UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
[X]
EXCHANGE ACT OF 1934
For the quarterly period ended
d
Or
[ ]
EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
,
(Address of principal executive offices) (Zip Code)
-
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbols
Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 [ ]
The registrant had
CONOCOPHILLIPS
TABLE OF CONTENTS
Page
Commonly Used Abbreviations ..................................................................................................................
1
Part I—Financial Information
Item 1. Financial Statements
Consolidated Income Statement ...........................................................................................................
2
Consolidated Statement of Comprehensive Income ............................................................................
3
Consolidated Balance Sheet .................................................................................................................
4
Consolidated Statement of Cash Flows................................................................................................
5
Notes to Consolidated Financial Statements ........................................................................................
6
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations .................................................................................................................
31
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................................................
57
Item 4. Controls and Procedures ............................................................................................................
57
Part II—Other Information
Item 1. Legal Proceedings ......................................................................................................................
57
Item 1A. Risk Factors .............................................................................................................................
57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ...................................................
58
Item 6. Exhibits ......................................................................................................................................
59
Signature .....................................................................................................................................................
60
1
Commonly Used Abbreviations
The following industry-specific, accounting and other terms, and abbreviations may be commonly used in this
report.
Currencies
Accounting
$ or USD
U.S. dollar
ARO
asset retirement obligation
CAD
Canadian dollar
ASC
accounting standards codification
EUR
Euro
ASU
accounting standards update
GBP
British pound
DD&A
depreciation, depletion and
amortization
Units of Measurement
FASB
Financial Accounting Standards
BBL
barrel
Board
BCF
billion cubic feet
FIFO
first-in, first-out
BOE
barrels of oil equivalent
G&A
general and administrative
MBD
thousands of barrels per day
GAAP
generally accepted accounting
MCF
thousand cubic feet
principles
MBOD
thousand barrels of oil per day
LIFO
last-in, first-out
MM
million
NPNS
normal purchase normal sale
MMBOE
million barrels of oil equivalent
PP&E
properties, plants and equipment
MMBOD
million barrels of oil per day
SAB
staff accounting bulletin
MBOED
thousands of barrels of oil
VIE
variable interest entity
equivalent per day
MMBOED
millions of barrels of oil
equivalent per day
Miscellaneous
MMBTU
million British thermal units
EPA
Environmental Protection Agency
MMCFD
million cubic feet per day
ESG
Environmental, Social and
Corporate Governance
EU
European Union
Industry
FERC
Federal Energy Regulatory
CBM
coalbed methane
Commission
E&P
exploration and production
GHG
greenhouse gas
FEED
front-end engineering and design
HSE
health, safety and environment
FPS
floating production system
ICC
International Chamber of
FPSO
floating production, storage and
Commerce
offloading
ICSID
World Bank’s International
G&G
geological and geophysical
Centre for Settlement of
JOA
joint operating agreement
Investment Disputes
LNG
liquefied natural gas
IRS
Internal Revenue Service
NGLs
natural gas liquids
OTC
over-the-counter
OPEC
Organization of Petroleum
NYSE
New York Stock Exchange
Exporting Countries
SEC
U.S. Securities and Exchange
PSC
production sharing contract
Commission
PUDs
proved undeveloped reserves
TSR
total shareholder return
SAGD
steam-assisted gravity drainage
U.K.
United Kingdom
WCS
Western Canada Select
U.S.
United States of America
WTI
West Texas Intermediate
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Income Statement
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
2021
2020
Revenues and Other Income
Sales and other operating revenues
$
Equity in earnings of affiliates
Gain (loss) on dispositions
(42 )
Other income (loss)
(1,539 )
Total Revenues and Other Income
Costs and Expenses
Purchased commodities
Production and operating expenses
Selling, general and administrative expenses
(3 )
Exploration expenses
Depreciation, depletion and amortization
Impairments
(3 )
Taxes other than income taxes
Accretion on discounted liabilities
Interest and debt expense
Foreign currency transactions (gain) loss
(90 )
Other expenses
(6 )
Total Costs and Expenses
Income (loss) before income taxes
(1,563 )
Income tax provision
Net income (loss)
(1,711 )
Less: net income attributable to noncontrolling interests
(28 )
Net Income (Loss) Attributable to ConocoPhillips
$
(1,739 )
Net Income (Loss) Attributable to ConocoPhillips Per Share
(dollars)
Basic
$
(1.60 )
Diluted
(1.60 )
Average Common Shares Outstanding
(in thousands)
Basic
Diluted
See Notes to Consolidated Financial Statements.
3
Consolidated Statement of Comprehensive Income
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
2021
2020
Net Income (Loss)
$
(1,711 )
Other comprehensive income (loss)
Defined benefit plans
Reclassification adjustment for amortization of prior service credit
included in net income (loss)
(9 )
(8 )
Net actuarial gain arising during the period
Reclassification adjustment for amortization of net actuarial losses included
in net income (loss)
Income taxes on defined benefit plans
(21 )
(4 )
Defined benefit plans, net of tax
Net unrealized holding loss on securities
(1 )
(3 )
Income taxes on net unrealized holding loss on securities
Net unrealized holding loss on securities, net of tax
(1 )
(2 )
Foreign currency translation adjustments
(799 )
Income taxes on foreign currency translation adjustments
Foreign currency translation adjustments, net of tax
(797 )
Other Comprehensive Income (Loss), Net of Tax
(788 )
Comprehensive Income (Loss)
(2,499 )
Less: comprehensive income attributable to noncontrolling interests
(28 )
Comprehensive Income (Loss) Attributable to ConocoPhillips
$
(2,527 )
See Notes to Consolidated Financial Statements.
4
Consolidated Balance Sheet
ConocoPhillips
Millions of Dollars
March 31
December 31
2021
2020
Assets
Cash and cash equivalents
$
Short-term investments
Accounts and notes receivable (net of allowance of $
, respectively)
Accounts and notes receivable—related parties
Investment in Cenovus Energy
Inventories
Prepaid expenses and other current assets
Total Current Assets
Investments and long-term receivables
Loans and advances—related parties
Net properties, plants and equipment
(net of accumulated DD&A of $
, respectively)
Other assets
Total Assets
$
Liabilities
Accounts payable
$
Accounts payable—related parties
Short-term debt
Accrued income and other taxes
Employee benefit obligations
Other accruals
Total Current Liabilities
Long-term debt
Asset retirement obligations and accrued environmental costs
Deferred income taxes
Employee benefit obligations
Other liabilities and deferred credits
Total Liabilities
Equity
Common stock (
Issued (2021—
Par value
Capital in excess of par
Treasury stock (at cost: 2021—
(47,672 )
(47,297 )
Accumulated other comprehensive loss
(5,080 )
(5,218 )
Retained earnings
Total Equity
Total Liabilities and Equity
$
See Notes to Consolidated Financial Statements.
5
Consolidated Statement of Cash Flows
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
2021
2020
Cash Flows From Operating Activities
Net Income (Loss)
$
(1,711 )
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation, depletion and amortization
Impairments
(3 )
Dry hole costs and leasehold impairments
Accretion on discounted liabilities
Deferred taxes
(227 )
Undistributed equity earnings
(Gain) loss on dispositions
(233 )
Unrealized (gain) loss on investment in Cenovus Energy
(308 )
Other
(581 )
(284 )
Working capital adjustments
Decrease (increase) in accounts and notes receivable
(785 )
Decrease (increase) in inventories
(51 )
Increase in prepaid expenses and other current assets
(43 )
(79 )
Increase (decrease) in accounts payable
(297 )
Increase (decrease) in taxes and other accruals
(445 )
Net Cash Provided by Operating Activities
Cash Flows From Investing Activities
Cash acquired from Concho
Capital expenditures and investments
(1,200 )
(1,649 )
Working capital changes associated with investing activities
Proceeds from asset dispositions
(17 )
Net purchases of investments
(499 )
(935 )
Collection of advances/loans—related parties
Other
(44 )
Net Cash Used in Investing Activities
(1,215 )
(1,932 )
Cash Flows From Financing Activities
Repayment of debt
(26 )
(24 )
Issuance of company common stock
(28 )
Repurchase of company common stock
(375 )
(726 )
Dividends paid
(588 )
(458 )
Other
(24 )
Net Cash Used in Financing Activities
(1,015 )
(1,230 )
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted
Cash
(2 )
(122 )
Net Change in Cash, Cash Equivalents and Restricted Cash
(152 )
(1,179 )
Cash, cash equivalents and restricted cash at beginning of period
Cash, Cash Equivalents and Restricted Cash at End of Period
$
Restricted cash of $
respectively, of our Consolidated Balance Sheet as of March 31, 2021.
Restricted cash of $
respectively, of our Consolidated Balance Sheet as of December 31, 2020.
See Notes to Consolidated Financial Statements.
6
Notes to Consolidated Financial Statements
ConocoPhillips
Note 1—Basis of Presentation
The interim-period financial information presented in the financial statements included in this report is
unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair
presentation of the consolidated financial position of ConocoPhillips and its results of operations and cash
flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed.
Certain notes and other information have been condensed or omitted from the interim financial statements
included in this report. Therefore, these financial statements should be read in conjunction with the
consolidated financial statements and notes included in our 2020 Annual Report on Form 10-K
.
Note 2—Inventories
Inventories consisted of the following:
Millions of Dollars
March 31
2021
2020
Crude oil and natural gas
$
Materials and supplies
$
Inventories valued on the LIFO basis totaled $
31, 2020, respectively.
Note 3—Acquisitions and Dispositions
Acquisition of
We completed our acquisition of Concho on
agreement, each share of Concho common stock was exchanged at a fixed ratio of
ConocoPhillips common stock, for total consideration of $
Total Consideration
Number of shares exchanged
$
$
**Based on the ConocoPhillips average stock price on January 15, 2021.
7
The transaction was accounted for as a business combination under FASB ASC 805 using the acquisition
method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair
values. Fair value measurements were made for acquired assets and liabilities, and adjustments to those
measurements may be made in subsequent periods, up to one year from the acquisition date as we identify new
information about facts and circumstances that existed as of the acquisition date to consider. Oil and gas
properties were valued using a discounted cash flow approach incorporating market participant and internally
generated price assumptions; production profiles; and operating and development cost assumptions. Debt
assumed in the acquisition was valued based on observable market prices. The fair values determined for
accounts receivables, accounts payable, and most other current assets and current liabilities were equivalent to
the carrying value due to their short-term nature. The total consideration of $
identifiable assets and liabilities based on their fair values as of January 15, 2021.
Assets Acquired
Millions of Dollars
Cash and cash equivalents
$
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Investments and long-term receivables
Net properties, plants and equipment
Other assets
Total assets acquired
$
Liabilities Assumed
Accounts payable
$
Accrued income and other taxes
Employee benefit obligations
Other accruals
Long-term debt
Asset retirement obligations and accrued environmental costs
Deferred income taxes
Other liabilities and deferred credits
Total liabilities assumed
$
Net assets acquired
$
With the completion of the Concho transaction, we acquired proved and unproved properties of approximately
$
We recognized approximately $
period. 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.
8
The impact from these transaction and restructuring costs to the lines of our consolidated income statement for
the three-month period ending March 31, 2021, are below:
Millions of Dollars
Transaction Cost
Restructuring Cost
Total Cost
Production and operating expenses
$
Selling, general and administration expenses
Exploration expenses
Taxes other than income taxes
Other expenses
$
On February 8, 2021, we completed a debt exchange offer related to the debt assumed from Concho. As a
result of the debt exchange, we recognized an additional income tax related restructuring charge of $
million. See Note 18—Income Taxes, for additional information.
“Total Revenues and Other Income” and “Net Income (Loss) Attributable to ConocoPhillips” associated with
the acquired Concho business were approximately $
month period ending March 31, 2021. The results associated with the Concho business include a before- and
after-tax loss of $
settlement dates on or before March 31, 2021, and an additional before- and after-tax loss of $
$
loss is recorded within “Total Revenues and Other Income” on our consolidated income statement. For
additional information about the financial derivative instruments acquired, see Note 10—Derivative and
Financial Instruments.
The following summarizes the unaudited supplemental pro forma financial information for the three-month
period ending March 31, 2020, as if we had completed the acquisition of Concho on January 1, 2020:
Millions of Dollars
Supplemental Pro Forma (unaudited)
Three Months Ended
March 31, 2020
Total revenues and other income
$
Net loss
(390 )
Net loss attributable to ConocoPhillips
(418 )
$ per share
Earnings per share:
Three Months Ended
March 31, 2020
Basic net loss
$
(0.31 )
Diluted net loss
(0.31 )
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-month period ending March 31, 2020 is a result of
combining the consolidated income statement of ConocoPhillips with the results of Concho. The pro forma
results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction.
