Operating Revenues

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Note 5—Operating Revenues

Operating revenues are primarily generated from long-term pipeline transportation, terminaling, storage, processing and fractionation lease and service agreements, mainly with Phillips 66. These agreements typically include escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. In addition, most of these agreements contain renewal options, which typically require the mutual consent of both our customers and us.

Total operating revenues disaggregated by asset type were as follows:



	Millions of Dollars
	2019		2018	2017*

Pipelines	$	473	454	424
Terminals	167		157	152
Storage, processing and other revenues	486		434	358
Total operating revenues	$	1,126	1,045	934

* Sales and other operating revenues for the year ended December 31, 2017, are presented in accordance with accounting standards in effect prior to our adoption of ASU No. 2014-09 on January 1, 2018.

The majority of our agreements with Phillips 66 are considered operating leases under GAAP. The lease’s classification as either an operating or financing lease requires judgment in assessing the contract’s lease and service components and in determining the asset’s fair value. For reporting periods prior to our adoption of the new lease accounting standard, ASU No. 2016-02, as of January 1, 2019, the lease and service elements included in these contracts were separated with the lease element recognized in accordance with the existing lease accounting standard and the service element recognized in accordance with the revenue accounting standard. Effective for periods after January 1, 2019, we elected to account for lease and service elements of contracts classified as leases on a combined basis under the provisions of ASU No. 2016-02, except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continued to separate the lease and service elements based on relative standalone prices and applied the new lease standard to the lease element and the revenue standard to the service element.

As a result of our change in accounting policy, our lease and service revenues, lease and service accounts receivable and lease and service deferred revenues reported for the year ended December 31, 2019, are not prepared on the same basis as the amounts reported for the year ended December 31, 2018. For the year ended December 31, 2019, lease revenues were $930 million and service revenues were $196 million. For the year ended December 31, 2018, lease revenues were $599 million and service revenues were $446 million.

Accounts Receivable

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

Total accounts receivable by revenue type was as follows:



	Millions of Dollars
	2019		2018

Lease receivables	$	87	53
Service receivables	18		41
Other receivables	—		1
Total accounts receivable	$	105	95

Deferred Revenues

Our deferred revenues represent payments received from our customers, mainly Phillips 66, in advance of the period in which lease and service contract performance obligations have been fulfilled. The majority of our deferred revenues relate to a tolling agreement and a storage agreement that are classified as leases. The remainder of our deferred revenues relate to lease and service agreements that contain minimum volume commitments with recovery provisions. Our deferred revenues are recorded in the “Deferred revenues” and “Other liabilities” line items on our consolidated balance sheet.

Total deferred revenues under our lease and service agreements were as follows:



	Millions of Dollars
	2019		2018

Deferred lease revenues	$	41	73
Deferred service revenues	1		6
Total deferred revenues	$	42	79

Future Minimum Lease Payments from Customers

At December 31, 2019, future minimum payments to be received under our lease agreements with customers were estimated to be:



	Millions of Dollars

2020	$	697
2021	692
2022	680
2023	636
2024	516
Remaining years	1,353
Total future minimum lease payments from customers	$	4,574

Remaining Performance Obligations

We typically have long-term service contracts with our customers, of which the original durations range from 5 to 15 years. The weighted-average remaining duration of these contracts is 11 years. These contracts include both fixed and variable transaction price components. At December 31, 2019, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that have an original expected duration of greater than one year were:



	Millions of Dollars

2020	$	146
2021	137
2022	136
2023	136
2024	116
Remaining years	671
Total future service revenues	$	1,342

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