UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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



~~For the quarterly period ended~~	~~March 31, 2020~~



For the quarterly period ended	September 30, 2020	or


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

For the transition period from



Commission file number:			001-35349

Phillips 66

(Exact name of registrant as specified in its charter)



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

2331 CityWest ~~Blvd~~.Blvd., Houston,, Texas77042

(Address of principal executive offices) (Zip Code)

~~281~~-~~293-6600~~281-293-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value

PSX

New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ☒

The registrant had ~~436,674,707~~436,800,185 shares of common stock, $0.01 par value, outstanding as of ~~March 31,~~September 30, 2020.

Table of Contents

PHILLIPS 66

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS



Consolidated Statement of Operations			Phillips 66

Millions of Dollars
Three Months Ended
March 31
2020
2019
Revenues and Other Income
Sales and other operating revenues $ 20,878
23,103
Equity in earnings of affiliates 365
516
Net gain on dispositions 1
1
Other income —
38
Total Revenues and Other Income 21,244
23,658

Costs and Expenses
Purchased crude oil and products 18,440
21,055
Operating expenses 1,341
1,307
Selling, general and administrative expenses 319
366
Depreciation and amortization 342
331
Impairments 3,006
1
Taxes other than income taxes 157
128
Accretion on discounted liabilities 6
6
Interest and debt expense 111
119
Foreign currency transaction losses —
5
Total Costs and Expenses 23,722
23,318
Income (loss) before income taxes (2,478 ) 340
Income tax expense (benefit) (51 ) 70
Net Income (Loss) (2,427 ) 270
Less: net income attributable to noncontrolling interests 69
66
Net Income (Loss) Attributable to Phillips 66 $ (2,496 ) 204

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

Basic $ (5.66 ) 0.44
Diluted (5.66 ) 0.44

Weighted-Average Common Shares Outstanding (thousands)

Basic 441,345
457,599
Diluted 441,345
459,289
See Notes to Consolidated Financial Statements.


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019	2020	2019
Revenues and Other Income
Sales and other operating revenues	$	15,929	27,218	47,720	78,168
Equity in earnings of affiliates	349		499	871	1,663
Net gain on dispositions	1		18	87	19
Other income	20		36	48	97
Total Revenues and Other Income	16,299		27,771	48,726	79,947

Costs and Expenses
Purchased crude oil and products	14,509		23,806	42,557	69,415
Operating expenses	1,016		1,206	3,383	3,678
Selling, general and administrative expenses	384		416	1,112	1,190
Depreciation and amortization	352		336	1,037	1,001
Impairments	1,140		853	4,146	856
Taxes other than income taxes	106		105	377	330
Accretion on discounted liabilities	6		6	17	17
Interest and debt expense	132		109	360	343
Foreign currency transaction (gains) losses	4		(9)	10	5
Total Costs and Expenses	17,649		26,828	52,999	76,835
Income (loss) before income taxes	(1,350)		943	(4,273)	3,112
Income tax expense (benefit)	(624)		150	(1,053)	545
Net Income (Loss)	(726)		793	(3,220)	2,567
Less: net income attributable to noncontrolling interests	73		81	216	227
Net Income (Loss) Attributable to Phillips 66	$	(799)	712	(3,436)	2,340

Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic	$	(1.82)	1.58	(7.83)	5.15
Diluted	(1.82)		1.58	(7.83)	5.13



Weighted-Average Common Shares Outstanding (thousands)
Basic	438,916		449,005	439,670	453,398
Diluted	438,916		451,001	439,670	455,810

See Notes to Consolidated Financial Statements.

Table of Contents



Consolidated Statement of Comprehensive Income (Loss)			Phillips 66

Millions of Dollars
Three Months Ended
March 31
2020
2019

Net Income (Loss) $ (2,427 ) 270
Other comprehensive income (loss)
Defined benefit plans
Amortization to income of net actuarial loss, net prior service credit and settlements 23
19
Plans sponsored by equity affiliates 2
4
Income taxes on defined benefit plans (5 ) (5 )
Defined benefit plans, net of income taxes 20
18
Foreign currency translation adjustments (222 ) 57
Income taxes on foreign currency translation adjustments 1
—
Foreign currency translation adjustments, net of income taxes (221 ) 57
Cash flow hedges (9 ) (4 )
Income taxes on hedging activities 2
1
Hedging activities, net of income taxes (7 ) (3 )
Other Comprehensive Income (Loss), Net of Income Taxes (208 ) 72
Comprehensive Income (Loss) (2,635 ) 342
Less: comprehensive income attributable to noncontrolling interests 69
66
Comprehensive Income (Loss) Attributable to Phillips 66 $ (2,704 ) 276

~~See Notes to Consolidated Financial Statements.~~



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

Millions of Dollars
March 31
2020
December 31
2019
Assets
Cash and cash equivalents $ 1,221
1,614
Accounts and notes receivable (net of allowances of $41 million in 2020 and 2019) 4,046
7,376
Accounts and notes receivable—related parties 513
1,134
Inventories 5,331
3,776
Prepaid expenses and other current assets 594
495
Total Current Assets 11,705
14,395
Investments and long-term receivables 13,635
14,571
Net properties, plants and equipment 24,051
23,786
Goodwill 1,425
3,270
Intangibles 880
869
Other assets 1,764
1,829
Total Assets $ 53,460
58,720

Liabilities
Accounts payable $ 4,882
8,043
Accounts payable—related parties 440
532
Short-term debt 2,243
547
Accrued income and other taxes 703
979
Employee benefit obligations 301
710
Other accruals 1,960
835
Total Current Liabilities 10,529
11,646
Long-term debt 10,720
11,216
Asset retirement obligations and accrued environmental costs 635
638
Deferred income taxes 5,487
5,553
Employee benefit obligations 1,000
1,044
Other liabilities and deferred credits 1,450
1,454
Total Liabilities 29,821
31,551

Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2020—648,446,534 shares; 2019—647,416,633 shares)

Par value 6
6
Capital in excess of par 20,305
20,301
Treasury stock (at cost: 2020—211,771,827 shares; 2019—206,390,806 shares) (17,116 ) (16,673 )
Retained earnings 19,168
22,064
Accumulated other comprehensive loss (991 ) (788 )
Total Stockholders’ Equity 21,372
24,910
Noncontrolling interests 2,267
2,259
Total Equity 23,639
27,169
Total Liabilities and Equity $ 53,460
58,720

~~See Notes to Consolidated Financial Statements.~~



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

Millions of Dollars
Three Months Ended
March 31
2020
2019
Cash Flows From Operating Activities
Net income (loss) $ (2,427 ) 270
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization 342
331
Impairments 3,006
1
Accretion on discounted liabilities 6
6
Deferred income taxes (47 ) 179
Undistributed equity earnings (4 ) 95
Net gain on dispositions (1 ) (1 )
Other (139 ) 42
Working capital adjustments
Accounts and notes receivable 3,900
(1,170 )
Inventories (1,620 ) (1,790 )
Prepaid expenses and other current assets (90 ) (438 )
Accounts payable (3,239 ) 2,466
Taxes and other accruals 530
(469 )
Net Cash Provided by (Used in) Operating Activities 217
(478 )

Cash Flows From Investing Activities
Capital expenditures and investments (923 ) (1,097 )
Return of investments in equity affiliates 38
21
Proceeds from asset dispositions 1
82
Advances/loans—related parties (8 ) —
Other 15
(18 )
Net Cash Used in Investing Activities (877 ) (1,012 )

Cash Flows From Financing Activities
Issuance of debt 1,199
725
Repayment of debt (7 ) (592 )
Issuance of common stock 6
8
Repurchase of common stock (443 ) (344 )
Dividends paid on common stock (396 ) (364 )
Distributions to noncontrolling interests (61 ) (56 )
Net proceeds from issuance of Phillips 66 Partners LP common units 2
32
Other (24 ) 307
Net Cash Provided by (Used in) Financing Activities 276
(284 )

Effect of Exchange Rate Changes on Cash and Cash Equivalents (9 ) 8

Net Change in Cash and Cash Equivalents (393 ) (1,766 )
Cash and cash equivalents at beginning of period 1,614
3,019
Cash and Cash Equivalents at End of Period $ 1,221
1,253


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019	2020	2019

Net Income (Loss)	$	(726)	793	(3,220)	2,567
Other comprehensive income (loss)
Defined benefit plans

Actuarial loss arising during the period	0		0	(300)	0
Amortization to income of net actuarial loss, prior service credit and settlements	34		17	112	51


Plans sponsored by equity affiliates	4		2	9	7
Income taxes on defined benefit plans	(10)		(4)	44	(13)
Defined benefit plans, net of income taxes	28		15	(135)	45
Foreign currency translation adjustments	155		(119)	(41)	(124)
Income taxes on foreign currency translation adjustments	(4)		1	(3)	0
Foreign currency translation adjustments, net of income taxes	151		(118)	(44)	(124)
Cash flow hedges	2		(2)	(7)	(13)

Income taxes on hedging activities	0		1	2	2
Hedging activities, net of income taxes	2		(1)	(5)	(11)
Other Comprehensive Income (Loss), Net of Income Taxes	181		(104)	(184)	(90)
Comprehensive Income (Loss)	(545)		689	(3,404)	2,477
Less: comprehensive income attributable to noncontrolling interests	73		81	216	227
Comprehensive Income (Loss) Attributable to Phillips 66	$	(618)	608	(3,620)	2,250

See Notes to Consolidated Financial Statements.

Table of Contents



Consolidated Balance Sheet			Phillips 66


	Millions of Dollars
	September 30 2020		December 31 2019
Assets
Cash and cash equivalents	$	1,462	1,614
Accounts and notes receivable (net of allowances of $37 million in 2020 and $41 million in 2019)	5,195		7,376
Accounts and notes receivable—related parties	768		1,134
Inventories	4,897		3,776
Prepaid expenses and other current assets	500		495
Total Current Assets	12,822		14,395
Investments and long-term receivables	13,767		14,571
Net properties, plants and equipment	23,489		23,786
Goodwill	1,425		3,270
Intangibles	849		869
Other assets	1,929		1,829
Total Assets	$	54,281	58,720

Liabilities
Accounts payable	$	4,905	8,043
Accounts payable—related parties	552		532
Short-term debt	1,860		547
Accrued income and other taxes	1,229		979
Employee benefit obligations	443		710
Other accruals	1,524		835
Total Current Liabilities	10,513		11,646
Long-term debt	12,666		11,216
Asset retirement obligations and accrued environmental costs	644		638
Deferred income taxes	5,507		5,553
Employee benefit obligations	1,394		1,044
Other liabilities and deferred credits	1,252		1,454
Total Liabilities	31,976		31,551

Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2020—648,572,012 shares; 2019—647,416,633 shares)
Par value	6		6
Capital in excess of par	20,363		20,301
Treasury stock (at cost: 2020—211,771,827 shares; 2019—206,390,806 shares)	(17,116)		(16,673)
Retained earnings	17,436		22,064
Accumulated other comprehensive loss	(967)		(788)
Total Stockholders’ Equity	19,722		24,910
Noncontrolling interests	2,583		2,259
Total Equity	22,305		27,169
Total Liabilities and Equity	$	54,281	58,720

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Cash Flows			Phillips 66


	Millions of Dollars
	Nine Months Ended September 30
	2020		2019
Cash Flows From Operating Activities
Net income (loss)	$	(3,220)	2,567
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	1,037		1,001
Impairments	4,146		856
Accretion on discounted liabilities	17		17
Deferred income taxes	2		115
Undistributed equity earnings	254		(25)
Net gain on dispositions	(87)		(19)


Other	52		(97)
Working capital adjustments
Accounts and notes receivable	2,684		(909)
Inventories	(1,134)		(2,004)
Prepaid expenses and other current assets	(40)		(269)
Accounts payable	(2,985)		1,778
Taxes and other accruals	746		103


Net Cash Provided by Operating Activities	1,472		3,114

Cash Flows From Investing Activities
Capital expenditures and investments	(2,414)		(2,595)
Return of investments in equity affiliates	139		55
Proceeds from asset dispositions	3		84
Advances/loans—related parties	(251)		(95)
Collection of advances/loans—related parties	44		95

Other	(87)		24


Net Cash Used in Investing Activities	(2,566)		(2,432)

Cash Flows From Financing Activities
Issuance of debt	3,305		1,758
Repayment of debt	(546)		(1,004)
Issuance of common stock	6		15
Repurchase of common stock	(443)		(1,238)
Dividends paid on common stock	(1,182)		(1,172)
Distributions to noncontrolling interests	(201)		(176)
Net proceeds from issuance of Phillips 66 Partners LP common units	2		133
Other	(22)		282


Net Cash Provided by (Used in) Financing Activities	919		(1,402)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	23		(31)

Net Change in Cash and Cash Equivalents	(152)		(751)
Cash and cash equivalents at beginning of period	1,614		3,019
Cash and Cash Equivalents at End of Period	$	1,462	2,268

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Changes in Equity			Phillips 66


	Millions of Dollars
	Three Months Ended September 30
	Attributable to Phillips 66
	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Retained Earnings	Accum. Other Comprehensive Loss	Noncontrolling Interests	Total

June 30, 2020	$	6	20,342	(17,116)	18,631	(1,148)	2,580	23,295
Net income (loss)	—		—	—	(799)	—	73	(726)
Other comprehensive income	—		—	—	—	181	—	181
Dividends paid on common stock ($0.90 per share)	—		—	—	(393)	—	—	(393)

Benefit plan activity	—		21	—	(3)	—	—	18
Net distributions to noncontrolling interests	—		—	—	—	—	(70)	(70)

September 30, 2020	$	6	20,363	(17,116)	17,436	(967)	2,583	22,305



June 30, 2019	$	6	19,912	(15,822)	21,423	(767)	2,554	27,306

Net income	—		—	—	712	—	81	793
Other comprehensive loss	—		—	—	—	(104)	—	(104)
Dividends paid on common stock ($0.90 per share)	—		—	—	(402)	—	—	(402)
Repurchase of common stock	—		—	(439)	—	—	—	(439)
Benefit plan activity	—		22	—	(3)	—	—	19
Issuance of Phillips 66 Partners LP common units	—		44	—	—	—	32	76
Impacts from Phillips 66 Partners GP/IDR restructuring transaction	—		275	—	—	—	(373)	(98)
Distributions to noncontrolling interests	—		—	—	—	—	(59)	(59)
September 30, 2019	$	6	20,253	(16,261)	21,730	(871)	2,235	27,092


	Shares
	Three Months Ended September 30
	Common Stock Issued	Treasury Stock

June 30, 2020	648,468,487	211,771,827
Repurchase of common stock	—	0
Shares issued—share-based compensation	103,525	—
September 30, 2020	648,572,012	211,771,827

June 30, 2019	646,828,397	198,286,700
Repurchase of common stock	—	4,406,701
Shares issued—share-based compensation	222,580	—
September 30, 2019	647,050,977	202,693,401










See Notes to Consolidated Financial Statements.

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, 2019 $ 6
20,301
(16,673 ) 22,064
(788 ) 2,259
27,169
Net income (loss) —
—
—
(2,496 ) —
69
(2,427 )
Other comprehensive loss —
—
—
—
(208 ) —
(208 )
Dividends paid on common stock ($0.90 per share) —
—
—
(396 ) —
—
(396 )
Repurchase of common stock —
—
(443 ) —
—
—
(443 )
Benefit plan activity —
4
—
(2 ) —
—
2
Distributions to noncontrolling interests —
—
—
—
—
(61 ) (61 )
Other —
—
—
(2 ) 5
—
3
March 31, 2020 $ 6
20,305
(17,116 ) 19,168
(991 ) 2,267
23,639

December 31, 2018 $ 6
19,873
(15,023 ) 20,489
(692 ) 2,500
27,153
Cumulative effect of accounting changes —
—
—
81
(89 ) (1 ) (9 )
Net income —
—
—
204
—
66
270
Other comprehensive income —
—
—
—
72
—
72
Dividends paid on common stock ($0.80 per share) —
—
—
(364 ) —
—
(364 )
Repurchase of common stock —
—
(344 ) —
—
—
(344 )
Benefit plan activity —
4
—
(2 ) —
—
2
Issuance of Phillips 66 Partners LP common units —
2
—
—
—
19
21
Distributions to noncontrolling interests —
—
—
—
—
(56 ) (56 )
March 31, 2019 $ 6
19,879
(15,367 ) 20,408
(709 ) 2,528
26,745

Shares in Thousands
Common Stock Issued
Treasury Stock

December 31, 2019 647,417
206,391
Repurchase of common stock —
5,381
Shares issued—share-based compensation 1,030
—
March 31, 2020 648,447
211,772

December 31, 2018 645,692
189,526
Repurchase of common stock —
3,639
Shares issued—share-based compensation 1,024
—
March 31, 2019 646,716
193,165
See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Changes in Equity			Phillips 66


	Millions of Dollars
	Nine Months Ended September 30, 2020
	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, 2019	$	6	20,301	(16,673)	22,064	(788)	2,259	27,169
Net income (loss)	—		—	—	(3,436)	—	216	(3,220)
Other comprehensive loss	—		—	—	—	(184)	—	(184)
Dividends paid on common stock ($2.70 per share)	—		—	—	(1,182)	—	—	(1,182)
Repurchase of common stock	—		—	(443)	—	—	—	(443)
Benefit plan activity	—		62	—	(8)	—	—	54
Transfer of equity interest	—		—	—	—	—	305	305
Net distributions to noncontrolling interests	—		—	—	—	—	(197)	(197)
Other	—		—	—	(2)	5	—	3
September 30, 2020	$	6	20,363	(17,116)	17,436	(967)	2,583	22,305

December 31, 2018	$	6	19,873	(15,023)	20,489	(692)	2,500	27,153
Cumulative effect of accounting changes	—		—	—	81	(89)	(1)	(9)
Net income	—		—	—	2,340	—	227	2,567
Other comprehensive loss	—		—	—	—	(90)	—	(90)
Dividends paid on common stock ($2.60 per share)	—		—	—	(1,172)	—	—	(1,172)
Repurchase of common stock	—		—	(1,238)	—	—	—	(1,238)
Benefit plan activity	—		56	—	(8)	—	—	48
Issuance of Phillips 66 Partners LP common units	—		49	—	—	—	58	107
Impacts from Phillips 66 Partners GP/IDR restructuring transaction	—		275	—	—	—	(373)	(98)
Distributions to noncontrolling interests	—		—	—	—	—	(176)	(176)
September 30, 2019	$	6	20,253	(16,261)	21,730	(871)	2,235	27,092


	Shares
	Nine Months Ended September 30
	Common Stock Issued	Treasury Stock

December 31, 2019	647,416,633	206,390,806
Repurchase of common stock	—	5,381,021
Shares issued—share-based compensation	1,155,379	—
September 30, 2020	648,572,012	211,771,827

December 31, 2018	645,691,761	189,526,331
Repurchase of common stock	—	13,167,070
Shares issued—share-based compensation	1,359,216	—
September 30, 2019	647,050,977	202,693,401
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 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 2019 Annual Report on Form 10-K. The results of operations for the three and nine months ended ~~March 31,~~September 30, 2020, are not necessarily indicative of the results expected for the full year.

Note 2—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
2020
2019
Product Line and Services
Refined petroleum products $ 16,157
18,793
Crude oil resales 2,877
3,038
Natural gas liquids (NGL) 979
1,304
Services and other*
865
(32 )
Consolidated sales and other operating revenues $ 20,878
23,103

Geographic Location**
United States $ 15,710
17,575
United Kingdom 2,309
2,431
Germany 858
957
Other foreign countries 2,001
2,140
Consolidated sales and other operating revenues $ 20,878
23,103
* Includes derivatives-related activities. See Note 12—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.


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019
Product Line and Services
Refined petroleum products	$	12,573	22,373		37,431	64,088
Crude oil resales	2,198		3,511		6,565	10,162
Natural gas liquids (NGL)	966		1,025		2,645	3,508
Services and other*	192		309		1,079	410
Consolidated sales and other operating revenues	$	15,929	27,218		47,720	78,168

Geographic Location**
United States	$	12,125	21,160		36,212	60,602
United Kingdom	1,850		2,375		5,131	7,318
Germany	805		1,025		2,276	3,074
Other foreign countries	1,149		2,658		4,101	7,174
Consolidated sales and other operating revenues	$	15,929	27,218		47,720	78,168
* 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,~~September 30, 2020, and December 31, 2019, receivables from contracts with customers were ~~$3,344~~$3,410 million and $6,902 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,~~September 30, 2020, and December 31, 2019, our asset balances related to such payments were ~~$357~~$389 million and $336 million, respectively.

