What changed in this filing

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Item 1. Financial Statements

2024-10-29 compared with 2024-07-31 · 206 added, 116 removed, 723 unchanged (31% of the section changed)

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

2 unchanged sentences

Equity in earnings of affiliates 549 562 1,564 1,736

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

Net gain on dispositions 2 102 239 124

Other income 84 15 239 162

9 unchanged sentences

Interest and debt expense 229 221 687 679

Foreign currency transaction losses 1 2 8 27

Foreign currency transaction (gains) losses 1 ( 12 ) 9 15

Total Costs and Expenses 35,750 37,509 108,822 103,443

14 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

60 unchanged sentences

Millions of Dollars

Six Months Ended

Nine Months Ended

Cash Flows From Operating Activities

6 unchanged sentences

Undistributed equity earnings ( 519 ) ( 767 )

Loss on early redemption of debt 2 53

Loss (gain) on early redemption of debt ( 3 ) 53

Net gain on dispositions ( 239 ) ( 124 )

10 unchanged sentences

Capital expenditures and investments ( 1,353 ) ( 1,521 )

Acquisitions, net of cash acquired ( 567 ) ( 263 )

Purchases of government obligations ( 1,100 ) —

Return of investments in equity affiliates 122 159

Proceeds from asset dispositions 906 370

Collection of advances/loans—related parties 2 —

Other ( 126 ) 73

17 unchanged sentences

Millions of Dollars

Three Months Ended June 30

Three Months Ended September 30

Attributable to Phillips 66

1 unchanged sentence

Other Comprehensive Loss Noncontrolling Interests Total

March 31, 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

Net income — — — 346 — 23 369

5 unchanged sentences

Benefit plan activity — 42 — ( 4 ) — — 38

September 30, 2024 $ 7 19,759 ( 22,140 ) 31,237 ( 141 ) 1,062 29,784

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

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

Net income — — — 2,097 — 46 2,143

Other comprehensive income — — — — 101 — 101

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

Dividends paid on common stock ($ 1.05 per share)

3 unchanged sentences

Acquisition of noncontrolling interest in

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

DCP Midstream, LP — 17 — — — ( 25 ) ( 8 )

Benefit plan activity — 123 — ( 3 ) — — 120

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

Three Months Ended June 30

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

Three Months Ended September 30

Common Stock Issued Treasury Stock

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

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

Repurchase of common stock — 5,932,552

Shares issued—share-based compensation 352,596 —

September 30, 2024 656,887,405 243,898,178

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

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

Repurchase of common stock — 6,523,145

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

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

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

See Notes to Consolidated Financial Statements.

Millions of Dollars

Six Months Ended June 30

Nine Months Ended September 30

Attributable to Phillips 66

3 unchanged sentences

Net income — — — 2,109 — 41 2,150

Other comprehensive loss — — — — ( 27 ) — ( 27 )

Other comprehensive income — — — — 141 — 141

Dividends paid on common stock ($ 3.35 per share)

3 unchanged sentences

Benefit plan activity — 109 — ( 12 ) — — 97

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

September 30, 2024 $ 7 19,759 ( 22,140 ) 31,237 ( 141 ) 1,062 29,784

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

5 unchanged sentences

Distributions to noncontrolling interests — — — — — ( 140 ) ( 140 )

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

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

Benefit plan activity — 173 — ( 11 ) — 1 163

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

Six Months Ended June 30

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

Nine Months Ended September 30

Common Stock Issued Treasury Stock

2 unchanged sentences

Shares issued—share-based compensation 2,045,304 —

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

September 30, 2024 656,887,405 243,898,178

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

1 unchanged sentence

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

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

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

See Notes to Consolidated Financial Statements.

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

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.

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

Certain prior period financial information has been reclassified and recast for comparability.

See Note 19—Cash Flow Information and Note 21—Segment Disclosures and Related Information, for additional information.

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

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See Note 23—DCP Midstream Class A Segment, for additional information regarding the DCP LP Merger.

Note 3— Restructuring

Los Angeles Refinery

On September 20, 2024, we approved a plan to cease operations at our Los Angeles Refinery in the fourth quarter of 2025, and are evaluating potential future uses of the property.

As a result of this decision, the following impacts were recorded in our Refining segment:

• We assessed the Los Angeles Refinery asset group for impairment and concluded that the carrying value of the asset group was recoverable.

