The Citgo Controversy: How Phillips 66’s Governance Battle Could Reshape Energy Markets

The battle between Phillips 66 (PSX) and activist investor Elliott Management has escalated into a high-stakes proxy war, with accusations of conflicts of interest and competing visions for the energy giant’s future. At the heart of the dispute is Elliott’s simultaneous push to acquire Citgo Petroleum—a direct competitor—and dismantle Phillips 66’s integrated business model. As the May 21 shareholder meeting approaches, investors must weigh whether Phillips 66’s defense of its long-term strategy or Elliott’s call for a breakup better positions the company for value creation.

The Conflict of Interest at the Core

Phillips 66 has accused Elliott of a material conflict of interest due to its involvement in bidding for Citgo through Amber Energy, an Elliott-backed entity. The company argues that Gregory Goff, CEO of Amber Energy and an Elliott ally, is misleading shareholders by failing to disclose his ties to the firm. Goff, who owns a $10 million stake in Phillips 66, publicly endorsed Elliott’s director nominees in a shareholder letter, claiming the company suffers from poor governance. Phillips 66 fired back, labeling Goff’s claims “plainly misleading” and emphasizing his role in a bid for a direct competitor.

The board’s April 9 rebuttal highlighted the stakes: “The notion he is an investor independent of Elliott is obviously false,” it stated, pointing to Amber Energy’s ongoing efforts to acquire Citgo—a rival that could undercut Phillips 66’s refining and midstream operations.

Proxy Fight: A Clash of Strategies

The May 21 shareholder meeting will determine the fate of Phillips 66’s strategy. Elliott has nominated seven director candidates to push its agenda of spinning off midstream assets, divesting non-core holdings, and focusing solely on refining. The firm argues that this “simplification” could unlock up to $20 billion in shareholder value.

Phillips 66 has countered with its own slate of four nominees, including two new candidates: John Lowe (a midstream/refining veteran) and A. Nigel Hearne (a 35-year energy industry leader). The company defends its integrated model—spanning refining, chemicals, and renewables—as a strength in volatile markets. It points to its track record of returning $43 billion to shareholders since 2013 through dividends and buybacks, which it claims Elliott’s rushed breakup would jeopardize.

Why the Outcome Matters for Investors

The proxy battle reflects a broader tension between short-term activism and long-term value creation. Elliott’s focus on splitting the company aligns with its $2.5 billion stake and its reputation for aggressive corporate restructuring. However, Phillips 66’s integrated model has insulated it from some market swings, particularly in renewable fuels and petrochemicals.

Crucial data points:
- Phillips 66’s EBITDA margins (24% in Q1 2025) outperform industry averages, suggesting operational efficiency.
- Elliott’s prior campaign in 2024 resulted in only one board seat (Robert Pease), indicating resistance to deeper changes.
- The unresolved Citgo sale remains under court supervision, with Elliott’s bid facing creditor challenges—a risk to its broader strategy.

Risks and Implications

If Elliott prevails, the immediate focus will be on asset sales and cost-cutting, which could boost short-term earnings but risk long-term synergies. A Phillips 66 victory would preserve its integrated model, but it must continue proving its value against peers like Marathon and Valero.

The stock’s recent volatility—falling 12% in 2025 amid the proxy fight—reflects investor uncertainty. A vote for continuity could stabilize the stock, while a breakup may trigger a short-term spike followed by prolonged uncertainty.

Conclusion: A Crossroads for Energy Strategy

The May 21 shareholder vote is more than a governance clash—it’s a referendum on the future of integrated energy companies. Phillips 66’s defense of its diversified operations and $43 billion in shareholder returns since 2013 underscores its case for stability. Meanwhile, Elliott’s aggressive stance highlights the risks of prioritizing short-term gains in a sector where infrastructure and long-term planning are critical.

Investors must decide: Is Phillips 66’s integrated model a resilient asset or a bloated liability? The answer will hinge on whether the board’s track record outweighs Elliott’s “simplify and profit” mantra—a choice that could redefine the energy landscape for years.

The stakes are clear: A vote for Elliott could spark a wave of breakups in the energy sector, while Phillips 66’s victory might signal that integration still has a role to play. Either way, the outcome will set a precedent for how activist investors and management navigate corporate conflicts in an evolving industry.