Our contract liabilities represent advances from our customers prior to product or service delivery. At ~~March 31,~~September 30, 2020, and December 31, 2019, contract liabilities were 0tnot material.

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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, which mostly expire by 2021. At ~~March 31,~~September 30, 2020, the remaining performance obligations related to these minimum volume commitment contracts were 0tnot material.

Note 3—Credit Losses

We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil and NGL. 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 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 evaluation. A credit limit is established for each counterparty based on the outcome of this review. We may require collateralized asset support or a prepayment to mitigate credit risk.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and 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.

The ~~recent decline in commodity prices, weak petroleum product demand, and~~ negative economic impacts associated with Coronavirus Disease 2019 (COVID-19) increase the probability that certain of our counterparties may not be able to ~~fully~~completely fulfill their obligations in a timely manner. In response, we have enhanced our credit monitoring, sought collateral to support some transactions, and required prepayments from higher-risk counterparties.

At ~~March 31,~~September 30, 2020, and December 31, 2019, we reported ~~$4,559~~$5,963 million and $8,510 million of accounts and notes receivable, ~~respectively,~~ net of allowances of $37 million and $41 million, ~~for both periods.~~respectively. Based on an aging analysis at ~~March 31,~~September 30, 2020, more than 98% of our accounts receivable were outstanding less than 60 days.

We are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt and standby letters of credit. See Note ~~10—~~11—Guarantees, and Note ~~11—~~12—Contingencies and Commitments, for more information on these off-balance sheet exposures.

Note 4—Inventories

Inventories consisted of the following:

Millions of Dollars
March 31
2020
December 31
2019

Crude oil and petroleum products $ 5,008
3,452
Materials and supplies 323
324
$ 5,331
3,776


	Millions of Dollars
	September 30 2020		December 31 2019

Crude oil and petroleum products	$	4,561	3,452
Materials and supplies	336		324
	$	4,897	3,776

Inventories valued on the last-in, first-out (LIFO) basis totaled ~~$4,879~~$4,436 million and $3,331 million at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively. ~~We performed a lower-of-cost-or-market evaluation for our crude oil~~The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $1.6 billion and ~~petroleum products inventory~~$4.3 billion at ~~March 31,~~September 30, 2020, and determined that a write-down was not required based on forward prices. Should crude oil and petroleum product forward prices have a sustained decline, a future lower-of-cost-or-market write‑down may be required.

December 31, 2019, respectively.

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Note 5—Investments, Loans and Long-Term Receivables

Equity Investments

Gray Oak Pipeline, LLC

Phillips 66 Partners LP (Phillips 66 Partners) has a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. Phillips 66 Partners has an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering a co-venturer’s 35% interest in the consolidated holding company.

In September 2020, Gray Oak Pipeline, LLC closed its offering of $1.4 billion aggregate principal amount of senior unsecured notes with maturities ranging from 2023 to 2027. These senior notes are not guaranteed by Phillips 66 Partners or any of its co-venturers. Net proceeds from the offering were used to repay a third-party term loan of $1,379 million, and for general company purposes. Concurrent with the full repayment of the third-party term loan facility, the associated equity contribution agreement was terminated.

During its development phase, Gray Oak Pipeline, LLC was considered a variable interest entity (VIE) because it did not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We determined we were not the primary beneficiary because we and our co-venturers jointly directed the activities of Gray Oak Pipeline, LLC that most significantly impacted economic performance. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and ceased being a VIE. At September 30, 2020, Phillips 66 Partners’ investment in the Gray Oak Pipeline had a book value of $896 million. See Note 20—Phillips 66 Partners LP, for additional information regarding Phillips 66 Partners’ ownership in Gray Oak Pipeline, LLC.

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

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $2.5 billion aggregate principal amount of senior unsecured notes, consisting of:

•$650 million aggregate principal amount of 3.625% Senior Notes due 2022.

•$1.0 billion aggregate principal amount of 3.900% Senior Notes due 2024.

•$850 million aggregate principal amount of 4.625% Senior Notes due 2029.

Dakota Access and ETCO have guaranteed repayment of the notes. In addition, Phillips 66 Partners and its co-venturers in Dakota Access 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 ongoing litigation related to an easement granted by the U.S. Army Corps of Engineers (USACE) to allow the pipeline to be constructed under Lake Oahe in North Dakota. Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes. If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts. At September 30, 2020, Phillips 66 Partners’ share of the maximum potential equity contributions under the CECU was approximately $631 million.

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In March 2020, the trial court presiding over this litigation ordered the USACE to prepare an Environmental Impact Statement (EIS), and requested additional information to enable a decision on whether the Dakota Access Pipeline should be shut down while the EIS is being prepared. On July 6, 2020, the trial court ordered the Dakota Access Pipeline to be shut down and emptied of crude oil within 30 days, and that the pipeline should remain shut down pending the preparation of the EIS by the USACE, which the USACE has indicated is expected to take approximately 13 months. Dakota Access filed an appeal and a request for a stay of the order, which was granted. The case is now on an expedited appellate track and oral arguments regarding whether the pipeline easement is valid and whether the USACE must prepare an EIS are set for early November 2020, with a decision expected in late 2020 or early 2021. In addition to the proceedings in the appellate court, the trial court has been asked to issue an injunction to shut down the pipeline until the USACE completes the EIS, which could be ruled on as early as late December 2020. If the pipeline is required to cease operations pending the preparation of the EIS, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, Phillips 66 Partners also could be asked to support its share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU.

CF United LLC (CF United)

We hold a 50% voting interest and a 48% economic interest in CF United, a retail marketing joint venture with operations primarily on the U.S. West Coast. CF United is considered a VIE because our co-venturer has an option to sell its interest to us based on a fixed multiple. The put option becomes effective July 1, 2023, and expires on March 31, 2024. The put option is viewed as a variable interest as the purchase price on the exercise date may not represent the then-current fair value of CF United. We have determined that we are not the primary beneficiary because we and our co-venturer jointly direct the activities of CF United that most significantly impact economic performance. At September 30, 2020, our maximum exposure to loss was comprised of our $326 million investment in CF United and any potential future loss resulting from the put option, if the purchase price based on a fixed multiple exceeds the then-current fair value of CF United.

DCP Midstream, LLC (DCP Midstream)

~~The~~At September 30, 2019, we estimated the fair value of our investment in DCP Midstream was below our book value due to a decline in the market values of DCP Midstream, LP (DCP Partners) common units and its then general partner interest. Accordingly, we recorded an $853 million before-tax impairment in the third quarter of 2019. After the elimination of its general partner’s economic interests in November 2019, the fair value of our investment in DCP Midstream depends solely on the market value of DCP ~~Midstream, LP (DCP Partners)~~Partners common units. ~~The~~In the first quarter of 2020, the market value of DCP Partners common units further declined by approximately 85% ~~in the first quarter of 2020.~~. As a result, at March 31, 2020, the fair value of our investment in DCP Midstream was significantly lower than its book value. We concluded the difference between its fair value and book value was not temporary primarily due to ~~its magnitude.~~the magnitude of the difference. Accordingly, we recorded a ~~$1,161 million~~$1.2 billion before-tax impairment of our investment in the first quarter of 2020. ~~This charge is~~These charges are included in the “Impairments” line item on our consolidated statement of operations. ~~Following the impairment, our investment in DCP Midstream had a book value of $245 million at March 31, 2020. The impairment~~These impairments increased the basis difference for our investment in DCP Midstream to $1.8 billion at March 31, 2020, which ~~indicates~~indicated the carrying value of our investment iswas lower than our share of DCP Midstream’s recorded net ~~assets.~~assets at March 31, 2020. The basis difference ~~of $1,795 million~~ is ~~expected to be~~being amortized and recognized as a benefit to equity earnings over a period of 22 years, which was the estimated remaining useful life of DCP Midstream’s properties, plants and equipment (PP&E) at March 31, 2020. Equity earnings for the three and nine months ended September 30, 2020, were increased by approximately $20 million and $50 million, respectively, due to the amortization of the basis difference. See Note ~~13—~~14—Fair Value Measurements, for additional information on the techniques used to determine the fair value of our investment in DCP Midstream.

~~Gray Oak Pipeline, LLC~~

~~Gray Oak Pipeline, LLC has~~ At September 30, 2020, our investment in DCP Midstream had a third-party term loan facility with a borrowing capacity of $1,379 million, inclusive of accrued interest. Borrowings under the facility are due on June 3, 2022. Phillips 66 Partners LP (Phillips 66 Partners) and its co-venturers provided a guarantee through an equity contribution agreement requiring proportionate equity contributions to Gray Oak Pipeline, LLC up to the total outstanding loan amount, plus any additional accrued interest and associated fees, if the term loan facility is fully utilized and Gray Oak Pipeline, LLC defaults on certain of its obligations thereunder. At March 31, 2020, the term loan facility was fully utilized by Gray Oak Pipeline, LLC, and Phillips 66 Partners’ 42.25% proportionate exposure under the equity contribution agreement was $583 million.

Gray Oak Pipeline, LLC is considered a variable interest entity (VIE) because it does not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We have determined we are not the primary beneficiary because we and our co-venturers jointly direct the activities of Gray Oak Pipeline, LLC that most significantly impact economic performance. On April 1, 2020, the Gray Oak Pipeline commenced full operations from West Texas to Texas Gulf Coast destinations. The Eagle Ford segment of the pipeline commenced operations later in April. At March 31, 2020, Phillips 66 Partners’ effective ownership interest in the Gray Oak Pipeline was 42.25%, and Phillips 66 Partners’ maximum exposure to loss was $1,382 million, which represented the book value of ~~the investment in Gray Oak Pipeline, LLC of $799 million and the term loan guarantee of $583~~$281 million. ~~See Note 19—Phillips 66 Partners LP, for additional information regarding Phillips 66 Partners’ ownership in Gray Oak Pipeline, LLC.~~

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

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $2,500 million aggregate principal amount of unsecured senior notes. Dakota Access and ETCO have guaranteed repayment of the notes. In addition, Phillips 66 Partners and its co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, if Dakota Access receives an unfavorable court ruling in the litigation related to certain disputed construction permits and Dakota Access determines that an equity contribution trigger event has occurred, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access and ETCO up to an aggregate maximum of approximately $2,525 million. Phillips 66 Partners’ share of the maximum potential equity contributions under the CECU is approximately $631 million. In March 2020, the court in such litigation requested an Environmental Impact Statement from the U.S. Army Corps of Engineers, and requested additional information to make a further decision regarding whether the Dakota Access Pipeline should be shut down while the Environmental Impact Statement is being prepared. Currently, this ruling does not have any immediate impact on the operations of Dakota Access and ETCO.

~~CF United LLC (United)~~

In the fourth quarter of 2019, we acquired a 50% voting interest and a 48% economic interest in United, a retail marketing joint venture with operations primarily on the U.S. West Coast. United is considered a VIE because our co‑venturer has an option to sell its interest to us based on a fixed multiple. The put option is viewed as a variable interest as the purchase price on the exercise date may not represent the then-current fair value of United. We have determined that we are not the primary beneficiary because we and our co-venturer jointly direct the activities of United that most significantly impact economic performance. At March 31, 2020, our maximum exposure to loss was comprised of our $250 million investment in United and any potential future loss resulting from the put option, if the purchase price based on a fixed multiple exceeds the then-current fair value of United.

Liberty Pipeline LLC (Liberty)

~~Liberty is~~Phillips 66 Partners holds a 50%~~-owned~~ interest in Liberty, a joint venture formed to develop and construct the Liberty Pipeline system which, upon completion, will transport crude oil from the Rockies and Bakken production areas to Cushing, Oklahoma. Liberty is considered a VIE because it does not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We have determined we are not the primary beneficiary because we and our co-venturer jointly direct the activities of Liberty that most significantly impact economic performance. ~~On March 2, 2020, Phillips 66 Partners closed a transaction to acquire our 50% interest in Liberty for $75 million. Phillips 66 Partners and its co-venturer subsequently deferred the~~The development and construction of the Liberty Pipeline system have been deferred as a result of the current challenging business environment. At ~~March 31,~~September 30, 2020, our maximum exposure to loss was ~~$216~~$252 million, which represented the book value of Phillips 66 Partners’ investment in Liberty of ~~$103~~$239 million and our outstanding proportionate vendor guarantees of ~~$113~~$13 million.

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OnCue Holdings, LLC (OnCue)

We hold a 50% interest in OnCue, a joint venture that owns and operates retail convenience stores. We fully guaranteed various debt agreements of OnCue and our co-venturer did not participate in the guarantees. This entity is considered a VIE because our debt guarantees resulted in OnCue not being exposed to all potential losses. We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact OnCue’s economic performance. At ~~March 31,~~September 30, 2020, our maximum exposure to loss was ~~$148~~$165 million, which represented the book value of our investment in OnCue of ~~$79~~$92 million and guaranteed debt obligations of ~~$69~~$73 million.

Red Oak Pipeline LLC (Red Oak)

We hold a 50% interest in a joint venture formed to develop and construct the Red Oak Pipeline ~~system which, upon completion, will transport crude oil from Cushing, Oklahoma, and~~system. In the Permian to multiple destinations along the Texas Gulf Coast, including Corpus Christi, Ingleside, Houston, and Beaumont, Texas. Red Oak is considered a VIE because it does not have sufficient equity at risk to fully fund the constructionthird quarter of all assets required for principal operations. We have determined we are not the primary beneficiary because we and our co-venturer jointly direct the activities of Red Oak that most significantly impact economic performance. The development and construction of2020, the Red Oak Pipeline ~~system have been deferred as~~project was canceled. As a result, we assessed our investment for impairment and concluded that the carrying value of our investment at September 30, 2020, was greater than its fair value. Accordingly, we recorded a before-tax impairment of $84 million in the ~~current challenging business environment.~~Midstream segment, which is included in the “Impairments” line item on our consolidated statement of operations for the three and nine months ended September 30, 2020. See Note 14—Fair Value Measurements, for additional information on the techniques used to determine the fair value of our investment in Red Oak. At ~~March 31,~~September 30, 2020, ~~our maximum exposure to loss was $66 million, which represented~~ the remaining book value of our investment in Red Oak was $20 million.

Related Party Loan

In the second and third quarters of ~~$54 million~~2020, we and ~~an outstanding~~our co-venturer provided a short-term member loan to ~~Red Oak~~WRB Refining LP (WRB). At September 30, 2020, the outstanding loan balance to WRB was approximately $420 million, of ~~$12~~which our share was approximately $210 million.

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Note 6—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, 2020 December 31, 2019

Gross
PP&E

Accum.
D&A

Net
PP&E

Gross
PP&E

Accum.
D&A

Net
PP&E

Midstream $ 11,605
2,467
9,138
11,221
2,391
8,830
Chemicals —
—
—
—
—
—
Refining 23,956
10,521
13,435
23,692
10,336
13,356
Marketing and Specialties (M&S) 1,660
917
743
1,847
959
888
Corporate and Other 1,352
617
735
1,311
599
712
$ 38,573
14,522
24,051
38,071
14,285

23,786


	Millions of Dollars
	September 30, 2020				December 31, 2019
	Gross PP&E		Accum. D&A	Net PP&E	Gross PP&E	Accum. D&A	Net PP&E

Midstream	$	12,154	2,727	9,427	11,221	2,391	8,830
Chemicals	0		0	0	0	0	0
Refining	24,330		11,819	12,511	23,692	10,336	13,356
Marketing and Specialties (M&S)	1,762		988	774	1,847	959	888
Corporate and Other	1,434		657	777	1,311	599	712
	$	39,680	16,191	23,489	38,071	14,285	23,786

In the third quarter of 2020, we announced a plan to reconfigure our San Francisco Refinery to produce renewable fuels at the Rodeo refining facility in Rodeo, California, starting in early 2024. Consequently, we plan to cease operation of the Santa Maria refining facility in Arroyo Grande, California, certain assets at the Rodeo refining facility, and associated Midstream assets in 2023. We assessed the San Francisco Refinery asset group for impairment and concluded that the carrying value of the asset group was not recoverable. As a result, we recorded a $1,030 million before-tax impairment to reduce the carrying value of the net PP&E and intangible assets in this asset group to its fair value of $940 million. The impairment charge resulted in a reduction of net PP&E totaling $1,009 million, consisting of $889 million in the Refining segment and $120 million in the Midstream segment, as well as a reduction of the Refining segment’s intangible assets of $21 million. This impairment charge is included within the “Impairments” line item on our consolidated statement of operations for the three and nine months ended September 30, 2020. See Note 14—Fair Value Measurements for additional information on the techniques used to determine the fair value of the asset group.

Note 7—Goodwill

Our stock price declined significantly in the first quarter of 2020 due to the ~~volatility~~disruption in global commodity and equity markets related to the COVID-19 pandemic and other factors. We assessed our goodwill for impairment due to the decline in our market capitalization and concluded that the carrying value of our Refining reporting unit at March 31, 2020, was greater than its fair value by an amount in excess of its goodwill balance. Accordingly, we recorded a before-tax goodwill impairment charge of $1,845 million in our Refining ~~segment.~~segment during the first quarter of 2020. This charge is included in the “Impairments” line item on our consolidated statement of ~~operations. The fair value of our other reporting units continued to exceed their carrying values by a significant percentage.~~operations for the nine months ended September 30, 2020. See Note ~~13—~~14—Fair Value Measurements for additional information on the techniques used to determine the fair value of our Refining reporting unit.

The carrying amount of goodwill by segment at ~~March 31,~~September 30, 2020, was:

Millions of Dollars
Midstream
Refining
M&S
Total

Balance at January 1, 2020 $ 626
1,845
799
3,270
Impairments —
(1,845 ) —
(1,845 )
Balance at March 31, 2020 $ 626
—
799
1,425


	Millions of Dollars
	Midstream		Refining	M&S	Total

Balance at January 1, 2020	$	626	1,845	799	3,270
Impairments	0		(1,845)	0	(1,845)
Balance at September 30, 2020	$	626	0	799	1,425

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Note 8—Impairments


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019	2020	2019








Midstream	$	204	853	1,365	856






Refining	911		0	2,756	0

Corporate and Other	25		0	25	0
Total impairments	$	1,140	853	4,146	856

These impairment charges are included within the “Impairments” line item on our consolidated statement of operations. See Note 5—Investments, Loans and Long-Term Receivables, Note 6—Properties, Plants and Equipment, Note 7—Goodwill, and Note 14—Fair Value Measurements for additional information regarding our impairment charges.

The COVID-19 pandemic continues to result in economic disruption globally. Reduced demand for petroleum products has resulted in low crude oil prices and refining margins, as well as decreased volumes through logistics infrastructure. We continue to assess our long-lived assets and equity investments for impairment in this challenging business environment. The depth and duration of the economic consequences of the COVID-19 pandemic remain unknown. Additional impairments may be required in the future if there is a further deterioration in our projected cash flows.

