What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 1725 added, 1341 removed, 541 unchanged (85% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenues and Other Income

1 unchanged sentence

Equity in earnings of affiliates

Gain on dispositions

Gain (loss) on dispositions

Other income (loss)

Total Revenues and

Revenues and Other Income

Costs and Expenses

1 unchanged sentence

Production and operating expenses

Selling, general and administrative expenses

Selling, general and administrative

Exploration expenses

Depreciation, depletion and amortization

Taxes other than income

other than income taxes

Accretion on discounted liabilities

Interest and debt expense

Foreign currency transaction (gain) loss

Foreign currency transaction

Other expenses

Total Costs and Expenses

Costs and Expenses

Income (loss) before income taxes

1 unchanged sentence

Net income (loss)

net income attributable to noncontrolling interests

Net Income (Loss) Attributable to ConocoPhillips

Net Income (Loss) Attributable to ConocoPhillips Per Share

net loss attributable to noncontrolling

Net Income (Loss) Attributable

to ConocoPhillips

Net Income (Loss) Attributable

to ConocoPhillips Per Share

of Common Stock

Average Common

Shares Outstanding

Average Common Shares

(in thousands)

See Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income

Financial Statements

ConocoPhillips

Consolidated Statement

of Comprehensive Income

ConocoPhillips

Millions of Dollars

Three Months Ended

Six Months Ended

Nine Months Ended

Net Income (Loss)

1 unchanged sentence

Defined benefit plans

Reclassification adjustment for amortization of prior

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

Net actuarial gain (loss) arising during the period

Reclassification adjustment for

amortization of net actuarial

losses included in net income (loss)

Income taxes on defined benefit plans

Income taxes on defined benefit

Defined benefit plans, 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

Income taxes on foreign currency translation adjustments

Foreign currency translation adjustments, net of tax

Other Comprehensive Income (Loss), Net of

Income taxes on unrealized

holding gain on securities

Unrealized holding gain (loss) on securities,

Foreign currency translation

Income taxes on foreign

currency translation adjustments

Foreign currency translation

adjustments, net of tax

Other Comprehensive Income (Loss), Net of Tax

Comprehensive Income (Loss)

comprehensive income attributable to noncontrolling interests

Comprehensive Income (Loss) Attributable to

ConocoPhillips

comprehensive income attributable

to noncontrolling interests

Comprehensive Income (Loss) Attributable

to ConocoPhillips

See Notes to Consolidated Financial Statements.

Financial Statements

ConocoPhillips

Consolidated Balance Sheet

3 unchanged sentences

Short-term investments

Accounts and notes receivable (net of allowance of $

Accounts and notes receivable (net of allowance

, respectively)

Accounts and notes receivable—related parties

Accounts and notes receivable—related

Investment in Cenovus Energy

Prepaid expenses and other current assets

Total Current Assets

Prepaid expenses and other current

Current Assets

Investments and long-term receivables

4 unchanged sentences

Accounts payable

Accounts payable—related parties

Accounts payable—related

Short-term debt

2 unchanged sentences

Other accruals

Total Current Liabilities

Current Liabilities

Long-term debt

Asset retirement obligations and accrued environmental costs

Asset retirement obligations

and accrued environmental costs

Deferred income taxes

1 unchanged sentence

Other liabilities and deferred credits

Total Liabilities

Common stock (

5 unchanged sentences

Capital in excess of par

Treasury stock (at cost:

Accumulated other comprehensive loss

Treasury stock

Accumulated other comprehensive

Retained earnings

Total Liabilities and Equity

Liabilities and Equity

See Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows

Financial Statements

ConocoPhillips

Consolidated Statement

of Cash Flows

ConocoPhillips

Millions of Dollars

Six Months Ended

Nine Months Ended

Cash Flows From Operating Activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating

Adjustments to reconcile net income

(loss) to net cash provided by operating

Depreciation, depletion and amortization

4 unchanged sentences

Gain on dispositions

(Gain) loss on investment in Cenovus Energy

capital adjustments

Decrease (increase) in accounts and notes receivable

(Gain) loss on investment in Cenovus

Working capital adjustments

Decrease (increase) in accounts and notes

Increase in inventories

Increase in prepaid expenses and other current assets

Increase in prepaid expenses and other current

Increase (decrease) in accounts payable

Increase (decrease) in taxes and other accruals

Net Cash Provided by Operating Activities

Increase (decrease) in taxes

and other accruals

Net Cash Provided by Operating

Cash Flows From Investing Activities

1 unchanged sentence

Capital expenditures and investments

capital changes associated with investing activities

Working capital changes

associated with investing activities

Proceeds from asset dispositions

1 unchanged sentence

Collection of advances/loans—related parties

Net Cash Used in Investing Activities

Net Cash Provided by (Used in) Investing

Cash Flows From Financing Activities

Issuance of debt

Repayment of debt

Issuance of company common stock

Repurchase of company common stock

Repurchase of company common

Dividends paid

Net Cash Used in Financing Activities

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

Net Change in Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, Cash Equivalents and Restricted Cash at End of Period

Effect of Exchange

Rate Changes on Cash, Cash Equivalents

and Restricted Cash

Net Change in Cash, Cash Equivalents and

Restricted Cash

Cash, cash equivalents and restricted

cash at beginning of period

Cash, Cash Equivalents and Restricted

Cash at End of Period

Restricted cash of $

million and $

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

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

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

assets" lines,

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

Restricted cash of $

million and $

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

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

respectively, of our Consolidated Balance Sheet as of December 31, 2020.

2 unchanged sentences

ConocoPhillips

Notes to Consolidated

Financial Statements

Note 1—Basis of Presentation

The interim-period financial information

presented in the financial statements included

in this report is

unaudited and, in the opinion of management,

includes all known accruals and adjustments

necessary for a fair

presentation of the consolidated financial position

of ConocoPhillips and its results of operations

flows for such periods.

presented in the financial statements

included in this report is unaudited

and, in the opinion of management, includes all known accruals and

adjustments necessary for a fair presentation

of the consolidated financial position of ConocoPhillips

its results of operations and cash flows

for such periods.

All such adjustments are of a normal and recurring

nature unless otherwise disclosed.

Certain notes and other information have been

condensed or omitted from the interim

financial statements

Certain notes and other

information have been condensed

or omitted from the interim financial statements

included in this report.

Therefore, these financial statements should

be read in conjunction with the

consolidated financial statements and notes included

in our 2020 Annual Report on Form

Therefore, these financial statements

should be read in conjunction with the consolidated

financial statements and

notes included in our 2020 Annual Report on Form

Note 2—Inventories

Inventories consisted of the following:

Millions of Dollars

1 unchanged sentence

Materials and supplies

Inventories valued on the LIFO basis totaled

million and $

million at June 30, 2021 and December

31, 2020, respectively.

Inventories valued on

the LIFO basis

Note 3—Acquisitions and Dispositions

Announced Acquisition of Shell Permian Assets

In September 2021, we signed a definitive agreement

to acquire Shell Enterprises LLC’s

assets in the Delaware

Basin in an all-cash transaction for $

billion before customary

adjustments (Shell Permian Acquisition).

to be acquired include approximately

net acres and producing properties

located entirely in Texas,

miles of operated crude, gas and

water pipelines and infrastructure.

The acquisition is anticipated to

close in the fourth quarter of 2021, subject to regulatory

approval and other customary

closing conditions.

the terms of the agreement, we paid a deposit of $

million which is presented within “Cash

Investing Activities - Other” on our consolidated statement

of cash flows.

See Item 1A “Risk Factors” for further

discussion of risks related to the Shell Permian Acquisition.

Acquisition of

Concho Resources Inc.

We completed our acquisition of Concho on

We completed our acquisition

January 15, 2021

and as defined under the terms of the

and as defined under the terms of the transaction

agreement, each share of Concho common stock

was exchanged for

shares of ConocoPhillips common

stock, for total consideration of $

shares of ConocoPhillips common stock,

for total consideration

Total Consideration

Number of shares of Concho common stock

issued and outstanding (in thousands)*

Number of shares of Concho stock awards outstanding

(in thousands)*

Number of shares of Concho common stock issued

and outstanding (in thousands)*

Number of shares of Concho stock awards

outstanding (in thousands)*

Number of shares exchanged

2 unchanged sentences

issued as consideration (in thousands)

Average price per share of ConocoPhillips common stock**

Total Consideration (Millions)

Average price per share of ConocoPhillips

common stock**

Total Consideration

*Outstanding as of January 15, 2021.

**Based on the ConocoPhillips average stock price on January

The transaction was accounted for as a business

combination under FASB ASC 805 using the acquisition

method, which requires assets acquired and liabilities

assumed to be measured at their acquisition date fair

Fair value measurements were made for acquired

assets and liabilities, and adjustments to those

measurements may be made in subsequent periods,

up to one year from the acquisition date as

we identify new

information about facts and circumstances that existed

as of the acquisition date to consider.

properties were valued using a discounted cash

flow approach incorporating market participant

and internally

generated price assumptions;

**Based on the ConocoPhillips average stock

price on January 15, 2021.

