What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 175 added, 138 removed, 801 unchanged (28% of the section changed)

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

2 unchanged sentences

Equity in earnings of affiliates 562 782 1,736 2,384

Net gain (loss) on dispositions ( 12 ) — 22 1

Other income (loss) 99 ( 185 ) 147 ( 328 )

Net gain on dispositions 102 1 124 2

Other income 15 3,026 162 2,698

Total Revenues and Other Income 40,322 48,764 111,151 134,795

8 unchanged sentences

Interest and debt expense 221 158 679 426

Foreign currency transaction losses 2 21 27 19

Foreign currency transaction (gains) losses ( 12 ) 5 15 24

Total Costs and Expenses 37,509 41,606 103,443 122,703

14 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

10 unchanged sentences

Foreign currency translation adjustments, net of income taxes ( 114 ) ( 301 ) 60 ( 625 )

Income taxes on hedging activities — — — —

Hedging activities, net of income taxes — — — —

Other Comprehensive Income (Loss), Net of Income Taxes ( 113 ) ( 261 ) 75 ( 549 )

49 unchanged sentences

Millions of Dollars

Six Months Ended

Nine Months Ended

Cash Flows From Operating Activities

8 unchanged sentences

Net gain on dispositions ( 124 ) ( 2 )

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

Unrealized investment loss 34 418

32 unchanged sentences

Millions of Dollars

Three Months Ended June 30

Three Months Ended September 30

Attributable to Phillips 66

1 unchanged sentence

Other Comprehensive Loss Noncontrolling Interests Total

March 31, 2023 $ 7 19,795 ( 16,083 ) 26,903 ( 373 ) 4,667 34,916

June 30, 2023 $ 7 19,463 ( 17,422 ) 28,122 ( 272 ) 1,162 31,060

Net income — — — 2,097 — 46 2,143

Other comprehensive income — — — — 101 — 101

Other comprehensive loss — — — — ( 113 ) — ( 113 )

Dividends paid on common stock ($ 1.05 per share)

4 unchanged sentences

Acquisition of noncontrolling interests in DCP Midstream, LP — 17 — — — ( 25 ) ( 8 )

September 30, 2023 $ 7 19,603 ( 18,155 ) 29,751 ( 385 ) 1,168 31,989

June 30, 2022 $ 7 19,717 ( 13,802 ) 19,087 ( 733 ) 297 24,573

March 31, 2022 $ 7 19,667 ( 13,736 ) 16,391 ( 514 ) 306 22,121

Net income — — — 5,391 — 149 5,540

5 unchanged sentences

Distributions to noncontrolling interests — — — — — ( 3 ) ( 3 )

Acquisition of noncontrolling interest in Phillips 66 Partners LP — ( 32 ) — — — — ( 32 )

June 30, 2022 $ 7 19,717 ( 13,802 ) 19,087 ( 733 ) 297 24,573

Three Months Ended June 30

Merger of DCP Midstream, LLC and Gray Oak Holdings LLC — — — — — 4,633 4,633

September 30, 2022 $ 7 19,738 ( 14,526 ) 24,008 ( 994 ) 5,076 33,309

Three Months Ended September 30

Common Stock Issued Treasury Stock

March 31, 2023 653,266,184 194,403,868

June 30, 2023 653,361,255 208,073,327

Repurchase of common stock — 6,523,145

Shares issued—share-based compensation 1,190,792 —

September 30, 2023 654,552,047 214,596,472

June 30, 2022 651,697,833 170,646,736

March 31, 2022 651,046,617 169,946,591

Repurchase of common stock — 8,565,824

Shares issued—share-based compensation 146,940 —

June 30, 2022 651,697,833 170,646,736

September 30, 2022 651,844,773 179,212,560

See Notes to Consolidated Financial Statements.

Millions of Dollars

Six Months Ended June 30

Nine Months Ended September 30

Attributable to Phillips 66

10 unchanged sentences

Acquisition of noncontrolling interests in DCP Midstream, LP — ( 361 ) — — — ( 3,504 ) ( 3,865 )

June 30, 2023 $ 7 19,463 ( 17,422 ) 28,122 ( 272 ) 1,162 31,060

September 30, 2023 $ 7 19,603 ( 18,155 ) 29,751 ( 385 ) 1,168 31,989

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

7 unchanged sentences

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

June 30, 2022 $ 7 19,717 ( 13,802 ) 19,087 ( 733 ) 297 24,573

Six Months Ended June 30

Merger of DCP Midstream, LLC and Gray Oak Holdings LLC — — — — — 4,633 4,633

September 30, 2022 $ 7 19,738 ( 14,526 ) 24,008 ( 994 ) 5,076 33,309

Nine Months Ended September 30

Common Stock Issued Treasury Stock

2 unchanged sentences

Shares issued—share-based compensation 2,178,402 —

June 30, 2023 653,361,255 208,073,327

September 30, 2023 654,552,047 214,596,472

December 31, 2021 650,026,318 211,771,827

2 unchanged sentences

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

June 30, 2022 651,697,833 170,646,736

September 30, 2022 651,844,773 179,212,560

See Notes to Consolidated Financial Statements.

