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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-21 · 406 added, 361 removed, 656 unchanged (54% of the section changed)

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Management’s Discussion and Analysis is the company’s analysis of its financial performance, financial condition, and significant trends that may affect future performance.

It should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

It should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report.

The term “earnings” as used in Management’s Discussion and Analysis refers to net income attributable to Phillips 66.

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EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT

Phillips 66 is uniquely positioned as a diversified and integrated downstream energy company operating with Midstream, Chemicals, Refining, and Marketing and Specialties (M&S) segments.

Phillips 66 is uniquely positioned as a leading integrated downstream energy provider operating with Midstream, Chemicals, Refining, Marketing and Specialties (M&S), and Renewable Fuels segments.

At December 31, 2024, we had total assets of $72.6 billion.

Executive Overview

During 2023, we reported earnings of $7 billion, generated $7 billion in cash from operating activities and received proceeds from debt offerings, net of debt repayments, of $2 billion.

We used available cash primarily to repurchase noncontrolling interests in DCP Midstream, LP (DCP LP) for $4.1 billion, fund capital expenditures and investments of $2.4 billion, repurchase shares of common stock for $4 billion and pay dividends on our common stock of $1.9 billion.

We ended 2023 with $3.3 billion of cash and cash equivalents and approximately $6.4 billion of total committed capacity available under our credit facilities.

Strategic Priorities Update

In November 2022, we announced financial and operational targets toward achieving the company’s strategic priorities and in October 2023, we announced updates to certain targets.

Our strategic priorities that are intended to enhance long-term shareholder value include:

• Deliver Shareholder Returns – We believe shareholder value is enhanced through, among other things, a secure, competitive and growing dividend, complemented by share repurchases.

We increased our target for returns to shareholders through share repurchases and dividends from July 2022 through year-end 2024 to a range of $13 billion to $15 billion from a range of $10 billion to $12 billion.

In support of the increased target, our Board of Directors approved a $5 billion increase to our share repurchase authorization on October 25, 2023.

We plan to return at least 50% of net cash provided by operating activities to shareholders through share repurchases and dividends.

In 2023, we paid $4 billion to repurchase shares of our common stock and paid dividends on our common stock of $1.9 billion.

During 2024, we reported earnings of $2.1 billion and generated $4.2 billion in cash from operating activities.

We funded capital expenditures and investments of $1.9 billion, completed acquisitions for cash consideration of $625 million, purchased government obligations of $1.1 billion that were ultimately used to extinguish debt, and received proceeds from asset dispositions of $1.1 billion.

Additionally, we received proceeds from debt issuances, net of debt repayments, of $2.1 billion.

We paid $3.5 billion to repurchase common stock and $1.9 billion to fund dividends on our common stock.

We ended 2024 with $1.7 billion of cash and cash equivalents and $4.6 billion of total committed capacity available under our credit facilities.

Strategic Priorities

In November 2022, we announced financial and operational targets toward achieving the company’s strategic priorities, and in October 2023, we announced updates and enhancements to certain of those targets.

The strategic priority targets were focused on achieving financial and operational goals through year-end 2024, with an emphasis on delivering shareholder returns;

improving refining performance;

capturing value from wellhead-to-market;

executing business transformation initiatives;

maintaining financial strength and flexibility;

and driving disciplined growth and returns.

In January 2025, we announced the next phase of priorities along with financial and operational initiatives through year-end 2027.

With these targets, the company is continuing to focus on creating shareholder value;

driving disciplined growth and returns;

and maintaining financial strength and flexibility.

As the company has completed its business transformation efforts, the company has shifted to operational and cost reduction targets intended to drive world-class operations across its portfolio, while maintaining emphasis on growing its Midstream and Chemicals businesses.

• Shareholder Returns – We believe shareholder value is enhanced through, among other things, a secure, competitive and growing dividend, complemented by share repurchases.

With the return of $5.3 billion to shareholders through share repurchases and dividends during 2024, we achieved our target of returning between $13 billion and $15 billion to our shareholders from July 2022 to year-end 2024, as we distributed a total of $13.6 billion to shareholders.

Our new target aims to return greater than 50% of net cash provided by operating activities to shareholders through share repurchases and dividends.

The amount and timing of future dividend payments and the level and timing of future share repurchases is subject to the discretion of, and approval by, our Board of Directors and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans.

We also plan to monetize certain assets that are no longer considered to be a long-term strategic fit.

We expect to generate proceeds of over $3 billion from the disposition of these non-core assets, which we plan to use to further advance our strategic priorities, including returns to shareholders through share repurchases and dividends.

The timing of these asset dispositions will be subject to satisfactory market conditions and any necessary regulatory approvals.

• Improve Refining Performance – We are focused on optimizing utilization rates and product yield at our refineries through reliable and safe operations, which will enable us to capture the value available in the market in terms of prices and margins.

We plan to enhance Refining segment returns and increase our utilization rates by focusing on low-capital, higher-return projects that increase asset reliability, improve market capture and reduce costs.

During 2023, our worldwide refining crude oil capacity utilization rate was 92% and our worldwide refining clean product yield was 85%, compared to 90% and 84%, respectively, in 2022.

Index to Financial Statements

• Capture Value from Wellhead-to-Market – We are focused on growing our fully integrated natural gas liquids (NGL) wellhead-to-market value chain within our Midstream segment.

As part of executing this strategy, we completed two transactions that increased our economic interest in DCP LP;

the first in 2022, which increased our indirect economic interest to 43.3%, and the second in 2023, which increased our aggregate direct and indirect economic interest in DCP LP to 86.8%.

We have already captured operating and commercial synergies from these transactions and remain focused on capturing additional synergies as we complete our integration activities in 2024.

In 2024, we have budgeted $985 million of capital expenditures and investments in our Midstream segment, of which $593 million will be focused on enhancing our integrated NGL wellhead-to-market value chain.

In addition, growth capital includes $250 million related to the repayment of our 25% share of Dakota Access, LLC’s (Dakota Access) debt due in 2024.

• Execute Business Transformation – We continue to progress our multi-year business transformation aimed at sustainably reducing our cost structure.

We exceeded our savings target by achieving a run-rate cost reduction of $900 million per year and sustaining capital reduction of $300 million per year by the end of 2023.

As such, we are now targeting a run-rate cost reduction of $1.1 billion per year by the end of 2024, while maintaining our sustaining capital reduction of $300 million per year in 2024.

• Maintain Financial Strength and Flexibility – During 2023, we successfully reduced our sustaining capital spend and used available cash and proceeds from debt offerings to increase our economic interest in DCP LP, repurchase shares of our common stock, pay dividends on our common stock, fund capital expenditures and investments and repay a portion of DCP LP’s debt.

• Drive Disciplined Growth and Returns – A disciplined capital allocation process ensures we invest in projects that are expected to generate competitive returns.

Our strategy remains focused on investing growth capital in the Midstream and Chemicals segments.

We are also investing in capital-efficient renewable fuels projects to advance a lower-carbon future.

In 2024, we have budgeted $2.2 billion in capital expenditures and investments, which includes $1.3 billion of growth capital.

DCP Midstream, LLC and Gray Oak Holdings LLC Merger (DCP Midstream Merger)

On August 17, 2022, we announced a realignment of our economic and governance interests in DCP LP and Gray Oak Pipeline, LLC (Gray Oak Pipeline) resulting from the merger of DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings).

In connection with the DCP Midstream Merger, we were delegated DCP Midstream’s governance rights over DCP LP and its general partner entities, referred to as DCP Midstream Class A Segment, and our indirect economic interest in DCP LP increased to 43.3%.

Starting on August 18, 2022, our financial results reflect the consolidation of DCP Midstream Class A Segment, as well as DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills).

Since the DCP Midstream Merger, we have taken steps to integrate the operations and personnel of DCP Midstream Class A Segment to enable the capture of commercial and operational synergies.

DCP Midstream, LP Merger (DCP LP Merger)

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

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

Under the terms of the DCP LP Merger Agreement, at the effective time of the DCP LP Merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and its subsidiaries) issued and outstanding as of immediately prior to the effective time was converted into the right to receive $41.75 per common unit in cash.

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

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements, for additional information on the DCP Midstream and DCP LP Mergers.

Index to Financial Statements

• World-Class Operations – We are focused on achieving operational excellence by optimizing utilization rates and product yield at our refineries through reliable and safe operations, which will enable us to capture the value available in the market in terms of prices and margins.

With our new targets, we will remain focused on a competitive cost structure and plan to enhance Refining segment returns and increase our utilization rates by focusing on low-capital, higher-return projects that increase asset reliability and improve market capture.

At year-end 2024, we achieved final total company run-rate cost savings of $1.5 billion through our business transformation efforts, including a $0.3 billion reduction of sustaining capital, exceeding our targeted savings on a run-rate basis.

Our worldwide refining crude oil capacity utilization rate was 95% for 2024, and our worldwide refining clean product yield was 87%, compared to 92% and 85%, respectively, in 2023.

Our new priorities for 2025-2027 continue to focus on Refining performance, targeting an annual clean product yield of greater than 86%, crude oil capacity utilization rates higher than industry average, and continuing to improve our competitive cost structure.

• Disciplined Growth and Returns – A disciplined capital allocation process ensures we invest in projects that are expected to generate competitive returns.

Our strategy remains focused on growing our Midstream and Chemicals businesses.

Within our Midstream segment, we are primarily focused on maximizing the value of our fully integrated natural gas liquids (NGL) wellhead-to-market value chain.

▪ During 2024, we completed the conversion of our San Francisco Refinery in Rodeo, California, into the Rodeo Renewable Energy Complex (Rodeo Complex).

▪ In 2024, we funded capital expenditures and investments of $1.9 billion and completed acquisitions of $0.6 billion through disciplined capital allocation and $1.1 billion in proceeds from asset dispositions.

In January 2025, we received proceeds from asset dispositions of $2.1 billion and we will continue to evaluate future opportunities to rationalize our asset portfolio.

We have budgeted $2.1 billion for 2025 capital expenditures and investments, exclusive of acquisitions, which includes $1.1 billion of growth capital, primarily in our Midstream segment.

▪ During 2024, we expanded our Midstream NGL wellhead-to-market platform with the acquisition of Pinnacle Midland Parent LLC (Pinnacle Midstream) and approval of a follow-on processing plant expansion in the Midland Basin expected to be completed in mid-2025.

