*Prior-period financial information has been retrospectively adjusted for acquisitions

Table of ~~businesses under common control.~~

~~See Notes to Consolidated Financial Statements.~~



Consolidated Balance Sheet			Phillips 66 Partners LP


	Millions of Dollars
	June 30 2021		December 31 2020
Assets
Cash and cash equivalents	$	2	7
Accounts receivable—related parties	96		103
Accounts receivable—third parties	5		3
Materials and supplies	36		16
Prepaid expenses and other current assets	13		11
Total current assets	152		140
Equity investments	2,962		3,244
Net properties, plants and equipment	3,653		3,639
Goodwill	185		185
Other assets	49		50
Total Assets	$	7,001	7,258

Liabilities
Accounts payable—related parties	$	19	19
Accounts payable—third parties	48		73
Accrued interest	35		35
Deferred revenues	34		27
Short-term debt	465		465
Accrued property and other taxes	20		11
Other current liabilities	8		3
Total current liabilities	629		633
Long-term debt	3,445		3,444
Other liabilities	88		90
Total Liabilities	4,162		4,167

Equity
Preferred unitholders (2021—13,451,263 units issued and outstanding; 2020—13,819,791 units issued and outstanding)	729		749
Common unitholders—public (2021 and 2020—58,580,009 units issued and outstanding)	2,649		2,706
Common unitholder—Phillips 66 (2021 and 2020—169,760,137 units issued and outstanding)	(820)		(656)
Accumulated other comprehensive loss	(2)		(1)
Total unitholders’ equity	2,556		2,798
Noncontrolling interest	283		293
Total Equity	2,839		3,091
Total Liabilities and Equity	$	7,001	7,258
See Notes to Consolidated Financial Statements.

Millions of Dollars
September 30
2017
December 31
2016
Assets
Cash and cash equivalents $ 2
2
Accounts receivable—related parties 66
76
Accounts receivable—third parties 4
7
Materials and supplies 12
11
Prepaid expenses 3
4
Total current assets 87
100
Equity investments 1,265
1,142
Net properties, plants and equipment 2,675
2,675
Goodwill 185
185
Deferred rentals and other 7
7
Total Assets $ 4,219
4,109

Liabilities
Accounts payable—related parties $ 10
12
Accounts payable—third parties 31
31
Accrued property and other taxes 21
10
Accrued interest 29
26
Short-term debt 17
15
Deferred revenues 25
14
Other current liabilities 2
3
Total current liabilities 135
111
Long-term debt 2,273
2,396
Asset retirement obligations 10
9
Accrued environmental costs 2
2
Deferred income taxes 3
2
Deferred revenues and other 21
23
Total Liabilities 2,444
2,543

Equity
Common unitholders—public (2017—46,458,478 units issued and outstanding; 2016—43,134,902 units issued and outstanding) 1,966
1,795
Common unitholder—Phillips 66 (2017 and 2016—64,047,024 units issued and outstanding) 472
476
General partner—Phillips 66 (2017 and 2016—2,187,386 units issued and outstanding) (662 ) (704 )
Accumulated other comprehensive loss (1 ) (1 )
Total Equity 1,775
1,566
Total Liabilities and Equity $ 4,219
4,109

~~See Notes to Consolidated Financial Statements.~~

Table of Contents



Consolidated Statement of Cash Flows			Phillips 66 Partners LP


	Millions of Dollars
	Six Months Ended June 30
	2021		2020
Cash Flows From Operating Activities
Net income	$	223	481
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	68		61
Impairments	198		0
Undistributed equity earnings	2		9
Gain from equity interest transfer	0		(84)
Other	0		7
Working capital adjustments
Accounts receivable	5		8

Prepaid expenses and other current assets	(2)		0
Accounts payable	(3)		(7)
Accrued interest	0		(7)
Deferred revenues	7		8
Other accruals	15		13
Net Cash Provided by Operating Activities	513		489

Cash Flows From Investing Activities
Cash capital expenditures and investments	(141)		(601)
Liberty acquisition	0		(75)
Return of investment from equity affiliates	77		86
Proceeds from sale of equity interest	22		0
Net Cash Used in Investing Activities	(42)		(590)

Cash Flows From Financing Activities
Issuance of debt	465		215
Repayment of debt	(465)		(25)
Issuance of common units	0		2


Repurchase of preferred units	(24)		0
Quarterly distributions to preferred unitholders	(24)		(19)
Quarterly distributions to common unitholders—public	(103)		(102)
Quarterly distributions to common unitholder—Phillips 66	(297)		(297)
Net proceeds from equity interest transfer	0		40

Distributions to noncontrolling interest	(26)		0
Other distributions from (to) Phillips 66	(2)		8
Net Cash Used in Financing Activities	(476)		(178)

Net Change in Cash and Cash Equivalents	(5)		(279)
Cash and cash equivalents at beginning of period	7		286
Cash and Cash Equivalents at End of Period	$	2	7
See Notes to Consolidated Financial Statements.

Millions of Dollars

Nine Months Ended
September 30

2017
2016*
Cash Flows From Operating Activities

Net income $ 299
306
Adjustments to reconcile net income to net cash provided by operating activities

Depreciation 82
71
Deferred taxes 1
1
Adjustment to equity earnings for cash distributions received 2
(4 )
Deferred revenues and other (2 ) 9
Other 9
4
Working capital adjustments

Decrease (increase) in accounts receivable 13
(15 )
Decrease (increase) in materials and supplies (1 ) (1 )
Decrease (increase) in prepaid expenses and other current assets 1
(2 )
Increase (decrease) in accounts payable —
7
Increase (decrease) in accrued interest 3
(17 )
Increase (decrease) in deferred revenues 11
5
Increase (decrease) in other accruals 4
7
Net Cash Provided by Operating Activities 422
371

Cash Flows From Investing Activities

Cash capital expenditures and investments (227 ) (321 )
Return of investment from equity affiliates 28
10
Other —
(24 )
Net Cash Used in Investing Activities (199 ) (335 )

Cash Flows From Financing Activities

Net contributions from Phillips 66 to Predecessors —
41
Acquisition of noncontrolling interest in Sweeny Frac LLC —
(656 )
Issuance of debt 1,383
428
Repayment of debt (1,506 ) (686 )
Issuance of common units 171
972
Quarterly distributions to common unitholders—public (78 ) (41 )
Quarterly distributions to common unitholder—Phillips 66 (113 ) (86 )
Quarterly distributions to General Partner—Phillips 66 (96 ) (50 )
Other cash contributions from Phillips 66 16
11
Net Cash Used in Financing Activities (223 ) (67 )

Net Change in Cash and Cash Equivalents —
(31 )
Cash and cash equivalents at beginning of period 2
50
Cash and Cash Equivalents at End of Period $ 2
19

*Prior-period financial information has been retrospectively adjusted for acquisitions

Table of ~~businesses under common control.~~Contents

~~See Notes to Consolidated Financial Statements.~~



Consolidated Statement of Changes in Equity			Phillips 66 Partners LP

Millions of Dollars
Partnership
Common Unitholders
Public
Common Unitholder
Phillips 66
General Partner
Phillips 66
Accum. Other Comprehensive Loss
Net Investment— Predecessors*
Total

December 31, 2015 $ 809
233
(650 ) (2 ) 1,054
1,444
Net income attributable to Predecessors —
—
—
—
103
103
Net contributions from Phillips 66—Predecessors —
—
—
—
88
88
Issuance of common units 971
—
—
—
—
971
Allocation of net investment to unitholders —
233
33
—
(266 ) —
Net income attributable to the Partnership 51
89
63
—
—
203
Other comprehensive income —
—
—
1
—
1
Quarterly cash distributions to unitholders and General Partner (41 ) (86 ) (50 ) —
—
(177 )
Other contributions from Phillips 66 —
—
4
—
—
4
September 30, 2016* $ 1,790
469
(600 ) (1 ) 979
2,637

December 31, 2016 $ 1,795
476
(704 ) (1 ) —
1,566
Issuance of common units 171
—
—
—
—
171
Net income attributable to the Partnership 78
109
112
—
—
299
Quarterly cash distributions to unitholders and General Partner (78 ) (113 ) (96 ) —
—
(287 )
Other contributions from Phillips 66 —
—
26
—
—
26
September 30, 2017 $ 1,966
472
(662 ) (1 ) —
1,775


	Millions of Dollars
	Three Months Ended June 30
	Partnership
	Preferred Unitholders Public		Common Unitholders Public	Common Unitholder Phillips 66	Accum. Other Comprehensive Loss	Noncontrolling Interest	Total

March 31, 2021	$	749	2,647	(828)	(2)	287	2,853
Net income	12		55	158	—	9	234

Quarterly cash distributions to unitholders ($0.875 per common unit)	(12)		(52)	(148)	—	—	(212)
Repurchase of preferred units	(20)		(1)	(3)	—	—	(24)

Distributions to noncontrolling interest	—		—	—	—	(13)	(13)
Other contributions from Phillips 66	—		—	1	—	—	1
June 30, 2021	$	729	2,649	(820)	(2)	283	2,839

March 31, 2020	$	747	2,723	(616)	(1)	0	2,853

Net income	9		63	183	—	—	255
Quarterly cash distributions to unitholders ($0.875 per common unit)	(10)		(51)	(148)	—	—	(209)
Transfer of equity interest	—		—	—	—	305	305
Other contributions from Phillips 66	—		—	9	—	—	9
June 30, 2020	$	746	2,735	(572)	(1)	305	3,213


	Units
	Three Months Ended June 30
	Preferred Units Public	Common Units Public	Common Units Phillips 66	Total Units

March 31, 2021	13,819,791	58,580,009	169,760,137	242,159,937
Units issued in public equity offerings	—	—	—	—
Repurchase of preferred units	(368,528)	—	—	(368,528)
June 30, 2021	13,451,263	58,580,009	169,760,137	241,791,409

March 31, 2020	13,819,791	58,580,009	169,760,137	242,159,937
Units issued in public equity offerings	—	—	—	—
June 30, 2020	13,819,791	58,580,009	169,760,137	242,159,937
See Notes to Consolidated Financial Statements.

Table of Contents

*Prior-period financial information has been retrospectively adjusted for acquisitions


	Millions of Dollars
	Six Months Ended June 30
	Partnership
	Preferred Unitholders Public		Common Unitholders Public	Common Unitholder Phillips 66	Accum. Other Comprehensive Loss	Noncontrolling Interest	Total

December 31, 2020	$	749	2,706	(656)	(1)	293	3,091
Net income	24		47	136	—	16	223
Other comprehensive loss	—		—	—	(1)	—	(1)
Quarterly cash distributions to unitholders ($1.750 per common unit)	(24)		(103)	(297)	—	—	(424)
Repurchase of preferred units	(20)		(1)	(3)	—	—	(24)

Distributions to noncontrolling interest	—		—	—	—	(26)	(26)

June 30, 2021	$	729	2,649	(820)	(2)	283	2,839

December 31, 2019	$	746	2,717	(628)	(1)	0	2,834
Issuance of common units	—		2	—	—	—	2
Net income	19		118	344	—	—	481
Quarterly cash distributions to unitholders ($1.750 per common unit)	(19)		(102)	(297)	—	—	(418)
Transfer of equity interest	—		—	—	—	305	305
Other contributions from Phillips 66	—		—	9	—	—	9
June 30, 2020	$	746	2,735	(572)	(1)	305	3,213


	Units
	Six Months Ended June 30
	Preferred Units Public	Common Units Public	Common Units Phillips 66	Total Units

December 31, 2020	13,819,791	58,580,009	169,760,137	242,159,937
Units issued in public equity offerings	—	—	—	—
Repurchase of preferred units	(368,528)	—	—	(368,528)
June 30, 2021	13,451,263	58,580,009	169,760,137	241,791,409

December 31, 2019	13,819,791	58,539,439	169,760,137	242,119,367
Units issued in public equity offerings	—	40,570	—	40,570
June 30, 2020	13,819,791	58,580,009	169,760,137	242,159,937
See Notes to Consolidated Financial Statements.

Table of ~~businesses under common control.~~

Common Units
Public

Common Units
Phillips 66

General Partner
Units
Phillips 66

Total Units

December 31, 2015 24,138,750
58,349,042
1,683,425
84,171,217
Units issued in public equity offerings 18,996,152
—
—
18,996,152
Units issued associated with acquisitions —
1,813,745
295,178
2,108,923
September 30, 2016 43,134,902
60,162,787
1,978,603
105,276,292

December 31, 2016 43,134,902
64,047,024
2,187,386
109,369,312
Units issued in public equity offerings 3,323,576
—
—
3,323,576
September 30, 2017 46,458,478
64,047,024
2,187,386
112,692,888

~~See Notes to Consolidated Financial Statements.~~

Contents



Notes to Consolidated Financial Statements			Phillips 66 Partners LP

Note 1—~~Business and Basis~~Description of ~~Presentation~~the Business

Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners,” “the Partnership,” “us,” “our,” “we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries. References to Phillips 66 may refer to Phillips 66 and/or its subsidiaries, depending on the context. References to our “General Partner” or “GP” refer to Phillips 66 Partners GP LLC, and references to ~~Phillips~~“Phillips 66 ~~PDI~~PDI” refer to Phillips 66 Project Development Inc., the Phillips 66 subsidiary that holds a limited partner interest in ~~us.~~us and wholly owns our General Partner.

~~Description of the Business~~

We are a ~~growth-oriented~~ master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets. Our operations consist of crude oil, refined petroleum products and natural gas liquids (NGL) ~~pipelines, terminals and other~~ transportation, ~~and midstream assets. Our common units trade on the New York Stock Exchange under the symbol PSXP.~~

~~Our assets consist of crude oil, refined petroleum products and NGL transportation,~~terminaling, processing ~~terminaling~~ and storage ~~systems, as well as an NGL fractionator.~~assets. We conduct our operations through both wholly owned and ~~joint-venture~~joint venture operations. The majority of our wholly owned assets are associated with, and are integral to the operation of, ~~nine~~9 of Phillips 66’s owned or ~~joint-venture~~joint venture refineries. Our operations consist of 1 reportable segment.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, ~~terminaling,~~ storage and ~~NGL~~ fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling ~~NGL,~~crude oil, refined petroleum products and ~~crude oil.~~NGL. Since we do not own any of the ~~NGL,~~ crude oil, ~~and~~ refined petroleum products and NGL we handle and do not engage in the trading of ~~NGL, crude oil and refined petroleum products,~~those commodities, we have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.

~~Basis of Presentation~~

We have acquired assets from Phillips 66 that were considered transfers of businesses between entities under common control. This required the transactions to be accounted for as if the transfers had occurred at the beginning of the transfer period, with prior periods retrospectively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes have been retrospectively adjusted to include the historical results and financial position of these acquired businesses prior to the effective date of each acquisition. We refer to these pre-acquisition operations as those of our “Predecessors.”

The combined financial statements of our Predecessors were derived from the accounting records of Phillips 66 and reflect the combined historical results of operations, financial position and cash flows of our Predecessors as if such businesses had been combined for all periods presented.

All intercompany transactions and accounts of our Predecessors have been eliminated. The assets and liabilities of our Predecessors in these financial statements have been reflected on a historical cost basis because the transfer of the Predecessors to us took place within the Phillips 66 consolidated group. The consolidated statement of income also includes expense allocations for certain functions performed by Phillips 66, including operational support services such as engineering and logistics and allocations of general corporate expenses related to executive oversight, accounting, treasury, tax, legal, information technology and procurement. These allocations were based primarily on relative carrying values of properties, plants and equipment (PP&E) and equity-method investments, or number of terminals and pipeline miles, and secondarily on activity-based cost allocations. Our management believes the assumptions underlying the allocation of expenses from Phillips 66 are reasonable. Nevertheless, the financial results of our Predecessors may not include all of the actual expenses that would have been incurred had our Predecessors been a stand-alone publicly traded partnership during the periods presented.

Note 2—Interim Financial Information

The unaudited interim financial information presented in the financial statements included in this report is ~~unaudited~~prepared 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 our financial position, 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 audited consolidated financial statements and notes included in our ~~2016~~2020 Annual Report on Form 10-K. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2021, are not necessarily indicative of the results to be expected for the full year.

