Company Quick10K Filing
Phillips 66 Partners
Price56.73 EPS4
Shares228 P/E15
MCap12,910 P/FCF17
Net Debt2,835 EBIT892
TEV15,745 TEV/EBIT18
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-04-30
10-K 2020-12-31 Filed 2021-02-24
10-Q 2020-09-30 Filed 2020-10-30
10-Q 2020-06-30 Filed 2020-07-31
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-21
10-Q 2019-09-30 Filed 2019-10-25
10-Q 2019-06-30 Filed 2019-07-26
10-Q 2019-03-31 Filed 2019-04-30
10-K 2018-12-31 Filed 2019-02-22
10-Q 2018-09-30 Filed 2018-10-26
10-Q 2018-06-30 Filed 2018-07-27
10-Q 2018-03-31 Filed 2018-04-27
10-K 2017-12-31 Filed 2018-02-23
10-Q 2017-09-30 Filed 2017-10-27
10-Q 2017-06-30 Filed 2017-08-01
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-07-29
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-10-30
10-Q 2015-06-30 Filed 2015-07-31
10-Q 2015-03-31 Filed 2015-05-01
10-K 2014-12-31 Filed 2015-02-13
10-Q 2014-09-30 Filed 2014-10-30
10-Q 2014-06-30 Filed 2014-07-31
10-Q 2014-03-31 Filed 2014-05-01
10-K 2013-12-31 Filed 2014-02-21
10-Q 2013-09-30 Filed 2013-10-31
10-Q 2013-06-30 Filed 2013-08-20
8-K 2020-11-02
8-K 2020-10-30
8-K 2020-10-20
8-K 2020-10-01
8-K 2020-07-31
8-K 2020-07-21
8-K 2020-05-01
8-K 2020-04-21
8-K 2020-03-24
8-K 2020-02-25
8-K 2020-01-31
8-K 2020-01-21
8-K 2019-11-06
8-K 2019-10-25
8-K 2019-10-16
8-K 2019-09-03
8-K 2019-08-01
8-K 2019-08-01
8-K 2019-07-30
8-K 2019-07-26
8-K 2019-07-24
8-K 2019-07-17
8-K 2019-04-30
8-K 2019-04-17
8-K 2019-03-22
8-K 2019-02-08
8-K 2019-01-22
8-K 2018-12-10
8-K 2018-11-27
8-K 2018-10-26
8-K 2018-10-17
8-K 2018-07-27
8-K 2018-07-18
8-K 2018-04-27
8-K 2018-04-18
8-K 2018-02-26
8-K 2018-02-21
8-K 2018-02-02
8-K 2018-01-17

PSXP 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Description of The Business
Note 2 - Interim Financial Information
Note 3 - Operating Revenues
Note 4 - Equity Investments
Note 5 - Net Income (Loss) per Limited Partner Unit
Note 6 - Properties, Plants and Equipment
Note 7 - Debt
Note 8 - Contingencies
Note 9 - Equity
Note 10 - Related Party Transactions
Note 11 - Cash Flow Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 mlp-2021331_exhibit311.htm
EX-31.2 mlp-2021331_exhibit312.htm
EX-32 mlp-2021331_exhibit32.htm

Phillips 66 Partners Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
0.50.40.30.20.10.02012201420172020
Rev, G Profit, Net Income
1.10.60.1-0.3-0.8-1.32012201420172020
Ops, Inv, Fin

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number:
001-36011

Phillips 66 Partners LP
(Exact name of registrant as specified in its charter)
 
Delaware38-3899432
(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)
(855) 283-9237
(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 Units, Representing Limited Partner InterestsPSXPNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  
The registrant had 228,340,146 common units outstanding as of March 31, 2021.


Table of Contents
PHILLIPS 66 PARTNERS LP

TABLE OF CONTENTS
 

Page


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
 

Consolidated Statement of Income (Loss)
Phillips 66 Partners LP
Millions of Dollars
Three Months Ended
March 31
2021 2020 
Revenues and Other Income
Operating revenues—related parties$245 258 
Operating revenues—third parties7 9 
Equity in earnings of affiliates124 136 
Other income 1 
Total revenues and other income376 404 
Costs and Expenses
Operating and maintenance expenses95 88 
Depreciation34 30 
Impairments198  
General and administrative expenses17 17 
Taxes other than income taxes10 11 
Interest and debt expense33 29 
Other expenses 2 
Total costs and expenses387 177 
Income (loss) before income taxes(11)227 
Income tax expense 1 
Net Income (Loss)(11)226 
Less: Net income attributable to noncontrolling interest7  
Net Income (Loss) Attributable to the Partnership(18)226
Less: Preferred unitholders’ interest in net income (loss) attributable to the Partnership12 10 
Limited Partners’ Interest in Net Income (Loss) Attributable to the Partnership$(30)216 
Net Income (Loss) Attributable to the Partnership Per Limited Partner Unit (dollars)
Common units—basic$(0.13)0.95 
Common units—diluted(0.13)0.93 
Weighted-Average Limited Partner Units Outstanding (thousands)
Common units—basic228,340 228,312 
Common units—diluted228,340 242,132 
See Notes to Consolidated Financial Statements.
1

Table of Contents
Consolidated Statement of Comprehensive Income (Loss)
Phillips 66 Partners LP

Millions of Dollars
Three Months Ended
March 31
2021 2020 
Net Income (Loss)$(11)226 
Defined benefit plans
Plan sponsored by equity affiliates, net of income taxes(1) 
Other comprehensive loss(1) 
Comprehensive Income (Loss)(12)226
Less: Comprehensive income attributable to noncontrolling interest7  
Comprehensive Income (Loss) Attributable to the Partnership$(19)226 
See Notes to Consolidated Financial Statements.
2

Table of Contents
Consolidated Balance Sheet
Phillips 66 Partners LP
 
Millions of Dollars
March 31
2021
December 31
2020
Assets
Cash and cash equivalents
$3 7 
Accounts receivable—related parties
104 103 
Accounts receivable—third parties
3 3 
Materials and supplies
16 16 
Prepaid expenses and other current assets
17 11 
Total current assets
143 140 
Equity investments
3,029 3,244 
Net properties, plants and equipment
3,646 3,639 
Goodwill
185 185 
Other assets
50 50 
Total Assets
$7,053 7,258 
Liabilities
Accounts payable—related parties
$20 19 
Accounts payable—third parties
54 73 
Accrued interest
39 35 
Deferred revenues
38 27 
Short-term debt
500 465 
Accrued property and other taxes
12 11 
Other current liabilities
3 3 
Total current liabilities
666 633 
Long-term debt
3,444 3,444 
Other liabilities
90 90 
Total Liabilities
4,200 4,167 
Equity
Preferred unitholders (2021 and 2020—13,819,791 units issued and outstanding)
749 749 
Common unitholders—public (2021 and 2020—58,580,009 units issued and outstanding)
2,647 2,706 
Common unitholder—Phillips 66 (2021 and 2020—169,760,137 units issued and outstanding)
(828)(656)
Accumulated other comprehensive loss(2)(1)
Total unitholders’ equity
2,566 2,798 
Noncontrolling interest
287 293 
Total Equity
2,853 3,091 
Total Liabilities and Equity
$7,053 7,258 
See Notes to Consolidated Financial Statements.
3

Table of Contents
Consolidated Statement of Cash Flows
Phillips 66 Partners LP

Millions of Dollars

Three Months Ended
March 31

2021 2020 
Cash Flows From Operating Activities


Net income (loss)
$(11)226 
Adjustments to reconcile net income (loss) to net cash provided by operating activities


Depreciation
34 30 
Impairments198  
Undistributed equity earnings
(5)4 
Other
 2 
Working capital adjustments


Accounts receivable
(1)10 
Prepaid expenses and other current assets
(6)(4)
Accounts payable
2 (3)
Accrued interest
4 4 
Deferred revenues
11 3 
Other accruals
1 2 
Net Cash Provided by Operating Activities
227 274 


Cash Flows From Investing Activities


Cash capital expenditures and investments
(78)(236)
Liberty acquisition
 (75)
Return of investment from equity affiliates
39 38 
Net Cash Used in Investing Activities
(39)(273)


Cash Flows From Financing Activities


Issuance of debt
450  
Repayment of debt
(415) 
Issuance of common units
 2 
Quarterly distributions to preferred unitholders
(12)(9)
Quarterly distributions to common unitholders—public
(51)(51)
Quarterly distributions to common unitholder—Phillips 66
(149)(149)
Net proceeds from equity interest transfer
 12 
Distributions to noncontrolling interest(13) 
Other distributions to Phillips 66
(2) 
Net Cash Used in Financing Activities
(192)(195)


Net Change in Cash and Cash Equivalents
(4)(194)
Cash and cash equivalents at beginning of period
7 286 
Cash and Cash Equivalents at End of Period
$3 92 
See Notes to Consolidated Financial Statements.
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Consolidated Statement of Changes in Equity
Phillips 66 Partners LP
Millions of Dollars
Three Months Ended
March 31
Partnership
Preferred
Unitholders
Public
Common
Unitholders
Public
Common
Unitholder
Phillips 66
Accum. Other
Comprehensive
Loss
Noncontrolling
Interest
Total
December 31, 2020$749 2,706 (656)(1)293 3,091 
Net income (loss)12 (8)(22) 7 (11)
Other comprehensive loss   (1) (1)
Quarterly cash distributions to unitholders ($0.875 per common unit)
(12)(51)(149)  (212)
Distributions to noncontrolling interest    (13)(13)
Other distributions to Phillips 66  (1)  (1)
March 31, 2021$749 2,647 (828)(2)287 2,853 
December 31, 2019$746 2,717 (628)(1) 2,834 
Issuance of common units— 2 — — — 2 
Net income10 55 161 — — 226 
Quarterly cash distributions to unitholders ($0.875 per common unit)
(9)(51)(149)— — (209)
March 31, 2020$747 2,723 (616)(1) 2,853 

Units
Three Months Ended
March 31
Preferred Units
Public
Common Units
Public
Common Units
Phillips 66
Total Units
December 31, 202013,819,791 58,580,009 169,760,137 242,159,937 
Units issued in public equity offerings    
March 31, 202113,819,791 58,580,009 169,760,137 242,159,937 
December 31, 201913,819,791 58,539,439 169,760,137 242,119,367 
Units issued in public equity offerings— 40,570 — 40,570 
March 31, 202013,819,791 58,580,009 169,760,137 242,159,937 
See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial StatementsPhillips 66 Partners LP
 
Note 1—Description of the Business
Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners,” “the Partnership,” “us,” “our,” “we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries. References to Phillips 66 may refer to Phillips 66 and/or its subsidiaries, depending on the context. References to our “General Partner” or “GP” refer to Phillips 66 Partners GP LLC, and references to “Phillips 66 PDI” refer to Phillips 66 Project Development Inc., the Phillips 66 subsidiary that holds a limited partner interest in us and wholly owns our General Partner.

We are a growth-oriented master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets. Our operations consist of crude oil, refined petroleum products and natural gas liquids (NGL) transportation, terminaling, processing and storage assets. We conduct our operations through both wholly owned and joint venture operations. The majority of our wholly owned assets are associated with, and are integral to the operation of, nine of Phillips 66’s owned or joint venture refineries. Our operations consist of one reportable segment.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, storage and fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling crude oil, refined petroleum products and NGL. Since we do not own any of the crude oil, refined petroleum products and NGL we handle and do not engage in the trading of those commodities, we have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.


Note 2—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 our financial position, 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 audited consolidated financial statements and notes included in our 2020 Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results to be expected for the full year.

The COVID-19 pandemic continues to disrupt economic activities globally. Reduced demand for petroleum products has resulted in decreased volumes through logistics infrastructure. The depth and duration of the economic consequences of the COVID-19 pandemic remain uncertain. We continuously monitor our asset and investment portfolio for impairments in this challenging business environment. We recorded an impairment totaling $198 million in the first quarter of 2021, and additional impairments may be required in the future. See Note 4—Equity Investments for additional information.


Note 3—Operating Revenues

Operating revenues are primarily generated from long-term pipeline transportation, terminaling, storage, processing and fractionation lease and service agreements, mainly with Phillips 66. These agreements typically include escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. In addition, most of these agreements contain renewal options, which typically require the mutual consent of both our customers and us.
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Total operating revenues disaggregated by asset type were as follows:
Millions of Dollars
Three Months Ended
March 31
2021 2020 
Pipelines
$104111
Terminals
3943
Storage, processing and other revenues
109113
Total operating revenues
$252267


The majority of our agreements with Phillips 66 are considered operating leases under GAAP. The classification of a lease as either an operating or a financing lease requires judgment in assessing the contract’s lease and service components and in determining the asset’s fair value. We have elected to account for lease and service elements of contracts classified as leases on a combined basis, except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continue to separate the lease and service elements based on relative standalone prices and apply the lease standard to the lease element and the revenue standard to the service element.
Total operating revenues disaggregated by lease and service revenues were as follows:
Millions of Dollars
Three Months Ended
March 31
2021 2020 
Lease revenues$207 218 
Service revenues45 49 
Total operating revenues$252 267 


Accounts Receivable
We bill our customers, mainly Phillips 66, under our lease and service contracts generally on a monthly basis.

Total accounts receivable by revenue type was as follows:

Millions of Dollars
March 31
2021
December 31
2020
Lease receivables$89 87 
Service receivables18 19 
Total accounts receivable$107 106 


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Deferred Revenues
Our deferred revenues represent payments received from our customers, mainly Phillips 66, in advance of the period in which lease and service contract performance obligations have been fulfilled. The majority of our deferred revenues relate to a tolling agreement and a storage agreement that are classified as leases. The remainder of our deferred revenues relate to lease and service agreements that contain minimum volume commitments with recovery provisions. Our deferred revenues are recorded in the “Deferred revenues” and “Other liabilities” line items on our consolidated balance sheet.
Total deferred revenues under our lease and service agreements were as follows:
Millions of Dollars
March 31
2021
December 31
2020
Deferred lease revenues$54 45 
Deferred service revenues4 4 
Total deferred revenues$58 49 


Future Minimum Lease Payments from Customers
At March 31, 2021, future minimum payments to be received under our lease agreements with customers, mainly Phillips 66, were estimated to be:
Millions
of Dollars
Remainder of 2021$575 
2022752 
2023706 
2024588 
2025530 
Remaining years1,297 
Total future minimum lease payments from customers$4,448 


Remaining Performance Obligations
We typically have long-term service contracts with our customers, mainly Phillips 66, of which the original durations range from 5 to 15 years. The weighted-average remaining duration of these contracts is 9 years. These contracts include both fixed and variable transaction price components. At March 31, 2021, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that have an original expected duration of greater than one year were:

Millions
of Dollars
Remainder of 2021$99 
2022124 
2023123 
202499 
202595 
Remaining years381 
Total future service revenues$921 

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For the remaining service performance obligations, we applied the exemption for variable prices allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer distinct services as part of a performance obligation.


Note 4—Equity Investments

The following table summarizes the carrying value of our equity investments:

Millions of Dollars
Percentage
Ownership
March 31
2021
December 31
2020
Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (Bakken Pipeline)
25.00 %$575 577 
Bayou Bridge Pipeline, LLC (Bayou Bridge)40.00 281 288 
DCP Sand Hills Pipeline, LLC (Sand Hills)33.34 585 582 
DCP Southern Hills Pipeline, LLC (Southern Hills)33.34 217 217 
Explorer Pipeline Company (Explorer)21.94 89 92 
Gray Oak Pipeline, LLC65.00 843 860 
Liberty Pipeline LLC (Liberty)50.00 46 241 
Paradigm Pipeline LLC (Paradigm)50.00 140 141 
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)
70.00 15 15 
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)
25.00 175 167 
STACK Pipeline LLC (STACK)50.00 63 64 
Total equity investments$3,029 3,244 


Earnings from our equity investments were as follows:

Millions of Dollars
Three Months Ended
March 31
2021 2020 
Bakken Pipeline$44 57 
Bayou Bridge7 10 
Sand Hills27 41 
Southern Hills12 11 
Explorer3 7 
Gray Oak Pipeline, LLC21 5 
Liberty  
Paradigm5 4 
Phillips 66 Partners Terminal  
South Texas Gateway Terminal4  
STACK1 1 
Total equity in earnings of affiliates$124 136 


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Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)
In March 2019, a wholly owned subsidiary of Dakota Access issued $2.5 billion aggregate principal amount of senior unsecured notes. Dakota Access and ETCO have guaranteed repayment of the notes.  In addition, we and our co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering.  Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the ongoing litigation related to an easement granted by the U.S. Army Corps of Engineers (USACE) to allow the pipeline to be constructed under Lake Oahe in North Dakota. Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes. If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts. At March 31, 2021, our share of the maximum potential equity contributions under the CECU was approximately $631 million.

In July 2020, the trial court presiding over the litigation vacated Dakota Access’ easement under Lake Oahe and ordered the Dakota Access Pipeline to be shut down and emptied of crude oil pending the preparation of an Environmental Impact Statement (EIS) by the USACE, which had been ordered by the court in March 2020 and is now expected to be completed by March 2022. In August 2020, pending an appeal of the trial court’s decisions, an appellate court denied Dakota Access’ motion to stay the order vacating the easement, but granted its motion to stay the order that the pipeline be shut down while the EIS is prepared. In January 2021, the appellate court affirmed the trial court’s order vacating the easement and directing the USACE to prepare an EIS and reversed the order directing the pipeline to be shut down. Notwithstanding that the easement has been vacated, in April 2021, the USACE indicated that it currently intends to allow the pipeline to continue to operate while it proceeds with the EIS. Currently, there is a motion for a permanent injunction to shut down the pipeline before the trial court that could be decided at any time. Additionally, Dakota Access has requested the appellate court to stay its January 2021 decision pending a filing and disposition of a petition for writ of certiorari to the U.S. Supreme Court.

If the pipeline is required to cease operations, either permanently or pending the preparation of the EIS, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we also could be required to support our share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU.

Summarized financial information for 100% of Dakota Access is as follows:

Millions of Dollars
Three Months Ended
March 31
2021 2020 
Revenues$215 258 
Income before income taxes142 186 
Net income142 186 


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Gray Oak Pipeline, LLC
Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi and the Sweeny area, including the Phillips 66 Sweeny Refinery, as well as access to the Houston market. We have a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. In December 2018, a third party exercised its option to acquire a 35% interest in the holding company. Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP at that time. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet. We have an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering our co-venturer’s 35% interest in the consolidated holding company.

Liberty
At March 31, 2021, we held a 50% interest in Liberty, a joint venture formed to develop and construct the Liberty Pipeline system. Liberty was considered a VIE because it did not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We determined we were not the primary beneficiary because we and our co-venturer jointly directed the activities of Liberty that most significantly impact economic performance.

In the first quarter of 2021, we decided to exit the Liberty Pipeline project, which had previously been deferred due to the challenging business environment created by the COVID-19 pandemic. As a result, we recorded a $198 million impairment to reduce the book value of our investment in Liberty at March 31, 2021, to our share of the estimated fair value of the joint venture’s pipeline assets and net working capital. The impairment is included in the “Impairments” line item on our consolidated statement of income (loss). This valuation resulted in a Level 3 nonrecurring fair value measurement. At March 31, 2021, the book value of our investment in Liberty, and our maximum exposure to loss, was $46 million.

In April 2021, we transferred our ownership interest in Liberty to our co-venturer for cash and certain pipeline assets with an estimated fair value that approximated our book value at March 31, 2021.


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Note 5—Net Income (Loss) Per Limited Partner Unit

We calculate net income (loss) attributable to the Partnership per limited partner unit by dividing the limited partners’ interest in net income (loss) by the weighted-average number of common units outstanding for the period. After considering the period’s cash distributions declared, the remaining undistributed earnings or excess distributions declared over earnings, if any, are allocated to participating securities in accordance with the contractual terms of our partnership agreement and as prescribed under the two-class method for those periods in which we have participating securities. Our preferred units became participating securities effective October 1, 2020. See Note 9—Equity for additional information on our preferred units.

For the diluted net income (loss) per limited partner unit calculation, the preferred units are assumed to be converted at the beginning of the period into common limited partner units on a one-for-one basis, and the distribution formula for available cash in our partnership agreement is recalculated, using the original available cash amount increased only for the preferred distributions declared which would not have been paid after conversion. Any potentially dilutive securities are excluded from the diluted earnings per unit computation if the effect of including such securities would be anti-dilutive.

Millions of Dollars
Three Months Ended
March 31
2021 2020 
Net income (loss) attributable to the Partnership$(18)226 
Less:
Limited partners’ distributions declared on preferred units*12 10 
Limited partners’ distributions declared on common units*200 199 
Distributions less than (more than) net income (loss) attributable to the Partnership
$(230)17 
*Distributions declared are attributable to the indicated periods.

Limited
Partners’
Common
Units
Limited
Partners’
Preferred
Units
Total
Three Months Ended March 31, 2021
Net income (loss) attributable to the Partnership (millions):
Distributions declared$200 12 212 
Distributions more than net income (loss) attributable to the Partnership(230) (230)
Net income (loss) attributable to the Partnership—basic(30)12 (18)
Dilutive effect of preferred units 
Net income (loss) attributable to the Partnership—diluted$(30)
Weighted-average units outstanding—basic228,340,146 
Dilutive effect of preferred units 
Weighted-average units outstanding—diluted228,340,146 
Net income (loss) attributable to the Partnership per limited partner unit—basic (dollars)
$(0.13)
Net income (loss) attributable to the Partnership per limited partner unit—diluted (dollars)
(0.13)


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Limited
Partners’
Common
Units
Limited
Partners’
Preferred
Units
Total
Three Months Ended March 31, 2020
Net income attributable to the Partnership (millions):
Distributions declared$199 10 209 
Distributions less than net income attributable to the Partnership17  17 
Net income attributable to the Partnership—basic216 10 226 
Dilutive effect of preferred units10 
Net income attributable to the Partnership—diluted$226 
Weighted-average units outstanding—basic228,312,261 
Dilutive effect of preferred units13,819,791 
Weighted-average units outstanding—diluted242,132,052 
Net income attributable to the Partnership per limited partner unit—basic (dollars)
$0.95 
Net income attributable to the Partnership per limited partner unit—diluted (dollars)
0.93 


On April 20, 2021, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.875 per common unit, which will result in a total distribution of $200 million attributable to the first quarter of 2021. This distribution is payable on May 14, 2021, to common unitholders of record as of April 30, 2021.

Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders. Preferred unitholders will receive $12 million of distributions attributable to the first quarter of 2021. This distribution is payable May 14, 2021, to preferred unitholders of record as of April 30, 2021.


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Note 6—Properties, Plants and Equipment

Our investment in properties, plants and equipment (PP&E), with the associated accumulated depreciation, was:

Millions of Dollars
March 31
2021
December 31
2020
Land
$19 19 
Buildings and improvements
116 115 
Pipelines and related assets*
1,527 1,518 
Terminals and related assets*
849 847 
Rail racks and related assets*
137 137 
Processing and related assets*
1,064 1,063 
Caverns and related assets*
733 732 
Construction-in-progress
420 394 
Gross PP&E
4,865 4,825 
Accumulated depreciation
(1,219)(1,186)
Net PP&E
$3,646 3,639 
*Assets for which we are the lessor.

Note 7—Debt
Millions of Dollars
March 31
2021
December 31
2020
2.450% Senior Notes due December 2024
$300 300 
3.605% Senior Notes due February 2025
500 500 
3.550% Senior Notes due October 2026
500 500 
3.750% Senior Notes due March 2028
500 500 
3.150% Senior Notes due December 2029
600 600 
4.680% Senior Notes due February 2045
450 450 
4.900% Senior Notes due October 2046
625 625 
Tax-exempt bonds due April 2021, at weighted-average rates of 0.260% and 0.360% at March 31, 2021, and December 31, 2020, respectively
50 50 
Revolving credit facility borrowings due April 2021 at weighted-average rate of 1.345%
450 415 
Debt at face value3,975 3,940 
Net unamortized discounts and debt issuance costs(31)(31)
Total debt3,944 3,909 
Short-term debt(500)(465)
Long-term debt$3,444 3,444 


The fair value of our fixed-rate and floating-rate debt is estimated based on observable market prices and is classified as Level 2 of the fair value hierarchy. The fair value of our fixed-rate debt was $3,679 million and $3,752 million at March 31, 2021, and December 31, 2020, respectively. The fair value of our floating-rate debt approximated carrying value of $500 million and $465 million at March 31, 2021, and December 31, 2020, respectively.

