Businessmodel of Phillips 66

Customer Segments

Phillips 66 manufactures and distributes a broad portfolio of products that serve different functions across a range of commercial industries. The Company provides products and services a diverse selection of industries, including customers in the following sectors:

• Petrochemicals, including various petrochemical producers;
• Transportation and Automotive, including automotive manufacturers, aftermarket service providers, fleet operators, and transportation companies;
• Plastics and Packaging, including manufacturers of various packaging and plastics products;
• Chemicals and Lubricants, including manufacturers of chemicals and lubricants;
• Aviation and Aerospace, including aviation engineering companies, airfield services companies, and other aerospace businesses; and
• Energy, including power generators and other midstream, and downstream energy businesses. Phillips 66 also provides a range of consumer-focused automotive products under its Phillips 66, Conoco, and 76 brands.

Phillips 66’s principal market is its native US, which accounts for the majority of the Company’s revenue. The Company also serves a range of international customers across multiple regions, notably in the UK and Germany.

Value Propositions

Phillips 66 provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as a leading energy manufacturing and logistics company in the US and internationally, with a track record for providing high-quality services reliably and efficiently;
• Its portfolio of products, with the Company manufacturing and selling a broad range of products – including petrochemicals, distillates, and gasolines – as well as various ancillary services, serving a diverse range of markets, including the automotive and energy sectors;
• Its international reach, with the Company serving a large domestic customer base in the US, as well as serving a network of international clients, notably in Germany, and the UK;
• Its proprietary technologies, with the Company dedicating a portion of its funds to the development of innovative products and processes that enable it to provide unique products that cannot be purchased from competing companies; and
• Its industry expertise and experience, with the Company employing specialist technical personnel across its operating segments, as well as a team of experienced industry executives, and having a historic relationship with major oil and gas company ConocoPhillips. ### Channels

Phillips 66 operates a website at www.phillips66.com, through which it provides information on its various products, services, and other activities. The Company does not operate an online sales channel, nor does it provide an online portal through which clients can manage transactions.

Phillips 66 makes much of its sales through an in-house direct sales force organised by geographic region and operating segment. These sales representatives operate out of the Company’s network of offices, which includes locations across the Americas and Europe. The Company also makes sales of its gasoline, diesel and aviation fuel products in the US through approximately 8,350 marketer-owned or supplied outlets in 48 states. These sites utilize the Phillips 66, Conoco or 76 brands. The Company also has a wholesale infrastructure which comprises a network of marketers operating approximately 6,700 outlets.

Phillips 66 additionally operates its own network of refining facilities across the US, as well as an extensive pipeline network through which it is able to provide certain midstream and refining services to customers.

Customer Relationships

Phillips 66 does not provide products or services to its customers on a self-service basis. The Company makes the majority of its sales through its direct sales force, the members of which consult directly with clients in order to establish their individual needs and circumstances. The Company seeks to provide excellent customer care, encouraging longstanding relationships. The Company also provides personalised assistance through its retail network, where customers are able to browse products independently.

Phillips 66 Provides ongoing support to its customers. Clients are able to contact the Company’s support staff directly either over the phone, by post or via an online contact form in order to receive tailored responses to queries and enquiries. Certain larger customers are also provided their own account management teams to provide support and maintain ongoing contact.

Phillips 66 additionally provides a range of online resources to its customers, including product information and news and media coverage. It also operates a number of social media accounts – including with Facebook, Twitter, YouTube, and Instagram – through which it is able to interact with customers directly and provide timely updates on company developments.

Key Activities

Phillips 66 is an energy manufacturing and logistics company, operating midstream, chemicals, refining and marketing, and specialties businesses. The Company aligns its operations into four reportable business segments: Midstream, which includes its equity investments in midstream businesses DCP Midstream LLC and in Phillips 66 Partners LP, as well as the Company’s crude oil, feedstock, and delivery operations; Chemicals, which manufactures and markets petrochemicals and plastics; Refining, which buys, sells and refines crude oil and other feedstocks into petroleum products; and Marketing and Specialties, which purchases and markets refined petroleum products for resale. The Company serves an international customer bases spanning multiple industries, including the automotive, petrochemicals, and energy sectors.

Key Partners

Phillips 66 works closely with a broad network of partner companies and organisations in order to ensure the efficient and reliable operation of its various businesses. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, including suppliers of raw materials, equipment, and tools used in the Company’s refining processes, as well as providers of services and technologies that are employed more broadly across the enterprise;
• Channel and Distribution Partners, including the Company’s network of marketing and sales agents that assist in the Company’s wholesale business in the US;
• Joint Venture Partners, including various refining and logistics companies with which the Company jointly provides products and services through mutually owned entities; and
• Sustainability Partners, including various non-profits and charitable organisations with which the Company collaborates on sustainability and community projects, primarily in the US. Phillips 66 has launched numerous partnerships in recent years. This includes a branding agreement with CST Brands, a partnership with foodpros.com offering national discount pricing on foodservice equipment and merchandising items, and an education and research partnership with the University of Oklahoma.

Key Resources

Phillips 66’s key resources are its intellectual properties and technologies, its raw materials and supply chain, its network of refining and pipeline facilities, its other sales and distribution infrastructure, its partnerships, and its personnel.

Phillips 66 owns 404 active patents in 30 countries worldwide, including 260 active US patents, which it utilises in the production and distribution of its products. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in the name of Phillip 66, including applications entitled ‘Injector nozzle for quenching within piping systems’, ‘Upgrading sugar-alcohol derived gas oil in a gas oil hydrocracker’ and ‘Slurry oil upgrading while preserving aromatic content’.

Phillips 66 owns a network of physical infrastructure that is key to its operations. This includes its interest in major pipeline networks across the US, as well as its various refining, storage, and terminal facilities.

Cost Structure

Phillips 66 incurs costs in relation to the development of its technologies and solutions, the procurement of raw materials and professional services, the purchase of goods for resale, the operation of its refining and distribution infrastructure, the operation of its sales channels, the implementation of marketing and promotional campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 Phillips 66 recorded total expenses and costs in the amount of $94.91 billion. This included purchased crude oil and products totaling $73.40 billion, operating expenses in the amount of $4.29 billion, and selling, general, and administrative costs totaling $1.67 billion.

Revenue Streams

Phillips 66 generates revenue through the sale of various petrochemicals and chemicals products, as well as through the provision of related terminaling, storage and other related products.

In 2015 Phillips 66 generated total operating and sales revenue in the amount of $98.98 billion, down substantially on the 161.21 billion recorded by the Company the previous year. The Company attributed this decrease to a general decline in average prices for petroleum products, crude oil and natural gas liquids.

The majority of the Company’s revenue was attributed to its Marketing and Specialties segment, which alone recorded operating and sales revenue for the year of $73.15 billion. The bulk of the remaining revenue was generated by the Refining segment, which recorded $23.15 billion in sales and operating revenue.