Phillips 66 — Call Transcript 2026

All right, let's go ahead and get started with our keynote fireside chat with Phillips 66. Thank you to all the investors in the room and for those who are tuning in on the webcast. Those of you that don't know me, my name is Joe Laetsch, and I'm the refining analyst here at Morgan Stanley. Today, I'm very pleased to be joined by Mark Lashier, Chairman and CEO of Phillips 66. Before we get going here, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that out of the way, Mark, thank you for being here with us this afternoon. We have plenty to talk about today, but maybe to start higher level here. Phillips 66 has been active the past few years, building out its history business, improving refining operations, and optimizing its portfolio. As you sit here today, can you talk a bit about that journey and your strategic initiatives and plans in 2026 and beyond? Sure, Joe, I'd love to. Thank you everyone for being here. Thank you, Joe, for hosting this. It's been a great conference. We've gotten a lot out of it, timely and all the events going on. When you think about the journey that Phillips 66 has been on, we are intensely focused on being a unique opportunity for investors. We have designed things and are leaning into things such that we've got this durable, sustainable cash flow across the cycles. The integrated positions we have can be countercyclical. We've got businesses that just deliver rock solid earnings quarter after quarter. We've got more volatile segments that can really throw off a lot of cash at the peak. Then afford us opportunities to do things across the spectrum of investment opportunities we have, while still delivering at least 50% of our cash back to shareholders each and every quarter. We've had a strong growth story in our dividend. We're committed to being competitive, sustainable, and growing with our dividend every year. It's grown every year. I think our annual compounded rate of increases has been about 15% over the 13 years that we've been around, and that's our commitments, and we're sticking to it. We just increased our dividend again this year at our last board meeting. When you think about those segments, we've got midstream that gathers hydrocarbons, whether it's crude oil, natural gas, natural gas liquids. We move those hydrocarbons through our transportation assets to our facilities where we, you know, convert them to the molecules that you need, that you use every day. We just don't convert them to any molecules. We find the best value opportunity that we can create for our shareholders. We get those molecules out into the marketplace, finding the best disposition for those molecules across the globe. We've got, in addition to our midstream organization, refining organization, we've got a commercial organization, and their job is to optimize what goes in to what comes out of these assets and then captures the ultimate value that we can capture out of the marketplace. It all works incredibly well together. Don't forget about CPChem, our 50/50 JV with Chevron. It's deeply physically integrated with us at our Sweeney Complex. It consumes a lot of the NGLs that we produce, and so we understand those markets very well and how it interacts with the markets for our NGL clean products or purity products. It's all one big integrated hydrocarbon machine, and we endeavor to do it better each and every day. We've been on a journey of improvement in refining. We recognized four or five years ago that we had some challenges in refining, that we had a cost problem in refining, and we stepped up to the plate and we've been delivering and executing. It's been a hard journey, but we've reduced costs across the board. We've taken $1 a barrel plus out of our refining costs. We've improved the utilization of our assets. We've improved the clean product yield and all the time in the background, lowering the costs and delivering value. We've built a midstream wellhead-to-market presence that can compete with any midstream company out there. It's been a tough journey as well, but we've been very deliberate and very disciplined in the investments we made, and now you're seeing the fruits of those labor. Over the last four years, I think we've increased our earnings there by 40%. We're right at about $4 billion EBITDA a year. We're headed to four and a half by the end of 2027. We've enhanced our commercial organization. We've added a couple of dozen of origination players out across the globe, people that speak the local language, that know the local landscape, that can help us find the best feedstocks and the best disposition for the molecules that we're producing. We're on the move. We're looking for every way we can improve across the enterprise, and we're leaning in hard on integration and delivering value to shareholders every day. Awesome. That's a great overview and a lot to unpack there. Maybe before we get into the segments, I have to ask, one of the key topics in meetings this week has been the events that have unfolded in Iran and the Middle East over the past few days, and there's a lot of factors to consider that could affect refiners from product prices, feedstock costs, freight, as well as, we're talking about chemicals, implications as well. Well, there's still a lot of uncertainty about the path forward here. Could you just talk about what you're hearing from your commercial local organization currently? How are you thinking about potential impact to PSX, whether it's on the refining side or chemicals or anything else that you're seeing? I'm really glad that we're blessed with a strong commercial organization. Even before this started happening when you could see the military build up, they started thinking about what could happen, and then they're providing thoughtful insights every day, multiple times a day and looking what's going on across the spectrum. Whether it's LNG movements, the impact there on LNG markets out in the world marketplace to what the response is in Asia from a crude acquisition perspective. How refineries are already, you know, signaling that they're backing off run rates in Asia and what does that mean? Answering the questions, the very challenging questions just in the U.S., where we're safe, secure, we've got access to whether it's Western Canadian crude or Venezuelan crude or Permian crude. We've got access to crudes, what's it going to do to the pricing? What's it going to do to the pricing of refined products? What's going to be the political reaction globally and domestically? All of those things are coming into play. You know, this is, all of us, I think, intellectually have, you know, done the game in our head. Gee, what would happen if the Straits of Hormuz was closed? To sit here today and watch it unfold in real-time, it's a little bit surreal to see these things. This is not just a scenario planning exercise. This is a real-life war. People, unfortunately are dying. We've lost, I think, six U.S. soldiers, and it's tragic to see what is unfolding. Now, how do we get to the other side of this, and how do we ensure that the world has access to the resources it needs to avoid, you know, major economic disruption? How do we work with the government to ensure that the U.S. economy is on solid footing and that our customers get the resources they need to go about their business? The commercial group has been very good at providing the fundamentals we need to start thinking that through and making those decisions. That's helpful. I recognize there's a lot of uncertainty right now. Maybe we could dive into some of the segments. Starting with refining. Crack's been volatile to start the year. Can you just talk about what you're seeing across your footprint from a demand perspective and maybe longer term, how you see the supply-demand balance shaping up over the next couple of years? Yeah. At a high level, we've seen strong distillate demand. We've been in heavy distillate mode, and certainly current events only reinforce that. You can see the strange situation where there's no incentive to move into summer gasoline mode, which could create some interesting dynamics. Gasoline demand is... Diesel demand has been high, mostly at the expense of renewable diesel. The economics changed about around renewable diesel, that volume has been replaced by traditional diesel, but you're also seeing stronger demand out in the economy. There's a lot of strength in distillate. Jet continues to be strong. Gasoline has been about flat year-to-year. If gasoline has to compete with distillate this summer, it's not gonna feel flat. It's gonna feel very tight. That's kind of the 50,000 ft view of where we are on supply and demand. I think if you look back, again, I shouldn't be remiss to touch base on how we see the gives and takes from capacity additions, capacity reductions. I think this year our view is there might be another million barrels of crude capacity, crude conversion capacity out there. We see it coming out late in the year, it's gonna be a negligible impact. When you boil that down to the refined product level, you're seeing this year maybe 400,000 bbls a day of refined product impact when you're seeing demand increase by 600,000 bbls-800,000 bbls a day. Really, we see things continuing to tighten into this year. The new capacity come on late this year, it'll ramp up into next year, and it'll be offsetting the capacity or the volume growth that we see in refined products next year. It's gonna be kind of a wash. Beyond that, there's not much going on. We're very constructive, medium and long term on the balance for refined products. It's a good time to be a refiner. That's helpful. The other big development so far this year has been Venezuela and the incremental Venezuela barrels available to the market. Can you just talk about the latest dynamics that you're seeing on the light heavy crude side, crude availability, recognizing that the Middle East does, you know, inject some uncertainty. Sure. Just how you're seeing the light heavy crude availability against WCS. If you, if you stick it into the box of U.S. consumption patterns and the interaction, it really is about the competition between Venezuelan heavy crude and WCS. We are right at the interface of that competition. We've got Midcontinent refineries that consume WCS. Our Gulf Coast refineries consume WCS or Venezuelan crude. Venezuelan crude is gonna have to be priced to compete with WCS. Likewise, WCS is gonna have to be priced to compete with Venezuelan crude. The diffs have spread out from about $11 a barrel to about $15 a barrel on WCS. And that's certainly benefiting us today at places like Wood River, which we now have total control of. I think as one of my colleagues has been mentioning in our speed dating sessions that we really liked the Wood River transaction at $11 diffs. We love it at $15 diffs. It is true. We understood that when we came in, that there was tremendous upside, having control over the Wood River Refinery and the Borger Refinery. We're seeing that benefit today well beyond the synergies that we're capturing out of that. We're seeing the uplift in these tighter times. We have the ability to process about 250,000 bbls a day of Venezuelan crude, most of it at our Sweeny Refinery and some at our Lake Charles Refinery. We have in the past imported even before Maduro was removed. You know, Chevron had the ability to export to the U.S., and we were taking barrels then. There's nothing magically different today other than there will be more crude available. It still has to compete to get into our portfolio. We're not going to process it just because it's available. We're gonna process it because it displaces in the Gulf, in our Gulf Coast refineries, it displaces WCS. WCS will still compete. I think it's a very good dynamic place for us to be right in the middle of that. Yeah. Makes a lot of sense. Then I want to switch on the operational side. Last year, clean product yields, they reached a record level. The refineries ran really well, and costs continue to move lower. Can you just talk about where you are in the refining improvement process? Yeah. What the next steps are from here? No, that's a great question. You're right, Joe. We hit record clean product yields. We've been outpacing the industry on utilization rates, and we've been driving costs out of the system. Those have been the primary metrics that we've been focused on. It didn't happen overnight. You know, this journey started in late 2021, when we recognized that we had some challenges that we needed to address. We came up with a plan to address those challenges, and it's been a very hard path. We've had to make a lot of tough decisions. What you saw in 2025 is an inflection point where all those tough decisions we made started to come home to roost in a positive way. You're seeing it in our results. You can't turn the battleships that we have around, but overnight. We started looking at our refining system as a fleet, not as individual refineries. We challenged ourselves to drive costs out and to centralize a lot of things that could be centralized. We put our entire company on a unified bonus program versus competing with individual assets inside the portfolio. We were competing against the external world, and that changed the thinking and the approach to things overnight. We went out to the front lines and said, "Look, what things have you been challenged with in getting your job done? What makes your job difficult? How can we make your job more efficient?" And we set aside capital to address things that were making it hard for our frontline operators to run their assets. Maybe there were, you know, steam leaks. Maybe there were things that just, you know, weird position on valves that made their jobs more difficult. That won the hearts and minds of the front line, and they started coming up with more and more projects, more and more things we could do to be more efficient. We asked everybody in the organization to challenge the status quo. Don't get stuck in the old ways of doing things. Let's think about what we're doing and how we can do it better. We even had things embedded in our optimization models that were artificial limits that we were hitting. We said, "Why is that limit there?" "It's always been there." "Can we get beyond that limit safely?" "Yeah, nobody's ever wanted us to do that." Let's if we can do it safely, we can do it reliably, let's challenge it. We ruthlessly benchmark ourselves against other refiners. We are closing gaps. We have more gaps to close. You saw in our last earnings call, we rerated four of our refineries. That's not something we take lightly. We were, you know, we were getting, you know, good accolades for having these high utilization rates. They became so persistently high at four of our refineries. We said, we need to rerate those because we don't want our refiners to get lazy and comfortable that, oh, yeah, we're operating at 100%. We can't do any better than that. Well, your, your denominator is gonna go up, so you're gonna have to work a little harder. That's what we did. Four refineries. Two of those refineries were re-rerated solely on what we call operational excellence. They were being operated better. They were managing their turnarounds better. So they could go up, you know, about 10% in rates consistently, consistent enough that we said, "Okay, that's now what your baseline is." A couple of other projects like Sweeney and Bayway, we did specific projects that unleashed more potential, more throughput in those refineries, and it's been very beneficial to both those places. There's more to come. We've opened up that door for our process engineers and the operators out there to be creative in how we outrun these things, to be creative in utilization and in product yield. That's how you see the clean product yield going up. I love it when I go to a stewardship review at one of our refineries and there's a string of young process engineers that come in and said, "Hey, we figured out how to do this. We rewired this, now we're gonna make $20 million a year, we only spent $500,000." I said, "Why are you standing here talking to me about these great things? Go out and find more." They do. They've their intellectual capability has been unconstrained. They're applying AI to what they do. AI is helping our operators operate better. It's helping our maintenance people maintain our assets better and to shorten our turnarounds. AI is helping our commercial people make better decisions faster. It's helping our midstream teams find methane leaks using satellite data faster. It's, you know, we're quietly implementing things that are gonna be beneficial to our business through AI, and I think we're just touching the tip of the iceberg. It's great to see the improvements coming through. You spoke on it a little bit earlier, but one of these strategic focuses has been improving the commercial side of the business. Mm-hmm. Now you've been building out the organization. We saw it at the headquarters last fall. Can you talk about the progress you've made on the commercial side, where to go from here, and what are the signposts we should watch for in the results? Absolutely. We've got commercial operations in Houston, in Calgary, London, Singapore. We have a small office in China. We recognized that we had to do a better job on the origination side of things. We've added two dozen originators out across the planet. They speak the local language. They know the local cultures. They know where these deals are hidden and how to unlock those deals and bring more value from an inbound perspective. We've got more hunter-gatherers out there looking for better places to capture more value on the disposition of our products. We hired a new head of our trading organization, came in with tremendous experience, and he has hit the ground running, and he's pushing that organization to higher levels of performance. You're gonna start seeing that in the commercial results, but you'll