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Note 9—Earnings (Loss) Per Share

The numerator of basic earnings (loss) per share (EPS) is net income (loss) 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 (loss) 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 (losses) 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 September 30					Nine Months Ended September 30
	2020			2019		2020		2019
	Basic		Diluted	Basic	Diluted	Basic	Diluted	Basic	Diluted
Amounts Attributed to Phillips 66 Common Stockholders (millions):
Net income (loss) attributable to Phillips 66	$	(799)	(799)	712	712	(3,436)	(3,436)	2,340	2,340
Income allocated to participating securities	(2)		(2)	(2)	(1)	(6)	(6)	(5)	(1)
Net income (loss) available to common stockholders	$	(801)	(801)	710	711	(3,442)	(3,442)	2,335	2,339

Weighted-average common shares outstanding (thousands):	436,783		438,916	446,498	449,005	437,492	439,670	450,836	453,398
Effect of share-based compensation	2,133		0	2,507	1,996	2,178	0	2,562	2,412
Weighted-average common shares outstanding—EPS	438,916		438,916	449,005	451,001	439,670	439,670	453,398	455,810

Earnings (Loss) Per Share of Common Stock (dollars)	$	(1.82)	(1.82)	1.58	1.58	(7.83)	(7.83)	5.15	5.13

Three Months Ended
March 31
2020 2019
Basic
Diluted
Basic
Diluted
Amounts Attributed to Phillips 66 Common Stockholders (millions):

Net income (loss) attributable to Phillips 66 $ (2,496 ) (2,496 ) 204
204
Income allocated to participating securities (1 ) (1 ) (1 ) (1 )
Net income (loss) available to common stockholders $ (2,497 ) (2,497 )
203
203

Weighted-average common shares outstanding (thousands):
439,014
441,345
454,886
457,599
Effect of share-based compensation 2,331
—
2,713
1,690
Weighted-average common shares outstanding—EPS 441,345
441,345
457,599
459,289

Earnings (Loss) Per Share of Common Stock (dollars)
$ (5.66 ) (5.66 ) 0.44
0.44

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Note 9—10—Debt

Debt Issuances

On ~~April 9,~~June 10, 2020, Phillips 66 closed ~~on a~~its public offering of $1 billion aggregate principal amount of senior unsecured notes consisting of:

•$150 million aggregate principal amount of 3.850% Senior Notes due 2025.

•$850 million aggregate principal amount of 2.150% Senior Notes due 2030.

On April 9, 2020, Phillips 66 closed its public offering of $1 billion aggregate principal amount of senior unsecured notes consisting of:

•$500 million aggregate principal amount of 3.700% Senior Notes due 2023.

•$500 million aggregate principal amount of 3.850% Senior Notes due 2025.

Interest on the Senior Notes due 2023 is payable semiannually on April 6 and October 6 of each year, commencing on October 6, 2020. The Senior Notes due 2025 issued on June 10, 2020, constitute a further issuance of the Senior Notes due 2025 originally issued on April 9, 2020. The $650 million in aggregate principal amount of Senior Notes due 2025 is treated as a single class of debt securities. Interest on the Senior Notes due 2025 is payable semiannually on April 9 and October 9 of each year, commencing on October 9, 2020. Interest on the Senior Notes due 2030 is payable semiannually on June 15 and December 15 of each year, commencing on December 15, 2020.

Proceeds received from the public offerings of senior unsecured notes on June 10, 2020, and April 9, 2020, were $1,008 million and $993 million, respectively, net of underwriters’ discounts or premiums and commissions, ~~and~~as well as debt issuance ~~costs,~~costs. These proceeds are being used for general corporate purposes.

On March 19, 2020, Phillips 66 entered into a $1 billion 364-day delayed draw term loan agreement (the Facility) and borrowed $1 billion under the Facility shortly thereafter. On April 6, 2020, Phillips 66 increased the size of the Facility to $2 billion, ~~with $1 billion~~and in June 2020, the Facility was amended to extend the commitment period to September 19, 2020. We did not draw additional amounts under the Facility before the end of the commitment period or further extend the commitment period. Accordingly, the additional borrowing capacity ~~remaining undrawn.~~under the Facility expired prior to September 30, 2020. Borrowings under the Facility bear interest at a floating rate based on either the Eurodollar rate or the reference rate, plus a margin determined by the credit rating of Phillips 66’s senior unsecured ~~long‑term~~long-term debt. Phillips 66 is using the proceeds from the debt issuance for general corporate purposes.

At ~~March 31,~~September 30, 2020, borrowings of ~~$200~~$290 million were outstanding ~~under Phillips 66’s uncommitted $5 billion commercial paper program, compared with 0 borrowings outstanding under the commercial paper program at December 31, 2019. At March 31, 2020,~~ and ~~December 31, 2019, 0 amount~~$3 million in letters of credit had been ~~directly~~ drawn under Phillips 66 Partners’ $750 million revolving credit ~~facility; however, $3 million and $1 million in letters of credit had been issued under this facility at March 31, 2020, and December 31, 2019, respectively.~~facility.

Debt Repayments

In April 2020, Phillips 66 repaid ~~the~~ $300 million ~~outstanding principal balance~~ of ~~its~~ floating-rate notes due April 2020 and ~~the~~ $200 million outstanding ~~principal balance of its~~under the term loan facility due April 2020. Also, in April 2020, Phillips 66 Partners repaid ~~the~~ $25 million ~~outstanding principal balance~~ of ~~its~~ tax-exempt bonds due April 2020.

~~Note 10—Guarantees~~

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Note 11—Guarantees

At ~~March 31,~~September 30, 2020, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability for the fair value of our obligation as a guarantor for newly issued or modified guarantees. 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 is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantees and expect future performance to be either immaterial or have only a remote chance of occurrence.

Lease Residual Value Guarantees

Under the operating lease agreement on our headquarters facility in Houston, Texas, we ~~have a residual value guarantee with a maximum future exposure of $554 million at March 31, 2020. The operating lease term ends in~~ ~~June 2021~~ ~~and provides us~~had the option, at the end of the lease term to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. In September 2020, we amended and extended the lease term to September 2025. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at September 30, 2020. We also have residual value guarantees associated with railcar and airplane leases with maximum potential future payments totaling ~~$362~~$396 million. These leases have remaining terms of up to ~~four~~ten years.

~~Contingent Equity Contribution Undertaking~~Guarantees of Joint Venture and Other Obligations

In March 2019, Phillips 66 Partners and its co-venturers in Dakota Access provided a ~~Contingent Equity Contribution Undertaking~~CECU in conjunction with ana senior unsecured ~~senior~~ notes offering. See Note 5—Investments, Loans and Long-Term Receivables, for additional information on Dakota ~~Access.~~

~~Guarantees of Joint Venture Obligations~~Access and the CECU.

In ~~June 2019~~,September 2020, concurrent with the full repayment of a third-party term loan facility by Gray Oak Pipeline, LLC, the associated guarantee issued by Phillips 66 Partners ~~issued a guarantee~~ through an equity contribution agreement ~~for 42.25% of Gray Oak Pipeline, LLC’s third-party term loan facility.~~was terminated. See Note 5—Investments, Loans and Long-Term Receivables, for additional information on Gray Oak Pipeline, LLC.

In addition, at ~~March 31,~~September 30, 2020, we had other guarantees outstanding for our portion of certain joint venture debt obligations and purchase obligations, which have remaining terms of up to eight years. The maximum potential amount of future payments to third parties under these guarantees was approximately ~~$331~~$216 million. Payment would be required if a joint venture defaults on 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. Agreements associated with these sales include indemnifications for taxes, litigation, environmental liabilities, permits and licenses and employee claims, as well as real estate ~~indemnity~~indemnities 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,~~September 30, 2020, and December 31, 2019, the carrying amount of recorded indemnifications was ~~$159~~$147 million and $153 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 the 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. At ~~March 31,~~September 30, 2020, and December 31, 2019, environmental accruals for known contamination of ~~$111 million and~~ $105 million ~~respectively,~~ were included in the carrying amount of 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. For additional information about environmental liabilities, see Note ~~11—~~12—Contingencies and Commitments.

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Indemnification and Release Agreement

In 2012, in connection with our separation from ConocoPhillips, we entered into the 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. Generally, the agreement provides for 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.

Note ~~11—~~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 contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.

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 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 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.

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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 business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. At ~~March 31,~~September 30, 2020, our total environmental accruals were ~~$442~~$428 million, compared with $441 million at December 31, 2019. 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.

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 ~~March 31,~~September 30, 2020, we had performance obligations secured by letters of credit and bank guarantees of ~~$463~~$519 million related to various purchase and other commitments incident to the ordinary conduct of business.

Note ~~12—~~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 and unrealized gains and losses from commodity derivative contracts are recognized in our consolidated statement of operations. Gains and losses from derivative contracts held for trading not directly related to our physical business are reported net in the “Other income” line item on our consolidated statement of operations. 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 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 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 on the fair value of derivatives, see Note ~~13—~~14—Fair Value ~~Measurements~~.Measurements.

Commodity Derivative Contracts—We sell into or receive supply from the worldwide crude oil, refined petroleum product, NGL, natural gas 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 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 our consolidated balance sheet when the legal right of offset exists.

Millions of Dollars
March 31, 2020 December 31, 2019
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 $ 6,826
(6,173 ) (455 ) 198
23
—
—
23
Other assets 10
(6 ) —
4
3
—
—
3
Liabilities

Other accruals —
(36 ) —
(36 ) 1,188
(1,281 ) 80
(13 )
Other liabilities and deferred credits —
—
—
—
—
(1 ) —
(1 )
Total $ 6,836
(6,215 ) (455 ) 166
1,214
(1,282 ) 80
12


	Millions of Dollars
	September 30, 2020					December 31, 2019
	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	$	838	(730)	(20)	88		23	0	0	23
Other assets	0		0	0	0		3	0	0	3
Liabilities
Other accruals	109		(137)	20	(8)		1,188	(1,281)	80	(13)
Other liabilities and deferred credits	10		(12)	0	(2)		0	(1)	0	(1)
Total	$	957	(879)	0	78		1,214	(1,282)	80	12

At ~~March 31,~~September 30, 2020, and December 31, 2019, there was no material cash collateral received or paid that was not offset on our consolidated balance sheet.

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


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

Sales and other operating revenues	$	20	71		519	(89)
Other income	0		20		9	33
Purchased crude oil and products	(16)		60		301	(41)
Net gain (loss) from commodity derivative activity	$	4	151		829	(97)

Millions of Dollars
Three Months Ended
March 31
2020
2019

Sales and other operating revenues $ 679
(177 )
Other income 3
13
Purchased crude oil and products 441
(155 )
Net gain (loss) from commodity derivative activity $ 1,123
(319 )

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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 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 at least ~~98%~~97% at ~~March 31,~~September 30, 2020, and December 31, 2019.

Open Position
Long / (Short)
March 31
2020
December 31
2019
Commodity
Crude oil, refined petroleum products and NGL (millions of barrels)
(33 ) (16 )


	Open Position Long / (Short)
	September 30 2020	December 31 2019
Commodity
Crude oil, refined petroleum products and NGL (millions of barrels)	(36)	(16)

Interest Rate Derivative Contracts—In 2016, we entered into interest rate swaps to hedge the variability of lease payments on our headquarters facility. These monthly lease payments vary based on monthly changes in the one-month ~~LIBOR~~London Inter-Bank Offered Rate (LIBOR) and changes, if any, in our 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 in April 2021. We have designated these swaps as cash flow hedges.

The aggregate net fair value of these swaps was immaterial at ~~March 31,~~September 30, 2020, and December 31, 2019. We report the mark-to-market gains or losses on our interest rate swaps designated as highly effective cash flow hedges as a component of other comprehensive income (loss), and reclassify such gains and losses into earnings in the same period during which the hedged transaction affects earnings. Net realized gains and losses from settlements of the swaps were immaterial for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019.

We currently estimate that before-tax losses of $7$5 million will be reclassified from accumulated other comprehensive loss into general and administrative expenses during the next 12 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 Instruments

The credit risk from our 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.

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. 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 immaterial at ~~March 31,~~September 30, 2020, and December 31, 2019.

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Note ~~13—~~14—Fair Value Measurements

Recurring Fair Value Measurements

We carry certain assets and liabilities at fair value, which we measure at the reporting date using the price that would be received to sell an asset or paid to transfer a 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 significance of its observable or unobservable inputs to 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.

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


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


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

•

Derivative instruments—We fair value our exchange-traded contracts based on quoted market prices obtained from the New York Mercantile Exchange, the Intercontinental Exchange or other exchanges, and classify them 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 nonexchange quotes, we classify those contracts as Level 2.

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, 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. Physical and OTC 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 midmarket pricing convention (the midpoint between bid and ask prices). When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

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

•

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

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

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

The following tables display the fair value hierarchy for our 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. The following tables also reflect the effect of netting derivative assets and liabilities with the same counterparty for which we have the legal right of offset and collateral netting.

The carrying values and fair values by hierarchy of our financial assets and liabilities, either carried or disclosed at fair value, including any effects of counterparty and collateral netting, were:

Millions of Dollars
March 31, 2020
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 $ 5,251
1,545
—
6,796
(6,179 ) (455 ) —
162
Physical forward contracts —
40
—
40
—
—
—
40
Rabbi trust assets 116
—
—
116
N/A
N/A
—
116
$ 5,367
1,585
—
6,952
(6,179 ) (455 ) —
318

Commodity Derivative Liabilities
Exchange-cleared instruments $ 4,589
1,590
—
6,179
(6,179 ) —
—
—
OTC instruments —
4
—
4
—
—
—
4
Physical forward contracts —
32
—
32
—
—
—
32
Interest rate derivatives —
8
—
8
—
—
—
8
Floating-rate debt —
2,097
—
2,097
N/A
N/A
—
2,097
Fixed-rate debt, excluding finance leases —
10,560
—
10,560
N/A
N/A
17
10,577
$ 4,589
14,291
—
18,880
(6,179 ) —
17
12,718


	Millions of Dollars
	September 30, 2020
	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	$	735	203	0	938	(849)	(20)	0	69
OTC instruments	0		1	0	1	0	0	0	1
Physical forward contracts	0		17	1	18	0	0	0	18

Rabbi trust assets	133		0	0	133	N/A	N/A	0	133
	$	868	221	1	1,090	(849)	(20)	0	221

Commodity Derivative Liabilities
Exchange-cleared instruments	$	653	218	0	871	(849)	(20)	0	2

Physical forward contracts	0		8	0	8	0	0	0	8
Interest rate derivatives	0		5	0	5	0	0	0	5
Floating-rate debt	0		1,863	0	1,863	N/A	N/A	0	1,863
Fixed-rate debt, excluding finance leases	0		13,803	0	13,803	N/A	N/A	(1,421)	12,382
	$	653	15,897	0	16,550	(849)	(20)	(1,421)	14,260


	Millions of Dollars
	December 31, 2019
	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	$	820	368	0	1,188	(1,188)	0	0	0

Physical forward contracts	0		26	0	26	0	0	0	26
Interest rate derivatives	0		1	0	1	0	0	0	1
Rabbi trust assets	127		0	0	127	N/A	N/A	0	127
	$	947	395	0	1,342	(1,188)	0	0	154

Commodity Derivative Liabilities
Exchange-cleared instruments	$	884	385	0	1,269	(1,188)	(80)	0	1
OTC instruments	0		1	0	1	0	0	0	1
Physical forward contracts	0		12	0	12	0	0	0	12

Floating-rate debt	0		1,100	0	1,100	N/A	N/A	0	1,100
Fixed-rate debt, excluding finance leases	0		11,813	0	11,813	N/A	N/A	(1,438)	10,375
	$	884	13,311	0	14,195	(1,188)	(80)	(1,438)	11,489

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Millions of Dollars
December 31, 2019
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 $ 820
368
—
1,188
(1,188 ) —
—
—
Physical forward contracts —
26
—
26
—
—
—
26
Interest rate derivatives —
1
—
1
—
—
—
1
Rabbi trust assets 127
—
—
127
N/A
N/A
—
127
$ 947
395
—
1,342
(1,188 ) —
—
154

Commodity Derivative Liabilities
Exchange-cleared instruments $ 884
385
—
1,269
(1,188 ) (80 ) —
1
OTC instruments —
1
—
1
—
—
—
1
Physical forward contracts —
12
—
12
—
—
—
12
Floating-rate debt —
1,100
—
1,100
N/A
N/A
—
1,100
Fixed-rate debt, excluding finance leases —
11,813
—
11,813
N/A
N/A
(1,438 ) 10,375
$ 884
13,311
—
14,195
(1,188 ) (80 ) (1,438 ) 11,489

The rabbi trust assets are recorded in the “Investments and long-term receivables” line item and floating-rate and fixed-rate debt are recorded in the “Short-term debt” and “Long-term debt” line items on our consolidated balance sheet. See Note ~~12—~~13—Derivatives and Financial Instruments,, for information regarding where the assets and liabilities related to our commodity and interest rate derivatives are recorded on our consolidated balance sheet.

Nonrecurring Fair Value Measurements

~~The~~Equity Investments

In the first quarter of 2020, the nonrecurring fair value measurement used to record an impairment of our DCP Midstream investment was the fair value of our share of DCP Midstream’s limited partner interest in DCP Partners, which was estimated based on average market prices of DCP Partners common units for a ~~15-day~~multi-day trading period encompassing March 31, 2020. This valuation resulted in a Level 2 nonrecurring fair value measurement.

In the third quarter of 2019, the nonrecurring fair value measurement used to record an impairment of our DCP Midstream investment consisted of:

•The fair value of our share of DCP Midstream’s limited partner interest in DCP Partners was estimated based on an average market price of DCP Partners common units for a multi-day trading period encompassing September 30, 2019.

•The fair value of our share of DCP Midstream’s general partner interest in DCP Partners was estimated using two primary inputs: 1) estimated future cash flows of distributions attributable to the incentive distribution rights from DCP Partners, and 2) a multiple of those cash flows based on internal estimates and observation of incentive distribution right (IDR) conversion transactions by other master limited partnerships.

Overall, we concluded the valuation above resulted in a Level 3 nonrecurring fair value measurement.

In the third quarter of 2020, the nonrecurring fair value measurement used to record an impairment of our Red Oak investment was the estimated salvage value of the joint venture’s assets. This valuation resulted in a Level 3 nonrecurring fair value measurement.

See Note 5—Investments, Loans and Long-Term Receivables, for additional information on these impairments.

PP&E and Intangible Assets

In the third quarter of 2020, we remeasured the carrying value of the net PP&E and intangible assets of our San Francisco Refinery asset group to fair value. The estimated fair value of the plants, equipment and intangible assets was determined using a replacement cost approach adjusted, as applicable, for physical deterioration, functional obsolescence and economic obsolescence. The estimated fair value of the properties was determined using a sales comparison approach. This valuation resulted in a Level 3 nonrecurring fair value measurement. See Note 6—Properties, Plants and Equipment, for additional information on this impairment.

Goodwill

The carrying value of the Refining reporting unit’s goodwill was remeasured to fair value on a nonrecurring basis in the first quarter of 2020. The fair value of the Refining reporting unit was calculated by weighting the results from the income approach and the market approach. The income approach uses a discounted cash flow model that requires various observable and nonobservable inputs, such as prices, volumes, expenses, capital expenditures, discount rates and projected ~~long‑term~~long-term growth rates and terminal values. The market approach uses peer company enterprise values relative to current and future net income (loss) before net interest expense, income taxes, depreciation and amortization (EBITDA) projections to arrive at an average multiple. This multiple was applied to the reporting unit’s current and projected EBITDA, with consideration for an estimated market participant acquisition premium. The resulting fair value Level 3 estimate was less than the Refining reporting unit’s carrying value by an amount that exceeded the existing goodwill balance of the reporting unit. As a result, the Refining reporting unit’s goodwill was impaired to 0. As part of our impairment analysis, the fair value of all reporting units was reconciled to the company’s market capitalization. See Note 7—Goodwill, for additional information onregarding the goodwill impairment.

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Note ~~14—~~15—Pension and Postretirement Plans

The components of net periodic benefit cost for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019, were as follows:


	Millions of Dollars
	Pension Benefits					Other Benefits
	2020			2019		2020	2019
	U.S.		Int’l.	U.S.	Int’l.
Components of Net Periodic Benefit Cost
Three Months Ended September 30
Service cost	$	35	7	32	5	1	1
Interest cost	21		5	27	6	2	2
Expected return on plan assets	(38)		(12)	(36)	(10)	0	0
Amortization of prior service credit	0		0	0	0	(1)	0
Recognized net actuarial loss	21		4	14	2	0	0
Settlements	17		0	1	0	0	0
Net periodic benefit cost*	$	56	4	38	3	2	3

Nine Months Ended September 30
Service cost	$	102	21	95	17	4	4
Interest cost	70		16	81	19	5	6
Expected return on plan assets	(121)		(37)	(107)	(33)	0	0
Amortization of prior service credit	0		0	0	0	(2)	(1)
Recognized net actuarial loss	50		12	40	5	0	0
Settlements	56		0	7	0	0	0
Net periodic benefit cost*	$	157	12	116	8	7	9
* Included in the “Operating expenses” and “Selling, general and administrative expenses” line items on our consolidated statement of operations.

