SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



~~[X]~~☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended	~~September 30, 2017~~March 31, 2024


☐
~~[ ]~~	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from


Delaware			45-3779385

~~Delaware~~	~~45-3779385~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2331 CityWest Blvd., Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

~~281-293-6600~~832-765-3010

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ~~[X]~~☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~ ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~☐ No ~~[X]~~☒

The registrant had ~~506,740,487~~423,952,135 shares of common stock, ~~$.01~~$0.01 par value, outstanding as of ~~September 30, 2017.~~March 31, 2024.

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS



Consolidated Statement of Income	Phillips 66

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Revenues and Other Income
Sales and other operating revenues* $ 25,627
21,624
72,608
60,882
Equity in earnings of affiliates 530
391
1,357
1,159
Net gain on dispositions —
3
15
9
Other income 49
24
519
59
Total Revenues and Other Income 26,206
22,042
74,499
62,109

Costs and Expenses
Purchased crude oil and products 19,463
15,961
55,495
44,089
Operating expenses 1,134
1,061
3,541
3,078
Selling, general and administrative expenses 435
411
1,258
1,218
Depreciation and amortization 337
293
972
863
Impairments 1
2
18
4
Taxes other than income taxes* 3,456
3,424
9,968
10,479
Accretion on discounted liabilities 5
5
16
15
Interest and debt expense 112
81
324
250
Foreign currency transaction (gains) losses 7
(9 ) 6
(16 )
Total Costs and Expenses 24,950
21,229
71,598
59,980
Income before income taxes 1,256
813
2,901
2,129
Provision for income taxes 407
277
908
679
Net Income 849
536
1,993
1,450
Less: net income attributable to noncontrolling interests 26
25
85
58
Net Income Attributable to Phillips 66 $ 823
511
1,908
1,392

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

Basic $ 1.60
0.97
3.68
2.62
Diluted 1.60
0.96
3.66
2.61

Dividends Paid Per Share of Common Stock (dollars)
$ 0.70
0.63
2.03
1.82

Weighted-Average Common Shares Outstanding (thousands)

Basic 512,923
525,991
517,420
528,650
Diluted 515,960
528,798
520,516
531,650
* Includes excise taxes on petroleum products sales: $ 3,376
3,357
9,664
10,225
See Notes to Consolidated Financial Statements.


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Revenues and Other Income
Sales and other operating revenues	$	35,811	34,396
Equity in earnings of affiliates	528		611
Net gain on dispositions	—		34
Other income	97		48
Total Revenues and Other Income	36,436		35,089

Costs and Expenses
Purchased crude oil and products	32,386		29,341
Operating expenses	1,452		1,578
Selling, general and administrative expenses	557		605
Depreciation and amortization	504		476
Impairments	165		8
Taxes other than income taxes	165		207
Accretion on discounted liabilities	9		6
Interest and debt expense	227		192
Foreign currency transaction losses	7		25
Total Costs and Expenses	35,472		32,438
Income before income taxes	964		2,651
Income tax expense	203		574
Net Income	761		2,077
Less: net income attributable to noncontrolling interests	13		116
Net Income Attributable to Phillips 66	$	748	1,961

Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic	$	1.74	4.21
Diluted	1.73		4.20



Weighted-Average Common Shares Outstanding (thousands)
Basic	428,959		464,810
Diluted	431,906		467,034
See Notes to Consolidated Financial Statements.

Table of Contents



Consolidated Statement of Comprehensive Income	Phillips 66

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Net Income $ 849
536
1,993
1,450
Other comprehensive income (loss)
Defined benefit plans
Actuarial loss arising during the period —
(28 ) —
(28 )
Amortization to net income of net actuarial loss and settlements 45
23
145
70
Curtailment gain —
31
—
31
Plans sponsored by equity affiliates 2
2
8
11
Income taxes on defined benefit plans (17 ) (9 ) (56 ) (29 )
Defined benefit plans, net of tax 30
19
97
55
Foreign currency translation adjustments 94
(61 ) 222
(183 )
Income taxes on foreign currency translation adjustments 1
(1 ) (8 ) (4 )
Foreign currency translation adjustments, net of tax 95
(62 ) 214
(187 )
Cash flow hedges —
4
—
(12 )
Income taxes on hedging activities —
(1 ) —
5
Hedging activities, net of tax —
3
—
(7 )
Other Comprehensive Income (Loss), Net of Tax 125
(40 ) 311
(139 )
Comprehensive Income 974
496
2,304
1,311
Less: comprehensive income attributable to noncontrolling interests 26
25
85
58
Comprehensive Income Attributable to Phillips 66 $ 948
471
2,219
1,253

~~See Notes to Consolidated Financial Statements.~~



~~Consolidated Balance Sheet~~	~~Phillips 66~~

Millions of Dollars
September 30
2017
December 31
2016
Assets
Cash and cash equivalents $ 1,547
2,711
Accounts and notes receivable (net of allowances of $31 million in 2017 and $34 million in 2016) 5,421
5,485
Accounts and notes receivable—related parties 934
912
Inventories 4,455
3,150
Prepaid expenses and other current assets 578
422
Total Current Assets 12,935
12,680
Investments and long-term receivables 13,899
13,534
Net properties, plants and equipment 21,303
20,855
Goodwill 3,270
3,270
Intangibles 884
888
Other assets 421
426
Total Assets $ 52,712
51,653

Liabilities
Accounts payable $ 6,404
6,395
Accounts payable—related parties 867
666
Short-term debt 706
550
Accrued income and other taxes 901
805
Employee benefit obligations 482
527
Other accruals 545
520
Total Current Liabilities 9,905
9,463
Long-term debt 9,495
9,588
Asset retirement obligations and accrued environmental costs 629
655
Deferred income taxes 7,605
6,743
Employee benefit obligations 877
1,216
Other liabilities and deferred credits 242
263
Total Liabilities 28,753
27,928

Equity
Common stock (2,500,000,000 shares authorized at $.01 par value)
Issued (2017—643,419,792 shares; 2016—641,593,854 shares)

Par value 6
6
Capital in excess of par 19,652
19,559
Treasury stock (at cost: 2017—136,679,305 shares; 2016—122,827,264 shares) (9,915 ) (8,788 )
Retained earnings 13,464
12,608
Accumulated other comprehensive loss (684 ) (995 )
Total Stockholders’ Equity 22,523
22,390
Noncontrolling interests 1,436
1,335
Total Equity 23,959
23,725
Total Liabilities and Equity $ 52,712
51,653

~~See Notes to Consolidated Financial Statements.~~



~~Consolidated Statement of Cash Flows~~	~~Phillips 66~~

Millions of Dollars
Nine Months Ended
September 30
2017
2016
Cash Flows From Operating Activities
Net income $ 1,993
1,450
Adjustments to reconcile net income to net cash provided by operating
activities

Depreciation and amortization 972
863
Impairments 18
4
Accretion on discounted liabilities 16
15
Deferred taxes 784
467
Undistributed equity earnings (543 ) (772 )
Net gain on dispositions (15 ) (9 )
Gain on consolidation of business (423 ) —
Other (234 ) (192 )
Working capital adjustments
Decrease (increase) in accounts and notes receivable (33 ) 185
Decrease (increase) in inventories (1,228 ) (510 )
Decrease (increase) in prepaid expenses and other current assets (106 ) (453 )
Increase (decrease) in accounts payable 464
1,025
Increase (decrease) in taxes and other accruals 52
223
Net Cash Provided by Operating Activities 1,717
2,296

Cash Flows From Investing Activities
Capital expenditures and investments (1,295 ) (2,031 )
Proceeds from asset dispositions* 65
159
Advances/loans—related parties (9 ) (266 )
Collection of advances/loans—related parties 325
107
Restricted cash received from consolidation of business 318
—
Other (80 ) (132 )
Net Cash Used in Investing Activities (676 ) (2,163 )

Cash Flows From Financing Activities
Issuance of debt 3,083
400
Repayment of debt (3,161 ) (418 )
Issuance of common stock 23
14
Repurchase of common stock (1,127 ) (812 )
Dividends paid on common stock (1,042 ) (954 )
Distributions to noncontrolling interests (83 ) (45 )
Net proceeds from issuance of Phillips 66 Partners LP common units 171
972
Other (66 ) (38 )
Net Cash Used in Financing Activities (2,202 ) (881 )

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash (3 ) 11

Net Change in Cash, Cash Equivalents and Restricted Cash (1,164 ) (737 )
Cash, cash equivalents and restricted cash at beginning of period 2,711
3,074
Cash, Cash Equivalents and Restricted Cash at End of Period $ 1,547
2,337

* Includes return of investments in equity affiliates and working capital true-ups on dispositions.


	Millions of Dollars
	Three Months Ended March 31
	2024		2023

Net Income	$	761	2,077
Other comprehensive income (loss)
Defined benefit plans


Amortization of net actuarial loss and settlements	2		10


Plans sponsored by equity affiliates	1		3
Income taxes on defined benefit plans	(1)		(3)
Defined benefit plans, net of income taxes	2		10
Foreign currency translation adjustments	(34)		76
Income taxes on foreign currency translation adjustments	2		1
Foreign currency translation adjustments, net of income taxes	(32)		77




Other Comprehensive Income (Loss), Net of Income Taxes	(30)		87
Comprehensive Income	731		2,164
Less: comprehensive income attributable to noncontrolling interests	13		116
Comprehensive Income Attributable to Phillips 66	$	718	2,048

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Balance Sheet			Phillips 66


	Millions of Dollars
	March 31 2024		December 31 2023
Assets
Cash and cash equivalents	$	1,570	3,323
Accounts and notes receivable (net of allowances of $75 million in 2024 and $71 million in 2023)	10,078		10,483
Accounts and notes receivable—related parties	1,454		1,247
Inventories	6,286		3,750
Prepaid expenses and other current assets	1,316		1,138
Total Current Assets	20,704		19,941
Investments and long-term receivables	15,592		15,302
Net properties, plants and equipment	35,549		35,712
Goodwill	1,553		1,550
Intangibles	911		920
Other assets	2,090		2,076
Total Assets	$	76,399	75,501

Liabilities
Accounts payable	$	11,745	10,332
Accounts payable—related parties	729		569
Short-term debt	2,325		1,482
Accrued income and other taxes	1,087		1,200
Employee benefit obligations	459		863
Other accruals	1,322		1,410
Total Current Liabilities	17,667		15,856
Long-term debt	17,829		17,877
Asset retirement obligations and accrued environmental costs	919		864
Deferred income taxes	7,368		7,424
Employee benefit obligations	613		630
Other liabilities and deferred credits	1,210		1,200
Total Liabilities	45,606		43,851

Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2024—656,284,691 shares; 2023—654,842,101 shares)
Par value	7		7
Capital in excess of par	19,674		19,650
Treasury stock (at cost: 2024—232,332,556 shares; 2023—224,377,439 shares)	(20,489)		(19,342)
Retained earnings	30,846		30,550
Accumulated other comprehensive loss	(312)		(282)
Total Stockholders’ Equity	29,726		30,583
Noncontrolling interests	1,067		1,067
Total Equity	30,793		31,650
Total Liabilities and Equity	$	76,399	75,501

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Cash Flows			Phillips 66


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Cash Flows From Operating Activities
Net income	$	761	2,077
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	504		476
Impairments	165		8
Accretion on discounted liabilities	9		6
Deferred income taxes	(55)		146
Undistributed equity earnings	(180)		(242)
Loss on early redemption of debt	2		—
Net gain on dispositions	—		(34)

Unrealized investment (gain) loss	(6)		11

Other	11		14
Working capital adjustments
Accounts and notes receivable	199		1,663
Inventories	(2,555)		(2,003)
Prepaid expenses and other current assets	(179)		469
Accounts payable	1,678		(739)
Taxes and other accruals	(590)		(653)


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

Cash Flows From Investing Activities
Capital expenditures and investments	(628)		(378)
Return of investments in equity affiliates	41		60
Proceeds from asset dispositions	2		77



Other	(80)		(24)


Net Cash Used in Investing Activities	(665)		(265)

Cash Flows From Financing Activities
Issuance of debt	3,815		2,488
Repayment of debt	(3,013)		(1,223)
Issuance of common stock	50		10
Repurchase of common stock	(1,164)		(800)
Dividends paid on common stock	(448)		(486)
Distributions to noncontrolling interests	(13)		(58)


Other	(73)		(48)


Net Cash Used in Financing Activities	(846)		(117)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	(6)		15

Net Change in Cash and Cash Equivalents	(1,753)		832
Cash and cash equivalents at beginning of period	3,323		6,133
Cash and Cash Equivalents at End of Period	$	1,570	6,965

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Changes in Equity			Phillips 66


	Millions of Dollars
	Three Months Ended March 31
	Attributable to Phillips 66
	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Retained Earnings	Accum. Other Comprehensive Loss	Noncontrolling Interests	Total

December 31, 2023	$	7	19,650	(19,342)	30,550	(282)	1,067	31,650
Net income	—		—	—	748	—	13	761
Other comprehensive loss	—		—	—	—	(30)	—	(30)
Dividends paid on common stock ($1.05 per share)	—		—	—	(448)	—	—	(448)
Repurchase of common stock	—		—	(1,147)	—	—	—	(1,147)
Distributions to noncontrolling interests	—		—	—	—	—	(13)	(13)



Benefit plan activity	—		24	—	(4)	—	—	20
March 31, 2024	$	7	19,674	(20,489)	30,846	(312)	1,067	30,793



December 31, 2022	$	7	19,791	(15,276)	25,432	(460)	4,612	34,106
Net income	—		—	—	1,961	—	116	2,077
Other comprehensive income	—		—	—	—	87	—	87
Dividends paid on common stock ($1.05 per share)	—		—	—	(486)	—	—	(486)
Repurchase of common stock	—		—	(807)	—	—	—	(807)

Distributions to noncontrolling interests	—		—	—	—	—	(58)	(58)

Benefit plan activity	—		4	—	(4)	—	(3)	(3)
March 31, 2023	$	7	19,795	(16,083)	26,903	(373)	4,667	34,916

Millions of Dollars
Attributable to Phillips 66
Common Stock
Par
Value
Capital in Excess of Par
Treasury Stock
Retained
Earnings
Accum. Other
Comprehensive Income (Loss)
Noncontrolling
Interests
Total

December 31, 2015 $ 6
19,145
(7,746 ) 12,348
(653 ) 838
23,938
Net income —
—
—
1,392
—
58
1,450
Other comprehensive loss —
—
—
—
(139 ) —
(139 )
Cash dividends paid on common stock —
—
—
(954 ) —
—
(954 )
Repurchase of common stock —
—
(812 ) —
—
—
(812 )
Benefit plan activity —
66
—
(11 ) —
—
55
Issuance of Phillips 66 Partners LP common units —
263
—
—
—
555
818
Distributions to noncontrolling interests and other —
—
—
—
—
(45 ) (45 )
September 30, 2016 $ 6
19,474
(8,558 ) 12,775
(792 ) 1,406
24,311

December 31, 2016 $ 6
19,559
(8,788 ) 12,608
(995 ) 1,335
23,725
Net income —
—
—
1,908
—
85
1,993
Other comprehensive income —
—
—
—
311
—
311
Cash dividends paid on common stock —
—
—
(1,042 ) —
—
(1,042 )
Repurchase of common stock —
—
(1,127 ) —
—
—
(1,127 )
Benefit plan activity —
48
—
(10 ) —
—
38
Issuance of Phillips 66 Partners LP common units —
45
—
—
—
99
144
Distributions to noncontrolling interests and other —
—
—
—
—
(83 ) (83 )
September 30, 2017 $ 6
19,652
(9,915 ) 13,464
(684 ) 1,436
23,959

Shares in Thousands
Common Stock Issued
Treasury Stock
December 31, 2015 639,336
109,926
Repurchase of common stock —
10,141
Shares issued—share-based compensation 1,581
—
September 30, 2016 640,917
120,067

December 31, 2016 641,594
122,827
Repurchase of common stock —
13,852
Shares issued—share-based compensation 1,826
—
September 30, 2017 643,420
136,679

~~See Notes to Consolidated Financial Statements.~~


	Shares
	Three Months Ended March 31
	Common Stock Issued	Treasury Stock

December 31, 2023	654,842,101	224,377,439
Repurchase of common stock	—	7,955,117
Shares issued—share-based compensation	1,442,590	—

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

December 31, 2022	652,373,645	186,529,667
Repurchase of common stock	—	7,874,201
Shares issued—share-based compensation	892,539	—

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










See Notes to Consolidated Financial Statements.

Table of Contents


Notes to Consolidated Financial Statements			Phillips 66

Note 1—Interim Financial Information

The unaudited interim financial information presented in the financial statements included in this report is ~~unaudited~~prepared in accordance with generally accepted accounting principles in the United States (GAAP) and includes all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of the consolidated financial position of Phillips 66 and its results of operations and cash flows for the periods presented. Unless otherwise specified, all such adjustments are of a normal and recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our ~~2016~~2023 Annual Report on Form 10-K. The results of operations for the ~~three- and nine-month periods~~three months ended ~~September 30, 2017,~~March 31, 2024, are not necessarily indicative of the results ~~to be~~ expected for the full year. ~~Certain prior period financial information has been recast~~

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

On June 15, 2023, we completed the acquisition of all publicly held common units of DCP Midstream, LP (DCP LP) pursuant to ~~reflect~~ the ~~current year’s presentation.~~

~~Note 2—Changes in Accounting Principles~~

~~Effective~~terms of the Agreement and Plan of Merger, dated as of January ~~1, 2017, we early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2017-04, “Intangibles—Goodwill~~5, 2023 (DCP LP Merger Agreement). The DCP LP Merger Agreement was entered into with DCP LP, its subsidiaries and ~~Other (Topic 350): Simplifying the Test for Goodwill Impairment,”~~its general partner entities, pursuant to which ~~eliminates the second step from the goodwill impairment test.~~one of our wholly owned subsidiaries merged with and into DCP LP, with DCP LP surviving as a Delaware limited partnership. Under the revised test, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is applied prospectively to goodwill impairment tests performed on or after January 1, 2017.

Effective January 1, 2017, we early adopted ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The new update clarifies the classification and presentation of changes in restricted cash. The amendment requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. Adoption of this ASU on a retrospective basis did not have a material impact on our financial statements. See Note 17—Restricted Cash for more information.

Effective January 1, 2017, we early adopted ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The new update clarifies how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. In addition, ASU No. 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. Adoption of this ASU on a retrospective basis did not have a material impact on our financial statements.

~~Effective January 1, 2017, we adopted ASU 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects~~terms of the ~~accounting for share-based payment award transactions, including accounting for income taxes and classification~~DCP LP Merger Agreement, at the effective time of ~~excess tax benefits on~~ the statement of cash flows, forfeitures and minimum statutory tax withholding requirements. Adoption of this ASU on a prospective basis did not materially impact our financial position, results of operations, or cash flows. We account for forfeitures of awards when they occur and excess tax benefits, which were previously reported in cash flows from financing activities, are now reported in cash flows from operating activities on a prospective basis.

~~Note 3—Variable Interest Entities (VIEs)~~

~~Consolidated VIEs~~

~~In 2013, we formed Phillips 66 Partners~~DCP LP a master limited partnership, to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines and terminals, as well as other midstream assets. We consolidate Phillips 66 Partners, as we determined that Phillips 66 Partners is a VIE and we are the primary beneficiary. As general partner of Phillips 66 Partners, we have the ability to control its financial interests, as well as the ability to direct the activities that most significantly impact its economic performance. See Note 21—Phillips 66 Partners LP, for additional information.

The most significant assets of Phillips 66 Partners that are available to settle only its obligations, along with its most significant liabilities for which its creditors do not have recourse to Phillips 66’s general credit, were:

Millions of Dollars
September 30
2017
December 31
2016

Equity investments* $ 1,265
1,142
Net properties, plants and equipment 2,675
2,675
Long-term debt 2,273
2,396

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

~~Non-consolidated VIEs~~

~~We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary.~~

~~Merey Sweeny, L.P. (MSLP) is~~Merger, each publicly held common unit representing a limited ~~partnership that owns a delayed coker~~partner interest in DCP LP (other than the common units owned by DCP Midstream and related facilities at the Sweeny Refinery. Under the agreements that governed the relationships between the former co-venturers in MSLP, certain defaults by Petróleos de Venezuela S.A. (PDVSA) with respect to supplyits subsidiaries) issued and outstanding as of ~~crude oil~~immediately prior to the ~~Sweeny Refinery triggered~~effective time was converted into the right to ~~acquire PDVSA’s 50 percent ownership~~receive $41.75 per common unit in cash. We accounted for the DCP LP Merger as an equity transaction. The DCP LP Merger increased our aggregate direct and indirect economic interest in ~~MSLP.~~DCP LP from 43.3% to 86.8% and our aggregate direct and indirect economic interests in DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills) increased from 62.2% to 91.2%.

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

Note 3—Business Combination

On August 1, 2023, our Marketing and Specialties (M&S) segment acquired a marketing business on the U.S. West Coast for total consideration of $272 million. These operations were acquired to support the placement of renewable diesel produced by our Rodeo facility, now referred to as the Rodeo Renewable Energy Complex. At March 31, 2024, we provisionally recorded $146 million of amortizable intangible assets, primarily customer relationships; $82 million of properties, plants and equipment (PP&E), including finance lease right of use assets; $40 million of net working capital; $67 million of goodwill; and $63 million of finance lease liabilities for this acquisition. The ~~call right was exercised in August 2009. The exercise~~fair values of the ~~call right was challenged,~~assets acquired and liabilities assumed are preliminary and subject to change until we finalize our accounting for this acquisition. We will complete a final determination of the fair values of assets acquired and liabilities assumed within the one-year measurement period from the date of the acquisition.

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Note 4—Sales and Other Operating Revenues

Disaggregated Revenues

The following tables present our disaggregated sales and other operating revenues:


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Product Line and Services
Refined petroleum products	$	25,739	24,718
Crude oil resales	5,578		4,565
Natural gas liquids (NGL) and natural gas	3,334		4,421
Services and other*	1,160		692
Consolidated sales and other operating revenues	$	35,811	34,396

Geographic Location**
United States	$	28,377	27,065
United Kingdom	3,890		3,930
Germany	1,303		1,306
Other countries	2,241		2,095
Consolidated sales and other operating revenues	$	35,811	34,396
* Includes derivatives-related activities. See Note 13—Derivatives and Financial Instruments, for additional information.
** Sales and other operating revenues are attributable to countries based on the location of the operations generating the revenues.

Contract-Related Assets and Liabilities

At March 31, 2024, and December 31, 2023, receivables from contracts with customers were $9,592 million and $9,638 million, respectively. Significant noncustomer balances, such as buy/sell receivables and excise tax receivables, were excluded from these amounts.

Our contract-related assets also include payments we make to our marketing customers related to incentive programs. An incentive payment is initially recognized as an asset and subsequently amortized as a reduction to revenue over the contract term, which generally ranges from 5 to 15 years. At March 31, 2024, and December 31, 2023, our asset balances related to such payments were $546 million and $537 million, respectively.

Our contract liabilities represent advances from our customers prior to product or service delivery. At March 31, 2024, and December 31, 2023, contract liabilities were $162 million and $187 million, respectively.

Remaining Performance Obligations

Most of our contracts with customers are spot contracts or term contracts with only variable consideration. We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less or because the variable consideration has been allocated entirely to an unsatisfied performance obligation. We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing. At March 31, 2024, the remaining performance obligations related to these minimum volume commitment contracts amounted to $326 million. This amount excludes variable consideration and estimates of variable rate escalation clauses in our contracts with customers, and is expected to be recognized through 2031 with a weighted average remaining life of two years as of March 31, 2024.

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Note 5—Credit Losses

We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil, NGL and natural gas. We assess each counterparty’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the ~~dispute was arbitrated~~counterparty’s established credit rating or our assessment of the counterparty’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risk, and business strategy in our ~~favor and subsequently litigated. Through February 7, 2017, we determined MSLP was~~evaluation. A credit limit is established for each counterparty based on the outcome of this review. We may require collateralized asset support or a ~~VIE and used the equity method of accounting because the exercise of the call right remained subject~~prepayment to legal challenge. As discussed more fully in Note 5—Business Combinations, the exercise of the call right ceased to be subject to legal challenge in February 2017. At that point, we no longer considered MSLP a VIE and began consolidating the entity as a wholly owned subsidiary.mitigate credit risk.

We ~~have a 25 percent ownership interest in both Dakota Access, LLC (DAPL)~~monitor our ongoing credit exposure through active review of counterparty balances against contract terms and ~~Energy Transfer Crude Oil Company, LLC (ETCO), which collectively own the Bakken Pipeline. These entities did not have sufficient equity~~due dates. Our activities include timely account reconciliations, dispute resolution and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. In addition, when events and circumstances arise that may affect certain counterparties’ abilities to fulfill their obligations, we enhance our credit monitoring, and we may seek collateral to support some transactions or require prepayments from higher-risk counterparties.

At March 31, 2024, and December 31, 2023, we reported $11,532 million and $11,730 million of accounts and notes receivable, respectively, net of allowances of $75 million and $71 million, respectively. Based on an aging analysis at ~~risk~~March 31, 2024, more than 95% of our accounts receivable were outstanding less than 60 days.

We are also exposed to ~~fully fund the construction~~credit losses from off-balance sheet exposures, such as guarantees of ~~all assets required~~joint venture debt and standby letters of credit. See Note 11—Guarantees, and Note 12—Contingencies and Commitments, for ~~principal operations, and thus represented VIEs until operations commenced. On June 1, 2017,~~more information regarding these ~~entities commenced operations and were no longer considered VIEs. We use the equity method~~off-balance sheet exposures.

Table of ~~accounting for these investments.~~Contents

Note 6—Inventories

~~Note 4—Inventories~~

Inventories consisted of the following:


	Millions of Dollars
	March 31 2024		December 31 2023

Crude oil and petroleum products	$	5,871	3,330
Materials and supplies	415		420
	$	6,286	3,750

Millions of Dollars
September 30
2017
December 31
2016

Crude oil and petroleum products $ 4,172
2,883
Materials and supplies 283
267
$ 4,455
3,150

Inventories valued on the last-in, first-out (LIFO) basis totaled ~~$4,059~~$5,698 million and ~~$2,772~~$3,050 million at ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, respectively. The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately ~~$3.8~~$6.3 billion and ~~$3.3~~$5.3 billion at ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, respectively.

Certain planned reductions in inventory that are not expected to be replaced by the end of the year cause liquidations of LIFO inventory values. LIFO inventory liquidations ~~during the three- and nine-month periods ended September 30, 2017, were~~did not ~~material. Excluding the disposition of the Whitegate Refinery, LIFO liquidations during the three- and nine-month periods ended September 30, 2016, decreased~~have a material impact on net income ~~by approximately $13 million and $71 million, respectively.~~

In conjunction with the Whitegate Refinery disposition, the refinery’s LIFO inventory values were liquidated causing a decrease in net income of $62 million during the three- and nine-month periods ended September 30, 2016. This LIFO liquidation impact was included in the gain recognized on the disposition.

