Executives from Phillips 66 (NYSE:PSX) outlined their strategic priorities across refining, midstream, chemicals, and capital allocation during a conference session hosted by Goldman Sachs. The discussion emphasized the company’s focus on downstream operations, integrated asset advantages, and plans to deliver “durable through-cycle cash flow” supported by a “rateable,” growing dividend.
Downstream focus and “irreplaceable” integrated assets
CEO Mark described Phillips 66 as a lower-volatility, integrated downstream company without upstream exposure. He said the company’s complementary refining, midstream, marketing, and chemicals assets sit in key hydrocarbon corridors including the Gulf Coast, Midcontinent, and Permian, and that replicating the system would be “prohibitive” for competitors.
Refining: Venezuela supply, WCS dynamics, and a tighter capacity outlook
On the potential return of Venezuelan crude supply, management said Phillips 66 has two Gulf Coast refineries capable of processing Venezuelan barrels and has occasionally participated in Chevron-exported Venezuelan crude. Mark said the company is watching the situation carefully and expects both near-term and longer-term impacts.
In the near term, Mark said additional Venezuelan barrels could enter North America and compete with Western Canadian Select (WCS) volumes currently processed on the Gulf Coast, influencing heavy crude differentials back into the Midcontinent. He said Phillips 66 sees the situation as constructive for both Gulf Coast and Midcontinent refining, and he also referenced potential increased naphtha requirements and opportunities to export C5s to Venezuela if that market develops.
Kevin said Phillips 66 could process “a couple hundred thousand barrels per day” of Venezuelan crude at Lake Charles and Sweeny if supply is available and economics are supportive, adding that changes in Venezuelan flows could affect the broader heavy crude market across the company’s system, where it runs about 500,000 barrels per day of heavy crudes.
Management also discussed potential flow redirection away from China and toward the U.S. Gulf Coast. Mark said the system could rebalance as Chinese buyers seek replacement barrels, and noted that Phillips 66 has previously exported WCS from the Gulf Coast to China and could potentially do so again. He also said the Trans Mountain Expansion (TMX) pipeline appears “maxed out,” and that Phillips 66 is seeing more WCS moving through the Midcontinent.
On the broader refining outlook, Mark said Phillips 66 had previously pushed back against narratives questioning refining terminal value and concluded the market view that refineries needed to “go away” was “nonsense.” He said refined product demand has remained strong and that the company continues to see tightness in global refining capacity as rationalizations continue. Mark said Phillips 66 expects additional rationalizations this year, while additions are expected to be modest. He cited an estimate of net capacity additions averaging roughly 500,000 barrels per day per year through the end of the decade, and said that does not account for potential delays, operational challenges at new builds, or “unknown rationalizations.”
Wood River, Borger, and the Midcontinent strategy
Management discussed recent steps to deepen Midcontinent integration, including the Wood River and Borger assets. Mark said Phillips 66 had evaluated Wood River “for a long time” and moved quickly once “the planets finally aligned” on value. Because Phillips 66 already operated the assets, he said there was no significant operational change, but the transaction enhances commercial flexibility around crude sourcing and product marketing.
Mark said the company intends to integrate Wood River and Borger more deeply with Ponca City, including moving intermediates among facilities and operating the network more like one large system. He also highlighted the potential Western Gateway pipeline, which management said could enable refined product deliveries from “St. Louis to Santa Monica,” expanding market access for Midcontinent refineries.
Addressing the view that the Midcontinent is disadvantaged versus the Gulf Coast, Mark said the Midcontinent “is and has been our strongest competitive position,” noting existing connectivity to the Gulf Coast and continued efforts to enhance that connectivity. On refining M&A, he said Phillips 66 would remain disciplined but would consider opportunities that strengthen its Midcontinent and Gulf Coast footprint.
Cost, reliability, and operational improvements
Asked about progress on reliability and cost improvements, Mark said safe, reliable operations are foundational and that the company views improvement as a continuous journey. He said Phillips 66 has shifted from segments competing for capital internally to operating as “one integrated system” focused on external competition.
Mark cited a refining cost target of $5.50 per barrel, stating the company has already removed about $1 per barrel and expects to reach a run rate of $5.50 or lower by the end of this year into 2027. He characterized the target as a milestone rather than an endpoint, and said taking “LA out of the system” would get the company “halfway” from where it is today toward the $5.50 target.
