Phillips 66 profit falls; refining unit posts loss
(Reuters) - Phillips 66's (PSX.N) third-quarter profit fell more than expected, with weak global margins causing a loss in the company's oil refining business.
Phillips 66 said on Wednesday that the refining unit had a loss of $2 million, driven by a 40 percent decline in the average worldwide crack spread, or the difference between wholesale petroleum product prices and crude oil.
A number of factors hit results at U.S. refining companies last quarter. A narrowing discount between West Texas Intermediate crude oil and Brent has affected profitability, and companies say the cost to comply with U.S. biofuel regulations also squeezed margins.
Analysts at Houston-based energy investment bank Simmons & Co said in a note to clients that Phillips 66's gross margins in the U.S. Gulf Coast and West Coast markets fell short of their expectations.
Some refiners have been hard hit by costs of ethanol credits, known as Renewable Identification Numbers, or RINs. Refiners must blend ethanol into fuel to gain a credit, or buy a RIN to cover obligations under U.S. renewable fuels policy for each gallon of unblended fuel they sell.
RIN costs soared to more than $1 per gallon earlier this year, but have since fallen after a draft proposal to cut 2014 blending requirements from the U.S. Environmental Protection Agency circulated in the market.
Phillips 66's chemicals business earned $262 million in the quarter, up from $153 million a year earlier, on higher margins for olefins and polyolefins, the Houston company said.
Overall, quarterly earnings were $535 million, or 87 cents per share, down from $1.6 billion, or $2.51 per share, a year earlier.
Analysts on average had expected a profit of 94 cents per share, according to Thomson Reuters I/B/E/S.
Shares of Phillips 66 were up 0.5 percent at $64.47 in morning New York Stock Exchange trading.
(Reporting by Anna Driver; Editing by Gerald E. McCormick, John Wallace and Lisa Von Ahn)