The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Energy sector dominated this year for the first time since 2008, with 28 companies featured on the list.

100 Fastest-Growing Companies

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are mining, oil and gas exploration and services, pipelines, refining, and utilities.

Fortune Sector Leaders: Energy

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Phillips 66

Phillips 66, a major operator of refineries and gas stations, climbed 37 spots in the rankings on the back of soaring crude oil prices, which boosted its revenue by 53% to $175 billion in 2022. 
<ul> 
 	<li>In an effort to expand its already lucrative natural gas business—which generated $3.2 billion in profit in 2022—Phillips 66 acquired all the publicly available shares of pipeline company DCP Midstream, amassing an 87% equity stake.</li> 
 	<li>In October 2022 Phillips 66 laid off 1,100 employees as part of CEO Mark Lashier’s attempts to find $500 million in cost savings by year-end.</li> 
 	<li>As part of the oil company’s sustainability efforts, Phillips 66 has announced that it will convert a crude oil refinery in Northern California to a renewable fuels facility that will manufacture biofuels.</li> 
</ul>

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-Phillips 66

Phillips 66, a major operator of refineries and gas stations, climbed 12 spots in the rankings on the back of soaring crude oil prices, which boosted its revenue by 53% to $175 billion in 2022. 
<ul> 
 	<li>In an effort to expand its already lucrative natural gas business—which generated $3.2 billion in profit in 2022—Phillips 66 acquired all the publicly available shares of pipeline company DCP Midstream, amassing an 87% equity stake.</li> 
 	<li>In October 2022 Phillips 66 laid off 1,100 employees as part of CEO Mark Lashier’s attempts to find $500 million in cost savings by year-end.</li> 
 	<li>As part of the oil company’s sustainability efforts, Phillips 66 has announced that it will convert a crude oil refinery in Northern California to a renewable fuels facility that will manufacture biofuels.</li> 
</ul>

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Phillips 66

As the world opened up in 2021, Phillips 66 bounced back; its revenue rose 75.4%, to $116 billion, boosted by the rebound in fuel consumption. As a major operator of refineries and gas stations, the company’s profit margins can be vulnerable when oil prices are particularly high, but Phillips was still able to produce $1.3 billion in profit. In April 2022, Mark Lashier, formerly president and CEO of the Chevron Phillips Chemical Company joint venture, succeeded Greg Garland as Phillips 66 CEO.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500 143 Phillips 66

It was a tumultuous year for Phillips 66, the Houston-based energy company. As lockdowns rippled around the globe, demand for transport fuels for cars and planes plunged, while losses mounted industrywide. Phillips 66 was no exception: The company lost $4 billion for the full year on a 40% drop in revenues. Like its peers, the company cut operating costs and slashed capital spending. The start of 2021, too, was rocky, as a crippling February storm in Texas hit operations in the state from refineries to pipelines.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-48-Phillips 66

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-061-Phillips 66

Phillips 66 continued to expand in 2019, extending its network of pipelines. It announced an $8 billion joint petrochemical venture with Chevron and Qatar Petroleum, and pushed for an offshore export terminal in the Gulf of Mexico. The Houston-based refiner was not hiding its ambition: it wanted to go all-in on the U.S. shale boom. But relatively weak prices in 2019 helped push the company’s adjusted earnings down by about 34% from last year's figure, to $3.7 billion. Across the oil sector, 2020 started with a jolt. The January price spike gave way to the coronavirus-fueled price crash, which quickly led refineries to cut back production.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-027-Philips-66

Phillips66 continued to expand in 2019, extending its network of pipelines. It announced an $8 billion joint petrochemical venture with Chevron and Qatar Petroleum, and pushed for an offshore export terminal in the Gulf of Mexico. The Houston-based refiner was not hiding its ambition: it wanted to go all-in on the U.S. shale boom. But relatively weak prices in 2019 helped push the company’s adjusted earnings down by about 34% from last year's figure, to $3.7 billion. Across the oil sector, 2020 started with a jolt. The January price spike gave way to the coronavirus-fueled price crash, which quickly led refineries to cut back production rates.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

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World's Most Admired Companies

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Phillips 66 is a multinational energy company focused on refining, midstream, chemicals, and marketing. As of 2026, Phillips 66 operates ten crude oil refineries in the U.S. Its midstream business focuses on crude oil and refined products, as well as collecting and processing natural gas. The company produces chemicals for various uses in the automotive, pharmaceutical, home, and electronics industries. The marketing arm includes 7,200 fuel stations with Phillips 66, Conoco, and 76 branding.

Q2 2026

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Phillips 66 (PSX): Company Profile, Stock Price, News, Rankings

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Phillips 66

phillips 66

Welcome to the first quarter 2026 Phillips 66 earnings conference call. My name is Rob and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Sean Maher, Vice President, Investor Relations and Chief Economist. Sean, you may begin.

