Phillips 66 (PSX) is one of the largest oil refiners in the United States. In addition to petroleum products, the company manufactures petrochemical products, lubricants, and fuel from renewable sources. PSX's business also includes a network of gas stations and a Midstream segment. The company was founded in 1985 and is headquartered in Houston, Texas. Around 80% of the company's revenue is generated in the United States.
Investment Attractiveness Factors:
• Growth in fuel demand and prices during the summer period: The third quarter is seasonally strong for refiners due to the increase in demand for petroleum products in the summer and early autumn. In Q1 2025, PSX’s refining margin remained low at $6.8 per barrel, down 38% YoY, but up 12% QoQ. Refining margins are expected to rise further, as increased demand for fuel in the summer will be accompanied by increased production from OPEC+ countries, which will put pressure on oil prices, the primary cost for refineries. It’s worth noting that OPEC+ countries decided to increase production quotas by 411,000 barrels in May and another 411,000 barrels in June. Additionally, a decision to further increase quotas in July may be made at the meeting on June 1st.
The average price of WTI crude oil fell 7.5% MoM in April, to $62.8 per barrel, and as of May 9, the price drop in May was 6.2%, to $59 per barrel. Therefore, the recovery of refining margins can be expected in Q2.
• High dividend yield and stock buybacks: In Q1 2025, PSX increased its quarterly dividend by 4.3% to $1.2 per share. The current yield is a relatively high 4.3%. In addition to paying generous dividends, the company returns funds to shareholders through stock buybacks. In Q1, the company spent $247 million on buybacks. Thanks to stock repurchases, Phillips 66 reduced the number of shares outstanding by 5% over the year.
Target Price – $123.