Phillips 66 Co. mentioned it’s eyeing to surrender property price $3 billion to help its shareholder return goal and different long-term priorities whereas focusing funding on low-cost however high-return tasks.
The Houston, Texas-based oil refiner bared the technique because it reported a fall in internet revenue to $1.3 billion for the fourth quarter of 2023 from $2.1 billion for the prior three-month interval and $1.9 billion from the corresponding quarter 2022. Phillips 66’s full-year internet revenue dropped to $7 billion from $11 billion as its refining margin continued to say no.
The skid in annual internet earnings 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.
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“Realized margins declined primarily resulting from decrease market crack spreads, partially offset by stock hedge impacts, greater Gulf Coast clear product realizations and robust business outcomes”, Phillips 66 mentioned in a information launch.
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.
Final November a gaggle of buyers referred to as for brand spanking new names within the firm’s board of administrators to treatment refining “underperformance”. Elliott Funding Administration LP, which disclosed an funding of about $1 billion in Phillips 66, rued the corporate’s shifting of focus away from the refining sector lately. “Because of this, operational execution has suffered, and the Firm was poorly positioned to reap the benefits of the refining super-cycle in 2022 and 2023”, it mentioned within the letter. “Throughout this transformative interval, friends equivalent to Marathon Petroleum and Valero Vitality had 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”, New York-based Elliott added, blaming underperformance in refining and poor execution of cost-reduction methods.
In distinction to its objective of decreasing prices, Phillips 66, which has been led by chief government Mark Lashier since July 2022, noticed prices climb relative to friends following the enforcement of a cost-reduction program 2019, Elliott mentioned.
Phillips 66 rejected the management change proposal, and within the firm’s newest quarterly report, lead unbiased director Glenn Tilton affirmed, “The Board is happy with the corporate’s outcomes, which replicate administration’s progress on our strategic priorities and our collective dedication to ship shareholder worth right this moment and sooner or later”.
Lashier highlighted that Phillips 66’s returned over 50 p.c of 2023 working money stream, which stood at $2.2 billion, to shareholders via dividends and inventory buybacks. “We have now distributed $8.3 billion to shareholders since July 2022, on tempo to attain our $13 billion to $15 billion goal by year-end 2024”, the president and chief government mentioned in an announcement.
On financial savings the corporate mentioned it had achieved $1.2 billion in run-rate price and capital financial savings as of December, towards $1.4 billion in run-rate financial savings by the tip of 2024.
Its midstream section did improve revenue however the fourth-quarter midstream results of $756 million pre-tax included a $101 million acquire on an funding sale and an additional $46 million from “a change in stock methodology for an acquired enterprise”.
Phillips 66 maintained its goal of 10 to fifteen high-return, low-capital tasks via 2025 with the intention of elevating its market seize price by 5 p.c by 2025. “In 2023, accomplished tasks added over 1 p.c to market seize based mostly on mid-cycle pricing”, it said.
Moreover cost-cutting, it mentioned it additionally plans to dump “property that now not match its long-term technique”. Topic to stockholder and regulatory approvals, “[t]hese asset inclinations are anticipated to generate over $3 billion in proceeds that may help the corporate’s strategic priorities, together with returns to shareholders”, Phillips 66 mentioned.
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