also see it in the capture, in refining and in the equivalent numbers in midstream because they are working on behalf of those organizations to capture the most value out of the marketplace to find the optimal feedstocks to bring in and the optimal placement of products on the other side and to trade around our assets. In a very proactive way to make sure that we're leveraging every stream that we have, every molecule that we have, the shorts that we understand, the longs that we understand, to make that all work to the benefit of our shareholders. Helpful. I wanted to shift over to midstream. This has been one of the key focuses on the NGL Wellhead-to-water strategy. DCP, Pinnacle, Coastal Bend have been integral to that process. Can you just talk about the strategy at a high level, where you are on the process of developing this platform? Yeah. The strategy really started when we had PSXP assets that we had built in our MLP. We had our DCP joint venture, and there was a disconnect between those assets. That we recognized that if we had those assets all under our control, we could create this wellhead-to-market backbone that would afford us the opportunity to take advantage of the growth that we saw continuing in the Permian Basin. We executed the DCP roll-up. A lot of people were scratching their heads. It was a difficult transaction to get done, a difficult nut to crack. We knew that then everybody was watching, "What are you gonna do next? Where are you headed with this?" What we did next was start to build out more G&P assets that could feed into that backbone, acquire assets like Pinnacle that sit right on top of those assets, that we were the natural operator that had built a competitive advantage on top of competitive advantages that we had and drove all that value creation down to our fractionators at Sweeny. Then the Epic transaction came along. We now call that Coastal Bend. Not only were we adding capacity to to fill out our own fractionators in a proprietary way, we're gonna need more transportation assets to bring those molecules to our fractionators. We could do what others have done, is go out and build another big piece of pipe, or we could acquire the pipe that we're already moving some molecules on that had debottleneck capacity. We've already debottlenecked that pipeline once and have another debottleneck, I think, to the tune of 125,000 bbls a day that will be done by early 2027. We're not buying assets to be buying assets. We're buying assets that create more competitive advantage for us and more organic growth opportunities for us. Pinnacle, we bought Pinnacle. There was one G&P asset sitting there in operation with great contracts behind it, footprint for two more. We've executed the second one. It's up and running, and it's flowing into that EPIC pipeline. Out to between the Midland and Delaware Basins, we've got Iron Mesa, a 300,000 bbls a day gas plant under construction. It's going to take the place of a very old, unreliable Goldsmith plant that we had and add additional capacity beyond that. There's more to come in that region as we, as we reestablish ourselves as a premier operator. Goldsmith, no one could put it in the premier operator, category. We had lots of challenges, with unsatisfied customers out there. They see the Goldsmith, asset as a whole new dawn of a, of a new, a new midstream opportunity out there. Now they're bringing other opportunities to us. We've got a lot of demand pull on more G&P assets that we're going to add, but we're only gonna add assets at the pace where we see the demand for the liquids that will fill them and the gas that will fill them. We're not growing just for growth's sake. We believe that we will hit $4.5 billion of EBITDA in the midstream business by the end of 2027. That's not an aspirational goal that said, Hey, we need to get to $4.5 billion of EBITDA. No, that's not the way we do it. We look at the accretive opportunities that we have in the midstream business and what is the result of executing well on those accretive opportunities, and we get to $4.5 billion. We're not driven by an EBITDA growth target. We're driven by creating value for our shareholders and driving accretive returns. That's helpful. Beyond 2027, Western Gateway, that's a project, that could add to growth beyond that time horizon. Can you just talk through the interest you've received in the project? Yeah. Path to reaching FID and how it fits within the overall strategy? Yeah. Western Gateway is the epitome of an integrated strategy. We had to have refining involved, we had to have midstream involved, we had to have commercial involved, we had to have marketing involved because we've got marketing assets in California. Actually, the idea was originally conceived and generated in a leadership development program we had, where we had representatives from all of those parts of the company being developed as future leaders. We asked them, instead of just giving them a Harvard Business Review, we said, "Hey, take a look at the company. We're focused on integration. Can you tell us, is there something that we should be looking at?" They came up with this concept even before we had executed on WRB, even before we had announced the exit of L.A. They said, "You know, this looks like a great opportunity," and we ran with it. Now, having full control of WRB and having our own short position because we ceased operations at L.A., made the project just jump to the front of the queue. We've been through one open season with our partners at Kinder Morgan. The first open season was successful. It was primarily focused on getting Midcontinent shippers providing Kinder Morgan the assurance that we were able to get enough volume to satisfy Phoenix so they could reverse the flow of their system that comes from California into Phoenix. Now they're comfortable with that, so we're having a second season that says, "Okay, now we're gonna open up the season for flow all the way into California." We heard in the first round that there were Gulf Coast shippers that would like to participate. We opened up origination points in the Gulf Coast that could come up through Explorer and tie into the system that we're developing. That open season will wrap up at the end of this month, and then we'll decide how big the pipe needs to be, and if the economics are compelling, we'll proceed. We're bullish on those economics. We're going to be one of the primary shippers on the pipeline, and so we believe in the project. It's a matter of getting that open season, getting all the shippers committed, and seeing what we can do. Sounds good. We'll stay tuned. I wanna talk about chemicals for a little bit. Margins, they've been challenged recently. Mm-hmm. Can you just talk about what you're seeing in the market currently? Maybe if we go back to Friday, 'cause I know there's a lot of uncertainty in the market currently? Yeah. How do you see the path progressing back to mid-cycle? Is it more demand growth driven, supply, rationalization? Just how do you see the lay of the land right now? Yeah. I'll try really hard to put myself back in Friday mode. No, it's been a tough market. It's been a tough down cycle. CPChem was built for these conditions to survive in these conditions, and they're actually doing quite well at the bottom of the market versus their competitors. They've been running at 100% plus operating rates. They've got assets on the Gulf Coast. They've got assets in the Middle East. They're focused on advantaged ethane and the polyethylene and related olefins chains. You know, in the 26 years that CPChem's been in existence, it's grown faster and more profitably than their competitors. If you look at the last week view, North American assets, exporting more than 50% of their production running at, over 90%. You get to 85% in that business, it's pretty tight. North America's running at 90%. Europe's running at 60% and rationalizing assets. Asia's running at 60% and rationalizing assets. More rationalization under those conditions, under those scenarios needs to occur. One thing that we've been talking about, even before, the current situation is, I'm not sure the world understands the drag on that business that subsidized or sub-market, crude oil being sold into China has. 'Cause the way you look at when you're thinking about pricing and cost in that business, there's a, there's a stark S-shaped cost curve where you've got naphtha producers that are converting naphtha to ethylene in China at the high end of the cost curve, and you've got people that are converting ethane in the Middle East and the Gulf Coast at the, at the low end of the cost curve. Well, if China is buying crude oil at a 40% discount, that cost curve it's distorted. China, everybody's scratching their heads, geez, China's so aggressive. They're dumping polyethylene in the world markets. They don't usually do that. Well, it's because they've got this incredible cost advantage, and so they're being disruptive and dumping into the rest of the world. We were already looking at that saying, "That's, that's just a disconnect. That's a dislocation. That's, that's a drag and causing us to continue to be at the bottom of this cycle." Now all of a sudden you look at something that's coming into play that could change that. They're not getting discounted Venezuelan crude. They're not getting the discounted Iranian crude. They're probably still getting discounted Russian crude, but you're seeing refiners in Asia cut back. You're seeing petrochemical assets in Asia cut back. Even the propane dehydrogenation facilities are gonna be challenged. It's a double whammy. You're gonna see that cost curve maybe revert to where it should be. Then you layer in the supply and demand impact that you're seeing from what's going on in the Arabian Gulf, Persian Gulf, is that, you know, production can't get out of Qatar. Production can't get out of Saudi Arabia. Production can't get out of other locations. It's trapped, and so it's gonna tighten up supply, not just for crude oil, but for polyethylene and in some respects, polypropylene as well. You're gonna see a cost curve revert, and you're gonna see supply and demand tighten. That could be a catalyst that gets us up off of this bottom of the cycle kind of condition. Will it hold and bridge to the next uptick? It could if it stays in place long enough, as global demand keeps ticking upward, people continue to move from poverty to the middle class and demanding more of these products. It could be that catalyst that really sets the next upcycle in the petrochemicals business. That's helpful. Maybe just bringing it all together, the value of integration has been a key topic of discussion over the past year or so. Can you just talk about the advantages of having refining, midstream, and chemicals businesses all under one under one roof? I think, you know, it starts with the midstream business. We move crude oil. We move NGLs, raw, Y-grade. Those two businesses are synergistic. We can manage them together. We realize cost advantages there just in the midstream. I think the poster child of our integration is our Sweeny Complex, where it all comes together. We've got millions of barrels of underground salt dome storage capability, where we can manage the NGL system, CPChem can manage their petrochemical system, and we can keep things moving and take advantage of markets each and every day. There's synergies around understanding the market movements, being a global player from that position on the Gulf Coast. We've got bi-directional flow from coming out of the Permian into Corpus Christi, bi-directional flow on purity products to Sweeny back to Corpus Christi, all the way up to Mont Belvieu. We can play all of those markets for our producers upstream, and all those assets are advantaged because of how we manage the whole Sweeny Complex. We've got an export terminal at Freeport, so we can access global markets out of Corpus Christi, out of Freeport, and out of Mont Belvieu. You look at there in the Sweeny Complex, the cost advantages of being able to leverage that midstream presence, that refining presence, and we've got petrochemical assets, three NGL crackers right at our Sweeny Complex that are owned and operated by CPChem. They're producing polyethylene. They're producing other olefin products right there. We've got streams that are going back and forth seamlessly without the friction of vastly different ownership. We understand those markets, and we understand the influence of those markets on the NGL value chain, so we can make better decisions commercially, faster. It's challenging to put a number on that, and we're working towards being able to discern what we can disclose to describe the values around that. It may be easier to think about what the value is that would be destroyed if you broke that integrated value chain up. We can take you to a location in Greeley, Colorado, and show you a gas plant we have there. At one end of the gas plant, there are 50 fairly innocuous wellheads. We're capturing all the gas and gas liquids off of those wellheads, capturing those liquids, sending them to Sweeney, fractionating them at Sweeney, and turning the ethane from those streams into ethylene polyethylene pellets at Sweeney. It's incredibly efficient, incredibly effective, and our partner is the one partner in CPChem, the C side of CPChem owns those wells. It's just very integrated, efficient. Things happen seamlessly every day. If you were to break that up into three distinct chunks, that would be a very challenging operation. Could you paper it? Sure, you can, but every piece of paper adds friction, adds a point of disconnect, adds a potential for lost value for everybody. Not just, you know, you get value and I lose value. It's just a loss of value. That's what we saw inside Wood River. Decisions were made slower. We couldn't really look at the full integrated value of running the right crudes at Wood River or Borger because of the things that we could do at the retail level and capture value. That value is now freed up, and we're delivering that. It's amazing how we're able to optimize better across the board each and every day seamlessly without friction. That makes a lot of sense. I wanted to ask on M&A. TSX has been active in M&A recently. Mm-hmm. I want you to talk about, is the portfolio in an optimal place right now? Is there more to do on either the acquisition or divestment side here? Yeah. We've divested about five and a half billion dollars worth of what we deem non-core assets. High value assets, but non-core. Assets that were generating good EBITDA but had no growth potential. We've redeployed much of that capital into the acquisitions that we did primarily midstream. It was the mirror image of that. We saw assets like Pinnacle that we could acquire and not only get great assets, but open up an organic growth opportunity, the EPIC Pipeline or the Wood River acquisition. We got it at great value, tremendous value if you look at where diffs are today. There's gotta be a value creation opportunity for us to acquire something. It was great to clean up our portfolio, but it was incredible to be able to redeploy the capital that we freed up into areas that would give us great returns on that capital invested and open up even higher return opportunities from a growth opportunity perspective. Primarily in midstream, but we're not shy about refining if we find the right opportunities as well. That makes sense. I wanted to ask just on cash flow. Can you talk about how you think about the balance between shareholder returns, debt pay down, the path to the $17 billion debt target by 2027? Buybacks versus dividends, which you just raised? Sure. ... again by about 6%, I think recently. Absolutely. Well, we're rock solid committed to delivering at least 50% of our operating cash flow to shareholders. We beat that target last year. We beat it for quite some time. You think about that, I think the consensus numbers for 2026 and 2027 have us generating about $8 billion of cash. If you think about that $8 billion, that's it's convenient to divide that up by 4, 2, 2. $8 billion says you gotta give $4 billion of that back to shareholders. Well, about $2 billion of that goes to the dividend right away, straight away. That means share repurchases are gonna be about $2 billion. Our capital budget is around $2 billion, that leaves debt repayment around $2 billion. We're targeting around $1.5 billion in 2026, 1.5 billion of debt repayment in 2027. That's how we look at that. That's how we think about that. To the extent that we have cash beyond that, we could accelerate the debt repayment and then... It's really gonna be balanced about where we think our share price is versus the ultimate value of our share price. We're committed to ratably deliver share repurchases. We've got models in place that will make purchases based on where we think the share price is versus the ultimate value. We know the things that we have in the hopper too, can create value out in the future. We can have line of sight on that and say, "Hey, this is knowing what we know out in the future, this is a pretty good deal to continue to buy shares." We think we can do both, and we think we're gonna have plenty of cash to get the debt down to that $17 billion level probably sooner than later, and still have upside in share repurchases, delivering cash to shareholders. Remember, we've got growth capital baked into that budget as well. We're not just gonna say, "Okay, we're buying these shares, and there's no growth out there." We've got profitable growth coming that will enhance that share price as well. It's doubly compounded because we're shrinking the number of shares, and we've got growth opportunities that are gonna stack on top of that smaller pile of shares going forward. Perfect. We're a little bit over time, I think that's a great place to end it here. All right. Mark, thank you so much for being here. Really appreciate it. Thanks, Joe. Thank you. Enjoyed the talk.

