What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-18 · 647 added, 392 removed, 1491 unchanged (41% of the section changed)

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Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm (DCP Midstream, LP) (PCAOB ID:

Consolidated Financial Statements of Phillips 66:

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Based on this assessment, management concluded the company’s internal control over financial reporting was effective as of December 31, 2022.

On August 17, 2022, the company and a co-venturer completed the merger of DCP Midstream, LLC and Gray Oak Holdings, LLC.

As a result of the merger and the governance rights delegated to the company over DCP Midstream, LLC’s Class A Segment, the company began consolidating the financial results of DCP Midstream, LLC’s Class A Segment, DCP Sand Hills Pipeline, LLC and DCP Southern Hills Pipeline, LLC.

The company has accounted for the consolidation of these entities as a business combination.

Accordingly, the acquired assets and assumed liabilities of these entities are included in our consolidated balance sheet as of December 31, 2022, and the results of operations and cash flows of these entities are reported in our consolidated statements of operations and cash flows from August 18, 2022 through December 31, 2022.

As permitted by the Securities and Exchange Commission for acquisitions completed during the reporting year, we have elected to exclude these entities from the company’s assessment of internal control over financial reporting as of December 31, 2022.

These entities represented approximately 22% of consolidated total assets as of December 31, 2022 and approximately 3% of total revenues and other income for the year ended December 31, 2022.

Ernst & Young LLP has issued an audit report on the company’s internal control over financial reporting as of December 31, 2022, and their report is included herein.

Garland /s/ Kevin J.

Garland Kevin J.

Chairman of the Board of Directors and Executive Vice President, Finance and

Chief Executive Officer Chief Financial Officer

Lashier /s/ Kevin J.

Lashier Kevin J.

President and Chief Executive Officer Executive Vice President and

Chief Financial Officer

February 22, 2023

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We have audited the accompanying consolidated balance sheets of Phillips 66 (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

In our opinion, based on our audits and, for 2022, the report of other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We did not audit the 2022 financial statements of DCP Midstream, LP (DCP LP), a consolidated subsidiary, which reflect total assets constituting approximately 18% at December 31, 2022, and total revenues constituting approximately 3% for the year then ended.

Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for DCP LP for 2022, is based solely on the report of the other auditors.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2023 expressed an unqualified opinion thereon.

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Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

Index to Financial Statements

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of Equity Method Investment Impairment

Consolidation of DCP Midstream

Description of the Matter

As discussed in Note 6 to the consolidated financial statements, the Company has investments in nonconsolidated entities accounted for using the equity method, totaling $12.8 billion as of December 31, 2021.

The carrying value of each equity method investment is evaluated for impairment when indicators of a loss in value below the carrying value exist, including a lack of sustained earnings or a deterioration of market conditions, among others.

Auditing the Company’s impairment assessments of whether an impairment indicator for its equity method investments exists was complex and judgmental due to the estimation required in determining whether an investment had an indicator of impairment.

As discussed in Note 3 to the consolidated financial statements, the Company and its co-venturer merged DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings) on August 17, 2022, with DCP Midstream as the surviving entity.

The Company determined that each of the two classes of membership interests (the Class A and B Segments) of DCP Midstream should be evaluated for consolidation separately under the variable interest consolidation model.

The Company determined it is the primary beneficiary of the Class A Segment due to the governance rights it has as the managing member of that segment, and the initial consolidation was accounted for as a business combination.

The Class B Segment is accounted for using the equity method of accounting.

Evaluating the Company’s determination that the Class A and B Segments should be evaluated for consolidation separately was complex and required us to use significant judgment when assessing the effect of the contractual rights and obligations of the Company and its co-venturer in DCP Midstream and the Class A and B Segments on such determination.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s equity method impairment review process, including controls over the identification of factors that may indicate an equity method investment is impaired.

In order to test whether an impairment was indicated, we tested the Company’s qualitative evaluation of the presence, or lack of, impairment indicators for its equity method investments.

This included, but was not limited to, an evaluation of the investments’ earnings history and sustainability under current and expected market conditions.

We exercised professional judgment based on our knowledge of the industry and the investee’s business to assess the appropriateness of the management’s qualitative evaluation.

For example, we performed inquiries of management, considered historical operating results of the investments being analyzed, their projected recovery periods, and current and expected market conditions affecting their results.

We performed an independent assessment using both internally and externally available information, such as public share prices (where available), throughputs, refining margins as well as future price and demand forecasts.

In addition to that, we evaluated management's ability to accurately forecast future operating income by comparing actual results to management's historical forecasts.

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its application of the variable interest consolidation model to DCP Midstream.

To test the Company’s application of the variable interest consolidation model, our audit procedures included identifying the relevant contractual rights and obligations of the Company and its co-venturer in DCP Midstream and the Class A and B Segments, making inquiries of management and legal counsel as to the interpretation and operation of such terms, and evaluating their effect on the Company’s consolidation conclusions.

In particular, significant judgment was required in evaluating the Company’s determination that essentially all of the assets, liabilities and equity of the Class A and B Segments are separate from the overall DCP Midstream entity, and that the two segments should be separately evaluated for consolidation.

We also have evaluated the Company’s disclosures in relation to this matter.

/s/ Ernst & Young LLP

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In our opinion, Phillips 66 (the Company), maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 18, 2022, expressed an unqualified opinion thereon.

As indicated in the accompanying Report of Management, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of DCP Midstream, LLC’s Class A Segment, DCP Sand Hills Pipeline, LLC and DCP Southern Hills Pipeline, LLC, which are included in the 2022 consolidated financial statements of the Company and constituted approximately 22% of total assets as of December 31, 2022 and approximately 3% of total revenues and other income, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of DCP Midstream, LLC’s Class A Segment, DCP Sand Hills Pipeline, LLC and DCP Southern Hills Pipeline, LLC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023, expressed an unqualified opinion thereon, based on our audit and the report of the other auditors.

Basis for Opinion

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and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Index to Financial Statements

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors of DCP Midstream GP, LLC and the Unitholders of DCP Midstream, LP

Opinion on the Financial Statements

We have audited the consolidated balance sheets of DCP Midstream, LP and subsidiaries (the "Partnership") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss) income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We did not audit the financial statements of Gulf Coast Express Pipeline, LLC, the Partnership’s investment which is accounted for by use of the equity method.

The consolidated financial statements of the Partnership include its equity investment in Gulf Coast Express Pipeline, LLC of $408 million and $422 million as of December 31, 2022 and 2021, and its equity earnings in Gulf Coast Express Pipeline, LLC of $67 million, $63 million, and $66 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Gulf Coast Express Pipeline, LLC is based solely on the report of the other auditors.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2022, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2023, expressed an unqualified opinion on the Partnership’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Partnership’s management.

Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

Index to Financial Statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Property, Plant and Equipment, Net - Determination of Impairment Indicators– Refer to Notes 2, 10 and 13 to the financial statements

Critical Audit Matter Description

The Partnership periodically evaluates whether the carrying value of long-lived assets has been impaired when circumstances indicate the carrying value of long-lived assets may not be recoverable.

Management considers various factors when determining if long-lived assets should be evaluated for impairment including a significant adverse change in the business climate, a current period operating or cash flow loss combined with a history of losses, a significant adverse change in the extent or manner in which an asset is used, or a current expectation that the asset will be sold or otherwise disposed of before the end of its useful life.

The Partnership’s determination of whether impairment indicators exist for long-lived assets requires management to apply significant judgment.

When events or circumstances exist that indicate the carrying value of long-lived assets may not be recoverable, the Partnership evaluates its long-lived assets for impairment by comparing the carrying amount of the applicable asset group to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (“recoverability analysis”).

If management determines the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.

The property, plant and equipment, net balance was $7,763 million as of December 31, 2022.

We identified the identification of impairment indicators for property, plant and equipment and the associated recoverability analysis as a critical audit matter because of the significant assumptions management makes when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of property, plant and equipment may not be recoverable as well as the significant judgements and assumptions made in the undiscounted cash flow analysis used to evaluate recoverability.

This required a high degree of auditor judgment, including an increased extent of effort related to evaluating indicators of impairment and auditing whether management appropriately identified impairment indicators and assessed recoverability.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the identification of impairment indicators and recoverability analysis for long-lived assets included the following, among others:

• We tested the effectiveness of internal controls over financial reporting related to management’s identification of possible impairment indicators for long-lived assets that may indicate the carrying amount of long-lived assets may not be recoverable.

• We tested the effectiveness of controls over estimates of future volumes of raw natural gas, or other applicable throughput.

Index to Financial Statements

• We evaluated management’s analysis of impairment indicators by:

• Assessing whether long-lived assets having indicators of impairment were appropriately identified

• Considering industry and analysts reports and the impact of macroeconomic factors, such as adverse changes in the regulatory environment, legislation or other factors that may represent impairment indicators not previously contemplated in management's analysis

• Evaluating management’s judgments around historical trends, macroeconomic and industry conditions, and whether projections are consistent with the Partnership’s operating strategy

• Evaluating management’s forecasts by comparing such forecasts to:

information included in the Partnership's public disclosures, recent results of operations, trends in operational data for asset groups such as measures of profitability over recent years and quarters

• Inquiry of management over whether long-lived assets may be sold or otherwise disposed of significantly before the end of the assets' previously estimated useful life

• Inspecting minutes of the board of directors and committees of executive management to understand if there were factors that would represent potential impairment indicators for long-lived assets

• For asset groups for which a recoverability analysis was performed, we evaluated management’s estimates of future volumes by:

• Comparing recent actual results to management’s historical forecasts

• Evaluating the reasonableness of volumetric assumptions by comparing forecasts to permits and rig count data

• Researching industry trends

• Performing a sensitivity analysis to evaluate the change in undiscounted cash flows that would result from changes in underlying volumetric assumptions

• Comparing historical results to management’s future assumptions

/s/ Deloitte & Touche LLP

Denver, Colorado

February 17, 2023

We have served as the Partnership’s auditor since 2004.

Index to Financial Statements

Consolidated Statement of Operations Phillips 66

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Interest and debt expense 619 581 499

Foreign currency transaction losses 1 12 5

Foreign currency transaction (gains) losses ( 9 ) 1 12

Total Costs and Expenses 161,063 113,112 70,458

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Net actuarial gain (loss) arising during the period 191 320 ( 261 )

Prior service credit arising during the period — — 2

Amortization of net actuarial loss, prior service credit and settlements 90 122 144

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Treasury stock (at cost:

2021 and 2020— 211,771,827 shares)

2022— 186,529,667 shares;

2021— 211,771,827 shares)

( 15,276 ) ( 17,116 )

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Net gain on dispositions ( 7 ) ( 7 ) ( 108 )

Unrealized investment gain ( 365 ) — —

Gain related to merger of businesses ( 3,013 ) — —

Unrealized investment (gain) loss 433 ( 365 ) —

Other 217 ( 51 ) 130

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December 31, 2019 $ 6 20,301 ( 16,673 ) 22,064 ( 788 ) 2,259 27,169

Cumulative effect of accounting changes — — — 81 ( 89 ) ( 1 ) ( 9 )

Net income — — — 3,076 — 301 3,377

Other comprehensive loss — — — — ( 7 ) — ( 7 )

Dividends paid on common stock — — — ( 1,570 ) — — ( 1,570 )

Repurchase of common stock — — ( 1,650 ) — — — ( 1,650 )

Benefit plan activity — 85 — ( 12 ) — — 73

Issuance of Phillips 66 Partners LP common units — 68 — — — 73 141

Impacts from Phillips 66 Partners LP GP/IDR restructuring transaction — 275 — — — ( 373 ) ( 98 )

Distributions to noncontrolling interests

— — — — — ( 241 ) ( 241 )

December 31, 2019 6 20,301 ( 16,673 ) 22,064 ( 788 ) 2,259 27,169

Net income (loss) — — — ( 3,975 ) — 261 ( 3,714 )

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December 31, 2021 7 20,504 ( 17,116 ) 16,216 ( 445 ) 2,471 21,637

Net income — — — 11,024 — 367 11,391

Other comprehensive loss — — — — ( 15 ) — ( 15 )

Dividends paid on common stock — — — ( 1,793 ) — — ( 1,793 )

Repurchase of common stock — — ( 1,540 ) — — — ( 1,540 )

Benefit plan activity — 188 — ( 15 ) — — 173

Distributions to noncontrolling interests — — — — — ( 185 ) ( 185 )

Acquisition of noncontrolling interest in Phillips 66 Partners LP — ( 901 ) 3,380 — — ( 2,163 ) 316

Merger of DCP Midstream, LLC and Gray Oak Holdings LLC — — — — — 4,622 4,622

Acquisition of noncontrolling interest in DCP Midstream, LP — — — — — ( 500 ) ( 500 )

December 31, 2022 $ 7 19,791 ( 15,276 ) 25,432 ( 460 ) 4,612 34,106

Index to Financial Statements

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December 31, 2020 648,643,223 211,771,827

Repurchase of common stock — 5,381,021

Shares issued—share-based compensation 1,383,095 —

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Shares issued—share-based compensation 2,347,327 —

Shares issued—acquisition of noncontrolling interest in Phillips 66 Partners LP — ( 41,825,236 )

December 31, 2022 652,373,645 186,529,667

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Undivided interests in pipelines, natural gas plants and terminals are consolidated on a proportionate basis.

See Note 27—Phillips 66 Partners LP, for further discussion on our significant consolidated VIE.

See Note 29—DCP Midstream Class A Segment for further discussion about a significant VIE that we began consolidating in August 2022, and Note 30—Phillips 66 Partners LP, for further discussion regarding our merger with Phillips 66 Partners LP (Phillips 66 Partners).

The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the affiliates’ operating and financial policies, including VIEs, of which we are not the primary beneficiary.

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See Note 8—Investments, Loans and Long-Term Receivables, for further discussion on our significant unconsolidated VIEs.

Recasted Financial Information

Certain prior period financial information has been recasted to reflect the current year’s presentation.

Use of Estimates

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We have several valuation methods for our various types of inventories and consistently use the following methods for each type of inventory.

Crude oil and refined petroleum products inventories are valued at the lower of cost or market in the aggregate, primarily on the last-in, first-out (LIFO) basis.

Crude oil and petroleum products inventories are valued at the lower of cost or market in the aggregate, primarily on the last-in, first-out (LIFO) basis.

Any necessary lower-of-cost-or-market write-downs at year end are recorded as permanent adjustments to the LIFO cost basis.

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Materials and supplies inventories are valued using the weighted-average-cost method.

Index to Financial Statements

Fair Value Measurements

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Level 3 inputs are unobservable inputs for the asset or liability that are used to measure fair value to the extent that relevant observable inputs are not available, and that reflect the assumptions we believe market participants would use when pricing an asset or liability for which there is little, if any, market activity at the measurement date.

Index to Financial Statements

Derivative Instruments

Derivative instruments are recorded on the balance sheet at fair value.

