What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 638 added, 581 removed, 1244 unchanged (49% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Revenues and Other Income

1 unchanged sentence

Equity in earnings of affiliates

Gain (loss) on dispositions

Gain on dispositions

Other income (loss)

9 unchanged sentences

Interest and debt expense

Foreign currency transactions (gain) loss

Foreign currency transaction (gain) loss

Other expenses

1 unchanged sentence

Income (loss) before income taxes

Income tax provision

Income tax provision (benefit)

Net income (loss)

11 unchanged sentences

Three Months Ended

Six Months Ended

Net Income (Loss)

1 unchanged sentence

Defined benefit plans

Reclassification adjustment for amortization of prior service credit

included in net income (loss)

Reclassification adjustment for amortization of prior

service credit included in net income (loss)

Net actuarial gain arising during the period

Reclassification adjustment for amortization of net actuarial losses included

in net income (loss)

Reclassification adjustment for amortization of net actuarial

losses included in net income (loss)

Income taxes on defined benefit plans

Defined benefit plans, net of tax

Net unrealized holding loss on securities

Income taxes on net unrealized holding loss on securities

Net unrealized holding loss on securities, net of tax

Unrealized holding gain (loss) on securities

Income taxes on unrealized holding gain on securities

Unrealized holding gain (loss) on securities, net of tax

Foreign currency translation adjustments

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Comprehensive Income (Loss)

comprehensive income attributable to noncontrolling

Comprehensive Income (Loss) Attributable to ConocoPhillips

comprehensive income attributable to noncontrolling interests

Comprehensive Income (Loss) Attributable to

ConocoPhillips

See Notes to Consolidated Financial Statements.

43 unchanged sentences

Millions of Dollars

Three Months Ended

Six Months Ended

Cash Flows From Operating Activities

6 unchanged sentences

Undistributed equity earnings

(Gain) loss on dispositions

Unrealized (gain) loss on investment in Cenovus Energy

Gain on dispositions

(Gain) loss on investment in Cenovus Energy

capital adjustments

Decrease (increase) in accounts and notes receivable

Decrease (increase) in inventories

Increase in inventories

Increase in prepaid expenses and other current assets

7 unchanged sentences

Proceeds from asset dispositions

Net purchases of investments

Net sales (purchases) of investments

Collection of advances/loans—related parties

6 unchanged sentences

Net Cash Used in Financing Activities

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash

Net Change in Cash, Cash Equivalents and Restricted Cash

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million are included in the "Prepaid expenses and other current assets" and "Other assets" lines,

respectively, of our Consolidated Balance Sheet as of March 31, 2021.

respectively, of our Consolidated Balance Sheet as of June 30, 2021.

Restricted cash of $

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necessary for a fair

presentation of the consolidated financial

position of ConocoPhillips and its results

of operations and cash

presentation of the consolidated financial position

of ConocoPhillips and its results of operations

flows for such periods.

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million and $

million at March 31, 2021 and December

million at June 30, 2021 and December

31, 2020, respectively.

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agreement, each share of Concho common stock

was exchanged at a fixed ratio of

for shares of

ConocoPhillips common stock, for total consideration

was exchanged for

shares of ConocoPhillips common

stock, for total consideration of $

Total Consideration

64 unchanged sentences

million of transaction-related costs that

were expensed in the current

were expensed in the first quarter

These non-recurring costs related primarily

2 unchanged sentences

on the terms of the Merger Agreement.

In the first quarter of 2021, we commenced a restructuring program, the scope of which included combining

In the first quarter of 2021, we commenced a restructuring

the scope of which included combining

the operations of the two companies.

For the three-month period ending March 31, 2021, we recognized non-

recurring restructuring costs mainly for employee severance and related incremental pension benefit costs of

approximately $ 134 million.

For the three-

and six-month periods ending June 30, 2021,

recognized non-recurring restructuring costs mainly

for employee severance and related incremental pension

benefit costs of approximately $

million and $

million, respectively.

The impact from these transaction and restructuring

costs to the lines of our consolidated income statement

the three-month period ending March 31, 2021,

the six-month period ending June 30, 2021, are below:

Millions of Dollars

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income tax related restructuring charge of $

See Note 18—Income Taxes, for additional information.

“Total Revenues and Other Income” and “Net Income (Loss) Attributable to

ConocoPhillips” associated with

the acquired Concho business were approximately

See Note 18 for additional information.

From the acquisition date through June 30, 2021,

“Total Revenues and Other Income” and “Net Income (Loss)

Attributable to ConocoPhillips” associated with the

acquired Concho business were approximately

million and $

million, respectively, for the three-

month period ending March 31, 2021.

million, respectively.

The results associated with the Concho business

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million and $

million, respectively, on the acquired derivative contracts with

settlement dates on or before March 31, 2021, and

an additional before- and after-tax loss of $

million, respectively, for contracts with settlement dates subsequent

to March 31, 2021.

The before-tax

loss is recorded within “Total Revenues and Other Income” on our consolidated income

additional information about the financial derivative

instruments acquired, see Note 10—Derivative

Financial Instruments.

million, respectively, on the acquired derivative contracts.

tax loss is recorded within “Total Revenues and Other Income” on our consolidated

income statement.

