Phillips 66
For the period ended Jun 30, 2024. Filed Jul 31, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 31, 2024
PSX$245.72-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-29.
0001534701-24-000104
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0001534701-24-000132
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 188 previous paragraphs and 215 current paragraphs.
118 unchanged; 61 reworded; 32 added; 8 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 21 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (32)
Current report
Basis of Presentation
Current report
Effective April 1, 2024, we changed the internal financial information reviewed by our chief executive officer to evaluate performance and allocate resources to our operating segments. This included changes in the composition of our operating segments, as well as measurement changes for certain activities between our operating segments. The primary effects are summarized below:
Current report
•Establishment of a Renewable Fuels operating segment, which includes renewable fuels activities and assets historically reported in our Refining, M&S and Midstream segments.
Current report
•Change in method of allocating results for certain Gulf Coast distillate export activities from our M&S segment to our Refining segment.
Current report
•Reclassification of certain crude oil and international clean products trading activities between our M&S segment and our Refining segment.
Current report
•Change in reporting of our 16% investment in NOVONIX from our Midstream segment to Corporate and Other.
Current report
The segment realignment is presented for the three- and six-month periods ended June 30, 2024, with prior periods recast for comparability.
Current report
Our Renewable Fuels segment consists of the operations and assets of the RREC, as well as the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels. Results for our Renewable Fuels segment are impacted by feedstock costs, throughput, and certain regulatory credits, as well as other market factors, largely determined by the relationship between supply and demand, and other operating costs.
Current report
Net gain on dispositions increased $249 million and $215 million in the second quarter and six-month period of 2024, respectively, primarily due to a before-tax gain of $238 million recognized in the Midstream segment in the second quarter of 2024 associated with the sale of our 25% ownership interest in REX.
Current report
Other income decreased 41% in the second quarter of 2024, primarily due to lower interest income as a result of lower cash balances.
Current report
Impairments increased $221 million and $378 million in the second quarter and six-month period of 2024, respectively, primarily due to before-tax impairment charges reported in our Midstream segment related to certain gathering and processing assets in Texas. In addition, the six-month period of 2024 included before-tax impairment charges reported in our Refining and Midstream segments totaling $163 million related to certain crude oil processing and logistics assets in California.
Current report
Results from our Midstream segment increased $147 million in the second quarter of 2024 and decreased $15 million in the six-month period of 2024.
Current report
Results from our Transportation business increased $262 million and $201 million in the second quarter and six-month period of 2024, respectively, primarily due to a before-tax gain of $238 million recognized in the second quarter of 2024 associated with the sale of our 25% ownership interest in REX. See Note 7—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information.
Current report
Results from our NGL business decreased $115 million and $216 million in the second quarter and six-month period of 2024, respectively, primarily due to before-tax impairment charges associated with certain gathering and processing assets in Texas, partially offset by lower maintenance costs. The decrease in the second quarter of 2024 was also partially offset by improved fractionation results and higher pipeline volumes.
Current report
Results from the Chemicals segment increased $30 million and $37 million in the second quarter and six-month period of 2024, respectively. The increase in the second quarter of 2024 was primarily due to higher margins driven by a decrease in feedstock costs, partially offset by lower equity earnings from CPChem’s equity affiliates. The increase in the six-month period of 2024 was primarily due to higher sales volumes, partially offset by lower equity earnings from CPChem’s equity affiliates and decreased margins.
Current report
Renewable Fuels
Current report
The Renewable Fuels segment processes renewable feedstocks into renewable products at the RREC. In addition, this segment also includes the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels.
Current report
Results from the Renewable Fuels segment decreased $123 million and $252 million in the second quarter and six-month period of 2024, respectively. The decrease in the second quarter was primarily driven by higher feedstock and other costs related to the ramp-up of the RREC. The decreases were partially offset by increased renewable fuel sales, as well as tax credits received from renewable diesel blending activity.
Current report
The decrease in the six-month period of 2023 was primarily driven by higher feedstock and other costs related to the ramp-up of the RREC, as well as lower benefits from emissions credits. The decreases were partially offset by increased renewable fuel sales, as well as tax credits received from renewable diesel blending activity.
Current report
During the first six months of 2024, cash generated by operating activities was $1.9 billion, compared with $2.2 billion for the first six months of 2023. The decrease was primarily due to lower earnings, primarily driven by a decline in realized refining margins, partially offset by more favorable working capital impacts.
