Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



[ X ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended	March 31, 2017



[ ]	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)



Delaware		38-3899432
(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)

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 [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ X ] 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 [ X ] 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 [ X ]

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PHILLIPS 66 PARTNERS LP

TABLE OF CONTENTS



	Page
Part I – Financial Information	1

Item 1. Financial Statements	1
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	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	36

Item 4. Controls and Procedures	36

Part II – Other Information	37

Item 1. Legal Proceedings	37

Item 1A. Risk Factors	37

Item 6. Exhibits	38

Signatures	39

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS



Consolidated Statement of Income	Phillips 66 Partners LP



	Millions of Dollars
	Three Months Ended March 31
	2017		2016*
Revenues and Other Income
Operating revenues—related parties	$	184	171
Operating revenues—third parties	10		8
Equity in earnings of affiliates	33		25
Other income	7		—
Total revenues and other income	234		204

Costs and Expenses
Operating and maintenance expenses	62		50
Depreciation	26		23
General and administrative expenses	16		17
Taxes other than income taxes	9		10
Interest and debt expense	24		10
Total costs and expenses	137		110
Income before income taxes	97		94
Provision for income taxes	—		—
Net income	97		94
Less: Net income attributable to Predecessors	—		42
Net income attributable to the Partnership	97		52
Less: General partner’s interest in net income attributable to the Partnership	32		16
Limited partners’ interest in net income attributable to the Partnership	$	65	36

Net Income Attributable to the Partnership Per Limited Partner Unit—Basic and Diluted (dollars)	$	0.60	0.44

Cash Distributions Paid Per Limited Partner Unit (dollars)	$	0.558	0.458

Average Limited Partner Units Outstanding—Basic and Diluted (thousands)
Common units—public	43,353		24,139
Common units—Phillips 66	64,047		58,490

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Comprehensive Income	Phillips 66 Partners LP



	Millions of Dollars
	Three Months Ended March 31
	2017		2016*

Net Income	$	97	94
Defined benefit plans
Plan sponsored by equity affiliate, net of tax	—		1
Other comprehensive income	—		1
Comprehensive Income	$	97	95

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheet	Phillips 66 Partners LP



	Millions of Dollars
	March 31 2017			December 31 2016
Assets
Cash and cash equivalents	$	1		2
Accounts receivable—related parties	66			76
Accounts receivable—third parties	6			7
Materials and supplies	12			11
Prepaid expenses	3			4
Total Current Assets	88			100
Equity investments	1,176			1,142
Net properties, plants and equipment	2,669			2,675
Goodwill	185			185
Deferred rentals—related parties	5			5
Other assets	2			2
Total Assets	$	4,125		4,109

Liabilities
Accounts payable—related parties	$	11		12
Accounts payable—third parties	28			31
Accrued property and other taxes	16			10
Accrued interest	28			26
Short-term debt	2			15
Deferred revenues—related parties	18			14
Other current liabilities	1			3
Total Current Liabilities	104			111
Long-term debt	2,357			2,396
Asset retirement obligations	9			9
Accrued environmental costs	2			2
Deferred income taxes	2			2
Deferred revenues—related parties—long-term	23			23
Total Liabilities	2,497			2,543

Equity
Common unitholders—public (2017—43,879,870 units issued and outstanding; 2016—43,134,902 units issued and outstanding)	1,837			1,795
Common unitholder—Phillips 66 (2017 and 2016—64,047,024 units issued and outstanding)	479			476
General partner—Phillips 66 (2017 and 2016—2,187,386 units issued and outstanding)	(687		)	(704	)
Accumulated other comprehensive loss	(1		)	(1	)
Total Equity	1,628			1,566
Total Liabilities and Equity	$	4,125		4,109

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Cash Flows	Phillips 66 Partners LP



	Millions of Dollars
	Three Months Ended March 31
	2017			2016*
Cash Flows From Operating Activities
Net income	$	97		94
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	26			23
Undistributed equity earnings	(4		)	1
Deferred revenues—long-term	—			6
Other	3			—
Working capital adjustments
Decrease (increase) in accounts receivable	10			(11	)
Decrease (increase) in materials and supplies	(1		)	(1	)
Decrease (increase) in prepaid expenses and other current assets	1			—
Increase (decrease) in accounts payable	(1		)	7
Increase (decrease) in accrued interest	2			(11	)
Increase (decrease) in deferred revenues	4			1
Increase (decrease) in other accruals	2			2
Net Cash Provided by Operating Activities	139			111

Cash Flows From Investing Activities
Cash capital expenditures and investments	(57		)	(97	)
Return of investment from equity affiliates	8			3
Net Cash Used in Investing Activities	(49		)	(94	)

Cash Flows From Financing Activities
Net contributions from Phillips 66 to Predecessors	—			12
Issuance of debt	712			78
Repayment of debt	(765		)	(86	)
Issuance of common units	40			—
Quarterly distributions to common unitholders—public	(24		)	(11	)
Quarterly distributions to common unitholder—Phillips 66	(36		)	(27	)
Quarterly distributions to General Partner—Phillips 66	(28		)	(13	)
Other cash contributions from Phillips 66	10			—
Net Cash Used in Financing Activities	(91		)	(47	)

Net Change in Cash and Cash Equivalents	(1		)	(30	)
Cash and cash equivalents at beginning of period	2			50
Cash and Cash Equivalents at End of Period	$	1		20

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

See Notes to Consolidated Financial Statements.

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Consolidated Statement of Changes in Equity	Phillips 66 Partners LP



	Millions of Dollars
	Partnership
	Common Unitholders Public			Common Unitholder Phillips 66		General Partner Phillips 66		Accum. Other Comprehensive Loss		Net Investment— Predecessors*		Total

December 31, 2015	$	809		233		(650	)	(2	)	1,054		1,444
Net income attributable to Predecessors	—			—		—		—		42		42
Net contributions from Phillips 66—Predecessors	—			—		—		—		45		45
Allocation of net investment to unitholders	—			69		1		—		(70	)	—
Net income attributable to the Partnership	10			26		16		—		—		52
Other comprehensive income	—			—		—		1		—		1
Quarterly cash distributions to unitholders and General Partner	(11		)	(27	)	(13	)	—		—		(51	)
March 31, 2016*	$	808		301		(646	)	(1	)	1,071		1,533

December 31, 2016	$	1,795		476		(704	)	(1	)	—		1,566
Issuance of common units	40			—		—		—		—		40
Net income attributable to the Partnership	26			39		32		—		—		97
Quarterly cash distributions to unitholders and General Partner	(24		)	(36	)	(28	)	—		—		(88	)
Other contributions from Phillips 66	—			—		13		—		—		13
March 31, 2017	$	1,837		479		(687	)	(1	)	—		1,628



	Common Units Public	Common Units Phillips 66	General Partner Units Phillips 66	Total Units

December 31, 2015	24,138,750	58,349,042	1,683,425	84,171,217
Units issued associated with acquisitions	—	412,823	8,425	421,248
March 31, 2016	24,138,750	58,761,865	1,691,850	84,592,465

December 31, 2016	43,134,902	64,047,024	2,187,386	109,369,312
Units issued in public equity offerings	744,968	—	—	744,968
March 31, 2017	43,879,870	64,047,024	2,187,386	110,114,280

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements	Phillips 66 Partners LP

Note 1—Business and Basis of Presentation

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.

Description of the Business

We are a growth-oriented master limited partnership formed to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids (NGL) pipelines, terminals and other transportation and midstream assets. Our common units trade on the New York Stock Exchange under the symbol PSXP.

Our assets consist of crude oil, refined petroleum products and NGL transportation, terminaling and storage systems, as well as an NGL fractionator. We conduct our operations through both wholly owned and joint venture operations. The majority of our wholly owned assets are associated with, and integral to the operation of, nine of Phillips 66’s owned or joint venture refineries.

We generate revenue primarily by providing fee-based transportation, terminaling, storage and NGL fractionation services to Phillips 66 and other customers. Our equity affiliates generate revenue primarily from transporting and terminaling NGL, refined petroleum products and crude oil. Since we do not own any of the NGL, crude oil and refined petroleum products we handle and do not engage in the trading of NGL, crude oil and refined petroleum products, 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.

Basis of Presentation

We have acquired assets from Phillips 66 that were considered transfers of businesses between entities under common control. This required the transactions to be accounted for as if the transfers had occurred at the beginning of the transfer period, with prior periods retrospectively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes have been retrospectively adjusted to include the historical results and financial position of these acquired businesses prior to the effective date of each acquisition. We refer to these pre-acquisition operations as those of our “Predecessors.”

The combined financial statements of our Predecessors were derived from the accounting records of Phillips 66 and reflect the combined historical results of operations, financial position and cash flows of our Predecessors as if such businesses had been combined for all periods presented.

All intercompany transactions and accounts within our Predecessors have been eliminated. The assets and liabilities of our Predecessors in these financial statements have been reflected on a historical cost basis because the transfer of the Predecessors to us took place within the Phillips 66 consolidated group. The consolidated statement of income also includes expense allocations for certain functions performed by Phillips 66, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, information technology and procurement; and operational support services such as engineering and logistics. These allocations were based primarily on relative carrying values of properties, plants and equipment (PP&E) and equity-method investments, or number of terminals and pipeline miles, and secondarily on activity-based cost allocations. Our management believes the assumptions underlying the allocation of expenses from Phillips 66 are reasonable. Nevertheless, the financial results of our Predecessors may not include all of the actual expenses that would have been incurred had our Predecessors been a stand-alone publicly traded partnership during the periods presented.

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Note 2—Interim Financial Information

The interim financial information presented in the financial statements included in this report is unaudited 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 2016 Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2017, are not necessarily indicative of the results to be expected for the full year.

Note 3—Changes in Accounting Principles

Effective January 1, 2017, we early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test. Under the revised test, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Beginning this year, we will apply this ASU prospectively to our goodwill impairment test.

Effective January 1, 2017, we early adopted ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The new update changes the classification and presentation of restricted cash in the statement of cash flow. The amendment requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Adoption of this ASU on a retrospective basis did not impact our financial statements.

Effective January 1, 2017, we early adopted ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The new update clarifies the treatment of several cash flow categories. In addition, ASU No. 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. Adoption of this ASU on a retrospective basis did not have a material impact on our financial statements.

Note 4—Acquisitions

River Parish Acquisition

In November 2016, we acquired the River Parish NGL System, a third party’s NGL logistics assets located in southeast Louisiana, consisting of pipelines and storage caverns connecting multiple fractionation facilities, refineries and a petrochemical facility. We recorded $183 million of PP&E and $3 million of goodwill in connection with the acquisition in 2016. Our acquisition accounting was finalized during the first quarter of 2017, with no change to the provisional amounts recorded in 2016.

During 2016, we completed three acquisitions that were considered transfers of businesses between entities under common control, and therefore the related acquired assets were transferred at historical carrying value. Because these acquisitions were common control transactions in which we acquired businesses, our historical financial statements have been retrospectively adjusted as if we owned the acquired assets for all periods presented.

Fractionator Acquisitions

Initial Fractionator Acquisition. In February 2016, we entered into a Contribution, Conveyance and Assumption Agreement (CCAA) with subsidiaries of Phillips 66 to acquire a 25 percent controlling interest in Phillips 66 Sweeny Frac LLC (Sweeny Frac LLC) for total consideration of $236 million (the Initial Fractionator Acquisition). Total consideration consisted of the assumption of a $212 million note payable to a subsidiary of Phillips 66 and the issuance of 412,823 common units to Phillips 66 PDI and 8,425 general partner units to our General Partner to maintain its 2 percent general partner interest. The Initial Fractionator Acquisition closed in March 2016.

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Subsequent Fractionator Acquisition. In May 2016, we entered into a CCAA with subsidiaries of Phillips 66 to acquire the remaining 75 percent interest in Sweeny Frac LLC and 100 percent of the Standish Pipeline for total consideration of $775 million (the Subsequent Fractionator Acquisition). Total consideration consisted of the assumption of $675 million of notes payable to a subsidiary of Phillips 66 and the issuance of 1,400,922 common units to Phillips 66 PDI and 286,753 general partner units to our General Partner to maintain its 2 percent general partner interest in us after also taking into account the public offering we completed in May 2016. The Subsequent Fractionator Acquisition closed in May 2016.

Eagle Acquisition

In October 2016, we entered into a CCAA with subsidiaries of Phillips 66 to acquire certain pipeline and terminal assets supporting four Phillips 66-operated refineries (the Eagle Acquisition). The Eagle Acquisition closed in October 2016. We paid Phillips 66 total consideration of $1,305 million, consisting of $1,109 million in cash and the issuance of 3,884,237 common units to Phillips 66 PDI and 208,783 general partner units to our General Partner to allow it to maintain its 2 percent general partner interest in us.

The following tables present our previously reported results of operations and cash flows giving effect to the Subsequent Fractionator Acquisition and the Eagle Acquisition for the three months ended March 31, 2016. The results of operations and cash flows of the Initial Fractionator Acquisition are included in our previously reported consolidated statement of income and consolidated statement of cash flows for the three months ended March 31, 2016, within the first column. The second and third columns in all tables present the retrospective adjustments made to our historical financial information for the related acquired assets prior to the effective date of acquisition. The fourth column in all tables presents our consolidated financial information as retrospectively adjusted.

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	Three Months Ended March 31, 2016
	Millions of Dollars
Consolidated Statement of Income	Phillips 66 Partners LP (As previously reported)		Acquired Subsequent Fractionator Assets Predecessor		Acquired Eagle Assets Predecessor	Consolidated Results
Revenues and Other Income
Operating revenues—related parties	$	94	5		72	171
Operating revenues—third parties	2		—		6	8
Equity in earnings of affiliates	25		—		—	25
Total revenues and other income	121		5		78	204

Costs and Expenses
Operating and maintenance expenses	23		—		27	50
Depreciation	14		—		9	23
General and administrative expenses	9		—		8	17
Taxes other than income taxes	5		—		5	10
Interest and debt expense	10		—		—	10
Total costs and expenses	61		—		49	110
Income before income taxes	60		5		29	94
Provision for income taxes	—		—		—	—
Net income	60		5		29	94
Less: Net income attributable to noncontrolling interests	3		(3	)	—	—
Less: Net income attributable to Predecessors	5		8		29	42
Net income attributable to the Partnership	52		—		—	52
Less: General partner’s interest in net income attributable to the Partnership	16		—		—	16
Limited partners’ interest in net income attributable to the Partnership	$	36	—		—	36

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	Three Months Ended March 31, 2016
	Millions of Dollars
	Phillips 66 Partners LP (As previously reported)			Acquired Subsequent Fractionator Assets Predecessor		Acquired Eagle Assets Predecessor		Consolidated Results
Cash Flows From Operating Activities
Net income	$	60		5		29		94
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	14			—		9		23
Unfunded equity losses	1			—		—		1
Deferred revenues—long-term	6			—		—		6
Working capital adjustments
Decrease (increase) in accounts receivable	(12		)	—		1		(11	)
Decrease (increase) in materials and supplies	(1		)	—		—		(1	)
Decrease (increase) in other current assets	1			—		(1	)	—
Increase (decrease) in accounts payable	6			—		1		7
Increase (decrease) in accrued interest	(11		)	—		—		(11	)
Increase (decrease) in deferred revenues	1			—		—		1
Increase (decrease) in other accruals	2			—		—		2
Net Cash Provided by Operating Activities	67			5		39		111

Cash Flows From Investing Activities
Cash capital expenditures and investments	(77		)	—		(20	)	(97	)
Return of investment from equity affiliates	3			—		—		3
Net Cash Used in Investing Activities	(74		)	—		(20	)	(94	)

Cash Flows From Financing Activities
Net contributions from (to) Phillips 66 to (from) Predecessors	57			(26	)	(19	)	12
Issuance of debt	57			21		—		78
Repayment of debt	(86		)	—		—		(86	)
Quarterly distributions to common unitholders—public	(11		)	—		—		(11	)
Quarterly distributions to common unitholder—Phillips 66	(27		)	—		—		(27	)
Quarterly distributions to General Partner—Phillips 66	(13		)	—		—		(13	)
Net Cash Used in Financing Activities	(23		)	(5	)	(19	)	(47	)

Net Change in Cash and Cash Equivalents	(30		)	—		—		(30	)
Cash and cash equivalents at beginning of period	50			—		—		50
Cash and Cash Equivalents at End of Period	$	20		—		—		20

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Note 5—Equity Investments

The following table summarizes our equity investments.



			Millions of Dollars
	Percentage Ownership		Carrying Value
	Percentage Ownership		March 31 2017		December 31 2016

DCP Sand Hills Pipeline, LLC (Sand Hills)	33.34	%	$	459	445
DCP Southern Hills Pipeline, LLC (Southern Hills)	33.34		213		212
Explorer Pipeline Company (Explorer)	21.94		124		126
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)	70.00		67		72
Paradigm Pipeline LLC (Paradigm)	50.00		115		117
Bayou Bridge Pipeline, LLC (Bayou Bridge)	40.00		139		115
STACK Pipeline LLC (STACK)	50.00		59		55
Total equity investments			$	1,176	1,142

Earnings from our equity investments were as follows:



	Millions of Dollars
	Three Months Ended March 31
	2017			2016

Sand Hills	$	17		15
Southern Hills	7			7
Explorer	5			3
Phillips 66 Partners Terminal	2			—
Paradigm	(1		)	—
Bayou Bridge	2			—
STACK	1			—
Total equity in earnings of affiliates	$	33		25

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Note 6—Properties, Plants and Equipment

Our investment in PP&E, with the associated accumulated depreciation, was:



	Millions of Dollars
	March 31 2017		December 31 2016

Land	$	19	19
Buildings and improvements	88		88
Pipelines and related assets^*	1,338		1,335
Terminals and related assets^*	612		610
Rail racks and related assets^*	137		137
Fractionator and related assets^*	615		615
Caverns and related assets^*	569		569
Construction-in-progress	42		27
Gross PP&E	3,420		3,400
Less: Accumulated depreciation	751		725
Net PP&E	$	2,669	2,675

*Assets for which we are the lessor.

Note 7—Debt

Debt at March 31, 2017, and December 31, 2016, was:



	Millions of Dollars
	March 31, 2017
	Fair Value Hierarchy				Total Fair Value	Balance Sheet Carrying Value
	Level 1		Level 2*	Level 3	Total Fair Value	Balance Sheet Carrying Value

2.646% Senior Notes due 2020	$	—	300	—	300	300
3.605% Senior Notes due 2025	—		492	—	492	500
3.550% Senior Notes due 2026	—		479	—	479	500
4.680% Senior Notes due 2045	—		275	—	275	300
4.900% Senior Notes due 2046	—		595	—	595	625
Revolving credit facility at 2.23% at March 31, 2017	—		157	—	157	157
Total	$	—	2,298	—	2,298	2,382
Net unamortized discounts and debt issuance costs						(23		)
Total debt						$	2,359

*Fair value was estimated using quoted market prices of comparable instruments.

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	Millions of Dollars
	December 31, 2016
	Fair Value Hierarchy				Total Fair Value	Balance Sheet Carrying Value
	Level 1		Level 2*	Level 3	Total Fair Value	Balance Sheet Carrying Value

2.646% Senior Notes due 2020	$	—	298	—	298	300
3.605% Senior Notes due 2025	—		490	—	490	500
3.550% Senior Notes due 2026	—		483	—	483	500
4.680% Senior Notes due 2045	—		277	—	277	300
4.900% Senior Notes due 2046	—		599	—	599	625
Revolving credit facility at 1.98% at year-end 2016	—		210	—	210	210
Total	$	—	2,357	—	2,357	2,435
Net unamortized discounts and debt issuance costs						(24		)
Total debt						$	2,411
*Fair value was estimated using quoted market prices of comparable instruments.

Revolving Credit Facility

At March 31, 2017, and December 31, 2016, we had an aggregate of $157 million and $210 million borrowed and outstanding under our $750 million revolving credit facility, respectively.

Note 8—Equity

ATM Program

In June 2016, we filed a prospectus supplement to the shelf registration statement for our continuous offering program that became effective with the Securities and Exchange Commission in May 2016, related to the continuous issuance of up to an aggregate of $250 million of common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program, or at-the-market program, referred to as our ATM Program). For the three months ended March 31, 2017, on a settlement date basis, we issued 744,968 common units under the ATM Program, which generated net proceeds of $40 million. Since inception through March 31, 2017, we have issued an aggregate of 1,091,120 common units under our ATM Program, generating net proceeds of $58 million, after broker commissions of $1 million. The net proceeds from sales under the ATM Program are used for general partnership purposes, which may include debt repayment, future acquisitions, capital expenditures and additions to working capital.

Note 9—Net Income Per Limited Partner Unit

Net income per limited partner unit is computed by dividing the limited partners’ interest in net income attributable to the Partnership by the weighted average number of common units outstanding for the period. The classes of participating securities as of March 31, 2017, included common units, general partner units and incentive distribution rights (IDRs). Basic and diluted net income per unit are the same because we do not have potentially dilutive instruments outstanding.

Net income earned by the Partnership is allocated between the limited partners and the General Partner (including the General Partner’s IDRs) in accordance with our partnership agreement. First, earnings are allocated based on actual cash distributions made to our unitholders, including those attributable to the General Partner’s IDRs. To the extent net income attributable to the Partnership exceeds or is less than cash distributions, this difference is allocated based on the unitholders’ respective ownership percentages, after consideration of any priority allocations of earnings.

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When our financial statements are retrospectively adjusted after a dropdown transaction, the earnings of the acquired business, prior to the closing of the transaction, are allocated entirely to our General Partner and presented as net income (loss) attributable to Predecessors. The earnings per unit of our limited partners prior to the close of the transaction do not change as a result of the dropdown. After the closing of a dropdown transaction, the earnings of the acquired business are allocated in accordance with our partnership agreement as previously described.



	Millions of Dollars
	Three Months Ended March 31
	2017		2016

Net income attributable to the Partnership	$	97	52
Less: General partner’s distribution declared (including IDRs)*	32		16
Limited partners’ distribution declared on common units*	63		40
Distributions less than (in excess of) net income attributable to the Partnership	$	2	(4	)

*Distribution declared attributable to the indicated periods.



	General Partner (including IDRs)		Limited Partners’ Common Units		Total
Three Months Ended March 31, 2017
Net income attributable to the Partnership (millions):
Distribution declared	$	32	63		95
Distribution less than net income attributable to the Partnership	—		2		2
Net income attributable to the Partnership	$	32	65		97

Weighted average units outstanding:
Basic	2,187,386		107,400,037		109,587,423
Diluted	2,187,386		107,400,037		109,587,423

Net income per limited partner unit (dollars):
Basic			$	0.60
Diluted			0.60

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	General Partner (including IDRs)		Limited Partners’ Common Units			Total
Three Months Ended March 31, 2016
Net income attributable to the Partnership (millions):
Distribution declared	$	16	40			56
Distribution in excess of net income attributable to the Partnership	—		(4		)	(4	)
Net income attributable to the Partnership	$	16	36			52

Weighted average units outstanding:
Basic	1,686,295		82,628,424			84,314,719
Diluted	1,686,295		82,628,424			84,314,719

Net income per limited partner unit (dollars):
Basic			$	0.44
Diluted			0.44

On April 19, 2017, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.586 per limited partner unit which, combined with distributions to our General Partner, will result in total distributions of $95 million attributable to the first quarter of 2017. This distribution is payable May 12, 2017, to unitholders of record as of May 1, 2017.

Note 10—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 less than certain.

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.

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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 both March 31, 2017, and December 31, 2016, our total environmental accrual was $2 million. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

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, 2017, and December 31, 2016, 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 a non-cash expense and an associated non-cash capital contribution from our General Partner, as these are considered liabilities paid for by a principal unitholder.

We have assumed, and have agreed to pay, discharge and perform as and when due, all liabilities arising out of or attributable to the ownership or operation of the assets, or other activities occurring in connection with and attributable to the ownership or operation of the assets, from and after the effective date of each acquisition.

Note 11—Cash Flow Information

2016 Initial Fractionator Acquisition

The Initial Fractionator Acquisition was a noncash transaction. The historical book value of the net assets of our 25 percent interest acquired was $283 million. Of this amount, $212 million was attributed to the note payable assumed (a noncash investing and financing activity). The remaining $71 million was attributed to the common and general partner units issued (a noncash investing and financing activity).

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Capital Expenditures

Our capital expenditures and investments consisted of:



	Millions of Dollars
	Three Months Ended March 31
	2017			2016*
Capital Expenditures and Investments
Cash capital expenditures and investments	$	57		97
Change in capital expenditure accruals	(4		)	(33	)
Total capital expenditures and investments	$	53		64

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.



	Millions of Dollars
	Three Months Ended March 31
	2017		2016
Capital Expenditures and Investments
Capital expenditures and investments attributable to the Partnership	$	53	33
Capital expenditures attributable to Predecessors*	—		31
Total capital expenditures and investments*	$	53	64

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.



	Millions of Dollars
	Three Months Ended March 31
	2017		2016
Other Noncash Investing and Financing Activities
Certain liabilities of acquired assets retained by Phillips 66⁽¹⁾	$	—	34

⁽¹⁾Certain liabilities of assets acquired from Phillips 66 were retained by Phillips 66, pursuant to the terms of various agreements under which we acquired those assets. See Note 10—Contingencies for additional information on excluded liabilities associated with acquisitions from Phillips 66.

Note 12—Related Party Transactions

Commercial Agreements

We have entered into multiple commercial agreements with Phillips 66, including transportation services agreements, terminal services agreements, storage services agreements, stevedoring services agreements, a fractionation service agreement and rail terminal services agreements. Under these long-term, fee-based agreements, we provide transportation, terminaling, storage, stevedoring, fractionation and rail terminal services to Phillips 66, and Phillips 66 commits to provide us with minimum quarterly throughput volumes of crude oil, NGL and refined petroleum products or minimum monthly service fees. Under our transportation and terminaling services agreements, if Phillips 66 fails to transport, throughput or store its minimum throughput volume during any quarter, then Phillips 66 will pay us a deficiency payment based on the calculation described in the agreement.

Amended Operational Services Agreement

Under our amended operational services agreement, we reimburse Phillips 66 for providing certain operational services to us in support of our pipelines, terminaling 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 annual 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.

Tax Sharing Agreement

We have entered into a tax sharing agreement with Phillips 66 pursuant to which we will 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. The amount of any such reimbursement will be 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. 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 operating and maintenance expenses, general and administrative expenses and interest and debt expense were:



	Millions of Dollars
	Three Months Ended March 31
	2017		2016*

Operating and maintenance expenses	$	28	25
General and administrative expenses	15		14
Interest and debt expense	—		1
Total	$	43	40

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

We pay Phillips 66 a monthly operational and administrative support fee under the terms of our amended omnibus agreement in the amount of $7 million. The operational and administrative support fee is for the provision of certain services, including: 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; corporate engineering services, including asset integrity and regulatory services; logistical services; asset oversight, such as operational management and supervision; business development services; investor relations; tax matters; and public company reporting services. 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 being performed for our operations. Under our amended operational services agreement, we reimburse Phillips 66 for the provision of certain operational services to us in support of our pipelines, rail racks, fractionator, and terminaling and storage facilities. Additionally, we pay Phillips 66 for insurance services provided to us. Operating and maintenance expenses also include volumetric gain/loss associated with volumes transported by Phillips 66.

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Note 13—New Accounting Standards

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction does not involve the acquisition of a business. If the screen is not met, then the amendment requires that, to be considered a business, the operation must include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under the previous accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant and equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases—financing and operating—which are substantially similar to capital and operating leases in the previous lease guidance. Under the new standard, recognition of assets and liabilities arising from operating leases will require recognition on the balance sheet. The effect of all leases in the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply its provisions to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” to meet its objective of providing more decision-useful information about financial instruments. The majority of this ASU’s provisions amend only the presentation or disclosures of financial instruments; however, one provision will also affect net income. Equity investments carried under the cost method or lower of cost or fair value method of accounting, in accordance with current GAAP, will have to be carried at fair value upon adoption of ASU No. 2016-01, with changes in fair value recorded in net income. For equity investments that do not have readily determinable fair values, a company may elect to carry such investments at cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. Public business entities should apply the guidance in ASU No. 2016-01 for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption prohibited. We are currently evaluating the provisions of ASU No. 2016-01. Our initial review indicates that ASU No. 2016-01 will have a limited impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new standard converged guidance on recognizing revenues in contracts with customers under GAAP and International Financial Reporting Standards. This ASU is intended to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets and expand disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. Retrospective or modified retrospective application of the accounting standard is required. ASU No. 2014-09 was further amended in March 2016 by the provisions of ASU No. 2016-08, “Principal versus Agent Considerations (Reporting

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Revenue Gross versus Net),” in April 2016 by the provisions of ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” in May 2016 by the provisions of ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and in December 2016 by the provisions of ASU No. 2016-20, “Technical Corrections to Topic 606, Revenue from Contracts with Customers.” As part of our assessment work-to-date, we have formed an implementation work team, completed training on the new ASU’s revenue recognition model and are continuing our contract review and documentation. Our expectation is to adopt the standard on January 1, 2018, using the modified retrospective application. Our evaluation of the new ASU is ongoing, which includes understanding the impact of adoption on earnings from equity method investments and revenue generated by lease arrangements. Based on our analysis to-date, we have not identified any material impact on our financial statements, other than disclosure.

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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.

Management’s Discussion and Analysis is the Partnership’s analysis of its financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes appearing 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 identify forward-looking statements. 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.”

BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW

Partnership Overview

We are a growth-oriented master limited partnership formed to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids (NGL) pipelines and terminals, as well as other midstream assets. Our common units trade on the New York Stock Exchange under the symbol PSXP.

Basis of Presentation

See the “Basis of Presentation” section of Note 1—Business and Basis of Presentation, in the Notes to Consolidated Financial Statements, for additional information on the content and comparability of our historical financial statements.

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How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics to analyze our performance, including: (1) volumes handled (including pipeline throughput, terminaling throughput and storage volumes); (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, storage and NGL fractionator systems. In addition, our equity affiliates generate revenue from transporting NGL, crude oil and refined petroleum products. These volumes are primarily affected by the supply of, and demand for, NGL, crude oil and refined petroleum products 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.

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. These 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 that period. 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 performed regularly.

Our operating and maintenance expenses are also affected by volumetric gains/losses resulting from variances in meter readings and other measurement methods, as well as volume fluctuations due to pressure and temperature changes. Under certain commercial agreements with Phillips 66, the value of any NGL, crude oil, or refined petroleum product volumetric gain/loss is determined by reference to the monthly average reference price for the applicable commodity. Any gains and losses under these provisions decrease or increase, respectively, our operating and maintenance expenses in the period in which they are realized. These contractual volumetric gain/loss provisions could increase variability in our operating and maintenance expenses.

EBITDA, Adjusted EBITDA and Distributable Cash Flow

We define EBITDA as net income (loss) plus net interest expense, income taxes, depreciation and amortization attributable to both the Partnership and our Predecessors.

Adjusted EBITDA is the EBITDA directly attributable to the Partnership after deducting the EBITDA attributable to our Predecessors, further adjusted for:


•	The difference between cash distributions received and equity earnings from our affiliates.


•	Transaction costs associated with acquisitions.


•	Certain other noncash items, including expenses indemnified by Phillips 66.

Distributable cash flow is defined as adjusted EBITDA less net interest, maintenance capital expenditures and income taxes paid, plus adjustments for deferred revenue impacts and prefunded maintenance capital expenditures.

EBITDA, adjusted EBITDA and distributable cash flow are not presentations made in accordance with accounting principles generally accepted in the United States (GAAP). EBITDA, adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may find useful to assess:


•	Our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA and adjusted EBITDA, financing methods.

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•	The ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders.


•	Our ability to incur and service debt and fund capital expenditures.


•	The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

The GAAP performance measure most directly comparable to EBITDA and adjusted EBITDA is net income. The GAAP liquidity measure most directly comparable to EBITDA and distributable cash flow is net cash provided by operating activities. These non-GAAP financial measures should not be considered alternatives to GAAP net income or net cash provided by operating activities. They have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA, adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definition of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Business Environment

Since we do not own any of the NGL, crude oil and refined petroleum products we handle and do not engage in the trading of NGL, crude oil and refined petroleum products, 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.

Our throughput volumes depend primarily on the volume of crude oil processed and refined petroleum products produced at Phillips 66’s owned or operated refineries with which our assets are integrated, which in turn are primarily dependent on Phillips 66’s refining margins and maintenance schedules. Refining margins depend on the cost of crude oil or other feedstocks and the price of refined petroleum products. These prices are affected by numerous factors beyond our or Phillips 66’s control, including the domestic and global supply of and demand for crude oil and refined petroleum products. Throughput volumes of our equity affiliates depend primarily on upstream drilling activities, refinery performance and product supply and demand.

While we believe we have substantially mitigated our indirect exposure to commodity price fluctuations through the minimum volume commitments in our commercial agreements with Phillips 66 during the respective terms of those agreements, our ability to execute our growth strategy in our areas of operation will depend, in part, on the availability of attractively priced crude oil in the areas served by our crude oil pipelines and rail racks, demand for refined petroleum products in the markets served by our refined petroleum product pipelines and terminals, and the general demand for midstream services, including NGL transportation and fractionation.

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RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three-month period ended March 31, 2017, is based on a comparison with the corresponding period of 2016.



	Millions of Dollars
	Three Months Ended March 31
	2017		2016*
Revenues and Other Income
Operating revenues—related parties	$	184	171
Operating revenues—third parties	10		8
Equity in earnings of affiliates	33		25
Other income	7		—
Total revenues and other income	234		204

Costs and Expenses
Operating and maintenance expenses	62		50
Depreciation	26		23
General and administrative expenses	16		17
Taxes other than income taxes	9		10
Interest and debt expense	24		10
Total costs and expenses	137		110
Income before income taxes	97		94
Provision for income taxes	—		—
Net income	97		94
Less: Net income attributable to Predecessors	—		42
Net income attributable to the Partnership	97		52
Less: General partner’s interest in net income attributable to the Partnership	32		16
Limited partners’ interest in net income attributable to the Partnership	$	65	36

Net cash provided by operating activities	$	139	111

Adjusted EBITDA	$	155	74

Distributable cash flow	$	124	64

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

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	Three Months Ended March 31
	2017		2016
	Thousands of Barrels Daily
Pipeline, Terminal and Storage Volumes
Pipelines⁽¹⁾
Pipeline throughput volumes
Wholly Owned Pipelines
Crude oil*	940		1,025
Refined products and NGL*	935		801
Total	1,875		1,826

Selected Joint Venture Pipelines⁽²⁾
NGL	354		306

Terminals
Terminaling throughput and storage volumes⁽³⁾
Crude oil*⁽⁴⁾	485		502
Refined products and NGL*	898		784
Total	1,383		1,286

Revenue Per Barrel (dollars)
Average pipeline revenue per barrel⁽⁵⁾	$	0.63	0.61
Average terminaling and storage revenue per barrel	0.41		0.42

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

⁽¹⁾Represents the sum of volumes transported through each separately tariffed pipeline segment.

⁽²⁾ Total pipeline system throughput volumes for the Sand Hills and Southern Hills pipelines (100 percent basis) per day for each period presented.

⁽³⁾ Terminal throughput and storage volumes include leased capacity converted to a MBD-equivalent based on capacity divided by days in the period.

⁽⁴⁾Crude oil terminals include Bayway and Ferndale rail rack volumes.

⁽⁵⁾Excludes equity affiliates.

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The following tables present reconciliations of EBITDA and adjusted EBITDA to net income and EBITDA and distributable cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.



	Millions of Dollars
	Three Months Ended March 31
	2017		2016*
Reconciliation to Net Income
Net income	$	97	94
Plus:
Depreciation	26		23
Net interest expense	24		10
EBITDA	147		127
Plus:
Distributions in excess of equity earnings	4		4
Expenses indemnified by Phillips 66	3		—
Transaction costs associated with acquisitions	1		1
Less:
EBITDA attributable to Predecessors	—		58
Adjusted EBITDA	155		74
Plus:
Deferred revenue impacts**	4		1
Less:
Net interest expense	24		10
Maintenance capital expenditures	11		1
Distributable cash flow	$	124	64

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

**Difference between cash receipts and revenue recognition.

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	Millions of Dollars
	Three Months Ended March 31
	2017			2016*
Reconciliation to Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities	$	139		111
Plus:
Net interest expense	24			10
Changes in working capital	(17		)	13
Undistributed equity earnings	4			(1	)
Other	(3		)	(6	)
EBITDA	147			127
Plus:
Distributions in excess of equity earnings	4			4
Expenses indemnified by Phillips 66	3			—
Transaction costs associated with acquisitions	1			1
Less:
EBITDA attributable to Predecessors	—			58
Adjusted EBITDA	155			74
Plus:
Deferred revenue impacts^†	4			1
Less:
Net interest expense	24			10
Maintenance capital expenditures	11			1
Distributable cash flow	$	124		64

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

^†Difference between cash receipts and revenue recognition.

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Minimum Volume Commitments

Under certain of our transportation services agreements, if Phillips 66 fails to transport a minimum throughput volume during any quarter, then Phillips 66 will pay us a deficiency payment based on the calculation described in the agreement. Payments made by Phillips 66 for these shortfall volumes are initially recorded as “Deferred revenues—related parties” on our consolidated balance sheet, as Phillips 66 generally has the right to make up the shortfall volumes in the following four quarters. The deferred revenue is recognized at the earlier of the quarter in which Phillips 66 makes up the shortfall volumes or the expiration of the period in which Phillips 66 is contractually allowed to make up the shortfall volumes.

Detail on these transportation-based deferred revenues follows:



	Millions of Dollars
	Three Months Ended March 31
	2017			2016

Deferred revenues—beginning of period	$	12		4
Quarterly deficiency payments⁽¹⁾	5			2
Quarterly deficiency make-up/expirations⁽²⁾	(1		)	(1	)
Deferred revenues—end of period	$	16		5

⁽¹⁾ Cash received with deferred revenue recognition.

⁽²⁾ Revenue recognized on cash previously received.

Statement of Income Analysis

Operating revenues increased $15 million, or 8 percent, in the first quarter of 2017. The increase was primarily attributable to additional revenues from the acquisition of the River Parish NGL System in November 2016 and from additional storage capacity coming online at Clemens Caverns.

Equity in earnings of affiliates increased $8 million, or 32 percent, in the first quarter of 2017. The increase was primarily attributable to higher earnings from our investments in Explorer Pipeline Company (Explorer) and DCP Sand Hills Pipeline, LLC (Sand Hills), primarily due to higher volumes. In addition, the increase in the three-month period of 2017 also reflected earnings from Bayou Bridge Pipeline, LLC (Bayou Bridge), which began operations in April 2016, and STACK Pipeline LLC (STACK), which was acquired in August 2016.

Other income increased $7 million in the first quarter of 2017. The increase was primarily due to receiving tax-related contractual make-whole payments associated with the transfer of a co-venturer’s interests in Sand Hills and DCP Southern Hills Pipeline, LLC (Southern Hills) to DCP Midstream, LP.

Operating and maintenance expenses increased $12 million, or 24 percent, in the first quarter of 2017. The increase was primarily due to costs related to the Paradis Pipeline Station incident and increased maintenance activity.

Depreciation increased $3 million, or 13 percent, in the first quarter of 2017. The increase was mainly attributable to the acquisition of the River Parish NGL System in November 2016 and additional storage capacity coming online at the Clemens Caverns.

Interest and debt expense increased $14 million in the first quarter of 2017, due to a higher average debt principal balance as a result of the issuance of $1,125 million in aggregate principal amount of senior notes in October 2016.

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CAPITAL RESOURCES AND LIQUIDITY

Significant Sources of Capital

Our sources of liquidity include cash generated from operations, borrowings from related parties and under our revolving credit facility, and issuances of additional debt and equity securities. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements, and make our quarterly cash distributions.

Operating Activities

We generated $139 million in cash from operations during the first three months of 2017, an improvement over cash from operations of $111 million for the corresponding period of 2016. The improvement was mainly driven by working capital impacts.

Revolving Credit Facility

At March 31, 2017, and December 31, 2016, we had an aggregate of $157 million and $210 million borrowed and outstanding under our $750 million revolving credit facility, respectively.

ATM Program

In June 2016, we filed a prospectus supplement to our shelf registration statement for our continuous offering program that became effective with the U.S. Securities and Exchange Commission (SEC) in May 2016, related to the continuous issuance of up to an aggregate of $250 million of common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program, or at-the-market program, referred to as our ATM Program). For the three months ended March 31, 2017, on a settlement date basis, we issued 744,968 common units under the ATM Program, which generated net proceeds of $40 million. Since inception through March 31, 2017, we have issued an aggregate of 1,091,120 common units under our ATM Program, generating net proceeds of $58 million, after broker commissions of $1 million. The net proceeds from sales under the ATM Program are used for general partnership purposes, which may include debt repayment, future acquisitions, capital expenditures and additions to working capital.

Issuance of common units under the ATM Program can reduce our General Partner’s interest to under 2 percent. We expect the General Partner’s interest to be periodically restored to 2 percent in connection with dropdown transactions or through direct equity contributions. However, these future contributions from our General Partner cannot be assured. At March 31, 2017, our General Partner’s interest was slightly less than 2 percent.

Shelf Registration

We have a universal shelf registration statement on file with the SEC under which we, as a well-known seasoned issuer, have the ability to issue and sell an indeterminate amount of common units representing limited partner interests and debt securities.

Off-Balance Sheet Arrangements

We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.

Capital Requirements

Capital Expenditures and Investments

Our operations can be capital intensive, requiring investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational requirements of our wholly owned and joint venture entities. Our capital requirements consist of maintenance and expansion capital expenditures, as well as contributions to our joint ventures. Examples of maintenance capital expenditures are those made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or other capital expenditures that are incurred in maintaining existing system volumes and related cash flows. In contrast, expansion capital expenditures are those made to expand and upgrade our systems and facilities and to construct or acquire new systems or facilities to grow our business, including contributions to joint ventures that are using the contributed funds for such purposes.

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Our capital expenditures and investments for the first three months of 2017 and 2016 were:



	Millions of Dollars
	Three Months Ended March 31
	2017		2016

Capital expenditures and investments attributable to the Partnership
Expansion	$	42	32
Maintenance	11		1
Total	53		33
Capital expenditures attributable to Predecessors*	—		31
Total capital expenditures and investments	$	53	64

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Our capital expenditures and investments for the first three months of 2017 were $53 million, primarily associated with the following activities:


•	Continued progress on the Bayou Bridge pipeline segment from Lake Charles, Louisiana, to St. James, Louisiana.


•	Contributions to Sand Hills to increase capacity on its NGL pipeline system.


•	Contributions to STACK to extend the origination point of its pipeline system to access additional area producers and increase capacity.


•	Various upgrades and replacements on our assets.

Cash Distribution

On April 19, 2017, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.586 per common unit which, combined with distributions to our General Partner, will result in a total distribution of $95 million, payable on May 12, 2017, to unitholders of record as of May 1, 2017.

Cash distributions will be made to our General Partner in respect of its general partner interest and its ownership of all incentive distribution rights (IDRs), which entitle our General Partner to receive increasing percentages, up to 50 percent, of quarterly cash distributions in excess of $0.244375 per unit. Accordingly, based on the per-unit distribution declared on April 19, 2017, our General Partner will receive 33 percent of the first-quarter 2017 cash distributions in respect of its general partner interest and its ownership of all IDRs.

Contingencies

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Regulatory Matters

Our interstate common carrier crude oil and refined petroleum products pipeline operations are subject to rate regulation by the Federal Energy Regulatory Commission under the Interstate Commerce Act and Energy Policy Act of 1992, and certain of our pipeline systems providing intrastate service are subject to rate regulation by applicable state authorities under their respective laws and regulations. Our pipeline, rail rack and terminal operations are also subject to safety regulations adopted by the Department of Transportation, as well as to state regulations.

Legal and Tax Matters

Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal and tax support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal and tax organizations apply their knowledge, experience and professional judgment to the specific characteristics of our cases and uncertain tax positions. Phillips 66’s legal organization employs 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, 2017, and December 31, 2016, we did not have any material accrued contingent liabilities associated with litigation matters.

Environmental

We are subject to extensive federal, state and local environmental laws and regulations. These requirements, which change frequently, regulate the discharge of materials into the environment or otherwise relate to protection of the environment. Compliance with these laws and regulations may require us to remediate environmental damage from any discharge of petroleum or chemical substances from our facilities or require us to install additional pollution control equipment at or on our facilities. Our failure to comply with these or any other environmental or safety-related regulations could result in the assessment of administrative, civil, or criminal penalties, the imposition of investigatory and remedial liabilities, and the issuance of governmental orders that may subject us to additional operational constraints. Future expenditures may be required to comply with the Clean Air Act and other federal, state and local requirements in respect of our various sites, including our pipelines and storage assets. The impact of legislative and regulatory developments, if enacted or adopted, could result in increased compliance costs and additional operating restrictions on our business, each of which could have an adverse impact on our financial position, results of operations and liquidity.

As with all costs, if these expenditures are not ultimately reflected in the tariffs and other fees we receive for our services, our operating results will be adversely affected. We believe that substantially all similarly situated parties and holders of comparable assets must comply with similar environmental laws and regulations. However, the specific impact on each may vary depending on a number of factors, including, but not limited to, the age and location of its operating facilities.

We accrue for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. As environmental remediation matters proceed toward ultimate resolution or as additional remediation obligations arise, charges in excess of those previously accrued may be required. New or expanded environmental requirements, which could increase our environmental costs, may arise in the future. We believe we are in substantial compliance with all legal obligations regarding the environment and have established the environmental accruals that are currently required; however, it is not possible to predict all of the ultimate costs of compliance, including remediation costs that may be incurred and penalties that may be imposed, because not all of the

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costs are fixed or presently determinable (even under existing legislation) and the costs may be affected by future legislation or regulations.

Paradis Pipeline Station Incident

On February 9, 2017, a fire occurred at the Paradis Pipeline Station on the River Parish NGL System. There was one Phillips 66 employee fatality in the fire. Based on our assessment, which is ongoing, we do not currently expect the incident to have a material impact on our results of operations.

Indemnification and Excluded Liabilities

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NEW ACCOUNTING STANDARDS

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction does not involve the acquisition of a business. If the screen is not met, then the amendment requires that, to be considered a business, the operation must include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under the previous accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant and equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases - financing and operating - which are substantially similar to capital and operating leases in the previous lease guidance. Under the new standard, recognition of assets and liabilities arising from operating leases will require recognition on the balance sheet. The effect of all leases in the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply its provisions to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements. You can identify our forward-looking statements by 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.

We based the forward-looking statements on our current expectations, estimates and projections about us and the industries in which we operate in general. We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:


•	The continued ability of Phillips 66 to satisfy its obligations under our commercial and other agreements.


•	The volume of crude oil, NGL and refined petroleum products we transport, fractionate, terminal and store.


•	The tariff rates with respect to volumes that we transport through our regulated assets, which rates are subject to review and possible adjustment by federal and state regulators.


•	Changes in revenue we realize under the loss allowance provisions of our regulated tariffs resulting from changes in underlying commodity prices.


•	Fluctuations in the prices for crude oil, NGL and refined petroleum products.


•	Changes in global economic conditions and the effects of a global economic downturn on the business of Phillips 66 and the business of its suppliers, customers, business partners and credit lenders.


•	Liabilities associated with the risks and operational hazards inherent in transporting, fractionating, terminaling and storing crude oil, NGL and refined petroleum products.


•	Curtailment of operations due to severe weather disruption; riots, strikes, lockouts or other industrial disturbances; or failure of information technology systems due to various causes, including unauthorized access or attack.


•	Inability to timely obtain or maintain permits, including those necessary for capital projects; comply with government regulations; or make capital expenditures required to maintain compliance.


•	Failure to timely complete construction of announced and future capital projects.


•	The operation, financing and distribution decisions of our joint ventures.


•	Costs or liabilities associated with federal, state, and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity.


•	Costs associated with compliance with evolving environmental laws and regulations on climate change.


•	Costs associated with compliance with safety regulations, including pipeline integrity management program testing and related repairs.


•	Changes in the cost or availability of third-party vessels, pipelines, railcars and other means of delivering and transporting crude oil, NGL and refined petroleum products.


•	Direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war.


•	The factors generally described in “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K filed with the SEC on February 17, 2017.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our commodity price risk and interest rate risk at March 31, 2017, did not differ materially from that disclosed under Item 7A of our 2016 Annual Report on Form 10-K.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in U.S. Securities and Exchange Commission (the SEC) rules and forms, and that such information is accumulated and communicated to our General Partner’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of March 31, 2017, our General Partner’s Chairman and Chief Executive Officer and its Vice President and Chief Financial Officer, with the participation of the General Partner’s management, carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our General Partner’s Chairman and Chief Executive Officer and its Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of March 31, 2017.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the quarterly period ended March 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not a party to any reportable litigation or governmental or other proceeding, including those involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment, that we believe will have a material adverse impact on our consolidated financial position. In addition, as discussed in Note 10—Contingencies, in the Notes to Consolidated Financial Statements, under our amended omnibus agreement, Phillips 66 indemnifies us or assumes responsibility for certain liabilities relating to litigation and environmental matters attributable to the ownership or operation of our assets prior to their contribution to us from Phillips 66.

Item 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K.

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Item 6. EXHIBITS




Exhibit Number		Exhibit Description

12		Computation of Ratio of Earnings to Fixed Charges.

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32		Certifications pursuant to 18 U.S.C. Section 1350.

101.INS		XBRL Instance Document.

101.SCH		XBRL Schema Document.

101.CAL		XBRL Calculation Linkbase Document.

101.LAB		XBRL Labels Linkbase Document.

101.PRE		XBRL Presentation Linkbase Document.

101.DEF		XBRL Definition Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	PHILLIPS 66 PARTNERS LP

	By: Phillips 66 Partners GP LLC, its general partner

	/s/ Chukwuemeka A. Oyolu
	Chukwuemeka A. Oyolu Vice President and Controller (Chief Accounting and Duly Authorized Officer)

May 5, 2017



	/s/ Greg C. Garland
	Greg C. Garland
	Chairman of the Board of Directors and Chief Executive Officer
	Phillips 66 Partners GP LLC (the general partner of Phillips 66 Partners LP)



	/s/ Kevin J. Mitchell
	Kevin J. Mitchell
	Director, Vice President and Chief Financial Officer
	Phillips 66 Partners GP LLC (the general partner of Phillips 66 Partners LP)



	/s/ Greg C. Garland
	Greg C. Garland
	Chairman of the Board of Directors and Chief Executive Officer
	Phillips 66 Partners GP LLC (the general partner of Phillips 66 Partners LP)



	/s/ Kevin J. Mitchell
	Kevin J. Mitchell
	Director, Vice President and Chief Financial Officer
	Phillips 66 Partners GP LLC (the general partner of Phillips 66 Partners LP)

Document and Entity Information	3 Months Ended
Document and Entity Information	Mar. 31, 2017 shares
Document and Entity Information [Abstract]
Entity Registrant Name	Phillips 66 Partners LP
Entity Central Index Key	0001572910
Trading Symbol	PSXP
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding	107,926,894


1.	I have reviewed this quarterly report on Form 10-Q of Phillips 66 Partners LP;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


(1)	The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Consolidated Balance Sheet - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Assets
Cash and cash equivalents	$ 1	$ 2
Accounts receivable—related parties	66	76
Accounts receivable—third parties	6	7
Materials and supplies	12	11
Prepaid expenses	3	4
Total Current Assets	88	100
Equity investments	1,176	1,142
Net properties, plants and equipment	2,669	2,675
Goodwill	185	185
Deferred rentals—related parties	5	5
Other assets	2	2
Total Assets	4,125	4,109
Liabilities
Accounts payable—related parties	11	12
Accounts payable—third parties	28	31
Accrued property and other taxes	16	10
Accrued interest	28	26
Short-term debt	2	15
Deferred revenues—related parties	18	14
Other current liabilities	1	3
Total Current Liabilities	104	111
Long-term debt	2,357	2,396
Asset retirement obligations	9	9
Accrued environmental costs	2	2
Deferred income taxes	2	2
Deferred revenues—related parties—long-term	23	23
Total Liabilities	2,497	2,543
Equity
General partner—Phillips 66 (2017 and 2016—2,187,386 units issued and outstanding)	(687)	(704)
Accumulated other comprehensive loss	(1)	(1)
Total Equity	1,628	1,566
Total Liabilities and Equity	4,125	4,109
Public \| Common Units
Equity
Unitholders	1,837	1,795
Total Equity	1,837	1,795
Non-public \| Common Units \| Phillips 66
Equity
Unitholders	479	476
Total Equity	$ 479	$ 476

Consolidated Balance Sheet (Parenthetical) - shares	Mar. 31, 2017	Dec. 31, 2016
General partner—Phillips 66 units issued (in shares)	2,187,386	2,187,386
General partner—Phillips 66 units outstanding (in shares)	2,187,386	2,187,386
Common Units \| Public
Units issued (in shares)	43,879,870	43,134,902
Units outstanding (in shares)	43,879,870	43,134,902
Common Units \| Non-public \| Phillips 66
Units issued (in shares)	64,047,024	64,047,024
Units outstanding (in shares)	64,047,024	64,047,024

Business and Basis of Presentation	3 Months Ended
Business and Basis of Presentation	Mar. 31, 2017
Business and Basis of Presentation [Abstract]
Business and Basis of Presentation	Business and Basis of Presentation 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. Description of the Business We are a growth-oriented master limited partnership formed to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids (NGL) pipelines, terminals and other transportation and midstream assets. Our common units trade on the New York Stock Exchange under the symbol PSXP. Our assets consist of crude oil, refined petroleum products and NGL transportation, terminaling and storage systems, as well as an NGL fractionator. We conduct our operations through both wholly owned and joint venture operations. The majority of our wholly owned assets are associated with, and integral to the operation of, nine of Phillips 66’s owned or joint venture refineries. We generate revenue primarily by providing fee-based transportation, terminaling, storage and NGL fractionation services to Phillips 66 and other customers. Our equity affiliates generate revenue primarily from transporting and terminaling NGL, refined petroleum products and crude oil. Since we do not own any of the NGL, crude oil and refined petroleum products we handle and do not engage in the trading of NGL, crude oil and refined petroleum products, 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. Basis of Presentation We have acquired assets from Phillips 66 that were considered transfers of businesses between entities under common control. This required the transactions to be accounted for as if the transfers had occurred at the beginning of the transfer period, with prior periods retrospectively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes have been retrospectively adjusted to include the historical results and financial position of these acquired businesses prior to the effective date of each acquisition. We refer to these pre-acquisition operations as those of our “Predecessors.” The combined financial statements of our Predecessors were derived from the accounting records of Phillips 66 and reflect the combined historical results of operations, financial position and cash flows of our Predecessors as if such businesses had been combined for all periods presented. All intercompany transactions and accounts within our Predecessors have been eliminated. The assets and liabilities of our Predecessors in these financial statements have been reflected on a historical cost basis because the transfer of the Predecessors to us took place within the Phillips 66 consolidated group. The consolidated statement of income also includes expense allocations for certain functions performed by Phillips 66, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, information technology and procurement; and operational support services such as engineering and logistics. These allocations were based primarily on relative carrying values of properties, plants and equipment (PP&E) and equity-method investments, or number of terminals and pipeline miles, and secondarily on activity-based cost allocations. Our management believes the assumptions underlying the allocation of expenses from Phillips 66 are reasonable. Nevertheless, the financial results of our Predecessors may not include all of the actual expenses that would have been incurred had our Predecessors been a stand-alone publicly traded partnership during the periods presented.

Interim Financial Information	3 Months Ended
Interim Financial Information	Mar. 31, 2017
Interim Financial Information [Abstract]
Interim Financial Information	Interim Financial Information The interim financial information presented in the financial statements included in this report is unaudited 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 2016 Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2017, are not necessarily indicative of the results to be expected for the full year.

Changes in Accounting Principles	3 Months Ended
Changes in Accounting Principles	Mar. 31, 2017
Changes in Accounting Principles [Abstract]
Changes in Accounting Principles	Changes in Accounting Principles Effective January 1, 2017, we early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test. Under the revised test, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Beginning this year, we will apply this ASU prospectively to our goodwill impairment test. Effective January 1, 2017, we early adopted ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The new update changes the classification and presentation of restricted cash in the statement of cash flow. The amendment requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Adoption of this ASU on a retrospective basis did not impact our financial statements. Effective January 1, 2017, we early adopted ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The new update clarifies the treatment of several cash flow categories. In addition, ASU No. 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. Adoption of this ASU on a retrospective basis did not have a material impact on our financial statements.

Equity	3 Months Ended
Equity	Mar. 31, 2017
Equity [Abstract]
Equity	Equity ATM Program In June 2016, we filed a prospectus supplement to the shelf registration statement for our continuous offering program that became effective with the Securities and Exchange Commission in May 2016, related to the continuous issuance of up to an aggregate of $250 million of common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program, or at-the-market program, referred to as our ATM Program). For the three months ended March 31, 2017, on a settlement date basis, we issued 744,968 common units under the ATM Program, which generated net proceeds of $40 million. Since inception through March 31, 2017, we have issued an aggregate of 1,091,120 common units under our ATM Program, generating net proceeds of $58 million, after broker commissions of $1 million. The net proceeds from sales under the ATM Program are used for general partnership purposes, which may include debt repayment, future acquisitions, capital expenditures and additions to working capital.

Contingencies	3 Months Ended
Contingencies	Mar. 31, 2017
Contingencies [Abstract]
Contingencies	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 less than certain. 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 both March 31, 2017, and December 31, 2016, our total environmental accrual was $2 million. In the future, we may be involved in additional environmental assessments, cleanups and proceedings. 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, 2017, and December 31, 2016, 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 a non-cash expense and an associated non-cash capital contribution from our General Partner, as these are considered liabilities paid for by a principal unitholder. We have assumed, and have agreed to pay, discharge and perform as and when due, all liabilities arising out of or attributable to the ownership or operation of the assets, or other activities occurring in connection with and attributable to the ownership or operation of the assets, from and after the effective date of each acquisition.

New Accounting Standards	3 Months Ended
New Accounting Standards	Mar. 31, 2017
New Accounting Standards [Abstract]
New Accounting Standards	In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction does not involve the acquisition of a business. If the screen is not met, then the amendment requires that, to be considered a business, the operation must include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under the previous accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant and equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases—financing and operating—which are substantially similar to capital and operating leases in the previous lease guidance. Under the new standard, recognition of assets and liabilities arising from operating leases will require recognition on the balance sheet. The effect of all leases in the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply its provisions to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” to meet its objective of providing more decision-useful information about financial instruments. The majority of this ASU’s provisions amend only the presentation or disclosures of financial instruments; however, one provision will also affect net income. Equity investments carried under the cost method or lower of cost or fair value method of accounting, in accordance with current GAAP, will have to be carried at fair value upon adoption of ASU No. 2016-01, with changes in fair value recorded in net income. For equity investments that do not have readily determinable fair values, a company may elect to carry such investments at cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. Public business entities should apply the guidance in ASU No. 2016-01 for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption prohibited. We are currently evaluating the provisions of ASU No. 2016-01. Our initial review indicates that ASU No. 2016-01 will have a limited impact on our financial statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new standard converged guidance on recognizing revenues in contracts with customers under GAAP and International Financial Reporting Standards. This ASU is intended to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets and expand disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. Retrospective or modified retrospective application of the accounting standard is required. ASU No. 2014-09 was further amended in March 2016 by the provisions of ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” in April 2016 by the provisions of ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” in May 2016 by the provisions of ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and in December 2016 by the provisions of ASU No. 2016-20, “Technical Corrections to Topic 606, Revenue from Contracts with Customers.” As part of our assessment work-to-date, we have formed an implementation work team, completed training on the new ASU’s revenue recognition model and are continuing our contract review and documentation. Our expectation is to adopt the standard on January 1, 2018, using the modified retrospective application. Our evaluation of the new ASU is ongoing, which includes understanding the impact of adoption on earnings from equity method investments and revenue generated by lease arrangements. Based on our analysis to-date, we have not identified any material impact on our financial statements, other than disclosure.

Business and Basis of Presentation (Policies)	3 Months Ended
Business and Basis of Presentation (Policies)	Mar. 31, 2017
Business and Basis of Presentation [Abstract]
Basis of Presentation	Basis of Presentation We have acquired assets from Phillips 66 that were considered transfers of businesses between entities under common control. This required the transactions to be accounted for as if the transfers had occurred at the beginning of the transfer period, with prior periods retrospectively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes have been retrospectively adjusted to include the historical results and financial position of these acquired businesses prior to the effective date of each acquisition. We refer to these pre-acquisition operations as those of our “Predecessors.” The combined financial statements of our Predecessors were derived from the accounting records of Phillips 66 and reflect the combined historical results of operations, financial position and cash flows of our Predecessors as if such businesses had been combined for all periods presented. All intercompany transactions and accounts within our Predecessors have been eliminated. The assets and liabilities of our Predecessors in these financial statements have been reflected on a historical cost basis because the transfer of the Predecessors to us took place within the Phillips 66 consolidated group. The consolidated statement of income also includes expense allocations for certain functions performed by Phillips 66, including allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, information technology and procurement; and operational support services such as engineering and logistics. These allocations were based primarily on relative carrying values of properties, plants and equipment (PP&E) and equity-method investments, or number of terminals and pipeline miles, and secondarily on activity-based cost allocations. Our management believes the assumptions underlying the allocation of expenses from Phillips 66 are reasonable. Nevertheless, the financial results of our Predecessors may not include all of the actual expenses that would have been incurred had our Predecessors been a stand-alone publicly traded partnership during the periods presented.
New Accounting Pronouncements	Changes in Accounting Principles Effective January 1, 2017, we early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test. Under the revised test, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Beginning this year, we will apply this ASU prospectively to our goodwill impairment test. Effective January 1, 2017, we early adopted ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The new update changes the classification and presentation of restricted cash in the statement of cash flow. The amendment requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. Adoption of this ASU on a retrospective basis did not impact our financial statements. Effective January 1, 2017, we early adopted ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The new update clarifies the treatment of several cash flow categories. In addition, ASU No. 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. Adoption of this ASU on a retrospective basis did not have a material impact on our financial statements. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction does not involve the acquisition of a business. If the screen is not met, then the amendment requires that, to be considered a business, the operation must include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendments should be applied prospectively, and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under the previous accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant and equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases—financing and operating—which are substantially similar to capital and operating leases in the previous lease guidance. Under the new standard, recognition of assets and liabilities arising from operating leases will require recognition on the balance sheet. The effect of all leases in the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply its provisions to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” to meet its objective of providing more decision-useful information about financial instruments. The majority of this ASU’s provisions amend only the presentation or disclosures of financial instruments; however, one provision will also affect net income. Equity investments carried under the cost method or lower of cost or fair value method of accounting, in accordance with current GAAP, will have to be carried at fair value upon adoption of ASU No. 2016-01, with changes in fair value recorded in net income. For equity investments that do not have readily determinable fair values, a company may elect to carry such investments at cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. Public business entities should apply the guidance in ASU No. 2016-01 for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption prohibited. We are currently evaluating the provisions of ASU No. 2016-01. Our initial review indicates that ASU No. 2016-01 will have a limited impact on our financial statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new standard converged guidance on recognizing revenues in contracts with customers under GAAP and International Financial Reporting Standards. This ASU is intended to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets and expand disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. Retrospective or modified retrospective application of the accounting standard is required. ASU No. 2014-09 was further amended in March 2016 by the provisions of ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” in April 2016 by the provisions of ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” in May 2016 by the provisions of ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and in December 2016 by the provisions of ASU No. 2016-20, “Technical Corrections to Topic 606, Revenue from Contracts with Customers.” As part of our assessment work-to-date, we have formed an implementation work team, completed training on the new ASU’s revenue recognition model and are continuing our contract review and documentation. Our expectation is to adopt the standard on January 1, 2018, using the modified retrospective application. Our evaluation of the new ASU is ongoing, which includes understanding the impact of adoption on earnings from equity method investments and revenue generated by lease arrangements. Based on our analysis to-date, we have not identified any material impact on our financial statements, other than disclosure.
Earnings Per Share	Net income per limited partner unit is computed by dividing the limited partners’ interest in net income attributable to the Partnership by the weighted average number of common units outstanding for the period. The classes of participating securities as of March 31, 2017, included common units, general partner units and incentive distribution rights (IDRs). Basic and diluted net income per unit are the same because we do not have potentially dilutive instruments outstanding. Net income earned by the Partnership is allocated between the limited partners and the General Partner (including the General Partner’s IDRs) in accordance with our partnership agreement. First, earnings are allocated based on actual cash distributions made to our unitholders, including those attributable to the General Partner’s IDRs. To the extent net income attributable to the Partnership exceeds or is less than cash distributions, this difference is allocated based on the unitholders’ respective ownership percentages, after consideration of any priority allocations of earnings.

Business and Basis of Presentation (Narrative) (Details)	Mar. 31, 2017 refinery
Phillips 66
Limited Partners' Capital Account [Line Items]
Number of refineries	9

Acquisitions (Narrative) (Details) $ in Millions		1 Months Ended
Acquisitions (Narrative) (Details) $ in Millions	Oct. 14, 2016 USD ($) refinery shares	May 31, 2016 USD ($) shares	Mar. 31, 2016 USD ($) shares	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($) Business	Mar. 01, 2016
Business Acquisition [Line Items]
Goodwill				$ 185	$ 185
Number of businesses acquired \| Business					3
General partner interest, percent	2.00%	2.00%	2.00%
River Parish Acquisition \| Phillips 66 \| Phillips 66
Business Acquisition [Line Items]
Property, plant, and equipment					$ 183
Goodwill					$ 3
Sweeny Fractionator Acquisition \| Phillips 66 \| General Partner Units
Business Acquisition [Line Items]
Units issued associated with acquisition (in shares) \| shares			8,425
Sweeny Fractionator Acquisition \| Phillips 66 \| Phillips 66
Business Acquisition [Line Items]
Controlling interest acquired, percentage			25.00%			25.00%
Total consideration			$ 236
Assumption of a note payable to a subsidiary of Phillips 66			$ 212
Sweeny Fractionator Acquisition \| Phillips 66 \| Phillips 66 \| Common Units
Business Acquisition [Line Items]
Units issued associated with acquisition (in shares) \| shares			412,823
Subsequent Fractionator Acquisition \| Phillips 66 \| General Partner Units
Business Acquisition [Line Items]
Units issued associated with acquisition (in shares) \| shares		286,753
Subsequent Fractionator Acquisition \| Phillips 66 \| Phillips 66
Business Acquisition [Line Items]
Total consideration		$ 775
Assumption of a note payable to a subsidiary of Phillips 66		$ 675
Subsequent Fractionator Acquisition \| Phillips 66 \| Phillips 66 \| Common Units
Business Acquisition [Line Items]
Units issued associated with acquisition (in shares) \| shares		1,400,922
Subsequent Fractionator Acquisition \| Phillips 66 Sweeny Frac LLC \| Phillips 66 \| Phillips 66
Business Acquisition [Line Items]
Controlling interest acquired, percentage		75.00%
Subsequent Fractionator Acquisition \| Standish Pipeline \| Phillips 66 \| Phillips 66
Business Acquisition [Line Items]
Controlling interest acquired, percentage		100.00%
Eagle Acquisition \| Phillips 66 \| General Partner Units
Business Acquisition [Line Items]
Units issued associated with acquisition (in shares) \| shares	208,783
Eagle Acquisition \| Phillips 66 \| Common Units
Business Acquisition [Line Items]
Units issued associated with acquisition (in shares) \| shares	3,884,237
Eagle Acquisition \| Phillips 66 \| Phillips 66
Business Acquisition [Line Items]
Total consideration	$ 1,305
Number of refineries \| refinery	4
Cash consideration for the transaction partially funded by proceeds from debt and equity offerings	$ 1,109

Properties, Plants and Equipment (Summary of Properties, Plants and Equipment) (Details) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Gross PP&E	$ 3,420	$ 3,400
Less: Accumulated depreciation	751	725
Net PP&E	2,669	2,675
Land
Property, Plant and Equipment [Line Items]
Gross PP&E	19	19
Buildings and improvements
Property, Plant and Equipment [Line Items]
Gross PP&E	88	88
Pipelines and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E	1,338	1,335
Terminals and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E	612	610
Rail racks and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E	137	137
Fractionator and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E	615	615
Caverns and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E	569	569
Gross PP&E
Property, Plant and Equipment [Line Items]
Gross PP&E	$ 42	$ 27

Debt (Summary of Long-Term Debt) (Details) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 2,382.0	$ 2,435.0
Long-term debt, fair value	2,298.0	2,357.0
Long-term line of credit	157.0	210.0
Unamortized discounts and debt issuance costs	(23.0)	(24.0)
Total debt	2,359.0	2,411.0
2.646% Senior Notes due 2020 \| Senior Notes
Debt Instrument [Line Items]
Balance Sheet Carrying Value	300.0	300.0
Long-term debt, fair value	$ 300.0	$ 298.0
Interest rate, stated percentage	2.646%	2.646%
3.605% Senior Notes due 2025 \| Senior Notes
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 500.0	$ 500.0
Long-term debt, fair value	$ 492.0	$ 490.0
Interest rate, stated percentage	3.605%	3.605%
3.550% Senior Notes due 2026 \| Senior Notes
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 500.0	$ 500.0
Long-term debt, fair value	$ 479.0	$ 483.0
Interest rate, stated percentage	3.55%	3.55%
4.680% Senior Notes due 2045 \| Senior Notes
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 300.0	$ 300.0
Long-term debt, fair value	$ 275.0	$ 277.0
Interest rate, stated percentage	4.68%	4.68%
4.900% Senior Notes due 2046 \| Senior Notes
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 625.0	$ 625.0
Long-term debt, fair value	$ 595.0	$ 599.0
Interest rate, stated percentage	4.90%	4.90%
Level 1
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 0.0	$ 0.0
Long-term line of credit	0.0	0.0
Level 1 \| 2.646% Senior Notes due 2020 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 1 \| 3.605% Senior Notes due 2025 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 1 \| 3.550% Senior Notes due 2026 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 1 \| 4.680% Senior Notes due 2045 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 1 \| 4.900% Senior Notes due 2046 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 2
Debt Instrument [Line Items]
Balance Sheet Carrying Value	2,298.0	2,357.0
Long-term line of credit	157.0	210.0
Level 2 \| 2.646% Senior Notes due 2020 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	300.0	298.0
Level 2 \| 3.605% Senior Notes due 2025 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	492.0	490.0
Level 2 \| 3.550% Senior Notes due 2026 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	479.0	483.0
Level 2 \| 4.680% Senior Notes due 2045 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	275.0	277.0
Level 2 \| 4.900% Senior Notes due 2046 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	595.0	599.0
Level 3
Debt Instrument [Line Items]
Balance Sheet Carrying Value	0.0	0.0
Long-term line of credit	0.0	0.0
Level 3 \| 2.646% Senior Notes due 2020 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 3 \| 3.605% Senior Notes due 2025 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 3 \| 3.550% Senior Notes due 2026 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 3 \| 4.680% Senior Notes due 2045 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	0.0	0.0
Level 3 \| 4.900% Senior Notes due 2046 \| Senior Notes
Debt Instrument [Line Items]
Long-term debt, fair value	$ 0.0	$ 0.0
Revolving Credit Facility
Debt Instrument [Line Items]
Interest rate, stated percentage	2.33%	1.98%
Revolving Credit Facility \| Line of Credit
Debt Instrument [Line Items]
Balance Sheet Carrying Value	$ 157.0	$ 210.0
Long-term line of credit	$ 157.0	$ 210.0

Debt (Narrative) (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Long-term line of credit	$ 157,000,000	$ 210,000,000
Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Long-term line of credit	157,000,000	$ 210,000,000
Line of credit facility, maximum borrowing capacity	$ 750,000,000

Equity (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended	10 Months Ended
Equity (Narrative) (Details) - USD ($)	May 31, 2016	Mar. 31, 2017	Mar. 31, 2017
Limited Partners' Capital Account [Line Items]
Number of common units issued in public offering (in shares)		744,968
At The Market Offering Program \| Common Units
Limited Partners' Capital Account [Line Items]
Number of common units issued in public offering (in shares)		744,968
Proceeds from public offering, net of underwriting discounts		$ 40,000,000
Broker commission paid			$ 1,000,000
Maximum \| At The Market Offering Program \| Common Units
Limited Partners' Capital Account [Line Items]
Maximum aggregate amount of continuous units issuance authorized	$ 250,000,000
Phillips 66 Partners LP \| At The Market Offering Program \| Common Units
Limited Partners' Capital Account [Line Items]
Number of common units issued in public offering (in shares)			1,091,120
Proceeds from public offering, net of underwriting discounts			$ 58,000,000

Net Income Per Limited Partner Unit (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Apr. 19, 2017	Mar. 31, 2017	Mar. 31, 2016
Subsequent Events [Abstract]
Total distributions attributable to the first quarter of 2017		$ 88	$ 51
Cash Distribution \| Subsequent Event
Subsequent Events [Abstract]
Total distributions attributable to the first quarter of 2017	$ 95
Common Units \| Cash Distribution \| Subsequent Event
Subsequent Events [Abstract]
Quarterly cash distribution declared per limited partner unit (in dollars per share)	$ 0.586

Contingencies (Narrative) (Details) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Accrual for Environmental Loss Contingencies Disclosure [Abstract]
Environmental accruals	$ 2	$ 2

Related Party Transactions (Narrative) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($)
Phillips 66 \| Amended Omnibus Agreement \| Phillips 66
Related party agreements and fees
Monthly operational and administrative support fee	$ 7