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Therefore, these interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2022 Annual Report on Form 10-K.

The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the results expected for the full year.

The results of operations for the three and nine months ended September 30, 2023, are not necessarily indicative of the results expected for the full year.

Note 2— Change in Accounting Principle

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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 DCP Midstream Merger.

As a result, our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased to 62.2 % from 52.2 %.

As a result of the DCP Midstream Merger, our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased from 52.2 % to 62.2 %.

Starting on August 18, 2022, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills and reporting the direct and indirect economic interests held by others in these entities as noncontrolling interests on our financial statements.

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See Note 21—DCP Midstream Class A Segment, for additional information regarding our variable interest in DCP Midstream Class A Segment.

DCP LP Merger

DCP Midstream, LP Merger (DCP LP Merger)

On June 15, 2023, we completed the acquisition of all publicly held common units of DCP LP pursuant to the terms of the Agreement and Plan of Merger, dated as of January 5, 2023 (DCP LP Merger Agreement).

2 unchanged sentences

We accounted for the DCP LP Merger as an equity transaction.

The DCP LP Merger increased our economic interest in DCP LP from 43.3 % to 86.8 %.

The DCP LP Merger increased our aggregate direct and indirect economic interest in DCP LP from 43.3 % to 86.8 % and our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased from 62.2 % to 91.2 %.

See Note 21—DCP Midstream Class A Segment, for additional information regarding the equity transaction.

Note 4— Business Combinations

Marketing and Specialties Acquisition

On August 1, 2023, our M&S segment acquired a marketing business on the U.S.

West Coast for total consideration of $ 269 million.

These operations were acquired to support the placement of renewable diesel that will be produced by our Rodeo renewable fuels facility.

At September 30, 2023, we provisionally recorded $ 143 million of amortizable intangible assets, primarily customer relationships;

$ 77 million of PP&E, including finance lease right of use assets;

$ 42 million of net working capital;

$ 63 million of finance lease liabilities and $ 70 million of goodwill for this acquisition.

The fair values of the assets acquired and liabilities assumed are preliminary and subject to change until we finalize our accounting for this acquisition.

DCP Midstream Merger

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

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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, DCP Midstream 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 properties, plants and equipment (PP&E), investments in unconsolidated affiliates accounted for under the equity method, inventories, identifiable intangible assets, leases, financial instruments, asset retirement and environmental obligations, legal and tax 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 DCP Midstream Merger.

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

The following table shows the preliminary purchase price allocation as of the date of the DCP Midstream Merger, and cumulative adjustments we have made as of June 30, 2023:

The aggregate purchase consideration noted above was allocated to the assets acquired and liabilities assumed of the entities consolidated based upon their estimated fair values as of the DCP Midstream Merger on August 17, 2022.

We finalized the valuation of the assets acquired and liabilities assumed during the three months ended September 30, 2023, prior to the end of the one-year measurement period on August 16, 2023.

The following table shows the purchase price allocation as of the date of the DCP Midstream Merger, and cumulative adjustments we have made through the end of the measurement period:

Millions of Dollars

25 unchanged sentences

Total merger consideration $ 4,891 — 4,891

The adjustments reflected in the table above include reclassification adjustments we have made to the preliminary purchase price allocation to conform with our historical presentation and adjustments we have made to the estimated fair value of certain assets acquired and liabilities assumed.

The adjustments recorded in the six months ended June 30, 2023, were not material.

Marketing and Specialties Acquisition

On August 1, 2023, we acquired certain marketing operations on the U.S.

West Coast for cash consideration of approximately $ 260 million plus an adjustment for net working capital.

The adjustments reflected in the table above include reclassification adjustments we made to the purchase price allocation to conform with our historical presentation and adjustments we have made to the estimated fair value of certain assets acquired and liabilities assumed during the measurement period.

The adjustments to our purchase price allocation recorded in the nine months ended September 30, 2023, were not material.

See Note 15—Fair Value Measurements, for additional information on the determination of the fair value of the DCP Midstream Merger.

In connection with the DCP Midstream Merger, we recognized before-tax gains totaling $ 2,831 million from remeasuring our previously held equity investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills 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.

These before-tax gains are included in the “Other income” line item on our consolidated statement of income for the three and nine months ended September 30, 2022, and are reported in the Midstream segment.

