filings.toolsPhillips 66 10-K 2015-12-31
Filed 2016-02-19. 18 sections, 502K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
10-K 1 psx-20151231_10k.htm 10-K
| 2015 |
| UNITED STATES | ||
| SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
| FORM 10-K |
| (Mark One) | ||
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended | December 31, 2015 | |
| OR | ||
| [ ] | 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: 001-35349 |
| Phillips 66 | ||
| (Exact name of registrant as specified in its charter) |
| Delaware | 45-3779385 | |||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 3010 Briarpark Drive, Houston, Texas 77042 | ||
| (Address of principal executive offices) (Zip Code) | ||
| Registrant’s telephone number, including area code: 281-293-6600 |
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of each class | Name of each exchange on which registered | |||
| Common Stock, $.01 Par Value | New York Stock Exchange |
| Securities registered pursuant to Section 12(g) of the Act: None | ||||
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | [X] Yes [ ] No | |||
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | [ ] Yes [X] No | |||
| 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. | [X] Yes [ ] 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). | [X] Yes [ ] No | |||
| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | [X] | |||
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | ||||
| Large accelerated filer [X] | Accelerated filer [ ] | Non-accelerated filer [ ] | Smaller reporting company [ ] | |
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | [ ] Yes [X] No |
The aggregate market value of common stock held by non-affiliates of the registrant on June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $80.56, was $43.3 billion. The registrant, solely for the purpose of this required presentation, had deemed its Board of Directors and executive officers to be affiliates, and deducted their stockholdings in determining the aggregate market value.
The registrant had 527,459,894 shares of common stock outstanding at January 31, 2016.
Documents incorporated by reference:
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 4, 2016 (Part III).
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Item 1A. RISK FACTORS
You should carefully consider the following risk factors in addition to the other information included in this Annual Report on Form 10-K. Each of these risk factors could adversely affect our business, operating results and financial condition, as well as affect the value of an investment in our common stock.
Our operating results and future rate of growth are exposed to the effects of changing commodity prices and refining, marketing and petrochemical margins.
Our revenues, operating results and future rate of growth are highly dependent on a number of factors, including fixed and variable expenses (including the cost of crude oil, NGLs, and other refinery and petrochemical feedstocks) and the margin we can derive from selling refined and Chemicals segment products. The prices of feedstocks and our products fluctuate substantially. These prices depend on numerous factors beyond our control, including the global supply and demand for feedstocks and our products, which are subject to, among other things:
| • | Changes in the global economy and the level of foreign and domestic production of crude oil, natural gas and NGLs and refined, petrochemical and plastics products. |
| • | Availability of feedstocks and refined products and the infrastructure to transport feedstocks and refined products. |
| • | Local factors, including market conditions, the level of operations of other facilities in our markets, and the volume of products imported and exported. |
| • | Threatened or actual terrorist incidents, acts of war and other global political conditions. |
| • | Government regulations. |
| • | Weather conditions, hurricanes or other natural disasters. |
The price of crude oil influences prices for refined products. We do not produce crude oil and must purchase all of the crude oil we process. Many crude oils available on the world market will not meet the quality restrictions for use in our refineries. Others are not economical to use due to excessive transportation costs or for other reasons. The prices for crude oil and refined products can fluctuate differently based on global, regional and local market conditions. In addition, the timing of the relative movement of the prices (both among different classes of refined products and among various global markets for similar refined products), as well as the overall change in refined product prices, can reduce refining margins and could have a significant impact on our refining, wholesale marketing and retail operations, revenues, operating income and cash flows. Also, crude oil supply contracts generally have market-responsive pricing provisions. We normally purchase our refinery feedstocks weeks before manufacturing and selling the refined products. During the period between the time we purchase feedstocks and sell the refined products from these feedstocks, price changes could have a significant effect on our financial results. We also purchase refined products produced by others for sale to our customers. Price changes during the periods between purchasing and selling these refined products also could have a material adverse effect on our business, financial condition and results of operations.
The price of feedstocks also influences prices for petrochemical and plastics products. Although our Chemicals segment gathers, transports, and fractionates feedstocks to meet a portion of their demand and has certain long-term feedstock supply contracts with others, it is still subject to volatile feedstock prices. In addition, the petrochemicals industry is both cyclical and volatile. Cyclicality occurs when periods of tight supply, resulting in increased prices and profit margins, are followed by periods of capacity expansion, resulting in oversupply and declining prices and profit margins. Volatility occurs as a result of changes in supply and demand for products, changes in energy prices, and changes in various other economic conditions around the world.
Uncertainty and illiquidity in credit and capital markets can impair our ability to obtain credit and financing on acceptable terms and can adversely affect the financial strength of our business partners.
Our ability to obtain credit and capital depends in large measure on the state of the credit and capital markets, which is beyond our control. Our ability to access credit and capital markets may be restricted at a time when we would like, or need, access to those markets, which could constrain our flexibility to react to changing economic and business conditions. In addition, the cost and availability of debt and equity financing may be adversely impacted by unstable or illiquid market conditions. Protracted uncertainty and illiquidity in these markets also could have an adverse impact on our lenders, commodity hedging counterparties, or our customers, preventing them from meeting their obligations to us.
From time to time, our cash needs may exceed our internally generated cash flow, and our business could be materially and adversely affected if we are unable to obtain necessary funds from financing activities. From time to time, we may need to supplement cash generated from operations with proceeds from financing activities. Uncertainty and illiquidity in financial markets may materially impact the ability of the participating financial institutions to fund their commitments to us under our liquidity facilities. Accordingly, we may not be able to obtain the full amount of the funds available under our liquidity facilities to satisfy our cash requirements, and our failure to do so could have a material adverse effect on our operations and financial position.
Deterioration in our credit profile could increase our costs of borrowing money and limit our access to the capital markets and commercial credit, and could trigger co-venturer rights under joint venture arrangements.
Our or Phillips 66 Partners’ credit ratings could be lowered or withdrawn entirely by a rating agency if, in its judgment, the circumstances warrant. If a rating agency were to downgrade our rating below investment grade, our or Phillips 66 Partners’ borrowing costs would increase, and our funding sources could decrease. In addition, a failure by us to maintain an investment grade rating could affect our business relationships with suppliers and operating partners. For example, our agreement with Chevron regarding CPChem permits Chevron to buy our 50 percent interest in CPChem for fair market value if we experience a change in control or if both S&P and Moody’s lower our credit ratings below investment grade and the credit rating from either rating agency remains below investment grade for 365 days thereafter, with fair market value determined by agreement or by nationally recognized investment banks. As a result of these factors, a downgrade of credit ratings could have a materially adverse impact on our future operations and financial position.
We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations. Likewise, future environmental laws and regulations may impact or limit our current business plans and reduce demand for our products.
Our business is subject to numerous laws and regulations relating to the protection of the environment. These laws and regulations continue to increase in both number and complexity and affect our operations with respect to, among other things:
| • | The discharge of pollutants into the environment. |
| • | Emissions into the atmosphere (such as nitrogen oxides, sulfur dioxide and mercury emissions, and greenhouse gas emissions as they are, or may become, regulated). |
| • | The quantity of renewable fuels that must be blended into motor fuels. |
| • | The handling, use, storage, transportation, disposal and cleanup of hazardous materials and hazardous and nonhazardous wastes. |
| • | The dismantlement, abandonment and restoration of our properties and facilities at the end of their useful lives. |
We have incurred and will continue to incur substantial capital, operating and maintenance, and remediation expenditures as a result of these laws and regulations. To the extent these expenditures, as with all costs, are not ultimately reflected in the prices of our products and services, our business, financial condition, results of operations and cash flows in future periods could be materially adversely affected.
The U.S. Environmental Protection Agency (EPA) has implemented a Renewable Fuel Standard (RFS) pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into motor fuels consumed in the United States. To provide certain flexibility in compliance options available to the industry, a Renewable Identification Number (RIN) is assigned to each gallon of renewable fuel produced in, or imported into, the United States. As a producer of petroleum-based motor fuels, we are obligated to blend renewable fuels into the products we produce at a rate that is at least commensurate to the EPA’s quota and, to the extent we do not, we must purchase RINs in the open market to satisfy our obligation under the RFS program. To the extent the EPA mandates a quantity of renewable fuel that exceeds the amount that is commercially feasible to blend into motor fuel (a situation commonly referred to as “the blend wall”), our operations could be materially adversely impacted, up to and including a reduction in produced motor fuel.
