What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-21 compared with 2023-02-22 · 529 added, 422 removed, 1716 unchanged (36% of the section changed)

5 unchanged sentences

Consolidated Financial Statements of Phillips 66:

Consolidated Statement of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020

Consolidated Statement of Income for the years ended December 31, 202 3 , 202 2 and 202 1

Consolidated Statement of Comprehensive Income for the years ended December 31, 202 3 , 202 2 and 202 1

Consolidated Balance Sheet at December 31, 202 3 and 202 2

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Based on this assessment, management concluded the company’s internal control over financial reporting was effective as of December 31, 2023.

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, 2023, and their report is included herein.

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Opinion on the Financial Statements

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, 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.

We have audited the accompanying consolidated balance sheets of Phillips 66 (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audits and, for 2023 and 2022, the report of other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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 did not audit the 2023 and 2022 financial statements of DCP Midstream, LP (DCP LP), a consolidated subsidiary, which reflect total assets constituting approximately 14% and 18% at December 31, 2023 and 2022 respectively, and total revenues constituting approximately 4% in 2023 and 3% in 2022 for the years 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 2023 and 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, 2023, 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 21, 2024 expressed an unqualified opinion thereon.

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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.

Consolidation of DCP Midstream

Impairment Assessment of Certain Equity Method Investments

Description of the Matter

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.

As discussed in Note 1 to the consolidated financial statements, the Company assesses investments in nonconsolidated entities accounted for under the equity method for impairment when changes in the facts and circumstances indicate a loss in value has occurred.

As discussed in Note 8 to the consolidated financial statements, the Company owns a 50% interest in WRB Refining LP (WRB), a joint venture that owns the Wood River and Borger refineries.

The carrying value of the Company’s investment in WRB was $2.7 billion as of December 31, 2023.

WRB’s earnings are subject to variability as they are dependent on market conditions, as well as the utilization of its refineries.

Accordingly, significant judgment is required in determining whether events or changes in circumstances indicate a loss in value may have occurred that is indicative of a possible impairment.

We determined that the identification and evaluation of events or changes in circumstances indicating that the carrying value of the investment in WRB may not be recoverable is a critical audit matter because of the judgement and assumptions management uses to perform its identification and evaluation of such factors.

How We Addressed the Matter in Our Audit

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.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for identifying and evaluating events or changes in circumstances that would indicate that the carrying value of the investment in WRB may not be recoverable and performed a walkthrough of the Company’s process and controls.

Our evaluation of the Company’s analysis included an assessment of whether events or changes in circumstances indicating that the carrying value of the investment in WRB may not be recoverable were appropriately identified and evaluated by the Company.

This included, but was not limited to, an evaluation of the investee’s earnings history and an evaluation of the sustainability of the investee’s earnings 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 management’s evaluation and conclusions.

For example, we performed inquiries of management, considered WRB’s historical operating results, reviewed the projected investment recovery period, and assessed current and expected market conditions affecting WRB’s results.

We performed an independent assessment using both internally and externally available information, such as utilization and margins for WRB’s and other regional refineries, as well as forecasted prices, market crack spreads and demand.

We also considered other information, such as the Company’s internal valuations, to identify evidence contrary to management’s conclusion.

Additionally, we evaluated management’s process to accurately forecast future operating income by comparing actual results to budgeted results.

/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, 2023, based on the COSO criteria.

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.

We did not examine the effectiveness of internal control over financial reporting of DCP Midstream, LP whose financial statements reflect total assets and sales constituting 14% and 4%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

The effectiveness of DCP Midstream, LP’s internal control over financial reporting was audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the effectiveness of DCP Midstream, LP’s internal control over financial reporting, 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 consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 21, 2024, expressed an unqualified opinion thereon, based on our audit and the report of the other auditors.

Basis for Opinion

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We believe that our audit provides a reasonable basis for our opinion.

Index to Financial Statements

Definition and Limitations of Internal Control Over Financial Reporting

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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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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 have audited the consolidated balance sheets of DCP Midstream, LP and subsidiaries (the "Partnership") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”) (not presented herein).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, 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.

The consolidated financial statements of the Partnership include its equity investment in Gulf Coast Express Pipeline, LLC of $385 million and $408 million as of December 31, 2023 and 2022, and its equity earnings in Gulf Coast Express Pipeline, LLC of $68 million and $67 million for the years ended December 31, 2023 and 2022, 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.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and in accordance with auditing standards generally accepted in the United States of America, the Partnership’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2024, expressed an unqualified opinion on the Partnership’s internal control over financial reporting.

Basis for Opinion

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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.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

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.

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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

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 those charged with governance and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter 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 and Recoverability Analysis for Asset Grouping in the South Region – Refer to Notes 2, 9 and 12 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”).

The Partnership evaluates on a quarterly basis whether the carrying value of long-lived assets should be impaired when circumstances indicate the carrying value of such 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 legal or business climate, a current period operating or cash flow loss combined with a history of losses, an accumulation of costs significantly in excess of the amount originally expected, a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in the market value of an asset, 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 judgments and assumptions.

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 of the asset (“recoverability analysis”) using the income approach and selecting a discount rate reflective of the risk inherent in future cash flows, and applying that discount rate to the cash flow projections.

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.

This analysis resulted in management determining that an impairment triggering event had occurred at a certain asset group in the South region of the Gathering and Processing segment.

The triggering event is a reflection of the diminished probability of new well connects and margin degradation, commodity prices in the recently prepared budget forecasts, and a negative outlook for long-term production volume forecasts.

Management prepared a recoverability analysis and recognized a $209 million impairment loss for the year ended December 31, 2023.

We considered 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 that management makes when determining whether events or changes in circumstances have occurred or could occur 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 and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate, the terminal value multiple, forecasted future gathering and processing volumes and future commodity pricing.

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:

Our audit procedures related to the identification of impairment indicators 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.

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• 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

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

– Evaluating management’s forecasts by comparing such forecasts to recent results of operations

– 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

Our further audit procedures on the recoverability analysis included evaluating Management’s significant inputs, including forecasted gathering and processing volumes, future commodity prices, the terminal value multiple, and the selection of the discount rate applied to estimated future cash flows included in Management’s cash flow model, included the following, among others:

• We tested the effectiveness of internal controls over financial reporting related to management’s preparation and review of significant underlying assumptions used in the undiscounted cash flow model

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

– Evaluating the reasonableness of volumetric assumptions by comparing forecasts to permits and rig count data including researching industry trends

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

– Performing a lookback analysis by comparing historical results to management’s future assumptions to assess the reasonableness of estimates

– Evaluating the reasonableness of management’s future commodity pricing forecasts by comparing to independent analysts’ estimates

• With the assistance of our Internal fair value specialists, we evaluated the reasonableness of the discount rate and terminal value multiple by:

– Evaluating the appropriateness of the mathematical model used to develop the discount rate

– Evaluating the guideline public companies selected by management and used in the selection of the discount rate considering the comparability of operations to those of the Partnership

– Developing a range of independent estimates of the discount rate by independently obtaining information to estimate components of the discount rate, including the cost of debt capital, the cost of equity capital, and debt-to-equity ratio

– Evaluating the terminal value multiple in comparison to recent valuation metrics for companies of similar operations

/s/ Deloitte & Touche LLP

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Index to Financial Statements

Consolidated Statement of Operations Phillips 66

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 Internal Control over Financial Reporting

We have audited the internal control over financial reporting of DCP Midstream, LP and subsidiaries (the "Partnership") as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and in accordance with auditing standards generally accepted in the United States of America, the consolidated financial statements as of and for the year ended December 31, 2023, of the Partnership (not presented herein) and our report dated February 21, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Partnership's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting (not presented herein).

