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, ~~2022~~2023


☐			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., Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

832-765-3010

(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 ~~481,100,026~~458,862,316 shares of common stock, $0.01 par value, outstanding as of March 31, ~~2022.~~2023.

Table of Contents

PHILLIPS 66

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


Consolidated Statement of ~~Operations~~Income			Phillips 66


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022
Revenues and Other Income	Revenues and Other Income						Revenues and Other Income
Sales and other operating revenues	Sales and other operating revenues	$	36,179	21,627			Sales and other operating revenues	$	34,396	36,179
Equity in earnings of affiliates	Equity in earnings of affiliates	685		285			Equity in earnings of affiliates	611		685
Net gain on dispositions	Net gain on dispositions	1		—			Net gain on dispositions	34		1
Other income (loss)	Other income (loss)	(143)		15			Other income (loss)	48		(143)
Total Revenues and Other Income	Total Revenues and Other Income	36,722		21,927			Total Revenues and Other Income	35,089		36,722

Costs and Expenses	Costs and Expenses						Costs and Expenses
Purchased crude oil and products	Purchased crude oil and products	33,495		20,065			Purchased crude oil and products	29,341		33,495
Operating expenses	Operating expenses	1,340		1,380			Operating expenses	1,578		1,340
Selling, general and administrative expenses	Selling, general and administrative expenses	433		408			Selling, general and administrative expenses	605		433
Depreciation and amortization	Depreciation and amortization	338		356			Depreciation and amortization	476		338
Impairments	Impairments	—		198			Impairments	8		—
Taxes other than income taxes	Taxes other than income taxes	149		139			Taxes other than income taxes	207		149
Accretion on discounted liabilities	Accretion on discounted liabilities	6		6			Accretion on discounted liabilities	6		6
Interest and debt expense	Interest and debt expense	135		146			Interest and debt expense	192		135
Foreign currency transaction gains		(2)		—
Foreign currency transaction (gains) losses							Foreign currency transaction (gains) losses	25		(2)
Total Costs and Expenses	Total Costs and Expenses	35,894		22,698			Total Costs and Expenses	32,438		35,894
Income (loss) before income taxes		828		(771)
Income tax expense (benefit)		171		(132)
Net Income (Loss)		657		(639)
Income before income taxes							Income before income taxes	2,651		828
Income tax expense							Income tax expense	574		171
Net Income							Net Income	2,077		657
Less: net income attributable to noncontrolling interests	Less: net income attributable to noncontrolling interests	75		15			Less: net income attributable to noncontrolling interests	116		75
Net Income (Loss) Attributable to Phillips 66		$	582	(654)
Net Income Attributable to Phillips 66							Net Income Attributable to Phillips 66	$	1,961	582

Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)
Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars)							Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic	Basic	$	1.29	(1.49)			Basic	$	4.21	1.29
Diluted	Diluted	1.29		(1.49)			Diluted	4.20		1.29

Weighted-Average Common Shares Outstanding (thousands)	Weighted-Average Common Shares Outstanding (thousands)						Weighted-Average Common Shares Outstanding (thousands)
Basic	Basic	449,298		439,504			Basic	464,810		449,298
Diluted	Diluted	450,011		439,504			Diluted	467,034		450,011

See Notes to Consolidated Financial Statements.	See Notes to Consolidated Financial Statements.						See Notes to Consolidated Financial Statements.

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Consolidated Statement of Comprehensive Income ~~(Loss)~~			Phillips 66


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022

Net Income (Loss)		$	657	(639)
Net Income							Net Income	$	2,077	657
Other comprehensive income (loss)	Other comprehensive income (loss)						Other comprehensive income (loss)
Defined benefit plans	Defined benefit plans						Defined benefit plans

Amortization of net actuarial loss, prior service credit and settlements	Amortization of net actuarial loss, prior service credit and settlements	11		22			Amortization of net actuarial loss, prior service credit and settlements	10		11

Plans sponsored by equity affiliates	Plans sponsored by equity affiliates	5		6			Plans sponsored by equity affiliates	3		5
Income taxes on defined benefit plans	Income taxes on defined benefit plans	(3)		(6)			Income taxes on defined benefit plans	(3)		(3)
Defined benefit plans, net of income taxes	Defined benefit plans, net of income taxes	13		22			Defined benefit plans, net of income taxes	10		13
Foreign currency translation adjustments	Foreign currency translation adjustments	(82)		(15)			Foreign currency translation adjustments	76		(82)
Income taxes on foreign currency translation adjustments	Income taxes on foreign currency translation adjustments	—		—			Income taxes on foreign currency translation adjustments	1		—
Foreign currency translation adjustments, net of income taxes	Foreign currency translation adjustments, net of income taxes	(82)		(15)			Foreign currency translation adjustments, net of income taxes	77		(82)
Cash flow hedges		—		2

Income taxes on hedging activities	Income taxes on hedging activities	—		—			Income taxes on hedging activities	—		—
Hedging activities, net of income taxes	Hedging activities, net of income taxes	—		2			Hedging activities, net of income taxes	—		—
Other Comprehensive Income (Loss), Net of Income Taxes	Other Comprehensive Income (Loss), Net of Income Taxes	(69)		9			Other Comprehensive Income (Loss), Net of Income Taxes	87		(69)
Comprehensive Income (Loss)		588		(630)
Comprehensive Income							Comprehensive Income	2,164		588
Less: comprehensive income attributable to noncontrolling interests	Less: comprehensive income attributable to noncontrolling interests	75		15			Less: comprehensive income attributable to noncontrolling interests	116		75
Comprehensive Income (Loss) Attributable to Phillips 66		$	513	(645)
Comprehensive Income Attributable to Phillips 66							Comprehensive Income Attributable to Phillips 66	$	2,048	513

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheet			Phillips 66


		Millions of Dollars				Millions of Dollars
		March 31 2022		December 31 2021		March 31 2023		December 31 2022
Assets	Assets				Assets
Cash and cash equivalents	Cash and cash equivalents	$	3,335	3,147	Cash and cash equivalents	$	6,965	6,133
Accounts and notes receivable (net of allowances of $44 million in 2022 and 2021)		8,749		6,138
Accounts and notes receivable (net of allowances of $67 million in 2023 and 2022)					Accounts and notes receivable (net of allowances of $67 million in 2023 and 2022)	8,123		9,497
Accounts and notes receivable—related parties	Accounts and notes receivable—related parties	1,706		1,332	Accounts and notes receivable—related parties	1,203		1,488
Inventories	Inventories	4,530		3,394	Inventories	5,445		3,276
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,534		686	Prepaid expenses and other current assets	934		1,528
Total Current Assets	Total Current Assets	19,854		14,697	Total Current Assets	22,670		21,922
Investments and long-term receivables	Investments and long-term receivables	14,465		14,471	Investments and long-term receivables	15,289		14,950
Net properties, plants and equipment	Net properties, plants and equipment	22,333		22,435	Net properties, plants and equipment	35,111		35,163
Goodwill	Goodwill	1,484		1,484	Goodwill	1,486		1,486
Intangibles	Intangibles	819		813	Intangibles	793		831
Other assets	Other assets	1,683		1,694	Other assets	1,913		2,090
Total Assets	Total Assets	$	60,638	55,594	Total Assets	$	77,262	76,442

Liabilities	Liabilities				Liabilities
Accounts payable	Accounts payable	$	12,047	7,629	Accounts payable	$	9,923	10,748
Accounts payable—related parties	Accounts payable—related parties	1,137		832	Accounts payable—related parties	646		575
Short-term debt	Short-term debt	1,474		1,489	Short-term debt	825		529
Accrued income and other taxes	Accrued income and other taxes	1,363		1,254	Accrued income and other taxes	1,388		1,397
Employee benefit obligations	Employee benefit obligations	375		638	Employee benefit obligations	436		764
Other accruals	Other accruals	1,207		959	Other accruals	1,487		1,876
Total Current Liabilities	Total Current Liabilities	17,603		12,801	Total Current Liabilities	14,705		15,889
Long-term debt	Long-term debt	12,960		12,959	Long-term debt	17,660		16,661
Asset retirement obligations and accrued environmental costs	Asset retirement obligations and accrued environmental costs	716		727	Asset retirement obligations and accrued environmental costs	872		879
Deferred income taxes	Deferred income taxes	5,264		5,475	Deferred income taxes	6,813		6,671
Employee benefit obligations	Employee benefit obligations	1,049		1,055	Employee benefit obligations	931		937
Other liabilities and deferred credits	Other liabilities and deferred credits	925		940	Other liabilities and deferred credits	1,365		1,299
Total Liabilities	Total Liabilities	38,517		33,957	Total Liabilities	42,346		42,336

Equity	Equity				Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2022—651,046,617 shares; 2021—650,026,318 shares)
Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2023—653,266,184 shares; 2022—652,373,645 shares)					Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2023—653,266,184 shares; 2022—652,373,645 shares)
Par value	Par value	7		7	Par value	7		7
Capital in excess of par	Capital in excess of par	19,667		20,504	Capital in excess of par	19,795		19,791
Treasury stock (at cost: 2022—169,946,591 shares; 2021—211,771,827 shares)		(13,736)		(17,116)
Treasury stock (at cost: 2023—194,403,868 shares; 2022—186,529,667 shares)					Treasury stock (at cost: 2023—194,403,868 shares; 2022—186,529,667 shares)	(16,083)		(15,276)
Retained earnings	Retained earnings	16,391		16,216	Retained earnings	26,903		25,432
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(514)		(445)	Accumulated other comprehensive loss	(373)		(460)
Total Stockholders’ Equity	Total Stockholders’ Equity	21,815		19,166	Total Stockholders’ Equity	30,249		29,494
Noncontrolling interests	Noncontrolling interests	306		2,471	Noncontrolling interests	4,667		4,612
Total Equity	Total Equity	22,121		21,637	Total Equity	34,916		34,106
Total Liabilities and Equity	Total Liabilities and Equity	$	60,638	55,594	Total Liabilities and Equity	$	77,262	76,442

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Cash Flows			Phillips 66

Millions of Dollars
Three Months Ended
March 31
2022 2021
Cash Flows From Operating Activities
Net income (loss) $ 657 (639)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation and amortization 338 356
Impairments — 198
Accretion on discounted liabilities 6 6
Deferred income taxes 142 (103)
Undistributed equity earnings (100) 217
Net gain on dispositions (1) —
Unrealized investment loss 169 —
Other 40 138
Working capital adjustments
Accounts and notes receivable (3,042) (1,740)
Inventories (1,152) (377)
Prepaid expenses and other current assets (849) (283)
Accounts payable 4,809 2,779
Taxes and other accruals 119 (281)
Net Cash Provided by Operating Activities 1,136 271
Cash Flows From Investing Activities
Capital expenditures and investments (370) (331)
Return of investments in equity affiliates 15 58
Proceeds from asset dispositions 1 —
Advances/loans—related parties — (155)
Other (74) (39)
Net Cash Used in Investing Activities (428) (467)
Cash Flows From Financing Activities
Issuance of debt — 450
Repayment of debt (24) (925)
Issuance of common stock 23 20
Dividends paid on common stock (404) (394)
Distributions to noncontrolling interests (77) (76)
Other (30) (20)
Net Cash Used in Financing Activities (512) (945)
Effect of Exchange Rate Changes on Cash and Cash Equivalents (8) (22)
Net Change in Cash and Cash Equivalents 188 (1,163)
Cash and cash equivalents at beginning of period 3,147 2,514
Cash and Cash Equivalents at End of Period $ 3,335 1,351


	Millions of Dollars
	Three Months Ended March 31
	2023		2022
Cash Flows From Operating Activities
Net income	$	2,077	657
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	476		338
Impairments	8		—
Accretion on discounted liabilities	6		6
Deferred income taxes	146		142
Undistributed equity earnings	(242)		(100)
Net gain on dispositions	(34)		(1)

Unrealized investment loss	11		169

Other	14		40
Working capital adjustments
Accounts and notes receivable	1,663		(3,042)
Inventories	(2,003)		(1,152)
Prepaid expenses and other current assets	469		(849)
Accounts payable	(739)		4,809
Taxes and other accruals	(653)		119


Net Cash Provided by Operating Activities	1,199		1,136

Cash Flows From Investing Activities
Capital expenditures and investments	(378)		(370)
Return of investments in equity affiliates	60		15
Proceeds from asset dispositions	77		1



Other	(24)		(74)


Net Cash Used in Investing Activities	(265)		(428)

Cash Flows From Financing Activities
Issuance of debt	2,488		—
Repayment of debt	(1,223)		(24)
Issuance of common stock	10		23
Repurchase of common stock	(800)		—
Dividends paid on common stock	(486)		(404)
Distributions to noncontrolling interests	(58)		(77)


Other	(48)		(30)


Net Cash Used in Financing Activities	(117)		(512)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	15		(8)

Net Change in Cash and Cash Equivalents	832		188
Cash and cash equivalents at beginning of period	6,133		3,147
Cash and Cash Equivalents at End of Period	$	6,965	3,335

See Notes to Consolidated Financial Statements.

Table of Contents


Consolidated Statement of Changes in Equity			Phillips 66


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

December 31, 2022										December 31, 2022	$	7	19,791	(15,276)	25,432	(460)	4,612	34,106
Net income										Net income	—		—	—	1,961	—	116	2,077
Other comprehensive income										Other comprehensive income	—		—	—	—	87	—	87
Dividends paid on common stock ($1.05 per share)										Dividends paid on common stock ($1.05 per share)	—		—	—	(486)	—	—	(486)
Repurchase of common stock										Repurchase of common stock	—		—	(807)	—	—	—	(807)
Benefit plan activity										Benefit plan activity	—		4	—	(4)	—	(3)	(3)
Distributions to noncontrolling interests										Distributions to noncontrolling interests	—		—	—	—	—	(58)	(58)

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

December 31, 2021	December 31, 2021	$	7	20,504	(17,116)	16,216	(445)	2,471	21,637	December 31, 2021	$	7	20,504	(17,116)	16,216	(445)	2,471	21,637
Net income	Net income	—		—	—	582	—	75	657	Net income	—		—	—	582	—	75	657
Other comprehensive loss	Other comprehensive loss	—		—	—	—	(69)	—	(69)	Other comprehensive loss	—		—	—	—	(69)	—	(69)
Dividends paid on common stock ($0.92 per share)	Dividends paid on common stock ($0.92 per share)	—		—	—	(404)	—	—	(404)	Dividends paid on common stock ($0.92 per share)	—		—	—	(404)	—	—	(404)
Benefit plan activity		—		32	—	(3)	—	—	29
Distributions to noncontrolling interests		—		—	—	—	—	(77)	(77)
Acquisition of noncontrolling interest in Phillips 66 Partners LP		—		(869)	3,380	—	—	(2,163)	348

March 31, 2022		$	7	19,667	(13,736)	16,391	(514)	306	22,121

December 31, 2020		$	6	20,383	(17,116)	16,500	(789)	2,539	21,523
Net income (loss)		—		—	—	(654)	—	15	(639)
Other comprehensive income		—		—	—	—	9	—	9
Dividends paid on common stock ($0.90 per share)		—		—	—	(394)	—	—	(394)

Benefit plan activity	Benefit plan activity	—		37	—	(3)	—	—	34	Benefit plan activity	—		32	—	(3)	—	—	29

Distributions to noncontrolling interests	Distributions to noncontrolling interests	—		—	—	—	—	(76)	(76)	Distributions to noncontrolling interests	—		—	—	—	—	(77)	(77)

March 31, 2021		$	6	20,420	(17,116)	15,449	(780)	2,478	20,457
Acquisition of noncontrolling interest in Phillips 66 Partners LP										Acquisition of noncontrolling interest in Phillips 66 Partners LP	—		(869)	3,380	—	—	(2,163)	348
March 31, 2022										March 31, 2022	$	7	19,667	(13,736)	16,391	(514)	306	22,121


		Shares			Shares
		Three Months Ended March 31			Three Months Ended March 31
		Common Stock Issued	Treasury Stock		Common Stock Issued	Treasury Stock

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

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

December 31, 2021	December 31, 2021	650,026,318	211,771,827	December 31, 2021	650,026,318	211,771,827

Shares issued—share-based compensation	Shares issued—share-based compensation	1,020,299	—	Shares issued—share-based compensation	1,020,299	—
Shares issued—acquisition of noncontrolling interest in Phillips 66 Partners LP	Shares issued—acquisition of noncontrolling interest in Phillips 66 Partners LP	—	(41,825,236)	Shares issued—acquisition of noncontrolling interest in Phillips 66 Partners LP	—	(41,825,236)
March 31, 2022	March 31, 2022	651,046,617	169,946,591	March 31, 2022	651,046,617	169,946,591

December 31, 2020		648,643,223	211,771,827

Shares issued—share-based compensation		995,658	—
March 31, 2021		649,638,881	211,771,827

See Notes to Consolidated Financial Statements.	See Notes to Consolidated Financial Statements.			See Notes to Consolidated Financial Statements.

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~~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 ~~2021~~2022 Annual Report on Form 10-K. The results of operations for the three months ended March 31, ~~2022,~~2023, are not necessarily indicative of the results expected for the full year.

~~On March 9, 2022,~~

Note 2—Change in Accounting Principle

Effective January 1, 2023, we ~~completed~~adopted ASU 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” This ASU requires the ~~previously announced merger between us~~buyer in a supplier finance program to disclose qualitative and ~~Phillips 66 Partners LP (Phillips 66 Partners). See Note 18—Phillips 66 Partners LP, for additional~~quantitative information about the program. At the time of adoption, this ASU did not have a material impact on ~~the merger transaction.~~our consolidated financial statements.

Note 2—3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger

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

Prior to the merger, we and Enbridge each held a 50% interest and jointly governed DCP Midstream, whose primary assets are its general partner and limited partner interests in DCP Midstream, LP (DCP LP), and we each held indirect economic interests in DCP LP of 28.26%. DCP LP is a variable interest entity (VIE) because its limited partners do not have the ability to remove its general partner with a simple majority vote, nor do its limited partners have substantive participating rights in the significant decisions made in the ordinary course of business. DCP Midstream ultimately consolidates DCP LP because one of its wholly owned subsidiaries is the primary beneficiary of DCP LP.

We and Enbridge also held 65% and 35% interests, respectively, in Gray Oak Holdings, whose primary asset was a 65% noncontrolling interest in Gray Oak Pipeline, LLC (Gray Oak Pipeline). Our and Enbridge’s indirect economic interests in Gray Oak Pipeline were 42.25% and 22.75%, respectively. We had voting control over and consolidated Gray Oak Holdings and reported Gray Oak Holdings’ 65% interest in Gray Oak Pipeline as an equity investment and Enbridge’s interest in Gray Oak Holdings as a noncontrolling interest.

In connection with the merger, we and Enbridge entered into a Third Amended and Restated Limited Liability Company Agreement of DCP Midstream (Amended and Restated LLC Agreement), which realigned the members’ economic interests and governance responsibilities. Under the Amended and Restated LLC Agreement, two classes of membership interests in DCP Midstream were created, Class A and Class B, that are intended to track the assets, liabilities, revenues and expenses of the following operating segments of DCP Midstream:

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

•Class B Segment comprised of the business, activities, assets and liabilities of Gray Oak Pipeline (DCP Midstream Class B Segment).

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We hold a 76.64% Class A membership interest, which represents an indirect economic interest in DCP LP of 43.3%, and a 10% Class B membership interest, which represents an indirect economic interest in Gray Oak Pipeline of 6.5%. Enbridge holds the remaining Class A and Class B membership interests. We have been designated as the managing member of DCP Midstream Class A Segment and are responsible for conducting, directing and managing all activities associated with this segment, except as limited in certain instances. Enbridge has been designated as the managing member of DCP Midstream Class B Segment. Earnings and distributions from each segment are allocated to the members based on their membership interest in each membership class, except as otherwise provided.

DCP Midstream Class A Segment and DCP Midstream Class B Segment were determined to be silos under the variable interest consolidation model.As a result, DCP Midstream was also determined to be a VIE. We determined that we are the primary beneficiary of DCP Midstream Class A Segment because of the governance rights granted to us under the Amended and Restated LLC Agreement as managing member of the segment.

We hold a 33.33% direct ownership interest in DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills). DCP LP holds the remaining 66.67% ownership interest in these entities. As a result of the governance rights granted to us over DCP Midstream Class A Segment and the governance rights we hold through our direct ownership interests, we obtained controlling financial interests in these entities in connection with the merger. As a result, our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased to 62.2% from 52.2%.

Starting on August 18, 2022, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills. We also began reporting the direct and indirect economic interests held by Enbridge, DCP LP’s public common unitholders and DCP LP’s preferred unitholders as noncontrolling interests on our financial statements.

We account for our remaining indirect economic interest in Gray Oak Pipeline, now held through DCP Midstream Class B Segment, using the equity method of accounting. As a result of the merger, we derecognized Enbridge’s noncontrolling interest in Gray Oak Holdings.

We accounted for our consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills as a business combination using the acquisition method of accounting. See Note 4—Business Combinations, for additional information on our accounting for this transaction. See Note 21—DCP Midstream Class A Segment, for additional information regarding our variable interest in DCP Midstream Class A Segment and the definitive agreement we executed on January 5, 2023, to acquire an incremental interest in DCP LP.

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Note 4—Business Combinations

On August 17, 2022, we realigned our economic interest in, and governance rights over, DCP Midstream and Gray Oak Holdings through the merger of these existing entities with DCP Midstream as the surviving entity. As part of the merger, we transferred a 35.75% indirect economic interest in Gray Oak Pipeline and contributed $404 million of cash to DCP Midstream, which was then paid to Enbridge, in return for a 15.05% incremental indirect economic ownership interest in DCP LP. As noted above, the additional governance rights we were granted as part of this transaction resulted in us consolidating the DCP Midstream Class A Segment, as well as DCP Sand Hills and DCP Southern Hills. Given the nature of this transaction, we have accounted for the consolidation of these entities using the acquisition method of accounting.

The components of the fair value of the merger consideration are:


	Millions of Dollars
Cash contributed	$	404
Fair value of transferred equity interest	634
Fair value of previously held equity interests	3,853
Total merger consideration	$	4,891

The aggregate purchase consideration noted above was allocated to the assets acquired and liabilities assumed of the entities consolidated based upon a preliminary estimate of their fair values as of the August 17, 2022, merger date. Due to the level of effort required to develop fair value measurements, the valuation information necessary to determine the fair values of assets acquired and liabilities assumed is preliminary, including the underlying cash flows, appraisals and other information used to estimate the fair values of the net assets acquired and noncontrolling interests in those net assets. We continue to evaluate the factors used in establishing the fair values of assets and liabilities as of the acquisition date, including, but not limited to, those factors that could affect the estimated fair values of properties, plants and equipment (PP&E), investments in unconsolidated affiliates accounted for under the equity method, inventories, identifiable intangible assets, leases, financial instruments, asset retirement and environmental obligations, legal and tax contingencies, debt and noncontrolling interests. We will complete a final determination of the fair values of assets acquired and liabilities assumed within the one-year measurement period from the date of the merger. Any adjustments made in subsequent periods could be material to the preliminary values.

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The following table shows the preliminary purchase price allocation as of the date of the merger, and cumulative adjustments we have made as of March 31, 2023:


	Millions of Dollars
	As Originally Reported		Adjustments	As Adjusted
Fair value of assets acquired:
Cash and cash equivalents	$	98	—	98
Accounts and notes receivable	1,003		—	1,003
Inventories	74		166	240
Prepaid expenses and other current assets	439		—	439
Investments and long-term receivables	2,192		57	2,249
Properties, plants and equipment	12,837		13	12,850

Intangibles	36		(36)	—
Other assets	343		(158)	185
Total assets acquired	17,022		42	17,064
Fair value of liabilities assumed:
Accounts payable	912		—	912
Short-term debt	625		(2)	623
Accrued income and other taxes	107		(11)	96
Employee benefit obligation—current	50		22	72
Other accruals	497		(21)	476
Long-term debt	4,541		40	4,581
Asset retirement obligations and accrued environmental costs	168		16	184
Deferred income taxes	40		14	54
Employee benefit obligations	54		—	54
Other liabilities and deferred credits	227		(5)	222

Total liabilities assumed	7,221		53	7,274
Fair value of net assets	9,801		(11)	9,790




Less: Fair value of noncontrolling interests	4,910		(11)	4,899
Total merger consideration	$	4,891	—	4,891

The adjustments reflected in the table above include reclassification adjustments we have made to the preliminary purchase price allocation to conform with our historical presentation and adjustments we have made to the estimated fair value of certain assets acquired and liabilities assumed. The adjustments recorded in the three months ended March 31, 2023, were not material.

Pending Acquisition

On April 10, 2023, we entered into an agreement to acquire certain marketing assets on the U.S. West Coast for cash consideration of approximately $260 million plus an adjustment for net working capital that will be determined at closing. The transaction is expected to close in the second or early third quarter of 2023, subject to regulatory approval and completion of other customary closing conditions.

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Note 5—Sales and Other Operating Revenues

Disaggregated Revenues

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


		Millions of Dollars				Millions of Dollars
		Three Months Ended March 31					Three Months Ended March 31
		2022		2021					2023		2022
Product Line and Services	Product Line and Services							Product Line and Services
Refined petroleum products	Refined petroleum products	$	29,382	16,343				Refined petroleum products	$	24,718	29,382
Crude oil resales	Crude oil resales	3,755		3,189				Crude oil resales	4,565		3,755
Natural gas liquids (NGL)		3,230		1,774
Natural gas liquids (NGL) and natural gas								Natural gas liquids (NGL) and natural gas	4,421		3,230
Services and other*	Services and other*	(188)		321				Services and other*	692		(188)
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues	$	36,179	21,627				Consolidated sales and other operating revenues	$	34,396	36,179

Geographic Location**	Geographic Location**							Geographic Location**
United States	United States	$	28,885	16,612				United States	$	27,065	28,885
United Kingdom	United Kingdom	3,640		2,287				United Kingdom	3,930		3,640
Germany	Germany	1,382		817				Germany	1,306		1,382
Other foreign countries		2,272		1,911
Other countries								Other countries	2,095		2,272
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues	$	36,179	21,627				Consolidated sales and other operating revenues	$	34,396	36,179
* Includes derivatives-related activities. See Note 11—Derivatives and Financial Instruments, for additional information.
* Includes derivatives-related activities. See Note 14—Derivatives and Financial Instruments, for additional information.								* Includes derivatives-related activities. See Note 14—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.	** Sales and other operating revenues are attributable to countries based on the location of the operations generating the revenues.				** Sales and other operating revenues are attributable to countries based on the location of the operations generating the revenues.

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Contract-Related Assets and Liabilities

At March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, receivables from contracts with customers were ~~$8,604~~$7,317 million and ~~$6,140~~$8,749 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, ~~2022,~~2023, and December 31, ~~2021,~~2022, our asset balances related to such payments were ~~$471~~$509 million and ~~$466~~$505 million, respectively.

Our contract liabilities represent advances from our customers prior to product or service delivery. At March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, contract liabilities were ~~not material.~~$203 million and $156 million, respectively.

Remaining Performance Obligations

Most of our contracts with customers are spot contracts or term contracts with only variable consideration. We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less or because the variable consideration has been allocated entirely to an unsatisfied performance obligation. We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing. At March 31, ~~2022,~~2023, the remaining performance obligations related to these minimum volume commitment contracts ~~were immaterial.~~amounted to $446 million. This amount excludes variable consideration and estimates of variable rate escalation clauses in our contracts with customers, and is expected to be recognized through 2031 with a weighted average remaining life of three years as of March 31, 2023.

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Note 3—6—Credit Losses

We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil, NGL and ~~NGL.~~natural gas. We assess each counterparty’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the 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. In addition, when events and circumstances arise that may affect certain counterparties’ abilities to fulfill their obligations, ~~such as Coronavirus Disease 2019 (COVID-19),~~ we enhance our credit monitoring, and we may seek collateral to support some transactions or require prepayments from higher-risk counterparties.

At March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, we reported ~~$10,455~~$9,326 million and ~~$7,470~~$10,985 million of accounts and notes receivable, respectively, net of allowances of ~~$44~~$67 million for both periods. Based on an aging analysis at March 31, ~~2022,~~2023, more than 95% of our accounts receivable were outstanding less than 60 days.

We are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt and standby letters of credit. See Note 9—12—Guarantees, and Note ~~10—~~13—Contingencies and Commitments, for more information on these off-balance sheet exposures.

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Note 4—7—Inventories

Inventories consisted of the following:


		Millions of Dollars				Millions of Dollars
		March 31 2022		December 31 2021		March 31 2023		December 31 2022

Crude oil and petroleum products	Crude oil and petroleum products	$	4,152	3,024	Crude oil and petroleum products	$	5,046	2,914
Materials and supplies	Materials and supplies	378		370	Materials and supplies	399		362
		$	4,530	3,394		$	5,445	3,276

Inventories valued on the last-in, first-out (LIFO) basis totaled ~~$3,923~~$4,837 million and ~~$2,792~~$2,635 million at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively. The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately ~~$9.4~~$6 billion and ~~$5.7~~$6.3 billion at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively.

Certain planned reductions in inventory that are not expected to be replaced by the end of the year cause liquidations of LIFO inventory values.LIFO inventory liquidations increased our net income by $4 million and $40 million in the three months ended March 31, 2023 and 2022, ~~and increased our net loss by $28 million in the three months ended March 31, 2021.~~respectively.

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Note 5—8—Investments, Loans and Long-Term Receivables

Equity Investments

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

In 2020, the trial court presiding over litigation brought by the Standing Rock Sioux Tribe (the Tribe) ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) addressing an easement under Lake Oahe in North Dakota. The court later vacated the easement. Although the easement is vacated, the USACE has ~~indicated that it will not take action~~no plans to stop pipeline operations while it proceeds with the ~~EIS. In May 2021,~~EIS, and the ~~Standing Rock Sioux~~ Tribe’s request for ~~an injunction to force~~ a shutdown ~~of the pipeline while the EIS is being prepared~~ was ~~denied.~~denied in May 2021. In June 2021, the trial court dismissed the litigation entirely. Once the EIS is completed, new litigation or challenges ~~to the EIS could~~may be filed.

In ~~September 2021,~~February 2022, the U.S. Supreme Court (the Court) denied Dakota ~~Access filed a~~Access’ writ of certiorari requesting the ~~U.S. Supreme~~ Court to review the lower court’s decision to order the EIS and vacate the easement. ~~In February 2022, the writ was denied, and~~Therefore, the requirement to prepare the EIS stands. ~~Completion of~~Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS ~~was expected in the fall of 2022, but now may be delayed as~~process while the USACE ~~engages~~engaged with the ~~Standing Rock Sioux~~ Tribe on their reasons for ~~withdrawing as a cooperating agency with respect to preparation~~withdrawing. The draft EIS process resumed in August 2022, and release is expected in the second quarter of ~~the EIS.~~2023.

Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access ~~with an aggregate principal outstanding of $2.5 billion at~~in March 31, 2022. In addition, Phillips 66 Partners, now a wholly owned subsidiary of Phillips 66, 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 above-mentioned ongoing litigation. At March 31, 2022, our share of the maximum potential equity contributions under the CECU was approximately $631 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we could be required to support our 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 at March 31, 2022.

~~At March 31, 2022, the aggregate book value of our investments in Dakota Access and ETCO was $725 million.~~

2019. On April 1, 2022, Dakota Access’ wholly owned subsidiary repaid $650 million aggregate principal amount of its outstanding senior notes upon maturity. We funded our 25% share, or $163 million, with a capital contribution of $89 million in March 2022 and $74 million of distributions we elected not to receive from Dakota Access in the first quarter of 2022. AsAt March 31, 2023, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $1.85 billion.

In conjunction with the notes offering, Phillips 66 Partners LP (Phillips 66 Partners), now a ~~result~~wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU). Under the ~~debt repayment, on April 1, 2022,~~CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At March 31, 2023, our 25% share of the maximum potential equity contributions under the CECU ~~decreased to~~was approximately $467 ~~million,~~million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we could be required to support our 25% share of the ongoing expenses, including scheduled interest payments on the notes ~~that we could be required to support decreased to~~of approximately $20 million ~~annually.~~annually, in addition to the potential obligations under the CECU at March 31, 2023.

At March 31, 2023, the aggregate book value of our investments in Dakota Access and ETCO was $659 million.

CF United LLC (CF United)

We ~~hold~~own a 50% voting interest and a ~~48%~~47% economic interest in CF United, a retail marketing joint venture with operations primarily on the U.S. West Coast. CF United is considered a ~~variable interest entity (VIE)~~VIE because our co-venturer has an option to require us to purchase its interest 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 March 31, ~~2022,~~2023, our maximum exposure to loss was comprised of our ~~$278~~$292 million investment in CF United, and any potential future loss resulting from the put option should the purchase price based on a fixed multiple exceed the then-current fair value of CF United.

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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 economic performance. At March 31, ~~2022,~~2023, our maximum exposure to loss was ~~$188~~$213 million, which represented the book value of our investment in OnCue of ~~$120~~$145 million and guaranteed debt obligations of $68 million.

~~Liberty~~DCP Midstream, DCP Sand Hills, DCP Southern Hills, and Gray Oak Pipeline ~~LLC (Liberty)~~—Prior to the merger of DCP Midstream and Gray Oak Holdings on August 17, 2022, we held:

~~In the first quarter of 2021, Phillips 66 Partners decided to exit the Liberty Pipeline project, which resulted~~

•A 50% interest in DCP Midstream a $198 million before-tax impairment in our Midstream segment. The impairment is included in the “Impairments” line item on our consolidated statement of operations for the three months ended March 31, 2021. See Note 12—Fair Value Measurements, for additional information regarding this impairmentjoint venture that owns and ~~the techniques used to determine the fair value of this investment. In April 2021, Phillips 66 Partners transferred~~operates NGL and gas pipelines, gas plants, gathering systems, storage facilities and fractionation plants, through its subsidiary DCP LP.

•A 33.33% direct ownership interest in ~~Liberty~~DCP Sand Hills a joint venture that owns a NGL pipeline system that extends from the Permian Basin and Eagle Ford to ~~its co-venturer for cash~~facilities on the Texas Gulf Coast and ~~certain~~to the Mont Belvieu, Texas, market hub.

•A 33.33% direct ownership interest in DCP Southern Hills a joint venture that owns a NGL pipeline ~~assets with~~system that extends from the Midcontinent region to the Mont Belvieu, Texas, market hub.

•A 65% interest in Gray Oak Pipeline, which was held through a ~~value~~consolidated holding company, Gray Oak Holdings. Our indirect interest in Gray Oak Pipeline was 42.25%, after considering a co-venturer’s 35% interest in Gray Oak Holdings. Gray Oak Pipeline is a crude oil pipeline that ~~approximated its book value of $46 million at March 31, 2021.~~extends from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including our Sweeny Refinery.

Other Investments

In September 2021, we acquired 78 million ordinary shares, representing a 16% ownership interest, in NOVONIX Limited (NOVONIX), which are traded on the Australian Securities Exchange. NOVONIX is a Brisbane, Australia-based company that develops technology and supplies materials for lithium-ion batteries. Since we do not have significant influence over the operating and financial policies of NOVONIX and the shares we own have a readily determinable fair value, our investment is recorded at fair value at the end of each reporting period. The fair value of our investment is recorded in the “Investments and long-term receivables” line item on our consolidated balance sheet. The change in the fair value of our investment due to fluctuations in NOVONIX’s stock price, or unrealized investment ~~gains (losses),~~losses, is recorded in the “Other income (loss)” line item of our consolidated statement of ~~operations,~~income, while changes due to foreign currency fluctuations are recorded in the “Foreign currency transaction ~~gains”~~(gains) losses” line item on our consolidated statement of ~~operations.~~income. The fair value of our investment in NOVONIX was ~~$362~~$66 million at March 31, ~~2022.~~2023. The fair value of our investment in NOVONIX declined by ~~$158~~$12 million during the three months ended March 31, ~~2022,~~2023, reflecting an unrealized investment loss of ~~$169~~$11 million ~~partially offset by~~and an unrealized foreign currency ~~gain~~loss of ~~$11~~$1 million. See Note ~~12—~~15—Fair Value Measurements, for additional information regarding the recurring fair value measurement of our investment in NOVONIX.

~~Related Party Loans~~

~~We and our co-venturer provided member loans to WRB Refining LP (WRB). At March 31, 2022, our 50% share of the outstanding member loan balance, including accrued interest, was $597 million.~~

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Note 6—9—Properties, Plants and Equipment

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


		Millions of Dollars								Millions of Dollars
		March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
		Gross PP&E		Accum. D&A	Net PP&E	Gross PP&E	Accum. D&A	Net PP&E		Gross PP&E		Accum. D&A	Net PP&E	Gross PP&E	Accum. D&A	Net PP&E

Midstream	Midstream	$	12,597	3,156	9,441	12,524	3,064	9,460	Midstream	$	25,549	3,743	21,806	25,422	3,524	21,898
Chemicals	Chemicals	—		—	—	—	—	—	Chemicals	—		—	—	—	—	—
Refining	Refining	23,991		12,683	11,308	23,878	12,517	11,361	Refining	24,236		12,500	11,736	24,200	12,523	11,677
Marketing and Specialties	Marketing and Specialties	1,800		1,037	763	1,819	1,035	784	Marketing and Specialties	1,829		1,095	734	1,800	1,058	742
Corporate and Other	Corporate and Other	1,586		765	821	1,576	746	830	Corporate and Other	1,580		745	835	1,568	722	846
		$	39,974	17,641	22,333	39,797	17,362	22,435		$	53,194	18,083	35,111	52,990	17,827	35,163

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Note 7—10—Earnings ~~(Loss)~~ Per Share

The numerator of basic earnings ~~(loss)~~ per share (EPS) is net income ~~(loss)~~ attributable to Phillips 66, 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 by dividend equivalents paid on participating securities for which the dividends are more dilutive than the participation of the awards in the earnings ~~(loss)~~ of the periods presented. To the extent unvested stock, unit or option awards and vested unexercised stock options are dilutive, they are included with the weighted-average common shares outstanding in the denominator. Treasury stock is excluded from the denominator in both basic and diluted EPS.


		Three Months Ended March 31					Three Months Ended March 31
		2022			2021			2023				2022
		Basic		Diluted	Basic	Diluted				Basic		Diluted	Basic	Diluted
Amounts Attributed to Phillips 66 Common Stockholders (millions):	Amounts Attributed to Phillips 66 Common Stockholders (millions):								Amounts Attributed to Phillips 66 Common Stockholders (millions):
Net income (loss) attributable to Phillips 66		$	582	582	(654)	(654)
Net Income Attributable to Phillips 66									Net Income Attributable to Phillips 66	$	1,961	1,961	582	582
Income allocated to participating securities	Income allocated to participating securities	(2)		(2)	(2)	(2)			Income allocated to participating securities	(3)		(1)	(2)	(2)

Net income (loss) available to common stockholders		$	580	580	(656)	(656)
Net income available to common stockholders									Net income available to common stockholders	$	1,958	1,960	580	580

Weighted-average common shares outstanding (thousands):	Weighted-average common shares outstanding (thousands):	447,206		449,298	437,369	439,504			Weighted-average common shares outstanding (thousands):	462,870		464,810	447,206	449,298
Effect of share-based compensation	Effect of share-based compensation	2,092		713	2,135	—			Effect of share-based compensation	1,940		2,224	2,092	713
Weighted-average common shares outstanding—EPS	Weighted-average common shares outstanding—EPS	449,298		450,011	439,504	439,504			Weighted-average common shares outstanding—EPS	464,810		467,034	449,298	450,011

Earnings (Loss) Per Share of Common Stock (dollars)		$	1.29	1.29	(1.49)	(1.49)
Earnings Per Share of Common Stock (dollars)									Earnings Per Share of Common Stock (dollars)	$	4.21	4.20	1.29	1.29

~~Note 18—Phillips 66 Partners LP, for additional information on the merger transaction.~~

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Note 8—11—Debt

~~2022 Activities~~

Debt Issuances and Repayments

~~In early April 2022, upon maturity, Phillips 66 repaid its 4.300% senior notes with an aggregate principal amount of $1.0 billion and Phillips 66 Partners repaid its $450 million term loan.~~

~~Debt Exchange~~

On ~~April 6, 2022,~~March 29, 2023, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, ~~announced offers to exchange (the Exchange Offers) all validly tendered~~issued $1.25 billion aggregate principal amount of senior unsecured notes consisting of:

•$750 million aggregate principal amount of ~~7 different series~~4.950% Senior Notes due December 2027 (2027 Notes).

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

The 2027 Notes and 2033 Notes (collectively, the Notes) are fully and unconditionally guaranteed by Phillips ~~66 Partners (collectively,~~66. Interest on the ~~Old Notes),~~2027 Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2023. Interest on the 2033 Notes is payable semi-annually on June 30 and December 30 of each year, commencing on December 30, 2023.

The Notes are required to be redeemed at a price equal to 101% of the principal amount, plus accrued and unpaid interest, at the earliest occurrence of any of the following events: the DCP LP public common unit acquisition is not completed on or prior to December 31, 2023; the agreement to acquire the DCP LP public common units is terminated; or we notify the trustee of the notes in writing that the DCP LP public common unit acquisition will not be consummated on or prior to December 31, 2023. See Note 21—DCP Midstream Class A Segment, for additional information regarding the definitive agreement we executed on January 5, 2023, to acquire an incremental interest in DCP LP.

On March 15, 2023, DCP LP repaid its 3.875% senior unsecured notes due March 2023 with an aggregate principal amount of ~~approximately $3.5 billion, for notes to be issued by Phillips 66 Company (collectively, the New Notes). The New Notes will be fully~~$500 million using borrowings under its revolving credit and ~~unconditionally guaranteed by Phillips 66 and will rank equally~~with Phillips 66 Company’s other unsecured and unsubordinated indebtedness, and the guarantees will rank equally with Phillips 66’s other unsecured and unsubordinated indebtedness. The Exchange Offers will expire on May 3, 2022, unless such date is extended (the Expiration Date). Phillips 66 Company currently expects the settlement of the Exchange Offers to occur on May 5, 2022, unless the Expiration Date is extended.accounts receivable securitization facilities.

The New Notes will have the same interest rates, interest payment dates and maturity dates as the Old Notes. In addition, holders that validly tender before the end of the early participation period onOn April 19, ~~2022 (the Early Participation Date), will receive New Notes~~2023, DCP LP announced its intent to redeem its 5.850% junior subordinated notes due May 2043 with an aggregate principal amount ~~equivalent~~outstanding of $550 million on or about May 21, 2023. DCP LP expects to the Old Notes, while holders that validly tender after the Early Participation Date, but before the Expiration Date, will receive New Notes with an aggregate principal amount that is 3% less than the Old Notes.use borrowings under its revolving credit and accounts receivable securitization facilities.

~~Through~~Term Loan Agreement

On March 27, 2023 (the Closing Date), Phillips 66 Company, a wholly owned subsidiary of Phillips 66, entered into a $1.5 billion delayed draw term loan agreement guaranteed by Phillips 66 (the Term Loan Agreement). The Term Loan Agreement provides for a single borrowing (the date of such borrowing, the ~~end~~Funding Date) during a 90-day period commencing on the Closing Date, contingent upon us completing the DCP LP public common unit acquisition, and matures on the third anniversary of the ~~early participation period on April 19, 2022, Old Notes with an aggregate~~Funding Date. The Term Loan Agreement contains customary covenants similar to those contained in our revolving credit agreement, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Term Loan Agreement has customary events of default, such as nonpayment of principal ~~amount~~when due; nonpayment of ~~approximately $3.2 billion had been validly tendered for exchange.~~interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Term Loan Agreement, in whole or in part, without premium or penalty. Outstanding borrowings under the Term Loan Agreement will bear interest at either: (a) Adjusted Term SOFR in effect from time to time plus the applicable margin; or (b) the reference rate plus the applicable margin, as defined in the Term Loan Agreement. As of March 31, 2023, no borrowings are outstanding under the Term Loan Agreement.

~~2021 Activities~~See Note 21—DCP Midstream Class A Segment, for additional information regarding the definitive agreement we executed on January 5, 2023, to acquire an incremental interest in DCP LP.

~~In February 2021,~~

Credit Facilities and Commercial Paper

Phillips 66 ~~repaid $500 million outstanding principal balance of its floating-rate senior notes upon maturity.~~and Phillips 66 Company

On June 23, 2022, we entered into a $5 billion revolving credit facility with Phillips 66 Company as the borrower and Phillips 66 as the guarantor. At both March 31, 2023, and December 31, 2022, no amount had been drawn under the $5 billion revolving credit facility or $5 billion uncommitted commercial paper program.

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DCP Midstream Class A Segment

At March 31, 2023, DCP LP had $225 million of borrowings outstanding under its $1.4 billion credit facility and $2 million of letters of credit had been issued that supported the credit facility. At December 31, 2022, DCP LP had no borrowings outstanding under its $1.4 billion credit facility, and $10 million in letters of credit had been issued that are supported by the credit facility.

As of March 31, 2023, and December 31, 2022, $350 million and $40 million of borrowings, respectively, were outstanding under DCP LP’s accounts receivable securitization facility, which are secured by its accounts receivable at DCP Receivables LLC.

Note 9—12—Guarantees

At March 31, ~~2022,~~2023, 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 for our headquarters facility in Houston, Texas, we have the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at March 31, ~~2022.~~2023. We also have residual value guarantees associated with railcar, airplane and ~~airplane~~truck leases with maximum potential future exposures totaling ~~$221~~$164 million. These leases have remaining terms of upfive to ten years.

Guarantees of Joint Venture Obligations

In March 2019, Phillips 66 Partners and its co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering. See Note 5—8—Investments, Loans and Long-Term Receivables, for additional information on Dakota Access and the CECU.

At March 31, ~~2022,~~2023, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to ~~four~~three years. The maximum potential future exposures under these guarantees were approximately ~~$133~~$83 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.~~indemnifications. Agreements associated with these sales include indemnifications for taxes, litigation, environmental liabilities, permits and licenses, employee claims, and real estate 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, ~~2022,~~2023, and December 31, ~~2021,~~2022, the carrying amount of recorded indemnifications was ~~$146~~$134 million and ~~$144~~$137 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, ~~2022,~~2023, and December 31, ~~2021,~~2022, environmental accruals for known contamination of ~~$109~~$105 million and ~~$106~~$108 million, respectively, were included in the carrying amount of the recorded indemnifications noted above. These environmental accruals were primarily included in the “Asset retirement obligations and accrued environmental costs” line item on our consolidated balance sheet. For additional information about environmental liabilities, see Note ~~10—~~13—Contingencies and Commitments.

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Indemnification and Release Agreement

In 2012, in connection with our separation from ConocoPhillips, we entered into an Indemnification and Release Agreement. This agreement governs the treatment between ConocoPhillips and us of matters relating to indemnification, insurance, litigation responsibility and management, and litigation document sharing and cooperation arising in connection with the separation. 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.

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Note ~~10—~~13—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 uncertain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to international, federal, state and local environmental laws and regulations. When we prepare our consolidated financial statements, we record accruals for environmental liabilities based on management’s best estimates, using 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 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 for which we are potentially responsible are still under investigation by the EPA or the state agencies concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit, although some of the indemnifications are subject to dollar and time limits.

We are currently participating in environmental assessments and cleanups at numerous federal Superfund and comparable state sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those pertaining to sites acquired in a 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, ~~2022, and December 31, 2021,~~2023, our total environmental accruals were ~~$436 million.~~$439 million, compared with $434 million at December 31, 2022. We expect to incur a substantial amount of these expenditures within the next 30 years. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

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Legal Proceedings

Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases and enables the tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.

Other Contingencies

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

At March 31, ~~2022,~~2023, we had performance obligations secured by letters of credit and bank guarantees of ~~$1,546~~$749 million related to various purchase and other commitments incident to the ordinary conduct of business.

Note ~~11—~~14—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.~~income. Gains and losses from derivative contracts held for trading not directly related to our physical business are reported net in the “Other ~~income”~~income (loss)” line item on our consolidated statement of ~~operations.~~income. Cash flows from all our derivative activity for the periods presented appear in the operating section on our consolidated statement of cash flows.

Purchase and sales contracts with firm minimum notional volumes for commodities that are readily convertible to cash are recorded on our consolidated balance sheet as derivatives unless the contracts are eligible for, and we elect, the normal purchases and normal sales exception, whereby the contracts are recorded on an accrual basis. We generally apply the normal purchases and normal sales exception to eligible crude oil, refined petroleum product, NGL, natural gas, renewable feedstock, and power commodity contracts to purchase or sell quantities we expect to use or sell in the normal course of business. All other derivative instruments are recorded at fair value on our consolidated balance sheet. For further information on the fair value of derivatives, see Note ~~12—~~15—Fair Value Measurements.

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

Through DCP LP’s operations, DCP Midstream Class A Segment is exposed to a variety of risks including but not limited to changes in the prices of commodities that DCP LP buys or sells. Effective from the date of the merger, we include DCP LP’s financial instruments in our financial statements. See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, for additional information regarding the merger and the associated accounting treatment.

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										Millions of Dollars
		March 31, 2022					December 31, 2021					March 31, 2023								December 31, 2022
		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			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	Effect of Collateral Netting				Assets	Liabilities		Effect of Collateral Netting				Assets	Liabilities	Effect of Collateral Netting	Net Carrying Value Presented on the Balance Sheet

Assets	Assets												Assets
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	202	(11)	(8)	183		99		(20)	—		79		Prepaid expenses and other current assets		$	3,008	(2,834)	(1)	173			1,331	(1,110)	—	221
Other assets	Other assets	37		(15)	—	22		3	(1)	—	2		Other assets	29		(4)	—		25			46	(1)	—	45
Liabilities	Liabilities												Liabilities
Other accruals	Other accruals	5,403		(5,649)	142	(104)		758	(855)	49	(48)		Other accruals	27		(144)	15		(102)			471	(750)	90	(189)
Other liabilities and deferred credits	Other liabilities and deferred credits	—		(2)	—	(2)		—	(1)	—	(1)		Other liabilities and deferred credits	24		(23)	—		1			12	(35)	—	(23)
Total	Total	$	5,642	(5,677)	134	99		860	(877)	49	32		Total	$	3,088	(3,005)	14		97			1,860	(1,896)	90	54

At March 31, ~~2022, and~~2023, there was $32 million of collateral paid that was not offset on our consolidated balance sheet. At December 31, ~~2021,~~2022, there was ~~no material~~$93 million of 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,~~income, were:


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022

Sales and other operating revenues	Sales and other operating revenues	$	(420)	(123)			Sales and other operating revenues	$	50	(420)
Other income		25		1
Other income (loss)							Other income (loss)	(14)		25
Purchased crude oil and products	Purchased crude oil and products	(228)		(135)			Purchased crude oil and products	137		(228)
Net loss from commodity derivative activity		$	(623)	(257)
Net gain (loss) from commodity derivative activity							Net gain (loss) from commodity derivative activity	$	173	(623)

~~Table of Contents~~

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 more than ~~95%~~90% at March 31, ~~2022,~~2023, and December 31, ~~2021.~~2022.

Open Position
Long / (Short)
March 31
2022 December 31
2021
Commodity
Crude oil, refined petroleum products, NGL and renewable feedstocks (millions of barrels)
(27) (18)

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	Open Position Long / (Short)
	March 31 2023	December 31 2022
Commodity
Crude oil, refined petroleum products, NGL and renewable feedstocks (millions of barrels)	(37)	(25)
Natural gas (billions of cubic feet)	(37)	(77)

Credit Risk from Derivative and Financial Instruments

Financial instruments potentially exposed to concentrations of credit risk consist primarily of trade receivables and derivative contracts.

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

The credit risk from our 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.~~ratings. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if our credit ratings fall below investment grade. Cash is the primary collateral in all contracts; however, many contracts also permit us to post letters of credit as collateral.

The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at March 31, ~~2022,~~2023, and December 31, ~~2021.~~2022.

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Note ~~12—~~15—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.

•Derivative instruments—WeThe fair value of our exchange-traded contracts is based on quoted market prices obtained from the New York Mercantile Exchange, the Intercontinental Exchange or other exchanges, and ~~classify them~~is reported as Level 1 in the fair value hierarchy. When exchange-cleared contracts lack sufficient liquidity, or are valued using either adjusted exchange-provided prices or nonexchange quotes, we classify those contracts as Level 2.2 or Level 3 based on the degree to which inputs are observable.

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.

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

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

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

•Debt—The carrying amount of our floating-rate debt approximates fair value. The fair value of our fixed-rate debt is estimated primarily based on observable 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									Millions of Dollars
		March 31, 2022									March 31, 2023
		Fair Value Hierarchy				Total Fair Value of Gross Assets & Liabilities	Effect of Counterparty Netting	Effect of Collateral Netting	Difference in Carrying Value and Fair Value	Net Carrying Value Presented on the Balance Sheet			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						Level 1				Level 2		Level 3
Commodity Derivative Assets	Commodity Derivative Assets											Commodity Derivative Assets
Exchange-cleared instruments	Exchange-cleared instruments	$	3,677	1,800	—	5,477	(5,429)	(8)	—	40		Exchange-cleared instruments	$	2,914		76			2		2,992	(2,867)	(1)	—	124
OTC instruments	OTC instruments	—		1	—	1	—	—	—	1		OTC instruments	—			13		13		26	—	—	—	26
Physical forward contracts	Physical forward contracts	—		163	1	164	—	—	—	164		Physical forward contracts	—			68		2		70	(22)	—	—	48

Rabbi trust assets	Rabbi trust assets	150		—	—	150	N/A		—	150		Rabbi trust assets	179			—		—		179	N/A		—	179
Investment in NOVONIX	Investment in NOVONIX	362		—	—	362	N/A		—	362		Investment in NOVONIX	66			—		—		66	N/A		—	66
		$	4,189	1,964	1	6,154	(5,429)	(8)	—	717
													$	3,159		157		17		3,333	(2,889)	(1)	—	443

Commodity Derivative Liabilities	Commodity Derivative Liabilities											Commodity Derivative Liabilities
Exchange-cleared instruments	Exchange-cleared instruments	$	3,737	1,835	—	5,572	(5,429)	(142)	—	1		Exchange-cleared instruments	$	2,883		82		2		2,967	(2,867)	(15)	—	85

OTC instruments												OTC instruments	—			4		—		4	—	—	—	4
Physical forward contracts	Physical forward contracts	—		104	1	105	—	—	—	105		Physical forward contracts	—			34		—		34	(22)	—	—	12

Floating-rate debt	Floating-rate debt	—		475	—	475	N/A		—	475		Floating-rate debt	—			600		—		600	N/A		—	600
Fixed-rate debt, excluding finance leases and software obligations	Fixed-rate debt, excluding finance leases and software obligations	—		14,104	—	14,104	N/A		(434)	13,670		Fixed-rate debt, excluding finance leases and software obligations	—			16,919		—		16,919	N/A		696	17,615
		$	3,737	16,518	1	20,256	(5,429)	(142)	(434)	14,251			$	2,883		17,639		2		20,524	(2,889)	(15)	696	18,316

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		Millions of Dollars									Millions of Dollars
		December 31, 2021									December 31, 2022
		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			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						Level 1				Level 2		Level 3		Total Fair Value of Gross Assets & Liabilities
Commodity Derivative Assets	Commodity Derivative Assets											Commodity Derivative Assets
Exchange-cleared instruments	Exchange-cleared instruments	$	419	368	—	787	(779)	—	—	8		Exchange-cleared instruments	$	1,615		130		3			1,748	(1,582)	—	—	166

OTC instruments												OTC instruments	—			7		16		23	—	—	—	23
Physical forward contracts	Physical forward contracts	—		73	—	73	—	—	—	73		Physical forward contracts	—			86		3		89	(12)	—	—	77

Rabbi trust assets	Rabbi trust assets	158		—	—	158	N/A		—	158		Rabbi trust assets	126			—		—		126	N/A		—	126
Investment in NOVONIX	Investment in NOVONIX	520		—	—	520	N/A		—	520		Investment in NOVONIX	78			—		—		78	N/A		—	78
Other investments												Other investments	42			1		—		43	N/A		—	43
		$	1,097	441	—	1,538	(779)	—	—	759			$	1,861		224		22		2,107	(1,594)	—	—	513

Commodity Derivative Liabilities	Commodity Derivative Liabilities											Commodity Derivative Liabilities
Exchange-cleared instruments	Exchange-cleared instruments	$	463	362	—	825	(779)	(49)	—	(3)		Exchange-cleared instruments	$	1,676		164		5		1,845	(1,582)	(90)	—	173
OTC instruments	OTC instruments	—		1	—	1	—	—	—	1		OTC instruments	—			9		—		9	—	—	—	9
Physical forward contracts	Physical forward contracts	—		51	—	51	—	—	—	51		Physical forward contracts	—			42		—		42	(12)	—	—	30

Floating-rate debt	Floating-rate debt	—		475	—	475	N/A		—	475		Floating-rate debt	—			65		—		65	N/A		—	65
Fixed-rate debt, excluding finance leases and software obligations	Fixed-rate debt, excluding finance leases and software obligations	—		15,353	—	15,353	N/A		(1,686)	13,667		Fixed-rate debt, excluding finance leases and software obligations	—			15,871		—		15,871	N/A		977	16,848
		$	463	16,242	—	16,705	(779)	(49)	(1,686)	14,191			$	1,676		16,151		5		17,832	(1,594)	(90)	977	17,125

The rabbi trust assets and investment in NOVONIX 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 ~~11—~~14—Derivatives and Financial Instruments, for information regarding where the assets and liabilities related to our commodity derivatives are recorded on our consolidated balance sheet.

Nonrecurring Fair Value Measurements

DCP Midstream and Gray Oak Holdings Merger

On August 17, 2022, we and Enbridge agreed to merge DCP Midstream and Gray Oak Holdings with DCP Midstream as the surviving entity. As a result, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills, and accordingly, accounted for the business combination using the acquisition method of accounting, which requires DCP Midstream Class A Segment’s, DCP Sand Hills’ and DCP Southern Hills’, assets and liabilities to be recorded at fair value as of the acquisition date on our consolidated balance sheet. See Note 4—Business Combinations, for additional information on the merger transaction.

Equity Investments

~~In the first quarter of 2021, Phillips 66 Partners wrote down the book~~The preliminary fair value of ~~its investment in Liberty to estimated~~the investments we acquired that are accounted for under the equity method was $2,215 million. The preliminary fair value of these assets was determined using athe income approach. The income approach used discounted cash flow models that require various observable and non-observable inputs, such as margins, tariffs and rates, utilization, volumes, product costs, operating expenses, capital expenditures, terminal-year values and risk-adjusted discount rates. These valuations resulted in Level 3 nonrecurring fair value ~~measurement. This nonrecurring measurement~~measurements.

PP&E

The preliminary fair value of PP&E was ~~based on~~$12,850 million. The preliminary fair value of these assets was determined primarily using the cost approach. The cost approach used assumptions for the current replacement costs of similar plant and equipment assets adjusted for estimated physical deterioration, functional obsolescence and economic obsolescence. The estimated fair value of Phillip 66 Partners’ share of the joint venture’s pipeline assets and net working capital at March 31, 2021. See Note 5—Investments, Loans and Long-Term Receivables, for more information regarding Phillips 66 Partners’ transfer of its ownershipproperties was determined using a sales comparison approach. These valuations resulted in ~~Liberty to its co-venturer in April 2021.~~Level 3 nonrecurring fair value measurements.

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Debt

The preliminary fair value of DCP LP’s senior and junior subordinated notes was measured using a market approach, based on the average of quotes for the acquired debt from major financial institutions. These valuations resulted in Level 2 nonrecurring fair value measurements.

Noncontrolling Interests

As a result of our consolidation of the DCP Midstream Class A Segment, the noncontrolling interests held in the DCP Midstream Class A Segment were recorded at their estimated fair values on the merger date. These noncontrolling interests primarily include Enbridge’s indirect economic interest in DCP LP, the public holders of DCP LP’s common units and the holders of DCP LP’s preferred units. The fair value of the noncontrolling interests in DCP LP’s common units was based on their unit market price as of the date of the merger, August 17, 2022. The fair value of the noncontrolling interests in DCP LP’s publicly traded preferred units was based on their respective market price as of the date of the merger, August 17, 2022. These valuations resulted in Level 1 nonrecurring fair value measurements. The preliminary fair value of the noncontrolling interests in DCP LP’s other preferred units was based on an income approach that used projected distributions that were discounted using an average implied yield of DCP LP’s publicly traded preferred units and expected redemption dates. This valuation resulted in a Level 2 nonrecurring fair value measurement.

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Note ~~13—~~16—Pension and Postretirement Plans

The components of net periodic benefit cost for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, were as follows:


		Millions of Dollars								Millions of Dollars
		Pension Benefits					Other Benefits			Pension Benefits					Other Benefits
		2022			2021		2022	2021		2023			2022		2023	2022
		U.S.		Int’l.	U.S.	Int’l.				U.S.		Int’l.	U.S.	Int’l.
Components of Net Periodic Benefit Cost	Components of Net Periodic Benefit Cost								Components of Net Periodic Benefit Cost
Three Months Ended March 31	Three Months Ended March 31								Three Months Ended March 31
Service cost	Service cost	$	35	8	37	9	1	1	Service cost	$	27	3	35	8	1	1
Interest cost	Interest cost	21		6	20	5	1	1	Interest cost	29		8	21	6	2	1
Expected return on plan assets	Expected return on plan assets	(39)		(16)	(41)	(15)	—	—	Expected return on plan assets	(31)		(10)	(39)	(16)	—	—
Amortization of prior service credit		—		—	—	—	—	(1)

Amortization of net actuarial loss (gain)	Amortization of net actuarial loss (gain)	6		3	15	6	(1)	—	Amortization of net actuarial loss (gain)	3		(1)	6	3	(2)	(1)
Settlements	Settlements	1		—	—	—	—	—	Settlements	10		—	1	—	—	—
Net periodic benefit cost*	Net periodic benefit cost*	$	24	1	31	5	1	1	Net periodic benefit cost*	$	38	—	24	1	1	1

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

During the three months ended March 31, ~~2022,~~2023, we contributed $5$29 million to our U.S. pension and other postretirement benefit plans and $6$5 million to our international pension plans. We currently expect to make additional contributions of approximately $40 million to our U.S. pension and other postretirement benefit plans and approximately ~~$20~~$15 million to our international pension plans during the remainder of ~~2022.~~2023.

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Note ~~14—~~17—Accumulated Other Comprehensive Loss

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


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

December 31, 2022							December 31, 2022	$	(122)	(336)	(2)	(460)
Other comprehensive income before reclassifications							Other comprehensive income before reclassifications	2		77	—	79
Amounts reclassified from accumulated other comprehensive loss							Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*							Defined benefit plans*
Amortization of net actuarial loss and settlements							Amortization of net actuarial loss and settlements	8		—	—	8
Foreign currency translation							Foreign currency translation	—		—	—	—
Hedging							Hedging	—		—	—	—
Net current period other comprehensive income							Net current period other comprehensive income	10		77	—	87
March 31, 2023							March 31, 2023	$	(112)	(259)	(2)	(373)

December 31, 2021	December 31, 2021	$	(398)	(45)	(2)	(445)	December 31, 2021	$	(398)	(45)	(2)	(445)
Other comprehensive income before reclassifications		4		—	—	4
Other comprehensive income (loss) before reclassifications							Other comprehensive income (loss) before reclassifications	4		(82)	—	(78)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss						Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*	Defined benefit plans*						Defined benefit plans*
Amortization of net actuarial loss, prior service credit and settlements	Amortization of net actuarial loss, prior service credit and settlements	9		—	—	9	Amortization of net actuarial loss, prior service credit and settlements	9		—	—	9
Foreign currency translation	Foreign currency translation	—		(82)	—	(82)	Foreign currency translation	—		—	—	—
Hedging	Hedging	—		—	—	—	Hedging	—		—	—	—
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	13		(82)	—	(69)	Net current period other comprehensive income (loss)	13		(82)	—	(69)

March 31, 2022	March 31, 2022	$	(385)	(127)	(2)	(514)	March 31, 2022	$	(385)	(127)	(2)	(514)

December 31, 2020		$	(809)	25	(5)	(789)
Other comprehensive income (loss) before reclassifications		5		(15)	—	(10)
Amounts reclassified from accumulated other comprehensive loss
Defined benefit plans*
Amortization of net actuarial loss and prior service credit		17		—	—	17
Foreign currency translation		—		—	—	—
Hedging		—		—	2	2
Net current period other comprehensive income (loss)		22		(15)	2	9

March 31, 2021		$	(787)	10	(3)	(780)
* Included in the computation of net periodic benefit cost. See Note 13—Pension and Postretirement Plans, for additional information.
* Included in the computation of net periodic benefit cost. See Note 16—Pension and Postretirement Plans, for additional information.							* Included in the computation of net periodic benefit cost. See Note 16—Pension and Postretirement Plans, for additional information.

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Note ~~15—~~18—Related Party Transactions

Significant transactions with related parties were:


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022

Operating revenues and other income ~~(a)~~(d)	Operating revenues and other income ~~(a)~~(d)	$	1,340	770			Operating revenues and other income ~~(a)~~(d)	$	1,304	1,340
Purchases ~~(b)~~(d)	Purchases ~~(b)~~(d)	4,681		2,357			Purchases ~~(b)~~(d)	3,699		4,681
Operating expenses and selling, general and administrative expenses (c)	Operating expenses and selling, general and administrative expenses (c)	70		68			Operating expenses and selling, general and administrative expenses (c)	72		70

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

(b)We purchased crude oil, refined petroleum products, NGL and solvents from WRB. 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 Paralubes 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.

(d)As a result of the DCP Midstream and Gray Oak Holdings merger, we began consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills. As a result, transactions with these parties after August 17, 2022, are not presented in the table above.

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Note ~~16—~~19—Segment Disclosures and Related Information

Effective October 1, 2022, we changed the organizational structure of the internal financial information reviewed by our President and Chief Executive Officer, and determined this resulted in a change in the composition of our operating segments. As part of the realignment, we moved the results and net assets of our Merey Sweeny vacuum distillation and delayed coker units at our Sweeny Refinery and the isomerization unit at our Lake Charles Refinery from our Midstream segment to our Refining segment. Additionally, commissions charged to the Refining segment by the M&S segment related to sales of specialty products were eliminated and the costs of the sales organization were reclassified from the M&S segment to the Refining segment. The segment realignment is presented for the three months ended March 31, 2023, with prior periods recast for comparability.

Our operating segments are:

1)Midstream—Provides natural gas and NGL transportation, storage, fractionation, gathering, processing and marketing services, as well as 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 50% equity investment in~~As a result of the merger on August 17, 2022, we began consolidating DCP Midstream Class A Segment, DCP Sand Hills and ~~our 16% investment in NOVONIX.~~DCP Southern Hills. On March 9, 2022, we also completed the ~~previously announced~~ merger between us and Phillips 66 Partners. See Note ~~18—~~3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 22—Phillips 66 Partners LP, for additional information on ~~the merger transaction.~~these transactions. This segment also includes our 16% investment in NOVONIX.

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

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

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

Corporate and Other includes general corporate overhead, interest expense, our investment in research of new technologies and various other corporate activities. Corporate assets include all cash, cash equivalents and income tax-related assets. Corporate and Other also includes restructuring costs related to our business transformation. See Note 23—Restructuring for additional information regarding restructuring costs.

Intersegment sales are at prices that we believe approximate market.

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Analysis of Results by Operating Segment


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022
Sales and Other Operating Revenues*	Sales and Other Operating Revenues*						Sales and Other Operating Revenues*
Midstream	Midstream						Midstream
Total sales	Total sales	$	4,082	2,384			Total sales	$	5,292	4,022
Intersegment eliminations	Intersegment eliminations	(886)		(627)			Intersegment eliminations	(695)		(826)
Total Midstream	Total Midstream	3,196		1,757			Total Midstream	4,597		3,196
Chemicals	Chemicals	—		1			Chemicals	—		—
Refining	Refining						Refining
Total sales	Total sales	24,093		15,053			Total sales	22,341		24,141
Intersegment eliminations	Intersegment eliminations	(15,591)		(8,456)			Intersegment eliminations	(14,095)		(15,576)
Total Refining	Total Refining	8,502		6,597			Total Refining	8,246		8,565
Marketing and Specialties	Marketing and Specialties						Marketing and Specialties
Total sales	Total sales	25,295		13,598			Total sales	22,399		25,211
Intersegment eliminations	Intersegment eliminations	(819)		(333)			Intersegment eliminations	(855)		(798)
Total Marketing and Specialties	Total Marketing and Specialties	24,476		13,265			Total Marketing and Specialties	21,544		24,413
Corporate and Other	Corporate and Other	5		7			Corporate and Other	9		5
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues	$	36,179	21,627			Consolidated sales and other operating revenues	$	34,396	36,179
* See Note 2—Sales and Other Operating Revenues, for further details on our disaggregated sales and other operating revenues.
* See Note 5—Sales and Other Operating Revenues, for further details on our disaggregated sales and other operating revenues.							* See Note 5—Sales and Other Operating Revenues, for further details on our disaggregated sales and other operating revenues.

Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes						Income (Loss) Before Income Taxes
Midstream	Midstream	$	242	76			Midstream	$	702	212
Chemicals	Chemicals	396		154			Chemicals	198		396
Refining	Refining	123		(1,040)			Refining	1,608		173
Marketing and Specialties	Marketing and Specialties	316		290			Marketing and Specialties	426		296
Corporate and Other	Corporate and Other	(249)		(251)			Corporate and Other	(283)		(249)
Consolidated income (loss) before income taxes		$	828	(771)
Consolidated income before income taxes							Consolidated income before income taxes	$	2,651	828


		Millions of Dollars				Millions of Dollars
		March 31 2022		December 31 2021		March 31 2023		December 31 2022
Total Assets	Total Assets				Total Assets
Midstream	Midstream	$	16,141	15,932	Midstream	$	29,358	30,273
Chemicals	Chemicals	6,551		6,453	Chemicals	6,981		6,785
Refining	Refining	22,138		19,952	Refining	22,750		21,581
Marketing and Specialties	Marketing and Specialties	10,829		8,505	Marketing and Specialties	9,443		9,939
Corporate and Other	Corporate and Other	4,979		4,752	Corporate and Other	8,730		7,864
Consolidated total assets	Consolidated total assets	$	60,638	55,594	Consolidated total assets	$	77,262	76,442

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Note ~~17—~~20—Income Taxes

Our effective income tax rate for the three months ended March 31, ~~2022,~~2023, was ~~21%~~22%, compared with ~~17%~~21% for the corresponding period of ~~2021.~~2022. The increase in our effective tax rate for the three months ended March 31, ~~2022,~~2023, was primarily attributable to non-taxable foreign earnings of our chemical joint venture and an increase in foreign tax rate.

The effective tax rate for the ~~elimination~~three months ended March 31, 2023, varied from the U.S. federal statutory income tax rate primarily due to state income taxes, partially offset by the impact of foreign operations and noncontrolling interest.

On August 16, 2022, the ~~favorable noncontrolling interest impact~~U.S. government enacted the Inflation Reduction Act of 2022 (IRA) that includes, among other provisions, changes to the U.S. corporate income tax system, including 15% minimum tax based on adjusted financial statement income as ~~a result of~~defined in the ~~completion of~~IRA, which was effective after December 31, 2022. We do not anticipate owing 2023 corporate alternative minimum tax as the ~~merger between us and Phillips 66 Partners on March 9, 2022.~~regular U.S. tax liability is forecasted to exceed the corporate alternative minimum tax.

Note ~~18—~~21—DCP Midstream Class A Segment

DCP Midstream Class A Segment is a VIE and we are the primary beneficiary. DCP Midstream Class A Segment is comprised of the businesses, activities, assets and liabilities of DCP LP and its subsidiaries and its general partner entities. Refer to Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 4—Business Combinations, for more details on the DCP Midstream and Gray Oak Holdings merger transaction and related accounting.

DCP LP, headquartered in Denver, Colorado, is a publicly traded master limited partnership whose operations currently include producing and fractionating NGL, gathering, compressing, treating and processing natural gas; recovering condensate; and transporting, trading, marketing and storing natural gas and NGL.

As a result of our consolidation of DCP Midstream Class A Segment, the public common and preferred unitholders’ ownership interests and Enbridge’s indirect economic interest in DCP LP are reflected as noncontrolling interests in our consolidated financial statements. At March 31, 2023, we held a 43.3% indirect economic interest in DCP LP.

The most significant assets of DCP Midstream Class A Segment 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 2023		December 31 2022
Accounts receivable, trade*	$	713	988
Net properties, plants and equipment	9,280		9,297
Investments in unconsolidated affiliates**	2,182		2,161
Accounts payable	755		1,239
Short-term debt	4		504
Long-term debt	4,808		4,248

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

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

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Preferred Units

DCP LP’s preferred units rank senior to its common units with respect to distribution rights and rights upon liquidations. Holders of DCP LP’s preferred units have no voting rights except for certain limited protective voting rights. Distributions on the preferred units are payable out of DCP LP’s available cash, are accretive and are cumulative from the date of original issuance of the preferred units.

Distributions on the Series B preferred units are payable quarterly in arrears in March, June, September and December of each year. Distributions on the Series C preferred units are payable quarterly in arrears in January, April, July and October of each year. During the three months ended March 31, 2023, DCP LP made cash distributions of $3 million to Series B preferred unitholders and $2 million to Series C preferred unitholders.

As of March 31, 2023, DCP LP had 6,450,000 Series B preferred units outstanding with an aggregate liquidation preference of approximately $161 million, and 4,400,000 Series C preferred units outstanding with an aggregate liquidation preference of $110 million. The Series B and C preferred units are publicly traded on the New York Stock Exchange.

Common Units

As of March 31, 2023, DCP LP had approximately 209 million of common units outstanding, of which approximately 91 million were publicly held. In addition, Enbridge holds a 23.36% economic interest in the approximately 118 million common units held by DCP Midstream Class A Segment. During the three months ended March 31, 2023, DCP LP made cash distributions of $51 million to common unit holders other than Phillips 66.

DCP LP Public Common Unit Acquisition

On January 5, 2023, we entered into a definitive agreement with DCP LP, its subsidiaries and its general partner entities, pursuant to which one of our wholly owned subsidiaries will merge with and into DCP LP, with DCP LP surviving as a Delaware limited partnership. Under the terms of the agreement, at the effective time of the merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and DCP Midstream GP, LP) issued and outstanding as of immediately prior to the effective time will be converted into the right to receive $41.75 per common unit in cash, without interest. The merger will increase our economic interest in DCP LP from 43.3% to 86.8%. The transaction is expected to close in the second quarter of 2023, subject to customary closing conditions.

If the merger is successfully completed, we will pay approximately $3.8 billion in cash consideration, which we expect to fund through a combination of cash generated from operating activities, proceeds from the offering of the Notes and borrowings under the Term Loan Agreement.See Note 11—Debt, for additional information.

The transaction was unanimously approved by the board of the general partner of DCP LP, based on the unanimous approval and recommendation of its special committee comprised entirely of independent directors after evaluation of the transaction by the special committee in consultation with independent financial and legal advisors.Concurrently with the execution of the agreement, affiliates of Phillips 66, which together own greater than a majority of the outstanding DCP LP common units, delivered their consent to approve the transaction.As a result, DCP LP has not solicited and is not soliciting approval of the transaction by any other holders of DCP LP common units.

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Note 22—Phillips 66 Partners LP

On March 9, 2022, we completed ~~the previously announced~~a merger between us and Phillips 66 Partners. The merger resulted in the acquisition of all limited partnership interests in Phillips 66 Partners not already owned by us in exchange for ~~approximately 42~~41.8 million shares of Phillips 66 common stock issued from treasury stock. Phillips 66 Partners common unitholders received 0.50 shares of Phillips 66 common stock for each outstanding Phillips 66 Partners common unit. Phillips 66 Partners’ perpetual convertible preferred units were converted into common units at a premium to the original issuance price prior to being exchanged for Phillips 66 common stock. The merger was accounted for as an equity transaction. Upon closing, Phillips 66 Partners became a wholly owned subsidiary of Phillips 66 and its common units are no longer publicly traded.

~~The merger was accounted for as an equity transaction~~

Note 23—Restructuring

In April 2022, we announced that we are progressing a multi-year business transformation focused on enterprise-wide opportunities to improve our cost structure. For the three months ended March 31, 2023, we recorded restructuring costs totaling $35 million, primarily related to consulting fees. These costs are primarily recorded in the “Selling, general and resulted in decreases to “Treasury stock” of $3,380 million, “Noncontrolling interests” of $2,163 million, “Capital in excess of par” of $869 million, “Deferred income taxes” of $355 million, and “Cash and cash equivalents” of $2 million, and an increase to “Other accruals” of $5 millionadministrative expenses” line item on our consolidated ~~balance sheet.~~statement of income and are reported in our Corporate segment.

In addition, in the first quarter of 2023, we recorded restructuring costs of $12 million associated with the integration of DCP Midstream Class A Segment primarily related to severance. These costs are primarily recorded in the “Selling, general and administrative expenses” line item on our consolidated statement of income and are reported in our Midstream segment.

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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, 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” or “loss” as used in Management’s Discussion and Analysis refer to net income (loss) attributable to Phillips 66. The terms “results,” “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 a diversified energy company with ~~midstream, chemicals, refining,~~Midstream, Chemicals, Refining, and ~~marketing~~Marketing and ~~specialties businesses.~~Specialties (M&S) operating segments. At March 31, ~~2022,~~2023, we had total assets of ~~$61~~$77 billion. Our common stock trades on the New York Stock Exchange under the symbol PSX.

Executive Overview

In the first quarter of ~~2022,~~2023, we reported earnings of ~~$582 million~~$2 billion and generated cash from operating activities of ~~$1.1~~$1.2 billion. In addition, we had net borrowings of $1.3 billion. We used available cash to ~~fund capital expenditures and investments~~repurchase $800 million of ~~$370 million and~~common stock, pay dividends on our common stock of ~~$404~~$486 million, and fund capital expenditures and investments of $378 million. We ended the first quarter of ~~2022~~2023 with ~~$3.3~~$7 billion of cash and cash ~~equivalents and approximately $5.7 billion of total committed capacity available under our revolving credit facilities.~~equivalents.

Our reported earnings for the first quarter of 2022, compared with the first quarter of 2021, reflect a recovery in global demand for refined petroleum products due to the administration of COVID-19 vaccines and the easing of pandemic restrictions that occurred throughout 2021, as well as recovery from effects of the winter storms that occurred in the first quarter of 2021. The increase in global demand and recent market disruptions resulting from the conflict between Russia and Ukraine resulted in the widening of market crack spreads. Consequently, margins and utilization for our Refining segment, sales volumes for our Marketing and Specialties (M&S) segment, and throughput volumes for our Transportation business have improved. In addition, equity earnings from our Chemicals segment increased due to higher sales volumes. However, as uncertainty remains regarding the impacts on the global economy of the lingering pandemic and the conflict between Russia and Ukraine, we willBusiness Transformation

We continue to ~~be disciplined in~~progress our ~~allocation of capital and monitor the performance of our portfolio.~~

~~In addition, we are progressing a~~ multi-year business transformation focused on enterprise-wide opportunities to improve our cost structure. ~~We are targeting~~In 2022, we started implementing initiatives designed to achieve a targeted sustainable run-rate cost reduction of at least ~~$700~~$800 million and lower sustaining capital of at least $200 million per year by the end of 2023.

Midstream NGL Merger Transactions

As part of executing our NGL growth strategy to build a wellhead-to-market value chain, on August 17, 2022, we announced a realignment of our economic and governance interests in DCP Midstream, LP (DCP LP) and Gray Oak Pipeline, LLC (Gray Oak Pipeline) resulting from the ~~transformation period. We will provide updates~~merger of DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings). In connection with the merger, we were delegated DCP Midstream’s governance rights over DCP LP and its general partner entities, referred to as DCP Midstream Class A Segment, and acquired an economic interest in DCP LP of 43.3%. As a result of the ~~initiative progresses.~~governance rights granted to us, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills) from the merger date forward.

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~~Phillips 66 Partners Merger~~To further advance our NGL growth strategy on January 5, 2023, we entered into a definitive agreement with DCP LP, its subsidiaries and its general partner entities, pursuant to which one of our wholly owned subsidiaries will merge with and into DCP LP, with DCP LP surviving as a Delaware limited partnership. Under the terms of the agreement, at the effective time of the merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and DCP Midstream GP, LP) issued and outstanding as of immediately prior to the effective time will be converted into the right to receive $41.75 per common unit in cash, without interest. The merger will increase our economic interest in DCP LP from 43.3% to 86.8%. The transaction is expected to close in the second quarter of 2023, subject to customary closing conditions.

~~On March 9,~~

Since August 17, 2022, we ~~completed~~also have been taking steps to integrate the ~~previously announced merger between us~~operations of DCP Midstream Class A Segment to enable the capture of commercial and operational synergies. On April 1, 2023, we achieved a significant integration milestone with the transition of DCP Midstream’s employees to Phillips 66 Partners LP (Phillips 66 Partners). The merger resulted in the acquisition of all limited partnership interests in Phillips 66 Partners not already owned by us. Upon closing, Phillips 66 Partners became a wholly owned subsidiary of Phillips 66 and its common units are no longer publicly traded. 66.

See Note ~~18—Phillips 66 Partners LP,~~3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, in the Notes to Consolidated Financial Statements, for additional information on the merger ~~transaction.~~

~~CEO Transition~~

~~On April 12, 2022, Greg C. Garland, Chairman~~ of DCP Midstream and Gray Oak Holdings and Note 21—DCP Midstream Class A Segment, in the ~~Board and Chief Executive Officer of Phillips 66 announced his intention~~Notes to ~~retire from his position as Chief Executive Officer effective July 1, 2022. Mr. Garland will continue to serve as Executive Chairman of~~Consolidated Financial Statements, for additional information on the ~~Board with an expected retirement date from this position in 2024. Mark E. Lashier will become President and Chief Executive Officer effective July 1, 2022.~~

common unit acquisition.

Business Environment

The Midstream segment includes our Transportation and NGL businesses. Our Transportation business contains fee-based operations not directly exposed to commodity price risk. Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward, contains both fee-based operations and operations directly impacted by ~~NGL~~natural gas liquids (NGL), natural gas and condensate prices. ~~The Midstream segment also includes our 50% equity investment in DCP Midstream, LLC (DCP Midstream).~~ During the first quarter of ~~2022,~~2023, NGL and natural gas prices ~~increased significantly,~~decreased, compared with the first quarter of ~~2021,~~2022, due to ~~strong demand and increased crude oil and natural gas prices.~~warmer than usual weather, which negatively impacted heating demand.

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 quarter of ~~2022,~~2023, the benchmark high-density polyethylene chain margin decreased, compared with the first quarter of ~~2021. This decrease was~~2022, mainly due to ~~higher feedstock cost.~~excess polyethylene capacity and weaker demand.

Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. The price of U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, ~~increased~~decreased to an average of ~~$94.49~~$76.11 per barrel during the first quarter of ~~2022,~~2023, compared with an average of ~~$57.84~~$94.49 per barrel in the first quarter of ~~2021.~~2022. Market crack spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. Worldwide market crack spreads increased to an average of ~~$21.93~~$30.59 per barrel during the first quarter of ~~2022,~~2023, compared with an average of ~~$13.23~~$21.93 per barrel in the first quarter of ~~2021.~~2022. The increases in ~~crude oil prices and~~ market crack spreads were ~~mainly~~primarily driven by ~~tight supply due to a significant increase in~~improved demand for refined petroleum products, ~~as economic activities continue to recover as the COVID-19 pandemic recedes, as well as market disruptions from the conflict between Russia~~low refined product inventories and ~~Ukraine.~~reduced crude oil prices.

Results for our M&S segment depend largely on marketing fuel and lubricant margins and sales volumes of our refined petroleum ~~and other specialty~~ products. While marketing fuel and lubricant margins are primarily driven by market factors, largely determined by the relationship between supply and demand, marketing fuel margins, in particular, are influenced by trends in spot prices, and where applicable, retail prices for refined petroleum products in the regions and countries where we operate. In general, 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. Demand for refined petroleum products has improved in the first quarter of 2022, compared with the first quarter of 2021, as economic activities continue to recover as the COVID-19 pandemic recedes.

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RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three months ended March 31, ~~2022,~~2023, is based on a comparison with the corresponding period of ~~2021.~~2022.

Basis of Presentation

Effective August 18, 2022, forward, in connection with the merger of DCP Midstream and Gray Oak Holdings we began consolidating the results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills. As a result of this transaction, we began presenting the results of DCP Midstream Class A Segment within the results of our NGL and Other business. Prior periods also have been updated to reflect the results of our equity investment in DCP Midstream prior to August 18, 2022, within the results of our NGL and Other business. See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, Note 4—Business Combinations, and Note 15—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information on the merger of DCP Midstream and Gray Oak Holdings.

Effective October 1, 2022, we changed the organizational structure of the internal financial information reviewed by our President and Chief Executive Officer, and determined this resulted in a change in the composition of our operating segments. As part of the realignment, we moved the results and net assets of our Merey Sweeny vacuum distillation and delayed coker units at our Sweeny Refinery and the isomerization unit at our Lake Charles Refinery from our Midstream segment to our Refining segment. Additionally, commissions charged to the Refining segment by the M&S segment related to sales of specialty products were eliminated and the costs of the sales organization were reclassified from the M&S segment to the Refining segment. Further, we are no longer presenting disaggregated business line results for our Chemicals and M&S segments to align with changes in our internal financial reporting. The segment realignment and business line reporting changes are presented for the three months ended March 31, 2023, with the prior periods recast for comparability.

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			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022

Midstream	Midstream	$	242	76			Midstream	$	702	212
Chemicals	Chemicals	396		154			Chemicals	198		396
Refining	Refining	123		(1,040)			Refining	1,608		173
Marketing and Specialties	Marketing and Specialties	316		290			Marketing and Specialties	426		296
Corporate and Other	Corporate and Other	(249)		(251)			Corporate and Other	(283)		(249)
Income (loss) before income taxes		828		(771)
Income tax expense (benefit)		171		(132)
Net income (loss)		657		(639)
Income before income taxes							Income before income taxes	2,651		828
Income tax expense							Income tax expense	574		171
Net income							Net income	2,077		657
Less: net income attributable to noncontrolling interests	Less: net income attributable to noncontrolling interests	75		15			Less: net income attributable to noncontrolling interests	116		75
Net income (loss) attributable to Phillips 66		$	582	(654)
Net income attributable to Phillips 66							Net income attributable to Phillips 66	$	1,961	582

Our net income attributable to Phillips 66 in the first quarter of ~~2022~~2023 was ~~$582 million,~~$2 billion, compared with ~~a net loss attributable to Phillips 66 of $654~~$582 million in the first quarter of ~~2021.~~2022. The ~~improvement~~increase in net income attributable to Phillips 66 was primarily due ~~to:~~

•~~Improved~~to improved realized refining ~~margins.~~

•~~Higher equity earnings from CPChem.~~

•~~Lower impairments in the Midstream segment.~~

~~These improvements were~~margins, partially offset by ~~an unrealized decrease in the fair value of our investment in NOVONIX Limited (NOVONIX), which we acquired in September 2021, as well as the recognition of~~higher income tax ~~expense in the first quarter~~expense.

Table of ~~2022, compared with an income tax benefit in the first quarter of 2021.~~Contents

See the “Segment Results” section for additional information on our segment performance and Note ~~17—~~20—Income Taxes, in the Notes to Consolidated Financial Statements, for additional information on income taxes.

~~Table of Contents~~

Statement of ~~Operations~~Income Analysis

Sales and other operating revenues for the first quarter of 2023 decreased 5%, and purchased crude oil and products ~~both increased 67% in the first quarter of 2022.~~decreased 12%. These ~~increases~~decreases were mainly due to ~~higher~~lower prices for refined petroleum products, crude oil and ~~NGL, as well as increased sales volumes.~~NGL.

Equity in earnings of affiliates ~~increased $400 million~~decreased 11% in the first quarter of ~~2022.~~2023. The ~~increase~~decrease was primarily due to lower equity earnings from CPChem due to lower margins, as well as DCP Midstream, DCP Sand Hills, DCP Southern Hills and Gray Oak Pipeline due to the merger of DCP Midstream and Gray Oak Holdings in August 2022. Decreases in equity earnings from the above entities were partially offset by higher equity earnings from ~~CPChem mainly driven by improved margins and higher sales volumes and~~ WRB Refining LP (WRB) ~~resulting from~~due to improved realized refining ~~margins~~margins. See Note 3—DCP Midstream, LLC and ~~higher refinery production. See~~Gray Oak Holdings LLC Merger and the Chemicals segment analysis in the “Segment Results” section for additional information onregarding CPChem.

~~Other income (loss)~~Net gain on dispositions ~~decreased $158~~increased $33 million in the first quarter of 2023. The increase was primarily due to a before-tax gain of $36 million recognized in the first quarter of 2023 associated with the sale of the Belle Chasse Terminal.

We had other income of $48 million in the first quarter of 2023, compared with other loss of $143 million in the first quarter of 2022. The ~~decrease~~improvement was primarily ~~due to~~driven by an unrealized loss on our investment ~~loss~~in NOVONIX of ~~$169~~$12 million ~~related to the decrease~~ in ~~NOVONIX’s stock price during~~ the first quarter of ~~2022. We acquired this investment~~2023, compared with an unrealized loss of $158 million in ~~September 2021.~~the first quarter of 2022, as well as higher interest income. See Note 5—8—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information regarding our investment in NOVONIX.

~~Impairments~~Operating expenses ~~decreased $198 million~~increased 18% first quarter of 2023. The increase was primarily due to consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills starting in August 2022, as well as higher turnaround and other maintenance expenses, partially offset by lower operating costs due to the sale of the Belle Chasse Terminal and lower employee-related costs.

Selling, general and administrative expenses increased 40% in the first quarter of ~~2022~~2023. The increase was primarily due to ~~a before-tax impairment of $198 million recorded~~consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills starting in August 2022, as well as restructuring costs associated with our business transformation.

Depreciation and amortization increased 41% in the first quarter of ~~2021~~2023. The increase was primarily due to additional depreciation and amortization related to ~~Phillips 66 Partners’ decision to exit the Liberty Pipeline project. See Note 5—Investments, Loans~~assets acquired as a result of consolidating DCP Midstream Class A Segment, DCP Southern Hills and ~~Long-Term Receivables,~~DCP Sand Hills starting in August 2022.

Taxes other than income taxes increased 39% in the ~~Notes~~first quarter of 2023. The increase was primarily due to ~~Consolidated Financial Statements, for additional information regarding this impairment.~~consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills starting in August 2022 and higher crude oil and refined petroleum product excise taxes.

Interest and debt expense increased 42% in the first quarter of 2023. The increase was primarily driven by higher average debt principal balances as a result of consolidating DCP Midstream Class A Segment, DCP Southern Hills and DCP Sand Hills starting in August 2022.

We had income tax expense of $574 million in the first quarter of 2023, compared with an income tax expense of $171 million in the first quarter of ~~2022, compared with an~~ 2022. The fluctuation in income ~~tax benefit~~ ~~of $132 million in the first quarter of 2021.~~taxes between periods is primarily due to improved results. See Note ~~17—~~20—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our effective income tax rates.

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Net income attributable to noncontrolling interests increased ~~$60 million~~55% in the first quarter of 2023. The increase was primarily driven by consolidating DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills starting in August 2022. This merger resulted in us reflecting additional noncontrolling interests on our consolidated income statement for the interests in DCP LP owned by public common and preferred unitholders and the interest in DCP Midstream Class A Segment held by Enbridge Inc. The increase from the merger above was partially offset by a decrease due to the merger between us and Phillips 66 Partners that occurred in the first quarter of 2022. ~~The increase was primarily driven by the allocation~~Upon closing of this merger transaction, Phillips 66 Partners became a ~~portion~~wholly owned subsidiary of ~~the before-tax impairment recorded~~Phillips 66. See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 22—Phillips 66 Partners LP, in the ~~first quarter of 2021 related~~Notes to ~~the Liberty Pipeline project to the noncontrolling interest owners of Phillips 66 Partners.~~Consolidated Financial Statements, for additional information on these merger transactions.

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Segment Results

Midstream


		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022

		Millions of Dollars			Millions of Dollars
Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes						Income (Loss) Before Income Taxes
Transportation	Transportation	$	278	7			Transportation	$	306	278
NGL and Other	NGL and Other	91		35			NGL and Other	408		92
DCP Midstream		31		34

NOVONIX	NOVONIX	(158)		—			NOVONIX	(12)		(158)
Total Midstream	Total Midstream	$	242	76			Total Midstream	$	702	212


		Thousands of��Barrels Daily		Thousands of Barrels Daily
Transportation Volumes	Transportation Volumes				Transportation Volumes
Pipelines*	Pipelines*	3,099	2,801		Pipelines*	3,039	3,099
Terminals	Terminals	2,900	2,675		Terminals	3,203	2,900
Operating Statistics	Operating Statistics				Operating Statistics
NGL fractionated**	NGL fractionated**	452	363		NGL fractionated**	660	452
NGL production***	NGL production***	400	356		NGL production***	421	400

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

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

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

Dollars Per Gallon

Market Indicator

Weighted-Average NGL Price*

1.10

0.69

Weighted-Average NGL Price*

0.74

1.10

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

The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing ~~services, as well as natural gas and~~services; NGL production, transportation, storage, fractionation, processing and marketing ~~services,~~services; natural gas gathering, compressing, treating, processing, storage, transportation and marketing services; and condensate recovery. These activities are mainly in the United States. This segment also includes our ~~50% equity investment in DCP Midstream, which includes the operations of DCP Midstream, LP (DCP Partners), its master limited partnership, and our 16%~~ investment in NOVONIX.

In connection with the merger of DCP Midstream and Gray Oak Holdings, the results of our Transportation business reflect a decrease in our indirect economic interest in Gray Oak Pipeline to 6.5% from August 18, 2022, forward. Prior to August 18, 2022, the Transportation results presented in the table above reflect Gray Oak Holdings’ 65% economic interest in Gray Oak Pipeline. In addition, the results of our NGL and Other business include the consolidated results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022, forward. Prior to August 18, 2022, our investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills were accounted for using the equity method. As a result of the merger and consolidation, equity earnings from our investment in DCP Midstream prior to the merger have been included with the results of our NGL and Other business.

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Results from our Midstream segment increased ~~$166~~$490 million in the first quarter of ~~2022.~~2023.

Results from our Transportation business increased ~~$271~~$28 million in the first quarter of ~~2022.~~2023. The increase was primarily due to a ~~before-tax impairment~~gain of ~~$198~~$36 million ~~recorded~~from the sale of the Belle Chasse Terminal. Excluding the gain on sale, results were down slightly as lower equity earnings driven by a decrease in our indirect economic interest in Gray Oak Pipeline in connection with the ~~first quarter~~merger of ~~2021 related to Phillips 66 Partners’ decision to exit~~DCP Midstream and Gray Oak Holdings were mostly offset by the ~~Liberty Pipeline project,~~impact of higher volumes and ~~higher results from both our equity affiliates and wholly owned assets due to increased volumes.~~lower operating costs.

Results from our NGL and Other business increased ~~$56~~$316 million in the first quarter of ~~2022. This~~2023. The increase was primarily due to the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills from August 18, 2022 forward, improved hedging results ~~from Fracs 1, 2, and 3 at the~~for DCP Midstream’s Class A Segment, as well as higher Sweeny Hub and revenues from the start-up of the C2G pipeline in December 2021. Improved results from the Sweeny Fracs reflect recovery from the impacts of the winter storms that occurred in February 2021, which caused lower run rates and higher operating expenses in the first quarter of 2021.trading results.

~~Results from our investment in DCP Midstream decreased $3 million in the first quarter of 2022.~~

~~Table of Contents~~

The fair value of our investment in NOVONIX decreased by $12 million in the first quarter of 2023, compared with a decrease of $158 million in the first quarter of 2022. ~~We acquired this investment in September 2021.~~

~~See Note 5—Investments, Loans and Long-Term Receivables, in~~In the Notes to Consolidated Financial Statements, see Note 8—Investments, Loans and Long-Term Receivables, for additional information ~~regarding the Liberty Pipeline project impairment and~~on our investment in NOVONIX.

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
2022 2021
Millions of Dollars
Income Before Income Taxes $ 396 154


	Three Months Ended March 31
	2023		2022

	Millions of Dollars

Income Before Income Taxes	$	198	396


					Millions of Pounds
		Millions of Pounds
CPChem Externally Marketed Sales Volumes*	CPChem Externally Marketed Sales Volumes*			CPChem Externally Marketed Sales Volumes*	5,706	6,239
Olefins and Polyolefins		5,065	4,570
Specialties, Aromatics and Styrenics		1,174	981
		6,239	5,551
* 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) 99 % 79~~


Olefins and Polyolefins Capacity Utilization (percent)	94	%	99

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~~CPChem produces and markets ethylene and other olefin products. Ethylene produced is primarily consumed within CPChem for the production of polyethylene, normal alpha olefins and polyethylene pipe. CPChem manufactures and markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene, as well as manufactures and/or markets a variety of specialty chemical products. Unless otherwise noted, amounts referenced below reflect our ~~reporting of CPChem’s operations around two primary business lines: Olefins and Polyolefins (O&P) and Specialties, Aromatics and Styrenics (SA&S).~~net 50% interest in CPChem.

Results from the Chemicals segment ~~increased $242~~decreased $198 million in the first quarter of ~~2022.~~2023. The ~~increase~~decrease was primarily due to ~~improved O&P~~lower margins ~~reflecting strong demand and~~driven by a decline in sales prices due to higher ~~sales volumes. Results in the first quarter of 2021 were negatively impacted by the winter storms that occurred in the Central and Gulf Coast regions.~~market supply.

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

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Refining

Three Months Ended
March 31
2022 2021
Millions of Dollars
Income (Loss) Before Income Taxes
Atlantic Basin/Europe $ 143 (153)
Gulf Coast 4 (253)
Central Corridor (135) (248)
West Coast 111 (386)
Worldwide $ 123 (1,040)


	Three Months Ended March 31
	2023		2022

	Millions of Dollars
Income (Loss) Before Income Taxes
Atlantic Basin/Europe	$	142	152
Gulf Coast	705		41
Central Corridor	739		(135)
West Coast	22		115
Worldwide	$	1,608	173


		Dollars Per Barrel			Dollars Per Barrel
Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes					Income (Loss) Before Income Taxes
Atlantic Basin/Europe	Atlantic Basin/Europe	$	2.98	(3.57)		Atlantic Basin/Europe	$	3.60	3.17
Gulf Coast	Gulf Coast	0.08		(4.64)		Gulf Coast	13.73		0.79
Central Corridor	Central Corridor	(5.70)		(12.55)		Central Corridor	28.42		(5.70)
West Coast	West Coast	3.84		(14.89)		West Coast	0.77		3.98
Worldwide	Worldwide	0.81		(7.27)		Worldwide	11.07		1.13

Realized Refining Margins*	Realized Refining Margins*					Realized Refining Margins*
Atlantic Basin/Europe	Atlantic Basin/Europe	$	11.71	4.86		Atlantic Basin/Europe	$	16.13	11.71
Gulf Coast	Gulf Coast	7.71		3.39		Gulf Coast	21.28		8.59
Central Corridor	Central Corridor	7.89		5.97		Central Corridor	26.86		7.89
West Coast	West Coast	17.68		3.33		West Coast	16.53		17.74
Worldwide	Worldwide	10.55		4.36		Worldwide	20.72		10.83

* 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 March 31
Operating Statistics	Operating Statistics	2022		2021			Operating Statistics	2023		2022
Refining operations*	Refining operations*						Refining operations*
Atlantic Basin/Europe	Atlantic Basin/Europe						Atlantic Basin/Europe
Crude oil capacity	Crude oil capacity	537		537			Crude oil capacity	537		537
Crude oil processed	Crude oil processed	503		438			Crude oil processed	443		503
Capacity utilization (percent)	Capacity utilization (percent)	94	%	82			Capacity utilization (percent)	82	%	94
Refinery production	Refinery production	538		482			Refinery production	438		538
Gulf Coast**
Gulf Coast							Gulf Coast
Crude oil capacity	Crude oil capacity	529		784			Crude oil capacity	529		529
Crude oil processed	Crude oil processed	497		553			Crude oil processed	519		497
Capacity utilization (percent)	Capacity utilization (percent)	94	%	71			Capacity utilization (percent)	98	%	94
Refinery production	Refinery production	590		603			Refinery production	580		590
Central Corridor	Central Corridor						Central Corridor
Crude oil capacity	Crude oil capacity	531		531			Crude oil capacity	531		531
Crude oil processed	Crude oil processed	453		384			Crude oil processed	475		453
Capacity utilization (percent)	Capacity utilization (percent)	85	%	72			Capacity utilization (percent)	89	%	85
Refinery production	Refinery production	474		398			Refinery production	494		474
West Coast	West Coast						West Coast
Crude oil capacity	Crude oil capacity	364		364			Crude oil capacity	319		364
Crude oil processed	Crude oil processed	294		268			Crude oil processed	281		294
Capacity utilization (percent)	Capacity utilization (percent)	81	%	74			Capacity utilization (percent)	88	%	81
Refinery production	Refinery production	321		288			Refinery production	314		321
Worldwide	Worldwide						Worldwide
Crude oil capacity	Crude oil capacity	1,961		2,216			Crude oil capacity	1,916		1,961
Crude oil processed	Crude oil processed	1,747		1,643			Crude oil processed	1,718		1,747
Capacity utilization (percent)	Capacity utilization (percent)	89	%	74			Capacity utilization (percent)	90	%	89
Refinery production	Refinery production	1,923		1,771			Refinery production	1,826		1,923
* Includes our share of equity affiliates.	* Includes our share of equity affiliates.						* Includes our share of equity affiliates.
** Excludes operating statistics of the Alliance Refinery beginning on October 1, 2021.

The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, at 12 refineries in the United States and Europe. ~~In the fourth quarter of 2021, we shut down our Alliance Refinery and are in the process of converting it into a terminal.~~

Results from our Refining segment increased ~~$1,163~~$1,435 million in the first quarter of ~~2022,~~2023, primarily due to higher realized refining ~~margins. The~~margins driven by improved ~~realized refining margins were mainly attributable to increased~~clean product differentials and market crack spreads, partially offset by ~~decreased secondary product margins and~~ lower ~~clean product differentials.~~volumes.

Our worldwide refining crude oil capacity utilization rate was 90% in the first quarter of 2023, compared with 89% in the first quarter of 2022, compared with 74% in the first quarter of 2021. The increase was primarily driven by improved market demand for refined petroleum products following the administration of COVID-19 vaccines and the easing of pandemic restrictions, as well as less unplanned downtime caused by the winter storms that occurred in February 2021.

2022. See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.

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Marketing and Specialties

Three Months Ended
March 31
2022 2021
Millions of Dollars
Income Before Income Taxes
Marketing and Other $ 203 211
Specialties 113 79
Total Marketing and Specialties $ 316 290


	Three Months Ended March 31
	2023		2022

	Millions of Dollars

Income Before Income Taxes	$	426	296


		Dollars Per Barrel			Dollars Per Barrel
Income Before Income Taxes	Income Before Income Taxes					Income Before Income Taxes
U.S.	U.S.	$	1.13	1.36		U.S.	$	1.79	1.13
International	International	0.92		2.24		International	4.93		0.92

Realized Marketing Fuel Margins*	Realized Marketing Fuel Margins*					Realized Marketing Fuel Margins*
U.S.	U.S.	$	1.59	1.94		U.S.	$	2.30	1.59
International	International	2.30		4.01		International	6.45		2.30

* 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			Dollars Per Gallon
U.S. Average Wholesale Prices*	U.S. Average Wholesale Prices*					U.S. Average Wholesale Prices*
Gasoline	Gasoline	$	3.05	2.01		Gasoline	$	2.81	3.05
Distillates	Distillates	3.25		1.98		Distillates	3.23		3.25
* On third-party branded petroleum product sales, excluding excise taxes.	* On third-party branded petroleum product sales, excluding excise taxes.					* On third-party branded petroleum product sales, excluding excise taxes.


		Thousands of Barrels Daily		Thousands of Barrels Daily

Marketing Petroleum Products Sales Volumes
Marketing Refined Petroleum Product Sales					Marketing Refined Petroleum Product Sales
Gasoline	Gasoline	1,129	1,023		Gasoline	1,111	1,129
Distillates	Distillates	1,011	818		Distillates	848	1,011
Other	Other	17	18		Other	19	17
Total		2,157	1,859
						1,978	2,157

The M&S segment purchases for resale and markets refined petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, mainly in the United States and Europe. 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 ~~$26~~$130 million in the first quarter of ~~2022,~~2023, primarily driven by higher ~~results from our lubricants business reflecting increased finished lubricant and Excel Paralubes base oil~~realized marketing fuel margins, ~~higher marketing sales volumes and improved results from our chartered marine vessel and other businesses. These increases were~~ partially offset by lower ~~marketing fuel margins primarily due to spot prices increasing more significantly in the first quarter of 2022, compared with the first quarter of 2021.~~results from trading activities.

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			Millions of Dollars
		Three Months Ended March 31				Three Months Ended March 31
		2022		2021				2023		2022
Loss Before Income Taxes	Loss Before Income Taxes						Loss Before Income Taxes
Net interest expense	Net interest expense	$	(132)	(143)			Net interest expense	$	(124)	(132)
Corporate overhead and other	Corporate overhead and other	(117)		(108)			Corporate overhead and other	(159)		(117)

Total Corporate and Other	Total Corporate and Other	$	(249)	(251)			Total Corporate and Other	$	(283)	(249)

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, restructuring costs related to our business transformation, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment.

Net interest expense decreased ~~$11~~$8 million, in the first quarter of ~~2022,~~2023. The decrease was primarily driven by ~~lower average debt principal balances, reflecting debt repayments during 2021,~~increased interest income, partially offset by higher interest expense as ~~well as higher capitalized interest primarily due to the restart~~a result of ~~the Sweeny Frac 4 capital project.~~consolidating DCP Midstream Class A Segment.

Corporate overhead and other costs increased $9$42 million in the first quarter of ~~2022, reflecting higher employee-related expenses.~~2023. The increase was primarily due to restructuring costs associated with our business transformation, mainly related to consulting fees. See Note 23—Restructuring, in the Notes to Consolidated Financial Statements, for additional information regarding restructuring costs.

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CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators


		Millions of Dollars, Except as Indicated				Millions of Dollars, Except as Indicated
		March 31 2022		December 31 2021		March 31 2023		December 31 2022

Cash and cash equivalents	Cash and cash equivalents	$	3,335	3,147	Cash and cash equivalents	$	6,965	6,133
Short-term debt	Short-term debt	1,474		1,489	Short-term debt	825		529
Total debt	Total debt	14,434		14,448	Total debt	18,485		17,190
Total equity	Total equity	22,121		21,637	Total equity	34,916		34,106
Percent of total debt to capital*	Percent of total debt to capital*	39%		40	Percent of total debt to capital*	35%		34
Percent of floating-rate debt to total debt	Percent of floating-rate debt to total debt	3%		3	Percent of floating-rate debt to total debt	3%		—
* Capital includes total debt and total equity.	* Capital includes total debt and total equity.				* Capital includes total debt and total equity.

To meet our short- and long-term liquidity requirements, we use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. During the first three months of ~~2022,~~2023, we generated ~~$1.1~~$1.2 billion of cash from ~~operations.~~operations and had net borrowings of $1.3 billion. We used available cash primarily ~~for~~to repurchase $800 million of our common stock, pay dividends on our common stock of $486 million, and fund capital expenditures and investments of ~~$370 million and dividend payments on our common stock of $404~~$378 million. During the first three months of ~~2022,~~2023, cash and cash equivalents increased ~~$188~~$832 million to ~~$3.3~~$7 billion.

Significant Sources of Capital

Operating Activities

During the first three months of ~~2022,~~2023, cash generated by operating activities was ~~$1.1~~$1.2 billion, compared with ~~$271 million~~$1.1 billion for the first three months of ~~2021.~~2022. The increase was primarily due to improved ~~realized refining margins,~~earnings, partially offset by unfavorable working capital ~~impacts.~~impacts and decreased distributions from equity affiliates.

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

The level and quality of output from our refineries also 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.

Equity Affiliate Operating Distributions

Our operating cash flows are also impacted by distribution decisions made by our equity affiliates, including CPChem. During the first three months of 2023, cash from operations included aggregate distributions of $369 million from our equity affiliates. During the same period of 2022, cash from operations included aggregate distributions of $585 million, ~~from our equity affiliates,~~ including $299 ~~million from CPChem. During the same period of 2021, cash from operations included aggregate distributions of $502 million, including $205~~ million from CPChem. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured.

~~Revolving~~

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Senior Note Issuances

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

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

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

The 2027 Notes and 2033 Notes (collectively, the Notes) are fully and unconditionally guaranteed by Phillips 66. Interest on the 2027 Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2023. Interest on the 2033 Notes is payable semi-annually on June 30 and December 30 of each year, commencing on December 30, 2023.

Term Loan Agreement

On March 27, 2023 (the Closing Date), Phillips 66 Company, a wholly owned subsidiary of Phillips 66, entered into a $1.5 billion delayed draw term loan agreement guaranteed by Phillips 66 (the Term Loan Agreement). The Term Loan Agreement provides for a single borrowing (the date of such borrowing, the Funding Date) during a 90-day period commencing on the Closing Date, contingent upon us completing the DCP LP public common unit acquisition, and matures on the third anniversary of the Funding Date. The Term Loan Agreement contains customary covenants similar to those contained in our revolving credit agreement, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Term Loan Agreement has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Term Loan Agreement, in whole or in part, without premium or penalty. Outstanding borrowings under the Term Loan Agreement will bear interest at either: (a) Adjusted Term SOFR in effect from time to time plus the applicable margin; or (b) the reference rate plus the applicable margin, as defined in the Term Loan Agreement. As of March 31, 2023, no borrowings are outstanding under the Term Loan Agreement. See Note 21—DCP Midstream Class A Segment, for additional information regarding the definitive agreement we executed on January 5, 2023, to acquire an incremental interest in DCP LP.

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

On June 23, 2022, we entered into a $5 billion revolving credit facility with Phillips 66 Company as the borrower and Phillips 66 as the guarantor. At both March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, no amount had been drawn under ~~Phillips 66’s~~the $5 billion revolving credit facility or ~~uncommitted~~ $5 billion uncommitted commercial paper program.

DCP Midstream Class A Segment

At March 31, ~~2022~~2023, DCP LP had $225 million of borrowings outstanding under its $1.4 billion credit facility and $2 million of letters of credit had been issued that supported the credit facility. At December 31, ~~2021,~~2022, DCP LP had no borrowings ~~were~~ outstanding under its $1.4 billion credit facility, and $1$10 million in letters of credit had been ~~drawn under Phillips 66 Partners’ $750 million revolving~~issued that are supported by the credit facility.

Total Committed Capacity Available

At March 31, 2023, and December 31, 2022, we had approximately $6.2 billion and $6.7 billion, respectively, of total committed capacity available under the credit facilities described above.

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Off-Balance Sheet Arrangements

Lease Residual Value Guarantees

Under the operating lease agreement for our headquarters facility in Houston, Texas, we have the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at March 31, ~~2022.~~2023. We also have residual value guarantees associated with railcar, truck and airplane leases with maximum potential future exposures totaling ~~$221~~$164 million. These leases have remaining terms of upfive to ten years.

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

In ~~September 2021,~~February 2022, the U.S. Supreme Court (the Court) denied Dakota ~~Access filed a~~Access’ writ of certiorari requesting the ~~U.S. Supreme~~ Court to review the lower court’s decision to order the EIS and vacate the easement. ~~In February 2022, the writ was denied, and~~Therefore, the requirement to prepare the EIS stands. ~~Completion of~~Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS ~~was expected in the fall of 2022, but now may be delayed as~~process while the USACE ~~engages~~engaged with the ~~Standing Rock Sioux~~ Tribe on their reasons for ~~withdrawing as a cooperating agency with respect to preparation~~withdrawing. The draft EIS process resumed in August of 2022, and release is expected in the ~~EIS.~~second quarter of 2023.

In conjunction with the notes offering, Phillips 66 Partners, now a ~~result~~wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU). Under the ~~debt repayment, on April 1, 2022,~~CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At March 31, 2023, our 25% share of the maximum potential equity contributions under the CECU ~~decreased to~~was approximately $467 ~~million,~~million.

See Note 9—12—Guarantees, in the Notes to Consolidated Financial Statements, for additional information on our guarantees.

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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 ~~both~~ March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, was ~~$14.4 billion.~~$18.5 billion and $17.2 billion, respectively. Our total debt-to-capital ratio was ~~39%~~35% and ~~40%~~34% at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively.

~~In early April 2022, upon maturity, Phillips 66~~On March 15, 2023, DCP LP repaid its ~~4.300%~~3.875% senior unsecured notes due March 2023 with an aggregate principal amount of ~~$1.0 billion~~$500 million using borrowings under its revolving credit and ~~Phillips 66 Partners repaid its $450 million term loan. As our operating cash flows improve further, we will continue to prioritize debt reductions in 2022.~~accounts receivable securitization facilities.

~~Debt Exchange~~

On April ~~6, 2022, Phillips 66 Company, a wholly owned subsidiary of Phillips 66,~~19, 2023, DCP LP announced ~~offers~~its intent to ~~exchange (the Exchange Offers) all validly tendered~~redeem its 5.850% junior subordinated notes ~~of seven different series of notes issued by Phillips 66 Partners (collectively, the Old Notes),~~due May 2043 with an aggregate principal amount outstanding of ~~approximately $3.5 billion, for notes~~$550 million on or about May 21, 2023. DCP LP expects to use borrowings under its revolving credit and accounts receivable securitization facilities.

DCP LP Public Common Unit Acquisition

On January 5, 2023, we entered into a definitive agreement with DCP LP, its subsidiaries and its general partner entities, pursuant to which one of our wholly owned subsidiaries will merge with and into DCP LP, with DCP LP surviving as a Delaware limited partnership. Under the terms of the agreement, at the effective time of the merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and DCP Midstream GP, LP) issued and outstanding as of immediately prior to the effective time will be ~~issued by Phillips 66 Company (collectively,~~converted into the ~~New Notes)~~right to receive $41.75 per common unit in cash, without interest. The merger will increase our economic interest in DCP LP from 43.3% to 86.8%. The ~~New Notes~~transaction is expected to close in the second quarter of 2023, subject to customary closing conditions.

If the merger is successfully completed, we will ~~be fully and unconditionally guaranteed by Phillips 66 and will rank equallywith Phillips 66 Company’s other unsecured and unsubordinated indebtedness, and~~pay approximately $3.8 billion in cash consideration, which we expect to fund through a combination of cash generated from operating activities, proceeds from the guarantees will rank equally with Phillips 66’s other unsecured and unsubordinated indebtedness. The Exchange Offers will expire on May 3, 2022, unless such date is extended (the Expiration Date). Phillips 66 Company currently expects the settlementoffering of the ~~Exchange Offers to occur on May 5, 2022, unless~~Notes and borrowings under the ~~Expiration Date is extended.~~Term Loan Agreement.

The ~~New Notes will have~~transaction was unanimously approved by the ~~same interest rates, interest payment dates and maturity dates as the Old Notes. In addition, holders that validly tender before the end~~board of the ~~early participation period~~general partner of DCP LP, based on ~~April 19, 2022 (the Early Participation Date), will receive New Notes~~the unanimous approval and recommendation of its special committee comprised entirely of independent directors after evaluation of the transaction by the special committee in consultation with ~~an aggregate principal amount equivalent~~independent financial and legal advisors. Concurrently with the execution of the agreement, affiliates of Phillips 66, which together own greater than a majority of the outstanding DCP LP common units, delivered their consent to approve the ~~Old Notes, while~~transaction. As a result, DCP LP has not solicited and is not soliciting approval of the transaction by any other holders ~~that validly tender after the Early Participation Date, but before the Expiration Date, will receive New Notes with an aggregate principal amount that is 3% less than the Old Notes.~~of DCP LP common units.

~~Through the end of the early participation period on April 19, 2022, Old Notes with an aggregate principal amount of approximately $3.2 billion had been validly tendered for exchange.~~

~~Joint Venture Loans~~

We and our co-venturer provided member loans to WRB. At March 31, 2022, our 50% share of the outstanding member loan balance, including accrued interest, was $597 million. The need for additional loans to WRB in the remainder of 2022, as well as WRB’s repayment schedule, will depend on market conditions.

~~Merger with Phillips 66 Partners~~

On March 9, 2022, we completed the previously announced merger between us and Phillips 66 Partners. The merger resulted in the acquisition of all limited partnership interests in Phillips 66 Partners not already owned by us in exchange for approximately 42 million shares of Phillips 66 common stock issued from treasury stock. Phillips 66 Partners common unitholders received 0.50 shares of Phillips 66 common stock for each outstanding Phillips 66 Partners common unit. Phillips 66 Partners’ perpetual convertible preferred units were converted into common units at a premium to the original issuance price prior to being exchanged for Phillips 66 common stock. Upon closing, Phillips 66 Partners became a wholly owned subsidiary of Phillips 66 and its common units are no longer publicly traded. See Note ~~18—Phillips 66 Partners LP,~~3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger and Note 21—DCP Midstream Class A Segment, in the Notes to the Consolidated Financial Statements, for additional information on the merger ~~transaction.~~of DCP Midstream and Gray Oak Holdings.

~~Dividends~~DCP LP Cash Distributions to Unitholders

DCP LP’s partnership agreement requires that, within 45 days after the end of each quarter, DCP LP distributes all available cash. During the first quarter of 2023, DCP LP made cash distributions of $51 million to common unitholders other than Phillips 66, $3 million to Series B preferred unitholders and $2 million to Series C preferred unitholders. See Note 21—DCP Midstream Class A Segment, in the Notes to the Consolidated Financial Statements, for additional information.

On ~~February 9, 2022, our~~April 19, 2023, the board of directors of DCP Midstream GP, LLC, declared a quarterly ~~cash dividend~~distribution on DCP LP’s common units of ~~$0.92~~$0.43 per common ~~share. This dividend was~~unit and a quarterly distribution on DCP LP’s Series B and Series C Preferred Units of $0.4922 and $0.4969 per unit, respectively. The distribution on the common units will be paid on ~~March 1, 2022,~~May 15, 2023, to ~~shareholders~~unitholders of record ason May 1, 2023. The Series B distribution will be paid on June 15, 2023, to unitholders of ~~the close~~record on June 1, 2023. The Series C distribution will be paid on July 17, 2023, to unitholders of ~~business~~record on ~~February 22, 2022.~~July 3, 2023.

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Pending Acquisition

Dividends

On February 8, 2023, our Board of Directors declared a quarterly cash dividend of $1.05 per common share, representing an 8% increase from the prior quarter. The dividend was paid on March 1, 2023, to holders of record at the close of business on February 21, 2023.

Share Repurchases

Since July 2012, our board of directors has authorized an aggregate of ~~$15~~$20 billion of repurchases of our outstanding common stock. The authorizations do not have expiration dates. Future 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. For the three months ended March 31, 2023, we repurchased 7.9 million shares at an aggregate cost of approximately $807 million. Since the inception of our share repurchase program in 2012, we have repurchased ~~159~~183.8 million shares at an aggregate cost of ~~$12.5~~$14.8 billion. Shares of stock repurchased are held as treasury shares. We suspended share repurchases in mid-March 2020 to preserve liquidity in response to the global economic disruption caused by the COVID-19 pandemic. In April 2022, we announced plans to resume our share repurchase program in the second quarter of 2022.

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Capital Spending

Millions of Dollars
Three Months Ended
March 31
2022 2021
Capital Expenditures and Investments
Midstream $ 164 100
Chemicals — —
Refining 171 184
Marketing and Specialties 11 22
Corporate and Other 24 25
Total Capital Expenditures and Investments $ 370 331
Selected Equity Affiliates*
DCP Midstream $ 11 7
CPChem 113 79
WRB 42 59
$ 166 145

* Our share of joint venture’s capital spending.


	Millions of Dollars
	Three Months Ended March 31
	2023		2022
Capital Expenditures and Investments
Midstream*	$	124	163
Chemicals	—		—
Refining	227		172
Marketing and Specialties	11		11
Corporate and Other	16		24
Total Capital Expenditures and Investments	$	378	370



Selected Equity Affiliates**

CPChem	142		113
WRB	45		42
	$	187	155
* Includes 100% of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills capital expenditures and investments from August 18, 2022, forward, net of acquired cash.
** Our share of joint ventures’ capital spending.

Midstream

During the first three months of ~~2022,~~2023, capital spending in our Midstream segment, ~~included:~~

•~~Contribution to Dakota Access to fund our 25% share~~including DCP LP, was primarily driven by expansion of ~~Dakota Access’ debt repayment~~gathering systems in ~~April 2022.~~

•~~Continued development of additional Gulf Coast fractionation capacity at our Sweeny Hub.~~

•~~Spending associated with~~the DJ Basin and Permian Basin, other return projects, as well as reliability and maintenance ~~projects in our Transportation and NGL businesses.~~projects.

Chemicals

During the first three months of ~~2022,~~2023, on a 100% basis, CPChem’s capital expenditures and investments were ~~$225~~$283 million. The capital spending was primarily for the development of petrochemical projects on the U.S. Gulf Coast and in the Middle East, as well as sustaining, debottlenecking and optimization projects on existing assets. CPChem’s capital program was self-funded, and we expect CPChem to continue self-funding its capital program for the remainder of ~~2022.~~2023.

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Refining

Capital spending for the Refining segment during the first three months of ~~2022~~2023 was primarily for refinery upgrade projects to enhance the yield of high-value products, produce renewable diesel, ~~projects, improvements to the~~improve operating integrity of key processing units, and safety-related projects.

Major capital activities included:

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

•Engineering of facilities, procurement of long-lead items and construction to produce biofuels at the San Francisco refinery.

~~Table~~•Installation of ~~Contents~~facilities to improve product value at the jointly owned Borger refinery.

Marketing and Specialties

Capital spending for the M&S segment during the first three months of ~~2022~~2023 was primarily for the continued development and enhancement of retail sites in ~~Europe and for Lubricants reliability and maintenance projects.~~Europe.

Corporate and Other

Capital spending for Corporate and Other during the first three months of ~~2022~~2023 was primarily for information ~~technology and facilities.~~

technology.

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Contingencies

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

Legal and Tax Matters

Our legal and tax matters are handled by our legal and tax organizations. These organizations apply their knowledge, experience and professional judgment to the specific characteristics of our cases and uncertain tax positions. We employ a litigation management process to manage and monitor the legal proceedings. Our process facilitates the early evaluation and quantification of potential exposures in individual cases and enables the tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required. In the case of income tax-related contingencies, we monitor tax legislation and court decisions, the status of tax audits and the statute of limitations within which a taxing authority can assert a liability.

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Environmental

Like other companies in our industry, we are subject to numerous international, federal, state and local environmental laws and regulations. For a discussion of the most significant international and federal environmental laws and regulations to which we are subject, see the “Environmental” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2021~~2022 Annual Report on Form 10-K.

We are required to purchase RINs in the open market to satisfy the portion of our obligation under the Renewable Fuel Standard (RFS) that is not fulfilled by blending renewable fuels into the motor fuels we produce. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, we incurred expenses of ~~$152~~$238 million and ~~$165~~$152 million, respectively, associated with our obligation to purchase RINs in the open market to comply with the RFS for our wholly owned refineries. These expenses are included in the “Purchased crude oil and products” line item on our consolidated statement of ~~operations.~~income. Our jointly owned refineries also incurred expenses associated with the purchase of RINs in the open market, of which our share was ~~$85~~$114 million and ~~$63~~$85 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. These expenses are included in the “Equity in earnings of affiliates” line item on our consolidated statement of ~~operations.~~income. The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery production, blending activities and renewable volume obligation requirements.

We occasionally receive requests for information or notices of potential liability from the EPA and state environmental agencies alleging that we are a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or an equivalent state statute. On occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain wastes attributable to our past operations. At March 31, 2023 and December 31, ~~2021, we reported that~~2022, we had been notified of potential liability under CERCLA and comparable state laws at 2522 sites within the United States. ~~In the first quarter of 2022, we were notified of one site that was deemed resolved and closed, accordingly, leaving 24 unresolved sites with potential liability at March 31, 2022.~~

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

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Climate Change

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

For examples of legislation and regulation or precursors for possible regulation that do or could affect our operations, see the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2021~~2022 Annual Report on Form 10-K.

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

In February 2022, we announced our intention ~~by 2050~~ to reduce ~~the GHG emissions intensity for~~our Scope 1 and Scope 2 GHG emissions ~~from~~intensity related to our operations by 50% ~~compared to~~of 2019 ~~levels.~~levels by the year 2050. This new target builds upon our previously announced 2030 GHG emissions intensity targets to reduce Scope 1 and Scope 2 emissions from our operations by 30% and Scope 3 emissions from our energy products by 15% compared to 2019 levels.

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GUARANTOR FINANCIAL INFORMATION

~~At March 31, 2022,~~

We have various cross guarantees between Phillips 66 ~~had $10.3 billion of senior unsecured notes outstanding guaranteed by~~and its wholly owned subsidiary Phillips 66 Company ~~a direct, wholly owned operating subsidiary of Phillips 66.~~(together, the Obligor Group) with respect to publicly held debt securities. Phillips 66 conducts substantially all of its operations through subsidiaries, including Phillips 66 Company, and those subsidiaries generate substantially all of its operating income and cash flow. ~~The guarantees (1) are unsecured~~Phillips 66 has fully and unconditionally guaranteed the payment obligations of Phillips 66 Company ~~(2) rank equally~~ with ~~all~~respect to its publicly held debt securities. In addition, Phillips 66 Company has fully and unconditionally guaranteed the payment obligations of Phillips 66 ~~Company’s other unsecured and unsubordinated indebtedness, and (3)~~with respect to its publicly held debt securities. All guarantees are full and unconditional. At March 31, 2023, $13.3 billion of senior unsecured notes outstanding has been guaranteed by the Obligor Group.

See the “Significant Sources of Capital” section for additional information regarding the Exchange Offers by Phillips 66 Company for existing senior notes of Phillips 66 Partners that ~~are expected to be~~ settled in May 2022.

Summarized financial information of ~~Phillips 66 and Phillips 66 Company (the~~the Obligor ~~Group)~~Group is presented on a combined basis. Intercompany transactions among the members of the Obligor Group have been eliminated. The financial information of non-guarantor subsidiaries has been excluded from the summarized financial information. Significant intercompany transactions and receivable/payable balances between the Obligor Group and non-guarantor subsidiaries are presented separately in the summarized financial information.

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The summarized results of operations for the three months ended March 31, ~~2022,~~2023, and the summarized financial position at March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, for the Obligor Group on a combined basis were:


Summarized Combined Statement of ~~Operations~~Income	Millions of Dollars
	Three Months Ended March 31, ~~2022~~2023
Sales and other operating revenues	$	~~28,640~~24,824
Revenues and other income—non-guarantor subsidiaries	~~867~~1,403
Purchased crude oil and products—third parties	~~16,892~~14,695
Purchased crude oil and products—related parties	~~4,646~~3,671
Purchased crude oil and products—non-guarantor subsidiaries	~~6,000~~4,778

Income before income taxes	~~433~~1,505
Net income	~~341~~1,191


		Millions of Dollars
Summarized Combined Balance Sheet	Summarized Combined Balance Sheet	March 31 2022		December 31 2021	Summarized Combined Balance Sheet	Millions of Dollars
						March 31 2023		December 31 2022
Accounts and notes receivable—third parties	Accounts and notes receivable—third parties	$	5,732	3,772	Accounts and notes receivable—third parties	$	4,270	5,485
Accounts and notes receivable—related parties	Accounts and notes receivable—related parties	1,631		1,289	Accounts and notes receivable—related parties	1,094		1,376
Due from non-guarantor subsidiaries, current	Due from non-guarantor subsidiaries, current	970		456	Due from non-guarantor subsidiaries, current	936		741
Total current assets	Total current assets	14,452		10,080	Total current assets	15,952		15,566
Investments and long-term receivables	Investments and long-term receivables	10,241		10,324	Investments and long-term receivables	10,840		10,433
Net properties, plants and equipment	Net properties, plants and equipment	11,522		11,541	Net properties, plants and equipment	11,675		11,652
Goodwill	Goodwill	1,047		1,047	Goodwill	1,047		1,047
Due from non-guarantor subsidiaries, noncurrent	Due from non-guarantor subsidiaries, noncurrent	3,068		5,699	Due from non-guarantor subsidiaries, noncurrent	2,092		2,163
Other assets associated with non-guarantor subsidiaries	Other assets associated with non-guarantor subsidiaries	2,466		2,565	Other assets associated with non-guarantor subsidiaries	1,970		2,144
Total noncurrent assets	Total noncurrent assets	30,103		32,935	Total noncurrent assets	29,354		29,209
Total assets	Total assets	44,555		43,015	Total assets	45,306		44,775

Due to non-guarantor subsidiaries, current	Due to non-guarantor subsidiaries, current	$	3,301	2,227	Due to non-guarantor subsidiaries, current	$	2,284	2,297
Total current liabilities	Total current liabilities	14,259		10,551	Total current liabilities	11,001		11,148
Long-term debt	Long-term debt	9,370		9,364	Long-term debt	12,494		12,060
Due to non-guarantor subsidiaries, noncurrent	Due to non-guarantor subsidiaries, noncurrent	6,711		9,341	Due to non-guarantor subsidiaries, noncurrent	7,318		7,088
Total noncurrent liabilities	Total noncurrent liabilities	21,472		24,094	Total noncurrent liabilities	25,994		25,223
Total liabilities	Total liabilities	35,731		34,645	Total liabilities	36,995		36,371
Total equity	Total equity	8,824		8,370	Total equity	8,311		8,404
Total liabilities and equity	Total liabilities and equity	44,555		43,015	Total liabilities and equity	45,306		44,775

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NON-GAAP RECONCILIATIONS

Refining

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

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

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		Millions of Dollars, Except as Indicated							Millions of Dollars, Except as Indicated
Realized Refining Margins	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, 2022
Income (loss) before income taxes		$	143	4	(135)	111	123
Three Months Ended March 31, 2023								Three Months Ended March 31, 2023
Income before income taxes								Income before income taxes	$	142	705	739	22	1,608
Plus:	Plus:							Plus:

Taxes other than income taxes	Taxes other than income taxes	19		27	18	24	88	Taxes other than income taxes	22		33	25	33	113
Depreciation, amortization and impairments	Depreciation, amortization and impairments	52		51	35	60	198	Depreciation, amortization and impairments	50		60	38	54	202
Selling, general and administrative expenses	Selling, general and administrative expenses	14		11	14	9	48	Selling, general and administrative expenses	10		4	21	10	45
Operating expenses	Operating expenses	296		307	184	305	1,092	Operating expenses	365		286	166	350	1,167
Equity in losses of affiliates		3		2	16	—	21
Equity in (earnings) losses of affiliates								Equity in (earnings) losses of affiliates	2		(1)	(200)	—	(199)
Other segment (income) expense, net	Other segment (income) expense, net	12		—	(4)	1	9	Other segment (income) expense, net	20		5	(1)	1	25
Proportional share of refining gross margins contributed by equity affiliates	Proportional share of refining gross margins contributed by equity affiliates	23		—	205	—	228	Proportional share of refining gross margins contributed by equity affiliates	26		—	402	—	428

Realized refining margins	Realized refining margins	$	562	402	333	510	1,807	Realized refining margins	$	637	1,092	1,190	470	3,389

Total processed inputs (thousands of barrels)	Total processed inputs (thousands of barrels)	48,015		52,151	23,691	28,877	152,734	Total processed inputs (thousands of barrels)	39,472		51,349	26,004	28,416	145,241
Adjusted total processed inputs (thousands of barrels)*	Adjusted total processed inputs (thousands of barrels)*	48,015		52,151	42,267	28,877	171,310	Adjusted total processed inputs (thousands of barrels)*	39,472		51,349	44,315	28,416	163,552

Income (loss) before income taxes per barrel (dollars per barrel)**		$	2.98	0.08	(5.70)	3.84	0.81
Income before income taxes per barrel (dollars per barrel)**								Income before income taxes per barrel (dollars per barrel)**	$	3.60	13.73	28.42	0.77	11.07
Realized refining margins (dollars per barrel)***	Realized refining margins (dollars per barrel)***	11.71		7.71	7.89	17.68	10.55	Realized refining margins (dollars per barrel)***	16.13		21.28	26.86	16.53	20.72

Three Months Ended March 31, 2021
Loss before income taxes		$	(153)	(253)	(248)	(386)	(1,040)
Three Months Ended March 31, 2022								Three Months Ended March 31, 2022
Income (loss) before income taxes								Income (loss) before income taxes	$	152	41	(135)	115	173
Plus:	Plus:							Plus:

Taxes other than income taxes	Taxes other than income taxes	20		27	15	23	85	Taxes other than income taxes	19		27	18	24	88
Depreciation, amortization and impairments	Depreciation, amortization and impairments	52		77	34	54	217	Depreciation, amortization and impairments	52		56	35	60	203
Selling, general and administrative expenses	Selling, general and administrative expenses	14		10	7	11	42	Selling, general and administrative expenses	6		4	13	7	30
Operating expenses	Operating expenses	230		321	205	382	1,138	Operating expenses	296		317	184	306	1,103
Equity in losses of affiliates	Equity in losses of affiliates	2		3	117	—	122	Equity in losses of affiliates	3		2	16	—	21
Other segment (income) expense, net	Other segment (income) expense, net	—		—	(2)	2	—	Other segment (income) expense, net	12		—	(4)	1	9
Proportional share of refining gross margins contributed by equity affiliates	Proportional share of refining gross margins contributed by equity affiliates	43		—	86	—	129	Proportional share of refining gross margins contributed by equity affiliates	23		—	205	—	228

Realized refining margins	Realized refining margins	$	208	185	214	86	693	Realized refining margins	$	563	447	332	513	1,855

Total processed inputs (thousands of barrels)	Total processed inputs (thousands of barrels)	42,826		54,560	19,754	25,917	143,057	Total processed inputs (thousands of barrels)	48,015		52,151	23,691	28,877	152,734
Adjusted total processed inputs (thousands of barrels)*	Adjusted total processed inputs (thousands of barrels)*	42,826		54,560	35,711	25,917	159,014	Adjusted total processed inputs (thousands of barrels)*	48,015		52,151	42,267	28,877	171,310

Loss before income taxes per barrel (dollars per barrel)**		$	(3.57)	(4.64)	(12.55)	(14.89)	(7.27)
Income (loss) before income taxes per barrel (dollars per barrel)**								Income (loss) before income taxes per barrel (dollars per barrel)**	$	3.17	0.79	(5.70)	3.98	1.13
Realized refining margins (dollars per barrel)***	Realized refining margins (dollars per barrel)***	4.86		3.39	5.97	3.33	4.36	Realized refining margins (dollars per barrel)***	11.71		8.59	7.89	17.74	10.83
* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.
** Income (loss) before income taxes divided by total processed inputs.	** Income (loss) before income taxes divided by total processed inputs.							** Income (loss) before income taxes divided by total processed inputs.
*** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.

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Marketing

Our realized marketing fuel margins measure the difference between (a) sales and other operating revenues derived from the sale of fuels in our M&S segment and (b) costs of those fuels. The realized marketing fuel margins are adjusted to exclude those items that are not representative of the underlying operating performance of a period, which we call “special items.” The realized marketing fuel margins are converted to a per-barrel basis by dividing them by sales volumes measured on a barrel basis. We believe realized marketing fuel margin per barrel demonstrates the value uplift our marketing operations provide by optimizing the placement and ultimate sale of our refineries’ fuel production.

Within the M&S segment, the GAAP performance measure most directly comparable to realized marketing fuel margin per barrel is the marketing business’ “income before income taxes per barrel.” Realized marketing fuel margin per barrel excludes items that are typically included in gross margin, such as depreciation and operating expenses, and other items used to determine income before income taxes, such as general and administrative expenses. Because realized marketing fuel margin per barrel excludes these items, and because realized marketing fuel margin per barrel may be defined differently by other companies in our industry, it has limitations as an analytical tool. Following are reconciliations of income before income taxes to realized marketing fuel margins:


		Millions of Dollars, Except as Indicated						Millions of Dollars, Except as Indicated
		Three Months Ended March 31, 2022			Three Months Ended March 31, 2021			Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
		U.S.		International	U.S.	International		U.S.		International	U.S.	International
Realized Marketing Fuel Margins	Realized Marketing Fuel Margins						Realized Marketing Fuel Margins
Income before income taxes	Income before income taxes	$	191	23	199	48	Income before income taxes	$	273	125	191	23
Plus:	Plus:						Plus:

Depreciation and amortization	Depreciation and amortization	3		18	3	19	Depreciation and amortization	3		18	3	18
Selling, general and administrative expenses	Selling, general and administrative expenses	182		63	165	60	Selling, general and administrative expenses	181		62	182	63

Equity in earnings of affiliates	Equity in earnings of affiliates	(7)		(26)	(2)	(24)	Equity in earnings of affiliates	(3)		(22)	(7)	(26)
Other operating revenues*	Other operating revenues*	(107)		(12)	(86)	(5)	Other operating revenues*	(108)		(13)	(107)	(12)
Other expense, net	Other expense, net	6		4	4	1	Other expense, net	5		6	6	4

Marketing margins	Marketing margins	268		70	283	99	Marketing margins	351		176	268	70
Less: margin for nonfuel related sales	Less: margin for nonfuel related sales	—		13	—	13	Less: margin for nonfuel related sales	—		12	—	13
Realized marketing fuel margins	Realized marketing fuel margins	$	268	57	283	86	Realized marketing fuel margins	$	351	164	268	57

Total fuel sales volumes (thousands of barrels)	Total fuel sales volumes (thousands of barrels)	169,196		24,926	145,794	21,474	Total fuel sales volumes (thousands of barrels)	152,662		25,380	169,196	24,926

Income before income taxes per barrel (dollars per barrel)	Income before income taxes per barrel (dollars per barrel)	$	1.13	0.92	1.36	2.24	Income before income taxes per barrel (dollars per barrel)	$	1.79	4.93	1.13	0.92
Realized marketing fuel margins (dollars per barrel)**	Realized marketing fuel margins (dollars per barrel)**	1.59		2.30	1.94	4.01	Realized marketing fuel margins (dollars per barrel)**	2.30		6.45	1.59	2.30
* Includes other nonfuel revenues.	* Includes other nonfuel revenues.						* 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.	** 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.						** 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.

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

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can normally identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions that convey the prospective nature of events or outcomes, but the absence of such words does not mean a statement is not forward-looking.

We based the forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they ~~operate in general.~~operate. We caution you not to place undue reliance on these forward-looking statements as they are not guarantees of future performance ~~as they~~and involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in ~~the~~any forward-looking statements. ~~Any~~Such differences could result from a variety of factors, ~~including the following:~~

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

•Fluctuations in NGL, crude oil, refined petroleum product and natural gas prices and refining, marketing and petrochemical margins.

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

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

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

•The ability to achieve the expected benefits of the integration of DCP LP and any other benefits that may result from the buy-in of DCP’s publicly-held common units, if consummated.

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

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

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

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

•The inability to timely obtain or maintain permits, including those necessary for capital projects.

•The inability to comply with government regulations or make capital expenditures required to maintain compliance.

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

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

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

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

•Potential disruption or interruption of our operations or damage to our facilities due to accidents, weather and climate events, civil unrest, insurrections, political events, terrorism or cyberattacks.

•~~Potential disruption or damage to our facilities as a result of significant storms, flooding or other destructive climate events.~~

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

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•General domestic and international economic and political developments including armed hostilities, expropriation of assets, and other political, economic or diplomatic developments, including those caused by public health issues, outbreaks of diseases and pandemics.

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

•International monetary conditions and exchange controls.

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

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

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

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

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

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

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

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

•The factors generally described in Item 1A.—Risk Factors in our ~~2021~~2022 Annual Report on Form 10-K.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our commodity price risk and interest rate risk at March 31, ~~2022,~~2023, did not differ materially from the risks disclosed under Item 7A of our ~~2021~~2022 Annual Report on Form 10-K.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in U.S. Securities and Exchange Commission ~~(SEC)~~ rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of March 31, ~~2022,~~2023, with the participation of management, our ~~Chairman~~President and Chief Executive Officer and our Executive Vice President ~~Finance~~ and Chief Financial Officer carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our ~~Chairman~~President and Chief Executive Officer and our Executive Vice President ~~Finance~~ and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of March 31, ~~2022.~~2023.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the quarterly period ended March 31, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation and claims arising out of our operations in the normal course of business. Additionally, ~~Item 103 of Regulation S-K promulgated by the SEC requires disclosure of~~we have elected a $300,000 threshold to disclose certain proceedings arising under federal, state or local environmental ~~matters~~laws when a governmental authority is a party to the ~~proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will be in excess of $300,000.~~proceedings. During the first quarter of ~~2022, there were no~~2023, one such new ~~matters that~~matter arose and ~~there were~~ no material developments ~~that~~ occurred with respect to matters previously reported but still unresolved. We do not currently believe that the eventual outcome of any matters previously reported but still unresolved, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

~~Our~~Further, our U.S. refineries are implementing two separate consent decrees, regarding alleged violations of the Federal Clean Air Act, with the EPA, five states and one local air pollution agency. Some of the requirements and limitations contained in the decrees provide for stipulated penalties for violations. Stipulated penalties under the decrees are not automatic, but must be requested by one of the agency signatories. As part of periodic reports under the decrees or other reports required by permits or regulations, we occasionally report matters that could be subject to a request for stipulated penalties. If a specific request for stipulated penalties meeting the reporting threshold set forth in ~~SEC~~U.S. Securities and Exchange Commission (SEC) rules is made pursuant to these decrees based on a given reported exceedance, we will separately report that matter and the amount of the proposed penalty. We did receive such a request in the first quarter of 2023, which is described in the new matter below.

New Matter

Following preliminary discussions, we expect to receive a final demand for alleged stipulated penalties arising from self-reported Clean Air Act violations at our Alliance, Borger, Sweeny and Wood River refineries. The proposed penalties exceed $500,000 and would be pursued pursuant to the consent decree referenced above and a related Wood River Refinery consent decree.

See Note ~~10—~~13—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, for additional information.

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Item 1A.�� RISK FACTORS

~~There were~~Except as set forth below, there have been no material changes from the risk factors disclosed in Item 1A of our ~~2021~~2022 Annual Report on Form 10-K.

Political and economic developments could affect our operations and materially reduce our profitability and cash flows.

Actions of federal, state, local and international governments through legislation or regulation, executive order, permit or other review of infrastructure or facility development, and commercial restrictions could delay projects, increase costs, limit development, or otherwise reduce our profitability both in the United States and abroad. Any such actions may affect many aspects of our operations, including:

•Establishing maximum margins that can be earned on sales of motor fuels or imposing financial penalties on profits earned above any established maximum margins.

•Limiting or prohibiting our ability to undertake turnaround or other maintenance activities at our refineries.

•Requiring permits or other approvals that may impose unforeseen or unduly burdensome conditions or potentially cause delays in our operations.

•Further limiting or prohibiting construction or other activities in environmentally sensitive or other areas.

•Requiring increased capital costs to construct, maintain or upgrade equipment, facilities or infrastructure.

•Restricting the locations where we may construct facilities or requiring the relocation of facilities.

For example, in March 2023, the California legislature adopted Senate Bill No. 2 (such statute, together with any regulations contemplated or issued thereunder, SBx 1-2), which, among other things, (i) authorizes the establishment of a maximum gross gasoline refining margin (maximum margin) and the imposition of a financial penalty for profits above the maximum margin, (ii) significantly expands reporting obligations relating to the maintenance and business of our California refineries, which includes reporting requirements to the California Energy Commission (CEC) for all participants in the petroleum industry supply chain in California, (iii) creates the Division of Petroleum Market Oversight within the CEC to analyze the data provided under SBx 1-2, and (iv) authorizes the CEC to regulate the timing and other aspects of refinery turnaround and other maintenance activities in certain instances. While the provisions of SBx 1-2 are expected to become effective June 26, 2023, and the CEC has not yet undertaken rulemaking with respect to SBx 1-2, the potential implementation of a financial penalty or any restrictions or delays on our ability to undertake turnaround or other maintenance activities creates uncertainty due to the potential adverse effects on our refining, marketing and midstream operations in California, which may be material to our results of operations, financial condition, profitability and cash flows.

We anticipate that other jurisdictions may contemplate similarly focused legislation or actions. The ultimate timing and impacts of SBx 1-2 and any other similarly focused legislation or actions are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, legal challenges, and potential changes in law, regulation, or policy, and it is not currently possible to predict the ultimate effects of these matters and developments, but they may be significant.For example, adverse effects on the financial performance of our operations in the state of California or the useful lives of the assets related to such operations may result in the recognition of material asset impairment charges and asset retirement obligations.

Furthermore, the U.S. government can prevent or restrict us from doing business in foreign countries and from doing business with entities affiliated with foreign governments, which can include state oil companies and U.S. subsidiaries of those companies. The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security matters. The effect of any such OFAC sanctions could disrupt transactions with or operations involving entities affiliated with sanctioned countries, and could limit our ability to obtain optimum crude slates and other refinery feedstocks and effectively distribute refined petroleum products.

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Other political and economic risks include global pandemics; financial market turmoil; economic volatility and global economic slowdown; currency exchange rate fluctuations; short-term and long-term inflationary pressures; import or export restrictions and changes in trade regulations; supply chain disruptions; acts of terrorism, war, civil unrest and other political risks; limitations in the availability of labor to develop, staff and manage operations; and potentially adverse tax developments. If any of these events occur, our businesses and results of operations may be adversely affected.

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

Issuer Purchases of Equity Securities

In March 2020, we announced that we had temporarily suspended our share repurchases. As of March 31, 2022, we had $2,514 million remaining on our existing share repurchase authorization, which has no expiration date. In April 2022, we announced plans to resume our share repurchase program in the second quarter of 2022. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans.


					Millions of Dollars
Period	Total Number of Shares Purchased*	Average Price Paid per Share**		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs***	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2023	2,318,765	$	105.43	2,318,765	$	5,730
February 1-28, 2023	2,440,300	103.12		2,440,300	5,478
March 1-31, 2023	3,115,136	99.80		3,115,136	5,167
Total	7,874,201	$	102.48	7,874,201
* Includes repurchase of shares of common stock from company employees in connection with the company’s broad-based employee incentive plans, when applicable.
** Average price paid per share includes excise tax.
*** Since July 2012, our Board of Directors has authorized an aggregate of $20 billion of repurchases of our outstanding common stock. Repurchases pursuant to the current authorizations do not have an expiration date. 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.

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Item 6. EXHIBITS

Exhibit
Number

~~Exhibit Description~~

22*

~~List of Guarantor Subsidiaries~~.

~~31.1~~*

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

~~31.2~~*

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

32*

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

101.INS*

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

101.SCH*

~~Inline XBRL Schema Document.~~

101.CAL*

~~Inline XBRL Calculation Linkbase Document.~~

101.LAB*

~~Inline XBRL Labels Linkbase Document.~~

101.PRE*

~~Inline XBRL Presentation Linkbase Document.~~

101.DEF*

~~Inline XBRL Definition Linkbase Document.~~

104*

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

* Filed herewith.

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

Exhibit Number

Filing Date

SEC File No.

4.1

Form of the terms of the 2027 Notes, including the form of the 2027 Note.

8-K

4.2

03/29/2023

001-35349

4.2

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

8-K

4.3

03/29/2023

001-35349

10.1

Credit Agreement dated as of March 27, 2023, among Phillips 66 Company, Phillips 66, as guarantor, the lenders party thereto, and Mizuho Bank, Ltd., as administrative agent.

8-K

10.1

03/29/2023

001-35349

10.2 *

Form of Stock Option Award Agreement under the 2022 Omnibus Stock and Performance Incentive Plan of Phillips 66.**

10.3 *

Form of Restricted Stock or Restricted Stock Unit Award Agreement under the 2022 Omnibus Stock and Performance Incentive Plan of Phillips 66.**

10.4*

Form of Performance Share Unit Award Agreement under the 2022 Omnibus Stock and Performance Incentive Plan of Phillips 66.**

10.5*

Letter Agreement with Vanessa L. Allen Sutherland, dated October 9, 2021.**

22*

List of Guarantor Subsidiaries.

31.1*

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

31.2*

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

32*

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

101.INS*

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

101.SCH*

Inline XBRL Schema Document.

101.CAL*

Inline XBRL Calculation Linkbase Document.

101.LAB*

Inline XBRL Labels Linkbase Document.

101.PRE*

Inline XBRL Presentation Linkbase Document.

101.DEF*

Inline XBRL Definition Linkbase Document.

104*

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

* Filed herewith.

** Management contracts and compensatory plans or arrangements.

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SIGNATURES

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


						PHILLIPS 66

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

Date: ~~April 29, 2022~~May 4, 2023

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			Page
Part I – Financial Information

Item 1. Financial Statements
Consolidated Statement of ~~Operations~~Income			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			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2836

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5565

Item 4. Controls and Procedures			5565

Part II – Other Information

Item 1. Legal Proceedings			5666

Item 1A. Risk Factors			5667

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5668

Item 6. Exhibits			5769

Signatures			5870