filings.toolsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHILLIPS 66
INDEX TO FINANCIAL STATEMENTS
Report of Management
Management prepared, and is responsible for, the consolidated financial statements and the other information appearing in this Annual Report. The consolidated financial statements present fairly the company’s financial position, results of operations and cash flows in conformity with 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, 2025. 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, 2025.
Ernst & Young LLP has issued an audit report on the company’s internal control over financial reporting as of December 31, 2025, and their report is included herein.
| /s/ Mark E. Lashier | /s/ Kevin J. Mitchell | |||||||
| Mark E. Lashier | Kevin J. Mitchell | |||||||
| Chairman and Chief Executive Officer | Executive Vice President and | |||||||
| Chief Financial Officer | ||||||||
Date: February 20, 2026
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, 2025 and 2024, 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, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits and, for 2023, the report of Deloitte & Touche LLP, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We did not audit the 2023 financial statements of DCP Midstream, LP (DCP LP), a consolidated subsidiary, whose financial statements reflect total revenues constituting 4% of the Company’s revenues and other income for the year ended December 31, 2023. Those financial 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, 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, 2025, 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 20, 2026 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 Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the report of Deloitte & Touche LLP provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Audit and Finance Committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| WRB Refining LP Acquisition | ||||||||
| Description of the Matter | As discussed in Note 5 to the financial statements, the Company entered into a definitive agreement to acquire the 50% equity interest in WRB Refining LP it did not already own from subsidiaries of Cenovus Energy Inc. The transaction closed on October 1, 2025 and was accounted for as a business combination. As a result of the transaction, the Company recognized $2.8 billion of properties, plants and equipment, which was composed primarily of refining assets. Auditing management's accounting for the WRB Refining LP acquisition was complex due to the significant estimation required to determine the fair value of the refining assets. In particular, the fair value estimates for certain refining assets were sensitive to economic obsolescence, which had a significant effect on the fair value estimates. | |||||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the valuation of the refining assets related to the acquisition. For example, we tested controls over management’s review of the valuation models and the underlying assumptions used to develop estimated fair values of these assets. To test the estimated fair value of the refining assets, our audit procedures included, among others, evaluating the Company’s selection of the valuation methodology, the underlying assumptions used by the Company, and the completeness and accuracy of the underlying data supporting the assumptions and estimates. We involved our valuation specialists to assist in assessing the appropriateness of the valuation methodology used by the Company, to develop an expected range of values to assess the reasonableness of the Company’s estimates, and to evaluate the effects of economic obsolescence on the fair value estimates. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2011.
Houston, Texas
February 20, 2026
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Phillips 66
Opinion on Internal Control Over Financial Reporting
We have audited Phillips 66’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Phillips 66 (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, 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, 2025, and the related notes, and our report dated February 20, 2026 expressed an unqualified opinion thereon, based on our audit and the report of Deloitte & Touche LLP.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included under the heading “Assessment of Internal Control Over Financial Reporting” in the accompanying “Report of Management.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We 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 Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Houston, Texas
February 20, 2026
Report of Independent Registered Public Accounting Firm
To the Board of Directors of DCP Midstream GP, LLC and the Unitholders of DCP Midstream, LP
Opinion on the Financial Statements
We have audited the consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”) of DCP Midstream, LP and subsidiaries (the “Partnership”) (not presented herein). In our opinion, the financial statements present fairly, in all material respects the results of the Partnership’s operations and its cash flows for the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We did not audit the financial statements of Gulf Coast Express Pipeline, LLC, the Partnership’s investment which is accounted for by use of the equity method. The consolidated financial statements of the Partnership include its equity earnings in Gulf Coast Express Pipeline, LLC of $68 million for the year ended December 31, 2023. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Gulf Coast Express Pipeline, LLC is based solely on the report of the other auditors.
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Denver, Colorado
February 21, 2024
We began serving as the Partnership’s auditor in 2004. In 2024 we became the predecessor auditor.
| Consolidated Statement of Income | Phillips 66 |
| Millions of Dollars | |||||||||||||||||
| Years Ended December 31 | 2025 | 2024 | 2023 | ||||||||||||||
| Revenues and Other Income | |||||||||||||||||
| Sales and other operating revenues | $ | 132,376 | 143,153 | 147,399 | |||||||||||||
| Equity in earnings of affiliates | 762 | 1,779 | 2,017 | ||||||||||||||
| Net gain on dispositions | 2,984 | 321 | 115 | ||||||||||||||
| Other income | 438 | 243 | 359 | ||||||||||||||
| Total Revenues and Other Income | 136,560 | 145,496 | 149,890 | ||||||||||||||
| Costs and Expenses | |||||||||||||||||
| Purchased crude oil and products | 116,093 | 129,962 | 128,086 | ||||||||||||||
| Operating expenses | 6,423 | 5,939 | 6,154 | ||||||||||||||
| Selling, general and administrative expenses | 2,437 | 2,814 | 2,525 | ||||||||||||||
| Depreciation and amortization | 3,251 | 2,363 | 1,977 | ||||||||||||||
| Impairments | 1,060 | 456 | 24 | ||||||||||||||
| Taxes other than income taxes | 791 | 329 | 707 | ||||||||||||||
| Accretion on discounted liabilities | 47 | 40 | 29 | ||||||||||||||
| Interest and debt expense | 1,039 | 907 | 897 | ||||||||||||||
| Foreign currency transaction (gains) losses | (1) | 11 | 22 | ||||||||||||||
| Total Costs and Expenses | 131,140 | 142,821 | 140,421 | ||||||||||||||
| Income before income taxes | 5,420 | 2,675 | 9,469 | ||||||||||||||
| Income tax expense | 892 | 500 | 2,230 | ||||||||||||||
| Net Income | 4,528 | 2,175 | 7,239 | ||||||||||||||
| Less: net income attributable to noncontrolling interests | 125 | 58 | 224 | ||||||||||||||
| Net Income Attributable to Phillips 66 | $ | 4,403 | 2,117 | 7,015 | |||||||||||||
| Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars) | |||||||||||||||||
| Basic | $ | 10.82 | 5.01 | 15.56 | |||||||||||||
| Diluted | 10.79 | 4.99 | 15.48 | ||||||||||||||
| Weighted-Average Common Shares Outstanding (thousands) | |||||||||||||||||
| Basic | 406,008 | 420,174 | 450,136 | ||||||||||||||
| Diluted | 408,053 | 421,888 | 453,210 | ||||||||||||||
| See Notes to Consolidated Financial Statements. |
| Consolidated Statement of Comprehensive Income | Phillips 66 | ||||||||||||||||
| Millions of Dollars | |||||||||||||||||
| Years Ended December 31 | 2025 | 2024 | 2023 | ||||||||||||||
| Net Income | $ | 4,528 | 2,175 | 7,239 | |||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||
| Defined benefit plans | |||||||||||||||||
| Net actuarial gain (loss) arising during the period | 25 | (23) | (11) | ||||||||||||||
| Amortization of net actuarial loss and settlements | 19 | 14 | 19 | ||||||||||||||
| Plans sponsored by equity affiliates | 8 | (19) | (8) | ||||||||||||||
| Divestiture | (12) | — | — | ||||||||||||||
| Income taxes on defined benefit plans | (13) | 8 | 2 | ||||||||||||||
| Defined benefit plans, net of income taxes | 27 | (20) | 2 | ||||||||||||||
| Foreign currency translation adjustments | 222 | (111) | 182 | ||||||||||||||
| Income taxes on foreign currency translation adjustments | (9) | 6 | (3) | ||||||||||||||
| Foreign currency translation adjustments, net of income taxes | 213 | (105) | 179 | ||||||||||||||
| Cash flow hedges | — | — | (3) | ||||||||||||||
| Income taxes on hedging activities | — | — | — | ||||||||||||||
| Hedging activities, net of income taxes | — | — | (3) | ||||||||||||||
| Other Comprehensive Income (Loss), Net of Income Taxes | 240 | (125) | 178 | ||||||||||||||
| Comprehensive Income | 4,768 | 2,050 | 7,417 | ||||||||||||||
| Less: comprehensive income attributable to noncontrolling interests | 125 | 58 | 224 | ||||||||||||||
| Comprehensive Income Attributable to Phillips 66 | $ | 4,643 | 1,992 | 7,193 | |||||||||||||
| See Notes to Consolidated Financial Statements. |
| Consolidated Balance Sheet | Phillips 66 | ||||||||||
| Millions of Dollars | |||||||||||
| At December 31 | 2025 | 2024 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 1,116 | 1,738 | ||||||||
| Accounts and notes receivable (net of allowances of $68 million in 2025 and $70 million in 2024) | 9,158 | 9,544 | |||||||||
| Accounts and notes receivable—related parties | 613 | 1,489 | |||||||||
| Inventories | 5,097 | 3,995 | |||||||||
| Prepaid expenses and other current assets | 1,287 | 1,144 | |||||||||
| Total Current Assets | 17,271 | 17,910 | |||||||||
| Investments and long-term receivables | 11,905 | 14,378 | |||||||||
| Net properties, plants and equipment | 39,097 | 35,264 | |||||||||
| Goodwill | 1,433 | 1,575 | |||||||||
| Intangibles | 978 | 1,161 | |||||||||
| Other assets | 2,996 | 2,294 | |||||||||
| Total Assets | $ | 73,680 | 72,582 | ||||||||
| Liabilities | |||||||||||
| Accounts payable | $ | 8,581 | 9,792 | ||||||||
| Accounts payable—related parties | 286 | 512 | |||||||||
| Short-term debt | 1,038 | 1,831 | |||||||||
| Accrued income and other taxes | 1,362 | 1,060 | |||||||||
| Employee benefit obligations | 680 | 732 | |||||||||
| Other accruals | 1,379 | 1,160 | |||||||||
| Total Current Liabilities | 13,326 | 15,087 | |||||||||
| Long-term debt | 18,678 | 18,231 | |||||||||
| Asset retirement obligations and accrued environmental costs | 1,022 | 1,129 | |||||||||
| Deferred income taxes | 7,308 | 7,101 | |||||||||
| Employee benefit obligations | 573 | 703 | |||||||||
| Other liabilities and deferred credits | 2,532 | 1,868 | |||||||||
| Total Liabilities | 43,439 | 44,119 | |||||||||
| Equity | |||||||||||
| Common stock (2,500,000,000 shares authorized at $0.01 par value) Issued (2025—659,391,484 shares; 2024—656,987,861 shares) | |||||||||||
| Par value | 7 | 7 | |||||||||
| Capital in excess of par | 19,948 | 19,788 | |||||||||
| Treasury stock (at cost: 2025—258,252,603 shares; 2024—248,594,923 shares) | (23,934) | (22,751) | |||||||||
| Retained earnings | 33,239 | 30,771 | |||||||||
| Accumulated other comprehensive loss | (167) | (407) | |||||||||
| Total Stockholders’ Equity | 29,093 | 27,408 | |||||||||
| Noncontrolling interests | 1,148 | 1,055 | |||||||||
| Total Equity | 30,241 | 28,463 | |||||||||
| Total Liabilities and Equity | $ | 73,680 | 72,582 | ||||||||
| See Notes to Consolidated Financial Statements. |
| Consolidated Statement of Cash Flows | Phillips 66 | ||||||||||||||||
| Millions of Dollars | |||||||||||||||||
| Years Ended December 31 | 2025 | 2024 | 2023 | ||||||||||||||
| Cash Flows From Operating Activities | |||||||||||||||||
| Net income | $ | 4,528 | 2,175 | 7,239 | |||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||||||
| Depreciation and amortization | 3,251 | 2,363 | 1,977 | ||||||||||||||
| Impairments | 1,060 | 456 | 24 | ||||||||||||||
| Accretion on discounted liabilities | 47 | 40 | 29 | ||||||||||||||
| Deferred income taxes | 178 | (251) | 840 | ||||||||||||||
| Undistributed equity earnings | 120 | (411) | (822) | ||||||||||||||
| Loss (gain) on early redemption of debt | — | (3) | 53 | ||||||||||||||
| Net gain on dispositions | (2,984) | (321) | (115) | ||||||||||||||
| Unrealized investment loss | 12 | — | 38 | ||||||||||||||
| Other | (69) | 758 | (419) | ||||||||||||||
| Working capital adjustments | |||||||||||||||||
| Accounts and notes receivable | (508) | 574 | (696) | ||||||||||||||
| Inventories | 160 | (278) | (245) | ||||||||||||||
| Prepaid expenses and other current assets | (259) | 44 | 269 | ||||||||||||||
| Accounts payable | (804) | (491) | (480) | ||||||||||||||
| Taxes and other accruals | 230 | (464) | (663) | ||||||||||||||
| Net Cash Provided by Operating Activities | 4,962 | 4,191 | 7,029 | ||||||||||||||
| Cash Flows From Investing Activities | |||||||||||||||||
| Capital expenditures and investments | (2,233) | (1,859) | (2,155) | ||||||||||||||
| Acquisitions, net of cash acquired | (3,498) | (625) | (263) | ||||||||||||||
| Purchases of government obligations | — | (1,100) | — | ||||||||||||||
| Return of investments in equity affiliates | 90 | 141 | 201 | ||||||||||||||
| Proceeds from asset dispositions | 3,520 | 1,082 | 392 | ||||||||||||||
| Other | 24 | (102) | 35 | ||||||||||||||
| Net Cash Used in Investing Activities | (2,097) | (2,463) | (1,790) | ||||||||||||||
| Cash Flows From Financing Activities | |||||||||||||||||
| Issuance of debt | 8,395 | 6,272 | 6,260 | ||||||||||||||
| Repayment of debt | (8,774) | (4,140) | (4,252) | ||||||||||||||
| Issuance of common stock | 107 | 86 | 123 | ||||||||||||||
| Repurchase of common stock | (1,207) | (3,451) | (4,014) | ||||||||||||||
| Dividends paid on common stock | (1,922) | (1,882) | (1,882) | ||||||||||||||
| Distributions to noncontrolling interests | (164) | (70) | (163) | ||||||||||||||
| Repurchase of noncontrolling interests | — | — | (4,067) | ||||||||||||||
| Contributions from noncontrolling interests | 132 | — | — | ||||||||||||||
| Other | (104) | (120) | (97) | ||||||||||||||
| Net Cash Used in Financing Activities | (3,537) | (3,305) | (8,092) | ||||||||||||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | 50 | (8) | 43 | ||||||||||||||
| Net Change in Cash and Cash Equivalents | (622) | (1,585) | (2,810) | ||||||||||||||
| Cash and cash equivalents at beginning of year | 1,738 | 3,323 | 6,133 | ||||||||||||||
| Cash and Cash Equivalents at End of Year | $ | 1,116 | 1,738 | 3,323 | |||||||||||||
| See Notes to Consolidated Financial Statements. |
| Consolidated Statement of Changes in Equity | Phillips 66 | ||||||||||||||||||||||
| Millions of Dollars | |||||||||||||||||||||||
| Attributable to Phillips 66 | |||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Par Value | Capital in Excess of Par | Treasury Stock | Retained Earnings | Accum. Other Comprehensive Loss | Noncontrolling Interests | Total | |||||||||||||||||
| December 31, 2022 | $ | 7 | 19,791 | (15,276) | 25,432 | (460) | 4,612 | 34,106 | |||||||||||||||
| Net income | — | — | — | 7,015 | — | 224 | 7,239 | ||||||||||||||||
| Other comprehensive income | — | — | — | — | 178 | — | 178 | ||||||||||||||||
| Dividends paid on common stock | — | — | — | (1,882) | — | — | (1,882) | ||||||||||||||||
| Repurchase of common stock | — | — | (4,066) | — | — | — | (4,066) | ||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | (163) | (163) | ||||||||||||||||
| Acquisition of noncontrolling interest in DCP Midstream, LP | — | (361) | — | — | — | (3,613) | (3,974) | ||||||||||||||||
| Benefit plan activity and other | — | 220 | — | (15) | — | 7 | 212 | ||||||||||||||||
| December 31, 2023 | 7 | 19,650 | (19,342) | 30,550 | (282) | 1,067 | 31,650 | ||||||||||||||||
| Net income | — | — | — | 2,117 | — | 58 | 2,175 | ||||||||||||||||
| Other comprehensive loss | — | — | — | — | (125) | — | (125) | ||||||||||||||||
| Dividends paid on common stock | — | — | — | (1,882) | — | — | (1,882) | ||||||||||||||||
| Repurchase of common stock | — | — | (3,409) | — | — | — | (3,409) | ||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | (70) | (70) | ||||||||||||||||
| Benefit plan activity | — | 138 | — | (14) | — | — | 124 | ||||||||||||||||
| December 31, 2024 | 7 | 19,788 | (22,751) | 30,771 | (407) | 1,055 | 28,463 | ||||||||||||||||
| Net income | — | — | — | 4,403 | — | 125 | 4,528 | ||||||||||||||||
| Other comprehensive income | — | — | — | — | 240 | — | 240 | ||||||||||||||||
| Dividends paid on common stock | — | — | — | (1,922) | — | — | (1,922) | ||||||||||||||||
| Repurchase of common stock | — | — | (1,183) | — | — | — | (1,183) | ||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | (164) | (164) | ||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | 132 | 132 | ||||||||||||||||
| Benefit plan activity | — | 160 | — | (13) | — | — | 147 | ||||||||||||||||
| December 31, 2025 | $ | 7 | 19,948 | (23,934) | 33,239 | (167) | 1,148 | 30,241 |
| Shares | ||||||||||||||
| Common Stock Issued | Treasury Stock | |||||||||||||
| December 31, 2022 | 652,373,645 | 186,529,667 | ||||||||||||
| Repurchase of common stock | — | 37,847,772 | ||||||||||||
| Shares issued—share-based compensation | 2,468,456 | — | ||||||||||||
| December 31, 2023 | 654,842,101 | 224,377,439 | ||||||||||||
| Repurchase of common stock | — | 24,217,484 | ||||||||||||
| Shares issued—share-based compensation | 2,145,760 | — | ||||||||||||
| December 31, 2024 | 656,987,861 | 248,594,923 | ||||||||||||
| Repurchase of common stock | — | 9,657,680 | ||||||||||||
| Shares issued—share-based compensation | 2,403,623 | — | ||||||||||||
| December 31, 2025 | 659,391,484 | 258,252,603 | ||||||||||||
| Dollars | ||||||||||||||
| Years Ended December 31 | Dividends Paid Per Share of Common Stock | |||||||||||||
| 2023 | $ | 4.20 | ||||||||||||
| 2024 | 4.50 | |||||||||||||
| 2025 | $ | 4.75 | ||||||||||||
| See Notes to Consolidated Financial Statements. | ||||||||||||||
| Notes to Consolidated Financial Statements | Phillips 66 |
Note 1—Summary of Significant Accounting Policies
Consolidation Principles and Investments
Our consolidated financial statements include the accounts of majority-owned, controlled subsidiaries and variable interest entities (VIEs) where we are the primary beneficiary. Undivided interests in pipelines, natural gas plants and terminals are consolidated on a proportionate basis. See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for further discussion about a significant VIE that we began consolidating in August 2022.
The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the affiliates’ operating and financial policies, including VIEs, of which we are not the primary beneficiary. Other securities and investments are generally carried at fair value, or cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. See Note 9—Investments, Loans and Long-Term Receivables, for further discussion on our significant unconsolidated VIEs.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
Foreign Currency
Adjustments resulting from the process of translating financial statements with foreign functional currencies into U.S. dollars are included in accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains and losses result from remeasuring monetary assets and liabilities denominated in a foreign currency into the functional currency of our subsidiary holding the asset or liability. We include these transaction gains and losses in current earnings (loss). Most of our foreign operations use their local currency as the functional currency.
Cash Equivalents
Cash equivalents are highly liquid, short-term investments that are readily convertible to known amounts of cash and will mature within 90 days or less from the date of acquisition. We carry these investments at cost plus accrued interest.
Inventories
We have several valuation methods for our various types of inventories and consistently use the following methods for each type of inventory. Crude oil and products inventories are valued at the lower of cost or market in the aggregate, primarily on the last-in, first-out (LIFO) basis. Any necessary lower-of-cost-or-market write-downs at year end are recorded as permanent adjustments to the LIFO cost basis. LIFO is used to better match current inventory costs with current revenues and to meet tax-conformity requirements. Costs include both direct and indirect expenditures incurred in bringing an item or product to its existing condition and location. Materials and supplies inventories are valued using the weighted-average-cost method.
Fair Value Measurements
We categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability that are used to measure fair value to the extent that relevant observable inputs are not available, and that reflect the assumptions we believe market participants would use when pricing an asset or liability for which there is little, if any, market activity at the measurement date.
Derivative Instruments
Derivative instruments, except those designated as normal purchases and normal sales, are recorded on the balance sheet at fair value. We have master netting agreements with most of our exchange-cleared instrument counterparties and certain of our counterparties to other commodity instrument contracts (e.g., physical commodity forward contracts). We have elected to net derivative assets and liabilities with the same counterparty on the balance sheet if the legal right of offset exists and certain other criteria are met. When applicable, we also net collateral payables and receivables against derivative assets and derivative liabilities, respectively.
Recognition and classification of the gain or loss that results from recording and adjusting a derivative to fair value depends on the purpose for issuing or holding the derivative. All realized and unrealized gains and losses from derivative instruments for which we do not apply hedge accounting are immediately recognized in our consolidated statement of income. Unrealized gains or losses from derivative instruments that qualify for and are designated as cash flow hedges are recognized in other comprehensive income (loss) and appear on the balance sheet in accumulated other comprehensive income (loss) until the hedged transactions are recognized in earnings. However, to the extent the change in the fair value of a derivative instrument exceeds the change in the anticipated cash flows of the hedged transaction, the excess gain or loss is recognized immediately in earnings.
Loans and Long-Term Receivables
We enter into agreements with other parties to pursue business opportunities, which may require us to provide loans or advances to certain affiliated and nonaffiliated companies. Loans are recorded when cash is transferred or seller financing is provided to the affiliated or nonaffiliated company pursuant to a loan agreement. The loan balance will increase as interest is earned on the outstanding loan balance and will decrease as interest and principal payments are received. Interest is earned at the loan agreement’s stated interest rate. Loans and long-term receivables are evaluated for impairment based on an expected credit loss assessment.
Impairment of Investments in Unconsolidated Affiliates
Investments in unconsolidated affiliates accounted for under the equity method are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred. When indicators exist, the fair value is estimated and compared to the investment carrying value. If any impairment is judgmentally determined to be other than temporary, the carrying value of the investment is written down to fair value. The fair value of the impaired investment is determined based on quoted market prices, if available, or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.
Depreciation and Amortization
Depreciation and amortization of properties, plants and equipment (PP&E) are determined by either the individual-unit-straight-line method or the group-straight-line method (for those individual units that are highly integrated with other units).
Capitalized Interest
A portion of interest from external borrowings is capitalized on major projects with an expected construction period of one year or longer. Capitalized interest is added to the cost of the related asset, and is depreciated over the useful life of the related asset.
Impairment of Properties, Plants and Equipment
PP&E used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If indicators of potential impairment exist, an undiscounted cash flow test is performed. If the sum of the undiscounted expected future before-tax cash flows of an asset group is less than the carrying value of the asset group, including applicable liabilities, the carrying value of the PP&E included in the asset group is written down to estimated fair value and the write down is reported in the “Impairments” line item on our consolidated statement of income in the period in which the impairment determination is made. Individual assets are grouped for impairment testing purposes at the lowest level for which identifiable cash flows are available. Because there is usually a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined using one or more of the following methods: the present values of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants; a market multiple of earnings for similar assets; historical market transactions for similar assets, adjusted using principal market participant assumptions when necessary; or replacement cost adjusted for physical deterioration and economic obsolescence. Long-lived assets held for sale are accounted for at the lower of amortized cost or fair value, less cost to sell, with fair value determined using a binding negotiated price, if available, estimated replacement cost, or present value of expected future cash flows as previously described.
The expected future cash flows used for impairment reviews and related fair value calculations are based on estimated future volumes, prices, costs, margins and capital project decisions, considering all available evidence at the date of review.
Property Dispositions
When complete units of depreciable property are sold, the asset cost and related accumulated depreciation are eliminated, with any gain or loss reflected in the “Net gain on dispositions” line item on our consolidated statement of income. When less than complete units of depreciable property are disposed of or retired, the difference between asset cost and salvage value is charged or credited to accumulated depreciation.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. Goodwill is not amortized, but is assessed for impairment annually and when events or changes in circumstance indicate that the fair value of a reporting unit with goodwill is below its carrying value. The impairment assessment requires allocating goodwill and other assets and liabilities to reporting units. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. If the fair value of the reporting unit is less than the book value, an impairment is recognized for the amount by which the book value exceeds the reporting unit’s fair value. A goodwill impairment cannot exceed the total amount of goodwill allocated to that reporting unit. For purposes of assessing goodwill for impairment, we have three reporting units with goodwill balances at our 2025 testing date: Marketing and Specialties (M&S), Transportation and Natural Gas Liquids (NGL).
Intangible Assets Other Than Goodwill
Intangible assets with finite useful lives are amortized using the straight-line method over their useful lives. Intangible assets with indefinite useful lives are not amortized, but are tested at least annually for impairment. Each reporting period, we evaluate intangible assets with indefinite useful lives to determine whether events and circumstances continue to support this classification. Indefinite-lived intangible assets are considered impaired if their fair value is lower than their net book value. The fair value of intangible assets is determined based on quoted market prices in active markets, if available. If quoted market prices are not available, the fair value of intangible assets is determined based upon the present values of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants, or upon estimated replacement cost, if expected future cash flows from the intangible asset are not determinable.
Asset Retirement Obligations
When we have a legal obligation to incur costs to retire an asset, we record a liability in the period in which the obligation was incurred provided that a reasonable estimate of fair value can be made. If a reasonable estimate of fair value cannot be made at the time the obligation arises, we record the liability when sufficient information is available to estimate its fair value. When a liability is initially recorded, we capitalize the costs by increasing the carrying amount of the related PP&E. Over time, the liability is increased for changes in present value, and the capitalized costs in PP&E are depreciated over the useful life of the related assets. If our estimate of the liability changes after initial recognition, we record an adjustment to the liability and PP&E.
Our practice is to keep our refining and other processing assets in good operating condition through routine repair and maintenance of component parts in the ordinary course of business and by continuing to make improvements based on technological advances. As a result, we believe that generally these assets have no expected retirement dates for purposes of estimating asset retirement obligations since the dates or ranges of dates upon which we would retire these assets cannot be reasonably estimated at this time. We will recognize liabilities for these obligations in the period when sufficient information becomes available to estimate a date or range of potential retirement dates.
Environmental Costs
Environmental expenditures are expensed or capitalized, depending upon their future economic benefit. Expenditures relating to an existing condition caused by past operations, and those having no future economic benefit, are expensed. When environmental assessments or cleanups are probable and the costs can be reasonably estimated, environmental expenditures are accrued on an undiscounted basis (unless acquired in a business combination). Recoveries of environmental remediation costs from other parties, such as state reimbursement funds, are recorded as a reduction to environmental expenditures.
Guarantees
The fair value of a guarantee is determined and recorded as a liability at the time the guarantee is given. The initial liability is subsequently reduced as we are released from exposure under the guarantee. We amortize the guarantee liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of guarantee. We amortize the guarantee liability to the related statement of income line item based on the nature of the guarantee. In cases where the guarantee term is indefinite, we reverse the liability when we have information to support the reversal. When the performance on the guarantee becomes probable and the liability can be reasonably estimated, we accrue a separate liability for the excess amount above the guarantee’s book value based on the facts and circumstances at that time. We reverse the fair value liability only when there is no further exposure under the guarantee.
Treasury Stock
We record treasury stock purchases at cost, which includes related transaction costs and excise taxes. Amounts are recorded as reductions of stockholders’ equity on the consolidated balance sheet. Common stock reissued from treasury stock is valued based on the average cost of historical repurchases.
Revenue Recognition
Our revenues are primarily associated with sales of refined petroleum products and renewable fuels, crude oil, NGL and natural gas. Each gallon, or other unit of measure of product, is separately identifiable and represents a distinct performance obligation to which a transaction price is allocated. The transaction prices of our contracts with customers are either fixed or variable, with variable pricing based upon various market indices. For our contracts that include variable consideration, we utilize the variable consideration allocation exception, whereby the variable consideration is only allocated to the performance obligations that are satisfied during the period. The related revenue is recognized at a point in time when control passes to the customer, which is when title and the risk of ownership pass to the customer and physical delivery of goods occurs, either immediately or within a fixed delivery schedule that is reasonable and customary in the industry. The payment terms with our customers vary based on the product or service provided, but usually are 30 days or less.
Revenues associated with pipeline transportation services are recognized at a point in time when the volumes are delivered based on contractual rates. Revenues associated with terminaling and storage services are recognized over time as the services are performed based on throughput volume or capacity utilization at contractual rates.
Revenues associated with transactions commonly called buy/sell contracts, in which the purchase and sale of inventory with the same counterparty are entered into in contemplation of one another, are combined and reported in the “Purchased crude oil and products” line item on our consolidated statement of income (i.e., these transactions are recorded net).
Taxes Collected from Customers and Remitted to Governmental Authorities
Excise taxes on sales of refined petroleum products and renewable fuels charged to our customers are presented net of taxes on sales of refined petroleum products and renewable fuels payable to governmental authorities in the “Taxes other than income taxes” line item on our consolidated statement of income. Other sales and value-added taxes are recorded net in the “Taxes other than income taxes” line item on our consolidated statement of income.
Shipping and Handling Costs
We have elected to account for shipping and handling costs as fulfillment activities and include these activities in the “Purchased crude oil and products” line item on our consolidated statement of income. Freight costs billed to customers are recorded in “Sales and other operating revenues.”
Maintenance and Repairs
Costs of maintenance and repairs, which are not significant improvements, are expensed when incurred. Major refinery maintenance turnarounds are expensed as incurred.
Share-Based Compensation
We recognize share-based compensation expense over the shorter of: (1) the service period (i.e., the stated period of time required to earn the award); or (2) the period beginning at the start of the service period and ending when an employee first becomes eligible for retirement, but not less than ten months as that is the minimum period of time required for awards not to be subject to forfeiture. Our equity-classified programs generally provide accelerated vesting (i.e., a waiver of the remaining period of service required to earn an award) for awards held by employees at the time they become eligible for retirement (at age 55 with 5 years of service). We have elected to recognize expense on a straight-line basis over the service period for the entire award, irrespective of whether the award was granted with ratable or cliff vesting, and have elected to recognize forfeitures of awards when they occur.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that includes the enactment date. Income tax effects are released from accumulated other comprehensive loss to retained earnings, when applicable, on an individual item basis as those items are reclassified into income. Interest related to unrecognized income tax benefits is reflected in the “Interest and debt expense” line item, and penalties are reported in the “Operating expenses” or “Selling, general and administrative expenses” line items on our consolidated statement of income. We have elected to treat the global intangible low-taxed income (GILTI) tax as a period expense.
Business Combinations
In accounting for a business combination, assets acquired, liabilities assumed and noncontrolling interests are recorded based on estimated fair values as of the date of acquisition. The excess or shortfall of the purchase price when compared to the fair value of the net tangible and identifiable intangible assets acquired, if any, is recorded as goodwill or a bargain purchase gain, respectively. We use available information to make these fair value determinations and engage third-party specialists in the valuation process as necessary.
The fair values of assets acquired, liabilities assumed and noncontrolling interests as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate; the cost approach, which requires estimates of replacement costs and depreciation and obsolescence estimates; and the market approach which uses market data and adjusts for entity specific differences. Subsequent to the acquisition date, and not later than one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period of the adjustment. Acquisition-related costs are expensed as incurred in connection with each business combination.
Note 2—Changes in Accounting Principles
Effective January 1, 2025, we adopted ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures,” which enhances the transparency, effectiveness, and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The adoption of this pronouncement did not have an impact on our consolidated financial statements; however, we applied the new disclosure requirements retrospectively, so all prior period disclosures have been adjusted to reflect the new disclosure requirements. See additional and updated disclosures within Note 25—Income Taxes and Note 27—Cash Flow Information.
Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers
DCP Midstream, LLC and Gray Oak Holdings LLC Merger (DCP Midstream Merger)
On August 17, 2022, we and our co-venturer, Enbridge Inc. (Enbridge), agreed to merge DCP Midstream, LLC (DCP Midstream) and Gray Oak Holdings LLC (Gray Oak Holdings), with DCP Midstream as the surviving entity. Prior to the DCP Midstream Merger, we and Enbridge each held a 50% interest and jointly governed DCP Midstream, whose primary assets are its general partner and limited partner interests in DCP Midstream, LP (DCP LP), and we each held indirect economic interests in DCP LP of 28.26%. DCP LP is a VIE because its limited partners do not have the ability to remove its general partner with a simple majority vote, nor do its limited partners have substantive participating rights in the significant decisions made in the ordinary course of business. DCP Midstream ultimately consolidates DCP LP because one of its wholly owned subsidiaries is the primary beneficiary of DCP LP. We and Enbridge also held 65% and 35% interests, respectively, in Gray Oak Holdings, whose primary asset was a 65% noncontrolling interest in Gray Oak Pipeline, LLC (Gray Oak Pipeline). Our and Enbridge’s indirect economic interests in Gray Oak Pipeline were 42.25% and 22.75%, respectively. We had voting control over and consolidated Gray Oak Holdings and reported Gray Oak Holdings’ 65% interest in Gray Oak Pipeline as an equity investment and Enbridge’s interest in Gray Oak Holdings as a noncontrolling interest.
In connection with the DCP Midstream Merger, we and Enbridge entered into a Third Amended and Restated Limited Liability Company Agreement of DCP Midstream (Amended and Restated LLC Agreement), which realigned the members’ economic interests and governance responsibilities. Under the Amended and Restated LLC Agreement, two classes of membership interests in DCP Midstream were created, Class A and Class B, that are intended to track the assets, liabilities, revenues and expenses of the following operating segments of DCP Midstream:
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Class A Segment comprised of the businesses, activities, assets and liabilities of DCP LP and its subsidiaries and its general partner entities (DCP Midstream Class A Segment).
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Class B Segment comprised of the business, activities, assets and liabilities of Gray Oak Pipeline (DCP Midstream Class B Segment).
We hold a 76.64% Class A membership interest, which represents an indirect economic interest in DCP LP of 43.3%, and a 10% Class B membership interest, which represents an indirect economic interest in Gray Oak Pipeline of 6.5%. Enbridge holds the remaining Class A and Class B membership interests. We have been designated as the managing member of DCP Midstream Class A Segment and are responsible for conducting, directing and managing all activities associated with this segment, except as limited in certain instances. Enbridge has been designated as the managing member of DCP Midstream Class B Segment. Earnings and distributions from each segment are allocated to the members based on their membership interest in each membership class, except as otherwise provided.
DCP Midstream Class A Segment and DCP Midstream Class B Segment were determined to be silos under the variable interest consolidation model. As a result, DCP Midstream was also determined to be a VIE. We determined that we are the primary beneficiary of DCP Midstream Class A Segment because of the governance rights granted to us under the Amended and Restated LLC Agreement as managing member of the segment.
We hold a 33.33% direct ownership interest in DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills). DCP LP holds the remaining 66.67% ownership interest in these entities. As a result of the governance rights granted to us over DCP Midstream Class A Segment and the governance rights we hold through our direct ownership interests, we obtained controlling financial interests in these entities in connection with the DCP Midstream Merger. As a result of the DCP Midstream Merger, our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased from 52.2% to 62.2%.
Starting on August 18, 2022, we began consolidating the financial results of DCP Midstream Class A Segment, DCP Sand Hills and DCP Southern Hills and reporting the direct and indirect economic interests held by others in these entities as noncontrolling interests on our financial statements.
We account for our remaining indirect economic interest in Gray Oak Pipeline, now held through DCP Midstream Class B Segment, using the equity method of accounting. As a result of the DCP Midstream Merger, we derecognized Enbridge’s noncontrolling interest in Gray Oak Holdings.
DCP Midstream, LP Merger (DCP LP Merger)
On June 15, 2023, we completed the acquisition of all publicly held common units of DCP LP and eliminated the public common unit noncontrolling interest in our consolidated financial statements from the DCP LP Merger date, forward, pursuant to the terms of the Agreement and Plan of Merger, dated as of January 5, 2023 (DCP LP Merger Agreement). The DCP LP Merger Agreement was entered into with DCP LP, its subsidiaries and its general partner entities, pursuant to which one of our wholly owned subsidiaries merged with and into DCP LP, with DCP LP surviving as a Delaware limited partnership. Under the terms of the DCP LP Merger Agreement, at the effective time of the DCP LP Merger, each publicly held common unit representing a limited partner interest in DCP LP (other than the common units owned by DCP Midstream and its subsidiaries) issued and outstanding as of immediately prior to the effective time was converted into the right to receive $41.75 per common unit in cash. We paid $3,796 million in cash consideration to common unitholders, funded with a combination of available cash and debt proceeds. The DCP LP Merger was accounted for as an equity transaction. The DCP LP Merger increased our aggregate direct and indirect economic interest in DCP LP from 43.3% to 86.8% and our aggregate direct and indirect economic interests in DCP Sand Hills and DCP Southern Hills increased from 62.2% to 91.2%.
DCP Midstream Class A Segment
DCP Midstream Class A Segment is a VIE and we are the primary beneficiary. DCP Midstream Class A Segment is comprised of the businesses, activities, assets and liabilities of DCP LP and its subsidiaries and its general partner entities.
DCP LP is a master limited partnership whose operations currently include producing and fractionating NGL; gathering, compressing, treating and processing natural gas; recovering condensate; and transporting, trading, marketing and storing natural gas and NGL.
The most significant assets of DCP Midstream Class A Segment that are available to settle only its obligations, along with its most significant liabilities for which its creditors do not have recourse to Phillips 66’s general credit, were:
| Millions of Dollars | |||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||
| Accounts receivable | $ | 530 | 638 | ||||||||
| Net properties, plants and equipment | 9,211 | 8,861 | |||||||||
| Investments and long-term receivables | 705 | 1,622 | |||||||||
| Accounts payable | 785 | 909 | |||||||||
| Short-term debt | — | 532 | |||||||||
| Long-term debt | 2,903 | 2,913 | |||||||||
Preferred Units
On October 16, 2023, DCP LP redeemed its Series C preferred units at the aggregated liquidation preference of $110 million, which approximated the book value of the preferred units. On June 15, 2023, DCP LP redeemed its Series B preferred units at the aggregated liquidation preference of $161 million, which approximated book value of the preferred units.
Distributions
For the years ended December 31, 2025, 2024 and 2023, DCP LP made cash distributions of $130 million, $47 million and $125 million, respectively, to common unitholders other than Phillips 66 and its subsidiaries.
Note 4—Restructuring
Los Angeles Refinery
In October 2024, we announced our intention to cease operations and begin idling the facilities at our Los Angeles Refinery in the fourth quarter of 2025. In the fourth quarter of 2025, consistent with our plan, we began idling the facility and ceased fuel production. We have submitted redevelopment project applications for the facilities, initiating the review process and allowing us to continue pursuing the redevelopment of the property for future uses. As a result of the decision to cease operations and begin idling the facilities, the following impacts were recorded in our Refining segment:
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In 2024, we assessed the Los Angeles Refinery asset group for impairment and concluded that the carrying value of the asset group was recoverable. However, the estimated useful lives of the Los Angeles Refinery assets were shortened to reflect the plan to cease operations and begin idling the assets in the fourth quarter of 2025. As of December 31, 2025, the carrying values of the net PP&E and intangible assets were depreciated to the estimated salvage value of $241 million. Total depreciation related to the Los Angeles Refinery assets for the years ended December 31, 2025 and December 31, 2024, was $1,062 million and $350 million, including $964 million and $253 million of accelerated depreciation, respectively. This accelerated depreciation is included within the “Depreciation and amortization” line item on our consolidated statement of income for the years ended December 31, 2025 and 2024.
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Our asset retirement obligations (AROs) at the Los Angeles Refinery were $253 million as of December 31, 2025, primarily reflecting asbestos abatement and decommissioning of assets. The estimation of asset retirement obligations requires judgment and is subject to changes in the underlying assumptions. Depreciation of the related capitalized asset retirement costs was also recorded through the fourth quarter of 2025, and the amounts for the years ended December 31, 2025 and 2024, are reflected in the accelerated depreciation discussed above.
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We accrued $69 million in environmental expenses related to future groundwater mitigation plans at the Los Angeles Refinery. Additionally, we recorded a $35 million write down of material and supplies inventory. These expenses are included within the “Operating expenses” line item on our consolidated statement of income for the year ended December 31, 2025.
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We recorded $44 million of severance costs, which are included within the “Operating expenses” line item on our consolidated statement of income for the year ended December 31, 2024.
In April 2022, we began a multi-year business transformation focused on enterprise-wide opportunities to improve our cost structure. For the year ended December 31, 2023, we recorded restructuring costs totaling $177 million primarily related to consulting fees and severance costs. These costs are primarily recorded in the “Selling, general and administrative expenses” line item on our consolidated statement of income and are reported in Corporate and Other.
In addition, for the year ended December 31, 2023, we recorded restructuring costs of $38 million associated with the integration of DCP Midstream Class A Segment primarily related to severance and contract exit costs. These costs are primarily recorded in the “Selling, general and administrative expenses” line item on our consolidated statement of income and are reported in our Midstream segment.
Note 5—Business Combinations
Refining Acquisition
On October 1, 2025, we acquired the remaining 50% equity interest in WRB Refining LP (WRB) from subsidiaries of Cenovus Energy Inc. (Cenovus) for total cash consideration of $1.3 billion, subject to post-closing adjustments. This acquisition will enable full integration with our broader value chain and expand our position in the Central Corridor region.
The components of the fair value of the WRB acquisition consideration are:
| Millions of Dollars | |||||
| Cash paid to Cenovus | $ | 1,304 | |||
| Fair value of previously held equity interest in WRB | 1,304 | ||||
| Settlement of relationships with Phillips 66 and WRB | 793 | ||||
| Total acquisition consideration | $ | 3,401 |
The acquisition date fair value of the previously held equity interest in WRB was determined in conjunction with the impairment recorded in the third quarter of 2025. See Note 9—Investments, Loans and Long-Term Receivables for additional information on the impairment. See Note 20—Fair Value Measurements for additional information on the determination of fair value.
We accounted for this acquisition as a business combination and provisionally recorded $2,767 million of PP&E; $1,200 million of inventory; $54 million of other long-term assets; $9 million of intangibles; $450 million of short-term debt assumed at acquisition and also fully repaid on October 1, 2025; $119 million of net working capital deficit (excluding inventory and short-term debt); $34 million of AROs and accrued environmental costs; $21 million of other long-term liabilities; and $5 million of deferred income tax liabilities. The fair values of the assets acquired and liabilities assumed are preliminary and subject to change until we finalize the accounting for this acquisition.
Midstream Acquisitions
On April 1, 2025, we acquired all issued and outstanding equity interests in each of EPIC Y-Grade GP, LLC and EPIC Y-Grade, LP, together with their respective subsidiaries (collectively referred to herein as Coastal Bend), which own various long haul NGL pipelines, fractionation facilities and distribution systems, for total consideration of $2.2 billion, net of cash acquired. This acquisition further enhances our wellhead-to-market strategy. For this acquisition, we provisionally recorded $2,224 million of PP&E; $4 million of other assets; $4 million of net working capital (excluding cash); $33 million of other long-term liabilities; and $4 million of AROs. The fair values of the assets acquired and liabilities assumed are preliminary and subject to change until we finalize the accounting for this acquisition.
On July 1, 2024, we acquired Pinnacle Midland Parent LLC (referred to herein as Dos Picos) to expand our natural gas gathering and processing operations in the Permian Basin for total cash consideration of $565 million. This acquisition expands our natural gas gathering and processing operations in the Permian Basin. We finalized the valuation of the assets acquired and liabilities assumed during the three months ended June 30, 2025. For this acquisition, we recorded $325 million of PP&E, including finance lease right of use assets; $256 million of amortizable intangible assets, primarily customer relationships; $21 million of goodwill; $18 million of net working capital deficit; $13 million of AROs; and $6 million of finance lease liabilities.
Marketing and Specialties Acquisitions
On October 1, 2024, we acquired a marketing business on the U.S. West Coast for total consideration of $68 million. These operations were acquired to support the placement of renewable diesel produced by the Rodeo Renewable Energy Complex (Rodeo Complex). We finalized the valuation of the assets acquired and liabilities assumed during the three months ended September 30, 2025. For this acquisition, we recorded $20 million of amortizable intangible assets, primarily customer relationships; $62 million of PP&E, including finance lease right of use assets; $31 million of net working capital; and $45 million of finance lease liabilities.
Note 6—Sales and Other Operating Revenues
Disaggregated Revenues
The following tables present our disaggregated sales and other operating revenues for the years ended December 31:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Product Line and Services | |||||||||||||||||
| Refined petroleum products and renewable fuels | $ | 97,359 | 103,685 | 108,644 | |||||||||||||
| Crude oil resales | 15,183 | 22,008 | 20,824 | ||||||||||||||
| NGL and natural gas | 17,066 | 14,548 | 14,467 | ||||||||||||||
| Services and other* | 2,768 | 2,912 | 3,464 | ||||||||||||||
| Consolidated sales and other operating revenues | $ | 132,376 | 143,153 | 147,399 | |||||||||||||
| Geographic Location** | |||||||||||||||||
| United States | $ | 104,259 | 113,599 | 118,786 | |||||||||||||
| United Kingdom | 13,207 | 12,713 | 14,642 | ||||||||||||||
| Germany | 4,993 | 5,265 | 5,547 | ||||||||||||||
| Other countries | 9,917 | 11,576 | 8,424 | ||||||||||||||
| Consolidated sales and other operating revenues | $ | 132,376 | 143,153 | 147,399 | |||||||||||||
| ** Includes derivatives-related activities. See Note 19—Derivatives and Financial Instruments for additional information.* | |||||||||||||||||
| *** Sales and other operating revenues are attributable to countries based on the location of the operations generating the revenues.* |
Contract-Related Assets and Liabilities
At December 31, 2025 and 2024, receivables from contracts with customers were $7,781 million and $8,615 million, respectively. Significant noncustomer balances, such as buy/sell receivables and excise tax receivables, were excluded from these amounts.
Our contract-related assets also include payments we make to our marketing customers related to incentive programs. An incentive payment is initially recognized as an asset and subsequently amortized as a reduction to revenue over the contract term, which generally ranges from 5 to 15 years. At December 31, 2025 and 2024, our asset balances related to such payments were $820 million and $643 million, respectively.
Our contract liabilities primarily represent advances from our customers prior to product or service delivery. At December 31, 2025 and 2024, contract liabilities were $198 million and $232 million, respectively.
Remaining Performance Obligations
Most of our contracts with customers are spot contracts or term contracts with only variable consideration. We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less or because the variable consideration has been allocated entirely to an unsatisfied performance obligation. We also have certain contracts in our Midstream segment that include minimum volume commitments with fixed pricing. At December 31, 2025, the remaining performance obligations related to these minimum volume commitment contracts amounted to $854 million. This amount excludes variable consideration and estimates of variable rate escalation clauses in our contracts with customers, and is expected to be recognized through 2036 with a weighted average remaining life of four years as of December 31, 2025.
Note 7—Credit Losses
We are exposed to credit losses primarily through our sales of refined petroleum products, renewable fuels, renewable feedstocks, crude oil, NGL and natural gas. We assess each counterparty’s ability to pay for the products we sell by conducting a credit review. The credit review considers our expected billing exposure and timing for payment and the counterparty’s established credit rating or our assessment of the counterparty’s creditworthiness based on our analysis of their financial statements when a credit rating is not available. We also consider contract terms and conditions, country and political risk, and business strategy in our evaluation. A credit limit is established for each counterparty based on the outcome of this review. We may require collateralized asset support or a prepayment to mitigate credit risk.
We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities include timely account reconciliations, dispute resolution and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. In addition, when events and circumstances arise that may affect certain counterparties’ abilities to fulfill their obligations, we enhance our credit monitoring, and we may seek collateral to support some transactions or require prepayments from higher-risk counterparties.
At December 31, 2025 and 2024, we reported $9,771 million and $11,033 million of accounts and notes receivable, net of allowances of $68 million and $70 million, respectively. Based on an aging analysis at December 31, 2025, more than 95% of our accounts receivable were outstanding less than 60 days.
We are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt and accounts receivable sold under a securitization facility, as well as standby letters of credit. See Note 15—Debt, Note 17—Guarantees, and Note 18—Contingencies and Commitments for additional information on these off-balance sheet exposures.
Note 8—Inventories
Inventories at December 31 consisted of the following:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Crude oil and products | $ | 4,529 | 3,547 | ||||||||
| Materials and supplies | 568 | 448 | |||||||||
| $ | 5,097 | 3,995 | |||||||||
Inventories valued on the LIFO basis totaled $4,461 million and $3,443 million at December 31, 2025 and 2024, respectively. The increase in inventories in 2025 was primarily related to the consolidation of assets following our acquisition of the remaining ownership interest of WRB. See Note 5—Business Combinations for additional information. The estimated excess of current replacement cost over LIFO cost of inventories amounted to approximately $3.6 billion and $4.9 billion at December 31, 2025 and 2024, respectively.
During each of the three years ended December 31, 2025, certain volume reductions in inventory caused liquidations of LIFO inventory values. For the year ended December 31, 2025, LIFO inventory liquidations increased net income by $13 million. For the year ended December 31, 2024, LIFO inventory liquidations decreased net income by $10 million. For the year ended December 31, 2023, LIFO inventory liquidations increased net income by $94 million.
Note 9—Investments, Loans and Long-Term Receivables
Components of investments and long-term receivables at December 31 were:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Equity investments | $ | 11,425 | 14,013 | ||||||||
| Other investments | 177 | 191 | |||||||||
| Loans and long-term receivables | 303 | 174 | |||||||||
| $ | 11,905 | 14,378 |
Equity Investments
The following table represents our significant investments in unconsolidated affiliates at December 31:
| At December 31, 2025 | Millions of Dollars | ||||||||||||||||||||||
| VIE | Ownership Percentage | 2025 | 2024 | ||||||||||||||||||||
| Chevron Phillips Chemical Company LLC | 50.00 | % | $ | 7,899 | 7,819 | ||||||||||||||||||
| WRB Refining LP* | 100.00 | — | 2,323 | ||||||||||||||||||||
| Gulf Coast Express Pipeline LLC** | — | — | 776 | ||||||||||||||||||||
| Dakota Access, LLC | 25.00 | 748 | 777 | ||||||||||||||||||||
| JET Management Holding GmbH & Co. KG*** | 35.00 | 743 | — | ||||||||||||||||||||
| Front Range Pipeline LLC | 33.33 | 436 | 459 | ||||||||||||||||||||
| CF United LLC † | 47.09 | 298 | 284 | ||||||||||||||||||||
| OnCue Holdings, LLC †† | X | 50.00 | 211 | 185 | |||||||||||||||||||
| *** On October 1, 2025, we acquired the remaining 50% equity interest in WRB from Cenovus and began consolidating the financial results of WRB Refining LP. See Note 5—Business Combinations for additional information. | |||||||||||||||||||||||
| **** Sold as of January 30, 2025. See further discussion in “Dispositions” section below. | |||||||||||||||||||||||
| ***** On December 1, 2025, we divested 65% of our interest in Germany and Austria retail marketing business. We retained a 35% non-operating equity interest in a new entity, JET Management Holding GmbH & Co. KG (JET Management Holding). See further discussion in “Dispositions” section below. | |||||||||||||||||||||||
| † On January 1, 2024, CF United LLC (CF United) ceased to be a VIE following the completion of the acquisition of another joint venture in which we had an ownership interest. In connection with this acquisition, the governing agreement for CF United was amended and restated. The amended and restated agreement included removal of a put option that required us to purchase our co-venturer’s interest based on a fixed multiple that was considered a variable interest. | |||||||||||||||||||||||
| †† We fully guarantee various debt agreements of OnCue Holdings, LLC (OnCue), and our co-venturer does not participate in the guarantees. This entity is considered a VIE because our debt guarantees resulted in OnCue not being exposed to all potential losses. We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact economic performance. At December 31, 2025, our maximum exposure to loss was $265 million, which represented the book value of our investment in OnCue of $211 million and guaranteed debt obligations of $54 million. |
The following table presents significant basis differences between the carrying value of our investments in unconsolidated affiliates and our share of their underlying equity at December 31:
| Millions of Dollars | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Excess (deficit) of Carrying Value over (under) Underlying Equity in Unconsolidated Affiliates | ||||||||||||||
| WRB Refining LP* | $ | — | (1,526) | |||||||||||
| Gulf Coast Express Pipeline LLC** | — | 393 | ||||||||||||
| Front Range Pipeline LLC | 264 | 280 | ||||||||||||
| *** On October 1, 2025, we acquired the remaining 50% equity interest in WRB from Cenovus and began consolidating the financial results of WRB Refining LP. See Note 5—Business Combinations for additional information. | ||||||||||||||
| **** Sold as of January 30, 2025. See further discussion in “Investment Dispositions” section below. |
The basis differences result from the carrying values of our investments being higher or lower than our share of the underlying equity of our unconsolidated affiliates. Carrying amounts in excess of the underlying equity of our unconsolidated affiliates are amortized and recognized as a decrease to equity earnings over the remaining life of the underlying long-lived assets of the affiliate. Carrying amounts that are less than the underlying equity of our unconsolidated affiliates are amortized and recognized as a benefit to equity earnings over the remaining life of the underlying long-lived assets of the affiliate.
Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)
Dakota Access is a 25 percent-owned joint venture that owns a pipeline system transporting crude oil from the Bakken/Three Forks production area in North Dakota to Patoka, Illinois. ETCO is a 25 percent-owned joint venture that owns a connecting crude oil pipeline system that extends from Patoka to Nederland, Texas. These two pipeline systems collectively form the Bakken Pipeline system, which is operated by a co-venturer.
In 2020, the trial court presiding over litigation brought by the Standing Rock Sioux Tribe (the Tribe) ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) addressing environmental impacts from an easement allowing the passage of the Dakota Access Pipeline (DAPL) under Lake Oahe in North Dakota. Later in 2020, the trial court vacated the easement, but operations have been allowed to continue while the USACE proceeds with the EIS as ordered. The Tribe’s requests for a shutdown have been denied. Most recently, in March 2025, the trial court dismissed a second lawsuit filed by the Tribe, again challenging USACE’s allowance of pipeline operations while the EIS process proceeds. The Tribe’s lawsuit was premature, and the trial court held that it cannot be refiled until after a final EIS is issued.
In December 2025, the USACE published its final EIS, completing its analysis of alternatives. The final EIS evaluates five alternatives: two no-action alternatives (denial with restoration or abandonment) and three action alternatives, with one marked as USACE’s preferred alternative, that would grant the easement under varying conditions. The preferred alternative would grant the easement subject to the same conditions as the 2017 easement but would authorize an increased throughput volume of 1.1 million barrels per day (bpd), up from the previous 570,000 bpd under the original authorization. The remaining action alternatives would impose either additional operational conditions or require an alternate pipeline route, both of which may entail substantial implementation costs and could have a material impact on our financial statements.
We await a Record of Decision (ROD), which will provide a definitive statement of the selected alternative and any related conditions. The Standing Rock Sioux Tribe and affiliated parties may file a new lawsuit in Washington, D.C., challenging the ROD shortly after it is issued.
Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access. On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $1 billion aggregate principal amount of its outstanding senior notes upon maturity. We funded our 25% share of the repayment, or $250 million, with a capital contribution of $171 million in March 2024 and $79 million of distributions we elected not to receive from Dakota Access in the first quarter of 2024. At December 31, 2025, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $850 million.
In addition, Phillips 66 Partners and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At December 31, 2025, our 25% share of the maximum potential equity contributions under the CECU was approximately $215 million. If the pipeline is required to cease operations, it may have a material adverse effect on our results of operations and cash flows. Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also could be required to support our 25% share of the ongoing expenses, including scheduled interest payments on the notes of approximately $10 million annually, in addition to the potential obligations under the CECU at December 31, 2025.
At December 31, 2025 and 2024, the aggregate book value of our investments in Dakota Access and ETCO was $846 million and $883 million, respectively.
WRB Refining LP Impairment
In the third quarter of 2025, we identified impairment indicators related to our equity method investment in WRB, as a result of our definitive agreement to acquire the remaining 50% equity interest in WRB for a purchase price that was below the carrying value of our then existing 50% equity interest in WRB. We performed an impairment analysis based on a market approach and concluded the decline in fair value to be other than temporary. As a result, we recorded a $948 million before-tax impairment in our Refining segment to reduce the carrying value of our then existing 50% equity interest in WRB to its fair value of $1.3 billion as of September 30, 2025. These impairment charges are included within the “Impairments” line item on our consolidated statement of income. As a result of the acquisition, effective October 1, 2025, we began consolidating the financial results of WRB. See Note 5—Business Combinations for additional information regarding our acquisition of WRB and Note 20—Fair Value Measurements for additional information on the determination of fair value used to record these impairments.
Dispositions
On December 1, 2025, we divested 65% of our interest in Germany and Austria retail marketing business (Germany and Austria Marketing) for cash proceeds of approximately $1.7 billion (1.4 billion Euros) and retained a 35% non-operating equity interest in the newly formed entity, JET Management Holding. We also settled the foreign currency forward contracts entered into in May 2025, in connection with the asset sale, in which we sold an aggregate of approximately 1.5 billion Euros in exchange for an aggregate of approximately $1.6 billion. We recognized a before-tax gain of $1.9 billion from these transactions, which is presented within the “Net gain on dispositions” line item on our consolidated statement of income for the year ended December 31, 2025, and is reported in our M&S segment. The gain comprised of the following components:
| Millions of Dollars | |||||
| Cash proceeds received | $ | 1,664 | |||
| Fair value of 35% retained interest in JET Management Holding | 744 | ||||
| Reclassification from accumulated other comprehensive income | 49 | ||||
| Less: Carrying value of assets net of liabilities sold (including cash)* | (320) | ||||
| Less: Goodwill allocated | (141) | ||||
| Less: Foreign currency forward contract loss | (53) | ||||
| Less: Liabilities incurred in conjunction with the sale | (40) | ||||
| Gain on sale of Germany and Austria Marketing | $ | 1,903 | |||
| *** Includes trade name intangible assets associated with Germany and Austria Marketing. |
See Note 11—Goodwill and Intangibles for additional information on the allocation of goodwill and trade name intangible assets. See Note 20—Fair Value Measurements for additional information on the determination of fair value of the retained 35% equity interest. See Note 26—Accumulated Other Comprehensive Loss for additional information on the reclassification from accumulated other comprehensive loss.
As of December 1, 2025, following the divestitures, transactions with JET Management Holding will be classified and disclosed as related party transactions. See Note 29—Related Party Transactions for additional information.
On January 31, 2025, we sold our 49% ownership interest in Coop Mineraloel AG (Coop) and settled the foreign currency forward contracts entered into in connection with the asset sale. We received cash proceeds of $1.2 billion, consisting of a sales price of $1.15 billion and a final dividend relating to financial year 2024 of $92 million from Coop that was paid on January 30, 2025. We recognized a before-tax gain of $1 billion associated with the sale, which is included within the “Net gain on dispositions” line item on our consolidated statement of income for the year ended December 31, 2025, and is reported in our M&S segment. The equity investment balance was $164 million as of December 31, 2024.
On January 30, 2025, DCP Midstream, LP sold its 25% ownership interest in Gulf Coast Express Pipeline LLC for cash proceeds of $853 million. We recognized a before-tax gain of $68 million, which is included within the “Net gain on dispositions” line item on our consolidated statement of income for the year ended December 31, 2025, and is reported in our Midstream segment. The equity investment balance was $776 million as of December 31, 2024.
On December 10, 2024, we sold our equity interests in certain pipeline and terminaling assets in North Dakota for cash proceeds of approximately $143 million and recorded an immaterial before-tax loss on the sale.
On August 1, 2024, we sold our ownership interests in certain gathering and processing assets in Louisiana and Alabama for cash proceeds of $173 million and recognized a before-tax gain of $18 million, which is included in the “Net gain on dispositions” line item on our consolidated statement of income for the year ended December 31, 2024, and is reported in the Midstream segment.
On June 14, 2024, we sold our 25% ownership interest in Rockies Express Pipeline LLC for cash proceeds of $685 million and recognized a before-tax gain of $238 million, which is included in the “Net gain on dispositions” line item on our consolidated statement of income for the year ended December 31, 2024, and is reported in the Midstream segment.
Equity Affiliate Distributions
Total cash distributions received from affiliates were $971 million, $1,525 million, and $1,396 million for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, at December 31, 2025, retained earnings included approximately $3.7 billion related to the undistributed earnings of affiliated companies.
Summarized Equity Affiliate Financial Information
Summarized 100% financial information for all affiliated companies accounted for under the equity method, on a combined basis, as of and for the years ended December 31 was:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenues | $ | 32,377 | 42,069 | 42,078 | |||||||||||||
| Income before income taxes | 2,416 | 4,846 | 5,350 | ||||||||||||||
| Net income | 2,305 | 4,674 | 5,160 | ||||||||||||||
| Current assets | 5,221 | 6,820 | 6,759 | ||||||||||||||
| Noncurrent assets | 33,646 | 46,480 | 46,241 | ||||||||||||||
| Current liabilities | 3,898 | 6,494 | 5,750 | ||||||||||||||
| Noncurrent liabilities | 8,108 | 9,304 | 10,980 | ||||||||||||||
| Noncontrolling interests | — | 2 | 2 |
Includes results from our equity method investment in WRB through September 30, 2025, and for the years ended December 31, 2024 and 2023. On October 1, 2025, we acquired the remaining 50% equity interest in WRB from Cenovus and began consolidating the financial results of WRB Refining LP. See Note 5—Business Combinations for additional information
Note 10—Properties, Plants and Equipment
Our investment in PP&E is recorded at cost. Investments in refining and processing facilities are generally depreciated on a straight-line basis over a 25-year life, pipeline assets over a 45-year life, terminal assets over a 35-year life, and gathering systems over a 35-year life. The company’s investment in PP&E, with the associated accumulated depreciation and amortization (Accum. D&A), at December 31 was:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Gross PP&E | Accum. D&A | Net PP&E | Gross PP&E | Accum. D&A | Net PP&E | ||||||||||||||||||||||||||||||
| Midstream | $ | 29,558 | 5,771 | 23,787 | 26,187 | 4,820 | 21,367 | ||||||||||||||||||||||||||||
| Chemicals | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Refining | 25,955 | 13,685 | 12,270 | 22,274 | 11,991 | 10,283 | |||||||||||||||||||||||||||||
| Marketing and Specialties | 1,014 | 543 | 471 | 2,091 | 1,267 | 824 | |||||||||||||||||||||||||||||
| Renewable Fuels | 3,772 | 1,762 | 2,010 | 3,716 | 1,669 | 2,047 | |||||||||||||||||||||||||||||
| Corporate and Other | 1,492 | 933 | 559 | 1,688 | 945 | 743 | |||||||||||||||||||||||||||||
| $ | 61,791 | 22,694 | 39,097 | 55,956 | 20,692 | 35,264 |
See Note 4—Restructuring, for information regarding the cessation of fuel production and idling of the Los Angeles Refinery. See Note 5—Business Combinations and Note 20—Fair Value Measurements for additional information regarding our acquisitions in the Midstream, Refining and Marketing and Specialties segments. See Note 9—Investments, Loans and Long-Term Receivables for additional information regarding the partial sale of Germany and Austria Marketing in the M&S segment. See Note 12—Impairments, for information regarding PP&E impairments the Refining and Midstream segments.
On August 30, 2024, we sold certain Midstream gathering and processing assets in Texas for cash proceeds of $41 million and recognized a before-tax loss of $9 million, which is included in the “Net gain on dispositions” line item on our consolidated statement of income for the year ended December 31, 2024.
Note 11—Goodwill and Intangibles
The carrying amount of goodwill by segment at December 31 was:
| Millions of Dollars | |||||||||||||||||||||||
| Midstream | Marketing and Specialties | Total | |||||||||||||||||||||
| Balance at December 31, 2023 | $ | 626 | 924 | 1,550 | |||||||||||||||||||
| Goodwill assigned to acquisitions | 22 | 3 | 25 | ||||||||||||||||||||
| Balance at December 31, 2024 | 648 | 927 | 1,575 | ||||||||||||||||||||
| Adjustments | — | (1) | (1) | ||||||||||||||||||||
| Goodwill assigned to divestiture | — | (141) | (141) | ||||||||||||||||||||
| Balance at December 31, 2025 | $ | 648 | 785 | 1,433 |
On December 1, 2025, we divested 65% of our interest in Germany and Austria Marketing, and derecognized $141 million goodwill in connection with the disposition. The $141 million goodwill allocated to Germany and Austria Marketing is based on the relative fair value of Germany and Austria Marketing compared to the fair value of the M&S reporting unit. See Note 9—Investments, Loans and Long-Term Receivables for additional information on the disposition.
On July 1, 2024, we acquired Dos Picos in our Midstream segment and recognized goodwill of $21 million associated with this acquisition. Refer to Note 5—Business Combinations for additional information.
Intangible Assets
Intangible Assets with Indefinite Useful Lives
The gross carrying value of indefinite-lived intangible assets at December 31 consisted of the following:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Trade names and trademarks | $ | 410 | 503 | ||||||||
| Refinery air and operating permits | 117 | 109 | |||||||||
| $ | 527 | 612 |
During the year ended December 31, 2025, our trade names and trademarks intangible balances decreased $93 million, primarily due to the derecognition of a trade name in connection with the partial sale of Germany and Austria Marketing. See Note 9—Investments, Loans and Long-Term Receivables for additional information on the disposition.
Intangible Assets with Finite Useful Lives
The net book value of our amortized intangible assets was $450 million at December 31, 2025, and $549 million at December 31, 2024. These balances include accumulated amortization of $462 million and $408 million, at December 31, 2025 and 2024, respectively. The amortized intangible assets are primarily related to customer relationships.
On July 1, 2024, we acquired Dos Picos in our Midstream segment and recorded $256 million in amortizable intangible assets, which have a weighted-average amortization period of 20 years. Associated with the 2024 acquisition and final valuation of a marketing business on the U.S. West Coast, in our M&S segment, we recorded $20 million in amortizable intangible assets. See Note 5—Business Combinations for additional information.
For the years ended December 31, 2025, 2024 and 2023, amortization expense was $138 million, $53 million and $33 million, respectively. The increases in amortization expense for the years ended December 31, 2025 and 2024 are primarily due to the accelerated amortization resulting from the cessation of fuel production and idling of our Los Angeles Refinery. See Note 4—Restructuring for additional information. Expected amortization expenses beyond 2026 are less than $50 million per year.
Note 12—Impairments
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Midstream | $ | 79 | 346 | 3 | |||||||||||||
| Refining | 955 | 106 | 10 | ||||||||||||||
| Marketing and Specialties | 1 | 3 | 3 | ||||||||||||||
| Corporate and Other | 25 | 1 | 8 | ||||||||||||||
| Total impairments | $ | 1,060 | 456 | 24 |
For the year ended December 31, 2025, we recorded before-tax impairments totaling $1.1 billion, which included $955 million recorded in our Refining segment and $79 million recorded in our Midstream segment. Refining segment impairments included a $948 million before-tax impairment related to our equity method investment in WRB. See Note 9—Investments, Loans and Long-Term Receivables for additional information. The Midstream segment included a $79 million before-tax impairment related to an equity investment in an NGL pipeline in Texas.
For the year ended December 31, 2024, we recorded before-tax impairments totaling $456 million, which included $346 million recorded in our Midstream segment and $106 million recorded in our Refining segment. Midstream segment impairments included $224 million related to certain gathering and processing assets in Texas, $35 million related to an equity investment in a crude pipeline in Oklahoma, and $28 million related to certain crude gathering assets in Texas. Before-tax impairments for the year ended December 31, 2024 also included $163 million related to certain crude oil processing and logistics assets in California, of which $104 million was reported in our Refining segment and $59 million was reported in our Midstream segment.
These impairment charges are included within the “Impairments” line item on our consolidated income statement. See Note 20—Fair Value Measurements for additional information on the determination of fair value used to record these impairments.
Note 13—Asset Retirement Obligations and Accrued Environmental Costs
Asset retirement obligations and accrued environmental costs at December 31 were:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Asset retirement obligations | $ | 721 | 771 | ||||||||
| Accrued environmental costs | 506 | 439 | |||||||||
| Total asset retirement obligations and accrued environmental costs | 1,227 | 1,210 | |||||||||
| Asset retirement obligations and accrued environmental costs due within one year* | (205) | (81) | |||||||||
| Long-term asset retirement obligations and accrued environmental costs | $ | 1,022 | 1,129 |
** Classified as a current liability, which is presented within the “Other accruals” line item on our consolidated balance sheet.*
Asset Retirement Obligations
We have asset retirement obligations that we are required to perform under law or contract once an asset is permanently taken out of service. Our recognized asset retirement obligations primarily involve asbestos abatement at our current refineries, or at sites we own that were previously utilized as refineries; decommissioning, removal or dismantlement of certain assets at refineries that have ceased or will cease operations; and decommissioning, removal or dismantlement of certain midstream pipelines and processing facilities. Asset retirement obligations related to dismantlement or removal of assets at certain leased international marketing sites were derecognized as of December 31, 2025, following the partial sale of Germany and Austria Marketing. Most of our asset retirement obligations are not expected to be paid until many years in the future and are expected to be funded from general company resources at the time of removal.
Our overall asset retirement obligations changed as follows during the years ended December 31:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at January 1 | $ | 771 | 537 | ||||||||
| Accretion of discount | 34 | 27 | |||||||||
| New obligations | 42 | 261 | |||||||||
| Changes in estimates of existing obligations | 81 | 33 | |||||||||
| Spending on existing obligations | (84) | (25) | |||||||||
| Asset dispositions | (138) | (55) | |||||||||
| Foreign currency translation | 15 | (7) | |||||||||
| Balance at December 31 | $ | 721 | 771 |
During the year ended December 31, 2025, our asset retirement obligations balance decreased $50 million. This decrease was primarily due to the derecognition of obligations as a result of the partial sale of Germany and Austria Marketing, partially offset by increased estimates in existing obligations of $81 million, primarily due to the cessation of fuel production and idling of the Los Angeles Refinery, and new obligations of $42 million, primarily from the WRB acquisition. See Note 4—Restructuring for additional information on the cessation of fuel production and idling of the Los Angeles Refinery; See Note 5—Business Combinations for additional information on the WRB acquisition; See Note 9—Investments, Loans and Long-Term Receivables for additional information regarding the partial sale of Germany and Austria Marketing.
Accrued Environmental Costs
Of our total accrued environmental costs at December 31, 2025, $373 million was primarily related to cleanup at current domestic refineries, or at sites we own that were previously utilized as domestic refineries, and underground storage tanks at U.S. service stations; $96 million was associated with non-operated sites; and $37 million was related to sites at which we have been named a potentially responsible party under federal or state laws. A large portion of our expected environmental expenditures have been discounted as these obligations were acquired in various business combinations. Expected expenditures for acquired environmental obligations were discounted using a weighted-average discount rate of approximately 5%. At December 31, 2025, the accrued balance for acquired environmental liabilities was $304 million. The expected future undiscounted payments related to the portion of the accrued environmental costs that have been discounted are: $35 million in 2026, $24 million in 2027, $28 million in 2028, $34 million in 2029, $24 million in 2030, and $230 million in the aggregate for all years after 2030.
Note 14—Earnings Per Share
The numerator of basic earnings per share (EPS) is net income attributable to Phillips 66, adjusted for noncancelable dividends paid on unvested share-based employee awards during the vesting period (participating securities). The denominator of basic EPS is the sum of the daily weighted-average number of common shares outstanding during the periods presented and fully vested stock and unit awards that have not yet been issued as common stock. The numerator of diluted EPS is also based on net income attributable to Phillips 66, which is reduced by dividend equivalents paid on participating securities for which the dividends are more dilutive than the participation of the awards in the earnings of the periods presented. To the extent unvested stock, unit or option awards and vested unexercised stock options are dilutive, they are included with the weighted-average common shares outstanding in the denominator. Treasury stock is excluded from the denominator in both basic and diluted EPS.
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||||
| Amounts Attributed to Phillips 66 Common Stockholders (millions): | ||||||||||||||||||||||||||
| Net Income Attributable to Phillips 66 | $ | 4,403 | 4,403 | 2,117 | 2,117 | 7,015 | 7,015 | |||||||||||||||||||
| Income allocated to participating securities | (9) | (2) | (10) | (10) | (11) | — | ||||||||||||||||||||
| Net income available to common stockholders | $ | 4,394 | 4,401 | 2,107 | 2,107 | 7,004 | 7,015 | |||||||||||||||||||
| Weighted-average common shares outstanding (thousands): | 404,783 | 406,008 | 418,607 | 420,174 | 448,381 | 450,136 | ||||||||||||||||||||
| Effect of share-based compensation | 1,225 | 2,045 | 1,567 | 1,714 | 1,755 | 3,074 | ||||||||||||||||||||
| Weighted-average common shares outstanding—EPS | 406,008 | 408,053 | 420,174 | 421,888 | 450,136 | 453,210 | ||||||||||||||||||||
| Earnings Per Share of Common Stock (dollars) | $ | 10.82 | 10.79 | 5.01 | 4.99 | 15.56 | 15.48 |
Note 15—Debt
Short-term and long-term debt at December 31 was:
| Millions of Dollars | |||||||||||||||||
| December 31, 2025 | |||||||||||||||||
| Phillips 66 | Phillips 66 Company | Phillips 66 Partners | DCP LP | Total | |||||||||||||
| 1.300% Senior Notes due February 2026 | 100 | — | — | — | 100 | ||||||||||||
| 3.550% Senior Notes due October 2026 | — | 458 | 34 | — | 492 | ||||||||||||
| 5.625% Senior Notes due July 2027 | — | — | — | 500 | 500 | ||||||||||||
| 4.950% Senior Notes due December 2027 | — | 750 | — | — | 750 | ||||||||||||
| 3.750% Senior Notes due March 2028 | — | 427 | 73 | — | 500 | ||||||||||||
| 3.900% Senior Notes due March 2028 | 800 | — | — | — | 800 | ||||||||||||
| 5.125% Senior Notes due May 2029 | — | — | — | 600 | 600 | ||||||||||||
| 3.150% Senior Notes due December 2029 | — | 570 | 30 | — | 600 | ||||||||||||
| 8.125% Senior Notes due August 2030 | — | — | — | 300 | 300 | ||||||||||||
| 2.150% Senior Notes due December 2030 | 850 | — | — | — | 850 | ||||||||||||
| 5.250% Senior Notes due June 2031 | — | 1,200 | — | — | 1,200 | ||||||||||||
| 3.250% Senior Notes due February 2032 | — | — | — | 400 | 400 | ||||||||||||
| 5.300% Senior Notes due June 2033 | — | 900 | — | — | 900 | ||||||||||||
| 4.650% Senior Notes due November 2034 | 1,000 | — | — | — | 1,000 | ||||||||||||
| 4.950% Senior Notes due March 2035 | — | 600 | — | — | 600 | ||||||||||||
| 6.450% Senior Notes due November 2036 | — | — | — | 300 | 300 | ||||||||||||
| 6.750% Senior Notes due September 2037 | — | — | — | 450 | 450 | ||||||||||||
| 5.875% Senior Notes due May 2042 | 1,500 | — | — | — | 1,500 | ||||||||||||
| 5.600% Senior Notes due April 2044 | — | — | — | 400 | 400 | ||||||||||||
| 4.875% Senior Notes due November 2044 | 1,700 | — | — | — | 1,700 | ||||||||||||
| 4.680% Senior Notes due February 2045 | — | 442 | 8 | — | 450 | ||||||||||||
| 4.900% Senior Notes due October 2046 | — | 605 | 20 | — | 625 | ||||||||||||
| 3.300% Senior Notes due March 2052 | 1,000 | — | — | — | 1,000 | ||||||||||||
| 5.650% Senior Notes due June 2054 | — | 500 | — | — | 500 | ||||||||||||
| 5.500% Senior Notes due March 2055 | — | 600 | — | — | 600 | ||||||||||||
| 5.875% Series A Junior Subordinated Notes due March 2056 | — | 1,000 | — | — | 1,000 | ||||||||||||
| 6.200% Series B Junior Subordinated Notes due March 2056 | — | 1,000 | — | — | 1,000 | ||||||||||||
| Commercial paper due January 2026 at 3.952% at year-end 2025 | 200 | — | — | — | 200 | ||||||||||||
| Receivables Securitization Facility due September 2026 at 4.538% at year-end 2025 | 200 | — | — | — | 200 | ||||||||||||
| Debt at face value | 7,350 | 9,052 | 165 | 2,950 | 19,517 | ||||||||||||
| Finance leases | 338 | ||||||||||||||||
| Software obligations | 34 | ||||||||||||||||
| Net unamortized discounts, debt issuance costs and acquisition fair value adjustments | (173) | ||||||||||||||||
| Total debt | 19,716 | ||||||||||||||||
| Short-term debt | (1,038) | ||||||||||||||||
| Long-term debt | $ | 18,678 |
| Millions of Dollars | |||||||||||||||||
| December 31, 2024 | |||||||||||||||||
| Phillips 66 | Phillips 66 Company | Phillips 66 Partners | DCP LP | Total | |||||||||||||
| 3.605% Senior Notes due February 2025 | — | — | 59 | — | 59 | ||||||||||||
| 5.375% Senior Notes due July 2025 | — | — | — | 525 | 525 | ||||||||||||
| 1.300% Senior Notes due February 2026 | 500 | — | — | — | 500 | ||||||||||||
| 3.550% Senior Notes due October 2026 | — | 458 | 34 | — | 492 | ||||||||||||
| 5.625% Senior Notes due July 2027 | — | — | — | 500 | 500 | ||||||||||||
| 4.950% Senior Notes due December 2027 | — | 750 | — | — | 750 | ||||||||||||
| 3.750% Senior Notes due March 2028 | — | 427 | 73 | — | 500 | ||||||||||||
| 3.900% Senior Notes due March 2028 | 800 | — | — | — | 800 | ||||||||||||
| 5.125% Senior Notes due May 2029 | — | — | — | 600 | 600 | ||||||||||||
| 3.150% Senior Notes due December 2029 | — | 570 | 30 | — | 600 | ||||||||||||
| 8.125% Senior Notes due August 2030 | — | — | — | 300 | 300 | ||||||||||||
| 2.150% Senior Notes due December 2030 | 850 | — | — | — | 850 | ||||||||||||
| 5.250% Senior Notes due June 2031 | — | 1,200 | — | — | 1,200 | ||||||||||||
| 3.250% Senior Notes due February 2032 | — | — | — | 400 | 400 | ||||||||||||
| 5.300% Senior Notes due June 2033 | — | 900 | — | — | 900 | ||||||||||||
| 4.650% Senior Notes due November 2034 | 1,000 | — | — | — | 1,000 | ||||||||||||
| 4.950% Senior Notes due March 2035 | — | 600 | — | — | 600 | ||||||||||||
| 6.450% Senior Notes due November 2036 | — | — | — | 300 | 300 | ||||||||||||
| 6.750% Senior Notes due September 2037 | — | — | — | 450 | 450 | ||||||||||||
| 5.875% Senior Notes due May 2042 | 1,500 | — | — | — | 1,500 | ||||||||||||
| 5.600% Senior Notes due April 2044 | — | — | — | 400 | 400 | ||||||||||||
| 4.875% Senior Notes due November 2044 | 1,700 | — | — | — | 1,700 | ||||||||||||
| 4.680% Senior Notes due February 2045 | — | 442 | 8 | — | 450 | ||||||||||||
| 4.900% Senior Notes due October 2046 | — | 605 | 20 | — | 625 | ||||||||||||
| 3.300% Senior Notes due March 2052 | 1,000 | — | — | — | 1,000 | ||||||||||||
| 5.650% Senior Notes due June 2054 | — | 500 | — | — | 500 | ||||||||||||
| 5.500% Senior Notes due March 2055 | — | 600 | — | — | 600 | ||||||||||||
| Commercial paper due January 2025 at 4.695% at year-end 2024 | 435 | — | — | — | 435 | ||||||||||||
| Uncommitted Facility due July 2025 at 5.300% at year-end 2024 | — | 400 | — | — | 400 | ||||||||||||
| Receivables Securitization Facility due September 2025 at 5.182% at year-end 2024 | — | 375 | — | — | 375 | ||||||||||||
| Floating Rate Term Loan due June 2026 at 5.445% at year-end 2024 | — | 550 | — | — | 550 | ||||||||||||
| Other | 1 | — | — | — | 1 | ||||||||||||
| Debt at face value | 7,786 | 8,377 | 224 | 3,475 | 19,862 | ||||||||||||
| Finance leases | 352 | ||||||||||||||||
| Software obligations | 17 | ||||||||||||||||
| Net unamortized discounts, debt issuance costs and acquisition fair value adjustments | (169) | ||||||||||||||||
| Total debt | 20,062 | ||||||||||||||||
| Short-term debt | (1,831) | ||||||||||||||||
| Long-term debt | $ | 18,231 |
Maturities of borrowings outstanding at December 31, 2025, inclusive of net unamortized discounts and debt issuance costs, for each of the years from 2026 through 2030 are $1,038 million, $1,282 million, $1,319 million, $1,217 million and $1,192 million, respectively.
Senior Notes and Term Loan Issuances and Repayments
Issuances
On September 11, 2024, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, issued $1.8 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66. The senior unsecured notes issuance consisted of:
-
$600 million aggregate principal amount of 5.250% Senior Notes due 2031 (Additional 2031 Notes).
-
$600 million aggregate principal amount of 4.950% Senior Notes due 2035 (2035 Notes).
-
$600 million aggregate principal amount of 5.500% Senior Notes due 2055 (2055 Notes).
Interest on the Additional 2031 Notes is payable semi-annually on June 15 and December 15 of each year and commenced on December 15, 2024. Interest on the 2035 Notes and 2055 Notes is payable semi-annually on March 15 and September 15 of each year and commenced on March 15, 2025.
On February 28, 2024, Phillips 66 Company issued $1.5 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66. The senior unsecured notes issuance consisted of:
-
$600 million aggregate principal amount of 5.250% Senior Notes due 2031 (2031 Notes).
-
$400 million aggregate principal amount of 5.300% Senior Notes due 2033 (Additional 2033 Notes).
-
$500 million aggregate principal amount of 5.650% Senior Notes due 2054 (2054 Notes).
Interest on the 2031 Notes and 2054 Notes is payable semi-annually on June 15 and December 15 of each year and commenced on June 15, 2024. Interest on the Additional 2033 Notes is payable semi-annually on June 30 and December 30 of each year and commenced on June 30, 2024.
On March 29, 2023, Phillips 66 Company issued $1.25 billion aggregate principal amount of senior unsecured notes that are fully and unconditionally guaranteed by Phillips 66. The senior unsecured notes issuance consisted of:
-
$750 million aggregate principal amount of 4.950% Senior Notes due December 2027.
-
$500 million aggregate principal amount of 5.300% Senior Notes due June 2033.
Repayments
On December 31, 2025, Phillips 66 early redeemed $400 million of its 1.300% Senior Notes due February 2026. After the redemption, an aggregate principal amount of $100 million remained outstanding.
On December 4, 2025, Phillips 66 Company repaid the remaining $550 million outstanding under its delayed draw term loan agreement (the Term Loan Agreement), which had a maturity date of June 2026, and terminated this agreement.
On June 27, 2025, DCP LP early redeemed the outstanding $525 million of its 5.375% Senior Notes due July 2025, with an aggregate principal amount of $825 million.
On February 18, 2025, upon maturity, Phillips 66 Partners repaid its 3.605% Senior Notes due February 2025, with an aggregate principal amount of $59 million.
On December 16, 2024, upon maturity, Phillips 66 Company and Phillips 66 Partners repaid the 2.450% Senior Notes due December 2024 with an aggregate principal amount of $300 million.
On March 29, 2024, DCP LP early redeemed $300 million of its 5.375% Senior Notes due July 2025, at par with an aggregate principal amount of $825 million.
On March 4, 2024, Phillips 66 Company repaid $700 million of the $1.25 billion borrowed under its delayed draw term loan that matures in June 2026.
On February 15, 2024, upon maturity, Phillips 66 repaid its 0.900% senior notes due February 2024 with an aggregate principal amount of $800 million.
On May 19, 2023, DCP LP redeemed its 5.850% junior subordinated notes due May 2043 with an aggregate principal amount outstanding of $550 million. On the date of redemption, our carrying value of DCP LP’s junior subordinated notes was $497 million, which resulted in a $53 million before-tax loss. DCP LP’s junior subordinated notes were adjusted to fair value on August 17, 2022, in connection with the consolidation of DCP LP. See Note 20—Fair Value Measurements for additional information regarding the fair value of DCP LP’s junior subordinated notes.
On March 15, 2023, DCP LP repaid its 3.875% senior unsecured notes due March 2023 with an aggregate principal amount of $500 million.
Discharge of Senior Notes
On September 20, 2024, we extinguished (i) the remaining $441 million outstanding principal amount of Phillips 66 Company’s 3.605% senior notes due February 2025 (2025 P66 Co Notes), and (ii) the remaining $650 million outstanding principal amount of Phillips 66’s 3.850% senior notes due April 2025 (the 2025 PSX Notes, and together with the 2025 P66 Co Notes, the Discharged Notes), whereby we irrevocably transferred a total of $1.1 billion in government obligations to the trustee of the 2025 P66 Co Notes and the 2025 PSX Notes. The cash paid to purchase the government obligations is included within investing cash flows on our consolidated statement of cash flows. These government obligations yielded sufficient principal and interest over their remaining term to permit the trustee to satisfy the remaining principal and interest due on the Discharged Notes on the applicable maturity dates. On September 20, 2024, Phillips 66 and Phillips 66 Company ceased to be the primary obligors under the Discharged Notes. The transfer of the government obligations to the trustee was accounted for as a transfer of financial assets. The Discharged Notes and the government obligations were derecognized from our balance sheet at December 31, 2024. For the year ended December 31, 2024, we recognized an immaterial gain on the extinguishment of this debt.
Term Loan Agreement
On March 27, 2023, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, entered into a $1.5 billion delayed draw term loan agreement guaranteed by Phillips 66. The Term Loan Agreement provides for a single borrowing during a 90-day period commencing on the closing date, which borrowing was contingent upon the completion of the DCP LP Merger. The Term Loan Agreement contains customary covenants similar to those contained in our revolving credit agreement, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Term Loan Agreement has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Term Loan Agreement, in whole or in part, without premium or penalty. Outstanding borrowings under the Term Loan Agreement bear interest at either: (a) the adjusted term Secured Overnight Financing Rate (SOFR) in effect from time to time plus the applicable margin; or (b) the reference rate plus the applicable margin, as defined in the Term Loan Agreement. At December 31, 2025, no borrowings were outstanding under the Term Loan Agreement, as the remaining balance was prepaid in full on December 4, 2025. At December 31, 2024, $550 million was outstanding under the Term Loan Agreement, which had a maturity date of June 2026. This agreement was terminated as of December 31, 2025.
Related Party Advance Term Loan Agreements
On December 31, 2024, WRB distributed its Advance Term Loan with a principal balance of $290 million, including the right to receive any accrued but unpaid interest, to Phillips 66 Company, resulting in the reduction of our related party debt balance and our investment in WRB by $290 million. The distribution was recognized as a non-cash investing and financing transaction.
Junior Subordinated Notes Issuances
On September 18, 2025, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, issued $2 billion aggregate principal amount of junior subordinated notes that are fully and unconditionally guaranteed by Phillips 66. The junior subordinated notes issuance consisted of:
-
$1 billion aggregate principal amount of 5.875% Series A Junior Subordinated Notes due 2056 (Series A 2056 Notes).
-
$1 billion aggregate principal amount of 6.200% Series B Junior Subordinated Notes due 2056 (Series B 2056 Notes).
Interest on the Series A 2056 Notes and Series B 2056 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2026. The Series A 2056 Notes will bear interest at 5.875% per year until March 15, 2031. The interest rate will reset every five years beginning on March 15, 2031, to equal the then-current five-year U.S. Treasury rate plus a spread of 2.283%, provided that the interest rate will not reset below 5.875%. The Series B 2056 Notes will bear interest at 6.200% per year until March 15, 2036. The interest rate will reset every five years beginning on March 15, 2036, to equal the then-current five-year U.S. Treasury rate plus a spread of 2.166%, provided that the interest rate will not reset below 6.200%. We may defer interest payments on the Series A 2056 Notes and Series B 2056 Notes on one or more occasions for up to 10 consecutive years per deferral period. If interest payments on the Series A 2056 Notes or Series B 2056 Notes are deferred, we may not, subject to certain limited exceptions, declare or pay any dividends or distributions, or redeem, purchase, acquire, or make a liquidation payment on any of our capital stock during the deferral period. Also, during the deferral period, we may not (i) pay any principal of, or interest or premium, if any, on or repay, repurchase or redeem any debt securities of Phillips 66 or Phillips 66 Company that rank equally with, or junior to, the Series A 2056 Notes and Series B 2056 Notes, respectively, in right of payment or (ii) make any payments with respect to any guarantee by Phillips 66 or Phillips 66 Company of indebtedness if the guarantee ranks equally with or junior to the Series A 2056 Notes or Series B 2056 Notes, respectively, in right of payment.
Accounts Receivable Securitization
On September 30, 2024, Phillips 66 Company entered into a 364-day, $500 million accounts receivable securitization facility (the Receivables Securitization Facility). Under the Receivables Securitization Facility, Phillips 66 Company sells or contributes on an ongoing basis, certain of its accounts receivable, together with related security and interests in the proceeds thereof, to its wholly owned subsidiary, Phillips 66 Receivables LLC (P66 Receivables), a consolidated and bankruptcy-remote special purpose entity created for the sole purpose of transacting under the Receivables Securitization Facility. On April 1, 2025, Phillips 66 Company amended the Receivables Securitization Facility to, among other things, increase the maximum size of the Receivables Securitization Facility from $500 million to $1 billion. On September 29, 2025, Phillips 66 Company amended the Receivables Securitization Facility to, among other things, increase the maximum size of the Receivables Securitization Facility from $1 billion to $1.25 billion and extend the term of the facility through September 28, 2026. Under the amended Receivables Securitization Facility, P66 Receivables may borrow and incur indebtedness from, and/or sell certain accounts receivable in an amount not to exceed $1.25 billion in the aggregate, and will secure its obligations with a pledge of undivided interests in such receivables, together with related security and interests in the proceeds thereof, to PNC Bank, National Association, as Administrative Agent, for the benefit of the secured parties thereunder. Accounts receivable outstanding under the Receivables Securitization Facility accrue interest at an adjusted SOFR plus the applicable margin. In all instances, Phillips 66 Company retains the servicing of the accounts receivables transferred.
P66 Receivables’ sole activity consists of purchasing accounts receivable from Phillips 66 Company, providing those accounts receivable as collateral for P66 Receivables’ borrowings or on-selling certain of its accounts receivable under the Receivables Securitization Facility. P66 Receivables is a separate legal entity with its own separate creditors, who will be entitled, upon its liquidation, to be satisfied out of P66 Receivables’ assets prior to assets or value in P66 Receivables becoming available to P66 Receivables’ equity holders. The assets of P66 Receivables, including any funds of P66 Receivables that may be commingled with funds of any of its affiliates for purposes of cash management and related efficiencies, are not available to pay creditors of Phillips 66 Company, Phillips 66 or any affiliate thereof. Collections on accounts receivable in excess of amounts owed by P66 Receivables under the Receivables Securitization Facility are available to P66 Receivables for payment to Phillips 66 Company, for sales of its accounts receivable to P66 Receivables under the Receivables Securitization Facility, and otherwise for distribution to Phillips 66 Company, in each case, subject to the terms set forth in the Receivables Securitization Facility. The amount available for borrowing or sale
of accounts receivable may be limited by the availability of eligible accounts receivable and other customary factors and conditions, as well as the covenants set forth in the Receivables Securitization Facility.
Sales of accounts receivable under the Receivables Securitization Facility meet the sale criteria under ASC 860, Transfers and Servicing, and are derecognized from the consolidated balance sheet. P66 Receivables guarantees payment, in full, for accounts receivable sold to the purchasers. Cash receipts from the sale of accounts receivable under the Receivables Securitization Facility, received at the time of sale, are classified as cash flows from operating activities. For the year-ended December 31, 2025, we sold $759 million in accounts receivable in exchange for cash proceeds of $290 million, and a $469 million reduction in our borrowings under the Receivables Securitization Facility which was recognized as a non-cash financing transaction. For the year ended December 31, 2024, we sold $125 million in accounts receivable in exchange for a $125 million reduction in our borrowings under the Receivables Securitization Facility, which was recognized as a non-cash financing transaction. We recognized immaterial charges associated with the transfer of financial assets, which are included as a component within the line item “Selling, general and administrative expense” on our consolidated statement of income for the years ended December 31, 2025 and 2024.
Borrowings under the Receivables Securitization Facility are recognized as short-term debt on the consolidated balance sheet. Borrowings are secured by the accounts receivable, held by P66 Receivables, which remain reported as accounts receivable on the consolidated balance sheet. At December 31, 2025 and 2024, we had outstanding borrowings of $200 million and $375 million, respectively. These borrowings were secured by accounts receivable held by P66 Receivables of $4.4 billion and $4.6 billion for 2025 and 2024, respectively, which are included within the “Accounts and notes receivable” line item on our consolidated balance sheet.
At December 31, 2025, we had utilized $367 million of the $1.25 billion capacity of the Receivables Securitization Facility from $167 million of sold accounts receivable not yet remitted to the Administrative Agent and $200 million of outstanding borrowings. At December 31, 2024, we had utilized the full $500 million capacity of our Receivables Securitization Facility from $125 million of sold accounts receivable not yet remitted to the Administrative Agent and $375 million of outstanding borrowings.
Credit Facilities and Commercial Paper
Phillips 66 and Phillips 66 Company
On January 13, 2025, we entered into a $200 million uncommitted credit facility (the 2025 Uncommitted Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor. The 2025 Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities. The 2025 Uncommitted Facility has no commitment fees or compensating balance requirements. Outstanding borrowings under the 2025 Uncommitted Facility bear interest at a rate of either (a) the adjusted term SOFR plus the applicable margin, (b) the adjusted daily simple SOFR plus the applicable margin or (c) the base rate, in each case plus the applicable margin. Each borrowing matures six months from the date of such borrowing. We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty. At December 31, 2025, no borrowings were outstanding under the 2025 Uncommitted Facility.
On June 25, 2024, we entered into a $400 million uncommitted credit facility (the 2024 Uncommitted Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor. The 2024 Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities. The 2024 Uncommitted Facility has no commitment fees or compensating balance requirements. Outstanding borrowings under the 2024 Uncommitted Facility bear interest at a rate of either (a) the adjusted term SOFR, (b) the adjusted daily simple SOFR or (c) the reference rate, in each case plus the applicable margin. Each borrowing matures six months from the date of such borrowing. We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty. At December 31, 2025, no borrowings were outstanding, while at December 31, 2024, the entire $400 million had been drawn under the 2024 Uncommitted Facility.
On February 28, 2024, we entered into a new $5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029. The Facility replaced our previous $5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as the guarantor, and the previous revolving credit facility was terminated. The Facility contains customary covenants similar to the previous revolving credit facility, including a maximum consolidated net
debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Facility, in whole or in part, without premium or penalty. We have the option to increase the overall capacity to $6 billion, subject to certain conditions. We also have the option to extend the scheduled maturity of the Facility for up to two additional one-year terms, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment. Outstanding borrowings under the Facility bear interest at either: (a) the adjusted term SOFR (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The pricing levels for the commitment fee and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time. At December 31, 2025 and 2024, no amounts were drawn under the Facility or the previous revolving credit facility.
Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to less than one year. At December 31, 2025, and 2024, $200 million and $435 million, respectively, of commercial paper had been issued under this program.
DCP Midstream Class A Segment
On March 15, 2024, DCP LP terminated its $1.4 billion credit facility and its accounts receivable securitization facility that previously provided for up to $350 million of borrowing capacity. In conjunction with the termination of these facilities, DCP LP repaid $25 million in borrowings outstanding under its $1.4 billion credit facility and $350 million of borrowings outstanding under its accounts receivable securitization facility during the three months ended March 31, 2024.
Total Committed Capacity Available
At December 31, 2025, and 2024, we had $5.7 billion and $4.6 billion, respectively, of total committed capacity available under the credit facilities described above.
Note 16—Accounts Receivable Factoring
In addition to the Receivables Securitization Facility, discussed in Note 15—Debt, the Company entered into other facilities with various financial institutions during the fourth quarter of 2025 that enable the Company to sell certain eligible accounts receivable to these financial institutions on a non-recourse basis. Sales of accounts receivable under these facilities meet the sale criteria under ASC 860, Transfers and Servicing, and are derecognized from the consolidated balance sheet. Cash receipts from the sale of accounts receivable, received at the time of sale, are classified as cash flows from operating activities. The Company retains the servicing on all accounts receivable sold under these facilities. For the year ended December 31, 2025, we sold $195 million of accounts receivable under these facilities for cash proceeds. We recognized immaterial charges associated with these transfers, which are included as a component within the line item “Selling, general and administrative expense” on our consolidated statement of income for the year ended December 31, 2025.
Note 17—Guarantees
At December 31, 2025, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability either because the guarantees were issued prior to December 31, 2002, or because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantees and expect future performance to be either immaterial or have only a remote chance of occurrence.
Lease Residual Value Guarantees
Under the operating lease agreement for our headquarters facility in Houston, Texas, we had the option at the end of the existing lease term to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. In September 2025, we amended and extended the lease term to September 2030. Under the new operating lease agreement, we have a residual value guarantee with a maximum potential future exposure of $404 million at December 31, 2025.
We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $175 million. These leases have remaining terms of one to ten years.
Guarantees of Joint Venture Obligations
In March 2019, Phillips 66 Partners and its co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering. See Note 9—Investments, Loans and Long-Term Receivables for additional information regarding Dakota Access and the CECU.
At December 31, 2025, we also had other guarantees outstanding primarily for our portion of certain joint venture debt, which have remaining terms of up to four years. The maximum potential future exposures under these guarantees were approximately $54 million. Payment would be required if a joint venture defaults on its obligations.
Indemnifications
Over the years, we have entered into various agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to indemnifications. Agreements associated with these sales include indemnifications for taxes, litigation, environmental liabilities, permits and licenses, employee claims, and real estate tenant defaults. The provisions of these indemnifications vary greatly. The majority of these indemnifications are related to environmental issues, which generally have indefinite terms and potentially unlimited exposure. At December 31, 2025 and 2024, the carrying amount of recorded indemnifications was $53 million and $125 million, respectively.
We amortize the indemnification liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of indemnity. In cases where the indemnification term is indefinite, we will reverse the liability when we have information to support the reversal. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. At December 31, 2025 and 2024, environmental accruals for known contamination of $50 million and $100 million, respectively, were included in the carrying amount of the recorded indemnifications noted above. These environmental accruals were primarily included in the “Asset retirement obligations and accrued environmental costs” line item on our consolidated balance sheet. For additional information about environmental liabilities, see Note 13—Asset Retirement Obligations and Accrued Environmental Costs and Note 18—Contingencies and Commitments.
Additionally, P66 Receivables has guaranteed all borrowings and receivables sold under our Receivables Securitization Facility. At December 31, 2025 and 2024, $125 million and $121 million of the sold accounts receivable remained uncollected, respectively, which represents our maximum potential future exposure under the guarantee associated with the Receivables Securitization Facility. See Note 15—Debt for information regarding the guarantee under our Receivables Securitization Facility.
Indemnification and Release Agreement
In 2012, in connection with our separation from ConocoPhillips, we entered into an Indemnification and Release Agreement. This agreement governs the treatment between ConocoPhillips and us of matters relating to indemnification, insurance, litigation responsibility and management, and litigation document sharing and cooperation arising in connection with the separation. Generally, the agreement provides for cross indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of ConocoPhillips’ business with ConocoPhillips. The agreement also establishes procedures for handling claims subject to indemnification and related matters.
Note 18—Contingencies and Commitments
A number of lawsuits involving a variety of claims that arose in the ordinary course of business have been filed against us or are subject to indemnifications provided by us. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for financial recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is uncertain. See Note 25—Income Taxes for additional information about income-tax-related contingencies.
Other than with respect to the legal matters described herein, based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.
Environmental
We are subject to international, federal, state and local environmental laws and regulations. When we prepare our consolidated financial statements, we record accruals for environmental liabilities based on management’s best estimates, using information available at the time. We measure estimates and base contingent liabilities on currently available facts, existing technology and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring contingent environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the Environmental Protection Agency (EPA) or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.
Although liability for environmental remediation costs is generally joint and several for federal sites and frequently so for state sites, we are usually only one of many companies alleged to have liability at a particular site. Due to such joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites for which we are potentially responsible are still under investigation by the EPA or the state agencies concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit, although some of the indemnifications are subject to dollar and time limits.
We are currently participating in environmental assessments and cleanups at numerous federal Superfund and comparable state sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those pertaining to sites acquired in a business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings. See Note 13—Asset Retirement Obligations and Accrued Environmental Costs, for a summary of our accrued environmental liabilities.
Legal Proceedings
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases and enables the tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.
Propel Fuels Litigation
In late 2017, as part of Phillips 66 Company’s evaluation of various opportunities in the renewable fuels business, Phillips 66 Company engaged with Propel Fuels, Inc. (Propel Fuels), a California company that distributes E85 and other alternative fuels through fueling kiosks. Ultimately, the parties were not able to reach an agreement, and negotiations were terminated in August 2018. On February 17, 2022, 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 during and after due diligence. 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. Based on the willfulness finding, Propel Fuels asked the Propel Court to award $1.2 billion in exemplary damages, and Phillips 66 Company filed a brief in opposition to that request. A hearing on exemplary damages was held on March 4, 2025, and the Propel Court awarded Propel Fuels $195 million in exemplary damages on July 30, 2025. On August 5, 2025, the Propel Court entered a final judgment against Phillips 66 Company in the amount of $833 million. The judgment includes the $604.9 million jury verdict, $195 million of exemplary damages, and $33.3 million of pre-judgment interest at 7%. Post-judgment interest of 10% is accruing from the date of the final judgment. On August 25, 2025, Phillips 66 Company filed three post-trial motions requesting that the Propel Court render judgment in favor of Phillips 66 Company, grant a new trial, and/or reduce the damages award. On October 20, 2025, the Propel Court denied Phillips 66 Company’s motions. On November 14, 2025, Phillips 66 Company filed its Notice of Appeal, which has been assigned to Division Two of the First District Court of Appeal. Separately, on October 24, 2025, Propel Fuels filed additional motions with the Propel Court seeking attorney’s fees and costs. Phillips 66 Company filed its opposition to that request on January 13, 2026, and once the record on this issue is complete, the Propel Court will rule on these motions. Phillips 66 Company denies any wrongdoing and intends to vigorously defend its position. As a result of the August 2025 final judgment and the October 2024 jury verdict, we recorded $262 million and $604.9 million of expense for the years ended December 31, 2025 and 2024, respectively, which are included within the “Selling, general and administrative expenses” line on our consolidated statement of income and reported in the M&S segment. Therefore, our recorded accruals totaling $867 million and $604.9 million as of December 31, 2025 and 2024, respectively, are reflected as “Other liabilities and deferred credits” on our consolidated balance sheet. However, it is reasonably possible that the estimate of the loss could change based on the progression of the case, including the appeals process. If information were to become available that would allow us to reasonably estimate a range of potential exposure in an amount higher or lower than the amount already accrued, we would adjust our accrued liabilities accordingly. While Phillips 66 Company believes the jury verdict is not legally or factually supported, there can be no assurances that such defense efforts will be successful. Until the final resolution of this matter, we may be exposed to losses in excess of the amount recorded, and such amounts may have a material adverse effect on our financial position.
Other Contingencies
We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized.
At December 31, 2025, we had performance obligations secured by letters of credit and bank guarantees of $326 million related to various purchase and other commitments incident to the ordinary conduct of business.
Long-Term Throughput Agreements and Take-or-Pay Agreements
We have certain throughput agreements and take-or-pay agreements in support of third-party financing arrangements. The agreements typically provide for crude oil transportation to be used in the ordinary course of our business. At December 31, 2025, the estimated aggregate future payments under these agreements were on average $315 million per year for each year from 2026 through 2030 and $54 million in aggregate for all years after 2030. For the years ended December 31, 2025, 2024 and 2023, total payments under these agreements were $316 million, $319 million and $319 million, respectively.
Note 19—Derivatives and Financial Instruments
Derivative Instruments
We use financial and commodity-based derivative contracts to manage exposures to fluctuations in commodity prices, interest rates and foreign currency exchange rates, or to capture market opportunities. Because we do not apply hedge accounting for commodity derivative contracts, all realized and unrealized gains and losses from commodity derivative contracts are recognized in our consolidated statement of income. Gains and losses from derivative contracts held for trading not directly related to our physical business are reported net within the “Other income” line item on our consolidated statement of income. Realized and unrealized gains and losses on foreign currency derivatives entered into in connection with our investment dispositions are reported within the “Net gain on dispositions” line item on our consolidated statement of income. Cash flows from all our commodity derivative activity for the periods presented appear within the “Cash Flows from Operating Activities” section on our consolidated statement of cash flows.
Purchase and sales contracts with firm minimum notional volumes for commodities that are readily convertible to cash are recorded on our consolidated balance sheet as derivatives unless the contracts are eligible for, and we elect, the normal purchases and normal sales exception, whereby the contracts are recorded on an accrual basis. We generally apply the normal purchases and normal sales exception to eligible crude oil, refined petroleum product, NGL, natural gas, renewable feedstocks, and power commodity contracts to purchase or sell quantities we expect to use or sell in the normal course of business. All other derivative instruments are recorded at fair value on our consolidated balance sheet. For further information on the fair value of derivatives, see Note 20—Fair Value Measurements.
Commodity Derivative Contracts
We sell into or receive supply from the worldwide crude oil, refined petroleum product, NGL, natural gas, renewable feedstocks and renewable fuels, and electric power markets, exposing our revenues, purchases, cost of operating activities and cash flows to fluctuations in the prices for these commodities. Generally, our policy is to remain exposed to the market prices of commodities; however, we use futures, forwards, swaps and options in various markets to balance physical systems, meet customer needs, manage price exposures on specific transactions, and do a limited amount of trading not directly related to our physical business, all of which may reduce our exposure to fluctuations in market prices. We also use the market knowledge gained from these activities to capture market opportunities such as moving physical commodities to more profitable locations, storing commodities to capture seasonal or time premiums, and blending commodities to capture quality upgrades.
The following table indicates the consolidated balance sheet line items that include the fair values of commodity derivative assets and liabilities. The balances in the following table are presented on a gross basis, before the effects of counterparty and collateral netting. However, we have elected to present our commodity derivative assets and liabilities with the same counterparty on a net basis on our consolidated balance sheet when the legal right of offset exists.
| Millions of Dollars | ||||||||||||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| Commodity Derivatives | Effect of Collateral Netting | Net Carrying Value Presented on the Balance Sheet | Commodity Derivatives | Effect of Collateral Netting | Net Carrying Value Presented on the Balance Sheet | |||||||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | $ | 2,714 | (2,583) | — | 131 | 1,021 | (922) | — | 99 | |||||||||||||||||||||||
| Other assets | 23 | (20) | — | 3 | — | — | — | — | ||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Other accruals | 67 | (108) | 20 | (21) | 1,136 | (1,226) | 46 | (44) | ||||||||||||||||||||||||
| Other liabilities and deferred credits | — | — | — | — | 60 | (71) | 16 | 5 | ||||||||||||||||||||||||
| Total | $ | 2,804 | (2,711) | 20 | 113 | 2,217 | (2,219) | 62 | 60 |
At December 31, 2025, and 2024, there was no material cash collateral received or paid that was not offset on our consolidated balance sheet.
The realized and unrealized gains (losses) incurred from commodity derivatives, and the line items where they appear on our consolidated statement of income, were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Sales and other operating revenues | $ | 187 | 35 | 137 | |||||||||||||
| Other income | 87 | 48 | 99 | ||||||||||||||
| Purchased crude oil and products | (7) | (5) | (269) | ||||||||||||||
| Net gain (loss) from commodity derivative activity | $ | 267 | 78 | (33) |
The following table summarizes our material net exposures resulting from outstanding commodity derivative contracts. These financial and physical derivative contracts are primarily used to manage price exposure on our underlying operations. The underlying exposures may be from nonderivative positions such as inventory volumes. Financial derivative contracts may also offset physical derivative contracts, such as forward purchase and sales contracts. The percentage of our derivative contract volumes expiring within the next 12 months was more than 90% at December 31, 2025 and 2024.
| Open Position Long / (Short) | |||||||||||
| 2025 | 2024 | ||||||||||
| Commodity | |||||||||||
| Crude oil, refined petroleum products, NGL and renewable feedstocks (millions of barrels) | (33) | (22) | |||||||||
| Natural gas (billions of cubic feet) | (17) | (14) |
Credit Risk from Derivative and Financial Instruments
Financial instruments potentially exposed to concentrations of credit risk consist primarily of trade receivables and derivative contracts.
Our trade receivables result primarily from the sale of products from, or related to, our refinery operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less. We continually monitor this exposure and the creditworthiness of the counterparties and recognize bad debt expense based on a probability assessment of credit loss. Generally, we do not require collateral to limit the exposure to loss; however, we will sometimes use letters of credit, prepayments or master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us to others to be offset against amounts owed to us.
The credit risk from our derivative contracts, such as forwards and swaps, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared with an exchange clearinghouse and subject to mandatory margin requirements, typically on a daily basis, until settled.
Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit ratings. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if our credit ratings fall below investment grade. Cash is the primary collateral in all contracts; however, many contracts also permit us to post letters of credit as collateral.
The aggregate fair values of all derivative instruments with such credit-risk-related contingent features that were in a liability position were immaterial at December 31, 2025 and 2024.
Note 20—Fair Value Measurements
Recurring Fair Value Measurements
We carry certain assets and liabilities at fair value, which we measure at the reporting date using the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price), and disclose the quality of these fair values based on the valuation inputs used in these measurements under the following hierarchy:
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Level 1: Fair value measured with unadjusted quoted prices from an active market for identical assets or liabilities.
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Level 2: Fair value measured either with: (1) adjusted quoted prices from an active market for similar assets or liabilities; or (2) other valuation inputs that are directly or indirectly observable.
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Level 3: Fair value measured with unobservable inputs that are significant to the measurement.
We classify the fair value of an asset or liability based on the significance of its observable or unobservable inputs to the measurement. However, the fair value of an asset or liability initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement or corroborating market data becomes available. Conversely, an asset or liability initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.
We used the following methods and assumptions to estimate the fair value of financial instruments:
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Cash and cash equivalents—The carrying amount reported on our consolidated balance sheet approximates fair value.
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Accounts and notes receivable—The carrying amount reported on our consolidated balance sheet approximates fair value.
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Derivative instruments—The fair value of our exchange-traded contracts is based on quoted market prices obtained from the New York Mercantile Exchange, the Intercontinental Exchange or other exchanges, and is reported as Level 1 in the fair value hierarchy. When exchange-cleared contracts lack sufficient liquidity, or are valued using either adjusted exchange-provided prices or nonexchange quotes, we classify those contracts as Level 2 or Level 3 based on the degree to which inputs are observable.
Physical commodity forward purchase and sales contracts and over-the-counter (OTC) financial swaps are generally valued using forward quotes provided by brokers and price index developers, such as Platts and Oil Price Information Service. We corroborate these quotes with market data and classify the resulting fair values as Level 2. When forward market prices are not available, we estimate fair value using the forward price of a similar commodity, adjusted for the difference in quality or location. In certain less liquid markets or for longer-term contracts, forward prices are not as readily available. In these circumstances, physical commodity purchase and sales contracts and OTC swaps are valued using internally developed methodologies that consider historical relationships among various commodities that result in management’s best estimate of fair value. We classify these contracts as Level 3. Physical and OTC commodity options are valued using industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and contractual prices for the underlying instruments, as well as other relevant economic measures. The degree to which these inputs are observable in the forward markets determines whether the options are classified as Level 2 or Level 3. We use a midmarket pricing convention (the midpoint between bid and ask prices). When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.
When applicable, we determine the fair value of interest rate swaps based on observable market valuations for interest rate swaps that have notional amounts, terms and pay and reset frequencies similar to ours.
When applicable, we determine the fair value of foreign currency derivatives based on observable market data. Management’s best estimate of transaction dates may be used if relevant to the instrument valuation. The degree to which these inputs are observable in the forward markets determines whether the instruments are classified as Level 2 or Level 3.
- Rabbi trust assets—These deferred compensation investments are measured at fair value using unadjusted quoted prices available from national securities exchanges and are therefore categorized as Level 1 in the fair value hierarchy.
*•*Investment in NOVONIX—At December 31, 2025, our investment in NOVONIX Limited (NOVONIX) was 14.29%, which is measured at fair value using unadjusted quoted prices available from the Australian Securities Exchange and is therefore categorized as Level 1 in the fair value hierarchy.
*•*Other investments—Includes other marketable securities with observable market prices.
*•*Debt—The carrying amount of our floating-rate debt approximates fair value. The fair value of our fixed-rate debt is estimated primarily based on observable market prices.
The following tables display the fair value hierarchy for our financial assets and liabilities either accounted for or disclosed at fair value on a recurring basis. These values are determined by treating each contract as the fundamental unit of account; therefore, derivative assets and liabilities with the same counterparty are shown on a gross basis in the hierarchy sections of these tables, before the effects of counterparty and collateral netting. The following tables also reflect the effect of netting derivative assets and liabilities with the same counterparty for which we have the legal right of offset and collateral netting.
The carrying values and fair values by hierarchy of our financial assets and liabilities, either carried or disclosed at fair value, including any effects of counterparty and collateral netting, were:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | Total Fair Value of Gross Assets & Liabilities | Effect of Counterparty Netting | Effect of Collateral Netting | Difference in Carrying Value and Fair Value | Net Carrying Value Presented on the Balance Sheet | ||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||
| Commodity Derivative Assets | |||||||||||||||||||||||||||||||||||
| Exchange-cleared instruments | $ | 2,731 | — | — | 2,731 | (2,660) | — | — | 71 | ||||||||||||||||||||||||||
| Physical forward contracts | — | 69 | 4 | 73 | (10) | — | — | 63 | |||||||||||||||||||||||||||
| Rabbi trust assets | 144 | — | — | 144 | N/A | N/A | — | 144 | |||||||||||||||||||||||||||
| Investment in NOVONIX | 26 | — | — | 26 | N/A | N/A | — | 26 | |||||||||||||||||||||||||||
| $ | 2,901 | 69 | 4 | 2,974 | (2,670) | — | — | 304 | |||||||||||||||||||||||||||
| Commodity Derivative Liabilities | |||||||||||||||||||||||||||||||||||
| Exchange-cleared instruments | $ | 2,680 | — | — | 2,680 | (2,660) | (20) | — | — | ||||||||||||||||||||||||||
| Physical forward contracts | — | 30 | 1 | 31 | (10) | — | — | 21 | |||||||||||||||||||||||||||
| Floating-rate debt | — | 400 | — | 400 | N/A | N/A | — | 400 | |||||||||||||||||||||||||||
| Fixed-rate debt, excluding finance leases and software obligations | — | 18,324 | — | 18,324 | N/A | N/A | 621 | 18,945 | |||||||||||||||||||||||||||
| $ | 2,680 | 18,754 | 1 | 21,435 | (2,670) | (20) | 621 | 19,366 |
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | Total Fair Value of Gross Assets & Liabilities | Effect of Counterparty Netting | Effect of Collateral Netting | Difference in Carrying Value and Fair Value | Net Carrying Value Presented on the Balance Sheet | ||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||
| Commodity Derivative Assets | |||||||||||||||||||||||||||||||||||
| Exchange-cleared instruments | $ | 2,137 | — | — | 2,137 | (2,111) | — | — | 26 | ||||||||||||||||||||||||||
| OTC instruments | — | 7 | — | 7 | — | — | — | 7 | |||||||||||||||||||||||||||
| Physical forward contracts | — | 70 | 3 | 73 | (7) | — | — | 66 | |||||||||||||||||||||||||||
| Rabbi trust assets | 153 | — | — | 153 | N/A | N/A | — | 153 | |||||||||||||||||||||||||||
| Investment in NOVONIX | 36 | — | — | 36 | N/A | N/A | — | 36 | |||||||||||||||||||||||||||
| Foreign currency derivative* | — | 67 | — | 67 | N/A | N/A | — | 67 | |||||||||||||||||||||||||||
| $ | 2,326 | 144 | 3 | 2,473 | (2,118) | — | — | 355 | |||||||||||||||||||||||||||
| Commodity Derivative Liabilities | |||||||||||||||||||||||||||||||||||
| Exchange-cleared instruments | $ | 2,173 | — | — | 2,173 | (2,111) | (62) | — | — | ||||||||||||||||||||||||||
| Physical forward contracts | — | 45 | 1 | 46 | (7) | — | — | 39 | |||||||||||||||||||||||||||
| Floating-rate debt | — | 1,760 | — | 1,760 | N/A | N/A | — | 1,760 | |||||||||||||||||||||||||||
| Fixed-rate debt, excluding finance leases and software obligations | — | 16,913 | — | 16,913 | N/A | N/A | 1,020 | 17,933 | |||||||||||||||||||||||||||
| $ | 2,173 | 18,718 | 1 | 20,892 | (2,118) | (62) | 1,020 | 19,732 |
** Related to foreign currency derivative entered into in connection with the sale of Coop. See Note 9—Investments, Loans and Long-Term Receivables.*
The rabbi trust assets and investment in NOVONIX are recorded in the “Investments and long-term receivables” line item, the foreign currency derivative is recorded in the “Prepaid expenses and other current assets” line item, and floating-rate and fixed-rate debt are recorded in the “Short-term debt” and “Long-term debt” line items on our consolidated balance sheet. See Note 19—Derivatives and Financial Instruments, for information regarding where the assets and liabilities related to our commodity derivatives are recorded on our consolidated balance sheet.
Nonrecurring Fair Value Measurements
Equity Investments and PP&E
In the fourth quarter of 2025, we remeasured the carrying value of an equity method investment in an NGL pipeline in Texas to fair value. Fair value was determined using an income approach. The valuation resulted in a Level 3 nonrecurring fair value measurement.
In the third quarter of 2025, we remeasured the carrying value of our equity method investment in WRB to fair value. Fair value was determined using a market approach. The valuation resulted in a Level 3 nonrecurring fair value measurement. See Note 5—Business Combinations and Note 9—Investments, Loans and Long-Term Receivables for additional information.
In the fourth quarter of 2024, we remeasured the carrying value of an equity method investment in a crude pipeline in Oklahoma to fair value. Fair value was determined using an income approach. The valuation resulted in a Level 3 nonrecurring fair value measurement.
In the second and third quarters of 2024, we remeasured the carrying value of the net PP&E and equity method investment in certain crude gathering, and gathering and processing asset groups in Texas to fair value. Fair value was determined using a market approach. These valuations resulted in Level 3 nonrecurring fair value measurements.
In the first quarter of 2024, we remeasured the carrying value of the net PP&E of certain crude oil processing and logistics assets in California to fair value. Fair value was determined using a market approach. These valuations resulted in Level 3 nonrecurring fair value measurements.
See Note 12—Impairments for additional information regarding before-tax impairments recorded in 2025 and 2024.
JET Management Holding Equity Method Investment
On December 1, 2025, we divested 65% of our interest in Germany and Austria Marketing. We retained a 35% non-operating equity interest in JET Management Holding subsequent to the divestiture. The fair value of our 35% interest in JET Management Holding of $744 million was determined using a market approach. This valuation resulted in Level 3 nonrecurring fair value measurements. See Note 9—Investments, Loans and Long-Term Receivables for additional information on the transaction.
WRB Acquisition
On October 1, 2025, we acquired and began consolidating the financial results of WRB and, accordingly, accounted for the business combination using the acquisition method of accounting, which requires WRB’s assets and liabilities to be recorded at fair value as of the acquisition date on our consolidated balance sheet.
The preliminary fair value of PP&E was $2,767 million and was determined primarily using the cost approach. The cost approach used assumptions for the current replacement cost of similar plant and equipment assets adjusted for estimated physical deterioration, functional obsolescence and economic obsolescence. The preliminary fair value of inventories was $1,200 million and was determined using a market approach. These valuations resulted in Level 3 nonrecurring fair value measurements. See Note 5—Business Combinations for additional information on the transaction.
Coastal Bend Acquisition
On April 1, 2025, we acquired and began consolidating the financial results of Coastal Bend and, accordingly, accounted for the business combination using the acquisition method of accounting, which requires Coastal Bend’s assets and liabilities to be recorded at fair value as of the acquisition date on our consolidated balance sheet.
The preliminary fair value of PP&E was $2,224 million. The preliminary fair value of these assets was determined primarily using the cost approach. The cost approach used assumptions for the current replacement cost of similar plant and equipment assets adjusted for estimated physical deterioration, functional obsolescence and economic obsolescence. This valuation resulted in Level 3 nonrecurring fair value measurements. See Note 5—Business Combinations for additional information on the transaction.
Note 21—Equity
Preferred Stock
Phillips 66 has 500 million shares of preferred stock authorized, with a par value of $0.01 per share, none of which have been issued.
Treasury Stock
On October 25, 2023, our Board of Directors approved a $5 billion increase to our share repurchase authorization. Since the inception of our share repurchase program in 2012, our Board of Directors has authorized an aggregate of $25 billion of repurchases of our outstanding common stock, and we have repurchased 248 million shares at an aggregate cost of $22.7 billion. In 2025, we repurchased 9.7 million shares at an aggregate cost of $1.2 billion. Our share repurchase authorizations do not expire. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. Shares of stock repurchased are held as treasury shares.
Our Board of Directors separately authorized two transactions in 2014 and 2018, which resulted in the repurchase of 52.4 million shares of Phillips 66 common stock with an aggregate value of $4.6 billion. In addition, in connection with a transaction in 2022, we issued 41.8 million shares of common stock from our treasury stock with an aggregate cost of $3.4 billion.
Common Stock Dividends
On February 11, 2026, our Board of Directors declared a quarterly cash dividend of $1.27 per common share, payable March 4, 2026, to shareholders of record at the close of business on February 23, 2026.
Noncontrolling Interests
At December 31, 2025 and 2024, our noncontrolling interests primarily represented Enbridge’s indirect economic interest in DCP LP. On June 15, 2023, as part of the DCP LP Merger, we acquired all publicly held common units of DCP LP and eliminated the public common unit noncontrolling interest in our consolidated financial statements from the DCP LP Merger date, forward. See Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, for further information on the DCP LP Merger and preferred unit redemptions.
Note 22—Leases
We lease marine vessels, pipelines, storage tanks, railcars, service station sites, office buildings, corporate aircraft, land and other facilities and equipment. In determining whether an agreement contains a lease, we consider our ability to control the asset and whether third-party participation or vendor substitution rights limit our control. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices, as well as renewal options and/or options to purchase the leased property. Renewal options have been included only when reasonably certain of exercise. There are no significant restrictions imposed on us in our lease agreements with regards to dividend payments, asset dispositions or borrowing ability. Certain leases have residual value guarantees, which may require additional payments at the end of the lease term if future fair values decline below contractual lease balances.
We discount lease obligations using our incremental borrowing rate. We separate costs for lease and service components for contracts involving marine vessels, consignment service stations, and refining processing equipment. For these contracts, we allocate the consideration payable between the lease and service components using the relative standalone prices of each component. For contracts involving all other asset types, we account for the lease and service components on a combined basis. For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised, we do not recognize the right-of-use (ROU) asset and corresponding lease liability on our consolidated balance sheet.
The following table indicates the consolidated balance sheet line items that include the ROU assets and lease liabilities for our finance and operating leases at December 31:
| Millions of Dollars | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Finance Leases | Operating Leases | Finance Leases | Operating Leases | ||||||||||||||||||||
| Right-of-Use Assets | |||||||||||||||||||||||
| Prepaid expenses and other current assets | $ | — | — | — | 20 | ||||||||||||||||||
| Net properties, plants and equipment | 299 | — | 323 | — | |||||||||||||||||||
| Other assets | — | 1,807 | — | 1,300 | |||||||||||||||||||
| Total right-of-use assets | $ | 299 | 1,807 | 323 | 1,320 | ||||||||||||||||||
| Lease Liabilities | |||||||||||||||||||||||
| Short-term debt | $ | 34 | — | 30 | — | ||||||||||||||||||
| Other accruals | — | 574 | — | 421 | |||||||||||||||||||
| Long-term debt | 304 | — | 322 | — | |||||||||||||||||||
| Other liabilities and deferred credits | — | 1,296 | — | 934 | |||||||||||||||||||
| Total lease liabilities | $ | 338 | 1,870 | 352 | 1,355 |
Future minimum lease payments at December 31, 2025, for finance and operating lease liabilities were:
| Millions of Dollars | |||||||||||||||||||||||
| Finance Leases | Operating Leases | ||||||||||||||||||||||
| 2026 | $ | 49 | 657 | ||||||||||||||||||||
| 2027 | 41 | 506 | |||||||||||||||||||||
| 2028 | 40 | 378 | |||||||||||||||||||||
| 2029 | 37 | 281 | |||||||||||||||||||||
| 2030 | 34 | 158 | |||||||||||||||||||||
| Remaining years | 255 | 110 | |||||||||||||||||||||
| Future minimum lease payments | 456 | 2,090 | |||||||||||||||||||||
| Amount representing interest or discounts | (118) | (220) | |||||||||||||||||||||
| Total lease liabilities | $ | 338 | 1,870 |
Our finance lease liabilities relate primarily to our marketing business, service station consignment agreements with a marketing joint venture, and a crude oil terminal in the United Kingdom. The lease liability for the terminal finance lease is subject to foreign currency translation adjustments each reporting period.
Components of net lease cost for the years ended December 31 were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Finance lease cost | |||||||||||||||||
| Amortization of right-of-use assets | $ | 33 | 33 | 30 | |||||||||||||
| Interest on lease liabilities | 16 | 13 | 9 | ||||||||||||||
| Total finance lease cost | 49 | 46 | 39 | ||||||||||||||
| Operating lease cost | 597 | 478 | 390 | ||||||||||||||
| Short-term lease cost | 124 | 88 | 76 | ||||||||||||||
| Variable lease cost | 55 | 53 | 55 | ||||||||||||||
| Sublease income | (28) | (19) | (12) | ||||||||||||||
| Total net lease cost | $ | 797 | 646 | 548 |
Cash paid for amounts included in the measurement of our lease liabilities for the years ended December 31 was:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating cash outflows—finance leases | $ | 16 | 13 | 15 | |||||||||||||
| Operating cash outflows—operating leases | 600 | 473 | 390 | ||||||||||||||
| Financing cash outflows—finance leases | 30 | 28 | 19 |
During the years ended December 31, 2025, 2024 and 2023, we recorded noncash ROU assets and corresponding operating lease liabilities totaling $1,125 million, $547 million and $398 million, respectively, related to new and modified lease agreements, including leases acquired as part of the business combinations. See Note 5—Business Combinations for additional information.
The weighted-average remaining lease terms and discount rates for our lease liabilities at December 31 were:
| 2025 | 2024 | ||||||||||
| Weighted-average remaining lease term—finance leases (years) | 12.2 | 13.0 | |||||||||
| Weighted-average remaining lease term—operating leases (years) | 4.2 | 4.9 | |||||||||
| Weighted-average discount rate—finance leases | 4.4 | % | 4.4 | ||||||||
| Weighted-average discount rate—operating leases | 5.2 | 4.8 |
Note 23—Pension and Postretirement Plans
The following table provides a reconciliation of the projected benefit obligations and plan assets for our pension plans and accumulated benefit obligations for our other postretirement benefit plans:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||||||||||||||
| Change in Benefit Obligations | |||||||||||||||||||||||||||||||||||
| Benefit obligations at January 1 | $ | 2,349 | 697 | 2,260 | 752 | 137 | 150 | ||||||||||||||||||||||||||||
| Service cost | 123 | 12 | 116 | 14 | 3 | 3 | |||||||||||||||||||||||||||||
| Interest cost | 127 | 35 | 114 | 32 | 7 | 7 | |||||||||||||||||||||||||||||
| Plan participant contributions | — | 4 | — | 3 | 7 | 7 | |||||||||||||||||||||||||||||
| Actuarial loss (gain) | 104 | (24) | 68 | (48) | 1 | (8) | |||||||||||||||||||||||||||||
| Benefits paid | (291) | (35) | (209) | (34) | (22) | (22) | |||||||||||||||||||||||||||||
| Divestiture* | — | (127) | — | — | — | — | |||||||||||||||||||||||||||||
| Foreign currency exchange rate change | — | 60 | — | (22) | — | — | |||||||||||||||||||||||||||||
| Benefit obligations at December 31 | $ | 2,412 | 622 | 2,349 | 697 | 133 | 137 | ||||||||||||||||||||||||||||
| Change in Fair Value of Plan Assets | |||||||||||||||||||||||||||||||||||
| Fair value of plan assets at January 1 | $ | 2,121 | 751 | 2,139 | 778 | — | — | ||||||||||||||||||||||||||||
| Actual return on plan assets | 269 | 34 | 172 | 14 | — | — | |||||||||||||||||||||||||||||
| Company contributions | 150 | 5 | 19 | 5 | 15 | 15 | |||||||||||||||||||||||||||||
| Plan participant contributions | — | 4 | — | 3 | 7 | 7 | |||||||||||||||||||||||||||||
| Benefits paid | (291) | (35) | (209) | (34) | (22) | (22) | |||||||||||||||||||||||||||||
| Divestiture* | — | (13) | — | — | — | — | |||||||||||||||||||||||||||||
| Foreign currency exchange rate change | — | 60 | — | (15) | — | — | |||||||||||||||||||||||||||||
| Fair value of plan assets at December 31 | $ | 2,249 | 806 | 2,121 | 751 | — | — | ||||||||||||||||||||||||||||
| Funded Status at December 31 | $ | (163) | 184 | (228) | 54 | (133) | (137) | ||||||||||||||||||||||||||||
| ** Derecognition in connection with the disposition of 65% of our interest in Germany and Austria Marketing. See Note 9—Investments, Loans and Long-Term Receivables.* |
Amounts recognized in the consolidated balance sheet for our pension and other postretirement benefit plans at December 31 include:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||||||||||||||
| Amounts Recognized in the Consolidated Balance Sheet | |||||||||||||||||||||||||||||||||||
| Noncurrent assets | $ | — | 199 | — | 181 | — | — | ||||||||||||||||||||||||||||
| Current liabilities | (20) | — | (60) | — | (15) | (15) | |||||||||||||||||||||||||||||
| Noncurrent liabilities | (143) | (15) | (168) | (127) | (118) | (122) | |||||||||||||||||||||||||||||
| Total recognized | $ | (163) | 184 | (228) | 54 | (133) | (137) |
Included in accumulated other comprehensive loss at December 31 were the following before-tax amounts that had not been recognized in net periodic benefit cost:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||||||||||||||
| Unrecognized net actuarial loss (gain) | $ | 102 | (15) | 141 | (16) | (48) | (54) | ||||||||||||||||||||||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
| Millions of Dollars | |||||||||||||||||||||||||||||||||||
| Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||||||||||||||
| Sources of Change in Other Comprehensive Income | |||||||||||||||||||||||||||||||||||
| Net actuarial gain (loss) arising during the period | $ | 14 | 12 | (49) | 18 | (1) | 8 | ||||||||||||||||||||||||||||
| Divestiture* | — | (12) | — | — | — | — | |||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) and settlements | 25 | (1) | 19 | — | (5) | (5) | |||||||||||||||||||||||||||||
| Total recognized in other comprehensive income | $ | 39 | (1) | (30) | 18 | (6) | 3 |
** Related to the disposition of 65% of our interest in Germany and Austria Marketing and is included in the “Net gain on dispositions” line item on the consolidated statement of income. See Note 9—Investments, Loans and Long-Term Receivables.*
The accumulated benefit obligations for all U.S. and international pension plans were $2,298 million and $552 million, respectively, at December 31, 2025, and $2,218 million and $609 million, respectively, at December 31, 2024.
Information for U.S. and international pension plans with an accumulated benefit obligation in excess of plan assets at December 31 was:
| Millions of Dollars | |||||||||||||||||||||||
| Pension Benefits | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||
| Accumulated benefit obligations | $ | 55 | 16 | 100 | 134 | ||||||||||||||||||
| Fair value of plan assets | — | 1 | — | 13 |
Information for U.S. and international pension plans with a projected benefit obligation in excess of plan assets at December 31 was:
| Millions of Dollars | |||||||||||||||||||||||
| Pension Benefits | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||
| Projected benefit obligations | $ | 2,412 | 16 | 2,349 | 139 | ||||||||||||||||||
| Fair value of plan assets | 2,249 | 1 | 2,121 | 13 |
Components of net periodic benefit cost for all defined benefit plans are presented in the table below:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||||||||||||||||||||||||||||||
| Components of Net Periodic Benefit Cost | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Service cost | $ | 123 | 12 | 116 | 14 | 108 | 13 | 3 | 3 | 3 | |||||||||||||||||||||||||||||||||||||||||||
| Interest cost | 127 | 35 | 114 | 32 | 118 | 31 | 7 | 7 | 8 | ||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | (151) | (46) | (153) | (45) | (126) | (43) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | 16 | (1) | 12 | — | 11 | (3) | (5) | (5) | (6) | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement losses | 9 | — | 7 | — | 17 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net periodic benefit cost (credit)* | $ | 124 | — | 96 | 1 | 128 | (2) | 5 | 5 | 5 |
** Included in the “Operating expenses” and “Selling, general and administrative expenses” line items on our consolidated statement of income.*
In determining net periodic benefit cost, we amortize prior service costs on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan. For net actuarial gains and losses, we amortize 10% of the unamortized balance each year. The amount subject to amortization is determined on a plan-by-plan basis.
The following weighted-average assumptions were used to determine benefit obligations and net periodic benefit costs for the years ended December 31:
| Pension Benefits | Other Benefits | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l. | U.S. | Int’l. | ||||||||||||||||||||||||||||||||
| Assumptions Used to Determine Benefit Obligations: | |||||||||||||||||||||||||||||||||||
| Discount rate | 5.63 | % | 5.53 | 5.75 | 4.99 | 5.30 | 5.70 | ||||||||||||||||||||||||||||
| Rate of compensation increase | 4.29 | 3.98 | 4.25 | 3.74 | — | — | |||||||||||||||||||||||||||||
| Interest crediting rate on cash balance plan | 5.34 | — | 4.88 | — | — | — | |||||||||||||||||||||||||||||
| Assumptions Used to Determine Net Periodic Benefit Cost: | |||||||||||||||||||||||||||||||||||
| Discount rate | 5.75 | % | 4.99 | 5.35 | 4.36 | 5.70 | 5.45 | ||||||||||||||||||||||||||||
| Expected return on plan assets | 7.50 | 5.89 | 7.50 | 5.86 | — | — | |||||||||||||||||||||||||||||
| Rate of compensation increase | 4.25 | 3.74 | 4.30 | 3.34 | — | — | |||||||||||||||||||||||||||||
| Interest crediting rate on cash balance plan | 4.88 | — | 3.98 | — | — | — |
For both U.S. and international pension plans, the overall expected long-term rate of return is developed from the expected future return of each asset class, weighted by the expected allocation of pension assets to that asset class. We rely on a variety of independent market forecasts in developing the expected rate of return for each class of assets.
For the year ended December 31, 2025, actuarial losses resulted in increases in our U.S. pension benefit obligations of $104 million and actuarial gains resulted in a decrease in our international pension benefit obligation of $24 million. For the year ended December 31, 2024, actuarial losses resulted in increases in our U.S. pension benefit obligations of $68 million and actuarial gains resulted in a decrease in our international pension benefit obligation of $48 million. The primary driver for the actuarial losses in 2025 were decreases in the discount rates and lump-sum conversion rates. The primary driver for the actuarial gains in 2025 and 2024 were increases in the discount rates. The primary driver for the actuarial losses in 2024 were changes in demographic experience.
For the year ended December 31, 2025, the weighted-average actual return on plan assets was 11%, which resulted in an increase in our U.S. and international plan assets of $269 million and $34 million, respectively. For the year ended December 31, 2024, the weighted-average actual return on plan assets was 7%, which resulted in an increase in our U.S. and international plan assets of $172 million and $14 million, respectively. The primary driver of the return on plan assets in 2025 and 2024 was fluctuations in the equity and fixed income markets.
Our other postretirement benefit plans for health insurance are contributory. Effective December 31, 2012, we terminated the subsidy for retiree medical plans. Since January 1, 2013, eligible employees have been able to utilize notional amounts credited to an account during their period of service with the company to pay all, or a portion, of their cost to participate in postretirement health insurance. In general, employees hired after December 31, 2012, will not receive credits to an account, but will have unsubsidized access to health insurance through the plan. The cost of health insurance will be adjusted annually by the company’s actuary to reflect actual experience and expected health care cost trends. The measurement of the accumulated benefit obligation assumes a health care cost trend rate of 8.00% in 2026 that declines to 5% by 2032.
Plan Assets
The investment strategy for managing pension plan assets is to seek a reasonable rate of return relative to an appropriate level of risk and provide adequate liquidity for benefit payments and portfolio management. We follow a policy of diversifying pension plan assets across asset classes, investment managers, and individual holdings. As a result, our plan assets have no significant concentrations of credit risk. Asset classes that are considered appropriate include equities, fixed income, cash, real estate and infrastructure investments and insurance contracts. Plan fiduciaries may consider and add other asset classes to the investment program from time to time. The target allocations for plan assets are approximately 43% equity securities, 34% debt securities, 10% real estate investments and 13% in all other types of investments as of December 31, 2025. Generally, the investments in the plans are publicly traded, therefore minimizing the liquidity risk in the portfolio.
The following is a description of the valuation methodologies used for the pension plan assets.
-
Fair values of equity securities and government debt securities are based on quoted market prices.
-
Fair values of corporate debt securities are estimated using recently executed transactions and market price quotations. If there have been no market transactions in a particular fixed income security, its fair value is calculated by pricing models that benchmark the security against other securities with actual market prices.
-
Fair values of cash and cash equivalents approximate their carrying amounts.
-
Fair values of insurance contracts are valued at the present value of the future benefit payments owed by the insurance company to the plans’ participants.
-
Fair values of investments in common/collective trusts (CCT) and real estate and infrastructure investments, which include a CCT, limited partnerships, and other real estate funds, are valued at the net asset value (NAV) as a practical expedient. The NAV is based on the underlying net assets owned by the fund and the relative interest of each participating investor in the fair value of the underlying assets. These investments valued at NAV are not classified within the fair value hierarchy, but are presented in the fair value table to permit reconciliation of total plan assets to the amounts presented in the fair value table.
The fair values of our pension plan assets at December 31, by asset class, were:
| Millions of Dollars | |||||||||||||||||||||||||||||||||||||||||||||||
| United States | International | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
| 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | $ | 219 | — | — | 219 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Government debt securities | 360 | — | — | 360 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | 115 | — | 115 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 76 | — | — | 76 | 6 | — | — | 6 | |||||||||||||||||||||||||||||||||||||||
| Insurance contracts | — | — | — | — | — | — | 235 | 235 | |||||||||||||||||||||||||||||||||||||||
| Total assets in the fair value hierarchy | 655 | 115 | — | 770 | 6 | — | 235 | 241 | |||||||||||||||||||||||||||||||||||||||
| Common/collective trusts measured at NAV | 1,215 | 462 | |||||||||||||||||||||||||||||||||||||||||||||
| Real estate and infrastructure investments measured at NAV | 264 | 103 | |||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 655 | 115 | — | 2,249 | 6 | — | 235 | 806 |
| Millions of Dollars | |||||||||||||||||||||||||||||||||||||||||||||||
| United States | International | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | $ | 298 | — | — | 298 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Government debt securities | 330 | — | — | 330 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | 109 | — | 109 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 28 | — | — | 28 | 21 | — | — | 21 | |||||||||||||||||||||||||||||||||||||||
| Insurance contracts | — | — | — | — | — | — | 190 | 190 | |||||||||||||||||||||||||||||||||||||||
| Total assets in the fair value hierarchy | 656 | 109 | — | 765 | 21 | — | 190 | 211 | |||||||||||||||||||||||||||||||||||||||
| Common/collective trusts measured at NAV | 1,079 | 419 | |||||||||||||||||||||||||||||||||||||||||||||
| Real estate and infrastructure investments measured at NAV | 277 | 121 | |||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 656 | 109 | — | 2,121 | 21 | — | 190 | 751 |
The following table is a reconciliation of the changes in our Level 3 plan asset balance:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at January 1 | $ | 190 | 13 | ||||||||
| Transfer in | 46 | 186 | |||||||||
| Actual return on plan assets | (1) | (6) | |||||||||
| Divestiture | (13) | — | |||||||||
| Foreign currency exchange rate change | 13 | (3) | |||||||||
| Balance at December 31 | $ | 235 | 190 |
Our funding policy for U.S. plans is to contribute at least the minimum required by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986, as amended. Contributions to international plans are subject to local laws and tax regulations. Actual contribution amounts are dependent upon plan asset returns, changes in pension obligations, regulatory environments, and other economic factors. In 2026, we expect to contribute approximately $200 million to our U.S. pension plans and other postretirement benefit plans and $4 million to our international pension plans.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid to plan participants in the years indicated:
| Millions of Dollars | |||||||||||||||||
| Pension Benefits | Other Benefits | ||||||||||||||||
| U.S. | Int’l. | ||||||||||||||||
| 2026 | $ | 225 | 21 | 15 | |||||||||||||
| 2027 | 222 | 22 | 15 | ||||||||||||||
| 2028 | 221 | 27 | 15 | ||||||||||||||
| 2029 | 224 | 29 | 15 | ||||||||||||||
| 2030 | 224 | 31 | 15 | ||||||||||||||
| 2031-2035 | 1,201 | 164 | 65 |
Defined Contribution Plans
Most U.S. employees are eligible to participate in the Phillips 66 Savings Plan (Savings Plan). Employees can contribute up to 75% of their eligible pay, subject to certain statutory limits, in the Savings Plan to a choice of investment funds. For the years ended December 31, 2025, 2024, and 2023, Phillips 66 provided a company match of participant contributions up to 8% of eligible pay. For the year ended December 31, 2023, Phillips 66 provided an additional Success Share contribution ranging from 0% to 4% of eligible pay based on management discretion.
For the years ended December 31, 2025, 2024 and 2023, we recorded expense of $163 million, $155 million and $196 million, respectively, related to our contributions to the Savings Plan.
Note 24—Share-Based Compensation Plans
Share-based payment awards, including stock options, Restricted Stock Unit (RSU) awards, and performance awards, are granted to our employees, nonemployee directors and other plan participants by the Human Resources and Compensation Committee (HRCC) of our Board of Directors under the applicable Omnibus Stock and Performance Incentive Plan of Phillips 66. Prior to May 11, 2022, share-based payment awards were granted under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the 2013 P66 Omnibus Plan). On May 11, 2022, Phillips 66’s shareholders approved the 2022 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the 2022 P66 Omnibus Plan), which replaced the 2013 P66 Omnibus Plan. No future awards will be made under the 2013 P66 Omnibus Plan. As of December 31, 2025, approximately 11 million shares of Phillips 66’s common stock remained available to be issued to settle share-based payment awards under the 2022 P66 Omnibus Plan.
Total share-based compensation expense recognized in income and the associated income tax benefit for the years ended December 31 were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Restricted stock units | $ | 115 | 121 | 130 | |||||||||||||
| Performance share units | 100 | 83 | 139 | ||||||||||||||
| Stock options | 2 | 4 | 19 | ||||||||||||||
| Other | 3 | 2 | 9 | ||||||||||||||
| Total share-based compensation expense | $ | 220 | 210 | 297 | |||||||||||||
| Income tax benefit | $ | (65) | (84) | (87) |
Restricted Stock Units
Generally, RSUs are granted annually under the provisions of the applicable Phillips 66 incentive plan, and vest either ratably over three years following the grant date or cliff vest at the end of three years for awards granted in 2025, 2024 and 2023. For awards granted prior to 2023, RSUs cliff vest at the end of three years. The grant date fair value is equal to the average of the high and low market price of our stock on the grant date. The recipients receive a quarterly dividend equivalent cash payment until the RSU is settled by issuing one share of our common stock for each RSU at the end of the service period. For recipients outside of the United States and United Kingdom, expected dividend equivalents during the service period are reduced from the grant date fair value on the grant date. RSUs granted to retirement-eligible employees are not subject to forfeiture ten months after the grant date. Special RSUs are granted to attract or retain key personnel and the terms and conditions may vary by award.
The following table summarizes our RSU activity from January 1, 2025, to December 31, 2025:
| Stock Units | Weighted-Average Grant-Date Fair Value | ||||||||||
| Outstanding at January 1, 2025 | 2,861,407 | $ | 109.20 | ||||||||
| Granted | 995,345 | 128.09 | |||||||||
| Forfeited | (82,589) | 126.84 | |||||||||
| Issued | (1,508,654) | 97.98 | |||||||||
| Outstanding at December 31, 2025 | 2,265,509 | $ | 124.34 | ||||||||
| Not Vested at December 31, 2025 | 1,619,525 | $ | 124.22 |
At December 31, 2025, the remaining unrecognized compensation cost from unvested RSU awards was $92 million, which will be recognized over a weighted-average period of 19 months, the longest period being 35 months.
During 2024 and 2023, we granted RSUs with a weighted-average grant-date fair value of $145.65 and $100.39, respectively. During 2025, 2024 and 2023, we issued shares with an aggregate fair value of $186 million, $206 million and $126 million, respectively, to settle RSUs.
Performance Share Units
Under the applicable Phillips 66 incentive plan, senior management is annually awarded restricted performance share units (PSUs) with three-year performance periods. These awards vest when the HRCC approves the three-year performance results, which represents the grant date. Retirement-eligible employees may retain a prorated share of the award if they retire prior to the grant date. PSUs are classified as liability awards and compensation expense is recognized over the three-year performance periods.
PSUs granted under the applicable Phillips 66 incentive plan are settled by cash payments equal to the fair value of the awards, which is based on the market prices of our stock near the end of the performance periods. The HRCC must approve the three-year performance results prior to payout. Dividend equivalents are not paid on these awards.
PSUs granted under prior incentive compensation plans were classified as equity awards. These equity awards are settled upon an employee’s retirement by issuing one share of our common stock for each PSU held. Dividend equivalents are paid on these awards.
The following table summarizes our PSU activity from January 1, 2025, to December 31, 2025:
| Performance Share Units | Weighted-Average Grant-Date Fair Value | ||||||||||
| Outstanding at January 1, 2025 | 432,093 | $ | 37.75 | ||||||||
| Granted | 883,094 | 119.96 | |||||||||
| Forfeited | — | — | |||||||||
| Issued | (102,290) | 36.74 | |||||||||
| Cash settled | (883,094) | 119.96 | |||||||||
| Outstanding at December 31, 2025 | 329,803 | $ | 38.06 |
At December 31, 2025, there was no remaining unrecognized compensation cost from unvested PSU awards.
During 2024 and 2023, we granted PSUs with a weighted-average grant-date fair value of $130.22 and $102.66, respectively. During 2025, 2024 and 2023, we issued shares with an aggregate fair value of $12 million, $14 million and $13 million, respectively, to settle PSUs. During 2025, 2024 and 2023, we cash settled PSUs with an aggregate fair value of $106 million, $131 million and $36 million, respectively.
Stock Options
Stock options granted under the provisions of the applicable Phillips 66 incentive plan and earlier plans permit purchases of our common stock at exercise prices equivalent to the average of the high and low market price of our stock on the date the options were granted. The options have terms of 10 years and vest ratably over three years following the grant date, with one-third of the options becoming exercisable each year on the grant date anniversary. Options granted to retirement-eligible employees are not subject to forfeiture ten months after the grant date. No options were granted in 2025 and 2024.
The following table summarizes our stock option activity from January 1, 2025, to December 31, 2025:
| Options | Weighted-Average Exercise Price | ||||||||||
| Outstanding at January 1, 2025 | 4,056,466 | $ | 89.32 | ||||||||
| Granted | — | — | |||||||||
| Forfeited | (3,301) | 97.80 | |||||||||
| Exercised | (1,221,431) | 87.40 | |||||||||
| Outstanding at December 31, 2025 | 2,831,734 | $ | 90.11 | ||||||||
| Vested at December 31, 2025 | 2,769,822 | $ | 89.89 | ||||||||
| Exercisable at December 31, 2025 | 2,582,241 | $ | 89.12 |
The weighted-average remaining contractual terms of vested options and exercisable options at December 31, 2025, were 5.20 and 5.06 years, respectively. During 2025, we received $107 million in cash and realized an income tax benefit of $12 million from the exercise of options. At December 31, 2025, the remaining unrecognized compensation expense from unvested options was $0.3 million, which will be recognized over a weighted-average period of 3 months, the longest period being 5 months.
In 2025 and 2024, no options were granted. In 2023, we granted options with a weighted-average grant-date fair value of $27.45. During 2025, 2024 and 2023, employees exercised options with an aggregate intrinsic value of $55 million, $68 million and $52 million, respectively. At December 31, 2025, the aggregate intrinsic value of vested and exercisable options was $109 million and $103 million, respectively.
The following table provides the significant assumptions used to calculate the grant-date fair values of options granted in 2023, as calculated using the Black-Scholes-Merton option-pricing model:
| 2023 | ||||||||||||||
| Risk-free interest rate | 3.84 | |||||||||||||
| Dividend yield | 3.80 | |||||||||||||
| Volatility factor | 35.19 | |||||||||||||
| Expected life (years) | 6.78 | |||||||||||||
| No options were granted in 2025 or 2024. |
We calculate the volatility factor using historical Phillips 66 end-of-week closing stock prices. We periodically calculate the average period of time elapsed between grant dates and exercise dates of past grants to estimate the expected life of new option grants.
Note 25—Income Taxes
Components of income tax expense (benefit) were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Income Tax Expense (Benefit) | |||||||||||||||||
| Federal | |||||||||||||||||
| Current | $ | 390 | 662 | 661 | |||||||||||||
| Deferred | 114 | (282) | 830 | ||||||||||||||
| Foreign | |||||||||||||||||
| Current | 261 | 78 | 394 | ||||||||||||||
| Deferred | 57 | 95 | (23) | ||||||||||||||
| State and local | |||||||||||||||||
| Current | 63 | 11 | 335 | ||||||||||||||
| Deferred | 7 | (64) | 33 | ||||||||||||||
| $ | 892 | 500 | 2,230 |
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (IRA) that includes, among other provisions, changes to the U.S. corporate income tax system, including provisions that allow a company to purchase transferable tax credits. In 2024 and 2023, we executed agreements to purchase eligible tax credits for a total of $485 million and $262 million, respectively. In 2024 and 2023, we paid $551 million and $196 million to our counterparties, respectively. These tax credits were used to offset estimated tax payments in 2024 and 2023.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Major components of deferred tax liabilities and assets at December 31 were:
| Millions of Dollars | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred Tax Liabilities | |||||||||||
| Properties, plants and equipment, and intangibles | $ | 3,743 | 3,493 | ||||||||
| Investment in joint ventures* | 1,094 | 1,864 | |||||||||
| Investment in subsidiaries** | 3,188 | 2,511 | |||||||||
| Other | 342 | 318 | |||||||||
| Total deferred tax liabilities | 8,367 | 8,186 | |||||||||
| Deferred Tax Assets | |||||||||||
| Benefit plan accruals | 296 | 355 | |||||||||
| Loss and credit carryforwards | 209 | 162 | |||||||||
| Asset retirement obligations and accrued environmental costs | 422 | 299 | |||||||||
| Other financial accruals and deferrals | 72 | 91 | |||||||||
| Inventory | 8 | 82 | |||||||||
| Other | 246 | 299 | |||||||||
| Total deferred tax assets | 1,253 | 1,288 | |||||||||
| Less: valuation allowance | 160 | 137 | |||||||||
| Net deferred tax assets | 1,093 | 1,151 | |||||||||
| Net deferred tax liabilities | $ | 7,274 | 7,035 | ||||||||
| *2024 includes activity associated with our 50% equity interest in WRB. | |||||||||||
| **Includes activity associated with our consolidated investments in Phillips 66 Partners and DCP LP. 2025 also includes activity associated with our consolidated investment in WRB, see Note 9—Investments, Loans and Long-Term Receivables for additional information. |
At December 31, 2025, the loss and credit carryforward deferred tax assets were primarily related to a foreign tax credit carryforward in the United States of $150 million; a state tax net operating loss carryforward of $49 million; and capital loss and net operating loss carryforwards in the United Kingdom of $10 million. State net operating loss carryforwards begin to expire in 2040. Foreign tax credit carryforwards, which have a full valuation allowance against them, begin to expire in 2029. The other loss and credit carryforwards, all of which relate to foreign operations, and have a full valuation allowance against them, have indefinite lives.
Valuation allowances have been established to reduce deferred tax assets to an amount that will, more likely than not, be realized. During the year ended December 31, 2025, our total valuation allowance balance increased by $23 million. Based on our historical taxable income, expectations for the future and available tax planning strategies, management expects the remaining net deferred tax assets will be realized as offsets to reversing deferred tax liabilities and the tax consequences of future taxable income.
Earnings of our foreign subsidiaries and foreign joint ventures after December 31, 2017, are generally not subject to incremental income taxes in the United States or withholding taxes in foreign countries upon repatriation. As such, we only assert that the earnings of one of our foreign subsidiaries are indefinitely reinvested. At December 31, 2025 and 2024, the unrecorded deferred tax liability related to the undistributed earnings of this foreign subsidiary was not material.
A deferred income tax liability has not been recognized on the excess of the book basis over the tax basis of an investment in a controlled foreign subsidiary that is essentially permanent in duration. Recognition of a deferred tax liability will only be required if it becomes apparent that this subsidiary will be sold or liquidated in the foreseeable future. At December 31, 2025, the temporary difference resulting from the investment book basis exceeding the tax basis was $1,766 million. Determination of the unrecognized deferred income tax liability related to this temporary difference is not practicable given the variables involved in performing such a calculation.
We file tax returns in the U.S. federal jurisdiction and in many foreign and state jurisdictions. Unrecognized tax benefits reflect the difference between positions taken on income tax returns and the amounts recognized in the financial statements.
The following table is a reconciliation of the changes in our unrecognized income tax benefits balance:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1 | $ | 88 | 116 | 54 | |||||||||||||
| Additions for tax positions of current year | — | — | — | ||||||||||||||
| Additions for tax positions of prior years | — | — | 66 | ||||||||||||||
| Reductions for tax positions of prior years | — | (28) | (4) | ||||||||||||||
| Balance at December 31 | $ | 88 | 88 | 116 |
Included in the balance of unrecognized income tax benefits at December 31, 2025, 2024 and 2023, were $87 million, $87 million and $100 million, respectively, which, if recognized, would affect our effective income tax rate.
At December 31, 2025, 2024 and 2023, accrued liabilities for interest and penalties, net of accrued income taxes, totaled $1 million, $1 million and $8 million, respectively. These accruals had no impact on our results for the year ended December 31, 2025, increased our results for the year ended December 31, 2024, by $7 million and decreased our results for the year ended December 31, 2023, by $1 million.
Audits in significant jurisdictions are generally complete as follows: United Kingdom (2022), Germany (2017) and United States (2020). Certain issues remain in dispute for audited years, and unrecognized income tax benefits for years still subject to or currently undergoing an audit are subject to change. As a consequence, the balance in unrecognized income tax benefits can be expected to fluctuate from period to period. Although it is reasonably possible such changes could be significant when compared with our total unrecognized income tax benefits, the amount of change is not estimable.
| The amounts of U.S. and foreign income before income taxes, with a reconciliation of income tax at the federal statutory rate to the recorded income tax expense (benefit), were: | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||||||||||||||
| United States | $ | 1,035 | 19.1 | % | 1,796 | 67.1 | 7,887 | 83.3 | |||||||||||||||||||||||||||
| Foreign | 4,385 | 80.9 | 879 | 32.9 | 1,582 | 16.7 | |||||||||||||||||||||||||||||
| $ | 5,420 | 100.0 | % | 2,675 | 100.0 | 9,469 | 100.0 | ||||||||||||||||||||||||||||
| Federal statutory income tax | 1,138 | 21.0 | 562 | 21.0 | 1,989 | 21.0 | |||||||||||||||||||||||||||||
| State income tax, net of federal income tax benefit* | 57 | 1.1 | (43) | (1.6) | 290 | 3.1 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between United Kingdom and United States | 59 | 1.1 | — | — | — | — | |||||||||||||||||||||||||||||
| Non-taxable gain on disposition** | (251) | (4.6) | — | — | — | — | |||||||||||||||||||||||||||||
| Other | (2) | — | — | — | — | — | |||||||||||||||||||||||||||||
| Germany | |||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between Germany and United States | 308 | 5.7 | — | — | — | — | |||||||||||||||||||||||||||||
| Non-taxable gain on disposition*** | (740) | (13.7) | — | — | — | — | |||||||||||||||||||||||||||||
| Other | 12 | 0.2 | — | — | — | — | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | 11 | 0.1 | (11) | (0.4) | 39 | 0.4 | |||||||||||||||||||||||||||||
| Tax law and rate changes | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Effect of cross-border tax laws | |||||||||||||||||||||||||||||||||||
| Disposition of Coop** | 220 | 4.1 | 36 | 1.4 | — | — | |||||||||||||||||||||||||||||
| Other | 59 | 1.1 | (11) | (0.4) | (43) | (0.5) | |||||||||||||||||||||||||||||
| Tax credits | (1) | — | (2) | (0.1) | (2) | — | |||||||||||||||||||||||||||||
| Changes in valuation allowances | 21 | 0.4 | 17 | 0.6 | 22 | 0.2 | |||||||||||||||||||||||||||||
| Non-taxable or non-deductible items | |||||||||||||||||||||||||||||||||||
| Discount on purchased credits | — | — | (36) | (1.3) | — | — | |||||||||||||||||||||||||||||
| Other | (7) | (0.1) | (12) | (0.5) | (74) | (0.8) | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | — | — | 4 | 0.1 | 16 | 0.2 | |||||||||||||||||||||||||||||
| Other | 8 | 0.1 | (4) | (0.1) | (7) | — | |||||||||||||||||||||||||||||
| $ | 892 | 16.5 | % | 500 | 18.7 | 2,230 | 23.6 | ||||||||||||||||||||||||||||
| Note - items that do not meet the 5% threshold for disaggregation have not been separately stated. | |||||||||||||||||||||||||||||||||||
| ** The states that contribute to the majority (greater than 50 percent) of the tax effect in this category include Illinois, Oklahoma, New Jersey, California, and Louisiana for 2025 and 2024, and California, New Jersey, Oklahoma, and Illinois for 2023.* | |||||||||||||||||||||||||||||||||||
| *** Related to the disposition of our ownership interest in Coop. See Note 9—Investments, Loans and Long-Term Receivables for additional information.* | |||||||||||||||||||||||||||||||||||
| **** Related to the disposition of 65% of our interest in Germany and Austria Marketing. See Note 9—Investments, Loans and Long-Term Receivables for additional information.* |
Income tax expense of $47 million for the year ended December 31, 2025 and income tax benefits of $14 million and $113 million for the years ended December 31, 2024 and 2023, respectively, are reflected in “Capital in Excess of Par” on the consolidated statement of changes in equity.
Note 26—Accumulated Other Comprehensive Loss
Changes in the balances of each component of accumulated other comprehensive loss were as follows:
| Millions of Dollars | |||||||||||||||||||||||
| Defined Benefit Plans | Foreign Currency Translation | Hedging | Accumulated Other Comprehensive Loss | ||||||||||||||||||||
| December 31, 2022 | $ | (122) | (336) | (2) | (460) | ||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | (12) | 179 | (3) | 164 | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||||||||||||||
| Defined benefit plans | |||||||||||||||||||||||
| Amortization of net actuarial loss and settlements* | 14 | — | — | 14 | |||||||||||||||||||
| Foreign currency translation | — | — | — | — | |||||||||||||||||||
| Hedging | — | — | — | — | |||||||||||||||||||
| Net current period other comprehensive income (loss) | 2 | 179 | (3) | 178 | |||||||||||||||||||
| December 31, 2023 | (120) | (157) | (5) | (282) | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | (31) | (105) | — | (136) | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||||||||||||||
| Defined benefit plans | |||||||||||||||||||||||
| Amortization of net actuarial loss and settlements* | 11 | — | — | 11 | |||||||||||||||||||
| Foreign currency translation | — | — | — | — | |||||||||||||||||||
| Hedging | — | — | — | — | |||||||||||||||||||
| Net current period other comprehensive loss | (20) | (105) | — | (125) | |||||||||||||||||||
| December 31, 2024 | (140) | (262) | (5) | (407) | |||||||||||||||||||
| Other comprehensive loss before reclassifications | 25 | 263 | — | 288 | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||||||||||||||
| Defined benefit plans | |||||||||||||||||||||||
| Amortization of net actuarial loss and settlements* | 14 | — | — | 14 | |||||||||||||||||||
| Divestiture** | (12) | — | — | (12) | |||||||||||||||||||
| Foreign currency translation**† | — | (50) | — | (50) | |||||||||||||||||||
| Hedging | — | — | — | — | |||||||||||||||||||
| Net current period other comprehensive income | 27 | 213 | — | 240 | |||||||||||||||||||
| December 31, 2025 | $ | (113) | (49) | (5) | (167) |
** Included in the computation of net periodic benefit cost. See Note 23—Pension and Postretirement Plans for additional information.*
*** Related to the disposition of 65% of our interest in Germany and Austria Marketing and is included in the “Net gain on dispositions” line item on the consolidated statement of income. See Note 9—Investments, Loans and Long-Term Receivables.*
† Related to the disposition of Coop and is included in the “Net gain on dispositions” line item on the consolidated statement of income. See Note 9—Investments, Loans and Long-Term Receivables.
Note 27—Cash Flow Information
Supplemental Cash Flow Information
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cash Payments (Receipts) | |||||||||||||||||
| Interest | $ | 972 | 901 | 816 | |||||||||||||
| Federal Income Taxes | 92 | 800 | 565 | ||||||||||||||
| State Income Taxes | |||||||||||||||||
| California | (19) | ** | 96 | ||||||||||||||
| Illinois | 10 | ** | ** | ||||||||||||||
| New Jersey | (13) | ** | 88 | ||||||||||||||
| Oklahoma | (19) | ** | ** | ||||||||||||||
| Other | (5) | 85 | 176 | ||||||||||||||
| Foreign Income Taxes | |||||||||||||||||
| Austria | 11 | ** | ** | ||||||||||||||
| Canada | 51 | 69 | ** | ||||||||||||||
| Germany | 108 | 99 | 133 | ||||||||||||||
| United Kingdom | (22) | 122 | 295 | ||||||||||||||
| Other | 6 | 11 | 44 | ||||||||||||||
| Total income taxes* | 200 | 1,186 | 1,397 | ||||||||||||||
| ** Federal income tax payments in 2024 and 2023 include $551 million and $196 million, respectively, of cash paid to counterparties to purchase IRA eligible tax credits.* | |||||||||||||||||
| *** The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.* |
| Millions of Dollars | |||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||
| Non-cash investing activities | |||||||||||||||||||||||||||||
| Derecognition of government obligations | $ | — | 1,100 | — | |||||||||||||||||||||||||
| Reduction of WRB investment balance | — | 290 | — | ||||||||||||||||||||||||||
| Non-cash financing activities | |||||||||||||||||||||||||||||
| Derecognition of Discharged Notes | $ | — | (1,100) | — | |||||||||||||||||||||||||
| Distribution of Advance Term Loan from WRB | — | (290) | — | ||||||||||||||||||||||||||
| Reduction in borrowings under Receivables Securitization Facility | (469) | (125) | — | ||||||||||||||||||||||||||
See Note 15—Debt for additional information regarding the above non-cash activities.
Note 28—Other Financial Information
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Interest and Debt Expense | |||||||||||||||||
| Incurred | |||||||||||||||||
| Debt | $ | 997 | 919 | 842 | |||||||||||||
| Other | 63 | 9 | 86 | ||||||||||||||
| 1,060 | 928 | 928 | |||||||||||||||
| Capitalized | (21) | (21) | (31) | ||||||||||||||
| Expensed | $ | 1,039 | 907 | 897 | |||||||||||||
| Other Income | |||||||||||||||||
| Interest income | $ | 141 | 158 | 269 | |||||||||||||
| Unrealized investment loss—NOVONIX | (15) | — | (38) | ||||||||||||||
| Other, net* | 312 | 85 | 128 | ||||||||||||||
| $ | 438 | 243 | 359 | ||||||||||||||
| ** Includes derivatives-related activities. See Note 19—Derivatives and Financial Instruments, for additional information.* | |||||||||||||||||
| Research and Development Expenses | $ | 6 | 15 | 27 | |||||||||||||
| Advertising Expenses | $ | 62 | 51 | 54 | |||||||||||||
| Foreign Currency Transaction (Gains) Losses | |||||||||||||||||
| Midstream | $ | — | — | — | |||||||||||||
| Chemicals | — | — | — | ||||||||||||||
| Refining | (21) | — | 19 | ||||||||||||||
| Marketing and Specialties | 2 | 3 | 2 | ||||||||||||||
| Renewable Fuels | 6 | 2 | 3 | ||||||||||||||
| Corporate and Other | 12 | 6 | (2) | ||||||||||||||
| $ | (1) | 11 | 22 |
Note 29—Related Party Transactions
Significant transactions with related parties were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating revenues and other income (a)(d) | $ | 4,093 | 4,443 | 4,623 | |||||||||||||
| Purchases (b)(d) | 12,851 | 20,620 | 17,208 | ||||||||||||||
| Operating expenses and selling, general and administrative expenses (c) | 312 | 299 | 295 | ||||||||||||||
(a)We sold NGL, other petrochemical feedstocks and solvents to Chevron Phillips Chemical Company LLC (CPChem), gas oil and hydrogen feedstocks to Excel Paralubes LLC (Excel Paralubes) and refined petroleum products to several of our equity affiliates in the M&S segment, including OnCue, CF United LLC (CF United), and JET Management Holding. See Note 9—Investments, Loans and Long-Term Receivables for additional information on JET Management Holding. We also sold certain feedstocks and intermediate products to WRB and acted as an agent for WRB in supplying crude oil and other feedstocks for a fee. In addition, we charged several of our equity affiliates, including CPChem, for the use of common facilities, such as steam generators, waste and water treaters and warehouse facilities.
(b)We purchased crude oil, refined petroleum products, NGL and solvents from WRB. We also purchased natural gas and NGL from DCP Midstream and CPChem, as well as other feedstocks from various equity affiliates, for use in our refinery and fractionation processes. In addition, we purchased base oils and fuel products from Excel Paralubes for use in our specialty and refining businesses. We paid NGL fractionation fees to CPChem. We also paid fees to various pipeline equity affiliates for transporting crude oil, refined petroleum products and NGL.
(c)We paid consignment fees to CF United, and utility and processing fees to various equity affiliates.
(d)As a result of the WRB acquisition, we began consolidating WRB’s financial results beginning on October 1, 2025. As such, transactions after this date are not presented in the table above. See Note 5—Business Combinations for additional information.
Note 30—Segment Disclosures and Related Information
Our operating segments are:
1)**Midstream—**Provides crude oil and refined petroleum product transportation, terminaling and storage services, as well as natural gas and NGL gathering, processing, transportation, fractionation, storage and marketing services in the United States. In addition, this segment exports liquefied petroleum gas to global markets.
2)**Chemicals—**Consists of our 50% equity investment in 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 and distillates, including aviation fuels. At December 31, 2025, this segment included 10 refineries in the United States and Europe.
4)**Marketing and Specialties—**Purchases for resale and markets refined products, mainly in the United States and Europe. In addition, this segment includes the manufacturing and marketing of base oils and lubricants.
5)**Renewable Fuels—**Processes renewable feedstocks into renewable products at the Rodeo Complex and at our Humber Refinery. In addition, this segment includes the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels.
Corporate and Other includes general corporate overhead, interest income, interest expense, our investment in research of new technologies, business transformation restructuring costs, our investment in NOVONIX, and various other corporate activities. Corporate assets include all cash, cash equivalents, income tax-related assets and enterprise information technology assets. Effective in the first quarter of 2026, activities associated with decommissioning and redeveloping at our idled Los Angeles Refinery will be included in Corporate and Other. See Note 4—Restructuring for additional information.
Intersegment sales are at prices that we believe approximate market.
Through our implementation of ASU No. 2023-07, “Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures,” we are including additional disclosures regarding significant segment expenses regularly provided to our chief operating decision maker (CODM), who is our Chief Executive Officer. The measure of segment profit or loss reviewed by our CODM is “income (loss) before income taxes.” The CODM uses segment income (loss) before income taxes to allocate resources to each segment predominantly in the annual budgeting and forecasting process. The CODM compares budget-to-actual segment income (loss) before income taxes on a monthly and quarterly basis and considers trend analyses, as well as other market factors when making decisions about allocating capital and personnel to the segments. The measure of segment assets reported on our consolidated balance sheet reviewed by our CODM is “Total Assets.”
Analysis of Results by Operating Segment
| Millions of Dollars | ||||||||||||||||||||||||||
| Year Ended December 31, 2025 | ||||||||||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||||
| Midstream | Chemicals | Refining† | M&S | Renewable Fuels | Corporate and Other | Consolidating Adjustments | Total Consolidated | |||||||||||||||||||
| Revenues and Other Income | ||||||||||||||||||||||||||
| Third-party sales and other operating revenues | $ | 18,577 | — | 26,872 | 83,740 | 3,150 | 37 | — | 132,376 | |||||||||||||||||
| Intercompany revenues | 2,598 | — | 48,027 | 2,157 | 3,028 | 10 | (55,820) | — | ||||||||||||||||||
| Total sales and other operating revenues | 21,175 | — | 74,899 | 85,897 | 6,178 | 47 | (55,820) | 132,376 | ||||||||||||||||||
| Equity in earnings of affiliates | 399 | 297 | (79) | 146 | (1) | — | — | 762 | ||||||||||||||||||
| Net gain on dispositions | 58 | — | 3 | 2,923 | — | — | — | 2,984 | ||||||||||||||||||
| Other income | 24 | — | 40 | 16 | 204 | 154 | — | 438 | ||||||||||||||||||
| Total Revenues and Other Income | 21,656 | 297 | 74,863 | 88,982 | 6,381 | 201 | (55,820) | 136,560 | ||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||
| Purchased crude oil and products | 15,224 | — | 67,766 | 82,714 | 6,097 | 1 | (55,709) | 116,093 | ||||||||||||||||||
| Operating expenses* | 2,021 | 7 | 4,060 | 73 | 365 | 8 | (111) | 6,423 | ||||||||||||||||||
| Selling, general and administrative expenses* | 217 | (7) | 170 | 1,592 | 66 | 399 | — | 2,437 | ||||||||||||||||||
| Depreciation and amortization | 1,030 | — | 1,820 | 97 | 95 | 209 | — | 3,251 | ||||||||||||||||||
| Impairments | 79 | — | 955 | 1 | — | 25 | — | 1,060 | ||||||||||||||||||
| Taxes other than income taxes | 261 | — | 357 | (1) | 132 | 42 | — | 791 | ||||||||||||||||||
| Interest and debt expense | — | — | — | — | — | 1,039 | — | 1,039 | ||||||||||||||||||
| Other segment items** | 7 | — | 9 | 6 | 6 | 18 | — | 46 | ||||||||||||||||||
| Total Costs and Expenses | 18,839 | — | 75,137 | 84,482 | 6,761 | 1,741 | (55,820) | 131,140 | ||||||||||||||||||
| Income (loss) before income taxes | $ | 2,817 | 297 | (274) | 4,500 | (380) | (1,540) | — | 5,420 | |||||||||||||||||
| ** These significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. The total of the line items "Operating expenses" and "Selling, general and administrative expenses" is considered "Controllable costs" and is provided to the CODM.* | ||||||||||||||||||||||||||
| *** “Other segment items” for each reportable segment includes the following line items on our consolidated income statement: “Accretion on discounted liabilities” and “Foreign currency transaction (gains) losses.”* | ||||||||||||||||||||||||||
| † Includes our proportional share of our equity method investment in WRB through September 30, 2025. Beginning on October 1, 2025, 100% of Borger Refinery and Wood River Refinery are included in consolidated results. Refer to Note 5—Business Combinations, in the Notes to Consolidated Financial Statements for additional information. |
| Millions of Dollars | |||||||||||||||||||||||
| As of and for the Year Ended December 31, 2025 | |||||||||||||||||||||||
| Operating Segments | |||||||||||||||||||||||
| Midstream | Chemicals | Refining† | M&S | Renewable Fuels | Corporate and Other | Total Consolidated | |||||||||||||||||
| Interest Income | $ | — | — | — | — | — | 141 | 141 | |||||||||||||||
| Investments In and Advances to Affiliates | 2,117 | 7,899 | 65 | 1,330 | 15 | 2 | 11,428 | ||||||||||||||||
| Total Assets | 30,172 | 7,899 | 19,435 | 10,059 | 3,197 | 2,918 | 73,680 | ||||||||||||||||
| Capital Expenditures and Investments | 1,231 | — | 776 | 118 | 56 | 52 | 2,233 | ||||||||||||||||
| † Includes our proportional share of our equity method investment in WRB through September 30, 2025. Beginning on October 1, 2025, 100% of Borger Refinery and Wood River Refinery are included in consolidated results. Refer to Note 5—Business Combinations, in the Notes to Consolidated Financial Statements for additional information. |
| Millions of Dollars | ||||||||||||||||||||||||||
| Year Ended December 31, 2024 | ||||||||||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||||
| Midstream | Chemicals | Refining | M&S | Renewable Fuels | Corporate and Other | Consolidating Adjustments | Total Consolidated | |||||||||||||||||||
| Revenues and Other Income | ||||||||||||||||||||||||||
| Third-party sales and other operating revenues | $ | 16,012 | — | 34,793 | 90,318 | 1,995 | 35 | — | 143,153 | |||||||||||||||||
| Intercompany revenues | 2,775 | — | 50,171 | 2,129 | 3,567 | 15 | (58,657) | — | ||||||||||||||||||
| Total sales and other operating revenues | 18,787 | — | 84,964 | 92,447 | 5,562 | 50 | (58,657) | 143,153 | ||||||||||||||||||
| Equity in earnings of affiliates | 591 | 863 | 50 | 276 | (1) | — | — | 1,779 | ||||||||||||||||||
| Net gain on dispositions | 263 | — | (8) | 66 | — | — | — | 321 | ||||||||||||||||||
| Other income | 11 | — | 3 | 42 | 10 | 186 | (9) | 243 | ||||||||||||||||||
| Total Revenues and Other Income | 19,652 | 863 | 85,009 | 92,831 | 5,571 | 236 | (58,666) | 145,496 | ||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||
| Purchased crude oil and products | 13,429 | — | 79,850 | 89,572 | 5,664 | — | (58,553) | 129,962 | ||||||||||||||||||
| Operating expenses* | 1,876 | (3) | 3,727 | 70 | 370 | 12 | (113) | 5,939 | ||||||||||||||||||
| Selling, general and administrative expenses* | 213 | (10) | 209 | 1,932 | 51 | 419 | — | 2,814 | ||||||||||||||||||
| Depreciation and amortization | 920 | — | 1,077 | 179 | 64 | 123 | — | 2,363 | ||||||||||||||||||
| Impairments | 346 | — | 106 | 3 | — | 1 | — | 456 | ||||||||||||||||||
| Taxes other than income taxes | 216 | — | 387 | 59 | (382) | 49 | — | 329 | ||||||||||||||||||
| Interest and debt expense | — | — | — | — | — | 907 | — | 907 | ||||||||||||||||||
| Other segment items** | 14 | — | 18 | 5 | 2 | 12 | — | 51 | ||||||||||||||||||
| Total Costs and Expenses | 17,014 | (13) | 85,374 | 91,820 | 5,769 | 1,523 | (58,666) | 142,821 | ||||||||||||||||||
| Income (loss) before income taxes | $ | 2,638 | 876 | (365) | 1,011 | (198) | (1,287) | — | 2,675 | |||||||||||||||||
| ** These significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. The total of the line items "Operating expenses" and "Selling, general and administrative expenses" is considered "Controllable costs" and is provided to the CODM.* | ||||||||||||||||||||||||||
| *** “Other segment items” for each reportable segment includes the following line items on our consolidated income statement: “Accretion on discounted liabilities” and “Foreign currency transaction (gains) losses.”* |
| Millions of Dollars | |||||||||||||||||||||||
| As of and for the Year Ended December 31, 2024 | |||||||||||||||||||||||
| Operating Segments | |||||||||||||||||||||||
| Midstream | Chemicals | Refining | M&S | Renewable Fuels | Corporate and Other | Total Consolidated | |||||||||||||||||
| Interest Income | $ | — | — | — | — | — | 158 | 158 | |||||||||||||||
| Investments In and Advances to Affiliates | 3,080 | 7,819 | 2,381 | 719 | 16 | 2 | 14,017 | ||||||||||||||||
| Total Assets | 28,334 | 7,842 | 19,599 | 9,799 | 3,142 | 3,866 | 72,582 | ||||||||||||||||
| Capital Expenditures and Investments | 751 | — | 582 | 85 | 375 | 66 | 1,859 | ||||||||||||||||
| Millions of Dollars | ||||||||||||||||||||||||||
| Year Ended December 31, 2023 | ||||||||||||||||||||||||||
| Operating Segments | ||||||||||||||||||||||||||
| Midstream | Chemicals | Refining | M&S | Renewable Fuels | Corporate and Other | Consolidating Adjustments | Total Consolidated | |||||||||||||||||||
| Revenues and Other Income | ||||||||||||||||||||||||||
| Third-party sales and other operating revenues | $ | 15,780 | — | 34,241 | 95,931 | 1,412 | 35 | — | 147,399 | |||||||||||||||||
| Intercompany revenues | 2,824 | — | 57,985 | 3,000 | 3,534 | 13 | (67,356) | — | ||||||||||||||||||
| Total sales and other operating revenues | 18,604 | — | 92,226 | 98,931 | 4,946 | 48 | (67,356) | 147,399 | ||||||||||||||||||
| Equity in earnings of affiliates | 648 | 586 | 439 | 345 | (1) | — | — | 2,017 | ||||||||||||||||||
| Net gain on dispositions | 130 | — | (13) | 3 | (3) | (2) | — | 115 | ||||||||||||||||||
| Other income | 5 | — | 86 | (11) | 8 | 259 | 12 | 359 | ||||||||||||||||||
| Total Revenues and Other Income | 19,387 | 586 | 92,738 | 99,268 | 4,950 | 305 | (67,344) | 149,890 | ||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||
| Purchased crude oil and products | 13,126 | — | 81,726 | 95,808 | 4,667 | — | (67,241) | 128,086 | ||||||||||||||||||
| Operating expenses* | 1,844 | (3) | 4,245 | 57 | 98 | 16 | (103) | 6,154 | ||||||||||||||||||
| Selling, general and administrative expenses* | 441 | (11) | 169 | 1,336 | 8 | 582 | — | 2,525 | ||||||||||||||||||
| Depreciation and amortization | 923 | — | 831 | 122 | 8 | 93 | — | 1,977 | ||||||||||||||||||
| Impairments | 3 | — | 10 | 3 | — | 8 | — | 24 | ||||||||||||||||||
| Taxes other than income taxes | 229 | — | 382 | 40 | 12 | 44 | — | 707 | ||||||||||||||||||
| Interest and debt expense | — | — | — | — | — | 897 | — | 897 | ||||||||||||||||||
| Other segment items** | 2 | — | 35 | 5 | 4 | 5 | — | 51 | ||||||||||||||||||
| Total Costs and Expenses | 16,568 | (14) | 87,398 | 97,371 | 4,797 | 1,645 | (67,344) | 140,421 | ||||||||||||||||||
| Income (loss) before income taxes | $ | 2,819 | 600 | 5,340 | 1,897 | 153 | (1,340) | — | 9,469 | |||||||||||||||||
| ** These significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. The total of the line items "Operating expenses" and "Selling, general and administrative expenses" is considered "Controllable costs" and is provided to the CODM.* | ||||||||||||||||||||||||||
| *** “Other segment items” for each reportable segment includes the following line items on our consolidated income statement: “Accretion on discounted liabilities” and “Foreign currency transaction (gains) losses.”* |
| Millions of Dollars | |||||||||||||||||||||||
| As of and for the Year Ended December 31, 2023 | |||||||||||||||||||||||
| Operating Segments | |||||||||||||||||||||||
| Midstream | Chemicals | Refining | M&S | Renewable Fuels | Corporate and Other | Total Consolidated | |||||||||||||||||
| Interest Income | $ | — | — | — | — | — | 269 | 269 | |||||||||||||||
| Investments In and Advances to Affiliates | 3,749 | 7,341 | 2,802 | 824 | 18 | 2 | 14,736 | ||||||||||||||||
| Total Assets | 29,052 | 7,357 | 21,013 | 10,834 | 2,012 | 5,233 | 75,501 | ||||||||||||||||
| Capital Expenditures and Investments | 625 | — | 586 | 101 | 753 | 90 | 2,155 | ||||||||||||||||
Geographic Information
Long-lived assets, defined as net PP&E plus investments and long-term receivables, by geographic location at December 31 were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 48,872 | 47,889 | 49,124 | |||||||||||||
| United Kingdom | 1,333 | 1,341 | 1,406 | ||||||||||||||
| Germany | 794 | 325 | 394 | ||||||||||||||
| Other countries | 3 | 87 | 90 | ||||||||||||||
| Worldwide consolidated | $ | 51,002 | 49,642 | 51,014 |
Note 31—New Accounting Standards
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40),” which will require additional disclosure of certain costs and expenses within the notes to the consolidated financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are evaluating the provisions of ASU 2024-03 and the incremental disclosures that will be required in our consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software,” which simplifies the capitalization guidance by removing all references to software development project stages. Under this standard, eligible software development costs will begin capitalization when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. This ASU is effective for annual reporting periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. We are evaluating the provisions of ASU 2025-06 on our consolidated financial statements and related disclosures.
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