Hello, everyone. Good morning and thank you for joining Phillips 66 first quarter 2026 earnings conference call. Participants on today's call will include Mark Lashier, Chairman and CEO, Kevin Mitchell, CFO, Don Baldridge, Midstream and Chemicals, Rich Harbison, Refining, and Brian Mandell, Marketing and Commercial. Today's presentation can be found on the investor relations section of the Phillips 66 website, along with supplemental financial and operating information. Slide two contains our safe harbor statement. We will be making forward-looking statements during today's call. Actual results may differ materially from today's comments. Factors that could cause actual results to differ are included here as well as in our SEC filings. With that, I'll turn the call over to Mark.

Thank you, Sean. Geopolitical events in the Middle East drove unprecedented commodity price volatility during the quarter. To put this in context, March was the first month that price moves in major crude oil, refined product, and European natural gas benchmarks all exceeded the 95th percentile. In the face of this volatility, we remain focused on operational excellence. Our team is executing safely and reliably. The majority of our assets are in the U.S. We have pipeline connectivity to some of the lowest cost and most reliable hydrocarbon corridors in the world. This positions us to reliably supply energy to support global demand. Due to the closure of the Strait of Hormuz, a significant amount of global refining and petrochemical capacity is down. We, however, continue to operate at high utilization, supplying products to our customers. Additionally, we have global placement optionality through our commercial organization.

This quarter has seen a significant and favorable shift in market fundamentals. First, the importance of U.S.-sourced hydrocarbons has increased due to a need for diversification and access to reliable supply. Second, unplanned downtime in global refining assets has reduced inventories and will support margins. Finally, reduced petrochemical production globally due to downtime and higher naphtha prices has reduced inventories and will also support margins. As a reminder, 80% of CPChem's capacity is on the U.S. Gulf Coast with competitive ethane feedstock. Recent global events show the importance of reliable domestic energy supply. Our Western Gateway Pipeline project will address long-term refined products needs, improve supply flexibility, and increase reliability for the West Coast markets. We're excited about the future due to our strong asset footprint, culture of operating excellence, and attractive fundamental outlook across all of our businesses.

Anchored by the strength of our balance sheet, we're confident in our ability to navigate market volatility and capture opportunities. Brian will now share more on slide four about how our commercial organization is one of our competitive advantages.

Thanks, Mark. We have a strong commercial organization with six offices across the globe. Our business enhances our asset footprint by optimizing feedstocks, delivering products into the marketplace, and capturing value. We capitalize on geographic dislocations and turn volatility into opportunity. With our expertise in global market dynamics, we're ahead of the game. We have an asset-backed trading model and can leverage our physical footprint to take advantage of opportunities. We trade over 6 million bbl of liquid hydrocarbons every day. This creates optionality and economic value. Markets are fluid right now and volatility is likely to persist into next year. Recent disruptions have created multiple opportunities. For example, we moved Bakken crude oil to our Beaumont terminal on the U.S. Gulf Coast and then, leveraging the Jones Act waiver, to our Bayway Refinery.

We displaced international crudes with domestic grades into our refining system and sold the international barrels into tight overseas markets. We placed gasoline from our U.S. Gulf Coast commercial blending facilities into the West Coast using the Jones Act waiver. We leveraged our global footprint to deliver LPGs and naphtha produced at our Sweeny Hub to global petrochemical customers around the world. Commercial performance is included in the results of our operating segments, enhancing their margins and improving market capture. Moving to slide five, the recent shock to the global energy system has been universal. Refining capacity has been damaged, logistics have shifted, arbitrage routes have changed. We are watching these and other signposts closely to capture additional value. The differentials between global indices and physical markets have spiked, and forward markets are heavily backwardated. This dynamic reflects tight global crude oil balances.

The outlook for product markets looks even tighter, and we expect refining margins to be constructive through the remainder of the year. Our market analysis, commercial capabilities, and global footprint enable us to optimize the flow of molecules around our system. Our team maximizes the margin uplift across our value chains. Here are two examples of how we are optimizing our system. First, we've added two dozen originators around the globe. They speak the language, they know the culture, and they know how to source deals that unlock more value and optionality, providing long-term access to key global markets. Second, we've tripled our vessels on time charter in the past two years, securing roughly half of our waterborne crude slate. The global tanker fleet has become tight with limited spot availabilities and a large share of sanctioned vessels. This has caused freight rates to increase to historic levels.

By locking in our freight rates early, we reduce the cost of crude to our refineries. We optimize around our refineries, pipelines, and terminals to ensure that we're leveraging every molecule and driving additional value from our fundamental knowledge of the global markets. Backed by world-class assets, we find opportunity and volatility to deliver greater shareholder value. Now, I'll turn the call over to Kevin.

