Bob Pease’s Letter to Phillips 66 Shareholders
Dear Shareholders of Phillips 66,
I joined the Phillips 66 Board of Directors in February 2024 as part of an agreement between Elliott Management and Phillips 66. At that time, Elliott emphasized that I would bring extensive experience in refining and the broader energy sector to the Board. However, today, Elliott is seeking my removal from the Board.
I am writing to you directly to explain my perspective on the Phillips 66 Board and to clarify why my views on Elliott’s campaign for change have evolved over time.
Why I Joined the Board
I’ll begin by explaining why I agreed to join the Phillips 66 Board under these unusual circumstances. As a veteran in the refining industry, I have held various leadership positions, particularly in downstream operations. At the time of my appointment, Elliott’s primary goal was to improve Phillips 66’s performance in refining, an area where my experience aligned perfectly. Joining the Board with Elliott’s support seemed like a mutually beneficial opportunity.
However, I was concerned about the optics of joining a Board at the behest of an activist hedge fund. I knew that such a situation could lead to friction with other Board members. With this in mind, I anticipated that it would take time for me to establish my influence and contribute meaningfully to the Board’s decision-making.
But I was wrong. From the moment I joined, my experience and insights were welcomed. In fact, I was encouraged to dive deep into the refining plans and challenge management where necessary. The level of rigorous debate, thorough analysis, and scrutiny I witnessed within the Board was precisely the kind of engagement shareholders should expect.
Strong Board Performance
The Phillips 66 Board has demonstrated exceptional operational performance in refining while continuously seeking opportunities to enhance value across all business segments. Our integrated business model has generated synergies that drive efficiency and produce more stable cash flows—this is a competitive advantage for the company.
The Board has set ambitious goals, and we are committed to maintaining top-tier asset integrity while delivering a competitive and growing dividend. We are also dedicated to pursuing accretive growth and returning more than 50% of our net operating cash flow to shareholders through share repurchases and dividends.
Achieving such results requires a highly effective, engaged, and collaborative Board. In my view, this is precisely what we have in place at Phillips 66.
Elliott’s Inconsistent Engagement
What has been most perplexing in my time on the Board is Elliott’s inconsistent approach. There have been long periods of silence, followed by sudden and public actions. From the Board’s perspective, we are committed to getting to the right decisions for shareholders, but engaging with a distracted and often reactive shareholder like Elliott has proven difficult.
At times, Elliott’s response has been simply a declaration that there were “no next steps,” yet their public criticisms continued. Additionally, despite Phillips 66’s efforts to meet with their nominees, Elliott has been unwilling to engage in constructive dialogue. This pattern of behavior culminated in Elliott’s decision to nominate four new Board candidates for the 2025 Annual General Meeting, despite their prior public endorsement of my appointment just a year ago. Now, Elliott wants me removed from the Board, but I have no clarity on why they have changed their position.
The Board’s Commitment to Shareholder Value
Let me be clear: The Phillips 66 Board is fully committed to creating long-term shareholder value. We are dedicated to challenging management and holding them accountable for delivering results. However, we are not a group that will make hasty decisions based on short-term market fluctuations or speculative valuations. Our focus is on ensuring that the company’s actions align with sustainable, long-term growth.
We are steadfast in our belief that the best way to create value for Phillips 66 shareholders is through careful and thoughtful decision-making. The Board’s commitment to long-term value creation will always guide our actions, and we will continue to prioritize the interests of our shareholders.
Conclusion
In conclusion, while my time on the Phillips 66 Board has been marked by progress and meaningful contributions, Elliott’s unpredictable approach has raised concerns. As a Board, we are focused on achieving the best outcomes for the company and its long-term shareholders, and I remain committed to this mission.
Thank you for your continued support, and for your investment in Phillips 66.
Sincerely,
Bob Pease
Independent Director
About Phillips 66
Phillips 66 (NYSE: PSX) is a leading integrated downstream energy company. It manufactures, transports, and markets products that power the global economy. The company’s diverse portfolio includes Midstream, Chemicals, Refining, Marketing and Specialties, and Renewable Fuels businesses. Headquartered in Houston, Phillips 66 employs people worldwide who are committed to providing energy safely and reliably while advancing a lower-carbon future.
