UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


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

For the transition period from ___________________ to ___________________

Commission file number: 001-32395

ConocoPhillips

(Exact name of registrant as specified in its charter)


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

925 N. Eldridge Parkway, Houston, TX 77079

(Address of principal executive offices) (Zip Code)

281-293-1000

(Registrant's telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Emerging growth company ☐

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

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

The registrant had ~~1,246,071,066~~1,197,490,673 shares of common stock, $.01 par value, outstanding at ~~September~~June 30, ~~2022.~~

2023.

Table of Contents


Commonly Used Abbreviations			Table of Contents

Commonly Used Abbreviations

The following industry-specific, accounting and other terms, and abbreviations may be commonly used in this report.

Currencies

Accounting

$ or USD

U.S. dollar

ARO

asset retirement obligation

CAD

Canadian dollar

ASC

accounting standards codification

EUR

Euro

ASU

accounting standards update

GBP

British pound

DD&A

depreciation, depletion and amortization

Units of Measurement

FASB

Financial Accounting Standards

Board

BBL

barrel

BCF

billion cubic feet

FIFO

first-in, first-out

BOE

barrels of oil equivalent

G&A

general and administrative

MBD

thousands of barrels per day

GAAP

generally accepted accounting principles

MCF

thousand cubic feet

~~MBOD~~MM

~~thousand barrels of oil per day~~million

LIFO

last-in, first-out

~~million~~

~~NPNS~~

~~normal purchase normal sale~~

MMBOE

million barrels of oil equivalent

~~PP&E~~NPNS

~~properties, plants and equipment~~

~~MMBOD~~

~~million barrels of oil per day~~

~~VIE~~

~~variable interest entity~~normal purchase normal sale

MBOED

thousands of barrels of oil equivalent per day

PP&E

properties, plants and equipment

MMBOED

millions of barrels of oil equivalent

per day

~~Miscellaneous~~VIE

variable interest entity

MMBTU

million British thermal units

~~DE&I~~

~~diversity, equity and inclusion~~

MMCFD

million cubic feet per day

Miscellaneous

MTPA

million tonnes per annum

CERCLA

Federal Comprehensive Environmental Response Compensation and Liability Act

Industry

DEI

diversity, equity and inclusion

BLM

Bureau of Land Management

EPA

Environmental Protection Agency

CBM

coalbed methane

ESG

Environmental, Social and Corporate Governance

~~Industry~~

~~European Union~~

~~BLM~~

~~Bureau of Land Management~~

~~FERC~~

~~Federal Energy Regulatory Commission~~

~~CBM~~

~~coalbed methane~~

~~CCUS~~CCS

carbon capture ~~utilization~~ and storage

~~GHG~~

~~greenhouse gas~~

~~storage~~

~~HSE~~

~~health, safety and environment~~

E&P

exploration and production

~~ICC~~EU

~~International Chamber of Commerce~~European Union

FEED

front-end engineering and design

~~ICSID~~FERC

~~World Bank’s International~~Federal Energy Regulatory Commission

FID

final investment decision

FPS

floating production system

GHG

~~Centre for Settlement of~~greenhouse gas

FPSO

floating production, storage and

HSE

~~Investment Disputes~~health, safety and environment

offloading

~~IRS~~ICC

~~Internal Revenue Service~~International Chamber of Commerce

G&G

geological and geophysical

~~OTC~~ICSID

~~over-the-counter~~World Bank’s International

JOA

joint operating agreement

Centre for Settlement of

LNG

liquefied natural gas

Investment Disputes

NGLs

natural gas liquids

IRS

Internal Revenue Service

OPEC

Organization of Petroleum

OTC

over-the-counter

Exporting Countries

NYSE

New York Stock Exchange

~~LNG~~PSC

~~liquefied natural gas~~production sharing contract

SEC

U.S. Securities and Exchange

~~NGLs~~PUDs

~~natural gas liquids~~proved undeveloped reserves

Commission

~~OPEC~~SAGD

~~Organization of Petroleum~~steam-assisted gravity drainage

TSR

total shareholder return

WCS

~~Exporting Countries~~Western Canadian Select

U.K.

United Kingdom

~~PSC~~WTI

~~production sharing contract~~West Texas Intermediate

U.S.

United States of America

~~PUDs~~

~~proved undeveloped reserves~~

VROC

variable return of cash

~~SAGD~~

~~steam-assisted gravity drainage~~

~~WCS~~

~~Western Canada Select~~

~~WTI~~

~~West Texas Intermediate~~


1			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Financial Statements			Table of Contents

PART I. Financial Information

Item 1. Financial Statements


Consolidated Income Statement			ConocoPhillips


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Revenues and Other Income	Revenues and Other Income						Revenues and Other Income
Sales and other operating revenues	Sales and other operating revenues	$	21,013	11,326	59,936	30,708	Sales and other operating revenues	$	12,351	21,161	27,162	38,923
Equity in earnings of affiliates	Equity in earnings of affiliates	561		239	1,511	500	Equity in earnings of affiliates	412		524	911	950
Gain (loss) on dispositions	Gain (loss) on dispositions	(40)		2	1,039	294	Gain (loss) on dispositions	(1)		262	92	1,079
Other income	Other income	80		49	408	884	Other income	122		42	236	328
Total Revenues and Other Income	Total Revenues and Other Income	21,614		11,616	62,894	32,386	Total Revenues and Other Income	12,884		21,989	28,401	41,280
Costs and Expenses	Costs and Expenses						Costs and Expenses
Purchased commodities	Purchased commodities	9,251		4,179	25,236	11,660	Purchased commodities	4,616		9,234	10,754	15,985
Production and operating expenses	Production and operating expenses	1,799		1,389	5,121	4,151	Production and operating expenses	1,886		1,741	3,665	3,322
Selling, general and administrative expenses	Selling, general and administrative expenses	148		128	431	556	Selling, general and administrative expenses	205		96	364	283
Exploration expenses	Exploration expenses	89		65	301	206	Exploration expenses	83		143	221	212
Depreciation, depletion and amortization	Depreciation, depletion and amortization	1,872		1,672	5,505	5,425	Depreciation, depletion and amortization	2,010		1,810	3,952	3,633
Impairments	Impairments	2		(89)	6	(90)	Impairments	—		2	1	4
Taxes other than income taxes	Taxes other than income taxes	843		403	2,677	1,154	Taxes other than income taxes	512		1,020	1,088	1,834
Accretion on discounted liabilities	Accretion on discounted liabilities	60		61	182	186	Accretion on discounted liabilities	68		61	136	122
Interest and debt expense	Interest and debt expense	199		219	627	665	Interest and debt expense	179		211	367	428
Foreign currency transaction (gain) loss		(93)		(10)	(139)	19
Foreign currency transaction gain							Foreign currency transaction gain	(14)		(70)	(58)	(46)
Other expenses	Other expenses	4		17	(46)	78	Other expenses	(23)		86	(13)	(50)
Total Costs and Expenses	Total Costs and Expenses	14,174		8,034	39,901	24,010	Total Costs and Expenses	9,522		14,334	20,477	25,727
Income before income taxes	Income before income taxes	7,440		3,582	22,993	8,376	Income before income taxes	3,362		7,655	7,924	15,553
Income tax provision	Income tax provision	2,913		1,203	7,562	2,924	Income tax provision	1,130		2,510	2,772	4,649

