Phillips 66 Steps Up Repurchases in Q3 and Indicates More to Come, but We Await Strategy Update

Phillips 66 reported third-quarter adjusted earnings of $3.1 billion compared with $1.4 billion a year ago as improved refining and marketing earnings offset declines in chemical earnings. Although absolute debt levels increased with the consolidation of DCP Midstream to $17.7 billion during the quarter, net debt/capital of 29% was unchanged and is a level management is comfortable with. As such, it stepped up repurchases to $694 million from $376 million in the second quarter. Including dividends, it returned $1.2 billion to shareholders during the quarter. Management indicated it would continue with some debt reduction, but it is no longer the top priority for discretionary cash while it is committed to repurchases. Over the long term, management aims to reinvest 60% of cash flow and return 40% to shareholders in dividends and repurchases, while targeting steady dividend growth.