In addition, we achieved over $500 million of run-rate synergies from the integration of DCP Midstream Class A Segment, which is comprised of the businesses, activities, assets and liabilities of DCP Midstream, LP (DCP LP) and its subsidiaries and general partner entities, surpassing our target.

▪ Our new financial targets for 2025-2027 reflect our plans to grow Midstream and Chemicals businesses, as well as maintain total annual capital expenditures and investments of approximately $2 billion, excluding acquisitions.

• Financial Strength and Flexibility – We use a variety of funding sources to support our liquidity requirements, including cash from operations, debt and proceeds from dispositions.

Our focus remains on protecting the stable cash generation from the Midstream and Marketing and Specialties (M&S) businesses while balancing continued portfolio optimization.

▪ During 2024, we used available cash and proceeds from asset dispositions and debt offerings to fund capital expenditures and investments, complete the acquisition of Pinnacle Midstream, purchase government obligations that were ultimately used to extinguish debt, repurchase shares of our common stock and pay dividends on our common stock.

▪ We are targeting reductions of total debt to $17 billion and reductions of our debt to capital ratio.

Basis of Presentation

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

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 operating segments.

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

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

• Change in reporting of our investment in NOVONIX Limited (NOVONIX) from our Midstream operating segment to Corporate and Other.

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.

Starting on August 18, 2022, our Midstream operating segment and consolidated results reflect the impacts of the merger of DCP Midstream, LLC and Gray Oak Holdings LLC Merger (DCP Midstream Merger).

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements for additional information.

Business Environment

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Our Transportation business contains fee-based operations not directly exposed to commodity price risk.

Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward, contains both fee-based operations and operations directly impacted by NGL and natural gas prices.

During 2023, NGL and natural gas prices decreased, compared with 2022, as the result of increased production.

Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills), contains both fee-based operations and operations directly impacted by NGL and natural gas prices.

The weighted-average NGL price was $0.68 per gallon during 2024, compared with $0.67 per gallon during 2023.

The Henry Hub natural gas price was $2.24 per million British thermal units (MMBtu) during 2024, compared with $2.53 per MMBtu during 2023.

The increase in NGL prices was primarily due to higher demand and increased exports, while the decrease in natural gas prices was partially due to increased production and constraints on Permian natural gas exit capacity.

The Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem).

The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors.

Compared with 2022, the benchmark high-density polyethylene chain margin decreased in 2023, due to lower polyethylene sales prices as a result of industry oversupply driven by recent capacity additions.

The benchmark high-density polyethylene chain margin was 17.7 cents per pound in 2024, compared with 16.4 cents per pound in 2023.

The increase was mainly due to improved polyethylene sales prices and lower natural gas and ethane prices.

Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs.

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The composite 3:2:1 market crack spread for our business decreased to an average of $16.95 per barrel during 2024, from an average of $28.37 per barrel in 2023.

The decrease in the composite market crack spread was primarily driven by lower global prices for gasoline and distillates reflecting reduced refining costs due to lower natural gas prices.

While the composite market crack spread fell in 2023, from the highest levels in at least a decade during 2022, it remains well above the five-year and 10-year average levels.

The decrease in the composite market crack spread was primarily driven by higher supply due to increased global refining utilization and lower global prices for gasoline and diesel.

The price of U.S.

benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, decreased to an average of $77.69 per barrel during 2023, from an average of $94.44 per barrel in 2022.

The decrease in crude oil prices was primarily driven by increased production in the United States and other countries outside of the Organization of Petroleum Exporting Countries (OPEC).

Results for our M&S segment depend largely on marketing fuel and lubricant margins and sales volumes of our refined petroleum products.

While marketing fuel and lubricant margins are primarily driven by market factors, largely determined by the relationship between supply and demand, marketing fuel margins, in particular, are influenced by trends in spot prices, and where applicable, retail prices for refined petroleum products in the regions and countries where we operate.

Index to Financial Statements

benchmark crude oil, West Texas Intermediate at Cushing, Oklahoma, decreased to an average of $75.83 per barrel during 2024, from an average of $77.69 per barrel in 2023.

The decrease in crude oil prices was primarily driven by increased production in the United States and other countries outside of the Organization of the Petroleum Exporting Countries (OPEC).

Results for our M&S segment depend largely on marketing fuel and lubricant margins and sales volumes of our refined products.

While marketing fuel and lubricant margins are primarily driven by market factors, largely determined by the relationship between supply and demand, marketing fuel margins, in particular, are influenced by trends in spot prices, and where applicable, retail prices for refined products in the regions and countries where we operate.

Our Renewable Fuels segment consists of the operations and assets of the Rodeo Complex, as well as the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels.

Results for our Renewable Fuels segment are impacted by several factors, including the market price of renewable fuels, feedstock costs, throughput, operating costs, and the value of certain regulatory credits, as well as other market factors, largely determined by the relationship between supply and demand.

RESULTS OF OPERATIONS

Our business segment and consolidated results reflect the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills, in connection with the DCP Midstream Merger, from August 18, 2022, forward.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements, for additional information regarding the DCP Midstream Merger.

Consolidated Results

A summary of income before income taxes by business segment with a reconciliation to net income attributable to Phillips 66 follows:

A summary of income (loss) before income taxes by operating segment with a reconciliation to net income attributable to Phillips 66 follows:

Millions of Dollars

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Marketing and Specialties 1,011 1,897 2,072

Renewable Fuels (198) 153 171

Corporate and Other (1,287) (1,340) (1,612)

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Net income attributable to Phillips 66 for the year ended December 31, 2024, was $2,117 million, compared with $7,015 million for the year ended December 31, 2023.

The decrease in 2023 was primarily due to the recognition of an aggregate before-tax gain of $3,013 million in 2022 in our Midstream segment in connection with the DCP Midstream Merger and a decline in realized refining margins, partially offset by a decrease in income tax expense and lower unrealized investment losses related to our investment in NOVONIX Limited (NOVONIX).

The decrease in 2024 was primarily due to a decline in realized refining margins primarily driven by lower market crack spreads, partially offset by lower income tax expense.

Net income attributable to Phillips 66 for the year ended December 31, 2023, was $7,015 million, compared with $11,024 million for the year ended December 31, 2022.

The improvement was primarily due to higher realized refining margins, an aggregate before-tax gain of $3,013 million recognized in our Midstream segment in connection with the DCP Midstream Merger, lower impairments in the Refining segment, and improved international marketing fuel margins.

These improvements were partially offset by an increase in income tax expense, lower equity earnings from CPChem, and an unrealized decrease in the fair value of our investment in NOVONIX.

The decrease in 2023 was primarily due to the recognition of an aggregate before-tax gain of $3,013 million in 2022 in our Midstream segment in connection with the DCP Midstream Merger, and a decline in realized refining margins, partially offset by a decrease in income tax expense and lower unrealized investment losses related to our investment in NOVONIX.

See the “Segment Results” section for additional information on our segment results and Note 24—Income Taxes, in the Notes to Consolidated Financial Statements for additional information on income taxes.

See also Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements for additional information regarding the DCP Midstream Merger.

Index to Financial Statements

Statement of Income Analysis

Sales and other operating revenues decreased 3%, primarily due to lower prices for refined petroleum products and crude oil, partially offset by an increase in prices for NGL.

Purchased crude oil and products increased 1% in 2024, primarily due to higher refined product purchase volumes, partially offset by lower prices for refined petroleum products.

Equity in earnings of affiliates decreased 12% in 2024, primarily due to lower equity earnings from WRB Refining LP (WRB) as a result of decreased margins, Rockies Express Pipeline LLC (REX) due to the sale of our ownership interest in 2024, South Texas Gateway Terminal due to the sale of our ownership interest in 2023, and Excel Paralubes LLC due to declining margins, partially offset by higher sales volumes and lower maintenance costs.

These decreases were partially offset by higher equity earnings from CPChem.

See the Chemicals segment analysis in the “Segment Results” section for additional information.

Net gain on dispositions increased $206 million in 2024, primarily due to a before-tax gain of $238 million associated with the sale of our ownership interest in REX, as well as a before-tax gain of $67 million associated with the foreign currency forward contracts entered into in connection with the sale of our ownership interest in Coop Mineraloel AG (Coop).

These increases were partially offset by before-tax gains totaling $137 million associated with the sales of our ownership interests in the South Texas Gateway Terminal and the Belle Chasse Terminal in 2023.

See Note 9—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements for more information regarding our sales of REX and Coop.

Other income decreased 32% in 2024, primarily due to lower interest income as a result of lower cash balances and decreased results from trading activities.

These decreases were partially offset by an increase in the fair value of our investment in NOVONIX.

Selling, general and administrative expenses increased 11% in 2024, mainly driven by an accrual of $605 million recorded during the third quarter of 2024 related to litigation with Propel Fuels, Inc.

(Propel Fuels).

The increase was partially offset by lower employee-related expenses and selling expenses.

See Note 17—Contingencies and Commitments, in the Notes to Consolidated Financial Statements for additional information regarding our litigation with Propel Fuels.

Depreciation and amortization increased 20% in 2024, primarily due to $253 million of accelerated depreciation recorded in 2024 associated with our plan to cease operations at our Los Angeles Refinery during the fourth quarter of 2025, as well as depreciation and amortization associated with the startup of additional production capacity at the Rodeo Complex.

See Note 4—Restructuring, in the Notes to Consolidated Financial Statements for information regarding our plans to cease operations at our Los Angeles Refinery.

Impairments increased $432 million in 2024, primarily due to before-tax impairments recorded in our Midstream segment of certain gathering and processing assets in Texas, an equity investment in a crude pipeline in Oklahoma and certain crude gathering assets in Texas.

In 2024, we also recorded before-tax impairments in our Midstream and Refining segments related to certain crude oil processing and logistics assets in California.

See Note 12—Impairments, in the Notes to Consolidated Financial Statements for more information regarding impairments.

Taxes other than income taxes decreased 53% in 2024, primarily due to an increase in tax credits generated from higher renewable diesel production and blending activity.

Income tax expense decreased 78% in 2024, primarily due to lower income before income taxes.

See Note 24—Income Taxes, in the Notes to Consolidated Financial Statements for more information regarding our income taxes.

Net income attributable to noncontrolling interests decreased 74% in 2024.

