Frequently Asked Questions

Phillips 66 boasts a collection of high-quality energy assets – but is falling well short of its potential. The Company has consistently underperformed its peers, due in large part to its inefficient conglomerate structure, which has contributed to management distraction and led to poor operating performance. Worse, missed financial targets and unfulfilled promises by Phillip 66’s current leadership have caused a crisis of confidence in the investment community – severely holding back what should be a higher-performing investment.

Over the past decade, Phillips 66 shares have managed to underperform Valero Energy and Marathon Petroleum, its closest peers, by -138% and -188%,¹ respectively. That is no accident: Unlike at Phillips 66, shareholder-focused boards and management teams at those companies have recognized the need for improvement, welcomed investor advice and responded with decisive changes.

We believe that Phillips 66 is in urgent need of a new direction and that its shareholders deserve better.

Elliott’s Streamline 66 plan would unlock value currently trapped by Phillips 66’s conglomerate structure and refocus management on improving refining-segment operating performance – boosting returns for all shareholders. Our plan calls for the Company to do the following:

1. Simplify its portfolio by separating its midstream business. The Company should evaluate a sale or spinoff of the midstream segment and a sale of other non-core assets, such as its retail operations in Europe and its interest in CPChem, a joint venture with Chevron.
2. Conduct a thorough review of the Company’s refining operations, with an eye toward greater cost discipline and higher profitability per barrel.
3. Enhance oversight and accountability, starting with a stronger Board of Directors that can finally provide proper oversight of management while improving the Company’s deficient corporate governance.

We are confident that these steps could significantly boost Phillips 66 stock. The full details of our Streamline 66 plan are here.

Elliott Investment Management, L.P. manages funds that together are among Phillips 66’s top-five shareholders. We are long-term investors in the Company and we remain committed shareholders based on our conviction in the significant opportunity for value creation represented by the quality of Phillips 66’s assets.

We’ve done our homework on Phillips 66, having conducted extensive due diligence on the Company’s strategy, financial performance, asset portfolio, operations and market position. We spoke with former employees, industry executives, suppliers, customers and competitors. We retained a leading operational consulting firm, an energy market consultant, a top accounting firm, a global investment bank and legal advisors to examine all angles. All of our work and due diligence shows that the Streamline 66 plan could substantially boost Phillips 66 stock.

Yes. Elliott has years of experience in the global energy sector, as investors in and partners to numerous major public and private companies across the globe. Our public investments have included Marathon Petroleum, Suncor Energy, Hess, and NRG Energy.

At Marathon, our successful engagement led to leadership and governance enhancements, substantial portfolio simplification and significantly improved operations. The result was sustainable operational improvement and strong stock outperformance. Since our engagement, Marathon’s total shareholder return has exceeded its peers Valero Energy by 120% and Phillips 66 by 178%.²

When we engaged with Marathon in 2019, the company had challenges comparable to those now facing Phillips 66. It took decisive action by leadership to set Marathon back on track and deliver a stock price that greatly outperformed peers.

Today, the same kind of turnaround and superlative stock returns are entirely within reach of Phillips 66. Our highly experienced and qualified nominees for Phillips 66’s Board bring a wealth of experience in refining and midstream operations, complex strategic transactions, strong corporate governance and other areas critical to the Company’s future. We have seen this story before and believe there is an enormous opportunity for positive change at Phillips 66 today. Learn more about our Streamline 66 plan here.

Putting the Streamline 66 plan into action requires a Board with relevant expertise and the credibility to keep management on course. After years of missed targets, leadership has lost the trust of Phillips 66’s investors, contributing to the stock’s perpetual underperformance. We believe that the Board is sorely in need of new independent directors who can provide the essential level of oversight needed to keep management accountable and to execute on the Streamline 66 plan.

Investors have been patient. Eighteen months ago, we were willing to give the Company and its leaders a fair chance to restore Phillips 66 to best-in-class performance. Then, after initially agreeing to work with us to add two new directors to its Board, Phillips 66 reneged on that commitment. Instead, Phillips 66 added only one new director after passing over a number of other highly qualified candidates whom we submitted for consideration.

Phillips 66 is the third-largest independent refiner in the U.S., and its Board should have a wealth of experience in refining. Instead, the current Board is made up of individuals with backgrounds in aerospace, airlines, food and beverage companies, commercial retail, and investment research. By contrast, our candidates would add urgently needed relevant experience and valuable new perspectives.

In February of this year, we publicly presented our Streamline 66 plan and our rationale for why change is needed at the Company. Phillips 66’s response has been to misrepresent our critiques and overstate its own performance – without demonstrating any interest in genuine engagement with us. At this point, it has become clear that sweeping changes are needed to the Company’s structure, its operations and its Board. This is why we have nominated a slate of four outstanding director nominees with the right experience and independent perspectives for election at the 2025 Annual Meeting in May.