~~Note 3—Changes~~The Coronavirus Disease 2019 (COVID-19) pandemic continues to impact global economic activity. Our results in ~~Accounting Principles~~

Effective January 1, 2017, we early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the second ~~step~~quarter of 2021 reflect the gradual recovery of demand for refined petroleum products following the administration of COVID-19 vaccines and the easing of pandemic restrictions since the beginning of 2021. However, the adverse impacts of the COVID-19 pandemic may continue in the near term, and the depth and duration of the resulting economic consequences remain uncertain. We continuously monitor our asset and investment portfolio for impairments in this challenging business environment.

Note 3—Operating Revenues

Operating revenues are primarily generated from long-term pipeline transportation, terminaling, storage, processing and fractionation lease and service agreements, mainly with Phillips 66. These agreements typically include escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. In addition, most of these agreements contain renewal options, which typically require the ~~goodwill impairment test. Under the revised test, an entity should perform its annual, or interim, goodwill impairment test~~mutual consent of both our customers and us.

Table of Contents

Total operating revenues disaggregated by ~~comparing the fair value~~asset type were as follows:


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020	2021	2020

Pipelines	$	121	97	225	208
Terminals	43		33	82	76
Storage, processing and other revenues	116		111	225	224
Total operating revenues	$	280	241	532	508

The majority of our agreements with Phillips 66 are considered operating leases under GAAP. The classification of a ~~reporting unit with its carrying amount. An entity should recognize~~lease as either an ~~impairment charge~~operating or a financing lease requires judgment in assessing the contract’s lease and service components and in determining the asset’s fair value. We have elected to account for lease and service elements of contracts classified as leases on a combined basis, except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continue to separate the ~~amount~~lease and service elements based on relative standalone prices and apply the lease standard to the lease element and the revenue standard to the service element.

Total operating revenues disaggregated by ~~which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount~~lease and service revenues were as follows:


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020	2021	2020

Lease revenues	$	233	195	440	413
Service revenues	47		46	92	95
Total operating revenues	$	280	241	532	508

Accounts Receivable

We bill our customers, mainly Phillips 66, under our lease and service contracts generally on a monthly basis.

Total accounts receivable by revenue type was as follows:


	Millions of Dollars
	June 30 2021		December 31 2020

Lease receivables	$	84	87
Service receivables	17		19
Total accounts receivable	$	101	106

Table of ~~goodwill allocated to that reporting unit. This ASU is applied prospectively to goodwill impairment tests performed on or after January 1, 2017.~~Contents

Deferred Revenues

~~Effective January 1, 2017, we early adopted ASU No. 2016-18, “Statement~~Our deferred revenues represent payments received from our customers, mainly Phillips 66, in advance of Cash Flows (Topic 230): Restricted Cash.” The new update changes the classification and presentation of restricted cash in the statement of cash flows. The amendment requires that a statement of cash flows explain the change during the period in ~~the total~~which lease and service contract performance obligations have been fulfilled. The majority of ~~cash, cash equivalents,~~our deferred revenues relate to a tolling agreement and ~~amounts generally described~~a storage agreement that are classified as ~~restricted cash~~leases. The remainder of our deferred revenues relate to lease and ~~restricted cash equivalents. Adoption of this ASU on a retrospective basis did not impact our financial statements.~~

Effective January 1, 2017, we early adopted ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The new update clarifies how certain cash receipts and cash payments should be presented and classifiedservice agreements that contain minimum volume commitments with recovery provisions. Our deferred revenues are recorded in the ~~statement~~“Deferred revenues” and “Other liabilities” line items on our consolidated balance sheet.

Total deferred revenues under our lease and service agreements were as follows:


	Millions of Dollars
	June 30 2021		December 31 2020

Deferred lease revenues	$	51	45
Deferred service revenues	2		4
Total deferred revenues	$	53	49

Future Minimum Lease Payments from Customers

At June 30, 2021, future minimum payments to be received under our lease agreements with customers, mainly Phillips 66, were estimated to be:


	Millions of Dollars

Remainder of 2021	$	384
2022	753
2023	707
2024	589
2025	530
Remaining years	1,297
Total future minimum lease payments from customers	$	4,260

Remaining Performance Obligations

We typically have long-term service contracts with our customers, mainly Phillips 66, of ~~cash flows. In addition,~~which the ~~new update clarifies~~original durations range from 5 to 15 years. The weighted-average remaining duration of these contracts is 9 years. These contracts include both fixed and variable transaction price components. At June 30, 2021, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that ~~when cash receipts and cash payments~~ have ~~aspects~~an original expected duration of ~~more~~greater than one ~~class~~year were:


	Millions of Dollars

Remainder of 2021	$	65
2022	124
2023	124
2024	99
2025	95
Remaining years	381
Total future service revenues	$	888

Table of ~~cash flows and cannot be separated, classification will depend on~~Contents

For the ~~predominant source~~remaining service performance obligations, we applied the exemption for variable prices allocated entirely to a wholly unsatisfied performance obligation or ~~use. Adoption of this ASU on~~to a ~~retrospective basis did not have a material impact on our financial statements.~~

~~Note 4—Acquisitions~~

~~River Parish Acquisition~~

In November 2016, we acquired the River Parish NGL System, a non-affiliated party’s NGL logistics assets located in southeast Louisiana, consisting of pipelines and storage caverns connecting multiple fractionation facilities, refineries and a petrochemical facility. 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 changewholly unsatisfied promise to ~~the provisional amounts recorded in 2016.~~

During 2016, we completed three acquisitions that were considered transfers of businesses between entities under common control, and therefore the related acquired assets were transferred at historical carrying value. Because these acquisitions were common control transactions in which we acquired businesses, our historical financial statements have been retrospectively adjustedtransfer distinct services as ~~if we owned the acquired assets for all periods presented.~~

~~Fractionator Acquisitions~~

~~Initial Fractionator Acquisition.~~ In February 2016, we entered into a Contribution, Conveyance and Assumption Agreement (CCAA) with subsidiaries of Phillips 66 to acquire a 25 percent controlling interest in Phillips 66 Sweeny Frac LLC (Sweeny Frac LLC) for total consideration of $236 million (the Initial Fractionator Acquisition). Total consideration consisted of the assumptionpart of a $212 million note payable to a subsidiary of Phillips 66 and the issuance of 412,823 common units to Phillips 66 PDI and 8,425 general partner units to our General Partner to maintain its 2 percent general partner interest. The Initial Fractionator Acquisition closed in March 2016.performance obligation.

~~Subsequent Fractionator Acquisition.~~In May 2016, we entered into a CCAA with subsidiaries of Phillips 66 to acquire the remaining 75 percent interest in Sweeny Frac LLC and 100 percent of the Standish Pipeline for total consideration of $775 million (the Subsequent Fractionator Acquisition). Total consideration consisted of the assumption of $675 million of notes payable to a subsidiary of Phillips 66 and the issuance of 1,400,922 common units to Phillips 66 PDI and 286,753 general partner units to our General Partner to maintain its 2 percent general partner interest in us after also taking into account the public offering we completed in May 2016. The Subsequent Fractionator Acquisition closed in May 2016.

~~Eagle Acquisition~~

In October 2016, we entered into a CCAA with subsidiaries of Phillips 66 to acquire certain pipeline and terminal assets supporting four Phillips 66-operated refineries (the Eagle Acquisition). We paid Phillips 66 total consideration of $1,305 million, consisting of $1,109 million in cash and the issuance of 3,884,237 common units to Phillips 66 PDI and 208,783 general partner units to our General Partner to maintain its 2 percent general partner interest. The Eagle Acquisition closed in October 2016.

The following tables present our previously reported results of operations and cash flows giving effect to the Eagle Acquisition. The results of operations and cash flows of the Initial Fractionator Acquisition and Subsequent Fractionator Acquisition are included in our previously reported consolidated statement of income and consolidated statement of cash flows for the periods presented, within the first column. The second column in all tables presents the retrospective adjustments made to our historical financial information for the related acquired assets prior to the effective date of acquisition. The third column in all tables presents our consolidated financial information as retrospectively adjusted.

Millions of Dollars

Three Months Ended September 30, 2016
Consolidated Statement of Income Phillips 66
Partners LP
(As previously reported)
Acquired Eagle Assets Predecessor

Consolidated
Results
Revenues and Other Income

Operating revenues—related parties $ 108
73

181
Operating revenues—third parties 2
5

7
Equity in earnings of affiliates 33
—

33
Other income 1
—

1
Total revenues and other income 144
78

222

Costs and Expenses

Operating and maintenance expenses 26
28

54
Depreciation 15
10

25
General and administrative expenses 9
8

17
Taxes other than income taxes 1
3

4
Interest and debt expense 10
—

10
Total costs and expenses 61
49

110
Income before income taxes 83
29

112
Provision for income taxes —
—

—
Net income 83
29

112
Less: Net income attributable to Predecessors —
29

29
Net income attributable to the Partnership 83
—

83
Less: General partner’s interest in net income attributable to the Partnership 26
—

26
Limited partners’ interest in net income attributable to the Partnership $ 57
—

57

Millions of Dollars
Nine Months Ended September 30, 2016
Consolidated Statement of Income Phillips 66
Partners LP
(As previously reported)
Acquired Eagle Assets Predecessor
Consolidated
Results
Revenues and Other Income
Operating revenues—related parties $ 315
219
534
Operating revenues—third parties 6
16
22
Equity in earnings of affiliates 88
—
88
Other income 1
—
1
Total revenues and other income 410
235
645

Costs and Expenses
Operating and maintenance expenses 76
86
162
Depreciation 44
27
71
General and administrative expenses 26
24
50
Taxes other than income taxes 11
13
24
Interest and debt expense 31
—
31
Total costs and expenses 188
150
338
Income before income taxes 222
85
307
Provision for income taxes 1
—
1
Net income 221
85
306
Less: Net income attributable to Predecessors 18
85
103
Net income attributable to the Partnership 203
—
203
Less: General partner’s interest in net income attributable to the Partnership 63
—
63
Limited partners’ interest in net income attributable to the Partnership $ 140
—
140

Millions of Dollars
Nine Months Ended September 30, 2016
Phillips 66
Partners LP
(As previously reported)
Acquired Eagle Assets Predecessor
Consolidated
Results
Cash Flows From Operating Activities
Net income $ 221
85
306
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 44
27
71
Deferred taxes 1
—
1
Adjustment to equity earnings for cash distributions received (4 ) —
(4 )
Deferred revenues and other 9
—
9
Other 4
—
4
Working capital adjustments
Decrease (increase) in accounts receivable (16 ) 1
(15 )
Decrease (increase) in materials and supplies (1 ) —
(1 )
Decrease (increase) in prepaid expenses and other current assets (2 ) —
(2 )
Increase (decrease) in accounts payable 4
3
7
Increase (decrease) in accrued interest (17 ) —
(17 )
Increase (decrease) in deferred revenues 5
—
5
Increase (decrease) in other accruals 3
4
7
Net Cash Provided by Operating Activities 251
120
371

Cash Flows From Investing Activities
Cash capital expenditures and investments (249 ) (72 ) (321 )
Return of investment from equity affiliates 10
—
10
Other (24 ) —
(24 )
Net Cash Used in Investing Activities (263 ) (72 ) (335 )

Cash Flows From Financing Activities
Net contributions from (to) Phillips 66 to (from) Predecessors 89
(48 ) 41
Acquisition of noncontrolling interest in Sweeny Frac LLC (656 ) —
(656 )
Issuance of debt 428
—
428
Repayment of debt (686 ) —
(686 )
Issuance of common units 972
—
972
Quarterly distributions to common unitholders—public (41 ) —
(41 )
Quarterly distributions to common unitholder—Phillips 66 (86 ) —
(86 )
Quarterly distributions to General Partner—Phillips 66 (50 ) —
(50 )
Other cash contributions from Phillips 66 11
—
11
Net Cash Used in Financing Activities (19 ) (48 ) (67 )

Net Change in Cash and Cash Equivalents (31 ) —
(31 )
Cash and cash equivalents at beginning of period 50
—
50
Cash and Cash Equivalents at End of Period $ 19
—
19

Note 5—4—Equity Investments

The following table summarizes the carrying value of our equity ~~investments.~~investments:


			Millions of Dollars
	Percentage Ownership		June 30 2021		December 31 2020

Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (Bakken Pipeline)	25.00	%	$	577	577
Bayou Bridge Pipeline, LLC (Bayou Bridge)	40.00		280		288
DCP Sand Hills Pipeline, LLC (Sand Hills)	33.34		580		582
DCP Southern Hills Pipeline, LLC (Southern Hills)	33.34		214		217
Explorer Pipeline Company (Explorer)	21.94		84		92
Gray Oak Pipeline, LLC	65.00		833		860
Liberty Pipeline LLC (Liberty)*	0		0		241
Paradigm Pipeline LLC (Paradigm)	50.00		139		141
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)	70.00		16		15
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)	25.00		176		167
STACK Pipeline LLC (STACK)	50.00		63		64
Total equity investments			$	2,962	3,244

Millions of Dollars
Percentage Ownership
Carrying Value
September 30
2017
December 31
2016

DCP Sand Hills Pipeline, LLC (Sand Hills) 33.34 % $ 478
445
DCP Southern Hills Pipeline, LLC (Southern Hills) 33.34
208
212
Explorer Pipeline Company (Explorer) 21.94
124
126
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal) 70.00
57
72
Paradigm Pipeline LLC (Paradigm) 50.00
130
117
Bayou Bridge Pipeline, LLC (Bayou Bridge) 40.00
171
115
STACK Pipeline LLC (STACK) 50.00
97
55
Total equity investments $ 1,265
1,142

*In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer.

Earnings (losses) from our equity investments were as follows:


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020	2021	2020

Bakken Pipeline	$	38	30	82	87
Bayou Bridge	10		7	17	17
Sand Hills	33		37	60	78
Southern Hills	12		10	24	21
Explorer	11		4	14	11
Gray Oak Pipeline, LLC	26		14	47	19

Paradigm	6		2	11	6
Phillips 66 Partners Terminal	1		(1)	1	(1)
South Texas Gateway Terminal	5		0	9	0
STACK	0		1	1	2
Total equity in earnings of affiliates	$	142	104	266	240

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Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Sand Hills $ 21
16
58
48
Southern Hills 6
7
20
21
Explorer 7
8
18
17
Phillips 66 Partners Terminal 2
—
5
—
Paradigm (1 ) —
(2 ) —
Bayou Bridge 4
2
8
2
STACK 2
—
4
—
Total equity in earnings of affiliates $ 41
33
111
88
Liberty

~~Note 6—Properties, Plants~~Liberty was a joint venture formed to develop and ~~Equipment~~

~~Our~~construct the Liberty Pipeline system. In the first quarter of 2021, we decided to exit the Liberty Pipeline project, which had previously been deferred due to the challenging business environment created by the COVID-19 pandemic. As a result, we recorded a $198 million impairment to reduce the book value of our investment in ~~PP&E,~~Liberty at March 31, 2021, to our share of the estimated fair value of the joint venture’s pipeline assets and net working capital. The impairment is included in the “Impairments” line item on our consolidated statement of income. This valuation resulted in a Level 3 nonrecurring fair value measurement.

In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer for cash and certain pipeline assets with a value that approximated our book value of $46 million at March 31, 2021.

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

In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North 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 ~~associated accumulated depreciation, was:~~EIS, which is expected to be completed in 2022. In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and in June 2021, dismissed the litigation. It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed.

