UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
[
]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation
or organization)
(I.R.S. Employer
Identification No.)
,
-
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbols
Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated
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Act). Yes [ ]
The registrant had
CONOCOPHILLIPS
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1
Commonly Used Abbreviations
The following industry-specific, accounting and other terms, and abbreviations may be commonly used in this
report.
Currencies
Accounting
$ or USD
U.S. dollar
ARO
asset retirement obligation
CAD
Canadian dollar
ASC
accounting standards codification
EUR
Euro
ASU
accounting standards update
GBP
British pound
DD&A
depreciation, depletion and
amortization
Units of Measurement
FASB
Financial Accounting Standards
BBL
barrel
Board
BCF
billion cubic feet
FIFO
first-in, first-out
BOE
barrels of oil equivalent
G&A
general and administrative
MBD
thousands of barrels per day
GAAP
generally accepted accounting
MCF
thousand cubic feet
principles
MBOD
thousand barrels of oil per day
LIFO
last-in, first-out
MM
million
NPNS
normal purchase normal sale
MMBOE
million barrels of oil equivalent
PP&E
properties, plants and equipment
MMBOD
million barrels of oil per day
SAB
staff accounting bulletin
MBOED
thousands of barrels of oil
VIE
variable interest entity
MMBOED
equivalent per day
millions of barrels of oil
equivalent per day
MMBTU
million British thermal units
Miscellaneous
MMCFD
million cubic feet per day
EPA
Environmental Protection Agency
ESG
Environmental, Social and
Corporate Governance
Industry
EU
European Union
CBM
coalbed methane
FERC
Federal Energy Regulatory
E&P
exploration and production
Commission
FEED
front-end engineering and design
GHG
greenhouse gas
FPS
floating production system
HSE
health, safety and environment
FPSO
floating production, storage and
ICC
International Chamber of
offloading
Commerce
G&G
geological and geophysical
ICSID
World Bank’s International
JOA
joint operating agreement
Centre for Settlement of
LNG
liquefied natural gas
Investment Disputes
NGLs
natural gas liquids
IRS
Internal Revenue Service
OPEC
Organization of Petroleum
OTC
over-the-counter
Exporting Countries
NYSE
New York Stock Exchange
PSC
production sharing contract
SEC
U.S. Securities and Exchange
PUDs
proved undeveloped reserves
Commission
SAGD
steam-assisted gravity drainage
TSR
total shareholder return
WCS
Western Canada Select
U.K.
United Kingdom
WTI
West Texas Intermediate
U.S.
United States of America
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Income Statement
ConocoPhillips
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Revenues and Other Income
Sales and other operating revenues
$
Equity in earnings of affiliates
Gain on dispositions
Other income (loss)
(945 )
Total Revenues and Other Income
Costs and Expenses
Purchased commodities
Production and operating expenses
Selling, general and administrative expenses
Exploration expenses
Depreciation, depletion and amortization
Impairments
(2 )
(1 )
Taxes other than income taxes
Accretion on discounted liabilities
Interest and debt expense
Foreign currency transaction (gain) loss
(83 )
Other expenses
(7 )
(13 )
Total Costs and Expenses
Income (loss) before income taxes
(1,542 )
Income tax provision (benefit)
(257 )
(109 )
Net income (loss)
(1,433 )
Less: net income attributable to noncontrolling interests
(18 )
(46 )
Net Income (Loss) Attributable to ConocoPhillips
$
(1,479 )
Net Income (Loss) Attributable to ConocoPhillips Per Share
of Common Stock
(dollars)
Basic
$
(1.37 )
Diluted
(1.37 )
Average Common Shares Outstanding
(in thousands)
Basic
Diluted
See Notes to Consolidated Financial Statements.
3
Consolidated Statement of Comprehensive Income
ConocoPhillips
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net Income (Loss)
$
(1,433 )
Other comprehensive income (loss)
Defined benefit plans
Reclassification adjustment for amortization of prior
service credit included in net income (loss)
(10 )
(8 )
(19 )
(16 )
Net actuarial gain arising during the period
Reclassification adjustment for amortization of net actuarial
losses included in net income (loss)
Income taxes on defined benefit plans
(19 )
(3 )
(40 )
(7 )
Defined benefit plans, net of tax
Unrealized holding gain (loss) on securities
(1 )
Income taxes on unrealized holding gain on securities
(2 )
(1 )
Unrealized holding gain (loss) on securities, net of tax
(1 )
Foreign currency translation adjustments
(490 )
Income taxes on foreign currency translation adjustments
Foreign currency translation adjustments, net of tax
(488 )
Other Comprehensive Income (Loss), Net of Tax
(468 )
Comprehensive Income (Loss)
(1,901 )
Less: comprehensive income attributable to noncontrolling interests
(18 )
(46 )
Comprehensive Income (Loss) Attributable to ConocoPhillips
$
(1,947 )
See Notes to Consolidated Financial Statements.
4
Consolidated Balance Sheet
ConocoPhillips
Millions of Dollars
June 30
December 31
2021
2020
Assets
Cash and cash equivalents
$
Short-term investments
Accounts and notes receivable (net of allowance of $
, respectively)
Accounts and notes receivable—related parties
Investment in Cenovus Energy
Inventories
Prepaid expenses and other current assets
Total Current Assets
Investments and long-term receivables
Loans and advances—related parties
Net properties, plants and equipment
(net of accumulated DD&A of $
, respectively)
Other assets
Total Assets
$
Liabilities
Accounts payable
$
Accounts payable—related parties
Short-term debt
Accrued income and other taxes
Employee benefit obligations
Other accruals
Total Current Liabilities
Long-term debt
Asset retirement obligations and accrued environmental costs
Deferred income taxes
Employee benefit obligations
Other liabilities and deferred credits
Total Liabilities
Equity
Common stock (
Issued (2021—
Par value
Capital in excess of par
Treasury stock (at cost: 2021—
(48,278 )
(47,297 )
Accumulated other comprehensive loss
(4,920 )
(5,218 )
Retained earnings
Total Equity
Total Liabilities and Equity
$
See Notes to Consolidated Financial Statements.
5
Consolidated Statement of Cash Flows
ConocoPhillips
Millions of Dollars
Six Months Ended
June 30
2021
2020
Cash Flows From Operating Activities
Net income (loss)
$
(1,433 )
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation, depletion and amortization
Impairments
(1 )
Dry hole costs and leasehold impairments
Accretion on discounted liabilities
Deferred taxes
(320 )
Undistributed equity earnings
Gain on dispositions
(292 )
(554 )
(Gain) loss on investment in Cenovus Energy
(726 )
Other
(688 )
(244 )
Working capital adjustments
Decrease (increase) in accounts and notes receivable
(794 )
Increase in inventories
(89 )
(27 )
Increase in prepaid expenses and other current assets
(388 )
(149 )
Increase (decrease) in accounts payable
(754 )
Increase (decrease) in taxes and other accruals
(838 )
Net Cash Provided by Operating Activities
Cash Flows From Investing Activities
Cash acquired from Concho
Capital expenditures and investments
(2,465 )
(2,525 )
Working capital changes associated with investing activities
(251 )
Proceeds from asset dispositions
Net sales (purchases) of investments
(1,030 )
Collection of advances/loans—related parties
Other
(35 )
Net Cash Used in Investing Activities
(481 )
(2,462 )
Cash Flows From Financing Activities
Repayment of debt
(44 )
(214 )
Issuance of company common stock
(25 )
Repurchase of company common stock
(981 )
(726 )
Dividends paid
(1,171 )
(913 )
Other
(28 )
Net Cash Used in Financing Activities
(2,218 )
(1,879 )
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
(93 )
Net Change in Cash, Cash Equivalents and Restricted Cash
(2,172 )
Cash, cash equivalents and restricted cash at beginning of period
Cash, Cash Equivalents and Restricted Cash at End of Period
$
Restricted cash of $
respectively, of our Consolidated Balance Sheet as of June 30, 2021.
Restricted cash of $
respectively, of our Consolidated Balance Sheet as of December 31, 2020.
See Notes to Consolidated Financial Statements.
6
Notes to Consolidated Financial Statements
ConocoPhillips
Note 1—Basis of Presentation
The interim-period financial information presented in the financial statements included in this report is
unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair
presentation of the consolidated financial position of ConocoPhillips and its results of operations and cash
flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed.
Certain notes and other information have been condensed or omitted from the interim financial statements
included in this report. Therefore, these financial statements should be read in conjunction with the
consolidated financial statements and notes included in our 2020 Annual Report on Form 10-K.
Note 2—Inventories
Inventories consisted of the following:
Millions of Dollars
June 30
2021
2020
Crude oil and natural gas
$
Materials and supplies
$
Inventories valued on the LIFO basis totaled $
31, 2020, respectively.
Note 3—Acquisitions and Dispositions
Acquisition of
We completed our acquisition of Concho on
agreement, each share of Concho common stock was exchanged for
stock, for total consideration of $
Total Consideration
Number of shares exchanged
$
$
**Based on the ConocoPhillips average stock price on January 15, 2021.
7
The transaction was accounted for as a business combination under FASB ASC 805 using the acquisition
method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair
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. 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 receivables, 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 $
identifiable assets and liabilities based on their fair values as of January 15, 2021.
Assets Acquired
Millions of Dollars
Cash and cash equivalents
$
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Investments and long-term receivables
Net properties, plants and equipment
Other assets
Total assets acquired
$
Liabilities Assumed
Accounts payable
$
Accrued income and other taxes
Employee benefit obligations
Other accruals
Long-term debt
Asset retirement obligations and accrued environmental costs
Deferred income taxes
Other liabilities and deferred credits
Total liabilities assumed
$
Net assets acquired
$
With the completion of the Concho transaction, we acquired proved and unproved properties of approximately
$
We recognized approximately $
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 restructuring program, the scope of which included combining
the operations of the two companies. For the three- and six-month periods ending June 30, 2021, we
recognized non-recurring restructuring costs mainly for employee severance and related incremental pension
benefit costs of approximately $
8
The impact from these transaction and restructuring costs to the lines of our consolidated income statement for
the six-month period ending June 30, 2021, are below:
Millions of Dollars
Transaction Cost
Restructuring Cost
Total Cost
Production and operating expenses
$
Selling, general and administration expenses
Exploration expenses
Taxes other than income taxes
Other expenses
$
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 $
million.
From the acquisition date through June 30, 2021, “Total Revenues and Other Income” and “Net Income (Loss)
Attributable to ConocoPhillips” associated with the acquired Concho business were approximately $
million and $
after-tax loss of $
tax loss is recorded within “Total Revenues and Other Income” on our consolidated income statement.
The following summarizes the unaudited supplemental pro forma financial information as if we had completed
the acquisition of Concho on January 1, 2020:
Millions of Dollars
Supplemental Pro Forma (unaudited)
Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Total revenues and other income
$
Net loss
(229 )
(619 )
Net loss attributable to ConocoPhillips
(247 )
(665 )
$ per share
Earnings per share:
Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Basic net loss
$
(0.18 )
(0.49 )
Diluted net loss
(0.18 )
(0.49 )
The unaudited supplemental pro forma financial information is presented for illustration purposes only and is
not necessarily indicative of the operating results that would have occurred had the transaction been completed
on January 1, 2020, nor is it necessarily indicative of future operating results of the combined entity. The
unaudited pro forma financial information for the three- and six-month periods ending June 30, 2020 is a result
of combining the consolidated income statement of ConocoPhillips with the results of Concho. The pro forma
results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction.
The pro forma results include adjustments to reverse impairment expense of $
recorded by Concho in the six-month period ending June 30, 2020, 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.
9
Assets Sold
In 2020, we completed the sale of our Australia-West asset and operations. The sales agreement entitled us to
a $
30, 2021, FID was announced and as such, we recognized a $
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 $
date. Results of operations related to this transaction are reflected in our Asia Pacific segment.
In 2017, we completed the sale of our
(FCCL) Partnership, as well as the majority of our western Canada gas assets to Cenovus Energy (CVE).
. For the three- and six-months ended June 30, 2021, we recorded
contingent payments of $
2020. Contingent payments are recorded as gain on dispositions on our consolidated income statement and
reflected in our Canada segment.
Planned Dispositions
In July 2021, we entered into divestiture agreements to sell our interests in certain noncore assets in our Lower
48 segment. Proceeds from these agreements total approximately $
The transactions are expected to close in the third quarter of 2021.
Note 4—Investments, Loans and Long-Term Receivables
Australia Pacific LNG Pty Ltd (APLNG)
APLNG executed project financing agreements for an $
amounts were drawn from the facility. The project financing facility has been restructured over time and at
June 30, 2021, this facility was composed of a financing agreement with the Export-Import Bank of 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 June 30, 2021, a balance of $
During the fourth quarter of 2020, the estimated fair value of our investment in APLNG declined to an amount
below carrying value, primarily due to the weakening of the U.S. dollar relative to the Australian dollar. Based
on a review of the facts and circumstances surrounding this decline in fair value, we concluded the impairment
was not other than temporary under the guidance of FASB ASC Topic 323, “Investments – Equity Method and
Joint Ventures.” Due primarily to improved outlooks for commodity prices and the strengthening of the U.S.
dollar relative to the Australian dollar during the first six months of 2021, the estimated fair value of our
investment increased and is above carrying value at June 30, 2021. We will continue to monitor the
relationship between the carrying value and fair value of APLNG.
At June 30, 2021, the carrying value of our equity method investment in APLNG was $
balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet.
Loans and Long-Term Receivables
As part of our normal ongoing business operations, and consistent with industry practice, we enter into
numerous agreements with other parties to pursue business opportunities. Included in such activity are loans
made to certain affiliated and non-affiliated companies. At June 30, 2021, significant loans to affiliated
companies included $
10
On our consolidated balance sheet, the long-term portion of these loans is included in the “Loans and
advances—related parties” line, while the short-term portion is in the “Accounts and notes receivable—related
parties” line.
Note 5—Investment in Cenovus Energy
Our investment in CVE shares is carried on our consolidated balance sheet at fair value of $
on the closing price of $
and December 31, 2020, we held
June 30, 2021, our investment approximated
During the second quarter, we sold
million, of which $
continue to decrease our investment over time.