Thank you, Brian. On slide six, first quarter reported earnings were $207 million or $0.51 per share. Adjusted earnings were $200 million or $0.49 per share. As a result of a sharp increase in commodity prices during the first quarter, the company's financial results were impacted by mark-to-market losses of $839 million related to short derivative positions used as economic hedges to manage price risk on certain physical positions. We had a use of operating cash flow of $2.3 billion. Operating cash flow excluding working capital was approximately $700 million. Capital spending for the quarter was $582 million. We returned $778 million to shareholders, including $269 million of share repurchases and $509 million of dividend payments.

We increased the quarterly dividend 7% on an annualized basis. I will now cover the segment results on slide seven. Total company adjusted earnings were $200 million. Midstream results decreased mainly due to lower volumes, largely due to impacts from Winter Storm Fern, lower margins associated with customer recontracting, and accelerated depreciation associated with a Permian Basin gas plant. In chemicals, results increased mainly due to higher polyethylene margins. Across refining, marketing and specialties, and renewable fuels, results decreased mainly due to mark-to-market impacts. In corporate and other, the pre-tax loss increased, primarily due to the inclusion of costs associated with the decommissioning and redevelopment of the idled Los Angeles refinery site. Slide eight shows cash flow for the quarter. We started the quarter with a $1.1 billion cash balance. Cash from operations, excluding working capital, was approximately $700 million.

There was a $3 billion use of working capital, mainly reflecting an inventory build and an increase in cash collateral on derivative positions, partly offset by the net benefit in our payables and receivables positions associated with rising commodity prices. We funded $582 million of capital spending and returned $778 million to shareholders through share repurchases and dividends. Our commitment to return greater than 50% of net operating cash flow to shareholders remains unchanged. The company increased debt in the first quarter. Given the sharp increase in commodity prices, we issued a term loan and increased borrowings on short-term facilities to manage the margin collateral requirements. We ended the quarter with $5.2 billion in cash. We are well-positioned to manage further commodity price volatility through significant liquidity, including a high cash balance and cash generated from operations.

Slide nine shows the projected path from the current debt level to year-end 2026 and 2027 debt. We remain fully committed to a total debt balance of $17 billion by year-end 2027. Consensus cash from operations for 2026 and 2027 is approximately $8 billion. In the remainder of 2026, we expect operating cash flow, working capital benefits, and the reduction of cash balances as markets stabilize to enable us to reduce debt to approximately $19 billion. In 2027, we expect operating cash flow to enable us to reduce debt by a further $2 billion to $17 billion. This is consistent with the capital allocation framework we have previously laid out, with approximately $2 billion each to dividends, share repurchases, capital spend, and debt paydown.

Looking ahead to the second quarter on slide 10. In chemicals, we expect the global O&P utilization rate to be in the low 80s, driven by the uncertainty of operating levels at CPChem's joint ventures in the Middle East. In refining, we expect the worldwide crude utilization rate to be in the low to mid-90s. Turnaround expense is expected to be between $120 million and $150 million. We anticipate corporate and other costs to be between $430 million and $450 million. Moving to slide 11, Mark will now provide some final thoughts. We will then open the line for questions.

Great things happen when preparation meets opportunity. The current environment is attractive across all our businesses. We've prepared by focusing relentlessly on what we control: cost, culture, competitiveness, and capital with discipline, all in the service of safe, reliable operations that deliver strong shareholder returns. Our teams are performing, and we're pressing in and capturing those opportunities, fully prepared, fully committed to execute and win. When we win, you win.

Thank you, Mark. We will now begin the question-and-answer session. As we open the call for questions, as a courtesy to all participants, please limit yourself to one question and a follow-up. If you have a question, please press star then one on your touch-tone phone. If you wish to withdraw from the queue, please press star then one again. If you're using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star one then one on your touch-tone phone. Steve Richardson from Evercore ISI, please go ahead. Your line is open.

Hi. Thank you. Guys, I was wonder if we could start on the mark-to-market adjustments, and wonder if you could give us some color on some of these impacts by segment, if you could. You know, I know you addressed this in the 8-K, if you could get into a little bit of how the volatility that you witnessed was outside the bands of expectations. Can you also just be sure to hit on how you think about that draw of liquidity, what it means going forward, and what it, you know, any impacts it may have on your shareholder return commitments?

Yeah, Steve, this is Kevin. Let me walk through some of that detail. As we laid out, in the first quarter, we saw a $839 million mark-to-market loss from an income statement standpoint that impacted refining, M&S, and renewables, and the specific amounts by segment were detailed in the press release. This is broadly consistent with what we put out in the 8-K. We said approximately $900 million at that point. That was our best estimate at that point in time. I think it's important to make it clear that these are mark-to-market impacts on paper hedges that we have in place to offset physical purchases.

Those purchases are mark-to-market at the end of each month, but the physical inventory is not, and so there's a net impact through the income statement. I do think it's important to emphasize that we do this to protect economic value. This is a risk mitigation tool. We've been doing this for some time. It's standard practice. In the normal course, the impacts of these mark-to-market transactions are just not that significant, not that material. As Mark mentioned in his comments, we saw unprecedented volatility across the commodity markets in which we participate, that caused this, what we'll say, is a sort of outsized impact.

