CONOCOPHILLIPS - Quarter Report: 2021 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2021
or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number:
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
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
[x]
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
[x]
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
[ ]
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
[x]
The registrant had
1,318,946,867
Table of Contents
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Commonly Used Abbreviations
1
ConocoPhillips 2021 Q3 10-Q
Commonly Used Abbreviations
The following industry-specific, accounting and other terms, and abbreviations may be commonly used in this
report.
Currencies
Accounting
$ or USD
U.S. dollar
ARO
asset retirement obligation
CAD
Canadian dollar
ASC
accounting standards codification
EUR
Euro
ASU
accounting standards update
GBP
British pound
DD&A
depreciation, depletion and
amortization
Units of Measurement
FASB
Financial Accounting Standards
BBL
barrel
Board
BCF
billion cubic feet
FIFO
first-in, first-out
BOE
barrels of oil equivalent
G&A
general and administrative
MBD
thousands of barrels per day
GAAP
generally accepted accounting
MCF
thousand cubic feet
principles
MBOD
thousand barrels of oil per day
LIFO
last-in, first-out
MM
million
NPNS
normal purchase normal sale
MMBOE
million barrels of oil equivalent
PP&E
properties, plants and equipment
MMBOD
million barrels of oil per day
SAB
staff accounting bulletin
MBOED
thousands of barrels of oil
VIE
variable interest entity
MMBOED
equivalent per day
millions of barrels of oil equivalent
per day
MMBTU
million British thermal units
Miscellaneous
MMCFD
million cubic feet per day
EPA
Environmental Protection Agency
ESG
Environmental, Social and
Corporate Governance
Industry
EU
European Union
CBM
coalbed methane
FERC
Federal Energy Regulatory
E&P
exploration and production
Commission
FEED
front-end engineering and design
GHG
greenhouse gas
FPS
floating production system
HSE
health, safety and environment
FPSO
floating production, storage and
ICC
International Chamber of
offloading
Commerce
G&G
geological and geophysical
ICSID
World Bank’s International
JOA
joint operating agreement
Centre for Settlement of
LNG
liquefied natural gas
Investment Disputes
NGLs
natural gas liquids
IRS
Internal Revenue Service
OPEC
Organization of Petroleum
OTC
over-the-counter
Exporting Countries
NYSE
New York Stock Exchange
PSC
production sharing contract
SEC
U.S. Securities and Exchange
PUDs
proved undeveloped reserves
Commission
SAGD
steam-assisted gravity drainage
TSR
total shareholder return
WCS
Western Canada Select
U.K.
United Kingdom
WTI
West Texas Intermediate
U.S.
United States of America
Financial Statements
ConocoPhillips 2021 Q3 10-Q
2
PART I. Financial Information
Item 1. Financial Statements
Consolidated Income Statement
ConocoPhillips
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Revenues and Other Income
Sales and other operating revenues
$
11,326
4,386
30,708
13,293
Equity in earnings of affiliates
239
35
500
346
Gain (loss) on dispositions
2
(3)
294
551
Other income (loss)
49
(38)
884
(983)
Total Revenues and Other Income
11,616
4,380
32,386
13,207
Costs and Expenses
Purchased commodities
4,179
1,839
11,660
5,630
Production and operating expenses
1,389
963
4,151
3,183
Selling, general and administrative expenses
128
96
556
249
Exploration expenses
65
125
206
410
Depreciation, depletion and amortization
1,672
1,411
5,425
3,980
Impairments
(89)
2
(90)
521
Taxes other than income taxes
403
179
1,154
570
Accretion on discounted liabilities
61
62
186
195
Interest and debt expense
219
200
665
604
Foreign currency transaction (gain) loss
(10)
(5)
19
(88)
Other expenses
17
20
78
7
Total Costs and Expenses
8,034
4,892
24,010
15,261
Income (loss) before income taxes
3,582
(512)
8,376
(2,054)
Income tax provision (benefit)
1,203
(62)
2,924
(171)
Net income (loss)
2,379
(450)
5,452
(1,883)
Less: net loss attributable to noncontrolling interests
-
-
-
(46)
Net Income (Loss) Attributable to ConocoPhillips
$
2,379
(450)
5,452
(1,929)
Net Income (Loss) Attributable to ConocoPhillips Per Share
of Common Stock
(dollars)
Basic
$
1.78
(0.42)
4.10
(1.79)
Diluted
1.78
(0.42)
4.09
(1.79)
Average Common Shares Outstanding
(in thousands)
Basic
1,332,286
1,077,377
1,327,216
1,079,525
Diluted
1,336,379
1,077,377
1,330,652
1,079,525
See Notes to Consolidated Financial Statements.
Financial Statements
3
ConocoPhillips 2021 Q3 10-Q
Consolidated Statement of Comprehensive Income
ConocoPhillips
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income (Loss)
$
2,379
(450)
5,452
(1,883)
Other comprehensive income (loss)
Defined benefit plans
Reclassification adjustment for amortization of prior
service credit included in net income (loss)
(9)
(8)
(28)
(24)
Net actuarial gain (loss) arising during the period
8
(78)
113
(73)
Reclassification adjustment for amortization of net actuarial
losses included in net income (loss)
45
45
133
81
Income taxes on defined benefit plans
(9)
10
(49)
3
Defined benefit plans, net of tax
35
(31)
169
(13)
Unrealized holding gain (loss) on securities
-
-
(1)
3
Income taxes on unrealized holding gain on securities
-
-
-
(1)
Unrealized holding gain (loss) on securities, net of tax
-
-
(1)
2
Foreign currency translation adjustments
(237)
188
(72)
(302)
Income taxes on foreign currency translation adjustments
(1)
2
(1)
4
Foreign currency translation adjustments, net of tax
(238)
190
(73)
(298)
Other Comprehensive Income (Loss), Net of Tax
(203)
159
95
(309)
Comprehensive Income (Loss)
2,176
(291)
5,547
(2,192)
Less: comprehensive income attributable to noncontrolling interests
-
-
-
(46)
Comprehensive Income (Loss) Attributable to ConocoPhillips
$
2,176
(291)
5,547
(2,238)
See Notes to Consolidated Financial Statements.
Financial Statements
ConocoPhillips 2021 Q3 10-Q
4
Consolidated Balance Sheet
ConocoPhillips
Millions of Dollars
September 30
December 31
2021
2020
Assets
Cash and cash equivalents
$
9,833
2,991
Short-term investments
678
3,609
Accounts and notes receivable (net of allowance of $
2
4
, respectively)
5,336
2,634
Accounts and notes receivable—related parties
129
120
Investment in Cenovus Energy
1,416
1,256
Inventories
1,043
1,002
Prepaid expenses and other current assets
1,746
454
Total Current Assets
20,181
12,066
Investments and long-term receivables
8,058
8,017
Loans and advances—related parties
-
114
Net properties, plants and equipment
(net of accumulated DD&A of $
65,223
62,213
, respectively)
56,689
39,893
Other assets
2,376
2,528
Total Assets
$
87,304
62,618
Liabilities
Accounts payable
$
4,101
2,669
Accounts payable—related parties
30
29
Short-term debt
920
619
Accrued income and other taxes
2,082
320
Employee benefit obligations
691
608
Other accruals
2,625
1,121
Total Current Liabilities
10,449
5,366
Long-term debt
18,748
14,750
Asset retirement obligations and accrued environmental costs
5,721
5,430
Deferred income taxes
5,630
3,747
Employee benefit obligations
1,162
1,697
Other liabilities and deferred credits
1,479
1,779
Total Liabilities
43,189
32,769
Equity
Common stock (
2,500,000,000
0.01
Issued (2021—
2,089,046,718
1,798,844,267
Par value
21
18
Capital in excess of par
60,431
47,133
Treasury stock (at cost: 2021—
770,099,851
730,802,089
(49,521)
(47,297)
Accumulated other comprehensive loss
(5,123)
(5,218)
Retained earnings
38,307
35,213
Total Equity
44,115
29,849
Total Liabilities and Equity
$
87,304
62,618
See Notes to Consolidated Financial Statements.
Financial Statements
5
ConocoPhillips 2021 Q3 10-Q
Consolidated Statement of Cash Flows
ConocoPhillips
Millions of Dollars
Nine Months Ended
September 30
2021
2020
Cash Flows From Operating Activities
Net income (loss)
$
5,452
(1,883)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation, depletion and amortization
5,425
3,980
Impairments
(90)
521
Dry hole costs and leasehold impairments
7
114
Accretion on discounted liabilities
186
195
Deferred taxes
895
(428)
Undistributed equity earnings
258
450
Gain on dispositions
(294)
(551)
(Gain) loss on investment in Cenovus Energy
(743)
1,302
Other
(866)
(188)
Working capital adjustments
Decrease (increase) in accounts and notes receivable
(1,619)
1,132
Increase in inventories
(13)
(74)
Increase in prepaid expenses and other current assets
(800)
(49)
Increase (decrease) in accounts payable
682
(583)
Increase (decrease) in taxes and other accruals
2,648
(808)
Net Cash Provided by Operating Activities
11,128
3,130
Cash Flows From Investing Activities
Cash acquired from Concho
382
-
Capital expenditures and investments
(3,767)
(3,657)
Working capital changes associated with investing activities
79
(229)
Proceeds from asset dispositions
792
1,312
Net sales (purchases) of investments
2,846
(1,089)
Collection of advances/loans—related parties
105
116
Other
(386)
(31)
Net Cash Provided by (Used in) Investing Activities
51
(3,578)
Cash Flows From Financing Activities
Issuance of debt
-
300
Repayment of debt
(363)
(234)
Issuance of company common stock
27
(2)
Repurchase of company common stock
(2,224)
(726)
Dividends paid
(1,750)
(1,367)
Other
6
(27)
Net Cash Used in Financing Activities
(4,304)
(2,056)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
(3)
(62)
Net Change in Cash, Cash Equivalents and Restricted Cash
6,872
(2,566)
Cash, cash equivalents and restricted cash at beginning of period
3,315
5,362
Cash, Cash Equivalents and Restricted Cash at End of Period
$
10,187
2,796
Restricted cash of $
95
259
respectively, of our Consolidated Balance Sheet as of September 30, 2021.
Restricted cash of $
94
230
respectively, of our Consolidated Balance Sheet as of December 31, 2020.
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
6
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 2020 Annual Report on Form 10-K.
Note 2—Inventories
Millions of Dollars
September 30
2021
2020
Crude oil and natural gas
$
485
461
Materials and supplies
558
541
Total Inventories
$
1,043
1,002
Inventories valued on the LIFO basis
$
305
282
Note 3—Acquisitions and Dispositions
Announced Acquisition of Shell Permian Assets
In September 2021, we signed a definitive agreement to acquire Shell Enterprises LLC’s assets in the Delaware
Basin in an all-cash transaction for $
9.5
to be acquired include approximately
225,000
as over
600
close in the fourth quarter of 2021, subject to regulatory approval and other customary closing conditions. Under
the terms of the agreement, we paid a deposit of $
475
Investing Activities - Other” on our consolidated statement of cash flows.
Acquisition of
Concho Resources Inc.
We completed our acquisition of Concho on
January 15, 2021
agreement, each share of Concho common stock was exchanged for
1.46
for total consideration of $
13.1
Total Consideration
194,243
1,599
Number of shares exchanged
195,842
1.46
285,929
$
45.9025
$
13,125
**Based on the ConocoPhillips average stock price on January 15, 2021.
Notes to Consolidated Financial Statements
7
ConocoPhillips 2021 Q3 10-Q
The transaction was accounted for as a business combination under FASB ASC 805 using the acquisition method,
which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Fair
value measurements were made for acquired assets and liabilities, and adjustments to those measurements may
be made in subsequent periods, up to one year from the acquisition date as we identify new information about
facts and circumstances that existed as of the acquisition date to consider. Oil and gas properties were valued
using a discounted cash flow approach incorporating market participant and internally generated price
assumptions; production profiles; and, operating and development cost assumptions. Debt assumed in the
acquisition was valued based on observable market prices. The fair values determined for accounts receivables,
accounts payable, and most other current assets and current liabilities were equivalent to the carrying value due to
their short-term nature. The total consideration of $
13.1
liabilities based on their fair values as of January 15, 2021.
Assets Acquired
Millions of Dollars
Cash and cash equivalents
$
382
Accounts receivable, net
745
Inventories
45
Prepaid expenses and other current assets
37
Investments and long-term receivables
333
Net properties, plants and equipment
18,968
Other assets
62
Total assets acquired
$
20,572
Liabilities Assumed
Accounts payable
$
638
Accrued income and other taxes
49
Employee benefit obligations
4
Other accruals
510
Long-term debt
4,696
Asset retirement obligations and accrued environmental costs
310
Deferred income taxes
1,123
Other liabilities and deferred credits
117
Total liabilities assumed
$
7,447
Net assets acquired
$
13,125
With the completion of the Concho transaction, we acquired proved and unproved properties of approximately
$
11.8
6.9
We recognized approximately $
157
quarter of 2021. These non-recurring costs related primarily to fees paid to advisors and the settlement of share-
based awards for certain Concho employees based on the terms of the Merger Agreement.
In the first quarter of 2021, we commenced a company-wide restructuring program, the scope of which included
combining the operations of the two companies as well as other global restructuring activities. For the three- and
nine-month periods ending September 30, 2021, we recognized non-recurring restructuring costs of approximately
$
52
209
costs.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
8
The impact from these transaction and restructuring costs to the lines of our consolidated income statement for
the nine-month period ending September 30, 2021, are below:
Millions of Dollars
Transaction Cost
Restructuring Cost
Total Cost
Production and operating expenses
$
110
110
Selling, general and administration expenses
135
64
199
Exploration expenses
18
4
22
Taxes other than income taxes
4
2
6
Other expenses
-
29
29
$
157
209
366
On February 8, 2021, we completed a debt exchange offer related to the debt assumed from Concho. As a result
of the debt exchange, we recognized an additional income tax related restructuring charge of $
75
From the acquisition date through September 30, 2021, “Total Revenues and Other Income” and “Net Income
(Loss) Attributable to ConocoPhillips” associated with the acquired Concho business were approximately $
4,499
million and $
1,600
include a before- and after-tax loss of $
305
233
contracts. The before-tax loss is recorded within “Total Revenues and Other Income” on our consolidated income
statement.
The following summarizes the unaudited supplemental pro forma financial information as if we had completed the
acquisition of Concho on January 1, 2020:
Millions of Dollars
Supplemental Pro Forma (unaudited)
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
Total revenues and other income
$
5,019
16,384
Net loss
(565)
(1,184)
Net loss attributable to ConocoPhillips
(565)
(1,230)
$ per share
Earnings per share:
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
Basic net loss
$
(0.41)
(0.90)
Diluted net loss
(0.41)
(0.90)
The unaudited supplemental pro forma financial information is presented for illustration purposes only and is not
necessarily indicative of the operating results that would have occurred had the transaction been completed on
January 1, 2020, nor is it necessarily indicative of future operating results of the combined entity. The unaudited
pro forma financial information for the three- and nine-month periods ending September 30, 2020 is a result of
combining the consolidated income statement of ConocoPhillips with the results of Concho. The pro forma results
do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction. The pro
forma results include adjustments to reverse impairment expense of $
10.5
1.9
gas properties and goodwill, respectively, recorded by Concho in the nine-month period ending September 30,
2020. Other adjustments made relate primarily to DD&A, which is based on the unit-of-production method,
resulting from the purchase price allocated to properties, plants and equipment. We believe the estimates and
assumptions are reasonable, and the relative effects of the transaction are properly reflected.