Notes to Consolidated Financial Statements

ConocoPhillips

The transaction was accounted

for as a business combination under FASB

ASC 805 using the acquisition method,

which requires assets acquired and

liabilities assumed to be measured at their acquisition date

value measurements were made

for acquired assets and liabilities, and

adjustments to those measurements

be made in subsequent periods, up to one year

from the acquisition date as we identify new information

facts and circumstances that

existed as of the acquisition date to

Oil and gas properties were valued

using a discounted cash flow approach

incorporating market participant

and internally generated price

production profiles;

and operating and development cost assumptions.

assumed in the acquisition was valued based on

observable market prices.

and, operating

and development cost assumptions.

Debt assumed in the

acquisition was valued based on observable

market prices.

The fair values determined for

accounts receivables, accounts payable, and most

other current assets and current liabilities

were equivalent to

the carrying value due to their short-term

The total consideration of $

billion was allocated to the

identifiable assets and liabilities based on their

fair values as of January 15, 2021.

accounts receivables,

accounts payable, and most

other current assets and current liabilities were

equivalent to the carrying value

their short-term nature.

The total consideration

billion was allocated to the identifiable

liabilities based on their fair values as of January 15, 2021.

Assets Acquired

2 unchanged sentences

Accounts receivable, net

Prepaid expenses and other current assets

Prepaid expenses and other current

Investments and long-term receivables

Net properties, plants and equipment

Total assets acquired

Liabilities Assumed

4 unchanged sentences

Long-term debt

Asset retirement obligations and accrued environmental

Asset retirement obligations

and accrued environmental costs

Deferred income taxes

Other liabilities and deferred credits

Total liabilities assumed

Total liabilities

Net assets acquired

With the completion of the Concho transaction, we acquired proved

and unproved properties of approximately

With the completion of the Concho transaction,

we acquired proved and unproved

properties of approximately

billion and $

1 unchanged sentence

We recognized approximately

million of transaction-related costs that

were expensed in the first quarter

These non-recurring costs related primarily

to fees paid to advisors and the settlement of

awards for certain Concho employees based

on the terms of the Merger Agreement.

In the first quarter of 2021, we commenced a restructuring

the scope of which included combining

the operations of the two companies.

million of transaction-related costs,

all of which were expensed in the first

quarter of 2021.

These non-recurring costs related

primarily to fees paid to advisors

and the settlement of share-

based awards for certain Concho

employees based on the terms of the Merger Agreement.

In the first quarter of 2021, we commenced

a company-wide restructuring program,

the scope of which included

combining the operations of the two companies

as well as other global restructuring activities.

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 $

nine-month periods ending September 30, 2021, we recognized

non-recurring restructuring costs

of approximately

million and $

million, respectively,

mainly for employee severance

and related incremental

pension benefit

Notes to Consolidated Financial Statements

ConocoPhillips

The impact from these transaction and restructuring

costs to the lines of our consolidated income statement

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

the nine-month period ending September 30, 2021, are

Millions of Dollars

Transaction Cost

Restructuring Cost

Production and operating expenses

Selling, general and administration expenses

Selling, general and administration

Exploration expenses

Taxes other than income taxes

other than income taxes

Other expenses

On February 8, 2021, we completed a debt exchange

offer related to the debt assumed from Concho.

result of the debt exchange, we recognized an additional

income tax related restructuring charge of $

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

On February 8, 2021, we completed a debt

exchange offer

related to the debt assumed from Concho.

of the debt exchange, we recognized

an additional income tax related

restructuring charge of $

From the acquisition date through

September 30, 2021, “Total Revenues

and Other Income” and “Net Income

(Loss) Attributable to ConocoPhillips”

associated with the acquired Concho business

were approximately $

million and $

1 unchanged sentence

The results associated with the Concho business

include a before- and

after-tax loss of $

for the same period

include a before- and after-tax

million and $

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 as if we had completed

the acquisition of Concho on January 1, 2020:

million, respectively,

on the acquired derivative

The before-tax loss is recorded

within “Total Revenues

and Other Income” on our consolidated

The following summarizes the unaudited

supplemental pro forma financial information

as if we had completed the

acquisition of Concho on January 1, 2020:

Millions of Dollars

1 unchanged sentence

Three Months Ended

June 30, 2020

Six Months Ended

June 30, 2020

Total revenues and other income

September 30, 2020

Nine Months Ended

September 30, 2020

revenues and other income

Net loss attributable to ConocoPhillips

1 unchanged sentence

Three Months Ended

June 30, 2020

Six Months Ended

June 30, 2020

September 30, 2020

Nine Months Ended

September 30, 2020

Basic net loss

Diluted net loss

The unaudited supplemental pro forma financial

information is presented for illustration purposes

not necessarily indicative of the operating results

that would have occurred had the transaction been

on January 1, 2020, nor is it necessarily indicative

of future operating results of the combined entity.

unaudited pro forma financial information

The unaudited supplemental pro forma

financial information is presented

for illustration purposes

only and is not

necessarily indicative of the operating

results that would have occurred

had the transaction been completed on

January 1, 2020, nor is it necessarily indicative of future

operating results of the combined entity.

The unaudited

pro forma financial information

for the three-

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

of combining the consolidated income statement

and nine-month periods ending September 30, 2020 is

combining the consolidated income statement

of ConocoPhillips with the results of Concho.

The pro forma

results do not include transaction-related costs,

nor any cost savings anticipated as a result

of the transaction.

The pro forma results include adjustments to

reverse impairment expense of $

The pro forma results

do not include transaction-related

costs, nor any cost savings

anticipated as a result of the transaction.

forma results include adjustments

to reverse impairment expense

billion and $

recorded by Concho in the six-month period ending

June 30, 2020, related to oil and gas properties

goodwill, respectively.

Other adjustments made relate primarily to

DD&A, which is based on the unit-of-

production method, resulting from the purchase

price allocated to properties, plants and equipment.

believe the estimates and assumptions are reasonable,

and the relative effects of the transaction are properly

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

The sales agreement entitled us to

billion related to oil and

gas properties and goodwill, respectively,

recorded by Concho in the nine-month

period ending September 30,

Other adjustments made relate

primarily to DD&A, which is based on the unit-of-production

resulting from the purchase price allocated

to properties, plants and equipment.

We believe the estimates

assumptions are reasonable, and the relative

effects of the transaction

are properly reflected.

Notes to Consolidated Financial Statements

ConocoPhillips

In 2020, we completed the sale of our Australia

-West asset and operations.

The sales agreement entitled us to a

million payment upon a final investment

decision (FID) of the Barossa development

30, 2021, FID was announced and as such,

we recognized a $

decision (FID) of the Barossa development project.

2021, FID was announced and as such, we recognized

million gain on disposition in the first

The purchaser failed to pay the FID bonus when

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 segment.

See Note 9 for

additional information.

In 2017, we completed the sale of our

percent nonoperated interest in the Foster Creek

Christina Lake

(FCCL) Partnership, as well as the majority of

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

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

The contingent payment,

calculated on a quarterly basis, is $6 million CAD for every $1 CAD by which the WCS quarterly average

crude price exceeds $52 CAD per barrel

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

The purchaser failed to pay the

FID bonus when due.

We have commenced an arbitration

proceeding against the

purchaser to enforce our contractual

right to the $

million, plus interest accruing from the

operations related to

this transaction are reflected

in our Asia Pacific segment.

In the third quarter of 2021, we sold our interests

in certain noncore assets in our Lower 48 segment

approximately $

million after customary adjustments,

recognizing a before-tax gain

on sale of approximately

Production from these noncore Lower

48 properties averaged

approximately

MBOED in the nine-

months ended September 30, 2021.

We also completed the sale of our

noncore exploration interests

in Argentina,

recognizing a before-tax

loss on disposition of $

Results of operations

for Argentina were reported

our Other International segment.

For the three- and nine-months ended September

30, 2021, we recorded contingent

payments of $

million, respectively,

relating to previous dispositions.

The contingent payments are

recorded as gain on

disposition on our consolidated income statement

and are reflected within our Canada

and Lower 48 segments.

contingent payments were

recorded in 2020.

Note 4—Investments,

Loans and Long-Term

Australia Pacific LNG Pty Ltd

APLNG executed project financing

agreements for an $

billion project finance facility in 2012.

amounts were drawn from the facility.

All 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.

At June 30, 2021, a balance of $

billion was outstanding on the current

Note 8 for additional information.

over time and at September 30, 2021,

this facility was composed of a financing agreement

with the Export-Import Bank of the United States,

commercial bank facility and

United States Private

Placement note facilities.