The pro forma results include adjustments to reverse impairment expense of $
recorded by Concho in the three-month period ending March 31, 2020, related to oil and gas properties and
goodwill, respectively. Other adjustments made relate primarily to DD&A, which is based on the unit-of-
production method, resulting from the purchase price allocated to properties, plants and equipment. We
9
believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly
reflected.
Assets Sold
In 2020, we completed the sale of our Australian-West asset and operations. The sales agreement entitles us to
a $
30, 2021, FID was announced and as such, we recognized a $
of 2021. The purchaser failed to pay the FID bonus when due. We intend to take all action required to enforce
our contractual right to the $
to this transaction are reflected in our Asia Pacific segment.
In 2017, we completed the sale of our
(FCCL) Partnership, as well as the majority of our western Canada gas assets to Cenovus Energy.
Consideration for the transaction included a five-year, uncapped contingent payment.
gain on disposition for these contingent payments of $
2021.
Note 4—Investments, Loans and Long-Term Receivables
APLNG
APLNG executed project financing agreements for an $
billion project finance facility was initially composed of financing agreements executed by APLNG with the
Export-Import Bank of the United States for approximately $
approximately $
approximately $
interest repayment in March 2017 and is scheduled to make
APLNG made a voluntary repayment of $
At the same time, APLNG obtained a United States Private Placement (USPP) bond facility of $
APLNG made its first interest payment related to this facility in March 2019, and principal payments are
scheduled to commence in September 2023, with
During the first quarter of 2019, APLNG refinanced $
transactions. As a result of the first transaction, APLNG obtained a commercial bank facility of $
APLNG made its first principal and interest repayment in September 2019 with
facility until March 2028. Through the second transaction, APLNG obtained a USPP bond facility of $
billion. APLNG made its first interest payment in September 2019, and principal payments are scheduled to
commence in September 2023, with
In conjunction with the $3.2 billion debt obtained during the first quarter of 2019 to refinance existing project
finance debt, APLNG made voluntary repayments of $
and international commercial banks and the Export-Import Bank of China, respectively.
At March 31, 2021, a balance of $
additional information.
10
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 an improved outlook for crude oil prices, the estimated fair value of our
investment increased and is above carrying value at March 31, 2021. We will continue to monitor the
relationship between the carrying value and fair value of APLNG. Should we determine in the future there has
been a loss in the value of our investment that is other than temporary, we would record an impairment of our
equity investment, calculated as the total difference between carrying value and fair value as of the end of the
reporting period.
At March 31, 2021, the carrying value of our equity method investment in APLNG was $
balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet.
Loans and Long-Term Receivables
As part of our normal ongoing business operations, and consistent with industry practice, we enter into
numerous agreements with other parties to pursue business opportunities. Included in such activity are loans
made to certain affiliated and non-affiliated companies. At March 31, 2021, significant loans to affiliated
companies included $
On our consolidated balance sheet, the long-term portion of these loans is included in the “Loans and
advances—related parties” line, while the short-term portion is in the “Accounts and notes receivable—related
parties” line.
Note 5-–Investment in Cenovus Energy
In 2017, we completed the sale of certain assets to Cenovus Energy (CVE) in which we received
CVE common shares as consideration. At March 31, 2021, the investment was included on our consolidated
balance sheet at fair value of $
CVE common stock. The fair value of the
per share on the NYSE on the last trading day of the quarter. In the first quarter of 2021, we recognized an
unrealized gain of $
$
fair value are reflected within the “Other income (loss)” line on our consolidated income statement in the first
quarter of 2021 relating to the shares held at the reporting date. See Note 11—Fair Value Measurement for
additional information. Subject to market conditions, we intend to decrease our investment over time through
market transactions, private agreements or otherwise.
Note 6—Debt
Our debt balance at March 31, 2021, was $
On January 15, 2021, we completed the acquisition of Concho in an all-stock transaction. In the acquisition,
we assumed Concho’s publicly traded debt, with an outstanding principal balance of $
recorded at fair value of $
●
% Notes due
●
% Notes due
●
% Notes due
●
% Notes due
●
% Notes due
11
The adjustment to fair value of the senior notes of approximately $
amortized as an adjustment to interest expense over the remaining contractual terms of the senior notes.
On February 8, 2021, we completed a debt exchange offer related to the debt assumed from Concho. Of the
approximately $
percent, or approximately $
has the same interest rates and maturity dates as the Concho senior notes. The portion not exchanged,
approximately $
exchange was treated as a debt modification for accounting purposes resulting in a portion of the unamortized
fair value adjustment of the Concho senior notes allocated to the new debt issued by ConocoPhillips on the
settlement date of the exchange. The new debt issued in the exchange is fully and unconditionally guaranteed
by ConocoPhillips Company. See Note 3—Acquisitions and Dispositions, for more information on the
acquisition.
We have a revolving credit facility totaling $
credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $
million, or as support for our commercial paper program. The revolving credit facility is broadly syndicated
among financial institutions and does not contain any material adverse change provisions or any covenants
requiring maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-
default provision relating to the failure to pay principal or interest on other debt obligations of $
more by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to
redetermination prior to its expiration date.
Credit facility borrowings may bear interest at a margin above rates offered by certain designated banks in the
London interbank market or at a margin above the overnight federal funds rate or prime rates offered by
certain designated banks in the U.S. The agreement calls for commitment fees on available, but unused,
amounts. The agreement also contains early termination rights if our current directors or their approved
successors cease to be a majority of the Board of Directors.
The revolving credit facility supports our ability to issue up to $
primarily a funding source for short-term working capital needs. Commercial paper maturities are generally
limited to
, and is included in the short-term debt on our consolidated balance sheet. With $
of commercial paper outstanding and
available borrowing capacity under our revolving credit facility at March 31, 2021. At December 31, 2020, we
had $
At March 31, 2021, we had $
maturities ranging through 2035. The VRDBs are redeemable at the option of the bondholders on any business
day. If they are ever redeemed, we have the ability and intent to refinance on a long-term basis, therefore, the
VRDBs are included in the “Long-term debt” line on our consolidated balance sheet.
12
Note 7—Changes in Equity
The following tables reflect the changes in stockholders' 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 March 31, 2021
Balances at December 31, 2020
$
(47,297 )
(5,218 )
Net income
Other comprehensive income
Dividends paid ($
(588 )
(588 )
Acquisition of Concho
Repurchase of company common stock
(375 )
(375 )
Distributed under benefit plans
Other
Balances at March 31, 2021
$
(47,672 )
(5,080 )
For the three months ended March 31, 2020
Balances at December 31, 2019
$
(46,405 )
(5,357 )
Net income (loss)
(1,739 )
(1,711 )
Other comprehensive loss
(788 )
(788 )
Dividends paid ($
(458 )
(458 )
Repurchase of company common stock
(726 )
(726 )
Distributions to noncontrolling interests and other
(26 )
(26 )
Distributed under benefit plans
Other
Balances at March 31, 2020
$
(47,130 )
(6,145 )
Note 8—Guarantees
At March 31, 2021, we were liable for certain contingent obligations under various contractual arrangements
as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for
newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not
recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise
stated, we are not currently performing with any significance under the guarantee and expect future
performance to be either immaterial or have only a remote chance of occurrence.
13
APLNG Guarantees
At March 31, 2021, we had outstanding multiple guarantees in connection with our
interest in APLNG. The following is a description of the guarantees with values calculated utilizing March
2021 exchange rates:
●
During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rata
portion of the funds in a project finance reserve account. We estimate the remaining term of this
guarantee to be
. Our maximum exposure under this guarantee is approximately $
and may become payable if an enforcement action is commenced by the project finance lenders against
APLNG. At March 31, 2021, the carrying value of this guarantee was approximately $
●
In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy in
October 2008, we agreed to reimburse Origin Energy for our share of the existing contingent liability
arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales
agreements with remaining terms of
. Our maximum potential liability for future
payments, or cost of volume delivery, under these guarantees is estimated to be $
billion in the event of intentional or reckless breach) and would become payable if APLNG fails to
meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future
payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered
if APLNG does not have enough natural gas to meet these sales commitments and if the co-venturers do
not make necessary equity contributions into APLNG.
●
We have guaranteed the performance of APLNG with regard to certain other contracts executed in
connection with the project’s continued development. The guarantees have remaining terms of
. Our maximum potential amount of future payments related to these
guarantees is approximately $
March 31, 2021, the carrying value of these guarantees was approximately $
Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling approximately
$
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
certain asset values are lower than guaranteed amounts at the end of the lease or contract term, business
conditions decline at guaranteed entities, or as a result of nonperformance of contractual terms by guaranteed
parties. At March 31, 2021, the carrying value of these guarantees was approximately $
Indemnifications
Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint
ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications
for taxes and environmental liabilities. Most of these indemnifications are related to tax issues and the
majority of these expire in 2021. Those related to environmental issues have terms that are generally indefinite
and the maximum amounts of future payments are generally unlimited. The carrying amount recorded for
these indemnifications at March 31, 2021, was approximately $
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 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, see Note 9—Contingencies and Commitments.
14
Note 9—Contingencies and Commitments
A number of lawsuits involving a variety of claims arising in the ordinary course of business have been filed
against ConocoPhillips. We also may be required to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active
and inactive sites. We regularly assess the need for accounting recognition or disclosure of these
contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a
liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be
reasonably estimated and no amount within the range is a better estimate than any other amount, then the low
end of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries.
We accrue receivables for insurance or other third-party recoveries when applicable. With respect to income
tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a
tax position is less than certain.
Based on currently available information, we believe it is remote that future costs related to known contingent
liability exposures will exceed current accruals by an amount that would have a material adverse impact on our
consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position
both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future
changes include contingent liabilities recorded for environmental remediation, tax and legal matters.
Estimated future environmental remediation costs are subject to change due to such factors as the uncertain
magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and
the determination of our liability in proportion to that of other responsible parties. Estimated future costs
related to tax and legal matters are subject to change as events evolve and as additional information becomes
available during the administrative and litigation processes.
Environmental
We are subject to international, federal, state and local environmental laws and regulations. When we prepare
our consolidated financial statements, we record accruals for environmental liabilities based on management’s
best estimates, using all information that is available at the time. We measure estimates and base liabilities on
currently available facts, existing technology, and presently enacted laws and regulations, taking into account
stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior
experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by
the U.S. EPA or other organizations. We consider unasserted claims in our determination of environmental
liabilities, and we accrue them in the period they are both probable and reasonably estimable.
Although liability of those potentially responsible for environmental remediation costs is generally joint and
several for federal sites and frequently so for other sites, we are usually only one of many companies cited at a
particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to
any site at which we have been designated as a potentially responsible party. We have been successful to date
in sharing cleanup costs with other financially sound companies. Many of the sites at which we are potentially
responsible are still under investigation by the EPA or the agency concerned. Prior to actual cleanup, those
potentially responsible normally assess the site conditions, apportion responsibility and determine the
appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability.
Where it appears that other potentially responsible parties may be financially unable to bear their proportional
share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly.
As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these
environmental obligations are mitigated by indemnifications made by others for our benefit, and some of the
indemnifications are subject to dollar limits and time limits.
We are currently participating in environmental assessments and cleanups at numerous federal Superfund and
comparable state and international sites. After an assessment of environmental exposures for cleanup and
other costs, we make accruals on an undiscounted basis (except those acquired in a purchase business
combination, which we record on a discounted basis) for planned investigation and remediation activities for
sites where it is probable future costs will be incurred and these costs can be reasonably estimated. We have
not reduced these accruals for possible insurance recoveries.
15
At March 31, 2021, our consolidated balance sheet included a total environmental accrual of $
compared with $
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 and
claims of alleged environmental contamination from historic operations. We will continue to defend ourselves
vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific
characteristics of our cases, employing a litigation management process to manage and monitor the legal
proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in
individual cases. This process also enables us to track those cases that have been scheduled for trial and/or
mediation. Based on professional judgment and experience in using these litigation management tools and
available information about current developments in all our cases, our legal organization regularly assesses the
adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new
accruals, is required.
