Phillips 66PSX
Phillips 66 Leases Disclosure
Leases
We lease marine vessels, pipelines, storage tanks, railcars, service station sites, office buildings, corporate aircraft, land and other facilities and equipment. In determining whether an agreement contains a lease, we consider our ability to control the asset and whether third-party participation or vendor substitution rights limit our control. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices, as well as renewal options and/or options to purchase the leased property. Renewal options have been included only when reasonably certain of exercise. There are no significant restrictions imposed on us in our lease agreements with regards to dividend payments, asset dispositions or borrowing ability. Certain leases have residual value guarantees, which may require additional payments at the end of the lease term if future fair values decline below contractual lease balances.
We discount lease obligations using our incremental borrowing rate. We separate costs for lease and service components for contracts involving marine vessels, consignment service stations, and refining processing equipment. For these contracts, we allocate the consideration payable between the lease and service components using the relative standalone prices of each component. For contracts involving all other asset types, we account for the lease and service components on a combined basis. For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised, we do not recognize the right-of-use (ROU) asset and corresponding lease liability on our consolidated balance sheet.
The following table indicates the consolidated balance sheet line items that include the ROU assets and lease liabilities for our finance and operating leases at December 31:
| Millions of Dollars | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Finance Leases | Operating Leases | Finance Leases | Operating Leases | ||||||||||||||||||||
| Right-of-Use Assets | |||||||||||||||||||||||
| Prepaid expenses and other current assets | $ | — | — | — | 20 | ||||||||||||||||||
| 299 | — | 323 | — | ||||||||||||||||||||
| Other assets | — | 1,807 | — | 1,300 | |||||||||||||||||||
| Total right-of-use assets | $ | 299 | 1,807 | 323 | 1,320 | ||||||||||||||||||
| Lease Liabilities | |||||||||||||||||||||||
| $ | 34 | — | 30 | — | |||||||||||||||||||
| — | 574 | — | 421 | ||||||||||||||||||||
| 304 | — | 322 | — | ||||||||||||||||||||
| — | 1,296 | — | 934 | ||||||||||||||||||||
| Total lease liabilities | $ | 338 | 1,870 | 352 | 1,355 | ||||||||||||||||||
Future minimum lease payments at December 31, 2025, for finance and operating lease liabilities were:
| Millions of Dollars | ||||||||||||||
| Finance Leases | Operating Leases | |||||||||||||
| 2026 | $ | 49 | 657 | |||||||||||
| 2027 | 41 | 506 | ||||||||||||
| 2028 | 40 | 378 | ||||||||||||
| 2029 | 37 | 281 | ||||||||||||
| 2030 | 34 | 158 | ||||||||||||
| Remaining years | 255 | 110 | ||||||||||||
| Future minimum lease payments | 456 | 2,090 | ||||||||||||
| Amount representing interest or discounts | (118) | (220) | ||||||||||||
| Total lease liabilities | $ | 338 | 1,870 | |||||||||||
Our finance lease liabilities relate primarily to our marketing business, service station consignment agreements with a marketing joint venture, and a crude oil terminal in the United Kingdom. The lease liability for the terminal finance lease is subject to foreign currency translation adjustments each reporting period.
Components of net lease cost for the years ended December 31 were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Finance lease cost | |||||||||||||||||
| Amortization of right-of-use assets | $ | 33 | 33 | 30 | |||||||||||||
| Interest on lease liabilities | 16 | 13 | 9 | ||||||||||||||
| Total finance lease cost | 49 | 46 | 39 | ||||||||||||||
| Operating lease cost | 597 | 478 | 390 | ||||||||||||||
| Short-term lease cost | 124 | 88 | 76 | ||||||||||||||
| Variable lease cost | 55 | 53 | 55 | ||||||||||||||
| Sublease income | (28) | (19) | (12) | ||||||||||||||
| Total net lease cost | $ | 797 | 646 | 548 | |||||||||||||
Cash paid for amounts included in the measurement of our lease liabilities for the years ended December 31 was:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Operating cash outflows—finance leases | $ | 16 | 13 | 15 | |||||||||||||
| Operating cash outflows—operating leases | 600 | 473 | 390 | ||||||||||||||
| Financing cash outflows—finance leases | 30 | 28 | 19 | ||||||||||||||
During the years ended December 31, 2025, 2024 and 2023, we recorded noncash ROU assets and corresponding operating lease liabilities totaling $1,125 million, $547 million and $398 million, respectively, related to new and modified lease agreements, including leases acquired as part of the business combinations. See Note 5—Business Combinations for additional information.
The weighted-average remaining lease terms and discount rates for our lease liabilities at December 31 were:
| 2025 | 2024 | ||||||||||
| Weighted-average remaining lease term—finance leases (years) | 12.2 | 13.0 | |||||||||
| Weighted-average remaining lease term—operating leases (years) | 4.2 | 4.9 | |||||||||
| Weighted-average discount rate—finance leases | 4.4 | % | 4.4 | ||||||||
| Weighted-average discount rate—operating leases | 5.2 | 4.8 | |||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 19, 2016 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.