As you look ahead in terms of what you can expect on a go-forward basis, it's very much a function of where the commodity prices move from end of March, think through, say, the end of the year. If we were to use the forward curve as of end of day yesterday, we'd recover by the end of the year about $500 million of that $893 million. It's a commodity-by-commodity calculation on a quarter-by-quarter basis. Based on the forward curve, if that were to play out as reality, that's what you'd see come back in that, in that context. From a cash standpoint, we have, at the end of the quarter, we had a total of $3.2 billion out on margin associated with all of this activity.

That differs from the income statement effect because there are other barrels being marked where we actually do a corresponding impact to reflect the physical gain. You have more paper activity than is subject to the income statement related mark-to-market. That cash impact will come back. Two ways it comes back. One, directly in falling prices, you'll see the reverse effect. In normal course, because this is a continual process, as volatility subsides, we effectively consume this cash through our normal purchasing activity. Just to put some context around that, $3.2 billion out on margin at the end of March.

At the end of yesterday, it was $2.1 billion, even though the absolute price levels are pretty similar to where they were at the end of the first quarter. You will see that come down as we work our way through the year. Then as we get into, you know, what does this mean in terms of capital allocation, debt reduction, share buybacks? Big picture, and I covered it in the earlier comments and the slide that we put in the presentation on debt targets. We think we will be able to utilize between working capital benefits and the remainder of the year operating cash flow.

As the market stabilize, we don't need to carry that much cash, which is what we showed at the end of the quarter and still do, but we can draw down that cash, get debt down to about $19 billion at the end of this year, and then down to our target $17 billion next year, all while still returning 50% of our operating cash flow back through dividends and buybacks. Quite frankly, we used the Street estimates for cash generation in that calculation. I feel pretty optimistic that there's upside there as well. We'll hold true to that, so 50% back to shareholders and the other excess will just accelerate debt reduction.

That's great. Thanks for the fulsome answer, Kevin. I was wondering if I could just hit on as well while we've got you on CPChem. The consultants have full chain margins up, I believe $0.33 at last check for the second quarter. I was wondering if you could talk about what you're seeing in your business and your view on capturing this with obviously very high utilization rate on the U.S. Gulf Coast into the second quarter and the balance of the year.

Absolutely, Steve. This is Mark. CPChem's well-positioned to go out and capture those margins. There can be some contractual step-ups that occur, but they're certainly out there aggressively pushing that. You've seen the supply and demand situation tighten up dramatically with the limitations coming out of the Middle East. Additionally, you've seen limitations for producers in Asia that frankly, some countries in Asia are selectively moving hydrocarbons away from petrochemical production and into energy use to protect that. That further tightens things up. The cost curve has dramatically shifted as the price of oil has gone up versus low-cost ethane in North America. You see that price floor going up, driving the margin increases.

There's this factor that, prior to Venezuela, prior to the activities in Iran, China was accessing deeply discounted crude. They were converting that into deeply discounted naphtha and then pouring that polyethylene into the world market. We think that somewhere in a $0.05/lb-$0.06/lb advantage versus what the cost curve should have been. Now that's been eliminated with the things that have been going on. It's very constructive for CPChem. They can operate from the U.S. Gulf Coast at high rates. Over 80% of their capacity is in the U.S. access to advantage ethane feedstocks. That feedstock cost has been stable versus what's been going on in the rest of the world. They're very well positioned to go out and capture those margins.

Neil Mehta from Goldman Sachs, please go ahead. Your line is open.

Yeah. Good morning, Mark and team. The standout number from this quarter was really the worldwide market capture, which ticked up to 138%. Maybe you can bring this to life a little bit. Can you give us a couple of examples of dynamics that specifically drove that strength? When we think about sort of a mid-cycle market capture rate, you've talked about mid-90s type of utilization. I think there are a lot of investors on the call who are thinking that 2Q could be lower than that mid-90s number, though, just because of the backwardation in the curve and just your perspective if that is actually achievable as we set up for Q2.

Yeah. Neil, it's a great question. Brian was, you know, he was pretty humble in his opening remarks. We always talk about optionality and creating optionality. What he and his commercial team demonstrated in Q1 is leveraging that optionality. You think about moving Bakken crude to New Jersey without using a train and leveraging the shipping logistics that they've at least advanced. We've got an advantage over shipping using the Jones Act waivers. All those things lined up to where Brian and his team could take full advantage of that and to drive that, and that's what drove that pretty remarkable capture number. We're really proud of what they've been doing. They weren't sitting around watching the world in a crisis.

They were moving things to take advantage of the optionality that we've created and were prepared for. Brian, you can go ahead and talk a little bit more about what your folks have been up to.