The decrease primarily reflects the impacts of the acquisition of all publicly held common units of DCP LP in June 2023 (DCP LP Merger), as well as the impacts of before-tax impairments reported in our Midstream segment related to certain DCP LP gathering and processing assets in Texas.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, and Note 12—Impairments, in the Notes to Consolidated Financial Statements for additional information.

Sales and other operating revenues and purchased crude oil and products decreased 13% and 15%, respectively, in 2023.

These decreases were mainly due to lower prices for refined petroleum products, crude oil and NGL.

Equity in earnings of affiliates decreased 32% in 2023, resulting from lower equity earnings from DCP Midstream, DCP Sand Hills, DCP Southern Hills and Gray Oak Pipeline due to the DCP Midstream Merger in August 2022, as well as decreased equity earnings from WRB Refining LP (WRB) and CPChem primarily due to lower margins, partially offset by lower operating costs.

Equity in earnings of affiliates decreased 32% in 2023, resulting from lower equity earnings from DCP Midstream, DCP Sand Hills, DCP Southern Hills and Gray Oak Pipeline as a result of the DCP Midstream Merger in August 2022, as well as decreased equity earnings from WRB and CPChem primarily due to lower margins, partially offset by lower operating costs.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements and the Chemicals segment analysis in the “Segment Results” section for additional information.

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Other income decreased $2,378 million in 2023, primarily due to an aggregate before-tax gain of $3,013 million recognized in our Midstream segment in connection with the DCP Midstream Merger in August 2022.

The decrease was partially offset by lower unrealized investment losses on our investment in NOVONIX in 2023 compared to 2022, and higher interest income.

See Note 4—Business Combinations, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information on the aggregate before-tax gain.

See Note 8—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information regarding our investment in NOVONIX.

The decrease was partially offset by lower unrealized investment losses on our investment in NOVONIX in 2023 compared with 2022, and higher interest income.

See Note 5—Business Combinations, and Note 19—Fair Value Measurements, in the Notes to Consolidated Financial Statements for additional information on the aggregate before-tax gain, and for additional information regarding our investment in NOVONIX.

Selling, general and administrative expenses increased 16% in 2023, mainly driven by the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills starting in August 2022 and higher costs associated with our business transformation.

These increases were partially offset by lower selling expenses due to decreased refined petroleum product prices.

See Note 31—Restructuring, in the Notes to Consolidated Financial Statements, for additional information regarding restructuring costs.

See Note 4—Restructuring, in the Notes to Consolidated Financial Statements for additional information regarding business transformation restructuring costs.

Depreciation and amortization increased 21% in 2023, primarily due to additional depreciation and amortization related to assets acquired as a result of consolidating DCP Midstream Class A Segment, DCP Southern Hills and DCP Sand Hills starting in August 2022.

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The decrease reflects the impacts of the DCP LP Merger in June 2023, and the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills and the derecognition of a noncontrolling interest related to Gray Oak Holdings as a result of the DCP Midstream Merger in August 2022.

The decrease also reflects the impact of the merger between us and Phillips 66 Partners in March 2022.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, and Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the DCP Midstream Merger and the Phillips 66 Partners merger, respectively.

Index to Financial Statements

Sales and other operating revenues and purchased crude oil and products increased 52% and 47%, respectively, in 2022.

These increases were mainly due to higher prices for refined petroleum products, crude oil and NGL.

Other income increased $2,283 million in 2022, primarily due to an aggregate before-tax gain of $3,013 million recognized in our Midstream segment in connection with the DCP Midstream Merger.

The impact of this gain was partially offset by an unrealized investment loss on our investment in NOVONIX, compared with an unrealized gain in 2021.

See Note 4—Business Combinations, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information on the aggregate before-tax gain.

See Note 8—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information regarding our investment in NOVONIX.

Operating expenses increased 19% in 2022, mainly attributable to higher utility costs driven by increased natural gas and power prices and higher turnaround and other maintenance expenses.

Selling, general and administrative expenses increased 24% in 2022, primarily driven by higher employee-related expenses, restructuring costs related to our business transformation and increased selling expenses driven by rising refined petroleum product prices.

Impairments decreased 96% in 2022, primarily due to a before-tax impairment of $1,298 million recorded in the third quarter of 2021 associated with our Alliance Refinery.

See Note 11—Impairments, in the Notes to Consolidated Financial Statements, for additional information.

Taxes other than income taxes increased 29% in 2022, primarily due to tax credits received from renewable diesel blending activity at our San Francisco Refinery in the third quarter of 2021, as well as higher property and other taxes.

Income tax expense increased $3,102 million in 2022 primarily due to improved results.

See Note 23—Income Taxes, in the Notes to Consolidated Financial Statements, for more information regarding our income taxes.

Net income attributable to noncontrolling interests increased 32% in 2022.

The increase was primarily driven by the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills as part of the DCP Midstream Merger in August 2022, which resulted in us reflecting the additional noncontrolling interests owned by the public common and preferred unitholders of DCP LP, as well as Enbridge’s noncontrolling interest in DCP Midstream Class A Segment, on our consolidated statement of income.

The increase was partially offset by a decrease due to the merger between us and Phillips 66 Partners in March 2022 that resulted in Phillips 66 Partners becoming a wholly owned subsidiary of Phillips 66.

The decrease also reflects the impact of the merger between us and Phillips 66 Partners LP (Phillips 66 Partners), a wholly owned subsidiary of Phillips 66, in March 2022.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, and Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements for additional information on the DCP Midstream Merger and the Phillips 66 Partners merger, respectively.

Index to Financial Statements

Segment Results

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Millions of Dollars

Income (Loss) Before Income Taxes

Income Before Income Taxes

Transportation $ 1,292 1,310 1,176

NGL and Other 1,503 4,000 452

NOVONIX (39) (442) 370

NGL 1,346 1,509 4,000

Total Midstream $ 2,638 2,819 5,176

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Operating Statistics

NGL fractionated** 711 529 410

Wellhead Volume (billion cubic feet per day)** 4.3 4.6 4.4

NGL production** 436 437 423

Wellhead Volume (Bcf/D)*** 4.6 4.4 4.2

* Pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment, excluding NGL pipelines.

Pipeline Throughput–Y-Grade to Market*** 754 707 704

NGL fractionated 728 711 529

* Pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment, excluding NGL’s pipelines.

* * Includes 100% of DCP Midstream Class A Segment’s volumes from August 18, 2022, forward.

*** Includes 100% of DCP Midstream Class A Segment’s volumes.

Dollars Per Gallon

Market Indicator

Weighted-Average NGL Price* $ 0.67 1.00 0.83

* Based on index prices from the Mont Belvieu market hub, which are weighted by NGL component mix.

*** Represents volumes delivered to major fractionation market hubs, including Mont Belvieu, Sweeny and Conway.

Includes 100% of DCP Midstream Class A Segment and Phillips 66’s direct interest in DCP Sand Hills and DCP Southern Hills.

The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing services;

NGL production, transportation, storage, fractionation, processing and marketing services;

NGL production, transportation, storage, fractionation, processing, marketing and export services;

natural gas gathering, compressing, treating, processing, storage, transportation and marketing services;

and condensate recovery.

These activities are mainly in the United States.

This segment also includes our investment in NOVONIX.

In connection with the DCP Midstream Merger, the results of our Transportation business reflect a decrease in our indirect economic interest in Gray Oak Pipeline to 6.5% from August 18, 2022, forward.

Prior to August 18, 2022, the Transportation results presented in the table above reflect Gray Oak Holdings’ 65% economic interest in Gray Oak Pipeline.

In addition, the results of our NGL and Other business include the consolidated results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward.

Prior to August 18, 2022, our investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills were accounted for using the equity method and equity earnings from these investments are included in the results of our NGL and Other business.

In addition, the results of our NGL business include the consolidated results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward.

In the Notes to Consolidated Financial Statements, see Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for additional information regarding the DCP Midstream Merger.

Index to Financial Statements

Results from our Midstream segment decreased $181 million in 2024, compared with 2023.

Results from our Transportation business decreased $18 million in 2024, compared with 2023.

The decrease in 2024 was primarily due to before-tax impairments totaling $122 million, partially offset by an increase in before-tax gains on sales of assets.

We sold our ownership interest in REX in 2024 and recorded a before-tax gain of $238 million, compared to before-tax gains recorded in 2023 associated with the sales of our ownership interests in the South Texas Gateway Terminal and the Belle Chasse Terminal which totaled $137 million.

Results from our NGL business decreased $163 million in 2024, compared with 2023.

The decrease was primarily due to before-tax impairment charges recognized in 2024 associated with certain gathering and processing assets in Texas, as well as unfavorable pricing driven by falling natural gas prices and winter weather impacts.

These decreases were partially offset by improved pipeline volumes and higher liquefied petroleum gas cargo volumes and margins.

See Note 12—Impairments, in the Notes to Consolidated Financial Statements for further information regarding impairments.

See Note 9—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements for further information regarding the sale of our ownership interest in REX.

See the “Executive Overview and Business Environment” section for information on market factors impacting 2024 results.

Results from our Midstream segment decreased $2,357 million in 2023, compared with 2022.

Results from our Transportation business increased $134 million in 2023, compared with 2022.

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In August 2023, we recognized a $101 million before-tax gain on the sale of our 25% ownership interest in the South Texas Gateway Terminal, while in August 2022, we recognized a before-tax gain of $182 million related to the transfer of an indirect economic interest in Gray Oak Pipeline as part of the DCP Midstream Merger.

Results from our NGL and Other business decreased $2,497 million in 2023, compared with 2022.

Results from our NGL business decreased $2,491 million in 2023, compared with 2022.

The decrease was primarily due to an aggregate before-tax gain of $2,831 million recognized in the third quarter of 2022 from remeasuring our previously held equity investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills to their fair values in connection with the DCP Midstream Merger.

The decrease was partially offset by the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward, as well as increased fractionation volumes at the Sweeny Hub reflecting the startup of Frac 4 in October 2022.

The fair value of our investment in NOVONIX declined by $39 million in 2023, compared with a decline of $442 million in 2022.

In the Notes to Consolidated Financial Statements, see Note 8—Investments, Loans and Long-Term Receivables, for additional information on our investment in NOVONIX and the before-tax gain on the sale of our 25% ownership interest in the South Texas Gateway Terminal in August 2023.

See also Note 4—Business Combinations, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information regarding the before-tax gains recorded in connection with the DCP Midstream Merger.

See the “Executive Overview and Business Environment” section for information on market factors impacting 2023 results.

