What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-17 compared with 2021-02-16 · 156 added, 3972 removed, 28 unchanged (99% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk

Financial Instrument Market Risk

We and certain of our subsidiaries hold and issue derivative contracts and financial

instruments that expose our

cash flows or earnings to changes in commodity

prices, foreign currency exchange rates

or interest rates.

may use financial and commodity-based derivative

contracts to manage the risks produced by changes

prices of natural gas, crude oil and related products;

fluctuations in interest rates and foreign currency

We and certain of our subsidiaries hold

and issue derivative contracts

and financial instruments that expose our

cash flows or earnings to changes in commodity prices,

foreign currency exchange

rates or interest

use financial and commodity-based derivative

contracts to manage the risks

produced by changes in the prices of

natural gas, crude oil and related

fluctuations in interest

rates and foreign currency

exchange rates;

or to capture market opportunities.

Our use of derivative instruments is governed

by an “Authority Limitations” document

approved by our Board

of Directors that prohibits the use of highly leveraged

derivatives or derivative instruments without

capture market opportunities.

Our use of derivative instruments

is governed by an “Authority

Limitations” document approved

by our Board of

Directors that prohibits

the use of highly leveraged derivatives

or derivative instruments without

The Authority Limitations document also establishes

at Risk (VaR) limits for the

company, and compliance with these limits is monitored daily.

The Executive Vice President and Chief

Financial Officer, who reports to the Chief Executive Officer, monitors commodity price risk

resulting from foreign currency exchange rates and

the Value at Risk (VaR)

limits for the company,

compliance with these limits is monitored daily.

The Executive Vice President and Chief Financial

reports to the Chief Executive

Officer, monitors

commodity price risk and risks resulting from

foreign currency

exchange rates and

interest rates.

The Commercial organization manages our

commercial marketing, optimizes our commodity

flows and positions, and monitors risks.

The Commercial organization

manages our commercial marketing, optimizes

our commodity flows and positions, and monitors

Commodity Price Risk

Our Commercial organization uses futures, forwards, swaps

and options in various markets to accomplish

Our Commercial organization

uses futures, forwards, swaps

and options in various markets

to accomplish the

following objectives:

1 unchanged sentence

Consistent with our policy to generally

remain exposed to market prices, we

use swap contracts to convert fixed-price sales

contracts, which are often requested by natural

consumers, to floating market prices.

Enable us to use market knowledge to capture opportunities

such as moving physical commodities to

more profitable locations and storing commodities

to capture seasonal or time premiums.

derivatives to optimize these activities.

model to estimate the loss in fair value that

could potentially result on a single day from the

effect of adverse changes in market conditions on the derivative

financial instruments and derivative

commodity instruments we hold or issue, including

commodity purchases and sales contracts

recorded on the

balance sheet at December 31, 2020,

as derivative instruments.

remain exposed to market

prices, we use

swap contracts to convert

fixed-price sales contracts, which

are often requested by natural

consumers, to floating market

Enable us to use market knowledge to

capture opportunities such as moving physical

commodities to

more profitable locations and storing

commodities to capture seasonal or time premiums.

derivatives to optimize

these activities.

model to estimate the loss in fair

value that could potentially result

on a single day from the effect of

adverse changes in market

conditions on the derivative financial instruments

and derivative commodity

instruments we hold or issue, including commodity

purchases and sales contracts

recorded on the balance sheet at

December 31, 2021, as derivative instruments.

Using Monte Carlo simulation, a 95 percent

confidence level and a one-day holding period, the

confidence level and a

one-day holding period, the VaR

for those instruments issued or held for

purposes or held for purposes other than trading

at December 31, 2020 and 2019, was immaterial

consolidated cash flows and net income attributable

to ConocoPhillips.

trading purposes or held for purposes

other than trading at December 31, 2021 and 2020, was

immaterial to our consolidated

cash flows and net income

attributable to ConocoPhillips.

Interest Rate Risk

The following table provides information

about our debt instruments that are sensitive to

changes in U.S.

about our debt instruments that are

sensitive to changes in U.S.

The table presents principal cash flows

and related weighted-average

interest rates

The table presents principal cash flows and related

weighted-average interest rates by expected

maturity dates.

Weighted-average variable rates are based on effective rates at the reporting date.

carrying amount of our floating-rate debt approximates

by expected maturity

Weighted-average

variable rates are based

on effective rates

at the reporting date.

The carrying amount of

our floating-rate debt approximates

its fair value.

A hypothetical 10 percent change in

prevailing interest rates would not have a material

impact on interest expense associated with our floating-rate

The fair value of the fixed-rate debt is measured

using prices available from a pricing service

corroborated by market data.

Changes to prevailing interest rates would not

impact our cashflows associated

with fixed rate debt,

unless we elect to repurchase or retire such

prevailing interest rates

would not have a material impact

on interest expense associated

with our floating-rate debt.

The fair value of the

fixed-rate debt is measured

using prices available from a pricing service that

is corroborated by

Changes to prevailing interest

rates would not impact our cash

flows associated with fixed rate

debt, unless we

elect to repurchase or retire such

debt prior to maturity.

ConocoPhillips

Millions of Dollars Except as Indicated

Expected Maturity Date

Year-End 2021

Remaining years

Year-End 2020

Remaining years

Foreign Currency Exchange Risk

We have foreign currency exchange rate risk resulting from international operations.

comprehensively hedge the exposure to currency

exchange rate changes although we

may choose to selectively

hedge certain foreign currency exchange rate exposures,

such as firm commitments for capital projects

currency tax payments, dividends and cash returns from

net investments in foreign affiliates to be remitted

within the coming year, and investments in equity securities.

Foreign Currency Exchange

We have foreign

currency exchange rate

risk resulting from international

We do not comprehensively

hedge the exposure to currency

exchange rate changes

although we may choose to selectively

hedge certain

foreign currency exchange

rate exposures,

such as firm commitments for capital

projects or local currency tax

payments, dividends and cash returns

from net investments in foreign

affiliates to be remitted

within the coming

and investments in equity securities.

At December 31, 2021 and 2020, we held foreign

currency exchange forwards hedging cross-border

commercial activity and foreign currency exchange

swaps for purposes of mitigating our cash-related

Although these forwards and swaps hedge exposures

to fluctuations in exchange rates, we elected

not to utilize hedge accounting.

currency exchange forwards

hedging cross-border commercial

activity and foreign currency exchange

swaps for purposes of mitigating

our cash-related exposures.

these forwards and swaps

hedge exposures to fluctuations in exchange

rates, we elected not to

utilize hedge

As a result, the change in the fair value of these foreign

currency exchange

derivatives is recorded directly in earnings.

At December 31, 2020,

we had outstanding foreign currency exchange

forward contracts to sell $0.45 billion

CAD at $0.748 CAD against the U.S.

At December 31, 2019, we had outstanding foreign

exchange forward contracts to sell $1.35 billion

CAD at $0.748 CAD against the U.S.

assumed volatility in the fair value calculation,

the net fair value of these foreign currency

December 31, 2020 and December 31, 2019, were

a before-tax loss of $16 million and $28 million,

respectively.

Based on an adverse hypothetical 10 percent

change in the December 2020 and December 2019

exchange rate, this would result in an additional

before-tax loss of $39 million and $115 million,

respectively.

The sensitivity analysis is based on changing

one assumption while holding all other

assumptions constant, which in practice may be

unlikely to occur, as changes in some of the assumptions may

be correlated.

currency exchange derivatives

directly in earnings.

At December 31, 2021, we had outstanding

foreign currency exchange

forward contracts

to buy $1.9 billion AUD at

$0.715 AUD against the U.S.

At December 31, 2020, we had outstanding

foreign currency exchange

contracts to sell $0.45 billion CAD at $0.748

CAD against the U.S.

Based on the assumed volatility in the fair

value calculation, the net fair value

of these foreign currency contracts

at December 31, 2021 and December 31,

2020, were a before-tax

gain of $21 million and before

-tax loss of $16 million, respectively.

Based on an adverse

hypothetical 10 percent change

in the December 2021 and December 2020 exchange

rate, this would result

additional before-tax loss

of $134 million and $39 million, respectively.

The sensitivity analysis is based on

changing one assumption while holding all other assumptions constant,

which in practice may be unlikely

as changes in some of the assumptions may be correlated.

ConocoPhillips

The gross notional and fair value of these positions

at December 31, 2021 and 2020, were as follows

Foreign Currency Exchange Derivatives

Sell Canadian dollar, buy U.S.

Buy Canadian dollar, sell U.S.

Foreign Currency Exchange

Sell Canadian dollar,

Buy Canadian dollar,

Buy Australian dollar,

Sell British pound, buy euro

1 unchanged sentence

*Denominated in USD.

For additional information about our use of derivative

instruments, see Note 13—Derivative

and Financial

Instruments, in the Notes to Consolidated Financial

FINANCIAL STATEMENTS AND SUPPLEMENTARY

CONOCOPHILLIPS

INDEX TO FINANCIAL STATEMENTS

Reports of Management

...........................................................................................................................

Reports of Independent Registered Public Accounting

Firm .................................................................

Consolidated Income Statement for the years ended

December 31, 2020,

2019 and 2018

....................

Consolidated Statement of Comprehensive Income

for the years ended

December 31, 2020, 2019 and 2018

..................................................................................................

Consolidated Balance Sheet at December 31, 2020

................................................................

Consolidated Statement of Cash Flows for the years

ended December 31, 2020,

2019 and 2018

Consolidated Statement of Changes in Equity for

the years ended

December 31, 2020, 2019 and 2018

..................................................................................................

Notes to Consolidated Financial Statements

............................................................................................

Supplementary Information

Oil and Gas Operations

..............................................................................................................

of Management

Management prepared, and is responsible for, the consolidated financial

statements and the other information

appearing in this annual report.

The consolidated financial statements present

fairly the company’s financial

position, results of operations and cash flows in

conformity with accounting principles

generally accepted in

the United States.

In preparing its consolidated financial statements,

the company includes amounts that are

based on estimates and judgments management believes

are reasonable under the circumstances.

company’s financial statements have been audited by Ernst & Young LLP,

an independent registered public

accounting firm appointed by the Audit and Finance

Committee of the Board of Directors and ratified

stockholders.

Management has made available to Ernst

& Young LLP all of the company’s financial records

and related data, as well as the minutes of stockholders’

and directors’ meetings.

Assessment of Internal Control Over Financial Reporting

Management is also responsible for establishing

and maintaining adequate internal control

over financial

ConocoPhillips’ internal control system

was designed to provide reasonable assurance to

company’s management and directors regarding the preparation and fair

presentation of published financial

All internal control systems, no matter how

well designed, have inherent limitations.

Therefore, even those

systems determined to be effective can provide only reasonable

assurance with respect to financial statement

preparation and presentation.

Management assessed the effectiveness of the company’s internal control over financial

reporting as of

December 31, 2020.

In making this assessment, it used the criteria

set forth by the Committee of Sponsoring

Organizations of the Treadway Commission in

Internal Control—Integrated Framework (2013)

assessment, we believe the company’s internal control over financial

reporting was effective as of

December 31, 2020.

Ernst & Young LLP has issued an audit report on the company’s internal control over financial reporting as of

December 31, 2020, and their report is included

/s/ William L.

Chief Executive Officer

Executive Vice President and

Chief Financial Officer

Report of Independent Registered Public Accounting

To the Stockholders and the Board of Directors of ConocoPhillips

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ConocoPhillips

(the Company) as of

December 31, 2020 and 2019, the related consolidated

income statement, consolidated statements

comprehensive income, changes in equity and

cash flows for each of the three years in

the period ended

December 31, 2020, and the related notes (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial

position of the Company at December 31, 2020

and 2019, and the results of its operations

and its cash flows

for each of the three years in the period ended

December 31, 2020, in conformity with

generally accepted

accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board

(United States) (PCAOB), the Company’s internal control over financial

reporting as of December 31, 2020,

based on criteria established in Internal Control–Integrated

Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (2013 framework) and our report

dated February 16, 2021,

expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to

express an opinion on the Company’s financial statements based on our audits.

We are a public accounting

firm registered with the PCAOB and are required

to be independent with respect to the Company

accordance with the U.S.

federal securities

laws and the applicable rules and regulations

of the Securities and

Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards

require that we

plan and perform the audit to obtain reasonable

assurance about whether the financial statements

material misstatement, whether due to error

Our audits included performing procedures

to assess the

risks of material misstatement of the financial

statements, whether due to error or fraud,

and performing

procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial

Our audits also included evaluating

accounting principles used and significant estimates

made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that our audits provide a reasonable

basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are

matters arising from the current period

consolidated financial statements that were communicated

or required to be communicated to the Audit

Finance Committee and that:

(1) relate to

accounts or disclosures that are material to the

consolidated financial

statements and (2) involved our especially challenging,

subjective or complex judgments.

The communication

of critical audit matters does not alter in any

way our opinion on the consolidated financial

statements, taken as

a whole, and we are not, by communicating the

critical audit matters below, providing separate opinions on the

critical audit matters or on the accounts or disclosures

to which they relate.

Accounting for asset retirement obligations for

certain offshore properties

Description of

At December 31, 2020, the asset retirement

obligation (ARO) balance totaled $5.6

As further described in Note 9, the Company

records AROs in the period in

which they are incurred, typically when the asset

is installed at the production location.

The estimation of certain obligations related

to deepwater offshore assets requires

significant judgment given the magnitude

of these removal costs and higher estimation

uncertainty related to the removal plan and costs.

Furthermore, given certain of these

assets are nearing the end of their operations, the

impact of changes in these AROs may

result in a material impact to earnings given the

relatively short remaining useful lives of

Auditing the Company’s AROs for the obligations identified above is complex

highly judgmental due to the significant estimation

required by management in

determining the obligations.

In particular, the estimates were

sensitive to significant

subjective assumptions such as removal cost estimates

and end of field life, which are

affected by expectations about future market or economic

Addressed the

Matter in Our

We obtained an understanding, evaluated the design and tested the operating

effectiveness of the Company’s internal controls over its ARO estimation process,

including management’s review of the significant assumptions that

have a material effect

on the determination of the obligations.

We also tested management’s controls over the

completeness and accuracy of the financial

data used in the valuation.

To test the AROs for the obligations identified above, our audit procedures included,

among others, assessing the significant assumptions

and inputs used in the valuation,

including removal cost estimates and end of

field life assumptions.

For example, we

evaluated removal cost estimates by comparing

to settlements and recent removal

activities and costs.

We also compared end of field life assumptions to production

We involved our internal specialists in testing the Company’s methodology to

estimate removal costs.

Depreciation, depletion and amortization and impairment

of properties, plants and

Description of

At December 31, 2020, the net book value of the

Company’s properties, plants and

equipment (PP&E) was $39.9 billion, and depreciation,

depletion and amortization

(DD&A) expense and impairment expense were

$5.5 billion and $0.8 billion,

respectively, for the year then ended.

As described in Note 1, under the successful

method of accounting, DD&A of PP&E on producing

hydrocarbon properties and certain

pipeline and liquified natural gas assets (those

which are expected to have a declining

utilization pattern) are determined by the unit-of-production

production method uses proved oil and gas

reserves, as estimated by the Company’s

internal reservoir engineers.

