Phillips 66 10-K 2024-12-31

FORM 10-K

Commission file number: 001-35349

2331 CityWest Blvd., Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 832-765-3010

The aggregate market value of common stock held by non-affiliates of the registrant on June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $141.17, was $59 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 407,698,347 shares of common stock outstanding at January 31, 2025.

Documents incorporated by reference:

Portions of the Proxy Statement for the Registrant’s 2025 Annual Meeting of Shareholders.

TABLE OF CONTENTS

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You should carefully consider the following risk factors in addition to the other information included in this Annual Report. Each of these risk factors could adversely affect our business, operating results and financial condition, as well as the value of an investment in our securities. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we do not currently consider to present significant risks to our operations.

Summary of Risk Factors

Risks Related to Our Manufacturing and Operations

• Margins for the products we produce are cyclical and volatile due to changes in market conditions, which are largely dependent on factors beyond our control, and directly affect our earnings, financial condition and cash flows.

• The prices at which we buy our feedstocks are dependent on market conditions that are beyond our control, and changes in supply and demand for the feedstocks we process directly impact the results of our business.

• Changes to government policies relating to renewable feedstocks and renewable fuels that adversely affect programs like the renewable fuels standards program, low-carbon fuels standards and tax credits for processing certain renewable feedstocks impact our financial condition and results of operations.

• Our operations are subject to planned and unplanned downtime, business interruptions, and operational hazards, any of which could adversely impact our ability to operate and could adversely impact our financial condition, results of operations and cash flows.

• We are subject to interruptions of supply and offtake, as well as increased costs, as a result of our reliance on third-party transportation of crude oil or other feedstocks, NGL, refined petroleum and renewable fuels products.

• Our investments in joint ventures decrease our ability to manage risk.

• Public health crises, epidemics and pandemics have had and could in the future have a material adverse effect on our business. Any future widespread health crises could materially and adversely impact our business.

Competition Risks

• Refining, midstream and marketing competitors that produce their own feedstocks, have more extensive retail outlets, or have greater financial resources may have a competitive advantage.

• Our Midstream segment competes for natural gas supplies with other companies that provide midstream gathering and processing, transportation, fractionation and terminaling services, and a failure to grow or maintain throughput levels may negatively impact the results of operations of our business.

• Volatility in market demand for our petrochemical and plastics products and midstream transportation services and the risk of overbuild in these industries may negatively impact the results of operations of our businesses.

Strategic Performance and Future Growth Risks

• Large capital-intensive projects can take many years to complete, and the political and regulatory environments or market conditions could change significantly between the project approval date and the project startup date, negatively impacting expected project returns.

• Plans we or our joint ventures may have to expand or construct assets or develop new technologies, and plans for our future performance are subject to risks associated with societal and political pressures and other forms of opposition to the future development, transportation and use of petroleum-based and renewables-based fuels. Such risks could adversely impact our business and results of operations.

• Political and economic developments could affect our operations and materially reduce our profitability and cash flows.

• We may not be able to effectively identify, whether through acquisition, investment or development, lower-carbon opportunities on favorable terms, or at all, and failure to do so could limit our growth, our ability to participate in the energy transition, and our ability to meet our environmental goals and targets.

• Our business could be negatively impacted as a result of shareholder activism.

Legal, Regulatory, and Environmental, Climate and Weather Risks

• We are subject to a variety of legal proceedings and other claims arising out of our operations which may adversely impact our business and financial condition.

• Climate change and severe weather may adversely affect our and our joint ventures’ facilities and ongoing operations.

• There are certain environmental hazards and risks inherent in our operations that could adversely affect those operations and our financial results.

• We expect to continue to incur substantial capital expenditures and operating costs to comply with existing and future environmental laws and regulations.

• Factors associated with climate change legislation or regulation could result in increased operating costs, reduce demand for the refined petroleum products we produce and could otherwise have a material impact on our business.

• Increased regulation of the fossil fuel industry, particularly with respect to hydraulic fracturing, could result in reductions or delays in the production of crude oil and natural gas, which could adversely impact our results of operations.

• Compliance with the EPA’s Renewable Fuel Standard (RFS) could adversely affect our financial results.