Midstream’s results increased $3,234 million in 2022, compared with 2021.

Results from our Transportation business increased $498 million in 2022, compared with 2021.

The increase was primarily due to a before-tax impairment of $198 million recorded in the first quarter of 2021 related to Phillips 66 Partners’ decision to exit the Liberty Pipeline project, a before-tax gain of $182 million from the transfer of a 35.75% indirect economic interest in Gray Oak Pipeline to our co-venturer as part of the DCP Midstream Merger, and lower depreciation and amortization expense from logistic assets that were retired in the fourth quarter of 2021 as part of the planned conversion of the Alliance Refinery to a terminal.

Results from our NGL and Other business increased $3,548 million in 2022, compared with 2021.

The increase was primarily due to before-tax gains totaling $2,831 million recognized from remeasuring our previously held equity investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills to their fair values in connection with the DCP Midstream Merger.

Additionally, the increased results reflect the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward, as well as improved Sweeny Hub results.

In 2022, the fair value of our investment in NOVONIX decreased by $442 million compared with an increase of $370 million in 2021.

We acquired this investment in September 2021.

See Note 11—Impairments, and Note 8—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information on impairments and our investment in NOVONIX, respectively.

See Note 5—Business Combinations, and Note 19—Fair Value Measurements, in the Notes to Consolidated Financial Statements for additional information regarding the before-tax gains recorded in connection with the DCP Midstream Merger.

Index to Financial Statements

Year Ended December 31

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Ethylene produced is primarily consumed within CPChem for the production of polyethylene, normal alpha olefins and polyethylene pipe.

CPChem manufactures and markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene, as well as manufactures and/or markets a variety of specialty chemical products.

CPChem manufactures and/or markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene, as well as manufactures and/or markets a variety of specialty chemical products.

Unless otherwise noted, amounts referenced below reflect our net 50% interest in CPChem.

Results from the Chemicals segment decreased $256 million in 2023, compared with 2022.

The decrease was primarily due to lower margins driven by decreased sales prices, partially offset by lower utility costs due to a decline in natural gas prices.

Results from the Chemicals segment increased $276 million in 2024, compared with 2023.

The increase was primarily due to improved margins driven by higher sales prices and lower feedstock costs, as well as increased volumes and decreased utility costs.

See the “Executive Overview and Business Environment” section for information on market factors impacting CPChem’s 2024 results.

Results from the Chemicals segment decreased $256 million in 2023, compared with 2022.

The decrease was primarily due to lower margins driven by decreased sales prices, higher feedstock and utility costs, as well as decreased results from CPChem’s equity affiliates.

Index to Financial Statements

The decrease was primarily due to lower margins driven by decreased sales prices, partially offset by lower utility costs due to a decline in natural gas prices.

Year Ended December 31

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* See the “Non-GAAP Reconciliations” section for a reconciliation of this non-GAAP measure to the most directly comparable measure under generally accepted accounting principles in the United States (GAAP), income (loss) before income taxes per barrel.

Index to Financial Statements

In October 2024, we announced our intention to cease operations at our Los Angeles Refinery in the fourth quarter of 2025, and are evaluating potential future uses of the property.

See Note 4—Restructuring, in the Notes to Consolidated Financial Statements for additional information.

In early 2024, we ceased crude operations at the San Francisco Refinery as part of the conversion of the refinery into the Rodeo Complex.

Thousands of Barrels Daily

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Refinery production 551 497 487

West Coast***

Crude oil capacity 244 313 364

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* Includes our share of equity affiliates.

** Excludes operating statistics of the Alliance Refinery beginning on October 1, 2021.

*** Reflects reduced capacity of our San Francisco refinery from the shutdown of the Santa Maria facility in February 2023 and the shutdown of one of the Rodeo facility’s crude units in October 2023 in connection with converting this refinery into a renewable fuels facility.

Our Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels.

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

In the fourth quarter of 2021, we shut down our Alliance Refinery and converted it into a terminal.

** As part of our plans to convert the San Francisco Refinery into a renewable fuels facility, in the first quarter of 2023, we ceased operations at the Santa Maria facility in Arroyo Grande, California, which reduced net crude throughput capacity from 120 MB/D to 75 MB/D.

In October 2023, we further reduced net crude throughput capacity from 75 MB/D to 52 MB/D as we shut down one of the two crude units at the Rodeo facility.

The Rodeo facility’s net crude throughput capacity of 52 MB/D prior to shutdown was excluded from the 2024 operating statistics above.

The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline and distillates, including aviation fuels, at 11 refineries in the United States and Europe.

Results from the Refining segment decreased $5,705 million in 2024, compared with 2023.

The decrease was primarily due to lower realized margins, partially offset by lower utility costs.

The decrease in realized margins was primarily driven by a decline in market crack spreads, partially offset by increased feedstock advantage and improved crude optimization benefits.

The decrease was primarily due to lower realized margins as a result of declining market crack spreads.

Our worldwide refining crude oil capacity utilization rate was 95% and 92% in 2024 and 2023, respectively.

See the “Executive Overview and Business Environment” section for information on industry crack spreads and other market factors impacting this year’s results.

Index to Financial Statements

Results from the Refining segment increased $10,169 million in 2022, compared with 2021.

The improved results were primarily due to higher realized refining margins driven by improved market crack spreads, partially offset by higher operating costs.

In addition, 2021 included a before-tax impairment of $1,288 million associated with our Alliance Refinery.

See Note 11—Impairments, in the Notes to Consolidated Financial Statements, for additional information regarding this impairment.

Results from the Refining segment decreased $2,636 million in 2023, compared with 2022.

The decrease was primarily due to lower realized margins, partially offset by lower utility costs.

The decrease in realized margins was primarily driven by a decline in market crack spreads, partially offset by increased feedstock advantage and improved crude optimization benefits.

Our worldwide refining crude oil capacity utilization rate was 92% and 90% in 2023 and 2022, respectively.

The increase in 2022 was primarily driven by improved demand for refined petroleum products due to supply constraints caused by the conflict between Russia and Ukraine and easing of restrictions from the COVID-19 pandemic.

Index to Financial Statements

Marketing and Specialties

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Distillates 2.69 3.23 3.86

* On third-party branded refined petroleum product sales, excluding excise taxes.

* On third-party branded refined product sales, excluding excise taxes.

Thousands of Barrels Daily

Marketing Refined Petroleum Product Sales

Marketing Refined Product Sales

Gasoline 1,278 1,240 1,183

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2,340 2,224 2,179

The M&S segment purchases for resale and markets refined petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, mainly in the United States and Europe.

The M&S segment 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.

Before-tax income from the M&S segment decreased $886 million in 2024, compared with 2023.

The decrease in 2023 was primarily driven by lower international realized marketing fuel margins and decreased equity earnings from affiliates, partially offset by higher U.S.

realized marketing fuel margins.

The decrease in 2024 was primarily driven by an accrual of $605 million recorded during the third quarter of 2024 related to litigation with Propel Fuels, as well as lower U.S.

marketing fuel margins.

See the “Executive Overview and Business Environment” section for information on marketing fuel margins and other market factors impacting 2024 results.

Before-tax income from the M&S segment increased $679 million in 2022, compared with 2021.

The increase in 2022 was primarily driven by improved realized international marketing fuel margins and higher results from our specialty lubricants and other businesses.

Index to Financial Statements

See Note 17—Contingencies and Commitments, in the Notes to Consolidated Financial Statements for additional information regarding our litigation with Propel Fuels.

Before-tax income from the M&S segment decreased $175 million in 2023, compared with 2022.

The decrease in 2023 was primarily driven by lower international realized marketing fuel margins and decreased equity earnings from affiliates.

Renewable Fuels

Year Ended December 31

2024 2023 2022

Millions of Dollars

Income (Loss) Before Income Taxes $ (198) 153 171

Thousands of Barrels Daily

Operating Statistics

Total Renewable Fuels Produced 31 10 8

Total Renewable Fuel Sales 52 28 23

Market Indicators

Chicago Board of Trade (CBOT) soybean oil (dollars per pound) $ 0.44 0.58 0.71

California Low-Carbon Fuel Standard (LCFS) carbon credit (dollars per metric ton) 60.48 72.76 98.73

California Air Resource Board (CARB) ultra-low-sulfur diesel (ULSD) - San Francisco (dollars per gallon) 2.48 2.87 3.56

Biodiesel Renewable Identification Number (RIN) (dollars per RIN) 0.59 1.35 1.67

The Renewable Fuels segment processes renewable feedstocks into renewable products at the Rodeo Complex and at our Humber Refinery.

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

Results from the Renewable Fuels segment decreased $351 million in 2024, compared with 2023.

The decrease was primarily driven by higher costs related to the ramp-up of the Rodeo Complex.

Results from the Renewable Fuels segment decreased $18 million in 2023, compared with 2022.

The decrease was primarily driven by higher costs related to the ramp-up of the Rodeo Complex, as well as lower results from renewable transport fuel certificate activity due to lower blending margins.

These decreases were partially offset by higher credit generation and increased renewable fuel sales.

See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.

Corporate and Other

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Corporate overhead and other (539) (672) (633)

NOVONIX (3) (39) (442)

Total Corporate and Other $ (1,287) (1,340) (1,612)

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Corporate overhead and other includes general and administrative expenses, technology costs, environmental costs associated with sites no longer in operation, restructuring costs related to our business transformation, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment.

Corporate and Other also includes the change in the fair value of our investment in NOVONIX.

See Note 19—Fair Value Measurements, in the Notes to Consolidated Financial Statements for additional information regarding our investment in NOVONIX.

Net interest expense increased $116 million in 2024, compared with 2023, primarily driven by decreased interest income as a result of lower cash balances.

Corporate overhead and other decreased $133 million in 2024, compared with 2023, primarily due to a decrease in consulting fees associated with our business transformation, as well as lower employee-related expenses.

The fair value of our investment in NOVONIX declined by $3 million during 2024, compared with a decline of $39 million during 2023.

Net interest expense increased $92 million in 2023, compared with 2022, primarily driven by higher interest expense as a result of consolidating DCP Midstream Class A Segment, new debt issuances in 2023 related to the DCP LP Merger and a $53 million before-tax loss on the early redemption of DCP LP’s 5.850% junior subordinated notes.

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See Note 4—Restructuring, in the Notes to Consolidated Financial Statements for additional information regarding restructuring costs.

