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

Phillips 66 joins rival refiners with sharp profit drop on lower margins
© Reuters. FILE PHOTO: General view of oil tanks and the Bayway Refinery of Phillips 66 in Linden, New Jersey, U.S., March 30, 2020. REUTERS/Mike Segar/File Photo

By Arunima Kumar

(Reuters) – Phillips 66 (NYSE:) 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 2.7% to $109.04 in afternoon trade.

Realized margins fell 46.5% to $15.32 per barrel in the second quarter, Phillips said.

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.

Rivals Valero Energy Corp (NYSE:) and Marathon Petroleum (NYSE:) have reported steep declines in quarterly profits on pressured margins.

Still, fuel demand remained resilient. The April-June quarter is traditionally one of the year’s busiest periods as companies boost gasoline and jet fuel output for summer travel.

Crude utilization rate was 93% in the second quarter, higher than 90% a year earlier, Phillips 66 said, 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’s $3.87 per share earnings beat the average analyst estimate of $3.56, according to Refinitiv data.

“This was a some what mixed quarter for Phillips 66,” Edward Jones analyst Faisal Hersi said.

Refining throughput volumes and margins were better than expected, he said.

Capital expenditure is expected to be above the $2 billion annual budget, Phillips 66 said, reflecting about $200 million of additional spending on its California Rodeo renewable fuels refinery. The plant is scheduled to begin commercial operations in the first quarter of 2024.

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.

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