~~Note 5—Business Combinations~~

MSLP owns a delayed coker and related facilities at the Sweeny Refinery, and its results are included in our Refining segment. Prior to August 28, 2009, MSLP was owned 50/50 by ConocoPhillips and PDVSA. Under the agreements that governed the relationships between the partners, certain defaults by PDVSA with respect to supply of crude oil to the Sweeny Refinery triggered the right, exercised in August 2009, to acquire its 50 percent ownership interest in MSLP for a purchase price determined by a contractual formula. As the distributions PDVSA received from MSLP exceeded the amounts it contributed to MSLP, the contractual formula required no cash consideration for the ~~acquisition. The exercise was challenged,~~three months ended March 31, 2024, and ~~the dispute was arbitrated in our favor and subsequently litigated. While the dispute was being arbitrated and litigated, we continued to use the equity method~~2023.

Table of accounting for our 50 percent interest in MSLP. When the exercise of the call right ceased to be subject to legal challenge on February 7, 2017, we deemed that the acquisition was complete and began accounting for MSLP as a wholly owned consolidated subsidiary.Contents

Based on a third-party appraisal of the fair value of MSLP’s net assets, utilizing discounted cash flows and replacement costs, the acquisition of PDVSA’s 50 percent interest resulted in our recording a pre-tax gain of $423 million in the first quarter of 2017. This gain was included in the “Other income” line on our consolidated statement of income. The fair value of our original equity interest in MSLP immediately prior to the deemed acquisition was $145 million. As a result of the transaction, we recorded $318 million of restricted cash, $250 million of properties, plants and equipment (PP&E) and $238 million of debt, as well as a net $93 million for the elimination of our equity investment in MSLP and net intercompany payables. Our acquisition accounting was finalized during the first quarter of 2017.

In November 2016, Phillips 66 Partners acquired NGL logistics assets located in southeast Louisiana, consisting of approximately 500 miles of pipelines and storage caverns connecting multiple fractionation facilities, refineries and a petrochemical facility. The acquisition provided an opportunity for fee-based growth in the Louisiana market within our Midstream segment. The acquisition was included in the “Capital expenditures and investments” line on our consolidated statement of cash flows. At the acquisition date, we recorded $183 million of PP&E and $3 million of goodwill. Our acquisition accounting was finalized during the first quarter of 2017, with no change to the provisional amounts recorded in 2016.

~~Note 6—Assets Held for Sale or Sold~~

In June 2017, we entered into an agreement to sell vacant land. In our segment disclosures, the property is included in Corporate and Other. We classified the property as held for sale and transferred $50 million of PP&E to the “Prepaid expenses and other current assets” line on our consolidated balance sheet. We expect to close the sale in the first quarter of 2018, following a contractual inspection period. The net sales proceeds are expected to approximate the carrying value of the land.

In September 2016, we completed the sale of the Whitegate Refinery and related marketing assets, which were included primarily in our Refining segment. The net carrying value of the assets at the time of their disposition was $135 million, which consisted of $127 million of inventory, other working capital, and PP&E; and $8 million of allocated goodwill. An immaterial gain was recognized in 2016 on the disposition.

Note 7—Investments, Loans and Long-Term Receivables

Equity Investments

~~Summarized 100 percent financial information for Chevron Phillips Chemical~~

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

In 2020, the trial court presiding over litigation brought by the Standing Rock Sioux Tribe (the Tribe) ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) addressing an easement under Lake Oahe in North Dakota. The trial court later vacated the easement. Although the easement is vacated, the USACE has no plans to stop pipeline operations while it proceeds with the EIS, and the Tribe’s request for a shutdown was ~~as follows:~~denied in May 2021. In June 2021, the trial court dismissed the litigation entirely. Once the EIS is completed, new litigation or challenges may be filed.

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Revenues $ 2,287
2,186
7,196
6,526
Income before income taxes 345
372
1,469
1,400
Net income 331
355
1,424
1,343

~~Related Party Loans and Advances~~

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. Therefore, the requirement to prepare the EIS stood. Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS process while the USACE engaged with the Tribe on their reasons for withdrawing.

The draft EIS process resumed in August 2022, and in September 2023, the USACE published its draft EIS for public comment. The USACE identified five potential outcomes, but did not indicate which one it preferred. The options comprise two “no action” alternatives where the USACE would deny an easement to Dakota Access and require it to shut down the pipeline and either remove the pipe from under Lake Oahe, or allow the pipeline to be abandoned-in-place under the lake. The USACE also identified three “action” alternatives; two of them contemplate that the USACE would reissue the easement to Dakota Access under essentially the same terms as 2017 with either the same or a larger volume of oil allowed through the pipeline, while the third alternative would require decommissioning 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 the fall of 2024. The Record of Decision will follow within 30 to 60 days after the issuance of the final EIS.

Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access with an aggregate principal amount outstanding of $1.85 billion at March 31, 2024. In addition, Phillips 66 Partners LP (Phillips 66 Partners), a wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At March 31, 2024, our 25% share of the maximum potential equity contributions under the CECU was approximately $467 million.

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

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

On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $1 billion aggregate principal amount of its outstanding senior notes upon maturity. 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 ~~2017, we received payment~~2024. As a result of the ~~$250~~debt repayment, on April 1, 2024, our share of the maximum potential equity contributions under the CECU decreased to approximately $215 million, ~~outstanding principal balance at December~~and our share of scheduled interest payments on the notes that we could be required to support decreased to approximately $10 million annually.

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CF United LLC (CF United)

On January 1, 2024, CF United, a retail marketing joint venture with operations primarily on the U.S. West Coast, completed the acquisition of another joint venture in which we had an ownership interest. In connection with this acquisition, the governing agreement for CF United was amended and restated. The amended and restated agreement included removal of a put option that required us to purchase our co-venturer’s interest based on a fixed multiple that was considered a variable interest. As a result of the removal of this put option, CF United ceased to be a variable interest entity (VIE) effective January 1, 2024. At March 31, ~~2016,~~2024, we held a 50% voting interest and a 47% economic interest in CF United and the book value of our ~~sponsor loans to the DAPL~~investment was $340 million.

OnCue Holdings, LLC (OnCue)

We hold a 50% interest in OnCue, a joint venture that owns and ~~ETCO joint ventures.~~operates retail convenience stores. We ~~also received payment~~fully guaranteed various debt agreements of ~~the $75 million outstanding principal balance of the partner loan to WRB Refining LP (WRB). These cash inflows, totaling $325 million, are included~~OnCue and our co-venturer did not participate in the ~~“Collections~~guarantees. This entity is considered a VIE because our debt guarantees resulted in OnCue not being exposed to all potential losses. We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact economic performance. At March 31, 2024, our maximum exposure to loss was $231 million, which represented the book value of ~~advances/loans—related parties” line on~~ our ~~consolidated statement~~investment in OnCue of ~~cash flows.~~$168 million and guaranteed debt obligations of $63 million.

Note 8—Properties, Plants and Equipment

Our gross investment in PP&E and the associated accumulated depreciation and amortization (Accum. D&A) balances were as follows:


	Millions of Dollars
	March 31, 2024				December 31, 2023
	Gross PP&E		Accum. D&A	Net PP&E	Gross PP&E	Accum. D&A	Net PP&E

Midstream	$	26,207	4,665	21,542	26,124	4,382	21,742
Chemicals	—		—	—	—	—	—
Refining	25,199		12,801	12,398	25,421	13,103	12,318
Marketing and Specialties	2,000		1,185	815	1,997	1,166	831
Corporate and Other	1,646		852	794	1,650	829	821
	$	55,052	19,503	35,549	55,192	19,480	35,712

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

Millions of Dollars
September 30, 2017 December 31, 2016

Gross
PP&E

Accum.
D&A

Net
PP&E

Gross
PP&E

Accum.
D&A

Net
PP&E

Midstream $ 8,491
1,775
6,716
8,179
1,579
6,600
Chemicals —
—
—
—
—
—
Refining 22,143
8,805
13,338
21,152
8,197
12,955
Marketing and Specialties 1,610
889
721
1,451
776
675
Corporate and Other 1,104
576
528
1,207
582
625
$ 33,348
12,045
21,303
31,989
11,134
20,855

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Note 9—Earnings Per Share

The numerator of basic earnings per share (EPS) is net income attributable to Phillips 66, ~~reduced by~~adjusted for noncancelable dividends paid on unvested share-based employee awards during the vesting period (participating securities). The denominator of basic EPS is the sum of the daily weighted-average number of common shares outstanding during the periods presented and fully vested stock and unit awards that have not yet been issued as common stock. The numerator of diluted EPS is also based on net income attributable to Phillips 66, which is reduced ~~only~~ by dividend equivalents paid on participating securities for which the dividends are more dilutive than the participation of the awards in the earnings of the periods presented. To the extent unvested stock, unit or option awards and vested unexercised stock options are dilutive, they are included with the weighted-average common shares outstanding in the denominator. Treasury stock is excluded from the denominator in both basic and diluted EPS.


	Three Months Ended March 31
	2024			2023
	Basic		Diluted	Basic	Diluted
Amounts Attributed to Phillips 66 Common Stockholders (millions):
Net Income Attributable to Phillips 66	$	748	748	1,961	1,961
Income allocated to participating securities	(2)		(1)	(3)	(1)

Net income available to common stockholders	$	746	747	1,958	1,960

Weighted-average common shares outstanding (thousands):	427,165		428,959	462,870	464,810
Effect of share-based compensation	1,794		2,947	1,940	2,224
Weighted-average common shares outstanding—EPS	428,959		431,906	464,810	467,034

Earnings Per Share of Common Stock (dollars)	$	1.74	1.73	4.21	4.20

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
Basic
Diluted
Basic
Diluted
Basic
Diluted
Basic
Diluted
Amounts attributed to Phillips 66 Common
Stockholders (millions):

Net income attributable to Phillips 66 $ 823
823
511
511
1,908
1,908
1,392
1,392
Income allocated to participating securities (1 ) —
(2 ) (1 ) (4 ) (1 ) (5 ) (3 )
Net income available to common stockholders $ 822
823

509
510
1,904
1,907

1,387
1,389

Weighted-average common shares outstanding (thousands):
509,147
512,923
521,815
525,991
513,583
517,420
524,365
528,650
Effect of stock-based compensation 3,776
3,037
4,176
2,807
3,837
3,096
4,285
3,000
Weighted-average common shares outstanding—EPS 512,923
515,960
525,991
528,798
517,420
520,516
528,650
531,650

Earnings Per Share of Common Stock (dollars)
$ 1.60
1.60
0.97
0.96
3.68
3.66
2.62
2.61

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Note 10—Debt

~~At September 30, 2017, no amount had been directly drawn under our $5 billion revolving credit facility; however, we had $200 million of short-term commercial paper outstanding~~Senior Notes and $51 million of issued letters of credit that were supported by this facility. In addition, at September 30, 2017, there was $87 million outstanding under Phillips 66 Partners’ $750 million revolving credit facility. As a result, we had $5.4 billion of total committed capacity available under our credit facilities at September 30, 2017.

~~Debt~~Term Loan Issuances and Repayments

~~In May 2017, we repaid $1,500 million of 2.95% Senior Notes upon maturity with the funding from the April 2017 debt issuances discussed below.~~

Also in May 2017, we repaid $135 million of MSLP 8.85% Senior Notes due in 2019. This debt was recorded as a result of the consolidation of MSLP in February 2017. See Note 5—Business Combinations for additional information regarding MSLP.

~~Debt~~ Issuances

In April 2017, Phillips 66 completed a private offering of $600 million aggregate principal amount of unsecured notes, consisting of $300 million of Notes due 2019 and $300 million of Notes due 2020. Interest on these notes is a floating rate equal to three-month LIBOR plus 0.65% per annum for the 2019 Notes and three-month LIBOR plus 0.75% per annum for the 2020 Notes. Interest on both series of notes is payable quarterly in arrears on January 15, April 15, July 15 and October 15, commencing in July 2017. The 2019 Notes mature on April 15, 2019, and the 2020 Notes mature on April 15, 2020. The notes are guaranteed by

On February 28, 2024, Phillips 66 Company, a wholly owned ~~subsidiary.~~

~~Also in April 2017,~~subsidiary of Phillips 66, ~~entered into term loan facilities with an~~issued $1.5 billion aggregate ~~borrowing~~principal amount of ~~$900 million, consisting of a $450 million 364-day facility~~senior unsecured notes that are fully and ~~a $450 million three-year facility. Interest on the term loans is a floating rate based on either the Eurodollar rate or the reference rate, plus a margin determined~~unconditionally guaranteed by ~~our long-term credit ratings.~~Phillips 66. The senior unsecured notes issuance consisted of:

Phillips 66 used the net proceeds from the issuance of the notes, together with the proceeds from the term loans, and cash on-hand to repay its outstanding 2.95% Senior Notes upon maturity in May 2017, for capital expenditures and for general corporate purposes.

~~Subsequent Events~~

In October 2017, as part of a contribution of assets to Phillips 66 Partners, Phillips 66 Partners assumed the $450 million of term loans outstanding under the 364-day facility originally issued in April 2017, and repaid those loans shortly thereafter. In addition, Phillips 66 Partners issued $500•$600 million aggregate principal amount of ~~3.75%~~5.250% Senior Notes due ~~2028 and $150~~2031 (2031 Notes).

•$400 million aggregate principal amount of ~~4.68%~~5.300% Senior Notes due ~~2045.~~ 2033 (Additional 2033 Notes).

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

Interest on the ~~3.75% Senior~~2031 Notes ~~due 2028~~and 2054 Notes is payable ~~semiannually in arrears~~semi-annually on ~~March 1~~June 15 and ~~September 1~~December 15 of each year, commencing on June 15, 2024. Interest on the Additional 2033 Notes is payable semi-annually on June 30 and December 30 of each year, commencing on June 30, 2024.

On March ~~1, 2018.~~29, 2023, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, issued $1.25 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66. The ~~4.68%~~senior unsecured notes issuance consisted of:

•$750 million aggregate principal amount of 4.950% Senior Notes due ~~2045 are~~December 2027 (2027 Notes).

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

Repayments

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

On March 4, 2024, Phillips 66 ~~Partners’ 4.68% Senior Notes, and interest is payable semiannually~~Company repaid $700 million of the $1.25 billion borrowed under its delayed draw term loan that matures in ~~arrears on~~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.

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

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Credit Facilities and ~~August 15~~Commercial Paper

Phillips 66 and Phillips 66 Company

On February 28, 2024, we entered into a new $5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029. The Facility replaced our previous $5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as guarantor, and the previous revolving credit facility was terminated. The Facility 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 ~~year.~~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 Secured Overnight Financing Rate (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The pricing levels for the commitment fee and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time. At March 31, 2024, and December 31, 2023, no amount had been drawn under our revolving credit facilities.

~~Also in October 2017, we repaid~~Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the ~~$200~~Facility. Commercial paper maturities are contractually limited to less than one year. At March 31, 2024, $1.5 billion of commercial paper had been issued under this program. At December 31, 2023, no borrowings were outstanding under this program.

DCP Midstream Class A Segment

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 ~~short-term commercial paper~~borrowing capacity. At December 31, 2023, DCP LP had $25 million in borrowings outstanding ~~at September 30, 2017.~~under its $1.4 billion credit facility and $350 million of borrowings outstanding under its accounts receivable securitization facility, which were repaid during the three months ended March 31, 2024.

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Note 11—Guarantees

At ~~September 30, 2017,~~March 31, 2024, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability ~~at inception,~~ for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability either because the guarantees were issued prior to December 31, 2002, or because the fair value of the obligation ~~was~~is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the ~~guarantee~~guarantees and expect future performance to be either immaterial or have only a remote chance of occurrence.

~~Guarantees of Joint Venture Debt~~

In December 2016, as part of the restructuring within DCP Midstream, LLC (DCP Midstream), we issued a guarantee, effective January 1, 2017, in support of DCP Midstream’s debt issued in the first quarter of 2017. At September 30, 2017, the maximum potential amount of future payments to third parties under the guarantee was estimated to be $175 million. Payment would be required if DCP Midstream defaults on this debt obligation, which matures in 2019.

~~At September 30, 2017, we had other guarantees outstanding for our portion of certain joint venture debt obligations,~~

which have remaining terms of up to 8 years. The maximum potential amount of future payments to third parties under these guarantees is approximately $135 million. Payment would be required if a joint venture defaults on its debt obligations.

~~Other~~Lease Residual Value Guarantees

~~In 2016,~~Under the operating lease ~~commenced on~~agreement for our headquarters facility in Houston, ~~Texas. Under this lease agreement,~~Texas, we have ~~a residual value guarantee with a maximum future exposure of $554 million. The operating lease has a term of five years and provides us~~ the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale.

We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at March 31, 2024. We also have residual value guarantees associated with railcar, airplane and ~~airplane~~truck leases with maximum potential future exposures totaling ~~$349~~$171 million. These leases have remaining terms of one to ten years.

Guarantees of Joint Venture Obligations

In March 2019, Phillips 66 Partners and its co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering. See Note 7—Investments, Loans and Long-Term Receivables, for additional information regarding Dakota Access and the CECU.

At ~~year-end 2016, based~~March 31, 2024, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to two years. The maximum potential future exposures under these guarantees were approximately $78 million. Payment would be required if a joint venture defaults on an outside appraisal of the railcars’ fair value at the end of their lease terms, we estimated a total residual value deficiency of $94 million and recognized $28 million as expense in 2016. During the first nine months of 2017, we recognized an additional $35 million of expense related to the residual value deficiency. At September 30, 2017, the remaining residual value deficiency was $31 million. This deficiency will be recognized on a straight-line basis through May 2019. its obligations.

Indemnifications

Over the years, we have entered into various agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to ~~indemnification.~~indemnifications. Agreements associated with these sales include indemnifications for taxes, litigation, environmental liabilities, permits and licenses, ~~and~~ employee claims, ~~as well as~~and real estate ~~indemnity against~~ tenant defaults. The provisions of these indemnifications vary greatly. The majority of these indemnifications are related to environmental issues, which generally have indefinite terms and potentially unlimited exposure. At March 31, 2024, and December 31, 2023, the ~~maximum~~carrying amount of ~~future payments is generally unlimited. The carrying amount~~ recorded ~~for~~ indemnifications ~~at September 30, 2017,~~ was ~~$201 million.~~$155 million and $159 million, respectively.

We amortize the indemnification liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of indemnity. In cases where the indemnification term is indefinite, we will reverse the liability when we have information to support ~~that~~ the ~~liability was essentially relieved or amortize the liability over an appropriate time period as the fair value of our indemnification exposure declines.~~reversal. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. ~~Included in the recorded carrying amount were $109 million of~~At March 31, 2024, and December 31, 2023, environmental accruals for known contamination ~~that~~of $110 million and $114 million, respectively, were included in the carrying amount of the recorded indemnifications noted above. These environmental accruals were primarily included in the “Asset retirement obligations and accrued environmental costs” line item on our consolidated balance ~~sheet at September 30, 2017.~~sheet. For additional information about environmental liabilities, see Note 12—Contingencies and Commitments.

Indemnification and Release Agreement

In 2012, in connection with our separation from ConocoPhillips, ~~(the Separation),~~ we entered into ~~the~~an Indemnification and Release Agreement. This agreement governs the treatment between ConocoPhillips and us of matters relating to indemnification, insurance, litigation responsibility and management, and litigation document sharing and cooperation arising in connection with the ~~Separation.~~separation. Generally, the agreement provides for ~~cross-indemnities~~cross indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of ConocoPhillips’ business with ConocoPhillips. The agreement also establishes procedures for handling claims subject to indemnification and related matters.

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Note 12—Contingencies and Commitments

A number of lawsuits involving a variety of claims that arose in the ordinary course of business have been filed against us or are subject to indemnifications provided by us. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for financial recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of ~~income-tax-related~~income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is ~~less than certain.~~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. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to international, federal, state and local environmental laws and regulations. When we prepare our consolidated financial statements, we record accruals for environmental liabilities based on management’s best estimates, using ~~all~~ information available at the time. We measure estimates and base contingent liabilities on currently available facts, existing technology and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring contingent environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the ~~U.S.~~ Environmental Protection Agency (EPA) or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.

Although liability ~~of those potentially responsible~~ for environmental remediation costs is generally joint and several for federal sites and frequently so for state sites, we are usually only one of many companies alleged to have liability at a particular site. Due to such joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites atfor which we are potentially responsible are still under investigation by the EPA or the state agencies concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit, although some of the indemnifications are subject to dollar and time limits.

We are currently participating in environmental assessments and cleanups at numerous federal Superfund and comparable state sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those pertaining to sites acquired in a ~~purchase~~ business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and ~~the~~these costs can be reasonably estimated. At ~~September 30, 2017,~~March 31, 2024, our total environmental ~~accrual was $458~~accruals were $442 million, compared with ~~$496~~$446 million at December 31, ~~2016.~~2023. We expect to incur a substantial amount of these expenditures within the next 30 years. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

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Legal Proceedings

Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. 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. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.

Other Contingencies

We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized.

At ~~September 30, 2017,~~March 31, 2024, we had performance obligations secured by letters of credit and bank guarantees of ~~$574~~$847 million ~~(of which $51 million was issued under the provisions of our revolving credit facility, and the remainder was issued as direct bank letters of credit and bank guarantees)~~ related to various purchase and other commitments incident to the ordinary conduct of business.

Note 13—Derivatives and Financial Instruments

Derivative Instruments

We use financial and commodity-based derivative contracts to manage exposures to fluctuations in commodity prices, interest rates and foreign currency exchange rates, or to capture market opportunities. Because we do not apply hedge accounting for commodity derivative contracts, all realized orand unrealized gains and losses from commodity derivative contracts are recognized in our consolidated statement of income. Gains and losses from derivative contracts held for trading not directly related to our physical business are reported net in the “Other income” line item on our consolidated statement of income. Cash flows from all our derivative activity for the periods presented appear in the operating section on our consolidated statement of cash flows.

Purchase and sales contracts with firm minimum notional volumes for commodities that are readily convertible to cash are recorded on ~~the~~our consolidated balance sheet as derivatives unless the contracts are eligible for, and we elect, the normal purchases and normal sales exception, whereby the contracts are recorded on an accrual basis. We generally apply the normal purchases and normal sales exception to eligible crude oil, refined petroleum product, NGL, natural gas, renewable feedstock, and power commodity contracts to purchase or sell quantities we expect to use or sell in the normal course of business. All other derivative instruments are recorded at fair value on our consolidated balance sheet. For further information onregarding the fair value of derivatives, see Note 14—Fair Value ~~Measurements~~.Measurements.

Commodity Derivative Contracts—We sell into or receive supply from the worldwide crude oil, refined ~~products,~~petroleum product, NGL, natural gas, renewable feedstock, and electric power markets, exposing our revenues, purchases, cost of operating activities and cash flows to fluctuations in the prices for these commodities. Generally, our policy is to remain exposed to the market prices of commodities; however, we use futures, forwards, swaps and options in various markets to balance physical systems, meet customer needs, manage price exposures on specific transactions, and do a limited ~~immaterial~~ amount of trading not directly related to our physical business, all of which may reduce our exposure to fluctuations in market prices. We also use the market knowledge gained from these activities to capture market opportunities such as moving physical commodities to more profitable locations, storing commodities to capture seasonal or time premiums, and blending commodities to capture quality upgrades.

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The following table indicates the consolidated balance sheet line items that include the fair values of commodity derivative assets and liabilities. The balances in the following table are presented on a gross basis, before the effects of counterparty and collateral netting. However, we have elected to present our commodity derivative assets and liabilities with the same counterparty on a net basis on ~~the~~our consolidated balance sheet when the legal right of ~~setoff~~offset exists.


	Millions of Dollars
	March 31, 2024					December 31, 2023
	Commodity Derivatives			Effect of Collateral Netting	Net Carrying Value Presented on the Balance Sheet		Commodity Derivatives		Effect of Collateral Netting	Net Carrying Value Presented on the Balance Sheet
	Assets		Liabilities			Assets	Liabilities

Assets
Prepaid expenses and other current assets	$	190	(26)	—	164		2,148	(2,005)	—	143
Other assets	26		(13)	—	13		19	(2)	—	17
Liabilities
Other accruals	4,515		(4,818)	171	(132)		1,034	(1,127)	18	(75)
Other liabilities and deferred credits	3		(11)	—	(8)		—	(14)	—	(14)
Total	$	4,734	(4,868)	171	37		3,201	(3,148)	18	71

Millions of Dollars
September 30, 2017
Commodity Derivatives Effect of Collateral Netting
Net Carrying Value Presented on the Balance Sheet
Assets
Liabilities

Assets
Prepaid expenses and other current assets $ 30
—
—
30
Other assets 5
(3 ) —
2
Liabilities

Other accruals 933
(1,141 ) 168
(40 )
Other liabilities and deferred credits 2
(4 ) —
(2 )
Total $ 970
(1,148 ) 168
(10 )

Millions of Dollars
December 31, 2016
Commodity Derivatives Effect of Collateral Netting
Net Carrying Value Presented on the Balance Sheet
Assets
Liabilities

Assets
Prepaid expenses and other current assets $ 267
(154 ) —
113
Other assets 5
(1 ) —
4
Liabilities

Other accruals 474
(612 ) 73
(65 )
Other liabilities and deferred credits —
(1 ) —
(1 )
Total $ 746
(768 ) 73
51

At ~~September 30, 2017, and December~~March 31, ~~2016,~~2024, there was ~~no material~~$13 million of cash collateral ~~received or~~ paid that was not offset on ~~the~~our consolidated balance sheet. At December 31, 2023, there was $7 million of net cash collateral received that was not offset on our consolidated balance sheet.

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


	Millions of Dollars
	Three Months Ended March 31
	2024		2023

Sales and other operating revenues	$	(202)	50
Other income (loss)	38		(14)
Purchased crude oil and products	(256)		137
Net gain (loss) from commodity derivative activity	$	(420)	173

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Sales and other operating revenues $ (256 ) (6 ) (101 ) (274 )
Other income 33
8
46
24
Purchased crude oil and products (111 ) 36
16
(89 )
Net gain (loss) from commodity derivative activity $ (334 ) 38
(39 ) (339 )

The following table summarizes our material net exposures resulting from outstanding commodity derivative contracts. These financial and physical derivative contracts are primarily used to manage price exposure on our underlying operations. The underlying exposures may be from ~~non-derivative~~nonderivative positions such as inventory volumes. Financial derivative contracts may also offset physical derivative contracts, such as forward purchase and sales contracts. The percentage of our derivative contract volumes expiring within the next 12 months was ~~approximately 98 percent~~more than 90% at ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016.~~

Crude oil, refined products and NGL (millions of barrels)

Crude oil, refined petroleum products, NGL and renewable feedstocks (millions of barrels)

Natural gas (billions of cubic feet)

~~Interest Rate Derivative Contracts~~—In 2016, we entered into interest rate swaps to hedge the variability of anticipated lease payments on our new headquarters. These monthly lease payments will vary based on monthly changes in the one-month LIBOR and changes, if any, in the Company’s credit rating over the five-year term of the lease. The pay-fixed, receive-floating interest rate swaps have an aggregate notional value of $650 million and end on April 25, 2021. They qualify for, and are designated as, cash-flow hedges.

