Phillips 66 stock reaffirmed as Buy by UBS on refining optimizations

Investing.com - UBS has reiterated its Buy rating and $150.00 price target on Phillips 66 (NYSE:PSX), currently trading at $130.40, as the energy company works to optimize its recently acquired refinery assets. According to InvestingPro data, analyst targets range from $127 to $170, with the stock showing FAIR overall financial health.

The investment firm highlighted management’s enthusiasm about full ownership of WRB assets, noting Phillips 66 can now operate Borger, Wood River, and Ponca City refineries in a more coordinated manner and pursue smaller "quick hit" projects with complete ownership of the facilities.

UBS pointed out that Phillips 66 previously indicated it could reach its mid-cycle refining EBITDA target of $5 billion when the combined refining indicator hits $14 per barrel, with current conditions approaching that threshold at approximately $12.50 per barrel in July and August.

Management expressed optimism about diesel margins, gasoline demand, and wider quality discounts, with increased crude flows from Canadian producers and additional barrels expected to enter the market as OPEC internal power burn ends, potentially driving wider quality discounts in the Atlantic Basin.

The company also noted that closing its Los Angeles refinery would reduce the cost of its entire refining system by approximately $0.30 per barrel, as the LA facility’s operating expenses per barrel are "many times higher" than its Central Corridor assets.

In other recent news, Phillips 66 has announced a $2 billion notes offering with maturities in 2056. The offering includes $1 billion in 5.875% Series A Junior Subordinated Notes and $1 billion in 6.200% Series B Junior Subordinated Notes, both guaranteed by the company. Additionally, Phillips 66 has entered a definitive agreement to acquire the remaining 50% ownership interest in WRB Refining LP from Cenovus Energy for $1.4 billion in cash. This acquisition will increase the company’s refining capacity by approximately 250,000 barrels per day. UBS has reiterated its Buy rating on Phillips 66, raising its stock price target to $143, citing strong earnings and a competitive business model. Furthermore, Phillips 66 has appointed Sean Maher as vice president of investor relations and chief economist, effective October 1. Maher brings nearly 30 years of experience in energy finance and investment to the role, succeeding Jeff Dietert, who is retiring. These developments highlight Phillips 66’s strategic moves in the energy sector.

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