We have contingent liabilities resulting from throughput agreements with pipeline and processing companies
not associated with financing arrangements. Under these agreements, we may be required to provide any such
company with additional funds through advances and penalties for fees related to throughput capacity not
utilized. In addition, at March 31, 2021, we had performance obligations secured by letters of credit of $
million (issued as direct bank letters of credit) related to various purchase commitments for materials, supplies,
commercial activities and services incident to the ordinary conduct of business.
In 2007, ConocoPhillips was unable to reach agreement with respect to the empresa mixta structure mandated
by the Venezuelan government’s Nationalization Decree. As a result, Venezuela’s national oil company,
Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’
interests in the Petrozuata and Hamaca heavy oil ventures and the offshore Corocoro development project. In
response to this expropriation, ConocoPhillips initiated international arbitration on November 2, 2007, with the
ICSID. On September 3, 2013, an ICSID arbitration tribunal held that Venezuela unlawfully expropriated
ConocoPhillips’ significant oil investments in June 2007. On January 17, 2017, the Tribunal reconfirmed the
decision that the expropriation was unlawful. In March 2019, the Tribunal unanimously ordered the
government of Venezuela to pay ConocoPhillips approximately $
government’s unlawful expropriation of the company’s investments in Venezuela in 2007. ConocoPhillips has
filed a request for recognition of the award in several jurisdictions. On August 29, 2019, the ICSID Tribunal
issued a decision rectifying the award and reducing it by approximately $
at $
automatically stayed enforcement of the award. Annulment proceedings are underway.
16
In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against
PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued
an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $
agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures.
a result, ConocoPhillips has resumed legal enforcement actions. ConocoPhillips has ensured that the
settlement and any actions taken in enforcement thereof meet all appropriate U.S. regulatory requirements,
including those related to any applicable sanctions imposed by the U.S. against Venezuela.
In 2016, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against
PDVSA under the contracts that had established the Corocoro project. On August 2, 2019, the ICC Tribunal
awarded ConocoPhillips approximately $
ConocoPhillips is seeking recognition and enforcement of the award in various jurisdictions. ConocoPhillips
has ensured that all the actions related to the award meet all appropriate U.S. regulatory requirements,
including those related to any applicable sanctions imposed by the U.S. against Venezuela.
The Office of Natural Resources Revenue (ONRR) has conducted audits of ConocoPhillips’ payment of
royalties on federal lands and has issued multiple orders to pay additional royalties to the federal government.
ConocoPhillips and the ONRR entered into a settlement agreement on March 23, 2021, to resolve the dispute.
All orders and associated appeals have been withdrawn with prejudice.
Beginning in 2017, governmental and other entities in several states in the U.S. have filed lawsuits against oil
and gas companies, including ConocoPhillips, seeking compensatory damages and equitable relief to abate
alleged climate change impacts. Additional lawsuits with similar allegations are expected to be filed. The
amounts claimed by plaintiffs are unspecified and the legal and factual issues involved in these cases are
unprecedented. ConocoPhillips believes these lawsuits are factually and legally meritless and are an
inappropriate vehicle to address the challenges associated with climate change and will vigorously defend
against such lawsuits.
Several Louisiana parishes and the State of Louisiana have filed
Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips,
seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by
historical oil and gas operations. ConocoPhillips entities are defendants in
vigorously defend against them. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty
about these claims (both as to scope and damages) and any potential financial impact on the company.
In October 2020, the Bureau of Safety and Environmental Enforcement (BSEE) ordered the prior owners of
Outer Continental Shelf (OCS) Lease P-0166, including ConocoPhillips, to decommission the lease facilities,
including two offshore platforms located near Carpinteria, California. This order was sent after the current
owner of OCS Lease P-0166 relinquished the lease and abandoned the lease platforms and facilities. BSEE’s
order to ConocoPhillips is premised on its connection to Phillips Petroleum Company, a legacy company of
ConocoPhillips, which held a historical
sold its interest approximately
production on this lease since that time. ConocoPhillips is challenging this order.
17
Note 10—Derivative and Financial Instruments
We use futures, forwards, swaps and options in various markets to meet our customer needs, capture market
opportunities, and manage foreign exchange currency risk.
Commodity Derivative Instruments
Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG and NGLs.
Commodity derivative instruments are held at fair value on our consolidated balance sheet. Where these
balances have the right of setoff, they are presented on a net basis. Related cash flows are recorded as
operating activities on our consolidated statement of cash flows. On our consolidated income statement, gains
and losses are recognized either on a gross basis if directly related to our physical business or a net basis if held
for trading. Gains and losses related to contracts that meet and are designated with the NPNS exception are
recognized upon settlement. We generally apply this exception to eligible crude contracts and certain gas
contracts. We do not apply hedge accounting for our commodity derivatives.
The following table presents the gross fair values of our commodity derivatives, excluding collateral, and the
line items where they appear on our consolidated balance sheet:
Millions of Dollars
March 31
December 31
2021
2020
Assets
Prepaid expenses and other current assets
$
Other assets
Liabilities
Other accruals
Other liabilities and deferred credits
The gains (losses) from commodity derivatives incurred, and the line items where they appear on our
consolidated income statement were:
Millions of Dollars
March 31
2021
2020
Sales and other operating revenues
$
(279 )
Other income (loss)
Purchased commodities
(27 )
On January 15, 2021, we assumed financial derivative instruments consisting of oil and natural gas swaps
following the acquisition of Concho. At the acquisition date, the financial derivative instruments acquired
were recognized at fair value as a net liability of $
through December 31, 2022. During the first quarter, we recognized a before-tax loss of $
Concho derivative contracts with settlement dates on or before March 31, 2021, and an additional $
loss related to acquired Concho derivative contracts with settlement dates subsequent to March 31, 2021, for a
total before-tax loss of $
within the “Sales and other operating revenues” line on our consolidated income statement.
18
At March 31, 2021, all oil and natural gas derivative financial instruments acquired from Concho were
contractually settled. In connection with the settlement, we paid $
will pay the remaining $
derivative contracts are presented within “Cash Flows From Operating Activities” on our consolidated cash
flow statement.
The table below summarizes our net exposures resulting from outstanding commodity derivative contracts:
Open Position
Long/(Short)
March 31
December 31
2021
2020
Commodity
Natural gas and power (billion cubic feet equivalent)
(20 )
(12 )
(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.
The following investments are carried on our consolidated balance sheet at cost, plus accrued interest and the
table reflects remaining maturities at March 31, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-
Term Receivables
March 31
December 31
March 31
December 31
March 31
December 31
2021
2020
2021
2020
2021
2020
Cash
$
Demand Deposits
Time Deposits
1 to 90 days
91 to 180 days
Within one year
One year through five years
U.S. Government Obligations
1 to 90 days
$
19
The following investments in debt securities classified as available for sale are carried at fair value on our
consolidated balance sheet at March 31, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-Term
Receivables
March 31
December 31
March 31
December 31
March 31
December 31
2021
2020
2021
2020
2021
2020
Major Security Type
Corporate Bonds
$
Commercial Paper
U.S. Government Obligations
U.S. Government Agency
Obligations
Foreign Government Obligations
Asset-backed Securities
$
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.
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
March 31
December 31
March 31
December 31
2021
2020
2021
2020
Major Security Type
Corporate bonds
$
Commercial paper
U.S. government obligations
U.S. government agency obligations
Foreign government obligations
Asset-backed securities
$
As of March 31, 2021 and December 31, 2020, total unrealized losses for debt securities classified as available
for sale with net losses were negligible. Additionally, at March 31, 2021 and December 31, 2020, investments
in these debt securities in an unrealized loss position for which an allowance for credit losses has not been
recorded were negligible.
For the three-month periods ended March 31, 2021 and March 31, 2020, proceeds from sales and redemptions
of investments in debt securities classified as available for sale were $
respectively. Gross realized gains and losses included in earnings from those sales and redemptions were
negligible. The cost of securities sold and redeemed is determined using the specific identification method.
20
Credit Risk
Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents,
short-term investments, long-term investments in debt securities, OTC derivative contracts and trade
receivables. Our cash equivalents and short-term investments are placed in high-quality commercial paper,
government money market funds, government debt securities, time deposits with major international banks and
financial institutions, high-quality corporate bonds, and foreign government obligations. Our long-term
investments in debt securities are placed in high-quality corporate bonds, U.S. government and government
agency obligations, asset-backed securities, and time deposits with major international banks and financial
institutions.
The credit risk from our OTC derivative contracts, such as forwards, swaps and options, derives from the
counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit
limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant
nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because
these trades are cleared primarily with an exchange clearinghouse and subject to mandatory margin
requirements until settled; however, we are exposed to the credit risk of those exchange brokers for receivables
arising from daily margin cash calls, as well as for cash deposited to meet initial margin requirements.
Our trade receivables result primarily from our oil and gas operations and reflect a broad national and
international customer base, which limits our exposure to concentrations of credit risk. The majority of these
receivables have payment terms of 30 days or less, and we continually monitor this exposure and the
creditworthiness of the counterparties. At our option, we may require collateral to limit the exposure to loss
including, letters of credit, prepayments and surety bonds, as well as master netting arrangements 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.
The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were
in a liability position at March 31, 2021 and December 31, 2020, was $
respectively. For these instruments,
our credit rating had been downgraded below investment grade at March 31, 2021, we would have been
required to post $
Note 11—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit
price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed
according to the quality of valuation inputs under the following hierarchy:
●
Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities.
●
Level 2: Inputs other than quoted prices that are directly or indirectly observable.
●
Level 3: Unobservable inputs that are significant to the fair value of assets or liabilities.
21
The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those
that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from
unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes
available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if
corroborated market data is no longer available. There were no material transfers into or out of Level 3 during
2021 or 2020.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair value on a recurring basis primarily include our investment in
Cenovus Energy common shares, our investments in debt securities classified as available for sale, and
commodity derivatives.
●
Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are
valued using unadjusted prices available from the underlying exchange. Level 1 also includes our
investment in common shares of Cenovus Energy, which is valued using quotes for shares on the NYSE,
and our investments in U.S. government obligations classified as available for sale debt securities, which
are valued using exchange prices.
●
Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and
sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing service
companies that are all corroborated by market data. Level 2 also includes our investments in debt
securities classified as available for sale including investments in corporate bonds, commercial paper,
asset-backed securities, U.S. government agency obligations and foreign government obligations that are
valued using pricing provided by brokers or pricing service companies that are corroborated with market
data.
●
Level 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale
contracts where a significant portion of fair value is calculated from underlying market data that is not
readily available. The derived value uses industry standard methodologies that may consider the historical
relationships among various commodities, modeled market prices, time value, volatility factors and other
relevant economic measures. The use of these inputs results in management’s best estimate of fair value.
Level 3 activity was not material for all periods presented.
The following table summarizes the fair value hierarchy for gross financial assets and liabilities (i.e.,
unadjusted where the right of setoff exists for commodity derivatives accounted for at fair value on a recurring
basis):
Millions of Dollars
March 31, 2021
December 31, 2020
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investment in Cenovus Energy
$
Investments in debt securities
-
Commodity derivatives
Total assets
$
Liabilities
Commodity derivatives
$
Total liabilities
$
22
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
March 31, 2021
Assets
$
Liabilities
December 31, 2020
Assets
$
Liabilities
At March 31, 2021 and December 31, 2020, we did not present any amounts gross on our consolidated
balance sheet where we had the right of setoff.
Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
●
Cash and cash equivalents and short-term investments: The carrying amount reported on the balance
sheet approximates fair value. For those investments classified as available for sale debt securities,
the carrying amount reported on the balance sheet is fair value.
●
Accounts and notes receivable (including long-term and related parties): The carrying amount
reported on the balance sheet approximates fair value. The valuation technique and methods used to
estimate the fair value of the current portion of fixed-rate related party loans is consistent with Loans
and advances—related parties.
●
Investment in Cenovus Energy: See Note 5—Investment in Cenovus Energy for a discussion of the
carrying value and fair value of our investment in Cenovus Energy common shares.
●
Investments in debt securities classified as available for sale: The fair value of investments in debt
securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The
fair value of investments in debt securities categorized as Level 2 in the fair value hierarchy is
measured using pricing provided by brokers or pricing service companies that are corroborated with
market data. See Note 10—Derivatives and Financial Instruments, for additional information.
●
Loans and advances—related parties: The carrying amount of floating-rate loans approximates fair
value. The fair value of fixed-rate loan activity is measured using market observable data and is
categorized as Level 2 in the fair value hierarchy. See Note 4—Investments, Loans and Long-Term
Receivables, for additional information.
