Phillips 66 director Bob Pease issues letter to shareholders

Phillips 66 (PSX) released the following letter from independent director Bob Pease to the company’s shareholders: “I joined the Phillips 66 Board of Directors in February 2024. My appointment came as a result of an agreement between Elliott Management and Phillips 66. At the time, Elliott Management said I would bring to the Board “extensive experience in refining and energy more broadly.” Now Elliott wants me off the Board. Today I’m writing you, our shareholders, to lay out the truth about the Phillips 66 Board and why my own view of Elliott’s campaign for change at the Phillips 66 has evolved. I’ll start first with why I agreed to join the Phillips 66 Board in this relatively unusual manner. I’m a refinery guy first and foremost, holding numerous leadership roles, particularly in downstream businesses. When I joined the Board, Elliott’s primary demand was for Phillips 66 to improve its performance in refining. My experience was a perfect fit. Joining the Board then with Elliott’s endorsement felt like a win-win. I worried that joining a board with the endorsement of a well-known activist hedge fund may not be the best way to win the hearts and minds of other board members. I have been around long enough to know human nature, so I believed it would take some time to have an impact on this Board. I was wrong. My experience, insight and voice were immediately welcomed. In fact, I was encouraged early on to look closely at refining plans and challenge management. The level of debate, in-depth analysis and looking under every stone that I have seen so far on this Board is exactly what shareholders should want in the Board room. The Phillips 66 Board has delivered strong operational performance in refining while constantly exploring opportunities to create value across the full portfolio. Our integrated model has delivered synergies between the businesses and less volatile cash flows – it is a competitive advantage. We have set ambitious goals and are committed to maintaining best-in-class asset integrity while delivering a secure, competitive, and growing dividend; pursuing further accretive growth; and returning over 50% of our net operating cash flow to shareholders through share repurchases and dividends. You simply don’t achieve results like this without a high functioning, deeply engaged Board. In my view, it was Elliott’s inconsistent engagement that has proven most peculiar. There would be long silences, followed by rapid public action. What I saw from the Board was a clear commitment to getting to the right answer but a real struggle to understand and engage with an apparently highly distracted shareholder in Elliott. We have only been met with a declaration that there were “no next steps” and then continued public assaults, even while Elliott refused to allow us to meet their nominees. Then came their notification that Elliott would in fact be running four nominees for election at the 2025 Annual General Meeting. With my re-nomination to the Board confirmed, that meant I would be targeted for replacement by Elliott’s nominees, just a year after they publicly supported me. I do not know why Elliott now wants me off the Board. The Phillips 66 Board is committed to shareholder value creation. We are committed to challenging management to deliver results. We are committed to acting, when necessary, but we are not a group that makes sweeping, irreversible costly change in response to short-term market fluctuations and speculative valuations. We will always act in the best interest of our long-term shareholders for long-term value creation.”