Elliott Investment Management has nominated seven directors to the Phillips 66 board, signaling a potential push for significant changes, including a possible spin-off or sale of its midstream business. This marks Elliott’s second engagement with the oil refiner in recent years, highlighting the activist investor’s continued focus on unlocking value within the energy sector.
Last month, Elliott unveiled a substantial $2.5 billion stake in Phillips 66, returning after a previous $1 billion investment in late 2023. In a public letter, Elliott expressed concerns about Phillips 66’s lagging stock price, refinery operations, and board composition. The company’s share price has experienced a 13% decline over the past year.
Elliott has privately nominated a slate of experienced executives with backgrounds in investment, finance, law, and energy. The seven nominees provide Elliott with strategic flexibility in anticipation of upcoming board changes. Following the company’s annual meeting in May, the current 14-member board will be reduced to 12.
While both Phillips 66 and Elliott have declined to comment publicly on the nominations, sources familiar with the matter indicate that the move underscores Elliott’s commitment to driving strategic improvements at Phillips 66.
Elliott, with $70 billion in assets under management, boasts a successful track record in the energy sector. Led by partner John Pike, the firm has spearheaded impactful investments in companies such as Marathon Petroleum, NRG Energy, Suncor Energy, and Hess. Pike is also leading the current Phillips 66 campaign and a recent $2.5 billion investment in BP.
Among the nominated directors are Pike himself, Brian Coffman (former CEO of Motiva Enterprises), Sigmund Cornelius (former CFO of ConocoPhillips), and Alan Hirshberg (former senior executive at ConocoPhillips and Exxon Mobil). The final number of candidates for shareholder election will be disclosed in Elliott’s definitive proxy materials filed with securities regulators.
Beyond operational improvements, Elliott is also targeting Phillips 66’s corporate governance, particularly its classified board structure. Despite several attempts in recent years, Phillips 66 has failed to amend its charter to allow for annual elections of all directors. This requires an 80% shareholder vote, a threshold that has not yet been met. Classified boards, where only a portion of directors are elected annually, are generally viewed unfavorably by investors and proxy advisory firms like Institutional Shareholder Services.
In conclusion, Elliott Investment Management’s nomination of seven directors to the Phillips 66 board signals a renewed push for strategic change at the oil refining giant. The activist investor’s focus on operational improvements, board composition, and corporate governance highlights its commitment to enhancing shareholder value in the energy sector. The outcome of this campaign will likely have significant implications for Phillips 66’s future direction and performance.
