What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 1932 added, 1493 removed, 293 unchanged (92% of the section changed)

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Discussion and Analysis is the company’s analysis of its financial performance and of

significant trends that may affect future performance.

It should be read in conjunction with the financial

statements and notes.

It contains forward-looking statements including, without limitation,

statements relating

to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe

harbor” provisions of the Private Securities Litigation Reform

Management’s Discussion and Analysis is the company’s

analysis of its financial performance and of significant

trends that may affect future performance.

It should be read in conjunction with the financial statements

It contains forward-looking statements

including, without limitation, statements

relating to the company’s

plans, strategies, objectives, expectations

and intentions that are made pursuant to

the “safe harbor” provisions of

the Private Securities Litigation Reform Act of 1995.

The words “anticipate,”

“believe,” “budget,” “continue,” “could,” “effort,”

“estimate,” “expect,” “forecast,” “goal,” “guidance,”

“intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,”

“target,” “will,” “would,” and similar expressions identify forward-looking statements.

The company does

not undertake to update, revise or correct any of the forward-looking information unless required to do so

under the federal securities laws.

Readers are cautioned that such forward-looking statements should be read

in conjunction with the company’s disclosures under the heading:

“CAUTIONARY STATEMENT FOR THE

PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS

OF THE PRIVATE SECURITIES LITIGATION

REFORM ACT OF 1995,” beginning on page

The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss)

“believe,” “budget,”

“plan,” “potential,”

“predict,” “projection,”

“seek,” “should,”

“will,” “would,”

and similar expressions

identify forward-looking statements.

The company does not undertake

to update, revise or correct any of the

forward-looking information unless required to do so under

the federal securities laws.

Readers are cautioned that

such forward-looking statements

should be read in conjunction with the company’s

disclosures under the heading:

“CAUTIONARY STATEMENT

FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS

OF THE PRIVATE

LITIGATION REFORM

ACT OF 1995,”

beginning on page 57.

The terms “earnings” and “loss” as used in Management’s

Discussion and Analysis refer to net income (loss)

attributable to ConocoPhillips.

BUSINESS ENVIRONMENT AND EXECUTIVE

ConocoPhillips is the world’s largest independent E&P company with operations

and activities in 15 countries.

Our diverse, low cost of supply portfolio includes

resource-rich unconventional plays in North

conventional assets in North America, Europe,

LNG developments;

inventory of global conventional and unconventional

Business Environment and Executive Overview

ConocoPhillips is the world’s

largest independent E&P company

with operations and activities in 14 countries.

diverse, low cost of supply portfolio

includes resource-rich unconventional

plays in North America;

assets in North America, Europe, and Asia;

developments;

oil sands in Canada;

and an inventory

conventional and unconventional

exploration prospects.

Headquartered in Houston, Texas,

at June 30, 2021, we employed approximately

at September 30,

2021, we employed approximately

9,900 people worldwide and had total assets

of $87 billion.

Completed Acquisition of Concho Resources Inc.

Completed and Announced Acquisitions

On January 15, 2021, we completed our acquisition

1 unchanged sentence

(Concho), an independent

and gas exploration and production company

with operations across New Mexico and West Texas.

addition of complementary acreage in the

Delaware and Midland Basins creates a sizeable

Permian presence to

augment our leading unconventional positions

in the Eagle Ford, Bakken and Montney.

Since the closing of the transaction, we have made

significant progress in integrating the two

companies and

have exceeded our own expectations in realizing

synergies and savings that should have long lasting positive

effects on our business.

We previously announced an expected $750 million of annual cost and capital

However, due to additional benefits anticipated from further cost, capital,

and margin improvements,

we now expect approximately $1 billion in annual

synergies and savings by 2022.

See Note 3 for additional

information related to our Concho acquisition.

While commodity prices continued to improve

in the second quarter of 2021, we believe that

remain cyclical and volatile.

exploration and production

company with operations across

New Mexico and West Texas.

The addition of

complementary acreage in the Delaware

and Midland Basins resulted in a significant

Permian presence to augment

our leading unconventional positions

in the Eagle Ford, Bakken and

In September 2021, we signed a definitive agreement

to acquire Shell Enterprises LLC

Basin (Shell Permian Acquisition) in an all-cash transaction

for $9.5 billion before customary

to be acquired include approximately

225,000 net acres and producing properties

located entirely in Texas,

as over 600 miles of operated crude, gas

and water pipelines and infrastructure.

This acquisition further enhances

our already sizeable Permian

position, and we believe that our development,

operational and commercial

expertise will deliver significant incremental

This acquisition is expected to close in the

fourth quarter of

2021, subject to regulatory approval

and other customary closing conditions.

See Item 1A “Risk

Factors” for further discussion of the risks related to the Shell Permian Acquisition.

While commodity prices in the third quarter of 2021 improve

to pre-pandemic levels,

we expect that they will

continue to be cyclical and volatile.

Our view is that a successful business strategy

in the E&P industry must be

resilient in lower price environments, while

also retaining upside during periods of higher prices.

are unhedged, remain disciplined in our investment

decisions and are monitoring market

fundamentals,

including OPEC plus updates regarding supply

inventory levels, and capital restraint across

Demand is still recovering but has yet to reach

pre-pandemic levels.

The speed and extent of this

recovery will be influenced by whether and at what

pace the COVID-19 restrictions that

economic activity and depressed the demand for

our products globally are eased.

As the macro energy environment continues to evolve,

we have embraced what we believe sector leadership

requires and we call it our triple mandate.

We believe ConocoPhillips can play a valued role in whatever

pathway the energy transition takes by investing in the lowest

cost of supply barrels to help meet global energy

demand, delivering competitive returns of and on capital,

and achieving our net-zero ambition on our gross

operated (scope 1 and 2) emissions.

resilient in lower price environments,

while also retaining upside during periods

of higher prices.

As such, we are

unhedged, remain highly disciplined in our investment

decisions and continually monitor market

including OPEC plus updates regarding

supply guidance and inventory

Demand continues to recover but

has yet to regain pre

-pandemic levels.

The speed and extent of this recovery

will be influenced by continual easing

of COVID-19 restrictions that have

reduced economic activity and depressed

the demand for our products globally.

Management’s Discussion and Analysis

ConocoPhillips

The energy macro-environment

including energy transition, continues

We believe ConocoPhillips can

play a valued role in the energy

We have adopted a triple mandate

that simultaneously calls for

meeting energy pathway demand,

delivering competitive returns of and on

capital, and achieving our net-zero

ambition on operational (scope 1 and 2) emissions.

Our triple mandate is supported by financial principles

and allocation priorities that should allow

us to deliver

superior returns through the price cycles.

and capital allocation priorities that

should allow us to

deliver superior returns through the price cycles

Our financial principles consist of maintaining

balance sheet

strength, providing peer-leading distributions,

making disciplined investments, and delivering ESG excellence,

all of which are in service of delivering financial

Our acquisition of Concho further reinforced

value proposition.

In the second quarter, total company production was 1,588

MBOED, including 435

MBOED from the Permian Basin, resulting in cash

provided by operating activities of $4.3 billion.

month period ended June 30, 2021, we have

generated $6.3 billion in cash provided by operating

returning $1.2 billion to shareholders through dividends

and $1 billion through share repurchases.

the quarter with cash, cash equivalents and short-term

investments totaling $8.9 billion.

In February 2021, we resumed our share repurchase

program at an annualized level of $1.5 billion

increased in the second quarter to an annualized level

of $2.5 billion for 2021.

Additionally, in May 2021 we announced a paced monetization program related

to the 208 million shares of

Cenovus Energy (CVE) common shares owned at that time.

We plan to fully dispose of our CVE shares by

year-end 2022, however, the sales pace for the remaining shares will be guided

by market conditions, and we

retain discretion to adjust accordingly.

The proceeds from this disposition will be deployed

incremental share repurchases.

During the second quarter of 2021 we sold 20 million

shares or approximately

10 percent of the shares held at December 31, 2020

for $180 million.

Based on current market conditions, in

2021 we anticipate $1 billion in proceeds to be directed

towards our existing share repurchase authorization,

bringing our total 2021 share repurchases to an estimated

strength, providing peer-leading

distributions, making disciplined investment

s, and delivering ESG excellence,

which are in service to delivering competitive financial

Our completed and announced acquisitions

year further reinforce our value

In the third quarter,

total company production

was 1,544 MBOED

resulting in cash provided by operating

activities of $4.8 billion.

In the nine-month period ended September 30,

2021, we generated $11.1 billion in

cash provided by operating activities,

returning $1.8 billion to shareholders

through dividends and $2.2 billion through share

We ended the quarter with cash,

cash equivalents

and short-term investments totaling

$10.5 billion.

See Note 5 for additional information

on our investment in CVE.

These share repurchases along with our annual

dividend of $2.3 billion amount to a total of approximately

billion in planned distributions for 2021.

we demonstrated our commitment to preserving

-rated balance sheet by announcing our

intent to reduce the company’s gross debt by $5 billion over five years through

natural and accelerated

In June 2021, we affirmed our commitment to ESG leadership

and excellence,

and to the specific targets that

we set in October 2020 when we became the first

U.S.-based oil and gas company to adopt a Paris-aligned

climate-risk strategy.

Our commitment includes:

Net-zero ambition for operational (scope 1 and

2) emissions by 2050 with active advocacy

on carbon to address end-use (scope 3) emissions;

Targeting a reduction in operational greenhouse gas emissions intensity by 35 to 45 percent

levels by 2030;

Zero routine flaring by 2030, with an ambition

to get there by 2025;

10 percent reduction target for methane emissions intensity

by 2025, in addition to the 65 percent

reductions we have made since 2015;

Adding continuous methane monitoring devices to

our operations with a focus on the larger Lower 48

Formation of a dedicated low carbon technology

organization responsible for identifying and

prioritizing global emissions reduction initiatives

and opportunities associated with the energy

transition including carbon capture, utilization

and storage (CCUS) and hydrogen;

ESG performance in executive and employee

compensation programs.

2021, we resumed our share repurchase

program at an annualized

level of $1.5 billion, which we

increased in the second quarter to an annualized

level of $2.5 billion for 2021.

Additionally, in

May 2021 we announced a paced monetization

program related to the

208 million shares of

Cenovus Energy (CVE) common shares

owned at that time.

We plan to fully dispose of our CVE shares

2022, however,

the sales pace for the remaining shares will

be guided by market conditions,

and we retain

discretion to adjust accordingly.

During the third quarter of 2021, we sold 47 million shares

for $404 million and

inception to date have sold

67 million shares for $584 million.

Proceeds from the disposition of CVE shares

deployed toward incremental

share repurchases.

In September 2021, we declared an increase

in the company’s quarterly

ordinary dividend from 43 cents per share

to 46 cents per share, representing

a 7 percent increase.

The dividend is payable on December 1, 2021,

stockholders of record

at the close of business on October 28, 2021.

Planned distributions for 2021 amount to

a total of approximately $6 billion

between dividends

repurchases combined.

Additionally in September 2021, we demonstrated

our commitment to preserving our ‘A’

-rated balance sheet by

restating our intent

to reduce the company’s

gross debt by $5 billion over five years

through natural and

accelerated maturities.

In conjunction with our Shell Permian Acquisition announcement

we also communicated an increase

planned disposition target that was

initially set in June at $2 to $3 billion by 2022.

We are now targeting

billion in disposition proceeds by 2023, with the additional

$2 billion sourced primarily from the Permian

part of our ongoing portfolio high-grading and

optimization efforts.

we have generated

$0.2 billion in

disposition proceeds.

The proceeds from these transactions will be used

in accordance with the company’s

priorities, including returns of capital

to shareholders and reduction of gross

Management’s Discussion and Analysis

ConocoPhillips

In September 2021, in conjunction with the announcement

of the Shell Permian Acquisition,

we reaffirmed our

commitment to ESG leadership and

excellence by announcing an improvement

to our operational GHG emissions

intensity reduction targets

Our Paris-aligned climate-risk commitment

now includes:

Net-zero ambition for

operational (scope 1 and 2) emissions

by 2050 with active advocacy for a price

carbon to address end-use (scope 3) emissions;

a reduction in gross operated

and net equity operational GHG emissions intensity

percent from 2016 levels by 2030, an

improvement from the previously

announced target of 35 to 45

percent on only a gross operated

Zero routine flaring by 2030, with an

ambition to get there by 2025;

10 percent reduction target

for methane emissions intensity

by 2025 from a 2019 baseline, in addition to

the 65 percent reductions we have

made since 2015;

Adding continuous methane detection devices

to our operations,

with an initial focus on the larger Lower

48 facilities;

Dedicated low carbon technology

organization responsible

for identifying and prioritizing global emissions

reduction initiatives and opportunities associated

with the energy transition including carbon capture,

utilization and storage

(CCUS) and hydrogen;

ESG performance factoring into

executive and employee compensation

Operationally,

we remain focused on safely

executing the business.

Production was 1,544 MBOED in the third

quarter of 2021, an increase of 477 MBOED or 45 percent,

compared with the third quarter of 2020, primarily

to the addition of approximately

343 MBOED in the Permian Basin from our Concho

acquisition and the absence of

last year’s economic curtailments

predominantly in North American operated

assets as a result of lower oil prices.

We re-invested

$1.3 billion into the business in the form of capital

expenditures during the third quarter,

half of our investments focused

on flexible, short-cycle unconventional

plays in the Lower 48 segment where our

production is liquids-weighted and

has access to both domestic and export markets

For the full year,

disciplined with our allocation of capital with a

planned $5.3 billion program excluding

the impacts of the recently

announced Shell Permian Acquisition which is anticipated

to close in the fourth quarter.

