UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission file number: 001-32395

ConocoPhillips

(Exact name of registrant as specified in its charter)


			Delaware			01-0562944
			(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

925 N. Eldridge Parkway, Houston, TX 77079

(Address of principal executive offices) (Zip Code)

281-293-1000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbols	Name of each exchange on which registered
Common Stock, $.01 Par Value	COP	New York Stock Exchange
7% Debentures due 2029	CUSIP—718507BK1	New York Stock Exchange

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had ~~1,293,449,547~~1,273,033,365 shares of common stock, $.01 par value, outstanding at ~~March 31,~~June 30, 2022.

Table of Contents


Commonly Used Abbreviations			Table of Contents

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 Board
BBL	barrel
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 principles
MCF	thousand cubic feet
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	VIE	variable interest entity
MBOED	thousands of barrels of oil equivalent per day
MMBOED	millions of barrels of oil equivalent per day	Miscellaneous
MMBTU	million British thermal units	DE&I	diversity, equity and inclusion
MMCFD	million cubic feet per day	EPA	Environmental Protection Agency
		ESG	Environmental, Social and Corporate Governance
Industry		EU	European Union
BLM	Bureau of Land Management	FERC	Federal Energy Regulatory Commission
CBM	coalbed methane
CCUS	carbon capture utilization and	GHG	greenhouse gas
	storage	HSE	health, safety and environment
E&P	exploration and production	ICC	International Chamber of Commerce
FEED	front-end engineering and design	ICSID	World Bank’s International
FPS	floating production system		Centre for Settlement of
FPSO	floating production, storage and		Investment Disputes
	offloading	IRS	Internal Revenue Service
G&G	geological and geophysical	OTC	over-the-counter
JOA	joint operating agreement	NYSE	New York Stock Exchange
LNG	liquefied natural gas	SEC	U.S. Securities and Exchange
NGLs	natural gas liquids		Commission
OPEC	Organization of Petroleum	TSR	total shareholder return
	Exporting Countries	U.K.	United Kingdom
PSC	production sharing contract	U.S.	United States of America
PUDs	proved undeveloped reserves	VROC	variable return of cash
SAGD	steam-assisted gravity drainage
WCS	Western Canada Select
WTI	West Texas Intermediate


1			ConocoPhillips 2022 Q1Q2 10-Q


Financial Statements			Table of Contents

PART I. Financial Information

Item 1. Financial Statements


Consolidated Income Statement			ConocoPhillips


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021
Revenues and Other Income	Revenues and Other Income						Revenues and Other Income
Sales and other operating revenues	Sales and other operating revenues	$	17,762	9,826			Sales and other operating revenues	$	21,161	9,556	38,923	19,382
Equity in earnings of affiliates	Equity in earnings of affiliates	426		122			Equity in earnings of affiliates	524		139	950	261
Gain on dispositions	Gain on dispositions	817		233			Gain on dispositions	262		59	1,079	292
Other income	Other income	286		378			Other income	42		457	328	835
Total Revenues and Other Income	Total Revenues and Other Income	19,291		10,559			Total Revenues and Other Income	21,989		10,211	41,280	20,770
Costs and Expenses	Costs and Expenses						Costs and Expenses
Purchased commodities	Purchased commodities	6,751		4,483			Purchased commodities	9,234		2,998	15,985	7,481
Production and operating expenses	Production and operating expenses	1,581		1,383			Production and operating expenses	1,741		1,379	3,322	2,762
Selling, general and administrative expenses	Selling, general and administrative expenses	187		311			Selling, general and administrative expenses	96		117	283	428
Exploration expenses	Exploration expenses	69		84			Exploration expenses	143		57	212	141
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1,823		1,886			Depreciation, depletion and amortization	1,810		1,867	3,633	3,753
Impairments	Impairments	2		(3)			Impairments	2		2	4	(1)
Taxes other than income taxes	Taxes other than income taxes	814		370			Taxes other than income taxes	1,020		381	1,834	751
Accretion on discounted liabilities	Accretion on discounted liabilities	61		62			Accretion on discounted liabilities	61		63	122	125
Interest and debt expense	Interest and debt expense	217		226			Interest and debt expense	211		220	428	446
Foreign currency transaction loss		24		19
Foreign currency transaction (gain) loss							Foreign currency transaction (gain) loss	(70)		10	(46)	29
Other expenses	Other expenses	(136)		24			Other expenses	86		37	(50)	61
Total Costs and Expenses	Total Costs and Expenses	11,393		8,845			Total Costs and Expenses	14,334		7,131	25,727	15,976
Income before income taxes	Income before income taxes	7,898		1,714			Income before income taxes	7,655		3,080	15,553	4,794
Income tax provision	Income tax provision	2,139		732			Income tax provision	2,510		989	4,649	1,721

Net Income	Net Income	$	5,759	982			Net Income	$	5,145	2,091	10,904	3,073

Net Income Per Share of Common Stock (dollars)	Net Income Per Share of Common Stock (dollars)						Net Income Per Share of Common Stock (dollars)
Basic	Basic	$	4.41	0.75			Basic	$	3.98	1.55	8.39	2.32
Diluted	Diluted	4.39		0.75			Diluted	3.96		1.55	8.36	2.31
Average Common Shares Outstanding (in thousands)	Average Common Shares Outstanding (in thousands)						Average Common Shares Outstanding (in thousands)
Basic	Basic	1,301,930		1,300,375			Basic	1,289,791		1,348,637	1,295,827	1,324,639
Diluted	Diluted	1,307,404		1,302,691			Diluted	1,295,844		1,353,201	1,301,126	1,329,507

See Notes to Consolidated Financial Statements.


			ConocoPhillips 2022 Q1Q2 10-Q			2


Financial Statements			Table of Contents


Consolidated Statement of Comprehensive Income			ConocoPhillips


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021
Net Income	Net Income	$	5,759	982			Net Income	$	5,145	2,091	10,904	3,073
Other comprehensive income	Other comprehensive income						Other comprehensive income
Defined benefit plans	Defined benefit plans						Defined benefit plans
Reclassification adjustment for amortization of prior service credit included in net income	Reclassification adjustment for amortization of prior service credit included in net income	(10)		(9)			Reclassification adjustment for amortization of prior service credit included in net income	(10)		(10)	(20)	(19)
Net change	Net change	(10)		(9)			Net change	(10)		(10)	(20)	(19)
Net actuarial gain arising during the period		—		75
Net actuarial gain (loss) arising during the period							Net actuarial gain (loss) arising during the period	(82)		30	(82)	105
Reclassification adjustment for amortization of net actuarial losses included in net income	Reclassification adjustment for amortization of net actuarial losses included in net income	16		25			Reclassification adjustment for amortization of net actuarial losses included in net income	25		63	41	88
Net change	Net change	16		100			Net change	(57)		93	(41)	193

Income taxes on defined benefit plans	Income taxes on defined benefit plans	(2)		(21)			Income taxes on defined benefit plans	14		(19)	12	(40)
Defined benefit plans, net of tax	Defined benefit plans, net of tax	4		70			Defined benefit plans, net of tax	(53)		64	(49)	134
Unrealized holding loss on securities	Unrealized holding loss on securities	(4)		(1)			Unrealized holding loss on securities	(5)		—	(9)	(1)
Income taxes on unrealized holding loss on securities	Income taxes on unrealized holding loss on securities	1		—			Income taxes on unrealized holding loss on securities	1		—	2	—
Unrealized holding loss on securities, net of tax	Unrealized holding loss on securities, net of tax	(3)		(1)			Unrealized holding loss on securities, net of tax	(4)		—	(7)	(1)
Foreign currency translation adjustments	Foreign currency translation adjustments	141		69			Foreign currency translation adjustments	(448)		96	(307)	165

Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	141		69			Foreign currency translation adjustments, net of tax	(448)		96	(307)	165
Other Comprehensive Income, Net of Tax		142		138
Other Comprehensive Income (Loss), Net of Tax							Other Comprehensive Income (Loss), Net of Tax	(505)		160	(363)	298

Comprehensive Income	Comprehensive Income	$	5,901	1,120			Comprehensive Income	$	4,640	2,251	10,541	3,371

See Notes to Consolidated Financial Statements.


3			ConocoPhillips 2022 Q1Q2 10-Q


Financial Statements			Table of Contents


Consolidated Balance Sheet			ConocoPhillips


		Millions of Dollars				Millions of Dollars
		March 31 2022		December 31 2021		June 30 2022		December 31 2021
Assets	Assets				Assets
Cash and cash equivalents	Cash and cash equivalents	$	6,414	5,028	Cash and cash equivalents	$	6,909	5,028
Short-term investments	Short-term investments	730		446	Short-term investments	1,272		446
Accounts and notes receivable (net of allowance of $2 and $2, respectively)	Accounts and notes receivable (net of allowance of $2 and $2, respectively)	7,807		6,543	Accounts and notes receivable (net of allowance of $2 and $2, respectively)	8,081		6,543
Accounts and notes receivable—related parties	Accounts and notes receivable—related parties	72		127	Accounts and notes receivable—related parties	72		127
Investment in Cenovus Energy	Investment in Cenovus Energy	—		1,117	Investment in Cenovus Energy	—		1,117
Inventories	Inventories	1,174		1,208	Inventories	1,234		1,208
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,389		1,581	Prepaid expenses and other current assets	1,292		1,581
Total Current Assets	Total Current Assets	17,586		16,050	Total Current Assets	18,860		16,050
Investments and long-term receivables	Investments and long-term receivables	8,309		7,113	Investments and long-term receivables	8,203		7,113

Net properties, plants and equipment (net of accumulated DD&A of $64,711 and $64,735, respectively)		64,642		64,911
Net properties, plants and equipment (net of accumulated DD&A of $65,212 and $64,735, respectively)					Net properties, plants and equipment (net of accumulated DD&A of $65,212 and $64,735, respectively)	64,008		64,911
Other assets	Other assets	2,771		2,587	Other assets	2,622		2,587
Total Assets	Total Assets	$	93,308	90,661	Total Assets	$	93,693	90,661

Liabilities	Liabilities				Liabilities
Accounts payable	Accounts payable	$	4,875	5,002	Accounts payable	$	5,845	5,002
Accounts payable—related parties	Accounts payable—related parties	22		23	Accounts payable—related parties	28		23
Short-term debt	Short-term debt	1,160		1,200	Short-term debt	676		1,200
Accrued income and other taxes	Accrued income and other taxes	3,162		2,862	Accrued income and other taxes	2,759		2,862
Employee benefit obligations	Employee benefit obligations	446		755	Employee benefit obligations	529		755
Other accruals	Other accruals	1,959		2,179	Other accruals	2,379		2,179
Total Current Liabilities	Total Current Liabilities	11,624		12,021	Total Current Liabilities	12,216		12,021
Long-term debt	Long-term debt	17,586		18,734	Long-term debt	16,295		18,734
Asset retirement obligations and accrued environmental costs	Asset retirement obligations and accrued environmental costs	5,815		5,754	Asset retirement obligations and accrued environmental costs	5,737		5,754
Deferred income taxes	Deferred income taxes	6,556		6,179	Deferred income taxes	6,694		6,179
Employee benefit obligations	Employee benefit obligations	1,085		1,153	Employee benefit obligations	1,080		1,153
Other liabilities and deferred credits	Other liabilities and deferred credits	1,424		1,414	Other liabilities and deferred credits	1,469		1,414
Total Liabilities	Total Liabilities	44,090		45,255	Total Liabilities	43,491		45,255

Equity	Equity				Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)	Common stock (2,500,000,000 shares authorized at $0.01 par value)				Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2022—2,098,495,534 shares; 2021—2,091,562,747 shares)
Issued (2022—2,100,027,414 shares; 2021—2,091,562,747 shares)					Issued (2022—2,100,027,414 shares; 2021—2,091,562,747 shares)
Par value	Par value	21		21	Par value	21		21
Capital in excess of par	Capital in excess of par	60,907		60,581	Capital in excess of par	61,045		60,581
Treasury stock (at cost: 2022—805,045,987 shares; 2021—789,319,875 shares)		(52,344)		(50,920)
Treasury stock (at cost: 2022—826,994,049 shares; 2021—789,319,875 shares)					Treasury stock (at cost: 2022—826,994,049 shares; 2021—789,319,875 shares)	(54,644)		(50,920)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(4,808)		(4,950)	Accumulated other comprehensive loss	(5,313)		(4,950)
Retained earnings	Retained earnings	45,442		40,674	Retained earnings	49,093		40,674
Total Equity	Total Equity	49,218		45,406	Total Equity	50,202		45,406
Total Liabilities and Equity	Total Liabilities and Equity	$	93,308	90,661	Total Liabilities and Equity	$	93,693	90,661

See Notes to Consolidated Financial Statements.


			ConocoPhillips 2022 Q1Q2 10-Q			4


Financial Statements			Table of Contents


Consolidated Statement of Cash Flows			ConocoPhillips


		Millions of Dollars				Millions of Dollars
		Three Months Ended March 31				Six Months Ended June 30
		2022		2021		2022		2021
Cash Flows From Operating Activities	Cash Flows From Operating Activities				Cash Flows From Operating Activities
Net income	Net income	$	5,759	982	Net income	$	10,904	3,073
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities				Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1,823		1,886	Depreciation, depletion and amortization	3,633		3,753
Impairments	Impairments	2		(3)	Impairments	4		(1)
Dry hole costs and leasehold impairments	Dry hole costs and leasehold impairments	7		6	Dry hole costs and leasehold impairments	104		7
Accretion on discounted liabilities	Accretion on discounted liabilities	61		62	Accretion on discounted liabilities	122		125
Deferred taxes	Deferred taxes	373		203	Deferred taxes	868		567
Undistributed equity earnings	Undistributed equity earnings	220		81	Undistributed equity earnings	591		317
Gain on dispositions	Gain on dispositions	(817)		(233)	Gain on dispositions	(1,079)		(292)
Gain on investment in Cenovus Energy	Gain on investment in Cenovus Energy	(251)		(308)	Gain on investment in Cenovus Energy	(251)		(726)
Other	Other	(152)		(581)	Other	(37)		(688)
Working capital adjustments	Working capital adjustments				Working capital adjustments
Increase in accounts and notes receivable	Increase in accounts and notes receivable	(1,535)		(785)	Increase in accounts and notes receivable	(1,861)		(794)
Decrease (increase) in inventories		27		(51)
Decrease (increase) in prepaid expenses and other current assets		58		(43)
Increase (decrease) in accounts payable		(204)		424
Increase in inventories					Increase in inventories	(53)		(89)
Increase in prepaid expenses and other current assets					Increase in prepaid expenses and other current assets	(283)		(388)
Increase in accounts payable					Increase in accounts payable	635		323
Increase (decrease) in taxes and other accruals	Increase (decrease) in taxes and other accruals	(303)		440	Increase (decrease) in taxes and other accruals	(315)		1,144
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	5,068		2,080	Net Cash Provided by Operating Activities	12,982		6,331
Cash Flows From Investing Activities	Cash Flows From Investing Activities				Cash Flows From Investing Activities
Capital expenditures and investments	Capital expenditures and investments	(3,161)		(1,200)	Capital expenditures and investments	(5,129)		(2,465)
Working capital changes associated with investing activities	Working capital changes associated with investing activities	363		61	Working capital changes associated with investing activities	496		2
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	37		382	Acquisition of businesses, net of cash acquired	37		382
Proceeds from asset dispositions	Proceeds from asset dispositions	2,332		(17)	Proceeds from asset dispositions	2,951		160
Net purchases of investments		(263)		(499)
Net (purchase) sale of investments					Net (purchase) sale of investments	(1,104)		1,302
Collection of advances/loans—related parties	Collection of advances/loans—related parties	55		52	Collection of advances/loans—related parties	55		52
Other	Other	26		6	Other	(8)		86
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(611)		(1,215)	Net Cash Used in Investing Activities	(2,702)		(481)
Cash Flows From Financing Activities	Cash Flows From Financing Activities				Cash Flows From Financing Activities
Issuance of debt	Issuance of debt	2,897		—	Issuance of debt	2,897		—
Repayment of debt	Repayment of debt	(3,964)		(26)	Repayment of debt	(5,829)		(44)
Issuance of company common stock	Issuance of company common stock	271		(28)	Issuance of company common stock	350		(25)
Repurchase of company common stock	Repurchase of company common stock	(1,425)		(375)	Repurchase of company common stock	(3,725)		(981)
Dividends paid	Dividends paid	(864)		(588)	Dividends paid	(1,852)		(1,171)
Other	Other	(52)		2	Other	(56)		3
Net Cash Used in Financing Activities	Net Cash Used in Financing Activities	(3,137)		(1,015)	Net Cash Used in Financing Activities	(8,215)		(2,218)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	21		(2)	Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(237)		9
Net Change in Cash, Cash Equivalents and Restricted Cash	Net Change in Cash, Cash Equivalents and Restricted Cash	1,341		(152)	Net Change in Cash, Cash Equivalents and Restricted Cash	1,828		3,641
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	5,398		3,315	Cash, cash equivalents and restricted cash at beginning of period	5,398		3,315
Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	6,739	3,163	Cash, Cash Equivalents and Restricted Cash at End of Period	$	7,226	6,956

Restricted cash of $0$317 million ~~and $325 million are~~is included in the ~~"Prepaid expenses and other current assets" and~~ "Other assets" ~~lines, respectively,~~line of our Consolidated Balance Sheet as of ~~March 31,~~June 30, 2022.

Restricted cash of $152 million and $218 million are included in the "Prepaid expenses and other current assets" and "Other assets" lines, respectively, of our Consolidated Balance Sheet as of December 31, 2021.

See Notes to Consolidated Financial Statements.


5			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Notes to Consolidated Financial Statements

Note 1—Basis of Presentation

The interim-period financial information presented in the financial statements included in this report is unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair presentation of the consolidated financial position of ConocoPhillips, 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 2021 Annual Report on Form 10-K.

Note 2—Inventories


		Millions of Dollars				Millions of Dollars
		March 31 2022		December 31 2021		June 30 2022		December 31 2021
Crude oil and natural gas	Crude oil and natural gas	$	611	647	Crude oil and natural gas	$	653	647
Materials and supplies	Materials and supplies	563		561	Materials and supplies	581		561
Total Inventories	Total Inventories	$	1,174	1,208	Total Inventories	$	1,234	1,208

Inventories valued on the LIFO basis	Inventories valued on the LIFO basis	$	353	395	Inventories valued on the LIFO basis	$	326	395

Note 3—Acquisitions and Dispositions

Acquisition of Shell Enterprise LLC's (Shell) Permian Assets

In December 2021, we completed our acquisition of Shell's assets in the Permian based Delaware Basin in an all-cash transaction for $8.6 billion after customary adjustments. Assets acquired include approximately 225,000 net acres and producing properties located entirely in Texas. The acquisition was accounted for as a business combination under FASB Topic ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date as we identify new information about facts and circumstances that existed as of the acquisition date to consider.

