Phillips 66 Sees Improved Conditions, Debt Reduction Leading to Resumption of Repurchases

Like in the third quarter, Phillips 66 reported a large improvement in fourth-quarter earnings from the year before as market conditions continue to improve with an economic recovery. Adjusted earnings soared to $1.3 billion from a loss of $507 million a year ago largely due to the refining segment. Debt fell to $14.4 billion by year-end from $15.9 billion at the beginning of the year as management continues to target the $12 billion precoronavirus level. It plans to pay off another $1.5 billion debt in April, which should put it closer to its target. While it might take a couple of years to get there, management indicated share repurchases could resume around midyear if market conditions remain strong. We expect this will be the case given the continued recovery of the economy along with refined product demand. Combined with already low inventory levels, margins and utilization levels should remain high.