Summarized financial information for 100% of Dakota Access is as follows:


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020		2021	2020

Revenues	$	198	169		413	427
Income before income taxes	125		94		267	280
Net income	125		94		267	280

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Millions of Dollars
September 30
2017
December 31
2016

Land $ 19
19
Buildings and improvements 87
88
Pipelines and related assets^*
1,352
1,335
Terminals and related assets^*
631
610
Rail racks and related assets^*
137
137
Fractionator and related assets^*
616
615
Caverns and related assets^*
583
569
Construction-in-progress 53
27
Gross PP&E 3,478
3,400
Less: Accumulated depreciation 803
725
Net PP&E $ 2,675
2,675
Gray Oak Pipeline, LLC

*AssetsGray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi and the Sweeny area, including the Phillips 66 Sweeny Refinery, as well as access to the Houston market. We have a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC. In December 2018, a third party exercised its option to acquire a 35% interest in the holding company. Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP at that time. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet. In addition, the premium of $84 million previously paid by the co-venturer in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of income for ~~which we are~~ the ~~lessor.~~

~~Note 7—Debt~~

~~Debt at September~~three and six months ended June 30, ~~2017, and December 31, 2016, was:~~

Millions of Dollars
September 30, 2017
Fair Value Hierarchy Total Fair Value
Balance Sheet
Carrying Value

Level 1
Level 2*
Level 3

2.646% Senior Notes due 2020 $ —
302
—
302
300
3.605% Senior Notes due 2025 —
499
—
499
500
3.550% Senior Notes due 2026 —
490
—
490
500
4.680% Senior Notes due 2045 —
291
—
291
300
4.900% Senior Notes due 2046 —
631
—
631
625
Revolving credit facility at 2.45% at
September 30, 2017
—
87
—
87
87
Total $ —
2,300
—
2,300
2,312
Net unamortized discounts and debt issuance costs (22 )
Total debt

2,290
Short-term debt (17 )
Long-term debt $ 2,273

*Fair value was estimated using observable market prices.

Millions of Dollars
December 31, 2016
Fair Value Hierarchy Total Fair Value
Balance Sheet
Carrying Value

Level 1
Level 2*
Level 3

2.646% Senior Notes due 2020 $ —
298
—
298
300
3.605% Senior Notes due 2025 —
490
—
490
500
3.550% Senior Notes due 2026 —
483
—
483
500
4.680% Senior Notes due 2045 —
277
—
277
300
4.900% Senior Notes due 2046 —
599
—
599
625
Revolving credit facility at 1.98% at December 31, 2016 —
210
—
210
210
Total $ —
2,357
—
2,357
2,435
Net unamortized discounts and debt issuance costs (24 )
Total debt

2,411
Short-term debt (15 )
Long-term debt $ 2,396
*Fair value was estimated using observable market prices.

~~Revolving Credit Facility~~

~~At September~~2020. For the six months ended June 30, ~~2017, and December 31, 2016, we had~~2020, the co-venturer contributed an aggregate of ~~$87~~$61 million ~~and $210 million, respectively, borrowed and outstanding under our $750 million revolving credit facility.~~

~~Note 8—Equity~~

~~ATM Program~~

~~In June 2016, we filed a prospectus supplement~~ to the shelf registration statement for our continuous offering program that became effective with the Securities and Exchange Commission in May 2016, related to the continuous issuance of up to an aggregate of $250 million of common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program, or at-the-market program, is referred to as our ATM Program). We did not issue any common units under the ATM Program during the three months ended September 30, 2017. For the nine months ended September 30, 2017, on a settlement date basis, we issued 3,323,576 common units under our ATM Program, which generated net proceeds of $171 million. For the three and nine months ended September 30, 2016, on a settlement date basis, we issued 83,294 and 346,152 common units, respectively, under our ATM Program, generating net proceeds of $5 million and $19 million, respectively. Since inception through September 30, 2017, we have issued an aggregate of 3,669,728 common units under our ATM Program, generating net proceeds of $190 million, after broker commissions of $2 million. The net proceeds from sales under the ATM Program are used for general partnership purposes, which may include debt repayment, future acquisitions, capital expenditures and additions to working capital.

~~Common Unit Offerings~~

In August 2016, we completed a public offering of 6,000,000 common units representing limited partner interests at a price of $50.22 per common unit. We received proceeds (net of underwriting discounts and commissions) of $299 million from the offering. We utilized the net proceeds to repay the note assumed as part of the Initial Fractionator Acquisition and to repay other short-term borrowings incurredholding company to fund its portion of Gray Oak Pipeline, LLC’s cash calls. We have an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering our ~~acquisition of an additional~~co-venturer’s 35% interest in ~~Explorer and our contribution to form STACK Pipeline.~~ ~~See~~the consolidated holding company.

Note 4—~~Acquisitions for additional information.~~

In May 2016, we completed a public offering, consisting of an aggregate of 12,650,000 common units representing limited partner interests at a price of $52.40 per common unit. We received proceeds (net of underwriting discounts and commissions) of $656 million from the offering. We utilized the net proceeds to partially repay debt assumed as part of the Subsequent Fractionator Acquisition. See Note 4—Acquisitions~~for additional information.~~

~~Note 9—~~5—Net Income Per Limited Partner Unit

~~Net~~We calculate net income attributable to the Partnership per limited partner unit ~~is computed~~ by dividing the limited partners’ interest in net income ~~attributable to the Partnership~~ by the weighted-average number of common units outstanding for the period. ~~The classes of~~After considering the period’s cash distributions declared, the remaining undistributed earnings or excess distributions declared over earnings, if any, are allocated to participating securities in accordance with the contractual terms of our partnership agreement and as ~~of September 30, 2017, included~~prescribed under the two-class method for those periods in which we have participating securities. The earnings amount allocated to the limited partner common unitholders is then adjusted for any premiums paid to repurchase preferred units. Our preferred units ~~general partner units and incentive distribution rights (IDRs). Basic and~~became participating securities effective October 1, 2020. See Note 9—Equityfor additional information on our preferred units.

For the diluted net income per limited partner unit calculation, the preferred units are assumed to be converted at the ~~same because we do~~beginning of the period into common limited partner units on a 1-for-one basis, and the distribution formula for available cash in our partnership agreement is recalculated, using the original available cash amount increased only for the preferred distributions declared which would not have been paid after conversion.Any potentially dilutive ~~instruments outstanding.~~

~~Net income earned by~~securities are excluded from the Partnership is allocated between the limited partners and the General Partner (including the General Partner’s IDRs) in accordance with our partnership agreement. First, earnings are allocated based on actual cash distributions made to our unitholders, including those attributable to the General Partner’s IDRs. To the extent net income attributable to the Partnership exceeds or is less than cash distributions, this difference is allocated based on the unitholders’ respective ownership percentages, after consideration of any priority allocations of earnings.

When our financial statements are retrospectively adjusted after a dropdown transaction, the earnings of the acquired business, prior to the closing of the transaction, are allocated entirely to our General Partner and presented as net income (loss) attributable to Predecessors. Thediluted earnings per unit computation if the effect of our limited partners prior to the close of the transaction do not change as a result of a dropdown transaction. After the closing of a dropdown transaction, the earnings of the acquired business are allocated in accordance with our partnership agreement as previously described.including such securities would be anti-dilutive.

Millions of Dollars
Three Months Ended September 30 Nine Months Ended September 30
2017
2016
2017
2016

Net income attributable to the Partnership $ 99
83
299
203
Less: General partner’s distribution declared (including IDRs)* 43
26
111
63
Limited partners’ distribution declared on common units* 78
56
209
145
Distributions less than (in excess of) net income attributable to the Partnership $ (22 ) 1
(21 ) (5 )


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020		2021	2020

Net income attributable to the Partnership	$	225	255		207	481
Less:
Limited partners’ distributions declared on preferred units*	12		9		24	19
Limited partners’ distributions declared on common units*	199		200		399	399
Distributions less than (more than) net income attributable to the Partnership	$	14	46		(216)	63

*~~Distribution~~Distributions declared are attributable to the indicated periods.

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General Partner (including IDRs)
Limited Partners’ Common Units
Total
Three Months Ended September 30, 2017
Net income attributable to the Partnership (millions):

Distribution declared $ 43
78
121
Distribution in excess of net income attributable to the Partnership —
(22 ) (22 )
Net income attributable to the Partnership $ 43
56
99

Weighted-average units outstanding—basic and diluted 110,505,502

Net income per limited partner unit—basic and diluted (dollars)
$ 0.51

Three Months Ended September 30, 2016
Net income attributable to the Partnership (millions):

Distribution declared $ 26
56
82
Distribution less than net income attributable to the Partnership —
1
1
Net income attributable to the Partnership $ 26
57
83

Weighted-average units outstanding—basic and diluted 100,555,277

Net income per limited partner unit—basic and diluted (dollars)
$ 0.57


	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Three Months Ended June 30, 2021
Net income attributable to the Partnership (millions):
Distributions declared	$	199	12	211
Distributions less than net income attributable to the Partnership	14		0	14
Net income attributable to the Partnership	213		12	225
Premium paid for the repurchase of preferred units	(4)
Net income attributable to the Partnership—basic	209
Dilutive effect of preferred units	0
Net income attributable to the Partnership—diluted	$	209

Weighted-average units outstanding—basic	228,340,146
Dilutive effect of preferred units	0
Weighted-average units outstanding—diluted	228,340,146

Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	0.91
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	0.91


	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Three Months Ended June 30, 2020
Net income attributable to the Partnership (millions):
Distributions declared	$	200	9	209
Distributions less than net income attributable to the Partnership	46		0	46
Net income attributable to the Partnership—basic	246		9	255
Dilutive effect of preferred units	9
Net income attributable to the Partnership—diluted	$	255

Weighted-average units outstanding—basic	228,340,146
Dilutive effect of preferred units	13,819,791
Weighted-average units outstanding—diluted	242,159,937

Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	1.07
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	1.05

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General Partner (including IDRs)
Limited Partners’ Common Units
Total
Nine Months Ended September 30, 2017
Net income attributable to the Partnership (millions):

Distribution declared $ 111
209
320
Distribution less than (in excess of) net income attributable to the Partnership 1
(22 ) (21 )
Net income attributable to the Partnership $ 112
187
299

Weighted-average units outstanding—basic and diluted 109,042,961

Net income per limited partner unit—basic and diluted (dollars)
$ 1.72

Nine Months Ended September 30, 2016
Net income attributable to the Partnership (millions):

Distribution declared $ 63
145
208
Distribution in excess of net income attributable to the Partnership —
(5 ) (5 )
Net income attributable to the Partnership $ 63
140
203

Weighted-average units outstanding—basic and diluted 91,414,459

Net income per limited partner unit—basic and diluted (dollars)
$ 1.53


	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Six Months Ended June 30, 2021
Net income attributable to the Partnership (millions):
Distributions declared	$	399	24	423
Distributions more than net income attributable to the Partnership	(216)		0	(216)
Net income attributable to the Partnership	183		24	207
Premium paid for the repurchase of preferred units	(4)
Net income attributable to the Partnership—basic	179
Dilutive effect of preferred units	0
Net income attributable to the Partnership—diluted	$	179

Weighted-average units outstanding—basic	228,340,146
Dilutive effect of preferred units	0
Weighted-average units outstanding—diluted	228,340,146

Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	0.78
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	0.78


	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Six Months Ended June 30, 2020
Net income attributable to the Partnership (millions):
Distributions declared	$	399	19	418
Distributions less than net income attributable to the Partnership	63		0	63
Net income attributable to the Partnership—basic	462		19	481
Dilutive effect of preferred units	19
Net income attributable to the Partnership—diluted	$	481

Weighted-average units outstanding—basic	228,326,203
Dilutive effect of preferred units	13,819,791
Weighted-average units outstanding—diluted	242,145,994

Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	2.02
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	1.99

On ~~October 18, 2017,~~July 20, 2021, the Board of Directors of our General Partner declared a quarterly cash distribution of ~~$0.646~~$0.875 per ~~limited partner~~common unit, which ~~combined with distributions to our General Partner,~~ will result in a total ~~distributions~~distribution of ~~$121~~$199 million attributable to the ~~third~~second quarter of ~~2017.~~2021. This distribution is payable ~~November~~on August 13, ~~2017,~~2021, to common unitholders of record as of ~~October~~July 30, 2021.

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Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders at the record date are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders. Preferred unitholders will receive $12 million of distributions attributable to the second quarter of 2021. This distribution is payable August 13, 2021, to preferred unitholders of record as of July 30, 2021.

Note 6—Properties, Plants and Equipment

Our investment in properties, plants and equipment (PP&E), with the associated accumulated depreciation, was:


	Millions of Dollars
	June 30 2021		December 31 2020

Land	$	19	19
Buildings and improvements	117		115
Pipelines and related assets*	1,539		1,518
Terminals and related assets*	851		847
Rail racks and related assets*	137		137
Processing and related assets*	1,064		1,063
Caverns and related assets*	733		732
Construction-in-progress	445		394
Gross PP&E	4,905		4,825
Accumulated depreciation	(1,252)		(1,186)
Net PP&E	$	3,653	3,639
*Assets for which we are the lessor.

Note 7—Debt


	Millions of Dollars
	June 30 2021		December 31 2020

2.450% Senior Notes due December 2024	$	300	300
3.605% Senior Notes due February 2025	500		500
3.550% Senior Notes due October 2026	500		500
3.750% Senior Notes due March 2028	500		500
3.150% Senior Notes due December 2029	600		600
4.680% Senior Notes due February 2045	450		450
4.900% Senior Notes due October 2046	625		625

Tax-exempt bonds due April 2021 at weighted-average rate of 0.360%	0		50
Term loan due April 2022 at rate of 0.955%	450		0
Revolving credit facility borrowings due July 2021 at rate of 1.350% at June 30, 2021 and weighted-average rate of 1.397% at December 31, 2020	15		415
Debt at face value	3,940		3,940
Net unamortized discounts and debt issuance costs	(30)		(31)
Total debt	3,910		3,909
Short-term debt	(465)		(465)
Long-term debt	$	3,445	3,444

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The fair value of our fixed-rate and floating-rate debt is estimated based on observable market prices and is classified as Level 2 of the fair value hierarchy. The fair value of our fixed-rate debt was $3,827 million and $3,752 million at June 30, 2021, and December 31, ~~2017.~~2020, respectively. The fair value of our floating-rate debt approximated carrying value of $465 million at June 30, 2021 and December 31, 2020.

At June 30, 2021, and December 31, 2020, borrowings of $15 million and $415 million, respectively, were outstanding under our $750 million revolving credit facility. At both June 30, 2021, and December 31, 2020, $1 million in letters of credit had been issued that were supported by this facility.

Term Loan Agreement

On April 6, 2021, we 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 our $750 million revolving credit facility.

Debt Repayment

On April 1, 2021, we repaid the 2 remaining $25 million tranches of tax-exempt bonds due April 2021, totaling $50 million.

Note ~~10—~~8—Contingencies

From time to time, lawsuits involving a variety of claims that arise in the ordinary course of business are filed against 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 sites. We regularly assess the need for accounting 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 ~~less than certain.~~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 any contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that

of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to ~~extensive~~ federal, state and local environmental laws and regulations. We record accruals for contingent environmental liabilities based on management’s best estimates, using all information that is available at the time. We measure estimates and base liabilities on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. Environmental Protection Agency or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.

At ~~both September~~June 30, ~~2017,~~2021, and December 31, ~~2016,~~2020, our total environmental ~~accrual was $2 million.~~ accruals were not material.

In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

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Legal Proceedings

Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. The process facilitates the early evaluation and quantification of potential exposures in individual cases and enables 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, Phillips 66’s legal organization regularly assesses the adequacy of current accruals and ~~recommends~~determines if adjustment of existing accruals, or establishment of new accruals, is required. As of ~~September~~June 30, ~~2017,~~2021, and December 31, ~~2016,~~2020, we did not have any material accrued contingent liabilities associated with litigation matters.

Indemnification and Excluded Liabilities

Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize ~~a non-cash expense~~noncash expenses and an associated ~~non-cash~~noncash capital ~~contribution~~contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.

~~We have assumed,~~

Note 9—Equity

On June 29, 2021, we repurchased 368,528 of the outstanding Series A Perpetual Convertible Preferred Units with an aggregate carrying value of $20 million for $24 million in cash, or $65.124 per unit. Upon the repurchase, these preferred units were canceled and ~~have agreed~~are no longer outstanding. At June 30, 2021, there were 13,451,263 preferred units outstanding.

