What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-04-29 · 217 added, 100 removed, 622 unchanged (34% of the section changed)

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Revenues and Other Income

1 unchanged sentence

Equity in earnings of affiliates 487 563 1,015 1,174

Net gain on dispositions — 34

Net gain (loss) on dispositions 237 ( 12 ) 237 22

Other income 58 99 155 147

26 unchanged sentences

Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Net Income $ 1,020 1,734 1,781 3,811

18 unchanged sentences

Accounts and notes receivable (net of allowances of $ 73 million in 2024 and $ 71 million in 2023)

10,078 10,483

Accounts and notes receivable—related parties 1,870 1,247

39 unchanged sentences

Millions of Dollars

Three Months Ended

Six Months Ended

Cash Flows From Operating Activities

Net income $ 1,781 3,811

Adjustments to reconcile net income to net cash provided by operating

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

Depreciation and amortization 1,001 971

5 unchanged sentences

Net gain on dispositions ( 237 ) ( 22 )

Unrealized investment (gain) loss ( 6 ) 11

Unrealized investment loss 1 26

Other ( 6 ) ( 101 )

Working capital adjustments

4 unchanged sentences

Taxes and other accruals ( 297 ) ( 366 )

Net Cash Provided by (Used in) Operating Activities ( 236 ) 1,199

Net Cash Provided by Operating Activities 1,861 2,154

Cash Flows From Investing Activities

2 unchanged sentences

Proceeds from asset dispositions 687 90

Collection of advances/loans—related parties 2 —

Other ( 99 ) 23

7 unchanged sentences

Distributions to noncontrolling interests ( 33 ) ( 125 )

Repurchase of noncontrolling interests — ( 3,957 )

Other ( 82 ) ( 59 )

7 unchanged sentences

Millions of Dollars

Three Months Ended March 31

Three Months Ended June 30

Attributable to Phillips 66

1 unchanged sentence

Other Comprehensive Loss Noncontrolling Interests Total

March 31, 2024 $ 7 19,674 ( 20,489 ) 30,846 ( 312 ) 1,067 30,793

Net income — — — 1,015 — 5 1,020

Other comprehensive income — — — — 3 — 3

Dividends paid on common stock ($ 1.15 per share)

— — — ( 485 ) — — ( 485 )

Repurchase of common stock — — ( 843 ) — — — ( 843 )

Distributions to noncontrolling interests — — — — — ( 20 ) ( 20 )

Benefit plan activity — 43 — ( 4 ) — — 39

June 30, 2024 $ 7 19,717 ( 21,332 ) 31,372 ( 309 ) 1,052 30,507

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

Net income — — — 1,697 — 37 1,734

Other comprehensive income — — — — 101 — 101

Dividends paid on common stock ($ 1.05 per share)

— — — ( 474 ) — — ( 474 )

Repurchase of common stock — — ( 1,339 ) — — — ( 1,339 )

Distributions to noncontrolling interests — — — — — ( 67 ) ( 67 )

Acquisition of noncontrolling interest in

DCP LP — ( 378 ) — — — ( 3,479 ) ( 3,857 )

Benefit plan activity — 46 — ( 4 ) — 4 46

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

Three Months Ended June 30

Common Stock Issued Treasury Stock

March 31, 2024 656,284,691 232,332,556

Repurchase of common stock — 5,633,070

Shares issued—share-based compensation 250,118 —

June 30, 2024 656,534,809 237,965,626

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

Repurchase of common stock — 13,669,459

Shares issued—share-based compensation 95,071 —

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

See Notes to Consolidated Financial Statements.

Millions of Dollars

Six Months Ended June 30

Attributable to Phillips 66

Par Value Capital in Excess of Par Treasury Stock Retained Earnings Accum.

