CONOCOPHILLIPS 10-K

Item 8. Financial Statements and Supplementary Data ConocoPhillips Index to Financial Statements Page Reports of Management 75 Reports of Independent Registered Public Accounting Firm (PCAOB ID # 42 ) 76 Consolidated Income Statement for the years ended December 31, 2021, 2020 and 2019 82 Consolidated Statement of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 83 Consolidated Balance Sheet at December 31, 2021 and 2020 84 Consolidated Statement of Cash Flows for the years ended December 31, 2021, 2020 and 2019 85 Consolidated Statement of Changes in Equity for the years ended December 31, 2021, 2020 and 2019 86 Notes to Consolidated Financial Statements 87 Supplementary Information Oil and Gas Operations 149 Table of Contents 75 ConocoPhillips 2021 10-K Reports 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. The 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 by 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 reporting. ConocoPhillips’ internal control system was designed to provide reasonable assurance to the company’s management and directors regarding the preparation and fair presentatio n of published financial statements. 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, 2021. 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) . Based on our assessment, we believe the company’s internal control over financial reporting was effective as of December 31, 2021. Management’s assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of the assets acquired from Shell Enterprise LLC in December 2021. The total assets acquired represented approximately 10 percent of the company’s consolidated total assets at December 31, 2021. Ernst & Young LLP has issued an audit report on the company’s internal control over financial reporting as of December 31, 2021, and their report is included herein. /s/ Ryan M. Lance /s/ William L. Bullock, Jr. Ryan M. Lance William L. Bullock, Jr. Chairman and Chief Executive Officer Executive Vice President and Chief Financial Officer Table of Contents ConocoPhillips 2021 10-K 76 Report of Independent Registered Public Accounting Firm 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, 2021 and 2020, 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, 2021, 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 as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. 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, 2021, 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 17, 2022, 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 in 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 are free of material misstatement, whether due to error or fraud. 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 statements. Our audits also included evaluating the 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 audit of the consolidated financial statements that were communicated or required to be communicated to the Audit and 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. Table of Contents 77 ConocoPhillips 2021 10-K Accounting for asset retirement obligations for certain offshore properties Description of the Matter At December 31, 2021, the asset retirement obligation (ARO) balance totaled $5.9 billion. As further described in Note 8, 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 obligations related to certain offshore assets requires significant judgment given the magnitude and higher estimation uncertainty related to plugging and abandonment of wells and removal and disposal of offshore oil and gas platforms, facilities and pipelines costs (collectively, removal 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 remainin g useful lives of the assets. Auditing the Company’s AROs for the obligations identified above is complex and 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 conditions. How We Addressed the Matter in Our Audit 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 forecasts. Depreciation, depletion and amortization of proved oil and gas properties, plants and equipment Description of the Matter At December 31, 2021, the net book value of the Company’s proved oil and gas properties, plants and equipment (PP&E) was $52 billion, and depreciation, depletion and amortization (DD&A) expense was $7.0 billion for the year then ended. As described in Note 1, under the successful efforts method of accounting, DD&A of PP&E on producing hydrocarbon properties and steam-assisted gravity drainage facilities 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 method. The unit-of-production method uses proved oil and gas reserves, as estimated by the Company’s internal reservoir engineers. 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. Significant judgment is required by the Company’s internal reservoir engineers in evaluating geological and engineering data when estimating proved oil and gas reserves. Estimating proved oil and gas 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. Because of the complexity involved in estimating proved oil and gas reserves, management also used an independent petroleum engineering consulting firm to perform a review of the processes and controls used by the Company’s internal reservoir engineers to determine estimates of proved oil and gas reserves. Table of Contents ConocoPhillips 2021 10-K 78 Auditing the Company’s DD&A calculation is complex because of the 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 proved oil and gas reserves. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s internal controls over its processes to calculate DD&A, including management’s controls over the completeness and accuracy of the financial data provided to the internal reservoir engineers for use in estimating proved 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 proved oil and gas reserve estimates and the independent petroleum engineering consulting firm used to review the Company’s processes and controls. In addition, in assessing whether we can use the work of the internal reservoir engineers, we evaluated the completeness and accuracy of the financial data and inputs described above used by the internal reservoir engineers in estimating proved 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 calculation, including comparing the proved oil and gas reserve amounts used in the calculation to the Company’s reserve report. Valuation and recognition of proved and unproved oil & gas properties acquired in business combinations Description of the Matter During 2021, the Company closed its acquisition of Concho Resources Inc. and its acquisition of Permian assets from Shell Enterprises LLC resulting in the recognition of proved and unproved oil and gas properties within net properties, plants and equipment of $18.9 billion and $8.6 billion, respectively. As described in Note 3, the transactions were accounted for as business combinations under FASB ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Oil and gas properties were valued using a discounted cash flow approach based on market participant assumptions and third party valuation experts were engaged by the Company to prepare fair value estimates. Significant inputs to the valuation of proved and unproved oil and gas properties include estimates of future commodity price assumptions and production profiles of reserve estimates, the pace of drilling plans, future operating costs and discount rates using a market -based weighted average cost of capital. Auditing the Company's accounting for its valuation of proved and unproved oil and gas properties is complex and considerably judgmental due to the significant estimation required by management of reserves and resources associated with the acquired assets and the sensitivity of significant assumptions used in determining the fair value. In evaluating the reasonableness of management’s estimates and assumptions used, the audit testing procedures performed required a high degree of auditor judgment and additional effort, including involving internal specialists. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s internal controls over its process to estimate the fair value of the acquired proved and unproved oil and gas properties, including management’s review of the significant assumptions used as inputs to the fair value calculations and final recording of the analysis. Table of Contents 79 ConocoPhillips 2021 10-K To test the estimated fair value of the acquired proved and unproved oil and gas properties, our audit procedures included, among others, evaluating the significant assumptions used and testing the completeness and accuracy of the underlying data supporting the significant assumptions. For example, we compared certain significant assumptions to current industry, third-party data and historical results for reasonableness. We also performed sensitivity analyses of significant assumptions, to evaluate the extent of their impact to the fair value calculation. In addition, we involved our valuation specialists to assist with certain significant assumptions included in the fair value estimate. Furthermore, we evaluated the professional qualifications and objectivity of the third party valuation specialist engaged by the Company to prepare the fair value of the acquired proved and unproved oil and gas properties. /s/ Ernst & Young LLP We have served as ConocoPhillips’ auditor since 1949. Houston, Texas February 17, 2022 Table of Contents ConocoPhillips 2021 10-K 80 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, 2021, based on 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, 2021, based on the COSO criteria. As indicated under the heading “Assessment of Internal Control Over Financial Reporting” in the accompanying Reports of Management, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the assets acquired from Shell Enterprise LLC, which is included in the 2021 consolidated financial statements of ConocoPhillips and constituted approximately 10 percent of consolidated total assets as of December 31, 2021. Our audit of internal control over financial reporting of ConocoPhillips also did not include an evaluation of the internal control over financial reporting of the assets acquired from Shell Enterprise LLC. 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, 2021 and 2020, 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, 2021, and the related notes and our report dated February 17, 2022, expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and 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. We conducted 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. We believe that our audit provides a reasonable basis for our opinion. Table of Contents 81 ConocoPhillips 2021 10-K 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. A company’s 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 company; (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 the company; 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 deteriorate. /s/ Ernst & Young LLP Houston, Texas February 17, 2022 Financial Statements Table of Contents ConocoPhillips 2021 10-K 82 Consolidated Income Statement ConocoPhillips Years Ended December 31 Millions of Dollars 2021 2020 2019 Revenues and Other Income Sales and other operating revenues $ 45,828 18,784 32,567 Equity in earnings of affiliates 832 432 779 Gain on dispositions 486 549 1,966 Other income (loss) 1,203 ( 509 ) 1,358 Total Revenues and Other Income 48,349 19,256 36,670 Costs and Expenses Purchased commodities 18,158 8,078 11,842 Production and operating expenses 5,694 4,344 5,322 Selling, general and administrative expenses 719 430 556 Exploration expenses 344 1,457 743 Depreciation, depletion and amortization 7,208 5,521 6,090 Impairments 674 813 405 Taxes other than income taxes 1,634 754 953 Accretion on discounted liabilities 242 252 326 Interest and debt expense 884 806 778 Foreign currency transaction (gains) losses ( 22 ) ( 72 ) 66 Other expenses 102 13 65 Total Costs and Expenses 35,637 22,396 27,146 Income (loss) before income taxes 12,712 ( 3,140 ) 9,524 Income tax provision (benefit) 4,633 ( 485 ) 2,267 Net income (loss) 8,079 ( 2,655 ) 7,257 Less: net income attributable to noncontrolling interests - ( 46 ) ( 68 ) Net Income (Loss) Attributable to ConocoPhillips $ 8,079 ( 2,701 ) 7,189 Net Income (Loss) Attributable to ConocoPhillips Per Share of Common Stock (dollars) Basic $ 6.09 ( 2.51 ) 6.43 Diluted 6.07 ( 2.51 ) 6.40 Average Common Shares Outstanding (in thousands) Basic 1,324,194 1,078,030 1,117,260 Diluted 1,328,151 1,078,030 1,123,536 See Notes to Consolidated Financial Statements. Financial Statements Table of Contents 83 ConocoPhillips 2021 10-K Consolidated Statement of Comprehensive Income ConocoPhillips Years Ended December 31 Millions of Dollars 2021 2020 2019 Net Income (Loss) $ 8,079 ( 2,655 ) 7,257 Other comprehensive income (loss) Defined benefit plans Prior service credit arising during the period - 29 - Reclassification adjustment for amortization of prior service credit included in net income (loss) ( 38 ) ( 32 ) ( 35 ) Net change ( 38 ) ( 3 ) ( 35 ) Net actuarial gain (loss) arising during the period 357 ( 210 ) ( 55 ) Reclassification adjustment for amortization of net actuarial losses included in net income (loss) 178 117 146 Net change 535 ( 93 ) 91 Nonsponsored plans* 5 1 ( 3 ) Income taxes on defined benefit plans ( 108 ) 20 ( 2 ) Defined benefit plans, net of tax 394 ( 75 ) 51 Unrealized holding gain (loss) on securities ( 2 ) 2 - Reclassification adjustment for loss included in net income ( 1 ) - - Income taxes on unrealized holding loss on securities 1 - - Unrealized holding gain (loss) on securities, net of tax ( 2 ) 2 - Foreign currency translation adjustments ( 124 ) 209 699 Income taxes on foreign currency translation adjustments - 3 ( 4 ) Foreign currency translation adjustments, net of tax ( 124 ) 212 695 Other Comprehensive Income, Net of Tax 268 139 746 Comprehensive Income (Loss) 8,347 ( 2,516 ) 8,003 Less: comprehensive income attributable to noncontrolling interests - ( 46 ) ( 68 ) Comprehensive Income (Loss) Attributable to ConocoPhillips $ 8,347 ( 2,562 ) 7,935 *Plans for which ConocoPhillips is not the primary obligor—primarily those administered by equity affiliates. See Notes to Consolidated Financial Statements. Financial Statements Table of Contents ConocoPhillips 2021 10-K 84 Consolidated Balance Sheet ConocoPhillips At December 31 Millions of Dollars 2021 2020 Assets Cash and cash equivalents $ 5,028 2,991 Short-term investments 446 3,609 Accounts and notes receivable (net of allowance of $ 2 and $ 4 , respectively) 6,543 2,634 Accounts and notes receivable—related parties 127 120 Investment in Cenovus Energy 1,117 1,256 Inventories 1,208 1,002 Prepaid expenses and other current assets 1,581 454 Total Current Assets 16,050 12,066 Investments and long-term receivables 7,113 8,017 Loans and advances—related parties - 114 Net properties, plants and equipment (net of accumulated DD&A of $ 64,735 and $ 62,213 , respectively) 64,911 39,893 Other assets 2,587 2,528 Total Assets $ 90,661 62,618 Liabilities Accounts payable $ 5,002 2,669 Accounts payable—related parties 23 29 Short-term debt 1,200 619 Accrued income and other taxes 2,862 320 Employee benefit obligations 755 608 Other accruals 2,179 1,121 Total Current Liabilities 12,021 5,366 Long-term debt 18,734 14,750 Asset retirement obligations and accrued environmental costs 5,754 5,430 Deferred income taxes 6,179 3,747 Employee benefit obligations 1,153 1,697 Other liabilities and deferred credits 1,414 1,779 Total Liabilities 45,255 32,769 Equity Common stock ( 2,500,000,000 shares authorized at $ 0.01 par value) Issued (2021— 2,091,562,747 shares; 2020— 1,798,844,267 shares) Par value 21 18 Capital in excess of par 60,581 47,133 Treasury stock (at cost: 2021— 789,319,875 shares; 2020— 730,802,089 shares) ( 50,920 ) ( 47,297 ) Accumulated other comprehensive loss ( 4,950 ) ( 5,218 ) Retained earnings 40,674 35,213 Total Equity 45,406 29,849 Total Liabilities and Equity $ 90,661 62,618 See Notes to Consolidated Financial Statements. Financial Statements Table of Contents 85 ConocoPhillips 2021 10-K Consolidated Statement of Cash Flows ConocoPhillips Years Ended December 31 Millions of Dollars 2021 2020 2019 Cash Flows From Operating Activities Net income (loss) $ 8,079 ( 2,655 ) 7,257 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation, depletion and amortization 7,208 5,521 6,090 Impairments 674 813 405 Dry hole costs and leasehold impairments 44 1,083 421 Accretion on discounted liabilities 242 252 326 Deferred taxes 1,346 ( 834 ) ( 444 ) Undistributed equity earnings 446 645 594 Gain on dispositions ( 486 ) ( 549 ) ( 1,966 ) (Gain) loss on CVE common shares ( 1,040 ) 855 ( 649 ) Other ( 788 ) 43 ( 351 ) Working capital adjustments Decrease (increase) in accounts and notes receivable ( 2,500 ) 521 505 Increase in inventories ( 160 ) ( 25 ) ( 67 ) Decrease (increase) in prepaid expenses and other current assets ( 649 ) 76 37 Increase (decrease) in accounts payable 1,399 ( 249 ) ( 378 ) Increase (decrease) in taxes and other accruals 3,181 ( 695 ) ( 676 ) Net Cash Provided by Operating Activities 16,996 4,802 11,104 Cash Flows From Investing Activities Capital expenditures and investments ( 5,324 ) ( 4,715 ) ( 6,636 ) Working capital changes associated with investing activities 134 ( 155 ) ( 103 ) Acquisition of businesses, net of cash acquired ( 8,290 ) - - Proceeds from asset dispositions 1,653 1,317 3,012 Net sales (purchases) of investments 3,091 ( 658 ) ( 2,910 ) Collection of advances/loans—related parties 105 116 127 Other 87 ( 26 ) ( 108 ) Net Cash Used in Investing Activities ( 8,544 ) ( 4,121 ) ( 6,618 ) Cash Flows From Financing Activities Issuance of debt - 300 - Repayment of debt ( 505 ) ( 254 ) ( 80 ) Issuance of company common stock 145 ( 5 ) ( 30 ) Repurchase of company common stock ( 3,623 ) ( 892 ) ( 3,500 ) Dividends paid ( 2,359 ) ( 1,831 ) ( 1,500 ) Other 7 ( 26 ) ( 119 ) Net Cash Used in Financing Activities ( 6,335 ) ( 2,708 ) ( 5,229 ) Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 34 ) ( 20 ) ( 46 ) Net Change in Cash, Cash Equivalents and Restricted Cash 2,083 ( 2,047 ) ( 789 ) Cash, cash equivalents and restricted cash at beginning of period 3,315 5,362 6,151 Cash, Cash Equivalents and Restricted Cash at End of Period $ 5,398 3,315 5,362 Restricted cash of $ 152 million and $ 218 million is included in the “Prepaid expenses and other current assets” and “Other assets” lines, respectively, of our Consolidated Balance Sheet as of December 31, 2021. Restricted cash of $ 94 million and $ 230 million is included in the “Prepaid expenses and other current assets” and “Other assets” lines, respectively, of our Consolidated Balance Sheet as of December 31, 2020. See Notes to Consolidated Financial Statements. Financial Statements Table of Contents ConocoPhillips 2021 10-K 86 Consolidated Statement of Changes in Equity ConocoPhillips Millions of Dollars Attributable to ConocoPhillips Common Stock Par Value Capital in Excess of Par Treasury Stock Accum. Other Comprehensive Income (Loss) Retained Earnings Non- Controlling Interests Total Balances at December 31, 2018 $ 18 46,879 ( 42,905 ) ( 6,063 ) 34,010 125 32,064 Net income 7,189 68 7,257 Other comprehensive loss 746 746 Dividends declared—ordinary ($ 1.34 per share of common stock) ( 1,500 ) ( 1,500 ) Repurchase of company common stock ( 3,500 ) ( 3,500 ) Distributions to noncontrolling interests and other ( 128 ) ( 128 ) Distributed under benefit plans 104 104 Changes in Accounting Principles* ( 40 ) 40 - Other 3 4 7 Balances at December 31, 2019 $ 18 46,983 ( 46,405 ) ( 5,357 ) 39,742 69 35,050 Net income (loss) ( 2,701 ) 46 ( 2,655 ) Other comprehensive income 139 139 Dividends declared—ordinary ($ 1.69 per share of common stock) ( 1,831 ) ( 1,831 ) Repurchase of company common stock ( 892 ) ( 892 ) Distributions to noncontrolling interests and other ( 32 ) ( 32 ) Disposition ( 84 ) ( 84 ) Distributed under benefit plans 150 150 Other 3 1 4 Balances at December 31, 2020 $ 18 47,133 ( 47,297 ) ( 5,218 ) 35,213 - 29,849 Net income 8,079 - 8,079 Other comprehensive income 268 268 Dividends declared Ordinary ($ 1.75 per share of common stock) ( 2,359 ) ( 2,359 ) Variable return of cash ($ 0.20 per share of common stock) ( 260 ) ( 260 ) Acquisition of Concho 3 13,122 13,125 Repurchase of company common stock ( 3,623 ) ( 3,623 ) Distributed under benefit plans 326 326 Other 1 - 1 Balances at December 31, 2021 $ 21 60,581 ( 50,920 ) ( 4,950 ) 40,674 - 45,406 *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 Table of Contents 87 ConocoPhillips 2021 10-K Notes to Consolidated Financial Statements Note 1—Accounting Policies ● Consolidation Principles and Investments —Our consolidated financial statements include the accounts of majority-owned, controlled subsidiaries and, if applicable, variable interest entities where we are the primary beneficiary. 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 fair value. For those exceptions, it will be measured at cost minus impairment, plus or minus observable price changes in orderly transactions for an identical or 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 basis. Other securities and investments are generally carried at cost. We manage our operations through six operating segments, defined by geographic region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International. See Note 23 . ● Foreign Currency Translation —Adjustments resulting from the process of translating foreign functional currency financial statements into U.S. dollars are included in accumulated other comprehensive loss in common stockholders’ equity. Foreign currency transaction gains and losses are included in current earnings. Some of our foreign operations use their local currency as the functional currency. ● Use of Estimates —The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. 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 of 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 products. Payment is typically due within 30 days or less. 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 line). ● 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 of 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 purchase. They are carried at cost plus accrued interest, which approximates fair value. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 88 ● 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 when the remaining maturities are within one year. We also invest in financial instruments classified as available for sale debt securities which are carried at fair value. 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 includes financial instruments classified as available for sale debt securities with remaining maturities greater than 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. ● Inventories —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 costs with 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 and 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 inputs. 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. If the 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 against 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 in earnings. We do not apply hedge accounting to our derivative instruments. ● Oil and Gas Exploration and Development —Oil and gas exploration and development costs are accounted for using the successful efforts method of accounting. 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 Notes to Consolidated Financial Statements Table of Contents 89 ConocoPhillips 2021 10-K 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. For complex 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 as proved reserves. Management reviews suspended well balances quarterly, continuously monitors the results of the additional appraisal drilling and seismic work, and expenses the suspended well costs as dry holes when it judges the potential field does not warrant further investment in the near term. See Note 6 . Development Costs —Costs incurred to drill and equip development wells, including unsuccessful development wells, are capital ized. 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 development costs is based on the unit-of-production method using estimated proved developed oil 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 assets. ● 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 to have a 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 or the group-straight-line method (for those individual units that are highly integrated with other units). ● Impairment of Properties, Plants and Equipment —Long-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in 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 for prices, volumes and future development plans. If the sum of the undiscounted cash flows before income-taxes is less than the carrying value of the asset group, the carrying value is written down to estimated fair value and reported as an impairment in the period in which the determination is made. Individual assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that are largely independent of the 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 is typically determined based on the present values of expected future cash flows using discount rates and prices believed to be consistent with those used by principal market participants, or based on a multiple of operating cash flow validated with historical market transactions of similar assets where possible. The expected future cash flows used for impairment reviews and related fair value calculations are based on estimated future production volumes, commodity prices, operating costs and capital decisions, considering all available evidence at the date of review. 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. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 90 Long-lived assets committed by management for disposal within one year are accounted for at the lower of amortized cost or fair value, less cost to sell, with fair value determined using a binding negotiated price, if available, or present value of expected future cash flows as previously described. ● 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” line of our consolidated income statement. When partial units of depreciable property are disposed of or retired which do not significantly alter the DD&A rate, the difference between asset cost and salvage value is charged or credited to accumulated depreciation. ● Asset Retirement Obligations and Environmental Costs —The fair value of legal obligations to retire and remove long-lived assets are recorded in the period in which the obligation is incurred (typically 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 impacts of the use of technologies. See Note 8 . 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 estimated. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is probable and estimable. ● Impairment of Investments in Nonconsolidated Entities —Investments in nonconsolidated entities are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred. When such a condition is judgmentally determined to be other than temporary, the carrying value of the investment is written down to fair value. The fair value of the impaired investment is based 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, plus market analysis of comparable assets owned by the investee, if appropriate. ● Guarantees —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 time. 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 time. We 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 the start of the service period and ending when an employee first becomes eligible for retirement. We have 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. Notes to Consolidated Financial Statements Table of Contents 91 ConocoPhillips 2021 10-K ● Income Taxes —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 taxes. Interest related to unrecognized tax benefits is reflected in interest and debt expense, and penalties 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 the year. Also, this 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 securities. 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 effect. 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—Inventories Inventories at December 31 were: Millions of Dollars 2021 2020 Crude oil and natural gas $ 647 461 Materials and supplies 561 541 Total inventories $ 1,208 1,002 Inventories valued on the LIFO basis $ 395 282 The estimated excess of current replacement cost over LIFO cost of inventories was approximately $ 251 million and $ 87 million at December 31, 2021 and 2020, respectively. Note 3—Asset Acquisitions and Dispositions All gains or losses on asset dispositions are reported before-tax and are included net in the “Gain on dispositions” line on our consolidated income stat ement. All cash proceeds and payments are included in the “Cash Flows From Investing Activities” section of our consolidated statement of cash flows. During the year, we completed the acquisitions of Concho Resources Inc. (Concho) and of Shell Enterprises LLC’s (Shell) Permian assets. The acquisitions were accounted for as business combinations under FASB Topic ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date as we identify new information about facts and circumstances that existed as of the acquisition date to consider. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 92 2021 Acquisition of Concho Resources Inc. In January 2021, we completed our acquisition of Concho, an independent oil 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 $ 13.1 billion, in which 1.46 shares of ConocoPhillips common stock were exchanged for each outstanding share of Concho common stock. Total Consideration Number of shares of Concho common stock issued and outstanding (in thousands)* 194,243 Number of shares of Concho stock awards outstanding (in thousands)* 1,599 Number of shares exchanged 195,842 Exchange ratio 1.46 Additional shares of ConocoPhillips common stock issued as consideration (in thousands) 285,929 Average price per share of ConocoPhillips common stock** $ 45.9025 Total Consideration (Millions) $ 13,125 *Outstanding as of January 15, 2021. **Based on the ConocoPhillips average stock price on January 15, 2021. Oil and gas properties were valued using a discounted cash flow approach incorporating market participant and internally generated price assumptions; production profiles; and operating and development cost assumptions. Debt assumed in the acquisition was valued based on observable market prices. The fair values determined for accounts receivable, accounts payable, and most other current assets and current liabilities were equivalent to the carrying value due to their short-term nature. The total consideration of $ 13.1 billion was allocated to the identifiable assets and liabilities based on their fair values as of January 15, 2021. Assets Acquired Millions of Dollars Cash and cash equivalents $ 382 Accounts receivable, net 745 Inventories 45 Prepaid expenses and other current assets 37 Investments and long-term receivables 333 Net properties, plants and equipment 18,923 Other assets 62 Total assets acquired $ 20,527 Liabilities Assumed Accounts payable $ 638 Accrued income and other taxes 56 Employee benefit obligations 4 Other accruals 510 Long-term debt 4,696 Asset retirement obligations and accrued environmental costs 310 Deferred income taxes 1,071 Other liabilities and deferred credits 117 Total liabilities assumed $ 7,402 Net assets acquired $ 13,125 Notes to Consolidated Financial Statements Table of Contents 93 ConocoPhillips 2021 10-K With the completion of the Concho transaction, we acquired proved and unproved properties of approximately $ 11.8 billion and $ 6.9 billion, respectively. We recognized approximately $ 157 million of transaction-related costs, all of which were expensed in the first quarter of 2021. These non-recurring costs related primarily to fees paid to advisors and the settlement of share- based awards for certain Concho employees based on the terms of the Merger Agreement. In the first quarter of 2021, we commenced a company-wide restructuring program, the scope of which included combining the operations of the two companies as well as other global restructuring activities. We recognized non-recurring restructuring costs mainly for employee severance and related incremental pension benefit costs. The impact from these transaction and restructuring costs to the lines of our consolidated income statement for the year ended December 31, 2021, are below: Millions of Dollars Transaction Cost Restructuring Cost Total Cost Production and operating expenses $ 128 128 Selling, general and administration expenses 135 67 202 Exploration expenses 18 8 26 Taxes other than income taxes 4 2 6 Other expenses - 29 29 $ 157 234 391 On February 8, 2021, we completed a debt exchange offer related to the debt assumed from Concho. As a result of the debt exchange, we recognized an additional income tax related restructuring charge of $ 75 million. See Note 17. From the acquisition date through December 31, 2021, “Total Revenues and Other Income” and “Net Income (Loss) Attributable to ConocoPhillips” associated with the acquired Concho business were approximately $ 6,571 million and $ 2,330 million, respectively. The results associated with the Concho business for the same period include a before- and after-tax loss of $ 305 million and $ 233 million, respectively, on the acquired derivative contracts. The before-tax loss is recorded within “Total Revenues and Other Income” on our consolidated income statement. See Note 12. Acquisition of Shell Permian Assets In December 2021, we completed our acquisition of Shell assets in the Permian based Delaware Basin. The accounting close date used for reporting purposes was December 31, 2021. Assets acquired include approximately 225,000 net acres and producing properties located entirely in Texas. Total consideration for the transaction was $ 8.7 billion. Oil and gas properties were valued using a discounted cash flow approach incorporating market participant and internally generated price assumptions , production profiles, and operating and development cost assumptions. The fair values determined for accounts receivable, accounts payable, and most other current assets and current liabilities were equivalent to the carrying value due to their short-term nature. The total consideration of $ 8.7 billion was allocated to the identifiable assets and liabilities based on their fair values at the acquisition date. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 94 Assets Acquired Millions of Dollars Accounts receivable, net $ 337 Inventories 20 Net properties, plants and equipment 8,624 Other assets 50 Total assets acquired $ 9,031 Liabilities Assumed Accounts payable $ 211 Accrued income and other taxes 6 Other accruals 20 Asset retirement obligations and accrued environmental costs 86 Other liabilities and deferred credits 36 Total liabilities assumed $ 359 Net assets acquired $ 8,672 With the completion of the Shell Permian transaction, we acquired proved and unproved properties of approximately $ 4.2 billion and $ 4.4 billion, respectively. We recognized approximately $ 44 million of transaction- related costs which were expensed during 2021. Supplemental Pro Forma (unaudited) The following tables summarize the unaudited supplemental pro forma financial information fo r the year ended December 31, 2021, and 2020, as if we had completed the acquisitions of Concho and the Shell Permian assets on January 1, 2020. Millions of Dollars Year Ended December 31, 2021 Pro forma Pro forma As reported Shell Combined Total Revenues and Other Income $ 48,349 3,220 51,569 Income (loss) before income taxes 12,712 1,201 13,913 Net Income (Loss) attributable to ConocoPhillips 8,079 920 8,999 Earnings per share: Basic net loss $ 6.09 6.78 Diluted net loss 6.07 6.76 Millions of Dollars Year Ended December 31, 2020 Pro forma Pro forma Pro forma As reported Concho Shell Combined Total Revenues and Other Income $ 19,256 3,762 1,685 24,703 Income (loss) before income taxes ( 3,140 ) 787 ( 247 ) ( 2,600 ) Net Income (Loss) attributable to ConocoPhillips ( 2,701 ) 498 ( 189 ) ( 2,392 ) Earnings per share: Basic net loss $ ( 2.51 ) ( 1.75 ) Diluted net loss ( 2.51 ) ( 1.75 ) Notes to Consolidated Financial Statements Table of Contents 95 ConocoPhillips 2021 10-K The unaudited supplemental pro forma financial information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the transactions been completed on January 1, 2020, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma financial information for the twelve-month period ending December 31, 2020 is a result of combining the consolidated income statement of ConocoPhillips with the results of Concho and the assets acquired from Shell. The pro forma results do not include transaction-related costs, nor any cost savings anticipated as a result of the transactions. The pro forma results include adjustments from Concho’s historical results to reverse impairment expense of $ 10.5 billion and $ 1.9 billion related to oil and gas properties and goodwill, respectively. Other adjustments made relate primarily to DD&A, which is based on the unit-of-production method, resulting from the purchase price allocated to properties, plants and equipment. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected. Announced Acquisitions In December 2021, we announced that we have notified Origin Energy that we are exercising our preemption right to purchase an additional 10 percent shareholding interest in APLNG from Origin Energy for $ 1.645 billion, which will be funded from cash on the balance sheet, before customary adjustments. The effective date of the transaction will be July 1, 2020 with closing anticipated to occur in the first quarter of 2022 subject to Australian government approval. See Note 4 and Note 7 . Assets Sold In 2020, we completed the sale of our Australia -West asset and operations. The sales agreement entitled us to a $ 200 million payment upon a final investment decision (FID) of the Barossa development project. On March 30, 2021, FID was announced and as such, we recognized a $ 200 million gain on disposition in the first quarter of 2021. The purchaser failed to pay the FID bonus when due. We have commenced an arbitration proceeding against the purchaser to enforce our contractual right to the $ 200 million, plus interest accruing from the due date. Results of operations related to this transaction are reflected in our Asia Pacific segment. See Note 11 . In the second half of 2021, we sold our interests in certain noncore assets in our Lower 48 segment for approximately $ 250 million after customary adjustments, recognizing a before-tax gain on sale of approximately $ 58 million. We also completed the sale of our noncore exploration interests in Argentina, recognizing a before- tax loss on disposition of $ 179 million. Results of operations for Argentina were reported in our Other International segment. In 2021, we recorded contingent payments of $ 369 million relating to previous dispositions. The contingent payments are recorded as gain on disposition on our consolidated income statement and are reflected within our Canada and Lower 48 segments. In our Canada segment, the contingent payment, calculated and paid on a quarterly basis, is $6 million CAD for every $1 CAD by which the WCS quarterly average crude price exceeds $52 CAD per barrel . The term for contingent payments in our Canada segment ends on May 16, 2022. In our Lower 48 segment, the contingent payment, paid on an annual basis, is calculated monthly at $7 million per month in which the U.S. Henry Hub price is at or above $3.20 per MMBTU . The term for contingent payments in our Lower 48 segment goes through 2023. No contingent payments were recorded in 2020. Planned Dispositions In December 2021, we entered into an agreement to sell two subsidiaries holding our Indonesia assets and operations to MedcoEnergi for $ 1.355 billion, before customary adjustments, with an effective date of January 1, 2021. The subsidiaries hold our 54 percent interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and a 35 percent shareholding interest in the Transasia Pipeline Company. The net carrying value is approximately $ 0.4 billion, which consists primarily of PP&E. The assets met the held for sale criteria in the fourth quarter, and as of December 31, 2021, we have reclassified $ 0.3 billion of PP&E to “Prepaid expenses and other current assets” and $ 0.1 billion of noncurrent ARO to “Other accruals” on our consolidated balance sheet. The before-tax earnings associated with our Indonesia subsidiaries were $ 604 million, $ 394 million and $ 512 million for the years ended December 31, 2021, 2020 and 2019, respectively . This transaction is expected to close in early 2022, subject to regulatory approvals and other specific conditions precedent. Results of operations for the subsidiaries to be sold are reported within our Asia Pacific segment. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 96 In January 2022, we entered into an agreement to sell our interests in certain noncore assets in the Lower 48 segment for $ 440 million, before customary adjustments. This transaction is expected to close in the second quarter of 2022. 2020 Asset Acquisition In August 2020, we completed the acquisition of additional Montney acreage in Canada from Kelt Exploration Ltd. for $ 382 million after customary adjustments, plus the assumption of $ 31 million in financing obligations associated with partially owned infrastructure. This acquisition consisted primarily of undeveloped properties and included 140,000 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 295,000 net acres with a 100 percent working interest. This agreement was accounted for as an asset acquisition resulting in the recognition of $ 490 million of PP&E; $ 77 million of ARO and accrued environmental costs; and $ 31 million of financing obligations recorded primarily to long-term debt. Results of operations for the Montney asset are reported in our Canada segment. Assets Sold In February 2020, we sold our Waddell Ranch interests in the Permian Basin for $ 184 million after customary adjustments. No 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 $ 359 million after customary adjustments and recognized a before-tax loss on disposition of $ 38 million. At the time of disposition, our interest in Niobrara had a net carrying value of $ 397 million, consisting primarily of $ 433 million of PP&E and $ 34 million of ARO. The before-tax losses associated with our interests in Niobrara, including the loss on disposition noted above and an impairment of $ 386 million recorded when we signed an agreement to sell our interests in the fourth quarter of 2019, were $ 25 million and $ 372 million for the years ended December 31, 2020 and 2019, respectively. 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 $ 765 million. We recognized a before- tax gain of $ 587 million related to this transaction in 2020. At the time of disposition, the net carrying value of the subsidiaries sold was approximately $ 0.2 billion, excluding $ 0.5 billion of cash. The net carrying value consisted primarily of $ 1.3 billion of PP&E and $ 0.1 billion of other current assets offset by $ 0.7 billion of ARO, $ 0.3 billion of deferred tax liabilities, and $ 0.2 billion of other liabilities. The before-tax earnings associated with the subsidiaries sold, including the gain on disposition noted above, were $ 851 million and $ 372 million for the years ended December 31, 2020 and 2019, respectively. Production from the beginning of the year through the disposition date in May 2020 averaged 43 MBOED. The sales agreement entitled us to an additional $ 200 million upon FID of the Barossa development project. Results of operations for the subsidiaries sold were reported in our Asia Pacific segment. 2019 Assets Sold In January 2019, we entered into agreements to sell our 12.4 percent ownership interests in the Golden Pass 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 a before -tax impairment of $ 60 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. Notes to Consolidated Financial Statements Table of Contents 97 ConocoPhillips 2021 10-K In April 2019, we entered into an agreement to sell two ConocoPhillips U.K. subsidiaries to Chrysaor E&P Limited for $ 2.675 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 $ 2.2 billion and recognized a $ 1.7 billion before-tax and $ 2.1 billion after-tax gain associated with this transaction in 2019. 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 $ 0.5 billion, consisting primarily of $ 1.6 billion of PP&E, $ 0.5 billion of cumulative foreign currency translation adjustments, and $ 0.3 billion of deferred tax assets, offset by $ 1.8 billion of ARO and negative $ 0.1 billion of working capital. The before-tax earnings associated with the subsidiaries sold, including the gain on dispositions noted above, was $ 2.1 billion for the year ended December 31, 2019. 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 $ 52 million upon the closing of the sale of our 30 percent interest in the Greater Sunrise Fields to the government of Timor-Leste for $ 350 million. The 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 of $ 16 million and recognized a before-tax gain of $ 82 million. At the time of sale, the net carrying value consisted of $ 4 million of PP&E offset by $ 70 million of ARO. The Magnolia results of operations were reported within our Lower 48 segment. Note 4—Investments, Loans and Long-Term Receivables Components of investments, loans and long-term receivables at December 31 were: Millions of Dollars 2021 2020 Equity investments $ 6,701 7,596 Loans and advances—related parties - 114 Long-term receivables 98 137 Long-term investments in debt securities 248 217 Other investments 66 67 $ 7,113 8,131 Equity Investments Affiliated companies in which we had a significant equity investment at December 31, 2021, included: ● APLNG— 37.5 percent owned joint venture with Origin Energy ( 37.5 percent) and Sinopec ( 25 percent)— to produce CBM from the Bowen and Surat basins in Queensland, Australia, as well as process and export LNG. ● Qatar Liquefied Gas Company Limited (3) (QG3)— 30 percent owned joint venture with affiliates of QatarEnergy ( 68.5 percent) and Mitsui & Co., Ltd. ( 1.5 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 2021 2020 2019 Revenues $ 11,824 7,931 11,310 Income before income taxes 3,946 1,843 3,726 Net income 2,557 1,426 3,085 Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 98 Summarized 100 percent balance sheet information for equity method investments in affiliated companies, combined, was as follows: Millions of Dollars 2021 2020 Current assets $ 4,493 2,579 Noncurrent assets 36,602 35,257 Current liabilities 3,498 2,110 Noncurrent liabilities 17,465 18,099 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, 2021, retained earnings included $ 42 million related to the undistributed earnings of affiliated companies. Dividends received from affiliates were $ 1,279 million, $ 1,076 million and $ 1,378 million in 2021, 2020 and 2019, respectively. APLNG APLNG is a joint venture focused on producing CBM from the Bowen and Surat basins in Queensland, Australia. Natural gas is sold to domestic customers and LNG is processed and exported to Asia Pacific markets. Our investment in APLNG gives us access to CBM resources in Australia and enhances our LNG position. 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 for an $ 8.5 billion project finance facility in 2012. All amounts were drawn from the facility. APLNG achieved financial completion on its original $ 8.5 billion project finance facility during the third quarter of 2017, resulting in the facility being nonrecourse. The project financing facility has been refinanced over time and at December 31, 2021, this facility was composed of a financing agreement with the Export-Import Bank of the United States, a commercial bank facility and two United States Private Placement note facilities. APLNG made its first principal and interest repayment in March 2017 and is scheduled to make bi-annual payments until September 2030. At December 31, 2021, a balance of $ 5.7 billion was outstanding on the facilities. See Note 10 . During the fourth quarter of 2021, Origin Energy Limited agreed to the sale of 10 percent of their interest in APLNG for $ 1.645 billion, before customary adjustments. ConocoPhillips announced in December 2021 that we were exercising our preemption right under the APLNG Shareholders Agreement to purchase an additional 10 percent shareholding interest in APLNG, subject to government approvals. The sales price associated with this preemption right was determined to reflect a relevant observable market participant view of APLNG’s fair value which was below the carrying value of our existing investment in APLNG. Based on a review of the facts and circumstances surrounding this decline in fair value, we concluded in the fourth quarter of 2021 the impairment was other than temporary under the guidance of FASB ASC Topic 323, and the recognition of an impairment of our existing investment was necessary. Accordingly, we recorded a noncash $ 688 million, before-tax and after-tax impairment in the fourth quarter of 2021. The impairment, which is included in the “Impairments” line on our consolidated income statement, had the effect of reducing the carrying value of our existing investment to $ 5,574 million as of December 31, 2021. This carrying value is included in the “Investments and long-term receivables” line on our consolidated balance sheet. See Note 7 . Notes to Consolidated Financial Statements Table of Contents 99 ConocoPhillips 2021 10-K The historical cost basis of our 37.5 percent share of net assets on the books of APLNG was $ 5,523 million, resulting in a basis difference of $ 51 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 basis to individual production license areas owned by APLNG. Any future additional payments are expected to be allocated in a similar manner. As the joint venture produces natural gas from each license, we amortize the basis difference allocated to that license using the unit-of-production method. Included in net income (loss) attributable to ConocoPhillips for 2021, 2020 and 2019 was after-tax expense of $ 39 million, $ 41 million and $ 36 million, respectively, representing the amortization of this basis difference on currently producing licenses. QG3 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 of $ 114 million as described below under “Loans.” At December 31, 2021, the book value of our equity method investment in QG3, excluding the project financing, was $ 736 million. 