Net interest expense decreased $46 million in 2022, compared with 2021, primarily driven by increased interest income, partially offset by increased interest expense as a result of consolidating DCP Midstream Class A Segment from August 18, 2022, forward.

See Note 14—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.

Corporate overhead and other increased $241 million in 2022, compared with 2021.

The increase was primarily due to restructuring costs associated with our business transformation for consulting fees, severance and an impairment related to assets held for sale, as well as higher employee related expenses.

See Note 28—Segment Disclosures and Related Information, and Note 31—Restructuring, in the Notes to Consolidated Financial Statements, for additional information regarding restructuring costs.

Index to Financial Statements

The fair value of our investment in NOVONIX declined by $39 million during 2023, compared with a decline of $442 million during 2022.

CAPITAL RESOURCES AND LIQUIDITY

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To meet our short- and long-term liquidity requirements, we use a variety of funding sources, but rely primarily on cash generated from operating activities and debt financing.

During 2023, we generated $7 billion in cash from operations and received proceeds from debt offerings, net of debt repayments, of $2 billion.

We used available cash primarily to repurchase noncontrolling interests in DCP LP for $4.1 billion, repurchase shares of our common stock for $4 billion, fund capital expenditures and investments of $2.4 billion, and pay dividends on our common stock of $1.9 billion.

During 2024, we generated $4.2 billion in cash from operations.

Additionally, we received proceeds from debt issuances, net of debt repayments, of $2.1 billion.

We paid $3.5 billion to repurchase common stock and $1.9 billion to fund dividends on our common stock.

During 2024, cash and cash equivalents decreased $1.6 billion to $1.7 billion.

At this time, we believe that our cash on hand, as well as the sources of liquidity described herein, will be sufficient to fund our obligations over the short- and long-term.

Significant Sources of Capital

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During 2024, cash generated by operating activities was $4.2 billion, a $2.8 billion decrease compared with 2023.

The decrease was primarily due to lower earnings, driven by a decline in realized refining margins, partially offset by more favorable working capital impacts.

During 2023, cash generated by operating activities was $7.0 billion, a $3.8 billion decrease compared with 2022.

The decrease was primarily due to lower realized refining margins, working capital impacts, reduced operating distributions from equity affiliates, completion of long-term crude oil exchanges and higher contributions to our pension plans.

During 2022, cash generated by operating activities was $10.8 billion, a $4.8 billion increase compared with 2021.

The increase was primarily due to higher earnings resulting from improved realized refining margins, partially offset by working capital impacts and lower operating distributions from equity affiliates.

Our short- and long-term operating cash flows are highly dependent upon refining and marketing margins, NGL prices and chemicals margins.

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Factors such as operating efficiency, maintenance turnarounds, market conditions, feedstock availability, and weather conditions can affect output.

We actively manage the operations of our refineries, and any variability in their operations typically has not been as significant to cash flows as that caused by margins and prices.

We actively manage the operations of our refineries, and any variability in their operations typically has not been as significant to cash flows as that caused by fluctuations in margins and prices.

Our worldwide refining crude oil capacity utilization was 95%, 92% and 90% in 2024, 2023 and 2022, respectively.

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Equity Affiliate Operating Distributions

Our operating cash flows are also impacted by distribution decisions made by our equity affiliates, including CPChem.

Over the three years ended December 31, 2023, our operating cash flows included aggregate distributions from our equity affiliates of $5.6 billion, including $2.2 billion from CPChem.

Our operating cash flows are also impacted by distribution decisions made by our equity affiliates.

Over the three years ended December 31, 2024, operating cash flows included aggregate distributions from our equity affiliates of $4.2 billion.

We cannot control the amount of future dividends from equity affiliates;

therefore, future dividend payments by these equity affiliates are not assured.

Index to Financial Statements

We received a U.S.

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

Asset Dispositions

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

On February 28, 2023, we closed on the sale of the Belle Chasse Terminal for approximately $76 million.

Debt Issuances

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

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

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

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

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

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

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 and commenced 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 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 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.

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

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 December 31, 2024.

For the year ended December 31, 2024, we recognized an immaterial gain on the extinguishment of this debt.

Term Loan Agreement

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

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

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements, for additional information regarding the DCP LP Merger.

At December 31, 2024 and 2023, $550 million and $1.25 billion were borrowed under the Term Loan Agreement, which matures in June 2026, respectively.

Related Party Advance Term Loan Agreements

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

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

Index to Financial Statements

At December 31, 2023, borrowings outstanding under our Advance Term Loan agreements with WRB totaled $290 million.

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

On December 31, 2024, WRB distributed its Advance Term Loan with a principal balance of $290 million, including the right to receive any accrued but unpaid interest, to Phillips 66 Company, resulting in the reduction of our related party debt balance and our investment in WRB by $290 million.

The distribution was recognized as a non-cash investing and financing transaction.

Accounts Receivable Securitization

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 (P66 Receivables), 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, P66 Receivables may borrow and incur indebtedness from, and/or sell certain receivables 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 plus the applicable margin.

In all instances, Phillips 66 Company retains the servicing of the accounts receivables transferred.

P66 Receivables’ sole activity consists of purchasing receivables from Phillips 66 Company, providing those receivables as collateral for P66 Receivables’ borrowings or on-selling certain of its receivables under the Receivables Securitization Facility.

P66 Receivables is a separate legal entity with its own separate creditors, who will be entitled, upon its liquidation, to be satisfied out of P66 Receivables’ assets prior to assets or value in P66 Receivables becoming available to P66 Receivables’ equity holders.

The assets of P66 Receivables, including any funds of P66 Receivables 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 P66 Receivables under the Receivables Securitization Facility are available to P66 Receivables for payment to Phillips 66 Company, for sales of its receivables to P66 Receivables under the Receivables 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.

Sales of accounts receivables under the Receivables Securitization Facility meet the sale criteria under ASC 860, Transfers and Servicing, and are derecognized from the consolidated balance sheet.

P66 Receivables guarantees payment, in full, for accounts receivables sold to the purchasers.

Cash receipts from the sale of accounts receivables under the Receivables Securitization Facility, received at the time of sale, are classified as cash flows from operating activities.

For the year-ended December 31, 2024, we sold $125 million of accounts receivables in exchange for a $125 million reduction in our borrowings under the Receivables Securitization Facility, which was recognized as a non-cash financing transaction.

We recognized an immaterial charge associated with the transfer of financial assets, which is included as a component within the line item “Selling, general and administrative expense” on our consolidated statement of income during the year ended December 31, 2024.

At December 31, 2024, $121 million of the sold accounts receivable remained outstanding, which represents our maximum potential future exposure under the guarantee.

Borrowings under the Receivables Securitization Facility are recognized as short-term debt on the consolidated balance sheet.

Borrowings are secured by the accounts receivables, held by P66 Receivables, which remain reported as accounts receivables on the consolidated balance sheet.

At December 31, 2024, we had outstanding borrowings of $375 million under the Receivables Securitization Facility, secured by approximately $4.6 billion of accounts receivable held by P66 Receivables.

At December 31, 2024, we had no unused capacity under the Receivables Securitization Facility.

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

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

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

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

On January 13, 2025, we entered into a $200 million uncommitted credit facility (the 2025 Uncommitted Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor.

The 2025 Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities.

The 2025 Uncommitted Facility has no commitment fees or compensating balance requirements.

Outstanding borrowings under the 2025 Uncommitted Facility bear interest at a rate of either (a) the adjusted term SOFR plus the applicable margin, (b) the adjusted daily simple SOFR plus the applicable margin or (c) the base 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 February 21, 2025, no amount had been drawn under the 2025 Uncommitted Facility.

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

The 2024 Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities.

The 2024 Uncommitted Facility has no commitment fees or compensating balance requirements.

Outstanding borrowings under the 2024 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 December 31, 2024, the entire $400 million had been drawn under the 2024 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 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.

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

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

and violation of covenants.

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

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

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

Outstanding borrowings under the Facility bear interest at either (a) the adjusted term SOFR (as described in the Facility) in effect from time to time plus the applicable margin;

Outstanding borrowings under the Facility bear interest at either:

(a) the adjusted term SOFR (as described in the Facility) in effect from time to time plus the applicable margin;

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

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

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

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

At December 31, 2023 and 2022, no amount had been drawn under the Facility.

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 December 31, 2024 and 2023, no amounts were 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 365 days.

At December 31, 2023 and 2022, no borrowings were outstanding under the program.

Phillips 66 Partners

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

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

At December 31, 2024, $435 million of commercial paper had been issued under this program.

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

DCP Midstream Class A Segment

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

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

Indebtedness under the Credit Agreement bears interest at either:

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

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

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

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

At December 31, 2023, DCP LP had $25 million in borrowings outstanding under the Credit Agreement.

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

At December 31, 2023, and December 31, 2022, respectively, $2 million and $10 million in letters of credit had been issued that are supported by the Credit Agreement.

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

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

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

On March 15, 2024, DCP LP terminated its $1.4 billion credit facility and its accounts receivable securitization facility that previously provided for up to $350 million of borrowing capacity.

At December 31, 2023, DCP LP had $25 million in borrowings outstanding under its $1.4 billion credit facility and $350 million of borrowings outstanding under its accounts receivable securitization facility, both of which were repaid during the three months ended March 31, 2024.

Total Committed Capacity Available

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

Index to Financial Statements

Other Debt Issuances and Financings

Senior Unsecured Notes

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

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

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

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

Phillips 66 Partners Term Loan

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

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

At December 31, 2024, and 2023, we had $4.6 billion and $6.4 billion, respectively, of total committed capacity available under the credit facilities described above.

Asset & Investment Dispositions

On December 10, 2024, we sold our equity interests in certain pipeline and terminaling assets in North Dakota for cash proceeds of approximately $143 million.

On August 30, 2024, we sold certain Midstream gathering and processing assets in Texas for cash proceeds of $41 million.

On August 1, 2024, we sold our ownership interests in certain gathering and processing assets in Louisiana and Alabama for cash proceeds of $173 million.

On June 14, 2024, we sold our 25% ownership interest in REX for cash proceeds of $685 million.

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

On February 28, 2023, we sold the Belle Chasse Terminal for approximately $76 million.

Subsequent Investment Dispositions

On January 30, 2025, we sold our 25% ownership interest in Gulf Coast Express Pipeline LLC for cash proceeds of $853 million.

On January 31, 2025, we sold our 49% ownership interest in Coop.