Other Comprehensive Loss Noncontrolling Interests Total

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

6 unchanged sentences

Benefit plan activity — 67 — ( 8 ) — — 59

March 31, 2024 $ 7 19,674 ( 20,489 ) 30,846 ( 312 ) 1,067 30,793

June 30, 2024 $ 7 19,717 ( 21,332 ) 31,372 ( 309 ) 1,052 30,507

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

5 unchanged sentences

Distributions to noncontrolling interests — — — — — ( 125 ) ( 125 )

Acquisition of noncontrolling interest in Phillips 66 Partners LP — ( 378 ) — — — ( 3,479 ) ( 3,857 )

Benefit plan activity — 50 — ( 8 ) — 1 43

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

Three Months Ended March 31

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

Six Months Ended June 30

Common Stock Issued Treasury Stock

2 unchanged sentences

Shares issued—share-based compensation 1,692,708 —

March 31, 2024 656,284,691 232,332,556

June 30, 2024 656,534,809 237,965,626

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

1 unchanged sentence

Shares issued—share-based compensation 987,610 —

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

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

See Notes to Consolidated Financial Statements.

5 unchanged sentences

Therefore, these interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2023 Annual Report on Form 10-K.

The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results expected for the full year.

The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results expected for the full year.

Certain prior period segment financial information has been recast for comparability.

See Note 19—Segment Disclosures and Related Information, for additional information.

Note 2— DCP Midstream, LP Merger (DCP LP Merger)

1 unchanged sentence

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.

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, LLC 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 Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills) increased from 62.2 % to 91.2 %.

See Note 20—DCP Midstream Class A Segment, for additional information regarding the equity transaction.

Note 3— Business Combination

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

Note 3— Business Combinations

On August 1, 2023, our Marketing and Specialties (M&S) segment acquired a marketing business on the U.S.

West Coast for total consideration of $ 272 million.

These operations were acquired to support the placement of renewable diesel produced by our Rodeo facility, now referred to as the Rodeo Renewable Energy Complex.

At March 31, 2024, we provisionally recorded $ 146 million of amortizable intangible assets, primarily customer relationships;

These operations were acquired to support the placement of renewable diesel produced by the Rodeo Renewable Energy Complex (RREC).

We finalized the valuation of the assets acquired and the liabilities assumed during the three months ended June 30, 2024, prior to the end of the one-year measurement period on July 31, 2024.

For this acquisition, we recorded $ 146 million of amortizable intangible assets, primarily customer relationships;

$ 82 million of properties, plants and equipment (PP&E), including finance lease right of use assets;

1 unchanged sentence

$ 67 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.

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 acquisition.

and $ 63 million of finance lease liabilities.

We did not record any material adjustments to our purchase price allocation during the six months ended June 30, 2024.

Pending Acquisition

On May 17, 2024, we entered into an agreement to acquire Pinnacle Midland Parent LLC to expand our natural gas gathering and processing operations in the Permian Basin.

The transaction closed on July 1, 2024, for total cash consideration of $ 566 million.

Note 4— Sales and Other Operating Revenues

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Product Line and Services

Refined petroleum products $ 25,739 24,718

Refined petroleum products and renewable fuels $ 28,071 26,517 53,810 51,235

Crude oil resales 5,905 4,650 11,483 9,215

1 unchanged sentence

Services and other *

570 666 1,730 1,358

Consolidated sales and other operating revenues $ 38,129 35,090 73,940 69,486

9 unchanged sentences

Contract-Related Assets and Liabilities

At March 31, 2024, and December 31, 2023, receivables from contracts with customers were $ 9,592 million and $ 9,638 million, respectively.

At June 30, 2024 and December 31, 2023, receivables from contracts with customers were $ 8,919 million and $ 9,638 million, respectively.

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

Our contract-related assets also include payments we make to our marketing customers related to incentive programs.

Our contract-related assets include payments we make to our marketing customers related to incentive programs.

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

At March 31, 2024, and December 31, 2023, our asset balances related to such payments were $ 546 million and $ 537 million, respectively.

At June 30, 2024 and December 31, 2023, our asset balances related to such payments were $ 563 million and $ 537 million, respectively.

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

At March 31, 2024, and December 31, 2023, contract liabilities were $ 162 million and $ 187 million, respectively.

At June 30, 2024 and December 31, 2023, contract liabilities were $ 162 million and $ 187 million, respectively.

Remaining Performance Obligations

2 unchanged sentences

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

At March 31, 2024, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 326 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 two years as of March 31, 2024.