Millions of Dollars
Pension Benefits Other Benefits
2020 2019 2020
2019
U.S.
Int’l.
U.S.
Int’l.

Components of Net Periodic Benefit Cost
Three Months Ended March 31
Service cost $ 33
7
32
6
1
1
Interest cost 25
6
27
6
2
2
Expected return on plan assets (41 ) (13 ) (36 ) (11 ) —
—
Amortization of prior service credit —
—
—
—
(1 ) —
Recognized net actuarial loss 14
4
13
2
—
—
Settlements —
—
4
—
—
—
Net periodic benefit cost* $ 31

4

40

3

2

3
* Included in the “Operating expenses” and “Selling, general and administrative expenses” line items on our consolidated statement of operations.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we contributed $4$28 million to our U.S. pension and other postretirement benefit plans and $20 million to our international pension plans. We currently expect to make additional contributions of approximately $6 million to our U.S. pension and other postretirement benefit plans and $7 million to our international pension ~~plans. We currently expect to make additional contributions of approximately $42 million to our U.S. pension and other postretirement benefit plans and $20 million to our international pension~~ plans during the remainder of 2020.

Lump-sum benefit payments exceeded the sum of service and interest costs for our U.S. qualified pension plan during 2020 and for our U.S. non-qualified pension plan during 2020 and 2019. As a result, we recognized a proportionate share of prior actuarial losses, or pension settlement expense, totaling $56 million and $7 million for the nine months ended September 30, 2020 and 2019, respectively.

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Note ~~15—~~16—Accumulated Other Comprehensive Loss

Changes in the balances of each component of accumulated other comprehensive loss were as follows:

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

December 31, 2019 $ (656 ) (131 ) (1 ) (788 )
Other comprehensive income (loss) before reclassifications 1
(221 ) (7 ) (227 )
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss and net prior service credit 19
—
—
19
Foreign currency translation —
—
—
—
Hedging —
—
—
—
Net current period other comprehensive income (loss) 20
(221 ) (7 ) (208 )
Other —
5
—
5
March 31, 2020 $ (636 ) (347 ) (8 ) (991 )

December 31, 2018 $ (472 ) (228 ) 8
(692 )
Other comprehensive income (loss) before reclassifications 3
57
(1 ) 59
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss and settlements 15
—
—
15
Foreign currency translation —
—
—
—
Hedging —
—
(2 ) (2 )
Net current period other comprehensive income (loss) 18
57
(3 ) 72
Income taxes reclassified to retained earnings** (93 ) 2
2
(89 )
March 31, 2019 $ (547 ) (169 ) 7
(709 )
* Included in the computation of net periodic benefit cost. See Note 14—Pension and Postretirement Plans, for additional information.
** As of January 1, 2019, stranded income taxes related to the enactment of the Tax Act in December 2017 were reclassified to retained earnings upon adoption of ASU No. 2018-02.


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

December 31, 2019	$	(656)	(131)	(1)	(788)
Other comprehensive loss before reclassifications	(221)		(44)	(8)	(273)
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss, prior service credit and settlements	86		—	—	86
Foreign currency translation	—		0	—	0
Hedging	—		—	3	3
Net current period other comprehensive loss	(135)		(44)	(5)	(184)
Other	—		5	—	5
September 30, 2020	$	(791)	(170)	(6)	(967)

December 31, 2018	$	(472)	(228)	8	(692)
Other comprehensive income (loss) before reclassifications	5		(124)	(6)	(125)
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss, prior service credit and settlements	40		—	—	40
Foreign currency translation	—		0	—	0
Hedging	—		—	(5)	(5)
Net current period other comprehensive income (loss)	45		(124)	(11)	(90)
Income taxes reclassified to retained earnings**	(93)		2	2	(89)
September 30, 2019	$	(520)	(350)	(1)	(871)
* Included in the computation of net periodic benefit cost. See Note 15—Pension and Postretirement Plans, for additional information.
** As of January 1, 2019, stranded income taxes related to the enactment of the Tax Cuts and Jobs Act in December 2017 were reclassified to retained earnings upon adoption of ASU No. 2018-02.

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Note ~~16—~~17—Related Party Transactions

Significant transactions with related parties were:


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

Operating revenues and other income (a)	$	450	756		1,337	2,235
Purchases (b)	1,612		2,842		4,868	8,770
Operating expenses and selling, general and administrative expenses (c)	65		8		171	25

(a)We sold NGL, other petrochemical feedstocks and solvents to Chevron Phillips Chemical Company LLC (CPChem), gas oil and hydrogen feedstocks to Excel Paralubes (Excel), 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 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.

(b)We purchased crude oil, refined petroleum products and NGL from WRB and also acted as agent for WRB in distributing solvents. We also purchased natural gas and NGL from DCP Midstream and CPChem, as well as other feedstocks from various equity affiliates, for use in our refinery and fractionation processes. In addition, we purchased base oils and fuel products from Excel for use in our specialty and refining businesses. We paid NGL fractionation fees to CPChem. We also paid fees to various pipeline equity affiliates for transporting crude oil, refined petroleum products and NGL.

(c)We paid consignment fees to CF United, and utility and processing fees to various equity affiliates.

Millions of Dollars
Three Months Ended
March 31
2020
2019

Operating revenues and other income (a) $ 534
683
Purchases (b) 2,126
2,668
Operating expenses and selling, general and administrative expenses (c) 51
9

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~~(a)~~

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

~~(b)~~

We purchased crude oil, refined petroleum products and NGL from WRB and also acted as agent for WRB in distributing solvents. We also purchased natural gas and NGL from DCP Midstream and CPChem, as well as other feedstocks from various affiliates, for use in our refinery and fractionation processes. In addition, we purchased base oils and fuel products from Excel for use in our specialty and refining businesses. We paid NGL fractionation fees to CPChem. We also paid fees to various pipeline affiliates for transporting crude oil, refined petroleum products and NGL.


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

Note ~~17—~~18—Segment Disclosures and Related Information

Our operating segments are:

1)Midstream—Provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, processing, and marketing services, mainly in the United States. The Midstream segment includes our master limited partnership (MLP), Phillips 66 Partners, as well as our 50% equity investment in DCP Midstream.

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

3)Refining—Refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, at 13 refineries in the United States and Europe.

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

Provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, processing, and marketing services, mainly in the United States. The Midstream segment includes our master limited partnership (MLP), Phillips 66 Partners, as well as our 50% equity investment in DCP Midstream.


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


3)	~~Refining—Refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, at 13 refineries in the United States and Europe.~~


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

Corporate and Other includes general corporate overhead, interest expense, our investment in new technologies, and various other corporate activities. Corporate assets include all cash, cash equivalents and income tax-related assets.

Intersegment sales are at prices that we believe approximate market.

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Analysis of Results by Operating Segment

Millions of Dollars
Three Months Ended
March 31
2020
2019
Sales and Other Operating Revenues*

Midstream
Total sales $ 1,538
1,897
Intersegment eliminations (495 ) (584 )
Total Midstream 1,043
1,313
Chemicals 1
1
Refining
Total sales 13,781
16,861
Intersegment eliminations (7,633 ) (9,768 )
Total Refining 6,148
7,093
Marketing and Specialties
Total sales 14,249
15,242
Intersegment eliminations (570 ) (553 )
Total Marketing and Specialties 13,679
14,689
Corporate and Other 7
7
Consolidated sales and other operating revenues $ 20,878
23,103
* See Note 2—Sales and Other Operating Revenues, for further details on our disaggregated sales and other operating revenues.

Income (Loss) Before Income Taxes
Midstream $ (702 ) 316
Chemicals 169
227
Refining (2,261 ) (198 )
Marketing and Specialties 513
205
Corporate and Other (197 ) (210 )
Consolidated income (loss) before income taxes $ (2,478 ) 340


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019
Sales and Other Operating Revenues*
Midstream
Total sales	$	1,458	1,602		4,096	5,208
Intersegment eliminations	(446)		(482)		(1,323)	(1,526)
Total Midstream	1,012		1,120		2,773	3,682
Chemicals	1		1		3	3
Refining
Total sales	10,434		19,591		31,567	56,839
Intersegment eliminations	(6,286)		(11,452)		(18,356)	(34,008)
Total Refining	4,148		8,139		13,211	22,831
Marketing and Specialties
Total sales	11,038		18,535		32,780	53,464
Intersegment eliminations	(278)		(584)		(1,068)	(1,833)
Total Marketing and Specialties	10,760		17,951		31,712	51,631
Corporate and Other	8		7		21	21
Consolidated sales and other operating revenues	$	15,929	27,218		47,720	78,168
* See Note 2—Sales and Other Operating Revenues, for further details on our disaggregated sales and other operating revenues.

Income (Loss) Before Income Taxes
Midstream	$	146	(460)		(232)	279
Chemicals	231		227		442	729
Refining	(1,903)		856		(5,042)	1,641
Marketing and Specialties	415		498		1,214	1,056
Corporate and Other	(239)		(178)		(655)	(593)
Consolidated income (loss) before income taxes	$	(1,350)	943		(4,273)	3,112

Millions of Dollars
March 31
2020
December 31
2019
Total Assets
Midstream $ 14,846
15,716
Chemicals 6,376
6,249
Refining 22,516
25,150
Marketing and Specialties 7,108
8,659
Corporate and Other 2,614
2,946
Consolidated total assets $ 53,460
58,720


	Millions of Dollars
	September 30 2020		December 31 2019
Total Assets
Midstream	$	15,605	15,716
Chemicals	6,284		6,249
Refining	20,898		25,150
Marketing and Specialties	7,322		8,659
Corporate and Other	4,172		2,946
Consolidated total assets	$	54,281	58,720

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Note ~~18—~~19—Income Taxes

Historically, we have calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full year to income (loss) for the interim period. In the second quarter of 2020, and again in the third quarter, we concluded that we could not calculate a reliable estimate of our annual effective tax rate due to the range of potential impacts the COVID-19 pandemic may have on our business and results of operations. Accordingly, we computed the effective tax rate for the nine-month period ending September 30, 2020, using actual results.

Our effective income tax rate for the three and nine months ended ~~March 31,~~September 30, 2020, was 2%46% and 25%, respectively, compared with ~~21%~~16% and 18% for the corresponding ~~period~~periods of 2019. The ~~decrease~~increase in our effective tax rate for the three months ended September 30, 2020, was primarily ~~attributable~~due to the ~~impact of our foreign operations, income attributable~~ability provided under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to ~~noncontrolling interests,~~carry back a ~~nondeductible goodwill impairment and a~~2020 net operating loss ~~carryback~~ to a year with a 35% income tax ~~rate.~~rate, state income tax, foreign operations and income attributable to noncontrolling interests. The increase in our effective tax rate for the nine months ended September 30, 2020, was primarily due to the ability provided under the CARES Act to carry back a 2020 net operating loss to a year with a 35% income tax rate, foreign operations and income attributable to noncontrolling interests, partially offset by the impact of the nondeductible goodwill impairment.

The effective income tax rate for the three months ended ~~March 31,~~September 30, 2020, varied from the U.S. federal statutory income tax rate of 21%, primarily due to the ~~impact of our foreign operations, income attributable~~ability provided under the CARES Act to ~~noncontrolling interests,~~carry back a ~~nondeductible goodwill impairment and a~~2020 net operating loss ~~carryback~~ to a year with a 35% income tax ~~rate. These items have a disproportionate impact on our~~rate and state income tax. The effective income tax rate infor the nine months ended September 30, 2020, varied from the U.S. federal statutory rate of 21%, primarily due to the ability provided under the CARES Act to carry back a ~~period~~2020 net operating loss to a year with a ~~before-tax loss.~~35% income tax rate and state income tax, partially offset by the impact of the nondeductible goodwill impairment.

An income tax receivable of $1.3 billion is included in the “Accounts and notes receivable” line item on our consolidated balance sheet as of September 30, 2020, which reflects our estimate of the tax benefit that we expect to realize within the next 12 months.

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Note ~~19—~~20—Phillips 66 Partners LP

Phillips 66 Partners, headquartered in Houston, Texas, is a publicly traded MLP formed in 2013 to own, operate, develop and acquire primarily fee-based midstream assets. Phillips 66 Partners’ operations currently consist of crude oil, refined petroleum product and NGL transportation, fractionation, processing, terminaling, and storage assets.

We consolidate Phillips 66 Partners because we determined it is a VIE of which 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. As a result of this consolidation, the public common and perpetual convertible preferred unitholders’ ownership interests in Phillips 66 Partners are reflected as noncontrolling interests in our financial statements. At ~~March 31,~~September 30, 2020, we owned 170 million Phillips 66 Partners common units, representing a 74% limited partner interest in Phillips 66 Partners, while the public owned a 26% limited partner interest and 13.8 million perpetual convertible preferred units.

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
March 31
2020
December 31
2019

Cash and cash equivalents $ 92
286
Equity investments* 3,136
2,961
Net properties, plants and equipment 3,410
3,349
Short-term debt 25
25
Long-term debt 3,491
3,491
* Included in “Investments and long-term receivables” line item on the Phillips 66 consolidated balance sheet.


	Millions of Dollars
	September 30 2020		December 31 2019

Cash and cash equivalents	$	2	286
Equity investments*	3,373		2,961
Net properties, plants and equipment	3,575		3,349
Short-term debt	340		25
Long-term debt	3,443		3,491
* Included in the “Investments and long-term receivables” line item on the Phillips 66 consolidated balance sheet.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, ~~and 2019,~~ on a settlement-date basis, Phillips 66 Partners generated net proceeds of $2 million ~~and $32 million, respectively,~~ from common units issued under its continuous offering of common units, or at-the-market (ATM) ~~programs. Since inception~~programs, with 0 issuances in ~~June 2016~~the second and ~~through March 31, 2020,~~third quarters of 2020. For the ~~ATM programs have~~three and nine months ended September 30, 2019, Phillips 66 Partners generated net proceeds of ~~$494 million.~~$91 million and $133 million, respectively, under its ATM programs.

Phillips 66 Partners has a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. After deducting a co-venturer’s pending acquisition of a 35% interest in the consolidated holding company, Phillips 66 Partners has an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC. Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi and the Sweeny area, including the Phillips 66 Sweeny Refinery, as well as access to the Houston market. ~~On April 1, 2020,~~Phillips 66 Partners has a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. In December 2018, a third party exercised its option to acquire a 35% interest in the holding company. Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP at that time. The Gray Oak Pipeline commenced full operations ~~from West Texas to Texas Gulf Coast destinations. The Eagle Ford segment~~in the second quarter of 2020, and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the ~~pipeline commenced operations later in April.~~sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company ~~is expected to be~~was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet, inand the ~~second quarter. Also at that time, the~~ premium of $84 million previously paid by the co-venturer ~~will be~~in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of operations. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, the co-venturer contributed an aggregate of ~~$23~~$64 million to the holding company to fund its portion of Gray Oak Pipeline, LLC’s cash calls. Phillips 66 Partners has an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering a co-venturer’s 35% interest in the consolidated holding company. See Note 5—Investments, Loans and Long-Term Receivables, for further discussion regarding Phillips 66 Partners’ investment in Gray Oak Pipeline, ~~LLC.~~

LLC, Dakota Access and ETCO, and Liberty.

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Note ~~20—~~21—Condensed Consolidating Financial Information

Phillips 66 has 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, 2020
Statement of Operations	Phillips 66		Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments	Total Consolidated
Revenues and Other Income (Loss)
Sales and other operating revenues	$	0	11,907	4,022	—	15,929
Equity in earnings (losses) of affiliates	(725)		173	220	681	349
Net gain on dispositions	0		1	0	0	1
Other income	0		11	9	0	20
Intercompany revenues	1		1,000	2,332	(3,333)	—
Total Revenues and Other Income (Loss)	(724)		13,092	6,583	(2,652)	16,299

Costs and Expenses
Purchased crude oil and products	0		12,056	5,685	(3,232)	14,509
Operating expenses	0		795	253	(32)	1,016
Selling, general and administrative expenses	1		295	91	(3)	384
Depreciation and amortization	0		237	115	0	352
Impairments	0		962	178	0	1,140
Taxes other than income taxes	0		78	28	0	106
Accretion on discounted liabilities	0		4	2	0	6
Interest and debt expense	98		15	85	(66)	132
Foreign currency transaction losses	0		0	4	0	4
Total Costs and Expenses	99		14,442	6,441	(3,333)	17,649
Income (loss) before income taxes	(823)		(1,350)	142	681	(1,350)
Income tax expense (benefit)	(24)		(625)	25	0	(624)
Net Income (Loss)	(799)		(725)	117	681	(726)
Less: net income attributable to noncontrolling interests	0		0	73	0	73
Net Income (Loss) Attributable to Phillips 66	$	(799)	(725)	44	681	(799)

Comprehensive Income (Loss)	$	(618)	(544)	254	363	(545)

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Millions of Dollars
Three Months Ended March 31, 2020
Statement of Operations Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Revenues and Other Income
Sales and other operating revenues $ —
15,510
5,368
—
20,878
Equity in earnings (losses) of affiliates (2,420 ) (361 ) 239
2,907
365
Net gain on dispositions —
1
—
—
1
Other income (loss) —
(2 ) 2
—
—
Intercompany revenues —
930
2,418
(3,348 ) —
Total Revenues and Other Income (Loss) (2,420 ) 16,078
8,027
(441 ) 21,244

Costs and Expenses
Purchased crude oil and products —
14,986
6,689
(3,235 ) 18,440
Operating expenses —
1,117
254
(30 ) 1,341
Selling, general and administrative expenses 3
211
107
(2 ) 319
Depreciation and amortization —
235
107
—
342
Impairments —
1,805
1,201
—
3,006
Taxes other than income taxes —
123
34
—
157
Accretion on discounted liabilities —
5
1
—
6
Interest and debt expense 78
36
78
(81 ) 111
Total Costs and Expenses 81
18,518
8,471
(3,348 ) 23,722
Loss before income taxes (2,501 ) (2,440 ) (444 ) 2,907
(2,478 )
Income tax benefit (5 ) (20 ) (26 ) —
(51 )
Net Loss (2,496 ) (2,420 ) (418 ) 2,907
(2,427 )
Less: net income attributable to noncontrolling interests —
—
69
—
69
Net Loss Attributable to Phillips 66 $ (2,496 ) (2,420 ) (487 ) 2,907
(2,496 )

Comprehensive Loss $ (2,704 ) (2,628 ) (627 ) 3,324
(2,635 )

Millions of Dollars
Three Months Ended March 31, 2019
Statement of Operations Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Revenues and Other Income
Sales and other operating revenues $ —
17,415
5,688
—
23,103
Equity in earnings of affiliates 281
431
165
(361 ) 516
Net gain on dispositions —
—
1
—
1
Other income —
20
18
—
38
Intercompany revenues —
1,161
3,215
(4,376 ) —
Total Revenues and Other Income 281
19,027
9,087
(4,737 ) 23,658

Costs and Expenses
Purchased crude oil and products —
17,080
8,254
(4,279 ) 21,055
Operating expenses —
1,000
326
(19 ) 1,307
Selling, general and administrative expenses 3
255
110
(2 ) 366
Depreciation and amortization —
227
104
—
331
Impairments —
—
1
—
1
Taxes other than income taxes —
95
33
—
128
Accretion on discounted liabilities —
4
1
1
6
Interest and debt expense 93
36
67
(77 ) 119
Foreign currency transaction losses —
—
5
—
5
Total Costs and Expenses 96
18,697
8,901
(4,376 ) 23,318
Income before income taxes 185
330
186
(361 ) 340
Income tax expense (benefit) (19 ) 49
40
—
70
Net Income 204
281
146
(361 ) 270
Less: net income attributable to noncontrolling interests —
—
66
—
66
Net Income Attributable to Phillips 66 $ 204
281
80
(361 ) 204

Comprehensive Income $ 276
353
211
(498 ) 342


	Millions of Dollars
	Three Months Ended September 30, 2019
Statement of Operations	Phillips 66		Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments	Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	0	20,947	6,271	—	27,218
Equity in earnings of affiliates	781		214	147	(643)	499
Net gain on dispositions	0		1	17	0	18
Other income	0		25	11	0	36
Intercompany revenues	0		837	3,704	(4,541)	—
Total Revenues and Other Income	781		22,024	10,150	(5,184)	27,771