●
Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts
payable and floating-rate debt reported on the balance sheet approximates fair value.
●
Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a
pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level
2 in the fair value hierarchy.
●
Commercial paper: The carrying amount of our commercial paper instruments approximates fair value
and is reported on the balance sheet as short-term debt.
23
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
March 31
December 31
March 31
December 31
2021
2020
2021
2020
Financial assets
Investment in Cenovus Energy
$
Commodity derivatives
Investments in debt securities
Loans and advances—related parties
Financial liabilities
Total debt, excluding finance leases
Commodity derivatives
Note 12—Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss in the equity section of our consolidated balance sheet included:
Millions of Dollars
Defined Benefit
Plans
Net Unrealized
Gain (Loss) on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2020
$
(425 )
(4,795 )
(5,218 )
Other comprehensive income (loss)
(1 )
March 31, 2021
$
(355 )
(4,726 )
(5,080 )
The following table summarizes reclassifications out of accumulated other comprehensive loss and into net
income (loss):
Millions of Dollars
Three Months Ended
March 31
2021
2020
Defined benefit plans
$
The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $
$
information.
24
Note 13—Cash Flow Information
Millions of Dollars
Three Months Ended
March 31
2021
2020
Cash Payments
Interest
$
Income taxes
Net Sales (Purchases) of Investments
Short-term investments purchased
$
(3,432 )
(3,423 )
Short-term investments sold
Investments and Long-term receivables purchased
(60 )
(143 )
Investments and Long-term receivables sold
$
(499 )
(935 )
We assumed various financial derivative instruments in the Concho acquisition. In the first quarter of 2021,
we settled all financial derivative contracts assumed in the Concho acquisition, including accelerating
settlement of contracts with settlement dates after March 31, 2021. Cash settlements related to financial
derivatives of $
cash flow statement. See Note 10—Derivative and Financial Instruments, for additional information.
For the first quarter of 2021, included within “Cash Flows From Investing Activities” is $
received through the addition of cash balances acquired from Concho. We had additional non-cash increases
in assets and liabilities associated with the acquisition of Concho as consideration for the transaction was
entirely in ConocoPhillips common stock. See Note 3—Acquisitions and Dispositions for additional
information on the acquisition.
25
Note 14—Employee Benefit Plans
Pension and Postretirement Plans
The components of net periodic benefit cost of all defined benefit plans for the first quarter are presented in
the following table:
Millions of Dollars
Other Benefits
2021
2020
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Components of Net Periodic Benefit Cost
Three Months Ended March 31
Service cost
$
Interest cost
Expected return on plan assets
(24 )
(30 )
(21 )
(37 )
Amortization of prior service credit
(9 )
(8 )
Recognized net actuarial loss
Settlements
(1 )
Curtailments
Special termination benefits
Net periodic benefit cost
$
(8 )
(5 )
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.
As part of our restructuring program, we concluded that actions taken during the three-month period ended
March 31, 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
$
conjunction with the recognition of curtailment losses, the fair market values of pension plan assets were
updated, and the pension benefit obligations of the U.S. qualified pension, a U.S. nonqualified supplemental
retirement plan and the U.S. other postretirement benefit plans were remeasured. At March 31, 2021, the net
pension liability decreased by $
by lower than premised return on assets on the U.S. qualified pension plan, resulting in a corresponding
increase to other comprehensive income.
The relevant discount rates are summarized in the following table:
March 31
December 31
Discount rate
2021
2020
U.S. qualified pension plan
%
U.S. nonqualified pension plan
U.S. postretirement benefit plans
26
Severance Accrual
The following table summarizes our severance accrual activity for the three-month period ended March 31,
2021:
Millions of Dollars
Balance at December 31, 2020
$
Accruals
Benefit payments
(33 )
Balance at March 31, 2021
$
Accruals in the first quarter of 2021 represent severance costs associated with our restructuring program. Of
the total remaining balance at March 31, 2021, $
Acquisitions and Dispositions, for additional information on the restructuring program.
Note 15—Related Party Transactions
Our related parties primarily include equity method investments and certain trusts for the benefit of
employees.
Significant transactions with our equity affiliates were:
Millions of Dollars
Three Months Ended
March 31
2021
2020
Operating revenues and other income
$
Operating expenses and selling, general and administrative expenses
Net interest (income) expense*
(1 )
(2 )
*We paid interest to, or received interest from, various affiliates. See Note 4—Investments, Loans and Long-Term Receivables, for additional
information on loans to affiliated companies.
Note 16—Sales and Other Operating Revenues
Revenue from Contracts with Customers
The following table provides further disaggregation of our consolidated sales and other operating revenues:
Millions of Dollars
March 31
2021
2020
Revenue from contracts with customers
$
Revenue from contracts outside the scope of ASC Topic 606
Physical contracts meeting the definition of a derivative
Financial derivative contracts
(309 )
(49 )
Consolidated sales and other operating revenues
$
27
Revenues from contracts outside the scope of ASC Topic 606 relate primarily to physical gas contracts at
market prices which qualify as derivatives accounted for under ASC Topic 815, “Derivatives and Hedging,”
and for which we have not elected NPNS. There is no significant difference in contractual terms or the policy
for recognition of revenue from these contracts and those within the scope of ASC Topic 606. The following
disaggregation of revenues is provided in conjunction with Note 17—Segment Disclosures and Related
Information:
Millions of Dollars
March 31
2021
2020
Revenue from Outside the Scope of ASC Topic 606 by Segment
Lower 48
$
Canada
Europe, Middle East and North Africa
Physical contracts meeting the definition of a derivative
$
Millions of Dollars
March 31
2021
2020
Revenue from Outside the Scope of ASC Topic 606 by Product
Crude oil
$
Natural gas
Other
Physical contracts meeting the definition of a derivative
$
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.
Receivables and Contract Liabilities
Receivables from Contracts with Customers
At March 31, 2021, the “Accounts and notes receivable” line on our consolidated balance sheet included trade
receivables of $
contracts with customers within the scope of ASC Topic 606 and those that are outside the scope of ASC
Topic 606.
contracts at market prices for which we do not elect NPNS and are therefore accounted for as a derivative
under ASC Topic 815. There is little distinction in the nature of the customer or credit quality of trade
receivables associated with gas sold under contracts for which NPNS has not been elected compared with trade
receivables where NPNS has been elected.
28
Contract Liabilities from Contracts with Customers
Millions of Dollars
Contract Liabilities
At December 31, 2020
$
Contractual payments received
Revenue recognized
(62 )
At March 31, 2021
$
Amounts Recognized in the Consolidated Balance Sheet at March 31, 2021
Current liabilities
$
Note 17—Segment Disclosures and Related Information
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide
basis. We manage our operations through
region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other
International.
Corporate and Other represents income and costs not directly associated with an operating segment, such as
most interest income and expense; premiums on early retirement of debt; corporate overhead and certain
technology activities, including licensing revenues; and unrealized holding gains or losses on equity securities.
Corporate assets include all cash and cash equivalents and short-term investments.
We evaluate performance and allocate resources based on net income (loss) attributable to ConocoPhillips.
Intersegment sales are at prices that approximate market.
Effective with the third quarter of 2020, we restructured our segments to align with changes to our internal
organization. The Middle East business was realigned from the Asia Pacific and Middle East segment to the
Europe and North Africa segment. The segments have been renamed the Asia Pacific segment and the Europe,
Middle East and North Africa segment. We have revised segment information disclosures and segment
performance metrics presented within our results of operations for the prior comparative periods.
On January 15, 2021, we completed our acquisition of Concho, an independent oil and gas exploration and
production company with operations across New Mexico and West Texas. Results of operations for Concho
are included in our Lower 48 segment for the current period. Certain transaction and restructuring costs
associated with the Concho acquisition are included in our Corporate and Other segment. See Note 3—
Acquisitions and Dispositions for additional information related to our Concho acquisition.
29
Analysis of Results by Operating Segment
Millions of Dollars
Three Months Ended
March 31
2021
2020
Sales and Other Operating Revenues
Alaska
$
Lower 48
Intersegment eliminations
(2 )
(10 )
Lower 48
Canada
Intersegment eliminations
(305 )
(180 )
Canada
Europe, Middle East and North Africa
Asia Pacific
Other International
Corporate and Other
Consolidated sales and other operating revenues
$
Sales and Other Operating Revenues by Geographic Location
(1)
United States
$
Australia
Canada
China
Indonesia
Libya
Malaysia
Norway
United Kingdom
Other foreign countries
Worldwide consolidated
$
Sales and Other Operating Revenues by Product
Crude oil
$
Natural gas
Natural gas liquids
Other
(2)
Consolidated sales and other operating revenues by product
$
(1) Sales and other operating revenues are attributable to countries based on the location of the selling operation.
(2) Includes LNG and bitumen.
30
Millions of Dollars
Three Months Ended
March 31
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
Alaska
$
Lower 48
(437 )
Canada
(109 )
Europe, Middle East and North Africa
Asia Pacific
Other International
(4 )
Corporate and Other
(121 )
(1,775 )
Consolidated net income (loss) attributable to ConocoPhillips
$
(1,739 )
Millions of Dollars
March 31
December 31
2021
2020
Total Assets
Alaska
$
Lower 48
Canada
Europe, Middle East and North Africa
Asia Pacific
Other International
Corporate and Other
Consolidated total assets
$
Note 18—Income Taxes
Our effective tax rate for the first quarter of 2021 was
first quarter of 2020. The increase in the effective tax rate for the first quarter of 2021 is primarily due to a
shift in the mix of our before-tax income between higher and lower tax jurisdictions and the impact of the
interest deduction related to our Concho debt exchange, described below. This increase is partially offset by a
decrease in our valuation allowance.
Our effective tax rate for the first quarter of 2021 is adversely impacted by $
interest deductions from the exchange of debt acquired from Concho offsetting U.S. foreign source revenue
that would otherwise have been offset by foreign tax credits. See Note 6—Debt, for additional information on
the debt exchange.
During the first quarter of 2021, our valuation allowance decreased by $
$
primarily to the fair value measurement of our Cenovus Energy common shares and our expectation of the tax
impact related to incremental capital gains and losses.
Our deferred tax liability increased by approximately $
Concho acquisition. Additionally, our reserve for unrecognized tax benefits increased by $
to tax credit carryovers acquired from Concho that we do not expect to recognize. See Note 3—Acquisitions
and Dispositions for more information.
31
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 55.
The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss)
attributable to ConocoPhillips.
BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW
ConocoPhillips is the world’s largest independent E&P company with operations and activities in 15 countries.
Our diverse, low cost of supply portfolio includes resource-rich unconventional plays in North America;
conventional assets in North America, Europe and Asia; LNG developments; oil sands in Canada; and an
inventory of global conventional and unconventional exploration prospects. Headquartered in Houston, Texas,
at March 31, 2021, we employed approximately 10,300 people worldwide and had total assets of $84 billion.
Completed Acquisition of Concho Resources Inc.
On January 15, 2021, we completed our acquisition of Concho Resources Inc. (Concho), an independent oil
and gas exploration and production company with operations across New Mexico and West Texas. The
addition of complementary acreage in the Delaware and Midland Basins creates a sizeable Permian presence to
augment our leading unconventional positions in the Eagle Ford, Bakken and Montney.
Consideration for the all-stock transaction was valued at $13.1 billion, in which 1.46 shares of ConocoPhillips
common stock were exchanged for each outstanding share of Concho common stock, resulting in the issuance
of approximately 286 million shares of ConocoPhillips common stock. We also assumed $3.9 billion in
aggregate principal amount of outstanding debt for Concho, which was recorded at fair value of $4.7 billion as
of the closing date. We have made significant progress since the closing of the transaction on achieving our
previously announced $750 million of annual cost and capital savings by 2022.
Transaction and restructuring activities associated with combining the operations of ConocoPhillips and
Concho resulted in non-recurring expenses for employee severance payments; incremental pension benefit
costs related to the workforce reductions; employee retention costs; employee relocations; fees paid to
financial, legal, and accounting advisors; and filing fees. We recognized $291 million before-tax related to
these costs in the first quarter of 2021 and expect to incur less of these expenses throughout the remainder of
the year. Additionally, we recognized $305 million of before-tax losses on commodity derivatives related to
hedging positions assumed in the Concho acquisition. At March 31, 2021, all oil and natural gas derivative
financial instruments acquired from Concho were contractually settled. In connection with the settlement, we
paid $692 million in the first quarter of 2021 and will pay the remaining $69 million in the second quarter of
2021. For additional information related to the settlement of financial derivatives acquired from Concho, see
Note 10—Derivative and Financial Instruments, in the Notes to Consolidated Financial Statements.
