An Independent Evaluation of Phillips 66, its Business Strategy, and Execution

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Conoco and Phillips 66 announced on November 18, 2001 that their boards of directors had unanimously approved a definitive agreement for a "merger of equals". The merged company, ConocoPhillips, became the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production. On November 11, 2011 ConocoPhillips announced that Phillips 66 would be the name of a new independent oil and gasoline refining and marketing firm, created as ConocoPhillips split into two companies. ConocoPhillips kept the current name of the company and concentrated on oil exploration and production side while Phillips 66 included refining, marketing, midstream, and chemical portions of the company. Photo: Hugh Pickens all rights reserved.

by Hugh Pickens, Ponca City Oklahoma

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The purpose of this report is to provide a comprehensive overview of Phillips 66 that documents and explains the company's business strategy and execution of that strategy.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal <html>
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Corporate

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Strategic and Financial

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Business Segments

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Stock Market

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Reference

Refining Business Segment

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Increasing Profitability in Refining Business Segment

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Detailed Look at Ponca City Refinery

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Other Phillips Refineries

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Other Locations


Contents

Master Index of Articles about Phillips 66

File:Refinery crane.jpg
The 587 foot tall Mammoet PTC 140 crane, seen here from North First Street, towers over the Refinery Complex in Ponca City. The supercrane was used to move two new 232 ton coker reactor units within the refinery on September 29, 2013. Phillips was willing to invest $70 million in the two new coker reactor units because the Ponca City Refinery is one of the best run, safest, and most profitable of Phillips' fifteen worldwide refineries and Garland wants the refinery in Ponca City to continue to run smoothly and profitably. This photograph of the supercrane in Ponca City was taken from almost two miles away from the crane. Photo: Hugh Pickens All Rights Reserved.
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Hugh Pickens, an analyst who closely follows Phillips 66, speaks with Phillips CEO Greg Garland (right) about the disposition of the North Tower, South Tower, and Research West at Phillips' Ponca City Refinery after Garland's speech to the Bartlesville Chamber of Commerce on August 13, 2014.

by Hugh Pickens, Ponca City Oklahoma

<html>
</html>

The purpose of this report is to provide a comprehensive overview of Phillips 66 that documents and explains the company's business strategy and execution of that strategy.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal <html>
</html>

Corporate

<html>
</html>

Strategic and Financial

<html>
</html>

Business Segments

<html>
</html>

Stock Market

<html>
</html>

Reference

Refining Business Segment

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</html>

Increasing Profitability in Refining Business Segment

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</html>

Detailed Look at Ponca City Refinery

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</html>

Other Phillips Refineries

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Other Locations


Introduction

File:Marlandrefinery2.jpg
A photo of part of Marland Refinery in Ponca City, Oklahoma taken in 1919. An article from Petroleum Age in 1922 said that Marland Refinery in Ponca City had a production of 10,000-barrel per day and Marland Refinery included nearly two million barrels of steel storage for crude and finished products. An article from Petroleum Age in 1928 said "Marland refinery at Ponca City is one of the largest complete plants in the Mid-Continent field with a crude capacity of 35,000 barrels per day of which approximately half can be run down to wax. The plant is equipped with four large Dubbs units, two Cross units, and 18 Fleming stills." Derivative Photo: Hugh Pickens

by Hugh Pickens, Ponca City Oklahoma On May 1, 2012 ConocoPhillips split into two separate publicly-traded companies: an upstream company that will retain the name ConocoPhillips and concentrate on exploration and production, and a downstream company, to be named Phillips 66, that will include refining and marketing (R&M), chemicals, and midstream business segments. The refinery in Ponca City, with over 700 employees the single largest employer in Ponca City, is part of the R&M segment and will go into Phillips 66. Phillips 66 will be a publicly traded company (PSX) and a number of independent financial analysts will be following the company.

The purpose of this web site is to follow Phillips 66 to document and understand the company's plans and policies particularly with respect to its Refinery and Marketing Business Segment with a special emphasis on evaluating the impact of Phillips 66 business decisions on the refinery in Ponca City, Oklahoma. Some of the conclusions I have reached after analysis of publicly available information on Phillips 66 include the following:

  • The Refining and Marketing Business Segment will be more important to Phillips 66 than it was to ConocoPhillips.
  • The refinery in Ponca City will be more important to Phillips 66 than it was to ConocoPhillips.
  • The Refining and Marketing Business Segment is the least profitable Business Segment and will be de-emphasized with unprofitable refineries closed or sold off.
  • There will be a reduction in the capital allocated to the Refining and Marketing Segment.
  • Although Phillips 66 sold the Trainer refinery on May 1, 2012 and has tried to sell the Alliance refinery, the refinery in Ponca City is unlikely to be closed or sold for at least three to five years as margins have been strong in the Mid-Continent Segment and are expected to remain high for the medium term.
  • Profits are presently very high for the Mid-Continent refineries of which the refinery at Ponca City forms a part. The Ponca City Refinery earned profits in excess of $500 million in 2011 and based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line. But these profits are due to the glut of crude oil pouring into the region from newly tapped shale oil like North Dakota’s Bakken and the high Brent to West Texas Intermediate differential and these high profits are not expected to persist for more than three to five years.
  • Phillips 66 plans and strategy to increase profitability by moving away from the low COBE and cyclical Refining and Marketing Business Segment and making massive investments in the high COBE Chemical Business Segment and Midstream Business Segment appear sound. The question for Phillips 66 now becomes now becomes one of executing the plan.[1][2]

Creation of Phillips 66

File:Phillips history.jpg
On May 1, 2012 Phillips 66 issued a press release announcing that Phillips 66 had emerged as an independent downstream energy company with industry-leading businesses in refining and marketing, midstream, and chemicals. Created through a spin-off of these assets from ConocoPhillips, Phillips 66 begins regular trading on the New York Stock Exchange this morning under the ticker symbol PSX. "Our strategic approach combines one of the world's most competitive refining and marketing operations with rapidly growing midstream and chemicals businesses," said CEO Greg Garland. "Phillips 66 will be clearly differentiated from pure-play refining companies with specific plans for enhancing returns and growing shareholder distributions. We have an exciting future ahead of us."[3] Graphic Created by: Granger Meador Used with permission
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"Phillips 66 has strong brand recognition and value and it provides a link between our rich history and our exciting future," says Greg Garland, designated chairman and chief executive officer of Phillips 66. The new company's name capitalizes on public awareness and gives tribute to history, adds Garland. Photo: ConocoPhillips

Rationale for the ConocoPhillips Split

There are two ways to look at the decision to split off the downstream segment from ConocoPhillips with the creation of Phillips 66. According to Christopher Helman writing in Forbes magazine the ConocoPhillips’ split can be seen as the upstream guys seizing an opportunity to jettison their lower-returning downstream assets all at once rather than piecemeal, as they’ve been doing. On the other hand, the split "liberates downstream to pursue its own growth opportunities," according to incoming Philips 66 CEO Greg Garland. "As an integrated oil company we were pushing a lot of our capital to the Exploration and Production (E&P) space, which was the right thing to do as an integrated oil company."[4]

"If Phillips 66 has been left with the wrong end of the deal, then Greg Garland is putting in a spirited effort to persuade investors otherwise. He says the creation of Phillips 66 represents an opportunity to ensure that his company is in a strong position to make the best of the uncertain conditions in the downstream sector," writes Shaun Polczer in "The Petroleum Economist on May 25, 2012. "The company hopes that ...Phillips 66 will be better able to capitalise on its options to maintain a steady income stream from mid and downstream operations. "[5]

Simone Sebastian and Emily Pickrell writes in the Houston Chronicle that Mulva abandoned the super-major model that its retiring leader helped engineer a decade ago leaving behind "a more modest oil exploration and production company, streamlined by the aggressive asset sell-off that has defined his final years at the helm." Mulva is the last of a group of oil executives who orchestrated the model of building companies that delivered fuel from the ground to gas tanks through their own international networks of exploration, refining and distribution assets. "He appreciated the changing paradigm in the industry a decade ago when all the oil companies were combining," said Doug Terreson, head of energy research for ISI. "The oil industry is shifting toward a new competitive paradigm now and separation makes a great deal of logic."[6]

Rod Walker writes in the Tulsa World on April 28, 2012 that "the separation of ConocoPhillips and Phillips 66 is the final achievement of CEO Jim Mulva's eight-year reign atop the integrated company" although questions abound regarding the rationale behind the split one decade after the merger that created ConocoPhillips. "Why was it better to get bigger 10 years ago and not now?" asks Bruce DeShazo, assistant vice president and investment adviser at American Heritage Bank of Sapulpa. "I would think the reason they'd do something like this is to divest those losing assets. They're just having a hard time making money in refining." Outgoing ConocoPhillips CEO Jim Mulva wants to reduce the company's exposure to refining by spinning off Phillips 66. "We said sell non-core assets, position for growth. Essentially, 90 percent of our capital spending is directed towards exploration and production, and reduce our exposure to refining."[7]

According to Mulva in his presentation to financial analysts on July 14, 2011, the question is why would you spin out the downstream versus to stay integrated. "We believe more value is created in the formation of two very clear, standalone companies versus accomplishing our objectives of rationalizing our downstream within the integrated oil structure. There is generally greater external transparency of the business performance when the marketplace looks at the pure plays versus being accomplished in the integrateds. And we also believe there is more focus and attention and greater probability of success by the management team by having pure-play separate upstream and downstream companies. Our investors, we believe, have the better ability to adjust to overweight or underweight their views of investing in these segments of integration, upstream and downstream. And as I just said, there is greater management focus to customize strategies, both upstream and downstream. And we also believe with this, it really allows us to attract, retain and compensate the talent we need to create the highest probability of success upstream and downstream."[8][9]

"I think that world and that marketplace has pretty well changed. So if we look out the medium- and the long-term, we face this challenge, whether we are viewed as independent or viewed as an integrated company, the issue of competitive growth is the same, whether it is a company bigger than ourselves or it is an independent smaller than ourselves. So it doesn't change with the accomplishment of doing this transaction and spinning out the downstream. We are faced with the same challenge. Some also could argue that the larger you are, the more difficult it is, given the access issues, and in many places in the world, an emphasis of trying to move IOCs or independents more towards service contracts than it is taking equity interest. So all we are saying is whether we are classified as independent or classified as an integrated, or however we are classified and what we are structured, we still have the issue of how do we take our current reserve position and our production, how do we grow it and do it with competitive finding and development cost. So we have got the same challenge. Now, if we do that well, whether we are integrated or we are viewed as independent pure plays, if we do that well, it will be recognized in the marketplace. And that is really where we are coming from. We are not doing something cleverly just to get a higher PE multiple, but we do think the pure plays are better understood in the marketplace, and it is going to put a lot more focus on our management and our leadership to accomplish the objective, which is to convert the resources that we have. We like to always get more resource, but convert those resources to reserves, and do that really well with competitive finding and development cost, we will grow our production and we will do it in a value-creating way."[10][11]