Speaker 1: All right, let's go ahead and get started with our keynote fireside chat with Phillips 66. Thank you to all the investors in the room and for those who are tuning in on the webcast. Those of you that don't know me, my name is Joe Laetsch, and I'm the refining analyst here at Morgan Stanley. Today, I'm very pleased to be joined by Mark Lashier, Chairman and CEO of Phillips 66. Before we get going here, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. All right, let's go ahead and get started with our keynote fireside chat with Phillips 66. all right let's go ahead and get started with our keynote fireside chat with phillips 66 Thank you to all the investors in the room and for those who are tuning in on the webcast. thank you to all the investors in the room and for those who are tuning in on the webcast Those of you that don't know me, my name is Joe Laetsch, and I'm the refining analyst here at Morgan Stanley. those of you that don't know me my name is joe laetsch and i'm the refining analyst here at morgan stanley Today, I'm very pleased to be joined by Mark Lashier, Chairman and CEO of Phillips 66. today i'm very pleased to be joined by mark lashier chairman and ceo of phillips 66 Before we get going here, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. before we get going here for important disclosures please see the morgan stanley research disclosure website at www.morganstanley.com/researchdisclosures If you have any questions, please reach out to your Morgan Stanley sales representative. if you have any questions please reach out to your morgan stanley sales representative With that out of the way, Mark, thank you for being here with us this afternoon. We have plenty to talk about today, but maybe to start higher level here. Phillips 66 has been active the past few years, building out its history business, improving refining operations, and optimizing its portfolio. As you sit here today, can you talk a bit about that journey and your strategic initiatives and plans in 2026 and beyond? With that out of the way, Mark, thank you for being here with us this afternoon. with that out of the way mark thank you for being here with us this afternoon We have plenty to talk about today, but maybe to start higher level here. we have plenty to talk about today but maybe to start higher level here Phillips 66 has been active the past few years, building out its history business, improving refining operations, and optimizing its portfolio. phillips 66 has been active the past few years building out its history business improving refining operations and optimizing its portfolio As you sit here today, can you talk a bit about that journey and your strategic initiatives and plans in 2026 and beyond? as you sit here today can you talk a bit about that journey and your strategic initiatives and plans in 2026 and beyond

Speaker 2: Sure, Joe, I'd love to. Thank you everyone for being here. Thank you, Joe, for hosting this. It's been a great conference. We've gotten a lot out of it, timely and all the events going on. When you think about the journey that Phillips 66 has been on, we are intensely focused on being a unique opportunity for investors. We have designed things and are leaning into things such that we've got this durable, sustainable cash flow across the cycles. The integrated positions we have can be countercyclical. We've got businesses that just deliver rock solid earnings quarter after quarter. We've got more volatile segments that can really throw off a lot of cash at the peak. Sure, Joe, I'd love to. sure joe i'd love to Thank you everyone for being here. thank you everyone for being here Thank you, Joe, for hosting this. thank you joe for hosting this It's been a great conference. it's been a great conference We've gotten a lot out of it, timely and all the events going on. we've gotten a lot out of it timely and all the events going on When you think about the journey that Phillips 66 has been on, we are intensely focused on being a unique opportunity for investors. when you think about the journey that phillips 66 has been on we are intensely focused on being a unique opportunity for investors We have designed things and are leaning into things such that we've got this durable, sustainable cash flow across the cycles. we have designed things and are leaning into things such that we've got this durable sustainable cash flow across the cycles The integrated positions we have can be countercyclical. the integrated positions we have can be countercyclical We've got businesses that just deliver rock solid earnings quarter after quarter. we've got businesses that just deliver rock solid earnings quarter after quarter We've got more volatile segments that can really throw off a lot of cash at the peak. we've got more volatile segments that can really throw off a lot of cash at the peak Then afford us opportunities to do things across the spectrum of investment opportunities we have, while still delivering at least 50% of our cash back to shareholders each and every quarter. We've had a strong growth story in our dividend. We're committed to being competitive, sustainable, and growing with our dividend every year. It's grown every year. I think our annual compounded rate of increases has been about 15% over the 13 years that we've been around, and that's our commitments, and we're sticking to it. We just increased our dividend again this year at our last board meeting. When you think about those segments, we've got midstream that gathers hydrocarbons, whether it's crude oil, natural gas, natural gas liquids. Then afford us opportunities to do things across the spectrum of investment opportunities we have, while still delivering at least 50% of our cash back to shareholders each and every quarter. then afford us opportunities to do things across the spectrum of investment opportunities we have while still delivering at least 50% of our cash back to shareholders each and every quarter We've had a strong growth story in our dividend. we've had a strong growth story in our dividend We're committed to being competitive, sustainable, and growing with our dividend every year. we're committed to being competitive sustainable and growing with our dividend every year It's grown every year. it's grown every year I think our annual compounded rate of increases has been about 15% over the 13 years that we've been around, and that's our commitments, and we're sticking to it. i think our annual compounded rate of increases has been about 15% over the 13 years that we've been around and that's our commitments and we're sticking to it We just increased our dividend again this year at our last board meeting. we just increased our dividend again this year at our last board meeting When you think about those segments, we've got midstream that gathers hydrocarbons, whether it's crude oil, natural gas, natural gas liquids. when you think about those segments we've got midstream that gathers hydrocarbons whether it's crude oil natural gas natural gas liquids We move those hydrocarbons through our transportation assets to our facilities where we, you know, convert them to the molecules that you need, that you use every day. We just don't convert them to any molecules. We find the best value opportunity that we can create for our shareholders. We get those molecules out into the marketplace, finding the best disposition for those molecules across the globe. We've got, in addition to our midstream organization, refining organization, we've got a commercial organization, and their job is to optimize what goes in to what comes out of these assets and then captures the ultimate value that we can capture out of the marketplace. It all works incredibly well together. Don't forget about CPChem, our 50/50 JV with Chevron. It's deeply physically integrated with us at our Sweeney Complex. We move those hydrocarbons through our transportation assets to our facilities where we, you know, convert them to the molecules that you need, that you use every day. we move those hydrocarbons through our transportation assets to our facilities where we you know convert them to the molecules that you need that you use every day We just don't convert them to any molecules. we just don't convert them to any molecules We find the best value opportunity that we can create for our shareholders. we find the best value opportunity that we can create for our shareholders We get those molecules out into the marketplace, finding the best disposition for those molecules across the globe. we get those molecules out into the marketplace finding the best disposition for those molecules across the globe We've got, in addition to our midstream organization, refining organization, we've got a commercial organization, and their job is to optimize what goes in to what comes out of these assets and then captures the ultimate value that we can capture out of the marketplace. we've got in addition to our midstream organization refining organization we've got a commercial organization and their job is to optimize what goes in to what comes out of these assets and then captures the ultimate value that we can capture out of the marketplace It all works incredibly well together. it all works incredibly well together Don't forget about CPChem, our 50/50 JV with Chevron. don't forget about cpchem our 50/50 jv with chevron It's deeply physically integrated with us at our Sweeney Complex. it's deeply physically integrated with us at our sweeney complex It consumes a lot of the NGLs that we produce, and so we understand those markets very well and how it interacts with the markets for our NGL clean products or purity products. It's all one big integrated hydrocarbon machine, and we endeavor to do it better each and every day. We've been on a journey of improvement in refining. We recognized four or five years ago that we had some challenges in refining, that we had a cost problem in refining, and we stepped up to the plate and we've been delivering and executing. It's been a hard journey, but we've reduced costs across the board. We've taken $1 a barrel plus out of our refining costs. We've improved the utilization of our assets. It consumes a lot of the NGLs that we produce, and so we understand those markets very well and how it interacts with the markets for our NGL clean products or purity products. it consumes a lot of the ngls that we produce and so we understand those markets very well and how it interacts with the markets for our ngl clean products or purity products It's all one big integrated hydrocarbon machine, and we endeavor to do it better each and every day. it's all one big integrated hydrocarbon machine and we endeavor to do it better each and every day We've been on a journey of improvement in refining. we've been on a journey of improvement in refining We recognized four or five years ago that we had some challenges in refining, that we had a cost problem in refining, and we stepped up to the plate and we've been delivering and executing. we recognized four or five years ago that we had some challenges in refining that we had a cost problem in refining and we stepped up to the plate and we've been delivering and executing It's been a hard journey, but we've reduced costs across the board. it's been a hard journey but we've reduced costs across the board We've taken $1 a barrel plus out of our refining costs. we've taken $1 a barrel plus out of our refining costs We've improved the utilization of our assets. we've improved the utilization of our assets We've improved the clean product yield and all the time in the background, lowering the costs and delivering value. We've built a midstream wellhead-to-market presence that can compete with any midstream company out there. It's been a tough journey as well, but we've been very deliberate and very disciplined in the investments we made, and now you're seeing the fruits of those labor. Over the last four years, I think we've increased our earnings there by 40%. We're right at about $4 billion EBITDA a year. We're headed to four and a half by the end of 2027. We've enhanced our commercial organization. We've improved the clean product yield and all the time in the background, lowering the costs and delivering value. we've improved the clean product yield and all the time in the background lowering the costs and delivering value We've built a midstream wellhead-to-market presence that can compete with any midstream company out there. we've built a midstream wellhead-to-market presence that can compete with any midstream company out there It's been a tough journey as well, but we've been very deliberate and very disciplined in the investments we made, and now you're seeing the fruits of those labor. it's been a tough journey as well but we've been very deliberate and very disciplined in the investments we made and now you're seeing the fruits of those labor Over the last four years, I think we've increased our earnings there by 40%. over the last four years i think we've increased our earnings there by 40% We're right at about $4 billion EBITDA a year. we're right at about $4 billion ebitda a year We're headed to four and a half by the end of 2027. we're headed to four and a half by the end of 2027 We've enhanced our commercial organization. we've enhanced our commercial organization We've added a couple of dozen of origination players out across the globe, people that speak the local language, that know the local landscape, that can help us find the best feedstocks and the best disposition for the molecules that we're producing. We're on the move. We're looking for every way we can improve across the enterprise, and we're leaning in hard on integration and delivering value to shareholders every day. We've added a couple of dozen of origination players out across the globe, people that speak the local language, that know the local landscape, that can help us find the best feedstocks and the best disposition for the molecules that we're producing. we've added a couple of dozen of origination players out across the globe people that speak the local language that know the local landscape that can help us find the best feedstocks and the best disposition for the molecules that we're producing We're on the move. we're on the move We're looking for every way we can improve across the enterprise, and we're leaning in hard on integration and delivering value to shareholders every day. we're looking for every way we can improve across the enterprise and we're leaning in hard on integration and delivering value to shareholders every day

Speaker 1: Awesome. That's a great overview and a lot to unpack there. Maybe before we get into the segments, I have to ask, one of the key topics in meetings this week has been the events that have unfolded in Iran and the Middle East over the past few days, and there's a lot of factors to consider that could affect refiners from product prices, feedstock costs, freight, as well as, we're talking about chemicals, implications as well. Well, there's still a lot of uncertainty about the path forward here. Could you just talk about what you're hearing from your commercial local organization currently? How are you thinking about potential impact to PSX, whether it's on the refining side or chemicals or anything else that you're seeing? Awesome. awesome That's a great overview and a lot to unpack there. that's a great overview and a lot to unpack there Maybe before we get into the segments, I have to ask, one of the key topics in meetings this week has been the events that have unfolded in Iran and the Middle East over the past few days, and there's a lot of factors to consider that could affect refiners from product prices, feedstock costs, freight, as well as, we're talking about chemicals, implications as well. maybe before we get into the segments i have to ask one of the key topics in meetings this week has been the events that have unfolded in iran and the middle east over the past few days and there's a lot of factors to consider that could affect refiners from product prices feedstock costs freight as well as we're talking about chemicals implications as well Well, there's still a lot of uncertainty about the path forward here. well there's still a lot of uncertainty about the path forward here Could you just talk about what you're hearing from your commercial local organization currently? could you just talk about what you're hearing from your commercial local organization currently How are you thinking about potential impact to PSX, whether it's on the refining side or chemicals or anything else that you're seeing? how are you thinking about potential impact to psx whether it's on the refining side or chemicals or anything else that you're seeing

