# Phillips 66 (PSX) Financial Model

Free Excel 3-statement financial model and company analysis for Phillips 66.

- Canonical: https://finamodel.com/companies/phillips-66
- Industry: Oil and Gas
- Downloadable model: Yes
- Excel download: https://finamodel.com/company-models/PSX.xlsx

## Model Purpose

This model evaluates the sum-of-the-parts (SOTP) equity valuation and cash flow generation capacity of Phillips 66, enabling an equity research analyst to forecast segment-level profitability, assess the impact of the ongoing transition towards renewable fuels, and determine the sustainability of shareholder returns (dividends and buybacks) across various commodity price cycles.

## Company Overview

- Phillips 66 is a leading diversified and integrated downstream energy provider that manufactures, transports, and markets refined petroleum products, petrochemicals, and renewable fuels.
- **Business segments:**
  - Refining (~45-55% of consolidated EBITDA, highly cyclical)
  - Midstream (~35-40% of consolidated EBITDA, stable fee-based)
  - Marketing and Specialties (M&S) (~15-20% of consolidated EBITDA)
  - Chemicals (Equity earnings from 50% CPChem joint venture)
  - Renewable Fuels (Newly established segment in 2024, growing contribution)
- **Key geographies:** Primarily the United States (Gulf Coast, Mid-Continent, West Coast) and Europe (though recently reduced via the 2025 sale of its Germany and Austria retail marketing business).
- **Business model type:** Asset-heavy, commodity-driven, integrated downstream operator.
- **Competitive position:** One of the largest independent refiners in the US, with a highly competitive midstream footprint and a leading position in renewable diesel following the Rodeo Renewed conversion.
- **Recent major events:** In 2025, the company sold its Germany and Austria retail marketing business (recognising a $1.9 billion pre-tax gain), acquired the remaining 50% of WRB Refining (consolidating it fully), announced the closure of the Los Angeles Refinery (incurring accelerated depreciation), and completed the Coastal Bend midstream acquisition. In 2024, it completed the conversion of the Rodeo facility to a 50,000 BPD Renewable Energy Complex.

## Revenue Deep Dive



### Refining

- **Segment name:** Refining
- **Revenue driver formula:** `Crude Throughput (BPD) x 365 x Realised Refining Margin ($/bbl)`
- **Historical growth rate:** Highly volatile, driven by crack spreads rather than structural volume growth.
- **Key growth levers and headwinds:** Market crack spreads, crude oil differentials (e.g., WTI vs. Brent, heavy/sour discounts), refinery utilisation rates, and turnaround schedules.
- **Pricing dynamics:** Spot market pricing based on global supply/demand for gasoline, distillate, and aviation fuel.
- **Revenue recognition notes:** Recognised upon delivery of refined products to customers.
- **Seasonality:** Q2 and Q3 are typically stronger due to the summer driving season in the US.

### Midstream

- **Segment name:** Midstream
- **Revenue driver formula:** `(Pipeline Throughput x Tariff Rate) + (Fractionation Volumes x Fractionation Fee) + NGL Sales`
- **Historical growth rate:** 5-8% CAGR, driven by acquisitions and organic capacity expansions.
- **Key growth levers and headwinds:** NGL production volumes, pipeline capacity expansions (e.g., Dos Picos II), and integration of acquired assets (Coastal Bend).
- **Pricing dynamics:** Largely fee-based with minimum volume commitments (MVCs) and inflation-linked tariff escalators, providing stable cash flows.
- **Revenue recognition notes:** Recognised as transportation, terminaling, and processing services are rendered.
- **Seasonality:** Relatively stable, though extreme weather (e.g., winter freezes) can temporarily disrupt volumes.