Beginning with the distribution to ~~pay, discharge and perform as and when due, all liabilities arising out of or~~preferred unitholders attributable to the ~~ownership or operation~~fourth quarter of 2020, the ~~assets, or other activities occurring in connection with and attributable~~preferred unitholders at the record date are entitled to receive cumulative quarterly distributions equal to the ~~ownership~~greater of $0.678375 per unit, or ~~operation of~~ the ~~assets, from and after the effective date of each acquisition.~~

~~Note 11—Cash Flow Information~~

~~2016 Subsequent Fractionator Acquisition~~

~~The Subsequent Fractionator Acquisition had both cash and noncash elements. The historical book value of the net assets acquired was $871 million. Of this~~per-unit distribution amount $656 million was a financing cash outflow, representing the acquisition of the noncontrolling interest in Sweeny Frac LLC, through the repayment of a portion of the debt assumed in the transaction. The remaining debt financing balance of $19 million represented a noncash investing and financing activity. The remaining $196 million of book value was attributedpaid to the common ~~and general partner~~unitholders as if such preferred units ~~issued (a noncash investing and financing activity).~~

~~2016 Initial Fractionator Acquisition~~

had converted into common units immediately prior to the record date. The ~~Initial Fractionator Acquisition was a noncash transaction. The historical book value~~holders of the ~~net assets of our 25 percent interest acquired was $283 million. Of this amount, $212 million was attributed~~preferred units may convert their preferred units into common units, on a 1-for-one basis, at any time, in full or in part, subject to ~~the note payable assumed (a noncash investing~~minimum conversion amounts and ~~financing activity). The remaining $71 million was attributed to the common and general partner units issued (a noncash investing and financing activity).~~conditions.

~~Capital Expenditures~~

~~Our capital expenditures and investments consisted of:~~

Millions of Dollars
Nine Months Ended
September 30
2017
2016*
Capital Expenditures and Investments
Cash capital expenditures and investments $ 227
321
Change in capital expenditure accruals (2 ) (23 )
Total capital expenditures and investments $ 225
298

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Millions of Dollars

Nine Months Ended
September 30

2017
2016
Capital Expenditures and Investments

Capital expenditures and investments attributable to the Partnership $ 225
207
Capital expenditures attributable to Predecessors* —
91
Total capital expenditures and investments* $ 225
298

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Millions of Dollars
Nine Months Ended
September 30
2017
2016
Other Noncash Investing and Financing Activities
Certain liabilities of acquired assets retained by Phillips 66⁽¹⁾
$ —
45

⁽¹⁾~~Certain liabilities of assets acquired from Phillips 66 were retained by Phillips 66, pursuant to the terms of various agreements under which we acquired those assets. See~~ Note 10—~~Contingencies for additional information on excluded liabilities associated with acquisitions from Phillips 66.~~

~~Note 12—~~Related Party Transactions

Commercial Agreements

We have entered into ~~multiple~~long-term, fee-based commercial agreements with Phillips 66 including transportation services agreements, terminal services agreements, storage services agreements, stevedoring services agreements, a fractionation service agreement, a tolling services agreement, and rail terminal services agreements. Under these long-term, fee-based agreements, weto provide transportation, terminaling, storage, stevedoring, fractionation, processing, and rail terminal ~~services to Phillips 66, and~~services. Under these agreements, Phillips 66 commits to provide us with minimum ~~quarterly~~transportation, throughput or storage volumes, ~~of crude oil, NGL, feedstock, and refined petroleum products~~ or minimum monthly service fees. ~~Under our transportation, processing, and terminaling services agreements, if~~If Phillips 66 ~~fails to transport, throughput or store~~does not meet its minimum ~~throughput~~ volume ~~during any quarter, then~~commitments under an agreement, Phillips 66 ~~will pay~~pays us a deficiency payment based on the calculation described in the agreement.

Amended and Restated Operational Services Agreement

Under our amended and restated operational services agreement, we reimburse Phillips 66 for ~~providing~~ certain operational services ~~to us~~provided in support of our pipelines, ~~and~~ terminaling, processing, and storage facilities. These services include routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and Phillips 66 may mutually agree upon from time to time.

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Amended Omnibus Agreement

The amended omnibus agreement addresses our payment of an operating and administrative support fee and our obligation to reimburse Phillips 66 for all other direct or allocated costs and expenses incurred by Phillips 66 in providing general and administrative services. Additionally, the omnibus agreement addresses Phillips 66’s indemnification to us and our indemnification to Phillips 66 for certain environmental and other liabilities. Further, it addresses the granting of a license from Phillips 66 to us with respect to the use of certain Phillips 66 trademarks.

The operational and administrative support fee is for the provision of certain services, including: logistical services; asset oversight, such as operational management and supervision; corporate engineering services, including asset integrity and regulatory services; business development services; executive services; financial and administrative services (including treasury and accounting); information technology; legal services; corporate health, safety and environmental services; facility services; human resources services; procurement services; investor relations; tax matters; and public company reporting services. We pay Phillips 66 an operational and administrative support fee under the terms of our amended omnibus agreement in the amount of $8 million per month.

We also reimburse Phillips 66 for all other direct or allocated costs incurred on behalf of us, pursuant to the terms of our amended omnibus agreement. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the functional nature of the services performed for our operations. Under our amended and restated operational services agreement, we reimburse Phillips 66 for the provision of certain operational services in support of our operating assets. Additionally, we pay Phillips 66 for insurance services provided to us, and recoveries under these policies are recorded as an offset to our expenses. Operating and maintenance expenses also include volumetric gains and losses associated with volumes transported by Phillips 66.

Tax Sharing Agreement

~~We have entered into a~~Under our tax sharing agreement, ~~with Phillips 66 pursuant to which~~ we reimburse Phillips 66 for our share of state and local income and other taxes incurred by Phillips 66 due to our results of operations being included in a combined or consolidated tax return filed by Phillips 66. Any reimbursement is limited to the tax that we (and our subsidiaries) would have paid had we not been included in a combined group with Phillips 66. Phillips 66 may use its tax attributes to cause its combined or consolidated group to owe no tax; however, we would nevertheless reimburse Phillips 66 for the tax we would have owed, even though Phillips 66 had no cash expense for that period.

Related Party Transactions

Significant related party transactions included in ~~operating~~our costs and ~~maintenance~~ expenses ~~general and administrative expenses and interest and debt expense~~ were:


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020		2021	2020

Operating and maintenance expenses	$	47	42		105	90
General and administrative expenses	16		21		31	38

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016*
2017
2016*

Operating and maintenance expenses $ 31
28
88
79
General and administrative expenses 15
14
44
41
Interest and debt expense —
1
—
3
Total $ 46
43
132
123

*Prior-period financial information has been retrospectively adjusted for acquisitionsTable of ~~businesses under common control.~~Contents

We pay Phillips 66 a monthly operational and administrative support fee under the terms of our amended omnibus agreement in the amount of $7 million. On October 6, 2017, in connection with the transaction described in Note 14—Subsequent Events, the omnibus agreement was amended and our monthly operational and administrative support fee was increased to $8 million prospectively. The operational and administrative support fee is for the provision of certain services, including: logistical services; asset oversight, such as operational management and supervision; corporate engineering services, including asset integrity and regulatory services; business development services; executive services; financial and administrative services (including treasury and accounting); information technology; legal services; corporate health, safety and environmental services; facility services; human resources services; procurement services; investor relations; tax matters; and public company reporting services. We also reimburse Phillips 66 for all other direct or allocated costs incurred on behalf of us, pursuant to the terms of our amended omnibus agreement. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the functional nature of the services performed for our operations. Under our amended operational services agreement, we reimburse Phillips 66 for the provision of certain operational services to us in support of our pipeline, rail rack, fractionator, processing, terminaling, and storage facilities. Additionally, we pay Phillips 66 for insurance services provided to us. Operating and maintenance expenses also include volumetric gain/loss associated with volumes transported by Phillips 66.

During the third quarter of 2016, we paid $24 million to Phillips 66 to assume Phillips 66’s rights and obligations under an agreement to acquire the River Parish NGL System in southeast Louisiana. The payment to Phillips 66 is reflected as an “other” investing cash outflow in the consolidated statement of cash flows in 2016.

Other related party balances were included in the following line items on our consolidated balance sheet, ~~consisted of the following,~~ all of which were related to commercial agreements with Phillips 66:


	Millions of Dollars
	June 30 2021		December 31 2020

Prepaid expenses and other current assets	$	8	7
Other assets	46		47
Deferred revenues	34		27
Other current liabilities	1		1
Other liabilities	62		64

Millions of Dollars
September 30
2017
December 31
2016

Deferred rentals and other $ 5
5
Deferred revenues 24
14
Deferred revenues and other 18
19

~~Note 13—New Accounting Standards~~

Equity Affiliate Arrangements

In ~~January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of~~March 2019, we and our co-venturers in Dakota Access provided a ~~Business,” which clarifies the definition of~~CECU in conjunction with a ~~business with the objective of adding guidance to assist in evaluating whether transactions should be accounted~~senior unsecured notes offering. See Note 4—Equity Investments, for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction is not considered an acquisition of a business. If the screen is not met, then the amendment requires that, to be considered a business, the operation must include, at a minimum, an inputadditional information.

Note 11—Cash Flow Information

Capital Expenditures and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendment should be applied prospectively,Investments

Our capital expenditures and ~~no disclosures~~investments consisted of:


	Millions of Dollars
	Six Months Ended June 30
	2021		2020

Cash capital expenditures and investments	$	141	601
Change in capital expenditure accruals	(22)		10
Total capital expenditures and investments	$	119	611

Distributions from Equity Affiliates

Distributions received from our equity affiliates are ~~required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01.~~

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under current accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant and equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases—financing and operating—which are substantially similar to capital and operating leases under current guidance. Under the new standard, assets and liabilities arising from operating leases will require recognitionclassified on ~~the balance sheet. The effect of all leases in the statement of comprehensive income and the~~our consolidated statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply its provisions to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements. As part of our assessment work-to-date, we have formed an implementation team, commenced identification of our lease population and are evaluating lease software packages.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” to meet its objective of providing more decision-useful information about financial instruments. The majority of this ASU’s provisions amend only the presentation or disclosures of financial instruments; however, one provision affects net income. Equity investments carried under the cost method or lower of cost or fair value method of accounting, in accordance with current GAAP, will have to be carried at fair value upon adoption of ASU No. 2016-01, with changes in fair value recorded in net income. For equity investments that do not have readily determinable fair values, a company may elect to carry such investments at cost less impairments, if any, adjusted up or down for price changes in similar financial instruments issued by the investee, when and if observed. Public business entities should apply the guidance in ASU No. 2016-01 for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption prohibited. We are currently evaluating the provisions of ASU No. 2016-01. Our initial review indicates that ASU No. 2016-01 will have a limited impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU and other related updates issued are intended to improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets and expand disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. As part of our assessment work-to-date, we have formed an implementation team, completed training on the new ASU’s revenue recognition model and are continuing our contract review and documentation. Our expectation is to adopt the standard on January 1, 2018, using the modified retrospective application. Our evaluation of the new ASU is ongoing, which includes understanding the impact of adoption on earnings from equity method investments and revenue generated by lease arrangements. Based on our analysis to-date, we have not identified any material impact on our financial statements, other than disclosure.

~~Note 14— Subsequent Events~~

~~Bakken Pipeline/MSLP Acquisition~~

On September 19, 2017, we entered into a CCAA with subsidiaries of Phillips 66 for us to acquire an indirect 25 percent interest in each of Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (together, Dakota/ETCO) and a direct 100 percent interest in Merey Sweeny, L.P. (MSLP and the acquisitions pursuant to the ~~CCAA, collectively, the Bakken Pipeline/MSLP Acquisition).~~

~~The assets owned by Dakota/ETCO~~cumulative earnings approach. Under this approach, a distribution received from an equity affiliate is considered a return on investment and ~~MSLP are described below:~~

Dakota/ETCO owns the Bakken Pipeline, which includes 1,926 combined pipeline miles which has 520,000 barrels per day (BPD) of crude oil capacity expandable to 570,000 BPD. There are receipt stations in North Dakota to access Bakken and Three Forks production, a delivery and receipt point in Patoka, Illinois, and delivery points in Nederland, Texas, including at the Phillips 66 Beaumont Terminal. The pipeline, which commenced commercial operations on June 1, 2017, is ~~supported by long-term, fee-based contracts.~~

MSLP owns a 125,000 BPD capacity vacuum distillation unit and a 70,000 BPD capacity delayed coker unit. MSLP processes residue from heavy sour crude oil into liquid products and fuel-grade petroleum coke at the Phillips 66 Sweeny Refinery in Old Ocean, Texas.

~~In connection with the closing of the acquisition, MSLP and Phillips 66 entered into~~classified as an ~~amended and restated tolling services agreement, effective October 1, 2017, with a 15-year term that includes a base throughput fee and a minimum volume commitment from Phillips 66.~~

~~The Bakken Pipeline/MSLP Acquisition closed on October 6, 2017. We paid Phillips 66 total consideration of $1.65 billion, consisting of $372 million in~~operating cash the assumption of $588 million of promissory notes payable to Phillips 66 and a $450 million term loan under which Phillips 66 was the obligor, and the issuance of 5,005,778 newly issued units, which were allocated as 4,713,113 common units to P66 PDI and 292,665 general partner units to our General Partner to maintain its 2 percent general partner interest. After the closing of the Bakken Pipeline/MSLP Acquisition, we repaid the $588 million of promissory notes and the $450 million term loan using proceedsinflow unless cumulative distributions received from the ~~private placement~~equity affiliate exceed cumulative equity in earnings. If cumulative distributions from an equity affiliate exceed cumulative equity in earnings, the excess is considered a return of investment and ~~debt issuances described below.~~ ~~The Bakken Pipeline/MSLP Acquisition increased~~is classified as an investing cash inflow on our ~~total equity investments and net PP&E by approximately$610 million and $220 million, respectively.~~consolidated statement of cash flows.

~~Debt and Equity Issuances~~

~~Private Placement~~

Table of ~~Preferred and Common Units.~~ ~~In part to fund the cash portion of the Bakken Pipeline/MSLP Acquisition consideration, on October 6, 2017, we closed on a private placement and issued the following:~~Contents

~~13,819,791 perpetual convertible preferred units generating gross proceeds of $750 million.~~

~~6,304,204 common units generating gross proceeds of $300 million.~~

~~Together, the units issued in the private placement resulted in net proceeds, after deducting offering and transaction expenses, of approximately $1.03 billion.~~

We privately placed approximately 13.8 million Series A Perpetual Convertible Preferred Units (Preferred Units) representing limited partner interests for a price of $54.27 per unit. The Preferred Units rank senior to all common units with respect to distributions and rights upon liquidation. The holders of the Preferred Units are entitled to receive cumulative quarterly distributions equal to $0.678375 per unit, commencing for the quarter ended December 31, 2017, with a prorated amount from the date of issuance. Following the third anniversary of the issuance of the Preferred Units, the holders of the Preferred Units will receive as a quarterly distribution the greater of $0.678375 per unit or the amount of per-unit distributions paid to common unitholders as if such Preferred Units had converted into common units immediately prior to the record date.

The holders of the Preferred Units may convert their Preferred Units into common units, on a one-for-one basis, at any time after the second anniversary of the issuance date, in full or in part, subject to minimum conversion amounts and conditions. After the third anniversary of the issuance date, we may convert the Preferred Units into common units at any time, in whole or in part, subject to certain minimum conversion amounts and conditions, if the arithmetic average of the volume-weighted trading price of our common units is greater than $73.2645 per unit for the 20 day trading period immediately preceding the conversion notice date and the average trading volume of the common units is at least 100,000 for the preceding 20 trading days. The conversion rate for the Preferred Units shall be the quotient of (a) the sum of (i) $54.27, plus (ii) any unpaid cash distributions on the applicable Preferred Unit, divided by (b) $54.27. The holders of the Preferred Units are entitled to vote on an as-converted basis with the common unitholders and have certain other class voting rights with respect to any amendment to our partnership agreement that would adversely affect any rights, preferences or privileges of the Preferred Units. In addition, upon certain events involving a change in control, the holders of Preferred Units may elect, among other potential elections, to convert their Preferred Units to common units at the then change of control conversion rate.