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 from QG3. We previously held a 12.4 percent interest in Golden Pass LNG Terminal and Golden Pass Pipeline, but we sold those interests in the second quarter of 2019 while retaining the basic use agreements. Currently, the LNG from QG3 is being sold to markets outside of the U.S. See Note 3 . Loans 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 to certain affiliated and non-affiliated companies. At December 31, 2021, significant loans to affiliated companies include $ 114 million in project financing to QG3 which is recorded within the “Accounts and notes receivable—related parties” line on our consolidated balance sheet. QG3 secured project financing of $ 4.0 billion in December 2005, consisting of $ 1.3 billion of loans from export credit agencies (ECA), $ 1.5 billion from commercial banks and $ 1.2 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. Semi-annual repayments began in January 2011 and will extend through July 2022. Note 5—Investment in Cenovus Energy Our investment in Cenovus Energy (CVE) common shares is carried on our balance sheet at fair value. December 31 2021 2020 Number of shares of CVE common stock (millions) 91 208 Ownership of issued and outstanding common stock 4.5 % 16.9 Closing price on NYSE on last trading day ($/share) $ 12.28 6.04 Fair Value (millions of dollars) $ 1,117 1,256 During 2021, we began to dispose of CVE shares, selling 117 million shares during the year, recognizing proceeds of $ 1.18 billion, $ 1.14 billion of which was received during the year. Proceeds related to the sale of our CVE shares are presented within “Cash Flows from Investing Activities” on our consolidated statement of cash flows. Subject to market conditions, we intend to continue to decrease our investment. All gains and losses are recognized within “Other income (loss)” on our consolidated income statement. See Note 13 . Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 100 Millions of Dollars 2021 2020 2019 Total Net gain (loss) on equity securities $ 1,040 ( 855 ) 649 Less: Net gain (loss) on equity securities sold during the period 473 Unrealized gain (loss) on equity securities still held at the reporting date $ 567 ( 855 ) 649 Note 6—Suspended Wells and Exploration Expenses The following table reflects the net changes in suspended exploratory well costs during 2021, 2020 and 2019: Millions of Dollars 2021 2020 2019 Beginning balance at January 1 $ 682 1,020 856 Additions pending the determination of proved reserves 10 164 239 Reclassifications to proved properties - ( 42 ) ( 11 ) Sales of suspended wells - ( 313 ) ( 54 ) Charged to dry hole expense ( 32 ) ( 147 ) ( 10 ) Ending balance at December 31 $ 660 682 1,020 * *Includes $ 313 million of assets held for sale in Australia-West at December 31, 2019. 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 2021 2020 2019 Exploratory well costs capitalized for a period of one year or less $ 4 156 206 Exploratory well costs capitalized for a period greater than one year 656 526 814 Ending balance $ 660 682 1,020 * *Includes $ 313 million of assets held for sale in Australia-West at December 31, 2019. Number of projects with exploratory well costs capitalized for a period greater than one year 22 22 23 Notes to Consolidated Financial Statements Table of Contents 101 ConocoPhillips 2021 10-K 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, 2021: Millions of Dollars Suspended Since Total 2018-2020 2015-2017 2004-2014 Willow—Alaska (1) 313 262 51 - Surmont—Canada (1) 121 2 19 100 PL 1009—Norway (1) 43 43 - - PL 891—Norway (1) 34 34 - - Narwhal Trend—Alaska (1) 25 25 - - WL4-00—Malaysia (1) 24 24 - - PL782S—Norway (1) 22 22 - - NC 98—Libya (2) 13 - - 13 Other of $10 million or less each (1)(2) 61 21 11 29 Total $ 656 433 81 142 (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 statement. 2020 In our Alaska segment, we recorded a before-tax impairment of $ 828 million for the entire associated carrying value of capitalized undeveloped leasehold costs related to our Alaska North Slope Gas asset. We no longer believe the project will advance, and there is no current market for the asset. In our Other International segment, our interests in the Middle Magdalena Basin of Colombia are in force majeure. As we had no immediate plans to perform under existing contracts; therefore, in 2020, we recorded a before-tax expense totaling $ 84 million for dry hole costs of a previously suspended well and an impairment of the associated capitalized undeveloped leasehold carrying value. In our Asia Pacific segment, we recorded before-tax expense of $ 50 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 plans. 2019 In our Lower 48 segment, we recorded a before-tax impairment of $ 141 million for the associated carrying value of capitalized undeveloped leasehold costs and dry hole expenses of $ 111 million before-tax due to our decision to discontinue exploration activities related to our Central Louisiana Austin Chalk acreage. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 102 Note 7—Impairments During 2021, 2020 and 2019, we recognized the following before-tax impairment charges: Millions of Dollars 2021 2020 2019 Alaska $ 5 - - Lower 48 ( 8 ) 804 402 Canada 6 3 2 Europe, Middle East and North Africa ( 24 ) 6 1 Asia Pacific 695 - - $ 674 813 405 2021 We recorded an impairment of $ 688 million on our APLNG investment included within the Asia Pacific segment. See Note 4 and Note 13 . In our Lower 48 segment, we recorded a credit to impairment of $ 89 million due to a decreased ARO estimate for a previously sold asset, in which we retained the ARO liability. This was offset by recorded impairments of $ 84 million during the fourth quarter of 2021, related to certain noncore assets due to changes in development plans. See Note 13 . In our Europe, Middle East and North Africa segment, we recorded a credit to impairment of $ 24 million due to decreased ARO estimates on fields in Norway which ceased production and were fully depreciated in prior years. 2020 We recorded impairments of $ 813 million, primarily related to certain noncore assets in the Lower 48. Due to a significant decrease in the outlook for current and long-term natural gas prices in early 2020, we recorded impairments of $ 523 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 2020. Additionally, due primarily to changes in development plans solidified in the last quarter of 2020, we recognized additional impairments of $ 287 million in the Lower 48 during the fourth quarter. See Note 13 . 2019 In the Lower 48, we recorded impairments of $ 402 million, primarily related to developed properties in our Niobrara asset which were written down to fair value less costs to sell. See Note 3 . Note 8—Asset Retirement Obligations and Accrued Environmental Costs Asset retirement obligations and accrued environmental costs at December 31 were: Millions of Dollars 2021 2020 Asset retirement obligations $ 5,926 5,573 Accrued environmental costs 187 180 Total asset retirement obligations and accrued environmental costs 6,113 5,753 Asset retirement obligations and accrued environmental costs due within one year* ( 359 ) ( 323 ) Long-term asset retirement obligations and accrued environmental costs $ 5,754 5,430 *Classified as a current liability on the balance sheet under “Other accruals.” Notes to Consolidated Financial Statements Table of Contents 103 ConocoPhillips 2021 10-K 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 PP&E. If, in subsequent periods, our estimate of this 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. 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 asset had not been previously impaired . 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 the 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 and gas platforms around the world, as well as oil and gas production facilities and pipelines in Alaska. During 2021 and 2020, our overall ARO changed as follows: Millions of Dollars 2021 2020 Balance at January 1 $ 5,573 6,206 Accretion of discount 238 248 New obligations 555 262 Changes in estimates of existing obligations ( 113 ) ( 307 ) Spending on existing obligations ( 164 ) ( 116 ) Property dispositions ( 108 ) ( 771 ) Foreign currency translation ( 55 ) 51 Balance at December 31 $ 5,926 5,573 Accrued Environmental Costs Total accrued environmental costs at December 31, 2021 and 2020, were $ 187 million and $ 180 million, respectively. We had accrued environmental costs of $ 135 million and $ 116 million at December 31, 2021 and 2020, respectively, related to remediation activities in the U.S. and Canada. We had also accrued in Corporate and Other $ 36 million and $ 48 million of environmental costs associated with sites no longer in operation at December 31, 2021 and 2020, respectively. In addition, both December 31, 2021 and 2020, included a $ 16 million accrual, where the company has been named a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation and Liability Act, or similar state laws. Accrued environmental liabilities are expected to be paid over periods extending up to 30 years. Expected expenditures for environmental obligations acquired in various business combinations are discounted using a weighted-average 5 percent discount factor, resulting in an accrued balance for acquired environmental liabilities of $ 109 million at December 31, 2021. The total expected future undiscounted payments related to the portion of the accrued environmental costs that have been discounted are $ 153 million. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 104 Note 9—Debt Long-term debt at December 31 was: Millions of Dollars 2021 2020 9.125 % Debentures due 2021 $ - 123 2.4 % Notes due 2022 329 329 7.65 % Debentures due 2023 78 78 3.35 % Notes due 2024 426 426 8.2 % Debentures due 2025 134 134 3.35 % Notes due 2025 199 199 6.875 % Debentures due 2026 67 67 4.95 % Notes due 2026 1,250 1,250 7.8 % Debentures due 2027 203 203 3.75 % Notes due 2027 981 - 3.75 % Notes due 2027 19 - 4.3 % Notes due 2028 973 - 4.3 % Notes due 2028 27 - 7.375 % Debentures due 2029 92 92 7 % Debentures due 2029 200 200 6.95 % Notes due 2029 1,549 1,549 8.125 % Notes due 2030 390 390 2.4 % Notes due 2031 489 - 2.4 % Notes due 2031 11 - 7.2 % Notes due 2031 575 575 7.25 % Notes due 2031 500 500 7.4 % Notes due 2031 500 500 5.9 % Notes due 2032 505 505 4.15 % Notes due 2034 246 246 5.95 % Notes due 2036 500 500 5.951 % Notes due 2037 645 645 5.9 % Notes due 2038 600 600 6.5 % Notes due 2039 2,750 2,750 4.3 % Notes due 2044 750 750 5.95 % Notes due 2046 500 500 7.9 % Debentures due 2047 60 60 4.875 % Notes due 2047 800 - 4.85 % Notes due 2048 590 - 4.85 % Notes due 2048 10 - Floating rate notes due 2022 at 1.02 % – 1.12 % during 2021 and 1.12 % – 2.81 % during 2020 500 500 Marine Terminal Revenue Refunding Bonds due 2031 at 0.04 % – 0.15 % during 2021 and 0.1 % – 7.5 % during 2020 265 265 Industrial Development Bonds due 2035 at 0.04 % – 0.12 % during 2021 and 0.11 % – 7.5 % during 2020 18 18 Commercial Paper at 0.05 % – 0.22 % during 2021 - 300 Other 35 38 Debt at face value 17,766 14,292 Finance leases 1,261 891 Net unamortized premiums, discounts and debt issuance costs 907 186 Total debt 19,934 15,369 Short-term debt ( 1,200 ) ( 619 ) Long-term debt $ 18,734 14,750 Notes to Consolidated Financial Statements Table of Contents 105 ConocoPhillips 2021 10-K On January 15, 2021, we completed the acquisition of Concho in an all-stock transaction. In the acquisition, we assumed Concho’s publicly traded debt, with an outstanding principal balance of $ 3.9 billion, which was recorded at fair value of $ 4.7 billion on the acquisition date. The adjustment to fair value of the senior notes of approximately $ 0.8 billion on the acquisition date will be amortized as an adjustment to interest expense over the remaining contractual terms of the senior notes. In the first quarter of 2021, we completed a debt exchange offer related to the debt assumed from Concho. Of the approximately $ 3.9 billion in aggregate principal amount of Concho’s senior notes offered in the exchange, 98 percent, or approximately $ 3.8 billion, was tendered and accepted. The new debt issued by ConocoPhillips had the same interest rates and maturity dates as the Concho senior notes. The portion not exchanged, approximately $ 67 million, remained outstanding across five series of senior notes issued by Concho. The debt exchange was treated as a debt modification for accounting purposes resulting in a portion of the unamortized fair value adjustment of the Concho senior notes allocated to the new debt issued by ConocoPhillips on the settlement date of the exchange. The new debt issued in the exchange is fully and unconditionally guaranteed by ConocoPhillips Company. See Note 3. We have a revolving credit facility totaling $ 6.0 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 up to $ 500 million, or as support for our commercial paper program. The revolving credit facility is broadly syndicated among financial institutions and does not contain any material adverse change provisions or any covenants requiring maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-default provision relating to the failure to pay principal or interest on other debt obligations of $ 200 million or more by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to redetermination prior to its expiration date. Credit facility borrowings may bear interest at a margin above rates offered by certain designated banks in the London interbank market or at a margin above the overnight federal funds rate or prime rates offered by certain designated banks in the U.S. The facility agreement calls for commitment fees on available, but unused, amounts. The 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 $ 6.0 billion of commercial paper, which is primarily a funding source for short-term working capital needs. Commercial paper maturities are generally limited to 90 days . With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $ 6.0 billion in available borrowing capacity under our revolving credit facility at December 31, 2021. We had no direct borrowings, letters of credit, and $ 300 million of commercial paper outstanding as of December 31, 2020. For information on Finance Leases, see Note 15 . The current credit ratings on our long-term debt are: ● Fitch: “A” with a “stable” outlook . ● S&P: “A-” with a “stable” outlook . ● Moody’s: “A3” with a “positive” outlook . We do not have any ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity, upon downgrade of our credit ratings. If our credit ratings are downgraded from their current levels, it could increase the cost of corporate debt available to us and restrict our access to the commercial paper markets. If our credit rating were to deteriorate to a level prohibiting us from accessing the commercial paper market, we would still be able to access funds under our revolving credit facility. At both December 31, 2021 and 2020, we had $ 283 million of certain variable rate demand bonds (VRDBs) outstanding with maturities ranging through 2035. The VRDBs are redeemable at the option of the bondholders on any business day. If they are ever redeemed, we have the ability and intent to refinance on a long-term basis, therefore, the VRDBs are included in the “Long-term debt” line on our consolidated balance sheet. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 106 Note 10—Guarantees At December 31, 2021, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence. APLNG Guarantees At December 31, 2021, we had outstanding multiple guarantees in connection with our 37.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing December 2021 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 account. We estimate the remaining term of this guarantee to be 9 years. Our maximum exposure under this guarantee is approximately $ 170 million and may become payable if an enforcement action is commenced by the project finance lenders against APLNG. At December 31, 2021, the carrying value of this guarantee is approximately $ 14 million. ● 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. The final guarantee expires in the fourth quarter of 2041. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be $ 660 million ($ 1.2 billion in the event of intentional or reckless breach) and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the co-ventures do not make necessary equity contributions into APLNG. ● We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of 15 to 24 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $ 180 million and would become payable if APLNG does not perform. At December 31, 2021, the carrying value of these guarantees was approximately $ 11 million. Other Guarantees We have other guarantees with maximum future potential payment amounts totaling approximately $ 720 million, which consist primarily of guarantees of the residual value of leased office buildings, guarantees 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 of one to five years and would become payable if certain asset values are lower than guaranteed amounts at the end of the lease or contract term, business conditions decline at guaranteed entities, or as a result of nonperformance of contractual terms by guaranteed parties. At December 31, 2021, the carrying value of these guarantees was approximately $ 8 million. 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. The carrying amount recorded for these indemnifications at December 31, 2021, was approximately $ 20 million. Those related to environmental issues have terms that are generally indefinite and the maximum amounts of future payments are generally unlimited. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. See Note 11 for additional information about environmental liabilities. Notes to Consolidated Financial Statements Table of Contents 107 ConocoPhillips 2021 10-K Note 11—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 a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the low end of the range 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 17 , for additional information about income tax -related contingencies. Based on currently available information, we believe it is remote that future costs related to known contingent 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 matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible 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 processes. Environmental We are subject to international, federal, state and local environmental laws and regulations and record accruals for environmental liabilities based on management’s best estimates . These estimates are based 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 by the U.S. 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 joint and several for federal sites and frequently so for other sites, we are usually only one of many companies cited at a particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to 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 the 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 proportional 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 business 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. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings. See Note 8 , for a summary of our accrued environmental liabilities. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 108 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, claims of alleged environmental contamination and damages from historic operations , and climate change. We will continue to defend ourselves vigorously in these matters. Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial and/or mediation. 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 the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new 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 not utilized. In addition, at December 31, 2021, we had performance obligations secured by letters of credit of $ 337 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. In response to this expropriation, ConocoPhillips initiated international arbitration on November 2, 2007, with the ICSID. On September 3, 2013, an ICSID arbitration tribunal held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in 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 $ 8.7 billion in compensation for the government’s unlawful expropriation of the company’s investments in Venezuela in 2007. On August 29, 2019, the ICSID Tribunal issued a decision rectifying the award and reducing it by approximately $ 227 million. The award now stands at $ 8.5 billion plus interest. The government of Venezuela sought annulment of the award, which automatically stayed enforcement of the award. On September 29, 2021, the ICSID annulment committee lifted the stay of enforcement of the award. The annulment proceedings have been suspended as a result of Venezuela’s non-payment of advances to cover the costs of these proceedings. 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 $ 2 billion under their agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures. In August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the payment period, including initial payments totaling approximately $ 500 million within a period of 90 days from the time of signing of the settlement agreement. The balance of the settlement is to be paid quarterly over a period of four and a half years. Per the settlement, PDVSA recognized the ICC award as a judgment in various jurisdictions, and ConocoPhillips agreed to suspend its legal enforcement actions. ConocoPhillips sent notices of default to PDVSA on October 14 and November 12, 2019, and to date PDVSA has failed to cure its breach. As a result, ConocoPhillips has resumed legal enforcement actions. To date, ConocoPhillips has received approximately $ 768 million in connection with the ICC award. ConocoPhillips has ensured that the settlement and any actions taken in enforcement thereof meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela. Notes to Consolidated Financial Statements Table of Contents 109 ConocoPhillips 2021 10-K 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 $ 33 million plus interest under the Corocoro contracts. ConocoPhillips is seeking recognition and enforcement of the award in various jurisdictions. ConocoPhillips has ensured that all the actions related to the award meet all appropriate U.S. 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’ payment of royalties on federal lands and has issued multiple orders to pay additional royalties to the federal government. ConocoPhillips and the ONRR entered into a settlement agreement on March 23, 2021, to resolve the dispute. All orders and associated appeals have been withdrawn with prejudice. Beginning in 2017, governmental and other entities in several states in the U.S. have filed lawsuits against oil and gas companies, including ConocoPhillips, seeking compensatory damages and equitable relief to abate alleged climate change impacts. Additional lawsuits with similar allegations are expected to be filed. The amounts claimed by plaintiffs are unspecified and the legal and factual issues involved in these cases are unprecedented. ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against such lawsuits. Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips, seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by historical oil and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will vigorously defend against them. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty about these claims (both as to scope and damages) and we continue to evaluate our exposure in these lawsuits . In October 2020, the Bureau of Safety and Environmental Enforcement (BSEE) ordered the prior owners of Outer Continental Shelf (OCS) Lease P-0166, including ConocoPhillips, to decommission the lease facilities, including two offshore platforms located near Carpinteria, California. This order was sent after the current owner of OCS Lease P-0166 relinquished the lease and abandoned the lease platforms and facilities. BSEE’s order to ConocoPhillips is premised on its connection to Phillips Petroleum Company, a legacy company of ConocoPhillips, which held a historical 25 percent interest in this lease and operated these facilities, but sold its interest approximately 30 years ago. ConocoPhillips continues to evaluate our exposure in these lawsuits. On May 10, 2021, ConocoPhillips filed arbitration under the rules of the Singapore International Arbitration Centre (SIAC) against Santos KOTN Pty Ltd. and Santos Limited for their failure to timely pay the $ 200 million bonus due upon FID of the Barossa development project under the sale and purchase agreement. Santos KOTN Pty Ltd. and Santos Limited have filed a response and counterclaim, and the arbitration is underway. In July 2021, a federal securities class action was filed against Concho, certain of Concho’s officers, and ConocoPhillips as Concho’s successor in the United States District Court for the Southern District of Texas. On October 21, 2021, the court issued an order appointing Utah Retirement Systems and the Construction Laborers Pension Trust for Southern California as lead plaintiffs (Lead Plaintiffs). On January 7, 2022, the Lead Plaintiffs filed their consolidated complaint alleging that Concho made materially false and misleading statements regarding its business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed appropriate. We believe the allegations in the action are without merit, and we intend to vigorously defend this litigation. 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 business. The aggregate amounts of estimated payments under these various agreements are: 2022—$ 7 million; 2023—$ 7 million; 2024—$ 7 million; 2025—$ 7 million; 2026—$ 7 million; and 2027 and after—$ 43 million. Total payments under the agreements were $ 27 million in 2021, $ 25 million in 2020 and $ 25 million in 2019. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 110 Note 12—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 risk. Commodity Derivative Instruments Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG and NGLs. Commodity derivative instruments are held at fair value on our consolidated balance sheet. Where these balances have the right of setoff, they are presented on a net basis. Related cash flows are recorded as operating activities on our consolidated statement of cash flows. On our consolidated income statement, gains and losses are recognized either on a gross basis if directly related to our physical business or a net basis if held for trading. Gains and losses related to contracts that meet and are designated with the NPNS exception are recognized upon settlement. We generally apply this exception to eligible crude contracts and certain gas contracts. 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 2021 2020 Assets Prepaid expenses and other current assets $ 1,168 229 Other assets 75 26 Liabilities Other accruals 1,160 202 Other liabilities and deferred credits 63 18 The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated income statement were: Millions of Dollars 2021 2020 2019 Sales and other operating revenues $ ( 228 ) 19 141 Other income (loss) 25 4 4 Purchased commodities 75 11 ( 118 ) On January 15, 2021, we assumed financial derivative instruments consisting of oil and natural gas swaps in connection with the acquisition of Concho. At the acquisition date, the financial derivative instruments acquired were recognized at fair value as a net liability of $ 456 million with settlement dates under the contracts through December 31, 2022. During 2021, we recognized a loss on settlement of the contracts for $ 305 million. This loss associated with the acquired financial instruments is recorded within the “Sales and other operating revenues” line on our consolidated income statement. In connection with the settlement, we issued a cash payment of $ 761 million during 2021. Cash settlements related to the derivative contracts are presented within “Cash Flows From Operating Activities” on our consolidated statement of cash flows. Notes to Consolidated Financial Statements Table of Contents 111 ConocoPhillips 2021 10-K The table below summarizes our material net exposures resulting from outstanding commodity derivative contracts: Open Position Long/(Short) 2021 2020 Commodity Natural gas and power (billions of cubic feet equivalent) Fixed price 4 ( 20 ) Basis ( 22 ) ( 10 ) 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 included within operating activities on our consolidated statement of cash flows. We do not elect hedge accounting on our foreign currency exchange derivatives. The following table presents the gross fair values of our foreign currency exchange derivatives, excluding collateral, and the line items where they appear on our consolidated balance sheet: Millions of Dollars 2021 2020 Assets Prepaid expenses and other current assets $ 28 2 Liabilities Other accruals 9 16 The (gains) losses from foreign currency exchange derivatives incurred and the line item where they appear on our consolidated income statement were: Millions of Dollars 2021 2020 2019 Foreign currency transaction (gains) losses $ ( 5 ) ( 40 ) 16 We had the following net notional position of outstanding foreign currency exchange derivatives: In Millions Notional Currency 2021 2020 Foreign Currency Exchange Derivatives Buy British pound, sell euro GBP 155 - Sell British pound, buy euro GBP - 5 Sell Canadian dollar, buy U.S. dollar CAD - 370 Buy Canadian dollar, sell U.S. dollar CAD 77 - Buy Australian dollar, sell U.S. dollar AUD 1,850 - Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 112 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. dollar in anticipation of our future acquisition of an additional interest in APLNG. 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. dollar . 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 of time. ● 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. ● U.S. government or government agency obligations: Securities issued by the U.S. government or U.S. government agencies. ● Foreign government obligations: Securities 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, 2021 and 2020: Millions of Dollars Carrying Amount Cash and Cash Equivalents Short-Term Investments Investments and Long- Term Receivables 2021 2020 2021 2020 2021 2020 Cash $ 670 597 Demand Deposits 1,554 1,133 Time Deposits 1 to 90 days 2,363 1,225 217 2,859 91 to 180 days 4 448 Within one year 4 13 One year through five years - 1 U.S. Government Obligations 1 to 90 days 431 23 - - $ 5,018 2,978 225 3,320 - 1 Notes to Consolidated Financial Statements Table of Contents 113 ConocoPhillips 2021 10-K The following investments in debt securities classified as available for sale are carried at fair value on our consolidated balance sheet at December 31, 2021 and 2020: Millions of Dollars Carrying Amount Cash and Cash Equivalents Short-Term Investments Investments and Long- Term Receivables 2021 2020 2021 2020 2021 2020 Major Security Type Corporate Bonds $ 3 - 128 130 173 143 Commercial Paper 7 13 82 155 U.S. Government Obligations - - - 4 2 13 U.S. Government Agency Obligations 2 - 8 17 Foreign Government Obligations 7 - 2 2 Asset-backed Securities 2 - 63 41 $ 10 13 221 289 248 216 Cash and Cash Equivalents and Short-Term Investments have remaining maturities within one year. Investments and Long-Term Receivables have remaining maturities that vary from greater than one year through eight years. The following table summarizes the amortized cost basis and fair value of investments in debt securities classified as available for sale at December 31: Millions of Dollars Amortized Cost Basis Fair Value 2021 2020 2021 2020 Major Security Type Corporate Bonds $ 305 271 304 273 Commercial Paper 88 168 89 168 U.S. Government Obligations 2 17 2 17 U.S. Government Agency Obligations 10 17 10 17 Foreign Government Obligations 9 2 9 2 Asset-Backed Securities 65 41 65 41 $ 479 516 479 518 As of December 31, 2021 and 2020, total unrealized losses for debt securities classified as available for sale with net losses were negligible. Additionally, as of December 31, 2021 and 2020, investments in these debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded were negligible. For the years ended December 31, 2021 and 2020, proceeds from sales and redemptions of investments in debt securities classified as available for sale were $ 594 million and $ 422 million, respectively. Gross realized gains and losses included in earnings from those sales and redemptions were negligible. The cost of securities sold and redeemed is determined using the specific identification method. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 114 Credit Risk Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, short-term investments, long-term investments in debt securities, OTC derivative contracts and trade receivables. Our cash equivalents and short-term investments are placed in high-quality commercial paper, government money market funds, U.S. government and government agency obligations, time deposits with major international banks and financial institutions, high-quality corporate bonds, foreign government obligations and asset-backed securities. Our long-term investments in debt securities are placed in high-quality corporate bonds, asset-backed securities, U.S. government and government agency obligations, foreign government obligations, and time deposits with major international banks and financial institutions. The credit risk from our OTC derivative contracts, such as forwards, swaps and options, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared primarily with an exchange clearinghouse and subject to mandatory margin requirements until 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 national and 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 the creditworthiness of the counterparties. We may require collateral to limit the exposure to loss including, letters of credit, prepayments and surety bonds, as well as master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due to us. Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below investment grade. 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, 2021 and December 31, 2020, was $ 281 million and $ 25 million, respectively. For these instruments, no collateral was posted as of December 31, 2021 or December 31, 2020. If our credit rating had been downgraded below investment grade on December 31, 2021, we would have been required to post $ 252 million of additional collateral, either with cash or letters of credit. Note 13—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 fair value hierarchy. The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. 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 2021 or 2020. Notes to Consolidated Financial Statements Table of Contents 115 ConocoPhillips 2021 10-K Recurring Fair Value Measurement Financial assets and liabilities reported at fair value on a recurring basis primarily include our investment in CVE common shares, our investment s in debt securities classified as available for sale, and commodity derivatives. ● Level 1 derivative assets and liabilities primarily represent exchange -traded futures and options that are valued using unadjusted prices available from the underlying exchange. Level 1 also includes our investment in common shares of CVE, which is valued using quotes for shares on the NYSE, and our investments in U.S. government obligations classified as available for sale debt securities, which are valued using exchange prices. ● Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing service companies that are all corroborated by market data. Level 2 also includes our investments in debt securities classified as available for sale including investments in corporate bonds, commercial paper, asset-backed securities, U.S. government agency obligations and foreign government obligations that are valued using pricing provided by brokers or pricing service companies that are corroborated with market data. ● Level 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale contracts where a significant portion of fair value is calculated from underlying market data that is not readily available. The derived value uses industry standard methodologies that may consider the historical relationships among various commodities, modeled market prices, time value, volatility factors and other relevant economic measures. The use of these inputs results in management’s best estimate of fair value. 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 basis): Millions of Dollars December 31, 2021 December 31, 2020 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Investment in Cenovus Energy $ 1,117 - - 1,117 1,256 - - 1,256 Investments in debt securities 2 477 - 479 17 501 - 518 Commodity derivatives 562 619 62 1,243 142 101 12 255 Total assets $ 1,681 1,096 62 2,839 1,415 602 12 2,029 Liabilities Commodity derivatives $ 593 543 87 1,223 120 91 9 220 Total liabilities $ 593 543 87 1,223 120 91 9 220 Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 116 The following table summarizes those commodity derivative balances subject to the right of setoff as presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of setoff exists. Millions of Dollars Amounts Subject to Right of Setoff Gross Amounts Not Gross Net Amounts Subject to Gross Amounts Amounts Cash Net Recognized Right of Setoff Amounts Offset Presented Collateral Amounts December 31, 2021 Assets $ 1,243 85 1,158 650 508 - 508 Liabilities 1,223 82 1,141 650 491 36 455 December 31, 2020 Assets $ 255 2 253 157 96 10 86 Liabilities 220 1 219 157 62 4 58 At December 31, 2021 and December 31, 2020, 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 basis: Millions of Dollars Fair Value Measurements Using Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Before-Tax Loss Year ended December 31, 2021 Net PP&E (held for use) December 31, 2021 $ 472 - - 472 80 Equity Method Investments December 31, 2021 5,574 - 5,574 - 688 Year ended December 31, 2020 Net PP&E (held for use) March 31, 2020 $ 65 - - 65 522 December 31, 2020 268 - - 268 287 Net PP&E (held for use) During 2021 and 2020, the estimated fair value of certain noncore assets included in our Lower 48 segment declined to amounts below the carrying values. The carrying values were written down to fair value. The fair values were estimated based on internal discounted cash flow models using the following estimated assumptions: estimated future production, an outlook of future prices from a combination of exchanges (short-term) coupled with 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 for significant assets were as follows: Notes to Consolidated Financial Statements Table of Contents 117 ConocoPhillips 2021 10-K Fair Value (Millions of Dollars) Valuation Technique Unobservable Inputs Range (Arithmetic Average) December 31, 2021 Lower 48 Gulf Coast and Rockies noncore field $ 472 Discounted cash flow Commodity production (MBOED) 0.2 - 17 ( 5.4 ) Commodity price outlook* ($/BOE) $ 41.45 - $ 93.68 ($ 64.39 ) Discount rate** 7.3 % - 9.7 % ( 8.7 %) *Commodity price outlook based on a combination of external pricing service companies' and our internal outlook for years 2024-2050; 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 appropriate. Fair Value (Millions of Dollars) Valuation Technique Unobservable Inputs Range (Arithmetic Average) March 31, 2020 Wind River Basin $ 65 Discounted cash flow Natural gas production (MMCFD) 8.4 - 55.2 ( 22.9 ) Natural gas price outlook* ($/MMBTU) $ 2.67 - $ 9.17 ($ 5.68 ) Discount rate** 7.9 % - 9.1 % ( 8.3 %) *Henry Hub natural gas price outlook based on a combination of external pricing service companies' outlooks for years 2022-2034; future prices escalated at 2.2 % annually after year 2034. **Determined as the weighted average cost of capital of a group of peer companies, adjusted for risks where appropriate. Fair Value (Millions of Dollars) Valuation Technique Unobservable Inputs Range (Arithmetic Average) December 31, 2020 Central Basin Platform $ 244 Discounted cash flow Commodity production (MBOED) 0.5 - 12.7 ( 3.4 ) Commodity price outlook* ($/BOE) $ 37.35 - $ 115.29 ($ 73.80 ) Discount rate** 6.8 % - 7.7 % ( 7.4 %) *Commodity price outlook based on a combination of external pricing service companies' and our internal outlook for years 2023-2050; 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 appropriate. Equity Method Investments During the fourth quarter of 2021, Origin Energy Limited agreed to the sale of 10 percent of their interest in APLNG for $ 1.645 billion, before customary adjustments. ConocoPhillips announced in December 2021 that we were exercising our preemption right under the APLNG Shareholders Agreement to purchase an additional 10 percent shareholding interest in APLNG, subject to government approvals. The sales price associated with this preemption right was determined to reflect a relevant observable market participant view of APLNG’s fair value which was below the carrying value of our existing investment in APLNG. As such, our investment in APLNG was written down to its fair value of $ 5,574 million, resulting in a before-tax charge of $ 688 million. See Note 4 and Note 7 . Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 118 Reported Fair Values of Financial Instruments We used the following methods and assumptions to estimate the fair value of financial instruments: ● Cash and cash equivalents and short-term investments: The carrying amount reported on the balance sheet approximates fair value. For those investments classified as available for sale debt securities, the carrying amount reported on the balance sheet is fair value. ● Accounts and notes receivable (including long-term and related parties): The carrying amount reported on the balance sheet approximates fair value. The valuation technique and methods used to estimate the fair value of the current portion of fixed -rate related party loans is consistent with Loans and advances— related parties. ● Investment in Cenovus Energy: See Note 5 for a discussion of the carrying value and fair value of our investment in CVE common shares. ● Investments in debt securities classified as available for sale: The fair value of investments in debt securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The 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 corroborate d with market data. See Note 12 . ● Loans and advances—related parties: The carrying amount of floating-rate loans approximates fair value. The fair value of fixed-rate loan activity is measured using market observable data and is categorized as Level 2 in the fair value hierarchy. See Note 4 . ● 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 from a pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in the fair value hierarchy. ● Commercial paper: The carrying amount of our commercial paper instruments approximates fair value and is reported on the balance sheet as short-term debt . 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 Fair Value 2021 2020 2021 2020 Financial assets Investment in CVE common shares $ 1,117 1,256 1,117 1,256 Commodity derivatives 593 88 593 88 Investments in debt securities 479 518 479 518 Loans and advances—related parties 114 220 114 220 Financial liabilities Total debt, excluding finance leases 18,673 14,478 22,451 19,106 Commodity derivatives 537 59 537 59 Commodity Derivatives At December 31, 2021, commodity derivative assets and liabilities are presented net with no obligation to return cash collateral and $ 36 million of rights to reclaim cash collateral, respectively. At December 31, 2020, commodity derivative assets and liabilities are presented net with $ 10 million in obligations to return cash collateral and $ 4 million of rights to reclaim cash collateral, respectively. Notes to Consolidated Financial Statements Table of Contents 119 ConocoPhillips 2021 10-K Note 14—Equity Common Stock The changes in our shares of common stock, as categorized in the equity section of the balance sheet, were: Shares 2021 2020 2019 Issued Beginning of year 1,798,844,267 1,795,652,203 1,791,637,434 Acquisition of Concho 285,928,872 - - Distributed under benefit plans 6,789,608 3,192,064 4,014,769 End of year 2,091,562,747 1,798,844,267 1,795,652,203 Held in Treasury Beginning of year 730,802,089 710,783,814 653,288,213 Repurchase of common stock 58,517,786 20,018,275 57,495,601 End of year 789,319,875 730,802,089 710,783,814 Preferred Stock We have authorized 500 million shares of preferred stock, par value $ 0.01 per share, none of which was issued or outstanding at December 31, 2021 or 2020. 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 interest. As a result, as of December 31, 2021 and 2020, we had no noncontrolling interests. Repurchase of Common Stock In late 2016, we initiated our current share repurchase program, which has a current total program authorization of $ 25 billion of our common stock. In May 2021, we began a paced monetization of our CVE common shares, the proceeds of which have been applied to share repurchases. Share repurchases since inception of our current program totaled 247 million shares at a cost of $ 14 billion through the end of December 2021. Note 15—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 that vary based on the nature of usage of the leased asset. 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. For additional information about guarantees, see Note 10 . There are no significant restrictions imposed on us by the lease agreements with regard to dividends, asset dispositions or borrowing ability. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 120 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; however, 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 lease and right-of-use assets and corresponding liabilities are recognized on our consolidated balance sheet based on the present value of future lease payments relating to the use of the underlying asset during the lease term. Future lease payments include variable lease payments that depend upon an index or rate using the index or 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 options. 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. Lease payments that vary subsequent to the commencement date based on future usage levels, the nature of leased 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 or less. 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 against us 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 consolidated 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 on a 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 could be legally enforced against us. In this circumstance, we would recogni ze 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 venture. 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 expiration. Notes to Consolidated Financial Statements Table of Contents 121 ConocoPhillips 2021 10-K 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 31: Millions of Dollars 2021 2020 Operating Leases Finance Leases Operating Leases Finance Leases Right-of-Use Assets Properties, plants and equipment Gross $ 1,812 1,375 Accumulated DD&A ( 857 ) ( 721 ) Net PP&E * 955 654 Prepaid expenses and other current assets $ 16 2 Other assets 649 783 Lease Liabilities Short-term debt ** $ 280 168 Other accruals 188 226 Long-term debt *** 981 723 Other liabilities and deferred credits 479 559 Total lease liabilities $ 667 1,261 785 891 * Includes proportionately consolidated finance lease assets of $ 208 million at December 31, 2021 and $ 258 million at December 31, 2020. ** Includes proportionately consolidated finance lease liabilities of $ 154 million at December 31, 2021 and $ 97 million at December 31, 2020. *** Includes proportionately consolidated finance lease liabilities of $ 462 million at December 31, 2021 and $ 522 million at December 31, 2020. The following table summarizes our lease costs: Millions of Dollars 2021 2020 2019 Lease Cost * Operating lease cost $ 278 321 341 Finance lease cost Amortization of right-of-use assets 148 163 99 Interest on lease liabilities 27 34 37 Short-term lease cost ** 21 42 77 Total lease cost *** $ 474 560 554 * 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 . Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 122 The following table summarizes the lease terms and discount rates as of December 31: 2021 2020 Lease Term and Discount Rate Weighted-average term (years) Operating leases 5.97 6.11 Finance leases 7.49 7.12 Weighted-average discount rate (percent) Operating leases 2.66 2.78 Finance leases 3.24 4.27 The following table summarizes other lease information: Millions of Dollars 2021 2020 2019 Other Information * Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 204 232 203 Operating cash flows from finance leases 6 11 27 Financing cash flows from finance leases 73 255 81 Right-of-use assets obtained in exchange for operating lease liabilities $ 174 250 499 Right-of-use assets obtained in exchange for finance lease liabilities 447 426 26 *The amounts presented in the table above have not been adjusted to reflect amounts recovered or reimbursed from oil and gas coventurers. In 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, 2021: Millions of Dollars Operating Leases Finance Leases Maturity of Lease Liabilities 2022 $ 195 341 2023 143 199 2024 114 166 2025 68 143 2026 50 139 Remaining years 159 462 Total * 729 1,450 Less: portion representing imputed interest ( 62 ) ( 189 ) Total lease liabilities $ 667 1,261 *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. Notes to Consolidated Financial Statements Table of Contents 123 ConocoPhillips 2021 10-K Note 16—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 follows: Millions of Dollars Pension Benefits Other Benefits 2021 2020 2021 2020 U.S. Int’l. U.S. Int’l. Change in Benefit Obligation Benefit obligation at January 1 $ 2,548 4,403 2,319 3,880 170 216 Service cost 73 61 85 54 2 2 Interest cost 53 79 66 85 4 6 Plan participant contributions - - - 1 16 18 Plan amendments - - - 2 - ( 30 ) Actuarial (gain) loss ( 117 ) ( 176 ) 319 398 ( 16 ) 7 Benefits paid ( 654 ) ( 162 ) ( 241 ) ( 151 ) ( 40 ) ( 49 ) Curtailment 12 - - 2 1 - Recognition of termination benefits 9 - - 3 - - Foreign currency exchange rate change - ( 81 ) - 129 - - Benefit obligation at December 31 * $ 1,924 4,124 2,548 4,403 137 170 *Accumulated benefit obligation portion of above at December 31: $ 1,793 3,658 2,359 4,095 Change in Fair Value of Plan Assets Fair value of plan assets at January 1 $ 1,770 4,793 1,591 4,306 - - Actual return on plan assets 97 147 321 416 - - Company contributions 451 119 99 60 24 31 Plan participant contributions - 1 - 1 16 18 Benefits paid ( 654 ) ( 162 ) ( 241 ) ( 151 ) ( 40 ) ( 49 ) Foreign currency exchange rate change - ( 86 ) - 161 - - Fair value of plan assets at December 31 $ 1,664 4,812 1,770 4,793 - - Funded Status $ ( 260 ) 688 ( 778 ) 390 ( 137 ) ( 170 ) Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 124 Millions of Dollars Pension Benefits Other Benefits 2021 2020 2021 2020 U.S. Int’l. U.S. Int’l. Amounts Recognized in the Consolidated Balance Sheet at December 31 Noncurrent assets $ 1 991 - 746 - - Current liabilities ( 29 ) ( 15 ) ( 56 ) ( 11 ) ( 34 ) ( 39 ) Noncurrent liabilities ( 232 ) ( 288 ) ( 722 ) ( 345 ) ( 103 ) ( 131 ) Total recognized $ ( 260 ) 688 ( 778 ) 390 ( 137 ) ( 170 ) Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31 Discount rate 2.80 % 2.15 2.30 1.80 2.65 2.15 Rate of compensation increase 4.00 3.40 4.00 3.10 Interest crediting rate for applicable benefits 2.50 2.10 Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 Discount rate 2.60 % 1.80 3.05 2.35 2.35 3.10 Expected return on plan assets 5.20 2.50 5.80 3.60 Rate of compensation increase 4.00 3.40 4.00 3.35 Interest crediting rate for applicable benefits 2.10 4.10 For both U.S. and international pension plans, 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 class. We rely on a variety of independent market forecasts in developing the expected rate of return for each class of assets. During 2021, the actuarial gains related to the benefit obligations for U.S. and international plans were primarily related to an increase in the discount rates. During 2020 and 2019, the actuarial losses related to the benefit obligations for U.S. and international plans were primarily related to a decrease in the discount rates. Notes to Consolidated Financial Statements Table of Contents 125 ConocoPhillips 2021 10-K The following tables summarize information related to the Company's pension plans with projected and accumulated benefit obligations in excess of the fair value of the plans' assets: Millions of Dollars Pension Benefits 2021 2020 U.S. Int’l. U.S. Int’l. Pension Plans with Projected Benefit Obligation in Excess of Plan Assets Projected benefit obligation $ 261 362 2,548 391 Fair value of plan assets - 58 1,770 35 Pension Plans with Accumulated Benefit Obligation in Excess of Plan Assets Accumulated benefit obligation $ 234 271 2,359 338 Fair value of plan assets - 9 1,770 35 Included in accumulated other comprehensive income (loss) at December 31 were the following before-tax amounts that had not been recognized in net periodic benefit cost: Millions of Dollars Pension Benefits Other Benefits 2021 2020 2021 2020 U.S. Int’l. U.S. Int’l. Unrecognized net actuarial loss (gain) $ 188 86 467 326 ( 1 ) 14 Unrecognized prior service cost (credit) - 1 - - ( 145 ) ( 182 ) Millions of Dollars Pension Benefits Other Benefits 2021 2020 2021 2020 U.S. Int’l. U.S. Int’l. Sources of Change in Other Comprehensive Income (Loss) Net gain (loss) arising during the period $ 134 207 ( 83 ) ( 120 ) 16 ( 7 ) Amortization of actuarial loss included in income (loss)* 145 33 95 21 - 1 Net change during the period $ 279 240 12 ( 99 ) 16 ( 6 ) Prior service credit (cost) arising during the period $ - - - ( 1 ) - 30 Amortization of prior service (credit) included in income (loss) - ( 1 ) - ( 1 ) ( 37 ) ( 31 ) Net change during the period $ - ( 1 ) - ( 2 ) ( 37 ) ( 1 ) *Includes settlement (gains) losses recognized in 2021 and 2020. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 126 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 2021 2020 2019 2021 2020 2019 U.S. Int’l. U.S. Int’l. U.S. Int’l. Components of Net Periodic Benefit Cost Service cost $ 73 61 85 54 79 69 2 2 1 Interest cost 53 79 66 85 79 97 4 6 8 Expected return on plan assets ( 80 ) ( 120 ) ( 85 ) ( 145 ) ( 74 ) ( 138 ) - - - Amortization of prior service credit - ( 1 ) - ( 1 ) - ( 2 ) ( 37 ) ( 31 ) ( 33 ) Recognized net actuarial loss (gain) 43 33 51 22 54 32 - 1 ( 2 ) Settlements loss (gain) 102 - 44 ( 1 ) 62 - - - - Curtailment loss 12 - - - - - - - - Net periodic benefit cost $ 203 52 161 14 200 58 ( 31 ) ( 22 ) ( 26 ) 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 $ 102 million in 2021, $ 43 million in 2020, and $ 62 million in 2019 as lump-sum benefit payments from certain U.S. and international pension plans exceeded the sum of service and interest costs for those plans and led to recognition of settlement losses. 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 10 percent of the unamortized balance each year. We have multiple non-pension 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 of 6.5 percent in 2022 that declines to 5 percent by 2028. The measurement of the U.S. post-65 retiree medical accumulated postretirement benefit obligation assumes a health care cost trend rate of 4.25 percent in 2022 that increases to 5 percent by 2028. Notes to Consolidated Financial Statements Table of Contents 127 ConocoPhillips 2021 10-K Plan Assets We follow a policy of broadly diversifying pension plan assets across asset classes and 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, non-U.S. equities, U.S. fixed income, non-U.S. fixed 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 22 percent equity securities, 74 percent debt securities, 3 percent real estate and 1 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. There have been no changes in the methodologies used at December 31, 2021 and 2020. ● 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 debt 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 in 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 value of shares held. ● Time deposits are valued at cost, which approximates fair value. ● Cash is valued at cost, which approximates fair value. Fair values of international cash equivalents categorized in Level 2 are valued using observable yield curves, discounting and interest rates. U.S. cash balances held in the form of short-term fund units that are redeemable at the measurement date 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 sources. ● 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 and other 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 the accumulated benefit obligation covered by the contract. The participating interest is classified as Level 3 in the fair value hierarchy as the fair value is determined via a combination of quoted market prices, recently executed transactions, and an actuarial present value computation for contract obligations. At December 31, 2021, the participating interest in the annuity contract was valued at $ 83 million and consisted of $ 206 million in debt securities, less $ 123 million for the accumulated benefit obligation covered by the contract. At December 31, 2020, the participating interest in the annuity contract was valued at $ 94 million and consisted of $ 233 million in debt securities, less $ 139 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 contract. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 128 The fair values of our pension plan assets at December 31, by asset class were as follows: Millions of Dollars U.S. International Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 2021 Equity securities U.S. $ 3 - 5 8 - - - - International 42 - - 42 - - - - Mutual funds 17 - - 17 236 403 - 639 Debt securities Corporate - 1 - 1 - - - - Mutual funds - - - - 511 - - 511 Cash and cash equivalents - - - - 68 - - 68 Real estate - - - - - - 157 157 Total in fair value hierarchy $ 62 1 5 68 815 403 157 1,375 Investments measured at net asset value* Equity securities Common/collective trusts $ 394 417 Debt securities Common/collective trusts 1,073 3,015 Cash and cash equivalents 9 - Real estate 36 1 Total** $ 62 1 5 1,580 815 403 157 4,808 *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 $ 83 million and net receivables related to security transactions of $ 5 million. Notes to Consolidated Financial Statements Table of Contents 129 ConocoPhillips 2021 10-K The fair values of our pension plan assets at December 31, by asset class were as follows: Millions of Dollars U.S. International Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 2020 Equity securities U.S. $ - 3 5 8 - - - - International 99 - - 99 - - - - Mutual funds 72 - - 72 235 384 - 619 Debt securities Corporate - 1 - 1 - - - - Mutual funds - - - - 455 - - 455 Cash and cash equivalents - - - - 74 - - 74 Derivatives - - - - 6 - - 6 Real estate - - - - - - 142 142 Total in fair value hierarchy $ 171 4 5 180 770 384 142 1,296 Investments measured at net asset value* Equity securities Common/collective trusts $ 678 372 Debt securities Common/collective trusts 730 3,007 Cash and cash equivalents 8 - Real estate 79 112 Total** $ 171 4 5 1,675 770 384 142 4,787 *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 $ 94 million and net receivables related to security transactions of $ 7 million. Level 3 activity was not material for all periods. Our funding policy for U.S. plans is to contribute at least the minimum required by the Employee Retirement 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 2022, we expect to contribute approximately $ 115 million to our domestic qualified and nonqualified pension and postretirement benefit plans and $ 80 million to our international qualified and nonqualified pension and postretirement benefit plans. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 130 The following benefit payments, which are exclusive of amounts to be paid from the insurance annuity contract and which reflect expected future service, as appropriate, are expected to be paid: Millions of Dollars Pension Other Benefits Benefits U.S. Int’l. 2022 $ 369 152 21 2023 185 152 18 2024 176 158 15 2025 154 162 14 2026 144 164 12 2027–2031 557 893 44 The following table summarizes our severance accrual activity: Millions of Dollars 2021 2020 2019 Balance at January 1 $ 24 23 48 Accruals 170 14 ( 1 ) Benefit payments ( 116 ) ( 13 ) ( 24 ) Balance at December 31 $ 78 24 23 Accruals include severance costs associated with our company-wide restructuring program. Of the remaining balance at December 31, 2021, $ 43 million is classified as short-term. Defined Contribution Plans Most U.S. employees are eligible to participate in the ConocoPhillips Savings Plan (CPSP). Employees can deposit up to 75 percent of their eligible pay, subject to statutory limits, in the CPSP to a choice of 17 investment options. Employees who participate in the CPSP and contribute 1 percent of their eligible pay receive a 6 percent company cash match with a potential company discretionary cash contribution of up to 6 percent. Effective January 1, 2019, new employees, rehires, and employees that elected to opt out of Title II of the ConocoPhillips Retirement Plan are eligible to receive a Company Retirement Contribution (CRC) of 6 percent of eligible pay into their CPSP. After three years of service with the company, the employee is 100 percent vested in any CRC. Company contributions charged to expense for the CPSP and predecessor plans were $ 93 million in 2021, $ 62 million in 2020, and $ 82 million in 2019. 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 $ 26 million in 2021, $ 25 million in 2020, and $ 30 million in 2019. Share-Based Compensation Plans The 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips (the Plan) was approved by shareholders in May 2014, replacing similar prior plans and providing that no new awards shall be granted under the prior plans. Over its 10 -year life, the Plan allows the issuance of up to 79 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 Plan or the prior plans that are forfeited, expire or are cancelled without delivery of shares of common stock or which result in the forfeiture of shares of common stock back to the company shall be available for awards under the Plan. Of the 79 million shares available for issuance under the Plan, no more than 40 million shares of common stock are available for incentive stock options. The Human Resources and Compensation Committee of our Board of Directors is authorized to determine the types, terms, conditions and limitations of awards granted. Awards may be granted in the form of, but not limited to, stock options, restricted Notes to Consolidated Financial Statements Table of Contents 131 ConocoPhillips 2021 10-K stock units and 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 to earn the award); 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 by employees at the time of their retirement. Some of our share-based awards vest ratably (i.e., portions of the 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 were: Millions of Dollars 2021 2020 2019 Compensation cost $ 304 159 274 Tax benefit 76 40 71 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 grant. 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. Beginning in 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 beginning with 2020 awards. The following summarizes our stock option activity for the year ended December 31, 2021: Millions of Dollars Weighted-Average Aggregate Options Exercise Price Intrinsic Value Outstanding at December 31, 2020 16,922,525 $ 55.12 $ 22 Exercised ( 3,846,361 ) 51.40 68 Expired or cancelled ( 1,102,381 ) 53.47 Outstanding at December 31, 2021 11,973,783 $ 56.46 $ 188 Vested at December 31, 2021 11,973,783 $ 56.46 $ 188 Exercisable at December 31, 2021 11,973,783 $ 56.46 $ 188 The weighted-average remaining contractual term of outstanding options, vested options and exercisable options at December 31, 2021, were all 3.06 years. The aggregate intrinsic value of options exercised was $ 23 million in 2020 and $ 39 million in 2019. During 2021, we received $ 198 million in cash and realized a tax benefit of $ 15 million from the exercise of options. At December 31, 2021, all outstanding stock options were fully vested and there was no remaining compensation cost to be recorded. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 132 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 unit. 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 or an accrued reinvested dividend equivalent that is charged to retained earnings. 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 31, 2021: Weighted-Average Millions of Dollars Stock Units Grant Date Fair Value Total Fair Value Outstanding at December 31, 2020 6,431,985 $ 58.94 Granted 4,590,103 46.56 Forfeited ( 566,047 ) 48.59 Issued ( 2,810,730 ) 54.74 $ 144 Outstanding at December 31, 2021 7,645,311 $ 53.81 Not Vested at December 31, 2021 5,509,133 53.81 At December 31, 2021, the remaining unrecognized compensation cost from the unvested stock-settled units was $ 126 million, which will be recognized over a weighted-average period of 1.67 years, the longest period being 2.59 years. The weighted-average grant date fair value of stock unit awards granted during 2020 and 2019 was $ 57.40 and $ 67.77 , respectively. The total fair value of stock units issued during 2020 and 2019 was $ 143 million and $ 225 million, respectively. Cash-Settled 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. Notes to Consolidated Financial Statements Table of Contents 133 ConocoPhillips 2021 10-K The following summarizes our cash -settled stock unit activity for the year ended December 31, 2021: Weighted-Average Millions of Dollars Stock Units Grant Date Fair Value Total Fair Value Outstanding at December 31, 2020 614,615 $ 39.95 Granted 11,186 57.19 Forfeited ( 2,927 ) 51.43 Issued ( 396,398 ) 50.75 $ 20 Outstanding at December 31, 2021 226,476 $ 72.18 Not Vested at December 31, 2021 59,443 72.18 At December 31, 2021, there was no remaining unrecognized compensation cost to be recorded for the unvested cash-settled units. The weighted-average grant date fair value of stock unit awards granted during 2020 and 2019 were $ 41.59 and $ 68.20 , respectively. The total fair value of stock units issued during 2020 and 2019 were negligible and $ 6 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 stock price through the end of each subsequent reporting period, through the grant date for stock -settled awards and 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 effective 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, 2021: Weighted-Average Millions of Dollars Stock Units Grant Date Fair Value Total Fair Value Outstanding at December 31, 2020 1,736,728 $ 50.56 Issued ( 287,881 ) 49.91 $ 18 Outstanding at December 31, 2021 1,448,847 $ 50.69 Not Vested at December 31, 2021 3,191 $ 48.61 Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 134 At December 31, 2021, there was no remaining unrecognized compensation cost to be recorded on the unvested stock-settled performance share s. The weighted-average grant date fair value of stock-settled PSUs granted during 2020 and 2019 was $ 58.61 and $ 68.90 , respectively. The total fair value of stock-settled PSUs issued during 2020 and 2019 was $ 13 million and $ 25 million, respectively. Cash-Settled In connection with and immediately following the separation of our Downstream businesses in 2012, grants of new PSUs, subject to a shortened performance period, were authorized. Once granted, these PSUs vest, absent employee election to defer, on the earlier of five years after the grant date of the award or the date the employee becomes eligible for retirement. 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. Otherwise, we recognize compensation expense beginning on the grant date and ending on the date the PSUs are scheduled to vest. These PSUs are settled in cash equal to the fair market value of a share of ConocoPhillips common stock per unit on the settlement date and thus are classified as liabilities on the balance sheet. Until settlement occurs, recipients of the PSUs receive a quarterly cash payment of a dividend equivalent that is charged to compensation expense. Beginning in 2013, PSUs authorized for future grants will vest 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 at the conclusion of the performance period. These PSUs 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. For performance periods beginning before 2018, during the performance period, recipients of the PSUs do not receive a quarterly cash payment of a dividend equivalent, but after the performance period ends, until settlement in cash occurs, recipients of the PSUs receive a quarterly cash payment of a dividend equivalent that is charged to compensation expense. For the performance period beginning in 2018, recipients of the PSUs 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. The following summarizes our cash -settled Performance Share Program activity for the year ended December 31, 2021: Weighted-Average Millions of Dollars Stock Units Grant Date Fair Value Total Fair Value Outstanding at December 31, 2020 124,529 $ 39.95 Granted 1,073,228 46.65 Settled ( 1,080,078 ) 48.13 $ 52 Outstanding at December 31, 2021 117,679 $ 72.18 At December 31, 2021, all outstanding cash-settled performance awards were fully vested and there was no remaining compensation cost to be recorded. The weighted-average grant date fair value of cash-settled PSUs granted during 2020 and 2019 was $ 58.61 and $ 68.90 , respectively. The total fair value of cash-settled performance share awards settled during 2020 and 2019 was $ 116 million and $ 171 million, respectively. Notes to Consolidated Financial Statements Table of Contents 135 ConocoPhillips 2021 10-K From inception of the Performance Share Program through 2013, approved PSU awards were granted after the conclusion of performance periods. Beginning in February 2014, initial target PSU awards are issued near the beginning of new performance periods. These initial target PSU awards will terminate at the end of the performance periods and will be settled after the performance periods have ended. Also in 2014, initial target PSU awards were issued for open performance periods that began in prior years. For the open performance period beginning in 2012, the initial target PSU awards terminated at the end of the three-year performance period and were replaced with approved PSU awards. For the open performance period beginning in 2013, the initial target PSU awards terminated at the end of the three-year performance period and were settled after the performance period ended. There is no effect on recognition of compensation expense. Other —In addition to the above active programs, we have outstanding shares of restricted stock and restricted stock units that were either issued as part of our non-employee director compensation program for current and former members of the company’s Board of Directors, as part of an executive compensation program that has been discontinued or acquired as a result of an acquisition. Generally, the recipients of the restricted shares or units receive a dividend or dividend equivalent. The following summarizes the aggregate activity of these restricted shares and units for the year ended December 31, 2021: Weighted-Average Millions of Dollars Stock Units Grant Date Fair Value Total Fair Value Outstanding at December 31, 2020 970,099 $ 47.78 Granted 797,704 46.43 Cancelled ( 1,948 ) 27.80 Issued ( 149,488 ) 46.80 $ 8 Outstanding at December 31, 2021 1,616,367 $ 47.24 Not Vested at December 31, 2021 695,958 $ 45.87 At December 31, 2021, the remaining compensation cost from the unvested restricted stock was $ 20 million, which will be recognized over a weighted-average period of 1.46 years, the longest period being 2 years. The weighted-average grant date fair value of awards granted during 2020 and 2019 was $ 51.46 and $ 63.58 , respectively. The total fair value of awards issued during 2020 and 2019 was $ 6 million and $ 11 million, respectively. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 136 Note 17—Income Taxes Components of income tax provision (benefit) were: Millions of Dollars 2021 2020 2019 Income Taxes Federal Current $ 32 3 18 Deferred 1,161 ( 625 ) ( 113 ) Foreign Current 3,128 350 2,545 Deferred 66 ( 70 ) ( 323 ) State and local Current 127 ( 4 ) 148 Deferred 119 ( 139 ) ( 8 ) Total tax provision (benefit) $ 4,633 ( 485 ) 2,267 Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Major components of deferred tax liabilities and assets at December 31 were: Millions of Dollars 2021 2020 Deferred Tax Liabilities PP&E and intangibles $ 10,170 7,744 Inventory 44 64 Other 213 242 Total deferred tax liabilities 10,427 8,050 Deferred Tax Assets Benefit plan accruals 321 540 Asset retirement obligations and accrued environmental costs 2,297 2,262 Investments in joint ventures 1,684 1,653 Other financial accruals and deferrals 827 907 Loss and credit carryforwards 7,402 8,904 Other 399 365 Total deferred tax assets 12,930 14,631 Less: valuation allowance ( 8,342 ) ( 9,965 ) Total deferred tax assets net of valuation allowance 4,588 4,666 Net deferred tax liabilities $ 5,839 3,384 At December 31, 2021, noncurrent assets and liabilities included deferred taxes of $ 340 million and $ 6,179 million, respectively. At December 31, 2020, noncurrent assets and liabilities included deferred taxes of $ 363 million and $ 3,747 million, respectively. At December 31, 2021, the loss and credit carryforward deferred tax assets were primarily related to U.S. foreign tax credit carryforwards of $ 5.5 billion and various jurisdictions net operating loss and credit carryforwards of $ 1.9 billion. If not utilized, U.S. foreign tax credits and net operating losses will begin to expire in 2022. Our overall deferred tax liability increased during 2021 by $ 1.1 billion due to our Concho acquisition. See Note 3 . Notes to Consolidated Financial Statements Table of Contents 137 ConocoPhillips 2021 10-K The following table shows a reconciliation of the beginning and ending deferred tax asset valuation allowance for for 2021, 2020 and 2019: Millions of Dollars 2021 2020 2019 Balance at January 1 $ 9,965 10,214 3,040 Charged to expense (benefit) ( 45 ) 460 ( 225 ) Other* ( 1,578 ) ( 709 ) 7,399 Balance at December 31 $ 8,342 9,965 10,214 *Represents changes due to originating deferred tax asset that have no impact to our effective tax rate, acquisitions/dispositions/revisions and the effect of translating foreign financial statements. Valuation allowances have been established to reduce deferred tax assets to an amount that will, more likely than not, be realized. At December 31, 2021, we have maintained a valuation allowance with respect to substantially all U.S. foreign tax credit carryforwards as well as certain net operating loss carryforwards for various jurisdictions. During 2021, the valuation allowance movement charged to earnings primarily relates to the fair value measurement of our CVE common shares that are not expected to be realized, and the expected realization of certain U.S. tax attributes associated with our planned disposition of our Indonesia assets. This is partially offset by Australian tax benefits associated with our impairment of APLNG that we do not expect to be realized. Other movements are primarily related to valuation allowances on expiring tax attributes. Based on our historical taxable income, expectations for the future, and available tax-planning strategies, management expects deferred tax assets, net of valuation allowances, will primarily be realized as offsets to reversing deferred tax liabilities. For more information on our pending Indonesia disposition see Note 3 . During 2020, the valuation allowance movement charged to earnings primarily related to capital losses in Australia and to the fair value measurement of our CVE common shares that are not expected to be realized. Other movements are primarily related to valuation allowances on expiring tax attributes. On December 2, 2019, the Internal Revenue Service finalized foreign tax credit regulations related to the 2017 Tax Cuts and Jobs Act. Due to the finalization of these regulations, in the fourth quarter of 2019 we recognized $ 151 million of net deferred tax assets. Correspondingly, we recorded $ 6,642 million of existing foreign tax credit carryovers where recognition was previously considered to be remote. Present legislation still makes their realization unlikely and therefore these credits have been offset with a full valuation allowance. At December 31, 2021, unremitted income considered to be permanently reinvested in certain foreign subsidiaries and foreign corporate joint ventures totaled approximately $ 4,384 million. Deferred income taxes have not been provided on this amount, as we do not plan to initiate any action that would require the payment of income taxes. The estimated amount of additional tax, primarily local withholding tax, that would be payable on this income if distributed is approximately $ 219 million. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 138 The following table shows a reconciliation of the beginning and ending unrecognized tax benefits for 2021, 2020 and 2019: Millions of Dollars 2021 2020 2019 Balance at January 1 $ 1,206 1,177 1,081 Additions based on tax positions related to the current year 15 6 9 Additions for tax positions of prior years 177 67 120 Reductions for tax positions of prior years ( 5 ) ( 34 ) ( 22 ) Settlements - ( 9 ) ( 9 ) Lapse of statute ( 48 ) ( 1 ) ( 2 ) Balance at December 31 $ 1,345 1,206 1,177 Included in the balance of unrecognized tax benefits for 2021, 2020 and 2019 were $ 1,261 million, $ 1,128 million and $ 1,100 million, respectively, which, if recognized, would impact our effective tax rate. The balance of the unrecognized tax benefits increased in 2021 mainly due to U.S. tax credits acquired through our Concho acquisition. The balance of the unrecognized tax benefits increased in 2019 mainly due to the treatment of our PDVSA settlement. See Note 3 and Note 11 . At December 31, 2021, 2020 and 2019, accrued liabilities for interest and penalties totaled $ 47 million, $ 46 million and $ 42 million, respectively, net of accrued income taxes. Interest and penalties resulted in a reduction to earnings of $ 1 million in 2021, a reduction of $ 4 million in 2020, and benefit to earnings of $ 3 million in 2019. We file tax returns in the U.S. federal jurisdiction and in many foreign and state jurisdictions. Audits in major jurisdictions are generally complete as follows: Canada (2016), U.S. (2017) and Norway (2020). Issues in dispute for audited years and audits for subsequent years are ongoing and in various stages of completion in the many jurisdictions in which we operate around the world. Consequently, the balance in unrecognized tax benefits can be expected to fluctuate from period to period. Within the next twelve months, we may have audit periods close that could significantly impact our total unrecognized tax benefits. It is reasonably possible such changes could be significant when compared with our total unrecognized tax benefits, but the amount of change is not estimable. In January 2022, the IRS closed the 2017 audit of our U.S. federal income tax return. As a result, in the first quarter of 2022, we will recognize a previously unrecognized $ 475 million federal tax benefit related to the recovery of outside tax basis previously offset by a full reserve. Notes to Consolidated Financial Statements Table of Contents 139 ConocoPhillips 2021 10-K The amounts of U.S. and foreign income (loss) before income taxes, with a reconciliation of tax at the federal statutory rate to the provision for income taxes, were: Millions of Dollars Percent of Pre-Tax Income (Loss) 2021 2020 2019 2021 2020 2019 Income (loss) before income taxes United States $ 8,024 ( 3,587 ) 4,704 63.1 % 114.2 49.4 Foreign 4,688 447 4,820 36.9 ( 14.2 ) 50.6 $ 12,712 ( 3,140 ) 9,524 100.0 % 100.0 100.0 Federal statutory income tax $ 2,670 ( 659 ) 2,000 21.0 % 21.0 21.0 Non-U.S. effective tax rates 1,915 194 1,399 15.1 ( 6.2 ) 14.7 Tax impact of debt restructuring 75 - - 0.6 - - Australia disposition - ( 349 ) - - 11.1 - U.K. disposition - - ( 732 ) - - ( 7.7 ) Recovery of outside basis ( 55 ) ( 22 ) ( 77 ) ( 0.4 ) 0.7 ( 0.8 ) Adjustment to tax reserves ( 11 ) 18 9 ( 0.1 ) ( 0.6 ) 0.1 Adjustment to valuation allowance ( 45 ) 460 ( 225 ) ( 0.4 ) ( 14.6 ) ( 2.4 ) State income tax 194 ( 112 ) 123 1.5 3.6 1.3 Malaysia Deepwater Incentive - - ( 164 ) - - ( 1.7 ) Enhanced oil recovery credit ( 99 ) ( 6 ) ( 27 ) ( 0.8 ) 0.2 ( 0.3 ) Other ( 11 ) ( 9 ) ( 39 ) ( 0.1 ) 0.3 ( 0.4 ) Tota l $ 4,633 ( 485 ) 2,267 36.4 % 15.5 23.8 Our effective tax rate for 2021 was driven by our jurisdictional tax rates for this profit mix with net favorable impacts from routine tax credits and valuation allowance adjustments. The valuation allowance adjustment is primarily related to the fair value measurement and disposition of our CVE common shares of $ 218 million and the ability to utilize the U.S. foreign tax credit and capital loss carryforward due to our anticipated disposition of our Indonesia entities of $ 29 million. This was partially offset by an increase to our valuation allowance related to the tax impact of the impairment of our APLNG investment of $ 206 million for which we do not expect to receive a tax benefit. Our effective tax rate for 2020 was impacted by the disposition of our Australia-West assets as well as the valuation allowance related to the fair value measurement of our CVE common shares. The Australia-West disposition generated a before-tax gain of $ 587 million with an associated tax benefit of $ 10 million and resulted in the de-recognition of deferred tax assets resulting in $ 92 million of tax expense. The disposition also generated an Australia capital loss tax benefit of $ 313 million which has been fully offset by a valuation allowance. Due to changes in the fair market value of CVE common shares, the valuation allowance was increased by $ 178 million to offset the expected capital loss. Our effective tax rate for 2019 was favorably impacted by the sale of two of our U.K. subsidiaries. The disposition generated a before-tax gain of more than $ 1.7 billion with an associated tax benefit of $ 335 million. The disposition generated a U.S. capital loss of approximately $ 2.1 billion which has generated a U.S. tax benefit of approximately $ 285 million. The remaining U.S. capital loss has been recorded as a deferred tax asset fully offset with a valuation allowance. See Note 3. During 2019, we received final partner approval in Malaysia Block G to claim certain deepwater tax credits. As a result, we recorded an income tax benefit of $ 164 million. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 140 Note 18—Accumulated Other Comprehensive Loss Accumulated other comprehensive loss in the equity section of the balance sheet included: Millions of Dollars Defined Benefit Plans Net Unrealized Gain/(Loss) on Securities Foreign Currency Translation Accumulated Other Comprehensive Loss December 31, 2018 $ ( 361 ) - ( 5,702 ) ( 6,063 ) Other comprehensive income (loss) 51 - 695 746 Cumulative effect of adopting ASU No. 2018-02* ( 40 ) - - ( 40 ) December 31, 2019 ( 350 ) - ( 5,007 ) ( 5,357 ) Other comprehensive income ( 75 ) 2 212 139 December 31, 2020 ( 425 ) 2 ( 4,795 ) ( 5,218 ) Other comprehensive income (loss) 394 ( 2 ) ( 124 ) 268 December 31, 2021 $ ( 31 ) - ( 4,919 ) ( 4,950 ) *We adopted ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," beginning January 1, 2019. During 2019, we recognized $ 483 million of foreign currency translation adjustments related to the completion of our sale of two ConocoPhillips U.K. subsidiaries. See Note 3 . The following table summarizes reclassifications out of accumulated other comprehensive loss during the years ended December 31: Millions of Dollars 2021 2020 Defined Benefit Plans $ 109 72 Above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of: $ 31 13 See Note 16. Notes to Consolidated Financial Statements Table of Contents 141 ConocoPhillips 2021 10-K Note 19—Cash Flow Information Millions of Dollars 2021 2020 2019 Noncash Investing Activities Increase (decrease) in PP&E related to an increase (decrease) in asset retirement obligations $ 442 ( 116 ) 205 Cash Payments Interest $ 924 785 810 Income taxes 856 905 2,905 Net Sales (Purchases) of Investments Short-term investments purchased $ ( 5,554 ) ( 12,435 ) ( 4,902 ) Short-term investments sold 8,810 12,015 2,138 Investments and long-term receivables purchased ( 279 ) ( 325 ) ( 146 ) Investments and long-term receivables sold 114 87 - $ 3,091 ( 658 ) ( 2,910 ) The following items are included in the “Cash Flows from Operating Activities” section of our consolidated cash flows. In 2021, we made a total of $ 297 million in contributions to our U.S. qualified pension plan. In 2019, we made a $ 324 million contribution to our U.K. pension plan. We collected $ 330 million in 2019 from PDVSA under settlement agreements related to an award issued by the ICC Tribunal in 2018. For more information on these settlements, see Note 11 . See Note 3 and Note 12 for additional information on cash and non-cash changes to our consolidated balance sheet associated with our Concho acquisition. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 142 Note 20—Other Financial Information Millions of Dollars 2021 2020 2019 Interest and Debt Expense Incurred Debt $ 887 788 799 Other 59 73 36 946 861 835 Capitalized ( 62 ) ( 55 ) ( 57 ) Expensed $ 884 806 778 Other Income (Loss) Interest income $ 33 100 166 Gain (loss) on investment in Cenovus Energy* 1,040 ( 855 ) 649 Other, net 130 246 543 $ 1,203 ( 509 ) 1,358 *See Note 5. Research and Development Expenditures —expensed $ 62 75 82 Shipping and Handling Costs $ 1,047 857 1,008 Foreign Currency Transaction (Gains) Losses —after-tax Alaska $ - - - Lower 48 - - - Canada ( 1 ) ( 7 ) 5 Europe, Middle East and North Africa ( 11 ) ( 15 ) - Asia Pacific 2 ( 11 ) 31 Other International 1 2 1 Corporate and Other ( 7 ) ( 31 ) 21 $ ( 16 ) ( 62 ) 58 Millions of Dollars 2021 2020 Properties, Plants and Equipment Proved properties* $ 114,274 ** 94,312 Unproved properties* 10,993 4,141 Other 4,379 3,653 Gross properties, plants and equipment 129,646 102,106 Less: Accumulated depreciation, depletion and amortization ( 64,735 ) ** ( 62,213 ) Net properties, plants and equipment $ 64,911 39,893 *Proved and Unproved properties increased by $ 20.0 billion and $ 6.9 billion, respectively, in 2021 compared with 2020, primarily due to the Concho and Shell Permian acquisitions. **Excludes assets classified as held for sale at December 31, 2021. See Note 3. Notes to Consolidated Financial Statements Table of Contents 143 ConocoPhillips 2021 10-K Note 21—Related Party Transactions Our related parties primarily include equity method investments and certain trusts for the benefit of employees. For disclosures on trusts for the benefit of employees, see Note 16 . Significant transactions with our equity affiliates were: Millions of Dollars 2021 2020 2019 Operating revenues and other income $ 88 79 89 Purchases 5 - 38 Operating expenses and selling, general and administrative expenses 196 63 65 Net interest income* ( 2 ) ( 5 ) ( 13 ) *We paid interest to, or received interest from, various affiliates. See Note 4, for additional information on loans to affiliated companies. Note 22—Sales and Other Operating Revenues Revenue from Contracts with Customers The following table provides further disaggregation of our consolidated sales and other operating revenues: Millions of Dollars 2021 2020 2019 Revenue from contracts with customers $ 34,590 13,662 26,106 Revenue from contracts outside the scope of ASC Topic 606 Physical contracts meeting the definition of a derivative 11,500 5,177 6,558 Financial derivative contracts ( 262 ) ( 55 ) ( 97 ) Consolidated sales and other operating revenues $ 45,828 18,784 32,567 Revenues from contracts outside the scope of ASC Topic 606 relate primarily to physical gas contracts at market prices which qualify as derivatives accounted for under ASC Topic 815, “Derivatives and Hedging,” and for which we have not elected NPNS. There is no significant difference in contractual terms or the policy for recognition of revenue from these contracts and those within the scope of ASC Topic 606. The following disaggregation of revenues is provided in conjunction with Note 23—Segment Disclosures and Related Information : Millions of Dollars 2021 2020 2019 Revenue from Outside the Scope of ASC Topic 606 by Segment Lower 48 $ 9,050 3,966 4,989 Canada 1,457 727 691 Europe, Middle East and North Africa 993 484 878 Physical contracts meeting the definition of a derivative $ 11,500 5,177 6,558 Millions of Dollars 2021 2020 2019 Revenue from Outside the Scope of ASC Topic 606 by Product Crude oil $ 757 395 804 Natural gas 10,034 4,339 5,313 Other 709 443 441 Physical contracts meeting the definition of a derivative $ 11,500 5,177 6,558 Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 144 Practical Expedients Typically, our commodity sales contracts are less than 12 months in duration; however, in certain specific cases may extend longer, which may be out to the end of field life. We have long-term commodity sales contracts which use prevailing market prices at the time of delivery, and under these contracts, the market-based variable consideration for each performance obligation (i.e., delivery of commodity) is allocated to each wholly unsatisfied performance obligation within the contract. Accordingly, we have applied the practical expedient allowed in ASC Topic 606 and do not disclose the aggregate amount of the transaction price allocated to performance obligations or when we expect to recognize revenues that are unsatisfied (or partially unsatisfied) as of the end of the reporting period. Receivables and Contract Liabilities Receivables from Contracts with Customers At December 31, 2021, the “Accounts and notes receivable” line on our consolidated balance sheet included trade receivables of $ 5,268 million compared with $ 1,827 million at December 31, 2020, and included both contracts with customers within the scope of ASC Topic 606 and those that are outside the scope of ASC Topic 606. We typically receive payment within 30 days or less (depending on the terms of the invoice) once delivery is made. Revenues that are outside the scope of ASC Topic 606 relate primarily to physical gas sales contracts at market prices for which we do not elect NPNS and are therefore accounted for as a derivative under ASC Topic 815. There is little distinction in the nature of the customer or credit quality of trade receivables associated with gas sold under contracts for which NPNS has not been elected compared with trade receivables where NPNS has been elected. Contract Liabilities from Contracts with Customers We have entered into contractual arrangements where we license proprietary technology to customers related to the optimization process for operating LNG plants. The agreements typically provide for negotiated payments to be made at stated milestones. The payments are not directly related to our performance under the contract and are recorded as deferred revenue to be recognized as revenue when the customer can utilize and benefit from their right to use the license. Payments are received in installments over the construction period. Millions of Dollars Contract Liabilities At December 31, 2020 $ 97 Contractual payments received 15 Revenue recognized ( 62 ) At December 31, 2021 $ 50 Amounts Recognized in the Consolidated Balance Sheet at December 31, 2021 Current liabilities $ 50 We expect to recognize the contract liabilities as of December 31, 2021, as revenue during 2022. Notes to Consolidated Financial Statements Table of Contents 145 ConocoPhillips 2021 10-K Note 23—Segment Disclosures and Related Information We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide basis. We manage our operations through six operating segments, which are primarily defined by geographic region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International. Corporate and Other represents income and costs not directly associated with an operating segment, such as most interest expense, premiums on early retirement of debt, corporate overhead and certain technology activities, including licensing revenues. Corporate assets include all cash and cash equivalents and short-term investments. We evaluate performance and allocate resources based on net income (loss) attributable to ConocoPhillips. Segment accounting policies are the same as those in Note 1 . Intersegment sales are at prices that approximate market. In 2021, we completed our acquisition of Concho, an independent oil and gas exploration and production company with operations across New Mexico and West Texas as well as our acquisition of Shell’s Permian assets in the Texas Delaware Basin. The accounting close date of the Shell transaction , used for reporting purposes, was December 31, 2021. Results of operations for Concho and assets acquired from Shell are included in our Lower 48 segment. Certain transaction and restructuring costs associated with these acquisitions are included in our Corporate and Other segment. See Note 3 . Analysis of Results by Operating Segment Millions of Dollars 2021 2020 2019 Sales and Other Operating Revenues Alaska $ 5,480 3,408 5,483 Intersegment eliminations - ( 11 ) - Alaska 5,480 3,397 5,483 Lower 48 29,306 9,872 15,514 Intersegment eliminations ( 12 ) ( 51 ) ( 46 ) Lower 48 29,294 9,821 15,468 Canada 4,077 1,666 2,910 Intersegment eliminations ( 1,583 ) ( 405 ) ( 1,141 ) Canada 2,494 1,261 1,769 Europe, Middle East and North Africa 5,902 1,919 5,101 Intersegment eliminations - ( 2 ) - Europe, Middle East and North Africa 5,902 1,917 5,101 Asia Pacific 2,579 2,363 4,525 Other International 4 7 - Corporate and Other 75 18 221 Consolidated sales and other operating revenues $ 45,828 18,784 32,567 The market for our products is large and diverse, therefore, our sales and other operating revenues are not dependent upon any single customer. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 146 Millions of Dollars 2021 2020 2019 Depreciation, Depletion, Amortization and Impairments Alaska $ 1,002 996 805 Lower 48 4,067 3,358 3,224 Canada 392 342 232 Europe, Middle East and North Africa 862 775 887 Asia Pacific 1,483 809 1,285 Other International - - - Corporate and Other 76 54 62 Consolidated depreciation, depletion, amortization and impairments $ 7,882 6,334 6,495 Equity in Earnings of Affiliates Alaska $ 5 ( 7 ) 7 Lower 48 ( 18 ) ( 11 ) ( 159 ) Canada - - - Europe, Middle East and North Africa 502 311 470 Asia Pacific 343 137 461 Other International - 2 - Corporate and Other - - - Consolidated equity in earnings of affiliates $ 832 432 779 Income Tax Provision (Benefit) Alaska $ 402 ( 256 ) 472 Lower 48 1,390 ( 378 ) 137 Canada 150 ( 185 ) ( 43 ) Europe, Middle East and North Africa 2,543 136 1,425 Asia Pacific 483 294 501 Other International ( 53 ) ( 20 ) 8 Corporate and Other ( 282 ) ( 76 ) ( 233 ) Consolidated income tax provision (benefit) $ 4,633 ( 485 ) 2,267 Net Income (Loss) Attributable to ConocoPhillips Alaska $ 1,386 ( 719 ) 1,520 Lower 48 4,932 ( 1,122 ) 436 Canada 458 ( 326 ) 279 Europe, Middle East and North Africa 1,167 448 3,170 Asia Pacific 453 962 1,483 Other International ( 107 ) ( 64 ) 263 Corporate and Other ( 210 ) ( 1,880 ) 38 Consolidated net income (loss) attributable to ConocoPhillips $ 8,079 ( 2,701 ) 7,189 Notes to Consolidated Financial Statements Table of Contents 147 ConocoPhillips 2021 10-K Millions of Dollars 2021 2020 2019 Investments in and Advances to Affiliates Alaska $ 58 62 83 Lower 48 242 25 35 Canada - - - Europe, Middle East and North Africa 797 918 1,070 Asia Pacific 5,603 6,705 7,265 Other International 1 - - Corporate and Other - - - Consolidated investments in and advances to affiliates $ 6,701 7,710 8,453 Total Assets Alaska $ 14,812 14,623 15,453 Lower 48 41,699 11,932 14,425 Canada 7,439 6,863 6,350 Europe, Middle East and North Africa 9,125 8,756 9,269 Asia Pacific 9,840 11,231 13,568 Other International 1 226 285 Corporate and Other 7,745 8,987 11,164 Consolidated total assets $ 90,661 62,618 70,514 Capital Expenditures and Investments Alaska $ 982 1,038 1,513 Lower 48 3,129 1,881 3,394 Canada 203 651 368 Europe, Middle East and North Africa 534 600 708 Asia Pacific 390 384 584 Other International 33 121 8 Corporate and Other 53 40 61 Consolidated capital expenditures and investments $ 5,324 4,715 6,636 Interest Income and Expense Interest income Alaska $ - - - Lower 48 - - - Canada - - - Europe, Middle East and North Africa 2 5 11 Asia Pacific 9 7 6 Other International - - - Corporate and Other 22 88 149 Interest and debt expense Corporate and Other $ 884 806 778 Sales and Other Operating Revenues by Product Crude oil $ 23,648 9,736 18,482 Natural gas 16,904 6,427 8,715 Natural gas liquids 1,668 528 814 Other* 3,608 2,093 4,556 Consolidated sales and other operating revenues by product $ 45,828 18,784 32,567 *Includes LNG and bitumen. Notes to Consolidated Financial Statements Table of Contents ConocoPhillips 2021 10-K 148 Geographic Information Millions of Dollars Sales and Other Operating Revenues (1) Long-Lived Assets (2) 2021 2020 2019 2021 2020 2019 United States $ 34,847 13,230 21,159 50,580 24,034 26,566 Australia and Timor-Leste - 605 1,647 5,579 6,676 7,228 Canada 2,494 1,261 1,769 6,608 6,385 5,769 China 724 460 772 1,476 1,491 1,447 Indonesia (3) 879 689 875 28 464 605 Libya 1,102 155 1,103 659 670 668 Malaysia 975 610 1,230 1,252 1,501 1,871 Norway 2,563 1,426 2,349 4,681 5,294 5,258 United Kingdom 2,236 336 1,649 1 1 2 Other foreign countries 8 12 14 748 1,087 1,308 Worldwide consolidated $ 45,828 18,784 32,567 71,612 47,603 50,722 (1) Sales and other operating revenues are attributable to countries based on the location of the selling operation. (2) Defined as net PP&E plus equity investments and advances to affiliated companies. (3) Met held for sale criteria in 2021 in conjunction with our agreement to sell our subsidiary holding our Indonesia assets. Supplementary Data Table of Contents 149 ConocoPhillips 2021 10-K Oil and Gas Operations (Unaudited) In accordance with FASB ASC Topic 932, “Extractive Activities—Oil and Gas,” and regulations of the SEC, we are making certain supplemental disclosures about our oil and gas exploration and production operations. These disclosures include information about our consolidated oil and gas activities and our proportionate share of our equity affiliates’ oil and gas activities in our operating segments. As a result, amounts reported as equity affiliates in Oil and Gas Operations may differ from those shown in the individual segment disclosures reported elsewhere in this report. Our disclosures by geographic area include the U.S., Canada, Europe, Asia Pacific/Middle East (inclusive of equity affiliates) , and Africa. As required by current authoritative guidelines, the estimated future date when an asset will be permanently shut down for economic reasons is based on historical 12-month first-of-month average prices and current costs. This estimated date when production will end affects the amount of estimated reserves. Therefore, as prices and cost levels change from year to year, the estimate of proved reserves also changes. Generally, our proved reserves decrease as prices decline and increase as prices rise. Our proved reserves include estimated quantities related to PSCs, which are reported under the “economic interest” method, as well as variable-royalty regimes, and are subject to fluctuations in commodity prices, recoverable operating expenses and capital costs. If costs remain stable, reserve quantities attributable to recovery of costs will change inversely to changes in commodity prices. For example, if prices increase, then our applicable reserve quantities would decline. At December 31, 2021, approximately 4 percent of our total proved reserves were under PSCs, located in our Asia Pacific/Middle East geographic reporting area, and 5 percent of our total proved reserves were under a variable-royalty regime, located in our Canada geographic reporting area. Reserves Governance The recording and reporting of proved reserves are governed by criteria established by regulations of the SEC and FASB. Proved reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain it will commence the project within a reasonable time. Proved reserves are further classified as either developed or undeveloped. Proved developed reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, or in which the cost of the required equipment is relatively minor compared with the cost of a new well, and through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. Proved undeveloped reserves are proved reserves expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence provided by reliable technologies exists that establishes reasonable certainty of economic producibility at greater distances. As defined by SEC regulations, reliable technologies may be used in reserve estimation when they have been demonstrated in the field to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. The technologies and data used in the estimation of our proved reserves include, but are not limited to, performance-based methods, volumetric -based methods, geologic maps, seismic interpretation, well logs, well test data, core data, analogy and statistical analysis. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 150 We have a company -wide, comprehensive, SEC-compliant internal policy that governs the determination and reporting of proved reserves. This policy is applied by the geoscientists and reservoir engineers in our business units around the world. As part of our internal control process, each business unit’s reserves processes and controls are reviewed annually by an internal team which is headed by the company’s Manager of Reserves Compliance and Reporting. This team, composed of internal reservoir engineers, geoscientists, finance personnel and a senior representative from DeGolyer and MacNaughton (D&M), a third -party petroleum engineering consulting firm, reviews the business units’ reserves for adherence to SEC guidelines and company policy through on-site visits, teleconferences and review of documentation. In addition to providing independent reviews, this internal team also ensures reserves are calculated using consistent and appropriate standards and procedures. This team is independent of business unit line management and is responsible for reporting its findings to senior management. The team is responsible for communicating our reserves policy and procedures and is available for internal peer reviews and consultation on major projects or technical issues throughout the year. All of our proved reserves held by consolidated companies and our share of equity affiliates have been estimated by ConocoPhillips. During 2021, our processes and controls used to assess over 90 percent of proved reserves as of December 31, 2021, were reviewed by D&M. The purpose of their review was to assess whether the adequacy and effectiveness of our internal processes and controls used to determine estimates of proved reserves are in accordance with SEC regulations. In such review, ConocoPhillips’ technical staff presented D&M with an overview of the reserves data, as well as the methods and assumptions used in estimating reserves. The data presented included pertinent seismic information, geologic maps, well logs, production tests, material balance calculations, reservoir simulation models, well performance data, operating procedures and relevant economic criteria. Management’s intent in retaining D&M to review its processes and controls was to provide objective third-party input on these processes and controls. D&M’s opinion was the general processes and controls employed by ConocoPhillips in estimating its December 31, 2021, proved reserves for the properties reviewed are in accordance with the SEC reserves definitions. D&M’s report is included as Exhibit 99 of this Annual Report on Form 10-K. The technical person primarily responsible for overseeing the processes and internal controls used in the preparation of the company’s reserves estimates is the Manager of Reserves Compliance and Reporting. This individual holds a master’s degree in petroleum engineering. He is a member of the Society of Petroleum Engineers with over 25 years of oil and gas industry experience and has held positions of increasing responsibility in reservoir engineering, subsurface and asset management in the U.S. and several international field locations. Engineering estimates of the quantities of proved reserves are inherently imprecise. See the “Critical Accounting Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional discussion of the sensitivities surrounding these estimates. Supplementary Data Table of Contents 151 ConocoPhillips 2021 10-K Proved Reserves Years Ended Crude Oil December 31 Millions of Barrels Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total Developed and Undeveloped Consolidated operations End of 2018 1,233 703 1,936 4 246 159 188 2,533 Revisions 40 (36) 4 (1) 18 (5) 23 39 Improved recovery 7 - 7 - - - - 7 Purchases - 1 1 - - - - 1 Extensions and discoveries 25 226 251 2 - 11 - 264 Production (74) (95) (169) - (36) (31) (14) (250) Sales - (2) (2) - (30) - - (32) End of 2019 1,231 797 2,028 5 198 134 197 2,562 Revisions (297) (126) (423) (2) 4 (4) (3) (428) Improved recovery - - - - - 3 - 3 Purchases - 5 5 3 - - - 8 Extensions and discoveries 10 108 118 3 - - - 121 Production (65) (77) (142) (2) (28) (25) (3) (200) Sales - (14) (14) (1) - - - (15) End of 2020 879 693 1,572 6 174 108 191 2,051 Revisions 209 (52) 157 2 14 37 6 216 Improved recovery 1 - 1 - - - - 1 Purchases - 691 691 - - - - 691 Extensions and discoveries 10 289 299 5 2 1 - 307 Production (64) (160) (224) (3) (29) (24) (13) (293) Sales - (9) (9) - - - - (9) End of 2021 1,035 1,452 2,487 10 161 122 184 2,964 Equity affiliates End of 2018 - - - - - 78 - 78 Revisions - - - - - - - - Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - - - - Production - - - - - (5) - (5) Sales - - - - - - - - End of 2019 - - - - - 73 - 73 Revisions - - - - - - - - Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - - - - Production - - - - - (5) - (5) Sales - - - - - - - - End of 2020 - - - - - 68 - 68 Revisions - - - - - - - - Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - - - - Production - - - - - (5) - (5) Sales - - - - - - - - End of 2021 - - - - - 63 - 63 Total company End of 2018 1,233 703 1,936 4 246 237 188 2,611 End of 2019 1,231 797 2,028 5 198 207 197 2,635 End of 2020 879 693 1,572 6 174 176 191 2,119 End of 2021 1,035 1,452 2,487 10 161 185 184 3,027 Supplementary Data Table of Contents ConocoPhillips 2021 10-K 152 Years Ended Crude Oil December 31 Millions of Barrels Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total Developed Consolidated operations End of 2018 1,058 346 1,404 2 192 113 185 1,896 End of 2019 1,048 334 1,382 3 149 94 181 1,809 End of 2020 765 263 1,028 6 129 77 175 1,415 End of 2021 912 916 1,828 4 122 98 171 2,223 Equity affiliates End of 2018 - - - - - 78 - 78 End of 2019 - - - - - 73 - 73 End of 2020 - - - - - 68 - 68 End of 2021 - - - - - 63 - 63 Undeveloped Consolidated operations End of 2018 175 357 532 2 54 46 3 637 End of 2019 183 463 646 2 49 40 16 753 End of 2020 114 430 544 - 45 31 16 636 End of 2021 123 536 659 6 39 24 13 741 Equity affiliates End of 2018 - - - - - - - - End of 2019 - - - - - - - - End of 2020 - - - - - - - - End of 2021 - - - - - - - - Notable changes in proved crude oil reserves in the three years ended December 31, 2021, included: ● Revisions : In 2021, Alaska upward revisions were primarily driven by higher prices. Downward revisions in Lower 48 were due to development timing for specific well locations from unconventional plays of 203 million barrels and technical revisions of 35 million barrels, partially offset by upward revisions due to higher prices of 115 million barrels and additional infill drilling in the unconventional plays of 71 million barrels. Upward revisions in Europe were primarily due to higher prices. In Asia Pacific/Middle East, increases were due to higher prices of 21 million barrels and technical revisions of 16 million barrels. In 2020, Alaska downward revisions were primarily driven by lower prices of 243 million barrels and development plan changes of 54 million barrels. Downward revisions in Lower 48 were due to lower prices of 89 million barrels and development timing for specific well locations from unconventional plays of 82 million barrels, partially offset by upward technical revisions and additional infill drilling in the unconventional plays of 45 million barrels. In 2019, Alaska upward revisions were due to cost and technical revisions of 74 million barrels, partially offset by downward price revisions of 34 million barrels. Upward revisions in Europe and Africa were primarily due to infill drilling and technical revisions. Downward revisions in Lower 48 were due to changes in development timing for specific well locations from the unconventional plays of 71 million barrels and price revisions of 22 million barrels, partially offset by upward revisions related to infill drilling and improved well performance of 57 million barrels. Supplementary Data Table of Contents 153 ConocoPhillips 2021 10-K ● Purchases : In 2021, Lower 48 purchases were due to the Concho and Shell Permian acquisitions. ● Extensions and discoveries : In 2021, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases resulting from development plan timing in the revisions category. In 2020, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases resulting from development plan timing in the revisions category. In 2019, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases in the revisions category. In Asia Pacific/Middle East, increases were due to sanctioning of development programs in China and Malaysia. ● Sales : In 2019, Europe sales represent the disposition of the U.K. assets. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 154 Years Ended Natural Gas Liquids December 31 Millions of Barrels Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Total Developed and Undeveloped Consolidated operations End of 2018 106 222 328 1 17 3 349 Revisions (1) (11) (12) - 3 (1) (10) Improved recovery - - - - - - - Purchases - - - - - - - Extensions and discoveries - 62 62 1 - - 63 Production (5) (28) (33) - (3) (1) (37) Sales - - - - (4) - (4) End of 2019 100 245 345 2 13 1 361 Revisions - (26) (26) - 1 (1) (26) Improved recovery - - - - - - - Purchases - 2 2 2 - - 4 Extensions and discoveries - 41 41 1 - - 42 Production (6) (27) (33) (1) (2) - (36) Sales - (5) (5) - - - (5) End of 2020 94 230 324 4 12 - 340 Revisions (6) 213 207 - 1 - 208 Improved recovery - - - - - - - Purchases - 72 72 - - - 72 Extensions and discoveries - 82 82 2 - - 84 Production (6) (50) (56) (1) (2) - (59) Sales - (1) (1) - - - (1) End of 2021 82 546 628 5 11 - 644 Equity affiliates End of 2018 - - - - - 42 42 Revisions - - - - - - - Improved recovery - - - - - - - Purchases - - - - - - - Extensions and discoveries - - - - - - - Production - - - - - (3) (3) Sales - - - - - - - End of 2019 - - - - - 39 39 Revisions - - - - - - - Improved recovery - - - - - - - Purchases - - - - - - - Extensions and discoveries - - - - - - - Production - - - - - (3) (3) Sales - - - - - - - End of 2020 - - - - - 36 36 Revisions - - - - - - - Improved recovery - - - - - - - Purchases - - - - - - - Extensions and discoveries - - - - - - - Production - - - - - (3) (3) Sales - - - - - - - End of 2021 - - - - - 33 33 Total company End of 2018 106 222 328 1 17 45 391 End of 2019 100 245 345 2 13 40 400 End of 2020 94 230 324 4 12 36 376 End of 2021 82 546 628 5 11 33 677 Supplementary Data Table of Contents 155 ConocoPhillips 2021 10-K Years Ended Natural Gas Liquids December 31 Millions of Barrels Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Total Developed Consolidated operations End of 2018 106 97 203 - 15 3 221 End of 2019 100 99 199 1 10 1 211 End of 2020 94 83 177 4 9 - 190 End of 2021 82 334 416 3 9 - 428 Equity affiliates End of 2018 - - - - - 42 42 End of 2019 - - - - - 39 39 End of 2020 - - - - - 36 36 End of 2021 - - - - - 33 33 Undeveloped Consolidated operations End of 2018 - 125 125 1 2 - 128 End of 2019 - 146 146 1 3 - 150 End of 2020 - 147 147 - 3 - 150 End of 2021 - 212 212 2 2 - 216 Equity affiliates End of 2018 - - - - - - - End of 2019 - - - - - - - End of 2020 - - - - - - - End of 2021 - - - - - - - Notable changes in proved NGL reserves in the three years ended December 31, 2021, included: ● Revisions : In 2021, upward revisions in Lower 48 were due to conversion of acquired Concho Permian two-stream contracts to a three-stream (crude oil, natural gas and natural gas liquids) basis, adding 182 million barrels, additional infill drilling in the unconventional plays of 44 million barrels, technical revisions of 21 million barrels and higher prices of 28 million barrels, partially offset by downward revisions related to development timing for specific well locations from unconventional plays of 62 million barrels. In 2020, downward revisions in Lower 48 were due to lower prices of 33 million barrels and development timing for specific well locations from unconventional plays of 20 million barrels, partially offset by upward technical revisions and additional infill drilling in the unconventional plays of 27 million barrels. In 2019, downward revisions in Lower 48 were due to changes in development timing for specific well locations from the unconventional plays of 32 million barrels and price revisions of 11 million barrels, partially offset by upward revisions related to infill drilling and improved well performance of 32 million barrels. ● Purchases : In 2021, Lower 48 purchases were due to the Shell Permian acquisition. ● Extensions and discoveries : In 2021, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases in the revisions category. In 2020, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays , which more than offset the decreases in the revisions category. In 2019, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays , which more than offset the decreases in the revisions category. ● Sales : In 2019, Europe sales represent the disposition of the U.K. assets. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 156 Years Ended Natural Gas December 31 Billions of Cubic Feet Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total Developed and Undeveloped Consolidated operations End of 2018 2,736 2,318 5,054 26 1,212 1,079 214 7,585 Revisions 30 (113) (83) (2) 160 147 21 243 Improved recovery - - - - - - - - Purchases - 2 2 - - - - 2 Extensions and discoveries 7 483 490 23 - 1 - 514 Production (85) (252) (337) (4) (178) (250) (11) (780) Sales - (7) (7) - (298) - - (305) End of 2019 2,688 2,431 5,119 43 896 977 224 7,259 Revisions (607) (439) (1,046) (15) 39 103 2 (917) Improved recovery - - - - - - - - Purchases - 74 74 29 - - - 103 Extensions and discoveries - 304 304 33 2 - - 339 Production (85) (231) (316) (16) (112) (171) (2) (617) Sales - (39) (39) - - (58) - (97) End of 2020 1,996 2,100 4,096 74 825 851 224 6,070 Revisions 715 41 756 15 54 60 - 885 Improved recovery - - - - - - - - Purchases - 2,438 2,438 - - - - 2,438 Extensions and discoveries - 822 822 46 2 - - 870 Production (86) (473) (559) (30) (113) (147) (7) (856) Sales - (270) (270) - - - - (270) End of 2021 2,625 4,658 7,283 105 768 764 217 9,137 Equity affiliates End of 2018 - - - - - 4,564 - 4,564 Revisions - - - - - (7) - (7) Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - 252 - 252 Production - - - - - (388) - (388) Sales - - - - - - - - End of 2019 - - - - - 4,421 - 4,421 Revisions - - - - - (382) - (382) Improved recovery - - - - - - - - Purchases - - - - - 2 - 2 Extensions and discoveries - - - - - 78 - 78 Production - - - - - (395) - (395) Sales - - - - - - - - End of 2020 - - - - - 3,724 - 3,724 Revisions - - - - - 247 - 247 Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - 116 - 116 Production - - - - - (390) - (390) Sales - - - - - - - - End of 2021 - - - - - 3,697 - 3,697 Total company End of 2018 2,736 2,318 5,054 26 1,212 5,643 214 12,149 End of 2019 2,688 2,431 5,119 43 896 5,398 224 11,680 End of 2020 1,996 2,100 4,096 74 825 4,575 224 9,794 End of 2021 2,625 4,658 7,283 105 768 4,461 217 12,834 Supplementary Data Table of Contents 157 ConocoPhillips 2021 10-K Years Ended Natural Gas December 31 Billions of Cubic Feet Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total Developed Consolidated operations End of 2018 2,720 1,427 4,147 17 1,052 758 214 6,188 End of 2019 2,601 1,398 3,999 30 697 843 224 5,793 End of 2020 1,961 1,051 3,012 74 598 806 224 4,714 End of 2021 2,579 3,100 5,679 52 679 688 217 7,315 Equity affiliates End of 2018 - - - - - 4,059 - 4,059 End of 2019 - - - - - 3,898 - 3,898 End of 2020 - - - - - 3,293 - 3,293 End of 2021 - - - - - 3,204 - 3,204 Undeveloped Consolidated operations End of 2018 16 891 907 9 160 321 - 1,397 End of 2019 87 1,033 1,120 13 199 134 - 1,466 End of 2020 35 1,049 1,084 - 227 45 - 1,356 End of 2021 46 1,558 1,604 53 89 76 - 1,822 Equity affiliates End of 2018 - - - - - 505 - 505 End of 2019 - - - - - 523 - 523 End of 2020 - - - - - 431 - 431 End of 2021 - - - - - 493 - 493 Natural gas production in the reserves table may differ from gas production (delivered for sale) in our statistics disclosure, primarily because the quantities above include gas consumed in production operations. Quantities consumed in production operations are not significant in the periods presented. The value of net production consumed in operations is not reflected in net revenues and production expenses, nor do the volumes impact the respective per unit metrics. Reserve volumes include natural gas to be consumed in operations of 2,748 Bcf, 2,286 Bcf and 3,141 Bcf, as of December 31, 2021, 2020 and 2019, respectively. These volumes are not included in the calculation of our Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserve Quantities. Natural gas reserves are computed at 14.65 pounds per square inch absolute and 60 degrees Fahrenheit. Notable changes in proved natural gas reserves in the three years ended December 31, 2021, included: ● Revisions : In 2021, upward revisions in Alaska were due to higher prices of 587 Bcf and technical revisions of 128 Bcf. In Lower 48, upward revisions of 614 Bcf were due to higher prices, additional infill drilling in the unconventional plays of 277 Bcf and technical revisions of 60 Bcf, partially offset by downward revisions due to development timing for specific well locations from unconventional plays of 498 Bcf and conversion of previously acquired Permian two-stream contracted volumes to a three-stream (crude oil, natural gas and natural gas liquids) basis of 412 Bcf. Upward revisions in Canada were due to higher prices of 29 Bcf, partially offset by downward revisions due to technical revisions of 14 Bcf. In Europe, upward revisions were primarily due to higher prices. Upward revisions in our consolidated operations in Asia Pacific/Middle East were due to technical revisions of 76 Bcf, partially offset by price revisions of 16 Bcf. In our equity affiliates in Asia Pacific/Middle East, upward revisions were due to higher prices of 124 Bcf and technical and cost revisions of 123 Bcf. In 2020, downward revisions in Alaska were primarily due to lower prices. In Lower 48, downward revisions of 372 Bcf were due to lower prices and 154 Bcf were due to development timing for specific well locations from unconventional plays, partially offset by technical revisions of 87 Bcf. Downward revisions in our equity affiliates in Asia Pacific/Middle East were Supplementary Data Table of Contents ConocoPhillips 2021 10-K 158 due to lower prices of 426 Bcf, partially offset by performance revisions of 44 Bcf. Upward revisions in our consolidated operations in Asia Pacific/Middle East were due to technical revisions of 88 Bcf and price revisions of 15 Bcf. In 2019, upward revisions in Europe were due to technical and cost revisions. In Asia Pacific/Middle East upward revisions were primarily due to the Indonesia Corridor PSC term extension. Downward revisions in Lower 48 were due to changes in development timing for specific well locations from the unconventional plays of 207 Bcf and price revisions of 125 Bcf, partially offset by upward revisions related to infill drilling and improved well performance of 219 Bcf. ● Purchases : In 2021, Lower 48 purchases were due to the Concho and Shell Permian acquisitions. In 2020, Canada purchases were due to the acquisition of additional Montney acreage. ● Extensions and discoveries : In 2021, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases resulting from development plan timing in the revisions category. Extensions and discoveries in Canada were primarily driven by ongoing drilling successes in Montney. In 2020, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases resulting from development plan timing in the revisions category. Extensions and discoveries in Canada were primarily driven by ongoing drilling successes in Montney. In 2019, extensions and discoveries in Lower 48 were due to planned development to add specific well locations from the unconventional plays which more than offset the decreases in the revisions category. Extensions and discoveries in our equity affiliates were due to ongoing development in APLNG. ● Sales : In 2021, Lower 48 sales represent the disposition of noncore assets. In 2020, Asia Pacific/Middle East sales represent the disposition of the Australia -West assets. In 2019, Europe sales represent the disposition of the U.K. assets. Supplementary Data Table of Contents 159 ConocoPhillips 2021 10-K Years Ended Bitumen December 31 Millions of Barrels Canada Developed and Undeveloped Consolidated operations End of 2018 236 Revisions 37 Improved recovery - Purchases - Extensions and discoveries 31 Production (22) Sales - End of 2019 282 Revisions (15) Improved recovery - Purchases - Extensions and discoveries 85 Production (20) Sales - End of 2020 332 Revisions (50) Improved recovery - Purchases - Extensions and discoveries - Production (25) Sales - End of 2021 257 Equity affiliates End of 2018 - Revisions - Improved recovery - Purchases - Extensions and discoveries - Production - Sales - End of 2019 - Revisions - Improved recovery - Purchases - Extensions and discoveries - Production - Sales - End of 2020 - Revisions - Improved recovery - Purchases - Extensions and discoveries - Production - Sales - End of 2021 - Total company End of 2018 236 End of 2019 282 End of 2020 332 End of 2021 257 Supplementary Data Table of Contents ConocoPhillips 2021 10-K 160 Years Ended Bitumen December 31 Millions of Barrels Canada Developed Consolidated operations End of 2018 155 End of 2019 187 End of 2020 117 End of 2021 150 Equity affiliates End of 2018 - End of 2019 - End of 2020 - End of 2021 - Undeveloped Consolidated operations End of 2018 81 End of 2019 95 End of 2020 215 End of 2021 107 Equity affiliates End of 2018 - End of 2019 - End of 2020 - End of 2021 - Notable changes in proved bitumen reserves in the three years ended December 31, 2021, included: ● Revisions : In 2021, downward revisions of 64 million barrels were driven by changes in carbon tax costs and 39 million barrels due to changes in development timing for specific pad locations from the Surmont development program, partially offset by upward revisions from price of 53 million barrels. In 2020, downward revisions in Canada were due to changes in development timing for specific pad locations from the Surmont development program of 12 million barrels with the remaining revisions primarily related to lower prices. In 2019, upward revisions in Canada were due to technical revisions in Surmont of 70 million barrels, partially offset by downward revisions due to changes in development timing for specific pad locations from the Surmont development program of 31 million barrels. ● Extensions and discoveries : In 2020, extensions and discoveries in Canada were primarily due to planned development to add specific pad locations from the Surmont development program, which more than offset the decrease in the revisions category. In 2019, extensions and discoveries in Canada were due to planned development to add specific pad locations from the Surmont development program, which offset the decrease in the revisions category of 31 million barrels. Supplementary Data Table of Contents 161 ConocoPhillips 2021 10-K Years Ended Total Proved Reserves December 31 Millions of Barrels of Oil Equivalent Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total Developed and Undeveloped Consolidated operations End of 2018 1,795 1,312 3,107 245 465 342 224 4,383 Revisions 44 (67) (23) 36 48 19 26 106 Improved recovery 7 - 7 - - - - 7 Purchases - 2 2 - - - - 2 Extensions and discoveries 26 368 394 38 - 11 - 443 Production (93) (165) (258) (23) (68) (74) (16) (439) Sales - (3) (3) - (85) - - (88) End of 2019 1,779 1,447 3,226 296 360 298 234 4,414 Revisions (398) (226) (624) (20) 12 13 (3) (622) Improved recovery - - - - - 3 - 3 Purchases - 19 19 10 - - - 29 Extensions and discoveries 10 200 210 95 - - - 305 Production (85) (142) (227) (25) (49) (55) (3) (359) Sales - (25) (25) (1) - (10) - (36) End of 2020 1,306 1,273 2,579 355 323 249 228 3,734 Revisions 322 168 490 (45) 23 47 6 521 Improved recovery 1 - 1 - - - - 1 Purchases - 1,169 1,169 - - - - 1,169 Extensions and discoveries 10 508 518 15 3 1 - 537 Production (84) (289) (373) (35) (50) (48) (14) (520) Sales - (54) (54) - - - - (54) End of 2021 1,555 2,775 4,330 290 299 249 220 5,388 Equity affiliates End of 2018 - - - - - 880 - 880 Revisions - - - - - (1) - (1) Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - 42 - 42 Production - - - - - (73) - (73) Sales - - - - - - - - End of 2019 - - - - - 848 - 848 Revisions - - - - - (63) - (63) Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - 13 - 13 Production - - - - - (73) - (73) Sales - - - - - - - - End of 2020 - - - - - 725 - 725 Revisions - - - - - 42 - 42 Improved recovery - - - - - - - - Purchases - - - - - - - - Extensions and discoveries - - - - - 19 - 19 Production - - - - - (73) - (73) Sales - - - - - - - - End of 2021 - - - - - 713 - 713 Total company End of 2018 1,795 1,312 3,107 245 465 1,222 224 5,263 End of 2019 1,779 1,447 3,226 296 360 1,146 234 5,262 End of 2020 1,306 1,273 2,579 355 323 974 228 4,459 End of 2021 1,555 2,775 4,330 290 299 962 220 6,101 Supplementary Data Table of Contents ConocoPhillips 2021 10-K 162 Years Ended Total Proved Reserves December 31 Millions of Barrels of Oil Equivalent Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total Developed Consolidated operations End of 2018 1,617 681 2,298 160 382 244 221 3,305 End of 2019 1,582 666 2,248 197 275 236 218 3,174 End of 2020 1,186 521 1,707 140 238 211 212 2,508 End of 2021 1,424 1,767 3,191 166 244 212 207 4,020 Equity affiliates End of 2018 - - - - - 796 - 796 End of 2019 - - - - - 761 - 761 End of 2020 - - - - - 653 - 653 End of 2021 - - - - - 631 - 631 Undeveloped Consolidated operations End of 2018 178 631 809 85 83 98 3 1,078 End of 2019 197 781 978 99 85 62 16 1,240 End of 2020 120 752 872 215 85 38 16 1,226 End of 2021 131 1,008 1,139 124 55 37 13 1,368 Equity affiliates End of 2018 - - - - - 84 - 84 End of 2019 - - - - - 87 - 87 End of 2020 - - - - - 72 - 72 End of 2021 - - - - - 82 - 82 Natural gas reserves are converted to barrels of oil equivalent (BOE) based on a 6:1 ratio: six MCF of natural gas converts to one BOE. Proved Undeveloped Reserves The following table shows changes in total proved undeveloped reserves for 2021: Proved Undeveloped Reserves Millions of Barrels of Oil Equivalent End of 2020 1,298 Revisions (167) Improved recovery 1 Purchases 158 Extensions and discoveries 448 Sales - Transfers to proved developed (288) End of 2021 1,450 Downward revisions were driven by changes in development timing of 389 MMBOE primarily in North America and negative bitumen revisions in Canada due to changes in carbon tax costs of 65 MMBOE, partially offset by upward revisions for Lower 48 infill drilling of 162 MMBOE and higher prices of 125 MMBOE. Purchases were driven by Lower 48 due to the Concho acquisition. Supplementary Data Table of Contents 163 ConocoPhillips 2021 10-K Extensions and discoveries were largely driven by an addition of 399 MMBOE in Lower 48 for the continued development of unconventional plays. The remaining extensions and discoveries were driven by the continued development planned in the other geographic regions. Transfers to proved developed reserves were driven by the ongoing development of our assets. Approximately 65 percent of the transfers were from the development of our Lower 48 unconventional plays. The remainder of transfers were from development across the other geographic regions. At December 31, 2021, our PUDs represented 24 percent of total proved reserves, compared with 29 percent at December 31, 2020. Costs incurred for the year ended December 31, 2021, relating to the development of PUDs were $3.8 billion. A portion of our costs incurred each year relates to development projects where the PUDs will be converted to proved developed reserves in future years. At the end of 2021, approximately 93 percent of total PUDs were under development or scheduled for development within five years of initial disclosure, including all of our Lower 48 PUDs. The remaining PUDs are in major development areas which are currently producing and within our Canada and Asia Pacific/Middle East geographic areas. Results of Operations The company’s results of operations from oil and gas activities for the years 2021, 2020 and 2019 are shown in the following tables. Non-oil and gas activities, such as pipeline and marine operations, LNG operations, crude oil and gas marketing activities, and the profit element of transportation operations in which we have an ownership interest are excluded. Additional information about selected line items within the results of operations tables is shown below: ● Sales include sales to unaffiliated entities attributable primarily to the company’s net working interests and royalty interests. Sales are net of fees to transport our produced hydrocarbons beyond the production function to a final delivery point using transportation operations which are not consolidated. ● Transportation costs reflect fees to transport our produced hydrocarbons beyond the production function to a final delivery point using transportatio n operations which are consolidated. ● Other revenues include gains and losses from asset sales, certain amounts resulting from the purchase and sale of hydrocarbons, and other miscellaneous income. ● Production costs include costs incurred to operate and maintain wells, related equipment and facilities used in the production of petroleum liquids and natural gas. ● Taxes other than income taxes include production, property and other non-income taxes. ● Depreciation of support equipment is reclassified as applicable. ● Other related expenses include inventory fluctuations, foreign currency transaction gains and losses and other miscellaneous expenses. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 164 Results of Operations Year Ended Millions of Dollars December 31, 2021 Lower Total Asia Pacific/ Other Alaska 48 U.S. Canada Europe Middle East Africa Areas Total Consolidated operations Sales $ 4,832 14,093 18,925 1,219 3,568 2,525 917 - 27,154 Transfers 4 - 4 - - - - - 4 Transportation costs (626) - (626) - - - - - (626) Other revenues 14 135 149 323 (5) 237 141 (161) 684 Total revenues 4,224 14,228 18,452 1,542 3,563 2,762 1,058 (161) 27,216 Production costs excluding taxes 1,073 2,414 3,487 518 487 466 43 - 5,001 Taxes other than income taxes 442 937 1,379 23 36 91 1 1 1,531 Exploration expenses 80 98 178 39 21 51 2 15 306 Depreciation, depletion and amortization 864 4,053 4,917 383 844 787 35 - 6,966 Impairments 5 (8) (3) 6 (24) 7 - - (14) Other related expenses (31) 12 (19) (22) (42) 4 4 12 (63) Accretion 71 47 118 10 70 26 - - 224 1,720 6,675 8,395 585 2,171 1,330 973 (189) 13,265 Income tax provision (benefit) 378 1,467 1,845 145 1,673 494 870 (53) 4,974 Results of operations $ 1,342 5,208 6,550 440 498 836 103 (136) 8,291 Equity affiliates Sales $ - - - - - 745 - - 745 Transfers - - - - - 1,797 - - 1,797 Transportation costs - - - - - - - - - Other revenues - - - - - 5 - - 5 Total revenues - - - - - 2,547 - - 2,547 Production costs excluding taxes - - - - - 329 - - 329 Taxes other than income taxes - - - - - 824 - - 824 Exploration expenses - - - - - 268 - - 268 Depreciation, depletion and amortization - - - - - 593 593 Impairments - - - - - 718 - - 718 Other related expenses - - - - - 3 - - 3 Accretion - - - - - 17 - - 17 - - - - - (205) - - (205) Income tax provision (benefit) - - - - - (42) - - (42) Results of operations $ - - - - - (163) - - (163) Supplementary Data Table of Contents 165 ConocoPhillips 2021 10-K Year Ended Millions of Dollars December 31, 2020 Lower Total Asia Pacific/ Other Alaska 48 U.S. Canada Europe Middle East Africa Areas Total Consolidated operations Sales $ 2,944 3,421 6,365 230 1,560 1,717 129 - 10,001 Transfers 4 - 4 - - 191 - - 195 Transportation costs (587) - (587) - - (19) - - (606) Other revenues (1) (20) (21) 40 (21) 576 11 10 595 Total revenues 2,360 3,401 5,761 270 1,539 2,465 140 10 10,185 Production costs excluding taxes 1,058 1,399 2,457 366 417 478 21 2 3,741 Taxes other than income taxes 296 263 559 16 30 42 3 1 651 Exploration expenses 1,099 73 1,172 40 52 71 13 108 1,456 Depreciation, depletion and amortization 840 2,544 3,384 335 755 808 8 - 5,290 Impairments - 804 804 3 5 - - - 812 Other related expenses 46 5 51 5 (58) (25) (29) 2 (54) Accretion 72 46 118 8 73 33 - - 232 (1,051) (1,733) (2,784) (503) 265 1,058 124 (103) (1,943) Income tax provision (benefit) (271) (430) (701) (191) 116 277 88 (20) (431) Results of operations $ (780) (1,303) (2,083) (312) 149 781 36 (83) (1,512) Equity affiliates Sales $ - - - - - 483 - - 483 Transfers - - - - - 1,205 - - 1,205 Transportation costs - - - - - - - - - Other revenues - - - - - 8 - - 8 Total revenues - - - - - 1,696 - - 1,696 Production costs excluding taxes - - - - - 289 - - 289 Taxes other than income taxes - - - - - 502 - - 502 Exploration expenses - - - - - 20 - - 20 Depreciation, depletion and amortization - - - - - 569 - - 569 Impairments - - - - - - - - - Other related expenses - - - - - (2) - - (2) Accretion - - - - - 15 - - 15 - - - - - 303 - - 303 Income tax provision (benefit) - - - - - 39 - - 39 Results of operations $ - - - - - 264 - - 264 Supplementary Data Table of Contents ConocoPhillips 2021 10-K 166 Year Ended Millions of Dollars December 31, 2019 Lower Total Asia Pacific/ Other Alaska 48 U.S. Canada Europe Middle East Africa Areas Total Consolidated operations Sales $ 4,883 6,356 11,239 709 3,207 3,032 919 - 19,106 Transfers 4 - 4 - - 449 - - 453 Transportation costs (629) - (629) - - (41) - - (670) Other revenues 61 78 139 86 1,785 12 101 326 2,449 Total revenues 4,319 6,434 10,753 795 4,992 3,452 1,020 326 21,338 Production costs excluding taxes 1,235 1,578 2,813 380 741 619 70 (8) 4,615 Taxes other than income taxes 308 437 745 18 32 54 3 (2) 850 Exploration expenses 97 430 527 32 69 80 5 33 746 Depreciation, depletion and amortization 700 2,804 3,504 230 842 1,172 37 - 5,785 Impairments - 402 402 2 1 - - - 405 Other related expenses (12) 116 104 (38) (42) 58 22 10 114 Accretion 62 49 111 7 142 43 - - 303 1,929 618 2,547 164 3,207 1,426 883 293 8,520 Income tax provision (benefit) 444 147 591 (74) 591 458 833 7 2,406 Results of operations $ 1,485 471 1,956 238 2,616 968 50 286 6,114 Equity affiliates Sales $ - - - - - 599 - - 599 Transfers - - - - - 2,229 - - 2,229 Transportation costs - - - - - - - - - Other revenues - - - - - 31 - - 31 Total revenues - - - - - 2,859 - - 2,859 Production costs excluding taxes - - - - - 335 - - 335 Taxes other than income taxes - - - - - 820 - - 820 Exploration expenses - - - - - - - - - Depreciation, depletion and amortization - - - - - 579 - - 579 Impairments - - - - - - - - - Other related expenses - - - - - 11 - - 11 Accretion - - - - - 16 - - 16 - - - - - 1,098 - - 1,098 Income tax provision (benefit) - - - - - 170 - - 170 Results of operations $ - - - - - 928 - - 928 Supplementary Data Table of Contents 167 ConocoPhillips 2021 10-K Statistics Net Production 2021 2020 2019 Thousands of Barrels Daily Crude Oil Consolidated operations Alaska 178 181 202 Lower 48 447 213 266 United States 625 394 468 Canada 8 6 1 Europe 81 78 100 Asia Pacific 65 69 85 Africa 37 8 38 Total consolidated operations 816 555 692 Equity affiliates— Asia Pacific/Middle East 13 13 13 Total company 829 568 705 Delaware Basin Area (Lower 48)* 162 28 24 Greater Prudhoe Area (Alaska)* 67 68 66 Natural Gas Liquids Consolidated operations Alaska 16 16 15 Lower 48 110 74 81 United States 126 90 96 Canada 4 2 - Europe 4 4 7 Asia Pacific - 1 4 Total consolidated operations 134 97 107 Equity affiliates— Asia Pacific/Middle East 8 8 8 Total company 142 105 115 Delaware Basin Area (Lower 48)* 27 11 11 Greater Prudhoe Area (Alaska)* 16 15 15 Bitumen Consolidated operations— Canada 69 55 60 Total company 69 55 60 Natural Gas Millions of Cubic Feet Daily Consolidated operations Alaska 16 10 7 Lower 48 1,340 585 622 United States 1,356 595 629 Canada 80 40 9 Europe 298 270 447 Asia Pacific 360 429 637 Africa 15 5 31 Total consolidated operations 2,109 1,339 1,753 Equity affiliates— Asia Pacific/Middle East 1,053 1,055 1,052 Total company 3,162 2,394 2,805 Delaware Basin Area (Lower 48)* 584 99 86 Greater Prudhoe Area (Alaska)* 12 4 4 *At year-end 2021, the Delaware Basin Area in Lower 48 contained more than 15 percent of our total proved reserves. At year-end 2021, 2020 and 2019, the Greater Prudhoe Area in Alaska contained more than 15 percent of our total proved reserves. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 168 Average Sales Prices 2021 2020 2019 Crude Oil Per Barrel Consolidated operations Alaska* $ 60.81 33.72 55.85 Lower 48 66.12 35.17 55.30 United States 64.53 34.48 55.54 Canada 56.38 23.57 40.87 Europe 68.94 42.80 65.12 Asia Pacific 70.36 42.84 65.02 Africa 69.06 48.64 64.47 Total international 68.85 42.39 64.85 Total consolidated operations 65.53 36.69 58.51 Equity affiliates —Asia Pacific/Middle East 69.45 39.02 61.32 Total operations 65.59 36.75 58.57 Natural Gas Liquids Per Barrel Consolidated operations Lower 48 $ 30.63 12.13 16.83 United States 30.63 12.13 16.85 Canada 31.18 5.41 19.87 Europe 43.97 23.27 29.37 Asia Pacific - 33.21 37.85 Total international 37.50 20.25 32.29 Total consolidated operations 31.04 12.90 18.73 Equity affiliates —Asia Pacific/Middle East 54.16 32.69 36.70 Total operations 32.45 14.61 20.09 Bitumen Per Barrel Consolidated operations— Canada $ 37.52 8.02 ** 31.72 Natural Gas Per Thousand Cubic Feet Consolidated operations Alaska $ 2.81 2.91 3.19 Lower 48 4.38 1.65 2.12 United States 4.38 1.66 2.12 Canada 2.54 1.21 0.49 Europe 13.75 3.23 4.92 Asia Pacific* 6.56 5.27 5.73 Africa 3.73 3.71 4.87 Total international 8.91 4.31 5.35 Total consolidated operations 6.00 3.13 4.19 Equity affiliates —Asia Pacific/Middle East 5.31 3.71 6.29 Total operations 5.77 3.38 4.99 *Average sales prices for Alaska crude oil and Asia Pacific natural gas above reflect a reduction for transportation costs in which we have an ownership interest that are incurred subsequent to the terminal point of the production function. Accordingly, the average sales prices differ from those discussed in Item 7 of Management's Discussion and Analysis of Financial Condition and Results of Operations. **Average sales prices include unutilized transportation costs. Supplementary Data Table of Contents 169 ConocoPhillips 2021 10-K 2021 2020 2019 Average Production Costs Per Barrel of Oil Equivalent* Consolidated operations Alaska $ 14.92 14.60 15.52 Lower 48 8.48 9.93 9.59 United States 9.78 11.51 11.52 Canada 15.10 14.29 16.53 Europe 9.88 8.97 11.22 Asia Pacific 10.21 9.26 8.74 Africa 2.95 6.38 4.46 Total international 10.53 10.11 10.26 Total consolidated operations 9.99 10.99 10.99 Equity affiliates— Asia Pacific/Middle East 4.60 4.01 4.68 Average Production Costs Per Barrel—Bitumen Consolidated operations— Canada $ 13.41 12.45 13.74 Taxes Other Than Income Taxes Per Barrel of Oil Equivalent Consolidated operations Alaska $ 6.15 4.08 3.87 Lower 48 3.29 1.87 2.65 United States 3.87 2.62 3.05 Canada 0.67 0.62 0.78 Europe 0.73 0.65 0.48 Asia Pacific 1.99 0.81 0.76 Africa 0.07 0.91 0.19 Total international 1.06 0.72 0.60 Total consolidated operations 3.06 1.91 2.03 Equity affiliates— Asia Pacific/Middle East 11.52 6.96 11.46 Depreciation, Depletion and Amortization Per Barrel of Oil Equivalent Consolidated operations Alaska $ 12.02 11.59 8.80 Lower 48 14.24 18.05 17.03 United States 13.79 15.86 14.35 Canada 11.16 13.08 10.00 Europe 17.13 16.24 12.75 Asia Pacific 17.25 15.66 16.55 Africa 2.40 2.43 2.36 Total international 14.25 15.01 12.99 Total consolidated operations 13.92 15.54 13.78 Equity affiliates— Asia Pacific/Middle East 8.29 7.89 8.09 *Includes bitumen. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 170 Development and Exploration Activities The following two tables summarize our net interest in productive and dry exploratory and development wells in the years ended December 31, 2021, 2020 and 2019. A “development well” is a well drilled within the proved area of a reservoir to the depth of a stratigraphic horizon known to be productive. An “exploratory well” is a well drilled to find and produce crude oil or natural gas in an unknown field or a new reservoir within a proven field. Exploratory wells also include wells drilled in areas near or offsetting current production, or in areas where well density or production history have not achieved statistical certainty of results. Excluded from the exploratory well count are stratigraphic -type exploratory wells, primarily relating to oil sands delineation wells located in Canada and CBM test wells located in Asia Pacific/Middle East. Net Wells Completed Productive Dry 2021 2020 2019 2021 2020 2019 Exploratory Consolidated operations Alaska - - 7 1 3 - Lower 48 87 3 35 - - 6 United States 87 3 42 1 3 6 Canada 12 23 - - - - Europe - - 1 - * 1 Asia Pacific/Middle East * * 1 * * 1 Africa - - - - * - Other areas - - - - * - Total consolidated operations 99 26 44 1 3 8 Equity affiliates Asia Pacific/Middle East 3 8 8 - - - Total equity affiliates 3 8 8 - - - Development Consolidated operations Alaska 1 7 12 - - - Lower 48 339 127 255 - - - United States 340 134 267 - - - Canada 2 - 2 - - - Europe 7 7 6 - - - Asia Pacific/Middle East 21 16 21 - - - Africa 1 2 2 - - - Other areas - - - - - - Total consolidated operations 371 159 298 - - - Equity affiliates Asia Pacific/Middle East 30 109 106 - - - Total equity affiliates 30 109 106 - - - *Our total proportionate interest was less than one. Supplementary Data Table of Contents 171 ConocoPhillips 2021 10-K The table below represents the status of our wells drilling at December 31, 2021, and includes wells in the process of drilling or in active completion. It also represents gross and net productive wells, including producing wells and wells capable of production at December 31, 2021. Wells at December 31, 2021 Productive In Progress Oil Gas Gross Net Gross Net Gross Net Consolidated operations Alaska 2 1 1,602 940 - - Lower 48 665 337 16,306 8,015 5,091 2,211 United States 667 338 17,908 8,955 5,091 2,211 Canada 18 15 186 94 149 149 Europe 11 1 494 84 59 2 Asia Pacific/Middle East 15 7 351 166 38 18 Africa 7 1 858 140 10 2 Other areas - - - - - - Total consolidated operations 718 362 19,797 9,439 5,347 2,382 Equity affiliates Asia Pacific/Middle East 130 25 - - 4,908 1,171 Total equity affiliates 130 25 - - 4,908 1,171 Acreage at December 31, 2021 Thousands of Acres Developed Undeveloped Gross Net Gross Net Consolidated operations Alaska 663 479 1,341 1,329 Lower 48 4,096 2,538 10,514 8,233 United States 4,759 3,017 11,855 9,562 Canada 297 219 3,433 1,948 Europe 430 50 938 371 Asia Pacific/Middle East 921 421 10,451 6,930 Africa 358 58 12,545 2,049 Other areas - - 156 125 Total consolidated operations 6,765 3,765 39,378 20,985 Equity affiliates Asia Pacific/Middle East 1,039 248 3,807 856 Total equity affiliates 1,039 248 3,807 856 Supplementary Data Table of Contents ConocoPhillips 2021 10-K 172 Costs Incurred Year Ended Millions of Dollars December 31 Lower Total Asia Pacific/ Other Alaska 48 U.S. Canada Europe Middle East Africa Areas Total 2021 Consolidated operations Unproved property acquisition $ 1 11,261 11,262 4 - - - - 11,266 Proved property acquisition - 16,101 16,101 1 - - - - 16,102 1 27,362 27,363 5 - - - - 27,368 Exploration 84 765 849 80 31 51 2 40 1,053 Development 949 2,461 3,410 175 398 433 24 - 4,440 $ 1,034 30,588 31,622 260 429 484 26 40 32,861 Equity affiliates Unproved property acquisition $ - - - - - - - - - Proved property acquisition - - - - - - - - - - - Exploration - - - - - 5 - - 5 Development - - - - - 21 - - 21 $ - - - - - 26 - - 26 2020 Consolidated operations Unproved property acquisition $ 4 10 14 378 - 3 - 9 404 Proved property acquisition - 62 62 129 - - - - 191 4 72 76 507 - 3 - 9 595 Exploration 287 116 403 218 110 32 4 38 805 Development 745 1,758 2,503 102 451 427 18 - 3,501 $ 1,036 1,946 2,982 827 561 462 22 47 4,901 Equity affiliates Unproved property acquisition $ - - - - - - - - - Proved property acquisition - - - - - - - - - - - - - - - - - - Exploration - - - - - 12 - - 12 Development - - - - - 282 - - 282 $ - - - - - 294 - - 294 2019 Consolidated operations Unproved property acquisition $ 101 45 146 14 - - - 197 357 Proved property acquisition 1 116 117 - - 115 - - 232 102 161 263 14 - 115 - 197 589 Exploration 281 390 671 200 119 66 8 39 1,103 Development 1,125 3,028 4,153 215 625 486 22 - 5,501 $ 1,508 3,579 5,087 429 744 667 30 236 7,193 Equity affiliates Unproved property acquisition $ - - - - - 62 - - 62 Proved property acquisition - - - - - - - - - - - - - - 62 - - 62 Exploration - - - - - 23 - - 23 Development - - - - - 171 - - 171 $ - - - - - 256 - - 256 Supplementary Data Table of Contents 173 ConocoPhillips 2021 10-K Capitalized Costs At December 31 Millions of Dollars Lower Total Asia Pacific/ Other Alaska 48 U.S. Canada Europe Middle East Africa Areas Total 2021 Consolidated operations Proved property $ 22,750 58,561 81,311 7,380 14,514 12,226 966 - 116,397 Unproved property 1,402 7,704 9,106 1,517 155 92 114 9 10,993 24,152 66,265 90,417 8,897 14,669 12,318 1,080 9 127,390 Accumulated depreciation, depletion and amortization 11,945 29,975 41,920 2,749 10,166 9,240 422 9 64,506 $ 12,207 36,290 48,497 6,148 4,503 3,078 658 - 62,884 Equity affiliates Proved property $ - - - - - 10,357 - - 10,357 Unproved property - - - - - 2,162 - - 2,162 - - - - - 12,519 - - 12,519 Accumulated depreciation, depletion and amortization - - - - - 8,539 - - 8,539 $ - - - - - 3,980 - - 3,980 2020 Consolidated operations Proved property $ 21,819 37,452 59,271 7,255 14,931 11,913 942 - 94,312 Unproved property 1,398 631 2,029 1,529 151 89 114 229 4,141 23,217 38,083 61,300 8,784 15,082 12,002 1,056 229 98,453 Accumulated depreciation, depletion and amortization 11,098 27,948 39,046 2,431 10,015 8,567 387 9 60,455 $ 12,119 10,135 22,254 6,353 5,067 3,435 669 220 37,998 Equity affiliates Proved property $ - - - - - 10,310 - - 10,310 Unproved property - - - - - 2,187 - - 2,187 - - - - - 12,497 - - 12,497 Accumulated depreciation, depletion and amortization - - - - - 6,959 - - 6,959 $ - - - - - 5,538 - - 5,538 Supplementary Data Table of Contents ConocoPhillips 2021 10-K 174 Standardized Measure of Discounted Future Net Cash Flows Relatin g to Proved Oil and Gas Reserve Quantities In accordance with SEC and FASB requirements, amounts were computed using 12-month average prices (adjusted only for existing contractual terms) and end-of-year costs, appropriate statutory tax rates and a prescri bed 10 percent discount factor. Twelve- month average prices are calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. For all years, continuation of year -end economic conditions was assumed. The calculations were based on estimates of proved reserves, which are revised over time as new data becomes available. Probable or possible reserves, which may become proved in the future, were not considered. The calculations also require assumptions as to the timing of future production of proved reserves and the timing and amount of future development costs, including dismantlement, and future production costs, including taxes other than income taxes. While due care was taken in its preparation, we do not represent that this data is the fair value of our oil and gas properties, or a fair estimate of the present value of cash flows to be obtained from their development and production. Discounted Future Net Cash Flows Millions of Dollars Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total 2021 Consolidated operations Future cash inflows $ 65,910 125,197 191,107 10,847 21,670 11,583 15,778 250,985 Less: Future production costs 34,444 43,034 77,478 4,960 6,090 4,987 801 94,316 Future development costs 8,033 13,386 21,419 923 3,960 1,314 413 28,029 Future income tax provisions 5,310 13,167 18,477 117 8,345 1,542 13,506 41,987 Future net cash flows 18,123 55,610 73,733 4,847 3,275 3,740 1,058 86,653 10 percent annual discount 7,963 22,290 30,253 1,639 696 930 440 33,958 Discounted future net cash flows $ 10,160 33,320 43,480 3,208 2,579 2,810 618 52,695 Equity affiliates Future cash inflows $ - - - - - 27,851 - 27,851 Less: Future production costs - - - - - 15,491 - 15,491 Future development costs - - - - - 1,649 - 1,649 Future income tax provisions - - - - - 3,071 - 3,071 Future net cash flows - - - - - 7,640 - 7,640 10 percent annual discount - - - - - 2,640 - 2,640 Discounted future net cash flows $ - - - - - 5,000 - 5,000 Total company Discounted future net cash flows $ 10,160 33,320 43,480 3,208 2,579 7,810 618 57,695 Supplementary Data Table of Contents 175 ConocoPhillips 2021 10-K Millions of Dollars Lower Total Asia Pacific/ Alaska 48 U.S. Canada* Europe Middle East Africa Total 2020 Consolidated operations Future cash inflows $ 30,145 31,533 61,678 4,198 9,857 7,940 9,997 93,670 Less: Future production costs 22,905 17,582 40,487 4,316 4,770 3,838 1,277 54,688 Future development costs 7,932 12,799 20,731 750 3,688 1,289 461 26,919 Future income tax provisions - 376 376 - 267 1,075 7,571 9,289 Future net cash flows (692) 776 84 (868) 1,132 1,738 688 2,774 10 percent annual discount (1,501) (820) (2,321) (396) 117 406 294 (1,900) Discounted future net cash flows $ 809 1,596 2,405 (472) 1,015 1,332 394 4,674 Equity affiliates Future cash inflows $ - - - - - 17,284 - 17,284 Less: Future production costs - - - - - 10,239 - 10,239 Future development costs - - - - - 1,186 - 1,186 Future income tax provisions - - - - - 1,728 - 1,728 Future net cash flows - - - - - 4,131 - 4,131 10 percent annual discount - - - - - 1,269 - 1,269 Discounted future net cash flows $ - - - - - 2,862 - 2,862 Total company Discounted future net cash flows $ 809 1,596 2,405 (472) 1,015 4,194 394 7,536 *Undiscounted future net cash flows related to the proved oil and gas reserves disclosed for Canada for the year ending December 31, 2020, are negative due to the inclusion of asset retirement costs and certain indirect costs in the calculation of the standardized measure of discounted future net cash flows. These costs are not required to be included in the economic limit test for proved developed reserves as defined in Regulation S-X Rule 4-10. Future net cash flows for Canada were also impacted by lower 12-month average pricing for bitumen and crude oil in 2020. Commodity prices have since improved in the current environment. Supplementary Data Table of Contents ConocoPhillips 2021 10-K 176 Millions of Dollars Lower Total Asia Pacific/ Alaska 48 U.S. Canada Europe Middle East Africa Total 2019 Consolidated operations Future cash inflows $ 70,341 53,400 123,741 8,244 16,919 13,084 15,582 177,570 Less: Future production costs 40,464 22,194 62,658 4,525 5,843 5,162 1,314 79,502 Future development costs 9,721 14,083 23,804 577 4,143 2,179 484 31,187 Future income tax provisions 3,904 2,793 6,697 - 4,201 1,931 12,747 25,576 Future net cash flows 16,252 14,330 30,582 3,142 2,732 3,812 1,037 41,305 10 percent annual discount 6,571 4,311 10,882 1,198 558 835 460 13,933 Discounted future net cash flows $ 9,681 10,019 19,700 1,944 2,174 2,977 577 27,372 Equity affiliates Future cash inflows $ - - - - - 31,671 - 31,671 Less: Future production costs - - - - - 16,157 - 16,157 Future development costs - - - - - 1,218 - 1,218 Future income tax provisions - - - - - 3,086 - 3,086 Future net cash flows - - - - - 11,210 - 11,210 10 percent annual discount - - - - - 4,040 - 4,040 Discounted future net cash flows $ - - - - - 7,170 - 7,170 Total company Discounted future net cash flows $ 9,681 10,019 19,700 1,944 2,174 10,147 577 34,542 Supplementary Data Table of Contents 177 ConocoPhillips 2021 10-K Sources of Change in Discounted Future Net Cash Flows Millions of Dollars Consolidated Operations Equity Affiliates Total Company 2021 2020 2019 2021 2020 2019 2021 2020 2019 Discounted future net cash flows at the beginning of the year $ 4,674 27,372 35,434 2,862 7,170 7,929 7,536 34,542 43,363 Changes during the year Revenues less production costs for the year (20,000) (5,198) (13,424) (1,389) (897) (1,673) (21,389) (6,095) (15,097) Net change in prices and production costs 50,956 (34,307) (13,538) 3,822 (4,769) (422) 54,778 (39,076) (13,960) Extensions, discoveries and improved recovery, less estimated future costs 10,420 887 2,985 (44) 22 260 10,376 909 3,245 Development costs for the year 4,396 3,593 5,333 91 192 239 4,487 3,785 5,572 Changes in estimated future development costs (33) 754 559 (104) (205) (21) (137) 549 538 Purchases of reserves in place, less estimated future costs 17,833 1 10 - (3) - 17,833 (2) 10 Sales of reserves in place, less estimated future costs (468) (302) (1,997) - - - (468) (302) (1,997) Revisions of previous quantity estimates 2,985 (2,299) 2,099 178 (42) 69 3,163 (2,341) 2,168 Accretion of discount 964 3,984 5,144 344 804 869 1,308 4,788 6,013 Net change in income taxes (19,032) 10,189 4,767 (760) 590 (80) (19,792) 10,779 4,687 Total changes 48,021 (22,698) (8,062) 2,138 (4,308) (759) 50,159 (27,006) (8,821) Discounted future net cash flows at year end $ 52,695 4,674 27,372 5,000 2,862 7,170 57,695 7,536 34,542 ● The net change in prices and production costs is the beginning-of-year reserve-production forecast multiplied by the net annual change in the per-unit sales price and production cost, discounted at 10 percent. ● Purchases and sales of reserves in place, along with extensions, discoveries and improved recovery, are calculated using production forecasts of the applicable reserve quantities for the year multiplied by the 12-month average sales prices, less future estimated costs, discounted at 10 percent. ● Revisions of previous quantity estimates are calculated using production forecast changes for the year, including changes in the timing of production, multiplied by the 12-month average sales prices, less future estimated costs, discounted at 10 percent. ● The accretion of discount is 10 percent of the prior year’s discounted future cash inflows, less future production and development costs. ● The net change in income taxes is the annual change in the discounted future income tax provisions. Table of Contents ConocoPhillips 2021 10-K 178 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.