Investment Returns - The total return on the Fund's net asset value for the first half of 2025 was 2.3%, with dividends and capital gains reinvested [1] - The S&P Energy Sector and the S&P 500 Materials Sector had returns of 0.8% and 6.0%, respectively, while the benchmark (S&P 500 Energy Sector 80% and S&P 500 Materials Sector 20%) returned 1.8% [1] - The total return on the Fund's market price for the same period was 3.1% [1] Annualized Comparative Returns - For the 1-year period, the Fund's net asset value (NAV) decreased by 2.2%, while the market price increased by 1.7% [4] - Over 3 years, the NAV returned 10.7% and the market price returned 12.3% [4] - The 5-year returns were 21.2% for NAV and 22.1% for market price, while the 10-year returns were 6.1% for NAV and 6.8% for market price [4] Net Asset Value - As of June 30, 2025, the Fund's net assets were $634.74 million, down from $689.99 million a year earlier [6] - The number of shares outstanding increased to 26,888,697 from 25,453,641 [6] - The net asset value per share decreased to $23.61 from $27.11 [6] Largest Equity Portfolio Holdings - The top ten equity holdings accounted for 62.9% of net assets, with Exxon Mobil Corporation at 22.7% and Chevron Corporation at 11.5% [7] - Other significant holdings included ConocoPhilips (5.3%), Linde plc (4.7%), and EOG Resources, Inc. (3.8%) [7] Industry Weightings - The Fund's net assets were allocated primarily to the energy sector, with Integrated Oil & Gas at 35.1% and Exploration & Production at 19.8% [9] - Other allocations included Storage & Transportation (11.6%), Chemicals (13.6%), and Metals & Mining (3.6%) [10]

Company Performance - Phillips 66 (PSX) closed at $129.01, reflecting a -2.05% change from the previous day's closing price, underperforming the S&P 500 which gained 0.14% [1] - Over the past month, shares of Phillips 66 have appreciated by 7.83%, outperforming the Oils-Energy sector's gain of 2.89% and the S&P 500's gain of 3.97% [1] Upcoming Financial Results - Phillips 66 is set to announce its earnings on July 25, 2025, with an anticipated EPS of $1.62, representing a 29.87% decline compared to the same quarter of the previous year [2] - The consensus estimate for revenue is $30.54 billion, down 21.51% from the prior-year quarter [2] Fiscal Year Estimates - For the entire fiscal year, Zacks Consensus Estimates predict earnings of $4.17 per share and revenue of $122.7 billion, indicating changes of -32.2% and -15.67% respectively from the previous year [3] Analyst Estimates and Stock Performance - Recent adjustments to analyst estimates for Phillips 66 indicate changing near-term business trends, with upward revisions reflecting analysts' positivity towards the company's operations [4] - A 2.34% decline in the Zacks Consensus EPS estimate over the past month has resulted in Phillips 66 currently holding a Zacks Rank of 4 (Sell) [6] Valuation Metrics - Phillips 66 has a Forward P/E ratio of 31.59, which is a premium compared to the industry average Forward P/E of 18.57 [7] - The company has a PEG ratio of 2.11, compared to the industry average PEG ratio of 1.74 [7] Industry Context - The Oil and Gas - Refining and Marketing industry, part of the Oils-Energy sector, has a Zacks Industry Rank of 198, placing it in the bottom 20% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Insights - The article emphasizes the importance of innovation and disruption in the financial sector, particularly focusing on high-tech and early growth companies [1] Group 1: Investment Focus - The company is keen on identifying growth buyouts and value stocks as potential investment opportunities [1] - There is a strong emphasis on monitoring the pace of technological advancements within the industry [1] Group 2: Research and Analysis - The article aims to provide readers with comprehensive research and insights into current events affecting the industry [1]