Costs and Expenses
Purchased crude oil and products	0		19,383	8,866	(4,443)	23,806
Operating expenses	0		959	264	(17)	1,206
Selling, general and administrative expenses	1		324	94	(3)	416
Depreciation and amortization	0		230	106	0	336
Impairments	0		0	853	0	853
Taxes other than income taxes	0		77	28	0	105
Accretion on discounted liabilities	0		4	2	0	6
Interest and debt expense	85		35	67	(78)	109
Foreign currency transaction gains	0		0	(9)	0	(9)
Total Costs and Expenses	86		21,012	10,271	(4,541)	26,828
Income (loss) before income taxes	695		1,012	(121)	(643)	943
Income tax expense (benefit)	(17)		231	(64)	0	150
Net Income (Loss)	712		781	(57)	(643)	793
Less: net income attributable to noncontrolling interests	0		0	81	0	81
Net Income (Loss) Attributable to Phillips 66	$	712	781	(138)	(643)	712

Comprehensive Income (Loss)	$	608	677	(170)	(426)	689

Table of Contents


	Millions of Dollars
	Nine Months Ended September 30, 2020
Statement of Operations	Phillips 66		Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments	Total Consolidated
Revenues and Other Income (Loss)
Sales and other operating revenues	$	0	35,653	12,067	—	47,720
Equity in earnings (losses) of affiliates	(3,231)		42	633	3,427	871
Net gain on dispositions	0		2	85	0	87
Other income	0		28	20	0	48
Intercompany revenues	2		2,534	6,303	(8,839)	—
Total Revenues and Other Income (Loss)	(3,229)		38,259	19,108	(5,412)	48,726

Costs and Expenses
Purchased crude oil and products	0		35,032	16,039	(8,514)	42,557
Operating expenses	0		2,722	755	(94)	3,383
Selling, general and administrative expenses	5		825	290	(8)	1,112
Depreciation and amortization	0		707	330	0	1,037
Impairments	0		2,767	1,379	0	4,146
Taxes other than income taxes	0		287	90	0	377
Accretion on discounted liabilities	0		13	4	0	17
Interest and debt expense	268		73	242	(223)	360
Foreign currency transaction losses	0		0	10	0	10
Total Costs and Expenses	273		42,426	19,139	(8,839)	52,999
Loss before income taxes	(3,502)		(4,167)	(31)	3,427	(4,273)
Income tax benefit	(66)		(936)	(51)	0	(1,053)
Net Income (Loss)	(3,436)		(3,231)	20	3,427	(3,220)
Less: net income attributable to noncontrolling interests	0		0	216	0	216
Net Loss Attributable to Phillips 66	$	(3,436)	(3,231)	(196)	3,427	(3,436)

Comprehensive Loss	$	(3,620)	(3,415)	(30)	3,661	(3,404)

Table of Contents


	Millions of Dollars
	Nine Months Ended September 30, 2019
Statement of Operations	Phillips 66		Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments	Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	0	60,060	18,108	—	78,168
Equity in earnings of affiliates	2,557		1,645	514	(3,053)	1,663
Net gain on dispositions	0		1	18	0	19
Other income	0		67	30	0	97
Intercompany revenues	0		2,720	11,014	(13,734)	—
Total Revenues and Other Income	2,557		64,493	29,684	(16,787)	79,947

Costs and Expenses
Purchased crude oil and products	0		56,648	26,202	(13,435)	69,415
Operating expenses	0		2,876	861	(59)	3,678
Selling, general and administrative expenses	5		898	295	(8)	1,190
Depreciation and amortization	0		686	315	0	1,001
Impairments	0		1	855	0	856
Taxes other than income taxes	0		242	88	0	330
Accretion on discounted liabilities	0		13	4	0	17
Interest and debt expense	267		108	200	(232)	343
Foreign currency transaction losses	0		0	5	0	5
Total Costs and Expenses	272		61,472	28,825	(13,734)	76,835
Income before income taxes	2,285		3,021	859	(3,053)	3,112
Income tax expense (benefit)	(55)		464	136	0	545
Net Income	2,340		2,557	723	(3,053)	2,567
Less: net income attributable to noncontrolling interests	0		0	227	0	227
Net Income Attributable to Phillips 66	$	2,340	2,557	496	(3,053)	2,340

Comprehensive Income	$	2,250	2,467	615	(2,855)	2,477

Table of Contents


	Millions of Dollars
	September 30, 2020
Balance Sheet	Phillips 66		Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments	Total Consolidated
Assets
Cash and cash equivalents	$	0	665	797	0	1,462
Accounts and notes receivable	0		4,477	3,905	(2,419)	5,963
Inventories	0		3,421	1,476	0	4,897
Prepaid expenses and other current assets	0		255	245	0	500
Total Current Assets	0		8,818	6,423	(2,419)	12,822
Investments and long-term receivables	30,358		25,272	10,990	(52,853)	13,767
Net properties, plants and equipment	0		12,783	10,706	0	23,489
Goodwill	0		1,047	378	0	1,425
Intangibles	0		717	132	0	849
Other assets	12		4,207	713	(3,003)	1,929
Total Assets	$	30,370	52,844	29,342	(58,275)	54,281

Liabilities and Equity
Accounts payable	$	0	5,282	2,594	(2,419)	5,457
Short-term debt	1,498		15	347	0	1,860
Accrued income and other taxes	0		480	749	0	1,229
Employee benefit obligations	0		392	51	0	443
Other accruals	159		1,304	425	(364)	1,524
Total Current Liabilities	1,657		7,473	4,166	(2,783)	10,513
Long-term debt	8,939		156	3,571	0	12,666
Asset retirement obligations and accrued environmental costs	0		463	181	0	644
Deferred income taxes	0		3,566	1,944	(3)	5,507
Employee benefit obligations	0		1,166	228	0	1,394
Other liabilities and deferred credits	22		10,990	5,664	(15,424)	1,252
Total Liabilities	10,618		23,814	15,754	(18,210)	31,976
Common stock	3,253		25,886	9,582	(35,468)	3,253
Retained earnings	17,466		4,111	1,743	(5,884)	17,436
Accumulated other comprehensive loss	(967)		(967)	(320)	1,287	(967)
Noncontrolling interests	0		0	2,583	0	2,583
Total Liabilities and Equity	$	30,370	52,844	29,342	(58,275)	54,281

Table of Contents


	Millions of Dollars
	December 31, 2019
Balance Sheet	Phillips 66		Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments	Total Consolidated
Assets
Cash and cash equivalents	$	0	136	1,478	0	1,614
Accounts and notes receivable	86		6,334	4,148	(2,058)	8,510
Inventories	0		2,594	1,182	0	3,776
Prepaid expenses and other current assets	2		362	131	0	495
Total Current Assets	88		9,426	6,939	(2,058)	14,395
Investments and long-term receivables	33,082		25,039	10,989	(54,539)	14,571
Net properties, plants and equipment	0		13,676	10,110	0	23,786
Goodwill	0		2,853	417	0	3,270
Intangibles	0		732	137	0	869
Other assets	14		4,290	714	(3,189)	1,829
Total Assets	$	33,184	56,016	29,306	(59,786)	58,720

Liabilities and Equity
Accounts payable	$	0	7,024	3,609	(2,058)	8,575
Short-term debt	500		16	31	0	547
Accrued income and other taxes	0		386	593	0	979
Employee benefit obligations	0		648	62	0	710
Other accruals	65		850	249	(329)	835
Total Current Liabilities	565		8,924	4,544	(2,387)	11,646
Long-term debt	7,434		155	3,627	0	11,216
Asset retirement obligations and accrued environmental costs	0		460	178	0	638
Deferred income taxes	0		3,727	1,828	(2)	5,553
Employee benefit obligations	0		825	219	0	1,044
Other liabilities and deferred credits	245		8,975	5,465	(13,231)	1,454
Total Liabilities	8,244		23,066	15,861	(15,620)	31,551
Common stock	3,634		25,838	9,516	(35,354)	3,634
Retained earnings	22,094		7,900	1,940	(9,870)	22,064
Accumulated other comprehensive loss	(788)		(788)	(270)	1,058	(788)
Noncontrolling interests	0		0	2,259	0	2,259
Total Liabilities and Equity	$	33,184	56,016	29,306	(59,786)	58,720

Table of Contents


	Millions of Dollars
	Nine Months Ended September 30, 2020
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 (Used in) Operating Activities	$	520	(225)	1,733	(556)	1,472

Cash Flows From Investing Activities
Capital expenditures and investments	0		(746)	(1,710)	42	(2,414)
Return of investments in equity affiliates	0		12	127	0	139
Proceeds from asset dispositions	0		2	1	0	3
Intercompany lending activities	(1,352)		2,309	(957)	0	0
Advances/loans—related parties	0		(230)	(21)	0	(251)
Collection of advances/loans—related parties	0		20	24	0	44

Other	0		(40)	(47)	0	(87)


Net Cash Provided by (Used in) Investing Activities	(1,352)		1,327	(2,583)	42	(2,566)

Cash Flows From Financing Activities
Issuance of debt	3,015		0	290	0	3,305
Repayment of debt	(500)		(17)	(29)	0	(546)
Issuance of common stock	6		0	0	0	6
Repurchase of common stock	(443)		0	0	0	(443)
Dividends paid on common stock	(1,182)		(556)	0	556	(1,182)
Distributions to noncontrolling interests	0		0	(201)	0	(201)
Net proceeds from issuance of Phillips 66 Partners LP common units	0		0	2	0	2
Other	(64)		0	84	(42)	(22)


Net Cash Provided by (Used in) Financing Activities	832		(573)	146	514	919

Effect of Exchange Rate Changes on Cash and Cash Equivalents	0		0	23	0	23

Net Change in Cash and Cash Equivalents	0		529	(681)	0	(152)
Cash and cash equivalents at beginning of period	0		136	1,478	0	1,614
Cash and Cash Equivalents at End of Period	$	0	665	797	0	1,462

Table of Contents

Millions of Dollars
March 31, 2020
Balance Sheet Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Assets
Cash and cash equivalents $ —
809
412
—
1,221
Accounts and notes receivable —
3,114
3,726
(2,281 ) 4,559
Inventories —
3,821
1,510
—
5,331
Prepaid expenses and other current assets —
387
207
—
594
Total Current Assets —
8,131
5,855
(2,281 ) 11,705
Investments and long-term receivables 30,738
24,454
10,173
(51,730 ) 13,635
Net properties, plants and equipment —
13,738
10,313
—
24,051
Goodwill —
1,047
378
—
1,425
Intangibles —
744
136
—
880
Other assets 13
4,239
662
(3,150 ) 1,764
Total Assets $ 30,751
52,353
27,517
(57,161 ) 53,460

Liabilities and Equity
Accounts payable $ —
5,296
2,307
(2,281 ) 5,322
Short-term debt 2,196
16
31
—
2,243
Accrued income and other taxes —
303
400
—
703
Employee benefit obligations —
271
30
—
301
Other accruals 134
1,620
548
(342 ) 1,960
Total Current Liabilities 2,330
7,506
3,316
(2,623 ) 10,529
Long-term debt 6,936
165
3,619
—
10,720
Asset retirement obligations and accrued environmental costs —
460
175
—
635
Deferred income taxes —
3,863
1,627
(3 ) 5,487
Employee benefit obligations —
787
213
—
1,000
Other liabilities and deferred credits 83
9,782
5,799
(14,214 ) 1,450
Total Liabilities 9,349
22,563
14,749
(16,840 ) 29,821
Common stock 3,195
25,859
9,527
(35,386 ) 3,195
Retained earnings 19,198
4,922
1,453
(6,405 ) 19,168
Accumulated other comprehensive loss (991 ) (991 ) (479 ) 1,470
(991 )
Noncontrolling interests —
—
2,267
—
2,267
Total Liabilities and Equity $ 30,751
52,353
27,517
(57,161 ) 53,460


	Millions of Dollars
	Nine Months Ended September 30, 2019
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 (Used in) Operating Activities	$	(143)	1,645	1,730	(118)	3,114

Cash Flows From Investing Activities
Capital expenditures and investments	0		(803)	(1,792)	0	(2,595)
Return of investments in equity affiliates	0		352	53	(350)	55
Proceeds from asset dispositions	0		0	84	0	84
Intercompany lending activities	2,587		(2,245)	(342)	0	0
Advances/loans—related parties	0		0	(95)	0	(95)
Collection of advances/loans—related parties	0		0	95	0	95

Other	0		(3)	27	0	24


Net Cash Provided by (Used in) Investing Activities	2,587		(2,699)	(1,970)	(350)	(2,432)

Cash Flows From Financing Activities
Issuance of debt	0		0	1,758	0	1,758
Repayment of debt	0		(14)	(990)	0	(1,004)
Issuance of common stock	15		0	0	0	15
Repurchase of common stock	(1,238)		0	0	0	(1,238)
Dividends paid on common stock	(1,172)		0	(118)	118	(1,172)

Distributions to noncontrolling interests	0		0	(176)	0	(176)
Net proceeds from issuance of Phillips 66 Partners LP common units	0		0	133	0	133
Other	(49)		(4)	(15)	350	282


Net Cash Provided by (Used in) Financing Activities	(2,444)		(18)	592	468	(1,402)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	0		0	(31)	0	(31)

Net Change in Cash and Cash Equivalents	0		(1,072)	321	0	(751)
Cash and cash equivalents at beginning of period	0		1,648	1,371	0	3,019
Cash and Cash Equivalents at End of Period	$	0	576	1,692	0	2,268

Millions of Dollars
December 31, 2019
Balance Sheet Phillips 66
Phillips 66 Company
All Other Subsidiaries
Consolidating Adjustments
Total Consolidated
Assets
Cash and cash equivalents $ —
136
1,478
—
1,614
Accounts and notes receivable 86
6,334
4,148
(2,058 ) 8,510
Inventories —
2,594
1,182
—
3,776
Prepaid expenses and other current assets 2
362
131
—
495
Total Current Assets 88
9,426
6,939
(2,058 ) 14,395
Investments and long-term receivables 33,082
25,039
10,989
(54,539 ) 14,571
Net properties, plants and equipment —
13,676
10,110
—
23,786
Goodwill —
2,853
417
—
3,270
Intangibles —
732
137
—
869
Other assets 14
4,290
714
(3,189 ) 1,829
Total Assets $ 33,184
56,016
29,306
(59,786 ) 58,720

Liabilities and Equity
Accounts payable $ —
7,024
3,609
(2,058 ) 8,575
Short-term debt 500
16
31
—
547
Accrued income and other taxes —
386
593
—
979
Employee benefit obligations —
648
62
—
710
Other accruals 65
850
249
(329 ) 835
Total Current Liabilities 565
8,924
4,544
(2,387 ) 11,646
Long-term debt 7,434
155
3,627
—
11,216
Asset retirement obligations and accrued environmental costs —
460
178
—
638
Deferred income taxes —
3,727
1,828
(2 ) 5,553
Employee benefit obligations —
825
219
—
1,044
Other liabilities and deferred credits 245
8,975
5,465
(13,231 ) 1,454
Total Liabilities 8,244
23,066
15,861
(15,620 ) 31,551
Common stock 3,634
25,838
9,516
(35,354 ) 3,634
Retained earnings 22,094
7,900
1,940
(9,870 ) 22,064
Accumulated other comprehensive loss (788 ) (788 ) (270 ) 1,058
(788 )
Noncontrolling interests —
—
2,259
—
2,259
Total Liabilities and Equity $ 33,184
56,016
29,306
(59,786 ) 58,720

Table of Contents

Millions of Dollars
Three Months Ended March 31, 2020
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 (Used in) Operating Activities $ 643
(364 ) 494
(556 ) 217

Cash Flows From Investing Activities
Capital expenditures and investments —
(292 ) (631 ) —
(923 )
Return of investments in equity affiliates —
—
38
—
38
Proceeds from asset dispositions —
1
—
—
1
Intercompany lending activities (973 ) 1,914
(941 ) —
—
Advances/loans—related parties —
—
(8 ) —
(8 )
Other —
(25 ) 40
—
15
Net Cash Provided by (Used in) Investing Activities (973 ) 1,598
(1,502 ) —
(877 )

Cash Flows From Financing Activities
Issuance of debt 1,199
—
—
—
1,199
Repayment of debt —
(5 ) (2 ) —
(7 )
Issuance of common stock 6
—
—
—
6
Repurchase of common stock (443 ) —
—
—
(443 )
Dividends paid on common stock (396 ) (556 ) —
556
(396 )
Distributions to noncontrolling interests —
—
(61 ) —
(61 )
Net proceeds from issuance of Phillips 66 Partners LP common units —
—
2
—
2
Other (36 ) —
12
—
(24 )
Net Cash Provided by (Used in) Financing Activities 330
(561 ) (49 ) 556
276

Effect of Exchange Rate Changes on Cash and Cash Equivalents —
—
(9 ) —
(9 )

Net Change in Cash and Cash Equivalents —
673
(1,066 ) —
(393 )
Cash and cash equivalents at beginning of period —
136
1,478
—
1,614
Cash and Cash Equivalents at End of Period $ —
809
412
—
1,221

Millions of Dollars
Three Months Ended March 31, 2019
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 (Used in) Operating Activities $ 3
(384 ) 21
(118 ) (478 )

Cash Flows From Investing Activities
Capital expenditures and investments —
(234 ) (863 ) —
(1,097 )
Return of investments in equity affiliates —
—
21
—
21
Proceeds from asset dispositions —
—
82
—
82
Intercompany lending activities 731
(806 ) 75
—
—
Other —
(26 ) 8
—
(18 )
Net Cash Provided by (Used in) Investing Activities 731
(1,066 ) (677 ) —
(1,012 )

Cash Flows From Financing Activities
Issuance of debt —
—
725
—
725
Repayment of debt —
(5 ) (587 ) —
(592 )
Issuance of common stock 8
—
—
—
8
Repurchase of common stock (344 ) —
—
—
(344 )
Dividends paid on common stock (364 ) —
(118 ) 118
(364 )
Distributions to noncontrolling interests —
—
(56 ) —
(56 )
Net proceeds from issuance of Phillips 66 Partners LP common units —
—
32
—
32
Other (34 ) —
341
—
307
Net Cash Provided by (Used in) Financing Activities (734 ) (5 ) 337
118
(284 )

Effect of Exchange Rate Changes on Cash and Cash Equivalents —
—
8
—
8

Net Change in Cash and Cash Equivalents —
(1,455 ) (311 ) —
(1,766 )
Cash and cash equivalents at beginning of period —
1,648
1,371
—
3,019
Cash and Cash Equivalents at End of Period $ —
193
1,060
—
1,253

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

Unless otherwise indicated, “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.

Management’s Discussion and Analysis is the company’s analysis of its financial performance, financial condition, and significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes 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 company does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. 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 terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss) attributable to Phillips 66. The terms “before-tax income” or “before-tax loss” as used in Management’s Discussion and Analysis refer to income (loss) before income taxes.

EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT

Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. At ~~March 31,~~September 30, 2020, we had total assets of ~~$53.5~~$54.3 billion. Our common stock trades on the New York Stock Exchange under the symbol PSX.

Executive Overview

The ~~global markets for crude oil and petroleum products were materially disrupted during the first quarter of 2020 by two significant events:~~

~~The outbreak of~~ Coronavirus Disease 2019 (COVID-19) ~~and its development into a~~ pandemic ~~resulted~~continues to result in ~~significant~~ economic disruption globally. Actions taken by governments to prevent the spread of the disease, ~~included severe~~including travel and business restrictions, ~~which~~have resulted in substantial decreases in the demand for many refined petroleum products, particularly gasoline and jet fuel. ~~This drop in~~The lack of demand ~~led refiners to reduce crude oil processing rates and eventually led to lower crude oil demand and prices.~~

~~The dispute over production levels between Russia and the members of the Organization of Petroleum Exporting Countries (OPEC), including Saudi Arabia,~~for petroleum products has resulted in ~~an oversupply of crude oil, which exacerbated the decline in~~low crude oil prices and ~~eventually led to lower petroleum product prices.~~refining margins. Accordingly, crude oil producers have shut in high cost production, and refiners have reduced crude oil processing rates.