However, the estimated useful lives of the Los Angeles Refinery assets were shortened to reflect the plan to cease the use of the assets in the fourth quarter of 2025.

As such, depreciation of the $ 1,538 million carrying value of the Los Angeles Refinery assets will be accelerated through December 2025 to reduce the carrying value of the net properties, plants and equipment (PP&E) and intangible assets to the estimated salvage value of $ 241 million.

Total depreciation related to the Los Angeles Refinery assets for the three months ended September 30, 2024 was $ 50 million, including $ 25 million of accelerated depreciation.

This accelerated depreciation is included within the “Depreciation and amortization” line item on our consolidated statement of income for the three and nine months ended September 30, 2024.

• We increased our asset retirement obligations (AROs) by $ 205 million as of September 30, 2024, with a corresponding increase to the carrying amount of the related long-lived assets.

The increase was primarily driven by a change in the estimated timing of spending for asbestos abatement and decommissioning of assets at the Los Angeles Refinery.

Depreciation of the related capitalized asset retirement costs also will be recorded through December 2025, and the amount for the three and nine months ended September 30, 2024, is reflected in the accelerated depreciation discussed above.

• We recorded $ 41 million of severance costs, which are included in the “Operating expenses” line item on our consolidated statement of income for the three and nine months ended September 30, 2024.

Business Transformation

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

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

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

These costs 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.

Note 4— Business Combinations

On July 1, 2024, we acquired Pinnacle Midland Parent LLC to expand our natural gas gathering and processing operations in the Permian Basin for total cash consideration of $ 567 million.

For this acquisition, we provisionally recorded $ 325 million of PP&E, including finance lease right of use assets;

$ 256 million of amortizable intangible assets, primarily customer relationships;

$ 21 million of goodwill;

$ 16 million of net working capital deficit;

$ 13 million of AROs;

and $ 6 million of finance lease liabilities.

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

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

3 unchanged sentences

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;

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

$ 40 million of net working capital;

1 unchanged sentence

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 5— Sales and Other Operating Revenues

3 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

16 unchanged sentences

Contract-Related Assets and Liabilities

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

At September 30, 2024 and December 31, 2023, receivables from contracts with customers were $ 8,542 million and $ 9,638 million, respectively.

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

1 unchanged sentence

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

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

At September 30, 2024 and December 31, 2023, our asset balances related to such payments were $ 608 million and $ 537 million, respectively.

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

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

At September 30, 2024 and December 31, 2023, contract liabilities were $ 183 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 June 30, 2024, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 394 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 June 30, 2024.

At September 30, 2024, the remaining performance obligations related to these minimum volume commitment contracts amounted to $ 341 million.

Note 6— Credit Losses

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

At September 30, 2024 and December 31, 2023, we reported $ 10,440 million and $ 11,730 million of accounts and notes receivable, respectively, net of allowances of $ 77 million and $ 71 million, respectively.

Based on an aging analysis at September 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.

9 unchanged sentences

* 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.

Inventories valued on the last-in, first-out (LIFO) basis totaled $ 5,491 million and $ 3,050 million at September 30, 2024 and December 31, 2023, respectively.

The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $ 4.5 billion and $ 5.3 billion at September 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 liquidations did not have a material impact on net income for the three and six months ended June 30, 2024 and 2023.

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

Note 8— Investments, Loans and Long-Term Receivables

24 unchanged sentences

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.

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

At September 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 $ 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.

At September 30, 2024, the aggregate book value of our investments in Dakota Access and ETCO was $ 882 million.

OnCue Holdings, LLC (OnCue)

1 unchanged sentence

We fully guaranteed various debt agreements of OnCue and our co-venturer did not participate in the guarantees.

This entity is considered a VIE because our debt guarantees resulted in OnCue not being exposed to all potential losses.

This entity is considered a variable interest entity (VIE) because our debt guarantees resulted in OnCue not being exposed to all potential losses.

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

At June 30, 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.

At September 30, 2024, our maximum exposure to loss was $ 239 million, which represented the book value of our investment in OnCue of $ 178 million and guaranteed debt obligations of $ 61 million.

Investment Dispositions

On August 1, 2024, we sold our ownership interests in certain gathering and processing assets in Louisiana and Alabama for $ 173 million and recognized a before-tax gain of $ 18 million, which is included in the “Net gain on dispositions” line item on our consolidated statement of income for the three and nine months ended September 30, 2024, and is reported in the Midstream segment.