PP&E used in operations

is assessed by management for

impairment when changes in facts and circumstances

indicate a possible significant

deterioration in the future cash flows expected to

be generated by an asset group.

is an indication the carrying value of an asset

may not be recovered, the Company

compares undiscounted cash flows before income

taxes to the carrying value of the asset

If the expected undiscounted cash flows

before income taxes are lower than the

carrying value of the asset group, the carrying

value is written down to estimated fair

Proved oil and gas reserve estimates are

based on geological and engineering

assessments of in-place hydrocarbon volumes, the production

plan, historical extraction

recovery and processing yield factors, installed

plant operating capacity and approved

operating limits.

Additionally, the expected future cash flows used for impairment

reviews and related fair value calculations are

based on future production volumes of

estimated oil and gas reserves.

Significant judgment

is required by the Company’s

internal reservoir engineers in evaluating geological

and engineering data when

estimating oil and gas reserves.

reserves also requires the selection of inputs,

including oil and gas price assumptions, future

operating and capital costs assumptions

and tax rates by jurisdiction, among others.

of the complexity involved in

estimating oil and gas reserves, management

also used an independent petroleum

engineering consulting firm to perform a review

of the processes and controls used by

Company’s internal reservoir engineers to determine estimates of

proved oil and gas

Auditing the Company’s DD&A and impairment calculations is complex because

use of the work of the internal reservoir engineers

and the independent petroleum

engineering consulting firm and the evaluation

of management’s determination of the

inputs described above used by the internal reservoir

engineers in estimating oil and gas

Addressed the

Matter in Our

We obtained an understanding, evaluated the design and tested the operating

effectiveness of the Company’s internal controls over its processes to calculate

and impairments, including management’s controls over the completeness

of the financial data provided to the internal reservoir

engineers for use in estimating oil

and gas reserves.

Our audit procedures included, among others,

evaluating the professional qualifications

and objectivity of the Company’s internal reservoir engineers primarily

responsible for

overseeing the preparation of the reserve estimates

and the independent petroleum

engineering consulting firm used to review the

Company’s processes and controls.

addition, in assessing whether we can use the

work of the internal reservoir engineers,

evaluated the completeness and accuracy of the financial

data and inputs described above

used by the internal reservoir engineers in estimating

oil and gas reserves by agreeing

them to source documentation and we identified

and evaluated corroborative and

contrary evidence.

We also tested the accuracy of the DD&A and impairment

calculations, including comparing the oil and gas

reserve amounts used in the

calculations to the Company’s reserve report.

/s/ Ernst & Young LLP

We have served as ConocoPhillips’ auditor since 1949.

Houston, Texas

February 16, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders

and the Board of Directors of ConocoPhillips

Opinion on Internal Control over Financial Reporting

We have audited

ConocoPhillips’ internal control over financial reporting as of December 31, 2020, based

criteria established in Internal Control–Integrated Framework issued

by the Committee of Sponsoring Organizations

of the Treadway Commission (2013 framework)

(the COSO criteria).

In our opinion, ConocoPhillips (the Company)

maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2020,

based on the COSO criteria.

We also have audited,

in accordance with the standards of the Public Company Accounting Oversight Board (United

States) (PCAOB), the consolidated balance sheets of the Company as of December

31, 2020 and 2019, the related

consolidated income statement, consolidated statements of comprehensive

income, changes in equity and cash flows

for each of the three years in the period ended December 31, 2020, and the related notes and

our report dated

February 16, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible

for maintaining effective internal control over financial reporting

for its assessment of the effectiveness of internal control over financial

reporting included under the heading

“Assessment of Internal Control Over Financial Reporting” in the accompanying

“Reports of Management.” Our

responsibility is to express an opinion on the Company’s

internal control over financial reporting based on our audit.

We are a public

accounting firm registered with the PCAOB and are required to be independent

with respect to the

Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the

Securities and Exchange Commission and the PCAOB.

our audit in accordance with the standards of the PCAOB.

Those standards require

that we plan and

perform the audit to obtain reasonable assurance about whether effective

internal control over financial reporting

was maintained in all material respects.

Our audit included obtaining an understanding of internal control over

financial reporting, assessing the risk that a

material weakness exists, testing and evaluating the design and operating effectiveness

of internal control based on

the assessed risk, and performing such other procedures as we considered

necessary in the circumstances.

believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over

financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in

accordance with generally accepted accounting principles.

internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance

of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the

(2) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of

financial statements in accordance

with generally accepted accounting principles, and that receipts and expenditures

of the company are being made

only in accordance with authorizations of management and directors of

and (3) provide reasonable

assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s

assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods

are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of

compliance with the policies or procedures may

/s/ Ernst & Young

Houston, Texas

February 16, 2021

Consolidated Income Statement

ConocoPhillips

Ended December 31

Millions of Dollars

Revenues and Other Income

Sales and other operating revenues

Equity in earnings of affiliates

Gain on dispositions

Other income (loss)

Total Revenues and

Costs and Expenses

Purchased commodities

Production and operating expenses

Selling, general and administrative expenses

Exploration expenses

Depreciation, depletion and amortization

Taxes other than income

Accretion on discounted liabilities

Interest and debt expense

Foreign currency transaction (gains) losses

Other expenses

Total Costs and Expenses

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

net income attributable to noncontrolling interests

Net Income (Loss) Attributable to ConocoPhillips

Net Income (Loss) Attributable to ConocoPhillips Per Share

of Common Stock

Average Common

Shares Outstanding

(in thousands)

See Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income

ConocoPhillips

Ended December 31

Millions of Dollars

Net Income (Loss)

Other comprehensive income (loss)

Defined benefit plans

Prior service credit (cost) arising during the period

Reclassification adjustment for amortization of prior

service credit included in net income (loss)

Net actuarial loss arising during the period

Reclassification adjustment for amortization of net

actuarial losses included in net income (loss)

Nonsponsored plans*

Income taxes on defined benefit plans

Defined benefit plans, net of tax

Unrealized holding gain on securities

Unrealized gain on securities, net of tax

Foreign currency translation adjustments

Income taxes on foreign currency translation adjustments

Foreign currency translation adjustments, net of tax

Other Comprehensive Income (Loss), Net of

Comprehensive Income (Loss)

comprehensive income attributable to noncontrolling interests

Comprehensive Income (Loss) Attributable to ConocoPhillips

*Plans for which ConocoPhillips is not the primary obligor

primarily those administered by equity affiliates.

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheet

ConocoPhillips

At December 31

Millions of Dollars

Cash and cash equivalents

Short-term investments

Accounts and notes receivable (net of allowance of $

, respectively)

Accounts and notes receivable—related parties

Investment in Cenovus Energy

Prepaid expenses and other current assets

Total Current Assets

Investments and long-term receivables

Loans and advances—related parties

Net properties, plants and equipment

(net of accumulated DD&A of $

, respectively)

Accounts payable

Accounts payable—related parties

Short-term debt

Accrued income and other taxes

Employee benefit obligations

Other accruals

Total Current Liabilities

Long-term debt

Asset retirement obligations and accrued environmental costs

Deferred income taxes

Employee benefit obligations

Other liabilities and deferred credits

Total Liabilities

Common stock (

2,500,000,000

shares authorized at $

Issued (2020—

1,798,844,267

1,795,652,203

Capital in excess of par

Treasury stock (at cost:

Accumulated other comprehensive loss

Retained earnings

Stockholders’ Equity

Noncontrolling interests

Total Liabilities and Equity

See Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows

ConocoPhillips

Ended December 31

Millions of Dollars

Cash Flows From Operating Activities

Net income (loss)

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

operating activities

Depreciation, depletion and amortization

Dry hole costs and leasehold impairments

Accretion on discounted liabilities

Deferred taxes

Undistributed equity earnings

Gain on dispositions

Unrealized (gain) loss on investment in Cenovus Energy

capital adjustments

Decrease in accounts and notes receivable

Decrease (increase) in inventories

Decrease (increase) in prepaid expenses and other current assets

Decrease in accounts payable

Increase (decrease) in taxes and other accruals

Net Cash Provided by Operating Activities

Cash Flows From Investing Activities

Capital expenditures and investments

capital changes associated with investing activities

Proceeds from asset dispositions

Net sales (purchases) of investments

Collection of advances/loans—related parties

Net Cash Used in Investing Activities

Cash Flows From Financing Activities

Issuance of debt

Repayment of debt

Issuance of company common stock

Repurchase of company common stock

Dividends paid

Net Cash Used in Financing Activities

Effect of Exchange Rate Changes on Cash, Cash Equivalents and

Restricted Cash

Net Change in Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, Cash Equivalents and Restricted Cash at End of Period

Restricted cash of $

million and $

million is included in the “Prepaid expenses and other current assets” and “Other assets”

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

Restricted cash of $

million and $

million is included in the “Prepaid expenses and other current assets” and “Other assets”

respectively, of our Consolidated Balance Sheet as of December 31, 2019.

See Notes to Consolidated Financial Statements.

Consolidated Statement of Changes in Equity

ConocoPhillips

Millions of Dollars

Attributable to ConocoPhillips

Comprehensive

Income (Loss)

Balances at December 31, 2017

Other comprehensive loss

Dividends paid ($

per share of common stock)

Repurchase of company common stock

Distributions to noncontrolling interests and other

Distributed under benefit plans

Changes in Accounting Principles*

Balances at December 31, 2018

Other comprehensive income

Dividends paid ($

per share of common stock)

Repurchase of company common stock

Distributions to noncontrolling interests and other

Distributed under benefit plans

Changes in Accounting Principles**

Balances at December 31, 2019

Net income (loss)

Other comprehensive income

Dividends paid ($

per share of common stock)

Repurchase of company common stock

Distributions to noncontrolling interests and other

Distributed under benefit plans

Balances at December 31, 2020

*Cumulative effect of the adoption of ASC Topic 606, "Revenue from Contracts with Customers," and ASU No.

2016-01, "Recognition

and Measurement of

Financial Assets and Liabilities," at January 1, 2018.

**Cumulative effect of the adoption of ASU No.

2018-02, "Reclassification

of Certain Tax Effects from Accumulated Other Comprehensive Income."

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

ConocoPhillips

Note 1—Accounting Policies

Consolidation Principles and Investments

—Our consolidated financial statements

include the accounts

of majority-owned, controlled subsidiaries

and variable interest entities where we are the primary

The equity method is used to account for

investments in affiliates in which we have the

ability to exert significant influence over the affiliates’

operating and financial policies.

When we do not

have the ability to exert significant influence,

the investment is measured at fair value

except when the

investment does not have a readily determinable

For those exceptions, it will be measured

cost minus impairment, plus or minus observable

price changes in orderly transactions for an identical

similar investment of the same issuer.

Undivided interests in oil and gas joint ventures,

pipelines, natural

gas plants and terminals are consolidated on a proportionate

Other securities and investments are

generally carried at cost.

We manage our operations through six operating segments, defined by geographic

Middle East and North Africa;

Asia Pacific;

and Other International.

For additional

information, see Note 24—Segment Disclosures

and Related Information.

The unrealized (gain) loss on investment in Cenovus

Energy included on our consolidated statement of

cash flows, previously reflected on the line item

“Other” within net cash provided by operating

has been reclassified in the comparative periods

to conform with the current period’s presentation.

Foreign Currency Translation

—Adjustments resulting from the process of translating

functional currency financial statements into

dollars are included in accumulated other

comprehensive loss in common stockholders’ equity.

Foreign currency transaction gains and losses

included in current earnings.

Some of our foreign operations use their local currency

as the functional

Use of Estimates

—The preparation of financial statements

in conformity with accounting principles

generally accepted in the U.S.

requires management

to make estimates and assumptions that

reported amounts of assets, liabilities,

revenues and expenses, and the disclosures of contingent

Actual results could differ from these estimates.

Revenue Recognition

—Revenues associated with the sales of crude

oil, bitumen, natural gas, LNG,

NGLs and other items are recognized at the point

in time when the customer obtains control

of the asset.

In evaluating when a customer has control of the

asset, we primarily consider whether

the transfer of legal

title and physical delivery has occurred, whether

the customer has significant risks and rewards

ownership, and whether the customer has accepted

delivery and a right to payment exists.

These products

are typically sold at prevailing market prices.

We allocate variable market-based consideration to

deliveries (performance obligations) in the

current period as that consideration relates

specifically to our

efforts to transfer control of current period deliveries to the

customer and represents the amount we

expect to be entitled to in exchange for the related

Payment is typically due within 30 days or

Revenues associated with transactions commonly

called buy/sell contracts, in which the

purchase and sale

of inventory with the same counterparty are entered

into “in contemplation” of one another, are combined

and reported net (i.e., on the same income statement

Shipping and Handling Costs

—We typically incur shipping and handling costs prior to control

transferring to the customer and account for these

activities as fulfillment costs.

Accordingly, we include

shipping and handling costs in production and operating

expenses for production activities.

Transportation costs related to marketing activities are recorded

in purchased commodities.

Freight costs

billed to customers are treated as a component of the

transaction price and recorded as a component

revenue when the customer obtains control.

Cash Equivalents

—Cash equivalents are highly liquid,

short-term investments that are readily

convertible to known amounts of cash and have

original maturities of 90 days or less from

their date of

They are carried at cost plus accrued interest,

which approximates fair value.

Short-Term Investments

—Short-term investments include investments

in bank time deposits and

marketable securities (commercial paper and government

obligations) which are carried at cost plus

accrued interest and have original maturities

of greater than 90 days but within one year or

remaining maturities are within one year.

We also invest in financial instruments classified as available

for sale debt securities which are carried at fair

Those instruments are included in short-term

investments when they have remaining maturities

within one year as of the balance sheet date.

Long-Term Investments in Debt Securities

—Long-term investments in debt securities

financial instruments classified as available for sale

debt securities with remaining maturities

one year as of the balance sheet date.

They are carried at fair value and presented

within the “Investments

and long-term receivables” line of our consolidated

balance sheet.

—We have several valuation methods for our various types of inventories

and consistently

use the following methods for each type of inventory.

The majority of our commodity-related inventories

are recorded at cost using the LIFO basis.

We measure these inventories at the lower-of-cost-or-market in

the aggregate.

Any necessary lower-of-cost-or-market write-downs at year

end are recorded as

permanent adjustments to the LIFO cost basis.

LIFO is used to better match current inventory

current revenues.

Costs include both direct and indirect expenditures

incurred in bringing an item or

product to its existing condition and location,

but not unusual/nonrecurring costs or research

development costs.

Materials, supplies and other miscellaneous inventories,

such as tubular goods and

well equipment, are valued using various methods,

including the weighted-average-cost

method, and the

FIFO method, consistent with industry practice.

Fair Value Measurements

—Assets and liabilities measured at fair value

and required to be categorized

within the fair value hierarchy are categorized into

one of three different levels depending on the

observability of the inputs employed in the measurement.

Level 1 inputs are quoted prices in active

markets for identical assets or liabilities.

Level 2 inputs are observable inputs other than

quoted prices

included within Level 1 for the asset or liability, either directly or indirectly

through market-corroborated

Level 3 inputs are unobservable inputs for

the asset or liability reflecting significant

modifications

to observable related market data or our assumptions

about pricing by market participants.

Derivative Instruments

—Derivative instruments are recorded on the balance

sheet at fair value.

right of offset exists and certain other criteria are met,

derivative assets and liabilities with the same

counterparty are netted on the balance sheet and the

collateral payable or receivable is netted

derivative assets and derivative liabilities,

respectively.

Recognition and classification of the gain or loss

that results from recording and adjusting

a derivative to

fair value depends on the purpose for issuing or

holding the derivative.

Gains and losses from derivatives

not accounted for as hedges are recognized immediately

We do not apply hedge accounting

on our derivative instruments.