~~These events resulted in significant reductions in realized margins and materially impacted our results of operations in~~During the first quarter of 2020. Our first quarter results of operations also reflect a $1.8 billion goodwill impairment, a $1.2 billion before-tax impairment of our investment in DCP Midstream, LLC (DCP Midstream), and approximately $50 million of lower-of-cost-or-market inventory charges recorded by certain of our equity affiliates.

~~In March and April~~nine months of 2020, we took the following significant steps to enhance our ~~liquidity:~~liquidity in this challenged margin environment:

~~Secured a $2~~•Borrowed $1 billion under our 364-day term loan ~~facility, under which we have drawn $1 billion to date.~~facility.

•Issued $1$2 billion of senior unsecured notes in ~~equal~~three tranches of three-, five-, and ~~five-year~~ten-year maturities.

•Temporarily suspended our share repurchase programs.

•Reduced our consolidated capital spending plans in 2020 by $700 million.

•Executed a plan to reduce our budgeted operating and administrative costs by $500 million in 2020.

~~OPEC has agreed~~

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In the third quarter of 2020, we reported a loss of $799 million and generated cash from operating activities of $491 million. We used available cash to ~~crude oil production cuts into 2022, but~~fund capital expenditures and investments of $552 million and pay dividends of $393 million. We ended the ~~near-term outlook~~third quarter of 2020 with $1.5 billion of cash and cash equivalents and approximately $5.5 billion of total committed capacity available under our revolving credit facilities.

Our earnings in the third quarter of 2020 reflect the continued adverse effects of the pandemic. These adverse effects may continue to be significant in the near term. We continue to assess our long-lived assets and equity investments for ~~petroleum product demand remains highly uncertain, prices remain volatile, and margins and volumes remain challenged.~~impairment in this challenging business environment. The depth and duration of the economic consequences of the COVID-19 pandemic ~~are currently~~remain unknown. ~~However, the adverse economic effects on our company have continued into the second quarter and will likely continue to~~Additional impairments may be ~~significant~~required in the ~~near term.~~future if there is a further deterioration in our projected cash flows.

In the first quarter of 2020, we reported a loss of $2.5 billion, generated cash from operating activities of $217 million, borrowed $1.0 billion under a new term loan facility and borrowed $200 million of commercial paper. We used available cash to fund capital expenditures and investments of $923 million, repurchase $443 million of our common stock and pay dividends of $396 million. We ended the first quarter of 2020 with $1.2 billion of cash and cash equivalents and approximately $5.7 billion of total committed capacity available under our revolving credit facilities.

Business Environment

The Midstream segment includes our Transportation and Natural Gas Liquids (NGL) businesses. Our Transportation business contains fee-based operations that are not directly exposed to commodity price risk. Our NGL business results are primarily driven by fractionation and terminaling margins, throughput volumes, and impacts from NGL prices. The Midstream segment also includes our 50% equity investment in DCP ~~Midstream. Compared with~~Midstream, LLC (DCP Midstream). During the ~~first quarter of 2019, NGL prices have experienced significant volatility and declined in the first~~third quarter of 2020, ~~resulting from~~NGL prices remained relatively flat, compared with the ~~negative economic impacts from the response to the COVID-19 pandemic.~~third quarter of 2019.

The Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors. During the ~~first~~third quarter of 2020, the benchmark high-density polyethylene chain margin decreased, compared with the ~~first~~third quarter of 2019, mainly driven by ~~continued supply increases from the startup of new~~lower polyethylene ~~plants in 2019~~sales prices and ~~trade policy uncertainty.~~higher feedstock costs.

Our Refining segment results are driven by several factors, including refining margins, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. The price of U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, decreased to an average of ~~$45.97~~$40.91 per barrel during the ~~first~~third quarter of 2020, compared with an average of ~~$54.87~~$56.44 per barrel in the ~~first~~third quarter of 2019, ~~driven by~~due to a significant decline in global demand ~~for petroleum products in March 2020, as a result of~~driven by the negative global economic impacts ~~in response to~~of the COVID-19 ~~pandemic, combined with increased crude supply from Russia and OPEC.~~pandemic. Market crack spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. During the ~~first~~third quarter of 2020, the worldwide market crack spreads were ~~relatively flat~~significantly lower compared with the ~~first~~third quarter of ~~2019. However, starting in mid-March, the gasoline and jet fuel crack spreads have significantly decreased,~~2019, mainly driven by a sharp decline in demand for refined petroleum products resulting from ~~significant~~the global economic disruption ~~in response to~~caused by the COVID-19 pandemic.

Results for our Marketing and Specialties (M&S) segment depend largely on marketing fuel ~~margins,~~and lubricant margins, and sales volumes of our refined petroleum and other specialty ~~product sales.~~products. While M&S 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 in spot prices for refined petroleum products. Generally speaking, a downward trend 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. The ~~decline in~~global disruption caused by the COVID-19 pandemic significantly reduced demand for ~~gasoline~~our refined petroleum and ~~jet fuel led to lower revenues derived from selling those products.~~specialty products in 2020 compared with 2019.

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RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three and nine months ended ~~March 31,~~September 30, 2020,, is based on a comparison with the corresponding ~~period~~periods of 2019.

~~2019~~.

Consolidated Results

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


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

Midstream	$	146	(460)		(232)	279
Chemicals	231		227		442	729
Refining	(1,903)		856		(5,042)	1,641
Marketing and Specialties	415		498		1,214	1,056
Corporate and Other	(239)		(178)		(655)	(593)
Income (loss) before income taxes	(1,350)		943		(4,273)	3,112
Income tax expense (benefit)	(624)		150		(1,053)	545
Net income (loss)	(726)		793		(3,220)	2,567
Less: net income attributable to noncontrolling interests	73		81		216	227
Net income (loss) attributable to Phillips 66	$	(799)	712		(3,436)	2,340

Millions of Dollars
Three Months Ended
March 31
2020
2019

Midstream $ (702 ) 316
Chemicals 169
227
Refining (2,261 ) (198 )
Marketing and Specialties 513
205
Corporate and Other (197 ) (210 )
Income (loss) before income taxes (2,478 ) 340
Income tax expense (benefit) (51 ) 70
Net income (loss) (2,427 ) 270
Less: net income attributable to noncontrolling interests 69
66
Net income (loss) attributable to Phillips 66 $ (2,496 ) 204

Our earnings decreased ~~$2,700~~$1,511 million in the ~~first~~third quarter of 2020, mainly reflecting:

•Lower realized refining margins and decreased refinery production.

•Higher impairment charges, primarily related to a long-lived asset impairment associated with our plan to reconfigure the San Francisco Refinery into a renewable fuels plant, which impacted our Refining and Midstream segments.

These decreases were partially offset by an income tax benefit recognized in the current quarter, compared with income tax expense recognized in the third quarter of 2019.

Our earnings decreased $5,776 million in the nine-month period of 2020, mainly reflecting:

•Lower realized refining margins and decreased refinery production.

•A ~~$1,845 million~~ goodwill impairment in our Refining segment.

•A ~~$1,161 million before-tax~~long-lived asset impairment, ~~of our investment in DCP Midstream.~~

~~Lower refinery production.~~

~~Lower equity in earnings of affiliates in~~which impacted our Refining and ~~Chemicals~~Midstream segments.

•Higher impairments of equity investments in our Midstream segment.

•Lower chemicals margins.

These decreases were partially offset ~~by:~~

~~Higher realized marketing margins.~~

~~Improved results from our NGL and Other business.~~

~~Higher equity in earnings of affiliates in our Midstream segment.~~

Anby an income tax benefit recognized in the current ~~period.~~nine-month period, comparedwith income tax expense recognized in the nine-month period of 2019.

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

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Statement of Operations Analysis

Sales and other operating revenues for the third quarter and nine-month period of 2020 decreased 41% and 39%, respectively, and purchased crude oil and products decreased ~~10% and 12%, respectively, in the first quarter of 2020.~~39% for both periods. These decreases were mainly due to lower ~~prices for refined~~ petroleum ~~products,~~product and crude oil sales prices and ~~NGL.~~volumes.

Equity in earnings of affiliates decreased ~~29%~~30% and 48% in the ~~first~~third quarter and nine-month period of 2020, respectively. The decrease in both periods was primarily due to lower realized refining margins and decreased refinery production at WRB Refining LP (WRB), partially offset by increased equity earnings from the Gray Oak Pipeline, which commenced full operations in the second quarter of 2020. The decrease in the nine-month period of 2020 was ~~mainly due to~~also driven by lower ~~refining margins at WRB Refining LP (WRB) and~~equity earnings from CPChem as a result of lower ~~polyethylene margins at CPChem, partially offset by improved results from our Midstream joint venture assets.~~margins. See Chemicals segment analysis in the “Segment Results” section for additional information on CPChem.

~~Other income~~Impairments ~~decreased $38~~increased $287 million and $3,290 million in the ~~first~~third quarter ~~of 2020. The decrease was primarily driven by a decrease in the fair value of deferred compensation investments in the first quarter~~and nine-month period of 2020, ~~compared with an increase in the fair value of deferred compensation investments in the first quarter of 2019.~~respectively. See Note ~~13—Fair Value Measurements,~~5—Investments, Loans and Long-Term Receivables, Note 6—Properties, Plants and Equipment, Note 7—Goodwill, and Note 8—Impairments, in the Notes to Consolidated Financial Statements, for ~~additional~~ information ~~on the fair value of the deferred compensation investments.~~

~~Selling, general and administrative expenses~~ ~~decreased 13% in the first quarter of 2020, mainly due to lower selling costs in our M&S segment and lower employee-related expenses.~~

~~Impairments~~ were $3.0 billion in the first quarter of 2020, consisting of a before-tax impairment of $1.2 billion associated with our investment in DCP Midstream, and a $1.8 billion before-tax goodwill impairment in our Refining segment. See Note 5—Investments, Loans and Long-Term Receivables and Note 7—Goodwill, in the Notes to Consolidated Financial Statements, for additional information associated withregarding these impairments.

We had an income tax benefit of ~~$51~~$624 million and $1,053 million in the ~~first~~third quarter and nine-month period of 2020, respectively, compared with an income tax expense of ~~$70~~$150 million and $545 million, respectively, in the ~~first quarter~~corresponding periods of 2019. ~~The benefit in the first quarter of 2020 was attributable to a loss before income taxes.~~ See Note ~~18—~~19—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our effective income tax rates.

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Segment Results

Midstream


	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

	Millions of Dollars
Income (Loss) Before Income Taxes
Transportation	$	(3)	248		411	696
NGL and Other	99		169		356	402
DCP Midstream	50		(877)		(999)	(819)
Total Midstream	$	146	(460)		(232)	279

Three Months Ended
March 31
2020
2019

Millions of Dollars
Income (Loss) Before Income Taxes
Transportation $ 200
203
NGL and Other 179
90
DCP Midstream (1,081 ) 23
Total Midstream $ (702 ) 316


	Thousands of Barrels Daily			Thousands of Barrels Daily
Transportation Volumes			Transportation Volumes
Pipelines*	3,178	3,176	Pipelines*	3,076	3,443	3,032	3,346
Terminals	3,148	3,063	Terminals	2,966	3,381	2,999	3,236
Operating Statistics			Operating Statistics
NGL fractionated**	198	234	NGL fractionated**	217	203	195	223
NGL production***	396	428	NGL production***	414	409	395	420

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

** Excludes DCP Midstream.

*** Includes 100% of DCP Midstream’s volumes.


	Dollars Per Gallon
Weighted-Average NGL Price*

DCP Midstream	$	0.44	0.44	0.38	0.52
* 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 $ 0.39
0.60
* Based on index prices from the Mont Belvieu market hub, which are weighted by NGL component.

The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, processing and marketing services, mainly in the United States. This segment includes our master limited partnership (MLP), Phillips 66 Partners LP (Phillips 66 Partners), as well as our 50% equity investment in DCP Midstream, which includes the operations of ~~its MLP,~~ DCP Midstream, LP (DCP Partners)., its MLP.

~~The~~Results from our Midstream segment ~~had a before-tax loss of $702~~increased $606 million in the ~~first~~third quarter of 2020 ~~compared with before-tax income of $316~~and decreased $511 million in the ~~first quarter~~nine-month period of ~~2019. The decrease was primarily driven by a $1,161 million before-tax impairment~~2020.

Table of ~~our equity investment in DCP Midstream, partially offset by improved results from our NGL and Other business and higher equity earnings from DCP Midstream.~~Contents

~~Before-tax income~~Results from our Transportation business decreased ~~slightly~~$251 million and $285 million in the ~~first~~third quarter and nine-month period of 2020, respectively. The decreased results in both periods were primarily attributable to before-tax impairment charges totaling $204 million for the pipeline and terminal assets associated with the planned reconfiguration of our San Francisco Refinery into a renewal fuels plant, and the cancellation of the Red Oak Pipeline project, along with lower throughput volumes and decreased equity earnings. The decreased results for the nine-month period also included higher operating costs and an $84 million before-tax gain recognized in the second quarter of ~~2020.~~2020 associated with the Gray Oak Pipeline joint venture. See Note 5—Investments, Loans and Long-Term Receivables, and Note 6—Properties, Plants and Equipment, in the Notes to Consolidated Financial Statements, for additional information regarding the impairments, and Note 20—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the $84 million before-tax gain.

Before-tax income from our NGL and Other business ~~increased $89~~decreased $70 million and $46 million in the ~~first~~third quarter and nine-month period of ~~2020.~~2020, respectively. The ~~increase~~decrease in both periods was ~~mainly~~primarily due to ~~improved margins~~lower results from our trading activities around NGL inventory management and ~~volumes~~start-up costs for additional fractionation capacity at the Sweeny Hub, ~~a favorable impact from our trading activities associated with NGL inventory management,~~partially offset by the ~~start-up~~startup of a new isomerization unit at our Lake Charles Refinery in the second half of ~~2019, and higher equity earnings.~~2019. Lower cargo margins at the Sweeny Hub also contributed to the decrease in the third quarter of 2020.

~~The before-tax loss~~Results from our investment in DCP Midstream ~~was $1,081~~increased $927 million in the ~~first~~third quarter of 2020 ~~compared with before-tax income of $23~~and decreased $180 million in the ~~first~~nine-month period of 2020. The increased results in the third quarter of ~~2019. The current period loss was primarily~~2020 were mainly due to ~~a $1,161~~the absence of an $853 million before-tax impairment of our ~~equity~~ investment in DCP ~~Midstream.~~Midstream recorded in the third quarter of 2019. The decreased results in the nine-month period of 2020 were primarily attributable to higher impairment charges. Excluding the ~~impairment,~~impairments, equity earnings from DCP Midstream increased ~~$57 million~~ in the ~~first quarter~~nine-month period of 2020, primarily ~~driven~~due to the recognition of a benefit to equity earnings from the amortization of the basis difference created by the impairments, lower operating costs, and favorable impacts from its commodity price risk management ~~activities, and DCP Midstream’s increased ownership interest in DCP Partners associated with the Incentive Distribution Rights elimination transaction in the fourth quarter of 2019.~~

The fair value of our investment in DCP Midstream depends on the market value of DCP Partners common units. The market value of DCP Partners common units declined by approximately 85% in the first quarter of 2020. As a result, at March 31, 2020, the fair value of our investment in DCP Midstream was significantly lower than its book value. We concluded the difference between its fair value and book value was not temporary primarily due to its magnitude. Accordingly, we recorded a $1,161 million before-tax impairment of our investment in the first quarter of 2020. This charge is included in the “Impairments” line item on our consolidated statement of operations. Following the impairment, our investment in DCP Midstream had a book value of $245 million at March 31, 2020. The impairment increased the basis difference for our investment in DCP Midstream, which indicates the carrying value of our investment is lower than our share of DCP Midstream’s recorded net assets. The basis difference of $1,795 million is expected to be amortized and recognized as a benefit to equity earnings over a period of 22 years, which was the estimated remaining useful life of DCP Midstream’s properties, plants and equipment (PP&E) at March 31, 2020.activities. See Note ~~13—Fair Value Measurements,~~5—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information ~~on the techniques used to determine the fair value~~regarding impairments of our investment in DCP Midstream.

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

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Chemicals

Three Months Ended
March 31
2020
2019

Millions of Dollars

Income Before Income Taxes $ 169
227


	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

	Millions of Dollars

Income Before Income Taxes	$	231	227		442	729


	Millions of Pounds
CPChem Externally Marketed Sales Volumes*
Olefins and Polyolefins	5,069	5,402	15,559	15,314
Specialties, Aromatics and Styrenics	1,120	1,322	3,322	3,360
	6,189	6,724	18,881	18,674
* 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 4,600
4,692
Specialties, Aromatics and Styrenics 1,188
1,069
5,788
5,761
* Represents 100% of CPChem’s outside sales of produced petrochemical products, as well as commission sales from equity affiliates.


Olefins and Polyolefins Capacity Utilization (percent)	94	%	97	98	97

~~Olefins and Polyolefins Capacity Utilization (percent) 98 % 98~~

The Chemicals segment consists of our 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 our reporting of CPChem’s operations around two primary business lines: Olefins and Polyolefins (O&P) and Specialties, and Aromatics and Styrenics (SA&S).

Before-tax income from the Chemicals segment ~~decreased $58~~increased $4 million in the ~~first~~third quarter of 2020 and decreased $287 million in the nine-month period of 2020. The decrease in the current nine-month period was ~~mainly due to decreased polyethylene~~primarily driven by lower margins and ~~lower equity~~decreased earnings from CPChem’s equity affiliates, resulting from their higher turnaround activities and lower margins. In addition, CPChem recorded a lower-of-cost-or-market write-down of inventories valued on the last-in, first-out (LIFO) basis, and our portion of the write-down reduced our equity earnings from CPChem by $24 million, before-tax. These decreases were partially offset by higher ~~polyethylene sales~~ volumes, lower ~~utility expenses~~operating costs and ~~lower maintenance activities during~~a favorable impact from lower-of-cost-or-market adjustments of inventories attributable to petrochemical product price recovery in the ~~first quarter of 2020.~~current quarter.