The aggregate net fair value of these swaps, which is included in the “Other accruals” and “Other assets” lines on our consolidated balance sheet, amounted to $8 million at both September 30, 2017, and December 31, 2016.

We report the effective portion of the mark-to-market gain or loss on our interest rate swaps designated and qualifying as a cash flow hedging instrument as a component of other comprehensive income (loss) and reclassify such gains and losses into earnings in the same period during which the hedged forecasted transaction affects earnings. Gains and losses due to ineffectiveness are recognized in general and administrative expenses. We did not recognize any material hedge ineffectiveness gain or loss in the consolidated income statement for the three- and nine-month periods ended September 30, 2017 and 2016. Net realized losses from settlements of the swaps were immaterial for the three- and nine-month periods ended September 30, 2017 and 2016.

We currently estimate that pre-tax gains of less than $1 million will be reclassified from accumulated other comprehensive income (loss) into general and administrative expenses during the next twelve months as the hedged transactions settle; however, the actual amounts that will be reclassified will vary based on changes in interest rates.

Credit Risk from Derivative and Financial Instruments

Financial instruments potentially exposed to concentrations of credit risk consist primarily of ~~over-the-counter (OTC)~~trade receivables and derivative ~~contracts~~contracts.

Our trade receivables result primarily from the sale of products from, or related to, our refinery operations and ~~trade receivables.~~reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less. We continually monitor this exposure and the creditworthiness of the counterparties and recognize bad debt expense based on a probability assessment of credit loss. Generally, we do not require collateral to limit the exposure to loss; however, we will sometimes use letters of credit, prepayments or master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us to others to be offset against amounts owed to us.

The credit risk from our ~~OTC~~ derivative contracts, such as forwards and swaps, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared with an exchange clearinghouse and subject to mandatory margin requirements, typically on a daily basis, until settled. ~~However, we are exposed to the credit risk of those exchange brokers for receivables arising from daily margin cash calls, as well as for cash deposited to meet initial margin requirements.~~

Our trade receivables result primarily from the sale of products from, or related to, our refinery operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of ~~30 days or less~~. We continually monitor this exposure and the creditworthiness of the counterparties and recognize bad debt expense based on historical write-off experience or specific counterparty collectability. Generally, we do not require collateral to limit the exposure to loss; however, we will sometimes use letters of credit, prepayments or master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due to us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit ~~rating.~~ratings. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if our credit ratings fall below investment grade. Cash is the primary collateral in all contracts; however, many contracts also permit us to post letters of credit as collateral.

The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were ~~not material~~immaterial at ~~September 30, 2017, or~~March 31, 2024, and December 31, ~~2016.~~2023.

Note 14—Fair Value Measurements

Recurring Fair ~~Values~~Value Measurements

We carry certain assets and liabilities at fair value, which we measure at the reporting date using ~~an exit price (i.e.,~~ the price that would be received to sell an asset or paid to transfer a ~~liability)~~liability (i.e., an exit price), and disclose the quality of these fair values based on the valuation inputs used in these measurements under the following hierarchy:

•Level 1: Fair value measured with unadjusted quoted prices from an active market for identical assets or liabilities.

•Level 2: Fair value measured either with: (1) adjusted quoted prices from an active market for similar assets or liabilities; or (2) other valuation inputs that are directly or indirectly observable.

•Level 3: Fair value measured with unobservable inputs that are significant to the measurement.

We classify the fair value of an asset or liability based on the ~~lowest level~~significance of ~~input significant~~its observable or unobservable inputs to ~~its~~the measurement. However, the fair value of an asset or liability initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement or corroborating market data becomes available. Conversely, an asset or liability initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable. For the nine-month period ended September 30, 2017, derivative assets with an aggregate value of $110 million and derivative liabilities with an aggregate value of $112 million were transferred into Level 1 from Level 2, as measured from the beginning of the reporting period. The measurements were reclassified within the fair value hierarchy due to the availability of unadjusted quoted prices from an active market.

We used the following methods and assumptions to estimate the fair value of financial instruments:

•Cash and cash equivalents—The carrying amount reported on ~~the~~our consolidated balance sheet approximates fair value.

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

•Derivative instruments—WeThe fair value of our exchange-traded contracts is based on quoted market prices obtained from the New York Mercantile Exchange, the Intercontinental Exchange or other exchanges, and ~~classify them~~is reported as Level 1 in the fair value hierarchy. When exchange-cleared contracts lack sufficient liquidity, or are valued using either adjusted exchange-provided prices or ~~non-exchange~~nonexchange quotes, we classify those contracts as Level 2.

2 or Level 3 based on the degree to which inputs are observable.

~~OTC financial swaps and physical~~Physical commodity forward purchase and sales contracts and over-the-counter (OTC) financial swaps are generally valued using forward quotes provided by brokers and price index developers, such as Platts and Oil Price Information Service. We corroborate these quotes with market data and classify the resulting fair values as Level 2. When forward market prices are not available, we estimate fair value using the forward price of a similar commodity, adjusted for the difference in quality or location. In certain less liquid markets or for longer-term contracts, forward prices are not as readily available. In these circumstances, ~~OTC swaps and~~ physical commodity purchase and sales contracts and OTC swaps are valued using internally developed methodologies that consider historical relationships among various commodities that result in management’s best estimate of fair value. We classify these contracts as Level 3. ~~Financial~~Physical and OTC ~~and physical~~ commodity options are valued using industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and contractual prices for the underlying instruments, as well as other relevant economic measures. The degree to which these inputs are observable in the forward markets determines whether the options are classified as Level 2 or 3. We use a ~~mid-market~~midmarket pricing convention (the ~~mid-point~~midpoint between bid and ask prices). When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

WeWhen applicable, we determine the fair value of ~~our~~ interest rate swaps based on ~~observed~~observable market valuations for interest rate swaps that have ~~notionals,~~notional amounts, terms and pay and reset frequencies similar to ours.

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

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

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

•Debt—The carrying amount of our floating-rate debt approximates fair value. The fair value of our fixed-rate debt is estimated primarily based on observable ~~quotes.~~

market prices.

The following tables display the fair value hierarchy for our ~~material~~ financial assets and liabilities either accounted for or disclosed at fair value on a recurring basis. These values are determined by treating each contract as the fundamental unit of account; therefore, derivative assets and liabilities with the same counterparty are shown on a gross basis in the hierarchy sections of these tables, before the effects of counterparty and collateral netting. ~~These tables also show that our Level 3 activity was not material.~~

We have master netting agreements for all of our exchange-cleared derivative instruments, the majority of our OTC derivative instruments and certain physical commodity forward contracts (primarily pipeline crude oil deliveries). The following tables ~~show~~also reflect the ~~impact~~effect of ~~these contracts in~~netting derivative assets and liabilities with the ~~column “Effect~~same counterparty for which we have the legal right of ~~Counterparty Netting.”~~offset and collateral netting.

The carrying values and fair values by hierarchy of our ~~material~~ financial ~~instruments~~assets and ~~commodity forward contracts,~~liabilities, either carried or disclosed at fair value, including any effects of ~~netting derivative assets with liabilities~~counterparty and ~~netting~~ collateral ~~due to right of setoff or master~~ netting, ~~agreements,~~ were:


	Millions of Dollars
	March 31, 2024
	Fair Value Hierarchy				Total Fair Value of Gross Assets & Liabilities	Effect of Counterparty Netting	Effect of Collateral Netting	Difference in Carrying Value and Fair Value	Net Carrying Value Presented on the Balance Sheet
	Level 1		Level 2	Level 3
Commodity Derivative Assets
Exchange-cleared instruments	$	4,565	41	—	4,606	(4,553)	—	—	53

Physical forward contracts	—		125	3	128	(4)	—	—	124

Rabbi trust assets	159		—	—	159	N/A	N/A	—	159
Investment in NOVONIX	44		—	—	44	N/A	N/A	—	44

	$	4,768	166	3	4,937	(4,557)	—	—	380

Commodity Derivative Liabilities
Exchange-cleared instruments	$	4,724	45	—	4,769	(4,553)	(171)	—	45

Physical forward contracts	—		98	1	99	(4)	—	—	95

Floating-rate debt	—		840	—	840	N/A	N/A	—	840
Fixed-rate debt, excluding finance leases and software obligations	—		18,423	—	18,423	N/A	N/A	584	19,007
	$	4,724	19,406	1	24,131	(4,557)	(171)	584	19,987


	Millions of Dollars
	December 31, 2023
	Fair Value Hierarchy				Total Fair Value of Gross Assets & Liabilities	Effect of Counterparty Netting	Effect of Collateral Netting	Difference in Carrying Value and Fair Value	Net Carrying Value Presented on the Balance Sheet
	Level 1		Level 2	Level 3
Commodity Derivative Assets
Exchange-cleared instruments	$	3,075	54	—	3,129	(3,039)	—	—	90
OTC instruments	—		1	—	1	—	—	—	1
Physical forward contracts	—		70	1	71	(2)	—	—	69

Rabbi trust assets	155		—	—	155	N/A	N/A	—	155
Investment in NOVONIX	39		—	—	39	N/A	N/A	—	39

	$	3,269	125	1	3,395	(3,041)	—	—	354

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

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

Floating-rate debt	—		1,915	—	1,915	N/A	N/A	—	1,915
Fixed-rate debt, excluding finance leases and software obligations	—		16,718	—	16,718	N/A	N/A	408	17,126
	$	3,057	18,724	—	21,781	(3,041)	(18)	408	19,130

Millions of Dollars
September 30, 2017
Fair Value Hierarchy Total Fair Value of Gross Assets & Liabilities
Effect of Counterparty Netting
Effect of Collateral Netting
Difference in Carrying Value and Fair Value
Net Carrying Value Presented on the Balance Sheet
Level 1
Level 2
Level 3
Commodity Derivative Assets
Exchange-cleared instruments $ 487
452
—
939
(938 ) —
—
1
OTC instruments —
1
—
1
—
—
—
1
Physical forward contracts —
30
—
30
—
—
—
30
Interest rate derivatives —
8
—
8
—
—
—
8
Rabbi trust assets 111
—
—
111
N/A
N/A
—
111
$ 598
491
—
1,089
(938 ) —
—
151

Commodity Derivative Liabilities
Exchange-cleared instruments $ 630
476
—
1,106
(938 ) (168 ) —
—
OTC instruments —
1
—
1
—
—
—
1
Physical forward contracts —
30
11
41
—
—
—
41
Floating-rate debt 100
1,587
—
1,687
N/A
N/A
—
1,687
Fixed-rate debt, excluding capital leases —
9,110
—
9,110
N/A
N/A
(787 ) 8,323
$ 730
11,204
11
11,945
(938 ) (168 ) (787 ) 10,052

Millions of Dollars
December 31, 2016
Fair Value Hierarchy Total Fair Value of Gross Assets & Liabilities
Effect of Counterparty Netting
Effect of Collateral Netting
Difference in Carrying Value and Fair Value
Net Carrying Value Presented on the Balance Sheet
Level 1
Level 2
Level 3

Commodity Derivative Assets
Exchange-cleared instruments $ 273
371
—
644
(628 ) —
—
16
OTC instruments —
6
—
6
(1 ) —
—
5
Physical forward contracts —
94
2
96
—
—
—
96
Interest rate derivatives —
8
—
8
—
—
—
8
Rabbi trust assets 97
—
—
97
N/A
N/A
—
97
$ 370
479
2
851
(629 ) —
—
222

Commodity Derivative Liabilities
Exchange-cleared instruments $ 249
452
—
701
(628 ) (73 ) —
—
OTC instruments —
1
—
1
(1 ) —
—
—
Physical forward contracts —
61
5
66
—
—
—
66
Floating-rate debt 50
210
—
260
N/A
N/A
—
260
Fixed-rate debt, excluding capital leases —
10,260
—
10,260
N/A
N/A
(570 ) 9,690
$ 299
10,984
5
11,288
(629 ) (73 ) (570 ) 10,016

The rabbi trust assets ~~appear on our consolidated balance sheet~~and investment in NOVONIX are recorded in the “Investments and long-term receivables” line ~~while the~~item, and floating-rate and fixed-rate debt ~~appear~~are recorded in the “Short-term debt” and “Long-term debt” ~~lines. For information~~

~~regarding the location of our commodity derivative assets and liabilities~~line items on our consolidated balance ~~sheet, see the first table in~~ sheet. See Note 13—Derivatives and Financial Instruments,. for information regarding where the assets and liabilities related to our commodity derivatives are recorded on our consolidated balance sheet.

~~Nonrecurring Fair Value Measurements~~

~~See Note 5—Business Combinations for remeasurement of our investment in MSLP to fair value. During the nine months endedSeptember 30, 2017 and 2016, there were no other material nonrecurring fair value remeasurements of assets subsequent to their initial recognition.~~

Note 15—~~Employee Benefit Plans~~

Pension and Postretirement Plans

The components of net periodic benefit cost for the ~~three-~~three months ended March 31, 2024 and ~~nine-month periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~,2023, were as follows:

During the ~~first nine~~three months ~~of 2017,~~ended March 31, 2024, we contributed ~~$432~~$5 million to our U.S. ~~employee~~pension and other postretirement benefit plans and ~~$26~~$1 million to our international ~~employee benefit~~pension plans. ~~The contributions were included in the “Other” line within the operating activities section on our consolidated statement of cash flows.~~ We currently expect to make additional contributions of approximately $6$70 million to our U.S. ~~employee~~pension and other postretirement benefit plans and $9approximately $4 million to our international ~~employee benefit~~pension plans during the remainder of ~~2017.~~

For our U.S. pension plans, lump-sum benefit payments have exceeded the sum of service and interest costs for the year. As a result, we have recognized a proportionate share of prior actuarial losses, or pension settlement expense, totaling $76 million for the nine months ended September 30, 2017.

In conjunction with the Whitegate Refinery disposition, the fair market value of plan assets was updated and the pension benefit obligation was remeasured for the Ireland Pension Plan at August 31, 2016. At the measurement date, the pension liability had a net decrease of $3 million, which resulted in an increase to other comprehensive income, due to the

following two components: 1) a curtailment gain (decrease in projected benefit obligation) of $31 million, as all future benefit accruals were eliminated from projected benefit obligation, and 2) an actuarial loss (increase in projected benefit obligation) of $28 million, which was primarily related to a decline2024. Cash contributions are included in the ~~discount rate from 2.3 percent at December 31, 2015, to 1.3 percent at August 31, 2016.~~“Other” line item of the “Cash Flows From Operating Activities” section of our consolidated statement of cash flows.

Note 16—Accumulated Other Comprehensive ~~Income (Loss)~~Loss

~~The following table depicts changes~~Changes in ~~accumulated other comprehensive income (loss) by~~the balances of each component ~~as well as detail on reclassifications out~~ of accumulated other comprehensive ~~income (loss):~~loss were as follows:


	Millions of Dollars
	Defined Benefit Plans		Foreign Currency Translation	Hedging	Accumulated Other Comprehensive Loss

December 31, 2023	$	(120)	(157)	(5)	(282)
Other comprehensive income (loss) before reclassifications	1		(32)	—	(31)
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss and settlements	1		—	—	1
Foreign currency translation	—		—	—	—
Hedging	—		—	—	—
Net current period other comprehensive income (loss)	2		(32)	—	(30)
March 31, 2024	$	(118)	(189)	(5)	(312)

December 31, 2022	$	(122)	(336)	(2)	(460)
Other comprehensive income before reclassifications	2		77	—	79
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss and settlements	8		—	—	8
Foreign currency translation	—		—	—	—
Hedging	—		—	—	—
Net current period other comprehensive income	10		77	—	87

March 31, 2023	$	(112)	(259)	(2)	(373)
* Included in the computation of net periodic benefit cost. See Note 15—Pension and Postretirement Plans, for additional information.

Millions of Dollars
Defined Benefit Plans
Foreign Currency Translation
Hedging
Accumulated Other Comprehensive Income (Loss)

December 31, 2015 $ (662 ) 11
(2 ) (653 )
Other comprehensive income (loss) before reclassifications 10
(187 ) (7 ) (184 )
Amounts reclassified from accumulated other comprehensive income (loss)*
Amortization of defined benefit plan items**
Actuarial losses and settlements 45
—
—
45
Net current period other comprehensive income (loss) 55
(187 ) (7 ) (139 )
September 30, 2016 $ (607 ) (176 ) (9 ) (792 )

December 31, 2016 $ (713 ) (285 ) 3
(995 )
Other comprehensive income before reclassifications 5
214
—
219
Amounts reclassified from accumulated other comprehensive income (loss)*

Amortization of defined benefit plan items**
Actuarial losses and settlements 92
—
—
92
Net current period other comprehensive income 97
214
—
311
September 30, 2017 $ (616 ) (71 ) 3
(684 )

* There were no significant reclassifications related to foreign currency translation or hedging.

Note 17—~~Restricted Cash~~

At September 30, 2017, and December 31, 2016, the company did not have any restricted cash. The restrictions on the cash acquired in February 2017, as a result of the consolidation of MSLP, were fully removed in the second quarter of 2017 when MSLP’s outstanding debt that contained lender restrictions on the use of cash was paid in full. See Note 5—~~Business Combinations~~ ~~and Note 10—Debt for additional information regarding MSLP.~~

~~Note 18—~~Related Party Transactions

Significant transactions with related parties were:


	Millions of Dollars
	Three Months Ended March 31
	2024		2023

Operating revenues and other income (a)	$	1,133	1,304
Purchases (b)	5,231		3,699
Operating expenses and selling, general and administrative expenses (c)	69		72

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Operating revenues and other income (a) $ 638
588
1,778
1,544
Purchases (b) 2,557
2,118
6,932
5,769
Operating expenses and selling, general and administrative expenses (c) 13
31
52
92

(a)We sold NGL, other petrochemical feedstocks and solvents to Chevron Phillips Chemical Company LLC (CPChem), gas oil and hydrogen feedstocks to Excel Paralubes LLC (Excel Paralubes), and refined petroleum products to several of our equity affiliates in the M&S segment, including OnCue and CF United. We also sold certain feedstocks and intermediate products to WRB and acted as an agent for WRB in supplying crude oil and other feedstocks for a fee. In addition, we charged several of our equity affiliates, including CPChem, for the use of common facilities, such as steam generators, waste and water treaters and warehouse facilities.

~~As discussed more fully~~(b)We purchased crude oil, refined petroleum products, NGL and solvents from WRB. We also purchased natural gas and NGL from CPChem, as well as other feedstocks from various equity affiliates, for use in ~~Note 5—Business Combinations~~,our refinery and fractionation processes. In addition, we purchased base oils and fuel products from Excel Paralubes for use in ~~February 2017, we began accounting~~our specialty and refining businesses. We paid NGL fractionation fees to CPChem. We also paid fees to various pipeline equity affiliates for ~~MSLP as a wholly owned consolidated subsidiary. Accordingly, the table above only includes~~transporting crude oil, refined petroleum products and NGL.

(c)We paid consignment fees to CF United, and utility and processing fees ~~paid~~ to ~~MSLP through the consolidation date.~~

Note ~~19—~~18—Segment Disclosures and Related Information

Our operating segments are:

~~Midstream—~~Gathers, processes, transports and markets natural gas; and transports, stores, fractionates and markets NGL in the United States. In addition, this segment transports crude oil and other feedstocks to our refineries and other locations, delivers refined and specialty products to market, and provides terminaling and storage services for crude oil and petroleum products. The segment also stores, refrigerates and exports liquefied petroleum gas primarily to Asia. The Midstream segment includes our master limited partnership, Phillips 66 Partners LP, as well as our ~~50 percent~~ ~~equity investment in DCP Midstream.~~

1)Midstream—Provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, gathering, processing and marketing services, mainly in the United States. This segment also includes our 16% investment in NOVONIX.

~~Chemicals—Consists of our~~ ~~50 percent~~ ~~equity investment in CPChem, which manufactures and markets petrochemicals and plastics on a worldwide basis.~~

~~Refining—Purchases, sells and refines crude oil and other feedstocks at~~ 13 ~~refineries, mainly in the United States and Europe.~~

2)Chemicals—Consists of our 50% equity investment in CPChem, which manufactures and markets petrochemicals and plastics on a worldwide basis.

~~Marketing and Specialties—~~Purchases for resale and markets refined products (such as gasolines, distillates and aviation fuels), mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of specialty products (such as base oils and lubricants), as well as power generation operations.

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

4)Marketing and Specialties—Purchases for resale and markets refined petroleum products and renewable fuels, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of base oils and lubricants.

Corporate and Other includes general corporate overhead, interest income, interest expense, our ~~investments~~investment in research of new technologies, business transformation restructuring costs, and various other corporate activities. Corporate assets include all cash, cash equivalents and ~~cash equivalents.~~income tax-related assets. See Note 21—Restructuring for additional information regarding restructuring costs.

~~We evaluate segment performance based on net income attributable to Phillips 66.~~ Intersegment sales are at prices that we believe approximate market.

Table of Contents

Analysis of Results by Operating Segment


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Sales and Other Operating Revenues*
Midstream
Total sales	$	4,841	5,292
Intersegment eliminations	(717)		(695)
Total Midstream	4,124		4,597
Chemicals	—		—
Refining
Total sales	22,130		22,341
Intersegment eliminations	(13,001)		(14,095)
Total Refining	9,129		8,246
Marketing and Specialties
Total sales	23,176		22,399
Intersegment eliminations	(628)		(855)
Total Marketing and Specialties	22,548		21,544
Corporate and Other	10		9
Consolidated sales and other operating revenues	$	35,811	34,396
* See Note 4—Sales and Other Operating Revenues, for further details on our disaggregated sales and other operating revenues.


Income (Loss) Before Income Taxes
Midstream	$	554	702
Chemicals	205		198
Refining	131		1,608
Marketing and Specialties	404		426
Corporate and Other	(330)		(283)
Consolidated income before income taxes	$	964	2,651


	Millions of Dollars
	March 31 2024		December 31 2023
Total Assets
Midstream	$	28,948	29,107
Chemicals	7,512		7,357
Refining	25,123		22,432
Marketing and Specialties	11,560		11,411
Corporate and Other	3,256		5,194
Consolidated total assets	$	76,399	75,501

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Sales and Other Operating Revenues
Midstream
Total sales $ 1,433
934
4,467
2,784
Intersegment eliminations (433 ) (296 ) (1,260 ) (866 )
Total Midstream 1,000
638
3,207
1,918
Chemicals 2
1
4
3
Refining
Total sales 16,499
13,465
46,014
37,242
Intersegment eliminations (10,461 ) (9,035 ) (28,641 ) (24,840 )
Total Refining 6,038
4,430
17,373
12,402
Marketing and Specialties
Total sales 18,887
16,799
52,903
47,327
Intersegment eliminations (306 ) (252 ) (900 ) (792 )
Total Marketing and Specialties 18,581
16,547
52,003
46,535
Corporate and Other 6
8
21
24
Consolidated sales and other operating revenues $ 25,627
21,624
72,608
60,882

Net Income (Loss) Attributable to Phillips 66
Midstream $ 85
75
221
179
Chemicals 121
101
498
447
Refining 550
177
1,033
412
Marketing and Specialties 208
267
563
701
Corporate and Other (141 ) (109 ) (407 ) (347 )
Consolidated net income attributable to Phillips 66 $ 823
511
1,908
1,392

Table of Contents

Millions of Dollars
September 30
2017
December 31
2016
Total Assets
Midstream $ 12,904
12,832
Chemicals 6,211
5,802
Refining 23,949
22,825
Marketing and Specialties 7,118
6,227
Corporate and Other 2,530
3,967
Consolidated total assets $ 52,712
51,653

Note ~~20—~~19—Income Taxes

Our effective ~~tax rates for the third quarter and the first nine months of 2017 were 32 percent and 31 percent, respectively, compared with 34 percent and 32 percent for the corresponding periods of 2016.~~

~~The decrease in the effective~~income tax rate for the ~~third quarter~~three months ended March 31, 2024, was 21%, compared to 22% for the corresponding period of ~~2017~~2023. The decrease in our effective rate for the three months ended March 31, 2024, was primarily attributable to ~~the relative impact of foreign operations that are subject~~a decrease related to ~~a lower income tax rate and excess~~ tax benefits ~~associated with share-based compensation.~~

~~The effective tax rate varies~~ from ~~the federal statutory tax rate of 35 percent primarily as a result of foreign operations, excess tax benefits associated with~~ share-based compensation ~~and the impact of income attributable to noncontrolling interests,~~plans, partially offset by ~~state~~an increase in our foreign tax ~~expense.~~rate.

Note ~~21—Phillips 66 Partners~~20—DCP Midstream Class A Segment

DCP Midstream Class A Segment is comprised of the businesses, activities, assets and liabilities of DCP LP

~~Phillips 66 Partners~~ and its subsidiaries and its general partner entities. DCP LP is a ~~publicly traded~~ master limited partnership ~~formed~~whose operations currently include producing and fractionating NGL, gathering, compressing, treating and processing natural gas; recovering condensate; and transporting, trading, marketing and storing natural gas and NGL. DCP Midstream Class A Segment is a consolidated VIE as we are the primary beneficiary.

The most significant assets of DCP Midstream Class A Segment that are available to ~~own, operate, develop~~settle only its obligations, along with its most significant liabilities for which its creditors do not have recourse to Phillips 66’s general credit, were:


	Millions of Dollars
	March 31 2024		December 31 2023
Accounts receivable, trade*	$	459	601
Net properties, plants and equipment	9,240		9,319
Investments in unconsolidated affiliates**	1,872		1,901
Accounts payable	630		815
Short-term debt	8		357
Long-term debt	3,433		3,759

* Included in the “Accounts and ~~acquire primarily fee-based crude oil, refined petroleum product and NGL pipelines and terminals, as well as other midstream assets. Headquartered in Houston, Texas,~~notes receivable” line item on the Phillips 66 ~~Partners’ assets currently consist of crude oil, refined petroleum products~~consolidated balance sheet.

** Included in the “Investments and ~~NGL transportation, terminaling and storage systems, as well as crude oil and NGL processing facilities.~~long-term receivables” line item on the Phillips 66 ~~Partners conducts~~consolidated balance sheet.

