Is Phillips 66 Poised to Gain From a Favorable Refining Backdrop?

Phillips 66 PSX is a diversified energy company with operations spanning multiple sectors, including refining, midstream, chemicals, renewable fuels and marketing. PSX’s refining segment has reported significant gains on the back of strong refining margins in 2025. The company’s refining business is expected to gain further in the fourth quarter as well, driven by widening light-heavy crude spreads.

Phillips 66 owns an extensive and highly complex refinery network that can process a variety of feedstocks, including heavy sour crude with a high sulfur content. The company is a significant user of Western Canadian Select (WCS), a heavy sour crude that is expected to become cheaper in the upcoming quarters. PSX has stated that additional WCS production coming online, along with winter diluent blending, is expected to boost Canadian production in the fourth quarter and the first quarter of 2026. With more crude entering the market, heavy crude prices are expected to fall, benefiting the refining wing of the company.

Additionally, with the Trump administration potentially reopening the door to Venezuela’s significant oil and gas reserves for U.S. refiners, Venezuelan heavy sour crude may also hit the market, further pressuring heavy crude prices. Hence, the current refining scenario is likely to enhance the company’s earnings by supporting strong refining margins.

VLO & PARR Are Two Other Leading Refiners

Valero Energy Corporation VLO and Par Pacific HoldingsPARR are two other refining players with a diversified refinery footprint.

Valero Energy boasts an extensive refinery network with 15 refineries and a combined throughput capacity of 3.2 million barrels per day. VLO’s diversified refinery base enables it to tap into different markets and cater to a diverse range of customer needs.

Par Pacific Holdings is a Houston-based refining player with a combined refining capacity of 219,000 barrels per day, and operations spread across Hawaii and the Pacific Northwest. The company also operates 119 retail locations, along with a logistics business segment.

PSX’s Price Performance, Valuation & Estimates

Shares of Phillips 66 have gained 19.7% over the past year compared with the 12.7% rally of the composite stocks belonging to the industry.

From a valuation standpoint, PSX trades at a trailing 12-month enterprise-value-to-EBITDA (EV/EBITDA) of 14.32X. This is above the broader industry average of 4.47X.

The Zacks Consensus Estimate for PSX’s 2025 earnings has seen downward revisions over the past seven days.

 PSX, VLO and PARR currently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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