Hey, Neil. You know, as Mark said, you know, with the huge amount of volatility in the market, with market dislocations and just the integration of our businesses, there was a lot of value to be had in the market. Just maybe some examples. We profited from a long RIN position, including RINs we generated at our Rodeo Renewable facility, and we were also able to roll some lower cost RINs from prior year into this year. We had really strong results in our European and Asian trading businesses. As I mentioned earlier, and as Mark mentioned, the time charters that we put on over the last couple of years really helped in the elevated freight market and reduced our crude costs into our refineries.

Finally, you saw some of the product differentials, like on octane and jet, were higher than the indicators, so that helped as well. To give you some context, maybe going forward, if we use our refining indicator, it includes a lot of the impacts already. It's embedded in the indicator. Historically, an average for the year would be 98%. In Q1, we captured, benefited from all the commercial opportunities I just mentioned. Normally, in Q2, beginning of summer driver season, we would think about mid-50s. Just thinking about some of the tailwinds and headwinds. Tailwinds, things like butane blending. We think there'll be more butane blending due to the RVP waivers.

Strong jet or octane diffs can help us there and additional commercial value, and I think, we'll continue to see some of the same value we saw in Q1. There's some headwinds, as you said, backwardation and inventory impacts and even turnarounds, if we had some in Q2, would impact capture. I'd start with the mid-90s and think about what you think the market will look like in Q2 and then work your way from there.

Is it fair to say mid-90s is a good starting point, though?

Yeah. Mid-90s would be a good starting point.

Okay. All right. Kevin, can you hit slide nine again maybe in a little bit more detail? 'Cause this is on the pushback. Since they came out that I know you and we have gotten on the PSX stories is leverage pretty elevated. I think part of that is you're just holding excess cash. If you could spend a little more time just unpacking this slide because I think it is important.

Yeah. That, that is a really important point that we've effectively from a debt and cash standpoint, we sort of grossed up the balance sheet by borrowing more than we need from a normal day-to-day standpoint, but being positioned in the event that we see more extreme volatility and have a need on, for example, margin calls in the event that significant price increases. That, it does feel like since the end of the first quarter, that dynamic has settled down a little bit. I mean, the markets still continue to fluctuate, but we've been in this, if you look at crude in this sort of $90-$110-ish band over that period.

Our expectation is, as market conditions stabilize, we'll be able to draw that cash down and clearly, that will have an offset on debt. Likewise, on working capital, we had a big working capital use in the first quarter. We expect that to more than come back over the course of the remainder of the year through the combination of normal sort of annual trends. First quarter is usually a working capital use for us. It was exacerbated by the margin calls this year, but we expect that we recover that and end up our projection is a slight working capital benefit for the year, for the full year. That's our assumption.

Then, operating cash flow, we expect to have healthy operating cash flow, and that will go to debt reduction. As you roll into next year, that we continue to have that sort of $8 billion of operating cash flow, then, a couple billion of that can go to debt reduction pretty comfortably. All that gets us to our projected $17 billion target. I will emphasize that if we see a continuation of strong margin conditions in refining and chemicals, that will further enhance the cash generation, will enable us to pay down the debt quicker, and also enable us to return more cash to shareholders.

Manav Gupta from UBS Financial, please go ahead. Your line is open.

Good morning, guys. I have a more of a theoretical question, but I'm trying to get to the bottom of this. Based on your preliminary comments, it feels your refining system, which is in the U.S. mostly, is relatively insulated from these crude supply disruptions and other things that are happening in the world where certain refining assets may be very good but can't run. You are relatively insulated from these things. What I'm trying to understand is, does that mean somebody like a Phillips or even any U.S. refiner in this environment is structurally better off than their global counterparts? If that is the case, in your opinion, is this the time to be bullish U.S. refining or is it this time to be bearish U.S. refining? If you could help us answer that.

Manav, it's Brian. You know, you're absolutely right. This is the time to be bullish U.S. refining. You know, if we look at what's happened in the marketplace, it started in Asia, moved to Europe, but U.S. has been relatively insulated on supply. Refinery runs are strong, consumer demand is healthy, crude production is relatively stable. This kind of highlights how we're immune to the crisis, although not to the higher prices. Largely, our crude, for instance, at Phillips 66, we only purchase about 1% of our crude from the Middle East. Our crude is generally from Canada, from the U.S., and from Latin America. Of course, from Canada and the U.S., it's all pipeline connected. We are in a very, very good position.

I would add to Brian's comments, and you think about the activities that they undertook in the first quarter. They, you know, they do interface with the rest of the world, so they're able to move around and leverage domestic supply and push normal imports out into what the global markets are demanding. Then in addition to that great position in North American refining, CPChem is rock solid in North America petrochemicals in the high-density polyethylene value chain. All of our product lines, all of our businesses really have tailwinds in this environment. We think that those tailwinds will persist for a considerable amount of time.