All gains and losses are recognized within “Other income (loss)” on our consolidated income statement.
Proceeds related to the sale of our CVE shares are presented within “Cash Flows from Investing Activities” on
our consolidated cash flow statement.
Gains and losses recorded in other income (loss) for our investment in CVE were:
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Total net gain (loss) on equity securities
$
(1,140 )
Less: Net gain on equity securities sold during the period
(31 )
(60 )
Unrealized gain (loss) on equity securities still held at
$
(1,140 )
Note 6—Debt
Our debt balance at June 30, 2021, was $
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 $
recorded at fair value of $
●
% Notes due
●
% Notes due
●
% Notes due
●
% Notes due
●
% Notes due
The adjustment to fair value of the senior notes of approximately $
amortized as an adjustment to interest expense over the remaining contractual terms of the senior notes.
11
In the first quarter of 2021, we completed a debt exchange offer related to the debt assumed from Concho. Of
the approximately $
ConocoPhillips had the same interest rates and maturity dates as the Concho senior notes. The portion not
exchanged, approximately $
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.
We have a revolving credit facility totaling $
May 2023
. Our revolving
credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $
million, or as support for our commercial paper program. The revolving credit facility is broadly syndicated
among financial institutions and does not contain any material adverse change provisions or any covenants
requiring maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-
default provision relating to the failure to pay principal or interest on other debt obligations of $
more by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to
redetermination prior to its expiration date.
Credit facility borrowings may bear interest at a margin above rates offered by certain designated banks in the
London interbank market or at a margin above the overnight federal funds rate or prime rates offered by
certain designated banks in the U.S. The facility agreement calls for commitment fees on available, but
unused, amounts. The facility agreement also contains early termination rights if our current directors or their
approved successors cease to be a majority of the Board of Directors.
The revolving credit facility supports our ability to issue up to $
paper is generally limited to
balance sheet. With $
no
credit, we had access to $
30, 2021. At December 31, 2020, we had $
no
borrowings or letters of credit issued.
.
At June 30, 2021, we had $
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.
12
Note 7—Changes in Equity
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
For the three months ended June 30, 2021
Balances at March 31, 2021
$
(47,672 )
(5,080 )
Net income
Other comprehensive income
Dividends paid ($
(583 )
(583 )
Repurchase of company common stock
(606 )
(606 )
Distributed under benefit plans
Balances at June 30, 2021
$
(48,278 )
(4,920 )
For the six months ended June 30, 2021
Balances at December 31, 2020
$
(47,297 )
(5,218 )
Net income
Other comprehensive income
Dividends paid ($
(1,171 )
(1,171 )
Acquisition of Concho
Repurchase of company common stock
(981 )
(981 )
Distributed under benefit plans
Other
Balances at June 30, 2021
$
(48,278 )
(4,920 )
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
For the three months ended June 30, 2020
Balances at March 31, 2020
$
(47,130 )
(6,145 )
Net income
Other comprehensive income
Dividends paid ($
(455 )
(455 )
Distributions to noncontrolling interests and other
(6 )
(6 )
Dispositions
(84 )
(84 )
Distributed under benefit plans
Other
Balances at June 30, 2020
$
(47,130 )
(5,825 )
For the six months ended June 30, 2020
Balances at December 31, 2019
$
(46,405 )
(5,357 )
Net income
(1,479 )
(1,433 )
Other comprehensive loss
(468 )
(468 )
Dividends paid ($
(913 )
(913 )
Repurchase of company common stock
(726 )
(726 )
Distributions to noncontrolling interests and other
(32 )
(32 )
Dispositions
(84 )
(84 )
Distributed under benefit plans
Other
Balances at June 30, 2020
$
(47,130 )
(5,825 )
13
Note 8—Guarantees
At June 30, 2021, we were liable for certain contingent obligations under various contractual arrangements as
described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for
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 June 30, 2021, we had outstanding multiple guarantees in connection with our
interest in APLNG. The following is a description of the guarantees with values calculated utilizing June 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 is
. Our maximum exposure under this guarantee is approximately $
and may become payable if an enforcement action is commenced by the project finance lenders
against APLNG. At June 30, 2021, the carrying value of this guarantee was $
●
In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy in
October 2008, we agreed to reimburse Origin Energy for our share of the existing contingent liability
arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales
agreements with remaining terms of
. Our maximum potential liability for future
payments, or cost of volume delivery, under these guarantees is estimated to be $
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-venturers 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
. Our maximum potential amount of future payments related to these
guarantees is approximately $
June 30, 2021, the carrying value of these guarantees was $
Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling approximately $
million, which consist primarily of guarantees of the residual value of leased office buildings, guarantees of the
residual value of corporate aircrafts, and a guarantee for our portion of a joint venture’s project finance reserve
accounts. These guarantees have remaining terms of
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
June 30, 2021, the carrying value of these guarantees was $
Indemnifications
Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint
ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications
for taxes and environmental liabilities. Most of these indemnifications are related to tax issues and the
majority of these expire in 2021. Those related to environmental issues have terms that are generally indefinite
and the maximum amounts of future payments are generally unlimited.
The carrying amount recorded for these indemnification obligations at June
30, 2021, was $
14
indemnity is in effect, if one exists, based on the facts and circumstances surrounding each type of indemnity.
In cases where the indemnification term is indefinite, we will reverse the liability when we have information
the liability is essentially relieved or amortize the liability over an appropriate time period as the fair value of
our indemnification exposure declines. Although it is reasonably possible future payments 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.
Note 9—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.
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.
15
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.
At June 30, 2021, our balance sheet included a total environmental accrual of $
$
substantial amount of these expenditures within the next
. In the future, we may be involved in
additional environmental assessments, cleanups and proceedings.
Litigation and Other Contingencies
We are subject to various lawsuits and claims including but not limited to matters 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 from historic operations, and other contract disputes. We will
continue to defend ourselves vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific
characteristics of our cases, employing a litigation management process to manage and monitor the legal
proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in
individual cases. This process also enables us to track those cases that have been scheduled for trial and/or
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 June 30, 2021, we had performance obligations secured by letters of credit of
$
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 $
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 $
million. The award now stands at $
of the award, which automatically stayed enforcement of the award. Annulment proceedings are underway.
16
In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against
PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued
an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $
agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures.
approximately $
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. 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.
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 $
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, cities, counties, governments 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
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
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
its interest approximately
production on this lease since that time. ConocoPhillips is challenging this order.
17
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 $
million bonus due upon a final investment decision (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.
Note 10—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
June 30
December 31
2021
2020
Assets
Prepaid expenses and other current assets
$
Other assets
Liabilities
Other accruals
Other liabilities and deferred credits
The gains (losses) from commodity derivatives incurred, and the line items where they appear on our
consolidated income statement were:
Millions of Dollars
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Sales and other operating revenues
$
(100 )
(50 )
(379 )
(3 )
Other income (loss)
(1 )
Purchased commodities
(2 )
18
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 $
contracts through December 31, 2022. During the first quarter of 2021, we recognized a loss of $
on Concho derivative contracts with settlement dates on or before March 31, 2021, and an additional $
million loss related to all remaining Concho derivative contracts with settlement dates subsequent to March 31,
2021, for a total loss of $
within the “Sales and other operating revenues” line on our consolidated income statement.
By the end of March 2021, all oil and natural gas derivative financial instruments acquired from Concho were
contractually settled. In connection with the settlement, we issued a cash payment of $
quarter of 2021 and $
derivative contracts are presented within “Cash Flows From Operating Activities” on our consolidated cash
flow statement.
The table below summarizes our material net exposures resulting from outstanding commodity derivative
contracts:
Open Position
Long/(Short)
June 30
December 31
2021
2020
Commodity
Natural gas and power (billions of cubic feet equivalent)
(20 )
(6 )
(10 )
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.
19
The following investments are carried on our consolidated balance sheet at cost, plus accrued interest and the
table reflects remaining maturities at June 30, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-
Term Receivables
June 30
December 31
June 30
December 31
June 30
December 31
2021
2020
2021
2020
2021
2020
Cash
$
Demand Deposits
Time Deposits
1 to 90 days
91 to 180 days
Within one year
One year through five years
U.S. Government Obligations
1 to 90 days
$
The following investments in debt securities classified as available for sale are carried at fair value on our
consolidated balance sheet at June 30, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-Term
Receivables
June 30
December 31
June 30
December 31
June 30
December 31
2021
2020
2021
2020
2021
2020
Major Security Type
Corporate Bonds
$
Commercial Paper
U.S. Government Obligations
U.S. Government Agency
Foreign Government Obligations
Asset-backed Securities
$
Cash and Cash Equivalents and Short-Term Investments have remaining maturities within one year.
Investments and Long-Term Receivables have remaining maturities greater than one year through eight years.
20
The following table summarizes the amortized cost basis and fair value of investments in debt securities
classified as available for sale:
Millions of Dollars
Amortized Cost Basis
Fair Value
June 30
December 31
June 30
December 31
2021
2020
2021
2020
Major Security Type
Corporate bonds
$
Commercial paper
U.S. government obligations
U.S. government agency obligations
Foreign government obligations
Asset-backed securities
$
At June 30, 2021 and December 31, 2020, total unrealized losses for debt securities classified as available for
sale with net losses were negligible. Additionally, at June 30, 2021 and December 31, 2020, investments in
these debt securities in an unrealized loss position for which an allowance for credit losses has not been
recorded were negligible.
For the three- and six-month periods ended June 30, 2021, proceeds from sales and redemptions of investments
in debt securities classified as available for sale were $
three- and six-month periods ended June 30, 2020, proceeds from sales and redemptions of investments in debt
securities classified as available for sale were $
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.
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, government debt securities, 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, U.S.
government and government agency obligations, asset-backed securities, 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 oil and gas operations and reflect a broad national and
international customer base, which limits our exposure to concentrations of credit risk. The majority of these
receivables have payment terms of
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.
21
The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were
in a liability position at June 30, 2021 and December 31, 2020, was $
For these instruments,
been downgraded below investment grade at June 30, 2021, we would have been required to post $
of additional collateral, either with cash or letters of credit.
Note 11—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit
price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed
according to the quality of valuation inputs under the following hierarchy:
●
Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities.
●
Level 2: Inputs other than quoted prices that are directly or indirectly observable.
●
Level 3: Unobservable inputs that are significant to the fair value of assets or liabilities.
The classification of an asset or liability is based on the lowest level of input significant to its fair value. 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
the three- and six-month periods ended June 30, 2021, nor during the year ended December 31, 2020.
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 investments in debt securities classified as available for sale, and commodity
derivatives.
●
Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are
valued using unadjusted prices available from the underlying exchange. Level 1 also includes our
investment in common shares of CVE, which is valued using quotes for shares on the NYSE, and our
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.
22
●
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
June 30, 2021
December 31, 2020
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investment in CVE shares
$
Investments in debt securities
Commodity derivatives
Total assets
$
Liabilities
Commodity derivatives
$
Total liabilities
$
The following table summarizes those commodity derivative balances subject to the right of setoff as
presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for
multiple derivative instruments executed with the same counterparty in our financial statements 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
June 30, 2021
Assets
$
Liabilities
December 31, 2020
Assets
$
Liabilities
At June 30, 2021 and December 31, 2020, we did not present any amounts gross on our consolidated
balance sheet where we had the right of setoff.
23
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 CVE:
●
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 corroborated with
market data.
●
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.
●
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
June 30
December 31
June 30
December 31
2021
2020
2021
2020
Financial assets
Investment in CVE shares
$
Commodity derivatives
Investments in debt securities
Loans and advances—related parties
Financial liabilities
Total debt, excluding finance leases
Commodity derivatives
24
Note 12—Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss in the equity section of our consolidated balance sheet included:
Millions of Dollars
Defined
Benefit Plans
Net Unrealized
Gain (Loss) on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2020
$
(425 )
(4,795 )
(5,218 )
Other comprehensive income (loss)
(1 )
June 30, 2021
$
(291 )
(4,630 )
(4,920 )
The following table summarizes reclassifications out of accumulated other comprehensive loss and into net
income (loss):
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Defined benefit plans
$
The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $
million for the three-month periods ended June 30, 2021 and June 30, 2020, respectively, and $
periods ended June 30, 2021 and June 30, 2020, respectively
.
Note 13—Cash Flow Information
Millions of Dollars
Six Months Ended
June 30
2021
2020
Cash Payments
Interest
$
Income taxes
Net Sales (Purchases) of Investments
Short-term investments purchased
$
(5,439 )
(7,021 )
Short-term investments sold
Long-term investments purchased
(149 )
(208 )
Long-term investments sold
$
(1,030 )
See Note 3 for additional information on cash and non-cash changes to our consolidated balance sheet
25
Note 14—Employee Benefit Plans
Pension and Postretirement Plans
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int'l.
U.S.
Int'l.
Components of Net Periodic Benefit Cost
Three Months Ended June 30
Service cost
$
Interest cost
Expected return on plan assets
(20 )
(30 )
(21 )
(34 )
Amortization of prior service credit
(10 )
(8 )
Recognized net actuarial loss
Settlements
Net periodic benefit cost
$
(7 )
(7 )
Six Months Ended June 30
Service cost
$
Interest cost
Expected return on plan assets
(44 )
(60 )
(42 )
(71 )
Amortization of prior service credit
(19 )
(16 )
Recognized net actuarial loss
Settlements
(1 )
Curtailments
Special Termination Benefits
Net periodic benefit cost
$
(15 )
(12 )
The components of net periodic benefit cost, other than the service cost component, are included in the “Other
expenses” line item on our consolidated income statement.
During the three-month period ended June 30, 2021, lump-sum benefit payments exceeded the sum of
service and interest costs for the year for the U.S. qualified pension plan and a U.S. non-qualified supplemental
retirement plan. As a result, we recognized a proportionate share of prior actuarial losses from other
comprehensive income as pension settlement expense of $
pension settlement expense, the fair market values of the pension plan assets were updated and the pension
benefit obligations of the U.S. qualified pension plan and the U.S. non-qualified supplemental retirement plan
were remeasured at June 30, 2021. At the measurement date, the net pension liability decreased by $
million, primarily a result of better actual return on assets compared with the expected return, partially offset
by a decrease in the discount rate, resulting in a corresponding increase to other comprehensive income.
