PSX 10-K & 10-Q changes, risk factors and insider trading

You should carefully consider the following risk factors in addition to the other information included in this Annual Report. Each of these risk factors could adversely affect our business, operating results andresults, financial condition, and reputation, as well as the value of an investment in our securities. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we do not currently consider to present significant risks to our operations. Some of the factors, events and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past and instead reflect our beliefs and opinions as to the factors, events or contingencies that could materially and adversely affect us in the future.

•geopolitical risks, such as the ongoing global impact of conflicts in the Middle East andEast, Eastern Europe and South America;

Lower margins have in the past, and may in the future, lead us to reduce the amount of refined products we produce, which may reduce our results of operations and cash flows. Significant reductions in margins could require us to impair the carrying value of our assets (such as properties, plants and equipment, inventoriesinventories, equity investments or goodwill) and may adversely affect our ability to fund our capital priorities, including share repurchases and dividends.

We do not produce crude oil and other feedstocks and must purchase all of the feedstocks we process. The prices for crude oil, other feedstocks and refined products can fluctuate based on global, regional and local market conditions, as well as by type and class of products, which can reduce margins and have a significant impact on our refining, wholesale marketing and retail operations, revenues, operating income and cash flows. The ability of the members of OPEC to agree on and to set crude oil price and production controls and changes in trade flows from events such as the warconflicts in Eastern Europe and South America have also had, and are likely to continue to have, a significant impact on the market prices of crude oil and certain of our products.

In order to maintain or increase throughput levels on our natural gas gathering and transportation pipeline systems and NGL pipelines and the asset utilization rates at our natural gas processing plants, we must continually obtain new supplies. The level of successful drilling activity and prices of, and demand for, natural gas and crude oil, as well as producers’ desire and ability to obtain necessary permits are some of the factors that may affect new supplies of natural gas and NGL.NGLs. If we are not able to obtain new supplies of natural gas and NGLs to replace the natural decline in volumes from existing wells or because of competition, throughput on our pipelines and the utilization rates of our treating and processing facilities would decline. This could have a material adverse effect on our business, results of operations, financial position and cash flows, and our ability to make cash distributions.

Our global operations expose us to risks associated with public health crises and outbreaks of epidemics, pandemics, or contagious diseases, such as the COVID-19 pandemic.diseases.

The refining and marketingOur industry is highly competitive with respect to both feedstock supply and refined petroleum product markets. We compete with many companies for available supplies of crude oil and other feedstocks and for outlets for our refined products. We do not produce any of our crude oil feedstocks. Some of our competitors, however, obtain a portion of their feedstocks from their own production and some have more extensive retail outlets than we have. Competitors that have their own production or extensive retail outletsoutlets, (andincluding those with greater brand-name recognition)recognition, are at times able to offset losses from refining operations with profits from producing or retailing operations, and may be better positioned to withstand periods of depressed refining margins or feedstock shortages.

In order to maintain or increase throughput levels on our natural gas gathering and transportation pipeline systems and NGL pipelines and the asset utilization rates at our natural gas processing plants, we must continually obtain new supplies. The level of successful drilling activity and prices of, and demand for, natural gas and crude oil, as well as producers’ desire and ability to obtain necessary permits are some of the factors that may affect new supplies of natural gas and NGL.NGLs. If we are not able to obtain new supplies of natural gas and NGLs to replace the natural decline in volumes from existing wells or because of competition, throughput on our pipelines and the utilization rates of our treating and processing facilities would decline. This could have a material adverse effect on our business, results of operations, financial position and cash flows.

Our basis for approving large-scale capital-intensive projects, such as the recent conversion of our San Francisco Refinery into the Rodeo Complex, is the expectation that it will deliver an acceptable rate of return on the capital invested.employed. We base these forecasted project economics on our best estimate of future market conditions including the regulatory and operating environment. Most large-scale projects take several years to complete. During this multi-year period, the political and regulatory environments or other market conditions can change from those we anticipated, and these changes could be significant. Supply chain disruptions may also delay projects or increase costs. Accordingly, we may not be able to realize our expected returns from a large investment in a capital project, and this could negatively impact our results of operations, cash flows and our return on capital employed.

We anticipate that other jurisdictions may contemplate similarly focused legislation or actions. The timing and impacts of SBx 1-2 and any other similarly focused legislation or actions are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, legal challenges, and potential changes in law, regulation, or policy, and it is not currently possible to predict the ultimate effects of these matters and developments, but they may be significant. For example, adverse effects on the financial performance of our operations in the state of California or the useful lives of the assets related to such operations may result in the recognition of material asset impairment chargescharges, accelerated depreciation and asset retirement obligations.

Furthermore, the U.S. government can prevent or restrict us from doing business in foreign countries and from doing business with entities affiliated with foreign governments, which can include state oil companies and U.S. subsidiaries of those companies. The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security matters. The effect of any such OFAC sanctions could disrupt transactions with or operations involving entities affiliated with sanctioned countries, and could limit our ability to obtain optimum crude slates and other feedstocks and effectively distribute refined products. We may face other regulatory changes in the U.S.United States including, but not limited to, the enactment of tax law changes that adversely affect our industry, tariffs on imported material, components and feedstocks and retaliatory tariffs imposed by other countries on U.S. made goods, new emissions standards, restrictive flaring regulations, and more stringent requirements for environmental impact studies and reviews.