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At March 31, 2021, and December 31, 2020, borrowings of $450 million and $415 million were outstanding under our $750 million revolving credit facility, respectively. At both March 31, 2021, and December 31, 2020, $1 million in letters of credit had been issued that were supported by this facility.

Debt Repayment
On April 1, 2021, we repaid the two remaining $25 million tranches of tax-exempt bonds due April 2021, totaling $50 million.

Debt Issuance
On April 6, 2021, we entered into a $450 million term loan agreement and borrowed the full amount. The term loan agreement has a maturity date of April 5, 2022, and the outstanding borrowings can be repaid at any time and from time to time, in whole or in part, without premium or penalty. Borrowings bear interest at a floating rate based on either a Eurodollar rate or a reference rate, plus a margin of 0.875%. Proceeds were primarily used to repay amounts borrowed under our $750 million revolving credit facility.


Note 8—Contingencies

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

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

Environmental
We are subject to federal, state and local environmental laws and regulations. We record accruals for contingent environmental liabilities based on management’s best estimates, using all information that is available at the time. We measure estimates and base liabilities on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. Environmental Protection Agency or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable. At March 31, 2021, and December 31, 2020, our total environmental accruals were not material.

In the future, we may be involved in additional environmental assessments, cleanups and proceedings.
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Legal Proceedings
Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. The process facilitates the early evaluation and quantification of potential exposures in individual cases and enables tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, Phillips 66’s legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required. As of March 31, 2021, and December 31, 2020, we did not have any material accrued contingent liabilities associated with litigation matters.

Indemnification and Excluded Liabilities
Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize noncash expenses and associated noncash capital contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.


Note 9—Equity

ATM Programs
We have authorized an aggregate of $750 million under three $250 million continuous offerings of common units, or at-the-market (ATM) programs. The first two programs concluded in June 2018 and December 2019, respectively. We suspended issuances under the ATM program in the first quarter of 2020 due to low common unit prices. We did not issue any common units under the current ATM program during the three months ended March 31, 2021.

Preferred Units
Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders as if such preferred units had converted into common units immediately prior to the record date. The holders of the preferred units may convert their preferred units into common units, on a one-for-one basis, at any time, in full or in part, subject to minimum conversion amounts and conditions.


Note 10—Related Party Transactions

Commercial Agreements
We have entered into long-term, fee-based commercial agreements with Phillips 66 to provide transportation, terminaling, storage, stevedoring, fractionation, processing, and rail terminal services. Under these agreements, Phillips 66 commits to provide us with minimum transportation, throughput or storage volumes, or minimum monthly service fees. If Phillips 66 does not meet its minimum volume commitments under an agreement, Phillips 66 pays us a deficiency payment based on the calculation described in the agreement.

Amended and Restated Operational Services Agreement
Under our amended and restated operational services agreement, we reimburse Phillips 66 for certain operational services provided in support of our pipelines, terminaling, processing, and storage facilities. These services include routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and Phillips 66 may mutually agree upon from time to time.
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Amended Omnibus Agreement
The amended omnibus agreement addresses our payment of an operating and administrative support fee and our obligation to reimburse Phillips 66 for all other direct or allocated costs and expenses incurred by Phillips 66 in providing general and administrative services. Additionally, the omnibus agreement addresses Phillips 66’s indemnification to us and our indemnification to Phillips 66 for certain environmental and other liabilities. Further, it addresses the granting of a license from Phillips 66 to us with respect to the use of certain Phillips 66 trademarks.

The operational and administrative support fee is for the provision of certain services, including: logistical services; asset oversight, such as operational management and supervision; corporate engineering services, including asset integrity and regulatory services; business development services; executive services; financial and administrative services (including treasury and accounting); information technology; legal services; corporate health, safety and environmental services; facility services; human resources services; procurement services; investor relations; tax matters; and public company reporting services. We pay Phillips 66 an operational and administrative support fee under the terms of our amended omnibus agreement in the amount of $8 million per month.

We also reimburse Phillips 66 for all other direct or allocated costs incurred on behalf of us, pursuant to the terms of our amended omnibus agreement. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the functional nature of the services performed for our operations. Under our amended and restated operational services agreement, we reimburse Phillips 66 for the provision of certain operational services in support of our operating assets. Additionally, we pay Phillips 66 for insurance services provided to us, and recoveries under these policies are recorded as an offset to our expenses. Operating and maintenance expenses also include volumetric gains and losses associated with volumes transported by Phillips 66.

Tax Sharing Agreement
Under our tax sharing agreement, we reimburse Phillips 66 for our share of state and local income and other taxes incurred by Phillips 66 due to our results of operations being included in a combined or consolidated tax return filed by Phillips 66. Any reimbursement is limited to the tax that we (and our subsidiaries) would have paid had we not been included in a combined group with Phillips 66. Phillips 66 may use its tax attributes to cause its combined or consolidated group to owe no tax; however, we would nevertheless reimburse Phillips 66 for the tax we would have owed, even though Phillips 66 had no cash expense for that period.

Related Party Transactions
Significant related party transactions included in our costs and expenses were:

Millions of Dollars
Three Months Ended
March 31
2021 2020 
Operating and maintenance expenses$58 48 
General and administrative expenses15 17 


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Other related party balances were included in the following line items on our consolidated balance sheet, all of which were related to commercial agreements with Phillips 66:

Millions of Dollars
March 31
2021
December 31
2020
Prepaid expenses and other current assets
$117
Other assets
4747
Deferred revenues
3827
Other current liabilities
11
Other liabilities
6364


Equity Affiliate Arrangements
In March 2019, we and our co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering. See Note 4—Equity Investments, for additional information.


Note 11—Cash Flow Information

Capital Expenditures and Investments
Our capital expenditures and investments consisted of:
Millions of Dollars
Three Months Ended
March 31
2021 2020 
Cash capital expenditures and investments$78 236 
Change in capital expenditure accruals(20)(2)
Total capital expenditures and investments$58 234 


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

Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners,” “the Partnership,” “us,” “our,” “we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries. References to Phillips 66 may refer to Phillips 66 and/or its subsidiaries, depending on the context. References to our “General Partner” refer to Phillips 66 Partners GP LLC, and references to “Phillips 66 PDI” refer to Phillips 66 Project Development Inc., the Phillips 66 subsidiary that holds a limited partner interest in us and wholly owns our General Partner.

Management’s Discussion and Analysis is the Partnership’s analysis of its financial performance, 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 report. It contains forward-looking statements including, without limitation, statements relating to the Partnership’s plans, strategies, objectives, expectations and intentions. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions normally identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The Partnership does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the Partnership’s disclosures under the heading: “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.”


EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT

Partnership Overview
We are a growth-oriented master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets. Our operations consist of crude oil, refined petroleum products and natural gas liquids (NGL) transportation, terminaling, processing and storage assets. We conduct our operations through both wholly owned and joint venture operations. The majority of our wholly owned assets are associated with, and are integral to the operation of, nine of Phillips 66’s owned or joint venture refineries.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, storage and fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling crude oil, refined petroleum products and NGL.

Our common units trade on the New York Stock Exchange under the symbol PSXP.

How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics to analyze our performance, including: (1) volumes handled; (2) operating and maintenance expenses; (3) net income (loss) before net interest expense, income taxes, depreciation and amortization (EBITDA); (4) adjusted EBITDA; and (5) distributable cash flow.

Volumes Handled
The amount of revenue we generate primarily depends on the volumes of crude oil, refined petroleum products and NGL that we handle in our pipeline, terminal, rail rack, processing, storage and fractionator systems. In addition, our equity affiliates generate revenue from transporting and terminaling crude oil, refined petroleum products and NGL. These volumes are primarily affected by the supply of, and demand for, crude oil, refined petroleum products and NGL in the markets served directly or indirectly by our assets, as well as the operational status of the refineries served by our assets. Phillips 66 has committed to minimum throughput volumes under many of our commercial agreements.

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Operating and Maintenance Expenses
Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses primarily consist of labor expenses (including contractor services), utility costs, and repair and maintenance expenses. Operating and maintenance expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities, particularly maintenance activities, performed during the period. Our processing assets are periodically subject to major maintenance, or turnaround activities, which can significantly increase operating and maintenance expenses in a given year. Although we seek to manage our maintenance expenditures on our facilities to avoid significant variability in our quarterly cash flows, we balance this approach with our high standards of safety and environmental stewardship, such that critical maintenance is regularly