See Note 15—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.

Pro Forma Financial Information

The following unaudited pro forma financial information presents consolidated results for the three and nine months ended September 30, 2022, as if assuming the DCP Midstream Merger occurred on January 1, 2021.

The unaudited pro forma information includes adjustments based on available information, and we believe the estimates and assumptions used are reasonable and that 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 nine months ended September 30, 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 DCP Midstream 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 financial information presented is for comparative purposes only and does not give effect to any potential synergies that could be achieved and is not necessarily indicative of the results of future operations.

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Sales and other operating revenues ( millions )

$ 46,892 136,848

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 )

Note 5— Sales and Other Operating Revenues

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

16 unchanged sentences

Contract-Related Assets and Liabilities

At June 30, 2023, and December 31, 2022, receivables from contracts with customers were $ 7,633 million and $ 8,749 million, respectively.

At September 30, 2023, and December 31, 2022, receivables from contracts with customers were $ 10,137 million and $ 8,749 million, respectively.

Significant noncustomer balances, such as buy/sell receivables and excise tax receivables, were excluded from these amounts.

1 unchanged sentence

An incentive payment is initially recognized as an asset and subsequently amortized as a reduction to revenue over the contract term, which generally ranges from 5 to 15 years.

At June 30, 2023, and December 31, 2022, our asset balances related to such payments were $ 525 million and $ 505 million, respectively.

At September 30, 2023, and December 31, 2022, our asset balances related to such payments were $ 527 million and $ 505 million, respectively.

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

At June 30, 2023, and December 31, 2022, contract liabilities were $ 221 million and $ 156 million, respectively.

At September 30, 2023, and December 31, 2022, contract liabilities were $ 228 million and $ 156 million, respectively.

Remaining Performance Obligations

2 unchanged sentences

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

At June 30, 2023, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 416 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 June 30, 2023.

At September 30, 2023, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 391 million.

Note 6— Credit Losses

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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 June 30, 2023, and December 31, 2022, we reported $ 9,458 million and $ 10,985 million of accounts and notes receivable, respectively, net of allowances of $ 68 million and $ 67 million, respectively.

Based on an aging analysis at June 30, 2023, more than 95 % of our accounts receivable were outstanding less than 60 days.

At September 30, 2023, and December 31, 2022, we reported $ 11,976 million and $ 10,985 million of accounts and notes receivable, respectively, net of allowances of $ 71 million and $ 67 million, respectively.

Based on an aging analysis at September 30, 2023, more than 95 % of our accounts receivable were outstanding less than 60 days.

We are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt and standby letters of credit.

7 unchanged sentences

$ 5,732 3,276

Inventories valued on the last-in, first-out (LIFO) basis totaled $ 5,799 million and $ 2,635 million at June 30, 2023, and December 31, 2022, respectively.

The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $ 5.4 billion and $ 6.3 billion at June 30, 2023, and December 31, 2022, respectively.

Inventories valued on the last-in, first-out (LIFO) basis totaled $ 5,140 million and $ 2,635 million at September 30, 2023, and December 31, 2022, respectively.

The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $ 7.7 billion and $ 6.3 billion at September 30, 2023, and December 31, 2022, respectively.

Certain planned reductions in inventory that are not expected to be replaced by the end of the year cause liquidations of LIFO inventory values.

LIFO inventory liquidations increased our net income by $ 1 million and $ 5 million in the three and six months ended June 30, 2023, respectively.

LIFO inventory liquidations increased our net income by $ 3 million and $ 43 million in the three and six months ended June 30, 2022, respectively .

LIFO inventory liquidations increased our net income by $ 11 million and $ 16 million in the three and nine months ended September 30, 2023, respectively.

The impact of LIFO inventory liquidations was immaterial for the three months ended September 30, 2022 and increased our net income by $ 43 million in the nine months ended September 30, 2022 .

Note 8— Investments, Loans and Long-Term Receivables

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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.

The trial 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.

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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.

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

Therefore, the requirement to prepare the EIS stood.

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 the third quarter of 2023.

The draft EIS process resumed in August 2022, and in September 2023 the USACE published its draft EIS for public comment.

The USACE identified five potential outcomes, but did not indicate which one it preferred.

The options comprise two “no action” alternatives where the USACE would deny an easement to Dakota Access and require it to shut down the pipeline and either remove the pipe from under Lake Oahe, or allow the pipeline to be abandoned-in-place under the lake.

The USACE also identified three “action” alternatives;

two of them contemplate that the USACE would reissue the easement to Dakota Access under essentially the same terms as 2017 with either the same or a larger volume of oil allowed through the pipeline, while the third option would decommission the current pipeline and require construction of a new line 39 miles upstream from the current location.