Hostilities in the Middle East, Eastern Europe and South America or elsewhere or the occurrence or threat of future terrorist attacks could adversely affect the economies of the U.S.United States and other countries. Other political and economic risks include global health crises; financial market turmoil; economic volatility and global economic slowdown; currency exchange rate fluctuations; short-term and long-term inflationary pressures; rising or prolonged periods of high interest rates; import or export restrictions and changes in trade regulations; supply chain disruptions; civil unrest and other political risks; limitations in the availability of labor to develop, staff and manage operations; and potentially adverse tax developments. If any of these events occur, our businesses and results of operations may be adversely affected.

Publicly traded companies are increasingly subject to campaigns by activist shareholders advocating corporate actions such as operational, governance or management changes, or sales of assets or entire segments. The Company has been and may again be subject to shareholder activism and the corporate actions advocated by the shareholder activist that may not align with the Company’s current business strategies and the best interests of all of the Company’s shareholders.stakeholders. The actions of activist shareholders may cause fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals or prospects of our business. In addition, responding to the actions of activist shareholders can be costly and time-consuming, disrupting our business and diverting the attention of our Board of Directors and management from pursuing our business strategies.

Factors associated with climate change legislation or regulation could result in increased operating costs, reducereduced demand for the refined petroleum products we produce and could otherwise have a material impact on our business.

International climate change-related efforts, such as the 2015 United Nations Conference on Climate Change, which led to the creation of the Paris Agreement, and the 2023 United Nations Climate Change Conference, may impact the regulatory framework of states whose policies directly influence our present and future operations. In January 2025,2026, President Trump signedissued ana executive ordermemorandum directing the United States to withdraw from thevarious Parisinternational Agreement,organizations and ittreaties isrelated expectedto thatclimate President Trumpchange, and the Republican-ledadministration Congresshas willgenerally divergebeen frompursuing thea previousde-regulatory administration’sposture positionson andenvironmental GHG commitments.matters. However, future emission reduction targets and other provisions of legislative or regulatory initiatives and policies enacted in the future by the United States could be brought by future administrations or, in the absence of federal action, states may become more active and focused on taking legislative or regulatory actions aimed at climate change and minimizing GHG emissions.

States have been and are expected to continue to adopt new and amended legislative and regulatory measures regarding climate change and GHG emissions controls. For example, in 2017, the California state legislature adopted Assembly Bill 398, which provides direction and parameters on utilizing cap and trade after 2020 to meet the 40% reduction target for GHG emissions from 1990 levels by 2030 specified in Senate Bill 32. Compliance with the cap and trade program is demonstrated through a market-based credit system. Additionally, on August 25,in 2022, the CARB adopted regulations that effectively ban the in-state sales of new cars containing internal combustion engines beginning in 2035. Also, on December 15,in 2022, CARB adopted its “2022 Scoping Plan for Achieving Carbon Neutrality,” which purports to provide a road map for California to achieve carbon neutrality (which it defines as removing as many carbon emissions from the atmosphere as it emits) by year 2045. Other states are proposing, or have already promulgated, low carbon fuel standards or similar initiatives to reduce emissions from the transportation sector. If we are unable to pass the costs of compliance on to our customers, sufficient credits are unavailable for purchase, we have to pay a significantly higher price for credits, or if we are otherwise unable to meet our compliance obligation, our financial condition and results of operations could be adversely affected. Additionally, certain states have recently passedpassed, or are considering, legislation seeking to recover financial damages allegedly associated with climate change from fossil fuel companies like the Vermont Climate Superfund Act passed by the Vermont Legislature in May 2024.

The future of the U.S.’sU.S. climate change strategy and the impact to our industry and operations due to further GHG regulation is unknown at this time. Federal, regional and state climate change and air emissions goals and regulatory programs are complex, subject to change and impose considerable uncertainty due to a number of factors including technological feasibility, legal challenges and potential changes in federal policy. Increasing concerns about climate change and carbon intensity have resulted in heightened societal awareness and a number of international and national measures to limit GHG emissions. We cannot determine what final regulations will be enacted, modified or reversed, or whether stricter investor pressure can be expected in the future. Any of these changes may have a material adverse impact on our business or financial condition.

Developments aimed at reducing GHG emissions may decrease the demand or increase the cost for our petroleum-based fuels. Societal attitudes toward these products and their relationship to the environment may significantly affect our effectiveness in marketing our products. GovernmentEfforts effortsby governments or other private interests to steer the public toward non-petroleum-based fuel dependent modes of transportation may foster a negative perception toward petroleum products or increase costs of our products, thus affecting the public’s attitude toward our major products. Advanced technology and increased use of vehicles that do not use petroleum-based transportation fuels or that are powered by hybrid engines would reduce demand for the motor fuel we produce. We may also incur increased production costs, which we may not be able to pass along to our customers.