• Societal, technological, political and scientific developments around emissions and fuel efficiency may decrease demand for petroleum-based fuels.

• Continuing political and social concerns about climate change and other Environmental, Social and Governance (ESG) matters may result in changes to our business and significant expenditures, including litigation-related expenses.

• Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products due to recycling concerns, or new or more restrictive regulations and rules related to plastic waste could reduce demand for CPChem’s plastic products and could negatively impact our equity interest.

Cybersecurity and Data Privacy Risks

• Cybersecurity incidents and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

• Increasing regulatory focus on privacy and cybersecurity issues and expanding laws could expose us to increased liability, subject us to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.

Indebtedness, Capital Markets and Financial Risks

• 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.

• Negative sentiment towards fossil fuels and increased attention to environmental and social matters, including climate change, could adversely affect our business, the market price for our securities and our access to and cost of capital.

• Our published GHG emissions intensity reduction goals and other E&S targets we may set in the future could negatively impact our business.

• We do not fully insure against all potential losses, including those from extreme weather events or natural disasters, and, therefore, our business, financial condition, results of operations and cash flows could be adversely affected by unexpected or underinsured liabilities and increased costs.

• Deterioration in our credit profile could increase our costs of borrowing money, limit our access to the capital markets and commercial credit, and could trigger co-venturer rights under joint venture arrangements.

• 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.

• We may incur losses as a result of

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None.

Management has implemented a comprehensive cybersecurity program that is designed to protect our information, and that of our customers and suppliers, against cybersecurity threats that may materially and adversely affect the confidentiality, integrity, and availability of our information systems. Our cybersecurity program includes processes and standards that leverage recognized cybersecurity frameworks, industry best practices and guidance from U.S. Government security directives that focus on cybersecurity and critical infrastructure.

Cybersecurity Governance

Board of Directors

The Audit and Finance Committee of the Board of Directors (the Audit and Finance Committee) is responsible for overseeing the company’s Enterprise Risk Management (ERM) program, including oversight of the processes management has implemented to assess, identify and manage risks associated with cybersecurity and information technology.

In carrying out this responsibility, the Audit and Finance Committee regularly receives written reports from the company’s Chief Information Security Officer (CISO) and periodic briefings from the CISO. These presentations may address a wide range of topics, such as the results of recent vulnerability assessments and third-party independent reviews, changes to the threat environment, technological trends and other recent developments, and peer and other third-party benchmarking.

The Audit and Finance Committee makes regular reports to the Board of Directors on data protection and cybersecurity matters. The company maintains an Enterprise Cybersecurity Incident Response Plan (ECIRP) which provides the framework for management’s response to cyber-related incidents and escalation protocols, including, when appropriate, prompt reporting to the Board of Directors.

Management

At the management level, our CISO has extensive cybersecurity knowledge and skills gained from work experience at the company and with a law enforcement agency, as well as from obtaining advanced professional certifications. The CISO is responsible for the assessment and management of risks from cybersecurity threats and leads a team responsible for implementing, monitoring, and maintaining cybersecurity and data protection practices across the company. The individuals who report directly to our CISO possess relevant educational and industry experience in the areas of cyber threat hunting and intelligence, digital standards, data privacy, cyber training, and cybersecurity operations center management. In addition to our internal cybersecurity capabilities, we also regularly engage consultants, or other third parties to assist with assessing, identifying, and managing cybersecurity risks. The CISO receives reports on cybersecurity threats on an ongoing basis, and in conjunction with management, regularly reviews risk management measures implemented by the company to identify, assess and mitigate data protection and cybersecurity risks. Our CISO works closely with the company’s Senior Counsel, Intellectual Property and Data Protection, to oversee compliance with legal, regulatory and contractual security requirements.

Risk Management and Strategy

On an annual basis, we conduct an evaluation of our cybersecurity risks as part of the ERM program. Through the ERM program, the CISO and other internal subject matter experts review potential cybersecurity threat scenarios, such as data theft, cash theft, widespread outages and business disruptions, and the potential consequences of such scenarios. The results of the risk assessment are shared with management and the Audit and Finance Committee.

