Good afternoon. And welcome to the Phillips 66 Partners fourth quarter earnings call.

Participants on today's call will include Kevin Mitchell, Vice President and CFO; Tim Roberts, Vice President, Operations; and Rosy Zuklic, Vice President and Chief Operating Officer. The presentation materials we will be using during the call can be found on the Events section of the Phillips 66 Partners website, along with supplemental financial and operating information.

Slide 2 contains our Safe Harbor Statement. It is a reminder that we will be making forward-looking statements during the presentation and the Q&A.

Actual results may differ materially from what we present today. Factors that could cause actual results to differ are included here as well as in our SEC filings.

With that, I will turn the call over to Kevin Mitchell.

Thank you, Jeff and good afternoon everyone. I will start on Slide 3 which shows our distribution history.

Our Board of Directors approved a fourth quarter distribution of $83.5 per common unit, a 5.4% increase from the previous quarter. We reached the significant milestone with Partners achieving its 5 year 30% compound annual distribution growth target.

We have delivered 21 consecutive quarters of increases since our IPO demonstrating industry leading distribution growth. Moving on to Slide 4.

2018 was a successful year for the partnership. We operated safely and reliably and achieved record financial results.

The partnerships are strong volumes across its diversified portfolio of wholly owned assets and equity affiliates. The partnership reported 2018 earnings of $796 million, a 73% increase from the prior year.

Adjusted EBITDA for the year was $1.1 billion, up 51% from the prior year. We accomplished our $1.1 billion run rate adjusted EBITDA target ahead of schedule in the second quarter and ended 2018 at $1.2 billion run rate.

As you can see from the chart on this slide, we have grown Phillips 66 Partners at a rapid pace. We have scaled financial strength and the opportunities ahead of us.

We are well positioned to find an organic capital program to deliver continued growth. During the year, we sanctioned our largest project to-date, the Gray Oak pipeline and this quarter completed the expansion of the Sand Hills pipeline.

On to Slide 5, the fourth adjusted EBITDA of $309 million is an increase of $4 million from the previous quarter. The improvement reflects strong performance from our equity affiliates driven by higher Bakken pipeline volumes that average more than 500,000 barrels per day.

Our wholly owned assets benefited from increased volumes associated with higher utilization at Phillips 66 refineries. Fourth quarter distributable cash flow was $238 million, an increase of $20 million in the prior quarter primarily due to increased JV distributions and lower maintenance capital.

Slide 6 highlights our financial flexibility and liquidity. We ended the fourth quarter with $1 million of cash and $125 million of outstanding borrowings under our $750 million revolving credit facility.

Our debt-to-EBITDA ratio on the revolver covenant basis was 2.8x. Long term, we expect leverage to be around 3.5x.

Our distribution coverage ratio is 1.39x. The 2019 adjusted capital budget of $1.2 billion is predominantly for our growth projects which will be covered on the next slide.

JV level financing for the Gray Oak pipeline will reduce capital spending to approximately $600 million. The partnerships strong financial position enables funding of the 2019 capital program with operating cash flow and debt capacity.

I'll now turn it over to Rosy to provide an update on our growth projects.

Thanks Kevin and hello everyone. Slide 7, lists the projects we have underway that will drive EBITDA growth for the next two years.

Our disciplined approach to capital investment combined with our scale and financial strength have not only enabled us to find a larger capital program but one that will provide strong returns. During the quarter we made good progress on our growth projects.

The Gray Oak pipeline will provide 900,000 barrels per day of crude oil transportation from the Permian and Eagle Ford to Texas Gulf Coast destination. We have received 360 miles of pipes, trenched 75 miles and have started construction on all 17 tanks.

We remain on track for the pipeline completion in the fourth quarter this year. Gray Oak will connect to multiple terminals in Corpus Christi including the New South Texas Gateway Terminal that is being developed by Buckeye Partners.

The terminal will have two deep water docks and planned storage capacity of 6.5 million to 7 million barrels up from the original project scope of 3.4 million barrels. We have a 25% ownership in the terminal which is expected to be in operation by mid-2020.

As announced this morning PSXP is expanding its Sweeny capacity - net pipeline capacity by 80,000 barrels per day and net capacity in the Terminal we are adding 300,000 barrels of products storage along with connections to third party terminal. The project enables the partnership to offer customers additional storage services at the Pasadena terminal while improving product placement optionality.

The expansion is expected to be completed in the second quarter of 2020. Commercial operations for the Bayou Bridge Pipeline extension from Lake Charles to St.

James, Louisiana are now expected to begin in March. Phillips 66 Partners owns a 40% interest in the pipeline joint venture.

