Refining margins expected constructive through 2026
Phillips 66 discussed a quarter heavily impacted by unprecedented commodity price volatility from the closure of the Strait of Hormuz. The company highlighted its ability to capture value from the dislocations through commercial optionality, while also facing significant mark-to-market losses and a working capital drain from margin calls. Management painted a bullish picture for US refining and chemicals, with margins expected to remain constructive through the year. First quarter 2026 EPS of $0.49, impacted by $839 million of mark-to-market losses on economic hedges.
Buzzberg readRefining margins expected constructive through 2026Phillips 66 discussed a quarter heavily impacted by unprecedented commodity price volatility from the closure of the Strait of Hormuz. The company highlighted its ability to capture value from the dislocations through commercial optionality, while also facing significant mark-to-market losses and a working capital drain from margin calls. Management painted a bullish picture for US refining and chemicals, with margins expected to remain constructive through the year. First quarter 2026 EPS of $0.49, impacted by $839 million of mark-to-market losses on economic hedges.Read full analysisCollapse analysis
Phillips 66 discussed a quarter heavily impacted by unprecedented commodity price volatility from the closure of the Strait of Hormuz. The company highlighted its ability to capture value from the dislocations through commercial optionality, while also facing significant mark-to-market losses and a working capital drain from margin calls. Management painted a bullish picture for US refining and chemicals, with margins expected to remain constructive through the year. First quarter 2026 EPS of $0.49, impacted by $839 million of mark-to-market losses on economic hedges.
US-centric asset base and commercial agility are capturing value from global dislocations caused by the Strait of Hormuz closure.
Refining market capture was 138% in Q1, driven by marketing and commercial optimization.
Midstream and chemicals results were mixed, but chemicals benefited from tight global supply and higher PE margins.
Revenue$34.076B
+0% QoQ
EPS$0.49
reported
Gross margin10.64%
reported
Op margin8.38%
reported
What changed this quarter
01
Margins
Refining margins expected constructive through 2026
Reported gross margin was 10.64%, reinforcing the quarter's better-than-guided profitability.
02
Supply
U.S. refining and petrochemicals well positioned vs global
First quarter 2026 EPS of $0.49, impacted by $839 million of mark-to-market losses on economic hedges.
03
Balance Sheet
Debt reduced to $17B by 2027, $19B end-2026
US-centric asset base and commercial agility are capturing value from global dislocations caused by the Strait of Hormuz closure.
04
Capex
Western Gateway FID expected mid-to-late summer
Management reaffirmed its $4.5 billion midstream EBITDA target by 2027 and highlighted growth projects, including the Western Gateway Pipeline (expected FID mid-to-late summer, 2029 in-service) and organic opportunities in gathering/processing if volumes grow. They also noted…
Demand & capex
Demand
Bookings & conversion
Management is very bullish on the current and forward outlook, citing a tight global market, strong refining margins, and a constructive petrochemical environment.
Capex
Investment and capacity
Management reaffirmed its $4.5 billion midstream EBITDA target by 2027 and highlighted growth projects, including the Western Gateway Pipeline (expected FID mid-to-late summer, 2029 in-service) and organic opportunities in gathering/processing if volumes grow. They also noted CP Chem's Golden Triangle and RLPP projects are progressing as planned to come online fully in 2027.
Tone · Confident
Management expressed confidence in capturing opportunities from volatile market conditions, underscored by a strong asset footprint and forward-looking tailwinds across businesses.
Supply-chain alpha
A1
The company is securing value by locking in time charter rates for tankers at historic lows, with roughly half of its waterborne crude slate secured, reducing exposure to the current spike in freight rates.
The company is securing value by locking in time charter rates for tankers at historic lows, with roughly half of its waterborne crude slate secured, reducing exposure to the current spike in freight rates.
… 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.
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