\nPhillips 66 (NYSE:PSX) today announced that it has filed its definitive proxy materials with the U.S. Securities and Exchange Commission in connection with its upcoming Annual Meeting of Shareholders on May 21, 2025. Shareholders of record as of the close of business on April 4, 2025 are entitled to vote at the meeting.\n<\/p>\n
\nIn addition, the Board wrote a letter to shareholders that highlights valuable information to make an informed voting decision, including:\n<\/p>\n
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- \nThe consistent, compelling value Phillips 66 delivers for its shareholders;\n<\/li>\n
- \nThe bold steps Phillips 66 has taken to drive shareholder value under Mark Lashier\u2019s leadership;\n<\/li>\n
- \nProgress made across business areas and future actions that will drive continued outperformance;\n<\/li>\n
- \nPhillips 66\u2019s track record of allocating capital effectively and prioritizing consistent shareholder returns across economic and industry cycles; and\n<\/li>\n
- \nHow Elliott\u2019s misguided proposals will disrupt Phillips 66\u2019s momentum by pushing for irreversible change that will destroy shareholder value.\n<\/li>\n<\/ul>\n
\nPhillips 66 also published a video on Phillips66Delivers.com<\/a>, which reiterates Phillips 66\u2019s differentiated platform, transformative strategy, approach to capital allocation and history of engagement with Elliott Investment Management (\u201cElliott\u201d).\n<\/p>\n
\nThe full text of the Board\u2019s letter to shareholders follows:\n<\/p>\n
\nDear Fellow Shareholders,\n<\/p>\n
\nThank you for your investment in Phillips 66 and your continued support.\n<\/p>\n
\nThe Board is committed to protecting your investment and focused on sustainable long-term value creation. For twelve years, we reliably grew our dividend and consistently returned capital to shareholders, delivering more than $43 billion1 <\/sup>in cumulative shareholder distributions.\n<\/p>\n
Phillips 66\u2019s Strategy Delivers Consistent and Compelling Long-Term Value<\/b><\/p>\n
\nOur ability to continue to deliver long-term value for you is on the line \u2013 and your vote at our 2025 Annual Meeting is very important to us.\n<\/p>\n
\nYou face an important choice regarding your Phillips 66 investment:\n<\/p>\n
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- \nOn one side is a Board and management team implementing a clear transformative strategy that has delivered results<\/b>. The strategy is in its early stages and has significant room to deliver further value.\n<\/li>\n
- \nOn the other side is an activist hedge fund pushing an aggressive short-term agenda<\/b> \u2013 including a rushed breakup of our Company based on flawed analysis \u2013 that would introduce unnecessary risk and disruption, slow our momentum and jeopardize your invested capital and long-term returns.\n<\/li>\n<\/ul>\n
\nWe do not dismiss Elliott\u2019s ideas \u2013 in fact, we\u2019ve welcomed their ideas throughout our entire engagement with them. We encourage healthy debate in the board room and that spirit extends to how we incorporate shareholder feedback. We care about finding the right path to drive the highest value for your investment.\n<\/p>\n
\nGiven our assessment of where Phillips 66 is in its strategy, current market conditions and specific costs and risks related to Elliott\u2019s thesis, we believe pursuing their ideas puts your investment at risk.\n<\/p>\n
\nElliott continues to use its activist playbook to avoid collaboration, cloud the discussion and drive a false narrative to promote their short-term agenda. Meanwhile, Phillips 66\u2019s Board and management team are taking bold steps to drive shareholder value.\n<\/p>\n
Phillips 66 is in the Early Innings of a Deliberate Transformation<\/b><\/p>\n
\nUnder CEO Mark Lashier\u2019s leadership since July 2022, Phillips 66 has made a series of bold decisions for shareholders, including:\n<\/p>\n
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- \nReturning $13.6 billion to shareholders;1<\/sup><\/li>\n
- \nNearly doubling EBITDA contributions from our Midstream segment from 2021 levels;\n<\/li>\n
- \nDivesting a total of $3.5 billion in assets;\n<\/li>\n
- \nAnnouncing plans to cease operations at our Los Angeles refinery; and\n<\/li>\n
- \nFulfilling our commitment to substantially reduce controllable costs.\n<\/li>\n<\/ul>\n
\nThese are significant actions where the benefits to shareholders are just starting to be realized. Since Mark became CEO, we have delivered strong total shareholder returns, significantly outperforming a weighted average of our proxy peers2 <\/sup>\u2013 67%3 <\/sup>vs 42%3<\/sup>.\n<\/p>\n
Phillips 66\u2019s Strategy and Current Initiatives are Built for Consistent Returns While Providing Shareholders with Meaningful Upside<\/b><\/p>\n
\nElliott wants a quick win by breaking up the Company, based on inflated and unrealistic assumptions. As we continue to execute our strategy, we are confident we will continue to deliver outperformance for our shareholders.\n<\/p>\n
\nThe path to additional shareholder value is in the ongoing efforts across our business, including:\n<\/p>\n
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- We\u2019re in the early stages of building out a world-class midstream business in the advantaged Permian Basin.<\/b> We have expanded our integrated NGL value chain while nearly doubling our midstream adjusted EBITDA4 <\/sup>in just three years, from $2.1 billion in 2021 to $3.7 billion in 2024. To date, we have realized $500 million in annual run-rate synergies from the successful integration of DCP Midstream (well in excess of our original target of $300 million), with more value from integration to come.\n
There is still more to come. We have a clear line of sight to reaching $4.5 billion in midstream adjusted EBITDA by 2027.\n<\/li>\n<\/ul>\n