Speaker 2: I'm really glad that we're blessed with a strong commercial organization. Even before this started happening when you could see the military build up, they started thinking about what could happen, and then they're providing thoughtful insights every day, multiple times a day and looking what's going on across the spectrum. Whether it's LNG movements, the impact there on LNG markets out in the world marketplace to what the response is in Asia from a crude acquisition perspective. How refineries are already, you know, signaling that they're backing off run rates in Asia and what does that mean? Answering the questions, the very challenging questions just in the U.S., where we're safe, secure, we've got access to whether it's Western Canadian crude or Venezuelan crude or Permian crude. I'm really glad that we're blessed with a strong commercial organization. i'm really glad that we're blessed with a strong commercial organization Even before this started happening when you could see the military build up, they started thinking about what could happen, and then they're providing thoughtful insights every day, multiple times a day and looking what's going on across the spectrum. even before this started happening when you could see the military build up they started thinking about what could happen and then they're providing thoughtful insights every day multiple times a day and looking what's going on across the spectrum Whether it's LNG movements, the impact there on LNG markets out in the world marketplace to what the response is in Asia from a crude acquisition perspective. whether it's lng movements the impact there on lng markets out in the world marketplace to what the response is in asia from a crude acquisition perspective How refineries are already, you know, signaling that they're backing off run rates in Asia and what does that mean? how refineries are already you know signaling that they're backing off run rates in asia and what does that mean Answering the questions, the very challenging questions just in the U.S., where we're safe, secure, we've got access to whether it's Western Canadian crude or Venezuelan crude or Permian crude. answering the questions the very challenging questions just in the u.s where we're safe secure we've got access to whether it's western canadian crude or venezuelan crude or permian crude We've got access to crudes, what's it going to do to the pricing? What's it going to do to the pricing of refined products? What's going to be the political reaction globally and domestically? All of those things are coming into play. You know, this is, all of us, I think, intellectually have, you know, done the game in our head. Gee, what would happen if the Straits of Hormuz was closed? To sit here today and watch it unfold in real-time, it's a little bit surreal to see these things. This is not just a scenario planning exercise. This is a real-life war. People, unfortunately are dying. We've lost, I think, six U.S. soldiers, and it's tragic to see what is unfolding. We've got access to crudes, what's it going to do to the pricing? we've got access to crudes what's it going to do to the pricing What's it going to do to the pricing of refined products? what's it going to do to the pricing of refined products What's going to be the political reaction globally and domestically? what's going to be the political reaction globally and domestically All of those things are coming into play. all of those things are coming into play You know, this is, all of us, I think, intellectually have, you know, done the game in our head. you know this is all of us i think intellectually have you know done the game in our head Gee, what would happen if the Straits of Hormuz was closed? gee what would happen if the straits of hormuz was closed To sit here today and watch it unfold in real-time, it's a little bit surreal to see these things. to sit here today and watch it unfold in real-time it's a little bit surreal to see these things This is not just a scenario planning exercise. this is not just a scenario planning exercise This is a real-life war. this is a real-life war People, unfortunately are dying. people unfortunately are dying We've lost, I think, six U.S. soldiers, and it's tragic to see what is unfolding. we've lost i think six u.s soldiers and it's tragic to see what is unfolding Now, how do we get to the other side of this, and how do we ensure that the world has access to the resources it needs to avoid, you know, major economic disruption? How do we work with the government to ensure that the U.S. economy is on solid footing and that our customers get the resources they need to go about their business? The commercial group has been very good at providing the fundamentals we need to start thinking that through and making those decisions. Now, how do we get to the other side of this, and how do we ensure that the world has access to the resources it needs to avoid, you know, major economic disruption? now how do we get to the other side of this and how do we ensure that the world has access to the resources it needs to avoid you know major economic disruption How do we work with the government to ensure that the U.S. economy is on solid footing and that our customers get the resources they need to go about their business? how do we work with the government to ensure that the u.s economy is on solid footing and that our customers get the resources they need to go about their business The commercial group has been very good at providing the fundamentals we need to start thinking that through and making those decisions. the commercial group has been very good at providing the fundamentals we need to start thinking that through and making those decisions

Speaker 1: That's helpful. I recognize there's a lot of uncertainty right now. Maybe we could dive into some of the segments. Starting with refining. Crack's been volatile to start the year. Can you just talk about what you're seeing across your footprint from a demand perspective and maybe longer term, how you see the supply-demand balance shaping up over the next couple of years? That's helpful. that's helpful I recognize there's a lot of uncertainty right now. i recognize there's a lot of uncertainty right now Maybe we could dive into some of the segments. maybe we could dive into some of the segments Starting with refining. starting with refining Crack's been volatile to start the year. crack's been volatile to start the year Can you just talk about what you're seeing across your footprint from a demand perspective and maybe longer term, how you see the supply-demand balance shaping up over the next couple of years? can you just talk about what you're seeing across your footprint from a demand perspective and maybe longer term how you see the supply-demand balance shaping up over the next couple of years

Speaker 2: Yeah. At a high level, we've seen strong distillate demand. We've been in heavy distillate mode, and certainly current events only reinforce that. You can see the strange situation where there's no incentive to move into summer gasoline mode, which could create some interesting dynamics. Gasoline demand is... Diesel demand has been high, mostly at the expense of renewable diesel. The economics changed about around renewable diesel, that volume has been replaced by traditional diesel, but you're also seeing stronger demand out in the economy. There's a lot of strength in distillate. Jet continues to be strong. Gasoline has been about flat year-to-year. If gasoline has to compete with distillate this summer, it's not gonna feel flat. It's gonna feel very tight. Yeah. yeah At a high level, we've seen strong distillate demand. at a high level we've seen strong distillate demand We've been in heavy distillate mode, and certainly current events only reinforce that. we've been in heavy distillate mode and certainly current events only reinforce that You can see the strange situation where there's no incentive to move into summer gasoline mode, which could create some interesting dynamics. you can see the strange situation where there's no incentive to move into summer gasoline mode which could create some interesting dynamics Gasoline demand is... gasoline demand is Diesel demand has been high, mostly at the expense of renewable diesel. diesel demand has been high mostly at the expense of renewable diesel The economics changed about around renewable diesel, that volume has been replaced by traditional diesel, but you're also seeing stronger demand out in the economy. the economics changed about around renewable diesel that volume has been replaced by traditional diesel but you're also seeing stronger demand out in the economy There's a lot of strength in distillate. there's a lot of strength in distillate Jet continues to be strong. jet continues to be strong Gasoline has been about flat year-to-year. gasoline has been about flat year-to-year If gasoline has to compete with distillate this summer, it's not gonna feel flat. if gasoline has to compete with distillate this summer it's not gonna feel flat It's gonna feel very tight. it's gonna feel very tight That's kind of the 50,000 ft view of where we are on supply and demand. I think if you look back, again, I shouldn't be remiss to touch base on how we see the gives and takes from capacity additions, capacity reductions. I think this year our view is there might be another million barrels of crude capacity, crude conversion capacity out there. We see it coming out late in the year, it's gonna be a negligible impact. When you boil that down to the refined product level, you're seeing this year maybe 400,000 bbls a day of refined product impact when you're seeing demand increase by 600,000 bbls-800,000 bbls a day. Really, we see things continuing to tighten into this year. That's kind of the 50,000 ft view of where we are on supply and demand. that's kind of the 50,000 ft view of where we are on supply and demand I think if you look back, again, I shouldn't be remiss to touch base on how we see the gives and takes from capacity additions, capacity reductions. i think if you look back again i shouldn't be remiss to touch base on how we see the gives and takes from capacity additions capacity reductions I think this year our view is there might be another million barrels of crude capacity, crude conversion capacity out there. i think this year our view is there might be another million barrels of crude capacity crude conversion capacity out there We see it coming out late in the year, it's gonna be a negligible impact. we see it coming out late in the year it's gonna be a negligible impact When you boil that down to the refined product level, you're seeing this year maybe 400,000 bbls a day of refined product impact when you're seeing demand increase by 600,000 bbls-800,000 bbls a day. when you boil that down to the refined product level you're seeing this year maybe 400,000 bbls a day of refined product impact when you're seeing demand increase by 600,000 bbls-800,000 bbls a day Really, we see things continuing to tighten into this year. really we see things continuing to tighten into this year The new capacity come on late this year, it'll ramp up into next year, and it'll be offsetting the capacity or the volume growth that we see in refined products next year. It's gonna be kind of a wash. Beyond that, there's not much going on. We're very constructive, medium and long term on the balance for refined products. It's a good time to be a refiner. The new capacity come on late this year, it'll ramp up into next year, and it'll be offsetting the capacity or the volume growth that we see in refined products next year. the new capacity come on late this year it'll ramp up into next year and it'll be offsetting the capacity or the volume growth that we see in refined products next year It's gonna be kind of a wash. it's gonna be kind of a wash Beyond that, there's not much going on. beyond that there's not much going on We're very constructive, medium and long term on the balance for refined products. we're very constructive medium and long term on the balance for refined products It's a good time to be a refiner. it's a good time to be a refiner

Speaker 1: That's helpful. The other big development so far this year has been Venezuela and the incremental Venezuela barrels available to the market. Can you just talk about the latest dynamics that you're seeing on the light heavy crude side, crude availability, recognizing that the Middle East does, you know, inject some uncertainty. That's helpful. that's helpful The other big development so far this year has been Venezuela and the incremental Venezuela barrels a vailable to the market. the other big development so far this year has been venezuela and the incremental venezuela barrels a vailable to the market Can you just talk about the latest dynamics that you're seeing on the light heavy crude side, crude availability, recognizing that the Middle East does, you know, inject some uncertainty. can you just talk about the latest dynamics that you're seeing on the light heavy crude side crude availability recognizing that the middle east does you know inject some uncertainty

Speaker 2: Sure. Sure. sure

Speaker 1: Just how you're seeing the light heavy crude availability against WCS. Just how you're seeing the light heavy crude availability against WCS. just how you're seeing the light heavy crude availability against wcs

Speaker 2: If you, if you stick it into the box of U.S. consumption patterns and the interaction, it really is about the competition between Venezuelan heavy crude and WCS. We are right at the interface of that competition. We've got Midcontinent refineries that consume WCS. Our Gulf Coast refineries consume WCS or Venezuelan crude. Venezuelan crude is gonna have to be priced to compete with WCS. Likewise, WCS is gonna have to be priced to compete with Venezuelan crude. The diffs have spread out from about $11 a barrel to about $15 a barrel on WCS. And that's certainly benefiting us today at places like Wood River, which we now have total control of. If you, if you stick it into the box of U.S. consumption patterns and the interaction, it really is about the competition between Venezuelan heavy crude and WCS. if you if you stick it into the box of u.s consumption patterns and the interaction it really is about the competition between venezuelan heavy crude and wcs We are right at the interface of that competition. we are right at the interface of that competition We've got Midcontinent refineries that consume WCS. we've got midcontinent refineries that consume wcs Our Gulf Coast refineries consume WCS or Venezuelan crude. our gulf coast refineries consume wcs or venezuelan crude Venezuelan crude is gonna have to be priced to compete with WCS. venezuelan crude is gonna have to be priced to compete with wcs Likewise, WCS is gonna have to be priced to compete with Venezuelan crude. likewise wcs is gonna have to be priced to compete with venezuelan crude The diffs have spread out from about $11 a barrel to about $15 a barrel on WCS. the diffs have spread out from about $11 a barrel to about $15 a barrel on wcs And that's certainly benefiting us today at places like Wood River, which we now have total control of. and that's certainly benefiting us today at places like wood river which we now have total control of I think as one of my colleagues has been mentioning in our speed dating sessions that we really liked the Wood River transaction at $11 diffs. We love it at $15 diffs. It is true. We understood that when we came in, that there was tremendous upside, having control over the Wood River Refinery and the Borger Refinery. We're seeing that benefit today well beyond the synergies that we're capturing out of that. We're seeing the uplift in these tighter times. We have the ability to process about 250,000 bbls a day of Venezuelan crude, most of it at our Sweeny Refinery and some at our Lake Charles Refinery. I think as one of my colleagues has been mentioning in our speed dating sessions that we really liked the Wood River transaction at $11 diffs. i think as one of my colleagues has been mentioning in our speed dating sessions that we really liked the wood river transaction at $11 diffs We love it at $15 diffs. we love it at $15 diffs It is true. it is true We understood that when we came in, that there was tremendous upside, having control over the Wood River Refinery and the Borger Refinery. we understood that when we came in that there was tremendous upside having control over the wood river refinery and the borger refinery We're seeing that benefit today well beyond the synergies that we're capturing out of that. we're seeing that benefit today well beyond the synergies that we're capturing out of that We're seeing the uplift in these tighter times. we're seeing the uplift in these tighter times We have the ability to process about 250,000 bbls a day of Venezuelan crude, most of it at our Sweeny Refinery and some at our Lake Charles Refinery. we have the ability to process about 250,000 bbls a day of venezuelan crude most of it at our sweeny refinery and some at our lake charles refinery We have in the past imported even before Maduro was removed. You know, Chevron had the ability to export to the U.S., and we were taking barrels then. There's nothing magically different today other than there will be more crude available. It still has to compete to get into our portfolio. We're not going to process it just because it's available. We're gonna process it because it displaces in the Gulf, in our Gulf Coast refineries, it displaces WCS. WCS will still compete. I think it's a very good dynamic place for us to be right in the middle of that. We have in the past imported even before Maduro was removed. we have in the past imported even before maduro was removed You know, Chevron had the ability to export to the U.S., and we were taking barrels then. you know chevron had the ability to export to the u.s and we were taking barrels then There's nothing magically different today other than there will be more crude available. there's nothing magically different today other than there will be more crude available It still has to compete to get into our portfolio. it still has to compete to get into our portfolio We're not going to process it just because it's available. we're not going to process it just because it's available We're gonna process it because it displaces in the Gulf, in our Gulf Coast refineries, it displaces WCS. we're gonna process it because it displaces in the gulf in our gulf coast refineries it displaces wcs WCS will still compete. wcs will still compete I think it's a very good dynamic place for us to be right in the middle of that. i think it's a very good dynamic place for us to be right in the middle of that

