Activist Elliott has unfinished Business at Phillips 66. How its plan to build value may unfold

Business:Phillips 66 is an energy manufacturing and logistics company. It operates through the following segments: Midstream, Chemicals, Refining, and Marketing and Specialies (M&S). The midstream segment provides Crude Oil and Refined Petroleum Product Transportation, Terminaling and Processing Services, As Well as Natural Gas and Natural Gas Liquids (NGL) Processing and marketing service. The chemicals segment consists of the company’s 50% Equity Investment in Chevron Phillips Chemical Company LLC (CPchem), which manufactures and markets petrocles and plastics on a work. The refining business Refines Crude Oil And Other Feedstocks Into Petroleum Products, Such as Gasoline, Distilletes and Aviation Fuels, As Well as Renewable Fuels, at 12 Refirpes in the us and Europe. Finally, the marketing and specialtys segment purchases for resale and markets refined petroleum products and renewable fuels.

Stock market value: $ 52.88B ($ 128.04 per share)

On Feb. 11, Elliott Issued a letter And presentation to the phillips 66 board outlining “streamline66,” a plan to resolve the company’s continued underperformance and poor corporate government . It includes the following steps: (i) streamline the company’s portfolio through a sala or spin-off the midstram business as well as a potential salary of itest in cpchem; (ii) Initiate an operating review by committing to Ambitious refining targets and closing the ebitda-ra-pa-barrel gap with its peers; And (iii) Increase oversight and Bolster Accountability of Phillips 66’s Management Team by Adding New Independent Directors to the Board.

Despite this, elliot actd the way we want active shareholders to do so, as opposed to how they are perceived by many. The Firm Gave Ceo Mark Lashier The Opportunity to Demonstrate Meaning M Capital Return Policy. They quickly and amically agreed with the company to add two new directors with refining experience to the board. The company added robert pease, a former executive of cenovus, to the board in February 2024And agreed to continue to work with alliott on identifying a second director in the coming months. The second Director Never Materialized.

Now, more than a year laater, elliott has increased its position to $ 2.5 billion and is going to become more active in creating shareholder value, Issuing a public letter and presentation to “streamline666.” Elliot Identifys Three Primary Sources of PSX’s underperformance. First, The Firm Argues That The Company’s Intrinsic Value has been obscured by its intertific conglomerate structure, Resulting in it trading in line with it Bitda Coming from its other premium businesses. Second, PSX’s operating performance has failed to meet Management’s Targets and Profitability Continues to Lag peers. In 2024, PSX delivered Annualized Adjusted Ebitda of Between $ 4.5 Billion and $ 8.7 Billion, Well Short of Its $ 14 Billion 2025 MID-CYCLE TARGET. The company’s Opex Per Barrel has Risen in Two Consecurable Quarters, and Its Ebitda Per Barrel Profitability Gap has Gap has only widened versus vlo. Third, Elliott Asserts that Management’s Continuous Claim of a Successful Turnaround Without Any Tangible Financial Results has been eroded their credibility with invoice. The firm also said the board has failed in its fundal oversight duties, rewarding management with compensation disconnected from the company’s performance.

This is what has been elliott to release it-pronged plan to: (i) streamline psx’s portfolio, (ii) review operational performance with an eye toward refinging margin improving Ent Credibility with the Addition of New Directors. First, Elliot Suggessts Spinning or Selling PSX’s Midstream Assets, Estimating that they could deliver approximately $ 40 billion to $ 45 billion to $ 45 billion as a standalone or in a sale to a sale to a sale to a sale to a sale to a sale to In addition, elliot also sugges the sell of cpchem and jet, estimating that net proceeds of $ 48 billion from the three assets would be equivalent to 96% of the company’s cross. The Raising of that Amount of Capital Cold Allow PSX to Repurchase Between 60% and 90% of the company’s shares outstanding and increase the payout ratio to 100% of free cash flow like its refining peers. With enhanced oversight enabled by the addition of new directions with industry and operational experience, PSXCULD COLD GET on Track TRACK TORACK TOWARDS IMPROVIVING IITDA PERRLDA PERRALDA PERREL and Progresses.

Elliott estimates that this plan could yield a share price of approximately $ 200 per share. Moreover, the firm asserts that if PSX executes the playbook elliot employed in its engagement at mpc, shares clock increase to over $ 300. At Marathon, Elliot Helped Facilitate The Addition of a New Director, Transition to a New Ceo, Closure of the Gap in Per Barrel Ebitda with vlo, recrement of 50% of its shares outs Ail Operation for $ 17 Billion in after-tax cash proceeds. SINCE ELLIOTT Sent its first letter to marathon on nov. 21, 2016, mpc has outperformed vlo and psx by 56% and 116%, responsible.

Having a good plan is the first step, implementing it is another story. This time, Elliot will not be settling for one or two directors, especially after psx failed to follow through the agreement last time to add a second direction. Elliot Gave Management Time to Execute. Management failed. Now, Elliot will do what the board is supposed to do, but did not: Hold Management Accountable. Elliott does not explicitly state that it’s looking to replace senior management, but it does discuss management’s damaged credibility and eroded investor confidence, and that is hard to fix without replacing management. Moreover, Elliott does Cite Ceo Replacement As the first item which is LED to successful turnings in their engines at Marathon and Suncor. With the company’s Nomination Window Closing this week and four directors on the 14-Person Board Up for Election, We Expect Elliot Will Nominate A Full White of Four Directors, IFNLYLY THE OPSRIVE e discussing governance with the board.

Ken Squire is the Founder and President of 13D Monitor, An Institutional Research Service on ShareHolder Activism, and the Founder and Portfolio Manager of the 13D Activist Fund, A Mutual Funds in Activist Investments.