Note 10 for additional information.

The following summarizes the unaudited supplemental

pro forma financial information for the three-month

period ending March 31, 2020, as if we had completed

pro forma financial information as if we had completed

the acquisition of Concho on January 1, 2020:

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Three Months Ended

March 31, 2020

June 30, 2020

Six Months Ended

June 30, 2020

Total revenues and other income

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Three Months Ended

March 31, 2020

June 30, 2020

Six Months Ended

June 30, 2020

Basic net loss

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unaudited pro forma financial information

for the three-month period ending March 31, 2020 is

combining the consolidated income statement

for the three-

and six-month periods ending June 30, 2020 is a result

of combining the consolidated income statement

of ConocoPhillips with the results of Concho.

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billion and $

recorded by Concho in the three-month period ending

March 31, 2020, related to oil and gas properties

recorded by Concho in the six-month period ending

June 30, 2020, related to oil and gas properties

goodwill, respectively.

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and the relative effects of the transaction are properly

In 2020, we completed the sale of our Australian-West asset and operations.

The sales agreement entitles us to

In 2020, we completed the sale of our Australia-West asset and operations.

The sales agreement entitled us to

million payment upon a final investment

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The purchaser failed to pay the FID bonus when

We intend to take all action required to enforce

our contractual right to the $

We have commenced an arbitration proceeding

against the purchaser to enforce our contractual right

million, plus interest accruing from the due

Results of operations related

to this transaction are reflected in our Asia Pacific

Results of operations related to this transaction

are reflected in our Asia Pacific segment.

See Note 9 for

additional information.

In 2017, we completed the sale of our

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(FCCL) Partnership, as well as the majority of

our western Canada gas assets to Cenovus Energy.

Consideration for the transaction included a five-year, uncapped

contingent payment.

our western Canada gas assets to Cenovus Energy (CVE).

Consideration for the transaction included a five-year, uncapped contingent payment.

The contingent payment,

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crude price exceeds $52 CAD per barrel

Contingent payments during the five-year period are recorded as gain

on dispositions on our consolidated income statement and reflected in our Canada segment.

We recorded a

gain on disposition for these contingent payments

million for the three-month period of March 31,

For the three- and six-months ended June

30, 2021, we recorded

contingent payments of $

million and $

million, respectively.

contingent payments were recorded in

Contingent payments are recorded as gain on dispositions

on our consolidated income statement and

reflected in our Canada segment.

Planned Dispositions

In July 2021, we entered into divestiture agreements

to sell our interests in certain noncore assets

Proceeds from these agreements total approximately

billion before customary adjustments.

The transactions are expected to close in the third

quarter of 2021.

Note 4—Investments, Loans and Long-Term Receivables

Australia Pacific LNG Pty Ltd (APLNG)

APLNG executed project financing agreements

billion project finance facility in 2012.

billion project finance facility was initially composed

of financing agreements executed by APLNG

Export-Import Bank of the United States for approximately

billion, the Export-Import Bank of China for

approximately $

billion, and a syndicate of Australian and international

commercial banks for

approximately $

All amounts were drawn from the facility.

APLNG made its first principal and

interest repayment in March 2017 and is scheduled

payments until March 2029.

APLNG made a voluntary repayment of $

billion to the Export-Import Bank of China

in September 2018.

At the same time, APLNG obtained a United

States Private Placement (USPP) bond facility

APLNG made its first interest payment related to

this facility in March 2019, and principal

scheduled to commence in September 2023,

payments due on the facility until September

During the first quarter of 2019, APLNG refinanced

billion of existing project finance debt through two

transactions.

As a result of the first transaction, APLNG

obtained a commercial bank facility of $

APLNG made its first principal and interest

repayment in September 2019 with

payments due on the

facility until March 2028.

Through the second transaction, APLNG obtained

a USPP bond facility of $

APLNG made its first interest payment in September

2019, and principal payments are scheduled

commence in September 2023, with

payments due on the facility until

amounts were drawn from the facility.

The project financing facility has been restructured

over time and at

June 30, 2021, this facility was composed of a financing

agreement with the Export-Import Bank of

States, a commercial bank facility and two

United States Private Placement note facilities.

APLNG made its

first principal and interest repayment in March

2017 and is scheduled to make bi-annual payments

September 2030.

In conjunction with the $3.2 billion debt obtained

during the first quarter of 2019 to refinance existing

finance debt, APLNG made voluntary repayments

billion and $

billion to a syndicate of Australian

and international commercial banks and the Export-Import

Bank of China, respectively.

At March 31, 2021, a balance of $

billion was outstanding on the facilities.

See Note 8—Guarantees, for

additional information.

At June 30, 2021, a balance of $

billion was outstanding on the current

Note 8 for additional information.

During the fourth quarter of 2020, the estimated

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Joint Ventures.”

Due primarily to an improved outlook for

crude oil prices, the estimated fair value of our

Due primarily to improved outlooks for

commodity prices and the strengthening of the

dollar relative to the Australian dollar during the first

six months of 2021, the estimated fair

investment increased and is above carrying value

at March 31, 2021.

at June 30, 2021.

