Phillips 66 (NYSE:PSX) today responded to a May 2 letter released by Elliott Management. The Company has issued the following statement:
In its letter, Elliott attempted to rebut a number of reasonable questions Phillips 66 raised in its April 24 letter to shareholders. Our letter encouraged shareholders to scrutinize the facts of this situation – namely, Elliott's expectation of director loyalty, its conflicting competitive interests, its misleading disclosures and its preference for theatrics over transparency, strong corporate governance and good-faith engagement with Phillips 66.
Elliott's 5,886 word letter failed to substantively resolve the core issues we raised. Instead of addressing the facts of this particular situation, Elliott points to its history of engaging with other companies.
We are not interested in Elliott's history at other companies. We are focused on ensuring Phillips 66 shareholders have complete and transparent information to make informed decisions.
We reiterate below where Elliott has left questions either unanswered or raised new issues:
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What Real Director Independence Looks Like: Bob Pease. On March 28, Bob Pease wrote an open letter to shareholders recounting his experience in joining the Phillips 66 Board as a nominee supported by Elliott. Bob's independence is a testament to our Board's credibility. In his own words, Bob joined the Board with Elliott's support and was "looking to challenge" the Board. This is what activist shareholders claim to want. Bob concluded the Board was asking the right questions, doing the work and prioritizing the interests of all shareholders. Elliott has claimed it is seeking to replace Bob because he allowed the Board to combine the Chairman and CEO role. Elliott has invested in several companies where the CEO and Chairman roles were combined without challenging this construct. Is this the sign of a shareholder who wants independent directors or directors loyal only to Elliott?
Elliott also claims it offered a one-off conversation with Bob Pease, ironically, because it "was the courteous thing to do." This outreach was conducted one week after its public presentation on February 11. That presentation followed five months of no substantive business communications or requests for engagement aside from routine investor relations engagement.
What shareholder reasonably expects it can or should privately contact a single independent director? Given the heightened risk of the appearance of a loyalty test, shouldn't Elliott be even more careful about private outreach to individual directors it identified and supported?
- CITGO Remains Ongoing: Elliott states it has no investment in CITGO and it is not the leading bidder. Shareholders will see through this as a semantic illusion. Elliott's language intentionally leaves open the possibility that it remains interested and active in the ongoing pursuit of CITGO. Public reports indicate bidding remains ongoing for CITGO and will not be resolved until July1, well after the Phillips 66 Annual Meeting.
- Monetary Agreement With Mr. Goff: Once again, Elliott attempts a linguistics trick regarding its relationship with Gregory Goff by saying it "has never paid him a cent of compensation." Can Elliott provide our shareholders with more clarity that there is no form of monetary agreement between Mr. Goff and Elliott or an Elliott owned entity? Are shareholders to believe that Mr. Goff has agreed to serve as CEO of Amber Energy, a wholly owned Elliott entity, with no promise of any economic gain? We reiterate that Elliott's current nominees have a number of significant relationships with Mr. Goff and the leadership of Amber Energy.
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Timing of Goff Agreement and Share Purchases: Elliott has also asked shareholders to not look at the details too closely with its description of Mr. Goff's supposedly independent views.
- Elliott only disclosed its agreement to pay for Mr. Goff's solicitation expenses in an SEC filing after Mr. Goff's letter was made public. Shareholders should examine Mr. Goff's letter and Elliott's response and ask if their coordination was made clear in the press releases or left to be found in a technical filing.
- Elliott conveniently describes the above as an April 9 filing while thoughtfully avoiding the fact the agreement with Mr. Goff was entered into on April 8. Roughly 99% of the shares Mr. Goff owns were purchased on April 8, the same day Mr. Goff and Elliott entered into this agreement2. Calling this an April 9 filing, and not an April 8 agreement, is misleading and obfuscates their coordination.
- How likely is it that Mr. Goff independently decided to buy over 102,000 shares on the same day he entered into an agreement with Elliott?
- Make no mistake, we are not questioning Mr. Goff's business acumen and reputation, but rather his unnecessary, biased and clear relationship-driven insertion into Elliott's campaign.
- Annual Resignation Policy: We understand that the outcome of the shareholder vote with respect to Elliott's proposal is non-binding. But this must be clearly separated from the mandatory nature of the underlying annual resignation policy requested in that proposal, if implemented. Elliott continues to misleadingly claim the annual resignation policy is "voluntary" while conveniently ignoring the resolve clause that it drafted, which clearly says directors would be REQUIRED to resign each year. The annual resignation policy was designed to circumvent the Company's charter and by-laws by simulating declassification without the required 80% shareholder vote. A leading Delaware law firm has advised the Board that, if implemented, the annual resignation policy would violate Delaware law and expose the Board to potential claims for breach of fiduciary duty. When Elliott states that "the Company itself would be responsible for drafting" the policy, they miss the point that no legal policy that is intended to circumvent the Company's charter and by-laws could be drafted and, if it were possible, Elliott would certainly have drafted it themselves. Why would Elliott want shareholders to vote for a policy it knows the Board cannot implement?
We welcome Elliott's efforts at clarifying the questions we have raised, and we encourage them to provide more clarity to our shareholders on these important topics.
About Phillips 66
Phillips 66 (NYSE:PSX) is a leading integrated downstream energy provider that manufactures, transports and markets products that drive the global economy. The company's portfolio includes Midstream, Chemicals, Refining, Marketing and Specialties, and Renewable Fuels businesses. Headquartered in Houston, Phillips 66 has employees around the globe who are committed to safely and reliably providing energy and improving lives while pursuing a lower-carbon future. For more information, visit phillips66.com or follow @Phillips66Co on LinkedIn.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the federal securities laws relating to Phillips 66's operations, strategy and performance. Words such as "anticipated," "committed," "estimated," "expected," "planned," "scheduled," "targeted," "believe," "continue," "intend," "will," "would," "objective," "goal," "project," "efforts," "strategies" and similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements included in this news release are based on management's expectations, estimates and projections as of the date they are made. These statements are not guarantees of future events or performance, and you should not unduly rely on them as they involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include: changes in governmental policies or laws that relate to our operations, including regulations that seek to limit or restrict refining, marketing and midstream operations or regulate profits, pricing, or taxation of our products or feedstocks, or other regulations that restrict feedstock imports or product exports; our ability to timely obtain or maintain permits necessary for projects; fluctuations in NGL, crude oil, refined petroleum, renewable fuels and natural gas prices, and refining, marketing and petrochemical margins; the effects of any widespread public health crisis and its negative impact on commercial activity and demand for refined petroleum or renewable fuels products; changes to worldwide government policies relating to renewable fuels and greenhouse gas emissions that adversely affect programs including the renewable fuel standards program, low carbon fuel standards and tax credits for renewable fuels; potential liability from pending or future litigation; liability for remedial actions, including removal and reclamation obligations under existing or future environmental regulations; unexpected changes in costs for constructing, modifying or operating our facilities; our ability to successfully complete, or any material delay in the completion of, any asset disposition, acquisition, shutdown or conversion that we have announced or may pursue, including receipt of any necessary regulatory approvals or permits related thereto; unexpected difficulties in manufacturing, refining or transporting our products; the level and success of drilling and production volumes around our midstream assets; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products, renewable fuels or specialty products; lack of, or disruptions in, adequate and reliable transportation for our products; failure to complete construction of capital projects on time or within budget; our ability to comply with governmental regulations or make capital expenditures to maintain compliance with laws; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets, which may also impact our ability to repurchase shares and declare and pay dividends; potential disruption of our operations due to accidents, weather events, including as a result of climate change, acts of terrorism or cyberattacks; general domestic and international economic and political developments, including armed hostilities (such as the Russia-Ukraine war), expropriation of assets, and other diplomatic developments; international monetary conditions and exchange controls; changes in estimates or projections used to assess fair value of intangible assets, goodwill and property and equipment and/or strategic decisions with respect to our asset portfolio that cause impairment charges; investments required, or reduced demand for products, as a result of environmental rules and regulations; changes in tax, environmental and other laws and regulations (including alternative energy mandates); political and societal concerns about climate change that could result in changes to our business or increase expenditures, including litigation-related expenses; the operation, financing and distribution decisions of equity affiliates we do not control; and other economic, business, competitive and/or regulatory factors affecting Phillips 66's businesses generally as set forth in our filings with the Securities and Exchange Commission. Phillips 66 is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information
On April 8, 2025, Phillips 66 filed a definitive proxy statement on Schedule 14A (the "Proxy Statement") and accompanying WHITE proxy card with the U.S. Securities and Exchange Commission (the "SEC") in connection with its 2025 Annual Meeting of Shareholders (the "2025 Annual Meeting") and its solicitation of proxies for Phillips 66's director nominees and for other matters to be voted on. This communication is not a substitute for the Proxy Statement or any other document that Phillips 66 has filed or may file with the SEC in connection with any solicitation by Phillips 66. PHILLIPS 66 SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT (AND ANY AMENDMENTS AND SUPPLEMENTS THERETO) AND ACCOMPANYING WHITE PROXY CARD AND ANY OTHER RELEVANT SOLICITATION MATERIALS FILED WITH THE SEC AS THEY CONTAIN IMPORTANT INFORMATION. Shareholders may obtain copies of the Proxy Statement, any amendments or supplements to the Proxy Statement and other documents (including the WHITE proxy card) filed by Phillips 66 with the SEC without charge from the SEC's website at www.sec.gov. Copies of the documents filed by Phillips 66 with the SEC also may be obtained free of charge at Phillips 66's investor relations website at https://investor.phillips66.com or upon written request sent to Phillips 66, 2331 CityWest Boulevard, Houston, TX 77042, Attention: Investor Relations.
Certain Information Regarding Participants
Phillips 66, its directors, its director nominees and certain of its executive officers and employees may be deemed to be participants in connection with the solicitation of proxies from Phillips 66 shareholders in connection with the matters to be considered at the 2025 Annual Meeting. Information regarding the names of such persons and their respective interests in Phillips 66, by securities holdings or otherwise, is available in the Proxy Statement, which was filed with the SEC on April 8, 2025, including in the sections captioned "Beneficial Ownership of Phillips 66 Securities" and "Appendix C: Supplemental Information Regarding Participants in the Solicitation." To the extent that Phillips 66's directors and executive officers who may be deemed to be participants in the solicitation have acquired or disposed of securities holdings since the applicable "as of" date disclosed in the Proxy Statement, such transactions have been or will be reflected on Statements of Changes in Ownership of Securities on Form 4 or Initial Statements of Beneficial Ownership of Securities on Form 3 filed with the SEC. These documents are or will be available free of charge at the SEC's website at www.sec.gov.
1 Marianna Parraga, "US Court Launches 30-day Competition for Citgo Parent's Shares," Reuters, April 25, 2025.
2 Elliott Investment Management, Schedule 14A (filed April 14, 2025).
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