We undertook an exhaustive search process, researching and interviewing dozens of potential candidates, to identify nominees who will bring experience, independence, relevant insight, judgment and objectivity to a boardroom that has clearly been lacking all the above. We ultimately selected our four highly qualified director nominees:

• Sigmund Cornelius, who served as CFO at the predecessor company of Phillips 66, ConocoPhillips, where he oversaw a substantial divestiture and simplification program that led to a material increase in shareholder value. He later served as president of Freeport LNG Development, as well as a director at Andeavor and Western Refining.
• Michael Heim, who has a long record of leadership in the industry as a founder of Targa Resources, one of the most successful Permian-focused midstream operators, and as a member of multiple boards and a respected consultant.
• Brian Coffman, a seasoned operator who spent much of his career running Phillips 66’s current refining assets while they were part of ConocoPhillips. After three decades at ConocoPhillips, he became the executive in charge of refining for Andeavor, leading the operations of ten refineries throughout the United States, as well as the President and CEO of Motiva, one of North America’s largest refiners.
• Stacy Nieuwoudt, who would bring an investor’s eye to Phillips 66’s challenges, having spent her career as a senior energy and industrials analyst at Citadel. She has also served on the boards of multiple publicly traded energy companies.

The Phillips 66 Board is divided into three “classes,” with only one of the three classes of directors up for election at each annual meeting, and with directors elected to serve staggered three-year terms. This means only one-third of the Board is voted on by shareholders at each annual meeting, with the rest of the board shielded from a shareholder vote.

Staggered boards are not in the interest of shareholders because they limit accountability and can enable entrenchment. A board that upholds accountability should itself be accountable. An annually elected Board would make all directors accountable to shareholders each year, consistent with nearly 90% of the companies in the S&P 500.

This staggered Board shields long-serving directors from accountability to shareholders and means Phillips 66 is only holding elections for four Board seats this year. This structure allowed the Company to engineer a slate that includes three seats currently occupied by directors who have been on the Board for less than a year, another sign of leadership entrenchment at Phillips 66.

Elliott is proposing a key improvement to Phillips 66’s corporate governance: annual elections for all Board seats, rather than the current arrangement of a staggered Board with only a portion of seats up for election each year.

Proposals to address this governance defect have been presented at past Phillips 66 Annual Meetings and have consistently received near-unanimous support among those shareholders who have voted. However, these measures have never passed, because amendments to the Company’s charter must be supported by 80% of all outstanding shares – not just voted shares – and this threshold is all but impossible to meet.

To overcome this obstacle, we have proposed a straightforward way for the Board to promote the annual election of all directors: a non-binding proposal asking the Board to adopt a policy calling for each director to voluntarily commit to a one-year term and stand for election at each Annual Meeting. The annual election of directors reflects standard best practice in corporate governance, and it is what the vast majority of Phillips 66 shareholders want – as evidenced by the 99% of voting shareholders who supported de-staggering the last time it was proposed.

Incredibly, Phillips 66’s leaders have come out against this proposal, arguing that a board policy promoting the annual election of directors could be found by a court to conflict with the Company’s governing documents. This argument is entirely unconvincing, however, because the proposal is non-binding, and the Board policy does not purport to supersede or modify the Company’s governing documents. The policy would not be legally binding on directors and their compliance with the policy would be voluntary – requiring only that all Phillips 66 directors have the courage to be accountable to shareholders on an annual basis, as is the case at nearly 90% of the companies in the S&P 500. The Company conspicuously fails to cite any legal authority for its assertions.

Instead, the Company is asking shareholders to try the same approach to de-staggering that has repeatedly failed before – fully aware that its supermajority voting requirement makes failing again a near certainty. Shareholders should be asking whether a board truly interested in good governance would be satisfied with this status quo, allowing an archaic governance regime to constrain shareholder choice and shield a majority of its directors, who have presided over years of underperformance, from an annual shareholder vote.

Don’t just take our word for it. In an essay published on April 3, Mark DesJardine, an associate professor at Dartmouth’s Tuck School of Business, noted that, while Phillips 66 repeatedly putting forward the proposal to de-stagger its Board suggests that the Company agrees with the need for governance improvement, its opposition to our annual election proposal makes this effort less than sincere.

“This pattern suggests that Phillips 66’s board is using these repeated proposals as a shield against activism while failing to deliver tangible governance reform that shareholders clearly seem to support,” Prof. DesJardine wrote. “If the desire to declassify is genuine, one would think the board would accept the remedy that Elliott has proposed.”