We have master netting agreements with our exchange-cleared instrument counterparties and certain of our counterparties to other commodity instrument contracts (e.g., physical commodity forward contracts).

We have master netting agreements with most of our exchange-cleared instrument counterparties and certain of our counterparties to other commodity instrument contracts (e.g., physical commodity forward contracts).

We have elected to net derivative assets and liabilities with the same counterparty on the balance sheet if the legal right of offset exists and certain other criteria are met.

We also net collateral payables and receivables against derivative assets and derivative liabilities, respectively.

When applicable, we also net collateral payables and receivables against derivative assets and derivative liabilities, respectively.

Recognition and classification of the gain or loss that results from recording and adjusting a derivative to fair value depends on the purpose for issuing or holding the derivative.

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A goodwill impairment cannot exceed the total amount of goodwill allocated to that reporting unit.

For purposes of assessing goodwill for impairment, we have two reporting units with goodwill balances at the 2021 testing date:

For purposes of assessing goodwill for impairment, we have two reporting units with goodwill balances at our 2022 testing date:

Transportation and Marketing and Specialties (M&S).

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Amounts are recorded as reductions of stockholders’ equity on the consolidated balance sheet.

Common stock reissued from treasury stock is valued based on the average cost of historical repurchases.

Index to Financial Statements

Revenue Recognition

Our revenues are primarily associated with sales of refined petroleum products, crude oil and natural gas liquids (NGL).

Our revenues are primarily associated with sales of refined petroleum products, crude oil, natural gas liquids (NGL) and natural gas.

Each gallon, or other unit of measure of product, is separately identifiable and represents a distinct performance obligation to which a transaction price is allocated.

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Revenues associated with terminaling and storage services are recognized over time as the services are performed based on throughput volume or capacity utilization at contractual rates.

Index to Financial Statements

Revenues associated with transactions commonly called buy/sell contracts, in which the purchase and sale of inventory with the same counterparty are entered into in contemplation of one another, are combined and reported in the “Purchased crude oil and products” line item on our consolidated statement of operations (i.e., these transactions are recorded net).

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that includes the enactment date.

Income tax effects are released from accumulated other comprehensive loss to retained earnings, when applicable, on an individual item basis as those items are reclassified into income.

Interest related to unrecognized income tax benefits is reflected in the “Interest and debt expense” line item, and penalties in the “Operating expenses” or “Selling, general and administrative expenses” line items on our consolidated statement of operations.

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Note 2— Changes in Accounting Principles

Effective January 1, 2022, we early adopted ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This pronouncement requires application of ASC 606 "Revenue from Contracts with Customers" ("Topic 606") to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

Effective October 1, 2021, we adopted ASU No.

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Amendments in ASU 2021-01 further clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

These pronouncements were effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.

These pronouncements were effective upon issuance and applicable to contract modifications through December 31, 2022.

On December 21, 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.” The ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

This pronouncement was also effective upon issuance.

The adoption of these pronouncements did not impact our consolidated financial statements.

Effective January 1, 2019, we elected to adopt ASU No.

2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU permits the deferred income tax effects stranded in accumulated other comprehensive income (AOCI) resulting from the U.S.

Tax Cuts and Jobs Act (the Tax Act) enacted in December 2017 to be reclassified to retained earnings.

As of January 1, 2019, we recorded a cumulative effect adjustment to our opening consolidated balance sheet to reclassify an aggregate income tax benefit of $ 89 million, primarily related to our pension plans, from accumulated other comprehensive loss to retained earnings.

Effective January 1, 2019, we early adopted ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” using the modified retrospective transition method.

This ASU amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables, and off-balance sheet credit exposures.

The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses.

We recorded a noncash cumulative effect adjustment to retained earnings of $ 9 million, net of $ 3 million of income taxes, on our opening consolidated balance sheet as of January 1, 2019.

See Note 4—Credit Losses, for more information on our presentation of credit losses.

Effective January 1, 2019, we adopted ASU No.

2016-02, “Leases (Topic 842),” using the modified retrospective transition method.

The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with terms longer than 12 months.

Leases will continue to be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statement of operations.

We elected the package of practical expedients that allowed us to carry forward our determination of whether an arrangement contained a lease and lease classification, as well as our accounting for initial direct costs for existing contracts.

We recorded a noncash cumulative effect adjustment, reflecting an aggregate operating lease ROU asset and corresponding lease liability of $ 1,415 million and immaterial adjustments to retained earnings and noncontrolling interests, on our opening consolidated balance sheet as of January 1, 2019.

See Note 18—Leases, for the new lease disclosures required by this ASU.

Index to Financial Statements

Note 3— DCP Midstream, LLC and Gray Oak Holdings LLC Merger

On August 17, 2022, we and our co-venturer, Enbridge Inc.

(Enbridge), agreed to merge DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings), with DCP Midstream as the surviving entity.

Prior to the merger, we and Enbridge each held a 50 % interest and jointly governed DCP Midstream, whose primary assets are its general partner and limited partner interests in DCP Midstream, LP (DCP LP), and we each held indirect economic interests in DCP LP of 28.26 %.

DCP LP is a VIE because its limited partners do not have the ability to remove its general partner with a simple majority vote, nor do its limited partners have substantive participating rights in the significant decisions made in the ordinary course of business.

DCP Midstream ultimately consolidates DCP LP because one of its wholly owned subsidiaries is the primary beneficiary of DCP LP.

We and Enbridge also held 65 % and 35 % interests, respectively, in Gray Oak Holdings, whose primary asset was a 65 % noncontrolling interest in Gray Oak Pipeline, LLC (Gray Oak Pipeline).

Our and Enbridge’s indirect economic interests in Gray Oak Pipeline were 42.25 % and 22.75 %, respectively.

We had voting control over and consolidated Gray Oak Holdings and reported Gray Oak Holdings’ 65 % interest in Gray Oak Pipeline as an equity investment and Enbridge’s interest in Gray Oak Holdings as a noncontrolling interest.

In connection with the merger, we and Enbridge entered into a Third Amended and Restated Limited Liability Company Agreement of DCP Midstream (Amended and Restated LLC Agreement), which realigned the members’ economic interests and governance responsibilities.

Under the Amended and Restated LLC Agreement, two classes of membership interests in DCP Midstream were created, Class A and Class B, that are intended to track the assets, liabilities, revenues and expenses of the following operating segments of DCP Midstream:

• Class A Segment comprised of the businesses, activities, assets and liabilities of DCP LP and its subsidiaries and its general partner entities (DCP Midstream Class A Segment).

• Class B Segment comprised of the business, activities, assets and liabilities of Gray Oak Pipeline (DCP Midstream Class B Segment).

We hold a 76.64 % Class A membership interest, which represents an indirect economic interest in DCP LP of 43.31 %, and a 10 % Class B membership interest, which represents an indirect economic interest in Gray Oak Pipeline of 6.5 %.

Enbridge holds the remaining Class A and Class B membership interests.

We have been designated as the managing member of DCP Midstream Class A Segment and are responsible for conducting, directing and managing all activities associated with this segment, except as limited in certain instances.

Enbridge has been designated as the managing member of DCP Midstream Class B Segment.

Earnings and distributions from each segment are allocated to the members based on their membership interest in each membership class, except as otherwise provided.

DCP Midstream Class A Segment and DCP Midstream Class B Segment were determined to be silos under the variable interest consolidation model.

As a result, DCP Midstream was also determined to be a VIE.

We determined that we are the primary beneficiary of DCP Midstream Class A Segment because of the governance rights granted to us under the Amended and Restated LLC Agreement as managing member of the segment.

We hold a 33.33 % direct ownership interest in DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills).

DCP LP holds the remaining 66.67 % ownership interest in these entities.

As a result of the governance rights granted to us over DCP Midstream Class A Segment and the governance rights we hold through our direct ownership interests, we obtained controlling financial interests in these entities in connection with the merger.

As a result, our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased to 62.21 % from 52.17 %.

Starting on August 18, 2022, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills.

We also began reporting the direct and indirect economic interests held by Enbridge, DCP LP’s public common unitholders and DCP LP’s preferred unitholders as noncontrolling interests on our financial statements.

Index to Financial Statements

We continue to account for our remaining indirect economic interest in Gray Oak Pipeline, now held through DCP Midstream Class B Segment, using the equity method of accounting.

As a result of the merger, we derecognized Enbridge’s noncontrolling interest in Gray Oak Holdings.

We accounted for our consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills as a business combination using the acquisition method of accounting.

See Note 4—Business Combination, for additional information on our accounting for this transaction.

See Note 29—DCP Midstream Class A Segment, for additional information regarding our variable interest in DCP Midstream Class A Segment and the definitive agreement we executed on January 5, 2023, to acquire an incremental interest in DCP LP.

Note 4— Business Combination

On August 17, 2022, we realigned our economic interest in, and governance rights over, DCP Midstream and Gray Oak Holdings through the merger of these existing entities with DCP Midstream as the surviving entity.

As part of the merger, we transferred a 35.75 % indirect economic interest in Gray Oak Pipeline and contributed $ 404 million of cash to DCP Midstream, which was then paid to Enbridge, in return for a 15.05 % incremental indirect economic ownership interest in DCP LP.

As noted above, the additional governance rights we were granted as part of this transaction resulted in us consolidating the Class A Segment of DCP Midstream, as well as DCP Sand Hills and DCP Southern Hills.

Given the nature of this transaction, we have accounted for the consolidation of these entities using the acquisition method of accounting.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, for additional information on the merger and our consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills.

The components of the fair value of the merger consideration are:

Millions of Dollars

Cash contributed $ 404

Fair value of transferred equity interest 634

Fair value of previously held equity interests 3,853

Total merger consideration $ 4,891

The aggregate purchase consideration noted above was allocated to the assets acquired and liabilities assumed of the entities consolidated based upon a preliminary estimate of their fair values as of the August 17, 2022, merger date.

Due to the level of effort required to develop fair value measurements, the valuation information necessary to determine the fair values of assets acquired and liabilities assumed is preliminary, including the underlying cash flows, appraisals and other information used to estimate the fair values of the net assets acquired and noncontrolling interests in those net assets.

We continue to evaluate the factors used in establishing the fair values of assets and liabilities as of the acquisition date, including, but not limited to, those factors that could affect the estimated fair values of PP&E, investments in unconsolidated affiliates accounted for under the equity method, identifiable intangible assets, leases, financial instruments, asset retirement and environmental obligations, legal contingencies, debt and noncontrolling interests.

We will complete a final determination of the fair values of assets acquired and liabilities assumed within the one-year measurement period from the date of the merger.

Any adjustments made in subsequent periods could be material to the preliminary values.

Adjustments made in the fourth quarter of 2022 were immaterial.

Index to Financial Statements

The following table summarizes, based on our preliminary purchase price allocation described above, the fair values of the assets acquired and liabilities assumed of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills as of August 17, 2022:

Millions of Dollars

Fair value of assets acquired:

Cash and cash equivalents $ 98

Accounts and notes receivable 1,003

Inventories 74

Prepaid expenses and other current assets 439

Investments and long-term receivables 2,198

Properties, plants and equipment 12,838

Intangibles 36

Other assets 343

Total assets acquired 17,029

Fair value of liabilities assumed:

Accounts payable 912

Short-term debt 623

Accrued income and other taxes 96

Employee benefit obligation—current 50

Other accruals 497

Long-term debt 4,553

Asset retirement obligations and accrued environmental costs 168

Deferred income taxes 59

Employee benefit obligations 54

Other liabilities and deferred credits 227

Total liabilities assumed 7,239

Fair value of net assets 9,790

Fair value of noncontrolling interests 4,899

Total merger consideration $ 4,891

As of August 17, 2022, the preliminary fair value of our previously held equity investments in DCP Midstream, DCP Sand Hills, and DCP Southern Hills totaled $ 3,853 million, and the preliminary fair value of the equity interest in Gray Oak Pipeline we transferred to our co-venturer was $ 634 million.

In connection with the merger, we recognized gains totaling $ 2,831 million from remeasuring our previously held equity investments to their fair values and a gain of $ 182 million related to the transfer of a 35.75 % indirect economic interest in Gray Oak Pipeline to our co-venturer.

These gains are included in the “Other income” line item in our consolidated statement of operations for the year ended December 31, 2022, and are reported in the Midstream segment.

See Note 18—Fair Value Measurements, for additional information on the determination of the fair value of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills.

Index to Financial Statements

The following “Sales and other operating revenues” and “Net Income Attributable to Phillips 66” of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills were included in our consolidated statement of operations from August 18, 2022, forward.

Millions of Dollars

Sales and other operating revenues $ 4,531

Net Income Attributable to Phillips 66 216

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents our consolidated results assuming the acquisition of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills occurred on January 1, 2021.

The unaudited pro forma information includes adjustments based on currently available information and we believe the estimates and assumptions are reasonable, and the significant effects of the transactions are properly reflected in the unaudited pro forma information.

An aggregate before-tax gain of $ 2,831 million was included in the pro forma financial information for the year ended December 31, 2021, which is related to the remeasurement of the previously held equity investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills to their fair values in connection with the merger.

Adjustments related to the economic interest change in our equity investment in Gray Oak Pipeline were excluded from the pro forma financial information.

The unaudited pro forma information does not give effect to any potential synergies that could be achieved and is not necessarily indicative of the results of future operations.

Year Ended December 31

Sales and other operating revenues (millions)

$ 177,127 119,027

Net Income Attributable to Phillips 66 (millions)

Net Income Attributable to Phillips 66 per share—basic (dollars)

Net Income Attributable to Phillips 66 per share—diluted (dollars)

Index to Financial Statements

Note 5— Sales and Other Operating Revenues

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Crude oil resales 20,574 12,801 9,114

NGL 9,074 4,084 4,814

NGL and natural gas 16,174 9,074 4,084

Services and other* 1,444 581 1,163

Consolidated sales and other operating revenues $ 169,990 111,476 64,129

$ 111,476 64,129 107,293

Geographic Location**

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Consolidated sales and other operating revenues $ 169,990 111,476 64,129

$ 111,476 64,129 107,293

* Includes derivatives-related activities.

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At December 31, 2022 and 2021, our asset balances related to such payments were $ 505 million and $ 466 million, respectively.

Our contract liabilities represent advances from our customers prior to product or service delivery.

At December 31, 2021 and 2020, contract liabilities were not material.

Our contract liabilities primarily represent advances from our customers prior to product or service delivery.

At December 31, 2022 and 2021, contract liabilities were $ 156 million and $ 90 million, respectively.

Remaining Performance Obligations

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We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less or because the variable consideration has been allocated entirely to an unsatisfied performance obligation.

We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing, which mostly expire by 2022.

At December 31, 2021, the remaining performance obligations related to these minimum volume commitment contracts were not material.

We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing.

At December 31, 2022, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 445 million.

This amount excludes variable consideration and estimates of variable rate escalation clauses in our contracts with customers, and is expected to be recognized through 2031 with a weighted average remaining life of three years as of December 31, 2022.