As part of our restructuring program, we concluded that actions taken during the first quarter of 2021, would
result in a significant reduction of future service of active employees in the U.S. qualified pension plan, a U.S.
nonqualified supplemental retirement plan and the U.S. other postretirement benefit plans. As a result, we
recognized an increase in the benefit obligation as a curtailment loss of $
plans in the first quarter of 2021. In conjunction with the recognition of curtailment losses, the fair market
values of pension plan assets were updated, and the pension benefit obligations of the U.S. qualified pension, a
U.S. nonqualified supplemental retirement plan and the U.S. other postretirement benefit plans were
remeasured. At March 31, 2021, the net pension liability decreased by $
discount rate increases for each plan offset by lower than premised return on assets on the U.S. qualified
pension plan, resulting in a corresponding increase to other comprehensive income.
26
The relevant discount rates are summarized in the following table:
June 30
March 31
December 31
Discount rate
2021
2021
2020
U.S. qualified pension plan
%
U.S. nonqualified pension plan
U.S. postretirement benefit plans
*
* Not remeasured at June 30, 2021.
During the first six months of 2021, we contributed $
to our international benefit plans. In 2021, we expect to contribute a total of approximately $
our domestic qualified and nonqualified pension and postretirement benefit plans and $
international qualified and nonqualified pension and postretirement benefit plans.
Severance Accrual
The following table summarizes our severance accrual activity for the six-month period ended June 30, 2021:
Millions of Dollars
Balance at December 31, 2020
$
Accruals
Benefit payments
(91 )
Balance at June 30, 2021
$
Accruals include severance costs associated with our restructuring program. Of the remaining balance at June
30, 2021, $
Note 15—Related Party Transactions
Our related parties primarily include equity method investments and certain trusts for the benefit of employees.
Significant transactions with our equity affiliates were:
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Operating revenues and other income
$
Purchases
Operating expenses and selling, general and administrative
expenses
Net interest (income) expense*
(2 )
(1 )
(4 )
*We paid interest to, or received interest from, various affiliates.
27
Note 16—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
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Revenue from contracts with customers
$
Revenue from contracts outside the scope of ASC Topic 606
Physical contracts meeting the definition of a derivative
Financial derivative contracts
(26 )
(260 )
(75 )
Consolidated sales and other operating revenues
$
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
Millions of Dollars
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Revenue from Outside the Scope of ASC Topic 606
by Segment
Lower 48
$
Canada
Europe, Middle East and North Africa
Physical contracts meeting the definition of a derivative
$
Millions of Dollars
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Revenue from Outside the Scope of ASC Topic 606
by Product
Crude oil
$
Natural gas
Other
Physical contracts meeting the definition of a derivative
$
28
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.
Receivables and Contract Liabilities
Receivables from Contracts with Customers
At June 30, 2021, the “Accounts and notes receivable” line on our consolidated balance sheet, includes trade
receivables of $
contracts with customers within the scope of ASC Topic 606 and those that are outside the scope of ASC
Topic 606.
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 to 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.
Millions of Dollars
Contract Liabilities
At December 31, 2020
$
Contractual payments received
Revenue recognized
(62 )
At June 30, 2021
$
Amounts Recognized in the Consolidated Balance Sheet at June 30, 2021
Current liabilities
$
29
Note 17—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
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 income and expense; premiums on early retirement of debt; corporate overhead and certain
technology activities, including licensing revenues; and unrealized holding gains or losses on equity securities.
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.
Intersegment sales are at prices that approximate market.
Effective in the third quarter of 2020, we restructured our segments to align with changes to our internal
organization. The Middle East business was realigned from the Asia Pacific and Middle East segment to the
Europe and North Africa segment. The segments have been renamed the Asia Pacific segment and the Europe,
Middle East and North Africa segment. We have revised segment information disclosures and segment
performance metrics presented within our results of operations for the prior comparative periods.
On January 15, 2021, we completed our acquisition of Concho, an independent oil and gas exploration and
production company with operations across New Mexico and West Texas. Results of operations for Concho
are included in our Lower 48 segment for the current period. Certain transaction and restructuring costs
associated with the Concho acquisition are included in our Corporate and Other segment.
30
Analysis of Results by Operating Segment
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Sales and Other Operating Revenues
Alaska
$
Intersegment eliminations
Alaska
Lower 48
Intersegment eliminations
(2 )
(28 )
(4 )
(38 )
Lower 48
Canada
Intersegment eliminations
(352 )
(657 )
(180 )
Canada
Europe, Middle East and North Africa
Asia Pacific
Other International
Corporate and Other
Consolidated sales and other operating revenues
$
Sales and Other Operating Revenues by Geographic Location
(1)
United States
$
Australia
Canada
China
Indonesia
Libya
Malaysia
Norway
United Kingdom
Other foreign countries
Worldwide consolidated
$
Sales and Other Operating Revenues by Product
Crude oil
$
Natural gas
Natural gas liquids
Other
(2)
Consolidated sales and other operating revenues by product
$
(1) Sales and other operating revenues are attributable to countries based on the location of the selling operation.
(2) Includes LNG and bitumen.
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
Alaska
$
(141 )
(60 )
Lower 48
(365 )
(802 )
Canada
(86 )
(195 )
Europe, Middle East and North Africa
Asia Pacific
Other International
(5 )
(6 )
(9 )
Corporate and Other
(55 )
(1,590 )
Consolidated net income (loss) attributable to ConocoPhillips
$
(1,479 )
31
Millions of Dollars
June 30
December 31
2021
2020
Total Assets
Alaska
$
Lower 48
Canada
Europe, Middle East and North Africa
Asia Pacific
Other International
Corporate and Other
Consolidated total assets
$
Note 18—Income Taxes
Our effective tax rate was
comparable period of 2020. Both periods were primarily impacted by shifts in our before-tax income between
higher and lower tax jurisdictions as well as the change in our U.S. valuation allowance driven by the fair
value measurement of our CVE common shares.
Our effective tax rates for the six-months ended June 30, 2021 and 2020 were
respectively and both periods were impacted by the same items noted above. Additionally, our effective tax
rate for the six-month period ended June 30, 2021 was adversely impacted by $
interest deductions from the exchange of debt acquired from Concho offsetting U.S. foreign source revenue
that would otherwise have been offset by foreign tax credits. The six-month period ending June 30, 2020, was
also impacted by the tax effect of the gain on disposition recognized for Australia-West assets.
During the three and six-month periods of 2021, our valuation allowance decreased by $
million, respectively, compared to a decrease of $
2020. The change to our U.S. valuation allowance for all periods relates primarily to the fair value
measurement of our CVE common shares and our expectation of the tax impact related to incremental capital
gains and losses.
The Company has ongoing income tax audits in a number of jurisdictions. The government agents in charge of
these audits regularly request additional time to complete audits, which we generally grant, and conversely
occasionally close audits unpredictably. Within the next twelve months we may have audit periods close that
could significantly impact our total unrecognized tax benefits. The amount of such change and the associated
impact on our financial statements is not estimable at this time.
Our deferred tax liability increased by approximately $
Concho acquisition. Additionally, our reserve for unrecognized tax benefits increased by $
to tax credit carryovers acquired from Concho that we do not expect to recognize.
32
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management’s Discussion and Analysis is the company’s analysis of its financial performance and of
significant trends that may affect future performance. It should be read in conjunction with the financial
statements and notes. It contains forward-looking statements including, without limitation, statements relating
to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,”
“believe,” “budget,” “continue,” “could,” “effort,” “estimate,” “expect,” “forecast,” “goal,” “guidance,”
“intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,”
“target,” “will,” “would,” and similar expressions identify forward-looking statements. The company does
not undertake to update, revise or correct any of the forward-looking information unless required to do so
under the federal securities laws. Readers are cautioned that such forward-looking statements should be read
in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE
PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995,” beginning on page 57.
The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss)
attributable to ConocoPhillips.
BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW
ConocoPhillips is the world’s largest independent E&P company with operations and activities in 15 countries.
Our diverse, low cost of supply portfolio includes resource-rich unconventional plays in North America;
conventional assets in North America, Europe, and Asia; LNG developments; oil sands in Canada; and an
inventory of global conventional and unconventional exploration prospects. Headquartered in Houston, Texas,
at June 30, 2021, we employed approximately 10,100 people worldwide and had total assets of $85 billion.
Completed Acquisition of Concho Resources Inc.
On January 15, 2021, we completed our acquisition of Concho Resources Inc. (Concho), an independent oil
and gas exploration and production company with operations across New Mexico and West Texas. The
addition of complementary acreage in the Delaware and Midland Basins creates a sizeable Permian presence to
augment our leading unconventional positions in the Eagle Ford, Bakken and Montney.
Since the closing of the transaction, we have made significant progress in integrating the two companies and
have exceeded our own expectations in realizing synergies and savings that should have long lasting positive
effects on our business. We previously announced an expected $750 million of annual cost and capital savings
by 2022. However, due to additional benefits anticipated from further cost, capital, and margin improvements,
we now expect approximately $1 billion in annual synergies and savings by 2022.
Overview
While commodity prices continued to improve in the second quarter of 2021, we believe that prices will
remain cyclical and volatile. Our view is that a successful business strategy in the E&P industry must be
resilient in lower price environments, while also retaining upside during periods of higher prices. As such, we
are unhedged, remain disciplined in our investment decisions and are monitoring market fundamentals,
including OPEC plus updates regarding supply guidance, inventory levels, and capital restraint across the
industry. Demand is still recovering but has yet to reach pre-pandemic levels. The speed and extent of this
recovery will be influenced by whether and at what pace the COVID-19 restrictions that have reduced
economic activity and depressed the demand for our products globally are eased.
33
As the macro energy environment continues to evolve, we have embraced what we believe sector leadership
requires and we call it our triple mandate. We believe ConocoPhillips can play a valued role in whatever
pathway the energy transition takes by investing in the lowest cost of supply barrels to help meet global energy
demand, delivering competitive returns of and on capital, and achieving our net-zero ambition on our gross
operated (scope 1 and 2) emissions.
Our triple mandate is supported by financial principles and allocation priorities that should allow us to deliver
superior returns through the price cycles. Our financial principles consist of maintaining balance sheet
strength, providing peer-leading distributions, making disciplined investments, and delivering ESG excellence,
all of which are in service of delivering financial returns. Our acquisition of Concho further reinforced our
value proposition. In the second quarter, total company production was 1,588 MBOED, including 435
MBOED from the Permian Basin, resulting in cash provided by operating activities of $4.3 billion. In the six-
month period ended June 30, 2021, we have generated $6.3 billion in cash provided by operating activities,
returning $1.2 billion to shareholders through dividends and $1 billion through share repurchases. We ended
the quarter with cash, cash equivalents and short-term investments totaling $8.9 billion.
In February 2021, we resumed our share repurchase program at an annualized level of $1.5 billion which was
increased in the second quarter to an annualized level of $2.5 billion for 2021.
Additionally, in May 2021 we announced a paced monetization program related to the 208 million shares of
Cenovus Energy (CVE) common shares owned at that time. We plan to fully dispose of our CVE shares by
year-end 2022, however, the sales pace for the remaining shares will be guided by market conditions, and we
retain discretion to adjust accordingly. The proceeds from this disposition will be deployed towards
incremental share repurchases. During the second quarter of 2021 we sold 20 million shares or approximately
10 percent of the shares held at December 31, 2020 for $180 million. Based on current market conditions, in
2021 we anticipate $1 billion in proceeds to be directed towards our existing share repurchase authorization,
bringing our total 2021 share repurchases to an estimated $3.5 billion.
These share repurchases along with our annual dividend of $2.3 billion amount to a total of approximately $6
billion in planned distributions for 2021.
In May 2021, we demonstrated our commitment to preserving our ‘A’ -rated balance sheet by announcing our
intent to reduce the company’s gross debt by $5 billion over five years through natural and accelerated
maturities.
In June 2021, we affirmed our commitment to ESG leadership and excellence, and to the specific targets that
we set in October 2020 when we became the first U.S.-based oil and gas company to adopt a Paris-aligned
climate-risk strategy. Our commitment includes:
●
Net-zero ambition for operational (scope 1 and 2) emissions by 2050 with active advocacy for a price
on carbon to address end-use (scope 3) emissions;
●
Targeting a reduction in operational greenhouse gas emissions intensity by 35 to 45 percent from 2016
levels by 2030;
●
Zero routine flaring by 2030, with an ambition to get there by 2025;
●
10 percent reduction target for methane emissions intensity by 2025, in addition to the 65 percent
reductions we have made since 2015;
●
Adding continuous methane monitoring devices to our operations with a focus on the larger Lower 48
facilities;
●
Formation of a dedicated low carbon technology organization responsible for identifying and
prioritizing global emissions reduction initiatives and opportunities associated with the energy
transition including carbon capture, utilization and storage (CCUS) and hydrogen; and
●
ESG performance in executive and employee compensation programs.
34
Q2'19
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Q4'20
Q1'21
Q2'21
WTI/Brent
$/Bbl
WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Prices
Quarterly Averages
WTI - $/Bbl
Brent - $/Bbl
HH - $/MMBTU
HH
$/MMBTU
Operationally, we remain focused on safely executing the business. Production was 1,588 MBOED in the
second quarter of 2021, an increase of 607 MBOED or 62 percent, compared with the second quarter of 2020,
primarily due to the acquisition of approximately 330 MBOED in the Permian Basin from our Concho
acquisition and the absence of last year’s economic curtailments driven by weakness in oil prices
predominantly in operated North American assets.
We re-invested $1.3 billion back into the business in the form of capital expenditures during the second
quarter, with over half of our investments focused on flexible, short-cycle unconventional plays in the Lower
48 segment where our production is liquids-weighted and is accessible to both domestic and export markets.
For the full year, driven by efficiencies we have already captured from the Concho transaction, we have
reduced our 2021 capital guidance to $5.3 billion and cost guidance to $6.1 billion for 2021.