### Marketing and Specialties (M&S)

- **Segment name:** Marketing and Specialties
- **Revenue driver formula:** `Fuel Sales Volumes x Marketing Margin ($/bbl) + Lubricant Sales`
- **Historical growth rate:** Flat to low single-digit decline (adjusted for the 2025 European retail divestiture).
- **Key growth levers and headwinds:** Retail fuel demand, brand licensing, and base oil pricing.
- **Pricing dynamics:** Highly competitive retail and wholesale fuel pricing; margins often expand when wholesale fuel prices drop rapidly (rocket and feather effect).
- **Revenue recognition notes:** Recognised at the point of sale at retail sites or upon wholesale delivery.
- **Seasonality:** Higher volumes in summer months.

### Chemicals

- **Segment name:** Chemicals (CPChem Joint Venture)
- **Revenue driver formula:** `Olefins & Polyolefins Capacity x Utilisation x Chain Margin` (Modelled as Equity Earnings).
- **Historical growth rate:** Cyclical, 3-5% through the cycle.
- **Key growth levers and headwinds:** Global GDP growth, packaging demand, and the ethane-to-naphtha cost advantage.
- **Pricing dynamics:** Spot and contract pricing tied to global petrochemical supply additions.
- **Revenue recognition notes:** Reported as "Equity in earnings of affiliates" on the income statement, not consolidated revenue.
- **Seasonality:** Minimal, though turnaround activity impacts specific quarters.

### Renewable Fuels

- **Segment name:** Renewable Fuels
- **Revenue driver formula:** `Renewable Production (BPD) x 365 x (Renewable Fuel Price + LCFS Credits + RINs)`
- **Historical growth rate:** >100% YoY in 2024/2025 as the Rodeo facility ramped to full 50,000 BPD capacity.
- **Key growth levers and headwinds:** Feedstock costs (used cooking oil, tallow), regulatory credit prices (RINs, LCFS), and sustainable aviation fuel (SAF) adoption.
- **Pricing dynamics:** Heavily dependent on state (California) and federal environmental credit markets.
- **Revenue recognition notes:** Includes the value of environmental credits generated and sold.
- **Seasonality:** Minimal operational seasonality, but credit prices fluctuate based on regulatory announcements.

## Cost Structure



### Variable Costs / COGS

- **Line-by-line breakdown:** Purchased crude oil and products, renewable feedstocks (tallow, vegetable oils), natural gas for refinery fuel, and blending components.
- **Gross margin range:** Highly volatile; Refining gross margins range from $8/bbl to $25+/bbl depending on the macro environment.
- **Key input costs and commodity exposures:** Crude oil (WTI, Brent, WCS), natural gas (Henry Hub), and renewable feedstocks.
- **How COGS scales with revenue:** Directly proportional to volume, but heavily skewed by the absolute price of crude oil.

### Operating Expenses

- **Operating Expenses (Opex):** Includes labour, maintenance, utilities, and turnaround costs. Fixed in the short term, but scales with capacity additions.
- **SG&A:** General corporate overhead, marketing expenses, and IT. Typically 2-3% of total revenue.
- **Depreciation & Amortisation:** Significant due to asset-heavy nature. Spiked in 2025 due to ~$1.2 billion in accelerated depreciation related to the Los Angeles Refinery closure.
- **Stock-Based Compensation:** Immaterial relative to total revenue (typical for traditional energy).
- **Restructuring / one-time charges:** Frequent in recent years (e.g., Los Angeles Refinery idling costs, European retail divestiture costs).

### Margin Profile

- **Gross margin:** 8-15% (distorted by high absolute revenue numbers when oil prices are high).
- **EBITDA margin:** 5-10% consolidated.
- **Segment-level margins:** Midstream is high margin (often >50% EBITDA margin on net revenues), while Refining is low margin on a percentage basis but generates massive absolute cash flow.
- **Margin trend:** Refining margins are normalising post-2022/2023 peaks; Midstream margins are expanding due to scale and integration.