Business Environment

Commodity prices are the most significant

factor impacting our profitability and

related reinvestment of operating

cash flows into our business.

Dynamics that could influence world energy markets

and commodity prices are

global economic health, supply or demand disruptions

or fears thereof caused by civil

unrest, global pandemics,

military conflicts, actions taken

by OPEC plus and other major oil producing countries,

environmental laws, tax

regulations, governmental policies,

and weather-related disruptions.

Our strategy is to create

value through price

cycles by delivering on the financial, operational

and ESG priorities that underpin our value proposition

Our earnings and operating cash flows

generally correlate with

price levels for crude oil and natural

gas, which are

subject to factors external

to the company and over which we have

The following graph depicts the

trend in average benchmark prices

for WTI crude oil, Brent crude oil and

Henry Hub natural gas:

Management’s Discussion and Analysis

ConocoPhillips

WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Prices

1 unchanged sentence

Brent - $/Bbl

Operationally, we remain focused on safely executing the business.

Production was 1,588 MBOED in the

second quarter of 2021, an increase of 607 MBOED

or 62 percent, compared with the second quarter

primarily due to the acquisition of approximately

330 MBOED in the Permian Basin from

acquisition and the absence of last year’s economic curtailments

driven by weakness in oil prices

predominantly in operated North American assets.

We re-invested $1.3 billion back into the business in the form of capital expenditures

during the second

quarter, with over half of our investments focused on flexible,

short-cycle unconventional plays in the Lower

48 segment where our production is liquids-weighted

and is accessible to both domestic and export

For the full year, driven by efficiencies we have already captured from the

Concho transaction,

reduced our 2021 capital guidance to $5.3 billion

and cost guidance to $6.1 billion for 2021.

Business Environment

Commodity prices are the most significant

factor impacting our profitability and related reinvestment

operating cash flows into our business.

Among other dynamics that could influence

world energy markets and

commodity prices are global economic health, supply

or demand disruptions or fears thereof caused

unrest, global pandemics, military conflicts,

actions taken by OPEC plus and other major

oil producing

countries, environmental laws, tax regulations,

governmental policies, and weather-related disruptions.

strategy is to create value through price cycles

by delivering on the financial,

operational and ESG priorities

that underpin our value proposition.

Our earnings and operating cash flows generally

correlate with price levels for crude oil

and natural gas, which

are subject to factors external to the company and over

which we have no control.

The following graph depicts

the trend in average benchmark prices for WTI

crude oil, Brent crude oil and Henry Hub natural

Brent crude oil prices averaged $68.83 per barrel

in the second quarter of 2021,

an increase of 136 percent

compared with $29.20 per barrel in the second quarter

Brent crude oil prices averaged

$73.47 per barrel in the third quarter of 2021, an increase

of 71 percent compared

with $43.00 per barrel in the third quarter of 2020.

WTI at Cushing crude oil prices averaged

$66.07 per barrel in the second quarter of 2021,

an increase of 137 percent compared with $27.85

$70.56 per barrel in

the second quarter of 2020.

Oil prices increased alongside the ongoing global

economic recovery following

2020’s COVID closures as well as OPEC plus supply restraint.

the third quarter of 2021, an increase of 72 percent

compared with $40.93 per barrel in the third

quarter of 2020.

Oil prices increased alongside the ongoing global economic

recovery following 2020’s

COVID impacts as well as

OPEC plus supply restraint,

continued capital discipline by U.S.

and various unplanned supply disruptions in

producing countries.

Henry Hub natural gas prices averaged

per MMBTU in the second quarter of 2021,

an increase of 65

percent compared with $1.71 per MMBTU in the second

$4.02 per MMBTU in the third quarter

of 2021, an increase of 103 percent

compared with $1.98 per MMBTU in the third

quarter of 2020.

Henry Hub prices have increased

due to healthy domestic demand accompanied

by record levels of feedgas demand for LNG exports

Our realized bitumen price averaged $37.60 per barrel

in the second quarter of 2021,

approximately $61 per barrel compared with negative

$23.11 per barrel in the second quarter of 2020.

increase in the second quarter of 2021 was driven

by higher blend price for Surmont sales,

largely attributed to

a strengthening of WTI price and reduced unutilized

transportation costs which negatively impacted

realized bitumen price in 2020.

We continue to optimize bitumen price realizations through the utilization of

downstream transportation solutions and implementation

of alternate blend capability which results in lower

diluent costs.

Our total average realized price was $50.03 per

BOE in the second quarter of 2021,

increased in comparison

with $23.09 per BOE in the second quarter of

Key Operating and Financial Summary

Significant items during the second quarter

of 2021 and recent announcements included

the following:

Delivered strong operational performance across the

company’s asset base, including successful

planned maintenance turnarounds, resulting in second

quarter production of 1,547 MBOED,

Net cash provided by operating activities was $4.3

billion, exceeding capital expenditures

investments of $1.3 billion.

Distributed $1.2 billion to shareholders, comprised

of $0.6 billion in dividends and $0.6 billion

share repurchases.

Henry Hub prices have increased due to

domestic demand accompanied by record

levels of feedgas demand for

LNG exports to Europe and Asia.

Our realized bitumen price averaged

$41.19 per barrel in the third quarter of 2021, an

increase of 160 percent

compared with $15.87 per barrel in the third

quarter of 2020.

The increase in the third quarter of 2021 was driven

by higher blend price for Surmont sales, largely

attributed to a strengthening

of WTI price.

We continue to

optimize bitumen price realizations

through the utilization of downstream

transportation solutions

implementation of alternate

blend capability which results in lower diluent

For the third quarter of 2021 our total

average realized

price increased to $56.92 per BOE compared

per BOE in the third quarter of 2020.

Management’s Discussion and Analysis

ConocoPhillips

Key Operating and Financial

Significant items during the third quarter

of 2021 and recent announcements included the following:

Delivered strong operational

performance across the company’s

asset base, including successful planned

maintenance turnarounds, resulting

in third quarter production of 1,507 MBOED,

excluding Libya.

Net cash provided by operating

activities was $4.8 billion, exceeding capital

expenditures and investments

of $1.3 billion.

Distributed a total of $4.0 billion to

shareholders year to date,

comprised of $2.2 billion in share

repurchases and $1.8 billion in dividends as

part of the company’s plan to return

approximately $6.0

billion to shareholders during 2021.

Announced an increase to the quarterly dividend

by 7 percent to 46 cents per share.

Ended the quarter with cash and cash equivalents

totaling $9.8 billion and short-term investments

$2.3 billion, equaling $8.9 billion in ending cash,

cash equivalents and short-term investments.

Entered into divestiture agreements during July for

certain Lower 48 noncore assets totaling

approximately $0.2 billion, subject to customary

closing adjustments, as part of the company’s plan to

generate $2 to $3 billion in disposition proceeds

over the next 18 months.

billion, equaling $10.5 billion in ending cash, cash equivalents

and short-term investments.

As part of a commitment to ESG excellence,

announced an improvement to

the company’s scope

GHG emissions intensity reduction targets

from a 2016 baseline to 40 to 50 percent

on a net equity and

gross operated basis, from

the previous target of 35 to 45 percent

on only a gross operated basis

Announced highly accretive pending acquisition

of Shell Enterprises LLC’s complementary

Delaware Basin

position in the Permian for $9.5 billion in cash,

before customary closing adjustments.

Generated approximately

$0.2 billion in disposition proceeds from Lower 48 noncore

asset sales as part of

the company’s target

to generate $4 to $5 billion in proceeds

Production from the disposed

assets average approximately

15 MBOED in the first nine months of 2021.

Cost and Production

In June 2021, due to realizing synergistic savings from

our Concho acquisition earlier than anticipated,

announced reductions

of full year 2021

operating plan capital and cost guidance by

a combined $300 million.

Capital guidance was reduced to $5.3 billion

and cost guidance to $6.1 billion for the full

Third-quarter 2021 production is expected to be 1.48

to 1.52 MMBOED,

reflecting seasonal turnarounds

planned in Alaska and the Asia Pacific region.

This production guidance excludes Libya and

previously announced divestitures close during

the third quarter of 2021.

All other guidance items are

Fourth-quarter 2021 production is

expected to be 1.53 to 1.57 MMBOED.

This guidance excludes Libya

impacts from pending acquisitions.

Guidance regarding capital and

cost are unchanged.

This production guidance includes the impact of planned conversion

of the significant majority of previously

acquired Concho two-stream contracted

volumes to a three-stream (crude oil,

natural gas and natural

reporting basis as Concho volumes are integrated

into the company’s

commercial activities.

The conversion to

three-stream reporting is neutral

Effective in the fourth

this conversion is expected

production of approximately

40 MBOED and increase revenue and operating

costs by roughly $70 million.

Depreciation, Depletion and Amortization

DD&A expense was $1.9 billion in the second quarter

Proved reserves estimates were updated in the

current quarter utilizing historical twelve-month

first-of-month average prices, which decreased

second quarter

DD&A expense by approximately $160 million

Depending on price fluctuations, we would expect

reserve estimates to either increase or decrease.

Our proved reserve estimates

are greatly impacted by commodity

price fluctuations, and generally decrease

prices decline and increase as prices rise.

Proved reserves estimates

were updated and increased in the current

quarter utilizing historical twelve-month

first-of-month average

prices, which decreased third quarter DD&A

expense by approximately

$240 million before-tax.

As such, the company reduced its 2021 DD&A expense

guidance by $0.3 billion to $7.1 billion.

Results of Operations

Effective with the third quarter of 2020, we have restructured our segments to align with

changes to our

internal organization.

The Middle East business was realigned from the Asia Pacific and Middle East

to the Europe and North Africa segment.

The segments have been renamed the Asia Pacific segment

Europe, Middle East and North Africa segment.

We have revised segment information disclosures and

segment performance metrics presented within our results of operations for the

prior comparative periods.

ConocoPhillips

Results of Operations

Unless otherwise indicated, discussion of results for the three

and six-month periods ended June 30, 2021, is

based on a comparison with the corresponding periods of 2020.

and nine-month periods ended September 30, 2021,

is based on a comparison with the corresponding periods of 2020.

Consolidated Results

A summary of the company's net income (loss)

attributable to ConocoPhillips by business segment

A summary of the company's net income (loss) attributable

to ConocoPhillips by business segment follows:

Millions of Dollars

Three Months Ended

Six Months Ended

Nine Months Ended

Europe, Middle East and North Africa

1 unchanged sentence

Corporate and Other

Net income (loss) attributable to ConocoPhillips

in the second quarter of 2021 increased $1,831 million.

Earnings were positively impacted by:

Net income (loss) attributable to

ConocoPhillips

Net income (loss) attributable to

ConocoPhillips in the third quarter of 2021 increased

$2,829 million.

quarter earnings were positively impacted

Higher realized commodity prices.

Higher sales volumes, primarily due to our

Concho acquisition and absence of production

in our operated North American assets.

For additional information related to our Concho acquisition,

Second quarter 2021 net income increases were partly

Higher DD&A expenses primarily due to our

Concho acquisition and the absence of production

curtailments in our operated North American assets,

partially offset by lower rates driven from price-

related reserve revisions due to higher commodity

prices in 2021.

Higher production and operating expenses and

taxes other than income taxes, primarily

Concho acquisition and the absence of production

curtailments in our operated North American

Absence of a $597 million after-tax gain on dispositions

related to our Australia-West divestiture in

Net income (loss) attributable to ConocoPhillips

in the six-month period ended June 30, 2021, increased

Higher sales volumes, primarily due to our Concho

acquisition and absence of production curtailments in

our North American operated

Higher equity in earnings of affiliates, primarily due to

higher LNG sales prices.

A gain of $17 million after-tax on our CVE common shares

in the third quarter of 2021, as compared to a

$162 million after-tax loss on those shares

in the third quarter of 2020.

Third quarter 2021 net income increases

were partly offset by:

Higher production and operating expenses

and taxes other than income taxes,

primarily due to higher

sales volumes.

Higher DD&A expenses caused by higher production

volumes, partially offset by lower rates

price-related reserve revisions

due to higher commodity prices in 2021.

Net income (loss) attributable to

ConocoPhillips in the nine-month period ended September

30, 2021, increased

$7,381 million.

In addition to the items detailed above, earnings

were positively impacted by:

A gain of $726 million after-tax on our CVE

common shares, compared with an after-tax

$1,140 million in the first half of 2020.

For discussion of our CVE common shares, see Note 5.

Lower impairments by $519 million,

primarily due to the absence of impairments to noncore

assets in our Lower 48 segment.

In addition to the items detailed above, the increases

in earnings in the six-month period ended

June 30, 2021,

Inclusive of the third quarter gain associated

with our CVE common shares, in the nine-month period we

recognized a gain of $743 million

after-tax on our CVE common shares,

compared with an after-tax loss of

$1,302 million in the nine-month period of 2020.

In addition to the items detailed above,

earnings in the nine-month period were positively

Lower impairments of $611 million, primarily due to a

credit recognized for a decrease

estimate of a previously sold asset,

in which we retained the ARO liability,

as well as the absence of

impairments recognized in the prior period

for non-core gas assets

in our Lower 48 segment.

An after-tax gain of $194 million recognized

for a FID bonus associated with our

Australia-West divestiture

completed in the second quarter of 2020.

Lower exploration expenses

due to the absence of charges associated

with the early cancellation of our

2020 winter exploration program

as well as the absence of 2020 dry hole expenses in Alaska

unproved property impairment

and dry hole expenses for the Kamunsu

East Field in Malaysia,

longer in our development plans.