Oil and gas properties were valued using a discounted cash flow approach incorporating market participant and internally generated price assumptions, production profiles, and operating and development cost assumptions. The fair values determined for accounts receivable, accounts payable, and most other current assets and current liabilities were equivalent to the carrying value due to their short-term nature. The total consideration of $8.6 billion was allocated to the identifiable assets and liabilities based on their fair values at the acquisition date.


			ConocoPhillips 2022 Q1Q2 10-Q			6


Notes to Consolidated Financial Statements			Table of Contents


Assets Acquired	Millions of Dollars
Accounts receivable, net	$	337
Inventories	20
Net properties, plants and equipment	8,582
Other assets	50
Total assets acquired	$	8,989

Liabilities Assumed
Accounts payable	$	206
Accrued income and other taxes	6
Other accruals	20
Asset retirement obligations and accrued environmental costs	86
Other liabilities and deferred credits	36
Total liabilities assumed	$	354
Net assets acquired	$	8,635

With the completion of the Shell Permian transaction, we acquired proved and unproved properties of approximately $4.2 billion and $4.3 billion, respectively.

Supplemental Pro Forma (unaudited)

The following table summarizes the unaudited supplemental pro forma financial information for the ~~three-month period ending March 31,~~three- and six-month periods ended June 30, 2021, as if we had completed the acquisition of Shell's Permian assets on January 1, 2020:


		Millions of Dollars					Millions of Dollars
		Three Months Ended March 31, 2021					Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
Supplemental Pro Forma (unaudited)	Supplemental Pro Forma (unaudited)	As Reported		Pro forma Shell	Pro forma Combined	Supplemental Pro Forma (unaudited)	As Reported		Pro forma Shell	Pro forma Combined	As Reported	Pro forma Shell	Pro forma Combined
Total Revenues and Other Income	Total Revenues and Other Income	10,559		596	11,155	Total Revenues and Other Income	10,211		799	11,010	20,770	1,395	22,165
Income before income taxes	Income before income taxes	1,714		119	1,833	Income before income taxes	3,080		297	3,377	4,794	416	5,210
Net Income	Net Income	982		91	1,073	Net Income	2,091		227	2,318	3,073	318	3,391

Earnings per share ($ per share):	Earnings per share ($ per share):					Earnings per share ($ per share):
Basic net income	Basic net income	$	0.75	0	0.82	Basic net income	$	1.55	0	1.71	2.32	0	2.56
Diluted net income	Diluted net income	0.75		0	0.82	Diluted net income	1.55		0	1.71	2.31	0	2.55

The unaudited supplemental pro forma financial information is presented for illustration and comparative 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-month period ending March 31,~~three- and six-month periods ended June 30, 2021, is a result of combining the consolidated income statement of ConocoPhillips with the results of the assets acquired from Shell. The pro forma results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction. The pro forma results include adjustments made 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.


7			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Acquisition of Concho Resources Inc. (Concho)

In January 2021, we completed our acquisition of Concho, an independent oil and gas exploration and production company in an all-stock transaction. In conjunction with this acquisition, we commenced, and completed in 2021, a company-wide restructuring program, the scope of which included combining the operations of the two companies as well as other global restructuring activities for which we recognized non-recurring restructuring and transaction costs. Further information regarding the Concho acquisition can be found in the following footnotes: Note 7—Changes in Equity; Note 9—Contingencies and Commitments; Note 10—Derivative and Fi ~~nancial~~Financial Instruments; and Note 13—Cash Flow Information and should be read in conjunction with the notes included in our Annual Report on Form 10-K.

Acquisition of Additional Shareholding Interest in Australia Pacific LNG Pty Ltd (APLNG)

In February 2022, we completed the acquisition of an additional 10 percent interest in APLNG from Origin Energy for approximately $1.4 billion, after customary adjustments, in an all-cash transaction resulting from the exercise of our preemption right. This increases our ownership in APLNG to 47.5 percent, with Origin Energy and Sinopec owning

27.5 percent and 25 percent, respectively. APLNG is reported as an equity investment in our Asia Pacific segment.

Assets Sold

In April 2022, we sold our interests in certain noncore assets in the Lower 48 segment for net proceeds of $370 million and recognized a $80 million before-tax and $63 million after-tax gain. At the time of disposition, our interests in these assets had a net carrying value of $290 million, consisting primarily of $401 million of PP&E and $111 million of liabilities, primarily related to AROs.

In March 2022, we completed the divestiture of our subsidiaries that held our Indonesia assets and operations, and based on an effective date of January 1, 2021, we received net proceeds of $731 million after customary adjustments and recognized a $534 million before-tax and $462 million after-tax gain related to this transaction. Together, the subsidiaries sold indirectly held our 54 percent interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and

35 percent shareholding in the Transasia Pipeline Company. At the time of the disposition, the net carrying value was approximately $0.2 billion, excluding $0.2 billion of cash and restricted cash. The net book value consisted primarily of $0.3 billion of PP&E and $0.1 billion of ARO. The before-tax earnings associated with the subsidiaries sold, excluding the gain on disposition noted above, were $138 million and ~~$122~~$264 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022 and 2021, respectively. Results of operations for the Indonesia interests sold were reported in our Asia Pacific segment.

For the ~~three-months~~three- and six-months ended ~~March 31,~~June 30, 2022, we recorded contingent payments of ~~$250~~$174 million and $424 million, respectively, relating to the previous dispositions of our interest in the Foster Creek Christina Lake Partnership and western Canada gas assets as well as our San Juan assets. The contingent payments are recorded as gain on disposition in our consolidated income statement and are reflected within our Canada and Lower 48 segments. InFor the ~~first quarter of~~three- and six-months ended June 30, 2021, we recorded contingent payments of ~~$26 million.~~$68 million and $94 million, respectively.

~~Assets Held for Sale~~Planned Dispositions

In ~~January~~July 2022, we entered into ~~an agreement~~agreements to sell our interests in certain noncore assets in the Lower 48 segment for ~~$440~~$265 million, before customary adjustments. These assets have a net carrying value of approximately $289 million, which consisted primarily of $400 million of PP&E and $111 million of liabilities, primarily noncurrent AROs. These assets met held for sale criteriatransactions are expected to close in the ~~first~~third quarter ~~and as~~ of March 31, 2022, we reclassified the PP&E to "Prepaid expenses and other current assets" and the noncurrent liabilities to "Other accruals" on our consolidated balance sheet. The before-tax earnings associated with these assets were $23.1 million and $0.5 million for the three-month periods ended March 31, 2022 and 2021, respectively. This transaction closed in April 2022.


			ConocoPhillips 2022 Q1Q2 10-Q			8


Notes to Consolidated Financial Statements			Table of Contents

Note 4—Investments, Loans and Long-Term Receivables

APLNG

APLNG executed project agreements for an $8.5 billion project finance facility in 2012 which became non-recourse following financial completion in 2017. Following restructuring efforts, the facility is currently 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 principal and interest payments commenced in March 2017 and are scheduled to occur bi-annually until September 2030. At ~~March 31,~~June 30, 2022, a balance of $5.5 billion was outstanding on these facilities.

See Note 8.

In February 2022, we completed the acquisition of an additional 10 percent interest in APLNG from Origin Energy for approximately $1.4 billion resulting from the exercise of our preemption right. This increases our ownership in APLNG to 47.5 percent, with Origin Energy and Sinopec owning 27.5 percent and 25 percent, respectively.

At ~~March 31,~~June 30, 2022, the carrying value of our equity method investment in APLNG was ~~$6.8~~$6.4 billion. The balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet.

Loans

As part of our normal ongoing business operations, ~~and consistent with industry practice,~~ we enter into numerous agreements with other parties to pursue business opportunities. Included in such activity are loans made to certain affiliated and non-affiliated companies. At ~~March 31,~~June 30, 2022, significant loans to affiliated companies included $59 million in project financing to Qatar Liquefied Gas Company Limited (3), which is included within the “Accounts and notes receivable—related parties” line on our consolidated balance sheet.

Note 5—Investment in Cenovus Energy

~~During 2021, we initiated disposal of our Cenovus Energy (CVE) common shares and at March 31, 2022, we are fully divested of our investment.~~

At December 31, 2021, we held 91 million common shares of Cenovus Energy (CVE), which approximated 4.5% of ~~the~~their issued and outstanding common ~~shares of CVE.~~shares. Those shares were carried on our balance sheet at fair value of $1.1 billion based on ~~the~~NYSE closing price ~~on the NYSE~~of $12.28 per share on the last ~~trading~~ day of ~~$12.28 per share.~~trading for the period. During the first quarter of 2022, we sold our remaining 91 million shares, recognizing proceeds of $1.4 billion.

All gains and losses ~~are~~were recognized within "Other income” on our consolidated income statement. Proceeds related to the sale of our CVE shares ~~are~~were included within “Cash Flows from Investing Activities” on our consolidated statement of cash flows. See Note 11.


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022		2021
Total Net gain on equity securities	Total Net gain on equity securities	$	251	308			Total Net gain on equity securities	$	—	418	251		726
Less: Net gain on equity securities sold during the period	Less: Net gain on equity securities sold during the period	251		—			Less: Net gain on equity securities sold during the period	—		31	251		60
Unrealized gain on equity securities still held at the reporting date	Unrealized gain on equity securities still held at the reporting date	$	—	308			Unrealized gain on equity securities still held at the reporting date	$	—	387	$	—	666


9			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 6—Debt


		Millions of Dollars				Millions of Dollars
		March 31 2022		December 31 2021		June 30 2022		December 31 2021
2.4% Notes due 2022	2.4% Notes due 2022	$	329	329	2.4% Notes due 2022	$	329	329
7.65% Debentures due 2023	7.65% Debentures due 2023	78		78	7.65% Debentures due 2023	78		78
3.35% Notes due 2024	3.35% Notes due 2024	426		426	3.35% Notes due 2024	426		426
2.125% Notes due 2024	2.125% Notes due 2024	900		—	2.125% Notes due 2024	900		—
8.2% Notes due 2025	8.2% Notes due 2025	134		134	8.2% Notes due 2025	134		134
3.35% Debentures due 2025	3.35% Debentures due 2025	199		199	3.35% Debentures due 2025	199		199
2.4% Notes due 2025	2.4% Notes due 2025	900		—	2.4% Notes due 2025	900		—
6.875% Debentures due 2026	6.875% Debentures due 2026	67		67	6.875% Debentures due 2026	67		67
4.95% Notes due 2026	4.95% Notes due 2026	1,250		1,250	4.95% Notes due 2026	—		1,250
7.8% Debentures due 2027	7.8% Debentures due 2027	203		203	7.8% Debentures due 2027	203		203
3.75% Notes due 2027	3.75% Notes due 2027	196		1,000	3.75% Notes due 2027	196		1,000
4.3% Notes due 2028	4.3% Notes due 2028	223		1,000	4.3% Notes due 2028	223		1,000
7.375% Debentures due 2029	7.375% Debentures due 2029	92		92	7.375% Debentures due 2029	92		92
7% Debentures due 2029	7% Debentures due 2029	112		200	7% Debentures due 2029	112		200
6.95% Notes due 2029	6.95% Notes due 2029	1,195		1,549	6.95% Notes due 2029	1,195		1,549
8.125% Notes due 2030	8.125% Notes due 2030	390		390	8.125% Notes due 2030	390		390
7.4% Notes due 2031	7.4% Notes due 2031	382		500	7.4% Notes due 2031	382		500
7.25% Notes due 2031	7.25% Notes due 2031	400		500	7.25% Notes due 2031	400		500
7.2% Notes due 2031	7.2% Notes due 2031	447		575	7.2% Notes due 2031	447		575
2.4% Notes due 2031	2.4% Notes due 2031	227		500	2.4% Notes due 2031	227		500
5.9% Notes due 2032	5.9% Notes due 2032	505		505	5.9% Notes due 2032	505		505
4.15% Notes due 2034	4.15% Notes due 2034	246		246	4.15% Notes due 2034	246		246
5.95% Notes due 2036	5.95% Notes due 2036	326		500	5.95% Notes due 2036	326		500
5.951% Notes due 2037	5.951% Notes due 2037	645		645	5.951% Notes due 2037	645		645
5.9% Notes due 2038	5.9% Notes due 2038	350		600	5.9% Notes due 2038	350		600
6.5% Notes due 2039	6.5% Notes due 2039	1,588		2,750	6.5% Notes due 2039	1,588		2,750
3.758% Notes due 2042	3.758% Notes due 2042	785		—	3.758% Notes due 2042	785		—
4.3% Notes due 2044	4.3% Notes due 2044	750		750	4.3% Notes due 2044	750		750
5.95% Notes due 2046	5.95% Notes due 2046	329		500	5.95% Notes due 2046	329		500
7.9% Debentures due 2047	7.9% Debentures due 2047	60		60	7.9% Debentures due 2047	60		60
4.875% Notes due 2047	4.875% Notes due 2047	319		800	4.875% Notes due 2047	319		800
4.85% Notes due 2048	4.85% Notes due 2048	219		600	4.85% Notes due 2048	219		600
3.8% Notes due 2052	3.8% Notes due 2052	1,100		—	3.8% Notes due 2052	1,100		—
4.025% Notes due 2062	4.025% Notes due 2062	1,770		—	4.025% Notes due 2062	1,770		—
Floating rate notes due 2022 at 1.06% – 1.41% during 2022 and 1.02% –1.12% during 2021	Floating rate notes due 2022 at 1.06% – 1.41% during 2022 and 1.02% –1.12% during 2021	500		500	Floating rate notes due 2022 at 1.06% – 1.41% during 2022 and 1.02% –1.12% during 2021	—		500
Marine Terminal Revenue Refunding Bonds due 2031 at 0.07% – 0.65% during 2022 and 0.04% – 0.15% during 2021		265		265
Industrial Development Bonds due 2035 at 0.07%% – 0.65% during 2022 and 0.04% – 0.12% during 2021		18		18
Marine Terminal Revenue Refunding Bonds due 2031 at 0.07% – 1.09% during 2022 and 0.04% – 0.15% during 2021					Marine Terminal Revenue Refunding Bonds due 2031 at 0.07% – 1.09% during 2022 and 0.04% – 0.15% during 2021	265		265
Industrial Development Bonds due 2035 at 0.07% – 1.09% during 2022 and 0.04% – 0.12% during 2021					Industrial Development Bonds due 2035 at 0.07% – 1.09% during 2022 and 0.04% – 0.12% during 2021	18		18
Other	Other	35		35	Other	33		35
Debt at face value	Debt at face value	17,960		17,766	Debt at face value	16,208		17,766
Finance leases	Finance leases	1,308		1,261	Finance leases	1,284		1,261
Net unamortized premiums, discounts and debt issuance costs	Net unamortized premiums, discounts and debt issuance costs	(522)		907	Net unamortized premiums, discounts and debt issuance costs	(521)		907
Total debt	Total debt	18,746		19,934	Total debt	16,971		19,934
Short-term debt	Short-term debt	(1,160)		(1,200)	Short-term debt	(676)		(1,200)
Long-term debt	Long-term debt	$	17,586	18,734	Long-term debt	$	16,295	18,734


			ConocoPhillips 2022 Q1Q2 10-Q			10


Notes to Consolidated Financial Statements			Table of Contents

In May 2022, we redeemed $1,250 million principal amount of our 4.95 percent Notes due 2026. We paid premiums above face value of $79 million to redeem the debt and recognized a loss on debt extinguishment of $83 million which is included in the "Other expenses" line on our consolidated income statement. We also paid $500 million to retire the outstanding principal amount of the floating rate notes due 2022 at maturity.

In the first quarter of 2022, we completed a debt refinancing consisting of three concurrent transactions: a tender offer to repurchase existing debt for cash; exchange offers to retire certain debt in exchange for new debt and cash; and a new debt issuance to partially fund the cash paid in the tender and exchange offers.

Tender Offer

In March 2022, we repurchased a total of $2,716 million aggregate principal amount of debt as listed below. We paid premiums above face value of $333 million to repurchase these debt instruments and recognized a gain on debt extinguishment of $155 million which is included in the "Other expenses" line on our consolidated income statement.

•3.75% Notes due 2027 with principal of $1,000 million (partial repurchase of $804 million)

•4.3% Notes due 2028 with principal of $1,000 million (partial repurchase of $777 million)

•2.4% Notes due 2031 with principal of $500 million (partial repurchase of $273 million)

•4.875% Notes due 2047 with principal of $800 million (partial repurchase of $481 million)

•4.85% Notes due 2048 with principal of $600 million (partial repurchase of $381 million)

Exchange Offers

Also in March 2022, we completed 2 concurrent debt exchange offers through which $2,544 million of aggregate principal of existing notes was tendered and accepted in exchange for a combination of new notes and cash. The debt exchange offers were treated as debt modifications for accounting purposes resulting in a portion of the unamortized debt discount, premiums and debt issuance costs of the existing notes being allocated to the new notes on the settlement dates of the exchange offers. We paid premiums above face value of $883 million, comprised of $872 million of cash as well as new notes, which were capitalized as additional debt discount. We incurred expenses of $28 million in the exchanges which are included in the "Other expenses" line on our consolidated income statement.

The notes tendered and accepted in the exchange offers were:

•7% Debentures due 2029 with principal amount of $200 million (partial exchange of $88 million)

•6.95% Notes due 2029 with principal amount of $1,549 million (partial exchange of $354 million)

•7.4% Notes due 2031 with principal amount of $500 million (partial exchange of $118 million)

•7.25% Notes due 2031 with principal amount of $500 million (partial exchange of $100 million)

•7.2% Notes due 2031 with principal amount of $575 million (partial exchange of $128 million)

•5.95% Notes due 2036 with principal amount of $500 million (partial exchange of $174 million)

•5.9% Notes due 2038 with principal amount of $600 million (partial exchange of $250 million)

•6.5% Notes due 2039 with principal amount of $2,750 million (partial exchange of $1,162 million)

•5.95% Notes due 2046 with principal amount of $500 million (partial exchange of $171 million)

The notes tendered and accepted were exchanged for the following new notes:

•3.758% ~~Note~~Notes due 2042 with principal amount of $785 million

•4.025% ~~Note~~Notes due 2062 with principal amount of $1,770 million

New Debt Issuance

On March 8, 2022, we issued the following new notes consisting of:

•2.125% Notes due 2024 with principal of $900 million

•2.4% Notes due 2025 with principal of $900 million

•3.8% Notes due 2052 with principal of $1,100 million

In April 2022, we provided formal notice to holders of our 4.95% Notes due 2026 with principal of $1,250 million that we would retire this debt in full per the provisions in the bond indenture, with settlement scheduled for May 2022. Retirement of this bond will be sourced from cash and further accelerates progress towards our debt reduction target.

In February 2022, we refinanced our revolving credit facility from a total borrowing capacity of $6.0 billion to $5.5 billion with an expiration date of February 2027. 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~~

$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.


