NEW YORK — Elliott Investment Management LP has acquired a significant investment, exceeding $2.5 billion, in Phillips 66 and is advocating for the energy company to either divest or spin off its midstream unit to enhance stock valuation.
In morning trading on Tuesday, shares of Phillips 66 saw an increase of nearly 4%.
In a correspondence addressed to the board of Phillips 66, Elliott expressed confidence that the company could potentially generate upwards of $40 billion from its midstream operations, which involve the transportation and storage of crude oil and refined products.
Elliott stated, “This exceptional business should be separated from a corporate framework that both diminishes and obscures its value.” With this move, the hedge fund has positioned itself among the top five shareholders in Phillips 66.
Additionally, Elliott has proposed that Phillips 66 reassess its portfolio and consider selling non-core assets like Chevron Phillips Chemical and specific European retail ventures. This, they believe, would allow for greater returns to shareholders while enabling the company to focus on its primary refining operations. Chevron Phillips Chemical is a partnership formed in July 2000 between Chevron U.S.A. Inc. and Phillips 66.
Moreover, Elliott is advocating for the inclusion of new independent directors on Phillips 66’s board to oversee these changes.
Phillips 66 has yet to provide a response to requests for comment.
Last month, the Houston-headquartered company disclosed a fourth-quarter adjusted loss of 15 cents per share, paired with revenues reaching $33.99 billion. These results exceeded the forecasts of analysts from Zacks Investment Research, who were predicting a loss of 20 cents per share with a revenue of $32.03 billion.
Elliott is known for its history of activist investments. Recently, Honeywell, one of the remaining major U.S. industrial conglomerates, announced plans to split into three independent entities. This announcement followed the revelation of Elliott’s more than $5 billion stake in Honeywell and its push for a separation of the company’s automation and aerospace divisions.