Our responsibility is to express an opinion on the Partnership's internal control over financial reporting based on our audit.

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 audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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.

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

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Denver, Colorado

February 21, 2024

Index to Financial Statements

Consolidated Statement of Income Phillips 66

Millions of Dollars

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Total Costs and Expenses 140,421 161,063 113,112

Income (loss) before income taxes 14,639 1,740 ( 4,964 )

Income tax expense (benefit) 3,248 146 ( 1,250 )

Net Income (Loss) 11,391 1,594 ( 3,714 )

Income before income taxes 9,469 14,639 1,740

Income tax expense 2,230 3,248 146

Net Income 7,239 11,391 1,594

net income attributable to noncontrolling interests 224 367 277

Net Income (Loss) Attributable to Phillips 66 $ 11,024 1,317 ( 3,975 )

Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)

Net Income Attributable to Phillips 66 $ 7,015 11,024 1,317

Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars)

Basic $ 15.56 23.36 2.97

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Index to Financial Statements

Consolidated Statement of Comprehensive Income (Loss) Phillips 66

Consolidated Statement of Comprehensive Income Phillips 66

Millions of Dollars

Years Ended December 31 2023 2022 2021

Net Income (Loss) $ 11,391 1,594 ( 3,714 )

Net Income $ 7,239 11,391 1,594

Other comprehensive income (loss)

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Other Comprehensive Income (Loss), Net of Income Taxes 178 ( 15 ) 344

Comprehensive Income (Loss) 11,376 1,938 ( 3,720 )

Comprehensive Income 7,417 11,376 1,938

comprehensive income attributable to noncontrolling interests 224 367 277

Comprehensive Income (Loss) Attributable to Phillips 66 $ 11,009 1,661 ( 3,981 )

Comprehensive Income Attributable to Phillips 66 $ 7,193 11,009 1,661

See Notes to Consolidated Financial Statements.

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Cash and cash equivalents $ 3,323 6,133

Accounts and notes receivable (net of allowances of $ 67 million in 2022 and $ 44 million in 2021)

Accounts and notes receivable (net of allowances of $ 71 million in 2023 and

$ 67 million in 2022)

Accounts and notes receivable—related parties 1,247 1,488

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Cash Flows From Operating Activities

Net income (loss) $ 11,391 1,594 ( 3,714 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Net income $ 7,239 11,391 1,594

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization 1,977 1,629 1,605

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Undistributed equity earnings ( 822 ) ( 1,308 ) ( 128 )

Loss on early redemption of debt 53 — —

Net gain on dispositions ( 115 ) ( 7 ) ( 7 )

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Repurchase of noncontrolling interests ( 4,067 ) ( 500 ) ( 24 )

Net proceeds from issuance of Phillips 66 Partners LP common and preferred units — — 2

Other ( 97 ) ( 70 ) ( 52 )

Net Cash Provided by (Used in) Financing Activities ( 6,388 ) ( 3,470 ) 1,791

Net Cash Used in Financing Activities ( 8,092 ) ( 6,388 ) ( 3,470 )

Effect of Exchange Rate Changes on Cash and Cash Equivalents 43 49 ( 42 )

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December 31, 2020 $ 6 20,383 ( 17,116 ) 16,500 ( 789 ) 2,539 21,523

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

Other comprehensive loss — — — — ( 6 ) — ( 6 )

Dividends paid on common stock — — — ( 1,575 ) — — ( 1,575 )

Repurchase of common stock — — ( 443 ) — — — ( 443 )

Benefit plan activity — 80 — ( 12 ) — — 68

Transfer of equity interest — 2 — — — 305 307

Net distributions to noncontrolling interests — — — — — ( 285 ) ( 285 )

Other — — — ( 2 ) 5 ( 1 ) 2

December 31, 2020 6 20,383 ( 17,116 ) 16,500 ( 789 ) 2,539 21,523

Net income — — — 1,317 — 277 1,594

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Dividends paid on common stock — — — ( 1,585 ) — — ( 1,585 )

Benefit plan activity 1 121 — ( 14 ) — — 108

Distributions to noncontrolling interests — — — — — ( 324 ) ( 324 )

Repurchase of noncontrolling interests — — — ( 2 ) — ( 21 ) ( 23 )

Benefit plan activity 1 121 — ( 14 ) — — 108

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

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

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

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

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

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

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

Net income — — — 7,015 — 224 7,239

Other comprehensive income — — — — 178 — 178

Dividends paid on common stock — — — ( 1,882 ) — — ( 1,882 )

Repurchase of common stock — — ( 4,066 ) — — — ( 4,066 )

Distributions to noncontrolling interests — — — — — ( 163 ) ( 163 )

Acquisition of noncontrolling interest in DCP Midstream, LP — ( 361 ) — — — ( 3,613 ) ( 3,974 )

Benefit plan activity and other — 220 — ( 15 ) — 7 212

December 31, 2023 $ 7 19,650 ( 19,342 ) 30,550 ( 282 ) 1,067 31,650

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 —

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

Repurchase of common stock — 16,583,076

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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Shares issued—share-based compensation 2,468,456 —

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

December 31, 2023 654,842,101 224,377,439

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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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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.

Derivative instruments, except those designated as normal purchases and normal sales, are recorded on the balance sheet at fair value.

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).

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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.

All realized and unrealized gains and losses from derivative instruments for which we do not apply hedge accounting are immediately recognized in our consolidated statement of operations.

All realized and unrealized gains and losses from derivative instruments for which we do not apply hedge accounting are immediately recognized in our consolidated statement of income.

Unrealized gains or losses from derivative instruments that qualify for and are designated as cash flow hedges are recognized in other comprehensive income (loss) and appear on the balance sheet in accumulated other comprehensive income (loss) until the hedged transactions are recognized in earnings.

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If indicators of potential impairment exist, an undiscounted cash flow test is performed.

If the sum of the undiscounted expected future before-tax cash flows of an asset group is less than the carrying value of the asset group, including applicable liabilities, the carrying value of the PP&E included in the asset group is written down to estimated fair value and the write down is reported in the “Impairments” line item on our consolidated statement of operations in the period in which the impairment determination is made.

Individual assets are grouped for impairment purposes at the lowest level for which identifiable cash flows are available.

If the sum of the undiscounted expected future before-tax cash flows of an asset group is less than the carrying value of the asset group, including applicable liabilities, the carrying value of the PP&E included in the asset group is written down to estimated fair value and the write down is reported in the “Impairments” line item on our consolidated statement of income in the period in which the impairment determination is made.

Individual assets are grouped for impairment testing purposes at the lowest level for which identifiable cash flows are available.

Because there is usually a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined using one or more of the following methods:

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a market multiple of earnings for similar assets;

historical market transactions including similar assets, adjusted using principal market participant assumptions when necessary;

historical market transactions for similar assets, adjusted using principal market participant assumptions when necessary;

or replacement cost adjusted for physical deterioration and economic obsolescence.