At June 30, 2024, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 394 million.

Note 5— Credit Losses

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

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

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

7 unchanged sentences

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

At March 31, 2024, and December 31, 2023, we reported $ 11,532 million and $ 11,730 million of accounts and notes receivable, respectively, net of allowances of $ 75 million and $ 71 million, respectively.

Based on an aging analysis at March 31, 2024, more than 95 % of our accounts receivable were outstanding less than 60 days.

At June 30, 2024 and December 31, 2023, we reported $ 10,887 million and $ 11,730 million of accounts and notes receivable, respectively, net of allowances of $ 73 million and $ 71 million, respectively.

Based on an aging analysis at June 30, 2024, more than 95 % of our accounts receivable were outstanding less than 60 days.

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

4 unchanged sentences

2024 December 31

Crude oil and petroleum products $ 5,871 3,330

Crude oil and products *

$ 6,096 3,330

Materials and supplies 426 420

$ 6,522 3,750

Inventories valued on the last-in, first-out (LIFO) basis totaled $ 5,698 million and $ 3,050 million at March 31, 2024, and December 31, 2023, respectively.

The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $ 6.3 billion and $ 5.3 billion at March 31, 2024, and December 31, 2023, respectively.

* Includes feedstocks other than crude oil.

Inventories valued on the last-in, first-out (LIFO) basis totaled $ 5,929 million and $ 3,050 million at June 30, 2024 and December 31, 2023, respectively.

The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $ 5.9 billion and $ 5.3 billion at June 30, 2024 and December 31, 2023, respectively.

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

LIFO inventory liquidations did not have a material impact on net income for the three months ended March 31, 2024, and 2023.

LIFO liquidations did not have a material impact on net income for the three and six months ended June 30, 2024 and 2023.

Note 7— Investments, Loans and Long-Term Receivables

17 unchanged sentences

The public comment period concluded on December 13, 2023.

The USACE plans to review the comments and issue its final EIS in the fall of 2024.

The USACE plans to review the comments and issue its final EIS in early 2025.

The Record of Decision will follow within 30 to 60 days after the issuance of the final EIS.

Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access with an aggregate principal amount outstanding of $ 1.85 billion at March 31, 2024.

The final EIS must be completed before the USACE can reauthorize the easement for the pipeline.

If reauthorization occurs, new litigation challenging the reauthorization may be filed.

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

On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $ 1 billion aggregate principal amount of its outstanding senior notes upon maturity.

We funded our 25 % share of the repayment, or $ 250 million, with a capital contribution of $ 171 million in March 2024 and $ 79 million of distributions we elected not to receive from Dakota Access in the first quarter of 2024.

At June 30, 2024, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $ 850 million.

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

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

At March 31, 2024, our 25 % share of the maximum potential equity contributions under the CECU was approximately $ 467 million.

At June 30, 2024, our 25 % share of the maximum potential equity contributions under the CECU was approximately $ 215 million.

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

Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also could be required to support our 25 % share of the ongoing expenses, including scheduled interest payments on the notes of approximately $ 20 million annually, in addition to the potential obligations under the CECU at March 31, 2024.

At March 31, 2024, the aggregate book value of our investments in Dakota Access and ETCO was $ 887 million.

On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $ 1 billion aggregate principal amount of its outstanding senior notes upon maturity.

As a result of the debt repayment, on April 1, 2024, our share of the maximum potential equity contributions under the CECU decreased to approximately $ 215 million, and our share of scheduled interest payments on the notes that we could be required to support decreased to approximately $ 10 million annually.

CF United LLC (CF United)

On January 1, 2024, CF United, a retail marketing joint venture with operations primarily on the U.S.

West Coast, completed the acquisition of another joint venture in which we had an ownership interest.

In connection with this acquisition, the governing agreement for CF United was amended and restated.

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

As a result of the removal of this put option, CF United ceased to be a variable interest entity (VIE) effective January 1, 2024.

At March 31, 2024, we held a 50 % voting interest and a 47 % economic interest in CF United and the book value of our investment was $ 340 million.