We will continue to monitor the

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value of APLNG.

Should we determine in the future there has

been a loss in the value of our investment

that is other than temporary, we would record an impairment of our

equity investment, calculated as the total difference between

carrying value and fair value as of the end

reporting period.

At March 31, 2021, the carrying value of our

equity method investment in APLNG was

At June 30, 2021, the carrying value of our equity

method investment in APLNG was

balance is included in the “Investments and long-term

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made to certain affiliated and non-affiliated companies.

At March 31, 2021, significant loans to affiliated

At June 30, 2021, significant loans to affiliated

companies included $

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Note 5—Investment in Cenovus Energy

In 2017, we completed the sale of certain assets

to Cenovus Energy (CVE) in which we received

CVE common shares as consideration.

At March 31, 2021, the investment was included

on our consolidated

balance sheet at fair value of $

billion, which approximates

percent of the issued and outstanding

CVE common stock.

The fair value of the

million CVE common shares reflects the

closing price of $

per share on the NYSE on the last trading day

of the quarter.

In the first quarter of 2021, we recognized an

unrealized gain of $

million before-tax on our CVE common shares,

compared with an unrealized loss of

million before-tax in the first quarter

The unrealized gain (loss) associated with changes

fair value are reflected within the “Other income

(loss)” line on our consolidated income statement

quarter of 2021 relating to the shares held at the

reporting date.

See Note 11—Fair Value Measurement for

additional information.

Our investment in CVE shares is carried on our

consolidated balance sheet at fair value of

billion based

on the closing price of $

per share on the NYSE on the last trading day of

At June 30, 2021

and December 31, 2020, we held

million shares of CVE common

stock, respectively.

June 30, 2021, our investment approximated

percent of the issued and outstanding CVE common

During the second quarter, we sold

million shares of our CVE common stock, recognizing

proceeds of $

million, of which $

was received in the second quarter.

Subject to market conditions, we intend to

decrease our investment over time through

market transactions, private agreements or otherwise.

Our debt balance at March 31, 2021, was $

continue to decrease our investment over time.

All gains and losses are recognized within “Other income

(loss)” on our consolidated income statement.

Proceeds related to the sale of our CVE shares

are presented within “Cash Flows from

Investing Activities” on

our consolidated cash flow statement.

See Note 11 for additional information related to fair value

Gains and losses recorded in other income (loss)

for our investment in CVE were:

Millions of Dollars

Three Months Ended

Six Months Ended

Total net gain (loss) on equity securities

Net gain on equity securities sold during

Unrealized gain (loss) on equity securities still

the reporting date

Our debt balance at June 30, 2021, was $

billion compared with $

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senior notes.

On February 8, 2021, we completed a debt exchange

offer related to the debt assumed from Concho.

approximately $

billion in aggregate principal amount of Concho’s senior notes offered in the

In the first quarter of 2021, we completed a debt

exchange offer related to the debt assumed from Concho.

the approximately $

billion in aggregate principal amount of Concho’s senior notes

offered in the exchange,

percent, or approximately $

billion, were tendered and accepted.

The new debt issued by ConocoPhillips

has the same interest rates and maturity dates

as the Concho senior notes.

The portion not exchanged,

approximately $

million, remains outstanding across five series

of senior notes issued by Concho.

exchange was treated as a debt modification

The new debt issued by

ConocoPhillips had the same interest rates

and maturity dates as the Concho senior notes.

The portion not

exchanged, approximately $

million, remained outstanding across five series

of senior notes issued by

The debt exchange was treated as a debt modification

for accounting purposes resulting in a portion

of the unamortized

fair value adjustment of the Concho senior notes

allocated to the new debt issued by ConocoPhillips

settlement date of the exchange.

of the unamortized fair value adjustment of the Concho

senior notes allocated to the new debt

ConocoPhillips on the settlement date of the exchange.

The new debt issued in the exchange is fully

and unconditionally guaranteed

by ConocoPhillips Company.

See Note 3—Acquisitions and Dispositions,

for more information on the

unconditionally guaranteed by ConocoPhillips

See Note 3 for additional information on our

Concho acquisition.

We have a revolving credit facility totaling $

billion with an expiration date of May 2023.

billion with an expiration date of

Our revolving

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certain designated banks in the U.S.

The agreement calls for commitment fees

on available, but unused,

The agreement also contains early termination

rights if our current directors or their approved

successors cease to be a majority of the Board

of Directors.

The facility agreement calls for commitment

fees on available, but

unused, amounts.

The facility agreement also contains early

termination rights if our current directors or

approved successors cease to be a majority of

the Board of Directors.

The revolving credit facility supports our ability

to issue up to $

billion of commercial paper, which is

primarily a funding source for short-term working capital

Commercial paper maturities are generally

billion of commercial paper.

paper is generally limited to

maturities of 90 days

and is included in the short-term debt on our consolidated

balance sheet.

of commercial paper outstanding and

direct borrowings or letters of credit, we had

available borrowing capacity under our revolving credit

facility at March 31, 2021.