Net Income	Net Income	$	4,527	2,379	15,431	5,452	Net Income	$	2,232	5,145	5,152	10,904

Net Income Per Share of Common Stock (dollars)	Net Income Per Share of Common Stock (dollars)						Net Income Per Share of Common Stock (dollars)
Basic	Basic	$	3.56	1.78	11.96	4.10	Basic	$	1.84	3.98	4.23	8.39
Diluted	Diluted	3.55		1.78	11.93	4.09	Diluted	1.84		3.96	4.22	8.36
Average Common Shares Outstanding (in thousands)	Average Common Shares Outstanding (in thousands)						Average Common Shares Outstanding (in thousands)
Basic	Basic	1,265,893		1,332,286	1,285,739	1,327,216	Basic	1,207,443		1,289,791	1,213,800	1,295,827
Diluted	Diluted	1,269,321		1,336,379	1,289,953	1,330,652	Diluted	1,210,342		1,295,844	1,216,743	1,301,126

See Notes to Consolidated Financial Statements.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			2


Financial Statements			Table of Contents


Consolidated Statement of Comprehensive Income			ConocoPhillips


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Net Income	Net Income	$	4,527	2,379	15,431	5,452	Net Income	$	2,232	5,145	5,152	10,904
Other comprehensive income	Other comprehensive income						Other comprehensive income
Defined benefit plans	Defined benefit plans						Defined benefit plans
Reclassification adjustment for amortization of prior service credit included in net income	Reclassification adjustment for amortization of prior service credit included in net income	(10)		(9)	(30)	(28)	Reclassification adjustment for amortization of prior service credit included in net income	(10)		(10)	(19)	(20)
Net change	Net change	(10)		(9)	(30)	(28)	Net change	(10)		(10)	(19)	(20)
Net actuarial gain (loss) arising during the period		(23)		8	(105)	113
Net actuarial loss arising during the period							Net actuarial loss arising during the period	—		(82)	—	(82)
Reclassification adjustment for amortization of net actuarial losses included in net income	Reclassification adjustment for amortization of net actuarial losses included in net income	17		45	58	133	Reclassification adjustment for amortization of net actuarial losses included in net income	19		25	42	41
Net change	Net change	(6)		53	(47)	246	Net change	19		(57)	42	(41)

Income taxes on defined benefit plans	Income taxes on defined benefit plans	4		(9)	16	(49)	Income taxes on defined benefit plans	(3)		14	(6)	12
Defined benefit plans, net of tax	Defined benefit plans, net of tax	(12)		35	(61)	169	Defined benefit plans, net of tax	6		(53)	17	(49)
Unrealized holding loss on securities		(7)		—	(16)	(1)
Reclassification adjustment for loss included in net income		(1)		—	(1)	—
Income taxes on unrealized holding loss on securities		2		—	4	—
Unrealized holding loss on securities, net of tax		(6)		—	(13)	(1)
Foreign currency translation adjustments		(534)		(237)	(841)	(72)
Income taxes on foreign currency translation adjustments		—		(1)	—	(1)
Unrealized holding gain (loss) on securities							Unrealized holding gain (loss) on securities	(3)		(5)	3	(9)
Reclassification adjustment for gain included in net income							Reclassification adjustment for gain included in net income	(1)		—	(2)	—
Income taxes on unrealized holding gain (loss) on securities							Income taxes on unrealized holding gain (loss) on securities	1		1	—	2
Unrealized holding gain (loss) on securities, net of tax							Unrealized holding gain (loss) on securities, net of tax	(3)		(4)	1	(7)

Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	(534)		(238)	(841)	(73)	Foreign currency translation adjustments, net of tax	99		(448)	57	(307)

Other Comprehensive Income (Loss), Net of Tax	Other Comprehensive Income (Loss), Net of Tax	(552)		(203)	(915)	95	Other Comprehensive Income (Loss), Net of Tax	102		(505)	75	(363)

Comprehensive Income	Comprehensive Income	$	3,975	2,176	14,516	5,547	Comprehensive Income	$	2,334	4,640	5,227	10,541

See Notes to Consolidated Financial Statements.