During 2024,2025, we reported earnings of $2.1$4.4 billion and generated $4.2$5 billion in cash from operating activities. We funded capital expenditures and investments of $1.9$2.2 billion, completed acquisitions forof $3.5 billion, net of cash consideration of $625 million, purchased government obligations of $1.1 billion that were ultimately used to extinguish debt,acquired and received proceeds from asset dispositions of $1.1 billion. Additionally, we received proceeds from debt issuances, net of debt repayments, of $2.1$3.5 billion. We paid $3.5$1.2 billion to repurchase common stock and $1.9 billion to fund dividends on our common stock. Additionally, we paid $0.4 billion of debt repayments, net of proceeds from debt issuances. We ended 20242025 with $1.7$1.1 billion of cash and cash equivalents and $4.6$5.7 billion of total committed capacity available under our credit facilities.

In January 2025, we announced the next phase of the company’s strategic priorities along with financial and operational initiativesperformance targets through year-end 2027. WithThese thesetargets targets,demonstrate the companycompany’s is continuing tocontinued focus on creatingworld-class shareholder valueoperations; driving disciplined growth and returns; and maintaining financial strength and flexibility. As the company has completed its business transformation efforts, the company has shifted to operationalflexibility and costshareholder reduction targets intended to drive world-class operations across its portfolio, while maintaining emphasis on growing its Midstream and Chemicals businesses.returns.

•World-Class Operations – We are focused on achieving operational excellenceand bycost optimizingreduction targets driving world-class operations across our portfolio. Optimizing utilization rates and product yield at our refineries through reliable and safe operations, whichoperations will enable us to capture the value available in the market in terms of prices and margins. With our new targets, we willWe remain focused on a competitive cost structure and plan to enhance Refining segment returns and increase our utilization rates by focusing on low-capital, higher-return projects that increase asset reliability and improve market capture.

•Disciplined Growth and Returns – A disciplined capital allocation process ensures we investmake in projectsinvestments that are expected to generate competitive returns. Our strategy remains focused on growing our Midstream and Chemicals businesses. Within our Midstream segment, we are primarily focused on maximizing the value of our fully integrated natural gas liquids (NGL) wellhead-to-market value chain.

▪Our new financial targets forthrough 2025-20272027 reflect our plans to organically grow our Midstream and Chemicals businesses, as well as maintain total annual capital expenditures and investments of approximately $2$2.5 billion, excludingincluding acquisitions.capital related to WRB following the consolidation on October 1, 2025.

•Financial Strength and Flexibility – We use a variety of funding sources to support our liquidity requirements, including cash from operations, debt and proceeds from dispositions. Our focus remains on protecting the stable cash generation from the Midstream and Marketing and Specialties (M&S) businesses while balancingevaluating continuedfuture portfolioopportunities optimization.to optimize our portfolio.

▪During 2024,2025, we used available cash and proceeds from asset dispositions and debt offerings to fund capital expenditures and investments, complete the acquisition of Pinnacle Midstream, purchase government obligations that were ultimately used to extinguish debt, repurchase shares of our common stock and pay dividends on our common stock.

▪We are targeting reductions of total debt to $17 billion and reductions of our debtdebt-to-capital toratio capitalby ratio.the end of 2027.

The Midstream segment includes our Transportation and NGL businesses. Our Transportation business contains fee-based operations not directly exposed to commodity price risk. Our NGL business, including DCP Midstream Class A Segment, DCP Sand Hills Pipeline, LLC (DCP Sand Hills) and DCP Southern Hills Pipeline, LLC (DCP Southern Hills),business contains both fee-based operations and operations directly impacted by NGL and natural gas prices. The weighted-average NGL price was $0.64 per gallon during 2025, compared with $0.68 per gallon during 2024, compared with $0.67 per gallon during 2023.2024. The Henry Hub natural gas price was $2.24$3.54 per million British thermal units (MMBtu) during 2024,2025, compared with $2.53$2.24 per MMBtu during 2023.2024. The increasedecrease in NGL prices was primarily due to higher demand and increased exports,supply, while the decreaseincrease in natural gas prices was partially due to increased production and constraints on Permianliquified natural gas exitexports capacity.as U.S. export infrastructure increases.

The Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors. The benchmark high-density polyethylene chain margin was 7.1 cents per pound in 2025, compared with 17.7 cents per pound in 2024, compared with 16.4 cents per pound in 2023.2024. The increasedecrease was mainly due to improvedhigher polyethyleneethane salesprices, pricespartially anddriven lowerby rising natural gas prices, and ethanecontinued prices.industry oversupply from capacity additions.

Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity, and other operating costs. Market crack spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. The composite 3:2:1 market crack spread for our business decreasedincreased to an average of $20.42 per barrel during 2025, from an average of $16.95 per barrel during 2024, from an average of $28.37 per barrel in 2023.2024. The decreaseincrease in the composite market crack spread was primarily driven by higherstronger supplypetroleum duediesel todemand, increasedsupported globalby refininglow utilizationseasonal inventories, and lower globalcrude prices for gasoline and diesel.prices. The price of U.S. benchmark crude oil, West Texas Intermediate at Cushing, Oklahoma, decreased to an average of $75.83$64.89 per barrel during 2024,2025, from an average of $77.69$75.83 per barrel in 2023.2024. The decrease in crude oil prices was primarily driven by increased global production, including production in the United States and other countries outside of the Organization of the Petroleum Exporting Countries (OPEC).States.