Business Environment
Commodity prices are the most significant factor impacting our profitability and related reinvestment of
operating cash flows into our business. Among other dynamics that could influence world energy markets and
commodity prices are global economic health, supply or demand disruptions or fears thereof caused by civil
unrest, global pandemics, military conflicts, actions taken by OPEC plus and other major oil producing
countries, environmental laws, tax regulations, governmental policies, and weather-related disruptions. Our
strategy is to create value through price cycles by delivering on the financial, operational and ESG priorities
that underpin our value proposition.
Our earnings and operating cash flows generally correlate with price levels for crude oil and natural gas, which
are subject to factors external to the company and over which we have no control. The following graph depicts
the trend in average benchmark prices for WTI crude oil, Brent crude oil and Henry Hub natural gas:
Brent crude oil prices averaged $68.83 per barrel in the second quarter of 2021, an increase of 136 percent
compared with $29.20 per barrel in the second quarter of 2020. WTI at Cushing crude oil prices averaged
$66.07 per barrel in the second quarter of 2021, an increase of 137 percent compared with $27.85 per barrel in
the second quarter of 2020. Oil prices increased alongside the ongoing global economic recovery following
2020’s COVID closures as well as OPEC plus supply restraint.
35
Henry Hub natural gas prices averaged $2.83 per MMBTU in the second quarter of 2021, an increase of 65
percent compared with $1.71 per MMBTU in the second quarter of 2020. Henry Hub prices have increased
due to healthy domestic demand accompanied by record levels of feedgas demand for LNG exports to Europe
and Asia.
Our realized bitumen price averaged $37.60 per barrel in the second quarter of 2021, an increase of
approximately $61 per barrel compared with negative $23.11 per barrel in the second quarter of 2020. The
increase in the second quarter of 2021 was driven by higher blend price for Surmont sales, largely attributed to
a strengthening of WTI price and reduced unutilized transportation costs which negatively impacted our
realized bitumen price in 2020. We continue to optimize bitumen price realizations through the utilization of
downstream transportation solutions and implementation of alternate blend capability which results in lower
diluent costs.
Our total average realized price was $50.03 per BOE in the second quarter of 2021, increased in comparison
with $23.09 per BOE in the second quarter of 2020.
Key Operating and Financial Summary
Significant items during the second quarter of 2021 and recent announcements included the following:
●
Delivered strong operational performance across the company’s asset base, including successful
planned maintenance turnarounds, resulting in second quarter production of 1,547 MBOED, excluding
Libya.
●
Net cash provided by operating activities was $4.3 billion, exceeding capital expenditures and
investments of $1.3 billion.
●
Distributed $1.2 billion to shareholders, comprised of $0.6 billion in dividends and $0.6 billion in
share repurchases.
●
Ended the quarter with cash and cash equivalents totaling $6.6 billion and short-term investments of
$2.3 billion, equaling $8.9 billion in ending cash, cash equivalents and short-term investments.
●
Entered into divestiture agreements during July for certain Lower 48 noncore assets totaling
approximately $0.2 billion, subject to customary closing adjustments, as part of the company’s plan to
generate $2 to $3 billion in disposition proceeds over the next 18 months.
Outlook
Capital, Cost and Production
In June 2021, due to realizing synergistic savings from our Concho acquisition earlier than anticipated, we
announced reductions of full year 2021 operating plan capital and cost guidance by a combined $300 million.
Capital guidance was reduced to $5.3 billion and cost guidance to $6.1 billion for the full year 2021.
Third-quarter 2021 production is expected to be 1.48 to 1.52 MMBOED, reflecting seasonal turnarounds
planned in Alaska and the Asia Pacific region. This production guidance excludes Libya and assumes that
previously announced divestitures close during the third quarter of 2021. All other guidance items are
unchanged.
Depreciation, Depletion and Amortization
DD&A expense was $1.9 billion in the second quarter of 2021. Proved reserves estimates were updated in the
current quarter utilizing historical twelve-month first-of-month average prices, which decreased second quarter
DD&A expense by approximately $160 million before-tax. Depending on price fluctuations, we would expect
reserve estimates to either increase or decrease.
36
RESULTS OF OPERATIONS
Effective with the third quarter of 2020, we have restructured our segments to align with changes to our
internal organization. The Middle East business was realigned from the Asia Pacific and Middle East segment
to the Europe and North Africa segment. The segments have been renamed the Asia Pacific segment and the
Europe, Middle East and North Africa segment. We have revised segment information disclosures and
segment performance metrics presented within our results of operations for the prior comparative periods.
Unless otherwise indicated, discussion of results for the three- and six-month periods ended June 30, 2021, is
based on a comparison with the corresponding periods of 2020.
Consolidated Results
A summary of the company's net income (loss) attributable to ConocoPhillips by business segment follows:
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Alaska
$
371
(141)
530
(60)
Lower 48
1,175
(365)
1,643
(802)
Canada
102
(86)
112
(195)
Europe, Middle East and North Africa
207
25
360
226
Asia Pacific
175
648
492
920
Other International
(5)
(6)
(9)
22
Corporate and Other
66
185
(55)
(1,590)
Net income (loss) attributable to ConocoPhillips
$
2,091
260
3,073
(1,479)
Net income (loss) attributable to ConocoPhillips in the second quarter of 2021 increased $1,831 million.
Earnings were positively impacted by:
●
Higher realized commodity prices.
●
Higher sales volumes, primarily due to our Concho acquisition and absence of production curtailments
in our operated North American assets.
Second quarter 2021 net income increases were partly offset by:
●
Higher DD&A expenses primarily due to our Concho acquisition and the absence of production
curtailments in our operated North American assets, partially offset by lower rates driven from price-
related reserve revisions due to higher commodity prices in 2021.
●
Higher production and operating expenses and taxes other than income taxes, primarily due to our
Concho acquisition and the absence of production curtailments in our operated North American assets.
●
Absence of a $597 million after-tax gain on dispositions related to our Australia-West divestiture in
May 2020.
Net income (loss) attributable to ConocoPhillips in the six-month period ended June 30, 2021, increased
$4,552 million. In addition to the items detailed above, earnings were positively impacted by:
●
A gain of $726 million after-tax on our CVE common shares, compared with an after-tax loss of
$1,140 million in the first half of 2020.
●
Lower impairments by $519 million, primarily due to the absence of impairments to noncore gas
assets in our Lower 48 segment.
37
In addition to the items detailed above, the increases in earnings in the six-month period ended June 30, 2021,
were partly offset by:
●
Restructuring and transaction expenses of approximately $261 million after-tax related to our Concho
acquisition and mark-to-market impacts on certain key employee compensation programs.
●
Realized losses on hedges of $233 million after-tax related to derivative positions assumed through
our Concho acquisition. These derivative positions were settled entirely within the first quarter of
2021.
See the “Segment Results” section for additional information.
Income Statement Analysis
Unless otherwise indicated, all results in Income Statement Analysis are before-tax.
Sales and other operating revenues for the three- and six-month periods of 2021 increased $6,807 million and
$10,475 million, respectively, mainly due to higher realized commodity prices and higher sales volumes in the
Lower 48, primarily related to our Concho acquisition and the absence of production curtailments in our
operated North American assets.
Equity in earnings of affiliates for the three-month period of 2021 increased $62 million primarily due to
higher earnings driven by higher LNG and crude prices, partially offset by a higher effective tax rate related to
equity method investments in our Europe, Middle East, and North Africa segment. For the six-month period
of 2021, Equity in earnings of affiliates decreased $50 million primarily due to lower earnings driven by lower
LNG lagging contract prices in 2021 when compared with the same periods in 2020.
Gain on dispositions for the three- and six-month periods of 2021 decreased $537 million and $262 million,
respectively, primarily due to the absence of a $587 million gain associated with our Australia-West
divestiture. The six-month decrease was partially offset by recognition of a $200 million FID bonus associated
with our Australia-West divestiture in the first quarter of 2021.
Other income (loss) for the three-month period of 2021 decreased $137 million and for the six-month period
increased $1,780 million. During these periods in 2021, we recognized gains of $418 million and $726
million, respectively, on our CVE common shares, compared with a gain of $551 million and loss of $1,140
million, respectively, for the same periods in 2020.
Purchased commodities for the three- and six-month periods of 2021 increased $1,868 million and $3,690
million, respectively, primarily due to higher gas and crude prices. In the six-month period of 2021, higher
prices were partly offset by lower crude oil volumes purchased.
Production and operating expenses for the three- and six-month periods of 2021 increased $332 million and
$542 million, respectively, primarily due to costs associated with additional volumes in our operated North
American assets related to our Concho acquisition and the absence of production curtailments.
Selling, general and administrative expenses increased $275 million in the six-month period of 2021, primarily
due to higher costs associated with compensation and benefits, including mark-to-market impacts of certain
key employee compensation programs, and transaction and restructuring expenses associated with our Concho
acquisition.
Exploration expenses for the six-month period of 2021 decreased $144 million, primarily due to the absence of
an unproved property impairment and dry hole expenses related to the Kamunsu East Field in Malaysia and the
absence of charges associated with the early termination of our 2020 winter exploration program in Alaska.
38
DD&A for the three- and six-month periods of 2021 increased $709 million and $1,184 million, respectively,
mainly due to higher production volumes in the Lower 48 associated with our Concho acquisition and higher
volumes in each of our North American assets due to the absence of production curtailments, Montney ramp
up and Kelt acquisition in Canada. These increases were partly offset by lower rates from price-related reserve
revisions in Lower 48 and Canada.
Impairments decreased $520 million in the six-month period of 2021, primarily due to the absence of a $511
million impairment of certain non-core gas assets in our Lower 48 segment.
Taxes other than income taxes for the three- and six-month periods of 2021 increased $240 million and $360
million, respectively, primarily due to higher sales volumes in Lower 48 from our Concho acquisition, the
absence of production curtailments in all of our North American assets and higher commodity prices.
Foreign currency transaction (gain) loss in the six-month period of 2021 was a loss of $29 million compared
with a gain of $83 million in the six-month period of 2020. This increase of $112 million was primarily due to
the absence of gains recognized from foreign currency derivatives and other foreign currency remeasurements.
See
rate.
39
Summary Operating Statistics
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Average Net Production
Crude oil (MBD)
Consolidated operations
836
460
820
551
Equity affiliates
13
14
13
13
Total crude oil
849
474
833
564
Natural gas liquids (MBD)
Consolidated operations
120
85
113
101
Equity affiliates
8
8
8
7
Total natural gas liquids
128
93
121
108
Bitumen (MBD)
68
34
69
50
Natural gas (MMCFD)
Consolidated operations
2,209
1,221
2,142
1,429
Equity affiliates
1,051
1,056
1,066
1,046
Total natural gas
3,260
2,277
3,208
2,475
Total Production
(MBOED)
1,588
981
1,558
1,135
Dollars Per Unit
Average Sales Prices
Crude oil (per bbl)
Consolidated operations*
$
65.54
25.10
61.60
38.81
Equity affiliates
64.10
25.32
62.03
38.52
Total crude oil
65.51
25.10
61.60
38.80
Natural gas liquids (per bbl)
Consolidated operations
25.62
8.29
25.06
10.85
Equity affiliates
44.12
23.93
46.53
32.38
Total natural gas liquids
26.87
9.88
26.68
12.63
Bitumen (per bbl)
37.60
(23.11)
34.09
(3.09)
Natural gas (per MCF)
Consolidated operations*
4.25
2.64
4.56
3.19
Equity affiliates
3.97
3.90
3.76
4.65
Total natural gas
4.16
3.22
4.29
3.81
Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical,
lease rental, and other
$
56
94
134
215
Leasehold impairment
1
-
1
31
Dry holes
-
3
6
39
$
57
97
141
285
*Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho
acquisition, were $60.59 per barrel for crude oil and $4.50 per mcf for natural gas for the six-month period ended June 30, 2021. As of March
31, 2021, we had settled all oil and gas hedging positions acquired from Concho.
40
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide
basis. At June 30, 2021, our operations were producing in the U.S., Norway, Canada, Australia, Indonesia,
China, Malaysia, Qatar and Libya.
Total production of 1,588 MBOED increased 607 MBOED or 62 percent in the second quarter of 2021 and
423 MBOED or 37 percent in the six-month period of 2021, primarily due to:
●
Higher volumes in the Lower 48 due to our Concho acquisition.
●
Higher volumes in our operated North American assets and Malaysia due to the absence of production
curtailments.
●
New wells online in the Lower 48, Canada, Norway, Malaysia, and Australia.
●
Higher production in Libya due the absence of a forced shutdown of the Es Sider export terminal and
other eastern export terminals after a period of civil unrest.
The increase in the second quarter and in the six-month period of 2021 was partly offset by:
●
Normal field decline.
●
Disposition activity primarily related to our Australia-West divestiture completed in the second
quarter of 2020.
In addition to the items detailed above, in the six-month period of 2021, production also decreased due to:
●
Higher unplanned downtime in the Lower 48 due to Winter Storm Uri, which impacted production by
approximately 50 MBOED in the first quarter of 2021.
Production excluding Libya for the second quarter of 2021 was 1,547 MBOED, an increase of 566 MBOED
from the same period a year ago. After adjusting for closed acquisitions and dispositions as well as estimated
impacts from the 2020 curtailment program, second-quarter 2021 production increased 46 MBOED or 3
percent. This increase was primarily due to new production from the Lower 48 and other development
programs across the portfolio, partially offset by normal field decline. Production from Libya averaged 41
MBOED.
Production excluding Libya for the six-month period of 2021 was 1,518 MBOED, an increase of 388 MBOED
from the same period a year ago. After adjusting for closed acquisitions and dispositions, estimated impacts
from the 2020 curtailment program and Winter Storm Uri impacts from 2021, production increased 18
MBOED. This increase was primarily due to new production from the Lower 48 and other development
programs across the portfolio, partially offset by normal field decline. Production from Libya averaged 40
MBOED.