Results of Operations

ConocoPhillips

In addition to the items detailed above,

the increases in earnings in the nine-month period ended September

2021, were partly offset by:

Restructuring and transaction expenses of approximately

$261 million after-tax related to our Concho

acquisition and mark-to-market impacts on certain

key employee compensation programs.

Realized losses on hedges of $233 million after-tax

related to derivative positions assumed through

our Concho acquisition.

Absence of a $597 million after-tax gain

on our Australia-West

divestiture completed in May

Restructuring and transaction expenses

of $288 million after-tax associated

with the Concho acquisition

and mark-to-market impacts on certain

key employee compensation

Realized losses on hedges of $233 million after

-tax related to derivative

positions assumed through our

Concho acquisition.

These derivative positions were settled

entirely within the first quarter of 2021.

See Note 10 for additional information.

Absence of gains recorded in

2020 from foreign currency derivatives.

See the “Segment Results” section for additional

Income Statement Analysis

Unless otherwise indicated, all results in Income Statement Analysis

are before-tax.

Sales and other operating revenues for the three-

and six-month periods of 2021 increased $6,807

$10,475 million,

respectively, mainly due to higher realized commodity prices and higher sales

volumes in the

Lower 48, primarily related to our Concho acquisition

and the absence of production curtailments in

operated North American assets.

Equity in earnings of affiliates for the three-month period

of 2021 increased $62 million primarily due to

higher earnings driven by higher LNG and crude

prices, partially offset by a higher effective tax rate related

equity method investments in our Europe, Middle

East, and North Africa segment.

For the six-month period

of 2021, Equity in earnings of affiliates decreased $50 million

primarily due to lower earnings driven by lower

LNG lagging contract prices in 2021 when compared

with the same periods in 2020.

Gain on dispositions for the three-

and six-month periods of 2021 decreased $537

million and $262 million,

respectively, primarily due to the absence of a $587 million gain associated with

Unless otherwise indicated, all results in Income Statement

Analysis are before-tax.

Sales and other operating revenues

for the three-

and nine-month periods of 2021 increased $6,940 million

$17,415 million, respectively,

mainly due to higher realized commodity

prices and higher sales volumes.

Equity in earnings of affiliates for

and nine-month periods of 2021 increased $204 million and

million, respectively,

primarily due to higher earnings driven by higher LNG and

crude prices, partially offset by a

higher effective tax rate

related to equity method

investments in our Europe,

Middle East, and North Africa

Gain (loss) on dispositions in the third quarter of 2021 recognized

a loss of $179 million for the sale of noncore

assets in our Other International segment.

the loss were gains recognized

for contingent payments

associated with previous dispositions

in our Canada and Lower 48 segments and gains

on sales of certain noncore

assets in our Lower 48 segment.

For the nine-month period of 2021, net gains on dispositions

decreased $257

million primarily due to the absence of a $587 million gain

associated with our Australia

-West divestiture,

offset by a $200 million FID bonus recognized

in the first quarter of 2021 associated with

our Australia-West

The six-month decrease was partially offset by recognition

of a $200 million FID bonus associated

with our Australia-West divestiture in the first quarter of 2021.

Other income (loss) for the three-month period

decreased $137 million and for the six-month

increased $1,780 million.

Other income (loss) for the three-

and nine-month periods of 2021 increased $87 million

and $1,867 million,

respectively.

During these periods in 2021, we recognized

gains of $418 million and $726

respectively, on our CVE common shares, compared with a gain of $551 million

and loss of $1,140

respectively, for the same periods in 2020.

Purchased commodities for the three- and six-month

periods of 2021 increased $1,868 million

million, respectively, primarily due to higher gas and crude prices.

In the six-month period of 2021, higher

prices were partly offset by lower crude oil volumes purchased.

Production and operating expenses for the three-

and six-month periods of 2021

increased $332 million and

$542 million, respectively, primarily due to costs associated with additional

volumes in our operated North

American assets related to our Concho acquisition

and the absence of production curtailments.

Selling, general and administrative expenses increased

$275 million in the six-month period of 2021,

due to higher costs associated with compensation

and benefits, including mark-to-market impacts

key employee compensation programs,

and transaction and restructuring expenses

associated with our Concho

Exploration expenses for the six-month period of 2021

decreased $144 million, primarily due to the

an unproved property impairment and dry hole expenses

related to the Kamunsu East Field in Malaysia

absence of charges associated with the early termination

of our 2020 winter exploration program in Alaska.

gains of $17 million and $743 million, respectively,

our CVE common shares,

compared with losses of $162 million and $1,302 million for

the same periods in 2020.

Purchased commodities for the three

and nine-month periods of 2021 increased $2,340 million and

million, respectively,

primarily due to higher gas and crude prices and

Production and operating expenses

for the three-

and nine-month periods of 2021 increased $426 million

$968 million, respectively,

primarily in line with higher production volumes.

Selling, general and administrative

expenses increased $307 million in the nine-month

period of 2021, primarily

due to transaction and restructuring

expenses associated with our Concho acquisition

and higher costs associated

with compensation and benefits, including mark-to

-market impacts of certain key

employee compensation

Exploration expenses for

the nine-month period of 2021 decreased $204 million, primarily

due to the absence of

charges associated with the early cancellation

of our 2020 winter exploration

program as well as the absence of

2020 dry hole expenses in Alaska and an unproved

property impairment and dry hole expenses related

East Field in Malaysia.

Results of Operations

ConocoPhillips

DD&A for the three-

and six-month periods of 2021 increased $709

million and $1,184 million, respectively,

mainly due to higher production volumes in the

Lower 48 associated with our Concho acquisition

volumes in each of our North American assets

due to the absence of production curtailments,

up and Kelt acquisition in Canada.

These increases were partly offset by lower rates from

price-related reserve

revisions in Lower 48 and Canada.

Impairments decreased $520 million in

the six-month period of 2021, primarily due to the

absence of a $511

million impairment of certain non-core gas assets

in our Lower 48 segment.

Taxes other than income taxes for the three-

and six-month periods of 2021 increased

$240 million and $360

million, respectively, primarily due to higher sales volumes in Lower 48 from

our Concho acquisition,

absence of production curtailments

in all of our North American assets and higher commodity

Foreign currency transaction (gain) loss in the

six-month period of 2021 was a loss of $29 million

with a gain of $83 million in the six-month period

This increase of $112 million was primarily due to

the absence of gains recognized from foreign currency

derivatives and other foreign currency remeasurements.

and nine-month periods of 2021 increased $261 million and

$1,445 million, respectively,

mainly due to higher production volumes

partly offset by lower rates

from price-related reserve revisions

Impairments decreased $91 million in the third

quarter of 2021, primarily due to a decrease in an ARO

a previously sold asset, in which we retained

the ARO liability.

The decrease of $611 million in the nine-month

period of 2021 was also impacted by the absence

of impairments

recorded for certain non-core

gas assets in our

Lower 48 segment.

other than income taxes for

and nine-month periods of 2021 increased $224 million and

million, respectively,

caused by higher sales volumes primarily in Lower

48 and higher commodity prices.

Foreign currency transaction

(gain) loss for the nine-month period of 2021 was

impaired by $107 million due to the

absence of derivative gains and

other remeasurements.

Note 19—Income Taxes

for information regarding our income tax provision

for information regarding

our income tax provision

(benefit) and effective tax

Results of Operations

ConocoPhillips

Summary Operating Statistics

Three Months Ended

Six Months Ended

Nine Months Ended

Average Net Production

2 unchanged sentences

Equity affiliates

Total crude oil

Natural gas liquids (MBD)

1 unchanged sentence

Equity affiliates

Total natural gas liquids

natural gas liquids

Bitumen (MBD)

2 unchanged sentences

Equity affiliates

Total natural gas

Total Production

4 unchanged sentences

Equity affiliates

Total crude oil

Natural gas liquids (per bbl)

1 unchanged sentence

Equity affiliates

Total natural gas liquids

natural gas liquids

Bitumen (per bbl)

2 unchanged sentences

Equity affiliates

Total natural gas

Millions of Dollars

Exploration Expenses

General administrative, geological and geophysical,

General administrative,

geological and geophysical,

lease rental, and other

Leasehold impairment

*Average sales prices, including the impact of hedges settling per initial contract

terms in the first quarter of 2021 assumed in our Concho

acquisition, were $60.59 per barrel for crude oil and $4.50 per mcf for natural gas for the six-month

period ended June 30, 2021.

31, 2021, we had settled all oil and gas hedging positions acquired from Concho.

See Note 10 for additional information.

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on

At June 30, 2021, our operations were producing

in the U.S., Norway, Canada, Australia, Indonesia,

China, Malaysia,

Qatar and Libya.

Total production of 1,588 MBOED increased 607 MBOED or 62 percent in

the second quarter of 2021 and

423 MBOED or 37 percent in the six-month period

primarily due to:

Higher volumes in the Lower 48 due to our

Concho acquisition.

Higher volumes in our operated North American

assets and Malaysia due to the absence

of production

curtailments.

New wells online in the Lower 48, Canada,

Norway, Malaysia, and Australia.

Higher production in Libya due the absence of

a forced shutdown of the Es Sider export terminal

other eastern export terminals after a period of

civil unrest.

The increase in the second quarter and in the six-month

period of 2021 was partly offset by:

Normal field decline.

Disposition activity primarily related to our

Australia-West divestiture completed in the second

*Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our

acquisition, were $63.95 per barrel for crude oil and $4.98 per mcf for natural gas for the nine-month

period ended September 30, 2021.

March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho.

Results of Operations

ConocoPhillips

We explore for,

produce, transport and market

crude oil, bitumen, natural gas,

LNG and NGLs on a worldwide

At September 30, 2021, our operations

were producing in the U.S., Norway,

Canada, Australia, Indonesia,

China, Malaysia, Qatar and Libya.

production of 1,544 MBOED increased 477 MBOED or

45 percent in the third quarter of 2021 and 441

MBOED or 40 percent in the nine-month period of 2021, primarily

Higher volumes in the Lower 48 due to our Concho acquisition.

New wells online in the Lower 48, Canada, Norway

and Malaysia.

Higher volumes in our North American operated

assets due to the absence of production curtailments.

Higher production in Libya due the absence of a forced

shutdown of the Es Sider export terminal and

other eastern export terminals after

a period of civil unrest.

Improved well performance in

Canada, Alaska and China.

Production increases

in the third quarter and in the nine-month period of 2021 were

partly offset by normal field

In addition to the normal field decline, in the nine-month period

of 2021, production also decreased due to:

Absence of production from Australia

-West due to our second quarter

2020 disposition.

Higher unplanned downtime in the Lower 48 due to Winter

Storm Uri, which impacted production by

approximately 50 MBOED in the first

quarter of 2021.

In addition to the items detailed above, in the six-month

period of 2021, production also decreased

Higher unplanned downtime in the Lower 48

due to Winter Storm Uri, which impacted production by

approximately 50 MBOED in the first quarter

Production excluding Libya for the second quarter

of 2021 was 1,547 MBOED, an increase of 566

from the same period a year ago.

After adjusting for closed acquisitions and dispositions

as well as estimated

impacts from the 2020 curtailment program, second-quarter

2021 production increased 46 MBOED or 3

This increase was primarily due to new production

from the Lower 48 and other development

programs across the portfolio, partially offset by normal

field decline.

Production excluding Libya

for the third quarter of 2021 was

1,507 MBOED, an increase of 441 MBOED from the

same period a year ago.

After adjusting for closed acquisitions

and dispositions as well as estimated impacts from

the 2020 curtailment program,

third-quarter 2021 production increased

26 MBOED or 2 percent.

This increase

was primarily due to new production from

the Lower 48 and other development programs

across the portfolio,

partially offset by normal field decline.

Production from Libya averaged

Production excluding Libya for the six-month period

of 2021 was 1,518 MBOED, an increase

from the same period a year ago.

After adjusting for closed acquisitions and dispositions,

estimated impacts

from the 2020 curtailment program and Winter Storm Uri impacts

from 2021, production increased 18

Production excluding Libya

for the nine-month period of 2021 was 1,514 MBOED,

an increase of 406 MBOED from

the same period a year ago.

After adjusting for closed acquisitions

and dispositions as well as impacts from the

2020 curtailment program and

Winter Storm Uri impacts from 2021, production

increased 17 MBOED or 1 percent.

This increase was primarily due to new production

from the Lower 48 and other development

programs across the portfolio, partially offset by normal

field decline.

programs across the

portfolio, partially offset by

normal field decline.

Production from Libya averaged

Segment Results

Results of Operations

ConocoPhillips

Three Months Ended

Six Months Ended

Net income (loss) attributable to ConocoPhillips

Nine Months Ended

Net Income (Loss) Attributable

to ConocoPhillips

Average Net Production

6 unchanged sentences

Natural gas ($ per MCF)

The Alaska segment primarily explores for, produces, transports

and markets crude oil, NGLs and natural gas.

As of June 30, 2021, Alaska contributed 20 percent

of our consolidated liquids production and less

percent of our consolidated natural gas production.

The Alaska segment primarily explores for,

produces, transports and markets

crude oil, NGLs and natural gas.

September 30, 2021, Alaska contributed

19 percent of our consolidated liquids production

and less than 1 percent

of our consolidated natural

gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings from Alaska increased $512 million

in the second quarter of 2021

and increased $590 million in the

six-month period of 2021, respectively.