11			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

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 $5.5 billion of commercial paper. Commercial paper is generally limited to maturities of 90 days and is included in ~~the~~ short-term debt on our consolidated balance sheet. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at ~~March 31,~~June 30, 2022. At December 31, 2021, we had no commercial paper outstanding and no direct borrowings or letters of credit issued.

The current credit ratings on our long-term debt are:

•Fitch: “A” with a “stable” outlook

•S&P: “A-” with a “stable” outlook

•Moody’s: “A3” with a “positive” outlook

We do not have any ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity upon downgrade of our credit ratings. If our credit ratings are downgraded from their current levels, it could increase the cost of corporate debt available to us and restrict our access to the commercial paper markets. If our credit ~~rating~~ratings were to deteriorate to a level prohibiting us from accessing the commercial paper market, we would still be able to access funds under our revolving credit facility.

At ~~March 31,~~June 30, 2022, we had $283 million of certain variable rate demand bonds (VRDBs) outstanding with maturities ranging through 2035. The VRDBs are redeemable at the option of the bondholders on any business day. If they are ever redeemed, we have the ability and intent to refinance on a long-term basis, therefore, the VRDBs are included in the “Long-term debt” line on our consolidated balance sheet.


			ConocoPhillips 2022 Q1Q2 10-Q			12


Notes to Consolidated Financial Statements			Table of Contents

Note 7—Changes in Equity

Millions of Dollars
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
For the three months ended March 31, 2022
Balances at December 31, 2021 $ 21 60,581 (50,920) (4,950) 40,674 45,406
Net income 5,759 5,759
Other comprehensive income 142 142
Dividends declared
Ordinary ($0.46 per common share) (603) (603)
Variable return of cash ($0.30 per common share) (390) (390)
Repurchase of company common stock (1,425) (1,425)
Distributed under benefit plans 326 326
Other 1 2 3
Balances at March 31, 2022 $ 21 60,907 (52,344) (4,808) 45,442 49,218
For the three months ended March 31, 2021
Balances at December 31, 2020 $ 18 47,133 (47,297) (5,218) 35,213 29,849
Net income 982 982
Other comprehensive income 138 138
Dividends declared
Ordinary ($0.43 per common share) (588) (588)
Acquisition of Concho 3 13,122 13,125
Repurchase of company common stock (375) (375)
Distributed under benefit plans 23 23
Other 1 1
Balances at March 31, 2021 $ 21 60,278 (47,672) (5,080) 35,608 43,155


	Millions of Dollars

	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Accum. Other Comprehensive Income (Loss)	Retained Earnings	Total
For the three months ended June 30, 2022
Balances at March 31, 2022	$	21	60,907	(52,344)	(4,808)	45,442	49,218
Net income						5,145	5,145
Other comprehensive income					(505)		(505)
Dividends declared
Ordinary ($0.46 per common share)						(598)	(598)
Variable return of cash ($0.70 per common share)						(896)	(896)
Repurchase of company common stock				(2,300)			(2,300)
Distributed under benefit plans			138				138
Other				0		0	—
Balances at June 30, 2022	$	21	61,045	(54,644)	(5,313)	49,093	50,202

For the six months ended June 30, 2022
Balances at December 31, 2021	$	21	60,581	(50,920)	(4,950)	40,674	45,406
Net income						10,904	10,904
Other comprehensive income					(363)		(363)
Dividends declared
Ordinary ($0.92 per common share)						(1,201)	(1,201)
Variable return of cash ($1.00 per common share)						(1,286)	(1,286)
Repurchase of company common stock				(3,725)			(3,725)
Distributed under benefit plans			464				464
Other				1		2	3
Balances at June 30, 2022	$	21	61,045	(54,644)	(5,313)	49,093	50,202



	Millions of Dollars
	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Accum. Other Comprehensive Income (Loss)	Retained Earnings	Total
For the three months ended June 30, 2021
Balances at March 31, 2021	$	21	60,278	(47,672)	(5,080)	35,608	43,155
Net income						2,091	2,091
Other comprehensive income					160		160
Dividends declared
Ordinary ($0.43 per common share)						(583)	(583)
Repurchase of company common stock				(606)			(606)
Distributed under benefit plans			59				59
Balances at June 30, 2021	$	21	60,337	(48,278)	(4,920)	37,116	44,276

For the six months ended June 30, 2021
Balances at December 31, 2020	$	18	47,133	(47,297)	(5,218)	35,213	29,849
Net income						3,073	3,073
Other comprehensive loss					298		298
Dividends declared
Ordinary ($0.86 per common share)						(1,171)	(1,171)
Acquisition of Concho	3		13,122				13,125
Repurchase of company common stock				(981)			(981)
Distributed under benefit plans			82				82
Other						1	1
Balances at June 30, 2021	$	21	60,337	(48,278)	(4,920)	37,116	44,276


13			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 8—Guarantees

At ~~March 31,~~June 30, 2022, 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 ~~March 31,~~June 30, 2022, we had outstanding multiple guarantees in connection with our 47.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing ~~March~~June 2022 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 9 years. Our maximum exposure under this guarantee is approximately $210 million and may become payable if an enforcement action is commenced by the project finance lenders against APLNG. At ~~March 31,~~June 30, 2022, the carrying value of this guarantee was $14 million.

•In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy Limited in October 2008, we agreed to reimburse Origin Energy Limited for our share of the existing contingent liability arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales agreements. The final guarantee expires in the fourth quarter of 2041. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be ~~$910~~$820 million ($~~1.6~~1.4 billion in the event of intentional or reckless breach) and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the co-ventures do not make necessary equity contributions into APLNG.

•We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of 15 to 2423 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $290 million and would become payable if APLNG does not perform. At ~~March 31,~~June 30, 2022, the carrying value of these guarantees was approximately $20 million.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling approximately $720 million, which consist primarily of guarantees of the residual value of leased office buildings, guarantees of the residual value of corporate aircrafts, and a guarantee for our portion of a joint venture’s project finance reserve accounts. These guarantees have remaining terms of one to five years and would become payable if certain asset values are lower than guaranteed amounts at the end of the lease or contract term, business conditions decline at guaranteed entities, or as a result of nonperformance of contractual terms by guaranteed parties. At ~~March 31,~~June 30, 2022, the carrying value of these guarantees was $8 million.

Indemnifications

Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes and environmental liabilities. The carrying amount recorded for these indemnification obligations at ~~March 31,~~June 30, 2022, was ~~$20~~

$20 million. Those related to environmental issues have terms that are generally indefinite and the maximum amounts of future payments are generally unlimited. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. See Note 9 for additional information about environmental liabilities.


			ConocoPhillips 2022 Q1Q2 10-Q			14


Notes to Consolidated Financial Statements			Table of Contents

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.

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 ~~March 31,~~June 30, 2022, our balance sheet included a total environmental accrual of ~~$184~~$178 million, compared with $187 million at December 31, 2021, for remediation activities in the U.S. and Canada. We expect to incur a substantial amount of these expenditures within the next 30 years. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.


15			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Litigation and Other Contingencies

We are subject to various lawsuits and claims including, but not limited to, matters involving oil and gas royalty and severance tax payments, gas measurement and valuation methods, contract disputes, environmental damages, climate change, personal injury, and property damage. Our primary exposures for such matters relate to alleged royalty and tax underpayments on certain federal, state and privately owned properties, claims of alleged environmental contamination and damages from historic operations, and climate change. We will continue to defend ourselves vigorously in these matters.

Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.

We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at ~~March 31,~~June 30, 2022, we had performance obligations secured by letters of credit of ~~$340~~$320 million (issued as direct bank letters of credit) related to various purchase commitments for materials, supplies, commercial activities and services incident to the ordinary conduct of business.

In 2007, ConocoPhillips was unable to reach agreement with respect to the empresa mixta structure mandated by the Venezuelan government’s Nationalization Decree. As a result, Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’ interests in the Petrozuata and Hamaca heavy oil ventures and the offshore Corocoro development project. In response to this expropriation, ConocoPhillips initiated international arbitration on November 2, 2007, with the ICSID. On September 3, 2013, an ICSID arbitration tribunal held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in June 2007. On January 17, 2017, the Tribunal reconfirmed the decision that the expropriation was unlawful. In March 2019, the Tribunal unanimously ordered the government of Venezuela to pay ConocoPhillips approximately $8.7 billion in compensation for the government’s unlawful expropriation of the company’s investments in Venezuela in 2007. On August 29, 2019, the ICSID Tribunal issued a decision rectifying the award and reducing it by approximately $227 million. The award now stands at $8.5 billion plus interest. The government of Venezuela sought annulment of the award, which automatically stayed enforcement of the award. On September 29, 2021, the ICSID annulment committee lifted the stay of enforcement of the award.

In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $2 billion under their agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures. In August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the payment period, including initial payments totaling approximately $500 million within a period of 90 days from the time of signing of the settlement agreement. The balance of the settlement is to be paid quarterly over a period of four and a half years. Per the settlement, PDVSA recognized the ICC award as a judgment in various jurisdictions, and ConocoPhillips agreed to suspend its legal enforcement actions. ConocoPhillips sent notices of default to PDVSA on October 14 and November 12, 2019, and to date PDVSA has failed to cure its breach. As a result, ConocoPhillips has resumed legal enforcement actions. To date, ConocoPhillips has received approximately ~~$769~~$771 million in connection with the ICC award. ConocoPhillips has ensured that the settlement and any actions taken in enforcement thereof meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.

In 2016, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Corocoro Project. On August 2, 2019, the ICC Tribunal awarded ConocoPhillips approximately $33 million plus interest under the Corocoro contracts. ConocoPhillips is seeking recognition and enforcement of the award in various jurisdictions. ConocoPhillips has ensured that all the actions related to the award meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.


			ConocoPhillips 2022 Q1Q2 10-Q			16


Notes to Consolidated Financial Statements			Table of Contents

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.~~unprecedented, therefore, there is significant uncertainty about the scope of the claims and alleged damages and any potential impact on the Company’s financial condition. ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against such lawsuits.

Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips, seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by historical oil and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will vigorously defend against them. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty about these claims (both as to scope and damages) and we continue to evaluate our exposure in these lawsuits.

In October 2020, the Bureau of Safety and Environmental Enforcement (BSEE) ordered the prior owners of Outer Continental Shelf (OCS) Lease P-0166, including ConocoPhillips, to decommission the lease facilities, including two offshore platforms located near Carpinteria, California. This order was sent after the current owner of OCS Lease P-0166 relinquished the lease and abandoned the lease platforms and facilities. BSEE’s order to ConocoPhillips is premised on its connection to Phillips Petroleum Company, a legacy company of ConocoPhillips, which held a historical 25 percent interest in this lease and operated these facilities but sold its interest approximately 30 years ago. ConocoPhillips is challenging the BSEE order but continues to evaluate its exposure in this matter.

On May 10, 2021, ConocoPhillips filed arbitration under the rules of the Singapore International Arbitration Centre (SIAC) against Santos KOTN Pty Ltd. and Santos Limited for their failure to timely pay the $200 million bonus due upon ~~FID~~final investment decision of the Barossa development project under the sale and purchase agreement. Santos KOTN Pty Ltd. and Santos Limited have filed a response and counterclaim, and the arbitration is underway.

In July 2021, a federal securities class action was filed against Concho, certain of Concho’s officers, and ConocoPhillips as Concho’s successor in the United States District Court for the Southern District of Texas. On October 21, 2021, the court issued an order appointing Utah Retirement Systems and the Construction Laborers Pension Trust for Southern California as lead plaintiffs (Lead Plaintiffs). On January 7, 2022, the Lead Plaintiffs filed their consolidated complaint alleging that Concho made materially false and misleading statements regarding its business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed appropriate. We believe the allegations in the action are without merit and are vigorously defending this litigation.

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.


17			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

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				Millions of Dollars
		March 31 2022		December 31 2021		June 30 2022		December 31 2021
Assets	Assets				Assets
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	1,471	1,168	Prepaid expenses and other current assets	$	1,790	1,168
Other assets	Other assets	154		75	Other assets	262		75
Liabilities	Liabilities				Liabilities
Other accruals	Other accruals	1,474		1,160	Other accruals	1,824		1,160
Other liabilities and deferred credits	Other liabilities and deferred credits	143		63	Other liabilities and deferred credits	232		63

The gains (losses) from commodity derivatives incurred and the line items where they appear on our consolidated income statement were:


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021

Sales and other operating revenues	Sales and other operating revenues	$	(407)	(279)			Sales and other operating revenues	$	(13)	(100)	(420)	(379)
Other income	Other income	1		17			Other income	1		(1)	2	16
Purchased commodities	Purchased commodities	401		13			Purchased commodities	(55)		132	346	145

InDuring the ~~three months ended March 31,~~first quarter of 2021, we recognized a $305 million loss on settlement of derivative contracts acquired through the Concho transaction. This loss is recorded within the “Sales and other operating revenues” line on our consolidated income statement. In connection with this settlement, we issued a cash payment of $692 million in the first quarter of 2021 and $69 million in the second quarter of 2021 which are included within “Cash Flows From Operating Activities” on our consolidated statement of cash flows.

The table below summarizes our material net exposures resulting from outstanding commodity derivative contracts:

Open Position
Long/(Short)

Open Position
Long (Short)

March 31
2022

December 31
2021

June 30
2022

December 31
2021

Commodity

Natural gas and power (billions of cubic feet equivalent)

Fixed price

(14)

Basis

(5)

(22)

Basis

(1)

(22)


			ConocoPhillips 2022 Q1Q2 10-Q			18


Notes to Consolidated Financial Statements			Table of Contents

Financial Instruments

We invest in financial instruments with maturities based on our cash forecasts for the various accounts and currency pools we manage. The types of financial instruments in which we currently invest include:

•Time deposits: Interest bearing deposits placed with financial institutions for a predetermined amount of time.

•Demand deposits: Interest bearing deposits placed with financial institutions. Deposited funds can be withdrawn without notice.

•Commercial paper: Unsecured promissory notes issued by a corporation, commercial bank or government agency purchased at a discount to mature at par.

•U.S. government or government agency obligations: Securities issued by the U.S. government or U.S. government agencies.

•Foreign government obligations: Securities issued by foreign governments.

•Corporate bonds: Unsecured debt securities issued by corporations.

•Asset-backed securities: Collateralized debt securities.

The following investments are carried on our consolidated balance sheet at cost, plus accrued interest, and the table reflects remaining maturities at ~~March 31,~~June 30, 2022, and December 31, 2021:


		Millions of Dollars					Millions of Dollars
		Carrying Amount					Carrying Amount
		Cash and Cash Equivalents			Short-Term Investments			Cash and Cash Equivalents				Short-Term Investments
		March 31 2022		December 31 2021	March 31 2022	December 31 2021				June 30 2022		December 31 2021	June 30 2022	December 31 2021
Cash	Cash	$	594	670					Cash	$	505	670
Demand Deposits	Demand Deposits	1,459		1,554					Demand Deposits	1,690		1,554
Time Deposits	Time Deposits								Time Deposits
1 to 90 days	1 to 90 days	4,341		2,363	277	217			1 to 90 days	4,555		2,363	524	217
91 to 180 days	91 to 180 days				215	4			91 to 180 days				112	4
Within one year	Within one year				10	4			Within one year				47	4
One year through five years	One year through five years								One year through five years
U.S. Government Obligations	U.S. Government Obligations								U.S. Government Obligations
1 to 90 days	1 to 90 days	5		431	—	—			1 to 90 days	39		431	—	—
		$	6,399	5,018	502	225				$	6,789	5,018	683	225


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Notes to Consolidated Financial Statements			Table of Contents

The following investments in debt securities classified as available for sale are carried at fair value on our consolidated balance sheet at ~~March 31,~~June 30, 2022 and December 31, 2021:


		Millions of Dollars								Millions of Dollars
		Carrying Amount								Carrying Amount
		Cash and Cash Equivalents			Short-Term Investments		Investments and Long-Term Receivables			Cash and Cash Equivalents			Short-Term Investments		Investments and Long-Term Receivables
		March 31 2022		December 31 2021	March 31 2022	December 31 2021	March 31 2022	December 31 2021		June 30 2022		December 31 2021	June 30 2022	December 31 2021	June 30 2022	December 31 2021
Major Security Type	Major Security Type								Major Security Type
Corporate Bonds	Corporate Bonds	$	—	3	146	128	148	173	Corporate Bonds	$	—	3	299	128	298	173
Commercial Paper	Commercial Paper	15		7	75	82			Commercial Paper	120		7	215	82
U.S. Government Obligations	U.S. Government Obligations	—		—	—	—	10	2	U.S. Government Obligations	—		—	68	—	94	2
U.S. Government Agency Obligations	U.S. Government Agency Obligations				2	2	8	8	U.S. Government Agency Obligations				5	2	5	8
Foreign Government Obligations	Foreign Government Obligations				3	7	2	2	Foreign Government Obligations				2	7	4	2
Asset-backed Securities	Asset-backed Securities				2	2	61	63	Asset-backed Securities				—	2	100	63
		$	15	10	228	221	229	248		$	120	10	589	221	501	248

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 seven years.

The following table summarizes the amortized cost basis and fair value of investments in debt securities classified as available for sale:


		Millions of Dollars						Millions of Dollars
		Amortized Cost Basis			Fair Value			Amortized Cost Basis			Fair Value
		March 31 2022		December 31 2021	March 31 2022	December 31 2021		June 30 2022		December 31 2021	June 30 2022	December 31 2021
Major Security Type	Major Security Type						Major Security Type
Corporate Bonds	Corporate Bonds	$	298	305	294	304	Corporate Bonds	$	604	305	597	304
Commercial Paper	Commercial Paper	90		88	90	89	Commercial Paper	335		88	335	89
U.S. Government Obligations	U.S. Government Obligations	10		2	10	2	U.S. Government Obligations	163		2	162	2
U.S. Government Agency Obligations	U.S. Government Agency Obligations	10		10	10	10	U.S. Government Agency Obligations	10		10	10	10
Foreign Government Obligations	Foreign Government Obligations	5		9	5	9	Foreign Government Obligations	6		9	6	9
Asset-backed Securities	Asset-backed Securities	63		65	63	65	Asset-backed Securities	100		65	100	65
		$	476	479	472	479		$	1,218	479	1,210	479

As of ~~March 31,~~June 30, 2022 and December 31, 2021, total unrealized losses for debt securities classified as available for sale with net losses were negligible. Additionally, as of ~~March 31,~~June 30, 2022 and December 31, 2021, 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-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022, proceeds from sales and ~~March 31,~~redemptions of investments in debt securities classified as available for sale were $86 million and $201 million, respectively. 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 ~~$115~~$173 million and ~~$147~~$320 million, respectively. Gross realized gains and losses included in earnings from those sales and redemptions were negligible. The cost of securities sold and redeemed is determined using the specific identification method.