We completely agree. Quickly pivoting to, sometimes people don't forget that you actually own significant amount of renewable diesel capacity in the U.S. You never actually entered into a JV to split your capacity. Renewable diesel margins were negative. Everybody was losing money. We are in a very different environment. Given the size of your footprint, would it be fair to say year-over-year, you could see a material free cash flow inflection in your renewable diesel business given where we are right now?

Well, absolutely. Even if you just think about the RINs, Manav, the current blended RIN is more than twice what it was in 2025. Just the credit value alone. We are running very, very well right now, in fact, above nameplate capacity. You should see a substantial difference than the prior year.

Doug Leggate from Wolfe Research, please go ahead. Your line is open.

Hey, good morning, everybody. Thank you for taking my questions. Brian, I wonder if I could direct this to you. We've got extraordinary margins you pointed out multiple times that it's steeply back related, and I get the bullish near-term outlook. The question is duration and what breaks it? We're seeing a lot of airlines cutting capacity or balancing demand through demand destruction, you could argue, versus physical supply constraints. What's your response to that in terms of margins are great, but what's your view on duration? And I got a follow-up for Kevin, please.

Thanks, Doug. You know, our view is this is gonna last throughout the rest of this year and into early next year. If you think about what's going on, it's less about demand destruction and more about demand constriction, trying to manage the need for products. We kind of think of it as a race to the top, where we're watching very tight crude markets and crude prices keep moving up over $106 today on WTI, $118 on Brent. As crude prices move up, products are gonna have to move up even further to open up the refinery margin to keep refiners producing the products that the world needs.

Clearly, the world is tight, and as you mentioned, it's probably jet fuel is the tightest, it's the refinery margins are gonna have to keep opening. We saw that even, for instance, in our European refinery recently where we saw the gasoline crack was somewhat weak compared to the distillate crack, which seemed to be slowing down European refineries. Then all of a sudden, the gasoline crack made a large move to the upside, opening up margins so that European refiners could produce the products that they need. I think we'll continue to see that through this year and through the early part of next year, even if the straits are opened in the next month or two months.

Brian, would you treat this as a, would you annuitize this or treat it as a windfall?

Would you annuitize this, or would you treat it as a windfall?

In other words, are the margins gonna persist?

I think so. We see them persisting for longer than the straits being closed. Annuitize it, I don't know that we're at the point where we would annuitize anything. We see it more than just a few months phenomenon.

Thank you for that. This leads my follow-up question, which is for Kevin. Kevin, your share price is 5% off, its high, and, you know, I think Mark just said we wouldn't annuitize this. This is the opportunity to permanently shift this windfall to your equity value comes from debt reduction versus buying back your shares. Why is that not the right answer if this is indeed a windfall?

Yeah, Doug. So, you are correct that debt reduction creates equity value as well, and debt reduction is a priority. The $17 billion target that we laid out there is a target. If we have significant excess cash generation, we will reduce debt below that level. I'm not going to go so far as to say we will stop buying back shares, so it can all go to debt reduction. I think having, maintaining a degree of balance through the cycle on capital allocation, we've been pretty clear on the 50% return of which at current levels, about half of that is the dividend and the other half is buybacks.

As the absolute level of cash generation increases, by definition, if you take 50% back to shareholders, that's an increasing amount also going to the balance sheet. We view it as a balance across the board. As of right now, while we may only be a few percent off of our high, we still think there is good value in our share price, we feel comfortable with that plan and capital allocation.

Thanks so much for taking my questions, guys.

Joe Laetsch from Morgan Stanley, please go ahead. Your line is open.

Hey, good morning, Mark and team, and thanks for taking my questions. I wanted to start on the macro, just given where product prices are today. Can you talk about the demand trends that you're seeing within your system in the U.S.? Are you seeing any signs of demand destruction on gasoline and diesel? Inventory levels in the U.S. have drawn to at or below the five-year range on products. Things are starting to look pretty tight.

Hey, Joe, this is Brian. We haven't seen much demand destruction, probably 1% down for products, both gasoline and diesel. In terms of our system, we've actually done really well. We added over 500 franchise stores last year in marketing, we're actually seeing a lot of value from the good work the sales team has done in marketing. We haven't seen demand destruction in the U.S.

Thanks. That's helpful. I wanted to just ask on the refining side. Utilization rates of 95% in the quarter were solid, even with some maintenance, I think some third-party pipeline impacts as well. Can you just talk to some of the drivers of the performance during the quarter? As part of that, operating costs, they continue to trend in the right direction. I recognize there is variability quarter-to-quarter with throughput and natural gas costs. Could you just touch on which inning you think you're in in terms of cost reduction efforts and the path to the $5.50/bbl?