At December 31, 2020, we

million of commercial paper outstanding and

direct borrowings or letters of

credit, we had access to $

billion in available borrowing capacity under our revolving

credit facility at June

At December 31, 2020, we had $

million of commercial paper outstanding

direct borrowings or letters of credit issued.

In October 2020, Moody’s affirmed its rating of our senior long-term debt of “A3” with a “stable” outlook , and

affirmed its rating of our short-term debt as “Prime-2.” In January 2021, Fitch affirmed its rating of our long-

term debt as “A” with a “stable” outlook and affirmed its rating of our short-term debt as “F1+.” On January

25, 2021, S&P revised its industry risk assessment of the E&P industry to “Moderately High” from

“Intermediate” based on a view of increasing risks from the energy transition, price volatility, and weaker

profitability.

On February 11, 2021, S&P downgraded its rating of our long-term debt from “A” to “A-” with a

“stable” outlook and downgraded its rating of our short-term debt from “A-1” to “A-2.” We do not have any

ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our

access to liquidity, upon downgrade of our credit ratings.

If our credit ratings are downgraded from their

current levels, it could increase the cost of corporate debt available to us and restrict our access to the

commercial paper markets.

If our credit rating were to deteriorate to a level prohibiting us from accessing the

commercial paper market, we would still be able to access funds under our revolving credit facility.

At March 31, 2021, we had $

million of certain variable rate demand

bonds (VRDBs) outstanding with

borrowings or letters of credit issued.

In January 2021, Fitch affirmed its rating of our long-term debt as “A” with a “stable” outlook and affirmed its

rating of our short-term debt as “F1+.” On January 25, 2021, S&P revised its industry risk assessment of the

E&P industry to “Moderately High” from “Intermediate” based on a view of increasing risks from the energy

transition, price volatility, and weaker profitability.

On February 11, 2021, S&P downgraded its rating of our

long-term debt from “A” to “A-” with a “stable” outlook and downgraded its rating of our short-term debt

from “A-1” to “A-2.” In May 2021, Moody’s affirmed its rating of our senior long-term debt of “A3” with a

“stable” outlook.

Moody’s rates our short-term debt as “Prime-2.” We do not have any ratings triggers on any

of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity, upon

downgrade of our credit ratings.

If our credit ratings are downgraded from their current levels, it could

increase the cost of corporate debt available to us and restrict our access to the commercial paper markets.

our credit rating were to deteriorate to a level prohibiting us from accessing the commercial paper market, we

would still be able to access funds under our revolving credit facility

At June 30, 2021, we had $

million of certain variable rate demand bonds (VRDBs)

outstanding with

maturities ranging through 2035.

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If they are ever redeemed, we have the ability

to refinance on a long-term basis, therefore, the

and intent to refinance on a long-term basis,

therefore, the

VRDBs are included in the “Long-term debt” line

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Note 7—Changes in Equity

The following tables reflect the changes in stockholders'

Millions of Dollars

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Income (Loss)

For the three months ended March 31, 2021

For the three months ended June 30, 2021

Balances at March 31, 2021

Other comprehensive income

Dividends paid ($

per common share)

Repurchase of company common stock

Distributed under benefit plans

Balances at June 30, 2021

For the six months ended June 30,

Balances at December 31, 2020

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Distributed under benefit plans

Balances at June 30, 2021

Millions of Dollars

Attributable to ConocoPhillips

Comprehensive

Income (Loss)

For the three months ended June 30, 2020

Balances at March 31, 2020

For the three months ended March 31, 2020

Other comprehensive income

Dividends paid ($

per common share)

Distributions to noncontrolling interests and

Distributed under benefit plans

Balances at June 30, 2020

For the six months ended June 30,

Balances at December 31, 2019

Net income (loss)

Other comprehensive loss

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Repurchase of company common stock

Distributions to noncontrolling interests and other

Distributions to noncontrolling interests and

Distributed under benefit plans

Balances at March 31, 2020

Balances at June 30, 2020

Note 8—Guarantees

At March 31, 2021, we were liable for certain

At June 30, 2021, we were liable for certain

contingent obligations under various contractual

as described below.

arrangements as

described below.

We recognize a liability, at inception, for the fair value of our obligation as a guarantor for

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APLNG Guarantees

At March 31, 2021, we had outstanding multiple

At June 30, 2021, we had outstanding multiple

guarantees in connection with our

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The following is a description of the guarantees

with values calculated utilizing March

with values calculated utilizing June 2021

exchange rates:

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We estimate the remaining term of this

guarantee to be

Our maximum exposure under this guarantee is

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and may become payable if an enforcement action

is commenced by the project finance lenders against

At March 31, 2021, the carrying value of this

guarantee was approximately $

is commenced by the project finance lenders

against APLNG.

At June 30, 2021, the carrying value of this

guarantee was $

In conjunction with our original purchase of an ownership

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arising under guarantees of an existing obligation

of APLNG to deliver natural gas under

several sales

of APLNG to deliver natural gas under several

agreements with remaining terms of

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the obligations cannot otherwise be mitigated.

payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered

if APLNG does not have enough natural gas

to meet these sales commitments and if the

co-venturers do

not make necessary equity contributions into APLNG.

payments are considered unlikely, as the payments, or cost of volume delivery, would only be

triggered if APLNG does not have enough natural

gas to meet these sales commitments and if

co-venturers do not make necessary equity contributions

We have guaranteed the performance of APLNG with regard to certain other contracts

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does not perform.

