The Phillips 66 Los Angeles refinery plant in Los Angeles stands on November 28, 2022 in Wilmington, California.
Mario Tama | Getty Images
Company: Phillips 66 (PSX)
Job: Phillips 66 is a company for energy and logistics. It operates through the following segments: medium flow, chemicals, refinement and marketing and specialties (M&S). The middle stream segment provides raw oil and refined transportation, appointment and processing services, as well as transportation, storage, fractions, fractions, collection and marketing for natural gas and natural gas (NGL). The chemical segment consists of 50% investment in the company’s capital in Chevron Phillips Chemical Company LLC (CPCHEM), which also produces on the world basis for the sale of petrochemicals and plastic. The refinement job is refining raw oil and other raw materials in oil products, such as gasoline, distillate and airlines, as well as renewable fuels, in 12 refineries in the USA -UI Europe. Finally, the segment of marketing and specialties buys resale and markets refined oil products and renewable fuel.
Stock value: 52.88b ($ 128.04 per share)
Phillips 66 shares in the last year
Activist: Elliott Investment Management
Property: ~ 4.6%
Average cost: on
Activist comment: Elliott is a very successful and insightful activist investor. The company team includes analysts of leading companies for private capital, engineers, operational partners – former technology and COOS executives. When evaluating investment, the company also employs special and general management advisers, experts and experts in the industry. He often observes companies for many years before investment and has an extensive stable impressive candidate. Elliott focused historically on strategic activism in the technological sector and was very successful with the strategy. However, in the past few years, a group of company activism has grown, and because of much more activism aimed at management and creating value from the level of the committee in the much higher width of companies.
What’s going on
February 11 Elliott issued a letter and presentation of the PHILLIPS 66 plaque, which amounts to “Streamline66”, a plan to resolve the continued effect of the company and poor corporate management practices despite its portfolio of attractive assets. Includes the following steps: (i) simplify the portfolio of the company by sale or spin-off business business, as well as the potential sale of your interest in CPCHE; (ii) initiate operational examination by an ambitious goals for refining and closing the gap eBitda by barrel with peers; and (III) increase the supervision and increase the responsibility of the Phillips 66 management team by adding new independent directors to the Committee.
Behind the scenes
Phillips 66 (PSX) is a company for energy and logistics. The company maintains four valuable assets segments, each offering scalability and strong competitive positioning. Its segment in the middle flow is managed by vertically integrated native fluid (NGL) fluid in the pipeline in Permian and DJ pools. The chemical segment consists of their World Petrochemical Common Investment. Rafining segment is one of the largest refinement systems in the US. The marketing and specialty segment consists of marketing operations with scalated fuels and the production of special products. Despite the attractiveness of this property individually, Phillips traded with a significant discount on the estimation of the sums of parts. Although approximately 70% of the company’s earnings before interest, tax, depreciation and depreciation, they come from the premium of multiple medium flow segments, chemicals and marketing, which trade as much as 10 times EBITDA, PSX traded closer to multiple refined major refinements in 6.6 times. As a result, the company significantly had the average of its closest peers, Valero Energy (VLO) and marathon oil (MPC), in cumulative total yield by 9%, 33%and 97%in the last 1-, 3-3- 3- and five-year periods .
Elliott first publicly hired PSX in November 2023, when the company sent a letter to the Board of Directors, which announced an investment in one billion dollars in the company. Elliott criticized PSX for its history of weak performance, citing problems such as indulgence and poorly ready to exploit the great refinement cycle in ’22 and ’23., Growing operational expenditures (OPEX) by pipes in absolute and relative sense compared to VLO and MPC peers , and increasing costs over peers after the cost of reducing the cost. Elliott at the time recorded a potential price price of more than $ 200 per share, but the company shared the Wall Street concern that PSX was primarily the story of execution.
