The unaudited interim financial information presented in the financial statements included in this report is unauditedprepared in accordance with generally accepted accounting principles in the United States (GAAP) and includes all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of the consolidated financial position of Phillips 66 and its results of operations and cash flows for the periods presented. Unless otherwise specified, all such adjustments are of a normal and recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these interim financial statements should be read in conjunction with the consolidated financial statements and notes included in our 20162021 Annual Report on Form 10-K. The results of operations for the three- and nine-month periodsthree months ended September 30, 2017,March 31, 2022, are not necessarily indicative of the results to be expected for the full year. Certain prior period financial information has been recast to reflect

On March 9, 2022, we completed the current year’s presentation.

The most significantfollowing tables present our disaggregated sales and other operating revenues:

Our contract-related assets also include payments we make to our marketing customers related to incentive programs. An incentive payment is initially recognized as an asset and subsequently amortized as a reduction to revenue over the contract term, which generally ranges from 5 to 15 years. At March 31, 2022, and December 31, 2021, our asset balances related to such payments were $471 million and $466 million, respectively.

Most of Phillips 66 Partners thatour contracts with customers are available to settlespot contracts or term contracts with only its obligations, along with its most significant liabilities for which its creditorsvariable consideration. We do not disclose remaining performance obligations for these contracts as the expected duration is one year or less or because the variable consideration has been allocated entirely to an unsatisfied performance obligation. We also have recoursecertain contracts in our Midstream segment that include minimum volume commitments with fixed pricing. At March 31, 2022, the remaining performance obligations related to Phillips 66’s generalthese minimum volume commitment contracts were immaterial.

We are exposed to credit were:

We hold variable interests in VIEsmonitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities include timely account reconciliations, dispute resolution and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. In addition, when events and circumstances arise that have not been consolidated becausemay affect certain counterparties’ abilities to fulfill their obligations, such as Coronavirus Disease 2019 (COVID-19), we are not considered the primary beneficiary.enhance our credit monitoring, and we may seek collateral to support some transactions or require prepayments from higher-risk counterparties.

Merey Sweeny, L.P. (MSLP) is a limited partnership that owns a delayed cokerAt March 31, 2022, and related facilitiesDecember 31, 2021, we reported $10,455 million and $7,470 million of accounts and notes receivable, respectively, net of allowances of $44 million for both periods. Based on an aging analysis at the Sweeny Refinery. Under the agreements that governed the relationships between the former co-venturers in MSLP, certain defaults by Petróleos de Venezuela S.A. (PDVSA) with respect to supplyMarch 31, 2022, more than 95% of crude oil to the Sweeny Refinery triggered the right to acquire PDVSA’s 50 percent ownership interest in MSLP. The call right was exercised in August 2009. The exercise of the call right was challenged, and the dispute was arbitrated in our favor and subsequently litigated. Through February 7, 2017, we determined MSLP was a VIE and used the equity method of accounting because the exercise of the call right remained subject to legal challenge. As discussed more fully in Note 5—Business Combinations, the exercise of the call right ceased to be subject to legal challenge in February 2017. At that point, we no longer considered MSLP a VIE and began consolidating the entity as a wholly owned subsidiary.accounts receivable were outstanding less than 60 days.

We have a 25 percent ownership interest in both Dakota Access, LLC (DAPL)are also exposed to credit losses from off-balance sheet exposures, such as guarantees of joint venture debt and Energy Transfer Crude Oil Company, LLC (ETCO), which collectively own the Bakken Pipeline. These entities did not have sufficient equity at risk to fully fund the constructionstandby letters of all assets requiredcredit. See Note 9—Guarantees, and Note 10—Contingencies and Commitments, for principal operations, and thus represented VIEs until operations commenced. On June 1, 2017,more information on these entities commenced operations and were no longer considered VIEs. We use the equity methodoff-balance sheet exposures.

Inventories consisted of the following:

In 2020, the trial court presiding over litigation brought by the Standing Rock Sioux 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 court later vacated the easement. Although the easement is vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS. In May 2021, the Standing Rock Sioux Tribe’s request for an injunction to force a shutdown of the pipeline while the EIS is being prepared was denied. In June 2021, the trial court dismissed the litigation entirely. Once the EIS is completed, new litigation or challenges to the EIS could be filed.

Dakota Access and ETCO have guaranteed repayment of senior unsecured notes issued by a wholly owned subsidiary of Dakota Access with an aggregate principal outstanding of $2.5 billion at March 31, 2022. In addition, Phillips 66 Partners, now a wholly owned subsidiary of Phillips 66, and its co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the Whitegate Refinery disposition,notes offering. Under the refinery’s LIFO inventory values were liquidated causing a decrease in net income of $62 million duringCECU, the three- and nine-month periods ended September 30, 2016. This LIFO liquidation impact was includedco-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the gain recognizedabove-mentioned ongoing litigation. At March 31, 2022, our 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, we could be required to support our share of the ongoing expenses, including scheduled interest payments on the disposition.

At March 31, 2022, the aggregate book value of our investments in August 2009, to acquire its 50 percent ownership interest in MSLP for a purchase price determined by a contractual formula.  As the distributions PDVSA received from MSLP exceeded the amounts it contributed to MSLP, the contractual formula required no cash consideration for the acquisition. The exerciseDakota Access and ETCO was challenged, and the dispute was arbitrated in our favor and subsequently litigated.  While the dispute was being arbitrated and litigated, we continued to use the equity method of accounting for our 50 percent interest in MSLP.  When the exercise of the call right ceased to be subject to legal challenge on February 7, 2017, we deemed that the acquisition was complete and began accounting for MSLP as a$725 million.

