PHILLIPS 66 Unless otherwise indicated, "the company," "we," "our," "us" and "Phillips 66"
are used in this report to refer to the businesses of
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 company does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the company's disclosures under the heading: "CAUTIONARY STATEMENT FOR THE PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995." The terms "earnings" or "loss" as used in Management's Discussion and Analysis refer to net income (loss) attributable toPhillips 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 an energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses. AtJune 30, 2021 , we had total assets of$57 billion . Our common stock trades on theNew York Stock Exchange under the symbol PSX. Executive Overview The Coronavirus Disease 2019 (COVID-19) pandemic continues to disrupt economic activities globally. Reduced demand for refined petroleum products resulted in low refining margins and decreased volumes through refineries and logistics infrastructure in 2020. Since the beginning of 2021, demand for refined petroleum products has started to recover following the administration of COVID-19 vaccines and the easing of pandemic restrictions. Consequently, refining margins have improved, as has volume throughput. However, refining profitability remains challenged. The depth and duration of the economic consequences of the COVID-19 pandemic remain uncertain and we continue to monitor our asset and investment portfolio. The consequences of the sustained disruption of economic activities by the pandemic may include additional asset impairments and portfolio rationalization in the future. In the second quarter of 2021, we reported earnings of$296 million and generated cash from operating activities of$1.7 billion , including aU.S. federal income tax refund of$1.1 billion . We used available cash for capital expenditures and investments of$380 million , dividend payments on our common stock of$394 million , and an additional member loan to an equity affiliate of$90 million . We ended the second quarter of 2021 with$2.2 billion of cash and cash equivalents and approximately$5.7 billion of total committed capacity available under our revolving credit facilities. 30 -------------------------------------------------------------------------------- Table of Contents Business Environment The Midstream segment includes our Transportation and NGL businesses. Our Transportation business contains fee-based operations that are not directly exposed to commodity price risk. Our NGL business contains both fee-based operations and operations that are directly impacted by NGL prices. The Midstream segment also includes our 50% equity investment inDCP Midstream, LLC (DCP Midstream). During the second quarter of 2021, NGL prices increased significantly, compared with the second quarter of 2020, due to strong demand as economic activities gradually recovered following the administration of COVID-19 vaccines and the easing of pandemic restrictions. The Chemicals segment consists of our 50% equity investment inChevron 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. During the second quarter of 2021, the benchmark high-density polyethylene chain margin increased significantly, compared with the second quarter of 2020. This significant increase was due to continued strong demand and tight supplies driven by the operational impacts caused by the winter storms that occurred in the Central andGulf Coast regions in the first quarter of 2021. Our Refining segment results are driven by several factors, including refining margins, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. The price ofU.S. benchmark crude oil, West Texas Intermediate (WTI) atCushing, Oklahoma , increased to an average of$66.09 per barrel during the second quarter of 2021, compared with an average of$27.80 per barrel in the second quarter of 2020. Market crack spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. During the second quarter of 2021, worldwide market crack spreads were higher than the second quarter of 2020. The increases in crude oil prices and market crack spreads were mainly driven by a significant increase in demand for refined petroleum products, as economic activities gradually recovered following the administration of COVID-19 vaccines and the easing of pandemic restrictions, as well as a tightening supply. In addition, in the second quarter of 2021, renewable identification number (RIN) costs increased significantly, compared with the corresponding period of 2020. Results for our Marketing and Specialties (M&S) segment depend largely on marketing fuel and lubricant margins, and sales volumes of our refined petroleum and other specialty products. While M&S margins are primarily driven by market factors, largely determined by the relationship between supply and demand, marketing fuel margins, in particular, are influenced by the trend in spot prices for refined petroleum products. Generally speaking, a downward trend of spot prices has a favorable impact on marketing fuel margins, while an upward trend of spot prices has an unfavorable impact on marketing fuel margins. The global disruption caused by the COVID-19 pandemic resulted in reduced demand for refined petroleum and specialty products sinceMarch 2020 . Following the administration of COVID-19 vaccines in 2021 and the easing of pandemic restrictions, the global economy has begun to recover, and demand for refined petroleum and specialty products has significantly improved, compared with the second quarter of 2020. 31 -------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS Unless otherwise indicated, discussion of results for the three and six months endedJune 30, 2021 , is based on a comparison with the corresponding periods of 2020. Consolidated Results
A summary of income (loss) before income taxes by business segment with a
reconciliation to net income (loss) attributable to
Millions of Dollars
Three Months
Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Midstream $ 312 324 388 (378)
Chemicals 623 42 777 211
Refining (729) (878) (1,769) (3,139)
Marketing and Specialties 476 286 766 799
Corporate and Other (246) (219) (497) (416)
Income (loss) before income taxes 436 (445) (335) (2,923)
Income tax expense (benefit) 62 (378) (70) (429)
Net income (loss) 374 (67) (265) (2,494)
Less: net income attributable to noncontrolling interests 78
74 93 143
Net income (loss) attributable to Phillips 66 $ 296 (141) (358) (2,637)
Our net income attributable to Phillips 66 in the second quarter of 2021 was
$296 million , compared with a net loss attributable to Phillips 66 of $141
million in the second quarter of 2020. The improvement reflects increased equity
earnings from affiliates in our Chemicals and M&S segments, improved realized
marketing fuel margins and sales volumes and higher realized refining margins.