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Property Dispositions

When complete units of depreciable property are sold, the asset cost and related accumulated depreciation are eliminated, with any gain or loss reflected in the “Net gain on dispositions” line item on our consolidated statement of operations.

When less than complete units of depreciable property are disposed of or retired, the difference between asset cost and salvage value is charged or credited to accumulated depreciation.

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

We amortize the guarantee liability to the related statement of operations line item based on the nature of the guarantee.

We amortize the guarantee liability to the related statement of income line item based on the nature of the guarantee.

In cases where the guarantee term is indefinite, we reverse the liability when we have information to support the reversal.

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Treasury Stock

We record treasury stock purchases at cost, which includes incremental direct transaction costs.

We record treasury stock purchases at cost, which includes related transaction costs.

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

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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.

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).

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 income (i.e., these transactions are recorded net).

Taxes Collected from Customers and Remitted to Governmental Authorities

Excise taxes on sales of refined petroleum products charged to our customers are presented net of taxes on sales of refined petroleum products payable to governmental authorities in the “Taxes other than income taxes” line item on our consolidated statement of operations.

Other sales and value-added taxes are recorded net in the “Taxes other than income taxes” line item on our consolidated statement of operations.

Other sales and value-added taxes are recorded net in the “Taxes other than income taxes” line item on our consolidated statement of income.

Shipping and Handling Costs

We have elected to account for shipping and handling costs as fulfillment activities and include these activities in the “Purchased crude oil and products” line item on our consolidated statement of operations.

Freight costs billed to customers are recorded in “Sales and other operating revenues.”

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(1) the service period (i.e., the stated period of time required to earn the award);

or (2) the period beginning at the start of the service period and ending when an employee first becomes eligible for retirement, but not less than six months as this is the minimum period of time required for an award not to be subject to forfeiture.

or (2) the period beginning at the start of the service period and ending when an employee first becomes eligible for retirement, but not less than ten months for shared-based payment awards granted in 2023 and not less than six months for share-based payment awards granted prior to 2023 as those are the minimum periods of time required for awards not to be subject to forfeiture.

Our equity-classified programs generally provide accelerated vesting (i.e., a waiver of the remaining period of service required to earn an award) for awards held by employees at the time they become eligible for retirement (at age 55 with 5 years of service).

We have elected to recognize expense on a straight-line basis over the service period for the entire award, irrespective of whether the award was granted with ratable or cliff vesting, and have elected to recognize forfeitures of awards when they occur.

Index to Financial Statements

Income taxes are accounted for under the asset and liability method.

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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.

Index to Financial Statements

Note 2— Changes in Accounting Principles

Effective January 1, 2023, we adopted 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.

At the time of adoption, this ASU did not have a material impact on our consolidated financial statements.

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

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Index to Financial Statements

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

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

DCP Midstream, LLC and Gray Oak Holdings LLC Merger (DCP Midstream 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 %.

Prior to the DCP Midstream 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.

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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.

In connection with the DCP Midstream 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:

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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.

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.

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 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 DCP Midstream 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.

See Note 4—Business Combinations, for additional information regarding 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.

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).

The DCP LP Merger Agreement was entered into with DCP LP, its subsidiaries and its general partner entities, pursuant to which one of our wholly owned subsidiaries merged with and into DCP LP, with DCP LP surviving as a Delaware limited partnership.

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.

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

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 29—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 December 31, 2023, we provisionally recorded $ 146 million of amortizable intangible assets, primarily customer relationships;

$ 82 million of PP&E, including finance lease right of use assets;

$ 40 million of net working capital;

$ 64 million of goodwill;

and $ 63 million of finance lease liabilities 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.

As part of the DCP Midstream 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 DCP Midstream Class A Segment, 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:

The components of the fair value of the DCP Midstream Merger consideration are:

Millions of Dollars

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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, 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:

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 made during the measurement period:

Millions of Dollars

Fair value of assets acquired:

As Originally Reported Adjustments As Adjusted

Cash and cash equivalents $ 98 — 98

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Total merger consideration $ 4,891 — 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.

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 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 during the measurement period were not material.

See Note 18—Fair Value Measurements, for additional information on the determination of the fair value of the DCP Midstream Merger.

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.

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 in our consolidated statement of income 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.

Millions of Dollars

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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.

The following unaudited pro forma financial information presents consolidated results for the years ending December 31, 2022, and 2021, as if 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.

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.

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.

Year Ended December 31

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Germany 5,547 6,392 4,290

Other foreign countries 9,862 8,081 5,353

Other countries 8,424 9,862 8,081

Consolidated sales and other operating revenues $ 147,399 169,990 111,476

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At December 31, 2023, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 365 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

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During each of the three years ended December 31, 2023, 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 years ended December 31, 2023 and 2022, LIFO inventory liquidations increased net income by $ 94 million and $ 75 million, respectively.

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 year ended December 31, 2020.

Index to Financial Statements

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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.

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

We have a basis difference for our investment in Gulf Coast Express because the carrying value of our investment is higher than our share of Gulf Coast Express net assets.

The basis difference is the result of recognizing the investment at fair value.

The basis difference is being amortized and recognized as a decrease to equity earnings over a period of 20 years, which was the estimated remaining useful life of the joint venture’s PP&E at the acquisition date.

At December 31, 2023, the aggregate remaining basis difference for this investment was $ 415 million.

Equity earnings for each of the years ended December 31, 2023 and 2022, were decreased by $ 22 million and $ 7 million, respectively, due to the amortization of our basis difference.

At December 31, 2023 and 2022, the book value of our investment in Gulf Coast Express was $ 800 million and $ 844 million, respectively.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, Note 4—Business Combinations and Note 18—Fair Value Measurements, for additional information on the DCP Midstream Merger and our accounting for this transaction as a business combination.

Index to Financial Statements

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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 Spring 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 alternative would require decommissioning the current pipeline and construction of a new line 39 miles upstream from the current location.

The USACE has not indicated when it will issue its final decision.

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

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At December 31, 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.

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 December 31, 2023.

At December 31, 2023 and 2022, the aggregate book value of our investments in Dakota Access and ETCO was $ 640 million and $ 675 million, respectively.

Index to Financial Statements

• 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

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

We have a basis difference for our investment in Front Range because the carrying value of our investment is higher than our share of Front Range net assets.

The basis difference is the result of recognizing the investment at fair value.

At December 31, 2023, the aggregate remaining basis difference for this investment was $ 292 million.

Equity earnings for each of the years ended December 31, 2023 and 2022, were decreased by $ 16 million and $ 5 million, respectively, due to the amortization of our basis difference.

At December 31, 2023 and 2022, the book value of our investment in Front Range was $ 477 million and $ 499 million, respectively.

• Rockies Express Pipeline LLC (REX) — 25 percent-owned joint venture that owns a natural gas pipeline system that extends from Wyoming and Colorado to Ohio with a bidirectional section that extends from Ohio to Illinois.

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We own a 50 % voting interest and a 48 % economic interest in this joint venture.

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.

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 December 31, 2022, our maximum exposure to loss was comprised of our $ 296 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 December 31, 2023, CF United was considered a VIE because our co-venturer had an option to require us to purchase its interest based on a fixed multiple.

The put option became effective July 1, 2023, and was scheduled to expire on March 31, 2024.

