Cover and table of contents

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Cover and table of contents


2021


			UNITED STATES
			SECURITIES AND EXCHANGE COMMISSION
			Washington, D.C. 20549

FORM 10-K


(Mark One)
☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended			December 31, 2021
			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.)

2331 CityWest Blvd., 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	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	PSX	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.								☒	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	☒	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.								☒	Yes	☐	No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).								☒	Yes	☐	No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.								☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.								☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).								☐	Yes	☒	No

The aggregate market value of common stock held by non-affiliates of the registrant on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $85.82, was $37.5 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 438,461,584 shares of common stock outstanding at January 31, 2022.

Documents incorporated by reference:

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 11, 2022 (Part III).

Index to Financial Statements

TABLE OF CONTENTS


Item			Page

PART I

1 and 2. Business and Properties			1
Corporate Structure			1
Segment and Geographic Information			2
Midstream			2
Chemicals			11
Refining			13
Marketing and Specialties			17

Energy Research & Innovation			18
Human Capital			19
Competition			20
General			21
1A. Risk Factors			22
1B. Unresolved Staff Comments			35
3. Legal Proceedings			35
4. Mine Safety Disclosures			35
Information About Our Executive Officers			36

PART II

5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			37
6. [Reserved]			37
7. Management's Discussion and Analysis of Financial Condition and Results of Operations			38
7A. Quantitative and Qualitative Disclosures About Market Risk			75
Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995			77
8. Financial Statements and Supplementary Data			79
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			147
9A. Controls and Procedures			147
9B. Other Information			147
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			147

PART III

10. Directors, Executive Officers and Corporate Governance			148
11. Executive Compensation			148
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			148
13. Certain Relationships and Related Transactions, and Director Independence			148
14. Principal Accountant Fees and Services			148

PART IV

15. Exhibit and Financial Statement Schedules			149
16. Form 10-K Summary			149
Signatures			154

Index to Financial Statements

Unless otherwise indicated, “the company,” “we,” “our,” “us” and “Phillips 66” are used in this report to refer to the businesses of Phillips 66 and its consolidated subsidiaries.

This Annual Report on Form 10-K contains forward-looking statements including, without limitation, statements relating to our 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 often identify forward-looking statements, but the absence of these words does not mean a statement is not forward-looking. The company does not undertake to update, revise or correct any 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 headings “Risk Factors” and “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”

PART I

Items 1 and 2. BUSINESS AND PROPERTIES

CORPORATE STRUCTURE

Phillips 66, headquartered in Houston, Texas, was incorporated in Delaware in 2011 in connection with, and in anticipation of, a restructuring of ConocoPhillips that separated its downstream businesses into an independent, publicly traded company named Phillips 66. The two companies were separated by ConocoPhillips distributing to its stockholders all the shares of common stock of Phillips 66 after the market closed on April 30, 2012 (the separation). Phillips 66 stock trades on the New York Stock Exchange under the “PSX” stock symbol.

Our business is organized into four operating segments:

1)**Midstream—**Provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and natural gas liquids (NGL) transportation, storage, fractionation, processing and marketing services, mainly in the United States. This segment includes our master limited partnership (MLP), Phillips 66 Partners LP (Phillips 66 Partners), our 50% equity investment in DCP Midstream, LLC (DCP Midstream), and our 16% investment in NOVONIX Limited (NOVONIX), a company that develops technology and supplies materials for lithium-ion batteries.

2)**Chemicals—**Consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem), which manufactures and markets petrochemicals and plastics on a worldwide basis.

3)**Refining—**Refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, at 12 refineries in the United States and Europe.

4)**Marketing and Specialties (M&S)—**Purchases for resale and markets refined petroleum products and renewable fuels, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of specialty products, such as base oils and lubricants.

Corporate and Other includes general corporate overhead, interest expense, our investment in new technologies and various other corporate activities. Corporate assets include all cash, cash equivalents and income tax-related assets.

Index to Financial Statements

SEGMENT AND GEOGRAPHIC INFORMATION

MIDSTREAM

The Midstream segment consists of three business lines:

Transportation—Transports crude oil and other feedstocks to our refineries and other locations, delivers refined petroleum products to market, and provides terminaling and storage services for crude oil and refined petroleum products.
NGL and Other—Transports, stores, fractionates, exports and markets NGL, provides other fee-based processing services. It also includes our 16% investment in NOVONIX.
DCP Midstream—Gathers, processes, transports and markets natural gas and transports, fractionates and markets NGL.

Phillips 66 Partners

Phillips 66 Partners, headquartered in Houston, Texas, is a publicly traded MLP formed in 2013, which owns and operates primarily fee-based midstream assets. At December 31, 2021, we owned a noneconomic general partner interest and 170 million Phillips 66 Partners common units, representing a 74% limited partner interest in Phillips 66 Partners, while the public owned a 26% limited partner interest and 13.5 million perpetual convertible preferred units. Phillips 66 Partners’ operations consist of crude oil, refined petroleum product and NGL transportation, terminaling, fractionation, processing and storage assets that are geographically dispersed throughout the United States. The majority of Phillips 66 Partners’ assets are associated with, and integral to, Phillips 66 operated refineries. The results of operations of Phillips 66 Partners are included in Midstream’s Transportation and NGL and Other business lines, based on the nature of the activity within the partnership.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66 Partners to acquire all of the limited partner interests in Phillips 66 Partners not already owned by us on the closing date of the transaction. The agreement provides for an all-stock transaction in which each outstanding Phillips 66 Partners common unitholder would receive 0.50 shares of Phillips 66 common stock for each Phillips 66 Partners common unit. Phillips 66 Partners’ perpetual convertible preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock. This merger is expected to close in March 2022, subject to customary closing conditions. Upon closing, Phillips 66 Partners will become a wholly owned subsidiary of Phillips 66 and will no longer be a publicly traded partnership.

Index to Financial Statements

Transportation

We own or lease various assets to provide transportation, terminaling and storage services. These assets include crude oil, refined petroleum product, NGL, and natural gas pipeline systems; crude oil, refined petroleum product and NGL terminals; a petroleum coke handling facility; marine vessels; railcars and trucks.