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

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Refining


	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

	Millions of Dollars
Income (Loss) Before Income Taxes
Atlantic Basin/Europe	$	(199)	296		(1,063)	547
Gulf Coast	(405)		184		(1,613)	288
Central Corridor	(132)		408		(463)	1,005
West Coast	(1,167)		(32)		(1,903)	(199)
Worldwide	$	(1,903)	856		(5,042)	1,641

Three Months Ended
March 31
2020
2019

Millions of Dollars
Income (Loss) Before Income Taxes
Atlantic Basin/Europe $ (637 ) (7 )
Gulf Coast (843 ) (118 )
Central Corridor (227 ) 77
West Coast (554 ) (150 )
Worldwide $ (2,261 ) (198 )


	Dollars Per Barrel						Dollars Per Barrel
Income (Loss) Before Income Taxes						Income (Loss) Before Income Taxes
Atlantic Basin/Europe	$	(15.41	)	(0.17	)	Atlantic Basin/Europe	$	(4.61)	5.93	(8.60)	3.83
Gulf Coast	(13.16		)	(1.80	)	Gulf Coast	(7.86)		2.46	(9.13)	1.32
Central Corridor	(9.72		)	3.22		Central Corridor	(5.35)		15.26	(6.73)	13.07
West Coast	(19.87		)	(4.89	)	West Coast	(38.12)		(0.93)	(22.59)	(2.03)
Worldwide	(14.44		)	(1.22	)	Worldwide	(12.69)		4.60	(11.12)	3.07

Realized Refining Margins*						Realized Refining Margins*
Atlantic Basin/Europe	$	2.38		7.76		Atlantic Basin/Europe	$	1.65	11.48	1.86	10.17
Gulf Coast	6.76			5.44		Gulf Coast	(0.61)		8.34	2.40	7.42
Central Corridor	13.50			10.23		Central Corridor	4.46		15.99	8.09	14.91
West Coast	4.80			6.25		West Coast	2.23		10.11	3.94	8.84
Worldwide	7.11			7.23		Worldwide	1.78		11.18	3.91	10.06

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

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	Thousands of Barrels Daily				Thousands of Barrels Daily
	Three Months Ended March 31				Three Months Ended September 30			Nine Months Ended September 30
Operating Statistics	2020		2019	Operating Statistics	2020		2019		2020	2019
Refining operations*				Refining operations*
Atlantic Basin/Europe				Atlantic Basin/Europe
Crude oil capacity	537		537	Crude oil capacity	537		537		537	537
Crude oil processed	437		427	Crude oil processed	432		509		424	485
Capacity utilization (percent)	81	%	80	Capacity utilization (percent)	81	%	95		79	90
Refinery production	456		467	Refinery production	473		545		454	527
Gulf Coast				Gulf Coast
Crude oil capacity	769		764	Crude oil capacity	769		764		769	764
Crude oil processed	645		654	Crude oil processed	506		729		586	714
Capacity utilization (percent)	84	%	85	Capacity utilization (percent)	66	%	95		76	93
Refinery production	703		722	Refinery production	563		817		647	797
Central Corridor				Central Corridor
Crude oil capacity	530		515	Crude oil capacity	530		515		530	515
Crude oil processed	471		445	Crude oil processed	455		517		437	495
Capacity utilization (percent)	89	%	86	Capacity utilization (percent)	86	%	100		82	96
Refinery production	488		468	Refinery production	469		535		451	515
West Coast				West Coast
Crude oil capacity	364		364	Crude oil capacity	364		364		364	364
Crude oil processed	279		307	Crude oil processed	311		351		285	325
Capacity utilization (percent)	77	%	84	Capacity utilization (percent)	85	%	97		78	89
Refinery production	306		342	Refinery production	334		371		307	357
Worldwide				Worldwide
Crude oil capacity	2,200		2,180	Crude oil capacity	2,200		2,180		2,200	2,180
Crude oil processed	1,832		1,833	Crude oil processed	1,704		2,106		1,732	2,019
Capacity utilization (percent)	83	%	84	Capacity utilization (percent)	77	%	97		79	93
Refinery production	1,953		1,999	Refinery production	1,839		2,268		1,859	2,196
* Includes our share of equity affiliates.				* Includes our share of equity affiliates.

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

~~The before-tax loss~~Results from our Refining segment ~~increased $2,063~~decreased $2,759 million and $6,683 million in the third quarter and nine-month period of 2020, respectively. The decreased results in both periods were primarily due to:

•Lower realized refining margins and decreased refinery production. A sharp decline in demand for refined petroleum products resulting from global economic disruption caused by the COVID-19 pandemic led to lower market crack spreads and reduced refinery production in the current periods. In addition, hurricane impacts contributed to the lower refinery production in the Gulf Coast region.

•A before-tax long-lived asset impairment of $910 million associated with our plan to reconfigure the San Francisco Refinery into a renewable fuels plant.

In addition, the decreased results in the current nine-month period were also attributable to a before-tax goodwill impairment of $1,845 million recognized in the first quarter of ~~2020, primarily driven by a goodwill impairment~~2020.

Table of $1,845 million in the first quarter of 2020, combined with lower refinery production and higher operating expenses due to higher turnaround costs in the current quarter, partially offset by higher realized refining margins in the Gulf Coast and Central Corridor regions. Lower refinery production was mainly driven by a sharp decline in demand for petroleum products in March 2020 in response to the COVID-19 pandemic.Contents

Our stock price declined significantly in the first quarter of 2020 due to the volatility in global commodity and equity markets related to the COVID-19 pandemic and other factors. We assessed our goodwill for impairment due to the decline in our market capitalization and concluded that the carrying value of our Refining reporting unit at March 31, 2020, was greater than its fair value by an amount in excess of its goodwill balance. Accordingly, we recorded a goodwill impairment charge of $1,845 million in our Refining segment. This charge is included in the “Impairments” line item on our consolidated statement of operations. The fair value of our other reporting units continued to exceed their carrying values by a significant percentage. See Note ~~13—Fair Value Measurements,~~6—Properties, Plants and Equipment, and Note 7—Goodwill, in the Notes to Consolidated Financial Statements, for additional information ~~on the techniques used to determine the fair value of our Refining reporting unit.~~regarding these impairments.

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

Our worldwide refining crude oil capacity utilization rate was ~~83%~~77% and 79% in the ~~first~~third quarter and nine-month period of 2020, respectively, compared with ~~84%~~97% and 93% in the ~~first quarter~~corresponding periods of ~~2019.~~2019, respectively. The ~~decrease~~decreases were primarily due to reduced refining runs in the current ~~quarter was primarily due to refinery economic run cuts~~year periods driven by lower demand for refined petroleum products, as well as hurricane impacts in ~~March 2020 in response to~~ the ~~COVID-19 pandemic.~~Gulf Coast region.

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Marketing and Specialties


	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019

	Millions of Dollars
Income Before Income Taxes
Marketing and Other	$	365	440		1,091	872
Specialties	50		58		123	184
Total Marketing and Specialties	$	415	498		1,214	1,056

Three Months Ended
March 31
2020
2019

Millions of Dollars
Income Before Income Taxes
Marketing and Other $ 471
138
Specialties 42
67
Total Marketing and Specialties $ 513
205


	Dollars Per Barrel				Dollars Per Barrel
Income Before Income Taxes				Income Before Income Taxes
U.S.	$	1.79	0.60	U.S.	$	1.74	1.66	1.60	1.14
International	6.58		2.25	International	5.01		5.19	5.16	4.10

Realized Marketing Fuel Margins*				Realized Marketing Fuel Margins*
U.S.	$	2.08	1.06	U.S.	$	2.23	2.11	2.03	1.59
International	8.53		3.80	International	6.28		6.37	6.78	5.42

* See the “Non-GAAP Reconciliations” section for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure, income before income taxes per barrel.




	Dollars Per Gallon
U.S. Average Wholesale Prices*
Gasoline	$	1.62	2.14	1.57	2.11
Distillates	1.41		2.07	1.45	2.10
* On third-party branded petroleum product sales, excluding excise taxes.

Dollars Per Gallon
U.S. Average Wholesale Prices*
Gasoline $ 1.77
1.86
Distillates 1.76
2.04
* On third-party branded petroleum product sales, excluding excise taxes.


	Thousands of Barrels Daily


Marketing Petroleum Products Sales Volumes
Gasoline	1,080	1,222	1,029	1,205
Distillates	863	1,099	915	1,041
Other	15	16	17	18
Total	1,958	2,337	1,961	2,264

Thousands of Barrels Daily
Marketing Petroleum Products Sales Volumes
Gasoline 1,066
1,151
Distillates 1,037
940
Other 20
18
Total 2,123
2,109

The M&S segment purchases for resale and markets refined petroleum products, such as gasoline, 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.

Before-tax income from the M&S segment ~~increased $308~~decreased $83 million in the ~~first~~third quarter of 2020 and increased $158 million in the nine-month period of 2020. The ~~increase~~decrease in the third quarter of 2020 was primarily due to lower sales volumes driven by decreased demand for refined petroleum and specialty products. The increase in the nine-month period of 2020 was primarily attributable to higher realized marketing fuel ~~margins.~~margins, partially offset by lower sales volumes for refined petroleum and specialty products driven by decreased demand.

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

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Corporate and Other


	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2020		2019		2020	2019
Loss Before Income Taxes
Net interest expense	$	(131)	(98)		(348)	(311)
Corporate overhead and other	(108)		(80)		(307)	(282)



Total Corporate and Other	$	(239)	(178)		(655)	(593)

Millions of Dollars
Three Months Ended
March 31
2020
2019
Loss Before Income Taxes
Net interest expense $ (103 ) (108 )
Corporate overhead and other (94 ) (102 )
Total Corporate and Other $ (197 ) (210 )

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Corporate overhead and other includes general and administrative expenses, technology costs, environmental costs associated with sites no longer in operation, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment.

Net interest expense increased $33 million and $37 million in the third quarter and nine-month period of 2020, respectively, primarily due to higher average debt principal balances, reflecting new debt issuances in the nine-month period of 2020, along with decreased interest income driven by lower interest rates in 2020. The increase in net interest expense in the nine-month period of 2020 was partially offset by higher capitalized interest associated with Midstream capital projects. See Note 10—Debt, in the Notes to Consolidated Financial Statements, for additional information on the debt issuances in 2020.

Corporate overhead and other ~~decreased $8~~increased by $28 million and $25 million in the ~~first~~third quarter and nine-month period of 2020, respectively, reflecting a property impairment charge of $25 million in the third quarter of ~~2020, mainly driven by lower employee-related expenses.~~2020.

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CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators


	Millions of Dollars, Except as Indicated
	September 30 2020		December 31 2019

Cash and cash equivalents	$	1,462	1,614
Short-term debt	1,860		547
Total debt	14,526		11,763
Total equity	22,305		27,169
Percent of total debt to capital*	39%		30
Percent of floating-rate debt to total debt	13%		9
* Capital includes total debt and total equity.

Millions of Dollars,
Except as Indicated
March 31
2020
December 31
2019

Cash and cash equivalents $ 1,221
1,614
Short-term debt 2,243
547
Total debt 12,963
11,763
Total equity 23,639
27,169
Percent of total debt to capital* 35 % 30
* Capital includes total debt and total equity.

To meet our short- and long-term liquidity requirements, we ~~seek~~use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. ~~Additionally, Phillips 66 Partners has the ability to fund its growth activities through debt and equity financings.~~ During the first ~~three~~nine months of 2020, we generated ~~$217 million~~$1.5 billion of cash from operations, received approximately $2.0 billion in proceeds from two public offerings of senior unsecured notes, and borrowed $1$1.0 billion under ~~our new~~a term loan ~~facility, and borrowed $200 million under our commercial paper~~ facility. We used available cash primarily for capital expenditures and investments of ~~$923 million; repurchases~~$2.4 billion, repayment of ~~our common stock~~$525 million of ~~$443 million;~~maturing debt, and dividend payments on our common stock of ~~$396 million.~~$1.2 billion. During the first ~~three~~quarter of 2020, we spent $443 million on common stock repurchases, before suspending our share repurchase programs in March 2020. During the first nine months of 2020, cash and cash equivalents decreased ~~$393~~$152 million to ~~$1.2~~$1.5 billion.

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, defined benefit plan contributions, and debt repayments.

Significant Sources of Capital

Operating Activities

During the first ~~three~~nine months of 2020, cash generated by operating activities was ~~$217~~$1,472 million, compared with ~~cash used in operating activities of $478~~$3,114 million for the first ~~three~~nine months of 2019. The ~~increase~~decrease in the first ~~three~~nine months of 2020, compared with the same period in 2019, was ~~mainly~~primarily due to ~~favorable working capital impacts, partially offset~~lower refining margins driven by ~~decreased~~global economic disruption caused by the COVID-19 pandemic, and reduced cash distributions from our equity ~~affiliates.~~affiliates, partially offset by higher realized marketing margins and working capital impacts.

Our short- and long-term operating cash flows are highly dependent upon refining, ~~and~~ marketing ~~margins, NGL prices~~ and chemical ~~margins.~~margins, as well as NGL prices. 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 recent decline in demand for refined petroleum products has led to a ~~significant~~ decrease in refining margins. If the global economic disruption associated with the COVID-19 pandemic sustains, we expect refining ~~marketing and chemical~~ margins, along with marketing, transportation and terminaling volumes, to remain challenged in the near term, all of which could have ~~a significant~~an unfavorable impact on our future operating cash flows.

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The level and quality of output from our refineries also ~~impacts~~impact 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. However, the recent decline in demand for refined petroleum products has led to a reduction of our refinery production; and if the global economic disruption associated with the COVID-19 pandemic sustains, we expect the reduced refinery production to continue in the near term, which could have ~~a significant~~an unfavorable impact on our future operating cash flows.

Equity Affiliate Operating Distributions

Our operating cash flows are also impacted by distribution decisions made by our equity affiliates. During the first ~~three~~nine months of 2020, cash from operations included distributions of ~~$361~~$1,125 million from our equity affiliates, compared with ~~$611~~$1,638 million during the same period of 2019. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured. ~~If the global economic disruption associated with the COVID-19 pandemic sustains, we expect lower distributions from our equity affiliates.~~

Phillips 66 Partners LP

Unit Issuances

During the first ~~three~~nine months of 2020, on a settlement-date basis, Phillips 66 Partners generated net proceeds of $2 million from common units issued under its active continuous offering of common units, or at-the-market (ATM) program. ~~Since inception in June 2016 through March 31, 2020, net proceeds of $494 million have been received under its ATM programs.~~

Transfer of Equity ~~Interests~~Interest

Phillips 66 Partners has a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. After deducting a co-venturer’s pending acquisition of a 35% interest in the consolidated holding company, Phillips 66 Partners has an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC. Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi and the Sweeny area, including the Phillips 66 Sweeny Refinery, as well as access to the Houston market. ~~On April 1, 2020,~~Phillips 66 Partners has a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. In December 2018, a third party exercised its option to acquire a 35% interest in the holding company. Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP at that time. The Gray Oak Pipeline commenced full operations ~~from West Texas to Texas Gulf Coast destinations. The Eagle Ford segment~~in the second quarter of 2020, and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the ~~pipeline commenced operations later in April.~~sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company ~~is expected to be~~was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet, inand the ~~second quarter. Also at that time, the~~ premium of $84 million previously paid by the co-venturer ~~will be~~in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of operations. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, the co-venturer contributed an aggregate of ~~$23~~$64 million to the holding company to fund its portion of Gray Oak Pipeline, LLC’s cash calls. Phillips 66 Partners has an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering a co-venturer’s 35% interest in the consolidated holding company. See Note 5—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for further discussion regarding Phillips 66 Partners’ investment in Gray Oak Pipeline, LLC.

Credit Facilities and Commercial Paper

At ~~March 31,~~September 30, 2020, borrowings of $290 million were outstanding and $3 million in letters of credit had been drawn under Phillips 66 Partners’ $750 million revolving credit facility. At September 30, 2020, no amount had been drawn under Phillips 66’s $5 billion revolving credit facility and no amount had been directly drawn under Phillips 66 Partners’ $750 million revolving credit facility; however, $3 million in letters of credit had been issued under Phillips 66 Partners’ revolving credit facility. As a result, we had approximately $5.7 billion of total committed capacity available under our revolving credit facilities at March 31, 2020. In addition, at March 31, 2020, borrowings of $200 million were outstanding under Phillips 66’sor uncommitted $5 billion commercial paper program.

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Other Debt Issuances and Financings

On ~~April 9,~~June 10, 2020, Phillips 66 closed ~~on a~~its public offering of $1 billion aggregate principal amount of senior unsecured notes consisting of:

•$150 million aggregate principal amount of 3.850% Senior Notes due 2025.

•$850 million aggregate principal amount of 2.150% Senior Notes due 2030.

On April 9, 2020, Phillips 66 closed its public offering of $1 billion aggregate principal amount of senior unsecured notes consisting of:

•$500 million aggregate principal amount of 3.700% Senior Notes due 2023.

•$500 million aggregate principal amount of 3.850% Senior Notes due 2025.

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Off-Balance Sheet Arrangements

Lease Residual Value Guarantees

Under the operating lease agreement on our headquarters facility in Houston, Texas, we ~~have a residual value guarantee with a maximum future exposure of $554 million at March 31, 2020. The operating lease term ends in~~ ~~June 2021~~ ~~and provides us~~had the option, at the end of the lease term to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. In September 2020, we amended and extended the lease term to September 2025. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million as of September 30, 2020. We also have residual value guarantees associated with railcar and airplane leases with maximum potential future payments totaling ~~$362 million at March 31, 2020, which~~$396 million. These leases have remaining terms of up to ~~four~~ten years.

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

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of ~~$2,500~~$2.5 billion aggregate principal amount of senior unsecured notes, consisting of:

•$650 million aggregate principal amount of ~~unsecured senior notes.~~ 3.625% Senior Notes due 2022.

•$1.0 billion aggregate principal amount of 3.900% Senior Notes due 2024.

•$850 million aggregate principal amount of 4.625% Senior Notes due 2029.

Dakota Access and ~~Energy Transfer Crude Oil Company, LLC (ETCO)~~ETCO have guaranteed repayment of the notes. In addition, Phillips 66 Partners and its co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, if Dakota Access receives an unfavorable court ruling in the litigation related to certain disputed construction permits and Dakota Access determines that an equity contribution trigger event has occurred, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access ~~and ETCO up~~if there is an unfavorable final judgment in the ongoing litigation related to an ~~aggregate maximum~~easement granted by the U.S. Army Corps of ~~approximately $2,525 million.~~Engineers (USACE) to allow the pipeline to be constructed under Lake Oahe in North Dakota. Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes. If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts. At September 30, 2020, Phillips 66 Partners’ share of the maximum potential equity contributions under the CECU iswas approximately $631 million.

In March 2020, the trial court ~~in such~~presiding over this litigation ~~requested~~ordered the USACE to prepare an Environmental Impact Statement ~~from the U.S. Army Corps of Engineers,~~(EIS), and requested additional information to ~~make~~enable a ~~further~~ decision ~~regarding~~on whether the Dakota Access Pipeline should be shut down while the ~~Environmental Impact Statement~~EIS is being prepared. ~~Currently, this ruling does not have any immediate impact~~On July 6, 2020, the trial court ordered the Dakota Access Pipeline to be shut down and emptied of crude oil within 30 days, and that the pipeline should remain shut down pending the preparation of the EIS by the USACE, which the USACE has indicated is expected to take approximately 13 months. Dakota Access filed an appeal and a request for a stay of the order, which was granted. The case is now on an expedited appellate track and oral arguments regarding whether the pipeline easement is valid and whether the USACE must prepare an EIS are set for early November 2020, with a decision expected in late 2020 or early 2021. In addition to the proceedings in the appellate court, the trial court has been asked to issue an injunction to shut down the pipeline until the USACE completes the EIS, which could be ruled on as early as late December 2020. If the pipeline is required to cease operations pending the preparation of the EIS, and should Dakota Access and ~~ETCO.~~ETCO not have sufficient funds to pay ongoing expenses, Phillips 66 Partners could be asked to support its share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU.

Gray Oak Pipeline, LLC

Gray Oak Pipeline, LLC ~~has~~had a third-party term loan facility with a borrowing capacity of $1,379 million, inclusive of accrued interest. Borrowings under the facility ~~are~~were due on June 3, 2022. Phillips 66 Partners and its co-venturers provided a guarantee through an equity contribution agreement requiring proportionate equity contributions to Gray Oak Pipeline, LLC up to the total outstanding loan amount, plus any additional accrued interest and associated fees, if ~~the term loan facility is fully utilized and~~ Gray Oak Pipeline, LLC defaults on certain of its obligations thereunder. ~~At March 31,~~In September 2020, Gray Oak Pipeline, LLC fully repaid the outstanding balance of the term loan facility, ~~was fully utilized by Gray Oak Pipeline, LLC,~~ and ~~Phillips 66 Partners’ 42.25% proportionate exposure under~~ the associated equity contribution agreement was ~~$583 million.~~ terminated.

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Other Guarantees

At ~~March 31,~~September 30, 2020, we had other guarantees outstanding for our portion of certain joint venture debt obligations and purchase obligations, which have remaining terms of up to eight years. The maximum potential amount of future payments to third parties under these guarantees was approximately ~~$331~~$216 million. Payment would be required if a joint venture defaults on its obligations.

See Note ~~10—~~11—Guarantees, in the Notes to Consolidated Financial Statements, for additional information on our guarantees.

Capital Requirements

Capital Expenditures and Investments

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

Debt Financing

Our total debt balance at ~~March 31,~~September 30, 2020, and December 31, 2019, was ~~$13.0~~$14.5 billion and $11.8 billion, respectively. Our total debt-to-capital ratio was ~~35%~~39% and 30% at ~~March 31,~~September 30, 2020, and December 31, 2019, respectively.

Dividends

On ~~February 5,~~July 8, 2020, our Board of Directors declared a quarterly cash dividend of $0.90 per common share. The dividend was paid on ~~March 2,~~September 1, 2020, to shareholders of record at the close of business on ~~February~~August 18, 2020. On October 9, 2020, our Board of Directors declared a quarterly cash dividend of $0.90 per common share. This dividend is payable on December 1, 2020, to shareholders of record at the close of business on November 17, 2020.