On June 14, 2024, we sold our 25 % ownership interest in Rockies Express Pipeline LLC for $ 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 nine months ended September 30, 2024, and is reported in the Midstream segment.

Pending Investment Dispositions

On October 28, 2024, we entered into an agreement to sell our equity interests in certain pipeline and terminaling assets in North Dakota for total cash proceeds of approximately $ 140 million, which approximates the net book value of the assets being sold.

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

On October 14, 2024, we entered into a definitive agreement to sell our 49 % non-operated equity interest in Coop Mineraloel AG (Coop) for cash proceeds of 1.06 billion Swiss francs (approximately $ 1.24 billion), consisting of a sales price of approximately 1.0 billion Swiss francs (approximately $ 1.17 billion) and an assumed dividend of 60 million Swiss francs (approximately $ 70 million) for 2024 to be paid at or prior to closing.

The sales price is subject to adjustment based on the amount of the dividend.

The transaction is subject to approval by the Swiss Competition Commission and is expected to close in the first quarter of 2025.

The net book value of our investment in Coop at September 30, 2024, was $ 152 million.

Note 9— Properties, Plants and Equipment

2 unchanged sentences

Millions of Dollars

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Midstream $ 25,951 4,576 21,375 26,124 4,382 21,742

5 unchanged sentences

$ 55,626 20,029 35,597 55,192 19,480 35,712

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.

On August 30, 2024, we sold our ownership interest in certain Midstream gathering and processing assets in Texas for $ 41 million and recognized a before-tax loss of $ 9 million, which is included in the “Net gain on dispositions” line item on our consolidated statement of income for the three and nine months ended September 30, 2024.

In the first quarter of 2024, 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 the conversion of the Rodeo facility and the change in composition of our operating segments recast in the second quarter of 2024.

See Note 21—Segment Disclosures and Related Information, for information regarding changes to our operating segments.

2 unchanged sentences

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

1 unchanged sentence

Refining — 3 105 8

Marketing & Specialties 1 — 1 —

Corporate and Other — — 1 7

Total impairments $ 29 3 419 15

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.

For the three and nine months ended September 30, 2024, we recorded before-tax impairments totaling $ 29 million and $ 419 million, respectively.

The before-tax impairments for the three and nine months ended September 30, 2024, included $ 28 million recorded in our Midstream segment related to certain crude gathering assets in Texas.

Before-tax impairments for the nine months ended September 30, 2024, also included $ 224 million recorded in our Midstream segment related to certain gathering and processing assets in Texas and $ 163 million 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 11— Earnings Per Share

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

12 unchanged sentences

Senior Notes and Term Loan Issuances and Repayments

On February 28, 2024, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, issued $ 1.5 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66.

On September 9, 2024, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, issued $ 1.8 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66.

The senior unsecured notes issuance consisted of:

• $ 600 million aggregate principal amount of 5.250 % Senior Notes due 2031 (Additional 2031 Notes).

• $ 600 million aggregate principal amount of 4.950 % Senior Notes due 2035 (2035 Notes).

• $ 600 million aggregate principal amount of 5.500 % Senior Notes due 2055 (2055 Notes).

Interest on the Additional 2031 Notes is payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 2024.

Interest on the 2035 Notes and 2055 Notes is payable semi-annually on March 15 and September 15, commencing on March 15, 2025.

On February 28, 2024, Phillips 66 Company issued $ 1.5 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66.

The senior unsecured notes issuance consisted of:

• $ 600 million aggregate principal amount of 5.250 % Senior Notes due 2031 (2031 Notes).

• $ 400 million aggregate principal amount of 5.300 % Senior Notes due 2033 (Additional 2033 Notes).

• $ 500 million aggregate principal amount of 5.650 % Senior Notes due 2054 (2054 Notes).

Interest on the 2031 Notes and 2054 Notes is payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2024.

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

Interest on the 2031 Notes and 2054 Notes is payable semi-annually on June 15 and December 15 of each year and commenced on June 15, 2024.

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

On March 29, 2023, Phillips 66 Company issued $ 1.25 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66.

The senior unsecured notes issuance consisted 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).

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

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

On March 29, 2024, DCP LP early redeemed $ 300 million of its 5.375 % Senior Notes due July 2025 at par with an aggregate principal amount of $ 825 million.

