Phillips 66 outperforms Wall Street expectations with higher refining margins

By Nicole Jao

NEW YORK, Oct 29 (Reuters) - Refiner Phillips 66 PSX.N beat Wall Street third-quarter profit estimates on Wednesday, helped by stronger-than-expected refining margins and performance in its renewable fuels business, sending its shares up nearly 3%.

U.S. fuelmakers have benefited from a rebound in refining margins from multiyear lows in 2024 as supply shortages tied to geopolitical tensions in Ukraine supported stronger pricing. U.S. refinery margins jumped nearly 29% in the third quarter from a year earlier.

Phillips 66 reported an adjusted profit of $2.52 per share for the quarter, compared with analysts' average estimate of $2.17 per share, according to data compiled by LSEG.

The refining segment reported adjusted earnings of $430 million, compared with a loss of $67 million a year earlier.

"We have been making structural changes to the portfolio and organization that will continue to drive long-term shareholder value," Richard Harbison, executive vice president of refining, told analysts on a conference call.

IDLING REFINERY INCURS COSTS

However, the refining segment's income was partially offset by higher environmental costs associated with idling its Los Angeles Refinery. The refiner ceased processing crude at the refinery this month as it winds down the facility for permanent closure by year's end.

Phillips' recent acquisition of full ownership of WRB Refining from Cenovus Energy CVE.TO will allow the refiner to increase its crude processing options, Harbison said. WRB Refining operates major refineries in Wood River, Illinois, and Borger, Texas.

During the third quarter, Phillips 66 operated its refineries at around 99%, the highest since 2018. The company plans to operate its refineries in the low-to-mid 90% range in the fourth quarter.

An improvement in the renewable fuels segment also helped the refiner's third-quarter performance. Analysts noted renewable diesel benefited from stronger margins and monetization of European credits.

The refiner's midstream segment, which transports products such as gasoline, diesel and natural gas liquids through its pipelines, reported adjusted earnings of $697 million, up about 4% from a year earlier.

Valero Energy VLO.N, the second-largest U.S. refiner by capacity, last week also posted stronger-than-expected quarterly results.