32
For additional information related to our Concho acquisition, see Note 3—Acquisitions and Dispositions in the
Notes to Consolidated Financial Statements.
Overview
After an unprecedented 2020, the energy landscape improved in the first quarter of 2021 with oil prices
rallying to peak over $60 per barrel for both Brent and WTI, a level not seen since the outbreak of the COVID-
19 pandemic. Oil prices have benefited from the continuation of coordinated production cuts by the OPEC
plus countries and capital discipline by independent oil and gas producers.
Despite the recent upswing in oil prices, we believe that commodity prices will remain cyclical and volatile,
and a successful business strategy in the exploration and production industry must be resilient in lower price
environments, while retaining upside during periods of higher prices. Accordingly, we remain disciplined and
are monitoring market fundamentals, including adherence of the OPEC plus countries to production cut
agreements and capital restraint across the broader E&P industry. Demand is recovering but has yet to reach
pre-pandemic levels. The speed and extent of this recovery will be influenced by the easing of COVID-19
restrictions that have reduced economic activity and depressed the demand for our products.
We believe a successful strategy in the E&P industry is to create value through the price cycles by delivering
on the foundational principles that underpin our value proposition; free cash flow generation, a strong balance
sheet, commitment to differential returns of and on capital, and ESG leadership. Our first quarter as a
combined company demonstrated the power of Concho’s acquired assets to help deliver on our value
proposition. Total company production was 1,527 MBOED, including 405 MBOED from the Permian Basin,
resulting in net cash provided by operating activities of $2.1 billion. We returned 46 percent of this cash to
shareholders with dividends of $0.6 billion and share repurchases of $0.4 billion, and ended the quarter with
cash, cash equivalents and short-term investments totaling $6.9 billion. Net cash provided by operating
activities in the first quarter was negatively impacted by approximately $1 billion due to impacts from settling
outstanding hedging contracts, in addition to transaction and restructuring costs.
In February 2021, we resumed our share repurchase program, with $1.5 billion of share repurchases
anticipated in 2021. As of March 31, 2021, approximately $14.1 billion of repurchase authority remained of
the $25 billion share repurchase program our Board of Directors had previously authorized.
In May 2021, we announced further progress on our value proposition principles. We plan to undertake a
paced monetization program related to the 10 percent of Cenovus Energy common shares we own. We
obtained these shares as partial consideration in the 2017 disposition of our Foster Creek Christina Lake oil
sands and western Canada Deep Basin natural gas assets. The proceeds from these sales will be directed
towards our existing share repurchase authorization and will be incremental to our previously announced $1.5
billion of share repurchases in 2021. We plan to fully dispose of our Cenovus shares by year-end 2022,
however, the sales pace will be guided by market conditions and we retain discretion to adjust accordingly.
Additionally, in May 2021, we reaffirmed our commitment to preserving our top-tier balance sheet with an
intent to reduce the company’s gross debt by $5 billion over five years, driving a more resilient and efficient
capital structure.
We remain focused on our commitment to ESG leadership and excellence. This commitment is demonstrated
by our continued progress on specific targets that we set in October 2020 when we announced our adoption of
a Paris-aligned climate risk framework, including:
●
Our ambition to become a net-zero company for operational (scope 1 and scope 2) emissions by 2050;
●
Targeting a reduction in operational greenhouse gas emissions intensity by 35 to 45 percent from 2016
levels by 2030;
●
Our ambition to exceed the World Bank Zero Routine Flaring 2030 initiative by five years;
●
Adding continuous methane monitoring devices to our operations, with an initial focus on our Lower
48 facilities;
33
●
Advocating for a U.S. carbon price to address end-use (scope 3) emissions through our membership in
the Climate Leadership Council;
●
Including ESG performance in executive and employee compensation programs; and
●
Increasing internal and external transparency of diversity and inclusion metrics.
Operationally, we remain focused on safely executing the business. In the first quarter of 2021, production of
1,527 MBOED was impacted by 50 MBOED of unplanned downtime in the Lower 48 due to Winter Storm
Uri. Production increased approximately 238 MBOED or 18 percent in the first quarter of 2021, compared
with the first quarter of 2020, primarily due to the acquisition of over 300 MBOED in the Permian Basin from
Concho, partly offset by the absence of 46 MBOED from the disposition of our Australia-West assets in the
second quarter of 2020. Adjusted for all acquisitions and dispositions in the comparative periods and
excluding Libya, production decreased 59 MBOED or 4 percent.
We re-invested $1.2 billion back into the business in the form of capital expenditures during the first quarter,
with over half of our investments focused on flexible, short-cycle unconventional plays in the Permian, Eagle
Ford and Bakken where our production is unhedged and located in tax and royalty regimes. For the full-year,
we remain disciplined capital allocators with a planned $5.5 billion of capital expenditures in 2021.
Business Environment
Commodity prices are the most significant factor impacting our profitability and related reinvestment of
operating cash flows into our business. Among other dynamics that could influence world energy markets and
commodity prices are global economic health, supply or demand disruptions or fears thereof caused by civil
unrest, global pandemic or 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 and operational priorities that
underpin our value proposition.
Our earnings and operating cash flows generally correlate with industry price levels for crude oil and natural
gas, the prices of which are subject to factors external to the company and over which we have no control. The
following graph depicts the trend in average benchmark prices for WTI crude oil, Brent crude oil and Henry
Hub natural gas:
Brent crude oil prices averaged $60.90 per barrel in the first quarter of 2021, an increase of 21 percent
compared with $50.31 per barrel in the first quarter of 2020. WTI at Cushing crude prices averaged $57.84 per
barrel in the first quarter of 2021, an increase of 26 percent compared with $46.06 per barrel in the first quarter
34
of 2020. Oil prices increased due to the recovery from simultaneous demand and supply shocks experienced in
the first quarter of 2020.
Henry Hub natural gas prices averaged $2.71 per MMBTU in the first quarter of 2021, an increase of 39
percent compared with $1.95 per MMBTU in the first quarter of 2020. Henry Hub prices are higher due to
Winter Storm Uri and normalization of inventories following COVID-19 demand losses.
Our realized bitumen price averaged $30.78 per barrel in the first quarter of 2021, a significant increase
compared with $5.90 per barrel in the first quarter of 2020. The increase in the first quarter of 2021 was driven
by higher WTI prices and a strengthening WCS differential to WTI at Hardisty. We continue to optimize
bitumen price realizations through the utilization of downstream transportation solutions and implementation
of alternate blend capability which results in lower diluent costs.
Our total average realized price was $45.36 per BOE in the first quarter of 2021, compared with $38.81 per
BOE in the first quarter of 2020, due to the recovery from simultaneous demand and supply shocks impacting
all of our produced commodities in 2020.
Key Operating and Financial Summary
Significant items during the first quarter of 2021 included the following:
●
Completed the Concho acquisition, enhancing both our asset portfolio and financial framework.
●
Net cash provided by operating activities was $2.1 billion, exceeding capital expenditures and
investments of $1.2 billion.
●
Net cash provided by operating activities included approximately $1.0 billion of non-recurring items
associated with our Concho acquisition.
●
Produced 1,488 MBOED, excluding Libya, during the first quarter despite incurring approximately 50
MBOED of unplanned production downtime throughout Lower 48 caused by Winter Storm Uri.
●
Ended the quarter with cash and cash equivalents totaling $2.8 billion and short-term investments of
$4.1 billion, equaling $6.9 billion in ending cash, cash equivalents and short-term investments.
●
Resumed the share repurchase program at an annualized level of $1.5 billion.
●
Distributed $0.6 billion in dividends and repurchased $0.4 billion of shares.
●
Recognized by the Dow Jones Sustainability Index as the top U.S. ESG performer in the Oil and Gas
Upstream and Integrated sector.
●
Reaffirmed commitment to preserving a top-tier balance sheet with intent to reduce the company’s
gross debt by $5 billion over the next five years, driving a more resilient and efficient capital structure.
●
Announced plans to sell our Cenovus shares in the open market in a disciplined manner by year-end
2022 beginning in the second quarter of 2021, utilizing the proceeds to fund incremental
ConocoPhillips share repurchases.
Outlook
Capital and Production
Second-quarter 2021 production is expected to be 1.50 to 1.54 MMBOED, reflecting the impact from seasonal
turnarounds planned in our Europe, Middle East and North Africa and Asia Pacific segments. This production
guidance excludes Libya.
In February 2021, we announced 2021 operating plan capital of $5.5 billion. The plan includes $5.1 billion to
sustain current production and $0.4 billion for investment in major projects, primarily in Alaska, in addition to
ongoing exploration appraisal activity.
35
RESULTS OF OPERATIONS
Effective with the third quarter of 2020, we have restructured our segments to align with changes to our
internal organization. The Middle East business was realigned from the Asia Pacific and Middle East segment
to the Europe and North Africa segment. The segments have been renamed the Asia Pacific segment and the
Europe, Middle East and North Africa segment. We have revised segment information disclosures and
segment performance metrics presented within our results of operations for the prior period.
Unless otherwise indicated, discussion of results for the three-month period ended March 31, 2021, is based
on a comparison with the corresponding period 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
March 31
2021
2020
Alaska
$
159
81
Lower 48
468
(437)
Canada
10
(109)
Europe, Middle East and North Africa
153
201
Asia Pacific
317
272
Other International
(4)
28
Corporate and Other
(121)
(1,775)
Net income (loss) attributable to ConocoPhillips
$
982
(1,739)
Net income (loss) attributable to ConocoPhillips increased $2,721 million in the first quarter of 2021.
Earnings were positively impacted by:
●
An unrealized gain of $308 million after-tax on our Cenovus Energy (CVE) common shares,
compared with an unrealized loss of $1,691 million after-tax in the first quarter of 2020.
●
Higher sales volumes, primarily in the Lower 48 due to our Concho acquisition. For additional
information related to our Concho acquisition, see Note 3—Acquisitions and Dispositions in the Notes
to Consolidated Financial Statements.
●
Higher realized commodity prices.
●
Lower impairments, mainly in the Lower 48 due to the absence of impairments to noncore gas assets.
●
A $194 million after-tax gain recognized for a contingent payment associated with our Australia-West
divestiture completed in the second quarter of 2020. For additional information related to this gain,
see Note 3—Acquisitions and Dispositions in the Notes to Consolidated Financial Statements.
●
The absence of a commodity inventory lower of cost or market adjustment of $170 million after-tax.
Earnings were negatively impacted by:
●
Higher selling, general and administrative expenses due to restructuring and transaction expenses of
approximately $243 million after-tax related to our Concho acquisition and mark-to-market impacts
on certain key employee compensation programs.
●
Realized losses on hedges of $233 million after-tax related to derivative positions acquired in our
Concho acquisition. See Note 10—Derivative and Financial Instruments in the Notes to Consolidated
Financial Statements, for additional information.
●
Higher DD&A expenses, production and operating expenses and taxes other than income taxes,
primarily due to production from our Concho acquisition.
See the “Segment Results” section for additional information.
36
Income Statement Analysis
Sales and other operating revenues increased 60 percent, mainly due to higher sales volumes and higher
commodity price realizations in the Lower 48, primarily related to our Concho acquisition.
Equity in earnings of affiliates decreased $112 million due to lower earnings from QG3 and APLNG because
of lower LNG prices and a higher effective tax rate related to the equity method investments in our Europe,
Middle East and North Africa segment.
Gain (loss) on dispositions increased $275 million due to recognizing a $200 million before-tax contingent
payment associated with our Australia-West divestiture completed in the second quarter of 2020 and the
absence of a $38 million before-tax loss on disposition related to the completion of our Niobrara disposition in
the first quarter of 2020. For additional information related to the Australia-West related gain on disposition,
see Note 3—Acquisitions and Dispositions in the Notes to Consolidated Financial Statements.
Other income (loss) increased $1,917 million primarily due to an unrealized gain of $308 million before-tax on
our CVE common shares, compared with an unrealized loss of $1,691 million before-tax in the first quarter of
2020. See Note 5—Investment in Cenovus Energy in the Notes to Consolidated Financial Statements, for
additional information related to our unrealized gain (loss) on CVE common shares.
Purchased commodities increased $1,822 million, primarily due to higher natural gas prices, partly offset by
lower crude oil volumes purchased.
