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Phillips 66 Trumps Earnings Estimates As Refining Margins Rise

One of the top U.S. refiners, Phillips 66 (NYSE: PSX), reported higher-than-expected earnings for the first quarter amid solid demand and lower crude oil feedstock.

Phillips 66 booked adjusted earnings of $2.0 billion, or $4.21 per share, in the first quarter, compared with fourth-quarter adjusted earnings of $1.9 billion. Adjusted EPS beat the Wall Street consensus of $3.56 compiled by the Wall Street Journal.

“In Refining, we ran above industry-average crude utilization, successfully executed major turnarounds and increased market capture to 93%,” said Mark Lashier, President and CEO of Phillips 66.

Lower volumes in refining, due to higher turnaround activity at refineries, were mostly offset by higher realized margins and lower utility costs, the refiner said.

Realized margins increased from $19.73 per barrel in the fourth quarter of 2022 to $20.72 per barrel in the first quarter of 2023. This was nearly double from $10.83 per barrel for the first quarter of 2022.

The higher margins in Q2 2023 were due to “lower market crack spreads were more than offset by higher clean product differentials, improved feedstock advantage and secondary products,” Phillips 66 said.

The refiner joins other giants in the sector, such as Valero Energy and Marathon Petroleum, which have also reported higher margins and earnings, beating analyst estimates.  

Last week, Valero Energy (NYSE: VLO) beat analyst expectations as it reported Q1 earnings more than tripled from a year ago as refining margins remained strong and the cost of crude dropped. Valero’s average cost of Brent crude oil for refining was $82.20 per barrel for Q1 2023, compared to $97.34 a barrel for Q1 2022.

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Earlier this week, Marathon Petroleum Corp (NYSE: MPC) said its net income jumped to $2.7 billion, or $6.09 per diluted share, for the first quarter of 2023, compared with net income of $845 million, or $1.49 per diluted share, for the first quarter of 2022. Marathon Petroleum’s refining and marketing (R&M) margin surged to $26.15 per barrel for the first quarter of 2023, versus $15.31 per barrel for the first quarter of 2022, while adjusted EBITDA for the refining division more than doubled to $3.9 billion from $1.4 billion for the first quarter of 2022.  

By Tsvetana Paraskova for Oilprice.com

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