~~Debt Issuances.~~ On October 13, 2017, we closed on a public debt offering and issued $500 million aggregate principal amount of 3.750% Senior Notes due 2028 and an additional $150 million aggregate principal amount of our outstanding 4.680% Senior Notes due 2045. Interest on the Senior Notes due 2028 is payable semiannually in arrears on March 1 and September 1 of each year, commencing on March 1, 2018. The Senior Notes due 2045 are an additional issuance of our existing Senior Notes due 2045, and interest is payable semiannually in arrears on February 15 and August 15 of each year. The proceeds from the public debt offering have been applied to repay the remaining balances on the promissory notes and term loan assumed in the Bakken Pipeline/MSLP Acquisition and also will be used for general partnership purposes, including funding of future acquisitions and organic projects and the repayment of outstanding indebtedness under our revolving credit facility.


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

Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners,” “the Partnership,” “us,” “our,” ~~“we”~~“we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries. References to Phillips 66 may refer to Phillips 66 and/or its subsidiaries, depending on the context. References to our “General Partner” refer to Phillips 66 Partners GP LLC, and references to ~~Phillips~~“Phillips 66 ~~PDI~~PDI” refer to Phillips 66 Project Development Inc., the Phillips 66 subsidiary that holds a limited partner interest in ~~us.~~us and wholly owns our General Partner.

Management’s Discussion and Analysis is the Partnership’s analysis of its financial performance, financial condition, and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes ~~appearing~~thereto included elsewhere in this report. It contains forward-looking statements including, without limitation, statements relating to the Partnership’s plans, strategies, objectives, expectations and intentions. 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 normally identify forward-looking ~~statements.~~statements, but the absence of these words does not mean that a statement is not forward-looking. The Partnership 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 Partnership’s disclosures under the heading: “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.”

EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT ~~AND EXECUTIVE OVERVIEW~~

Partnership Overview

We are a ~~growth-oriented~~ master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets. Our operations consist of crude oil, refined petroleum products and natural gas liquids (NGL) ~~pipelines and terminals, and other transportation and midstream assets. Our common units trade on the New York Stock Exchange under the symbol PSXP.~~

~~Our assets consist of crude oil, refined petroleum products and NGL~~ transportation, terminaling, processing and storage ~~systems, as well as an NGL fractionator.~~assets. We conduct our operations through both wholly owned and ~~joint-venture~~joint venture operations. The majority of our wholly owned assets are associated with, and are integral to the operation of, nine of Phillips 66’s owned or ~~joint-venture~~joint venture refineries.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, ~~terminaling,~~ storage and ~~NGL~~ fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling ~~NGL,~~crude oil, refined petroleum products and crude oil. Since we do not own any of the NGL, crude oil and refined petroleum products we handle and do not engage in the trading of NGL, crude oil and refined petroleum products, we have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.NGL.

~~Basis of Presentation~~

~~We have acquired assets from Phillips 66 that were considered transfers of businesses between entities under~~Our common control. This required the transactions to be accounted for as if the transfers had occurred at the beginning of the transfer period, with prior periods retrospectively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes have been retrospectively adjusted to include the historical results and financial position of these acquired businesses prior to the effective date of each acquisition. We refer to these pre-acquisition operations as those of our “Predecessors.”

~~See the “Basis of Presentation” section of Note 1—Business and Basis of Presentation, in the Notes to Consolidated Financial Statements, for additional information~~units trade on the ~~content and comparability of our historical financial statements.~~New York Stock Exchange under the symbol PSXP.

How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics to analyze our performance, including: (1) volumes ~~handled (including pipeline throughput, terminaling throughput and storage volumes);~~handled; (2) operating and maintenance expenses; (3) net income ~~(loss)~~ before net interest expense, income taxes, depreciation and amortization (EBITDA); (4) adjusted EBITDA; and (5) distributable cash flow.

Volumes Handled

The amount of revenue we generate primarily depends on the volumes of crude oil, refined petroleum products and NGL that we handle in our pipeline, terminal, rail rack, processing, storage and ~~NGL~~ fractionator systems. In addition, our equity affiliates generate revenue from transporting and terminaling ~~NGL,~~ crude oil, ~~and~~ refined petroleum ~~products.~~products and NGL. These volumes are primarily affected by the supply of, and demand for, ~~NGL,~~ crude oil, ~~and~~ refined petroleum products and NGL in the markets served directly or indirectly by our assets, as well as the operational status of the refineries served by our assets. Phillips 66 has committed to minimum throughput volumes under many of our commercial agreements.

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Operating and Maintenance Expenses

Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses primarily consist of labor expenses (including contractor services), utility costs, and repair and maintenance expenses. ~~These~~Operating and maintenance expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities, particularly maintenance activities, performed during the period. Our processing assets are periodically subject to major maintenance, or turnaround activities, which can significantly increase operating and maintenance expenses in a given year. Although we seek to manage our maintenance expenditures on our facilities to avoid significant variability in our quarterly cash flows, we balance this approach with our high standards of safety and environmental stewardship, such that critical maintenance is regularly performed.

Our operating and maintenance expenses are also affected by volumetric gains/losses resulting from variances in meter readings and other measurement methods, as well as volume fluctuations due to pressure and temperature changes. Under certain commercial agreements with Phillips 66, the value of any ~~NGL,~~ crude oil, or refined petroleum product and NGL volumetric ~~gain/loss is~~gains and losses are determined by reference to the monthly average reference price for the applicable commodity. Any ~~gains and~~ gains/losses under these provisions decrease or increase, respectively, our operating and maintenance expenses in the period in which they are realized. These contractual volumetric gain/loss provisions could increase variability in our operating and maintenance expenses.

EBITDA, Adjusted EBITDA and Distributable Cash Flow

We define EBITDA as net income ~~(loss)~~ plus net interest expense, income taxes, depreciation and ~~amortization attributable to both the Partnership and our Predecessors.~~amortization.

Adjusted EBITDA is ~~the~~ EBITDA ~~directly~~ attributable to the Partnership after deducting the adjusted EBITDA attributable to ~~our Predecessors,~~noncontrolling interest, further adjusted for:

•The ~~difference between cash distributions received~~proportional share of equity affiliates’ net interest expense, income taxes, depreciation and ~~equity earnings from our affiliates.~~amortization, and impairments.

•Transaction costs associated with acquisitions.

•Certain other noncash items, including ~~expenses indemnified by Phillips 66.~~gains and losses on asset sales and asset impairments.

Distributable cash flow is defined as adjusted EBITDA less (i) equity affiliate distributions less than proportional adjusted EBITDA, (ii) maintenance capital expenditures, (iii) net interest expense, ~~maintenance capital expenditures and~~(iv) income taxes paid and (v) preferred unit distributions, plus adjustments for deferred revenue ~~impacts and prefunded maintenance capital expenditures.~~impacts.

EBITDA, adjusted EBITDA, and distributable cash flow are not presentations made in accordance with ~~accounting principles~~ generally accepted ~~(GAAP)~~accounting principles in the United ~~States.~~States (GAAP). EBITDA, adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management believes external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may find useful to assess:

•Our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA and adjusted EBITDA, financing methods.

•The ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders.

•Our ability to incur and service debt and fund capital expenditures.

•The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

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The GAAP performance measure most directly comparable to EBITDA and adjusted EBITDA is net income. The GAAP liquidity measure most directly comparable to EBITDA and distributable cash flow is net cash provided by operating activities. These non-GAAP financial measures should not be considered alternatives to GAAP net income or net cash provided by operating activities. They have important limitations as analytical tools because they exclude some ~~but not all~~ items that affect net income and net cash provided by operating activities. Additionally, because EBITDA, adjusted EBITDA, and distributable cash flow may be defined differently by other companies in our industry, our definition of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Business Environment

~~Since we~~We do not own any of the ~~NGL,~~ crude oil, ~~and~~ refined petroleum products and NGL we handle and do not engage in the trading of ~~NGL, crude oil~~those commodities, and ~~refined petroleum products, we~~therefore have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.

Our throughput volumes primarily depend on the volume of crude oil processed and refined petroleum products produced at Phillips 66’s owned or operated refineries with which our assets are ~~integrated, which in turn~~integrated. These volumes are primarily dependent on Phillips 66’s refining margins and maintenance schedules. Refining margins depend on the ~~cost~~price of crude oil or other feedstocks and the price of refined petroleum products. These prices are affected by numerous factors beyond our or Phillips 66’s control, including the domestic and global supply of and demand for crude oil and refined petroleum products. Throughput volumes of our equity affiliates primarily depend on upstream drilling activities, refinery performance and product supply and demand.

The Coronavirus Disease 2019 (COVID-19) pandemic continues to impact global economic activity. Our results in the second quarter of 2021 reflect the gradual recovery of demand for refined petroleum products following the administration of COVID-19 vaccines and the easing of pandemic restrictions since the beginning of 2021. However, the adverse impacts of the COVID-19 pandemic may continue in the near term, and the depth and duration of the resulting economic consequences remain uncertain. We continuously monitor our asset and investment portfolio for impairments in this challenging business environment.

While we believe we and the majority of our joint ventures have substantially mitigated our indirect exposure to commodity price fluctuations through the minimum volume commitments included in our commercial ~~agreements with Phillips 66 during the respective terms of those~~ agreements, our ability to execute our ~~growth~~ strategy ~~in our areas of operation~~ will depend, in part, on the availability of attractively priced crude oil in the areas served by our crude oil pipelines and rail racks, demand for refined petroleum products in the markets served by our refined petroleum product pipelines and terminals, and the general demand for midstream services, including NGL transportation and fractionation.

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RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the ~~three-~~three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~,2021, is based on a comparison with the ~~respective~~ corresponding ~~periods~~period of ~~2016.~~2020.


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2021		2020		2021	2020
Revenues and Other Income
Operating revenues—related parties	$	274	236		519	494
Operating revenues—third parties	6		5		13	14
Equity in earnings of affiliates	142		104		266	240
Gain from equity interest transfer	—		84		—	84
Other income	1		1		1	2
Total revenues and other income	423		430		799	834

Costs and Expenses
Operating and maintenance expenses	93		84		188	172
Depreciation	34		31		68	61
Impairments	—		—		198	—
General and administrative expenses	18		17		35	34
Taxes other than income taxes	11		10		21	21
Interest and debt expense	32		28		65	57
Other expenses	—		5		—	7
Total costs and expenses	188		175		575	352
Income before income taxes	235		255		224	482
Income tax expense	1		—		1	1
Net Income	234		255		223	481
Less: Net income attributable to noncontrolling interest	9		—		16	—
Net Income Attributable to the Partnership	225		255		207	481
Less: Preferred unitholders’ interest in net income attributable to the Partnership	12		9		24	19
Limited Partners’ Interest in Net Income Attributable to the Partnership	$	213	246		183	462

Net Cash Provided by Operating Activities	$	286	215		513	489

Adjusted EBITDA	$	337	269		626	590

Distributable Cash Flow	$	267	218		500	487

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Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016*
2017
2016*
Revenues and Other Income
Operating revenues—related parties $ 193
181
563
534
Operating revenues—third parties 11
7
32
22
Equity in earnings of affiliates 41
33
111
88
Other income —
1
7
1
Total revenues and other income 245
222
713
645

Costs and Expenses
Operating and maintenance expenses 69
54
188
162
Depreciation 30
25
82
71
General and administrative expenses 16
17
48
50
Taxes other than income taxes 7
4
23
24
Interest and debt expense 23
10
71
31
Other expenses 1
—
1
—
Total costs and expenses 146
110
413
338
Income before income taxes 99
112
300
307
Provision for income taxes —
—
1
1
Net income 99
112
299
306
Less: Net income attributable to Predecessors —
29
—
103
Net income attributable to the Partnership 99
83
299
203
Less: General partner’s interest in net income attributable to the Partnership 43
26
112
63
Limited partners’ interest in net income attributable to the Partnership $ 56
57
187
140

Net cash provided by operating activities $ 152
128
422
371

Adjusted EBITDA $ 168
111
493
282

Distributable cash flow $ 136
102
400
250


	Three Months Ended June 30			Six Months Ended June 30
	2021		2020		2021	2020
Wholly Owned Operating Data
Pipelines
Pipeline revenues (millions of dollars)	$	121	97		225	208
Pipeline volumes(1) (thousands of barrels daily)
Crude oil	957		806		877	873
Refined petroleum products and NGL	1,029		825		920	846
Total	1,986		1,631		1,797	1,719

Average pipeline revenue per barrel (dollars)	$	0.66	0.65		0.68	0.66

Terminals
Terminal revenues (millions of dollars)	$	43	33		82	76
Terminal throughput (thousands of barrels daily)
Crude oil(2)	397		380		386	420
Refined petroleum products	827		690		743	719
Total	1,224		1,070		1,129	1,139

Average terminaling revenue per barrel (dollars)	$	0.38	0.33		0.39	0.36

Storage, processing and other revenues (millions of dollars)	$	116	111		225	224
Total Operating Revenues (millions of dollars)	$	280	241		532	508

Joint Venture Operating Data(3)
Crude oil, refined petroleum products and NGL (thousands of barrels daily)	1,327		942		1,190	890

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016
Thousands of Barrels Daily
Pipeline, Terminal and Storage Volumes
Pipelines⁽¹⁾

Pipeline throughput volumes
Wholly Owned Pipelines
Crude oil* 1,015
981
965
1,010
Refined products and NGL* 920
855
944
836
Total 1,935
1,836
1,909
1,846

Select Joint Venture Pipelines⁽²⁾

NGL 387
346
371
333

Terminals
Terminal throughput and storage volumes⁽³⁾

Crude oil*⁽⁴⁾
586
541
522
534
Refined products and NGL* 828
822
855
809
Total 1,414
1,363
1,377
1,343

Revenue Per Barrel (dollars)

Average pipeline revenue per barrel⁽⁵⁾
$ 0.63
0.59
0.62
0.60
Average terminaling and storage revenue per barrel 0.41
0.41
0.42
0.41

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

⁽¹⁾Represents the sum of volumes transported through each separately tariffed pipeline segment.

⁽²⁾ ~~Total pipeline system throughput volumes for the Sand Hills and Southern Hills pipelines (100 percent basis) per day for each period presented.~~

⁽³⁾ ~~Terminal throughput and storage volumes include leased capacity converted to a MBD-equivalent based on capacity divided by days in the period.~~

⁽⁴⁾~~Crude oil terminals include~~ Bayway and Ferndale rail rack ~~volumes.~~volumes included in crude oil terminals.

⁽⁵⁾~~Excludes~~(3) Proportional share of total pipeline and terminal volumes of joint ventures consistent with recognized equity in earnings of affiliates.

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The following tables present reconciliations of EBITDA and adjusted EBITDA to net income, and EBITDA and distributable cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.