We have a continuous monitoring program to detect and respond to potential cybersecurity threats in real-time. Log data from our technical controls are collected, aggregated, and correlated in a Security Information and Event Management (SIEM) system that identifies and categorizes events, as well as analyzes them. If the SIEM system identifies a potential security event, it can direct other controls to stop the activity and also generate alerts for detection and response. These alerts are monitored by a managed security service provider that augments our dedicated internal Security Operations Center team.

In addition, we utilize a third-party risk management (TPRM) program to identify, assess, monitor, and mitigate risks associated with third-party relationships, including cybersecurity risks. The TPRM program is designed to help ensure proper controls and measures are in place to manage the potential risks and vulnerabilities associated with third parties. Our policies and procedures aid in the governance from initial due diligence, selection, and contracting to termination.

With respect to cybersecurity incident response, our ECIRP provides a documented framework for responding to cybersecurity incidents. The ECIRP sets out a coordinated approach to investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate.

Our Internal Audit organization performs audits of our cybersecurity program. Each year, we conduct audits across the company’s information technology and operation technology infrastructure, networks, systems, applications, and operational processes and procedures to evaluate compliance with our information security policies and standards. Process control network assurance audits are conducted on a rotating schedule that is risk-based and provides coverage across each major operational business area no greater than five years. In addition to the internal audits, we also engage external cybersecurity experts and auditors to conduct assessments, penetration testing, and cybersecurity maturity assessments. Although we have experienced actual and attempted cybersecurity events and incidents on our networks and systems in the past, we do not believe that the risks from any of these events or incidents, individually or in the aggregate, have materially affected our business, operations, or financial condition, or are reasonably likely to have such an effect. For more information concerning cybersecurity risks we face, see the discussion in “Item 1A. Risk Factors” in this report.

From time to time, we may be involved in litigation and claims arising out of our operations in the normal course of business. Additionally, we have elected a $1 million threshold to disclose certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party to the proceedings. During the fourth quarter of 2024, two new matters arose, and there were material developments with respect to two matters previously reported, that resolved those matters, which are all described below. Except as otherwise set forth herein, we do not currently believe that the eventual outcome of any matters previously reported, but still unresolved, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Further, our U.S. refineries are implementing two separate consent decrees, regarding alleged violations of the Federal Clean Air Act, with the EPA, five 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 December 2024, the Bay Area Air Quality Management District (BAAQMD) offered to settle 172 notices of alleged violations of air regulations by the Rodeo Complex dating back to 2016. Settlement negotiations are underway, and resolution is expected in 2025.

In November 2024, Phillips 66 Company received an indictment from a federal grand jury in the United States District Court for the Central District of California alleging two counts of negligently violating the Clean Water Act and four counts of knowingly violating the Clean Water Act at its Los Angeles Refinery. If convicted of all charges, Phillips 66 would face a statutory maximum fine exceeding $1 million. The matter relates to alleged wastewater permit violations and is ongoing.

Matters Previously Reported (unresolved or resolved since the quarterly report on Form 10-Q for the quarterly period ended September 30, 2024)

As described further in the “Legal Proceedings” section of Note 17—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, on February 17, 2022, Propel Fuels, Inc. (Propel Fuels) filed a lawsuit in the Superior Court of California, County of Alameda (the Propel Court), alleging that Phillips 66 Company misappropriated trade secrets related to Propel Fuels’ renewable fuels business. On October 16, 2024, a jury returned a verdict against Phillips 66 Company for $604.9 million in compensatory damages and issued a willfulness finding. In 2025, the Propel Court is expected to rule on motions anticipated to be filed by Propel Fuels seeking exemplary damages and attorneys’ fees. Propel Fuels has asked the Propel Court to grant treble damages and Phillips 66 Company has filed a brief in opposition to that request. Also in 2025, the Propel Court is expected to rule on Phillips 66 Company’s motions for a judgment in its favor as a matter of law, or in the alternative to reduce the jury’s verdict or to grant a new trial. Phillips 66 Company denies any wrongdoing and intends to vigorously defend its position. While Phillips 66 Company believes the jury verdict is not legally or factually supported and intends to pursue post-judgment remedies and file an appeal, there can be no assurances that such defense efforts will be successful. To the extent Phillips 66 Company is required to pay exemplary damages, it may have a material adverse effect on our financial position and results of operations.

