Houston-based Phillips 66 saw its quarterly net income crater by 61 percent as most of nation’s refining industry saw its profit margins shrink dramatically.
The downstream sector suffered in the first three months of the year as the spread between falling crude oil and refined products prices — like gasoline and other fuels — dropped dramatically. Most refiners were already writing off first-quarter results and looking forward to a stronger remainder of 2016.
Refiners throughout the Gulf Coast profited greatly in 2015 as oil prices fell, while gasoline prices dropped more slowly until toward the end of the year. That gap allowed companies like Phillips 66 to rake in more profits last year.
Phillips 66 still reported quarterly earnings of $385 million on Friday, but that was down greatly from $987 million during the beginning of 2015, and even from $650 million in the fourth quarter.
“Weaker margins impacted our financial results in the first quarter,” said Greg Garland, chairman and CEO of Phillips 66, said in a prepared statement. “Our businesses ran well, and we remain focused on operating excellence with industry-leading safety performance.”
Phillips 66 profits in the pipeline in chemicals sectors dipped only slight from a year ago, but the refining earnings alone fell by 84 percent from $538 million down to $86 million. Last year, refining represented well more than half of Phillips 66’s profits.
There are, however, signs for optimism as with early data shows record demand for gasoline through the rest of 2016 as motorists take advantage of increasing, but still very low, prices at the pump.