The put option was 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 determined that we were not the primary beneficiary of CF United because we and our co-venturer jointly directed the activities that most significantly impacted economic performance.

At December 31, 2023, our maximum exposure to loss was comprised of our $ 291 million investment in CF United.

At December 31, 2022, the book value of our investment in CF United was $ 296 million.

Effective January 1, 2024, in connection with an acquisition by CF United of another joint venture in which we have an ownership interest, the governing agreement for the CF United joint venture was amended and restated.

The amended and restated agreement included removal of the put option that required us to purchase our co-venturer’s interest based on a fixed multiple.

Accordingly, CF United ceased to be a VIE effective January 1, 2024.

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

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At December 31, 2022, the book value of our investment in OnCue was $ 138 million.

• 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:

Index to Financial Statements

• 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.

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.

As a result of the DCP Midstream 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 DCP Midstream 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 DCP Midstream, LP Mergers, and Note 4—Business Combinations, for additional information regarding the DCP Midstream Merger and associated accounting treatment.

At December 31, 2023 and December 31, 2022, the book value of our investment in DCP Midstream Class B Segment was $ 75 million and $ 79 million, respectively.

• 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.

The impairment is included in the “Impairments” line item on our consolidated statement of income 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.

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.

Midstream Investment Disposition

On August 1, 2023, we sold our 25 % ownership interest in the South Texas Gateway Terminal for approximately $ 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 year ended December 31, 2023, and is reported in the Midstream segment.

Index to Financial Statements

Other Investments

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.

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

NOVONIX is a Brisbane, Australia-based company that develops technology and supplies materials for lithium-ion batteries and its shares are traded on the Australian Securities Exchange.

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.

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.

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 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.

At December 31, 2023 and 2022, the fair value of our investment in NOVONIX was $ 39 million and $ 78 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.

The fair value of our investment in NOVONIX declined by $ 39 million and $ 442 million during the years ended December 31, 2023 and 2022, respectively, and increased by $ 370 million during the year ended December 31, 2021.

The declines in fair value in 2023 and 2022 were primarily related to unrealized investment losses, while the increase in 2021 was primarily related to unrealized investment gains.

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

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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.

At December 31, 2023 and 2022, no member loans were outstanding.

Equity Affiliate Distributions

Total distributions received from affiliates were $ 1,396 million, $ 1,832 million, and $ 3,043 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In addition, at December 31, 2023, retained earnings included approximately $ 3.3 billion related to the undistributed earnings of affiliated companies.

Summarized Equity Affiliate Financial Information

Summarized 100% financial information for all affiliated companies accounted for under the equity method, on a combined basis, was:

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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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$ 55,192 19,480 35,712 52,990 17,827 35,163

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 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, Note 4—Business Combinations and Note 18—Fair Value Measurements, for additional information on the DCP Midstream 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.

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Balance at December 31, 2023 $ 626 924 1,550

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.

In August 2023, we acquired a marketing business on the U.S.

West Coast, in our M&S segment and recognized goodwill of $ 64 million associated with this acquisition.

Refer to Note 4—Business Combinations for additional information.

Intangible Assets

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The net book value of our amortized intangible assets was $ 220 million and $ 128 million at December 31, 2023 and 2022, respectively.

Acquisitions of amortized intangible assets were not material in 2022 and 2021.

For the years ended December 31, 2023, 2022 and 2021, amortization expense was $ 33 million, $ 27 million and $ 26 million, respectively, and is expected to be less than $ 35 million per year in future years.

In August 2023, we acquired a marketing business on the U.S.

West Coast, in our M&S segment and recorded additions of $ 146 million in amortized intangible assets.

Acquisitions of amortized intangible assets were not material in 2022.

Index to Financial Statements

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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.

Red Oak Pipeline LLC (Red Oak)

In the third quarter of 2020, the Red Oak Pipeline project was canceled.

As a result, we recorded an $ 84 million before-tax impairment to reduce the carrying value of our investment to our share of the estimated salvage value of the joint venture’s assets at September 30, 2020.

In the fourth quarter of 2020, Phillips 66 Partners assessed for impairment its equity method investments in two crude oil transportation and terminaling joint ventures, and concluded that the carrying values of these investments at December 31, 2020, were greater than their fair values.

Phillips 66 Partners concluded these differences were not temporary, based on its projections of future crude oil production.

As a result, Phillips 66 Partners recorded before-tax impairments totaling $ 96 million.

DCP Midstream

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.

We concluded this difference was not temporary primarily due to its magnitude, and we recorded a $ 1,161 million before-tax impairment of our investment in the first quarter of 2020.

Index to Financial Statements

PP&E and Intangible Assets

Alliance Refinery

In the third quarter of 2021, we identified impairment indicators related to our Alliance Refinery as a result of damages sustained from Hurricane Ida and our reassessment of the role this refinery will play in our refining portfolio.

Accordingly, we assessed the refinery asset group for impairment by performing an analysis that considered several usage scenarios, including selling or converting the asset group to an alternative use.

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

San Francisco Refinery

In the third quarter of 2020, we announced a plan to reconfigure our San Francisco Refinery to produce renewable fuels at the Rodeo refining facility in Rodeo, California, starting in early 2024.

Consequently, we plan to cease operation of the Santa Maria refining facility in Arroyo Grande, California, certain assets at the Rodeo refining facility, and associated Midstream assets in 2023.

We assessed the San Francisco Refinery asset group for impairment and concluded that the carrying value of the asset group was not recoverable.

As a result, we recorded a $ 1,030 million before-tax impairment to reduce the carrying value of the net PP&E and intangible assets in this asset group to its fair value of $ 940 million.

The impairment resulted in a reduction of net PP&E totaling $ 1,009 million and intangible assets of $ 21 million.

This impairment was primarily related to our Refining segment, with the exception of $ 120 million that was related to PP&E in our Midstream segment.

Our stock price declined significantly in the first quarter of 2020, mainly due to the disruption in global commodity and equity markets related to the COVID-19 pandemic.

We assessed our goodwill for impairment due to the decline in our market capitalization and concluded that the carrying value of our Refining reporting unit at March 31, 2020, was greater than its fair value by an amount in excess of its goodwill balance.

Accordingly, we recorded a before-tax goodwill impairment charge of $ 1,845 million in our Refining segment during the first quarter of 2020.

These impairment charges are included within the “Impairments” line item on our consolidated statement of operations.

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

These impairment charges are included within the “Impairments” line item on our consolidated income statement.

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

Index to Financial Statements

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decommissioning, removal or dismantlement of certain assets at refineries that have or will be shut down;

decommissioning, removal or dismantlement of certain midstream pipelines and processing facilities;

and dismantlement or removal of assets at certain leased international marketing sites.

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Spending on existing obligations ( 58 ) ( 32 )

Asset dispositions ( 23 ) —

Foreign currency translation 5 ( 5 )

Balance at December 31 $ 537 565

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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$ 24 million in 2024, $ 18 million in 2025, $ 20 million in 2026, $ 17 million in 2027, $ 16 million in 2028, and $ 200 million in the aggregate for all years after 2028.

Note 13— Earnings (Loss) Per Share

The numerator of basic earnings (loss) per share (EPS) is net income (loss) attributable to Phillips 66, adjusted for noncancelable dividends paid on unvested share-based employee awards during the vesting period (participating securities) and the premium paid for the repurchase of noncontrolling interests.