Pipelines and Terminals

At December 31, 2021, our Transportation business was comprised of over 22,000 miles of crude oil, refined petroleum product, NGL and natural gas pipeline systems in the United States, including those partially owned or operated by our affiliates. We owned or operated 39 refined petroleum product terminals, 20 crude oil terminals, 5 NGL terminals, a petroleum coke exporting facility and various other storage and loading facilities.

Phillips 66 Partners owns a 25% interest in the South Texas Gateway Terminal, which connects to the Gray Oak Pipeline in Corpus Christi, Texas. The marine export terminal commissioned additional storage capacity in the first quarter of 2021, bringing total capacity to 8.6 million barrels and marking completion of the final construction phase. The marine export terminal has two deepwater docks with up to 800,000 barrels per day (BPD) of export capacity.

Phillips 66 Partners completed construction of the C2G Pipeline, a 16 inch ethane pipeline that connects its Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi. The pipeline began commercial operations in the fourth quarter of 2021 and is supported by long-term commitments.

In the first half of 2021, Phillips 66 Partners exited the Liberty Pipeline project and transferred its ownership interest in the joint venture to its co-venturer. See the “Liberty Pipeline LLC (Liberty)” section of Note 6—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information regarding the Liberty Pipeline project.

The Dakota Access Pipeline is currently subject to litigation that could affect operations. See the “Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)” section of Note 6—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information on this litigation.

Index to Financial Statements

The following table depicts our ownership interest in major pipeline systems at December 31, 2021:


Name	State of Origination/Terminus	Interest		Length (Miles)	Gross Capacity (MBD)
Crude Oil
Bakken Pipeline †	North Dakota/Texas	25	%	1,918	750
Bayou Bridge †	Texas/Louisiana	40		213	480
Clifton Ridge †	Louisiana	100		10	260
CushPo †	Oklahoma	100		62	130
Eagle Ford Gathering †	Texas	100		28	58
Glacier †	Montana	79		800	124
Gray Oak Pipeline* †	Texas	42		862	900
Line 100	California	100		79	61
Line 200	California	100		228	100
Line 300	California	100		61	34
Line 400	California	100		153	46
Line O †	Oklahoma/Texas	100		276	38
New Mexico Crude †	New Mexico/Texas	100		227	106
North Texas Crude †	Texas	100		142	34
Oklahoma Crude †	Texas/Oklahoma	100		217	100
Sacagawea †	North Dakota	50		95	183
STACK PL †	Oklahoma	50		149	250
Sweeny Crude	Texas	100		56	617
West Texas Crude †	Texas	100		1,079	140
Refined Petroleum Products
ATA Line †	Texas/New Mexico	50		293	34
Borger to Amarillo †	Texas	100		93	74
Borger-Denver	Texas	100		38	39
Borger-Denver	Texas/Colorado	65		207	39
Borger-Denver	Colorado	70		152	39
Cherokee East †	Oklahoma/Missouri	100		292	59
Cherokee North †	Oklahoma/Kansas	100		29	55
Cherokee South †	Oklahoma	100		98	47
Cross Channel Connector †	Texas	100		5	184
Explorer †	Texas/Indiana	22		1,830	660
Gold Line †	Texas/Illinois	100		686	120

Heartland**	Kansas/Iowa	50		49	30
LAX Jet Line	California	50		19	25
Los Angeles Products	California	100		22	132
Paola Products †	Kansas	100		106	120
Pioneer	Wyoming/Utah	50		562	63
Powder River	Colorado/Texas	100		350	13
Richmond	California	100		14	31
SAAL †	Texas	33		102	32
SAAL †	Texas	54		19	30
Seminoe †	Montana/Wyoming	100		342	44
Standish †	Oklahoma/Kansas	100		92	77
Sweeny to Pasadena †	Texas	100		120	335
Torrance Products	California	100		8	279
Watson Products	California	100		9	238
Yellowstone	Montana/Washington	46		710	68

Index to Financial Statements


Name	State of Origination/Terminus	Interest		Length (Miles)	Gross Capacity (MBD)
NGL
Blue Line	Texas/Illinois	100	%	688	26
Brown Line †	Oklahoma/Kansas	100		76	26
C2G †	Texas	100		155	135
Chisholm	Oklahoma/Kansas	50		202	42
Conway to Wichita	Kansas	100		55	26
Medford †	Oklahoma	100		42	25
Powder River	Wyoming/Colorado	100		366	16
River Parish NGL †	Louisiana	100		499	104
Sand Hills †	New Mexico/Texas	33		1,400	500
Skelly-Belvieu	Texas	50		571	45
Southern Hills †	Kansas/Texas	33		981	192
Sweeny LPG	Texas	100		260	942
Sweeny NGL	Texas	100		18	204
TX Panhandle Y1/Y2	Texas	100		289	78






Natural Gas
Rockies Express***
East to West	Ohio/Illinois	25		661	2.6 Bcf/d
West to East	Colorado/Ohio	25		1,712	1.8 Bcf/d
Sacagawea Gas †	North Dakota	50		24	0.18 Bcf/d

† Owned by Phillips 66 Partners; Phillips 66 held 74% of the limited partner interest in Phillips 66 Partners at December 31, 2021.

** Interest reflects Phillips 66 Partners’ proportionate share of the Gray Oak Pipeline, net of a noncontrolling interest.*

*** Total pipeline system is 419 miles. Phillips 66 has an ownership interest in multiple segments totaling 49 miles.*

**** Total pipeline system consists of three zones for a total of 1,712 miles. The third zone of the pipeline is bidirectional and can transport 2.6 Bcf/d of natural gas from east to west.*

Index to Financial Statements

The following table depicts our ownership interest in terminal and storage facilities at December 31, 2021:


