Phillips 66 Co. appointed a brand new unbiased director and can identify one other member to the board within the coming months, the refiner has mentioned.
The modifications, which consequence within the board having 14 administrators together with 12 unbiased, have been coordinated with Elliott Funding Administration L.P. The investor group earlier known as for the addition of two names to the board who’ve the refining operations experience to enhance Phillips 66’s below-peers efficiency on this phase.
The Houston, Texas-based firm initially refused the proposal however has now named Robert W. Pease, who had held senior roles in several companies together with at Shell Buying and selling (U.S.) Co., to the board. “As well as, Phillips 66 and Elliott Funding Administration L.P. have agreed to work collectively to determine a second mutually agreed director to be named over the approaching months”, Phillips 66 mentioned in a information launch.
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Pease “demonstrated refining expertise, management and vitality experience will add to the board’s oversight of the corporate as we advance our strategic priorities and ship long-term, sustainable worth”, Greg Garland, government chair of the Phillips 66 board, mentioned in a press release.
“Phillips 66 is nicely positioned because the main built-in downstream vitality supplier”, Garland added. “Bob [Pease] enhances an already sturdy and various board and joins Phillips 66 after collaborative discussions with certainly one of our largest traders”.
In a letter to Phillips 66 November 29, Elliott which disclosed on the time an funding of about $1 billion in Phillips 66, rued the latter’s shifting of focus away from the refining sector lately. “Because of this, operational execution has suffered, and the Firm was poorly positioned to benefit from the refining super-cycle in 2022 and 2023”, it mentioned within the letter, printed on Elliott’s web site. “Throughout this transformative interval, friends reminiscent of Marathon Petroleum and Valero Power have been much better ready”.
“Over the previous three years, as Phillips 66 has fallen additional and additional behind, its inventory has meaningfully underperformed these friends”, West Palm Seaside, Florida-based Elliott added, blaming underperformance in refining and poor execution of cost-reduction methods.
Phillips 66 responded by saying in a press release November 29 it had “the precise administration staff and Board in place to ship long-term, sustainable worth”.
It has now made a u-turn, asserting the board modifications after reporting decreases in quarterly and yearly earnings as its refining margin continued to fall. For the fourth quarter of 2023, Phillips 66 posted $1.3 billion in web earnings, in comparison with $2.1 billion for the prior three-month interval and $1.9 billion for the corresponding quarter 2022. Phillips 66’s full-year web earnings dropped to $7 billion from $11 billion.
The decline in annual web revenue mirrored a lower in yearly refining margin to $17.35 a barrel in 2023 from $21.29 in 2022. For the fourth quarter of 2023 its refining margin dipped to $14.41 per barrel from $18.96 within the third quarter of 2023 and $19.73 within the comparable interval 2022.
“Realized margins declined primarily attributable to decrease market crack spreads, partially offset by stock hedge impacts, increased Gulf Coast clear product realizations and powerful business outcomes”, Phillips 66 mentioned in an earnings launch January 31.
Nevertheless, it mentioned the October–December 2023 interval marked the fourth consecutive quarter of above-industry-average crude utilization, at 92 p.c. Phillips 66 additionally highlighted its market seize price surged to 107 p.c from 66 p.c.
Welcoming the board modifications, Elliott associate John Pike and senior portfolio supervisor Mike Tomkins mentioned in a press release, “As a big investor, we consider Phillips 66 would considerably improve shareholder worth by hitting the improved targets it has outlined”.
“We stay up for persevering with our work with Phillips 66 to determine an extra director who can add useful views and expertise to the board”, they added.
Phillips 66 Co. mentioned in its quarterly report it’s eyeing to promote belongings price $3 billion to help its shareholder return goal and different long-term priorities. Phillips 66 maintained its goal of 10 to fifteen high-return, low-capital tasks via 2025 to lift its market seize price by 5 p.c by 2025.
The brand new board member brings 38 years of expertise within the vitality {industry} and a “world perspective on enterprise affairs”, Phillips 66 mentioned within the announcement of the management modifications. Pease had been president of Shell Buying and selling, chief government and president of Motiva Enterprises and most just lately president of downstream for Cenovus Power’s operations in america. In these positions Pease served “throughout a number of sides of the downstream vitality enterprise, together with refining, midstream and provide and buying and selling operations”, Phillips 66 mentioned.
To contact the writer, electronic mail jov.onsat@rigzone.com
