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Phillips 66 Repurchases 35M Shares From Berkshire Hathaway

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To enhance shareholders’ value, Phillips 66 (PSX - Free Report) will repurchase its common stock from a wholly-owned subsidiary of Berkshire Hathaway Inc. (BRK.A - Free Report) .

The company will buy back 35 million shares for $93.725 per share. The repurchase is valued at $3.3 billion and is expected to close on Feb 14.

On completion, Phillips 66 will have outstanding shares of 466.5 million, of which, Berkshire Hathaway will have an equity ownership interest in 45.7 million shares.

Warren E. Buffett, Berkshire Hathaway Chairman and CEO, cited the reason for sale as none other than its desire to get rid of the regulatory requirements that come with ownership levels above 10%. Buffett is optimistic about the company’s diverse downstream portfolio and strong management.

Per Phillips 66, the transaction is beneficial to all shareholders. The repurchase is immediately accretive to earnings and is a positive for valuation. The company is committed to grow Midstream and Chemicals businesses and boost returns from Refining and Marketing.

The company is a leading player in each of operations like refining, chemicals and midstream in terms of size, efficiency and strengths. Phillips 66 is on track to enhance its potential in every business segment by streamlining its portfolio of assets and investing in growth.

The company has an impressive capital deployment record. The company regularly rewards shareholders with increased dividends and share repurchases. This indicates its financial strength and steady returns from operating units.

Price Performance

Over the last three months, Phillips 66’s shares have underperformed the industry. The company’s shares have gained 1% compared with the industry’s rally of 2%.  



 

Zacks Rank & Key Picks

Phillips 66 carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are EOG Resources (EOG - Free Report) and Devon Energy (DVN - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based EOG Resources is a major independent oil and gas exploration and production company. The company delivered an average positive earnings surprise of 40.94% in the preceding four quarters.

Devon Energy, based in Oklahoma City, is an independent energy company engaged primarily in the exploration, development and production of oil and natural gas. The company delivered a positive earnings surprise of 13.77% in the preceding quarter.

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