Although the USACE has not indicated when it will issue its final decision, no decision is expected until 2024.

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

1 unchanged sentence

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 June 30, 2023, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $ 1.85 billion.

At September 30, 2023, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $ 1.85 billion.

In conjunction with the notes offering, Phillips 66 Partners LP (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.

At June 30, 2023, 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 June 30, 2023.

At June 30, 2023, the aggregate book value of our investments in Dakota Access and ETCO was $ 651 million.

At September 30, 2023, our 25 % share of the maximum potential equity contributions under the CECU was approximately $ 467 million.

If the pipeline is required to cease operations, it may have a material adverse effect on our results of operations and cash flows.

Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also 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 September 30, 2023.

At September 30, 2023, the aggregate book value of our investments in Dakota Access and ETCO was $ 644 million.

CF United LLC (CF United)

1 unchanged sentence

CF United is considered a VIE because our co-venturer has an option to require us to purchase its interest based on a fixed multiple.

The put option becomes effective July 1, 2023, and expires on March 31, 2024.

The put option is viewed as a variable interest as the purchase price on the exercise date may not represent the then-current fair value of CF United.

The put option became effective July 1, 2023, and expires on March 31, 2024.

Based on current conditions, we do not believe the put option will be exercised during the option period.

However, the put option is viewed as a variable interest as the purchase price on the exercise date may not represent the then-current fair value of CF United.

We have determined that we are not the primary beneficiary because we and our co-venturer jointly direct the activities of CF United that most significantly impact economic performance.

At June 30, 2023, our maximum exposure to loss was comprised of our $ 283 million investment in CF United, and any potential future loss resulting from the put option should the purchase price based on a fixed multiple exceed the then-current fair value of CF United.

At September 30, 2023, our maximum exposure to loss was comprised of our $ 282 million investment in CF United, and any potential future loss resulting from the put option should the purchase price based on a fixed multiple exceed the then-current fair value of CF United.

OnCue Holdings, LLC (OnCue)

3 unchanged sentences

We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact economic performance.

At June 30, 2023, our maximum exposure to loss was $ 220 million, which represented the book value of our investment in OnCue of $ 153 million and guaranteed debt obligations of $ 67 million.

DCP Midstream, DCP Sand Hills, DCP Southern Hills, and Gray Oak Pipeline —Prior to the DCP Midstream Merger, we held:

At September 30, 2023, our maximum exposure to loss was $ 228 million, which represented the book value of our investment in OnCue of $ 162 million and guaranteed debt obligations of $ 66 million.

DCP Midstream, DCP Sand Hills, DCP Southern Hills, and Gray Oak Pipeline —Prior to the DCP Midstream Merger 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.

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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.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for additional information about the DCP Midstream Merger.

Midstream Investment Disposition

On August 1, 2023, we sold our 25 % ownership interest in the South Texas Gateway Terminal for approximately $ 275 million.

At June 30, 2023, the book value of our investment was $ 171 million.

On August 1, 2023, we sold our 25 % ownership interest in the South Texas Gateway Terminal for $ 275 million and recognized a before-tax gain of $ 101 million.

The before-tax gain is included in the “Net gain on dispositions” line item on our consolidated statement of income for the three and nine months ended September 30, 2023, and is reported in the Midstream segment.

Other Investments

3 unchanged sentences

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 losses, is recorded in the “Other income (loss)” line item of our consolidated statement of income, while changes due to foreign currency fluctuations are recorded in the “Foreign currency transaction losses” line item on our consolidated statement of income.

The fair value of our investment in NOVONIX was $ 51 million at June 30, 2023.

The fair value of our investment in NOVONIX declined by $ 15 million and $ 27 million during the three and six months ended June 30, 2023, respectively, reflecting unrealized investment losses of $ 15 million and $ 26 million and immaterial unrealized foreign currency losses in both periods.

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

The fair value of our investment in NOVONIX was $ 42 million at September 30, 2023.

The fair value of our investment in NOVONIX declined by $ 9 million and $ 36 million during the three and nine months ended September 30, 2023, respectively, reflecting unrealized investment losses of $ 8 million and $ 34 million and immaterial unrealized foreign currency losses in both periods.

The fair value of our investment in NOVONIX declined by $ 33 million and $ 431 million during the three and nine months ended September 30, 2022, respectively, reflecting unrealized investment losses of $ 28 million and $ 418 million and unrealized foreign currency losses of $ 5 million and $ 13 million, respectively.

See Note 15—Fair Value Measurements, for additional information regarding the recurring fair value measurement of our investment in NOVONIX.

