Elliott Investment Management has expanded its stake in US refiner Phillips 66 to more than $2.5bn, renewing its call for significant operational changes, including the sale or spin-off of the company’s midstream business, according to a report by Reuters.
The activist hedge fund’s announcement on Tuesday sent Phillips 66 shares up 3.3% in late morning trading.
The move marks a significant escalation for Elliott, which disclosed a $1bn stake in Phillips 66 last year. Following that investment, the refiner introduced a performance improvement plan aimed at boosting shareholder returns and its stock price. However, Elliott now claims that the initiative has fallen short.
“The plan failed to materialize, and it has become evident that urgent changes are needed,” Elliott said, citing Phillips 66’s underperformance compared to rival refiners.
Elliott outlined a vision for a leaner Phillips 66, suggesting the sale or spin-off of its midstream business, which the hedge fund estimates could be valued at over $60bn. The firm also proposed divesting other non-core assets, including Phillips 66’s interests in Chevron Phillips Chemical (CPChem) and its JET retail operations in Germany and Austria.
“A streamlined Phillips would be better positioned to deliver value to shareholders,” Elliott stated.
As of its last close, Phillips 66 had a market capitalisation of $51.09bn, according to LSEG data. The company has yet to comment on Elliott’s latest proposals.
In addition to asset sales, Elliott called for changes to Phillips 66’s board, urging the addition of independent directors to enhance accountability and oversee a review of the company’s management. The hedge fund also emphasised the need for ambitious refining targets and a renewed focus on profitability, particularly as refining margins have contracted for US refiners in recent quarters.
Elliott’s campaign at Phillips 66 is part of a broader strategy by the activist fund to reshape energy companies with the firm having recently disclosed a stake in oil major BP.