Strategy and Performance - Phillips 66's TSR outperformed its synthetic proxy peer median by 22% (67% vs 45%) since the 2022 CEO transition[18] - The company's integrated model results in a 39% higher return of capital to shareholders compared to its weighted proxy peer average over the last 10 years (646% vs 465%)[20, 21] - Phillips 66's average return on capital employed is 44% higher than its weighted proxy peer average over the last 10 years (107% vs 74%)[22, 23] - The company has a 15% compound annual growth rate (CAGR) in dividends[32, 36] - Phillips 66 has repurchased 35% of its initial shares outstanding since the 2012 spin-off[36] Refining - Phillips 66 aims to reduce refining costs to $550 per barrel by 2027[51] - The company reduced refining costs from $698 per barrel to $590 per barrel[50] - Every $050 per barrel of cost reduction is expected to improve adjusted EBITDA by approximately $315 million[66] Midstream - Phillips 66 projects Midstream adjusted EBITDA growth since 2021[78] - The company is projecting $975 million in Midstream capital spend in 2025[90] Chemicals - CPChem is expected to add approximately 7 million metric tons per annum (MMTA) of capacity through self-funded organic growth from 2017 to 2027[101, 143] - CPChem anticipates a 19% chain margin recovery by 2027[143] Synergies and Capital Allocation - Phillips 66 generates over $500 million in annual operating synergies through integration[106] - The company targets returning over 50% of net operating cash flow to shareholders[53, 114, 119]

Group 1 - Phillips 66 (PSX) is considering producing CARB gasoline at its Ferndale refinery to improve air quality and increase gasoline supplies in California [1][2] - The Ferndale refinery has a capacity of 105,000 barrels per day (bpd) and will begin producing CARB gasoline for delivery to northern and southern California following the closure of the Los Angeles refinery, which has a capacity of 139,000 bpd [2][3] - The company is collaborating with California Governor Gavin Newsom and regulatory authorities to maintain fuel supply in the state after the Los Angeles refinery shutdown [3] Group 2 - Valero Energy plans to shut down or restructure its Benicia refinery in California by April 2026, which may lead to reduced refining capacity and higher gas prices in the state [4] - The refinery closures are primarily due to regulatory policies aimed at achieving cleaner energy targets and reducing emissions [4]

Group 1 - The core topic discussed was the recent annual meeting and the outcome of the shareholder vote, which resulted in a split Board vote with 2 out of 4 nominees elected [4] - The company views the shareholder engagement process as an opportunity to connect with a broad array of shareholders and communicate its strategy effectively [4] - The feedback received from shareholders was constructive, helping the company to refine its message and reaffirm its commitment to improving Refining performance [4] Group 2 - Mark E. Lashier has been the CEO of Phillips 66 since 2022 and has a long history with the company, including previous roles at Phillips Petroleum and CPChem [1] - The company is focused on enhancing its Refining performance and has been on this journey for some time, with positive responses from employees during the process [4]

Summary of Phillips 66 (PSX) 2025 Conference Call Company Overview - **Company**: Phillips 66 (PSX) - **CEO**: Mark Weisher, CEO since February 2022, has a long history with the company and its predecessors [1] Key Topics Discussed Shareholder Engagement - The company faced a situation with an activist shareholder, resulting in a split board vote with two out of four nominees elected [3] - The process provided constructive feedback from shareholders, helping to clarify the company's strategy and commitment to improving refining performance [4][6] Financial Strategy - Phillips 66 is committed to returning at least 50% of net operating cash flow to investors, prioritizing sustaining capital and dividends [7] - The capital budget is set between $2 billion to $2.5 billion, with $1 billion allocated for growth capital [8] - Proceeds from the sale of a 65% interest in jet assets in Germany and Austria are expected to be around $1.5 billion after tax, which will be used for debt pay down [9] Midstream Expansion - The company is expanding gas processing capacity with projects like Dos Pikos II and Iron Mesa, aiming to add approximately 700 million cubic feet per day of gathering processing capacity [11] - The Iron Mesa facility will be the largest gas gathering and processing facility, addressing reliability challenges and expected to come online in February 2027 [14] Chemicals Segment - CPChem, a joint venture, is currently experiencing one of the longest downturns in the industry but is expected to recover due to increasing global demand and rationalization of non-competitive assets [19][20] - CPChem is generating around $1 billion in EBITDA annually, while competitors are struggling [21] Refining Operations - The company is focused on improving refining reliability and cost control, with a target to reduce costs to $5.50 per barrel by 2026 [29][33] - The closure of the Los Angeles refinery is expected to reduce controllable costs and free up sustaining capital for other uses [30] - The Wilmington refinery closure was driven by a loss of crude advantage and high operational costs [46] Market Dynamics - The company anticipates crude differentials to widen back to $12 to $14 as maintenance and wildfires in Alberta are resolved [40] - Coastal light-heavy differentials are expected to face more headwinds than tailwinds due to geopolitical factors and shifts in crude supply [44] Regulatory Environment - The outlook on Renewable Identification Numbers (RINs) is complex, with potential impacts from small refinery exemptions and the EPA's interpretations [51][52] Additional Insights - The company is committed to transparency in refining-related income and is exploring ways to improve comparability with peers [34] - There is an ongoing review of all assets, including chemicals, to assess their value and potential for sale [24] This summary encapsulates the key points discussed during the Phillips 66 conference call, highlighting the company's strategic focus, financial commitments, and market outlook.