The remaining projects are on track to complete on schedule. This concludes our prepared remarks.

We will now open the line for questions.

I want to start off two part question on the pipeline tariffs. Just thinking about first quarter, I think they came in fourth quarter little bit weaker than we thought, so just wondering how to think about that as we move forward and then also on the PSX call I believe they mentioned some heavy refinery turnaround coming up.

How do we think about that as it impacts PSXP?

The pipeline tariff is actually what I would say is $0.62 to $0.63 is actually the normal run rate. The fourth quarter and actually the third quarter both had normal T&D routine adjustments that are making that quarter-over-quarter variance to look a little bit off.

I think the third quarter was at $0.66 and the fourth quarter coming in at $0.61 really both of them are outside the normal range. So if you look over the last eight quarters, $0.62 to $0.63 is really more of a normal run rate I would say that that's kind of a better gauge to use.

And then to your second question as far as the utilization rate, you're spot on. The refining system for PSX guiding to the mid-80% is obviously going to have an impact on our throughput volumes.

Third quarter and fourth quarter at over 100% specifically in the mid-con obviously contributed to strong earnings that we saw both - in both quarters. And so normally what I would say, as you look at across the four quarters, the first quarter always is weaker and the fourth quarter is always stronger and that kind outfall is the trend of the refining system as far as you know the first quarter being the heavier turnaround period.

Second one just on Southern Hills, I believe DCP and SemGroup are proposing to effectively convert Southern Hills into a gladiator crude pipeline and then build a new NGL line to replace Southern Hills I guess first am I thinking about that correctly. And then second obviously the known on Southern Hills, would you have an option to participate in gladiator maybe rather than develop Red Oak?

So obviously the open season is still ongoing, so a little bit too early to talk much about that but you are thinking about it right. At this point DCP what they're thinking about is that the current Southern Hills pipeline at 190,000 barrels a day capacity for NGL as a crude line could be at 300,000 barrels a day pipeline.

So they're thinking that if that gets converted to a crude line then, then you could then build another line for NGL but beyond that really not much I could really share on it.

Can you provide a little more detail around the ACE pipeline? You guys talked about those at press release about an open season, you know when does the open season run through, is there anything in the budget for that, for that pipeline in 2019?

Yes, so we don't really give timeline on our open season, that's just a normal practice for us. I can't really tell you when it ends.

It did just here recently open. So think about a normal timing being somewhere in the 30 to 60 days.

And just said to clarify the open season is specifically for the new build pipeline, that's going to be from St. James down to Clovelly and the JV premises with it being ourselves PBS and Harvest.

Harvest would be contributing the CAM pipeline which CAM currently runs from Clovelly up all the way to Marao, obviously that is servicing the PSX Alliance refinery, the PBS refinery all the way up to Valero's refinery. So we're really excited about it.

We do have a premise in the budget so answering your question directly for 2019. Hoping to see the open season conclude here but from a PBS and ourselves perspective, obviously there's upside additionally from the refining PSX has some crude optionality for Alliance, so I think that there's just upside that we would see from the open season.

And then you guys didn't provide any EBITDA guidance which is consistent with your previous comments but should we read anything into your comments on, we will continue to reward our unitholders with increasing distributions, you know kind of versus your previous targeting top quartile distribution growth.

So you're correct that we did not provide EBITDA guidance and we're really giving guidance in terms of looking at the fundamental business, the new assets that will be coming online if you look ahead to 2019. Really talked about the impact, if you look in the near term in the first quarter of the PSX refining utilization being then and you got the page right there - that Rosy covered that, had all of the growth projects.

And so there's some information available that can enable you to sort of build your models and come up with EBITDA - your own EBITDA estimates around that. In terms of distributions, we did not restate the first quartile guidance in part because we find that wasn't particularly helpful in terms of really what is first quartile today.

It was a little bit different back in the days when there was a lot of emphasis and focus on high rates of distribution growth but given the way the investor base is kind of shifted with regards to how it's looking at distribution growth in the appetite for distribution growth versus the ability to manage an organic capital program so that within operating cash flow in our case only some moderate debt. And so from a dividend distribution standpoint, we do expect to continue to increase the distribution.

We expect to be very competitive in that regard. We’re just staying further away from hard targets around what that growth is going to look like.

And did the question we always ask but given that many of your own large captures have eliminated IDRs or in the process of eliminating IDRs, and we know that IDRs may keep some investors kind of away from investing in PSXP. Can you maybe provide us your latest thoughts on IDR elimination and what are some of the key factors that keep PSX and PSXP from announcing an IDR elimination today?