These increases were partially offset by an increase in income taxes.
Our net loss attributable to Phillips 66 for the six months ended June 30, 2021 ,
was $358 million , compared with $2,637 million for the six months ended June 30,
2020 . The lower net loss attributable to Phillips 66 reflects a before-tax
impairment of $198 million in the first quarter of 2021, compared with
before-tax impairments of $3,006 million in the first quarter of 2020. Excluding
these impairments, after-tax results for the six months ended June 30, 2021 ,
decreased primarily due to a higher before-tax loss from our Refining segment
and a lower income tax benefit, partially offset by higher equity earnings from
our Chemicals segment.
See the "Segment Results" section for additional information on our segment performance and Note 18-Income Taxes, in the Notes to Consolidated Financial Statements, for additional information on income taxes.
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Statement of Operations Analysis
Sales and other operating revenues for the second quarter and six-month period
of 2021 increased 147% and 53%, respectively, and purchased crude oil and
products increased 162% and 61%, respectively. These increases were mainly due
to higher prices for refined petroleum products, crude oil and NGL, as well as
increased volumes.
Equity in earnings of affiliates increased $673 million and $593 million in the
second quarter and six-month period of 2021, respectively. The increase in both
periods was primarily due to higher equity earnings from CPChem. See Chemicals
segment analysis in the "Segment Results" section for additional information on
CPChem.
Net gain on dispositions decreased 98% in both the second quarter and six-month
period of 2021, primarily due to a before-tax gain of $84 million recognized in
the second quarter of 2020 associated with a co-venturer's acquisition of an
ownership interest in the consolidated holding company that owns an interest in
Gray Oak Pipeline, LLC .
Operating expenses increased 15% and 8% in the second quarter and six-month
period of 2021, respectively. The increase in the second quarter of 2021 was
mainly due to higher refinery turnaround and maintenance expenses and increased
utility costs. The increase in the six-month period of 2021 was primarily
attributable to higher utility, maintenance and repair costs driven by the
winter storms that occurred in the Central and Gulf Coast regions in February
2021 .
Selling, general and administrative expenses increased 16% in the six-month
period of 2021, primarily due to increased employee-related expenses and higher
selling expenses due to rising refined petroleum product prices and demand, as
well as a benefit received from a legal settlement in the first quarter of 2020.
Impairments decreased $2,808 million in the six-month period of 2021. During the
first quarter of 2021, a before-tax impairment of $198 million was related to
Phillips 66 Partners LP's investment in the Liberty Pipeline project. In the
first quarter of 2020, before-tax impairments of $3,006 million were recorded
for our investment in DCP Midstream and goodwill in our Refining segment. See
Note 7-Impairments, and Note 13-Fair Value Measurements, in the Notes to
Consolidated Financial Statements, for additional information regarding these
impairments.
Interest and debt expense increased 22% and 27% in the second quarter and
six-month period of 2021, respectively. The increase in both periods was
primarily driven by lower capitalized interest due to the completion of capital
projects and the placement of assets into service, as well as higher average
debt principal balances.
We had income tax expense of $62 million and an income tax benefit of $70
million in the second quarter and six-month period of 2021, respectively,
compared with an income tax benefit of $378 million and $429 million in the
corresponding periods of 2020, respectively, reflecting before-tax income in the
second quarter of 2021, and before-tax losses in the second quarter and
six-month period of 2020 and the six-month period of 2021. See Note 18-Income
Taxes, in the Notes to Consolidated Financial Statements, for information
regarding our effective income tax rates.
Net income attributable to noncontrolling interests decreased 35% in the
six-month period of 2021, primarily due to lower net income from Phillips 66
Partners LP (Phillips 66 Partners ) resulting from the before-tax impairment of
$198 million associated with its investment in the Liberty Pipeline project
described above.
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Segment Results
Midstream
Three Months
Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Millions of Dollars
Income (Loss) Before Income Taxes
Transportation $ 224 214 231 414
NGL and Other 79 78 114 257
DCP Midstream 9 32 43 (1,049)
Total Midstream $ 312 324 388 (378)
Thousands of Barrels Daily
Transportation Volumes
Pipelines* 3,424 2,840 3,114 3,009
Terminals 2,786 2,883 2,731 3,016
Operating Statistics
NGL fractionated** 401 170 382 184
NGL production*** 406 374 381 385
* Pipelines represent the sum of volumes transported through each separately
tariffed consolidated pipeline segment.