Earnings were positively impacted by:

Earnings from Alaska increased

$421 million in the third quarter of 2021 and $1,011 million

in the nine-month

period of 2021, respectively.

In the third quarter,

increases to earnings include:

Higher realized crude oil prices.

Lower DD&A expenses primarily driven by

lower production volumes and lower rates

in the quarter from

price-related reserve revisions

Offsets to the earnings increase include

Lower volumes due to a July turnaround

at our Western North Slope assets.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also increased due to:

Lower exploration expenses

due to the absence of charges associated

with the early cancellation of our

2020 winter exploration program

as well as the absence of 2020 dry hole expenses.

Higher volumes due to the absence of production

curtailments.

Lower exploration expenses due to the absence

of charges associated with the early cancellation of our

2020 winter exploration program.

Partly offsetting the increase in earnings was:

Higher DD&A expenses primarily driven

by higher production volumes and higher rates.

Average production increased 34 MBOED in the second quarter of 2021 and 13 MBOED

in the six-month

In addition to the items detailed above,

in the nine-month period of 2021, earnings also decreased due to:

Higher DD&A expenses primarily caused by higher

rates in the first half of 2021.

Average production

decreased 23 MBOED in the third quarter of 2021 and increased

1 MBOED in the nine-month

period of 2021, respectively.

The increase was primarily due to:

Absence of curtailments at our operated assets.

Partly offsetting the increase in production was:

In the third quarter of 2021, decreases to production

Normal field decline.

A July turnaround at our Western

North Slope assets.

More than offsetting the items

detailed above, in the nine-month period of 2021, production

increased due to:

Absence of curtailments.

Improved performance in the Greater

Prudhoe Area and Western

North Slope assets.

Results of Operations

ConocoPhillips

Willow Update

In August 2021, an Alaska federal

judge vacated the U.S.

approval granted

to our planned Willow

project previously approved

by the Bureau of Land Management (BLM) in October 2020.

The Department of

Justice did not appeal the decision and neither did we.

We believe the best path forward

is to work closely with

the BLM and engage directly with the relevant

agencies to address the matters

described in the decision.

interim, we are continuing with FEED

work in service of a final investment decision.

Three Months Ended

Six Months Ended

Net Income (Loss) Attributable to ConocoPhillips

Nine Months Ended

Net Income (Loss) Attributable

to ConocoPhillips

Average Net Production*

7 unchanged sentences

Natural gas ($ per MCF)**

*Average sales prices, including the impact of hedges settling per initial contract

terms in the first quarter of 2021 assumed in our Concho

acquisition, were $58.25 per barrel for crude oil and $3.78 per mcf for natural gas for the six-month

period ended June 30, 2021.

31, 2021, we had settled all oil and gas hedging positions acquired from Concho.

See Note 10 for additional information

The Lower 48 segment consists of operations located

Lower 48 states, as well as producing

properties in the Gulf of Mexico.

As of June 30, 2021, the Lower 48 contributed

53 percent of our

consolidated liquids production and 65 percent

of our consolidated natural gas production.

*Subsequent to the current period, we anticipate a change in both product mix and average net production

attributed to the planned conversion

of previously acquired two-stream contracted volumes to three-stream.

**Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho

acquisition, were $61.90 per barrel for crude oil and $4.07 per mcf for natural gas for the nine-month

period ended September 30, 2021.

March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho.

The Lower 48 segment consists of operations

located in the U.S.

Lower 48 states,

as well as producing properties in

the Gulf of Mexico.

As of September 30, 2021, the Lower 48 contributed

54 percent of our consolidated liquids

production and 65 percent of our consolidated

natural gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings from the Lower 48 increased $1,540 million

in the second quarter of 2021 and increased $2,445

million in the six-month period of 2021, respectively.

Earnings were positively impacted by:

Higher sales volumes of crude oil and natural gas

due to our Concho acquisition and the absence

Earnings from the Lower 48 increased $1,709

million in the third quarter of 2021 and increased

$4,154 million in

the nine-month period of 2021, respectively.

In the third quarter,

increases to earnings include:

Higher realized crude oil, natural

gas and NGL prices.

Higher sales volumes of crude oil and natural

gas due to our Concho acquisition and the absence of

production curtailments.

Higher realized crude oil, natural gas, and NGL

Partly offsetting the increase in earnings was:

Higher DD&A expenses primarily due to higher

production from our Concho acquisition

of production related curtailment partially

offset by lower rates from price-related reserve revisions.

Higher production and operating expenses and

taxes other than income taxes, primarily

due to higher

production from our Concho acquisition and the absence

of production curtailments.

In addition to the items detailed above, in the six-month

period of 2021, earnings also increased due to:

Offsets to the earnings increase include:

Higher DD&A expenses, production and operating

expenses and taxes other than

income taxes primarily

due to higher production volumes.

Partially offsetting the increase

in DD&A expenses were lower rates

from price-related reserve revisions.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also increased due to

The absence of $399 million in after-tax impairments

related to certain noncore gas assets in the Wind

River Basin operations area.

In addition to the items detailed above, in the six-month

period of 2021, earnings also decreased due

Realized losses on hedges related to derivative

positions acquired in our Concho acquisition.

Note 10 for additional information.

Higher selling, general and administrative

expenses, primarily due to transaction and restructuring

charges related

to our Concho acquisition.

For additional information see Note 3.

Average production increased 483 MBOED and 363 MBOED in the three-

and six-month periods of 2021,

respectively, primarily due to:

related to certain noncore

In addition to the items detailed above,

in the nine-month period of 2021, earnings also decreased due to:

Impacts resulting from our Concho Acquisition,

including higher selling, general and administrative

expenses for transaction and restructuring

charges, as well as realized losses

on derivative settlements.

Results of Operations

ConocoPhillips

Average production increased

431 MBOED and 386 MBOED in the three-

and nine-month periods of 2021,

respectively.

In the third quarter,

increases to production include:

Higher volumes due to our Concho acquisition.

New wells online from our development programs

in Eagle Ford, Permian and Bakken.

in Permian, Eagle Ford

Absence of curtailments.

These production increases were partly offset by:

Offsets to the production increases

Normal field decline.

In addition to the items detailed above, in the six-month

period of 2021, production also decreased

Higher unplanned downtime, primarily due to

Winter Storm Uri.

Planned Dispositions

In July 2021, we entered into divestiture agreements

to sell our interests in certain noncore assets

Proceeds from these agreements total approximately

$0.2 billion before customary adjustments.

The transactions are expected to close in the third

quarter of 2021.

In addition to normal field decline,

in the nine-month period of 2021, production also

decreased due to:

Higher unplanned downtime, primarily due to Winter

Asset Acquisitions and Dispositions

In September 2021, we announced the Shell Permian

Acquisition for $9.5 billion in cash before

The transaction is anticipated to

close in the fourth quarter of 2021, subject to regulatory

and other customary closing conditions.

See Item 1A “Risk Factors” for further discussion of risks

related to the Shell Permian Acquisition.

Additionally in September 2021, we completed

of certain noncore assets in our Lower 48 segment

recording proceeds of approximately

$150 million.

Production from these assets averaged

approximately 15

MBOED in the nine-months ended September 30, 2021.

Results of Operations

ConocoPhillips

Three Months Ended

Six Months Ended

Net Income (Loss) Attributable to ConocoPhillips

Nine Months Ended

Net Income (Loss) Attributable

to ConocoPhillips

Average Net Production

10 unchanged sentences

Average sales prices include unutilized transportation costs.

Our Canadian operations mainly consist of the

Surmont oil sands development in Alberta

Our Canadian operations mainly consist

of the Surmont oil sands development in Alberta

and the liquids-rich

Montney unconventional play in British Columbia.

As of June 30, 2021, Canada contributed

8 percent of our

consolidated liquids production and 4 percent

of our consolidated natural gas production.

Montney unconventional

play in British Columbia.

As of September 30, 2021, Canada contributed 8 percent

consolidated liquids production and

4 percent of our consolidated natural

gas production.

Net Income (Loss) Attributable to ConocoPhillips

1 unchanged sentence

and $537 million,

respectively, in the three-

and six-month

periods of 2021.

Earnings were positively impacted by:

respectively,

in the three-

and nine-month periods

Increases to earnings include:

Higher realized bitumen and crude oil prices.

After-tax gains on disposition related to contingent

payments of $52 million and $72 million

and six-month periods of 2021, respectively, associated with the sale of certain

assets to CVE in

See Note 3 for additional information about the transaction.

Partly offsetting the increase in earnings was:

Higher production and operating expenses primarily

due to the absence of production curtailment

increased Montney production.

Higher DD&A expenses primarily driven

by higher production volumes partially offset by lower rates

from price-related reserve revisions.

Absence of a $48 million refund from the Alberta

Tax & Revenue Administration.

Average production increased 47 MBOED in the second quarter of 2021

and increased 38 MBOED in the six-

month period of 2021, respectively.

The production increase was primarily due to:

Absence of curtailments at our Surmont operated

Wells online from Pad 2 and 3 in the Montney.

Production from our Kelt acquisition in the third

quarter of 2020.

Improved well performance at our Surmont operated

Higher sales volumes in our Surmont and Montney

After-tax gains

on disposition related to contingent

payments of $77 million and $149 million in

and nine-month periods of 2021, respectively,

associated with the sale of certain assets

to CVE in 2017.

Offsets to the earnings increase include

Higher production and operating expenses

primarily due to increased Surmont and Montney

Average production

increased 29 MBOED in the third quarter of 2021 and

increased 34 MBOED in the nine-month

period of 2021, respectively.

In the third quarter,

increases to production include:

Absence of curtailments.

Absence of third quarter 2020 turnaround

activity in the Surmont.

New wells online in the Montney.

Production from our Kelt acquisition

completed in the third quarter of 2020.

Offsets to the production increases

Higher well failures, plant power trips

and facility upsets in the Surmont.

In addition to the items detailed above,

in the nine-month period of 2021, production also increased

Improved well performance in

Results of Operations

ConocoPhillips

Europe, Middle East and North Africa

Three Months Ended

Six Months Ended

Net Income Attributable to ConocoPhillips

Nine Months Ended

Net Income Attributable

to ConocoPhillips

Consolidated Operations

8 unchanged sentences

Natural gas ($ per MCF)

*Prior periods have been updated to reflect the Middle East Business Unit

moving from Asia Pacific to the Europe, Middle East and North Africa

See Note 17 for additional information on our segments.

Middle East and North Africa segment consists

of operations principally located in the Norwegian

sector of the North Sea and the Norwegian Sea,

Qatar, Libya and commercial operations in the U.K.

June 30, 2021, our Europe,

Middle East and North Africa operations contributed

The Europe, Middle East and North Africa

segment consists of operations

principally located in the Norwegian

sector of the North Sea and the Norwegian Sea, Qatar,

Libya and commercial operations

September 30, 2021, our Europe, Middle East

and North Africa operations contributed

12 percent of our

consolidated liquids production and 14 percent

of our consolidated natural gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings from Europe,

Middle East and North Africa increased by

$182 million and $134 million in the three-

and six-month periods of 2021, respectively.

Earnings were positively impacted by:

Higher realized natural gas, crude oil and NGL

Higher LNG sales prices, reflected in equity in

earnings of affiliates.

Partly offsetting the increase in earnings was:

consolidated liquids production and

14 percent of our consolidated natural

gas production.

Net Income Attributable to ConocoPhillips

Earnings from Europe, Middle East

and North Africa increased by $149 million and $283 million in the three

nine-month periods of 2021, respectively.

Increases to earnings include:

Higher realized natural

gas, crude oil and NGL prices.

Higher LNG sales prices, reflected in equity in earnings

of affiliates.

Higher sales volumes of crude oil and LNG.

Offsets to the earnings increases

Higher taxes.

Higher DD&A expenses and production and operating

Absence of foreign currency gains.

Higher production and operating expenses

and DD&A expenses.

Consolidated Production

Average consolidated production increased 49 MBOED and 35 MBOED in the three-

and six-month periods

of 2021, respectively.

The production increase was primarily due:

Higher production in Libya due to the absence

of a forced shutdown of the Es Sider export terminal

and other eastern export terminals after

Average consolidated

production increased 47 MBOED and 39 MBOED in the three

and nine-month periods of

2021, respectively.

Increases to production

Higher production in Libya due to the absence of a

forced shutdown of the Es Sider export

other eastern export terminals after

a period of civil unrest.

Improved well performance in Norway.

New production from Norway drilling activities

including the completion of our Tor II redevelopment

project first achieved in December 2020.

Partly offsetting the increase in production was:

Improved well performance in

New production from Norway

drilling activities including our Tor

II redevelopment project with first

production in December 2020.

Offsets to the production increases

Normal field decline.

Results of Operations

ConocoPhillips

Three Months Ended

Six Months Ended

Net Income Attributable to ConocoPhillips

Nine Months Ended

Net Income Attributable

to ConocoPhillips

Consolidated Operations

8 unchanged sentences

Natural gas ($ per MCF)

*Prior periods have been updated to reflect the Middle East Business Unit

moving from Asia Pacific to the Europe, Middle East and North Africa

See Note 17 for additional information on our segments.

The Asia Pacific

segment has operations in China, Indonesia,

Malaysia and Australia.

As of June 30, 2021, Asia

Pacific contributed 7 percent of our consolidated

liquids production and 17 percent of our

consolidated natural

gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings decreased $473 million in the second

quarter of 2021 and decreased $428 million

in the six-month

period of 2021,

respectively.

Earnings were negatively impacted by:

Absence of a $597 million after-tax gain related

to our Australia-West divestiture.