Facility Name	Location	Commodity Handled	Interest		Gross Storage Capacity (MBbl)	Gross Rack Capacity (MBD)
Albuquerque †	New Mexico	Refined Petroleum Products	100	%	274	20
Amarillo †	Texas	Refined Petroleum Products	100		296	23
Beaumont	Texas	Crude Oil, Refined Petroleum Products	100		16,800	8
Billings	Montana	Refined Petroleum Products	100		81	12
Billings Crude †	Montana	Crude Oil	100		236	N/A
Borger	Texas	Crude Oil	50		772	N/A
Bozeman	Montana	Refined Petroleum Products	100		90	5
Buffalo Crude †	Montana	Crude Oil	100		303	N/A
Casper †	Wyoming	Refined Petroleum Products	100		365	7
Clemens †	Texas	NGL	100		16,500	N/A
Clifton Ridge †	Louisiana	Crude Oil	100		3,800	N/A
Coalinga	California	Crude Oil	100		817	N/A
Colton	California	Refined Petroleum Products	100		207	20
Cushing †	Oklahoma	Crude Oil	100		675	N/A
Cut Bank †	Montana	Crude Oil	100		315	N/A
Denver	Colorado	Refined Petroleum Products	100		441	43
Des Moines	Iowa	Refined Petroleum Products	50		217	12
East St. Louis †	Illinois	Refined Petroleum Products	100		1,529	55
Freeport	Texas	Crude Oil, Refined Petroleum Products, NGL	100		3,485	N/A
Glenpool †	Oklahoma	Refined Petroleum Products	100		571	18
Great Falls	Montana	Refined Petroleum Products	100		198	6
Hartford †	Illinois	Refined Petroleum Products	100		1,468	21
Helena	Montana	Refined Petroleum Products	100		195	5
Jefferson City †	Missouri	Refined Petroleum Products	100		103	15
Jones Creek	Texas	Crude Oil	100		2,580	N/A
Junction	California	Crude Oil, Refined Petroleum Products	100		524	N/A
Kansas City †	Kansas	Refined Petroleum Products	100		1,410	50
Keene †	North Dakota	Crude Oil	50		503	N/A
La Junta	Colorado	Refined Petroleum Products	100		109	5
Lake Charles Pipeline Storage	Louisiana	Refined Petroleum Products	50		3,143	N/A
Lincoln	Nebraska	Refined Petroleum Products	100		217	12
Linden †	New Jersey	Refined Petroleum Products	100		360	95
Los Angeles	California	Refined Petroleum Products	100		156	80
Lubbock †	Texas	Refined Petroleum Products	100		182	18
Medford Spheres †	Oklahoma	NGL	100		70	N/A
Missoula	Montana	Refined Petroleum Products	50		365	14
Moses Lake	Washington	Refined Petroleum Products	50		216	10
Mount Vernon †	Missouri	Refined Petroleum Products	100		365	40
North Salt Lake	Utah	Refined Petroleum Products	50		755	60
North Spokane	Washington	Refined Petroleum Products	100		492	N/A
Odessa †	Texas	Crude Oil	100		521	N/A
Oklahoma City †	Oklahoma	Crude Oil, Refined Petroleum Products	100		355	42

Index to Financial Statements


Facility Name	Location	Commodity Handled	Interest		Gross Storage Capacity (MBbl)	Gross Rack Capacity (MBD)
Palermo †	North Dakota	Crude Oil	70	%	235	N/A
Paola †	Kansas	Refined Petroleum Products	100		978	N/A
Pasadena †	Texas	Refined Petroleum Products, NGL	100		3,558	65
Pecan Grove †	Louisiana	Lubricant Base Stocks, Refined Petroleum Products	100		177	N/A
Ponca City †	Oklahoma	Refined Petroleum Products	100		63	22
Ponca City Crude †	Oklahoma	Crude Oil	100		1,229	N/A
Portland	Oregon	Refined Petroleum Products	100		650	38
Renton	Washington	Refined Petroleum Products	100		243	19
Richmond	California	Refined Petroleum Products	100		343	28
River Parish †	Louisiana	NGL	100		1,500	N/A
Rock Springs	Wyoming	Refined Petroleum Products	100		132	8
Sacramento	California	Refined Petroleum Products	100		146	12
San Bernard	Texas	Refined Petroleum Products	100		222	N/A
Santa Margarita	California	Crude Oil	100		398	N/A
Sheridan †	Wyoming	Refined Petroleum Products	100		94	6
South Texas Gateway †	Texas	Crude Oil	25		8,600	N/A
Spokane	Washington	Refined Petroleum Products	100		351	20
Tacoma	Washington	Refined Petroleum Products	100		316	19
Torrance	California	Crude Oil, Refined Petroleum Products	100		2,128	N/A
Tremley Point †	New Jersey	Refined Petroleum Products	100		1,701	25
Westlake	Louisiana	Refined Petroleum Products	100		128	10
Wichita Falls †	Texas	Crude Oil	100		225	N/A
Wichita North †	Kansas	Refined Petroleum Products	100		769	20
Wichita South †	Kansas	Refined Petroleum Products	100		272	N/A

† Owned by Phillips 66 Partners; Phillips 66 held 74% of the limited partner interest in Phillips 66 Partners at December 31, 2021.

Index to Financial Statements

The following table depicts our ownership interest in marine, rail and petroleum coke loading and offloading facilities at December 31, 2021:


Facility Name	Location	Commodity Handled	Interest		Gross Loading Capacity*
Marine
Beaumont	Texas	Crude Oil, Refined Petroleum Products	100	%	75
Clifton Ridge †	Louisiana	Crude Oil, Refined Petroleum Products	100		50
Freeport	Texas	Crude Oil, Refined Petroleum Products, NGL	100		46
Hartford †	Illinois	Refined Petroleum Products	100		3
Pecan Grove †	Louisiana	Lubricant Base Stocks, Refined Petroleum Products	100		6
Portland	Oregon	Crude Oil	100		10
Richmond	California	Crude Oil	100		3
San Bernard	Texas	Refined Petroleum Products	100		2
South Texas Gateway †	Texas	Crude Oil	25		120
Tacoma	Washington	Crude Oil	100		12
Tremley Point †	New Jersey	Refined Petroleum Products	100		7
Rail
Bayway †	New Jersey	Crude Oil	100		75
Beaumont	Texas	Crude Oil	100		20
Ferndale †	Washington	Crude Oil	100		35
Missoula	Montana	Refined Petroleum Products	50		41
Palermo †	North Dakota	Crude Oil	70		100
Thompson Falls	Montana	Refined Petroleum Products	50		41
Petroleum Coke
Lake Charles	Louisiana	Petroleum Coke	50		N/A

† Owned by Phillips 66 Partners; Phillips 66 held 74% of the limited partner interest in Phillips 66 Partners at December 31, 2021.