DCP LP Merger

On June 15, 2023, we completed the acquisition of approximately 91 million publicly held common units of DCP LP pursuant to the terms of the DCP LP Merger Agreement, which increased our aggregate direct and indirect economic interest in DCP LP from 43.3% to 86.8%. The DCP LP Merger Agreement was entered into with DCP LP, its ~~operations through both~~subsidiaries and its general partner entities, pursuant to which one of our wholly owned ~~and joint-venture operations. The majority of Phillips 66 Partners’ wholly owned assets are associated~~subsidiaries merged with and ~~integral to the operation of, nine of Phillips 66’s owned or joint-venture refineries.~~

~~We consolidate Phillips 66 Partners~~into DCP LP, with DCP LP surviving as a ~~variable interest entity for financial reporting purposes. See Note 3—Variable Interest Entities (VIEs) for additional information on why we consolidate~~Delaware limited partnership. Under the ~~partnership. As~~terms of the DCP LP Merger Agreement, at the effective time of the DCP LP Merger, each publicly held common unit representing a result of this consolidation, the public unitholders’ ownership interest in Phillips 66 Partners is reflected as a noncontrolling interest in our financial statements. At September 30, 2017, we owned a 57 percent limited partner interest ~~and a 2 percent general partner interest~~ in ~~Phillips 66 Partners, while~~DCP LP (other than the ~~public owned a 41 percent limited partner interest.~~

~~In June 2016, Phillips 66 Partners began issuing~~ common units ~~under~~owned by DCP Midstream and its subsidiaries) issued and outstanding as of immediately prior to the effective time was converted into the right to receive $41.75 per common unit in cash. We paid $3,796 million in cash consideration to common unitholders, funded with a ~~continuous offering program,~~combination of available cash and debt proceeds.

The DCP LP Merger was accounted for as an equity transaction and resulted in decreases to “Cash and cash equivalents” of $3,814 million, which allows for the issuance of up to an aggregate of $250 million of Phillips 66 Partners’ common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of the offerings (such continuous offering program, or at-the-market program, is referred to as the ATM program). For the nine months ended September 30, 2017, on a settlement-date basis, Phillips 66 Partners has issued 3,323,576 common units under the ATM program, which generated net proceeds of $171 million. From inception through September 30, 2017, Phillips 66 Partners has issued an aggregate of 3,669,728 common units under the ATM program, which generated net proceeds of $190 million.

~~Subsequent Events~~

On September 19, 2017, we entered into an agreement to contribute to Phillips 66 Partners our 25 percent interests in DAPL and ETCO and our 100 percent interest in MSLP. The transaction closed on October 6, 2017. Totalincluded cash consideration paid to ~~us by~~common unitholders of $3,796 million plus fees paid of $18 million, “Noncontrolling interests” of $3,343 million, “Capital in excess of par” of $361 million and “Deferred income taxes” of $110 million on our consolidated balance sheet.

Table of Contents

Distributions

During the three months ended March 31, 2024 and 2023, DCP LP made cash distributions of $12 million and $51 million to common unit holders other than Phillips 66 Partners was $1.65 billion, which included $372 million in cash at closing, the assumption of $588 million of promissory notes payable to us, the assumption of $450 million of term loans payable to a third party, and the issuance to us of common and general partner units with a fair value of $240 million. Shortly after closing, Phillips 66 Partners repaid the $588 million of promissory notes payable to us, resulting in total cash received by us for the transaction of $960 million. Phillips 66 Partners financed the consideration paid, in October 2017, with the proceeds from the private placement of $750 million of perpetual convertible preferred units and $300 million of common units, as well as a portion of the proceeds from a public offering of $650 million of Senior Notes. See its subsidiaries.

Note ~~10—Debt for additional information on the Senior Notes.~~21—Restructuring

After giving effect to the contribution and financing transactions discussed above, we own a 55 percent limited partner interest and a 2 percent general partner interest in Phillips 66 Partners, with the public owning a 43 percent limited partner interest.

~~Note 22—New Accounting Standards~~

In ~~February 2017,~~April 2022, we began a multi-year business transformation focused on enterprise-wide opportunities to improve our cost structure. For the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20).” This ASU clarifies the scope and accounting for the sale or transfer of nonfinancial assets and in substance nonfinancial assetsthree months ended March 31, 2023, we recorded restructuring costs totaling $35 million, primarily related to ~~noncustomers, including partial sales. This ASU will eliminate the use of carryover basis for most nonmonetary exchanges, including contributions of assets to equity method joint ventures.~~consulting fees. These ~~amendments could result~~costs were primarily recorded in the entity recognizing a gain or loss on the sale or transfer of nonfinancial assets. Public entities should apply the guidance in ASU No. 2017-05 to annual periods beginning after December 15, 2017, including interim periods within those periods. We are currently evaluating the provisions of ASU No. 2017-05.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset, or a group of similar identifiable assets, then the transaction is not considered an acquisition of a business. If the screen is not met, then the amendment requires that to be considered a business, the operation must include at a minimum an input“Selling, general and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The new standard amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which may result in earlier recognition of losses. Public business entities should apply the guidance in ASU No. 2016-13 for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption will be permitted for annual periods beginning after December 15, 2018. We are currently evaluating the provisions of ASU No. 2016-13 and assessing the impact on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under the previous accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant or equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases—financing and operating—which are substantially similar to capital and operating leases in the previous lease guidance. Under the new standard, recognition of assets and liabilities arising from operating leases will require recognition on the balance sheet. The effect of all leases in the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply the provisions of ASU No. 2016-02 to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements. As part of our assessment to-date, we have formed an implementation team, commenced identification of our lease population and are evaluating lease software packages.

be carried at fair value upon adoption of ASU No. 2016-01, with changes in fair value recorded in net income. For equity investments that do not have readily determinable fair values, a company may elect to carry such investments at cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. Public business entities should apply the guidance in ASU No. 2016-01 for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption prohibited. We are currently evaluating the provisions of ASU No. 2016-01. Our initial review indicates that ASU No. 2016-01 will have a limited impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU and other related updates issued are intended to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets and expand disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. As part of our assessment work to-date, we have formed an implementation work team, completed training on the new ASU’s revenue recognition model and are continuing our contract review and documentation. Our expectation is to adopt the standard on January 1, 2018, using the modified retrospective application. In addition, we expect to present revenue net of sales-based taxes collected from our customers, resulting in no impact to earnings. Sales-based taxes include excise taxes on petroleum product sales as notedadministrative expenses” line item on our consolidated statement of ~~income. Our evaluation~~income and were reported in our Corporate segment. In addition, in the first quarter of 2023, we recorded restructuring costs of $12 million associated with the ~~new ASU is ongoing, which includes understanding~~integration of DCP Midstream Class A Segment primarily related to severance. These costs were primarily recorded in the ~~impact of adoption on earnings from equity method investments. Based~~“Selling, general and administrative expenses” line item on our ~~analysis to-date, we have not identified any other material impact on~~consolidated statement of income and were reported in our ~~financial statements other than disclosures.~~Midstream segment.

~~Note 23—Condensed Consolidating Financial Information~~

~~Phillips 66 has $6 billion of senior notes outstanding, the payment obligations of which are fully and unconditionally guaranteed by Phillips 66 Company, a~~ ~~100-percent-owned subsidiary. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:~~

~~Phillips 66 and Phillips 66 Company (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting).~~

~~All other nonguarantor subsidiaries.~~

~~The consolidating adjustments necessary to present Phillips 66’s results on a consolidated basis.~~

~~This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and notes.~~

Millions of Dollars
Three Months Ended September 30, 2017
Statement of Income Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Revenues and Other Income
Sales and other operating revenues $ —
18,941
6,686
—
25,627
Equity in earnings of affiliates 880
608
172
(1,130 ) 530
Net gain (loss) on dispositions —
1
(1 ) —
—
Other income —
34
15
—
49
Intercompany revenues —
522
3,805
(4,327 ) —
Total Revenues and Other Income 880
20,106
10,677
(5,457 ) 26,206

Costs and Expenses
Purchased crude oil and products —
15,981
7,744
(4,262 ) 19,463
Operating expenses —
857
285
(8 ) 1,134
Selling, general and administrative expenses 2
338
98
(3 ) 435
Depreciation and amortization —
225
112
—
337
Impairments —
—
1
—
1
Taxes other than income taxes —
1,464
1,992
—
3,456
Accretion on discounted liabilities —
3
2
—
5
Interest and debt expense 86
20
60
(54 ) 112
Foreign currency transaction losses —
—
7
—
7
Total Costs and Expenses 88
18,888
10,301
(4,327 ) 24,950
Income before income taxes 792
1,218
376
(1,130 ) 1,256
Provision (benefit) for income taxes (31 ) 338
100
—
407
Net Income 823
880
276
(1,130 ) 849
Less: net income attributable to noncontrolling interests —
—
26
—
26
Net Income Attributable to Phillips 66 $ 823
880
250
(1,130 ) 823

Comprehensive Income $ 948
1,005
362
(1,341 ) 974

Table of Contents

Millions of Dollars
Three Months Ended September 30, 2016
Statement of Income Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Revenues and Other Income
Sales and other operating revenues $ —
15,264
6,360
—
21,624
Equity in earnings of affiliates 571
521
108
(809 ) 391
Net gain (loss) on dispositions —
(11 ) 14
—
3
Other income —
10
14
—
24
Intercompany revenues —
173
2,685
(2,858 ) —
Total Revenues and Other Income 571
15,957
9,181
(3,667 ) 22,042

Costs and Expenses
Purchased crude oil and products —
12,377
6,388
(2,804 ) 15,961
Operating expenses —
864
206
(9 ) 1,061
Selling, general and administrative expenses 1
314
99
(3 ) 411
Depreciation and amortization —
206
87
—
293
Impairments —
1
1
—
2
Taxes other than income taxes —
1,390
2,034
—
3,424
Accretion on discounted liabilities —
3
2
—
5
Interest and debt expense 91
6
26
(42 ) 81
Foreign currency transaction gains —
—
(9 ) —
(9 )
Total Costs and Expenses 92
15,161
8,834
(2,858 ) 21,229
Income before income taxes 479
796
347
(809 ) 813
Provision (benefit) for income taxes (32 ) 225
84
—
277
Net Income 511
571
263
(809 ) 536
Less: net income attributable to noncontrolling interests —
—
25
—
25
Net Income Attributable to Phillips 66 $ 511
571
238
(809 ) 511

Comprehensive Income $ 471
531
207
(713 ) 496

Millions of Dollars
Nine Months Ended September 30, 2017
Statement of Income Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Revenues and Other Income
Sales and other operating revenues $ —
52,844
19,764
—
72,608
Equity in earnings of affiliates 2,083
1,677
408
(2,811 ) 1,357
Net gain on dispositions —
1
14
—
15
Other income —
469
50
—
519
Intercompany revenues —
1,172
9,654
(10,826 ) —
Total Revenues and Other Income 2,083
56,163
29,890
(13,637 ) 74,499

Costs and Expenses
Purchased crude oil and products —
44,622
21,489
(10,616 ) 55,495
Operating expenses —
2,779
806
(44 ) 3,541
Selling, general and administrative expenses 6
962
298
(8 ) 1,258
Depreciation and amortization —
657
315
—
972
Impairments —
17
1
—
18
Taxes other than income taxes —
4,287
5,681
—
9,968
Accretion on discounted liabilities —
12
4
—
16
Interest and debt expense 263
46
173
(158 ) 324
Foreign currency transaction losses —
—
6
—
6
Total Costs and Expenses 269
53,382
28,773
(10,826 ) 71,598
Income before income taxes 1,814
2,781
1,117
(2,811 ) 2,901
Provision (benefit) for income taxes (94 ) 698
304
—
908
Net Income 1,908
2,083
813
(2,811 ) 1,993
Less: net income attributable to noncontrolling interests —
—
85
—
85
Net Income Attributable to Phillips 66 $ 1,908
2,083
728
(2,811 ) 1,908

Comprehensive Income $ 2,219
2,394
1,024
(3,333 ) 2,304

Millions of Dollars
Nine Months Ended September 30, 2016
Statement of Income Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Revenues and Other Income
Sales and other operating revenues $ —
42,199
18,683
—
60,882
Equity in earnings of affiliates 1,574
1,406
268
(2,089 ) 1,159
Net gain (loss) on dispositions —
(11 ) 20
—
9
Other income —
34
25
—
59
Intercompany revenues —
570
6,398
(6,968 ) —
Total Revenues and Other Income 1,574
44,198
25,394
(9,057 ) 62,109

Costs and Expenses
Purchased crude oil and products —
33,844
17,047
(6,802 ) 44,089
Operating expenses —
2,477
628
(27 ) 3,078
Selling, general and administrative expenses 5
914
307
(8 ) 1,218
Depreciation and amortization —
609
254
—
863
Impairments —
1
3
—
4
Taxes other than income taxes —
4,131
6,348
—
10,479
Accretion on discounted liabilities —
11
4
—
15
Interest and debt expense 275
23
83
(131 ) 250
Foreign currency transaction gains —
—
(16 ) —
(16 )
Total Costs and Expenses 280
42,010
24,658
(6,968 ) 59,980
Income before income taxes 1,294
2,188
736
(2,089 ) 2,129
Provision (benefit) for income taxes (98 ) 614
163
—
679
Net Income 1,392
1,574
573
(2,089 ) 1,450
Less: net income attributable to noncontrolling interests —
—
58
—
58
Net Income Attributable to Phillips 66 $ 1,392
1,574
515
(2,089 ) 1,392

Comprehensive Income $ 1,253
1,435
398
(1,775 ) 1,311

Millions of Dollars
September 30, 2017
Balance Sheet Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Assets
Cash and cash equivalents $ —
308
1,239
—
1,547
Accounts and notes receivable 10
4,596
4,584
(2,835 ) 6,355
Inventories —
3,174
1,281
—
4,455
Prepaid expenses and other current assets —
435
143
—
578
Total Current Assets 10
8,513
7,247
(2,835 ) 12,935
Investments and long-term receivables 30,418
22,699
9,195
(48,413 ) 13,899
Net properties, plants and equipment —
13,052
8,251
—
21,303
Goodwill —
2,853
417
—
3,270
Intangibles —
724
160
—
884
Other assets 14
252
158
(3 ) 421
Total Assets $ 30,442
48,093
25,428
(51,251 ) 52,712

Liabilities and Equity
Accounts payable $ —
6,828
3,278
(2,835 ) 7,271
Short-term debt 649
9
48
—
706
Accrued income and other taxes —
373
528
—
901
Employee benefit obligations —
419
63
—
482
Other accruals 128
305
112
—
545
Total Current Liabilities 777
7,934
4,029
(2,835 ) 9,905
Long-term debt 6,970
49
2,476
—
9,495
Asset retirement obligations and accrued environmental costs —
462
167
—
629
Deferred income taxes —
5,034
2,574
(3 ) 7,605
Employee benefit obligations —
593
284
—
877
Other liabilities and deferred credits 143
3,994
4,064
(7,959 ) 242
Total Liabilities 7,890
18,066
13,594
(10,797 ) 28,753
Common stock 9,743
25,403
10,416
(35,819 ) 9,743
Retained earnings 13,493
5,308
249
(5,586 ) 13,464
Accumulated other comprehensive loss (684 ) (684 ) (267 ) 951
(684 )
Noncontrolling interests —
—
1,436
—
1,436
Total Liabilities and Equity $ 30,442
48,093
25,428
(51,251 ) 52,712

Millions of Dollars
December 31, 2016
Balance Sheet Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Assets
Cash and cash equivalents $ —
854
1,857
—
2,711
Accounts and notes receivable 13
4,336
3,276
(1,228 ) 6,397
Inventories —
2,198
952
—
3,150
Prepaid expenses and other current assets 2
317
103
—
422
Total Current Assets 15
7,705
6,188
(1,228 ) 12,680
Investments and long-term receivables 31,165
22,733
8,588
(48,952 ) 13,534
Net properties, plants and equipment —
13,044
7,811
—
20,855
Goodwill —
2,853
417
—
3,270
Intangibles —
719
169
—
888
Other assets 15
245
168
(2 ) 426
Total Assets $ 31,195
47,299
23,341
(50,182 ) 51,653

Liabilities and Equity
Accounts payable $ —
5,626
2,663
(1,228 ) 7,061
Short-term debt 500
30
20
—
550
Accrued income and other taxes —
348
457
—
805
Employee benefit obligations —
475
52
—
527
Other accruals 59
371
90
—
520
Total Current Liabilities 559
6,850
3,282
(1,228 ) 9,463
Long-term debt 6,920
150
2,518
—
9,588
Asset retirement obligations and accrued environmental costs —
501
154
—
655
Deferred income taxes —
4,391
2,354
(2 ) 6,743
Employee benefit obligations —
948
268
—
1,216
Other liabilities and deferred credits 1,297
3,337
4,060
(8,431 ) 263
Total Liabilities 8,776
16,177
12,636
(9,661 ) 27,928
Common stock 10,777
25,403
10,117
(35,520 ) 10,777
Retained earnings 12,637
6,714
(269 ) (6,474 ) 12,608
Accumulated other comprehensive loss (995 ) (995 ) (478 ) 1,473
(995 )
Noncontrolling interests —
—
1,335
—
1,335
Total Liabilities and Equity $ 31,195
47,299
23,341
(50,182 ) 51,653

Millions of Dollars
Nine Months Ended September 30, 2017
Statement of Cash Flows Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Cash Flows From Operating Activities
Net Cash Provided by Operating Activities $ 1,919
601
1,566
(2,369 ) 1,717

Cash Flows From Investing Activities
Capital expenditures and investments* —
(842 ) (593 ) 140
(1,295 )
Proceeds from asset dispositions** —
2
63
—
65
Intercompany lending activities 93
1,655
(1,748 ) —
—
Advances/loans—related parties —
(9 ) —
—
(9 )
Collection of advances/loans—related parties —
75
250
—
325
Restricted cash received from consolidation of business —
—
318
—
318
Other —
(73 ) (7 ) —
(80 )
Net Cash Provided by (Used in) Investing Activities 93
808
(1,717 ) 140
(676 )

Cash Flows From Financing Activities
Issuance of debt 1,700
—
1,383
—
3,083
Repayment of debt (1,500 ) (16 ) (1,645 ) —
(3,161 )
Issuance of common stock 23
—
—
—
23
Repurchase of common stock (1,127 ) —
—
—
(1,127 )
Dividends paid on common stock (1,042 ) (1,939 ) (430 ) 2,369
(1,042 )
Distributions to noncontrolling interests —
—
(83 ) —
(83 )
Net proceeds from issuance of Phillips 66 Partners LP common units —
—
171
—
171
Other* (66 ) —
140
(140 ) (66 )
Net Cash Used in Financing Activities (2,012 ) (1,955 ) (464 ) 2,229
(2,202 )

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash —
—
(3 ) —
(3 )

Net Change in Cash, Cash Equivalents and Restricted Cash —
(546 ) (618 ) —
(1,164 )
Cash, cash equivalents and restricted cash at beginning of period —
854
1,857
—
2,711
Cash, Cash Equivalents and Restricted Cash at End of Period $ —
308
1,239
—
1,547

* Includes intercompany capital contributions.

** Includes return of investments in equity affiliates.

Millions of Dollars
Nine Months Ended September 30, 2016
Statement of Cash Flows Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Cash Flows From Operating Activities
Net Cash Provided by Operating Activities $ 3,111
1,790
1,174
(3,779 ) 2,296

Cash Flows From Investing Activities
Capital expenditures and investments* —
(1,025 ) (1,044 ) 38
(2,031 )
Proceeds from asset dispositions** —
—
159
—
159
Intercompany lending activities (1,303 ) 2,692
(1,389 ) —
—
Advances/loans—related parties —
(75 ) (191 ) —
(266 )
Collection of advances/loans—related parties —
—
107
—
107
Other —
30
(162 ) —
(132 )
Net Cash Provided by (Used in) Investing Activities (1,303 ) 1,622
(2,520 ) 38
(2,163 )

Cash Flows From Financing Activities
Issuance of debt —
—
400
—
400
Repayment of debt —
(21 ) (397 ) —
(418 )
Issuance of common stock 14
—
—
—
14
Repurchase of common stock (812 ) —
—
—
(812 )
Dividends paid on common stock (954 ) (3,099 ) (680 ) 3,779
(954 )
Distributions to noncontrolling interests —
—
(45 ) —
(45 )
Net proceeds from issuance of Phillips 66 Partners LP
common units
—
—
972
—
972
Other* (56 ) 18
38
(38 ) (38 )
Net Cash Provided by (Used in) Financing Activities (1,808 ) (3,102 ) 288
3,741
(881 )

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash —
—
11
—
11

Net Change in Cash, Cash Equivalents and Restricted Cash —
310
(1,047 ) —
(737 )
Cash, cash equivalents and restricted cash at beginning of period —
575
2,499
—
3,074
Cash, Cash Equivalents and Restricted Cash at End of Period $ —
885
1,452
—
2,337

* Includes intercompany capital contributions.

** Includes return of investments in equity affiliates and working capital true-ups on dispositions.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, ~~“the company,~~the “company,” “we,” “our,” “us” and “Phillips 66” are used in this report to refer to the businesses of Phillips 66 and its consolidated subsidiaries. Unless the context requires otherwise, references to “DCP Midstream” include the consolidated operations of DCP Midstream, LLC, including DCP Midstream, LP (formerly named DCP Midstream Partners, LP), the master limited partnership formed by DCP Midstream, LLC.

Management’s Discussion and Analysis is the company’s analysis of its financial performance, ~~its~~ financial condition, and significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes included elsewhere in this report. It contains forward-looking statements including, without limitation, statements relating to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions often identify forward-looking ~~statements.~~statements, but the absence of these words does not mean a statement is not forward-looking. The forward-looking statements made in this Quarterly Report on Form 10-Q are based on events or circumstances as of the date on which the statements are made. The company does not undertake to update, revise or correct any of the forward-looking information included in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events unless required to do so ~~under the federal securities laws.~~pursuant to applicable law. Readers are cautioned that such forward-looking statements should be read in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”

The term “earnings” as used in Management’s Discussion and Analysis refers to net income attributable to Phillips 66. The terms ~~“earnings” and “loss”~~“results,” “before-tax income” or “before-tax loss” as used in Management’s Discussion and Analysis refer to ~~net~~ income (loss) ~~attributable to Phillips 66.~~before income taxes.

EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT ~~AND EXECUTIVE OVERVIEW~~

Phillips 66 is anuniquely positioned as a diversified and integrated downstream energy ~~manufacturing~~company operating with Midstream, Chemicals, Refining, and ~~logistics company with midstream, chemicals, refining,~~Marketing and ~~marketing and specialties businesses.~~Specialties (M&S) segments. At ~~September 30, 2017,~~March 31, 2024, we had total assets of ~~$53~~$76.4 billion.Our common stock trades on the New York Stock Exchange under the symbol PSX.

Executive Overview

In the ~~third~~first quarter of ~~2017,~~2024, we reported earnings of ~~$823~~$748 million and ~~generated~~ cash ~~from~~used in operating activities of ~~$401 million. Cash~~$236 million, both of which were unfavorably impacted by lower realized refining margins and, in the case of operating cash flow, discretionary inventory builds. Additionally, we received proceeds from ~~operations for the quarter reflected contributions to our employee benefit plans~~debt issuances, net of ~~$426 million. We used available cash to fund~~debt repayments, of $802 million, funded capital expenditures and investments of ~~$367~~$628 million, ~~pay~~repurchased $1.2 billion of common stock, and paid dividends ~~of $356 million and repurchase $461 million~~ofon our common ~~stock.~~stock of $448 million. We ended the ~~third~~first quarter of ~~2017~~2024 with ~~$1.5~~$1.6 billion of cash and cash equivalents and ~~approximately $5.4~~$3.5 billion of total committed capacity available under our revolving credit ~~facilities.~~facility.

~~Business Environment~~Rodeo Renewable Energy Complex

~~Crude oil prices were relatively flat~~As part of the Rodeo Renewed project, we are converting the San Francisco Refinery into the Rodeo Renewable Energy Complex, expanding commercial scale production of renewable diesel and positioning Phillips 66 as a leader in renewable fuels production. The Rodeo Renewed project has progressed during the ~~third~~first quarter of ~~2017 compared~~2024 with the facility now processing only renewable feedstocks and having 30,000 barrels per day of renewable fuels production capacity. The Rodeo Renewable Energy Complex is on track to increase production capacity to 50,000 barrels per day (800 million gallons per year) of renewable fuels by the end of the second quarter of ~~2017, but significantly higher compared with~~2024. The Rodeo Renewed project design also provides the ~~third quarter~~capability of ~~2016. At the end~~producing renewable jet fuel, a key component of ~~the third quarter, Hurricane Harvey~~sustainable aviation fuel. The project advances our strategy to expand our renewable fuels production, lower our carbon footprint, and ~~Hurricane Irma combined~~provide reliable, affordable energy that we expect to ~~drive price volatility by reducing production~~create long-term value for our shareholders.

Table of crude oil, natural gas and refined products. The U.S. crude oil benchmark, West Texas Intermediate (WTI), stayed relatively flat, moving from an average of $48.24 per barrel in the second quarter of 2017 to $48.16 per barrel in the third quarter of 2017. The WTI discount to the international benchmark, Brent, expanded from the second quarter of 2017 average of $1.59 per barrel to $3.92 per barrel in the third quarter of 2017, driven by refinery and transportation and storage system outages on the U.S. Gulf Coast, as well as Organization of the Petroleum Exporting Countries (OPEC) production cuts. The continual low-commodity-price environment, along with the weather-related supply disruptions, had both favorable and unfavorable impacts on our businesses that vary by segment.Contents

Business Environment

~~Earnings in the~~The Midstream segment ~~which~~ includes our ~~50 percent equity investment in DCP Midstream, LLC (DCP Midstream), are closely linked to~~Transportation and natural gas liquids (NGL) ~~prices,~~businesses. 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 Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills, LLC (DCP Southern Hills), contains both fee-based operations and operations directly impacted by NGL and natural gas ~~prices and crude oil~~ prices. ~~Higher NGL prices in~~During the ~~third~~first quarter of ~~2017, compared with both the second quarter of 2017~~2024, NGL and ~~third quarter of 2016, resulted from lower inventories due to higher export volumes. Average~~ natural gas prices ~~improved in the third quarter of 2017 compared with the third quarter of 2016, benefiting from lower inventory, and~~ decreased, compared with the ~~second~~first quarter of ~~2017.~~2023, as the result of increased production and limited growth in export infrastructure.

The Chemicals segment consists of our ~~50 percent~~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. The petrochemicals industry continues to experience lower ethylene cash costs in regions of the world where ethylene feedstocks are based on NGL rather than crude-oil-derived feedstocks. In particular, companies with North American light NGL-based crackers have benefited from lower-priced feedstocks, primarily ethane. Due to weather-related issues, a number of crackers were offline or running at reduced rates during the quarter. The ethylene-to-polyethylenebenchmark high-density polyethylene chain ~~margins~~margin slightly decreased in the ~~third~~first quarter of ~~2017 declined~~2024, compared with the ~~second~~first quarter of ~~2017 and the third quarter of 2016~~2023, mainly due to ~~higher NGL feedstock costs.~~lower polyethylene sales prices as a result of industry oversupply driven by recent capacity additions.