Index to Financial Statements

Note 6— Credit Losses

We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil and NGL.

We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil, NGL and natural gas.

We assess each counterparty’s ability to pay for the products we sell by conducting a credit review.

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We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

The negative economic impacts associated with Coronavirus Disease 2019 (COVID-19) increase the probability that certain of our counterparties may not be able to completely fulfill their obligations in a timely manner.

In response, we have enhanced our credit monitoring, sought collateral to support some transactions, and required prepayments from higher-risk counterparties.

In addition, when events and circumstances arise that may affect certain counterparties’ abilities to fulfill their obligations, we enhance our credit monitoring, and we may seek collateral to support some transactions or require prepayments from higher-risk counterparties.

At December 31, 2022 and 2021, we reported $ 10,985 million and $ 7,470 million of accounts and notes receivable, net of allowances of $ 67 million and $ 44 million, respectively.

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During each of the three years ended December 31, 2022, certain volume reductions in inventory caused liquidations of LIFO inventory values.

For the year ended December 31, 2022, LIFO inventory liquidations increased net income by $ 75 million.

For the year ended December 31, 2021, LIFO inventory liquidations decreased net income by $ 101 million.

These liquidations did not have a material impact on our results for the years ended December 31, 2020 and 2019.

These liquidations did not have a material impact on our results for the year ended December 31, 2020.

Index to Financial Statements

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At December 31, 2022 and 2021, the book value of our investment in WRB was $ 2,411 million and $ 1,652 million, respectively.

We and our co-venturer provided member loans to WRB.

At December 31, 2021 and 2020, our 50 % share of the outstanding member loan balance, including accrued interest, was $ 595 million and $ 277 million, respectively.

• Gray Oak Pipeline, LLC —Phillips 66 Partners LP (Phillips 66 Partners) has a consolidated holding company that owns 65 % of Gray Oak Pipeline, LLC.

Phillips 66 Partners’ effective ownership interest in Gray Oak Pipeline, LLC is 42.25 %, after considering a co-venturer’s 35 % interest in the consolidated holding company.

The Gray Oak Pipeline, which commenced full operations in the second quarter of 2020, transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including our Sweeny Refinery.

At December 31, 2021 and 2020, Phillips 66 Partners’ investment in the Gray Oak Pipeline had a book value of $ 812 million and $ 860 million, respectively.

See Note 27—Phillips 66 Partners LP, for additional information regarding Phillips 66 Partners’ ownership in the consolidated holding company and Gray Oak Pipeline, LLC.

• Gulf Coast Express LLC (Gulf Coast Express) —DCP LP 25 percent-owned joint venture that owns an intrastate pipeline that transports natural gas from the Waha area in West Texas to Agua Dulce, in Nueces County, Texas.

The pipeline is operated by a co-venturer.

This investment was acquired as part of our consolidation of the DCP Midstream Class A Segment starting on August 18, 2022, and was initially recorded at its estimated fair value on this date.

The estimated fair value of this investment exceeds our share of Gulf Coast Express’ recorded net assets, which results in a basis difference.

At December 31, 2022, the preliminary aggregate remaining basis difference for this investment was $ 437 million.

The estimated fair value of the investment in Gulf Coast Express, the allocation of the basis difference to Gulf Coast Express’ net assets and the basis difference amortization period are based on preliminary estimates and are subject to change until we finalize our acquisition accounting for the DCP Midstream Class A Segment.

At December 31, 2022, the book value, including the preliminary fair value adjustment, of the investment in Gulf Coast Express was $ 844 million.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, Note 4—Business Combination and Note 18—Fair Value Measurements, for additional information on the DCP Midstream and Gray Oak Holdings merger and our accounting for this transaction as a business combination.

Index to Financial Statements

• DCP Sand Hills Pipeline, LLC (Sand Hills) —Phillips 66 Partners’ 33 percent-owned joint venture that owns an NGL pipeline system that extends from the Permian Basin and Eagle Ford to facilities on the Texas Gulf Coast and to the Mont Belvieu, Texas, market hub.

The Sand Hills Pipeline system is operated by DCP Midstream, LP (DCP Partners).

At December 31, 2021 and 2020, the book value of Phillips 66 Partners’ investment in Sand Hills was $ 577 million and $ 582 million, respectively.

• Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO) — Two Phillips 66 Partners 25 percent-owned joint ventures.

Dakota Access owns a pipeline system that transports crude oil from the Bakken/Three Forks production area in North Dakota to Patoka, Illinois, and ETCO owns a connecting crude oil pipeline system from Patoka to Nederland, Texas.

• Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO) — Two 25 percent-owned joint ventures.

These two pipeline systems collectively form the Bakken Pipeline system, which is operated by a co-venturer.

In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S.

Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North Dakota and later vacated the easement.

Although the easement has been vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS, which is expected to be completed in the second half of 2022.

In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and, in June 2021, dismissed the litigation.

It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed.

In September 2021, Dakota Access filed a writ of certiorari, requesting the U.S.

Supreme Court to review the lower court’s judgment that ordered the EIS and vacated the easement.

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $ 2.5 billion aggregate principal amount of senior unsecured notes consisting of:

• $ 650 million aggregate principal amount of 3.625 % Senior Notes due 2022.

• $ 1.0 billion aggregate principal amount of 3.900 % Senior Notes due 2024.

• $ 850 million aggregate principal amount of 4.625 % Senior Notes due 2029.

Dakota Access and ETCO have guaranteed repayment of the notes.

In addition, Phillips 66 Partners and its co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering.

In 2020, the trial court presiding over litigation brought by the Standing Rock Sioux Tribe (the Tribe) ordered the U.S.

Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) addressing an easement under Lake Oahe in North Dakota.

The court later vacated the easement.

Although the easement is vacated, the USACE has no plans to stop pipeline operations while it proceeds with the EIS, and the Tribe’s request for a shutdown was denied in May 2021.

In June 2021, the trial court dismissed the litigation entirely.

Once the EIS is completed, new litigation or challenges may be filed.

In February 2022, the U.S.

Supreme Court (the Court) denied Dakota Access’ writ of certiorari requesting the Court to review the lower court’s decision to order the EIS and vacate the easement.

Therefore, the requirement to prepare the EIS stands.

Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS process while the USACE engaged with the Tribe on their reasons for withdrawing.

The draft EIS process resumed in August 2022, and release is expected in Spring 2023.

Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access in March 2019.

On April 1, 2022, Dakota Access’ wholly owned subsidiary repaid $ 650 million aggregate principal amount of its outstanding senior notes upon maturity.

We funded our 25 % share, or $ 163 million, with a capital contribution of $ 89 million in March 2022 and $ 74 million of distributions we elected not to receive from Dakota Access in the first quarter of 2022.

At December 31, 2022, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $ 1.85 billion.

In conjunction with the notes offering, Phillips 66 Partners, now a wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU).

Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation.

Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes.

If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts.

At December 31, 2021, Phillips 66 Partners’ share of the maximum potential equity contributions under the CECU was approximately $ 631 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, Phillips 66 Partners also could be required to support its share of the ongoing expenses, including scheduled interest payments on the notes of approximately $ 25 million annually, in addition to the potential obligations under the CECU.

At December 31, 2021 and 2020, the aggregate book value of Phillips 66 Partners’ investments in Dakota Access and ETCO was $ 574 million and $ 577 million, respectively.

At December 31, 2022, our 25 % share of the maximum potential equity contributions under the CECU was approximately $ 467 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we could be required to support our 25 % share of the ongoing expenses, including scheduled interest payments on the notes of approximately $ 20 million annually, in addition to the potential obligations under the CECU.

At December 31, 2022 and 2021, the aggregate book value of our investments in Dakota Access and ETCO was $ 675 million and $ 574 million, respectively.

• Front Range Pipeline LLC (Front Range) —DCP LP 33 percent-owned joint venture that owns an NGL pipeline that originates in the DJ Basin and extends to Skellytown, Texas.

The pipeline is operated by a co-venturer.

This investment was acquired as part of our consolidation of the DCP Midstream Class A Segment starting on August 18, 2022, and was initially recorded at its estimated fair value on this date.

The estimated fair value of this investment exceeds our share of Front Range’s recorded net assets, which results in a basis difference.

At December 31, 2022, the preliminary aggregate remaining basis difference for this investment was $ 308 million.

The estimated fair value of the investment in Front Range, the allocation of the basis difference to Front Range’s net assets and the basis difference amortization period are based on preliminary estimates and are subject to change until we finalize our acquisition accounting for the DCP Midstream Class A Segment.

At December 31, 2022, the book value, including the fair value adjustment, of the investment in Front Range was $ 499 million.

Index to Financial Statements

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At December 31, 2022 and 2021, the book value of our investment in REX was $ 483 million and $ 510 million, respectively.

• DCP Midstream, LLC (DCP Midstream) — 50 percent-owned joint venture that owns and operates NGL and gas pipelines, gas plants, gathering systems, storage facilities and fractionation plants, through its subsidiary DCP Partners.

DCP Midstream markets a portion of its NGL to us and our equity affiliates.

We have a basis difference for our investment in DCP Midstream because the carrying value of our investment is lower than our share of DCP Midstream’s recorded net assets.

This basis difference was the result of impairment charges recorded on our investment in 2020 and 2019.

This basis difference is being amortized and recognized as a benefit to equity earnings over a period of 22 years, which was the estimated remaining useful life of DCP Midstream’s PP&E when the impairment charges were recorded.

At December 31, 2021, the aggregate remaining basis difference for this investment was $ 1,646 million.

Equity earnings for the years ended December 31, 2021, 2020 and 2019, were increased by $ 82 million, $ 71 million and $ 10 million, respectively, due to the amortization of our basis difference.

See Note 9—Impairments, and Note 16—Fair Value Measurements for additional information regarding the impairments and the techniques used to determine the fair value of our investment in DCP Midstream.

At December 31, 2021 and 2020, the book value of our investment in DCP Midstream was $ 391 million and $ 297 million, respectively.

• Bayou Bridge Pipeline, LLC (Bayou Bridge) —Phillips 66 Partners’ 40 percent-owned joint venture that owns a pipeline that transports crude oil from Nederland, Texas, to St.

James, Louisiana.

The Bayou Bridge Pipeline is operated by Phillips 66 Partners’ co-venturer.

At December 31, 2021 and 2020, the book value of Phillips 66 Partners’ investment in Bayou Bridge was $ 277 million and $ 288 million, respectively.

• CF United LLC (CF United) —A retail marketing joint venture with operations primarily on the U.S.

6 unchanged sentences

At December 31, 2021, the book value of our investment in CF United was $ 277 million.

• DCP Southern Hills Pipeline, LLC (Southern Hills) —Phillips 66 Partners’ 33 percent-owned joint venture that owns an NGL pipeline system that extends from the Midcontinent region to the Mont Belvieu, Texas, market hub.

The Southern Hills Pipeline system is operated by DCP Partners.

At both December 31, 2021 and 2020, the book value of Phillips 66 Partners’ investment in Southern Hills was $ 217 million.

Index to Financial Statements

• OnCue Holdings, LLC (OnCue) — 50 percent-owned joint venture that owns and operates retail convenience stores.

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At December 31, 2021, the book value of our investment in OnCue was $ 114 million.

• Liberty Pipeline LLC (Liberty) —In the first quarter of 2021, Phillips 66 Partners’ decision to exit the Liberty Pipeline project resulted in a $ 198 million before-tax impairment of its investment in Liberty.

• DCP Midstream, DCP Sand Hills, DCP Southern Hills, and Gray Oak Pipeline —Prior to the merger of DCP Midstream and Gray Oak Holdings on August 17, 2022, we held:

◦ A 50 % interest in DCP Midstream a joint venture that owns and operates NGL and gas pipelines, gas plants, gathering systems, storage facilities and fractionation plants, through its subsidiary DCP LP.

◦ A 33.33 % direct ownership interest in DCP Sand Hills a joint venture that owns a NGL pipeline system that extends from the Permian Basin and Eagle Ford to facilities on the Texas Gulf Coast and to the Mont Belvieu, Texas, market hub.

◦ A 33.33 % direct ownership interest in DCP Southern Hills a joint venture that owns a NGL pipeline system that extends from the Midcontinent region to the Mont Belvieu, Texas, market hub.

◦ A 65 % interest in Gray Oak Pipeline, which was held through a consolidated holding company, Gray Oak Holdings.

Our indirect interest in Gray Oak Pipeline was 42.25 %, after considering a co-venturer’s 35 % interest in Gray Oak Holdings.

Gray Oak Pipeline is a crude oil pipeline that extends from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including our Sweeny Refinery.

As a result of the merger, effective August 18, 2022, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills and our indirect economic interest in Gray Oak Pipeline was reduced to 6.5 %.

After the merger, our indirect economic interest in Gray Oak Pipeline is held through our economic interest in DCP Midstream Class B Segment.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 4—Business Combination, for additional information regarding the merger and associated accounting treatment.

Index to Financial Statements

At December 31, 2021, the book values of our investments in DCP Midstream, DCP Sand Hills, DCP Southern Hills and Gray Oak Pipeline were $ 391 million, $ 577 million, $ 217 million and $ 812 million, respectively.

At December 31, 2022, the book value of our investment in DCP Midstream Class B Segment was $ 79 million.

• Liberty Pipeline LLC (Liberty) —In the first quarter of 2021, Phillips 66 Partners’ decided to exit the Liberty Pipeline project, which resulted in a $ 198 million before-tax impairment.

The impairment is included in the “Impairments” line item on our consolidated statement of operations for the year ended December 31, 2021.

In April 2021, Phillips 66 Partners transferred its ownership interest in Liberty to its co-venturer for cash and certain pipeline assets with a value that approximated its book value of $ 46 million at March 31, 2021.

At December 31, 2020, the book value of Phillips 66 Partners’ investment in Liberty was $ 241 million.

See Note 11—Impairments, and Note 18—Fair Value Measurements, for additional information regarding the impairment and the techniques used to determine the fair value of Phillips 66 Partners’ investment in Liberty.

Other Investments

In September 2021, we acquired 78 million ordinary shares in NOVONIX Limited (NOVONIX), representing a 16 % ownership interest, for $ 150 million.

These ordinary shares are traded on the Australian Securities Exchange.

In September 2021, we acquired 78 million ordinary shares representing a 16 % ownership interest, in NOVONIX Limited (NOVONIX), which are traded on the Australian Securities Exchange.

NOVONIX is a Brisbane, Australia-based company that develops technology and supplies materials for lithium-ion batteries.

Since we do not have significant influence over the operating and financial policies of NOVONIX and the shares we own have a readily determinable fair value, our investment is recorded at fair value at the end of each reporting period.

The fair value of our investment is recorded in the “Investments and long-term receivables” line item on our consolidated balance sheet, and the change in the fair value of our investment, or unrealized gain (loss), is recorded in the “Other income” line item on our consolidated statement of operations.

The fair value of our investment in NOVONIX was $ 520 million at December 31, 2021.