## Balance Sheet Structure

- **Total assets:** ~$75-80 billion.
- **Key asset categories:** PP&E (refineries, pipelines, terminals), Investments in Affiliates (CPChem, WRB prior to Q4 2025), and Inventory.
- **Goodwill & intangibles:** Modest, primarily stemming from midstream acquisitions (e.g., DCP Midstream, Coastal Bend).
- **Working capital profile:**
  - **Days Sales Outstanding (DSO):** 15-25 days.
  - **Days Inventory Outstanding (DIO):** 25-35 days.
  - **Days Payable Outstanding (DPO):** 20-30 days.
  - **Net working capital as % of revenue:** Typically near zero or slightly negative, but absolute swings in oil prices cause massive cash flow impacts (e.g., rising oil prices consume billions in working capital).
- **PP&E:** The largest asset class. Maintenance capex is high (turnarounds). Useful lives range from 15 to 40 years for refining and midstream assets.
- **Right-of-use assets:** Material due to leased railcars, storage tanks, and retail sites.

## Capital Expenditure & Investment

- **Capex as % of revenue:** 1.5-2.5% (revenue is inflated by commodity prices; absolute capex is a better metric, typically $2.0B - $2.5B annually).
- **Maintenance capex vs. growth capex:** Roughly 50/50 split. Maintenance includes critical refinery turnarounds.
- **Major capex programmes underway or planned:** Rodeo Renewed (completed 2024), midstream NGL expansions (Dos Picos II).
- **Capitalised software / development costs:** Immaterial.
- **M&A pattern:** Strategic bolt-ons and consolidations (e.g., acquiring public units of DCP Midstream, WRB Refining remaining 50%, Coastal Bend).
- **Typical acquisition multiple paid:** 7-9x EBITDA for midstream assets.

## Debt & Capital Structure

- **Total debt:** ~$19.7 billion (as of year-end 2025).
- **Debt/EBITDA ratio:** Target is 1.0x - 1.5x through the cycle; currently ~2.2x based on 2025 reported EBITDA.
- **Credit rating:** Investment grade (Baa1/BBB+).
- **Key debt instruments:** Senior unsecured notes, term loans, and a revolving credit facility ($5.7 billion capacity).
- **Maturity profile:** Well-laddered, with average maturity >8 years.
- **Interest rate profile:** Predominantly fixed-rate bonds; weighted average cost of debt is ~4.5%.
- **Covenants:** Standard investment-grade covenants (debt-to-capitalisation limits).
- **Share repurchase programme:** Highly active. The company routinely returns excess cash to shareholders via buybacks (often $2B+ annually depending on refining margins).
- **Dividend policy:** Progressive dividend policy; current yield is ~3.5-4.0%, with a target payout of sustainable midstream/M&S cash flows.

## Cash Flow Characteristics

- **Operating cash flow conversion:** Highly variable due to working capital swings. 2025 OCF was $5.0 billion ($6.1 billion excluding working capital).
- **Free cash flow margin:** 2-5% of revenue, but better measured as absolute FCF ($2.5B - $4.0B annually).
- **Major non-cash items:** Depreciation & amortisation (elevated in 2025 due to LA Refinery), equity earnings from CPChem (must deduct equity earnings and add back actual cash dividends received from affiliates).
- **Working capital cash flow impact:** Massive source/use of cash depending on the trajectory of crude prices at quarter-end.
- **Capex intensity:** Moderate to high. Turnarounds are capital intensive and non-discretionary.
- **Cash tax rate vs. GAAP effective tax rate:** Cash taxes can lag GAAP taxes due to accelerated depreciation (MACRS) on major projects like Rodeo Renewed.

