Phillips 66 (NYSE:PSX) Q3 2020 Earnings Conference Call - Final Transcript

Oct 30, 2020 • 12:00 pm ET

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Phillips 66 (NYSE:PSX) Q3 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Neil Mehta from Goldman Sachs. Please go ahead. Your line is open.

Analyst
Neil Mehta

Thanks so much, guys, and good morning. My opening question is around the balance sheet and the dividend outlook from here. I think the message today is that you guys view the dividend as sustainable, but can you just talk to that? And then can you also just give us some flavor, maybe this is for Kevin, about conversations with the rating agencies about the credit and how do you feel about where your balance sheet position is right now?

Executive
Greg C. Garland

Let me take the first part and Kevin take the second. I think, I mean, Neil, first of all, one of the things I've learned is you never say never, right, in this business, but all the actions that we've taken to date, you know cutting our cost, cutting our capex, increasing our liquidity have been around defending [Phonetic] the dividend.

And as you look at Q3, essentially, we covered our capex and our dividend through cash. Certainly, we feel comfortable as we -- if things don't get any better and we stay kind of where we're at, then we feel really comfortable that our first dollar is going to go to sustaining capital, that's $1 billion; our second dollar is going to go the dividend of $1.6 billion [Phonetic]. So we can cover sustaining capex and our dividend from our cash.

So I think that's one of the great strengths of the PSX portfolio and the diversified nature of our portfolio. So I'll let Kevin talk a little bit about the balance sheet and expectations there.

Executive
Kevin J. Mitchell

Yeah, so we've consistently expressed our objective to maintain a strong balance sheet and keep that financial flexibility and that's reflected in our credit ratings A3 at Moody's and BBB plus at S&P. As you would expect, this year with a couple of debt issuances that we've done, we've had plenty of opportunity to have conversations with the rating agencies. Those have gone well. Our ratings have stayed where they are. We've had no actions and we still have a stable outlook on the current rating. So we feel good about that.

In the event that we need to go to the balance sheet, we feel pretty comfortable that we still have decent capacity without having a detrimental impact on the overall health of the balance sheet. So you think from a long-term standpoint, our objective is to have a solid investment grade credit rating and we're clearly there at this point.

We've added some debt. We've also talked about a 30% debt-to-capital ratio, we're above that right now. I think as we come through this current situation and we're able to get debt back down, we'd anticipate that over time, we'd like to see ourselves back in the range about that range. But we've always said, that's not an absolute target. The real objective is