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

Discharge of Senior Notes

On September 20, 2024, we extinguished (i) the remaining $ 441 million outstanding principal amount of Phillips 66 Company’s 3.605 % senior notes due February 2025 (2025 P66 Co Notes), and (ii) the remaining $ 650 million outstanding principal amount of Phillips 66’s 3.850 % senior notes due April 2025 (the 2025 PSX Notes, and together with the 2025 P66 Co Notes, the Discharged Notes), whereby we irrevocably transferred a total of $ 1,100 million in government obligations to the trustee of the 2025 P66 Co Notes and the 2025 PSX Notes.

The cash paid to purchase the government obligations is included within investing cash flows on our consolidated statement of cash flows.

These government obligations will yield sufficient principal and interest over their remaining term to permit the trustee to satisfy the remaining principal and interest due on the Discharged Notes.

Phillips 66 and Phillips 66 Company are no longer the primary obligors under the Discharged Notes.

The transfer of the government obligations to the trustee was accounted for as a transfer of financial assets.

If the trustee is unable to apply the government obligations to fund the remaining principal and interest payments on the Discharged Notes, then the Company’s obligations under the Indenture with respect to the Discharged Notes will be revived and reinstated.

We deem the likelihood of such event to be remote with no impact to the legal isolation of the assets.

Accordingly, the senior notes and the government obligations were derecognized on our balance sheet at September 30, 2024.

For the three and nine months ended September 30, 2024, we recognized an immaterial gain on the extinguishment of this debt.

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.

At September 30, 2024 and December 31, 2023, borrowings outstanding under our Advance Term Loan agreements with WRB Refining LP (WRB) totaled $ 290 million.

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

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

On September 30, 2024, Phillips 66 Company entered into a 364 -day, $ 500 million accounts receivable securitization facility (the Receivables Securitization Facility).

Under the Receivables Securitization Facility, Phillips 66 Company sells or contributes on an ongoing basis, certain of its receivables, together with related security and interests in the proceeds thereof, to its wholly-owned subsidiary, Phillips 66 Receivables LLC, a consolidated and bankruptcy-remote special purpose entity created for the sole purpose of transacting under the Receivables Securitization Facility.

Under the Receivables Securitization Facility, Phillips 66 Receivables LLC may borrow and incur indebtedness from, and/or sell certain receivables to the Purchaser/Lenders in an amount not to exceed $ 500 million in the aggregate, and will secure its obligations with a pledge of undivided interests in such receivables, together with related security and interests in the proceeds thereof, to PNC Bank, National Association, as Administrative Agent, for the benefit of the secured parties thereunder.

Accounts outstanding under the Receivables Securitization Facility accrue interest at an adjusted SOFR.

Phillips 66 Receivables LLC’s sole activity consists of purchasing receivables from Phillips 66 Company, providing those receivables as collateral for Phillips 66 Receivables LLC’s borrowings or on-selling certain of its receivables under the Receivables Securitization Facility.

Phillips 66 Receivables LLC is a separate legal entity with its own separate creditors, who will be entitled, upon its liquidation, to be satisfied out of Phillips 66 Receivables LLC’s assets prior to assets or value in Phillips 66 Receivables LLC becoming available to Phillips 66 Receivables LLC’s equity holders, and the assets of Phillips 66 Receivables LLC, including any funds of Phillips 66 Receivables LLC that may be commingled with funds of any of its affiliates for purposes of cash management and related efficiencies, are not available to pay creditors of Phillips 66 Company, Phillips 66 or any affiliate thereof.

Collections on receivables in excess of amounts owed by Phillips 66 Receivables LLC under the Receivables Securitization Facility are available to Phillips 66 Receivables LLC for payment to Phillips 66 Company, for sales of its receivables to Phillips 66 Receivables LLC under the Securitization Facility, and otherwise for distribution to Phillips 66 Company, in each case, subject to the terms set forth in the Receivables Securitization Facility.

The amount available for borrowing or sale of receivables may be limited by the availability of eligible receivables and other customary factors and conditions, as well as the covenants set forth in the Receivables Securitization Facility.

At September 30, 2024, we had unused capacity of $ 500 million under the Receivables Securitization Facility.

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.

4 unchanged sentences

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.

At September 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.

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

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

At September 30, 2024, $ 200 million of commercial paper had been issued under this program.

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

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Note 13— Guarantees

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

At September 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.

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

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

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

We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $ 173 million.

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

At June 30, 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 .

