Activist investor Elliott Investment Management lifted its stake in energy company Phillips 66 (PSX) with over $2.5 billion in fresh investment. The news was first reported by the Wall Street Journal, citing sources familiar with the matter. Elliott first disclosed a roughly $1 billion stake in PSX in 2023.
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With the new stake, Elliott has now become one of the top five shareholders of Phillips 66. The firm seeks to drive meaningful operational changes at the oil refiner to improve its lagging stock price performance. In the past year, PSX stock has declined 11.6%.
Elliott’s Tryst with Phillips 66
One of the important changes that Elliott seeks is to spin off Phillips 66’s midstream business, according to people familiar with the matter. The segment transports energy and is, hence, a more stable business than oil refinery, where changes in oil prices have an impact on the performance.
The billionaire Paul Singer-led firm already appointed one board member during its earlier face-off with the company. This time too, Elliott could try to push for board changes. Phillips 66 has oil refineries in California, Texas, and Louisiana, as well as chemical plants in the U.S. Plus, PSX has a pipeline and terminals business, transporting oil and natural gas across the country.
During its Q4 FY24 results, which missed expectations, Phillips 66 blamed weak refining margins and larger-than-expected depreciation at its Los Angeles refinery as reasons for the deterioration. At the time, CEO Mark Lashier said that the company was planning to close the LA refinery and trim the debt to $17 billion. Furthermore, Phillips 66 has plans to acquire EPIC’s NGL (natural gas liquids) for $2.2 billion to boost its Permian midstream business.
Is Phillips 66 a Buy, Hold, or Sell?
Analysts remain divided on Phillips 66 stock trajectory for the reasons mentioned above. On TipRanks, PSX stock has a Moderate Buy consensus rating based on eight Buys versus five Hold ratings. Also, the average Phillips 66 price target of $135.73 implies 9.7% upside potential from current levels.
