By Nicole Jao
NEW YORK, Oct 28 (Reuters) – Phillips 66 on Wednesday reported a record quarterly profit, topping Wall Street estimates, powered by higher refining margins on fuel supply disruptions due to the wars in Iran and Ukraine.
US fuelmakers benefited from historically wide refining margins as global fuel supplies have tightened and inventories have depleted on a war-related supply crunch in both the Middle East and Russia. Prices for diesel, which underpins everything from manufacturing to agriculture, have hit record highs, creating pain for consumers and US President Donald Trump’s Republican party, but a boon for refiners.
Peers Valero Energy and HF Sinclair also posted record third-quarter profits as US refiners emerged as key beneficiaries of the disruptions that tightened global supplies, while refinery utilization remained at multi-year highs.
Shares of the Houston-based refiner rose 1.32%.
STRONG DISTILLATES YIELDS, FREIGHT TAILWINDS
The combination of strong distillate margins and favorable freight positioning improved the Houston-based refiner’s ability to capture value in the refining segment, executives said during a call with investors on Wednesday.
Realized margins in the third quarter was $38 per barrel, up from $24.08 per barrel in the previous quarter.
“As we stay in this strong distillate economy, and our kit is really tuned to take advantage of that distillate production. I see the market capture favorable for all regions that we operate in,” Brian Mandell, executive vice president of marketing and commercial, said on Wednesday.
The company posted record distillate yield of 41% in the third quarter.
The refiner locked in more than 40 time-chartered vessels before freight markets tightened and has another 40 ships scheduled to join its fleet over the next two-and-a-half years at rates below current market levels, Mandell said. That gave the company a cost advantage as tanker rates climbed, helping offset higher transportation costs faced by other market participants.
Higher freight rates have squeezed some crude and product traders that export to Europe and Asia.
Phillips 66 reported an adjusted profit of $14.08 per share for the three months ended September 30, compared with analysts’ average estimate of $11.73, according to data compiled by LSEG.
Net income rose to $5.62 billion from $133 million a year earlier, marking its highest quarterly profit on record.
Adjusted earnings at its renewable fuel segment rose to $191 million during the quarter, compared to a loss of $43 million a year earlier.
Phillips 66 said its Coastal Bend expansion project remains on track, with initial volumes expected in the fourth quarter and full ramp-up to 350,000 barrels per day in early 2027, improving transportation between Permian and Eagle Ford output and NGL processing plants in Corpus Christi and Sweeny in Texas.
In August, the company, Kinder Morgan and HF Sinclair said they would proceed with the proposed $5 billion Western Gateway Pipeline system and had finalized a joint venture agreement.
(Reporting by Nicole Jao in New York, Pooja Menon in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski)
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