3			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Financial Statements			Table of Contents


Consolidated Balance Sheet			ConocoPhillips


		Millions of Dollars				Millions of Dollars
		September 30 2022		December 31 2021		June 30 2023		December 31 2022
Assets	Assets				Assets
Cash and cash equivalents	Cash and cash equivalents	$	8,010	5,028	Cash and cash equivalents	$	5,735	6,458
Short-term investments	Short-term investments	2,412		446	Short-term investments	1,080		2,785
Accounts and notes receivable (net of allowance of $2 and $2, respectively)		7,338		6,543
Accounts and notes receivable (net of allowance of $3 and $2, respectively)					Accounts and notes receivable (net of allowance of $3 and $2, respectively)	4,517		7,075
Accounts and notes receivable—related parties	Accounts and notes receivable—related parties	16		127	Accounts and notes receivable—related parties	14		13
Investment in Cenovus Energy		—		1,117

Inventories	Inventories	1,226		1,208	Inventories	1,236		1,219
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,451		1,581	Prepaid expenses and other current assets	919		1,199
Total Current Assets	Total Current Assets	20,453		16,050	Total Current Assets	13,501		18,749
Investments and long-term receivables	Investments and long-term receivables	8,204		7,113	Investments and long-term receivables	8,618		8,225

Net properties, plants and equipment (net of accumulated DD&A of $64,874 and $64,735, respectively)		63,673		64,911
Net properties, plants and equipment (net of accumulated DD&A of $69,529 and $66,630, respectively)					Net properties, plants and equipment (net of accumulated DD&A of $69,529 and $66,630, respectively)	65,452		64,866
Other assets	Other assets	2,507		2,587	Other assets	2,034		1,989
Total Assets	Total Assets	$	94,837	90,661	Total Assets	$	89,605	93,829

Liabilities	Liabilities				Liabilities
Accounts payable	Accounts payable	$	6,242	5,002	Accounts payable	$	4,597	6,113
Accounts payable—related parties	Accounts payable—related parties	26		23	Accounts payable—related parties	29		50
Short-term debt	Short-term debt	664		1,200	Short-term debt	879		417
Accrued income and other taxes	Accrued income and other taxes	3,187		2,862	Accrued income and other taxes	1,692		3,193
Employee benefit obligations	Employee benefit obligations	628		755	Employee benefit obligations	552		728
Other accruals	Other accruals	3,250		2,179	Other accruals	1,799		2,346
Total Current Liabilities	Total Current Liabilities	13,997		12,021	Total Current Liabilities	9,548		12,847
Long-term debt	Long-term debt	16,297		18,734	Long-term debt	15,565		16,226
Asset retirement obligations and accrued environmental costs	Asset retirement obligations and accrued environmental costs	5,729		5,754	Asset retirement obligations and accrued environmental costs	6,357		6,401
Deferred income taxes	Deferred income taxes	7,218		6,179	Deferred income taxes	8,038		7,726
Employee benefit obligations	Employee benefit obligations	1,087		1,153	Employee benefit obligations	981		1,074
Other liabilities and deferred credits	Other liabilities and deferred credits	1,430		1,414	Other liabilities and deferred credits	1,585		1,552
Total Liabilities	Total Liabilities	45,758		45,255	Total Liabilities	42,074		45,826

Equity	Equity				Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)	Common stock (2,500,000,000 shares authorized at $0.01 par value)				Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2022—2,100,379,079 shares; 2021—2,091,562,747 shares)
Issued (2023—2,102,624,236 shares; 2022—2,100,885,134 shares)					Issued (2023—2,102,624,236 shares; 2022—2,100,885,134 shares)
Par value	Par value	21		21	Par value	21		21
Capital in excess of par	Capital in excess of par	61,089		60,581	Capital in excess of par	61,169		61,142
Treasury stock (at cost: 2022—854,308,013 shares; 2021—789,319,875 shares)		(57,444)		(50,920)
Treasury stock (at cost: 2023—905,133,563 shares; 2022—877,029,062 shares)					Treasury stock (at cost: 2023—905,133,563 shares; 2022—877,029,062 shares)	(63,217)		(60,189)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,865)		(4,950)	Accumulated other comprehensive loss	(5,925)		(6,000)
Retained earnings	Retained earnings	51,278		40,674	Retained earnings	55,483		53,029
Total Equity	Total Equity	49,079		45,406	Total Equity	47,531		48,003
Total Liabilities and Equity	Total Liabilities and Equity	$	94,837	90,661	Total Liabilities and Equity	$	89,605	93,829

See Notes to Consolidated Financial Statements.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			4