"The other thing is we look at our Company in the marketplace, we have a number of investors that would say you are making the investment decision for us. You are putting us in both the upstream and downstream business, where we would like to make that investment decision ourselves. So by being separated, you can take your choice. You want to invest in the downstream, you want to invest in the upstream. So if you look at the integrated company, you can say, well, I think the downstream part of the company is holding back on the value creation and recognition of your E&P business. And then on the other hand, those people who are interested in the downstream would say, you are not getting recognition for the quality or the contribution of the downstream. And then there is another issue that we have seen, unfortunately. But from an enterprise risk management point of view, having two separate companies is -- we think is something that makes a lot of sense. And so it is for these different reasons and putting more focus both upstream and downstream at attention, and clear peer plays, not so much that the market can look and make the decision where they want to invest, but the leadership of the company knows clearly what business they are in and they dedicate their attention to doing it in a value-creating way."[12][13]

See also

Implementation of the ConocoPhillips Split

On May 1, 2012 Phillips 66 issued a press release announcing that Phillips 66 had emerged as an independent downstream energy company with industry-leading businesses in refining and marketing, midstream, and chemicals. Created through a spin-off of these assets from ConocoPhillips, Phillips 66 begins regular trading on the New York Stock Exchange this morning under the ticker symbol PSX. "Our strategic approach combines one of the world's most competitive refining and marketing operations with rapidly growing midstream and chemicals businesses," said CEO Greg Garland. "Phillips 66 will be clearly differentiated from pure-play refining companies with specific plans for enhancing returns and growing shareholder distributions. We have an exciting future ahead of us."[16]

On November 11, 2011 the Tulsa World reported that Phillips 66 would be the name for the new independent oil and gasoline refining and marketing firm, created as ConocoPhillips splits into two companies. ConocoPhillips will keep the current name of the company and will concentrate on the exploration and production side while Phillips 66 will include refining and marketing portions of the company. Each company will be run independently and will have different tocker names in the stock market. The refinery in Ponca City employs about 700 people while Bartlesville will be the global center for the Phillips 66 technology organization as well as the transaction services organizations for both companies.[17] ConocoPhillips CEO Jim Mulva will resign once the split is complete and Greg Garland will be the new CEO of Phillips 66.[18] The decision to name the new entity for Phillips 66 is because of name recognition and branding. "Phillips 66 has strong brand recognition and value, and it provides a link between our rich history and our exciting future," Garland said Thursday in a news release. "Our name reflects an independent spirit and drive."[19]

On April 4, 2012 ConocoPhillips' board of directors gave its final approval for the spin-off of its downstream businesses into Phillips 66.[20] ConocoPhillips executive vice president and CFO Jeffrey Sheets announced on April 23, 2012 that ConocoPhillips is putting its final touches on its spinoff of Phillips 66 this week, and the transaction will take place as scheduled on May 1, 2012.[21]

Garland Says the Spin-off of Phillips 66 Was Executed Flawlessly

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that spin-off of Phillips 66 was executed flawlessly. "I think it's a real tribute to the dedication and the capability of the Phillips 66 employees. They did a great job of getting our feet underneath this. The Company has stood up. We're ready to go. The systems are operating well. We've been running well and capturing good opportunities in the market.[22]

Decision to Name the Downstream Company Phillips 66

ConocoPhillips announced on November 11, 2011 that the new independent downstream company created through its previously announced strategic repositioning will be named Phillips 66. "With a history that goes all the way back to petroleum industry "birthplace," in Bartlesville, Oklahoma in 1917, the company will be a leading independent company with refining, marketing, midstream and chemicals businesses operating across the globe. "Phillips 66 has strong brand recognition and value and it provides a link between our rich history and our exciting future," said Greg Garland, designated chairman and chief executive officer of Phillips 66. "Our name reflects an independent spirit and drive--two attributes of our future company."[23] According to the ConocoPhillips web site "the name Phillips 66 was chosen [for the new downstream company] because it has strong brand recognition and value, which allows us to link our rich history and our exciting future. The name represents the independent spirit and drive that will be part of the culture of Phillips 66."[24] The new company's name capitalizes on the public awareness and gives tribute to history, Garland added.[25]

The company launched a new Phillips 66 website: www.phillips66.com, that provides some history of the brand:

Frank and L.E. Phillips were two of the original experts in gas. They started prospecting for oil in 1903 and founded Phillips Petroleum Company in 1917. Since then, the company has grown considerably and has expanded its product offerings through its commitment to innovation and meeting customer needs. That’s fancy talk for "we keep making it better." Phillips 66® also has a history with US Highway 66. In 1927, on the "Mother Road" during a test drive of a newly developed high-octane gasoline, the vehicle reached a cruising speed of 66 mph. The new fuel was named Phillips 66. Even the logo was inspired by the road signs that dot the length of the historic highway. And the rest is history. And gas. Very High quality gas.[26]

The Houston Chronicle reported on November 10, 2011 that according to ConocoPhillips spokesman John Roper, while Phillips 66 products will retain the traditional logo, executives haven't decided whether to make it the corporate logo as well.[27]

The Bartlesville Examiner-Enterprise editorialized on April 29, 2012 that "the downstream energy company — named Phillips 66 in a tip of the cap to its product lineage begun right here in Bartlesville — will be a leading independent refining, marketing, midstream and chemicals business."[28]

Strategic Vision for Phillips 66

File:Phillipsbusinesssegments.JPG
There are three leading operating segments in the new company: Chemicals, Midstream, and Refining and Marketing. The refinery in Ponca City falls in the Refining and Marketing Business Segment (R&M) which in 2011 had a much lower ROCE (Return on Capital Employed) than the other two Phillips 66 business segments. ROCE is a ratio used in finance, valuation, and accounting that compares earnings with capital invested in the company is used to prove the value the business gains from its assets and liabilities. Derivative Photo: Hugh Pickens
File:Rocecomparison02.JPG
Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that he expects a 15% ROCE in the R&M Business Segment going forward. "My view is that, refining historically has been kind of a 10% to 12% business," said Garland. "We think we have plans in place to advantage crude capture, yields, cost reduction, that we can move it 400 basis points. So it’s a 15% business going forward for us versus a 30% return business in Chemicals. And probably Midstream business 15% to 17% returns is kind of what we’re looking in fact. So, to the extent that we have 30% and 40% return projects in refining, we’re going to do those. I think, I mean we do get challenged by people all the time or we under investing in refining. At this point, we don’t think so. I don’t think there’s any opportunities out there, we feel that we’ve missed in terms of an investment opportunity in the refining space. Our focus is going to be very disciplined. We’re going to restrict capital in this space. We’re going to improve returns in this space. And so we don’t see a change required in our strategy at this point in time."[29] Derivative Photo: Hugh Pickens
File:Shiftingcapital.jpg
In 2011 about 84% of Phillips 66 capital was allocated to Refinery and Marketing with 11% allocated to Chemicals and 5% to Midstream. Phillips 66 plans a major change in this allocation. "Long-term we have a vision that about 50% of our capital employed will be directed towards the R&M segment. And the other 50% will be directed towards Midstream and Chemicals." Derivative Photo: Hugh Pickens

On April 9, 2012, Greg Garland, the designated CEO of Phillips 66, presented an overview of the new company and his plans for Phillips 66. There are three leading operating segments in the new company: Chemicals, Midstream, and Refining and Marketing.[30][31][32]

The basic Phillips 66 strategy to increase profitability is to focus on the business segments that have the highest return on capital invested which are the Chemical Business Segment and the Midstream Business Segment. This means that the Refining and Marketing Business Segment which has the lowest profitability will be de-emphasized. Capital allocations for the business segments with the highest profitability will be increased. Capital allocation for the R&M business segment will be reduced. Unprofitable refineries in the R&M Business Segment will be sold or closed. Ponca City falls into the Refining and Marketing business segment of Phillips 66.

See also:

Benefits of Being an Independent Company

Garland talked about the benefits of Phillips 66 being an independent company. "As I think about the spin and really the strategy and the rationale behind the spin, it creates opportunity for Phillips 66 to create value that we just couldn't pursue as part of the integrated ConocoPhillips. Our existing R&M business, our Chemicals and Midstream business, all provide good, solid cash flow and we can use this cash flow to fund strategic growth. We can use it to improve returns, and also for distributions to shareholders. I think another benefit of the spin is you will see greater granularity regarding asset performance and the financial results in all three segments."[33][34][35]

Simon Moore wrote at Seeking Alpha on May 10, 2012 that ConocoPhillips was a slower, more lumbering entity but with Phillips 66 newly reduced size, its growth should accelerate.[36]

The Houston Business Journal reported on August 10, 2012 in a profile of Chevron Phillips CEO Pete Cella that with the ConocoPhillips split of its upstream and downstream business in May, Chevron Phillips makes up a more prominent part of the Phillips 66 business, which is good because the company gets more attention, said Cella.[37]

Laurie Winslow reported in the Tulsa World on October 3, 2012 that with Phillips 66 up 40.3 percent in the five months since its divestiture on May 1, 2012, the market has applauded the move by ConocoPhillips to split its exploration and production company from its refining business, creating Phillips 66. "In past years, refiners have been the dogs of the energy sector, and in 2012 they find themselves the darling of the energy sector. Phillips 66 really has spread its wings since the spinoff from ConocoPhillips, and it's gotten quite a bit of international attention," says Jake Dollarhide, CEO of Longbow Asset Management Co. "A lot of people felt that ConocoPhillips with all of the businesses together wasn't getting the market valuation it deserved."[38]

Differentiated Portfolio Creates Value Through Lower Risk, Lower Cost of Capital, and Ability to See Across Entire Value Chain

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that the three pieces of Phillips 66 business, the Refining and Marketing; the Midstream business, and the Chemicals business are more valuable together and that value is created through lower risk, lower cost of capital, the ability to see across the entire value chain. "We think we have a clear strategy in terms of capturing growth opportunities, margin enhancement opportunities, and driving return improvement in our business. I would also say that we are very purposeful and thoughtful. We're very purposeful and thoughtful about the assets that we've put in to Phillips 66 as we started the Company. We think that the three pieces of our business, the Refining and Marketing, Specialties, Transportation; the Midstream business, and the Chemicals business are more valuable together. We think value is created through lower risk, lower cost of capital, the ability to see across the entire value chain. We think it makes us better allocators of capital ultimately. We think you'll see the benefits of our management of these three businesses as we go forward."[39]

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that a differentiated portfolio is a competitive advantage for Phillips. "I would just say over the last 3.5 years, about 40% of our adjusted earnings came out of R&M or specifically refining. Then you can see 60% came out of marketing specialties and other businesses, our Chemicals business and Midstream business. The point here, we have a differentiated portfolio. We like this portfolio. We think it's a competitive advantage for us."[40]

Enhance the Return on Capital Employed (ROCE)

ROCE (Return on Capital Employed) is a ratio used in finance, valuation, and accounting that compares earnings with capital invested in the company is used to prove the value the business gains from its assets and liabilities.[41] The three operating segments of Phillips 66 have very different ROCE's. In 2011 the ROCE of the Refining and Marketing segment was 12%, the ROCE of the Midstream segment was 30%, and the ROCE of the Chemical segment was 28%. Because the ROCE of the Chemical segments and the Midstream segments is so much higher than the ROCE in the R&M segment, Garland plans to plans to aggressively grow the Chemicals and Midstream segments of Phillips 66 and de-emphasize the Refining and Marketing segments of the company.