~~The results of our~~Our Refining segment results are driven by several factors, including ~~refining margins, cost control,~~market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and ~~turnaround activity. Industry~~other operating costs. Market crack ~~spread~~spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude ~~oil, are used to estimate refining margins.~~oil. The ~~U.S. Gulf Coast~~composite 3:2:1 market crack spread ~~(three barrels~~for our business decreased to an average of $19.45 per barrel during the first quarter of 2024, from an average of $30.59 per barrel during the first quarter of 2023. The decrease in the composite market crack spread was primarily driven by lower global prices for gasoline and higher crude oil ~~producing two barrels~~prices. The price of ~~gasoline and one~~U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, increased to an average of $77.07 per barrel during the first quarter of ~~diesel) rose significantly~~2024, from an average of $76.11 per barrel during the first quarter of 2023. The increase in crude production in the ~~third quarter of 2017, compared with the second quarter of 2017 and third quarter of 2016, due primarily to weather-related disruptions.~~United States limited significant escalation in crude prices.

Results for our ~~Marketing and Specialties (M&S)~~M&S segment depend largely on marketing fuel ~~margins,~~and lubricant margins and ~~other specialty product margins.~~sales volumes of our refined petroleum products. While ~~M&S~~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 ~~the trend~~trends in spot prices, and where applicable, retail prices for refined ~~products. Generally speaking, a downward trend~~petroleum products in the regions and countries where we operate.

Table of ~~spot prices has a favorable impact on marketing fuel margins, while an upward trend of spot prices has an unfavorable impact on marketing fuel margins.~~Contents

RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the ~~three- and nine-month periods~~three months ended ~~September 30, 2017~~,March 31, 2024, is based on a comparison with the corresponding periods of ~~2016~~.2023.

Consolidated Results

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


	Millions of Dollars
	Three Months Ended March 31
	2024		2023

Midstream	$	554	702
Chemicals	205		198
Refining	131		1,608
Marketing and Specialties	404		426
Corporate and Other	(330)		(283)
Income before income taxes	964		2,651
Income tax expense	203		574
Net income	761		2,077
Less: net income attributable to noncontrolling interests	13		116
Net income attributable to Phillips 66	$	748	1,961

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Midstream $ 85
75
221
179
Chemicals 121
101
498
447
Refining 550
177
1,033
412
Marketing and Specialties 208
267
563
701
Corporate and Other (141 ) (109 ) (407 ) (347 )
Net income attributable to Phillips 66 $ 823
511
1,908
1,392

~~Earnings for~~Our net income attributable to Phillips 66 ~~increased $312 million, or 61 percent,~~ in the ~~third~~first quarter of ~~2017, mainly reflecting:~~

~~Higher~~2024 was $748 million, compared with $2 billion in the first quarter of 2023. The decrease in net income attributable to Phillips 66 was primarily due to a decline in realized refining ~~margins.~~

~~Improved earnings from equity affiliates in our Midstream segment.~~

~~Lower refining turnaround costs.~~

~~These increases were~~margins, partially offset ~~by:~~

~~Increased costs due to Hurricane Harvey.~~

~~Lower realized marketing margins.~~

~~Higher interest and debt~~by lower income tax expense.

~~Earnings for Phillips 66 increased $516 million, or 37 percent, in the nine-month period of 2017, mainly reflecting:~~

~~Higher realized refining margins.~~

~~Recognition of a $261 million after-tax gain from the consolidation of Merey Sweeny, L.P. (MSLP).~~

~~Improved earnings from equity affiliates in our Midstream and Chemicals segments.~~

~~These increases were partially offset by:~~

~~Higher refining turnaround costs.~~

~~Lower realized marketing margins.~~

~~Higher interest and debt expense.~~

See the “Segment Results” section for additional information on our segment ~~results.~~

~~Statement of~~ results and Note 19—Income ~~Analysis~~

~~Sales and other operating revenues~~ ~~for the third quarter and nine-month period of 2017 both increased 19 percent and~~ ~~purchased crude oil and products~~ ~~increased 22 percent and 26 percent, respectively. These increases were mainly due to higher prices for petroleum products, crude oil and NGL.~~

~~Equity in earnings of affiliates~~ increased 36 percent in the third quarter and 17 percent in the nine-month period of 2017. These increases were mainly due to increased earnings from WRB Refining LP (WRB), driven by higher refining margins, and improved earnings from equity affiliates in our Midstream segment. Additionally, during the nine-month period of 2017, higher earnings from our investment in CPChem contributed to the increase. See the “Segment Results” section for additional information on Midstream and Chemicals earnings from equity affiliates.

~~Other income~~ increased $460 million in the nine-month period of 2017. We recognized a noncash, pre-tax gain of $423 million in the first quarter of 2017 related to the consolidation of MSLP. See Note 5—Business Combinations,Taxes, in the Notes to Consolidated Financial Statements, for additional ~~information.~~information on income taxes.

~~Operating expenses~~

Table of Contents

Statement of Income Analysis

Sales and other operating revenues for the first quarter of 2024 increased ~~7 percent in the third quarter~~4%, and ~~15 percent in the nine-month period of 2017. These~~purchased crude oil and products increased 10%. The increases were mainly due to higher ~~environmental expenses, transportation costs, hurricane-related costs and costs related~~prices for crude oil, while the increase in sales was also attributable to ~~our employee benefit plans. In the third quarter, these increases were~~higher refined petroleum product sales volumes, partially offset by lower prices for NGL, natural gas and refined petroleum products.

Equity in earnings of affiliates decreased 14% in the first quarter of 2024. The decrease reflects lower equity earnings from WRB Refining LP (WRB), primarily due to lower realized refining ~~turnaround costs. Additionally,~~margins.

Other income increased $49 million in the first quarter of 2024, primarily due to higher ~~refining turnaround costs contributed~~results from trading activities.

Impairments increased $157 million in the first quarter of 2024, primarily due to the ~~increase~~recognition of before-tax impairment charges reported in ~~operating costs during the nine-month period of 2017. See~~our Refining and Midstream segments. Refer to Note ~~15—Employee Benefit Plans,~~8—Properties, Plants and Equipment, in the Notes to Consolidated Financial Statements, for ~~more~~additional information.

~~Depreciation and amortization~~ increased 15 percent in the third quarter and 13 percent in the nine-month period of 2017, reflecting higher depreciation from the Freeport LPG Export Terminal, which began operations in late 2016, and an increase in properties, plants and equipment.

Taxes other than income taxes decreased ~~5 percent~~20% in the ~~nine-month period~~first quarter of ~~2017. This~~2024. The decrease was ~~mainly attributable to~~primarily driven by tax credits received from renewable diesel blending activity, as well as lower ~~excise taxes from our U.K. operations as a result of the sale of the Whitegate Refinery and related marketing assets in September 2016.~~property taxes.

Interest and debt expense increased ~~38 percent~~18% in the ~~third~~first quarter ~~and 30 percent in the nine-month period~~ of ~~2017. These increases were mainly due to~~2024. The increase was primarily driven by higher average debt principal ~~balances and lower capitalized interest~~balances. See Note 10—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.

Income tax expense decreased 65% in the first quarter of 2024, primarily due to ~~the Freeport LPG Export Terminal beginning operations in late 2016. These increases were partially offset by~~ lower ~~interest rates on debt issued in April 2017 to repay $1,500 million of 2.95% Senior Notes that came due in the second quarter of 2017.~~

~~Net~~ income ~~attributable to noncontrolling interest~~ ~~increased $27 million in the nine-month period of 2017, reflecting the contribution of assets to Phillips 66 Partners during 2016.~~

before income taxes. See Note ~~20—~~19—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our ~~provision~~effective income tax rates.

Net income attributable to noncontrolling interests decreased 89% in the first quarter of 2024. The decrease reflects the impacts of the DCP Midstream, LP Merger (DCP LP Merger) in June 2023. See Note 2—DCP Midstream, LP Merger (DCP LP Merger), in the Notes to Consolidated Financial Statements for ~~income taxes~~ ~~and effective tax rates.~~additional information.

Table of Contents

Segment Results

Midstream


	Three Months Ended March 31
	2024		2023

	Millions of Dollars
Income (Loss) Before Income Taxes
Transportation	$	243	306
NGL and Other	306		408

NOVONIX	5		(12)
Total Midstream	$	554	702

Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Millions of Dollars
Net Income (Loss) Attributable to Phillips 66
Transportation $ 97
63
204
200
NGL (13 ) 3
(14 ) (25 )
DCP Midstream 1
9
31
4
Total Midstream $ 85
75
221
179


	Thousands of Barrels Daily				Thousands of Barrels Daily
Transportation Volumes
Pipelines*	3,447	3,495	3,449	3,540
Pipelines*
Pipelines*
Terminals
Terminals
Terminals	2,675	2,417	2,552	2,356
Operating Statistics
Operating Statistics
Operating Statistics
NGL fractionated**	177	173	176	170
NGL extracted***	378	403	362	400
NGL fractionated**
NGL fractionated**
NGL production**
NGL production**
NGL production**
Wellhead Volume (Bcf/D)**
Wellhead Volume (Bcf/D)**
Wellhead Volume (Bcf/D)**

* Pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment, ~~including our share of equity volumes from Yellowstone Pipe Line Company and Lake Charles Pipe Line Company.~~excluding NGL pipelines.

** ~~Excludes DCP Midstream.~~

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


	Dollars Per Gallon
Market Indicator

Weighted-Average NGL Price*	$	0.70	0.74
* Based on index prices from the Mont Belvieu market hub, which are weighted by NGL component mix.

Dollars Per Gallon
Weighted-Average NGL Price*
DCP Midstream $ 0.62
0.45
0.59
0.43
* Based on index prices from the Mont Belvieu and Conway market hubs that are weighted by NGL component and location mix.

The Midstream segment ~~gathers, processes, transports~~provides crude oil and ~~markets~~refined petroleum product transportation, terminaling and processing services; NGL production, transportation, storage, fractionation, processing and marketing services; natural ~~gas;~~gas gathering, compressing, treating, processing, storage, transportation and ~~transports, stores, fractionates~~marketing services; and ~~markets NGL~~condensate recovery. These activities are mainly in the United States. In addition, this segment transports crude oil and other feedstocks to our refineries and other locations, delivers refined and specialty products to market, and provides terminaling and storage services for crude oil and petroleum products. TheThis segment also ~~stores, refrigerates, and exports liquefied petroleum gas primarily to Asia. The~~includes our investment in NOVONIX.

Results from our Midstream segment ~~includes~~decreased $148 million in the first quarter of 2024.

Results from our ~~master limited partnership, Phillips 66 Partners LP,~~Transportation business decreased $63 million in the first quarter of 2024, primarily due to a before-tax impairment charge of $59 million recognized in the first quarter of 2024 associated with certain crude processing and logistics assets in California, as well as ~~our 50 percent equity investment in DCP Midstream.~~

~~Earnings from the Midstream segment increased $10~~a before-tax gain of $36 million recognized in the ~~third quarter and $42 million in the nine-month period of 2017.~~

~~Transportation earnings increased $34 million in the third~~first quarter of ~~2017. The improved earnings were mainly driven by a full quarter of operations of~~2023 associated with the ~~Bakken Pipeline, which commenced commercial operations on June 1, 2017, as well as our share~~sale of a ~~settlement payment received by Rockies Express Pipeline LLC (REX)~~terminal in ~~connection with a breach of contract claim.~~Louisiana. These ~~items~~decreases were partially offset by higher pipeline tariffs and improved earnings ~~attributable to noncontrolling interests, reflecting the impact of transportation asset contributions to Phillips 66 Partners in October 2016. Transportation earnings~~from our equity affiliates primarily driven by increased $4 million in the nine-month period of 2017, as the Bakken Pipeline and REX Pipeline items noted above were mostly offset by higher earnings attributable to noncontrolling interests and increased maintenance costs.volumes.

Results from our NGL and Other business ~~were $16~~decreased $102 million ~~lower~~ in the ~~third~~first quarter of ~~2017,~~2024, primarily due to ~~higher depreciation from the startup~~unfavorable pricing driven by falling natural gas prices and winter weather impacts.

The fair value of ~~the Freeport LPG Export Terminal~~our investment in ~~late 2016 and development expenses associated with new capital projects. NGL results improved $11~~NOVONIX increased by $5 million in the ~~nine-month period~~first quarter of 2017. The improved results reflect the Freeport LPG Export Terminal startup in late 2016, as well as improved NGL margins. These items were partially offset by higher earnings attributable to noncontrolling interests, as2024, compared with a ~~result~~decline of ~~asset contributions to Phillips 66 Partners.~~

~~Earnings from our investment in DCP Midstream decreased $8~~$12 million in the ~~third~~first quarter of 2017, primarily reflecting the impact of higher asset impairments in the 2017 period and a gain on an asset sale in the 2016 period. In addition, lower volumes and margins, including the impact of DCP Midstream’s hedging program, contributed to the decrease in earnings. Earnings from our investment in DCP Midstream increased $27 million in the nine-month period of 2017, as higher margins more than offset the impact of lower volumes and the impairments and gain on sale noted above.2023.

Effective January 1, 2017, DCP Midstream, LLC and its master limited partnership (then named DCP Midstream Partners, LP, subsequently renamed DCP Midstream, LP on January 11, 2017, and referred to herein as DCP Partners) closed a transaction in which DCP Midstream, LLC contributed subsidiaries owning all of its operating assets and its existing debt to DCP Partners, in exchange for approximately 31.1 million DCP Partners units. Following the transaction, we and our co-venturer retained our 50/50 investment in DCP Midstream, LLC and DCP Midstream, LLC retained its incentive distribution rights in DCP Partners, through its ownership of the general partner of DCP Partners, and held a 38 percent interest in DCP Partners. See the “Equity Affiliates” section of “Significant Sources of Capital” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on this transaction.

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

Table of Contents

Chemicals

Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Millions of Dollars

Net Income Attributable to Phillips 66 $ 121
101
498
447


	Three Months Ended March 31
	2024		2023

	Millions of Dollars

Income Before Income Taxes	$	205	198


	Millions of Pounds

CPChem Externally Marketed Sales Volumes*	5,918	5,706
* Represents 100% of CPChem’s outside sales of produced petrochemical products, as well as commission sales from equity affiliates.

Millions of Pounds
CPChem Externally Marketed Sales Volumes*
Olefins and Polyolefins (O&P) 3,842
4,155
11,995
12,296
Specialties, Aromatics and Styrenics (SA&S) 1,095
1,284
3,476
3,750
4,937
5,439
15,471
16,046
* Includes 100 percent of CPChem’s outside sales of produced petrochemical products, as well as commission sales from equity affiliates.


Olefins and Polyolefins Capacity Utilization (percent)	96	%	94

Olefins and Polyolefins Capacity Utilization (percent)* 83 % 93 90 93
* Revised to exclude polyethylene pipe operations. Prior periods recast for comparability.

The Chemicals segment consists of our ~~50 percent~~50% interest in CPChem, which we account for under the equity method. CPChem uses NGL and other feedstocks to produce petrochemicals. These products are then marketed and sold or used as feedstocks to produce plastics and other chemicals. ~~We structure~~CPChem produces and markets ethylene and other olefin products. 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. Unless otherwise noted, amounts referenced below reflect our ~~reporting of CPChem’s operations around two primary business lines: Olefins and Polyolefins (O&P) and Specialties, Aromatics and Styrenics (SA&S).~~net 50% interest in CPChem.

~~Earnings~~Results from the Chemicals segment increased ~~$20~~$7 million in the third quarter and $51 million in the nine-month period of 2017. The increase in both 2017 periods primarily reflects the absence of an impairment of $177 million due to lower demand and margin factors affecting an equity investment affiliate, which resulted in an $89 million after-tax reduction in our equity earnings from CPChem in the third quarter and nine-month period of 2016. This increase was partially offset in both 2017 periods by lower margins and hurricane-related costs. In addition, the nine-month period of 2017 benefited from a gain CPChem recognized on the sale of its K-Resin^® ~~SBC business~~ in the first quarter of ~~2017,~~2024, primarily due to higher volumes and ~~higher outside~~lower utility costs, partially offset by lower margins driven by decreased sales ~~volumes.~~ prices.

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

Table of Contents

Refining


	Three Months Ended March 31
	2024		2023

	Millions of Dollars
Income (Loss) Before Income Taxes
Atlantic Basin/Europe	$	80	142
Gulf Coast	118		705
Central Corridor	210		739
West Coast	(277)		22
Worldwide	$	131	1,608


	Dollars Per Barrel
Income (Loss) Before Income Taxes
Atlantic Basin/Europe	$	1.70	3.60
Gulf Coast	2.49		13.73
Central Corridor	8.20		28.42
West Coast	(11.24)		0.77
Worldwide	0.91		11.07

Realized Refining Margins*
Atlantic Basin/Europe	$	9.55	16.13
Gulf Coast	10.91		21.28
Central Corridor	13.27		26.86
West Coast	8.89		16.53
Worldwide	10.91		20.72

* See the “Non-GAAP Reconciliations” section for a ~~result~~reconciliation of ~~Hurricane Harvey, CPChem’s Cedar Bayou facility in Baytown, Texas, experienced severe flooding, which caused it~~this non-GAAP measure to ~~shut down operations~~the most directly comparable measure under generally accepted accounting principles in the ~~third quarter~~United States (GAAP), income (loss) before income taxes per barrel.

Table of ~~2017. We expect~~Contents


	Thousands of Barrels Daily
	Three Months Ended March 31
Operating Statistics	2024		2023
Refining operations*
Atlantic Basin/Europe
Crude oil capacity	537		537
Crude oil processed	472		443
Capacity utilization (percent)	88	%	82
Refinery production	522		438
Gulf Coast
Crude oil capacity	529		529
Crude oil processed	475		519
Capacity utilization (percent)	90	%	98
Refinery production	526		580
Central Corridor
Crude oil capacity	531		531
Crude oil processed	509		475
Capacity utilization (percent)	96	%	89
Refinery production	527		494
West Coast**
Crude oil capacity	244		319
Crude oil processed	244		281
Capacity utilization (percent)	100	%	88
Refinery production	266		314
Worldwide
Crude oil capacity	1,841		1,916
Crude oil processed	1,700		1,718
Capacity utilization (percent)	92	%	90
Refinery production	1,841		1,826
* Includes our share of equity affiliates. ** 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 MBD to 75 MBD. In October 2023, we further reduced net crude throughput capacity from 75 MBD to 52 MBD as we shut down one of the two crude units at the Rodeo facility. Effective January 1, 2024, net crude throughput capacity was 52 MBD. The remaining net crude throughput capacity came offline upon the shutdown of the Rodeo facility’s second crude unit in February 2024. Accordingly, effective January 1, 2024, we have excluded the Rodeo facility from the operating statistics above.

The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, at 12 refineries in the ~~units at this facility to resume operations, in stages, beginning in November~~United States and completing in December 2017. CPChem’s U.S. Gulf Coast Petrochemicals Project, which consists of a world-scale ethane cracker at Cedar Bayou and two polyethylene units at Old Ocean, Texas, was also impacted by the flooding. As a result, we expect construction on the ethane cracker to be completed and commissioning to beginEurope.

Results from our Refining segment decreased $1,477 million in the first quarter of ~~2018.~~2024, primarily due to lower realized margins, partially offset by higher volumes. The decrease in realized margins in the first quarter of 2024 was primarily driven by lower market crack spreads, feedstock advantage and secondary product margins.

Our worldwide refining crude oil capacity utilization rate was 92% in the first quarter of 2024, compared with 90% in the first quarter of 2023. See the ~~“Business Environment~~“Executive Overview and ~~Executive Overview”~~Business Environment” section for information on market factors impacting this quarter’s results.

~~Refining~~

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Net Income Attributable to Phillips 66
Atlantic Basin/Europe $ 171
5
228
41
Gulf Coast 67
30
448
103
Central Corridor 197
142
286
217
West Coast 115
—
71
51
Worldwide $ 550
177
1,033
412

Marketing and Specialties

The following table presents our realized refining margin per barrel. Realized refining margins measure the difference between a) sales and other operating revenues derived from the sale of petroleum products manufactured at our refineries and b) purchase costs of feedstocks, primarily crude oil, used to produce the petroleum products. The margins are adjusted to include our proportional share of our joint venture refineries’ realized margins, as calculated above, as well as to exclude those items that are not representative of the underlying operating performance of a period, which we call “special items.” The realized refining margins are converted to a per-barrel basis by dividing them by total refinery processed inputs (primarily crude oil) measured on a barrel basis, including our share of inputs processed by our joint venture refineries. Our realized refining margin per barrel is intended to be comparable with industry refining margins, which are known as “crack spreads.” As discussed in “Business Environment,” industry crack spreads measure the difference between market prices for refined petroleum products and crude oil. Realized refining margin per barrel calculated on a similar basis as industry crack spreads provides a useful measure of how well we performed relative to benchmark industry margins.


	Three Months Ended March 31
	2024	2023

	Millions of Dollars

Income Before Income Taxes	404	426

* See the “Non-GAAP Reconciliations” section ~~below~~ for ~~reconciliations~~a reconciliation of ~~net income attributable to Phillips 66 to realized refining margins.~~

Dollars Per Barrel
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Net Income Attributable to Phillips 66
Atlantic Basin/Europe $ 3.27
0.09
1.58
0.24
Gulf Coast 0.95
0.42
2.14
0.49
Central Corridor 8.37
5.92
4.06
2.98
West Coast 3.14
—
0.71
0.51
Worldwide 3.01
0.96
1.97
0.74

Realized Refining Margins
Atlantic Basin/Europe $ 10.02
5.04
8.22
5.66
Gulf Coast 7.26
5.47
7.33
5.78
Central Corridor 14.04
11.18
11.55
9.10
West Coast 12.95
9.07
11.37
9.91
Worldwide 10.49
7.23
9.19
7.16

Thousands of Barrels Daily
Three Months Ended
September 30 Nine Months Ended
September 30
Operating Statistics 2017
2016
2017
2016
Refining operations*
Atlantic Basin/Europe
Crude oil capacity 520
571
520
582
Crude oil processed 536
573
479
581
Capacity utilization (percent) 103 % 100
92
100
Refinery production 574
611
536
617
Gulf Coast

Crude oil capacity 743
743
743
743
Crude oil processed 694
701
692
706
Capacity utilization (percent) 93 % 94
93
95
Refinery production 771
776
774
783
Central Corridor

Crude oil capacity 493
493
493
493
Crude oil processed 480
487
472
486
Capacity utilization (percent) 97 % 99
96
99
Refinery production 503
510
493
508
West Coast

Crude oil capacity 360
360
360
360
Crude oil processed 368
344
338
339
Capacity utilization (percent) 102 % 96
94
94
Refinery production 398
374
364
365
Worldwide

Crude oil capacity 2,116
2,167
2,116
2,178
Crude oil processed 2,078
2,105
1,981
2,112
Capacity utilization (percent) 98 % 97
94
97
Refinery production 2,246
2,271
2,167
2,273
* Includes our share of equity affiliates.

The Refining segment purchases, sells and refines crude oil and other feedstocks into petroleum products (such as gasoline, distillates and aviation fuels) at 13 refineries, mainly in the United States and Europe.

Earnings for the Refining segment increased $373 million in the third quarter of 2017. The increase was primarily due to higher realized refining margins resulting from improved market crack spreads and secondary product margins, partially offset by lower feedstock advantage and clean product differentials. Lower turnaround costs also contributedthis non-GAAP measure to the ~~increase in earnings.~~

Earnings for the Refining segment increased $621 million in the nine-month period of 2017. The increase in earnings was mainly due to higher realized refining margins and a gain recognized on the consolidation of MSLP. These increases were partially offset by higher turnaround costs. See Note 5—Business Combinations, in the Notes to Consolidated Financial Statements, for additional information on the consolidation of MSLP.

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

Our worldwide refining crude oil capacity utilization rate was 98 percent and 94 percent in the third quarter and nine-month period of 2017, respectively, compared with 97 percent in both the third quarter and nine-month period of 2016. The increase in the third quarter of 2017 was primarily attributable to improved market conditions, partially offset by hurricane-related downtime. The decrease in the nine-month period of 2017 was primarily due to higher turnaround activities in 2017 as compared with 2016.

~~Non-GAAP Reconciliations~~

Millions of Dollars, Except as Indicated
Realized Refining Margins Atlantic Basin/Europe
Gulf Coast
Central Corridor
West Coast
Worldwide

Three Months Ended September 30, 2017
Net income attributable to Phillips 66 $ 171
67
197
115
550
Plus (Less):
Provision for income taxes 76
42
120
75
313
Taxes other than income taxes 14
24
9
—
47
Depreciation, amortization and impairments 47
68
32
58
205
Selling, general and administrative expenses 16
14
8
12
50
Operating expenses 185
298
123
212
818
Equity in (earnings) losses of affiliates 3
(1 ) (146 ) —
(144 )
Other segment (income) expense, net (2 ) —
8
2
8
Proportional share of refining gross margins contributed by equity affiliates 15
—
290
—
305
Realized refining margins $ 525
512
641
474
2,152

Total processed inputs (thousands of barrels)
52,306
70,544
23,525
36,635
183,010
Adjusted total processed inputs (thousands of barrels)*
52,306
70,544
45,733
36,635
205,218

Net income attributable to Phillips 66 per barrel (dollars per barrel)**
$ 3.27
0.95
8.37
3.14
3.01
Realized refining margins (dollars per barrel)***
10.02
7.26
14.04
12.95
10.49

Three Months Ended September 30, 2016
Net income attributable to Phillips 66 $ 5
30
142
—
177
Plus (Less):
Provision (benefit) for income taxes (1 ) 21
78
(1 ) 97
Taxes other than income taxes 13
12
7
20
52
Depreciation, amortization and impairments 46
58
26
58
188
Selling, general and administrative expenses 16
14
8
12
50
Operating expenses 199
330
118
221
868
Equity in (earnings) losses of affiliates 2
(8 ) (62 ) —
(68 )
Other segment (income) expense, net (12 ) —
2
—
(10 )
Proportional share of refining gross margins contributed by equity affiliates 14
1
199
—
214
Special items:
Pending claims and settlements —
(70 ) —
—
(70 )
Realized refining margins $ 282
388
518
310
1,498

Total processed inputs (thousands of barrels)
55,854
70,814
23,977
34,251
184,896
Adjusted total processed inputs (thousands of barrels)*
55,854
70,814
46,420
34,251
207,339

Net income attributable to Phillips 66 per barrel (dollars per barrel)**
$ 0.09
0.42
5.92
—
0.96
Realized refining margins (dollars per barrel)***
5.04
5.47
11.18
9.07
7.23
* Adjusted total processed inputs include our proportional share of processed inputs of equity affiliates.
** Net income attributable to Phillips 66 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 due to rounding.