Joe, this is Rich. Thanks for the question. First quarter, I'll start with the cost per barrel and then maybe look back at some of the regional performance opportunities that we see last quarter. The cost per barrel 1Q was $6.21. That's actually $0.80/bbl improvement year-over-year. Good movement there. I'm very happy with what the team has accomplished on that front. Quarter-over-quarter, as you indicated, it was slightly higher. That's primarily due to fewer barrels processed in the quarter. That was a combination of planned maintenance activity as well as there's just fewer days in the quarter, in the first quarter of the year, and that does have a material effect. Total process inputs were down about 2% quarter-over-quarter. Seasonally higher natural gas price was also a big player in this.

Prices got all the way, I think, averaged at about $4.87/MMBtu at the Henry Hub. If we normalize that back to the $3 annual natural gas prices, which is the basis we've used for the $5.50 target, the number moves into the low $5.80s on a $1/bbl OPEX basis. That says, you know, we're well within striking range here of this $5.50/bbl target in 2027. The organization is really working hard. They've actually got over 200 initiatives that we're actively pursuing right now, which are forecasted to drive $0.15/bbl-$0.20/bbl out of the base operating costs.

These are structural changes in our cost profile and continuing a trend that we've started here well over four or five years ago now. Maybe an example of one or two of these. One of them is really changing our approach to how we clean FCC boilers. It doesn't sound like something very exotic, but that actually, once accomplished, will drive down our annual cost by well over $3 million. Another example is really acid consumption in our sulfuric acid alkylation units. We're working on tightening up the process controls and the temperature controls on those. That strategy is projected to save another $2 million per year

It's racking these wins up one by one by one across the system, and the team's been doing a fantastic job of doing that. You know, the balance of the closure, I see us continuing to increase our availability and utilization of the assets, you know, the continued maturity of our liability programs, as well as something I've mentioned before, which is increasing our total process inputs by filling up the downstream units behind the crude units, using all that discipline that we put in for the crude unit side to apply it to the downstream units. This remains an ongoing execution story, and I'm very happy with the way the organization's progressing it, and we do see additional upside on that.

On a market capture regional performance side of the business, you know, Brian covered a lot of that generally at the macro level, what we saw on the refining side was cargo prices coming in a little bit lower for us in refining, and some of that's just the anomaly of pricing. We got prior month pricing that's coming in on crude deliveries. Really good work by the European office to capture strong results, especially on the jet side of the business, the kerosene fuel, as those prices disconnected from traditional tie to distillate. On the Gulf Coast, we saw the same similar story. Jet production there, quarter-on-quarter was very high.

That's for us, it was also very timely with the jet pricing blowing out coming out of the Gulf Coast area as well. In the Central Corridor, this is where we had a lot of our turnaround activity focused for the quarter. We did see the market capture actually go down a bit there, and that was related to maintenance activity at Wood River and Borger facilities, and some mark-to-market impacts that Kevin had pointed out earlier in the call here. Last but not least, the West Coast was in a pretty good spot. As you mentioned, there was some impact with third-party pipeline operations there that slowed down our Pacific Northwest operations. Short of that, the team did a fantastic job of capturing the marketplace.

Phillip Jungwirth from BMO Capital Markets, please go ahead. Your line is open.

Thanks. Good morning. On midstream, just how does the higher crude prices change how you are thinking about investment opportunities? If it becomes clear, there's gonna be a greater call on shale, we see the public's raise CapEx. Would you be willing to look more at organic growth here? If so, which parts of the value chain would that consist of, G&P, pipeline, frack, or exports? Just last, how much sensitivity is there around the $4.5 billion midstream EBITDA target by year-end 2027 if we do see higher U.S. volumes?

Hi, Phillip. This is Don. When I think about the crude prices and the activity, what I would say, first and foremost, that the capital discipline returns, those are very important to us. Certainly, as opportunities evolve, whether that's volume growth in the field where we can add gathering and processing capacity to serve our customers and fill our value chain up, we'll certainly pursue those opportunities. We've got growth plans in place.

You'll see us continue to add capacity as the customer needs evolve. I think that's center of the fairway of our midstream growth plans. You'll see that we try to maintain a balanced value chain. What I mean by that is adding gathering and processing capacity, making sure we've got the downstream infrastructure, but also being mindful of what capacities are needed in the market. Again, going back to staying focused on capital discipline, staying focused on the returns that we can generate with those organic growth opportunities. In terms of 2027 and our $4.5 billion target, we feel very good about that target, the path that we are on. Certainly the fundamentals are bright.

Coupled with our execution and commercial successes, we feel very comfortable with where we are on that trajectory as well as the ability to sustain that growth beyond 2027.

Great. Then coming back to chemicals, once the Strait opens up, how do you see the progression for getting back to normal operations for CPChem where you are guiding the lower 2Q utilization, but obviously benefiting on the margin front in the Gulf Coast? If you could also just comment on the broader industry, that would also be helpful just in terms of what does that scenario look like, steps to take and time duration to get back to normal.