The unrealized investment gain, including foreign exchange impacts, was $ 370 million for the year ended December 31, 2021.

The fair value of our investment is recorded in the “Investments and long-term receivables” line item on our consolidated balance sheet.

The change in the fair value of our investment due to fluctuations in NOVONIX’s stock price, or unrealized investment gain (losses), is recorded in the “Other income” line item of our consolidated statement of operations, while changes due to foreign currency fluctuations are recorded in the “Foreign currency transaction (gains) losses” line item on our consolidated statement of operations.

At December 31, 2022 and 2021, the fair value of our investment in NOVONIX was $ 78 million and $ 520 million, respectively.

The fair value of our investment in NOVONIX declined by $ 442 million during the year ended December 31, 2022, reflecting unrealized investment losses of $ 433 million and unrealized foreign currency losses of $ 9 million.

The fair value of our investment in NOVONIX increased by $ 370 million during the year ended December 31, 2021, reflecting unrealized investment gains of $ 365 million and unrealized foreign currency gains of $ 5 million.

See Note 18—Fair Value Measurements, for additional information regarding the recurring fair value measurement of our investment in NOVONIX.

Related Party Loans

We and our co-venturer have provided member loans to WRB.

At December 31, 2022, our share of the outstanding member loan balance was repaid.

At December 31, 2021, our 50 % share of the outstanding member loan balance, including accrued interest, was $ 595 million.

Total distributions received from affiliates were $ 1,832 million, $ 3,043 million, and $ 1,717 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Index to Financial Statements

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 4—Business Combination, for additional information on the DCP Midstream and Gray Oak Holdings merger and accounting treatment.

Note 9— Properties, Plants and Equipment

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$ 52,990 17,827 35,163 39,797 17,362 22,435

In the fourth quarter of 2021, we announced the shutdown of our Alliance Refinery in connection with plans to convert it to a terminal.

We performed an evaluation of assets associated with our Alliance Refinery, and determined that certain Refining and Midstream PP&E had no further utility to us.

As a result, we retired these PP&E and recorded depreciation and amortization of $ 155 million before-tax, of which $ 85 million was recorded in our Refining segment and $ 70 million was recorded in our Midstream segment.

See Note 9—Impairments, for information regarding PP&E impairments associated with our Alliance Refinery and San Francisco Refinery asset groups.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, Note 4—Business Combination and Note 18—Fair Value Measurements, for additional information on the DCP Midstream and Gray Oak Holdings merger, accounting treatment and the associated fair value measurements.

See Note 11—Impairments, for information regarding PP&E impairments associated with our Alliance Refinery asset group.

See Note 28—Segment Disclosures and Related Information, for information regarding the change in the composition of our operating segments.

Index to Financial Statements

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Millions of Dollars

Midstream Refining Marketing and Specialties Total

Midstream Marketing and Specialties Total

Balance at December 31, 2020 $ 626 799 1,425

Asset transfer — 40 ( 40 ) —

Impairments* — ( 1,845 ) — ( 1,845 )

Goodwill assigned to acquisitions — 59 59

Balance at December 31, 2021 626 858 1,484

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Balance at December 31, 2022 $ 626 860 1,486

*Represents accumulated impairments at December 31, 2021.

In December 2021, we acquired a commercial fleet fueling business on the West Coast in our M&S segment and recognized goodwill of $ 59 million associated with this acquisition.

See Note 9—Impairments, for information regarding the goodwill impairment in the Refining reporting unit during 2020.

Intangible Assets

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For the years ended December 31, 2022, 2021 and 2020, amortization expense was $ 27 million, $ 26 million and $ 27 million, respectively, and is expected to be less than $ 35 million per year in future years.

See Note 9—Impairments, for information regarding the impairment of intangible assets related to our San Francisco Refinery.

Index to Financial Statements

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Equity Investments

In the first quarter of 2021, Phillips 66 Partners decided to exit the Liberty Pipeline project, which had previously been deferred due to the challenging business environment caused by the COVID-19 pandemic.

In the first quarter of 2021, Phillips 66 Partners decided to exit the Liberty Pipeline project in our Midstream segment, which had previously been deferred due to the challenging business environment caused by the COVID-19 pandemic.

As a result, Phillips 66 Partners recorded a $ 198 million before-tax impairment to reduce the book value of its investment in Liberty at March 31, 2021, to estimated fair value.

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DCP Midstream

At September 30, 2019, we estimated the fair value of our investment in DCP Midstream was below our book value due to a decline in the market values of DCP Partners common units and its then general partner interest.

We concluded this difference was not temporary due to its duration and magnitude, and we recorded an $ 853 million before-tax impairment in the third quarter of 2019.

After the elimination of its general partner economic interests in November 2019, the fair value of our investment in DCP Midstream depends solely on the market value of DCP Partners common units.

In the first quarter of 2020, the market value of DCP Partners common units further declined by approximately 85 %.

In the first quarter of 2020, the market value of DCP LP common units declined by approximately 85 %.

As a result, at March 31, 2020, the fair value of our investment in DCP Midstream was significantly lower than its book value.

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$ 1,288 million of the impairment charge was recorded in our Refining segment and $ 10 million was recorded in our Midstream segment.

In the fourth quarter of 2021, we announced the shutdown of our Alliance Refinery in connection with plans to convert it to a terminal.

See Note 7—Properties, Plants and Equipment, for additional information related to our Alliance Refinery.

In the fourth quarter of 2021, we shut down our Alliance Refinery.

San Francisco Refinery

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See Note 18—Fair Value Measurements, for additional information on the determination of fair value used to record these impairments.

During 2021, global refined petroleum product demand steadily recovered due to the easing of COVID-19 pandemic restrictions and the administration of COVID-19 vaccines.

Consequently, sales of refined petroleum products, refining margins and volumes through our refineries and logistics systems have improved.

However, as some uncertainty remains regarding the impact of the COVID-19 pandemic on global economic activities, we continue to monitor our asset and investment portfolio for indicators of impairment.

The consequences of a sustained disruption of economic activities by the pandemic may include additional asset impairments and portfolio rationalization in the future.

Index to Financial Statements

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New obligations 7 22

Acquisition of DCP Midstream Class A Segment, DCP Sand Hills and DCP

Southern Hills 168 —

Changes in estimates of existing obligations 17 66

2 unchanged sentences

Balance at December 31 $ 565 395

During the year ended December 31, 2021, our asset retirement balance increased by $ 86 million.

This increase was primarily due to changes in estimates of existing obligations related to the planned shutdown of our Santa Maria Refinery in connection with our Rodeo Renewed project, and asbestos abatement, as well as new obligations related to the decommissioning of certain assets at our Alliance Refinery, which was shut down in the fourth quarter of 2021 in connection with plans to convert it to a terminal.

During the year ended December 31, 2022, our asset retirement balance increased $ 170 million.

This increase was primarily due to consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills after the merger on August 17, 2022.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger for additional information on the DCP Midstream and Gray Oak Holdings merger.

Index to Financial Statements

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Millions of Dollars

December 31, 2022 December 31, 2021

Phillips 66 Phillips 66 Company Phillips 66 Partners DCP LP Total Phillips 66 Phillips 66 Partners Total

4.300 % Senior Notes due April 2022

$ — — — — — 1,000 — 1,000

3.875 % Senior Notes due March 2023

— — — 500 500 — — —

3.700 % Senior Notes due April 2023

— — — — — 500 — 500

0.900 % Senior Notes due February 2024

800 — — — 800 800 — 800

2.450 % Senior Notes due December 2024

— 277 23 — 300 — 300 300

3.605 % Senior Notes due February 2025

— 441 59 — 500 — 500 500

3.850 % Senior Notes due April 2025

650 — — — 650 650 — 650

5.375 % Senior Notes due July 2025

— — — 825 825 — — —

1.300 % Senior Notes due February 2026

500 — — — 500 500 — 500

3.550 % Senior Notes due October 2026

— 458 34 — 492 — 500 500

5.625 % Senior Notes due July 2027

— — — 500 500 — — —

3.750 % Senior Notes due March 2028

— 427 73 — 500 — 500 500

3.900 % Senior Notes due March 2028

800 — — — 800 800 — 800

5.125 % Senior Notes due May 2029

— — — 600 600 — — —

3.150 % Senior Notes due December 2029

— 570 30 — 600 — 600 600

8.125 % Senior Notes due August 2030

— — — 300 300 — — —

2.150 % Senior Notes due December 2030

850 — — — 850 850 — 850

3.250 % Senior Notes due February 2032

— — — 400 400 — — —

4.650 % Senior Notes due November 2034

1,000 — — — 1,000 1,000 — 1,000

6.450 % Senior Notes due November 2036

— — — 300 300 — — —

6.750 % Senior Notes due September 2037

— — — 450 450 — — —

5.875 % Senior Notes due May 2042

1,500 — — — 1,500 1,500 — 1,500

5.850 % Junior Subordinated Notes due May 2043

— — — 550 550 — — —

5.600 % Senior Notes due April 2044

— — — 400 400 — — —

4.875 % Senior Notes due November 2044

3.300 % Senior Notes due March 2052

Term Loan due November 2023 at 1.397 % at year-end 2020

Floating Rate Senior Notes due February 2021 at 0.833 % at year-end 2020

Floating Rate Senior Notes due February 2024 at 0.840 % at year-end 2020

Floating Rate Advance Term Loan due December 2034 at 0.699 % and 0.755 % at year-end 2021 and 2020, respectively—related party

Phillips 66 Partners

2.450 % Senior Notes due December 2024

1,700 — — — 1,700 1,700 — 1,700

4.680 % Senior Notes due February 2045

— 442 8 — 450 — 450 450

4.900 % Senior Notes due October 2046

— 605 20 — 625 — 625 625

3.300 % Senior Notes due March 2052

3.150 % Senior Notes due December 2029

4.680 % Senior Notes due February 2045

4.900 % Senior Notes due October 2046

1,000 — — — 1,000 1,000 — 1,000

Floating Rate Term Loan due April 2022 at 0.978 % at year-end 2021

Tax-Exempt Bonds due April 2021 at weighted-average rate of 0.360 % at year-end 2020

Revolving Credit Facility due January 2021 at weighted-average rate of 1.397 % at year-end 2020

— — — — — — 450 450

Securitization facility due August 2024 — — — 40 40 — — —

Floating Rate Advance Term Loan due December 2034 at 4.720 % and 0.699 % at year-end 2022 and 2021, respectively—related party

25 — — — 25 25 — 25

Other 1 — — — 1 1 — 1

Debt at face value 8,826 3,220 247 4,865 17,158 10,326 3,925 14,251

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Software obligations 20 16

Net unamortized discounts and debt issuance costs ( 109 ) ( 106 )

Net unamortized discounts, debt issuance costs and acquisition fair value adjustments ( 245 ) ( 109 )

Total debt 17,190 14,448

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2022 Activities

Debt Repayments

In December 2022, Phillips 66 repaid its 3.700 % senior notes due April 2023 with an aggregate principal amount of $ 500 million.

In April 2022, upon maturity, Phillips 66 repaid its 4.300 % senior notes with an aggregate principal amount of $ 1.0 billion and Phillips 66 Partners repaid its $ 450 million term loan.

DCP Midstream Class A Segment

As a result of the merger of DCP Midstream and Gray Oak Holdings, we recorded the fair value of DCP Midstream Class A Segment’s debt to our consolidated balance sheet as of August 17, 2022.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, Note 4—Business Combination, and Note 18—Fair Value Measurements, for additional information regarding the merger and the associated fair value measurements.

All of DCP Midstream Class A Segment’s debt is held by DCP LP.

Interest on all of DCP LP’s senior notes and junior subordinated notes is paid on a semi-annual basis.

Debt Exchange

On May 5, 2022, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, completed offers to exchange (the Exchange Offers) all validly tendered notes of seven different series of notes issued by Phillips 66 Partners (collectively, the Old Notes), with an aggregate principal amount of approximately $ 3.5 billion, for notes issued by Phillips 66 Company (collectively, the New Notes).

The New Notes are fully and unconditionally guaranteed by Phillips 66 and rank equally with Phillips 66 Company’s other unsecured and unsubordinated indebtedness, and the guarantees rank equally with Phillips 66’s other unsecured and unsubordinated indebtedness.

Old Notes with an aggregate principal amount of approximately $ 3.2 billion were tendered in the Exchange Offers.

The New Notes have the same interest rates, interest payment dates and maturity dates as the Old Notes.

Holders that validly tendered before the end of the early participation period on April 19, 2022 (the Early Participation Date), received New Notes with an aggregate principal amount equivalent to the Old Notes, while holders that validly tendered after the Early Participation Date, but before the Expiration Date, received New Notes with an aggregate principal amount 3 % less than the Old Notes.

Substantially all of the Old Notes exchanged were tendered during the Early Participation Period.

2021 Activities

In December 2021, Phillips 66 used cash on hand to repay the $ 450 million outstanding principal balance of its Floating Rate Senior Notes due February 2024.

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In November 2021, Phillips 66 closed its public offering of $ 1 billion aggregate principal amount of 3.300 % senior unsecured notes due 2052.

Interest on the Senior Notes due 2052 is payable semiannually on March 15 and September 15 of each year, commencing on March 15, 2022.

Proceeds received from the public offering were $ 982 million, net of underwriters’ discounts and commissions, as well as debt issuance costs.

Proceeds received from this public offering were $ 982 million, net of underwriters’ discounts, commissions and issuance costs.

In December 2021, Phillips 66 used the proceeds from this offering, together with cash on hand, to repay $ 1 billion in aggregate principal amount of its $ 2 billion 4.300 % Senior Notes due April 2022.

In September 2021, Phillips 66 repaid the $ 500 million of outstanding borrowings under the delayed draw term loan facility due November 2023 described below under “Term Loan Facility.”

In April 2021, Phillips 66 Partners entered into a $ 450 million term loan agreement and borrowed the full amount.

The term loan agreement has a maturity date of April 5, 2022, and the outstanding borrowings can be repaid at any time and from time to time, in whole or in part, without premium or penalty.

Borrowings bear interest at a floating rate based on either a Eurodollar rate or a reference rate, plus a margin of 0.875 %.

Proceeds were primarily used to repay amounts borrowed under Phillips 66 Partners’ $ 750 million revolving credit facility.

In September 2021, Phillips 66 repaid the $ 500 million of outstanding borrowings under the delayed draw term loan facility due November 2023.

In April 2021, Phillips 66 Partners entered into a $ 450 million term loan agreement with a one-year term and borrowed the full amount.

The term loan agreement was repaid upon maturity in April 2022 without premium or penalty.

Index to Financial Statements

In April 2021, Phillips 66 Partners repaid $ 50 million of its tax-exempt bonds upon maturity.

In February 2021, Phillips 66 repaid $ 500 million outstanding principal balance of its floating-rate senior notes upon maturity.