Oil and Gas Exploration and Development

—Oil and gas exploration and development

accounted for using the successful efforts method of

Property Acquisition Costs

—Oil and gas leasehold acquisition costs are

capitalized and included in

the balance sheet caption PP&E.

Leasehold impairment is recognized based

on exploratory

experience and management’s judgment.

Upon achievement of all conditions necessary for reserves

to be classified as proved, the associated leasehold

costs are reclassified to proved properties.

Exploratory Costs

—Geological and geophysical costs and the

costs of carrying and retaining

undeveloped properties are expensed as incurred.

Exploratory well costs are capitalized, or

“suspended,” on the balance sheet pending further

evaluation of whether economically recoverable

reserves have been found.

If economically recoverable reserves are not found,

exploratory well costs

are expensed as dry holes.

If exploratory wells encounter potentially

economic quantities of oil and

gas, the well costs remain capitalized on the balance

sheet as long as sufficient progress assessing the

reserves and the economic and operating viability

of the project is being made.

exploratory discoveries, it is not unusual to

have exploratory wells remain suspended

on the balance

sheet for several years while we perform additional

appraisal drilling and seismic work on the

potential oil and gas field or while we seek government

or co-venturer approval of development plans

or seek environmental permitting.

Once all required approvals and permits have been

obtained, the

projects are moved into the development phase,

and the oil and gas resources are designated

Management reviews suspended well balances quarterly, continuously monitors

the results of the

additional appraisal drilling and seismic work,

and expenses the suspended well costs

when it judges the potential field does not

warrant further investment in the near term.

Suspended Wells and Exploration Expenses, for additional information on suspended

Development Costs

—Costs incurred to drill and equip development

wells, including unsuccessful

development wells, are capitalized.

Depletion and Amortization

—Leasehold costs of producing properties

are depleted using the unit-

of-production method based on estimated proved

oil and gas reserves.

Amortization of intangible

development costs is based on the unit-of-production

method using estimated proved developed

and gas reserves.

Capitalized Interest

—Interest from external borrowings is

capitalized on major projects with an

expected construction period of one year or longer.

Capitalized interest is added to the cost of the

underlying asset and is amortized over the useful

lives of the assets in the same manner

as the underlying

Depreciation and Amortization

—Depreciation and amortization of PP&E

on producing hydrocarbon

properties and SAGD facilities and certain pipeline

and LNG assets (those which are expected

declining utilization pattern), are determined by

the unit-of-production method.

Depreciation and

amortization of all other PP&E are determined

by either the individual-unit-straight-line method

group-straight-line method (for those individual

units that are highly integrated with other

Impairment of Properties, Plants and Equipment

—PP&E used in operations are assessed for

impairment whenever changes in facts and circumstances

indicate a possible significant deterioration

the future cash flows expected to be generated

by an asset group.

If there is an indication the carrying

amount of an asset may not be recovered, a recoverability

test is performed using management’s

assumptions such as for prices, volumes and future

development plans.

If, upon review, the sum of the

undiscounted cash flows before income-taxes is

less than the carrying value of the asset

carrying value is written down to estimated fair

value and reported as an impairment in the

which the determination of the impairment

Individual assets are grouped for impairment

purposes at the lowest level for which there are

identifiable cash flows that are largely independent

cash flows of other groups of assets—generally

on a field-by-field basis for E&P assets.

Because there

usually is a lack of quoted market prices for

long-lived assets, the fair value of impaired assets

determined based on the present values of expected

future cash flows using discount rates

believed to be consistent with those used by principal

market participants, or based on a multiple

operating cash flow validated with historical

market transactions of similar assets

where possible.

lived assets committed by management for disposal

within one year are accounted for at

amortized cost or fair value, less cost to sell,

with fair value determined using a binding negotiated

if available, or present value of expected future

cash flows as previously described.

The expected future cash flows used for impairment

reviews and related fair value calculations are

on estimated future production volumes, prices

and costs, considering all available evidence at the

The impairment review includes cash flows from

proved developed and undeveloped reserves,

including any development expenditures necessary

to achieve that production.

Additionally, when

probable and possible reserves exist, an appropriate

risk-adjusted amount of these reserves may be

included in the impairment calculation.

Impairment of Investments in Nonconsolidated

—Investments in nonconsolidated entities

assessed for impairment whenever changes in the

facts and circumstances indicate a loss

When such a condition is judgmentally determined

to be other than temporary, the carrying

value of the investment is written down to fair

The fair value of the impaired investment

on quoted market prices, if available, or upon

the present value of expected future cash flows using

discount rates and prices believed to be consistent

with those used by principal market participants,

market analysis of comparable assets owned by the

investee, if appropriate.

Maintenance and Repairs

—Costs of maintenance and repairs, which are

not significant improvements,

are expensed when incurred.

Property Dispositions

—When complete units of depreciable property

are sold, the asset cost and related

accumulated depreciation are eliminated,

with any gain or loss reflected in the “Gain on dispositions”

of our consolidated income statement.

When less than complete units of depreciable property

disposed of or retired which do not significantly

alter the DD&A rate, the difference between asset

and salvage value is charged or credited to accumulated

depreciation.

Asset Retirement Obligations and Environmental Costs

fair value of legal obligations to retire

and remove long-lived assets are recorded in

the period in which the obligation is incurred

when the asset is installed at the production location).

Fair value is estimated using a present value

approach, incorporating assumptions about estimated

amounts and timing of settlements and

the use of technologies.

When the liability is initially recorded,

we capitalize this cost by increasing the

carrying amount of the related PP&E.

If, in subsequent periods, our estimate of this

liability changes, we

will record an adjustment to both the liability

Over time the liability is increased for the

change in its present value, and the capitalized cost

in PP&E is depreciated over the useful

related asset.

Reductions to estimated liabilities for

assets that are no longer producing are recorded as a

credit to impairment, if the asset had been previously

impaired, or as a credit to DD&A, if the

not been previously impaired.

For additional information, see Note 9—Asset

Retirement Obligations and

Accrued Environmental Costs.

Environmental expenditures are expensed or capitalized,

depending upon their future economic benefit.

Expenditures relating to an existing condition

caused by past operations, and those having no future

economic benefit, are expensed.

Liabilities for environmental expenditures are

recorded on an

undiscounted basis (unless acquired through a business

combination, which we record on a discounted

basis) when environmental assessments or cleanups

are probable and the costs can be reasonably

Recoveries of environmental remediation costs

from other parties are recorded as assets when

their receipt is probable and estimable.

—The fair value of a guarantee is determined

and recorded as a liability at the time the

guarantee is given.

The initial liability is subsequently reduced

as we are released from exposure under

the guarantee.

We amortize the guarantee liability over the relevant time period, if one exists, based on

the facts and circumstances surrounding each type

of guarantee.

In cases where the guarantee term is

indefinite, we reverse the liability when we have

information indicating the liability

is essentially relieved

or amortize it over an appropriate time

period as the fair value of our guarantee exposure

declines over

We amortize the guarantee liability to the related income statement line item based

on the nature of

the guarantee.

When it becomes probable that we will have

to perform on a guarantee, we accrue a

separate liability if it is reasonably estimable,

based on the facts and circumstances at that

reverse the fair value liability only when there

is no further exposure under the guarantee.

Share-Based Compensation

—We recognize share-based compensation expense over the shorter of the

service period (i.e., the stated period of time required

to earn the award) or the period beginning at

start of the service period and ending when an

employee first becomes eligible for retirement.

elected to recognize expense on a straight-line

basis over the service period for the entire

award, whether

the award was granted with ratable or cliff vesting.

—Deferred income taxes are computed using

the liability method and are provided on all

temporary differences between the financial reporting basis

and the tax basis of our assets and liabilities,

except for deferred taxes on income and temporary

differences related to the cumulative translation

adjustment considered to be permanently reinvested

in certain foreign subsidiaries and

foreign corporate

joint ventures.

Allowable tax credits are applied currently

as reductions of the provision for income

Interest related to unrecognized tax benefits

is reflected in interest and debt expense, and

related to unrecognized tax benefits are reflected

in production and operating expenses.

Taxes Collected from Customers and Remitted to Governmental Authorities

—Sales and value-

added taxes are recorded net.

Net Income (Loss) Per Share of Common Stock

—Basic net income (loss) per share of common stock

is calculated based upon the daily weighted-average

number of common shares outstanding during

calculation includes fully vested stock and unit

awards that have not yet been issued as

common stock, along with an adjustment to

net income (loss) for dividend equivalents

paid on unvested

unit awards that are considered participating

Diluted net income per share of common stock

includes unvested stock, unit or option awards granted

under our compensation plans and vested but

unexercised stock options, but only to the extent these

instruments dilute net income per share, primarily

under the treasury-stock method.

Diluted net loss per share, which is calculated

the same as basic net loss

per share, does not assume conversion or exercise

of securities that would have an antidilutive

Treasury stock is excluded from the daily weighted-average number

of common shares outstanding in

both calculations.

The earnings per share impact of the participating

securities is immaterial.

Note 2—Changes in Accounting Principles

We adopted the provisions of FASB ASU No.

2016-13, “Measurement of Credit Losses on Financial

Instruments,” (ASC Topic 326) and its amendments, beginning January 1, 2020.

This ASU, as amended, sets

forth the current expected credit loss model, a new forward-looking impairment model for certain financial

instruments measured at amortized cost basis based on expected losses rather than incurred losses.

as amended, which primarily applies to our accounts receivable, also requires credit losses related to available-

for-sale debt securities to be recorded through an allowance for credit losses.

The adoption of this ASU did

not have a material impact to our financial statements.

The majority of our receivables are due within 30 days

We monitor the credit quality of our counterparties through review of collections, credit ratings, and

other analyses.

We develop our estimated allowance for credit losses primarily using an aging method and

analyses of historical loss rates as well as consideration of current and future conditions that could impact our

counterparties’ credit quality and liquidity.

Note 3—Inventories

Inventories at December 31 were:

Millions of Dollars

Crude oil and natural gas

Materials and supplies

Inventories valued on the LIFO basis totaled

million and $

million at December 31, 2020 and 2019,

respectively.

In the first quarter of 2020, we recorded a lower

of cost or market adjustment of $

our crude oil and natural gas inventories, which is

included in the “Purchased commodities”

consolidated income statement.

Commodity prices have since improved.

The estimated excess of current

replacement cost over LIFO cost of inventories

was approximately $

million and $

December 31, 2020 and 2019, respectively.

Note 4—Asset Acquisitions and Dispositions

All gains or losses on asset dispositions

are reported before-tax and are included net in the

dispositions” line on our consolidated income

All cash proceeds and payments are included in the

“Cash Flows From Investing Activities” section

of our consolidated statement of cash flows.

On January 15, 2021, we completed our acquisition

of Concho Resources Inc.

(Concho), an independent

and gas exploration and production company

with operations across New Mexico and West

Texas focused in

the Permian Basin.

Total consideration for the all-stock transaction was valued at $

billion, in which

shares of ConocoPhillips common stock

was exchanged for each outstanding share of

Concho common stock,

resulting in the issuance of approximately

million shares of ConocoPhillips common

billion in aggregate principal amount of outstanding

debt for Concho, which was recorded at fair

billion as of the closing date.

For additional information related to this

transaction, see Note

25—Acquisition of Concho Resources Inc.

Asset Acquisition

In August 2020, we completed the acquisition

of additional Montney acreage in Canada from Kelt

million after customary adjustments, plus the

assumption of $

million in financing obligations

associated with partially owned infrastructure.

This acquisition consisted primarily

of undeveloped properties

net acres in the liquids-rich Inga Fireweed asset

Montney zone, which is directly

adjacent to our existing Montney position.

The transaction increased

our Montney acreage position to

approximately

net acres with a

percent working interest.

This agreement was accounted for as an

asset acquisition resulting in the recognition of $

million of PP&E;

million of ARO and accrued

environmental costs;

million of financing obligations recorded primarily

to long-term debt.

operations for the Montney asset are reported in our

Canada segment.

In February 2020, we sold our Waddell Ranch interests in the Permian Basin for $

million after customary

gain or loss was recognized on the sale.

Results of operations for the Waddell Ranch

interests sold were reported in our Lower 48 segment.

In March 2020, we completed the sale of our

Niobrara interests for approximately $

million after

customary adjustments and recognized a before-tax

loss on disposition of $

At the time of

disposition, our interest in Niobrara had a net carrying

million, consisting primarily of

million of PP&E and $

million of ARO.

The before-tax losses associated

with our interests in

Niobrara, including the loss on disposition noted above

and an impairment of $

million recorded when we

signed an agreement to sell our interests in

the fourth quarter of 2019, were $

million and $

the years ended December 31, 2020 and 2019,

respectively.

The before-tax earnings associated with our

interests in Niobrara for the year ended December

31, 2018 was $

Results of operations for the

Niobrara interests sold were reported in our

Lower 48 segment.

In May 2020, we completed the divestiture

of our subsidiaries that held our Australia-West assets and

operations, and based on an effective date of January

1, 2019, we received proceeds of $

million with an

million due upon final investment decision

of the proposed Barossa development project.

recognized a before-tax gain of $

million related to this transaction in 2020.

At the time of disposition, the

net carrying value of the subsidiaries sold was approximately

billion, excluding $

billion of cash.

net carrying value consisted primarily of $

billion of PP&E and $

billion of other current assets offset by

billion of ARO, $

billion of deferred tax liabilities, and $

billion of other liabilities.

The before-tax

earnings associated with the subsidiaries sold,

including the gain on disposition noted above,

million and $

million for the years ended December 31,

2020, 2019 and 2018, respectively.

Production from the beginning of the year through

the disposition date in May 2020 averaged

Results of operations for the subsidiaries

sold were reported in our Asia Pacific segment.

In January 2019, we entered into agreements to sell

percent ownership interests in the Golden

LNG Terminal and Golden Pass Pipeline.

We also entered into agreements to amend our contractual

obligations for retaining use of the facilities.

As a result of entering into these agreements, we recorded

before-tax impairment of $

million in the first quarter of 2019 which is included

in the “Equity in earnings

of affiliates” line on our consolidated income statement.

We completed the sale in the second quarter of 2019.

Results of operations for these assets were reported

in our Lower 48 segment.

See Note 14—Fair Value

Measurement for additional information.

In April 2019, we entered into an agreement to sell

two ConocoPhillips U.K.

subsidiaries to

Limited for $

billion plus interest and customary adjustments,

with an effective date of January 1, 2018.

On September 30, 2019, we completed the sale for

proceeds of $

billion and recognized a $

before-tax and $

billion after-tax gain associated with this transaction

Together the subsidiaries

sold indirectly held our exploration and production

assets in the U.K.

At the time of disposition, the net

carrying value was approximately $

billion, consisting primarily of $

billion of PP&E, $

cumulative foreign currency translation adjustments,

billion of deferred tax assets, offset by $

billion of ARO and negative $

billion of working capital.

The before-tax earnings associated with the

subsidiaries sold, including the gain on dispositions

noted above, were $

billion and $

billion for the

years ended December 31, 2019 and 2018, respectively.

Results of operations for the U.K.

were reported

within our Europe, Middle East and North Africa segment.

In the second quarter of 2019, we recognized an

after-tax gain of $

million upon the closing of the sale of

percent interest in the Greater Sunrise Fields

to the government of Timor-Leste for $

Greater Sunrise Fields were included in our Asia

Pacific segment.

In the fourth quarter of 2019, we sold our interests

in the Magnolia field and platform for net proceeds

million and recognized a before-tax gain of $

At the time of sale, the net carrying value consisted

million of PP&E offset by $

million of ARO.