Nevertheless, Elliott acted the way we want active shareholders, unlike the way many perceive them. The company provided the executive director Mark Lashier the opportunity to show meaningful progress at her $ 14 billion EBITDA middle cycle up to 2025, a non-excellent asset of $ 3 billion and increases PSX’s long-term policy of capital return. They quickly and friendly agreed with the company to add two new directors with a refining experience of the Committee. The company added Robert Pease, former Cenovus CEO, Committee February 2024And he agreed to continue working with Elliott to identify another director in the coming months. The second director never came true.
Now, more than a year later, Elliott has increased his position to $ 2.5 billion and will become more active in creating a shareholder value, publishing a public letter and a presentation of “Streamline66”. Elliott identifies three basic sources of PSX less efficiency. First, the company claims that the inner value of the company is tinted with its inefficient conglomerate, which resulted in the trade in accordance with its lowest multiple refinement segment, despite most of EBITDA, which comes from its other premium companies. Second, the operating effect of PSX failed to fill in management goals, and profitability still lags behind peers. In 2024, PSX delivered an annual adapted EBITDA between $ 4.5 billion and $ 8.7 billion, which is less than the goal of $ 14 billion in the US 2025 from the middle cycle. The company’s opera company rose in two consecutive quarters, and his eBitda by profit gap from Barrel just spread opposite VLO. Third, Elliott claims that the continuous statement of the Administration on a successful turnaround without any tangible financial results diminished their credibility with investors. The company also said that the Committee failed in its fundamental supervisory duties, rewarding the management of compensation from the carriage of the company.
Because of this, Elliott published his three-sided plan to: (I) simplify PSX portfolio, (II) review operational performance with the aim of improvement of margin and (III) improvement by enhancing credibility by managing new directors. First, Elliott proposes a spin or sale of PSX assets to the middle stream, estimating that they could deliver around $ 40 billion up to $ 45 billion as independent or on sale to a strategic customer. In addition, Elliott also suggests that the sale of CPCHEM JET JET, estimating that a net revenue of $ 48 billion from three assets would be equivalent to 96% of the current market limit limit. Increasing this amount of capital could allow PSX to buy between 60% and 90% of the part -time shares and increase the payment ratio to 100% free cash flow such as his peers to refine. With improved supervision enabled by adding new directors with industry and operational experience, PSX could start improvement of its eBitda by barrel and progress towards refining goals.
Elliott estimates that this plan could bring a stock price of approximately $ 200 per share. Furthermore, the company claims that if PSX executes a playbook that Elliott employed in its engagement on MPC, the shares could be increased to over $ 300. At the marathon, Elliott helped make it easier to add a new director, the transition to the new executive director, the jazz closure to Barel EBITDA with VLO, retirement of 50% of its shares of 2021, and sales of retail surgery Speedway for $ 17 for $ 17 $ 17 for $ 17 billion in cash after taxation. From Elliotta sent his first letter to the marathon On November 21, 2016. MPC surpassed Vlo and PSX for 56%and 116%.
Having a good plan is the first step, implementation is the second story. This time, Elliott will not settle for one or two directors, especially after PSX failed to follow the agreement last time to add another director with experience in the refinery. Elliott gave the management time to execute. The administration failed. Elliott will do what the Committee should do, but it is not: to manage responsibility. Elliott explicitly does not state that he wants to replace more management, but discusses the damaged credibility of the administration and disrupts the confidence of investors, which is difficult to repair without replacing management. Moreover, Elliott does that Quote Executive Director’s replacement As the first item that led to successful turnarounds in their engagement on marathon and Suncor. Given that the nomination nomination window will close this week and four directors in the 14 -person committee in the election, we expect Elliott to appoint a full board of four directors if he only preserves his options while talking about managing the Committee.
Ken Squire is the founder and chairman of the 13D monitor, institutional research services on the activism of shareholders, and the founder and manager of the 13D activist fund portfolio, a mutual fund that invests in the portfolio of activist 13D investments.