** Marine facilities in thousands of barrels per hour; Rail in thousands of barrels daily (MBD).*

Index to Financial Statements

Marine Vessels

At December 31, 2021, we had 11 international-flagged crude oil, refined petroleum product and NGL tankers under time charter contracts, with capacities ranging in size from 300,000 to 2,200,000 barrels. Additionally, we had a variety of inland and offshore tug/barge units. These vessels are used primarily to transport crude oil and other feedstocks, as well as refined petroleum products for our refineries. In addition, the NGL tankers are used to export propane and butane from our fractionation, transportation and storage infrastructure.

Truck and Rail

Our truck and rail fleets support our feedstock and distribution operations. Rail movements are provided via a fleet of approximately 9,000 owned and leased railcars. Truck movements are provided through our wholly owned subsidiary, Sentinel Transportation LLC, and through numerous third-party trucking companies.

NGL and Other

Our NGL and Other business includes the following:

The Sweeny Hub, a U.S. Gulf Coast NGL market hub consisting of three fractionators with a total fractionation capacity of 400,000 BPD, a liquefied petroleum gas (LPG) export terminal and NGL storage caverns. See below for additional information regarding Sweeny Hub Assets.
A 12.5% undivided interest in a fractionation plant in Mont Belvieu, Texas. Our net share of its capacity is 30,250 BPD.
A 40% undivided interest in a fractionation plant in Conway, Kansas. Our net share of its capacity is 43,200 BPD.
A 22.5% interest in Gulf Coast Fractionators, which owns an NGL fractionation plant in Mont Belvieu, Texas. Our net share of its capacity is 32,625 BPD. This facility has been idled since December 2020.
Phillips 66 Partners owns the River Parish NGL logistics system in southeast Louisiana, comprising approximately 500 miles of pipeline and a storage cavern connecting multiple fractionation facilities, refineries and a petrochemical facility.
Phillips 66 Partners owns a direct one-third interest in both DCP Sand Hills Pipeline, LLC (Sand Hills) and DCP Southern Hills Pipeline, LLC (Southern Hills), which own NGL pipeline systems that connect the Eagle Ford, Permian Basin and Midcontinent production areas to the Mont Belvieu, Texas, market hub.
Phillips 66 Partners owns a vacuum distillation unit with a capacity of 125,000 BPD and a delayed coker unit with a capacity of 70,000 BPD located at our Sweeny Refinery in Old Ocean, Texas.
Phillips 66 Partners owns a 25,000 BPD isomerization unit at our Lake Charles Refinery. The isomerization unit increases Phillips 66’s production of higher-octane gasoline blend components.
A 16% investment in NOVONIX, a company that develops technology and supplies materials for lithium-ion batteries. See below for additional information regarding our investment in NOVONIX.

Index to Financial Statements

Sweeny Hub Assets

The Sweeny Hub fractionators are located adjacent to our Sweeny Refinery in Old Ocean, Texas, and supply purity ethane to the petrochemical industry and purity NGL to domestic and global markets. Raw NGL supply to the fractionators is delivered from nearby major pipelines, including the Sand Hills Pipeline. The fractionators are supported by significant infrastructure including connectivity to two NGL supply pipelines, a pipeline connecting to the Mont Belvieu market hub and the Clemens Caverns storage facility with access to our LPG export terminal in Freeport, Texas.

During the second half of 2021, we resumed construction of Frac 4 at the Sweeny Hub. The 150,000-BPD fractionator is expected to be completed in the fourth quarter of 2022 and will increase Sweeny Hub fractionation capacity to 550,000 BPD. The fractionators are supported by long-term customer commitments.

The Freeport LPG Export Terminal leverages our fractionation, transportation and storage infrastructure to supply petrochemical, heating and transportation markets globally. The terminal can simultaneously load a propane vessel and a butane vessel, and has a combined LPG export capacity of 260,000 BPD. In addition, the terminal has the capability to export natural gasoline (C5+) produced by the Sweeny Hub fractionators.

NOVONIX

In September 2021, we acquired a 16% stake in NOVONIX, a Brisbane, Australia-based company that develops technology and supplies materials for lithium-ion batteries. Our investment in NOVONIX’s ordinary shares traded on the Australian Securities Exchange supports an expansion of synthetic graphite production capacity at NOVONIX’s Chattanooga, Tennessee plant. In January 2022, we signed a technology development agreement with NOVONIX to advance the production and commercialization of next-generation anode materials for lithium-ion batteries. In February 2022, NOVONIX’s American Depositary Receipts started trading on the Nasdaq Stock Market.

DCP Midstream

Our Midstream segment includes our 50% equity investment in DCP Midstream, which is headquartered in Denver, Colorado. The residual natural gas, primarily methane, which results from processing raw natural gas, is sold by DCP Midstream at market-based prices to marketers and end users, including large industrial companies, natural gas distribution companies and electric utilities. DCP Midstream purchases or takes custody of substantially all of its raw natural gas from producers, principally under contractual arrangements that expose DCP Midstream to the prices of NGL, natural gas and condensate. DCP Midstream also has fee-based arrangements with producers to provide midstream services such as gathering and processing. In addition, DCP Midstream markets a portion of its NGL to us and our equity affiliates under existing contracts.

At December 31, 2021, DCP Midstream, through its subsidiary DCP Midstream, LP (DCP Partners), owned or operated 35 active natural gas processing facilities, with a net processing capacity of approximately 5.4 billion cubic feet per day (Bcf/d), and approximately 56,000 miles of natural gas and NGL pipelines. DCP Midstream’s owned or operated natural gas pipeline systems included gathering services for these facilities and natural gas transmission. DCP Midstream also owned or operated 9 NGL fractionation plants, along with natural gas and NGL storage facilities and NGL pipelines. During 2021, DCP Midstream completed expansion projects around its existing assets.

Index to Financial Statements

CHEMICALS

The Chemicals segment consists of our 50% equity investment in CPChem, which is headquartered in The Woodlands, Texas. At December 31, 2021, CPChem owned or had joint venture interests in 28 manufacturing facilities located in Belgium, Colombia, Qatar, Saudi Arabia, Singapore and the United States. Additionally, CPChem has two research and development centers in the United States.