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

The maximum potential future exposures under these guarantees were approximately $ 150 million.

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

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

At September 30, 2024 and December 31, 2023, the carrying amount of recorded indemnifications was $ 143 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.

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

At June 30, 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.

At September 30, 2024 and December 31, 2023, environmental accruals for known contamination of $ 98 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.

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We regularly assess the need for financial recognition or disclosure of these contingencies.

In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable.

In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount of loss is reasonably estimable.

If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.

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In the case of income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is uncertain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements.

Other than with respect to the legal matters described herein, based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements.

As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures.

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

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

At September 30, 2024, our total environmental accruals were $ 439 million, compared with $ 446 million at December 31, 2023.

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

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Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.

Propel Fuels Litigation

In late 2017, as part of Phillips 66 Company’s evaluation of various opportunities in the renewable fuels business, Phillips 66 Company engaged with Propel Fuels, Inc.

(Propel Fuels), a California company that distributes E85 and other alternative fuels through fueling kiosks.

Ultimately, the parties were not able to reach an agreement and negotiations were terminated in August 2018.

On February 17, 2022, Propel Fuels filed a lawsuit in the Superior Court of California, County of Alameda (the Court), alleging that Phillips 66 Company misappropriated trade secrets related to Propel Fuels’ renewable fuels business during and after due diligence.

On October 16, 2024, a jury returned a verdict against Phillips 66 Company for $ 604.9 million in compensatory damages and issued a willfulness finding.

In 2025, the Court is expected to rule on motions anticipated to be filed by Propel Fuels seeking exemplary damages and attorneys’ fees.

Phillips 66 Company expects that Propel Fuels will ask the Court to grant treble damages.

Also in 2025, the Court is expected to rule on Phillips 66 Company’s motions for a judgment in its favor as a matter of law, or in the alternative to reduce the jury’s verdict or to grant a new trial.

Phillips 66 Company denies any wrongdoing and intends to vigorously defend its position.

As a result of the jury verdict, the Company has recorded an accrual of $ 604.9 million which is included in the “Selling, general and administrative expenses” line on our consolidated statement of income for the three and nine months ended September 30, 2024, and is reported in the M&S segment.

In addition, the accrued amount is reflected as “Other liabilities and deferred credits” on our consolidated balance sheet as of September 30, 2024.

However, it is reasonably possible that the estimate of the loss could change based on the progression of the case, including the appeals process.

Because of the uncertainties associated with ongoing litigation, we are unable to estimate the range of reasonably possible loss that may be attributable to exemplary damages, if any, in excess of the amount accrued.

If information were to become available that would allow us to reasonably estimate a range of potential exposure in an amount higher or lower than the amount already accrued, we would adjust our accrued liabilities accordingly.

While Phillips 66 Company believes the jury verdict is not legally or factually supported and intends to pursue post-judgment remedies and file an appeal, there can be no assurances that such defense efforts will be successful.

To the extent Phillips 66 Company is required to pay exemplary damages, it may have a material adverse effect on our financial position and results of operations.

Other Contingencies

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

At June 30, 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.

At September 30, 2024, we had performance obligations secured by letters of credit and bank guarantees of $ 848 million related to various purchase and other commitments incident to the ordinary conduct of business.

Note 15— Derivatives and Financial Instruments

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For further information regarding the fair value of derivatives, see Note 16—Fair Value Measurements.

Commodity Derivative Contracts —We sell into or receive supply from the worldwide crude oil, refined petroleum product, NGL, natural gas, renewable feedstock, and electric power markets, exposing our revenues, purchases, cost of operating activities and cash flows to fluctuations in the prices for these commodities.

Commodity Derivative Contracts

We sell into or receive supply from the worldwide crude oil, refined petroleum product, NGL, natural gas, renewable feedstock, and electric power markets, exposing our revenues, purchases, cost of operating activities and cash flows to fluctuations in the prices for these commodities.

Generally, our policy is to remain exposed to the market prices of commodities;

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Millions of Dollars

June 30, 2024 December 31, 2023

September 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

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Total $ 5,816 ( 5,812 ) 100 104 3,201 ( 3,148 ) 18 71

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.

At September 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

September 30 Nine Months Ended

2024 2023 2024 2023

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

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

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

Open Position

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

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

Note 16— Fair Value Measurements

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Millions of Dollars

June 30, 2024

September 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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Exchange-cleared instruments $ 5,705 — — 5,705 ( 5,635 ) ( 6 ) — 64

OTC instruments — 4 — 4 — — — 4

Physical forward contracts — 104 3 107 ( 8 ) — — 99

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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.