APLNG made its first principal

and interest repayme

nt in March 2017 and is scheduled to make

bi-annual payments until September

September 30, 2021, a balance of $

billion was outstanding on these

During the fourth quarter of 2020, the estimated

fair value of our investment in APLNG declined

fair value of our investment

in APLNG declined to an amount

below carrying value, primarily due to the weakening

dollar relative to the Australian

on a review of the facts and circumstances surrounding

this decline in fair value, we concluded the impairment

was not other than temporary under the guidance

of FASB ASC Topic

323, “Investments – Equity Method and

Joint Ventures.”

review of the facts and circumstances

surrounding this decline in fair value, we concluded

the impairment was not

other than temporary under the guidance of FASB

323, “Investments – Equity

Method and Joint

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 June 30, 2021.

We will continue to monitor the

relationship between the carrying value and fair

value of APLNG.

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

method investment in APLNG was

balance is included in the “Investments and long-term

receivables” line on our consolidated balance

Loans and Long-Term Receivables

commodity prices and the strengthening

relative to the Australian

dollar during the first nine months of 2021, the estimated

fair value of our investment

increased and is above carrying value at

September 30, 2021.

On October 25, 2021, Origin Energy Limited agreed

to the sale of

percent of their interest

approximately $

billion which is expected to close in the fourth

quarter of 2021.

The transaction is subject to

preemption rights in favor

of ConocoPhillips and Sinopec among other considerations.

We will continue to

monitor and evaluate the relationship

between the carrying value and fair value

of APLNG, including any impact

from this announced transaction.

At September 30, 2021, the carrying value

of our equity method investment

in APLNG was $

balance is included in the “Investments and

long-term receivables” line on our consolidated

balance sheet.

As part of our normal ongoing business operations,

and consistent with industry practice,

we enter into

numerous agreements with other parties to pursue

and consistent with industry practice, we enter

into numerous

agreements with other parties to pursue

business opportunities.

Included in such activity are loans

made to certain affiliated and non-affiliated companies.

At June 30, 2021, significant loans to affiliated

companies included $

Included in such activity are loans made to

certain affiliated and non-affiliated

At September 30, 2021, significant loans

to affiliated companies

million in project financing to Qatar Liquefied

Gas Company Limited (3).

On our consolidated balance sheet, the long-term

portion of these loans is included in the “Loans

advances—related parties” line, while the short-term

portion is in the “Accounts and notes receivable—related

parties” line.

Note 5—Investment in Cenovus Energy

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

Gas Company Limited (3), which is recorded

the “Accounts

and notes receivable—related

parties” line on our consolidated balance sheet

Notes to Consolidated Financial Statements

ConocoPhillips

Note 5—Investment in Cenovus

Our investment in Cenovus Energy

(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 the quarter.

September 30, 2021 and December 31, 2020, we held

million shares of CVE common stock,

respectively.

At September 30, 2021, our investment

percent of the issued and outstanding

common stock.

During the third quarter,

million shares of our CVE common stock, recognizing

proceeds of $

Since we began disposing of our CVE shares

in May 2021, we have sold

million shares for total proceeds

million, of which $

was received in the second quarter.

Subject to market conditions, we intend to

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:

million was received by the end of the third

Subject to market conditions, we

intend to continue to decrease

our investment over time.

All gains and losses are recognized

within “Other income (loss)” on our consolidated

income statement.

related to the sale of our CVE shares are

presented within “Cash Flows from Investing

Activities” on our

consolidated statement

of cash flows.

for information related

to fair value measurement

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

Nine Months Ended

Net gain (loss) on equity securities

Net gain (loss) on equity securities sold during

Unrealized gain (loss) on equity securities

still held at

the reporting date

Our debt balance at June 30, 2021, was $

Note 6—Impairments

During the three-

and nine-month periods ended September 30, 2021 and

2020, we recognized before

impairment charges within the following

Millions of Dollars

Three Months Ended

Nine Months Ended

Europe, Middle East and North Africa

In the three-month period ended September 30, 2021,

we recorded a credit to impairment

million in our

Lower 48 segment due to a decreased ARO

estimate for a previously

sold asset, in which we retained the ARO

In the first quarter of 2020, we recorded

impairments of $

million related to certain noncore

natural gas assets

in the Lower 48 segment which were written

down to fair value.

Notes to Consolidated Financial Statements

ConocoPhillips

Our debt balance at September 30, 2021, was

billion compared with $

billion at December 31, 2020.

On January 15, 2021, we completed the acquisition

of Concho in an all-stock transaction.

In the acquisition,

we assumed Concho’s publicly traded debt, with an outstanding principal

billion, which was

recorded at fair value of $

On January 15, 2021, we completed the acquisition of Concho

in an all-stock transaction.

In the acquisition, we

assumed Concho’s publicly

traded debt, with an outstanding principal balance

billion, which was recorded

at fair value of $

billion on the acquisition date.

5 unchanged sentences

with principal of $

The adjustment to fair value of the senior notes

of approximately $

The adjustment to fair value of the senior

notes of approximately $

billion on the acquisition date will be

amortized as an adjustment to interest expense over

the remaining contractual terms of the

senior notes.

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

amortized as an adjustment to interest

expense over the remaining contractual

terms of the senior notes.

In the first quarter of 2021, we completed

a debt exchange offer

related to the debt assumed from

approximately $

billion in aggregate principal amount

of Concho’s senior notes

offered in the exchange,

1 unchanged sentence

billion, were tendered and accepted.

The new debt issued by

ConocoPhillips had the same interest rates

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

ConocoPhillips on the settlement date of the exchange.

The new debt issued in the exchange is fully

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

Our revolving

credit facility may be used for direct bank borrowings,

the issuance of letters of credit totaling

million, or as support for our commercial paper

The revolving credit facility is broadly syndicated

among financial institutions and does not contain

any material adverse change provisions or any covenants

requiring maintenance of specified financial

ratios or credit ratings.

The facility agreement contains a cross-

default provision relating to the failure to pay principal

or interest on other debt obligations of $

more by ConocoPhillips, or any of its consolidated

subsidiaries.

The amount of the facility is not subject to

redetermination prior to its expiration date.

Credit facility borrowings may bear interest at

a margin above rates offered by certain designated banks in the

London interbank market or at a margin above the overnight

federal funds rate or prime rates offered by

certain designated banks in the U.S.

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 $

The portion not exchanged, approximately

million, remained outstanding across

five series of senior notes issued by Concho.

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 on the settlement

of the exchange.

The new debt issued in the exchange is

fully and unconditionally guaranteed by

ConocoPhillips

We have a revolving

credit facility totaling $

billion with an expiration date

Our revolving credit

facility may be used for direct

bank borrowings, the issuance of letters

of credit totaling up to $

million, or as

support for our commercial paper program.

The revolving credit facility is broadly

syndicated among financial

institutions and does not contain any

material adverse change provisions

or any covenants requiring maintenance

of specified financial ratios or credit ratings.

The facility agreement contains

a cross-default provision

the failure to pay principal or

interest on other debt obligations

million or more by ConocoPhillips, or any

of its consolidated subsidiaries.

The amount of the facility is not subject to redetermination

prior to its expiration

Credit facility borrowings may

bear interest at a margin above

rates offered

by certain designated banks in the

London interbank market or

at a margin above the overnight federal

funds rate or prime rates

offered by certain

designated banks in the U.S.

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 their 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.

paper is generally limited to

Commercial paper

is generally limited to

maturities of 90 days

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

balance sheet.

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 $

With no commercial paper outstanding

direct borrowings or letters

of credit, we had access to $

billion in available borrowing capacity

under our revolving credit facility at

September 30, 2021.

At December 31,

2020, we had $

million of commercial paper outstanding

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

direct borrowings or letters of credit

Notes to Consolidated Financial Statements

ConocoPhillips

Following our September 20, 2021, announcement

regarding the Shell Permian

the three rating

agencies reviewed their pre-announcement

ratings on our debt resulting in the

Fitch affirmed its rating of our long-term debt as “A” with a “stable” outlook.

S&P affirmed its rating of our long-term debt of “A-” with a “stable” outlook.

Moody’s affirmed its rating of our senior long-term debt of “A3” and upgraded the outlook to “positive”

from “stable.”

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

commercial paper market, we

would still be able to access funds under our revolving

credit facility.

At September 30, 2021, we had $

million of certain variable rate

demand bonds (VRDBs) outstanding with

maturities ranging through 2035.

The VRDBs are redeemable at the option of the

bondholders on any business

If they are ever redeemed, we have the ability

and intent to refinance on a long-term basis,

therefore, the

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

on our consolidated balance sheet.

The VRDBs are redeemable at the option of the bondholders

on any business

If they are ever redeemed, we have

the ability and intent to refinance on

a long-term basis, therefore, the

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

balance sheet.

