Phillips 66 expects renewable diesel margins to improve
SOURCE: Phillips 66
October 30, 2024
BY Erin Voegele
Phillips 66 on Oct. 29 reported that its renewable fuels segment was impacted by lower margins during the third quarter of this year, but company officials expect margins to improve moving forward. The company also reported it began producing sustainable aviation fuel (SAF) in September.
The company currently produces renewable fuels at its Rodeo Renewable Energy Complex, a biorefinery project has been under development since mid-2022 and reached full processing rates during the second quarter of 2024.
Kevin Mitchell, chief financial officer at Phillips 66, reported that the Rodeo facility produced 44,000 barrels per day of renewable fuels during the third quarter. The biorefinery has a nameplate capacity of approximately 50,000 barrels per day (800 MMgy).
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Brian Mandell, executive vice president of marketing and commercial, noted that the company is still in startup mode in terms of its renewable segment. He said the Rodeo facility is currently utilizing some higher carbon intensity (CI) feedstocks during the fourth quarter as the plant prepares for implementation of the 45Z clean fuels production credit net year.
Moving into the fourth quarter and beyond, Mandell said Phillips 66 expects to see margin improvements for renewables. He explained that feedstock prices remain depressed and a number of renewable diesel plants are struggling. He also noted that some current renewable diesel capacity is going to be converted to SAF and cited lower imports, a tighter West Coast car diesel market, the tightening of credit markets and the disincentivizing of biodiesel production as factors that the company expects to drive stronger renewable diesel margins.
Mandell also cautioned that the Rodeo facility is not likely to produce SAF during the fourth quarter, but said the biorefinery is expected to be in steady state operations by the first quarter of next year. SAF production should be underway at that time, he indicated.
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Richard Harbison, senior vice president of refining, stressed that the Rodeo facility did produce SAF in September. A market anomaly in the fourth quarter will limit SAF production for the remainder of this year, he explained, noting the company fully intends to be a supplier of SAF to the marketplace.
Phillips 66 reported a $116 million loss for its renewable fuels business segment during the third quarter, compared to a $55 million loss during the second quarter. Adjusted EBITDA for the segment was a $92 million loss, compared to a $43 million loss during the second quarter. The company produced 44,000 barrels per day of renewable fuels during the third quarter, up from 31,000 barrels per day during the second quarter.
Overall, Phillips 66 reported third quarter earnings of $346 million for the third quarter, compared to $1.015 billion during the second quarter. Diluted earnings per share were 82 cents, compared to $2.38.
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