Phillips 66 Announces 2013 Capital Program and Intent to Form MLP

Phillips 66 (NYSE: PSX) will host its inaugural Analyst Meeting today in New York to update investors and analysts on plans to enhance returns, deliver profitable growth and increase distributions to shareholders. Company executives will discuss Phillips 66’s strategy to capitalize on the North American oil and gas production revolution through its formation of a master limited partnership (MLP), $3.7 billion total capital program, and increased use of advantaged feedstocks. With a geographically-advantaged portfolio of refining and marketing (R&M), midstream and chemicals assets, Phillips 66 is uniquely positioned to benefit from these developing market opportunities.

In support of growth and value creation, Phillips 66 intends to contribute a portion of its transportation assets to form an MLP. The company is evaluating assets for contribution to the MLP, which may include certain product and crude pipelines and terminals, rail cars and other rail infrastructure, as well as natural gas liquids (NGL) assets. A registration statement for an initial public offering (IPO) is expected to be filed with the Securities and Exchange Commission in the second quarter of 2013. Subject to market conditions and final approval by Phillips 66’s board of directors, the company anticipates selling a minority interest in the MLP in an IPO in the second half of 2013. Phillips 66 expects the offering to raise approximately $300 million to $400 million of gross cash proceeds.

“We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors,” said Phillips 66 Chairman and CEO Greg Garland. “We believe the proposed MLP will enable us to enhance value for our shareholders and increase the transparency of our business.”

Phillips 66’s 2013 planned capital program is $3.7 billion. This includes Phillips 66’s portion of planned capital spending by DCP Midstream, Chevron Phillips Chemical Company (CPChem) and WRB Refining totaling $1.8 billion, which is not expected to require cash outlays by Phillips 66. The other $1.9 billion represents Phillips 66’s consolidated investments in R&M, Midstream and Corporate and Other. The 2013 capital program represents a 6 percent increase over expected 2012 capital spend of $3.5 billion.

DCP Midstream plans to invest $2.2 billion primarily for new logistics infrastructure and NGL production during 2013. Similarly, CPChem plans $1.1 billion of investment including several growth projects planned or under construction, such as its U.S. Gulf Coast petrochemicals complex and 1-hexene plant.

Phillips 66 is executing plans to improve capital efficiency in its R&M segment. The company has identified sources of additional advantaged crudes and is taking steps to move these lower cost feedstocks to its refineries. Currently, eight of the company’s domestic refineries are processing shale crudes. Additionally, as part of this ongoing initiative, Phillips 66 recently signed time charter agreements for two medium-range Jones Act marine vessels that will supply the Alliance and Bayway refineries, and potentially the company’s other Gulf Coast refineries, with Eagle Ford crude beginning in early 2013. Over the next several years, the company expects to replace 500,000 BPD of higher cost feedstocks with new or increasingly advantaged crudes.

Margins are also expected to improve as the company increases its ability to serve the growing international refined products markets where opportunities exist. Phillips 66 has several projects planned or in execution to increase export capability from its Gulf Coast and West Coast refineries by 100,000 BPD by 2014.

Other initiatives to improve margins include increasing clean product yields in refining, as well as controlling costs. Across the company, Phillips 66 is targeting cost reductions and value capture in excess of $200 million before-tax by the end of 2013.

“Our ability to capture advantaged feedstocks, coupled with the growing international demand for refined products, enables us to maintain high utilization rates and reduce costs per unit,” said Garland. “We will continue to primarily serve domestic markets and will explore opportunities to meet growing demand overseas. Export markets support a more positive balance of trade and promote economic benefits, and jobs, here in the United States.”

Phillips 66 intends to build its financial strength and flexibility through disciplined capital allocation. Equity growth and debt reduction are expected to further improve the company’s debt-to-capital ratio within its target range of 20 to 30 percent by the end of 2013. The company plans to reduce debt by $2 billion by the end of next year. Phillips 66’s approach to capital allocation is designed to fund earnings growth and sustainability investments, while increasing distributions to shareholders through dividends and share repurchases.

Since becoming an independent company in May 2012, Phillips 66 has announced plans to increase its quarterly dividend by a total of 56 percent, and to repurchase $2 billion of outstanding common stock.

Complementary to its plans for growth, Phillips 66 is building a high-performing organization in order to promote business continuity and continued success. The company has a long heritage of safe, reliable and environmentally sound operations and continues to maintain a constant focus on operating excellence.

“Our dedicated employees enable us to pursue and execute our strategy. Together, we are delivering energy to the world and conducting our business with safety, honor and commitment,” Garland concluded.

Garland and other company executives will further discuss Phillips 66’s strategy at today’s Analyst Meeting, which will begin at 8:30 a.m. Eastern time. To access the live webcast, go to Phillips 66’s Investors site, www.phillips66.com/investors, and click on “Presentations and Conference Calls.” You should begin this procedure at least 15-20 minutes prior to the start of the webcast. A replay of the webcast will be archived on Phillips 66’s Investors site approximately two hours following the live call. A transcript also will be available on the Investors site at a later date.

About Phillips 66

Headquartered in Houston, Phillips 66 is an advantaged downstream energy company with segment-leading Refining and Marketing (R&M), Midstream and Chemicals businesses. The company has approximately 14,000 employees worldwide. Phillips 66’s R&M operations include 15 refineries with a net crude oil capacity of 2.2 million barrels per day, 10,000 branded marketing outlets, and 15,000 miles of pipeline systems. In Midstream, the company primarily conducts operations through its 50 percent interest in DCP Midstream, LLC, one of the largest natural gas gatherers and processors in the United States, with 7.2 billion cubic feet per day of gross natural gas processing capacity. Phillips 66’s Chemicals business is conducted through its 50 percent interest in Chevron Phillips Chemical Company LLC, one of the world’s top producers of olefins and polyolefins with more than 30 billion pounds of net annual chemicals processing capacity across its product lines. For more information, visit www.phillips66.comor follow us on Twitter @Phillips66Co.

DISCLOSURES UNDER RULE 135

A registration statement relating to the common units of the MLP that would be sold in the offering referred to above is expected to be filed with the Securities and Exchange Commission, but has not been filed or become effective. This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. This announcement is being issued pursuant to, and in accordance with, Rule 135 under the Securities Act of 1933.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS

OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This news release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Words and phrases such as “is anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is targeted,” “believes,” “intends,” “objectives,” “projects,” “strategies” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to Phillips 66’s operations (including joint venture operations) are based on management’s expectations, estimates and projections about the company, its interests and the energy industry in general on the date this news release was prepared. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include fluctuations in crude oil, NGL, and natural gas prices, refining and marketing margins and margins for our chemicals business; unexpected changes in costs for constructing, modifying or operating our facilities; unexpected difficulties in manufacturing, refining or transporting our products; lack of, or disruptions in, adequate and reliable transportation for our crude oil, natural gas, NGL, and refined products; potential liability for remedial actions, including removal and reclamation obligations, under environmental regulations; potential liability resulting from litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; and other economic, business, competitive and/or regulatory factors affecting Phillips 66’s businesses generally as set forth in our filings with the Securities and Exchange Commission, including our Form 10 Registration Statement. Phillips 66 is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.