How Phillips 66 Balances Refining Upside With Midstream Stability

Core Insights - Current West Texas Intermediate (WTI) oil prices are around $60 per barrel, significantly lower than a year ago, leading to uncertainty in the energy sector [1] - The EIA projects the average WTI price for 2026 at $52.21 per barrel, down from $65.40 per barrel in 2025, which may benefit Phillips 66 (PSX) due to its refining margins [1] Company Overview - Phillips 66 is a leading refiner that has diversified its operations into midstream and chemicals, allocating equal capital of $1,110 million for both refining and midstream activities in 2026 [2][7] - The midstream business is characterized by stable cash flows and reduced vulnerability to commodity price fluctuations, providing PSX with a buffer against market volatility [3] Competitive Landscape - Valero Energy Corporation (VLO) and Par Pacific Holdings Inc. (PARR) are also positioned to benefit from low oil prices, with VLO operating 15 refineries and a throughput capacity of 3.2 million barrels per day [4] - Par Pacific has a refining capacity of 219,000 barrels per day and benefits from processing cheaper Canadian heavy oil [5] Financial Performance - PSX shares have increased by 20.6% over the past year, outperforming the industry average increase of 15.7% [6] - The current valuation of PSX is at a trailing 12-month EV/EBITDA of 14.41X, which is significantly higher than the industry average of 4.55X [8] Earnings Estimates - The Zacks Consensus Estimate for PSX's 2026 earnings has been revised downward over the past week, indicating potential challenges ahead [9] - Current earnings estimates for PSX are $2.21 for the current quarter, $2.22 for the next quarter, and $6.15 for the current year, showing a slight decline from previous estimates [10]