Phillips 66 announced on October 29 that its renewable fuels segment faced challenges from reduced margins in the third quarter, although company executives anticipate better margins in the near future. The firm also revealed it began producing sustainable aviation fuel (SAF) in September.
The company produces renewable fuels at its Rodeo Renewable Energy Complex, a biorefinery project that has been in development since mid-2022 and achieved full processing capacity in the second quarter of 2024.
As per the media report, CFO Kevin Mitchell reported that the Rodeo facility generated 44,000 barrels per day of renewable fuels during the third quarter, with a nameplate capacity of approximately 50,000 barrels per day (800 million gallons per year).
Brian Mandell, executive vice president of marketing and commercial, noted that the company is still in the startup phase for its renewable segment. He mentioned that the Rodeo facility is currently using some higher carbon intensity (CI) feedstocks in the fourth quarter as it prepares for the 45Z clean fuels production credit set to take effect next year.
Looking ahead, Mandell expressed optimism about margin improvements for renewable fuels. He pointed out that feedstock prices are low, and several renewable diesel plants are facing difficulties. He also highlighted the anticipated conversion of some renewable diesel capacity to SAF, alongside lower imports, a tighter diesel market on the West Coast, and tightening credit conditions as factors that may bolster renewable diesel margins.
Mandell cautioned, however, that the Rodeo facility is not expected to produce SAF in the fourth quarter, although he anticipates steady operations by the first quarter of next year, when SAF production is expected to commence.
Senior Vice President of Refining Richard Harbison confirmed that the Rodeo facility did produce SAF in September. He noted that a market anomaly in the fourth quarter will limit SAF production for the remainder of the year, but emphasized the company’s commitment to being a supplier of SAF.
For the third quarter, Phillips 66 reported a $116 million loss in its renewable fuels business, an increase from a $55 million loss in the second quarter. The segment’s adjusted EBITDA was a $92 million loss, compared to a $43 million loss in the previous quarter. Renewable fuel production increased to 44,000 barrels per day in the third quarter, up from 31,000 barrels per day in the second quarter.
Overall, Phillips 66’s third quarter earnings totaled $346 million, a decrease from $1.015 billion in the second quarter. Diluted earnings per share were 82 cents, down from $2.38.
