Sorry.
There you go.
Seems like that I always forget about the modern technology. Mark, let me cut to the chase. As the new Chief Executive Officer, you've been at the helm for less than a year. What you think is your value proposition to your investor, and that how you differentiate yourself than comparing to your peers or?
Mm-hmm.
The S&P 500?
Yep. Absolutely, Paul. First of all, thanks for having us here today. It's a great conference. It's a little tough to have all these great views, but we can still focus on the matters at hand. At Phillips 66, our value proposition is all around our ability to provide the energy that improves lives to meet the world's growing demand for the products that we produce. As that demand evolves over time, to be able to meet that need in whatever form of energy we need to provide. I think that we differentiate ourselves from our peers because of our differentiated integrated portfolio of businesses.
It provides us the opportunity to generate pretty stable cash flow, and we can take that cash flow and have this combination of strong cash returns to shareholders, but also the ability to invest in the best opportunities we have across that portfolio to continue to build a stable future ability to generate cash flow, to have that secure, competitive, growing, dividend, as well as, you know, continue to repurchase our shares as we see our shares below intrinsic value, so we can have robust return to shareholders. If you come back to our investor day last November, we laid out six priorities.
It really is at a high level about how do we perpetuate that model of being able to return cash to shareholders today, invest in our future so we can continue to perpetuate our ability to provide robust return to shareholders over the long term. The number one of those six priorities is to deliver cash returns to shareholders now in the form of dividends and in share repurchases. From July of 2022 out to the end of 2024, we've committed to return $10 billion-$12 billion of cash to shareholders. About $5 billion of that will come in the form of dividends. We recently increased our dividends, 8% to $1.05 per share. Then the balance will come in the form of share repurchases.
$5 billion-$7 billion addition, additional, in share repurchases. We are, we had a hiatus from share repurchases during COVID. We consistently grew our dividend throughout COVID, so we didn't back off our dividend. That's a promise we make, and we tend to view our dividend as an irrevocable promise. We're cautious about increasing that dividend. At the pace of share repurchases we're making today, we see that increment of dividend cash being fairly consistent. We'll increase the dividend per share over time. As we repurchase shares, take those off the table, that'll be a consistent amount at about right at $2 billion a year. That's the near-term shareholder return commitment that we made.
The next commitment was to enhance our refining performance. Frankly, we've been underperforming our peers, we've selectively elected to invest in midstream over the last several years. Now we're taking a hard look at refining, not to grow refining, but to be the best we can be at refining, because we, like a lot of the world, has concluded that we're gonna need refined products for a very long time. How do we do that in the most responsible way and the most return-enhancing way and the most agile way that we can to make sure that we've got the lowest cost position that we can to compete in that business, but we also have the flexibility to capture anything the market throws our way and to operate those at maximum utilization.
We also are, the third party is around our midstream NGL business. Our strategy there is to capture the growth that's gonna be available in NGLs. We believe NGLs coming out of places like the Permian and the DJ are gonna continue to grow at a rate higher than crude. That's driven by growth in petrochemical demand globally. We wanted to ensure that we had full access to the value chain from the wellhead all the way out to the marketplace. Before we did the DCP acquisition and integration, we were a bit disjointed. We, we couldn't provide full service to producers out in the Permian basin.
Now we're executing that, so we can have that full service, one-stop shopping for producers in the Permian, and that we can capture value all the way along that value chain, whether it's in the gas gathering and processing of the transportation assets or the NGL fractionating assets, all the way to our export terminal at Freeport. We can participate in global markets, or we can feed those molecules into the domestic, the domestic petrochemical, businesses. We're executing that. We believe that we have line of sight as we integrate DCP of increasing our earnings from DCP by $1 billion, by acquiring the outstanding interest, and then add an additional $300 million plus to those earnings through synergy capture, both cost synergies and commercial synergies.
That's the third item on that priority list. Fourth item is our business transformation. We initiated a business transformation, cost reduction, business restructuring, really a modernization of our systems to take full advantage of digital opportunities, lowering our cost across the board. It's not just about refining, but refining is a big part of that. Leverage digital opportunities to become more efficient. Basically, we told the organization we want to understand what we need to be world-class in and invest in that. We wanna understand what things that we just need to be, you know, just have the right level of service, not overpay, not underpay. What things do we need to stop doing? What work do we need to eliminate? We've gone very aggressively after those things, restructured the business.
Beyond the cost elements, it's had a profound impact on our ways of working has had a profound impact on the mentality of our employees. They're thinking more like investors. They're looking at ways to innovate every day, to get better every day, to be more efficient, to stop doing things just because we've always done them a certain way, and challenge the status quo and do them better. I think that's the key to making this long-term sustainable. That's our commitment, that by the end of this year, we will have captured over $1 billion in value that's sustainable and recurring over and over again. That's a big portion of what we're focused on and a big part of the commitment that we're making.
Now you look at the fifth item, we wanna have a strong, sustainable, agile financial position. We've repaired our balance sheet post-COVID. We've lowered our debt. We've brought in the debt from DCP under our balance sheet, and it's really not impaired us in any way, shape, or form. Our target is to have 25%-30% net debt to capital ratio, and we're there. It gives us a lot of strength. We're carrying more cash than we typically have in the past on our balance sheet because we want that flexibility, agility during volatile times. You know, no one knows if and when we'll go into a recession.
We wanna be able to not just survive that, but to thrive through it and make sure that we're able to continue to deliver the returns to our shareholders as we maintain our ability to invest very selectively and very responsibly. That's, that's the final item in those six priorities, that we want to make sure that we are investing for the future, but not just growth for growth's sake. The growth has to be supported by returns, whether it's investments in renewable energies. We don't invest in renewables just to invest in renewables. We invest in renewables because we see that we can capture competitive advantage and get a return. All of these things sit on our foundation of operational excellence, and we believe that we can differentiate ourselves based on our commitment to safe, reliable operations.
We are one of the safest operators in the industry, we're going to continue to do that, continue to build on that. As we modernize our operations through these digital opportunities, putting Wi-Fi in our plants, putting sensors on our equipment that allow us to only maintain those pieces of equipment when they need maintenance versus doing it on a time-based thing. All these thousands of small things that we're doing out there are going to save us millions of dollars. It's going to shorten the length of our turnarounds and put more distance between our turnarounds. We're only going to open up the equipment that we need to open up to do maintenance on. We're going to be making better decisions.
We're gonna be able to optimize across our fleet of refineries, across our fleet of midstream assets, marketing specialties assets in real time. We're gonna be able to make better decisions quicker to capture more value from the marketplace because of the investments that we're making today. We're also making investments to reduce our Scope 1, Scope 2, and Scope 3 emissions. We've got goals all the way out to 2030 to 2050. We're not a net zero by 2050 company because we're only gonna make commitments that we know how to realize. We do have line of sight on commitments that we can make, and we're executing projects today that are gonna return value and lower our greenhouse emissions.
I think from a long-term cash return to shareholders, Paul, I think that you should look at our track record. Since inception in 2012, we've returned over $33 billion in cash to shareholders through dividends, through share repurchases and exchanges. We again, like a lot of the world, that fell off a bit during COVID, but we're coming back in a very robust and very constructive way.
That's excellent. Mark, the last year that you guys did a pretty substantial and actually I have to say innovative and very creative deal with DCP.
Mm-hmm.
Just curious then, I mean, how important is M&A for your overall strategy over the next two or three years? What kind of criteria that you guys use to determine whether you want to do a deal or not?
That's a great question, yeah, Paul. I think that M&A is always something that's lurking out there that you need to keep track of, every company needs to keep track of. I think right now, based on what we did with DCP and prior to that, our internal MLP, we rolled up PSXP to create that midstream backbone. Our focus is intensely on integrating that today. If you think about the priorities that we laid out, we didn't explicitly say M&A in any of those six priorities. M&A has kinda taken a back seat to those priorities in the short term. If you drill in across our portfolio, we'll start with midstream. We, you know, it was a substantial acquisition to roll up DCP.
It's something we've been working on for a very long time. We finally found the magic combination to make it work, and we're quite happy with it. It's gonna be a good, strong growth platform for us, both organically, but there could be inorganic opportunities around that as well. As many of you know, it's been a pretty robust season over the last several years of investment in midstreams to support the offtake of liquids production in places like Permian and the DJ Basin. Now that we've got this strong backbone, this wellhead-to-water platform, we will attract other assets that are stranded out there, that perhaps people made investments, they had a quick payout on those investments, but they don't benefit from being part of a more integrated system.
We see those as maybe opportunistic bolt-ons. Those are kind of small, digestible kind of M&A things that we might look at. You can see us, certainly, CPChem is making organic, growth, investments. You know, and that's traditionally the way we've approached growth in petrochemicals because there are plenty of organic opportunities there. We like to spread the risk, so we do things quite often in partnerships, for instance, recently with Coterra Energy. Marketing and specialties, we've had a strategy to in a very focused way, to reenter, direct exposure to retail marketing margins through joint ventures.
We bring our expertise, but we've combined forces with others that are very good at operating convenience stores, so that we can have very attractive returns at very low capital investment that helps pull through our production of products, both traditional refined products as well as our renewable products in California. We've converted 600 retail stations to sell directly to consumers Renewable Diesel, for instance. That's all part of a strategy that's pulled through this low capital, but does afford us the opportunity to do small capital investments along the way to enhance that strategy. It really, you know, the whole You know, the whole M&A space is, you know, we view it as not programmatic, but more opportunistic, and typically small in scale and very accretive.
Great. One area of the M&A that I want to ask is on the marketing. Over the past several years, I mean, that you guys have formed some JV and instead of using a wholesale model, actually get back into.
Mm-hmm
Of the company kind of direct model. Is that a platform that you want to grow substantially? Or that, given the evolution on the market and also that, you want to have dynamic channel selling your [uncertain]
Mm-hmm
Or that, you are happy with your existing system? I mean, how the evolution in that business for you going to look like?
You know, it really has been a beneficial strategy to employ. We've seen, you know, since 2019, a strong step up in our performance in marketing. Exactly what you just mentioned, our increased wholesale exposure as well as our increased exposure to retail through these marketing JVs. That, that's been a very focused strategy. We're not taking a shotgun approach. There's not, "Oh, here's some retail outlets that are for sale in Miami." Well, we don't have any ability to pull through our refined products in Miami, so we wouldn't look at that market. There are markets where you see assets coming up for sale.
Perhaps third generations, families have had these assets for a long time, and now the next generation isn't interested in. They've acquired a number of retail outlets, and it happens to be in a market that we can lock in, pull through from our refineries. It has to be very specific, very accretive, very targeted investments. We've done that on the West Coast. We've done it in the Mid-Continent where it makes sense for us, and it's been very beneficial to us. We're able to capture a lot of value. The key is to have a partner that really understands how to make money from convenience stores. That's not our strength, but we've been able to align with partners that is a strength.
It's been a great combination and been a lot of value creation. Even in Europe, it's been very, very beneficial for us in Europe. Often it's more about what is being sold in the convenience store than the energy that is being provided out there. Many times we're asked, "Well, why would you continue to have investments in retail outlets in Europe?" Well, because we can evolve with what the European energy demand is, and we're innovating there with things like EV charging stations with hydrogen as a transportation fuel there, in small ways, but very meaningful ways.
As that market evolves away from gasoline and diesel towards these things, and a lot of the value is in the location that you have and the other things that you're selling there, it's a value creation model. You're still delivering energy at that location, but people come and spend a lot of money on other things while you're there. That's part of that model to be able to never lose sight of the fact that it's more than just the energy you're delivering. It's a great outlet for energy, but you can capture a lot of value selling other things while people spend time there getting whatever energy it is that they need.
That's excellent. Well, let me pause a moment and see if there's any question on the floor. If not, let me continue. Mark, one of the hallmark is that the company has been extremely disciplined. I think from day one since the spin-off, you guys is one of the first one come out and say, "Okay, I'm going to invest 60% of the cash flow back in the business and 40% distribute to the shareholder." That has been extremely well received.
Mm-hmm
By investor. Since then that the company had grown.