The Magnolia results of operations were reported

our Lower 48 segment.

In the first quarter of 2018, we completed the sale of

certain properties in the Lower 48 segment

proceeds of $

gain or loss was recognized on the sale.

In the second quarter of 2018, we

completed the sale of a package of largely undeveloped acreage

in the Lower 48 segment for net proceeds

gain or loss was recognized on the sale.

In the third quarter of 2018, we completed a

noncash exchange of undeveloped acreage in

the Lower 48 segment.

The transaction was recorded at fair

value resulting in the recognition of a $

million gain.

In the fourth quarter of 2018, we sold several

packages of undeveloped acreage in the Lower

48 segment for total net proceeds of $

recognized gains of approximately $

On October 31, 2018, we completed the sale of

our interests in the Barnett to Lime Rock Resources

million after customary adjustments and recognized

We recorded an impairment of $87

million in 2018 to reduce the net carrying value

of the Barnett to fair value.

At the time of the disposition, our

interest in Barnett had a net carrying value of $

million, consisting of $

million of PP&E and $

million of AROs.

The before-tax loss associated with our

interests in the Barnett, including both the

impairment and loss on disposition noted above,

million for the year ended December 31, 2018.

Barnett results of operations were included in our

Lower 48 segment.

On December 18, 2018, we completed the sale of

a ConocoPhillips subsidiary to BP.

The subsidiary held

percent of our

percent interest in the BP-operated Clair Field

We retained a

interest in the field.

At the same time, we acquired BP’s

percent nonoperated interest in the Greater

Kuparuk Area in Alaska, including their

percent interest in the Kuparuk Transportation Company (Kuparuk

The transaction was recorded at a fair value

million and was cash neutral except for

customary adjustments which resulted in net

proceeds of $

At closing, our interest in the Clair

Field had a net carrying value of approximately

million consisting primarily of $

million of deferred tax liabilities, and $

million of AROs.

We recognized a before-tax gain of

million on the transaction.

The 2018 before-tax earnings associated

percent interest in the

Clair Field, including the recognized gain, were $

Results of operations for our interest

Field are reported within our Europe, Middle

East and North Africa segment and the Kuparuk

included in our Alaska segment.

In May 2018, we completed the acquisition of

percent nonoperated interest in the Western

North Slope of Alaska, as well as its interest

in the Alpine Transportation Pipeline for $

million, after

customary adjustments.

This transaction was accounted for as a business

combination resulting in the

recognition of approximately $

million of proved property and $

million of unproved property within

million of inventory, $

million of investments, and $

million of AROs.

These assets are

included in our Alaska segment.

As discussed in the Clair Field transaction with BP

above, we acquired BP’s Kuparuk Assets on December 18,

The transaction was accounted for as an asset acquisition

with a net acquisition cost of $

comprised of the fair value of $

million associated with the disposed

percent of our

interest in the Clair Field, reduced by the net proceeds

Accordingly, we recorded

approximately $

billion to proved property within PP&E, $

million to inventory, $

investments, $

million of AROs, and a $

million decrease to net working capital.

The Kuparuk Assets

are included in our Alaska segment.

Note 5—Investments, Loans and Long-Term Receivables

Components of investments, loans and long-term

receivables at December 31 were:

Millions of Dollars

Equity investments

Loans and advances—related parties

Long-term receivables

Long-term investments in debt securities

Other investments

Equity Investments

Affiliated companies in which we had a significant

equity investment at December 31, 2020, included:

percent owned joint venture with Origin Energy (

percent) and Sinopec (

to produce CBM from the Bowen and Surat basins in Queensland, Australia, as well as process

Qatar Liquefied Gas Company Limited (3) (QG3)—30 percent owned

joint venture with affiliates of Qatar

percent) and Mitsui & Co., Ltd.

percent)—produces and liquefies natural gas from

Qatar’s North Field, as well as exports LNG.

Summarized 100 percent earnings information

for equity method investments in affiliated companies,

combined, was as follows:

Millions of Dollars

Income before income taxes

Summarized 100 percent balance sheet information

for equity method investments in affiliated

combined, was as follows:

Millions of Dollars

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

Our share of income taxes incurred directly

by an equity method investee is reported in equity

in earnings of

affiliates, and as such is not included in income taxes

on our consolidated financial statements.

At December 31, 2020, retained earnings included

million related to the undistributed earnings

affiliated companies.

Dividends received from affiliates were $

million in 2020, 2019 and 2018, respectively.

APLNG is a joint venture focused on producing

CBM from the Bowen and Surat basins in

Natural gas is sold to domestic customers and

LNG is processed and exported to Asia Pacific

Our investment in APLNG gives us access

to CBM resources in Australia and enhances our

The majority of APLNG LNG is sold under two

long-term sales and purchase agreements,

supplemented with sales of additional LNG spot

cargoes targeting the Asia Pacific markets.

Origin Energy, an

integrated Australian energy company, is the operator of APLNG’s production and pipeline system, while we

operate the LNG facility.

APLNG executed project financing agreements

billion project finance facility in 2012.

billion project finance facility was initially composed

of financing agreements executed by APLNG

Export-Import Bank of the United States for approximately

billion, the Export-Import Bank of China for

approximately $

billion, and a syndicate of Australian and international

commercial banks for

approximately $

All amounts were drawn from the facility.

APLNG made its first principal and

interest repayment in March 2017 and is scheduled

payments until March 2029.

APLNG made a voluntary repayment of $

billion to the Export-Import Bank of China

in September 2018.

At the same time, APLNG obtained a United

States Private Placement (USPP) bond facility

APLNG made its first interest payment related to

this facility in March 2019, and principal

scheduled to commence in September 2023,

payments due on the facility until September

During the first quarter of 2019, APLNG refinanced

billion of existing project finance debt through two

transactions.

As a result of the first transaction, APLNG

obtained a commercial bank facility of $

APLNG made its first principal and interest

repayment in September 2019 with

payments due on the

facility until March 2028.

Through the second transaction, APLNG obtained

a USPP bond facility of $

APLNG made its first interest payment in September

2019, and principal payments are scheduled

commence in September 2023, with

payments due on the facility until

September 2030.

In conjunction with the $

billion debt obtained during the first quarter

of 2019 to refinance existing project

finance debt, APLNG made voluntary repayments

billion and $

billion to a syndicate of Australian

and international commercial banks and the Export-Import

Bank of China, respectively.

At December 31, 2020, a balance of $

billion was outstanding on the facilities.

See Note 11—Guarantees,

for additional information.

During the fourth quarter of 2020, the estimated

fair value of our investment in APLNG declined

below carrying value, primarily due to the weakening

dollar relative to the Australian

on a review of the facts and circumstances surrounding

this decline in fair value, we concluded the impairment

was not other than temporary under the guidance

of FASB ASC Topic

323, “Investments – Equity Method and

Joint Ventures.”

In reaching this conclusion, we primarily

(1) the volatility and uncertainty

commodity and exchange rate markets;

the intent and ability of ConocoPhillips to retain

our investment in

and (3) the short length of time and extent

to which fair value has been less than carrying value

value exceeded carrying value as of September

Fair value has been estimated based on an internal

discounted cash flow model using the following

estimated assumptions:

estimated future production,

outlook of future prices from a combination of exchanges

(short-term) coupled with pricing service companies

and our internal outlook (long-term), operating

and capital expenditures, a market outlook of foreign

rates provided by a third party, and a discount rate believed to be consistent

with those used by principal

market participants.

At December 31, 2020, the fair value of our investment

in APLNG was estimated to be $

resulting in a not other than temporary impairment

We will continue to monitor the

relationship between the carrying value and fair

value of APLNG.

Should we determine in the future there has

been a loss in the value of our investment

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

equity investment, calculated as the total difference between

carrying value and fair value as of the end

reporting period.

At December 31, 2020, the carrying value of

our equity method investment in APLNG was $

The historical cost basis of our

percent share of net assets on the books

of APLNG was $

resulting in a basis difference of $

million on our books.

The basis difference, which is substantially all

associated with PP&E and subject to amortization,

has been allocated on a relative fair value

individual exploration and production license areas

owned by APLNG, some of which are not currently

Any future additional payments are expected

to be allocated in a similar manner.

exploration license area will periodically be reviewed

for any indicators of potential impairment,

required, would result in acceleration of basis

difference amortization.

As the joint venture produces natural

gas from each license, we amortize the basis

difference allocated to that license using the unit-of-production

Included in net income (loss) attributable

to ConocoPhillips for 2020,

2019 and 2018 was after-tax

million and $

million, respectively, representing the amortization of this basis

difference on currently producing licenses.

QG3 is a joint venture that owns an integrated

large-scale LNG project located in Qatar.

We provided project

financing, with a current outstanding balance

million as described below under “Loans and

Term Receivables.”

At December 31, 2020, the book value of our equity

method investment in QG3,

excluding the project financing, was $

We have terminal and pipeline use agreements with Golden

Pass LNG Terminal and affiliated Golden Pass Pipeline near Sabine Pass, Texas, intended to provide us with

terminal and pipeline capacity for the receipt,

storage and regasification of LNG purchased

previously held a

percent interest in Golden Pass LNG Terminal and Golden Pass Pipeline, but

those interests in the second quarter of 2019 while

retaining the basic use agreements.

from QG3 is being sold to markets outside of

For additional information, see Note 4—Asset

Acquisitions and Dispositions.

Loans and Long-Term Receivables

As part of our normal ongoing business operations

and consistent with industry practice,

we enter into

numerous agreements with other parties to pursue

business opportunities.

Included in such activity are loans

and long-term receivables to certain affiliated

and non-affiliated companies.

Loans are recorded when cash is

transferred or seller financing is provided to the

affiliated or non-affiliated company pursuant to a loan

The loan balance will increase as interest is earned

on the outstanding loan balance and will

decrease as interest and principal payments are

Interest is earned at the loan agreement’s stated

interest rate.

Loans and long-term receivables are assessed for

impairment when events indicate the loan

balance may not be fully recovered.

At December 31, 2020, significant loans to affiliated

companies include $

million in project financing to

percent interest in QG3, for which we

use the equity method of accounting.

participants in the project are affiliates of Qatar Petroleum

QG3 secured project financing of

billion in December 2005, consisting of $

billion of loans from export credit agencies

billion from commercial banks, and $

billion from ConocoPhillips.

The ConocoPhillips loan facilities have

substantially the same terms as the ECA and commercial

bank facilities.

On December 15, 2011, QG3

achieved financial completion and all project loan facilities

became nonrecourse to the project participants.

repayments began in January 2011 and will extend through July

The long-term portion of these loans is included

in the “Loans and advances—related parties”

consolidated balance sheet, while the short-term

portion is in “Accounts and notes receivable—related

Note 6—Investment in Cenovus Energy

On May 17, 2017, we completed the sale of our

percent nonoperated interest in the FCCL

Partnership, as

well as the majority of our western Canada gas

assets, to Cenovus Energy.

Consideration for the transaction

included 208 million Cenovus Energy common shares,

which, at closing, approximated

percent of issued

and outstanding Cenovus Energy common stock.

The fair value and cost basis of our investment

million Cenovus Energy common shares was $

billion based on a price of $

per share on the NYSE on

the closing date.

At December 31, 2020, the investment included on

our consolidated balance sheet was $

billion and is

carried at fair value.

The fair value of the

million Cenovus Energy common shares reflects

per share on the NYSE on the last trading

day of the quarter, a decrease of $

million from its

fair value of $

billion at December 31, 2019.

The decrease in fair value resulted in a net

unrealized loss

recorded within the “Other income (loss)” line of

our consolidated income statement for the

December 31, 2020 relating to the shares held

at the reporting date.

For the years ended 2019 and 2018, we

recorded an unrealized gain of $

million and an unrealized loss of $

million, respectively.

14—Fair Value Measurement and Note 21—Other Financial Information, for additional information.

to market conditions, we intend to decrease our

investment over time through market transactions,

agreements or otherwise.

On January 4, 2021, Cenovus Energy completed its

all-stock acquisition of Husky Energy Inc.

As a result of

this transaction, our investment now approximates

percent of the issued and outstanding Cenovus

common stock.

Note 7—Suspended Wells and Exploration Expenses

The following table reflects the net changes in suspended

exploratory well costs during 2020, 2019 and 2018:

Millions of Dollars

Beginning balance at January 1

Additions pending the determination of proved reserves

Reclassifications to proved properties

Sales of suspended wells

Charged to dry hole expense

Ending balance at December 31

million of assets held for sale in Australia at December

For additional details on suspended wells charged to dry hole expense, see the

Exploration Expenses section of this Note.

The following table provides an aging of suspended

well balances at December 31:

Millions of Dollars

Exploratory well costs capitalized for a period

of one year or less

Exploratory well costs capitalized for a period

greater than one year

Ending balance

Number of projects with exploratory well costs

capitalized for a

period greater than one year

million of assets held for sale in Australia at December

The following table provides a further aging of

those exploratory well costs that have

been capitalized for more

than one year since the completion of drilling

as of December 31, 2020:

Millions of Dollars

Suspended Since

Surmont—Canada

Narwhal Trend—Alaska

PL782S—Norway

WL4-00—Malaysia

Other of $10 million or less each

(1)Additional appraisal wells planned.

(2)Appraisal drilling complete;

costs being incurred to assess development.

Exploration Expenses

The charges discussed below are included in the “Exploration

expenses” line on our consolidated income

In our Alaska segment, we recorded a before-tax impairment

million for the entire associated carrying

value of capitalized undeveloped leasehold costs

related to our Alaska North Slope Gas asset.

along with affiliates of Exxon Mobil Corporation,

and Alaska Gasline Development Corporation

(AGDC), a state-owned corporation, completed

preliminary FEED technical work for

a potential LNG project

which would liquefy and export natural gas from

Alaska’s North Slope and deliver it to market.

along with the affiliates of ExxonMobil and BP, indicated our intention not to progress into the next phase

the project due to changes in the economic environment;

however, AGDC decided to continue on its own,

focusing primarily on permitting efforts.

Currently, AGDC is in the process of seeking new sponsors for the

Given current market conditions, we no longer

believe the project will advance and, there

current market for the asset.

In our Other International segment, our interests

in the Middle Magdalena Basin of Colombia

We have no immediate plans to perform under existing contracts;

in 2020, we recorded a

before-tax expense totaling $

million for dry hole costs of a previously suspended

well and an impairment of

the associated capitalized undeveloped leasehold carrying

In our Asia Pacific segment, we recorded before-tax

million related to dry hole costs of a

previously suspended well and an impairment

of the associated capitalized undeveloped

leasehold carrying

value associated with the Kamunsu East Field

in Malaysia that is no longer in our development

In our Lower 48 segment, we recorded a before-tax impairment

million for the associated carrying

value of capitalized undeveloped leasehold costs

and dry hole expenses of $

million before-tax due to our

decision to discontinue exploration activities

related to our Central Louisiana Austin Chalk acreage.

Note 8—Impairments

During 2020, 2019 and 2018, we recognized the

following before-tax impairment charges:

Millions of Dollars

Europe, Middle East and North Africa

During 2020, we recorded impairments of $

million, primarily related to certain

non-core assets in the

Due to a significant decrease in the outlook for

current and long-term natural gas prices in early

2020, we recorded impairments of $

million, primarily for the Wind River Basin operations area,

consisting of developed properties in the

Madden Field and the Lost Cabin Gas Plant, in

the first quarter of

Additionally, due primarily to changes in development plans solidified in

the last quarter of 2020, we

recognized additional impairments of $

million in the Lower 48 during the fourth

Fair Value Measurement, for additional information.