Speaker 1: Yeah. Makes a lot of sense. Then I want to switch on the operational side. Last year, clean product yields, they reached a record level. The refineries ran really well, and costs continue to move lower. Can you just talk about where you are in the refining improvement process? Yeah. yeah Makes a lot of sense. makes a lot of sense Then I want to switch on the operational side. then i want to switch on the operational side Last year, clean product yields, they reached a record level. last year clean product yields they reached a record level The refineries ran really well, and costs continue to move lower. the refineries ran really well and costs continue to move lower Can you just talk about where you are in the refining improvement process? can you just talk about where you are in the refining improvement process

Speaker 2: Yeah. Yeah. yeah

Speaker 1: What the next steps are from here? What the next steps are from here? what the next steps are from here

Speaker 2: No, that's a great question. You're right, Joe. We hit record clean product yields. We've been outpacing the industry on utilization rates, and we've been driving costs out of the system. Those have been the primary metrics that we've been focused on. It didn't happen overnight. You know, this journey started in late 2021, when we recognized that we had some challenges that we needed to address. We came up with a plan to address those challenges, and it's been a very hard path. We've had to make a lot of tough decisions. What you saw in 2025 is an inflection point where all those tough decisions we made started to come home to roost in a positive way. You're seeing it in our results. No, that's a great question. no that's a great question You're right, Joe. you're right joe We hit record clean product yields. we hit record clean product yields We've been outpacing the industry on utilization rates, and we've been driving costs out of the system. we've been outpacing the industry on utilization rates and we've been driving costs out of the system Those have been the primary metrics that we've been focused on. those have been the primary metrics that we've been focused on It didn't happen overnight. it didn't happen overnight You know, this journey started in late 2021, when we recognized that we had some challenges that we needed to address. you know this journey started in late 2021 when we recognized that we had some challenges that we needed to address We came up with a plan to address those challenges, and it's been a very hard path. we came up with a plan to address those challenges and it's been a very hard path We've had to make a lot of tough decisions. we've had to make a lot of tough decisions What you saw in 2025 is an inflection point where all those tough decisions we made started to come home to roost in a positive way. what you saw in 2025 is an inflection point where all those tough decisions we made started to come home to roost in a positive way You're seeing it in our results. you're seeing it in our results You can't turn the battleships that we have around, but overnight. We started looking at our refining system as a fleet, not as individual refineries. We challenged ourselves to drive costs out and to centralize a lot of things that could be centralized. We put our entire company on a unified bonus program versus competing with individual assets inside the portfolio. We were competing against the external world, and that changed the thinking and the approach to things overnight. We went out to the front lines and said, "Look, what things have you been challenged with in getting your job done? What makes your job difficult? How can we make your job more efficient?" And we set aside capital to address things that were making it hard for our frontline operators to run their assets. You can't turn the battleships that we have around, but overnight. you can't turn the battleships that we have around but overnight We started looking at our refining system as a fleet, not as individual refineries. we started looking at our refining system as a fleet not as individual refineries We challenged ourselves to drive costs out and to centralize a lot of things that could be centralized. we challenged ourselves to drive costs out and to centralize a lot of things that could be centralized We put our entire company on a unified bonus program versus competing with individual assets inside the portfolio. we put our entire company on a unified bonus program versus competing with individual assets inside the portfolio We were competing against the external world, and that changed the thinking and the approach to things overnight. we were competing against the external world and that changed the thinking and the approach to things overnight We went out to the front lines and said, "Look, what things have you been challenged with in getting your job done? we went out to the front lines and said "look what things have you been challenged with in getting your job done What makes your job difficult? what makes your job difficult How can we make your job more efficient?" And we set aside capital to address things that were making it hard for our frontline operators to run their assets. how can we make your job more efficient?" and we set aside capital to address things that were making it hard for our frontline operators to run their assets Maybe there were, you know, steam leaks. Maybe there were things that just, you know, weird position on valves that made their jobs more difficult. That won the hearts and minds of the front line, and they started coming up with more and more projects, more and more things we could do to be more efficient. We asked everybody in the organization to challenge the status quo. Don't get stuck in the old ways of doing things. Let's think about what we're doing and how we can do it better. We even had things embedded in our optimization models that were artificial limits that we were hitting. Maybe there were, you know, steam leaks. maybe there were you know steam leaks Maybe there were things that just, you know, weird position on valves that made their jobs more difficult. maybe there were things that just you know weird position on valves that made their jobs more difficult That won the hearts and minds of the front line, and they started coming up with more and more projects, more and more things we could do to be more efficient. that won the hearts and minds of the front line and they started coming up with more and more projects more and more things we could do to be more efficient We asked everybody in the organization to challenge the status quo. we asked everybody in the organization to challenge the status quo Don't get stuck in the old ways of doing things. don't get stuck in the old ways of doing things Let's think about what we're doing and how we can do it better. let's think about what we're doing and how we can do it better We even had things embedded in our optimization models that were artificial limits that we were hitting. we even had things embedded in our optimization models that were artificial limits that we were hitting We said, "Why is that limit there?" "It's always been there." "Can we get beyond that limit safely?" "Yeah, nobody's ever wanted us to do that." Let's if we can do it safely, we can do it reliably, let's challenge it. We ruthlessly benchmark ourselves against other refiners. We are closing gaps. We have more gaps to close. You saw in our last earnings call, we rerated four of our refineries. That's not something we take lightly. We were, you know, we were getting, you know, good accolades for having these high utilization rates. They became so persistently high at four of our refineries. We said, we need to rerate those because we don't want our refiners to get lazy and comfortable that, oh, yeah, we're operating at 100%. We said, "Why is that limit there?" "It's always been there." "Can we get beyond that limit safely?" "Yeah, nobody's ever wanted us to do that." Let's if we can do it safely, we can do it reliably, let's challenge it. we said "why is that limit there?" "it's always been there." "can we get beyond that limit safely?" "yeah nobody's ever wanted us to do that." let's if we can do it safely we can do it reliably let's challenge it We ruthlessly benchmark ourselves against other refiners. we ruthlessly benchmark ourselves against other refiners We are closing gaps. we are closing gaps We have more gaps to close. we have more gaps to close You saw in our last earnings call, we rerated four of our refineries. you saw in our last earnings call we rerated four of our refineries That's not something we take lightly. that's not something we take lightly We were, you know, we were getting, you know, good accolades for having these high utilization rates. we were you know we were getting you know good accolades for having these high utilization rates They became so persistently high at four of our refineries. they became so persistently high at four of our refineries We said, we need to rerate those because we don't want our refiners to get lazy and comfortable that, oh, yeah, we're operating at 100%. we said we need to rerate those because we don't want our refiners to get lazy and comfortable that oh yeah we're operating at 100% We can't do any better than that. Well, your, your denominator is gonna go up, so you're gonna have to work a little harder. That's what we did. Four refineries. Two of those refineries were re-rerated solely on what we call operational excellence. They were being operated better. They were managing their turnarounds better. So they could go up, you know, about 10% in rates consistently, consistent enough that we said, "Okay, that's now what your baseline is." A couple of other projects like Sweeney and Bayway, we did specific projects that unleashed more potential, more throughput in those refineries, and it's been very beneficial to both those places. There's more to come. We can't do any better than that. we can't do any better than that Well, your, your denominator is gonna go up, so you're gonna have to work a little harder. well your your denominator is gonna go up so you're gonna have to work a little harder That's what we did. that's what we did Four refineries. four refineries Two of those refineries were re-rerated solely on what we call operational excellence. two of those refineries were re-rerated solely on what we call operational excellence They were being operated better. they were being operated better They were managing their turnarounds better. they were managing their turnarounds better So they could go up, you know, about 10% in rates consistently, consistent enough that we said, "Okay, that's now what your baseline is." A couple of other projects like Sweeney and Bayway, we did specific projects that unleashed more potential, more throughput in those refineries, and it's been very beneficial to both those places. so they could go up you know about 10% in rates consistently consistent enough that we said "okay that's now what your baseline is." a couple of other projects like sweeney and bayway we did specific projects that unleashed more potential more throughput in those refineries and it's been very beneficial to both those places There's more to come. there's more to come We've opened up that door for our process engineers and the operators out there to be creative in how we outrun these things, to be creative in utilization and in product yield. That's how you see the clean product yield going up. I love it when I go to a stewardship review at one of our refineries and there's a string of young process engineers that come in and said, "Hey, we figured out how to do this. We rewired this, now we're gonna make $20 million a year, we only spent $500,000." I said, "Why are you standing here talking to me about these great things? Go out and find more." They do. They've their intellectual capability has been unconstrained. They're applying AI to what they do. We've opened up that door for our process engineers and the operators out there to be creative in how we outrun these things, to be creative in utilization and in product yield. we've opened up that door for our process engineers and the operators out there to be creative in how we outrun these things to be creative in utilization and in product yield That's how you see the clean product yield going up. that's how you see the clean product yield going up I love it when I go to a stewardship review at one of our refineries and there's a string of young process engineers that come in and said, "Hey, we figured out how to do this. i love it when i go to a stewardship review at one of our refineries and there's a string of young process engineers that come in and said "hey we figured out how to do this We rewired this, now we're gonna make $20 million a year, we only spent $500,000." I said, "Why are you standing here talking to me about these great things? we rewired this now we're gonna make $20 million a year we only spent $500,000." i said "why are you standing here talking to me about these great things Go out and find more." They do. go out and find more." they do They've their intellectual capability has been unconstrained. they've their intellectual capability has been unconstrained They're applying AI to what they do. they're applying ai to what they do AI is helping our operators operate better. It's helping our maintenance people maintain our assets better and to shorten our turnarounds. AI is helping our commercial people make better decisions faster. It's helping our midstream teams find methane leaks using satellite data faster. It's, you know, we're quietly implementing things that are gonna be beneficial to our business through AI, and I think we're just touching the tip of the iceberg. AI is helping our operators operate better. ai is helping our operators operate better It's helping our maintenance people maintain our assets better and to shorten our turnarounds. it's helping our maintenance people maintain our assets better and to shorten our turnarounds AI is helping our commercial people make better decisions faster. ai is helping our commercial people make better decisions faster It's helping our midstream teams find methane leaks using satellite data faster. it's helping our midstream teams find methane leaks using satellite data faster It's, you know, we're quietly implementing things that are gonna be beneficial to our business through AI, and I think we're just touching the tip of the iceberg. it's you know we're quietly implementing things that are gonna be beneficial to our business through ai and i think we're just touching the tip of the iceberg

Speaker 1: It's great to see the improvements coming through. You spoke on it a little bit earlier, but one of these strategic focuses has been improving the commercial side of the business. It's great to see the improvements coming through. it's great to see the improvements coming through You spoke on it a little bit earlier, but one of these strategic focuses has been improving the commercial side of the business. you spoke on it a little bit earlier but one of these strategic focuses has been improving the commercial side of the business

Speaker 2: Mm-hmm. Mm-hmm. mm-hmm

Speaker 1: Now you've been building out the organization. We saw it at the headquarters last fall. Can you talk about the progress you've made on the commercial side, where to go from here, and what are the signposts we should watch for in the results? Now you've been building out the organization. now you've been building out the organization We saw it at the headquarters last fall. we saw it at the headquarters last fall Can you talk about the progress you've made on the commercial side, where to go from here, and what are the signposts we should watch for in the results? can you talk about the progress you've made on the commercial side where to go from here and what are the signposts we should watch for in the results

Speaker 2: Absolutely. We've got commercial operations in Houston, in Calgary, London, Singapore. We have a small office in China. We recognized that we had to do a better job on the origination side of things. We've added two dozen originators out across the planet. They speak the local language. They know the local cultures. They know where these deals are hidden and how to unlock those deals and bring more value from an inbound perspective. We've got more hunter-gatherers out there looking for better places to capture more value on the disposition of our products. We hired a new head of our trading organization, came in with tremendous experience, and he has hit the ground running, and he's pushing that organization to higher levels of performance. Absolutely. absolutely We've got commercial operations in Houston, in Calgary, London, Singapore. we've got commercial operations in houston in calgary london singapore We have a small office in China. we have a small office in china We recognized that we had to do a better job on the origination side of things. we recognized that we had to do a better job on the origination side of things We've added two dozen originators out across the planet. we've added two dozen originators out across the planet They speak the local language. they speak the local language They know the local cultures. they know the local cultures They know where these deals are hidden and how to unlock those deals and bring more value from an inbound perspective. they know where these deals are hidden and how to unlock those deals and bring more value from an inbound perspective We've got more hunter-gatherers out there looking for better places to capture more value on the disposition of our products. we've got more hunter-gatherers out there looking for better places to capture more value on the disposition of our products We hired a new head of our trading organization, came in with tremendous experience, and he has hit the ground running, and he's pushing that organization to higher levels of performance. we hired a new head of our trading organization came in with tremendous experience and he has hit the ground running and he's pushing that organization to higher levels of performance You're gonna start seeing that in the commercial results, but you'll also see it in the capture, in refining and in the equivalent numbers in midstream because they are working on behalf of those organizations to capture the most value out of the marketplace to find the optimal feedstocks to bring in and the optimal placement of products on the other side and to trade around our assets. In a very proactive way to make sure that we're leveraging every stream that we have, every molecule that we have, the shorts that we understand, the longs that we understand, to make that all work to the benefit of our shareholders. You're gonna start seeing that in the commercial results, but you'll also see it in the capture, in refining and in the equivalent numbers in midstream because they are working on behalf of those organizations to capture the most value out of the marketplace to find the optimal feedstocks to bring in and the optimal placement of products on the other side and to trade around our assets. In a very proactive way to make sure that we're leveraging every stream that we have, every molecule that we have, the shorts that we understand, the longs that we understand, to make that all work to the benefit of our shareholders. you're gonna start seeing that in the commercial results but you'll also see it in the capture in refining and in the equivalent numbers in midstream because they are working on behalf of those organizations to capture the most value out of the marketplace to find the optimal feedstocks to bring in and the optimal placement of products on the other side and to trade around our assets. in a very proactive way to make sure that we're leveraging every stream that we have every molecule that we have the shorts that we understand the longs that we understand to make that all work to the benefit of our shareholders

