Phillips 66 posts surprise profit on higher refining margins

Phillips 66 posted a surprise first-quarter adjusted profit on Wednesday, as strong refining margins and higher capacity utilization helped the company offset the impact of volatile commodity prices.

U.S. Gulf Coast refiners are benefiting from some of their strongest margins in years, as disruptions to Middle Eastern oil flows following the Iran war have lifted demand for U.S. fuel exports.

Benchmark U.S. refining margins, measured by the 3-2-1 crack spread, rose about 73% on average in the first quarter from a year earlier.

Phillips 66's realized refining margin climbed to $10.11 per barrel in the first quarter from $6.81 a year earlier, while its refining segment swung to an adjusted profit of $208 million from a loss of $937 million.

Shares of the company were up 1.7% in premarket trading.

A sharp rise in commodity prices during the quarter, however, reduced the value of the company's hedges, offsetting gains from stronger underlying operations.

Phillips 66 recorded $839 million in related losses as rising prices eroded the value of those hedging positions.

The refiner has been expanding its midstream and export capacity.

Phillips 66's crude capacity utilization rose to 95% from 80% a year earlier, reflecting stronger operations, while its turnaround expenses fell to $178 million from $270 million.

The company said it increased NGL fractionation capacity at its Sweeny complex in Texas by 23% and boosted capacity at its Freeport LPG export dock by 15%, following the completion of debottlenecking work in 2025.

The Houston, Texas-based company reported an adjusted profit of 49 cents per share for the three months ended March 31, compared with analysts' average estimate of a loss of 40 cents per share, according to data compiled by LSEG.