Notes to Consolidated Financial Statements
9
ConocoPhillips 2021 Q3 10-Q
Assets Sold
In 2020, we completed the sale of our Australia -West asset and operations. The sales agreement entitled us to a
$
200
2021, FID was announced and as such, we recognized a $
200
The purchaser failed to pay the FID bonus when due. We have commenced an arbitration proceeding against the
purchaser to enforce our contractual right to the $
200
operations related to this transaction are reflected in our Asia Pacific segment.
In the third quarter of 2021, we sold our interests in certain noncore assets in our Lower 48 segment for
approximately $
150
$
26
15
months ended September 30, 2021. We also completed the sale of our noncore exploration interests in Argentina,
recognizing a before-tax loss on disposition of $
179
our Other International segment.
For the three- and nine-months ended September 30, 2021, we recorded contingent payments of $
121
$
222
disposition on our consolidated income statement and are reflected within our Canada and Lower 48 segments.
No
Note 4—Investments, Loans and Long-Term Receivables
Australia Pacific LNG Pty Ltd (APLNG)
APLNG executed project financing agreements for an $
8.5
drawn from the facility. The project financing facility has been restructured over time and at September 30, 2021,
this facility was composed of a financing agreement with the Export-Import Bank of the United States, a
commercial bank facility and
two
and interest repayme nt in March 2017 and is scheduled to make bi-annual payments until September 2030. At
September 30, 2021, a balance of $
5.7
During the fourth quarter of 2020, the estimated fair value of our investment in APLNG declined to an amount
below carrying value, primarily due to the weakening of the U.S. dollar relative to the Australian dollar. Based on a
review of the facts and circumstances surrounding this decline in fair value, we concluded the impairment was not
other than temporary under the guidance of FASB ASC Topic 323, “Investments – Equity Method and Joint
Ventures.” Due primarily to improved outlooks for commodity prices and the strengthening of the U.S. dollar
relative to the Australian dollar during the first nine months of 2021, the estimated fair value of our investment
increased and is above carrying value at September 30, 2021.
On October 25, 2021, Origin Energy Limited agreed to the sale of
10
approximately $
1.6
preemption rights in favor of ConocoPhillips and Sinopec among other considerations. We will continue to
monitor and evaluate the relationship between the carrying value and fair value of APLNG, including any impact
from this announced transaction.
At September 30, 2021, the carrying value of our equity method investment in APLNG was $
6.4
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 September 30, 2021, significant loans to affiliated companies
included $
114
the “Accounts and notes receivable—related parties” line on our consolidated balance sheet
.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
10
Note 5—Investment in Cenovus Energy
Our investment in Cenovus Energy (CVE) shares is carried on our consolidated balance sheet at fair value of $
1.4
billion based on the closing price of $
10.06
September 30, 2021 and December 31, 2020, we held
141
208
respectively. At September 30, 2021, our investment approximated
7
common stock.
During the third quarter, we sold
47
404
Since we began disposing of our CVE shares in May 2021, we have sold
67
584
million, of which $
569
intend to continue to decrease our investment over time.
All gains and losses are recognized within “Other income (loss)” on our consolidated income statement. Proceeds
related to the sale of our CVE shares are presented within “Cash Flows from Investing Activities” on our
consolidated statement of cash flows.
for information related to fair value measurement
.
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Total Net gain (loss) on equity securities
$
17
(162)
743
(1,302)
Less: Net gain (loss) on equity securities sold during
(50)
-
177
-
Unrealized gain (loss) on equity securities still held at
$
67
(162)
566
(1,302)
Note 6—Impairments
During the three- and nine-month periods ended September 30, 2021 and 2020, we recognized before -tax
impairment charges within the following segments:
Millions of Dollars
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Alaska
$
-
-
3
-
Lower 48
(89)
1
(93)
514
Europe, Middle East and North Africa
-
1
-
7
$
(89)
2
(90)
521
In the three-month period ended September 30, 2021, we recorded a credit to impairment of $
89
Lower 48 segment due to a decreased ARO estimate for a previously sold asset, in which we retained the ARO
liability.
In the first quarter of 2020, we recorded impairments of $
511
in the Lower 48 segment which were written down to fair value.
Notes to Consolidated Financial Statements
11
ConocoPhillips 2021 Q3 10-Q
Note 7—Debt
Our debt balance at September 30, 2021, was $
19.7
15.4
On January 15, 2021, we completed the acquisition of Concho in an all-stock transaction. In the acquisition, we
assumed Concho’s publicly traded debt, with an outstanding principal balance of $
3.9
at fair value of $
4.7
●
3.75
% Notes due
2027
1,000
●
4.3
% Notes due
2028
1,000
●
2.4
% Notes due
2031
500
●
4.875
% Notes due
2047
800
●
4.85
% Notes due
2048
600
The adjustment to fair value of the senior notes of approximately $
0.8
amortized as an adjustment to interest expense over the remaining contractual terms of the senior notes.
In the first quarter of 2021, we completed a debt exchange offer related to the debt assumed from Concho. Of the
approximately $
3.9
98
percent, or approximately $
3.8
the same interest rates and maturity dates as the Concho senior notes. The portion not exchanged, approximately
$
67
treated as a debt modification for accounting purposes resulting in a portion of the unamortized fair value
adjustment of the Concho senior notes allocated to the new debt issued by ConocoPhillips on the settlement date
of the exchange. The new debt issued in the exchange is fully and unconditionally guaranteed by ConocoPhillips
Company.
We have a revolving credit facility totaling $
6.0
May 2023
. Our revolving credit
facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $
500
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
of its consolidated subsidiaries. The amount of the facility is not subject to redetermination prior to its expiration
date.
Credit facility borrowings may bear interest at a margin above rates offered by certain designated banks in the
London interbank market or at a margin above the overnight federal funds rate or prime rates offered by certain
designated banks in the U.S. The facility agreement calls for commitment fees on available, but unused, amounts.
The facility agreement also contains early termination rights if our current directors or their approved successors
cease to be a majority of the Board of Directors.
The revolving credit facility supports our ability to issue up to $
6.0
is generally limited to
maturities of 90 days
sheet. With no commercial paper outstanding and
no
6.0
billion in available borrowing capacity under our revolving credit facility at September 30, 2021. At December 31,
2020, we had $
300
no
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
12
Following our September 20, 2021, announcement regarding the Shell Permian Acquisition, the three rating
agencies reviewed their pre-announcement ratings on our debt resulting in the following:
●
Fitch affirmed its rating of our long-term debt as “A” with a “stable” outlook.
●
S&P affirmed its rating of our long-term debt of “A-” with a “stable” outlook.
●
Moody’s affirmed its rating of our senior long-term debt of “A3” and upgraded the outlook to “positive”
from “stable.”
We do not have any ratings triggers on any of our corporate debt that would cause an automatic default, and
thereby impact our access to liquidity, upon downgrade of our credit ratings. If our credit ratings are downgraded
from their current levels, it could increase the cost of corporate debt available to us and restrict our access to the
commercial paper markets. If our credit rating were to deteriorate to a level prohibiting us from accessing the
commercial paper market, we would still be able to access funds under our revolving credit facility.
At September 30, 2021, we had $
283
maturities ranging through 2035. The VRDBs are redeemable at the option of the bondholders on any business
day. If they are ever redeemed, we have the ability and intent to refinance on a long-term basis, therefore, the
VRDBs are included in the “Long-term debt” line on our consolidated balance sheet.
Notes to Consolidated Financial Statements
13
ConocoPhillips 2021 Q3 10-Q
Note 8—Changes in Equity
Millions of Dollars
Attributable to ConocoPhillips
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Non-
Controlling
Interests
Total
For the three months ended September 30, 2021
Balances at June 30, 2021
$
21
60,337
(48,278)
(4,920)
37,116
44,276
Net income
2,379
2,379
Other comprehensive income
(203)
(203)
Dividends paid ($
0.43
(579)
(579)
Dividends payable ($
0.46
(609)
(609)
Repurchase of company common stock
(1,243)
(1,243)
Distributed under benefit plans
94
94
Balances at September 30, 2021
$
21
60,431
(49,521)
(5,123)
38,307
-
44,115
For the nine months ended September 30, 2021
Balances at December 31, 2020
$
18
47,133
(47,297)
(5,218)
35,213
29,849
Net income
5,452
5,452
Other comprehensive income
95
95
Dividends paid ($
1.29
(1,750)
(1,750)
Dividends payable ($
0.46
(609)
(609)
Acquisition of Concho
3
13,122
13,125
Repurchase of company common stock
(2,224)
(2,224)
Distributed under benefit plans
176
176
Other
1
1
Balances at September 30, 2021
$
21
60,431
(49,521)
(5,123)
38,307
-
44,115
Millions of Dollars
Attributable to ConocoPhillips
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Non-
Controlling
Interests
Total
For the three months ended September 30, 2020
Balances at June 30, 2020
$
18
47,079
(47,130)
(5,825)
37,351
31,493
Net income
(450)
(450)
Other comprehensive income
159
159
Dividends paid ($
0.42
(454)
(454)
Distributed under benefit plans
34
34
Other
1
1
Balances at September 30, 2020
$
18
47,113
(47,130)
(5,666)
36,448
-
30,783
For the nine months ended September 30, 2020
Balances at December 31, 2019
$
18
46,983
(46,405)
(5,357)
39,742
69
35,050
Net income
(1,929)
46
(1,883)
Other comprehensive loss
(309)
(309)
Dividends paid ($
1.26
(1,367)
(1,367)
Repurchase of company common stock
(726)
(726)
Distributions to noncontrolling interests and other
(32)
(32)
Dispositions
(84)
(84)
Distributed under benefit plans
130
130
Other
1
2
1
4
Balances at September 30, 2020
$
18
47,113
(47,130)
(5,666)
36,448
-
30,783
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
14
Note 9—Guarantees
At September 30, 2021, we were liable for certain contingent obligations under various contractual arrangements
as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for
newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not
recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we
are not currently performing with any significance under the guarantee and expect future performance to be
either immaterial or have only a remote chance of occurrence.
APLNG Guarantees
At September 30, 2021, we had outstanding multiple guarantees in connection with our
37.5
interest in APLNG. The following is a description of the guarantees with values calculated utilizing September 2021
exchange rates:
●
During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rata portion
of the funds in a project finance reserve account. We estimate the remaining term of this guarantee is
9
years
. Our maximum exposure under this guarantee is approximately $
170
if an enforcement action is commenced by the project finance lenders against APLNG. At September 30,
2021, the carrying value of this guarantee was $
14
●
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 with remaining terms of
1 to 21 years
. Our maximum potential liability for future payments, or
cost of volume delivery, under these guarantees is estimated to be $
670
1.2
intentional or reckless breach) and would become payable if APLNG fails to meet its obligations under these
agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as
the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural
gas to meet these sales commitments and if the co-venturers do not make necessary equity contributions
into APLNG.
●
We have guaranteed the performance of APLNG with regard to certain other contracts executed in
connection with the project’s continued development. The guarantees have remaining terms of
15 to 24
years
guarantees is approximately $
180
September 30, 2021, the carrying value of these guarantees was $
11
Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling approximately $
720
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
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 September
30, 2021, the carrying value of these guarantees was $
11
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,
lease commitments and environmental liabilities. Those related to environmental issues have terms that are
generally indefinite and the maximum amounts of future payments are generally unlimited. The carrying amount
recorded for these indemnification obligations at September 30, 2021, was $
30
indemnification liability over the relevant time period the indemnity is in effect, if one exists, based on the facts
and circumstances surrounding each type of indemnity. In cases where the indemnification term is indefinite, we
will reverse the liability when we have information the liability is essentially relieved or amortize the liability over
Notes to Consolidated Financial Statements
15
ConocoPhillips 2021 Q3 10-Q
an appropriate time period as the fair value of our indemnification exposure declines. Although it is reasonably
possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not
possible to make a reasonable estimate of the maximum potential amount of future payments.
for
additional information about environmental liabilities
.
Note 10—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.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
16
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 September 30, 2021, our balance sheet included a total environmental accrual of $
191
$
180
substantial amount of these expenditures within the next
30 years
. In the future, we may be involved in additional
environmental assessments, cleanups and proceedings.
Litigation and Other Contingencies
We are subject to various lawsuits and claims including but not limited to matters involving oil and gas royalty and
severance tax payments, gas measurement and valuation methods, contract disputes, environmental damages,
climate change, personal injury, and property damage. Our primary exposures for such matters relate to alleged
royalty and tax underpayments on certain federal, state and privately owned properties, claims of alleged
environmental contamination from historic operations, and other contract disputes. We will continue to defend
ourselves vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics
of our cases, employing a litigation management process to manage and monitor the legal proceedings against us.
Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This
process also enables us to track those cases that have been scheduled for trial and/or mediation. Based on
professional judgment and experience in using these litigation management tools and available information about
current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals
and determines if adjustment of existing accruals, or establishment of new accruals, is required.
We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not
associated with financing arrangements. Under these agreements, we may be required to provide any such
company with additional funds through advances and penalties for fees related to throughput capacity not utilized.
In addition, at September 30, 2021, we had performance obligations secured by letters of credit of
$
281
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 unan imously ordered the government of Venezuela to pay ConocoPhillips approximately
$
8.7
Venezuela in 2007. On August 29, 2019, the ICSID Tribunal issued a decision rectifying the award and reducing it
by approximately $
227
8.5
sought annulment of the award, which automatically stayed enforcement of the award. On September 29, 2021,
the ICSID annulment committee lifted the stay of enforcement of the award. The annulment proceedings have
been suspended as a result of Venezuela’s non-payment of advances to cover the costs of these proceedings.
Notes to Consolidated Financial Statements
17
ConocoPhillips 2021 Q3 10-Q
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
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.
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 $
766
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
recognition and enforcement of the award in various jurisdictions. ConocoPhillips has ensured that all the actions
related to the award meet all appropriate U.S. regulatory requirements, including those related to any applicable
sanctions imposed by the U.S. against Venezuela.
The Office of Natural Resources Revenue (ONRR) has conducted audits of ConocoPhillips’ payment of royalties on
federal lands and has issued multiple orders to pay additional royalties to the federal government. ConocoPhillips
and the ONRR entered into a settlement agreement on March 23, 2021, to resolve the dispute. All orders and
associated appeals have been withdrawn with prejudice.
Beginning in 2017, cities, counties, governments and other entities in several states in the U.S. have filed lawsuits
against oil and gas companies, including ConocoPhillips, seeking compensatory damages and equitable relief to
abate alleged climate change impacts. Additional lawsuits with similar allegations are expected to be filed. The
amounts claimed by plaintiffs are unspecified and the legal and factual issues involved in these cases are
unprecedented. ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate
vehicle to address the challenges associated with climate change and will vigorously defend against such lawsuits.