Speaker 1: Helpful. I wanted to shift over to midstream. This has been one of the key focuses on the NGL Wellhead-to-water strategy. DCP, Pinnacle, Coastal Bend have been integral to that process. Can you just talk about the strategy at a high level, where you are on the process of developing this platform? Helpful. helpful I wanted to shift over to midstream. i wanted to shift over to midstream This has been one of the key focuses on the NGL Wellhead-to-water strategy. this has been one of the key focuses on the ngl wellhead-to-water strategy DCP, Pinnacle, Coastal Bend have been integral to that process. dcp pinnacle coastal bend have been integral to that process Can you just talk about the strategy at a high level, where you are on the process of developing this platform? can you just talk about the strategy at a high level where you are on the process of developing this platform

Speaker 2: Yeah. The strategy really started when we had PSXP assets that we had built in our MLP. We had our DCP joint venture, and there was a disconnect between those assets. That we recognized that if we had those assets all under our control, we could create this wellhead-to-market backbone that would afford us the opportunity to take advantage of the growth that we saw continuing in the Permian Basin. We executed the DCP roll-up. A lot of people were scratching their heads. It was a difficult transaction to get done, a difficult nut to crack. We knew that then everybody was watching, "What are you gonna do next? Yeah. yeah The strategy really started when we had PSXP assets that we had built in our MLP. the strategy really started when we had psxp assets that we had built in our mlp We had our DCP joint venture, and there was a disconnect between those assets. we had our dcp joint venture and there was a disconnect between those assets That we recognized that if we had those assets all under our control, we could create this wellhead-to-market backbone that would afford us the opportunity to take advantage of the growth that we saw continuing in the Permian Basin. that we recognized that if we had those assets all under our control we could create this wellhead-to-market backbone that would afford us the opportunity to take advantage of the growth that we saw continuing in the permian basin We executed the DCP roll-up. we executed the dcp roll-up A lot of people were scratching their heads. a lot of people were scratching their heads It was a difficult transaction to get done, a difficult nut to crack. it was a difficult transaction to get done a difficult nut to crack We knew that then everybody was watching, "What are you gonna do next? we knew that then everybody was watching "what are you gonna do next Where are you headed with this?" What we did next was start to build out more G&P assets that could feed into that backbone, acquire assets like Pinnacle that sit right on top of those assets, that we were the natural operator that had built a competitive advantage on top of competitive advantages that we had and drove all that value creation down to our fractionators at Sweeny. Then the Epic transaction came along. We now call that Coastal Bend. Not only were we adding capacity to to fill out our own fractionators in a proprietary way, we're gonna need more transportation assets to bring those molecules to our fractionators. Where are you headed with this?" What we did next was start to build out more G&P assets that could feed into that backbone, acquire assets like Pinnacle that sit right on top of those assets, that we were the natural operator that had built a competitive advantage on top of competitive advantages that we had and drove all that value creation down to our fractionators at Sweeny. where are you headed with this?" what we did next was start to build out more g&p assets that could feed into that backbone acquire assets like pinnacle that sit right on top of those assets that we were the natural operator that had built a competitive advantage on top of competitive advantages that we had and drove all that value creation down to our fractionators at sweeny Then the Epic transaction came along. then the epic transaction came along We now call that Coastal Bend. we now call that coastal bend Not only were we adding capacity to to fill out our own fractionators in a proprietary way, we're gonna need more transportation assets to bring those molecules to our fractionators. not only were we adding capacity to to fill out our own fractionators in a proprietary way we're gonna need more transportation assets to bring those molecules to our fractionators We could do what others have done, is go out and build another big piece of pipe, or we could acquire the pipe that we're already moving some molecules on that had debottleneck capacity. We've already debottlenecked that pipeline once and have another debottleneck, I think, to the tune of 125,000 bbls a day that will be done by early 2027. We're not buying assets to be buying assets. We're buying assets that create more competitive advantage for us and more organic growth opportunities for us. Pinnacle, we bought Pinnacle. There was one G&P asset sitting there in operation with great contracts behind it, footprint for two more. We've executed the second one. It's up and running, and it's flowing into that EPIC pipeline. We could do what others have done, is go out and build another big piece of pipe, or we could acquire the pipe that we're already moving some molecules on that had debottleneck capacity. we could do what others have done is go out and build another big piece of pipe or we could acquire the pipe that we're already moving some molecules on that had debottleneck capacity We've already debottlenecked that pipeline once and have another debottleneck, I think, to the tune of 125,000 bbls a day that will be done by early 2027. we've already debottlenecked that pipeline once and have another debottleneck i think to the tune of 125,000 bbls a day that will be done by early 2027 We're not buying assets to be buying assets. we're not buying assets to be buying assets We're buying assets that create more competitive advantage for us and more organic growth opportunities for us. we're buying assets that create more competitive advantage for us and more organic growth opportunities for us Pinnacle, we bought Pinnacle. pinnacle we bought pinnacle There was one G&P asset sitting there in operation with great contracts behind it, footprint for two more. there was one g&p asset sitting there in operation with great contracts behind it footprint for two more We've executed the second one. we've executed the second one It's up and running, and it's flowing into that EPIC pipeline. it's up and running and it's flowing into that epic pipeline Out to between the Midland and Delaware Basins, we've got Iron Mesa, a 300,000 bbls a day gas plant under construction. It's going to take the place of a very old, unreliable Goldsmith plant that we had and add additional capacity beyond that. There's more to come in that region as we, as we reestablish ourselves as a premier operator. Goldsmith, no one could put it in the premier operator, category. We had lots of challenges, with unsatisfied customers out there. They see the Goldsmith, asset as a whole new dawn of a, of a new, a new midstream opportunity out there. Now they're bringing other opportunities to us. Out to between the Midland and Delaware Basins, we've got Iron Mesa, a 300,000 bbls a day gas plant under construction. out to between the midland and delaware basins we've got iron mesa a 300,000 bbls a day gas plant under construction It's going to take the place of a very old, unreliable Goldsmith plant that we had and add additional capacity beyond that. it's going to take the place of a very old unreliable goldsmith plant that we had and add additional capacity beyond that There's more to come in that region as we, as we reestablish ourselves as a premier operator. there's more to come in that region as we as we reestablish ourselves as a premier operator Goldsmith, no one could put it in the premier operator, category. goldsmith no one could put it in the premier operator category We had lots of challenges, with unsatisfied customers out there. we had lots of challenges with unsatisfied customers out there They see the Goldsmith, asset as a whole new dawn of a, of a new, a new midstream opportunity out there. they see the goldsmith asset as a whole new dawn of a of a new a new midstream opportunity out there Now they're bringing other opportunities to us. now they're bringing other opportunities to us We've got a lot of demand pull on more G&P assets that we're going to add, but we're only gonna add assets at the pace where we see the demand for the liquids that will fill them and the gas that will fill them. We're not growing just for growth's sake. We believe that we will hit $4.5 billion of EBITDA in the midstream business by the end of 2027. That's not an aspirational goal that said, Hey, we need to get to $4.5 billion of EBITDA. No, that's not the way we do it. We look at the accretive opportunities that we have in the midstream business and what is the result of executing well on those accretive opportunities, and we get to $4.5 billion. We're not driven by an EBITDA growth target. We're driven by creating value for our shareholders and driving accretive returns. We've got a lot of demand pull on more G&P assets that we're going to add, but we're only gonna add assets at the pace where we see the demand for the liquids that will fill them and the gas that will fill them. we've got a lot of demand pull on more g&p assets that we're going to add but we're only gonna add assets at the pace where we see the demand for the liquids that will fill them and the gas that will fill them We're not growing just for growth's sake. we're not growing just for growth's sake We believe that we will hit $4.5 billion of EBITDA in the midstream business by the end of 2027. we believe that we will hit $4.5 billion of ebitda in the midstream business by the end of 2027 That's not an aspirational goal that said, Hey, we need to get to $4.5 billion of EBITDA. that's not an aspirational goal that said hey we need to get to $4.5 billion of ebitda No, that's not the way we do it. no that's not the way we do it We look at the accretive opportunities that we have in the midstream business and what is the result of executing well on those accretive opportunities, and we get to $4.5 billion. we look at the accretive opportunities that we have in the midstream business and what is the result of executing well on those accretive opportunities and we get to $4.5 billion We're not driven by an EBITDA growth target. we're not driven by an ebitda growth target We're driven by creating value for our shareholders and driving accretive returns. we're driven by creating value for our shareholders and driving accretive returns

Speaker 1: That's helpful. Beyond 2027, Western Gateway, that's a project, that could add to growth beyond that time horizon. Can you just talk through the interest you've received in the project? That's helpful. that's helpful Beyond 2027, Western Gateway, that's a project, that could add to growth beyond that time horizon. beyond 2027 western gateway that's a project that could add to growth beyond that time horizon Can you just talk through the interest you've received in the project? can you just talk through the interest you've received in the project

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Path to reaching FID and how it fits within the overall strategy? Path to reaching FID and how it fits within the overall strategy? path to reaching fid and how it fits within the overall strategy

Speaker 2: Yeah. Western Gateway is the epitome of an integrated strategy. We had to have refining involved, we had to have midstream involved, we had to have commercial involved, we had to have marketing involved because we've got marketing assets in California. Actually, the idea was originally conceived and generated in a leadership development program we had, where we had representatives from all of those parts of the company being developed as future leaders. We asked them, instead of just giving them a Harvard Business Review, we said, "Hey, take a look at the company. We're focused on integration. Can you tell us, is there something that we should be looking at?" They came up with this concept even before we had executed on WRB, even before we had announced the exit of L.A. Yeah. yeah Western Gateway is the epitome of an integrated strategy. western gateway is the epitome of an integrated strategy We had to have refining involved, we had to have midstream involved, we had to have commercial involved, we had to have marketing involved because we've got marketing assets in California. we had to have refining involved we had to have midstream involved we had to have commercial involved we had to have marketing involved because we've got marketing assets in california Actually, the idea was originally conceived and generated in a leadership development program we had, where we had representatives from all of those parts of the company being developed as future leaders. actually the idea was originally conceived and generated in a leadership development program we had where we had representatives from all of those parts of the company being developed as future leaders We asked them, instead of just giving them a Harvard Business Review, we said, "Hey, take a look at the company. we asked them instead of just giving them a harvard business review we said "hey take a look at the company We're focused on integration. we're focused on integration Can you tell us, is there something that we should be looking at?" They came up with this concept even before we had executed on WRB, even before we had announced the exit of L.A. can you tell us is there something that we should be looking at?" they came up with this concept even before we had executed on wrb even before we had announced the exit of l.a They said, "You know, this looks like a great opportunity," and we ran with it. Now, having full control of WRB and having our own short position because we ceased operations at L.A., made the project just jump to the front of the queue. We've been through one open season with our partners at Kinder Morgan. The first open season was successful. It was primarily focused on getting Midcontinent shippers providing Kinder Morgan the assurance that we were able to get enough volume to satisfy Phoenix so they could reverse the flow of their system that comes from California into Phoenix. They said, "You know, this looks like a great opportunity," and we ran with it. they said "you know this looks like a great opportunity," and we ran with it Now, having full control of WRB and having our own short position because we ceased operations at L.A., made the project just jump to the front of the queue. now having full control of wrb and having our own short position because we ceased operations at l.a made the project just jump to the front of the queue We've been through one open season with our partners at Kinder Morgan. we've been through one open season with our partners at kinder morgan The first open season was successful. the first open season was successful It was primarily focused on getting Midcontinent shippers providing Kinder Morgan the assurance that we were able to get enough volume to satisfy Phoenix so they could reverse the flow of their system that comes from California into Phoenix. it was primarily focused on getting midcontinent shippers providing kinder morgan the assurance that we were able to get enough volume to satisfy phoenix so they could reverse the flow of their system that comes from california into phoenix Now they're comfortable with that, so we're having a second season that says, "Okay, now we're gonna open up the season for flow all the way into California." We heard in the first round that there were Gulf Coast shippers that would like to participate. We opened up origination points in the Gulf Coast that could come up through Explorer and tie into the system that we're developing. That open season will wrap up at the end of this month, and then we'll decide how big the pipe needs to be, and if the economics are compelling, we'll proceed. We're bullish on those economics. We're going to be one of the primary shippers on the pipeline, and so we believe in the project. It's a matter of getting that open season, getting all the shippers committed, and seeing what we can do. Now they're comfortable with that, so we're having a second season that says, "Okay, now we're gonna open up the season for flow all the way into California." We heard in the first round that there were Gulf Coast shippers that would like to participate. now they're comfortable with that so we're having a second season that says "okay now we're gonna open up the season for flow all the way into california." we heard in the first round that there were gulf coast shippers that would like to participate We opened up origination points in the Gulf Coast that could come up through Explorer and tie into the system that we're developing. we opened up origination points in the gulf coast that could come up through explorer and tie into the system that we're developing That open season will wrap up at the end of this month, and then we'll decide how big the pipe needs to be, and if the economics are compelling, we'll proceed. that open season will wrap up at the end of this month and then we'll decide how big the pipe needs to be and if the economics are compelling we'll proceed We're bullish on those economics. we're bullish on those economics We're going to be one of the primary shippers on the pipeline, and so we believe in the project. we're going to be one of the primary shippers on the pipeline and so we believe in the project It's a matter of getting that open season, getting all the shippers committed, and seeing what we can do. it's a matter of getting that open season getting all the shippers committed and seeing what we can do

