Phillips 66 Caps Record 2025 with Strong Earnings, Lays Out Ambitious Cost and Growth Targets Through 2027

HOUSTON – Phillips 66 (NYSE: PSX) closed the books on a record 2025, posting what executives termed "strong financial and operating results" during its year-end earnings call. The performance, fueled by higher refining utilization and surging midstream volumes, sets the stage for an ambitious multi-year plan targeting significant cost savings and EBITDA growth by 2027.

CEO Mark Lashier pointed to a year of strategic repositioning, including the full acquisition of the WRB joint venture, the partial sale of its European retail business, and the idling of its Los Angeles refinery. "Safety was foundational to our best year ever in that metric," Lashier stated, framing it as a prerequisite for operational and financial success.

Refining: A Relentless Focus on Costs

Central to the company's strategy is a drive to slash adjusted controllable refining costs to approximately $5.50 per barrel by the end of 2027. CFO Kevin Mitchell reported Q4 earnings of $2.9 billion ($7.17/share), with adjusted earnings at $1.0 billion ($2.47/share). The results included a final $239 million pre-tax charge for the idled LA refinery, which executives expect will become a tailwind for per-barrel costs in 2026.

Refining head Rich Harbison detailed that Q4 costs landed at $5.96 per barrel, but would have been in the $5.50-$5.57 range excluding the wind-down. He announced a net capacity increase of about 35,000 barrels per day across the system, citing improved operations and project completions.

Midstream: The Growth Engine

The Midstream and Chemicals segment, led by Don Baldridge, has been a standout, growing adjusted EBITDA by 40% since 2022 and delivering about $1 billion in Q4 2025 alone. Baldridge laid out a target of $4.5 billion in run-rate Adjusted EBITDA by year-end 2027, supported by organic projects like the Permian-based Dos Picos II and the upcoming Iron Mesa plant. The ongoing Coastal Bend pipeline expansion is set to add 125,000 bpd of capacity by late 2026.

Capital Discipline and Shareholder Returns

Phillips 66 returned $756 million to shareholders in Q4 via dividends and buybacks. Mitchell reiterated a commitment to return greater than 50% of operating cash flow to shareholders, while using excess cash for debt reduction. The company aims to cut debt by about $1.5 billion annually over the next two years. Net debt to capital stood at 38% at quarter's end.

Market Dynamics and Outlook

Executives addressed volatile crude differentials, noting the WRB acquisition increased exposure to Canadian heavy crude by 40%. Brian Mandell, head of Marketing and Commercial, highlighted the company's sensitivity, where each $1 move in the crude differential equates to roughly $140 million in annual earnings. For Q1 2026, the company expects global refining utilization in the low 90s percentage range.

Analyst and Investor Reactions

"The numbers are solid, and the 2027 targets provide a clear roadmap," said Michael Thorne, energy analyst at Granite Point Capital. "The focus on per-barrel cost reduction is particularly credible given the detailed initiative breakdown. The midstream growth trajectory looks achievable."

Sarah Chen, portfolio manager at Clearwater Advisors, offered a more measured take: "While the cost targets are ambitious, execution in a volatile energy cost environment remains key. The debt reduction plan is prudent, but shareholder returns are heavily back-end loaded to those future cash flows."

A more critical voice came from David R. Feld, managing partner at Feld & Co., an activist fund: "This is yet another promise of 'jam tomorrow.' They idle a major refinery, book a charge, and call it a future benefit. Where is the transformative portfolio action? The 2% capacity increase is a rounding error. Shareholders should demand more aggressive asset sales and a faster return of capital, not just promises for 2027."

As Phillips 66 moves into 2026, the company appears balanced between harvesting efficiencies from its refined footprint and investing in its capital-intensive midstream growth projects, all under a firm framework of capital discipline.