On August 30, 2024, the Colorado Department of Public Health & Environment, Air Pollution Control Division (APCD) sent DCP Operating Company, LP (DCP) a Compliance Order on Consent alleging violations at its Enterprise Compressor Station of AQCC Regulation 7 and DCP’s permit conditions. This matter was resolved in the fourth quarter of 2024 with an agreement to pay a penalty and an economic benefit reimbursement totaling less than $1 million.

On May 12, 2023, the EPA, Region 6, sent DCP a Notice of Violation and Opportunity to Confer regarding alleged violations of 40 C.F.R. Part 60, Subpart OOOOa (NOV). The NOV alleged non-compliances at the Artesia and Eunice Natural Gas Processing Plants in New Mexico. This matter was resolved in the fourth quarter of 2024 with an agreement to implement scheduled corrective actions and pay a penalty of $1.9 million.

Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)

See “Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)” section of Note 9—Investments, Loans and Long-Term Receivables and Note 17—Contingencies and Commitments, in the Notes to Consolidated Financial Statements for additional information regarding Legal Proceedings and other regulatory actions.

Not applicable.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

** As of February 21, 2025.*

There are no family relationships among any of the executive officers named above or any member of our Board of Directors. 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 the name, title and period of service of each executive officer identified above over the last five years.

Mark E. Lashier is Chairman and Chief Executive Officer, a position he has held since May 2024. Previously, Mr. Lashier served Phillips 66 as President and Chief Executive Officer from July 2022 to May 2024 and as President and Chief Operating Officer from April 2021 to July 2022. Mr. Lashier served as President and Chief Executive Officer of CPChem from August 2017 to April 2021.

Kevin J. Mitchell is Executive Vice President and Chief Financial Officer, a position he has held since January 2016.

Donald A. Baldridge is Executive Vice President, Midstream and Chemicals, a position he has held since June 2024. Previously, Mr. Baldridge served as Interim Chief Executive Officer of DCP Midstream from January 2023 to May 2024. Prior to that, he served as DCP Midstream’s President of Operations from January 2019 to December 2022.

Zhanna Golodryga is Executive Vice President, Emerging Energy and Sustainability, a position she has held since October 2022. Previously, Ms. Golodryga served as Senior Vice President, Chief Digital and Administrative Officer from April 2017 to October 2022.

Richard G. Harbison is Executive Vice President, Refining, a position he has held since June 2022. Mr. Harbison previously served as Vice President, San Francisco Refinery from March 2021 to May 2022; General Manager, San Francisco Refinery from June 2020 to February 2021; and Manager, Lake Charles Manufacturing Complex from February 2016 to May 2020.

Brian M. Mandell is Executive Vice President, Marketing and Commercial, a position he has held since March 2019.

Vanessa L. Allen Sutherland is Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, a position she has held since January 2022. Ms. Sutherland previously served as Executive Vice President and Chief Legal Officer of Norfolk Southern Corporation from April 2020 to January 2022 and Senior Vice President, Government Relations and Chief Legal Officer of Norfolk Southern Corporation from August 2019 to April 2020.

Ann M. Kluppel is Vice President and Controller, a position she has held since May 2024. Ms. Kluppel previously served as General Auditor from August 2021 to May 2024. Prior to that, Ms. Kluppel served as Managing Director, Corporate Finance from January 2021 to August 2021, and as Manager, Midstream Financial Planning & Analysis from August 2018 to December 2020.

PART II

Phillips 66’s common stock is traded on the New York Stock Exchange under the symbol “PSX.” At January 31, 2025, the number of shareholders of record of our shares was 27,494.

Performance Graph

The performance graph above shows the cumulative total shareholder return (TSR) of Phillips 66 common stock for the five years ended December 31, 2024, which assumes a $100 investment in our common stock on December 31, 2019, and reinvestment of dividends. The graph also compares our cumulative TSR against (i) our self-constructed Peer Group (defined below) and (ii) the S&P 500 Index, in each case upon the same assumptions for the same period. We evaluate our Peer Group on an annual basis and believe the Peer Group closely aligns with our size and lines of business. Our Peer Group is weighted according to the respective issuers’ stock market capitalization at the beginning of each period for which a return is indicated.

The Peer Group consists of CVR Energy, Inc.; Delek US Holdings, Inc.; Dow Inc.; HF Sinclair Corporation; LyondellBasell Industries N.V.; Marathon Petroleum Corporation; ONEOK, Inc.; PBF Energy Inc.; Targa Resources Corp.; Valero Energy Corporation; Westlake Chemical Corporation; and The Williams Companies, Inc. Additionally, HollyFrontier Corporation was included as a peer for periods prior to its acquisition by HF Sinclair Corporation in March 2022.

Issuer Purchases of Equity Securities

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.

The term “earnings” as used in Management’s Discussion and Analysis refers to net income attributable to Phillips 66. The terms “results,” “before-tax income” or “before-tax loss” as used in Management’s Discussion and Analysis refer to income (loss) before income taxes.

EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT

Phillips 66 is uniquely positioned as a leading integrated downstream energy provider operating with Midstream, Chemicals, Refining, Marketing and Specialties (M&S), and Renewable Fuels segments. At December 31, 2024, we had total assets of $72.6 billion.

Executive Overview

During 2024, we reported earnings of $2.1 billion and generated $4.2 billion in cash from operating activities. We funded capital expenditures and investments of $1.9 billion, completed acquisitions for cash consideration of $625 million, purchased government obligations of $1.1 billion that were ultimately used to extinguish debt, and received proceeds from asset dispositions of $1.1 billion. Additionally, we received proceeds from debt issuances, net of debt repayments, of $2.1 billion. We paid $3.5 billion to repurchase common stock and $1.9 billion to fund dividends on our common stock. We ended 2024 with $1.7 billion of cash and cash equivalents and $4.6 billion of total committed capacity available under our credit facilities.

Strategic Priorities

In November 2022, we announced financial and operational targets toward achieving the company’s strategic priorities, and in October 2023, we announced updates and enhancements to certain of those targets. The strategic priority targets were focused on achieving financial and operational goals through year-end 2024, with an emphasis on delivering shareholder returns; improving refining performance; capturing value from wellhead-to-market; executing business transformation initiatives; maintaining financial strength and flexibility; and driving disciplined growth and returns.

In January 2025, we announced the next phase of priorities along with financial and operational initiatives through year-end 2027. With these targets, the company is continuing to focus on creating shareholder value; driving disciplined growth and returns; and maintaining financial strength and flexibility. As the company has completed its business transformation efforts, the company has shifted to operational and cost reduction targets intended to drive world-class operations across its portfolio, while maintaining emphasis on growing its Midstream and Chemicals businesses.

• Shareholder Returns –** We believe shareholder value is enhanced through, among other things, a secure, competitive and growing dividend, complemented by share repurchases. With the return of $5.3 billion to shareholders through share repurchases and dividends during 2024, we achieved our target of returning between $13 billion and $15 billion to our shareholders from July 2022 to year-end 2024, as we distributed a total of $13.6 billion to shareholders. Our new target aims to return greater than 50% of net cash provided by operating activities to shareholders through share repurchases and dividends. The amount and timing of future dividend payments and the level and timing of future share repurchases is subject to the discretion of, and approval by, our Board of Directors and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans.

• World-Class Operations – We are focused on achieving operational excellence by optimizing utilization rates and product yield at our refineries through reliable and safe operations, which will enable us to capture the value available in the market in terms of prices and margins. With our new targets, we will remain focused on a competitive cost structure and plan to enhance Refining segment returns and increase our utilization rates by focusing on low-capital, higher-return projects that increase asset reliability and improve market capture.