Millions of Dollars, Except as Indicated
Realized Refining Margins Atlantic Basin/Europe
Gulf Coast
Central Corridor
West Coast
Worldwide

Nine Months Ended September 30, 2017
Net income attributable to Phillips 66 $ 228
448
286
71
1,033
Plus (Less):
Provision for income taxes 41
268
170
48
527
Taxes other than income taxes 43
74
36
41
194
Depreciation, amortization and impairments 143
203
96
183
625
Selling, general and administrative expenses 45
40
24
35
144
Operating expenses 640
930
442
747
2,759
Equity in (earnings) losses of affiliates 9
(6 ) (163 ) —
(160 )
Other segment (income) expense, net (8 ) (421 ) 14
4
(411 )
Proportional share of refining gross margins contributed by equity affiliates 45
1
634
—
680
Realized refining margins $ 1,186
1,537
1,539
1,129
5,391

Total processed inputs (thousands of barrels)
144,171
209,738
70,503
99,353
523,765
Adjusted total processed inputs (thousands of barrels)*
144,171
209,738
133,372
99,353
586,634

Net income attributable to Phillips 66 per barrel (dollars per barrel)**
$ 1.58
2.14
4.06
0.71
1.97
Realized refining margins (dollars per barrel)***
8.22
7.33
11.55
11.37
9.19

Nine Months Ended September 30, 2016
Net income attributable to Phillips 66 $ 41
103
217
51
412
Plus (Less):
Provision (benefit) for income taxes (20 ) 62
131
23
196
Taxes other than income taxes 45
56
32
61
194
Depreciation, amortization and impairments 147
173
78
172
570
Selling, general and administrative expenses 47
36
23
35
141
Operating expenses 627
905
336
650
2,518
Equity in (earnings) losses of affiliates 6
(33 ) (112 ) —
(139 )
Other segment (income) expense, net (15 ) 1
(1 ) (4 ) (19 )
Proportional share of refining gross margins contributed by equity affiliates 45
(5 ) 550
—
590
Special items:
Pending claims and settlements —
(70 ) —
—
(70 )
Recognition of deferred logistics commitments 30
—
—
—
30
Realized refining margins $ 953
1,228
1,254
988
4,423

Total processed inputs (thousands of barrels)
168,086
212,287
72,838
99,920
553,131
Adjusted total processed inputs (thousands of barrels)*
168,086
212,287
137,833
99,920
618,126

Net income attributable to Phillips 66 per barrel (dollars per barrel)**
$ 0.24
0.49
2.98
0.51
0.74
Realized refining margins (dollars per barrel)***
5.66
5.78
9.10
9.91
7.16
* Adjusted total processed inputs include our proportional share of processed inputs of equity affiliates.
** Net income attributable to Phillips 66 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 due to rounding.

~~Marketing and Specialties~~

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Net Income Attributable to Phillips 66
Marketing and Other $ 160
228
465
589
Specialties 48
39
98
112
Total Marketing and Specialties $ 208
267
563
701

The following table presents our realized marketing fuel margin per barrel. Realized marketing fuel margins measure the difference between a) sales and other operating revenues derived from the sale of fuels in our Marketing and Specialties segment and b) purchase costs of those fuels. These margins are converted to a per-barrel basis by dividing them by sales volumes measured on a barrel basis. 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.

~~Within the Marketing and Specialties segment, the GAAP performance measure~~ most directly comparable ~~to marketing fuel margin~~GAAP measure, income before income taxes per ~~barrel is the marketing business’ “net income attributable to Phillips 66 per~~ barrel.” 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 net income, such as general and administrative expenses and income taxes. Because marketing fuel margin per barrel excludes these items, and because marketing fuel margin per barrel may be defined differently by other companies in our industry, it has limitations as an analytical tool. See the “Non-GAAP Reconciliations” section below for reconciliations of net income attributable to Phillips 66 to realized marketing fuel margins.

Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Dollars Per Barrel
Net Income Attributable to Phillips 66
U.S. $ 0.65
0.86
0.64
0.83
International 1.79
2.77
1.90
2.01

Realized Marketing Fuel Margins
U.S. $ 1.63
1.88
1.62
1.83
International 4.45
5.19
4.37
4.16


	Thousands of Barrels Daily


Marketing Refined Petroleum Product Sales
Gasoline	1,196	1,111
Distillates	970	848
Other	43	19
	2,209	1,978

Dollars Per Gallon
U.S. Average Wholesale Prices*
Gasoline $ 1.89
1.69
1.85
1.60
Distillates 1.85
1.60
1.77
1.43
* On third-party branded petroleum product sales, excluding excise taxes.

Thousands of Barrels Daily
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Marketing Petroleum Products Sales Volumes
Gasoline 1,272
1,247
1,235
1,228
Distillates 946
969
898
949
Other products 18
17
17
17
Total 2,236
2,233
2,150
2,194

The M&S segment purchases for resale and markets refined petroleum products, ~~(such~~such as gasoline, distillates and aviation ~~fuels),~~fuels, as well as renewable fuels, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of ~~specialty products (such as~~ base oils and ~~lubricants), as well as power generation operations.~~lubricants.

~~The~~Before-tax income from the M&S segment ~~earnings~~ decreased ~~$59~~$22 million in the ~~third~~first quarter ~~and $138 million in the nine-month period~~ of ~~2017.~~2024. The ~~decreases were~~decrease was primarily ~~due to~~driven by lower ~~realized~~U.S. marketing margins. In addition, the nine-month period results reflected lower equity earnings due to increased turnaround activities and unplanned outages at Excel Paralubes, as well as the absence of biodiesel tax credits recognized in 2016.margins, partially offset by higher U.S. marketing volumes.

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

~~Non-GAAP Reconciliations~~

Millions of Dollars, Except as Indicated
U.S.
International
U.S.
International
Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
Realized Marketing Fuel Margins

Net income attributable to Phillips 66 $ 118
44
153
75
Plus (Less):
Provision for income taxes 73
14
90
23
Taxes other than income taxes 1,409
1,970
1,330
2,019
Depreciation and amortization 3
17
3
15
Selling, general and administrative expenses 193
70
185
66
Equity in earnings of affiliates (2 ) (22 ) (1 ) (21 )
Other operating revenues* (1,499 ) (1,973 ) (1,425 ) (2,024 )
Other segment income, net —
(1 ) —
—
Marketing margins 295
119

335
153
Less: margin for non-fuel related sales —
(10 ) —
(12 )
Realized marketing fuel margins $ 295
109

335
141

Total fuel sales volumes (thousands of barrels)
181,110
24,596
178,343
27,124

Net income attributable to Phillips 66 per barrel (dollars per barrel)
$ 0.65
1.79
0.86
2.77
Realized marketing fuel margins (dollars per barrel)**
1.63
4.45
1.88
5.19

Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016

Net income attributable to Phillips 66 $ 331
138
430
165
Plus (Less):
Provision for income taxes 200
43
252
46
Taxes other than income taxes 4,062
5,607
3,909
6,287
Depreciation and amortization 10
48
9
46
Selling, general and administrative expenses 560
193
526
193
Equity in earnings of affiliates (4 ) (63 ) (4 ) (56 )
Other operating revenues* (4,312 ) (5,616 ) (4,171 ) (6,307 )
Other segment (income) expense, net (15 ) (1 ) —
2
Marketing margins 832
349

951
376
Less: margin for non-fuel related sales —
(32 ) —
(34 )
Realized marketing fuel margins $ 832
317

951
342

Total fuel sales volumes (thousands of barrels)
514,077
72,710
519,129
82,058

Net income attributable to Phillips 66 per barrel (dollars per barrel)
$ 0.64
1.90
0.83
2.01
Realized marketing fuel margins (dollars per barrel)**
1.62
4.37
1.83
4.16
* Primarily excise taxes and other non-fuel revenues.
** Realized marketing fuel margins per barrel, as presented, are calculated using the underlying realized marketing fuel margin amounts, in dollars, divided by sales volumes, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts due to rounding.


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Loss Before Income Taxes
Net interest expense	$	(185)	(124)
Corporate overhead and other	(145)		(159)



Total Corporate and Other	$	(330)	(283)

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Net Loss Attributable to Phillips 66
Net interest $ (68 ) (49 ) (198 ) (155 )
Corporate general and administrative expenses (45 ) (39 ) (131 ) (121 )
Technology (16 ) (15 ) (45 ) (43 )
Other (12 ) (6 ) (33 ) (28 )
Total Corporate and Other $ (141 ) (109 ) (407 ) (347 )

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. ~~Net interest increased in the third quarter~~Corporate overhead and nine-month period of 2017, mainly due to lower capitalized interest and higher interest expense driven by higher average debt principal balances, reflecting Phillips 66 Partners’ debt issuance in October 2016.

~~Higher pension settlement expense contributed to the increase in Corporate~~other includes general and administrative expenses, ~~in both 2017 periods.~~

~~The category “Other” includes certain income tax expenses,~~technology costs, environmental costs associated with sites no longer in operation, business transformation restructuring costs, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment.

Net interest expense increased $61 million in the first quarter of 2024. The increase was primarily driven by higher interest expense as a result of higher average debt principal balances, as well as lower interest income. See Note 10—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.

Corporate overhead and other costs ~~during~~decreased $14 million in the ~~third~~first quarter of ~~2017 was~~2024 primarily due to ~~the accrual of environmental-related indemnities~~a decrease in consulting fees associated with ~~a previously sold refinery, partially offset by favorable tax impacts.~~our business transformation.

CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators

Millions of Dollars
Except as Indicated
September 30
2017
December 31
2016

Cash and cash equivalents $ 1,547
2,711
Short-term debt 706
550
Total debt 10,201
10,138
Total equity 23,959
23,725
Percent of total debt to capital* 30 % 30
Percent of floating-rate debt to total debt 17 % 3
* Capital includes total debt and total equity.

To meet our short- and long-term liquidity requirements, we ~~look to~~use a variety of funding sources but rely primarily on cash generated from operating ~~activities. Additionally, Phillips 66 Partners raises funds for its growth~~ activities ~~through~~and debt ~~and equity offerings.~~financing. During the first ~~nine~~three months of ~~2017,~~2024, we ~~generated $1,717~~used $236 million of cash in ~~cash from operations. In addition, Phillips 66 Partners raised net proceeds of $171 million from its continuous offering program of common units (ATM program),~~our operations and we ~~collected $325 million~~received proceeds from debt issuances, net of ~~previously issued related-party loans. Available~~debt repayments, of $802 million. We used available cash ~~was~~ primarily ~~used~~to repurchase shares of our common stock for $1.2 billion, fund capital expenditures and investments ~~($1,295 million), repurchases~~ of ~~our common stock ($1,127 million)~~$628 million, and ~~dividend payments~~pay dividends on our common stock ~~($1,042 million).~~of $448 million. During the first ~~nine~~three months of ~~2017,~~2024, cash and cash equivalents decreased ~~by $1,164 million~~ to ~~$1,547 million.~~$1.6 billion.

In addition to cash flows from operating activities, we rely on our commercial paper and credit facility programs, asset sales and our ability to issue securities using our shelf registration statement to support our short- and long-term liquidity requirements. We believe current cash and cash equivalents and cash generated by operations, together with access to external sources of funds as described below under “Significant Sources of Capital,” will be sufficient to meet our funding requirements in the near and long term, including our capital spending, dividend payments, employee benefit plan contributions, debt repayment and share repurchases.

Significant Sources of Capital

Operating Activities

During the first ~~nine~~three months of ~~2017,~~2024, cash ~~generated by operating activities~~used in our operations was ~~$1,717~~$236 million, compared with ~~$2,296 million~~cash provided by operations of $1.2 billion for the first ~~nine~~three months of ~~2016.~~ 2023. The decrease inwas primarily due to lower realized refining margins, as well as larger net unfavorable working capital impacts. The unfavorable working capital impacts were primarily driven by the ~~first nine months~~effects of ~~2017, compared with the same period~~changes in ~~2016, reflects inventory builds at higher~~ commodity prices, the timing of payments and ~~an increase in employee benefit plan contributions, partially offset by an increase in distributions from our equity affiliates.~~collections, and discretionary inventory builds.

Our short- and long-term operating cash flows are highly dependent upon refining and marketing margins, NGL prices and chemicals margins. Prices and margins in our industry are typically volatile, and are driven by market conditions over which we have little or no control. Absent other mitigating factors, as these prices and margins fluctuate, we would expect a corresponding change in our operating cash flows.

The level and quality of output from our refineries also impacts our cash flows. 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.

Equity ~~Affiliates~~Affiliate Operating Distributions

Our operating cash flows are also impacted by distribution decisions made by our equity ~~affiliates, including DCP Midstream, CPChem and WRB.~~affiliates. During the first ~~nine~~three months of ~~2017,~~2024, cash ~~from~~used in operations included aggregate distributions of ~~$814~~$348 million from our equity affiliates, ~~compared with $387 million~~while cash from operations during the ~~same period~~first three months of ~~2016. In the second quarter~~2023 included aggregate distributions of ~~2017, DCP Midstream resumed distributions. We did not receive any distributions~~$369 million from ~~CPChem in the third quarter of 2017, and do not expect to receive any distributions in the fourth quarter of 2017, due to the impacts of Hurricane Harvey on its Gulf Coast operations.~~our equity affiliates. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these ~~companies~~equity affiliates are not assured.

~~Effective January 1, 2017, DCP Midstream, LLC and DCP Partners closed a transaction in which DCP Midstream, LLC contributed subsidiaries owning all~~

Senior Notes Issuances

~~Foreign Cash Holdings~~

At September 30, 2017, approximately 22 percent of our consolidated cash and cash equivalents balance was available for domestic use without incurring material U.S. income taxes in excess of the amounts already accrued in the financial statements. We believe the remaining amount, primarily attributable to cash held in foreign locations where we have asserted our intention to indefinitely reinvest earnings, does not materially affect our consolidated liquidity due to the following factors:

~~In 2016, Phillips 66 Partners began issuing common units under its ATM program, which allows for the issuance of up to an aggregate of $250 million~~Company, a wholly owned subsidiary of Phillips 66, ~~Partners’ common units, in amounts, at prices~~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 ~~terms to be determined by market conditions~~the 2031 Notes and ~~other factors at~~2054 Notes is payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2024. Interest on the ~~time~~Additional 2033 Notes is payable semi-annually on June 30 and December 30 of ~~the offerings. For the nine months ended September~~each year, commencing on June 30, ~~2017, on a settlement-date basis,~~2024.

On March 29, 2023, Phillips 66 ~~Partners has issued 3,323,576 common units under the ATM program, which generated net proceeds~~Company, a wholly owned subsidiary of ~~$171 million. From inception through September 30, 2017,~~ Phillips 66, ~~Partners has~~ issued an$1.25 billion aggregate principal amount of ~~3,669,728 common units under the ATM program, which generated net proceeds of $190 million.~~

~~On September 19, 2017, we entered into an agreement to contribute to Phillips 66 Partners our 25 percent interests in the Dakota Access, LLC (DAPL)~~senior unsecured notes that are fully and ~~Energy Transfer Crude Oil Company, LLC (ETCO) joint ventures and our 100 percent interest in MSLP. The transaction closed on October 6, 2017. Total consideration paid to us~~unconditionally guaranteed by Phillips ~~66 Partners was $1.65 billion, which included $372~~66. The senior unsecured notes issuance consisted of:

•$750 million ~~in cash at closing, the assumption~~aggregate principal amount of ~~$588~~4.950% Senior Notes due December 2027 (2027 Notes).

•$500 million aggregate principal amount of promissory notes payable to us, the assumption of $450 million of term loans payable to a third party, and the issuance to us of common and general partner units with a fair value of $240 million. Shortly after closing, Phillips 66 Partners repaid the $588 million of promissory notes payable to us, resulting in total cash received by us for the transaction of $960 million. Phillips 66 Partners financed the consideration paid, in early October 2017, with proceeds from the private placement of $750 million of perpetual convertible preferred units and $300 million of common units, as well as a portion of the proceeds from a public offering of $650 million of5.300% Senior ~~Notes.~~Notes due June 2033 (2033 Notes).

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

On February 28, 2024, we entered into a new $5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029. The Facility replaced our previous $5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as guarantor, and the previous revolving credit facility was terminated. The Facility 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 Secured Overnight Financing Rate (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The pricing levels for the commitment fee and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time. At ~~September 30, 2017,~~March 31, 2024, and December 31, 2023, no amount had been ~~directly~~ drawn under our revolving credit facilities.

Phillips 66 also has a $5 billion ~~revolving~~uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to less than one year. At March 31, 2024, $1.5 billion of commercial paper had been issued under this program. At December 31, 2023, no borrowings were outstanding under this program.

DCP Midstream Class A Segment

On March 15, 2024, DCP LP terminated its $1.4 billion credit ~~facility; however,~~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, which were repaid during the three months ended March 31, 2024.

Total Committed Capacity Available
At March 31, 2024, and December 31, 2023, we had ~~$200 million of short-term commercial paper outstanding~~approximately $3.5 billion and $51 million of issued letters of credit that were supported by this facility. In addition, at September 30, 2017, there was $87 million outstanding under the $750 million revolving credit facility of Phillips 66 Partners. As a result, we had $5.4$6.4 billion, respectively, of total committed capacity available under ~~our~~the credit facilities ~~at September 30, 2017.~~described above.

~~Also in October 2017, we repaid the $200 million~~

Table of ~~short-term commercial paper outstanding at September 30, 2017, and Phillips 66 Partners repaid the $87 million of borrowings outstanding under its revolving credit facility at September 30, 2017.~~Contents

~~Debt Issuances and Repayments~~

In April 2017, Phillips 66 completed a private offering of $600 million aggregate principal amount of unsecured notes, consisting of $300 million of Notes due 2019 and $300 million of Notes due 2020. Interest on the notes is a floating rate equal to three-month LIBOR plus 0.65% per annum for the 2019 Notes and three-month LIBOR plus 0.75% per annum for the 2020 Notes. Interest on both series of notes is payable quarterly in arrears on January 15, April 15, July 15 and October 15, commencing in July 2017. The 2019 Notes mature on April 15, 2019, and the 2020 Notes mature on April 15, 2020. The notes are guaranteed by Phillips 66 Company, a wholly owned subsidiary.

Also in April 2017, Phillips 66 entered into term loan facilities with an aggregate borrowing amount of $900 million, consisting of a $450 million 364-day facility and a $450 million three-year facility. Interest on the term loans is a floating rate based on either the Eurodollar rate or the reference rate, plus a margin determined by our long-term credit ratings.

In October 2017, as part of the contribution of assets to Phillips 66 Partners, discussed above, Phillips 66 Partners assumed the $450 million of term loans outstanding under the 364-day facility originally issued in April 2017, and repaid those loans shortly thereafter. In addition, Phillips 66 Partners issued $500 million aggregate principal amount of 3.75% Senior Notes due 2028 and $150 million aggregate principal amount of 4.68% Senior Notes due 2045. Interest on the 3.75% Senior Notes due 2028 is payable semiannually in arrears on March 1 and September 1 of each year, commencing on March 1, 2018. The 4.68% Senior Notes due 2045 are an additional issuance of existing Phillips 66 Partners’ 4.68% Senior Notes, and interest is payable semiannually in arrears on February 15 and August 15 of each year.

~~Shelf Registration~~

We have a universal shelf registration statement on file with the U.S. Securities and Exchange Commission (SEC) under which we, as a well-known seasoned issuer, have the ability to issue and sell an indeterminate amount of various types of debt and equity securities.

Off-Balance Sheet Arrangements

~~In 2016,~~Lease Residual Value Guarantees

Under the operating lease ~~commenced on~~agreement for our headquarters facility in Houston, ~~Texas. Under this lease agreement,~~Texas, we have ~~a residual value guarantee with a maximum future exposure of $554 million. The operating lease has a term of five years and provides us~~ the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale.

We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at March 31, 2024. We also have residual value guarantees associated with railcar, airplane and ~~airplane~~truck leases with maximum potential future exposures totaling ~~$349~~$171 million. ~~For information on our need to perform under the railcar lease guarantee, see the Capital Requirements section to follow.~~

~~In addition, we have guarantees outstanding related to certain joint venture debt obligations, which~~These leases have remaining terms of upone to 8ten years.

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. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) addressing an easement under Lake Oahe in North Dakota. The trial court later vacated the easement. Although the easement is vacated, the USACE has no plans to stop pipeline operations while it proceeds with the EIS, and the Tribe’s request for a shutdown was denied in May 2021. In June 2021, the trial court dismissed the litigation entirely. Once the EIS is completed, new litigation or challenges may be filed.

On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $1 billion aggregate principal amount of ~~future~~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. As a result of the debt repayment on April 1, 2024, our share of the maximum potential equity contributions under the CECU decreased to approximately $215 million, and our share of scheduled interest payments on the notes that we could be required to ~~third parties under these guarantees is~~support decreased to approximately ~~$310 million.~~$10 million annually.

See Note 11—Guarantees, in the Notes to Consolidated Financial Statements, for additional information onregarding our guarantees.

Table of Contents

Capital Requirements

Capital Expenditures and Investments

For information about our capital expenditures and investments, see the “Capital Spending” ~~section.~~section below.

Debt Financing

Our debt balance at ~~September 30, 2017,~~March 31, 2024, and December 31, ~~2016,~~2023, was ~~$10.2~~$20.2 billion and ~~$10.1~~$19.4 billion, respectively. Our total debt-to-capital ratio was ~~30 percent~~40% and 38% at ~~both September 30, 2017,~~March 31, 2024, and December 31, ~~2016.~~2023, respectively.

~~In May 2017, we repaid $1,500~~On March 29, 2024, DCP LP early redeemed $300 million of ~~2.95% Senior Notes upon maturity with the funding from the April 2017 debt issuances discussed above.~~

~~Also in May 2017, we repaid $135 million of MSLP 8.85%~~its 5.375% Senior Notes due ~~in 2019. This debt was recorded as a result~~July 2025 at par with an aggregate principal amount of $825 million.

On March 4, 2024, Phillips 66 Company repaid $700 million of the ~~consolidation of MSLP~~$1.25 billion borrowed under its delayed draw term loan that matures in ~~February 2017. See Note 5—Business Combinations, in the Notes to the Consolidated Financial Statements, for additional information regarding MSLP.~~June 2026.

On ~~July 12, 2017,~~February 15, 2024, upon maturity, Phillips 66 repaid its 0.900% senior notes due February 2024 with an aggregate principal amount of $800 million.

During the three months ended March 31, 2024, we ~~announced~~repaid $375 million of borrowings that were outstanding under DCP LP’s credit and accounts receivable securitization facilities at December 31, 2023.

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

Dividends

On February 7, 2024, our Board of Directors declared a quarterly cash dividend of ~~$0.70~~$1.05 per common share. ~~The~~This dividend was paid on ~~September~~March 1, ~~2017,~~2024, to shareholders of record atas of the close of business on ~~August 18, 2017.~~February 20, 2024. On ~~October 9, 2017, we announced that~~April 3, 2024, our Board of Directors declared a quarterly cash dividend of ~~$0.70~~$1.15 per common share. This dividend is payable on ~~December 1, 2017,~~June 3, 2024, to shareholders of record atas of the close of business on ~~November 17, 2017.~~May 20, 2024.

~~On October 9, 2017, we announced that our Board of Directors authorized $3 billion of additional share repurchases.~~ Share Repurchases

Since July 2012, our Board of Directors has authorized ~~share~~an aggregate of $25 billion of repurchases of our outstanding common stock ~~totaling up to $12 billion. The~~under our share repurchase program. Our share repurchase authorizations do not expire. Any future share repurchases ~~have been, and are expected to be, funded primarily through available cash. The shares~~ will be ~~repurchased from time to time in~~made at the ~~open market at~~discretion of management and will depend on various factors including our ~~discretion, subject to market conditions~~share price, results of operations, financial condition and other factors, and in accordance with applicable regulatory requirements. We are not obligated to acquire any particular amount of common stock and may commence, suspend or discontinue purchases at any time or from time to time without prior notice. Duringcash required for future business plans. For the ~~first nine~~three months ~~of 2017,~~ended March 31, 2024, we repurchased ~~13,852,041~~8 million shares at aan aggregate cost of ~~$1,127 million.~~approximately $1.2 billion. Since ~~the inception of our share repurchases in~~July 2012, ~~through September 30, 2017,~~ we have repurchased ~~a total of 119,256,690~~222 million shares under our share repurchase program at aan aggregate cost of ~~$8,565 million.~~$19.2 billion. Shares of stock repurchased are held as treasury shares.

Employee Benefit Plan Contributions

During the ~~first nine~~three months ~~of 2017,~~ended March 31, 2024, we contributed ~~$432~~$5 million to our U.S. ~~employee~~pension and other postretirement benefit plans and ~~$26~~$1 million to our international ~~employee benefit~~pension plans. We currently expect to make additional contributions of approximately $6$70 million to our U.S. ~~employee~~pension and other postretirement benefit plans and $9approximately $4 million to our international ~~employee benefit~~pension plans during the remainder of ~~2017.~~2024.

~~We have a 25 percent ownership interest in both DAPL and ETCO, which were formed to construct pipelines to deliver crude oil produced in the Bakken area~~

Table of North Dakota to market centers in the Midwest and the Gulf Coast. In 2016, we and our co-venturer executed agreements, and an amendment to the original agreements, that provided we and our co-venturer would loan DAPL and ETCO up to a maximum of $1,411 million and $76 million, respectively, with the amounts loaned by us and our co-venturer being proportionate to our ownership interests (Sponsor Loans). Also in 2016, DAPL and ETCO secured a $2.5 billion facility (Facility) with a syndicate of financial institutions on a limited recourse basis with certain guarantees. Allowable draws under the Facility were initially reduced and finally suspended in September 2016 pending resolution of permitting delays. As a result, DAPL and ETCO resumed making draws under the Sponsor Loans. In February 2017, DAPL was granted the lone outstanding easement required to complete work beneath the Missouri River. As a result, construction of the pipelines resumed and draws under the Facility were reinitiated and all outstanding Sponsor Loans were paid in February 2017. Construction on both pipelines was completed, with commercial operations beginning in June 2017. As of September 30, 2017, DAPL and ETCO have an aggregate balance outstanding under the Facility of $2.5 billion.Contents

Capital Spending

~~In 2016, we and our co-venturer in WRB each made a $75 million partner loan to provide for WRB’s short-term operating needs. These partner loans were repaid in the first quarter of 2017.~~


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Capital Expenditures and Investments
Midstream	$	255	124
Chemicals	—		—
Refining	351		227
Marketing and Specialties	15		11
Corporate and Other	7		16
Total Capital Expenditures and Investments	$	628	378



Selected Equity Affiliates*

CPChem	201		142
WRB	24		45
	$	225	187
* Our share of joint ventures’ capital spending.

Midstream

During the first ~~nine~~three months of 2017, we recognized an additional $35 million of the residual value deficiency of our leased railcars. The residual value deficiency of $31 million remaining at September 30, 2017, will be recognized on a straight-line basis through May 2019. Due to current market uncertainties, changes in the estimated fair values of railcars could occur, which could increase or decrease our currently estimated residual value deficiency. As of September 30, 2017, our maximum future exposure for residual value guarantees associated with our railcar and airplane leases was approximately $349 million. In October 2017, we paid $53 million of our railcar residual value guarantee liability. For additional information, see Note 11—Guarantees, in the Notes to Consolidated Financial Statements.

~~Capital Spending~~

Millions of Dollars
Nine Months Ended
September 30
2017
2016
Capital Expenditures and Investments
Midstream $ 559
1,045
Chemicals —
—
Refining 623
827
Marketing and Specialties 65
63
Corporate and Other 48
96
$ 1,295
2,031

Selected Equity Affiliates*
DCP Midstream $ 166
76
CPChem 506
746
WRB 91
116
$ 763
938

* Our share of capital spending.