Production and operating expenses increased $210 million, primarily due to costs associated with additional
volumes in the Lower 48, mainly related to our Concho acquisition.
Selling, general and administrative expenses increased $314 million, primarily due to higher costs associated
with compensation and benefits, including mark-to-market impacts of certain key employee compensation
programs, and restructuring expenses associated with our Concho acquisition, including severance expenses.
Exploration expenses decreased $104 million, primarily due to the absence of an unproved property
impairment and dry hole expenses related to the Kamunsu East Field in Malaysia that is no longer in our
development plans and the absence of charges associated with the early termination of our 2020 winter
exploration program in Alaska.
Depreciation, depletion and amortization increased $475 million, primarily due to higher volumes in the Lower
48 associated with our Concho acquisition; higher volumes in Canada due to Montney ramp up and our Kelt
acquisition in the third quarter of 2020; and higher expenses in Alaska due to higher DD&A rates from price-
related reserve revisions.
Impairments decreased $524 million, primarily due to the absence of a $511 million before-tax impairment of
certain noncore gas assets in the Lower 48 due to a significant decrease in the outlook for natural gas prices in
the first quarter of 2020.
Taxes other than income taxes increased $120 million, primarily due to higher volumes in the Lower 48
associated with our Concho acquisition.
Foreign currency transactions (gain) loss increased $109 million due to the absence of gains incurred from
foreign currency derivatives.
See Note 18—Income Taxes, in the Notes to Consolidated Financial Statements, for information regarding our
income tax provision and effective tax rate.
37
Summary Operating Statistics
Three Months Ended
March 31
2021
2020
Average Net Production
Crude oil (MBD)
Consolidated operations
804
642
Equity affiliates
14
12
Total crude oil
818
654
Natural gas liquids (MBD)
Consolidated operations
105
116
Equity affiliates
8
7
Total natural gas liquids
113
123
Bitumen (MBD)
70
66
Natural gas (MMCFD)
Consolidated operations
2,074
1,638
Equity affiliates
1,081
1,036
Total natural gas
3,155
2,674
Total Production
(MBOED)
1,527
1,289
Dollars Per Unit
Average Sales Prices
Crude oil (per bbl)
Consolidated operations
*
$
57.18
48.77
Equity affiliates
59.73
53.14
Total crude oil
57.22
48.86
Natural gas liquids (per bbl)
Consolidated operations
24.36
12.81
Equity affiliates
48.89
42.41
Total natural gas liquids
26.44
14.82
Bitumen (per bbl)
30.78
5.90
Natural gas (per mcf)
Consolidated operations
*
4.89
3.60
Equity affiliates
3.54
5.41
Total natural gas
4.42
4.30
Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical, and
lease rental, and other
$
78
121
Leasehold impairment
-
31
Dry holes
6
36
$
84
188
*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 $55.03 per barrel for crude oil and $4.76 per mcf for natural gas. As of March 31, 2021, we had settled all oil and gas hedging
positions acquired from Concho. See Note 10—Derivative and Financial Instruments, in the Notes to Consolidated Financial Statements.
38
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide
basis. At March 31, 2021, our operations were producing in the U.S., Norway, Canada, Australia, Indonesia,
China, Malaysia, Qatar and Libya.
Total production, including Libya, of 1,527 MBOED increased 238 MBOED or 18 percent in the first quarter
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, China and Malaysia.
●
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.
The increase in first quarter 2021 production was partly offset by:
●
Normal field decline.
●
Disposition activity, including our Australia-West divestiture completed in the second quarter of 2020
and noncore Lower 48 assets disposed in the first quarter of 2020. For additional information related
to our Australia-West divestiture, see Note 3—Acquisitions and Dispositions in the Notes to
Consolidated Financial Statements.
●
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.
Total production, excluding Libya, of 1,488 MBOED increased 210 MBOED or 16 percent in the first quarter
of 2021. Adjusted for acquisitions and dispositions and excluding Libya, production decreased by 59 MBOED
or 4 percent.
39
Segment Results
Alaska
Three Months Ended
March 31
2021
2020
Net Income Attributable to ConocoPhillips
(millions of dollars)
$
159
81
Average Net Production
Crude oil (MBD)
190
198
Natural gas liquids (MBD)
17
19
Natural gas (MMCFD)
8
8
Total Production
(MBOED)
208
218
Average Sales Prices
Crude oil ($ per bbl)
$
59.56
54.78
Natural gas ($ per mcf)
2.23
3.07
The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas.
As of March 31, 2021, Alaska contributed 21 percent of our consolidated liquids production and less than 1
percent of our consolidated natural gas production.
Net Income Attributable to ConocoPhillips
Earnings for Alaska increased by $78 million in the first quarter of 2021, compared with the same period of
2020. Earnings were positively impacted by:
●
The absence of a $96 million after-tax lower of cost or market commodity inventory adjustment.
●
Higher realized crude oil prices.
●
Lower exploration expenses due to the absence of charges associated with the early cancellation of our
2020 winter exploration program.
Earnings were negatively impacted by:
●
Higher DD&A expenses, primarily due to higher DD&A rates from price-related reserve revisions.
●
Lower crude oil sales volumes.
Production
Average production decreased 10 MBOED or 5 percent in the first quarter of 2021 compared with the same
period of 2020. The production decrease was primarily due to:
●
Normal field decline.
These production decreases were partly offset by:
●
Improved well performance at the Greater Prudhoe Area.
40
Lower 48
Three Months Ended
March 31
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
(millions of dollars)
$
468
(437)
Average Net Production
Crude oil (MBD)
416
270
Natural gas liquids (MBD)
79
89
Natural gas (MMCFD)
1,319
679
Total Production
(MBOED)
715
472
Average Sales Prices
Crude oil ($ per bbl)*
$
55.68
40.97
Natural gas liquids ($ per bbl)
23.99
11.85
Natural gas ($ per mcf)*
4.56
1.48
*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 $51.58 per barrel for crude oil and $4.35 per mcf for natural gas. As of March 31, 2021, we had settled all oil and gas hedging
positions acquired from Concho. See Note 10
—
Derivative and Financial Instruments in the Notes to Consolidated Financial Statements.
The Lower 48 segment consists of operations located in the contiguous U.S. and the Gulf of Mexico. As of
March 31, 2021, the Lower 48 contributed 51 percent of our consolidated liquids production and 64 percent of
our consolidated natural gas production.
Concho Acquisition
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. The addition of complementary
acreage in the Delaware and Midland Basins creates a sizeable Permian presence to augment our leading
unconventional positions in the Eagle Ford and Bakken in the Lower 48. For additional information related to
this transaction, see Note 3—Acquisitions and Dispositions in the Notes to Consolidated Financial Statements.
Net Income (Loss) Attributable to ConocoPhillips
Earnings for the Lower 48 increased by $905 million in the first quarter of 2021, compared with the same
period of 2020. Earnings were positively impacted by:
●
Higher sales volumes of crude oil and natural gas due to our Concho acquisition.
●
Higher realized crude oil, natural gas and NGL prices.
●
The absence of $399 million in after-tax impairments related to certain noncore gas assets in the Wind
River Basin operations area.
Earnings were negatively impacted by:
●
Higher DD&A expenses, production and operating expenses and taxes other than income taxes,
primarily due to higher production from our Concho acquisition.
●
Realized losses on hedges of $233 million after-tax related to derivative positions acquired in our
Concho acquisition. See Note 10—Derivative and Financial Instruments in the Notes to Consolidated
Financial Statements, for additional information.
●
Higher selling, general and administrative expenses, primarily due to transaction and restructuring
charges related to our Concho acquisition.
41
Production
Average production increased 243 MBOED in the first quarter of 2021, compared with the same period of
2020. The production increase was primarily due to:
●
Higher volumes in the Permian due to our Concho acquisition.
●
New wells online from our development programs in the Eagle Ford, Permian and Bakken.
These production increases were partly offset by:
●
Normal field decline.
●
Higher unplanned downtime, primarily due to Winter Storm Uri which impacted production by
approximately 50 MBOED in the first quarter of 2021.
Canada
Three Months Ended
March 31
2021
*
2020
Net Income (Loss) Attributable to ConocoPhillips
(millions of dollars)
$
10
(109)
Average Net Production
Crude oil (MBD)
11
2
Natural gas liquids (MBD)
4
1
Bitumen (MBD)
70
66
Natural gas (MMCFD)
91
20
Total Production
(MBOED)
100
72
Average Sales Prices
Crude oil (per bbl)
$
47.41
-
Natural gas liquids (per bbl)
25.32
-
Bitumen (per bbl)
30.78
5.90
Natural gas (per mcf)
2.37
-
* Average sales prices include unutilized transportation costs.
Our Canadian operations mainly consist of the Surmont oil sands development in Alberta and the liquids-rich
Montney unconventional play in British Columbia. As of March 31, 2021, Canada contributed 9 percent of
our consolidated liquids production and 4 percent of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings for Canada increased by $119 million in the first quarter of 2021, compared with the same period of
2020. Earnings were positively impacted by:
●
Higher realized commodity prices.
●
The absence of a $31 million after-tax lower of cost or market adjustment to commodity inventory.
●
Increased liquids and natural gas volumes in the Montney.
●
A $20 million after-tax gain on disposition related to a contingent payment associated with the sale of
certain assets to Cenovus Energy in 2017. For additional information, see Note 3—Acquisitions and
Dispositions in the Notes to Consolidated Financial Statements.
Earnings were negatively impacted by:
●
Higher DD&A expenses, primarily due to increased Montney production.
●
Higher production and operating expenses, primarily due to increased Montney production.
42
Production
Total average production increased 28 MBOED in the first quarter of 2021, compared with the same period of
2020, due to new wells online from Pad 2 and 3 in the Montney, as well as production from our Kelt
acquisition in the third quarter of 2020.
Europe, Middle East and North Africa
Three Months Ended
March 31
2021
2020*
Net Income Attributable to ConocoPhillips
$
153
201
Consolidated Operations
Average Net Production
Crude oil (MBD)
116
93
Natural gas liquids (MBD)
5
5
Natural gas (MMCFD)
309
310
Total Production
(MBOED)
173
150
Average Sales Prices
Crude oil (per bbl)
$
57.75
55.53
Natural gas liquids (per bbl)
34.70
21.54
Natural gas (per mcf)
5.99
3.68
*The prior period has been updated to reflect the Middle East Business Unit moving from Asia Pacific to the Europe, Middle East and North
Africa segment. See Note 17—Segment Disclosures and Related Information in the Notes to Consolidated Financial Statements for additional
information.
The Europe, Middle East and North Africa segment consists of operations principally located in the Norwegian
sector of the North Sea; the Norwegian Sea; Qatar; Libya; and commercial and terminalling operations in the
U.K. As of March 31, 2021, our Europe, Middle East and North Africa operations contributed 12 percent of
our consolidated liquids production and 15 percent of our consolidated natural gas production.
Net Income Attributable to ConocoPhillips
Earnings for Europe, Middle East and North Africa decreased by $48 million in the first quarter of 2021,
compared with the same period of 2020. Earnings were negatively impacted by:
●
Lower LNG sales prices, reflected in equity in earnings of affiliates.
●
Higher taxes from our equity method investments.
●
The absence of foreign currency gains.
Earnings were positively impacted by:
●
Higher LNG sales volumes, reflected in equity in earnings of affiliates.
●
Higher natural gas, crude oil and NGL price realizations.
Consolidated Production
Average consolidated production increased 23 MBOED in the first quarter of 2021 compared with the same
period of 2020. The production increase was primarily due to:
●
Higher oil production from Libya due to the absence of a cessation of production following a period of
civil unrest.
●
New production from Norway drilling activities including first production from Tor II redevelopment
achieved in December 2020.
These production increases were partly offset by normal field decline.
43
Asia Pacific
Three Months Ended
March 31
2021
2020*
Net Income Attributable to ConocoPhillips
$
317
272
Consolidated Operations
Average Net Production
Crude oil (MBD)
71
79
Natural gas liquids (MBD)
-
2
Natural gas (MMCFD)
347
621
Total Production
129
185
Average Sales Prices
Crude oil (per bbl)
$
60.36
54.71
Natural gas liquids (per bbl)
-
39.34
Natural gas (per mcf)
5.88
5.94
*The prior period has been updated to reflect the Middle East Business Unit moving from Asia Pacific to the Europe, Middle East and North
Africa segment. See Note 17
—
Segment Disclosures and Related Information in the Notes to Consolidated Financial Statements for additional
information.