We structure our reporting of CPChem’s operations around two primary business lines: Olefins and Polyolefins (O&P) and Specialties, Aromatics and Styrenics (SA&S). The O&P business line produces and markets ethylene and other olefin products. The ethylene produced is primarily used by CPChem to produce polyethylene, normal alpha olefins (NAO) and polyethylene pipe. The SA&S business line manufactures and markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene. SA&S also manufactures and/or markets a variety of specialty chemical products including organosulfur chemicals, solvents, catalysts, and chemicals used in drilling and mining.

The manufacturing of petrochemicals and plastics involves the conversion of hydrocarbon-based raw material feedstocks into higher-value products, often through a thermal process referred to in the industry as “cracking.” For example, ethylene can be produced by cracking ethane, propane, butane, natural gasoline or certain refinery liquids, such as naphtha and gas oil. Ethylene primarily is used as a raw material in the production of plastics, such as polyethylene and polyvinyl chloride (PVC). Plastic resins, such as polyethylene, are manufactured in a thermal/catalyst process, and the produced output is used as a further raw material for various applications, such as packaging and plastic pipe.

The following table reflects CPChem’s petrochemicals and plastics product capacities at December 31, 2021:


	Millions of Pounds per Year*
	U.S.	Worldwide
O&P
Ethylene	11,910	14,385
Propylene	2,675	3,180
High-density polyethylene	5,305	7,470
Low-density polyethylene	620	620
Linear low-density polyethylene	1,590	1,590
Polypropylene	—	310
Normal alpha olefins	2,335	2,850
Polyalphaolefins	125	255
Polyethylene pipe	500	500
Total O&P	25,060	31,160

SA&S
Benzene	1,600	2,530
Cyclohexane	1,060	1,455
Styrene	1,050	1,875
Polystyrene	835	915
Specialty chemicals	440	575
Total SA&S	4,985	7,350
Total O&P and SA&S	30,045	38,510

** Capacities include CPChem’s share in equity affiliates and excludes CPChem’s NGL fractionation capacity.*

Index to Financial Statements

CPChem is growing its normal alpha olefins business with a second world-scale unit to produce 1-hexene, a critical component in high-performance polyethylene. The 586 million pounds per year unit will be located in Old Ocean, Texas. The project will utilize CPChem’s proprietary technology. In addition, CPChem is expanding its propylene splitting capacity by 1 billion pounds per year with a new unit located at its Cedar Bayou facility. Both projects are expected to start up in 2023.

In early 2022, CPChem announced its first commercial sales of Marlex® Anew™ Circular Polyethylene, which uses advanced recycling technology to convert difficult-to-recycle plastic waste into high-quality raw materials. CPChem is working to further expand production volumes, targeting annual production of 1 billion pounds of circular polyethylene by 2030.

CPChem is continuing development of world-scale petrochemical facilities on the U.S. Gulf Coast and in Ras Laffan, Qatar, jointly with its co-venturer. CPChem expects to make a final investment decision for its U.S. Gulf Coast project in 2022.

Index to Financial Statements

REFINING

Our Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, at 12 refineries in the United States and Europe.

The Alliance Refinery, located in Belle Chasse, Louisiana, sustained significant impacts from Hurricane Ida in August 2021. In the fourth quarter of 2021, we announced the shutdown of the Alliance Refinery in connection with plans to convert it to a terminal.

The table below depicts information for each of our owned and joint venture refineries at December 31, 2021:


							Thousands of Barrels Daily
Region/Refinery		Location		Interest			Net Crude Throughput Capacity		Net Clean Product Capacity**		Clean Product Yield Capability
At December 31 2021	Effective January 1 2022		Gasolines			Distillates
Atlantic Basin/Europe
Bayway		Linden, NJ		100	%		258	258	155	130	92	%
Humber		N. Lincolnshire, United Kingdom		100			221	221	95	115	81
MiRO*		Karlsruhe, Germany		19			58	58	25	27	87
							537	537

Gulf Coast

Lake Charles		Westlake, LA		100			264	264	105	115	70
Sweeny		Old Ocean, TX		100			265	265	158	125	86
							529	529

Central Corridor
Wood River		Roxana, IL		50			173	173	88	70	81
Borger		Borger, TX		50			75	75	50	35	91
Ponca City		Ponca City, OK		100			217	217	120	100	93
Billings		Billings, MT		100			66	66	37	30	90
							531	531

West Coast
Ferndale		Ferndale, WA		100			105	105	65	39	84
Los Angeles		Carson/Wilmington, CA		100			139	139	85	65	90
San Francisco		Arroyo Grande/Rodeo, CA		100			120	120	60	65	85
							364	364
							1,961	1,961

** Mineraloelraffinerie Oberrhein GmbH.*

** Clean product capacities are maximum rates for each clean product category, independent of each other. They are not additive when calculating the clean product yield capability for each refinery.

Index to Financial Statements

Primary crude oil characteristics and sources of crude oil for our owned and joint venture refineries are as follows:


	Characteristics				Sources
	Sweet	Medium Sour	Heavy Sour	High TAN*	United States	Canada	South and Central America	Europe**	Middle East & Africa
Bayway	l	l			l	l		l	l
Humber	l		l	l	l			l	l
MiRO	l	l	l		l			l	l

Lake Charles	l	l	l	l	l	l	l	l	l
Sweeny	l	l	l	l	l	l	l
Wood River	l		l	l	l	l
Borger	l	l	l		l	l
Ponca City	l	l	l		l	l
Billings		l	l	l	l	l
Ferndale	l	l			l	l			l
Los Angeles		l	l	l	l	l	l		l
San Francisco	l	l	l	l	l	l	l	l	l

** High TAN (Total Acid Number): acid content greater than or equal to 1.0 milligram of potassium hydroxide (KOH) per gram.*

*** Includes Russian crude.*

Atlantic Basin/Europe Region

Bayway Refinery

The Bayway Refinery is located on the New York Harbor in Linden, New Jersey. Bayway’s facilities include crude distilling, naphtha reforming, fluid catalytic cracking, solvent deasphalting, hydrodesulfurization and alkylation units. The complex also includes a polypropylene plant with the capacity to produce up to 775 million pounds per year. The refinery produces a high percentage of transportation fuels, as well as petrochemical feedstocks, residual fuel oil and home heating oil. Refined petroleum products are distributed to East Coast customers by pipeline, barge, railcar and truck.

Humber Refinery

The Humber Refinery is located on the east coast of England in North Lincolnshire, United Kingdom, approximately 180 miles north of London. Humber’s facilities include crude distilling, naphtha reforming, fluid catalytic cracking, hydrodesulfurization, thermal cracking and delayed coking units. The refinery has two coking units with associated calcining plants. Humber is the only coking refinery in the United Kingdom, and a producer of high-quality specialty graphite and anode-grade petroleum cokes. The refinery also produces a high percentage of transportation fuels. The majority of the light oils produced by the refinery are distributed to customers in the United Kingdom by pipeline, railcar and truck, while the other refined petroleum products are exported throughout the world.

MiRO Refinery

The MiRO Refinery is located on the Rhine River in Karlsruhe, Germany, approximately 95 miles south of Frankfurt, Germany. MiRO is the largest refinery in Germany and operates as a joint venture in which we own an 18.75% interest. Facilities include crude distilling, naphtha reforming, fluid catalytic cracking, petroleum coking and calcining, hydrodesulfurization, isomerization, ethyl tert-butyl ether and alkylation units. MiRO produces a high percentage of transportation fuels. Other products produced include petrochemical feedstocks, home heating oil, bitumen, and anode- and fuel-grade petroleum cokes. Refined petroleum products are distributed to customers in Germany, Switzerland, France, and Austria by truck, railcar and barge.

Index to Financial Statements

Gulf Coast Region

Lake Charles Refinery

The Lake Charles Refinery is located in Westlake, Louisiana, approximately 150 miles east of Houston, Texas. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrocracking, hydrodesulfurization and delayed coking units. Refinery facilities also include a specialty coker and calciner. The refinery produces a high percentage of transportation fuels. Other products produced include off-road diesel, home heating oil, feedstock for our Excel Paralubes joint venture in our M&S segment, and high-quality specialty graphite and fuel-grade petroleum cokes. A majority of the refined petroleum products are distributed to customers in the southeastern and eastern United States by truck, railcar, barge or major common carrier pipelines. Additionally, refined petroleum products are exported to customers primarily in Latin America and Europe by waterborne cargo.

Sweeny Refinery

The Sweeny Refinery is located in Old Ocean, Texas, approximately 65 miles southwest of Houston, Texas. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, aromatics units, and a Phillips 66 Partners owned delayed coking unit. The refinery produces a high percentage of transportation fuels. Other products include petrochemical feedstocks, home heating oil and fuel-grade petroleum coke. A majority of the refined petroleum products are distributed to customers throughout the Midcontinent region, southeastern and eastern United States by pipeline, barge and railcar. Additionally, refined petroleum products are exported to customers primarily in Latin America by waterborne cargo.

Central Corridor Region

WRB Refining LP (WRB)

We are the operator and managing partner of WRB, a 50 percent-owned joint venture that owns the Wood River and Borger refineries.

Wood River Refinery

The Wood River Refinery is located in Roxana, Illinois, about 15 miles northeast of St. Louis, Missouri, at the confluence of the Mississippi and Missouri rivers. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrocracking, hydrodesulfurization and delayed coking units. The refinery produces a high percentage of transportation fuels. Other products produced include petrochemical feedstocks, asphalt and fuel-grade petroleum coke. Refined petroleum products are distributed to customers throughout the Midcontinent region by pipeline, railcar, barge and truck.

Borger Refinery

The Borger Refinery is located in Borger, Texas, in the Texas Panhandle, approximately 50 miles north of Amarillo, Texas. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, and delayed coking units. The refinery produces a high percentage of transportation fuels, as well as fuel-grade petroleum coke, NGL and solvents. Refined petroleum products are distributed to customers in West Texas, New Mexico, Colorado and the Midcontinent region by company-owned and common carrier pipelines.

Ponca City Refinery

The Ponca City Refinery is located in Ponca City, Oklahoma, approximately 95 miles northwest of Tulsa, Oklahoma. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization, and delayed coking units. The refinery produces a high percentage of transportation fuels and anode-grade petroleum coke. Refined petroleum products are primarily distributed to customers throughout the Midcontinent region by company-owned and common carrier pipelines.

Billings Refinery

The Billings Refinery is located in Billings, Montana. Refinery facilities include crude distilling, naphtha reforming, fluid catalytic cracking, alkylation, hydrodesulfurization and delayed coking units. The refinery produces a high percentage of transportation fuels and fuel-grade petroleum coke. Refined petroleum products are distributed to customers in Montana, Wyoming, Idaho, Utah, Colorado and Washington by pipeline, railcar and truck.

Index to Financial Statements

West Coast Region

Ferndale Refinery

The Ferndale Refinery is located on Puget Sound in Ferndale, Washington, approximately 20 miles south of the U.S.-Canada border. Facilities include crude distillation, naphtha reforming, fluid catalytic cracking, alkylation and hydrodesulfurization units. The refinery produces a high percentage of transportation fuels. Other products produced include residual fuel oil, which is supplied to the northwest marine bunker fuel market. Most of the refined petroleum products are distributed to customers in the northwest United States by pipeline and barge.

Los Angeles Refinery

The Los Angeles Refinery consists of two facilities linked by pipeline located five miles apart in Carson and Wilmington, California, approximately 15 miles southeast of Los Angeles. The Carson facility serves as the front end of the refinery by processing crude oil, and the Wilmington facility serves as the back end of the refinery by upgrading the intermediate products to finished products. Refinery facilities include crude distillation, naphtha reforming, fluid catalytic cracking, alkylation, hydrocracking, and delayed coking units. The refinery produces a high percentage of transportation fuels. The refinery produces California Air Resources Board (CARB)-grade gasoline. Other products produced include fuel-grade petroleum coke. Refined petroleum products are distributed to customers in California, Nevada and Arizona by pipeline and truck.