41
Segment Results
Alaska
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net income (loss) attributable to ConocoPhillips
($MM)
$
371
(141)
530
(60)
Average Net Production
Crude oil (MBD)
184
153
187
175
Natural gas liquids (MBD)
15
13
16
16
Natural gas (MMCFD)
11
8
10
8
Total Production
(MBOED)
201
167
205
192
Average Sales Prices
Crude oil ($ per bbl)
$
67.87
26.81
63.93
42.52
Natural gas ($ per MCF)
4.53
2.56
3.17
2.82
The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas.
As of June 30, 2021, Alaska contributed 20 percent of our consolidated liquids production and less than 1
percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from Alaska increased $512 million in the second quarter of 2021 and increased $590 million in the
six-month period of 2021, respectively. Earnings were positively impacted by:
●
Higher realized crude oil prices.
●
Higher volumes due to the absence of production curtailments.
●
Lower exploration expenses due to the absence of charges associated with the early cancellation of our
2020 winter exploration program.
Partly offsetting the increase in earnings was:
●
Higher DD&A expenses primarily driven by higher production volumes and higher rates.
Production
Average production increased 34 MBOED in the second quarter of 2021 and 13 MBOED in the six-month
period of 2021, respectively. The increase was primarily due to:
●
Absence of curtailments at our operated assets.
Partly offsetting the increase in production was:
●
Normal field decline.
42
Lower 48
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
$
1,175
(365)
1,643
(802)
Average Net Production
Crude oil (MBD)
454
166
435
218
Natural gas liquids (MBD)
97
64
89
77
Natural gas (MMCFD)
1,459
486
1,389
582
Total Production
(MBOED)
794
311
755
392
Average Sales Prices
Crude oil ($ per bbl)*
$
64.13
19.87
60.17
32.92
Natural gas liquids ($ per bbl)
24.62
6.95
24.34
9.81
Natural gas ($ per MCF)*
3.27
1.18
3.88
1.36
*Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho
acquisition, were $58.25 per barrel for crude oil and $3.78 per mcf for natural gas for the six-month period ended June 30, 2021. As of March
31, 2021, we had settled all oil and gas hedging positions acquired from Concho.
.
The Lower 48 segment consists of operations located in the U.S. Lower 48 states, as well as producing
properties in the Gulf of Mexico. As of June 30, 2021, the Lower 48 contributed 53 percent of our
consolidated liquids production and 65 percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from the Lower 48 increased $1,540 million in the second quarter of 2021 and increased $2,445
million in the six-month period of 2021, respectively. Earnings were positively impacted by:
●
Higher sales volumes of crude oil and natural gas due to our Concho acquisition and the absence of
production curtailments.
●
Higher realized crude oil, natural gas, and NGL prices.
Partly offsetting the increase in earnings was:
●
Higher DD&A expenses primarily due to higher production from our Concho acquisition and absence
of production related curtailment partially offset by lower rates from price-related reserve revisions.
●
Higher production and operating expenses and taxes other than income taxes, primarily due to higher
production from our Concho acquisition and the absence of production curtailments.
In addition to the items detailed above, in the six-month period of 2021, earnings also increased due to:
●
The absence of $399 million in after-tax impairments related to certain noncore gas assets in the Wind
River Basin operations area.
In addition to the items detailed above, in the six-month period of 2021, earnings also decreased due to:
●
Realized losses on hedges related to derivative positions acquired in our Concho acquisition.
●
Higher selling, general and administrative expenses, primarily due to transaction and restructuring
charges related to our Concho acquisition.
43
Production
Average production increased 483 MBOED and 363 MBOED in the three- and six-month periods of 2021,
respectively, primarily due to:
●
Higher volumes due to our Concho acquisition.
●
New wells online from our development programs in Eagle Ford, Permian and Bakken.
●
Absence of curtailments.
These production increases were partly offset by:
●
Normal field decline.
In addition to the items detailed above, in the six-month period of 2021, production also decreased due to:
●
Higher unplanned downtime, primarily due to Winter Storm Uri.
Planned Dispositions
In July 2021, we entered into divestiture agreements to sell our interests in certain noncore assets in our Lower
48 segment. Proceeds from these agreements total approximately $0.2 billion before customary adjustments.
The transactions are expected to close in the third quarter of 2021.
Canada
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
($MM)
$
102
(86)
112
(195)
Average Net Production
Crude oil (MBD)
9
5
10
4
Natural gas liquids (MBD)
4
2
4
1
Bitumen (MBD)
68
34
69
50
Natural gas (MMCFD)
84
40
87
30
Total Production
(MBOED)
95
48
98
60
Average Sales Prices
Crude oil ($ per bbl)
$
56.87
8.69
51.66
15.39
Natural gas liquids ($ per bbl)
27.14
1.64
26.19
1.89
Bitumen ($ per bbl)
37.60
(23.11)
34.09
(3.09)
Natural gas ($ per MCF)
2.26
0.79
2.32
1.05
Average sales prices include unutilized transportation costs.
Our Canadian operations mainly consist of the Surmont oil sands development in Alberta and the liquids-rich
Montney unconventional play in British Columbia. As of June 30, 2021, Canada contributed 8 percent of our
consolidated liquids production and 4 percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from Canada increased $188 million and $307 million, respectively, in the three- and six-month
periods of 2021. Earnings were positively impacted by:
●
Higher realized bitumen and crude oil prices.
●
After-tax gains on disposition related to contingent payments of $52 million and $72 million in the
three- and six-month periods of 2021, respectively, associated with the sale of certain assets to CVE in
2017.
44
Partly offsetting the increase in earnings was:
●
Higher production and operating expenses primarily due to the absence of production curtailment and
increased Montney production.
●
Higher DD&A expenses primarily driven by higher production volumes partially offset by lower rates
from price-related reserve revisions.
●
Absence of a $48 million refund from the Alberta Tax & Revenue Administration.
Production
Average production increased 47 MBOED in the second quarter of 2021 and increased 38 MBOED in the six-
month period of 2021, respectively. The production increase was primarily due to:
●
Absence of curtailments at our Surmont operated asset.
●
Wells online from Pad 2 and 3 in the Montney.
●
Production from our Kelt acquisition in the third quarter of 2020.
●
Improved well performance at our Surmont operated asset.
Europe, Middle East and North Africa
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
*
2021
2020
*
Net Income Attributable to ConocoPhillips
($MM)
$
207
25
360
226
Consolidated Operations
Average Net Production
Crude oil (MBD)
120
75
118
84
Natural gas liquids (MBD)
4
5
4
5
Natural gas (MMCFD)
297
264
303
287
Total Production
(MBOED)
173
124
172
137
Average Sales Prices
Crude oil ($ per bbl)
$
66.34
32.32
62.48
44.70
Natural gas liquids ($ per bbl)
39.49
16.76
38.21
18.75
Natural gas ($ per MCF)
7.17
2.21
6.58
3.03
*Prior periods have been updated to reflect the Middle East Business Unit moving from Asia Pacific to the Europe, Middle East and North Africa
segment.
The Europe, Middle East and North Africa segment consists of operations principally located in the Norwegian
sector of the North Sea and the Norwegian Sea, Qatar, Libya and commercial operations in the U.K. As of
June 30, 2021, our Europe, Middle East and North Africa operations contributed 12 percent of our
consolidated liquids production and 14 percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from Europe, Middle East and North Africa increased by $182 million and $134 million in the three-
and six-month periods of 2021, respectively. Earnings were positively impacted by:
●
Higher realized natural gas, crude oil and NGL prices.
●
Higher LNG sales prices, reflected in equity in earnings of affiliates.
45
Partly offsetting the increase in earnings was:
●
Higher taxes.
●
Higher DD&A expenses and production and operating expenses.
●
Absence of foreign currency gains.
Consolidated Production
Average consolidated production increased 49 MBOED and 35 MBOED in the three- and six-month periods
of 2021, respectively. The production increase was primarily due:
●
Higher production in Libya due to the absence of a forced shutdown of the Es Sider export terminal
and other eastern export terminals after a period of civil unrest.
●
Improved well performance in Norway.
●
New production from Norway drilling activities including the completion of our Tor II redevelopment
project first achieved in December 2020.
Partly offsetting the increase in production was:
●
Normal field decline.
Asia Pacific
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
*
2021
2020
*
Net Income Attributable to ConocoPhillips
$
175
648
492
920
Consolidated Operations
Average Net Production
Crude oil (MBD)
69
61
70
70
Natural gas liquids (MBD)
-
1
-
2
Natural gas (MMCFD)
358
423
353
522
Total Production
(MBOED)
129
133
129
159
Average Sales Prices
Crude oil ($ per bbl)
$
67.72
27.98
64.01
43.02
Natural gas liquids ($ per bbl)
-
27.90
-
33.21
Natural gas ($ per MCF)
6.32
4.74
6.10
5.45
*Prior periods have been updated to reflect the Middle East Business Unit moving from Asia Pacific to the Europe, Middle East and North Africa
segment.
The Asia Pacific segment has operations in China, Indonesia, Malaysia and Australia. As of June 30, 2021, Asia
Pacific contributed 7 percent of our consolidated liquids production and 17 percent of our consolidated natural
gas production.
46
Net Income (Loss) Attributable to ConocoPhillips
Earnings decreased $473 million in the second quarter of 2021 and decreased $428 million in the six-month
period of 2021, respectively. Earnings were negatively impacted by:
●
Absence of a $597 million after-tax gain related to our Australia-West divestiture.
●
Lower earnings due to our Australia-West divestiture completed in the second quarter of 2020.
●
Higher taxes associated with higher production and prices in Malaysia and Indonesia.
Partly offsetting the decrease in earnings was:
●
Higher crude oil and natural gas prices.
●
Lower production and operating expenses related to our Australia-West divestiture.
In addition to the items detailed above, in the six-month period of 2021, earnings also decreased due to:
●
Lower equity in earnings of affiliates, primarily due to lower LNG lagging contract prices, partly offset
by increased LNG sales volumes.
In addition to the items detailed above, in the six-month period of 2021, earnings also increased due to:
●
A $200 million gain on disposition related to a FID bonus from our Australia-West divestiture. For
additional information related to this FID bonus, see
●
Lower exploration expenses, due to the absence of an unproved property impairment and dry hole
expenses related to the Kamunsu East Field in Malaysia.
Consolidated Production
Average consolidated production decreased 4 MBOED and 30 MBOED in the three- and six-month periods of
2021, respectively. The production decrease was primarily due to:
●
The divestiture of our Australia-West assets that contributed 24 MBOED in the second quarter and 35
MBOED in the six-month period of 2020.
●
Normal field decline.
Partly offsetting the decrease in production was:
●
Absence of curtailments in Malaysia.
●
Bohai Bay development activity in China.
●
Increased production in Malaysia associated with Malakai Phase 2 first production and ramp-up.
Other International
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
($MM)
$
(5)
(6)
(9)
22
The Other International segment consists of exploration and appraisal activities in Colombia and Argentina as
well as contingencies associated with prior operations in other countries.
Earnings from our Other International operations increased $1 million and decreased $31 million in the three-
and six-month periods of 2021, respectively. The decrease in earnings was primarily due to the absence of a
$29 million after-tax benefit to earnings from the dismissal of arbitration related to prior operations in Senegal
recognized in the first quarter of 2020.
47
Corporate and Other
Millions of Dollars
Three Months Ended
Six Months Ended
June 30
June 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
Net interest expense
$
(181)
(174)
(451)
(329)
Corporate general and administrative expenses
(65)
(90)
(194)
(40)
Technology
(4)
(9)
37
(8)
Other income (expense)
316
458
553
(1,213)
$
66
185
(55)
(1,590)
Net interest expense consists of interest and financing expense, net of interest income and capitalized interest.
Net interest expense increased by $7 million and $122 million in the three-and six-month periods of 2021,
respectively, primarily due to higher debt balances assumed due to our Concho acquisition.
Corporate G&A expenses include compensation programs and staff costs. These expenses decreased by $25
million in the three-month period of 2021 primarily due to mark to market adjustments associated with certain
compensation programs. For the six-month period of 2021, Corporate G&A expenses increased by $154
million primarily due to restructuring expenses associated with our Concho acquisition.
Technology includes our investment in new technologies or businesses, as well as licensing revenues.
Activities are focused on both conventional and tight oil reservoirs, shale gas, heavy oil, oil sands, enhanced
oil recovery, as well as LNG. Earnings from Technology increased $45 million in the six-month period of
2021 primarily due to higher licensing revenues.
Other income (expense) or “Other” includes certain corporate tax-related items, foreign currency transaction
gains and losses, environmental costs associated with sites no longer in operation, other costs not directly
associated with an operating segment, premiums incurred on the early retirement of debt, holding gains or
losses on equity securities, and pension settlement expense. “Other” decreased by $142 million in the second
quarter of 2021, primarily due to an after-tax gain of $418 million on our CVE common shares in the second
quarter of 2021 compared with an after-tax gain of $551 million in the same period of 2020 as well as the
absence of the release of a $92 million deferred tax asset related to our Australia-West divestiture in the second
quarter of 2020. In the six-month period of 2021, “Other” increased by $1,766 million, primarily due to an
after-tax gain of $726 million on our CVE common shares in the six-month period of 2021, and the absence of
a $1,140 million after-tax loss on those shares in the six-month period of 2020.
48
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
Millions of Dollars
June 30
December 31
2021
2020
Cash and cash equivalents
$
6,608
2,991
Short-term investments
2,251
3,609
Total debt
20,010
15,369
Total equity
44,276
29,849
Percent of total debt to capital*
31
%
34
Percent of floating-rate debt to total debt
5
%
7
*Capital includes total debt and total equity.
To meet our short- and long-term liquidity requirements, we look to a variety of funding sources, including
cash generated from operating activities, our commercial paper and credit facility programs, and our ability to
sell securities using our shelf registration statement. During the first six months of 2021, the primary uses of
our available cash were $2,465 million to support our ongoing capital expenditures and investments program;
$1,171 million to pay dividends, approximately $1.0 billion of hedging, transaction and restructuring costs,
and $981 million to repurchase common stock. During the first six months of 2021, our cash and cash
equivalents increased by $3,617 million to $6,608 million.