Midstream growth path and capital discipline
On midstream, executives reiterated a target of $4.5 billion of EBITDA by the latter part of 2027, from a current level described as about $3.94 billion. Management said the approximately $500 million of EBITDA growth is expected to come primarily from organic projects and operational/commercial improvements.
- Key projects cited included filling up the Dos Picos gas plant (turned on last summer) and the Iron Mesa gas processing plant (expected online in 2027).
- Additional NGL transportation needs are expected to be supported by a Coastal Bend pipeline expansion planned for late 2026.
- Management said about 60% of the EBITDA bridge comes from these larger projects, with the remainder from efficiencies, commercial performance, renewals, and contract escalations.
Executives also described continued opportunity beyond 2027, including potential projects such as a Corpus Christi fractionation expansion (discussed as a 2028 timeframe) and Western Gateway (discussed as a 2029 timeframe), while emphasizing that plans are expected to fit within the company’s capital framework, including roughly “$1 billion plus” of midstream spending.
Management said it is not pursuing growth “for EBITDA’s sake,” but rather focusing on returns and strategic alignment. Mark described internal efforts to remove barriers to funding small, high-return projects that improve integration and unlock value across segments.
Chemicals: CP Chem in a difficult cycle
On chemicals, Mark said the industry is in the toughest downturn of his career, but argued that CP Chem is “thriving” relative to the cycle—generating cash rather than burning it—and is preparing to start up two new facilities expected to deliver world-scale, best-in-class cost structure and returns even in the current environment.
Mark said Phillips 66 has been clear that any asset can be transacted, but that a “premium asset would require a premium return.” He also said CP Chem is advantaged by access to low-cost ethane, and that long-term demand fundamentals remain intact despite uncertainty about the pace of capacity rationalization and whether all announced Chinese capacity ultimately comes online.
Cash flow framework, debt reduction, and asset sales
Kevin outlined a cash flow and capital allocation framework tied to balance sheet targets. He said Phillips 66 ended the third quarter with $21.8 billion of debt and has a goal of reaching $17 billion by the end of 2027, with reductions expected in “approximately equal chunks” across 2025 (fourth quarter), 2026, and 2027.
He said fourth-quarter cash generation is expected to be supported by working capital, and noted that the European retail asset sale closed on December 1, while the company also funded the WRB acquisition early in the fourth quarter, which he said “approximately offset.”
Looking to 2026 and 2027, Kevin said the company expects about $8 billion of operating cash flow. He described the “twos” framework as:
- About $2 billion per year for the dividend
- About $2 billion per year for share buybacks (as part of a stated 50% total return to shareholders)
- A capital budget described as a “low $2 billion” number
- The remainder used for debt reduction
Kevin said this framework excludes any additional asset dispositions. He added that Phillips 66 continues to review the portfolio and identify non-core, often non-operated assets that may be worth more to others, potentially creating incremental flexibility for faster debt reduction, shareholder returns, or investment. Mark added that the company is not advertising a list of assets but views potential sales as a way to free up trapped capital where there is limited growth opportunity.
Marketing outlook and WCS differentials
Mark said marketing remains a consistent earnings contributor and described it as roughly a plus/minus $2 billion business, noting it may now be closer to $1.8 billion after a sale referenced as $350 million. He said the wholesale business represents the majority of marketing, and that the company retains retail exposure through a joint venture with United in specific locations. He said Phillips 66 exited certain European positions due to lack of strategic rationale and “pull-through.”
On WCS differentials, management did not forecast specific levels but said it is “constructive” on the outlook. Mark said that with $50–$60 oil, the company would not expect extremely wide differentials, but said “higher teens” differentials are “not out of the realm of possibility,” which he said would be constructive for Phillips 66.
About Phillips 66 (NYSE:PSX)
Phillips 66 (NYSE: PSX) is an independent energy manufacturing and logistics company engaged primarily in refining, midstream transportation, marketing and chemicals. The company processes crude oil into transportation fuels, lubricants and other petroleum products, operates pipeline and storage infrastructure, and participates in petrochemical production through strategic investments. Phillips 66 serves commercial, industrial and retail customers and positions its operations across the value chain of the downstream energy sector.
The company’s principal activities include refining crude oil into gasoline, diesel, jet fuel and feedstocks for petrochemical production; operating midstream assets such as pipelines, terminals and fractionators that move and store crude oil and natural gas liquids; and marketing and distributing fuels and lubricants through wholesale and retail channels.