San Francisco Refinery

The San Francisco Refinery consists of two facilities linked by our pipelines. The Santa Maria facility is located in Arroyo Grande, California, 200 miles south of San Francisco, California, while the Rodeo facility is located in the San Francisco Bay Area. Intermediate refined products from the Santa Maria facility are shipped by pipeline to the Rodeo facility for upgrading into finished petroleum products. Refinery facilities include crude distillation, naphtha reforming, hydrocracking, hydrodesulfurization and delayed coking units, as well as a calciner. The refinery produces a high percentage of transportation fuels, including CARB-grade gasoline. Other products produced include fuel-grade petroleum coke. The majority of the refined petroleum products are distributed to customers in California by pipeline and barge. Additionally, refined petroleum products are exported to customers primarily in Latin America by waterborne cargo.

We are advancing our plans at the San Francisco Refinery in Rodeo, California, to meet the growing demand for renewable fuels. The hydrotreater feedstock flexibility project reached full rates of 8,000 BPD (120 million gallons per year) of renewable diesel production in July 2021. Separately, the Rodeo Renewed refinery conversion project is expected to be finished in early 2024, subject to permitting and approvals. Upon completion, the facility will initially have over 50,000 BPD (800 million gallons per year) of renewable fuels production capacity. The conversion will reduce emissions from the facility and produce lower-carbon transportation fuels. We plan to distribute our renewable diesel through new and existing channels, including approximately 600 branded retail sites in California.

Index to Financial Statements

MARKETING AND SPECIALTIES

Our M&S segment purchases for resale and markets refined petroleum products, such as gasoline, distillates and aviation fuels, as well as renewable fuels, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of specialty products, such as base oils and lubricants.

Marketing

Marketing—United States

We market gasoline, diesel and aviation fuel through marketer and joint venture outlets that utilize the Phillips 66, Conoco or 76 brands. At December 31, 2021, we had approximately 7,110 branded outlets in 48 states and Puerto Rico.

Our wholesale operations utilize a network of marketers operating approximately 5,000 outlets. We place a strong emphasis on the wholesale channel of trade because of its relatively lower capital requirements. In addition, we hold brand-licensing agreements covering approximately 1,340 sites. Our refined petroleum products are marketed on both a branded and unbranded basis. A high percentage of our branded marketing sales are in the Midcontinent, Rockies and West Coast regions, where our wholesale marketing network secures efficient offtake from our refineries. We also utilize consignment fuel arrangements with several marketers whereby we own the fuel inventory and pay the marketers a monthly fee.

In the Gulf Coast and East Coast regions, most sales are conducted via the unbranded channel of trade, which does not require a highly integrated marketing network to secure product placement for refinery pull through. We have export capability at our U.S. coastal refineries to meet international demand.

In addition to automotive gasoline and diesel, we produce and market aviation gasoline and jet fuel. Aviation gasoline and jet fuel are sold through dealers and independent marketers at approximately 770 Phillips 66 branded locations.

During 2021, Phillips 66 converted approximately 600 branded retail sites in California to distribute renewable diesel. In December 2021, we acquired a commercial fleet fueling business in California, providing further placement opportunities for renewable diesel production to end-use customers.

We participate in joint ventures engaged in retail convenience store operations in the West Coast and Central regions. These joint ventures enable us to secure long-term placement of our refinery production and extend participation in the retail value chain. During 2021, a joint venture in the Central region acquired approximately 200 sites. At December 31, 2021, our retail joint ventures had approximately 930 outlets.

Marketing—International

We have marketing operations in four European countries. Our European marketing strategy is to sell primarily through owned, leased or joint venture retail sites using a low-cost, high-volume approach. We use the JET brand name to market retail and wholesale products in Austria, Germany and the United Kingdom. In addition, we have an equity interest in a joint venture that markets refined petroleum products in Switzerland under the Coop brand name.

We also market aviation fuels, LPG, heating oils, marine bunker fuels, and other secondary refined products to commercial customers and into the bulk or spot markets in the above countries.

At December 31, 2021, we had approximately 1,280 marketing outlets in Europe, of which approximately 990 were company owned and approximately 290 were dealer owned. We had interests in approximately 330 additional sites through our Coop joint venture operations in Switzerland, and we held brand-licensing agreements covering approximately 90 sites in Mexico.

In February 2022, we and H2 Energy Europe announced our commitment to form a joint venture to develop a network of up to 250 hydrogen retail refueling stations across Germany, Austria and Denmark by 2026. The formation of the joint venture is subject to regulatory approvals and customary closing conditions.

Index to Financial Statements

Specialties

We manufacture lubricants and sell a variety of specialty products, including petroleum coke products, solvents and polypropylene.

Lubricants

We manufacture and sell automotive, commercial, industrial and specialty lubricants which are marketed worldwide under the Phillips 66, Kendall, Red Line and other private label brands.

In addition, we own a 50% interest in Excel Paralubes LLC (Excel), an operated joint venture that owns a hydrocracked lubricant base oil manufacturing plant located adjacent to the Lake Charles Refinery. The facility has a capacity to produce 22,200 BPD of high-quality Group II clear hydrocracked base oils. Excel markets the produced base oil under the Pure Performance brand. The facility’s feedstock is sourced primarily from our Lake Charles Refinery.

Other Specialty Products

We market high-quality specialty graphite and anode-grade petroleum cokes in the United States, Europe and Asia for use in a variety of industries that include steel, aluminum, titanium dioxide and battery manufacturing. We also market polypropylene in North America under the COPYLENE brand name for use in consumer products, and market specialty solvents that include pentane, iso-pentane, hexane, heptane and odorless mineral spirits for use in the petrochemical, agriculture and consumer markets. In addition, we market sulfur for use in agricultural and chemical applications, and fuel-grade petroleum coke for use in the making of cement and glass, and generation of power.

ENERGY RESEARCH & INNOVATION

Our Energy Research & Innovation organization, located in Bartlesville, Oklahoma, includes scientists and engineers working in over 200 labs on our 440 acre research campus to develop new technologies focused on advancing our business and solving tomorrow’s energy challenges. Areas of focus for 2021 included feedstock valuation and process optimization to enhance margins in our refining segment; lubricant development and product support; water, air, and renewable fuels research to ensure the sustainability of all business segments; and energy transition programs such as carbon mitigation, hydrogen, batteries and fuel cells to help position Phillips 66 for the energy future.

Index to Financial Statements

HUMAN CAPITAL

Phillips 66 employees, our human capital, are guided by our values of safety, honor and commitment. Together, we operate as a high-performing organization by building breadth and depth in capabilities, pursuing excellence and doing the right thing. We empower our people to create and innovate, and to work in ways to deliver industry leading performance. At December 31, 2021, we had approximately 14,000 employees working toward our vision of providing energy and improving lives.

We believe maintaining and enhancing a high-performing organization is critical to our success. Our employees promote our culture and are integral to achieving our strategic goals and maximizing long-term shareholder value. We strive for continuous improvement of our high-performing organization, as we believe that our employees differentiate us in the marketplace. In addition to the disclosures below, we have issued a human capital management report that is accessible on our website and provides more detailed data about human capital generally. The human capital measures and objectives that we focus on in managing our business and that we believe are material to understand our business, include:

Safety—Safety is the cornerstone of our business. 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. We employ rigorous training and audit programs to drive ongoing improvement in personal safety as we strive for zero incidents. We also include safety metrics along with metrics for process safety and environmental performance in our annual bonus program to incentivize and reward safe operations. Our personal safety performance is measured by our total recordable rate (TRR), which measures the number of incidents per 200,000 hours worked. In 2021, our combined workforce TRR of 0.12 was industry leading and more than 25 times better than the U.S. manufacturing average.
Culture—Phillips 66 fosters behaviors that promote our culture. “Our Energy in Action” is a set of core behaviors embedded in all of the company’s talent and business processes to drive accountability. Those behaviors include working for the greater good; creating an environment of trust; seeking different perspectives; and achieving excellence.

In addition, we believe a high level of performance can only be achieved through an inclusive culture and diverse workforce. Our inclusion and diversity (I&D) council, chaired by our Chairman and Chief Executive Officer and comprised of executives and business leaders, sets the strategic vision for advancing I&D. We have eight Employee Resource Groups (ERGs) that align with our corporate objective of fostering a diverse workforce. These ERGs are organizations formed around a shared set of experiences and perspectives, and are focused on professional development, networking, recruiting, raising cultural awareness, and community involvement.

We conduct biennial employee engagement surveys to gather employee perspectives on their experience, although we delayed the rollout of the survey from 2020 to 2021 because of the Coronavirus Disease 2019 (COVID-19) pandemic. The results of the survey are shared with our employees and board of directors. Management analyzes findings to identify progress on previous recommendations and areas of continued opportunity. In 2021, we expanded the scope of the survey to include assessments of Our Energy in Action and a culture of inclusion. Compared to 2018, results showed a five-percentage point increase in our overall engagement score.

Capability—We strive to build depth and breadth in our skills. We drive employee development through technical training and providing opportunities for job rotations, as well as assisting employees with obtaining and sharpening managerial skills through targeted development programs and promotional moves. Our performance management process identifies coaching and training needs.

We also have a robust succession planning practice and work each year to identify successors for positions within the company. As part of the process, quarterly sessions are held with executives to monitor and guide leadership development for our key corporate positions.

Index to Financial Statements

Performance—We focus on delivering exceptional, sustainable results. We work towards retention of top talent and have advanced the effectiveness of our performance management process by embedding Our Energy in Action into the process to ensure that we drive the desired behaviors. Additionally, “High Performing Organization” is one of the metrics used in our annual bonus plan. Measures used are foundational metrics such as employee engagement and I&D, talent attraction, retention and development, as well as our organization’s ability to adapt and respond to changing market conditions or other external factors.

COMPETITION

In the Midstream segment, our crude oil and products pipelines face competition from other crude oil and products pipeline companies, major integrated oil companies, and independent crude oil gathering and marketing companies. Competition is based primarily on quality of customer service, competitive rates and proximity to customers and market hubs. In addition, the Midstream segment, through our equity investment in DCP Midstream and our other operations, competes with numerous integrated petroleum companies, as well as natural gas transmission and distribution companies, to deliver components of natural gas to end users in natural gas markets. Principal methods of competing include economically securing the right to purchase raw natural gas for gathering systems, managing the pressure of those systems, operating efficient NGL processing plants and securing markets for the products produced. In the Chemicals segment, CPChem is ranked among the top 10 producers in many of its major product lines according to published industry sources, based on average 2021 production capacity. Petroleum products, petrochemicals and plastics are typically delivered into the worldwide commodity markets. Our Refining and M&S segments compete primarily in the United States and Europe. We are one of the largest refiners of petroleum products in the United States. Elements of competition for both our Chemicals and Refining segments include product improvement, new product development, low-cost structures, ability to run advantaged feedstocks, and efficient manufacturing and distribution systems. In the marketing portion of the business, competitive factors include product properties, reliability of supply, customer service, price and credit terms, advertising and sales promotion, and development of customer loyalty to branded products.

Index to Financial Statements

GENERAL

At December 31, 2021, we held a total of 508 active patents in 21 countries worldwide, including 399 active U.S. patents. The overall profitability of any business segment is not dependent on any single patent, trademark, license or franchise.

In support of our goal to attain zero incidents, we have implemented a comprehensive Health, Safety and Environmental (HSE) management system to support consistent management of HSE risks across our enterprise. The management system is designed to ensure that personal safety, process safety, and environmental impact risks are identified, and mitigation steps are taken to reduce the risk. The management system requires periodic audits to ensure compliance with government regulations, as well as our internal requirements. Our commitment to continuous improvement is reflected in annual goal setting and performance measurement.

We are subject to various laws and government regulations concerning environmental matters and employee safety and health in the United States and other countries. In addition, various states have authority under the federal statutes and many state and local governments have adopted environmental and employee safety and health laws and regulations, some of which are similar to federal requirements. State and federal authorities may seek fines and penalties for violating these laws and regulations. The material effects of compliance with these government regulations upon our capital expenditures, earnings and competitive position are primarily associated with environmental regulations. See the environmental information contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity—Contingencies” under the captions “Environmental” and “Climate Change.” It includes information on expensed and capitalized environmental costs for 2021 and those expected for 2022 and 2023.

Website Access to SEC Reports

Our Internet website address is http://www.phillips66.com. Information contained on our Internet website is not part of this Annual Report on Form 10-K.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our website, free of charge, as soon as reasonably practicable after such reports are filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC). Alternatively, you may access these reports at the SEC’s website at http://www.sec.gov.

Index to Financial Statements

Next: Item 1A. RISK FACTORS