Phillips 66 joins rival refiners with sharp profit drop on lower margins

News wire — Phillips 66 reported a 46% fall in second-quarter profit on Wednesday, the latest U.S. refiner to signal the hit from a decline in margins from last year’s sky-high levels when Russia’s invasion of Ukraine squeezed fuel supplies.

The company’s shares fell 1.2% to $110.80 in premarket trade.

Refiners’ margins were beefed up last year as a rebound in fuel demand came amid a supply crunch caused by pandemic-era refinery closings and global oil market disruptions from Russia’s invasion of Ukraine.

Crude prices and supplies have since normalized.

Phillips said realized margins fell to $15.32 per barrel in the second quarter, from $28.62 a year earlier.

Despite the fall in margins, fuel demand remains resilient. The April-June quarter is traditionally one of the year’s biggest period for demand as companies build gasoline and jet fuel output for the summer vacation season.

Phillips 66’s crude utilization rate was 93% in the second quarter, higher than 90% a year earlier, while total processed input was unchanged year-over-year at 1.9 million barrels per day (bpd).

On an adjusted basis, the Houston-based refiner reported earnings of $3.87 per share for the three months ended June 30, beating average analysts estimate of $3.56, according to Refinitiv data.

Rivals Valero Energy Corp and Marathon Petroleum reported steep declines in quarterly profits on pressured margins, but managed to beat market expectations.

Phillips 66’s second-quarter net income fell to $1.7 billion, or $3.72 per share, from $3.2 billion, or $6.53 per share, in the year-ago quarter.

Reporting by Arunima Kumar in Bengaluru; Editing by Sriraj Kalluvila – Reuters

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