Several Louisiana parishes and the State of Louisiana have filed
43
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
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. ConocoPhillips is challenging this order. 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
but sold its interest approximately
30 years
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
upon FID of the Barossa development project under the sale and purchase agreement. Santos KOTN Pty Ltd. and
Santos Limited have filed a counterclaim, and the arbitration is underway.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
18
Note 11—Derivative and Financial Instruments
We use futures, forwards, swaps and options in various markets to meet our customer needs, capture market
opportunities and manage foreign exchange currency risk.
Commodity Derivative Instruments
Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG and NGLs.
Commodity derivative instruments are held at fair value on our consolidated balance sheet. Where these balances
have the right of setoff, they are presented on a net basis. Related cash flows are recorded as operating activities
on our consolidated statement of cash flows. On our consolidated income statement, gains and losses are
recognized either on a gross basis if directly related to our physical business or a net basis if held for trading. Gains
and losses related to contracts that meet and are designated with the NPNS exception are recognized upon
settlement. We generally apply this exception to eligible crude contracts and certain gas contracts. We do not
apply hedge accounting for our commodity derivatives.
The following table presents the gross fair values of our commodity derivatives, excluding collateral, and the line
items where they appear on our consolidated balance sheet:
Millions of Dollars
September 30
December 31
2021
2020
Assets
Prepaid expenses and other current assets
$
1,601
229
Other assets
109
26
Liabilities
Other accruals
1,681
202
Other liabilities and deferred credits
94
18
The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated
income statement were:
Millions of Dollars
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Sales and other operating revenues
$
(483)
33
(862)
30
Other income (loss)
7
(2)
23
3
Purchased commodities
405
(27)
550
(29)
On January 15, 2021, we assumed financial derivative instruments consisting of oil and natural gas swaps in
connection with the acquisition of Concho. At the acquisition date, the financial derivative instruments acquired
were recognized at fair value as a net liability of $
456
December 31, 2022. During the first quarter of 2021, we recognized a loss of $
173
contracts with settlement dates on or before March 31, 2021, and an additional $
132
remaining Concho derivative contracts with settlement dates subsequent to March 31, 2021, for a total loss of
$
305
operating revenues” line on our consolidated income statement.
Notes to Consolidated Financial Statements
19
ConocoPhillips 2021 Q3 10-Q
By the end of March 2021, all oil and natural gas derivative financial instruments acquired from Concho were
contractually settled. In connection with the settlement, we issued a cash payment of $
692
quarter of 2021 and $
69
contracts are presented 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)
September 30
December 31
2021
2020
Commodity
Natural gas and power (billions of cubic feet equivalent)
10
(20)
(19)
(10)
Financial Instruments
We invest in financial instruments with maturities based on our cash forecasts for the various accounts and
currency pools we manage. The types of financial instruments in which we currently invest include:
●
Time deposits: Interest bearing deposits placed with financial institutions for a predetermined amount of
time.
●
Demand deposits: Interest bearing deposits placed with financial institutions. Deposited funds can be
withdrawn without notice.
●
Commercial paper: Unsecured promissory notes issued by a corporation, commercial bank or government
agency purchased at a discount to mature at par.
●
U.S. government or government agency obligations: Securities issued by the U.S. government or U.S.
government agencies.
●
Foreign government obligations: Securities issued by foreign governments.
●
Corporate bonds: Unsecured debt securities issued by corporations.
●
Asset-backed securities: Collateralized debt securities.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
20
The following investments are carried on our consolidated balance sheet at cost, plus accrued interest and the table
reflects remaining maturities at September 30, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-Term
Receivables
September 30
December 31
September 30
December 31
September 30
December 31
2021
2020
2021
2020
2021
2020
Cash
$
634
597
Demand Deposits
1,847
1,133
Time Deposits
1 to 90 days
7,226
1,225
469
2,859
91 to 180 days
8
448
Within one year
5
13
One year through five years
2
1
U.S. Government
1 to 90 days
16
23
-
-
$
9,723
2,978
482
3,320
2
1
The following investments in debt securities classified as available for sale are carried at fair value on our consolidated
balance sheet at September 30, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-Term
Receivables
September 30
December 31
September 30
December 31
September 30
December 31
2021
2020
2021
2020
2021
2020
Major Security Type
Corporate Bonds
$
-
-
113
130
184
143
Commercial Paper
110
13
69
155
U.S. Government
-
-
-
4
6
13
U.S. Government
2
-
8
17
Foreign Government
10
-
3
2
Asset-backed
2
-
59
41
$
110
13
196
289
260
216
Cash and Cash Equivalents and Short-Term Investments have remaining maturities within one year.
Investments and Long-Term Receivables have remaining maturities greater than one year through eight years.
Notes to Consolidated Financial Statements
21
ConocoPhillips 2021 Q3 10-Q
The following table summarizes the amortized cost basis and fair value of investments in debt securities classified
as available for sale:
Millions of Dollars
Amortized Cost Basis
Fair Value
September 30
December 31
September 30
December 31
2021
2020
2021
2020
Major Security Type
Corporate bonds
$
296
271
297
273
Commercial paper
179
168
179
168
U.S. government obligations
6
17
6
17
U.S. government agency obligations
10
17
10
17
Foreign government obligations
13
2
13
2
Asset-backed securities
61
41
61
41
$
565
516
566
518
At September 30, 2021 and December 31, 2020, total unrealized losses for debt securities classified as available for
sale with net losses were negligible. Additionally, at September 30, 2021 and December 31, 2020, investment s in
these debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded
were negligible.
For the three- and nine-month periods ended September 30, 2021, proceeds from sales and redemptions of
investments in debt securities classified as available for sale were $
165
485
the three- and nine-month periods ended September 30, 2020, proceeds from sales and redemptions of
investments in debt securities classified as available for sale were $
109
298
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.
Credit Risk
Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents,
short-term investments, long-term investments in debt securities, OTC derivative contracts and trade receivables.
Our cash equivalents and short-term investments are placed in high-quality commercial paper, government money
market funds, U.S. government and government agency obligations, time deposits with major international banks
and financial institutions, high-quality corporate bonds, foreign government obligations and asset-backed
securities. Our long-term investments in debt securities are placed in high-quality corporate bonds, asset-backed
securities, U.S. government and government agency obligations, foreign government obligations, and time
deposits with major international banks and financial institutions.
The credit risk from our OTC derivative contracts, such as forwards, swaps and options, derives from the
counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits
and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant
nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these
trades are cleared primarily with an exchange clearinghouse and subject to mandatory margin requirements until
settled; however, we are exposed to the credit risk of those exchange brokers for receivables arising from daily
margin cash calls, as well as for cash deposited to meet initial margin requirements.
Our trade receivables result primarily from our 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
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.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
22
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 September 30, 2021 and December 31, 2020, was $
455
25
For these instruments,
no
had been downgraded below investment grade at September 30, 2021, we would have been required to post $
396
million of additional collateral, either with cash or letters of credit.
Note 12—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit
price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed according to
the quality of valuation inputs under the following hierarchy:
●
Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities.
●
Level 2: Inputs other than quoted prices that are directly or indirectly observable.
●
Level 3: Unobservable inputs that are significant to the fair value of assets or liabilities.
The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that
are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable
inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and
liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer
available. There were no material transfers into or out of Level 3 during the three- and nine-month periods ended
September 30, 2021, nor during the year ended December 31, 2020.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair value on a recurring basis primarily include our investment in CVE
common shares, our investments in debt securities classified as available for sale, and commodity derivatives.
●
Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are
valued using unadjusted prices available from the underlying exchange. Level 1 also includes our
investment in common shares of CVE, which is valued using quotes for shares on the NYSE, and our
investments in U.S. government obligations classified as available for sale debt securities, which are
valued using exchange prices.
●
Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and
sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing
service companies that are all corroborated by market data. Level 2 also includes our investments in debt
securities classified as available for sale including investments in corporate bonds, commercial paper,
asset-backed securities, U.S. government agency obligations and foreign government obligations that are
valued using pricing provided by brokers or pricing service companies that are corroborated with market
data.
●
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.
Notes to Consolidated Financial Statements
23
ConocoPhillips 2021 Q3 10-Q
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
September 30, 2021
December 31, 2020
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investment in CVE shares
$
1,416
-
-
1,416
1,256
-
-
1,256
Investments in debt securities
6
560
-
566
17
501
-
518
Commodity derivatives
882
788
40
1,710
142
101
12
255
Total assets
$
2,304
1,348
40
3,692
1,415
602
12
2,029
Liabilities
Commodity derivatives
$
893
723
159
1,775
120
91
9
220
Total liabilities
$
893
723
159
1,775
120
91
9
220
The following table summarizes those commodity derivative balances subject to the right of setoff as
presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for
multiple derivative instruments executed with the same counterparty in our financial statements when a legal
right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts Not
Gross
Net
Amounts
Subject to
Gross
Amounts
Amounts
Cash
Net
Recognized
Right of Setoff
Amounts
Offset
Presented
Collateral
Amounts
September 30, 2021
Assets
$
1,710
113
1,597
883
714
-
714
Liabilities
1,775
129
1,646
883
763
34
729
December 31, 2020
Assets
$
255
2
253
157
96
10
86
Liabilities
220
1
219
157
62
4
58
At September 30, 2021 and December 31, 2020, we did not present any amounts gross on our consolidated
balance sheet where we had the right of setoff.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
24
Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
●
Cash and cash equivalents and short-term investments: The carrying amount reported on the balance
sheet approximates fair value. For those investments classified as available for sale debt securities, the
carrying amount reported on the balance sheet is fair value.
●
Accounts and notes receivable (including long-term and related parties): The carrying amount reported on
the balance sheet approximates fair value. The valuation technique and methods used to estimate the
fair value of the current portion of fixed -rate related party loans is consistent with Loans and advances—
related parties.
●
Investment in CVE:
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.
●
Loans and advances—related parties: The carrying amount of floating-rate loans approximates fair value.
The fair value of fixed-rate loan activity is measured using market observable data and is categorized as
Level 2 in the fair value hierarchy.
●
Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts
payable and floating-rate debt reported on the balance sheet approximates fair value.
●
Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a
pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in
the fair value hierarchy.
●
Commercial paper: The carrying amount of our commercial paper instruments approximates fair value
and is reported on the balance sheet as short-term debt.
The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff
exists for commodity derivatives):
Millions of Dollars
Carrying Amount
Fair Value
September 30
December 31
September 30
December 31
2021
2020
2021
2020
Financial assets
Investment in CVE shares
$
1,416
1,256
1,416
1,256
Commodity derivatives
827
88
827
88
Investments in debt securities
566
518
566
518
Loans and advances—related parties
114
220
114
220
Financial liabilities
Total debt, excluding finance leases
18,815
14,478
22,797
19,106
Commodity derivatives
858
59
858
59
Notes to Consolidated Financial Statements
25
ConocoPhillips 2021 Q3 10-Q
Note 13—Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss in the equity section of our consolidated balance sheet included:
Millions of Dollars
Defined Benefit
Plans
Net Unrealized
Gain (Loss) on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2020
$
(425)
2
(4,795)
(5,218)
Other comprehensive income (loss)
169
(1)
(73)
95
September 30, 2021
$
(256)
1
(4,868)
(5,123)
The following table summarizes reclassifications out of accumulated other comprehensive loss and into net
income (loss):
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Defined benefit plans
$
29
30
83
46
The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $
7
7
million for the three-month periods ended September 30, 2021 and September 30, 2020, respectively, and $
22
11
nine-month periods ended September 30, 2021 and September 30, 2020, respectively
.
Note 14—Cash Flow Information
Millions of Dollars
Nine Months Ended
September 30
Cash Payments
2021
2020
Interest
$
695
591
Income taxes
358
803
Net Sales (Purchases) of Investments
Short-term investments purchased
$
(5,487)
(9,662)
Short-term investments sold
8,478
8,776
Long-term investments purchased
(228)
(271)
Long-term investments sold
83
68
$
2,846
(1,089)
We paid a deposit of $
475
is included within the “Cash Flows from Investing Activities - Other” on our consolidated statement of cash flows.
for additional information on cash and non-cash changes to our consolidated balance sheet associated
with our Concho acquisition and information on the announced Shell transaction.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
26
Note 15—Employee Benefit Plans
Pension and Postretirement Plans
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int'l.
U.S.
Int'l.
Components of Net Periodic Benefit Cost
Three Months Ended September 30
Service cost
$
17
15
21
14
-
1
Interest cost
12
19
17
21
1
2
Expected return on plan assets
(22)
(30)
(21)
(37)
-
-
Amortization of prior service credit
-
-
-
(1)
(9)
(7)
Recognized net actuarial loss
9
8
12
5
-
1
Settlements
28
-
27
-
-
-
Net periodic benefit cost
$
44
12
56
2
(8)
(3)
Nine Months Ended September 30
Service cost
$
56
46
63
41
1
2
Interest cost
40
59
51
63
3
5
Expected return on plan assets
(66)
(90)
(63)
(108)
-
-
Amortization of prior service credit
-
-
-
(1)
(28)
(23)
Recognized net actuarial loss
36
24
37
16
1
1
Settlements
72
-
28
(1)
-
-
Curtailments
12
-
-
-
-
-
Special Termination Benefits
9
-
-
-
-
-
Net periodic benefit cost
$
159
39
116
10
(23)
(15)
The components of net periodic benefit cost, other than the service cost component, are included in the “Other
expenses” line item on our consolidated income statement.
We recognized a proportionate share of prior actuarial losses from other comprehensive income as pension
settlement expense of $
28
72
2021, respectively. As part of our company-wide restructuring program, we concluded that actions taken during
the first quarter of 2021, would result in a significant reduction of future service of active employees in the U.S.
qualified pension plan, a U.S. nonqualified supplemental retirement plan and the U.S. other postretirement benefit
plans. As a result, we recognized an increase in the benefit obligation as a curtailment loss of $
12
U.S. pension benefit plans. 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 September 30, 2021. At the
measurement date, the net pension liability decreased by $
106
a result of an increase in the discount rate, resulting in a corresponding increase to other comprehensive income.
Notes to Consolidated Financial Statements
27
ConocoPhillips 2021 Q3 10-Q
The relevant assumptions are summarized in the following table:
September 30
December 31
2021
2020
Expected return on plan assets
3.40
%
5.80
Relevant discount rates
U.S. qualified pension plan
2.80
%
2.40
U.S. nonqualified pension plan
2.30
1.85
During the first nine months of 2021, we contributed $
409
104
to our international benefit plans. In 2021, we expect to contribute a total of approximately $
475
domestic qualified and nonqualified pension and postretirement benefit plans and $
115
international qualified and nonqualified pension and postretirement benefit plans.
Severance Accrual Activity
Millions of Dollars
Balance at December 31, 2020
$
24
Accruals
165
Benefit payments
(102)
Balance at September 30, 2021
$
87
Accruals include severance costs associated with our company-wide restructuring program. Of the remaining
balance at September 30, 2021, $
51
for information relating to our
Concho acquisition.
Note 16—Related Party Transactions
Our related parties primarily include equity method investments and certain trusts for the benefit of employees.