Lower earnings due to our Australia-West divestiture completed in the second quarter

Higher taxes associated with higher production and

prices in Malaysia and Indonesia.

Partly offsetting the decrease in earnings was:

Higher crude oil and natural gas prices.

Lower production and operating expenses related

to our Australia-West divestiture.

In addition to the items detailed above, in the six-month

period of 2021, earnings also decreased due

Lower equity in earnings of affiliates, primarily due to lower

LNG lagging contract prices, partly offset

by increased LNG sales volumes.

In addition to the items detailed above, in the six-month

period of 2021, earnings also increased due to:

The Asia Pacific segment has operations

in China, Indonesia, Malaysia and Australia.

As of September 30, 2021, Asia

Pacific contributed 7 percent

of our consolidated liquids production

and 17 percent of our consolidated natural

Net Income Attributable to ConocoPhillips

Earnings from Asia Pacific increased

$232 million in the third quarter of 2021 and decreased $196 million

month period of 2021, respectively.

In the third quarter,

increases to earnings include:

Higher crude oil and natural gas

Higher LNG sales prices, reflected in equity in earnings

of affiliates.

Lower DD&A expenses in the third quarter

of 2021 primarily driven by lower production volumes

lower rates from price-related

reserve revisions.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also increased due to:

A $200 million gain on disposition related

to a FID bonus from our Australia-West divestiture.

additional information related to this FID bonus,

Lower exploration expenses, due to the absence

of an unproved property impairment and dry hole

expenses related to the Kamunsu East Field in Malaysia.

to a FID bonus from our Australia-West

For additional

information related to

this FID bonus, see

Lower production and operating

expenses related to the absence of Australia

Offsetting the items detailed

above, in the nine-month period of 2021, earnings decreased

Absence of a $597 million after-tax gain

related to our Australia

-West divestiture.

Absence of sales volumes associated with Australia

Consolidated Production

Average consolidated production decreased 4 MBOED and 30 MBOED in the three-

and six-month periods of

Average consolidated

production decreased 6 MBOED and 22 MBOED in the three

and nine-month periods of 2021,

respectively.

The production decrease was primarily due to:

The divestiture of our Australia-West assets that contributed 24 MBOED in the second

quarter and 35

MBOED in the six-month period of 2020.

In the third quarter,

the primary decrease to production was

normal field decline.

Partly offsetting the decrease in production was:

Absence of curtailments in Malaysia.

Bohai Bay development activity in China.

Increased production in Malaysia associated

with Malakai Phase 2 first production and ramp-up.

Partly offsetting the decrease

in production was:

Increased production in Malaysia

associated with Malikai Phase 2 first

production and ramp-up.

Bohai Bay development activity in

In addition to normal field decline, in the nine-month period

of 2021, production also decreased due to:

The divestiture of our Australia

-West assets that contributed

23 MBOED in the nine-month period of 2020.

In addition to the items detailed above,

in the nine-month period of 2021, production also increased

The absence of curtailments across the segment

and increased demand in Indonesia from coal supply

restrictions.

Results of Operations

ConocoPhillips

Other International

Three Months Ended

Six Months Ended

Net Income (Loss) Attributable to ConocoPhillips

The Other International segment consists of exploration

and appraisal activities in Colombia and Argentina as

well as contingencies associated with prior operations

Nine Months Ended

Net Income (Loss) Attributable

to ConocoPhillips

The Other International segment consists

of exploration and appraisal

activities in Colombia as well as

contingencies associated with prior operations

in other countries.

Earnings from our Other International operations

increased $1 million and decreased $31 million

in the three-

and six-month periods of 2021, respectively.

The decrease in earnings was primarily due to the absence

$29 million after-tax benefit to earnings from the

dismissal of arbitration related to prior operations

recognized in the first quarter of 2020.

Earnings from our Other International

operations decreased $89 million and $120

million in the three-

month periods of 2021, respectively,

due to a loss on divestiture related to

our Argentina exploration

the third quarter as well as an absence of a $29 million after

-tax benefit to earnings from the dismissal

arbitration related to

prior operations in Senegal recognized

in the first quarter of 2020.

for additional

regarding the divestiture.

Corporate and Other

1 unchanged sentence

Three Months Ended

Six Months Ended

Net Income (Loss) Attributable to ConocoPhillips

Nine Months Ended

Net Loss Attributable to

ConocoPhillips

Net interest expense

Corporate general and administrative expenses

Corporate general and administrative

Other income (expense)

Net interest expense consists of interest and financing

expense, net of interest income and capitalized

Net interest expense increased by $7 million

and $122 million in the three-and six-month

periods of 2021,

respectively, primarily due to higher debt balances assumed due to our Concho

For additional

information regarding the debt acquired in our Concho transaction, see Note 6.

Net interest expense consists

of interest and financing expense,

net of interest income and capitalized

Net interest expense increased

by $119 million in the nine-month period of 2021 primarily due

to higher debt

balances assumed due to our Concho acquisition.

Corporate G&A expenses include compensation

programs and staff costs.

These expenses decreased by $25

million in the three-month period of 2021 primarily

due to mark to market adjustments associated

programs and staff

These expenses increased by $7 million

in the three-month period of 2021 primarily due to mark

to market adjustments

associated with certain

compensation programs.

For the six-month period of 2021, Corporate

G&A expenses increased by $154

million primarily due to restructuring expenses

associated with our Concho acquisition.

For additional

information about restructuring expenses, see Note 14.

Technology includes our investment in new technologies or businesses, as well

as licensing revenues.

Activities are focused on both conventional and tight

oil reservoirs, shale gas, heavy oil, oil

sands, enhanced

oil recovery, as well as LNG.

Earnings from Technology increased $45 million in the six-month period of

2021 primarily due to higher licensing revenues.

Other income (expense) or “Other” includes certain

corporate tax-related items, foreign currency

gains and losses, environmental costs associated

with sites no longer in operation, other costs not

associated with an operating segment, premiums

incurred on the early retirement of debt, holding

losses on equity securities, and pension settlement

“Other” decreased by $142 million in the second

quarter of 2021, primarily due to an after-tax

gain of $418 million on our CVE common shares

in the second

quarter of 2021

compared with an after-tax gain of $551 million

in the same period of 2020 as well as the

absence of the release of a $92 million deferred

tax asset related to our Australia-West divestiture in the second

quarter of 2020.

In the six-month period of 2021, “Other”

increased by $1,766 million,

primarily due to an

after-tax gain of $726 million on our CVE common

shares in the six-month period of 2021, and

the absence of

a $1,140 million after-tax loss on those shares

in the six-month period of 2020.

For the nine-month period of 2021, Corporate

G&A expenses increased by $161 million

primarily due to restructuring expenses associated

with our Concho acquisition.

Technology includes

our investment in new technologies

or businesses, as well as licensing revenues.

Activities are

focused on both conventional

and tight oil reservoirs, shale gas,

heavy oil, oil sands, enhanced oil recovery,

Earnings from Technology

increased $47 million in the nine-month period of 2021

primarily due to higher

licensing revenues.

Other income (expense) or “Other” includes certain corporate

tax-related items, foreign

currency transaction gains

and losses, environmental costs

associated with sites no longer in operation,

other costs not directly associated

with an operating segment, premiums

incurred on the early retirement of debt,

holding gains or losses on equity

securities, and pension settlement expense.

For the three-

and nine-month periods of 2021, “Other” increased

$179 million and $1,945 million, respectively.

During these periods in 2021, we recognized

gains of $17 million and

$743 million, respectively,

on our CVE common shares, compared

with losses of $162 million and $1,302 million for

the same periods in 2020.

Partially offsetting the impact on

the nine-month period was the release of a $92

million deferred tax asset

associated with our Australia West

Capital Resources and Liquidity

ConocoPhillips

Capital Resources and Liquidity

Financial Indicators

2 unchanged sentences

Short-term investments

Percent of total debt to capital*

Percent of floating-rate debt to total debt

Percent of total debt to

Percent of floating-rate

debt to total debt

*Capital includes total debt and total equity.

To meet our short-

and long-term liquidity requirements, we look

to a variety of funding sources, including

cash generated from operating activities,

our commercial paper and credit facility programs,

and our ability to

sell securities using our shelf registration

During the first six months of 2021, the primary uses

our available cash were $2,465 million to support

our ongoing capital expenditures and investments

$1,171 million to pay dividends,

approximately $1.0 billion of hedging, transaction

and restructuring costs,

and $981 million to repurchase common stock.

During the first six months of 2021, our cash and

equivalents increased by $3,617 million to

$6,608 million.

At June 30, 2021, we had cash and cash equivalents

of $6.6 billion, short-term investments of $2.3

available borrowing capacity under our credit facility

of $5.7 billion, totaling over $14

billion of liquidity.

believe current cash balances and cash generated

by operations, together with access to

external sources of

funds as described below in the “Significant Changes

in Capital” section, will be sufficient to meet our

requirements in the near- and long-term, including our capital

spending program, dividend payments and

required debt payments.

and long-term liquidity requirements,

we look to a variety of funding sources,

including cash

generated from operating

activities, our commercial paper and credit

facility programs, and our ability

securities using our shelf registration

During the first nine months of 2021, the primary uses of our

available cash were $3.8 billion to

support our ongoing capital expenditures

and investments program

to repurchase common stock

$1.8 billion to pay dividends, and $1.1 billion of hedging, transaction

restructuring costs.

During the first nine months of 2021, our cash and cash

equivalents increased by $6.8 billion

to $9.8 billion.

At September 30, 2021, we had cash

and cash equivalents of $9.8 billion, short-term investments

of $0.7 billion,

and available borrowing capacity

under our credit facility of $6.0 billion, totaling

approximately $16.5 billion of

We believe current cash

balances and cash generated by

operating activities, together with access

external sources of funds as described below in the “Significant

Changes in Capital” section, will be sufficient to

meet our funding requirements in the near-

and long-term, including our capital spending prog

acquisitions,

dividend payments and debt obligations

On September 20, 2021, we signed a definitive agreement

for the Shell Permian Acquisition for

$9.5 billion in cash

before customary adjustments

The effective date of the transaction

is July 1, 2021, and we expect to close in the

fourth quarter of 2021 subject to regulatory

clearance and the satisfaction

of other customary closing conditions.

The transaction will be funded from available

cash, and we expect our remaining cash

to meet our obligations and

business needs.

Significant Changes in Capital

1 unchanged sentence

Cash provided by operating activities was

million for the first six months of 2021, compared

$2,262 million for the corresponding period of 2020.

The increase in cash provided by operating activities

primarily due to higher realized commodity prices

and higher sales volumes mostly due to our acquisition

The increase in cash provided by operating activities

was partly offset by the settlement of all oil and

gas hedging positions acquired from Concho,

normal field decline, transaction and restructuring

costs, and the

divestiture of our Australia-West assets.

and long-term operating cash flows are highly

dependent upon prices for crude oil, bitumen, natural

$11.1 billion for the first nine months

of 2021, compared with $3.1

billion for the corresponding period of 2020.

The increase in cash provided by operating

activities is primarily due

to higher realized commodity prices and

higher sales volumes mostly due to our acquisition of Concho.

increase in cash provided by operating

activities was partly offset by the settlement

of all oil and gas hedging

positions acquired from Concho,

and transaction and restructuring cost

and long-term operating cash flows

are highly dependent upon prices for crude oil, bitumen,

gas, LNG and NGLs.

Prices and margins in our industry have historically

been volatile and are driven by

market conditions over which we have no control.

Absent other mitigating factors, as these prices

fluctuate, we would expect a corresponding change

been volatile and are driven by market

conditions over which we have

Absent other mitigating factors,

as these prices and margins fluctuate,

we would expect a corresponding change

in our operating cash flows.

The level of absolute production volumes, as

well as product and location mix, impacts our cash flows.

production is subject to numerous uncertainties, including,

Capital Resources and Liquidity

ConocoPhillips

The level of production volumes, as well as

product and location mix, impacts our cash

Future production is

subject to numerous uncertainties, including,

among others, the volatile crude oil and natural

price environment, which may impact investment

the effects of price changes on production

and variable-royalty contracts;

acquisition and disposition

environment, which may impact

investment decisions;

of price changes on production sharing and

variable-royalty contracts;

acquisition and disposition of fields;

field production decline rates;

technologies;

new technologies;

operating efficiencies;

2 unchanged sentences

political instability;

a global pandemic;

impacts of a global pandemic;

weather-related disruptions;

and the addition of proved reserves through exploratory

success and their timely and cost-effective development.

While we actively manage these factors, production

levels can cause variability in cash flows, although

generally this variability has not been as significant

caused by commodity prices.

To maintain or grow our production volumes, we must continue to add to our

proved reserve base.

“Capital Expenditures and Investments” section,

for information about our capital expenditures

On January 15, 2021, we assumed financial derivative

instruments consisting of oil and natural gas

the addition of proved reserves through

exploratory success and their timely and

cost-effective development.

While we actively manage these factors,

production levels can cause variability

cash flows, although generally this

variability has not been as significant as that caused

by commodity prices.

or grow our production volumes, we must

continue to add to our proved

reserve base.

“Capital Expenditures and Investments”

section, for information about

our capital expenditures and investments.

On January 15, 2021, we assumed financial derivative instruments

consisting of oil and natural gas

connection with our acquisition of Concho.

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

instruments acquired from Concho were contractually

In the first six months of 2021, we paid $761

million relating to these settlements.

See Note 10 for additional information.

At March 31, 2021, all oil and natural

gas derivative financial

instruments acquired from Concho

were contractually settled.