Note 13— Earnings Per Share

The numerator of basic earnings per share (EPS) is net income attributable to Phillips 66, adjusted for noncancelable dividends paid on unvested share-based employee awards during the vesting period (participating securities).

The denominator of basic EPS is the sum of the daily weighted-average number of common shares outstanding during the periods presented and fully vested stock and unit awards that have not yet been issued as common stock.

The numerator of diluted EPS is also based on net income (loss) attributable to Phillips 66, which is reduced by dividend equivalents paid on participating securities for which the dividends are more dilutive than the participation of the awards in the earnings (loss) of the periods presented, and the premium paid for the repurchase of noncontrolling interests.

The numerator of diluted EPS is also based on net income attributable to Phillips 66, which is reduced by dividend equivalents paid on participating securities for which the dividends are more dilutive than the participation of the awards in the earnings of the periods presented.

To the extent unvested stock, unit or option awards and vested unexercised stock options are dilutive, they are included with the weighted-average common shares outstanding in the denominator.

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Amounts Attributed to Phillips 66 Common Stockholders (millions) :

Net income (loss) attributable to Phillips 66 $ 11,024 11,024 1,317 1,317 ( 3,975 ) ( 3,975 )

Net Income Attributable to Phillips 66 $ 7,015 7,015 11,024 11,024 1,317 1,317

Income allocated to participating securities ( 11 ) — ( 10 ) — ( 9 ) ( 9 )

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— — — — ( 2 ) ( 2 )

Net income (loss) available to common stockholders $ 11,014 11,024 1,306 1,306 ( 3,983 ) ( 3,983 )

Net income available to common stockholders $ 7,004 7,015 11,014 11,024 1,306 1,306

Weighted-average common shares outstanding (thousands) :

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450,136 453,210 471,497 473,731 440,028 440,364

Earnings (Loss) Per Share of Common Stock (dollars)

Earnings Per Share of Common Stock (dollars)

$ 15.56 15.48 23.36 23.27 2.97 2.97

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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

December 31, 2023

Phillips 66 Phillips 66 Company Phillips 66 Partners DCP LP Total

0.900 % Senior Notes due February 2024

$ 800 — — — 800

2.450 % Senior Notes due December 2024

— 277 23 — 300

3.605 % Senior Notes due February 2025

— 441 59 — 500

3.850 % Senior Notes due April 2025

650 — — — 650

5.375 % Senior Notes due July 2025

— — — 825 825

1.300 % Senior Notes due February 2026

500 — — — 500

3.550 % Senior Notes due October 2026

— 458 34 — 492

5.625 % Senior Notes due July 2027

— — — 500 500

4.950 % Senior Notes due December 2027

— 750 — — 750

3.750 % Senior Notes due March 2028

— 427 73 — 500

3.900 % Senior Notes due March 2028

800 — — — 800

5.125 % Senior Notes due May 2029

— — — 600 600

3.150 % Senior Notes due December 2029

— 570 30 — 600

8.125 % Senior Notes due August 2030

— — — 300 300

2.150 % Senior Notes due December 2030

850 — — — 850

3.250 % Senior Notes due February 2032

— — — 400 400

5.300 % Senior Notes due June 2033

— 500 — — 500

4.650 % Senior Notes due November 2034

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

5.600 % Senior Notes due April 2044

— — — 400 400

4.875 % Senior Notes due November 2044

1,700 — — — 1,700

4.680 % Senior Notes due February 2045

— 442 8 — 450

4.900 % Senior Notes due October 2046

— 605 20 — 625

3.300 % Senior Notes due March 2052

1,000 — — — 1,000

Securitization facility due August 2024 — — — 350 350

Floating Rate Term Loan due June 2026 at 6.456 % at year-end 2023

— 1,250 — — 1,250

Floating Rate Advance Term Loan due 2035 at 6.096 % at year end 2023—related party

Floating Rate Advance Term Loan due 2038 at 6.490 % at year-end 2023—related party

265 — — — 265

Revolving credit facility due 2027 at 6.512 % at year-end 2023

Other 1 — — — 1

Debt at face value 9,091 5,720 247 4,150 19,208

Finance leases 305

Software obligations 13

Net unamortized discounts, debt issuance costs and acquisition fair value adjustments ( 167 )

Total debt 19,359

Short-term debt ( 1,482 )

Long-term debt $ 17,877

Index to Financial Statements

Millions of Dollars

December 31, 2022

Phillips 66 Phillips 66 Company Phillips 66 Partners DCP LP Total

3.875 % Senior Notes due March 2023

$ — — — 500 500

0.900 % Senior Notes due February 2024

800 — — — 800

2.450 % Senior Notes due December 2024

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1,000 — — — 1,000

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

— — — — — — 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

Floating Rate Advance Term Loan due December 2034 at 4.720 % at year-end 2022—related party

Other 1 — — — 1

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Long-term debt $ 16,661

Index to Financial Statements

Maturities of borrowings outstanding at December 31, 2023, inclusive of net unamortized discounts and debt issuance costs, for each of the years from 2024 through 2028 are $ 1,482 million, $ 1,999 million, $ 2,253 million, $ 1,276 million and $ 1,313 million, respectively.

Index to Financial Statements

2023 Activities

Debt Repayments

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.

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

On March 15, 2023, DCP LP repaid its 3.875 % senior unsecured notes due March 2023 with an aggregate principal amount of $ 500 million.

Debt Issuances

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:

• $ 750 million aggregate principal amount of 4.950 % Senior Notes due December 2027 (2027 Notes).

• $ 500 million aggregate principal amount of 5.300 % Senior Notes due June 2033 (2033 Notes).

The 2027 Notes and 2033 Notes (collectively, the Notes) are fully and unconditionally guaranteed by Phillips 66.

Interest on the 2027 Notes is payable semi-annually on June 1 and December 1 of each year and commenced on December 1, 2023.

Interest on the 2033 Notes is payable semi-annually on June 30 and December 30 of each year and commenced on December 30, 2023.

Term Loan Agreement

On March 27, 2023, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, entered into a $ 1.5 billion delayed draw term loan agreement guaranteed by Phillips 66 (the Term Loan Agreement).

The Term Loan Agreement provides for a single borrowing during a 90-day period commencing on the closing date, which borrowing was contingent upon the completion of the DCP LP Merger.

The Term Loan Agreement contains customary covenants similar to those contained in our revolving credit agreement, including a maximum consolidated net debt-to-capitalization ratio of 65 % as of the last day of each fiscal quarter.

The Term Loan Agreement has customary events of default, such as nonpayment of principal when due;

nonpayment of interest, fees or other amounts after grace periods;

and violation of covenants.

We may at any time prepay outstanding borrowings under the Term Loan Agreement, in whole or in part, without premium or penalty.

Outstanding borrowings under the Term Loan Agreement bear interest at either:

(a) the adjusted term Secured Overnight Financing Rate (SOFR) in effect from time to time plus the applicable margin;

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

At December 31, 2023, $ 1.25 billion was borrowed under the Term Loan Agreement, which matures in June 2026.

Related Party Advance Term Loan Agreements

Borrowings under related party Advance Term Loan agreements with WRB increased from $ 25 million at December 31, 2022, to $ 290 million at December 31, 2023.