			ConocoPhillips 2022 Q1Q2 10-Q			20


Notes to Consolidated Financial Statements			Table of Contents

Credit Risk

Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, short-term investments, long-term investments in debt securities, OTC derivative contracts and trade receivables. Our cash equivalents and short-term investments are placed in high-quality commercial paper, government money market funds, U.S. government and government agency obligations, time deposits with major international banks and financial institutions, high-quality corporate bonds, foreign government obligations and asset-backed securities. Our long-term investments in debt securities are placed in high-quality corporate bonds, asset-backed securities, U.S. government and government agency obligations, and foreign government obligations.

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 30 days or less, and we continually monitor this exposure and the creditworthiness of the counterparties. We may require collateral to limit the exposure to loss including letters of credit, prepayments and surety bonds, as well as master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due to us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also permit us to post letters of credit as collateral, such as transactions administered through the New York Mercantile Exchange.

The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were in a liability position at ~~March 31,~~June 30, 2022 and December 31, 2021 was ~~$212~~$326 million and $281 million, respectively. For these instruments, collateral posted at June 30, 2022 was $6 million and no collateral was posted at ~~March 31, 2022 or~~ December 31, 2021. If our credit rating had been downgraded below investment grade at ~~March 31,~~June 30, 2022, we would have been required to post ~~$163~~

$238 million 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 fair value hierarchy.

The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022, nor during the year ended December 31, 2021.


21			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair value on a recurring basis includes 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.

•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										Millions of Dollars
		March 31, 2022					December 31, 2021					June 30, 2022					December 31, 2021
		Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total		Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets	Assets										Assets
Investment in Cenovus Energy	Investment in Cenovus Energy	$	—	—	—	—	1,117	—	—	1,117	Investment in Cenovus Energy	$	—	—	—	—	1,117	—	—	1,117
Investments in debt securities	Investments in debt securities	10		462	—	472	2	477	—	479	Investments in debt securities	162		1,048	—	1,210	2	477	—	479
Commodity derivatives	Commodity derivatives	928		671	26	1,625	562	619	62	1,243	Commodity derivatives	957		1,037	58	2,052	562	619	62	1,243
Total assets	Total assets	$	938	1,133	26	2,097	1,681	1,096	62	2,839	Total assets	$	1,119	2,085	58	3,262	1,681	1,096	62	2,839

Liabilities	Liabilities										Liabilities
Commodity derivatives	Commodity derivatives	$	949	528	140	1,617	593	543	87	1,223	Commodity derivatives	$	1,004	867	185	2,056	593	543	87	1,223
Total liabilities	Total liabilities	$	949	528	140	1,617	593	543	87	1,223	Total liabilities	$	1,004	867	185	2,056	593	543	87	1,223


			ConocoPhillips 2022 Q1Q2 10-Q			22


Notes to Consolidated Financial Statements			Table of Contents

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									Millions of Dollars
					Amounts Subject to Right of Setoff									Amounts Subject to Right of Setoff
		Gross Amounts Recognized		Amounts Not Subject to Right of Setoff	Gross Amounts	Gross Amounts Offset	Net Amounts Presented	Cash Collateral	Net Amounts		Gross Amounts Recognized		Amounts Not Subject to Right of Setoff	Gross Amounts	Gross Amounts Offset	Net Amounts Presented	Cash Collateral	Net Amounts
March 31, 2022
June 30, 2022										June 30, 2022
Assets	Assets	$	1,625	17	1,608	1,095	513	—	513	Assets	$	2,052	27	2,025	1,302	723	—	723
Liabilities	Liabilities	1,617		8	1,609	1,095	514	44	470	Liabilities	2,056		16	2,040	1,302	738	48	690

December 31, 2021	December 31, 2021									December 31, 2021
Assets	Assets	$	1,243	85	1,158	650	508	—	508	Assets	$	1,243	85	1,158	650	508	—	508
Liabilities	Liabilities	1,223		82	1,141	650	491	36	455	Liabilities	1,223		82	1,141	650	491	36	455

At ~~March 31,~~June 30, 2022 and December 31, 2021, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.

Reported Fair Values of Financial Instruments

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

•Cash and cash equivalents and short-term investments: The carrying amount reported on the balance sheet approximates fair value. For those investments classified as available for sale debt securities, the carrying amount reported on the balance sheet is fair value.

•Accounts and notes receivable (including long-term and related parties): The carrying amount reported on the balance sheet approximates fair value. The valuation technique and methods used to estimate the fair value of the current portion of fixed-rate related party loans is consistent with Loans and advances— related parties.

•Investment in Cenovus Energy: See Note 5.for a discussion of the carrying value and fair value of our investment in CVE common shares.

•Investments in debt securities classified as available for sale: The fair value of investments in debt securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The fair value of investments in debt securities categorized as Level 2 in the fair value hierarchy is measured using pricing provided by brokers or pricing service companies that are corroborated with market data. See Note 10.

•Loans and advances—related parties: The carrying amount of floating-rate loans approximates fair value. The fair value of fixed-rate loan activity is measured using market observable data and is categorized as Level 2 in the fair value hierarchy. See Note 4.

•Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts payable and floating-rate debt reported on the balance sheet approximates fair value.

•Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in the fair value hierarchy.

•Commercial paper: The carrying amount of our commercial paper instruments approximates fair value and is reported on the balance sheet as short-term debt.


23			ConocoPhillips 2022 Q1Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

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						Millions of Dollars
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
		March 31 2022		December 31 2021	March 31 2022	December 31 2021		June 30 2022		December 31 2021	June 30 2022	December 31 2021
Financial assets	Financial assets						Financial assets
Investment in CVE common shares	Investment in CVE common shares	$	—	1,117	—	1,117	Investment in CVE common shares	$	—	1,117	—	1,117
Commodity derivatives	Commodity derivatives	530		593	530	593	Commodity derivatives	750		593	750	593
Investments in debt securities	Investments in debt securities	472		479	472	479	Investments in debt securities	1,210		479	1,210	479
Loans and advances—related parties	Loans and advances—related parties	59		114	59	114	Loans and advances—related parties	59		114	59	114
Financial liabilities	Financial liabilities						Financial liabilities
Total debt, excluding finance leases	Total debt, excluding finance leases	17,438		18,673	20,150	22,451	Total debt, excluding finance leases	15,687		18,673	16,547	22,451
Commodity derivatives	Commodity derivatives	478		537	478	537	Commodity derivatives	706		537	706	537

Note 12—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the equity section of our consolidated balance sheet includes:

Millions of Dollars

Defined Benefit
Plans
Net Unrealized
Gain (Loss) on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2021 $ (31) — (4,919) (4,950)
Other comprehensive income (loss) 4 (3) 141 142
March 31, 2022 $ (27) (3) (4,778) (4,808)


	Millions of Dollars
	Defined Benefit Plans		Net Unrealized Loss on Securities	Foreign Currency Translation	Accumulated Other Comprehensive Loss
December 31, 2021	$	(31)	—	(4,919)	(4,950)
Other comprehensive loss	(49)		(7)	(307)	(363)
June 30, 2022	$	(80)	(7)	(5,226)	(5,313)

The following table summarizes reclassifications out of accumulated other comprehensive loss and into net income (loss):

Millions of Dollars

Three Months Ended
March 31

2022 2021
Defined benefit plans $ 4 12


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2022		2021	2022	2021
Defined benefit plans	$	12	42	16	54

The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $2$3 million and $3$11 million for the three-month periods ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, respectively, and $5 million and $15 million for the six-month periods ended

June 30, 2022 and June 30, 2021, respectively. See Note 14.


			ConocoPhillips 2022 Q1Q2 10-Q			24


Notes to Consolidated Financial Statements			Table of Contents

Note 13—Cash Flow Information


		Millions of Dollars				Millions of Dollars
		Three Months Ended March 31				Six Months Ended June 30
Cash Payments	Cash Payments	2022		2021	Cash Payments	2022		2021
Interest	Interest	$	287	233	Interest	$	486	464
Income taxes	Income taxes	1,640		53	Income taxes	3,942		107

Net Sales (Purchases) of Investments	Net Sales (Purchases) of Investments				Net Sales (Purchases) of Investments
Short-term investments purchased	Short-term investments purchased	$	(521)	(3,432)	Short-term investments purchased	$	(1,253)	(5,439)
Short-term investments sold	Short-term investments sold	306		2,966	Short-term investments sold	613		6,842
Long-term investments purchased	Long-term investments purchased	(66)		(60)	Long-term investments purchased	(510)		(149)
Long-term investments sold	Long-term investments sold	18		27	Long-term investments sold	46		48
		$	(263)	(499)		$	(1,104)	1,302

In the first quarter of 2021, we acquired Concho in an all-stock ~~transaction~~transaction for $13.1 billion. In connection with this transaction, we acquired cash of $382 million, which is included in "Cash Flows From Investing Activities" on our consolidated statement of cash flows.

Note 14—Employee Benefit Plans

Pension and Postretirement Plans


		Millions of Dollars								Millions of Dollars
		Pension Benefits					Other Benefits			Pension Benefits					Other Benefits
		2022			2021		2022	2021		2022			2021		2022	2021
		U.S.		Int'l.	U.S.	Int'l.				U.S.		Int'l.	U.S.	Int'l.
Components of Net Periodic Benefit Cost	Components of Net Periodic Benefit Cost								Components of Net Periodic Benefit Cost
Three Months Ended March 31
Three Months Ended June 30									Three Months Ended June 30
Service cost									Service cost	$	16	13	18	16	1	1
Interest cost									Interest cost	12		21	15	20	1	1
Expected return on plan assets									Expected return on plan assets	(13)		(34)	(20)	(30)	—	—
Amortization of prior service credit									Amortization of prior service credit	—		—	—	—	(10)	(10)
Recognized net actuarial loss									Recognized net actuarial loss	5		2	12	8	—	1
Settlements									Settlements	18		—	42	—	—	—
Net periodic benefit cost									Net periodic benefit cost	$	38	2	67	14	(8)	(7)

Six Months Ended June 30									Six Months Ended June 30
Service cost	Service cost	$	16	13	21	15	—	—	Service cost	$	32	26	39	31	1	1
Interest cost	Interest cost	12		21	13	20	1	1	Interest cost	24		42	28	40	2	2
Expected return on plan assets	Expected return on plan assets	(13)		(34)	(24)	(30)	—	—	Expected return on plan assets	(26)		(68)	(44)	(60)	—	—
Amortization of prior service credit	Amortization of prior service credit	—		—	—	—	(10)	(9)	Amortization of prior service credit	—		—	—	—	(20)	(19)
Recognized net actuarial loss	Recognized net actuarial loss	6		2	15	8	—	—	Recognized net actuarial loss	11		4	27	16	—	1
Settlements	Settlements	4		—	2	—	—	—	Settlements	22		—	44	—	—	—
Curtailments	Curtailments	—		—	12	—	—	—	Curtailments	—		—	12	—	—	—
Special Termination Benefits	Special Termination Benefits	—		—	9	—	—	—	Special Termination Benefits	—		—	9	—	—	—
Net periodic benefit cost	Net periodic benefit cost	$	25	2	48	13	(9)	(8)	Net periodic benefit cost	$	63	4	115	27	(17)	(15)


25			ConocoPhillips 2022 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

The components of net periodic benefit cost, other than the service cost component, are included in the "Other expenses" line of our consolidated income statement.

During the first ~~three months~~six months of 2022, we contributed ~~$24~~$44 million to our domestic benefit plans and ~~$72~~$77 million to our international benefit plans. We expect our total contributions in 2022 to be approximately ~~$90~~$95 million to our domestic qualified and nonqualified pension and postretirement benefit plans and ~~$95~~$90 million to our international qualified and nonqualified pension and postretirement benefit plans.

During the three-month period ended June 30, 2022, 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. nonqualified supplemental retirement plan. As a result, we recognized a proportionate share of prior actuarial losses from other comprehensive income as pension settlement expense of $18 million. In conjunction with the recognition 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. nonqualified supplemental retirement plan were remeasured at June 30, 2022. At the measurement date, the net pension liability increased by $82 million, primarily a result of lower than premised return on assets, partially offset by an increase in the discount rate, resulting in a corresponding decrease to other comprehensive income.


25			~~ConocoPhillips 2022 Q1 10-Q~~

The relevant discount rates are summarized in the following table:


	June 30 2022		December 31 2021


Relevant discount rates
U.S. qualified pension plan	4.85	%	2.85
U.S. nonqualified pension plan	4.70		2.50


~~Notes to Consolidated Financial Statements~~			~~Table of Contents~~

Note 15—Related Party Transactions

Our related parties primarily include equity method investments and certain trusts for the benefit of employees.


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30					Six Months Ended June 30
Significant Transactions with Equity Affiliates	Significant Transactions with Equity Affiliates	2022		2021			Significant Transactions with Equity Affiliates	2022		2021		2022	2021
Operating revenues and other income	Operating revenues and other income	$	22	17			Operating revenues and other income	$	21	24		43	40

Purchases							Purchases	—		3		—	3
Operating expenses and selling, general and administrative expenses	Operating expenses and selling, general and administrative expenses	46		26			Operating expenses and selling, general and administrative expenses	44		63		90	89
Net interest (income) expense*	Net interest (income) expense*	$	—	(1)			Net interest (income) expense*	$	—	—		(1)	(1)

*We paid interest to, or received interest from, various affiliates. See Note 4 for information related to loans to equity affiliates.


			ConocoPhillips 2022 Q2 10-Q			26


Notes to Consolidated Financial Statements			Table of Contents

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			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021
Revenue from contracts with customers	Revenue from contracts with customers	$	14,506	7,161			Revenue from contracts with customers	$	16,728	7,753	31,234	14,914
Revenue from contracts outside the scope of ASC Topic 606	Revenue from contracts outside the scope of ASC Topic 606						Revenue from contracts outside the scope of ASC Topic 606
Physical contracts meeting the definition of a derivative	Physical contracts meeting the definition of a derivative	3,140		2,974			Physical contracts meeting the definition of a derivative	4,411		1,754	7,551	4,728
Financial derivative contracts	Financial derivative contracts	116		(309)			Financial derivative contracts	22		49	138	(260)
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues	$	17,762	9,826			Consolidated sales and other operating revenues	$	21,161	9,556	38,923	19,382

Revenues from contracts outside the scope of ASC Topic 606 relate primarily to physical gas contracts at market prices which qualify as derivatives accounted for under ASC Topic 815, “Derivatives and Hedging,” and for which we have not elected NPNS. There is no significant difference in contractual terms or the policy for recognition of revenue from these contracts and those within the scope of ASC Topic 606. The following disaggregation of revenues is provided in conjunction with Note 17—Segment Disclosures and Related Information:


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021
Revenue from Outside the Scope of ASC Topic 606 by Segment	Revenue from Outside the Scope of ASC Topic 606 by Segment						Revenue from Outside the Scope of ASC Topic 606 by Segment
Lower 48	Lower 48	$	2,444	2,466			Lower 48	$	3,483	1,345	5,927	3,811
Canada	Canada	560		303			Canada	807		207	1,367	510
Europe, Middle East and North Africa	Europe, Middle East and North Africa	136		205			Europe, Middle East and North Africa	121		202	257	407
Physical contracts meeting the definition of a derivative	Physical contracts meeting the definition of a derivative	$	3,140	2,974			Physical contracts meeting the definition of a derivative	$	4,411	1,754	7,551	4,728


			~~ConocoPhillips 2022 Q1 10-Q~~			26


~~Notes to Consolidated Financial Statements~~			~~Table of Contents~~


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021
Revenue from Outside the Scope of ASC Topic 606 by Product	Revenue from Outside the Scope of ASC Topic 606 by Product						Revenue from Outside the Scope of ASC Topic 606 by Product
Crude oil	Crude oil	$	219	124			Crude oil	$	64	178	283	302
Natural gas	Natural gas	2,773		2,727			Natural gas	4,254		1,504	7,027	4,231
Other	Other	148		123			Other	93		72	241	195
Physical contracts meeting the definition of a derivative	Physical contracts meeting the definition of a derivative	$	3,140	2,974			Physical contracts meeting the definition of a derivative	$	4,411	1,754	7,551	4,728

Practical Expedients

Typically, our commodity sales contracts are less than 12 months in duration; however, in certain specific cases they may extend longer, which may be out to the end of field life. We have long-term commodity sales contracts which use prevailing market prices at the time of delivery, and under these contracts, the market-based variable consideration for each performance obligation (i.e., delivery of commodity) is allocated to each wholly unsatisfied performance obligation within the contract. Accordingly, we have applied the practical expedient allowed in ASC Topic 606 and do not disclose the aggregate amount of the transaction price allocated to performance obligations or when we expect to recognize revenues that are unsatisfied (or partially unsatisfied) as of the end of the reporting period.


27			ConocoPhillips 2022 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Receivables and Contract Liabilities

Receivables from Contracts with Customers

At ~~March 31,~~June 30, 2022, the “Accounts and notes receivable” line on our consolidated balance sheet includes trade receivables of ~~$6,279~~$6,554 million compared with $5,268 million at December 31, 2021, and includes both contracts with customers within the scope of ASC Topic 606 and those that are outside the scope of ASC Topic 606. We typically receive payment within 30 days or less (depending on the terms of the invoice) once delivery is made. Revenues that are outside the scope of ASC Topic 606 relate primarily to physical gas sales contracts at market prices for which we do not elect NPNS and are therefore accounted for as a derivative under ASC Topic 815. There is little distinction in the nature of the customer or credit quality of trade receivables associated with gas sold under contracts for which NPNS has not been elected compared to trade receivables where NPNS has been elected.

Contract Liabilities from Contracts with Customers

We have entered into ~~contractual arrangements where~~certain agreements under which we license our proprietary technology, including the Optimized Cascade® process technology, to customers ~~related~~ to maximize the ~~optimization process for operating~~efficiency of LNG plants. ~~The~~These agreements typically provide for ~~negotiated~~milestone payments to be made ~~at stated milestones.~~during and after the construction phases of the LNG plant. The payments are not directly related to our performance obligations under the contract and are recorded as deferred revenue to be recognized ~~as revenue~~ when the customer ~~can utilize and~~is able to benefit from their right to use the ~~license. Payments are received in installments over the construction period.~~applicable licensed technology.


	Millions of Dollars
Contract Liabilities
At December 31, 2021	$	50
Contractual payments received	2625
Revenue recognized	(56)
At ~~March 31,~~June 30, 2022	$	2019

Amounts Recognized in the Consolidated Balance Sheet at ~~March 31,~~June 30, 2022
~~Current liabilities~~	$	1
Noncurrent liabilities	$	19
	$		20

~~During~~For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022, we recognized revenue of $56 million in the "Sales and other operating revenues" line on our consolidated income statement. No revenue was recognized during the three-month period ended June 30, 2022. We expect to recognize the ~~noncurrent~~ contract liabilities as of ~~March 31,~~June 30, 2022, as revenue during 2026.


