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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
Commission file number:001-35349

Phillips 66
(Exact name of registrant as specified in its charter) 
Delaware 45-3779385
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

2331 CityWest Blvd., Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
281-293-6600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValuePSXNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  
The registrant had 438,100,273 shares of common stock, $0.01 par value, outstanding as of September 30, 2021.


PHILLIPS 66

TABLE OF CONTENTS
 



PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
 
Consolidated Statement of OperationsPhillips 66

 Millions of Dollars
 Three Months Ended
September 30
Nine Months Ended
September 30
 2021 2020 2021 2020 
Revenues and Other Income
Sales and other operating revenues$30,243 15,929 78,872 47,720 
Equity in earnings of affiliates982 349 2,097 871 
Net gain on dispositions9 1 11 87 
Other income 238 20 304 48 
Total Revenues and Other Income31,472 16,299 81,284 48,726 
Costs and Expenses
Purchased crude oil and products27,529 14,509 72,812 42,557 
Operating expenses1,166 1,016 3,721 3,383 
Selling, general and administrative expenses424 384 1,265 1,112 
Depreciation and amortization361 352 1,081 1,037 
Impairments1,298 1,140 1,496 4,146 
Taxes other than income taxes85 106 343 377 
Accretion on discounted liabilities6 6 18 17 
Interest and debt expense151 132 440 360 
Foreign currency transaction (gains) losses4 4 (5)10 
Total Costs and Expenses31,024 17,649 81,171 52,999 
Income (loss) before income taxes448 (1,350)113 (4,273)
Income tax benefit(40)(624)(110)(1,053)
Net Income (Loss)488 (726)223 (3,220)
Less: net income attributable to noncontrolling interests86 73 179 216 
Net Income (Loss) Attributable to Phillips 66$402 (799)44 (3,436)
Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic$0.91 (1.82)0.08 (7.83)
Diluted0.91 (1.82)0.08 (7.83)
Weighted-Average Common Shares Outstanding (thousands)
Basic440,193 438,916 439,880 439,670 
Diluted440,368 438,916 440,259 439,670 
See Notes to Consolidated Financial Statements.
1

Consolidated Statement of Comprehensive Income (Loss)Phillips 66
 
 Millions of Dollars
 Three Months Ended
September 30
Nine Months Ended
September 30
 2021 2020 2021 2020 
Net Income (Loss)$488 (726)223 (3,220)
Other comprehensive income (loss)
Defined benefit plans
Net actuarial gain (loss) arising during the period  210 (300)
Amortization of net actuarial loss, prior service credit and settlements36 34 105 112 
Plans sponsored by equity affiliates4 4 33 9 
Income taxes on defined benefit plans(8)(10)(82)44 
Defined benefit plans, net of income taxes32 28 266 (135)
Foreign currency translation adjustments(74)155 (70)(41)
Income taxes on foreign currency translation adjustments2 (4)2 (3)
Foreign currency translation adjustments, net of income taxes(72)151 (68)(44)
Cash flow hedges 2 3 (7)
Income taxes on hedging activities  (1)2 
Hedging activities, net of income taxes 2 2 (5)
Other Comprehensive Income (Loss), Net of Income Taxes(40)181 200 (184)
Comprehensive Income (Loss)448 (545)423 (3,404)
Less: comprehensive income attributable to noncontrolling interests86 73 179 216 
Comprehensive Income (Loss) Attributable to Phillips 66$362 (618)244 (3,620)
See Notes to Consolidated Financial Statements.
2

Consolidated Balance SheetPhillips 66
 
 Millions of Dollars
 September 30
2021
December 31
2020
Assets
Cash and cash equivalents$2,897 2,514 
Accounts and notes receivable (net of allowances of $36 million in 2021 and $37 million in 2020)
6,527 5,688 
Accounts and notes receivable—related parties1,479 834 
Inventories4,400 3,893 
Prepaid expenses and other current assets716 347 
Total Current Assets16,019 13,276 
Investments and long-term receivables14,059 13,624 
Net properties, plants and equipment22,377 23,716 
Goodwill1,425 1,425 
Intangibles822 843 
Other assets1,705 1,837 
Total Assets$56,407 54,721 
Liabilities
Accounts payable$8,203 5,171 
Accounts payable—related parties1,012 378 
Short-term debt 1,489 987 
Accrued income and other taxes1,287 1,351 
Employee benefit obligations464 573 
Other accruals1,466 1,058 
Total Current Liabilities13,921 9,518 
Long-term debt13,421 14,906 
Asset retirement obligations and accrued environmental costs680 657 
Deferred income taxes5,434 5,644 
Employee benefit obligations1,123 1,341 
Other liabilities and deferred credits1,231 1,132 
Total Liabilities35,810 33,198 
Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)
     Issued (2021—649,872,100 shares; 2020—648,643,223 shares)
Par value6 6 
Capital in excess of par20,488 20,383 
Treasury stock (at cost: 2021 and 2020—211,771,827 shares)
(17,116)(17,116)
Retained earnings15,350 16,500 
Accumulated other comprehensive loss(589)(789)
Total Stockholders’ Equity18,139 18,984 
Noncontrolling interests2,458 2,539 
Total Equity20,597 21,523 
Total Liabilities and Equity$56,407 54,721 
See Notes to Consolidated Financial Statements.
3

Consolidated Statement of Cash FlowsPhillips 66
 Millions of Dollars
 Nine Months Ended
September 30
 2021 2020 
Cash Flows From Operating Activities
Net income (loss)$223 (3,220)
Adjustments to reconcile net income (loss) to net cash provided by operating
   activities
Depreciation and amortization1,081 1,037 
Impairments1,496 4,146 
Accretion on discounted liabilities18 17 
Deferred income taxes(290)2 
Undistributed equity earnings(78)254 
Net gain on dispositions(5)(87)
Unrealized investment gain(224) 
Other289 52 
Working capital adjustments
Accounts and notes receivable(1,465)2,684 
Inventories(495)(1,134)
Prepaid expenses and other current assets(369)(40)
Accounts payable3,723 (2,985)
Taxes and other accruals313 746 
Net Cash Provided by Operating Activities4,217 1,472 
Cash Flows From Investing Activities
Capital expenditures and investments(1,263)(2,414)
Return of investments in equity affiliates 236 139 
Proceeds from asset dispositions26 3 
Advances/loans—related parties(310)(251)
Collection of advances/loans—related parties1 44 
Other(5)(87)
Net Cash Used in Investing Activities(1,315)(2,566)
Cash Flows From Financing Activities
Issuance of debt450 3,305 
Repayment of debt(1,485)(546)
Issuance of common stock24 6 
Repurchase of common stock (443)
Dividends paid on common stock(1,182)(1,182)
Distributions to noncontrolling interests(239)(201)
Repurchase of noncontrolling interests(24) 
Other(36)(20)
Net Cash Provided by (Used in) Financing Activities(2,492)919 
Effect of Exchange Rate Changes on Cash and Cash Equivalents(27)23 
Net Change in Cash and Cash Equivalents383 (152)
Cash and cash equivalents at beginning of period2,514 1,614 
Cash and Cash Equivalents at End of Period$2,897 1,462 
See Notes to Consolidated Financial Statements.
4

Consolidated Statement of Changes in EquityPhillips 66

Millions of Dollars
Three Months Ended September 30
 Attributable to Phillips 66 
 Common Stock   
 Par ValueCapital in Excess of ParTreasury StockRetained EarningsAccum. Other Comprehensive LossNoncontrolling InterestsTotal
June 30, 2021$6 20,463 (17,116)15,345 (549)2,453 20,602 
Net income   402  86 488 
Other comprehensive loss    (40) (40)
Dividends paid on common stock ($0.90 per share)
   (394)  (394)
Benefit plan activity 25  (3)  22 
Distributions to noncontrolling interests
     (81)(81)
September 30, 2021$6 20,488 (17,116)15,350 (589)2,458 20,597 
June 30, 2020$6 20,342 (17,116)18,631 (1,148)2,580 23,295 
Net income (loss)— — — (799)— 73 (726)
Other comprehensive income— — — — 181 — 181 
Dividends paid on common stock ($0.90 per share)
— — — (393)— — (393)
Benefit plan activity— 21 — (3)— — 18 
Net distributions to noncontrolling interests— — — — — (70)(70)
September 30, 2020$6 20,363 (17,116)17,436 (967)2,583 22,305 


Shares
Three Months Ended September 30
 Common Stock IssuedTreasury Stock
June 30, 2021649,761,235 211,771,827 
Repurchase of common stock   
Shares issued—share-based compensation110,865  
September 30, 2021649,872,100 211,771,827 
June 30, 2020648,468,487 211,771,827 
Repurchase of common stock —  
Shares issued—share-based compensation103,525 — 
September 30, 2020648,572,012 211,771,827 
See Notes to Consolidated Financial Statements.






5

Consolidated Statement of Changes in EquityPhillips 66
Millions of Dollars
Nine Months Ended September 30
Attributable to Phillips 66
Common Stock
Par ValueCapital in Excess of ParTreasury StockRetained EarningsAccum. Other Comprehensive LossNoncontrolling InterestsTotal
December 31, 2020$6 20,383 (17,116)16,500 (789)2,539 21,523 
Net income   44  179 223 
Other comprehensive income    200  200 
Dividends paid on common stock ($2.70 per share)
   (1,182)  (1,182)
Benefit plan activity 105  (10)  95 
Distributions to noncontrolling interests     (239)(239)
Repurchase of noncontrolling interests   (2) (21)(23)
September 30, 2021$6 20,488 (17,116)15,350 (589)2,458 20,597 
December 31, 2019$6 20,301 (16,673)22,064 (788)2,259 27,169 
Net income (loss)— — — (3,436)— 216 (3,220)
Other comprehensive loss— — — — (184)— (184)
Dividends paid on common stock ($2.70 per share)
— — — (1,182)— — (1,182)
Repurchase of common stock— — (443)— — — (443)
Benefit plan activity— 62 — (8)— — 54 
Transfer of equity interest— — — — — 305 305 
Net distributions to noncontrolling interests— — — — — (197)(197)
Other— — — (2)5 — 3 
September 30, 2020$6 20,363 (17,116)17,436 (967)2,583 22,305 

Shares
Nine Months Ended September 30
Common Stock IssuedTreasury Stock
December 31, 2020648,643,223 211,771,827 
Repurchase of common stock  
Shares issued—share-based compensation1,228,877  
September 30, 2021649,872,100 211,771,827 
December 31, 2019647,416,633 206,390,806 
Repurchase of common stock— 5,381,021 
Shares issued—share-based compensation1,155,379 — 
September 30, 2020648,572,012 211,771,827 
See Notes to Consolidated Financial Statements.

6

Notes to Consolidated Financial StatementsPhillips 66

Note 1—Interim Financial Information

The unaudited interim financial information presented in the financial statements included in this report is prepared in accordance with generally accepted accounting principles in the United States (GAAP) and includes all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of the consolidated financial position of Phillips 66 and its results of operations and cash flows for the periods presented. Unless otherwise specified, all such adjustments are of a normal and recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2020 Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results expected for the full year.


Note 2—Sales and Other Operating Revenues

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

 Millions of Dollars
 Three Months Ended
September 30
Nine Months Ended
September 30
 2021 2020 2021 2020 
Product Line and Services
Refined petroleum products$24,838 12,573 63,057 37,431 
Crude oil resales3,091 2,198 9,484 6,565 
Natural gas liquids (NGL)2,331 966 6,048 2,645 
Services and other*
(17)192 283 1,079 
Consolidated sales and other operating revenues
$30,243 15,929 78,872 47,720 
Geographic Location**
United States$24,011 12,125 61,920 36,212 
United Kingdom2,948 1,850 8,070 5,131 
Germany1,194 805 3,049 2,276 
Other foreign countries2,090 1,149 5,833 4,101 
Consolidated sales and other operating revenues
$30,243 15,929 78,872 47,720 
* Includes derivatives-related activities. See Note 12—Derivatives and Financial Instruments, for additional information.
** Sales and other operating revenues are attributable to countries based on the location of the operations generating the revenues.



7

Contract-Related Assets and Liabilities
At September 30, 2021, and December 31, 2020, receivables from contracts with customers were $6,341 million and $3,911 million, respectively. Significant noncustomer balances, such as buy/sell receivables and excise tax receivables, were excluded from these amounts.

Our contract-related assets also include payments we make to our marketing customers related to incentive programs. An incentive payment is initially recognized as an asset and subsequently amortized as a reduction to revenue over the contract term, which generally ranges from 5 to 15 years. At September 30, 2021, and December 31, 2020, our asset balances related to such payments were $435 million and $404 million, respectively.

Our contract liabilities represent advances from our customers prior to product or service delivery. At September 30, 2021, and December 31, 2020, contract liabilities were immaterial.

Remaining Performance Obligations
Most of our contracts with customers are spot contracts or term contracts with only variable consideration. We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less or because the variable consideration has been allocated entirely to the unsatisfied performance obligations. We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing. At September 30, 2021, the remaining performance obligations related to these minimum volume commitment contracts were immaterial.


Note 3—Credit Losses

We are exposed to credit losses primarily through our sales of refined petroleum products, crude oil and NGL. We assess each counterparty’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the counterparty’s established credit rating or our assessment of the counterparty’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risk, and business strategy in our evaluation. A credit limit is established for each counterparty based on the outcome of this review. We may require collateralized asset support or a prepayment to mitigate credit risk.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities include timely account reconciliations, dispute resolution and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

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

At September 30, 2021, and December 31, 2020, we reported $8,006 million and $6,522 million of accounts and notes receivable, net of allowances of $36 million and $37 million, respectively. Based on an aging analysis at September 30, 2021, more than 95% of our accounts receivable were outstanding less than 60 days.

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


8

Note 4—Inventories

Inventories consisted of the following:

 Millions of Dollars
 September 30
2021
December 31
2020
Crude oil and petroleum products$4,015 3,536 
Materials and supplies385 357 
$4,400 3,893 


Inventories valued on the last-in, first-out (LIFO) basis totaled $3,828 million and $3,368 million at September 30, 2021, and December 31, 2020, respectively. The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $6.1 billion and $2.7 billion at September 30, 2021, and December 31, 2020, respectively.

Certain planned reductions in inventory that are not expected to be replaced by the end of the year cause liquidations of LIFO inventory values. LIFO inventory liquidations decreased our net income by $17 million and $99 million in the three and nine months ended September 30, 2021, respectively. The impact was immaterial for the corresponding periods of 2020.


9

Note 5—Investments, Loans and Long-Term Receivables

Equity Investments

Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)
In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North Dakota and later vacated the easement. Although the easement has been vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS, which is expected to be completed in the second half of 2022. In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and in June 2021, dismissed the litigation. It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed. In September 2021, Dakota Access filed a writ of certiorari, requesting the U.S. Supreme Court to review the lower court’s judgment that ordered the EIS and vacated the easement.

Dakota Access and ETCO have guaranteed repayment of $2.5 billion aggregate principal amount of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access. In addition, Phillips 66 Partners LP (Phillips 66 Partners) and its co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access in certain circumstances relating to the litigation described above. At September 30, 2021, Phillips 66 Partners’ share of the maximum potential equity contributions under the CECU was approximately $631 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, Phillips 66 Partners also could be required to support its share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU.

At September 30, 2021, the aggregate book value of Phillips 66 Partners’ investments in Dakota Access and ETCO was $579 million.

CF United LLC (CF United)
We hold a 50% voting interest and a 48% economic interest in CF United, a retail marketing joint venture with operations primarily on the U.S. West Coast. CF United is considered a variable interest entity (VIE) because our co-venturer has an option to require us to purchase its interest based on a fixed multiple. The put option becomes effective July 1, 2023, and expires on March 31, 2024. The put option is viewed as a variable interest as the purchase price on the exercise date may not represent the then-current fair value of CF United. We have determined that we are not the primary beneficiary because we and our co-venturer jointly direct the activities of CF United that most significantly impact economic performance. At September 30, 2021, our maximum exposure to loss was comprised of our $271 million investment in CF United, and any potential future loss resulting from the put option should the purchase price based on a fixed multiple exceed the then-current fair value of CF United.

OnCue Holdings, LLC (OnCue)
We hold a 50% interest in OnCue, a joint venture that owns and operates retail convenience stores. We fully guaranteed various debt agreements of OnCue and our co-venturer did not participate in the guarantees. This entity is considered a VIE because our debt guarantees resulted in OnCue not being exposed to all potential losses. We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact economic performance. At September 30, 2021, our maximum exposure to loss was $183 million, which represented the book value of our investment in OnCue of $113 million and guaranteed debt obligations of $70 million.


10

Liberty Pipeline LLC (Liberty)
In the first quarter of 2021, Phillips 66 Partners’ decision to exit the Liberty Pipeline project resulted in a $198 million before-tax impairment of its investment in Liberty. The impairment is included in the “Impairments” line item on our consolidated statement of operations for the nine months ended September 30, 2021. See Note 7—Impairments, and Note 13—Fair Value Measurements, for additional information regarding the impairment and the techniques used to determine the fair value of Phillips 66 Partners’ investment in Liberty. In April 2021, Phillips 66 Partners transferred its ownership interest in Liberty to its co-venturer for cash and certain pipeline assets with a value that approximated its book value of $46 million at March 31, 2021.

Other Investments
In September 2021, we acquired 78 million ordinary shares in NOVONIX Limited (NOVONIX), representing a 16% ownership interest, for $150 million. NOVONIX is a Brisbane, Australia-based company listed on the Australian Securities Exchange that develops and supplies materials for lithium-ion batteries. Since we do not have significant influence over the operating and financial policies of NOVONIX and the shares we own have a readily determinable fair value, our investment is recorded at fair value at the end of each reporting period. The fair value of our investment is recorded in the “Investments and long-term receivables” line item on our consolidated balance sheet, and the change in the fair value of our investment, or unrealized gain (loss), is recorded in the “Other income” line item on our consolidated statement of operations. The fair value of our investment in NOVONIX was $374 million at September 30, 2021, and the unrealized investment gain was $224 million for the three and nine months ended September 30, 2021. See Note 13—Fair Value Measurements, for additional information regarding the recurring fair value measurement of our investment in NOVONIX.

Related Party Loans
We and our co-venturer provided member loans to WRB Refining LP (WRB). At September 30, 2021, our 50% share of the outstanding member loan balance, including accrued interest, was $593 million.


Note 6—Properties, Plants and Equipment

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

 Millions of Dollars
 September 30, 2021December 31, 2020
 Gross
PP&E
Accum.
D&A
  Net
PP&E
Gross
PP&E
Accum.
D&A
Net
PP&E
Midstream$12,435 2,975 9,460 12,313 2,815 9,498 
Chemicals      
Refining25,378 14,033 11,345 24,647 12,019 12,628 
Marketing and Specialties1,802 1,028 774 1,815 1,007 808 
Corporate and Other1,524 726 798 1,448 666 782 
$41,139 18,762 22,377 40,223 16,507 23,716 


See Note 7—Impairments, for information regarding a PP&E impairment associated with our Alliance Refinery asset group.
11

Note 7—Impairments

Millions of Dollars
 Three Months Ended
September 30
Nine Months Ended
September 30
 2021202020212020
Midstream$10 204 208 1,365 
Refining1,288 911 1,288 2,756 
Corporate and Other 25  25 
Total impairments$1,298 1,140 1,496