We received cash proceeds of 1.06 billion Swiss francs, consisting of a sales price of approximately 977 million Swiss francs and a final dividend relating to financial year 2024 of 83 million Swiss francs from Coop that was paid on January 30, 2025.

We also settled the foreign currency forward contracts entered into in connection with the asset sale, in which we sold 1.06 billion Swiss francs in exchange for $1.24 billion U.S.

See Note 9—Investments, Loans and Long-Term Receivables and Note 10—Properties, Plants and Equipment, in the Notes to Consolidated Financial Statements for additional information regarding asset and investment dispositions.

Phillips 66 Availability of Debt Financing

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DCP LP Availability of Debt Financing

DCP LP has a BBB+ credit rating, with a stable outlook, from Standard and Poor’s and a Baa3 credit rating, with a positive outlook, from Moody’s Investors Service.

DCP LP has a Baa3 credit rating, with a positive outlook, from Moody’s Investors Service and a BBB+ credit rating, with a stable outlook, from Standard and Poor’s.

These ratings facilitate DCP LP’s access to a variety of lenders.

DCP LP does not have any ratings triggers on any of its corporate debt that would cause an automatic default, and thereby impact access to liquidity, in the event of a rating downgrade by one or more rating agencies.

Index to Financial Statements

Off-Balance Sheet Arrangements

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These leases have remaining terms of one to ten years.

Dakota Access and Energy Transfer Crude Oil Company, LLC (ETCO)

Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)

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

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In February 2022, the U.S.

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

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

Therefore, the requirement to prepare the EIS stood.

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The USACE also identified three “action” alternatives;

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

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

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

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

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

At December 31, 2023, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $1.85 billion.

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

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

The public comment period concluded on December 13, 2023.

The USACE plans to review the comments and issue its final EIS in early 2026.

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

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.

In October 2024, the Tribe filed another lawsuit against the USACE in federal district court in Washington, D.C., again challenging USACE’s allowance of pipeline operations while the EIS process proceeds.

In this lawsuit, the Tribe purports to introduce new evidence regarding the pipeline’s proximity to a reservoir and attempts to relitigate arguments about the need for injunctive relief to support its position that the Supreme Court should halt pipeline operations.

A consortium of 13 states has joined Dakota Access as intervenors.

The consortium argues that the pipeline reduces pollution compared to other modes of transportation and that Dakota Access is integral to the health of regional energy and agriculture markets.

The Tribe’s prior request for a shutdown was denied in May 2021.

This latest lawsuit seeking a shutdown does not change the current deadline for 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.

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 December 31, 2024, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $850 million.

In addition, Phillips 66 Partners 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.

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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 December 31, 2024.

See Note 9—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial statements for additional information regarding our investments in Dakota Access and ETCO.

See Note 16—Guarantees, in the Notes to Consolidated Financial Statements for additional information regarding guarantees.

Index to Financial Statements

Capital Requirements

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See Note 15—Debt, in the Notes to Consolidated Financial Statements for our annual debt maturities over the next five years and more information on debt repayments.

2023 Repayments

On May 19, 2023, DCP LP redeemed its 5.850% junior subordinated notes due May 2043 with an aggregate principal amount outstanding of $550 million.

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

2022 Repayments

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

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

In April 2022, upon maturity, Phillips 66 repaid its 4.300% senior notes with an aggregate principal amount of $1 billion and Phillips 66 Partners repaid its $450 million term loan.

Subsequent Repayment

On December 16, 2024, upon maturity, Phillips 66 Company and Phillips 66 Partners repaid the 2.450% Senior Notes due December 2024 with an aggregate principal amount of $300 million.

On March 29, 2024, DCP LP redeemed $300 million of its 5.375% Senior Notes due July 2025.

After the redemption, an aggregate principal amount of $525 million remained outstanding.

On March 4, 2024, Phillips 66 Company repaid $700 million of the $1.25 billion borrowed under its delayed draw term loan that matures in June 2026.

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.

Debt Exchange

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

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

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

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

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

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

DCP Midstream Merger

On August 17, 2022, we and our co-venturer, Enbridge, agreed to merge DCP Midstream and Gray Oak Holdings with DCP Midstream as the surviving entity.

As part of the DCP Midstream Merger, we made a net cash payment of $306 million.

Index to Financial Statements

DCP LP Merger

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

We paid approximately $3.8 billion in cash consideration, funded with a combination of available cash and proceeds from the offering of the Notes and borrowings under the Term Loan Agreement.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, Note 14—Debt, and Note 29—DCP Midstream Class A Segment, in the Notes to Consolidated Financial Statements, for additional information.

DCP LP Preferred Units

On October 16, 2023, DCP LP redeemed its Series C preferred units with an aggregate liquidation preference of approximately $110 million.

On June 15, 2023, DCP LP redeemed its Series B preferred units with an aggregate liquidation preference of approximately $161 million.

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

DCP LP Cash Distributions to Unitholders

DCP LP’s partnership agreement requires it to distribute all available cash within 45 days after the end of each quarter.

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

See Note 29—DCP Midstream Class A Segment, in the Notes to Consolidated Financial Statements, for additional information regarding the DCP LP public common unit acquisition and the redemptions of DCP LP’s Series B and Series C preferred units.

Merger with Phillips 66 Partners

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

The merger resulted in the acquisition of all limited partnership interests in Phillips 66 Partners not already owned by us in exchange for 41.8 million shares of Phillips 66 common stock issued from treasury stock.

Phillips 66 Partners common unitholders received 0.50 shares of Phillips 66 common stock for each outstanding Phillips 66 Partners common unit.

Phillips 66 Partners’ perpetual convertible preferred units were converted into common units at a premium to the original issuance price prior to being exchanged for Phillips 66 common stock.

Upon closing, Phillips 66 Partners became a wholly owned subsidiary of Phillips 66 and its common units are no longer publicly traded.

See Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the merger transaction.

For the year ended December 31, 2024, DCP LP made cash distributions of $47 million to common unitholders other than Phillips 66 and its subsidiaries.

See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements for additional information regarding the DCP LP public common unit acquisition.

On October 1, 2024, we acquired a marketing business on the U.S.

West Coast in our M&S segment for total consideration of $65 million.

These operations were acquired to support the placement of renewable diesel produced by the Rodeo Complex.

On July 1, 2024, we acquired Pinnacle Midstream in our Midstream segment to expand our natural gas gathering and processing operations in the Permian Basin for cash consideration of $565 million.

Midstream Pending Acquisition

On January 6, 2025, we entered into a definitive agreement to acquire all issued and outstanding equity interests in each of EPIC Y-Grade GP, LLC (Y-Grade GP) and EPIC Y-Grade, LP (Y-Grade LP, and, together with Y-Grade GP and their respective subsidiaries, EPIC Y-Grade), which own various long haul natural gas liquids pipelines, fractionation facilities and distribution systems, for cash consideration of $2.2 billion, subject to certain closing adjustments.

The closing date of this transaction is dependent on regulatory approval and completion of other customary closing conditions.

On February 12, 2025, our Board of Directors declared a quarterly cash dividend of $1.15 per common share.

The dividend is payable March 5, 2025, to holders of record at the close of business on February 24, 2025.

Index to Financial Statements

Share Repurchases

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

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

Since July 2012, our Board of Directors has authorized an aggregate of $25 billion of repurchases of our outstanding common stock, and we have repurchased 238 million shares at an aggregate cost of $21.5 billion.

In 2024, we repurchased 24.2 million shares at an aggregate cost of $3.4 billion.

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Shares of stock repurchased are held as treasury shares.

Employee Benefit Plan Contributions

During the year ended December 31, 2023, we contributed $391 million to our U.S.

pension plans and $20 million to our international pension plans.

Marketing and Specialties Acquisition

On August 1, 2023, we acquired a marketing business on the U.S.

West Coast for total consideration of $269 million.

This acquisition supports the placement of renewable diesel that will be produced by the Rodeo renewable fuels facility.

Contractual Obligations

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See Note 13—Asset Retirement Obligations and Accrued Environmental Costs, in the Notes to Consolidated Financial Statements for information regarding asset retirement and environmental obligations.

Index to Financial Statements

Capital Spending

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Marketing and Specialties 154 85 101 87

Renewable Fuels 74 375 753 323

Corporate and Other 75 66 90 134

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Total Selected Equity Affiliates $ 885 930 1,198 878

* Includes 100% of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills capital expenditures and investments from August 18, 2022, forward, net of acquired cash.

* 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 $625 million, $263 million and $306 million for the years ended December 31, 2024, 2023 and 2022, respectively.

** Includes 100% of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills capital expenditures and investments from August 18, 2022, forward.

*** Our share of joint ventures’ capital spending.

Capital spending in our Midstream segment was $2.1 billion for the three-year period ended December 31, 2024, including:

• Expansion of gathering systems in the DJ Basin and Permian Basin for DCP LP.

• Continued development and expansion of fractionation capacity at our Sweeny Hub.

We completed and started operations of Sweeny Frac 4 in the third quarter of 2022.

• Completion of construction on our C2G Pipeline, a new 16-inch ethane pipeline that connects our Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi.

• Net cash payment in connection with the DCP Midstream Merger.

• Investments in NOVONIX and a renewable feedstock processing plant.

• Expansion of gathering and processing systems in the Denver-Julesburg Basin and the Permian Basin.

• Contributions to Dakota Access for a pipeline optimization project, including a contribution to fund our 25% share of Dakota Access’ debt repayment.

• Continued development and expansion of fractionation capacity at our Sweeny Hub.

• Spending associated with other return, reliability, and maintenance projects in our Transportation and NGL businesses.

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Gulf Coast and in the Middle East, as well as sustaining, debottlenecking and optimization projects on existing assets.

Index to Financial Statements

Capital spending for the Refining segment during the three-year period ended December 31, 2023, was $3.1 billion, primarily for projects to enhance the yield of higher-value products, produce renewable fuels, and sustain the reliability and safety of our facilities.

Capital spending for the Refining segment during the three-year period ended December 31, 2024, was $1.8 billion, primarily for projects to enhance the yield of higher-value products and sustain the reliability and safety of our refineries.

Key projects funded during the three-year period included:

• Installation of facilities to produce renewable fuels at our San Francisco and Humber refineries.

• Installation of facilities to improve clean product yield at the Ponca City and Sweeny refineries, as well as the jointly owned Wood River Refinery.

• Installation of facilities to improve product value at the Lake Charles Refinery.