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 $ 10 million annually, in addition to the potential obligations under the CECU at June 30, 2024.

At June 30, 2024, the aggregate book value of our investments in Dakota Access and ETCO was $ 885 million.

OnCue Holdings, LLC (OnCue)

3 unchanged sentences

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

At March 31, 2024, our maximum exposure to loss was $ 231 million, which represented the book value of our investment in OnCue of $ 168 million and guaranteed debt obligations of $ 63 million.

At June 30, 2024, our maximum exposure to loss was $ 234 million, which represented the book value of our investment in OnCue of $ 172 million and guaranteed debt obligations of $ 62 million.

Midstream Investment Dispositions

On June 14, 2024, we sold our 25 % ownership interest in Rockies Express Pipeline LLC for approximately $ 685 million and recognized a before-tax gain of $ 238 million, which is included in the “Net gain on dispositions” line item on our consolidated statement of income for the three and six months ended June 30, 2024, and is reported in the Midstream segment.

Pending Disposition

On June 21, 2024, we entered into an agreement to sell our ownership interests in certain gathering and processing assets in Louisiana and Alabama for approximately $ 170 million, which approximates the net book value of the assets being sold.

The transaction is expected to close in the third quarter of 2024, subject to completion of customary closing conditions and satisfaction of certain due diligence requirements.

Note 8— Properties, Plants and Equipment

2 unchanged sentences

Millions of Dollars

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Midstream $ 26,277 5,085 21,192 26,124 4,382 21,742

2 unchanged sentences

Marketing and Specialties 2,013 1,199 814 1,997 1,166 831

Renewable Fuels 3,686 1,624 2,062 2,311 953 1,358

Corporate and Other 1,659 874 785 1,650 829 821

$ 55,385 20,156 35,229 55,192 19,480 35,712

In the first quarter of 2024, we recorded before-tax asset impairments totaling $ 163 million related to certain crude processing and logistics assets in California, of which $ 104 million was reported in our Refining segment and $ 59 million was reported in our Midstream segment.

We transferred $ 1 billion in gross PP&E and $ 656 million of accumulated depreciation and amortization from our Refining segment to our Renewable Fuels segment in connection with a change in composition of our operating segments.

See Note 19—Segment Disclosures and Related Information, for information regarding changes to our operating segments.

Note 9— Impairments

Millions of Dollars

Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Midstream 225 — 284 —

Refining — 4 105 5

Corporate and Other — — 1 7

Total impairments $ 225 4 390 12

For the three and six months ended June 30, 2024, we recorded before-tax impairments totaling $ 225 million and $ 390 million, respectively, which included before-tax impairments of $ 224 million reported in our Midstream segment related to certain gathering and processing assets in Texas.

The six-month period of 2024 also included $ 163 million of before-tax impairments recorded in the first quarter of 2024 related to certain crude oil processing and logistics assets in California, of which $ 104 million was reported in our Refining segment and $ 59 million was reported in our Midstream segment.

Note 10— Earnings Per Share

5 unchanged sentences

Three Months Ended

Basic Diluted Basic Diluted

June 30 Six Months Ended

2024 2023 2024 2023

Basic Diluted Basic Diluted Basic Diluted Basic Diluted

Amounts Attributed to Phillips 66 Common Stockholders (millions) :

17 unchanged sentences

Interest on the Additional 2033 Notes is payable semi-annually on June 30 and December 30 of each year, commencing on June 30, 2024.

On June 20, 2023, Phillips 66 Company borrowed $ 1.25 billion under its delayed draw term loan that matures in June 2026.

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 that are fully and unconditionally guaranteed by Phillips 66.

5 unchanged sentences

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.

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 loss before income taxes.

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

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

Related Party Advance Term Loan Agreements

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

The debt matures on May 31, 2038.

Borrowings bear interest at a floating rate of 1.042 % plus the adjusted term Secured Overnight Financing Rate (SOFR), payable on the last day of each month.

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

On June 25, 2024, we entered into a $ 400 million uncommitted credit facility (the Uncommitted Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor.

The Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities.

The Uncommitted Facility has no commitment fees or compensating balance requirements.

