Phillips 66 (PSX) fired back at Elliott Investment Management a day after the activist investor proposed seven independent candidates for the company’s board as it continues to push for a sale of the company’s midstream assets.

Elliott, which manages funds that have invested more than $2.5 billion in the company, said March 4 it was pushing for portfolio simplification, an operating review and enhanced oversight.

In a March 5 letter to shareholders, Mark E. Lashier, Phillips 66 chairman and CEO, touted improvements the company has made and blasted Elliott for a “series of attacks and proposals regarding monetization of certain business units and, for the first time … floating the idea of a separation.”

Elliott has urged Phillips to sell or spin off its midstream business, which the firm has said could generate at least $40 billion for shareholders.

In Lashier’s letter, the CEO said that PSX made several attempts to reach an agreement to add another director to the company’s board but that “Elliott has chosen to forego constructive dialogue with us and launch their activist playbook.”

“Nevertheless, we remain fully committed to constructive engagement and finding a path forward with Elliott that will benefit all shareholders,” Lashier said.

PSX’s team met with Elliott on March 3 to clear up a direction for the company and to interview Elliott’s director nominees.

“The meeting ended with Elliott representatives stating there were no immediate next steps. The next day, Elliott leaked their slate of director nominees to the media, issued a press release and filed a preliminary proxy statement,” Lashier wrote. “Our leadership team and Board stand ready to engage constructively when Elliott is ready despite these actions, which showed no genuine interest in engagement with Phillips 66.”

Phillips 66’s board “continuously and aggressively” evaluates its portfolio and other alternatives to maximize long-term shareholder value, Lashier said. “As always, we seriously and comprehensively review shareholder feedback with a focus on creating long-term value.”

In February, Elliott lambasted Phillips’ valuation, which it said trades at a substantial discount to a “sum-of-its-parts valuation.” Elliott has also criticized the company’s midstream acquisitions, including January’s $2.2 billion deal for EPIC’s Y-Grade Texas NGL assets. In 2024, PSX paid $550 million for Midland Basin gas and processing assets. And in 2023, the company bought various midstream assets from DCP Midstream for $3.8 billion.

Elliott has said the deals came after $3 billion in divestitures, earmarked for shareholder returns and debt reduction, were instead used for acquisitions.

Lashier said Phillips 66 has taken substantial action to deliver on objectives outlined in 2022 and 2023, which have led to “significant progress and achievements, enhancing shareholder returns and operational efficiency.”

Lashier cited accomplishments including:

  • Delivering total shareholder returns of 65% since Lashier became president and CEO in July 2022—“significantly outperforming the S&P 500 Energy Index (33%) and our proxy peer group median (22%);”
  • Buying back or paying dividends totaling $13.6 billion from July 2022 through year-end 2024, exceeding PSX’s distribution target;
  • Reducing refining costs by $1/bbl since 2022;
  • Maximizing value from our wellhead-to-market strategy by capturing $500 million of run rate synergies from our DCP Midstream acquisition and increasing its midstream segment’s adjusted EBITDA by $1.5 billion since 2022; and
  • Maintaining an investment grade credit rating (A3/BBB+) and engaging in a business optimization of more than $3 billion in non-core asset divestitures as well as reducing costs, since 2022, totaling $1.2 billion on a run-rate basis.

“Phillips 66 is dedicated to transparency, accountability, and sustainable value creation for shareholders,” Lashier said. “We have made substantial progress and realize there is more work to be done. We will continue to pursue opportunities that strengthen our position to the benefit of our shareholders. We look forward to your input and to provide further updates on our progress.”

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