~~Midstream~~

~~During the first nine months of 2017,~~2024, capital spending in our Midstream segment ~~included construction activities related~~included:

•A contribution to ~~increasing storage capacity at~~Dakota Access to fund our ~~crude oil~~25% share of Dakota Access’ debt repayment in April 2024.

•Expansion of gathering systems in the DJ Basin and ~~petroleum products terminal located near Beaumont, Texas, wrap-up activities related to our Freeport LPG Export Terminal and spending~~Permian Basin.

•Spending associated with other return projects, well connections, reliability and maintenance projects in our Transportation and NGL businesses. Other major construction activities included the further development of Phillips 66 Partners’ 40-percent-owned joint venture Bayou Bridge Pipeline, expansion activities on the Phillips 66 Partners’ 50-percent owned STACK Pipeline joint venture and the development of two crude oil pipelines (collectively, the Bakken Pipeline) by our 25-percent-owned joint ventures, DAPL and ETCO. Construction of the Bakken Pipeline was completed, with commercial operations beginning in June 2017.projects.

During the first nine months of 2017, DCP Midstream had a self-funded capital program, and thus had no new capital infusions from us or our co-venturer. During this period, on a 100 percent basis, DCP Midstream’s capital expenditures and investments were approximately $332 million, primarily for expansion capital expenditures, including construction of the Mewbourn 3 plant and investments in the Sand Hills Pipeline joint venture, as well as maintenance capital expenditures for existing assets.

Chemicals

During the first ~~nine~~three months of ~~2017, CPChem had a self-funded capital program, and thus required no new capital infusions from us or our co-venturer. During this period,~~2024, on a ~~100 percent~~100% basis, CPChem’s capital expenditures and investments were ~~$1,012 million,~~$401 million. The capital spending was primarily for ~~its~~the development of petrochemical projects on the U.S. Gulf Coast ~~Petrochemicals Project. We~~and in the Middle East, as well as sustaining, debottlenecking and optimization projects on existing assets. CPChem’s capital program was self-funded, and we expect CPChem to continue self-funding ~~their~~its capital program for the remainder of ~~2017.~~2024.

Refining

Capital spending for the Refining segment during the first ~~nine~~three months of ~~2017~~2024 was primarily for ~~air emission reduction~~ projects to ~~meet new environmental standards, refinery upgrade projects to increase accessibility~~produce renewable fuels, enhance the yield of ~~advantaged crudes~~higher-value products, and ~~improve product yields, improvements to~~sustain the ~~operating integrity~~reliability and safety of ~~key processing units and safety-related projects.~~our facilities.

Major ~~construction~~capital activities included:

~~Installation~~•Construction of facilities to ~~comply with U.S. Environmental Protection Agency (EPA) Tier 3 gasoline regulations~~produce renewable fuels at the ~~Sweeny and Bayway refineries.~~Rodeo Renewable Energy Complex.

•Installation of facilities to improve ~~processing of advantaged crudes~~market capture at the ~~Billings and~~ Lake Charles ~~refineries.~~

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

~~Our project~~•Capital spend to ~~increase advantaged crude processing~~improve reliability at the ~~Billings Refinery was completed in June 2017~~Ponca City, Lake Charles and ~~is operating at design specifications.~~Sweeny refineries, as well as the jointly owned Wood River Refinery.

~~Generally, our equity affiliates in the Refining segment are intended to have self-funding capital programs.~~

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Marketing and Specialties

Capital spending for the M&S segment during the first ~~nine~~three months of ~~2017~~2024 was primarily for ~~reliability~~the continued acquisition, development and ~~maintenance projects~~enhancement of retail sites in Europe, spend associated with marketing and ~~projects targeted at developing our new international sites.~~commercial fleet fueling businesses on the U.S. West Coast, and marketing-related information technology enhancements.

~~2017 Forecast~~Corporate and ~~2018 Budget~~Other

~~We are forecasting total capital~~Capital spending ~~in 2017~~for Corporate and Other during the first three months of ~~approximately $2 billion. Looking forward~~2024 was primarily related to ~~2018, we expect to finalize and announce our 2018 capital budget in December 2017. Our preliminary view is that the 2018 capital budget will be in the range~~information technology.

Table of ~~$2 billion to $3 billion, subject to approval by our Board of Directors.~~Contents

Contingencies

A number of lawsuits involving a variety of claims that arose in the ordinary course of business have been filed against us or are subject to indemnifications provided by us. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal, or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for financial recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of ~~income-tax-related~~income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is ~~less than certain.~~uncertain.

Legal and Tax Matters

Our legal and tax matters are handled by our legal and tax organizations. 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 against us.~~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. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required. In the case of ~~income-tax-related~~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.

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Environmental

Like other companies in our industry, we are subject to numerous international, federal, state and local environmental laws and regulations. For a discussion of the most significant ~~of these~~international and federal environmental laws and regulations ~~including those with associated remediation obligations,~~to which we are subject, see the “Environmental” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2016~~2023 Annual Report on Form 10-K.

We are required to purchase renewable identification numbers (RINs) in the open market to satisfy the portion of our obligation under the Renewable Fuel Standard (RFS) that is not fulfilled by blending renewable fuels into the motor fuels we produce. For the three months ended March 31, 2024 and 2023, we incurred expenses of $93 million and $238 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. Our jointly owned refineries also incurred expenses associated with the purchase of RINs in the open market, of which our share was $59 million and $114 million for the three months ended March 31, 2024 and 2023, respectively. 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 renewable volume obligation requirements.

We occasionally receive requests for information or notices of potential liability from the ~~EPA~~Environmental Protection Agency (EPA) and state environmental agencies alleging that we are a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or an equivalent state statute. On occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain wastes attributable to our past operations. ~~As of~~At March 31, 2024, and December 31, ~~2016, we reported that~~2023, we had been notified of potential liability under CERCLA and comparable state laws at 3121 sites within the United States. During the first nine months of 2017, there were three new sites for which we received notice of potential liability and three sites were deemed resolved and closed, leaving 31 sites with potential liability at September 30, 2017.

Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses, environmental costs and liabilities are inherent concerns in certain of our operations and products, and there can be no assurance that ~~material~~those costs and liabilities will not be ~~incurred.~~material. However, we currently do not expect any material adverse effect on our results of operations or financial position as a result of compliance with current environmental laws and regulations.

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Climate Change

There has been a broad range of proposed or promulgated state, national and international laws focusing on greenhouse gas (GHG) emissions reduction, including various regulations proposed or issued by the EPA. These proposed or promulgated laws apply or could apply in states and/or countries where we have interests or may have interests in the future. Laws regulating GHG emissions continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws potentially could have a material impact on our results of operations and financial condition as a result of increasing costs of compliance, lengthening project implementation and agency ~~review items,~~reviews, or reducing demand for certain hydrocarbon products. ~~We continue to monitor legislative and regulatory actions and legal proceedings globally relating to GHG emissions for potential impacts on our operations.~~

For examples of legislation and regulation or precursors for possible regulation that do or could affect our operations, see the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2016~~2023 Annual Report on Form 10-K.

We consider and take into account anticipated future GHG emissions in designing and developing major facilities and projects, and implement energy efficiency initiatives to reduce GHG emissions. Data on our GHG emissions, legal requirements regulating such emissions, and the possible physical effects of climate change on our coastal assets are incorporated into our planning, investment, and risk management decision-making. We are working to continuously improve operational and energy efficiency through resource and energy conservation efforts throughout our operations.

~~NEW ACCOUNTING STANDARDS~~

In February ~~2017,~~2022, we announced a target to reduce our Scope 1 and Scope 2 GHG emissions intensity related to our operations by 50% of 2019 levels by the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-05, “Other Income—Gains~~year 2050. The 2050 target builds upon our 2030 GHG emissions intensity targets to reduce Scope 1 and ~~Losses~~Scope 2 emissions from our operations by 30% and Scope 3 emissions from our energy products by 15% compared to 2019 levels.

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GUARANTOR FINANCIAL INFORMATION

We have various cross guarantees between Phillips 66 and its wholly owned subsidiary Phillips 66 Company (together, the ~~Derecognition of Nonfinancial Assets (Subtopic 610-20).” This ASU clarifies the scope and accounting for the sale or transfer of nonfinancial assets and in substance nonfinancial assets~~Obligor Group) with respect to noncustomers, including partial sales. This ASU will eliminate the use of carryover basis for most nonmonetary exchanges, including contributions of assets to equity method joint ventures. These amendments could result in the entity recognizing a gain or loss on the sale or transfer of nonfinancial assets. Public entities should apply the guidance in ASU No. 2017-05 to annual periods beginning after December 15, 2017, including interim periods within those periods. We are currently evaluating the provisions of ASU No. 2017-05.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. Ifpublicly held debt securities. Phillips 66 conducts substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset, or a group of similar identifiable assets, then the transaction is not considered an acquisition of a business. If the screen is not met, then the amendment requires that to be considered a business, the operation must include at a minimum an inputits operations through subsidiaries, including Phillips 66 Company, and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendments should be applied prospectively and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01.

Summarized financial information of the Obligor Group is presented on a combined basis. Intercompany transactions among the members of the Obligor Group have been eliminated. The financial information of non-guarantor subsidiaries has been excluded from the ~~use~~summarized financial information. Significant intercompany transactions and receivable/payable balances between the Obligor Group and non-guarantor subsidiaries are presented separately in the summarized financial information.

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The summarized results of operations for the three months ended March 31, 2024, and the summarized financial position at March 31, 2024, and December 31, 2023, for the Obligor Group on a combined basis were:


Summarized Combined Statement of Income	Millions of Dollars
	Three Months Ended March 31, 2024
Sales and other operating revenues	$	26,834
Revenues and other income—non-guarantor subsidiaries	2,561
Purchased crude oil and products—third parties	15,508
Purchased crude oil and products—related parties	5,212
Purchased crude oil and products—non-guarantor subsidiaries	6,745

Income before income taxes	198
Net income	176


Summarized Combined Balance Sheet	Millions of Dollars
	March 31 2024		December 31 2023
Accounts and notes receivable—third parties	$	6,216	6,716
Accounts and notes receivable—related parties	1,362		1,152
Due from non-guarantor subsidiaries, current	1,387		1,827
Total current assets	14,989		14,260
Investments and long-term receivables	11,442		11,242
Net properties, plants and equipment	12,314		12,242
Goodwill	1,047		1,047
Due from non-guarantor subsidiaries, noncurrent	3,510		2,995
Other assets associated with non-guarantor subsidiaries	1,574		1,666
Total noncurrent assets	31,727		31,010
Total assets	46,716		45,270

Due to non-guarantor subsidiaries, current	$	3,668	3,153
Total current liabilities	14,587		13,162
Long-term debt	13,799		13,459
Due to non-guarantor subsidiaries, noncurrent	10,535		10,061
Total noncurrent liabilities	30,162		29,234
Total liabilities	44,749		42,396
Total equity	1,967		2,874
Total liabilities and equity	46,716		45,270

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NON-GAAP RECONCILIATIONS

Refining

Our realized refining margins measure the difference between (a) sales and other operating revenues derived from the sale of petroleum products manufactured at our refineries and (b) costs of feedstocks, primarily crude oil, used to produce the petroleum products. The realized refining margins are adjusted to include our proportional share of our joint venture refineries’ realized margins, as well as to exclude those items that are not representative of the ~~asset and the right~~underlying operating performance of a period, which we call “special items.” The realized refining margins are converted to ~~direct its use. The FASB continued~~a per-barrel basis by dividing them by total refinery processed inputs (primarily crude oil) measured on a barrel basis, including our share of inputs processed by our joint venture refineries. Our realized refining margin per barrel is intended to ~~maintain two classifications of leases—financing and operating—~~be comparable with industry refining margins, which are ~~substantially~~known as “crack spreads.” As discussed in “Executive Overview and Business Environment—Business Environment,” industry crack spreads measure the difference between market prices for refined petroleum products and crude oil. We believe realized refining margin per barrel calculated on a similar basis as industry crack spreads provides a useful measure of how well we performed relative to ~~capital~~benchmark industry refining margins.

The GAAP performance measure most directly comparable to realized refining margin per barrel is the Refining segment’s “income (loss) before income taxes per barrel.” Realized refining margin per barrel excludes items that are typically included in a manufacturer’s gross margin, such as depreciation and operating ~~leases~~expenses, and other items used to determine income (loss) before income taxes, such as general and administrative expenses. It also includes our proportional share of joint venture refineries’ realized refining margins and excludes special items. Because realized refining margin per barrel is calculated in this manner, and because realized refining margin per barrel may be defined differently by other companies in our industry, it has limitations as an analytical tool. Following are reconciliations of income (loss) before income taxes to realized refining margins:

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	Millions of Dollars, Except as Indicated
Realized Refining Margins	Atlantic Basin/ Europe		Gulf Coast	Central Corridor	West Coast	Worldwide

Three Months Ended March 31, 2024
Income (loss) before income taxes	$	80	118	210	(277)	131
Plus:

Taxes other than income taxes	23		38	28	(3)	86
Depreciation, amortization and impairments	52		62	44	163	321
Selling, general and administrative expenses	7		6	24	10	47
Operating expenses	250		301	143	327	1,021
Equity in (earnings) losses of affiliates	1		(1)	(108)	—	(108)
Other segment (income) expense, net	2		1	(2)	—	1
Proportional share of refining gross margins contributed by equity affiliates	33		—	298	—	331
Special items:



Legal settlement	—		(7)	—	—	(7)
Realized refining margins	$	448	518	637	220	1,823

Total processed inputs (thousands of barrels)	46,911		47,492	25,658	24,669	144,730
Adjusted total processed inputs (thousands of barrels)*	46,911		47,492	47,912	24,669	166,984

Income (loss) before income taxes per barrel (dollars per barrel)**	$	1.70	2.49	8.20	(11.24)	0.91
Realized refining margins (dollars per barrel)***	9.55		10.91	13.27	8.89	10.91

Three Months Ended March 31, 2023
Income before income taxes	$	142	705	739	22	1,608
Plus:

Taxes other than income taxes	22		33	25	33	113
Depreciation, amortization and impairments	50		60	38	54	202
Selling, general and administrative expenses	10		4	21	10	45
Operating expenses	365		286	166	350	1,167
Equity in (earnings) losses of affiliates	2		(1)	(200)	—	(199)
Other segment (income) expense, net	20		5	(1)	1	25
Proportional share of refining gross margins contributed by equity affiliates	26		—	402	—	428





Realized refining margins	$	637	1,092	1,190	470	3,389

Total processed inputs (thousands of barrels)	39,472		51,349	26,004	28,416	145,241
Adjusted total processed inputs (thousands of barrels)*	39,472		51,349	44,315	28,416	163,552

Income before income taxes per barrel (dollars per barrel)**	$	3.60	13.73	28.42	0.77	11.07
Realized refining margins (dollars per barrel)***	16.13		21.28	26.86	16.53	20.72
* 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.
*** 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.

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Marketing

Our realized marketing fuel margins measure the ~~previous lease guidance. Under~~difference between (a) sales and other operating revenues derived from the ~~new standard, recognition~~sale of ~~assets~~fuels in our M&S segment and ~~liabilities arising from~~(b) costs of those fuels. The realized marketing fuel margins are adjusted to exclude those items that are not representative of the underlying operating ~~leases will require recognition~~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 ~~balance sheet. The effect~~value uplift our marketing operations provide by optimizing the placement and ultimate sale of ~~all leases~~our refineries’ 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 ~~the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing~~gross margin, such as depreciation and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply the provisions of ASU No. 2016-02 to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements. As part of our assessment to-date, we have formed an implementation team, commenced identification of our lease population and are evaluating lease software packages.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” to meet its objective of providing more decision-useful information about financial instruments. The majority of this ASU’s provisions amend only the presentation or disclosures of financial instruments; however, one provision will also affect net income. Equity investments carried under the cost method or lower of cost or fair value method of accounting, in accordance with current GAAP, will have to be carried at fair value upon adoption of ASU No. 2016-01, with changes in fair value recorded in net income. For equity investments that do not have readily determinable fair values, a company may elect to carry such investments at cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. Public business entities should apply the guidance in ASU No. 2016-01 for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption prohibited. We are currently evaluating the provisions of ASU No. 2016-01. Our initial review indicates that ASU No. 2016-01 will have a limited impact on our financial statements.

~~In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU~~expenses, and other ~~related updates~~items used to determine income before income taxes, such as general and administrative expenses. Because realized marketing fuel margin per barrel excludes these items, and because realized marketing fuel margin per barrel may be defined differently by other companies in our industry, it has limitations as an analytical tool. Following are ~~intended~~reconciliations of income before income taxes to ~~improve comparability~~realized marketing fuel margins:


	Millions of Dollars, Except as Indicated
	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
	U.S.		International	U.S.	International
Realized Marketing Fuel Margins
Income before income taxes	$	241	131	273	125
Plus:


Depreciation and amortization	10		18	3	18
Selling, general and administrative expenses	186		64	181	62

Equity in earnings of affiliates	(2)		(25)	(3)	(22)
Other operating revenues*	(108)		(9)	(108)	(13)
Other expense, net	12		12	5	6
Special items:
Legal settlement	(59)		—	—	—
Marketing margins	280		191	351	176
Less: margin for nonfuel related sales	—		13	—	12
Realized marketing fuel margins	$	280	178	351	164

Total fuel sales volumes (thousands of barrels)	175,269		25,781	152,662	25,380

Income before income taxes per barrel (dollars per barrel)	$	1.38	5.08	1.79	4.93
Realized marketing fuel margins (dollars per barrel)**	1.60		6.92	2.30	6.45
* Includes other nonfuel revenues.
** Realized marketing fuel margins per barrel, as presented, are calculated using the underlying realized marketing fuel margin amounts, in dollars, divided by sales volumes, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.

Table of revenue recognition practices across entities, industries, jurisdictions and capital markets and expand disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. As part of our assessment work to-date, we have formed an implementation work team, completed training on the new ASU’s revenue recognition model and are continuing our contract review and documentation. Our expectation is to adopt the standard on January 1, 2018, using the modified retrospective application. In addition, we expect to present revenue net of sales-based taxes collected from our customers, resulting in no impact to earnings. Sales-based taxes include excise taxes on petroleum product sales as noted on our consolidated statement of income. Our evaluation of the new ASU is ongoing, which includes understanding the impact of adoption on earnings from equity method investments. Based upon our analysis to-date, we have not identified any other material impact on our financial statements other than disclosures.Contents

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can normally identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar ~~expressions.~~

expressions that convey the prospective nature of events or outcomes, but the absence of such words does not mean a statement is not forward-looking.

We based ~~the~~these forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate, ~~in general.~~and our sustainability-related plans and goals. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, as they are not guarantees of future performance ~~as they~~and involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or ~~forecast~~forecasted in ~~the~~any forward-looking ~~statements. Any differences~~statement. Our sustainability-related goals are not guarantees or promises and may change. Statements regarding our goals are not guarantees or promises that they will be met. The information included in, and any issues identified as material for purposes of, our sustainability reports shall not be considered material for U.S. Securities and Exchange Commission (SEC) reporting purposes. Factors that could ~~result~~cause actual results to differ materially from ~~a variety of factors, including the following:~~those in our forward-looking statements include:

•Fluctuations in market conditions, including NGL, crude oil, refined petroleum ~~products~~product and natural gas prices and refining, marketing and petrochemical ~~margins.~~margins and demand.

~~Failure~~•Changes in governmental policies relating to NGL, crude oil, natural gas or refined petroleum products pricing, regulation or taxation, including exports.

•Capacity constraints in, or other limitations on, the pipelines, storage and fractionation facilities to which we deliver natural gas or NGL and the availability of ~~new products~~alternative markets and ~~services~~arrangements for our natural gas and NGL.

•Actions taken by OPEC and non-OPEC oil producing countries impacting supply and demand and correspondingly, commodity prices.

•Our ability to achieve ~~market acceptance.~~the expected benefits of the DCP LP integration, including the realization of expected synergies.

•Unexpected changes in costs or technical requirements for constructing, modifying or operating our facilities or transporting our products.

•Unexpected technological or commercial difficulties in manufacturing, refining or transporting our products, including ~~chemicals~~chemical products.

•Lack of, or disruptions in, adequate and reliable transportation for our NGL, crude oil, natural gas and refined petroleum products.

•The level and success of drilling and quality of production volumes around ~~DCP Midstream’s assets and its~~our midstream assets.

•Our ability ~~to connect supplies to its gathering and processing systems, residue gas and NGL infrastructure.~~

~~Inability~~ to timely obtain or maintain permits, including those necessary for capital ~~projects;~~projects.

•Our ability to comply with government ~~regulations;~~regulations or make capital expenditures required to maintain compliance.

•Our ability to realize sustained savings and cost reductions from the company’s business transformation initiatives.

•Changes to worldwide government policies relating to renewable fuels, climate change and greenhouse gas emissions that adversely affect programs like the renewable fuel standards program, low carbon fuel standards and tax credits for biofuels.

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•Domestic and international economic and political developments including armed hostilities, such as the Russia-Ukraine war, instability in the financial services and banking sector, excess inflation, rising interest rates, expropriation of assets and changes in fiscal policy.

•The impact on commercial activity and demand for refined petroleum products from any widespread public health crisis, as well as the extent and duration of recovery of economies and demand for our products following any such crisis.

•Failure to complete definitive agreements and feasibility studies for, and to ~~timely~~ complete construction of, announced and future capital ~~projects.~~projects on time and within budget.

•Our ability to successfully complete, or any material delay in the completion of, asset dispositions or acquisitions that we pursue.

•Potential disruption or interruption of our operations or those of our joint ventures due to litigation or other governmental or regulatory action.

•Damage to our facilities due to accidents, weather and climate events, civil unrest, insurrections, political events, terrorism or ~~cyber attacks.~~cyberattacks.

•Our ability to meet our sustainability goals, including reducing our GHG emissions intensity, developing and protecting new technologies, and commercializing lower-carbon opportunities.

•Failure of new products and services to achieve market acceptance.

•International monetary conditions and exchange controls.

•Substantial ~~investment~~investments required, or reduced demand for products, as a result of existing or future environmental rules and ~~regulations.~~regulations, including GHG emissions reductions and reduced consumer demand for refined petroleum products.

•Liability resulting from litigation or for remedial actions, including removal and reclamation obligations under environmental regulations.

General domestic and international economic and political developments including: armed hostilities; expropriation of assets; changes in governmental policies relating to NGL, crude oil, natural gas or refined product pricing, regulation or taxation; and other political, economic or diplomatic developments.

•Changes in tax, environmental and other laws and regulations (including alternative energy mandates) applicable to our business.

•Political and societal concerns about climate change that could result in changes to our business or operations or increase expenditures, including litigation-related expenses.

•Changes in estimates or projections used to assess fair value of intangible assets, goodwill, and properties, plants and equipment and/or strategic decisions or other developments with respect to our asset portfolio that cause impairment charges.

•Limited access to capital or significantly higher cost of capital related to changes to our credit profile or illiquidity or uncertainty in the domestic or international financial markets.

•The creditworthiness of our customers and the counterparties to our transactions, including the impact of bankruptcies.

•Cybersecurity incidents or other disruptions that compromise our information and expose us to liability.

•The operation, financing and distribution decisions of our joint ~~ventures.~~ventures that we do not control.

~~Domestic and foreign supplies of crude oil and other feedstocks.~~

~~Domestic and foreign supplies of petrochemicals and refined products, such as gasoline, diesel, aviation fuel and home heating oil.~~

~~Governmental policies relating to exports of crude oil and natural gas.~~

~~Overcapacity or undercapacity in the midstream, chemicals and refining industries.~~

~~Fluctuations in consumer demand for refined products.~~

•The factors generally described in Item 1A.—Risk Factors in our ~~2016~~2023 Annual Report on Form 10-K.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our commodity price risk and interest rate risk at ~~September 30, 2017,~~March 31, 2024, did not differ materially from the risks disclosed under Item 7A of our ~~2016~~2023 Annual Report on Form 10-K.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in ~~SEC~~U.S. Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of ~~September 30, 2017~~,March 31, 2024, with the participation of management, our ~~Chairman~~President and Chief Executive Officer and our Executive Vice President ~~Finance~~ and Chief Financial Officer carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our ~~Chairman~~President and Chief Executive Officer and our Executive Vice President ~~Finance~~ and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of ~~September 30, 2017~~.March 31, 2024.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the quarterly period ended ~~September 30, 2017,~~March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

~~The following is~~From time to time, we may be involved in litigation and claims arising out of our operations in the normal course of business. Additionally, we have elected a ~~description of reportable legal~~$300,000 threshold to disclose certain proceedings ~~including those involving governmental authorities~~arising under federal, state ~~and~~or local environmental laws ~~regulating~~when a governmental authority is a party to the ~~discharge~~proceedings. During the first quarter of ~~materials into the environment, for this reporting period. There were~~2024, no such new matters ~~that~~ arose ~~during the third quarter of 2017. There were no~~and there was one material ~~developments that occurred~~development with respect to matters previously reported ~~in our 2016 Annual Report on Form 10-K or our Quarterly Report on Form 10-Q for~~but still unresolved, which is described below. We do not currently believe that the ~~quarterly periods ended March 31, 2017, and June 30, 2017. While it is not possible to accurately predict the final~~eventual outcome of ~~these pending proceedings, even if~~ any ~~one~~matters previously reported but still unresolved, individually or ~~more of such proceedings were decided adversely to Phillips 66, we expect there would be no~~in the aggregate, could have a material adverse effect on our ~~consolidated~~business, financial ~~position. Nevertheless, such proceedings are reported pursuant to SEC regulations.~~condition, results of operations or cash flows.

~~Our~~Further, our U.S. refineries are implementing two separate consent decrees, regarding alleged violations of the Federal Clean Air Act, with the EPA, five states and one local air pollution agency. Some of the requirements and limitations contained in the decrees provide for stipulated penalties for violations. Stipulated penalties under the decrees are not automatic, but must be requested by one of the agency signatories. As part of periodic reports under the decrees or other reports required by permits or regulations, we occasionally report matters that could be subject to a request for stipulated penalties. If a specific request for stipulated penalties meeting the reporting threshold set forth in ~~SEC~~U.S. Securities and Exchange Commission (SEC) rules is made pursuant to these decrees based on a given reported exceedance, we will separately report that matter and the amount of the proposed penalty.

Material Development to Matter Previously Reported

In 2018, the Colorado Department of Public Health and Environment (CDPHE) issued a Compliance Advisory in relation to an improperly permitted facility flare and related air emissions from flare operations at one of DCP Operating Company LP’s (DCP Operating LP) gas processing plants, which DCP Operating LP self-disclosed to CDPHE in December 2017. Following information exchanges and discussions with CDPHE, a resolution was proposed pursuant to which the plant’s air permit would be revised, and DCP Operating LP would be assessed an administrative penalty and economic benefit payment. A revised air permit was issued in May 2019, but the parties had not yet entered into a final settlement agreement to complete the matter. Subsequently, in July 2020, CDPHE issued a Notice of Violation (NOV) in relation to amine treater emissions at this plant, which DCP Operating LP self-disclosed to CDPHE in April 2020. Two additional and related NOVs were then issued in 2021 and 2023. DCP Operating LP and the CDPHE have reached a tentative agreement to resolve these matters for aggregate monetary civil penalties of approximately $4 million. As part of the settlement, DCP Operating LP will install emissions management equipment that will address the alleged violations. A final order to resolve these matters is expected to be issued during the second quarter of 2024.

