By Arathy Somasekhar
HOUSTON (Reuters) -Activist investor Elliott Investment Management has accepted the performance improvement plan that U.S. oil refiner Phillips 66 (NYSE:) laid out to boost shareholder returns and share price, Chief Executive Mark Lashier said in an interview on Tuesday.
“They’ve bought into our plans that we already had in place,” the CEO of one of the largest U.S. oil refiners said at its Houston headquarters.
Elliott sent a letter to the company’s board last fall, disclosing a $1 billion stake in the company, and calling for additions to its board of directors and a focus on improving its oil refining business.
Last month, Phillips 66 appointed Robert Pease, a veteran refining executive, as a director, and said it was looking to add a second candidate. Elliott had urged the company last fall to add directors with refining experience that could address underperformance in refining and speed up cost-cutting efforts.
Since the activist firm publicly disclosed its recommendations, Phillips 66 shares have climbed 32%, to $156.37 per share, compared to a 15% increase in the .
“Elliott sees the progress. I think they’ve done quite well as any investor has that entered the shares over the last couple of years,” he said.
A person familiar with Elliott’s thinking said Lashier is correct in saying the hedge fund supports the company’s performance improvement targets, as it said in its letter last year.
But the person cautioned that significant work lies ahead to execute on those goals.
It has yet to be determined how much progress has been made in reaching those targets, said the person who is not permitted to speak publicly about the private discussions. He also noted the company’s stock price continues to lag that of rivals Marathon Petroleum (NYSE:) and Valero on a multi-year and year-to-date basis.
A representative for Elliott declined to comment.
The oil refiner and pipeline operator’s performance improved in 2023’s fourth quarter after a two-year period in which the company’s overall earnings lagged rivals.
Despite the share price gains, Lashier said the company is undervalued by investors waiting for it to deliver on profit targets.
Phillips is ahead of schedule on a plan to repurchase $6 billion to $8 billion in shares by year-end, he said. The company has committed to deliver $13 billion to $15 billion in total shareholder returns by the end of 2024.
Phillips 66 remains in discussions with potential buyers on a goal of raising $3 billion from asset sales, but is in no hurry to sell, Lashier added.
The company is in the final stages of converting its oil refinery in Rodeo, California, to produce about 50,000 barrels a day of sustainable aviation fuel and renewable diesel after it stopped processing in February, he said.
The facility will ramp up across the second quarter and expect to be in full operation by the end of the second quarter, Lashier added.