Our Renewable Fuels segment consistsprocesses ofrenewable thefeedstocks operationsinto andrenewable assetsproducts ofat the Rodeo Complex,Renewable asEnergy wellComplex as(Rodeo theComplex) and at our Humber Refinery. In addition, this segment includes global activities to procure renewable feedstocks, manage certain regulatory credits, and market renewable fuels. Results for our Renewable Fuels segment are impacted by several factors, including the market price of renewable fuels, feedstock costs, throughput, operating costs, and the value of certain regulatory credits, as well as other market factors, largely determined by the relationship between supply and demand.

Net income attributable to Phillips 66 for the year ended December 31, 2023,2025, was $7,015$4,403 million, compared with $11,024$2,117 million for the year ended December 31, 2022.2024. The decreaseincrease in 20232025 was primarily due to thea recognitionbefore-tax aggregate gain of an$1.9 aggregatebillion associated with the partial sale of Germany and Austria Marketing in December 2025, improved realized refining margins, primarily driven by higher market crack spreads, as well as a before-tax gain of $3,013$1 millionbillion in 2022 in our Midstream segment in connectionassociated with the DCPsale Midstreamof Merger,our and a declineinvestment in realizedCoop refiningrecognized margins,in January 2025 in the M&S segment. These increases were partially offset by a decreasebefore-tax impairment of $948 million recognized in incomethe taxthird expensequarter andof lower unrealized investment losses2025, related to our equity method investment in NOVONIX.WRB, as well as lower equity earnings from CPChem.

See the “Segment Results” section for additional information on our segment resultsresults, Note 9—Investments, Loans and Long-Term Receivables, Note 2425—Income Taxes, in the Notes to Consolidated Financial Statements for additional information on income taxes. See also Note 3—DCP Midstream, LLC and DCP Midstream, LP Mergers, in the Notes to Consolidated Financial Statements for additional information regarding the DCP Midstream Merger.information.

Equity in earnings of affiliates decreased 12% in 2024, primarily due to lower equity earnings from WRB Refining LP (WRB) as a result of decreased margins, Rockies Express Pipeline LLC (REX) due to the sale of our ownership interest in 2024, South Texas Gateway Terminal due to the sale of our ownership interest in 2023, and Excel Paralubes LLC due to declining margins, partially offset by higher sales volumes and lower maintenance costs. These decreases were partially offset by higher equity earnings from CPChem. See the Chemicals segment analysis in the “Segment Results” section for additional information.

Net gain on dispositions increased $206 million in 2024, primarily due to a before-tax gain of $238 million associated with the sale of our ownership interest in REX, as well as a before-tax gain of $67 million associated with the foreign currency forward contracts entered into in connection with the sale of our ownership interest in Coop Mineraloel AG (Coop).Coop. These increases were partially offset by before-tax gains totaling $137 million associated with the sales of our ownership interests in the South Texas Gateway Terminal and the Belle Chasse Terminal in 2023. See Note 9—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements for moreadditional information regarding our sales of REX and Coop.

Selling, general and administrative expenses increased 11% in 2024, mainly driven by an accrual of $605 million recorded during the third quarter of 2024 related to litigation with Propel Fuels, Inc. (Propel Fuels).Fuels. The increase was partially offset by lower employee-related expenses and selling expenses. See Note 1718—Contingencies and Commitments, in the Notes to Consolidated Financial Statements for additional information regarding our litigation with Propel Fuels.

Depreciation and amortization increased 20% in 2024, primarily due to $253 million of accelerated depreciation recorded in 2024 associated with our plan to cease operations at our Los Angeles Refinery during the fourth quarter of 2025, as well as depreciation and amortization associated with the startup of additional production capacity at the Rodeo Complex. See Note 4—Restructuring, in the Notes to Consolidated Financial Statements for information regarding ourthe plansidling to cease operations atof our Los Angeles Refinery.

Impairments increased $432 million in 2024, primarily due to before-tax impairments recorded in our Midstream segment of certain gathering and processing assets in Texas, an equity investment in a crude pipeline in Oklahoma and certain crude gathering assets in Texas. In 2024, we also recorded before-tax impairments in our Midstream and Refining segments related to certain crude oil processing and logistics assets in California. See Note 12—Impairments, in the Notes to Consolidated Financial Statements for moreadditional information regarding impairments.

Income tax expense decreased 78% in 2024, primarily due to lower income before income taxes. See Note 2425—Income Taxes, in the Notes to Consolidated Financial Statements for moreadditional information regarding our income taxes.

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

Phillips 66 is uniquely positioned as a leading integrated downstream energy provider operating with Midstream, Chemicals, Refining, Marketing and Specialties (M&S) and Renewable Fuels segments. At MarchJune 31,30, 2026, we had total assets of $84.1$81.8 billion. Our common stock trades on the New York Stock Exchange under the symbol PSX.