Current report
Related Party Advance Term Loan Agreement
Current report
On May 31, 2023, we borrowed $75 million from WRB through an Advance Term Loan Agreement. The debt matures on May 31, 2038. Borrowings bear interest at a floating rate of 1.042% plus the adjusted term Secured Overnight Financing Rate (SOFR), payable on the last day of each month.
Current report
On June 25, 2024, we entered into a $400 million uncommitted credit facility (the Uncommitted Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor. The Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities. The Uncommitted Facility has no commitment fees or compensating balance requirements. Outstanding borrowings under the Uncommitted Facility bear interest at a rate of either (a) the adjusted term SOFR, (b) the adjusted daily simple SOFR or (c) the reference rate, in each case plus the applicable margin. Each borrowing matures six months from the date of such borrowing. We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty. At June 30, 2024, $400 million was outstanding under the Uncommitted Facility.
Current report
Dispositions
Current report
On June 14, 2024, we sold our 25% ownership interest in REX for approximately $685 million. See Note 7—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information.
Current report
Pending Disposition
Current report
On June 21, 2024, we entered into an agreement to sell our ownership interests in certain gathering and processing assets in Louisiana and Alabama for approximately $170 million, which approximates the net book value of the assets being sold. The transaction is expected to close in the third quarter of 2024, subject to completion of customary closing conditions and satisfaction of certain due diligence requirements.
Current report
DCP LP Cash Distributions to Unitholders
Current report
DCP LP’s partnership agreement requires it to distribute all available cash within 45 days after the end of each quarter. During the six months ended June 30, 2024 and June 30, 2023, DCP LP made cash distributions of $24 million and $102 million, respectively, to common unit holders other than Phillips 66 and its subsidiaries.
Current report
Pending Acquisition
Current report
On May 17, 2024, we entered into an agreement to acquire Pinnacle Midland Parent LLC to expand our natural gas gathering and processing operations in the Permian Basin. The transaction closed on July 1, 2024, for total cash consideration of $566 million.
Current report
Renewable Fuels
Removed paragraphs (8)
Previous report
Other income increased $49 million in the first quarter of 2024, primarily due to higher results from trading activities.
Previous report
Impairments increased $157 million in the first quarter of 2024, primarily due to the recognition of before-tax impairment charges reported in our Refining and Midstream segments. Refer to Note 8—Properties, Plants and Equipment, in the Notes to Consolidated Financial Statements, for additional information.
Previous report
Results from our Midstream segment decreased $148 million in the first quarter of 2024.
Previous report
Results from our Transportation business decreased $63 million in the first quarter of 2024, primarily due to a before-tax impairment charge of $59 million recognized in the first quarter of 2024 associated with certain crude processing and logistics assets in California, as well as a before-tax gain of $36 million recognized in the first quarter of 2023 associated with the sale of a terminal in Louisiana. These decreases were partially offset by higher pipeline tariffs and improved earnings from our equity affiliates primarily driven by increased volumes.
Previous report
Results from our NGL and Other business decreased $102 million in the first quarter of 2024, primarily due to unfavorable pricing driven by falling natural gas prices and winter weather impacts.
Previous report
Results from the Chemicals segment increased $7 million in the first quarter of 2024, primarily due to higher volumes and lower utility costs, partially offset by lower margins driven by decreased sales prices.
Previous report
During the first three months of 2024, cash used in our operations was $236 million, compared with cash provided by operations of $1.2 billion for the first three months of 2023. The decrease was primarily due to lower realized refining margins, as well as larger net unfavorable working capital impacts. The unfavorable working capital impacts were primarily driven by the effects of changes in commodity prices, the timing of payments and collections, and discretionary inventory builds.
Previous report
On March 15, 2023, DCP LP repaid its 3.875% senior unsecured notes due March 2023 with an aggregate principal amount of $500 million.
Reworded paragraphs (61)
Previous wording
Phillips 66 is uniquely positioned as a diversified and integrated downstream energy company operating with Midstream, Chemicals, Refining, and Marketing and Specialties (M&S) segments. At March 31, 2024, we had total assets of $76.4 billion. Our common stock trades on the New York Stock Exchange under the symbol PSX.
Current wording
Phillips 66 is uniquely positioned as a diversified and integrated downstream energy provider operating with Midstream, Chemicals, Refining, Marketing and Specialties (M&S), and Renewable Fuels segments. At June 30, 2024, we had total assets of $75.9 billion. Our common stock trades on the New York Stock Exchange under the symbol PSX.
