Well, PSX earnings were about what we all expected them to be: adequate but not blockbuster like VLO and MPC.
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@ah 2 reasons IMO:
1) remember the massive 1q hedge margining and m-2-m effects (ie short futures hedges (outrights and timespreads) that were underwater given massive flat price moves upwards on physical inventories in tanks and cargoes, mostly managed by commercial. Although the physical is also being treated as m-2-m, it’s not actualized until it’s financially or physically liquidated across quarters, whereas hedges have to be “rolled” across quarters - those financial impacts have to be booked when they occur. If you recall, PSX booked huge losses on this in 1q (~$1Bn).
So PSX (rightfully) needed to show the impact of the physical (massive profit over and above hedge losses) once actualized and booked, given they had booked hedging losses for the prior quarter on said physical. Given most of this activity sits in Commercial, hence reporting on that.
2) the Elliott effect. It’s ever present and will be for a long time, until they ultimately liquidate. Remember, Elliott bashed the way Commercial was operated in their proxy war last year. So they forced the hiring / re-creation of the VP Global Trading position and other reorganizational tweaks.
Although just about all of the enhanced performance in Commercial is given the Iran headwinds (everyone in the sector and I mean EVERYONE is booking record profits in their Commercial divisions), PSX wants to show that they got the Elliott message and made changes (however material they were, which isn’t much).
It’s still damming that rolled up Commercial performance through this lift in the markets since Iran across Marketing/Refining/Commercial performance lags MPC and VLO - both with much, much smaller commercial operations relative to PSX.
It speaks to where the real value is still created (the assets) ………and where the real performance gap still is vs peers (and will remain, likely).
The balance sheet is still su-king wind.
Why did PSX note separately report Commercial earnings in the 2Q earning release?
Good to see us aggressively paying down debt. Paid off almost 7 billion in debt compared to 9 million for Marathon over the last quarter.