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We and certain of our subsidiaries may hold and use derivative contracts to manage these risks.
+Added: As a result of the merger, we included the assets and liabilities of DCP Midstream, LLC’s Class A Segment (DCP Midstream Class A Segment), DCP Sand Hills Pipeline, LLC and DCP Southern Hills Pipeline, LLC in our consolidated balance sheet as of December 31, 2022, and the results of their operations and cash flows are reported in our consolidated statements of operations and cash flows from August 18, 2022 through December 31, 2022.
+Added: DCP Midstream Class A Segment’s market risks are solely attributable to market risks of DCP Midstream, LP (DCP LP), because DCP LP is the sole operational asset in DCP Midstream Class A Segment.
+Added: DCP LP is exposed to market risks, including changes in commodity prices and interest rates.
+Added: DCP LP uses financial instruments such as forward contracts, swaps and futures to mitigate the effects of these risks.
+Added: See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, in the Notes to Consolidated Financial Statements, for additional information on the structure of the merger.
Commodity Price Risk
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These objectives optimize the value of our supply chain and may reduce our exposure to fluctuations in market prices.
−Removed: Our use of derivative instruments is governed by an “Authority Limitations” document approved by our Board of Directors.
+Added: Phillips 66’s use of derivative instruments is governed by an “Authority Limitations” document approved by our Board of Directors.
This document prohibits the use of highly leveraged derivatives or derivative instruments without sufficient market liquidity for comparable valuations, and establishes Value at Risk (VaR) limits.
Compliance with these limits is monitored daily by our global risk group.
−Removed: We use a VaR model to estimate the loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on the derivative commodity instruments held or issued.
−Removed: Using Monte Carlo simulation, a 95% confidence level and a one-day holding period, the VaR for derivative commodity instruments issued or held at December 31, 2021 and 2020, was immaterial to our cash flows and results of operations.
Index to Financial Statements
+Added: Phillips 66 uses a VaR model to estimate the loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on the derivative commodity instruments held or issued.
+Added: Using Monte Carlo simulation, a 95% confidence level and a one-day holding period, the VaR for derivative commodity instruments issued or held at December 31, 2022 and 2021, was immaterial to our cash flows and results of operations.
+Added: DCP LP’s use of derivative instruments is governed by a comprehensive risk management policy and a risk management committee that monitors and manages market risks associated with commodity prices.
+Added: The risk management committee is composed of DCP LP’s senior executives who receive regular briefings on positions and exposures, credit exposures and overall risk management in the context of market activities.
+Added: The risk management committee is responsible for the overall management of commodity price and credit risks, including monitoring exposure limits.
+Added: The estimated loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on derivative commodity instruments held or issued is not expected to be material to our cash flows and results of operations.
Interest Rate Risk
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Fair value $ 15,353 $ 475
+Added: Index to Financial Statements
Foreign Currency Risk
We are exposed to foreign currency exchange rate fluctuations related to our international operations.
−Removed: Generally, we do not enter into any derivative contracts to hedge our foreign currency risk.
−Removed: Our Chief Executive Officer and Chief Financial Officer monitor risks resulting from commodity prices, interest rates and foreign currency exchange rates.
+Added: Generally, we do not hedge our foreign currency risk.
+Added: Phillips 66’s Chief Executive Officer and Chief Financial Officer monitor risks effecting its operations resulting from commodity prices, interest rates and foreign currency exchange rates.
+Added: In addition, DCP LP’s risk management committee monitors risks effecting its operations resulting from commodity prices and interest rates.
For additional information about our use of derivative instruments, see Note 17—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statements.
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This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
−Removed: You can normally identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions, but the absence of such words does not mean a statement is not forward-looking.
−Removed: We based the forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate in general.
−Removed: We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict.
+Added: You can normally identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions that convey the prospective nature of events or outcomes, but the absence of such words does not mean a statement is not forward-looking.
+Added: We based the forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate.
+Added: We caution you not to place undue reliance on these forward-looking statements as they are not guarantees of future performance and involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict.
In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.
−Removed: Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements.
−Removed: Any differences could result from a variety of factors, including the following:
−Removed: • The continuing effects of the COVID-19 pandemic and its negative impact on commercial activity and demand for refined petroleum products, as well as the extent and duration of recovery of economies and demand for our products after the pandemic subsides.
+Added: Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in any forward-looking statements.
