Welcome to the Third Quarter 2015 Phillips 66 Earnings Conference Call. My name is Mike 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 Kevin Mitchell, Vice President of Investor Relations. Kevin, you may begin.

Thank you, Mike. Good morning and welcome to the Phillips 66 third quarter earnings conference call. With me today are Chairman and CEO, Greg Garland; President, Tim Taylor; EVP and Chief Financial Officer, Greg Maxwell; and EVP, Clayton Reasor. The presentation material we’ll be using during the call can be found on the Investor Relations section of the Phillips 66 website along with supplemental, financial and operating information. Slide 2 contains our Safe Harbor statement. It’s a reminder that we will be making forward-looking statements during the presentation and our question-and-answer session. Actual results may differ materially from today’s comments. Factors that could cause actual results to differ are included here on the second page as well as in our filings with the SEC. With that, I’ll turn the call over to Greg Garland for some opening remarks.

Thanks, Kevin. Good morning everyone and thanks for joining us today. We had a strong quarter across all of our business segments. Adjusted earnings were over $1.6 billion or $3.02 per share. This represents a second best earnings quarter since our formation. Our global refining business ran well increasing utilization to 96% and capturing the benefit of strong market cracks. Our U.S. Gulf Coast refineries ran at 100% for the quarter. Refining also had its second best earnings quarter. Marketing earnings increased in the quarter reflecting continued strong gasoline demand. In midstream we are approaching the period were our growth project start to come online. Sweeny Fractionator One is almost complete and should start up by the end of the year. Our Freeport LPP export terminal is 60% complete its contract on budget and we expected to start up in the second half of 2016. The Dakota Access and ETCOP pipeline projects continue to make good progress and remain on schedule. Our master limited partnership Phillips 66 Partners remains an important part of our midstream growth strategy that we believe we will create value for both PSX shareholders and also PSXP unitholders. As we announced this morning our interest in the Bayou Bridge Pipeline project will be acquired by Phillips 66 Partners. Once complete this project is expected to provide consistent fee-based earnings and support of PSXP stated growth objective of a five-year 30% distribution CAGR through 2018. In September we announced our plan to contribute capital to DCP Midstream, provide additional support to the business during the current low commodity price environment. We expect that this cash infusion along with specters asset contribution will allow DCP to bring its credit metrics back in line and to support its growth objectives through the commodity cycle. We anticipate the DCP will be self-funding going forward. In chemicals CPChem offset lower cash chain margins by running at higher utilization rates during the quarter. Development continues on CPChem U.S. Gulf Coast Petrochemicals project, which is now about 60% complete with start a planned in mid-2017, this project remains on track. We had another strong cash flow quarter generating over $1.4 billion in cash from operations. We use $1 billion of that cash flow on capital primarily to support midstream growth and maintain offer and integrity in our refining system. We recently announced our 2016 capital budget of $3.6 billion including $314 million PSX plans to spend our combined capital budget for 2016 will be $3.9 billion. As with this year the majority of growth capital will be spent on developing our major midstream growth projects. In addition, almost $400 million is being allocated capturing high return quick payout opportunities in our refining business. We also continue to return capital to shareholders. During the third quarter we returned nearly $700 million to shareholders in the form of dividends and share repurchase. In addition, we announced an incremental $2 billion the share repurchase authorization. To date we’ve completed $6 billion of the 9 billion in share repurchases authorized by our board and we’ve increased our dividend a 180% since May 2012. Before I turn the call over to Greg Maxwell to review this quarter’s results, I think it’s appropriate that we pause for just a minute and thank Greg Maxwell for 35 great years. He will be retiring at the end of this year; he’s been a terrific CFO. He’s been a leader; he’s been a mentor to just so many people in our company. He’s been a valuable part of our executive leadership team helping us to stand up a new company flawlessly and importantly to me he’s been a great friend for 35 years. So, Greg thanks for all you’ve done for the company and helping to make this a great place to work and maybe just one more time take us through the numbers.