Financial Statements			Table of Contents


Consolidated Statement of Cash Flows			ConocoPhillips


		Millions of Dollars				Millions of Dollars
		Nine Months Ended September 30				Six Months Ended June 30
		2022		2021		2023		2022
Cash Flows From Operating Activities	Cash Flows From Operating Activities				Cash Flows From Operating Activities
Net income	Net income	$	15,431	5,452	Net income	$	5,152	10,904
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities				Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization	Depreciation, depletion and amortization	5,505		5,425	Depreciation, depletion and amortization	3,952		3,633
Impairments	Impairments	6		(90)	Impairments	1		4
Dry hole costs and leasehold impairments	Dry hole costs and leasehold impairments	136		7	Dry hole costs and leasehold impairments	102		104
Accretion on discounted liabilities	Accretion on discounted liabilities	182		186	Accretion on discounted liabilities	136		122
Deferred taxes	Deferred taxes	1,594		895	Deferred taxes	489		868
Undistributed equity earnings	Undistributed equity earnings	569		258	Undistributed equity earnings	652		591
Gain on dispositions	Gain on dispositions	(1,039)		(294)	Gain on dispositions	(92)		(1,079)
Gain on investment in Cenovus Energy	Gain on investment in Cenovus Energy	(251)		(743)	Gain on investment in Cenovus Energy	—		(251)
Other	Other	(38)		(866)	Other	(7)		(37)
Working capital adjustments	Working capital adjustments				Working capital adjustments
Increase in accounts and notes receivable		(1,317)		(1,619)
Decrease (increase) in accounts and notes receivable					Decrease (increase) in accounts and notes receivable	2,246		(1,861)
Increase in inventories	Increase in inventories	(64)		(13)	Increase in inventories	(23)		(53)
Increase in prepaid expenses and other current assets		(469)		(800)
Increase in accounts payable		1,098		682
Increase in taxes and other accruals		379		2,648
Decrease (increase) in prepaid expenses and other current assets					Decrease (increase) in prepaid expenses and other current assets	295		(283)
Increase (decrease) in accounts payable					Increase (decrease) in accounts payable	(1,614)		635
Decrease in taxes and other accruals					Decrease in taxes and other accruals	(2,032)		(315)
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	21,722		11,128	Net Cash Provided by Operating Activities	9,257		12,982
Cash Flows From Investing Activities	Cash Flows From Investing Activities				Cash Flows From Investing Activities
Capital expenditures and investments	Capital expenditures and investments	(7,626)		(3,767)	Capital expenditures and investments	(5,820)		(5,129)
Working capital changes associated with investing activities	Working capital changes associated with investing activities	542		79	Working capital changes associated with investing activities	86		496
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	37		382	Acquisition of businesses, net of cash acquired	—		37
Proceeds from asset dispositions	Proceeds from asset dispositions	3,354		792	Proceeds from asset dispositions	426		2,951
Net (purchase) sale of investments	Net (purchase) sale of investments	(2,235)		2,846	Net (purchase) sale of investments	1,549		(1,104)
Collection of advances/loans—related parties	Collection of advances/loans—related parties	114		105	Collection of advances/loans—related parties	—		55
Other	Other	7		(386)	Other	(5)		(8)
Net Cash (Used in) Provided by Investing Activities		(5,807)		51
Net Cash Used in Investing Activities					Net Cash Used in Investing Activities	(3,764)		(2,702)
Cash Flows From Financing Activities	Cash Flows From Financing Activities				Cash Flows From Financing Activities
Issuance of debt	Issuance of debt	2,897		—	Issuance of debt	1,093		2,897
Repayment of debt	Repayment of debt	(5,874)		(363)	Repayment of debt	(1,200)		(5,829)
Issuance of company common stock	Issuance of company common stock	345		27	Issuance of company common stock	(95)		350
Repurchase of company common stock	Repurchase of company common stock	(6,524)		(2,224)	Repurchase of company common stock	(3,000)		(3,725)
Dividends paid	Dividends paid	(3,336)		(1,750)	Dividends paid	(2,838)		(1,852)
Other	Other	(53)		6	Other	(11)		(56)
Net Cash Used in Financing Activities	Net Cash Used in Financing Activities	(12,545)		(4,304)	Net Cash Used in Financing Activities	(6,051)		(8,215)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(452)		(3)	Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(162)		(237)
Net Change in Cash, Cash Equivalents and Restricted Cash	Net Change in Cash, Cash Equivalents and Restricted Cash	2,918		6,872	Net Change in Cash, Cash Equivalents and Restricted Cash	(720)		1,828
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	5,398		3,315	Cash, cash equivalents and restricted cash at beginning of period	6,694		5,398
Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	8,316	10,187	Cash, Cash Equivalents and Restricted Cash at End of Period	$	5,974	7,226

Restricted cash of ~~$306~~$239 million is included in the ~~"Other assets"~~"Other assets" line of our Consolidated Balance Sheet as of ~~September~~June 30, ~~2022.~~2023.

Restricted cash of ~~$152~~$236 million ~~and $218 million are~~is included in the ~~"Prepaid expenses and other current assets" and "Other assets" lines, respectively,~~"Other assets" line of our Consolidated Balance Sheet as of December 31, ~~2021.~~2022.

See Notes to Consolidated Financial Statements.


5			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Notes to Consolidated Financial Statements

Note 1—Basis of Presentation

The interim-period financial information presented in the financial statements included in this report is unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair presentation of the consolidated financial position of ConocoPhillips, its results of operations and cash flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes included in our ~~2021~~2022 Annual Report on Form 10-K.

Note 2—Inventories


		Millions of Dollars				Millions of Dollars
		September 30 2022		December 31 2021		June 30 2023		December 31 2022
Crude oil and natural gas	Crude oil and natural gas	$	650	647	Crude oil and natural gas	$	625	641
Materials and supplies	Materials and supplies	576		561	Materials and supplies	611		578
Total Inventories	Total Inventories	$	1,226	1,208	Total Inventories	$	1,236	1,219

Inventories valued on the LIFO basis	Inventories valued on the LIFO basis	$	389	395	Inventories valued on the LIFO basis	$	443	396

Note 3—Acquisitions and Dispositions

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

~~In December 2021,~~Qatar Liquefied Gas Company Limited (12) (QG12)

During 2022, we ~~completed our acquisition of Shell's assets~~were awarded a 25 percent interest in QG12, a new joint venture with QatarEnergy, to participate in the Permian based Delaware Basin in an all-cash transaction for $8.6 billion after customary adjustments. Assets acquired include approximately 225,000 net acres and producing properties located entirely in Texas. The acquisition was accounted for as a business combination under FASB Topic ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date as we identify new information about facts and circumstances that existed asNorth Field South (NFS) LNG project. Formation of the ~~acquisition date to consider.~~NFS joint venture, QG12, closed in June 2023. QG12 has a 25 percent interest in the NFS project and is reported as an equity method investment in our Europe, Middle East and North Africa segment. See Note 4.

~~Oil~~Port Arthur Liquefaction Holdings, LLC (PALNG)

In March 2023, we acquired a 30 percent direct equity investment in PALNG, a joint venture for the development of a large-scale LNG facility for the first phase of the Port Arthur LNG project ("Phase 1"). Sempra PALNG Holdings, LLC owns the remaining 70 percent interest in the joint venture. PALNG is reported as an equity method investment in our Corporate and ~~gas properties were valued using~~Other segment. See Note 4.

Planned Acquisitions

Surmont

In July 2023, we executed an agreement to purchase the remaining 50 percent interest in Surmont, an asset in our Canada segment, from TotalEnergies EP Canada Ltd. for approximately $4 billion CAD ($3 billion), subject to customary adjustments, as well as contingent payments over a ~~discounted cash flow approach incorporating market participant~~five-year term of up to $440 million CAD ($325 million). These contingent payments represent $2.7 million CAD ($2.0 million) for every dollar that WCS pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved. The transaction is expected to close in the second half of 2023, with an effective date of April 1, 2023. Upon closing, we will hold 100 percent interest in the Surmont asset. This transaction is subject to regulatory approvals and ~~internally generated price assumptions, production profiles and operating and development cost assumptions. The fair values determined for accounts receivable, accounts payable and most~~ other ~~current assets and current liabilities were equivalent~~customary closing conditions.

