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U.S. refining and chemicals giant Phillips 66 booked higher-than-expected earnings for the third quarter even if earnings plunged from a year earlier, as expected, due to weak refining margins and fuel demand.
Phillips 66 reported on Tuesday adjusted earnings of $859 million, or $2.04 per share, for the third quarter, down from $2.1 billion, or $4.63 EPS, for the same period last year.
Despite the profit slump, the company’s adjusted EPS topped the analyst consensus estimate of $1.65 compiled by The Wall Street Journal.
During the third quarter of 2024, the midstream business of Phillips 66 held steady compared to the second quarter and the same period last year, but the refining division posted a loss of $108 million, compared to massive refining earnings of $1.7 billion for the third quarter of 2023, when refining margins were soaring.
This year, however, weaker demand for fuels and slumping refining margins have been weighing on refiners and the integrated oil and gas majors.
Phillips 66 said that the adjusted refining pre-tax loss was “primarily due to a decline in realized margins largely driven by lower market crack spreads.”
The 3-2-1 crack spread – which is a theoretical refinery crude yield to produce two barrels of gasoline and one barrel of diesel for every three barrels of crude input – slumped in the U.S. last month to $14.28 per barrel, the lowest level since the beginning of 2021.
All U.S. refiners are expected to report much lower profits for the third quarter compared to a year earlier, as refining margins slumped to multi-year lows amid tepid fuel demand and increased global fuel supply.
Yet, apart from Phillips 66, another major U.S. refiner, Valero Energy, also beat Wall Street estimates even as it reported last week a widely expected plunge in its third-quarter earnings due to slumping refining margins.
