Phillips 66PSX
Phillips 66 Stock Compensation Disclosure
Share-Based Compensation Plans
Share-based payment awards, including stock options, Restricted Stock Unit (RSU) awards, and performance awards, are granted to our employees, nonemployee directors and other plan participants by the Human Resources and Compensation Committee (HRCC) of our Board of Directors under the applicable Omnibus Stock and Performance Incentive Plan of Phillips 66. Prior to May 11, 2022, share-based payment awards were granted under the 2013 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the 2013 P66 Omnibus Plan). On May 11, 2022, Phillips 66’s shareholders approved the 2022 Omnibus Stock and Performance Incentive Plan of Phillips 66 (the 2022 P66 Omnibus Plan), which replaced the 2013 P66 Omnibus Plan. No future awards will be made under the 2013 P66 Omnibus Plan. As of December 31, 2025, approximately 11 million shares of Phillips 66’s common stock remained available to be issued to settle share-based payment awards under the 2022 P66 Omnibus Plan.
Total share-based compensation expense recognized in income and the associated income tax benefit for the years ended December 31 were:
| Millions of Dollars | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Restricted stock units | $ | 115 | 121 | 130 | |||||||||||||
| Performance share units | 100 | 83 | 139 | ||||||||||||||
| Stock options | 2 | 4 | 19 | ||||||||||||||
| Other | 3 | 2 | 9 | ||||||||||||||
| Total share-based compensation expense | $ | 220 | 210 | 297 | |||||||||||||
| Income tax benefit | $ | (65) | (84) | (87) | |||||||||||||
Restricted Stock Units
Generally, RSUs are granted annually under the provisions of the applicable Phillips 66 incentive plan, and vest either ratably over three years following the grant date or cliff vest at the end of three years for awards granted in 2025, 2024 and 2023. For awards granted prior to 2023, RSUs cliff vest at the end of three years. The grant date fair value is equal to the average of the high and low market price of our stock on the grant date. The recipients receive a quarterly dividend equivalent cash payment until the RSU is settled by issuing one share of our common stock for each RSU at the end of the service period. For recipients outside of the United States and United Kingdom, expected dividend equivalents during the service period are reduced from the grant date fair value on the grant date. RSUs granted to retirement-eligible employees are not subject to forfeiture ten months after the grant date. Special RSUs are granted to attract or retain key personnel and the terms and conditions may vary by award.
The following table summarizes our RSU activity from January 1, 2025, to December 31, 2025:
| Stock Units | Weighted-Average Grant-Date Fair Value | ||||||||||
| Outstanding at January 1, 2025 | 2,861,407 | $ | 109.20 | ||||||||
| Granted | 995,345 | 128.09 | |||||||||
| Forfeited | (82,589) | 126.84 | |||||||||
| Issued | (1,508,654) | 97.98 | |||||||||
| Outstanding at December 31, 2025 | 2,265,509 | $ | 124.34 | ||||||||
| Not Vested at December 31, 2025 | 1,619,525 | $ | 124.22 | ||||||||
At December 31, 2025, the remaining unrecognized compensation cost from unvested RSU awards was $92 million, which will be recognized over a weighted-average period of 19 months, the longest period being 35 months.
During 2024 and 2023, we granted RSUs with a weighted-average grant-date fair value of $145.65 and $100.39, respectively. During 2025, 2024 and 2023, we issued shares with an aggregate fair value of $186 million, $206 million and $126 million, respectively, to settle RSUs.
Performance Share Units
Under the applicable Phillips 66 incentive plan, senior management is annually awarded restricted performance share units (PSUs) with three-year performance periods. These awards vest when the HRCC approves the three-year performance results, which represents the grant date. Retirement-eligible employees may retain a prorated share of the award if they retire prior to the grant date. PSUs are classified as liability awards and compensation expense is recognized over the three-year performance periods.
