Phillips 66 Q3 Earnings Rise on Refining Margins

Phillips 66 (NYSE: PSX) reported a sharp sequential increase in third-quarter 2026 earnings as stronger refining margins and high refinery utilization more than offset weaker results across its other operating segments. Net income attributable to Phillips 66 was $5.62 billion, compared with $3.85 billion in the second quarter, while adjusted earnings rose to $5.62 billion from $3.79 billion. Adjusted earnings per share were $14.08, based on 399 million diluted shares.

The refining business accounted for most of the improvement. Adjusted refining pre-tax income nearly doubled to $6.06 billion from $3.09 billion in the previous quarter. Phillips 66 operated its refineries at 98% crude utilization, generated an 86% clean-product yield and achieved a third-quarter record distillate yield of 41%.

Worldwide realized refining margin increased to $38.00 per barrel from $24.08 in the second quarter. The company attributed the change in its market indicator primarily to stronger diesel and gasoline cracks across all regions and lower benchmark crude costs. Phillips 66 captured 100% of its $38.15-per-barrel refining market indicator, with benefits from distillate yield, freight contribution and a small-refinery exemption at Billings partly offset by crude-pricing effects related to market structure.

Adjusted refining EBITDA excluding adjusted turnaround expense reached $6.36 billion, or $32.42 per barrel, up from $3.43 billion, or $18.36 per barrel, in the second quarter. Adjusted controllable costs excluding turnaround expense were $5.92 per barrel, compared with $5.57 in the prior quarter.

All four refining regions were profitable on an adjusted pre-tax basis. The Central Corridor contributed $2.57 billion, followed by the Gulf Coast at $1.73 billion, the Atlantic Basin and Europe at $1.47 billion, and the West Coast at $287 million.

Other segments decline sequentially

Results outside refining were lower than in the second quarter. Midstream adjusted pre-tax income fell to $702 million from $785 million, while Chemicals declined to $311 million from $404 million. Marketing and Specialties generated adjusted pre-tax income of $245 million, down from $514 million, and Renewable Fuels fell to $191 million from $544 million. The adjusted Corporate and Other loss narrowed to $372 million from $407 million.

Midstream operations recorded fractionation volumes of 1 million barrels per day, wellhead volumes of 4.6 billion cubic feet per day and utilization of 105% at the Freeport LPG export dock.

Cash flow supports distributions and debt reduction

Phillips 66 generated $7.3 billion of operating cash flow during the quarter, including $6.2 billion excluding working-capital changes. It distributed $2.8 billion to shareholders through dividends and share repurchases and spent $680 million on capital expenditures and investments.

The company reduced total debt by $2.0 billion during the quarter to $18.5 billion. Net debt fell by $3.8 billion to $12.7 billion as cash and cash equivalents increased to $5.85 billion from $4.1 billion at the end of June. The net debt-to-capital ratio declined to 26% from 33% in the second quarter.

Management reiterated its target of returning more than 50% of operating cash flow excluding working-capital changes to shareholders. Phillips 66 also pointed to its second dividend increase of 2026 as part of its capital-return approach.

Fourth-quarter outlook

For the fourth quarter, Phillips 66 expects global Olefins and Polyolefins utilization in the mid-80% range and refining crude utilization in the mid-90% range. Refining turnaround expense is projected at $140 million to $170 million, including $100 million to $110 million in the Central Corridor.

Corporate and Other costs are expected to range from $350 million to $380 million, excluding effects from the company’s NOVONIX investment. Costs associated with decommissioning and redeveloping the idled Los Angeles refinery site have been included in Corporate and Other since the first quarter of 2026.

The outlook remains subject to commodity-price and refining-margin volatility, changing renewable-fuel and environmental policies, permitting and project-execution risks, operating disruptions, transportation constraints and broader economic or geopolitical developments. Phillips 66 also identified litigation, cyberattacks, weather events and potential changes in the cost or availability of capital among factors that could cause actual results to differ from management’s expectations.