Notes to Consolidated Financial Statements

ConocoPhillips

Note 8—Changes in Equity

3 unchanged sentences

Income (Loss)

For the three months ended June 30, 2021

Balances at March 31, 2021

For the three months ended September 30, 2021

Balances at June 30, 2021

Other comprehensive income

1 unchanged sentence

per common share)

Dividends payable ($

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 September 30, 2021

For the nine months ended September 30, 2021

Balances at December 31, 2020

2 unchanged sentences

per common share)

Dividends payable ($

per common share)

Acquisition of Concho

1 unchanged sentence

Distributed under benefit plans

Balances at June 30, 2021

Balances at September 30, 2021

Millions of Dollars

2 unchanged sentences

Income (Loss)

For the three months ended June 30, 2020

Balances at March 31, 2020

For the three months ended September 30, 2020

Balances at June 30, 2020

Other comprehensive income

1 unchanged sentence

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 September 30, 2020

For the nine months ended September 30, 2020

Balances at December 31, 2019

3 unchanged sentences

Repurchase of company common stock

Distributions to noncontrolling interests and

Distributions to noncontrolling interests and other

Distributed under benefit plans

Balances at June 30, 2020

Balances at September 30, 2020

Notes to Consolidated Financial Statements

ConocoPhillips

Note 9—Guarantees

At June 30, 2021, we were liable for certain

contingent obligations under various contractual

arrangements as

described below.

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

At September 30, 2021, we were

liable for certain contingent

obligations under various contractual

as described below.

We recognize a liability,

at inception, for the fair value

of our obligation as a guarantor

newly issued or modified guarantees.

Unless the carrying amount of the liability is noted

below, we have not

recognized a liability because the fair value of the

obligation is immaterial.

In addition, unless otherwise

stated, we are not currently performing with any

significance under the guarantee and expect future

performance to be either immaterial or have only

a remote chance of occurrence.

Unless the carrying amount of the liability is noted below,

recognized a liability because the

fair value of the obligation

is immaterial.

In addition, unless otherwise stated, we

are not currently performing with any

significance under the guarantee and expect

future performance to be

either immaterial or have only a remote

chance of occurrence.

APLNG Guarantees

At June 30, 2021, we had outstanding multiple

guarantees in connection with our

At September 30, 2021, we had outstanding

multiple guarantees in connection with our

percent ownership

1 unchanged sentence

The following is a description of the guarantees

with values calculated utilizing June 2021

with values calculated utilizing September

exchange rates:

During the third quarter of 2016, we issued a guarantee

to facilitate the withdrawal of our pro-rata

portion of the funds in a project finance reserve

We estimate the remaining term of this

Our maximum exposure under this guarantee is

approximately $

and may become payable if an enforcement action

is commenced by the project finance lenders

against APLNG.

At June 30, 2021, the carrying value of this

guarantee was $

to facilitate the withdrawal

of our pro-rata portion

of the funds in a project finance reserve account.

We estimate the remaining

term of this guarantee

Our maximum exposure under this guarantee

is approximately $

million and may become payable

if an enforcement action is commenced by

the project finance lenders against

At September 30,

2021, the carrying value of this guarantee

In conjunction with our original purchase of an ownership

interest in APLNG from Origin Energy in

October 2008, we agreed to reimburse Origin

Energy for our share of the existing contingent liability

arising under guarantees of an existing obligation

of APLNG to deliver natural gas under several

interest in APLNG from Origin Energy

October 2008, we agreed to reimburse

Origin Energy Limited for our share

of the existing contingent liability

arising under guarantees of an existing

obligation of APLNG to deliver natural

gas under several sales

agreements with remaining terms of

1 unchanged sentence

Our maximum potential liability for future

payments, or cost of volume delivery, under these guarantees is estimated

billion in the event of intentional or reckless breach)

and would become payable if APLNG fails

meet its obligations under these agreements and

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

co-venturers do not make necessary equity contributions

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

connection with the project’s continued development.

The guarantees have remaining terms

24 years or the life of the venture

cost of volume delivery,

under these guarantees is estimated

billion in the event of

intentional or reckless breach) and

would become payable if APLNG fails

to meet its obligations under these

agreements and the obligations

cannot otherwise be mitigated.

Future payments are considered

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

We have guaranteed

the performance of APLNG with regard

to certain other contracts executed

connection with the project’s continued

The guarantees have

remaining terms of

or the life of the venture.

Our maximum potential amount of future payments

1 unchanged sentence

guarantees is approximately

million and would become payable if APLNG

does not perform.

June 30, 2021, the carrying value of these guarantees

million and would become payable

if APLNG does not perform.

September 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

We have other guarantees

with maximum future potential payment

amounts totaling approximately

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

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

one to five years

and would become payable if certain asset

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

ventures and assets that gave rise to qualifying

conditions decline at

guaranteed entities, or as a result

of nonperformance of contractual

terms by guaranteed parties.

30, 2021, the carrying value of these guarantees

Indemnifications

These agreements include indemnifications

for taxes and environmental liabilities.

Most of these indemnifications are related to

tax issues and the

majority of these expire in 2021.

Those related to environmental issues have terms

that are generally indefinite

and the maximum amounts of future payments are

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 indemnifications.

These agreements include indemnifications for

lease commitments and environmental

Those related to environmental

issues have terms that are

generally indefinite and the maximum

amounts of future payments are

generally unlimited.

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.

The carrying amount

recorded for these indemnification

obligations at September 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

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

amounts recorded, due to the nature of the indemnifications,

it is not possible to make a reasonable estimate

the maximum potential amount of future payments.

indefinite, we

will reverse the liability when we have

information the liability is essentially

relieved or amortize the liability over

Notes to Consolidated Financial Statements

ConocoPhillips

an appropriate time period as the fair

value of our indemnification exposure

Although it is reasonably

possible future payments may exceed

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 payments.

additional information about environmental

Note 10—Contingencies and Commitments

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

We also may be required to remove or mitigate the effects on the environment of the

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances at

various active

and inactive sites.

We regularly assess the need for accounting recognition or disclosure of these

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue

liability when the loss is probable and the amount

is reasonably estimable.

If a range of amounts can be

reasonably estimated and no amount within the range

is a better estimate than any other amount,

end of the range is accrued.

We do not reduce these liabilities for potential insurance or third-party recoveries.

We accrue receivables for insurance or other third-party recoveries when applicable.

With respect to income

tax-related contingencies, we use a cumulative probability-weighted

loss accrual in cases where sustaining a

tax position is less than certain.

Based on currently available information, we believe

it is remote that future costs related to known

liability exposures will exceed current accruals by

an amount that would have a material adverse

A number of lawsuits involving a variety

of claims arising in the ordinary course of business

have been filed against

ConocoPhillips.

We also may be required

to remove or mitigate

the effects on the environment

of the placement,

storage, disposal or release of

certain chemical, mineral and petroleum

substances at various

active and inactive

We regularly assess the need for accounting

recognition or disclosure of these contingencies.

In the case of

all known contingencies (other than those related

to income taxes), we accrue

a liability when the loss is probable

and the amount is reasonably estimable.

If a range of amounts can be reasonably

estimated and no amount within

the range is a better estimate

than any other amount, then the low end of the range

We do not reduce

these liabilities for potential insurance

or third-party recoveries.

We accrue receivables for

insurance or other

third-party recoveries when applicable.

With respect to income tax-related

contingencies, we use a cumulative

probability-weighted loss accrual

in cases where sustaining a tax

position is less than certain.

Based on currently available information,

we believe it is remote that future

costs related to known

liability exposures will exceed

current accruals by an amount that

would have a material adverse

impact on our

1 unchanged sentence

As we learn new facts concerning contingencies,

we reassess our position

both with respect to accrued liabilities

and other potential exposures.

we reassess our position both

with respect to accrued liabilities and other potential

Estimates particularly sensitive to future

changes include contingent liabilities

recorded for environmental remediation, tax and legal

Estimated future environmental remediation

costs are subject to change due to such factors

as the uncertain

magnitude of cleanup costs, the unknown time

and extent of such remedial actions that

may be required, and

the determination of our liability in proportion

to that of other responsible parties.

include contingent liabilities recorded

for environmental

remediation, tax and legal matters.

Estimated future

environmental remediation

costs are subject to change due to

such factors as the uncertain

magnitude of cleanup

costs, the unknown time and extent of such

remedial actions that may be required,

and the determination of our

liability in proportion to that of other responsible

Estimated future costs

related to tax and legal matters are subject to

change as events evolve and as additional

information becomes

available during the administrative and litigation

related to tax and legal

are subject to change as events

evolve and as additional information

becomes available during the administrative

and litigation processes.

Environmental

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

and record accruals

for environmental liabilities based on management’s best estimates.

We are subject to international,

federal, state and

local environmental laws

and regulations and record

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.

facts, existing technology,

and presently enacted laws and regulations,

taking into account stakeholder

business considerations.