2020 Activities

Senior Unsecured Notes

In November 2020, Phillips 66 closed its public offering of $ 1.75 billion aggregate principal amount of senior unsecured notes consisting of:

• $ 450 million aggregate principal amount of Floating Rate Senior Notes due 2024 (the Floating Rate Notes).

• $ 800 million aggregate principal amount of 0.900 % Senior Notes due 2024.

• $ 500 million aggregate principal amount of 1.300 % Senior Notes due 2026.

The Floating Rate Notes bear interest at a floating rate, reset quarterly, equal to the three-month LIBOR plus 0.62 % per year, subject to adjustment.

Interest on the Senior Notes due 2024 and 2026 is payable semiannually on February 15 and August 15 of each year, commencing on February 15, 2021.

Proceeds received from the public offering of senior unsecured notes in November 2020 were $ 1.74 billion, net of underwriters’ discounts and commissions, as well as debt issuance costs.

On November 19, 2020, a portion of these proceeds was used to repay $ 500 million of outstanding borrowings under the term loan facility that Phillips 66 entered into in March 2020 (see the “Term Loan Facility” section below for a full description of the term loan facility).

In addition, a portion of the proceeds was used to repay the $ 500 million aggregate principal amount of our outstanding Floating Rate Senior Notes due February 2021.

The remainder of the proceeds are being used for general corporate purposes.

Index to Financial Statements

In June 2020, Phillips 66 closed its public offering of $ 1 billion aggregate principal amount of senior unsecured notes consisting of:

• $ 150 million aggregate principal amount of 3.850 % Senior Notes due 2025.

• $ 850 million aggregate principal amount of 2.150 % Senior Notes due 2030.

In April 2020, Phillips 66 closed its public offering of $ 1 billion aggregate principal amount of senior unsecured notes consisting of:

• $ 500 million aggregate principal amount of 3.700 % Senior Notes due 2023.

• $ 500 million aggregate principal amount of 3.850 % Senior Notes due 2025.

Interest on the Senior Notes due 2023 is payable semiannually on April 6 and October 6 of each year, commencing on October 6, 2020.

The Senior Notes due 2025 issued in June 2020 constitute a further issuance of the Senior Notes due 2025 originally issued in April 2020.

The $ 650 million in aggregate principal amount of Senior Notes due 2025 is treated as a single class of debt securities.

Interest on the Senior Notes due 2025 is payable semiannually on April 9 and October 9 of each year, commencing on October 9, 2020.

Interest on the Senior Notes due 2030 is payable semiannually on June 15 and December 15 of each year, commencing on December 15, 2020.

Proceeds received from the public offerings of senior unsecured notes in June and April of 2020 were $ 1,008 million exclusive of accrued interest received, and $ 993 million, respectively, net of underwriters’ discounts or premiums and commissions, as well as debt issuance costs.

These proceeds were used for general corporate purposes.

Term Loan Facility

In March 2020, Phillips 66 entered into a $ 1 billion 364 -day delayed draw term loan agreement (the Facility) and borrowed $ 1 billion under the Facility shortly thereafter.

In November 2020, we repaid $ 500 million of borrowings outstanding under the Facility, and the Facility was amended to extend the maturity date of the remaining $ 500 million to November 2023.

Borrowings under the Facility bear interest at a floating rate based on either a Eurodollar rate or a reference rate, plus a margin determined by the credit rating of Phillips 66’s senior unsecured long-term debt.

Other Debt Repayments

In April 2020, Phillips 66 repaid $ 300 million outstanding principal balance of its floating-rate notes due April 2020 and the $ 200 million outstanding principal balance of its term loan facility due April 2020.

Also in April 2020, Phillips 66 Partners repaid $ 25 million of its tax-exempt bonds upon maturity.

Revolving Credit Facilities and Commercial Paper

Phillips 66 has a $ 5 billion revolving credit facility which may be used for direct bank borrowings, as support for issuances of letters of credit, and as support for our commercial paper program.

We have an option to increase the overall capacity to $ 6 billion, subject to certain conditions.

We also have the option to extend the scheduled maturity of the facility for up to two additional one-year terms after its July 30, 2024, maturity date, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment.

The facility is with a broad syndicate of financial institutions and contains covenants that are usual and customary for an agreement of this type, including a maximum consolidated net debt-to-capitalization ratio of 65 % as of the last day of each fiscal quarter.

The facility has customary events of default, such as nonpayment of principal when due;

nonpayment of interest, fees or other amounts;

and violation of covenants.

Outstanding borrowings under the facility bear interest, at our option, at either:

(a) the Eurodollar rate in effect from time to time plus the applicable margin;

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

On June 23, 2022, we entered into a new $ 5 billion revolving credit facility (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of June 22, 2027.

The Facility replaced our previous $ 5 billion revolving credit facility with Phillips 66 as the borrower and Phillips 66 Company as the guarantor.

The Facility contains usual and customary covenants that are similar to the previous revolving credit facility, including a maximum consolidated net debt-to-capitalization ratio of 65 % as of the last day of each fiscal quarter.

We have the option to increase the overall capacity to $ 6 billion, subject to certain conditions.

We also have the option to extend the scheduled maturity of the Facility for up to two additional one-year terms, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment.

Outstanding borrowings under the Facility bear interest at either (a) the Adjusted Term Secured Overnight Financing Rate (SOFR) (as described in the Facility) in effect from time to time plus the applicable margin;

or (b) the reference rate (as described in the Facility) plus the applicable margin.

The Facility also provides for customary fees, including commitment fees.

The pricing levels for the commitment fees and interest-rate margins are determined based on the ratings in effect for Phillips 66’s senior unsecured long-term debt from time to time.

Phillips 66 may at any time prepay outstanding borrowings under the facility, in whole or in part, without premium or penalty.

At December 31, 2021 and 2020, no amount had been drawn under the facility.

Index to Financial Statements

Phillips 66 also has a $ 5 billion uncommitted commercial paper program for short-term working capital needs that is supported by our revolving credit facility.

The pricing levels for the commitment fees and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time.

We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty.

At December 31, 2022 and 2021, no amount had been drawn under our revolving credit facilities.

Phillips 66 also has a $ 5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility.

Commercial paper maturities are contractually limited to 365 days.

At December 31, 2022 and 2021, no borrowings were outstanding under the program.

Phillips 66 Partners has a $ 750 million revolving credit facility which may be used for direct bank borrowings and as support for issuances of letters of credit.

Phillips 66 Partners has an option to increase the overall capacity to $ 1 billion, subject to certain conditions.

Phillips 66 Partners also has the option to extend the facility for two additional one-year terms after its July 30, 2024, maturity date, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment.

The facility is with a broad syndicate of financial institutions and contains covenants that are usual and customary for an agreement of this type.

The facility has customary events of default, such as nonpayment of principal when due;

nonpayment of interest, fees or other amounts;

and violation of covenants.

Outstanding revolving borrowings under the facility bear interest, at Phillips 66 Partners’ option, at either:

(a) the Eurodollar rate in effect from time to time plus the applicable margin;

or (b) the reference rate (as described in the facility) plus the applicable margin.

The facility also provides for customary fees, including commitment fees.

The pricing levels for the commitment fees and interest-rate margins are determined based on Phillips 66 Partners’ credit ratings in effect from time to time.

Borrowings under the facility may be short-term or long-term in duration, and Phillips 66 Partners may at any time prepay outstanding borrowings under the facility, in whole or in part, without premium or penalty.

At December 31, 2021, no borrowings were outstanding under this facility, compared with borrowings of $ 415 million at December 31, 2020.

At both December 31, 2021 and 2020, $ 1 million in letters of credit had been issued that were supported by this facility.

We had approximately $ 5.7 billion and $ 5.3 billion of total committed capacity available under our revolving credit facilities at December 31, 2021 and 2020, respectively.

Phillips 66 Partners

In connection with entering into the Facility, we terminated Phillips 66 Partners’ $ 750 million revolving credit facility.

At December 31, 2021, there were no borrowings outstanding under its revolving credit facility and $ 1 million in letters of credit had been issued that were supported by its revolving credit facility.

DCP Midstream Class A Segment

DCP LP has a credit facility under its amended credit agreement (the Credit Agreement), with a borrowing capacity of up to $ 1.4 billion that matures on March 18, 2027.

The Credit Agreement grants DCP LP the option to increase the revolving loan commitment by an aggregate principal amount of up to $ 500 million and to extend the term for up to two additional one-year periods, subject to requisite lender approval.

Indebtedness under the Credit Agreement bears interest at either:

(a) an adjusted SOFR (as described in the Credit Agreement) plus the applicable margin;

or (b) the base rate (as described in the Credit Agreement) plus the applicable margin.

The Credit Agreement also provides for customary fees, including commitment fees.

The cost of borrowing under the Credit Agreement is determined by a ratings-based pricing grid based on DCP LP’s credit rating.

At December 31, 2022, DCP LP had no borrowings outstanding under the Credit Agreement.

At December 31, 2022, $ 10 million in letters of credit had been issued that are supported by the Credit Agreement.

DCP LP has an accounts receivable securitization facility (the Securitization Facility) that provides for up to $ 350 million of borrowing capacity through August 2024 at an adjusted SOFR and includes an uncommitted option to increase the total commitments under the Securitization Facility by up to an additional $ 400 million.

Under the Securitization Facility, certain of DCP LP’s wholly owned subsidiaries sell or contribute receivables to another of DCP LP’s consolidated subsidiaries, DCP Receivables LLC (DCP Receivables), a bankruptcy-remote special purpose entity created for the sole purpose of the Securitization Facility.

At December 31, 2022, $ 40 million of borrowings were outstanding under the Securitization Facility, which are secured by accounts receivable at DCP Receivables.

Index to Financial Statements

After our consolidation of DCP Midstream Class A Segment on August 17, 2022, DCP LP repaid $ 470 million of borrowing under its accounts receivable securitization and revolving credit facilities that were outstanding on the acquisition date.

Total Committed Capacity Available

At December 31, 2022, we had approximately $ 6.7 billion of total committed capacity available under the credit facilities described above.

At December 31, 2021, we had approximately $ 5.7 billion of total committed capacity available under our revolving credit facilities.

Index to Financial Statements

Note 15— Guarantees

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We also have residual value guarantees associated with railcar and airplane leases with maximum potential future exposures totaling $ 156 million.

These leases have remaining terms of up to ten years .

These leases have remaining terms of five to nine years .

Guarantees of Joint Venture Obligations

1 unchanged sentence

See Note 8—Investments, Loans and Long-Term Receivables, for additional information on Dakota Access and the CECU.

At December 31, 2021, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to four years .

At December 31, 2022, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to three years .

The maximum potential future exposures under these guarantees were approximately $ 170 million.

1 unchanged sentence

Indemnifications

Over the years, we have entered into various agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to indemnification.

Over the years, we have entered into various agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to indemnifications.

Agreements associated with these sales include indemnifications for taxes, litigation, environmental liabilities, permits and licenses, employee claims, and real estate tenant defaults.

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We also use the market knowledge gained from these activities to capture market opportunities such as moving physical commodities to more profitable locations, storing commodities to capture seasonal or time premiums, and blending commodities to capture quality upgrades.

DCP Midstream Class A Segment

Through DCP LP’s operations, DCP Midstream Class A Segment is exposed to a variety of risks including but not limited to changes in the prices of commodities that DCP LP buys or sells.

Effective from the date of the merger, we include DCP LP’s financial instruments in our financial statements.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, for additional information regarding the merger and the associated accounting treatment.

Index to Financial Statements

The following table indicates the consolidated balance sheet line items that include the fair values of commodity derivative assets and liabilities.

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Total $ 1,860 ( 1,896 ) 90 54 860 ( 877 ) 49 32

At December 31, 2021 and 2020, there was no material cash collateral received or paid that was not offset on our consolidated balance sheet.

Index to Financial Statements

At December 31, 2022, there was $ 93 million of collateral paid that was not offset on our consolidated balance sheet.

At December 31, 2021, there was no material cash collateral received or paid that was not offset on our consolidated balance sheet.

The realized and unrealized gains (losses) incurred from commodity derivatives, and the line items where they appear on our consolidated statement of operations, were:

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( 25 ) ( 18 )

Natural gas (billions of cubic feet)

Index to Financial Statements

Credit Risk from Derivative and Financial Instruments

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Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount.

We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating.

We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit ratings.

The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if our credit ratings fall below investment grade.

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The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at December 31, 2022 and 2021.

Index to Financial Statements

Note 18— Fair Value Measurements

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• Accounts and notes receivable — The carrying amount reported on our consolidated balance sheet approximates fair value.

• Derivative instruments —We fair value our exchange-traded contracts based on quoted market prices obtained from the New York Mercantile Exchange, the Intercontinental Exchange or other exchanges, and classify them as Level 1 in the fair value hierarchy.

When exchange-cleared contracts lack sufficient liquidity, or are valued using either adjusted exchange-provided prices or nonexchange quotes, we classify those contracts as Level 2.

Index to Financial Statements

• Derivative instruments —The fair value of our exchange-traded contracts is based on quoted market prices obtained from the New York Mercantile Exchange, the Intercontinental Exchange or other exchanges, and is reported as Level 1 in the fair value hierarchy.

When exchange-cleared contracts lack sufficient liquidity, or are valued using either adjusted exchange-provided prices or nonexchange quotes, we classify those contracts as Level 2 or Level 3 based on the degree to which inputs are observable.

Physical commodity forward purchase and sales contracts and over-the-counter (OTC) financial swaps are generally valued using forward quotes provided by brokers and price index developers, such as Platts and Oil Price Information Service.

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When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

We determine the fair value of our interest rate swaps based on observable market valuations for interest rate swaps that have notional amounts, terms and pay and reset frequencies similar to ours.

We determine the fair value of interest rate swaps based on observable market valuations for interest rate swaps that have notional amounts, terms and pay and reset frequencies similar to ours.

• Rabbi trust assets —These deferred compensation investments are measured at fair value using unadjusted quoted prices available from national securities exchanges and are therefore categorized as Level 1 in the fair value hierarchy.

• Investment in NOVONIX —Our investment in NOVONIX is measured at fair value using unadjusted quoted prices available from the Australian Securities Exchange and is therefore categorized as Level 1 in the fair value hierarchy.

Index to Financial Statements

• Other investments —Includes other marketable securities with observable market prices.

• Debt —The carrying amount of our floating-rate debt approximates fair value.

The fair value of our fixed-rate debt is estimated based on observable market prices.

The fair value of our fixed-rate debt is estimated primarily based on observable market prices.

The following tables display the fair value hierarchy for our financial assets and liabilities either accounted for or disclosed at fair value on a recurring basis.

2 unchanged sentences

The following tables also reflect the effect of netting derivative assets and liabilities with the same counterparty for which we have the legal right of offset and collateral netting.