Outstanding borrowings under the Uncommitted Facility bear interest at a rate of either (a) the adjusted term SOFR, (b) the adjusted daily simple SOFR or (c) the reference rate, in each case plus the applicable margin.

Each borrowing matures six months from the date of such borrowing.

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

At June 30, 2024, $ 400 million was outstanding under the Uncommitted Facility.

On February 28, 2024, we entered into a new $ 5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029.

The Facility replaced our previous $ 5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as guarantor, and the previous revolving credit facility was terminated.

The Facility replaced our previous $ 5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as the guarantor, and the previous revolving credit facility was terminated.

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

6 unchanged sentences

Outstanding borrowings under the Facility bear interest at either:

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

(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.

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

At March 31, 2024, and December 31, 2023, no amount had been drawn under our revolving credit facilities.

At June 30, 2024 and December 31, 2023, no amount had been drawn under the Facility or the previous revolving credit facility, respectively.

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

Commercial paper maturities are contractually limited to less than one year.

At March 31, 2024, $ 1.5 billion of commercial paper had been issued under this program.

At June 30, 2024, $ 899 million of commercial paper had been issued under this program.

At December 31, 2023, no borrowings were outstanding under this program.

3 unchanged sentences

Note 12— Guarantees

At March 31, 2024, we were liable for certain contingent obligations under various contractual arrangements as described below.

At June 30, 2024, we were liable for certain contingent obligations under various contractual arrangements as described below.

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

3 unchanged sentences

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

We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $ 514 million at March 31, 2024.

We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $ 514 million at June 30, 2024.

We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $ 172 million.

3 unchanged sentences

See Note 7—Investments, Loans and Long-Term Receivables, for additional information regarding Dakota Access and the CECU.

At March 31, 2024, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to two years .

At June 30, 2024, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to one year .

The maximum potential future exposures under these guarantees were approximately $ 177 million.

5 unchanged sentences

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

At March 31, 2024, and December 31, 2023, the carrying amount of recorded indemnifications was $ 155 million and $ 159 million, respectively.

At June 30, 2024 and December 31, 2023, the carrying amount of recorded indemnifications was $ 151 million and $ 159 million, respectively.

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

1 unchanged sentence

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

At March 31, 2024, and December 31, 2023, environmental accruals for known contamination of $ 110 million and $ 114 million, respectively, were included in the carrying amount of the recorded indemnifications noted above.

At June 30, 2024 and December 31, 2023, environmental accruals for known contamination of $ 105 million and $ 114 million, respectively, were included in the carrying amount of the recorded indemnifications noted above.

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

36 unchanged sentences

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

At March 31, 2024, our total environmental accruals were $ 442 million, compared with $ 446 million at December 31, 2023.

At June 30, 2024, our total environmental accruals were $ 448 million, compared with $ 446 million at December 31, 2023.

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

8 unchanged sentences

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

At March 31, 2024, we had performance obligations secured by letters of credit and bank guarantees of $ 847 million related to various purchase and other commitments incident to the ordinary conduct of business.

At June 30, 2024, we had performance obligations secured by letters of credit and bank guarantees of $ 1.1 billion related to various purchase and other commitments incident to the ordinary conduct of business.

Note 14— Derivatives and Financial Instruments

12 unchanged sentences

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.

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

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

The balances in the following table are presented on a gross basis, before the effects of counterparty and collateral netting.

1 unchanged sentence

Millions of Dollars

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

5 unchanged sentences

Total $ 3,283 ( 3,387 ) 112 8 3,201 ( 3,148 ) 18 71

At March 31, 2024, there was $ 13 million of cash collateral paid that was not offset on our consolidated balance sheet.

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

At June 30, 2024 and December 31, 2023, 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 income, were:

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Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Sales and other operating revenues $ 29 210 ( 173 ) 260

Other income (loss) 38 ( 14 )

Other income 30 24 68 10

Purchased crude oil and products 38 ( 34 ) ( 218 ) 103

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

The percentage of our derivative contract volumes expiring within the next 12 months was more than 90 % at March 31, 2024, and December 31, 2023.

