Is Phillips 66's Midstream Push Building More Resilient Business?

Core Insights - Phillips 66 (PSX) is an integrated downstream player that refines crude oil into final products and also engages in the transportation and storage of crude oil, natural gas, NGL, and refined products through its pipeline network and storage facilities [1] Group 1: Business Environment - The current trading price of West Texas Intermediate (WTI) crude is below $60 per barrel, down from $73.5 per barrel year over year, indicating a soft oil price environment that benefits downstream players like PSX by allowing them to purchase raw materials at lower prices [2] - PSX derives a significant portion of its revenues from its midstream business by renting midstream assets to shippers, generating stable fee-based revenues that provide predictable cash flow and protect the business from crude price volatility [3][9] Group 2: Strategic Focus - PSX is increasingly focusing on growing its midstream and chemicals businesses to generate additional cash flow and strengthen its overall business model [4][9] Group 3: Competitive Position - Compared to other downstream players like PBF Energy Inc. (PBF) and Valero Energy Corporation (VLO), PSX has an advantage due to its revenue generation from both midstream and downstream businesses, while PBF's business model is more vulnerable to crude price fluctuations due to its limited midstream revenue [5] Group 4: Financial Performance - Shares of Phillips 66 have gained 13.3% over the past year, outperforming the 12.2% rally of the composite stocks in the industry [6] - PSX trades at a trailing 12-month enterprise-value-to-EBITDA (EV/EBITDA) of 13.69X, which is significantly above the broader industry average of 4.51X [8] - The Zacks Consensus Estimate for PSX's 2025 earnings remains unchanged at 6.19, with the current quarter estimate at 2.24 and the next quarter at 2.62 [10][11]