• Installation of facilities to improve utilization and product value at the jointly owned Borger refinery.

• Installation of facilities to improve market capture at our refineries.

• Installation of facilities to improve utilization and product value at our refineries.

• Capital spending to improve reliability at our refineries.

Marketing and Specialties

Capital spending for the M&S segment during the three-year period ended December 31, 2023, was primarily for the acquisition of a marketing business and a commercial fleet fueling business on the U.S.

West Coast, both of which will provide further placement opportunities for renewable diesel production to end-use customers;

investment in a retail marketing joint venture in the U.S.

Central region;

and the continued acquisition, development and enhancement of retail sites in Europe.

Capital spending for the M&S segment during the three-year period ended December 31, 2024, was $273 million, primarily for the continued development and enhancement of retail sites in Europe, spend associated with marketing and commercial fleet fueling businesses on the U.S.

West Coast, marketing-related information technology enhancements, and reliability and maintenance projects for our Specialties business.

Renewable Fuels

Capital spending for the Renewable Fuels segment during the three-year period ended December 31, 2024, was $1.5 billion, primarily related to the construction of facilities to produce renewable fuels at the Rodeo Complex.

Corporate and Other

Capital spending for Corporate and Other during the three-year period ended December 31, 2023, was primarily related to information technology and facilities.

Capital spending for Corporate and Other during the three-year period ended December 31, 2024, was $290 million, primarily related to information technology and facilities.

Our 2025 capital budget is $2.1 billion, including $998 million for sustaining capital and $1.1 billion for growth capital.

Our sustaining capital budget reflects $300 million of efficiencies as a result of our business transformation efforts.

Our projected $2.2 billion capital budget excludes our portion of planned capital spending by our major joint ventures CPChem and WRB totaling $1 billion.

The Midstream capital budget of $985 million comprises a growth capital budget of $593 million focused on enhancing our integrated NGL wellhead-to-market value chain, as well as $250 million related to the repayment of our 25% share of Dakota Access’ debt due in 2024.

The Midstream capital budget also includes $392 million for sustaining projects, including DCP LP’s sustaining capital of $200 million.

In Refining, the total capital budget of $1.1 billion consists of $412 million for sustaining capital and $654 million for growth capital.

Refining’s growth capital includes completing the conversion of the San Francisco Refinery in Rodeo, California, into one of the world’s largest renewable fuels facilities.

Startup of the converted facility is expected in the first quarter of 2024.

Refining’s growth capital will also support high-return, low-capital projects to enhance market capture.

The M&S capital budget of $112 million reflects continued enhancement of our retail network, including energy transition opportunities.

Our projected $2.1 billion capital budget excludes our portion of planned capital spending by our major joint ventures CPChem and WRB totaling $885 million and acquisitions, including the pending acquisition of EPIC Y-Grade, which is subject to regulatory approval and completion of other customary closing conditions.

See Note 5—Business Combinations, in the Notes to Consolidated Financial Statements for additional information regarding the pending acquisition of EPIC Y-Grade.

The Midstream capital budget of $975 million comprises $429 million for sustaining projects and $546 million for growth projects.

The Midstream capital budget advances the integrated NGL wellhead-to-market value chain by strengthening our position in key basins, including by increasing gas processing capacity.

In Refining, we plan to invest $822 million, including $414 million for sustaining capital.

Refining growth capital of $408 million supports high-return, low-capital projects that will increase asset reliability and improve market capture.

The M&S capital budget of $154 million reflects the continued enhancement of our branded network.

The Renewable Fuels capital budget of $74 million reflects investments at the Rodeo Complex related to feedstock optimization and logistics for renewable diesel and sustainable aviation fuel production.

The Corporate and Other capital budget of $75 million will primarily fund information technology projects.

Index to Financial Statements

Contingencies

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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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Legal and Tax Matters

Our legal and tax matters are handled by our legal and tax organizations.

Our legal and tax matters are handled by our legal and tax organizations, respectively.

These organizations apply their knowledge, experience and professional judgment to the specific characteristics of our cases and uncertain tax positions.

We employ a litigation management process to manage and monitor the legal proceedings.

We employ a litigation management process to manage and monitor legal proceedings.

Our process facilitates the early evaluation and quantification of potential exposures in individual cases and enables the tracking of those cases that have been scheduled for trial and/or mediation.

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In the case of income tax-related contingencies, we monitor tax legislation and court decisions, the status of tax audits and the statute of limitations within which a taxing authority can assert a liability.

Index to Financial Statements

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

Propel Fuels has asked the Propel Court to grant treble damages and Phillips 66 Company has filed a brief in opposition to that request.

Also in 2025, the Propel 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 year ended December 31, 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 December 31, 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.

Environmental

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Federal Clean Water Act, which governs discharges into bodies of water.

• European Union Regulation for Registration, Evaluation, Authorization and Restriction of Chemicals (EU REACH), which governs production, marketing and use of chemicals and the United Kingdom’s legislation for the Registration, Evaluation, Authorization and Restriction of Chemicals (UK REACH), which replaced EU REACH in the United Kingdom in 2021 following the United Kingdom’s exit from the European Union (BREXIT).

• European Union Regulation for Registration, Evaluation, Authorization and Restriction of Chemicals (EU REACH), which governs production, marketing and use of chemicals and the United Kingdom’s legislation for the Registration, Evaluation, Authorization and Restriction of Chemicals, which replaced EU REACH in the United Kingdom in 2021 following the United Kingdom’s exit from the European Union (BREXIT).

Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), which imposes liability on generators, transporters and arrangers of hazardous substances at sites where hazardous substance releases have occurred or are threatening to occur.

Federal Resource Conservation and Recovery Act (RCRA), which governs the treatment, storage and disposal of solid waste.

Federal Emergency Planning and Community Right-to-Know Act (EPCRA), which requires facilities to report toxic chemical inventories to local emergency planning committees and response departments.

Federal Oil Pollution Act of 1990 (OPA90), under which owners and operators of onshore facilities and pipelines as well as owners and operators of vessels are liable for removal costs and damages that result from a discharge of crude oil into navigable waters of the United States.

Federal Emergency Planning and Community Right-to-Know Act, which requires facilities to report toxic chemical inventories to local emergency planning committees and response departments.

Federal Oil Pollution Act of 1990, under which owners and operators of onshore facilities and pipelines as well as owners and operators of vessels are liable for removal costs and damages that result from a discharge of crude oil into navigable waters of the United States.

• European Union Trading Directive resulting in the European Union Emissions Trading Scheme (EU ETS), which uses a market-based mechanism to incentivize the reduction of greenhouse gas (GHG) emissions, as well as the United Kingdom Emissions Trading Scheme (UK ETS), which replaced the EU ETS in the United Kingdom in 2021, following BREXIT.

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Notable areas of potential impacts include air emissions compliance and remediation obligations in the United States.

Index to Financial Statements

An example of this in the fuels area is the Energy Independence and Security Act of 2007 (EISA).

The law requires fuel producers and importers to provide additional renewable fuels for transportation motor fuels and stipulates a mix of various types.

Renewable Identification Numbers (RINs) form the mechanism used by the EPA to record compliance with the Renewable Fuel Standard (RFS).

Renewable Identification Numbers (RINs) form the mechanism used by the U.S.

Environmental Protection Agency (EPA) to record compliance with the Renewable Fuel Standard (RFS).

If an obligated party has more RINs than it needs to meet its obligation, it may sell or trade the extra RINs, or instead choose to “bank” them for use the following year.

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On June 21, 2023, the EPA finalized RVO for the 2023, 2024 and 2025 compliance years.

These standards increase cellulosic volumes, which reflect the EPA’s forecast for increasing compressed natural gas (CNG) and liquified natural gas (LNG) volumes derived from biogas.

These standards increase cellulosic volumes, which reflect the EPA’s forecast for increasing compressed natural gas and NGL volumes derived from biogas.

In addition, the EPA increased total advanced biofuel volumes from the 5.63 billion gallons established for the 2022 compliance year to 7.33 billion gallons in 2025.

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We are required to purchase RINs in the open market to satisfy the portion of our obligation under the RFS that is not fulfilled by blending renewable fuels into the motor fuels we produce.

For the years ended December 31, 2023, 2022 and 2021, we incurred expenses of $323 million, $478 million and $441 million, respectively, associated with our obligation to purchase RINs in the open market to comply with the RFS for our wholly owned refineries.

For the year ended December 31, 2024, we were able to fully satisfy our obligations under the RFS through blending renewable fuels into the motor fuel we produce.

For the years ended December 31, 2023 and 2022, we incurred expenses of $323 million and $478 million, respectively, associated with our obligation to purchase RINs in the open market to comply with the RFS for our wholly owned refineries.

These expenses are included in the “Purchased crude oil and products” line item on our consolidated statement of income.

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These expenses are included in the “Equity in earnings of affiliates” line item on our consolidated statement of income.

The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery production, blending activities, and RVO requirements.

We also are subject to certain laws and regulations relating to environmental remediation obligations associated with current and past operations.

Such laws and regulations include CERCLA and RCRA and their state equivalents.

The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery and renewable fuels production, blending activities, and RVO requirements.

We also are subject to certain laws and regulations relating to environmental remediation obligations associated with current and past operations, including CERCLA and RCRA and their state equivalents.

Remediation obligations include cleanup responsibility arising from petroleum releases from underground storage tanks located at numerous previously and currently owned and/or operated petroleum-marketing outlets throughout the United States.

Federal and state laws require contamination caused by such underground storage tank releases be assessed and remediated to meet applicable standards.

In addition to other cleanup standards, many states have adopted cleanup criteria for methyl tertiary-butyl ether (MTBE) for soil and groundwater and both the EPA and many states may adopt cleanup standards for per- and poly-fluoroalkyl substances (PFAS), which may have been a constituent in certain firefighting foams used or stored at or near some of our facilities.

In addition to other cleanup standards, many states have adopted cleanup criteria for methyl tertiary-butyl ether for soil and groundwater and both the EPA and many states may adopt cleanup standards for per- and poly-fluoroalkyl substances, which may have been a constituent in certain firefighting foams used or stored at or near some of our facilities.

At RCRA-permitted facilities, we are required to assess environmental conditions.

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At December 31, 2023, we reported that we had been notified of potential liability under CERCLA and comparable state laws at 21 sites within the United States.