In the first six months of 2021, we paid $761 million

relating to these settlements.

Investing Activities

For the first six months of 2021, we invested $2.5

For the first nine months of 2021, we invested

$3.8 billion in capital expenditures.

Our 2021 operating plan

capital expenditures is currently expected to be

$5.3 billion compared with $4.7 billion

“Capital Expenditures and Investments” section,

for information about our capital expenditures

We completed our acquisition of Concho on January 15, 2021.

The assets acquired in the transaction included

Our 2021 operating plan capital

expenditures is currently expected

to be $5.3 billion compared with $4.7 billion in 2020.

See the “Capital

Expenditures and Investments”

section, for information about our capital

expenditures and investments.

For additional information on Acquisitions

& Dispositions discussed below,

We completed our acquisition

of Concho on January 15, 2021.

The assets acquired in the transaction

$382 million of cash.

See Note 3 for additional information.

In May 2021, we announced a paced monetization

of our investment in CVE common shares with

direct proceeds toward our existing share repurchase

authorization program.

We expect to fully dispose of our

CVE shares by year-end 2022, however, the sales pace will

be guided by market conditions, and we retain

discretion to adjust accordingly.

In the second quarter of 2021, we sold 20 million

of these shares,

representing approximately 10% of the shares held

at December 31, 2020, for $180 million

Note 5 for additional information.

We invest in short-term investments as part of our cash investment strategy, the primary objective of which is

to protect principal, maintain liquidity and provide

yield and total returns;

these investments include

deposits, commercial paper, as well as debt securities classified

as available for sale.

Funds for short-term

needs to support our operating plan and provide resiliency

to react to short-term price volatility are invested

highly liquid instruments with maturities within

Funds we consider available to maintain resiliency

in longer term price downturns and to capture

opportunities outside a given operating plan

may be invested in

instruments with maturities greater than one year.

Investing activities in the first six months of 2021

included net sales of $1,302 million of investments.

In May 2021, we announced and began

a paced monetization of our investment

in CVE common shares with the

plan to direct proceeds toward

our existing share repurchase program.

We expect to fully dispose

shares by year-end 2022, however,

the sales pace will be guided by market conditions,

and we retain discretion to

adjust accordingly.

Since we began our monetization program,

we have sold 67 million CVE shares,

32% of our holdings at December 31, 2020, receiving $569

million of cash proceeds.

Other proceeds

from dispositions include our sale of certain noncore

assets in our Lower 48 segment for approximately

million and contingent payments

associated with previous divestitures.

In September 2021, we signed a definitive agreement

to acquire the Shell Permian assets

for $9.5 billion, before

customary adjustments.

Under the terms of the agreement, we paid a deposit

of $475 million which is presented

within “Cash Flows from Investing

Activities - Other” on our consolidated statement

of cash flows.

“Risk Factors” for further discussion of risks related to the Shell Permian Acquisition.

We invest in short

-term investments as part of our

cash investment strategy,

the primary objective of which is to

protect principal, maintain liquidity

and provide yield and total returns;

these investments include time deposits,

commercial paper,

as well as debt securities classified as available

Funds for short-term needs

our operating plan and provide resiliency

to react to short-term price volatility

are invested in highly liquid

instruments with maturities within the year.

Funds we consider available to maintain

resiliency in longer term

price downturns and to capture opportunities

outside a given operating plan may

be invested in instruments

maturities greater than one year.

Investing activities in the first

nine months of 2021 included net sales of $2,846 million of investments.

$2,991 million of short-term instruments

and invested $145 million in long-term instruments

See Note 10 for

additional information.

Capital Resources and Liquidity

ConocoPhillips

Financing Activities

We have a revolving credit facility totaling $6.0 billion, expiring in May 2023.

We have a revolving

credit facility totaling $6.0 billion,

expiring in May 2023.

Our revolving credit facility

may be used for direct bank borrowings, the issuance

of letters of credit totaling up to $500 million, or

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

maintenance of specified financial ratios or credit

The facility agreement contains a cross-default

provision relating to the failure to pay principal or interest

on other debt obligations of $200 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 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 their

approved successors

cease to be a majority of the Board of

The revolving credit facility supports ConocoPhillips

Company’s ability to issue up to $6.0 billion of

commercial paper.

Commercial paper maturities are generally

limited to 90 days.

With $300 million of

commercial paper outstanding and no direct borrowings

or letters of credit, we had $5.7 billion in

borrowing capacity under the revolving credit facility

at June 30, 2021.

We may consider issuing additional

commercial paper in the future to supplement our

cash position.

used for direct bank borrowings,

the issuance of letters of credit totaling

up to $500 million, or as support for our

commercial paper program.

With no commercial paper outstanding

and no direct borrowings or letters

we had access to $6.0 billion in available borrowing

capacity under our revolving credit

facility at September 30,

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, which was recorded at fair value

of $4.7 billion on the acquisition

In June 2021, we reaffirmed our commitment to preserving

our ‘A’-rated balance sheet with the intent to

reduce gross debt by $5 billion over the next five

years, driving a more resilient and efficient

capital structure.

See Note 3 for additional information on our Concho acquisition and

see Note 6 for additional information on

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

“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.

Certain of our project-related contracts, commercial

contracts and derivative instruments contain

In the acquisition, we

assumed Concho’s publicly

traded debt, which was recorded

at fair value of $4.7 billion on the acquisition

June 2021, we reaffirmed our commitment

to preserving our ‘A’

-rated balance sheet by restating

our intent to

reduce gross debt by $5 billion over

the next five years, driving a more

resilient and efficient capital

The current credit ratings on our

long-term debt are:

with a “stable” outlook

“A-” with a “stable”

with a “positive” outlook

for additional information on our Concho

acquisition and

for additional information on debt

revolving credit facility and credit

Certain of our project-related

contracts, commercial contracts

and derivative instruments contain

requiring us to post collateral.

Many of these contracts and instruments permit

us to post either cash or letters

of credit as collateral.

At June 30, 2021 and December 31, 2020,

we had direct bank letters of credit of $222

million and $249 million, respectively, which secured performance obligations

Many of these contracts and instruments

permit us to post either cash or letters

credit as collateral.

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

had direct bank letters of credit

million and $249 million, respectively,

which secured performance obligations

related to various purchase

commitments incident to the ordinary conduct of

In the event of credit ratings downgrades, we

be required to post additional letters of

commitments incident to the ordinary

conduct of business.

In the event of credit ratings

downgrades, we may be

required to post additional letters

Shelf Registration

We have a universal shelf registration statement on file with the SEC under which

we have the ability to issue

and sell an indeterminate amount of various types

of debt and equity securities.

Guarantor Summarized Financial Information

We have various cross guarantees among our Obligor group;

We have a universal

shelf registration statement

on file with the SEC under which we have the

ability to issue and

sell an indeterminate number of various

types of debt and equity securities.

Capital Requirements

For information about our capital

expenditures and investments,

see the “Capital Expenditures and Investments”

In addition to our capital expenditure and

program, we anticipate completing

Permian Acquisition in the fourth quarter

for $9.5 billion before customary

Our debt balance at September 30, 2021, was

$19.7 billion, compared with $15.4 billion at December 31, 2020.

The net increase is primarily due to $4.7 billion of debt assumed

in the Concho acquisition.

The current portion of

debt, including payments for finance

leases, is $920 million.

Payments will be made using current

cash balances

and cash generated by

We believe in delivering va

lue to our shareholders through

a growing and sustainable dividend supplemented

additional returns of capital, including share

In 2020, we paid $1.8 billion, equating to $1.69 per

share of common stock, in dividends.

In the first nine months of 2021, we paid dividends totaling

$1.8 billion, the

equivalent of $1.29 per share.

On September 20, 2021, we announced an increase

in our quarterly dividend from

$0.43 per share to $0.46 per share,

representing a 7 percent increase.

The dividend is payable December 1, 2021,

to stockholders of record

at the close of business on October 28, 2021.

We anticipate returning

approximately

$2.4 billion to shareholders in dividends

in 2021, or $1.75 per share.

Capital Resources and Liquidity

ConocoPhillips

ConocoPhillips Company and

Burlington Resources LLC, with respect to publicly

held debt securities.

ConocoPhillips Company is 100

percent owned by ConocoPhillips.

Burlington Resources LLC is 100 percent owned by

In late 2016, we initiated our current

share repurchase program,

which has a total program authorization

In May 2021, we began a paced monetization

of our CVE shares, the proceeds of which, have

to share repurchases.

The pace of CVE share sales will be guided by market conditions,

and we retain the

discretion to adjust accordingly.

In the nine months ended September 30, 2021, we repurchased

shares at a cost of $2,224 million, $561 million of which

was funded using CVE share proceeds.

Since the inception

of the share repurchase program,

we have repurchased 228 million shares

at a cost of $12.7 billion.

planned distributions for 2021, including dividends

and share repurchases, is approximately

$6.0 billion.

Our dividend and share repurchase programs

are subject to numerous considerations,

including market conditions,

management discretion and other factors.

See “Item 1A—Risk Factors

– Our ability to declare and pay dividends

and repurchase shares is subject to certain

considerations” in Part

I—Item 1A in our 2020 Annual Report on Form

Capital Expenditures and Investments

Millions of Dollars

Nine Months Ended

Europe, Middle East and North Africa

Other International

Corporate and Other

Capital expenditures and investments

During the first nine months of 2021, capital expenditures

and investments supported

key development programs,

Development activities in the Lower 48, primarily Permian,

Eagle Ford and Bakken.

Appraisal and development activities in Alaska

related to the Western

North Slope and development

activities in the Greater Kuparuk Area.

Appraisal activities in liquids-rich plays

and optimization of oils sands development in Canada.

Continued development activities across

assets in Norway.

Continued development activities in China,

Malaysia and Indonesia.

In February 2021, we announced 2021 operating plan

capital expenditures of $5.5 billion.

In June 2021, we

reduced capital guidance to $5.3 billion, recognizing

synergistic savings

from our Concho acquisition.

Capital Resources and Liquidity

ConocoPhillips

ConocoPhillips and/or ConocoPhillips Company

have fully and unconditionally guaranteed the

payment obligations of Burlington Resources

LLC, with respect to its publicly held debt

ConocoPhillips has fully and unconditionally

guaranteed the payment obligations of ConocoPhillips

Guarantor Summarized Financial

We have various

cross guarantees among our Obligor group;

ConocoPhillips, ConocoPhillips Company

Burlington Resources LLC,

with respect to publicly held debt securities.

ConocoPhillips Company is 100 percent

owned by ConocoPhillips.

Burlington Resources LLC is

100 percent owned by ConocoPhillips

ConocoPhillips and/or ConocoPhillips

Company have fully and unconditionally

guaranteed the payment obligations

of Burlington Resources LLC,

with respect to its publicly held debt securities.

In addition, ConocoPhillips Company

Similarly, ConocoPhillips

has fully and

unconditionally guaranteed the payment obligations

of ConocoPhillips with respect to its publicly

unconditionally guaranteed the payment

obligations of ConocoPhillips Company

with respect to its publicly held

debt securities.

In addition, ConocoPhillips Company has

fully and unconditionally guaranteed the payment

obligations of ConocoPhillips with respect

to its publicly held debt securities.

All guarantees are joint and several.

The following tables present summarized financial

information for the Obligor Group, as defined

The Obligor Group will reflect guarantors and

issuers of guaranteed securities consisting of

ConocoPhillips, ConocoPhillips Company and

Burlington Resources LLC.

The following tables present summarized

financial information for

the Obligor Group, as defined below:

The Obligor Group will reflect guarantors

and issuers of guaranteed securities consisting

ConocoPhillips, ConocoPhillips Company

and Burlington Resources LLC.

Consolidating adjustments for elimination

of investments in and transactions between the collective

guarantors and issuers of guaranteed securities

are reflected in the balances of the summarized

financial information.

of investments in and transactions

between the collective

guarantors and issuers

of guaranteed securities are reflected

in the balances of the summarized financial

Non-Obligated Subsidiaries are excluded

from the presentation.

Upon completion of the Concho acquisition

on January 15, 2021, we assumed Concho’s publicly traded debt

of approximately $3.9 billion in aggregate principal

amount, which was recorded at fair value

of $4.7 billion

on the acquisition date.

We completed a debt exchange offer that settled on February 8, 2021, of which 98

percent, or approximately $3.8 billion in aggregate

principal amount of Concho’s notes, were tendered and

accepted for new debt issued by ConocoPhillips.

The new debt issued in the exchange is fully

unconditionally guaranteed by ConocoPhillips

Both the guarantor and issuer of the exchange debt

is reflected within the Obligor Group presented

for additional information

relating to the Concho transaction.

Transactions and balances reflecting activity between the Obligors

and Non-Obligated Subsidiaries are

presented below:

Summarized Income Statement Data

Upon completion of the Concho acquisition on January 15, 2021, we assumed

Concho’s publicly traded

approximately $3.9 billion in aggregate

principal amount, which was recorded

at fair value of $4.7 billion on the

acquisition date.

We completed a debt exchange

offer that settled on February

8, 2021, of which 98 percent, or

approximately $3.8 billion in aggregate

principal amount of Concho’s

notes, were tendered and accepted

debt issued by ConocoPhillips.

The new debt issued in the exchange is fully and

unconditionally guaranteed by

ConocoPhillips Company.

