Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Management’s Discussion and Analysis is the company’s analysis of its financial performance, financial condition, and significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes included elsewhere in this report. It contains forward-looking statements including, without limitation, statements relating to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions often identify forward-looking statements, but the absence of these words does not mean a statement is not forward-looking. The forward-looking statements made in this Quarterly Report on Form 10-Q are based on events or circumstances as of the date on which the statements are made. The company does not undertake to update, revise or correct any of the forward-looking information included in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events unless required to do so pursuant to applicable law. Readers are cautioned that such forward-looking statements should be read in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”

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

EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT

Phillips 66 is uniquely positioned as a diversified and integrated downstream energy provider operating with Midstream, Chemicals, Refining, Marketing and Specialties (M&S), and Renewable Fuels segments. At June 30, 2024, we had total assets of $75.9 billion. Our common stock trades on the New York Stock Exchange under the symbol PSX.

Executive Overview

In the second quarter of 2024, we reported earnings of $1 billion and cash provided by operating activities of $2.1 billion. During the quarter, we funded capital expenditures and investments of $367 million, repurchased $840 million of common stock, and paid dividends on our common stock of $485 million. Additionally, we received proceeds from an asset disposition of $685 million. We ended the second quarter of 2024 with $2.4 billion of cash and cash equivalents and $4.1 billion of total committed capacity available under our revolving credit facility.

Rodeo Renewable Energy Complex

We completed the conversion of our San Francisco Refinery in Rodeo, California, into the Rodeo Renewable Energy Complex (RREC), expanding commercial scale production of renewable diesel and positioning Phillips 66 as a leader in renewable fuels production. The RREC processes approximately 50,000 barrels per day of renewable feedstocks into renewable fuels, including renewable diesel and renewable jet fuel. The RREC is expected to start producing sustainable aviation fuel in the third quarter of 2024, with the flexibility to produce up to 10,000 barrels per day. The RREC advances our strategy to expand renewable fuels production, lower our carbon footprint, and provide reliable, affordable energy that we expect will create long-term value for our shareholders.

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Basis of Presentation

Effective April 1, 2024, we changed the internal financial information reviewed by our chief executive officer to evaluate performance and allocate resources to our operating segments. This included changes in the composition of our operating segments, as well as measurement changes for certain activities between our operating segments. The primary effects are summarized below:

• Establishment of a Renewable Fuels operating segment, which includes renewable fuels activities and assets historically reported in our Refining, M&S and Midstream segments.

• Change in method of allocating results for certain Gulf Coast distillate export activities from our M&S segment to our Refining segment.

• Reclassification of certain crude oil and international clean products trading activities between our M&S segment and our Refining segment.

• Change in reporting of our 16% investment in NOVONIX from our Midstream segment to Corporate and Other.

The segment realignment is presented for the three- and six-month periods ended June 30, 2024, with prior periods recast for comparability.

Business Environment

The Midstream segment includes our Transportation and natural gas liquids (NGL) businesses. Our Transportation business contains fee-based operations not directly exposed to commodity price risk. Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills, LLC (DCP Southern Hills), contains both fee-based operations and operations directly impacted by NGL and natural gas prices. During the second quarter of 2024, compared with the second quarter of 2023, the NGL composite barrel price increased, partially due to crude oil prices increasing over the same period, while natural gas prices decreased over the same period primarily due to increased production, pipeline maintenance and limited growth in export infrastructure.

The Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors. The benchmark high-density polyethylene chain margin decreased in the second quarter of 2024, compared with the second quarter of 2023, mainly due to lower polyethylene sales prices as a result of industry oversupply driven by recent capacity additions.

Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. Market cracks are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. The composite 3:2:1 market crack spread for our business decreased to an average of $18.96 per barrel during the second quarter of 2024, from an average of $28.65 per barrel during the second quarter of 2023. The decrease in the composite market crack spread was primarily driven by higher crude oil costs and lower global prices for gasoline and diesel. The price of U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, increased to an average of $80.73 per barrel during the second quarter of 2024, from an average of $73.78 per barrel during the second quarter of 2023.

Results for our M&S segment depend largely on marketing fuel and lubricant margins and sales volumes of our refined petroleum products. While marketing fuel and lubricant margins are primarily driven by market factors, largely determined by the relationship between supply and demand, marketing fuel margins, in particular, are influenced by trends in spot prices, and where applicable, retail prices for refined petroleum products in the regions and countries where we operate.

Our Renewable Fuels segment consists of the operations and assets of the RREC, as well as the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels. Results for our Renewable Fuels segment are impacted by feedstock costs, throughput, and certain regulatory credits, as well as other market factors, largely determined by the relationship between supply and demand, and other operating costs.

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RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three and six months ended June 30, 2024, is based on a comparison with the corresponding periods of 2023.

Consolidated Results

A summary of income (loss) before income taxes by business segment with a reconciliation to net income attributable to Phillips 66 follows:

			Millions of Dollars
			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
Midstream			$	767					620						1,321			1,336
Chemicals			222						192						427			390
Refining			302						1,175						518			2,769
Marketing and Specialties			415						533						781			896
Renewable Fuels			(55)						68						(110)			142
Corporate and Other			(340)						(344)						(662)			(638)
Income before income taxes			1,311						2,244						2,275			4,895
Income tax expense			291						510						494			1,084
Net income			1,020						1,734						1,781			3,811
Less: net income attributable to noncontrolling interests			5						37						18			153
Net income attributable to Phillips 66			$	1,015					1,697						1,763			3,658

Our net income attributable to Phillips 66 in the second quarter of 2024 was $1 billion, compared with $1.7 billion in the second quarter of 2023. Our net income attributable to Phillips 66 for the six months ended June 30, 2024, was $1.8 billion, compared with $3.7 billion for the six months ended June 30, 2023. The decrease in net income attributable to Phillips 66 in both periods was primarily due to a decline in realized refining margins, partially offset by lower income tax expense and a before-tax gain of $238 million recognized in the second quarter of 2024 in our Midstream segment associated with the sale of our 25% ownership interest in Rockies Express Pipeline LLC (REX).

See the “Segment Results” section for additional information on our segment results. Also see Note 20—Income Taxes and Note 7—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information on income taxes and the before-tax gain associated with the sale of our 25% ownership interest in REX, respectively.

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Statement of Income Analysis

Sales and other operating revenues for the second quarter and six-month period of 2024 increased 9% and 6%, respectively, and purchased crude oil and products increased 13% and 12%, respectively. These increases were mainly due to higher prices for crude oil, partially offset by lower prices for natural gas and refined petroleum products. Additionally, higher refined petroleum product sales volumes contributed to the increase in sales in both periods.