In the firstsecond quarter of 2026, we reported earnings of $207$3.8 million. In response to the sharp increases in commodity pricesbillion and togenerated preserve$7.3 liquidity,billion weof cash from operations. We had net debt borrowingsrepayments of $7.7 billion and increased our cash and cash equivalents by $4 billion. We used available cash to fund operating activities of $2.3$6.7 billion, funded capital expenditures and investments of $582$726 million, dividendpaid paymentsdividends of $508 million to common stockholders ofand $509repurchased $379 million and repurchases of our common stock of $269 million.stock. The use of cash inprovided by operating activities was primarily due to unfavorablehigher net working capital impacts, which wasearnings, primarily driven by an increase in inventoryrealized refining margins and favorable net working capital impacts. Net working capital reflected favorable impacts from the net timing of payments and collections, lower inventory, and higher accountstaxes receivable,and other accruals, partially offset by higher accountsprepaid payable;expenses asand wellother as,current the funding of approximately $3 billion of cash collateral on derivative positions.assets. As of MarchJune 31,30, 2026, we had $5.2$4.1 billion of cash and cash equivalents and $0.8$6.4 billion of total committed capacity available under our credit facilities.

In early 2025, we announced the next phase of the company’s strategic priorities along with financial and operational performance targets through year-end 2027. These targets demonstrate the company’s continued focus on world-class operations; disciplined growth and returns; financial strength and flexibility; and shareholder returns.

•Shareholder Returns – We believe shareholder value is enhanced through, among other things, a secure, competitive and growing dividend, complemented by share repurchases. Our financial target aims to return greater than 50% of net cash provided by operating activities, excluding working capital, to shareholders through share repurchases and dividends. ThisThe amount and timing of future dividend payments and the level and timing of future share repurchases is subject to the discretion of, and approval by, our Board of Directors and will depend on various factors including our share price, results of operations, financial condition and cash required for future business plans.

•In FebruaryApril and AprilJuly 2026, our Board of Directors declared a quarterly cash dividenddividends of $1.27 per common share, reflecting our commitment to a secure, competitive and growing dividend.

We continue to see significant movements in commodity prices as a result of geopolitical events, and due to the uncertainty regarding their duration, continued disruptions could materially impact our future results. Below is a discussion of additional factors impacting our environment during the three months ended MarchJune 31,30, 20262026, as compared to the same period of 2025.

Our Midstream segment includes our Transportation and NGL businesses. Our Transportation business contains fee-based operations not directly exposed to commodity price risk. Our NGL business contains both fee-based operations and operations directly impacted by NGL and natural gas prices. The weighted-average NGL price was $0.62$0.73 per gallon during the firstsecond quarter of 2026, compared with $0.74$0.64 per gallon during the firstsecond quarter of 2025. The Henry Hub natural gas price was $4.87$2.93 per million British thermal units (MMBtu) during the firstsecond quarter of 2026, compared with $4.27$3.16 per MMBtu during the firstsecond quarter of 2025. The decreaseincrease in NGL prices was primarily due to increaseda supply,tight supply market with fewer cargos from the Middle East, while the increasedecrease in natural gas prices was due to increased liquified natural gas exportssupply asand U.S.the exportend infrastructureof increases.the winter demand season.

Our Chemicals segment consists of our 50% equity investment in Chevron Phillips Chemical Company LLC (CPChem). The chemicals and plastics industry is mainly a commodity-based industry where the margins for key products are based on supply and demand, as well as cost factors. The benchmark high-density polyethylene chain margin was 10.743.6 cents per pound in the firstsecond quarter of 2026, compared with 10.97.4 cents per pound in the firstsecond quarter of 2025. The decreaseincrease was mainly due to higherlower ethaneplant prices,utilizations partiallyin Asia that were driven by risingMiddle naturalEast gassupply prices, and continued industry capacity additions supporting higher global demand.concerns.

Our Refining segment results are driven by several factors, including market crack spreads, refinery throughput, feedstock costs, product yields, turnaround activity and other operating costs. Market crack spreads are used as indicators of refining margins and measure the difference between market prices for refined petroleum products and crude oil. The composite 3:2:1 market crack spread for our business increased to an average of $20.56$41.63 per barrel during the firstsecond quarter of 2026, from an average of $15.83$21.65 per barrel during the firstsecond quarter of 2025. The increase in the composite market crack spread was primarily driven by stronger petroleum diesel demand, supported by low seasonal product inventories, particularly diesel, and geopolitical events reducing global product resupply. The price of U.S. benchmark crude oil, West Texas Intermediate (WTI) at Cushing, Oklahoma, increased to an average of $71.98$93.21 per barrel during the firstsecond quarter of 2026, from an average of $71.46$63.86 per barrel during the firstsecond quarter of 2025. The increase in crude oil prices was primarily driven by geopolitical events in the Middle East restricting global crude supply.

Unless otherwise indicated, discussion of results for the three and six months ended MarchJune 31,30, 2026, is based on a comparison with the corresponding period of 2025.

See Note 6—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements for additional information regarding the sale of our investment in Coop. SeeAdditionally, Note 7—Properties, Plants and Equipment, insee the Notes“Segment toResults” Consolidated Financial Statements for additional information regarding accelerated depreciation. See Note 13—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statementssection for additional information on commodityour derivativesegment activity.results.