"Here's how we plan to enhance returns on capital," says Garland in the April9, 2012 financial analysts meeting. "I think you will see continued portfolio optimization, margin improvement from us. We will drive our capital employed to higher returning businesses. You can see on the chart on the right in 2012 we plan to high grade, to move more investment to Chemicals and Midstream. And by the way, these are our equity share of the investments in Chemicals and Midstream. While we're pursuing aggressive growth at both the DCP Midstream and the Chemicals Midstream, our view is that they're going to be self funding and at the same time they will dividend cash back to Phillips 66."

Allocation of Capital to More Profitable Business Segments

Garland says that long-term Phillips 66 has "a vision that about 50% of our capital employed will be directed towards the R&M segment. And the other 50% will be directed towards Midstream and Chemicals.We'll preferentially invest in the higher return businesses and we will be very selective in how we invest in the lower return businesses."

Garland told financial analysts at an investors conference on June 5, 2012 that Phillips 66 would keep investments in its refining assets to a minimum, instead focusing on expanding its chemical-and-logistics business and that Phillips 66 will spend $2 billion on capital projects in its midstream-logistics segment, including natural-gas-liquids processing and exports infrastructure.[42]

Molly Ryan reported in the Houston Business Journal on February 11, 2014 that Phillips' decision to move forward with more than $3 billion worth of projects reflects the company’s strategic decision to chase higher-margin markets. "Midstream spending is expected to pick up in 2014 since energy companies are increasingly realizing the profits that can be found in moving the massive amount of oil and gas coming from U.S. shale plays," writes Ryan. "Phillips 66 specifically hopes to cash in on this through its new liquefied petroleum gas terminal, which will store and transport fluids, and its new fractionator facility, which will supply and transport natural gas liquid products to petrochemical companies."[43]

Plan to Aggressively Grow Chemicals and Midstream segments of Phillips 66

Garland plans to aggressively grow the Chemicals and Midstream segments of Phillips 66 and de-emphasize the Refining and Marketing segments of the company. "Over the past three years we've reduced refining capacity about 450,000 barrels a day. In our Chemicals segment we've been growing primarily through investments in the Middle East. In our Midstream segment, growth has come from expansions around the shale liquids and gas producing areas."[44][45][46] "The refining business is currently a difficult business and one where the outlook doesn't change a lot going forward," said Mark Gilman, an independent oil and gas analyst. "Phillips 66's asset quality in the refining space is, at best, kind of average."[47] The best performing divisions for Phillips 66 are expected to be its midstream joint venture and a petrochemicals company.[48]

Simon Moore wrote on Seeking Alpha on May 10, 2012 that now that Phillips 66 is no longer part of ConocoPhillips, management is planning a clear cut move to greater emphasis on Midstream and Chemicals Business Segments. "New management's long term plan is to move to 50% Refining and Marketing, 25% Chemicals, and 25% Midstream. These latter two businesses have a much higher ROCE (return on capital employed) for PSX."[49]

Governance of Phillips 66

File:Jimmulva.jpg
Jim Mulva is the chairman and chief executive officer of ConocoPhillips and conceived and executed the idea of splitting up ConocoPhillips. The Houston Chronicle reported on April 23, 2012 that Jim Mulva retired on May 1, 2012 when ConocoPhillips' refining, pipelines and chemicals units spun off to form an independent, publicly traded company called Phillips 66.[50] "The separation of ConocoPhillips and Phillips 66 is the final achievement of CEO Jim Mulva’s eight-year reign atop the integrated company," writes Rod Walton. "Mulva helped oversee the 2002 merger as head of Phillips Petroleum and now walks offstage into retirement as the one company becomes two."[51] Photo: by EnergyTomorrow Flickr Creative Commons. Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

Jim Mulva, Chairman and CEO of ConocoPhillips

Although Jim Mulva will not be a corporate officer of Phillips 66, Mulva was the chairman and chief executive officer of ConocoPhillips who conceived and executed the idea of splitting up ConocoPhillips which resulted in the creation of Phillips 66. Mulva retired on May 1, 2012 when the split was accomplished.

Mulva served as president and chief executive officer of ConocoPhillips from 2002 to 2004. Prior to that, he served as chairman and chief executive officer of Phillips Petroleum Company from 1999 to 2002. Mulva served as Phillips’ president and chief operating officer beginning in May 1994 and executive vice president since January 1994. Mulva had been senior vice president in 1993 and chief financial officer since 1990, at which time he joined the company's management committee. Mulva began his career with Phillips in 1973.

Mulva graduated from the University of Texas in 1968 with a bachelor's degree and a master's degree in business administration finance in 1969.[52]

The Houston Chronicle reported on April 23, 2012 that Jim Mulva retired May 1, 2012 when ConocoPhillips' refining, pipelines and chemicals units spun off to form an independent, publicly traded company called Phillips 66.[53]

Rod Walton writes in the Tulsa World on April 28, 2012 that ConocoPhillips decided that bigger was better when Phillips Petroleum Co. and Conoco Inc. merged in 2002, but now has turned 180 degrees around in 10 short years now believing that smaller is what investors want. ConocoPhillips, the nation’s third-largest integrated energy firm, will now become known as a “pure play” independent when the refining and chemical side is spun off into a new company called Phillips 66. "Mulva helped oversee the 2002 merger as head of Phillips Petroleum and now walks offstage into retirement as the one company becomes two," writes Walton.[54] "Outgoing Chairman and CEO Jim Mulva, who has expertly led the company for a decade — and several years prior to that as Chairman and CEO of Bartlesville-based Phillips Petroleum Co. — steps into retirement having proven to be a true friend to the City of Bartlesville," editorialized the Bartlesville Examiner-Enterprise.[55]

Mulva Received $156 Million Severance Package in 2012

The New York Times reported on June 29, 2013 that Jim Mulva received the biggest package of any CEO in 2012 when he stepped down as CEO of ConocoPhillips. Mulva's total severance package was about $156 million and his exit sum is on top of salary, bonus and other compensation received while working for the company. "We calculated severance pay as the total of any amounts given in connection with end of service as C.E.O.,” said Aaron Boyd, director of governance research at Equilar. In Mulva’s case, much of the payout came from the market value of stock gains he received. But he also received payouts from a cash severance, a bonus and additional retirement distributions. ConocoPhillips said that the pay packages were fully disclosed to shareholders and that they were “the same pension and benefits programs as described in the proxy statement as any other retiring executive.” “The vast majority of Mulva’s compensation that he earned during his long and successful career as an executive remained in the form of company stock at his time of retirement,” Aftab Ahmed, a spokesman for ConocoPhillips, said in an e-mail.[56]

Mulva's Post-ConocoPhillips Activities

December 14, 2016: Jim Mulva Donates $75 million to University of Texas for Medical Research

The Austin Business Journal reported on December 14, 2016 that Jim and Miriam Mulva and the Mulva Family Foundation are giving $75 million to a pair of University of Texas institutions to further medical research. The donation will include $50 million to create the Mulva Clinic for the Neurosciences, to be located at the Dell Medical School at UT Austin and $25 million for cancer research at the University of Texas MD Anderson Cancer Center in Houston. “We are pleased to establish a new and innovative neurology clinic combining UT Austin’s state-of-the-art research with advanced clinical operations for these widespread and difficult diseases that impact so many people and families,” Jim and Miriam Mulva said in the announcement. “Furthermore, we have a passion and commitment to help MD Anderson — the premier cancer center in the world — treat and ultimately eradicate cancer.” The $25 million grant supports MD Anderson’s efforts in melanoma and prostate cancer research under the direction of Dr. Patrick Hwu, chairman of the Melanoma Medical Oncology Department; and Dr. Christopher Logothetis, chairman of the Genitourinary Medical Oncology Department. “I deeply appreciate the Mulva family’s continual support of the university and especially this transformational gift for the advancement of neurosciences across many disciplines at UT Austin,” Gregory Fenves, president of UT Austin, said in the announcement.[57]

April 28, 2016: Jim Mulva Donates $13 million to St. Norbert College for Expansion of the Schuldes Sports Center

Fox 11 reported on April 28, 2016 that James J. and Miriam B. Mulva of De Pere are giving $13 million toward the renovation and expansion of the Schuldes Sports Center at St. Norbert College. In recognition of the donation, the college plans to call the expanded facility the Mulva Family Fitness and Sports Center. The fitness and sports center will be the third building on the St. Norbert campus to be named for the Mulvas. The couple has previously given donations toward the Mulva Library and the Gehl-Mulva Science Center. Both James and Miriam Mulva are from De Pere. A former naval officer, James Mulva recently retired as chairman and CEO of ConocoPhillips. He also serves on the boards of General Electric, General Motors, Green Bay Packaging and the University of Texas M.D. Anderson Cancer Center, among others. Miriam Mulva is a member of St. Norbert's board of trustees.[58]

Mulva received "an astonishing $260 million from his former employer" when he left ConocoPhillips in June, 2013 and $141 million in combined compensation and stock options in 2011.[59]

February 10, 2016: ValueWalk Analyzes the Relation Between ConocoPhillips' Stock Buybacks and the Dividend Cut

ConocoPhillips recent dividend cut from $0.74 to $0.25 per share was a jolt to many investors. 720 Global published an analysis piece on February 10, 2016 about the hidden damage buybacks impose on shareholders and the economy as well as the questionable motives driving most of these decisions and using ConocoPhillips as an example, writes that "buybacks promote higher short-term stock prices that serve largely only to benefit [management's] own compensation. The costs of these actions are felt later as the future growth for the respective companies, employees and entire economy are robbed."

COP consistently paid a dividend since 1990 and during that 25 year period the dividend was increased 19 times. COP had never decreased their dividend until now. Even during the financial crisis of 2008/09, COP raised its dividend despite the price of crude oil dropping $100 per barrel. But since 2011, COP repurchased 251.316 million shares representing roughly 20% of their shares outstanding, at an approximate cost of $14.168 billion. According to 720 Global had ConocoPhillips' management and the board of directors not engaged in repurchases, COP would still have the $14.168 billion spent on buybacks since 2011, which could be used to support the $0.74 per share dividend for almost 5 years. "More importantly, the company could be in the envious position of employing the capital to buy assets that are being liquidated by other companies at cents on the dollar. Shareholders are suffering in many ways from the abuses of management in years past and will continue to do so for years to come."

