Phillips 66 (PSX) Issues Letter to Shareholders

Phillips 66 (NYSE: PSX) (the “Company”) today issued the following letter to its shareholders. The Company values shareholder feedback and is fully committed to continuing open engagement with all shareholders. This has been consistently demonstrated and expressed over the course of nearly two dozen meetings with Elliott Investment Management (“Elliott”) since October 2023, including the most recent meeting on March 3, 2025.

The Company also confirmed Elliott has nominated seven directors for election to Phillips 66’s Board of Directors (the “Board”) at the Company’s 2025 Annual Meeting. As the Company disclosed on February 19, the Board will present its recommendation regarding the director nominations with its definitive proxy statement to be filed with the U.S. Securities and Exchange Commission and made available to all shareholders eligible to vote at the 2025 Annual Meeting.

Following the proper procedures and in accordance with the Company’s By-Laws, the Board intends to put forward another management proposal to declassify the Board at our 2025 Annual Meeting and notes that it has done so five times since its 2015 Annual Meeting.

Fellow Shareholders:

At Phillips 66, we are committed to maximizing value for our shareholders through operational excellence and disciplined capital allocation.

We have a strong track record since our formation in 2012. We have built out a large-scale, competitive, high return Midstream platform, enhanced our chemicals position through Chevron Phillips Chemical Company (CPChem) and have made sustainable improvement to refining operations. These actions have positioned Phillips 66 as the leading energy business it is today.

Moreover, these actions have delivered substantial value for our shareholders. This includes total shareholder returns of 474%1 and returning $43 billion to shareholders through dividends and share repurchases. Most importantly, we have done all this while sustaining industry-leading safety performance.

We Have Made Significant Progress on our Strategic Priorities

Phillips 66 has taken substantial action to deliver on our objectives that we laid out in 2022, and further enhanced in 2023. Our actions have led to significant progress and achievements, enhancing shareholder returns and operational efficiency. We are a business that will always act decisively when we can realize sustainable long-term growth to the benefit of our shareholders and all stakeholders.

• Delivering strong total shareholder returns of 65%2 since Mark Lashier became President and CEO of Phillips 66 on July 1, 2022, significantly outperforming the S&P 500 Energy Index (33%2) and our proxy peer group median (22%2)
• Returning significant capital to shareholders with $13.6 billion in share repurchases and dividends from July 2022 through year-end 2024, exceeding our shareholder distribution target
• Reducing refining costs by $1 per barrel since 2022 and committing to continued improvement
• Maximizing value from our wellhead-to-market strategy by capturing $500 million of run rate synergies from our DCP Midstream acquisition (above our initial target of $300 million) and increasing our Midstream segment’s adjusted EBITDA by $1.5 billion since 2022
• Maintaining our financial resilience with strong investment grade credit ratings (A3 / BBB+), engaging in a business optimization that has resulted in over $3 billion in non-core asset divestitures to date and capturing significant cost reductions since 2022 totaling $1.2 billion on a run-rate basis
• Earning industry recognition for our exemplary safety performance in Midstream, Refining and Chemicals in 2022 and 2023

We Continue to Strengthen Our Business and Our Board

Below is an update on a number of our key strategic objectives and the actions underway:

Optimizing Our Business
We have demonstrated a commitment to evolving the business over time. We continue to high-grade our assets and capitalize on our growth platform to generate strong returns and significant free cash flow. We have simplified our business with over $3 billion in divestitures in the past year and returned over $5 billion to shareholders through a combination of share repurchases and dividends. We anticipate that our integrated NGL value chain growth strategy will be significantly strengthened with the pending EPIC acquisition.

Maintaining a Culture of Continuous Improvement, Operational Excellence and Cost Discipline
Our culture of continuous improvement demands, and will continue to demand, that we consistently and rigorously evaluate opportunities to optimize our cost structure and operational efficiency to maximize value for shareholders. While we have successfully reduced refining costs per barrel since 2022, as noted above, we recognize that we have more work to do in operations and costs. We are prioritizing our most competitive refineries and continuing to identify and execute cost-savings opportunities. Recently, we announced that we would cease operations at our Los Angeles Refinery in the fourth quarter of 2025, which will allow us to further high-grade our business. We continue to evaluate additional opportunities for efficiency enhancements.

Returning Cash to Our Shareholders
As previously outlined, our 2025–2027 strategic targets include returning over 50% of net operating cash flow to shareholders while driving strong operational performance, implementing further cost reductions and continuing our focus on disciplined capital allocation.

Ensuring Strong Corporate Governance and Board Oversight
We recognize the importance of strong corporate governance and have taken proactive steps to ensure that our Board remains aligned with shareholder interests and is best positioned to oversee the Company’s strategy. Over the past four years, we have welcomed five new independent directors to the Board, including two in 2024. Bob Pease, a director we identified in partnership with Elliott Investment Management (“Elliott”), brings extensive experience in refining and the energy industry broadly. Grace Puma, our most recent addition to the Board, brings strong supply chain experience. Additionally, as we have many times before in 2015, 2016, 2018, 2021 and 2023, we will be seeking shareholder approval of a management proposal to declassify the Board at our 2025 Annual Meeting. Our Board is committed to an evolution that will be responsive to shareholders and beneficial to the business for the long-term.

We are Listening to Our Shareholders

We regularly engage with our shareholders through our cross-functional shareholder engagement program to obtain feedback and respond to investor input. In 2024, we engaged with shareholders representing over 60% of our outstanding shares and we will continue to build on that momentum in 2025. It was in this spirit that we first engaged with Elliott in October 2023, to hear their ideas and work together collaboratively. Constructive discussions led to the realization of a common focus on our ambitious goals to maximize shareholder value. We continued constructive dialogue with Elliott throughout 2024, including adding Bob Pease to our Board in February 2024 with Elliott’s support.

Despite several attempts to reach agreement on adding another director to Phillips 66’s Board, Elliott has chosen to forego constructive dialogue with us and launch their activist playbook. This included a series of attacks and proposals regarding the monetization of certain business units and, for the first time in our discussions, floating the idea of a separation.

Nevertheless, we remain fully committed to constructive engagement and finding a path forward with Elliott that will benefit all shareholders.

On Monday, March 3, our team travelled to New York and met with Elliott to express our continued commitment to finding a constructive path forward and offering to interview their director nominees. The meeting ended with Elliott representatives stating there were no immediate next steps. The next day, Elliott leaked their slate of director nominees to the media, issued a press release and filed a preliminary proxy statement. Our leadership team and Board stand ready to engage constructively when Elliott is ready despite these actions, which showed no genuine interest in engagement with Phillips 66.

The Board continuously and aggressively evaluates the portfolio and other alternatives with a view to maximizing long-term shareholder value – and is willing to take decisive action to achieve this goal. As always, we seriously and comprehensively review shareholder feedback with a focus on creating long-term value.

The Bottom Line

Phillips 66 is dedicated to transparency, accountability, and sustainable value creation for shareholders.

We have made substantial progress and realize there is more work to be done. We will continue to pursue opportunities that strengthen our position to the benefit of our shareholders. We look forward to your input and to provide further updates on our progress.

Sincerely,

Mark E. Lashier
Chairman and Chief Executive Officer

Glenn F. Tilton
Lead Independent Director

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.

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