Sales and other operating revenues increased 7%53% and 31% for the three and six months ended MarchJune 31,30, 2026, primarily due to higher refined petroleum product sales volumes, partially offset by losses from commodity derivative activity.respectively. Purchased crude oil and products increased 6%50% and 28% for the three and six months ended MarchJune 31,30, 2026, respectively. The increases in both line items for the three and six months ended June 30, 2026, were primarily due to higher prices for refined petroleum products and crude oil, partially offset by impacts associated with the sale of 65% of our interest in Germany and Austria retail marketing business (Germany and Austria Marketing) in December 2025. Additionally, the six months ended June 30, 2026, was impacted by losses from commodity derivative activity and higher crude oil purchase volumes.activity. See Note 13—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statements for additional information.

Equity in earnings of affiliates increased 65%$482 million and $581 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively. The increaseincreases wasfor both periods of 2026 were primarily due to higher equity earnings from CPChem. The increase for the six months ended June 30, 2026, was also driven by equity losses from WRB Refining LP (WRB) in the first quarterhalf of 2025, compared to no equity earnings impact from WRB in the first quarterhalf of 2026 afterdue weto acquiredthe acquisition of the remaining 50% equity interest in WRB on October 1, 2025. See Note 2—Business Combinations, in the Notes to Consolidated Financial Statements for further details on the WRB acquisition.

Net gain on dispositions decreased $1 billion for the three months ended MarchJune 31,30, 2026, was $117 million, compared with a Net loss on dispositions of $93 million for the three months ended June 30, 2025. This increase was primarily due to a before-tax gain of $110 million recorded in the second quarter of 2026, related to post-closing adjustments from the partial sale of Germany and Austria Marketing, as well as a before-tax loss recognized in the second quarter of 2025, primarily associated with an aggregate unrealized loss of $89 million on foreign currency forward contracts entered into in connection with this transaction. For the six months ended June 30, 2026 and 2025, we had a Net gain on dispositions of $123 million and $994 million, respectively. This decrease was primarily due to a before-tax gain of $1 billion associated with the sale of our investment in Coop recognized in January 2025 in the M&S segment. See Note 6—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements for additional information regarding the sale of Coop.dispositions.

Other income increased $148$149 million and $297 million for the three and six months ended MarchJune 31,30, 2026, respectively. The increases for both periods were primarily drivenattributable byto higher results from trading activities and increased sales ofactivities, Clean Fuel Production credits.credits and interest income due to increased average cash balances.

Operating expenses increased $259$370 million and $629 million for the three and six months ended MarchJune 31,30, 2026, respectively. The increases for both periods were primarily duedriven toby our acquisition of WRB in October 2025, partially offset by lower turnaroundcosts costs.following the cessation of operations at the Los Angeles Refinery.

Depreciation and amortization decreased 28% and 29% for the three and six months ended MarchJune 31,30, 2026, respectively. These decreases were primarily due to $246 million of accelerated depreciation recorded in the first quarter of 2025 associated with the cessation of fuel production and idling offor the Los Angeles Refinery. See Note 7—Properties, Plants and Equipment, in the Notes to Consolidated Financial Statements for additional information.

Interest and debt expense increased 29%19% and 24% for the three and six months ended MarchJune 31,30, 2026, respectively, primarily due to higher average debt balances.

Income tax expense decreasedincreased 66%$880 million and $799 million for the three and six months ended MarchJune 31,30, 2026, respectively, primarily due to lowerhigher income before income taxes. See Note 20—Income Taxes, in the Notes to Consolidated Financial Statements for information regarding our effective income tax rates.

Net income attributable to noncontrolling interests decreased $27$26 million for the threesix months ended MarchJune 31,30, 2026, primarily due to impactslower earnings from DCP Midstream, LP (DCP LP) following the gain on sale of DCP Midstream, LP’s (DCP LP’s)its equity investment in Gulf Coast Express Pipeline LLC (GCX) recorded in Januarythe first quarter of 2025. See Note 6—Investments, Loans and Long-Term Receivables, in the Notes to Consolidated Financial Statements for additional information.

Results from our Midstream segment increased $54 million and decreased $160$106 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively.

Results from our Transportation business for the three and six months ended MarchJune 31,30, 2026, were in line with results for the three and six months ended MarchJune 31,30, 2025.

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

Results from our Refining segment increased $1,145$2,703 million and $3,848 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively. The increase in the three months ended MarchJune 31,30, 2026, was primarily due to higher realized margins as a result of improved market crack spreads and inventory impacts, including commodity derivative activity, partially offset by increased feedstock costs. The increase in the six months ended June 30, 2026, was primarily driven by improvedhigher realized margins and $246 million of accelerated depreciation recorded in the first quarter of 2025 associated with the cessation of fuel production and idling of the Los Angeles Refinery.volumes. The increase in realized margins in the six months ended June 30, 2026, was primarily due to higherimproved market crack spreads and increased feedstock advantage. These increases arespreads, partially offset by higherincreased RINfeedstock costs and impacts of commodity derivative activities.costs. See Note 13—Derivatives and Financial Instruments, in the Notes to Consolidated Financial Statements for additional information and the “Executive Overview and Business Environment” section for information on commodityindustry derivativecrack activity.spreads and other market factors impacting this quarter’s results.