March 31, 2021, the carrying value of these guarantees

was approximately $

June 30, 2021, the carrying value of these guarantees

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling

approximately

million, which consist primarily of

guarantees of the residual value of leased office buildings,

of the residual value of corporate aircrafts,

and a guarantee for our portion of a joint venture’s project finance

reserve accounts.

These guarantees have remaining terms

and would become payable if

certain asset values are lower

than guaranteed amounts at the end of the lease or

contract term, business

conditions decline at guaranteed entities,

or as a result of nonperformance of contractual

terms by guaranteed

At March 31, 2021, the carrying value of these guarantees

was approximately $

We have other guarantees with maximum future potential payment amounts totaling approximately

million, which consist primarily of guarantees

of the residual value of leased office buildings, guarantees

residual value of corporate aircrafts, and a guarantee

for our portion of a joint venture’s project finance reserve

These guarantees have remaining terms of

two to five years

and would become payable if certain

asset values are lower than guaranteed amounts

at the end of the lease or contract term, business

decline at guaranteed entities, or as a result of nonperformance

of contractual terms by guaranteed parties.

June 30, 2021, the carrying value of these guarantees

Indemnifications

Over the years, we have entered into agreements to

sell ownership interests in certain legal

entities, joint

Over the years, we have entered into agreements

to sell ownership interests in certain

legal entities, joint

ventures and assets that gave rise to qualifying

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generally unlimited.

The carrying amount recorded for

these indemnifications at March 31, 2021,

was approximately $

We amortize the indemnification

liability over the relevant time period the indemnity

is in effect, if one exists, based on the facts and

circumstances surrounding each type of indemnity.

See Note 9 for additional information

about environmental liabilities.

The carrying amount recorded for these indemnification

obligations at June

30, 2021, was $

We amortize the indemnification liability over the relevant time period the

indemnity is in effect, if one exists, based on the facts

and circumstances surrounding each type of indemnity.

In cases where the indemnification term is

indefinite, we

will reverse the liability when we have information

indefinite, we will reverse the liability when

we have information

the liability is essentially relieved or amortize

the liability

over an appropriate time period as the fair value

of our indemnification exposure declines.

Although it is

reasonably possible future payments may exceed

amounts recorded, due to the nature of

the indemnifications,

the liability over an appropriate time period

as the fair value of

our indemnification exposure declines.

Although it is reasonably possible future payments

amounts recorded, due to the nature of the indemnifications,

it is not possible to make a reasonable estimate

of the maximum potential amount of future

additional information about environmental liabilities,

see Note 9—Contingencies and Commitments.

the maximum potential amount of future payments.

Note 9—Contingencies and Commitments

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placement, storage, disposal or release of certain

chemical, mineral and petroleum substances

at various active

chemical, mineral and petroleum substances at

various active

and inactive sites.

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liability exposures will exceed current accruals by

an amount that would have a material

adverse impact on our

an amount that would have a material adverse

impact on our

consolidated financial statements.

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We are subject to international, federal, state and local environmental laws and regulations

When we prepare

our consolidated financial statements, we record

accruals for environmental liabilities based on management’s

best estimates, using all information that is

available at the time.

We measure estimates and base liabilities on

currently available facts, existing technology, and presently enacted laws

and regulations, taking into account

and record accruals

for environmental liabilities based on management’s best estimates.

These estimates are based on currently

available facts, existing technology, and presently enacted laws and regulations,

taking into account

stakeholder and business considerations.

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not reduced these accruals for possible insurance recoveries.

At March 31, 2021, our consolidated balance sheet

included a total environmental accrual of $

compared with $

At June 30, 2021, our balance sheet included a total

environmental accrual of $

million, compared with

million at December 31, 2020, for remediation

activities in the U.S.

expect to incur a substantial amount of these expenditures within the next 30 years.

In the future, we may be

involved in additional environmental assessments,

cleanups and proceedings.

We expect to incur a

substantial amount of these expenditures within

In the future, we may be involved in

additional environmental assessments, cleanups

and proceedings.

Litigation and Other Contingencies

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Our primary exposures for such matters

relate to alleged royalty and tax underpayments on

certain federal, state and privately owned properties

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties, claims

of alleged environmental contamination from

historic operations, and other contract disputes.

continue to defend ourselves vigorously in these matters.

Our legal organization applies its knowledge, experience

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and penalties for fees related to throughput capacity

In addition, at March 31, 2021, we had performance

obligations secured by letters of credit

million (issued as direct bank letters of credit)

related to various purchase commitments for materials,

commercial activities and services incident to

the ordinary conduct of business.

In addition, at June 30, 2021, we had performance

obligations secured by letters of credit of

million (issued as direct bank letters of

credit) related to various purchase commitments

for materials,

supplies, commercial activities and services incident

to the ordinary conduct of business.

In 2007, ConocoPhillips was unable to reach agreement

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government’s unlawful expropriation of the company’s investments in Venezuela in 2007.