"Fortunately for James Mulva, COP’s CEO during the 2011/2012 stock buyback era, his overly generous compensation is beyond COP’s ability to reclaim. Mr. Mulva retired in June of 2012 after repurchasing approximately 20% of the company’s outstanding shares. Upon retirement he received a $260 million golden parachute from the company. That was on top of $141 million in total compensation he received in 2011. The board of directors and shareholders must have been enamored with Mulva’s performance despite poor earnings trends in his final 2 years. From 2011 to 2012 the company earnings per share fell 25% from $8.97/share to $6.72/share. Had the board factored in the effect of buybacks on earnings per share when determining Mr. Mulva’s compensation, they would have realized that earnings per share were actually 40% lower at $5.37 per share."[60]

720 Global writes that this isn’t the first time Mulva put himself before the interests of others. "In January [2009], CEO James J. Mulva cut 4% of the Houston oil giant’s workforce," wrote Jena McGregor and Nanette Byrnes in Bloomberg Businessweek. "Two months later the company announced that Mulva had earned $29 million in 2008, on top of nearly $100 million he had made in the two prior years. In Bartlesville, Okla., where a chunk of the layoffs hit, many are still looking for work. The fact that Mulva took a $10 million stock grant in 2008 instead of the $38 million he got the year before hasn’t been much comfort to former employees there, some of whom lost their homes."[61]

October 27, 2015: Jim Mulva in Talks to Help Build Proposed Cultural Center for De Pere

We Are Green Bay reported on October 27, 2015 that the De Pere City Council has given their approval to the preliminary concept, allowing planning to move forward on the $7- $9 million facility to be built by Jim and Miriam Mulva. Mulva and his wife donated $7 million towards construction of a new library at St. Norbert College dedicated six years ago. For the past year they have been in discussions with Walsh on the construction of a cultural facility. "I don't think you could have any better two people to bring this forward than the Mulva family," said De Pere Mayor Mike Walsh. The two, or three story building will offer performance spaces for both musical and theatrical groups, an atrium, meeting spaces and a Veterans Memorial. It will also have a gallery hosting two to three nationally renowned exhibits per year. De Pere will donate the building site to the Mulva's project. Walsh says the hope is to open the facility in 2017. The design team, Haley Sharpe Design, is still working on renderings of the facility. They are expected in the coming months.[62]

March 28, 2013: Jim Mulva Got $260 Million from Golden Parachute On His Way Out The Door

The Huffington Post reported on March 28, 2013 that ConocoPhillips CEO James Mulva received "an astonishing $260 million from his former employer" when he left ConocoPhillips in June, 2013 USA Today reports. Apparently, the $141 million in combined compensation and stock options he received in 2011 wasn't enough to ensure a smooth exit from the company. Unfunnily enough, Mulva's expansive severance package, or golden parachute as it's also known, is almost as large as the $266 million compensation package ConocoPhillips agreed to pay China in April after polluting 6,200 square kilometers of water off the northern coast of the country."[63]

April 26, 2012: Mulva Joins Board of Directors of General Motors

The Detroit News reported on April 26, 2012 that Mulva has been asked to join the board of directors of General Motors. "Jim's extensive experience and expertise in the energy industry and in-depth background in finance will be invaluable to GM," said General Motors Co. CEO and Chairman Dan Akerson. Mulva already serves on the board for GE, which has a partnership with GM to accelerate deploying electric vehicle charging stations in China.[64] Your Houston News reported on September 4, 2012 that Mulva will be headlining the Adult Learning Program’s Fall Session at St. John Vianney Church in Houston by speaking on the oil industry and its future in Texas on September 25, 2012.[65]

January 24, 2014: Mulva Family Donates $60 Million to Business and Engineering Schools

The University of Texas reported on January 24, 2014 that the Mulva Family Foundation has made a $60 million multiyear pledge to The University of Texas at Austin to support the McCombs School of Business and the Cockrell School of Engineering, once again demonstrating a deep commitment to the university’s future and to a continued vision of excellence in teaching and research.

  • Of the gift, $20 million will go toward the construction of the EERC, which will include the James J. and Miriam B. Mulva Conference Center and Auditorium when it is completed in 2017.
  • Another $40 million will be used to renovate the Graduate School of Business and College of Business Administration buildings, upon consideration and approval of the University of Texas System Board of Regents. The buildings will collectively be renamed the James J. and Miriam B. Mulva Hall.

"Jim Mulva's career has exemplified innovation. I am so pleased that his name and Miriam’s name will be seen by thousands of students every week in the premier facility in the U.S. for engineering innovation — and that so many students will directly benefit from the Mulvas’ gift," said Provost Gregory L. Fenves, who is a former dean of the Cockrell School of Engineering.[66]

Greg Garland, Chairman, President and CEO of Phillips 66

File:Greggarland.jpg
Greg Garland was designated the Chairman and CEO of Phillips 66, the new Downstream company created with the split-up of ConcoPhillips on May 1, 2012. Garland is expected to take charge on May 1, 2012. Greg Garland was senior vice president, Exploration and Production, Americas for ConocoPhillips at the time of the split. Photo: ConocoPhillips
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A sculpture of Phillips 66 in front of the Price Tower (designed by Frank Lloyd Wright) in Bartlesville, a city in NorthEast Oklahoma that was formerly the headquarters of Phillips Petroleum Company. "I picked this company because of Bartlesville," said Phillips 66 CEO Greg Garland. "Four times over the course of 32 years I've lived here. We have good memories of Bartlesville, Oklahoma, and it's always going to be a very special place to me personally." Bartlesville has the same pride in Frank Phillips and of its century-long oil heritage as Ponca City has of oil pioneer EW Marland.
Greg Garland, Chairman, President and CEO of Phillips 66

On October 7, 2011, Greg Garland was designated the Chairman and CEO of Phillips 66, the new Downstream company created with the split-up of ConcoPhillips on May 1, 2012. Greg Garland was senior vice president, Exploration and Production, Americas for ConocoPhillips at the time of the split. Garland was previously president and chief executive officer of Chevron Phillips, a joint venture between ConocoPhillips and Chevron, with approximately 5,000 employees that is one of the world's top producers of olefins and polyolefins and a leading supplier of aromatics, alpha olefins, styrenics, specialty chemicals, piping, and proprietary plastics.[67][68]

According to George Pilko, founder of Pilko & Associates, a Houston- based company that advises chemical and energy companies on risk, Garland understands strategy, is a good leader and has a demeanor that makes him well liked by people who work for him. "He's got a very effective, relaxed manner," says Pilko. "Many CEOs are so hyper and wound tight, and Greg is always relaxed and in control."[69]

Garland's Education and Background

Garland was the first in his family to go to college.[70] Garland received a Bachelor of Science degree in chemical engineering from Texas A&M University in 1980. Texas A&M reported on October 30, 2014 that Garland presented a check for $1 million on behalf of Phillips 66 to the Texas A&M Foundation that will support the university’s new Engineering Education Complex (EEC). “Phillips 66 is committed to investing in education,” said Greg C. Garland, chairman and CEO of Phillips 66, and a Texas A&M chemical engineering graduate. “We need leaders from schools such as Texas A&M who will challenge the status quo and create solutions to meet rising energy needs in the decades ahead.” The company’s contribution will be used to create the “Phillips 66 Experiential Learning Laboratory” within the EEC. The new lab will help better prepare engineering students to meet the evolving needs of the engineering marketplace.[71][72]

Garland has more than 30 years of industry experience in technical and executive leadership positions with ConocoPhillips, its predecessor Phillips Petroleum Company, and Chevron Phillips Chemical Company. Garland has been with Phillips for his entire 32-year career. Garland was previously president and chief executive officer of Chevron Phillips, a joint venture between ConocoPhillips and Chevron. Before his election to that position, Garland served Chevron Phillips as senior vice president, Planning & Specialty Chemicals.[73][74]

Garland served as general manager of Qatar/Middle East for Phillips, a position he assumed in 1997.[75] Garland said that taking the job in Qatar in 1997 to manage one of the first oil operations in the Middle East for Phillips was a turning point in his career. Garland says that although he didn't want to take the job initially, he learned to view the company with a broad perspective.[76]

From 1995 to 1997, he served as general manager of natural gas liquids after serving as manager of planning and development in planning and technology. From 1992 to 1994, he was manager of the K-Resin® business unit. Garland began his career with Phillips in 1980 as a project engineer for the Plastics Technical Center. He later worked as a sales engineer for Phillips' plastics resins, business service manager for advanced materials, business development director, and olefins manager for chemicals.[77]

How Garland Was Selected for CEO of Phillips

By October 2010, CEO James Mulva was expected to retire within two years and wanted to establish a cabinet of possible successors. On October 7, 2010, ConocoPhillips announced a sweeping overhaul of its executive suite. The executive changes included the departure of the president and chief operating officer, John Carrig, and the chief financial officer, Sigmund Cornelius, as well as two senior level vice presidents. ConocoPhillips spokeswoman Cathy Cram said the changes are part of a plan to provide for a smooth transition in anticipation of Mulva's retirement. "You can assume the next leader will come from this team," Cram said. "They've been taking a lot of steps to position the company as well as they can for Mulva's successor," said Phil Weiss, an energy analyst with Argus Research who said he was pleased the company had lined up management with strong operations experience. "One of the biggest issues that many people believe Conoco faces is a somewhat lackluster production portfolio, as compared to other large integrated companies," he said. "I was of the opinion that to have someone with an operating background would be better than somebody that doesn't."[78]

Tom Fowler reported in FuelFix on October 7, 2010 that the management team reporting to Mulva at the end of the shakeup consisted of:

  • Alan Hirshberg, senior vice president, planning & strategy; formerly vice president, worldwide deep-water and Africa projects, for Exxon Mobil;
  • Greg Garland, senior vice president, exploration and production-Americas; formerly president and CEO of Chevron Phillips Chemical Co;
  • Jeff Sheets, senior vice president, finance and chief financial officer; formerly senior vice president, commercial and planning and strategy;
  • Willie C.W. Chiang, senior vice president, refining, marketing & transportation, adding responsibility for the company's commercial business activities;
  • Ryan Lance, senior vice president, exploration and production, international, and
  • Larry Archibald, senior vice president, exploration and business development, continuing in those roles.[79]

Tom Fowler reported in FuelFix on October 7, 2010 that since 2006 about a dozen executive-vice-president-level staff members moved on from ConocoPhillips, for a wide range of reasons and that a number of observers note there's been an oversized churn of talented executives from ConocoPhillips who one might have expected to stick around longer. According to Fowler some observers think the turnover may have more to do with the command-and-control management style of Chairman and CEO Jim Mulva than the day-to-day stress of working at an oil major. "It sounds like the head coach firing all the assistant coaches for a bad season, when it's really the head coach who's the problem," said one analyst. A former ConocoPhillips executive puts it another way: The company is seen by many as a major international corporation with an Oklahoma mentality (he's referring to the Bartlesville, Okla. roots of Phillips Petroleum, where Mulva worked when the firm merged with Conoco in 2002). "The latest round of departures is to clear the way for a likely successor to Mulva, who is expected to leave in a couple of years," writes Fowler. "It appears outgoing COO John Carrig didn't have the operations background the company wanted to fill that role."[80]

Brian Youngberg, an analyst with Edward Jones, says Garland's selection as CEO of Phillips was likely due to Garland's experience as chief executive officer of Chevron Phillips because he brings a wider view to Phillips including chemicals, the likely growth engine for the downstream company. Youngberg said Phillips will continue to de-emphasize refining over time, so "having someone with a broader background like Garland makes sense." ConocoPhillips brought in Garland in 2010 to oversee exploration and production in a management shake-up that included the retirement of former Chief Operating Officer John Carrig, who had been seen as Mulva's successor.[81]

Garland, who formerly headed Chevron Phillips Chemical, was selected to head the new company over Willy Chiang, senior vice president of ConocoPhillips' refining division.[82] Oxy reported on May 23, 2012 that Chiang left Phillips 66 and went to work as Executive Vice President, Operations at Occidental Petroleum Corporation with responsibility for oversight of Occidental's Midstream businesses.[83] Kristen Hays wrote at Reuters on October 7, 2011 that according to Deutsche Bank analyst Paul Sankey "we believe that Chiang sees himself as a future CEO, and he would have to find that role in a different company."[84]

Latest News About Greg Garland

March 22, 2017: Greg Garland's Salary Increases from $22.9 million in 2015 to $25.1 million in 2016

Reuters reported on March 22, 2017 that according to SEC filings Phillips 66 CEO Greg Garland's salary increased from $22.9 million in 2015 to $25.1 million in 2016.[85]

November 14, 2016: Garland Sells $6.4 Million in Phillips 66 Stock

Gurufocus reported on November 14, 2016 that Phillips 66 CEO Greg C. Garland sold 76,165 shares of Phillips on November 10, 2016 at an average price of $83.48 a share for a total sale of $6.4 million.[86]

June 6, 2016: Garland Sells 62,500 Shares of Phillips Stock

The Bibey Post reported on June 6, 2016 that the Chairman and CEO of Phillips 66 and company’s insider Greg Garland sold 62,500 shares of Phillips stock at $80.0 of a share. The transaction’s shares had a value of around $4,996,881 U.S. Dollars. Garland now owns 122,930 shares of Phillips stock.[87]

November 9, 2015: Garland Elected Chair of the Finance Committee at American Petroleum Institute

The American Petroleum Institute announced on November 9, 2015 that Phillips CEO Greg Garland has been elected cchair of the Finance Committee at the American Petroleum Institute. “Greg Garland’s long record of leadership and unique insight as well as operational knowledge of the industry’s financial landscape will maximize value for our members and provide guidance for API’s strategy. API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 625 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 25 million Americans.[88]

July 25, 2015: Oil is Down but Garland's Pay is Up
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The Houston Chronicle reported on July 25, 2015 that despite domestic oil's long and lingering swoon that began last summer, Phillips CEO Greg Garland's pay is up for 2014. Garland ranked No 2 in pay for CEO's of publicaly traded companies just behind Ryan Lance of ConocoPhillips.[89] Photo: Houston Chronicle

The Houston Chronicle reported on July 25, 2015 that despite domestic oil's long and lingering swoon that began last summer, Phillips CEO Greg Garland's pay is up for 2014. Garland ranked No 2 in pay for CEO's of publicaly traded companies just behind Ryan Lance of ConocoPhillips.[90] Phillips 66's Board of Directors cut Chief Executive Greg Garland's bonus pay by 35 percent in 2014, citing market conditions and stock performance. While the company performed well against financial and operational targets, the filing states, "market conditions and stock performance at the end of 2014 did not, in the Compensation Committee's view, justify a full payout" of the incentive pay that Garland and other top executives were eligible to receive.[91]

June 29, 2015: Greg Garland is No 1 Houstonian to Know in 2015 Despite Phillips Decrease in Revenue and Stock Price

B. Candace Beeke wrote in Houston Business Journal on June 29, 2015 that Greg Garland, CEO and chairman of Phillips 66 — is still holding tight to the No. 1 spot of the "Top 100 Public Companies" based in Houston. Phillips 66 "saw one of the largest decreases in revenue, stock price and assets on The List, year over year," writes Beeke. "Despite that, it’s still No. 1 in revenue and high on the list of total assets in fiscal year 2014."[92]

March 9, 2015: Board of Directors Cuts Garland's Bonus By 35 percent after Phillips 2014 Share Decline

Reuters reported on March 9, 2015 that Phillips 66's Board of Directors cut Chief Executive Greg Garland's bonus pay by 35 percent in 2014, citing market conditions and stock performance. While the company performed well against financial and operational targets, the filing states, "market conditions and stock performance at the end of 2014 did not, in the Compensation Committee's view, justify a full payout" of the incentive pay that Garland and other top executives were eligible to receive.

Garland received a total of $24.5 million for the year, up from $19.8 million in 2013, driven largely by a higher value calculated for future pension payments. Garland's base salary rose to $1.51 million in 2014 from $1.44 million in 2013. But the value of incentive payments to Garland fell to $2.66 million in 2014 from $4.11 million in 2013. [93]

March 2, 2015: Garland Sees Brent-WTI Spread Widening to $6-10/bl

Argus Media reported on March 2, 2015 that Phillips CEO Greg Garland sees the Brent-WTI differential widening to $6-10/bl. Inventories of crude storage at Cushing have gained for 12 consecutive weeks at an average pace of 2mn bl per week. Inventories climbed during the week ending 20 February by 2.4mn bl to 48.7mn bl, the highest level since June 2013. Stock levels have doubled since the end of October, growing at a pace unmatched in more than 10 years of records kept by the Energy Information Administration (EIA). "I believe that Cushing is going to fill or close to fill to the operating level, and that will carry over through a decent portion of the year in terms of impacting inland versus coastal crude differentials," says HollyFrontier chief executive Mike Jennings.[94]

September 25, 2014: Garland Places Ethics and Safety at the Top of His List

The Daily Cougar reported on September 25, 2014 that Phillips CEO Greg Garland spoke to students at the Bauer College of Business at the University of Houston on September 23, 2014 about the importance of ethical responsibility in the business world and the place of responsible, socially conscious decisions in modern commercial enterprise as part of the school's ongoing "Distinguished Leaders Program." "You've got to have high standards if you're going to be ethical. It has to start at the very top," Garland said. "(I) fundamentally disagree with people who say that energy companies can't be good corporate citizens … I think that good ethics makes for good business." Garland stressed that aside from being the responsible and morally correct decision, good ethical business and environmental safety is also profitable long-term. "We have people who invest literally billions of dollars in our company, and I want them to know they're investing in safety," Garland said. "One major accident can absolutely devastate shareholder value." Garland also offered some words of encouragement to UH students entering the energy industry. "Your education is actually just the launching pad for a lifetime and career of learning in this industry," Garland said. "And if you're at the top of your class, I want to talk to you after the show."[95]

August 13, 2014: Garland Wants to Find a Company to Lease the North and South Towers in Ponca City
The North Tower and the South Tower, part of Phillips 66's Refinery Complex in Ponca City, contain over 250,000 square feet of Class A office space that is essentially unused. Photo: Hugh Pickens
File:Pickens and Garland.jpg
Ponca City resident Hugh Pickens (left) speaks with Phillips CEO Greg Garland (right)[96] about the disposition of the North Tower, South Tower, and Research West after Garland's speech to the Bartlesville Chamber of Commerce on August 13, 2014.
File:Refinery crane.jpg
The 587 foot tall Mammoet PTC 140 crane, seen here from North First Street, towers over the Refinery Complex in Ponca City. The supercrane was used to move two new 232 ton coker reactor units within the refinery on September 29, 2013. Phillips was willing to invest $70 million in the two new coker reactor units because the Ponca City Refinery is one of the best run, safest, and most profitable of Phillips' fifteen worldwide refineries and Garland wants the refinery in Ponca City to continue to run smoothly and profitably. This photograph of the supercrane in Ponca City was taken from almost two miles away from the crane. Photo: Hugh Pickens All Rights Reserved.
File:Borger66refinery.jpg
Some of Phillips 66's other refineries do not run as safely or trouble-free as the refinery in Ponca City says Hugh Pickens, a private investor who closely follows Phillips' worldwide refinery operations. "For example, the Borger Refinery, operated by Phillips 66 since 1927[97], has a troubled history that includes two employee deaths and eleven injured by deadly fumes from a paralyzing gas in 1979 for which OSHA cited Phillips for "willful and serious" safety violations," says Pickens. More recently Phillips' Borger Refinery suffered three serious employee injuries in March, 2014, an employee fatality in 2012, a penalty for violations of the Clean Air Act in 2014, and an unscheduled shutdown in July, 2014 that closed down the refinery for 35 days for repairs. "Borger hasn't run well this year," says Garland.[98][99] [100] [101] [102][103] [104] [105] [106] [107] [108] [109][110] Borger Refinery Photo by: Philip Klein All Rights Reserved. Photo used with permission of the photographer
Ponca: A Core Asset. Phillips CEO Greg Garland told members of the Bartlesville Chamber of Commerce on August 27, 2013 that the refinery at Ponca is a 'core asset' of Phillips 66. The refinery in Ponca City "is making very good money for us," Garland told his Bartlesville audience. Garland added that he expects gas demands in the U.S. to decline by 20 percent in the next 10 years, but that demand for refined products in South America and Africa will more than offset that decline.[111]

Phillips 66 CEO Greg Garland spoke to over 250 community leaders at the Bartlesville Chamber of Commerce on August 13, 2014 about initiatives Phillips is taking to benefit communities in the state of Oklahoma including Phillips 66's new initiative to expand the Research Center in Bartlesville and Phillips 66's gift of $1.7 million to Bartlesville Public Schools to create new innovative laboratories on three school campuses to support science, technology, engineering and math classes and research projects.[112][113]

With regard to Ponca City, Garland announced at the forum that Phillips 66 has been working hard with state and local officials to figure out what to do with the North and South Towers and if Phillips and Ponca City can find a company or companies that would like to use those buildings, "I think we would like to go down that route." Garland praised the buildings and their condition effusively. "I did a refinery review in Ponca City the week before last. We actually had our review in the Marland Board Room. It is a beautiful building, a great facility," said Garland. "There is no question that these are great buildings that are part of the rich heritage of Ponca City."[114]

Garland's public statement about the North and South Towers came in response to a question from the audience from Ponca City resident Hugh Pickens. "Phillips 66 has two beautiful, nine-story office buildings in Ponca City, the North and South Towers, that together contain over 250,000 square feet of Class A office space suitable for several hundred employees that have been essentially vacant for several years," said Pickens. "Could you talk about what options you are considering for these two empty office towers? Specifically, what are the chances that you are going to continue to leave the buildings vacant, tear the two buildings down, or sell or lease them to a company or companies that could utilize them to benefit the community of Ponca City and could you share your rationale for your decision."[115]

The reason there is so much unused office space at the refinery complex is that on February 17, 2009 ConocoPhillips announced they had decided to relocate all of its 750 non-refinery positions out of Ponca City within two years and that the first 250 jobs would be moved in 2009 with 180 jobs going to Houston and 70 jobs to Bartlesville. The positions moving first included jobs in technical services, research and development, engineering and support, human resources and Internet technology, among others. Management met with hundreds of Ponca City employees to tell them the news. "It's a difficult time in general for all ConocoPhillips employees," said ConocoPhillips spokesman Tracy Harlow. "We made the strategic decision to consolidate locations for the most effective corporate operations." The decision to consolidate operations in Bartlesville and Houston was made by ConocoPhillips CEO Jim Mulva, formerly President and CEO of Phillips 66 before the merger with Conoco.[116]

"What can citizens of Ponca City do to support and encourage Greg Garland's initiative? First, if you are an employee of Phillips 66, thank Refinery Manager Tim Seidel for Garland's initiative and for Phillips 66's willingness to work with our community. Tell Mr. Seidel how important this is for Ponca City and offer your support for Phillips' decision to work with local Ponca City officials at the Ponca City Development Authority (PCDA) to find companies that will come to Ponca City to occupy space in the North Tower, South Tower, and Research West," says Pickens. "It is also extremely important that retirees of Conoco, ConocoPhillips, and Phillips 66 make their voices heard. Retirees are very influential because they know first hand the world-class resources at the refinery complex and how they have gone unused for so many years. For example, when you meet with Phillips managers and executives at retiree meetings, tell them that you do not want to see the North and South Towers torn down, that these facilities still have many years of good service left in them, and tell Phillips managers and executives that you know that Phillips 66, working together with the community of Ponca City, can use these buildings to benefit both Phillips and Ponca City."