Share Repurchases

Since July 2012, our Board of Directors has ~~at various times,~~ authorized an aggregate of $15 billion of repurchases of our outstanding common ~~stock under our share repurchase programs, which aggregate to a total of $15 billion.~~stock. The authorizations do not have expiration dates. The share repurchases are expected to be funded primarily through available cash. ~~The~~We are not obligated to repurchase any shares ~~under~~of common stock pursuant to these authorizations ~~are repurchased from time to time in the open market~~and may commence, suspend or terminate repurchases at ~~our discretion, subject to market conditions and other factors, and in accordance with applicable regulatory requirements.~~any time. Since the inception of our share repurchase programs in 2012, ~~through March 17, 2020,~~ we have repurchased 159 million shares at an aggregate cost of $12.5 billion. Shares of stock repurchased are held as treasury shares. We suspended share repurchases in mid-March 2020 to preserve liquidity primarily in response to the global economic ~~effects of~~disruption caused by the COVID-19 ~~pandemic and other factors, and will evaluate timing to resume share repurchases.~~pandemic.

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Capital Spending

Our capital expenditures and investments represent consolidated capital spending. Our adjusted capital spending is a non-GAAP financial measure that demonstrates our net share of capital spending, and reflects an adjustment for the portion of our consolidated capital spending funded by certain joint venture partners.


	Millions of Dollars				Millions of Dollars
	Three Months Ended March 31				Nine Months Ended September 30
	2020		2019		2020		2019
Capital Expenditures and Investments				Capital Expenditures and Investments
Midstream	$	603	841	Midstream	$	1,556	1,724
Chemicals	—		—	Chemicals	—		—
Refining	245		194	Refining	577		645
Marketing and Specialties	25		19	Marketing and Specialties	139		76
Corporate and Other	50		43	Corporate and Other	142		150
Total Capital Expenditures and Investments	923		1,097	Total Capital Expenditures and Investments	2,414		2,595
Less: capital spending funded by certain joint venture partners*	23		422	Less: capital spending funded by certain joint venture partners*	64		422
Adjusted Capital Spending	$	900	675	Adjusted Capital Spending	$	2,350	2,173

Selected Equity Affiliates**				Selected Equity Affiliates**
DCP Midstream	$	46	150	DCP Midstream	$	102	355
CPChem	126		103	CPChem	204		252
WRB	37		37	WRB	110		135
	$	209	290		$	416	742


			Page
Part I – Financial Information

			~~Page~~
~~Part I – Financial Information~~

Item 1. Financial Statements
Consolidated Statement of Operations			1
Consolidated Statement of Comprehensive Income (Loss)			2
Consolidated Balance Sheet			3
Consolidated Statement of Cash Flows			4
Consolidated Statement of Changes in Equity			5
Notes to Consolidated Financial Statements			67

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3439

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5968

Item 4. Controls and Procedures			5969

Part II – Other Information

Item 1. Legal Proceedings			6070

Item 1A. Risk Factors			6171

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6272

Item 6. Exhibits			6373

Signatures			6474



	Millions of Dollars
	March 31 2020			December 31 2019
Assets
Cash and cash equivalents	$	1,221		1,614
Accounts and notes receivable (net of allowances of $41 million in 2020 and 2019)	4,046			7,376
Accounts and notes receivable—related parties	513			1,134
Inventories	5,331			3,776
Prepaid expenses and other current assets	594			495
Total Current Assets	11,705			14,395
Investments and long-term receivables	13,635			14,571
Net properties, plants and equipment	24,051			23,786
Goodwill	1,425			3,270
Intangibles	880			869
Other assets	1,764			1,829
Total Assets	$	53,460		58,720

Liabilities
Accounts payable	$	4,882		8,043
Accounts payable—related parties	440			532
Short-term debt	2,243			547
Accrued income and other taxes	703			979
Employee benefit obligations	301			710
Other accruals	1,960			835
Total Current Liabilities	10,529			11,646
Long-term debt	10,720			11,216
Asset retirement obligations and accrued environmental costs	635			638
Deferred income taxes	5,487			5,553
Employee benefit obligations	1,000			1,044
Other liabilities and deferred credits	1,450			1,454
Total Liabilities	29,821			31,551

Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2020—648,446,534 shares; 2019—647,416,633 shares)
Par value	6			6
Capital in excess of par	20,305			20,301
Treasury stock (at cost: 2020—211,771,827 shares; 2019—206,390,806 shares)	(17,116		)	(16,673	)
Retained earnings	19,168			22,064
Accumulated other comprehensive loss	(991		)	(788	)
Total Stockholders’ Equity	21,372			24,910
Noncontrolling interests	2,267			2,259
Total Equity	23,639			27,169
Total Liabilities and Equity	$	53,460		58,720



	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, 2019	$	6	20,301	(16,673	)	22,064		(788	)	2,259		27,169
Net income (loss)	—		—	—		(2,496	)	—		69		(2,427	)
Other comprehensive loss	—		—	—		—		(208	)	—		(208	)
Dividends paid on common stock ($0.90 per share)	—		—	—		(396	)	—		—		(396	)
Repurchase of common stock	—		—	(443	)	—		—		—		(443	)
Benefit plan activity	—		4	—		(2	)	—		—		2
Distributions to noncontrolling interests	—		—	—		—		—		(61	)	(61	)
Other	—		—	—		(2	)	5		—		3
March 31, 2020	$	6	20,305	(17,116	)	19,168		(991	)	2,267		23,639

December 31, 2018	$	6	19,873	(15,023	)	20,489		(692	)	2,500		27,153
Cumulative effect of accounting changes	—		—	—		81		(89	)	(1	)	(9	)
Net income	—		—	—		204		—		66		270
Other comprehensive income	—		—	—		—		72		—		72
Dividends paid on common stock ($0.80 per share)	—		—	—		(364	)	—		—		(364	)
Repurchase of common stock	—		—	(344	)	—		—		—		(344	)
Benefit plan activity	—		4	—		(2	)	—		—		2
Issuance of Phillips 66 Partners LP common units	—		2	—		—		—		19		21
Distributions to noncontrolling interests	—		—	—		—		—		(56	)	(56	)
March 31, 2019	$	6	19,879	(15,367	)	20,408		(709	)	2,528		26,745



	Shares in Thousands
	Common Stock Issued	Treasury Stock

December 31, 2019	647,417	206,391
Repurchase of common stock	—	5,381
Shares issued—share-based compensation	1,030	—
March 31, 2020	648,447	211,772

December 31, 2018	645,692	189,526
Repurchase of common stock	—	3,639
Shares issued—share-based compensation	1,024	—
March 31, 2019	646,716	193,165
See Notes to Consolidated Financial Statements.



	Millions of Dollars
	Three Months Ended March 31, 2020
Statement of Operations	Phillips 66			Phillips 66 Company		All Other Subsidiaries		Consolidating Adjustments		Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	—		15,510		5,368		—		20,878
Equity in earnings (losses) of affiliates	(2,420		)	(361	)	239		2,907		365
Net gain on dispositions	—			1		—		—		1
Other income (loss)	—			(2	)	2		—		—
Intercompany revenues	—			930		2,418		(3,348	)	—
Total Revenues and Other Income (Loss)	(2,420		)	16,078		8,027		(441	)	21,244

Costs and Expenses
Purchased crude oil and products	—			14,986		6,689		(3,235	)	18,440
Operating expenses	—			1,117		254		(30	)	1,341
Selling, general and administrative expenses	3			211		107		(2	)	319
Depreciation and amortization	—			235		107		—		342
Impairments	—			1,805		1,201		—		3,006
Taxes other than income taxes	—			123		34		—		157
Accretion on discounted liabilities	—			5		1		—		6
Interest and debt expense	78			36		78		(81	)	111
Total Costs and Expenses	81			18,518		8,471		(3,348	)	23,722
Loss before income taxes	(2,501		)	(2,440	)	(444	)	2,907		(2,478	)
Income tax benefit	(5		)	(20	)	(26	)	—		(51	)
Net Loss	(2,496		)	(2,420	)	(418	)	2,907		(2,427	)
Less: net income attributable to noncontrolling interests	—			—		69		—		69
Net Loss Attributable to Phillips 66	$	(2,496	)	(2,420	)	(487	)	2,907		(2,496	)

Comprehensive Loss	$	(2,704	)	(2,628	)	(627	)	3,324		(2,635	)



	Millions of Dollars
	Three Months Ended March 31, 2019
Statement of Operations	Phillips 66			Phillips 66 Company	All Other Subsidiaries	Consolidating Adjustments		Total Consolidated
Revenues and Other Income
Sales and other operating revenues	$	—		17,415	5,688	—		23,103
Equity in earnings of affiliates	281			431	165	(361	)	516
Net gain on dispositions	—			—	1	—		1
Other income	—			20	18	—		38
Intercompany revenues	—			1,161	3,215	(4,376	)	—
Total Revenues and Other Income	281			19,027	9,087	(4,737	)	23,658

Costs and Expenses
Purchased crude oil and products	—			17,080	8,254	(4,279	)	21,055
Operating expenses	—			1,000	326	(19	)	1,307
Selling, general and administrative expenses	3			255	110	(2	)	366
Depreciation and amortization	—			227	104	—		331
Impairments	—			—	1	—		1
Taxes other than income taxes	—			95	33	—		128
Accretion on discounted liabilities	—			4	1	1		6
Interest and debt expense	93			36	67	(77	)	119
Foreign currency transaction losses	—			—	5	—		5
Total Costs and Expenses	96			18,697	8,901	(4,376	)	23,318
Income before income taxes	185			330	186	(361	)	340
Income tax expense (benefit)	(19		)	49	40	—		70
Net Income	204			281	146	(361	)	270
Less: net income attributable to noncontrolling interests	—			—	66	—		66
Net Income Attributable to Phillips 66	$	204		281	80	(361	)	204

Comprehensive Income	$	276		353	211	(498	)	342


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

Three Months Ended March 31, 2020
Three Months Ended September 30, 2020												Three Months Ended September 30, 2020
Loss before income taxes	$	(637	)	(843	)	(227	)	(554	)	(2,261	)	Loss before income taxes	$	(199)	(405)	(132)	(1,167)	(1,903)
Plus:												Plus:

Taxes other than income taxes	19			37		17		31		104		Taxes other than income taxes	14		30	11	16	71
Depreciation, amortization and impairments	492			741		469		364		2,066		Depreciation, amortization and impairments	50		75	33	974	1,132
Selling, general and administrative expenses	13			7		6		10		36		Selling, general and administrative expenses	6		11	7	9	33
Operating expenses	194			492		136		283		1,105		Operating expenses	180		258	111	235	784
Equity in (earnings) losses of affiliates	2			(1	)	51		—		52
Equity in losses of affiliates												Equity in losses of affiliates	2		1	118	—	121
Other segment (income) expense, net	(2		)	1		(3	)	1		(3	)	Other segment (income) expense, net	—		(1)	(1)	1	(1)
Proportional share of refining gross margins contributed by equity affiliates	16			—		113		—		129		Proportional share of refining gross margins contributed by equity affiliates	18		—	45	—	63
Special items:
Lower-of-cost-or-market inventory adjustments	—			—		35		—		35

Realized refining margins	$	97		434		597		135		1,263		Realized refining margins	$	71	(31)	192	68	300

Total processed inputs (thousands of barrels)	41,335			64,066		23,345		27,877		156,623		Total processed inputs (thousands of barrels)	43,176		51,543	24,682	30,615	150,016
Adjusted total processed inputs (thousands of barrels)*	41,335			64,066		44,291		27,877		177,569		Adjusted total processed inputs (thousands of barrels)*	43,176		51,543	42,979	30,615	168,313

Loss before income taxes per barrel (dollars per barrel)**	$	(15.41	)	(13.16	)	(9.72	)	(19.87	)	(14.44	)	Loss before income taxes per barrel (dollars per barrel)**	$	(4.61)	(7.86)	(5.35)	(38.12)	(12.69)
Realized refining margins (dollars per barrel)***	2.38			6.76		13.50		4.80		7.11		Realized refining margins (dollars per barrel)***	1.65		(0.61)	4.46	2.23	1.78

Three Months Ended March 31, 2019
Three Months Ended September 30, 2019												Three Months Ended September 30, 2019
Income (loss) before income taxes	$	(7	)	(118	)	77		(150	)	(198	)	Income (loss) before income taxes	$	296	184	408	(32)	856
Plus:												Plus:

Taxes other than income taxes	15			23		13		24		75		Taxes other than income taxes	12		23	10	23	68
Depreciation and amortization	50			67		33		62		212
Depreciation, amortization and impairments												Depreciation, amortization and impairments	49		66	34	66	215
Selling, general and administrative expenses	7			(2	)	1		5		11		Selling, general and administrative expenses	10		7	6	8	31
Operating expenses	233			384		145		249		1,011		Operating expenses	208		345	125	282	960
Equity in (earnings) losses of affiliates	3			—		(84	)	—		(81	)	Equity in (earnings) losses of affiliates	3		(1)	(69)	—	(67)
Other segment (income) expense, net	6			1		(2	)	2		7		Other segment (income) expense, net	(24)		1	(3)	1	(25)
Proportional share of refining gross margins contributed by equity affiliates	17			—		267		—		284		Proportional share of refining gross margins contributed by equity affiliates	19		—	269	—	288
Special items:
Pending claims and settlements	—			—		(21	)	—		(21	)

Realized refining margins	$	324		355		429		192		1,300		Realized refining margins	$	573	625	780	348	2,326

Total processed inputs (thousands of barrels)	41,682			65,434		23,893		30,703		161,712		Total processed inputs (thousands of barrels)	49,895		74,936	26,740	34,498	186,069
Adjusted total processed inputs (thousands of barrels)*	41,682			65,434		41,896		30,703		179,715		Adjusted total processed inputs (thousands of barrels)*	49,895		74,936	48,853	34,498	208,182

Income (loss) before income taxes per barrel (dollars per barrel)**	$	(0.17	)	(1.80	)	3.22		(4.89	)	(1.22	)	Income (loss) before income taxes per barrel (dollars per barrel)**	$	5.93	2.46	15.26	(0.93)	4.60
Realized refining margins (dollars per barrel)***	7.76			5.44		10.23		6.25		7.23		Realized refining margins (dollars per barrel)***	11.48		8.34	15.99	10.11	11.18
* 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.


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

Nine Months Ended September 30, 2020
Loss before income taxes	$	(1,063)	(1,613)	(463)	(1,903)	(5,042)
Plus:

Taxes other than income taxes	48		92	42	69	251
Depreciation, amortization and impairments	591		891	535	1,401	3,418
Selling, general and administrative expenses	31		28	20	28	107
Operating expenses	564		1,027	367	734	2,692
Equity in (earnings) losses of affiliates	7		(1)	248	—	254
Other segment (income) expense, net	1		—	(1)	3	3
Proportional share of refining gross margins contributed by equity affiliates	50		—	250	—	300





Realized refining margins	$	229	424	998	332	1,983

Total processed inputs (thousands of barrels)	123,632		176,641	68,805	84,229	453,307
Adjusted total processed inputs (thousands of barrels)*	123,632		176,641	123,337	84,229	507,839

Loss before income taxes per barrel (dollars per barrel)**	$	(8.60)	(9.13)	(6.73)	(22.59)	(11.12)
Realized refining margins (dollars per barrel)***	1.86		2.40	8.09	3.94	3.91
* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.
** 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.



	Millions of Dollars, Except as Indicated
	Three Months Ended March 31, 2020					Three Months Ended March 31, 2019
	U.S.			International		U.S.		International
Realized Marketing Fuel Margins
Income before income taxes	$	299		171		98		58
Plus:
Taxes other than income taxes	2			1		2		2
Depreciation and amortization	3			17		2		16
Selling, general and administrative expenses	127			63		155		62
Equity in earnings of affiliates	—			(22	)	(1	)	(22	)
Other operating revenues*	(84		)	2		(82	)	(6	)
Other segment (income) expense, net	—			—		—		(2	)
Marketing margins	347			232		174		108
Less: margin for nonfuel related sales	—			10		—		10
Realized marketing fuel margins	$	347		222		174		98

Total fuel sales volumes (thousands of barrels)	167,178			25,979		164,058		25,796

Income before income taxes per barrel (dollars per barrel)	$	1.79		6.58		0.60		2.25
Realized marketing fuel margins (dollars per barrel)**	2.08			8.53		1.06		3.80
* 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.


	Millions of Dollars, Except as Indicated
	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019
	U.S.		International	U.S.	International
Realized Marketing Fuel Margins
Income before income taxes	$	271	121	312	139
Plus:

Taxes other than income taxes	—		1	3	2
Depreciation and amortization	3		18	2	16
Selling, general and administrative expenses	174		62	184	61
Equity in earnings of affiliates	(10)		(31)	(3)	(27)
Other operating revenues*	(90)		(7)	(101)	(10)
Other segment (income) expense, net	—		(1)	—	1


Marketing margins	348		163	397	182
Less: margin for nonfuel related sales	—		11	—	11
Realized marketing fuel margins	$	348	152	397	171

Total fuel sales volumes (thousands of barrels)	155,948		24,164	188,172	26,796

Income before income taxes per barrel (dollars per barrel)	$	1.74	5.01	1.66	5.19
Realized marketing fuel margins (dollars per barrel)**	2.23		6.28	2.11	6.37
* 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.
	Millions of Dollars, Except as Indicated
	Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
	U.S.		International	U.S.	International
Realized Marketing Fuel Margins
Income before income taxes	$	749	360	613	326
Plus:

Taxes other than income taxes	4		4	8	5
Depreciation and amortization	9		51	7	48
Selling, general and administrative expenses	452		182	522	184
Equity in earnings of affiliates	(21)		(81)	(7)	(74)
Other operating revenues*	(245)		(9)	(286)	(25)



Marketing margins	948		507	857	464
Less: margin for nonfuel related sales	—		34	—	33
Realized marketing fuel margins	$	948	473	857	431

Total fuel sales volumes (thousands of barrels)	467,643		69,726	538,718	79,429

Income before income taxes per barrel (dollars per barrel)	$	1.60	5.16	1.14	4.10
Realized marketing fuel margins (dollars per barrel)**	2.03		6.78	1.59	5.42
* 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.


	Millions of Dollars, Except as Indicated
Expected Maturity Date	Fixed Rate Maturity		Average Interest Rate		Floating Rate Maturity		Average Interest Rate

Remainder of 2020	$	—	—	%	$	—	—	%
2021		—	—			1,000	1.65
2022		—	—			—	—
2023		500	3.70			—	—
2024		—	—			—	—
Remaining years		1,500	2.89			—	—
Total	$	2,000			$	1,000
Fair value	$	2,083			$	1,000


					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, 2020	—	$	—	—	$	2,514
August 1-31, 2020	—	—		—	2,514
September 1-30, 2020	—	—		—	2,514
Total	—	$	—	—
* 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, 2020, our Board of Directors has authorized an aggregate of $15 billion of repurchases of our outstanding common stock. The authorizations do not have expiration dates. The share repurchases are expected to be funded primarily through available cash. We are not obligated to repurchase any shares of common stock pursuant to these authorizations and may commence, suspend or terminate repurchases at any time. Shares of stock repurchased are held as treasury shares. Effective March 18, 2020, share repurchases under our share repurchase programs were temporarily suspended.



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

	As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the company has not filed with this Quarterly Report on Form 10-Q certain instruments defining the rights of holders of long-term debt of the company and its subsidiaries because the total amount of securities authorized thereunder does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. The company agrees to furnish a copy of such agreements to the Commission upon request.

10.1	Credit Agreement dated as of March 19, 2020, among Phillips 66, Phillips 66 Company, the lenders party thereto, Mizuho Bank, Ltd., as administrative agent.	8-K	10.1	03/24/2020	001-35349

10.2	Master New Lender Agreement dated as of April 6, 2020, among Phillips 66, Phillips 66 Company, the lenders party thereto, Mizuho Bank, Ltd., as administrative agent.	8-K	10.1	04/07/2020	001-35349

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.


						PHILLIPS 66

						~~PHILLIPS 66~~

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