At June 30, 2021, we had cash and cash equivalents of $6.6 billion, short-term investments of $2.3 billion, and
available borrowing capacity under our credit facility of $5.7 billion, totaling over $14 billion of liquidity. We
believe current cash balances and cash generated by operations, together with access to external sources of
funds as described below in the “Significant Changes in Capital” section, will be sufficient to meet our funding
requirements in the near- and long-term, including our capital spending program, dividend payments and
required debt payments.
Significant Changes in Capital
Operating Activities
Cash provided by operating activities was $6,331 million for the first six months of 2021, compared with
$2,262 million for the corresponding period of 2020. The increase in cash provided by operating activities is
primarily due to higher realized commodity prices and higher sales volumes mostly due to our acquisition of
Concho. The increase in cash provided by operating activities was partly offset by the settlement of all oil and
gas hedging positions acquired from Concho, normal field decline, transaction and restructuring costs, and the
divestiture of our Australia-West assets.
Our short- and long-term operating cash flows are highly dependent upon prices for crude oil, bitumen, natural
gas, LNG and NGLs. Prices and margins in our industry have historically been volatile and are driven by
market conditions over which we have no control. Absent other mitigating factors, as these prices and margins
fluctuate, we would expect a corresponding change in our operating cash flows.
49
The level of absolute production volumes, as well as product and location mix, impacts our cash flows. Future
production is subject to numerous uncertainties, including, among others, the volatile crude oil and natural gas
price environment, which may impact investment decisions; the effects of price changes on production sharing
and variable-royalty contracts; acquisition and disposition of fields; field production decline rates; new
technologies; operating efficiencies; timing of startups and major turnarounds; political instability; impacts of
a global pandemic; weather-related disruptions; and the addition of proved reserves through exploratory
success and their timely and cost-effective development. While we actively manage these factors, production
levels can cause variability in cash flows, although generally this variability has not been as significant as that
caused by commodity prices.
To maintain or grow our production volumes, we must continue to add to our proved reserve base. See the
“Capital Expenditures and Investments” section, for information about our capital expenditures and
investments.
On January 15, 2021, we assumed financial derivative instruments consisting of oil and natural gas swaps in
connection with our acquisition of Concho. At March 31, 2021, all oil and natural gas derivative financial
instruments acquired from Concho were contractually settled. In the first six months of 2021, we paid $761
million relating to these settlements.
Investing Activities
For the first six months of 2021, we invested $2.5 billion in capital expenditures. Our 2021 operating plan
capital expenditures is currently expected to be $5.3 billion compared with $4.7 billion in 2020. See the
“Capital Expenditures and Investments” section, for information about our capital expenditures and
investments.
We completed our acquisition of Concho on January 15, 2021. The assets acquired in the transaction included
$382 million of cash.
In May 2021, we announced a paced monetization of our investment in CVE common shares with the plan to
direct proceeds toward our existing share repurchase authorization program. We expect to fully dispose of our
CVE shares by year-end 2022, however, the sales pace will be guided by market conditions, and we retain
discretion to adjust accordingly. In the second quarter of 2021, we sold 20 million of these shares,
representing approximately 10% of the shares held at December 31, 2020, for $180 million of proceeds.
We invest in short-term investments as part of our cash investment strategy, the primary objective of which is
to protect principal, maintain liquidity and provide yield and total returns; these investments include time
deposits, commercial paper, as well as debt securities classified as available for sale. Funds for short-term
needs to support our operating plan and provide resiliency to react to short-term price volatility are invested in
highly liquid instruments with maturities within the year. Funds we consider available to maintain resiliency
in longer term price downturns and to capture opportunities outside a given operating plan may be invested in
instruments with maturities greater than one year.
Investing activities in the first six months of 2021 included net sales of $1,302 million of investments. We sold
$1,403 million of short-term instruments and invested $101 million in long-term instruments.
50
Financing Activities
We have a revolving credit facility totaling $6.0 billion, expiring in May 2023. Our revolving credit facility
may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or 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 facility agreement also contains early termination rights if our current directors or their
approved successors cease to be a majority of the Board of Directors.
The revolving credit facility supports ConocoPhillips Company’s ability to issue up to $6.0 billion of
commercial paper. Commercial paper maturities are generally limited to 90 days. With $300 million of
commercial paper outstanding and no direct borrowings or letters of credit, we had $5.7 billion in available
borrowing capacity under the revolving credit facility at June 30, 2021. We may consider issuing additional
commercial paper in the future to supplement our cash position.
On January 15, 2021, we completed the acquisition of Concho in an all-stock transaction. In the acquisition,
we assumed Concho’s publicly traded debt, which was recorded at fair value of $4.7 billion on the acquisition
date. In June 2021, we reaffirmed our commitment to preserving our ‘A’-rated balance sheet with the intent to
reduce gross debt by $5 billion over the next five years, driving a more resilient and efficient capital structure.
In January 2021, Fitch affirmed its rating of our long-term debt as “A” with a “stable” outlook and affirmed its
rating of our short-term debt as “F1+.” On January 25, 2021, S&P revised its industry risk assessment of the
E&P industry to “Moderately High” from “Intermediate” based on a view of increasing risks from the energy
transition, price volatility, and weaker profitability. On February 11, 2021, S&P downgraded its rating of our
long-term debt from “A” to “A-” with a “stable” outlook and downgraded its rating of our short-term debt
from “A-1” to “A-2.” In May 2021, Moody’s affirmed its rating of our senior long-term debt of “A3” with a
“stable” outlook. Moody’s rates our short-term debt as “Prime-2.” We do not have any ratings triggers on any
of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity, upon
downgrade of our credit ratings. If our credit ratings are downgraded from their current levels, it could
increase the cost of corporate debt available to us and restrict our access to the commercial paper markets. 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.
Certain of our project-related contracts, commercial contracts and derivative instruments contain provisions
requiring us to post collateral. Many of these contracts and instruments permit us to post either cash or letters
of credit as collateral. At June 30, 2021 and December 31, 2020, we had direct bank letters of credit of $222
million and $249 million, respectively, which secured performance obligations related to various purchase
commitments incident to the ordinary conduct of business. In the event of credit ratings downgrades, we may
be required to post additional letters of credit.
Shelf Registration
We have a universal shelf registration statement on file with the SEC under which we have the ability to issue
and sell an indeterminate amount of various types of debt and equity securities.
51
Guarantor Summarized Financial Information
We have various cross guarantees among our Obligor group; ConocoPhillips, ConocoPhillips Company and
Burlington Resources LLC, with respect to publicly held debt securities. ConocoPhillips Company is 100
percent owned by ConocoPhillips. Burlington Resources LLC is 100 percent owned by ConocoPhillips
Company. ConocoPhillips and/or ConocoPhillips Company have fully and unconditionally guaranteed the
payment obligations of Burlington Resources LLC, with respect to its publicly held debt securities. Similarly,
ConocoPhillips has fully and unconditionally guaranteed the payment obligations of ConocoPhillips Company
with respect to its publicly held debt securities. In addition, ConocoPhillips Company has fully and
unconditionally guaranteed the payment obligations of ConocoPhillips with respect to its publicly held debt
securities. All guarantees are joint and several.
The following tables present summarized financial information for the Obligor Group, as defined below:
●
The Obligor Group will reflect guarantors and issuers of guaranteed securities consisting of
ConocoPhillips, ConocoPhillips Company and Burlington Resources LLC.
●
Consolidating adjustments for elimination of investments in and transactions between the collective
guarantors and issuers of guaranteed securities are reflected in the balances of the summarized
financial information.
●
Non-Obligated Subsidiaries are excluded from the presentation.
Upon completion of the Concho acquisition on January 15, 2021, we assumed Concho’s publicly traded debt
of approximately $3.9 billion in aggregate principal amount, which was recorded at fair value of $4.7 billion
on the acquisition date. We completed a debt exchange offer that settled on February 8, 2021, of which 98
percent, or approximately $3.8 billion in aggregate principal amount of Concho’s notes, were tendered and
accepted for new debt issued by ConocoPhillips. The new debt issued in the exchange is fully and
unconditionally guaranteed by ConocoPhillips Company. Both the guarantor and issuer of the exchange debt
is reflected within the Obligor Group presented here. See
relating to the Concho transaction.
Transactions and balances reflecting activity between the Obligors and Non-Obligated Subsidiaries are
presented below:
Summarized Income Statement Data
Millions of Dollars
Six Months Ended
June 30, 2021
Revenues and Other Income
$
13,054
Income (loss) before income taxes
3,138
Net income (loss)
3,073
Net Income (Loss) Attributable to ConocoPhillips
3,073
52
Summarized Balance Sheet Data
Millions of Dollars
June 30
December 31
2021
2020
Current assets
$
10,597
8,535
Amounts due from Non-Obligated Subsidiaries, current
585
440
Noncurrent assets
58,272
37,180
Amounts due from Non-Obligated Subsidiaries, noncurrent
8,326
7,730
Current liabilities
5,322
3,797
Amounts due to Non-Obligated Subsidiaries, current
2,004
1,365
Noncurrent liabilities
25,829
18,627
Amounts due to Non-Obligated Subsidiaries, noncurrent
7,526
3,972
Capital Requirements
For information about our capital expenditures and investments, see the “Capital Expenditures and
Investments” section.
Our debt balance at June 30, 2021, was $20.0 billion, compared with $15.4 billion at December 31, 2020. The
net increase is primarily due to $4.7 billion of debt assumed in the Concho acquisition. The current portion of
debt, including payments for finance leases, is $1,205 million. Payments will be made using current cash
balances and cash generated by operations.
We believe in delivering value to our shareholders through a growing and sustainable dividend supplemented
by additional returns of capital, including share repurchases. In 2020, we paid $1.8 billion, equating to $1.69
per share of common stock, in dividends. We anticipate returning $2.3 billion to shareholders in the form of
dividends in 2021. In the first six months of 2021, we paid dividends totaling $1.2 billion, the equivalent of
$0.86 per share. On July 13, 2021, we announced a quarterly dividend of $0.43 per share, payable September
1, 2021.
In late 2016, we initiated our current share repurchase program, which has a total program authorization to
repurchase $25 billion of our common stock. As of June 30, 2021, our plan is to repurchase approximately
$3.5 billion in 2021 and we anticipate funding approximately $1.0 billion of that amount through proceeds
from the sales of our CVE common stock. The pace of CVE share sales will be guided by market conditions,
and we retain the discretion to adjust accordingly. In the six months ended June 30, 2021, we repurchased
17.7 million shares at a cost of $981 million, $159 million of which was funded using CVE share proceeds.
Since the inception of the program, we have repurchased 206 million shares at a cost of $11.5 billion.
Our dividend and share repurchase programs are subject to numerous considerations, including market
conditions, management discretion and other factors. See “Item 1A—Risk Factors – Our ability to declare and
pay dividends and repurchase shares is subject to certain considerations” in Part I—Item 1A in our 2020
Annual Report on Form 10-K.
53
Capital Expenditures and Investments
Millions of Dollars
Six Months Ended
June 30
2021
2020
Alaska
$
463
732
Lower 48
1,480
1,130
Canada
68
142
Europe, Middle East and North Africa
257
251
Asia Pacific
148
188
Other International
18
63
Corporate and Other
31
19
Capital expenditures and investments
$
2,465
2,525
During the first six months of 2021, capital expenditures and investments supported key exploration and
development programs, primarily:
●
Development and appraisal activities in the Lower 48, primarily Permian, Eagle Ford, and Bakken.
●
Appraisal and development activities in Alaska related to the Western North Slope and development
activities in the Greater Kuparuk Area.
●
Appraisal activities in liquids-rich plays and optimization of oils sands development in Canada.
●
Continued development activities across assets in Norway.
●
Continued development activities in China, Malaysia and Indonesia.
In February 2021, we announced 2021 operating plan capital expenditures of $5.5 billion. In June 2021, we
reduced capital guidance to $5.3 billion, recognizing synergistic savings from our Concho acquisition.
Contingencies
A number of lawsuits involving a variety of claims arising in the ordinary course of business have been filed
against ConocoPhillips. We also may be required to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active
and inactive sites. We regularly assess the need for accounting recognition or disclosure of these
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.
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.
54
Legal and Tax Matters
We are subject to various lawsuits and claims including but not limited to matters involving oil and gas royalty
and severance tax payments, gas measurement and valuation methods, contract disputes, environmental
damages, climate change, personal injury, and property damage. Our primary exposures for such matters
relate to alleged royalty and tax underpayments on certain federal, state and privately owned properties, claims
of alleged environmental contamination from historic operations, and other contract disputes. 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.
Environmental
We are subject to the same numerous international, federal, state and local environmental laws and regulations
as other companies in our industry. For a discussion of the most significant of these environmental laws and
regulations, including those with associated remediation obligations, see the “Environmental” section in
Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 64–66 of
our 2020 Annual Report on Form 10-K.
We occasionally receive requests for information or notices of potential liability from the EPA and state
environmental agencies alleging that we are a potentially responsible party under the Federal Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) or an equivalent state statute. On
occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties.
These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically
are not owned by us, but allegedly contain waste attributable to our past operations. As of June 30, 2021, there
were 15 sites around the U.S. in which we were identified as a potentially responsible party under CERCLA
and comparable state laws.
At June 30, 2021, our balance sheet included a total environmental accrual of $188 million, compared with
$180 million at December 31, 2020, for remediation activities in the U.S. and Canada. We expect to incur a
substantial amount of these expenditures within the next 30 years.
Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses,
environmental costs and liabilities are inherent concerns in our operations and products, and there can be no
assurance that material costs and liabilities will not be incurred. However, we currently do not expect any
material adverse effect upon our results of operations or financial position as a result of compliance with
current environmental laws and regulations.
Climate Change
Continuing political and social attention to the issue of global climate change has resulted in a broad range of
proposed or promulgated state, national and international laws focusing on GHG reduction. These proposed or
promulgated laws apply or could apply in countries where we have interests or may have interests in the future.
Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for
implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a
material impact on our results of operations and financial condition. For examples of legislation or precursors
for possible regulation and factors on which the ultimate impact on our financial performance will depend, see
the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of
Operations on pages 67–69 of our 2020 Annual Report on Form 10-K.