Equity in earnings of affiliates decreased 13% and 14% in the second quarter and six-month period of 2024, respectively. The decrease in both periods was primarily due to lower equity earnings from WRB Refining LP (WRB) and Excel Paralubes LLC (Excel), both primarily due to lower margins. These decreases were partially offset by higher equity earnings from CPChem. See the Chemicals segment analysis in the “Segment Results” section for additional information regarding CPChem.

Net gain on dispositions increased $249 million and $215 million in the second quarter and six-month period of 2024, respectively, primarily due to a before-tax gain of $238 million recognized in the Midstream segment in the second quarter of 2024 associated with the sale of our 25% ownership interest in REX.

Other income decreased 41% in the second quarter of 2024, primarily due to lower interest income as a result of lower cash balances.

Impairments increased $221 million and $378 million in the second quarter and six-month period of 2024, respectively, primarily due to before-tax impairment charges reported in our Midstream segment related to certain gathering and processing assets in Texas. In addition, the six-month period of 2024 included before-tax impairment charges reported in our Refining and Midstream segments totaling $163 million related to certain crude oil processing and logistics assets in California.

Taxes other than income taxes decreased 72% and 44% in the second quarter and six-month period of 2024. The decreases were primarily driven by tax credits received from renewable diesel blending activity.

Interest and debt expense decreased 13% in the second quarter of 2024. The decrease was primarily related to the early redemption of DCP Midstream LP’s (DCP LP) 5.850% junior subordinated notes that occurred in the second quarter of 2023, partially offset by higher average debt principal balances. See Note 11—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding debt.

Income tax expense decreased 43% and 54% in the second quarter and six-month period of 2024, primarily due to lower income before income taxes. See Note 20—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our effective income tax rates.

Net income attributable to noncontrolling interests decreased 86% and 88% in the second quarter and six-month period of 2024, respectively. The decrease in both periods relates to before-tax impairment charges reported in our Midstream segment primarily related to certain DCP LP gathering and processing assets in Texas. The decrease in the six-month period of 2024 also reflects the impacts of the acquisition of all publicly held common units of DCP LP (DCP LP Merger) in June 2023. See Note 2—DCP Midstream, LP Merger (DCP LP Merger) and Note 9—Impairments, in the Notes to Consolidated Financial Statements for additional information.

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Segment Results

Midstream

			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
			Millions of Dollars
Income Before Income Taxes
Transportation			$	547					285						791			590
NGL			220						335						530			746
Total Midstream			$	767					620						1,321			1,336

			Thousands of Barrels Daily
Transportation Volumes
Pipelines*			3,059						3,254						3,019			3,147
Terminals			3,226						3,149						3,168			3,176
Operating Statistics
NGL fractionated**			744						738						712			699
NGL production**			437						444						427			433
Wellhead Volume (billion cubic feet per day)**			4.5						4.5						4.5			4.5

** Pipelines represent the sum of volumes transported through each separately tariffed consolidated pipeline segment, excluding NGL pipelines.*

*** Includes 100% of DCP Midstream Class A Segment’s volumes.*

Market Indicator
Weighted-Average NGL Price (dollars per gallon)*			$	0.68					0.61						0.69			0.68
** Based on index prices from the Mont Belvieu market hub, which are weighted by NGL component mix.*

The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing services; NGL production, transportation, storage, fractionation, processing and marketing services; natural gas gathering, compressing, treating, processing, storage, transportation and marketing services; and condensate recovery. These activities are mainly in the United States.

Results from our Midstream segment increased $147 million in the second quarter of 2024 and decreased $15 million in the six-month period of 2024.

Results from our Transportation business increased $262 million and $201 million in the second quarter and six-month period of 2024, respectively, primarily due to a before-tax gain of $238 million recognized in the second quarter of 2024 associated with the sale of our 25% ownership interest in REX. See Note 7—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information.

Results from our NGL business decreased $115 million and $216 million in the second quarter and six-month period of 2024, respectively, primarily due to before-tax impairment charges associated with certain gathering and processing assets in Texas, partially offset by lower maintenance costs. The decrease in the second quarter of 2024 was also partially offset by improved fractionation results and higher pipeline volumes.

See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.

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Chemicals

			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
			Millions of Dollars
Income Before Income Taxes			$	222					192						427			390

			Millions of Pounds
CPChem Externally Marketed Sales Volumes*			6,195						5,892						12,133			11,598
** Represents 100% of CPChem’s outside sales of produced petrochemical products, as well as commission sales from equity affiliates.*

Olefins and Polyolefins Capacity Utilization (percent)			98		%				98						97			96

The Chemicals segment consists of our 50% interest in CPChem, which we account for under the equity method. CPChem uses NGL and other feedstocks to produce petrochemicals. These products are then marketed and sold or used as feedstocks to produce plastics and other chemicals. CPChem produces and markets ethylene and other olefin products. Ethylene produced is primarily consumed within CPChem for the production of polyethylene, normal alpha olefins and polyethylene pipe. CPChem manufactures and/or markets aromatics and styrenics products, such as benzene, cyclohexane, styrene and polystyrene, as well as manufactures and/or markets a variety of specialty chemical products. Unless otherwise noted, amounts referenced below reflect our net 50% interest in CPChem.

Results from the Chemicals segment increased $30 million and $37 million in the second quarter and six-month period of 2024, respectively. The increase in the second quarter of 2024 was primarily due to higher margins driven by a decrease in feedstock costs, partially offset by lower equity earnings from CPChem’s equity affiliates. The increase in the six-month period of 2024 was primarily due to higher sales volumes, partially offset by lower equity earnings from CPChem’s equity affiliates and decreased margins.

See the “Executive Overview and Business Environment” section for information on market factors impacting CPChem’s results.

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Refining

			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
			Millions of Dollars
Income (Loss) Before Income Taxes
Atlantic Basin/Europe			$	15					132						93			260
Gulf Coast			42						313						162			1,042
Central Corridor			243						633						456			1,365
West Coast			2						97						(193)			102
Worldwide			$	302					1,175						518			2,769

			Dollars Per Barrel
Income (Loss) Before Income Taxes
Atlantic Basin/Europe			$	0.30					2.95						0.95			3.09
Gulf Coast			0.82						6.22						1.64			10.25
Central Corridor			8.69						23.13						8.51			25.57
West Coast			0.10						3.23						(4.27)			1.78
Worldwide			2.00						7.70						1.76			9.33
Realized Refining Margins*
Atlantic Basin/Europe			$	8.10					10.64						8.87			13.19
Gulf Coast			7.88						13.22						9.36			17.53
Central Corridor			12.75						22.58						12.66			24.56
West Coast			13.06						15.80						11.77			15.80
Worldwide			10.01						15.55						10.50			18.05

** See the “Non-GAAP Reconciliations” section for a reconciliation of this non-GAAP measure to the most directly comparable measure under generally accepted accounting principles in the United States (GAAP), income (loss) before income taxes per barrel.*

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			Thousands of Barrels Daily
			Three Months Ended June 30									Six Months Ended June 30
Operating Statistics			2024						2023						2024			2023
Refining operations*
Atlantic Basin/Europe
Crude oil capacity			537						537						537			537
Crude oil processed			527						464						500			454
Capacity utilization (percent)			98		%				86						93			84
Refinery production			556						495						539			467
Gulf Coast
Crude oil capacity			529						529						529			529
Crude oil processed			507						498						491			509
Capacity utilization (percent)			96		%				94						93			96
Refinery production			571						563						548			572
Central Corridor
Crude oil capacity			531						531						531			531
Crude oil processed			541						498						525			487
Capacity utilization (percent)			102		%				94						99			92
Refinery production			564						519						545			507
West Coast**
Crude oil capacity			244						319						244			319
Crude oil processed			227						314						236			298
Capacity utilization (percent)			93		%				98						97			93
Refinery production			234						331						246			317
Worldwide
Crude oil capacity			1,841						1,916						1,841			1,916
Crude oil processed			1,802						1,774						1,752			1,748
Capacity utilization (percent)			98		%				93						95			92
Refinery production			1,925						1,908						1,878			1,863
** Includes our share of equity affiliates.* *** As part of our plans to convert the San Francisco Refinery into a renewable fuels facility, in the first quarter of 2023, we ceased operations at the Santa Maria facility in Arroyo Grande, California, which reduced net crude throughput capacity from 120 MBD to 75 MBD. In October 2023, we further reduced net crude throughput capacity from 75 MBD to 52 MBD as we shut down one of the two crude units at the Rodeo facility. Effective January 1, 2024, net crude throughput capacity was 52 MBD. The remaining net crude throughput capacity came offline upon the shutdown of the Rodeo facility’s second crude unit in February 2024. Accordingly, effective January 1, 2024, we have excluded the Rodeo facility from the operating statistics above.*

The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, at 11 refineries in the United States and Europe.

Results from our Refining segment decreased $873 million and $2,251 million in the second quarter and six-month period of 2024, respectively, primarily due to lower realized margins, partially offset by higher volumes. The decrease in realized margins in both periods was primarily driven by lower market crack spreads.

Our worldwide refining crude oil capacity utilization rate was 98% and 95% in the second quarter and six-month period of 2024, respectively, compared with 93% and 92% in the second quarter and six-month period of 2023, respectively. See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.

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Marketing and Specialties

			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
			Millions of Dollars
Income Before Income Taxes			$	415					533						781			896

			Dollars Per Barrel
Income Before Income Taxes
U.S.			$	1.16					1.82						1.26			1.65
International			5.02						5.31						4.00			4.49
Realized Marketing Fuel Margins*
U.S.			$	1.70					2.25						1.65			2.12
International			5.87						6.50						5.38			5.79

** See the “Non-GAAP Reconciliations” section for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure, income before income taxes per barrel.*

			Dollars Per Gallon
U.S. Average Wholesale Prices*
Gasoline			$	2.86					2.99						2.74			2.90
Distillates			2.78						2.99						2.81			3.11
** On third-party branded petroleum product sales, excluding excise taxes.*

			Thousands of Barrels Daily
Marketing Refined Petroleum Product Sales
Gasoline			1,371						1,242						1,293			1,186
Distillates			1,008						974						988			911
Other			52						35						50			31
			2,431						2,251						2,331			2,128

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

Results from the M&S segment decreased $118 million and $115 million in the second quarter and six-month period of 2024, respectively. The decrease in the second quarter of 2024 was primarily driven by lower U.S. marketing fuel margins and decreased equity earnings from affiliates. The decrease in the six-month period of 2024 was primarily due to lower realized marketing fuel margins and decreased equity earnings from affiliates, partially offset by higher U.S. marketing volumes.

See the “Executive Overview and Business Environment” section for information on marketing fuel margins and other market factors impacting this quarter’s results.

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Renewable Fuels

			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
			Millions of Dollars
Income (Loss) Before Income Taxes			$	(55)					68						(110)			142

			Thousands of Barrels Daily
Operating Statistics
Total Renewable Fuels Produced			31						10						20			11
Total Renewable Fuel Sales			45						27						40			27

Market Indicators
Chicago Board of Trade (CBOT) soybean oil (dollars per pound)			$	0.45					0.53						0.46			0.57
California Low-Carbon Fuel Standard (LCFS) carbon credit (dollars per metric ton)			51.83						81.11						57.85			73.64
California Air Resource Board (CARB) ultra-low-sulfur diesel (ULSD) - San Francisco (dollars per gallon)			2.64						2.44						2.65			2.68
Biodiesel Renewable Identification Number (RIN) (dollars per RIN)			0.51						1.51						0.54			1.57

The Renewable Fuels segment processes renewable feedstocks into renewable products at the RREC. In addition, this segment also includes the global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels.

Results from the Renewable Fuels segment decreased $123 million and $252 million in the second quarter and six-month period of 2024, respectively. The decrease in the second quarter was primarily driven by higher feedstock and other costs related to the ramp-up of the RREC. The decreases were partially offset by increased renewable fuel sales, as well as tax credits received from renewable diesel blending activity.

The decrease in the six-month period of 2023 was primarily driven by higher feedstock and other costs related to the ramp-up of the RREC, as well as lower benefits from emissions credits. The decreases were partially offset by increased renewable fuel sales, as well as tax credits received from renewable diesel blending activity.

See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.

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Corporate and Other

			Millions of Dollars
			Three Months Ended June 30									Six Months Ended June 30
			2024						2023						2024			2023
Loss Before Income Taxes
Net interest expense			$	(200)					(182)						(386)			(306)
Corporate overhead and other			(133)						(147)						(274)			(305)
NOVONIX			(7)						(15)						(2)			(27)
Total Corporate and Other			$	(340)					(344)						(662)			(638)

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Corporate overhead and other includes general and administrative expenses, technology costs, environmental costs associated with sites no longer in operation, business transformation restructuring costs, foreign currency transaction gains and losses, and other costs not directly associated with an operating segment. Corporate and Other also includes the change in the fair value of our investment in NOVONIX.

Net interest expense increased $18 million and $80 million in the second quarter and six-month period of 2024, respectively. The increase in both periods was primarily driven by lower interest income as a result of lower cash balances and higher average debt principal balances, partially offset by lower interest expense primarily related to the $53 million before-tax loss on early redemption of DCP LP’s 5.850% junior subordinated notes in May 2023. See Note 11—Debt, in the Notes to Consolidated Financial Statements, for additional information.

Corporate overhead and other costs decreased $14 million and $31 million in the second quarter and six-month period of 2024, respectively, primarily due to a decrease in consulting fees associated with our business transformation.

The fair value of our investment in NOVONIX declined by $7 million in the second quarter of 2024, compared with a decline of $15 million in the second quarter of 2023. The fair value of our investment in NOVONIX declined by $2 million in the six-month period of 2024, compared with a decline of $27 million in the six-month period of 2023.

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CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators

			Millions of Dollars, Except as Indicated
			June 30 2024						December 31 2023
Cash and cash equivalents			$	2,444					3,323
Short-term debt			2,780						1,482
Total debt			19,960						19,359
Total equity			30,507						31,650
Percent of total debt to capital*			40%						38
Percent of floating-rate debt to total debt			6%						10
** Capital includes total debt and total equity.*

To meet our short- and long-term liquidity requirements, we use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. During the first six months of 2024, we generated $1.9 billion of cash from operations. We received proceeds from an asset disposition of $685 million. Additionally, proceeds from debt issuances, net of debt repayments, were $599 million. We used available cash primarily to repurchase shares of our common stock for $2 billion, fund capital expenditures and investments of $995 million, and pay dividends on our common stock of $933 million. During the first six months of 2024, cash and cash equivalents decreased to $2.4 billion. At this time, we believe that our cash on hand, as well as the sources of liquidity described herein, will be sufficient to fund our obligations over the short- and long-term.

Significant Sources of Capital

Operating Activities

During the first six months of 2024, cash generated by operating activities was $1.9 billion, compared with $2.2 billion for the first six months of 2023. The decrease was primarily due to lower earnings, primarily driven by a decline in realized refining margins, partially offset by more favorable working capital impacts.

Our short- and long-term operating cash flows are highly dependent upon refining and marketing margins, NGL prices and chemicals margins. Prices and margins in our industry are typically volatile and are driven by market conditions over which we have little or no control. Absent other mitigating factors, as these prices and margins fluctuate, we would expect a corresponding change in our operating cash flows.

The level and quality of output from our refineries also impacts our cash flows. Factors such as operating efficiency, maintenance turnarounds, market conditions, feedstock availability, and weather conditions can affect output. We actively manage the operations of our refineries, and any variability in their operations typically has not been as significant to cash flows as that caused by changes in margins and prices.

Equity Affiliate Operating Distributions

Our operating cash flows are also impacted by distribution decisions made by our equity affiliates. During the first six months of 2024, cash from operations included aggregate distributions of $656 million from our equity affiliates, while cash from operations during the first six months of 2023 included aggregate distributions of $608 million from our equity affiliates. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured.

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Senior Notes Issuances

On February 28, 2024, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, 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, commencing on June 15, 2024. Interest on the Additional 2033 Notes is payable semi-annually on June 30 and December 30 of each year, commencing on June 30, 2024.

On June 20, 2023, Phillips 66 Company borrowed $1.25 billion under its delayed draw term loan that matures in June 2026.

On March 29, 2023, Phillips 66 Company, a wholly owned subsidiary of Phillips 66, 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 (2027 Notes).

• $500 million aggregate principal amount of 5.300% Senior Notes due June 2033 (2033 Notes).

Related Party Advance Term Loan Agreement

On May 31, 2023, we borrowed $75 million from WRB through an Advance Term Loan Agreement. The debt matures on May 31, 2038. Borrowings bear interest at a floating rate of 1.042% plus the adjusted term Secured Overnight Financing Rate (SOFR), payable on the last day of each month.

Credit Facilities and Commercial Paper

Phillips 66 and Phillips 66 Company

On June 25, 2024, we entered into a $400 million uncommitted credit facility (the Uncommitted Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor. The Uncommitted Facility contains covenants and events of default customary for unsecured uncommitted facilities. The Uncommitted Facility has no commitment fees or compensating balance requirements. Outstanding borrowings under the Uncommitted Facility bear interest at a rate of either (a) the adjusted term SOFR, (b) the adjusted daily simple SOFR or (c) the reference rate, in each case plus the applicable margin. Each borrowing matures six months from the date of such borrowing. We may at any time prepay outstanding borrowings, in whole or in part, without premium or penalty. At June 30, 2024, $400 million was outstanding under the Uncommitted Facility.

On February 28, 2024, we entered into a new $5 billion revolving credit agreement (the Facility) with Phillips 66 Company as the borrower and Phillips 66 as the guarantor and a scheduled maturity date of February 28, 2029. The Facility replaced our previous $5 billion revolving credit facility dated as of June 23, 2022, with Phillips 66 Company as the borrower and Phillips 66 as guarantor, and the previous revolving credit facility was terminated. The Facility contains customary covenants similar to the previous revolving credit facility, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Facility, in whole or in part, without premium or penalty. We have the option to increase the overall capacity to $6 billion, subject to certain conditions. We also have the option to extend the scheduled maturity of the Facility for up to two additional one-year terms, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment. Outstanding borrowings under the Facility bear interest at either: (a) the adjusted term SOFR (as described in the Facility) in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the Facility) plus the applicable margin. The pricing levels for the commitment fee and interest-rate margins are determined based on the ratings in effect for our senior unsecured long-term debt from time to time.

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At June 30, 2024 and December 31, 2023, no amount had been drawn under the Facility or the previous revolving credit facility, respectively.

Phillips 66 also has a $5 billion uncommitted commercial paper program for short-term working capital needs that is supported by the Facility. Commercial paper maturities are contractually limited to less than one year. At June 30, 2024, $899 million of commercial paper had been issued under this program. At December 31, 2023, no borrowings were outstanding under this program.

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. At December 31, 2023, DCP LP had $25 million in borrowings outstanding under its $1.4 billion credit facility and $350 million of borrowings outstanding under its accounts receivable securitization facility, which were repaid during the three months ended March 31, 2024.

Total Committed Capacity Available At June 30, 2024 and December 31, 2023, we had approximately $4.1 billion and $6.4 billion, respectively, of total committed capacity available under the credit facilities described above.

Dispositions

On June 14, 2024, we sold our 25% ownership interest in REX for approximately $685 million. See Note 7—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements, for additional information.

Pending Disposition

On June 21, 2024, we entered into an agreement to sell our ownership interests in certain gathering and processing assets in Louisiana and Alabama for approximately $170 million, which approximates the net book value of the assets being sold. The transaction is expected to close in the third quarter of 2024, subject to completion of customary closing conditions and satisfaction of certain due diligence requirements.

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Off-Balance Sheet Arrangements

Lease Residual Value Guarantees

Under the operating lease agreement for our headquarters facility in Houston, Texas, we have the option, at the end of the lease term in September 2025, to request to renew the lease, purchase the facility or assist the lessor in marketing it for resale. We have a residual value guarantee associated with the operating lease agreement with a maximum potential future exposure of $514 million at June 30, 2024. We also have residual value guarantees associated with railcar, airplane and truck leases with maximum potential future exposures totaling $172 million. These leases have remaining terms of one to ten years.

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

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 an easement under Lake Oahe in North Dakota. The trial court later vacated the easement. Although the easement is vacated, the USACE has no plans to stop pipeline operations while it proceeds with the EIS, and the Tribe’s request for a shutdown was denied in May 2021. In June 2021, the trial court dismissed the litigation entirely. Once the EIS is completed, new litigation or challenges may be filed.

In February 2022, the U.S. Supreme Court (the Court) denied Dakota Access’ writ of certiorari requesting the Court to review the trial court’s decision to order the EIS and vacate the easement. Therefore, the requirement to prepare the EIS stood. Also in February 2022, the Tribe withdrew as a cooperating agency, causing the USACE to halt the EIS process while the USACE engaged with the Tribe on their reasons for withdrawing.

The draft EIS process resumed in August 2022, and in September 2023, the USACE published its draft EIS for public comment. The USACE identified five potential outcomes but did not indicate which one it preferred. The options comprise two “no action” alternatives where the USACE would deny an easement to Dakota Access and require it to shut down the pipeline and either remove the pipe from under Lake Oahe or allow the pipeline to be abandoned-in-place under the lake. The USACE also identified three “action” alternatives; two of them contemplate that the USACE would reissue the easement to Dakota Access under essentially the same terms as 2017 with either the same or a larger volume of oil allowed through the pipeline, while the third alternative would require decommissioning of the current pipeline and construction of a new line 39 miles upstream from the current location.

The public comment period concluded on December 13, 2023. The USACE plans to review the comments and issue its final EIS in early 2025. The Record of Decision will follow within 30 to 60 days after the issuance of the final EIS. The final EIS must be completed before the USACE can reauthorize the easement for the pipeline. If reauthorization occurs, new litigation challenging the reauthorization may be filed.

Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access. On April 1, 2024, Dakota Access’ wholly owned subsidiary repaid $1 billion aggregate principal amount of its outstanding senior notes upon maturity. We funded our 25% share of the repayment, or $250 million, with a capital contribution of $171 million in March 2024 and $79 million of distributions we elected not to receive from Dakota Access in the first quarter of 2024. At June 30, 2024, the aggregate principal amount outstanding of Dakota Access’ senior unsecured notes was $850 million.

In addition, Phillips 66 Partners LP (Phillips 66 Partners), a wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access also provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above-mentioned ongoing litigation. At June 30, 2024, our 25% share of the maximum potential equity contributions under the CECU was approximately $215 million. If the pipeline is required to cease operations, it may have a material adverse effect on our results of operations and cash flows. Should operations cease and Dakota Access and ETCO not have sufficient funds to pay its expenses, we also could be required to support our 25% share of the ongoing expenses, including scheduled interest payments on the notes of approximately $10 million annually, in addition to the potential obligations under the CECU at June 30, 2024.

See Note 12—Guarantees, in the Notes to Consolidated Financial Statements, for additional information regarding our guarantees.

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Capital Requirements

Capital Expenditures and Investments

For information about our capital expenditures and investments, see the “Capital Spending” section below.

Debt Financing

Our debt balance at June 30, 2024 and December 31, 2023, was $20 billion and $19.4 billion, respectively. Our total debt-to-capital ratio was 40% and 38% at June 30, 2024 and December 31, 2023, respectively.

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.

During the three months ended March 31, 2024, we repaid $375 million of borrowings that were outstanding under DCP LP’s credit and accounts receivable securitization facilities at December 31, 2023.

DCP LP Cash Distributions to Unitholders

DCP LP’s partnership agreement requires it to distribute all available cash within 45 days after the end of each quarter. During the six months ended June 30, 2024 and June 30, 2023, DCP LP made cash distributions of $24 million and $102 million, respectively, to common unit holders other than Phillips 66 and its subsidiaries.

Pending Acquisition

On May 17, 2024, we entered into an agreement to acquire Pinnacle Midland Parent LLC to expand our natural gas gathering and processing operations in the Permian Basin. The transaction closed on July 1, 2024, for total cash consideration of $566 million.

Dividends

On April 3, 2024, our Board of Directors declared a quarterly cash dividend of $1.15 per common share. This dividend was paid on June 3, 2024, to shareholders of record as of the close of business on May 20, 2024. On July 10, 2024, our Board of Directors declared a quarterly cash dividend of $1.15 per common share. This dividend is payable on September 3, 2024, to shareholders of record as of the close of business on August 20, 2024.

Share Repurchases

Since July 2012, our Board of Directors has authorized an aggregate of $25 billion of repurchases of our outstanding common stock under our share repurchase program. Our share repurchase authorizations do not expire. Any future share repurchases will be made at the discretion of management and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans. For the six months ended June 30, 2024, we repurchased 13.6 million shares at an aggregate cost of approximately $2 billion. Since July 2012, we have repurchased 227.4 million shares under our share repurchase program at an aggregate cost of $20.1 billion. Shares of stock repurchased are held as treasury shares.

Employee Benefit Plan Contributions

During the six months ended June 30, 2024, we contributed $18 million to our U.S. pension and other postretirement benefit plans and $2 million to our international pension plans. We currently expect to make additional contributions of approximately $17 million to our U.S. pension and other postretirement benefit plans and approximately $3 million to our international pension plans during the remainder of 2024.

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Capital Spending

			Millions of Dollars
			Six Months Ended June 30
			2024						2023
Capital Expenditures and Investments
Midstream			$	351					300
Chemicals			—						—
Refining			240						256
Marketing and Specialties			35						36
Renewable Fuels			345						300
Corporate and Other			24						37
Total Capital Expenditures and Investments			$	995					929
Selected Equity Affiliates*
CPChem			400						519
WRB			53						92
			$	453					611
** Our share of joint ventures’ capital spending.*

Midstream

During the first six months of 2024, capital spending in our Midstream segment included:

• A contribution to Dakota Access to fund our 25% share of Dakota Access’ debt repayment.

• Expansion of gathering systems in the DJ Basin and Permian Basin.

• Spending associated with other return projects, well connections, reliability and maintenance projects.

Chemicals

During the first six months of 2024, on a 100% basis, CPChem’s capital expenditures and investments were $800 million. The capital spending was primarily for the development of petrochemical projects on the U.S. Gulf Coast and in the Middle East, as well as sustaining, debottlenecking and optimization projects on existing assets. CPChem’s capital program was self-funded, and we expect CPChem to continue self-funding its capital program for the remainder of 2024.

Refining

Capital spending for the Refining segment during the first six months of 2024 was primarily for projects to enhance the yield of higher-value products and sustain the reliability and safety of our facilities.

Major capital activities included:

• Installation of facilities to improve market capture at the Bayway, Lake Charles and Sweeny refineries, as well as the jointly owned Wood River Refinery.

• Capital spending to improve reliability at the Humber, Lake Charles and Sweeny refineries.

Marketing and Specialties

Capital spending for the M&S segment during the first six months of 2024 was primarily for the continued development and enhancement of retail sites in Europe, spend associated with marketing and commercial fleet fueling businesses on the U.S. West Coast, and marketing-related information technology enhancements.

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Renewable Fuels

Capital spending for the Renewable Fuels segment during the first six months of 2024 was related to the construction of facilities to produce renewable fuels at the RREC.

Corporate and Other

Capital spending for Corporate and Other during the first six months of 2024 was primarily related to information technology.

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Contingencies

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.

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.

Legal and Tax Matters

Our legal and tax matters are handled by our legal and tax organizations. These organizations apply their knowledge, experience and professional judgment to the specific characteristics of our cases and uncertain tax positions. We employ a litigation management process to manage and monitor the legal proceedings. 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. In the case of income tax-related contingencies, we monitor tax legislation and court decisions, the status of tax audits and the statute of limitations within which a taxing authority can assert a liability.

Environmental

Like other companies in our industry, we are subject to numerous international, federal, state and local environmental laws and regulations. For a discussion of the most significant international and federal environmental laws and regulations to which we are subject, see the “Environmental” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.

We are required to purchase RINs in the open market to satisfy the portion of our obligation under the Renewable Fuel Standard (RFS) that is not fulfilled by blending renewable fuels into the motor fuels we produce. For the six months ended June 30, 2024 and 2023, we incurred expenses of $96 million and $293 million, respectively, associated with our obligation to purchase RINs in the open market to comply with the RFS for our wholly owned refineries. These expenses are included in the “Purchased crude oil and products” line item on our consolidated statement of income. Our jointly owned refineries also incurred expenses associated with the purchase of RINs in the open market, of which our share was $114 million and $217 million for the six months ended June 30, 2024 and 2023, respectively. These expenses are included in the “Equity in earnings of affiliates” line item on our consolidated statement of income. The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery production, blending activities and renewable volume obligation requirements.

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We occasionally receive requests for information or notices of potential liability from the Environmental Protection Agency (EPA) and state environmental agencies alleging that we are a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or an equivalent state statute. On occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain wastes attributable to our past operations. At December 31, 2023, we had been notified of potential liability under CERCLA and comparable state laws at 21 sites within the United States. During the second quarter of 2024, our legal organization approved the removal of two sites, thus, leaving 19 unresolved sites with potential liability at June 30, 2024.

Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses, environmental costs and liabilities are inherent concerns in certain of our operations and products, and there can be no assurance that those costs and liabilities will not be material. However, we currently do not expect any material adverse effect on our results of operations or financial position as a result of compliance with current environmental laws and regulations.

Climate Change

There has been a broad range of proposed or promulgated state, national and international laws focusing on greenhouse gas (GHG) emissions reduction, including various regulations proposed or issued by the EPA. These proposed or promulgated laws apply or could apply in states and/or countries where we have interests or may have interests in the future. Laws regulating GHG emissions continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws potentially could have a material impact on our results of operations and financial condition as a result of increasing costs of compliance, lengthening project implementation and agency reviews, or reducing demand for certain hydrocarbon products.

For examples of legislation and regulation or precursors for possible regulation that do or could affect our operations, see the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.

We consider and take into account anticipated future GHG emissions in designing and developing major facilities and projects, and implement energy efficiency initiatives to reduce GHG emissions. Data on our GHG emissions, legal requirements regulating such emissions, and the possible physical effects of climate change on our coastal assets are incorporated into our planning, investment, and risk management decision-making. We are working to continuously improve operational and energy efficiency through resource and energy conservation efforts throughout our operations.

In February 2022, we announced a target to reduce our Scope 1 and Scope 2 GHG emissions intensity related to our operations by 50% of 2019 levels by the year 2050. The 2050 target builds upon our 2030 GHG emissions intensity targets to reduce Scope 1 and Scope 2 emissions from our operations by 30% and Scope 3 emissions from our energy products by 15% compared to 2019 levels.

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GUARANTOR FINANCIAL INFORMATION

We have various cross guarantees between Phillips 66 and its wholly owned subsidiary Phillips 66 Company (together, the Obligor Group) with respect to publicly held debt securities. Phillips 66 conducts substantially all of its operations through subsidiaries, including Phillips 66 Company, and those subsidiaries generate substantially all of its operating income and cash flow. Phillips 66 has fully and unconditionally guaranteed the payment obligations of Phillips 66 Company with respect to its publicly held debt securities. In addition, Phillips 66 Company has fully and unconditionally guaranteed the payment obligations of Phillips 66 with respect to its publicly held debt securities. All guarantees are full and unconditional. At June 30, 2024, $14 billion of senior unsecured notes outstanding has been guaranteed by the Obligor Group.

Summarized financial information of the Obligor Group is presented on a combined basis. Intercompany transactions among the members of the Obligor Group have been eliminated. The financial information of non-guarantor subsidiaries has been excluded from the summarized financial information. Significant intercompany transactions and receivable/payable balances between the Obligor Group and non-guarantor subsidiaries are presented separately in the summarized financial information.

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The summarized results of operations for the six months ended June 30, 2024, and the summarized financial position at June 30, 2024 and December 31, 2023, for the Obligor Group on a combined basis were:

Summarized Combined Statement of Income			Millions of Dollars
			Six Months Ended June 30, 2024
Sales and other operating revenues			$	56,060
Revenues and other income—non-guarantor subsidiaries			5,670
Purchased crude oil and products—third parties			33,302
Purchased crude oil and products—related parties			10,369
Purchased crude oil and products—non-guarantor subsidiaries			14,249
Income before income taxes			726
Net income			593

Summarized Combined Balance Sheet			Millions of Dollars
			June 30 2024						December 31 2023
Accounts and notes receivable—third parties			$	5,227					6,716
Accounts and notes receivable—related parties			1,689						1,152
Due from non-guarantor subsidiaries, current			1,577						1,827
Total current assets			15,628						14,260
Investments and long-term receivables			11,043						11,242
Net properties, plants and equipment			12,340						12,242
Goodwill			1,047						1,047
Due from non-guarantor subsidiaries, noncurrent			1,056						2,995
Other assets associated with non-guarantor subsidiaries			1,467						1,666
Total noncurrent assets			28,798						31,010
Total assets			44,426						45,270
Due to non-guarantor subsidiaries, current			$	4,018					3,153
Total current liabilities			15,348						13,162
Long-term debt			13,151						13,459
Due to non-guarantor subsidiaries, noncurrent			9,146						10,061
Total noncurrent liabilities			27,978						29,234
Total liabilities			43,326						42,396
Total equity			1,100						2,874
Total liabilities and equity			44,426						45,270

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NON-GAAP RECONCILIATIONS

Refining

Our realized refining margins measure the difference between (a) sales and other operating revenues derived from the sale of petroleum products manufactured at our refineries and (b) costs of feedstocks, primarily crude oil, used to produce the petroleum products. The realized refining margins are adjusted to include our proportional share of our joint venture refineries’ realized margins, as well as to exclude those items that are not representative of the underlying operating performance of a period, which we call “special items.” The realized refining margins are converted to a per-barrel basis by dividing them by total refinery processed inputs (primarily crude oil) measured on a barrel basis, including our share of inputs processed by our joint venture refineries. Our realized refining margin per barrel is intended to be comparable with industry refining margins, which are known as “crack spreads.” As discussed in “Executive Overview and Business Environment—Business Environment,” industry crack spreads measure the difference between market prices for refined petroleum products and crude oil. We believe realized refining margin per barrel calculated on a similar basis as industry crack spreads provides a useful measure of how well we performed relative to benchmark industry refining margins.

The GAAP performance measure most directly comparable to realized refining margin per barrel is the Refining segment’s “income (loss) before income taxes per barrel.” Realized refining margin per barrel excludes items that are typically included in a manufacturer’s gross margin, such as depreciation and operating expenses, and other items used to determine income (loss) before income taxes, such as general and administrative expenses. It also includes our proportional share of joint venture refineries’ realized refining margins and excludes special items. Because realized refining margin per barrel is calculated in this manner, and because realized refining margin per barrel may be defined differently by other companies in our industry, it has limitations as an analytical tool. Following are reconciliations of income (loss) before income taxes to realized refining margins:

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			Millions of Dollars, Except as Indicated
Realized Refining Margins			Atlantic Basin/ Europe			Gulf Coast			Central Corridor			West Coast			Worldwide
Three Months Ended June 30, 2024
Income before income taxes			$	15		42			243			2			302
Plus:
Taxes other than income taxes			15			19			22			18			74
Depreciation, amortization and impairments			51			64			44			44			203
Selling, general and administrative expenses			12			9			25			5			51
Operating expenses			264			269			142			209			884
Equity in (earnings) losses of affiliates			2			—			(35)			—			(33)
Other segment (income) expense, net			18			1			(22)			2			(1)
Proportional share of refining gross margins contributed by equity affiliates			32			—			228			—			260
Realized refining margins			$	409		404			647			280			1,740
Total processed inputs (thousands of barrels)			50,545			51,204			27,994			21,553			151,296
Adjusted total processed inputs (thousands of barrels)*			50,545			51,204			50,805			21,553			174,107
Income before income taxes per barrel (dollars per barrel)**			$	0.30		0.82			8.69			0.10			2.00
Realized refining margins (dollars per barrel)***			8.10			7.88			12.75			13.06			10.01
Three Months Ended June 30, 2023
Income before income taxes			$	132		313			633			97			1,175
Plus:
Taxes other than income taxes			17			25			26			27			95
Depreciation, amortization and impairments			53			62			39			53			207
Selling, general and administrative expenses			9			4			17			7			37
Operating expenses			236			249			157			291			933
Equity in (earnings) losses of affiliates			2			—			(119)			—			(117)
Other segment (income) expense, net			6			12			(8)			1			11
Proportional share of refining gross margins contributed by equity affiliates			22			—			313			—			335
Realized refining margins			$	477		665			1,058			476			2,676
Total processed inputs (thousands of barrels)			44,781			50,266			27,370			30,154			152,571
Adjusted total processed inputs (thousands of barrels)*			44,781			50,266			46,841			30,154			172,042
Income before income taxes per barrel (dollars per barrel)**			$	2.95		6.22			23.13			3.23			7.70
Realized refining margins (dollars per barrel)***			10.64			13.22			22.58			15.80			15.55
** Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.*
*** Income before income taxes divided by total processed inputs.*
**** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.*

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			Millions of Dollars, Except as Indicated
Realized Refining Margins			Atlantic Basin/ Europe			Gulf Coast			Central Corridor			West Coast			Worldwide
Six Months Ended June 30, 2024
Income (loss) before income taxes			$	93		162			456			(193)			518
Plus:
Taxes other than income taxes			39			57			50			49			195
Depreciation, amortization and impairments			103			126			88			200			517
Selling, general and administrative expenses			15			15			49			10			89
Operating expenses			515			570			285			467			1,837
Equity in (earnings) losses of affiliates			3			(1)			(143)			—			(141)
Other segment (income) expense, net			31			2			(62)			(2)			(31)
Proportional share of refining gross margins contributed by equity affiliates			65			—			526			—			591
Special items:
Legal settlement			—			(7)			—			—			(7)
Realized refining margins			$	864		924			1,249			531			3,568
Total processed inputs (thousands of barrels)			97,456			98,696			53,652			45,192			294,996
Adjusted total processed inputs (thousands of barrels)*			97,456			98,696			98,717			45,192			340,061
Income before income taxes per barrel (dollars per barrel)**			$	0.95		1.64			8.51			(4.27)			1.76
Realized refining margins (dollars per barrel)***			8.87			9.36			12.66			11.77			10.50
Six Months Ended June 30, 2023
Income before income taxes			$	260		1,042			1,365			102			2,769
Plus:
Taxes other than income taxes			40			58			51			58			207
Depreciation, amortization and impairments			103			122			77			105			407
Selling, general and administrative expenses			20			8			38			15			81
Operating expenses			600			535			323			631			2,089
Equity in (earnings) losses of affiliates			4			(1)			(319)			—			(316)
Other segment (income) expense, net			36			17			(12)			(3)			38
Proportional share of refining gross margins contributed by equity affiliates			48			—			716			—			764
Realized refining margins			$	1,111		1,781			2,239			908			6,039
Total processed inputs (thousands of barrels)			84,253			101,615			53,374			57,464			296,706
Adjusted total processed inputs (thousands of barrels)*			84,253			101,615			91,156			57,464			334,488
Income before income taxes per barrel (dollars per barrel)**			$	3.09		10.25			25.57			1.78			9.33
Realized refining margins (dollars per barrel)***			13.19			17.53			24.56			15.80			18.05
** Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.*
*** Income (loss) before income taxes divided by total processed inputs.*
**** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.*

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Marketing

Our realized marketing fuel margins measure the difference between (a) sales and other operating revenues derived from the sale of fuels in our M&S segment and (b) costs of those fuels. The realized marketing fuel margins are adjusted to exclude those items that are not representative of the underlying operating performance of a period, which we call “special items.” The realized marketing fuel margins are converted to a per-barrel basis by dividing them by sales volumes measured on a barrel basis. We believe realized marketing fuel margin per barrel demonstrates the value uplift our marketing operations provide by optimizing the placement and ultimate sale of our refineries’ fuel production.

Within the M&S segment, the GAAP performance measure most directly comparable to realized marketing fuel margin per barrel is the marketing business’ “income before income taxes per barrel.” Realized marketing fuel margin per barrel excludes items that are typically included in gross margin, such as depreciation and operating expenses, and other items used to determine income before income taxes, such as general and administrative expenses. Because realized marketing fuel margin per barrel excludes these items, and because realized marketing fuel margin per barrel may be defined differently by other companies in our industry, it has limitations as an analytical tool. Following are reconciliations of income before income taxes to realized marketing fuel margins:

			Millions of Dollars, Except as Indicated
			Three Months Ended June 30, 2024									Three Months Ended June 30, 2023
			U.S.			International						U.S.			International
Realized Marketing Fuel Margins
Income before income taxes			$	223		145						321			152
Plus:
Depreciation and amortization			9			18						3			21
Selling, general and administrative expenses			217			63						204			62
Equity in earnings of affiliates			(12)			(29)						(12)			(30)
Other operating revenues*			(123)			(9)						(122)			(8)
Other expense, net			14			(2)						3			5
Marketing margins			328			186						397			202
Less: margin for nonfuel related sales			—			16						—			16
Realized marketing fuel margins			$	328		170						397			186
Total fuel sales volumes (thousands of barrels)			192,398			28,893						176,349			28,605
Income before income taxes per barrel (dollars per barrel)			$	1.16		5.02						1.82			5.31
Realized marketing fuel margins (dollars per barrel)**			1.70			5.87						2.25			6.50
** Includes other nonfuel revenues.*
*** Realized marketing fuel margins per barrel, as presented, are calculated using the underlying realized marketing fuel margin amounts, in dollars, divided by sales volumes, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.*

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			Millions of Dollars, Except as Indicated
			Six Months Ended June 30, 2024									Six Months Ended June 30, 2023
			U.S.			International						U.S.			International
Realized Marketing Fuel Margins
Income before income taxes			$	465		226						543			253
Plus:
Depreciation and amortization			19			36						6			39
Selling, general and administrative expenses			403			127						384			123
Equity in earnings of affiliates			(14)			(53)						(15)			(53)
Other operating revenues*			(231)			(15)						(231)			(18)
Other expense, net			25			13						9			10
Special items:
Legal settlement			(59)			—						—			—
Marketing margins			608			334						696			354
Less: margin for nonfuel related sales			—			29						—			28
Realized marketing fuel margins			$	608		305						696			326
Total fuel sales volumes (thousands of barrels)			367,667			56,483						329,011			56,333
Income before income taxes per barrel (dollars per barrel)			$	1.26		4.00						1.65			4.49
Realized marketing fuel margins (dollars per barrel)**			1.65			5.38						2.12			5.79
** Includes other nonfuel revenues.*
*** Realized marketing fuel margins per barrel, as presented, are calculated using the underlying realized marketing fuel margin amounts, in dollars, divided by sales volumes, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts.*

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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can normally identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions that convey the prospective nature of events or outcomes, but the absence of such words does not mean a statement is not forward-looking.

We based these forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate, and our sustainability-related plans and goals. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, as they are not guarantees of future performance and involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in any forward-looking statement. Our sustainability-related goals are not guarantees or promises and may change. Statements regarding our goals are not guarantees or promises that they will be met. The information included in, and any issues identified as material for purposes of, our sustainability reports shall not be considered material for U.S. Securities and Exchange Commission (SEC) reporting purposes. Factors that could cause actual results to differ materially from those in our forward-looking statements include:

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

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

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

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

• Our ability to achieve the expected benefits of the DCP LP integration, including the realization of expected synergies.

• Unexpected changes in costs or technical requirements for constructing, modifying or operating our facilities or transporting our products.

• Unexpected technological or commercial difficulties in manufacturing, refining or transporting our products, including chemical products.

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

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

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

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

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

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

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

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

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

• Our ability to successfully complete, or any material delay in the completion of, asset dispositions or acquisitions that we pursue.

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

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

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

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

• International monetary conditions and exchange controls.

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

• Liability resulting from litigation or for remedial actions, including removal and reclamation obligations under environmental regulations.

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

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

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

• Limited access to capital or significantly higher cost of capital related to changes to our credit profile or illiquidity or uncertainty in the domestic or international financial markets.

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

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

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

• The factors generally described in Item 1A.—Risk Factors in our 2023 Annual Report on Form 10-K.

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