Phillips 66 Issues Preliminary Guidance for Q1 2026 Results: Anticipates \$900 Million Mark-to-Market Losses Amid Commodity Volatility

Key Points for Investors

• Preliminary Results Guidance Released: Phillips 66 has issued early guidance on its first-quarter 2026 financial results, prior to completing its full financial close process. These figures are subject to change.
• Significant Mark-to-Market Losses: The company expects approximately \$900 million in pre-tax mark-to-market losses for Q1 2026 due to a sharp increase in commodity prices, particularly affecting its derivatives hedging program.
• Net Short Derivative Position: As of March 31, 2026, Phillips 66 held a net short position of around 50 million barrels in crude oil and product-related derivative contracts.
• Segment Impact: The mark-to-market losses are estimated as follows:
  • Refining: Pre-tax loss ranging from \$350 million to \$400 million
  • Renewable Fuels: Pre-tax loss ranging from \$100 million to \$150 million
• Additional Segment Pressures:
  • The Refining segment results were also negatively impacted by a \$300 million pre-tax loss from the standard two-week lag in Gulf Coast clean products pricing.
  • Marketing & Specialties segment margins were squeezed by sharply rising spot prices.
• Liquidity Impact: The company experienced a net outflow of approximately \$3 billion in cash collateral on derivative positions due to market volatility, prompting draws on committed and uncommitted credit facilities.

Detailed Preliminary Financial Table

Other Operational Updates

• Refining Segment: Faced an additional \$300 million pre-tax headwind due to the lag in product pricing.
• Marketing & Specialties: Margins adversely impacted by rapidly increasing spot prices, further compounding earnings pressure.
• Net Debt and Adjusted Income: The company referenced non-GAAP measures such as net debt and adjusted income (loss) before income taxes, emphasizing that these are preliminary and not yet finalized.
• Liquidity Management: Due to the cash collateral outflows, the company drew on both committed and uncommitted credit lines, signaling a proactive approach to cash management during commodity price swings.

Updated Outlook on Key Operating Metrics

• Global Olefins & Polyolefins Utilization: Updated from “Mid-90%” to “Low-90%”.
• Refining Turnaround Expense: Remains unchanged at \$170–\$190 million for the quarter.

Potential Share Price Sensitivities

• Large Hedging Losses: The \$900 million mark-to-market loss is significant and may affect investor sentiment and share valuation, especially as the underlying physical inventory value increase is not reflected in book value.
• Cash Flow and Liquidity Concerns: The \$3 billion cash collateral outflow and reliance on credit facilities may raise questions about short-term liquidity and risk management.
• Segment Pressures: The Refining and Marketing & Specialties segments face ongoing earnings headwinds from both market volatility and structural timing lags in pricing, potentially pressuring overall profitability.
• Forward-Looking Statements: The company cautions that actual results may differ materially from these preliminary estimates due to the ongoing financial close process and market uncertainties.

Cautionary Statement

Disclaimer: This article is based on preliminary, unaudited financial information released by Phillips 66 for the first quarter of 2026. Actual results may differ materially from these estimates. This article includes forward-looking statements and is not a substitute for official SEC filings or company press releases. Investors are encouraged to consult the company’s official disclosures and risk factors before making investment decisions.

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