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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, 2020
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 436,800,185 shares of common stock, $0.01 par value, outstanding as of September 30, 2020.


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PHILLIPS 66

TABLE OF CONTENTS
 
 Page



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
 2020 2019 2020 2019 
Revenues and Other Income
Sales and other operating revenues$15,929 27,218 47,720 78,168 
Equity in earnings of affiliates349 499 871 1,663 
Net gain on dispositions1 18 87 19 
Other income 20 36 48 97 
Total Revenues and Other Income16,299 27,771 48,726 79,947 
Costs and Expenses
Purchased crude oil and products14,509 23,806 42,557 69,415 
Operating expenses1,016 1,206 3,383 3,678 
Selling, general and administrative expenses384 416 1,112 1,190 
Depreciation and amortization352 336 1,037 1,001 
Impairments1,140 853 4,146 856 
Taxes other than income taxes106 105 377 330 
Accretion on discounted liabilities6 6 17 17 
Interest and debt expense132 109 360 343 
Foreign currency transaction (gains) losses4 (9)10 5 
Total Costs and Expenses17,649 26,828 52,999 76,835 
Income (loss) before income taxes(1,350)943 (4,273)3,112 
Income tax expense (benefit)(624)150 (1,053)545 
Net Income (Loss)(726)793 (3,220)2,567 
Less: net income attributable to noncontrolling interests
73 81 216 227 
Net Income (Loss) Attributable to Phillips 66$(799)712 (3,436)2,340 
Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic
$(1.82)1.58 (7.83)5.15 
Diluted
(1.82)1.58 (7.83)5.13 
Weighted-Average Common Shares Outstanding (thousands)
Basic438,916 449,005 439,670 453,398 
Diluted438,916 451,001 439,670 455,810 
See Notes to Consolidated Financial Statements.
1

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Consolidated Statement of Comprehensive Income (Loss)Phillips 66
 
 Millions of Dollars
 Three Months Ended
September 30
Nine Months Ended
September 30
 2020 2019 2020 2019 
Net Income (Loss)$(726)793 (3,220)2,567 
Other comprehensive income (loss)
Defined benefit plans
Actuarial loss arising during the period  (300) 
Amortization to income of net actuarial loss, prior service credit and settlements34 17 112 51 
Plans sponsored by equity affiliates4 2 9 7 
Income taxes on defined benefit plans(10)(4)44 (13)
Defined benefit plans, net of income taxes28 15 (135)45 
Foreign currency translation adjustments155 (119)(41)(124)
Income taxes on foreign currency translation adjustments
(4)1 (3) 
Foreign currency translation adjustments, net of income taxes
151 (118)(44)(124)
Cash flow hedges2 (2)(7)(13)
Income taxes on hedging activities 1 2 2 
Hedging activities, net of income taxes2 (1)(5)(11)
Other Comprehensive Income (Loss), Net of Income Taxes181 (104)(184)(90)
Comprehensive Income (Loss)(545)689 (3,404)2,477 
Less: comprehensive income attributable to noncontrolling interests
73 81 216 227 
Comprehensive Income (Loss) Attributable to Phillips 66$(618)608 (3,620)2,250 
See Notes to Consolidated Financial Statements.
2

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Consolidated Balance SheetPhillips 66
 
 Millions of Dollars
 September 30
2020
December 31
2019
Assets
Cash and cash equivalents$1,462 1,614 
Accounts and notes receivable (net of allowances of $37 million in 2020 and $41 million in 2019)
5,195 7,376 
Accounts and notes receivable—related parties768 1,134 
Inventories4,897 3,776 
Prepaid expenses and other current assets500 495 
Total Current Assets12,822 14,395 
Investments and long-term receivables13,767 14,571 
Net properties, plants and equipment23,489 23,786 
Goodwill1,425 3,270 
Intangibles849 869 
Other assets1,929 1,829 
Total Assets$54,281 58,720 
Liabilities
Accounts payable$4,905 8,043 
Accounts payable—related parties552 532 
Short-term debt 1,860 547 
Accrued income and other taxes1,229 979 
Employee benefit obligations443 710 
Other accruals1,524 835 
Total Current Liabilities10,513 11,646 
Long-term debt12,666 11,216 
Asset retirement obligations and accrued environmental costs644 638 
Deferred income taxes5,507 5,553 
Employee benefit obligations1,394 1,044 
Other liabilities and deferred credits1,252 1,454 
Total Liabilities31,976 31,551 
Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)
     Issued (2020—648,572,012 shares; 2019—647,416,633 shares)
Par value6 6 
Capital in excess of par20,363 20,301 
Treasury stock (at cost: 2020—211,771,827 shares; 2019—206,390,806 shares)
(17,116)(16,673)
Retained earnings17,436 22,064 
Accumulated other comprehensive loss(967)(788)
Total Stockholders’ Equity19,722 24,910 
Noncontrolling interests2,583 2,259 
Total Equity22,305 27,169 
Total Liabilities and Equity$54,281 58,720 
See Notes to Consolidated Financial Statements.
3

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Consolidated Statement of Cash FlowsPhillips 66
 Millions of Dollars
 Nine Months Ended
September 30
 2020 2019 
Cash Flows From Operating Activities
Net income (loss)$(3,220)2,567 
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization1,037 1,001 
Impairments4,146 856 
Accretion on discounted liabilities17 17 
Deferred income taxes2 115 
Undistributed equity earnings254 (25)
Net gain on dispositions(87)(19)
Other52 (97)
Working capital adjustments
Accounts and notes receivable2,684 (909)
Inventories(1,134)(2,004)
Prepaid expenses and other current assets(40)(269)
Accounts payable(2,985)1,778 
Taxes and other accruals746 103 
Net Cash Provided by Operating Activities1,472 3,114 
Cash Flows From Investing Activities
Capital expenditures and investments(2,414)(2,595)
Return of investments in equity affiliates 139 55 
Proceeds from asset dispositions3 84 
Advances/loans—related parties(251)(95)
Collection of advances/loans—related parties44 95 
Other(87)24 
Net Cash Used in Investing Activities(2,566)(2,432)
Cash Flows From Financing Activities
Issuance of debt3,305 1,758 
Repayment of debt(546)(1,004)
Issuance of common stock6 15 
Repurchase of common stock(443)(1,238)
Dividends paid on common stock(1,182)(1,172)
Distributions to noncontrolling interests(201)(176)
Net proceeds from issuance of Phillips 66 Partners LP common units2 133 
Other(22)282 
Net Cash Provided by (Used in) Financing Activities919 (1,402)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
23 (31)
Net Change in Cash and Cash Equivalents(152)(751)
Cash and cash equivalents at beginning of period1,614 3,019 
Cash and Cash Equivalents at End of Period$1,462 2,268 
See Notes to Consolidated Financial Statements.

4

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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, 2020$6 20,342 (17,116)18,631 (1,148)2,580 23,295 
Net income (loss)   (799) 73 (726)
Other comprehensive income    181  181 
Dividends paid on common stock ($0.90 per share)
   (393)  (393)
Benefit plan activity
 21  (3)  18 
Net distributions to noncontrolling interests
     (70)(70)
September 30, 2020$6 20,363 (17,116)17,436 (967)2,583 22,305 
June 30, 2019$6 19,912 (15,822)21,423 (767)2,554 27,306 
Net income— — — 712 — 81 793 
Other comprehensive loss— — — — (104)— (104)
Dividends paid on common stock ($0.90 per share)
— — — (402)— — (402)
Repurchase of common stock— — (439)— — — (439)
Benefit plan activity— 22 — (3)— — 19 
Issuance of Phillips 66 Partners LP common units
— 44 — — — 32 76 
Impacts from Phillips 66 Partners GP/IDR restructuring transaction
— 275 — — — (373)(98)
Distributions to noncontrolling interests
— — — — — (59)(59)
September 30, 2019$6 20,253 (16,261)21,730 (871)2,235 27,092 


Shares
Three Months Ended September 30
 Common Stock IssuedTreasury Stock
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 
June 30, 2019646,828,397 198,286,700 
Repurchase of common stock — 4,406,701 
Shares issued—share-based compensation222,580 — 
September 30, 2019647,050,977 202,693,401 
See Notes to Consolidated Financial Statements.





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Consolidated Statement of Changes in EquityPhillips 66

Millions of Dollars
Nine Months Ended September 30, 2020
Attributable to Phillips 66
Common Stock
Par ValueCapital in Excess of ParTreasury StockRetained EarningsAccum. Other Comprehensive LossNoncontrolling InterestsTotal
December 31, 2019$6 20,301 (16,673)22,064 (788)2,259 27,169 
Net income (loss)   (3,436) 216 (3,220)
Other comprehensive loss    (184) (184)
Dividends paid on common stock ($2.70 per share)
   (1,182)  (1,182)
Repurchase of common stock  (443)   (443)
Benefit plan activity 62  (8)  54 
Transfer of equity interest
     305 305 
Net distributions to noncontrolling interests     (197)(197)
Other   (2)5  3 
September 30, 2020$6 20,363 (17,116)17,436 (967)2,583 22,305 
December 31, 2018$6 19,873 (15,023)20,489 (692)2,500 27,153 
Cumulative effect of accounting changes— — — 81 (89)(1)(9)
Net income— — — 2,340 — 227 2,567 
Other comprehensive loss— — — — (90)— (90)
Dividends paid on common stock ($2.60 per share)
— — — (1,172)— — (1,172)
Repurchase of common stock— — (1,238)— — — (1,238)
Benefit plan activity— 56 — (8)— — 48 
Issuance of Phillips 66 Partners LP common units
— 49 — — — 58 107 
Impacts from Phillips 66 Partners GP/IDR restructuring transaction
— 275 — — — (373)(98)
Distributions to noncontrolling interests— — — — — (176)(176)
September 30, 2019$6 20,253 (16,261)21,730 (871)2,235 27,092 



Shares
Nine Months Ended September 30
Common Stock IssuedTreasury Stock
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 
December 31, 2018645,691,761 189,526,331 
Repurchase of common stock— 13,167,070 
Shares issued—share-based compensation1,359,216 — 
September 30, 2019647,050,977 202,693,401 
See Notes to Consolidated Financial Statements.
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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 2019 Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2020, are not necessarily indicative of the results expected for the full year.


Note 2—Sales and Other Operating Revenues

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

 Millions of Dollars
 Three Months Ended
September 30
Nine Months Ended
September 30
 2020 2019 2020 2019 
Product Line and Services
Refined petroleum products$12,573 22,373 37,431 64,088 
Crude oil resales2,198 3,511 6,565 10,162 
Natural gas liquids (NGL)966 1,025 2,645 3,508 
Services and other*
192 309 1,079 410 
Consolidated sales and other operating revenues
$15,929 27,218 47,720 78,168 
Geographic Location**
United States$12,125 21,160 36,212 60,602 
United Kingdom1,850 2,375 5,131 7,318 
Germany805 1,025 2,276 3,074 
Other foreign countries1,149 2,658 4,101 7,174 
Consolidated sales and other operating revenues
$15,929 27,218 47,720 78,168 
* Includes derivatives-related activities. See Note 13—Derivatives and Financial Instruments, for additional information.
** Sales and other operating revenues are attributable to countries based on the location of the operations generating the revenues.


Contract-Related Assets and Liabilities
At September 30, 2020, and December 31, 2019, receivables from contracts with customers were $3,410 million and $6,902 million, respectively. Significant noncustomer balances, such as buy/sell receivables and excise tax receivables, were excluded from these amounts.

Our contract-related assets also include payments we make to our marketing customers related to incentive programs. An incentive payment is initially recognized as an asset and subsequently amortized as a reduction to revenue over the contract term, which generally ranges from 5 to 15 years. At September 30, 2020, and December 31, 2019, our asset balances related to such payments were $389 million and $336 million, respectively.

Our contract liabilities represent advances from our customers prior to product or service delivery. At September 30, 2020, and December 31, 2019, contract liabilities were not material.
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Remaining Performance Obligations
Most of our contracts with customers are spot contracts or term contracts with only variable consideration. We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less, or because the variable consideration has been allocated entirely to an unsatisfied performance obligation. We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing, which mostly expire by 2021. At September 30, 2020, the remaining performance obligations related to these minimum volume commitment contracts were not material.


Note 3—Credit Losses

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

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

The negative economic impacts associated with Coronavirus Disease 2019 (COVID-19) increase 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, 2020, and December 31, 2019, we reported $5,963 million and $8,510 million of accounts and notes receivable, net of allowances of $37 million and $41 million, respectively. Based on an aging analysis at September 30, 2020, more than 98% of our accounts receivable were outstanding less than 60 days.

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


Note 4—Inventories

Inventories consisted of the following:

 Millions of Dollars
 September 30
2020
December 31
2019
Crude oil and petroleum products$4,561 3,452 
Materials and supplies336 324 
$4,897 3,776 


Inventories valued on the last-in, first-out (LIFO) basis totaled $4,436 million and $3,331 million at September 30, 2020, and December 31, 2019, respectively. The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $1.6 billion and $4.3 billion at September 30, 2020, and December 31, 2019, respectively.

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Note 5—Investments, Loans and Long-Term Receivables

Equity Investments

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

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

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

Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)
In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $2.5 billion aggregate principal amount of senior unsecured notes, consisting of:

$650 million aggregate principal amount of 3.625% Senior Notes due 2022.
$1.0 billion aggregate principal amount of 3.900% Senior Notes due 2024.
$850 million aggregate principal amount of 4.625% Senior Notes due 2029.

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


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

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

DCP Midstream, LLC (DCP Midstream)
At September 30, 2019, we estimated the fair value of our investment in DCP Midstream was below our book value due to a decline in the market values of DCP Midstream, LP (DCP Partners) common units and its then general partner interest. Accordingly, we recorded an $853 million before-tax impairment in the third quarter of 2019. After the elimination of its general partner’s economic interests in November 2019, the fair value of our investment in DCP Midstream depends solely on the market value of DCP Partners common units. In the first quarter of 2020, the market value of DCP Partners common units further declined by approximately 85%.  As a result, at March 31, 2020, the fair value of our investment in DCP Midstream was significantly lower than its book value. We concluded the difference between its fair value and book value was not temporary primarily due to the magnitude of the difference. Accordingly, we recorded a $1.2 billion before-tax impairment of our investment in the first quarter of 2020. These charges are included in the “Impairments” line item on our consolidated statement of operations. These impairments increased the basis difference for our investment in DCP Midstream to $1.8 billion at March 31, 2020, which indicated the carrying value of our investment was lower than our share of DCP Midstream’s recorded net assets at March 31, 2020. The basis difference is being amortized and recognized as a benefit to equity earnings over a period of 22 years, which was the estimated remaining useful life of DCP Midstream’s properties, plants and equipment (PP&E) at March 31, 2020. Equity earnings for the three and nine months ended September 30, 2020, were increased by approximately $20 million and $50 million, respectively, due to the amortization of the basis difference. See Note 14—Fair Value Measurements, for additional information on the techniques used to determine the fair value of our investment in DCP Midstream. At September 30, 2020, our investment in DCP Midstream had a book value of $281 million.

Liberty Pipeline LLC (Liberty)
Phillips 66 Partners holds a 50% interest in Liberty, a joint venture formed to develop and construct the Liberty Pipeline system which, upon completion, will transport crude oil from the Rockies and Bakken production areas to Cushing, Oklahoma. Liberty is considered a VIE because it does not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We have determined we are not the primary beneficiary because we and our co-venturer jointly direct the activities of Liberty that most significantly impact economic performance. The development and construction of the Liberty Pipeline system have been deferred as a result of the current challenging business environment. At September 30, 2020, our maximum exposure to loss was $252 million, which represented the book value of Phillips 66 Partners’ investment in Liberty of $239 million and our outstanding proportionate vendor guarantees of $13 million.
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OnCue Holdings, LLC (OnCue)
We hold a 50% interest in OnCue, a joint venture that owns and operates retail convenience stores. We fully guaranteed various debt agreements of OnCue and our co-venturer did not participate in the guarantees. This entity is considered a VIE because our debt guarantees resulted in OnCue not being exposed to all potential losses. We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact OnCue’s economic performance. At September 30, 2020, our maximum exposure to loss was $165 million, which represented the book value of our investment in OnCue of $92 million and guaranteed debt obligations of $73 million.

Red Oak Pipeline LLC (Red Oak)
We hold a 50% interest in a joint venture formed to develop and construct the Red Oak Pipeline system. In the third quarter of 2020, the Red Oak Pipeline project was canceled. As a result, we assessed our investment for impairment and concluded that the carrying value of our investment at September 30, 2020, was greater than its fair value. Accordingly, we recorded a before-tax impairment of $84 million in the Midstream segment, which is included in the “Impairments” line item on our consolidated statement of operations for the three and nine months ended September 30, 2020. See Note 14—Fair Value Measurements, for additional information on the techniques used to determine the fair value of our investment in Red Oak. At September 30, 2020, the remaining book value of our investment in Red Oak was $20 million.

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



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Note 6—Properties, Plants and Equipment

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

 Millions of Dollars
 September 30, 2020December 31, 2019
 Gross
PP&E
Accum.
D&A
  Net
PP&E
Gross
PP&E
Accum.
D&A
Net
PP&E
Midstream$12,154 2,727 9,427 11,221