3 unchanged sentences

Millions of Dollars

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Midstream $ 26,016 4,169 21,847 25,422 3,524 21,898

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

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On May 19, 2023, DCP LP redeemed its 5.850 % junior subordinated notes due May 2043 with an aggregate principal amount outstanding of $ 550 million using borrowings under its revolving credit and accounts receivable securitization facilities.

On the date of redemption, our carrying value of DCP LP’s junior subordinated notes was $ 497 million, which resulted in a $ 53 million loss before income taxes.

On the date of redemption, our carrying value of DCP LP’s junior subordinated notes was $ 497 million, which resulted in a $ 53 million before-tax loss.

DCP LP’s junior subordinated notes were adjusted to fair value on August 17, 2022, in connection with the consolidation of DCP LP.

See Note 15—Fair Value Measurements, for additional information regarding the preliminary fair value of DCP LP’s junior subordinated notes.

See Note 15—Fair Value Measurements, for additional information regarding the fair value of DCP LP’s junior subordinated notes.

On March 29, 2023, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, issued $ 1.25 billion aggregate principal amount of senior unsecured notes consisting of:

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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.

Related Party Advance Term Loan Agreement

On May 31, 2023, we borrowed $ 75 million from WRB Refining LP (WRB) through an Advance Term Loan Agreement.

The debt matures on May 31, 2038.

Borrowings will bear interest at a floating rate of 1.042 % plus Adjusted Term SOFR, payable on the last day of each month.

Related Party Advance Term Loan Agreements

At September 30, 2023, and December 31, 2022, borrowings outstanding under Advance Term Loan agreements with WRB Refining LP (WRB) totaled $ 290 million and $ 25 million, respectively.

Borrowings under these agreements are due between 2035 and 2038 and bear interest at a floating rate based on Adjusted Term SOFR plus an applicable margin, payable on the last day of each month.

Term Loan Agreement

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or (b) the reference rate plus the applicable margin, as defined in the Term Loan Agreement.

As of June 30, 2023, $ 1.25 billion was borrowed under the Term Loan Agreement, which matures in June 2026.

At September 30, 2023, $ 1.25 billion was borrowed under the Term Loan Agreement, which matures in June 2026.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for additional information regarding the DCP LP Merger.

1 unchanged sentence

Phillips 66 and Phillips 66 Company

On June 23, 2022, we entered into a $ 5 billion revolving credit facility with Phillips 66 Company as the borrower and Phillips 66 as the guarantor.

At both June 30, 2023, and December 31, 2022, no amount had been drawn under the $ 5 billion revolving credit facility or $ 5 billion uncommitted commercial paper program.

We have a $ 5 billion revolving credit facility with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a $ 5 billion commercial paper program with Phillips 66 as the borrower that is supported by the revolving credit facility.

At both September 30, 2023, and December 31, 2022, no amount had been drawn under the $ 5 billion revolving credit facility or $ 5 billion uncommitted commercial paper program.

DCP Midstream Class A Segment

At June 30, 2023, DCP LP had $ 850 million of borrowings outstanding under its $ 1.4 billion credit facility and $ 2 million of letters of credit had been issued that supported the credit facility.

At September 30, 2023, DCP LP had $ 110 million of borrowings outstanding under its $ 1.4 billion credit facility and $ 2 million of letters of credit had been issued that are supported by the credit facility.

At December 31, 2022, DCP LP had no borrowings outstanding under its $ 1.4 billion credit facility, and $ 10 million in letters of credit had been issued that are supported by the credit facility.

As of June 30, 2023, and December 31, 2022, $ 280 million and $ 40 million of borrowings, respectively, were outstanding under DCP LP’s accounts receivable securitization facility, which are secured by its accounts receivable at DCP Receivables LLC.

At September 30, 2023, and December 31, 2022, $ 350 million and $ 40 million of borrowings, respectively, were outstanding under DCP LP’s accounts receivable securitization facility, which are secured by its accounts receivable at DCP Receivables LLC.

Note 12— Guarantees

At June 30, 2023, we were liable for certain contingent obligations under various contractual arrangements as described below.

At September 30, 2023, we were liable for certain contingent obligations under various contractual arrangements as described below.

We recognize a liability for the fair value of our obligation as a guarantor for newly issued or modified guarantees.

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Under the operating lease agreement for our headquarters facility in Houston, Texas, we have the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale.

We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $ 514 million at June 30, 2023.

We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $ 514 million at September 30, 2023.

We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $ 164 million.

These leases have remaining terms of four to ten years .

These leases have remaining terms of one to ten years .

Guarantees of Joint Venture Obligations

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

At June 30, 2023, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to two years .

At September 30, 2023, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to two years .

The maximum potential future exposures under these guarantees were approximately $ 90 million.

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The majority of these indemnifications are related to environmental issues, which generally have indefinite terms and potentially unlimited exposure.