Our worldwide refining crude oil capacity utilization rate was 95%96% and 80%95% for the three and six months ended June 30, 2026, respectively, compared with 98% and 89% in the three and six months ended June 30, 2025, respectively. The decrease for the three months ended MarchJune 31, 2026, and 2025, respectively. The increase for the three months ended March 31,30, 2026, was primarily due to higher turnaround activity. The increase for the six months ended June 30, 2026, was due to lower turnaround activity. See the “Executive Overview and Business Environment” section for information on market factors impacting this quarter’s results.

Results from the M&S segment increased $12 million and decreased $1.4$1,431 billionmillion for the three and six months ended June 30, 2026, respectively. The increase in the three months ended MarchJune 31,30, 2026.2026, was primarily driven by impacts associated with the partial sale of Germany and Austria Marketing, along with higher equity earnings from Excel Paralubes. These increases were partially offset by lower domestic marketing fuel margins and legal accruals. The decrease in the six months ended June 30, 2026, was primarily due to a before-tax gain of $1 billion associated with the sale of our investment in Coop recognized in January 2025, as well as lower U.S. and international marketing fuel margins, mainly driven by commodity derivative activities.activity. These decreases were partially offset by activity associated with the partial sale of Germany and Austria Marketing.

Results from the Renewable Fuels segment increased $144$677 million and $821 million for the three and six months ended MarchJune 31,30, 2026.2026, The increase wasrespectively, primarily due to higher renewablevalues productof pricingregulatory and credit generation. These increases were partially offset by commodity derivative activities and lower product sales volumes.credits.

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Corporate overhead and other includes general and administrative expenses, technology costs, environmental costs associated with sites no longer in operation, restructuring costs related to our business transformation, foreign currency transaction gains and losses and other costs not directly associated with an operating segment. Effective in the first quarter of 2026, activities associated with the decommissioning and redevelopment of our idled Los Angeles Refinery site are also included in corporate overhead and other. In addition, Corporate and Other also includes the change in the fair value of our investment in NOVONIX. See Note 14—Fair Value Measurements, in the Notes to Consolidated Financial Statements for additional information regarding our investment in NOVONIX.

Net interest expense increased $68$3 million and $71 million for the three and six months ended MarchJune 31,30, 2026, respectively. The increase in the six months ended June 30, 2026, was primarily duedriven toby higher average debt balances, partially offset by increased average cash balances.

Corporate overhead and other costs increaseddecreased $13$28 million and $15 million for the three and six months ended MarchJune 31,30, 2026, respectively. The decreases for both periods were primarily due to lower depreciation expense associated with information technology assets and advisory fees related to proxy solicitation services, both recorded in 2025, partially offset by costs associated with the decommissioning and redevelopment of our idled Los Angeles Refinery sitesite. andThe higherdecrease employee-relatedfor expenses.the Thesethree weremonths partiallyended offsetJune 30, 2026, was additionally impacted by lowerthe depreciationtiming expenseof associatedcorporate withcharitable informationcontributions, technologywhile assetsthe anddecrease for the six months ended June 30, 2026, also reflected charges associated with canceled projects, bothprojects recorded in the first quarter of 2025.

To meet our short- and long-term liquidity requirements, we use a variety of funding sources but rely primarily on cash generated from operating activities and debt financing. During the first threesix months of 2026, we hadgenerated net$5 debt borrowingsbillion of $7.7cash billionfrom andoperations, increased cash and cash equivalents by $4$3 billion and had net debt borrowings of $1 billion. We used cash to fund operating activities of $2.3 billion,funded capital expenditures and investments of $582$1.3 million,billion, paid $509$1 millionbillion of dividends to our common stockholders, and repurchased $269$0.6 millionbillion of our common stock. At this time, we believe that our cash on hand, as well as the sources of liquidity described herein, will be sufficient to fund our obligations over the short- and long-term.

During the first threesix months of 2026, net cash usedgenerated inby operating activities was $2.3$5 billion, compared with net$1 cash provided by operating activities of $187 millionbillion for the first threesix months of 2025. The decreaseincrease was primarily due to unfavorablehigher working capital impacts, mostlyearnings, driven by an increase in inventoryrealized andrefining higher accounts receivablemargins, as well as fundingfavorable working capital impacts. The favorable working capital impacts were primarily driven by the net timing of approximatelypayments $3and billioncollections, oflower cashinventory, collateraland onhigher derivativetaxes positions,and largelyother due to a sharp increase in commodity prices during the quarter.accruals. These decreasesincreases in working capital were partially offset by higher accountsprepaid payable.expenses and other current assets.

Our operating cash flows are also impacted by distribution decisions made by our equity affiliates. During the first threesix months of 2026, cash from operations included aggregate distributions of $166$287 million from our equity affiliates, while cash from operations during the first threesix months of 2025 included aggregate distributions of $273$501 million from our equity affiliates. We cannot control the amount of future dividends from equity affiliates; therefore, future dividend payments by these equity affiliates are not assured.