Garland told community leaders at the Bartlesville Regional Chamber of Commerce forum that the company's commitment to Bartlesville continues and that there are no plans to close any of the Bartlesville facilities or move any of Phillips' 2,000 employees out of Bartlesville. "Bartlesville is a special and unique place," said Garland. "It has a rich part of our heritage and our legacy. It is important today. It will be important in the future of Phillips 66… A big part of the day-to-day operations and the successes of Phillips 66 are born by the people here in Bartlesville." Even with expansion at the Houston headquarters, Garland said that the space there is already at capacity and the Bartlesville facilities will continue to be full as well. Garland talked about an expansion that is currently underway at the Research Center in Bartlesville to continue the development of polyethylene technologies.[117]

During his talk to the Bartlesville Chamber, Garland also announced that Phillips will be giving $1.7 million to Bartlesville Public Schools to create new innovative laboratories on three school campuses to support science, technology, engineering and math classes and research projects. "We want to create a place where our students will come and be excited, be challenged and hopefully be encouraged to follow a career at a place like Phillips 66," Garland said. "We want to put the right kind of tools in the hands of students in Bartlesville so they can be more successful."[118] An application by the Ponca City School System for a STEM grant under the Signature Community Initiative was turned down by Phillips 66.[119]

The funds came through a Phillips 66 Signature Community Initiative grant application submitted to the company under an effort spearheaded by Scott Bilger, a Bartlesville school board member and Phillips 66 employee, and Granger Meador, a physics teacher who heads up Bartlesville High's science department. The new laboratories and major new course offerings will be at the high school, along with Madison and Central Middle Schools. "We are just really, really excited about the opportunity this is going to provide our students," Superintendent Gary Quinn said. "It cannot be overstated what this is going to mean to our students."[120]

October 16, 2013: Garland Appointed to Board of Directors of Amgen

On October 16, 2013 Amgen Inc. announced the appointment of Garland to the Company's Board of Directors. Garland will serve on the Governance and Nominating Committee and the Audit Committee of the Board. "We are pleased to welcome Greg Garland to the Amgen Board," said Robert A. Bradway, Chairman and CEO of Amgen. "In addition to his leadership experiences as a chief executive officer, Greg brings more than 30 years of international experience in a highly regulated industry. At a time when Amgen is expanding its global presence to serve more patients, we look forward to Greg's contributions to the Board."[121]

August 27, 2013: Garland Recognizes Contribution of E. W. Marland

ConocoPhillips announced on November 11, 2011 that the new independent downstream company created through its previously announced strategic repositioning would be named Phillips 66. When Phillips went public on May 1, 2012, Garland recognized the contribution of Frank and L.E. Phillips and the company's "birthplace" in Bartlesville, Oklahoma in 1917. "With a history that goes all the way back to petroleum industry "birthplace," in Bartlesville, Oklahoma in 1917, the company will be a leading independent company with refining, marketing, midstream and chemicals businesses operating across the globe. "Phillips 66 has strong brand recognition and value and it provides a link between our rich history and our exciting future," said Greg Garland, designated chairman and chief executive officer of Phillips 66. "Our name reflects an independent spirit and drive--two attributes of our future company."[122] According to the ConocoPhillips web site "the name Phillips 66 was chosen [for the new downstream company] because it has strong brand recognition and value, which allows us to link our rich history and our exciting future. The name represents the independent spirit and drive that will be part of the culture of Phillips 66."[123] The new company's name capitalizes on the public awareness and gives tribute to history, Garland added.[25]

On August 27, 2013 Garland spoke to the Bartlesville Chamber of Commerce and said that the reputation and success of Phillips were built from the "giants" who first created the company and recognized E. W. Marland's contribution for the first time. "We are standing on the shoulders of giants," said Garland. "People like E. W. Marland, who started Marland Oil in 1911, and Frank and L. E. Phillips that started Phillips Petroleum in 1917. I could go on and on and list the giants that have come before us that have so well positioned this company for the success that we enjoy today."[124]

September 11, 2012: Bartlesville a Special Place for Garland

The Tulsa World reported on September 12, 2012 that Garland spoke on September 11, 2012 at a packed Bartlesville Area Chamber of Commerce Forum at the city's community center downtown carrying on a tradition started several years ago by his predecessor, ConocoPhillips CEO Jim Mulva. Garland was adamant that Bartlesville's value as a global web center, combined with its heritage as home city of the original Phillips Petroleum Co. always make it important to the company's future plans. "We have deep roots here," Garland said adding that he visits the company's local operations several times a year. "It's a cost-efficient place for us to do business. I think we made the right decision." Garland noted that office space is almost maxed out locally, so he does not see more than "modest growth" adding to the 2,000 jobs Phillips 66 already has in Bartlesville. Garland was recruited out of Texas A&M by Phillips and lived many years in Bartlesville with his wife and four children.[125]

The Bartlesville Examiner-Enterprise reported on September 12, 2012 that Garland went to work for Phillips 66 as his first job out of college because of Bartlesville. "I picked this company because of Bartlesville. Four times over the course of 32 years I've lived here. We have good memories of Bartlesville, Oklahoma, and it's always going to be a very special place to me personally," said Garland. "As we were approaching the repositioning and spinning Phillips 66 out of ConocoPhillips, there was never any question that Bartlesville would continue to be a strategic and important part of our company, in the support of our company operations, for a very long time."[126]

September 11, 2012: Conoco the Only Company That Didn't Offer Garland a Job

In an anecdote that reveals Garland's humorous side and long memory, Garland told members of the Bartlesville Chamber of Commerce during his speech in September 2012 that when Garland was looking for his first job as a chemical engineer after graduating with honors from Texas A&M in 1980, Garland interviewed with 17 companies but only received job offers from 16 of the companies. More than thirty years later, Garland was still able to quote from memory to his Bartlesville audience the contents of the rejection letter he received from the only company that did not offer him a job. According to Jessica Miller writing in the Bartlesville Examiner-Enterprise, when Garland disclosed the name of the one company that did not offer him a job, "his revelation of the company - Conoco - garnered laughter from the audience."[127]

Garland's Compensation as CEO of Phillips

Businessweek reports that as of the fiscal year 2012 Garland's Total Annual Calculated Compensation is $14,423,038 including his salary and stock options.[128]

John Lowe, Member of the Phillips 66 Board of Directors

Apart from Greg Garland, J.E. (John) Lowe is the only present or former employee of ConocoPhillips serving as a member of the Board of Directors of Phillips 66. Lower was executive vice president, planning, strategy and corporate affairs, of ConocoPhillips with responsibility for emerging businesses, as well as government affairs and communications. Lowe previously served as senior vice president, corporate strategy and development and was responsible for the forward strategy, development opportunities and public relations functions of Phillips Petroleum Company. Lowe was named to this position in 2001 after serving as senior vice president of planning and strategic transactions in 2000 and vice president of planning and strategic transactions in 1999. Lowe currently serves on the board of directors for Chevron Phillips Chemical Company, Duke Energy Field Services and the Houston Museum of Natural Science.

Lowe was born in 1959 in Oskaloosa, Iowa. Lowe received a bachelor of science degree in finance and accounting from Pittsburg State University in Pittsburg, Kansas, in 1981. Lowe is a certified public accountant.[129]

Board of Directors

On April 16, 2012 Phillips 66 announced the names of the seven members of its future board of directors. Greg Garland will serve as Phillips 66' chairman, president and CEO. He most recently served as senior vice president, Exploration and Production -- Americas for ConocoPhillips. The other members of the board will be:

  • Greg Garland, Phillips 66 chairman, president and CEO
  • John Lowe, who has served as assistant to the CEO of ConocoPhillips. Lower currently serves as assistant to the CEO of ConocoPhillips, a position he has held since 2008. He previously held a series of executive positions with ConocoPhillips, including executive vice president, Exploration & Production, from 2007 to 2008 and executive vice president, Commercial, from 2006 to 2007. He currently serves on the board of Agrium Inc.
  • J. Brian Ferguson, retired chairman and CEO of Eastman Chemical Co. Ferguson served as chairman of Eastman Chemical Company (Eastman) in 2010 until his retirement and as CEO of Eastman in 2009. He became the chairman and CEO of Eastman in 2002. He currently serves on the boards of Owens Corning and NextEra Energy Inc.
  • William Loomis Jr., an independent advisor who formerly served as CEO of Lazard LLC . Loomis has been an independent financial advisor since 2009. He was a general partner and managing director of Lazard Freres & Co. from 1984 to 2002, the CEO of Lazard LLC from 2000 to 2001 and a limited managing director of Lazard LLC from 2002 to 2004. He currently serves on the boards of Pacific Capital Bancorp and Limited Brands Inc., and is also a senior advisor to Lazard LLC and China International Capital Corporation.
  • Harold McGraw III, current chairman, president and CEO of The McGraw Hill Companies. McGraw currently serves as chairman, president and CEO of The McGraw-Hill Companies. Prior to his service as chairman, he served as president and CEO from 1998 to 2000 and president and chief operating officer from 1993 to 1998. He currently serves on the boards of The McGraw-Hill Companies, ConocoPhillips and United Technologies Corporation.
  • Glen Tilton, chairman of the Midwest and was formerly chairman and CEO of United Airlines. Tilton currently serves as chairman of the Midwest of JPMorgan Chase & Co. He was chairman and CEO of United Airlines Inc. from 2002 to 2010, having previously spent more than 30 years in increasingly senior roles with Texaco Inc. including chairman and CEO in 2001. He currently serves on the boards of United Continental Holdings Inc. (as non-executive chairman), Abbot Laboratories and Corning Inc.
  • Victoria Tschinkel, chairwoman of 1000 Friends of Florida. Tschinkel served as state director of the Florida Nature Conservancy from 2003 to 2006, was senior environmental consultant to Landers & Parsons, a Tallahassee, Florida law firm, from 1987 to 2002, and was the secretary of the Florida Department of Environmental Regulation from 1981 to 1987. She currently serves on the board of ConocoPhillips.
  • Dr. Marna C. Whittington, chief executive officer of Allianz Global Investors Capital, a diversified global investment firm, from 2002 until her retirement in January 2012. Whittington was chief operating officer of Allianz Global Investors, the parent company of Allianz Global Investors Capital, from 2001 to 2011. Prior to that, she was managing director and chief operating officer of Morgan Stanley Asset Management. Whittington started in the investment management industry in 1992, joining Philadelphia-based Miller Anderson & Sherrerd. The election of Dr. Whittington on May 9, 2012 increases the total number of Phillips 66 directors to eight.[130]

"We have assembled a strong board of directors, consisting of individuals with appropriate skills and experiences to meet their governance responsibilities and contribute effectively to our company," said Garland. "Our board reflects a range of talents, diversity and expertise, particularly in the areas of accounting and finance, domestic and international markets, government and regulatory affairs, management and leadership and petroleum-related industries, sufficient to provide sound and prudent guidance with respect to our operations and interests."[131][132]

October 7, 2016: Phillips 66 Board Elects New Directors

Businesswire reported on October 7, 2016 that board of directors of Phillips 66 elected Denise L. Ramos and Gary K. Adams to serve as independent directors. The election on October 6, 2016, increases the total number of Phillips 66 directors to 10.