55
Climate Change Litigation
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.
Company Response to Climate-Related Risks
The company has responded by putting in place a Sustainable Development Risk Management Standard
covering the assessment and registering of significant and high sustainable development risks based on their
consequence and likelihood of occurrence. We have developed a company-wide Climate Change Action Plan
with the goal of tracking mitigation activities for each climate-related risk included in the corporate
Sustainable Development Risk Register.
The risks addressed in our Climate Change Action Plan fall into four broad categories:
●
GHG-related legislation and regulation.
●
GHG emissions management.
●
Physical climate-related impacts.
●
Climate-related disclosure and reporting.
Emissions are categorized into three different scopes. Gross operated scope 1 and scope 2 GHG emissions
help us understand our climate transition risk.
●
Scope 1 emissions are direct GHG emissions from sources that we own or control.
●
Scope 2 emissions are GHG emissions from the generation of purchased electricity or steam that we
consume.
Scope 3 emissions are indirect emissions from sources that we neither own nor control.
56
We announced in October 2020 the adoption of a Paris-aligned climate risk framework with the objective of
implementing a coherent set of choices designed to facilitate the success of our existing exploration and
production business through the energy transition. Given the uncertainties remaining about how the energy
transition will evolve, the strategy aims to be robust across a range of potential future outcomes.
The strategy is comprised of four pillars:
●
Targets: Our target framework consists of a hierarchy of targets, from a long-term ambition that sets
the direction and aim of the strategy, to a medium-term performance target for GHG emissions
intensity, to shorter-term targets for flaring and methane intensity reductions. These performance
targets are supported by lower-level internal business unit goals to enable the company to achieve the
company-wide targets. We have set a target to reduce our gross operated (scope 1 and 2) emissions
intensity by 35 to 45 percent from 2016 levels by 2030, with an ambition to achieve net-zero operated
emissions by 2050. We have joined the World Bank Flaring Initiative to work towards zero routine
flaring of gas by 2030.
●
Technology choices: We expanded our Marginal Abatement Cost Curve process to provide a broader
range of opportunities for emission reduction technology.
●
Portfolio choices: Our corporate authorization process requires all qualifying projects to include a
GHG price in their project approval economics. Different GHG prices are used depending on the
region or jurisdiction. Projects in jurisdictions with existing GHG pricing regimes incorporate the
existing GHG price and forecast into their economics. Projects where no existing GHG pricing
regime exists utilize a scenario forecast from our internally consistent World Energy Model. In this
way, both existing and emerging regulatory requirements are considered in our decision-making. The
company does not use an estimated market cost of GHG emissions when assessing reserves in
jurisdictions without existing GHG regulations.
●
External engagement: Our external engagement aims to differentiate ConocoPhillips within the oil and
gas sector with our approach to managing climate-related risk. We are a Founding Member of the
Climate Leadership Council (CLC), an international policy institute founded in collaboration with
business and environmental interests to develop a carbon dividend plan. Participation in the CLC
provides another opportunity for ongoing dialogue about carbon pricing and framing the issues in
alignment with our public policy principles. We also belong to and fund Americans For Carbon
Dividends, the education and advocacy branch of the CLC.
57
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of
historical fact included or incorporated by reference in this report, including, without limitation, statements
regarding our future financial position, business strategy, budgets, projected revenues, projected costs and
plans, objectives of management for future operations, the anticipated benefits of the transaction between us
and Concho Resources Inc. (Concho), the anticipated impact of the transaction on the combined company’s
business and future financial and operating results, the expected amount and the timing of synergies from the
transaction are forward-looking statements. Examples of forward-looking statements contained in this report
include our expected production growth and outlook on the business environment generally, our expected
capital budget and capital expenditures, and discussions concerning future dividends. You can often identify
our forward-looking statements by the words “anticipate,” “believe,” “budget,” “continue,” “could,” “effort,”
“estimate,” “expect,” “forecast,” “intend,” “goal,” “guidance,” “may,” “objective,” “outlook,” “plan,”
“potential,” “predict,” “projection,” “seek,” “should,” “target,” “will,” “would” and similar expressions.
We based the forward-looking statements on our current expectations, estimates and projections about
ourselves and the industries in which we operate in general. We caution you these statements are not
guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be
incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-
looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our
actual outcomes and results may differ materially from what we have expressed or forecast in the forward-
looking statements. Any differences could result from a variety of factors and uncertainties, including, but not
limited to, the following:
●
The impact of public health crises, including pandemics (such as COVID-19) and epidemics and any
related company or government policies or actions.
●
Global and regional changes in the demand, supply, prices, differentials or other market conditions
affecting oil and gas, including changes resulting from a public health crisis or from the imposition or
lifting of crude oil production quotas or other actions that might be imposed by OPEC and other
producing countries and the resulting company or third-party actions in response to such changes.
●
Fluctuations in crude oil, bitumen, natural gas, LNG and NGLs prices, including a prolonged decline
in these prices relative to historical or future expected levels.
●
The impact of significant declines in prices for crude oil, bitumen, natural gas, LNG and NGLs, which
may result in recognition of impairment charges on our long-lived assets, leaseholds and
nonconsolidated equity investments.
●
Potential failures or delays in achieving expected reserve or production levels from existing and future
oil and gas developments, including due to operating hazards, drilling risks and the inherent
uncertainties in predicting reserves and reservoir performance.
●
Reductions in reserves replacement rates, whether as a result of the significant declines in commodity
prices or otherwise.
●
Unsuccessful exploratory drilling activities or the inability to obtain access to exploratory acreage.
●
Unexpected changes in costs or technical requirements for constructing, modifying or operating E&P
facilities.
●
Legislative and regulatory initiatives addressing environmental concerns, including initiatives
addressing the impact of global climate change or further regulating hydraulic fracturing, methane
emissions, flaring or water disposal.
●
Lack of, or disruptions in, adequate and reliable transportation for our crude oil, bitumen, natural gas,
LNG and NGLs.
●
Inability to timely obtain or maintain permits, including those necessary for construction, drilling
and/or development, or inability to make capital expenditures required to maintain compliance with
any necessary permits or applicable laws or regulations.
58
●
Failure to complete definitive agreements and feasibility studies for, and to complete construction of,
announced and future E&P and LNG development in a timely manner (if at all) or on budget.
●
Potential disruption or interruption of our operations due to accidents, extraordinary weather events,
civil unrest, political events, war, terrorism, cyber attacks, and information technology failures,
constraints or disruptions.
●
Changes in international monetary conditions and foreign currency exchange rate fluctuations.
●
Changes in international trade relationships, including the imposition of trade restrictions or tariffs
relating to crude oil, bitumen, natural gas, LNG, NGLs and any materials or products (such as
aluminum and steel) used in the operation of our business.
●
Substantial investment in and development use of, competing or alternative energy sources, including
as a result of existing or future environmental rules and regulations.
●
Liability for remedial actions, including removal and reclamation obligations, under existing and
future environmental regulations and litigation.
●
Significant operational or investment changes imposed by existing or future environmental statutes
and regulations, including international agreements and national or regional legislation and regulatory
measures to limit or reduce GHG emissions.
●
Liability resulting from litigation, including the potential for litigation related to the transaction with
Concho, or our failure to comply with applicable laws and regulations.
●
General domestic and international economic and political developments, including armed hostilities;
expropriation of assets; changes in governmental policies relating to crude oil, bitumen, natural gas,
LNG and NGLs pricing; regulation or taxation; and other political, economic or diplomatic
developments.
●
Volatility in the commodity futures markets.
●
Changes in tax and other laws, regulations (including alternative energy mandates), or royalty rules
applicable to our business.
●
Competition and consolidation in the oil and gas E&P industry.
●
Any limitations on our access to capital or increase in our cost of capital, including as a result of
illiquidity or uncertainty in domestic or international financial markets or investment sentiment.
●
Our inability to execute, or delays in the completion, of any asset dispositions or acquisitions we elect
to pursue.
●
Potential failure to obtain, or delays in obtaining, any necessary regulatory approvals for pending or
future asset dispositions or acquisitions, or that such approvals may require modification to the terms
of the transactions or the operation of our remaining business.
●
Potential disruption of our operations as a result of pending or future asset dispositions or acquisitions,
including the diversion of management time and attention.
●
Our inability to deploy the net proceeds from any asset dispositions that are pending or that we elect to
undertake in the future in the manner and timeframe we currently anticipate, if at all.
●
Our inability to liquidate the common stock issued to us by Cenovus Energy as part of our sale of
certain assets in western Canada at prices we deem acceptable, or at all.
●
The operation and financing of our joint ventures.
●
The ability of our customers and other contractual counterparties to satisfy their obligations to us,
including our ability to collect payments when due from the government of Venezuela or PDVSA.
●
Our inability to realize anticipated cost savings and capital expenditure reductions.
●
The inadequacy of storage capacity for our products, and ensuing curtailments, whether voluntary or
involuntary, required to mitigate this physical constraint.
●
Our ability to successfully integrate Concho’s business and fully achieve the expected benefits and
cost reductions associated with the transaction with Concho in a timely manner or at all.
●
The risk that we will be unable to retain and hire key personnel.
●
Unanticipated difficulties or expenditures relating to integration with Concho.
●
Uncertainty as to the long-term value of our common stock.
●
The diversion of management time on integration-related matters.
●
The factors generally described in Part I—Item 1A in our 2020 Annual Report on Form 10-K and any
additional risks described in our other filings with the SEC.
59
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the six months ended June 30, 2021, does not differ materially from that
discussed under Item 7A in our 2020 Annual Report on Form 10-K.
Item 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to ensure information required to be disclosed in
reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms, and that such
information is accumulated and communicated to management, including our principal executive and principal
financial officers, as appropriate, to allow timely decisions regarding required disclosure. At June 30, 2021,
with the participation of our management, our Chairman and Chief Executive Officer (principal executive
officer) and our Executive Vice President and Chief Financial Officer (principal financial officer) carried out
an evaluation, pursuant to Rule 13a-15(b) of the Act, of ConocoPhillips’ disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our Chairman and Chief Executive Officer
and our Executive Vice President and Chief Financial Officer concluded our disclosure controls and
procedures were operating effectively at June 30, 2021.
There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the
Act, in the period covered by this report that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There are no new material legal proceedings or material developments with respect to matters previously
disclosed in Item 3 of our 2020 Annual Report on Form 10-K.
Item 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Item 1A of our 2020 Annual Report on
Form 10-K.
60
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Millions of Dollars
Period
Total Number of
Shares
Purchased
*
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares That
May Yet Be
Purchased Under the
Plans or Programs
April 1-30, 2021
2,425,224
$
51.54
2,425,224
$
13,983
May 1-31, 2021
2,933,604
55.35
2,933,604
13,821
June 1-30, 2021
5,313,280
59.86
5,313,280
13,503
10,672,108
10,672,108
*There were no repurchases of common stock from company employees in connection with the company's broad-based employee incentive plans.
In late 2016, we initiated our current share repurchase program, which has a total program authorization of $25
billion of our common stock. In February 2021, we resumed our share repurchase program to an annualized
level of $1.5 billion which was increased in June to an annualized level of $2.5 billion. In May 2021, we
announced a plan to dispose of our 208 million CVE shares by year-end 2022. The sales pace will be guided
by market conditions, with ConocoPhillips retaining discretion to adjust accordingly. The proceeds from this
disposition will be deployed towards incremental share repurchases.
At June 30, 2021, we had repurchased $11.5 billion of shares, with $13.5 billion remaining under our current
authorization. Repurchases are made at management’s discretion, at prevailing prices, subject to market
conditions and other factors. Except as limited by applicable legal requirements, repurchases may be
increased, decreased or discontinued at any time without prior notice. Shares of stock repurchased under the
plan are held as treasury shares. See the “Our ability to declare and pay dividends and repurchase shares is
subject to certain considerations” section in Risk Factors on page 31 of our 2020 Annual Report on
Form 10-K.
61
Item 6. EXHIBITS
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Schema Document.
101.CAL*
Inline XBRL Calculation Linkbase Document.
101.LAB*
Inline XBRL Labels Linkbase Document.
101.PRE*
Inline XBRL Presentation Linkbase Document.
101.DEF*
Inline XBRL Definition Linkbase Document.
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
62
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
CONOCOPHILLIPS
/s/ Kontessa S. Haynes-Welsh
Kontessa S. Haynes-Welsh
Chief Accounting Officer
Exhibit 10.1
ConocoPhillips
925 N. Eldridge Parkway
Houston, TX 77079
www.conocophillips.com
The Human Resources and Compensation Committee approved the following actions to
facilitate an orderly transition of responsibilities from Matt Fox, Executive Vice President and
Chief Operating Officer upon retirement:
●
A proration for the Performance Share Units for the 2021-2023 Performance Period of
the Performance Share Program, waiving the usual requirement for at least one year of
employment with regard to an award to avoid forfeiture of the award, all other terms
and conditions for this award remain unchanged; and
●
A proration for the 2021 Executive Restricted Stock Unit award where the number of
units retained will be determined by multiplying the original number of units by a
fraction, the numerator of which is the number of full months of employment from
February 1, 2021 and the date of retirement and the denominator of 12, all other terms
and conditions for this award remain unchanged.
Exhibit 10.2
TIME SHARING AGREEMENT
This Time Sharing Agreement (the “
Agreement
”) is entered into as of the last date set
forth under the signatures of the parties, by and between
_____________
, with offices at
_____________
Lessor
”), and
_____________
, with a business address of
_____________
(“
Lessee
”).
RECITALS
WHEREAS
_____________
(“
Owner
”) is the registered owner of the aircraft
(“
Aircraft
”) listed on
Exhibit B
WHEREAS, Lessee desires to lease said Aircraft with flight crew from Lessor pursuant to
this Agreement on a non-exclusive time-sharing basis as defined in 14 C.F.R. § 91.501(c)(1) of
the Federal Aviation Regulations (“
FAR
”);
The parties agree as follows:
1.
Provision of Aircraft; Term
. Lessor agrees to lease the Aircraft to Lessee pursuant
to the provisions of 14 C.F.R. § 91.501(c)(1) and, in accordance with Section 7 hereof, to provide
a fully qualified flight crew for all operations. This Agreement shall commence on the date hereof
(the “
Effective Date
”), and continue for the remaining portion of the Calendar Year (“
Calendar
Year
” being defined as the period beginning January 1
st
st
the same year). Thereafter, this Agreement shall automatically renew on January 1
st
subsequent Calendar Year, unless and until terminated pursuant to the terms of this Agreement.
Except as otherwise provided in Section 9, either party may at any time terminate this Agreement
upon ten (10) business days’ written notice to the other party.
2.
Reimbursement
. Lessee shall pay Lessor for each flight conducted under this
Agreement (including all applicable “deadhead” positioning flights) as agreed by Lessor and
Lessee, but
NOT MORE THAN
authorized by 14 C.F.R. § 91.501(d) include:
(a)
Fuel, oil, lubricants, and other additives;
(b)
Travel expenses of the crew, including food, lodging and ground
transportation;
(c)
Hangar and tie down costs away from the Aircraft’s base of operation;
(d)
Insurance obtained for the specific flight;
(e)
Landing fees, airport taxes, and similar assessments;
Exhibit 10.2
(f)
Customs, foreign permit, and similar fees directly related to the flight;
(g)
In
-
flight food and beverages;
(h)
Passenger ground transportation;
(i)
Flight planning and weather contract services; and
(j)
An additional charge equal to 100% of the expenses listed in
subsection
(a)
of this Section 2.
3.
Expenses; Invoicing; Taxes
. Lessor will pay all expenses related to the operation
of the Aircraft when incurred and will provide an invoice to Lessee for the expenses enumerated
in Section 2 as well as all applicable FET and any other applicable Taxes (as such terms are defined
herein), and Lessee shall pay to Lessor all such invoiced amounts upon Lessee’s receipt of such
invoices, all in accordance with Lessor’s internal procedures.
Except as may otherwise be specifically provided in
14 C.F.R. §
91.501
,
but
notwithstanding anything else to the contrary herein, and whether or not such Taxes are invoiced
to Lessee in accordance with this Section 3, Lessee shall be responsible for, and agrees to
indemnify, defend, and hold Lessor harmless from and against, and shall pay to Lessor in
accordance with this Section 3 (or, in all other cases, to the applicable authority when due) the full
amount of any and all FET (as defined herein), sales, use, retail, excise, value added tax (VAT),
or other taxes, fees, duties, claims, or charges of any and every kind or nature whatsoever as well
as any penalties, interest and attorneys’ fees relating thereto that are or may be assessed, levied, or
imposed by any federal, foreign, national, state, county, district, city, local, or other governmental
authority or jurisdiction or airport as a result of this Agreement and/or any flights conducted
pursuant to this Agreement. Without limiting the generality of the foregoing, Lessor and Lessee
specifically acknowledge that all flights under this Agreement shall be subject to commercial air
transportation excise taxes pursuant to
26 U.S. Code § 4261 (any and all such taxes, “
FET
”)
.
The indemnities and Lessee’s obligations set forth in this Section 3 shall survive the
termination of this Agreement.
4.
Flight Requests
. Lessee will provide Lessor with requests for flight time and
proposed flight schedules in accordance with Lessor’s internal procedures and as far in advance of
any given flight as possible. Requests for flight time shall be in a form, whether written or oral,
mutually convenient to, and agreed upon by the parties and in accordance with Lessor’s internal
procedures.
5.
Flight Scheduling
. Lessor shall have final authority over the scheduling of the
Aircraft, provided that Lessor will use reasonable efforts to accommodate Lessee’s needs and to
avoid conflicts in scheduling, consistent with Lessor’s (and any other operator and/or lessee of the
Aircraft’s) use of the Aircraft and as permitted by (and subject to the requirements of) Owner.
Exhibit 10.2
Lessor shall have no obligation under this Agreement to arrange for or to provide air travel in the
event that the Aircraft is unavailable to satisfy Lessee’s requests for flight time for any reason or
if Owner otherwise does not consent to such use.
6.
Aircraft Maintenance
. Lessor shall be solely responsible for securing repairs,
maintenance, preventive maintenance and required or otherwise necessary inspections of the
Aircraft, and shall take such requirements into account in scheduling the Aircraft. No repair, period
of maintenance, preventive maintenance, or inspection shall be delayed or postponed for the
purpose of scheduling the Aircraft, unless said repair, maintenance, or inspection can be safely
conducted at a later time in compliance with all applicable laws and regulations, and within the
sound discretion of the pilot in command.
7.
Flight Crew
. Lessor shall provide to Lessee a qualified flight crew for each flight
undertaken under this Agreement.
8.
Operational Authority
. In accordance with the applicable FARs, the qualified
flight crew provided by Lessor will exercise all of its duties and responsibilities in regard to the
safety of each flight conducted hereunder. Lessee specifically agrees that the flight crew, in its sole
discretion, may terminate any flight, refuse to commence any flight, or take other action which in
the considered judgment of the pilot in command is necessitated by considerations of safety. The
pilot in command shall have final and complete authority to delay or cancel any flight for any
reason or condition which in his judgment would compromise the safety of the flight. No such
action of the pilot in command shall create or support any liability for loss, injury, damage, or
delay to Lessee or any other person. The parties further agree that Lessor shall not be liable for
delay or failure to furnish the Aircraft and crew pursuant to this Agreement when such failure is
caused by the demands of the Lessor’s (or any other operator or lessee of the Aircraft’s) business
operations requiring use
of the Aircraft, actions or inactions (including the withdrawal or
withholding of, or refusal to provide, consent) of Owner, government regulation or authority,
mechanical difficulty, war, civil commotion, strikes or labor disputes, weather conditions, acts of
God, or any other cause or occurrence beyond Lessor’s reasonable control.
9.
Insurance
. At all times during the term of this Agreement, Lessor shall maintain
the following insurance coverages from insurance carriers acceptable to Lessee:
(a)
Aircr
aft Physical Damage insurance in an amount at least equal to the fair
market value of the Aircraft; and
(b)
Aircraft Liability Insurance
–
Combined Single Limit Bodily Injury and
Property Damage, Including Passengers, of at least $100,000,000 for each
occurrence. Such coverage shall:
i.
Be primary, non-contributing with any insurance maintained by
Lessee;
ii.
Name Lessee and his guests as additional insureds;
Exhibit 10.2
iii.
Expressly waive subrogation against Lessee; and
iv.
Provide at least thirty (30) days advance written notice to Lessee of
any material changes, cancellation, or non-renewal.
If requested in writing by Lessee, Lessor shall furnish Lessee with duly executed
certificates evidencing all required insurance coverages, limits and requirements, together with
satisfactory evidence of the premium payment. Lessee retains the right to terminate this Agreement
immediately if Lessor fails to provide adequate and proper evidence of required insurance within
a reasonable time after Lessee’s written request for such evidence.
Lessor shall also bear the cost of paying any deductible amount on any policy of insurance
in the event of a claim or loss.
Each liability policy shall be primary without right of contribution from any other insurance
which is carried by Lessee or Lessor and shall expressly provide that all of the provisions thereof,
except the limits of liability, shall operate in the same manner as if there were a separate policy
covering each insured.
10.
Lessee Warranties
. Lessee warrants that:
(a)
Lesse
e will use the Aircraft for and on account of Lessee and Lessee’s
guests’ personal travel needs and will not use the Aircraft for the purpose of providing
transportation of passengers or cargo in air commerce for compensation or hire; and
(b)
Lessee will
refrain from incurring any mechanics or other lien and shall not
attempt to convey, mortgage, assign or lease the Aircraft or create any kind of lien or security
interest involving the Aircraft or do anything or take any action that might mature into such a lien.
The terms of this Section 10 shall survive the termination of this Agreement.
11.
Lessor Indemnity
. Lessor hereby indemnifies Lessee and agrees to hold harmless
Lessee from and against any liabilities, obligations, losses (excluding loss of anticipated profits),
damages, claims, actions, suits, costs, expenses and disbursements (“Losses”) imposed on,
incurred by or asserted against Lessee arising out of or resulting from the ownership, lease,
maintenance, repair, possession, use, operation, condition, or other disposition or application of
the Aircraft. Lessor’s obligation to indemnify Lessee under this Section 11 shall not, however,
extend to any Loss (i) resulting from the willful misconduct or gross negligence of Lessee, (ii) to
the extent such Loss is a direct result of any failure of Lessee to comply with any covenants
required to be performed or observed by him under this Agreement, or (iii) to the extent such Loss
is a direct result of any breach by Lessee of any of Lessee’s warranties or representations contained
in this Agreement.
Exhibit 10.2
12.
Lessee Indemnity
. Lessee hereby indemnifies Lessor and agrees to hold harmless
Lessor from and against any Losses imposed on, incurred by or asserted against Lessor (i) arising
out of or resulting from the willful misconduct or gross negligence of Lessee, (ii) to the extent such
Loss is a direct result of any failure of Lessee to comply with any covenants required to be
performed or observed by him, or (iii) to the extent such Loss is a direct result of any breach by
Lessee of any of Lessee’s warranties or representations contained in this Agreement.
13.
Permanent Base of Operations
. For purposes of this Agreement, the permanent
base of operation of the Aircraft shall be in __________.
14.
No Assignment; Successors and Assigns; Entire Agreement
.
Neither this
Agreement nor any party’s interest herein shall be assignable. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their representatives and successors. This
Agreement constitutes the entire understanding between Lessor and Lessee, and any change or
modification must be in writing and signed by both of Lessor and Lessee.
15.
No Joint Venture
. Nothing herein shall be construed to create a partnership, joint
venture, franchise, or any relationship of principal and agent between Lessor and Lessee.
16.
Amendments; Waivers
. This Agreement shall not be modified or amended except
by an instrument in writing signed by authorized representatives of Lessor and Lessee. Waivers
shall not be effective except in writing signed by an authorized representative of the party to be
bound.
17.
Notices
. All communications and notices provided for herein shall be in writing
and shall become effective when delivered by electronic mail transmission or by Federal Express
or other overnight courier or four (4) days following deposit in the United States mail, with correct
postage for first-class mail prepaid, addressed to Lessor or Lessee at their respective addresses set
forth under their signatures below, or else as otherwise directed by the other party from time to
time in writing.
18.
Applicable Law; Counterparts
. This Agreement is entered into under, and is to
be construed in accordance with, the laws of Texas and the applicable FAR. This Agreement may
be executed by the parties by
digital signature or
electronic or facsimile transmission in
counterparts, each of which, when duly executed, whether by digital signature or electronic or
facsimile transmission, shall constitute an original hereof.
19.
TRUTH-IN-LEASING STATEMENT UNDER 14 C.F.R. § 91.23
.
THE AIRCRAFT LISTED ON EXHIBIT B ATTACHED HERETO HA
S
BEEN
MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH
PERIOD PRECEDING THE DATE OF THIS AGREEMENT OR, IF THE AIRCRAFT IS LESS
THAN 12 MONTHS OLD, SINCE NEW. __________, CERTIFIES THAT THE AIRCRAFT
LISTED ON EXHIBIT B ATTACHED HERET
O IS
COMPLIANT WITH APPLICABLE
MAINTENANCE AND INSPECTION REQUIREMENTS OF FAR PART 91 FOR THE
Exhibit 10.2
OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT.
THE AIRCRAFT LISTED ON EXHIBIT B ATTACHED HERETO WILL BE
MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE
CONDUCTED UNDER THIS AGREEMENT.
DURING THE DURATION OF THIS AGREEMENT, __________, IS CONSIDERED
RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT LISTED ON
EXHIBIT B ATTACHED HERETO UNDER THIS AGREEMENT.
AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE
RESPONSIBLE FAA FLIGHT STANDARDS DISTRICT OFFICE.
THE “INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING
REQUIREMENTS” ATTACHED HERETO IN EXHIBIT A ARE INCORPORATED HEREIN
BY REFERENCE.
THE UNDERSIGNED, AS A DULY AUTHORIZED OFFICER OF __________,
CERTIFIES THAT IT IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE
AIRCRAFT LISTED ON EXHIBIT B ATTACHED HERETO AND THAT IT UNDERSTANDS
ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION
REGULATIONS.
[SIGNATURE BLOCK IS ON THE FOLLOWING PAGE]
Exhibit 10.2
IN WITNESS WHEREOF
, the parties have executed this Agreement, intending to be
legally bound.
(LESSOR)
By
:
____________________________
Name:
__________________________
Title: ____________________________
Date: _________________
Address:
Phone: _________________
Facsimile: ______________
Email: _________________
(LESSEE)
______________________________
Date: _________________
Address:
Exhibit 10.2
EXHIBIT A
INSTRUCTIONS FOR COMPLIANCE
WITH “TRUTH IN LEASING” REQUIREMENTS
1.
Mail a copy of the lease to the following address via certified mail, return
receipt requested, immediately upon execution of the lease (14 C.F.R. §
91.23 requires that the copy be sent within twenty-four hours after it is
signed):
Federal Aviation Administration
Aircraft Registration Branch
ATTN: Technical Section
P.O. Box 25724
Oklahoma City, Oklahoma 73125
2.
Telephone or fax the nearest Flight Standards District Office at least forty
-
eight hours prior to the first flight under this lease.
3.
Carry a copy of the lease in the aircraft at all times.
Exhibit 31.1
CERTIFICATION
I, Ryan M. Lance, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of ConocoPhillips;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
August 5, 2021
/s/ Ryan M. Lance
Ryan M. Lance
Chairman and
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, William L. Bullock, Jr., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of ConocoPhillips;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
August 5, 2021
/s/ William L. Bullock, Jr.
William L. Bullock, Jr.
Executive Vice President and
Chief Financial Officer
Exhibit 32
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of ConocoPhillips (the Company) on Form 10-Q for the period ended
June 30, 2021, as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report),
each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:
(1)
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
August 5, 2021
/s/ Ryan M. Lance
Ryan M. Lance
Chairman and
Chief Executive Officer
/s/ William L. Bullock, Jr.
William L. Bullock, Jr.
Executive Vice President and
Chief Financial Officer