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
Significant Transactions with Equity Affiliates
2021
2020
2021
2020
Operating revenues and other income
$
22
21
63
59
Purchases
1
-
5
-
Operating expenses and selling, general and administrative
expenses
45
16
135
43
Net interest (income) expense*
$
-
(1)
(2)
(5)
*We paid interest to, or received interest from, various affiliates
.
for information related to loans to
equity affiliates.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
28
Note 17—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
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Revenue from contracts with customers
$
8,880
3,078
23,794
9,908
Revenue from contracts outside the scope of ASC Topic 606
Physical contracts meeting the definition of a derivative
2,620
1,280
7,348
3,432
Financial derivative contracts
(174)
28
(434)
(47)
Consolidated sales and other operating revenues
$
11,326
4,386
30,708
13,293
Revenues from contracts outside the scope of ASC Topic 606 relate primarily to physical gas contracts at market
prices which qualify as derivatives accounted for under ASC Topic 815, “Derivatives and Hedging,” and for which
we have not elected NPNS. There is no significant difference in contractual terms or the policy for recognition of
revenue from these contracts and those within the scope of ASC Topic 606. The following disaggregation of
revenues is provided in conjunction with
Millions of Dollars
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Revenue from Outside the Scope of ASC Topic 606
by Segment
Lower 48
$
2,123
1,018
5,934
2,692
Canada
266
152
776
452
Europe, Middle East and North Africa
231
110
638
288
Physical contracts meeting the definition of a derivative
$
2,620
1,280
7,348
3,432
Millions of Dollars
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Revenue from Outside the Scope of ASC Topic 606
by Product
Crude oil
$
215
100
517
218
Natural gas
2,192
1,042
6,423
2,895
Other
213
138
408
319
Physical contracts meeting the definition of a derivative
$
2,620
1,280
7,348
3,432
Notes to Consolidated Financial Statements
29
ConocoPhillips 2021 Q3 10-Q
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.
we have applied the practical expedient allowed in ASC
Topic 606 and do not disclose the aggregate amount of the transaction price allocated to performance obligations
or when we expect to recognize revenues that are unsatisfied (or partially unsatisfied) as of the end of the
reporting period.
Receivables and Contract Liabilities
Receivables from Contracts with Customers
At September 30, 2021, the “Accounts and notes receivable” line on our consolidated balance sheet, includes
trade receivables of $
4,262
1,827
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 we license proprietary technology to customers related to
the optimization process for operating LNG plants. The agreements typically provide for negotiated payments to
be made at stated milestones. The payments are not directly related to our performance under the contract and
are recorded as deferred revenue to be recognized as revenue when the customer can utilize and benefit from
their right to use the license.
Payments are received in installments over the construction period.
Millions of Dollars
Contract Liabilities
At December 31, 2020
$
97
Contractual payments received
7
Revenue recognized
(62)
At September 30, 2021
$
42
Amounts Recognized in the Consolidated Balance Sheet at September 30, 2021
Current liabilities
$
42
For the nine-month period of 2021, we recognized revenue of $62 million in the “Sales and other operating
revenues” line on our consolidated income statement. No revenue was recognized during the three-month period
ended September 30, 2021. We expect to recognize the contract liabilities as of September 30, 2021, as revenue
during 2022.
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
30
Note 18—Segment Disclosures and Related Information
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide
basis. We manage our operations through
six
region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International.
Corporate and Other represents income and costs not directly associated with an operating segment, such as most
interest income and expense; premiums on early retirement of debt; corporate overhead and certain technology
activities, including licensing revenues; and unrealized holding gains or losses on equity securities. Corporate
assets include all cash and cash equivalents and short-term investments.
We evaluate performance and allocate resources based on net income (loss) attributable to ConocoPhillips.
Intersegment sales are at prices that approximate market.
On January 15, 2021, we completed our acquisition of Concho, an independent oil and gas exploration and
production company with operations across New Mexico and West Texas. Results of operations for Concho are
included in our Lower 48 segment for the current period. Certain transaction and restructuring costs associated
with the Concho acquisition are included in our Corporate and Other segment.
Notes to Consolidated Financial Statements
31
ConocoPhillips 2021 Q3 10-Q
Analysis of Results by Operating Segment
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Sales and Other Operating Revenues
Alaska
$
1,395
864
3,946
2,396
Intersegment eliminations
-
(30)
-
(11)
Alaska
1,395
834
3,946
2,385
Lower 48
7,566
2,323
19,968
6,859
Intersegment eliminations
(1)
(9)
(5)
(47)
Lower 48
7,565
2,314
19,963
6,812
Canada
967
348
2,636
1,026
Intersegment eliminations
(406)
(20)
(1,063)
(200)
Canada
561
328
1,573
826
Europe, Middle East and North Africa
1,127
432
3,270
1,320
Asia Pacific
673
477
1,880
1,930
Other International
1
1
4
5
Corporate and Other
4
-
72
15
Consolidated sales and other operating revenues
$
11,326
4,386
30,708
13,293
Sales and Other Operating Revenues by Geographic Location
(1)
United States
$
8,963
3,148
23,978
9,209
Australia
-
-
-
605
Canada
561
328
1,573
826
China
193
161
519
374
Indonesia
231
167
634
503
Libya
313
6
833
50
Malaysia
249
148
727
447
Norway
678
358
1,708
1,046
United Kingdom
136
68
729
224
Other foreign countries
2
2
7
9
Worldwide consolidated
$
11,326
4,386
30,708
13,293
Sales and Other Operating Revenues by Product
Crude oil
$
6,433
2,321
16,725
6,981
Natural gas
4,099
1,509
11,422
4,354
Natural gas liquids
414
129
976
364
Other
(2)
380
427
1,585
1,594
Consolidated sales and other operating revenues by product
$
11,326
4,386
30,708
13,293
(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
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
Alaska
$
405
(16)
935
(76)
Lower 48
1,631
(78)
3,274
(880)
Canada
155
(75)
267
(270)
Europe, Middle East and North Africa
241
92
601
318
Asia Pacific
257
25
749
945
Other International
(97)
(8)
(106)
14
Corporate and Other
(213)
(390)
(268)
(1,980)
Consolidated net income (loss) attributable to ConocoPhillips
$
2,379
(450)
5,452
(1,929)
Notes to Consolidated Financial Statements
ConocoPhillips 2021 Q3 10-Q
32
Millions of Dollars
September 30
December 31
2021
2020
Total Assets
Alaska
$
14,617
14,623
Lower 48
33,200
11,932
Canada
6,797
6,863
Europe, Middle East and North Africa
8,956
8,756
Asia Pacific
10,657
11,231
Other International
1
226
Corporate and Other
13,076
8,987
Consolidated total assets
$
87,304
62,618
Note 19—Income Taxes
Our effective tax rate for the three-month periods ended September 30, 2021 and 2020 was
34
12
percent, respectively. Both periods were primarily impacted by shifts in our before-tax income between higher
and lower tax jurisdictions as well as the change in our U.S. valuation allowance driven by the fair value
measurement of our CVE common shares.
Our effective tax rate for the nine-month periods ended September 30, 2021 and 2020 was
35
8
percent, respectively, and both periods were impacted by the same items noted above. Our 2021 effective tax
rate was adversely impacted by $
75
acquired from Concho offsetting U.S. foreign source revenue that would otherwise have been offset by foreign tax
credits. The nine-month period ending September 30, 2020, also reflects the tax impact of the gain on disposition
recognized for the Australia-West divestiture.
During the three and nine-month periods of 2021, our valuation allowance decreased by $
4
156
million, respectively, compared to increases of $
33
264
change to our U.S. valuation allowance for all periods relates primarily to the fair value measurement of our CVE
common shares and our expectation of the tax impact related to incremental capital gains and losses.
The Company has ongoing income tax audits in numerous jurisdictions which are occasionally extended or
completed earlier than anticipated. Within the next twelve months we may have audit periods close that could
significantly impact our total unrecognized tax benefits. The amount of such change and the associated impact on
our financial statements is not estimable at this time.
Our deferred tax liability increased by approximately $
1.1
Concho acquisition. Additionally, our reserve for unrecognized tax benefits increased by $
150
tax credit carryovers acquired from Concho that we do not expect to recognize.
Management’s Discussion and Analysis
33
ConocoPhillips 2021 Q3 10-Q
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Management’s Discussion and Analysis is the company’s analysis of its financial performance and of significant
trends that may affect future performance. It should be read in conjunction with the financial statements and
notes. It contains forward-looking statements including, without limitation, statements relating to the company’s
plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “budget,” “continue,”
“could,” “effort,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,”
“plan,” “potential,” “predict,” “projection,” “seek,” “should,” “target,” “will,” “would,” and similar expressions
identify forward-looking statements. The company does not undertake to update, revise or correct any of the
forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that
such forward-looking statements should be read in conjunction with the company’s disclosures under the heading:
“CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995,” beginning on page 57.
The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss)
attributable to ConocoPhillips.
Business Environment and Executive Overview
ConocoPhillips is the world’s largest independent E&P company with operations and activities in 14 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 September 30,
2021, we employed approximately 9,900 people worldwide and had total assets of $87 billion.
Completed and Announced Acquisitions
On January 15, 2021, we completed our acquisition of Concho Resources Inc. (Concho), an independent oil and gas
exploration and production company with operations across New Mexico and West Texas. The addition of
complementary acreage in the Delaware and Midland Basins resulted in a significant Permian presence to augment
our leading unconventional positions in the Eagle Ford, Bakken and Montney.
In September 2021, we signed a definitive agreement to acquire Shell Enterprises LLC ’s assets in the Delaware
Basin (Shell Permian Acquisition) in an all-cash transaction for $9.5 billion before customary adjustments. Assets
to be acquired include approximately 225,000 net acres and producing properties located entirely in Texas, as well
as over 600 miles of operated crude, gas and water pipelines and infrastructure. This acquisition further enhances
our already sizeable Permian position, and we believe that our development, operational and commercial
expertise will deliver significant incremental value. This acquisition is expected to close in the fourth quarter of
2021, subject to regulatory approval and other customary closing conditions.
Overview
While commodity prices in the third quarter of 2021 improve d to pre-pandemic levels, we expect that they will
continue to be cyclical and volatile. Our view is that a successful business strategy in the E&P industry must be
resilient in lower price environments, while also retaining upside during periods of higher prices. As such, we are
unhedged, remain highly disciplined in our investment decisions and continually monitor market fundamentals
including OPEC plus updates regarding supply guidance and inventory levels. Demand continues to recover but
has yet to regain pre -pandemic levels. The speed and extent of this recovery will be influenced by continual easing
of COVID-19 restrictions that have reduced economic activity and depressed the demand for our products globally.
Management’s Discussion and Analysis
ConocoPhillips 2021 Q3 10-Q
34
The energy macro-environment , including energy transition, continues to evolve. We believe ConocoPhillips can
play a valued role in the energy transition. We have adopted a triple mandate that simultaneously calls for
meeting energy pathway demand, delivering competitive returns of and on capital, and achieving our net-zero
ambition on operational (scope 1 and 2) emissions.
Our triple mandate is supported by financial principles and capital allocation priorities that should allow us to
deliver superior returns through the price cycles . Our financial principles consist of maintaining balance sheet
strength, providing peer-leading distributions, making disciplined investment s, and delivering ESG excellence, all of
which are in service to delivering competitive financial returns. Our completed and announced acquisitions this
year further reinforce our value proposition. In the third quarter, total company production was 1,544 MBOED
resulting in cash provided by operating activities of $4.8 billion. In the nine-month period ended September 30,
2021, we generated $11.1 billion in cash provided by operating activities, returning $1.8 billion to shareholders
through dividends and $2.2 billion through share repurchases. We ended the quarter with cash, cash equivalents
and short-term investments totaling $10.5 billion.
In February 2021, we resumed our share repurchase program at an annualized level of $1.5 billion, which we
increased in the second quarter to an annualized level of $2.5 billion for 2021.
Additionally, in May 2021 we announced a paced monetization program related to the 208 million shares of
Cenovus Energy (CVE) common shares owned at that time. We plan to fully dispose of our CVE shares by year-end
2022, however, the sales pace for the remaining shares will be guided by market conditions, and we retain
discretion to adjust accordingly. During the third quarter of 2021, we sold 47 million shares for $404 million and
inception to date have sold 67 million shares for $584 million. Proceeds from the disposition of CVE shares will be
deployed toward incremental share repurchases.
In September 2021, we declared an increase in the company’s quarterly ordinary dividend from 43 cents per share
to 46 cents per share, representing a 7 percent increase. The dividend is payable on December 1, 2021, to
stockholders of record at the close of business on October 28, 2021.
Planned distributions for 2021 amount to a total of approximately $6 billion between dividends and share
repurchases combined.
Additionally in September 2021, we demonstrated our commitment to preserving our ‘A’ -rated balance sheet by
restating our intent to reduce the company’s gross debt by $5 billion over five years through natural and
accelerated maturities.
In conjunction with our Shell Permian Acquisition announcement , we also communicated an increase to our
planned disposition target that was initially set in June at $2 to $3 billion by 2022. We are now targeting $4 to $5
billion in disposition proceeds by 2023, with the additional $2 billion sourced primarily from the Permian Basin as
part of our ongoing portfolio high-grading and optimization efforts. To date, we have generated $0.2 billion in
disposition proceeds. The proceeds from these transactions will be used in accordance with the company’s
priorities, including returns of capital to shareholders and reduction of gross debt.
Management’s Discussion and Analysis
35
ConocoPhillips 2021 Q3 10-Q
In September 2021, in conjunction with the announcement of the Shell Permian Acquisition, we reaffirmed our
commitment to ESG leadership and excellence by announcing an improvement to our operational GHG emissions
intensity reduction targets by 2030. Our Paris-aligned climate-risk commitment now includes:
●
Net-zero ambition for operational (scope 1 and 2) emissions by 2050 with active advocacy for a price 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, an improvement from the previously announced target of 35 to 45
percent on only a gross operated basis;
●
Zero routine flaring by 2030, with an ambition to get there by 2025;
●
10 percent reduction target for methane emissions intensity by 2025 from a 2019 baseline, in addition to
the 65 percent reductions we have made since 2015;
●
Adding continuous methane detection devices to our operations, with an initial focus on the larger Lower
48 facilities;
●
Dedicated low carbon technology organization responsible for identifying and prioritizing global emissions
reduction initiatives and opportunities associated with the energy transition including carbon capture,
utilization and storage (CCUS) and hydrogen; and
●
ESG performance factoring into executive and employee compensation programs.
Operationally, we remain focused on safely executing the business. Production was 1,544 MBOED in the third
quarter of 2021, an increase of 477 MBOED or 45 percent, compared with the third quarter of 2020, primarily due
to the addition of approximately 343 MBOED in the Permian Basin from our Concho acquisition and the absence of
last year’s economic curtailments predominantly in North American operated assets as a result of lower oil prices.
We re-invested $1.3 billion into the business in the form of capital expenditures during the third quarter, with over
half of our investments focused on flexible, short-cycle unconventional plays in the Lower 48 segment where our
production is liquids-weighted and has access to both domestic and export markets . For the full year, we remain
disciplined with our allocation of capital with a planned $5.3 billion program excluding the impacts of the recently
announced Shell Permian Acquisition which is anticipated to close in the fourth quarter.