Thank you, Greg. Good morning everyone. Staring on Slide 4, third quarter adjusted earnings were $1.6 billion or $3.02 per share; reported net income was also $1.6 billion but does include several special items that we excluded from adjusted earnings. These special items negatively impacted earnings by $69 million and include $46 million in pension settlement expense, $22 million in assets and goodwill impairments and a $19 million contingency accrual. These items were partially offset by an $18 million gain on an asset sale. Excluding negative working capital changes of $33 million cash from operations was $1.5 billion. Capital spending for the quarter was $1 billion with approximately $700 million being spent in Midstream on growth projects and $200 million in refining. Dividends and share repurchases in the third quarter totaled $673 million which brings our total shareholder distributions for the year to nearly $2 billion. At the end of the third quarter our adjusted debt-to-capital ratio excluding Phillips 66 partners was 25%. And after taking into account our ending cash balance, our adjusted net debt-to-capital ratio was 12%. The annualized adjusted return on capital employed through the third quarter was 15% and excluding special items our adjusted effective income tax rate was 32%. Slide 5, compares third quarter adjusted earnings with the second quarter by segment. Overall quarter-over-quarter adjusted earnings were up $645 million mainly driven by increased earnings in refining and marketing and specialties. Next we’ll cover each of the segments. I’ll start with midstream on Slide 6, offering businesses within midstream improved their performance in the third quarter. Transportation benefited from higher volumes and lower cost while NGL margins improved due in part to propane and butane margins and seasonal storage. Included in the transportation and NGL results is the contribution from Phillips 66 partners. During the quarter, PSXP contributed earnings of $31 million to the midstream segment. DCP midstream continues to work on itself help initiatives to reduce costs, to manage portfolio and restructure contracts. Results this quarter were improved largely due to better marketing margins and higher volumes despite lower NGL and crude prices. In addition we completed the announced $1.5 billion capital contribution to DCP earlier this morning. Annualized 2015 year-to-date adjusted return on capital employed for this segment was 5% based on an average capital employed at $6.1 billion. The return for this segment continues to reflect the impact of lower commodity prices on DCP Midstream results as well as increased capital employed driven by the significant growth investments we are making in our Midstream segment. Moving on to Slide 7, Midstream’s third quarter adjusted earnings were $91 million up $43 million from the second quarter. Transportation earnings for the quarter were $77 million up $12 million from the prior quarter. Transportation benefited from increased equity earnings from the Explorer and REX pipelines due primarily to increased volumes. Transportation also benefited from lower costs. Increased earnings from our NGL business were driven by higher margins and inventory impacts. Adjusted losses for DCP Midstream were lower in the third quarter mainly due to improved marketing margins and a second quarter loss on the Benedum asset sale offset partially by lower commodity prices. Now turning to chemicals on Slide 8. The Global Olefins & Polyolefins capacity utilization rate for the quarter was 94% and for SA&S they were negatively impacted by lower margins and lower volumes. The 2015 annualized year-to-date adjusted return on capital employed for our Chemicals segment remained at 21% and this is based on an average capital employed of $4.9 billion. As shown on Slide 9, third quarter adjusted earnings per chemicals were $272 million down from $295 million. In Olefins & Polyolefins the decrease of $6 million was largely due to second quarter insurance proceeds of $28 million and lower cash chain margins in the third quarter. This was partially offset by higher volumes and lower operating costs. Equity affiliate earnings improved as a result of higher margins. Specialties, Aromatics and Styrenics earnings declined to $17 million on lower equity earnings and lower volumes. That equity earnings decrease was partially due to lower margins. Next, we turn to refining. Realized margins were $13.96 per barrel for the quarter driven by strong market conditions. Market capture increased from 62% to 72% in the quarter due to improved clean product differentials and lower losses on secondary products. This was partially offset by tighter crude differentials and our clean product configuration which yields less gasoline and more distillates then it is implied in the 321 crack spread. Refining crude utilization increased to 96% up from 90% in the second quarter and clean product yields were 84% consistent with our average system configuration. Pre-tax turnaround costs were $69 million as compared to guidance of approximately $120 million due primarily to the deferral of some plant maintenance in the future periods. The annualized 2015 year-to-date adjusted cap return on capital employed for refining was 21% and this is based on an average capital employed of $13.6 billion. Moving to the next Slide. The refining segment had adjusted earnings of $1.1 billion up $448 million from the last quarter. Overall, the improvement this quarter was primarily due to higher clean product differentials and increased volumes. Adjusted earnings were higher than the second quarter in every region except for the Western Pacific. Atlantic Basin adjusted earnings benefited from lower controllable costs, better realized European margins and higher volumes resulting from the completion of the Humber turnaround early in the third quarter. The Gulf Coast region adjusted earnings were up from last quarter due to higher clean product differentials as well as increased volumes. The capacity utilization for this region was 100% in the third quarter. For the Central Corridor, we showed significant improvement due largely to higher margins from gasoline and secondary products, as well as wider differentials on Canadian crudes. This was partially offset by lower volumes due to turnaround activities at Ponca City and Wood River. And for the Western Region, we had a slight decrease in adjusted earnings due to lower margins and inventory effects. This was mostly offset by higher volumes. The lower margins are due in part from the continued supply impacts on our San Francisco refinery as a result of the plant’s pipeline outage. Next, we will cover market capture on Slide 12. Our worldwide realized margin was $13.96 per barrel versus the 321 market crash of $19.51 resulting in an overall market capture of 72% compared to a market capture rate of 62% last quarter. Our configuration allows us to produce roughly equal amounts of distillate and gasoline which reduced our realized margin relative to market as the gasoline crack was significantly higher than the distillate crack. Benefits from feedstock advantages were not high enough to fully offset the impact of secondary product losses despite fall in crude prices relative to coke and other secondary product prices. This was due primarily to tighter crude differentials this quarter. The other category mainly includes costs associated with RINs, ongoing freight, product differentials and inventory impacts. The $2.71 per barrel increase versus the second quarter was driven primarily by stronger product differentials and lower RIN prices. Moving on to marketing and specialties. This segment posted another strong quarter thanks to higher global marketing margins, record marketing volumes and continued strong margins in our lubricants business. Annualized 2015 year-to-date adjusted return on capital employed for M&S was 33% on an average capital employed of $2.9 billion. Slide 14 shows adjusted earnings for M&S in the third quarter of $344 million up $162 million from the second quarter. In marketing and other the $157 million increase was largely due to higher margins and both domestic and international marketing. Specialties adjusted earnings increased $5 million due to widening basal DGO spread. Moving on to corporate and other. This segment had after tax net costs of $112 million this quarter and improvement of $15 million from the second quarter. Net interest expense and corporate overhead decreased while other improved largely due to fixed assets write-offs that occurred in the second quarter. Next I’ll talk about our capital structure. Consistent with prior quarters we’re showing our capital structure both with and without Phillips 66 Partners. As shown on the graph on the right, excluding partners we ended the quarter with an adjusted debt balance of $7.9 billion, an adjusted debt to capital ratio of 25% and a net to capital ratio of 12%. Slide 17 shows our year-to-date cash flow for 2015. We began the year with the cash balance of $5.2 billion and excluding working capital impacts, cash from operations was $4.1 billion. Working capital changes resulted in a net positive impact of $100 million. In the quarter we issued $1.1 billion in debt and approximately $400 million in equity at the PSXP level. We also retired $800 million in debt. We’re funded $3.3 billion of capital expenditures and investments with $2.4 billion spent in midstream and nearly $800 million in refining. We also distributed $2 billion to our shareholders in the form of dividends and the repurchase of $14.5 million shares resulting in $533 million shares outstanding at the end of the quarter. And we ended the quarter with the cash balance of $4.8 billion. This concludes my discussion of the financial and operational results. Next I’ll cover a few outlook items. For the fourth quarter in chemicals we expect the global O&P utilization rate to be in the mid-90s. In refining we expect the worldwide crude utilization rate to also be in the mid-90s and pre-tax turnaround expense to be approximately $150 million, which includes the impact of maintenance activity that was delayed from the third quarter. This brings our full-year guidance on turnaround expense to approximately $550 million down from our original full-year guidance of $624 million to $675 million. In corporate and other we expect this segment’s after-tax cost to between $110 million and $120 million as we previously guided. And company-wide we expect the effective income tax rate to be in the mid-30s. We are revising our 2015 capital expenditure guidance to $5.8 billion this is up from $4.6 billion to reflect our expected capital spending of $4.3 billion plus we announced $1.5 billion cash contribution to DCP. With that we’ll now open the line for questions.