Investment Recommendations - The firm suggests turning around on AMD, implying a potential buy or hold recommendation after previous underperformance [1] - The firm favors high-quality dividend pairs amidst historic uncertainty, indicating a preference for stable, income-generating investments [1] - The firm highlights UUP (dollar) and treasuries as a contrarian play, suggesting a potential investment opportunity in safe-haven assets during uncertain times [2] - The firm mentions PSX Corp (formerly Philip 66) as a stock to watch [3] Market Sentiment - The firm acknowledges "historic uncertainty" driving investment decisions [1] - The firm observes a "flight to safety" trend, with investors potentially moving towards treasuries and the dollar [2]

Core Viewpoint - The Zacks Oil and Gas - Refining & Marketing industry is experiencing a paradox where strong fundamentals coexist with weak refining margins and market sentiment, primarily due to economic slowdown concerns and regulatory uncertainties [1][3][4]. Industry Overview - The industry includes companies that sell refined petroleum products and operate terminals, storage facilities, and transportation services, with refining margins being highly volatile and influenced by various factors such as inventory levels and capacity utilization [2]. Trends Defining the Industry's Future - Despite healthy demand for diesel and gasoline, refining margins have not met expectations, indicating a disconnect likely driven by macroeconomic concerns [3]. - The transition from the Blenders' Tax Credit to the Production Tax Credit has negatively impacted renewable diesel profitability, leading to reduced output and uncertainty regarding future recovery [4]. Long-Term Outlook - The refining industry is positioned for a favorable mid-cycle environment, supported by structural advantages in the U.S. market, including access to domestic crude and low-cost inputs [5]. - Marathon Petroleum anticipates continued global demand growth for refined products, despite upcoming capacity reductions in the U.S. and Europe [5]. Industry Performance - The Zacks Oil and Gas - Refining & Marketing industry ranks 139 out of 245 Zacks industries, placing it in the bottom 43% and indicating dull near-term prospects [6][7]. - The industry's earnings estimates for 2025 and 2026 have decreased by 38.3% and 19.7%, respectively, over the past year, reflecting a negative outlook [9]. Comparative Performance - Over the past year, the industry has underperformed compared to the broader Zacks Oil - Energy Sector and the S&P 500, with a decline of 16.9% versus an 8.2% decrease for the sector and a 12.5% gain for the S&P 500 [10]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 3.76X, significantly lower than the S&P 500's 16.65X and the sector's 4.59X, indicating a potentially undervalued position [14]. Stocks in Focus - **Marathon Petroleum**: A leading independent refiner with a market cap of $48.7 billion, known for strong cash flow generation and shareholder returns, though shares have lost 9% in the past year [18][19]. - **Phillips 66**: Operates 13 refineries with a total capacity of 2.2 million barrels per day, shares have decreased by 19% in the past year [21][22]. - **Valero Energy**: The largest independent refiner in the U.S. with a capacity of 3.2 million barrels per day, shares have lost 18% in the past year [25][27]. - **Galp Energia**: A Portuguese firm with a market cap of $11.3 billion, shares have decreased by 25% in the past year [28][29].

Core Viewpoint - Phillips 66 shareholders will elect two directors nominated by Elliott Investment Management, marking the activist investor's first proxy vote in the U.S. [1] Group 1 - Elliott's preliminary analysis indicates that shareholders are prepared to select Sigmund Cornelius and Michael Heim from Elliott's four nominees [1] - Phillips 66 stated that its own nominees, Robert Pease and Nigel Hearne, will also be elected [1]