Moody's Cuts Phillips 66 Rating Due to Slow Debt Reduction

By Katherine Hamilton

Moody's Ratings downgraded Phillips 66's issuer and backed senior unsecured notes to Baa1 from A3.

The downgrade reflects slower-than-expected debt reduction, Moody's ratings senior vice president Elena Nadtotchi said. It comes after Phillips 66 said Tuesday it agreed to pay $1.4 billion in cash to purchase the remaining 50% stake in WRB Refining.

That acquisition would follow a $2.2 billion purchase earlier this year of the natural liquefied gas company EPIC. Phillips 66 also paid $3.8 billion to purchase the publicly held units of DCP Midstream in 2023.

These purchases have required the company to step up its borrowing, Moody's said. The ratings firm believes the acquisitions will bring opportunities to grow earnings and improve returns on capital in the medium term, but will slow down the pace of debt reduction in 2025 and 2026.

Alongside the purchases, Phillips 66 has also committed to returning 50% of its cash flow from operations to shareholders over the next two years through dividends and share repurchases, Moody's said. From 2022 to 2024, the company spent $9 billion on share buybacks to meet its shareholder return goals.

Phillips 66 has said it is committed to cutting its debt to $17 billion by the end of 2027. If Phillips 66 can lower its debt to its stated target, Moody's said it could raise its rating.

Moody's maintained its stable outlook rating for the company.

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

September 09, 2025 18:41 ET (22:41 GMT)