Thank you. [Operator Instructions] And your first question comes from Edward Westlake from Credit Suisse. Your line is open.

Yes, good two questions. Firstly on the broader macro picture on demand, I mean chemicals margins have been doing pretty well. Dow was saying that they think actually utilization is going to get tighter over the next few years despite everything we hear out of China and fears about the global economy. So maybe just some comments on what you see on chemicals then I’ve got a follow-on midstream?

This is Tim. I think we look chemicals and the utilization rates continue to be fairly good. We don't see excessive inventories at the converter level. And we’re continuing to see good demand in Asia and across the system globally. So I think our view is demand is good. China is particular interest I think largely because of the reported numbers that what we see on both fuels and chemicals tells us that the consumer side of China is doing very well. So our view is supply demand on the basic petrochemical will probably likely continue to tighten. But offset somewhat with the narrow differentials spread between ethane and naphtha, which keeps the cost advantage in the Middle East and the U.S. still there but narrow then it was a year or two ago.

Thanks very clear. And then obviously NGL fracs are awful. You've got a big frac export complex coming up next year with I think guidance of $400 million to $500 million which I think that the frac is the smaller part and then the export. So are you still comfortable with that sort of a reasonable range or do you need to see some commodity price improvement to hit that kind of number?

Our guidance is still the $ 400 million to $500 million. The frac should start up later this year with the LPG terminal hitting in third and fourth quarter of next year. And these, again our fee-based commitments in large part on both the terminal and the frac that are supported by TNB agreements so it gives us some assurance around that piece. The variable piece really comes in terms of the market capture between the U.S. export price and the international markets on the export that are still open today. And so I think that's the one piece of the - that why we give guidance of the $400 million or $500 million.

Thanks, very clear.

Paul Cheng from Barclays is on the line with a question.

Hey, guys good morning.

Good morning.

First of all, just want to say thank you to Greg. We appreciate to have you over the last several years. Congratulation on retirement. I hope you have a lot of fun.

Thank you, Paul.

And I think I have two questions. On the MLP sector it’s no secret that evaluation have dropped a lot over last several months. Also U.S. onshore production has been in decline since probably April. Some of your peers in the MLP size start to suggest that the industry may have over invested in some area of infrastructure. I guess the question is that do you agree with those assessment and that's the recent change in the market environment that in any shape or form alter your view about your pace of the investment in the area of the dropdown pace, what are the M&A opportunities?

Yes, I think we agree broadly that yield structure has moved in the MLP space. We kind of reiterate our guidance and standby $1.1billion of EBITDA by 2018 will be at the MLP level, we feel pretty comfortable with the $2.3 billion of EBITDA we gave at your conference earlier this year, Paul as you think about it, but $1.9 billion that is either existing or projects under construction so the additional $400 million half of that probably come from frac, which to - which we’re going to FID 2016, we go really good about that. The balance of that’s going to come from other NGL refined projects that we have in the portfolio. So I’d say first of all we feel good about the $1.1 billion getting into the MLP by 2018. Other thing I think about to is I think high quality MLPs I think of the pairing of PSX and PSXP strong balance sheet, strong portfolio, existing EBITDA can be dropped. We have a great suite of organic projects that we think are really good projects that we’ll bring forward and execute well on. So we think investors will like that story and continue to want to be part of that story going down the road. And then we look at our cost of capital PSXP today is trading 3% let’s say and we look at the returns on the projects we have in the portfolio that’s a very attractive spread enabling us to create substantial shareholder value. So I would say we are watching what’s going on in most P space with interest, but we think we have a strong story that investors going to like.

How about the pace of the job done I think that you’ve been talking about $2 billion a year given the market condition, do you still think that that's doable or that at least for the immediate future that you probably go for is at slower pace?

I think we are on track, we are on pace. I mean to achieve the one, one you’ve kind of nailed the number that we need to do. We said it’s going to be lumpy and as we go through the period, but on average that’s about what it will be.

Okay. And final one from me. Have you seen any slowdown in the export market for gasoline and diesel and also that based on your network, you wholesale network in the U.S. what kind of a gasoline or diesel growth rate that you may be seeing? Thank you.

Kevin, why don’t you take that?

Paul, I maybe address the market question first. I think as we’ve look out to the year that 3% or so growth in gasoline is very consistent with what we see. The global demand is up as well with particularly strong growth in Asia on the gasoline side. We’ve had good placement opportunities in the U.S. in the last several quarters and I’d say that the export markets are there particularly on the distillates side for the U.S. to export to and so that presents a nice option for us as we think about how do we optimize product values in our system.

Thank you.

Your next question is from Evan Calio with Morgan Stanley.

Hey, good afternoon guys. I wanted to congratulate Kevin as well and wish Greg the best, it sounds like more time for the GreenAg in 2015 Greg.

Thank you, Evan.

My first question on refining, your earnings were over $1 billion or $400 quarter-over-quarter, last time over $1 billion and refining was in 3Q of 2012 when differentials were meaningfully higher. Can you elaborate on the factors that contributed to the quarter besides lower turnaround activity, because I know that over the past two years you had every turnarounds and reliability issues [indiscernible] and alliance. Just wondering if we should assume that these results indicate some of those problems are behind you?

We ran very well so we are up 130,000 barrels a day on the crude side so six point improvement in utilization rate and I think that speaks to the fundamentals on that. And I would say that the product side has been the part that really help the refining complex, so it’s really a view I think for the demand side and the strength of that and then that support staff. I would say gasoline, our view would be - will continue to be strong obviously with some seasonal effects, but literally from our perspective a strengthening market with this kind of price structure on the crude side. Distillate remains weaker, but still able to capture that, so I think the story has been around the market improvement running well and those two combine do that. We’ve also have an investment program to structure improved refining with some of the high return projects with the billings crude, optimization project, increasing the capability of our FCC at Bayway and other kinds of projects like that that will structurally add to our target of another $850. We have $850 million of EBITDA growth through 2018 so it’s a combination of self-help, running well in a good market conditions. So I think that’s our view of how we’ve continue to contribute to our higher structure.

That’s helpful.

Your next question is from the line of Roger Read with Wells Fargo.