27			~~ConocoPhillips 2022 Q1 10-Q~~


~~Notes to Consolidated Financial Statements~~			~~Table of Contents~~

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 6 operating segments, which are primarily defined by geographic region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International.

Corporate and Other represents income and costs not directly associated with an operating segment, such as most interest 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). Intersegment sales are at prices that approximate market.

~~Analysis of Results by Operating Segment~~

Millions of Dollars

Three Months Ended
March 31
2022 2021
Sales and Other Operating Revenues
Alaska $ 1,918 1,133
Lower 48 11,557 6,513
Intersegment eliminations (7) (2)
Lower 48 11,550 6,511
Canada 1,520 867
Intersegment eliminations (651) (305)
Canada 869 562
Europe, Middle East and North Africa 2,589 978
Asia Pacific 750 577
Other International — 1
Corporate and Other 86 64
Consolidated sales and other operating revenues $ 17,762 9,826
Sales and Other Operating Revenues by Geographic Location(1)
United States $ 13,553 7,707
Canada 869 562
China 273 155
Indonesia 159 196
Libya 431 230
Malaysia 318 226
Norway 932 412
United Kingdom 1,226 336
Other foreign countries 1 2
Worldwide consolidated $ 17,762 9,826
Sales and Other Operating Revenues by Product
Crude oil $ 9,870 4,495
Natural gas 5,998 4,511
Natural gas liquids 879 237
Other(2)
1,015 583
Consolidated sales and other operating revenues by product $ 17,762 9,826

~~(1)Sales and other operating revenues are attributable to countries based on the location of the selling operation.~~

~~(2)Includes LNG and bitumen.~~


			ConocoPhillips 2022 Q1Q2 10-Q			28


Notes to Consolidated Financial Statements			Table of Contents

Millions of Dollars
Three Months Ended
March 31
2022 2021
Net Income (Loss)
Alaska $ 584 159
Lower 48 2,790 468
Canada 291 10
Europe, Middle East and North Africa 412 153
Asia Pacific 1,136 317
Other International — (4)
Corporate and Other 546 (121)
Consolidated net income (loss) $ 5,759 982
Analysis of Results by Operating Segment


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2022		2021	2022	2021
Sales and Other Operating Revenues


Alaska	$	2,349	1,418	4,267	2,551
Lower 48	14,458		5,889	26,015	12,402
Intersegment eliminations	(6)		(2)	(13)	(4)
Lower 48	14,452		5,887	26,002	12,398
Canada	1,794		802	3,314	1,669
Intersegment eliminations	(726)		(352)	(1,377)	(657)
Canada	1,068		450	1,937	1,012
Europe, Middle East and North Africa	2,652		1,165	5,241	2,143
Asia Pacific	638		630	1,388	1,207
Other International	—		2	—	3
Corporate and Other	2		4	88	68
Consolidated sales and other operating revenues	$	21,161	9,556	38,923	19,382

Sales and Other Operating Revenues by Geographic Location(1)
United States	$	16,802	7,308	30,355	15,015

Canada	1,069		450	1,938	1,012
China	301		171	574	326
Indonesia	—		207	159	403
Libya	351		290	782	520
Malaysia	336		252	654	478
Norway	737		618	1,669	1,030
United Kingdom	1,564		257	2,790	593
Other foreign countries	1		3	2	5
Worldwide consolidated	$	21,161	9,556	38,923	19,382

Sales and Other Operating Revenues by Product
Crude oil	$	11,494	5,797	21,364	10,292
Natural gas	7,267		2,812	13,265	7,323
Natural gas liquids	1,042		325	1,921	562
Other(2)	1,358		622	2,373	1,205
Consolidated sales and other operating revenues by product	$	21,161	9,556	38,923	19,382

Millions of Dollars
March 31
2022 December 31
2021
Total Assets
Alaska $ 14,708 14,812
Lower 48 42,994 41,699
Canada 7,731 7,439
Europe, Middle East and North Africa 9,179 9,125
Asia Pacific 10,472 9,840
Other International 2 1
Corporate and Other 8,222 7,745
Consolidated total assets $ 93,308 90,661
(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 June 30			Six Months Ended June 30
	2022		2021	2022	2021
Net Income (Loss)
Alaska	$	687	371	1,271	530
Lower 48	3,581		1,175	6,371	1,643
Canada	316		102	607	112
Europe, Middle East and North Africa	385		207	797	360
Asia Pacific	525		175	1,661	492
Other International	—		(5)	—	(9)
Corporate and Other	(349)		66	197	(55)
Consolidated net income	$	5,145	2,091	10,904	3,073


29			ConocoPhillips 2022 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents


	Millions of Dollars
	June 30 2022		December 31 2021
Total Assets
Alaska	$	14,835	14,812
Lower 48	43,478		41,699
Canada	7,358		7,439
Europe, Middle East and North Africa	8,406		9,125
Asia Pacific	9,997		9,840
Other International	4		1
Corporate and Other	9,615		7,745
Consolidated total assets	$	93,693	90,661

Note 18—Income Taxes

Our effective tax rate for the three-month periods ended ~~March 31,~~June 30, 2022 and 2021 was ~~27.1~~32.8 percent and ~~42.7~~32.1 percent, ~~respectively. The change in~~respectively, and our effective tax rate for the six-month periods ended June 30, 2022 and 2021 was 29.9 percent and 35.9 percent, respectively. Our effective tax rate for the first ~~quarter~~six-months of 2022 ~~is primarily due to~~was impacted by the shift of income among our taxing jurisdictions, the release of tax reserves related to the closing of an IRS audit, a ~~reduction~~change to our valuation allowance, and the impact of the interest deduction related to our debt exchange, as described below.

In the first quarter of 2022, the IRS closed the 2017 audit of our U.S. federal income tax return. As a result, we recognized federal and state tax benefits totaling $515 million relating to the recovery of outside tax basis previously offset by a full reserve. ~~In addition,~~

During the second quarter of 2022, Norway enacted changes to the Petroleum Tax System. As a result of the enactment, a valuation allowance of $58 million was recorded during the quarter to reflect changes to our ability to realize certain deferred tax assets under the new law.

For the three- and six-month periods of 2022, our valuation allowance ~~decreased~~increased by ~~$53~~$58 million and $5 million, respectively, compared to a decrease of ~~$65~~$87 million and $151 million for the same ~~period~~periods of 2021. The increase in the three- and six-month periods of 2022 relate to the Norway tax law change todescribed above. In addition, our ~~U.S.~~six-month periods of 2022 and of 2021 include impacts from changes in our valuation allowance ~~for both periods relates primarily~~related to the fair value measurement of our CVE common shares and our expectation of the tax impact related to incremental capital gains and losses.

Our 2022 and 2021 effective tax rates were adversely impacted by $37 million and $75 million, respectively, due to incremental interest deductions from debt exchanges in both periods offsetting U.S. foreign source revenue that would otherwise have been offset by foreign tax credits. See Note 6.

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 is not estimable but could be significant when compared with our total unrecognized tax benefits.


29			ConocoPhillips 2022 Q1Q2 10-Q			30


Management’s Discussion and Analysis			Table of Contents

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,”~~“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 5153.

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

Business Environment and Executive Overview

ConocoPhillips is the world’s largest independent E&P company with operations and activities in 13 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 ~~March 31,~~June 30, 2022, we employed approximately 9,400 people worldwide and had total assets of ~~$93~~$94 billion.

Overview

Commodity prices incontinued to increase during the ~~first~~second quarter of 2022, ~~increased to levels not seen since 2014,~~ in part due to the continued impacts associated with the Russian invasion ~~and conflict in~~of Ukraine and sanctions levied against Russia as a result of the conflict. We anticipate that prices will continue to be cyclical and volatile, and our view is that a successful business strategy in the E&P industry must be resilient in lower price environments, while also retaining full upside exposure during periods of higher prices. As such, we are unhedged, remain highly disciplined in our investment decisions and continue to monitor market fundamentals including the impacts associated with the conflict in Ukraine, OPEC plus supply updates, global demand for our products, oil and gas inventory levels, inflation, supply chain disruptions and the fluctuating global COVID-19 impacts.

The ~~energy~~ macro-environment, including the energy transition, also continues to evolve. We believe ConocoPhillips ~~will play~~is playing a valued role in the energy transition. We are guided by our triple mandate that simultaneously calls for us to reliably and responsibly deliver oil and gas production to meet energy transition pathway demand, deliver competitive returns on and of capital, and do so with a resilient and sustainable portfolio enabling us to achieve our net-zero operating emissions ambition. Our triple mandate is supported by financial principles and capital allocation priorities designed to 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 demonstrating ESG leadership, all of which are in service to generating competitive financial returns through the price cycles.

In the ~~first~~second quarter, total company production was ~~1,747~~1,692 MBOED, resulting in cash provided by operating activities of ~~$5.1~~$7.9 billion, with ~~$0.9~~$1 billion returned to shareholders through our ordinary dividend and a VROC and ~~$1.4~~$2.3 billion through share repurchases. We ended the quarter with cash, cash equivalents and short-term investments totaling ~~$7.1~~$8.2 billion.

In May 2022, we announced an increase to our 2022 expected distributions through our three-tier return of capital framework to $10 billion for the year. Additionally, in August we increased our targeted distributions further, to a new total of ~~$2 billion, now totaling $10~~$15 billion for the year. This framework includes our ordinary dividend, share repurchases and the VROC tier that was introduced last December. In ~~May,~~August, we declared our third quarter ordinary dividend of ~~46 cents~~$0.46 per share and a ~~third~~fourth quarter VROC payment of ~~70 cents~~$1.40 per share.

During the first quarter of 2022, we completed our monetization program for the Cenovus Energy (CVE) common shares that we obtained as partial consideration in a 2017 asset divestiture, selling our remaining 91 million shares and recognizing proceeds of $1.4 billion. Since we began selling shares in May 2021, we have generated total proceeds of $2.5 billion. Proceeds from the disposition of CVE shares were deployed towards share repurchases. ~~See Note~~ 5.


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Management’s Discussion and Analysis			Table of Contents

Demonstrating our commitment to enhance balance sheet strength, in May 2022, we retired $1,250 million principal amount of our 4.95 percent Notes due 2026 and $500 million principal amount of floating rate notes. Both retirements were sourced from available cash. Additionally, in the first quarter we ~~demonstrated our commitment to enhancing balance sheet strength by executing~~executed a debt refinancing comprised of concurrent transactions including new debt issuances, a cash tender offer and debt exchange offers. ~~Part of the cash consideration in the cash tender and debt exchange offers was satisfied with current cash balances.~~ In aggregate, ~~the~~these transactions reduced the company's total debt by ~~$1.2~~$3 billion. ~~The refinancing facilitates~~These activities facilitate our ability to achieve our previously announced $5 billion debt reduction target by the end of 2026, while also reducing the company's annual cash interest expense. See Note 6.

In ~~April~~ 2022, we ~~provided formal notice~~have taken several steps to ~~holders of~~expand our ~~4.95% Notes due 2026~~global LNG business. In the first quarter, we increased our equity share in Asia Pacific LNG (APLNG). In the second quarter, we signed an agreement for a new joint venture with ~~principal of $1,250 million~~QatarEnergy that ~~we would retire this debt in full per the provisions~~will participate with a 12.5 percent interest in the ~~bond indenture,~~North Field East LNG project. Subject to regulatory approvals, we will hold a 25 percent interest in this joint venture. Domestically, in July 2022, we announced a Heads of Agreement (HOA) with ~~settlement scheduled for May 2022. Retirement~~Sempra to potentially acquire a 30 percent direct equity holding in Port Arthur Liquefaction Holdings, LLC and an LNG offtake equivalent to approximately 5 million tonnes per annum from the Port Arthur LNG project. The HOA is a preliminary, non-binding arrangement, with development of ~~this bond will be sourced from cash~~the Port Arthur LNG project subject to concluding definitive agreements and ~~further accelerates progress towards our debt reduction target.~~resolving a number of risks and uncertainties, including, among others, signing engineering and construction contracts, obtaining financing and reaching a final investment decision between the parties.

As part of our ongoing portfolio high-grading and optimization efforts, in ~~the first quarter of~~April 2022, we closed two transactions in our Asia Pacific segment, further strengthening our diverse, global asset portfolio. This included exercising our preemption right to purchase an additional 10 percent interest in Australia Pacific LNG Pty Ltd (APLNG) for approximately $1.4 billion after customary adjustments, andcompleted the sale of ~~our interests~~certain noncore assets in ~~Indonesia~~the Lower 48 segment for ~~approximately~~

~~$0.7 billion~~$370 million after customary adjustments. In ~~addition to these transactions, in the first quarter~~July 2022, we entered into ~~a divestiture agreement~~agreements to sell our ~~interest~~interests in additional noncore assets ~~within our~~in the Lower 48 segment for ~~$440~~$265 million, before customary ~~adjustments, which closed~~adjustments. These transactions are expected to close in ~~April~~the third quarter of 2022. ~~For more information on APLNG,~~ ~~see Note~~ 4~~and for more information on acquisition and disposition activity,~~ ~~see~~See Note 3.

In 2021, we announced a target to dispose of $4 to $5 billion in assets by year-end 2023. Through the first quarter of 2022, we have disposed of $1.7 billion in assets, generating approximately $1.0 billion in disposition proceeds. We received $0.8 billion in proceeds in the current period primarily from the sale of our Indonesia assets. The proceeds from these transactions will be used in accordance with the company’s priorities, including returns of capital to shareholders and reduction of total debt.

~~In February 2022, we reaffirmed our commitment to ESG leadership and excellence. Our Paris-aligned climate-risk 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 gross operated and net equity operational GHG emissions intensity by 40 to 50 percent from 2016 levels by 2030;~~

•~~Endorsed the World Bank Zero Routine Flaring Initiative, with the aim to get there by 2025;~~

•~~10 percent reduction target for methane emissions intensity by 2025 from a 2019 baseline, in addition to the 65 percent reductions we have made since 2015;~~

•~~Adding continuous methane detection devices to our operations, with an initial focus on the larger Lower 48 facilities;~~

•Allocating capital to our dedicated low carbon technology organization responsible for identifying and prioritizing global emissions reduction initiatives and opportunities associated with the energy transition including CCUS and hydrogen; and

•~~ESG performance factoring into executive and employee compensation programs.~~

Operationally, we remain focused on safely executing the business. Production was ~~1,747~~1,692 MBOED in the ~~first~~second quarter of 2022, an increase of ~~220~~104 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions and the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, ~~and 2021 Winter Storm Uri impacts, first-quarter~~second-quarter 2022 production decreased by 3669 MBOED or 24 percent from the same period a year ago. ~~This decrease was primarily due to downtime and seasonality impacts as new production~~Organic growth from ~~the~~ Lower 48 and other development programs more than offset ~~decline.~~decline; however, production was lower overall primarily due to planned and unplanned downtime.

We re-invested ~~$3.2~~$2 billion into the business in the form of capital expenditures and investments during the ~~first~~second quarter of ~~2022. Excluding our purchase of an additional 10 percent interest in APLNG,~~2022, with over half of the ~~remaining capital~~ expenditures ~~was~~ focused on flexible, short-cycle unconventional plays in the Lower 48 segment, where our production ~~is liquids-weighted and~~ has access to both domestic and export markets.

In further support of our commitment to ESG leadership and excellence, in July 2022, we announced that ConocoPhillips joined the Oil and Gas Methane Partnership (OGMP) 2.0 initiative. The initiative's mission is to improve industry transparency in methane emissions reporting and encourage progress in reducing those emissions. We believe that applying the rigorous OGMP 2.0 reporting standards across our global assets will be a vital step towards meeting our Paris-aligned climate-risk commitments, including our net-zero ambition for operational emissions by 2050, and will allow us to credibly demonstrate how we are delivering against our methane improvement objectives and targets.


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Management’s Discussion and Analysis			Table of Contents

Business Environment

Commodity prices are the most significant factor impacting our profitability and related ~~reinvestment~~returns on and of ~~operating cash flows into~~capital to our ~~business.~~shareholders. 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 ~~$101.40~~$113.78 per barrel in the ~~first~~second quarter of 2022, an increase of 6765 percent compared with ~~$60.90~~$68.83 per barrel in the ~~first~~second quarter of 2021. WTI at Cushing crude oil prices averaged ~~$94.29~~$108.41 per barrel in the ~~first~~second quarter of 2022, an increase of 6364 percent compared with ~~$57.84~~$66.07 per barrel in the ~~first~~second quarter of 2021. Oil prices increased as a result of the ongoing global economic recovery following ~~2020’s COVID~~COVID-related impacts as well as supply ~~disruptions caused by~~constraints due to Russia's invasion of Ukraine, OPEC plus adherence to agreed production quotas, other disruptions and supply ~~restraint and continued capital discipline by U.S. E&P companies.~~chain bottlenecks limiting growth.

Henry Hub natural gas prices averaged ~~$4.96~~$7.17 per MMBTU in the ~~first~~second quarter of 2022, an increase of 83153 percent compared with ~~$2.71~~$2.83 per MMBTU in the ~~first~~second quarter of 2021. Henry Hub prices have increased asdue to low inventories, healthy domestic demand and ~~record levels of feedgas demand for LNG~~strong exports ~~to Europe~~via pipelines and ~~Asia offset modest growth in production.~~LNG.

Our realized bitumen price averaged ~~$65.86~~$75.42 per barrel in the ~~first~~second quarter of 2022, an increase of ~~114~~101 percent compared with ~~$30.78~~$37.60 per barrel in the ~~first~~second quarter of 2021. The increase in the ~~first~~second quarter of 2022 was driven by higher blend ~~price~~prices for Surmont sales, largely attributed to a strengthening of WTI price. We continue to optimize bitumen price realizations through the utilization of downstream transportation solutions and implementation of alternate blend capability which results in lower diluent costs.

For the ~~first~~second quarter of 2022 our total average realized price increased to ~~$76.99~~$88.57 per BOE compared with ~~$45.36~~

$50.03 per BOE in the ~~first~~second quarter of 2021.


			~~ConocoPhillips 2022 Q1 10-Q~~			32


~~Management’s Discussion and Analysis~~			~~Table of Contents~~

~~Key Operating and Financial Summary~~

~~Significant items during the first quarter of 2022 and recent announcements included the following:~~

•~~Announced an increase in expected 2022 returns of capital to shareholders to a total of $10 billion, with the incremental $2 billion to be distributed through share repurchases and VROC tiers.~~

•~~Distributed $2.3 billion to shareholders through a three-tier return of capital framework, including $0.9 billion through the ordinary dividend and VROC and $1.4 billion through share repurchases.~~

•~~Generated cash provided by operating activities was $5.1 billion.~~

•Continued to integrate and optimize the recently acquired Permian assets while efficiently and safely executing company-wide capital programs, delivering record production of 1,747 MBOED in the quarter.