The adoption of climate change legislation could result in increased operating costs and reduced demand for the refined products we produce.
The U.S. government, including the EPA, as well as several state and international governments, have either considered or adopted legislation or regulations in an effort to reduce greenhouse gas (GHG) emissions. These proposed or promulgated laws apply or could apply in states and/or countries where we have interests or may have interests in the future. In addition, various groups suggest that additional laws may be needed in an effort to address climate change. We cannot predict the extent to which any such legislation will be enacted and, if so, what its provisions would be. To the extent we incur additional costs required to comply with the adoption of new laws and regulations that are not ultimately reflected in the prices of our products and services, our business, financial condition, results of operations and cash flows in future periods could be materially adversely affected. In addition, demand for the refined products we produce could be adversely affected.
Climate change may adversely affect our facilities and our ongoing operations.
The potential physical effects of climate change on our operations are highly uncertain and depend upon the unique geographic and environmental factors present. Examples of such effects include rising sea levels at our coastal facilities, changing storm patterns and intensities, and changing temperature levels. As many of our facilities are located near coastal areas, rising sea levels may disrupt our ability to operate those facilities or transport crude oil and refined petroleum products. Extended periods of such disruption could have an adverse effect on our results of operation. We could also incur substantial costs to protect or repair these facilities.
Domestic and worldwide political and economic developments could damage our operations and materially reduce our profitability and cash flows.
Actions of the U.S., state, local and international governments through tax and other legislation, executive order and commercial restrictions could reduce our operating profitability both in the United States and abroad. The U.S. government can prevent or restrict us from doing business in foreign countries. These restrictions and those of foreign governments could limit our ability to operate in, or gain access to, opportunities in various countries, as well as limit our ability to obtain the optimum slate of crude oil and other refinery feedstocks. Our foreign operations and those of our joint ventures are further subject to risks of loss of revenue, equipment and property as a result of expropriation, acts of terrorism, war, civil unrest and other political risks; unilateral or forced renegotiation, modification or nullification of existing contracts with governmental entities; and difficulties enforcing rights against a governmental agency because of the doctrine of sovereign immunity and foreign sovereignty over international operations. Our foreign operations and those of our joint ventures are also subject to fluctuations in currency exchange rates. Actions by both the United States and host governments may affect our operations significantly in the future.
Renewable fuels, alternative energy mandates and energy conservation efforts could reduce demand for refined products. Tax incentives and other subsidies can make renewable fuels and alternative energy more competitive with refined products than they otherwise might be, which may reduce refined product margins and hinder the ability of refined products to compete with renewable fuels.
Large capital projects can take many years to complete, and market conditions could deteriorate significantly between the project approval date and the project startup date, negatively impacting project returns.
To approve a large-scale capital project, the project must meet an acceptable level of return on the capital invested in the project. We base these forecasted project economics on our best estimate of future market conditions. Most large-scale projects take several years to complete. During this multi-year period, market conditions can change from those we forecast, and these changes could be significant. Accordingly, we may not be able to realize our expected returns from a large investment in a capital project, and this could negatively impact our results of operations, cash flows and our return on capital employed.
Our investments in joint ventures decrease our ability to manage risk.
We conduct some of our operations, including parts of our Midstream, Refining and M&S segments, and our entire Chemicals segment, through joint ventures in which we share control with our joint venture participants. Our joint
venture participants may have economic, business or legal interests or goals that are inconsistent with those of the joint venture or us, or our joint venture participants may be unable to meet their economic or other obligations, and we may be required to fulfill those obligations alone. Failure by us, or an entity in which we have a joint-venture interest, to adequately manage the risks associated with any acquisitions or joint ventures could have a material adverse effect on the financial condition or results of operations of our joint ventures and, in turn, our business and operations.
Activities in our Chemicals and Midstream segments involve numerous risks that may result in accidents or otherwise affect the ability of our equity affiliates to make distributions to us.
There are a variety of hazards and operating risks inherent in the manufacturing of petrochemicals and the gathering, processing, transmission, storage, and distribution of natural gas and NGL, such as spills, leaks, explosions and mechanical problems that could cause substantial financial losses. In addition, these risks could result in significant injury, loss of human life, damage to property, environmental pollution and impairment of operations, any of which could result in substantial losses. For assets located near populated areas, including residential areas, commercial business centers, industrial sites and other public gathering areas, the level of damage resulting from these risks could be greater. Should any of these risks materialize, it could have a material adverse effect on the business and financial condition of CPChem, DCP Midstream or REX and negatively impact their ability to make future distributions to us.
Our operations present hazards and risks, which may not be fully covered by insurance, if insured. If a significant accident or event occurs for which we are not adequately insured, our operations and financial results could be adversely affected.
The scope and nature of our operations present a variety of operational hazards and risks, including explosions, fires, toxic emissions, maritime hazards and natural catastrophes, that must be managed through continual oversight and control. For example, the operation of refineries, power plants, fractionators, pipelines, terminals and vessels is inherently subject to the risks of spills, discharges or other inadvertent releases of petroleum or hazardous substances. If any of these events had previously occurred or occurs in the future in connection with any of our refineries, pipelines or refined products terminals, or in connection with any facilities that receive our wastes or by-products for treatment or disposal, other than events for which we are indemnified, we could be liable for all costs and penalties associated with their remediation under federal, state, local and international environmental laws or common law, and could be liable for property damage to third parties caused by contamination from releases and spills. These and other risks are present throughout our operations. As protection against these hazards and risks, we maintain insurance against many, but not all, potential losses or liabilities arising from such operating risks. As such, our insurance coverage may not be sufficient to fully cover us against potential losses arising from such risks. Uninsured losses and liabilities arising from operating risks could reduce the funds available to us for capital and investment spending and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are subject to interruptions of supply and increased costs as a result of our reliance on third-party transportation of crude oil, NGL and refined products.
We often utilize the services of third parties to transport crude oil, NGL and refined products to and from our facilities. In addition to our own operational risks discussed above, we could experience interruptions of supply or increases in costs to deliver refined products to market if the ability of the pipelines or vessels to transport crude oil or refined products is disrupted because of weather events, accidents, governmental regulations or third-party actions. A prolonged disruption of the ability of a pipeline or vessel to transport crude oil, NGL or refined product to or from one or more of our refineries or other facilities could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Increased regulation of hydraulic fracturing could result in reductions or delays in U.S. production of crude oil and natural gas, which could adversely impact our results of operations.
An increasing percentage of crude oil supplied to our refineries and the crude oil and gas production of our Midstream segment’s customers is being produced from unconventional sources. These reservoirs require hydraulic fracturing completion processes to release the hydrocarbons from the rock so they can flow through casing to the surface. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into the formation to stimulate hydrocarbon production. The U.S. Environmental Protection Agency, as well as several state agencies, have commenced
studies and/or convened hearings regarding the potential environmental impacts of hydraulic fracturing activities. At the same time, certain environmental groups have suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic fracturing process, and legislation has been proposed to provide for such regulation. In addition, some communities have adopted measures to ban hydraulic fracturing in their communities. We cannot predict whether any such legislation will ever be enacted and, if so, what its provisions would be. Any additional levels of regulation and permits required with the adoption of new laws and regulations at the federal or state level could result in our having to rely on higher priced crude oil for our refineries. This could lead to delays, increased operating costs and process prohibitions that could reduce the volumes of natural gas that move through DCP Midstream’s gathering systems and could reduce supplies and increase costs of NGL feedstocks to CPChem ethylene facilities. This could materially adversely affect our results of operations and the ability of DCP Midstream and CPChem to make cash distributions to us.
DCP Midstream’s success depends on its ability to obtain new sources of natural gas and NGL. Any decrease in the volumes of natural gas DCP Midstream gathers could adversely affect its business and operating results.