Both the guarantor and issuer of the exchange

debt is reflected within the Obligor Group

presented here.

for additional information relating

to the Concho transaction.

and balances reflecting activity between the Obligors

and Non-Obligated Subsidiaries

are presented

Summarized Income Statement

Millions of Dollars

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

Revenues and Other Income

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Net income (loss)

Net Income (Loss) Attributable to ConocoPhillips

Net Income (Loss) Attributable

to ConocoPhillips

*Includes approximately $3.6 billion of purchased commodities expense for transactions with Non-Obligated Subsidiaries.

Summarized Balance Sheet Data

5 unchanged sentences

Current liabilities

Amounts due to Non-Obligated Subsidiaries, current

Amounts due to Non-Obligated Subsidiaries,

Noncurrent liabilities

Amounts due to Non-Obligated Subsidiaries, noncurrent

Capital Requirements

For information about our capital expenditures

and investments, see the “Capital Expenditures

Investments” section.

Our debt balance at June 30, 2021, was $20.0

billion, compared with $15.4 billion at December

net increase is primarily due to $4.7 billion of

debt assumed in the Concho acquisition.

The current portion of

debt, including payments for finance leases, is

$1,205 million.

Payments will be made using current cash

balances and cash generated by operations.

For additional information regarding debt, see Note 6.

We believe in delivering value to our shareholders through a growing and sustainable

dividend supplemented

by additional returns of capital, including share repurchases.

In 2020, we paid $1.8 billion, equating to $1.69

per share of common stock, in dividends.

We anticipate returning $2.3 billion to shareholders in the form of

dividends in 2021.

In the first six months of 2021, we paid

dividends totaling $1.2 billion, the equivalent of

$0.86 per share.

On July 13, 2021, we announced

a quarterly dividend of $0.43 per share, payable

In late 2016, we initiated our current share repurchase

program, which has a total program authorization

repurchase $25 billion of our common stock.

As of June 30, 2021, our plan is to repurchase approximately

$3.5 billion in 2021 and we anticipate funding

approximately $1.0 billion of that amount

through proceeds

from the sales of our CVE common stock.

The pace of CVE share sales will be guided

by market conditions,

and we retain the discretion to adjust accordingly.

In the six months ended June 30, 2021, we repurchased

17.7 million shares at a cost of $981 million, $159

million of which was funded using CVE share

Since the inception of the program, we have repurchased

206 million shares at a cost of $11.5 billion.

Our dividend and share repurchase programs are

subject to numerous considerations, including

conditions, management discretion and other factors.

See “Item 1A—Risk Factors – Our ability to declare

pay dividends and repurchase shares is subject to

certain considerations” in Part I—Item

1A in our 2020

Annual Report on Form 10-K.

Capital Expenditures and Investments

Millions of Dollars

Six Months Ended

Europe, Middle East and North Africa

Other International

Corporate and Other

Capital expenditures and investments

During the first six months of 2021, capital expenditures

and investments supported key exploration and

development programs, primarily:

Development and appraisal activities

in the Lower 48, primarily Permian, Eagle Ford, and Bakken.

Appraisal and development activities

in Alaska related to the Western North Slope and development

activities in the Greater Kuparuk Area.

Appraisal activities in liquids-rich plays and optimization

of oils sands development in Canada.

Continued development activities across assets

Continued development activities in China, Malaysia

and Indonesia.

In February 2021, we announced 2021 operating

plan capital expenditures of $5.5 billion.

In June 2021, we

reduced capital guidance to $5.3 billion, recognizing

synergistic savings from our Concho acquisition.

Contingencies

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

Amounts due to Non-Obligated Subsidiaries,

Capital Resources and Liquidity

ConocoPhillips

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 impact on our

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

consolidated financial statements.

For information on other contingencies, see Note 9.

Legal and Tax Matters

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

Legal and Tax

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

of alleged environmental contamination from

historic operations,

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.

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

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.

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

Environmental

We are subject to the same numerous international, federal, state and local environmental

laws and regulations

as other companies in our industry.

For a discussion of the most significant

of these environmental laws and

regulations, including those with associated remediation

obligations, see the “Environmental” section in

Management’s Discussion and Analysis of Financial Condition and Results

of Operations on pages 64–66

our 2020 Annual Report on Form 10-K.

We occasionally receive requests for information or notices of potential liability

from the EPA and state

environmental agencies alleging that we are

a potentially responsible party under the Federal

Comprehensive

Environmental Response, Compensation and

Liability Act (CERCLA) or an equivalent

We are subject to the same numerous

international, federal,

state and local environmental

laws and regulations as

other companies in our industry.

For a discussion of the most significant of these environmental

regulations, including those with associated

remediation obligations, see the “Environmental”

Management’s Discussion and Analysis

of Financial Condition and Results of Operations on pages

2020 Annual Report on Form 10-K.

We occasionally receive requests

for information or notices of potential

liability from the EPA

environmental agencies alleging

that we are a potentially responsible

party under the Federal Comprehensive

Environmental Response,

Compensation and Liability Act (CERCLA) or an equivalent

state statute.

occasion, we also have been made a party to cost

recovery litigation by those agencies or by private

These requests, notices and lawsuits assert potential

liability for remediation costs at various sites

that typically

are not owned by us, but allegedly contain waste attributable

to our past operations.

As of June 30, 2021, there

were 15 sites around the U.S.

in which we were identified as a potentially responsible

party under CERCLA

and comparable state laws.

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

environmental accrual of $188 million,

compared with

On occasion, we

also have been made a party to cost

recovery litigation by those agencies

or by private parties.

These requests,

notices and lawsuits assert potential liability for

remediation costs at various

sites that typically are not owned by

us, but allegedly contain waste

attributable to our past operations.

As of September 30, 2021, there were 15 sites

around the U.S.

in which we were

identified as a potentially responsible

party under CERCLA and comparable state

At September 30, 2021, our balance sheet included

a total environmental

accrual of $191 million, compared with

$180 million at December 31, 2020, for remediation

1 unchanged sentence

We expect to incur a

substantial amount of these expenditures within

the next 30 years.

Notwithstanding any of the foregoing, and as

with other companies engaged in similar businesses,

environmental costs and liabilities are inherent

concerns in our operations and products, and there

assurance that material costs and liabilities

will not be incurred.

However, we currently do not expect any

material adverse effect upon our results of operations or financial

position as a result of compliance with

current environmental laws and regulations.

substantial amount of these expe

nditures within the next 30 years.

Capital Resources and Liquidity

ConocoPhillips

Notwithstanding any of the foregoing,

and as with other companies engaged in similar businesses,

environmental

costs and liabilities are inherent

concerns in our operations and products,

and there can be no assurance that

material costs and liabilities will not be incurred.

we currently do not expect any material

adverse effect

upon our results of operations or financial position

as a result of compliance with current environmental

Environmental Litigation

Several Louisiana parishes and the State

of Louisiana have filed 43 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 22 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

Climate Change

Continuing political and social attention to the

issue of global climate change has resulted in

a broad range of

proposed or promulgated state, national and international

Continuing political and social attention

to the issue of global climate change has resulted

in a broad range of

proposed or promulgated

state, national and international

laws focusing on GHG reduction.

These proposed or

promulgated laws apply or could apply in countries

where we have interests or may have interests

in the future.

Laws in this field continue to evolve, and

while it is not possible to accurately estimate either

a timetable for

promulgated laws apply

or could apply in countries where we have

interests or may have

interests in the future.

Laws in this field continue to evolve,

and while it is not possible to accurately estimate

either a timetable for

implementation or our future compliance costs

relating to implementation, such laws, if

enacted, could have a

material impact on our results of operations and

financial condition.

relating to implementation, such

laws, if enacted, could have a

material impact on our results of operations

and financial condition.

For examples of legislation or precursors

for possible regulation and factors on which the

ultimate impact on our financial performance

will depend, see

the “Climate Change” section in Management’s Discussion and Analysis

of Financial Condition and Results of

possible regulation and factors

on which the ultimate impact on our financial performance

will depend, see the

“Climate Change” section in Management’s

Discussion and Analysis of Financial Condition and Results

Operations on pages 67–69 of our 2020 Annual

1 unchanged sentence

Climate Change Litigation

Beginning in 2017, governmental and other entities

in several states in the U.S.

Beginning in 2017, governmental and

other entities in several states

have filed lawsuits against

and gas companies, including ConocoPhillips,

seeking compensatory damages and equitable

relief to abate

alleged climate change impacts.

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.

amounts claimed by plaintiffs are unspecified and the legal

and factual issues involved in these cases are

unprecedented.

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

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 43 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

22 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

Company Response to Climate-Related Risks

The company has responded by putting in place

a Sustainable Development Risk Management

covering the assessment and registering of significant

and high sustainable development risks based

consequence and likelihood of occurrence.

We have developed a company-wide Climate Change Action Plan

with the goal of tracking mitigation activities

for each climate-related risk included in the corporate

Sustainable Development Risk Register.

Company Response to Climate

-Related Risks

The company has responded by putting

in place a Sustainable Development Risk Management

Standard covering

the assessment and registering of significant

and high sustainable development risks

based on their consequence

and likelihood of occurrence.

We have developed a

company-wide Climate Change Action Plan

with the goal of

tracking mitigation activities for

each climate-related risk included in the corporate

Sustainable Development Risk

The risks addressed in our Climate Change Action

Plan fall into four broad categories:

Plan fall into four broad

GHG-related legislation and regulation.

GHG emissions management.

Physical climate-related impacts.

Climate-related disclosure and reporting.

Emissions are categorized into three different scopes.

Gross operated scope 1 and scope 2 GHG

help us understand our climate transition

Scope 1 emissions are direct GHG emissions

from sources that we own or control.

Scope 2 emissions are GHG emissions from

the generation of purchased electricity or

steam that we

Scope 3 emissions are indirect emissions

from sources that we neither own nor control.

We announced in October 2020 the adoption of a Paris-aligned climate risk framework

Physical climate-related

Climate-related disclosure

and reporting.

Emissions are categorized

into three different

Gross operated scope

1 and scope 2 GHG emissions help us

understand our climate transition

Scope 1 emissions are direct GHG emissions from

sources that we own or control.

Scope 2 emissions are GHG emissions from the generation

of purchased electricity or steam that

Scope 3 emissions are indirect emissions from

sources that we neither own nor control.

Capital Resources and Liquidity

ConocoPhillips

We announced in October 2020 the adoption

of a Paris-aligned climate risk framework

with the objective of

implementing a coherent set of choices designed

to facilitate the success of our existing exploration

to facilitate the success

of our existing exploration

production business through the energy transition.

Given the uncertainties remaining about how the

transition will evolve, the strategy aims to be robust

across a range of potential future outcomes.

The strategy is comprised of four pillars:

Our target framework consists of a hierarchy of targets, from a long-term

ambition that sets

the direction and aim of the strategy, to a medium-term performance target for GHG emissions

intensity, to shorter-term targets for flaring and methane intensity reductions.

targets are supported by lower-level internal business

unit goals to enable the company to achieve the

company-wide targets.

We have set a target to reduce our gross operated (scope 1 and 2) emissions

intensity by 35 to 45 percent from 2016 levels by

Given the uncertainties remaining about

how the energy

will evolve, the strategy aims to

be robust across a range of potential

future outcomes.

The strategy is comprised of four

Our target framework

consists of a hierarchy

of targets, from a long-term ambition

that sets the

direction and aim of the strategy,

to a medium-term performance target

for GHG emissions intensity,

shorter-term targets for

flaring and methane intensity reductions.

These performance targets are

supported by lower-level internal

business unit goals to enable the company to

achieve the company-

wide targets.

In September 2021, we increased our interim

operational target and

have set it to reduce

our gross operated and net

equity (scope 1 and 2) emissions intensity by

40 to 50 percent from 2016

levels by 2030, an improvement from

the previously announced target

of 35 to 45 percent on only a gross

operated basis,

with an ambition to achieve net-zero

emissions by 2050.

We have joined the World

Bank Flaring Initiative to work towards zero

flaring of gas by 2030.

operated emissions by 2050.

We have joined the

World Bank Flaring Initiative to

work towards zero

routine flaring of associated gas

by 2030, with an

ambition to meet that goal by 2025.

Technology choices:

expanded our Marginal Abatement Cost Curve process

We expanded our Marginal

Abatement Cost Curve process

to provide a broader

range of opportunities for emission reduction

range of opportunities for emission

reduction technology.

Portfolio choices:

Our corporate authorization process requires

all qualifying projects to include a

GHG price in their project approval economics.

Different GHG prices are used depending on the

region or jurisdiction.

Projects in jurisdictions with existing GHG

pricing regimes incorporate the

existing GHG price and forecast into their

Projects where no existing GHG pricing

regime exists utilize a scenario forecast from

our internally consistent World Energy Model.

way, both existing and emerging regulatory requirements are considered in our decision-making.

company does not use an estimated market cost

of GHG emissions when assessing reserves

jurisdictions without existing GHG regulations.

Our corporate

authorization process requires

all qualifying projects to include a GHG

price in their project approval economics.

Different GHG prices are used

depending on the region or

jurisdiction.

Projects in jurisdictions with existing GHG pricing regimes

incorporate the existing

and forecast into

their economics.

Projects where no existing GHG pricing regime

exists utilize a scenario

forecast from our internally

consistent World

Energy Model.

both existing and emerging

regulatory requirements are

considered in our decision-making.

The company does not use an estimated

market cost of GHG emissions when assessing

reserves in jurisdictions without existing GHG regulations.

External engagement:

Our external engagement aims to differentiate ConocoPhillips

Our external engagement aims to

differentiate ConocoPhillips

within the oil and

gas sector with our approach to managing climate-related

gas sector with our approach to managing

climate-related risk.

We are a Founding Member of the

1 unchanged sentence

policy institute founded in collaboration

business and environmental interests to develop

a carbon dividend plan.

Participation in the CLC

provides another opportunity for ongoing dialogue

about carbon pricing and framing the issues

alignment with our public policy principles.

We also belong to and fund Americans For Carbon

Dividends, the education and advocacy branch of

CAUTIONARY STATEMENT

FOR THE PURPOSES OF THE “SAFE HARBOR”

PROVISIONS OF

SECURITIES LITIGATION REFORM ACT OF 1995

with business

and environmental interests

to develop a carbon dividend plan.

Participation in the CLC provides

opportunity for ongoing dialogue about carbon

pricing and framing the issues in alignment with our public

policy principles.

We also belong to and fund Americans For

Carbon Dividends, the education and

advocacy branch of the CLC.

Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the

Private Securities Litigation Reform Act

This report includes forward-looking statements

within the meaning of Section 27A of the Securities

1933 and Section 21E of the Securities Exchange

All statements other than statements of

historical fact included or incorporated by reference in

this report, including, without limitation,

regarding our future financial position, business

strategy, budgets, projected revenues, projected costs and

plans, objectives of management for future operations,

within the meaning of Section 27A of the Securities Act of 1933

and Section 21E of the Securities Exchange Act of 1934.

All statements other than

statements of historical

included or incorporated by

reference in this report, including, without

limitation, statements

regarding our future

financial position, business strategy,

budgets, projected revenues,

projected costs and plans, objectives

management for future operations,

the anticipated benefits of the transaction

and Concho Resources Inc.

(Concho), the anticipated

impact of the transaction on the combined company’s

between us and Concho Resources

(Concho), including the expected amount and

the timing of synergies from such transaction,

the anticipated

closing of the acquisition of assets from Shell Enterprises

LLC (Shell), and the anticipated impact of the Concho

Shell transactions on the combined company’s

business and future financial and operating results

the expected amount and the timing of synergies from

transaction are forward-looking statements.

Examples of forward-looking statements contained

in this report

include our expected production growth and

outlook on the business environment generally, our expected

capital budget and capital expenditures, and discussions

concerning future dividends.

You can often identify

our forward-looking statements by the words “anticipate,”

“believe,” “budget,” “continue,” “could,” “effort,”

“estimate,” “expect,” “forecast,” “intend,” “goal,”

“guidance,” “may,” “objective,” “outlook,” “plan,”

“potential,” “predict,” “projection,” “seek,” “should,”

“target,” “will,” “would” and similar expressions.

We based the forward-looking statements on our current expectations, estimates

and projections about

ourselves and the industries in which we operate in

We caution you these statements are not

guarantees of future performance as they involve

assumptions that, while made in good faith,

may prove to be

incorrect, and involve risks and uncertainties

we cannot predict.

looking statements.

Examples of forward-looking statements

contained in this report include our expected

production growth and outlook on the business

environment generally,

our expected capital budget

expenditures, and discussions concerning future

You can often

identify our forward-looking statements

by the words “anticipate,”

“believe,” “budget,”

“plan,” “potential,”

“predict,” “projection,”

“will,” “would” and similar

ConocoPhillips

We based the forward-looking

statements on our current

expectations, estimates and

projections about ourselves

and the industries in which we operate in

We caution you these

statements are not guarantees

performance as they involve

assumptions that, while made in good faith, may

prove to be incorrect, and involve

risks and uncertainties we cannot predict.

In addition, we based many of these forward

looking statements on assumptions about future events

-looking statements on

assumptions about future events

that may prove to be inaccurate.

Accordingly, our

actual outcomes and results may differ materially from

what we have expressed or forecast in the forward-

our actual outcomes and results

may differ materially from

what we have expressed

or forecast in the forward

-looking statements.

Any differences could result from a variety of factors

and uncertainties, including, but not

limited to, the following:

The impact of public health crises, including pandemics

(such as COVID-19) and epidemics and any

related company or government policies or

Global and regional changes in the demand, supply, prices, differentials or other market

affecting oil and gas, including changes resulting from a

public health crisis or from the imposition or

lifting of crude oil production quotas or other

actions that might be imposed by OPEC

producing countries and the resulting company

Any differences

could result from a variety of factors

and uncertainties, including, but not limited to,

the following:

The impact of public health crises, including pandemics (such as COVID

-19) and epidemics and any related

company or government policies

Global and regional changes in the demand, supply,

prices, differentials or other market

affecting oil and gas, including changes

resulting from a public health crisis or from the imposition

lifting of crude oil production quotas or other actions

that might be imposed by OPEC and other producing

countries and the resulting company

or third-party actions in response to such changes.

Fluctuations in crude oil, bitumen, natural gas,

LNG and NGLs prices, including a prolonged

in these prices relative to historical or future

expected levels.

The impact of significant declines in prices for

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

may result in recognition of impairment charges on

our long-lived assets, leaseholds and

nonconsolidated equity investments.

Potential failures or delays in achieving expected

reserve or production levels from existing

oil and gas developments, including due to operating

hazards, drilling risks and the inherent

uncertainties in predicting reserves and reservoir

Reductions in reserves replacement rates, whether

as a result of the significant declines in commodity

LNG and NGLs prices, including a prolonged decline in

these prices relative to historical

or future expected levels.

The impact of significant declines in prices for crude oil,

bitumen, natural gas, LNG and NGLs, which may

result in recognition of impairment charges

on our long-lived assets, leaseholds and nonconsolidated

equity investments.

Potential failures or delays

in achieving expected reserve or production

levels from existing and future

and gas developments, including due to

operating hazards, drilling risks

and the inherent uncertainties in

predicting reserves and reservoir performance.

Reductions in reserves replacement rates,

whether as a result of the significant declines in

prices or otherwise.

Unsuccessful exploratory drilling activities

or the inability to obtain access to exploratory acreage.

Unexpected changes in costs or technical requirements

for constructing, modifying or operating E&P

Unsuccessful exploratory drilling

activities or the inability to obtain access to exploratory

Unexpected changes in costs or technical

requirements for constructing,

modifying or operating E&P

Legislative and regulatory initiatives

addressing environmental concerns, including initiatives

addressing the impact of global climate change or further

regulating hydraulic fracturing, methane

emissions, flaring or water disposal.

Lack of, or disruptions in, adequate and reliable

transportation for our crude oil, bitumen, natural

addressing environmental concerns,

including initiatives addressing

the impact of global climate change or further regulating

hydraulic fracturing, methane

emissions, flaring

or water disposal.

Lack of, or disruptions

in, adequate and reliable transportation

for our crude oil, bitumen, natural gas,

LNG and NGLs.

Inability to timely obtain or maintain permits,

including those necessary for construction, drilling

and/or development, or inability to make capital

expenditures required to maintain compliance

any necessary permits or applicable laws or regulations.

Failure to complete definitive agreements and feasibility

studies for, and to complete construction of,

announced and future E&P and LNG development

in a timely manner (if at all) or on

Potential disruption or interruption of our operations

due to accidents, extraordinary weather events,

civil unrest, political events, war, terrorism, cyber attacks,

and information technology failures,

constraints or disruptions.

Changes in international monetary conditions and

foreign currency exchange rate fluctuations.

Inability to timely obtain or maintain

permits, including those necessary for construction, drilling

development, or inability to make

capital expenditures required

to maintain compliance with any

necessary permits or applicable laws or regulations.

Failure to complete definitive

agreements and feasibility studies

and to complete construction of,

announced and future E&P and LNG development in a timely

manner (if at all) or on budget.

Potential disruption or interruption

of our operations due to accidents, extraordinary

weather events, civil

unrest, political events,

war, terrorism,

cyber attacks, and information

technology failures, constraints

Changes in international monetary

conditions and foreign currency exchange

rate fluctuations.

Changes in international trade relationships,

including the imposition of trade restrictions

relating to crude oil, bitumen, natural gas,

LNG, NGLs and any materials or products (such

aluminum and steel) used in the operation of our

Substantial investment in and development use

of, competing or alternative energy sources, including

as a result of existing or future environmental

including the imposition of trade restrictions or

relating to crude oil, bitumen, natural

gas, LNG, NGLs and any materials or products

(such as aluminum

and steel) used in the operation of our business.

Substantial investment

in and development use of, competing

or alternative energy sources, including

a result of existing or future environmental

rules and regulations.

Liability for remedial actions, including removal

and reclamation obligations, under existing

future environmental regulations and litigation.

Significant operational or investment changes imposed

by existing or future environmental

and regulations, including international agreements

and national or regional legislation and regulatory

and reclamation obligations,

under existing and future

environmental regulations

and litigation.

Significant operational or investment

changes imposed by existing or future

environmental statutes

regulations, including international

agreements and national or regional legislation

and regulatory

measures to limit or reduce GHG emissions.

Liability resulting from litigation, including the

potential for litigation related to the

transaction with

Concho, or our failure to comply with applicable

laws and regulations.

General domestic and international economic and

political developments, including armed

ConocoPhillips

Liability resulting from litigation,

including litigation related to

the transaction with Concho, or our failure

to comply with applicable laws and regulations.

General domestic and international

economic and political developments, including armed

expropriation of assets;

1 unchanged sentence

policies relating to crude oil, bitumen, natural

LNG and NGLs pricing;

and NGLs pricing;

regulation or taxation;

and other political, economic or diplomatic

developments.

in the commodity futures markets.

Changes in tax and other laws, regulations (including

alternative energy mandates), or royalty rules

and other political, economic or diplomatic developments.

Volatility in the commodity futures

Changes in tax and other laws, regulations

(including alternative energy mandates),

or royalty rules

applicable to our business.

1 unchanged sentence

E&P industry.

Any limitations on our access to capital or increase

in our cost of capital, including as a result

illiquidity or uncertainty in domestic or international

financial markets or investment sentiment.

Our inability to execute, or delays in the completion,

of any asset dispositions or acquisitions

Potential failure to obtain, or delays in obtaining,

any necessary regulatory approvals for pending

future asset dispositions or acquisitions,

or that such approvals may require modification

of the transactions or the operation of our remaining

Potential disruption of our operations as a result

of pending or future asset dispositions or acquisitions,

Any limitations on our access to capital

or increase in our cost of capital, including

as a result of illiquidity

or uncertainty in domestic or international

financial markets or investment

Our inability to execute, or delays

in the completion, of any asset dispositions or acquisitions

Potential failure to obtain,

or delays in obtaining, any necessary

regulatory approvals

for pending or

future asset dispositions or acquisitions, or that such

approvals may require modification

to the terms of

the transactions or the operation

of our remaining business.

Potential disruption of our operations

as a result of pending or future asset dispositions or acquisitions,

including the diversion of management time and

Our inability to deploy the net proceeds from any

asset dispositions that are pending or

that we elect to

undertake in the future in the manner and timeframe

we currently anticipate, if at all.

Our inability to liquidate the common stock issued

to us by Cenovus Energy as part of our sale of

certain assets in western Canada at prices we deem

acceptable, or at all.

The operation and financing of our joint ventures.

asset dispositions that are pending or that we elect

undertake in the future in the manner and

timeframe we currently anticipate,

Our inability to liquidate the common stock

issued to us by Cenovus Energy as part of our sale of certain

assets in western Canada at prices we deem acceptable,

The operation and financing of our joint ve

The ability of our customers and other contractual

counterparties to satisfy their obligations to

counterparties to satisfy their obligations

including our ability to collect payments

when due from the government of Venezuela or PDVSA.

Our inability to realize anticipated cost savings

and capital expenditure reductions.

The inadequacy of storage capacity for our products,

and ensuing curtailments, whether voluntary

involuntary, required to mitigate this physical constraint.

Our ability to successfully integrate Concho’s business and fully achieve

the expected benefits and

cost reductions associated with the transaction

when due from the government of Venezuela

Our inability to realize anticipated

cost savings and capital expenditure

The inadequacy of storage capacity

for our products, and ensuing curtailments,

whether voluntary or

required to mitigate this physical

Our ability to successfully integrate

Concho’s business and

fully achieve the expected benefits and cost

reductions associated with the transaction

with Concho in a timely manner or at all.

The risk that we will be unable to retain and hire

key personnel.

Unanticipated difficulties or expenditures relating to integration

Uncertainty as to the long-term value of our common

The diversion of management time on integration-related

The factors generally described in Part I—Item 1A

in our 2020 Annual Report on Form

additional risks described in our other filings

with the SEC.

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Information about market risks for the six months

ended June 30, 2021, does not differ materially

discussed under Item 7A in our 2020 Annual Report

The risk that we will be unable to retain

and hire key personnel.

Unanticipated difficulties or expenditures

relating to integration with Concho.

The risk that the conditions to close the acquisition

of assets from Shell are not satisfied on

a timely basis

or at all, or the failure of the transaction

to close for any reason.

The risk that any regulatory

approval, consent or authorization

that may be required for

acquisition of assets from Shell is not obtained

or is obtained subject to conditions that are not

Unanticipated integration

issues relating to the proposed acquisition

of assets from Shell, such as

potential disruptions of our ongoing business and

higher than anticipated integration

Uncertainty as to the long-term value of our

common stock.

The diversion of management time on integration

-related matters.

The factors generally described

in Part I—Item 1A in our 2020 Annual Report

on Form 10-K and any

additional risks described in our other filings with the SEC.

Quantitative and Qualitative Disclosures about Market Risk

Information about market

risks for the nine months ended September

30, 2021, does not differ materially from

that discussed under Item 7A in our 2020 Annual Report

on Form 10-K.

ConocoPhillips

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis