July 28, 2025 [Reuters]- Refiner Phillips 66 beat Wall Street estimates for second-quarter profit on Friday, helped by higher refining margins and lower turnaround expenses.

Shares of Phillips 66 were up around 0.8% at 2 p.m. EDT.

Top U.S. refiners were expected to post higher second-quarter profit, rebounding from losses in the prior quarter as stronger-than-expected diesel margins lifted earnings.

The improved margins helped peers such as Valero Energy exceed Wall Street estimates.

“Earnings beat on stronger refining results from lower opex and retail results from higher U.S. margins,” TD Cowen analyst Jason Gabelman said in a note.

The refiner’s realized margin per barrel rose 12.4% to $11.25 in the quarter from a year ago, while turnaround expenses fell 47% at $53 million.

Its crude capacity utilization was 98%, while adjusted earnings from its refining segment rose about 30% at $392 million.

Some analysts flagged concerns about heavy debt. The refiner’s net debt to capital ratio for the second quarter was 41%, compared to rival Valero’s 12%.

“Concerns about leverage, as it expands midstream capabilities, remain,” said Stewart Glickman, energy equity analyst at CFRA Research.

The results come after a board fight in May, where Phillips 66 and activist investor Elliott Investment Management each won two board seats at an annual shareholders meeting.

As part of its argument for actions to boost share price, Elliott had advocated exploring the sale or spin-off of its midstream business and other asset divestments, to focus on the company’s refining operations.

“We will engage with industry experts to make sure that we’re thinking about it the right way and certainly we’ll lay it out all out for our board to drive to the right conclusions,” CEO of Phillips 66, Mark Lashier told analysts during the company’s earnings call on Friday.

Earlier this year, the refiner reported a bigger-than-expected loss for the first quarter, hurt by lower refining margins amid heavy turnaround activities in the U.S. refining sector.

In the second quarter, the refiner’s quarterly adjusted earnings for its midstream segment were down about 3% at $731 million from a year ago.

The company reported an adjusted profit of $2.38 per share for the second quarter, compared with analysts’ average estimate of $1.71, according to data compiled by LSEG.