## Sheet Structure

1. **Assumptions:** Hardcoded drivers for macro (WTI, crack spreads), segment volumes, margins, and corporate tax/debt rates.
2. **Macro & Pricing:** Translation of benchmark prices (WTI, Brent, Henry Hub) into realised prices and margins for PSX.
3. **Refining Segment:** Crude throughput (MBD), utilisation %, clean product yield %, realised margin ($/bbl), turnaround expenses, and segment EBITDA.
4. **Midstream Segment:** NGL pipeline throughput, fractionation volumes, tariff rates, and segment EBITDA.
5. **M&S Segment:** Fuel sales volumes, marketing margins, and segment EBITDA.
6. **Renewable Fuels Segment:** Renewable feedstock processing (MBD), SAF yield, LCFS/RIN pricing, and segment EBITDA.
7. **Chemicals Segment (CPChem):** Capacity utilisation, chain margins, equity earnings, and cash distributions to PSX.
8. **Consolidated Income Statement:** Aggregation of segment EBITDA, D&A, interest, taxes, and special items (e.g., LA Refinery closure).
9. **Working Capital Schedule:** Receivables, inventory, and payables driven by days outstanding and absolute commodity prices.
10. **PP&E & Capex Schedule:** Maintenance vs. growth capex, turnaround capitalisation, and D&A waterfall.
11. **Debt Schedule:** Tranche-by-tranche debt balances, interest expense, and debt paydown/issuance logic.
12. **Cash Flow Statement:** Net income to OCF (adjusting for equity earnings vs. distributions), investing cash flows, and financing cash flows (dividends, buybacks).
13. **Balance Sheet:** Assets, liabilities, and equity. Must balance perfectly.
14. **Valuation (SOTP & DCF):** Sum-of-the-parts EV/EBITDA valuation (applying different multiples to Midstream vs. Refining) and a consolidated DCF.

## Key Financial Relationships

1. `Refining Revenue = Refining Crude Throughput (BPD) x 365 x Realised Refined Product Price ($/bbl)`
2. `Refining Segment EBITDA = (Refining Crude Throughput (BPD) x 365 x Realised Refining Margin ($/bbl)) - Refining Opex`
3. `Midstream Segment EBITDA = (NGL Throughput x Tariff Rate) + (Fractionation Volumes x Fractionation Fee) + Equity Earnings from Midstream JVs - Midstream Opex`
4. `Renewable Fuels Revenue = Renewable Processing Volumes (BPD) x 365 x (Wholesale Diesel Price + RIN Value + LCFS Value)`
5. `Chemicals Equity Earnings = PSX 50% Share x (CPChem Total Volumes x Petrochemical Chain Margin - CPChem Fixed Costs - CPChem D&A)`
6. `Consolidated Adjusted EBITDA = Refining EBITDA + Midstream EBITDA + M&S EBITDA + Renewable Fuels EBITDA + Chemicals Equity Earnings - Corporate Overhead`
7. `Purchased Crude Oil and Products (COGS) = Total System Throughput x Average Feedstock Cost ($/bbl)`
8. `Depreciation Expense = Base D&A + (Capex x Blended Depreciation Rate) + Accelerated Depreciation (e.g., LA Refinery)`
9. `Free Cash Flow (FCF) = Operating Cash Flow - Capital Expenditures and Investments`
10. `Share Repurchases = MAX(0, FCF - Common Dividends - Target Debt Paydown)`
11. `Ending Share Count = Beginning Share Count - (Share Repurchases / Average Share Price)`
12. `Interest Expense = Average Total Debt x Weighted Average Interest Rate`

## Cross-Sheet Dependencies

- **Macro & Pricing** feeds into **Refining**, **Midstream**, and **Renewable Fuels** to determine realised margins and revenues.
- **Segment Sheets** (Refining, Midstream, M&S, Renewable Fuels, Chemicals) aggregate into the **Consolidated Income Statement** to calculate Adjusted EBITDA and Net Income.
- **Consolidated Income Statement** feeds Net Income and D&A into the **Cash Flow Statement**.
- **Working Capital Schedule** calculates changes in NWC, which feeds the **Cash Flow Statement**.
- **PP&E & Capex Schedule** feeds D&A to the **Consolidated Income Statement** and Capex to the **Cash Flow Statement**.
- **Cash Flow Statement** determines the net change in cash, which feeds the **Debt Schedule** (for revolver draw/paydown) and the **Balance Sheet** (ending cash).
- **Debt Schedule** feeds Interest Expense back to the **Consolidated Income Statement** (creating a circular reference that must be managed via a toggle or iterative calculation).