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

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

Index to Financial Statements

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.

1 unchanged sentence

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.

As a result of the DCP Midstream Merger, 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 DCP Midstream, LP Mergers, Note 4—Business Combinations, and Note 18—Fair Value Measurements, for additional information regarding the DCP Midstream Merger and the associated fair value measurements.

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

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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.

The redemption price of the senior notes was equal to 100 % of the principal amount of the senior notes outstanding, plus accrued and unpaid interest.

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

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.

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.

Subsequent Repayment

On February 15, 2024, upon maturity, Phillips 66 repaid its 0.900 % senior notes due February 2024 with an aggregate principal amount of $ 800 million.

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.

On June 23, 2022, we entered into a $ 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.

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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;

Outstanding borrowings under the Facility bear interest at either (a) the adjusted term 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.

2 unchanged sentences

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.

At December 31, 2023 and 2022, 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 the Facility.

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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

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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, 2023, DCP LP had $ 25 million in borrowings outstanding under the Credit Agreement.

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.

At December 31, 2023, and December 31, 2022, respectively, $ 2 million and $ 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

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, a bankruptcy-remote special purpose entity created for the sole purpose of the Securitization Facility.

At December 31, 2023, and December 31, 2022, respectively, $ 350 million and $ 40 million of borrowings were outstanding under the Securitization Facility, which are secured by accounts receivable at DCP Receivables LLC.

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.

At December 31, 2023, and 2022, we had approximately $ 6.4 billion and $ 6.7 billion, respectively, of total committed capacity available under the credit facilities described above.

Index to Financial Statements

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We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $ 514 million at December 31, 2023.

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 five to nine years .

We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $ 168 million.

These leases have remaining terms of one to ten years .

Guarantees of Joint Venture Obligations

In March 2019, Phillips 66 Partners and its co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering.

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

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 .

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

At December 31, 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 $ 214 million.

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We measure estimates and base contingent liabilities on currently available facts, existing technology and presently enacted laws and regulations, taking into account stakeholder and business considerations.

When measuring contingent environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the EPA or other organizations.

We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.

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For the years ended December 31, 2023, 2022 and 2021, total payments under these agreements were $ 319 million, $ 323 million and $ 327 million, respectively.

Index to Financial Statements

Note 17— Derivatives and Financial Instruments

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We use financial and commodity-based derivative contracts to manage exposures to fluctuations in commodity prices, interest rates and foreign currency exchange rates, or to capture market opportunities.

Because we do not apply hedge accounting for commodity derivative contracts, all realized and unrealized gains and losses from commodity derivative contracts are recognized in our consolidated statement of operations.

Gains and losses from derivative contracts held for trading not directly related to our physical business are reported net in the “Other income” line item on our consolidated statement of operations.

Gains and losses from derivative contracts held for trading not directly related to our physical business are reported net in the “Other income” line item on our consolidated statement of income.

Cash flows from all our derivative activity for the periods presented appear in the operating section on our consolidated statement of cash flows.

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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.

Index to Financial Statements

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 information below includes DCP LP’s financial instruments from the effective date of the DCP Midstream Merger.

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

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 $ 3,201 ( 3,148 ) 18 71 1,860 ( 1,896 ) 90 54

At December 31, 2023, there was $ 7 million of net collateral received that was not offset on our consolidated balance sheet.

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:

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

Millions of Dollars

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

Index to Financial Statements

Open Position

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Natural gas (billions of cubic feet)

Index to Financial Statements

( 25 ) ( 77 )

Credit Risk from Derivative and Financial Instruments

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Fair value measured with unobservable inputs that are significant to the measurement.

Index to Financial Statements

We classify the fair value of an asset or liability based on the significance of its observable or unobservable inputs to the measurement.

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

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.

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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 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.

When applicable, 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.

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Investment in NOVONIX 39 — — 39 N/A N/A — 39

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

$ 3,269 125 1 3,395 ( 3,041 ) — — 354

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Exchange-cleared instruments $ 3,057 41 — 3,098 ( 3,039 ) ( 18 ) — 41

OTC instruments — 9 — 9 — — — 9

Physical forward contracts — 50 — 50 ( 2 ) — — 48

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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

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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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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.

In the fourth quarter of 2020, the nonrecurring fair value measurements used by Phillips 66 Partners to impair its equity method investments in two crude oil transportation and terminaling joint ventures were calculated by weighting the results of different economic scenarios using the income approach.

The income approach uses a discounted cash flow model that requires various observable and nonobservable inputs, including volumes, rates/tariffs, expenses and discount rates.

These valuations resulted in a Level 3 nonrecurring fair value measurement.

DCP Midstream

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.

PP&E and Intangible Assets

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The fair value of PP&E was determined using a combination of the income, cost and sales comparison approaches.

The income approach used a discounted cash flow model that requires various observable and non-observable inputs, such as commodity prices, margins, operating rates, sales volumes, operating expenses, capital expenditures, terminal-year values and a risk-adjusted discount rate.

The income approach used a discounted cash flow model that required various observable and non-observable inputs, such as commodity prices, margins, operating rates, sales volumes, operating expenses, capital expenditures, terminal-year values and a risk-adjusted discount rate.

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.

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

San Francisco Refinery

In the third quarter of 2020, we remeasured the carrying value of the net PP&E and intangible assets of our San Francisco Refinery asset group to fair value.

The estimated fair value of the plants, equipment and intangible assets was determined using a replacement cost approach adjusted, as applicable, for physical deterioration, functional obsolescence and economic obsolescence.

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

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

The carrying value of the Refining reporting unit’s goodwill was remeasured to fair value on a nonrecurring basis in the first quarter of 2020.

The fair value of the Refining reporting unit was calculated by weighting the results from the income approach and the market approach.

The income approach used a discounted cash flow model that included various observable and nonobservable inputs, such as prices, volumes, expenses, capital expenditures, discount rates and projected long-term growth rates and terminal values.

The market approach used peer company enterprise values relative to current and future net income (loss) before net interest expense, income taxes, depreciation and amortization (EBITDA) projections to arrive at an average multiple.

This multiple was applied to the reporting unit’s current and projected EBITDA, with consideration for an estimated market participant acquisition premium.

The resulting Level 3 fair value estimate was less than the Refining reporting unit’s carrying value by an amount that exceeded the existing goodwill balance of the reporting unit.

As a result, the Refining reporting unit’s goodwill was impaired to zero .

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

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.

DCP Midstream Merger

On August 17, 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 required 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 Combinations, for additional information on the DCP Midstream Merger.

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 $ 12,838 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 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.

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

These valuations resulted in Level 3 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.

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.

Index to Financial Statements

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.

As a result of our consolidation of DCP Midstream Class A Segment, the noncontrolling interests held in 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.

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 DCP Midstream 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.

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.

These valuations resulted in Level 3 nonrecurring fair value measurements.

Index to Financial Statements

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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.

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.

On October 25, 2023, our Board of Directors approved a $ 5 billion increase to our share repurchase authorization.

Since the inception of our share repurchase program in 2012, our Board of Directors has authorized an aggregate of $ 25 billion of repurchases of our outstanding common stock, and we have repurchased 213.8 million shares at an aggregate cost of $ 18 billion.

