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How Phillips 66 Balances Refining Upside With Midstream Stability
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Key Takeaways
PSX is positioned to benefit from lower oil prices, which can support margins in its refining operations.
Phillips 66 is allocating an equal 2026 capital of $1.11B each to refining and midstream businesses.
PSX's midstream assets provide stable, long-term cash flows that help offset commodity price swings.
With West Texas Intermediate (WTI) oil prices currently hovering around $60 per barrel, according to data from Oilprice.com, which is significantly lower than a year ago, the overall energy business is now uncertain.
Also, EIA projects the spot average West Texas Intermediate price for 2026 at $52.21 per barrel, lower than $65.40 per barrel for 2025. Thus, Phillips 66 (PSX - Free Report) , which generates significant margin from its refining activities, is likely to benefit from soft oil prices.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. Along with investing in refining operations, Phillips 66 is allocating almost the same capital for midstream. For 2026, PSX has decided to allocate $1,110 million of capital for each of refining and midstream activities.
Midstream business, by its very definition, is stable since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility. Hence, having a diversified business model, PSX is insulated from the commodity price volatility to a great extent.
VLO & PARR Also Poised to Gain
Valero Energy Corporation (VLO - Free Report) and Par Pacific Holdings Inc. (PARR - Free Report) , two other well-known refiners, are also likely to benefit from the ongoing relatively low oil prices.
Valero Energy, with 15 refineries, has a throughput capacity of 3.2 million barrels per day. VLO mentioned that its refining activities are capable of generating sufficient cash flows to support shareholders’ returns along with growth.
Par Pacific is mainly a refining company with the capacity to process 219,000 barrels of oil daily. Notably, having exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely to have been enjoying a cost advantage.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 20.6% over the past year compared with the 15.7% rise of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 14.41X. This is above the broader industry average of 4.55X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PSX’s 2026 earnings has seen downward revisions over the past seven days.
Image: Bigstock
How Phillips 66 Balances Refining Upside With Midstream Stability
Key Takeaways
With West Texas Intermediate (WTI) oil prices currently hovering around $60 per barrel, according to data from Oilprice.com, which is significantly lower than a year ago, the overall energy business is now uncertain.
Also, EIA projects the spot average West Texas Intermediate price for 2026 at $52.21 per barrel, lower than $65.40 per barrel for 2025. Thus, Phillips 66 (PSX - Free Report) , which generates significant margin from its refining activities, is likely to benefit from soft oil prices.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. Along with investing in refining operations, Phillips 66 is allocating almost the same capital for midstream. For 2026, PSX has decided to allocate $1,110 million of capital for each of refining and midstream activities.
Midstream business, by its very definition, is stable since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility. Hence, having a diversified business model, PSX is insulated from the commodity price volatility to a great extent.
VLO & PARR Also Poised to Gain
Valero Energy Corporation (VLO - Free Report) and Par Pacific Holdings Inc. (PARR - Free Report) , two other well-known refiners, are also likely to benefit from the ongoing relatively low oil prices.
Valero Energy, with 15 refineries, has a throughput capacity of 3.2 million barrels per day. VLO mentioned that its refining activities are capable of generating sufficient cash flows to support shareholders’ returns along with growth.
Par Pacific is mainly a refining company with the capacity to process 219,000 barrels of oil daily. Notably, having exposure to Canadian heavy oil, which is cheaper than lighter crude, Par Pacific is likely to have been enjoying a cost advantage.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 20.6% over the past year compared with the 15.7% rise of the composite stocks belonging to the industry.
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 14.41X. This is above the broader industry average of 4.55X.
The Zacks Consensus Estimate for PSX’s 2026 earnings has seen downward revisions over the past seven days.
PSX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.