Business Environment
Commodity prices are the most significant factor impacting our profitability and related reinvestment of operating
cash flows into our business. Dynamics that could influence world energy markets and commodity prices are
global economic health, supply or demand disruptions or fears thereof caused by civil unrest, global pandemics,
military conflicts, actions taken by OPEC plus and other major oil producing countries, environmental laws, tax
regulations, governmental policies, and weather-related disruptions. Our strategy is to create value through price
cycles by delivering on the financial, operational and ESG priorities that underpin our value proposition .
Our earnings and operating cash flows generally correlate with price levels for crude oil and natural gas, which are
subject to factors external to the company and over which we have no control. The following graph depicts the
trend in average benchmark prices for WTI crude oil, Brent crude oil and Henry Hub natural gas:
Management’s Discussion and Analysis
ConocoPhillips 2021 Q3 10-Q
36
Q3'19
Q4'19
Q1'20
Q2'20
Q3'20
Q4'20
Q1'21
Q2'21
Q3'21
WTI/Brent
$/Bbl
WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Prices
Quarterly Averages
WTI - $/Bbl
Brent - $/Bbl
HH - $/MMBTU
HH
$/MMBTU
Brent crude oil prices averaged $73.47 per barrel in the third quarter of 2021, an increase of 71 percent compared
with $43.00 per barrel in the third quarter of 2020. WTI at Cushing crude oil prices averaged $70.56 per barrel in
the third quarter of 2021, an increase of 72 percent compared with $40.93 per barrel in the third quarter of 2020.
Oil prices increased alongside the ongoing global economic recovery following 2020’s COVID impacts as well as
OPEC plus supply restraint, continued capital discipline by U.S. E&P’s and various unplanned supply disruptions in
producing countries.
Henry Hub natural gas prices averaged $4.02 per MMBTU in the third quarter of 2021, an increase of 103 percent
compared with $1.98 per MMBTU in the third quarter of 2020. Henry Hub prices have increased due to healthy
domestic demand accompanied by record levels of feedgas demand for LNG exports to Europe and Asia.
Our realized bitumen price averaged $41.19 per barrel in the third quarter of 2021, an increase of 160 percent
compared with $15.87 per barrel in the third quarter of 2020. The increase in the third quarter of 2021 was driven
by higher blend price for Surmont sales, largely attributed to a strengthening of WTI price. We continue to
optimize bitumen price realizations through the utilization of downstream transportation solutions and
implementation of alternate blend capability which results in lower diluent costs.
For the third quarter of 2021 our total average realized price increased to $56.92 per BOE compared with $30.94
per BOE in the third quarter of 2020.
Management’s Discussion and Analysis
37
ConocoPhillips 2021 Q3 10-Q
Key Operating and Financial Summary
Significant items during the third quarter of 2021 and recent announcements included the following:
●
Delivered strong operational performance across the company’s asset base, including successful planned
maintenance turnarounds, resulting in third quarter production of 1,507 MBOED, excluding Libya.
●
Net cash provided by operating activities was $4.8 billion, exceeding capital expenditures and investments
of $1.3 billion.
●
Distributed a total of $4.0 billion to shareholders year to date, comprised of $2.2 billion in share
repurchases and $1.8 billion in dividends as part of the company’s plan to return approximately $6.0
billion to shareholders during 2021.
●
Announced an increase to the quarterly dividend by 7 percent to 46 cents per share.
●
Ended the quarter with cash and cash equivalents totaling $9.8 billion and short-term investments of $0.7
billion, equaling $10.5 billion in ending cash, cash equivalents and short-term investments.
●
As part of a commitment to ESG excellence, announced an improvement to the company’s scope 1 and 2
GHG emissions intensity reduction targets from a 2016 baseline to 40 to 50 percent on a net equity and
gross operated basis, from the previous target of 35 to 45 percent on only a gross operated basis .
●
Announced highly accretive pending acquisition of Shell Enterprises LLC’s complementary Delaware Basin
position in the Permian for $9.5 billion in cash, before customary closing adjustments.
●
Generated approximately $0.2 billion in disposition proceeds from Lower 48 noncore asset sales as part of
the company’s target to generate $4 to $5 billion in proceeds by 2023. Production from the disposed
assets average approximately 15 MBOED in the first nine months of 2021.
Outlook
Capital, Cost and Production
Fourth-quarter 2021 production is expected to be 1.53 to 1.57 MMBOED. This guidance excludes Libya and
impacts from pending acquisitions. Guidance regarding capital and cost are unchanged.
This production guidance includes the impact of planned conversion of the significant majority of previously
acquired Concho two-stream contracted volumes to a three-stream (crude oil, natural gas and natural gas liquids)
reporting basis as Concho volumes are integrated into the company’s commercial activities. The conversion to
three-stream reporting is neutral to earnings. Effective in the fourth quarter, this conversion is expected to add
production of approximately 40 MBOED and increase revenue and operating costs by roughly $70 million.
Depreciation, Depletion and Amortization
Our proved reserve estimates are greatly impacted by commodity price fluctuations, and generally decrease as
prices decline and increase as prices rise. Proved reserves estimates were updated and increased in the current
quarter utilizing historical twelve-month first-of-month average prices, which decreased third quarter DD&A
expense by approximately $240 million before-tax. As such, the company reduced its 2021 DD&A expense
guidance by $0.3 billion to $7.1 billion.
Results of Operations
ConocoPhillips 2021 Q3 10-Q
38
Results of Operations
Unless otherwise indicated, discussion of results for the three - and nine-month periods ended September 30, 2021,
is based on a comparison with the corresponding periods of 2020.
Consolidated Results
A summary of the company's net income (loss) attributable to ConocoPhillips by business segment follows:
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Alaska
$
405
(16)
935
(76)
Lower 48
1,631
(78)
3,274
(880)
Canada
155
(75)
267
(270)
Europe, Middle East and North Africa
241
92
601
318
Asia Pacific
257
25
749
945
Other International
(97)
(8)
(106)
14
Corporate and Other
(213)
(390)
(268)
(1,980)
Net income (loss) attributable to ConocoPhillips
$
2,379
(450)
5,452
(1,929)
Net income (loss) attributable to ConocoPhillips in the third quarter of 2021 increased $2,829 million. Third
quarter earnings were positively impacted by:
●
Higher realized commodity prices.
●
Higher sales volumes, primarily due to our Concho acquisition and absence of production curtailments in
our North American operated assets.
●
Higher equity in earnings of affiliates, primarily due to higher LNG sales prices.
●
A gain of $17 million after-tax on our CVE common shares in the third quarter of 2021, as compared to a
$162 million after-tax loss on those shares in the third quarter of 2020.
Third quarter 2021 net income increases were partly offset by:
●
Higher production and operating expenses and taxes other than income taxes, primarily due to higher
sales volumes.
●
Higher DD&A expenses caused by higher production volumes, partially offset by lower rates driven from
price-related reserve revisions due to higher commodity prices in 2021.
Net income (loss) attributable to ConocoPhillips in the nine-month period ended September 30, 2021, increased
$7,381 million.
●
Inclusive of the third quarter gain associated with our CVE common shares, in the nine-month period we
recognized a gain of $743 million after-tax on our CVE common shares, compared with an after-tax loss of
$1,302 million in the nine-month period of 2020.
In addition to the items detailed above, earnings in the nine-month period were positively impacted by:
●
Lower impairments of $611 million, primarily due to a credit recognized for a decrease in the ARO
estimate of a previously sold asset, in which we retained the ARO liability, as well as the absence of
impairments recognized in the prior period for non-core gas assets in our Lower 48 segment.
●
An after-tax gain of $194 million recognized for a FID bonus associated with our Australia-West divestiture
completed in the second quarter of 2020.
●
Lower exploration expenses due to the absence of charges associated with the early cancellation of our
2020 winter exploration program as well as the absence of 2020 dry hole expenses in Alaska , and
unproved property impairment and dry hole expenses for the Kamunsu East Field in Malaysia, which is no
longer in our development plans.
Results of Operations
39
ConocoPhillips 2021 Q3 10-Q
In addition to the items detailed above, the increases in earnings in the nine-month period ended September 30,
2021, were partly offset by:
●
Absence of a $597 million after-tax gain on our Australia-West divestiture completed in May 2020.
●
Restructuring and transaction expenses of $288 million after-tax associated with the Concho acquisition
and mark-to-market impacts on certain key employee compensation programs.
●
Realized losses on hedges of $233 million after -tax related to derivative positions assumed through our
Concho acquisition. These derivative positions were settled entirely within the first quarter of 2021.
●
Absence of gains recorded in 2020 from foreign currency derivatives.
See the “Segment Results” section for additional information.
Income Statement Analysis
Unless otherwise indicated, all results in Income Statement Analysis are before-tax.
Sales and other operating revenues for the three- and nine-month periods of 2021 increased $6,940 million and
$17,415 million, respectively, mainly due to higher realized commodity prices and higher sales volumes.
Equity in earnings of affiliates for the three- and nine-month periods of 2021 increased $204 million and $154
million, respectively, primarily due to higher earnings driven by higher LNG and crude prices, partially offset by a
higher effective tax rate related to equity method investments in our Europe, Middle East, and North Africa
segment.
Gain (loss) on dispositions in the third quarter of 2021 recognized a loss of $179 million for the sale of noncore
assets in our Other International segment. Offsetting the loss were gains recognized for contingent payments
associated with previous dispositions in our Canada and Lower 48 segments and gains on sales of certain noncore
assets in our Lower 48 segment.
For the nine-month period of 2021, net gains on dispositions decreased $257
million primarily due to the absence of a $587 million gain associated with our Australia -West divestiture, partially
offset by a $200 million FID bonus recognized in the first quarter of 2021 associated with our Australia-West
divestiture.
Other income (loss) for the three- and nine-month periods of 2021 increased $87 million and $1,867 million,
respectively. During these periods in 2021, we recognized gains of $17 million and $743 million, respectively, on
our CVE common shares, compared with losses of $162 million and $1,302 million for the same periods in 2020.
Purchased commodities for the three - and nine-month periods of 2021 increased $2,340 million and $6,030
million, respectively, primarily due to higher gas and crude prices and volumes.
Production and operating expenses for the three- and nine-month periods of 2021 increased $426 million and
$968 million, respectively, primarily in line with higher production volumes.
Selling, general and administrative expenses increased $307 million in the nine-month period of 2021, primarily
due to transaction and restructuring expenses associated with our Concho acquisition , and higher costs associated
with compensation and benefits, including mark-to -market impacts of certain key employee compensation
programs.
Exploration expenses for the nine-month period of 2021 decreased $204 million, primarily due to the absence of
charges associated with the early cancellation of our 2020 winter exploration program as well as the absence of
2020 dry hole expenses in Alaska and an unproved property impairment and dry hole expenses related to the
Kamunsu East Field in Malaysia.
Results of Operations
ConocoPhillips 2021 Q3 10-Q
40
DD&A for the three- and nine-month periods of 2021 increased $261 million and $1,445 million, respectively,
mainly due to higher production volumes partly offset by lower rates from price-related reserve revisions .
Impairments decreased $91 million in the third quarter of 2021, primarily due to a decrease in an ARO estimate for
a previously sold asset, in which we retained the ARO liability. The decrease of $611 million in the nine-month
period of 2021 was also impacted by the absence of impairments recorded for certain non-core gas assets in our
Lower 48 segment.
Taxes other than income taxes for the three- and nine-month periods of 2021 increased $224 million and $584
million, respectively, caused by higher sales volumes primarily in Lower 48 and higher commodity prices.
Foreign currency transaction (gain) loss for the nine-month period of 2021 was impaired by $107 million due to the
absence of derivative gains and other remeasurements.
See
Results of Operations
41
ConocoPhillips 2021 Q3 10-Q
Summary Operating Statistics
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Average Net Production
Crude oil (MBD)
Consolidated operations
802
535
814
546
Equity affiliates
13
13
13
13
Total crude oil
815
548
827
559
Natural gas liquids (MBD)
Consolidated operations
123
89
116
97
Equity affiliates
7
8
8
7
Total natural gas liquids
130
97
124
104
Bitumen (MBD)
69
49
69
50
Natural gas (MMCFD)
Consolidated operations
2,144
1,201
2,143
1,353
Equity affiliates
1,033
1,034
1,055
1,042
Total natural gas
3,177
2,235
3,198
2,395
Total Production
(MBOED)
1,544
1,067
1,553
1,112
Dollars Per Unit
Average Sales Prices
Crude oil (per bbl)
Consolidated operations*
$
70.39
39.49
64.62
39.04
Equity affiliates
73.44
37.56
65.71
38.22
Total crude oil
70.43
39.45
64.63
39.02
Natural gas liquids (per bbl)
Consolidated operations
33.28
13.73
28.02
11.72
Equity affiliates
56.70
30.21
49.81
31.65
Total natural gas liquids
34.79
15.29
29.58
13.45
Bitumen (per bbl)
41.19
15.87
36.61
2.90
Natural gas (per MCF)
Consolidated operations*
5.93
2.77
5.02
3.07
Equity affiliates
5.95
2.61
4.48
3.98
Total natural gas
5.94
2.70
4.84
3.47
Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical,
lease rental, and other
$
65
81
199
296
Leasehold impairment
-
-
1
31
Dry holes
-
44
6
83
$
65
125
206
410
*Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho
acquisition, were $63.95 per barrel for crude oil and $4.98 per mcf for natural gas for the nine-month period ended September 30, 2021. As of
March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho.
Results of Operations
ConocoPhillips 2021 Q3 10-Q
42
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide
basis. At September 30, 2021, our operations were producing in the U.S., Norway, Canada, Australia, Indonesia,
China, Malaysia, Qatar and Libya.
Total production of 1,544 MBOED increased 477 MBOED or 45 percent in the third quarter of 2021 and 441
MBOED or 40 percent in the nine-month period of 2021, primarily due to:
●
Higher volumes in the Lower 48 due to our Concho acquisition.
●
New wells online in the Lower 48, Canada, Norway and Malaysia.
●
Higher volumes in our North American operated assets due to the absence of production curtailments.
●
Higher production in Libya due the absence of a forced shutdown of the Es Sider export terminal and
other eastern export terminals after a period of civil unrest.
●
Improved well performance in Norway, Canada, Alaska and China.
Production increases in the third quarter and in the nine-month period of 2021 were partly offset by normal field
decline.
In addition to the normal field decline, in the nine-month period of 2021, production also decreased due to:
●
Absence of production from Australia -West due to our second quarter 2020 disposition.
●
Higher unplanned downtime in the Lower 48 due to Winter Storm Uri, which impacted production by
approximately 50 MBOED in the first quarter of 2021.
Production excluding Libya for the third quarter of 2021 was 1,507 MBOED, an increase of 441 MBOED from the
same period a year ago. After adjusting for closed acquisitions and dispositions as well as estimated impacts from
the 2020 curtailment program, third-quarter 2021 production increased 26 MBOED or 2 percent. This increase
was primarily due to new production from the Lower 48 and other development programs across the portfolio,
partially offset by normal field decline. Production from Libya averaged 37 MBOED.
Production excluding Libya for the nine-month period of 2021 was 1,514 MBOED, an increase of 406 MBOED from
the same period a year ago. After adjusting for closed acquisitions and dispositions as well as impacts from the
2020 curtailment program and Winter Storm Uri impacts from 2021, production increased 17 MBOED or 1 percent.
This increase was primarily due to new production from the Lower 48 and other development programs across the
portfolio, partially offset by normal field decline. Production from Libya averaged 39 MBOED.
Results of Operations
43
ConocoPhillips 2021 Q3 10-Q
Segment
Results
Alaska
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
($MM)
$
405
(16)
935
(76)
Average Net Production
Crude oil (MBD)
163
184
179
179
Natural gas liquids (MBD)
13
14
15
15
Natural gas (MMCFD)
11
14
10
10
Total Production
(MBOED)
178
201
196
195
Average Sales Prices
Crude oil ($ per bbl)
$
72.55
40.88
66.78
41.92
Natural gas ($ per MCF)
2.63
2.48
3.06
2.71
The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas. As of
September 30, 2021, Alaska contributed 19 percent of our consolidated liquids production and less than 1 percent
of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from Alaska increased $421 million in the third quarter of 2021 and $1,011 million in the nine-month
period of 2021, respectively. In the third quarter, increases to earnings include:
●
Higher realized crude oil prices.
●
Lower DD&A expenses primarily driven by lower production volumes and lower rates in the quarter from
price-related reserve revisions .
Offsets to the earnings increase include :
●
Lower volumes due to a July turnaround at our Western North Slope assets.
In addition to the items detailed above, in the nine-month period of 2021, earnings also increased due to:
●
Lower exploration expenses due to the absence of charges associated with the early cancellation of our
2020 winter exploration program as well as the absence of 2020 dry hole expenses.
●
Higher volumes due to the absence of production curtailments.
In addition to the items detailed above, in the nine-month period of 2021, earnings also decreased due to:
●
Higher DD&A expenses primarily caused by higher rates in the first half of 2021.
Production
Average production decreased 23 MBOED in the third quarter of 2021 and increased 1 MBOED in the nine-month
period of 2021, respectively. In the third quarter of 2021, decreases to production include:
●
Normal field decline.
●
A July turnaround at our Western North Slope assets.
More than offsetting the items detailed above, in the nine-month period of 2021, production increased due to:
●
Absence of curtailments.
●
Improved performance in the Greater Prudhoe Area and Western North Slope assets.
Results of Operations
ConocoPhillips 2021 Q3 10-Q
44
Willow Update
In August 2021, an Alaska federal judge vacated the U.S. government’s approval granted to our planned Willow
project previously approved by the Bureau of Land Management (BLM) in October 2020. The Department of
Justice did not appeal the decision and neither did we. We believe the best path forward is to work closely with
the BLM and engage directly with the relevant agencies to address the matters described in the decision. In the
interim, we are continuing with FEED work in service of a final investment decision.
Lower 48
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
$
1,631
(78)
3,274
(880)
Average Net Production*
Crude oil (MBD)
457
197
442
211
Natural gas liquids (MBD)
101
68
93
74
Natural gas (MMCFD)
1,389
566
1,389
577
Total Production
(MBOED)
790
359
767
381
Average Sales Prices
Crude oil ($ per bbl)**
$
68.59
36.43
63.14
34.02
Natural gas liquids ($ per bbl)
32.87
13.51
27.48
10.96
Natural gas ($ per MCF)**
4.63
1.63
4.13
1.45
*Subsequent to the current period, we anticipate a change in both product mix and average net production attributed to the planned conversion
of previously acquired two-stream contracted volumes to three-stream.
**Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho
acquisition, were $61.90 per barrel for crude oil and $4.07 per mcf for natural gas for the nine-month period ended September 30, 2021. As of
March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho.
The Lower 48 segment consists of operations located in the U.S. Lower 48 states, as well as producing properties in
the Gulf of Mexico. As of September 30, 2021, the Lower 48 contributed 54 percent of our consolidated liquids
production and 65 percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from the Lower 48 increased $1,709 million in the third quarter of 2021 and increased $4,154 million in
the nine-month period of 2021, respectively. In the third quarter, increases to earnings include:
●
Higher realized crude oil, natural gas and NGL prices.
●
Higher sales volumes of crude oil and natural gas due to our Concho acquisition and the absence of
production curtailments.
Offsets to the earnings increase include:
●
Higher DD&A expenses, production and operating expenses and taxes other than income taxes primarily
due to higher production volumes. Partially offsetting the increase in DD&A expenses were lower rates
from price-related reserve revisions.
In addition to the items detailed above, in the nine-month period of 2021, earnings also increased due to :
●
The absence of $399 million in after-tax impairments related to certain noncore gas assets.
In addition to the items detailed above, in the nine-month period of 2021, earnings also decreased due to:
●
Impacts resulting from our Concho Acquisition, including higher selling, general and administrative
expenses for transaction and restructuring charges, as well as realized losses on derivative settlements.
and
Results of Operations
45
ConocoPhillips 2021 Q3 10-Q
Production
Average production increased 431 MBOED and 386 MBOED in the three- and nine-month periods of 2021,
respectively. In the third quarter, increases to production include:
●
Higher volumes due to our Concho acquisition.
●
New wells online from our development programs in Permian, Eagle Ford and Bakken.
●
Absence of curtailments.
Offsets to the production increases include:
●
Normal field decline.
In addition to normal field decline, in the nine-month period of 2021, production also decreased due to:
●
Higher unplanned downtime, primarily due to Winter Storm Uri.
Asset Acquisitions and Dispositions
In September 2021, we announced the Shell Permian Acquisition for $9.5 billion in cash before customary
adjustments. The transaction is anticipated to close in the fourth quarter of 2021, subject to regulatory approval
and other customary closing conditions.
Additionally in September 2021, we completed divestitures of certain noncore assets in our Lower 48 segment ,
recording proceeds of approximately $150 million. Production from these assets averaged approximately 15
MBOED in the nine-months ended September 30, 2021.
Results of Operations
ConocoPhillips 2021 Q3 10-Q
46
Canada
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
($MM)
$
155
(75)
267
(270)
Average Net Production
Crude oil (MBD)
8
6
10
4
Natural gas liquids (MBD)
4
2
4
2
Bitumen (MBD)
69
49
69
50
Natural gas (MMCFD)
73
43
83
35
Total Production
(MBOED)
93
64
96
62
Average Sales Prices
Crude oil ($ per bbl)
$
58.99
25.16
53.81
15.39
Natural gas liquids ($ per bbl)
33.47
5.99
28.49
1.89
Bitumen ($ per bbl)
41.19
15.87
36.61
2.90
Natural gas ($ per MCF)
2.45
0.71
2.36
1.05
Average sales prices include unutilized transportation costs.
Our Canadian operations mainly consist of the Surmont oil sands development in Alberta and the liquids-rich
Montney unconventional play in British Columbia. As of September 30, 2021, Canada contributed 8 percent of our
consolidated liquids production and 4 percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings from Canada increased $230 million and $537 million, respectively, in the three- and nine-month periods
of 2021. Increases to earnings include:
●
Higher realized bitumen and crude oil prices.
●
Higher sales volumes in our Surmont and Montney assets.
●
After-tax gains on disposition related to contingent payments of $77 million and $149 million in the three-
and nine-month periods of 2021, respectively, associated with the sale of certain assets to CVE in 2017.
Offsets to the earnings increase include :
●
Higher production and operating expenses primarily due to increased Surmont and Montney production.
Production
Average production increased 29 MBOED in the third quarter of 2021 and increased 34 MBOED in the nine-month
period of 2021, respectively. In the third quarter, increases to production include:
●
Absence of curtailments.
●
Absence of third quarter 2020 turnaround activity in the Surmont.
●
New wells online in the Montney.
●
Production from our Kelt acquisition completed in the third quarter of 2020.
Offsets to the production increases include:
●
Higher well failures, plant power trips and facility upsets in the Surmont.
In addition to the items detailed above, in the nine-month period of 2021, production also increased due to:
●
Improved well performance in the Surmont.
Results of Operations
47
ConocoPhillips 2021 Q3 10-Q
Europe, Middle East and North Africa
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income Attributable to ConocoPhillips
($MM)
$
241
92
601
318
Consolidated Operations
Average Net Production
Crude oil (MBD)
117
77
118
82
Natural gas liquids (MBD)
5
5
4
5
Natural gas (MMCFD)
303
256
303
276
Total Production
(MBOED)
172
125
172
133
Average Sales Prices
Crude oil ($ per bbl)
$
72.43
41.79
65.94
43.72
Natural gas liquids ($ per bbl)
50.32
23.50
40.75
20.01
Natural gas ($ per MCF)
11.96
2.40
8.40
2.85
The Europe, Middle East and North Africa segment consists of operations principally located in the Norwegian
sector of the North Sea and the Norwegian Sea, Qatar, Libya and commercial operations in the U.K. As of
September 30, 2021, our Europe, Middle East and North Africa operations contributed 12 percent of our
consolidated liquids production and 14 percent of our consolidated natural gas production.
Net Income Attributable to ConocoPhillips
Earnings from Europe, Middle East and North Africa increased by $149 million and $283 million in the three - and
nine-month periods of 2021, respectively. Increases to earnings include:
●
Higher realized natural gas, crude oil and NGL prices.
●
Higher LNG sales prices, reflected in equity in earnings of affiliates.
●
Higher sales volumes of crude oil and LNG.
Offsets to the earnings increases include:
●
Higher taxes.
●
Higher production and operating expenses and DD&A expenses.
Consolidated Production
Average consolidated production increased 47 MBOED and 39 MBOED in the three - and nine-month periods of
2021, respectively. Increases to production include:
●
Higher production in Libya due to the absence of a forced shutdown of the Es Sider export terminal and
other eastern export terminals after a period of civil unrest.
●
Improved well performance in Norway.
●
New production from Norway drilling activities including our Tor II redevelopment project with first
production in December 2020.
Offsets to the production increases include:
●
Normal field decline.
Results of Operations
ConocoPhillips 2021 Q3 10-Q
48
Asia Pacific
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income Attributable to ConocoPhillips
$
257
25
749
945
Consolidated Operations
Average Net Production
Crude oil (MBD)
57
71
65
70
Natural gas liquids (MBD)
-
-
-
1
Natural gas (MMCFD)
368
322
358
455
Total Production
(MBOED)
119
125
125
147
Average Sales Prices
Crude oil ($ per bbl)
$
74.66
42.79
67.41
42.94
Natural gas liquids ($ per bbl)
-
-
-
33.21
Natural gas ($ per MCF)
6.66
5.33
6.30
5.42
The Asia Pacific segment has operations in China, Indonesia, Malaysia and Australia. As of September 30, 2021, Asia
Pacific contributed 7 percent of our consolidated liquids production and 17 percent of our consolidated natural gas
production.
Net Income Attributable to ConocoPhillips
Earnings from Asia Pacific increased $232 million in the third quarter of 2021 and decreased $196 million in the nine-
month period of 2021, respectively. In the third quarter, increases to earnings include:
●
Higher crude oil and natural gas prices.
●
Higher LNG sales prices, reflected in equity in earnings of affiliates.
●
Lower DD&A expenses in the third quarter of 2021 primarily driven by lower production volumes and
lower rates from price-related reserve revisions.
In addition to the items detailed above, in the nine-month period of 2021, earnings also increased due to:
●
A $200 million gain on disposition related to a FID bonus from our Australia-West divestiture. For additional
information related to this FID bonus, see
●
Lower production and operating expenses related to the absence of Australia -West.
Offsetting the items detailed above, in the nine-month period of 2021, earnings decreased due to:
●
Absence of a $597 million after-tax gain related to our Australia -West divestiture.
●
Absence of sales volumes associated with Australia -West.
Consolidated Production
Average consolidated production decreased 6 MBOED and 22 MBOED in the three - and nine-month periods of 2021,
respectively. In the third quarter, the primary decrease to production was normal field decline.
Partly offsetting the decrease in production was:
●
Increased production in Malaysia associated with Malikai Phase 2 first production and ramp-up.
●
Bohai Bay development activity in China.
In addition to normal field decline, in the nine-month period of 2021, production also decreased due to:
●
The divestiture of our Australia -West assets that contributed 23 MBOED in the nine-month period of 2020.
In addition to the items detailed above, in the nine-month period of 2021, production also increased due to:
●
The absence of curtailments across the segment and increased demand in Indonesia from coal supply
restrictions.
Results of Operations
49
ConocoPhillips 2021 Q3 10-Q
Other International
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
($MM)
$
(97)
(8)
(106)
14
The Other International segment consists of exploration and appraisal activities in Colombia as well as
contingencies associated with prior operations in other countries.
Earnings from our Other International operations decreased $89 million and $120 million in the three- and nine-
month periods of 2021, respectively, due to a loss on divestiture related to our Argentina exploration interests in
the third quarter as well as an absence of a $29 million after -tax benefit to earnings from the dismissal of
arbitration related to prior operations in Senegal recognized in the first quarter of 2020.
information regarding the divestiture.
Corporate and Other
Millions of Dollars
Three Months Ended
Nine Months Ended
September 30
September 30
2021
2020
2021
2020
Net Loss Attributable to ConocoPhillips
Net interest expense
$
(176)
(179)
(627)
(508)
Corporate general and administrative expenses
(57)
(50)
(251)
(90)
Technology
(6)
(8)
31
(16)
Other income (expense)
26
(153)
579
(1,366)
$
(213)
(390)
(268)
(1,980)
Net interest expense consists of interest and financing expense, net of interest income and capitalized interest.
Net interest expense increased by $119 million in the nine-month period of 2021 primarily due to higher debt
balances assumed due to our Concho acquisition.
Corporate G&A expenses include compensation programs and staff costs. These expenses increased by $7 million
in the three-month period of 2021 primarily due to mark to market adjustments associated with certain
compensation programs. For the nine-month period of 2021, Corporate G&A expenses increased by $161 million
primarily due to restructuring expenses associated with our Concho acquisition.
Technology includes our investment in new technologies or businesses, as well as licensing revenues. Activities are
focused on both conventional and tight oil reservoirs, shale gas, heavy oil, oil sands, enhanced oil recovery, as well
as LNG. Earnings from Technology increased $47 million in the nine-month period of 2021 primarily due to higher
licensing revenues.
Other income (expense) or “Other” includes certain corporate tax-related items, foreign currency transaction gains
and losses, environmental costs associated with sites no longer in operation, other costs not directly associated
with an operating segment, premiums incurred on the early retirement of debt, holding gains or losses on equity
securities, and pension settlement expense. For the three- and nine-month periods of 2021, “Other” increased
$179 million and $1,945 million, respectively. During these periods in 2021, we recognized gains of $17 million and
$743 million, respectively, on our CVE common shares, compared with losses of $162 million and $1,302 million for
the same periods in 2020. Partially offsetting the impact on the nine-month period was the release of a $92
million deferred tax asset associated with our Australia West divestiture.
