Operating Revenues

9 Months Ended

Sep. 30, 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 September 30			Nine Months Ended September 30
	2020		2019	2020	2019
Pipelines	$	117	121	325	347
Terminals	36		41	112	120
Storage, processing and other revenues	112		108	336	368
Total operating revenues	$	265	270	773	835

The majority of our agreements with Phillips 66 are considered operating leases under GAAP. The classification of a lease as either an operating or a 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 apply the 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 September 30			Nine Months Ended September 30
	2020		2019	2020	2019
Lease revenues	$	209	217	622	688
Service revenues	56		53	151	147
Total operating revenues	$	265	270	773	835

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
	September 30 2020		December 31 2019
Lease receivables	$	69	87
Service receivables	19		18
Total accounts receivable	$	88	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
	September 30 2020		December 31 2019
Deferred lease revenues	$	41	41
Deferred service revenues	3		1
Total deferred revenues	$	44	42

Future Minimum Lease Payments from Customers

At September 30, 2020, future minimum payments to be received under our lease agreements with customers were estimated to be:

	Millions of Dollars
Remainder of 2020	$	178
2021	706
2022	694
2023	648
2024	526
Remaining years	1,389
Total future minimum lease payments from customers	$	4,141

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 10 years. These contracts include both fixed and variable transaction price components. At September 30, 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	$	39
2021	152
2022	151
2023	151
2024	132
Remaining years	756
Total future service revenues	$	1,381

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.