In 2023, we repurchased 37.8 million shares at an aggregate cost of $ 4 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.

Our share repurchase authorizations do not expire.

Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans.

Shares of stock repurchased are held as treasury shares.

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Noncontrolling Interests

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.

At December 31, 2023, our noncontrolling interests primarily represented Enbridge’s indirect economic interest in DCP LP.

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.

During 2023, DCP LP also redeemed its Series B and Series C preferred units.

See Note 29—DCP Midstream Class A Segment, for further information on the DCP LP Merger and preferred unit redemptions.

At December 31, 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 Series B and Series C preferred units.

In December 2022, DCP LP redeemed its Series A preferred units.

In March 2022, we completed a merger between us and Phillips 66 Partners, which resulted in the acquisition of all limited partnership interests in Phillips 66 Partners not already owned by us.

See Note 29—DCP Midstream Class A Segment, for further information on the preferred unit redemption.

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

Index to Financial Statements

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Certain leases have residual value guarantees, which may require additional payments at the end of the lease term if future fair values decline below contractual lease balances.

In our implementation of ASU No.

2016-02, we elected to discount lease obligations using our incremental borrowing rate.

Furthermore, we elected to separate costs for lease and service components for contracts involving marine vessels and consignment service stations.

We discount lease obligations using our incremental borrowing rate.

We separate costs for lease and service components for contracts involving marine vessels and consignment service stations.

For these contracts, we allocate the consideration payable between the lease and service components using the relative standalone prices of each component.

For contracts involving all other asset types, we elected the practical expedient to account for the lease and service components on a combined basis.

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 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.

For contracts involving all other asset types, we account for the lease and service components on a combined basis.

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 do not recognize the right-of-use (ROU) asset and corresponding lease liability on our consolidated balance sheet.

The following table indicates the consolidated balance sheet line items that include the ROU assets and lease liabilities for our finance and operating leases at December 31:

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Financing cash outflows—finance leases 19 32 21

During the years ended December 31, 2022, 2021 and 2020, we recorded additional noncash ROU assets and corresponding operating lease liabilities totaling $ 269 million, $ 260 million and $ 363 million, respectively, related to new and modified lease agreements.

During the years ended December 31, 2023, 2022 and 2021, we recorded noncash ROU assets and corresponding operating lease liabilities totaling $ 398 million, $ 269 million and $ 260 million, respectively, related to new and modified lease agreements.

Index to Financial Statements

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Plan participant contributions — 2 — 2 7 6

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

Actuarial loss (gain) 58 30 ( 528 ) ( 502 ) 2 ( 37 )

Benefits paid ( 233 ) ( 33 ) ( 519 ) ( 44 ) ( 26 ) ( 19 )

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Unrecognized prior service credit

— — — ( 1 ) — ( 2 )

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):

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Sources of Change in Other Comprehensive Income

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

Net actuarial gain (loss) arising during the period $ 20 ( 26 ) 18 136 ( 2 ) 37

Amortization of net actuarial loss (gain) and settlements

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17 — 53 9 55 — — — —

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.

Net periodic benefit cost (credit)* $ 128 ( 2 ) 162 13 168 20 5 5 7

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

Index to Financial Statements

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We rely on a variety of independent market forecasts in developing the expected rate of return for each class of assets.

For the year ended December 31, 2022, actuarial gains resulted in decreases in our U.S.

For the year ended December 31, 2023, actuarial losses resulted in increases in our U.S.

and international pension benefit obligations of $ 58 million and $ 30 million, respectively.

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

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.

The primary driver for the actuarial losses in 2023 was decreases in the discount rates.

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

For the year ended December 31, 2023, the weighted-average actual return on plan assets was 10 %, which resulted in an increase in our U.S.

and international plan assets of $ 203 million and $ 44 million, respectively.

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.

The primary driver of the return on plan assets in 2023 and 2022 was fluctuations in the equity and fixed income markets.

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• Fair values of insurance contracts are valued at the present value of the future benefit payments owed by the insurance company to the plans’ participants.

• Fair values of investments in common/collective trusts and real estate and infrastructure investments are valued at the net asset value (NAV) as a practical expedient.

• Fair values of investments in common/collective trusts (CCT) and real estate and infrastructure investments, which include a CCT, limited partnerships, and other real estate funds, are valued at the net asset value (NAV) as a practical expedient.

The NAV is based on the underlying net assets owned by the fund and the relative interest of each participating investor in the fair value of the underlying assets.

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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 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, 2023 and 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 year 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 years ended December 31, 2023, 2022 and 2021, we recorded expense of $ 196 million, $ 210 million and $ 142 million, respectively, related to our contributions to the Savings Plan.

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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).

Prior to May 11, 2022, share-based payment 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:

(1) the service period (i.e., the stated period of time required to earn the award);

As of December 31, 2023, approximately 13 million shares of Phillips 66’s common stock remained available to be issued to settle share-based payment awards under the 2022 P66 Omnibus Plan.

Total share-based compensation expense recognized in income and the associated income tax benefit for the years ended December 31 were:

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Restricted Stock Units

Generally, RSUs are granted annually under the provisions of the applicable Phillips 66 incentive 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 vest either ratably over three years following the grant date or cliff vest at the end of three years for awards granted in 2023.

For awards granted prior to 2023, RSUs 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.

The recipients receive a quarterly dividend equivalent cash payment until the RSU is settled by issuing one share of our common stock for each RSU at the end of the service period.

RSUs granted to retirement-eligible employees are not subject to forfeiture six months after the grant date.

RSUs granted to retirement-eligible employees are not subject to forfeiture ten months after the grant date for RSUs granted in 2023 and six months after the grant date for RSUs granted prior to 2023.

Special RSUs are granted to attract or retain key personnel and the terms and conditions may vary by award.

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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.

Retirement-eligible employees may retain a prorated share of the award if they retire prior to the grant date.

PSUs are classified as liability awards and compensation expense is recognized over the three-year performance periods.

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.

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

Options granted to retirement-eligible employees are not subject to forfeiture ten months after the grant date for options granted in 2023 and six months after the grant date for options granted prior to 2023.

The following table summarizes our stock option activity from January 1, 2023, to December 31, 2023:

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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.

As a result of the DCP Midstream Merger, we began consolidating DCP Midstream Class A Segment starting on August 18, 2022.

DCP Midstream Class A Segment had a Long-Term Incentive Plan under which phantom units, performance units and distribution equivalent rights were awarded to key employees.

On June 15, 2023, DCP Midstream Class A Segment’s share-based payment awards were converted to Phillips 66 share-based payment awards and are included in the share-based payment award tables above.

Share-based compensation expense recognized for DCP Midstream Class A Segment’s share-based payment awards totaled $ 23 million for the period from August 18, 2022, through December 31, 2022, and $ 6 million for the period from January 1, 2023, through June 14, 2023.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers and Note 4—Business Combinations for additional information regarding the merger and associated accounting treatment.

Index to Financial Statements

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$ 2,230 3,248 146

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.

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

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

We do not owe corporate alternative minimum tax in 2023 as the regular U.S.

tax liability exceeds the corporate alternative minimum tax.

The IRA also included provisions that allow a company to purchase transferable tax credits.

In 2023, we executed agreements to purchase eligible tax credits for a total of $ 262 million.

In 2023, we paid $ 196 million to our counterparties and the remainder will be paid in 2024.