Speaker 1: Sounds good. We'll stay tuned. I wanna talk about chemicals for a little bit. Margins, they've been challenged recently. Sounds good. sounds good We'll stay tuned. we'll stay tuned I wanna talk about chemicals for a little bit. i wanna talk about chemicals for a little bit Margins, they've been challenged recently. margins they've been challenged recently

Speaker 2: Mm-hmm. Mm-hmm. mm-hmm

Speaker 1: Can you just talk about what you're seeing in the market currently? Maybe if we go back to Friday, 'cause I know there's a lot of uncertainty in the market currently? Can you just talk about what you're seeing in the market currently? can you just talk about what you're seeing in the market currently Maybe if we go back to Friday, 'cause I know there's a lot of uncertainty in the market currently? maybe if we go back to friday 'cause i know there's a lot of uncertainty in the market currently

Speaker 2: Yeah. Yeah. yeah

Speaker 1: How do you see the path progressing back to mid-cycle? Is it more demand growth driven, supply, rationalization? Just how do you see the lay of the land right now? How do you see the path progressing back to mid-cycle? how do you see the path progressing back to mid-cycle Is it more demand growth driven, supply, rationalization? is it more demand growth driven supply rationalization Just how do you see the lay of the land right now? just how do you see the lay of the land right now

Speaker 2: Yeah. I'll try really hard to put myself back in Friday mode. No, it's been a tough market. It's been a tough down cycle. CPChem was built for these conditions to survive in these conditions, and they're actually doing quite well at the bottom of the market versus their competitors. They've been running at 100% plus operating rates. They've got assets on the Gulf Coast. They've got assets in the Middle East. They're focused on advantaged ethane and the polyethylene and related olefins chains. You know, in the 26 years that CPChem's been in existence, it's grown faster and more profitably than their competitors. Yeah. yeah I'll try really hard to put myself back in Friday mode. i'll try really hard to put myself back in friday mode No, it's been a tough market. no it's been a tough market It's been a tough down cycle. it's been a tough down cycle CPChem was built for these conditions to survive in these conditions, and they're actually doing quite well at the bottom of the market versus their competitors. cpchem was built for these conditions to survive in these conditions and they're actually doing quite well at the bottom of the market versus their competitors They've been running at 100% plus operating rates. they've been running at 100% plus operating rates They've got assets on the Gulf Coast. they've got assets on the gulf coast They've got assets in the Middle East. they've got assets in the middle east They're focused on advantaged ethane and the polyethylene and related olefins chains. they're focused on advantaged ethane and the polyethylene and related olefins chains You know, in the 26 years that CPChem's been in existence, it's grown faster and more profitably than their competitors. you know in the 26 years that cpchem's been in existence it's grown faster and more profitably than their competitors If you look at the last week view, North American assets, exporting more than 50% of their production running at, over 90%. You get to 85% in that business, it's pretty tight. North America's running at 90%. Europe's running at 60% and rationalizing assets. Asia's running at 60% and rationalizing assets. More rationalization under those conditions, under those scenarios needs to occur. One thing that we've been talking about, even before, the current situation is, I'm not sure the world understands the drag on that business that subsidized or sub-market, crude oil being sold into China has. If you look at the last week view, North American assets, exporting more than 50% of their production running at, over 90%. if you look at the last week view north american assets exporting more than 50% of their production running at over 90% You get to 85% in that business, it's pretty tight. you get to 85% in that business it's pretty tight North America's running at 90%. north america's running at 90% Europe's running at 60% and rationalizing assets. europe's running at 60% and rationalizing assets Asia's running at 60% and rationalizing assets. asia's running at 60% and rationalizing assets More rationalization under those conditions, under those scenarios needs to occur. more rationalization under those conditions under those scenarios needs to occur One thing that we've been talking about, even before, the current situation is, I'm not sure the world understands the drag on that business that subsidized or sub-market, crude oil being sold into China has. one thing that we've been talking about even before the current situation is i'm not sure the world understands the drag on that business that subsidized or sub-market crude oil being sold into china has 'Cause the way you look at when you're thinking about pricing and cost in that business, there's a, there's a stark S-shaped cost curve where you've got naphtha producers that are converting naphtha to ethylene in China at the high end of the cost curve, and you've got people that are converting ethane in the Middle East and the Gulf Coast at the, at the low end of the cost curve. Well, if China is buying crude oil at a 40% discount, that cost curve it's distorted. China, everybody's scratching their heads, geez, China's so aggressive. They're dumping polyethylene in the world markets. They don't usually do that. Well, it's because they've got this incredible cost advantage, and so they're being disruptive and dumping into the rest of the world. 'Cause the way you look at when you're thinking about pricing and cost in that business, there's a, there's a stark S-shaped cost curve where you've got naphtha producers that are converting naphtha to ethylene in China at the high end of the cost curve, and you've got people that are converting ethane in the Middle East and the Gulf Coast at the, at the low end of the cost curve. 'cause the way you look at when you're thinking about pricing and cost in that business there's a there's a stark s-shaped cost curve where you've got naphtha producers that are converting naphtha to ethylene in china at the high end of the cost curve and you've got people that are converting ethane in the middle east and the gulf coast at the at the low end of the cost curve Well, if China is buying crude oil at a 40% discount, that cost curve it's distorted. well if china is buying crude oil at a 40% discount that cost curve it's distorted China, everybody's scratching their heads, geez, China's so aggressive. china everybody's scratching their heads geez china's so aggressive They're dumping polyethylene in the world markets. they're dumping polyethylene in the world markets They don't usually do that. they don't usually do that Well, it's because they've got this incredible cost advantage, and so they're being disruptive and dumping into the rest of the world. well it's because they've got this incredible cost advantage and so they're being disruptive and dumping into the rest of the world We were already looking at that saying, "That's, that's just a disconnect. That's a dislocation. That's, that's a drag and causing us to continue to be at the bottom of this cycle." Now all of a sudden you look at something that's coming into play that could change that. They're not getting discounted Venezuelan crude. They're not getting the discounted Iranian crude. They're probably still getting discounted Russian crude, but you're seeing refiners in Asia cut back. You're seeing petrochemical assets in Asia cut back. Even the propane dehydrogenation facilities are gonna be challenged. It's a double whammy. You're gonna see that cost curve maybe revert to where it should be. We were already looking at that saying, "That's, that's just a disconnect. we were already looking at that saying "that's that's just a disconnect That's a dislocation. that's a dislocation That's, that's a drag and causing us to continue to be at the bottom of this cycle." Now all of a sudden you look at something that's coming into play that could change that. that's that's a drag and causing us to continue to be at the bottom of this cycle." now all of a sudden you look at something that's coming into play that could change that They're not getting discounted Venezuelan crude. they're not getting discounted venezuelan crude They're not getting the discounted Iranian crude. they're not getting the discounted iranian crude They're probably still getting discounted Russian crude, but you're seeing refiners in Asia cut back. they're probably still getting discounted russian crude but you're seeing refiners in asia cut back You're seeing petrochemical assets in Asia cut back. you're seeing petrochemical assets in asia cut back Even the propane dehydrogenation facilities are gonna be challenged. even the propane dehydrogenation facilities are gonna be challenged It's a double whammy. it's a double whammy You're gonna see that cost curve maybe revert to where it should be. you're gonna see that cost curve maybe revert to where it should be Then you layer in the supply and demand impact that you're seeing from what's going on in the Arabian Gulf, Persian Gulf, is that, you know, production can't get out of Qatar. Production can't get out of Saudi Arabia. Production can't get out of other locations. It's trapped, and so it's gonna tighten up supply, not just for crude oil, but for polyethylene and in some respects, polypropylene as well. You're gonna see a cost curve revert, and you're gonna see supply and demand tighten. That could be a catalyst that gets us up off of this bottom of the cycle kind of condition. Will it hold and bridge to the next uptick? Then you layer in the supply and demand impact that you're seeing from what's going on in the Arabian Gulf, Persian Gulf, is that, you know, production can't get out of Qatar. then you layer in the supply and demand impact that you're seeing from what's going on in the arabian gulf persian gulf is that you know production can't get out of qatar Production can't get out of Saudi Arabia. production can't get out of saudi arabia Production can't get out of other locations. production can't get out of other locations It's trapped, and so it's gonna tighten up supply, not just for crude oil, but for polyethylene and in some respects, polypropylene as well. it's trapped and so it's gonna tighten up supply not just for crude oil but for polyethylene and in some respects polypropylene as well You're gonna see a cost curve revert, and you're gonna see supply and demand tighten. you're gonna see a cost curve revert and you're gonna see supply and demand tighten That could be a catalyst that gets us up off of this bottom of the cycle kind of condition. that could be a catalyst that gets us up off of this bottom of the cycle kind of condition Will it hold and bridge to the next uptick? will it hold and bridge to the next uptick It could if it stays in place long enough, as global demand keeps ticking upward, people continue to move from poverty to the middle class and demanding more of these products. It could be that catalyst that really sets the next upcycle in the petrochemicals business. It could if it stays in place long enough, as global demand keeps ticking upward, people continue to move from poverty to the middle class and demanding more of these products. it could if it stays in place long enough as global demand keeps ticking upward people continue to move from poverty to the middle class and demanding more of these products It could be that catalyst that really sets the next upcycle in the petrochemicals business. it could be that catalyst that really sets the next upcycle in the petrochemicals business

Speaker 1: That's helpful. Maybe just bringing it all together, the value of integration has been a key topic of discussion over the past year or so. Can you just talk about the advantages of having refining, midstream, and chemicals businesses all under one under one roof? That's helpful. that's helpful Maybe just bringing it all together, the value of integration has been a key topic of discussion over the past year or so. maybe just bringing it all together the value of integration has been a key topic of discussion over the past year or so Can you just talk about the advantages of having refining, midstream, and chemicals businesses all under one under one roof? can you just talk about the advantages of having refining midstream and chemicals businesses all under one under one roof