On April 1, 2022, Dakota Access’ wholly owned consolidated subsidiary.

We hold a 50% voting interest and equipment (PP&E)a 48% economic interest in CF United, a retail marketing joint venture with operations primarily on the U.S. West Coast. CF United is considered a variable interest entity (VIE) because our co-venturer has an option to require us to purchase its interest based on a fixed multiple. The put option becomes effective July 1, 2023, and $238 million of debt, as wellexpires on March 31, 2024. The put option is viewed as a net $93 million forvariable interest as the eliminationpurchase price on the exercise date may not represent the then-current fair value of CF United. We have determined that we are not the primary beneficiary because we and our co-venturer jointly direct the activities of CF United that most significantly impact economic performance. At March 31, 2022, our maximum exposure to loss was comprised of our equity$278 million investment in MSLPCF United, and net intercompany payables. Our acquisition accounting was finalized duringany potential future loss resulting from the first quarterput option should the purchase price based on a fixed multiple exceed the then-current fair value of 2017.CF United.

We hold a 50% interest in southeast Louisiana, consistingOnCue, a joint venture that owns and operates retail convenience stores. We fully guaranteed various debt agreements of approximately 500 miles of pipelinesOnCue and storage caverns connecting multiple fractionation facilities, refineries and a petrochemical facility. The acquisition provided an opportunity for fee-based growthour co-venturer did not participate in the Louisiana market withinguarantees. This entity is considered a VIE because our Midstream segment. The acquisitiondebt guarantees resulted in OnCue not being exposed to all potential losses. We have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact economic performance. At March 31, 2022, our maximum exposure to loss was included in$188 million, which represented the “Capital expenditures and investments” line on our consolidated statement of cash flows. At the acquisition date, we recorded $183 million of PP&E and $3 million of goodwill. Our acquisition accounting was finalized during the first quarter of 2017, with no change to the provisional amounts recorded in 2016.

In the first quarter of 2017,2021, Phillips 66 Partners decided to exit the Liberty Pipeline project, which resulted in a $198 million before-tax impairment in our Midstream segment. The impairment is included in the “Impairments” line item on our consolidated statement of operations for the three months ended March 31, 2021. See Note 12—Fair Value Measurements, for additional information regarding this impairment and the techniques used to determine the fair value of this investment. In April 2021, Phillips 66 Partners transferred its ownership interest in Liberty to its co-venturer for cash and certain pipeline assets with a value that approximated its book value of $46 million at March 31, 2021.

In September 2021, we received paymentacquired 78 million ordinary shares, representing a 16% ownership interest, in NOVONIX Limited (NOVONIX), which are traded on the Australian Securities Exchange. NOVONIX is a Brisbane, Australia-based company that develops technology and supplies materials for lithium-ion batteries. Since we do not have significant influence over the operating and financial policies of NOVONIX and the $250 million outstanding principal balanceshares we own have a readily determinable fair value, our investment is recorded at December 31, 2016,fair value at the end of each reporting period. The fair value of our sponsorinvestment is recorded in the “Investments and long-term receivables” line item on our consolidated balance sheet. The change in the fair value of our investment due to fluctuations in NOVONIX’s stock price, or unrealized investment gains (losses), is recorded in the “Other income (loss)” line item of our consolidated statement of operations, while changes due to foreign currency fluctuations are recorded in the “Foreign currency transaction gains” line item on our consolidated statement of operations. The fair value of our investment in NOVONIX was $362 million at March 31, 2022. The fair value of our investment in NOVONIX declined by $158 million during the three months ended March 31, 2022, reflecting an unrealized investment loss of $169 million, partially offset by an unrealized foreign currency gain of $11 million. See Note 12—Fair Value Measurements, for additional information regarding the recurring fair value measurement of our investment in NOVONIX.

We and our co-venturer provided member loans to the DAPL and ETCO joint ventures. We also received payment of the $75 million outstanding principal balance of the partner loan to WRB Refining LP (WRB). These cash inflows, totaling $325 million, are included inAt March 31, 2022, our 50% share of the “Collectionsoutstanding member loan balance, including accrued interest, was $597 million.

Our gross investment in PP&Eproperties, plants and equipment (PP&E) and the associated accumulated depreciation and amortization (Accum. D&A) balances were as follows:

The numerator of basic earnings (loss) per share (EPS) is net income (loss) attributable to Phillips 66, reduced byadjusted for noncancelable dividends paid on unvested share-based employee awards during the vesting period (participating securities). The denominator of basic EPS is the sum of the daily weighted-average number of common shares outstanding during the periods presented and fully vested stock and unit awards that have not yet been issued as common stock. The numerator of diluted EPS is also based on net income (loss) attributable to Phillips 66, which is reduced only by dividend equivalents paid on participating securities for which the dividends are more dilutive than the participation of the awards in the earnings (loss) of the periods presented. To the extent unvested stock, unit or option awards and vested unexercised stock options are dilutive, they are included with the weighted-average common shares outstanding in the denominator. Treasury stock is excluded from the denominator in both basic and diluted EPS.