At June 30, 2023, and December 31, 2022, the carrying amount of recorded indemnifications was $ 143 million and $ 137 million, respectively.

At September 30, 2023, and December 31, 2022, the carrying amount of recorded indemnifications was $ 143 million and $ 137 million, respectively.

We amortize the indemnification liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of indemnity.

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Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments.

At June 30, 2023, and December 31, 2022, environmental accruals for known contamination of $ 115 million and $ 108 million, respectively, were included in the carrying amount of the recorded indemnifications noted above.

At September 30, 2023, and December 31, 2022, environmental accruals for known contamination of $ 115 million and $ 108 million, respectively, were included in the carrying amount of the recorded indemnifications noted above.

These environmental accruals were primarily included in the “Asset retirement obligations and accrued environmental costs” line item on our consolidated balance sheet.

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After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those pertaining to sites acquired in a business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated.

At June 30, 2023, our total environmental accruals were $ 449 million, compared with $ 434 million at December 31, 2022.

At September 30, 2023, our total environmental accruals were $ 453 million, compared with $ 434 million at December 31, 2022.

We expect to incur a substantial amount of these expenditures within the next 30 years.

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Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized.

At June 30, 2023, we had performance obligations secured by letters of credit and bank guarantees of $ 1 billion related to various purchase and other commitments incident to the ordinary conduct of business.

At September 30, 2023, we had performance obligations secured by letters of credit and bank guarantees of $ 1.1 billion related to various purchase and other commitments incident to the ordinary conduct of business.

Note 14— Derivatives and Financial Instruments

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Millions of Dollars

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Commodity Derivatives Effect of Collateral Netting Net Carrying Value Presented on the Balance Sheet Commodity Derivatives Effect of Collateral Netting Net Carrying Value Presented on the Balance Sheet

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Total $ 6,544 ( 6,415 ) 61 190 1,860 ( 1,896 ) 90 54

At June 30, 2023, there was $ 3 million of collateral paid that was not offset on our consolidated balance sheet.

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

At September 30, 2023, and December 31, 2022, there was $ 2 million and $ 93 million, respectively, of cash collateral 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 income, were:

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

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Financial derivative contracts may also offset physical derivative contracts, such as forward purchase and sales contracts.

The percentage of our derivative contract volumes expiring within the next 12 months was more than 90 % at June 30, 2023, and December 31, 2022.

The percentage of our derivative contract volumes expiring within the next 12 months was more than 90 % at September 30, 2023, and December 31, 2022.

Open Position

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however, many contracts also permit us to post letters of credit as collateral.

The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at June 30, 2023, and December 31, 2022.

The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at September 30, 2023, and December 31, 2022.

Note 15— Fair Value Measurements

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Millions of Dollars

June 30, 2023

September 30, 2023

Fair Value Hierarchy Total Fair Value of Gross Assets & Liabilities Effect of Counterparty Netting Effect of Collateral Netting Difference in Carrying Value and Fair Value Net Carrying Value Presented on the Balance Sheet

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Exchange-cleared instruments $ 6,381 44 1 6,426 ( 6,216 ) ( 25 ) — 185

OTC instruments — 18 7 25 — — — 25

Physical forward contracts — 117 1 118 — — — 118

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Exchange-cleared instruments $ 6,303 39 1 6,343 ( 6,216 ) ( 86 ) — 41

OTC instruments — 6 3 9 — — — 9

Physical forward contracts — 72 — 72 — — — 72

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See Note 4—Business Combinations, for additional information regarding the DCP Midstream Merger.

Equity Investments

The preliminary fair value of the investments we acquired that are accounted for under the equity method was $ 2,215 million.

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

Equity Method Investments

The fair value of the investments we acquired that are accounted for under the equity method was $ 2,034 million.

The 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 $ 12,860 million.

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

The fair value of PP&E was $ 13,030 million.

The 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.

The 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.

The 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.

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 DCP Midstream Merger date.

These noncontrolling interests on the DCP Midstream Merger date 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.

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 fair values on the DCP Midstream Merger date.

These noncontrolling interests on the DCP Midstream Merger date primarily included Enbridge’s indirect economic interest in DCP LP, the public holders of DCP LP’s common units and the public 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 DCP Midstream Merger, August 17, 2022.

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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.

The 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.

Gains Related to DCP Midstream Merger

In connection with the DCP Midstream 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 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 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.