On March 18, 2026 (the Term Loan Closing Date), Phillips 66 Company entered into a 364-day, $2.25 billion term loan agreement guaranteed by Phillips 66 (the Term Loan Agreement). The Term Loan Agreement provides for a single borrowing on the Term Loan Closing Date and matures 364 days after the Term Loan Closing Date. The Term Loan Agreement contains customary covenants similar to those contained in our revolving credit agreement, including a maximum consolidated net debt-to-capitalization ratio of 65% as of the last day of each fiscal quarter. The Term Loan Agreement has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts after grace periods; and violation of covenants. We may at any time prepay outstanding borrowings under the Term Loan Agreement, in whole or in part, without premium or penalty. Outstanding borrowings under the Term Loan Agreement bear interest at either: (a) the term Secured Overnight Financing Rate (SOFR) in effect from time to time plus an applicable margin of 1.100%; or (b) the reference rate (as described in the Term Loan Agreement) plus an applicable margin of 0.100%. At MarchJune 31,30, 2026, the entire $2.25$1.25 billion was borrowedoutstanding under the Term Loan Agreement, which matures in March 2027. On July 31, 2026, this amount was fully repaid.

On September 30, 2024, Phillips 66 Company entered into a 364-day, $500 million accounts receivable securitization facility (the Receivables Securitization Facility). Under the Receivables Securitization Facility, Phillips 66 Company sells or contributes on an ongoing basis, certain of its receivables, together with related security and interests in the proceeds thereof, to its wholly owned subsidiary, Phillips 66 Receivables LLC (P66 Receivables), a consolidated and bankruptcy-remote special purpose entity created for the sole purpose of transacting under the Receivables Securitization Facility. During 2025, Phillips 66 Company amended the Receivables Securitization Facility to, among other things, increase the maximum size of the Receivables Securitization Facility to $1.25 billion and extend the term of the facility through September 28, 2026. On March 13, 2026, Phillips 66 Company amended the Receivables Securitization Facility to, among other things, increase the maximum size of the Receivables Securitization Facility from $1.25 billion to $1.75 billion and permit P66 Receivables to request a future increase in the maximum facility size to up to $2.0$2 billion. Under the amended Receivables Securitization Facility, P66 Receivables may borrow and incur indebtedness from, and/or sell certain accounts receivable in an amount not to exceed $1.75 billion in the aggregate, and will secure its obligations with a pledge of undivided interests in such receivables, together with related security and interests in the proceeds thereof, to PNC Bank, National Association, as Administrative Agent, for the benefit of the secured parties thereunder. Accounts receivable outstanding under the Receivables Securitization Facility accrue interest at an adjusted term SOFR plus the applicable margin. In all instances, Phillips 66 Company retains the servicing of the accounts receivablesreceivable transferred.

Accounts receivable sold under the Receivables Securitization Facility meet the sale criteria under ASC 860, Transfers and Servicing, and are derecognized from the consolidated balance sheet. P66 Receivables guarantees payment, in full, for accounts receivable sold to the purchasers. For the three months ended MarchJune 31,30, 2026, we sold $264$342 million of accounts receivable for cash proceeds. For the six months ended June 30, 2026, we sold $606 million of accounts receivable in exchange for cash proceeds of $342 million and a $264 million reduction in our borrowings under the Receivables Securitization Facility, which was recognized as a non-cash financing transaction. For the three months ended MarchJune 31,30, 2025, we sold $130$303 million of accounts receivablesreceivable in exchange for a $303 million reduction in our borrowings under the Receivables Securitization Facility, which was recognized as a non-cash financing transaction. For the six months ended June 30, 2025, we sold $433 million of accounts receivable in exchange for cash proceeds of $130 million and a $303 million reduction in our borrowings under the Receivables Securitization Facility. We recognized immaterial charges associated with the transfers of financial assets, which are included as a component within the line item “Selling, general and administrative expenseexpenses” on our consolidated statement of income, during the three and six months ended MarchJune 31,30, 2026 and 2025.

Borrowings under the Receivables Securitization Facility are recognized as short-term debt on the consolidated balance sheet. Borrowings are secured by the accounts receivable, held by P66 Receivables, which remain reported as accounts receivable on the consolidated balance sheet. At MarchJune 31,30, 2026, andwe Decemberhad 31,no 2025,outstanding weborrowings under the Receivables Securitization Facility. We had outstanding borrowings of $384$200 million andat $200December million,31, respectively.2025, These borrowingswhich were secured by accounts receivable held by P66 Receivables of $5.4 billion and $4.4 billion as of March 31, 2026, and December 31, 2025, respectively, which are included within the “Accounts and notes receivable” line item on our consolidated balance sheet.

At MarchJune 31,30, 2026, we had utilized $650$346 million of the $1.75 billion capacity of the Receivables Securitization FacilityFacility, all of which was from $266 million of sold accounts receivable not yet remitted to the Administrative Agent and $384 million of outstanding borrowings.Agent. At December 31, 2025, we had utilized $367 million of the $1.25 billion capacity of the Receivables Securitization Facility from $167 million of sold accounts receivable not yet remitted to the Administrative Agent and $200 million of outstanding borrowings.