In the Lower 48, we recorded impairments

million, primarily related to developed properties

Niobrara asset which were written down to fair value

less costs to sell.

See Note 4—Asset Acquisitions and

Dispositions,

for additional information on this disposition.

In Alaska, we recorded impairments of $

million primarily due to cancelled projects.

In the Lower 48, we recorded impairments

million, primarily related to developed properties

Barnett asset which were written down to fair value

less costs to sell, partly offset by a revision to reflect

finalized proceeds on a separate transaction.

In our Europe, Middle East and North Africa segment,

we recorded a credit to impairment of $

primarily due to decreased ARO estimates on fields

which ceased production and

were impaired in

prior years, partly offset by an increased ARO estimate

on a field in Norway which ceased production.

Note 9—Asset Retirement Obligations and Accrued

Environmental Costs

Asset retirement obligations and accrued environmental

costs at December 31 were:

Millions of Dollars

Asset retirement obligations

Accrued environmental costs

Total asset retirement obligations and accrued environmental costs

Asset retirement obligations and accrued environmental

costs due within one year*

Long-term asset retirement obligations and accrued

environmental costs

*Classified as a current liability on the balance sheet under “Other accruals.” For

million relates to assets which were held for sale

as of December 31, 2019, and subsequently sold in 2020.

additional information see Note 4—Asset Acquisitions and Dispositions.

Asset Retirement Obligations

We record the fair value of a liability for an ARO when it is incurred (typically when

the asset is installed at

the production location).

When the liability is initially recorded,

we capitalize the associated asset retirement

cost by increasing the carrying amount of the related

If, in subsequent periods, our estimate

liability changes, we will record an adjustment

to both the liability and PP&E.

Over time, the liability

increases for the change in its present value,

while the capitalized cost depreciates over the

useful life of the

related asset.

We have numerous AROs we are required to perform under law or contract once

an asset is permanently taken

out of service.

Most of these obligations are not expected

to be paid until several years, or decades, in

future and will be funded from general company

resources at the time of removal.

Our largest individual

obligations involve plugging and abandonment

of wells and removal and disposal of offshore oil

platforms around the world, as well as oil and

gas production facilities and pipelines in Alaska.

During 2020 and 2019, our overall ARO changed

Millions of Dollars

Balance at January 1

Accretion of discount

New obligations

Changes in estimates of existing obligations

Spending on existing obligations

Property dispositions

Foreign currency translation

Balance at December 31

Accrued Environmental Costs

Total accrued environmental costs at December 31, 2020 and 2019, were $

million and $

respectively.

We had accrued environmental costs of $

million and $

million at December 31, 2020 and 2019,

respectively, related to remediation activities in the U.S.

We had also accrued in Corporate and

million and $

million of environmental costs associated

with sites no longer in operation at

December 31, 2020 and 2019, respectively.

In addition, $

million and $

million were included at both

December 31, 2020 and 2019, respectively, where the company has been named

a potentially responsible party

under the Federal Comprehensive Environmental

Response, Compensation and Liability

Act, or similar state

Accrued environmental liabilities are expected to

be paid over periods extending up to

Expected expenditures for environmental obligations

acquired in various business combinations

are discounted

using a weighted-average

percent discount factor, resulting in an accrued balance for acquired

environmental

liabilities of $

million at December 31, 2020.

The expected future undiscounted payments

related to the

portion of the accrued environmental costs that

have been discounted are:

million in 2021, $

million in 2023, $

million in 2024, $

million in 2025, and $

million for all future years

Long-term debt at December 31 was:

Millions of Dollars

% Debentures due 2021

% Notes due 2022

% Debentures due 2023

% Notes due 2024

% Debentures due 2025

% Notes due 2025

% Debentures due 2026

% Notes due 2026

% Debentures due 2027

% Debentures due 2029

% Notes due 2029

% Notes due 2030

% Notes due 2031

% Notes due 2032

% Notes due 2034

% Notes due 2036

% Notes due 2037

% Notes due 2038

% Notes due 2039

% Notes due 2044

% Notes due 2046

% Debentures due 2047

Floating rate notes due 2022 at

% during 2020 and

% during 2019

Marine Terminal Revenue Refunding Bonds due 2031 at

% during 2019

Industrial Development Bonds due 2035 at

% during 2020 and

% during 2019

Commercial Paper at

% during 2020

Debt at face value

Finance leases

Net unamortized premiums, discounts and

debt issuance costs

Short-term debt

Long-term debt

Maturities of long-term borrowings, inclusive

of net unamortized premiums and discounts,

in 2021 through

million and $

million, respectively.

We have a revolving credit facility totaling $

billion with an expiration date of May 2023.

Our revolving

credit facility may be used for direct bank borrowings,

the issuance of letters of credit totaling

or as support for our commercial paper program.

The revolving credit facility is broadly syndicated

among financial institutions and does not contain

any material adverse change provisions or any covenants

requiring maintenance of specified financial

ratios or credit ratings.

The facility agreement contains a cross-

default provision relating to the failure to pay principal

or interest on other debt obligations of $

more by ConocoPhillips, or any of its consolidated

subsidiaries.

The amount of the facility is not subject to

redetermination prior to its expiration date.

Credit facility borrowings may bear interest at

a margin above rates offered by certain designated banks in the

London interbank market or at a margin above the overnight

federal funds rate or prime rates offered by

certain designated banks in the U.S.

The agreement calls for commitment fees

on available, but unused,

The agreement also contains early termination

rights if our current directors or their approved

successors cease to be a majority of the Board

of Directors.

The revolving credit facility supports our ability

to issue up to $

billion of commercial paper, which is

primarily a funding source for short-term working capital

Commercial paper maturities are generally

million of commercial paper in the third

quarter of 2020, which is

included in the short-term debt on our consolidated

balance sheet.

million of commercial paper

outstanding and

direct borrowings or letters of credit,

we had access to $

billion in available borrowing

capacity under our revolving credit facility

at December 31, 2020.

direct borrowings, letters of

credit, nor outstanding commercial paper as

of December 31, 2019.

At both December 31, 2020 and 2019, we had

million of certain variable rate demand

bonds (VRDBs)

outstanding with maturities ranging through 2035.

The VRDBs are redeemable at the option

bondholders on any business day.

If they are ever redeemed, we have the ability

to refinance on a

long-term basis, therefore, the VRDBs are included

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

For information on Finance Leases, see Note 16—Non-Mineral

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

billion on the acquisition

On December 7, 2020, we launched a debt

exchange offer which settled on February 8, 2021.

approximately $

billion in aggregate principal amount of Concho’s notes subject to

the exchange offer,

percent, or approximately $

billion, was tendered and exchanged for new

debt issued by ConocoPhillips.

The new debt received in the exchange is fully

and unconditionally guaranteed by ConocoPhillips

In conjunction with the exchange offer, Concho successfully solicited

consents to amend each of the

indentures governing the Concho notes to eliminate

certain covenants, restrictive provisions, events

and the requirements for certain Concho subsidiaries

to make future guarantees.

For additional information on

the acquisition see Note 25—Acquisition of Concho

Resources Inc.

Note 11—Guarantees

At December 31, 2020, we were liable for certain

contingent obligations under various contractual

arrangements as described below.

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

a guarantor for newly issued or modified guarantees.

Unless the carrying amount of the liability

below, we have not recognized a liability because the fair value of the obligation

is immaterial.

unless otherwise stated, we are not currently

performing with any significance under the

guarantee and expect

future performance to be either immaterial

or have only a remote chance of occurrence.

APLNG Guarantees

At December 31, 2020, we had outstanding multiple

guarantees in connection with our

percent ownership

interest in APLNG.

The following is a description of the guarantees

with values calculated utilizing December

2020 exchange rates:

During the third quarter of 2016, we issued a guarantee

to facilitate the withdrawal of our pro-rata

portion of the funds in a project finance reserve

We estimate the remaining term of this

guarantee to be

Our maximum exposure under this guarantee is

approximately $

and may become payable if an enforcement action

is commenced by the project finance lenders

against APLNG.

At December 31, 2020, the carrying value

of this guarantee is approximately $

In conjunction with our original purchase of an ownership

interest in APLNG from Origin Energy in

October 2008, we agreed to reimburse Origin

Energy for our share of the existing contingent liability

arising under guarantees of an existing obligation

of APLNG to deliver natural gas under

several sales

agreements with remaining terms of

1 to 21 years

Our maximum potential liability for future

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

billion in the event of intentional or reckless breach)

and would become payable if APLNG fails

meet its obligations under these agreements and

the obligations cannot otherwise be mitigated.

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

triggered if APLNG does not have enough natural

gas to meet these sales commitments and if

venturers do not make necessary equity contributions

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

connection with the project’s continued development.

The guarantees have remaining terms

25 years or the life of the venture

Our maximum potential amount of future payments

related to these

guarantees is approximately $

million and would become payable if APLNG

does not perform.

December 31, 2020, the carrying value of these

guarantees was approximately $

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling

approximately

million, which consist primarily of

guarantees of the residual value of leased office buildings,

of the residual value of corporate aircraft,

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

reserve accounts.

These guarantees have remaining terms

and would become payable if

certain asset values are lower than guaranteed

amounts at the end of the lease or contract

term, business

conditions decline at guaranteed entities,

or as a result of nonperformance of contractual

terms by guaranteed

At December 31, 2020, the carrying value of these

guarantees was approximately $

Indemnifications

Over the years, we have entered into agreements to

sell ownership interests in certain legal

entities, joint

ventures and assets that gave rise to qualifying

indemnifications.

These agreements include indemnifications

for taxes and environmental liabilities.

Most of these indemnifications are related to

tax issues and the

majority of these expire in 2021.

Those related to environmental issues have terms

that are generally indefinite

and the maximum amounts

of future payments are generally unlimited.

The carrying amount recorded for

these indemnifications at December 31, 2020, was

approximately $

We amortize the

indemnification liability over the relevant time

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

facts and circumstances surrounding each type

of indemnity.

In cases where the indemnification term

indefinite, we will reverse the liability when

we have information the liability is essentially

amortize the liability over an appropriate time

period as the fair value of our indemnification

Although it is reasonably possible future

payments may exceed amounts recorded, due to

of the indemnifications, it is not possible to make

a reasonable estimate of the maximum

potential amount of

future payments.

For additional information about environmental

liabilities, see Note 12—Contingencies and

Note 12—Contingencies and Commitments

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

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

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances at

various active

and inactive sites.

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

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue

liability when the loss is probable and the amount

is reasonably estimable.

If a range of amounts can be

reasonably estimated and no amount within the range

is a better estimate than any other amount,

end of the range is accrued.

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

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

With respect to income

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

loss accrual in cases where sustaining a

tax position is less than certain.

See Note 18—Income Taxes, for additional information about income tax-

related contingencies.

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.

As we learn new facts concerning contingencies,

we reassess our position

both with respect to accrued liabilities

and other potential exposures.

Estimates particularly sensitive to future

changes include contingent liabilities

recorded for environmental remediation, tax and legal

Estimated future environmental remediation

costs are subject to change due to such factors as

the uncertain

magnitude of cleanup costs, the unknown time

and extent of such remedial actions that

may be required, and

the determination of our liability in proportion

to that of other responsible parties.

Estimated future costs

related to tax and legal matters are subject to

change as events evolve and as additional

information becomes

available during the administrative and litigation

Environmental

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

When we prepare

our consolidated financial statements, we record

accruals for environmental liabilities based on management’s

best estimates, using all information that is

available at the time.

We measure estimates and base liabilities on

currently available facts, existing technology, and presently enacted laws

and regulations, taking into account

stakeholder and business considerations.

When measuring environmental liabilities,

we also consider our prior

experience in remediation of contaminated sites,

other companies’ cleanup experience, and data released

EPA or other organizations.

We consider unasserted claims in our determination of environmental

liabilities, and we accrue them in the period they

are both probable and reasonably estimable.

Although liability of those potentially responsible

for environmental remediation costs is generally

several for federal sites and frequently so for other

sites, we are usually only one of many companies

particular site.

Due to the joint and several liabilities, we could

be responsible for all cleanup costs related

any site at which we have been designated as a

potentially responsible party.

We have been successful to date

in sharing cleanup costs with other financially

sound companies.

Many of the sites at which we are potentially

responsible are still under investigation by the

EPA or the agency concerned.

Prior to actual cleanup, those

potentially responsible normally assess the

site conditions, apportion responsibility and determine

appropriate remediation.

In some instances, we may have no liability

or may attain a settlement of liability.

Where it appears that other potentially responsible

parties may be financially unable to bear their

share, we consider this inability in estimating

our potential liability, and we adjust our accruals accordingly.

As a result of various acquisitions in the past,

we assumed certain environmental obligations.

Some of these

environmental obligations are mitigated by indemnifications

made by others for our benefit, and some of the

indemnifications are subject to dollar limits

and time limits.

We are currently participating in environmental assessments and cleanups at numerous

federal Superfund and

comparable state and international sites.

After an assessment of environmental exposures

for cleanup and

other costs, we make accruals on an undiscounted

basis (except those acquired in a purchase

combination, which we record on a discounted

basis) for planned investigation and remediation

activities for

sites where it is probable future costs will be incurred

and these costs can be reasonably estimated.

not reduced these accruals for possible insurance recoveries.

In the future, we may be involved in additional

environmental assessments, cleanups and proceedings.

See Note 9—Asset Retirement Obligations and

Accrued Environmental Costs, for a summary of our

accrued environmental liabilities.

Litigation and Other Contingencies

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.

Our primary exposures for such matters

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties and

claims of alleged environmental contamination

from historic operations.

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

proceedings against us.

Our process facilitates the early evaluation and

quantification of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

accruals, is required.

We have contingent liabilities resulting from throughput agreements with pipeline and

processing companies

not associated with financing arrangements.

Under these agreements, we may be required

to provide any such

company with additional funds through advances

and penalties for fees related to throughput capacity

In addition, at December 31, 2020,

we had performance obligations secured by

letters of credit of

million (issued as direct bank letters of

credit) related to various purchase commitments

for materials,

supplies, commercial activities and services incident

to the ordinary conduct of business.

In 2007, ConocoPhillips was unable to reach

agreement with respect to the empresa

mixta structure mandated

by the Venezuelan government’s Nationalization Decree.

As a result, Venezuela’s

national oil company,

Petróleos de Venezuela, S.A.

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

interests in the Petrozuata and Hamaca heavy oil

ventures and the offshore Corocoro development project.

response to this expropriation, ConocoPhillips

initiated international arbitration on November 2,

2007, with the

On September 3, 2013, an ICSID arbitration tribunal

held that Venezuela unlawfully expropriated

ConocoPhillips’ significant oil investments

in June 2007.

On January 17, 2017, the Tribunal reconfirmed the

decision that the expropriation was unlawful.

In March 2019, the Tribunal unanimously ordered the

government of Venezuela to pay ConocoPhillips approximately $

billion in compensation for the

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

ConocoPhillips has

filed a request for recognition of the award in several

jurisdictions.

On August 29, 2019, the ICSID Tribunal

issued a decision rectifying the award and reducing

it by approximately $

The award now stands

billion plus interest.

The government of Venezuela sought annulment of the award before ICSID, and

annulment proceedings are underway.

In 2014, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Petrozuata and Hamaca projects.

The ICC Tribunal issued

an award in April 2018, finding that PDVSA owed

ConocoPhillips approximately $

agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures.

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

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

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

The balance of the

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

To date, ConocoPhillips has received

approximately $

Per the settlement, PDVSA recognized the

ICC award as a judgment in various

jurisdictions, and ConocoPhillips agreed to suspend

its legal enforcement actions.

ConocoPhillips sent notices

of default to PDVSA on October 14 and November

12, 2019, and to date PDVSA has failed

to cure its breach.

As a result, ConocoPhillips has resumed legal enforcement

ConocoPhillips has ensured that the

settlement and any actions taken in enforcement

thereof meet all appropriate U.S.

requirements,

including those related to any applicable sanctions

imposed by the U.S.

against Venezuela.

In 2016, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Corocoro Project.

On August 2, 2019, the ICC Tribunal

awarded ConocoPhillips approximately $

million plus interest under the Corocoro contracts.

ConocoPhillips is seeking recognition and enforcement

of the award in various jurisdictions.

For additional information about

our use of derivative instruments,

ConocoPhillips

has ensured that all the actions related to the award

meet all appropriate U.S.

regulatory requirements,

including those related to any applicable sanctions

imposed by the U.S.

against Venezuela.

The Office of Natural Resources Revenue (ONRR) has

conducted audits of ConocoPhillips’

royalties on federal lands and has issued multiple

orders to pay additional royalties to the federal

ConocoPhillips has appealed these orders and

strongly objects to the ONRR claims.

The appeals are pending

with the Interior Board of Land Appeals (IBLA),

except for one order that is the subject

ConocoPhillips filed in 2016 in New Mexico

federal court after its appeal was denied

Beginning in 2017, governmental and other entities

in several states in the U.S.

have filed lawsuits

and gas companies, including ConocoPhillips,

seeking compensatory damages and equitable

relief to abate

alleged climate change impacts.

Additional lawsuits with similar allegations

are expected to be filed.

amounts claimed by plaintiffs are unspecified and the legal

and factual issues involved in these cases are

unprecedented.

ConocoPhillips believes these lawsuits

are factually and legally meritless and are an

inappropriate vehicle to address the challenges

associated with climate change and will

vigorously defend

against such lawsuits.

Several Louisiana parishes and the State of Louisiana

have filed 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 any potential financial impact on the company.

In 2016, ConocoPhillips, through its subsidiary, The Louisiana Land and

Exploration Company LLC,

submitted claims as the largest private wetlands owner in

Louisiana within the settlement claims

administration process related to the oil spill

in the Gulf of Mexico in April 2010.

In July 2020, the claims

administrator issued an award to the company

which, after fees and expenses, totaled approximately

million, and was received in the third quarter

In October 2020, the Bureau of Safety and Environmental

Enforcement (BSEE) ordered the prior owners

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

ConocoPhillips, to decommission the lease facilities,

including two offshore platforms located near Carpinteria,

This order was sent after the current

owner of OCS Lease P-0166 relinquished the

lease and abandoned the lease platforms

and facilities.

Petroleum Company, a legacy company of ConocoPhillips, held a 25 percent interest

in this lease and operated

these facilities, but sold its interest approximately

30 years ago.

ConocoPhillips has not had any connection to

the operation or production on this lease since that

ConocoPhillips is challenging this order.

Long-Term Throughput Agreements and Take

-or-Pay Agreements

We have certain throughput agreements and take-or-pay agreements in support of financing arrangements.

The agreements typically provide for natural gas

or crude oil transportation to be used in

the ordinary course of

the company’s business.

The aggregate amounts of estimated payments

under these various agreements are:

Total payments under the agreements were $

million in 2020, $

million in 2019 and

million in 2018.

Note 13—Derivative and Financial Instruments

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

needs, capture market

opportunities, and manage foreign exchange currency

Commodity Derivative Instruments

Our commodity business primarily consists

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

Commodity derivative instruments are held at

fair value on our consolidated balance sheet.

balances have the right of setoff, they are presented on

Related cash flows are recorded as

operating activities on our consolidated statement

of cash flows.

On our consolidated income statement,

realized and unrealized gains and losses are recognized

either on a gross basis if directly related to

business or a net basis if held for trading.

Gains and losses related to contracts that meet

and are designated

with the NPNS exception are recognized upon

We generally apply this exception to eligible crude

We do not apply hedge accounting for our commodity derivatives.

The following table presents the gross fair values

of our commodity derivatives, excluding

collateral, and the

line items where they appear on our consolidated

balance sheet:

Millions of Dollars

Prepaid expenses and other current assets

Other accruals

Other liabilities and deferred credits

The gains (losses) from commodity derivatives

incurred, and the line items where they appear

consolidated income statement were:

Millions of Dollars

Sales and other operating revenues

Other income (loss)

Purchased commodities

The table below summarizes our material net exposures

resulting from outstanding commodity

Open Position

Natural gas and power (billions of cubic feet equivalent)

Foreign Currency Exchange Derivatives

We have foreign currency exchange rate risk resulting from international operations.

Our foreign currency

exchange derivative activity primarily

relates to managing our cash-related foreign currency

exchange rate

exposures, such as firm commitments for

capital programs or local currency tax payments,

dividends and cash

returns from net investments in foreign affiliates, and investments

in equity securities.

Our foreign currency exchange derivative instruments

are held at fair value on our consolidated

balance sheet.

Related cash flows are recorded as operating

activities on our consolidated statement of cash

apply hedge accounting to our foreign currency

exchange derivatives.

The following table presents the gross fair values

of our foreign currency exchange derivatives,

collateral, and the line items where they appear

on our consolidated balance sheet:

Millions of Dollars

Prepaid expenses and other current assets

Other accruals

Other liabilities and deferred credits

The (gains) losses from foreign currency exchange

derivatives incurred and the line item where they

on our consolidated income statement were:

Millions of Dollars

Foreign currency transaction (gains) losses

We had the following net notional position of outstanding foreign currency exchange

Notional Currency

Foreign Currency Exchange Derivatives

Buy British pound, sell euro

Sell British pound, buy euro

Sell Canadian dollar, buy U.S.

At December 31, 2020, we had outstanding foreign currency exchange forward contracts to sell $0.45 billion

CAD at $0.748 CAD against the U.S.

At December 31, 2019, we had outstanding foreign currency

exchange forward contracts to sell $1.35 billion CAD at $0.748 CAD against the U.S.

Financial Instruments

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

the various accounts and

currency pools we manage.

The types of financial instruments in which we currently

invest include:

Time deposits:

Interest bearing deposits placed with financial

institutions for a predetermined amount

Demand deposits:

Interest bearing deposits placed with financial

institutions.

Deposited funds can be

withdrawn without notice.

Commercial paper:

Unsecured promissory notes issued

by a corporation, commercial bank or

government agency purchased at a discount to

mature at par.

government or government agency obligations:

Securities issued by the U.S.

government agencies.

Foreign government obligations:

issued by foreign governments.

Corporate bonds:

Unsecured debt securities issued by corporations.

Asset-backed securities:

Collateralized debt securities.

The following investments are carried on our

consolidated balance sheet at cost, plus accrued

interest and the

table reflects remaining maturities at December

31, 2020 and 2019:

Millions of Dollars

Carrying Amount

Cash and Cash

Investments and Long-

Term Receivables

Demand Deposits

Time Deposits

91 to 180 days

Within one year

One year through five years

Commercial Paper

Government Obligations

The following investments in debt securities

classified as available for sale are carried on our

balance sheet at fair value as of December 31,

2020 and 2019:

Millions of Dollars

Carrying Amount

Cash and Cash

Investments and Long-

Term Receivables

Major Security Type

Corporate Bonds

Commercial Paper

Government Obligations

Government Agency

Foreign Government Obligations

Asset-backed Securities

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

within one year.

Investments and Long-Term Receivables have remaining maturities

greater than one year through five years.

The following table summarizes the amortized

cost basis and fair value of investments in

debt securities

classified as available for sale:

Millions of Dollars

Amortized Cost Basis

Major Security Type

Corporate bonds

Commercial paper

government obligations

government agency obligations

Foreign government obligations

Asset-backed securities

As of December 31, 2020 and December 31, 2019,

total unrealized losses for debt securities

classified as

available for sale with net losses were negligible.

Additionally, as of December 31, 2020 and December 31,

2019, investments in these debt securities

in an unrealized loss position for which an allowance

losses has not been recorded were negligible.

For the year ended December 31, 2020, proceeds

from sales and redemptions of investments

in debt securities

classified as available for sale were $

Gross realized gains and losses included in earnings

those sales and redemptions were negligible.

The cost of securities sold and redeemed

is determined using the

specific identification method.

Financial instruments potentially exposed to concentrations

of credit risk consist primarily of cash equivalents,

short-term investments, long-term investments

in debt securities, OTC derivative contracts and trade

Our cash equivalents and short-term investments

are placed in high-quality commercial paper,

government money market funds, government debt

time deposits with major international banks and

financial institutions,

and high-quality corporate bonds.

Our long-term investments in debt securities

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

and government agency obligations,

government obligations, and asset-backed securities.

The credit risk from our OTC derivative contracts,

such as forwards, swaps and options, derives

counterparty to the transaction.

Individual counterparty exposure is managed

within predetermined credit

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

thereby reducing the risk of significant

nonperformance.

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

these trades are cleared primarily with an exchange

clearinghouse and subject to mandatory margin

requirements until settled;

however, we are exposed to the credit

risk of those exchange brokers for receivables

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

deposited to meet initial margin requirements.

Our trade receivables result primarily

from our petroleum operations and reflect a broad

international customer base, which limits our

exposure to concentrations of credit risk.

The majority of these

receivables have payment terms of

30 days or less

, and we continually monitor this exposure and

creditworthiness of the counterparties.

At our option, we may require collateral to limit

the exposure to loss

including, letters of credit, prepayments and surety

bonds, as well as master netting arrangements

credit risk with counterparties that both buy from

and sell to us, as these agreements permit

the amounts owed

by us or owed to others to be offset against amounts

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

exposure exceeds a threshold amount.

We have contracts with fixed threshold amounts and other contracts

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

The variable threshold amounts

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

to zero if we fall below investment grade.

Cash is the primary collateral in all contracts;

however, many also

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

Mercantile Exchange.

The aggregate fair value of all derivative

instruments with such credit risk-related contingent

features that were

in a liability position on December 31, 2020 and

December 31, 2019, was $

million and $

respectively.

For these instruments,

no collateral

was posted as of December 31, 2020 or December

If our credit rating had been downgraded below

investment grade on December 31, 2020,

we would have been

required to post $

million of additional collateral, either with

cash or letters of credit.

Note 14—Fair Value Measurement

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

date using an exit

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

an asset or paid to transfer a liability) and disclosed

according to the quality of valuation inputs under

the following hierarchy:

Quoted prices (unadjusted) in an active

market for identical assets or liabilities.

Inputs other than quoted prices that

are directly or indirectly observable.

Unobservable inputs that are significant

to the fair value of assets or liabilities.

The classification of an asset or liability

is based on the lowest level of input significant

to its fair value.

that are initially classified as Level 3 are subsequently

reported as Level 2 when the fair value derived

unobservable inputs is inconsequential to the overall

fair value, or if corroborated market data becomes

Assets and liabilities initially reported as Level

2 are subsequently reported as Level 3 if

corroborated market data is no longer available.

There were no material transfers into or out

of Level 3 during

2020 or 2019.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair

value on a recurring basis primarily include

our investment in

Cenovus Energy common shares,

our investments

in debt securities classified as available

for sale, and

commodity derivatives.

Level 1 derivative assets and liabilities primarily

represent exchange-traded futures and options that are

valued using unadjusted prices available from the

underlying exchange.

Level 1 also includes our

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

and our investments in U.S.

government obligations

classified as available for sale debt securities,

are valued using exchange prices.

Level 2 derivative assets and liabilities primarily

represent OTC swaps, options and forward purchase

sale contracts that are valued using adjusted exchange

prices, prices provided by brokers or pricing

companies that are all corroborated by market

Level 2 also includes our investments in debt

securities classified as available for sale including

investments in corporate bonds, commercial

asset-backed securities, U.S.

government agency

obligations and foreign government obligations

valued using pricing provided by brokers or pricing

service companies that are corroborated

Level 3 derivative assets and liabilities consist

of OTC swaps, options and forward purchase and

contracts where a significant portion of fair

value is calculated from underlying market data

readily available.

The derived value uses industry standard

methodologies that may consider the historical

relationships among various commodities, modeled

market prices, time value, volatility factors

relevant economic measures.

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

Level 3 activity was not material for all

periods presented.

The following table summarizes the fair value

hierarchy for gross financial assets and

liabilities (i.e.,

unadjusted where the right of setoff exists for commodity

derivatives accounted for at fair value on a recurring

Millions of Dollars

December 31, 2020

December 31, 2019

Investment in Cenovus Energy

Investments in debt securities

Commodity derivatives

Total liabilities

The following table summarizes those commodity

derivative balances subject to the right of setoff as

presented on our consolidated balance sheet.

We have elected to offset the recognized fair value amounts for

multiple derivative instruments executed with the same

counterparty in our financial statements

right of setoff exists.

Millions of Dollars

Amounts Subject to Right of Setoff

Right of Setoff

December 31, 2020

December 31, 2019

At December 31, 2020 and December 31, 2019,

we did not present any amounts gross on our consolidated

balance sheet where we had the right of setoff.

Non-Recurring Fair Value Measurement

The following table summarizes the fair value

hierarchy by major category and date of

remeasurement for

assets accounted for at fair value on a non-recurring

Millions of Dollars

Fair Value Measurements Using

ended December 31, 2020

Net PP&E (held for use)

March 31, 2020

December 31, 2020

ended December 31, 2019

Net PP&E (held for sale)

November 30, 2019

December 31, 2019

Equity Method Investments

March 31, 2019

Net PP&E (held for use)

During 2020, the estimated fair value of certain

non-core assets included in our Lower

48 segment declined to

amounts below the carrying values.

The carrying values were written down to fair

The fair values were

estimated based on internal discounted cash flow models

using the following estimated assumptions:

future production, an outlook of future prices from

a combination of exchanges (short-term)

pricing service companies and our internal outlook

(long-term), future operating costs and capital

expenditures,

and a discount rate believed to be consistent

with those used by principal market participants.

The range and

arithmetic average of significant unobservable inputs

used in the Level 3 fair value measurements

significant assets were as follows:

Unobservable Inputs

(Arithmetic Average)

March 31, 2020

Wind River Basin

Discounted cash

Natural gas production

Natural gas price outlook*

Discount rate**

*Henry Hub natural gas price outlook based on a combination of external

pricing service companies' outlooks for years 2022-2034;

prices escalated at

annually after year 2034.

**Determined as the weighted average cost of capital of a group

of peer companies, adjusted for risks where

Unobservable Inputs

(Arithmetic Average)

December 31, 2020

Central Basin Platform

Discounted cash

Commodity production

Commodity price outlook*

Discount rate**

*Commodity price outlook based on a combination of external pricing

service companies' and our internal outlook for years

future prices escalated at

2.0% annually after year 2050.

**Determined as the weighted average cost of capital of a group

of peer companies, adjusted for risks where

Net PP&E (held for sale)

Net PP&E held for sale was written down to fair

value, less costs to sell.

The fair value of the assets were

determined by their negotiated selling prices

For additional information see Note 4—Asset

Acquisitions and Dispositions.

Equity Method Investments

During 2019, certain equity method investments

were determined to have fair values below their

amounts, and the impairments were considered to

be other than temporary under the guidance

Investments using Level 1 inputs were

written down to fair value, less costs to

sell, determined by

negotiated selling prices.

For additional information, see Note 4—Asset

Acquisitions and Dispositions and

Note 5—Investments, Loans and Long-Term Receivables.

An investment using Level 2 inputs was

determined to have a fair value below its

carrying value, and was written down to fair

Reported Fair Values of Financial Instruments

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

Cash and cash equivalents and short-term investments:

The carrying amount reported on the balance

sheet approximates fair value.

For those investments classified as available

for sale debt securities,

the carrying amount reported on the balance sheet

is fair value.

Accounts and notes receivable (including long-term

and related parties):

The carrying amount

reported on the balance sheet approximates fair

The valuation technique and methods used to

estimate the fair value of the current portion

of fixed-rate related party loans is consistent

and advances—related parties.

Investment in Cenovus Energy:

See Note 6—Investment

in Cenovus Energy for a discussion of the

carrying value and fair value of our investment in

Cenovus Energy common shares.

Investments in debt securities classified as available

The fair value of investments in debt

securities categorized as Level 1 in the fair

value hierarchy is measured using exchange

fair value of investments in debt securities

categorized as Level 2 in the fair value hierarchy is

measured using pricing provided by brokers or

pricing service companies that are corroborated

See Note 13—Derivatives and Financial Instruments,

for additional information.

Loans and advances—related parties:

amount of floating-rate loans approximates

The fair value of fixed-rate loan activity is

measured using market observable data and is

categorized as Level 2 in the fair value hierarchy.

See Note 5—Investments, Loans and Long-Term

Receivables, for additional information.

Accounts payable (including related parties)

and floating-rate debt:

The carrying amount of accounts

payable and floating-rate debt reported on the balance

sheet approximates fair value.

Fixed-rate debt:

The estimated fair value of fixed-rate

debt is measured using prices available

pricing service that is corroborated by market

therefore, these liabilities are categorized

2 in the fair value hierarchy.

Commercial paper:

The carrying amount of our

commercial paper instruments approximates

and is reported on the balance sheet as short-term

See Note 10—Debt, for additional

The following table summarizes the net fair

value of financial instruments (i.e., adjusted

where the right of

setoff exists for commodity derivatives):

Millions of Dollars

Carrying Amount

Financial assets

Investment in Cenovus Energy

Commodity derivatives

Investments in debt securities

Loans and advances—related parties

Financial liabilities

Total debt, excluding finance leases

Commodity derivatives

Commodity Derivatives

At December 31, 2020, commodity derivative

assets and liabilities are presented net with $

obligations to return cash collateral and $

million of rights to reclaim cash collateral,

respectively.

December 31, 2019, commodity derivative assets

and liabilities are presented net with $

obligations to return cash collateral and $

million of rights to reclaim cash collateral,

respectively.

Note 15—Equity

The changes in our shares of common stock, as categorized

in the equity section of the balance sheet, were:

Beginning of year

1,795,652,203

1,791,637,434

1,785,419,175

Distributed under benefit plans

1,798,844,267

1,795,652,203

1,791,637,434

Held in Treasury

Beginning of year

Repurchase of common stock

Preferred Stock

We have authorized

million shares of preferred stock, par value

of which was issued

or outstanding at December 31, 2020 or 2019.

Noncontrolling Interests

In the second quarter of 2020, we completed the

divestiture of our subsidiaries that held our Australia-West

assets and operations.

These assets included the Darwin LNG and

Bayu-Darwin Pipeline operating joint

ventures in which there was a noncontrolling

As a result, as of December 31,

2020, we had no

noncontrolling interests.

At December 31, 2019, we had $

million of equity outstanding in the same joint

Repurchase of Common Stock

In late 2016, we initiated our current share repurchase

program, which has a current total program

authorization of $

billion of our common stock.

Cost of share repurchases were $

million in 2020, 2019 and 2018, respectively.

Share repurchases were suspended in the second

and third quarters of 2020 in response to the economic

In the fourth quarter of 2020, we resumed

share repurchases, repurchasing $

billion of shares in October, until suspending further repurchases

entry into a definitive agreement to acquire Concho.

In February 2021, we resumed share repurchases

following our Concho acquisition.

Share repurchases since inception of our current

program totaled

million shares at a cost of $

million, as of December 31, 2020.

Note 16—Non-Mineral Leases

The company primarily leases office buildings and drilling

equipment, as well as ocean transport vessels,

tugboats, corporate aircraft, and other facilities

and equipment.

Certain leases include escalation clauses for

adjusting rental payments to reflect changes in price

indices and other leases include payment provisions

vary based on the nature of usage of the leased

Additionally, the company has executed certain leases

that provide it with the option to extend or renew

the term of the lease, terminate the lease

prior to the end of

the lease term, or purchase the leased asset as

of the end of the lease term.

In other cases, the company has

executed lease agreements that require it to

guarantee the residual value of certain leased office buildings.

additional information about guarantees, see

Note 11—Guarantees.

There are no significant restrictions

imposed on us by the lease agreements with regard

to dividends, asset dispositions or borrowing

Certain arrangements may contain both lease and

non-lease components and we determine

if an arrangement is

or contains a lease at contract inception.

We adopted the provisions of FASB ASU No.

2016-02, “Leases”

(ASC Topic 842) and its amendments, beginning January 1, 2019.

This ASU superseded the requirements in

FASB ASC Topic

840 “Leases” (ASC Topic 840).

Only the lease components of these contractual

arrangements are subject to the provisions of

ASC Topic 842, and any non-lease components are subject to

other applicable accounting guidance;

we have elected to adopt the optional practical expedient not

to separate lease components apart from non-lease components for accounting purposes.

This policy election

has been adopted for each of the company’s leased asset classes existing

as of the effective date and subject to

the transition provisions of ASC Topic 842 and will be applied to all new or

modified leases executed on or

after January 1, 2019.

For contractual arrangements executed in subsequent

periods involving a new leased

asset class, the company will determine at

contract inception whether it will apply the

optional practical

expedient to the new leased asset class.

Leases are evaluated for classification as operating

or finance leases at the commencement date of the

and right-of-use assets and corresponding liabilities

are recognized on our consolidated balance sheet

the present value of future lease payments relating

to the use of the underlying asset during the

Future lease payments include variable lease payments

that depend upon an index or rate using

rate at the commencement date and probable

amounts owed under residual value guarantees.

The amount of

future lease payments may be increased to include

additional payments related to lease extension, termination,

and/or purchase options when the company has

determined, at or subsequent to lease commencement,

generally due to limited asset availability

or operating commitments, it is reasonably

certain of exercising such

We use our incremental borrowing rate as the discount rate in determining the

present value of future

lease payments, unless the interest rate

implicit in the lease arrangement is readily determinable.

payments that vary subsequent to the commencement

date based on future usage levels, the nature

asset activities, or certain other contingencies are

not included in the measurement of lease

right-of-use assets

and corresponding liabilities.

We have elected not to record assets and liabilities on our consolidated balance

sheet for lease arrangements with terms of 12 months

We often enter into leasing arrangements acting in the capacity as operator for and/or

on behalf of certain oil

and gas joint ventures of undivided interests.

If the lease arrangement can be legally enforced only

as operator and there is no separate arrangement to

sublease the underlying leased asset

to our coventurers, we

recognize at lease commencement a right-of-use

asset and corresponding lease liability on our

balance sheet on a gross basis.

While we record lease costs on a gross basis in

our consolidated income

statement and statement of cash flows, such costs

are offset by the reimbursement we receive from our

coventurers for their share of the lease cost as the underlying

leased asset is utilized in joint venture activities.

As a result, lease cost is presented in our consolidated

income statement and statement of cash flows

proportional basis.

If we are a nonoperating coventurer, we recognize a right-of-use

asset and corresponding

lease liability only if we were a specified contractual

party to the lease arrangement and the arrangement

be legally enforced against us.

In this circumstance, we would recognize both

the right-of-use asset and

corresponding lease liability on our consolidated

balance sheet on a proportional basis

consistent with our

undivided interest ownership in the related joint

The company has historically recorded certain

finance leases executed by investee companies

accounted for

under the proportionate consolidation method of

accounting on its consolidated balance sheet

on a proportional

basis consistent with its ownership interest

in the investee company.

In addition, the company has historically

recorded finance lease assets and liabilities

associated with certain oil and gas joint ventures

on a proportional

basis pursuant to accounting guidance applicable

prior to January 1, 2019.

In accordance with the transition

provisions of ASC Topic 842, and since we have elected to adopt the package

of optional transition-related

practical expedients, the historical accounting treatment

for these leases has been carried forward

and is subject

to reconsideration upon the modification or

other required reassessment of the arrangements

prior to lease term

The following table summarizes

the right-of-use assets and lease liabilities

for both the operating and finance

leases on our consolidated balance sheet as of December

Millions of Dollars

Right-of-Use Assets

Properties, plants and equipment

Accumulated DD&A

Prepaid expenses and other current assets

Lease Liabilities

Short-term debt

Other accruals

Long-term debt

Other liabilities and deferred credits

Total lease liabilities

Includes proportionately consolidated finance lease assets of $

million at December 31, 2020 and $

million at December 31, 2019.

** Includes proportionately consolidated finance lease liabilities of

million at December 31, 2020 and $

million at December 31, 2019.

*** Includes proportionately consolidated finance lease liabilities of $

million at December 31, 2020 and $

million at December 31,

The following table summarizes our lease costs

for 2020 and 2019:

Millions of Dollars

Operating lease cost

Finance lease cost

Amortization of right-of-use assets

Interest on lease liabilities

Short-term lease cost

Total lease cost

* The amounts presented in the table above have not been adjusted to reflect amounts recovered or reimbursed from oil and gas coventurers.

** Short-term leases are not recorded on our consolidated balance sheet.

*** Variable lease cost and sublease income are immaterial for the periods presented and therefore are not included in the table above

The following table summarizes the lease terms

and discount rates as of December 31:

Lease Term and Discount Rate

Weighted-average term (years)

Operating leases

Finance leases

Weighted-average discount rate (percent)

Operating leases

Finance leases

The following table summarizes other lease information

for 2020 and 2019:

Millions of Dollars

Other Information

Cash paid for amounts included in the measurement

of lease liabilities

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for

operating lease liabilities

Right-of-use assets obtained in exchange for

finance lease liabilities

*The amounts presented in the table above have not been adjusted to reflect amounts recovered or reimbursed from oil and gas coventurers.

addition, pursuant to other applicable accounting guidance, lease

payments made in connection with preparing another asset for its intended use

are reported in the "Cash Flows From Investing Activities" section of our consolidated statement of cash flows.

The following table summarizes future lease

payments for operating and finance leases

at December 31, 2020:

Millions of Dollars

Maturity of Lease Liabilities

Remaining years

portion representing imputed interest

Total lease liabilities

*Future lease payments for operating and finance leases commencing on or

after January 1, 2019, also include payments related to non-lease

components in accordance with our election to adopt the optional practical

expedient not to separate lease components apart from non-lease

components for accounting purposes.

In addition, future payments related to operating and finance leases proportionately consolidated by the

company have been included in the table on a proportionate basis consistent

with our respective ownership interest in the underlying investee

company or oil and gas venture.

For the year ended December 31, 2018 operating

lease rental expense pursuant to ASC Topic 840 was:

Millions of Dollars

Total rentals

sublease rentals

Note 17—Employee Benefit Plans

Pension and Postretirement Plans

An analysis of the projected benefit obligations

for our pension plans and accumulated benefit

obligations for

our postretirement health and life insurance plans

Millions of Dollars

Pension Benefits

Other Benefits

Change in Benefit Obligation

Benefit obligation at January 1

Interest cost

Plan participant contributions

Plan amendments

Actuarial loss

Benefits paid

Recognition of termination benefits

Foreign currency exchange rate change

Benefit obligation at December 31

*Accumulated benefit obligation portion of above at

Change in Fair Value of Plan Assets

Fair value of plan assets at January 1

Actual return on plan assets

Company contributions

Plan participant contributions

Benefits paid

Foreign currency exchange rate change

Fair value of plan assets at December 31

Funded Status

Millions of Dollars

Pension Benefits

Other Benefits

Amounts Recognized in the

Consolidated Balance Sheet at

Noncurrent assets

Current liabilities

Noncurrent liabilities

Total recognized

Weighted-Average Assumptions Used to

Determine Benefit Obligations at

Discount rate

Rate of compensation increase

Interest crediting rate for applicable benefits

Weighted-Average Assumptions Used to

Determine Net Periodic Benefit Cost for

Ended December 31

Discount rate

Expected return on plan assets

Rate of compensation increase

Interest crediting rate for applicable benefits

For both U.S.

and international pensions, the

overall expected long-term rate of return is

developed from the

expected future return of each asset class, weighted

by the expected allocation of pension assets

to that asset

We rely on a variety of independent market forecasts in developing the expected

rate of return for each

class of assets.

The following tables set forth information related

to the Company’s pension plans with projected and

accumulated benefit obligations in excess of

the fair value of the plans’ assets as of December

Millions of Dollars

Pension Benefits

Pension Plans with Projected Benefit Obligation in

Excess of Plan Assets

Projected benefit obligation

Fair value of plan assets

Pension Plans with Accumulated Benefit

Obligation in

Excess of Plan Assets

Accumulated benefit obligation

Fair value of plan assets

Included in accumulated other comprehensive

income (loss) at December 31 were the following

amounts that had not been recognized in net

periodic benefit cost:

Millions of Dollars

Pension Benefits

Other Benefits

Unrecognized net actuarial loss

Unrecognized prior service credit

Millions of Dollars

Pension Benefits

Other Benefits

Sources of Change in Other

Comprehensive Income (Loss)

Net gain (loss) arising during the period

Amortization of actuarial (gain) loss included

in income (loss)*

Net change during the period

Prior service credit (cost) arising during the

Amortization of prior service cost (credit)

included in income (loss)

Net change during the period

*Includes settlement (gains) losses recognized in 2020 and 2019.

The components of net periodic benefit cost of

all defined benefit plans are presented in

the following table:

Millions of Dollars

Pension Benefits

Other Benefits

Components of Net

Periodic Benefit Cost

Interest cost

Expected return on plan

Amortization of prior

service credit

Recognized net actuarial

Settlements loss (gain)

Net periodic benefit cost

The components of net periodic benefit cost, other

than the service cost component, are included

in the “Other

expenses” line item on our consolidated income statement.

We recognized pension settlement losses of $

million in 2020, $

million in 2019, and $

2018 as lump-sum benefit payments from certain

and international pension plans exceeded the sum

service and interest costs for those plans and led

to recognition of settlement losses.

During 2020 and 2019, the actuarial losses

related to the benefit obligation for U.S.

and international

were primarily related to a decrease in the discount

The sale of two ConocoPhillips U.K.

completed during the third quarter of 2019 led

significant reduction of future services of active

employees in certain international pension

plans, resulting in a

In conjunction with the recognition of the curtailment,

the fair market values of pension plan

assets were updated, the pension benefit obligation

was remeasured, and the net pension asset

million, resulting in a corresponding decrease

to other comprehensive income.

This is primarily a result of

a decrease in the discount rate from

percent at December 31, 2018 to

percent at September 30, 2019

offset by a decrease in the pension benefit obligation from

In determining net pension and other postretirement

benefit costs, we amortize prior service costs

on a straight-

line basis over the average remaining service period

of employees expected to receive benefits

under the plan.

For net actuarial gains and losses, we amortize

percent of the unamortized balance each year.

We have multiple nonpension postretirement benefit plans for health and life insurance.

The health care plans

are contributory and subject to various cost sharing

features, with participant and company contributions

adjusted annually;

the life insurance plans are

noncontributory.

The measurement of the U.S.

pre-65 retiree

medical accumulated postretirement benefit

obligation assumes a health care cost trend rate

2021 that declines to

percent by 2028.

The measurement of the U.S.

post-65 retiree

medical accumulated

postretirement benefit obligation assumes an ultimate

health care cost trend rate of

percent achieved in 2021

that increases to

percent by 2028.

—We follow a policy of broadly diversifying pension plan assets across asset

individual holdings.

As a result, our plan assets have no significant

concentrations of credit risk.

Asset classes

that are considered appropriate include U.S.

equities, U.S.

fixed income, non-U.S.

income, real estate and private equity investments.

Plan fiduciaries may consider and add other

asset classes to

the investment program from time to time.

The target allocations for plan assets are

percent equity

percent debt securities,

percent real estate and

percent other.

Generally, the plan investments

are publicly traded, therefore minimizing liquidity

risk in the portfolio.

The following is a description of the valuation methodologies

used for the pension plan assets.

been no changes in the methodologies used at

December 31, 2020 and 2019.

Fair values of equity securities and government

debt securities categorized in Level 1 are primarily

based on quoted market prices in active markets

for identical assets and liabilities.

Fair values of corporate debt securities, agency and

mortgage-backed securities and government

securities categorized in Level 2 are estimated

using recently executed transactions and quoted market

prices for similar assets and liabilities in

active markets and for identical assets and liabilities

markets that are not active.

If there have been no market transactions

in a particular fixed income

security, its fair value is calculated by pricing models that benchmark the security

against other

securities with actual market prices.

When observable quoted market prices are not

available, fair

value is based on pricing models that use something

other than actual market prices (e.g., observable

inputs such as benchmark yields, reported trades and

issuer spreads for similar securities), and these

securities are categorized in Level 3 of the fair

value hierarchy.

Fair values of investments in common/collective

trusts are determined by the issuer of each fund

based on the fair value of the underlying assets.

Fair values of mutual funds are based on quoted

market prices, which represent the net asset

Time deposits are valued at cost, which approximates fair

Cash is valued at cost, which approximates fair

Fair values of international cash equivalents

categorized in Level 2 are valued using observable

yield curves, discounting and interest

cash balances held in the form of short-term

fund units that are redeemable at the measurement

are categorized as Level 2.

Fair values of exchange-traded derivatives classified

in Level 1 are based on quoted market prices.

For other derivatives classified in Level 2, the values

are generally calculated from pricing models

with market input parameters from third-party

Fair values of insurance contracts are valued at the

present value of the future benefit payments owed

by the insurance company to the plans’ participants.

Fair values of real estate investments are valued

using real estate valuation techniques

methods that include reference to third-party sources

and sales comparables where available.

A portion of U.S.

pension plan assets is held as

a participating interest in an insurance annuity

contract, which is calculated as the market value

of investments held under this contract, less

accumulated benefit obligation covered by the

The participating interest is classified as

Level 3 in the fair value hierarchy as the fair value

is determined via a combination of quoted

prices, recently executed transactions, and

an actuarial present value computation for

At December 31, 2020,

the participating interest in the annuity contract

was valued at

million and consisted of $

million in debt securities, less $

million for the accumulated

benefit obligation covered by the contract.

At December 31, 2019, the participating interest

annuity contract was valued at $

million and consisted of $

million in debt securities, less

million for the accumulated benefit obligation

covered by the contract.

The participating interest is

not available for meeting general pension benefit

obligations in the near term.

No future company

contributions are required and no new benefits

are being accrued under this insurance annuity

The fair values of our pension plan assets at

December 31, by asset class were as follows:

Millions of Dollars

International

Equity securities

International

Debt securities

Cash and cash equivalents

Total in fair value hierarchy

Investments measured at net asset value*

Equity securities

Common/collective trusts

Debt securities

Common/collective trusts

Cash and cash equivalents

*In accordance with FASB ASC Topic

715, “Compensation—Retirement Benefits,” certain investments that are to be measured at fair value

using the net asset value per share (or its equivalent) practical expedient

have not been classified in the fair value hierarchy.

The fair value

amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Change in

Fair Value of Plan Assets.

**Excludes the participating interest in the insurance annuity contract with a net

million and net receivables related to security

transactions of $

The fair values of our pension plan assets at

December 31, by asset class were as follows:

Millions of Dollars

International

Equity securities

International

Debt securities

Cash and cash equivalents

Total in fair value hierarchy

Investments measured at net asset value*

Equity securities

Common/collective trusts

Debt securities

Common/collective trusts

Cash and cash equivalents

*In accordance with FASB ASC Topic

715, “Compensation—Retirement Benefits,” certain investments that are to be measured at fair value

using the net asset value per share (or its equivalent) practical expedient

have not been classified in the fair value hierarchy.

The fair value

amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Change in

Fair Value of Plan Assets.

**Excludes the participating interest in the insurance annuity contract with a

net asset of $

million and net receivables related to security

transactions of $

Level 3 activity was not material for all

Our funding policy for U.S.

plans is to contribute

at least the minimum required by the Employee

Income Security Act of 1974 and the Internal

Revenue Code of 1986, as amended.

Contributions to foreign

plans are dependent upon local laws and tax regulations.

In 2021, we expect to contribute approximately $

million to our domestic qualified and nonqualified

pension and postretirement benefit plans and $

our international qualified and nonqualified

pension and postretirement benefit plans.

The following benefit payments, which are exclusive

of amounts to be paid from the insurance annuity

and which reflect expected future service, as appropriate,

are expected to be paid:

Millions of Dollars

Severance Accrual

The following table summarizes our severance accrual

activity for 2020, 2019 and 2018:

Millions of Dollars

Balance at January 1

Benefit payments

Foreign currency translation adjustments

Balance at December 31

Of the remaining balance at December 31, 2020,

million is classified as short-term.

Defined Contribution Plans

employees are eligible to participate

in the ConocoPhillips Savings Plan (CPSP).

Employees can

deposit up to

percent of their eligible pay, subject to statutory limits, in the CPSP to

approximately

investment options.

Employees who participate in the CPSP and contribute

their eligible pay receive a

percent company cash match with a potential

company discretionary cash

contribution of up to

Effective January 1, 2019, new employees, rehires, and

employees that elected

to opt out of Title II are eligible to receive a Company Retirement

Contribution (CRC) of

percent of eligible

pay into their CPSP.

of service with the company, the employee is

percent vested in any

Company contributions charged to expense for the

CPSP and predecessor plans were $

million in 2019, and $

million in 2018.

We have several defined contribution plans for our international employees, each

with its own terms and

eligibility depending on location.

Total compensation expense recognized for these international plans was

approximately $

million in 2020, $

million in 2019, and $

million in 2018.

Share-Based Compensation Plans

The 2014 Omnibus Stock and Performance Incentive

Plan of ConocoPhillips (the Plan) was approved

shareholders in May 2014.

-year life, the Plan allows the issuance of

million shares of our

common stock for compensation to our employees

and directors;

however, as of the effective date of the Plan,

(i) any shares of common stock available for future

awards under the prior plans and (ii)

any shares of common

stock represented by awards granted under the prior

plans that are forfeited, expire or are cancelled

delivery of shares of common stock or which result

in the forfeiture of shares of common stock

company shall be available for awards under the

Plan, and no new awards shall be granted

under the prior

million shares available for issuance

under the Plan, no more than

million shares of

common stock are available for incentive stock

The Human Resources and Compensation Committee

of our Board of Directors is authorized to determine

the types, terms, conditions and limitations

Awards may be granted in the form of, but not limited to, stock options, restricted stock units

performance share units to employees and non-employee

directors who contribute to the company’s continued

success and profitability.

Total share-based compensation expense is measured using the grant date fair value

for our equity-classified

awards and the settlement date fair value for our

liability-classified awards.

We recognize share-based

compensation expense over the shorter of the service

period (i.e., the stated period of time required

or the period beginning at the start of the

service period and ending when an employee

first becomes

eligible for retirement, but not less than six months,

as this is the minimum period of time

required for an

award to not be subject to forfeiture.

Our share-based compensation programs generally

provide accelerated

vesting (i.e., a waiver of the remaining period of service

required to earn an award) for awards held

employees at the time of their retirement.

Some of our share-based awards vest ratably (i.e., portions

award vest at different times) while some of our awards

cliff vest (i.e., all of the award vests at the same time).

We recognize expense on a straight-line basis over the service period for the entire

award, whether the award

was granted with ratable or cliff vesting.

Compensation Expense

—Total share-based compensation expense recognized in net income (loss) and the

associated tax benefit for the years ended

December 31 were as follows:

Millions of Dollars

Compensation cost

Stock Options

Stock options granted under the provisions of the Plan and prior plans permit purchase of our

common stock at exercise prices equivalent to the average fair market value of ConocoPhillips common stock

on the date the options were granted.

The options have terms of 10 years and generally vest ratably, with one-

third of the options awarded vesting and becoming exercisable on each anniversary date following the date of

Options awarded to certain employees already eligible for retirement vest within six months of the grant

date, but those options do not become exercisable until the end of the normal vesting period.

2018, stock option grants were discontinued and replaced with three-year, time-vested restricted stock units

which generally will be cash-settled

for 2018 and 2019 awards and stock-settled for 2020

The following summarizes our stock option activity

for the year ended December 31, 2020:

Millions of Dollars

Weighted-Average

Exercise Price

Intrinsic Value

Outstanding at December 31, 2019

( 1,111,805 )

Expired or cancelled

Outstanding at December 31, 2020

Vested at December 31, 2020

Exercisable at December 31, 2020

The weighted-average remaining contractual term

of outstanding options, vested options and exercisable

options at December 31, 2020, were all

The aggregate intrinsic value of options exercised

million in 2019 and $

million in 2018.

During 2020, we received $

million in cash and realized a tax benefit

million from the exercise of

At December 31, 2020, all outstanding stock

options were fully vested and there was no remaining

compensation cost to be recorded.

Stock Unit Program—

Generally, restricted stock units are granted annually under the provisions of the Plan

and vest in an aggregate installment on the third anniversary of the grant date.

In addition, restricted stock

units granted under the Plan for a variable long-term incentive program vest ratably in three equal annual

installments beginning on the first anniversary of the grant date.

Restricted stock units are also granted ad hoc

to attract or retain key personnel, and the terms and conditions under which these restricted stock units vest

vary by award

Stock-Settled

Upon vesting, these restricted stock units are settled by issuing one share of ConocoPhillips common stock per

Units awarded to retirement eligible employees vest six months from the grant date;

however, those units

are not issued as common stock until the earlier of separation from the company or the end of the regularly

scheduled vesting period.

Until issued as stock, most recipients of the restricted stock units receive a cash

payment of a dividend equivalent that is charged to retained earnings.

Executive recipients receive an accrued

reinvested dividend equivalent, subject to the terms and conditions of the award, that is charged to retained

The grant date fair market value of these restricted stock units is deemed equal to the average

ConocoPhillips stock price on the grant date.

The grant date fair market value of units that do not receive a

dividend equivalent while unvested is deemed equal to the average ConocoPhillips stock price on the grant

date, less the net present value of the dividends that will not be received

The following summarizes our stock-settled stock

unit activity for the year ended December

Weighted-Average

Millions of Dollars

Grant Date Fair Value

Total Fair Value

Outstanding at December 31, 2019

( 2,554,720 )

Outstanding at December 31, 2020

Not Vested at December 31, 2020

At December 31, 2020,

the remaining unrecognized compensation

cost from the unvested stock-settled units

million, which will be recognized over

a weighted-average period of

years, the longest period

The weighted-average grant date fair value

of stock unit awards granted during 2019 and

, respectively.

The total fair value of stock units issued during

2019 and 2018 was

million and $

million, respectively.

Cash settled executive restricted stock units granted in 2018 and 2019 replaced the stock option program.

These restricted stock units, subject to elections to defer, will be settled in cash equal to the fair market value

of a share of ConocoPhillips common stock per unit on the settlement date and are classified as liabilities on

the balance sheet.

Units awarded to retirement eligible employees vest six months from the grant date;

however, those units are not settled until the earlier of separation from the company or the end of the regularly

scheduled vesting period.

Compensation expense is initially measured using the average fair market value of

ConocoPhillips common stock and is subsequently adjusted, based on changes in the ConocoPhillips stock

price through the end of each subsequent reporting period, through the settlement date.

Recipients receive an

accrued reinvested dividend equivalent that is charged to compensation expense.

The accrued reinvested

dividend is paid at the time of settlement, subject to the terms and conditions of the award.

Beginning with

executive restricted stock units granted in 2020 awards will be settled in stock.

The following summarizes our cash-settled stock

unit activity for the year ended December 31, 2020:

Weighted-Average

Millions of Dollars

Grant Date Fair Value

Total Fair Value

Outstanding at December 31, 2019

Outstanding at December 31, 2020

Not Vested at December 31, 2020

At December 31, 2020,

the remaining unrecognized compensation

cost from the unvested cash-settled units

million, which will be recognized over a

weighted-average period of

year, the longest period being

The weighted-average grant date fair value of

stock unit awards granted during 2019

, respectively.

The total fair value of stock units issued during

2019 and 2018 were $

million and $

million, respectively.

Performance Share Program

—Under the Plan, we also annually grant restricted

performance share units

(PSUs) to senior management.

These PSUs are authorized three years prior to

their effective grant date (the

performance period).

Compensation expense is initially measured

using the average fair market value of

ConocoPhillips common stock and is subsequently

adjusted, based on changes in the ConocoPhillips

price through the end of each subsequent reporting

period, through the grant date for stock-settled

the settlement date for cash-settled awards.

Stock-Settled

For performance periods beginning before 2009, PSUs do not vest until the employee becomes eligible for

retirement by reaching age 55 with five years of service, and restrictions do not lapse until the employee

separates from the company.

With respect to awards for performance periods beginning in 2009 through 2012,

PSUs do not vest until the earlier of the date the employee becomes eligible for retirement by reaching age 55

with five years of service or five years after the grant date of the award, and restrictions do not lapse until the

earlier of the employee’s separation from the company or five years after the grant date (although recipients

can elect to defer the lapsing of restrictions until separation).

We recognize compensation expense for these

awards beginning on the grant date and ending on the date the PSUs are scheduled to vest.

Since these awards

are authorized three years prior to the grant date, for employees eligible for retirement by or shortly after the

grant date, we recognize compensation expense over the period beginning on the date of authorization and

ending on the date of grant.

Until issued as stock, recipients of the PSUs receive a quarterly cash payment of a

dividend equivalent that is charged to retained earnings.

Beginning in 2013, PSUs authorized for future grants

will vest, absent employee election to defer, upon settlement following the conclusion of the three-year

performance period.

We recognize compensation expense over the period beginning on the date of

authorization and ending on the conclusion of the performance period.

PSUs are settled by issuing one share

of ConocoPhillips common stock per unit.

The following summarizes our stock-settled Performance

Share Program activity for the year ended

December 31, 2020:

Weighted-Average

Millions of Dollars

Grant Date Fair Value

Total Fair Value

Outstanding at December 31, 2019

Outstanding at December 31, 2020

Not Vested at December 31, 2020

At December 31, 2020,

the remaining unrecognized compensation

cost from unvested stock-settled

performance share awards was

The weighted-average grant date fair value of

stock-settled PSUs granted

during 2019 and 2018 was $

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-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk