Phillips 66: When Better Execution Meets a Strong Refining Cycle
Summary
I am retaining my Strong Buy rating on Phillips 66 following its second-quarter 2026 results. In my previous analysis, I argued that better refining execution, a growing Midstream business and disciplined capital allocation were making Phillips 66 less dependent on favorable refining cycles. Q2 strengthens that thesis because those structural improvements are now meeting an exceptionally supportive refining environment.
Second-quarter performance improved dramatically. Earnings reached $3.8 Bn, adjusted earnings were $3.8 Bn, adjusted EPS reached $9.41, and adjusted EBITDA increased to $5.9 Bn. Refining was the largest contributor as realized margins more than doubled sequentially to $24.08 per barrel while crude utilization remained strong at 96%.
The investment case extends beyond refining. Record NGL fractionation and LPG export volumes strengthen the Midstream growth story, while management continues targeting approximately $4.5 Bn of annualized Midstream EBITDA by the end of 2027. At the same time, rapid debt reduction provides greater flexibility for shareholder returns.