Australia Pacific LNG Pty Ltd (APLNG)

In March 2023, we announced that, subject to the ~~carrying value due~~closing of EIG's transaction with Origin Energy, we intend to ~~their short-term nature.~~purchase up to an additional 2.49 percent shareholding interest in APLNG for $0.5 billion, subject to customary adjustments. Upon closing we will own up to 49.99 percent interest in APLNG. The ~~total consideration~~transaction is expected to close in early 2024, with an effective date of ~~$8.6 billion was allocated~~July 1, 2022. Both EIG's transaction with Origin Energy and our shareholder acquisition are subject to ~~the identifiable assets~~regulatory approvals and ~~liabilities based on their fair values at the acquisition date.~~

other customary closing conditions.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			6


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


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

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

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

~~Supplemental Pro Forma (unaudited)~~

~~The following table summarizes the unaudited supplemental pro forma financial information for the~~

~~three- and nine-month periods ended September 30, 2021, as if we had completed the acquisition of Shell's Permian assets on January 1, 2020:~~

Millions of Dollars
Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2021
Supplemental Pro Forma (unaudited) As Reported Pro forma Shell Pro forma Combined As Reported Pro forma Shell Pro forma Combined
Total Revenues and Other Income 11,616 882 12,498 32,386 2,277 34,663
Income before income taxes 3,582 364 3,946 8,376 780 9,156
Net Income 2,379 279 2,658 5,452 597 6,049
Earnings per share ($ per share):
Basic net income $ 1.78 1.99 4.10 4.55
Diluted net income 1.78 1.98 4.09 4.54

The unaudited supplemental pro forma financial information is presented for illustration and comparative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been completed on January 1, 2020, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma financial information for the three- and nine-month periods ended September 30, 2021, is a result of combining the consolidated income statement of ConocoPhillips with the results of the assets acquired from Shell. The pro forma results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction. The pro forma results include adjustments made primarily to DD&A, which is based on the unit-of-production method, resulting from the purchase price allocated to properties, plants and equipment. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected.


7			~~ConocoPhillips 2022 Q3 10-Q~~


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

~~Acquisition of Concho Resources Inc. (Concho)~~

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

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

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

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

~~Asset Acquisition~~

In September 2022, we completed the acquisition of additional working interest in certain Eagle Ford acreage in the Lower 48 segment for cash consideration of $236 million after customary adjustments. This agreement was accounted for as an asset acquisition resulting in the recognition of $254 million of PP&E, $10 million of ARO and an $8 million net reduction in working capital.

~~Assets Sold~~

In September 2022, we sold our interest in certain noncore assets in the Anadarko basin of our Lower 48 segment for net proceeds of $210 million and recognized a $76 million before-tax and $58 million after-tax loss. At the time of disposition, our interest in these assets had a net carrying value of $286 million, consisting of $310 million of assets, primarily related to $303 million of PP&E, and $24 million of liabilities, primarily related to AROs.

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

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

35 percent shareholding in the Transasia Pipeline Company. At the time of the disposition, the net carrying value was approximately $0.2 billion, excluding $0.2 billion of cash and restricted cash. The net book value consisted primarily of $0.3 billion of PP&E and $0.1 billion of ARO. The before-tax earnings associated with the subsidiaries sold, excluding the gain on disposition noted above, were $138 million and $423 million for the nine-month period ended September 30, 2022 and 2021, respectively. Results of operations for the Indonesia interests sold were reported in our Asia Pacific segment.

For the three- and nine-months ended September 30, 2022, we recorded contingent payments of $6 million and $430 million, respectively, relating to the previous dispositions of our interest in the Foster Creek Christina Lake Partnership and western Canada gas assets as well as our San Juan assets. The contingent payments are recorded as gain on dispositions in our consolidated income statement and are reflected within our Canada and Lower 48 segments. The term of contingent payments in our Canada segment ended in the second quarter of 2022. For the three- and nine-months ended September 30, 2021, we recorded contingent payments of $121 million and $222 million, respectively, relating to these dispositions.


			~~ConocoPhillips 2022 Q3 10-Q~~			8


Notes to Consolidated Financial Statements			Table of Contents

Note 4—Investments ~~Loans~~ and Long-Term Receivables

APLNG

In 2012, APLNG executed an $8.5 billion project finance facility ~~in 2012 which~~that became non-recourse following financial completion in 2017. ~~Following refinancing efforts, the~~The facility is currently composed of a financing agreement with the Export-Import Bank of the United States, a commercial bank facility and two United States Private Placement note facilities. APLNG principal and interest payments commenced in March 2017 and are scheduled to occur bi-annually until September 2030. At ~~September~~June 30, ~~2022,~~2023, a balance of ~~$5.2~~$4.9 billion was outstanding on these facilities.

See Note 8.

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

At ~~September~~June 30, ~~2022,~~2023, the carrying value of our equity method investment in APLNG was ~~$6.4~~approximately $5.6 billion. ~~The balance is included~~

PALNG

In March 2023, we acquired a 30 percent direct equity investment in PALNG, a joint venture for the ~~“Investments and long-term receivables” line on our consolidated balance sheet.~~

~~Loans~~

~~As part~~development of a large-scale LNG facility. At June 30, 2023, the carrying value of our ~~normal ongoing business operations, we enter into numerous agreements with other parties to pursue business opportunities. Included~~equity method investment in ~~such activity are loans made to certain affiliated and non-affiliated companies. At September 30, 2022, there were no outstanding loans to affiliated companies as~~PALNG was approximately $0.7 billion. See Note 3.

Qatar Liquefied Gas Company Limited

Our equity method investments in Qatar include the ~~final loan payment related to~~ following:

•Qatar Liquefied Gas Company Limited (3) ~~project financing was received~~(QG3)—30 percent owned joint venture with affiliates of QatarEnergy (68.5 percent) and Mitsui (1.5 percent)—produces and liquefies natural gas from Qatar’s North Field, as well as exports LNG.

•Qatar Liquefied Gas Company Limited (8) (QG8)—25 percent owned joint venture with an affiliate of QatarEnergy (75 percent)—participant in the ~~third quarter~~North Field East LNG project.

•Qatar Liquefied Gas Company Limited (12) (QG12)—25 percent owned joint venture with an affiliate of ~~2022.~~QatarEnergy (75 percent)—participant in the NFS LNG project. See Note 3.

At June 30, 2023, the carrying value of our Qatar equity method investments was approximately $1.1 billion.

Note 5—Investment in Cenovus Energy

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

~~All gains~~billion and ~~losses were~~a net gain of $251 million. The gain was recognized within "Other income” on our consolidated income statement. Proceeds related to the sale of our CVE shares were included within ~~“Cash~~"Cash Flows ~~from~~From Investing ~~Activities”~~Activities" on our consolidated statement of cash flows.~~See Note~~ 11.

Millions of Dollars
Three Months Ended
September 30
Nine Months Ended
September 30
2022 2021 2022 2021
Total Net gain on equity securities $ — 17 251 743
Less: Net gain (loss) on equity securities sold during the period — (50) 251 177
Unrealized gain on equity securities still held at the reporting date $ — 67 $ — 566


97			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 6—Debt
Millions of Dollars
September 30
2022 December 31 2021
2.4% Notes due 2022 $ 329 329
7.65% Debentures due 2023 78 78
3.35% Notes due 2024 426 426
2.125% Notes due 2024 900 —
8.2% Notes due 2025 134 134
3.35% Debentures due 2025 199 199
2.4% Notes due 2025 900 —
6.875% Debentures due 2026 67 67
4.95% Notes due 2026 — 1,250
7.8% Debentures due 2027 203 203
3.75% Notes due 2027 196 1,000
4.3% Notes due 2028 223 1,000
7.375% Debentures due 2029 92 92
7% Debentures due 2029 112 200
6.95% Notes due 2029 1,195 1,549
8.125% Notes due 2030 390 390
7.4% Notes due 2031 382 500
7.25% Notes due 2031 400 500
7.2% Notes due 2031 447 575
2.4% Notes due 2031 227 500
5.9% Notes due 2032 505 505
4.15% Notes due 2034 246 246
5.95% Notes due 2036 326 500
5.951% Notes due 2037 645 645
5.9% Notes due 2038 350 600
6.5% Notes due 2039 1,588 2,750
3.758% Notes due 2042 785 —
4.3% Notes due 2044 750 750
5.95% Notes due 2046 329 500
7.9% Debentures due 2047 60 60
4.875% Notes due 2047 319 800
4.85% Notes due 2048 219 600
3.8% Notes due 2052 1,100 —
4.025% Notes due 2062 1,770 —
Floating rate notes due 2022 at 1.06% – 1.41% during 2022 and 1.02% –1.12% during 2021 — 500
Marine Terminal Revenue Refunding Bonds due 2031 at 0.07% – 2.55% during 2022 and 0.04% – 0.15% during 2021 265 265
Industrial Development Bonds due 2035 at 0.07% – 2.55% during 2022 and 0.04% – 0.12% during 2021 18 18
Other 31 35
Debt at face value 16,206 17,766
Finance leases 1,282 1,261
Net unamortized premiums, discounts and debt issuance costs (527) 907
Total debt 16,961 19,934
Short-term debt (664) (1,200)
Long-term debt $ 16,297 18,734

In the second quarter of 2023, as described further below, we initiated and completed two concurrent transactions as part of our debt refinancing strategy. We issued $1.1 billion in new Notes through our universal shelf registration statement and prospectus supplement and used the funds to repurchase $1.1 billion of existing debt.


			~~ConocoPhillips 2022 Q3 10-Q~~			10

New Debt Issuance


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

On May 23, 2023, we issued $1.1 billion in 5.3% Notes due 2053.

Tender Offer

~~In May 2022,~~On May 25, 2023, we ~~redeemed $1,250~~repurchased a total of $1,133 million aggregate principal amount of ~~our 4.95 percent Notes due 2026.~~debt as listed below. We paid ~~premiums above~~$33 million below face value of ~~$79 million~~to ~~redeem the~~repurchase these debt instruments and recognized a ~~loss~~gain on debt extinguishment of ~~$83~~$27 million which is included in the "Other expenses" line on our consolidated income statement. ~~We also paid $500 million to retire the outstanding principal amount of the floating rate notes due 2022 at maturity.~~

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

~~Tender Offer~~

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

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

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

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

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

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

~~Exchange Offers~~

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

~~The notes tendered and accepted in the exchange offers were:~~

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

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

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

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

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

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

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

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

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

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

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

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

~~New Debt Issuance~~

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

•2.125% Notes due 2024 with principal of $900 million (partial repurchase of $439 million)

•~~2.4%~~3.350% Notes due 2024 with principal of $426 million (partial repurchase of $160 million)

•2.400% Notes due 2025 with principal of $900 million

•~~3.8% Notes due 2052 with principal~~ (partial repurchase of ~~$1,100 million~~$534 million)

~~In February~~Our debt balance at June 30, 2023 was $16.4 billion, compared with $16.6 billion at December 31, 2022 ~~we refinanced our~~.

Our revolving credit facility ~~from~~provides a total borrowing capacity of ~~$6.0 billion to~~ $5.5 billion with an expiration date of February 2027. Our revolving credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as support for our commercial paper program. The revolving credit facility is broadly syndicated among financial institutions and does not contain any material adverse change provisions or any covenants requiring maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-default provision relating to the failure to pay principal or interest on other debt obligations of

~~$200~~ $200 million or more by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to redetermination prior to its expiration date.


11			~~ConocoPhillips 2022 Q3 10-Q~~


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

Credit facility borrowings may bear interest at a margin above ~~rates offered by certain designated banks in~~ the ~~London interbank market or at a margin above the overnight federal funds rate or prime rates offered by certain designated banks in the U.S.~~Secured Overnight Financing Rate (SOFR). The facility agreement calls for commitment fees on available, but unused, amounts. The facility agreement also contains early termination rights if our current directors or their approved successors cease to be a majority of the Board of Directors.

The revolving credit facility supports our ability to issue up to $5.5 billion of commercial paper. Commercial paper is generally limited to maturities of 90 days and is included in short-term debt on our consolidated balance sheet. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at ~~September~~June 30, ~~2022.~~2023. At December 31, ~~2021,~~2022, we had no commercial paper outstanding and no direct borrowings or letters of credit issued.

In September 2022, Moody's upgraded our long-term credit rating to "A2" with a stable outlook from the previous "A3" with a positive outlook and upgraded our commercial paper rating to "Prime-1" from "Prime-2".

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

•~~Fitch: “A” with a “stable” outlook~~

•~~S&P: “A-” with a “stable” outlook~~

•~~Moody's: "A2" with a "stable" outlook~~

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

At ~~September~~June 30, ~~2022,~~2023, we had $283 million of certain variable rate demand bonds (VRDBs) outstanding with maturities ranging through 2035. The VRDBs are redeemable at the option of the bondholders on any business day. If they are ever redeemed, we have the ability and intent to refinance on a long-term ~~basis,~~basis; therefore, the VRDBs are included in the “Long-term debt” line on our consolidated balance sheet.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			128


Notes to Consolidated Financial Statements			Table of Contents

Note 7—Changes in Equity

Millions of Dollars
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
For the three months ended September 30, 2022
Balances at June 30, 2022 $ 21 61,045 (54,644) (5,313) 49,093 50,202
Net income 4,527 4,527
Other comprehensive loss (552) (552)
Dividends declared
Ordinary ($0.46 per common share) (588) (588)
Variable return of cash ($1.40 per common share) (1,754) (1,754)
Repurchase of company common stock (2,799) (2,799)
Distributed under benefit plans 44 44
Other (1) (1)
Balances at September 30, 2022 $ 21 61,089 (57,444) (5,865) 51,278 49,079
For the nine months ended September 30, 2022
Balances at December 31, 2021 $ 21 60,581 (50,920) (4,950) 40,674 45,406
Net income 15,431 15,431
Other comprehensive loss (915) (915)
Dividends declared
Ordinary ($1.38 per common share) (1,789) (1,789)
Variable return of cash ($2.40 per common share) (3,040) (3,040)
Repurchase of company common stock (6,524) (6,524)
Distributed under benefit plans 508 508
Other 2 2
Balances at September 30, 2022 $ 21 61,089 (57,444) (5,865) 51,278 49,079
Millions of Dollars
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
For the three months ended September 30, 2021
Balances at June 30, 2021 $ 21 60,337 (48,278) (4,920) 37,116 44,276
Net income 2,379 2,379
Other comprehensive loss (203) (203)
Dividends declared
Ordinary ($0.89 per common share) (1,188) (1,188)
Repurchase of company common stock (1,243) (1,243)
Distributed under benefit plans 94 94
Balances at September 30, 2021 $ 21 60,431 (49,521) (5,123) 38,307 44,115
For the nine months ended September 30, 2021
Balances at December 31, 2020 $ 18 47,133 (47,297) (5,218) 35,213 29,849
Net income 5,452 5,452
Other comprehensive income 95 95
Dividends declared
Ordinary ($1.75 per common share) (2,359) (2,359)
Acquisition of Concho 3 13,122 13,125
Repurchase of company common stock (2,224) (2,224)
Distributed under benefit plans 176 176
Other 1 1
Balances at September 30, 2021 $ 21 60,431 (49,521) (5,123) 38,307 44,115


	Millions of Dollars

	Common Stock
	Par Value		Capital in Excess of Par	Treasury Stock	Accum. Other Comprehensive Income (Loss)	Retained Earnings	Total
For the three months ended June 30, 2023
Balances at March 31, 2023	$	21	61,100	(61,904)	(6,027)	54,593	47,783
Net income						2,232	2,232
Other comprehensive income					102		102
Dividends declared
Ordinary ($0.51 per common share)						(620)	(620)
Variable return of cash ($0.60 per common share)						(723)	(723)
Repurchase of company common stock				(1,300)			(1,300)
Excise tax on share repurchases				(13)			(13)
Distributed under benefit plans			69				69
Other						1	1
Balances at June 30, 2023	$	21	61,169	(63,217)	(5,925)	55,483	47,531

For the six months ended June 30, 2023
Balances at December 31, 2022	$	21	61,142	(60,189)	(6,000)	53,029	48,003
Net income						5,152	5,152
Other comprehensive income					75		75
Dividends declared
Ordinary ($1.02 per common share)						(1,245)	(1,245)
Variable return of cash ($1.20 per common share)						(1,454)	(1,454)
Repurchase of company common stock				(3,000)			(3,000)
Excise tax on share repurchases				(28)			(28)
Distributed under benefit plans			27				27
Other						1	1
Balances at June 30, 2023	$	21	61,169	(63,217)	(5,925)	55,483	47,531



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

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


139			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 8—Guarantees

At ~~September~~June 30, ~~2022,~~2023, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.

APLNG Guarantees

At ~~September~~June 30, ~~2022,~~2023, we had outstanding multiple guarantees in connection with our 47.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing ~~September 2022~~June 2023 exchange rates:

•During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rata portion of the funds in a project finance reserve account. We estimate the remaining term of this guarantee ~~is 8~~to be eight years. Our maximum exposure under this guarantee is approximately $210 million and may become payable if an enforcement action is commenced by the project finance lenders against APLNG. At ~~September~~June 30, ~~2022,~~2023, the carrying value of this guarantee was approximately $14 million.

•In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy Limited in October 2008, we agreed to reimburse Origin Energy Limited for our share of the existing contingent liability arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales agreements. The final guarantee expires in the fourth quarter of 2041. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be ~~$760~~$740 million ($1.3 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 14 to 2322 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately ~~$280~~$390 million and would become payable if APLNG does not perform. At ~~September~~June 30, ~~2022,~~2023, the carrying value of these guarantees was approximately ~~$20~~$29 million.