Ramos will serve on the Audit and Finance Committee, the Nominating and Governance Committee and the Public Policy Committee. Adams will serve on the Human Resources and Compensation Committee and the Public Policy Committee.

Ramos, 60, was appointed chief executive officer, president and a director of ITT Inc. (formerly ITT Corporation) in October 2011. She previously served as senior vice president and chief financial officer of ITT. Prior to joining ITT, Ms. Ramos served as chief financial officer for Furniture Brands International from 2005 to 2007. From 2000 to 2005, Ms. Ramos served as senior vice president and corporate treasurer at Yum! Brands, Inc. and chief financial officer for the U.S. division of KFC Corporation. Ms. Ramos began her career in 1979 at Atlantic Richfield Company (ARCO), where she spent more than 20 years serving in a number of finance positions including corporate general auditor and assistant treasurer. Ms. Ramos served on the board of Praxair, Inc. from April 2014 to September 2016. She serves on the board of trustees for the Manufacturers Alliance for Productivity and Innovation, and is also a member of the Business Roundtable and the Business Council.

Adams, 65, is currently the chief advisor of chemicals for IHS Inc. He started his chemical industry career with Union Carbide. After 15 years serving in a number of positions at Union Carbide, Mr. Adams joined Chemical Market Associates Inc. (CMAI). He served as president, CEO and chairman of the board of CMAI from 1997 until its acquisition by IHS in 2011. Mr. Adams is a director of Trecora Resources and previously served on the boards of Westlake Chemical Partners LP from July 2014 to October 2016, and Phillips 66 Partners LP from September 2013 to August 2016.[133]

Management and Governance Effectiveness at Phillips 66

December 3, 2012: Standard and Poor Judges Management and Governance to be 'Fair' at Phillips 66

Standard and Poor reported on December 3, 2012 that they judged Phillips 66 Co.'s management and governance to be 'fair' based on a consolidated approach to the Phillips 66 entities. "While the best positioned of Phillips 66 Co.'s refineries are highly competitive, the overall quality of its operations is mixed, with some facilities being, in our view, candidates for divestiture or closure over the next few years."[134]

Financial Stability of Phillips 66 and Risk Management

September 7, 2015: Phillips 66 Receives 'A' Credit Rating from Morningstar

WatchList News reported on September 7, 2015 that Phillips 66 has earned an “A” credit rating from analysts at Morningstar. The firm’s “A” rating suggests that the company is a low default risk. They also gave their stock a three star rating.[135]

April 27, 2015: Phillips 66 Receives 'A' Credit Rating from Morningstar

Mideast Times reported on April 27, 2015 that Phillips 66 has received an “A” credit rating from analysts at Morningstar. The research firm’s “A” rating indicates that the company is a low default risk.[136]

August 26, 2014: Moody's Upgrades Phillip from Baa1 to A3

Moody's reported on August 26, 2014 that they have upgraded Phillips from Baa1 to A3. The rating outlook is stable. "The upgrade of Phillips 66's senior unsecured ratings to A3 reflects the company's clearly delineated strategic focus and capital structure since its spinoff from ConocoPhillips (A1 stable) in May 2012," said Terry Marshall, Moody's Senior Vice President. "The company's significant equity investments in Chevron Phillips Chemical Company LLC (CPChem, A3 positive) and DCP Midstream LLC (Baa2 stable) add a material credit enhancement to Phillips 66's large and diversified refining assets." According to Moody's "Phillip 66's A3 senior unsecured rating is driven by the scope and diversity of its refining business, which represents about half of its proportionate EBITDA, coupled with the further diversity provided by ownership of fast-growing chemicals and midstream businesses and moderate financial leverage. The equity investments add business diversification and are two of the three principal growth vehicles for Phillips 66 along with its in-house midstream and transportation businesses. The rating is further supported by excellent liquidity, and management's commitment to balancing shareholder returns with a strong balance sheet."[137]

June 6, 2013: A.M. Best Affirms Excellent Rating for Phillips' Captive Insurer

The Fort Mills Times reported on June 6, 2013 that A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Spirit Insurance Company of Burlington, VT, the captive insurer for its ultimate parent, Phillips 66. "Business written by Spirit has a history of strong underwriting results and operating returns. The company’s loss experience has remained favorable due in part to its strong loss control program at the parent. Phillips 66 will conduct periodic reviews of Spirit’s potential loss exposures through a specialist in industrial risks," reads the report.[138]

However the report also observes that a single occurrence could result in a large loss that approaches Spirit’s limits, that partially offsetting A.M. Best's positive rating factors are Spirit’s exposure to large losses due to the limits offered on its policies as well as its significant dependence on reinsurance protection and that although the majority of Spirit’s capital is loaned to its parent, there is limited counterparty risk due to the affiliation of the two companies.[139]

December 3, 2012: Standard and Poor Assigns BBB/Stable/A-2 Corporate Credit Rating, Judges Financial Risk Profile as 'Intermediate'

Standard and Poor reported on December 3, 2012 that they had assigned a BBB/Stable/A-2 corporate credit rating to Phillips 66 Co. based on a consolidated approach to the Phillips 66 entities. "The rating on Phillips 66 Co. reflects Standard & Poor's assessment of the company's business risk profile as 'satisfactory' and financial risk profile as 'intermediate' (as our criteria define these terms)," says the report prepared by Primary Credit Analyst Mark Habib. "We view the refining sector as having significantly higher-than-average industry risk, given its exceptional degree of volatility and fixed- and working-capital intensity. Notwithstanding the relatively favorable market conditions at times over the past year, we view long-range industry fundamentals as difficult given persisting excess production capacity globally and a secular decline in demand for some key transportation fuel products in developed markets."[140]

Government Relations

File:Philbrady.jpg
Phil Brady, the president of National Automobile Dealers Association, was named senior vice president of government affairs for Phillips 66 on July 30, 2012. Brady, who will be based in Washington, will be responsible for the company's federal, state and international policy and governmental affairs efforts.[141] Photo: Businesswire

October 20, 2014: Candidates for US Congress Discuss Wood River Refinery

The Telegraph reported on October 20, 2014 that Republican challenger for the Illinois Congressional District 12, Mike Bost, was joined by fellow Republican, John Shimkus (R- IL Dist. 15) at the Phillips 66 refinery in Wood River to discuss energy issues that affect Illinois residents. Shimkus is on the Congressional Energy Subcommittee, and was at the refinery to support Bost as well as future legislation regarding the controversial Keystone Pipeline XL. Shimkus said that the general public was not aware of how many pipelines there were in everyday use. “It is the safest, cheapest, and most environmentally sound way to move liquid product,” said Shimkus and added that Democrats in Congress were “dragging their feet” on the matter and he said that it was “ridiculous.” The two were discussing the expansion of the Keystone Pipeline with Phillips 66 in the background to display how many jobs American energy creates. According to representatives from Phillips 66, the refinery employs as many as 850 people directly and 400 indirectly through contract work. Many jobs were created when the refinery spent $4 billion to prepare for the incoming Canadian crude oil according to Shimkus. “They gave us jobs in a time when there wasn’t a lot of jobs in the area,” said Shimkus. After their short statements at the Phillips 66 refinery in Wood River, Shimkus and Bost went to Percy, Ill. to tour the Nighthawk Coal Mine.[142]

February 20, 2013: Phillips Retains Van Ness Feldman as New DC Lobbyists

Legal Times reported on February 20, 2013 that Phillips has retained Van Ness Feldman as their first outside firm to lobby in Washington to advocate for it on oil and gas industry matters, tax reform and the looming $85 billion in spending cuts known as the sequester, according to lobbying registration paperwork filed with Congress.[143]

February 20, 2013: Phillips Spent $1.5 million Lobbying Federal Government in 2012

Legal Times reported on February 20, 2013 that according to congressional records, Phillips has spent $1.5 million on federal government advocacy since it submitted lobbying registration paperwork to Congress in June 2012 and deployed three of its employees to lobby for it. In 2012 Phillips lobbied on U.S. Environmental Protection Agency issues concerning the oil and gas industry, the EPA's renewable fuel standard program and refinery rulemaking.[144]

November 14, 2012: Greg Garland Expects More Government Regulations During Second Obama Term

Fuel Fix reported on November 14, 2012 that Greg Garland expects President Barack Obama’s second term to bring a wave of regulations on their industry that portends another four years of policies that will reduce demand for their refineries’ petroleum-based fuels. “With the election now decided, I see a very active regulatory environment for the next four years,” says Garland. "There’s no question, between renewables and CAFE standards, over the next 10 to 20 years, you’re looking at a 10 to 20 percent reduction in gasoline demand. That’s something that concerns us.” Garland and Marathon Petroleum CEO Gary Heminger said new and expanded federal regulations, including the Renewable Fuel Standard and the Corporate Average Fuel Economy (CAFE) standards, have cost their companies billions over the years while cutting use of their products.[145]

July 30, 2012: Phil Brady Named Top Lobbyist for Phillips 66

The Detroit News reported on July 30, 2012 that Phil Brady, the president of National Automobile Dealers Association, has been named senior vice president of government affairs for Phillips 66. Brady, who will be based in Washington, will be responsible for the company's federal, state and international policy and governmental affairs efforts. Brady has previously served in senior White House positions for President Ronald Reagan and President George H.W. Bush and also served as general counsel at the U.S Transportation Department, and in senior positions with the U.S. Justice Department and Congress.[146] “It is important that our key constituents understand the economic value that energy companies like Phillips 66 bring to our country as a U.S. manufacturer, and Phil will help us to effectively share that story,” says Phillips 66 CEO Greg Garland. “Over just the past few months as an independent company, Phillips 66 has already put together an exceptional management team and strategy to grow in meeting the energy needs of this country,” says Brady. “I look forward to joining the team to help re-introduce this iconic energy company to our government leaders.”[147]