These tax credits were used to offset estimated tax payments in 2023.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes.

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Net deferred tax liabilities $ 7,300 6,582

Index to Financial Statements

At December 31, 2023, the loss and credit carryforward deferred tax assets were primarily related to a foreign tax credit carryforward in the United States of $ 113 million;

a state tax net operating loss carryforward of $ 30 million;

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

and capital loss and net operating loss carryforwards in the United Kingdom of $ 8 million.

State net operating loss carryforwards begin to expire in 2040.

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Earnings of our foreign subsidiaries and foreign joint ventures after December 31, 2017, are generally not subject to incremental income taxes in the United States or withholding taxes in foreign countries upon repatriation.

As such, we only assert that the earnings of one of our foreign subsidiaries are permanently reinvested.

As such, we only assert that the earnings of one of our foreign subsidiaries are indefinitely reinvested.

At December 31, 2023 and 2022, the unrecorded deferred tax liability related to the undistributed earnings of this foreign subsidiary was not material.

Index to Financial Statements

A deferred income tax liability has not been recognized on the excess of the book basis over the tax basis of an investment in a controlled foreign subsidiary that is essentially permanent in duration.

Recognition of a deferred tax liability will only be required if it becomes apparent that this subsidiary will be sold or liquidated in the foreseeable future.

At December 31, 2023, the temporary difference resulting from the investment book basis exceeding the tax basis was $ 1,430 million.

Determination of the unrecognized deferred income tax liability related to this temporary difference is not practicable given the variables involved in performing such a calculation.

We file tax returns in the U.S.

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Included in the balance of unrecognized income tax benefits at December 31, 2023, 2022 and 2021, were $ 100 million, $ 37 million and $ 35 million, respectively, which, if recognized, would affect our effective income tax rate.

With respect to various unrecognized income tax benefits and the related accrued liabilities, we do not expect any to be recognized or paid within the next twelve months.

With respect to various unrecognized income tax benefits and the related accrued liabilities, we expect $ 28 million to be recognized or paid within the next twelve months.

At December 31, 2023, 2022 and 2021, accrued liabilities for interest and penalties, net of accrued income taxes, totaled $ 8 million, $ 7 million and $ 6 million, respectively.

These accruals decreased our results by $ 3 million for each of the years ended December 31, 2022, 2021 and 2020.

These accruals decreased our results for each of the years ended December 31, 2023, 2022 and 2021 by $ 1 million, $ 3 million and $ 3 million, respectively.

Index to Financial Statements

Audits in significant jurisdictions are generally complete as follows:

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Although it is reasonably possible such changes could be significant when compared with our total unrecognized income tax benefits, the amount of change is not estimable.

Index to Financial Statements

The amounts of U.S.

and foreign income (loss) before income taxes, with a reconciliation of income tax at the federal statutory rate to the recorded income tax expense (benefit), were:

and foreign income before income taxes, with a reconciliation of income tax at the federal statutory rate to the recorded income tax expense (benefit), were:

Millions of Dollars Percentage of

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2023 2022 2021 2023 2022 2021

Income (loss) before income taxes

Income before income taxes

United States $ 7,887 12,628 1,737 83.3 % 86.3 99.8

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State income tax, net of federal income tax benefit 290 341 ( 65 ) 3.1 2.3 ( 3.7 )

Net operating loss carryback — — ( 398 ) — — 8.0

Goodwill impairment — — 387 — — ( 7.8 )

Noncontrolling interests ( 51 ) ( 74 ) ( 57 ) ( 0.5 ) ( 0.5 ) ( 3.3 )

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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 $ 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.”

For the years ended December 31, 2023 and 2022, income tax benefits of $ 113 million and $ 323 million, respectively, are reflected in “Capital in Excess of Par” on 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.

Index to Financial Statements

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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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Defined benefit plans*

Amortization of net actuarial loss, prior service credit and settlements 72 — — 72

Amortization of net actuarial loss and settlements 14 — — 14

Foreign currency translation — — — —

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Income taxes* 1,397 2,071 ( 1,065 )

* 2023 includes $ 196 million of cash paid to counterparties to purchase IRA eligible tax credits.

2021 reflects a net cash refund position.

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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.

(d) As a result of the DCP Midstream Merger, we began consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills.

As such, 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, 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.

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.

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

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.

3) Refining— Refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, at 12 refineries in the United States and Europe.

3) Refining— Refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels.

This segment includes 12 refineries in the United States and Europe.

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 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 and Other includes general corporate overhead, interest income, 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.

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Corporate and Other ( 1,306 ) ( 1,169 ) ( 974 )

Consolidated income (loss) before income taxes $ 14,639 1,740 ( 4,964 )

Consolidated income before income taxes $ 9,469 14,639 1,740

Investments In and Advances To Affiliates

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Germany 394 391 605

Other foreign countries 87 96 101

Other countries 90 87 96

Worldwide consolidated $ 51,014 50,113 36,906

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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;

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 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.

At December 31, 2022, we held a 43.31 % indirect economic interest in DCP LP.

As a result of the DCP Midstream Merger, we began consolidating 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.

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.

Index to Financial Statements

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Millions of Dollars

December 31, 2022

December 31, 2023 December 31, 2022

Accounts receivable, trade* $ 601 988

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** Included in the “Investments and long-term receivables” line item on the Phillips 66 consolidated balance sheet.

DCP LP Merger

On June 15, 2023, we completed the acquisition of approximately 91 million publicly held common units of DCP LP pursuant to the terms of the DCP LP Merger Agreement.

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

See Note 11—Debt, for additional information.

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’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.

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.

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.

In December 2022, DCP LP redeemed its Series A preferred units with an aggregate liquidation preference of $ 500 million, which approximated the book value of the preferred units.

Trading and Reporting Status

DCP LP’s common units, Series B preferred units and Series C preferred units have been delisted and deregistered from the New York Stock Exchange.

In addition, DCP LP has suspended its reporting obligations to the Securities and Exchange Commission under Sections 13 and 15(d) of the Exchange Act.

Distributions

For the years ended December 31, 2023, and 2022, DCP LP made cash distributions of $ 125 million and $ 51 million, respectively, to common unitholders other than Phillips 66 and its subsidiaries, and $ 15 million and $ 27 million, respectively, to preferred unitholders.

Index to Financial Statements

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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, 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.

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.

For the years ended December 31, 2023, and 2022, we recorded restructuring costs totaling $ 177 million and $ 160 million, respectively, primarily related to consulting fees and severance costs.

Restructuring costs for the year ended December 31, 2022, also included 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 income and are reported in our Corporate segment.

In addition, for the years ended December 31, 2023 and 2022, we recorded restructuring costs of $ 38 million and $ 18 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.

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.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures,” which enhances the transparency, effectiveness, and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid.

This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

We are evaluating the provisions of ASU 2023-09 and the impact on our financial statement disclosures.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We are evaluating the provisions of ASU 2023-07 and the impact on our segment reporting disclosures.

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842):

Common Control Arrangements.” This ASU provides additional requirements for lessees that are a party to a lease between entities under common control in which there are leasehold improvements.

This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

Effective January 1, 2024, we adopted ASU 2023-01.

At the time of adoption, there was no impact on our consolidated financial statements from this ASU.

Index to Financial Statements

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data