I think as far as CPChem is concerned, the assets in the Middle East that are offline are in good shape. The bigger question is then the greater infrastructure in the Middle East and what challenges there, there may be. I think that there's probably a greater sense of urgency to get crude oil and refined products moving, and then petrochemicals may be a next layer. I think that revival from the Gulf will be a little lag behind the energy recovery. And then you're going to see the system need to repopulate the inventory chain, the logistics chain, and that will take some time. I think you'll see this have some, you know, some legs on it.

Now, we've got two big projects underway too, those projects, you know, the Golden Triangle project in the U.S. and the RLPP project in Qatar, are both proceeding as expected. There's been no disruption in the progress of the RLPP project in spite of what's going on. Everybody's been safe. Everybody's doing what they need to do to get that project going. Both those projects will come online fully in 2027. You'll see Golden Triangle Polymers starting to commission things later this year, they're making great progress. I think they will contribute capacity at a time when it'll be really sorely needed, I think.

There, there'll be good progress from multiple dimensions for CPChem, as this crisis resolves itself.

Lloyd Byrne from Jefferies, please go ahead. Your line is open.

Hey, good afternoon, Mark, Kevin, team. Thank you for having me on. Can I start by following up on Neil's question on capture? I know you commented on how well-positioned your transportation is, but how does that impact second quarter capture or maybe even third quarter if rates continue to go on like this?

Yeah. You should see a benefit. You know, given that we locked in our shipping rates, you know, over the last couple of years and shipping rates are so elevated, you should continue to see a benefit from shipping rates, particularly in our Atlantic Basin region.

Okay. Thanks. Let me ask a follow-up of, I don't know whether Don's on, but maybe Mark can answer it. You can comment on Western Gateway and obviously a very good open season. Just what are the hurdles left and kind of the timing for FID?

Hey, Lloyd, this is Don. I appreciate the question on Western Gateway. We are quite excited about where we are on the Western Gateway project, the progress we've made to date and where we find ourselves at the end of the second open season. How I see the path forward here is to complete the JV arrangements with Kinder Morgan, as well as execute the transportation agreements with the third-party shippers. We've got a team that's working hard to get that done. I would say, with the successful conclusion of that work over the next couple of months, I'd expect we would be in a position to FID this project mid to late summer, again for a 2029 in service date.

One of the things as I reflect back on just the progress we've made and what we've learned through the open season is really twofold. One, I think there is a strong market interest in having a new build pipeline built to Phoenix and be able to deliver reliable, secure transportation fuels to the West. Two, there's strong support from the state and federal groups, agencies and officials in having this pipeline in service as soon as possible. That gives me a lot of confidence that Western Gateway is the right project at the right time and will deliver the right returns.

Jason Gabelman from TD Cowen, please go ahead. Your line is open.

Hey, thanks for taking my questions. I know you reiterated the $4.5 billion of EBITDA on midstream. 1Q obviously moved sequentially lower, particularly in the NGL business quarter-over-quarter. Can you just help us, I guess, bridge the quarter-over-quarter decline and remind us how you get to that $4.5 billion? Perhaps given Western Gateway and potential for continued activity, what type of upside do you see from that $4.5 billion?

Sure, Jason, appreciate the question. Just in summary, at the very onset, absent the impact of volume from Winter Storm Fern, we're right where I expected us to be from a Q1 performance. We continue to have great commercial success not only in the growth but also in the recontracting, which that has some impact in Q1. Let me maybe unpack that a little bit. When we think about our renewals, we're quite proactive in how we do that. We tend to renew those a year prior to their expiration dates. The ones that came up for this quarter, we had renewed those. What was exciting about that is we had renewed those for 10-year plus terms.

For me, that really validates the, you know, the success of our customer service, the success of our relationships with our customers. That execution gives me a lot of confidence in our ability to continue to grow into our $4.5 billion target by 2027. The fundamentals are bright. The execution by the team is strong. As we look through with Western Gateway, whether it's some of the follow-on expansions, when we talk about additional gas plants, that gives me confidence that we can sustain this growth rate beyond just 2027.

Got it. I neglected to ask about the LPG export arb opportunity in the current environment. If you could just talk about how you're thinking about that.

Sure. In the near term, most of our windows are spoken for either with our term customers or by ourselves from our time charters. Where we've had success is really in our delivered time charter market, where the team in Singapore is being able to optimize deliveries, be able to take advantage of the volatility, much like what you just heard Brian talk about. I think overall, what this shows is the importance and the strength of the Gulf Coast LPG export capability. I think this will continue to be a good tailwind for Gulf Coast exports, and we expect Freeport to be a beneficiary of that outlook.

Great. My follow-up is just on some of the assets you have on the West Coast. One, given Western Gateway, does that make Ferndale any more or less core to the business than it previously was? And maybe, can you also talk about the opportunity to sell down part of the interest in the renewable diesel plant as your peers have done and as that market has strengthened here?

Phillips 66 (PSX) Q1 2026 Earnings Call Transcript

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