Index to Financial Statements

The carrying values and fair values by hierarchy of our financial assets and liabilities, either carried or disclosed at fair value, including any effects of counterparty and collateral netting, were:

5 unchanged sentences

Exchange-cleared instruments $ 1,615 130 3 1,748 ( 1,582 ) — — 166

OTC instruments — 7 16 23 — — — 23

Physical forward contracts — 86 3 89 ( 12 ) — — 77

1 unchanged sentence

Investment in NOVONIX 78 — — 78 N/A N/A — 78

Other investments 42 1 — 43 N/A N/A — 43

$ 1,861 224 22 2,107 ( 1,594 ) — — 513

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Rabbi trust assets 158 — — 158 N/A N/A — 158

Investment in NOVONIX 520 — — 520 N/A N/A — 520

$ 1,097 441 — 1,538 ( 779 ) — — 759

1 unchanged sentence

Exchange-cleared instruments $ 463 362 — 825 ( 779 ) ( 49 ) — ( 3 )

OTC instruments — 1 — 1 — — — 1

Physical forward contracts — 51 — 51 — — — 51

Interest-rate derivatives — 3 — 3 — — — 3

Floating-rate debt — 475 — 475 N/A N/A — 475

1 unchanged sentence

$ 463 16,242 — 16,705 ( 779 ) ( 49 ) ( 1,686 ) 14,191

Index to Financial Statements

The rabbi trust assets and investment in NOVONIX are recorded in the “Investments and long-term receivables” line item, and floating-rate and fixed-rate debt are recorded in the “Short-term debt” and “Long-term debt” line items on our consolidated balance sheet.

See Note 17—Derivatives and Financial Instruments, for information regarding where the assets and liabilities related to our commodity derivatives are recorded on our consolidated balance sheet.

Index to Financial Statements

Nonrecurring Fair Value Measurements

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In the first quarter of 2021, Phillips 66 Partners wrote down the book value of its investment in Liberty to estimated fair value using a Level 3 nonrecurring fair value measurement.

This nonrecurring measurement was based on the estimated fair value of Phillip 66 Partners’ share of the joint venture’s pipeline assets and net working capital.

This nonrecurring measurement was based on the estimated fair value of Phillips 66 Partners’ share of the joint venture’s pipeline assets and net working capital at March 31, 2021.

See Note 8—Investments, Loans and Long-Term Receivables, for more information regarding Phillips 66 Partners’ transfer of its ownership in Liberty to its co-venturer in April 2021.

3 unchanged sentences

DCP Midstream

In the third quarter of 2019, the nonrecurring fair value measurement used to record an impairment of our DCP Midstream investment consisted of:

• The fair value of our share of DCP Midstream’s limited partner interest in DCP Partners, which was estimated based on an average market price of DCP Partners common units for a multi-day trading period encompassing September 30, 2019.

• The fair value of our share of DCP Midstream’s general partner interest in DCP Partners, which was estimated using two primary inputs:

1) estimated future cash flows of distributions attributable to the incentive distribution rights from DCP Partners, and 2) a multiple of those cash flows based on internal estimates and observation of IDR conversion transactions by other master limited partnerships.

Overall, we concluded the third-quarter 2019 valuation resulted in a Level 3 nonrecurring fair value measurement.

In the first quarter of 2020, the nonrecurring fair value measurement used to record an impairment of our DCP Midstream investment was the fair value of our share of DCP Midstream’s limited partner interest in DCP Partners, which was estimated based on average market prices of DCP Partners common units for a multi-day trading period encompassing March 31, 2020.

In the first quarter of 2020, the nonrecurring fair value measurement used to record an impairment of our DCP Midstream investment was the fair value of our share of DCP Midstream’s limited partner interest in DCP LP, which was estimated based on average market prices of DCP LP’s common units for a multi-day trading period encompassing March 31, 2020.

This valuation resulted in a Level 2 nonrecurring fair value measurement.

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This valuation resulted in a Level 3 nonrecurring fair value measurement.

Index to Financial Statements

San Francisco Refinery

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As part of our impairment analysis, the fair value of all reporting units was reconciled to the company’s market capitalization.

See Note 9—Impairments, for additional information on the above impairments.

Index to Financial Statements

DCP Midstream and Gray Oak Holdings Merger

In the third quarter of 2022, we and Enbridge agreed to merge DCP Midstream and Gray Oak Holdings with DCP Midstream as the surviving entity.

As a result, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills, and accordingly, accounted for the business combination using the acquisition method of accounting, which requires DCP Midstream Class A Segment’s, DCP Sand Hills’ and DCP Southern Hills’, assets and liabilities to be recorded at fair value as of the acquisition date on our consolidated balance sheet.

See Note 4—Business Combination, for additional information on the merger transaction.

Equity Investments

The preliminary fair value of the investments we acquired that are accounted for under the equity method was $ 2,198 million.

The preliminary fair value of these assets was determined using the income approach.

The income approach used discounted cash flow models that require various observable and non-observable inputs, such as margins, tariffs and rates, utilization, volumes, product costs, operating expenses, capital expenditures, terminal-year values and risk-adjusted discount rates.

These valuations resulted in Level 3 nonrecurring fair value measurements.

The preliminary fair value of PP&E was $ 12,838 million.

The preliminary fair value of these assets was determined primarily using the cost approach.

The cost approach used assumptions for the current replacement costs of similar plant and equipment assets adjusted for estimated physical deterioration, functional obsolescence and economic obsolescence.

The estimated fair value of properties was determined using a sales comparison approach.

These valuations resulted in Level 3 nonrecurring fair value measurements.

The preliminary fair value of DCP LP’s senior and junior subordinated notes was measured using a market approach, based on the average of quotes for the acquired debt from major financial institutions.

These valuations resulted in Level 2 nonrecurring fair value measurements.

Gain Related to Merger of Businesses

In connection with the merger, we recognized before-tax gains totaling $ 2,831 million from remeasuring our previously held equity investments to their fair values and a before-tax gain of $ 182 million related to the transfer of a 35.75 % indirect economic interest in Gray Oak Pipeline to our co-venturer.

The preliminary fair values of our previously held equity interest in DCP Midstream and the equity interest in Gray Oak Pipeline we transferred were primarily based on DCP LP’s publicly traded common unit market price on the effective date of the merger, August 17, 2022, the cash consideration contributed and obligations that were deemed to be effectively settled.

This valuation resulted in Level 1 nonrecurring fair value measurements.

The preliminary fair values of our previously held equity interests in DCP Sand Hills and DCP Southern Hills were determined using the income approach.

The income approach used discounted cash flow models that require various observable and non-observable inputs, such as tariffs, volumes, operating expenses, capital expenditures, terminal-year values and risk-adjusted discount rates.

These valuations resulted in Level 3 nonrecurring fair value measurements.

Noncontrolling Interests

As a result of our consolidation of the DCP Midstream Class A Segment, the noncontrolling interests held in the DCP Midstream Class A Segment were recorded at their estimated fair values on the merger date.

These noncontrolling interests primarily include Enbridge’s indirect economic interest in DCP LP, the public holders of DCP LP’s common units and the holders of DCP LP’s preferred units.

The fair value of the noncontrolling interests in DCP LP’s common units was based on their unit market price as of the date of the merger, August 17, 2022.

The fair value of the noncontrolling interests in DCP LP’s publicly traded preferred units was based on their respective market price as of the date of the merger, August 17, 2022.

These valuations resulted in Level 1 nonrecurring fair value measurements.

The preliminary fair value of the noncontrolling interests in DCP LP’s other preferred units was based on an income approach that used projected distributions that were discounted using an average implied yield of DCP LP’s publicly traded preferred units and expected redemption dates.

This valuation resulted in a Level 2 nonrecurring fair value measurement.

Index to Financial Statements

Note 19— Equity

Preferred Stock

We have 500 million shares of preferred stock authorized, with a par value of $ 0.01 per share, none of which have been issued.

Phillips 66 has 500 million shares of preferred stock authorized, with a par value of $ 0.01 per share, none of which have been issued.

Treasury Stock

In March 2020, we announced that we had temporarily suspended our share repurchases to preserve liquidity in response to the global economic disruption caused by the COVID-19 pandemic.

We resumed purchasing shares under our share repurchase program in the second quarter of 2022.

On November 7, 2022, our Board of Directors approved a $ 5 billion increase to our share repurchase program.

Since July 2012, our Board of Directors has authorized an aggregate of $ 20 billion of repurchases of our outstanding common stock.

The authorizations do not have expiration dates.

The share repurchases are expected to be funded primarily through available cash.

Future share repurchases are expected to be funded primarily through available cash.

We are not obligated to repurchase any shares of common stock pursuant to these authorizations and may commence, suspend or terminate repurchases at any time.

Since the inception of our share repurchase program in 2012 through December 31, 2021, we have repurchased a total of 159,349,212 shares at an aggregate cost of $ 12,486 million.

In 2022, we repurchased 16.6 million shares at an aggregate cost of $ 1.5 billion.

Since the inception of our share repurchase program in 2012, we have repurchased 175.9 million shares at an aggregate cost of $ 14 billion.

Shares of stock repurchased are held as treasury shares.

We suspended share repurchases in mid-March 2020 to preserve liquidity in response to the global economic disruption caused by the COVID-19 pandemic.

Our Board of Directors separately authorized two transactions in 2014 and 2018, which resulted in the repurchase of 52,422,615 shares of Phillips 66 common stock with an aggregate value of $ 4,630 million.

Our Board of Directors separately authorized two transactions in 2014 and 2018, which resulted in the repurchase of 52.4 million shares of Phillips 66 common stock with an aggregate value of $ 4.6 billion.

In March 2022, in connection with the Phillips 66 Partners merger, we issued 41.8 million shares of common stock from our treasury stock with an aggregate cost of $ 3.4 billion.

See Note 30—Phillips 66 Partners LP, for information on the merger with Phillips 66 Partners.

Common Stock Dividends

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Noncontrolling Interests

Our noncontrolling interests primarily represent issuances of common and preferred units to the public by Phillips 66 Partners.

See Note 27—Phillips 66 Partners LP, for information on Phillips 66 Partners.

In 2022, our noncontrolling interests primarily represented Enbridge’s indirect economic interest in DCP LP, the public holders of DCP LP’s common units and the holders of DCP LP’s preferred units.

In 2021, our noncontrolling interests primarily represented the public holders of Phillips 66 Partners’ common units and the holders of Phillips 66 Partners’ preferred units.

See Note 30—Phillips 66 Partners LP, for information on the merger with Phillips 66 Partners.

Index to Financial Statements

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Our right of way agreements in effect prior to January 1, 2019, were not accounted for as leases as they were not initially determined to be leases at their commencement dates.

However, modifications to these agreements or new agreements will be assessed and accounted for accordingly under ASU No.

However, modifications to these agreements or new agreements are assessed and accounted for accordingly under ASU No.

For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

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Plan participant contributions — 2 — 2 6 6

Net actuarial loss (gain) ( 82 ) ( 37 ) 353 168 ( 13 ) ( 13 )

Net actuarial gain ( 528 ) ( 502 ) ( 82 ) ( 37 ) ( 37 ) ( 13 )

Benefits paid ( 519 ) ( 44 ) ( 517 ) ( 44 ) ( 19 ) ( 19 )

Settlements — ( 101 ) — — — —

Foreign currency exchange rate change — ( 138 ) — ( 47 ) — —

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Benefits paid ( 519 ) ( 44 ) ( 517 ) ( 44 ) ( 19 ) ( 19 )

Settlements — ( 101 ) — — — —

Foreign currency exchange rate change — ( 124 ) — ( 31 ) — —

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2022 2021 2022 2021

Sources of Change in Other Comprehensive Income (Loss)

Net actuarial gain (loss) arising during the period $ 211 92 ( 170 ) ( 105 ) 13 13

Sources of Change in Other Comprehensive Income

Net actuarial gain arising during the period $ 18 136 211 92 37 13

Amortization of net actuarial loss (gain) and settlements

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Amortization of prior service credit — ( 1 ) — ( 1 ) ( 2 ) ( 2 )

Total recognized in other comprehensive income (loss) $ 312 116 ( 39 ) ( 90 ) 10 11

Total recognized in other comprehensive income $ 92 156 312 116 33 10

The accumulated benefit obligations for all U.S.

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53 9 55 — 61 — — — —

Total net periodic benefit cost*

$ 168 20 201 15 154 10 7 10 11

Net periodic benefit cost* $ 162 13 168 20 201 15 5 7 10

* Included in the “Operating expenses” and “Selling, general and administrative expenses” line items on our consolidated statement of operations.

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and international pension benefit obligations of $ 528 million and $ 502 million, respectively.

The primary driver for the actuarial gains in 2021 was increases in the discount rates.

For the year ended December 31, 2020, actuarial losses resulted in increases in our U.S.

For the year ended December 31, 2021, actuarial gains resulted in decreases in our U.S.

and international pension benefit obligations of $ 82 million and $ 37 million, respectively.

The primary drivers for the actuarial losses in 2020 were decreases in the discount rates and changes to the census data demographics.

For the year ended December 31, 2021, the weighted-average actual return on plan assets for our U.S.

pension plans was 11 %, which resulted in a $ 289 million increase in plan assets.

For the year ended December 31, 2020, the weighted-average actual return on plan assets for our U.S.

pension plans was 14 %, which resulted in a $ 342 million increase in plan assets.

The primary driver for the actuarial gains in 2022 and 2021 was increases in the discount rates.

For the year ended December 31, 2022, the weighted-average actual return on plan assets was negative 20 %, which resulted in a decrease in our U.S.

and international plan assets of $ 375 million and $ 329 million, respectively.

For the year ended December 31, 2021, the weighted-average actual return on plan assets was 10 %, which resulted in an increase in our U.S.

and international plan assets of $ 289 million and $ 114 million, respectively.

The primary driver of the return on plan assets in 2022 and 2021 was fluctuations in the equity and fixed income markets.

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Employees can contribute up to 75 % of their eligible pay, subject to certain statutory limits, in the Savings Plan to a choice of investment funds.

For the three years ended December 31, 2021, Phillips 66 provided a company match of participant contributions up to 6 % of eligible pay, with an additional Success Share contribution ranging from 0 % to 6 % of eligible pay based on management discretion.

For the year ended December 31, 2022, Phillips 66 provided a company match of participant contributions up to 8 % of eligible pay, with an additional Success Share contribution ranging from 0 % to 4 % of eligible pay based on management discretion.

For the years ended December 31, 2021 and 2020, Phillips 66 provided a company match of participant contributions up to 6 % of eligible pay, with an additional Success Share contribution ranging from 0 % to 6 % of eligible pay based on management discretion.

For the years ended December 31, 2022, 2021 and 2020, we recorded expense of $ 210 million, $ 142 million and $ 145 million, respectively, related to our contributions to the Savings Plan.

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Note 22— Share-Based Compensation Plans

In accordance with the Employee Matters Agreement related to the separation, compensation awards based on ConocoPhillips stock and granted before April 30, 2012 (the Separation Date) were converted to compensation awards based on both ConocoPhillips and Phillips 66 stock if, on the Separation Date, the awards were:

(1) options outstanding and exercisable;

or (2) restricted stock or restricted stock units (RSUs) awarded for completed performance periods under the ConocoPhillips Performance Share Program.