## Sign Convention

- **Revenues and Income:** Positive.
- **Expenses and Costs (COGS, Opex, SG&A, D&A, Interest, Taxes):** Positive in their specific schedules, but subtracted in aggregation formulas (e.g., `Gross Profit = Revenue - COGS`).
- **Assets:** Positive.
- **Liabilities and Equity:** Positive.
- **Cash Flow Statement:** Cash inflows are positive; cash outflows (Capex, dividends, debt paydown, share repurchases) are negative.
- **Working Capital:** An increase in an asset (e.g., Inventory) is a negative cash flow; an increase in a liability (e.g., Accounts Payable) is a positive cash flow.

## Things Most Likely to Go Wrong

1. **Consolidation Changes:** The model must account for the Q4 2025 shift where WRB Refining moved from 50% equity earnings to 100% consolidated operations. Historicals will not match forecasts without a pro-forma adjustment.
2. **European Retail Divestiture:** M&S segment revenues and EBITDA will drop structurally in 2026 due to the 2025 sale of the Germany and Austria retail business. Do not straight-line historical M&S growth.
3. **Los Angeles Refinery Closure:** Refining capacity and throughput must be reduced in Q4 2025/2026 to reflect the idling of the LA Refinery.
4. **Accelerated Depreciation:** 2025 D&A includes ~$1.2 billion in accelerated depreciation for the LA Refinery. This must be excluded from run-rate D&A forecasts.
5. **Equity Earnings vs. Cash Distributions:** Chemicals (CPChem) generates equity earnings on the Income Statement, but the Cash Flow Statement must deduct these earnings and add back actual cash distributions received.
6. **Working Capital Swings:** Do not project working capital as a flat % of revenue. Use days outstanding, as a $10/bbl swing in oil prices will artificially inflate revenue and inventory balances simultaneously.
7. **Renewable Fuels Segment:** This is a new segment as of 2024. Prior to 2024, these activities were buried in Refining and M&S. Ensure the forecast isolates the 50,000 BPD Rodeo complex.
8. **Special Items:** PSX frequently reports "Adjusted Earnings" to strip out asset sales (e.g., $1.9B European retail gain in 2025) and impairment charges. The model must forecast clean, adjusted figures.

## Validation Checks

1. "Refining crude utilisation should be in the 90-96% range; flag if >100% or <85%."
2. "Clean product yield should remain stable around 86-88%; flag if outside this band."
3. "Consolidated Debt/EBITDA should remain between 1.0x and 2.5x; flag if leverage exceeds 3.0x."
4. "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
5. "Midstream EBITDA should not decline YoY unless there is a modelled asset sale (highly contracted, fee-based business)."
6. "Total Capex should be between $2.0 billion and $2.5 billion annually; flag if outside this range."
7. "Effective tax rate should be 21-23%; flag if it deviates significantly without a modelled tax credit."
8. "Dividend payout should be fully covered by Midstream and M&S cash flows (a key PSX corporate target)."

