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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 ended September 30, 2022

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: 001-35349

Phillips 66

(Exact name of registrant as specified in its charter) 

Delaware	45-3779385
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2331 CityWest Blvd., Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

832-765-3010

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
	Common Stock, $0.01 Par Value	PSX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☒

The registrant had 472,632,213 shares of common stock, $0.01 par value, outstanding as of September 30, 2022.

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PHILLIPS 66

TABLE OF CONTENTS

	Page
Part I – Financial Information
Item 1. Financial Statements
Consolidated Statement of Income	1
Consolidated Statement of Comprehensive Income	2
Consolidated Balance Sheet	3
Consolidated Statement of Cash Flows	4
Consolidated Statement of Changes in Equity	5
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and      Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	70
Item 4. Controls and Procedures	70
Part II – Other Information
Item 1. Legal Proceedings	71
Item 1A. Risk Factors	72
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 6. Exhibits	73
Signatures	76

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Consolidated Statement of Income Phillips 66

	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2022		2021	2022	2021
Revenues and Other Income
Sales and other operating revenues	$	44,955	30,243	129,711	78,872
Equity in earnings of affiliates	782		982	2,384	2,097
Net gain on dispositions	1		9	2	11
Other income	3,026		238	2,698	304
Total Revenues and Other Income	48,764		31,472	134,795	81,284
Costs and Expenses
Purchased crude oil and products	38,646		27,529	114,786	72,812
Operating expenses	1,612		1,166	4,383	3,721
Selling, general and administrative expenses	617		424	1,538	1,265
Depreciation and amortization	430		361	1,127	1,081
Impairments	—		1,298	2	1,496
Taxes other than income taxes	133		85	400	343
Accretion on discounted liabilities	5		6	17	18
Interest and debt expense	158		151	426	440
Foreign currency transaction (gains) losses	5		4	24	(5)
Total Costs and Expenses	41,606		31,024	122,703	81,171
Income before income taxes	7,158		448	12,092	113
Income tax expense (benefit)	1,618		(40)	2,713	(110)
Net Income	5,540		488	9,379	223
Less: net income attributable to noncontrolling interests	149		86	239	179
Net Income Attributable to Phillips 66	$	5,391	402	9,140	44
Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars)
Basic	$	11.19	0.91	19.37	0.08
Diluted	11.16		0.91	19.31	0.08
Weighted-Average Common Shares Outstanding (thousands)
Basic	481,388		440,193	471,375	439,880
Diluted	483,036		440,368	473,452	440,259
See Notes to Consolidated Financial Statements.

1

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Consolidated Statement of Comprehensive Income Phillips 66

	Millions of Dollars
	Three Months Ended September 30			Nine Months Ended September 30
	2022		2021	2022	2021
Net Income	$	5,540	488	9,379	223
Other comprehensive income (loss)
Defined benefit plans
Net actuarial gain (loss) arising during the period	(4)		—	(17)	210
Amortization of net actuarial loss, prior service credit and settlements	42		36	93	105
Plans sponsored by equity affiliates	9		4	15	33
Income taxes on defined benefit plans	(7)		(8)	(15)	(82)
Defined benefit plans, net of income taxes	40		32	76	266
Foreign currency translation adjustments	(305)		(74)	(632)	(70)
Income taxes on foreign currency translation adjustments	4		2	7	2
Foreign currency translation adjustments, net of income taxes	(301)		(72)	(625)	(68)
Cash flow hedges	—		—	—	3
Income taxes on hedging activities	—		—	—	(1)
Hedging activities, net of income taxes	—		—	—	2
Other Comprehensive Income (Loss), Net of Income Taxes	(261)		(40)	(549)	200
Comprehensive Income	5,279		448	8,830	423
Less: comprehensive income attributable to noncontrolling interests	149		86	239	179
Comprehensive Income Attributable to Phillips 66	$	5,130	362	8,591	244

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheet Phillips 66

	Millions of Dollars
	September 30 2022		December 31 2021
Assets
Cash and cash equivalents	$	3,744	3,147
Accounts and notes receivable (net of allowances of $64 million in 2022 and $44 million in 2021)	11,606		6,138
Accounts and notes receivable—related parties	2,046		1,332
Inventories	4,294		3,394
Prepaid expenses and other current assets	1,580		686
Total Current Assets	23,270		14,697
Investments and long-term receivables	14,772		14,471
Net properties, plants and equipment	34,962		22,435
Goodwill	1,486		1,484
Intangibles	845		813
Other assets	2,004		1,694
Total Assets	$	77,339	55,594
Liabilities
Accounts payable	$	11,449	7,629
Accounts payable—related parties	868		832
Short-term debt	1,032		1,489
Accrued income and other taxes	1,836		1,254
Employee benefit obligations	714		638
Other accruals	1,983		959
Total Current Liabilities	17,882		12,801
Long-term debt	16,625		12,959
Asset retirement obligations and accrued environmental costs	862		727
Deferred income taxes	6,339		5,475
Employee benefit obligations	1,021		1,055
Other liabilities and deferred credits	1,301		940
Total Liabilities	44,030		33,957
Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)      Issued (2022—651,844,773 shares; 2021—650,026,318 shares)
Par value	7		7
Capital in excess of par	19,738		20,504
Treasury stock (at cost: 2022—179,212,560 shares; 2021—211,771,827 shares)	(14,526)		(17,116)
Retained earnings	24,008		16,216
Accumulated other comprehensive loss	(994)		(445)
Total Stockholders’ Equity	28,233		19,166
Noncontrolling interests	5,076		2,471
Total Equity	33,309		21,637
Total Liabilities and Equity	$	77,339	55,594

See Notes to Consolidated Financial Statements.

3

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Consolidated Statement of Cash Flows Phillips 66

	Millions of Dollars
	Nine Months Ended September 30
	2022		2021
Cash Flows From Operating Activities
Net income	$	9,379	223
Adjustments to reconcile net income to net cash provided by operating    activities
Depreciation and amortization	1,127		1,081
Impairments	2		1,496
Accretion on discounted liabilities	17		18
Deferred income taxes	1,146		(290)
Undistributed equity earnings	(985)		(78)
Net gain on dispositions	(2)		(5)
Gain related to merger of businesses	(3,013)		—
Unrealized investment (gain) loss	418		(224)
Other	15		289
Working capital adjustments
Accounts and notes receivable	(4,430)		(1,465)
Inventories	(970)		(495)
Prepaid expenses and other current assets	(462)		(369)
Accounts payable	2,656		3,723
Taxes and other accruals	1,165		313
Net Cash Provided by Operating Activities	6,063		4,217
Cash Flows From Investing Activities
Capital expenditures and investments	(1,481)		(1,263)
Return of investments in equity affiliates	78		236
Proceeds from asset dispositions	3		26
Advances/loans—related parties	(75)		(310)
Collection of advances/loans—related parties	236		1
Other	(17)		(5)
Net Cash Used in Investing Activities	(1,256)		(1,315)
Cash Flows From Financing Activities
Issuance of debt	—		450
Repayment of debt	(1,957)		(1,485)
Issuance of common stock	67		24
Repurchase of common stock	(760)		—
Dividends paid on common stock	(1,337)		(1,182)
Distributions to noncontrolling interests	(104)		(239)
Repurchase of noncontrolling interests	—		(24)
Other	(55)		(36)
Net Cash Used in Financing Activities	(4,146)		(2,492)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(64)		(27)
Net Change in Cash and Cash Equivalents	597		383
Cash and cash equivalents at beginning of period	3,147		2,514
Cash and Cash Equivalents at End of Period	$	3,744	2,897

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Changes in Equity Phillips 66

	Millions of Dollars
	Three Months Ended September 30
	Attributable to Phillips 66
	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Retained Earnings	Accum. Other Comprehensive Loss	Noncontrolling Interests	Total
June 30, 2022	$	7	19,717	(13,802)	19,087	(733)	297	24,573
Net income	—		—	—	5,391	—	149	5,540
Other comprehensive loss	—		—	—	—	(261)	—	(261)
Dividends paid on common stock ($0.97 per share)	—		—	—	(466)	—	—	(466)
Repurchase of common stock	—		—	(724)	—	—	—	(724)
Benefit plan activity	—		21	—	(4)	—	—	17
Distributions to noncontrolling interests	—		—	—	—	—	(3)	(3)
Merger of DCP Midstream, LLC and Gray     Oak Holdings LLC	—		—	—	—	—	4,633	4,633
September 30, 2022	$	7	19,738	(14,526)	24,008	(994)	5,076	33,309
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

	Shares
	Three Months Ended September 30
	Common Stock Issued	Treasury Stock
June 30, 2022	651,697,833	170,646,736
Repurchase of common stock	—	8,565,824
Shares issued—share-based compensation	146,940	—
September 30, 2022	651,844,773	179,212,560
June 30, 2021	649,761,235	211,771,827
Shares issued—share-based compensation	110,865	—
September 30, 2021	649,872,100	211,771,827
See Notes to Consolidated Financial Statements.

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Consolidated Statement of Changes in Equity Phillips 66

	Millions of Dollars
	Nine Months Ended September 30
	Attributable to Phillips 66
	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Retained Earnings	Accum. Other Comprehensive Loss	Noncontrolling Interests	Total
December 31, 2021	$	7	20,504	(17,116)	16,216	(445)	2,471	21,637
Net income	—		—	—	9,140	—	239	9,379
Other comprehensive loss	—		—	—	—	(549)	—	(549)
Dividends paid on common stock ($2.86 per share)	—		—	—	(1,337)	—	—	(1,337)
Repurchase of common stock	—		—	(790)	—	—	—	(790)
Benefit plan activity	—		135	—	(11)	—	—	124
Distributions to noncontrolling interests	—		—	—	—	—	(104)	(104)
Acquisition of noncontrolling interest in Phillips 66 Partners LP	—		(901)	3,380	—	—	(2,163)	316
Merger of DCP Midstream, LLC and Gray     Oak Holdings LLC	—		—	—	—	—	4,633	4,633
September 30, 2022	$	7	19,738	(14,526)	24,008	(994)	5,076	33,309
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

	Shares
	Nine Months Ended September 30
	Common Stock Issued	Treasury Stock
December 31, 2021	650,026,318	211,771,827
Repurchase of common stock	—	9,265,969
Shares issued—share-based compensation	1,818,455	—
Shares issued—acquisition of noncontrolling interest in Phillips 66 Partners LP	—	(41,825,236)
September 30, 2022	651,844,773	179,212,560
December 31, 2020	648,643,223	211,771,827
Shares issued—share-based compensation	1,228,877	—
September 30, 2021	649,872,100	211,771,827
See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements Phillips 66

Note 1—Interim Financial Information

The unaudited interim financial information presented in the financial statements included in this report is prepared in accordance with generally accepted accounting principles in the United States (GAAP) and includes all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of the consolidated financial position of Phillips 66 and its results of operations and cash flows for the periods presented. Unless otherwise specified, all such adjustments are of a normal and recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2021 Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results expected for the full year.

DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings) Merger

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

Prior to the merger, we and Enbridge each held a