Mm-hmm.
If you're looking at today comparing to 10 years ago when you first spin off, you become a much stronger and with a larger, one would argue that, whether it's mid-cycle or bottom of the cycle, cash flow. Mid-cycle, I think company is looking for $6 billion-$7 billion.
Yeah.
Over the next several year, that probably will also grow with all the investment that you're making. Why that we are still at 60/40? Some people will ask, is it just being ultra conservative or that there's a real reason why that you think the next several years your investment requirement may need to be much higher?
Yeah. Paul, I think it is, there is a conservative element to that. We've come through very volatile times. I think as we go through ongoing long-term energy transition, there's a lot of potential for volatility and opportunistic things that could come along. We want to maintain the flexibility. I would say that that 40% return to shareholders, we've come to view that as a floor. There's only upside. This is kind of long-term guidance. Clearly, the priorities that we've laid out on Investor Day, we're gonna be well above that 40%. I think that, so that we make sure that we have that ability to deliver immediate returns to shareholders.
Also have and reserve the capability to make the right investments at the right place at the right time with the right technologies to ensure that we can have that long-term ability to deliver cash returns to shareholders. That's, you know, part and parcel of why we've got this diversified integrated portfolio, that at different times there's gonna be different needs and different requirements in those businesses to maintain that stable cash flow that enables us to competitively grow our dividend and be that consistent deliverer of cash value, a cash stream in forms of dividend and share repurchases. To do that, we need that financial flexibility that that capital allocation allows. Really I think what the biggest thing...
Yes, from a capital allocation perspective, we are conservative and consistent, I think what's evolved is that 40% really is a floor versus kind of a target.
Excellent. We just talk about that, on the evolution on your business.
Mm-hmm.
It seems like, since you become the Chief Executive Officer, there's a renewed focus in refining.
Mm-hmm.
you announce a pretty impressive restructuring and also an objective that to improve the reliability.
Mm-hmm.
Is there any update that so far you, that you can give us on that?
Absolutely. Our business transformation is absolutely progressing. We recognize that we had to build on what we did with our Advantage 66 program that introduced a lot of digital innovations, and we need to capture the value, capture the promise of those digital innovations. It's across the enterprise, but since refining is such a big portion of who we are, what we are, and what we're doing, that it is a major impact on our refining business. We're, you know, we're removing any internal silos. We're recognizing that while healthy, competition is healthy, the competition is on the outside, not the inside.
We now are unleashing the full potential of optimizing across our refining fleet and really unleashing the full potential of our employees, unleashing the full potential of our assets, eliminating unnecessary work, simplifying what we do, getting people focused on the right things, and energizing every employee in the organization so they know exactly what their role is in delivering on those six priorities we laid out in Investor Day to delivering on the strategy that we've reached consensus with our board of directors going forward. Everybody knows how to contribute to that. The biggest impact of that restructure and that transformation is the mentality, the psychology, the culture, however you want to place that every employee is buying into.
Instead of our refiners being in a kind of defensive mode, the world doesn't want us to exist, there's no hope for our future to, oh, wow, you know, the world does need the products that we produce in refining. The world's gonna need these products for a very long time. We have to get better at how we produce these materials. We have to lower our carbon footprint every day. Most importantly, there's a future for this business. There's no growth. There's no, you know, we're not out trying to acquire refineries or robustly grow our refining business, but we are absolutely determined to be the best refiner on the planet. I think that's the future of our refining business, and that's the future of refining and really evolving those refining assets to be refineries of the future.
As you think about gasoline demand in North America or globally, it's not going to grow as fast as distillate or as, you know, diesel, jet fuel is globally. Certainly, we think it's peaked in North America. How do we restructure where those molecules go? We believe we've got line of sight on how to do that, which assets we can position to thrive in that environment. The world's recognizing that, you know, liquid hydrocarbons are important, and we're gonna need them for a very long period of time. We wanna be the best providers of those materials globally.
Well, that's an excellent way to wrap up, the main session. We will move to the breakout session, the Hong Kong A, for another 20-25 minutes for aditional discussion. Thank you, everyone.
Yeah. Thanks.
Thank you.