Note 16— Pension and Postretirement Plans

The components of net periodic benefit (credit) cost for the three and six months ended June 30, 2023 and 2022, were as follows:

The components of net periodic benefit (credit) cost for the three and nine months ended September 30, 2023 and 2022, were as follows:

Millions of Dollars

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Components of Net Periodic Benefit Cost

Three Months Ended June 30

Three Months Ended September 30

Service cost $ 27 3 28 6 1 1

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Settlements 1 — 20 9 — —

Net periodic benefit (credit) cost* $ 32 ( 1 ) 47 — 2 2

Six Months Ended June 30

Net periodic benefit cost* $ 29 — 51 10 1 1

Nine Months Ended September 30

Service cost $ 81 9 98 21 3 3

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

During the six months ended June 30, 2023, we contributed $ 44 million to our U.S.

During the nine months ended September 30, 2023, we contributed $ 401 million to our U.S.

pension and other postretirement benefit plans and $ 15 million to our international pension plans.

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pension and other postretirement benefit plans and approximately $ 5 million to our international pension plans during the remainder of 2023.

Cash contributions are included in the “Other” line item of the “Cash Flows From Operating Activities” section of our consolidated statement of cash flows.

Note 17— Accumulated Other Comprehensive Loss

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Net current period other comprehensive income 15 60 — 75

June 30, 2023 $ ( 108 ) ( 162 ) ( 2 ) ( 272 )

September 30, 2023 $ ( 107 ) ( 276 ) ( 2 ) ( 385 )

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

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Net current period other comprehensive income (loss) 76 ( 625 ) — ( 549 )

June 30, 2022 $ ( 362 ) ( 369 ) ( 2 ) ( 733 )

September 30, 2022 $ ( 322 ) ( 670 ) ( 2 ) ( 994 )

* Included in the computation of net periodic benefit cost.

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

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(d) As a result of the DCP Midstream Merger, we began consolidating DCP Midstream Class A Segment, as well as 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.

Transactions with these parties after August 17, 2022, are not presented in the table above.

Note 19— Segment Disclosures and Related Information

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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 three and six months ended June 30, 2023, with prior periods recast for comparability.

The segment realignment is presented for the three and nine months ended September 30, 2023, with prior periods recast for comparability.

Our operating segments are:

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As a result of the DCP Midstream Merger on August 17, 2022, we began consolidating DCP Midstream Class A Segment, as well as DCP Sand Hills and DCP Southern Hills.

On March 9, 2022, we also completed the merger between us and Phillips 66 Partners.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers and Note 22—Phillips 66 Partners LP, for additional information about these transactions.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers.

This segment also includes our 16 % investment in NOVONIX.

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2023 2022 2023 2022

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Note 20— Income Taxes

Our effective income tax rates for the three months ended June 30, 2023 and 2022 were 23 %, and our effective income tax rates for the six months ended June 30, 2023 and 2022 were 22 %.

The effective tax rate for the three and six months ended June 30, 2023, varied from the U.S.

federal statutory income tax rate primarily due to state income taxes, partially offset by the impact of noncontrolling interest.

Our effective income tax rates for the three and nine months ended September 30, 2023 were 24 % and 23 %, compared to 23 % and 22 %, respectively, for the corresponding periods of 2022.

The slight increase in our effective rate for the three and nine months ended September 30, 2023, was primarily attributable to non-taxable foreign earnings of our chemical joint venture and an increase in our foreign tax rate, partially offset by a decrease in our state tax rate.

In the third quarter of 2022, the tax consequences of the DCP Midstream Merger were not included in our estimated annual effective tax rate but instead were reported as a discrete item.

Refer to Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for additional information.

The effective tax rate for the three and nine months ended September 30, 2023, varied from the U.S.

federal statutory income tax rate primarily due to state income taxes and the impact of foreign operations, partially offset by the impact of noncontrolling interest.

On August 16, 2022, the U.S.

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Refer to Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers and Note 4—Business Combinations, for more details regarding the DCP Midstream Merger and related accounting.

DCP LP, headquartered in Denver, Colorado, is a master limited partnership whose operations currently include producing and fractionating NGL, gathering, compressing, treating and processing natural gas;

DCP LP is a master limited partnership 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.

We completed the DCP LP Merger on June 15, 2023, acquiring all publicly held common units of DCP LP and eliminating the public common unit noncontrolling interest in our consolidated financial statements from the DCP LP Merger date, forward.

The DCP LP Merger increased our economic interest in DCP LP from 43.3 % to 86.8 %.

Refer to Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for additional information about the DCP Midstream and DCP LP Mergers.

As a result of the DCP Midstream Merger, we began consolidating the DCP Midstream Class A Segment from the merger date forward, and we reflected the interests held by DCP LP’s public common and preferred unitholders’ and Enbridge’s indirect economic interest in DCP LP at the time of the merger as noncontrolling interests in our consolidated financial statements.