During the last quarter of 2023, our legal organization approved the removal of one site following Department of Justice dismissal of Phillips 66, thus, leaving 21 unresolved sites with potential liability at December 31, 2023.

Index to Financial Statements

During 2024, our legal organization approved the removal of two sites, which left 19 unresolved sites with potential liability at December 31, 2024.

For the majority of Superfund sites, our potential liability will be less than the total site remediation costs because the percentage of waste attributable to us, versus that attributable to all other potentially responsible parties, is relatively low.

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EU ETS impacts factories, power stations and other installations across all EU member states.

As a result of the United Kingdom’s exit from the EU (BREXIT), those types of entities in the United Kingdom are now subject to the UK ETS, rather than the EU ETS.

As a result of BREXIT, those types of entities in the United Kingdom are now subject to the UK ETS, rather than the EU ETS.

• EU Renewable Energy Directive II, which increases the EU’s energy consumption from renewable sources in the electricity, heat, and transportation sectors to 32% by 2030.

Index to Financial Statements

• United Kingdom’s Renewable Transport Fuel Obligation, which is intended to reduce the GHG emissions from fuel used in the United Kingdom transportation sector by encouraging the supply of renewable fuels.

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• United States’ Inflation Reduction Act, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies, which is intended to accelerate the energy transition.

Supreme Court decision in Massachusetts v.

• The Supreme Court decision in Massachusetts v.

EPA , 549 U.S.

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The Paris Agreement establishes a commitment by signatory parties to pursue domestic GHG emission reductions.

In 2017, President Trump announced his intention to withdraw the United States from the Paris Agreement and that withdrawal became effective on November 4, 2020.

On January 20, 2021, President Biden signed the “Acceptance on Behalf of the United States of America,” which allows the United States to rejoin the Paris Agreement.

The United States officially rejoined the Paris Agreement in February 2021, which could lead to additional GHG emission reduction requirements for sources in the United States.

In the United States, some additional form of regulation is likely to be forthcoming at the state or federal levels with respect to GHG emissions.

In January 2025, President Trump signed an executive order directing the United States to withdraw from the Paris Agreement, and it is expected that President Trump and the Republican-led Congress will diverge from the previous administration’s positions and GHG commitments.

However, future emission reduction targets and other provisions of legislative or regulatory initiatives and policies enacted in the future by the United States could be brought by future administrations or, in the absence of federal action, states may become more active and focused on taking legislative or regulatory actions aimed at climate change and minimizing GHG emissions.

In the United States, some additional form of regulation is likely to be forthcoming, particularly at the state level in the absence of federal action, with respect to GHG emissions.

Such regulation could take any of several forms that may result in additional financial burden in the form of taxes, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances.

Index to Financial Statements

Compliance with changes in laws and regulations that create a GHG emission trading program, GHG reduction requirements or carbon taxes could significantly increase our costs, reduce demand for fossil energy derived products, impact the cost and availability of capital and increase our exposure to litigation.

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Inclusion of transportation fuels in California’s cap and trade program as currently promulgated has increased our cap and trade program compliance costs.

Additionally, certain states have recently passed legislation seeking to recover financial damages allegedly associated with climate change from fossil fuel companies like the Vermont Climate Superfund Act passed by the Vermont Legislature in May 2024.

While such novel laws and implementing regulations may be subject to legal challenges, additional states may follow suit.

The ultimate impact on our financial performance, either positive or negative, from this and similar programs, will depend on a number of factors, including, but not limited to:

• Whether and to what extent legislation or regulation is enacted.

• The nature of the legislation or regulation, such as a cap and trade system or a tax on emissions.

• The nature of the legislation or regulation, such as a cap and trade system, a tax on emissions or financial damages.

• The GHG reductions required.

• The price and availability of offsets.

• The demand for, and amount and allocation of allowances.

• The demand for, amount and allocation of allowances.

• Technological and scientific developments leading to new products or services.

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The 2050 target builds upon our 2030 GHG emissions intensity targets to reduce Scope 1 and Scope 2 emissions from our operations by 30% and Scope 3 emissions from our energy products by 15% compared to 2019 levels.

In addition to the disclosures above, we have issued our 2023 Sustainability Report that is accessible on our website and provides more detailed information on our ESG initiatives, including information on environmental metrics and other topics of interest to our stakeholders, which may not be considered material for SEC reporting purposes.

The information contained in the Sustainability Report is not incorporated by reference into, and does not constitute a part of, this Form 10-K.

Index to Financial Statements

In addition to the disclosures above, we have issued our 2024 Sustainability and People Report that is accessible on our website and provides more detailed information regarding our environmental, social and governance and human capital initiatives, including information on environmental metrics and other topics of interest to our stakeholders, which may not be considered material for U.S.

Securities and Exchange Commission (SEC) reporting purposes.

The information contained in the Sustainability and People Report is not incorporated by reference into, and does not constitute a part of, this Annual Report.

CRITICAL ACCOUNTING ESTIMATES

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Accordingly, actual results may differ materially from the estimated results used to determine fair value.

See Note 4—Business Combinations, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information on our acquisitions in 2023 and 2022.

See Note 5—Business Combinations, and Note 19—Fair Value Measurements, in the Notes to Consolidated Financial Statements for additional information on our acquisitions.

Impairment of Long-Lived Assets and Equity Method Investments

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The expected future cash flows used for impairment reviews and related fair value calculations are based on judgmental assessments, including future volumes, commodity prices, operating costs, margins, discount rates and capital project decisions, considering all available information at the date of review.

Index to Financial Statements

Investments in nonconsolidated entities accounted for under the equity method are assessed for impairment when there are indicators of a loss in value, such as a lack of sustained earnings capacity or a current fair value less than the investment’s carrying amount.

Investments in unconsolidated affiliates accounted for under the equity method are assessed for impairment when there are indicators of a loss in value, such as a lack of sustained earnings capacity or a current fair value less than the investment’s carrying amount.

When it is determined that an indicated impairment is other than temporary, a charge is recognized for the difference between the investment’s carrying value and its estimated fair value.

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Different assumptions could affect the timing and the amount of an impairment of an investment in any period.

See Note 11—Impairments, in the Notes to Consolidated Financial Statements, for information about impairments recorded in 2023, 2022 and 2021.

Index to Financial Statements

See Note 12—Impairments, in the Notes to Consolidated Financial Statements for information about impairments.

GUARANTOR FINANCIAL INFORMATION

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Significant intercompany transactions and receivable/payable balances between the Obligor Group and non-guarantor subsidiaries are presented separately in the summarized financial information.

Index to Financial Statements

The summarized results of operations for the year ended December 31, 2024, and the summarized financial position at December 31, 2024, of the Obligor Group on a combined basis were:

5 unchanged sentences

Purchased crude oil and products—non-guarantor subsidiaries 27,748

Income before income taxes 4,998

Net income 3,652

Loss before income taxes (747)

Net loss (533)

Summarized Combined Balance Sheet Millions of Dollars

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Total liabilities and equity 38,608

Index to Financial Statements

NON-GAAP RECONCILIATIONS

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Following are reconciliations of income (loss) before income taxes to realized refining margins:

Index to Financial Statements

Millions of Dollars, Except as Indicated

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Year Ended December 31, 2024

Income before income taxes $ 910 1,640 2,210 506 5,266

Income (loss) before income taxes $ (59) (68) 670 (908) (365)

Taxes other than income taxes

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Certain tax impacts (9) — — — (9)

Legal settlement — (7) — — (7)

Realized refining margins

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196,067 196,055 200,290 87,631 680,043

Income before income taxes per barrel ( dollars per barrel )**

Income (loss) before income taxes per barrel ( dollars per barrel )**

$ (0.30) (0.35) 6.18 (10.38) (0.62)

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Special items:

Regulatory compliance costs 9 26 22 13 70

Certain tax impacts (15) — — — (15)

Realized refining margins

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* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.

** Income before income taxes divided by total processed inputs.

** Income (loss) before income taxes divided by total processed inputs.

*** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels.

As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.

Index to Financial Statements

Millions of Dollars, Except as Indicated

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Year Ended December 31, 2022

Income (loss) before income taxes $ 1 (1,759) 72 (667) (2,353)

Income before income taxes $ 2,402 2,252 2,431 891 7,976

Taxes other than income taxes

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1,242 1,230 809 1,450 4,731

Equity in losses of affiliates 9 11 164 — 184

Equity in (earnings) losses of affiliates 9 7 (763) — (747)

Other segment (income) expense, net

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Special items:

Certain tax impacts (4) — — — (4)

Regulatory compliance costs 9 26 22 13 70

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199,319 203,269 177,111 112,156 691,855

Income (loss) before income taxes per barrel ( dollars per barrel )**

Income before income taxes per barrel ( dollars per barrel )**

$ 12.05 11.08 24.81 7.94 13.02

2 unchanged sentences

* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.

** Income (loss) before income taxes divided by total processed inputs.

** Income before income taxes divided by total processed inputs.

*** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels.

As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.

Index to Financial Statements

Our realized marketing fuel margins measure the difference between (a) sales and other operating revenues derived from the sale of fuels in our M&S segment and (b) costs of those fuels.

The realized marketing fuel margins are adjusted to exclude those items that are not representative of the underlying operating performance of a period, which we call “special items.” The realized marketing fuel margins are converted to a per-barrel basis by dividing them by sales volumes measured on a barrel basis.

We believe realized marketing fuel margin per barrel demonstrates the value uplift our marketing operations provide by optimizing the placement and ultimate sale of our refineries’ fuel production.

We believe realized marketing fuel margin per barrel demonstrates the value uplift our marketing operations provide by optimizing the placement and ultimate sale of our facilities’ fuel production.

Within the M&S segment, the GAAP performance measure most directly comparable to realized marketing fuel margin per barrel is the marketing business’ “income before income taxes per barrel.” Realized marketing fuel margin per barrel excludes items that are typically included in gross margin, such as depreciation and operating expenses, and other items used to determine income before income taxes, such as general and administrative expenses.

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(29) (53) (71) (106) (116) (115)

Other operating (revenues) expenses* (477) (508) (424) (63) (62) 8

Other (income) expense, net 28 24 9 15 (7) 7

Other operating revenues* (467) (477) (508) (34) (31) (3)

Other expense, net 61 27 24 20 14 3

Special items:

Legal settlement (59) — — — — —

Net gain on asset disposition — — — (67) — —

Marketing margins

13 unchanged sentences

As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.

Index to Financial Statements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis