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What changed in Phillips 66's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Phillips 66's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+375 added−383 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Phillips 66's 2023 10-K

375 paragraphs added · 383 removed · 286 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

87 edited+27 added−14 removed84 unchanged
Biggest changeStrategic Performance and Future Growth Risks Large capital projects can take many years to complete, and market conditions could deteriorate significantly between the project approval date and the project startup date, negatively impacting expected project returns. Our basis for approving a large-scale capital project is the expectation that it will deliver an acceptable rate of return on the capital invested.
Biggest changeAny of these or other competitive forces could materially adversely affect our results of operations, financial position or cash flows, as well as our return on capital employed. 24 Table of Contents Index to Financial Statements Strategic Performance and Future Growth Risks Large capital-intensive projects can take many years to complete, and the political and regulatory environments or market conditions could deteriorate significantly between the project approval date and the project startup date, negatively impacting expected project returns.
Our Chemicals segment uses feedstocks that are derivatively produced in the refining of crude oil and the processing of natural gas, and those feedstock prices can fluctuate widely for a variety of reasons, including changes in worldwide energy prices and the supply and availability of the feedstocks.
Our Chemicals segment uses feedstocks that are derivatively produced in the processing of natural gas and refining of crude oil, and those feedstock prices can fluctuate widely for a variety of reasons, including changes in worldwide energy prices and the supply and availability of the feedstocks.
Increased regulation of the fossil fuel industry, particularly with respect to hydraulic fracturing, could result in reductions or delays in U.S. production of crude oil and natural gas, which could adversely impact our results of operations. Most of the crude oil and gas production of our Midstream segment’s customers is being produced from unconventional oil shale reservoirs.
Increased regulation of the fossil fuel industry, particularly with respect to hydraulic fracturing, could result in reductions or delays in U.S. production of crude oil and natural gas, which could adversely impact our results of operations. Most of the crude oil and natural gas production of our Midstream segment’s customers is being produced from unconventional oil shale reservoirs.
In connection with our separation from ConocoPhillips, we entered into an Indemnification and Release Agreement and certain other agreements pursuant to which ConocoPhillips agreed to indemnify us for certain liabilities, and we agreed to indemnify ConocoPhillips for certain liabilities. Indemnities that we may be required to provide are not subject to any cap and may be significant.
In connection with our separation from ConocoPhillips in 2012, we entered into an Indemnification and Release Agreement and certain other agreements pursuant to which ConocoPhillips agreed to indemnify us for certain liabilities, and we agreed to indemnify ConocoPhillips for certain liabilities. Indemnities that we may be required to provide are not subject to any cap and may be significant.
Government efforts to steer the public toward non-petroleum-based fuel dependent modes of transportation may foster a negative perception toward transportation fuels or increase costs of our products, thus affecting the public’s attitude toward our major product.
Government efforts to steer the public toward non-petroleum-based fuel dependent modes of transportation may foster a negative perception toward transportation fuels or increase costs of our products, thus affecting the public’s attitude toward our major products.
For example, Phillips 66’s agreement with Chevron Corporation (Chevron) regarding CPChem permits Chevron to buy Phillips 66’s 50% interest in CPChem for fair market value if Phillips 66 experiences a change in control or if both Standard & Poor’s Financial Services LLC and Moody’s Investors Service, Inc. lower its credit ratings below investment grade and the credit rating from either rating agency remains below investment grade for 365 days thereafter, with fair market value determined by agreement or by nationally recognized investment banks.
For example, Phillips 66’s agreement with Chevron Corporation (Chevron) regarding CPChem permits Chevron to buy Phillips 66’s 50% interest in CPChem for fair market value if Phillips 66 experiences a change in control or if both Standard & Poor’s Financial Services LLC and Moody’s Investors Service, Inc. lower their credit ratings below investment grade and the credit rating from either rating agency remains below investment grade for 365 days thereafter, with fair market value determined by agreement or by nationally recognized investment banks.
Factors that will influence the impact on our business and operations include the duration and extent of such events, including the virulence of the infection, the timing of vaccine development and distribution across the world and its impact on economic recovery, the extent of imposed or recommended containment and mitigation measures and their impact on our operations, and the general economic consequences of public health crises, epidemics and pandemics, such as the COVID-19 pandemic.
Factors that will influence the impact on our business and operations include the duration and extent of such events, including the virulence of the infection, the timing of vaccine development and distribution across the world and its impact on economic recovery, the extent of imposed or recommended containment and mitigation measures, including travel restrictions, and their impact on our operations, and the general economic consequences of public health crises, epidemics and pandemics, such as the COVID-19 pandemic.
Any new opportunities also may depend on the viability of new assets or businesses that are contingent on public policy mechanisms including investment tax credits, subsidies, renewable portfolio standards and carbon trading plans. These mechanisms have been implemented at the state and federal levels to support the development of renewable energy, demand-side, and other clean infrastructure technologies.
Any new opportunities also may depend on the viability of new assets or businesses that are contingent on public policy mechanisms including investment tax credits, subsidies, renewable portfolio standards and carbon trading plans. These mechanisms have been implemented at the state and federal levels to support the development of renewable energy and other clean infrastructure technologies.
Certain of our plans are based upon the assumption that societal sentiment will continue to enable, and existing regulations will remain in place to allow for, the future development, transportation and use of carbon-based fuels. A portion of our growth strategy is dependent on our and our joint ventures’ ability to capture growth opportunities in the Midstream and Chemicals segments.
Certain of our plans are based upon the assumption that societal sentiment will continue to enable, and existing regulations will remain in place to allow for, the future development, transportation and use of petroleum-based fuels. A portion of our growth strategy is dependent on our and our joint ventures’ ability to capture growth opportunities in the Midstream and Chemicals segments.
Policy decisions relating to the production, refining, transportation, marketing and use of carbon-based fuels are subject to political pressures and the influence and protests of environmental and other special interest groups. For example, the construction or expansion of pipelines can involve numerous regulatory, permitting, environmental, political, and legal uncertainties, many of which are beyond our control.
Regulatory policy decisions relating to the production, refining, transportation, marketing and use of petroleum-based fuels are subject to political pressures and the influence and protests of environmental and other special interest groups. For example, the construction or expansion of pipelines can involve numerous regulatory, permitting, environmental, political, and legal uncertainties, many of which are beyond our control.
Advanced technology and increased use of vehicles that do not use petroleum-based transportation fuels or that are powered by hybrid engines would reduce demand for motor fuel. We may also incur increased production costs, which we may not be able to pass along to our customers.
Advanced technology and increased use of vehicles that do not use petroleum-based transportation fuels or that are powered by hybrid engines would reduce demand for the motor fuel we produce. We may also incur increased production costs, which we may not be able to pass along to our customers.
Damages resulting from an incident involving any of our assets or operations may result in our being named as a defendant in one or more lawsuits asserting potentially substantial claims or in our being assessed potentially substantial fines by governmental authorities.
Damages resulting from an incident involving any of our assets or operations may result in our being named as a defendant in one or more lawsuits asserting potentially substantial claims or in our being assessed potentially substantial remediation fines or penalties by governmental authorities.
In addition, 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.
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.
Plans we or our joint ventures may have to expand or construct assets or develop new technologies, and plans for our future performance are subject to risks associated with societal and political pressures and other forms of opposition to the future development, transportation and use of carbon-based fuels. Such risks could adversely impact our results of operations.
Plans we or our joint ventures may have to expand or construct assets or develop new technologies, and plans for our future performance are subject to risks associated with societal and political pressures and other forms of opposition to the future development, transportation and use of petroleum-based fuels. Such risks could adversely impact our business and results of operations.
If we are unable to meet the sustainability standards set by these investors, we may lose investors, our stock price may be negatively impacted, our access to capital markets and lenders may be curtailed, and our reputation may be negatively affected. Our efforts to accurately report on sustainability-related issues expose us to operational, reputational, financial, legal, and other risks.
If we are unable to meet the E&S standards set by these investors, we may lose investors, our stock price may be negatively impacted, our access to capital markets and lenders may be curtailed, and our reputation may be negatively affected. Our efforts to accurately report on E&S-related issues expose us to operational, reputational, financial, legal, and other risks.
While we believe these lawsuits are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against them for lacking factual and legal merit, the ultimate outcome and impact to us of any such litigation cannot be predicted with certainty, and we could incur substantial legal costs associated with defending these and similar lawsuits in the future.
While we believe these lawsuits are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against them, the ultimate outcome and impact to us of any such litigation cannot be predicted with certainty, and we could incur substantial legal costs associated with defending these and similar lawsuits in the future.
Although the United States had previously withdrawn from the Paris Agreement, it has since taken the steps necessary to rejoin, which was effective in February 2021. The U.S. climate change strategy and the impact to our industry and operations due to GHG regulation is unknown at this time.
Although the United States had previously withdrawn from the Paris Agreement, it has since taken the steps necessary to rejoin, which was effective in February 2021. The future of the U.S.’s climate change strategy and the impact to our industry and operations due to further GHG regulation is unknown at this time.
Our ability to obtain credit and capital depends in large measure on the state of the credit and capital markets, which is beyond our control.
Our ability to obtain credit and capital depends in large measure on the state of the credit and capital markets, which is subject to factors beyond our control.
Changes in prices that occur between the time we purchase feedstocks or products and when we sell the refined petroleum products could have a significant effect on our financial results. The price of crude oil also influences prices for petrochemical and plastics products and the feedstocks used to manufacture the products.
Changes in prices that occur between the time we purchase feedstocks or products and when we sell the refined petroleum products could have a significant effect on our financial results. The price of natural gas and crude oil also influences prices for the petrochemical and plastics products we produce and the feedstocks used to manufacture those products.
This data is subject to governmental regulation at the federal, state, international, national, provincial and local levels in many areas of our business, including data privacy and security laws such as the European Union (EU) General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
This data is subject to governmental regulation at the federal, state, international, national, provincial and local levels in many areas of our business, including data privacy and security laws such as the European Union (EU) and United Kingdom (UK) versions of the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
There have been efforts in recent years aimed at the investment community, including investment advisors, sovereign wealth funds, public pension funds, universities, and other groups, to promote the divestment of energy companies, as well as to pressure lenders and other financial services companies to limit or curtail activities with energy companies.
There have been efforts in recent years aimed at the investment community, including investment advisors, sovereign wealth funds, public pension funds, universities, and other groups, to promote the divestment of fossil fuel companies, as well as to pressure lenders, insurers, and other financial services companies to limit or curtail activities with fossil fuel companies.
Each of these risks could negatively affect our business, results of operations and financial condition. 34 Table of Contents Index to Financial Statements
Each of these risks could negatively affect our business, results of operations and financial condition. 35 Table of Contents Index to Financial Statements
To the extent any public health crisis, epidemic or pandemic adversely affected or affects our business and financial results, it may also have the effect of heightening many of the other risks that could adversely affect our business described below, such as risks associated with industry capacity utilization, volatility in the price and availability of raw materials, material adverse changes in customer relationships including any failure of a customer to perform its obligations under agreements with us, and risks associated with worldwide or regional economic conditions.
To the extent any public health crisis, epidemic or pandemic adversely affected or affects our business and financial results, it may also have the effect of heightening many of the other risks that could adversely affect our business described in this Annual Report, such as risks associated with industry capacity utilization, volatility in the price and availability of raw materials, supply chain interruptions, material adverse changes in customer relationships including any failure of a customer to perform its obligations under agreements with us, and risks associated with worldwide or regional economic conditions.
Any such breaches could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
Any such incidents could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
Any such access, disclosure or other loss of information could result in one or more of the following outcomes: (i) a loss of intellectual property, proprietary information, or employee, customer or vendor data; (ii) public disclosure of sensitive information; (iii) increased costs to prevent, respond to, or mitigate cybersecurity events, such as deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants; (iv) systems interruption; (v) disruption of our business operations; (vi) remediation costs for repairs of system damage; (vii) reputational damage that adversely affects customer or investor confidence; and (viii) damage to our competitiveness, stock price, and long-term stockholder value.
Any such unauthorized access, disclosure or other loss of information could result in one or more of the following outcomes: (i) unauthorized access to or a loss or misuse of intellectual property, proprietary information, or employee, customer or vendor data; (ii) public disclosure of sensitive information; (iii) increased costs to prevent, respond to, or mitigate cybersecurity events, such as deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants; (iv) systems interruption; (v) disruption of our business operations; (vi) remediation costs for repairs of system damage, or regulatory fines or penalties; (vii) reputational damage that adversely affects customer or investor confidence; (viii) exposure to legal liability; and (ix) damage to our competitiveness, stock price, and long-term stockholder value.
Delays or cost increases related to capital spending programs or the inability to complete growth projects could negatively impact our reputation, results of operations, cash flows and our return on capital employed. In addition, our Energy Research & Innovation organization works to develop new technologies focused on advancing our business, including renewable fuels research and energy transition programs.
Delays or cost increases related to capital spending programs or the inability to complete growth projects could negatively impact our reputation, results of operations, cash flows and our return on capital employed. Our Energy Research & Innovation organization works to develop new technologies and solutions focused on advancing our business units, including renewable and sustainable fuels research.
Examples of potential physical risks include floods, hurricane-force winds, wildfires, freezing temperatures and snowstorms, as well as rising sea levels at our coastal facilities. We have incurred, and will continue to incur, costs to protect our assets from physical risks and to employ processes, to the extent available, to mitigate such risks.
Examples of potential physical risks include floods, hurricane-force winds, severe storms, droughts, heat waves, earthquakes, wildfires, freezing temperatures and snowstorms, as well as rising sea levels at our coastal facilities. We have incurred, and will continue to incur, costs to protect our assets from physical risks and to employ processes, to the extent available, to mitigate such risks.
Cybersecurity and Data Privacy Risks Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
Cybersecurity and Data Privacy Risks Cybersecurity incidents and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
As a result of these factors, a downgrade of credit ratings could have a material adverse impact on Phillips 66’s future operations and financial position. The level of returns on pension and postretirement plan assets and the actuarial assumptions used for valuation purposes could affect our earnings and cash flows in future periods.
As a result of these factors, a downgrade of credit ratings could have a material adverse impact on Phillips 66’s future operations and financial position. 34 Table of Contents Index to Financial Statements The level of returns on pension and postretirement plan assets and the actuarial assumptions used for valuation purposes could affect our earnings and cash flows in future periods.
We do not produce crude oil and must purchase all of the crude we process.
We do not produce crude oil and other feedstocks and must purchase all of the feedstocks we process.
We have systems in place to manage potential acute physical risks, including those that may be caused by climate change, but if any such events were to occur, they could have an adverse effect on our assets and operations.
We have systems in place to manage potential acute physical risks, including those that may be caused by climate change, but such events could have an adverse effect on our assets and operations.
If we are unable to identify and consummate acquisitions and investments, our ability to execute a portion of our growth strategy and meet our environmental goals may be impeded. 26 Table of Contents Index to Financial Statements Regulatory and Environmental, Climate and Weather Risks Climate change and severe weather may adversely affect our and our joint ventures’ facilities and ongoing operations.
If we are unable to identify and consummate acquisitions and investments, our ability to execute a portion of our growth strategy and meet our environmental goals may be impeded. Regulatory and Environmental, Climate and Weather Risks Climate change and severe weather may adversely affect our and our joint ventures’ facilities and ongoing operations.
To the extent we face increased regulatory requirements, we may be required to expend significant additional resources to meet such requirements. Increasing regulatory focus on privacy and cybersecurity issues and expanding laws could expose us to increased liability, subject us to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.
To the extent we face increased regulatory requirements, we may be required to expend significant additional resources to meet such requirements. 31 Table of Contents Index to Financial Statements Increasing regulatory focus on privacy and cybersecurity issues and expanding laws could expose us to increased liability, subject us to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.
In addition to our own operational risks, we could experience interruptions of supply or increases in costs to deliver refined petroleum products to market if the ability of the pipelines or vessels to transport crude oil or refined petroleum products is disrupted because of weather events, accidents, governmental regulations or third-party actions.
In addition to our own operational risks, we could experience interruptions of supply or increases in costs to deliver refined petroleum products to market if the ability of the pipelines or vessels to transport crude oil or refined petroleum products is disrupted because of weather events, accidents, governmental regulations, public health crises, armed hostilities, or third-party actions, including protests.
Standards for tracking and reporting on sustainability-related matters, including climate-related matters, have not been harmonized and continue to evolve.
Standards for tracking and reporting on E&S-related matters, including climate-related matters, have not been harmonized and continue to evolve.
A prolonged disruption of the ability of a pipeline or vessel to transport crude oil, NGL or refined petroleum products to or from one or more of our refineries or other facilities could have a material adverse effect on our business, financial condition, results of operations and cash flows.
A prolonged disruption of the ability of a pipeline or vessel to transport crude oil, NGL or refined petroleum products to or from one or more of our refineries or other facilities could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our investments in joint ventures decrease our ability to manage risk.
Societal, technological, political and scientific developments around emissions and fuel efficiency may decrease demand for transportation fuels. Developments aimed at reducing GHG emissions may decrease the demand or increase the cost for our transportation fuels. Societal attitudes toward these products and their relationship to the environment may significantly affect our effectiveness in marketing our products.
Developments aimed at reducing GHG emissions may decrease the demand or increase the cost for our transportation fuels. Societal attitudes toward these products and their relationship to the environment may significantly affect our effectiveness in marketing our products.
If ballot initiatives, local, state, or national restrictions or prohibitions are adopted and result in more stringent limitations on the production and development of crude oil and natural gas, producers may experience delays or curtailment in the permitting or pursuit of exploration, development or production activities.
If ballot initiatives, local, state, or national restrictions or prohibitions are adopted and result in more stringent limitations on the production and development of crude oil and natural gas, we may incur significant costs to comply with the requirements, and producers may experience delays or curtailment in the permitting or pursuit of exploration, development or production activities.
In addition, some communities have adopted measures to ban hydraulic fracturing in their communities. 28 Table of Contents Index to Financial Statements Also, certain interest groups have also proposed ballot initiatives and constitutional amendments designed to restrict crude oil and natural gas development generally.
In addition, some communities have adopted measures to ban hydraulic fracturing in their communities. Also, certain interest groups have also proposed ballot initiatives and constitutional amendments designed to restrict crude oil and natural gas development generally.
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.
Other political and economic risks include global health crises; financial market turmoil; economic volatility and global economic slowdown; currency exchange rate fluctuations; short-term and long-term inflationary pressures; rising or prolonged periods of high interest rates; import or export restrictions and changes in trade regulations; supply chain disruptions; civil unrest and other political risks; limitations in the availability of labor to develop, staff and manage operations; and potentially adverse tax developments.
Finally, depending on the severity and duration of any extreme weather events or climate conditions, our operations may need to be modified and material costs incurred, which could materially and adversely affect our business, financial condition and results of operations.
We could also incur substantial costs to prevent or repair damage to these facilities. Finally, depending on the severity and duration of any extreme weather events or climate conditions, our operations may need to be modified and material costs incurred, which could materially and adversely affect our business, financial condition and results of operations.
Sustained or prolonged declines in commodity prices and margins for our products may adversely affect our results of operations, liquidity, access to the capital markets, and our ability to fund our capital priorities, including share repurchases and dividends. Market conditions, including commodity prices, may impact the earnings, financial condition and cash flows of our Midstream business.
Sustained or prolonged declines in commodity prices and margins for our products may adversely affect our results of operations, liquidity, access to the capital markets, and our ability to fund our capital priorities, including share repurchases and dividends. 21 Table of Contents Index to Financial Statements Market conditions, including volatile commodity prices and demand for crude oil, natural gas and NGL, impact the earnings, financial condition and cash flows of our Midstream business.
If any of these events had previously occurred or occurs in the future in connection with any of our refineries, pipelines or refined petroleum products terminals, or in connection with any facilities that receive our wastes or byproducts for treatment or disposal, other than events for which we are indemnified, we could be liable for all costs and penalties associated with their remediation under federal, state, local and international environmental laws or common law, and could be liable for property damage to third parties caused by contamination from releases and spills.
If any of these events had previously occurred or occurs in the future in connection with any of our refineries, pipelines or refined petroleum products terminals, or in connection with any facilities that receive our wastes or byproducts for treatment or disposal, other than events for which we are indemnified, we could be liable for all costs and penalties associated with their remediation under federal, state, local and international environmental laws or at common law, and could be liable for property damage to third parties caused by contamination from releases and spills. 27 Table of Contents Index to Financial Statements We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations.
If sufficient RINs are unavailable for purchase, if we have to pay a significantly higher price for RINs, if we purchase RINs that are ultimately determined to be invalid, or if we are otherwise unable to meet the EPA’s RVO requirements, including because the EPA mandates a blending quantity of renewable fuel that exceeds the amount that is commercially feasible to blend into motor fuel (a situation commonly referred to as “the blend wall”), our operations could be materially adversely impacted, up to and including a reduction in produced motor fuel for sale in the United States.
If sufficient RINs are unavailable for purchase, if we have to pay a significantly higher price for RINs, if we purchase RINs that are ultimately determined to be invalid, or if we are otherwise unable to meet the EPA’s RVO requirements, including because the EPA mandates a blending quantity of renewable fuel that exceeds the amount that is commercially feasible to blend into motor fuel (a situation commonly referred to as “the blend wall”), our operations could be materially adversely impacted, up to and including a reduction in produced motor fuel for sale in the United States. 29 Table of Contents Index to Financial Statements Societal, technological, political and scientific developments around emissions and fuel efficiency may decrease demand for traditional transportation fuels.
Additionally, the level of production from natural gas wells will naturally decline over time. In order to maintain or increase throughput levels on our gathering and transportation pipeline systems and NGL pipelines and the asset utilization rates at our natural gas processing plants, we must continually obtain new supplies.
In order to maintain or increase throughput levels on our natural gas gathering and transportation pipeline systems and NGL pipelines and the asset utilization rates at our natural gas processing plants, we must continually obtain new supplies.
Additionally, governments and private parties are also increasingly filing lawsuits or initiating regulatory action based on allegations that certain public statements regarding climate change and other Environmental, Social and Corporate Governance (ESG) related matters and practices by companies are false and misleading “greenwashing” that violate deceptive trade practices and consumer protection statutes.
Additionally, governments and private parties are also increasingly filing lawsuits or initiating regulatory action based on allegations that certain public statements regarding climate change and other ESG-related matters and practices by companies are false or misleading “greenwashing” that violate deceptive trade practices and consumer protection statutes. Such claims are included in lawsuits filed against energy companies, including Phillips 66.
During this multiyear period, market conditions can change from those we forecast, and these changes could be significant. Accordingly, we may not be able to realize our expected returns from a large investment in a capital project, and this could negatively impact our results of operations, cash flows and our return on capital employed.
Accordingly, we may not be able to realize our expected returns from a large investment in a capital project, and this could negatively impact our results of operations, cash flows and our return on capital employed.
These laws and regulations continue to increase in both number and complexity and affect our operations with respect to, among other things: • The discharge of pollutants into the environment. • Emissions into the atmosphere, such as nitrogen oxides, sulfur dioxide and mercury emissions, and GHG emissions, as they are, or may become, regulated. • The quantity of renewable fuels that must be blended into motor fuels. • The handling, use, storage, transportation, disposal and cleanup of hazardous materials and hazardous and nonhazardous wastes. • The dismantlement and abandonment of our facilities and restoration of our properties at the end of their useful lives. 27 Table of Contents Index to Financial Statements To the extent these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, our business, financial condition, results of operations and cash flows in future periods could be materially adversely affected.
These laws and regulations continue to increase in both number and complexity and affect our operations with respect to, among other things: • The discharge of pollutants into the environment. • Emissions into the atmosphere, such as nitrogen oxides, sulfur dioxide and mercury emissions, and GHG emissions, as they are, or may become, regulated. • The quantity of renewable fuels that must be blended into motor fuels. • The handling, use, storage, transportation, disposal and cleanup of hazardous materials and hazardous and nonhazardous wastes. • The dismantlement and abandonment of our facilities and restoration of our properties at the end of their useful lives.
Investor sentiment towards climate change, fossil fuels and sustainability could adversely affect our business, the market price for our common stock and our access to and cost of capital.
Negative sentiment towards fossil fuels and increased attention to environmental and social matters, including climate change, could adversely affect our business, the market price for our common stock and our access to and cost of capital.
Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data as well as requiring disclosures about these practices.
Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data as well as requiring disclosures about these practices. Existing and potential future data privacy laws pose increasingly complex compliance challenges and potentially elevate our costs.
From time to time, we may need to supplement cash generated from operations with proceeds from financing activities. Uncertainty and illiquidity in financial markets may materially impact the ability of the participating financial institutions to fund their commitments to us under our liquidity facilities that are supported by a broad syndicate of financial institutions.
Uncertainty and illiquidity in financial markets may materially impact the ability of the participating financial institutions to fund their commitments to us under our liquidity facilities that are supported by a broad syndicate of financial institutions.
We may not be able to effectively identify, whether through acquisition, investment or development, lower-carbon opportunities on favorable terms, or at all, and failure to do so could limit our growth, our ability to participate in the energy transition, and our ability to meet our environmental goals and targets.
If any of these events occur, our businesses and results of operations may be adversely affected. 26 Table of Contents Index to Financial Statements We may not be able to effectively identify, whether through acquisition, investment or development, lower-carbon opportunities on favorable terms, or at all, and failure to do so could limit our growth, our ability to participate in the energy transition, and our ability to meet our environmental goals and targets.
Our information technology and infrastructure, or information technology and infrastructure of our third-party service providers (e.g., cloud-based service providers), may be vulnerable to attacks by malicious actors or breached due to human error, malfeasance or other disruptions, including ransomware and other malware, phishing and social engineering schemes.
Our information technology and infrastructure, or information technology and infrastructure of our third-party service providers (e.g., cloud-based service providers), may be vulnerable to attacks by malicious actors or breached due to human error, malfeasance or other disruptions, including ransomware and other malware, phishing and social engineering schemes, malicious software, data privacy breaches by employees, insiders or others with authorized access, attempts to gain unauthorized access to our data and systems; and other cybersecurity incidents.
Our financial results are largely affected by the relationship, or margin, between the prices at which we sell refined petroleum, petrochemical and plastics products and the prices for crude oil and other feedstocks used in manufacturing these products. Historically, margins have been volatile, and we expect they will continue to be volatile in the future.
Similar to other companies in the industry in which we operate, our financial results are largely affected by the relationship, or margin, between the prices at which we sell refined petroleum, petrochemical and plastics products and the prices for crude oil and other feedstocks used in manufacturing these products.
Examples of such factors include evolving government regulation, the pace of changes in technology, the successful development and deployment of existing or new technologies and business solutions on a commercial scale, competition from third parties in developing new technologies and the availability, timing and cost of equipment. 25 Table of Contents Index to Financial Statements Political and economic developments could affect our operations and materially reduce our profitability and cash flows.
Examples of such factors include evolving government regulation, the pace of changes in technology, the successful development and deployment of existing or new technologies and business solutions on a commercial scale, competition from third parties in developing new technologies and the availability, timing and cost of equipment.
Any such actions may affect many aspects of our operations, including: • 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.
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 established maximum margins. • Limiting or prohibiting our ability to undertake turnaround or other maintenance activities at our refineries. 25 Table of Contents Index to Financial Statements • 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.
As a result, we may face increasing pressure regarding our sustainability disclosures and practices. Additionally, members of the investment community may screen companies such as ours for sustainability performance before investing in our stock or participating in our financing activities.
Additionally, members of the investment community may screen companies such as ours for E&S performance before investing in our stock or participating in our financing activities.
The GDPR applies to activities related to personal data that are conducted from an establishment in the EU. As interpretation and enforcement of the GDPR evolves, it creates a range of new compliance obligations, which could cause us to incur additional costs.
The GDPR applies to the transfer and processing of personal data of those who live in the EU or UK, respectively. As interpretation and enforcement of the GDPR evolves, it creates a range of new compliance obligations, which could cause us to incur additional costs.
Processes and controls for reporting on sustainability matters are subject to evolving and disparate standards of identification, measurement, and reporting on such metrics, including any climate change and sustainability-related public company disclosure requirements adopted by the SEC, and such standards may change over time, which could result in significant revisions to our current sustainability practices and disclosures.
Processes and controls for reporting on E&S matters are subject to evolving and disparate standards of identification, measurement, and reporting on such metrics, including any climate change and E&S-related public company disclosure requirements adopted by the SEC, and such standards may change over time, which could result in significant revisions to our current E&S practices and disclosures. 33 Table of Contents Index to Financial Statements A failure to achieve our published GHG emissions intensity reduction goals and other E&S targets we may set in the future could negatively impact our business.
Some of our competitors also have materially greater financial and other resources than we have. Such competitors have a greater ability to bear the economic risks inherent in all aspects of our business.
Some of our competitors also have materially greater financial and other resources than we have. Such competitors have a greater ability to bear the economic risks inherent in all aspects of our business. In addition, we compete with other industries that provide alternative means to satisfy the energy and fuel requirements of our industrial, commercial and individual customers.
Existing data privacy laws, or any laws that may become applicable to our business, pose increasingly complex compliance challenges and potentially elevate our costs. Any failure by us to comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties and liabilities for us.
Any failure by us to comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties and liabilities for us.
Although we take precautions to ensure and enhance the safety of our operations and minimize the risk of disruptions, our operations are also subject to hazards inherent in chemicals, refining and midstream businesses, such as explosions, fires, refinery or pipeline releases or other incidents, power outages, labor disputes, restrictive governmental regulation or other natural or man-made disasters, such as geopolitical conflicts and acts of terrorism, including cyber intrusion.
Additionally, the availability of natural gas and electricity necessary to operate our assets can be affected by weather, pipeline interruptions, grid outages, and logistics disruptions, which may also cause us to temporarily curtail or shut down operations. 22 Table of Contents Index to Financial Statements Although we take precautions to ensure and enhance the safety of our operations and minimize the risk of disruptions, our operations are subject to the hazards inherent in chemicals, refining and midstream businesses, such as explosions, fires, refinery, processing facility or pipeline releases or other incidents, power outages, labor disputes, global health crises, restrictive governmental regulation or other natural or man-made disasters, such as geopolitical conflicts and acts of terrorism, including cyber intrusion.
Even if a virus or other illness does not spread significantly, the perceived risk of infection or health risk may result in reduced demand for our products and materially affect our business.
We may be impacted again in the future depending on the duration and scope of any future health crises, epidemics, or pandemics. 23 Table of Contents Index to Financial Statements Even if a virus or other illness does not spread significantly, the perceived risk of infection or health risk may result in reduced demand for our products and materially affect our business.
We operate facilities located in coastal regions of the United States, which have been impacted by hurricanes that have required us to temporarily, or even permanently, shut down operations at those sites. For example, due to significant damages from Hurricane Ida, we shut down the Alliance Refinery.
We operate facilities located in coastal regions of the United States, which have been impacted by hurricanes that have required us to temporarily, or even permanently, shut down operations at those sites. CPChem also operates facilities on the Gulf Coast and has had to temporarily shut down sites in the past as a result of hurricanes.
Uninsured or underinsured liabilities arising from operating hazards, including but not limited to, explosions, fires, refinery or pipeline releases or other incidents involving our assets or operations, including weather events, could reduce the funds available to us for capital and investment spending and could have a material adverse effect on our business, financial condition, results of operations and cash flows. 33 Table of Contents Index to Financial Statements Deterioration in our credit profile could increase our costs of borrowing money, limit our access to the capital markets and commercial credit, and could trigger co-venturer rights under joint venture arrangements.
We rely on existing liquidity, financial resources and borrowing capacity to meet short-term obligations that would result from uninsured or underinsured liabilities arising from operating hazards, including but not limited to, explosions, fires, refinery or pipeline releases or other incidents involving our assets or operations, including weather events, which could reduce the funds available to us for capital and investment spending and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We often utilize the services of third parties to transport crude oil, NGL and refined petroleum products to and from our facilities.
We are subject to interruptions of supply and offtake, as well as increased costs, as a result of our reliance on third-party transportation of crude oil, NGL and refined petroleum products. We often utilize the services of third parties to transport crude oil, NGL and refined petroleum products to and from our facilities.
The lawsuits seek damages allegedly associated with climate change, and the plaintiffs are seeking unspecified damages and abatement under various tort theories. Similar lawsuits may be filed in other jurisdictions.
Additionally, cities, counties, and other governmental entities in several states in the U.S. began filing lawsuits against energy companies in 2017, including Phillips 66, seeking damages allegedly associated with climate change, and the plaintiffs are seeking unspecified damages and abatement under various tort theories. Similar lawsuits may be filed in other jurisdictions.
International climate change-related efforts, such as the 2015 United Nations Conference on Climate Change, which led to the creation of the Paris Agreement, may impact the regulatory framework of states whose policies directly influence our present and future operations.
Additional stricter regulatory measures and investor pressure can be expected in the future and any of these changes may have a material adverse impact on our business or financial condition. 28 Table of Contents Index to Financial Statements International climate change-related efforts, such as the 2015 United Nations Conference on Climate Change, which led to the creation of the Paris Agreement, and the 2023 United Nations Climate Change Conference, may impact the regulatory framework of states whose policies directly influence our present and future operations.
Should any of these risks materialize at any of our equity affiliates, it could have a material adverse effect on the business and financial condition of the equity affiliate and negatively impact their ability to make future distributions to us. 23 Table of Contents Index to Financial Statements We are subject to interruptions of supply and offtake, as well as increased costs, as a result of our reliance on third-party transportation of crude oil, NGL and refined petroleum products.
Should any of these risks materialize at any of our equity affiliates, it could have a material adverse effect on the business and financial condition of the equity affiliate and negatively impact their ability to make future distributions to us.
The costs of feedstocks and the prices at which we can ultimately sell our products depend on numerous factors beyond our control, including regional and global supply and demand, which are subject to, among other things, production levels, levels of refined petroleum product inventories, productivity and growth of economies, and governmental regulation.
The cost of feedstocks and the prices at which we can ultimately sell our products depend on numerous factors beyond our control, including regional and global supply and demand, which are subject to, among other things, production levels, levels of refined petroleum product inventories, productivity and growth of economies, geopolitical risks, such as turmoil in the Middle East, Eastern Europe, and other producing regions, technology advancements and the pace of the energy transition, weather-related damage and disruptions due to other natural or human causes, consumer preferences and the use and availability of substitute products, and governmental regulation.
CPChem also operates facilities on the Gulf Coast and has had to temporarily shut down sites in the past as a result of hurricanes. Any extreme weather events or rising sea levels may disrupt the ability to operate our facilities located near coastal areas or to transport crude oil, refined petroleum or petrochemical and plastics products in these areas.
Any extreme weather events or rising sea levels may disrupt the ability to operate our facilities located near coastal areas or to transport crude oil, refined petroleum or petrochemical and plastics products in these areas. Extended periods of such disruption could have an adverse effect on our results of operations.
Sustained periods of low prices can also cause producers to significantly curtail or limit their oil and gas drilling operations, which could substantially delay the production and delivery of volumes of crude oil, natural gas and NGL. 22 Table of Contents Index to Financial Statements The volume of crude oil and refined petroleum products transported or stored in our pipelines and terminal facilities depends on the demand for and availability of crude oil and refined petroleum products in the areas serviced by our assets.
Sustained periods of low prices can also cause producers to significantly curtail or limit their oil and gas drilling operations, which could substantially delay the production and delivery of volumes of crude oil, natural gas and NGL.
Failure by us, or an entity in which we have a joint venture interest, to adequately manage the risks associated with any acquisitions or joint ventures could have a material adverse effect on the financial condition or results of operations of our joint ventures and, in turn, our business and operations. 31 Table of Contents Index to Financial Statements One of our subsidiaries serves as the managing member of the general partner of a publicly traded master limited partnership (MLP), DCP LP, which may increase our exposure to legal liability, including with respect to our pending acquisition of the publicly held common units of DCP LP.
Failure by us, or an entity in which we have a joint venture interest, to adequately manage the risks associated with any acquisitions or joint ventures could have a material adverse effect on the financial condition or results of operations of our joint ventures and, in turn, our business and operations.
Risks Related to Our Manufacturing and Operations Our financial results are affected by changing commodity prices and margins for refined petroleum, petrochemical and plastics products.
Risks Related to Our Manufacturing and Operations Market conditions, including volatile commodity prices, margins and demand for refined petroleum, petrochemical and plastics products, impact our earnings, financial condition and cash flows.
Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products due to recycling concerns, or new or more restrictive regulations and rules related to plastic waste could reduce demand for CPChem’s plastic products and could negatively impact our equity interest.
These risks may result in unexpected costs, negative sentiments about our company, disruptions in our operations, increases to our operating expenses and reduced demand for our products, which in turn could have an adverse effect on our business, financial condition and results of operations. 30 Table of Contents Index to Financial Statements Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products due to recycling concerns, or new or more restrictive regulations and rules related to plastic waste could reduce demand for CPChem’s plastic products and could negatively impact our equity interest.
Increasing concerns about climate change and carbon intensity have also resulted in heightened societal awareness and a number of international and national measures to limit GHG emissions. Additional stricter regulatory measures and investor pressure can be expected in the future and any of these changes may have a material adverse impact on our business or financial condition.
Increasing concerns about climate change and carbon intensity have also resulted in heightened societal awareness and a number of international and national measures to limit GHG emissions.
In addition, we compete with other industries that provide alternative means to satisfy the energy and fuel requirements of our industrial, commercial and individual customers. 24 Table of Contents Index to Financial Statements Volatility in market demand for our petrochemical and plastics products and midstream transportation services and the risk of overbuild in these industries could negatively impact the results of operations of our businesses.
Volatility in market demand for our petrochemical and plastics products and midstream transportation services and the risk of overbuild in these industries could negatively impact the results of operations of our businesses.
We base these forecasted project economics on our best estimate of future market conditions including the regulatory and operating environment. For example, we are in the process of converting our San Francisco refinery into a renewable fuels facility to meet growing demand for renewable fuels. Most large-scale projects take several years to complete.
Our basis for approving large-scale capital-intensive projects, such as the conversion of our San Francisco refinery into a renewable fuels facility, is the expectation that it will deliver an acceptable rate of return on the capital invested. We base these forecasted project economics on our best estimate of future market conditions including the regulatory and operating environment.
If these efforts are successful, our stock price, our ability to access capital markets and our cost of capital may be negatively impacted. Members of the investment community are also increasing their focus on sustainability practices, including practices related to GHG emissions, climate change, diversity and inclusion, environmental justice and other sustainability-related matters.
Members of the investment community are also increasing their focus on environmental and social (E&S) matters, including practices related to GHG emissions, climate change, business resilience, diversity and inclusion, environmental justice and other E&S matters. As a result, we may face increasing pressure regarding our E&S disclosures and practices.
Our credit ratings could be lowered or withdrawn entirely by a rating agency if, in its judgment, the circumstances warrant. If a rating agency were to downgrade our rating below investment grade, our borrowing costs would increase, and our funding sources could decrease.
Deterioration in our credit profile could increase our costs of borrowing money, limit our access to the capital markets and commercial credit, and could trigger co-venturer rights under joint venture arrangements. Our credit ratings could be lowered or withdrawn entirely by a rating agency if, in its judgment, the circumstances warrant.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIf a specific request for stipulated penalties meeting the reporting threshold set forth in 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. New Matters The EPA and U.S.
Biggest changeIf a specific request for stipulated penalties meeting the reporting threshold set forth in 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. 37 Table of Contents Index to Financial Statements We received such a request in the first quarter of 2023, and 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.
Following information exchanges and discussions with CDPHE, a resolution was proposed pursuant to which the plant’s air permit would be revised, and DCP LP would be assessed an administrative penalty and economic benefit payment. A revised air permit was issued in May 2019, but the parties had not yet entered into a final settlement agreement to complete the matter.
Following information exchanges and discussions with CDPHE, a resolution was proposed pursuant to which the plant’s air permit would be revised, and DCP Operating LP would be assessed an administrative penalty and economic benefit payment. A revised air permit was issued in May 2019, but the parties had not yet entered into a final settlement agreement to complete the matter.
The following matters are disclosed in accordance with that requirement. We do not currently believe that the eventual outcome of any matters reported, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations or cash flows.
The below matters are disclosed in accordance with that requirement. 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.
In 2018, the Colorado Department of Public Health and Environment (CDPHE) issued a Compliance Advisory in relation to an improperly permitted facility flare and related air emissions from flare operations at one of DCP LP’s gas processing plants, which DCP LP self-disclosed to CDPHE in December 2017.
Matters Previously Reported (unresolved or resolved since the quarterly report on Form 10-Q for the quarterly period ended September 30, 2023) In 2018, the Colorado Department of Public Health and Environment (CDPHE) issued a Compliance Advisory in relation to an improperly permitted facility flare and related air emissions from flare operations at one of DCP Operating Company LP’s (DCP Operating LP) gas processing plants, which DCP Operating LP self-disclosed to CDPHE in December 2017.
The penalty demand proposes to resolve 26 Notices of Violation (NOVs) issued between 2017 and 2020 for alleged violations of air permit and air pollution regulatory requirements at the Los Angeles Refinery. We are working with SCAQMD to resolve these NOVs.
On December 1, 2023, the South Coast Air Quality Management District (SCAQMD) issued a demand for penalties that exceeds the $300,000 reporting threshold. The penalty demand proposes to resolve seven Notices of Violation (NOVs) issued between 2020 and 2022 for alleged violations of air permit and air pollution regulatory requirements at the Los Angeles Refinery.
Subsequently, in July 2020, CDPHE issued a Notice of Violation in relation to amine treater emissions at this plant, which DCP LP self-disclosed to CDPHE in April 2020. DCP LP is engaging with CDPHE as to this and the flare-related matter, including possible settlement terms, although these matters, which have since been combined, may result in formal legal proceedings.
Subsequently, in July 2020, CDPHE issued a NOV in relation to amine treater emissions at this plant, which DCP Operating LP self-disclosed to CDPHE in April 2020. Two additional and related NOVs were then issued in 2021 and 2023.
Removed
Department of Justice (DOJ) notified Phillips 66 that the government will seek penalties for alleged violations of the 2019 consent decree (Civil Action No. 3:18-cv-01484-SMY-GCS) at our Wood River Refinery. We expect that penalties paid for the enforcement action will exceed $300,000. We are working with EPA and DOJ to resolve this matter.
Added
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. There have been no further developments with respect to this matter.
Removed
Matters Previously Reported (unresolved or resolved since the quarterly report on Form 10-Q for the quarterly period ended September 30, 2022) On July 2, 2020, the South Coast Air Quality Management District (SCAQMD) issued a demand for penalties totaling $2,697,575.
Added
New Matters The California Department of Toxic Substances Control (DTSC), served Phillips 66 Company (as successor to Tosco) and approximately 50 other potentially responsible parties with Imminent and Substantial Endangerment Determinations and Orders and Remedial Action Orders in November 2016 related to historic waste sent to certain California landfill sites that were operated by a now bankrupt party.
Removed
It is possible that resolution of this matter may include an administrative penalty and economic benefit payment, further revisions to the facility air permit, or installation of emissions management equipment, or a combination of these, that could result in costs that exceed $1 million. See Note 16—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, for additional information.
Added
Since that time, we have been coordinating with other potentially responsible parties to negotiate a proposed settlement with DTSC regarding funding future operations, maintenance, and financial assurance for post-closure activities at the sites.
Added
As part of the settlement process and Consent Decree in the matter, in December 2023 we agreed to pay approximately $4 million in full satisfaction of our potential liability at the Vine Hill landfill complex located in Martinez, California. The company does not expect any future financial liabilities related to the Vine Hill landfill complex to be material.
Added
We are working with SCAQMD to negotiate and resolve these NOVs.
Added
DCP Operating LP and the CDPHE have reached a tentative agreement to resolve these matters for aggregate monetary civil penalties of approximately $4 million. As part of the settlement, DCP Operating LP will install emissions management equipment that will address the alleged violations.
Added
A final order to resolve these matters is expected to be issued during the first quarter of 2024.
Added
See “Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)” section of Note 8—Investments, Loans and Long-Term Receivables and Note 16—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, for additional information regarding Legal Proceedings and other regulatory actions.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeRoberts served as Executive Vice President, Marketing and Commercial from January 2017 to August 2018 and as Executive Vice President Strategy and Business Development from April 2016 to January 2017. Vanessa L. Allen Sutherland is Executive Vice President, Government Affairs, General Counsel and Corporate Secretary of Phillips 66, a position she has held since January 2022. Ms.
Biggest changeRoberts is Executive Vice President, Midstream and Chemicals, a position he has held since August 2018. Previously, Mr. Roberts served as Executive Vice President, Marketing and Commercial from January 2017 to August 2018 and as Executive Vice President, Strategy and Business Development from April 2016 to January 2017. Vanessa L.
Lashier served as President and Chief Operating Officer of Phillips 66 from April 2021 to July 2022; President and Chief Executive Officer of CPChem from August 2017 to April 2021; and as Executive Vice President, Commercial of CPChem from August 2015 to August 2017.
Lashier served as President and Chief Operating Officer of Phillips 66 from April 2021 to July 2022; President and Chief Executive Officer of CPChem from August 2017 to April 2021; and as Executive Vice President, Commercial of CPChem from August 2015 to August 2017. Kevin J.
Lashier is President and Chief Executive Officer of Phillips 66, a position he has held since July 2022. Previously, Mr.
Lashier is President and Chief Executive Officer, a position he has held since July 2022. Previously, Mr.
Mandell is Executive Vice President, Marketing and Commercial of Phillips 66, a position he has held since March 2019. Mr. Mandell served as Senior Vice President, Marketing and Commercial from August 2018 to March 2019; Senior Vice President, Commercial from November 2016 to August 2018; and President, Global Marketing from March 2015 to November 2016. Kevin J.
Mandell is Executive Vice President, Marketing and Commercial, a position he has held since March 2019. Mr. Mandell served as Senior Vice President, Marketing and Commercial from August 2018 to March 2019; Senior Vice President, Commercial from November 2016 to August 2018; and President, Global Marketing from March 2015 to November 2016. Timothy D.
Harbison previously served as Vice President, San Francisco Refinery from March 2021 to May 2022, General Manager, San Francisco Refinery from June 2020 to February 2021, Manager, Lake Charles Manufacturing Complex from February 2016 to May 2020 and Manager of the Ferndale Refinery from August 2014 to January 2016. 36 Table of Contents Index to Financial Statements J.
Harbison previously served as Vice President, San Francisco Refinery from March 2021 to May 2022; General Manager, San Francisco Refinery from June 2020 to February 2021; Manager, Lake Charles Manufacturing Complex from February 2016 to May 2020 and Manager of the Ferndale Refinery from August 2014 to January 2016. Brian M.
Prior to joining Norfolk Southern Corporation, Ms. Sutherland served as Chairperson of the U.S. Chemical Safety and Hazard Investigation Board from August 2015 to June 2018. Richard G. Harbison is Senior Vice President, Refining of Phillips 66, a position he has held since June 2022. Mr.
Prior to joining Norfolk Southern Corporation, Ms. Sutherland served as Chairperson of the U.S. Chemical Safety and Hazard Investigation Board from August 2015 to June 2018. J. Scott Pruitt is Vice President and Controller, a position he has held since August 2021. Mr.
Item 4. MINE SAFETY DISCLOSURES Not applicable. 35 Table of Contents Index to Financial Statements INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Position Held Age* Mark E. Lashier President and Chief Executive Officer 61 Zhanna Golodryga Executive Vice President, Emerging Energy and Sustainability 67 Brian M. Mandell Executive Vice President, Marketing and Commercial 59 Kevin J.
Item 4. MINE SAFETY DISCLOSURES Not applicable. 38 Table of Contents Index to Financial Statements INFORMATION ABOUT OUR EXECUTIVE OFFICERS Name Position Held Age* Mark E. Lashier President and Chief Executive Officer 62 Kevin J. Mitchell Executive Vice President and Chief Financial Officer 57 Zhanna Golodryga Executive Vice President, Emerging Energy and Sustainability 68 Richard G.
Scott Pruitt is Vice President and Controller of Phillips 66, a position he has held since August 2021. Mr. Pruitt previously served as General Auditor from September 2020 to August 2021 and Assistant Controller from May 2012 to September 2020. 37 Table of Contents Index to Financial Statements PART II
Pruitt previously served as General Auditor from September 2020 to August 2021 and Assistant Controller from May 2012 to September 2020. 39 Table of Contents Index to Financial Statements PART II
Mitchell is Executive Vice President and Chief Financial Officer of Phillips 66, a position he has held since January 2016. Previously, Mr. Mitchell served as Vice President, Investor Relations from September 2014 to January 2016. Timothy D. Roberts is Executive Vice President, Midstream and Chemicals of Phillips 66, a position he has held since August 2018. Previously, Mr.
Mitchell is Executive Vice President and Chief Financial Officer, a position he has held since January 2016. Previously, Mr. Mitchell served as Vice President, Investor Relations from September 2014 to January 2016. Zhanna Golodryga is Executive Vice President, Emerging Energy and Sustainability, a position she has held since October 2022. Previously, Ms.
Zhanna Golodryga is Executive Vice President, Emerging Energy and Sustainability of Phillips 66, a position she has held since October 2022. Previously, Ms. Golodryga served as Senior Vice President, Chief Digital and Administrative Officer from April 2017 to October 2022. Brian M.
Golodryga served as Senior Vice President, Chief Digital and Administrative Officer from April 2017 to October 2022. Richard G. Harbison is Executive Vice President, Refining, a position he has held since June 2022. Mr.
Mitchell Executive Vice President and Chief Financial Officer 56 Timothy D. Roberts Executive Vice President, Midstream and Chemicals 61 Vanessa L. Allen Sutherland Executive Vice President, Government Affairs, General Counsel and Corporate Secretary 51 Richard G. Harbison Senior Vice President, Refining 57 J. Scott Pruitt Vice President and Controller 58 * On February 22, 2023.
Harbison Executive Vice President, Refining 58 Brian M. Mandell Executive Vice President, Marketing and Commercial 60 Timothy D. Roberts Executive Vice President, Midstream and Chemicals 62 Vanessa L. Allen Sutherland Executive Vice President, Government Affairs, General Counsel and Corporate Secretary 52 J. Scott Pruitt Vice President and Controller 59 * As of February 21, 2024.
Added
Allen Sutherland is Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, a position she has held since January 2022. Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMillions 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 October 1-31, 2022 2,100,323 $ 95.78 2,100,323 $ 1,523 November 1-30, 2022 2,346,608 108.33 2,346,608 6,269 December 1-31, 2022 2,870,176 102.74 2,870,176 5,974 Total 7,317,107 $ 102.54 7,317,107 * Includes repurchase of shares of common stock from company employees in connection with the company’s broad-based employee incentive plans, when applicable. ** Since July 2012, our Board of Directors has authorized an aggregate of $20 billion of repurchases of our outstanding common stock.
Biggest changeMillions 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 October 1-31, 2023 2,380,576 $ 113.47 2,380,576 $ 7,824 November 1-30, 2023 4,101,833 117.82 4,101,833 7,341 December 1-31, 2023 3,298,558 131.45 3,298,558 6,907 Total 9,780,967 $ 121.36 9,780,967 * Includes repurchase of shares of common stock from company employees in connection with the company’s broad-based employee incentive plans, when applicable. ** Average price paid per share includes excise taxes. *** Since the inception of our share repurchase program in 2012, our Board of Directors has authorized an aggregate of $25 billion of repurchases of our outstanding common stock.
The New Peer Group consists of CVR Energy, Inc.; Delek US Holdings, Inc.; Dow Inc.; HF Sinclair Corporation; LyondellBasell Industries N.V.; Marathon Petroleum Corporation; ONEOK, Inc.; PBF Energy Inc.; Targa Resources Corp.; Valero Energy Corporation; Westlake Chemical Corporation; and The Williams Companies, Inc.
The Peer Group consists of CVR Energy, Inc.; Delek US Holdings, Inc.; Dow Inc.; HF Sinclair Corporation; LyondellBasell Industries N.V.; Marathon Petroleum Corporation; ONEOK, Inc.; PBF Energy Inc.; Targa Resources Corp.; Valero Energy Corporation; Westlake Chemical Corporation; and The Williams Companies, Inc.
The above performance graph represents cumulative total stockholder return, which assumes reinvestment of dividends, of a $100 investment in our common stock, our self-constructed peer group for the year ended December 31, 2022 (the New Peer Group), our self-constructed peer group for the year ended December 31, 2021 (the Old Peer Group), and the S&P 500 Index, for the five years ended December 31, 2022.
Performance Graph The above performance graph represents cumulative total stockholder return, which assumes reinvestment of dividends, of a $100 investment in our common stock, our self-constructed peer group for the year ended December 31, 2023 (the Peer Group) and the S&P 500 Index, for the five years ended December 31, 2023.
Any future share repurchases pursuant to the share repurchase program 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.
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.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Phillips 66’s common stock is traded on the New York Stock Exchange under the symbol “PSX.” At January 31, 2023, the number of stockholders of record of our shares was 30,117.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Phillips 66’s common stock is traded on the New York Stock Exchange under the symbol “PSX.” At January 31, 2024, the number of stockholders of record of our shares was 28,817.
Additionally, HollyFrontier Corporation was included as a peer for periods prior to its acquisition by HF Sinclair Corporation in March 2022.
Additionally, HollyFrontier Corporation was included as a peer for periods prior to its acquisition by HF Sinclair Corporation in March 2022. 40 Table of Contents Index to Financial Statements Issuer Purchases of Equity Securities On October 25, 2023, our Board of Directors approved a $5 billion increase to our share repurchase authorization.
Removed
Performance Graph As a result of our annual reevaluation of our peer group, we made modifications to our peer group in 2022 to reflect companies that we believe are more closely aligned with our size and lines of business. The composition of our New Peer Group and Old Peer Group are discussed below.
Added
We evaluate our peer group on an annual basis and believe the Peer Group closely aligns with our size and lines of business.
Removed
Additionally, HollyFrontier Corporation was included as a peer for periods prior to its acquisition by HF Sinclair Corporation in March 2022. Additionally, Andeavor was included as a peer for periods prior to its acquisition by Marathon Petroleum Corporation in October 2018.
Added
Our share repurchase authorizations do not expire. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. Shares of stock repurchased are held as treasury shares.
Removed
The Old Peer Group consists of Delek US Holdings, Inc.; Dow Inc.; HF Sinclair Corporation; LyondellBasell Industries N.V.; Magellan Midstream Partners, L.P.; Marathon Petroleum Corporation; MPLX LP; ONEOK, Inc.; PBF Energy Inc.; Targa Resources Corp.; Valero Energy Corporation; Westlake Chemical Corporation; and The Williams Companies, Inc.
Removed
Additionally, Andeavor was included as a peer for periods prior to its acquisition by Marathon Petroleum Corporation in October 2018. 38 Table of Contents Index to Financial Statements Issuer Purchases of Equity Securities In March 2020, we announced that we had temporarily suspended our share repurchases to preserve liquidity in response to the global economic disruption caused by the COVID-19 pandemic.
Removed
We resumed purchasing shares under our share repurchase program in the second quarter of 2022. On November 7, 2022, our Board of Directors approved a $5 billion increase to our share repurchase program.
Removed
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

161 edited+51 added−67 removed115 unchanged
Biggest changeAs such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts. 77 Table of Contents Index to Financial Statements Millions of Dollars, Except as Indicated Realized Refining Margins Atlantic Basin/Europe Gulf Coast Central Corridor West Coast Worldwide Year Ended December 31, 2020 Loss before income taxes $ (1,207) (1,964) (642) (2,210) (6,023) Plus: Taxes other than income taxes 61 110 51 89 311 Depreciation, amortization and impairments 643 985 571 1,460 3,659 Selling, general and administrative expenses 27 37 28 35 127 Operating expenses 775 1,394 497 1,000 3,666 Equity in losses of affiliates 10 3 363 — 376 Other segment (income) expense, net 1 1 (2) 5 5 Proportional share of refining gross margins contributed by equity affiliates 67 — 298 — 365 Special items: Certain tax impacts (6) — — — (6) Realized refining margins $ 371 566 1,164 379 2,480 Total processed inputs ( thousands of barrels ) 170,536 213,871 92,050 110,602 587,059 Adjusted total processed inputs ( thousands of barrels )* 170,536 213,871 162,693 110,602 657,702 Loss before income taxes per barrel ( dollars per barrel )** $ (7.08) (9.18) (6.97) (19.98) (10.26) Realized refining margins ( dollars per barrel )*** 2.17 2.64 7.17 3.43 3.77 * Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate. ** Loss before income taxes divided by total processed inputs. *** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels.
Biggest changeFollowing are reconciliations of income (loss) before income taxes to realized refining margins: 76 Table of Contents Index to Financial Statements Millions of Dollars, Except as Indicated Realized Refining Margins Atlantic Basin/Europe Gulf Coast Central Corridor West Coast Worldwide Year Ended December 31, 2023 Income before income taxes $ 910 1,640 2,210 506 5,266 Plus: Taxes other than income taxes 69 106 94 123 392 Depreciation, amortization and impairments 209 246 163 231 849 Selling, general and administrative expenses 38 19 76 36 169 Operating expenses 1,097 1,104 738 1,397 4,336 Equity in (earnings) losses of affiliates 8 (2) (445) — (439) Other segment (income) expense, net 19 17 (7) 6 35 Proportional share of refining gross margins contributed by equity affiliates 89 — 1,257 — 1,346 Special items: Certain tax impacts (15) — — — (15) Realized refining margins $ 2,424 3,130 4,086 2,299 11,939 Total processed inputs ( thousands of barrels ) 182,213 206,356 102,774 120,581 611,924 Adjusted total processed inputs ( thousands of barrels )* 182,213 206,356 180,251 120,581 689,401 Income before income taxes per barrel ( dollars per barrel )** $ 4.99 7.95 21.50 4.20 8.61 Realized refining margins ( dollars per barrel )*** 13.30 15.17 22.67 19.07 17.32 Year Ended December 31, 2022 Income before income taxes $ 2,402 2,091 2,415 908 7,816 Plus: Taxes other than income taxes 53 87 57 91 288 Depreciation, amortization and impairments 203 250 147 279 879 Selling, general and administrative expenses 41 19 62 31 153 Operating expenses 1,242 1,230 809 1,486 4,767 Equity in (earnings) losses of affiliates 9 7 (763) — (747) Other segment (income) expense, net (6) 1 2 (1) (4) Proportional share of refining gross margins contributed by equity affiliates 93 — 1,668 — 1,761 Special items: Regulatory compliance costs 9 26 22 13 70 Realized refining margins $ 4,046 3,711 4,419 2,807 14,983 Total processed inputs ( thousands of barrels ) 199,319 203,269 97,997 115,457 616,042 Adjusted total processed inputs ( thousands of barrels )* 199,319 203,269 177,112 115,457 695,157 Income before income taxes per barrel ( dollars per barrel )** $ 12.05 10.29 24.64 7.86 12.69 Realized refining margins ( dollars per barrel )*** 20.30 18.25 24.96 24.31 21.55 * Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate. ** Income before income taxes divided by total processed inputs. *** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis is the company’s analysis of its financial performance and financial condition, and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis is the company’s analysis of its financial performance, financial condition, and significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.
DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings) Merger 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 merger of DCP Midstream and Gray Oak Holdings.
DCP Midstream, LLC and Gray Oak Holdings LLC Merger (DCP Midstream Merger) On August 17, 2022, we announced a realignment of our economic and governance interests in DCP LP and Gray Oak Pipeline, LLC (Gray Oak Pipeline) resulting from the merger of DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings).
Selling, general and administrative expenses increased 24% in 2022, primarily driven by higher employee-related expenses, restructuring costs due to our business transformation and increased selling expenses driven by rising refined petroleum product prices. Impairments decreased 96% in 2022 primarily due to a before-tax impairment of $1,298 million recorded in the third quarter of 2021 associated with our Alliance Refinery.
Selling, general and administrative expenses increased 24% in 2022, primarily driven by higher employee-related expenses, restructuring costs related to our business transformation and increased selling expenses driven by rising refined petroleum product prices. Impairments decreased 96% in 2022, primarily due to a before-tax impairment of $1,298 million recorded in the third quarter of 2021 associated with our Alliance Refinery.
Under the Securitization Facility, certain of DCP LP’s wholly owned subsidiaries sell or contribute receivables to another of DCP LP’s consolidated subsidiaries, DCP Receivables LLC (DCP Receivables), a bankruptcy-remote special purpose entity created for the sole purpose of the Securitization Facility.
Under the Securitization Facility, certain of DCP LP’s wholly owned subsidiaries sell or contribute receivables to another of DCP LP’s consolidated subsidiaries, DCP Receivables LLC, a bankruptcy-remote special purpose entity created for the sole purpose of the Securitization Facility.
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.
Dakota Access and Energy Transfer Crude Oil Company, LLC (ETCO) In 2020, the trial court presiding over litigation brought by the Standing Rock Sioux Tribe (the Tribe) ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) addressing an easement under Lake Oahe in North Dakota. The trial court later vacated the easement.
At RCRA-permitted facilities, we are required to assess environmental conditions. If conditions warrant, we may be required to remediate contamination caused by prior operations. In contrast to CERCLA, which is often referred to as “Superfund,” the cost of corrective action activities under RCRA corrective action programs typically is borne solely by us.
At RCRA-permitted facilities, we are required to assess environmental conditions. If conditions warrant, we may be required to remediate contamination caused by prior operations. In contrast to CERCLA, which is often referred to as “Superfund,” the cost of corrective action activities under RCRA corrective action programs is typically borne solely by us.
Other GHG emissions programs in the western U.S. states have been enacted or are under consideration or development, including amendments to California's Low Carbon Fuel Standard, California’s Advanced Clean Cars and Trucks Programs, California’s Carbon Neutrality by 2045 Scoping Plan, Oregon's Low Carbon Fuel Standard and Climate Protection Plan, and Washington's carbon reduction programs. • United States’ Inflation Reduction Act, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies, which is intended to accelerate the energy transition. • The U.S.
Other GHG emissions programs in states in the western U.S. have been enacted or are under consideration or development, including amendments to California's Low Carbon Fuel Standard, California’s Advanced Clean Cars and Trucks Programs, California’s Carbon Neutrality by 2045 Scoping Plan, Oregon's Low Carbon Fuel Standard and Climate Protection Plan, and Washington's carbon reduction programs. • United States’ Inflation Reduction Act, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies, which is intended to accelerate the energy transition. • The U.S.
As a result of the United Kingdom’s exit from the EU (BREXIT), those types of entities in the United Kingdom are now subject to the UK ETS, rather than the EU ETS. • EU Renewable Energy Directive II, which increases the EU’s energy consumption from renewable sources in the electricity, heat, and transportation sectors to 32% by 2030. 69 Table of Contents Index to Financial Statements • United Kingdom’s Renewable Fuel Obligation, which is intended to reduce the GHG emissions from fuel used in the United Kingdom transportation sector by encouraging the supply of renewable fuels. • California’s Senate Bill No. 32, which requires reduction of California's GHG emissions to 40% below the 1990 emission level by 2030, and Assembly Bill 398, which extends the California GHG emission cap and trade program through 2030.
As a result of the United Kingdom’s exit from the EU (BREXIT), those types of entities in the United Kingdom are now subject to the UK ETS, rather than the EU ETS. • EU Renewable Energy Directive II, which increases the EU’s energy consumption from renewable sources in the electricity, heat, and transportation sectors to 32% by 2030. 69 Table of Contents Index to Financial Statements • United Kingdom’s Renewable Transport Fuel Obligation, which is intended to reduce the GHG emissions from fuel used in the United Kingdom transportation sector by encouraging the supply of renewable fuels. • California’s Senate Bill No. 32, which requires reduction of California's GHG emissions to 40% below the 1990 emission level by 2030, and Assembly Bill 398, which extends the California GHG emission cap and trade program through 2030.
The increase was primarily due to a before-tax impairment of $198 million recorded in the first quarter of 2021 related to Phillips 66 Partners’ decision to exit the Liberty Pipeline project, a before-tax gain of $182 million from the transfer of a 35.75% indirect economic interest in Gray Oak Pipeline to our co-venturer as part of the merger of DCP Midstream and Gray Oak Holdings, and lower depreciation and amortization expense from logistic assets that were retired in the fourth quarter of 2021 as part of the planned conversion of the Alliance Refinery to a terminal.
The increase was primarily due to a before-tax impairment of $198 million recorded in the first quarter of 2021 related to Phillips 66 Partners’ decision to exit the Liberty Pipeline project, a before-tax gain of $182 million from the transfer of a 35.75% indirect economic interest in Gray Oak Pipeline to our co-venturer as part of the DCP Midstream Merger, and lower depreciation and amortization expense from logistic assets that were retired in the fourth quarter of 2021 as part of the planned conversion of the Alliance Refinery to a terminal.
We funded our 25% share, or $163 million, with a capital contribution of $89 million in March 2022 and $74 million of distributions we elected not to receive from Dakota Access in the first quarter of 2022. At December 31, 2022, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $1.85 billion.
We funded our 25% share, or $163 million, with a capital contribution of $89 million in March 2022 and $74 million of distributions we elected not to receive from Dakota Access in the first quarter of 2022. At December 31, 2023, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $1.85 billion.
In addition, there can be delays associated with notice and comment periods and the agency’s processing of the application. Many of the delays associated with the permitting process are beyond the control of the applicant. Other foreign countries and many states where we operate also have, or are developing, similar environmental laws and regulations governing these same types of activities.
In addition, there can be delays associated with notice and comment periods and the agency’s processing of the application. Many of the delays associated with the permitting process are beyond the control of the applicant. Other countries and many states where we operate also have, or are developing, similar environmental laws and regulations governing these same types of activities.
See Note 11—Impairments, in the Notes to Consolidated Financial Statements, for information about impairments recorded in 2022, 2021 and 2020. 73 Table of Contents Index to Financial Statements GUARANTOR FINANCIAL INFORMATION We have various cross guarantees between Phillips 66 and its wholly owned subsidiary Phillips 66 Company (together, the Obligor Group) with respect to publicly held debt securities.
See Note 11—Impairments, in the Notes to Consolidated Financial Statements, for information about impairments recorded in 2023, 2022 and 2021. 73 Table of Contents Index to Financial Statements GUARANTOR FINANCIAL INFORMATION We have various cross guarantees between Phillips 66 and its wholly owned subsidiary Phillips 66 Company (together, the Obligor Group) with respect to publicly held debt securities.
Olefins and Polyolefins Capacity Utilization (percent) 91 % 95 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.
Olefins and Polyolefins Capacity Utilization (percent) 96 % 91 95 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.
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.
Absent other mitigating factors, as these prices and margins fluctuate, we would expect a corresponding change in our operating cash flows. The level and quality of output from our refineries also impacts our cash flows. Factors such as operating efficiency, maintenance turnarounds, market conditions, feedstock availability, and weather conditions can affect output.
Key projects funded during the three-year period included: • Installation of facilities to improve clean product yield at the Ponca City and Sweeny refineries, as well as the jointly owned Wood River Refinery. • Installation of facilities to improve product value at the Lake Charles Refinery. • Installation of facilities to produce renewable fuels at our San Francisco and Humber refineries.
Key projects funded during the three-year period included: • Installation of facilities to produce renewable fuels at our San Francisco and Humber refineries. • Installation of facilities to improve clean product yield at the Ponca City and Sweeny refineries, as well as the jointly owned Wood River Refinery. • Installation of facilities to improve product value at the Lake Charles Refinery. • Installation of facilities to improve utilization and product value at the jointly owned Borger refinery.
For example, in California the South Coast Air Quality Management District (SCAQMD) approved amendments to the Regional Clean Air Incentives Market (RECLAIM) that became effective in 2016, which require a phased reduction of nitrogen oxide emissions through 2022, affecting refineries in the Los Angeles metropolitan area.
For example, in California the South Coast Air Quality Management District (SCAQMD) approved amendments to the Regional Clean Air Incentives Market (RECLAIM) that became effective in 2016, which required a phased reduction of nitrogen oxide emissions through 2022, affecting refineries in the Los Angeles metropolitan area.
These expenses are included in the “Equity in earnings of affiliates” line item on our consolidated statement of operations. The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery production, blending activities, and RVO requirements.
These expenses are included in the “Equity in earnings of affiliates” line item on our consolidated statement of income. The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery production, blending activities, and RVO requirements.
See Note 15—Guarantees, in the Notes to Consolidated Financial Statements, for additional information on our guarantees. 60 Table of Contents Index to Financial Statements Capital Requirements Capital Expenditures and Investments For information about our capital expenditures and investments, see the “Capital Spending” section below.
See Note 15—Guarantees, in the Notes to Consolidated Financial Statements, for additional information regarding guarantees. 60 Table of Contents Index to Financial Statements Capital Requirements Capital Expenditures and Investments For information about our capital expenditures and investments, see the “Capital Spending” section below.
In addition to other cleanup standards, many states have adopted cleanup criteria for methyl tertiary-butyl ether (MTBE) for both soil and groundwater and both the EPA and many states may adopt cleanup standards for per- and polyfluoroalkyl substances (PFAS), which may have been a constituent in certain firefighting foams used or stored at or near some of our facilities.
In addition to other cleanup standards, many states have adopted cleanup criteria for methyl tertiary-butyl ether (MTBE) for soil and groundwater and both the EPA and many states may adopt cleanup standards for per- and poly-fluoroalkyl substances (PFAS), which may have been a constituent in certain firefighting foams used or stored at or near some of our facilities.
The ultimate financial impact arising from environmental laws and regulations is neither clearly known nor easily determinable as new standards, such as air emission standards, water quality standards and stricter fuel regulations, continue to evolve.
The ultimate financial impact arising from environmental laws and regulations is neither clearly known nor easily determinable as new standards, such as air emissions standards, water quality standards and stricter fuel regulations, continue to evolve.
Dollars Per Gallon Market Indicator Weighted-Average NGL Price* $ 1.00 0.83 0.41 * Based on index prices from the Mont Belvieu market hub, which are weighted by NGL component mix.
Dollars Per Gallon Market Indicator Weighted-Average NGL Price* $ 0.67 1.00 0.83 * Based on index prices from the Mont Belvieu market hub, which are weighted by NGL component mix.
Significant Sources of Capital Operating Activities During 2022, cash generated by operating activities was $10.8 billion, a $4.8 billion increase compared with 2021. The increase was primarily due to higher earnings resulting from improved realized refining margins, partially offset by working capital impacts and lower distributions from equity affiliates.
During 2022, cash generated by operating activities was $10.8 billion, a $4.8 billion increase compared with 2021. The increase was primarily due to higher earnings resulting from improved realized refining margins, partially offset by working capital impacts and lower operating distributions from equity affiliates.
The improvement was primarily due to higher realized refining margins, an aggregate before-tax gain of $3,013 million recognized in our Midstream segment in connection with the merger of DCP Midstream and Gray Oak Holdings, lower impairments in the Refining segment, and improved international marketing fuel margins.
The improvement was primarily due to higher realized refining margins, an aggregate before-tax gain of $3,013 million recognized in our Midstream segment in connection with the DCP Midstream Merger, lower impairments in the Refining segment, and improved international marketing fuel margins.
Outstanding borrowings under the Facility bear interest at either (a) the Adjusted Term Secured Overnight Financing Rate (SOFR) (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The Facility also provides for customary fees, including commitment fees.
Outstanding borrowings under the Facility bear interest at either (a) the adjusted term SOFR (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The Facility also provides for customary fees, including commitment fees.
Results from our NGL and Other business increased $3,548 million in 2022, compared with 2021. The increase was primarily due to before-tax gains totaling $2,831 million recognized from remeasuring our previously held equity investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills to their fair values in connection with the merger of DCP Midstream and Gray Oak Holdings.
Results from our NGL and Other business increased $3,548 million in 2022, compared with 2021. The increase was primarily due to before-tax gains totaling $2,831 million recognized from remeasuring our previously held equity investments in DCP Midstream, DCP Sand Hills and DCP Southern Hills to their fair values in connection with the DCP Midstream Merger.
Our worldwide refining clean product yield was 84%, 83% and 84% in 2022, 2021 and 2020, respectively. Equity Affiliate Operating Distributions Our operating cash flows are also impacted by distribution decisions made by our equity affiliates, including CPChem.
Our worldwide refining clean product yield was 85%, 84% and 83% in 2023, 2022 and 2021, respectively. Equity Affiliate Operating Distributions Our operating cash flows are also impacted by distribution decisions made by our equity affiliates, including CPChem.
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. Our worldwide refining crude oil capacity utilization was 90%, 84% and 76% in 2022, 2021 and 2020, respectively.
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. Our worldwide refining crude oil capacity utilization was 92%, 90% and 84% in 2023, 2022 and 2021, respectively.
We completed and started operations of Sweeny Frac 4 in the third quarter of 2022. • Completion of construction on our C2G Pipeline, a new 16-inch ethane pipeline that connects our Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi. • Net cash payment in connection with the merger of DCP Midstream and Gray Oak Holdings. • Contributions to fund the Gray Oak Pipeline project and South Texas Gateway Terminal development activities. • Investments in NOVONIX and a renewable feedstock processing plant. • Contributions to Dakota Access for a pipeline optimization project, including a contribution to fund our 25% share of Dakota Access’ debt repayment. • Spending associated with other return, reliability, and maintenance projects in our Transportation and NGL businesses.
We completed and started operations of Sweeny Frac 4 in the third quarter of 2022. • Completion of construction on our C2G Pipeline, a new 16-inch ethane pipeline that connects our Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi. • Net cash payment in connection with the DCP Midstream Merger. • Investments in NOVONIX and a renewable feedstock processing plant. • Contributions to Dakota Access for a pipeline optimization project, including a contribution to fund our 25% share of Dakota Access’ debt repayment. • Spending associated with other return, reliability, and maintenance projects in our Transportation and NGL businesses.
The impact of this gain was partially offset by an unrealized investment loss on our investment in NOVONIX, compared with an unrealized gain in 2021. See Note 4—Business Combination, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information on the aggregate gain.
The impact of this gain was partially offset by an unrealized investment loss on our investment in NOVONIX, compared with an unrealized gain in 2021. See Note 4—Business Combinations, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information on the aggregate before-tax gain.
These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain wastes attributable to our past operations. As of December 31, 2021, we reported that we had been notified of potential liability under CERCLA and comparable state laws at 25 sites within the United States.
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 December 31, 2022, we reported that we had been notified of potential liability under CERCLA and comparable state laws at 22 sites within the United States.
The terms “earnings” and “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.
The term “earnings” as used in Management’s Discussion and Analysis refers to net income 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.
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 to reduce our Scope 1 and Scope 2 GHG emissions intensity related to our operations by 50% of 2019 levels by the year 2050.
We are working to continuously improve operational and energy efficiency through resource and energy conservation efforts throughout our operations. In February 2022, we announced a target to reduce our Scope 1 and Scope 2 GHG emissions intensity related to our operations by 50% of 2019 levels by the year 2050.
See the “Executive Overview and Business Environment” section for information on marketing fuel margins and other market factors impacting 2022 results. 2021 vs. 2020 Before-tax income from the M&S segment increased $302 million in 2021, compared with 2020.
See the “Executive Overview and Business Environment” section for information on marketing fuel margins and other market factors impacting 2023 results. 2022 vs. 2021 Before-tax income from the M&S segment increased $679 million in 2022, compared with 2021.
Chemicals During the three-year period ended December 31, 2022, CPChem had a self-funded capital program that totaled $2.7 billion on a 100% basis. Capital spending was primarily for the development of petrochemical projects on the U.S.
Chemicals During the three-year period ended December 31, 2023, CPChem had a self-funded capital program that totaled $4.2 billion on a 100% basis. Capital spending was primarily for the development of petrochemical projects on the U.S.
These increases were mainly due to higher prices for refined petroleum products, crude oil and NGL. Other income increased $2,283 million in 2022, primarily due to an aggregate gain of $3,013 million recognized in our Midstream segment in connection with the merger of DCP Midstream and Gray Oak Holdings.
These increases were mainly due to higher prices for refined petroleum products, crude oil and NGL. Other income increased $2,283 million in 2022, primarily due to an aggregate before-tax gain of $3,013 million recognized in our Midstream segment in connection with the DCP Midstream Merger.
For the years ended December 31, 2022, 2021 and 2020, we incurred expenses of $478 million, $441 million and $342 million, respectively, associated with our obligation to purchase RINs in the open market to comply with the RFS for our wholly owned refineries.
For the years ended December 31, 2023, 2022 and 2021, we incurred expenses of $323 million, $478 million and $441 million, respectively, associated with our obligation to purchase RINs in the open market to comply with the RFS for our wholly owned refineries.
In addition, Phillips 66 Company has fully and unconditionally guaranteed the payment obligations of Phillips 66 with respect to its publicly held debt securities. All guarantees are full and unconditional. At December 31, 2022, $12 billion of senior unsecured notes outstanding has been guaranteed by the Obligor Group.
In addition, Phillips 66 Company has fully and unconditionally guaranteed the payment obligations of Phillips 66 with respect to its publicly held debt securities. All guarantees are full and unconditional. At December 31, 2023, $13.3 billion of senior unsecured notes outstanding has been guaranteed by the Obligor Group.
It requires fuel producers and importers to provide additional renewable fuels for transportation motor fuels and stipulates a mix of various types. RINs form the mechanism used by the EPA to record compliance with the Renewable Fuel Standard (RFS).
The law requires fuel producers and importers to provide additional renewable fuels for transportation motor fuels and stipulates a mix of various types. Renewable Identification Numbers (RINs) form the mechanism used by the EPA to record compliance with the Renewable Fuel Standard (RFS).
DCP LP Availability of Debt Financing DCP LP has a BBB+ credit rating, with a stable outlook, from Standard and Poor’s; a BBB- credit rating, with a stable outlook, from Fitch Ratings; and a Ba1 credit rating, with a positive outlook, from Moody’s Investors Service. These ratings facilitate DCP LP access to a variety of lenders.
DCP LP Availability of Debt Financing DCP LP has a BBB+ credit rating, with a stable outlook, from Standard and Poor’s and a Baa3 credit rating, with a positive outlook, from Moody’s Investors Service. These ratings facilitate DCP LP’s access to a variety of lenders.
Thousands of Barrels Daily Marketing Refined Petroleum Product Sales Gasoline 1,167 1,154 1,021 Distillates 962 959 895 Other 18 17 17 2,147 2,130 1,933 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.
Thousands of Barrels Daily Marketing Refined Petroleum Product Sales Gasoline 1,218 1,167 1,154 Distillates 957 962 959 Other 18 18 17 2,193 2,147 2,130 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.
These expenses are included in the “Purchased crude oil and products” line item on our consolidated statement of operations. Our jointly owned refineries also incurred expenses associated with the purchase of RINs in the open market, of which our share was $437 million, $351 million and $133 million for the years ended December 31, 2022, 2021 and 2020, respectively.
These expenses are included in the “Purchased crude oil and products” line item on our consolidated statement of income. Our jointly owned refineries also incurred expenses associated with the purchase of RINs in the open market, of which our share was $389 million, $437 million and $351 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The increase was partially offset by a decrease due to the merger between us and Phillips 66 Partners that occurred in the first quarter of 2022 and resulted in Phillips 66 Partners becoming a wholly owned subsidiary of Phillips 66.
The increase was partially offset by a decrease due to the merger between us and Phillips 66 Partners in March 2022 that resulted in Phillips 66 Partners becoming a wholly owned subsidiary of Phillips 66.
The 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.
Our Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels. This segment includes 12 refineries in the United States and Europe.
See the “Executive Overview and Business Environment” section for information on industry crack spreads and other market factors impacting this year’s results. 52 Table of Contents Index to Financial Statements 2021 vs. 2020 Results from the Refining segment increased $3,670 million in 2021, compared with 2020.
See the “Executive Overview and Business Environment” section for information on industry crack spreads and other market factors impacting this year’s results. 52 Table of Contents Index to Financial Statements 2022 vs. 2021 Results from the Refining segment increased $10,169 million in 2022, compared with 2021.
In addition, they increase total advanced biofuel volumes from the 5.63 billion gallons established for the 2022 compliance year to 7.43 billion gallons in 2025. If adopted, we may experience a decrease in demand for refined petroleum products and increased program costs if not fully recovered in the market.
In addition, the EPA increased total advanced biofuel volumes from the 5.63 billion gallons established for the 2022 compliance year to 7.33 billion gallons in 2025. We may experience a decrease in demand for refined petroleum products and increased program costs if not fully recovered in the market.
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 of approximately $20 million annually, in addition to the potential obligations under the CECU at December 31, 2022.
Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also could be required to support our 25% share of the ongoing expenses, including scheduled interest payments on the notes of approximately $20 million annually, in addition to the potential obligations under the CECU at December 31, 2023.
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 LP 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.
Under the terms of the DCP LP Merger Agreement, at the effective time of the DCP LP Merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and its subsidiaries) issued and outstanding as of immediately prior to the effective time was converted into the right to receive $41.75 per common unit in cash.
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 LP 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.
Under the terms of the DCP LP Merger Agreement, at the effective time of the DCP LP Merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and its subsidiaries) issued and outstanding as of immediately prior to the effective time was converted into the right to receive $41.75 per common unit in cash.
Over the three years ended December 31, 2022, our operating cash flows included aggregate distributions from our equity affiliates of $6 billion, including $2.8 billion from CPChem.
Over the three years ended December 31, 2023, our operating cash flows included aggregate distributions from our equity affiliates of $5.6 billion, including $2.2 billion from CPChem.
Supreme Court (the Court) denied Dakota Access’ writ of certiorari requesting the Court to review the lower court’s decision to order the EIS and vacate the easement. Therefore, the requirement to prepare the EIS stands.
Supreme Court (the Court) denied Dakota Access’ writ of certiorari requesting the Court to review the trial court’s decision to order the EIS and vacate the easement. Therefore, the requirement to prepare the EIS stood.
The increase was primarily driven by the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills, which resulted in us reflecting the additional noncontrolling interest owned by the public common and preferred unitholders of DCP LP, as well as Enbridge’s noncontrolling interest in DCP Midstream Class A Segment, on our consolidated statement of operations.
The increase was primarily driven by the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills as part of the DCP Midstream Merger in August 2022, which resulted in us reflecting the additional noncontrolling interests owned by the public common and preferred unitholders of DCP LP, as well as Enbridge’s noncontrolling interest in DCP Midstream Class A Segment, on our consolidated statement of income.
Dollars Per Gallon U.S. Average Wholesale Prices* Gasoline $ 3.30 2.46 1.56 Distillates 3.86 2.36 1.47 * On third-party branded refined petroleum product sales, excluding excise taxes.
Dollars Per Gallon U.S. Average Wholesale Prices* Gasoline $ 2.93 3.30 2.46 Distillates 3.23 3.86 2.36 * On third-party branded refined petroleum product sales, excluding excise taxes.
The Corporate and Other capital budget is $108 million primarily for digital transformation and information technology projects. 65 Table of Contents Index to Financial Statements 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.
The Corporate and Other capital budget of $68 million will primarily fund information technology projects. 65 Table of Contents Index to Financial Statements 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.
See Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the merger transaction. Dividends On February 8, 2023, our Board of Directors declared a quarterly cash dividend of $1.05 per common share, representing an 8% increase.
See Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the merger transaction. Dividends On February 7, 2024, our Board of Directors declared a quarterly cash dividend of $1.05 per common share.
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.
The 2050 target builds upon our 2030 GHG emissions intensity targets to reduce Scope 1 and Scope 2 emissions from our operations by 30% and Scope 3 emissions from our energy products by 15% compared to 2019 levels.
See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, and Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the merger of DCP Midstream and Gray Oak Holdings and the Phillips 66 Partners merger, respectively. 46 Table of Contents Index to Financial Statements 2021 vs. 2020 Sales and other operating revenues and purchased crude oil and products increased 74% and 77%, respectively, in 2021.
See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, and Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the DCP Midstream Merger and the Phillips 66 Partners merger, respectively. 46 Table of Contents Index to Financial Statements 2022 vs. 2021 Sales and other operating revenues and purchased crude oil and products increased 52% and 47%, respectively, in 2022.
At December 31, 2022 and 2021, no amount had been drawn under our revolving credit facilities. Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to 365 days. At December 31, 2022 and 2021, no borrowings were outstanding under the program.
Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to 365 days. At December 31, 2023 and 2022, no borrowings were outstanding under the program.
We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at December 31, 2022. We also have residual value guarantees associated with railcar and airplane leases with maximum potential future exposures totaling $156 million. These leases have remaining terms of five to nine years.
We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at December 31, 2023. We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $168 million. These leases have remaining terms of one to ten years.
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. 43 Table of Contents Index to Financial Statements RESULTS OF OPERATIONS 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.
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. 44 Table of Contents Index to Financial Statements RESULTS OF OPERATIONS Our business segment and consolidated results reflect the consolidation of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills, in connection with the DCP Midstream Merger, from August 18, 2022, forward.
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.
In connection with the DCP Midstream Merger, the results of our Transportation business reflect a decrease in our indirect economic interest in Gray Oak Pipeline to 6.5% from August 18, 2022, forward. Prior to August 18, 2022, the Transportation results presented in the table above reflect Gray Oak Holdings’ 65% economic interest in Gray Oak Pipeline.
The increase in 2021 was primarily driven by improved market demand for refined petroleum products following the administration of COVID-19 vaccines and the easing of pandemic restrictions. 53 Table of Contents Index to Financial Statements Marketing and Specialties Year Ended December 31 2022 2021 2020 Millions of Dollars Income Before Income Taxes $ 2,402 1,723 1,421 Dollars Per Barrel Income Before Income Taxes U.S. $ 1.95 1.74 1.42 International 7.44 4.13 4.84 Realized Marketing Fuel Margins* U.S. $ 2.34 2.19 1.87 International 8.29 5.96 6.34 * 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.
The increase in 2022 was primarily driven by improved demand for refined petroleum products due to supply constraints caused by the conflict between Russia and Ukraine and easing of restrictions from the COVID-19 pandemic. 53 Table of Contents Index to Financial Statements Marketing and Specialties Year Ended December 31 2023 2022 2021 Millions of Dollars Income Before Income Taxes $ 2,135 2,402 1,723 Dollars Per Barrel Income Before Income Taxes U.S. $ 1.97 1.95 1.74 International 4.87 7.44 4.13 Realized Marketing Fuel Margins* U.S. $ 2.45 2.34 2.19 International 6.00 8.29 5.96 * 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.
The pricing levels for the commitment fees and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time. We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty.
The pricing levels for the commitment fees and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time. We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty. At December 31, 2023 and 2022, no amount had been drawn under the Facility.
Our worldwide refining crude oil capacity utilization rate was 84% and 76% in 2021 and 2020, respectively.
Our worldwide refining crude oil capacity utilization rate was 90% and 84% in 2022 and 2021, respectively.
See the “Executive Overview and Business Environment” section for information on market factors impacting 2022 results. 2021 vs. 2020 Midstream’s results increased $1,616 million in 2021, compared with 2020. Results from our Transportation business increased $170 million in 2021, compared with 2020.
See the “Executive Overview and Business Environment” section for information on market factors impacting 2023 results. 2022 vs. 2021 Midstream’s results increased $3,234 million in 2022, compared with 2021. Results from our Transportation business increased $498 million in 2022, compared with 2021.
The cost of borrowing under the Credit Agreement is determined by a ratings-based pricing grid based on DCP LP’s credit rating. At December 31, 2022, DCP LP had no borrowings outstanding under the Credit Agreement. At December 31, 2022, $10 million in letters of credit had been issued that are supported by the Credit Agreement.
The cost of borrowing under the Credit Agreement is determined by a ratings-based pricing grid based on DCP LP’s credit rating. At December 31, 2023, DCP LP had $25 million in borrowings outstanding under the Credit Agreement. At December 31, 2022, DCP LP had no borrowings outstanding under the Credit Agreement.
Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS process while the USACE engaged with the Tribe on their reasons for withdrawing. The draft EIS process resumed in August 2022, and release is expected in Spring 2023.
Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS process while the USACE engaged with the Tribe on their reasons for withdrawing. The draft EIS process resumed in August 2022, and in September 2023 the USACE published its draft EIS for public comment.
Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access in March 2019. On April 1, 2022, Dakota Access’ wholly owned subsidiary repaid $650 million aggregate principal amount of its outstanding senior notes upon maturity.
The USACE has not indicated when it will issue its final decision. Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access in March 2019. On April 1, 2022, Dakota Access’ wholly owned subsidiary repaid $650 million aggregate principal amount of its outstanding senior notes upon maturity.
Purchase Obligations Our purchase obligations represent agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms. We expect these purchase obligations will be fulfilled with operating cash flows in the period when due. As of December 31, 2022, our purchase obligations totaled $106.5 billion, with $44.4 billion due within one year.
Purchase Obligations Our purchase obligations represent agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms. We expect these purchase obligations will be fulfilled with operating cash flows in the period when due. At December 31, 2023, our purchase obligations totaled $84.8 billion, with $40.7 billion due within one year.
See Note 29—DCP Midstream Class A Segment, in the Notes to Consolidated Financial Statements, for additional information on the common unit acquisition agreement. Phillips 66 Partners Merger On March 9, 2022, we completed the merger between us and Phillips 66 Partners LP (Phillips 66 Partners).
See Note 29—DCP Midstream Class A Segment, in the Notes to Consolidated Financial Statements, for additional information regarding the DCP LP public common unit acquisition and the redemptions of DCP LP’s Series B and Series C preferred units. Merger with Phillips 66 Partners On March 9, 2022, we completed a merger between us and Phillips 66 Partners.
We acquired this investment in September 2021. See Note 11—Impairments, and Note 8—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information on impairments and our investment in NOVONIX, respectively. See Note 4—Business Combination, and Note 18—Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information regarding the before-tax gains.
We acquired this investment in September 2021. See Note 11—Impairments, and Note 8—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information on impairments and our investment in NOVONIX, respectively.
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 2022, we generated $10.8 billion in cash from operations.
To meet our short- and long-term liquidity requirements, we use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. During 2023, we generated $7 billion in cash from operations and received proceeds from debt offerings, net of debt repayments, of $2 billion.
See the “Executive Overview and Business Environment” section for information on market factors impacting CPChem’s 2022 results. 2021 vs. 2020 Before-tax income from the Chemicals segment increased $1,209 million in 2021, compared with 2020.
See the “Executive Overview and Business Environment” section for information on market factors impacting CPChem’s 2023 results. 2022 vs. 2021 Results from the Chemicals segment decreased $988 million in 2022, compared with 2021.
The amount and timing of future dividend payments and the level and timing of future share repurchases will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. • High-Performing Organization.
The amount and timing of future dividend payments and the level and timing of future share repurchases is subject to the discretion of, and approval by, our Board of Directors and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans.
The majority of our purchase obligations are market-based contracts, including exchanges and futures, for the purchase of products such as crude oil and raw NGL. The products are used to supply our refineries and fractionators and optimize our supply chain. At December 31, 2022, product purchase commitments with third parties and related parties were $54.6 billion and $26.1 billion, respectively.
The majority of our purchase obligations are market-based contracts, including exchanges and futures, for the purchase of commodities such as crude oil and NGL. The commodities are used to supply our refineries and fractionators and optimize our supply chain. At December 31, 2023, commodity purchase commitments with third parties and related parties were $44.2 billion and $23.9 billion, respectively.
International 2022 2021 2020 2022 2021 2020 Realized Marketing Fuel Margins Income before income taxes $ 1,329 1,180 870 765 403 454 Plus: Depreciation and amortization 14 14 12 72 76 70 Selling, general and administrative expenses 808 758 623 251 253 246 Equity in earnings of affiliates (71) (48) (31) (115) (113) (108) Other operating (revenues) expenses* (508) (424) (327) (62) 8 (27) Other (income) expense, net 24 9 1 (7) 7 6 Marketing margins 1,596 1,489 1,148 904 634 641 Less: margin for nonfuel related sales — — — 51 53 46 Realized marketing fuel margins $ 1,596 1,489 1,148 853 581 595 Total fuel sales volumes ( thousands of barrels ) 680,930 680,102 613,869 102,862 97,529 93,773 Income before income taxes per barrel ( dollars per barrel ) $ 1.95 1.74 1.42 7.44 4.13 4.84 Realized marketing fuel margins ( dollars per barrel )** 2.34 2.19 1.87 8.29 5.96 6.34 * Includes other nonfuel revenues and expenses. ** 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.
International 2023 2022 2021 2023 2022 2021 Realized Marketing Fuel Margins Income before income taxes $ 1,378 1,329 1,180 494 765 403 Plus: Depreciation and amortization 23 14 14 75 72 76 Selling, general and administrative expenses 814 808 758 253 251 253 Equity in earnings of affiliates (54) (71) (48) (113) (115) (113) Other operating (revenues) expenses* (477) (508) (424) (63) (62) 8 Other (income) expense, net 28 24 9 15 (7) 7 Marketing margins 1,712 1,596 1,489 661 904 634 Less: margin for nonfuel related sales — — — 52 51 53 Realized marketing fuel margins $ 1,712 1,596 1,489 609 853 581 Total fuel sales volumes ( thousands of barrels ) 698,961 680,930 680,102 101,466 102,862 97,529 Income before income taxes per barrel ( dollars per barrel ) $ 1.97 1.95 1.74 4.87 7.44 4.13 Realized marketing fuel margins ( dollars per barrel )** 2.45 2.34 2.19 6.00 8.29 5.96 * Includes other nonfuel revenues and expenses. ** 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.
We incur costs related to the prevention, control, abatement or elimination of environmental pollution. Expensed environmental costs were $728 million in 2022 and are expected to be approximately $800 million in 2023 and 2024. Capitalized environmental costs were $88 million in 2022 and are expected to be approximately $140 million and $250 million, in 2023 and 2024, respectively.
We incur costs related to the prevention, control, abatement or elimination of environmental pollution. Expensed environmental costs were $824 million in 2023 and are expected to be approximately $885 million and $863 million in 2024 and 2025, respectively.
See Note 23—Income Taxes, in the Notes to Consolidated Financial Statements, for more information regarding our income taxes. 47 Table of Contents Index to Financial Statements Segment Results Midstream Year Ended December 31 2022 2021 2020 Millions of Dollars Income (Loss) Before Income Taxes Transportation $ 1,176 678 508 NGL and Other 4,000 452 (624) NOVONIX (442) 370 — Total Midstream $ 4,734 1,500 (116) Thousands of Barrels Daily Transportation Volumes Pipelines* 3,089 3,271 3,005 Terminals 2,981 2,790 2,971 Operating Statistics NGL fractionated** 529 410 249 NGL production*** 423 394 399 * Pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment, excluding NGL pipelines. * * Includes 100% of DCP Midstream Class A Segment’s volumes from August 18, 2022, forward. *** Includes 100% of DCP Midstream Class A Segment’s volumes.
See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, and Note 30—Phillips 66 Partners LP, in the Notes to Consolidated Financial Statements, for additional information on the DCP Midstream Merger and the Phillips 66 Partners merger, respectively. 47 Table of Contents Index to Financial Statements Segment Results Midstream Year Ended December 31 2023 2022 2021 Millions of Dollars Income (Loss) Before Income Taxes Transportation $ 1,310 1,176 678 NGL and Other 1,503 4,000 452 NOVONIX (39) (442) 370 Total Midstream $ 2,774 4,734 1,500 Thousands of Barrels Daily Transportation Volumes Pipelines* 3,069 3,089 3,271 Terminals 3,246 2,981 2,790 Operating Statistics NGL fractionated** 711 529 410 NGL production*** 437 423 394 Wellhead Volume (Bcf/D)*** 4.6 4.4 4.2 * Pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment, excluding NGL pipelines. * * Includes 100% of DCP Midstream Class A Segment’s volumes from August 18, 2022, forward. *** Includes 100% of DCP Midstream Class A Segment’s volumes.
At December 31, 2021, we had approximately $5.7 billion of total committed capacity available under our revolving credit facilities. Other Debt Issuances and Financings Senior Unsecured Notes In November 2021, Phillips 66 closed its public offering of $1 billion aggregate principal amount of 3.300% senior unsecured notes due 2052.
Total Committed Capacity Available At December 31, 2023, and 2022, we had approximately $6.4 billion and $6.7 billion, respectively, of total committed capacity available under the credit facilities described above. 58 Table of Contents Index to Financial Statements Other Debt Issuances and Financings Senior Unsecured Notes In November 2021, Phillips 66 closed its public offering of $1 billion aggregate principal amount of 3.300% senior unsecured notes due 2052.
Corporate and Other Capital spending for Corporate and Other during the three-year period ended December 31, 2022, was primarily for information technology and facilities. 2023 Budget Our 2023 capital budget is $2 billion, including $865 million for sustaining capital and $1.1 billion for growth capital. Approximately 50% of growth capital is expected to support lower-carbon opportunities.
Corporate and Other Capital spending for Corporate and Other during the three-year period ended December 31, 2023, was primarily related to information technology and facilities. 2024 Budget Our 2024 capital budget is $2.2 billion, including $923 million for sustaining capital and $1.3 billion for growth capital.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSuch differences could result from a variety of factors, 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 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 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. • General domestic and international economic and political developments including armed hostilities, including the Russia-Ukraine war, expropriation of assets, and other political, economic or diplomatic developments, including those caused by public health issues, outbreaks of diseases and pandemics. • 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. 83 Table of Contents Index to Financial Statements • 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. • The inability to meet our sustainability goals, including reducing our GHG emissions intensity, developing and protecting new technologies, and commercializing lower-carbon opportunities. • Failure of new products and services to achieve market acceptance. • International monetary conditions and exchange controls. • Substantial 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.
Biggest changeFactors that could cause actual results to differ materially from those in our forward-looking statements include: • Fluctuations in market conditions, including NGL, crude oil, refined petroleum product and natural gas prices and refining, marketing and petrochemical margins and demand. • 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 non-OPEC oil producing countries impacting supply and demand and correspondingly, commodity prices. • Our ability to achieve the expected benefits of the DCP LP integration, including the realization of expected synergies. • Unexpected changes in costs or technical requirements for constructing, modifying or operating our facilities or transporting our products. • Unexpected technological or commercial difficulties in manufacturing, refining or transporting our products, including 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 assets. • Our ability to timely obtain or maintain permits, including those necessary for capital projects. • Our ability to comply with government regulations or make capital expenditures required to maintain compliance. • Our ability to realize sustained savings and cost reductions from the company’s business transformation initiatives. • Changes to worldwide government policies relating to renewable fuels, climate change and greenhouse gas emissions that adversely affect programs like the renewable fuel standards program, low carbon fuel standards and tax credits for biofuels. • Domestic and international economic and political developments including armed hostilities, such as the Russia-Ukraine war, instability in the financial services and banking sector, excess inflation, rising interest rates, expropriation of assets, and changes in fiscal policy. 82 Table of Contents Index to Financial Statements • The impact on commercial activity and demand for refined petroleum products from any widespread public health crisis, as well as the extent and duration of recovery of economies and demand for our products following any such crisis. • Failure to complete definitive agreements and feasibility studies for, and to complete construction of, announced and future capital projects on time and within budget. • Our ability to successfully complete, or any material delay in the completion of, asset dispositions or acquisitions that we pursue. • Potential disruption or interruption of our operations or those of our joint ventures due to litigation or other governmental or regulatory action. • Damage to our facilities due to accidents, weather and climate events, civil unrest, insurrections, political events, terrorism or cyberattacks. • Our ability to meet our sustainability goals, including reducing our GHG emissions intensity, developing and protecting new technologies, and commercializing lower-carbon opportunities. • Failure of new products and services to achieve market acceptance. • International monetary conditions and exchange controls. • Substantial 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 properties, plants and equipment and/or strategic decisions or other developments with respect to our asset portfolio that cause impairment charges. • Limited access to capital or significantly higher cost of capital related to changes to our credit profile or illiquidity or uncertainty in the domestic or international financial markets. • The creditworthiness of our customers and the counterparties to our transactions, including the impact of bankruptcies. • Cybersecurity incidents or other disruptions that compromise our information and expose us to liability. • The operation, financing and distribution decisions of our joint ventures that we do not control. • The factors generally described in “Item 1A.
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.
We based these forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate.
For additional information about our use of derivative instruments, see Note 17—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statements. 82 Table of Contents Index to Financial Statements 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.
For additional information about our use of derivative instruments, see Note 17—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statements. 81 Table of Contents Index to Financial Statements 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.
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 any forward-looking statements.
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 forecasted in any forward-looking statement.
Risk Factors” in this report. 84 Table of Contents Index to Financial Statements
Risk Factors” in this report. 83 Table of Contents Index to Financial Statements
We caution you not to place undue reliance on these forward-looking statements as they are not guarantees of future performance and involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict.
We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, as they are not guarantees of future performance and involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict.
Interest Rate Risk Our use of fixed- or variable-rate debt directly exposes us to interest rate risk. Fixed-rate debt, such as our senior notes, exposes us to changes in the fair value of our debt due to changes in market interest rates.
Fixed-rate debt, such as our senior notes, exposes us to changes in the fair value of our debt due to changes in market interest rates.
Phillips 66’s use of derivative instruments is governed by an “Authority Limitations” document approved by our Board of Directors. This document prohibits the use of highly leveraged derivatives or derivative instruments without sufficient market liquidity for comparable valuations, and establishes Value at Risk (VaR) limits.
Our use of derivative instruments is governed by an “Authority Limitations” document approved by our Board of Directors. This document prohibits the use of highly leveraged derivatives or derivative instruments without sufficient market liquidity for comparable valuations, and establishes Value at Risk (VaR) limits. Compliance with these limits is monitored daily by our global risk group.
Weighted-average variable rates are based on effective rates at each reporting date. The carrying amount of our floating-rate debt approximates its fair value. The fair value of the fixed-rate financial instruments is estimated based on observable market prices.
Weighted-average variable rates are based on effective rates at each reporting date. The carrying amount of our floating-rate debt approximates its fair value.
Using Monte Carlo simulation, a 95% confidence level and a one-day holding period, the VaR for derivative commodity instruments issued or held at December 31, 2022 and 2021, was immaterial to our cash flows and results of operations.
Using Monte Carlo simulation, a 95% confidence level and a one-day holding period, the VaR for derivative commodity instruments issued or held at December 31, 2023 and 2022, was immaterial to our cash flows and results of operations. Interest Rate Risk Our use of fixed- or variable-rate debt directly exposes us to interest rate risk.
Millions of Dollars, Except as Indicated Expected Maturity Date Fixed Rate Maturity Average Interest Rate Floating Rate Maturity Average Interest Rate Year-End 2022 2023 $ 500 3.88 % $ — — % 2024 1,100 1.32 40 5.33 2025 1,975 4.43 — — 2026 992 2.42 — — 2027 500 5.63 — — Remaining years 12,040 4.67 25 4.72 Total $ 17,107 $ 65 Fair value $ 15,871 $ 65 Millions of Dollars, Except as Indicated Expected Maturity Date Fixed Rate Maturity Average Interest Rate Floating Rate Maturity Average Interest Rate Year-End 2021 2022 $ 1,000 4.30 % $ 450 0.98 % 2023 500 3.70 — — 2024 1,100 1.32 — — 2025 1,150 3.74 — — 2026 1,000 2.43 — — Remaining years 9,026 4.31 25 0.70 Total $ 13,776 $ 475 Fair value $ 15,353 $ 475 81 Table of Contents Index to Financial Statements Foreign Currency Risk We are exposed to foreign currency exchange rate fluctuations related to our international operations.
The fair value of the fixed-rate financial instruments is estimated based on observable market prices. 80 Table of Contents Index to Financial Statements Millions of Dollars, Except as Indicated Expected Maturity Date Fixed Rate Maturity Average Interest Rate Floating Rate Maturity Average Interest Rate Year-End 2023 2024 $ 1,100 1.32 % $ 350 6.38 % 2025 1,975 4.43 — — 2026 992 2.42 1,250 6.46 2027 1,250 5.22 25 6.51 2028 1,300 3.84 — — Remaining years 10,676 4.74 290 6.46 Total $ 17,293 $ 1,915 Fair value $ 16,718 $ 1,915 Millions of Dollars, Except as Indicated Expected Maturity Date Fixed Rate Maturity Average Interest Rate Floating Rate Maturity Average Interest Rate Year-End 2022 2023 $ 500 3.88 % $ — — % 2024 1,100 1.32 40 5.33 2025 1,975 4.43 — — 2026 992 2.42 — — 2027 500 5.63 — — Remaining years 12,040 4.67 25 4.72 Total $ 17,107 $ 65 Fair value $ 15,871 $ 65 \ Foreign Currency Risk We are exposed to foreign currency exchange rate fluctuations related to our international operations.
The estimated loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on derivative commodity instruments held or issued is not expected to be material to our cash flows and results of operations.
We use a VaR model to estimate the loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on the derivative commodity instruments held or issued.
Generally, we do not hedge our foreign currency risk. Phillips 66’s Chief Executive Officer and Chief Financial Officer monitor risks effecting its operations resulting from commodity prices, interest rates and foreign currency exchange rates. In addition, DCP LP’s risk management committee monitors risks effecting its operations resulting from commodity prices and interest rates.
Generally, we do not hedge our foreign currency risk. Risk Monitoring Our Chief Executive Officer and Chief Financial Officer monitor risks to our business resulting from commodity prices, interest rates and foreign currency exchange rates.
We and certain of our subsidiaries may hold and use derivative contracts to manage these risks.
We and certain of our subsidiaries may hold and use derivative contracts to manage these risks. Commodity Price Risk Generally, our policy is to remain exposed to the market prices of commodities.
We also use futures, forwards, swaps and options in various markets to accomplish the following objectives: • Balance physical systems or meet our refinery requirements and market demand.
Consistent with this policy, we use derivative contracts to convert our exposure from fixed-price sales or purchase contracts, often specified in contracts with refined petroleum product customers, back to floating market prices. We also use futures, forwards, swaps and options in various markets to accomplish the following objectives: • Balance physical systems or meet our refinery requirements and market demand.
Removed
As a result of the merger, we included the assets and liabilities of DCP Midstream, LLC’s Class A Segment (DCP Midstream Class A Segment), DCP Sand Hills Pipeline, LLC and DCP Southern Hills Pipeline, LLC in our consolidated balance sheet as of December 31, 2022, and the results of their operations and cash flows are reported in our consolidated statements of operations and cash flows from August 18, 2022 through December 31, 2022.
Removed
DCP Midstream Class A Segment’s market risks are solely attributable to market risks of DCP Midstream, LP (DCP LP), because DCP LP is the sole operational asset in DCP Midstream Class A Segment. DCP LP is exposed to market risks, including changes in commodity prices and interest rates.
Removed
DCP LP uses financial instruments such as forward contracts, swaps and futures to mitigate the effects of these risks. See Note 3—DCP Midstream, LLC and Gray Oak Holdings LLC Merger, in the Notes to Consolidated Financial Statements, for additional information on the structure of the merger.
Removed
Commodity Price Risk Generally, our policy is to remain exposed to the market prices of commodities. Consistent with this policy, we use derivative contracts to convert our exposure from fixed-price sales or purchase contracts, often specified in contracts with refined petroleum product customers, back to floating market prices.
Removed
Compliance with these limits is monitored daily by our global risk group. 80 Table of Contents Index to Financial Statements Phillips 66 uses a VaR model to estimate the loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on the derivative commodity instruments held or issued.
Removed
DCP LP’s use of derivative instruments is governed by a comprehensive risk management policy and a risk management committee that monitors and manages market risks associated with commodity prices. The risk management committee is composed of DCP LP’s senior executives who receive regular briefings on positions and exposures, credit exposures and overall risk management in the context of market activities.
Removed
The risk management committee is responsible for the overall management of commodity price and credit risks, including monitoring exposure limits.

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