The decrease is down to a fall in sales and equity earnings and came despite costs falling in the same period.
The report also looked at risks to its business, including changing commodity prices and expected cost increases due to changing environmental regulation.
It reads: “These laws and regulations continue to increase in both number and complexity. […] We have incurred and will continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of these laws and regulations.”
The report notes the Paris Agreement and the Renewable Fuel Standard – which encourages using renewable fuels such as ethanol in motor fuel – are being enforced in the USA. Phillips says the need to blend more than it considers economically feasible could impact the quantity of produced motor fuel.
It adds consumers may start wanting less petroleum products due to climate change and acknowledges the impact of climate change on its business. It gives the example of rising sea levels affecting coastal facilities but the report said Phillips has “systems in place to manage potential acute physical risks”.
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Cybersecurity falls low down on the company’s list of potential risks. The report says Phillips has had “occasional, actual or attempted breaches” of cybersecurity, but none have affected its business or customers”.
Refineries in the pipeline
The company is upgrading its largest terminal, the Beaumont terminal in Texas, USA, which currently has storage capacity for 15.5 million barrels. By the end of Q1 2020, capacity will increase by 1.3 million barrels. By the end of September, the facility will have a fourth dock and be able to export 200,000 more barrels every day.
Delivering its first flow in November 2019, the Gray Oak Pipeline links reserves in mid-Texas to refineries on the coast. It is expected to reach its peak flow of 900,000 barrels per day by Q2 2020. At one end, the pipeline will connect to the co-owned South Texas Gateway Terminal, which will begin operation in Q3.
At the other end, the Red Oak Pipeline will begin delivery in the first half of 2021. This pipeline, connecting to Cushing, Oklahoma, will be operated and half-owned by Phillips 66. The Liberty Pipeline, owned by Phillips 66 Partners, will join to the end of this, linking the Rocky Mountains to the chain.
At the end of 2019, the company had a daily refining throughput of 2.18 million barrels.
The company also acknowledges the potential damage from legal disputes. The California State Water Resources Control has issued a penalty demand to the company for exceeding its permitted pollutant emissions during a rainstorm in February 2019. Phillips says it is working with the water board to resolve the $558,300 fine.