ConocoPhillips has

filed a request for recognition of the award in several

jurisdictions.

On August 29, 2019, the ICSID Tribunal

issued a decision rectifying the award and reducing

it by approximately $

The award now stands

On August 29,

2019, the ICSID Tribunal issued a decision rectifying the award

and reducing it by approximately $

The award now stands at $

billion plus interest.

The government of Venezuela sought annulment of the award, which

automatically stayed enforcement of the award.

The government of Venezuela sought annulment

of the award, which automatically stayed enforcement

of the award.

Annulment proceedings are underway.

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To date, ConocoPhillips has received

approximately $ 754 million.

Per the settlement, PDVSA recognized the ICC award as a judgment in various

jurisdictions, and ConocoPhillips agreed to suspend its legal enforcement actions.

approximately $

Per the settlement, PDVSA recognized the ICC

award as a judgment in various

jurisdictions, and ConocoPhillips agreed to suspend

its legal enforcement actions.

ConocoPhillips sent notices

of default to PDVSA on October 14 and November 12, 2019, and to date PDVSA failed to cure its breach.

a result, ConocoPhillips has resumed legal enforcement

of default to PDVSA on October 14 and November

12, 2019, and to date PDVSA has failed

to cure its breach.

As a result, ConocoPhillips has resumed legal enforcement

ConocoPhillips has ensured that the

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with prejudice.

Beginning in 2017, governmental and other entities

in several states in the U.S.

have filed lawsuits against

and gas companies, including ConocoPhillips,

seeking compensatory damages and equitable

relief to abate

alleged climate change impacts.

Beginning in 2017, cities, counties, governments

and other entities in several states in the U.S.

lawsuits against oil and gas companies, including

ConocoPhillips, seeking compensatory damages

equitable relief to abate alleged climate change impacts.

Additional lawsuits with similar allegations

are expected to be filed.

amounts claimed by plaintiffs are unspecified and the legal

and factual issues involved in these cases are

unprecedented.

ConocoPhillips believes these lawsuits are

factually and legally meritless and are an

inappropriate vehicle to address the challenges associated

with climate change and will vigorously defend

against such lawsuits.

expected to be filed.

The amounts claimed by plaintiffs are unspecified and

the legal and factual issues

involved in these cases are unprecedented.

ConocoPhillips believes these lawsuits are factually

meritless and are an inappropriate vehicle to address

the challenges associated with climate

change and will

vigorously defend against such lawsuits.

Several Louisiana parishes and the State of Louisiana

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about these claims (both as to scope and damages)

and any potential financial impact on the company.

and we continue to evaluate our exposure in these

In October 2020, the Bureau of Safety and Environmental

Enforcement (BSEE) ordered the prior owners of

Outer Continental Shelf (OCS) Lease P-0166, including

ConocoPhillips, to decommission the lease facilities,

Outer Continental Shelf (OCS) Lease P-0166,

including ConocoPhillips, to decommission

the lease facilities,

including two offshore platforms located near Carpinteria,

This order was sent after the current

owner of OCS Lease P-0166 relinquished the

lease and abandoned the lease platforms

and facilities.

owner of OCS Lease P-0166 relinquished the lease

and abandoned the lease platforms and facilities.

order to ConocoPhillips is premised on its connection

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percent interest in this lease and operated these

lease facilities, but

sold its interest approximately

ConocoPhillips has not had any connection

to the operation or

facilities, but sold

its interest approximately

ConocoPhillips has not had any connection to

the operation or

production on this lease since that time.

ConocoPhillips is challenging this order.

On May 10, 2021, ConocoPhillips filed

arbitration under the rules of the Singapore International

Centre (SIAC) against Santos KOTN Pty Ltd.

Santos Limited for their failure to timely

million bonus due upon a final investment decision

(FID) of the Barossa development project under

and purchase agreement.

Santos KOTN Pty Ltd.

and Santos Limited

have filed a response and counterclaim,

and the arbitration is underway.

Note 10—Derivative and Financial Instruments

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Three Months Ended

Six Months Ended

Sales and other operating revenues

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instruments consisting of oil and natural gas

following the acquisition of Concho.

connection with the acquisition of Concho.

At the acquisition date, the financial derivative

instruments acquired

were recognized at fair value as a net liability

million with settlement dates under the contracts

through December 31, 2022.

During the first quarter, we recognized a before-tax loss of $

Concho derivative contracts with settlement dates

on or before March 31, 2021, and an additional

loss related to acquired Concho derivative contracts

with settlement dates subsequent to March 31,

total before-tax loss of $

This loss associated with the acquired financial instruments

acquired were recognized at fair value as a net liability

million with settlement dates under the

contracts through December 31, 2022.

During the first quarter of 2021, we recognized

on Concho derivative contracts with settlement

dates on or before March 31, 2021, and an additional

million loss related to all remaining Concho derivative

contracts with settlement dates subsequent

2021, for a total loss of $

This loss associated with the acquired financial

instruments is recorded

within the “Sales and other operating revenues”

line on our consolidated income statement.