•~~Received 20-year production license extension in the Norway Greater Ekofisk Area from 2028 to 2048.~~

•~~Accelerated progress towards the company's debt reduction target while executing debt transactions that will result in lower annual cash interest expense.~~

•~~Closed the purchase of an additional 10 percent interest in APLNG for $1.4 billion in cash.~~

•~~Divested $1.4 billion of noncore assets during the quarter and an additional $0.4 billion in April.~~

•Completed monetization of the company's CVE common shares, generating proceeds of $1.4 billion during the quarter with funds applied to share repurchases, and $2.5 billion in total proceeds since May 2021.

•~~Published~~ ~~Plan for the Net-Zero Energy Transition~~ focused on meeting the company's Triple Mandate objectives: reliably and responsibly meeting energy transition pathway demand, delivering competitive returns on and of capital and achieving our net-zero operational emissions ambitions.

•~~Ended the quarter with cash and cash equivalents and restricted cash of $6.7 billion and short-term investments of $0.7 billion.~~

~~Outlook~~

~~Capital, Cost and Production~~

Second-quarter 2022 production is expected to be 1.67 to 1.73 MMBOED, reflecting the impact of seasonal turnarounds planned in Europe and Canada as well as weather impacts experienced during April in the Bakken. The company's full-year production is expected to be approximately 1.76 MMBOED, reflecting a net reduction of approximately 25 MBOED from acquisitions and dispositions closed as of May 5, 2022.

2022 operating capital guidance has been adjusted to $7.8 billion versus the prior guidance of $7.2 billion, reflecting higher partner-operated spend in Lower 48 and inflationary impacts. This guidance excludes $1.4 billion of capital associated with the closed acquisition of an additional 10 percent interest in APLNG.

~~Depreciation, Depletion and Amortization~~

~~Full-year guidance for DD&A has been decreased to $7.7 billion, reflecting the impact of revised production guidance.~~

~~All other guidance items remain unchanged.~~


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Management’s Discussion and Analysis			Table of Contents

Key Operating and Financial Summary

Significant items during the second quarter of 2022 and recent announcements included the following:

•Announced a $5 billion increase in expected 2022 returns of capital to shareholders to a total of $15 billion.

•Distributed $3.3 billion to shareholders through a three-tier framework, including $1.0 billion in cash through the ordinary dividend and VROC and $2.3 billion through share repurchases.

•Expanded global LNG portfolio through participation in QatarEnergy's North Field East LNG project and announced a non-binding Heads of Agreement with Sempra Infrastructure with opportunities to participate in large-scale LNG projects, an LNG offtake of approximately 5 million tonnes per annum and related carbon capture activities.

•As part of our ongoing commitment to ESG excellence and leadership, we joined the OGMP 2.0 initiative.

•Generated cash provided by operating activities of $7.9 billion.

•Delivered second-quarter production of 1,692 MBOED while successfully completing planned maintenance turnarounds.

•Continued progress toward the company's $5 billion debt reduction target through $1.8 billion of debt retirements during the quarter, now totaling $3 billion since announcing the target.

•Completed $0.4 billion of noncore asset sales during the quarter.

•Ended the quarter with cash, cash equivalents and restricted cash of $7.2 billion and short-term investments of $1.3 billion.

Outlook

Capital and Production

Third-quarter 2022 production is expected to be 1.70 to 1.76 MBOED, reflecting the impacts of seasonal turnarounds planned primarily in Alaska and the Asia Pacific region. Full-year production is expected to be approximately

1.74 MMBOED reflecting uncertainty in Libya and modest updates across the portfolio.

Guidance regarding capital is unchanged.

Depreciation, Depletion and Amortization

Full-year guidance for depreciation, depletion and amortization has decreased to $7.6 billion.


			ConocoPhillips 2022 Q2 10-Q			34


Results of Operations			Table of Contents

Results of Operations

Unless otherwise indicated, discussion of results for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, is based on a comparison with the corresponding period of 2021.

Consolidated Results

A summary of the company's net income (loss) by business segment follows:


		Millions of Dollars				Millions of Dollars
		Three Months Ended March 31,					Three Months Ended June 30					Six Months Ended June 30
		2022		2021					2022		2021		2022	2021
Alaska	Alaska	$	584	159				Alaska	$	687	371		1,271	530
Lower 48	Lower 48	2,790		468				Lower 48	3,581		1,175		6,371	1,643
Canada	Canada	291		10				Canada	316		102		607	112
Europe, Middle East and North Africa	Europe, Middle East and North Africa	412		153				Europe, Middle East and North Africa	385		207		797	360
Asia Pacific	Asia Pacific	1,136		317				Asia Pacific	525		175		1,661	492
Other International	Other International	—		(4)				Other International	—		(5)		—	(9)
Corporate and Other	Corporate and Other	546		(121)				Corporate and Other	(349)		66		197	(55)
Net income (loss)		$	5,759	$	982
Net income								Net income	$	5,145	2,091		10,904	3,073

Net income ~~(loss)~~ in the ~~first~~second quarter of 2022 increased ~~$4,777~~$3,054 million. ~~First~~Second quarter earnings were positively impacted by:

•Higher realized commodity prices.

•Higher sales volumes, primarily due to our Shell Permian acquisition, ~~and absence of the unplanned downtime associated with Winter Storm Uri.~~partly offset by assets divested. See Note 3.

•Higher equity in earnings of affiliates, primarily due to higher LNG sales prices.

•Gain on dispositions primarily due the divestiture of noncore assets in the Lower 48 segment and recognizing higher contingent payments related to prior dispositions in our Canada and Lower 48 segments.See Note 3.

Second quarter 2022 earnings were negatively impacted by:

•Higher production and operating expenses and taxes other than income taxes, primarily due to higher prices and production volumes.

•Higher income tax provision.

•Absence of mark to market gains associated with Cenovus Energy (CVE) shares. See Note 5.

Net income in the six-month period ended June 30, 2022, increased $7,831 million. In addition to the items mentioned above, earnings in the six-month period were positively impacted by:

•Previously unrecognized $515 million tax benefit related to the closing of an IRS ~~audit.~~audit in the first quarter.

See Note 18.

•Gain on dispositions primarily due to a $462 million after-tax gain related to the divestiture of our Indonesia ~~assets as well as recognizing higher contingent payments related to prior dispositions in our Canada and Lower 48 segments.~~assets. See Note 3.

•~~Higher equity in earnings of affiliates, primarily due to higher LNG sales prices.~~

•Absence of restructuring and transaction expenses of $243 million after-tax related to our Concho acquisition.

•Absence of realized losses on hedges of $233 million after-tax related to derivative positions acquired in our Concho acquisition. See Note 10.

•Lower DD&A expenses caused by lower rates driven by price-related reserve revisions due to higher commodity prices, partially offset by higher production volumes.

•After-tax gain of $62 million associated with refinancing transactions. See Note 6.

~~First quarter 2022 net income increases~~

In addition to the items mentioned above, earnings in the six-month period were ~~partly offset~~negatively impacted by:

•~~Higher production and operating expenses and taxes other than income taxes, primarily due to higher prices and sales volumes.~~

•Absence of a $194 million after-tax gain recognized in conjunction with our Australia-West ~~divestiture completed in 2020.~~divestiture. See Note 9.

See the “Segment Results” section for additional information.


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Results of Operations			Table of Contents

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 2022 increased ~~$7,936~~$11,605 million and

$19,541 million, respectively, mainly due to higher realized commodity prices and higher sales volumes.

Equity in earnings of affiliates for the three- and six-month periods of 2022 increased ~~$304~~$385 million and $689 million, respectively, primarily due to higher earnings driven by higher LNG and crude prices as well as higher sales volumes inclusive of the additional 10 percent interest in APLNG we acquired in the ~~quarter.~~first quarter of 2022. See Note 3.

Gain on dispositions in the ~~first~~second quarter of 2022 increased ~~$584 million primarily~~ due to a gain of $80 million for the sale of noncore assets in the Lower 48 segment. For the six-month period of 2022, we recognized a gain of $534 million from our Indonesia ~~divestiture~~divestiture. For both the three- and ~~from~~six-month periods of 2022, we recognized higher contingent payments associated with previous dispositions in our Canada and Lower 48 ~~segments.~~segments than the same periods of 2021. Offsetting the increase in gains in the six-month period of 2022 was the absence of a $200 million gain associated with our Australia-West divestiture recognized in the first quarter of 2021. See Note 3.

Other income for the three- and six-month periods of 2022 decreased $415 million and $507 million, respectively, primarily due to the absence of mark to market gains associated with our CVE common shares which were fully divested in the first quarter of 2022. See Note 5.

Purchased commodities for the three- and six-month periods of 2022 increased ~~$2,268~~$6,236 million and $8,504 million, respectively, primarily due to higher ~~crude~~gas and ~~gas~~crude prices and volumes.

Production and operating expenses for the three- and six-month periods of 2022 increased ~~$198~~$362 million ~~in line with~~and $560 million, respectively, primarily due to higher production volumes.

Selling, general and administrative expenses decreased ~~$124~~$145 million in the six-month period primarily due to the absence of transaction and restructuring expenses associated with our Concho acquisition in 2021.

DD&A for the ~~three-month period~~three- and six-month periods of 2022 decreased ~~$63~~$57 million and $120 million, respectively, mainly due to lower rates from positive price-related reserve revisions and ~~impact~~the absence of DD&A from disposed assets ~~held for sale~~ offset by higher overall production ~~volumes.~~volumes primarily associated with our Shell Permian acquisition.

Taxes other than income taxes for the three- and six-month periods of 2022 increased ~~$444~~$639 million and $1,083 million, respectively, caused by higher commodity prices and higher ~~sales~~production volumes.

Other expenses for the second quarter of 2022 increased $49 million primarily related to premiums paid to repurchase debt. For the six-month period of 2022, other expenses decreased ~~$160~~$111 million primarily related to a gain of $127 million associated with extinguishment of ~~debt.~~debt from the first quarter of 2022. See Note 6.

See Note 18—Income Taxes for information regarding our Income tax provision and effective tax rate.


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Results of Operations			Table of Contents

Summary Operating Statistics


		Three Months Ended March 31,		Three Months Ended June 30			Six Months Ended June 30
		2022	2021			2022	2021	2022	2021
Average Net Production	Average Net Production				Average Net Production
Crude oil (MBD)	Crude oil (MBD)				Crude oil (MBD)
Consolidated operations	Consolidated operations	903	804		Consolidated operations	857	836	880	820
Equity affiliates	Equity affiliates	12	14		Equity affiliates	14	13	13	13
Total crude oil	Total crude oil	915	818		Total crude oil	871	849	893	833

Natural gas liquids (MBD)	Natural gas liquids (MBD)				Natural gas liquids (MBD)
Consolidated operations	Consolidated operations	216	105		Consolidated operations	236	120	227	113
Equity affiliates	Equity affiliates	7	8		Equity affiliates	8	8	7	8
Total natural gas liquids	Total natural gas liquids	223	113		Total natural gas liquids	244	128	234	121

Bitumen (MBD)	Bitumen (MBD)	67	70		Bitumen (MBD)	59	68	63	69

Natural gas (MMCFD)	Natural gas (MMCFD)				Natural gas (MMCFD)
Consolidated operations	Consolidated operations	2,126	2,074		Consolidated operations	1,872	2,209	1,999	2,142
Equity affiliates	Equity affiliates	1,127	1,081		Equity affiliates	1,235	1,051	1,181	1,066
Total natural gas	Total natural gas	3,253	3,155		Total natural gas	3,107	3,260	3,180	3,208

Total Production (MBOED)	Total Production (MBOED)	1,747	1,527		Total Production (MBOED)	1,692	1,588	1,720	1,558


		Dollars Per Unit			Dollars Per Unit
Average Sales Prices	Average Sales Prices					Average Sales Prices
Crude oil (per bbl)	Crude oil (per bbl)					Crude oil (per bbl)
Consolidated operations	Consolidated operations	$	94.79	57.18		Consolidated operations	$	111.49	65.54	102.97	61.60
Equity affiliates	Equity affiliates	97.20		59.73		Equity affiliates	111.97		64.10	105.20	62.03
Total crude oil	Total crude oil	94.82		57.22		Total crude oil	111.50		65.51	103.00	61.60

Natural gas liquids (per bbl)	Natural gas liquids (per bbl)					Natural gas liquids (per bbl)
Consolidated operations	Consolidated operations	40.95		24.36		Consolidated operations	42.20		25.62	41.61	25.06
Equity affiliates	Equity affiliates	67.04		48.89		Equity affiliates	72.44		44.12	69.99	46.53
Total natural gas liquids	Total natural gas liquids	41.80		26.44		Total natural gas liquids	43.26		26.87	42.57	26.68

Bitumen (per bbl)	Bitumen (per bbl)	65.86		30.78		Bitumen (per bbl)	75.42		37.60	70.25	34.09

Natural gas (per MCF)	Natural gas (per MCF)					Natural gas (per MCF)
Consolidated operations	Consolidated operations	8.81		4.89		Consolidated operations	10.19		4.25	9.46	4.56
Equity affiliates	Equity affiliates	8.86		3.54		Equity affiliates	10.08		3.97	9.51	3.76
Total natural gas	Total natural gas	8.83		4.42		Total natural gas	10.15		4.16	9.48	4.29


		Millions of Dollars			Millions of Dollars
Exploration Expenses	Exploration Expenses					Exploration Expenses
General administrative, geological and geophysical, lease rental, and other		$	62	78
General administrative, geological and geophysical, lease rental and other						General administrative, geological and geophysical, lease rental and other	$	46	56	108	134
Leasehold impairment	Leasehold impairment	6		—		Leasehold impairment	10		1	16	1
Dry holes	Dry holes	1		6		Dry holes	87		—	88	6
		$	69	84			$	143	57	212	141


37			ConocoPhillips 2022 Q1Q2 10-Q			36


Results of Operations			Table of Contents

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide basis. ~~At March 31,~~In the quarter ending June 30, 2022, our operations were producing in the U.S., Norway, Canada, Australia, China, Malaysia, Qatar and Libya.

Total production of ~~1,747~~1,692 MBOED increased ~~220~~104 MBOED or 147 percent in the ~~first~~second quarter of 2022 and 162 MBOED or 10 percent in the six-month period of 2022, primarily due to:

•New wells online in the Lower 48, ~~Norway,~~Alaska, Malaysia and ~~Alaska.~~Canada.

•Higher volumes in the Lower 48 due to our Shell Permian acquisition.

•~~Absence of the impacts from Winter Storm Uri in the Lower 48.~~

•Conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis.

•~~Purchase of an additional 10 percent interest in APLNG.~~

Production increases in the ~~first~~second quarter and in the six-month period of 2022 were partly offset due to:

•Normal field decline.

•~~Our~~Divestitures of Indonesia ~~divestiture that~~and noncore assets in the Lower 48 segment.

Production for the second quarter of 2022 was 1,692 MBOED, an increase of 104 MBOED from the same period a year ago. After adjusting for closed ~~in March 2022.~~acquisitions and dispositions and the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, second-quarter 2022 production decreased by 69 MBOED or 4 percent from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline; however, production was lower overall primarily due to planned and unplanned downtime.

Production for the first six months of 2022 was 1,720 MBOED, an increase of 162 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions, the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, and 2021 Winter Storm Uri impacts, ~~first-quarter 2022~~ production decreased ~~by 36~~

53 MBOED or 23 percent from the same period a year ago. ~~This decrease was primarily due to downtime and seasonality impacts as new production~~Organic growth from ~~the~~ Lower 48 and other development programs more than offset ~~decline.~~decline; however, production was lower overall primarily due to planned and unplanned downtime.


37			ConocoPhillips 2022 Q1Q2 10-Q			38


Results of Operations			Table of Contents

Segment Results

Alaska


		Three Months Ended March 31,			Three Months Ended June 30				Six Months Ended June 30
		2022		2021			2022		2021	2022	2021
Net Income ($MM)	Net Income ($MM)	$	584	159		Net Income ($MM)	$	687	371	1,271	530

Average Net Production	Average Net Production					Average Net Production
Crude oil (MBD)	Crude oil (MBD)	182		190		Crude oil (MBD)	177		184	180	187
Natural gas liquids (MBD)	Natural gas liquids (MBD)	18		17		Natural gas liquids (MBD)	16		15	17	16
Natural gas (MMCFD)	Natural gas (MMCFD)	35		8		Natural gas (MMCFD)	34		11	34	10
Total Production (MBOED)	Total Production (MBOED)	206		208		Total Production (MBOED)	199		201	203	205

Average Sales Prices	Average Sales Prices					Average Sales Prices
Crude oil ($ per bbl)	Crude oil ($ per bbl)	$	95.54	59.56		Crude oil ($ per bbl)	$	114.77	67.87	105.26	63.93
Natural gas ($ per MCF)	Natural gas ($ per MCF)	3.92		2.23		Natural gas ($ per MCF)	3.34		4.53	3.66	3.17

The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas. As of ~~March 31,~~June 30, 2022, Alaska contributed 18 percent of our consolidated liquids production and 1two percent of our consolidated natural gas production.

Net Income

Earnings from Alaska increased ~~$425~~$316 million and $741 million in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Increases to earnings include:

•Higher realized crude oil prices.

Offsets to the earnings increase include:

•Higher taxes other than income taxes associated with higher realized crude oil prices.

In addition to the items detailed above, in the six-month period of 2022, earnings also increased due to:

•Lower DD&A expenses primarily driven by lower rates from price-related reserve revisions and lower production.

Production

Average production decreased ~~2 MBOED~~slightly in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Decreases to production include:

•Normal field decline.

•Higher downtime and lower base performance primarily in our Greater Kuparuk Area.

Offsets to the production decreases include:

•~~Improved performance in the Greater Prudhoe Area and Western North Slope assets.~~

•New wells online at our Western North Slope assets.

~~Alpine Gas Release~~

~~On March 4, a subsurface~~•Higher gas ~~release was observed at Alpine drill site CD1 well house 5. Operations to control this release were completed on March 28. The well is scheduled to be fully plugged and abandoned~~volumes in ~~the second quarter to ensure full source remediation.~~our Greater Prudhoe Area.


