Elliott Investment Management has taken a $1 billion stake in
Phillips 66,
the activist investor disclosed in a letter to the refiner’s board on Wednesday.
Phillips 66 stock rose 3.6% to $122.20. 4.2% to $122.98 Wednesday morning. The stock has risen 17% this year.
In the letter, Elliott highlighted drivers of the stock’s underperformance, and said that after some improvements the stock could reach more than $200, about 75% higher than the current price.
Phillips 66 President and CEO Mark Lashier said in an emailed statement to Barron’s that the company has engaged in discussions with Elliott Management “and we welcome their perspectives and the perspectives of other shareholders on our strategy and the actions we are taking to drive long-term sustainable growth and value creation.”
“Phillips 66 continues to invest in returns-focused growth opportunities, and with a portfolio of diversified, integrated assets, we are well positioned to continue driving long-term shareholder value,” he continued. “We remain committed to acting in the best interests of our shareholders.”
After spinning off from ConocoPhillips in 2012, most investors deemed Phillips 66 “a well-run and high-performing company,” Elliott said, but over the past three years, the stock has fallen behind peers
Valero Energy
and
Marathon Petroleum,
thanks to “underperformance in Refining, as well as poor execution on its cost-reduction efforts.”
That being said, the activist investor recommends the company appoint two new directors with refining-operating experience to the board.
“We are hopeful the current management team, supported by an enhanced Board, can deliver on its performance targets and achieve significant stock-price outperformance,” Elliott wrote.
“However, should Phillips 66 fail to show material progress toward its 2025 targets over the next year, we believe that the Company should at that point pursue its best available option by making a strategic pivot and following a path that mirrors Marathon’s recent transformation,” the activist investor continued. Marathon’s revamp, pushed by activists including Elliott, involved transitioning to a new CEO, and selling off a business segment.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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