At March 31, 2021, all oil and natural gas derivative

financial instruments acquired from Concho

By the end of March 2021, all oil and natural

gas derivative financial instruments acquired from

contractually settled.

In connection with the settlement, we paid $

million in the first quarter of 2021 and

will pay the remaining $

In connection with the settlement, we issued

a cash payment of $

million in the first

quarter of 2021 and $

million in the second quarter of 2021.

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flow statement.

The table below summarizes our net exposures resulting

from outstanding commodity derivative

The table below summarizes our material net exposures

resulting from outstanding commodity

Open Position

Natural gas and power (billion cubic feet equivalent)

Natural gas and power (billions of cubic feet equivalent)

Financial Instruments

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Securities issued by the U.S.

government or

government agencies.

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interest and the

table reflects remaining maturities at March

table reflects remaining maturities at June

30, 2021 and December 31, 2020:

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fair value on our

consolidated balance sheet at March 31, 2021

and December 31, 2020:

consolidated balance sheet at June 30, 2021 and

December 31, 2020:

Millions of Dollars

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Asset-backed securities

As of March 31, 2021 and December 31, 2020,

total unrealized losses for debt securities

classified as available

for sale with net losses were negligible.

Additionally, at March 31, 2021 and December 31, 2020, investments

in these debt securities in an unrealized loss position

for which an allowance for credit losses

At June 30, 2021 and December 31, 2020, total unrealized

losses for debt securities classified as available

sale with net losses were negligible.

Additionally, at June 30, 2021 and December 31, 2020, investments

these debt securities in an unrealized loss

position for which an allowance for

credit losses has not been

recorded were negligible.

For the three-month periods ended March 31,

2021 and March 31, 2020, proceeds from

sales and redemptions

of investments in debt securities classified

as available for sale were $

For the three-

and six-month periods ended June 30, 2021,

proceeds from sales and redemptions of investments

in debt securities classified as available for sale

million and $

respectively.

Gross realized gains and losses included in

earnings from those sales and redemptions were

The cost of securities sold and redeemed is determined

using the specific identification method.

million, respectively.

and six-month periods ended June 30, 2020, proceeds

from sales and redemptions of investments in

securities classified as available for sale were

million and $

million, respectively.

Gross realized

gains and losses included in earnings from those

sales and redemptions were negligible.

The cost of securities

sold and redeemed is determined using the specific

identification method.

Financial instruments potentially exposed to concentrations

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financial institutions, high-quality corporate

and foreign government obligations.

Our long-term

investments in debt securities are placed in high-quality

corporate bonds, U.S.

government and government

agency obligations, asset-backed securities,

and time deposits with major international

banks and financial

institutions.

foreign government obligations and asset-backed

Our long-term investments in debt securities

are placed in high-quality corporate bonds, U.S.

government and government agency obligations,

asset-backed securities, and time deposits

international banks and financial institutions.

The credit risk from our OTC derivative contracts,

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The majority of these

receivables have payment terms of 30 days or less,

and we continually monitor this exposure and

receivables have payment terms of

or less, and we continually monitor this exposure

creditworthiness of the counterparties.

At our option, we may require collateral to limit

the exposure to loss

including, letters of credit, prepayments and surety

bonds, as well as master netting arrangements

credit risk with counterparties that both buy from

and sell to us, as these agreements permit

the amounts owed

by us or owed to others to be offset against amounts

We may require collateral to limit the exposure to loss including, letters

of credit, prepayments and surety bonds, as

well as master netting arrangements to mitigate

credit risk with

counterparties that both buy from and sell to

us, as these agreements permit the amounts

owed by us or owed

to others to be offset against amounts due to us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative

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features that were

in a liability position at March 31, 2021 and

December 31, 2020, was $

in a liability position at June 30, 2021 and December

31, 2020, was $

million and $

respectively.

million, respectively.

For these instruments,

collateral was posted as of March 31, 2021 or

December 31, 2020.

our credit rating had been downgraded below investment

grade at March 31, 2021,

we would have been

required to post $

million of additional collateral, either with

cash or letters of credit.

collateral was posted at June 30, 2021 or December

If our credit rating had

been downgraded below investment grade at June

30, 2021, we would have been required to post

of additional collateral, either with cash or letters

Note 11—Fair Value

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out of Level 3 during

2021 or 2020.

the three- and six-month periods ended June 30, 2021,

nor during the year ended December 31, 2020.

Recurring Fair Value Measurement

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our investment in

Cenovus Energy common shares, our investments in debt

securities classified as available for sale, and

commodity derivatives.

CVE common shares,

our investments in debt securities classified

as available for sale, and commodity

Level 1 derivative assets and liabilities primarily

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Level 1 also includes our

investment in common shares of Cenovus Energy, which is valued using quotes for shares

and our investments in U.S.

investment in common shares of CVE, which is valued

using quotes for shares on the NYSE, and our

investments in U.S.

government obligations

classified as available for sale debt securities,

are valued using exchange prices.

valued using exchange prices.

Level 2 derivative assets and liabilities primarily

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prices, prices provided by brokers or pricing

companies that are all corroborated by market

Level 2 also includes our investments in

companies that are all corroborated by market data.

