Phillips 66 Pushes Back Against Elliott’s Breakup Plan
Phillips 66 (NYSE: PSX) has filed its definitive proxy statement ahead of its May 21 Annual Meeting and issued a strongly worded letter urging shareholders to support its current board nominees and reject activist hedge fund Elliott Management’s proposals, which the company says are based on flawed assumptions and would undermine long-term shareholder value.
The move escalates a high-stakes proxy battle between the downstream giant and Elliott, which is pushing for sweeping structural changes, including a potential breakup of Phillips 66’s integrated business. In its letter, Phillips 66 defended its ongoing transformation strategy under CEO Mark Lashier, touting a series of bold actions already delivering returns and positioned for further upside.
Strategic Progress vs. Short-Term Disruption
Since Lashier took the helm in July 2022, Phillips 66 has returned $13.6 billion to shareholders, doubled its midstream EBITDA from 2021 levels, and committed to reducing controllable costs across its refining operations. The company also highlighted strategic divestitures totaling $3.5 billion and the planned closure of its Los Angeles refinery, part of its efforts to optimize its portfolio.
In its midstream segment, Phillips 66 said it has already achieved $500 million in annual run-rate synergies from its DCP Midstream integration—well above its initial $300 million target—and expects adjusted EBITDA in the segment to grow from $3.7 billion in 2024 to $4.5 billion by 2027.
Meanwhile, the refining business has reduced adjusted controllable costs per barrel by 15% since 2022, targeting further cuts by 2027. The company also pointed to operational excellence, including outperforming the industry on utilization rates for eight consecutive quarters and reaching a record clean product yield of 87% in 2024.
On the chemicals front, the Chevron Phillips Chemical (CPChem) joint venture continues to position itself as a low-cost global leader, with capacity expansions in the U.S. Gulf Coast and Qatar on track for 2026.
Rejecting Elliott’s Playbook
Phillips 66’s board took direct aim at Elliott’s call for a rapid corporate breakup, arguing the hedge fund’s thesis is built on “inflated and unrealistic assumptions.” Specifically, the company said Elliott’s spin-off and sale analyses ignore material risks, including significant tax liabilities, ongoing dis-synergies, and market timing concerns in a volatile commodity environment.
Elliott’s proposal also assumes a $50 billion sale of the midstream business—an outcome Phillips 66 called highly unlikely, noting the improbability of finding buyers willing to pay full synergy value and the risk of up to $10 billion in tax leakage.
While acknowledging past engagement with Elliott and openness to shareholder input, Phillips 66 emphasized its responsibility to protect long-term value for all shareholders rather than prioritize the short-term gains of one.
Proxy Fight and Shareholder Vote
The company is calling on investors to vote only for its director nominees on the WHITE proxy card and reject what it describes as Elliott’s “aggressive short-term agenda.”
Citing a 67% total shareholder return since Lashier became CEO—outpacing peers at 42%—Phillips 66 framed the upcoming vote as a choice between continued transformation under experienced leadership and a potentially disruptive overhaul at the hands of activists.
With more than $43 billion returned to shareholders since its 2012 spin-off from ConocoPhillips and a 15% dividend CAGR, Phillips 66 underscored its long-standing commitment to capital discipline and value creation through industry cycles.
Oilprice.com
No comments:
Post a Comment