Operational Excellence

File:Recordablerates.jpg
OSHA recordable rates are standard industrial safety performance measures that represent health and safety incidents per 200,000 work hours, a unit of measure chosen by the agency because it approximates the annual work of 100 employees. Lost-time incidents are those injuries or occupational illnesses that result in time away from work.[148]

Greg Garland told financial analysts on April 9, 2012 that operational excellence would be a focus at Phillips 66 and part of his strategy to grow the company. "We'll always focus on operational excellence. We'll focus on building a great organization to execute our plans."[149][150][151]

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that Phillips 66 has a long legacy of being good operators and of operational excellence. "I have a real passion for this. It's the foundation that provides the opportunity to create sustainable value growth. I'm proud of our progress here. We have more work to do."[152]

In mid 2012, Phillips 66 rolled out its five-point strategy to its employees and Tim Taylor and other senior leaders of the company have hosted dozens of town-hall meetings to convey the strategy to workers across all levels of the organization. "Taylor approaches each town-hall gathering in three steps," wrote Morey Stettner in Investor's Business Daily on June 21, 2013. "If it's held at a refinery, he begins by huddling with the site managers to review operating metrics such as safety performance. He applies 'operational excellence' principles that encourage continuous improvement. Second, he visits control rooms to get an overview of the operation. Chatting with employees, he learns about different aspects of their job and the challenges they face. Finally, he hosts town halls. Between 100 and 200 employees usually attend. After Taylor's opening remarks, he engages in a lively Q&A." Taylor and other top executives at Phillips 66 use cross-functional teams to generate ideas. For example, an internal group of 10 to 15 crude oil buyers, logistics experts, refinery technicians, salespeople and others proposed that the company use railcars to transport oil. Thanks to the team's analysis, the company announced in June 2012 that it would buy up to 2,000 railroad tank cars to ship oil from inland shale fields to coastal refineries. One year later, the use of rail is already proving a winner in helping Phillips 66 boost results. "We were an early mover in rail and I'm proud (our team) came up with that," Taylor said. "Without them, we would not have made progress as rapidly as we have."[153]

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Operational Excellence is job one for Phillips. "We have to get this done right. We believe that we protect and enhance shareholder value when we do this well. When we send every employee home safely every day without getting hurt, when we operate the processes in control, when we operate them reliably, when we reduce our environmental footprint and we manage our costs well, we create value for the owners of our Company."[154]

Components of Operational Excellence

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that operational excellence is holistic in our view and includes personal safety, process safety, environmental excellence, reliability, and cost management. "It's all those elements wrapped together."[155]

Personal Safety, Process Safety, and Environment

Reliability

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that reliability has improved over the past couple of years. "We operate above industry average rates."[156]

Cost Management

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that part of Phillips' heritage is stringent, prudent, detailed cost management. "We have all grown up in commodity businesses. We understand the importance of cost, cost structure, and managing those costs every day."[157]

August 1, 2012: Plan to Reduce Controllable Cost by 5% with Optimize 66 Program

Phillips was asked by Paul Sankey of Deutsche Bank during their second-quarters earnings report on August 1, 2012 about the $4 billion of controllable costs and if Phillips had set a target for a 5% reduction in controllable costs for around $200 million of savings. "Yes. Controllable cost, we put a number out there $200 million. We think it is a good number," said Garland. "I frankly think we will do better than that. We tend to always exceed. We have got a program we call Optimize 66 that we are working across this budgeting process, which we are in the middle of now. And people are looking at all avenues to improve efficiency and reduce costs. And, frankly, [the boys] have come up with some great ideas from their early work that I have seen. So I think that the $200 million is a good number for a target."[158]
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  98. The statement that Borger refinery has a "troubled history" is the result of analysis by Hugh Pickens. See following footnotes.
  99. The Frederick Daily Leader reported on October 26, 1979 that two refinery workers trying to repair equipment at the Phillips Petroleum refinery at Borger, Texas were killed and 11 other were injured by deadly fumes from a paralyzing gas or acid lead in the area where they were working. One of the injured was in "very critical" condition. The accident occurred when either hydrogen sulfide gas or hydrflouric acid began leaking. "Apparently, ther was just a leakage of gas, said Jim Ormsby, director of human resources at Phillips. Ormsby said the situation had been brought under control and work at the plant was not interrupted. Frederick Daily Leader. "Fumes at Refinery Kill Two, Injure 11 Borger Workers" October 26, 1979.
  100. Officials said they were relatively certain the disabling fumes were from hydrogen sulfide gas that dissipated quickly, but the substance could have been dhydroflouric acid. A Lubbock, Texas, doctor said strong doses of hydrogen sulfide immediately paralyze the respiratory system and can kill within seconds. The gas is very dangerous, the doctor said, because it quickly overcomes a person's sense of smell. Ormsby said the 13 workers had been overhauling an "alkylation unit" at refinery unit 22 in recent weeks and "were getting it ready to start up." The fumes from the leak drifted over a platform crowded with workers after 1 pm, Ormsby said. Times-Union. "Fumes From Leakage At Refinery Kill 2" October 26, 1979.
  101. Phillips Petroleum was fined $19,600 for violating government safety regulations in connection with the death of the two workers at Borger Refinery. OSHA cited Phillips for "two willful and two serious" safety violations after the two workers fell to their deaths after they inhaled lethal gas on October 25, 1979 during a maintenance check of a special refinery tower at the refinery. Willful violations are those committed with an intentional disregard of, or plain indifference to, the requirements of the Occupational Safety and Health Act and OSHA regulations. A serious violation is defined as one in which there is a substantial probability that death or serious physical harm could result, and the employer knew or should have known of the hazard. Jerry Bailey, OSHA's area director, said that while the autopsies were inconclusive, there was "strong evidence" to show the men died from hydrogen sulfide poisoning. The Prescott Courier. "Oil Firm Fined in Deaths" December 28, 1979.
  102. Bailey added that an OSHA inspector noted the two men did not have respirators, breathing equipment or facial protection available to them when toxic gas spewed from a pipe thought to be empty. "We feel that had Phillips been in compliance with regulations, the deaths could have been prevented," Bailey said. Lawrence Journal-World "Report Says Phillips Hit with Safety Fine" December 30, 1979.
  103. Dan Murtaugh reported at Businessweek on July 3, 2014 that Phillips plans to shut most of its Borger Refinery for as long as 35 days after it was unable to recover from a power failure, according to a report from Energy News Today. Phillips declined to comment on the report when contacted by Bloomberg. Businessweek. "Trains Keep Rolling From Permian Basin on Crude Discounts" by Dan Murtaugh. July 3, 2014.
  104. Greg Garland told analysts during the 2nd quarter earnings conference on July 30, 2014 that with Borger's major turnaround in March and the 30-day-plus outage in July, Borger hasn't run well this year. "So we're working on improving operational reliability at Borger really to me are expectations. But the July event, by the way Borger is back up and running today. But July then was unplanned outage." Seeking Alpha. "Phillips 66's (PSX) CEO Greg Garland on Q2 2014 Results - Earnings Call Transcript" July 30, 2014.
  105. Phillips said it would shut most of the production units at its refinery in Borger, Texas, over the July Fourth weekend to start a month of repairs following a power outage early this week, said sources familiar with operations at the refinery. The company had already been planning to shut the refinery's 25,000 b/d delayed coking unit over the weekend for a three-week overhaul, sources told Reuters. Trade sources have said the refinery was planning a multi-unit overhaul this month to correct operational problems created by the power outage. US Department of Energy. "Energy Assurance Daily" July 7, 2014
  106. CSP Daily News reported on March 26, 2014 that Phillips will pay a $500,000 penalty for violations of the Clean Air Act at the Borger Refinery in Borger, Texas, the Lake Charles Refinery in Westlake, La., the Wood River Refinery in Roxana, Ill., the Alliance Refinery in Belle Chasse, La., the Sweeny Refinery in Old Ocean, Texas, and several terminals across the country. Phillips also agreed to retire more than 21 billion sulfur credits that could have been used in the production of gasoline, which could potentially lead to significantly less pollution from vehicles. In a administrative settlement agreement, the EPA alleged that the company generated invalid sulfur credits between 2006 and 2012 and that Phillips failed to comply with recordkeeping, reporting, sampling and testing requirements at the five refineries. EPA discovered these violations during facility inspections and through a review of company records, which included the results of third-party company audits required by the Clean Air Act. CSP Daily News. "Phillips 66 to Pay $500,000 Over Clean Air Act Violations" March 26, 2014.
  107. Channel 7 Amarillo reported on March 18, 2014 that two Phillips employees and a contractor were injured in an accident at Borger refinery that took place at about 5 pm on March 18, 2014. The injured were taken to Golden Plains Community Hospital to receive medical treatment and the condition of the individuals is not life threatening. One employee is at Golden Plains Community Hospital, the second has been transported to the Lubbock Burn Center, and the contract worker is under observation at Golden Plains Community Hospital. Scanner traffic indicated the injured had been exposed to hydrogen sulfide. Phillips is investigating the incident. Channel 7 Connect Amarillo. "Phillips 66 employees hospitalized" by Larry Lemon. March 18, 2014.
  108. According to the "Borger News-Herald" the incident occurred during turnaround at the unit that handles hydrofluric (HF) acid. The hydrofluric acid unit was shut down at the time the accident occurred. Phillips did not confirm the exact nature of the incident. Phillips is investigating the cause and implications of the incident and details are still being clarified as the influx of turnaround workers has increased traffic inside the plant. "We want to figure out exactly what happened," said Dennis Nuss, a Senior Advisor for Phillips 66 who works with Project Communications. "We want to make sure that something similar will not happen again." When asked if the incident was due to either a chemical exposure or a fire, Nuss said, "There was no fire." The Borger News-Herald is reaching out to contract companies and contractors for more information and will update the story as more information is released. Borger News-Herald. "Workers injured in industrial accident at Phillps 66" by JC Cortez. March 19, 2014.
  109. KVII-TV in Amarillo, Texas, reported on May 1, 2012 an employee at the Phillips 66 refinery in Borger, Texas fell from a height of 100 feet at about 3pm and was taken to the Golden Plains Community Hospital in Borger where he died. "ConocoPhillips deeply regrets the loss of our employee and wishes to extend sympathy to the employee's family, friends and co-workers," said spokesman Rich Johnson. "ConocoPhillips is investigating the cause of the accident." Officials with Phillips 66 say the incident remains under investigation. It is reported that this is the first fatality at the refinery in 25 years. Reuters. "Employee dies after fall at Phillips refinery" May 1, 2012.
  110. ConnectAmarillo.com "Borger ConocoPhillips employee dies after falling" by Travis Ruiz. May 1, 2012.
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  119. Pickens' source for the information on the Phillips 66 Signature Community Initiative grant application that was turned down is a Ponca City official who spoke on background and requested that he remain an unnamed source. The source added that Phillips provided very little information on why the application was turned down or how the application could be improved in a future round of grants. Comment made on August 22, 2014.
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