When measuring environmental liabilities,

we also consider our prior

experience in remediation of contaminated sites,

other companies’ cleanup experience, and data released

EPA or other organizations.

We consider unasserted claims in our determination of environmental

liabilities, and we accrue them in the period they

are both probable and reasonably estimable.

we also consider our prior experience in

remediation of contaminated

sites, other companies’ cleanup experience, and data

released by the U.S.

other organizations.

We consider unasserted claims in our determination

of environmental liabilities,

accrue them in the period they are both probable and

reasonably estimable.

Although liability of those potentially responsible

for environmental remediation costs is generally

several for federal sites and frequently so for other

for environmental remediation

costs is generally joint and

several for federal

sites and frequently so for other

sites, we are usually only one of many companies

2 unchanged sentences

be responsible for all cleanup costs related

any site at which we have been designated as a

potentially responsible party.

We have been successful to date

in sharing cleanup costs with other financially

sound companies.

site at which we have been designated

as a potentially responsible party.

We have been successful to

sharing cleanup costs with other financially sound

Many of the sites at which we are potentially

responsible are still under investigation by the

EPA or the agency concerned.

responsible are still under investigation

by the EPA or

the agency concerned.

Prior to actual cleanup, those

1 unchanged sentence

site conditions, apportion responsibility and determine

appropriate remediation.

In some instances, we may have no liability

or may attain a settlement of liability.

Where it appears that other potentially responsible

parties may be financially unable to bear their

share, we consider this inability in estimating

our potential liability, and we adjust our accruals accordingly.

As a result of various acquisitions in the past,

we assumed certain environmental obligations.

Some of these

environmental obligations are mitigated by indemnifications

made by others for our benefit, and some of the

indemnifications are subject to dollar limits

and time limits.

We are currently participating in environmental assessments and cleanups at numerous

federal Superfund and

comparable state and international sites.

After an assessment of environmental exposures

for cleanup and

other costs, we make accruals on an undiscounted

basis (except those acquired in a purchase

combination, which we record on a discounted

basis) for planned investigation and remediation

activities for

sites where it is probable future costs will be incurred

the appropriate

In some instances, we may have

no liability or may attain a settlement

of liability.

Where it appears

that other potentially responsible parties may

be financially unable to bear their proportional share,

this inability in estimating our potential liability,

and we adjust our accruals accordingly.

As a result of various

acquisitions in the past, we assumed certain environmental

Some of these environmental obligations

are mitigated by indemnifications

made by others for our benefit, and some of the indemnifications

are subject to

dollar limits and time limits.

Notes to Consolidated Financial Statements

ConocoPhillips

We are currently participating

in environmental assessments

and cleanups at numerous federal

Superfund and

comparable state and

international sites.

After an assessment of environmental

exposures for cleanup and other

costs, we make accruals on an

undiscounted basis (except

those acquired in a purchase business combination,

which we record on a discounted

basis) for planned investigation

and remediation activities for sites where

probable future costs will be incurred

and these costs can be reasonably estimated.

not reduced these accruals for possible insurance recoveries.

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

environmental accrual of $

We have not reduced

accruals for possible insurance recoveries

At September 30, 2021, our balance sheet included

a total environmental

million, compared with

2 unchanged sentences

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.

substantial amount of these expenditures

within the next

In the future, we may be involved

in additional

environmental assessments,

cleanups and proceedings.

Litigation and Other Contingencies

We are subject to various lawsuits and claims including but not limited to matters

We are subject to various

lawsuits and claims including but not limited to matters

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes,

environmental

damages, climate change, personal injury, and property damage.

severance tax payments,

gas measurement and valuation

methods, contract disputes,

environmental damages,

climate change, personal injury,

and property damage.

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, and other contract disputes.

continue to defend ourselves vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

relate to alleged

royalty and tax underpayments

on certain federal, state

and privately owned properties, claims

environmental contamination

from historic operations,

and other contract disputes.

We will continue to defend

ourselves vigorously in these matters.

Our legal organization

applies its knowledge, experience and professional

judgment to the specific characteristics

of our cases, employing a litigation management

process to manage and monitor the legal

proceedings against us.

Our process facilitates the early evaluation and

quantification of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

accruals, is required.

We have contingent liabilities resulting from throughput agreements with pipeline and

processing companies

not associated with financing arrangements.

Our process facilitates the

early evaluation and quantification

of potential exposures in individual cases.

process also enables us to track those cases

that have been scheduled for trial and/or

professional judgment and experience

in using these litigation management

tools and available information

current developments in all our cases,

our legal organization regularly

assesses the adequacy of current accruals

and determines if adjustment of existing

accruals, or establishment of new accruals, is

We have contingent

liabilities resulting from throughput agreements

with pipeline and processing companies not

associated with financing arrangements.

Under these agreements, we may be required

to provide any such

company with additional funds through advances

and penalties for fees related to throughput capacity

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

with respect to the empresa mixta structure

by the Venezuelan government’s Nationalization Decree.

company with additional funds through

advances and penalties for fees related

to throughput capacity not utilized.

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

obligations secured by letters

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 with respect to the empresa

mixta structure mandated

the Venezuelan government’s

Nationalization Decree.

As a result, Venezuela’s

national oil company,

Petróleos de Venezuela, S.A.

(PDVSA), or its affiliates, directly assumed control over ConocoPhillips’

interests in the Petrozuata and Hamaca heavy oil

ventures and the offshore Corocoro development project.

response to this expropriation, ConocoPhillips

initiated international arbitration on November 2,

2007, with the

On September 3, 2013, an ICSID arbitration tribunal

held that Venezuela unlawfully expropriated

ConocoPhillips’ significant oil investments

in June 2007.

On January 17, 2017, the Tribunal reconfirmed the

decision that the expropriation was unlawful.

In March 2019, the Tribunal unanimously ordered the

government of Venezuela to pay ConocoPhillips approximately $

billion in compensation for the

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

On August 29,

2019, the ICSID Tribunal issued a decision rectifying the award

and reducing it by approximately $

Venezuela, S.A.

or its affiliates, directly assumed control

over ConocoPhillips’ interests

in the Petrozuata

and Hamaca heavy oil ventures and

the offshore Corocoro development

In response to this expropriation,

ConocoPhillips initiated international

arbitration on November 2, 2007, with the ICSID.

On September 3, 2013, an

ICSID arbitration tribunal held that Venezuela

unlawfully expropriated ConocoPhillips’

significant oil investments in

On January 17, 2017, the Tribunal reconfirmed

the decision that the expropriation

was unlawful.

March 2019, the Tribunal unan

imously ordered the government of Venezuela

to pay ConocoPhillips approximately

billion in compensation for the government’s

unlawful expropriation of the company’s

investments in

Venezuela in 2007.

On August 29, 2019, the ICSID Tribunal

issued a decision rectifying the award and

by approximately $

The award now stands at

billion plus interest.

The government of Venezuela sought annulment

of the award, which automatically stayed enforcement

The government of Venezuela

sought annulment of the award,

which automatically stayed

enforcement of the award.

On September 29, 2021,

the ICSID annulment committee lifted the

stay of enforcement

of the award.

Annulment proceedings are underway.

In 2014, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Petrozuata and Hamaca projects.

The annulment proceedings have

been suspended as a result of Venezuela’s

non-payment of advances

to cover the costs of these proceedings.

Notes to Consolidated Financial Statements

ConocoPhillips

In 2014, ConocoPhillips filed a separate

and independent arbitration under the rules

of the ICC against PDVSA

under the contracts that had established

the Petrozuata

and Hamaca projects.

The ICC Tribunal issued

an award in April 2018, finding that PDVSA owed

ConocoPhillips approximately $

billion under their

agreements in connection with the expropriation of the

projects and other pre-expropriation fiscal

August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC

award, plus interest through the payment period, including initial payments totaling approximately $ 500

million within a period of 90 days from the time of signing of the settlement agreement.

The balance of the

settlement is to be paid quarterly over a period of four and a half years.

To date, ConocoPhillips has received

April 2018, finding that PDVSA owed ConocoPhillips

approximately $

Per the settlement, PDVSA recognized the ICC

award as a judgment in various

jurisdictions, and ConocoPhillips agreed to suspend

billion under their agreements in connection

with the expropriation of the projects

and other pre-expropriation fiscal

In August 2018, ConocoPhillips

entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the

payment period, including initial payments totaling approximately $ 500 million within a period of 90 days from the

time of signing of the settlement agreement.

The balance of the settlement is to be paid quarterly over a period of

four and a half years.

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 has failed

to cure its breach.

As a result, ConocoPhillips has resumed legal enforcement

ConocoPhillips has ensured that the

settlement and any actions taken in enforcement

thereof meet all appropriate U.S.

requirements,

including those related to any applicable sanctions

imposed by the U.S.

against Venezuela.

In 2016, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Corocoro Project.

ConocoPhillips sent notices of default to

on October 14 and November 12, 2019, and to

date PDVSA has failed to cure

ConocoPhillips has resumed legal enforcement

ConocoPhillips has received approximately

million in connection with the ICC award.

ConocoPhillips has ensured that

the settlement and any actions taken

enforcement thereof meet all

appropriate U.S.

requirements, including those related

to any applicable

sanctions imposed by the U.S.

In 2016, ConocoPhillips filed a separate

and independent arbitration under the rules

of the ICC against PDVSA

under the contracts that had established

the Corocoro Project.

On August 2, 2019, the ICC Tribunal

awarded ConocoPhillips approximately $

million plus interest under the Corocoro contracts.

ConocoPhillips is seeking recognition and enforcement

ConocoPhillips approximately

million plus interest under the Corocoro

ConocoPhillips is seeking

recognition and enforcement

of the award in various jurisdictions.

ConocoPhillips has ensured that all the actions

related to the award meet

all appropriate U.S.

requirements, including those related

to any applicable

sanctions imposed by the U.S.

The Office of Natural Resources

Revenue (ONRR) has conducted audits

of ConocoPhillips’ payment of royalties

federal lands and has issued multiple orders

to pay additional royalties

to the federal government.

ConocoPhillips

has ensured that all the actions related to the award

meet all appropriate U.S.

regulatory requirements,

including those related to any applicable sanctions

imposed by the U.S.

against Venezuela.

The Office of Natural Resources Revenue (ONRR) has

conducted audits of ConocoPhillips’

royalties on federal lands and has issued multiple

orders to pay additional royalties to the federal

ConocoPhillips and the ONRR entered into

a settlement agreement on March 23, 2021,

to resolve the dispute.

All orders and associated appeals have been withdrawn

and the ONRR entered into a settlement

agreement on March 23, 2021, to resolve

All orders and

associated appeals have been withdrawn

with prejudice.

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

and other entities in several states

have filed lawsuits

against oil and gas companies,

including ConocoPhillips, seeking compensatory

damages and equitable relief to

abate alleged climate change impacts.

Additional lawsuits with similar allegations are

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

lawsuits under Louisiana’s State and Local

Coastal Resources Management Act (SLCRMA)

against oil and gas companies, including ConocoPhillips,

seeking compensatory damages for contamination

and erosion of the Louisiana coastline

allegedly caused by

historical oil and gas operations.

ConocoPhillips entities are defendants in

of the lawsuits and will

vigorously defend against them.

Because Plaintiffs’ SLCRMA theories are unprecedented,

there is uncertainty

about these claims (both as to scope and damages)

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,

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.

Several Louisiana parishes and the State

of Louisiana have filed

lawsuits under Louisiana’s

State and Local

Coastal Resources Management

Act (SLCRMA) against oil and gas

companies, including ConocoPhillips, seeking

compensatory damages for contamination

and erosion of the Louisiana coastline allegedly

caused by historical oil

and gas operations.

ConocoPhillips entities are defendants

of the lawsuits and will vigorously defend

Because Plaintiffs’ SLCRMA theories are

unprecedented, there is uncertainty

about these claims (both as to

scope and damages) 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,

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.

order to ConocoPhillips is premised on its connection

to Phillips Petroleum Company, a legacy company of

ConocoPhillips, which held a historical

percent interest in this lease and operated these

facilities, but sold

its interest approximately

ConocoPhillips has not had any connection to

the operation or

production on this lease since that time.

the lease facilities, including two

offshore platforms located

near Carpinteria, California.

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,

This order was

sent after the current owner of OCS Lease P-0166

relinquished the lease and abandoned the lease platforms

BSEE’s order to

ConocoPhillips is premised on its connection to

Phillips Petroleum Company,

company of ConocoPhillips, which held a historical

percent interest in this

lease and operated these facilities,

but sold its interest approximately

ConocoPhillips continues to evaluate

its exposure in this matter.

On May 10, 2021, ConocoPhillips filed arbitration

under the rules of the Singapore International

Arbitration Centre

(SIAC) against Santos KOTN

and Santos Limited for

their failure to timely pay the $

million bonus due

upon FID of the Barossa development project

under the sale and purchase agreement.

Santos Limited have filed a counterclaim,

and the arbitration is underway.

Notes to Consolidated Financial Statements

ConocoPhillips

Note 11—Derivative and Financial Instruments

We use futures, forwards, swaps and options in various markets to meet our customer

needs, capture market

opportunities and manage foreign exchange currency

We use futures, forwards,

swaps and options in various markets

to meet our customer needs, capture

opportunities and manage foreign exchange

currency risk.

Commodity Derivative Instruments

Our commodity business primarily consists

of natural gas, crude oil, bitumen, LNG and NGLs.

Commodity derivative instruments are held at fair

value on our consolidated balance sheet.

balances have the right of setoff, they are presented on

Related cash flows are recorded as

operating activities on our consolidated statement

Our commodity business primarily consists of natural

gas, crude oil, bitumen, LNG and NGLs.

Commodity derivative instruments

are held at fair value on our consolidated

balance sheet.

Where these balances

have the right of setoff,

they are presented on a net basis.

Related cash flows are recorded

on our consolidated statement

of cash flows.

On our consolidated income statement, gains

and losses are recognized either on a gross basis

if directly related to our physical business

or a net basis if held

Gains and losses related to contracts that meet

and are designated with the NPNS exception are

recognized upon settlement.

We generally apply this exception to eligible crude contracts and certain gas

We do not apply hedge accounting for our commodity derivatives.

The following table presents the gross fair values

of our commodity derivatives, excluding

collateral, and the

line items where they appear on our consolidated

On our consolidated income statement,

gains and losses are

recognized either on a gross

basis if directly related to our physical

business or a net basis if held for trading.

and losses related to contracts

that meet and are designated with the NPNS

exception are recognized

We generally apply this

exception to eligible crude contracts

and certain gas contracts.

apply hedge accounting for our commodity

The following table presents the gross

fair values of our commodity derivatives,

excluding collateral,

items where they appear on our consolidated

balance sheet:

Millions of Dollars

Prepaid expenses and other current assets

Prepaid expenses and other current

Other accruals

1 unchanged sentence

The gains (losses) from commodity derivatives

incurred, and the line items where they appear

consolidated income statement were:

incurred, and the line items where they appear on

our consolidated

income statement were:

Millions of Dollars

Three Months Ended

Six Months Ended

Nine Months Ended

Sales and other operating revenues

1 unchanged sentence

Purchased commodities

On January 15, 2021, we assumed financial derivative

instruments consisting of oil and natural gas

On January 15, 2021, we assumed financial derivative instruments

consisting of oil and natural gas

connection with the acquisition of Concho.

At the acquisition date, the financial derivative

acquired were recognized at fair value as a net liability

million with settlement dates under the

contracts through December 31, 2022.

instruments acquired

were recognized at fair

value as a net liability of $

million with settlement dates under the contracts

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 $

million on Concho derivative

contracts with settlement dates

on or before March 31, 2021, and an

million loss related to all

remaining Concho derivative contracts

with settlement dates subsequent

to March 31, 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.

instruments is recorded within the

“Sales and other

operating revenues” line on our

consolidated income statement.

Notes to Consolidated Financial Statements

ConocoPhillips

By the end of March 2021, all oil and natural

gas derivative financial instruments acquired from

gas derivative financial instruments

acquired from Concho were

contractually settled.

4 unchanged sentences

million in the second quarter of 2021.

Cash settlements related to the Concho

derivative contracts

are presented within “Cash Flows From

Operating Activities” on our consolidated cash

flow statement.

The table below summarizes our material net exposures

resulting from outstanding commodity

Cash settlements related

to the Concho derivative

contracts are presented

within “Cash Flows From Operating Activities”

on our consolidated statement

The table below summarizes our material

net exposures resulting from

outstanding commodity derivative

Open Position

Natural gas and power (billions of cubic feet equivalent)

Natural gas and power (billions

of cubic feet equivalent)

Financial Instruments

We invest in financial instruments with maturities based on our cash forecasts for

the various accounts and

We invest in financial

instruments with maturities based on our cash

forecasts for the various

currency pools we manage.

The types of financial instruments in which we

currently invest include:

The types of financial instruments in which we currently

invest include:

Time deposits:

Interest bearing deposits placed with financial

institutions for a predetermined amount

Interest bearing deposits

placed with financial institutions for a predetermined

Demand deposits:

Interest bearing deposits placed

with financial institutions.

Interest bearing deposits

placed with financial institutions.

Deposited funds can be

1 unchanged sentence

Commercial paper:

Unsecured promissory notes issued

by a corporation, commercial bank or

government agency purchased at a discount to

Unsecured promissory

notes issued by a corporation, commercial

bank or government

agency purchased at a discount to

mature at par.

government or government agency obligations:

government or government

agency obligations:

Securities issued by the U.S.

government or U.S.

government agencies.

Foreign government obligations:

issued by foreign governments.

Securities issued by foreign governments.

Corporate bonds:

Unsecured debt securities

issued by corporations.

Unsecured debt

securities issued by corporations.

Asset-backed securities:

Collateralized debt securities.

The following investments are carried on our

consolidated balance sheet at cost, plus accrued

interest and the

table reflects remaining maturities at June

30, 2021 and December 31, 2020:

Collateralized

debt securities.

Notes to Consolidated Financial Statements

ConocoPhillips

The following investments are

carried on our consolidated balance sheet at cost, plus accrued

interest and the table

reflects remaining maturities at September 30, 2021 and

December 31, 2020:

Millions of Dollars

1 unchanged sentence

Cash and Cash Equivalents

Short-Term Investments

Investments and Long-

Term Receivables

Investments and Long-Term

Demand Deposits

3 unchanged sentences

One year through five years

Government Obligations

The following investments in debt securities

classified as available for sale are carried at

fair value on our

consolidated balance sheet at June 30, 2021 and

December 31, 2020:

fair value on our consolidated

balance sheet at September 30, 2021 and December 31, 2020:

Millions of Dollars

1 unchanged sentence

Cash and Cash Equivalents

Short-Term Investments

Investments and Long-Term

2 unchanged sentences

Commercial Paper

Government Obligations

Government Agency

Foreign Government Obligations

Asset-backed Securities

Cash and Cash Equivalents and Short-Term Investments have remaining maturities

Agency Obligations

Foreign Government

Cash and Cash Equivalents and Short-Term

Investments have remaining maturities

within one year.

Investments and Long-Term Receivables have remaining maturities

greater than one year through eight years.

The following table summarizes the amortized

cost basis and fair value of investments in

debt securities

classified as available for sale:

Investments and Long-Term

Receivables have remaining maturities greater

than one year through eight years.

Notes to Consolidated Financial Statements

ConocoPhillips

The following table summarizes the

amortized cost basis and fair value

of investments in debt securities classified

as available for sale:

Millions of Dollars

7 unchanged sentences

Asset-backed securities

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

losses for debt securities classified as available

At September 30, 2021 and December 31, 2020, total

unrealized losses for debt

securities classified as available for

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.

Additionally, at

September 30, 2021 and December 31, 2020, investment

these debt securities in an unrealized loss position

for which an allowance for

credit losses has not been recorded

were negligible.

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

and nine-month periods ended September 30, 2021, proceeds

from sales and redemptions of

investments in debt securities classified

as available for sale were $

million and $

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

and nine-month periods ended September 30, 2020,

proceeds from sales and redemptions of

investments in debt 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

Gross realized gains and

losses included in earnings from those sales and redemptions

were negligible.

securities sold and redeemed is determined using the specific

identification method.

Financial instruments potentially exposed to concentrations

of credit risk consist primarily of cash equivalents,

short-term investments, long-term investments

in debt securities, OTC derivative contracts and trade

Financial instruments potentially exposed

to concentrations of credit

risk consist primarily of cash equivalents,

short-term investments, long-term

investments in debt securities,

OTC derivative contracts

and trade receivables.

Our cash equivalents and short-term investments

are placed in high-quality commercial paper,

government money market funds, government debt

securities, time deposits with major international

financial institutions, high-quality corporate

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,

such as forwards, swaps and options, derives

government money

market funds, U.S.

and government agency obligations,

time deposits with major international banks

and financial institutions, high-quality corporate

bonds, foreign government obligations

and asset-backed

Our long-term investments in debt

securities are placed in high-quality corporate

bonds, asset-backed

securities, U.S.

government and government

agency obligations, foreign

government obligations, and

deposits with major international banks

and financial institutions.

The credit risk from our OTC derivative

contracts, such as forwards,

swaps and options, derives from the

counterparty to the transaction.

Individual counterparty exposure is managed

within predetermined credit

limits and includes the use of cash-call margins when appropriate,

Individual counterparty exposure

is managed within predetermined credit limits

and includes the use of cash-call margins when appropriate,

thereby reducing the risk of significant

nonperformance.

We also use futures, swaps and option contracts that have a negligible credit

these trades are cleared primarily with an exchange

clearinghouse and subject to mandatory margin

requirements until settled;

however, we are exposed to the credit

risk of those exchange brokers for receivables

arising from daily margin cash calls, as well as for cash

We also use futures, swaps

and option contracts that have

a negligible credit risk because these

trades are cleared primarily with an

exchange clearinghouse and subject to

mandatory margin requirements until

we are exposed to the credit risk

of those exchange brokers

for receivables arising from

margin cash calls, as well as for cash

deposited to meet initial margin requirements.

Our trade receivables result primarily

from our oil and gas operations and reflect a broad

international customer base, which limits our

exposure to concentrations of credit risk.

from our oil and gas operations

and reflect a broad national and

international customer base, which limits

our exposure to concentrations

of credit risk.

The majority of these

receivables have payment terms of

receivables have payment

or less, and we continually monitor this exposure

creditworthiness of the counterparties.

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

exposure exceeds a threshold amount.

We have contracts with fixed threshold amounts and other contracts

with variable threshold amounts that are contingent on our credit rating.

The variable threshold amounts

typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert

to zero if we fall below investment grade.

We may require collateral

to limit the exposure to loss including,

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.

Notes to Consolidated Financial Statements

ConocoPhillips

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

exceeds a threshold amount.

We have contracts with fixed threshold amounts and other contracts with variable

threshold amounts that are contingent on our credit rating.

The variable threshold amounts typically decline for

lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below

investment grade.

Cash is the primary collateral in all contracts;

however, many also

permit us to post letters of credit as collateral, such as transactions administered through the New York

Mercantile Exchange.

The aggregate fair value of all derivative

instruments with such credit risk-related contingent

features that were

in a liability position at June 30, 2021 and December

31, 2020, was $

however, many also permit us to post letters of

credit as collateral, such as transactions administered through the New York Mercantile Exchange.

The aggregate fair value

of all derivative instruments with such credit

risk-related contingent

features that were in

a liability position at September 30, 2021 and December 31,

million and $

1 unchanged sentence

For these instruments,

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

collateral was posted at

September 30, 2021 or December 31, 2020.

If our credit rating

had been downgraded below investment

grade at September 30, 2021, we

would have been required to post

million of additional collateral, either with cash

or letters of credit.

Note 12—Fair Value

We carry a portion of our assets and liabilities at fair value that are measured at the reporting

date using an exit

price (i.e., the price that would be received to sell

an asset or paid to transfer a liability) and disclosed

according to the quality of valuation inputs under

the following hierarchy:

Quoted prices (unadjusted) in an active

market for identical assets or liabilities.

Inputs other than quoted prices that

are directly or indirectly observable.

Unobservable inputs that are significant

to the fair value of assets or liabilities.

The classification of an asset or liability

is based on the lowest level of input significant

to its fair value.

that are initially classified as Level 3 are subsequently

We carry a portion of our assets and liabilities

at fair value that are measured

at the reporting date using an exit

price (i.e., the price that would be received to sell an

asset or paid to transfer

a liability) and disclosed according to

the quality of valuation inputs under the following hierarchy:

Quoted prices (unadjusted) in an

active market for identical

assets or liabilities.

Inputs other than quoted prices that are

directly or indirectly observable.

Unobservable inputs that are

significant to the fair value of assets

or liabilities.

The classification of an asset or liability is based on the lowest

level of input significant to its fair value.

are initially classified as Level 3 are subsequently

reported as Level 2 when the fair value derived

unobservable inputs is inconsequential to the overall

fair value, or if corroborated market data becomes

Assets and liabilities initially reported as Level

2 are subsequently reported as Level 3 if

corroborated market data is no longer available.

There were no material transfers into or

out of Level 3 during

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

nor during the year ended December 31, 2020.

Recurring Fair Value Measurement

from unobservable

inputs is inconsequential to the overall

fair value, or if corroborated

market data becomes available.

liabilities initially reported as Level 2 are subsequently

reported as Level 3 if corroborated

market data is no longer

There were no material transfers

into or out of Level 3 during the three-

and nine-month periods ended

September 30, 2021, nor during the year ended December

Recurring Fair Value

Financial assets and liabilities reported at fair

value on a recurring basis primarily include

our investment in

CVE common shares,

our investments in debt securities classified

as available for sale, and commodity

Level 1 derivative assets and liabilities primarily

represent exchange-traded futures and options that are

valued using unadjusted prices available from the

underlying exchange.

value on a recurring basis primarily include our investment

common shares, our investments

in debt securities classified as available for

sale, and commodity derivatives.

Level 1 derivative assets and

liabilities primarily represent exchange-traded

futures and options that are

valued using unadjusted prices available

from the underlying exchange.

Level 1 also includes our

investment in common shares of CVE, which is valued

using quotes for shares on the NYSE, and our

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,

obligations classified as available for

sale debt securities, which are

valued using exchange prices.

Level 2 derivative assets and liabilities primarily

represent OTC swaps, options and forward purchase

sale contracts that are valued using adjusted exchange

prices, prices provided by brokers or pricing

companies that are all corroborated by market data.

Level 2 also includes our investments in debt

Level 2 derivative assets and

liabilities primarily represent OTC

swaps, options and forward

sale contracts that are

valued using adjusted exchange

prices, prices provided by brokers

service companies that are all corroborated

by market data.

Level 2 also includes our investments

securities classified as available for sale including

investments in corporate bonds, commercial

investments in corporate

bonds, commercial paper,

asset-backed securities, U.S.

government agency

obligations and foreign government obligations

valued using pricing provided by brokers or pricing

service companies that are corroborated with

Level 3 derivative assets and liabilities consist

of OTC swaps, options and forward purchase and

contracts where a significant portion of fair

value is calculated from underlying market

data that is not

agency obligations and foreign

government obligations

valued using pricing provided by brokers

or pricing service companies that are corroborated

Level 3 derivative assets and

liabilities consist of OTC swaps,

options and forward purchase and

contracts where a significant

portion of fair value is calculated

from underlying market data

readily available.

The derived value uses industry standard methodologies

that may consider the historical

relationships among various commodities, modeled

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

The following table summarizes the fair value

hierarchy for gross financial assets and

liabilities (i.e.,

unadjusted where the right of setoff exists for commodity

derivatives accounted for at fair value on a recurring

The derived value uses industry standard

methodologies that may consider the

historical relationships

among various commodities, modeled market

prices, time value,

volatility factors

and other relevant economic measures.

The use of these inputs results in management’s

best estimate of

Level 3 activity was not material for

all periods presented.

Notes to Consolidated Financial Statements

ConocoPhillips

The following table summarizes the

fair value hierarchy

for gross financial assets and liabilities (i.e., unadjusted

where the right of setoff exists

for commodity derivatives accounted

for at fair value on a recurring

Millions of Dollars

June 30, 2021

September 30, 2021

December 31, 2020

3 unchanged sentences

Commodity derivatives

Total liabilities

The following table summarizes those commodity

derivative balances subject to the right of setoff as

presented on our consolidated balance sheet.

We have elected to offset the recognized fair value amounts for

multiple derivative instruments executed with the

same counterparty in our financial statements

The following table summarizes those

commodity derivative balances subject to

the right of setoff as

presented on our consolidated

balance sheet.

We have elected to

offset the recognized fair

value amounts for

multiple derivative instruments

executed with the same counterparty

in our financial statements when a legal

right of setoff exists.

2 unchanged sentences

Right of Setoff

June 30, 2021

September 30, 2021

December 31, 2020

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

did not present any amounts gross on our

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

did not present any amounts

gross on our consolidated

balance sheet where we had the right of setoff.

Reported Fair Values of Financial Instruments

We used the following methods and assumptions to estimate the fair value of financial

Notes to Consolidated Financial Statements

ConocoPhillips

Reported Fair Values

of Financial Instruments

We used the following methods

and assumptions to estimate the fair value

of financial instruments:

Cash and cash equivalents and short-term investments:

The carrying amount reported on the balance

sheet approximates fair value.

For those investments classified as available

for sale debt securities,

the carrying amount reported on the balance sheet

sheet approximates fair

For those investments classified as

available for sale debt securities, the

carrying amount reported on the balance sheet

is fair value.

Accounts and notes receivable (including long-term

and related parties):

The carrying amount

reported on the balance sheet approximates fair

Accounts and notes receivable (including

long-term and related parties):

amount reported on

the balance sheet approximates

The valuation technique and methods used to

estimate the fair value of the current portion

of fixed-rate related party loans is consistent

and advances—related parties.

fair value of the current portion of fixed

-rate related party

loans is consistent with Loans and advances—

related parties.

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

The fair value of investments in debt

securities categorized as Level 1 in the fair

value hierarchy is measured using exchange prices.

fair value of investments in debt securities

categorized as Level 2 in the fair value hierarchy

measured using pricing provided by brokers or

pricing service companies that are corroborated

See Note 10 for additional information.

for a discussion of the carrying value and fair

value of our investment in

CVE common shares.

Investments in debt securities classified

as available for sale:

The fair value

of investments in debt

securities categorized as Level

1 in the fair value hierarchy

is measured using exchange prices.

value of investments in debt

securities categorized as Level 2 in

the fair value hierarchy

is measured using

pricing provided by brokers

or pricing service companies that are corroborated

with market data.

Loans and advances—related parties:

amount of floating-rate loans approximates

The fair value of fixed-rate loan activity is

measured using market observable data and is

categorized as Level 2 in the fair value hierarchy.

See Note 4 for additional information.

Accounts payable (including related parties)

and floating-rate debt:

amount of floating-rate loans

approximates fair value.

The fair value of fixed-rate

loan activity is measured using market

observable data and is categorized

Level 2 in the fair value hierarchy.

Accounts payable (including

related parties) and floating-rate

The carrying amount of accounts

payable and floating-rate debt reported on the balance

sheet approximates fair value.

payable and floating-rate

debt reported on the balance sheet approximates

Fixed-rate debt:

The estimated fair value of fixed-rate

debt is measured using prices available

pricing service that is corroborated by market

therefore, these liabilities are categorized

2 in the fair value hierarchy.

The estimated

fair value of fixed-rate

debt is measured using prices available from

pricing service that is corroborated

by market data;

these liabilities are categorized

as Level 2 in

the fair value hierarchy.

Commercial paper:

The carrying amount of our

commercial paper instruments approximates

The carrying amount of our commercial

paper instruments approximates

and is reported on the balance sheet as short-term

The following table summarizes the net fair

value of financial instruments (i.e., adjusted

where the right of

setoff exists for commodity derivatives):

The following table summarizes the

net fair value of financial instruments

(i.e., adjusted where the right of setoff

exists for commodity derivatives):

Millions of Dollars

6 unchanged sentences

Financial liabilities

Total debt, excluding finance leases

debt, excluding finance leases

Commodity derivatives

Note 12—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the

equity section of our consolidated balance

sheet included:

Notes to Consolidated Financial Statements

ConocoPhillips

Note 13—Accumulated Other Comprehensive

Accumulated other comprehensive

loss in the equity section of our consolidated balance sheet included:

Millions of Dollars

Benefit Plans

Defined Benefit

Net Unrealized

3 unchanged sentences

Other comprehensive income (loss)

June 30, 2021

September 30, 2021

The following table summarizes reclassifications

out of accumulated other comprehensive loss and into

out of accumulated other comprehensive

loss and into net

income (loss):

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Defined benefit plans

The above amounts are included in the computation of net periodic benefit

cost and are presented net of tax expense of $

The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $

million and $

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

respectively, and $

million for the three-month periods ended September 30, 2021 and September 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.

million for the

nine-month periods ended September 30, 2021 and September 30, 2020, respectively

Note 14—Cash Flow Information

Millions of Dollars

Six Months Ended

Nine Months Ended

Cash Payments

Net Sales (Purchases) of Investments

Short-term investments purchased

Short-term investments sold

Short-term investments

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.

We paid a deposit of $

million under the terms of the agreement of the Shell Permian

is included within the “Cash Flows from Investing

Activities - Other” on our consolidated statement of cash

for additional information on cash

and non-cash changes to our consolidated

balance sheet associated

with our Concho acquisition and information on

the announced Shell transaction.

Notes to Consolidated Financial Statements

ConocoPhillips

Note 15—Employee Benefit Plans

Pension and Postretirement Plans

Pension and Postretirement

Millions of Dollars

2 unchanged sentences

Components of Net Periodic Benefit Cost

Three Months Ended June 30

Three Months Ended September 30

Interest cost

3 unchanged sentences

Net periodic benefit cost

Six Months Ended June 30

Nine Months Ended September 30

Interest cost

2 unchanged sentences

Recognized net actuarial loss

Special Termination Benefits

Special Termination

Net periodic benefit cost

The components of net periodic benefit cost, other

than the service cost component, are included

The components of net periodic benefit cost,

other than the service cost component, are included

in the “Other

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

expenses” line item on our consolidated

income statement.

We recognized a proportionate

share of prior actuarial losses from other comprehensive

income as pension

settlement expense of $

million and $

million during the three- and nine-month periods

ended September 30,

2021, respectively.

As part of our company-wide restructuring

program, we concluded that

actions taken during

the first quarter of 2021, would result

in a significant reduction of future service of active employees

qualified pension plan, a U.S.

nonqualified supplemental

retirement plan and the U.S.

What changed 10-Q

Item 1. Financial Statements