Speaker 2: I think, you know, it starts with the midstream business. We move crude oil. We move NGLs, raw, Y-grade. Those two businesses are synergistic. We can manage them together. We realize cost advantages there just in the midstream. I think the poster child of our integration is our Sweeny Complex, where it all comes together. We've got millions of barrels of underground salt dome storage capability, where we can manage the NGL system, CPChem can manage their petrochemical system, and we can keep things moving and take advantage of markets each and every day. There's synergies around understanding the market movements, being a global player from that position on the Gulf Coast. I think, you know, it starts with the midstream business. i think you know it starts with the midstream business We move crude oil. we move crude oil We move NGLs, raw, Y-grade. we move ngls raw y-grade Those two businesses are synergistic. those two businesses are synergistic We can manage them together. we can manage them together We realize cost advantages there just in the midstream. we realize cost advantages there just in the midstream I think the poster child of our integration is our Sweeny Complex, where it all comes together. i think the poster child of our integration is our sweeny complex where it all comes together We've got millions of barrels of underground salt dome storage capability, where we can manage the NGL system, CPChem can manage their petrochemical system, and we can keep things moving and take advantage of markets each and every day. we've got millions of barrels of underground salt dome storage capability where we can manage the ngl system cpchem can manage their petrochemical system and we can keep things moving and take advantage of markets each and every day There's synergies around understanding the market movements, being a global player from that position on the Gulf Coast. there's synergies around understanding the market movements being a global player from that position on the gulf coast We've got bi-directional flow from coming out of the Permian into Corpus Christi, bi-directional flow on purity products to Sweeny back to Corpus Christi, all the way up to Mont Belvieu. We can play all of those markets for our producers upstream, and all those assets are advantaged because of how we manage the whole Sweeny Complex. We've got an export terminal at Freeport, so we can access global markets out of Corpus Christi, out of Freeport, and out of Mont Belvieu. You look at there in the Sweeny Complex, the cost advantages of being able to leverage that midstream presence, that refining presence, and we've got petrochemical assets, three NGL crackers right at our Sweeny Complex that are owned and operated by CPChem. They're producing polyethylene. They're producing other olefin products right there. We've got bi-directional flow from coming out of the Permian into Corpus Christi, bi-directional flow on purity products to Sweeny back to Corpus Christi, all the way up to Mont Belvieu. we've got bi-directional flow from coming out of the permian into corpus christi bi-directional flow on purity products to sweeny back to corpus christi all the way up to mont belvieu We can play all of those markets for our producers upstream, and all those assets are advantaged because of how we manage the whole Sweeny Complex. we can play all of those markets for our producers upstream and all those assets are advantaged because of how we manage the whole sweeny complex We've got an export terminal at Freeport, so we can access global markets out of Corpus Christi, out of Freeport, and out of Mont Belvieu. we've got an export terminal at freeport so we can access global markets out of corpus christi out of freeport and out of mont belvieu You look at there in the Sweeny Complex, the cost advantages of being able to leverage that midstream presence, that refining presence, and we've got petrochemical assets, three NGL crackers right at our Sweeny Complex that are owned and operated by CPChem. you look at there in the sweeny complex the cost advantages of being able to leverage that midstream presence that refining presence and we've got petrochemical assets three ngl crackers right at our sweeny complex that are owned and operated by cpchem They're producing polyethylene. they're producing polyethylene They're producing other olefin products right there. they're producing other olefin products right there We've got streams that are going back and forth seamlessly without the friction of vastly different ownership. We understand those markets, and we understand the influence of those markets on the NGL value chain, so we can make better decisions commercially, faster. It's challenging to put a number on that, and we're working towards being able to discern what we can disclose to describe the values around that. It may be easier to think about what the value is that would be destroyed if you broke that integrated value chain up. We can take you to a location in Greeley, Colorado, and show you a gas plant we have there. At one end of the gas plant, there are 50 fairly innocuous wellheads. We've got streams that are going back and forth seamlessly without the friction of vastly different ownership. we've got streams that are going back and forth seamlessly without the friction of vastly different ownership We understand those markets, and we understand the influence of those markets on the NGL value chain, so we can make better decisions commercially, faster. we understand those markets and we understand the influence of those markets on the ngl value chain so we can make better decisions commercially faster It's challenging to put a number on that, and we're working towards being able to discern what we can disclose to describe the values around that. it's challenging to put a number on that and we're working towards being able to discern what we can disclose to describe the values around that It may be easier to think about what the value is that would be destroyed if you broke that integrated value chain up. it may be easier to think about what the value is that would be destroyed if you broke that integrated value chain up We can take you to a location in Greeley, Colorado, and show you a gas plant we have there. we can take you to a location in greeley colorado and show you a gas plant we have there At one end of the gas plant, there are 50 fairly innocuous wellheads. at one end of the gas plant there are 50 fairly innocuous wellheads We're capturing all the gas and gas liquids off of those wellheads, capturing those liquids, sending them to Sweeney, fractionating them at Sweeney, and turning the ethane from those streams into ethylene polyethylene pellets at Sweeney. It's incredibly efficient, incredibly effective, and our partner is the one partner in CPChem, the C side of CPChem owns those wells. It's just very integrated, efficient. Things happen seamlessly every day. If you were to break that up into three distinct chunks, that would be a very challenging operation. Could you paper it? Sure, you can, but every piece of paper adds friction, adds a point of disconnect, adds a potential for lost value for everybody. Not just, you know, you get value and I lose value. It's just a loss of value. We're capturing all the gas and gas liquids off of those wellheads, capturing those liquids, sending them to Sweeney, fractionating them at Sweeney, and turning the ethane from those streams into ethylene polyethylene pellets at Sweeney. we're capturing all the gas and gas liquids off of those wellheads capturing those liquids sending them to sweeney fractionating them at sweeney and turning the ethane from those streams into ethylene polyethylene pellets at sweeney It's incredibly efficient, incredibly effective, and our partner is the one partner in CPChem, the C side of CPChem owns those wells. it's incredibly efficient incredibly effective and our partner is the one partner in cpchem the c side of cpchem owns those wells It's just very integrated, efficient. it's just very integrated efficient Things happen seamlessly every day. things happen seamlessly every day If you were to break that up into three distinct chunks, that would be a very challenging operation. if you were to break that up into three distinct chunks that would be a very challenging operation Could you paper it? could you paper it Sure, you can, but every piece of paper adds friction, adds a point of disconnect, adds a potential for lost value for everybody. sure you can but every piece of paper adds friction adds a point of disconnect adds a potential for lost value for everybody Not just, you know, you get value and I lose value. not just you know you get value and i lose value It's just a loss of value. it's just a loss of value That's what we saw inside Wood River. Decisions were made slower. We couldn't really look at the full integrated value of running the right crudes at Wood River or Borger because of the things that we could do at the retail level and capture value. That value is now freed up, and we're delivering that. It's amazing how we're able to optimize better across the board each and every day seamlessly without friction. That's what we saw inside Wood River. that's what we saw inside wood river Decisions were made slower. decisions were made slower We couldn't really look at the full integrated value of running the right crudes at Wood River or Borger because of the things that we could do at the retail level and capture value. we couldn't really look at the full integrated value of running the right crudes at wood river or borger because of the things that we could do at the retail level and capture value That value is now freed up, and we're delivering that. that value is now freed up and we're delivering that It's amazing how we're able to optimize better across the board each and every day seamlessly without friction. it's amazing how we're able to optimize better across the board each and every day seamlessly without friction

Speaker 1: That makes a lot of sense. I wanted to ask on M&A. TSX has been active in M&A recently. That makes a lot of sense. that makes a lot of sense I wanted to ask on M&A. i wanted to ask on m&a TSX has been active in M&A recently. tsx has been active in m&a recently

Speaker 2: Mm-hmm. Mm-hmm. mm-hmm

Speaker 1: I want you to talk about, is the portfolio in an optimal place right now? Is there more to do on either the acquisition or divestment side here? I want you to talk about, is the portfolio in an optimal place right now? i want you to talk about is the portfolio in an optimal place right now Is there more to do on either the acquisition or divestment side here? is there more to do on either the acquisition or divestment side here

Speaker 2: Yeah. We've divested about five and a half billion dollars worth of what we deem non-core assets. High value assets, but non-core. Assets that were generating good EBITDA but had no growth potential. We've redeployed much of that capital into the acquisitions that we did primarily midstream. It was the mirror image of that. We saw assets like Pinnacle that we could acquire and not only get great assets, but open up an organic growth opportunity, the EPIC Pipeline or the Wood River acquisition. We got it at great value, tremendous value if you look at where diffs are today. There's gotta be a value creation opportunity for us to acquire something. Yeah. yeah We've divested about five and a half billion dollars worth of what we deem non-core assets. we've divested about five and a half billion dollars worth of what we deem non-core assets High value assets, but non-core. high value assets but non-core Assets that were generating good EBITDA but had no growth potential. assets that were generating good ebitda but had no growth potential We've redeployed much of that capital into the acquisitions that we did primarily midstream. we've redeployed much of that capital into the acquisitions that we did primarily midstream It was the mirror image of that. it was the mirror image of that We saw assets like Pinnacle that we could acquire and not only get great assets, but open up an organic growth opportunity, the EPIC Pipeline or the Wood River acquisition. we saw assets like pinnacle that we could acquire and not only get great assets but open up an organic growth opportunity the epic pipeline or the wood river acquisition We got it at great value, tremendous value if you look at where diffs are today. we got it at great value tremendous value if you look at where diffs are today There's gotta be a value creation opportunity for us to acquire something. there's gotta be a value creation opportunity for us to acquire something It was great to clean up our portfolio, but it was incredible to be able to redeploy the capital that we freed up into areas that would give us great returns on that capital invested and open up even higher return opportunities from a growth opportunity perspective. Primarily in midstream, but we're not shy about refining if we find the right opportunities as well. It was great to clean up our portfolio, but it was incredible to be able to redeploy the capital that we freed up into areas that would give us great returns on that capital invested and open up even higher return opportunities from a growth opportunity perspective. it was great to clean up our portfolio but it was incredible to be able to redeploy the capital that we freed up into areas that would give us great returns on that capital invested and open up even higher return opportunities from a growth opportunity perspective Primarily in midstream, but we're not shy about refining if we find the right opportunities as well. primarily in midstream but we're not shy about refining if we find the right opportunities as well

Speaker 1: That makes sense. I wanted to ask just on cash flow. Can you talk about how you think about the balance between shareholder returns, debt pay down, the path to the $17 billion debt target by 2027? Buybacks versus dividends, which you just raised? That makes sense. that makes sense I wanted to ask just on cash flow. i wanted to ask just on cash flow Can you talk about how you think about the balance between shareholder returns, debt pay down, the path to the $17 billion debt target by 2027? can you talk about how you think about the balance between shareholder returns debt pay down the path to the $17 billion debt target by 2027 Buybacks versus dividends, which you just raised? buybacks versus dividends which you just raised

Speaker 2: Sure. Sure. sure

Speaker 1: ... again by about 6%, I think recently. ... again by about 6%, I think recently. again by about 6% i think recently

Speaker 2: Absolutely. Well, we're rock solid committed to delivering at least 50% of our operating cash flow to shareholders. We beat that target last year. We beat it for quite some time. You think about that, I think the consensus numbers for 2026 and 2027 have us generating about $8 billion of cash. If you think about that $8 billion, that's it's convenient to divide that up by 4, 2, 2. $8 billion says you gotta give $4 billion of that back to shareholders. Well, about $2 billion of that goes to the dividend right away, straight away. That means share repurchases are gonna be about $2 billion. Our capital budget is around $2 billion, that leaves debt repayment around $2 billion. Absolutely. absolutely Well, we're rock solid committed to delivering at least 50% of our operating cash flow to shareholders. well we're rock solid committed to delivering at least 50% of our operating cash flow to shareholders We beat that target last year. we beat that target last year We beat it for quite some time. we beat it for quite some time You think about that, I think the consensus numbers for 2026 and 2027 have us generating about $8 billion of cash. you think about that i think the consensus numbers for 2026 and 2027 have us generating about $8 billion of cash If you think about that $8 billion, that's it's convenient to divide that up by 4, 2, 2. $8 b illion says you gotta give $4 billion of that back to shareholders. if you think about that $8 billion that's it's convenient to divide that up by 4 2 2. $8 b illion says you gotta give $4 billion of that back to shareholders Well, about $2 billion of that goes to the dividend right away, straight away. well about $2 billion of that goes to the dividend right away straight away That means share repurchases are gonna be about $2 billion. that means share repurchases are gonna be about $2 billion Our capital budget is around $2 billion, that leaves debt repayment around $2 billion. our capital budget is around $2 billion that leaves debt repayment around $2 billion We're targeting around $1.5 billion in 2026, 1.5 billion of debt repayment in 2027. That's how we look at that. That's how we think about that. To the extent that we have cash beyond that, we could accelerate the debt repayment and then... It's really gonna be balanced about where we think our share price is versus the ultimate value of our share price. We're committed to ratably deliver share repurchases. We've got models in place that will make purchases based on where we think the share price is versus the ultimate value. We know the things that we have in the hopper too, can create value out in the future. We're targeting around $1.5 billion in 2026, 1.5 billion of debt repayment in 2027. we're targeting around $1.5 billion in 2026 1.5 billion of debt repayment in 2027 That's how we look at that. that's how we look at that That's how we think about that. that's how we think about that To the extent that we have cash beyond that, we could accelerate the debt repayment and then... to the extent that we have cash beyond that we could accelerate the debt repayment and then It's really gonna be balanced about where we think our share price is versus the ultimate value of our share price. it's really gonna be balanced about where we think our share price is versus the ultimate value of our share price We're committed to ratably deliver share repurchases. we're committed to ratably deliver share repurchases We've got models in place that will make purchases based on where we think the share price is versus the ultimate value. we've got models in place that will make purchases based on where we think the share price is versus the ultimate value We know the things that we have in the hopper too, can create value out in the future. we know the things that we have in the hopper too can create value out in the future We can have line of sight on that and say, "Hey, this is knowing what we know out in the future, this is a pretty good deal to continue to buy shares." We think we can do both, and we think we're gonna have plenty of cash to get the debt down to that $17 billion level probably sooner than later, and still have upside in share repurchases, delivering cash to shareholders. Remember, we've got growth capital baked into that budget as well. We're not just gonna say, "Okay, we're buying these shares, and there's no growth out there." We've got profitable growth coming that will enhance that share price as well. We can have line of sight on that and say, "Hey, this is knowing what we know out in the future, this is a pretty good deal to continue to buy shares." We think we can do both, and we think we're gonna have plenty of cash to get the debt down to that $17 billion level probably sooner than later, and still have upside in share repurchases, delivering cash to shareholders. we can have line of sight on that and say "hey this is knowing what we know out in the future this is a pretty good deal to continue to buy shares." we think we can do both and we think we're gonna have plenty of cash to get the debt down to that $17 billion level probably sooner than later and still have upside in share repurchases delivering cash to shareholders Remember, we've got growth capital baked into that budget as well. remember we've got growth capital baked into that budget as well We're not just gonna say, "Okay, we're buying these shares, and there's no growth out there." We've got profitable growth coming that will enhance that share price as well. we're not just gonna say "okay we're buying these shares and there's no growth out there." we've got profitable growth coming that will enhance that share price as well It's doubly compounded because we're shrinking the number of shares, and we've got growth opportunities that are gonna stack on top of that smaller pile of shares going forward. It's doubly compounded because we're shrinking the number of shares, and we've got growth opportunities that are gonna stack on top of that smaller pile of shares going forward. it's doubly compounded because we're shrinking the number of shares and we've got growth opportunities that are gonna stack on top of that smaller pile of shares going forward

Speaker 1: Perfect. We're a little bit over time, I think that's a great place to end it here. Perfect. perfect We're a little bit over time, I think that's a great place to end it here. we're a little bit over time i think that's a great place to end it here

Speaker 2: All right. All right. all right

Speaker 1: Mark, thank you so much for being here. Really appreciate it. Mark, thank you so much for being here. mark thank you so much for being here Really appreciate it. really appreciate it

Speaker 2: Thanks, Joe. Thanks, Joe. thanks joe

Speaker 1: Thank you. Thank you. thank you

Speaker 2: Enjoyed the talk. Enjoyed the talk. enjoyed the talk