So our comment on that is very consistent with what we've said in the past which is, you look back and PSXP has grown very successfully over this last five years or so. The IDR life cycle continue to evolve over that time period.

Clearly it's much shorter than we originally assumed and we understand that, we understand the way this works. And so the reality is we will end up addressing the IDRs much sooner than we would have expected originally.

When we get to that point, I think what's important to take away is we expect this to be done in a way that is fair to the Phillips 66 shareholders and the PSXP unitholders and the transaction needs to be structured in a way that it's a fair appropriate transactional range and we expect to get to that sooner than later but no specific guidance on exactly what those triggers are going to be or exactly what that time is going to be.

Couple for me if you would. I guess the first one is related more - perhaps more of a question for PSX but on the fracs that's supposed to be on I think late 2020 but obviously that - it's been quite a topic lately.

Is there any ability to sort of accelerate those projects to bring them forward in 2020?

Yes, on that - this is Tim Roberts by the way. I'll answer that from the sponsor view.

You're right the PSX level but now this project as far as with the schedules that we've seen it looks like it's fairly well on schedule as it stands. It's hard to move these things forward one because you had a line up, fabrication space, shop space, procurement, contractors, and getting all that lined up.

So it's hard to accelerate those. Certainly if we're going to what we do we may see a slight movement forward but it's a pretty hot market right now on the Gulf Coast.

So maybe incrementally but not much.

And then I guess Kevin, just with the balance sheet availability that you talked about going up to 3.5x from the current level at 2.8x, any incremental thoughts on drop downs?

No, I mean you look at the program that we got today at PSXP there's a significant organic capital program. We like that.

We have the ability between the coverage and the available cash that that generates and the balance sheet that's available. We have the ability to continue to execute on that organic program and do that.

So the drop down from a PSX standpoint, the drop down just remain option - gives optionality for some point in the future if we think that's appropriate but for the time being very much focused on the organic build-out.

Just want to touch based on South Texas gateway. I think you noted kind of the mid-2020 for the completion there.

I was just wondering if parts of that could come on line enter service earlier than that kind of coincide with Gray Oak at year end '19 or kind of how do you think about that coming online at stages?

Yes, Buckeye Partners of course is the operator of this and just to kind of get everybody up to speed, the original scope of this project started off at 3.4 million barrels and now we're talking about it being at almost 7 million barrels, so obviously twice is the size of what the original scope was. So that mid 2020 timing is really reflecting the significant growth in the scope of the project and it is indicative of the entirety of the project being done and so as the facility becomes available at sections of the facility whether it tanks or the docks become available, then those are going to be made available to the customers.

And so yes, we think about Gray Oak obviously, Gray Oak is going to have multiple destination points, not just add corpus but even within the corpus area we have multiple terminals that we are delivering to and so we're really not at all, there's no concern in our mind right now with any of the timing.

And for DAPL I was just wondering if you would be able to share what the environments were for the quarter and also seems like there is - definitely interests for the expansion of the 570, what kind of a timeframe would it take to kind of achieve that capacity expansion?

Yes so as far as the quarter is - so both third quarter and fourth quarter we ran over 500,000 barrels a day and you know the open season that and energy transfer went out with was successful and has concluded and so we are looking to get it to the full capacity of 570,000 here in the short term. Minor modifications are going to have to be done to sustainably run at the 570.

So I would think that some time here in the next couple of quarters you would see it at that sustainable rate. And so beyond that, I think from the open season our partner has communicated that they did see enough interest to expand further but ETP as the operator would - is still obviously trying to assess what the market, what would need to be done in order to address the market needs and so they would be the better person to ask the question to.

Last one if I could, it seems like the Borger and Liberty Pipes, the open seasons were announced at the PSX level if I'm not mistaken and I was just wondering if you could extend it more as far as the drivers behind having this done at the PSX versus the PSXP level.

Yes this is Tim Robert. Well at this point, right now PSXP we’ve got a really ambitious and really solid capital program already so it's nice to see a pivot to the organic growth side.

So we got a lot on their plan right now and as we manage PSXP, we also don't want to lose out on opportunities that are also out there. So we're looking at this from a PSX standpoint.

We think that right now as we incubate this and see if there's a real project we had which the open season will tell us, this doesn't preclude us from at some point it moving it down to the partnership but at this point in time we didn't want also hesitate or wait on an opportunity to be sitting out there. So that's why we're handling it at PSX at this point in time.

Thank you, Julie, and thank all of you for your interest in Phillips 66 Partners. If you have additional questions please call me or Brent.

Thank you.