							Millions of Dollars
	Millions of Dollars						Three Months Ended June 30			Six Months Ended June 30
	Three Months Ended September 30			Nine Months Ended September 30			2021		2020		2021	2020
	2017		2016*	2017	2016*
Reconciliation to Net Income
Net income	$	99	112	299	306
Reconciliation to Net Income Attributable to the Partnership						Reconciliation to Net Income Attributable to the Partnership
Net Income Attributable to the Partnership						Net Income Attributable to the Partnership	$	225	255		207	481
Plus:						Plus:
Net income attributable to noncontrolling interest						Net income attributable to noncontrolling interest	9		—		16	—
Net Income						Net Income	234		255		223	481
Plus:						Plus:
Depreciation	30		25	82	71	Depreciation	34		31		68	61
Net interest expense	23		10	71	31	Net interest expense	32		29		65	57
Provision for income taxes	—		—	1	1
Income tax expense						Income tax expense	1		—		1	1
EBITDA	152		147	453	409	EBITDA	301		315		357	600
Plus:						Plus:
Distributions in excess of equity earnings	10		1	30	7
Expenses indemnified by Phillips 66	4		—	7	4
Proportional share of equity affiliates’ net interest, taxes, depreciation and amortization, and impairments						Proportional share of equity affiliates’ net interest, taxes, depreciation and amortization, and impairments	51		38		100	73
Expenses indemnified or prefunded by Phillips 66						Expenses indemnified or prefunded by Phillips 66	1		—		1	—
Transaction costs associated with acquisitions	2		2	3	4	Transaction costs associated with acquisitions	—		—		—	1
Impairments						Impairments	—		—		198	—
Less:						Less:
EBITDA attributable to Predecessors	—		39	—	142
Gain from equity interest transfer						Gain from equity interest transfer	—		84		—	84
Adjusted EBITDA attributable to noncontrolling interest						Adjusted EBITDA attributable to noncontrolling interest	16		—		30	—
Adjusted EBITDA	168		111	493	282	Adjusted EBITDA	337		269		626	590
Plus:						Plus:
Deferred revenue impacts**	1		4	9	7
Deferred revenue impacts*†						Deferred revenue impacts*†	(4)		5		5	7
Less:						Less:
Equity affiliate distributions less than (more than) proportional adjusted EBITDA						Equity affiliate distributions less than (more than) proportional adjusted EBITDA	3		(10)		17	(9)
Maintenance capital expenditures†						Maintenance capital expenditures†	17		28		23	43
Net interest expense	23		10	71	31	Net interest expense	32		29		65	57
Maintenance capital expenditures	10		3	31	8
Distributable cash flow	$	136	102	400	250
Preferred unit distributions						Preferred unit distributions	12		9		24	19
Income taxes paid						Income taxes paid	2		—		2	—
Distributable Cash Flow						Distributable Cash Flow	$	267	218		500	487

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

**Difference between cash receipts and revenue recognition.

†Excludes Merey Sweeny capital reimbursements and turnaround impacts.

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	Millions of Dollars										Millions of Dollars
	Three Months Ended September 30					Nine Months Ended September 30					Three Months Ended June 30			Six Months Ended June 30
	2017			2016*		2017		2016*			2021		2020		2021	2020
Reconciliation to Net Cash Provided by Operating Activities										Reconciliation to Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities	$	152		128		422		371		Net Cash Provided by Operating Activities	$	286	215		513	489
Plus:										Plus:
Net interest expense	23			10		71		31		Net interest expense	32		29		65	57
Provision for income taxes	—			—		1		1
Income tax expense										Income tax expense	1		—		1	1
Changes in working capital	(20		)	8		(31	)	16		Changes in working capital	(11)		(3)		(22)	(15)
Adjustment to equity earnings for cash distributions received	—			3		(2	)	4
Undistributed equity earnings										Undistributed equity earnings	(7)		(5)		(2)	(9)
Impairments										Impairments	—		—		(198)	—
Gain from equity interest transfer										Gain from equity interest transfer	—		84		—	84
Deferred revenues and other liabilities										Deferred revenues and other liabilities	2		2		2	2
Other	(3		)	(2	)	(8	)	(14	)	Other	(2)		(7)		(2)	(9)
EBITDA	152			147		453		409		EBITDA	301		315		357	600
Plus:										Plus:
Distributions in excess of equity earnings	10			1		30		7
Expenses indemnified by Phillips 66	4			—		7		4
Proportional share of equity affiliates’ net interest, taxes, depreciation and amortization, and impairments										Proportional share of equity affiliates’ net interest, taxes, depreciation and amortization, and impairments	51		38		100	73
Expenses indemnified or prefunded by Phillips 66										Expenses indemnified or prefunded by Phillips 66	1		—		1	—
Transaction costs associated with acquisitions	2			2		3		4		Transaction costs associated with acquisitions	—		—		—	1
Impairments										Impairments	—		—		198	—
Less:										Less:
EBITDA attributable to Predecessors	—			39		—		142
Gain from equity interest transfer										Gain from equity interest transfer	—		84		—	84
Adjusted EBITDA attributable to noncontrolling interest										Adjusted EBITDA attributable to noncontrolling interest	16		—		30	—

Adjusted EBITDA	168			111		493		282		Adjusted EBITDA	337		269		626	590
Plus:										Plus:
Deferred revenue impacts^**	1			4		9		7
Deferred revenue impacts*†										Deferred revenue impacts*†	(4)		5		5	7

Less:										Less:
Equity affiliate distributions less than (more than) proportional adjusted EBITDA										Equity affiliate distributions less than (more than) proportional adjusted EBITDA	3		(10)		17	(9)
Maintenance capital expenditures†										Maintenance capital expenditures†	17		28		23	43
Net interest expense	23			10		71		31		Net interest expense	32		29		65	57
Maintenance capital expenditures	10			3		31		8
Distributable cash flow	$	136		102		400		250
Preferred unit distributions										Preferred unit distributions	12		9		24	19
Income taxes paid										Income taxes paid	2		—		2	—
Distributable Cash Flow										Distributable Cash Flow	$	267	218		500	487

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

**Difference between cash receipts and revenue recognition.

†Excludes Merey Sweeny capital reimbursements and turnaround impacts.

~~Minimum Volume Commitments~~

Under certain of our transportation and terminal services agreements, if Phillips 66 fails to transport a minimum throughput volume during any quarter, then Phillips 66 will pay us a deficiency payment based on the calculation described in the agreement. Payments made by Phillips 66 for these shortfall volumes are initially recorded as “Deferred revenues” on our consolidated balance sheet, as Phillips 66 generally has the right to make up the shortfall volumes in the following four quarters. The deferred revenue is recognized at the earlier of the quarter in which Phillips 66 makes up the shortfall volumes or the expiration of the period in which Phillips 66 is contractually allowed to make up the shortfall volumes.

~~Detail on these transportation- and terminal-based deferred revenues follows:~~

Millions of Dollars
Three Months Ended
September 30 Nine Months Ended
September 30
2017
2016
2017
2016

Deferred revenues—beginning of period $ 21
5
12
4
Quarterly deficiency payments⁽¹⁾
4
3
17
7
Quarterly deficiency make-up/expirations⁽²⁾
(3 ) —
(7 ) (3 )
Deferred revenues—end of period $ 22
8
22
8

⁽¹⁾ ~~Cash received with deferred revenue recognition.~~

⁽²⁾ ~~Revenue recognized on cash previously received.~~

Statement of Income Analysis

Operating revenues increased ~~$16 million, or 9 percent, and~~ $39 million, or ~~7 percent,~~16%, and increased $24 million, or 5%, in the ~~third~~second quarter and ~~the nine-month~~six-month period of ~~2017,~~2021, respectively. The increases in both periods were primarily attributable to increased volumes resulting from market demand. Additionally, the increase in the ~~third quarter of 2017~~six-month period was ~~primarily attributable to additional revenues from the River Parish NGL System acquired in November 2016 and higher volumes on the Ponca Crude System,~~ partially offset by ~~lower volumes on~~ the ~~Sweeny to Pasadena Products System as a result~~effects of ~~Hurricane Harvey impacts. The increase~~winter storms impacting the Central and Gulf Coast regions in the ~~nine-month period~~first quarter of 2017 was due to additional revenues from the River Parish NGL System and from additional storage capacity coming online at Clemens Caverns, partially offset by lower throughput volumes on the Gold Line Products System due to maintenance at Phillips 66’s Borger refinery.2021.

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Equity in earnings of affiliates increased $8$38 million, or ~~24 percent,~~37%, and ~~$23~~increased $26 million, or ~~26 percent,~~11%, in the ~~third~~second quarter and ~~the nine-month~~six-month period of ~~2017,~~2021, respectively. The increases in both periods were primarily ~~attributable~~due to higher volumes, including volumes from Gray Oak Pipeline, LLC, which commenced full operations during the second quarter of 2020, and South Texas Gateway Terminal LLC (South Texas Gateway), which commenced full operations in the first quarter of 2021. The increases in both periods were partially offset by a decrease in earnings from DCP Sand Hills Pipeline, ~~LLC (Sand Hills)~~LLC. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Gain on equity interest transfer reflects the second-quarter 2020 gain recognition related to a co-venturer’s acquisition of a 35% interest in the consolidated holding company that owns an interest in Gray Oak Pipeline, LLC. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Operating and ~~Bayou Bridge Pipeline, LLC (Bayou Bridge)~~maintenance expenses increased $9 million, or 11%, and increased $16 million, or 9%, in the second quarter and six-month period of 2021, respectively. The increases in both periods were primarily due to higher ~~volumes. In addition, the increase~~utility costs.

Interest and debt expense increased $4 million, or 14%, and increased $8 million, or 14%, in the ~~nine-month period also reflected additional earnings from Bayou Bridge, which began operations in April 2016,~~second quarter and ~~STACK Pipeline LLC (STACK), in which we acquired a 50 percent interest in August 2016.~~

~~Operating and maintenance expenses~~ ~~increased~~ by ~~$15 million, or~~ ~~28 percent, and~~ ~~$26 million, or 16 percent, in the third quarter~~ ~~and the~~ ~~nine-month~~six-month period of ~~2017,~~2021, respectively. The increases in both periods were ~~primarily~~ due to ~~operating expenses associated with~~lower capitalized interest and increased debt.

Impairments reflects the ~~River Parish NGL System acquired~~first-quarter 2021 impairment of our investment in ~~November 2016.~~

~~Depreciation~~ ~~increased $5 million, or 20 percent, and $11 million, or 15 percent,~~Liberty Pipeline LLC (Liberty). See Note 4—Equity Investments, in the ~~third quarter and the nine-month period of 2017, respectively. The increases were mainly attributable~~Notes to ~~the River Parish NGL System acquired in November 2016,~~Consolidated Financial Statements, for additional ~~cavern storage capacity placed into service, and accelerated depreciation for assets taken out of service.~~information.

~~Interest and debt expense~~ ~~increased $13 million~~ ~~and~~ $40 million in the third quarter and the nine-month period of 2017, respectively, primarily due to higher average debt principal balances as a result of the issuance of $1,125 million in aggregate principal amount of senior notes in October 2016.

CAPITAL RESOURCES AND LIQUIDITY

Significant Sources of Capital

Our sources of liquidity include cash generated from operations, distributions from our equity affiliates, borrowings from related parties and under our revolving credit facility, ~~and~~ issuances of additional debt and equity ~~securities.~~securities, and funding from joint venture partners. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements, long-term capital expenditure requirements and our quarterly cash distributions.

Operating Activities

We generated ~~$422~~$513 million in cash from operations during the first ~~nine~~six months of ~~2017,~~2021, an ~~improvement over cash from operations~~increase of ~~$371~~$24 million ~~for~~compared with the corresponding period of ~~2016.~~2020. The ~~improvement~~increase was ~~mainly~~primarily driven by ~~working capital impacts.~~higher operating revenues and higher operating distributions from equity affiliates.

~~Common Units~~Equity Affiliate Distributions

~~In August 2016,~~Our operating and investing cash flows are impacted by distribution decisions made by our equity affiliates. During the first six months of 2021, we ~~completed~~received aggregate distributions from our equity affiliates of $345 million, compared with $335 million during the same period of 2020. We cannot control the amount or timing of future distributions from equity affiliates; therefore, future distributions are not assured.

Revolving Credit Facility

Term Loan Agreement

On April 6, 2021, we entered into a ~~public offering~~$450 million term loan agreement and borrowed the full amount. The term loan agreement has a maturity date of ~~6,000,000 common units representing limited partner interests~~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 ~~price~~floating rate based on either a Eurodollar rate or a reference rate, plus a margin of ~~$50.22 per common unit. We received proceeds (net of underwriting discounts and commissions) of $299 million from the offering. We utilized the net proceeds~~0.875%. Proceeds were primarily used to repay ~~the note assumed as part~~amounts borrowed under our $750 million revolving credit facility.

Table of ~~the Initial Fractionator Acquisition and to repay other short-term borrowings incurred to fund~~Contents

Transfer of Equity Interest

In April 2021, we transferred our ~~acquisition of an additional~~50% ownership interest in ~~Explorer~~Liberty to our co-venturer for cash and certain pipeline assets with a value that approximated our ~~contribution to form STACK Pipeline.~~ ~~SeeNote 4—Acquisitions in the Notes to Consolidated Financial Statements for additional information.~~

~~In May 2016, we completed a public offering, consisting~~book value of ~~an aggregate of 12,650,000 common units representing limited partner interests,~~$46 million at a price of $52.40 per common unit. We received proceeds (net of underwriting discounts and commissions) of $656 million from the offering (2016 Unit Offering). We utilized the net proceeds to partially repay debt assumed as part of the Subsequent Fractionator Acquisition.March 31, 2021. See Note 4—~~Acquisitions~~Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

ATM Program

InAt June ~~2016,~~30, 2021, we ~~filed a prospectus supplement to the shelf registration statement for~~have $248 million of available capacity under our $250 million continuous offering ~~program that became effective with the Securities and Exchange Commission in May 2016, related to the continuous issuance of up to an aggregate of $250 million~~ of common units, ~~in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program,~~ or at-the-market (ATM) program. We suspended issuances under the ATM program ~~is referred~~in the first quarter of 2020 due to ~~as our ATM Program).~~low common unit prices. We did not issue any common units under ~~our~~the ATM ~~Program~~program during the three and six months ended ~~September~~June 30, ~~2017. For~~2021.

Off-Balance Sheet Arrangements

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

In 2020, the ~~nine months ended September~~trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North 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. In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and in June 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, we and our 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. At June 30, ~~2017, on a settlement date basis, we issued 3,323,576 common units under~~2021, our ~~ATM Program, which generated net proceeds~~share of ~~$171 million. For~~ the three and nine months ended September 30, 2016, on a settlement date basis, we issued 83,294 and 346,152 common units, respectively, under our ATM Program, generating net proceeds of $5 million and $19 million, respectively. Since inception through September 30, 2017, we have issued an aggregate of 3,669,728 common units under our ATM Program, generating net proceeds of $190 million, after broker commissions of $2 million. The net proceeds from salesmaximum potential equity contributions under the ~~ATM Program~~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 also could be required to support our 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. If we are ~~used for general partnership purposes, which may include funding of debt repayment, future acquisitions, capital expenditures and additions~~required to ~~working capital.~~

~~Issuances of common units~~perform under ~~our ATM Program can reduce our General Partner’s interest below 2 percent. We~~the CECU, we would expect ~~the General Partner’s interest~~ to ~~be periodically restored to 2 percent in connection~~fund such performance with dropdown transactions or through direct equity contributions. However, these future contributions from our General Partner cannot be assured. At September 30, 2017, our General Partner’s interest was slightly less than 2 percent.

~~Revolving Credit Facility~~

~~At September 30, 2017, and December 31, 2016, we had an aggregate of $87 million and $210 million, respectively, borrowed and outstanding~~cash, capacity available under ~~our $750 million revolving credit facility. We repaid the $87 million outstanding balance on~~ our revolving credit facility, ~~in October 2017, utilizing proceeds~~third-party debt financing, and/or sponsor loans from ~~the equity and debt issuances discussed in the “Outlook” section.~~Phillips 66.

~~Note Payable~~

In May 2016, in connection with the Subsequent Fractionator Acquisition, we entered into three separate Assignment and Assumption of Note agreements with subsidiaries of Phillips 66, pursuant to which we assumed the obligations under three term promissory notes (the Subsequent Notes), each with a $225 million principal balance. Also in May 2016, using proceeds from the 2016 Unit Offering, we repaid two of the Subsequent Notes in their entirety and reduced the outstanding balance on the remaining Subsequent Note to $19 million, which was repaid in June 2016.

~~Shelf Registration~~

We have a universal shelf registration statement on file with the SEC under which we, as a well-known seasoned issuer, have the ability to issue and sell an indeterminate amount of common units representing limited partner interests, preferred units representing limited partner interests, and debt securities.

~~Off-Balance Sheet Arrangements~~

~~We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.~~

Capital Requirements

Capital Expenditures and Investments

Our operations ~~can be~~are capital intensive ~~requiring~~and require investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational requirements of our wholly owned and joint venture entities. Our capital requirements consist of maintenance and expansion capital expenditures, as well as contributions to our joint ventures. ~~Examples of maintenance~~Maintenance capital expenditures are those made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or to maintain existing system volumes and related cash flows. In contrast, expansion capital expenditures are those made to expand and upgrade our systems and facilities and to construct or acquire new systems or facilities to grow our business, including contributions to joint ventures that are using the contributed funds for such purposes.

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Our capital expenditures and investments represent the total spending for our capital requirements. 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 consolidated capital spending funded by certain joint venture partners. Additionally, the disaggregation of adjusted capital spending between expansion and maintenance is not a distinction recognized under GAAP. We disaggregate adjusted capital spending because our partnership agreement requires that we treat expansion and maintenance capital differently for operating and capital surplus determinations. Further, we generally fund expansion capital spending with both operating and financing cash flows and fund maintenance capital spending with operating cash flows.

Our capital expenditures and investments were:


	Millions of Dollars
	Six Months Ended June 30
	2021		2020
Capital Expenditures and Investments
Capital expenditures and investments	$	119	611
Capital expenditures and investments funded by certain joint venture partners	—		(61)
Adjusted Capital Spending	$	119	550

Expansion	$	96	507
Maintenance	23		43

Our capital expenditures and investments for the first ~~nine~~six months of ~~2017 and 2016 were:~~

Millions of Dollars
Nine Months Ended
September 30
2017
2016

Capital expenditures and investments attributable to the Partnership
Expansion $ 194
199
Maintenance 31
8
Total 225
207
Capital expenditures attributable to Predecessors* —
91
Total capital expenditures and investments $ 225
298

*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

~~Our capital expenditures and investments for the first nine months of 2017~~2021 were ~~$225 million,~~ primarily associated with the following activities:

•Construction activities related to the C2G Pipeline, a new 16-inch ethane pipeline that connects our Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi, Texas.

•Contributions to ~~Bayou Bridge to continue progress on its~~Dakota Access for a pipeline ~~segment from Lake Charles, Louisiana, to St. James, Louisiana.~~optimization project.

•Contributions to ~~STACK to extend~~complete the ~~origination point of its pipeline system to access additional area producers~~South Texas Gateway Terminal development activities.

•Spending associated with other return, reliability and ~~increase capacity.~~maintenance projects.

~~Contributions to Sand Hills to increase capacity on its NGL pipeline system.~~

~~Reactivation and upgrading of various tanks at the Bayway Products System to facilitate additional storage and gasoline blending.~~

~~Contributions to Paradigm Pipeline LLC to fund its contributions to the Sacagawea Pipeline joint venture to construct a natural gas pipeline.~~

~~Various upgrades and replacements of assets.~~

~~Other Investing~~

Cash ~~Distribution~~Distributions

On ~~October 18, 2017,~~July 20, 2021, the Board of Directors of our General Partner declared a quarterly cash distribution of ~~$0.646~~$0.875 per common unit, which ~~combined with distributions to our General Partner,~~ will result in a total distribution of ~~$121~~$199 million attributable to the second quarter of 2021. This distribution is payable on ~~November~~August 13, ~~2017,~~2021, to common unitholders of record as of ~~October 31, 2017.~~July 30, 2021.

~~Cash distributions will be made~~Beginning with the distribution to ~~our General Partner in respect~~preferred unitholders attributable to the fourth quarter of ~~its general partner interest and its ownership of all incentive distribution rights (IDRs), which entitle our General Partner~~2020, the preferred unitholders at the record date are entitled to receive ~~increasing percentages, up~~cumulative quarterly distributions equal to ~~50 percent,~~the greater of ~~quarterly cash distributions in excess of $0.244375~~$0.678375 per ~~unit. Accordingly, based on~~unit, or the per-unit distribution ~~declared on October 18, 2017, our General Partner~~amount paid to the common unitholders. Preferred unitholders will receive ~~35 percent~~$12 million of distributions attributable to the second quarter of 2021. This distribution is payable August 13, 2021, to preferred unitholders of record as of July 30, 2021.

Repurchase of Preferred Units

On June 29, 2021, we repurchased 368,528 of the ~~third-quarter 2017~~outstanding Series A Perpetual Convertible Preferred Units with an aggregate carrying value of $20 million for $24 million in cash, ~~distribution in respect~~or $65.124 per unit. Upon the repurchase, these preferred units were canceled and are no longer outstanding. At June 30, 2021, there were 13,451,263 preferred units outstanding.

Table of ~~its general partner interest and its ownership~~Contents

Debt Repayment

On April 1, 2021, we repaid the two remaining $25 million tranches of ~~all IDRs.~~tax-exempt bonds due April 2021, totaling $50 million.

Contingencies

Regulatory Matters

Our interstate common carrier crude oil and refined petroleum products pipeline operations are subject to rate regulation by the Federal Energy Regulatory Commission under the Interstate Commerce Act and Energy Policy Act of 1992, and certain of our pipeline systems providing intrastate service are subject to rate regulation by applicable state authorities under their respective laws and regulations. Our pipeline, rail rack and terminal operations are also subject to safety regulations adopted by the Department of Transportation, as well as to state regulations.

Legal and Tax Matters

Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal and tax support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal and tax organizations apply their knowledge, experience and professional judgment to the specific characteristics of our cases and uncertain tax positions. Phillips 66’s legal organization employs a litigation management process to manage and monitor the legal proceedings against us. The process facilitates the early evaluation and quantification of potential exposures in individual cases and enables 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, Phillips 66’s legal organization regularly assesses the adequacy of current accruals and recommends if adjustment of existing accruals, or establishment of new accruals, is required. As of ~~September~~June 30, ~~2017,~~2021, and December 31, ~~2016,~~2020, we did not have any material accrued contingent liabilities associated with litigation matters.

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Environmental

We are subject to extensive federal, state and local environmental laws and regulations. These requirements, which frequently change, regulate the discharge of materials into the environment or otherwise relate to protection of the environment. Compliance with these laws and regulations may require us to remediate environmental damage from any discharge of petroleum or chemical substances from our facilities or require us to install additional pollution control equipment at or on our facilities. Our failure to comply with these or any other environmental or safety-related regulations could result in the assessment of administrative, civil, or criminal penalties, the imposition of investigatory and remedial liabilities, and the issuance of governmental orders that may subject us to additional operational constraints. Future expenditures may be required to comply with the Federal Clean Air Act and other federal, state and local requirements in respect of our various sites, including our pipelines and storage assets. The impact of legislative and regulatory developments, if enacted or adopted, could result in increased compliance costs and additional operating restrictions on our business, each of which could have an adverse impact on our financial position, results of operations and liquidity.

As with all costs, if these expenditures are not ultimately ~~reflected~~recovered in the tariffs and other fees we receive for our services, our operating results will be adversely affected. We believe that substantially all similarly situated parties and holders of comparable assets must comply with similar environmental laws and regulations. However, the specific impact on each may vary depending on a number of factors, including, but not limited to, the age and location of its operating facilities.

We accrue for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. As environmental remediation matters proceed toward ultimate resolution or as additional remediation obligations arise, charges in excess of those previously accrued may be required. New or expanded environmental requirements, which could increase our environmental costs, may arise in the future. We believe we are in substantial compliance with all legal obligations regarding the environment and have established the environmental accruals that are currently required; however, it is not possible to predict all of the ultimate costs of compliance, including remediation costs that may be incurred and penalties that may be imposed, because not all of the costs are fixed or presently determinable (even under existing legislation) and the costs may be affected by future legislation or regulations.

~~Paradis Pipeline Station Incident~~

On February 9, 2017, a fire occurred at the Paradis Pipeline Station on the River Parish NGL System. There was one Phillips 66 employee fatality and other workers injured. We continue to cooperate with regulatory agencies investigating this incident. We do not currently expect claims related to this incident, individually or in the aggregate, to have a material impact on our results of operations.

Indemnification and Excluded Liabilities

Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize a non-cash ~~expense~~expenses and an associated non-cash capital ~~contribution~~contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.

~~We have assumed, and have agreed to pay, discharge and perform as and when due, all liabilities arising out~~

Table of or attributable to the ownership or operation of the assets, or other activities occurring in connection with and attributable to the ownership or operation of the assets, from and after the effective date of each acquisition.Contents

~~NEW ACCOUNTING STANDARDS~~

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business with the objective of adding guidance to assist in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The amendment provides a screen for determining when a transaction involves an acquisition of a business. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the transaction is not considered an acquisition of a business. If the screen is not met, then the amendment requires that, to be considered a business, the operation must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output. The guidance may reduce the number of transactions accounted for as business acquisitions. Public business entities should apply the guidance in ASU No. 2017-01 to annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The amendment should be applied prospectively, and no disclosures are required at the effective date. We are currently evaluating the provisions of ASU No. 2017-01.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” In the new standard, the FASB modified its determination of whether a contract is a lease rather than whether a lease is a capital or operating lease under current accounting principles generally accepted in the United States (GAAP). A contract represents a lease if a transfer of control occurs over an identified property, plant and equipment for a period of time in exchange for consideration. Control over the use of the identified asset includes the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct its use. The FASB continued to maintain two classifications of leases - financing and operating - which are substantially similar to capital and operating leases under current guidance. Under the new standard, assets and liabilities arising from operating leases will require recognition on the balance sheet. The effect of all leases in the statement of comprehensive income and the statement of cash flows will be largely unchanged. Lessor accounting will also be largely unchanged. Additional disclosures will be required for financing and operating leases for both lessors and lessees. Public business entities should apply the guidance in ASU No. 2016-02 for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. Entities are required to adopt the ASU using a modified retrospective approach, subject to certain optional practical expedients, and apply its provisions to leasing arrangements existing at or entered into after the earliest comparative period presented in the financial statements. We are currently evaluating the provisions of ASU No. 2016-02 and assessing its impact on our financial statements. As part of our assessment work-to-date, we have formed an implementation team, commenced identification of our lease population and are evaluating lease software packages.

~~OUTLOOK~~

~~Bakken Pipeline/MSLP Acquisition~~

On September 19, 2017, we entered into a Contribution, Conveyance and Assumption Agreement (CCAA) with subsidiaries of Phillips 66 for us to acquire an indirect 25 percent interest in each of Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (together, Dakota/ETCO) and a direct 100 percent interest in Merey Sweeny, L.P. (MSLP and the acquisitions pursuant to the CCAA, collectively, the Bakken Pipeline/MSLP Acquisition).

~~The assets owned by Dakota/ETCO and MSLP are described below:~~

In connection with the closing of the acquisition, MSLP and Phillips 66 entered into an amended and restated tolling services agreement, effective October 1, 2017, with a 15-year term that includes a base throughput fee and a minimum volume commitment from Phillips 66.

The Bakken Pipeline/MSLP Acquisition closed on October 6, 2017. We paid Phillips 66 total consideration of $1.65 billion, consisting of $372 million in cash, the assumption of $588 million of promissory notes payable to Phillips 66 and a $450 term loan under which Phillips 66 was the obligor, and the issuance of 5,005,778 newly issued units, which were allocated as 4,713,113 common units to P66 PDI and 292,665 general partner units to our General Partner to maintain its 2 percent general partner interest. After the closing of the Bakken Pipeline/MSLP Acquisition, we repaid the $588 million of promissory notes and the $450 million term loan using proceeds from the private placement and debt issuances described below.

~~Debt and Equity Issuances~~

~~In part to fund the cash portion of the Bakken Pipeline/MSLP Acquisition consideration, on October 6, 2017, we closed on a private placement and issued the following:~~

~~13,819,791 perpetual convertible preferred units (Preferred Units) generating gross proceeds of $750 million.~~

~~6,304,204 common units generating gross proceeds of $300 million.~~

Together, the Preferred Units and common units issued in the private placement resulted in net proceeds, after deducting offering and transaction expenses, of approximately $1.03 billion. Additionally, on October 13, 2017, we closed on a public debt offering pursuant to our effective shelf registration statement and issued $500 million aggregate principal amount of 3.750% Senior Notes due 2028 and an additional $150 million aggregate principal amount of our outstanding 4.680% Senior Notes due 2045.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements. 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.~~expressions, although the absence of these words does not mean that statement is not forward-looking.

We based the forward-looking statements on our current expectations, estimates and projections about us, our operations, the operations of our joint ventures and the entities in which we own 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 the demand for crude oil and refined petroleum products, as well as the extent and duration of recovery of economies and the demand for crude oil and refined petroleum products after the pandemic subsides.

•Reductions in the volume of crude oil, refined petroleum products and NGL we or our equity affiliates transport, fractionate, process, terminal and store.

•The continued ability of Phillips 66 to satisfy its obligations under our commercial and other agreements.

~~The volume of crude oil, NGL and refined petroleum products we transport, fractionate, process, terminal and store.~~

~~The tariff rates with respect to volumes that we transport through our regulated assets, which rates are subject to review and possible adjustment by federal and state regulators.~~

~~Changes in revenue we realize under the loss allowance provisions of our regulated tariffs resulting from changes in underlying commodity prices.~~

•Fluctuations in the prices and demand for crude oil, ~~NGL and~~ refined petroleum ~~products.~~products and NGL, including as a result of actions taken by OPEC and other countries impacting supply and demand and, correspondingly, commodity prices.

•Changes in ~~global economic conditions and the effects of a global economic downturn on the business of Phillips 66 and the business of its suppliers, customers, business partners and credit lenders.~~governmental policies relating to crude oil, refined petroleum products or NGL pricing, regulation, taxation, or exports.

~~Liabilities~~•Potential liabilities associated with the risks and operational hazards inherent in transporting, fractionating, processing, terminaling and storing crude oil, ~~NGL and~~ refined petroleum ~~products.~~products and NGL.

•Curtailment of operations due to severe weather ~~disruption;~~(including as a result of climate change) disruption or natural disasters; riots, strikes, lockouts or other industrial ~~disturbances;~~disturbances.

•Accidents or ~~failure~~other unscheduled shutdowns affecting our pipelines, processing, fractionating, terminaling, and storage facilities or equipment, or those of ~~information technology systems due to various causes, including unauthorized access~~our equity affiliates, suppliers or ~~attack.~~customers.

~~Inability~~•Our, and our equity affiliates’, inability to obtain or maintain permits, in a timely manner, ifor at all, ~~including those necessary for capital projects, or~~and the possibility of the revocation or modification of ~~existing~~such permits.

~~Inability~~•The operation, financing and distribution decisions of our joint ventures, which we may not control.

•The inability to comply with government regulations or make capital expenditures required to maintain compliance.

~~Failure~~•The failure to ~~timely~~ complete construction of announced and future capital projects in a timely manner, cost overruns associated with such projects, and the ability to obtain or maintain permits necessary for such projects.

~~The operation, financing and distribution decisions of our joint ventures.~~

•Costs or liabilities associated with federal, state, and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity.

•Failure of information technology systems due to various causes, including unauthorized access or attack.

•Changes to the tariff rates with respect to volumes transported through regulated assets, which rates are subject to review and possible adjustment by federal and state regulators.

•Changes in revenues we realize under the loss allowance provisions of our regulated tariffs resulting from changes in underlying commodity prices.

•Costs associated with compliance with evolving environmental laws and regulations on climate change.

•Costs associated with compliance with safety regulations, including pipeline integrity management program testing and related repairs.

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•Changes in the cost or availability of third-party vessels, pipelines, railcars and other means of delivering and transporting crude oil, ~~NGL and~~ refined petroleum ~~products.~~products and NGL.

•General domestic and international economic and political developments including armed hostilities, expropriation of assets, social unrest, insurrections, and other political, economic or diplomatic developments, including those caused by public health issues and outbreaks of diseases and pandemics.

•Direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war.

•Our ability to comply with the terms of our credit facility, indebtedness and other financing arrangements, which, if accelerated, we may not be able to repay.

•Our ability to incur additional indebtedness or our ability to obtain financing on terms that we deem acceptable, including the refinancing of our current obligations; higher interest rates and costs of financing would increase our expenses.

•Changes in tax, environmental and other laws and regulations.

•The factors generally described in ~~“Item~~Item 1A. Risk ~~Factors”~~Factors in our ~~2016~~2020 Annual Report on Form ~~10-K filed with the SEC on February 17, 2017.~~10-K.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our commodity price risk and interest rate risk at ~~September~~June 30, ~~2017,~~2021, did not differ materially from that disclosed under Item 7A of our ~~2016~~2020 Annual Report on Form 10-K.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in U.S. Securities and Exchange Commission ~~(the SEC)~~ rules and forms, and that such information is accumulated and communicated to our General Partner’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of ~~September~~June 30, ~~2017,~~2021, our General Partner’s Chairman and Chief Executive Officer and its Vice President and Chief Financial Officer, with the participation of the General Partner’s management, carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our General Partner’s Chairman and Chief Executive Officer and its Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of ~~September~~June 30, ~~2017.~~2021.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the quarterly period ended ~~September~~June 30, ~~2017,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not a party to any reportable litigation or governmental or other proceeding, including those involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment, that we reasonably believe will be in excess of $300,000 or have a material adverse impact on our consolidated financial position. ~~In addition, as discussed in Note 10—Contingencies, in the Notes to Consolidated Financial Statements, under~~

Under our amended omnibus agreement, and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 indemnifies us, or assumes responsibility, for certain liabilities relating to litigation and environmental matters attributable to the ownership or operation of our assets prior to their contribution to us from Phillips 66.

See Note 8—Contingencies, in the Notes to Consolidated Financial Statements, for additional information.

Item 1A. RISK FACTORS

There ~~have been~~were no material changes from the risk factors disclosed ~~under~~in Item 1A of our ~~2016~~2020 Annual Report on Form 10-K.

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Item 6. EXHIBITS

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

Exhibit Number

Filing Date

SEC File No.

10.1

Credit Agreement, dated as of April 6, 2021, by and among Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, the lenders party thereto, The Bank of Nova Scotia, Houston Branch, as administrative agent, and The Bank of Nova Scotia, BofA Securities, Inc. and Sumitomo Mitsui Banking Corporation as joint lead arrangers and joint bookrunners.

8-K

10.1

4/12/2021

001-36011

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32*

Certifications pursuant to 18 U.S.C. Section 1350.

101.INS*

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

Inline XBRL Taxonomy Extension Schema Document.

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

Incorporated by Reference
Exhibit
Number Exhibit Description Form Exhibit Number Filing Date SEC File No.

3.1

Certificate of Limited Partnership of Phillips 66 Partners LP.

S-1 3.1 3/27/2013 333-187582

3.2

Amendment to Certificate of Limited Partnership, dated October 5, 2017.
8-K 3.1 10/10/2017 001-36011

3.3

Second Amended and Restated Agreement of Limited Partnership of Phillips 66 Partners LP, dated as of October 6, 2017.
8-K 3.2 10/10/2017 001-36011

4.1

Sixth Supplemental Indenture, dated as of October 13, 2017, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2028 Notes.
8-K 4.2 10/13/2017 001-36011

4.2

Form of the 2028 Notes (included in Exhibit 4.1 as Exhibit A to the Appendix thereto).
8-K 4.4 10/13/2017 001-36011

4.3

Registration Rights Agreement dated as of October 6, 2017 by and among Phillips 66 Partners LP and the Purchasers party thereto.
8-K 4.1 10/10/2017 001-36011

10.1

Series A Preferred Unit and Common Unit Purchase Agreement, dated as of September 21, 2017, by and among Phillips 66 Partners LP and the Purchasers party thereto.
8-K 10.1 9/25/2017 001-36011

10.2

Contribution, Conveyance and Assumption Agreement, dated as of September 19, 2017, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company and Phillips 66 Project Development Inc.
8-K 2.1 9/25/2017 001-36011

10.3

Seventh Amendment to the Omnibus Agreement, dated as of October 1, 2017, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Carrier LLC.
8-K 10.1 10/10/2017 001-36011

10.4

Amended and Restated Operational Services Agreement, dated as of October 1, 2017, by and among Phillips 66 Carrier LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Pipeline LLC.
8-K 10.2 10/10/2017 001-36011

10.5†

Amended and Restated Tolling Services Agreement, dated as of October 1, 2017, by and between Merey Sweeny, L.P. and Phillips 66 Company.
8-K 10.3 10/10/2017 001-36011

12*

Computation of Ratio of Earnings to Fixed Charges.

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32*

Certifications pursuant to 18 U.S.C. Section 1350.

101.INS* XBRL Instance Document.

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		~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~	~~Exhibit Description~~	~~Form~~	~~Exhibit Number~~	~~Filing Date~~	~~SEC File No.~~

101.SCH*	~~XBRL Schema Document.~~

101.CAL*	~~XBRL Calculation Linkbase Document.~~

101.LAB*	~~XBRL Labels Linkbase Document.~~

101.PRE*	~~XBRL Presentation Linkbase Document.~~

101.DEF*	~~XBRL Definition Linkbase Document.~~

* Filed herewith
†Confidential treatment has been requested for certain portion of this Exhibit pursuant to a confidential treatment request filed with the Securities and Exchange Commission on October 10, 2017. Such portions have been omitted and filed separately with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			PHILLIPS 66 PARTNERS LP

			~~PHILLIPS 66 PARTNERS LP~~

	By: Phillips 66 Partners GP LLC, its general partner

			/s/ Chukwuemeka A. Oyolu
			Chukwuemeka A. Oyolu Vice President and Controller (Chief Accounting and Duly Authorized Officer)

Date: ~~October 27, 2017~~

August 3, 2021



Delaware						38-3899432
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



Large accelerated filer ~~[ X ]~~	☒	Accelerated filer ~~[ ]~~	☐
Non-accelerated filer ~~[ ]~~	☐	Smaller reporting company ~~[ ]~~	☐
Emerging growth company ~~[ ]~~	☐



			Page
Part I – Financial Information			1

Item 1. Financial Statements			1
Consolidated Statement of Income			1
Consolidated Statement of Comprehensive Income			2
Consolidated Balance Sheet			3
Consolidated Statement of Cash Flows			4
Consolidated Statement of Changes in Equity			5
Notes to Consolidated Financial Statements			67

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2420

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4034

Item 4. Controls and Procedures			4034

Part II – Other Information			4135

Item 1. Legal Proceedings			4135

Item 1A. Risk Factors			4135

Item 6. Exhibits			4236

~~Signature~~Signaturess			4437



~~[ X ]~~☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended			~~September~~June 30, ~~2017~~2021



~~[ ]~~☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Millions of Dollars
	September 30 2017			December 31 2016
Assets
Cash and cash equivalents	$	2		2
Accounts receivable—related parties	66			76
Accounts receivable—third parties	4			7
Materials and supplies	12			11
Prepaid expenses	3			4
Total current assets	87			100
Equity investments	1,265			1,142
Net properties, plants and equipment	2,675			2,675
Goodwill	185			185
Deferred rentals and other	7			7
Total Assets	$	4,219		4,109

Liabilities
Accounts payable—related parties	$	10		12
Accounts payable—third parties	31			31
Accrued property and other taxes	21			10
Accrued interest	29			26
Short-term debt	17			15
Deferred revenues	25			14
Other current liabilities	2			3
Total current liabilities	135			111
Long-term debt	2,273			2,396
Asset retirement obligations	10			9
Accrued environmental costs	2			2
Deferred income taxes	3			2
Deferred revenues and other	21			23
Total Liabilities	2,444			2,543

Equity
Common unitholders—public (2017—46,458,478 units issued and outstanding; 2016—43,134,902 units issued and outstanding)	1,966			1,795
Common unitholder—Phillips 66 (2017 and 2016—64,047,024 units issued and outstanding)	472			476
General partner—Phillips 66 (2017 and 2016—2,187,386 units issued and outstanding)	(662		)	(704	)
Accumulated other comprehensive loss	(1		)	(1	)
Total Equity	1,775			1,566
Total Liabilities and Equity	$	4,219		4,109



	Millions of Dollars
	Partnership
	Common Unitholders Public			Common Unitholder Phillips 66		General Partner Phillips 66		Accum. Other Comprehensive Loss		Net Investment— Predecessors*		Total

December 31, 2015	$	809		233		(650	)	(2	)	1,054		1,444
Net income attributable to Predecessors	—			—		—		—		103		103
Net contributions from Phillips 66—Predecessors	—			—		—		—		88		88
Issuance of common units	971			—		—		—		—		971
Allocation of net investment to unitholders	—			233		33		—		(266	)	—
Net income attributable to the Partnership	51			89		63		—		—		203
Other comprehensive income	—			—		—		1		—		1
Quarterly cash distributions to unitholders and General Partner	(41		)	(86	)	(50	)	—		—		(177	)
Other contributions from Phillips 66	—			—		4		—		—		4
September 30, 2016*	$	1,790		469		(600	)	(1	)	979		2,637

December 31, 2016	$	1,795		476		(704	)	(1	)	—		1,566
Issuance of common units	171			—		—		—		—		171
Net income attributable to the Partnership	78			109		112		—		—		299
Quarterly cash distributions to unitholders and General Partner	(78		)	(113	)	(96	)	—		—		(287	)
Other contributions from Phillips 66	—			—		26		—		—		26
September 30, 2017	$	1,966		472		(662	)	(1	)	—		1,775



	Common Units Public	Common Units Phillips 66	General Partner Units Phillips 66	Total Units

December 31, 2015	24,138,750	58,349,042	1,683,425	84,171,217
Units issued in public equity offerings	18,996,152	—	—	18,996,152
Units issued associated with acquisitions	—	1,813,745	295,178	2,108,923
September 30, 2016	43,134,902	60,162,787	1,978,603	105,276,292

December 31, 2016	43,134,902	64,047,024	2,187,386	109,369,312
Units issued in public equity offerings	3,323,576	—	—	3,323,576
September 30, 2017	46,458,478	64,047,024	2,187,386	112,692,888



	Millions of Dollars
	Three Months Ended September 30, 2016
Consolidated Statement of Income	Phillips 66 Partners LP (As previously reported)		Acquired Eagle Assets Predecessor	Consolidated Results
Revenues and Other Income
Operating revenues—related parties	$	108	73	181
Operating revenues—third parties	2		5	7
Equity in earnings of affiliates	33		—	33
Other income	1		—	1
Total revenues and other income	144		78	222

Costs and Expenses
Operating and maintenance expenses	26		28	54
Depreciation	15		10	25
General and administrative expenses	9		8	17
Taxes other than income taxes	1		3	4
Interest and debt expense	10		—	10
Total costs and expenses	61		49	110
Income before income taxes	83		29	112
Provision for income taxes	—		—	—
Net income	83		29	112
Less: Net income attributable to Predecessors	—		29	29
Net income attributable to the Partnership	83		—	83
Less: General partner’s interest in net income attributable to the Partnership	26		—	26
Limited partners’ interest in net income attributable to the Partnership	$	57	—	57



	Millions of Dollars
	Nine Months Ended September 30, 2016
Consolidated Statement of Income	Phillips 66 Partners LP (As previously reported)		Acquired Eagle Assets Predecessor	Consolidated Results
Revenues and Other Income
Operating revenues—related parties	$	315	219	534
Operating revenues—third parties	6		16	22
Equity in earnings of affiliates	88		—	88
Other income	1		—	1
Total revenues and other income	410		235	645

Costs and Expenses
Operating and maintenance expenses	76		86	162
Depreciation	44		27	71
General and administrative expenses	26		24	50
Taxes other than income taxes	11		13	24
Interest and debt expense	31		—	31
Total costs and expenses	188		150	338
Income before income taxes	222		85	307
Provision for income taxes	1		—	1
Net income	221		85	306
Less: Net income attributable to Predecessors	18		85	103
Net income attributable to the Partnership	203		—	203
Less: General partner’s interest in net income attributable to the Partnership	63		—	63
Limited partners’ interest in net income attributable to the Partnership	$	140	—	140



			Millions of Dollars
	Percentage Ownership		Carrying Value
	Percentage Ownership		September 30 2017		December 31 2016

DCP Sand Hills Pipeline, LLC (Sand Hills)	33.34	%	$	478	445
DCP Southern Hills Pipeline, LLC (Southern Hills)	33.34		208		212
Explorer Pipeline Company (Explorer)	21.94		124		126
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)	70.00		57		72
Paradigm Pipeline LLC (Paradigm)	50.00		130		117
Bayou Bridge Pipeline, LLC (Bayou Bridge)	40.00		171		115
STACK Pipeline LLC (STACK)	50.00		97		55
Total equity investments			$	1,265	1,142



	Millions of Dollars
	September 30, 2017
	Fair Value Hierarchy				Total Fair Value	Balance Sheet Carrying Value
	Level 1		Level 2*	Level 3	Total Fair Value	Balance Sheet Carrying Value

2.646% Senior Notes due 2020	$	—	302	—	302	300
3.605% Senior Notes due 2025	—		499	—	499	500
3.550% Senior Notes due 2026	—		490	—	490	500
4.680% Senior Notes due 2045	—		291	—	291	300
4.900% Senior Notes due 2046	—		631	—	631	625
Revolving credit facility at 2.45% at September 30, 2017	—		87	—	87	87
Total	$	—	2,300	—	2,300	2,312
Net unamortized discounts and debt issuance costs						(22		)
Total debt						2,290
Short-term debt						(17		)
Long-term debt						$	2,273



	Millions of Dollars
	Three Months Ended September 30				Nine Months Ended September 30
	2017			2016	2017		2016

Net income attributable to the Partnership	$	99		83	299		203
Less: General partner’s distribution declared (including IDRs)*	43			26	111		63
Limited partners’ distribution declared on common units*	78			56	209		145
Distributions less than (in excess of) net income attributable to the Partnership	$	(22	)	1	(21	)	(5	)



	General Partner (including IDRs)		Limited Partners’ Common Units			Total
Three Months Ended September 30, 2017
Net income attributable to the Partnership (millions):
Distribution declared	$	43	78			121
Distribution in excess of net income attributable to the Partnership	—		(22		)	(22	)
Net income attributable to the Partnership	$	43	56			99

Weighted-average units outstanding—basic and diluted			110,505,502

Net income per limited partner unit—basic and diluted (dollars)			$	0.51

Three Months Ended September 30, 2016
Net income attributable to the Partnership (millions):
Distribution declared	$	26	56			82
Distribution less than net income attributable to the Partnership	—		1			1
Net income attributable to the Partnership	$	26	57			83

Weighted-average units outstanding—basic and diluted			100,555,277

Net income per limited partner unit—basic and diluted (dollars)			$	0.57



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit Number	Filing Date	SEC File No.

3.1	Certificate of Limited Partnership of Phillips 66 Partners LP.	S-1	3.1	3/27/2013	333-187582

3.2	Amendment to Certificate of Limited Partnership, dated October 5, 2017.	8-K	3.1	10/10/2017	001-36011

3.3	Second Amended and Restated Agreement of Limited Partnership of Phillips 66 Partners LP, dated as of October 6, 2017.	8-K	3.2	10/10/2017	001-36011

4.1	Sixth Supplemental Indenture, dated as of October 13, 2017, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2028 Notes.	8-K	4.2	10/13/2017	001-36011

4.2	Form of the 2028 Notes (included in Exhibit 4.1 as Exhibit A to the Appendix thereto).	8-K	4.4	10/13/2017	001-36011

4.3	Registration Rights Agreement dated as of October 6, 2017 by and among Phillips 66 Partners LP and the Purchasers party thereto.	8-K	4.1	10/10/2017	001-36011

10.1	Series A Preferred Unit and Common Unit Purchase Agreement, dated as of September 21, 2017, by and among Phillips 66 Partners LP and the Purchasers party thereto.	8-K	10.1	9/25/2017	001-36011

10.2	Contribution, Conveyance and Assumption Agreement, dated as of September 19, 2017, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company and Phillips 66 Project Development Inc.	8-K	2.1	9/25/2017	001-36011

10.3	Seventh Amendment to the Omnibus Agreement, dated as of October 1, 2017, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Carrier LLC.	8-K	10.1	10/10/2017	001-36011

10.4	Amended and Restated Operational Services Agreement, dated as of October 1, 2017, by and among Phillips 66 Carrier LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Pipeline LLC.	8-K	10.2	10/10/2017	001-36011

10.5†	Amended and Restated Tolling Services Agreement, dated as of October 1, 2017, by and between Merey Sweeny, L.P. and Phillips 66 Company.	8-K	10.3	10/10/2017	001-36011

12*	Computation of Ratio of Earnings to Fixed Charges.

31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32*	Certifications pursuant to 18 U.S.C. Section 1350.

101.INS*	XBRL Instance Document.