On June 15, 2023, as part of the DCP LP Merger, we acquired all publicly held common units of DCP LP and eliminated the public common unit noncontrolling interest in our consolidated financial statements from the DCP LP Merger date, forward.

The DCP LP Merger increased our aggregate direct and indirect economic interest in DCP LP from 43.3 % to 86.8 %.

See below and Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for additional information about the DCP Midstream and DCP LP Mergers, as well as information on preferred unit redemptions that also decreased the “Noncontrolling interests” balance on our consolidated balance sheet since December 31, 2022.

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:

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Under the terms of the DCP LP Merger Agreement, at the effective time of the DCP LP Merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and its subsidiaries) issued and outstanding as of immediately prior to the effective time was converted into the right to receive $ 41.75 per common unit in cash, without interest.

We paid $ 3,796 million in cash consideration, funded through a combination of cash generated from operating activities and proceeds from the offering of the Notes and borrowings under the Term Loan Agreement.

We paid $ 3,796 million in cash consideration to common unitholders, funded through a combination of cash generated from operating activities and proceeds from the offering of the Notes and borrowings under the Term Loan Agreement.

See Note 11—Debt, for additional information.

The merger was accounted for as an equity transaction and resulted in decreases to “Cash and cash equivalents” of $ 3,796 million, “Noncontrolling interests” of $ 3,318 million, “Capital in excess of par” of $ 378 million, “Deferred income taxes” of $ 118 million, and an increase to “Other accruals” of $ 18 million on our consolidated balance sheet.

The DCP LP Merger was accounted for as an equity transaction and resulted in decreases to “Cash and cash equivalents” of $ 3,814 million, which includes cash consideration paid to common unitholders of $ 3,796 million plus fees paid of $ 18 million, “Noncontrolling interests” of $ 3,343 million, “Capital in excess of par” of $ 361 million and “Deferred income taxes” of $ 110 million on our consolidated balance sheet.

Preferred Units

DCP LP redeemed its Series B preferred units at the aggregated liquidation preference of $ 161 million in June 2023, which approximated the book value of these preferred units.

As of June 30, 2023, DCP LP had 4,400,000 Series C preferred units outstanding with an aggregate liquidation preference of $ 110 million.

The Series C preferred units are publicly traded on the New York Stock Exchange.

In June 2023, DCP LP redeemed its Series B preferred units at the aggregated liquidation preference of $ 161 million, which approximated the book value of the preferred units.

At September 30, 2023, DCP LP had 4,400,000 Series C preferred units outstanding with an aggregate liquidation preference of $ 110 million.

On October 16, 2023, DCP LP redeemed its Series C preferred units at the aggregated liquidation preference of $ 110 million, which approximated the book value of the preferred units.

The New York Stock Exchange suspended trading of the Series B preferred units and Series C preferred units in connection with the redemptions described herein, and DCP LP filed with the Securities and Exchange Commission a certification and notice of termination on Form 15 deregistering each series of preferred units under the Exchange Act and suspending its reporting obligations under Sections 13 and 15(d) of the Exchange Act.

Distributions

During the three and six months ended June 30, 2023, DCP LP made cash distributions of $ 5 million and $ 10 million, respectively, to preferred unitholders and cash distributions of $ 51 million and $ 102 million, respectively, to common unit holders other than Phillips 66 and its subsidiaries.

During the three and nine months ended September 30, 2023, DCP LP made cash distributions of $ 2 million and $ 12 million, respectively, to preferred unitholders and cash distributions of $ 12 million and $ 113 million, respectively, to common unit holders other than Phillips 66 and its subsidiaries.

Note 22— Phillips 66 Partners LP

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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 three and six months ended June 30, 2023, we recorded restructuring costs totaling $ 41 million and $ 76 million, respectively, primarily related to consulting fees.

For the three and nine months ended September 30, 2023, we recorded restructuring costs totaling $ 51 million and $ 127 million, respectively, primarily related to consulting fees and severance costs.

For the three and nine months ended September 30, 2022, we recorded restructuring costs totaling $ 74 million and $ 99 million, respectively, primarily related to consulting fees and severance costs.

These costs are primarily recorded in the “Selling, general and administrative expenses” line item on our consolidated statement of income and are reported in our Corporate segment.

In addition, in the three and six months ended June 30, 2023, we recorded restructuring costs of $ 22 million and $ 34 million, respectively, associated with the integration of DCP Midstream Class A Segment primarily related to severance and contract exit costs.

In addition, in the three and nine months ended September 30, 2023, we recorded restructuring costs of $ 4 million and $ 38 million, respectively, associated with the integration of DCP Midstream Class A Segment primarily related to severance and contract exit costs.

These costs are primarily recorded in the “Selling, general and administrative expenses” line item on our consolidated statement of income and are reported in our Midstream segment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements