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Update 10:35pm: Adds Phillips 66 comment.
Phillips 66 (NYSE:PSX) rose 4% after activist investor Elliottt Investment Management disclosed it had taken a $1 billion stake in the refiner and is seeking board seats.
Prominent activist hedge fund Elliott is seeking two board seats at Phillips 66 (PSX), according to a letter and statement from the acitivist on Wednesday. Elliott sees about 75% upside to PSX’s current stock pric
“We believe the Board must take several steps to reassure investors that Phillips 66 is in the best possible position to achieve its value-creation potential,” Elliott said in the statement.
Elliott wants Phillips 66 (PSX) to close the current $2-3 per barrel refining EBITDA gap between PSX and Valero (VLO). The activist believes PSX could generate $15 billion to $20 billion in after-tax cash proceeds from the sale of PSX’s CPChem stake, European convenience stores, and a portion of its non-operated midstream stakes.
Phillips 66 (PSX) issued a statement late Wednesday that it has has held discussions with Elliott over the last several weeks and plans to continue a “constructive dialogue.”
“We agree with Elliott that successful execution of our strategic priorities will drive substantial stock price performance and believe that we have the right management team and Board in place to deliver long-term, sustainable value,” Phillips 66 said in the statement.
Elliott is focused on Phillips 66 (PSX) underperformance in the refining area. Phillips 66’s opex/bbl is higher than that of Marathon Petroleum (MPC) and Valero (VLO).
“We believe this lack of opex discipline has been a key driver of the company’s stock-price underperformance, particularly in the context of the substantial improvements made by its similarly situated peer Marathon,” Elliott’s John Pike and Mike Tomkins wrote in the letter. “Achieving safe, reliable and efficient refining operations is paramount to reversing Phillips 66’s underperformance.”
News of the Elliott stake was earlier reported by CNBC.
Elliott disclosed in its Q2 13F in filing in August that it purchased 775K shares of Phillips 66 (PSX) in Q2.