+Added: Such differences could result from a variety of factors, including:
• Fluctuations in NGL, crude oil, refined petroleum product and natural gas prices and refining, marketing and petrochemical margins.
• Changes in governmental policies relating to NGL, crude oil, natural gas or refined petroleum products pricing, regulation or taxation, including exports.
−Removed: • Actions taken by OPEC and other countries impacting supply and demand and correspondingly, commodity prices.
+Added: • Capacity constraints in, or other limitations on, the pipelines, storage and fractionation facilities to which we deliver natural gas or NGL and the availability of alternative markets and arrangements for our natural gas and NGL.
+Added: • Actions taken by OPEC and non-OPEC oil producing countries impacting supply and demand and correspondingly, commodity prices.
+Added: • The ability to achieve the expected benefits of the integration of DCP LP and any other benefits that may result from the buy-in of DCP’s publicly-held common units, if consummated.
• Unexpected changes in costs or technical requirements for constructing, modifying or operating our facilities or transporting our products.
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• The inability to comply with government regulations or make capital expenditures required to maintain compliance.
−Removed: • Changes to worldwide government policies relating to renewable fuels and greenhouse gas emissions that adversely affect programs like the renewable fuel standards program, low carbon fuel standards and tax credits for biofuels.
−Removed: • Failure to complete definitive agreements and feasibility studies for, and to complete construction of, announced and future capital projects on time and within budget.
−Removed: • Potential disruption or interruption of our operations due to accidents, weather events, civil unrest, insurrections, political events, terrorism or cyberattacks.
−Removed: • Potential disruption or damage to our facilities as a result of significant storms or other destructive climate events.
−Removed: • The inability to meet our sustainability goals, including reducing our emissions intensity, developing and protecting new technologies, and commercializing lower-carbon opportunities.
+Added: • Changes to worldwide government policies relating to renewable fuels, climate change and greenhouse gas emissions that adversely affect programs like the renewable fuel standards program, low carbon fuel standards and tax credits for biofuels.
+Added: • General domestic and international economic and political developments including armed hostilities, including the Russia-Ukraine war, expropriation of assets, and other political, economic or diplomatic developments, including those caused by public health issues, outbreaks of diseases and pandemics.
+Added: • The impact on commercial activity and demand for refined petroleum products from any widespread public health crisis, as well as the extent and duration of recovery of economies and demand for our products following any such crisis.
Index to Financial Statements
−Removed: • General domestic and international economic and political developments including armed hostilities, expropriation of assets, and other political, economic or diplomatic developments, including those caused by public health issues, outbreaks of diseases and pandemics.
+Added: • Failure to complete definitive agreements and feasibility studies for, and to complete construction of, announced and future capital projects on time and within budget.
+Added: • Potential disruption or interruption of our operations or damage to our facilities due to accidents, weather and climate events, civil unrest, insurrections, political events, terrorism or cyberattacks.
+Added: • The inability to meet our sustainability goals, including reducing our GHG emissions intensity, developing and protecting new technologies, and commercializing lower-carbon opportunities.
• Failure of new products and services to achieve market acceptance.
• International monetary conditions and exchange controls.
−Removed: • Substantial investments required, or reduced demand for products, as a result of existing or future environmental rules and regulations, including reduced consumer demand for refined petroleum products.
+Added: • Substantial investments required, or reduced demand for products, as a result of existing or future environmental rules and regulations, including GHG emissions reductions and reduced consumer demand for refined petroleum products.
• Liability resulting from litigation or for remedial actions, including removal and reclamation obligations under environmental regulations.
• Changes in tax, environmental and other laws and regulations (including alternative energy mandates) applicable to our business.
−Removed: • Political and societal concerns about climate change that could result in changes to our business or increase expenditures, including litigation-related expenses.
+Added: • Political and societal concerns about climate change that could result in changes to our business or operations or increase expenditures, including litigation-related expenses.
• Changes in estimates or projections used to assess fair value of intangible assets, goodwill and property and equipment and/or strategic decisions or other developments with respect to our asset portfolio that cause impairment charges.
−Removed: • The timing and completion of the agreement to acquire all of the limited partner interests in Phillips 66 Partners not already owned by us, as well as any lawsuits that may be brought as a result of the acquisition.
• Limited access to capital or significantly higher cost of capital related to changes to our credit profile or illiquidity or uncertainty in the domestic or international financial markets.
+Added: • The creditworthiness of our customers and the counterparties to our transactions, including the impact of bankruptcies.
• The operation, financing and distribution decisions of our joint ventures that we do not control.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.