The percentage of our derivative contract volumes expiring within the next 12 months was more than 90 % at June 30, 2024 and December 31, 2023.

Open Position

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Natural gas (billions of cubic feet)

( 13 ) ( 25 )

Credit Risk from Derivative and Financial Instruments

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

The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at March 31, 2024, and December 31, 2023.

The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at June 30, 2024 and December 31, 2023.

Note 15— Fair Value Measurements

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

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

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

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

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Millions of Dollars

March 31, 2024

June 30, 2024

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

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See Note 14—Derivatives and Financial Instruments, for information regarding where the assets and liabilities related to our commodity derivatives are recorded on our consolidated balance sheet.

Nonrecurring Fair Value Measurements

Equity Investments and PP&E

In the second quarter of 2024, we remeasured the carrying value of the net PP&E and equity method investment in a Texas gathering and processing asset group to fair value.

Fair value was determined using a market approach.

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

Note 16— Pension and Postretirement Plans

The components of net periodic benefit cost for the three months ended March 31, 2024 and 2023, were as follows:

The components of net periodic benefit cost for the three and six months ended June 30, 2024 and 2023, were as follows:

Millions of Dollars

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Components of Net Periodic Benefit Cost

Three Months Ended March 31

Three Months Ended June 30

Service cost $ 29 4 27 3 — 1

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Settlements 3 — 4 — — —

Net periodic benefit cost* $ 23 — 38 — 2 1

Net periodic benefit (credit) cost* $ 25 1 32 ( 1 ) 1 2

Six Months Ended June 30

Service cost $ 58 7 54 6 1 2

Interest cost 57 16 59 16 4 4

Expected return on plan assets ( 77 ) ( 22 ) ( 63 ) ( 21 ) — —

Amortization of net actuarial loss (gain) 6 — 6 ( 2 ) ( 2 ) ( 3 )

Settlements 4 — 14 — — —

Net periodic benefit (credit) cost* $ 48 1 70 ( 1 ) 3 3

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

During the three months ended March 31, 2024, we contributed $ 5 million to our U.S.

During the six months ended June 30, 2024, we contributed $ 18 million to our U.S.

pension and other postretirement benefit plans and $ 2 million to our international pension plans.

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Net current period other comprehensive income (loss) 6 ( 33 ) — ( 27 )

March 31, 2024 $ ( 118 ) ( 189 ) ( 5 ) ( 312 )

June 30, 2024 $ ( 114 ) ( 190 ) ( 5 ) ( 309 )

December 31, 2022 $ ( 122 ) ( 336 ) ( 2 ) ( 460 )

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Net current period other comprehensive income 14 174 — 188

March 31, 2023 $ ( 112 ) ( 259 ) ( 2 ) ( 373 )

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

* Included in the computation of net periodic benefit cost.

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Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Operating revenues and other income (a) $ 1,188 1,059 2,321 2,363

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Operating expenses and selling, general and administrative expenses (c) 77 76 146 148

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

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

We also sold certain feedstocks and intermediate products to WRB and acted as an agent for WRB in supplying crude oil and other feedstocks for a fee.

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We also purchased natural gas and NGL from CPChem, as well as other feedstocks from various equity affiliates, for use in our refinery and fractionation processes.

In addition, we purchased base oils and fuel products from Excel Paralubes for use in our specialty and refining businesses.

In addition, we purchased base oils and fuel products from Excel for use in our specialty and refining businesses.

We paid NGL fractionation fees to CPChem.

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Note 19— Segment Disclosures and Related Information

Effective April 1, 2024, we changed the internal financial information reviewed by our chief executive officer to evaluate performance and allocate resources to our operating segments.

This included changes in the composition of our operating segments, as well as measurement changes for certain activities between our operating segments.

The primary effects are summarized below:

• Establishment of a Renewable Fuels operating segment, which includes renewable fuels activities and assets historically reported in our Refining, M&S and Midstream segments.

• Change in method of allocating results for certain Gulf Coast distillate export activities from our M&S segment to our Refining segment.

• Reclassification of certain crude oil and international clean products trading activities between our M&S segment and our Refining segment.