The Asia Pacific segment has operations in China, Indonesia, Malaysia and Australia. As of March 31, 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 for Asia Pacific increased $45 million in the first quarter of 2021, compared with the same period of
2020. The earnings increase was primarily due to:
●
A $200 million gain on disposition related to a contingent payment from our Australia-West divestiture
completed in the second quarter of 2020. For additional information related to this gain, please see Note
3—Acquisitions and Dispositions in the Notes to Consolidated Financial Statements.
●
Lower exploration expenses, due to the absence of an unproved property impairment and dry hole
expenses related to the Kamunsu East Field in Malaysia.
Earnings were negatively impacted by:
●
Lower earnings due to our Australia-West divestiture completed in the second quarter of 2020.
●
Lower equity in earnings of affiliates, primarily due to lower realized LNG prices.
Consolidated Production
Average consolidated production decreased 56 MBOED or 30 percent in the first quarter of 2021, compared with
the same period of 2020. The decrease was primarily due to:
●
The divestiture of our Australia-West assets that contributed 46 MBOED in first quarter of 2020.
●
Normal field decline.
These production decreases were partly offset by:
●
Bohai Bay development activity in China, including first production from Phase 4A Project at the
Penglai 25-6 Field and first production from Malikai Phase 2 in Malaysia.
44
Bohai Bay Well Control Incident
On April 5, 2021, a shallow gas kick occurred during drilling operations, resulting in a fire on the V platform in
Bohai Bay, China. On April 6, 2021, the fire was extinguished. We are working with the operator to fully
understand the impacts.
Other International
Three Months Ended
March 31
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
(millions of dollars)
$
(4)
28
The Other International segment consists of exploration activities in Colombia and Argentina and
contingencies associated with prior operations in other countries.
Earnings for Other International decreased $32 million in the first quarter of 2021, compared with the same
period of 2020. Earnings were lower primarily due to the absence of a $29 million after-tax benefit to earnings
from the dismissal of arbitration related to prior operations in Senegal.
45
Corporate and Other
Millions of Dollars
Three Months Ended
March 31
2021
2020
Net Loss Attributable to ConocoPhillips
Net interest expense
$
(270)
(155)
Corporate general and administrative expenses
(129)
50
Technology
41
1
Other income (expense)
237
(1,671)
$
(121)
(1,775)
Net interest expense consists of interest and financing expense, net of interest income and capitalized interest.
Net interest expense increased by $115 million in the first quarter of 2021, primarily due to higher debt
balances. See Note 6—Debt in the Notes to Consolidated Financial Statements for more information related to
debt acquired in our Concho transaction. Net interest expense also increased due to lower interest income
from lower cash and cash equivalent balances and yield.
Corporate G&A expenses include compensation programs and staff costs. These expenses increased by $179
million mainly due to mark-to-market adjustments associated with certain key employee compensation
programs and restructuring expenses associated with our Concho acquisition. For additional information about
restructuring expenses, see Note 14—Employee Benefit Plans in the Notes to Consolidated Financial
Statements.
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 and LNG. Earnings from Technology increased $40 million in the first quarter of 2021 primarily
due to higher licensing revenues.
Other income (expense) or “Other” includes certain 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, unrealized holding gains or losses on
equity securities, and pension settlement expense. Earnings in “Other” increased by $1,908 million in the first
quarter of 2021, compared with the same period of 2020, primarily due to an unrealized gain of $308 million
after-tax in the first quarter of 2021 on our CVE common shares, compared with an unrealized loss of $1,691
million after-tax on those shares in the first quarter of 2020.
46
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
Millions of Dollars
March 31
December 31
2021
2020
Cash and cash equivalents
$
2,831
2,991
Short-term investments
4,104
3,609
Total debt
20,027
15,369
Total equity
43,155
29,849
Percent of total debt to capital*
%
32
34
Percent of floating-rate debt to total debt
5
7
*Capital includes total debt and total equity.
To meet our short- and long-term liquidity requirements, we look to a variety of funding sources, including
cash generated from operating activities, our commercial paper and credit facility programs, and our ability to
sell securities using our shelf registration statement. During the first quarter of 2021, the primary uses of our
available cash were $1,200 million to support our ongoing capital expenditures and investments program;
approximately $1.0 billion of hedging, transaction and restructuring costs; $588 million to pay dividends; $499
million of net purchases of investments; and $375 million to repurchase common stock. During the first
quarter of 2021, our cash and cash equivalents decreased by $160 million to $2,831 million.
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. See Note 6—Debt and Note 3—Acquisitions and Dispositions, in the Notes to Consolidated Financial
Statements for additional information.
At March 31, 2021, we had cash and cash equivalents of $2.8 billion, short-term investments of $4.1 billion,
and available borrowing capacity under our credit facility of $5.7 billion, totaling over $12 billion of liquidity.
We believe current cash balances and cash generated by operations, together with access to external sources of
funds as described below in the “Significant Changes in Capital” section, will be sufficient to meet our funding
requirements in the near- and long-term, including our capital spending program, dividend payments and
required debt payments.
Significant Changes in Capital
Operating Activities
Cash provided by operating activities was $2,080 million for the first quarter of 2021, compared with $2,105
million for the first quarter of 2020. The decrease in cash provided by operating activities is primarily due to
the settlement of all oil and gas hedging positions acquired from Concho, normal field decline, transaction and
restructuring costs, and the divestiture of our Australia-West assets. The decrease in cash provided by
operating activities was partly offset by higher sales volumes and higher realized commodity prices in the
Lower 48, primarily due to our acquisition of Concho.
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.
47
The level of absolute production volumes, as well as product and location mix, impacts our cash flows.
Future production is subject to numerous uncertainties, including, among others, the volatile crude oil and
natural gas price environment, which may impact investment decisions; the effects of price changes on
production sharing and variable-royalty contracts; acquisition and disposition of fields; field production
decline rates; new technologies; operating efficiencies; timing of startups and major turnarounds; political
instability; 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
following the acquisition of Concho. At March 31, 2021, all oil and natural gas derivative financial
instruments acquired from Concho were contractually settled. In connection with the settlement, we paid $692
million in the first quarter of 2021 and will pay the remaining $69 million in the second quarter of 2021. For
additional information, see Note 10—Derivative and Financial Instruments in the Notes to Consolidated
Financial Statements.
Investing Activities
In the first quarter of 2021, we invested $1.2 billion in capital expenditures. Our 2021 operating plan capital
expenditures is $5.5 billion compared with $4.7 billion in 2020. See the “Capital Expenditures and
Investments” section, for information about our capital expenditures and investments.
We completed our acquisition of Concho on January 15, 2021. The assets acquired in the transaction included
$382 million of cash which is reflected in the “Net Cash Used in Investing Activities” section of our
consolidated statement of cash flows. See Note 3—Acquisitions and Dispositions, in the Notes to Consolidated
Financial Statements for additional information.
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 quarter of 2021 included net purchases of $499 million of investments, of which
$466 million was invested in short-term instruments and $33 million was invested in long-term instruments.
See Note 10—Derivative and Financial Instruments, in the Notes to Consolidated Financial Statements for
additional information.
48
Financing Activities
We have a revolving credit facility totaling $6.0 billion, expiring in May 2023. Our revolving credit facility
may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as
support for our commercial paper program. The revolving credit facility is broadly syndicated among financial
institutions and does not contain any material adverse change provisions or any covenants requiring
maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-default
provision relating to the failure to pay principal or interest on other debt obligations of $200 million or more
by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to the
redetermination prior to its expiration date.
Credit facility borrowings may bear interest at a margin above rates offered by certain designated banks in the
London interbank market or at a margin above the overnight federal funds rate or prime rates offered by
certain designated banks in the U.S. The agreement calls for commitment fees on available, but unused,
amounts. The agreement also contains early termination rights if our current directors or their approved
successors cease to be a majority of the Board of Directors.
The revolving credit facility supports the ConocoPhillips Company’s ability to issue up to $6.0 billion of
commercial paper, which is primarily a funding source for short-term working capital needs. Commercial
paper maturities are generally limited to 90 days. With $300 million of commercial paper outstanding and no
direct borrowings or letters of credit, we had $5.7 billion in available borrowing capacity under the revolving
credit facility at March 31, 2021. We may consider issuing additional commercial paper in the future to
supplement our cash position.
On January 15, 2021, we completed the acquisition of Concho in an all-stock transaction. In the acquisition,
we assumed Concho’s publicly traded debt, which was recorded at fair value of $4.7 billion on the acquisition
date. See Note 3—Acquisitions and Dispositions and Note 6—Debt, in the Notes to Consolidated Financial
Statements for additional information. In May 2021, we reaffirmed our commitment to preserving a top-tier
balance sheet with an intent to reduce the company’s gross debt by $5 billion over the next five years, driving a
more resilient and efficient capital structure.
In October 2020, Moody’s affirmed its rating of our senior long-term debt of “A3” with a “stable” outlook, and
affirmed its rating of our short-term debt as “Prime-2.” In January 2021, Fitch affirmed its rating of our long-
term debt as “A” with a “stable” outlook and affirmed its rating of our short-term debt as “F1+.” On January
25, 2021, S&P revised the industry risk assessment for the E&P industry to “Moderately High” from
“Intermediate” based on a view of increasing risks from the energy transition, price volatility, and weaker
profitability. On February 11, 2021, S&P downgraded its rating of our long-term debt from “A” to “A-” with a
“stable” outlook and downgraded its rating of our short-term debt from “A-1” to “A-2.” We do not have any
ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our
access to liquidity, upon downgrade of our credit ratings. If our credit ratings are downgraded from their
current levels, it could increase the cost of corporate debt available to us and restrict our access to the
commercial paper markets. If our credit rating were to deteriorate to a level prohibiting us from accessing the
commercial paper market, we would still be able to access funds under our revolving credit facility.
Certain of our project-related contracts, commercial contracts and derivative instruments contain provisions
requiring us to post collateral. Many of these contracts and instruments permit us to post either cash or letters
of credit as collateral. At March 31, 2021 and December 31, 2020, we had direct bank letters of credit of $309
million and $249 million, respectively, which secured performance obligations related to various purchase
commitments incident to the ordinary conduct of business. In the event of credit ratings downgrades, we may
be required to post additional letters of credit.
Shelf Registration
We have a universal shelf registration statement on file with the SEC under which we have the ability to issue
and sell an indeterminate amount of various types of debt and equity securities.
49
Guarantor Summarized Financial Information
We have various cross guarantees among 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 Note 3—Acquisitions and Dispositions and Note
6—Debt, in the Notes to Consolidated Financial Statements for additional information.
Transactions and balances reflecting activity between the Obligors and Non-Obligated Subsidiaries are
presented below:
Summarized Income Statement Data
Millions of Dollars
Three Months Ended
March 31, 2021
Revenues and Other Income
$
6,607
Income (loss) before income taxes
1,092
Net income (loss)
982
Net Income (Loss) Attributable to ConocoPhillips
982
50
Summarized Balance Sheet Data
Millions of Dollars
March 31
2021
December 31
2020
Current assets
$
9,067
8,535
Amounts due from Non-Obligated Subsidiaries, current
673
440
Noncurrent assets
56,845
37,180
Amounts due from Non-Obligated Subsidiaries, noncurrent
8,528
7,730
Current liabilities
4,564
3,797
Amounts due to Non-Obligated Subsidiaries, current
1,889
1,365
Noncurrent liabilities
24,750
18,627
Amounts due to Non-Obligated Subsidiaries, noncurrent
5,756
3,972
Capital Requirements
For information about our capital expenditures and investments, see the “Capital Expenditures and
Investments” section.
Our debt balance as of March 31, 2021, was $20.0 billion compared with $15.4 billion at December 31, 2020.
The increase of $4.6 billion is due to debt assumed in the Concho acquisition. The current portion of debt,
including payments for finance leases, is $0.7 billion. Payments will be made using current cash balances and
cash generated by operations. See Note 6—Debt, in the Notes to Consolidated Financial Statements for
additional information on debt.
We believe in delivering value to our shareholders through a growing and sustainable dividend supplemented
by additional returns of capital, including share repurchases. In 2020, we paid $1.8 billion, equating to $1.69
per share of common stock, in dividends. On February 2, 2021, we announced a quarterly dividend of $0.43
per share. The dividend was paid on March 1, 2021, to stockholders of record at the close of business on
February 12, 2021. On May 4, 2021, we announced a quarterly dividend of $0.43 per share, payable June 1,
2021, to stockholders of record at the close of business on May 14, 2021.