PSUs granted under the applicable Phillips 66 incentive plan are settled by cash payments equal to the fair value of the awards, which is based on the market prices of our stock near the end of the performance periods. The HRCC must approve the three-year performance results prior to payout. Dividend equivalents are not paid on these awards.
PSUs granted under prior incentive compensation plans were classified as equity awards. These equity awards are settled upon an employee’s retirement by issuing one share of our common stock for each PSU held. Dividend equivalents are paid on these awards.
The following table summarizes our PSU activity from January 1, 2025, to December 31, 2025:
| Performance Share Units | Weighted-Average Grant-Date Fair Value | ||||||||||
| Outstanding at January 1, 2025 | 432,093 | $ | 37.75 | ||||||||
| Granted | 883,094 | 119.96 | |||||||||
| Forfeited | — | — | |||||||||
| Issued | (102,290) | 36.74 | |||||||||
| Cash settled | (883,094) | 119.96 | |||||||||
| Outstanding at December 31, 2025 | 329,803 | $ | 38.06 | ||||||||
At December 31, 2025, there was no remaining unrecognized compensation cost from unvested PSU awards.
During 2024 and 2023, we granted PSUs with a weighted-average grant-date fair value of $130.22 and $102.66, respectively. During 2025, 2024 and 2023, we issued shares with an aggregate fair value of $12 million, $14 million and $13 million, respectively, to settle PSUs. During 2025, 2024 and 2023, we cash settled PSUs with an aggregate fair value of $106 million, $131 million and $36 million, respectively.
Stock Options
Stock options granted under the provisions of the applicable Phillips 66 incentive plan and earlier plans permit purchases of our common stock at exercise prices equivalent to the average of the high and low market price of our stock on the date the options were granted. The options have terms of 10 years and vest ratably over three years following the grant date, with one-third of the options becoming exercisable each year on the grant date anniversary. Options granted to retirement-eligible employees are not subject to forfeiture ten months after the grant date. No options were granted in 2025 and 2024.
The following table summarizes our stock option activity from January 1, 2025, to December 31, 2025:
| Options | Weighted-Average Exercise Price | ||||||||||
| Outstanding at January 1, 2025 | 4,056,466 | $ | 89.32 | ||||||||
| Granted | — | — | |||||||||
| Forfeited | (3,301) | 97.80 | |||||||||
| Exercised | (1,221,431) | 87.40 | |||||||||
| Outstanding at December 31, 2025 | 2,831,734 | $ | 90.11 | ||||||||
| Vested at December 31, 2025 | 2,769,822 | $ | 89.89 | ||||||||
| Exercisable at December 31, 2025 | 2,582,241 | $ | 89.12 | ||||||||
The weighted-average remaining contractual terms of vested options and exercisable options at December 31, 2025, were 5.20 and 5.06 years, respectively. During 2025, we received $107 million in cash and realized an income tax benefit of $12 million from the exercise of options. At December 31, 2025, the remaining unrecognized compensation expense from unvested options was $0.3 million, which will be recognized over a weighted-average period of 3 months, the longest period being 5 months.
In 2025 and 2024, no options were granted. In 2023, we granted options with a weighted-average grant-date fair value of $27.45. During 2025, 2024 and 2023, employees exercised options with an aggregate intrinsic value of $55 million, $68 million and $52 million, respectively. At December 31, 2025, the aggregate intrinsic value of vested and exercisable options was $109 million and $103 million, respectively.
The following table provides the significant assumptions used to calculate the grant-date fair values of options granted in 2023, as calculated using the Black-Scholes-Merton option-pricing model:
| 2023 | ||||||||
| Risk-free interest rate | 3.84 | |||||||
| Dividend yield | 3.80 | |||||||
| Volatility factor | 35.19 | |||||||
| Expected life (years) | 6.78 | |||||||
No options were granted in 2025 or 2024. | ||||||||
We calculate the volatility factor using historical Phillips 66 end-of-week closing stock prices. We periodically calculate the average period of time elapsed between grant dates and exercise dates of past grants to estimate the expected life of new option grants.
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 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.