39			ConocoPhillips 2022 Q1Q2 10-Q			38


Results of Operations			Table of Contents

Lower 48


		Three Months Ended March 31,			Three Months Ended June 30				Six Months Ended June 30
		2022		2021			2022		2021	2022	2021
Net Income ($MM)	Net Income ($MM)	$	2,790	468		Net Income ($MM)	$	3,581	1,175	6,371	1,643

Average Net Production	Average Net Production					Average Net Production
Crude oil (MBD)	Crude oil (MBD)	538		416		Crude oil (MBD)	528		454	533	435
Natural gas liquids (MBD)*	Natural gas liquids (MBD)*	191		79		Natural gas liquids (MBD)*	214		97	203	89
Natural gas (MMCFD)*	Natural gas (MMCFD)*	1,426		1,319		Natural gas (MMCFD)*	1,411		1,459	1,419	1,389
Total Production (MBOED)	Total Production (MBOED)	967		715		Total Production (MBOED)	977		794	972	755

Average Sales Prices	Average Sales Prices					Average Sales Prices
Crude oil ($ per bbl)**		$	93.55	55.68
Crude oil ($ per bbl)						Crude oil ($ per bbl)	$	109.14	64.13	101.34	60.17
Natural gas liquids ($ per bbl)	Natural gas liquids ($ per bbl)	40.42		23.99		Natural gas liquids ($ per bbl)	42.00		24.62	41.26	24.34
Natural gas ($ per MCF)**		4.63		4.56
Natural gas ($ per MCF)						Natural gas ($ per MCF)	6.85		3.27	5.74	3.88

*~~Current period~~2022 includes the conversion of previously acquired Concho two-stream contracts to three-stream initiated in the fourth quarter of 2021.

**Prior period average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho acquisition from 2021, were $51.58 per barrel for crude oil and $4.35 per mcf for natural gas. As of March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho. ~~See Note~~ 10.

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 ~~March 31,~~June 30, 2022, the Lower 48 contributed 6567 percent of our consolidated liquids production and 67

71 percent of our consolidated natural gas production.

Net Income

Earnings from the Lower 48 increased ~~$2,322~~$2,406 million and $4,728 million in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Increases to earnings include:

•Higher realized ~~crude oil, natural gas and NGL~~ prices.

•Higher sales volumes of crude oil ~~natural gas~~ and ~~NGLs.~~NGLs primarily related to our Shell Permian Acquisition. See Note 3.

•After-tax gains on disposition of $63 million related to the sale of certain noncore assets as well as contingent payments of $16 million and $32 million in the three- and six-month periods of 2022, respectively, associated with previous asset sales. See Note 3.

Offsets to the earnings increase include:

•Higher ~~DD&A expenses,~~ production and operating expenses, ~~and~~ taxes other than income taxes and DD&A expenses primarily due to higher production volumes. Partially offsetting the increase in DD&A expenses were lower rates from price-related reserve revisions.

In addition to the items detailed above, in the six-month period of 2022, earnings also increased due to the absence of realized losses on hedges related to derivative positions acquired in our Concho acquisition. See Note 10.

Production

Average production increased ~~252~~183 MBOED and 217 MBOED in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Increases to production include:

•New wells online from our development programs in Permian, Eagle Ford and Bakken.

•Higher volumes due to our Shell Permian acquisition. See Note 3.

•Conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis.

•~~Absence of the impacts from Winter Storm Uri in the first quarter of 2021.~~

Offsets to the production increases include:

•Normal field decline.

~~Assets Held for Sale~~Completed and Planned Dispositions

~~In January~~On April 1, 2022, we ~~entered into an agreement to sell~~completed our ~~interests in~~divestiture of certain noncore assets for ~~$440~~$370 million, ~~before~~after customary adjustments. ~~This transaction closed in April 2022.~~ Production from these assets averaged approximately 10 MBOED in the three-months ended March 31, 2022. In July 2022, we entered into agreements to sell our interests in certain noncore assets in the Lower 48 segment for $265 million, before customary adjustments. These transactions are expected to close in the third quarter of 2022. See Note 3.


39			ConocoPhillips 2022 Q1Q2 10-Q			40


Results of Operations			Table of Contents

Canada


		Three Months Ended March 31,			Three Months Ended June 30				Six Months Ended June 30
		2022		2021			2022		2021	2022	2021
Net Income ($MM)	Net Income ($MM)	$	291	10		Net Income ($MM)	$	316	102	607	112

Average Net Production	Average Net Production					Average Net Production
Crude oil (MBD)	Crude oil (MBD)	6		11		Crude oil (MBD)	5		9	6	10
Natural gas liquids (MBD)	Natural gas liquids (MBD)	3		4		Natural gas liquids (MBD)	3		4	3	4
Bitumen (MBD)	Bitumen (MBD)	67		70		Bitumen (MBD)	59		68	63	69
Natural gas (MMCFD)	Natural gas (MMCFD)	63		91		Natural gas (MMCFD)	66		84	65	87
Total Production (MBOED)	Total Production (MBOED)	86		100		Total Production (MBOED)	78		95	83	98

Average Sales Prices	Average Sales Prices					Average Sales Prices
Crude oil ($ per bbl)	Crude oil ($ per bbl)	$	82.13	47.41		Crude oil ($ per bbl)	$	94.79	56.87	88.04	51.66
Natural gas liquids ($ per bbl)	Natural gas liquids ($ per bbl)	41.83		25.32		Natural gas liquids ($ per bbl)	44.93		27.14	43.44	26.19
Bitumen ($ per bbl)	Bitumen ($ per bbl)	65.86		30.78		Bitumen ($ per bbl)	75.42		37.60	70.25	34.09
Natural gas ($ per MCF)	Natural gas ($ per MCF)	3.25		2.37		Natural gas ($ per MCF)	4.47		2.26	3.88	2.32

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 ~~March 31,~~June 30, 2022, Canada contributed 1one percent of our consolidated liquids production and 3three percent of our consolidated natural gas production.

Net Income

Earnings from Canada increased ~~$281~~$214 million and $495 million in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Increases to earnings include:

•Higher realized prices.

•Higher after-tax gains on disposition related to contingent payments of ~~$176~~$118 million and $294 million in the three- and six-month periods of 2022, respectively, associated with the prior sale of certain assets to CVE, ~~in 2017,~~ compared with ~~$20~~$52 million and $72 million in the same ~~period~~periods of ~~2021.~~2021, respectively. See Note 3.

•~~Higher realized bitumen and crude oil prices.~~

~~Offsets to~~Offsetting the earnings ~~increase include:~~

•~~Lower~~increases were lower sales volumes.

Production

Average production decreased 1417 MBOED and 15 MBOED in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Decreases to production include:

•Normal field decline.

•Planned turnaround at the Surmont Central Processing Facility 1 during the second quarter of 2022.

•Higher royalty rates across the segment due to higher commodity ~~prices and the exhaustion of well credits.~~

•~~Higher downtime and facility upsets at Surmont.~~

prices.


41			ConocoPhillips 2022 Q1Q2 10-Q			40


Results of Operations			Table of Contents

Europe, Middle East and North Africa


		Three Months Ended March 31,			Three Months Ended June 30				Six Months Ended June 30
		2022		2021			2022		2021	2022	2021
Net Income ($MM)	Net Income ($MM)	$	412	153		Net Income ($MM)	$	385	207	797	360

Consolidated Operations	Consolidated Operations					Consolidated Operations
Average Net Production	Average Net Production					Average Net Production
Crude oil (MBD)	Crude oil (MBD)	113		116		Crude oil (MBD)	90		120	101	118
Natural gas liquids (MBD)	Natural gas liquids (MBD)	4		5		Natural gas liquids (MBD)	3		4	4	4
Natural gas (MMCFD)	Natural gas (MMCFD)	331		309		Natural gas (MMCFD)	306		297	318	303
Total Production (MBOED)	Total Production (MBOED)	172		173		Total Production (MBOED)	144		173	158	172

Average Sales Prices	Average Sales Prices					Average Sales Prices
Crude oil ($ per bbl)	Crude oil ($ per bbl)	$	94.68	57.75		Crude oil ($ per bbl)	$	115.61	66.34	103.21	62.48
Natural gas liquids ($ per bbl)	Natural gas liquids ($ per bbl)	58.67		34.70		Natural gas liquids ($ per bbl)	68.00		39.49	60.49	38.21
Natural gas ($ per MCF)	Natural gas ($ per MCF)	29.18		5.99		Natural gas ($ per MCF)	28.32		7.17	28.77	6.58

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. During the current period, we have increased our capacity and supply arrangements on future gas purchases, which are primarily offset by future gas sales contracts, primarily in Europe. As of ~~March 31,~~June 30, 2022, our Europe, Middle East and North Africa operations contributed 10nine percent of our consolidated liquids production and 16 percent of our consolidated natural gas production.

Net Income

Earnings from Europe, Middle East and North Africa increased by ~~$259~~$178 million and $437 million in the ~~first quarter~~three- and

six-month periods of ~~2022.~~2022, respectively. Increases to earnings include:

•Higher realized ~~natural gas, crude oil and NGL~~ prices.

•Higher LNG sales prices, reflected in equity in earnings of affiliates.

•Foreign exchange gains as the USD strengthened against the Norwegian Kroner.

Offsetting the earnings increases include:

•Lower sales volumes primarily due to turnaround activity in Norway in the second quarter.

•Changes to the Petroleum Tax System in Norway. See Note 18.

In addition to the items detailed above, in the six-month period of 2022, earnings impacts include:

•Increase due to lower DD&A expenses primarily driven by lower volumes and lower rates from price-related reserve revisions.

•Decrease due to lower sales volumes primarily due to turnaround activity in Qatar in the first quarter, reflected in equity in earnings of affiliates.


			ConocoPhillips 2022 Q2 10-Q			42


Results of Operations			Table of Contents

Consolidated Production

Average consolidated production decreased 129 MBOED and 15 MBOED in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Decreases to production include:

•Fieldwide turnarounds in the Greater Ekofisk Area of Norway in the second quarter of 2022.

•Normal field decline.

•~~Facility capacity constraints~~Curtailed production in ~~Norway.~~Libya due to the force majeure at the Es Sider export terminal in June.

Offsets to the production decreases include:

•New wells online and improved performance in Norway.

•~~Higher gas~~Force Majeure in Libya

Production ceased the last week of June 2022, due to a forced shutdown of the Es Sider export terminal after a period of civil unrest. Force majeure was lifted on July 15, 2022, and production has resumed.

Exploration Activity

Three wells from our 2022 four well exploration and appraisal campaign in ~~Norway.~~

Norway have been drilled and determined to be dry holes, increasing exploration expenses by approximately $76 million including the Slagugle appraisal well, which is in an area we are continuing to evaluate.


4143			ConocoPhillips 2022 Q1Q2 10-Q


Results of Operations			Table of Contents

Asia Pacific


		Three Months Ended March 31,			Three Months Ended June 30				Six Months Ended June 30
		2022		2021			2022		2021	2022	2021
Net Income ($MM)	Net Income ($MM)	$	1,136	317		Net Income ($MM)	$	525	175	1,661	492

Consolidated Operations	Consolidated Operations					Consolidated Operations
Average Net Production	Average Net Production					Average Net Production
Crude oil (MBD)	Crude oil (MBD)	64		71		Crude oil (MBD)	57		69	60	70

Natural gas (MMCFD)	Natural gas (MMCFD)	271		347		Natural gas (MMCFD)	55		358	163	353
Total Production (MBOED)	Total Production (MBOED)	109		129		Total Production (MBOED)	66		129	87	129

Average Sales Prices	Average Sales Prices					Average Sales Prices
Crude oil ($ per bbl)	Crude oil ($ per bbl)	$	104.84	60.36		Crude oil ($ per bbl)	$	117.14	67.72	110.89	64.01

Natural gas ($ per MCF)	Natural gas ($ per MCF)	7.01		5.88		Natural gas ($ per MCF)	4.17		6.32	6.53	6.10

The Asia Pacific segment has operations in China, Malaysia, Australia and commercial operations in Singapore and Japan. As of ~~March 31,~~June 30, 2022, Asia Pacific contributed 6five percent of our consolidated liquids production and 13eight percent of our consolidated natural gas production.

Net Income

Earnings from Asia Pacific increased ~~$819~~$350 million and $1,169 million in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Increases to earnings include:

•~~Gain~~Higher equity in earnings of affiliates reflecting higher LNG sales prices as well as our increased interest in APLNG.

•Higher realized crude oil prices.

•Lower DD&A expenses associated with lower production volumes due to the divestiture of our Indonesia assets and lower rates from positive price-related reserve revisions.

Offsets to the earnings increase include:

•Lower sales volumes primarily due to the divestiture of our Indonesia assets.

•Higher taxes other than income taxes primarily due to higher realized crude oil prices.

In addition to the items detailed above, in the six-month period of 2022, earnings impacts include:

•Increase due to an after-tax gain of $534 million associated with the divestiture of our Indonesia assets. See Note 3.

•~~Higher LNG sales prices, reflected in equity in earnings~~Decrease due to absence of ~~affiliates.~~

•~~Higher crude oil and natural gas prices.~~

~~Offsets to the earnings increase include:~~

•~~Absence~~an after-tax gain of a $200 million ~~gain on disposition~~recognized in the first quarter of 2021 related to a contingent payment from our Australia-West divestiture in 2020. See Note 9.

•~~Lower sales volumes.~~

Consolidated Production

Average consolidated production decreased 2063 MBOED and 42 MBOED in the ~~first quarter~~three- and six-month periods of ~~2022.~~2022, respectively. Decreases to production include:

•Divestiture of our Indonesia ~~assets.~~assets in the first quarter of 2022.

•Normal field decline.

•Decrease in crude oil entitlement percentage and PSC adjustments in Malaysia.

Offsets to the production decreases ~~include:~~

•includes Bohai Bay development activity in China.

•~~Increased production in Malaysia associated with development drilling at both Malikai and Siakap North-Petai.~~

Asset Acquisitions and Dispositions

In the first quarter of 2022, we completed the acquisition of an additional 10 percent interest in APLNG ~~for approximately $1.4 billion after customary adjustments. This increases~~increasing our ownership ~~in APLNG~~ to 47.5 percent. Also in the first quarter, we completed the divestiture of our subsidiaries that held our Indonesia assets and ~~operations, and based on an effective date of January 1, 2021, we received proceeds of $731 million after customary adjustments.~~operations. Production from the disposed assets averaged approximately 33 MBOED in the

three-months ended March 31, 2022. See Note 3.


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Results of Operations			Table of Contents

Other International

Three Months Ended
March 31,
2022 2021
Net Income (Loss) ($MM)
$ — (4)


	Three Months Ended June 30			Six Months Ended June 30
	2022		2021	2022	2021
Net Loss ($MM)	$	—	(5)	—	(9)

The Other International segment consists of exploration and appraisal activities in Colombia as well as contingencies associated with prior operations in other countries. As a result of recent acquisitions, we refocused our exploration program and announced our intent to pursue managed exits from certain areas.

Earnings from our Other International operations improved $4$5 million in the ~~first~~second quarter of 2022 and $9 million in the six-month period ended June 30, 2022, compared with the ~~first quarter~~same periods of 2021.

Corporate and Other


		Millions of Dollars			Millions of Dollars
		Three Months Ended March 31,				Three Months Ended June 30				Six Months Ended June 30
		2022		2021				2022		2021	2022	2021
Net Income (Loss)	Net Income (Loss)						Net Income (Loss)
Net interest expense	Net interest expense	$	(218)	(270)			Net interest expense	$	(164)	(181)	(382)	(451)
Corporate general and administrative expenses	Corporate general and administrative expenses	(79)		(129)			Corporate general and administrative expenses	(16)		(65)	(95)	(194)
Technology	Technology	58		41			Technology	(9)		(4)	49	37
Other income		785		237
Other income (expense)							Other income (expense)	(160)		316	625	553
		$	546	(121)				$	(349)	66	197	(55)

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Net interest expense improved by ~~$52~~$17 million and $69 million in the ~~three-month period~~three- and six-month periods of 2022, respectively, primarily ~~due to~~as a result of our debt reduction transactions. Improvement in the six-month period also includes the absence of a prior year tax adjustment.

Corporate G&A expenses include compensation programs and staff costs. These expenses decreased by ~~$50~~$49 million and $99 million in the ~~three-month~~three- and six-month periods ended June 30, 2022, respectively, due to mark to market adjustments associated with certain compensation programs. Additionally, in the six-month period of 2022 ~~primarily~~Corporate G&A expenses decreased due to the absence of restructuring expenses associated with our 2021 acquisition of Concho Resources Inc. ~~This was partially offset by mark-to-market adjustments associated with certain key employee compensation programs.~~

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 $17 million in the three-month period of 2022 primarily due to higher licensing revenues.~~See Note 16.

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~~gains/losses on the early retirement of debt, holding gains or losses on equity securities, and pension settlement expense. In the second quarter of 2022, “Other” decreased $476 million primarily due to the absence of unrealized gains associated with our CVE common shares which were fully divested in the first quarter of 2022 and premiums paid to repurchase debt. For the ~~three-month~~six-month period of 2022, ~~“Other”~~"Other" increased ~~$548 million compared with~~$72 million. In addition to the ~~same period in 2021. During~~items mentioned previously, during the first quarter of 2022, the IRS closed the 2017 audit of our U.S. federal income tax ~~return. As a result, we recognized a previously unrecognized~~return, resulting in $474 million federal tax benefit. Also in the first quarter, we recognized an after-tax gain of $62 million associated with the debt restructuring ~~transactions. This was~~transactions, partly offset by a $101 million tax impact associated with the disposition of our Indonesia assets. See Note 5 for information on our CVE common shares, Note 18 for information about the tax benefit, Note 6 for information regarding debt and Note 3 for information on our Indonesia divestiture.


4345			ConocoPhillips 2022 Q1Q2 10-Q


Capital Resources and Liquidity			Table of Contents

Capital Resources and Liquidity

Financial Indicators


		Millions of Dollars					Millions of Dollars
		March 31 2022			December 31 2021		June 30 2022			December 31 2021
Cash and cash equivalents	Cash and cash equivalents	$	6,414		5,028	Cash and cash equivalents	$	6,909		5,028
Short-term investments	Short-term investments	730			446	Short-term investments	1,272			446
Total debt	Total debt	18,746			19,934	Total debt	16,971			19,934
Total equity	Total equity	49,218			45,406	Total equity	50,202			45,406
Percent of total debt to capital*	Percent of total debt to capital*	28		%	31	Percent of total debt to capital*	25		%	31
Percent of floating-rate debt to total debt	Percent of floating-rate debt to total debt	4		%	4	Percent of floating-rate debt to total debt	2		%	4

*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 ~~quarter~~six months of 2022, the primary uses of our available cash were

$~~3.2~~5.1 billion to support our ongoing capital expenditures and investments program, ~~$1.4~~$3.7 billion to repurchase common stock, ~~$1.1~~$2.9 billion net to reduce debt as part of refinancing transactions and ~~$0.9~~retirements, $1.9 billion to pay dividends, including the ordinary dividend and a ~~VROC.~~VROC, and $1.1 billion net purchases of investments.

At ~~March 31,~~June 30, 2022, we had total liquidity of $13.7 billion, including cash and cash ~~equivalents~~equivalents of ~~$6.4~~$6.9 billion, short-term investments of ~~$0.7~~$1.3 billion, and available borrowing capacity under our credit facility of $5.5 ~~billion, totaling liquidity $12.6~~ billion. We believe current cash balances and cash generated by operating activities, 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~~the near- and long-term, including our capital spending program, acquisitions, dividend payments and debt obligations.

Significant Changes in Capital

Operating Activities

Cash provided by operating ~~activities~~activities was ~~$5.1~~$13.0 billion for the first ~~three~~six months of 2022, compared with ~~$2.1~~$6.3 billion for the corresponding period of 2021. The increase in cash provided by operating activities is primarily due to higher realized commodity prices, higher sales volumes mostly due to our acquisition of Shell Permian assets, and the absence of the 2021 settlement of all oil and gas hedging positions acquired from Concho. The increase in cash provided by operating activities was partly offset by the timing of Libya tax and royalty payments occurring in the first quarter of ~~2022.~~2022 as well as U.S. tax payments in the second quarter.

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.

The level of 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 for 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.~~

section.


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Capital Resources and Liquidity			Table of Contents

Investing Activities

For the first ~~three~~six months of 2022, we ~~invested $3.2~~invested $5.1 billion in capital expenditures ~~and~~and investments; $1.4 billion of which was acquisition capital for the additional 10 percent interest in APLNG, and the remainder ~~being~~funding our operating ~~capital.~~capital program. Our 2022 operating plan capital expenditures are currently expected to be $7.8 ~~billion versus the prior guidance of $7.2 billion, reflecting higher partner-operated spend in Lower 48 and inflationary impacts.~~billion. This guidance excludes $1.4 billion of capital associated with ~~the acquisition of an additional 10 percent interest in APLNG.~~increasing our APLNG interest. Our 2021 capital expenditures and investments ~~was~~were $5.3 billion. See the “Capital Expenditures and Investments” ~~section for information about our capital expenditures and investments.~~section.

In May 2021, we initiated the monetization of our investment in CVE common shares with the plan to direct proceeds toward our existing share repurchase program. We began disposing of our CVE shares in May 2021, and ~~at March 31, 2022,~~by the end of the first quarter, we ~~have~~ fully divested of our investment, ~~for total proceeds,~~ recognizing proceeds of $1.4 billion in the first quarter of 2022. Since inception, we have generated total proceeds of $2.5 billion. S eeSee Note 5. Other proceeds from dispositions received in the current year include ~~the sale of~~ our ~~subsidiaries that held our Indonesia assets~~divestitures in Asia Pacific and ~~operations~~Lower 48 segments for approximately ~~$731 million~~$1.1 billion after customary adjustments and $362 million in contingent payments associated with ~~previous~~prior divestitures. See Note 3.

In ~~2021, we announced a target to dispose of $4 to $5 billion in assets by year-end 2023. Through the first quarter of~~April 2022, we ~~have disposed of $1.7 billion in assets, generating approximately $1.0 billion in disposition proceeds. We received $0.8 billion in proceeds in the current period primarily from~~completed the sale of certain noncore assets in the Lower 48 segment for $370 million after customary adjustments. In July 2022, we entered into agreements to sell our ~~Indonesia assets. The proceeds from these~~interests in additional noncore assets in the Lower 48 segment for $265 million, before customary adjustments. These transactions ~~will be used~~are expected to close in ~~accordance with~~ the ~~company’s priorities, including returns~~third quarter of ~~capital to shareholders and reduction of total debt.~~2022.

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 ~~three~~six months of 2022 included net purchases of ~~$263~~$1,104 million of investments. We ~~purchased $215~~had net purchases of $640 million of short-term instruments and ~~$48~~$464 million inof long-term instruments. See Note 13.

Financing Activities

In February 2022, we refinanced our revolving credit facility from a total aggregate principal amount of $6.0 billion to $5.5 billion with an expiration date of February 2027. The 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. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at ~~March 31,~~June 30, 2022.

Our debt balance at ~~March 31,~~June 30, 2022, was ~~$18.7~~$17.0 billion compared with $19.9 billion at December 31, 2021. The current portion of debt, including payments for finance leases, is ~~$1.2~~$0.7 billion. Payments will bebe made using current cash balances and cash generated by ~~operations.~~operating activities. In the second quarter of 2022, we repurchased notes and retired floating rate debt and in the first quarter of 2022, we executed a debt refinancing comprised of concurrent transactions including new debt issuances, a cash tender offer and debt exchange offers. ~~Part of the cash consideration in the cash tender and debt exchange offers was satisfied with current cash balances.~~ In aggregate, the transactions reduced the company's total debt by ~~$1.2~~$3.0 billion. The refinancing facilitates our ability to achieve our previously announced $5 billion debt reduction target by the end of 2026 while also reducing the company's annual cash interest expense.

The current credit ratings on our long-term debt are:

•Fitch: “A” with a “stable” outlook

•S&P: “A-” with a “stable” outlook

•Moody’s: “A3” with a “positive” outlook

See Note 6 for additional information on debt, revolving credit facility and credit ratings.


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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 ~~March 31,~~June 30, 2022 and December 31, 2021, we had direct bank letters of credit of ~~$340~~$320 million and $337 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.


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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 number of various types of debt and equity securities.

Capital Requirements

For information about our capital expenditures and investments, see the “Capital Expenditures and Investments” section.

In 2021, as part of our objective to maintain a strong balance sheet, we announced our intention to reduce our total debt by $5 billion by 2026. In the first ~~quarter~~half of 2022, we executed aconcurrent debt refinancing ~~to facilitate~~transactions, repurchased existing notes, and retired floating rates notes upon natural maturity, that in aggregate reduced the company's total debt by

$3 billion and progressed the achievement of our debt reduction target while also lowering our annual cash interest expense and extending the weighted average maturity of our debt portfolio. See Note 6.In April 2022, we provided formal notice to holders of our 4.95% Notes due 2026 with principal of $1,250 million that we would retire this debt in full per the provisions in the bond indenture, with settlement scheduled for May 2022. Retirement of this bond will be sourced from cash and further accelerates progress towards our debt reduction target.

In December 2021, we announced our expected 2022 return of capital program and the initiation of a three-tier return of capital framework. The framework is structured to deliver a compelling, growing ordinary dividend and through-cycle share repurchases. In addition to the ordinary dividend and share repurchases, beginning in December 2021, the framework includes the addition of a discretionary VROC tier. The VROC will provide a flexible tool for meeting our commitment of returning greater than 30 percent of cash from operating activities during periods where commodity prices are meaningfully higher than our planning price range. Our expected 2022 total capital return is ~~$10~~$15 billion, an increase of $2$5 billion from our previously announced target. ~~The incremental amount will be distributed through share repurchases and VROC tiers.~~

In ~~February~~the first six months of 2022, we paid ordinary dividends of $0.92 per common share. In addition, we paid VROC dividends of $0.50 per common share for dividends declared in the fourth quarter of 2021 and the first quarter of 2022. In the first six months of 2021, we paid ordinary dividends of $0.86 per common share. On August 4, 2022, we declared both ana third-quarter ordinary dividend and a second-quarter VROC. The ordinary dividend is $0.46 per share, and was paid on March 1, 2022 to stockholders of record at the close of business on February 14, 2022. The VROC dividend was $0.30 per share, and was paid on April 14, 2022 to shareholders of record on March 31, 2022. On

~~May 5, 2022, we declared both an ordinary dividend and a third-quarter~~fourth-quarter VROC. The ordinary dividend is $0.46 per share payable ~~June~~September 1, 2022, to shareholders of record on ~~May 17,~~August 16, 2022. The VROC is ~~$0.70~~$1.40 per share, payable ~~July 15,~~October 14, 2022 to shareholders of record on ~~June 28, 2022.~~September 29, 2022

In late 2016, we initiated our current share repurchase program with Board of Director’s authorization of $25 billion of our common stock. As of ~~March 31,~~June 30, 2022, share repurchases since the inception of our current program totaled ~~263~~285 million shares and ~~$15.6~~$17.9 billion. In the ~~three~~six months ended ~~March 31,~~June 30, 2022, we repurchased ~~15.7~~37.7 million shares for a cost of ~~$1.4~~

$3.7 billion. Repurchases are made at management’s discretion, at prevailing prices, subject to market conditions and other factors.

See Part I—Item 1A—Risk Factors – “Our ability to execute our capital return program is subject to certain considerations” in our 2021 Annual Report on Form 10-K.


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Capital Expenditures and Investments


		Millions of Dollars			Millions of Dollars
		Three Months Ended Millions of Dollars			Six Months Ended June 30
		2022	2021		2022	2021
Alaska	Alaska	253	235	Alaska	471	463
Lower 48	Lower 48	1,062	718	Lower 48	2,347	1,480
Canada	Canada	122	33	Canada	247	68
Europe, Middle East and North Africa	Europe, Middle East and North Africa	172	121	Europe, Middle East and North Africa	364	257
Asia Pacific	Asia Pacific	1,538	76	Asia Pacific	1,664	148
Other International	Other International	—	6	Other International	—	18
Corporate and Other	Corporate and Other	14	11	Corporate and Other	36	31
Capital expenditures and investments	Capital expenditures and investments	3,161	1,200	Capital expenditures and investments	5,129	2,465

During the first ~~three~~six months of 2022, capital expenditures and investments supported key operating activities and acquisitions, primarily:

•Development ~~activities~~ 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 and development activities in the Montney and optimization of oil sands development in Canada.

•Development, exploration, and appraisal activities across assets in Norway.

•Continued development activities in ~~China~~Malaysia and ~~Malaysia.~~China.

•Acquisition capital associated with 10 percent additional interest in APLNG.

Our 2022 operating plan capital expenditures is currently expected to be $7.8 billion compared with $5.3 billion in 2021.


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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.

Transactions and balances reflecting activity between the Obligors and Non-Obligated Subsidiaries are presented below:

Summarized Income Statement Data


	Millions of Dollars
	~~Three~~Six Months Ended ~~March 31,~~ June 30, 2022
Revenues and Other Income	$	~~12,910~~27,937
Income before income taxes*	~~5,355~~10,478

Net Income	~~5,759~~10,904

*Includes approximately ~~$2.1~~$5.1 billion of purchased commodities expense for transactions with Non-Obligated Subsidiaries.

Summarized Balance Sheet Data


		Millions of Dollars				Millions of Dollars
		March 31, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Current assets	Current assets	$	9,255	7,689	Current assets	$	10,013	7,689
Amounts due from Non-Obligated Subsidiaries, current	Amounts due from Non-Obligated Subsidiaries, current	2,510		1,927	Amounts due from Non-Obligated Subsidiaries, current	2,268		1,927
Noncurrent assets	Noncurrent assets	73,688		69,841	Noncurrent assets	78,542		69,841
Amounts due from Non-Obligated Subsidiaries, noncurrent	Amounts due from Non-Obligated Subsidiaries, noncurrent	7,600		7,281	Amounts due from Non-Obligated Subsidiaries, noncurrent	8,343		7,281
Current liabilities	Current liabilities	8,759		8,005	Current liabilities	9,240		8,005
Amounts due to Non-Obligated Subsidiaries, current	Amounts due to Non-Obligated Subsidiaries, current	4,390		3,477	Amounts due to Non-Obligated Subsidiaries, current	4,624		3,477
Noncurrent liabilities	Noncurrent liabilities	31,523		30,677	Noncurrent liabilities	35,671		30,677
Amounts due to Non-Obligated Subsidiaries, noncurrent	Amounts due to Non-Obligated Subsidiaries, noncurrent	15,033		13,007	Amounts due to Non-Obligated Subsidiaries, noncurrent	20,343		13,007

Contingencies

We are subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. We accrue for losses associated with legal claims when such losses are considered probable and the amounts can be reasonably estimated. See N ~~ote~~ Note 9.


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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 and damages from historic operations, and climate change. We will continue to defend ourselves vigorously in these matters.

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 58–60 of our 2021 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 ~~March 31,~~June 30, 2022, there were 15 sites around the U.S. in which we were identified as a potentially responsible party under CERCLA and comparable state laws.

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.

See Part I—Item 1A—Risk Factors – "We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations" in our 2021 Annual Report on Form 10-K and Note 9 for information on environmental litigation.

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 61–63 of our 2021 Annual Report on Form 10-K.

See Part 1—I—Item 1A—Risk Factors – "Existing and future laws, regulations and internal initiatives relating to global climate changes, such as limitations on GHG emissions may impact or limit our business plans, result in significant expenditures, promote alternative uses of energy or reduce demand for our products" in our 2021 Annual Report on Form 10-K and Note 9 for information on climate change litigation.


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Company Response to Climate-Related Risks

The company has responded by putting in place a Sustainable Development Risk Management Standard covering the assessment and registration 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 and net equity 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 control or in which we have ownership interest.~~

•~~Scope 2 emissions are indirect 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.~~

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.

We announced in July 2022 that ConocoPhillips has joined the OGMP 2.0 initiative. The initiative's mission is to improve industry transparency in methane emissions reporting and encourage progress in reducing those emissions. We believe that applying the rigorous OGMP 2.0 reporting standards across our global assets will be a vital step towards meeting our Paris-aligned climate-risk commitments, including our net-zero ambition for operational emissions by 2050, and will allow us to credibly demonstrate how we are delivering against our methane improvement objectives and targets.

In 2022, we published our Plan for the Net-Zero Energy Transition (the ‘Plan’) focusing on meeting energy transition pathway demand, delivering competitive returns on and of capital and achieving our net-zero operational emissions ambitions.

Our Plan describes how we will:

•Build a resilient asset portfolio: Focus on low cost of supply and low ~~greenhouse gas (GHG)~~GHG intensity resources.

•Commit to near, medium, and long-term targets: Reducing operational (Scope 1 and 2) emissions over which we have ownership and control with an ambition to become a net-zero company for Scope 1 and 2 emissions by 2050. These targets include:

•Strengthening our previously announced operational GHG emissions intensity reduction target to 40-50% by 2030 and expanding it to apply to both a gross operated and net equity basis.

•Meeting a further 10% reduction target for methane emissions intensity by 2025 from our 2019 baseline.

•Aiming to achieve zero routine flaring by 2025.

•Address end-use emissions: Advocate for a well-designed, economy-wide price on carbon that would help shift consumer demand from high-carbon to low-carbon energy sources.

•Pursue transition opportunities: Evaluate potential investments in emerging energy transition and low-carbon technologies.

•In 2021, we established a multi-disciplinary Low-Carbon Technologies organization to identify and evaluate business opportunities that address end-use emissions and early-stage low-carbon technology opportunities that would leverage our existing expertise and adjacencies.

•In the 2022 capital budget, we allocated $200 million to advance energy transition activities, the majority of which will address Scope 1 and 2 emissions reduction projects across our global operations, with the rest allocated for early-stage low-carbon technology opportunities.

•Track the energy transition: Utilize a comprehensive scenario planning process to calibrate and understand alternative energy transition pathways.

•Maintain capital discipline: Use scenario analyses and a fully-burdened cost of supply, including an appropriate cost of carbon, as the primary basis for capital allocation.


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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 ~~and the anticipated impact of the Shell Enterprise LLC (Shell) transaction on the company’s business and future financial and operating results~~ 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 as a result of any ongoing military conflict, including the conflict between Russia and Ukraine, and the global response to such conflict, or 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.

•The potential for insufficient liquidity or other factors, such as those described herein, that could impact our ability to repurchase shares and declare and pay dividends, whether fixed or variable.

•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, inflationary pressures 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.

•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.


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•Potential disruption or interruption of our operations due to accidents, extraordinary weather events, supply chain disruptions, 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, including any sanctions imposed as a result of any ongoing military conflict, including the conflict between Russia and Ukraine.

•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 litigation directly or indirectly related to the transaction with Concho Resources Inc., 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, including as a result of any ongoing military conflict, including the conflict between Russia and Ukraine.

•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.

•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.

•The risk that we will be unable to retain and hire key personnel.

•Unanticipated integration issues relating to the acquisition of assets from Shell, such as potential disruptions of our ongoing business and higher than anticipated integration costs.

•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 2021 Annual Report on Form 10-K and any additional risks described in our other filings with the SEC.


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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information about market risks for the ~~three~~six months ended ~~March 31,~~June 30, 2022 does not differ materially from that discussed under Item 7A in our 2021 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 ~~March 31,~~June 30, 2022, 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 ~~March 31,~~June 30, 2022.

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

The interim-period financial information presented in the financial statements included in this report is unaudited. There are no new material legal proceedings or material developments with respect to matters previously disclosed in Item 3 of our 2021 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 2021 Annual Report on Form 10-K.


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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
January 1-31, 2022 5,203,865 $ 81.71 5,203,865 $ 10,435
February 1-28, 2022 4,946,863 90.57 4,946,863 9,987
March 1-31, 2022 5,575,384 98.91 5,575,384 9,435
15,726,112 15,726,112


					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, 2022	3,253,879	$	99.13	3,253,879	$	9,113
May 1 - 31, 2022	5,554,477	103.29		5,554,477	8,539
June 1 - 30, 2022	13,139,706	106.83		13,139,706	7,136
	21,948,062			21,948,062

*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. As of ~~March 31,~~June 30, 2022, we had repurchased ~~$15.6~~$17.9 billion of shares. 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 Part I—Item 1A—Risk Factors – “Our ability to execute our capital return program is subject to certain considerations” in our 2021 Annual Report on Form 10-K.


			ConocoPhillips 2022 Q1Q2 10-Q			5456


			Table of Contents

Item 6. Exhibits


10.1*			L etter agreement with Timoth y A. Leach, dated April 28, 2022.

31.1*			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32*			Certifications pursuant to 18 U.S.C. Section 1350.

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.


5557			ConocoPhillips 2022 Q1Q2 10-Q


			Table of Contents

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
~~May 5,~~August 4, 2022


			ConocoPhillips 2022 Q1Q2 10-Q			5658


			Page
Commonly Used Abbreviations			1

Part I—Financial Information

Item 1. Financial Statements
Consolidated Income Statement			2
Consolidated Statement of Comprehensive Income			3
Consolidated Balance Sheet			4
Consolidated Statement of Cash Flows			5
Notes to Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3031

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5355

Item 4. Controls and Procedures			5355

Part II—Other Information

Item 1. Legal Proceedings			5355

Item 1A. Risk Factors			5355

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5456

Item 6. Exhibits			5557

Signature			5658







For the three months ended March 31, 2021
Balances at December 31, 2020	$	18	47,133	(47,297)	(5,218)	35,213	29,849
Net income						982	982
Other comprehensive income					138		138
Dividends declared
Ordinary ($0.43 per common share)						(588)	(588)
Acquisition of Concho	3		13,122				13,125
Repurchase of company common stock				(375)			(375)
Distributed under benefit plans			23				23
Other						1	1
Balances at March 31, 2021	$	21	60,278	(47,672)	(5,080)	35,608	43,155


	Millions of Dollars
	Defined Benefit Plans		Net Unrealized Gain (Loss) on Securities	Foreign Currency Translation	Accumulated Other Comprehensive Loss
December 31, 2021	$	(31)	—	(4,919)	(4,950)
Other comprehensive income (loss)	4		(3)	141	142
March 31, 2022	$	(27)	(3)	(4,778)	(4,808)