DCP Midstream’s gathering and transportation pipeline systems are connected to or dependent on the level of production from natural gas wells, which will naturally decline over time. As a result, its cash flows associated with these wells will also decline over time. In order to maintain or increase throughput levels on its gathering and transportation pipeline systems and NGL pipelines and the asset utilization rates at its natural gas processing plants, DCP Midstream must continually obtain new supplies. The primary factors affecting DCP Midstream’s ability to obtain new supplies of natural gas and NGL, and to attract new customers to its assets, include the level of successful drilling activity near these assets, prices of, and the demand for, natural gas and crude oil, producers’ desire and ability to obtain necessary permits in an efficient manner, natural gas field characteristics and production performance, surface access and infrastructure issues, and its ability to compete for volumes from successful new wells. If DCP Midstream is not able to obtain new supplies of natural gas to replace the natural decline in volumes from existing wells or because of competition, throughput on its pipelines and the utilization rates of its treating and processing facilities would decline. This could have a material adverse effect on its business, results of operations, financial position and cash flows, and its ability to make cash distributions to us.
Competitors that produce their own supply of feedstocks, have more extensive retail outlets, or have greater financial resources may have a competitive advantage.
The refining and marketing industry is highly competitive with respect to both feedstock supply and refined product markets. We compete with many companies for available supplies of crude oil and other feedstocks and for outlets for our refined products. We do not produce any of our crude oil feedstocks. Some of our competitors, however, obtain a portion of their feedstocks from their own production and some have more extensive retail outlets than we have. Competitors that have their own production or extensive retail outlets (and greater brand-name recognition) are at times able to offset losses from refining operations with profits from producing or retailing operations, and may be better positioned to withstand periods of depressed refining margins or feedstock shortages.
Some of our competitors also have materially greater financial and other resources than we have. Such competitors have a greater ability to bear the economic risks inherent in all phases of our business. In addition, we compete with other industries that provide alternative means to satisfy the energy and fuel requirements of our industrial, commercial and individual customers.
We may incur losses as a result of our forward-contract activities and derivative transactions.
We currently use commodity derivative instruments, and we expect to use them in the future. If the instruments we utilize to hedge our exposure to various types of risk are not effective, we may incur losses. Derivative transactions involve the risk that counterparties may be unable to satisfy their obligations to us. A large percentage of our future production is subject to commodity price changes and our ability to fund our planned activities could be adversely affected if any of our counterparties were to default on their obligations to us under the hedging contracts or seek bankruptcy protection. The risk of counterparty default is heightened in a poor economic environment.
One of our subsidiaries acts as the general partner of a publicly traded master limited partnership, Phillips 66 Partners LP, which may involve a greater exposure to legal liability than our historic business operations.
One of our subsidiaries acts as the general partner of Phillips 66 Partners LP, a publicly traded master limited partnership. Our control of the general partner of Phillips 66 Partners may increase the possibility that we could be subject to claims of breach of fiduciary duties, including claims of conflicts of interest, related to Phillips 66 Partners. Any liability resulting from such claims could have a material adverse effect on our future business, financial condition, results of operations and cash flows.
A significant interruption in one or more of our facilities could adversely affect our business.
Our operations could be subject to significant interruption if one or more of our facilities were to experience a major accident, mechanical failure, or power outage, encounter work stoppages relating to organized labor issues, be damaged by severe weather or other natural or man-made disaster, such as an act of terrorism, or otherwise be forced to shut down. If any facility were to experience an interruption in operations, earnings from the facility could be materially adversely affected (to the extent not recoverable through insurance, if insured) because of lost production and repair costs. A significant interruption in one or more of our facilities could also lead to increased volatility in prices for feedstocks and refined products, and could increase instability in the financial and insurance markets, making it more difficult for us to access capital and to obtain insurance coverage that we consider adequate.
Our performance depends on the uninterrupted operation of our facilities, which are becoming increasingly dependent on our information technology systems.
Our performance depends on the efficient and uninterrupted operation of the manufacturing equipment in our production facilities. The inability to operate one or more of our facilities due to a natural disaster; power outage; labor dispute; or failure of one or more of our information technology, telecommunications, or other systems could significantly impair our ability to manufacture our products. Our manufacturing equipment is becoming increasingly dependent on our information technology systems. A disruption in our information technology systems due to a catastrophic event or security breach could interrupt or damage our operations.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect sensitive data, including personally identifiable information of our customers using credit cards at our branded retail outlets. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Although we have experienced occasional, actual or attempted breaches of our cybersecurity, none of these breaches has had a material effect on our business, operations or reputation (or compromised any customer data). Any such breaches could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of customer information, disrupt the services we provide to customers, and damage our reputation, any of which could adversely affect our business.
The level of returns on pension and postretirement plan assets and the actuarial assumptions used for valuation purposes could affect our earnings and cash flows in future periods.
Assumptions used in determining projected benefit obligations and the expected return on plan assets for our pension plan and other postretirement benefit plans are evaluated by us based on a variety of independent market information and in consultation with outside actuaries. If we determine that changes are warranted in the assumptions used, such as the discount rate, expected long-term rate of return, or health care cost trend rate, our future pension and postretirement benefit expenses and funding requirements could increase. In addition, several factors could cause actual results to differ significantly from the actuarial assumptions that we use. Funding obligations are determined based on the value of assets and liabilities on a specific date as required under relevant regulations. Future pension funding requirements, and the timing of funding payments, could be affected by legislation enacted by governmental authorities.
In connection with the Separation, ConocoPhillips has agreed to indemnify us for certain liabilities and we have agreed to indemnify ConocoPhillips for certain liabilities. If we are required to act on these indemnities to ConocoPhillips, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. The ConocoPhillips indemnity may not be sufficient to insure us against the full amount of liabilities for which it has been allocated responsibility, and ConocoPhillips may not be able to satisfy its indemnification obligations in the future.
Pursuant to the Indemnification and Release Agreement and certain other agreements with ConocoPhillips entered into in connection with the Separation, ConocoPhillips agreed to indemnify us for certain liabilities, and we agreed to indemnify ConocoPhillips for certain liabilities. Indemnities that we may be required to provide ConocoPhillips are not subject to any cap, may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution of Phillips 66 stock. Third parties could also seek to hold us responsible for any of the liabilities that ConocoPhillips has agreed to retain. Further, the indemnity from ConocoPhillips may not be sufficient to protect us against the full amount of such liabilities, and ConocoPhillips may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from ConocoPhillips any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.
We are subject to continuing contingent liabilities of ConocoPhillips following the Separation.
Notwithstanding the Separation, there are several significant areas where the liabilities of ConocoPhillips may become our obligations. For example, under the Internal Revenue Code and the related rules and regulations, each corporation that was a member of the ConocoPhillips consolidated U.S. federal income tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the Separation is jointly and severally liable for the U.S. federal income tax liability of the entire ConocoPhillips consolidated tax reporting group for that taxable period. In connection with the Separation, we entered into the Tax Sharing Agreement with ConocoPhillips that allocates the responsibility for prior period taxes of the ConocoPhillips consolidated tax reporting group between us and ConocoPhillips. ConocoPhillips may be unable to pay any prior period taxes for which it is responsible, and we could be required to pay the entire amount of such taxes. Other provisions of federal law establish similar liability for other matters, including laws governing tax-qualified pension plans as well as other contingent liabilities.
If the distribution in connection with the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, our stockholders and ConocoPhillips could be subject to significant tax liability and, in certain circumstances, we could be required to indemnify ConocoPhillips for material taxes pursuant to indemnification obligations under the Tax Sharing Agreement.
ConocoPhillips received a private letter ruling from the Internal Revenue Service (IRS) substantially to the effect that, among other things, the distribution, together with certain related transactions, qualified as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. The private letter ruling and the tax opinion that ConocoPhillips received relied on certain representations, assumptions and undertakings, including those relating to the past and future conduct of our business, and neither the private letter ruling nor the opinion would be valid if such representations, assumptions and undertakings were incorrect. Moreover, the private letter ruling does not address all the issues that are relevant to determining whether the distribution qualified for tax-free treatment. Notwithstanding the private letter ruling and the tax opinion, the IRS could determine the distribution should be treated as a taxable transaction for U.S. federal income tax purposes if it determines any of the representations, assumptions or undertakings that were included in the request for the private letter ruling are false or have been violated or if it disagrees with the conclusions in the opinion that are not covered by the IRS ruling.
If the IRS were to determine that the distribution failed to qualify for tax-free treatment, in general, ConocoPhillips would be subject to tax as if it had sold the Phillips 66 common stock in a taxable sale for its fair market value, and ConocoPhillips stockholders who received shares of Phillips 66 common stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
Under the Tax Sharing Agreement, we would generally be required to indemnify ConocoPhillips against any tax resulting from the distribution to the extent that such tax resulted from (i) any of our representations or undertakings being incorrect or violated, or (ii) other actions or failures to act by us. Our indemnification obligations to ConocoPhillips and
its subsidiaries, officers and directors are not limited by any maximum amount. If we are required to indemnify ConocoPhillips or such other persons under the circumstances set forth in the Tax Sharing Agreement, we may be subject to substantial liabilities.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 3. LEGAL PROCEEDINGS
The following is a description of reportable legal proceedings, including those involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment. While it is not possible to accurately predict the final outcome of these pending proceedings, if any one or more of such proceedings were decided adversely to Phillips 66, we expect there would be no material effect on our consolidated financial position. Nevertheless, such proceedings are reported pursuant to SEC regulations.
Our U.S. refineries are implementing two separate consent decrees, regarding alleged violations of the Federal Clean Air Act, with the U.S. Environmental Protection Agency (EPA), six states and one local air pollution agency. Some of the requirements and limitations contained in the decrees provide for stipulated penalties for violations. Stipulated penalties under the decrees are not automatic, but must be requested by one of the agency signatories. As part of periodic reports under the decrees or other reports required by permits or regulations, we occasionally report matters that could be subject to a request for stipulated penalties. If a specific request for stipulated penalties meeting the reporting threshold set forth in SEC rules is made pursuant to these decrees based on a given reported exceedance, we will separately report that matter and the amount of the proposed penalty.
New Matters
In November and December of 2015, the Bay Area Quality Management District (AQMD) issued demands to settle 17 Notices of Violation (NOVs) issued in 2013 and 2014 with respect to alleged violations of regulatory and/or permit requirements at the Rodeo refining facility. The settlement demands aggregate to approximately $180,000. We are working with the Bay Area AQMD to resolve these matters.
Matters Previously Reported
In October 2007, we received a Complaint from the EPA alleging violations of the Clean Water Act related to a 2006 oil spill at the Bayway Refinery and proposing a penalty of $156,000. We are working with the EPA and the U.S. Coast Guard to resolve this matter.
In May 2010, we received a Consolidated Compliance Order and Notice of Potential Penalty from the Louisiana Department of Environmental Quality (LDEQ) alleging various violations of applicable air emission regulations at the Lake Charles Refinery, as well as certain provisions of the consent decree in Civil Action No. H-01-4430. In July 2014, we resolved the consent decree issues, and in January 2016 an agreement was reached with LDEQ to resolve the remaining allegations.
In May 2012, the Illinois Attorney General’s office filed and notified us of a complaint with respect to operations at the Wood River Refinery alleging violations of the Illinois groundwater standards and a third-party’s hazardous waste permit. The complaint seeks as relief remediation of area groundwater; compliance with the hazardous waste permit; enhanced pipeline and tank integrity measures; additional spill reporting; and yet-to-be specified amounts for fines and penalties. We are working with the Illinois Environmental Protection Agency and Attorney General’s office to resolve these allegations.
In October 2012, July 2014 and May 2015, the Bay Area AQMD issued demands to settle 64 NOVs issued in 2010 through 2013 with respect to alleged violations of regulatory and/or permit requirements at the Rodeo Refinery. The settlement demands aggregate approximately $900,000. We are working with the Bay Area AQMD to resolve these matters.
In July 2014, Phillips 66 received a NOV from the EPA alleging various flaring-related violations between 2009 and 2013 at the Wood River Refinery. We are working with the EPA to resolve these allegations.
In September 2014, the EPA issued an NOV alleging a violation of hazardous air pollution regulations at the Wood River Refinery during 2014. We are working with the EPA to resolve this NOV.
In January 2015, the Bay Area AQMD made a $262,000 demand to settle five NOVs issued in 2012 with respect to an incident involving the release of material from a sour water tank at the Rodeo facility in June 2012. We are working with the Bay Area AQMD to resolve this matter.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
| Name | Position Held | Age* | |
| Greg C. Garland | Chairman and Chief Executive Officer | 58 | |
| Tim G. Taylor | President | 62 | |
| Robert A. Herman | Executive Vice President, Midstream | 56 | |
| Paula A. Johnson | Executive Vice President, Legal, General Counsel and Corporate Secretary | 52 | |
| Kevin J. Mitchell | Executive Vice President, Finance and Chief Financial Officer | 49 | |
| Lawrence M. Ziemba | Executive Vice President, Refining | 60 | |
| Chukwuemeka A. Oyolu | Vice President and Controller | 46 | |
| *On February 12, 2016. |
There are no family relationships among any of the officers named above. The Board of Directors annually elects the officers to serve until a successor is elected and qualified or as otherwise provided in our By-Laws. Set forth below is information about the executive officers identified above.
Greg C. Garland is the Chairman and Chief Executive Officer of Phillips 66, after serving as Phillips 66’s Chairman, President and Chief Executive Officer from April 2012 to June 2014. Mr. Garland previously served as ConocoPhillips’ Senior Vice President, Exploration and Production—Americas from October 2010 to April 2012, and as President and Chief Executive Officer of CPChem from 2008 to 2010.
Tim G. Taylor is the President of Phillips 66, after serving as Executive Vice President, Commercial, Marketing, Transportation and Business Development from April 2012 to June 2014. Mr. Taylor retired as Chief Operating Officer of CPChem in 2011. Prior to this, Mr. Taylor served at CPChem as Executive Vice President, Olefins and Polyolefins from 2008 to 2011.
Robert A. Herman is Executive Vice President, Midstream for Phillips 66, a position he has held since June 2014. Previously, Mr. Herman served Phillips 66 as Senior Vice President, HSE, Projects and Procurement from February 2014 to June 2014, and Senior Vice President, Health, Safety, and Environment from April 2012 to February 2014. Mr. Herman was Vice President, Health, Safety, and Environment for ConocoPhillips, from 2010 to 2012.
Paula A. Johnson is Executive Vice President, Legal, General Counsel and Corporate Secretary of Phillips 66, a position she has held since May 2013. Previously, Ms. Johnson served as Senior Vice President, Legal, General Counsel and Corporate Secretary of Phillips 66 since April 2012. Ms. Johnson served as Deputy General Counsel of ConocoPhillips from 2009 to 2012.
Kevin J. Mitchell is Executive Vice President, Finance and Chief Financial Officer of Phillips 66, a position he has held since January 2016. Previously, Mr. Mitchell served as Phillips 66’s Vice President, Investor Relations since joining the company in September 2014. Prior to joining the company, he served as the General Auditor of ConocoPhillips from May 2010 until September 2014.
Lawrence M. Ziemba is Executive Vice President, Refining of Phillips 66, a position he has held since February 2014. Prior to this, Mr. Ziemba served Phillips 66 as Executive Vice President, Refining, Projects and Procurement since April 2012. Mr. Ziemba served as President, Global Refining, at ConocoPhillips from 2010 to 2012.
Chukwuemeka A. Oyolu is Vice President and Controller of Phillips 66, a position he has held since December 2014. Mr. Oyolu was Phillips 66’s General Manager, Finance for Refining, Marketing and Transportation from May 2012 until February 2014 when he became General Manager, Planning and Optimization. Prior to this, Mr. Oyolu worked for ConocoPhillips as Manager, Downstream Finance, from 2009 until April 2012.
PART II
| Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Quarterly Common Stock Prices and Cash Dividends Per Share
Phillips 66’s common stock is traded on the New York Stock Exchange (NYSE) under the symbol “PSX.” The following table reflects intraday high and low sales prices of, and dividends declared on, our common stock for each quarter presented:
| Stock Price | |||||||||
| High | Low | Dividends | |||||||
| 2015 | |||||||||
| First Quarter | $ | 80.59 | 57.33 | .50 | |||||
| Second Quarter | 82.19 | 76.43 | .56 | ||||||
| Third Quarter | 84.85 | 69.79 | .56 | ||||||
| Fourth Quarter | 94.12 | 76.45 | .56 | ||||||
| 2014 | |||||||||
| First Quarter | $ | 80.39 | 68.78 | .39 | |||||
| Second Quarter | 87.05 | 76.18 | .50 | ||||||
| Third Quarter | 87.98 | 78.53 | .50 | ||||||
| Fourth Quarter | 82.00 | 64.02 | .50 |
| Closing Stock Price at December 31, 2015 | $ | 81.80 | ||||
| Closing Stock Price at January 29, 2016 | $ | 80.15 | ||||
| Number of Stockholders of Record at January 29, 2016 | 42,950 |
Performance Graph
In the 2014 annual report, the performance graph included a peer index (the “Old Peer Group”) composed of Dow, Marathon Petroleum, Tesoro and Valero. To better reflect our unique portfolio of assets, we revised our peer index for 2015 (the “New Peer Group”) to include an expanded representative population of companies with assets and operations in all four of our major businesses; Midstream, Chemicals, Refining, and Marketing and Specialties. The New Peer Index is composed of Celanese, Delek, Dow, Eastman Chemical, Energy Transfer, Enterprise Products, HollyFrontier, Huntsman, Marathon Petroleum, Oneok, PBF Energy, Targa Resources, Tesoro, Valero, Western Refining, and Westlake Chemical. We anticipate using the index identified as “New Peer Index” in future annual reports.
Issuer Purchases of Equity Securities
| Millions of Dollars | |||||||||||||
| Period | Total Number of Shares Purchased* | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs** | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
| October 1-31, 2015 | 1,556,053 | $ | 80.99 | 1,556,053 | $ | 2,884 | |||||||
| November 1-30, 2015 | 1,314,018 | 90.96 | 1,314,018 | 2,765 | |||||||||
| December 1-31, 2015 | 1,861,861 | 85.63 | 1,861,861 | 2,604 | |||||||||
| Total | 4,731,932 | $ | 85.59 | 4,731,932 |
*Includes repurchase of shares of common stock from company employees in connection with the company’s broad-based employee incentive plans, when applicable.
**Our Board of Directors has authorized repurchases totaling up to $9 billion of our outstanding common stock. The current authorization was announced in July 2014, in the amount of $2 billion, and increased to $4 billion as announced in October 2015. The authorization does not have an expiration date. The share repurchases are expected to be funded primarily through available cash. The shares under these authorizations will be repurchased from time to time in the open market at the company’s discretion, subject to market conditions and other factors, and in accordance with applicable regulatory requirements. We are not obligated to acquire any particular amount of common stock and may commence, suspend or discontinue purchases at any time or from time to time without prior notice. Shares of stock repurchased are held as treasury shares.
Item 6. SELECTED FINANCIAL DATA
For periods prior to the Separation, the following selected financial data consisted of the combined operations of the downstream businesses of ConocoPhillips. All financial information presented for periods after the Separation represents the consolidated results of operations, financial position and cash flows of Phillips 66. Accordingly:
| • | The selected income statement data for the years ended December 31, 2015, 2014 and 2013, consist entirely of the consolidated results of Phillips 66. The selected income statement data for the year ended December 31, 2012, consists of the consolidated results of Phillips 66 for the eight months ended December 31, 2012, and the combined results of the downstream businesses for the four months ended April 30, 2012. The selected income statement data for the year ended December 31, 2011, consists entirely of the combined results of the downstream businesses. |
| • | The selected balance sheet data at December 31, 2015, 2014, 2013 and 2012, consist of the consolidated balances of Phillips 66, while the selected balance sheet data at December 31, 2011, consists of the combined balances of the downstream businesses. |
| Millions of Dollars Except Per Share Amounts | |||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
| Sales and other operating revenues | $ | 98,975 | 161,212 | 171,596 | 179,290 | 195,931 | |||||||||
| Income from continuing operations | 4,280 | 4,091 | 3,682 | 4,083 | 4,737 | ||||||||||
| Income from continuing operations attributable to Phillips 66 | 4,227 | 4,056 | 3,665 | 4,076 | 4,732 | ||||||||||
| Per common share | |||||||||||||||
| Basic | 7.78 | 7.15 | 5.97 | 6.47 | 7.54 | ||||||||||
| Diluted | 7.73 | 7.10 | 5.92 | 6.40 | 7.45 | ||||||||||
| Net income | 4,280 | 4,797 | 3,743 | 4,131 | 4,780 | ||||||||||
| Net income attributable to Phillips 66 | 4,227 | 4,762 | 3,726 | 4,124 | 4,775 | ||||||||||
| Per common share | |||||||||||||||
| Basic | 7.78 | 8.40 | 6.07 | 6.55 | 7.61 | ||||||||||
| Diluted | 7.73 | 8.33 | 6.02 | 6.48 | 7.52 | ||||||||||
| Total assets* | 48,580 | 48,692 | 49,769 | 48,035 | 43,211 | ||||||||||
| Long-term debt* | 8,843 | 7,793 | 6,101 | 6,924 | 361 | ||||||||||
| Cash dividends declared per common share | 2.1800 | 1.8900 | 1.3275 | 0.4500 | — |
*Prior period amounts have been retrospectively adjusted for Accounting Standards Update No. 2015-03.
To ensure full understanding, you should read the selected financial data presented above in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis is the company’s analysis of its financial performance, financial condition, and significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. It contains forward-looking statements including, without limitation, statements relating to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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 company 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 company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”
The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss) attributable to Phillips 66.
BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW
Phillips 66 is an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. At December 31, 2015, we had total assets of $48.6 billion.
Executive Overview
We reported earnings of $4.2 billion in 2015 and generated $5.7 billion in cash from operating activities. Phillips 66 Partners LP issued $1.1 billion of debt and $384 million of its common units to the public. We used available cash primarily to fund capital expenditures and investments of $5.8 billion, pay dividends of $1.2 billion, repurchase $1.5 billion of our common stock, and repay $800 million of senior notes that came due in 2015. We ended 2015 with $3.1 billion of cash and cash equivalents and approximately $4.9 billion of total capacity under our available liquidity facilities.
Our financial performance in 2015 demonstrated the benefit of a diversified portfolio of businesses in a low commodity price environment. We continue to focus on the following strategic priorities:
| • | Operating Excellence. Our commitment to operating excellence guides everything we do. We are committed to protecting the health and safety of everyone who has a role in our operations and the communities in which we operate. Continuous improvement in safety, environmental stewardship, reliability and cost efficiency is a fundamental requirement for our company and employees. We employ rigorous training and audit programs to drive ongoing improvement in both personal and process safety as we strive for zero incidents. Since we cannot control commodity prices, controlling operating expenses and overhead costs, within the context of our commitment to safety and environmental stewardship, is a high priority. We actively monitor these costs using various methodologies that are reported to senior management. We are committed to protecting the environment and strive to reduce our environmental footprint throughout our operations. Optimizing utilization rates at our refineries through reliable and safe operations enables us to capture the value available in the market in terms of prices and margins. During 2015, our worldwide refining crude oil capacity utilization rate was 91 percent. |
| • | Growth. We have budgeted $3.9 billion in capital expenditures and investments in 2016, including $0.3 billion for Phillips 66 Partners. Including our share of expected capital spending by joint ventures DCP Midstream, LLC (DCP Midstream), Chevron Phillips Chemical Company LLC (CPChem) and WRB Refining LP (WRB), our total 2016 capital program is expected to be $5.3 billion. This program is designed primarily to grow our Midstream and Chemicals segments, which have planned expansions for manufacturing and logistics capacity. The need for additional new gathering and processing, pipeline, storage and distribution infrastructure–driven by domestic unconventional crude oil, natural gas liquids (NGL) and natural gas production–is creating capital investment opportunities in our Midstream business. Over the next few years, CPChem plans significant |
reinvestment of its earnings to build additional manufacturing capacity benefiting from cost-advantaged NGL feedstocks. We continue to focus on funding the most attractive growth opportunities across our portfolio.
In 2013, we formed Phillips 66 Partners, a master limited partnership, to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and NGL pipelines and terminals, as well as other transportation and midstream assets. Phillips 66 Partners provides a cost-efficient vehicle to fund Midstream growth.
| • | Returns. We plan to improve refining returns by increasing throughput of advantaged feedstocks, disciplined capital allocation and portfolio optimization. A disciplined capital allocation process ensures that we focus investments in projects that generate competitive returns throughout the business cycle. During 2015, 93 percent of the company's U.S. crude slate was advantaged. |
| • | Distributions. We believe shareholder value is enhanced through, among other things, consistent and ongoing growth of regular dividends, supplemented by share repurchases. We increased our quarterly dividend rate by 12 percent during 2015, and have increased it 180 percent since our separation from ConocoPhillips in 2012 (the Separation). Regular dividends demonstrate the confidence our management has in our capital structure and operation’s capability to generate free cash flow throughout the business cycle. Through December 31, 2015, we have cumulatively repurchased $6.4 billion, or approximately 92.5 million shares, of our common stock. At the discretion of our Board of Directors, we plan to increase dividends annually and fund our share repurchase program while continuing to invest in the growth of our business. In October 2015, our Board of Directors increased our current share repurchase authorization by $2 billion resulting in a total authorization of $4 billion. Since July 2012, our Board of Directors has authorized repurchases of our outstanding common stock totaling up to $9 billion. |
| • | High-Performing Organization. We strive to attract, train, develop and retain individuals with the knowledge and skills to implement our business strategy and who support our values and culture. Throughout the company, we focus on getting results in the right way and believe success is both what we do and how we do it. We encourage collaboration throughout our company, while valuing differences, respecting diversity of thought, and creating a great place to work. We foster an environment of learning and development through structured programs focused on enhancing functional and technical skills where employees are engaged in our business and committed to their own, as well as the company’s, success. |
Business Environment
The dramatic fall in commodity prices, which started during the second half of 2014, continued throughout 2015. The U.S. oil rig count declined over 60 percent and crude oil production declined well below its peak which was set during the second quarter of 2015. Additionally, the discount for U.S. benchmark West Texas Intermediate (W
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Instrument Market Risk
We and certain of our subsidiaries hold and issue derivative contracts and financial instruments that expose our cash flows or earnings to changes in commodity prices, foreign currency exchange rates or interest rates. We may use financial- and commodity-based derivative contracts to manage the risks produced by changes in the prices of crude oil and related products, natural gas, NGL, and electric power; fluctuations in interest rates and foreign currency exchange rates; or to capture market opportunities.
Our use of derivative instruments is governed by an “Authority Limitations” document approved by our Board of Directors that prohibits the use of highly leveraged derivatives or derivative instruments without sufficient market liquidity for comparable valuations. The Authority Limitations document also establishes the Value at Risk (VaR) limits for us, and compliance with these limits is monitored daily. Our Chief Financial Officer monitors risks resulting from foreign currency exchange rates and interest rates. Our President monitors commodity price risk. The Commercial organization manages our commercial marketing, optimizes our commodity flows and positions, and monitors related risks of our businesses.
Commodity Price Risk
We sell into or receive supply from the worldwide crude oil, refined products, natural gas, NGL, and electric power markets, exposing our revenues, purchases, cost of operating activities, and cash flows to fluctuations in the prices for these commodities. Generally, our policy is to remain exposed to the market prices of commodities. Consistent with this policy, our Commercial organization uses derivative contracts to effectively convert our exposure from fixed-price sales contracts, often requested by refined product customers, back to fluctuating market prices. Conversely, our Commercial organization also uses futures, forwards, swaps and options in various markets to accomplish the following objectives to optimize the value of our supply chain, and this may reduce our exposure to fluctuations in market prices:
| • | In addition to cash settlement prior to contract expiration, exchange-traded futures contracts may be settled by physical delivery of the commodity. This provides another source of supply to balance physical systems or to meet our refinery requirements and marketing demand. |
| • | Manage the risk to our cash flows from price exposures on specific crude oil, refined product, natural gas, NGL, and electric power transactions. |
| • | Enable us to use the market knowledge gained from these activities to capture market opportunities such as moving physical commodities to more profitable locations, storing commodities to capture seasonal or time premiums, and blending commodities to capture quality upgrades. Derivatives may be utilized to optimize these activities. |
We use a VaR model to estimate the loss in fair value that could potentially result on a single day from the effect of adverse changes in market conditions on the derivative financial instruments and derivative commodity instruments held or issued, including commodity purchase and sales contracts recorded on the balance sheet at December 31, 2015, as derivative instruments. Using Monte Carlo simulation, a 95 percent confidence level and a one-day holding period, the VaR for those instruments issued or held for trading purposes at December 31, 2015 and 2014, was immaterial to our cash flows and net income.
The VaR for instruments held for purposes other than trading at December 31, 2015 and 2014, was also immaterial to our cash flows and net income.
Interest Rate Risk
The following tables provide information about our debt instruments that are sensitive to changes in U.S. interest rates. These tables present principal cash flows and related weighted-average interest rates by expected maturity dates. Weighted-average variable rates are based on effective rates at the reporting date. The carrying amount of our floating-rate debt approximates its fair value. The fair value of the fixed-rate financial instruments is estimated based on quoted market prices.
| Millions of Dollars Except as Indicated | ||||||||||||||
| Expected Maturity Date | Fixed Rate Maturity | Average Interest Rate | Floating Rate Maturity | Average Interest Rate | ||||||||||
| Year-End 2015 | ||||||||||||||
| 2016 | $ | 27 | 7.24 | % | $ | — | — | % | ||||||
| 2017 | 1,529 | 3.03 | — | — | ||||||||||
| 2018 | 26 | 7.18 | 12 | 0.01 | ||||||||||
| 2019 | 24 | 7.12 | — | — | ||||||||||
| 2020 | 319 | 2.90 | 12 | 0.01 | ||||||||||
| Remaining years | 6,800 | 4.79 | 26 | 0.01 | ||||||||||
| Total | $ | 8,725 | $ | 50 | ||||||||||
| Fair value | $ | 8,434 | $ | 50 |
| Millions of Dollars Except as Indicated | ||||||||||||||
| Expected Maturity Date | Fixed Rate Maturity | Average Interest Rate | Floating Rate Maturity | Average Interest Rate | ||||||||||
| Year-End 2014 | ||||||||||||||
| 2015 | $ | 825 | 2.11 | % | $ | — | — | % | ||||||
| 2016 | 27 | 7.24 | — | — | ||||||||||
| 2017 | 1,529 | 3.03 | — | — | ||||||||||
| 2018 | 26 | 7.19 | 12 | 0.03 | ||||||||||
| 2019 | 24 | 7.12 | 18 | 1.33 | ||||||||||
| Remaining years | 6,020 | 4.90 | 38 | 0.03 | ||||||||||
| Total | $ | 8,451 | $ | 68 | ||||||||||
| Fair value | $ | 8,806 | $ | 68 |
For additional information about our use of derivative instruments, see Note 16—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statements.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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:
| • | Fluctuations in NGL, crude oil, petroleum products and natural gas prices and refining, marketing and petrochemical margins. |
| • | Failure of new products and services to achieve market acceptance. |
| • | Unexpected changes in costs or technical requirements for constructing, modifying or operating our facilities or transporting our products. |
| • | Unexpected technological or commercial difficulties in manufacturing, refining or transporting our products, including chemicals products. |
| • | Lack of, or disruptions in, adequate and reliable transportation for our NGL, crude oil, natural gas and refined products. |
| • | The level and success of drilling and quality of production volumes around DCP Midstream’s assets and its ability to connect supplies to its gathering and processing systems, residue gas and NGL infrastructure. |
| • | 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 complete definitive agreements and feasibility studies for, and to timely complete construction of, announced and future capital projects. |
| • | Potential disruption or interruption of our operations due to accidents, weather events, civil unrest, political events, terrorism or cyber attacks. |
| • | International monetary conditions and exchange controls. |
| • | Substantial investment or reduced demand for products as a result of existing or future environmental rules and regulations. |
| • | Liability resulting from litigation or for remedial actions, including removal and reclamation obligations under environmental regulations. |
| • | General domestic and international economic and political developments including: armed hostilities; expropriation of assets; changes in governmental policies relating to NGL, crude oil, natural gas or refined product pricing, regulation or taxation; and other political, economic or diplomatic developments. |
| • | Changes in tax, environmental and other laws and regulations (including alternative energy mandates) applicable to our business. |
| • | Limited access to capital or significantly higher cost of capital related to changes to our credit profile or illiquidity or uncertainty in the domestic or international financial markets. |
| • | The operation, financing and distribution decisions of our joint ventures. |
| • | Domestic and foreign supplies of crude oil and other feedstocks. |
| • | Domestic and foreign supplies of petrochemicals and refined products, such as gasoline, diesel, aviation fuel and home heating oil. |
| • | Governmental policies relating to exports of crude oil and natural gas. |
| • | Overcapacity or undercapacity in the midstream, chemicals and refining industries. |
| • | Fluctuations in consumer demand for refined products. |
| • | The factors generally described in Item 1A.—Risk Factors in this report. |
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHILLIPS 66
INDEX TO FINANCIAL STATEMENTS
Report of Management
Management prepared, and is responsible for, the consolidated financial statements and the other information appearing in this annual report. The consolidated financial statements present fairly the company’s financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. In preparing its consolidated financial statements, the company includes amounts that are based on estimates and judgments management believes are reasonable under the circumstances. The company’s financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm appointed by the Audit and Finance Committee of the Board of Directors. Management has made available to Ernst & Young LLP all of the company’s financial records and related data, as well as the minutes of stockholders’ and directors’ meetings.
Assessment of Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Phillips 66’s internal control system was designed to provide reasonable assurance to the company’s management and directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on this assessment, management concluded the company’s internal control over financial reporting was effective as of December 31, 2015.
Ernst & Young LLP has issued an audit report on the company’s internal control over financial reporting as of December 31, 2015, and their report is included herein.
| /s/ Greg C. Garland | /s/ Kevin J. Mitchell | |
| Greg C. Garland | Kevin J. Mitchell | |
| Chairman and | Executive Vice President, Finance and | |
| Chief Executive Officer | Chief Financial Officer | |
| February 19, 2016 |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Phillips 66
We have audited the accompanying consolidated balance sheet of Phillips 66 as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule included in Item 15(a)2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Phillips 66 at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Phillips 66’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2016 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Houston, Texas
February 19, 2016
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Phillips 66
We have audited Phillips 66’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Phillips 66’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included under the heading “Assessment of Internal Control Over Financial Reporting” in the accompanying “Report of Management.” Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was mainta
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. 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 SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of December 31, 2015, with the participation of management, our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer 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 Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of December 31, 2015.
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 December 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
This report is included in Item 8 and is incorporated herein by reference.
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
This report is included in Item 8 and is incorporated herein by reference.
Item 9B. OTHER INFORMATION
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding our executive officers appears in Part I of this report.
Information required by Item 10 of Part III is incorporated herein by reference from our 2016 Definitive Proxy Statement.*
Item 11. EXECUTIVE COMPENSATION
Information required by Item 11 of Part III is incorporated herein by reference from our 2016 Definitive Proxy Statement.*
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 of Part III is incorporated herein by reference from our 2016 Definitive Proxy Statement.*
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by Item 13 of Part III is incorporated herein by reference from our 2016 Definitive Proxy Statement.*
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by Item 14 of Part III is incorporated herein by reference from our 2016 Definitive Proxy Statement.*
*Except for information or data specifically incorporated herein by reference under Items 10 through 14, other information and data appearing in our 2016 Definitive Proxy Statement are not deemed to be a part of this Annual Report on Form 10‑K or deemed to be filed with the Commission as a part of this report.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a) | 1. | Financial Statements and Supplementary Data The financial statements and supplementary information listed in the Index to Financial Statements, which appears on page 67, are filed as part of this Annual Report on Form 10-K. |
| 2. | Financial Statement Schedules Schedule II—Valuation and Qualifying Accounts appears below. All other schedules are omitted because they are not required, not significant, not applicable or the information is shown in another schedule, the financial statements or the notes to consolidated financial statements. | |
| 3. | Exhibits The exhibits listed in the Index to Exhibits, which appears on pages 137 to 140, are filed as part of this Annual Report on Form 10-K. | |
| (c) | Pursuant to Rule 3-09 of Regulation S-X, the financial statements of WRB Refining LP and Chevron Phillips Chemical Company LLC, each as of December 31, 2015 and 2014, and for the three years ended December 31, 2015, are included as exhibits to this Annual Report on Form 10-K. |
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (Consolidated)
| Millions of Dollars | |||||||||||||||||
| Description | Balance at January 1 | Charged to Expense | Other (a) | Deductions | Balance at December 31 | ||||||||||||
| 2015 | |||||||||||||||||
| Deducted from asset accounts: | |||||||||||||||||
| Allowance for doubtful accounts and notes receivable | $ | 71 | 3 | — | (19 | ) | (b) | 55 | |||||||||
| Deferred tax asset valuation allowance | 107 | (17 | ) | 70 | — | 160 | |||||||||||
| 2014 | |||||||||||||||||
| Deducted from asset accounts: | |||||||||||||||||
| Allowance for doubtful accounts and notes receivable | $ | 47 | 29 | — | (5 | ) | (b) | 71 | |||||||||
| Deferred tax asset valuation allowance | 127 | (13 | ) | (7 | ) | — | 107 | ||||||||||
| 2013 | |||||||||||||||||
| Deducted from asset accounts: | |||||||||||||||||
| Allowance for doubtful accounts and notes receivable | $ | 50 | 10 | — | (13 | ) | (b) | 47 | |||||||||
| Deferred tax asset valuation allowance | 329 | 20 | (222 | ) | — | 127 |
(a)Represents acquisitions/dispositions/revisions; net transfers associated with the Separation; deferred tax asset reinstatement in conjunction with German tax legislation, the realization of which is not more likely than not; and the effect of translating foreign financial statements.
(b)Amounts charged off less recoveries of amounts previously charged off.
PHILLIPS 66
INDEX TO EXHIBITS
| Incorporated by Reference | |||||||
| Exhibit Number | Exhibit Description | Form | Exhibit Number | Filing Date | SEC File No. | ||
| 2.1 | Separation and Distribution Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | 8-K | 2.1 | 05/01/12 | 001-35349 | ||
| 3.1 | Amended and Restated Certificate of Incorporation of Phillips 66. | 8-K | 3.1 | 05/01/12 | 001-35349 | ||
| 3.2 | Amended and Restated By-Laws of Phillips 66. | 8-K | 3.2 | 05/01/12 | 001-35349 | ||
| 4.1 | Indenture, dated as of March 12, 2012, among Phillips 66, as issuer, Phillips 66 Company, as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of senior debt securities of Phillips 66. | 10 | 4.3 | 04/05/12 | 001-35349 | ||
| 4.2 | Form of the terms of the 1.950% Senior Notes due 2015, the 2.950% Senior Notes due 2017, the 4.300% Senior Notes due 2022 and the 5.875% Senior Notes due 2042, including the form of the 1.950% Senior Notes due 2015, the 2.950% Senior Notes due 2017, the 4.300% Senior Notes due 2022 and the 5.875% Senior Notes due 2042. | 10-K | 4.2 | 02/22/13 | 001-35349 | ||
| 4.3 | Form of the terms of the 4.650% Senior Notes due 2034 and the 4.875% Senior Notes due 2044. | 8-K | 4.2 | 11/17/14 | 001-35349 | ||
| 10.1 | Credit Agreement among Phillips 66, Phillips 66 Company, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders named therein, dated as of February 22, 2012. | 10 | 4.1 | 03/01/12 | 001-35349 | ||
| 10.2 | First Amendment to Credit Agreement among Phillips 66, Phillips 66 Company, JPMorgan Chase Bank, N.A., and lenders named therein, dated as of June 10, 2013. | 10-Q | 10.1 | 05/01/14 | 001-35349 | ||
| 10.3 | Second Amendment to Credit Agreement among Phillips 66, Phillips 66 Company, JPMorgan Chase Bank, N.A., and lenders named therein, dated as of December 10, 2014. | 10-K | 10.3 | 02/20/15 | 001-35349 | ||
| 10.4 | Third Amended and Restated Limited Liability Company Agreement of Chevron Phillips Chemical Company LLC, effective as of May 1, 2012. | 10-Q | 10.14 | 08/03/12 | 001-35349 | ||
| 10.5 | Second Amended and Restated Limited Liability Company Agreement of Duke Energy Field Services, LLC, dated July 5, 2005, by and between ConocoPhillips Gas Company and Duke Energy Enterprises Corporation. | 10 | 10.12 | 03/01/12 | 001-35349 | ||
| 10.6 | First Amendment to Second Amended and Restated Limited Liability Company Agreement of Duke Energy Field Services, LLC, dated August 11, 2006, by and between ConocoPhillips Gas Company and Duke Energy Enterprises Corporation. | 10 | 10.13 | 03/01/12 | 001-35349 | ||
| 10.7 | Second Amendment to Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC), dated February 1, 2007, by and between ConocoPhillips Gas Company, Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding Corp. | 10 | 10.14 | 03/01/12 | 001-35349 |
| Incorporated by Reference | |||||||
| Exhibit Number | Exhibit Description | Form | Exhibit Number | Filing Date | SEC File No. | ||
| 10.8 | Third Amendment to Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC), dated April 30, 2009, by and between ConocoPhillips Gas Company, Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding Corp. | 10 | 10.15 | 03/01/12 | 001-35349 | ||
| 10.9 | Fourth Amendment to Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC), dated November 9, 2010, by and between ConocoPhillips Gas Company, Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding Corp. | 10 | 10.16 | 03/01/12 | 001-35349 | ||
| 10.10 | Fifth Amendment to July 5, 2005 Second Amended and Restated Limited Liability Company Agreement of DCP Midstream, LLC (formerly Duke Energy Field Services, LLC) dated September 9, 2014, by and between Phillips Gas Company (formerly ConocoPhillips Gas Company), Spectra Energy DEFS Holding, LLC, and Spectra Energy DEFS Holding II, LLC. | 10-Q | 10.1 | 10/30/14 | 001-35349 | ||
| 10.11 | Indemnification and Release Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | 8-K | 10.1 | 05/01/12 | 001-35349 | ||
| 10.12 | Intellectual Property Assignment and License Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | 8-K | 10.2 | 05/01/12 | 001-35349 | ||
| 10.13 | Tax Sharing Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | 8-K | 10.3 | 05/01/12 | 001-35349 | ||
| 10.14 | Employee Matters Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | 8-K | 10.4 | 05/01/12 | 001-35349 | ||
| 10.15 | Amendment to the Employee Matters Agreement by and between ConocoPhillips and Phillips 66, dated April 26, 2012. | 10-Q | 10.1 | 05/02/13 | 001-35349 | ||
| 10.16 | Transition Services Agreement between ConocoPhillips and Phillips 66, dated April 26, 2012. | 8-K | 10.5 | 05/01/12 | 001-35349 | ||
| 10.17 | 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66.** | DEF14A | App. A | 03/27/13 | 001-35349 | ||
| 10.18 | Phillips 66 Key Employee Supplemental Retirement Plan.** | 10-Q | 10.15 | 08/03/12 | 001-35349 | ||
| 10.19 | First Amendment to the Phillips 66 Key Employee Supplemental Retirement Plan.** | 10-K | 10.18 | 02/22/13 | 001-35349 | ||
| 10.20 | Phillips 66 Executive Severance Plan.** | 10-Q | 10.16 | 08/03/12 | 001-35349 | ||
| 10.21 | First Amendment to the Phillips 66 Executive Severance Plan.** | 10-K | 10.20 | 02/22/13 | 001-35349 | ||
| 10.22 | Phillips 66 Deferred Compensation Plan for Non-Employee Directors.** | 10-Q | 10.17 | 08/03/12 | 001-35349 | ||
| 10.23 | Phillips 66 Key Employee Deferred Compensation Plan-Title I.** | 10-Q | 10.18 | 08/03/12 | 001-35349 |
| Incorporated by Reference | |||||||
| Exhibit Number | Exhibit Description | Form | Exhibit Number | Filing Date | SEC File No. | ||
| 10.24 | Phillips 66 Key Employee Deferred Compensation Plan-Title II.** | 10-Q | 10.19 | 08/03/12 | 001-35349 | ||
| 10.25 | First Amendment to the Phillips 66 Key Employee Deferred Compensation Plan Title II.** | 10-K | 10.24 | 02/22/13 | 001-35349 | ||
| 10.26 | Phillips 66 Defined Contribution Make-Up Plan Title I.** | 10-Q | 10.20 | 08/03/12 | 001-35349 | ||
| 10.27 | Phillips 66 Defined Contribution Make-Up Plan Title II.** | 10-K | 10.26 | 02/22/13 | 001-35349 | ||
| 10.28 | Phillips 66 Key Employee Change in Control Severance Plan.** | 10-K | 10.27 | 02/22/13 | 001-35349 | ||
| 10.29 | First Amendment to Phillips 66 Key Employee Change in Control Severance Plan, Effective October 2, 2015.** | 8-K | 10.1 | 11/08/13 | 001-35349 | ||
| 10.30 | Annex to the Phillips 66 Nonqualified Deferred Compensation Arrangements.** | 10-Q | 10.23 | 08/03/12 | 001-35349 | ||
| 10.31 | Form of Stock Option Award Agreement under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66.** | 10-K | 10.29 | 02/22/13 | 001-35349 | ||
| 10.32 | Form of Restricted Stock or Restricted Stock Unit Award Agreement under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66.** | 10-K | 10.30 | 02/22/13 | 001-35349 | ||
| 10.33 | Form of Performance Share Unit Award Agreement under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66.** | 10-K | 10.31 | 02/22/13 | 001-35349 | ||
| 12* | Computation of Ratio of Earnings to Fixed Charges. | ||||||
| 21* | List of Subsidiaries of Phillips 66. | ||||||
| 23.1* | Consent of Ernst & Young LLP, independent registered public accounting firm. | ||||||
| 23.2* | Consent of Ernst & Young LLP, independent auditors for WRB Refining LP. | ||||||
| 23.3* | Consent of Ernst & Young LLP, independent auditors for Chevron Phillips Chemicals Company LLC. | ||||||
| 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. | ||||||
| 99.1* | The financial statements of WRB Refining LP, pursuant to Rule 3-09 of Regulation S-X. | ||||||
| 99.2* | The financial statements of Chevron Phillips Chemical Company, LLC, pursuant to Rule 3-09 of Regulation S-X. | ||||||
| Incorporated by Reference | |||||||
| Exhibit Number | Exhibit Description | Form | Exhibit Number | Filing Date | SEC File No. | ||
| 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. | ||||||
*Filed herewith.
**Management contracts and compensatory plans or arrangements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 | |
| February 19, 2016 | /s/ Greg C. Garland |
| Greg C. Garland Chairman of the Board of Directors and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed, as of February 19, 2016, on behalf of the registrant by the following officers in the capacity indicated and by a majority of directors.
| Signature | Title | |
| /s/ Greg C. Garland | Chairman of the Board of Directors | |
| Greg C. Garland | and Chief Executive Officer | |
| (Principal executive officer) | ||
| /s/ Kevin J. Mitchell | Executive Vice President, Finance | |
| Kevin J. Mitchell | and Chief Financial Officer | |
| (Principal financial officer) | ||
| /s/ Chukwuemeka A. Oyolu | Vice President and Controller | |
| Chukwuemeka A. Oyolu | (Principal accounting officer) | |
| /s/ J. Brian Ferguson | Director | |
| J. Brian Ferguson | ||
| /s/ William R. Loomis Jr. | Director | |
| William R. Loomis Jr. | ||
| /s/ John E. Lowe | Director | |
| John E. Lowe | ||
| /s/ Harold W. McGraw III | Director | |
| Harold W. McGraw III | ||
| /s/ Glenn F. Tilton | Director | |
| Glenn F. Tilton | ||
| /s/ Victoria J. Tschinkel | Director | |
| Victoria J. Tschinkel | ||
| /s/ Marna C. Whittington | Director | |
| Marna C. Whittington |