Previous wording
In the first quarter of 2024, we reported earnings of $748 million and cash used in operating activities of $236 million, both of which were unfavorably impacted by lower realized refining margins and, in the case of operating cash flow, discretionary inventory builds. Additionally, we received proceeds from debt issuances, net of debt repayments, of $802 million, funded capital expenditures and investments of $628 million, repurchased $1.2 billion of common stock, and paid dividends on our common stock of $448 million. We ended the first quarter of 2024 with $1.6 billion of cash and cash equivalents and $3.5 billion of total committed capacity available under our revolving credit facility.
Current wording
In the second quarter of 2024, we reported earnings of $1 billion and cash provided by operating activities of $2.1 billion. During the quarter, we funded capital expenditures and investments of $367 million, repurchased $840 million of common stock, and paid dividends on our common stock of $485 million. Additionally, we received proceeds from an asset disposition of $685 million. We ended the second quarter of 2024 with $2.4 billion of cash and cash equivalents and $4.1 billion of total committed capacity available under our revolving credit facility.
Previous wording
As part of the Rodeo Renewed project, we are converting the San Francisco Refinery into the Rodeo Renewable Energy Complex, expanding commercial scale production of renewable diesel and positioning Phillips 66 as a leader in renewable fuels production. The Rodeo Renewed project has progressed during the first quarter of 2024 with the facility now processing only renewable feedstocks and having 30,000 barrels per day of renewable fuels production capacity. The Rodeo Renewable Energy Complex is on track to increase production capacity to 50,000 barrels per day (800 million gallons per year) of renewable fuels by the end of the second quarter of 2024. The Rodeo Renewed project design also provides the capability of producing renewable jet fuel, a key component of sustainable aviation fuel. The project advances our strategy to expand our renewable fuels production, lower our carbon footprint, and provide reliable, affordable energy that we expect to create long-term value for our shareholders.
Current wording
We completed the conversion of our San Francisco Refinery in Rodeo, California, into the Rodeo Renewable Energy Complex (RREC), expanding commercial scale production of renewable diesel and positioning Phillips 66 as a leader in renewable fuels production. The RREC processes approximately 50,000 barrels per day of renewable feedstocks into renewable fuels, including renewable diesel and renewable jet fuel. The RREC is expected to start producing sustainable aviation fuel in the third quarter of 2024, with the flexibility to produce up to 10,000 barrels per day. The RREC advances our strategy to expand renewable fuels production, lower our carbon footprint, and provide reliable, affordable energy that we expect will create long-term value for our shareholders.
Previous wording
The Midstream segment includes our Transportation and natural gas liquids (NGL) businesses. Our Transportation business contains fee-based operations not directly exposed to commodity price risk. Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills, LLC (DCP Southern Hills), contains both fee-based operations and operations directly impacted by NGL and natural gas prices. During the first quarter of 2024, NGL and natural gas prices decreased, compared with the first quarter of 2023, as the result of increased production and limited growth in export infrastructure.
Current wording
The Midstream segment includes our Transportation and natural gas liquids (NGL) businesses. Our Transportation business contains fee-based operations not directly exposed to commodity price risk. Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills, LLC (DCP Southern Hills), contains both fee-based operations and operations directly impacted by NGL and natural gas prices. During the second quarter of 2024, compared with the second quarter of 2023, the NGL composite barrel price increased, partially due to crude oil prices increasing over the same period, while natural gas prices decreased over the same period primarily due to increased production, pipeline maintenance and limited growth in export infrastructure.
Previous wording
The Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors. The benchmark high-density polyethylene chain margin slightly decreased in the first quarter of 2024, compared with the first quarter of 2023, mainly due to lower polyethylene sales prices as a result of industry oversupply driven by recent capacity additions.
Current wording
The Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors. The benchmark high-density polyethylene chain margin decreased in the second quarter of 2024, compared with the second quarter of 2023, mainly due to lower polyethylene sales prices as a result of industry oversupply driven by recent capacity additions.
Previous wording
Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. Market crack spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. The composite 3:2:1 market crack spread for our business decreased to an average of $19.45 per barrel during the first quarter of 2024, from an average of $30.59 per barrel during the first quarter of 2023. The decrease in the composite market crack spread was primarily driven by lower global prices for gasoline and higher crude oil prices. The price of U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, increased to an average of $77.07 per barrel during the first quarter of 2024, from an average of $76.11 per barrel during the first quarter of 2023. The increase in crude production in the United States limited significant escalation in crude prices.
Current wording
Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. Market cracks are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. The composite 3:2:1 market crack spread for our business decreased to an average of $18.96 per barrel during the second quarter of 2024, from an average of $28.65 per barrel during the second quarter of 2023. The decrease in the composite market crack spread was primarily driven by higher crude oil costs and lower global prices for gasoline and diesel. The price of U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, increased to an average of $80.73 per barrel during the second quarter of 2024, from an average of $73.78 per barrel during the second quarter of 2023.
Previous wording
Unless otherwise indicated, discussion of results for the three months ended March 31, 2024, is based on a comparison with the corresponding periods of 2023.
Current wording
Unless otherwise indicated, discussion of results for the three and six months ended June 30, 2024, is based on a comparison with the corresponding periods of 2023.
Previous wording
A summary of income before income taxes by business segment with a reconciliation to net income attributable to Phillips 66 follows:
Current wording
A summary of income (loss) before income taxes by business segment with a reconciliation to net income attributable to Phillips 66 follows:
Previous wording
Our net income attributable to Phillips 66 in the first quarter of 2024 was $748 million, compared with $2 billion in the first quarter of 2023. The decrease in net income attributable to Phillips 66 was primarily due to a decline in realized refining margins, partially offset by lower income tax expense.
Current wording
Our net income attributable to Phillips 66 in the second quarter of 2024 was $1 billion, compared with $1.7 billion in the second quarter of 2023. Our net income attributable to Phillips 66 for the six months ended June 30, 2024, was $1.8 billion, compared with $3.7 billion for the six months ended June 30, 2023. The decrease in net income attributable to Phillips 66 in both periods was primarily due to a decline in realized refining margins, partially offset by lower income tax expense and a before-tax gain of $238 million recognized in the second quarter of 2024 in our Midstream segment associated with the sale of our 25% ownership interest in Rockies Express Pipeline LLC (REX).
Previous wording
See the “Segment Results” section for additional information on our segment results and Note 19—Income Taxes, in the Notes to Consolidated Financial Statements, for additional information on income taxes.
Current wording
See the “Segment Results” section for additional information on our segment results. Also see Note 20—Income Taxes and Note 7—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information on income taxes and the before-tax gain associated with the sale of our 25% ownership interest in REX, respectively.
Previous wording
Sales and other operating revenues for the first quarter of 2024 increased 4%, andpurchased crude oil and products increased 10%. The increases were mainly due to higher prices for crude oil, while the increase in sales was also attributable to higher refined petroleum product sales volumes, partially offset by lower prices for NGL, natural gas and refined petroleum products.
Current wording
Sales and other operating revenues for the second quarter and six-month period of 2024 increased 9% and 6%, respectively, andpurchased crude oil and products increased 13% and 12%, respectively. These increases were mainly due to higher prices for crude oil, partially offset by lower prices for natural gas and refined petroleum products. Additionally, higher refined petroleum product sales volumes contributed to the increase in sales in both periods.
Previous wording
Equity in earnings of affiliates decreased 14% in the first quarter of 2024. The decrease reflects lower equity earnings from WRB Refining LP (WRB), primarily due to lower realized refining margins.
Current wording
Equity in earnings of affiliates decreased 13% and 14% in the second quarter and six-month period of 2024, respectively. The decrease in both periods was primarily due to lower equity earnings from WRB Refining LP (WRB) and Excel Paralubes LLC (Excel), both primarily due to lower margins. These decreases were partially offset by higher equity earnings from CPChem. See the Chemicals segment analysis in the “Segment Results” section for additional information regarding CPChem.
Previous wording
Taxes other than income taxes decreased 20% in the first quarter of 2024. The decrease was primarily driven by tax credits received from renewable diesel blending activity, as well as lower property taxes.
Current wording
Taxes other than income taxes decreased 72% and 44% in the second quarter and six-month period of 2024. The decreases were primarily driven by tax credits received from renewable diesel blending activity.
Previous wording
Interest and debt expense increased 18% in the first quarter of 2024. The increase was primarily driven by higher average debt principal balances. See Note 10—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.
Current wording
Interest and debt expense decreased 13% in the second quarter of 2024. The decrease was primarily related to the early redemption of DCP Midstream LP’s (DCP LP) 5.850% junior subordinated notes that occurred in the second quarter of 2023, partially offset by higher average debt principal balances. See Note 11—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.
Previous wording
Income tax expense decreased 65% in the first quarter of 2024, primarily due to lower income before income taxes. See Note 19—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our effective income tax rates.
Current wording
Income tax expense decreased 43% and 54% in the second quarter and six-month period of 2024, primarily due to lower income before income taxes. See Note 20—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our effective income tax rates.
Previous wording
Net income attributable to noncontrolling interests decreased 89% in the first quarter of 2024. The decrease reflects the impacts of the DCP Midstream, LP Merger (DCP LP Merger) in June 2023. See Note 2—DCP Midstream, LP Merger (DCP LP Merger), in the Notes to Consolidated Financial Statements for additional information.
Current wording
Net income attributable to noncontrolling interests decreased 86% and 88% in the second quarter and six-month period of 2024, respectively. The decrease in both periods relates to before-tax impairment charges reported in our Midstream segment primarily related to certain DCP LP gathering and processing assets in Texas. The decrease in the six-month period of 2024 also reflects the impacts of the acquisition of all publicly held common units of DCP LP (DCP LP Merger) in June 2023. See Note 2—DCP Midstream, LP Merger (DCP LP Merger) and Note 9—Impairments, in the Notes to Consolidated Financial Statements for additional information.
Previous wording
The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing services; NGL production, transportation, storage, fractionation, processing and marketing services; natural gas gathering, compressing, treating, processing, storage, transportation and marketing services; and condensate recovery. These activities are mainly in the United States. This segment also includes our investment in NOVONIX.
Current wording
The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing services; NGL production, transportation, storage, fractionation, processing and marketing services; natural gas gathering, compressing, treating, processing, storage, transportation and marketing services; and condensate recovery. These activities are mainly in the United States.
Previous wording
The Chemicals segment consists of our 50% interest in CPChem, which we account for under the equity method. CPChem uses NGL and other feedstocks to produce petrochemicals. These products are then marketed and sold or used as feedstocks to produce plastics and other chemicals. CPChem produces and markets ethylene and other olefin products. Ethylene produced is primarily consumed within CPChem for the production of polyethylene, normal alpha olefins and polyethylene pipe. CPChem manufactures and markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene, as well as manufactures and/or markets a variety of specialty chemical products. Unless otherwise noted, amounts referenced below reflect our net 50% interest in CPChem.
Current wording
The Chemicals segment consists of our 50% interest in CPChem, which we account for under the equity method. CPChem uses NGL and other feedstocks to produce petrochemicals. These products are then marketed and sold or used as feedstocks to produce plastics and other chemicals. CPChem produces and markets ethylene and other olefin products. Ethylene produced is primarily consumed within CPChem for the production of polyethylene, normal alpha olefins and polyethylene pipe. CPChem manufactures and/or markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene, as well as manufactures and/or markets a variety of specialty chemical products. Unless otherwise noted, amounts referenced below reflect our net 50% interest in CPChem.
Previous wording
The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, at 12 refineries in the United States and Europe.
Current wording
The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, at 11 refineries in the United States and Europe.
Previous wording
Results from our Refining segment decreased $1,477 million in the first quarter of 2024, primarily due to lower realized margins, partially offset by higher volumes. The decrease in realized margins in the first quarter of 2024 was primarily driven by lower market crack spreads, feedstock advantage and secondary product margins.
Current wording
Results from our Refining segment decreased $873 million and $2,251 million in the second quarter and six-month period of 2024, respectively, primarily due to lower realized margins, partially offset by higher volumes. The decrease in realized margins in both periods was primarily driven by lower market crack spreads.
Previous wording
Our worldwide refining crude oil capacity utilization rate was 92% in the first quarter of 2024, compared with 90% in the first quarter of 2023. See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.
Current wording
Our worldwide refining crude oil capacity utilization rate was 98% and 95% in the second quarter and six-month period of 2024, respectively, compared with 93% and 92% in the second quarter and six-month period of 2023, respectively. See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.
Previous wording
The M&S segment purchases for resale and markets refined petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of base oils and lubricants.
Current wording
The M&S segment purchases for resale and markets refined products, such as gasoline, distillates and aviation fuels, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of base oils and lubricants.
Previous wording
Before-tax income from the M&S segment decreased $22 million in the first quarter of 2024. The decrease was primarily driven by lower U.S. marketing margins, partially offset by higher U.S. marketing volumes.
Current wording
Results from the M&S segment decreased $118 million and $115 million in the second quarter and six-month period of 2024, respectively. The decrease in the second quarter of 2024 was primarily driven by lower U.S. marketing fuel margins and decreased equity earnings from affiliates. The decrease in the six-month period of 2024 was primarily due to lower realized marketing fuel margins and decreased equity earnings from affiliates, partially offset by higher U.S. marketing volumes.
Previous wording
Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Corporate overhead and other includes general and administrative expenses, technology costs, environmental costs associated with sites no longer in operation, business transformation restructuring costs, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment.
Current wording
Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Corporate overhead and other includes general and administrative expenses, technology costs, environmental costs associated with sites no longer in operation, business transformation restructuring costs, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment. Corporate and Other also includes the change in the fair value of our investment in NOVONIX.
Previous wording
Net interest expense increased $61 million in the first quarter of 2024. The increase was primarily driven by higher interest expense as a result of higher average debt principal balances, as well as lower interest income. See Note 10—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.
Current wording
Net interest expense increased $18 million and $80 million in the second quarter and six-month period of 2024, respectively. The increase in both periods was primarily driven by lower interest income as a result of lower cash balances and higher average debt principal balances, partially offset by lower interest expense primarily related to the $53 million before-tax loss on early redemption of DCP LP’s 5.850% junior subordinated notes in May 2023. See Note 11—Debt, in the Notes to Consolidated Financial Statements, for additional information.
Previous wording
Corporate overhead and other costs decreased $14 million in the first quarter of 2024 primarily due to a decrease in consulting fees associated with our business transformation.
Current wording
Corporate overhead and other costs decreased $14 million and $31 million in the second quarter and six-month period of 2024, respectively, primarily due to a decrease in consulting fees associated with our business transformation.
Previous wording
The fair value of our investment in NOVONIX increased by $5 million in the first quarter of 2024, compared with a decline of $12 million in the first quarter of 2023.
Current wording
The fair value of our investment in NOVONIX declined by $7 million in the second quarter of 2024, compared with a decline of $15 million in the second quarter of 2023. The fair value of our investment in NOVONIX declined by $2 million in the six-month period of 2024, compared with a decline of $27 million in the six-month period of 2023.
Previous wording
To meet our short- and long-term liquidity requirements, we use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. During the first three months of 2024, we used $236 million of cash in our operations and we received proceeds from debt issuances, net of debt repayments, of $802 million. We used available cash primarily to repurchase shares of our common stock for $1.2 billion, fund capital expenditures and investments of $628 million, and pay dividends on our common stock of $448 million. During the first three months of 2024, cash and cash equivalents decreased to $1.6 billion.
Current wording
To meet our short- and long-term liquidity requirements, we use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. During the first six months of 2024, we generated $1.9 billion of cash from operations. We received proceeds from an asset disposition of $685 million. Additionally, proceeds from debt issuances, net of debt repayments, were $599 million. We used available cash primarily to repurchase shares of our common stock for $2 billion, fund capital expenditures and investments of $995 million, and pay dividends on our common stock of $933 million. During the first six months of 2024, cash and cash equivalents decreased to $2.4 billion. At this time, we believe that our cash on hand, as well as the sources of liquidity described herein, will be sufficient to fund our obligations over the short- and long-term.
Previous wording
The level and quality of output from our refineries also impacts our cash flows. Factors such as operating efficiency, maintenance turnarounds, market conditions, feedstock availability, and weather conditions can affect output. We actively manage the operations of our refineries, and any variability in their operations typically has not been as significant to cash flows as that caused by margins and prices.
Current wording
The level and quality of output from our refineries also impacts our cash flows. Factors such as operating efficiency, maintenance turnarounds, market conditions, feedstock availability, and weather conditions can affect output. We actively manage the operations of our refineries, and any variability in their operations typically has not been as significant to cash flows as that caused by changes in margins and prices.
Previous wording
Our operating cash flows are also impacted by distribution decisions made by our equity affiliates. During the first three months of 2024, cash used in operations included aggregate distributions of $348 million from our equity affiliates, while cash from operations during the first three months of 2023 included aggregate distributions of $369 million from our equity affiliates. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured.
Current wording
Our operating cash flows are also impacted by distribution decisions made by our equity affiliates. During the first six months of 2024, cash from operations included aggregate distributions of $656 million from our equity affiliates, while cash from operations during the first six months of 2023 included aggregate distributions of $608 million from our equity affiliates. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured.
Previous wording
On February 28, 2024, we entered into a new $5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029. The Facility replaced our previous $5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as guarantor, and the previous revolving credit facility was terminated. The Facility contains customary covenants similar to the previous revolving credit facility, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Facility, in whole or in part, without premium or penalty. We have the option to increase the overall capacity to $6 billion, subject to certain conditions. We also have the option to extend the scheduled maturity of the Facility for up to two additional one-year terms, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment. Outstanding borrowings under the Facility bear interest at either: (a) the adjusted term Secured Overnight Financing Rate (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The pricing levels for the commitment fee and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time. At March 31, 2024, and December 31, 2023, no amount had been drawn under our revolving credit facilities.
Current wording
On February 28, 2024, we entered into a new $5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029. The Facility replaced our previous $5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as guarantor, and the previous revolving credit facility was terminated. The Facility contains customary covenants similar to the previous revolving credit facility, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Facility, in whole or in part, without premium or penalty. We have the option to increase the overall capacity to $6 billion, subject to certain conditions. We also have the option to extend the scheduled maturity of the Facility for up to two additional one-year terms, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment. Outstanding borrowings under the Facility bear interest at either: (a) the adjusted term SOFR (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The pricing levels for the commitment fee and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time.
Previous wording
Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to less than one year. At March 31, 2024, $1.5 billion of commercial paper had been issued under this program. At December 31, 2023, no borrowings were outstanding under this program.
Current wording
Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to less than one year. At June 30, 2024, $899 million of commercial paper had been issued under this program. At December 31, 2023, no borrowings were outstanding under this program.
Previous wording
At March 31, 2024, and December 31, 2023, we had approximately $3.5 billion and $6.4 billion, respectively, of total committed capacity available under the credit facilities described above.
Current wording
At June 30, 2024 and December 31, 2023, we had approximately $4.1 billion and $6.4 billion, respectively, of total committed capacity available under the credit facilities described above.
Previous wording
Under the operating lease agreement for our headquarters facility in Houston, Texas, we have the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at March 31, 2024. We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $171 million. These leases have remaining terms of one to ten years.
Current wording
Under the operating lease agreement for our headquarters facility in Houston, Texas, we have the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at June 30, 2024. We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $172 million. These leases have remaining terms of one to ten years.
Previous wording
The draft EIS process resumed in August 2022, and in September 2023, the USACE published its draft EIS for public comment. The USACE identified five potential outcomes, but did not indicate which one it preferred. The options comprise two “no action” alternatives where the USACE would deny an easement to Dakota Access and require it to shut down the pipeline and either remove the pipe from under Lake Oahe, or allow the pipeline to be abandoned-in-place under the lake. The USACE also identified three “action” alternatives; two of them contemplate that the USACE would reissue the easement to Dakota Access under essentially the same terms as 2017 with either the same or a larger volume of oil allowed through the pipeline, while the third alternative would require decommissioning of the current pipeline and construction of a new line 39 miles upstream from the current location. The public comment period concluded on December 13, 2023. The USACE plans to review the comments and issue its final EIS in the fall of 2024. The Record of Decision will follow within 30 to 60 days after the issuance of the final EIS.
Current wording
The draft EIS process resumed in August 2022, and in September 2023, the USACE published its draft EIS for public comment. The USACE identified five potential outcomes but did not indicate which one it preferred. The options comprise two “no action” alternatives where the USACE would deny an easement to Dakota Access and require it to shut down the pipeline and either remove the pipe from under Lake Oahe or allow the pipeline to be abandoned-in-place under the lake. The USACE also identified three “action” alternatives; two of them contemplate that the USACE would reissue the easement to Dakota Access under essentially the same terms as 2017 with either the same or a larger volume of oil allowed through the pipeline, while the third alternative would require decommissioning of the current pipeline and construction of a new line 39 miles upstream from the current location.
Previous wording
On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $1 billion aggregate principal amount of its outstanding senior notes upon maturity. We funded our 25% share of the repayment, or $250 million, with a capital contribution of $171 million in March 2024 and $79 million of distributions we elected not to receive from Dakota Access in the first quarter of 2024. As a result of the debt repayment on April 1, 2024, our share of the maximum potential equity contributions under the CECU decreased to approximately $215 million, and our share of scheduled interest payments on the notes that we could be required to support decreased to approximately $10 million annually.
Current wording
Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access. On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $1 billion aggregate principal amount of its outstanding senior notes upon maturity. We funded our 25% share of the repayment, or $250 million, with a capital contribution of $171 million in March 2024 and $79 million of distributions we elected not to receive from Dakota Access in the first quarter of 2024. At June 30, 2024, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $850 million.
Previous wording
Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access with an aggregate principal amount outstanding of $1.85 billion at March 31, 2024. In addition, Phillips 66 Partners LP (Phillips 66 Partners), a wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At March 31, 2024, our 25% share of the maximum potential equity contributions under the CECU was approximately $467 million.
Current wording
In addition, Phillips 66 Partners LP (Phillips 66 Partners), a wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At June 30, 2024, our 25% share of the maximum potential equity contributions under the CECU was approximately $215 million. If the pipeline is required to cease operations, it may have a material adverse effect on our results of operations and cash flows. Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also could be required to support our 25% share of the ongoing expenses, including scheduled interest payments on the notes of approximately $10 million annually, in addition to the potential obligations under the CECU at June 30, 2024.
Previous wording
Our debt balance at March 31, 2024, and December 31, 2023, was $20.2 billion and $19.4 billion, respectively. Our total debt-to-capital ratio was 40% and 38% at March 31, 2024, and December 31, 2023, respectively.
Current wording
Our debt balance at June 30, 2024 and December 31, 2023, was $20 billion and $19.4 billion, respectively. Our total debt-to-capital ratio was 40% and 38% at June 30, 2024 and December 31, 2023, respectively.
Previous wording
On February 7, 2024, our Board of Directors declared a quarterly cash dividend of $1.05 per common share. This dividend was paid on March 1, 2024, to shareholders of record as of the close of business on February 20, 2024. On April 3, 2024, our Board of Directors declared a quarterly cash dividend of $1.15 per common share. This dividend is payable on June 3, 2024, to shareholders of record as of the close of business on May 20, 2024.
Current wording
On April 3, 2024, our Board of Directors declared a quarterly cash dividend of $1.15 per common share. This dividend was paid on June 3, 2024, to shareholders of record as of the close of business on May 20, 2024. On July 10, 2024, our Board of Directors declared a quarterly cash dividend of $1.15 per common share. This dividend is payable on September 3, 2024, to shareholders of record as of the close of business on August 20, 2024.
Previous wording
Since July 2012, our Board of Directors has authorized an aggregate of $25 billion of repurchases of our outstanding common stock under our share repurchase program. Our share repurchase authorizations do not expire. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. For the three months ended March 31, 2024, we repurchased 8 million shares at an aggregate cost of approximately $1.2 billion. Since July 2012, we have repurchased 222 million shares under our share repurchase program at an aggregate cost of $19.2 billion. Shares of stock repurchased are held as treasury shares.
Current wording
Since July 2012, our Board of Directors has authorized an aggregate of $25 billion of repurchases of our outstanding common stock under our share repurchase program. Our share repurchase authorizations do not expire. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. For the six months ended June 30, 2024, we repurchased 13.6 million shares at an aggregate cost of approximately $2 billion. Since July 2012, we have repurchased 227.4 million shares under our share repurchase program at an aggregate cost of $20.1 billion. Shares of stock repurchased are held as treasury shares.
Showing the first 40 of 61 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.
Current report — wording carried from elsewhere
On June 20, 2023, Phillips 66 Company borrowed $1.25 billion under its delayed draw term loan that matures in June 2026.
Current report — wording carried from elsewhere
At June 30, 2024 and December 31, 2023, no amount had been drawn under the Facility or the previous revolving credit facility, respectively.
Current report — wording carried from elsewhere
The public comment period concluded on December 13, 2023. The USACE plans to review the comments and issue its final EIS in early 2025. The Record of Decision will follow within 30 to 60 days after the issuance of the final EIS. The final EIS must be completed before the USACE can reauthorize the easement for the pipeline. If reauthorization occurs, new litigation challenging the reauthorization may be filed.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
If the pipeline is required to cease operations, it may have a material adverse effect on our results of operations and cash flows. Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also could be required to support our 25% share of the ongoing expenses, including scheduled interest payments on the notes of approximately $20 million annually, in addition to the potential obligations under the CECU at March 31, 2024.