Level 2 also includes our investments in debt

securities classified as available for sale including

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valued using pricing provided by brokers or pricing

service companies that are corroborated

service companies that are corroborated with

Level 3 derivative assets and liabilities consist

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readily available.

The derived value uses industry standard

methodologies that may consider the historical

The derived value uses industry standard methodologies

that may consider the historical

relationships among various commodities, modeled

market prices, time value, volatility factors

market prices, time value, volatility factors and other

relevant economic measures.

The use of these inputs results in management’s best estimate of fair

Level 3 activity was not material for all

periods presented.

Level 3 activity was not material for all periods

The following table summarizes the fair value

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Millions of Dollars

March 31, 2021

June 30, 2021

December 31, 2020

Investment in Cenovus Energy

Investment in CVE shares

Investments in debt securities

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Right of Setoff

March 31, 2021

June 30, 2021

December 31, 2020

At March 31, 2021 and December 31, 2020, we

At June 30, 2021 and December 31, 2020, we

did not present any amounts gross on our

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and advances—related parties.

Investment in Cenovus Energy:

See Note 5—Investment

in Cenovus Energy for a discussion of the

carrying value and fair value of our investment in

Cenovus Energy common shares.

Investment in CVE:

See Note 5 for a discussion of the carrying value and fair value of our investment

in CVE common shares.

Investments in debt securities classified as available

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pricing service companies that are corroborated

See Note 10—Derivatives and Financial Instruments,

for additional information.

See Note 10 for additional information.

Loans and advances—related parties:

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categorized as Level 2 in the fair value hierarchy.

See Note 4—Investments, Loans and Long-Term

Receivables, for additional information.

See Note 4 for additional information.

Accounts payable (including related parties)

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Financial assets

Investment in Cenovus Energy

Investment in CVE shares

Commodity derivatives

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Millions of Dollars

Defined Benefit

Benefit Plans

Net Unrealized

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Other comprehensive income (loss)

March 31, 2021

June 30, 2021

The following table summarizes reclassifications

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Three Months Ended

Six Months Ended

Defined benefit plans

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cost and are presented net of tax expense of $

million for the three-month periods ended March 31, 2021 and 2020, respectively.

See Note 14—Employee Benefit Plans, for additional

million and $

million for the three-month periods ended June 30, 2021 and June 30, 2020,

respectively, and $

million and $

million for the six-month

periods ended June 30, 2021 and June 30, 2020, respectively

See Note 14 for additional information.

Note 13—Cash Flow Information

Millions of Dollars

Three Months Ended

Six Months Ended

Cash Payments

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Short-term investments sold

Investments and Long-term receivables purchased

Investments and Long-term receivables sold

We assumed various financial derivative instruments in the Concho acquisition.

In the first quarter of 2021,

we settled all financial derivative contracts

assumed in the Concho acquisition, including

settlement of contracts with settlement

dates after March 31, 2021.

Cash settlements related to financial

derivatives of $

million are presented within “Cash Flows From

Operating Activities” on our consolidated

cash flow statement.

See Note 10—Derivative and Financial Instruments,

for additional information.

For the first quarter of 2021, included within

“Cash Flows From Investing Activities”

million of cash

received through the addition of cash balances acquired

We had additional non-cash increases

in assets and liabilities associated with the acquisition

of Concho as consideration for the transaction

entirely in ConocoPhillips common stock.

See Note 3—Acquisitions and Dispositions

for additional

information on the acquisition.

Long-term investments purchased

Long-term investments sold

See Note 3 for additional information on cash and non-cash changes to our consolidated balance sheet

associated with our Concho acquisition.

Note 14—Employee Benefit Plans

Pension and Postretirement Plans

The components of net periodic benefit cost of

all defined benefit plans for the first quarter

are presented in

the following table:

Millions of Dollars

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Components of Net Periodic Benefit Cost

Three Months Ended March 31

Three Months Ended June 30

Interest cost

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Recognized net actuarial loss

Net periodic benefit cost

Six Months Ended June 30

Interest cost

Expected return on plan assets

Amortization of prior service credit

Recognized net actuarial loss

Special Termination Benefits

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expenses” line item on our consolidated income statement.

During the three-month period ended June 30,

2021, lump-sum benefit payments exceeded the sum

service and interest costs for the year for the

qualified pension plan and a U.S.

non-qualified

retirement plan.

As a result, we recognized a proportionate share

of prior actuarial losses from other

comprehensive income as pension settlement

In conjunction with the recognition of

pension settlement expense, the fair market

values of the pension plan assets were updated

and the pension

obligations of the U.S.

qualified pension plan

non-qualified supplemental

retirement plan

were remeasured at June 30, 2021.

At the measurement date, the net pension liability

decreased by $

million, primarily a result of better actual return

on assets compared with the expected return,

partially offset

by a decrease in the discount rate, resulting

in a corresponding increase to other comprehensive

As part of our restructuring program, we concluded

that actions taken during the three-month

March 31, 2021, would result in a significant

reduction of future service of active employees

qualified pension plan, a U.S.

supplemental retirement plan and the U.S.

What changed 10-Q

Item 1. Financial Statements