Thank you. Good morning and congratulations to everybody on the - I guess we’ll call them future roles even for you Greg. Just like to get in a little bit follow-up on couple of the questions have been asked. On the MLP side, obviously the question about dropdowns some challenges in that space. Do you look at it as something you be willing to do more on the acquisition side I wasn't clear from the answer earlier if that was a possibility. And I'm thinking more the traditional fee-based assets not some of the more assets here exotic I think things we’ve seen.

Well, I think in terms of acquisitions the PSXP level we look at everything that’s out there. I think we feel pretty strongly that our organic profile that we have where we can essentially build something for seven and trade up into a higher value creates more value for both unitholders and for shareholders of PSX. But we saw something out there we thought added value for both PSX and PSXP unitholders then I think we would be one to consider that.

Okay that helps. And then in the refining side of the business as you’ve mentioned in prior calls and in this one you have a higher distillate yield in a typical crack spread would indicate. Gasoline demand clearly growing faster than diesel demand excuse as we look at recent past and I think kind of the expectations here in the near-term future. Is there anything you would do to change your gasoline diesel yields as we look into the summer of 2016 or maybe another way of asking it what is it that you can change on the yield side and that kind of the short timeframe?

First of all, we're running max gasoline have been all years I think were about 41% gasoline and 38% distillate. So typically we would run it the other way around 41% distillate. So we’re run in max gasoline today, some of the projects that we have the Tim mentioned that both billings and also Bayway are around yields in improvement and so we are prior makes more gasoline and more distillates out of those projects, but at the margin that’s what we will do we are not going to make just big investments to try to chases at this point in time. Given we think we have better opportunities in midstream in chemicals.

Okay so near-term no particular additional flexibility on the gasoline volumes or diesel.

No.

Okay thank you.

You bet.

The next question is from Blake Fernandez with Howard.

Guys, good morning and nice results today also offer congratulations to both Greg and Kevin. I had question on DCP, I think the comment was made that you believe it will be self-funding go forward. I am just curious if you can offered to - did that contemplate the current environment or is that just an anticipation that the current cash infusion and then the more stable revenue stream should kind of get you through this difficult pattern and move to more normalized market.

I think that’s the answer that we would give you clearly you know as we’re delivering the balance sheet interest expenses going to go down. DCP is done a great job in terms of reducing costs you know reducing capital spend there also that I would say you know they're working hard to cover further third of the equity linked and from present of proceeds essentially to fixed fee. And so you kind of roll all that together and it kind of moves there breakeven from say mid-65% range down about where we are today. So I think we feel pretty good about that.

Okay thanks. And then one follow up if I think you pretty tackle the midstream outlook and I understand fully that’s you got the dropdown potential but I guess what I am wondering is there as you kind of digest the current assets that are being constructed is there potential to maybe reduced the amount of capital spending there on a go forward basis I guess what I am asking the total CapEx of $3.6 billion does that - move down as we progress toward 2017, 2018, 2019?

We don’t like to give guidance quite that far out, I think we are going to be in the $2 billion a year range in midstream through that that period of time. So the things we have in-flight today are pretty clear to see as you start thing about 2018, 2019, 2020 I would say there is probably reshuffling of the project deck and you will see is more NGL more refined products, more crude things right around our existing assets as we sort through where the drill bits going to go, but I mean our view consistently remains by 2017 and 2018 that really sort itself out and we are probably not $50 crude environment but we are probably not $100 but somewhere $60, $70, $80 in that range. And so I think that one sent drilling and we will see a pickup of infrastructure back on that side. I think our base view at this point we have the juice in our portfolio so to speak that’s going to push us through that period of time.

Got it. Thank you.

Your next question is from Evan Calio with Morgan Stanley.

Hi, guys I am back. Sorry, maybe operator is short.

Welcome back.

So my second question was on - if I look at the 2016 CapEx guidance, I know your midstream is down 924 and then PSX is up can you elaborate on the shift there? And I presume as, I presume as you move forward, you did expect PSX would take on more projects versus kind of building PSX and dropping them down to PSXP?

I will take a stab and Tim can follow-on, there is the question why we said many times and we want to get PSXP to scale. So they can start doing its own organic investments Bayou Bridge was a great opportunity to give PSXP a great organic project and so I think what time you will see us try to grow that ability to do organic products at PSXP, there is no question, we think that makes a lot of sense. We’re still willing to incubate projects at top and take them as it makes sense. Frac is a great example $1 billion plus investment that’s a little big for PSXP today. But in the future we’ll do more and more organic there.

I just think, Evan, that having a sponsored MLP let’s just tackle much bigger, stronger projects that ultimately can be tested for the MLP and as Greg said we plan to continue to do a nice amount of organic growth at PSXP and as that business grows, hopefully we get more of that spending gap at that level which really accretive for the partnership.

Thanks, guys. I’ll leave it there, thank you.

Thanks.

And your next question is from Doug Leggate with Bank of America.

Good afternoon guys and again Greg let me add my congratulations. But I do think I am the only analyst - Kevin congrats on flying the flight to the homeland. I got a couple of questions if I may. So, Greg just going back to Paul earlier question about MLPs. So the multiple compression we’re seeing on the MLP market I think you said in the past that your investments really need about a seven to eight times, CapEx is about maybe seven plus times - back typically, so you need a higher multiple in that to really get the line of sight on the dropdowns. Do you think you can still achieve that in this market or does it may be slow the pace a little bit until things improve?

No. There's a reason for us to slowdown. I mean we look at the yields where we’re trading today, we feel very comfortable Doug.

Okay, all right, so no change in strategy. I guess the kind of related question is really is I wanted to revisit something you said when the Company was separated from Conoco to begin with. And that was that you really had no interest in expanding our building out and you wanted to diversify but you clearly doing great. But refining has been very strong I’m just curious if strategically your views have changed any of if you still very much on the opinion of taking a windfall and moving into these other business?

I think there is some great deals that have been done out there by some of our peers. And so for the right opportunity we would never say never, I would reiterate we look at the portfolio investments that we have both in midstream and chemicals. And we still think there's value and preferentially investing in those higher valued higher returning businesses over the refining business. And so we’ll continue to watch that but there is nothing on the horizon today that we look and say we can increment a lot of value for shareholders by doing that in the refining space.

Okay, and then I can squeeze in last one actually more of housekeeping issue - you want to take this but the capture rate in the Mid Continent clearly very, very strong this quarter. I am just wondering if you can point to anything in particular that was behind? And I will leave it there. Thank you.

Okay, thanks. Doug, it’s Tim, really it just reflected our ability to place products in the high valued markets in the Mid Cont. So we were able to capture a significant uplift versus the group three averages that we used as a benchmark.

We see a little bit as well.

Yes, and we had heavy disk that helped us, yes they were up five bucks, so that was helpful to and ran pretty good.

Thanks everyone.

Thanks.

Thank you.

The next question is from Jeff Dietert with Simmons.

Good morning.

Hi, Jeff.

It looks like with some the most recent capital spending plan, we are going to have the second year of declines in capital spending on the upstream side for the first time since the 80s, U.S. production declined for the fifth month in a row in BOE stats today at Gulf of Mexico and Canadian production continue to grow. Could you talk a little bit about how this evolving market is impacting your crude procurement strategy and maybe talk a little bit about how you see differentials playing out going forward?

Hey Jeff, it’s Tim. So I’d say that we look at this and say this is a great time for options on crude so the infrastructure projects that we talked about that trade options around our refined network have a great deal of value and obviously we can balance the import versus the inland production and the heavy light. So I just think we are into a period with that optionality is going to be a key value contributor and that’s where some of our mid-stream spending is going as well to really support that drive commercial value. And Value Bridge is a perfect example where we connect the Texas side to Louisiana to offer more crude options with the terminal that can import and export so just a lot of dynamics, but that’s the kind of things that we are going to capture that. On this side I think the light heavy dip is likely to stay to a point where that's an attractive options, we think about it. I think the call on lights in the U.S. refining system like crude has increased and its production falls over that’s going to continue to keep that relatively snug. So I think that this will be volatile as you work in the U.S., as you work through both the import and inland production, but I think it speaks to probably a bit narrower WTI-Brent as that shakes up a clearly a period where I think it’s going to move a lot from a month-to-month and quarter-to-quarter. So that’s kind of thesis that we are seeing and I think if you look at the market there you see that playing out right now.

Secondly, if I could you mentioned the product exports were down quarter-on-quarter, because of the stronger domestic demand. Are there any specifics you can share with regard to what you're seeing on the demand side, is it due to any specific actions on your part to access additional markets?

Well, I think again it goes similar to the crude story, we’ve a lot of options on the placement side with our pipeline network and marine options in the U.S. and so we literally try to optimize a net back around each location that we have and so we were able to access some of those higher valued options as we’ve looked around the system to do that. That said I think exports will remain an important dimension to keep high utilization rates in the U.S.

Congratulations Greg and Kevin. Thanks for your comments.

Thank you.

The next question is from Neil Mehta with Goldman Sachs.

Good morning.

Good morning.

Or good afternoon. So Greg congratulations on the announcement, Kevin congratulations on the new opportunity. So on the quarter the retail segment really stood out here really outstanding in terms of volume capturing and margins. How sustainable do we think this is and anything idiosyncratic that you think you should carry forward here in terms of what's happening on the marketing in the specialties business I should say?

Most of that increases - it’s Tim. Most of the increases is really on the marketing side of our business I would call the wholesale side, obviously it’s a phase to our markers to the retail side, so strong demand has really translated into some opportunity to put better margin there. And then in a period when you have falling prices you're able to capture more of that market, because rack prices tend to lag at the stock price. So there is an element as price movements occur that you can go plus, minus on that, but then structurally the stronger demand picture helps that pricing as well.

Thank you. And then on the chemical side, is there an opportunity here to take on incremental leverage at CPChem and use that as a dividend up to the parent?

Well, we certainly took that opportunity this last year we put $1.4 billion debt against CPChem. That’s a decision we take between ourselves and our partner in that, but certainly there is more capacity at CPChem if the owners decided that best warranted.

All right guys, congrats again.

Thanks.

Your next question comes from Ryan Todd with Deutsche Bank.

Great. Thanks and I'll join in congratulating Greg and Kevin as well. Maybe just a couple of quick housekeeping type ones. Turnaround outlook you had great 3Q run 4Q looks good. Any thoughts in terms of kind of the first half of 2016 what you look like the turnaround point of view I guess both PSX specific and maybe the industry as well?

Yes, I would say next year 2016 we go back to more normal type turnaround. This is 2015 was abnormal for us. We had a lot of turnarounds going on this year. This is the way schedule hit, but yes, more of a historical turnaround year in terms of expense.

Okay thanks and then maybe just one last one I guess you addressed earlier the potential to deploy or questions around deploying additional capital and refining versus other businesses but if you think about the portfolio as well there was recent out there I guess on the like refinery. On the flip side when you look across your refining portfolio is there any - is there the possibility of further rationalizations across the business or you pretty content with the portfolio look likes right now?

Well, I don’t think our view around portfolio have changed over what we've been saying so you know we always said the Whitegate is probably an asset that we will do something with ultimately. Interesting enough Atlantic basin margins very strong this year and Whitegates has actually been performing quite well in this environment. But longer-term it’s a relatively small refinery and what we think is the challenge market we continue to think of the California has been [indiscernible] just one of those things that you know long-term we think California is a difficult market we think that certainly our assets our average in that marketplace, but it costs us nothing to hold the option there and will continue to do that we are pleased with the performance of those assets, this year in 2015. So you know you think around the portfolio we’ve done most of the heavy work around the refining portfolio at this point time I would say.

Great thanks gentlemen.

Your next question comes from Phil Gresham with JPMorgan.

Hi, Greg.

Hi, Phil.

First question on CPChem with the projects, is that wiggle room to coming under budget at this stage you think on the first cracker and when - if and when you do second cracker. When you trying to make a decision by?

Let Tim take that one.

I think Phil our view is that we’re still looking at the cost we talked about in those crackers. We are not seeing any kind of extraordinary inflation rate thing, but we are about over 50% complete on that and so we still have some room to go. So our view is it still going to hit about what we expect with over $6 billion investment startup in mid-2017, still like the project. As far as the second cracker goes, we’re still doing development work. So it’s kind of things like site selection, derivatives play, those kind of things continue to advance that. And I could think about it when you look at it today, these were typically six, seven year project cycle. So that would say FID but you still some period out in the future. But overall it would be look push 2020, 2021 at the earliest and we have flexibility in the timing. But we still like North America, as we think about the NGL supply, we still like the North American side is one of those options. But I will also tell you that we continue to look at cracker sites around the world and we plan to continue to try and not try - we plan to continue to growth that business to match the market growth that we are seeing.

Okay. One question for Greg on cash balances. I think in the past you’ve talked about like a minimum cash balance in that $2 billion to $3 billion range. I just wondering with a lower oil prices etc. cetera, if that cash balance that minimum cash balance requirements has change it off. And then I’ll make sure to ask Kevin next time.

Okay, this is Greg. As we looked at we initially when we came out of the spend, we said some neighborhood of $2 billion to $3 billion as we continue to work with our capital structure. I think we could probably easily stay within the $1.5 billion range as long as we have access to the commercial paper markets and use our revolvers as the backstops. As we’ve continue to sort of get our feelings after the spend and everything. I would say $1.5 billion is probably a decent number to look at.

Nice target you leave for Kevin.

I just going to ask one last question on the $400 million to $500 million EBITDA guidance target for the two midstream projects, what kind of timeframe do you think you'd be able to achieve that, given that there is a market element to that EBITDA, I mean do you feel confident that you did a full run rate in 2017 or just generally how you are thinking about that?

Yes, so in 2016 we’ll start you know we’ll have the frac that's a fee-based asset with supplies taking care of the output is placed with that one. On the LPG export terminal that starts up at the end of 2016. So we would expect over toward mid 2017 or so that we should hit that run rate EBITDA with the variable being really the commercial risk contribution piece that's got some variability but a large piece of that is fee-based as well. So it’s a 150,000 barrel a day just a reminder, 150,000 barrel a day of LPG export.

And would you say the commercial piece of that will be somewhere 100 to 200 range?

Yes, I think that’s a decent kind of number to think about that on the risk side.

Okay, perfect. Thanks a lot.

And the next question is from Brad Heffern with RBC.

Good morning, everyone.

Hi, Brad.

I guess to it’s a beat the dead horse a little bit more on midstream obviously you said that the dropdown schedule is still in tax no real change to the - how you are thinking about that? Has there been a change in terms of how you think about the funding side of it? Is one of the levers that you might pull funding it more internally taking PSXP shares back, may be doing internal financing rather than PSXP raising capital on its own in order to finance this dropdown?

We don't think that the PSXP’s access to the equity capital markets are going to be impaired. So I think our plan going forward is still kind of half debt, half equity at PSXP to fund it.

Okay, great. And then earlier you mentioned that frac one at $1 billion was too big for PSXP to tackle. I am curious on frac two given that a lot of spending is pretty far out. Is that something that PSXP could take on organically rather than being incubated at PSX?

No, probably not, we will do that one up top and drop it.

Okay, thanks.

Take care.

And your next question comes from Faisal Khan with Citigroup.

Hi good morning or good afternoon, it’s Faisal.

Hey.

Greg, congratulations on your retirement, our team here certainly appreciates your insights into the business since the company was spun off. Few questions, just on your prepared remarks you talked about how the Western - the refining complex on the West sort of underperformed because of an outage on the pipeline. And can you elaborate a little bit more on that, because obviously gasoline margins were high sequentially quarter-over-quarter and it seems like maybe there was something on the crude side that I didn't quite get in the prepared remarks?

Meanwhile to answer your question is probably about 20 a day of crude that we just couldn’t into the facility to run and that probably translates to about $20 million, $22 million or something in that range. And of course we try to do the work around, but the ultimate solutions for the pipe to get back in service so that we can get the right kind of crude in the Santa Maria, but I think that was the biggest impact that we saw in terms of our West Coast operations.

Okay, got it. And just going back to marketing just want to understand the strong performance of marketing a little bit too. I believe you guys have some excess capacity on Keystone within that business and then there's the exports of course and then a retro also this issue in the Rhine River had any impact on or sort of benefit in the quarter for marketing margins?

Really the Keystone is part of our refining earnings in terms of any excess space we have and the ability to capture additional value from that standpoint so it’s not really the sale of clean products. That’s a crude system that we put into really the refining piece of the business and I did not see anything unusual from our perspective with the Rhine and accept to say that European fuel margins were better than the New York harbor. So to the extent that have an impact that may have been the only place where I’d see the uplift from that.

Okay. And then on the midstream capital spending I appreciate the details on 2016, if I look at a lot of those projects a lot of your assets come online sort of during the course of next year. And so I just want to go back to the remark you made that you still think you’ll spend kind of $2 billion even beyond that a year at midstream. I’m just trying to understand where that will come from is that going to be value bridge or is there something that will be above and beyond the assets you have online in 2016?

Yes, I mean we plan the FID Frac Two in 2016 and of course the LPG export terminals start rolling off and one kind of rolls off this year. Than we were not quite a bit worried, and you’ve got to finish up dapple, at topline we’ve got the value bridge that we are looking at which will be funded at PSXP partners of course now after today, but there's is actually quite a bit of other projects we have around Beaumont in terms of access both crude side and product side that we are working that we’ll hear more about in 2016. Tim if you want to add anything on that.

No, there is just a host of projects has put infrastructure around our network as well that are just much smaller, so there is a large once there that are coming on and then as we continue to go there is a nice steady stream of smaller incremental projects that are good returns that increase both fee based nature in the midstream and then we capture commercial value in our refining and marketing business.

Okay, got you. And one last question from me, you talked about the deferred maintenance during the quarter. When would you see sort of heavy maintenance schedule over the next several months, is that going to be sort of into the first quarter or are we going to see that here in the fourth quarter?

I think you’ll see seasonally still be in the first quarter, fourth quarter and maybe to reiterate on deferral. What we found is we’ve got much better catalyst performance this year than what we anticipated, it wouldn’t allow us to run that longer before we need to come down to change out that catalyst and that’s just makes good economic sense, it’s not around reliability or other issues in terms of some of the deferrals that we’ve had from 2015 into 2016.

Okay, got it. Thanks for the time. Appreciate it.

You bet.

That was our last question at this time. I’ll now turn the call back over to the presenters.

Thank you very much for participating in the call today. We do appreciate your interest in the company. You’ll be able to find a transcript of the call posted on our website shortly and if have any additional questions please free to contact Kevin or CW. Thanks again.

Thank you, ladies and gentlemen this concludes today's conference. Thank you for participating. You may now disconnect.