See “Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)” section of Note 7—Investments, Loans and Long-Term Receivables and Note 12—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, for additional information regarding Legal Proceedings and other regulatory actions.

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Item 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in Item 1A of our ~~2016~~2023 Annual Report on Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities


					Millions of Dollars
Period	Total Number of Shares Purchased*	Average Price Paid per Share**		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs***	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2024	3,086,765	$	134.86	3,086,765	$	6,491
February 1-29, 2024	2,558,768	146.86		2,558,768	6,115
March 1-31, 2024	2,309,584	154.59		2,309,584	5,758
Total	7,955,117	$	144.45	7,955,117
* Includes repurchase of shares of common stock from company employees in connection with the company’s broad-based employee incentive plans, when applicable.
** Average price paid per share includes excise taxes.
*** 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. Our share repurchase authorizations do not expire. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. Shares of stock repurchased are held as treasury shares.

Item 5. OTHER INFORMATION

During the quarter ended March 31, 2024, no director or Section 16 officer adopted, modified or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408(a) of Regulation S-K).

Millions of Dollars
Period Total Number of Shares Purchased* Average Price Paid per Share
Total Number of Shares Purchased
as Part of Publicly Announced Plans
or Programs**

Approximate Dollar Value of Shares
that May Yet Be Purchased Under the Plans or Programs

July 1-31, 2017 1,635,271 $ 82.57
1,635,271 $ 761
August 1-31, 2017 1,968,056 83.81
1,968,056 596
September 1-30, 2017 1,857,760 86.52
1,857,760 435
Total 5,461,087 �� $ 84.36
5,461,087
* Includes repurchase of shares of common stock from company employees in connection with the company’s broad-based employee incentive plans, when applicable.
** As of September 30, 2017, our Board of Directors has authorized repurchases totaling up to $9 billion of our outstanding common stock. In October 2017, the Board of Directors authorized additional repurchases of $3 billion, which increased the total authorized repurchases to $12 billion. The authorizations do not have expiration dates. The share repurchases are expected to be funded primarily through available cash. The shares under these authorizations will be repurchased from time to time in the open market at the company’s discretion, subject to market conditions and other factors, and in accordance with applicable regulatory requirements. We are not obligated to acquire any particular amount of common stock and may commence, suspend or discontinue purchases at any time or from time to time without prior notice. Shares of stock repurchased are held as treasury shares.

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Item 6. EXHIBITS

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

Exhibit Number

Filing Date

SEC File No.

3.1

Amended and Restated Certificate of Incorporation of Phillips 66.

8-K

3.1

05/01/2012

001-35349

3.2

Amended and Restated By-Laws of Phillips 66.

8-K

3.1

12/09/2022

001-35349

4.1

Indenture, dated as of May 5, 2022, among Phillips 66 Company, as issuer, Phillips 66, as guarantor, and U.S. Bank Trust Company, National Association, as trustee, in respect of senior debt securities of Phillips 66 Company.

8-K

4.1

05/05/2022

001-35349

4.2

Form of the terms of the 2031 Notes, including the form of the 2031 Note.

8-K

4.2

02/28/2024

001-35349

4.3

Form of the terms of the 2033 Notes, including the form of the 2033 Note.

8-K

4.3

03/29/2023

001-35349

4.4

Form of the terms of the 2054 Notes, including the form of the 2054 Note.

8-K

4.4

02/28/2024

001-35349

10.1

Credit Agreement dated as of February 28, 2024, among Phillips 66 Company, Phillips 66, as guarantor, the lenders party thereto, and Mizuho Bank, Ltd., as administrative agent.

8-K

10.1

02/28/2024

001-35349

22*

List of Guarantor Subsidiaries.

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32**

Certifications pursuant to 18 U.S.C. Section 1350.

101.INS*

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

Inline XBRL Schema Document.

101.CAL*

Inline XBRL Calculation Linkbase Document.

101.LAB*

Inline XBRL Labels Linkbase Document.

101.PRE*

Inline XBRL Presentation Linkbase Document.

101.DEF*

Inline XBRL Definition Linkbase Document.

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Number Filing Date SEC File No.
4.1

Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of senior debt securities of Phillips 66 Partners LP.
8-K 4.1 2/23/2015 001-36011

4.2

First Supplemental Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2020 Notes.
8-K 4.2 2/23/2015 001-36011

4.3

Second Supplemental Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2025 Notes.
8-K 4.3 2/23/2015 001-36011

4.4

Third Supplemental Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2045 Notes.
8-K 4.4 2/23/2015 001-36011

4.5

Fourth Supplemental Indenture, dated as of October 14, 2016, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2026 Notes.
8-K 4.2 10/17/2016 001-36011

4.6

Fifth Supplemental Indenture, dated as of October 14, 2016, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2046 Notes.
8-K 4.3 10/17/2016 001-36011

4.7

Sixth Supplemental Indenture, dated as of October 13, 2017, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2028 Notes.
8-K 4.2 10/13/2017 001-36011

4.8

Form of the Phillips 66 Partners LP 2020 Notes (included in Exhibit 4.2 as Exhibit A to the Appendix thereto).
8-K 4.5 2/23/2015 001-36011

4.9

Form of the Phillips 66 Partners LP 2025 Notes (included in Exhibit 4.3 as Exhibit A to the Appendix thereto).
8-K 4.6 2/23/2015 001-36011

4.10

Form of the Phillips 66 Partners LP 2045 Notes (included in Exhibit 4.4 as Exhibit A to the Appendix thereto).
8-K 4.7 2/23/2015 001-36011

4.11

Form of the Phillips 66 Partners LP 2026 Notes (included in Exhibit 4.2 as Exhibit A to the Appendix thereto).
8-K 4.4 10/17/2016 001-36011

4.12

Form of the Phillips 66 Partners LP 2046 Notes (included in Exhibit 4.3 as Exhibit A to the Appendix thereto).
8-K 4.5 10/17/2016 001-36011

4.13

Form of the Phillips 66 Partners LP 2028 Notes (included in Exhibit 4.2 as Exhibit A to the Appendix thereto).
8-K 4.4 10/13/2017 001-36011

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		~~Incorporated by Reference~~
~~Exhibit Number~~	~~Exhibit Description~~	~~Form~~	~~Exhibit Number~~	~~Filing Date~~	~~SEC File No.~~

12*	~~Computation of Ratio of Earnings to Fixed Charges~~.

~~31.1~~*	~~Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934~~.

~~31.2~~*	~~Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934~~.

32*	~~Certifications pursuant to 18 U.S.C. Section 1350~~.

101.INS*	~~XBRL Instance Document.~~

101.SCH*	~~XBRL Schema Document.~~

101.CAL*	~~XBRL Calculation Linkbase Document.~~

101.LAB*	~~XBRL Labels Linkbase Document.~~

101.PRE*	~~XBRL Presentation Linkbase Document.~~

101.DEF*	~~XBRL Definition Linkbase Document.~~

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						PHILLIPS 66

						/s/ J. Scott Pruitt
						~~PHILLIPS 66~~

		~~/s/ Chukwuemeka A. Oyolu~~
		~~Chukwuemeka A. Oyolu~~J. Scott Pruitt Vice President and Controller (Chief Accounting and Duly Authorized Officer)

Date: ~~October 27, 2017~~

April 29, 2024



	Page
Part I – Financial Information

Item 1. Financial Statements
Consolidated Statement of Income		1
Consolidated Statement of Comprehensive Income		2
Consolidated Balance Sheet		3
Consolidated Statement of Cash Flows		4
Consolidated Statement of Changes in Equity		5
Notes to Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3629

Item 3. Quantitative and Qualitative Disclosures About Market Risk		6155

Item 4. Controls and Procedures		6155

Part II – Other Information

Item 1. Legal Proceedings		6256

Item 1A. Risk Factors		6257

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		6357

Item 5. Other Information		57

Item 6. Exhibits		6458

Signatures		6659



	Millions of Dollars
	Three Months Ended September 30				Nine Months Ended September 30
	2017		2016		2017	2016
Revenues and Other Income
Sales and other operating revenues*	$	25,627	21,624		72,608	60,882
Equity in earnings of affiliates	530		391		1,357	1,159
Net gain on dispositions	—		3		15	9
Other income	49		24		519	59
Total Revenues and Other Income	26,206		22,042		74,499	62,109

Costs and Expenses
Purchased crude oil and products	19,463		15,961		55,495	44,089
Operating expenses	1,134		1,061		3,541	3,078
Selling, general and administrative expenses	435		411		1,258	1,218
Depreciation and amortization	337		293		972	863
Impairments	1		2		18	4
Taxes other than income taxes*	3,456		3,424		9,968	10,479
Accretion on discounted liabilities	5		5		16	15
Interest and debt expense	112		81		324	250
Foreign currency transaction (gains) losses	7		(9	)	6	(16	)
Total Costs and Expenses	24,950		21,229		71,598	59,980
Income before income taxes	1,256		813		2,901	2,129
Provision for income taxes	407		277		908	679
Net Income	849		536		1,993	1,450
Less: net income attributable to noncontrolling interests	26		25		85	58
Net Income Attributable to Phillips 66	$	823	511		1,908	1,392

Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic	$	1.60	0.97		3.68	2.62
Diluted	1.60		0.96		3.66	2.61

Dividends Paid Per Share of Common Stock (dollars)	$	0.70	0.63		2.03	1.82

Weighted-Average Common Shares Outstanding (thousands)
Basic	512,923		525,991		517,420	528,650
Diluted	515,960		528,798		520,516	531,650
* Includes excise taxes on petroleum products sales:	$	3,376	3,357		9,664	10,225
See Notes to Consolidated Financial Statements.



	Millions of Dollars
	September 30 2017			December 31 2016
Assets
Cash and cash equivalents	$	1,547		2,711
Accounts and notes receivable (net of allowances of $31 million in 2017 and $34 million in 2016)	5,421			5,485
Accounts and notes receivable—related parties	934			912
Inventories	4,455			3,150
Prepaid expenses and other current assets	578			422
Total Current Assets	12,935			12,680
Investments and long-term receivables	13,899			13,534
Net properties, plants and equipment	21,303			20,855
Goodwill	3,270			3,270
Intangibles	884			888
Other assets	421			426
Total Assets	$	52,712		51,653

Liabilities
Accounts payable	$	6,404		6,395
Accounts payable—related parties	867			666
Short-term debt	706			550
Accrued income and other taxes	901			805
Employee benefit obligations	482			527
Other accruals	545			520
Total Current Liabilities	9,905			9,463
Long-term debt	9,495			9,588
Asset retirement obligations and accrued environmental costs	629			655
Deferred income taxes	7,605			6,743
Employee benefit obligations	877			1,216
Other liabilities and deferred credits	242			263
Total Liabilities	28,753			27,928

Equity
Common stock (2,500,000,000 shares authorized at $.01 par value) Issued (2017—643,419,792 shares; 2016—641,593,854 shares)
Par value	6			6
Capital in excess of par	19,652			19,559
Treasury stock (at cost: 2017—136,679,305 shares; 2016—122,827,264 shares)	(9,915		)	(8,788	)
Retained earnings	13,464			12,608
Accumulated other comprehensive loss	(684		)	(995	)
Total Stockholders’ Equity	22,523			22,390
Noncontrolling interests	1,436			1,335
Total Equity	23,959			23,725
Total Liabilities and Equity	$	52,712		51,653



	Shares in Thousands
	Common Stock Issued	Treasury Stock
December 31, 2015	639,336	109,926
Repurchase of common stock	—	10,141
Shares issued—share-based compensation	1,581	—
September 30, 2016	640,917	120,067

December 31, 2016	641,594	122,827
Repurchase of common stock	—	13,852
Shares issued—share-based compensation	1,826	—
September 30, 2017	643,420	136,679


														Millions of Dollars
														Pension Benefits	Other Benefits

	U.S.
Components of Net Periodic Benefit Cost
Components of Net Periodic Benefit Cost
Components of Net Periodic Benefit Cost
Three Months Ended March 31
Three Months Ended March 31
Three Months Ended March 31
Service cost
Service cost
Service cost
Interest cost
Expected return on plan assets

Amortization of net actuarial loss (gain)
Amortization of net actuarial loss (gain)
Amortization of net actuarial loss (gain)
Settlements
Net periodic benefit cost*

	Millions of Dollars
	Pension Benefits									Other Benefits
	2017					2016				2017		2016
	U.S.			Int’l.		U.S.		Int’l.
Components of Net Periodic Benefit Cost
Three Months Ended September 30
Service cost	$	33		8		32		8		1		1
Interest cost	27			7		29		7		2		2
Expected return on plan assets	(37		)	(11	)	(32	)	(9	)	—		—
Amortization of prior service cost	1			—		1		—		—		—
Recognized net actuarial loss	17			6		18		4		—		—
Settlements	21			—		2		—		—		—
Net periodic benefit cost	$	62		10		50		10		3		3

Nine Months Ended September 30
Service cost	$	99		25		96		26		4		5
Interest cost	81			20		87		22		6		6
Expected return on plan assets	(110		)	(30	)	(96	)	(29	)	—		—
Amortization of prior service cost (credit)	2			(1	)	2		(1	)	(1	)	(1	)
Recognized net actuarial loss	52			18		54		11		—		—
Settlements	76			—		5		—		—		—
Net periodic benefit cost	$	200		32		148		29		9		10

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

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

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


~~(c)~~	~~We paid utility and processing fees to various affiliates.~~



	Millions of Dollars
	Three Months Ended September 30, 2017
Statement of Income	Phillips 66			Phillips 66 Company	All Other Subsidiaries		Consolidating Adjustments		Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	—		18,941	6,686		—		25,627
Equity in earnings of affiliates	880			608	172		(1,130	)	530
Net gain (loss) on dispositions	—			1	(1	)	—		—
Other income	—			34	15		—		49
Intercompany revenues	—			522	3,805		(4,327	)	—
Total Revenues and Other Income	880			20,106	10,677		(5,457	)	26,206

Costs and Expenses
Purchased crude oil and products	—			15,981	7,744		(4,262	)	19,463
Operating expenses	—			857	285		(8	)	1,134
Selling, general and administrative expenses	2			338	98		(3	)	435
Depreciation and amortization	—			225	112		—		337
Impairments	—			—	1		—		1
Taxes other than income taxes	—			1,464	1,992		—		3,456
Accretion on discounted liabilities	—			3	2		—		5
Interest and debt expense	86			20	60		(54	)	112
Foreign currency transaction losses	—			—	7		—		7
Total Costs and Expenses	88			18,888	10,301		(4,327	)	24,950
Income before income taxes	792			1,218	376		(1,130	)	1,256
Provision (benefit) for income taxes	(31		)	338	100		—		407
Net Income	823			880	276		(1,130	)	849
Less: net income attributable to noncontrolling interests	—			—	26		—		26
Net Income Attributable to Phillips 66	$	823		880	250		(1,130	)	823

Comprehensive Income	$	948		1,005	362		(1,341	)	974



	Millions of Dollars
	Three Months Ended September 30, 2016
Statement of Income	Phillips 66			Phillips 66 Company		All Other Subsidiaries		Consolidating Adjustments		Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	—		15,264		6,360		—		21,624
Equity in earnings of affiliates	571			521		108		(809	)	391
Net gain (loss) on dispositions	—			(11	)	14		—		3
Other income	—			10		14		—		24
Intercompany revenues	—			173		2,685		(2,858	)	—
Total Revenues and Other Income	571			15,957		9,181		(3,667	)	22,042

Costs and Expenses
Purchased crude oil and products	—			12,377		6,388		(2,804	)	15,961
Operating expenses	—			864		206		(9	)	1,061
Selling, general and administrative expenses	1			314		99		(3	)	411
Depreciation and amortization	—			206		87		—		293
Impairments	—			1		1		—		2
Taxes other than income taxes	—			1,390		2,034		—		3,424
Accretion on discounted liabilities	—			3		2		—		5
Interest and debt expense	91			6		26		(42	)	81
Foreign currency transaction gains	—			—		(9	)	—		(9	)
Total Costs and Expenses	92			15,161		8,834		(2,858	)	21,229
Income before income taxes	479			796		347		(809	)	813
Provision (benefit) for income taxes	(32		)	225		84		—		277
Net Income	511			571		263		(809	)	536
Less: net income attributable to noncontrolling interests	—			—		25		—		25
Net Income Attributable to Phillips 66	$	511		571		238		(809	)	511

Comprehensive Income	$	471		531		207		(713	)	496



	Millions of Dollars
	Nine Months Ended September 30, 2017
Statement of Income	Phillips 66			Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments		Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	—		52,844	19,764	—		72,608
Equity in earnings of affiliates	2,083			1,677	408	(2,811	)	1,357
Net gain on dispositions	—			1	14	—		15
Other income	—			469	50	—		519
Intercompany revenues	—			1,172	9,654	(10,826	)	—
Total Revenues and Other Income	2,083			56,163	29,890	(13,637	)	74,499

Costs and Expenses
Purchased crude oil and products	—			44,622	21,489	(10,616	)	55,495
Operating expenses	—			2,779	806	(44	)	3,541
Selling, general and administrative expenses	6			962	298	(8	)	1,258
Depreciation and amortization	—			657	315	—		972
Impairments	—			17	1	—		18
Taxes other than income taxes	—			4,287	5,681	—		9,968
Accretion on discounted liabilities	—			12	4	—		16
Interest and debt expense	263			46	173	(158	)	324
Foreign currency transaction losses	—			—	6	—		6
Total Costs and Expenses	269			53,382	28,773	(10,826	)	71,598
Income before income taxes	1,814			2,781	1,117	(2,811	)	2,901
Provision (benefit) for income taxes	(94		)	698	304	—		908
Net Income	1,908			2,083	813	(2,811	)	1,993
Less: net income attributable to noncontrolling interests	—			—	85	—		85
Net Income Attributable to Phillips 66	$	1,908		2,083	728	(2,811	)	1,908

Comprehensive Income	$	2,219		2,394	1,024	(3,333	)	2,304



	Millions of Dollars
	Nine Months Ended September 30, 2016
Statement of Income	Phillips 66			Phillips 66 Company		All Other Subsidiaries		Consolidating Adjustments		Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	—		42,199		18,683		—		60,882
Equity in earnings of affiliates	1,574			1,406		268		(2,089	)	1,159
Net gain (loss) on dispositions	—			(11	)	20		—		9
Other income	—			34		25		—		59
Intercompany revenues	—			570		6,398		(6,968	)	—
Total Revenues and Other Income	1,574			44,198		25,394		(9,057	)	62,109

Costs and Expenses
Purchased crude oil and products	—			33,844		17,047		(6,802	)	44,089
Operating expenses	—			2,477		628		(27	)	3,078
Selling, general and administrative expenses	5			914		307		(8	)	1,218
Depreciation and amortization	—			609		254		—		863
Impairments	—			1		3		—		4
Taxes other than income taxes	—			4,131		6,348		—		10,479
Accretion on discounted liabilities	—			11		4		—		15
Interest and debt expense	275			23		83		(131	)	250
Foreign currency transaction gains	—			—		(16	)	—		(16	)
Total Costs and Expenses	280			42,010		24,658		(6,968	)	59,980
Income before income taxes	1,294			2,188		736		(2,089	)	2,129
Provision (benefit) for income taxes	(98		)	614		163		—		679
Net Income	1,392			1,574		573		(2,089	)	1,450
Less: net income attributable to noncontrolling interests	—			—		58		—		58
Net Income Attributable to Phillips 66	$	1,392		1,574		515		(2,089	)	1,392

Comprehensive Income	$	1,253		1,435		398		(1,775	)	1,311



	Millions of Dollars
	September 30, 2017
Balance Sheet	Phillips 66			Phillips 66 Company		All Other Subsidiaries		Consolidating Adjustments		Total Consolidated
Assets
Cash and cash equivalents	$	—		308		1,239		—		1,547
Accounts and notes receivable	10			4,596		4,584		(2,835	)	6,355
Inventories	—			3,174		1,281		—		4,455
Prepaid expenses and other current assets	—			435		143		—		578
Total Current Assets	10			8,513		7,247		(2,835	)	12,935
Investments and long-term receivables	30,418			22,699		9,195		(48,413	)	13,899
Net properties, plants and equipment	—			13,052		8,251		—		21,303
Goodwill	—			2,853		417		—		3,270
Intangibles	—			724		160		—		884
Other assets	14			252		158		(3	)	421
Total Assets	$	30,442		48,093		25,428		(51,251	)	52,712

Liabilities and Equity
Accounts payable	$	—		6,828		3,278		(2,835	)	7,271
Short-term debt	649			9		48		—		706
Accrued income and other taxes	—			373		528		—		901
Employee benefit obligations	—			419		63		—		482
Other accruals	128			305		112		—		545
Total Current Liabilities	777			7,934		4,029		(2,835	)	9,905
Long-term debt	6,970			49		2,476		—		9,495
Asset retirement obligations and accrued environmental costs	—			462		167		—		629
Deferred income taxes	—			5,034		2,574		(3	)	7,605
Employee benefit obligations	—			593		284		—		877
Other liabilities and deferred credits	143			3,994		4,064		(7,959	)	242
Total Liabilities	7,890			18,066		13,594		(10,797	)	28,753
Common stock	9,743			25,403		10,416		(35,819	)	9,743
Retained earnings	13,493			5,308		249		(5,586	)	13,464
Accumulated other comprehensive loss	(684		)	(684	)	(267	)	951		(684	)
Noncontrolling interests	—			—		1,436		—		1,436
Total Liabilities and Equity	$	30,442		48,093		25,428		(51,251	)	52,712



	Millions of Dollars
	Nine Months Ended September 30, 2017
Statement of Cash Flows	Phillips 66			Phillips 66 Company		All Other Subsidiaries		Consolidating Adjustments		Total Consolidated
Cash Flows From Operating Activities
Net Cash Provided by Operating Activities	$	1,919		601		1,566		(2,369	)	1,717

Cash Flows From Investing Activities
Capital expenditures and investments*	—			(842	)	(593	)	140		(1,295	)
Proceeds from asset dispositions**	—			2		63		—		65
Intercompany lending activities	93			1,655		(1,748	)	—		—
Advances/loans—related parties	—			(9	)	—		—		(9	)
Collection of advances/loans—related parties	—			75		250		—		325
Restricted cash received from consolidation of business	—			—		318		—		318
Other	—			(73	)	(7	)	—		(80	)
Net Cash Provided by (Used in) Investing Activities	93			808		(1,717	)	140		(676	)

Cash Flows From Financing Activities
Issuance of debt	1,700			—		1,383		—		3,083
Repayment of debt	(1,500		)	(16	)	(1,645	)	—		(3,161	)
Issuance of common stock	23			—		—		—		23
Repurchase of common stock	(1,127		)	—		—		—		(1,127	)
Dividends paid on common stock	(1,042		)	(1,939	)	(430	)	2,369		(1,042	)
Distributions to noncontrolling interests	—			—		(83	)	—		(83	)
Net proceeds from issuance of Phillips 66 Partners LP common units	—			—		171		—		171
Other*	(66		)	—		140		(140	)	(66	)
Net Cash Used in Financing Activities	(2,012		)	(1,955	)	(464	)	2,229		(2,202	)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	—			—		(3	)	—		(3	)

Net Change in Cash, Cash Equivalents and Restricted Cash	—			(546	)	(618	)	—		(1,164	)
Cash, cash equivalents and restricted cash at beginning of period	—			854		1,857		—		2,711
Cash, Cash Equivalents and Restricted Cash at End of Period	$	—		308		1,239		—		1,547



	Dollars Per Gallon
Weighted-Average NGL Price*
DCP Midstream	$	0.62	0.45	0.59	0.43
* Based on index prices from the Mont Belvieu and Conway market hubs that are weighted by NGL component and location mix.



	Millions of Pounds
CPChem Externally Marketed Sales Volumes*
Olefins and Polyolefins (O&P)	3,842	4,155	11,995	12,296
Specialties, Aromatics and Styrenics (SA&S)	1,095	1,284	3,476	3,750
	4,937	5,439	15,471	16,046
* Includes 100 percent of CPChem’s outside sales of produced petrochemical products, as well as commission sales from equity affiliates.



Nine Months Ended September 30, 2016
Net income attributable to Phillips 66	$	41		103		217		51		412
Plus (Less):
Provision (benefit) for income taxes	(20		)	62		131		23		196
Taxes other than income taxes	45			56		32		61		194
Depreciation, amortization and impairments	147			173		78		172		570
Selling, general and administrative expenses	47			36		23		35		141
Operating expenses	627			905		336		650		2,518
Equity in (earnings) losses of affiliates	6			(33	)	(112	)	—		(139	)
Other segment (income) expense, net	(15		)	1		(1	)	(4	)	(19	)
Proportional share of refining gross margins contributed by equity affiliates	45			(5	)	550		—		590
Special items:
Pending claims and settlements	—			(70	)	—		—		(70	)
Recognition of deferred logistics commitments	30			—		—		—		30
Realized refining margins	$	953		1,228		1,254		988		4,423

Total processed inputs (thousands of barrels)	168,086			212,287		72,838		99,920		553,131
Adjusted total processed inputs (thousands of barrels)*	168,086			212,287		137,833		99,920		618,126

Net income attributable to Phillips 66 per barrel (dollars per barrel)**	$	0.24		0.49		2.98		0.51		0.74
Realized refining margins (dollars per barrel)***	5.66			5.78		9.10		9.91		7.16
* Adjusted total processed inputs include our proportional share of processed inputs of equity affiliates.
** Net income attributable to Phillips 66 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 due to rounding.




	Dollars Per Gallon
U.S. Average Wholesale Prices*
Gasoline	$	2.61	2.81
Distillates	2.83		3.23
* On third-party branded petroleum product sales, excluding excise taxes.


	Millions of Dollars, Except as Indicated
	March 31 2024		December 31 2023

Cash and cash equivalents	$	1,570	3,323
Short-term debt	2,325		1,482
Total debt	20,154		19,359
Total equity	30,793		31,650
Percent of total debt to capital*	40%		38
Percent of floating-rate debt to total debt	4%		10
* Capital includes total debt and total equity.



	Millions of Dollars Except as Indicated
	September 30 2017			December 31 2016

Cash and cash equivalents	$	1,547		2,711
Short-term debt	706			550
Total debt	10,201			10,138
Total equity	23,959			23,725
Percent of total debt to capital*	30		%	30
Percent of floating-rate debt to total debt	17		%	3
* Capital includes total debt and total equity.

Olefins and Polyolefins Capacity Utilization (percent)*

* Revised to exclude polyethylene pipe operations. Prior periods recast for comparability.