** Excludes DCP Midstream.
*** Includes 100% of DCP Midstream's volumes.
Dollars Per Gallon
Weighted-Average NGL Price*
DCP Midstream $ 0.71 0.32 0.70 0.36
* Based on index prices from the
The Midstream segment provides crude oil and refined petroleum product transportation, terminaling and processing services, as well as natural gas and NGL transportation, storage, fractionation, processing and marketing services, mainly inthe United States . This segment includes our master limited partnership (MLP),Phillips 66 Partners , as well as our 50% equity investment in DCP Midstream, which includes the operations of DCP Midstream, LP (DCP Partners ), its MLP.
Results from our Midstream segment decreased
Results from our Transportation business increased$10 million in the second quarter of 2021, and decreased$183 million in the six-month period of 2021. The increase in the second quarter of 2021 was mainly driven by higher pipeline volumes resulting from improved refinery utilization rates and increased earnings from equity affiliates. These increases were partially offset by a before-tax gain of$84 million recognized in the second quarter of 2020 associated with a co-venturer's acquisition of an ownership interest in the consolidated holding company that owns an interest inGray Oak Pipeline, LLC . The decrease in the six-month period of 2021 was primarily attributable to a before-tax impairment of$198 million associated withPhillips 66 Partners' decision to exit the Liberty Pipeline project. 34 -------------------------------------------------------------------------------- Table of Contents Results from our NGL and Other business increased$1 million in the second quarter of 2021, and decreased$143 million in the six-month period of 2021. The decrease in the six-month period of 2021 was primarily due to higher operating expenses driven by the winter storms that occurred in theGulf Coast region inFebruary 2021 , lower results from trading activities, reduced cargo margins at the Sweeny Hub, and decreased equity earnings. These decreases were partially offset by increased fractionation volumes from the startup of Fracs 2 and 3 at the Sweeny Hub in late 2020, leading to higher exported cargos. Results from our investment in DCP Midstream decreased$23 million in the second quarter of 2021, and increased$1,092 million in the six-month period of 2021. The decrease in the second quarter of 2021 was primarily due to unfavorable impacts from DCP Midstream's commodity price risk management activities. The increase in the six-month period of 2021 was primarily due to a$1,161 million before-tax impairment of our investment in DCP Midstream recorded in the first quarter of 2020. See Note 7-Impairments, and Note 13-Fair Value Measurements, in the Notes to Consolidated Financial Statements, for additional information regarding impairments related to the Liberty Pipeline project and our investment in DCP Midstream.
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 Six Months Ended
June 30 June 30
2021 2020 2021 2020
Millions of Dollars
Income Before Income Taxes $ 623 42 777 211
Millions of Pounds
CPChem Externally Marketed Sales Volumes*
Olefins and Polyolefins 4,778 5,378 9,348 10,491
Specialties, Aromatics and Styrenics 1,234 1,014 2,215 2,202
6,012 6,392 11,563 12,693
* 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) 102 % 103
88 100
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. We structure our reporting of CPChem's
operations around two primary business lines: Olefins and Polyolefins (O&P) and
Specialties, Aromatics and Styrenics (SA&S).
Results from the Chemicals segment increased $581 million and $566 million in
the second quarter and six-month period of 2021, respectively. The increase in
both periods was primarily driven by higher margins reflecting strong demand,
and tight supplies following the winter storms that occurred in the Central and
Gulf Coast regions in February 2021 .
See the "Executive Overview and Business Environment" section for information on market factors impacting this quarter's results.
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Refining
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Millions of Dollars
Loss Before Income Taxes
Atlantic Basin/Europe $ (110) (227) (263) (864)
Gulf Coast (264) (365) (517) (1,208)
Central Corridor (82) (104) (330) (331)
West Coast (273) (182) (659) (736)
Worldwide $ (729) (878) (1,769) (3,139)
Dollars Per Barrel
Loss Before Income Taxes
Atlantic Basin/Europe $ (2.20) (5.80) (2.83) (10.74)
Gulf Coast (3.81) (5.98) (4.17) (9.66)
Central Corridor (3.49) (5.01) (7.64) (7.50)
West Coast (9.70) (7.07) (12.19) (13.73)
Worldwide (4.26) (5.99) (5.63) (10.35)
Realized Refining Margins*
Atlantic Basin/Europe $ 4.63 1.53 4.73 1.97
Gulf Coast 2.10 0.36 2.67 3.64
Central Corridor 6.40 5.78 6.21 10.03
West Coast 3.37 5.05 3.35 4.92
Worldwide 3.92 2.60 4.12 4.96
* 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
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Thousands of
Three Months Ended Six Months Ended
June 30 June 30
Operating Statistics 2021 2020 2021 2020
Refining operations*
Atlantic Basin /Europe
Crude oil capacity 537 537 537 537
Crude oil processed 513 402 476 420
Capacity utilization (percent) 96 % 75 89 78
Refinery production 552 433 517 445
Gulf Coast
Crude oil capacity 784 769 784 769
Crude oil processed 687 609 620 627
Capacity utilization (percent) 88 % 79 79 81
Refinery production 763 675 683 689
Central Corridor
Crude oil capacity 531 530 531 530
Crude oil processed 462 386 423 428
Capacity utilization (percent) 87 % 73 80 81
Refinery production 475 396 436 442
West Coast
Crude oil capacity 364 364 364 364
Crude oil processed 286 263 278 271
Capacity utilization (percent) 79 % 72 76 75
Refinery production 307 280 298 293
Worldwide
Crude oil capacity 2,216 2,200 2,216 2,200
Crude oil processed 1,948 1,660 1,797 1,746
Capacity utilization (percent) 88 % 75 81 79
Refinery production 2,097 1,784 1,934 1,869
* Includes our share of equity affiliates.
38-------------------------------------------------------------------------------- Table of Contents The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasoline, distillates and aviation fuels, at 13 refineries inthe United States andEurope . Results from our Refining segment improved by$149 million and$1,370 million , respectively, in the second quarter and six-month period of 2021. The improved results in the second quarter of 2021 were primarily attributable to increased realized refining margins and higher refinery production driven by improved market demand, partially offset by higher refinery turnaround and other operating expenses. The improved results in the six-month period reflect a$1,845 million before-tax goodwill impairment recorded in the first quarter of 2020. Excluding this impairment, results decreased in the six-month period of 2021, mainly due to lower realized refining margins, and higher utility costs primarily driven by the winter storms that occurred in the Central andGulf Coast regions inFebruary 2021 . Realized refining margins were lower in the six-month period, as the benefit of improved market crack spreads was more than offset by higher RIN costs, lower clean product differentials and decreased secondary product margins. Our worldwide refining crude oil capacity utilization rate was 88% and 81% in the second quarter and six-month period of 2021, respectively, compared with 75% and 79% in the second quarter and six-month period of 2020, respectively. The increase in both periods was primarily driven by improved market demand for refined petroleum products following the administration of COVID-19 vaccines and the easing of pandemic restrictions since the beginning of 2021.
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 Six Months Ended
June 30 June 30
2021 2020 2021 2020
Millions of Dollars
Income Before Income Taxes
Marketing and Other $ 389 255 600 726
Specialties 87 31 166 73
Total Marketing and Specialties $ 476 286 766 799
Dollars Per Barrel
Income Before Income Taxes
U.S. $ 2.15 1.24 1.79 1.53
International 1.96 3.48 2.09 5.25
Realized Marketing Fuel Margins*
U.S. $ 2.62 1.75 2.31 1.92
International 2.89 5.07 3.41 7.04
* 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 $ 2.44 1.26 2.24 1.53
Distillates 2.28 1.17 2.14 1.47
* On third-party branded petroleum product sales,
excluding excise taxes.
Thousands of Barrels Daily
Marketing Petroleum Products Sales Volumes
Gasoline 1,176 941 1,100 1,003
Distillates 947 847 882 942
Other 18 15 18 18
Total 2,141 1,803 2,000 1,963
The M&S segment purchases for resale and markets refined petroleum 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 specialty products, such as base oils and lubricants.
Before-tax income from the M&S segment increased
The increase in the second quarter of 2021 was primarily due to higher realized
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The decrease in the six-month period of 2021 was primarily driven by lower
realized international marketing fuel margins from rising spot prices, decreased
margins from chartered marine vessels and a benefit received from a legal
settlement in the first quarter of 2020. These decreases were partially offset
by higher realized U.S. marketing fuel margins and sales volumes, as well as
increased equity earnings from Excel Paralubes LLC due to improved base oil
margins and volumes.
See the "Executive Overview and Business Environment" section for information on
marketing fuel margins and other market factors impacting this quarter's
results.
Corporate and Other
Millions of Dollars
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Loss Before Income Taxes
Net interest expense $ (141) (114) (284) (217)
Corporate overhead and other (105) (105) (213) (199)
Total Corporate and Other $ (246) (219) (497) (416)
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, foreign currency transaction gains and
losses, and other costs not directly associated with an operating segment.
Net interest expense increased $27 million and $67 million , respectively, in the
second quarter and six-month period of 2021. The increase in both periods was
primarily driven by lower capitalized interest due to the completion of capital
projects and the placement of assets into service, as well as higher average
debt principal balances.
Corporate overhead and other remained flat in the second quarter of 2021, and
increased
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CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
Millions of Dollars,
Except as Indicated
June 30 December 31
2021 2020
Cash and cash equivalents $ 2,207 2,514
Short-term debt 2,489 987
Total debt 15,413 15,893
Total equity 20,602 21,523
Percent of total debt to capital* 43% 42
Percent of floating-rate debt to total debt 9% 12
* 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 2021, we generated$2.0 billion of cash from operations, including aU.S. federal income tax refund of$1.1 billion . We used available cash primarily for capital expenditures and investments of$711 million , dividend payments on our common stock of$788 million , repayment of$550 million of maturing debt, and an additional member loan to an equity affiliate of$245 million . During the first six months of 2021, cash and cash equivalents decreased$307 million to$2.2 billion .
Significant Sources of Capital
Operating Activities During the first six months of 2021, cash generated by operating activities was$2,014 million , compared with$981 million for the first six months of 2020. The increase was primarily due to aU.S. federal income tax refund of$1.1 billion received in the second quarter of 2021. 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 impact 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 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 2021, cash from operations included distributions of$1,114 million from our equity affiliates, compared with$820 million during the same period of 2020. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured.
Tax Refunds
We received a
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Revolving Credit Facilities and Commercial Paper
At June 30, 2021 , borrowings of $15 million were outstanding and $1 million in
letters of credit had been drawn under Phillips 66 Partners' $750 million
revolving credit facility, compared with outstanding borrowings of $415 million
and $1 million in letters of credit drawn under the facility at December 31,
2020 . At both June 30, 2021 , and December 31, 2020 , no amount had been drawn
under Phillips 66's $5 billion revolving credit facility or uncommitted
$5 billion commercial paper program.
Term Loan Agreement
On April 6, 2021 , Phillips 66 Partners entered into a $450 million term loan
agreement and borrowed the full amount. The term loan agreement has a maturity
date of April 5, 2022 , and the outstanding borrowings can be repaid at any time
and from time to time, in whole or in part, without premium or penalty.
Borrowings bear interest at a floating rate based on either a Eurodollar rate or
a reference rate, plus a margin of 0.875%. Proceeds were primarily used to repay
amounts borrowed under Phillips 66 Partners' $750 million revolving credit
facility.
43-------------------------------------------------------------------------------- Table of Contents Off-Balance Sheet Arrangements Lease Residual Value Guarantees Under the operating lease agreement for our headquarters facility inHouston, Texas , we have the option, at the end of the lease term inSeptember 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 atJune 30, 2021 . We also have residual value guarantees associated with railcar and airplane leases with maximum potential future exposures totaling$209 million . These leases have remaining terms of up to nine years.Dakota Access, LLC (Dakota Access) andEnergy Transfer Crude Oil Company, LLC (ETCO) In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered theU.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement underLake Oahe inNorth Dakota and later vacated the easement. Although the easement has been vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS, which is expected to be completed in 2022. InMay 2021 , the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and inJune 2021 , dismissed the litigation. It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed. Dakota Access and ETCO have guaranteed repayment of$2.5 billion aggregate principal amount of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access. In addition,Phillips 66 Partners and its co-venturers in Dakota Access 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 in certain circumstances relating to the litigation described above. AtJune 30, 2021 ,Phillips 66 Partners' share of the maximum potential equity contributions under the CECU was approximately$631 million . If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses,Phillips 66 Partners also could be required to support its share of the ongoing expenses, including scheduled interest payments on the notes of approximately$25 million annually, in addition to the potential obligations under the CECU.
See Note 10-Guarantees, in the Notes to Consolidated Financial Statements, for additional information on 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 total debt balance at June 30, 2021 , and December 31, 2020 , was $15.4
billion and $15.9 billion , respectively. Our total debt-to-capital ratio was 43%
and 42% at June 30, 2021 , and December 31, 2020 , respectively.
In
In
Joint Venture Loans We and our co-venturer provided member loans to WRB. AtJune 30, 2021 , our 50% share of the outstanding member loan balance, including accrued interest, was$525 million . The need for additional loans to WRB in the remainder of 2021, as well as WRB's repayment schedule, will depend on market conditions.
Dividends
OnMay 12, 2021 , our board of directors declared a quarterly cash dividend of$0.90 per common share. The dividend was paid onJune 1, 2021 , to shareholders of record as of the close of business onMay 24, 2021 . OnJuly 14, 2021 , our board of directors declared a quarterly cash dividend of$0.90 per common share. This dividend is payable onSeptember 1, 2021 , to shareholders of record as of the close of business onAugust 18, 2021 . Share Repurchases SinceJuly 2012 , our board of directors has authorized an aggregate of$15 billion of repurchases of our outstanding common stock. The authorizations do not have expiration dates. The share repurchases are expected to be funded primarily through available cash. We are not obligated to repurchase any shares of common stock pursuant to these authorizations and may commence, suspend or terminate repurchases at any time. Since the inception of our share repurchase program in 2012, we have repurchased 159 million shares at an aggregate cost of$12.5 billion . Shares of stock repurchased are held as treasury shares. We suspended share repurchases inmid-March 2020 to preserve liquidity in response to the global economic disruption caused by the COVID-19 pandemic. 45 -------------------------------------------------------------------------------- Table of Contents Capital Spending Our capital expenditures and investments represent consolidated capital spending. Our adjusted capital spending is a non-GAAP financial measure that demonstrates our net share of capital spending, and reflects an adjustment for the portion of our consolidated capital spending funded by a joint venture partner. Millions of Dollars Six Months Ended June 30 2021 2020 Capital Expenditures and Investments Midstream $ 241 1,238 Chemicals - - Refining 370 409 Marketing and Specialties 44 111 Corporate and Other 56 104 Total Capital Expenditures and Investments 711 1,862 Less: capital spending funded by a joint venture partner* - 61 Adjusted Capital Spending $ 711 1,801 Selected Equity Affiliates** DCP Midstream $ 21 90 CPChem 151 139 WRB 106 71 $ 278 300 * Included in the Midstream segment. ** Our share of joint venture's capital spending.
Midstream
During the first six months of 2021, capital spending in our Midstream segment included:
•Construction activities onPhillips 66 Partners' C2G Pipeline, a new 16-inch ethane pipeline that connectsPhillips 66 Partners' Clemens Caverns storage facility to petrochemical facilities inGregory, Texas , nearCorpus Christi, Texas .
•Construction activities on a new 35-mile, 12-inch hydrogen gas pipeline
connecting
•Contributions to Dakota Access by
•Investment in a renewable feedstock processing plant.
•Contributions by
•Continued development of additional
•Spending associated with other return, reliability, and maintenance projects in our Transportation and NGL businesses.
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Chemicals
During the first six months of 2021, on a 100% basis, CPChem's capital
expenditures and investments were $301 million . The capital spending was
primarily for optimization, debottlenecking and sustaining 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 2021.
Refining
Capital spending for the Refining segment during the first six months of 2021 was primarily for refinery upgrade projects to enhance the yield of high-value products, renewable diesel projects, improvements to the operating integrity of key processing units, and safety-related projects. In the second quarter of 2021, we started up facilities to improve product value at thePonca City Refinery and facilities to provide flexibility to produce renewable diesel at theSan Francisco Refinery . Other major construction activities included installation of facilities to improve product value at the jointly ownedWood River Refinery . Marketing and Specialties Capital spending for the M&S segment during the first six months of 2021 was primarily for an investment in a retail marketing joint venture in the Central region and the development and enhancement of retail sites inEurope . Corporate and Other Capital spending for Corporate and Other during the first six months of 2021 was primarily for information technology and facilities. 47 -------------------------------------------------------------------------------- Table of Contents 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. 48 -------------------------------------------------------------------------------- Table of Contents 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 2020 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 endedJune 30, 2021 and 2020, we incurred expenses of$422 million and$147 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 operations. Our jointly owned refineries also incurred expenses associated with the purchase of RINs in the open market, of which our share was$178 million and$50 million for the six months endedJune 30, 2021 and 2020, respectively. These expenses are included in the "Equity in earnings of affiliates" line item on our consolidated statement of operations. The amount of these expenses and fluctuations between periods is primarily driven by the market price of RINs, refinery production and blending activities. We occasionally receive requests for information or notices of potential liability from theEPA 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. AtJune 30, 2021 , andDecember 31, 2020 , we had been notified of potential liability under CERCLA and comparable state laws at 25 sites withinthe United States . 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 those costs and liabilities could 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. 49 -------------------------------------------------------------------------------- Table of Contents 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 theEPA . 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. We continue to monitor legislative and regulatory actions and legal proceedings globally relating to GHG emissions for potential impacts on our operations.
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 2020 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 throughout our operations.
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GUARANTOR FINANCIAL INFORMATION
At June 30, 2021 , Phillips 66 had $10.8 billion of senior unsecured notes
outstanding guaranteed by Phillips 66 Company , a direct, wholly owned operating
subsidiary of Phillips 66 . 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.
The guarantees (1) are unsecured obligations of Phillips 66 Company , (2) rank
equally with all of Phillips 66 Company's other unsecured and unsubordinated
indebtedness, and (3) are full and unconditional.
Summarized financial information of Phillips 66 and Phillips 66 Company (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.
The summarized results of operations for the six months ended June 30, 2021 , and
the summarized financial position at June 30, 2021 , and December 31, 2020 , for
the Obligor Group on a combined basis were:
Summarized Combined Statement of Operations Millions of Dollars
Six Months Ended June 30, 2021
Sales and other operating revenues $ 37,273
Revenues and other income-non-guarantor subsidiaries 2,371
Purchased crude oil and products-third parties 23,836
Purchased crude oil and products-related parties 5,710
Purchased crude oil and products-non-guarantor subsidiaries 7,921
Loss before income taxes (639)
Net loss (494)
Millions of Dollars
June 30 December 31
Summarized Combined Balance Sheet 2021 2020
Accounts and notes receivable-third parties $ 4,109 4,060
Accounts and notes receivable-related parties 1,389 804
Due from non-guarantor subsidiaries, current 604 288
Total current assets 11,538 8,965
Investments and long-term receivables 9,536 9,229
Net properties, plants and equipment 12,823 12,815
Goodwill 1,047 1,047
Due from non-guarantor subsidiaries, noncurrent 6,148 6,173
Other assets associated with non-guarantor subsidiaries 2,737 2,870
Total noncurrent assets 34,132 34,034
Total assets 45,670 42,999
Due to non-guarantor subsidiaries, current $ 3,042 2,203
Total current liabilities 12,599 7,938
Long-term debt 9,327 11,330
Due to non-guarantor subsidiaries, noncurrent 9,965 9,316
Total noncurrent liabilities 24,828 26,044
Total liabilities 37,427 33,982
Total equity 8,243 9,017
Total liabilities and equity 45,670 42,999
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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 loss before income taxes to
realized refining margins:
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Millions of Dollars, Except as Indicated
Atlantic
Basin/ Gulf Central West
Realized Refining Margins Europe Coast Corridor Coast Worldwide
Three Months Ended June 30, 2021
Loss before income taxes $ (110) (264) (82) (273) (729)
Plus:
Taxes other than income taxes 18 25 11 22 76 Depreciation, amortization and impairments 52 77 34 57 220 Selling, general and administrative expenses 18 14 7 10 49 Operating expenses 217 299 125 281 922 Equity in losses of affiliates 2 - 65 - 67 Other segment income, net (8) (6) (8) (2) (24) Proportional share of refining gross margins contributed by equity affiliates 42 - 125 - 167 Realized refining margins$ 231 145 277 95 748 Total processed inputs (thousands of barrels) 49,979 69,364 23,466 28,158 170,967
Adjusted total processed inputs (thousands of barrels)* 49,979 69,364 43,189
28,158 190,690
Loss before income taxes per barrel (dollars per
barrel)** $ (2.20) (3.81) (3.49) (9.70) (4.26)
Realized refining margins (dollars per barrel)*** 4.63 2.10 6.40 3.37 3.92
Three Months Ended June 30, 2020
Loss before income taxes $ (227) (365) (104) (182) (878)
Plus:
Taxes other than income taxes 15 25 14 22 76 Depreciation, amortization and impairments 49 75 33 63 220 Selling, general and administrative expenses 12 10 7 9 38 Operating expenses 190 277 120 216 803 Equity in (earnings) losses of affiliates 3 (1) 79 - 81 Other segment expense, net 3 - 3 1 7
Proportional share of refining gross margins contributed by equity affiliates
16 - 92 - 108
Special items:
Lower-of-cost-or-market inventory adjustments - - (35) - (35) Realized refining margins$ 61 21 209 129 420 Total processed inputs (thousands of barrels) 39,121 61,032 20,778 25,737 146,668
Adjusted total processed inputs (thousands of barrels)* 39,121 61,032 36,067
25,737 161,957
Loss before income taxes per barrel (dollars per
barrel)** $ (5.80) (5.98) (5.01) (7.07) (5.99)
Realized refining margins (dollars per barrel)*** 1.53 0.36 5.78 5.05 2.60
* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.
** 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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Millions of Dollars, Except as Indicated
Atlantic
Basin/ Gulf Central West
Realized Refining Margins Europe Coast Corridor Coast Worldwide
Six Months Ended June 30, 2021
Loss before income taxes $ (263) (517) (330) (659) (1,769)
Plus:
Taxes other than income taxes 38 52 26 45 161 Depreciation, amortization and impairments 104 154 68 111 437 Selling, general and administrative expenses 32 24 14 21 91 Operating expenses 447 620 330 663 2,060 Equity in losses of affiliates 4 3 182 - 189 Other segment income, net (8) (6) (10) - (24) Proportional share of refining gross margins contributed by equity affiliates 85 - 211 - 296 Realized refining margins$ 439 330 491 181 1,441
Total processed inputs (thousands of barrels) 92,805 123,924 43,220
54,075 314,024
Adjusted total processed inputs (thousands of
barrels)* 92,805 123,924 78,900 54,075 349,704
Loss before income taxes per barrel (dollars per
barrel)** $ (2.83) (4.17) (7.64) (12.19) (5.63)
Realized refining margins (dollars per barrel)*** 4.73 2.67
6.21 3.35 4.12
* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.
** 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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Millions of Dollars, Except as Indicated
Atlantic
Basin/ Gulf Central West
Realized Refining Margins Europe Coast Corridor Coast Worldwide
Six Months Ended June 30, 2020
Loss before income taxes $ (864) (1,208) (331) (736) (3,139)
Plus:
Taxes other than income taxes 34 62 31 53 180 Depreciation, amortization and impairments 541 816 502 427 2,286 Selling, general and administrative expenses 25 17 13 19 74 Operating expenses 384 769 256 499 1,908 Equity in (earnings) losses of affiliates 5 (2) 130 - 133 Other segment expense, net 1 1 - 2 4 Proportional share of refining gross margins contributed by equity affiliates 32 - 205 - 237 Realized refining margins$ 158 455 806 264 1,683
Total processed inputs (thousands of barrels) 80,456 125,098
44,123 53,614 303,291
Adjusted total processed inputs (thousands of
barrels)* 80,456 125,098 80,358 53,614 339,526
Loss before income taxes per barrel (dollars per
barrel)** $ (10.74) (9.66) (7.50) (13.73) (10.35)
Realized refining margins (dollars per barrel)*** 1.97 3.64 10.03 4.92 4.96
* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.
** 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 Three Months Ended
June 30, 2021 June 30, 2020
U.S. International U.S. International
Realized Marketing Fuel Margins
Income before income taxes $ 366 48 179 68
Plus:
Taxes other than income taxes 2 1 2 2 Depreciation and amortization 5 19 3 16 Selling, general and administrative expenses 198 60 151 57 Equity in earnings of affiliates (15) (31) (11) (28) Other operating revenues* (110) (10) (71) (4) Other segment (income) expense, net - (1) - 1 Marketing margins 446 86 253 112 Less: margin for nonfuel related sales - 15 - 13 Realized marketing fuel margins$ 446 71 253 99
Total fuel sales volumes (thousands of barrels) 170,228 24,539
144,517 19,583
Income before income taxes per barrel (dollars
per barrel) $ 2.15 1.96 1.24 3.48
Realized marketing fuel margins (dollars per
barrel)** 2.62 2.89 1.75 5.07
* 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 Six Months Ended
June 30, 2021 June 30, 2020
U.S. International U.S. International
Realized Marketing Fuel Margins
Income before income taxes $ 565 96 478 239
Plus:
Taxes other than income taxes 6 3 4 3 Depreciation and amortization 8 38 6 33 Selling, general and administrative expenses 363 120 278 120 Equity in earnings of affiliates (17) (55) (11) (50) Other operating revenues* (196) (15) (155) (2) Other segment (income) expense, net - (2) - 1 Marketing margins 729 185 600 344 Less: margin for nonfuel related sales - 28 - 23 Realized marketing fuel margins$ 729 157 600 321
Total fuel sales volumes (thousands of barrels) 316,022 46,013
311,695 45,562
Income before income taxes per barrel (dollars
per barrel) $ 1.79 2.09 1.53 5.25
Realized marketing fuel margins (dollars per
barrel)** 2.31 3.41 1.92 7.04
* 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, but the absence of such
words does not mean a statement is not forward-looking.
We based the 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 in general. We caution you these statements are not guarantees of future
performance as they involve assumptions that, while made in good faith, may
prove to be incorrect, and involve risks and uncertainties we cannot predict. In
addition, we based many of these forward-looking statements on assumptions about
future events that may prove to be inaccurate. Accordingly, our actual outcomes
and results may differ materially from what we have expressed or forecast in the
forward-looking statements. Any differences could result from a variety of
factors, including the following:
•The continuing effects of the COVID-19 pandemic and its negative impact on
commercial activity and demand for refined petroleum products, as well as the
extent and duration of recovery of economies and demand for our products after
the pandemic subsides.
•Fluctuations in NGL, crude oil, refined petroleum product and natural gas
prices and refining, marketing and petrochemical margins.
•Changes in governmental policies relating to NGL, crude oil, natural gas or
refined petroleum products pricing, regulation or taxation, including exports.
•Actions taken by OPEC and other countries impacting supply and demand and
correspondingly, commodity prices.
•Unexpected changes in costs or technical requirements for constructing,
modifying or operating our facilities or transporting our products.
•Unexpected technological or commercial difficulties in manufacturing, refining
or transporting our products, including chemical products.
•Lack of, or disruptions in, adequate and reliable transportation for our NGL,
crude oil, natural gas and refined petroleum products.
•The level and success of drilling and quality of production volumes around our
Midstream assets.
•The inability to timely obtain or maintain permits, including those necessary
for capital projects.
•The inability to comply with government regulations or make capital
expenditures required to maintain compliance.
•Changes to worldwide government policies relating to renewable fuels and
greenhouse gas emissions that adversely affect programs like the renewable fuel
standards program, low carbon fuel standards and tax credits for biofuels.
•Failure to complete definitive agreements and feasibility studies for, and to
complete construction of, announced and future capital projects on time and
within budget.
•Potential disruption or interruption of our operations due to accidents,
weather events (including as a result of climate change), civil unrest,
insurrections, political events, terrorism or cyberattacks.
•General domestic and international economic and political developments
including armed hostilities, expropriation of assets, and other political,
economic or diplomatic developments, including those caused by public health
issues, outbreaks of diseases and pandemics.
•Failure of new products and services to achieve market acceptance.
•International monetary conditions and exchange controls.
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•Substantial investments required, or reduced demand for products, as a result
of existing or future environmental rules and regulations, including 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.
•Changes in estimates or projections used to assess fair value of intangible
assets, goodwill and property and equipment and/or strategic decisions 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 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 2020 Annual
Report on Form 10-K.
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