In late 2016, we initiated our current share repurchase program, which has a total program authorization to
repurchase $25 billion of our common stock. In February 2021, we resumed the program at an annualized
level of $1.5 billion. In May 2021, we announced our plan to dispose of our 208 million shares of Cenovus
Energy by year-end 2022. The sales pace will be guided by market conditions, with ConocoPhillips retaining
discretion to adjust accordingly. The proceeds from this disposition will be deployed towards incremental
share repurchases. In the first quarter of 2021, we repurchased 7 million shares at a cost of $375 million.
Since the inception of the program we have repurchased 196 million shares at a cost of $10.9 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.
51
Capital Expenditures and Investments
Millions of Dollars
Three Months Ended
March 31
2021
2020
Alaska
$
235
509
Lower 48
718
776
Canada
33
74
Europe, Middle East and North Africa
121
121
Asia Pacific
76
103
Other International
6
53
Corporate and Other
11
13
Capital expenditures and investments
$
1,200
1,649
During the first quarter of 2021, capital expenditures and investments supported key exploration and
development programs, primarily:
●
Development and appraisal activities in the Lower 48, primarily Permian, Eagle Ford, and Bakken.
●
Appraisal and development activities in Alaska related to the Western North Slope and development
activities in the Greater Kuparuk Area.
●
Appraisal activities in liquids-rich plays and optimization of oils sands development in Canada.
●
Continued development activities across assets in Norway.
●
Continued development activities in China, Malaysia and Indonesia.
In February 2021, we announced 2021 operating plan capital expenditures of $5.5 billion. The plan includes
$5.1 billion to sustain current production and $0.4 billion for investment in major projects, primarily in Alaska,
in addition to ongoing exploration appraisal activity.
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. For information on other contingencies, see Note 9—Contingencies and
Commitments, in the Notes to Consolidated Financial Statements.
52
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, and
claims of alleged environmental contamination from historic operations. We will continue to defend ourselves
vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific
characteristics of our cases, employing a litigation management process to manage and monitor the 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 March 31, 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 March 31, 2021, our balance sheet included a total environmental accrual of $188 million, compared with
$180 million at December 31, 2020, for remediation activities in the U.S. and Canada. We expect to incur a
substantial amount of these expenditures within the next 30 years.
Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses,
environmental costs and liabilities are inherent concerns in our operations and products, and there can be no
assurance that material costs and liabilities will not be incurred. However, we currently do not expect any
material adverse effect upon our results of operations or financial position as a result of compliance with
current environmental laws and regulations.
53
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.
Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local
Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips,
seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by
historical oil and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will
vigorously defend against them. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty
about these claims (both as to scope and damages) and any potential financial impact on the company.
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.
54
We announced in October 2020 the adoption of a Paris-aligned climate risk framework with the objective of
implementing a coherent set of choices designed to facilitate the success of our existing exploration and
production business through the energy transition. Given the uncertainties remaining about how the energy
transition will evolve, the strategy aims to be robust across a range of potential future outcomes.
The strategy is comprised of four pillars:
●
Targets: Our target framework consists of a hierarchy of targets, from a long-term ambition that sets
the direction and aim of the strategy, to a medium-term performance target for GHG emissions
intensity, to shorter-term targets for flaring and methane intensity reductions. These performance
targets are supported by lower-level internal business unit goals to enable the company to achieve the
company-wide targets. We have set a target to reduce our gross operated (scope 1 and 2) emissions
intensity by 35 to 45 percent from 2016 levels by 2030, with an ambition to achieve net-zero operated
emissions by 2050. We have joined the World Bank Flaring Initiative to work towards zero routine
flaring of gas by 2030.
●
Technology choices: We expanded our Marginal Abatement Cost Curve process to provide a broader
range of opportunities for emission reduction technology.
●
Portfolio choices: Our corporate authorization process requires all qualifying projects to include a
GHG price in their project approval economics. Different GHG prices are used depending on the
region or jurisdiction. Projects in jurisdictions with existing GHG pricing regimes incorporate the
existing GHG price and forecast into their economics. Projects where no existing GHG pricing
regime exists utilize a scenario forecast from our internally consistent World Energy Model. In this
way, both existing and emerging regulatory requirements are considered in our decision-making. The
company does not use an estimated market cost of GHG emissions when assessing reserves in
jurisdictions without existing GHG regulations.
●
External engagement: Our external engagement aims to differentiate ConocoPhillips within the oil and
gas sector with our approach to managing climate-related risk. We are a Founding Member of the
Climate Leadership Council (CLC), an international policy institute founded in collaboration with
business and environmental interests to develop a carbon dividend plan. Participation in the CLC
provides another opportunity for ongoing dialogue about carbon pricing and framing the issues in
alignment with our public policy principles. We also belong to and fund Americans For Carbon
Dividends, the education and advocacy branch of the CLC.
55
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, the anticipated impact of the transaction on the combined company’s business and future
financial and operating results, the expected amount and the timing of synergies from the transaction are
forward-looking statements. Examples of forward-looking statements contained in this report include our
expected production growth and outlook on the business environment generally, our expected capital budget
and capital expenditures, and discussions concerning future dividends. You can often identify our forward-
looking statements by the words “anticipate,” “believe,” “budget,” “continue,” “could,” “effort,” “estimate,”
“expect,” “forecast,” “intend,” “goal,” “guidance,” “may,” “objective,” “outlook,” “plan,” “potential,”
“predict,” “projection,” “seek,” “should,” “target,” “will,” “would” and similar expressions.
We based the forward-looking statements on our current expectations, estimates and projections about
ourselves and the industries in which we operate in general. We caution you these statements are not
guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be
incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-
looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our
actual outcomes and results may differ materially from what we have expressed or forecast in the forward-
looking statements. Any differences could result from a variety of factors and uncertainties, including, but not
limited to, the following:
●
The impact of public health crises, including pandemics (such as COVID-19) and epidemics and any
related company or government policies or actions.
●
Global and regional changes in the demand, supply, prices, differentials or other market conditions
affecting oil and gas, including changes resulting from a public health crisis or from the imposition or
lifting of crude oil production quotas or other actions that might be imposed by OPEC and other
producing countries and the resulting company or third-party actions in response to such changes.
●
Fluctuations in crude oil, bitumen, natural gas, LNG and NGLs prices, including a prolonged decline
in these prices relative to historical or future expected levels.
●
The impact of significant declines in prices for crude oil, bitumen, natural gas, LNG and NGLs, which
may result in recognition of impairment charges on our long-lived assets, leaseholds and
nonconsolidated equity investments.
●
Potential failures or delays in achieving expected reserve or production levels from existing and future
oil and gas developments, including due to operating hazards, drilling risks and the inherent
uncertainties in predicting reserves and reservoir performance.
●
Reductions in reserves replacement rates, whether as a result of the significant declines in commodity
prices or otherwise.
●
Unsuccessful exploratory drilling activities or the inability to obtain access to exploratory acreage.
●
Unexpected changes in costs or technical requirements for constructing, modifying or operating E&P
facilities.
●
Legislative and regulatory initiatives addressing environmental concerns, including initiatives
addressing the impact of global climate change or further regulating hydraulic fracturing, methane
emissions, flaring or water disposal.
●
Lack of, or disruptions in, adequate and reliable transportation for our crude oil, bitumen, natural gas,
LNG and NGLs.
●
Inability to timely obtain or maintain permits, including those necessary for construction, drilling
and/or development, or inability to make capital expenditures required to maintain compliance with
any necessary permits or applicable laws or regulations.
56
●
Failure to complete definitive agreements and feasibility studies for, and to complete construction of,
announced and future E&P and LNG development in a timely manner (if at all) or on budget.
●
Potential disruption or interruption of our operations due to accidents, extraordinary weather events,
civil unrest, political events, war, terrorism, cyber attacks, and information technology failures,
constraints or disruptions.
●
Changes in international monetary conditions and foreign currency exchange rate fluctuations.
●
Changes in international trade relationships, including the imposition of trade restrictions or tariffs
relating to crude oil, bitumen, natural gas, LNG, NGLs and any materials or products (such as
aluminum and steel) used in the operation of our business.
●
Substantial investment in and development use of, competing or alternative energy sources, including
as a result of existing or future environmental rules and regulations.
●
Liability for remedial actions, including removal and reclamation obligations, under existing and
future environmental regulations and litigation.
●
Significant operational or investment changes imposed by existing or future environmental statutes
and regulations, including international agreements and national or regional legislation and regulatory
measures to limit or reduce GHG emissions.
●
Liability resulting from litigation, including the potential for litigation related to the transaction with
Concho, or our failure to comply with applicable laws and regulations.
●
General domestic and international economic and political developments, including armed hostilities;
expropriation of assets; changes in governmental policies relating to crude oil, bitumen, natural gas,
LNG and NGLs pricing; regulation or taxation; and other political, economic or diplomatic
developments.
●
Volatility in the commodity futures markets.
●
Changes in tax and other laws, regulations (including alternative energy mandates), or royalty rules
applicable to our business.
●
Competition and consolidation in the oil and gas E&P industry.
●
Any limitations on our access to capital or increase in our cost of capital, including as a result of
illiquidity or uncertainty in domestic or international financial markets or investment sentiment.
●
Our inability to execute, or delays in the completion, of any asset dispositions or acquisitions we elect
to pursue.
●
Potential failure to obtain, or delays in obtaining, any necessary regulatory approvals for pending or
future asset dispositions or acquisitions, or that such approvals may require modification to the terms
of the transactions or the operation of our remaining business.
●
Potential disruption of our operations as a result of pending or future asset dispositions or acquisitions,
including the diversion of management time and attention.
●
Our inability to deploy the net proceeds from any asset dispositions that are pending or that we elect to
undertake in the future in the manner and timeframe we currently anticipate, if at all.
●
Our inability to liquidate the common stock issued to us by Cenovus Energy as part of our sale of
certain assets in western Canada at prices we deem acceptable, or at all.
●
The operation and financing of our joint ventures.
●
The ability of our customers and other contractual counterparties to satisfy their obligations to us,
including our ability to collect payments when due from the government of Venezuela or PDVSA.
●
Our inability to realize anticipated cost savings and capital expenditure reductions.
●
The inadequacy of storage capacity for our products, and ensuing curtailments, whether voluntary or
involuntary, required to mitigate this physical constraint.
●
Our ability to successfully integrate Concho’s business and fully achieve the expected benefits and
cost reductions associated with the transaction with Concho in a timely manner or at all.
●
The risk that we will be unable to retain and hire key personnel.
●
Unanticipated difficulties or expenditures relating to integration with Concho.
●
Uncertainty as to the long-term value of our common stock.
●
The diversion of management time on integration-related matters.
●
The factors generally described in Part I—Item 1A in our 2020 Annual Report on Form 10-K and any
additional risks described in our other filings with the SEC.
57
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Other information about market risks for the three months ended March 31, 2021, does not differ materially
from that discussed under Item 7A in our 2020 Annual Report on Form 10-K.
Item 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to ensure information required to be disclosed in
reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms, and that such
information is accumulated and communicated to management, including our principal executive and principal
financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of March 31,
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 as of March 31, 2021.
There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the
Act, in the period covered by this report that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There are no new material legal proceedings or material developments with respect to matters previously
disclosed in Item 3 of our 2020 Annual Report on Form 10-K.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in Item 1A of our 2020 Annual Report on
Form 10-K.
58
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Millions of Dollars
Period
Total Number
of Shares
Purchased
*
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate Dollar
Value of Shares
That May Yet Be
Purchased Under the
Plans or Programs
January 1-31, 2021
-
$
-
-
$
14,483
February 1-28, 2021
1,767,507
48.49
1,767,507
14,397
March 1-31, 2021
5,219,017
55.43
5,219,017
14,108
6,986,524
6,986,524
*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 current total program
authorization of $25 billion of our common stock. In February 2021, we resumed our share repurchase
program at an annualized level of $1.5 billion. In May 2021, we announced a plan to dispose of our 208
million shares of Cenovus Energy by year-end 2022. The sales pace will be guided by market conditions, with
ConocoPhillips retaining discretion to adjust accordingly. The proceeds from this disposition will be deployed
towards incremental share repurchases.
As of March 31, 2021, we had repurchased $10.9 billion of shares, with $14.1 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.
59
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.
60
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
CONOCOPHILLIPS
/s/ Kontessa S. Haynes-Welsh
Kontessa S. Haynes-Welsh
Chief Accounting Officer
May 6, 2021