At year-end 2024, we achieved final total company run-rate cost savings of $1.5 billion through our business transformation efforts, including a $0.3 billion reduction of sustaining capital, exceeding our targeted savings on a run-rate basis. Our worldwide refining crude oil capacity utilization rate was 95% for 2024, and our worldwide refining clean product yield was 87%, compared to 92% and 85%, respectively, in 2023. Our new priorities for 2025-2027 continue to focus on Refining performance, targeting an annual clean product yield of greater than 86%, crude oil capacity utilization rates higher than industry average, and continuing to improve our competitive cost structure.

• Disciplined Growth and Returns –** A disciplined capital allocation process ensures we invest in projects that are expected to generate competitive returns. Our strategy remains focused on growing our Midstream and Chemicals businesses. Within our Midstream segment, we are primarily focused on maximizing the value of our fully integrated natural gas liquids (NGL) wellhead-to-market value chain.

▪During 2024, we completed the conversion of our San Francisco Refinery in Rodeo, California, into the Rodeo Renewable Energy Complex (Rodeo Complex).

▪In 2024, we funded capital expenditures and investments of $1.9 billion and completed acquisitions of $0.6 billion through disciplined capital allocation and $1.1 billion in proceeds from asset dispositions. In January 2025, we received proceeds from asset dispositions of $2.1 billion and we will continue to evaluate future opportunities to rationalize our asset portfolio. We have budgeted $2.1 billion for 2025 capital expenditures and investments, exclusive of acquisitions, which includes $1.1 billion of growth capital, primarily in our Midstream segment.

▪During 2024, we expanded our Midstream NGL wellhead-to-market platform with the acquisition of Pinnacle Midland Parent LLC (Pinnacle Midstream) and approval of a follow-on processing plant expansion in the Midland Basin expected to be completed in mid-2025. In addition, we achieved over $500 million of run-rate synergies from the integration of DCP Midstream Class A Segment, which is comprised of the businesses, activities, assets and liabilities of DCP Midstream, LP (DCP LP) and its subsidiaries and general partner entities, surpassing our target.

▪Our new financial targets for 2025-2027 reflect our plans to grow Midstream and Chemicals businesses, as well as maintain total annual capital expenditures and investments of approximately $2 billion, excluding acquisitions.

• Financial Strength and Flexibility –** We use a variety of funding sources to support our liquidity requirements, including cash from operations, debt and proceeds from dispositions. Our focus remains on protecting the stable cash generation from the Midstream and Marketing and Specialties (M&S) businesses while balancing continued portfolio optimization.

▪During 2024, we used available cash and proceeds from asset dispositions and debt offerings to fund capital expenditures and investments, complete the acquisition of Pinnacle Midstream, purchase government obligations that were ultimately used to extinguish debt, repurchase shares of our common stock and pay dividends on our common stock.

▪We are targeting reductions of total debt to $17 billion and reductions of our debt to capital ratio.

Basis of Presentation

Effective April 1, 2024, we changed the internal financial information reviewed by our chief executive officer to evaluate performance and allocate resources to our operating segments. This resulted in changes to the composition of our

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Financial Instrument Market Risk

We and certain of our subsidiaries are exposed to market risks produced by changes in the prices of crude oil, refined petroleum products, NGL, natural gas, renewable feedstocks and renewable fuels, and electric power, as well as fluctuations in interest rates and foreign currency exchange rates. We and certain of our subsidiaries may hold and use derivative contracts to manage these risks.

Commodity Price Risk

Generally, our policy is to remain exposed to the market prices of commodities. Consistent with this policy, we use derivative contracts to convert our exposure from fixed-price sales or purchase contracts, often specified in contracts with refined product customers, back to floating market prices. We also use futures, forwards, swaps and options in various markets to accomplish the following objectives:

• Balance physical systems or meet our refinery requirements and market demand. In addition to cash settlement prior to contract expiration, certain exchange-traded futures may be settled by physical delivery of the underlying commodity.

• Enable us to use the market knowledge gained from our physical commodity market 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.

• Manage the risk to our cash flows from price exposures on specific crude oil, refined petroleum product, NGL, renewable feedstocks and natural gas transactions.

These objectives optimize the value of our supply chain and may reduce our exposure to fluctuations in market prices.

Our use of derivative instruments is governed by an “Authority Limitations” document approved by our Board of Directors. This document prohibits the use of highly leveraged derivatives or derivative instruments without sufficient market liquidity for comparable valuations, and establishes Value at Risk (VaR) limits. Compliance with these limits is monitored daily by our global risk group.

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 commodity instruments held or issued. Using Monte Carlo simulation, a 95% confidence level and a one-day holding period, the VaR for derivative commodity instruments issued or held at December 31, 2024 and 2023, was immaterial to our cash flows and results of operations.

Interest Rate Risk

Our use of fixed- or variable-rate debt directly exposes us to interest rate risk. Fixed-rate debt, such as our senior notes, exposes us to changes in the fair value of our debt due to changes in market interest rates. Fixed-rate debt also exposes us to the risk that we may need to refinance maturing debt with new debt at higher rates, or that we may be obligated to pay rates higher than the current market. Variable-rate debt, such as our floating-rate notes or borrowings under our revolving credit facility, exposes us to short-term changes in market rates that impact our interest expense. 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 each 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 observable market prices.

Foreign Currency Risk

We are exposed to foreign currency exchange rate fluctuations related to our international operations. Generally, we do not hedge our foreign currency risk. In October 2024, we entered into a foreign currency derivative instrument and recognized a before-tax gain of $67 million. The instrument is in connection with the sale of our 49% ownership interest in Coop, which closed in January 2025. This instrument was settled in January 2025. For additional information, see Note 9—Investments, Loans and Long-Term Receivables.

Risk Monitoring

Our Chief Executive Officer and Chief Financial Officer monitor risks to our business resulting from commodity prices, interest rates and foreign currency exchange rates.

For additional information about our use of derivative instruments, see Note 18—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 normally 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,” “priorities” and similar expressions that convey the prospective nature of events or outcomes, but the absence of such words does not mean a statement is not forward-looking.

We based these forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate, and our sustainability-related plans and goals. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, as they are not guarantees of future performance and 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 forecasted in any forward-looking statement. Our sustainability-related goals are not guarantees or promises and may change. Statements regarding our goals are not guarantees or promises that they will be met. The information included in, and any issues identified as material for purposes of, our sustainability reports shall not be considered material for SEC reporting purposes. Factors that could cause actual results to differ materially from those in our forward-looking statements include:

• Fluctuations in market conditions and demand impacting the prices of NGL, crude oil, refined petroleum products, renewable fuels, renewable feedstocks and natural gas prices and changes in refined product, marketing and petrochemical margins.

• Changes in governmental policies relating to NGL, crude oil, natural gas, refined petroleum or renewable fuels products pricing, regulation or taxation, including exports.

• Capacity constraints in, or other limitations on, the pipelines, storage and fractionation facilities to which we deliver natural gas or NGL and the availability of alternative markets and arrangements for our natural gas and NGL.

• Actions taken by OPEC and non-OPEC oil producing countries impacting crude oil production and correspondingly, commodity prices.

• 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 chemical products.

• Changes in the cost or availability of adequate and reliable transportation for our NGL, crude oil, natural gas and refined petroleum and renewable fuels products.

• The level and success of producers’ drilling plans and the amount and quality of production volumes around our midstream assets.

• Our ability to timely obtain or maintain permits, including those necessary for capital projects.

• Our ability to comply with government regulations or make capital expenditures required to maintain compliance.

• Our ability to realize sustained savings and cost reductions from the company’s business transformation initiatives.

• Changes to government policies relating to renewable fuels, climate change and GHG emissions that adversely affect programs like the renewable fuel standards program, low carbon fuel standards and tax credits for biofuels.

• Domestic and international economic and political developments including armed hostilities, such as the war in Eastern Europe, instability in the financial services and banking sector, excess inflation, expropriation of assets and changes in fiscal policy, including interest rates.

• The impact on commercial activity and demand for our products from any widespread public health crisis, as well as the extent and duration of recovery of economies and demand for our products following any such crisis.

• Failure to complete definitive agreements and feasibility studies for, and to complete construction of, announced and future capital projects on time and within budget.

• Our ability to successfully complete, or any material delay in the completion of, any asset dispositions, acquisitions, shutdowns or conversions that we may pursue, including the receipt of any necessary regulatory approvals or permits related to such action.

• Potential disruption or interruption of our operations or those of our joint ventures due to litigation or governmental or regulatory action.

• Damage to our facilities due to accidents, weather and climate events, civil unrest, insurrections, political events, terrorism or cyberattacks.

• Our sustainability goals, including reducing our GHG emissions intensity, developing and protecting new technologies, and commercializing lower-carbon opportunities.

• Failure of new products and services to achieve market acceptance.

• International monetary conditions and exchange controls.

• Substantial investments required, or reduced demand for products, as a result of existing or future environmental rules and regulations, including GHG emissions reductions and reduced consumer demand for refined petroleum products.

• Liability resulting from pending or future litigation or other legal proceedings.

• Liability for remedial actions, including removal and reclamation obligations under environmental regulations.

• Changes in tax, environmental and other laws and regulations (including alternative energy mandates) applicable to our business.

• Economic, political and regulatory conditions domestically and internationally, including imposition of tariffs or other tax incentives or disincentives.

• Political and societal concerns about climate change that could result in changes to our business or operations or increase expenditures, including litigation-related expenses.

• Changes in estimates or projections used to assess fair value of intangible assets, goodwill, and properties, plants and equipment and/or strategic decisions or other developments with respect to our asset portfolio that cause impairment charges.

• 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 creditworthiness of our customers and the counterparties to our transactions, including the impact of bankruptcies.

• Cybersecurity incidents or other disruptions that compromise our information and expose us to liability.

• The operation, financing and distribution decisions of our joint ventures that we do not control.

• The potential impact of activist shareholder actions or tactics.

• The factors generally described in “Item 1A. Risk Factors” in this report.

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 generally accepted accounting principles 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 shareholders’ 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, 2024. 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, 2024.

Ernst & Young LLP has issued an audit report on the company’s internal control over financial reporting as of December 31, 2024, and their report is included herein.

Date: February 21, 2025

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Phillips 66

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Phillips 66 (the Company) as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits and, for 2023 and 2022, the report of Deloitte & Touche LLP, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We did not audit the 2023 and 2022 financial statements of DCP Midstream, LP (DCP LP), a consolidated subsidiary, whose financial statements reflect total assets constituting 14% of the Company’s total assets as of December 31, 2023 and total revenues constituting 4% and 3% of the Company’s revenues and other income for the years ended December 31, 2023 and 2022, respectively. Those statements were audited by Deloitte & Touche LLP, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for DCP LP for 2023 and 2022, is based solely on the report of Deloitte & Touche LLP.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, 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 21, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchang

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None.

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, 2024, 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, 2024.

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, 2024, 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.

During the quarter ended December 31, 2024, no director or Section 16 officer adopted, modified or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408(a) of Regulation S-K).

Not applicable.

PART III

Information regarding our executive officers appears in Part I of this report.

We have adopted a Code of Ethics for the Principal Executive Officer and Senior Financial Officers (the “Code of Ethics”) that applies to our Principal Executive Officer, Chief Financial Officer and Controller. The Code of Ethics is posted on our website located at http://www.phillips66.com (within the Corporate Governance section) and is available in print upon request. We intend to disclose future amendments to the Code of Ethics, and any waivers of the Code of Ethics, on our website within four business days following the date of the amendment or waiver.

The remaining information required by Item 10 of Part III is incorporated herein by reference from our Definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, which will be filed within 120 days after December 31, 2024 (the 2025 Definitive Proxy Statement).*

The information required by Item 11 of Part III is incorporated herein by reference from our 2025 Definitive Proxy Statement.*

The information required by Item 12 of Part III is incorporated herein by reference from our 2025 Definitive Proxy Statement.*

The information required by Item 13 of Part III is incorporated herein by reference from our 2025 Definitive Proxy Statement.*

The information required by Item 14 of Part III is incorporated herein by reference from our 2025 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 2025 Definitive Proxy Statement are not deemed to be a part of this Annual Report or deemed to be filed with the U.S. Securities and Exchange Commission as a part of this report.*

PART IV

None.

PHILLIPS 66

INDEX TO EXHIBITS

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