Phillips 66 restricted stock, RSUs and options issued in this conversion became subject to the “Omnibus Stock and Performance Incentive Plan of Phillips 66” (the 2012 Plan) on the Separation Date, whether held by grantees working for Phillips 66 or grantees that remained employees of ConocoPhillips.

Some of these awards based on Phillips 66 stock and held by employees of ConocoPhillips are outstanding and appear in the activity tables for the Stock Option and the Performance Share Programs presented later in this note.

In May 2013, shareholders approved the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the P66 Omnibus Plan).

Subsequent to this approval, all new share-based awards are granted under the P66 Omnibus Plan, which authorizes the Human Resources and Compensation Committee (HRCC) of our Board of Directors to grant stock options, stock appreciation rights, stock awards (including restricted stock and RSU awards), cash awards, and performance awards to our employees, nonemployee directors and other plan participants.

The number of new shares that may be issued under the P66 Omnibus Plan to settle share-based awards may not exceed 45 million.

Share-based payment awards, including stock options, stock appreciation rights, stock awards (including restricted stock and RSU awards), cash awards, and performance awards, are granted to our employees, nonemployee directors and other plan participants by the Human Resources and Compensation Committee (HRCC) of our Board of Directors under the applicable Omnibus Stock and Performance Incentive Plan of Phillips 66.

Prior to May 11, 2022, share-based awards were granted under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the 2013 P66 Omnibus Plan).

On May 11, 2022, Phillips 66’s shareholders approved the 2022 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the 2022 P66 Omnibus Plan), which replaced the 2013 P66 Omnibus Plan.

No future awards will be made under the 2013 P66 Omnibus Plan.

As of December 31, 2022, approximately 15 million shares of Phillips 66’s common stock remained available to be issued to settle share-based awards under the 2022 P66 Omnibus Plan.

We recognize share-based compensation expense over the shorter of:

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2022 2021 2020

Share-based compensation expense $ 144 127 169

Income tax benefit ( 33 ) ( 35 ) ( 53 )

Index to Financial Statements

Restricted stock units $ 101 100 91

Performance share units 68 23 17

Stock options 17 19 17

Stock options granted under the provisions of the P66 Omnibus Plan and earlier plans permit purchases of our common stock at exercise prices equivalent to the average of the high and low market price of our stock on the date the options were granted.

The options have terms of 10 years and vest ratably, with one-third of the options becoming exercisable on each anniversary date for the three years following the date of grant.

Options awarded to employees eligible for retirement are not subject to forfeiture six months after the grant date.

The following table summarizes our stock option activity from January 1, 2021, to December 31, 2021:

Millions of Dollars

Options Weighted-Average

Exercise Price Weighted-Average

Fair Value Aggregate

Intrinsic Value

Outstanding at January 1, 2021 5,433,988 $ 78.49

Granted 1,475,100 75.23 $ 12.06

Forfeited ( 31,670 ) 81.61

Exercised ( 613,212 ) 42.26 $ 24

Outstanding at December 31, 2021 6,264,206 $ 81.25

Vested at December 31, 2021 4,194,413 $ 80.46 $ 7

Exercisable at December 31, 2021 3,896,406 $ 81.19 $ 7

The weighted-average remaining contractual terms of vested options and exercisable options at December 31, 2021, were 5.25 years and 4.91 years, respectively.

During 2021, we received $ 26 million in cash and realized an income tax benefit of $ 3 million from the exercise of options.

At December 31, 2021, the remaining unrecognized compensation expense from unvested options was $ 4 million, which will be recognized over a weighted-average period of 21 months, the longest period being 25 months.

The calculations of realized income tax benefits and weighted-average periods include awards based on both Phillips 66 and ConocoPhillips stock held by Phillips 66 employees.

During 2020 and 2019, we granted options with a weighted-average grant-date fair value of $ 15.80 and $ 17.58 , respectively.

During 2020 and 2019, employees exercised options with an aggregate intrinsic value of $ 21 million and $ 51 million, respectively.

The following table provides the significant assumptions used to calculate the grant-date fair values of options granted over the years shown below, as calculated using the Black-Scholes-Merton option-pricing model:

2021 2020 2019

Risk-free interest rate 0.93 % 1.58 2.68

Dividend yield 5.30 % 3.20 3.70

Volatility factor 32.11 % 25.23 25.61

Expected life (years) 6.76 6.96 7.06

We calculate the volatility factor using historical Phillips 66 end-of-week closing stock prices.

We periodically calculate the average period of time elapsed between grant dates and exercise dates of past grants to estimate the expected life of new option grants.

Total share-based compensation expense $ 210 144 127

Income tax benefit $ ( 55 ) ( 33 ) ( 35 )

Index to Financial Statements

Restricted Stock Units

Generally, RSUs are granted annually under the provisions of the P66 Omnibus Plan and cliff vest at the end of three years .

Generally, RSUs are granted annually under the provisions of the applicable Phillips 66 incentive plan and cliff vest at the end of three years .

The grant date fair value is equal to the average of the high and low market price of our stock on the grant date.

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Performance Share Units

Under the P66 Omnibus Plan, we annually grant to senior management restricted performance share units (PSUs) with three-year performance periods that vest when the HRCC approves the three-year performance results on the grant date.

PSUs granted under the P66 Omnibus Plan are classified as liability awards and compensation expense is recognized beginning on the authorization date and ending on the vesting date.

PSUs granted under the P66 Omnibus Plan are settled by cash payments equal to the fair value of the awards, which is based on the market prices of our stock near the end of the performance periods.

Under the applicable Phillips 66 incentive plan, senior management is annually awarded restricted performance share units (PSUs) with three-year performance periods.

These awards vest when the HRCC approves the three-year performance results, which represents the grant date.

PSUs granted under Phillips 66’s incentive plans are classified as liability awards and compensation expense is recognized beginning on the authorization date and ending on the vesting date.

PSUs granted under the applicable Phillips 66 incentive plan are settled by cash payments equal to the fair value of the awards, which is based on the market prices of our stock near the end of the performance periods.

The HRCC must approve the three-year performance results prior to payout.

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Not Vested at December 31, 2022 — $ —

At December 31, 2021, the remaining unrecognized compensation cost from unvested PSU awards was immaterial.

The calculations of unamortized expense and weighted-average periods include awards based on both Phillips 66 and ConocoPhillips stock held by Phillips 66 employees.

At December 31, 2022, there was no remaining unrecognized compensation cost from unvested PSU awards.

During 2021 and 2020, we granted PSUs with a weighted-average grant-date fair value of $ 68.18 and $ 112.73 , respectively.

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During 2021 and 2020, we cash settled PSUs with an aggregate fair value of $ 27 million and $ 63 million, respectively.

Stock Options

Stock options granted under the provisions of the applicable Phillips 66 incentive plan and earlier plans permit purchases of our common stock at exercise prices equivalent to the average of the high and low market price of our stock on the date the options were granted.

The options have terms of 10 years and vest ratably, with one-third of the options becoming exercisable on each anniversary date for the three years following the date of grant.

Options awarded to employees eligible for retirement are not subject to forfeiture six months after the grant date.

The following table summarizes our stock option activity from January 1, 2022, to December 31, 2022:

Millions of Dollars

Options Weighted-Average

Exercise Price Weighted-Average

Fair Value Aggregate

Intrinsic Value

Outstanding at January 1, 2022 6,264,206 $ 81.25

Granted 1,043,300 88.89 $ 17.02

Forfeited ( 28,123 ) 86.19

Exercised ( 1,436,468 ) 71.57 $ 42

Outstanding at December 31, 2022 5,842,915 $ 84.97

Vested at December 31, 2022 5,291,211 $ 85.09 $ 101

Exercisable at December 31, 2022 3,534,630 $ 86.08 $ 64

Index to Financial Statements

The weighted-average remaining contractual terms of vested options and exercisable options at December 31, 2022, were 6.47 years and 5.5 years, respectively.

During 2022, we received $ 103 million in cash and realized an income tax benefit of $ 8 million from the exercise of options.

At December 31, 2022, the remaining unrecognized compensation expense from unvested options was $ 5 million, which will be recognized over a weighted-average period of 22 months, the longest period being 30 months.

During 2021 and 2020, we granted options with a weighted-average grant-date fair value of $ 12.06 and $ 15.80 , respectively.

During 2021 and 2020, employees exercised options with an aggregate intrinsic value of $ 24 million and $ 21 million, respectively.

2022 2021 2020

Risk-free interest rate 1.97 % 0.93 1.58

Dividend yield 5.10 % 5.30 3.20

Volatility factor 33.67 % 32.11 25.23

Expected life (years) 6.61 6.76 6.96

We calculate the volatility factor using historical Phillips 66 end-of-week closing stock prices.

We periodically calculate the average period of time elapsed between grant dates and exercise dates of past grants to estimate the expected life of new option grants.

Other share-based compensation expense is primarily associated with the consolidation of DCP Midstream Class A Segment following the August 18, 2022, merger of DCP Midstream and Gray Oak Holdings.

Under DCP Midstream Class A Segment’s Long-Term Incentive Plan, phantom units, performance units and distribution equivalent rights are rewarded to key employees.

Equity-based compensation expense was $ 23 million for the period from August 18, 2022, through December 31, 2022.

At December 31, 2022, the remaining unrecognized compensation cost was $ 15 million, which will be recognized over a weighted-average period of 19 months, with the longest period being 33 months.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 4—Business Combination for additional information regarding the merger and associated accounting treatment.

Index to Financial Statements

Note 23— Income Taxes

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During the year ended December 31, 2020, in accordance with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, we recorded a tax benefit reflecting the carryback of a significant portion of our 2020 net operating loss to a year that had a 35% federal statutory income tax rate.

An income tax receivable of $ 1.5 billion was included in the “Accounts and notes receivable” line item on our consolidated balance sheet as of December 31, 2020.

We received a U.S.

federal income tax refund of $ 1.1 billion in the second quarter of 2021.

As of December 31, 2021, the remaining $ 400 million income tax receivable related to 2020 is no longer expected to be received in the next twelve months due to the estimated timing of IRS review procedures and certain elections we made when filing our 2020 income tax return.

During the year ended December 31, 2019, we recorded adjustments to the one-time deemed repatriation tax, which decreased our income tax expense by $ 42 million.

The adjustments were due to the issuance of additional guidance by the U.S.

Internal Revenue Service related to the Tax Act.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 (IRA) that includes, among other provisions, changes to the U.S.

corporate income tax system, including a 15% minimum tax based on adjusted financial statement income as defined in the IRA, which is effective after December 31, 2022.

We are continuing to evaluate the IRA and its requirements, as well as the application to our business.

Index to Financial Statements

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Investment in subsidiaries 1,974 969

Inventory — 77

Other 238 267

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Other financial accruals and deferrals 51 82

Inventory 62 —

Other 220 262

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Net deferred tax liabilities $ 6,582 5,442

At December 31, 2021, the loss and credit carryforward deferred tax assets were primarily related to a state tax net operating loss carryforward of $ 83 million;

a foreign tax credit carryforward in the United States of $ 67 million;

capital loss and net operating loss carryforwards in the United Kingdom of $ 11 million;

and a German interest deduction carryforward of $ 11 million.

State net operating loss carryforwards begin to expire in 2040 or have indefinite lives.

At December 31, 2022, the loss and credit carryforward deferred tax assets were primarily related to a foreign tax credit carryforward in the United States of $ 90 million;

a state tax net operating loss carryforward of $ 16 million;

and a capital loss and net operating loss carryforwards in the United Kingdom of $ 6 million.

State net operating loss carryforwards begin to expire in 2040.

Foreign tax credit carryforwards, which have a full valuation allowance against them, begin to expire in 2029.

The other loss and credit carryforwards, all of which relate to foreign operations, have indefinite lives.

The other loss and credit carryforwards, all of which relate to foreign operations, and have a full valuation allowance against them, have indefinite lives.

Valuation allowances have been established to reduce deferred tax assets to an amount that will, more likely than not, be realized.

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Reductions for tax positions of prior years ( 3 ) ( 2 ) ( 28 )

Settlements — — —

Balance at December 31 $ 54 54 56

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For the year ended December 31, 2021, state income tax, net of federal income tax benefit, includes a $ 58 million benefit, primarily to reflect the impact of updated apportionment factors.

There is no income tax reflected for the year ended December 31, 2021, in “Capital in Excess of Par” in the consolidated statement of changes in equity.

An income tax benefit of $ 1 million for the year ended December 31, 2020, and income tax expense of $ 123 million for the year ended December 31, 2019, is reflected in “Capital in Excess of Par.”

There is $ 323 million income tax benefit reflected for the year ended December 31, 2022 in “Capital in Excess of Par” in the consolidated statement of changes in equity.

There is no income tax reflected in “Capital in Excess of Par” for the year ended December 31, 2021, and income tax benefit of $ 1 million for the year ended December 31, 2020, is reflected in “Capital in Excess of Par.”

Index to Financial Statements

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Net current period other comprehensive income (loss) ( 153 ) 151 ( 4 ) ( 6 )

Income taxes reclassified to retained earnings** ( 93 ) 2 2 ( 89 )

Other — 5 — 5

December 31, 2020 ( 809 ) 25 ( 5 ) ( 789 )

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Net current period other comprehensive income (loss) 411 ( 70 ) 3 344

Other — 5 — 5

December 31, 2021 ( 398 ) ( 45 ) ( 2 ) ( 445 )

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See Note 21—Pension and Postretirement Plans, for additional information.

** As of January 1, 2019, stranded income taxes related to the enactment of the Tax Act in December 2017 were reclassified to retained earnings upon adoption of ASU No.

Index to Financial Statements

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Interest income $ 82 11 14

Unrealized investment gain—NOVONIX 365 — —

Unrealized investment gain (loss)—NOVONIX ( 433 ) 365 —

Gain related to merger of businesses 3,013 — —

Other, net* 75 78 52

$ 2,737 454 66

* Includes derivatives-related activities.

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2022 2021 2020

Operating revenues and other income (a) $ 3,759 1,932 2,977

Purchases (b) 14,645 6,536 11,726

Operating revenues and other income (a)(d) $ 6,111 3,759 1,932

Purchases (b)(d) 21,244 14,645 6,536

Operating expenses and selling, general and administrative expenses (c) 281 284 247

(a) We sold NGL, other petrochemical feedstocks and solvents to CPChem, NGL and certain feedstocks to DCP Midstream, gas oil and hydrogen feedstocks to Excel Paralubes (Excel), and refined petroleum products to several of our equity affiliates in the M&S segment, including OnCue and CF United.

(a) We sold NGL, other petrochemical feedstocks and solvents to CPChem, NGL and certain feedstocks to DCP Midstream, gas oil and hydrogen feedstocks to Excel Paralubes LLC (Excel Paralubes), and refined petroleum products to several of our equity affiliates in the M&S segment, including OnCue and CF United.

