Phillips 66, headquartered in Houston, Texas, was incorporated in Delaware
on November 10, 2011, in connection with, and in anticipation of, a restructuring
of ConocoPhillips. On April 4, 2012, the ConocoPhillips Board of Directors approved
the separation of its downstream businesses into an independent, publicly traded
company named Phillips 66.
We have organized our reporting structure based on the grouping of similar
products and services, resulting in three operating segments:
1) R&M—This segment purchases, refines, markets and transports crude
oil and petroleum products, mainly in the United States, Europe and Asia. This
segment also includes power generation operations. The R&M segments “refining”
and “marketing, specialties and other” operations are disclosed
separately for supplemental reporting purposes.
2) Midstream—This segment gathers, processes, transports and markets natural
gas; and transports, fractionates and markets natural gas liquids (NGL) in the
United States. The Midstream segment includes our 50 percent equity investment
in DCP Midstream, LLC (DCP Midstream).
3) Chemicals—This segment manufactures and markets petrochemicals and
plastics on a worldwide basis. The Chemicals segment consists of our 50 percent
equity investment in Chevron Phillips Chemical Company LLC (CPChem).
COMPETITION
Our R&M segment competes primarily in the United States, Europe and Asia.
Based on the statistics published in the December 3, 2012, issue of the Oil
& Gas Journal, we are one of the largest refiners of petroleum products
in the United States. Worldwide, our refining capacity ranked in the top 10
among non-government-controlled companies. In the Chemicals segment, CPChem
generally ranked within the top 10 producers of many of its major product lines,
based on average 2012 production capacity, as published by industry sources.
Petroleum products, petrochemicals and plastics are typically delivered into
the worldwide commodity markets. Elements of competition for both our R&M
and Chemicals segments include product improvement, new product development,
low-cost structures, and efficient manufacturing and distribution systems. In
the marketing portion of the business, competitive factors include product properties
and processibility, reliability of supply, customer service, price and credit
terms, advertising and sales promotion, and development of customer loyalty
to branded products.
The Midstream segment, through our equity investment in DCP Midstream and our
other operations, competes with numerous integrated petroleum companies, as
well as natural gas transmission and distribution companies, to deliver components
of natural gas to end users in the commodity natural gas markets. DCP Midstream
is one of the leading natural gas gatherers and processors in the United States
based on wellhead volumes, and one of the largest U.S. producers and marketers
of NGL, based on published industry sources. Principal methods of competing
include economically securing the right to purchase raw natural gas for gathering
systems, managing the pressure of those systems, operating efficient NGL processing
plants and securing markets for the products produced.