• Change in reporting of our 16 % investment in NOVONIX from our Midstream segment to Corporate and Other.

The segment realignment is presented for the three- and six-month periods ended June 30, 2024, 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.

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.

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

This segment includes 11 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.

4) Marketing and Specialties— Purchases for resale and markets refined products, 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 income, interest expense, our investment in research of new technologies, business transformation restructuring costs, and various other corporate activities.

5) Renewable Fuels —Processes renewable feedstocks into renewable products at the RREC.

In addition, this segment also includes the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels.

Corporate assets include all cash, cash equivalents and income tax-related assets.

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Three Months Ended

June 30 Six Months Ended

2024 2023 2024 2023

Sales and Other Operating Revenues *

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Total Marketing and Specialties 24,945 23,224 47,029 44,883

Renewable Fuels

Total sales 1,501 1,235 2,644 2,289

Intersegment eliminations ( 1,151 ) ( 873 ) ( 1,926 ) ( 1,705 )

Total Renewable Fuels 350 362 718 584

Corporate and Other 8 9 18 18

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Marketing and Specialties 415 533 781 896

Renewable Fuels ( 55 ) 68 ( 110 ) 142

Corporate and Other ( 340 ) ( 344 ) ( 662 ) ( 638 )

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Marketing and Specialties 10,672 10,834

Renewable Fuels 3,245 2,012

Corporate and Other 4,135 5,233

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Note 20— Income Taxes

Our effective income tax rate for the three months ended March 31, 2024, was 21 %, compared to 22 % for the corresponding period of 2023.

The decrease in our effective rate for the three months ended March 31, 2024, was primarily attributable to a decrease related to tax benefits from share-based compensation plans, partially offset by an increase in our foreign tax rate.

Our effective income tax rates for the three and six months ended June 30, 2024, were 22 % and 22 %, respectively, compared to 23 % and 22 % for the corresponding periods of 2023, respectively.

The decrease in our effective rate for the three months ended June 30, 2024, was primarily attributable to tax benefits from share-based compensation plans, partially offset by an increase in our foreign tax rate.

The effective tax rates for the three and six months ended June 30, 2024, varied from the U.S.

federal statutory income tax rate primarily due to state income taxes and the impact of foreign operations, partially offset by the impact of non-taxable earnings and tax benefits from share-based compensation plans.

Note 21—DCP Midstream Class A Segment

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.

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

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

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2024 December 31

Accounts receivable, trade* $ 459 601

Accounts receivable $ 507 601

Net properties, plants and equipment 8,967 9,319

Investments in unconsolidated affiliates** 1,872 1,901

Investments and long-term receivables 1,849 1,901

Accounts payable 756 815

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Long-term debt 3,435 3,759

* Included in the “Accounts and notes receivable” line item on the Phillips 66 consolidated balance sheet.

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

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

On June 15, 2023, we completed the DCP LP Merger pursuant to the terms of the DCP LP Merger Agreement, which increased our aggregate direct and indirect economic interest in DCP LP from 43.3 % to 86.8 %.

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, LLC 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 paid $ 3,796 million in cash consideration to common unitholders, funded with a combination of available cash and debt proceeds.

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 included 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.

The DCP LP Merger was accounted for as an equity transaction.

Preferred Units

On June 15, 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.

Distributions

During the three months ended March 31, 2024 and 2023, DCP LP made cash distributions of $ 12 million and $ 51 million to common unit holders other than Phillips 66 and its subsidiaries.

During the three and six months ended June 30, 2024, DCP LP made cash distributions of $ 12 million and $ 24 million, respectively, to a common unit holder other than Phillips 66 and its subsidiaries.

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

Note 22— Restructuring

In April 2022, we began a multi-year business transformation focused on enterprise-wide opportunities to improve our cost structure.

For the three months ended March 31, 2023, we recorded restructuring costs totaling $ 35 million, primarily related to consulting fees.

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

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

In addition, in the first quarter of 2023, we recorded restructuring costs of $ 12 million associated with the integration of DCP Midstream Class A Segment primarily related to severance.

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

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

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

What changed 10-Q

Item 1. Financial Statements