We also sold certain feedstocks and intermediate products to WRB and acted as an agent for WRB in supplying crude oil and other feedstocks for a fee.

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We also purchased natural gas and NGL from DCP Midstream and CPChem, as well as other feedstocks from various equity affiliates, for use in our refinery and fractionation processes.

In addition, we purchased base oils and fuel products from Excel for use in our specialty and refining businesses.

In addition, we purchased base oils and fuel products from Excel Paralubes for use in our specialty and refining businesses.

We paid NGL fractionation fees to CPChem.

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(d) As a result of the DCP Midstream and Gray Oak Holdings merger, we began consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills.

As a result, transactions with these parties after August 17, 2022, are not presented in the table above.

Index to Financial Statements

Note 28— Segment Disclosures and Related Information

Effective October 1, 2022, we changed the organizational structure of the internal financial information reviewed by our President and Chief Executive Officer, and determined this resulted in a change in the composition of our operating segments.

As part of the realignment, we moved the results and net assets of our Merey Sweeny vacuum distillation and delayed coker units at our Sweeny Refinery and the isomerization unit at our Lake Charles Refinery from our Midstream segment to our Refining segment.

Additionally, commissions charged to the Refining segment by the M&S segment related to sales of specialty products were eliminated and the costs of the sales organization were reclassified from the M&S segment to the Refining segment.

The segment realignment is presented for the year ended December 31, 2022, with prior periods recast for comparability.

Our operating segments are:

1) Midstream— Provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, processing and marketing services, mainly in the United States.

The Midstream segment includes our master limited partnership (MLP), Phillips 66 Partners, our 50 % equity investment in DCP Midstream, and our 16 % investment in NOVONIX.

1) Midstream— Provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, gathering, processing and marketing services, mainly in the United States.

As a result of the merger on August 17, 2022, we began consolidating DCP Midstream Class A Segment;

DCP Sand Hills and DCP Southern Hills.

On March 9, 2022, we also completed a merger between us and Phillips 66 Partners.

See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 30—Phillips 66 Partners LP for additional information on these transactions.

This segment also includes our 16 % investment in NOVONIX.

2) Chemicals— Consists of our 50 % equity investment in CPChem, which manufactures and markets petrochemicals and plastics on a worldwide basis.

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4) Marketing and Specialties— Purchases for resale and markets refined petroleum products and renewable fuels, mainly in the United States and Europe.

In addition, this segment includes the manufacturing and marketing of specialty products.

Corporate and Other includes general corporate overhead, interest expense, our investment in new technologies and various other corporate activities.

In addition, this segment includes the manufacturing and marketing of base oils and lubricants.

Corporate and Other includes general corporate overhead, interest expense, our investment in research of new technologies and various other corporate activities.

Corporate assets include all cash, cash equivalents and income tax-related assets.

Corporate and Other also includes restructuring costs related to our business transformation.

See Note 31—Restructuring for additional information regarding restructuring costs.

Intersegment sales are at prices that we believe approximate market.

80 unchanged sentences

Worldwide consolidated $ 50,113 36,906 37,340

Note 29— DCP Midstream Class A Segment

DCP Midstream Class A Segment is a VIE and we are the primary beneficiary.

DCP Midstream Class A Segment is comprised of the businesses, activities, assets and liabilities of DCP LP and its subsidiaries and its general partner entities.

Refer to Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 4—Business Combination, for more details on the DCP Midstream and Gray Oak Holdings merger transaction and related accounting.

DCP LP, headquartered in Denver, Colorado, is a publicly traded MLP whose operations currently include producing and fractionating NGL, gathering, compressing, treating and processing natural gas;

recovering condensate;

and transporting, trading, marketing and storing natural gas and NGL.

As a result of our consolidation of DCP Midstream Class A Segment, the public common and preferred unitholders’ ownership interests and Enbridge’s indirect economic interest in DCP LP are reflected as noncontrolling interests in our consolidated financial statements.

At December 31, 2022, we held a 43.31 % indirect economic interest in DCP LP.

Index to Financial Statements

Note 27— Phillips 66 Partners LP

Phillips 66 Partners, headquartered in Houston, Texas, is a publicly traded MLP formed in 2013, which owns and operates primarily fee-based midstream assets.

Phillips 66 Partners’ operations consist of crude oil, refined petroleum product and NGL transportation, fractionation, processing, terminaling and storage assets.

On August 1, 2019, Phillips 66 Partners completed a restructuring transaction to eliminate the IDRs held by us and convert our 2 % economic general partner interest into a noneconomic general partner interest in exchange for 101 million Phillips 66 Partners common units.

As a result of the restructuring transaction, the balance of “Noncontrolling interests” in our consolidated balance sheet decreased $ 373 million, with a $ 275 million increase to “Capital in excess of par,” a $ 91 million increase in “Deferred income taxes” and $ 7 million of transaction costs.

No distributions were made for the general partner interest after August 1, 2019.

At December 31, 2021, we owned 170 million Phillips 66 Partners common units, representing a 74 % limited partner interest, while the public owned a 26 % limited partner interest and 13.5 million perpetual convertible preferred units.

Prior to October 2020, holders of the preferred units received cumulative quarterly distributions equal to $ 0.678375 per unit.

Beginning in October 2020, holders receive quarterly distributions equal to the greater of $ 0.678375 per unit or the per-unit distribution paid to common unitholders.

In June 2021, Phillips 66 Partners repurchased 368,528 of its outstanding perpetual convertible preferred units for $ 24 million in cash.

Upon the repurchase, these preferred units were canceled and are no longer outstanding.

We consolidate Phillips 66 Partners because we determined it is a VIE of which we are the primary beneficiary.

As general partner of Phillips 66 Partners, we have the ability to control its financial interests, as well as the ability to direct the activities that most significantly impact its economic performance.

As a result of this consolidation, the public common and perpetual convertible preferred unitholders’ ownership interests in Phillips 66 Partners are reflected as noncontrolling interests of $ 2,169 million and $ 2,219 million on our consolidated balance sheet at December 31, 2021 and 2020, respectively.

The most significant assets of Phillips 66 Partners that are available to settle only its obligations, along with its most significant liabilities for which its creditors do not have recourse to Phillips 66’s general credit, were:

The most significant assets of DCP Midstream Class A Segment that are available to settle only its obligations, along with its most significant liabilities for which its creditors do not have recourse to Phillips 66’s general credit, were:

Millions of Dollars

December 31, 2022

Equity investments* $ 2,929 3,244

Accounts receivable, trade* $ 988

Net properties, plants and equipment 9,297

Investments in unconsolidated affiliates** 2,161

Accounts payable 1,239

Short-term debt 504

Long-term debt 4,248

* Included in “Investments and long-term receivables” line item on the Phillips 66 consolidated balance sheet.

Phillips 66 Partners has authorized an aggregate of $ 750 million under three $ 250 million continuous offerings of common units, or at-the-market (ATM) programs.

The first two programs concluded in June 2018 and December 2019, respectively.

Phillips 66 Partners did no t issue any common units under the ATM program for the year ended December 31, 2021.

For the years ended December 31, 2020 and 2019, on a settlement-date basis, Phillips 66 Partners generated net proceeds of $ 2 million and $ 173 million, respectively, from common units issued under the ATM programs.

* Included in the “Accounts and notes receivable” line item on the Phillips 66 consolidated balance sheet.

** Included in the “Investments and long-term receivables” line item on the Phillips 66 consolidated balance sheet.

Preferred Units

DCP LP’s preferred units rank senior to its common units with respect to distribution rights and rights upon liquidations.

Holders of DCP LP’s preferred units have no voting rights except for certain limited protective voting rights.

Distributions on the preferred units are payable out of DCP LP’s available cash, are accretive and are cumulative from the date of original issuance of the preferred units.

DCP LP redeemed its Series A preferred units with an aggregate liquidation preference of $ 500 million in December 2022.

Distributions on the Series B preferred units are payable quarterly in arrears in March, June, September and December of each year.

Distributions on the Series C preferred units are payable quarterly in arrears in January, April, July and October of each year.

Since August 18, 2022, DCP LP made cash distributions of $ 19 million to Series A preferred unitholders, $ 6 million to Series B preferred unitholders and $ 2 million to Series C preferred unitholders.

As of December 31, 2022, DCP LP had 6,450,000 Series B preferred units outstanding with an aggregate liquidation preference of approximately $ 161 million and 4,400,000 Series C preferred units outstanding with an aggregate liquidation preference of $ 110 million.

The Series B and C preferred units are publicly traded.

As of December 31, 2022, DCP LP had approximately 208 million of common units outstanding, of which approximately 90 million were publicly held.

In addition, Enbridge holds a 23.36 % economic interest in the approximately 118 million common units held by DCP Midstream Class A Segment.

Since August 18, 2022, DCP LP made cash distributions of $ 51 million to common unit holders other than Phillips 66.

DCP LP Public Common Unit Acquisition Agreement

On January 5, 2023, we entered into a definitive agreement with DCP LP, its subsidiaries and its general partner entities, pursuant to which one of our wholly owned subsidiaries will merge with and into DCP LP, with DCP LP surviving as a Delaware limited partnership.

Under the terms of the agreement, at the effective time of the merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP LP and DCP Midstream GP, LP) issued and outstanding as of immediately prior to the effective time will be converted into the right to receive $ 41.75 per common unit in cash, without interest.

The merger will increase our economic interest in DCP LP from 43.31 % to 86.8 %.

The transaction is expected to close in the second quarter of 2023, subject to customary closing conditions.

If the merger is successfully completed, we will pay approximately $ 3.8 billion in cash consideration, which we expect to fund through a combination of cash generated from operating activities and debt.

The transaction was unanimously approved by the board of the general partner of DCP LP, based on the unanimous approval and recommendation of its special committee comprised entirely of independent directors after evaluation of the transaction by the special committee in consultation with independent financial and legal advisors.

Concurrently with the execution of the agreement, affiliates of Phillips 66, which together own greater than a majority of the outstanding DCP LP common units, delivered their consent to approve the transaction.

As a result, DCP LP has not solicited and is not soliciting approval of the transaction by any other holders of DCP LP common units.

Index to Financial Statements

Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including our Sweeny Refinery.

Phillips 66 Partners has a consolidated holding company that owns 65 % of Gray Oak Pipeline, LLC.

Note 30— Phillips 66 Partners LP

On March 9, 2022, we completed a merger between us and Phillips 66 Partners.

The merger resulted in the acquisition of all limited partnership interests in Phillips 66 Partners not already owned by us in exchange for 41.8 million shares of Phillips 66 common stock issued from treasury stock.

Phillips 66 Partners common unitholders received 0.50 shares of Phillips 66 common stock for each outstanding Phillips 66 Partners common unit.

Phillips 66 Partners’ perpetual convertible preferred units were converted into common units at a premium to the original issuance price prior to being exchanged for Phillips 66 common stock.

Upon closing, Phillips 66 Partners became a wholly owned subsidiary of Phillips 66 and its common units are no longer publicly traded.

The merger was accounted for as an equity transaction and resulted in decreases to “Treasury stock” of $ 3,380 million, “Noncontrolling interests” of $ 2,163 million, “Capital in excess of par” of $ 901 million, “Deferred income taxes” of $ 323 million, and “Cash and cash equivalents” of $ 2 million, and an increase to “Other accruals” of $ 5 million on our consolidated balance sheet.

Gray Oak Pipeline was formed to develop and construct a pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including our Sweeny Refinery.

Phillips 66 Partners had a consolidated holding company that owned 65 % of Gray Oak Pipeline.

In December 2018, a third party acquired a 35 % interest in the holding company.

Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during the construction of the Gray Oak Pipeline, the legal sale of the 35 % interest did not qualify as a sale under GAAP at that time.

The Gray Oak Pipeline commenced full operations in the second quarter of 2020, and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP.

Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during construction of the pipeline, the legal sale of the 35 % interest did not qualify as a sale under GAAP at that time.

The pipeline commenced full operations in the second quarter of 2020, and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP.

Accordingly, at June 30, 2020, the co-venturer’s 35 % interest in the holding company was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet, and the premium of $ 84 million previously paid by the co-venturer in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of operations.

For the year ended December 31, 2020, the co-venturer contributed an aggregate of $ 61 million to the holding company to fund its portion of Gray Oak Pipeline, LLC’s cash calls.

Phillips 66 Partners’ effective ownership interest in Gray Oak Pipeline, LLC is 42.25 %, after considering the co-venturer’s 35 % interest in the consolidated holding company.

See Note 6—Investments, Loans and Long-Term Receivables, for further discussion regarding Phillips 66 Partners’ investment in Gray Oak Pipeline, LLC, as well as certain other joint ventures.

Pending Merger

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66 Partners to acquire all of the limited partner interests in Phillips 66 Partners not already owned by us on the closing date of the transaction.

The agreement provides for an all-stock transaction in which each outstanding Phillips 66 Partners common unitholder would receive 0.50 shares of Phillips 66 common stock for each Phillips 66 Partners common unit.

Phillips 66 Partners’ perpetual convertible preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock.

This merger is expected to close in March 2022, subject to customary closing conditions.

If the merger is successfully completed, based on the closing market prices of Phillips 66 common stock and Phillips 66 Partners common units on December 31, 2021, we would issue approximately 44 million shares of Phillips 66 common stock with a value of approximately $ 3.2 billion to Phillips 66 Partners’ public unitholders following completion of the merger.

The number of shares of common stock we will issue and the value of those shares are subject to change until the merger is closed.

Upon closing, Phillips 66 Partners will become a wholly owned subsidiary of Phillips 66 and will no longer be a publicly traded partnership.

This transaction will be accounted for as an equity transaction and after the closing we will no longer reflect the ownership interest previously held by Phillips 66 Partners’ publicly held common and perpetual convertible preferred unitholders as noncontrolling interests on our consolidated balance sheet nor will we attribute a portion of Phillips 66 Partners’ net income to these former unitholders on our consolidated statement of operations.

Note 31— Restructuring

In April 2022, we announced that we are progressing a multi-year business transformation focused on enterprise-wide opportunities to improve our cost structure.

For the year ended December 31, 2022, we recorded restructuring costs totaling $ 160 million, primarily related to consulting fees, severance and an impairment related to assets held for sale.

These costs are primarily recorded in the “Selling, general and administrative expenses” and “Impairments” line items on our consolidated statement of operations and are reported in our Corporate segment.

In addition, in the fourth quarter of 2022, we recorded severance-related restructuring costs of $ 18 million associated with the integration of DCP Midstream Class A Segment.

These costs are primarily recorded in the “Selling, general and administrative expenses” line item on our consolidated statement of operations and are reported in our Midstream segment.

Note 32— New Accounting Standards

In September 2022, the FASB issued ASU 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.” This ASU requires the buyer in a supplier finance program to disclose qualitative and quantitative information about the program.

This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

We do not anticipate the adoption of this ASU having a material impact on our consolidated financial statements.

Index to Financial Statements

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What changed 10-K

Item 8. Financial Statements and Supplementary Data