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- We have improved our cost structure in refining while maintaining a commitment to operational excellence.<\/b> From 2022 to 2024, we lowered our Refining Adjusted Controllable Costs per barrel5 from $6.98\/BBL to $5.90\/BBL (a 15% reduction). Over the same period, our refining utilization rates have outperformed the industry average for eight consecutive quarters, and we reached a record annual clean product yield of 87% in 2024.\n
We\u2019re not done. We have a goal of lowering our Refining Adjusted Controllable Costs per barrel to $5.50\/BBL by 2027 (a 21% reduction from 2022 levels).\n<\/li>\n<\/ul>\n
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- We continue to position Chevron Phillips Chemical Company (\u201cCPChem\u201d) as the lowest cost producer<\/b> of ethylene with 95% advantaged feedstock, allowing it to withstand commodity cycles. Since its inception in 2000, the world leading joint venture has returned over $17 billion of after-tax distributions to its partners, allowing Phillips 66 to continually increase returns to its shareholders.\n
CPChem is adding significant production capacity at the lowest end of the cost curve. Projects on the U.S. Gulf Coast and in Qatar are expected to be online by late 2026.\n<\/li>\n<\/ul>\n
Phillips 66 has a track record of allocating capital efficiently and generating high returns on invested capital.<\/b> Since 2015, we have delivered Return on Capital Employed (\u201cROCE\u201d)4<\/sup> of 11%, outperforming the weighted average of our proxy peers. We achieved this by being highly selective when deciding where to deploy our capital within the business. This proven and disciplined approach to capital allocation will help deliver value for our shareholders.\n<\/p>\n
\nSince our formation in 2012, we have returned more than $43 billion to shareholders through dividends and share repurchases1<\/sup>. We have grown our dividend at a 15% Compound Annual Growth Rate (\u201cCAGR\u201d). The dividend we pay to our shareholders has grown every single year since we have been a publicly traded company<\/b>.\n<\/p>\n
So, What is at Risk with Elliott\u2019s Proposals?<\/b><\/p>\n
Elliott seeks rapid, irreversible change in pursuit of an unrealistic thesis \u2013 and risks halting the momentum on our long-term value-creating strategic plan.<\/i><\/b><\/p>\n
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- Elliott\u2019s thesis jeopardizes <\/b>shareholders\u2019 realization of value from our long-term strategy.\n<\/li>\n
- Their thesis is inherently based on short-term market fluctuations<\/b>, aspirational valuations and unrealistic assumptions.\n<\/li>\n
- Elliott\u2019s analysis of a potential spin of the midstream business understates one-time costs<\/b> and ongoing dis-synergies.\n<\/li>\n
- Their analysis of a potential sale of the midstream business unrealisticallyasserts that cash buyers exist at a $50 billion price tag and would pay for 100% of synergies<\/b>, both of which are highly unlikely. In addition, tax leakage costs could be as high as $10 billion.\n<\/li>\n
- Elliott\u2019s analysis notably excludes external factors<\/b>, such as the timing risk of valuations in commodity businesses, which can significantly impact transactions in our industry.\n<\/li>\n<\/ul>\n
\nThe Board is committed to thoroughly evaluating Phillips 66\u2019s portfolio to maximize long-term shareholder value. We debate these topics rigorously and always carefully review all options, but we will not favor short-term decision making under the pressure of one shareholder at the expense of all others.\n<\/p>\n
To Sum it All Up: Long-Term Value Creation is Phillips 66\u2019s North Star<\/b><\/p>\n
Phillips 66 is executing a disciplined strategy that continues to deliver tangible results and has significant room to drive further shareholder value.<\/b> Our strong track record of financial performance, operational excellence and shareholder returns underscores our ability to successfully navigate industry cycles. We are well positioned to continue building on these successes to provide you with consistent and compelling long-term returns.\n<\/p>\n
\nWe urge you to support Phillips 66 at the 2025 Annual Meeting. Your investment is best served by having a Board focused on creating reliable value, both now and in the future.\n<\/p>\n
\nWe unanimously recommend you vote \u201cFOR\u201d ONLY Phillips 66\u2019s nominees on the WHITE proxy card.\n<\/p>\n
\nThank you for your continued support.\n<\/p>\n
\nSincerely,\n<\/p>\n
\nThe Phillips 66 Board of Directors\n<\/p>\n
- Their thesis is inherently based on short-term market fluctuations<\/b>, aspirational valuations and unrealistic assumptions.\n<\/li>\n
- Elliott\u2019s thesis jeopardizes <\/b>shareholders\u2019 realization of value from our long-term strategy.\n<\/li>\n
- We continue to position Chevron Phillips Chemical Company (\u201cCPChem\u201d) as the lowest cost producer<\/b> of ethylene with 95% advantaged feedstock, allowing it to withstand commodity cycles. Since its inception in 2000, the world leading joint venture has returned over $17 billion of after-tax distributions to its partners, allowing Phillips 66 to continually increase returns to its shareholders.\n
- We have improved our cost structure in refining while maintaining a commitment to operational excellence.<\/b> From 2022 to 2024, we lowered our Refining Adjusted Controllable Costs per barrel5 from $6.98\/BBL to $5.90\/BBL (a 15% reduction). Over the same period, our refining utilization rates have outperformed the industry average for eight consecutive quarters, and we reached a record annual clean product yield of 87% in 2024.\n
- \nOn the other side is an activist hedge fund pushing an aggressive short-term agenda<\/b> \u2013 including a rushed breakup of our Company based on flawed analysis \u2013 that would introduce unnecessary risk and disruption, slow our momentum and jeopardize your invested capital and long-term returns.\n<\/li>\n<\/ul>\n
- \nOn one side is a Board and management team implementing a clear transformative strategy that has delivered results<\/b>. The strategy is in its early stages and has significant room to deliver further value.\n<\/li>\n
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