In the second and third quarters of 2024, we remeasured the carrying value of the net PP&E and equity method investment in certain crude gathering, and gathering and processing asset groups in Texas to fair value.

Fair value was determined using a market approach.

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

These valuations resulted in Level 3 nonrecurring fair value measurements.

Note 17— Pension and Postretirement Plans

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

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

Millions of Dollars

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Components of Net Periodic Benefit Cost

Three Months Ended June 30

Three Months Ended September 30

Service cost $ 29 3 27 3 1 1

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Settlements — — 1 — — —

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

Six Months Ended June 30

Net periodic benefit cost* $ 23 — 29 — 1 1

Nine Months Ended September 30

Service cost $ 87 10 81 9 2 3

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

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

During the nine months ended September 30, 2024, we contributed $ 22 million to our U.S.

pension and other postretirement benefit plans and $ 4 million to our international pension plans.

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December 31, 2023 $ ( 120 ) ( 157 ) ( 5 ) ( 282 )

Other comprehensive income (loss) before reclassifications 1 ( 33 ) — ( 32 )

Other comprehensive income before reclassifications 1 133 — 134

Amounts reclassified from accumulated other

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Hedging — — — —

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

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

Net current period other comprehensive income 8 133 — 141

September 30, 2024 $ ( 112 ) ( 24 ) ( 5 ) ( 141 )

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

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Net current period other comprehensive income 15 60 — 75

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

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

* Included in the computation of net periodic benefit cost.

See Note 17—Pension and Postretirement Plans, for additional information.

Note 19— Cash Flow Information

In the third quarter of 2024, we began presenting the line item “Capital expenditures and investments” on our consolidated statement of cash flows exclusive of acquisitions, net of cash acquired.

Prior period information has been reclassified for comparability.

Acquisitions, net of cash acquired, were $ 567 million and $ 263 million for the nine months ended September 30, 2024 and 2023, respectively.

Supplemental Cash Flow Information

Millions of Dollars

Three Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

Non-cash investing activities

Derecognition of government obligations* 1,100 — 1,100 —

Non-cash financing activities

Derecognition of Discharged Notes* ( 1,100 ) — ( 1,100 ) —

* Refer to Note 12—Debt, for additional information regarding the derecognition of the government obligations and Discharged Notes on our balance sheet at September 30, 2024.

Note 20— Related Party Transactions

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

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The primary effects are summarized below.

Prior period information has been recast for comparability.

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

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• 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:

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Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2024 2023 2024 2023

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Note 22— Income Taxes

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.

Our effective income tax rates for the three and nine months ended September 30, 2024, were 11 % and 20 %, respectively, compared to 24 % and 23 % for the corresponding periods of 2023, respectively.

The decrease in our effective rate for the three months ended September 30, 2024, was primarily attributable to the impact of lower income before income taxes in 2024, discounts on purchased tax credits, non-taxable equity earnings, and a reduction to state income taxes.

The decrease in our effective rate for the nine months ended September 30, 2024, was primarily attributable to the tax benefits from share-based compensation plans, discounts on purchased tax credits, and non-taxable equity earnings.

The effective tax rate for the three months ended September 30, 2024, varied from the U.S.

federal statutory income tax rate primarily due to the impact of discounts on purchased tax credits and non-taxable equity earnings.

The effective tax rate for the nine months ended September 30, 2024, varied from the U.S.

federal statutory income tax rate primarily due to the tax benefit from share-based equity compensation plans, discounts on purchased tax credits, and non-taxable equity earnings, partially offset by state taxes.

Pursuant to the Inflation Reduction Act of 2022, we executed agreements to purchase eligible tax credits for a total of $ 372 million and $ 517 million during the three and nine months ended September 30, 2024, respectively.

We paid $ 102 million and $ 146 million to our counterparties during the three and nine months ended September 30, 2024, respectively, and the remainder will be paid by the end of 2024.

These credits were used to offset tax payments for 2023 and 2024.

Note 23—DCP Midstream Class A Segment

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Distributions

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 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 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.

During the three and nine months ended September 30, 2024, DCP LP made cash distributions of $ 12 million and $ 36 million, respectively, to a common unit holder other than Phillips 66 and its subsidiaries.

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

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