Capital Resources and Liquidity
ConocoPhillips 2021 Q3 10-Q
50
Capital Resources and Liquidity
Financial Indicators
Millions of Dollars
September 30
December 31
2021
2020
Cash and cash equivalents
$
9,833
2,991
Short-term investments
678
3,609
Total debt
19,668
15,369
Total equity
44,115
29,849
Percent of total debt to capital*
31
%
34
Percent of floating-rate debt to total debt
4
%
7
*Capital includes total debt and total equity.
To meet our short- and long-term liquidity requirements, we look to a variety of funding sources, including cash
generated from operating activities, our commercial paper and credit facility programs, and our ability to sell
securities using our shelf registration statement. During the first nine months of 2021, the primary uses of our
available cash were $3.8 billion to support our ongoing capital expenditures and investments program ; $2.2 billion
to repurchase common stock , $1.8 billion to pay dividends, and $1.1 billion of hedging, transaction and
restructuring costs. During the first nine months of 2021, our cash and cash equivalents increased by $6.8 billion
to $9.8 billion.
At September 30, 2021, we had cash and cash equivalents of $9.8 billion, short-term investments of $0.7 billion,
and available borrowing capacity under our credit facility of $6.0 billion, totaling approximately $16.5 billion of
liquidity. 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 near- and long-term, including our capital spending prog ram, acquisitions,
dividend payments and debt obligations .
On September 20, 2021, we signed a definitive agreement for the Shell Permian Acquisition for $9.5 billion in cash
before customary adjustments . The effective date of the transaction is July 1, 2021, and we expect to close in the
fourth quarter of 2021 subject to regulatory clearance and the satisfaction of other customary closing conditions.
The transaction will be funded from available cash, and we expect our remaining cash to meet our obligations and
business needs.
Significant Changes in Capital
Operating Activities
Cash provided by operating activities was $11.1 billion for the first nine months of 2021, compared with $3.1
billion for the corresponding period of 2020. The increase in cash provided by operating activities is primarily due
to higher realized commodity prices and higher sales volumes mostly due to our acquisition of Concho. The
increase in cash provided by operating activities was partly offset by the settlement of all oil and gas hedging
positions acquired from Concho, and transaction and restructuring cost s.
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.
Capital Resources and Liquidity
51
ConocoPhillips 2021 Q3 10-Q
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 these factors, production levels can cause variability in
cash flows, although generally this variability has not been as significant as that caused by commodity prices.
To maintain or grow our production volumes, we must continue to add to our proved reserve base. See the
“Capital Expenditures and Investments” section, for information about our capital expenditures and investments.
On January 15, 2021, we assumed financial derivative instruments consisting of oil and natural gas swaps in
connection with our acquisition of Concho. At March 31, 2021, all oil and natural gas derivative financial
instruments acquired from Concho were contractually settled. In the first six months of 2021, we paid $761 million
relating to these settlements.
Investing Activities
For the first nine months of 2021, we invested $3.8 billion in capital expenditures. Our 2021 operating plan capital
expenditures is currently expected to be $5.3 billion compared with $4.7 billion in 2020. See the “Capital
Expenditures and Investments” section, for information about our capital expenditures and investments.
For additional information on Acquisitions & Dispositions discussed below,
We completed our acquisition of Concho on January 15, 2021. The assets acquired in the transaction included
$382 million of cash.
In May 2021, we announced and began a paced monetization of our investment in CVE common shares with the
plan to direct proceeds toward our existing share repurchase program. We expect to fully dispose of our CVE
shares by year-end 2022, however, the sales pace will be guided by market conditions, and we retain discretion to
adjust accordingly. Since we began our monetization program, we have sold 67 million CVE shares, representing
32% of our holdings at December 31, 2020, receiving $569 million of cash proceeds.
Other proceeds
from dispositions include our sale of certain noncore assets in our Lower 48 segment for approximately $150
million and contingent payments associated with previous divestitures.
In September 2021, we signed a definitive agreement to acquire the Shell Permian assets for $9.5 billion, before
customary adjustments. Under the terms of the agreement, we paid a deposit of $475 million which is presented
within “Cash Flows from Investing Activities - Other” on our consolidated statement of cash flows.
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 nine months of 2021 included net sales of $2,846 million of investments. We sold
$2,991 million of short-term instruments and invested $145 million in long-term instruments
.
Capital Resources and Liquidity
ConocoPhillips 2021 Q3 10-Q
52
Financing Activities
We have a revolving credit facility totaling $6.0 billion, expiring in May 2023. Our revolving credit facility may be
used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as support for our
commercial paper program. With no commercial paper outstanding and no direct borrowings or letters of credit,
we had access to $6.0 billion in available borrowing capacity under our revolving credit facility at September 30,
2021.
On January 15, 2021, we completed the acquisition of Concho in an all-stock transaction. In the acquisition, we
assumed Concho’s publicly traded debt, which was recorded at fair value of $4.7 billion on the acquisition date. In
June 2021, we reaffirmed our commitment to preserving our ‘A’ -rated balance sheet by restating our intent to
reduce gross debt by $5 billion over the next five years, driving a more resilient and efficient capital structure.
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
revolving credit facility and credit ratings.
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 September 30, 2021 and December 31, 2020, we had direct bank letters of credit of $281
million and $249 million, respectively, which secured performance obligations related to various purchase
commitments incident to the ordinary conduct of business. In the event of credit ratings downgrades, we may be
required to post additional letters of credit.
Shelf Registration
We have a universal shelf registration statement on file with the SEC under which we have the ability to issue and
sell an indeterminate 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 addition to our capital expenditure and investments program, we anticipate completing the Shell
Permian Acquisition in the fourth quarter for $9.5 billion before customary adjustments.
Our debt balance at September 30, 2021, was $19.7 billion, compared with $15.4 billion at December 31, 2020.
The net increase is primarily due to $4.7 billion of debt assumed in the Concho acquisition. The current portion of
debt, including payments for finance leases, is $920 million. Payments will be made using current cash balances
and cash generated by operations.
We believe in delivering va lue to our shareholders through a growing and sustainable dividend supplemented by
additional returns of capital, including share repurchases. In 2020, we paid $1.8 billion, equating to $1.69 per
share of common stock, in dividends. In the first nine months of 2021, we paid dividends totaling $1.8 billion, the
equivalent of $1.29 per share. On September 20, 2021, we announced an increase in our quarterly dividend from
$0.43 per share to $0.46 per share, representing a 7 percent increase. The dividend is payable December 1, 2021,
to stockholders of record at the close of business on October 28, 2021. We anticipate returning approximately
$2.4 billion to shareholders in dividends in 2021, or $1.75 per share.
Capital Resources and Liquidity
53
ConocoPhillips 2021 Q3 10-Q
In late 2016, we initiated our current share repurchase program, which has a total program authorization of $25
billion. In May 2021, we began a paced monetization of our CVE shares, the proceeds of which, have been applied
to share repurchases. The pace of CVE share sales will be guided by market conditions, and we retain the
discretion to adjust accordingly. In the nine months ended September 30, 2021, we repurchased 39.3 million
shares at a cost of $2,224 million, $561 million of which was funded using CVE share proceeds. Since the inception
of the share repurchase program, we have repurchased 228 million shares at a cost of $12.7 billion. Our total
planned distributions for 2021, including dividends and share repurchases, is approximately $6.0 billion.
Our dividend and share repurchase programs are subject to numerous considerations, including market conditions,
management discretion and other factors. See “Item 1A—Risk Factors – Our ability to declare and pay dividends
and repurchase shares is subject to certain considerations” in Part I—Item 1A in our 2020 Annual Report on Form
10-K.
Capital Expenditures and Investments
Millions of Dollars
Nine Months Ended
September 30
2021
2020
Alaska
$
698
882
Lower 48
2,250
1,398
Canada
129
593
Europe, Middle East and North Africa
385
410
Asia Pacific
235
280
Other International
33
66
Corporate and Other
37
28
Capital expenditures and investments
$
3,767
3,657
During the first nine months of 2021, capital expenditures and investments supported key development programs,
primarily:
●
Development activities in the Lower 48, primarily Permian, Eagle Ford and Bakken.
●
Appraisal and development activities in Alaska related to the Western North Slope and development
activities in the Greater Kuparuk Area.
●
Appraisal activities in liquids-rich plays and optimization of oils sands development in Canada.
●
Continued development activities across assets in Norway.
●
Continued development activities in China, Malaysia and Indonesia.
In February 2021, we announced 2021 operating plan capital expenditures of $5.5 billion. In June 2021, we
reduced capital guidance to $5.3 billion, recognizing synergistic savings from our Concho acquisition.
Capital Resources and Liquidity
ConocoPhillips 2021 Q3 10-Q
54
Guarantor Summarized Financial Information
We have various cross guarantees among our Obligor group; ConocoPhillips, ConocoPhillips Company and
Burlington Resources LLC, with respect to publicly held debt securities. ConocoPhillips Company is 100 percent
owned by ConocoPhillips. Burlington Resources LLC is 100 percent owned by ConocoPhillips Company.
ConocoPhillips and/or ConocoPhillips Company have fully and unconditionally guaranteed the payment obligations
of Burlington Resources LLC, with respect to its publicly held debt securities. Similarly, ConocoPhillips has fully and
unconditionally guaranteed the payment obligations of ConocoPhillips Company with respect to its publicly held
debt securities. In addition, ConocoPhillips Company has fully and unconditionally guaranteed the payment
obligations of ConocoPhillips with respect to its publicly held debt securities. All guarantees are joint and several.
The following tables present summarized financial information for the Obligor Group, as defined below:
●
The Obligor Group will reflect guarantors and issuers of guaranteed securities consisting of
ConocoPhillips, ConocoPhillips Company and Burlington Resources LLC.
●
Consolidating adjustments for elimination of investments in and transactions between the collective
guarantors and issuers of guaranteed securities are reflected in the balances of the summarized financial
information.
●
Non-Obligated Subsidiaries are excluded from the presentation.
Upon completion of the Concho acquisition on January 15, 2021, we assumed Concho’s publicly traded debt of
approximately $3.9 billion in aggregate principal amount, which was recorded at fair value of $4.7 billion on the
acquisition date. We completed a debt exchange offer that settled on February 8, 2021, of which 98 percent, or
approximately $3.8 billion in aggregate principal amount of Concho’s notes, were tendered and accepted for new
debt issued by ConocoPhillips. The new debt issued in the exchange is fully and unconditionally guaranteed by
ConocoPhillips Company. Both the guarantor and issuer of the exchange debt is reflected within the Obligor Group
presented here.
See
and
for additional information relating to the Concho transaction.
Transactions and balances reflecting activity between the Obligors and Non-Obligated Subsidiaries are presented
below:
Summarized Income Statement Data
Millions of Dollars
Nine Months Ended
September 30, 2021
Revenues and Other Income
$
20,893
Income (loss) before income taxes*
5,445
Net income (loss)
5,452
Net Income (Loss) Attributable to ConocoPhillips
5,452
*Includes approximately $3.6 billion of purchased commodities expense for transactions with Non-Obligated Subsidiaries.
Summarized Balance Sheet Data
Millions of Dollars
September 30
December 31
2021
2020
Current assets
$
12,955
8,535
Amounts due from Non-Obligated Subsidiaries, current
1,194
440
Noncurrent assets
59,997
37,180
Amounts due from Non-Obligated Subsidiaries, noncurrent
8,223
7,730
Current liabilities
7,059
3,797
Amounts due to Non-Obligated Subsidiaries, current
2,778
1,365
Noncurrent liabilities
28,336
18,627
Amounts due to Non-Obligated Subsidiaries, noncurrent
10,304
3,972
Capital Resources and Liquidity
55
ConocoPhillips 2021 Q3 10-Q
Contingencies
A number of lawsuits involving a variety of claims arising in the ordinary course of business have been filed against
ConocoPhillips. We also may be required to remove or mitigate the effects on the environment of the placement,
storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive
sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of
all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable,
and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within
the range is a better estimate than any other amount, then the low end of the range is accrued. We do not reduce
these liabilities for potential insurance or third-party recoveries. We accrue receivables for insurance or other
third-party recoveries when applicable. With respect to income tax-related contingencies, we use a cumulative
probability-weighted loss accrual in cases where sustaining a tax position is less than certain.
Based on currently available information, we believe it is remote that future costs related to known contingent
liability exposures will exceed current accruals by an amount that would have a material adverse impact on our
consolidated financial statements.
Legal and Tax Matters
We are subject to various lawsuits and claims including but not limited to matters involving oil and gas royalty and
severance tax payments, gas measurement and valuation methods, contract disputes, environmental damages,
climate change, personal injury, and property damage. Our primary exposures for such matters relate to alleged
royalty and tax underpayments on certain federal, state and privately owned properties, claims of alleged
environmental contamination from historic operations, and other contract disputes. We will continue to defend
ourselves vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics
of our cases, employing a litigation management process to manage and monitor the legal proceedings against us.
Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This
process also enables us to track those cases that have been scheduled for trial and/or mediation. Based on
professional judgment and experience in using these litigation management tools and available information about
current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals
and determines if adjustment of existing accruals, or establishment of new accruals, is required.
Environmental
We are subject to the same numerous international, federal, state and local environmental laws and regulations as
other companies in our industry. For a discussion of the most significant of these environmental laws and
regulations, including those with associated remediation obligations, see the “Environmental” section in
Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 64–66 of our
2020 Annual Report on Form 10-K.
We occasionally receive requests for information or notices of potential liability from the EPA and state
environmental agencies alleging that we are a potentially responsible party under the Federal Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) or an equivalent state statute. On occasion, we
also have been made a party to cost recovery litigation by those agencies or by private parties. These requests,
notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by
us, but allegedly contain waste attributable to our past operations. As of September 30, 2021, there were 15 sites
around the U.S. in which we were identified as a potentially responsible party under CERCLA and comparable state
laws.
At September 30, 2021, our balance sheet included a total environmental accrual of $191 million, compared with
$180 million at December 31, 2020, for remediation activities in the U.S. and Canada. We expect to incur a
substantial amount of these expe nditures within the next 30 years.
Capital Resources and Liquidity
ConocoPhillips 2021 Q3 10-Q
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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.
Environmental Litigation
Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local
Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips, seeking
compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by historical oil
and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will vigorously defend 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.
Climate Change
Continuing political and social attention to the issue of global climate change has resulted in a broad range of
proposed or promulgated state, national and international laws focusing on GHG reduction. These proposed or
promulgated laws apply or could apply in countries where we have interests or may have interests in the future.
Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for
implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a
material impact on our results of operations and financial condition. For examples of legislation or precursors for
possible regulation and factors on which the ultimate impact on our financial performance will depend, see the
“Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of
Operations on pages 67–69 of our 2020 Annual Report on Form 10-K.
Climate Change Litigation
Beginning in 2017, governmental and other entities in several states in the U.S. have filed lawsuits against oil and
gas companies, including ConocoPhillips, seeking compensatory damages and equitable relief to abate alleged
climate change impacts. Additional lawsuits with similar allegations are expected to be filed. The amounts
claimed by plaintiffs are unspecified and the legal and factual issues involved in these cases are unprecedented.
ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate vehicle to
address the challenges associated with climate change and will vigorously defend against such lawsuits.
Company Response to Climate -Related Risks
The company has responded by putting in place a Sustainable Development Risk Management Standard covering
the assessment and registering of significant and high sustainable development risks based on their consequence
and likelihood of occurrence. We have developed a company-wide Climate Change Action Plan with the goal of
tracking mitigation activities for each climate-related risk included in the corporate Sustainable Development Risk
Register.
The risks addressed in our Climate Change Action Plan fall into four broad categories:
●
GHG-related legislation and regulation.
●
GHG emissions management.
●
Physical climate-related impacts.
●
Climate-related disclosure and reporting.
Emissions are categorized into three different scopes. Gross operated scope 1 and scope 2 GHG emissions help us
understand our climate transition risk.
●
Scope 1 emissions are direct GHG emissions from sources that we own or control.
●
Scope 2 emissions are GHG emissions from the generation of purchased electricity or steam that we
consume.
Scope 3 emissions are indirect emissions from sources that we neither own nor control.
Capital Resources and Liquidity
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ConocoPhillips 2021 Q3 10-Q
We announced in October 2020 the adoption of a Paris-aligned climate risk framework with the objective of
implementing a coherent set of choices designed to facilitate the success of our existing exploration and
production business through the energy transition. Given the uncertainties remaining about how the energy
transition will evolve, the strategy aims to be robust across a range of potential future outcomes.
The strategy is comprised of four pillars:
●
Targets : Our target framework consists of a hierarchy of targets, from a long-term ambition that sets the
direction and aim of the strategy, to a medium-term performance target for GHG emissions intensity, to
shorter-term targets for flaring and methane intensity reductions. These performance targets are
supported by lower-level internal business unit goals to enable the company to achieve the company-
wide targets. In September 2021, we increased our interim operational target and have set it to reduce
our gross operated and net equity (scope 1 and 2) emissions intensity by 40 to 50 percent from 2016
levels by 2030, an improvement from the previously announced target of 35 to 45 percent on only a gross
operated basis, with an ambition to achieve net-zero operated emissions by 2050. We have joined the
World Bank Flaring Initiative to work towards zero routine flaring of associated gas by 2030, with an
ambition to meet that goal by 2025.
●
Technology choices: We expanded our Marginal Abatement Cost Curve process to provide a broader
range of opportunities for emission reduction technology.
●
Portfolio choices: Our corporate authorization process requires all qualifying projects to include a GHG
price in their project approval economics. Different GHG prices are used depending on the region or
jurisdiction. Projects in jurisdictions with existing GHG pricing regimes incorporate the existing GHG price
and forecast into their economics. Projects where no existing GHG pricing regime exists utilize a scenario
forecast from our internally consistent World Energy Model. In this way, both existing and emerging
regulatory requirements are considered in our decision-making. The company does not use an estimated
market cost of GHG emissions when assessing reserves in jurisdictions without existing GHG regulations.
●
External engagement: Our external engagement aims to differentiate ConocoPhillips within the oil and
gas sector with our approach to managing climate-related risk. We are a Founding Member of the
Climate Leadership Council (CLC), an international policy institute founded in collaboration with business
and environmental interests to develop a carbon dividend plan. Participation in the CLC provides another
opportunity for ongoing dialogue about carbon pricing and framing the issues in alignment with our public
policy principles. We also belong to and fund Americans For Carbon Dividends, the education and
advocacy branch of the CLC.
Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the
Private Securities Litigation Reform Act of 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact
included or incorporated by reference in this report, including, without limitation, statements regarding our future
financial position, business strategy, budgets, projected revenues, projected costs and plans, objectives of
management for future operations, the anticipated benefits of the transaction between us and Concho Resources
Inc. (Concho), including the expected amount and the timing of synergies from such transaction, the anticipated
closing of the acquisition of assets from Shell Enterprises LLC (Shell), and the anticipated impact of the Concho and
Shell transactions on the combined 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.
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58
We based the forward-looking statements on our current expectations, estimates and projections about ourselves
and the industries in which we operate in general. We caution you these statements are not guarantees of future
performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve
risks and uncertainties we cannot predict. In addition, we based many of these forward -looking statements on
assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results
may differ materially from what we have expressed or forecast in the forward -looking statements. Any differences
could result from a variety of factors and uncertainties, including, but not limited to, the following:
●
The impact of public health crises, including pandemics (such as COVID -19) and epidemics and any related
company or government policies or actions.
●
Global and regional changes in the demand, supply, prices, differentials or other market conditions
affecting oil and gas, including changes resulting from a public health crisis or from the imposition or
lifting of crude oil production quotas or other actions that might be imposed by OPEC and other producing
countries and the resulting company or third-party actions in response to such changes.
●
Fluctuations in crude oil, bitumen, natural gas, LNG and NGLs prices, including a prolonged decline in
these prices relative to historical or future expected levels.
●
The impact of significant declines in prices for crude oil, bitumen, natural gas, LNG and NGLs, which may
result in recognition of impairment charges on our long-lived assets, leaseholds and nonconsolidated
equity investments.
●
Potential failures or delays in achieving expected reserve or production levels from existing and future oil
and gas developments, including due to operating hazards, drilling risks and the inherent uncertainties in
predicting reserves and reservoir performance.
●
Reductions in reserves replacement rates, whether as a result of the significant declines in commodity
prices or otherwise.
●
Unsuccessful exploratory drilling activities or the inability to obtain access to exploratory acreage.
●
Unexpected changes in costs or technical requirements for constructing, modifying or operating E&P
facilities.
●
Legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing
the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring
or water disposal.
●
Lack of, or disruptions in, adequate and reliable transportation for our crude oil, bitumen, natural gas,
LNG and NGLs.
●
Inability to timely obtain or maintain permits, including those necessary for construction, drilling and/or
development, or inability to make capital expenditures required to maintain compliance with any
necessary permits or applicable laws or regulations.
●
Failure to complete definitive agreements and feasibility studies for, and to complete construction of,
announced and future E&P and LNG development in a timely manner (if at all) or on budget.
●
Potential disruption or interruption of our operations due to accidents, extraordinary weather events, civil
unrest, political events, war, terrorism, cyber attacks, and information technology failures, constraints or
disruptions.
●
Changes in international monetary conditions and foreign currency exchange rate fluctuations.
●
Changes in international trade relationships, including the imposition of trade restrictions or tariffs
relating to crude oil, bitumen, natural gas, LNG, NGLs and any materials or products (such as aluminum
and steel) used in the operation of our business.
●
Substantial investment in and development use of, competing or alternative energy sources, including as
a result of existing or future environmental rules and regulations.
●
Liability for remedial actions, including removal and reclamation obligations, under existing and future
environmental regulations and litigation.
●
Significant operational or investment changes imposed by existing or future environmental statutes and
regulations, including international agreements and national or regional legislation and regulatory
measures to limit or reduce GHG emissions.
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ConocoPhillips 2021 Q3 10-Q
●
Liability resulting from litigation, including litigation related to the transaction with Concho, or our failure
to comply with applicable laws and regulations.
●
General domestic and international economic and political developments, including armed hostilities;
expropriation of assets; changes in governmental policies relating to crude oil, bitumen, natural gas, LNG
and NGLs pricing; regulation or taxation; and other political, economic or diplomatic developments.
●
Volatility in the commodity futures markets.
●
Changes in tax and other laws, regulations (including alternative energy mandates), or royalty rules
applicable to our business.
●
Competition and consolidation in the oil and gas E&P industry.
●
Any limitations on our access to capital or increase in our cost of capital, including as a result of illiquidity
or uncertainty in domestic or international financial markets or investment sentiment.
●
Our inability to execute, or delays in the completion, of any asset dispositions or acquisitions we elect to
pursue.
●
Potential failure to obtain, or delays in obtaining, any necessary regulatory approvals for pending or
future asset dispositions or acquisitions, or that such approvals may require modification to the terms of
the transactions or the operation of our remaining business.
●
Potential disruption of our operations as a result of pending or future asset dispositions or acquisitions,
including the diversion of management time and attention.
●
Our inability to deploy the net proceeds from any asset dispositions that are pending or that we elect to
undertake in the future in the manner and timeframe we currently anticipate, if at all.
●
Our inability to liquidate the common stock issued to us by Cenovus Energy as part of our sale of certain
assets in western Canada at prices we deem acceptable, or at all.
●
The operation and financing of our joint ve ntures.
●
The ability of our customers and other contractual counterparties to satisfy their obligations to us,
including our ability to collect payments when due from the government of Venezuela or PDVSA.
●
Our inability to realize anticipated cost savings and capital expenditure reductions.
●
The inadequacy of storage capacity for our products, and ensuing curtailments, whether voluntary or
involuntary, required to mitigate this physical constraint.
●
Our ability to successfully integrate Concho’s business and fully achieve the expected benefits and cost
reductions associated with the transaction with Concho in a timely manner or at all.
●
The risk that we will be unable to retain and hire key personnel.
●
Unanticipated difficulties or expenditures relating to integration with Concho.
●
The risk that the conditions to close the acquisition of assets from Shell are not satisfied on a timely basis
or at all, or the failure of the transaction to close for any reason.
●
The risk that any regulatory approval, consent or authorization that may be required for the proposed
acquisition of assets from Shell is not obtained or is obtained subject to conditions that are not
anticipated.
●
Unanticipated integration issues relating to the proposed acquisition of assets from Shell, such as
potential disruptions of our ongoing business and higher than anticipated integration 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 2020 Annual Report on Form 10-K and any
additional risks described in our other filings with the SEC.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information about market risks for the nine months ended September 30, 2021, does not differ materially from
that discussed under Item 7A in our 2020 Annual Report on Form 10-K.
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60
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 September 30, 2021, with the
participation of our management, our Chairman and Chief Executive Officer (principal executive officer) and our
Executive Vice President and Chief Financial Officer (principal financial officer) carried out an evaluation, pursuant
to Rule 13a-15(b) of the Act, of ConocoPhillips’ disclosure controls and procedures (as defined in Rule 13a-15(e) of
the Act). Based upon that evaluation, our Chairman and Chief Executive Officer and our Executive Vice President
and Chief Financial Officer concluded our disclosure controls and procedures were operating effectively at
September 30, 2021.
There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act,
in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART II. Other Information
Item 1. Legal Proceedings
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 2020 Annual Report on Form 10-K.
Item 1A. Risk Factors
Other than the risk factors set forth below, there have been no material changes to the risk factors disclosed in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Risks Related to the Proposed Shell Permian Acquisition
Our ability to complete the Shell Permian Acquisition is subject to various closing conditions, including regulatory
clearance, which may impose conditions that could adversely affect us or cause the acquisition not to be
completed.
The Shell Permian Acquisition is subject to a number of conditions to closing as specified in the definitive
agreement signed on September 20, 2021 (Purchase Agreement), including but not limited to the expiration or
termination of the waiting period under the Hart-Scott -Rodino Antitrust Improvements Act of 1976, as
amended. No assurance can be given that the required regulatory clearance will be obtained or that the other
required conditions to closing will be satisfied, and, if the regulatory clearance is obtained and the required
conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such clearance,
including whether any required conditions will materially adversely affect ConocoPhillips following the Shell
Permian Acquisition. Any delay in closing the Shell Permian Acquisition could cause ConocoPhillips not to realize,
or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Shell Permian Acquisition
is successfully closed within its expected time frame.
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ConocoPhillips 2021 Q3 10-Q
The termination of the Purchase Agreement could negatively impact our business and in some circumstances, we
could forfeit a portion of the purchase price.
If the Shell Permian Acquisition is not completed for any reason, including if the above closing conditions are not
satisfied, our ongoing business may be adversely affected and, without realizing any of the expected benefits of
having completed the Shell Permian Acquisition, we would be subject to a number of risks, including the following:
●
We may experience negative reactions from the financial markets, including negative impacts on the
trading price of our common stock; and
●
We will be required to pay our costs relating to the Shell Permian Acquisition, such as legal and
accounting costs and associated fees and expenses, whether or not the Shell Permian Acquisition is
completed.
Additionally, upon entry into the Purchase Agreement, 5% (the Deposit) of the $9.5 billion (Base Purchase Price)
was paid to Shell. If the Purchase Agreement is terminated solely as a result of the material breach or failure of
any of our representations, warranties or covenants included in the Purchase Agreement, the Deposit will not be
refunded.
Integrating the assets acquired in the Shell Permian Acquisition may be more difficult, costly or time-consuming
than expected and we may fail to realize the full anticipated benefits of the transaction, which may adversely
affect our business results and negatively affect the value of our common stock.
We may encounter difficulties integrating the assets acquired from Shell into our business and realizing the
anticipated benefits of the transaction or such benefits may take longer to realize than expected. The Shell
Permian Acquisition is expected to add approximately 225,000 net acres, thereby increasing our unconventional
position in Permian by nearly 30 percent. There are a large number of processes, policies, procedures, operations
and technologies and systems that must be integrated in connection with the Shell Permian Acquisition and the
integration of Shell’s assets. It is possible that the integration process could result in the disruption of our ongoing
business; inconsistencies in standards, controls, procedures and policies; unexpected integration issues; higher
than expected integration costs and an overall post -completion integration process that takes longer than
originally anticipated. We will be required to devote management attention and resources to integrating the
business practices and operations, and prior to closing the transaction, management attention and resources will
be required to plan for such integration. An inability to realize the full extent of the anticipated benefits of the
Shell Permian Acquisition, as well as any delays encountered in the integration process, could have an adverse
effect on our revenues or on our level of expenses and operating results, which may adversely affect the value of
our common stock. In addition, the actual integration may result in additional and unforeseen expenses. Although
we expect that the strategic benefits, and additional income, as well as the realization of other efficiencies related
to the integration of the Shell assets, may offset incremental transaction-related costs over time, if we are not able
to adequately address integration challenges, we may be unable to successfully integrate operations or realize the
anticipated benefits of the integration of the Shell assets.
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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
July 1-31, 2021
7,118,526
$
58.18
7,118,526
$
13,088
August 1-31, 2021
7,530,282
55.61
7,530,282
12,669
September 1-30, 2021
6,990,322
58.70
6,990,322
12,259
21,639,130
21,639,130
*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. At September 30, 2021, we had repurchased $12.7 billion of shares, with $12.3
billion remaining under our current authorization. Repurchases are made at management’s discretion, at
prevailing prices, subject to market conditions and other factors. Except as limited by applicable legal
requirements, repurchases may be increased, decreased or discontinued at any time without prior notice. Shares
of stock repurchased under the plan are held as treasury shares. See the “Our ability to declare and pay dividends
and repurchase shares is subject to certain considerations” section in Risk Factors on page 31 of our 2020 Annual
Report on Form 10-K.
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ConocoPhillips 2021 Q3 10-Q
Item 6. Exhibits
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Schema Document.
101.CAL*
Inline XBRL Calculation Linkbase Document.
101.LAB*
Inline XBRL Labels Linkbase Document.
101.PRE*
Inline XBRL Presentation Linkbase Document.
101.DEF*
Inline XBRL Definition Linkbase Document.
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
ConocoPhillips 2021 Q3 10-Q
64
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