Operating Revenues

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Operating Revenues

Note 3—Operating Revenues

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

Total operating revenues disaggregated by asset type were as follows:

	Millions of Dollars
	Three Months Ended March 31
	2020		2019
Pipelines	$	111	109
Terminals	43		40
Storage, processing and other revenues	113		153
Total operating revenues	$	267	302

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. We have elected to account for lease and service elements of contracts classified as leases on a combined basis, except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continue to separate the lease and service elements based on relative standalone prices and applied the new lease standard to the lease element and the revenue standard to the service element.

Total operating revenues disaggregated by lease and service revenues were as follows:

	Millions of Dollars
	Three Months Ended March 31
	2020		2019
Lease revenues	$	218	257
Service revenues	49		45
Total operating revenues	$	267	302

Accounts Receivable

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

Total accounts receivable by revenue type was as follows:

	Millions of Dollars
	March 31 2020		December 31 2019
Lease receivables	$	74	87
Service receivables	20		18
Other receivables	1		—
Total accounts receivable	$	95	105

Deferred Revenues

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

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

	Millions of Dollars
	March 31 2020		December 31 2019
Deferred lease revenues	$	41	41
Deferred service revenues	2		1
Total deferred revenues	$	43	42

Future Minimum Lease Payments from Customers

At March 31, 2020, future minimum payments to be received under our lease agreements with customers were estimated to be:

	Millions of Dollars
Remainder of 2020	$	527
2021	698
2022	685
2023	642
2024	521
Remaining years	1,386
Total future minimum lease payments from customers	$	4,459

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 March 31, 2020, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that have an original expected duration of greater than one year were:

	Millions of Dollars
Remainder of 2020	$	109
2021	137
2022	136
2023	136
2024	116
Remaining years	671
Total future service revenues	$	1,305

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.