## Key Assumptions (Default Values)

| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Refining Crude Capacity | 1,800 | MBD | Reflects post-LA Refinery closure capacity. |
| Refining Utilisation Rate | 94.0 | % | 2025 actual average utilisation. |
| Clean Product Yield | 87.0 | % | 2025 actual yield. |
| Realised Refining Margin | 12.50 | $/bbl | Mid-cycle assumption based on normalising crack spreads. |
| Midstream EBITDA Growth | 4.0 | % | Run-rate growth post-Coastal Bend and Dos Picos II integration. |
| Renewable Fuels Capacity | 50.0 | MBD | Full capacity of the Rodeo Renewable Energy Complex. |
| M&S EBITDA | 1,500 | $ Millions | Adjusted downward to reflect the sale of European retail assets. |
| CPChem Equity Earnings | 600 | $ Millions | Mid-cycle petrochemical margin assumption. |
| Total Capex | 2,200 | $ Millions | Management guidance for sustaining and growth capital. |
| Effective Tax Rate | 22.0 | % | Historical GAAP average. |
| Weighted Average Interest Rate | 4.5 | % | Based on current debt stack and fixed-rate notes. |
| Dividend per Share | 4.60 | $ | Annualised based on recent quarterly declarations. |
| Share Repurchases | 1,500 | $ Millions | Base assumption, scales up if refining margins exceed mid-cycle. |
| WACC | 8.5 | % | Standard downstream energy discount rate. |
| Terminal Growth Rate | 1.0 | % | Low terminal growth due to long-term energy transition headwinds. |

## Data Sources & Benchmarks

- **Filings:** SEC EDGAR (10-K, 10-Q, 8-K) and the Phillips 66 Investor Relations page (specifically the April 2025 Investor Update and Q4 2025 Earnings Presentation).
- **Key Peers:** Valero Energy (VLO), Marathon Petroleum (MPC), HF Sinclair (DINO).
- **Industry Data:** EIA (Energy Information Administration) for weekly crack spreads, crude inventory, and refinery utilisation; CARB (California Air Resources Board) for LCFS credit pricing.
- **Consensus Estimates:** FactSet or Bloomberg for forward crack spread curves and CPChem margin expectations.

## Sources

- Phillips 66 Q4 2025 Earnings Release and Presentation (February 4, 2026)
- Phillips 66 2025 Form 10-K (Filed February 2026)
- Phillips 66 Investor Update Presentation (April 2025)
- Phillips 66 Rodeo Renewed Project Updates and Press Releases (2024)
- Macrotrends and AlphaQuery Historical EBITDA Data

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## Frequently asked questions

### What is Phillips 66's primary business model and how does it generate revenue?

Phillips 66 is a diversified and integrated downstream energy provider. It generates revenue by manufacturing, transporting, and marketing refined petroleum products, petrochemicals, and renewable fuels across its Refining, Midstream, Marketing and Specialties, Chemicals, and Renewable Fuels segments.

### What are the key factors influencing Phillips 66's revenue growth?

Phillips 66's revenue is heavily influenced by commodity prices, particularly crude oil and refined product prices, given its asset-heavy and commodity-driven business model. Segment-level profitability also depends on refining margins, midstream fee-based volumes, and the growing contribution from renewable fuels.

### What is Phillips 66's typical capital expenditure as a percentage of revenue?

Phillips 66's capital expenditure is typically 1.5-2.5% of revenue, although absolute capex (around $2.0B - $2.5B annually) is often a more stable metric due to commodity price fluctuations impacting revenue. This capex is roughly split 50/50 between maintenance, including critical refinery turnarounds, and growth initiatives like midstream NGL expansions.

### What are the main cost assumptions in a financial model for Phillips 66?

Key cost assumptions for Phillips 66 include COGS as approximately 89.14% of revenue, SGA at about 1.71% of revenue, and DA at around 1.43% of revenue. These percentages reflect the company's operational structure as an integrated downstream operator.

### How does the financial model assess Phillips 66's valuation and cash flow generation?

The financial model evaluates Phillips 66 using a sum-of-the-parts (SOTP) equity valuation approach. It forecasts segment-level profitability and assesses the company's cash flow generation capacity to determine the sustainability of shareholder returns across various commodity price cycles.

### Can I download an Excel financial model for Phillips 66, and what is its forecast horizon?

Yes, an Excel financial model for Phillips 66 is available for download. This model provides a forecast horizon from Fiscal Year 2026 through Fiscal Year 2030, allowing for detailed analysis of future performance.

[Interactive forecast calculator](https://finamodel.com/companies/phillips-66/forecast)