Qatar Liquefied Gas Company Limited Guarantees

We have guaranteed our portion of certain fiscal and other joint venture obligations as a shareholder in QG8 and QG12. These guarantees have an approximate 30-year term with no maximum limit. At June 30, 2023, the carrying value of these guarantees was approximately $14 million.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling approximately $600 million, which consist primarily of guarantees of the residual value of leased office buildings and guarantees of the residual value of corporate ~~aircrafts.~~aircraft. These guarantees have remaining terms of ~~three~~two to ~~five~~four years and would become payable if certain asset values are lower than guaranteed amounts at the end of the lease or contract term, business conditions decline at guaranteed entities, or as a result of nonperformance of contractual terms by guaranteed parties. At ~~September~~June 30, ~~2022,~~2023, there was no carrying value associated with these guarantees.

Indemnifications

Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes and environmental liabilities. The carrying amount recorded for these indemnification obligations at ~~September~~June 30, ~~2022,~~2023, was approximately $20 million. Those related to environmental issues have terms that are generally indefinite, and the maximum amounts of future payments are generally unlimited. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. See Note 9 for additional information about environmental liabilities.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			1410


Notes to Consolidated Financial Statements			Table of Contents

Note 9—Contingencies and Commitments

A number of lawsuits involving a variety of claims arising in the ordinary course of business have been filed against ConocoPhillips. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the low end of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. We accrue receivables for insurance or other third-party recoveries when applicable. With respect to income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to international, federal, state and local environmental laws and regulations and record accruals for environmental liabilities based on management’s best estimates. These estimates are based on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. EPA or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.

Although liability of those potentially responsible for environmental remediation costs is generally joint and several for federal sites and frequently so for other sites, we are usually only one of many companies cited at a particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites at which we are potentially responsible are still under investigation by the EPA or the agency concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit, and some of the indemnifications are subject to dollar limits and time limits.

We are currently participating in environmental assessments and cleanups at numerous ~~federal Superfund~~CERCLA and other comparable state and international sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those acquired in a purchase business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. We have not reduced these accruals for possible insurance recoveries.

~~At September 30, 2022,~~For remediation activities in the U.S. and Canada, our balance sheet included a total environmental accrual of ~~$182~~$185 million at June 30, 2023, compared with ~~$187~~$182 million at December 31, ~~2021, for remediation activities in the U.S. and Canada.~~2022. We expect to incur a substantial amount of these expenditures within the next 30 years. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.


1511			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Litigation and Other Contingencies

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

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

We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at ~~September~~June 30, ~~2022,~~2023, we had performance obligations secured by letters of credit of $261 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 ("Tribunal") held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in June 2007. On January 17, 2017, the Tribunal reconfirmed the decision that the expropriation was unlawful. In March 2019, the Tribunal unanimously ordered the government of Venezuela to pay ConocoPhillips approximately $8.7 billion in compensation for the government’s unlawful expropriation of the company’s investments in Venezuela in 2007. On August 29, 2019, the ~~ICSID~~ Tribunal issued a decision rectifying the award and reducing it by approximately $227 million. The award now stands at $8.5 billion plus interest. The government of Venezuela sought annulment of the award, which automatically stayed enforcement of the award. On September 29, 2021, the ICSID annulment committee lifted the stay of enforcement of the award. The annulment proceedings are underway.

In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $2 billion under their agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures. In August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the payment period, including initial payments totaling approximately $500 million within a period of 90 days from the time of signing of the settlement agreement. The balance of the settlement is to be paid quarterly over a period of four and a half years. Per the settlement, PDVSA recognized the ICC award as a judgment in various jurisdictions, and ConocoPhillips agreed to suspend its legal enforcement actions. ConocoPhillips sent notices of default to PDVSA on October 14 and November 12, 2019, and to date PDVSA has failed to cure its breach. As a result, ConocoPhillips has resumed legal enforcement actions. To date, ConocoPhillips has received approximately ~~$772~~$776 million in connection with the ICC award. ConocoPhillips has ensured that the settlement and any actions taken in enforcement thereof meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.

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


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			1612


Notes to Consolidated Financial Statements			Table of Contents

Beginning in 2017, governmental and other entities in several ~~states~~states/territories 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 are unprecedented, therefore, there is significant uncertainty about the scope of the claims and alleged damages and any potential impact on the Company’s financial condition. ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against such lawsuits.

Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips, seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by historical oil and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will vigorously defend against them. ~~Defendants are seeking rehearing of a~~On October 17, 2022, the Fifth Circuit ~~panel’s recent decision affirming the~~affirmed remand of ~~these~~lead cases to ~~Louisiana~~ state court ~~which operates~~and the subsequent request for rehearing was denied. On February 27, 2023, the Supreme Court denied a certiorari petition from the defendants regarding the Fifth Circuit ruling. Accordingly, the federal district courts have issued remands to ~~extend the stay of the remand order.~~state court. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty about these claims (both as to scope and damages) and we continue to evaluate our exposure in these lawsuits.

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

On May 10, 2021, ConocoPhillips filed arbitration under the rules of the Singapore International Arbitration Centre (SIAC) against Santos KOTN Pty Ltd. and Santos Limited for their failure to timely pay the $200 million bonus due upon final investment decision of the Barossa development project under the sale and purchase ~~agreement. Santos KOTN Pty Ltd.~~agreement for the sale of our Australia-West asset and ~~Santos Limited have filed a response and counterclaim.~~operations. The ~~arbitration is ongoing with a hearing scheduled~~matter was resolved in ~~December 2022.~~April 2023 to our satisfaction.

In July 2021, a federal securities class action was filed against Concho, certain of Concho’s officers, and ConocoPhillips as Concho’s successor in the United States District Court for the Southern District of Texas. On October 21, 2021, the court issued an order appointing Utah Retirement Systems and the Construction Laborers Pension Trust for Southern California as lead plaintiffs (Lead Plaintiffs). On January 7, 2022, the Lead Plaintiffs filed their consolidated complaint alleging that Concho made materially false and misleading statements regarding its business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed appropriate. The defendants filed a motion to dismiss the consolidated complaint on March 8, 2022. On June 23, 2023, the court denied defendants’ motion as to most defendants including Concho/ConocoPhillips. We believe the allegations in the action are without merit and are vigorously defending this litigation.

ConocoPhillips is involved in pending disputes with commercial counterparties relating to the propriety of its force majeure notices following Winter Storm Uri in 2021.We believe these claims are without merit and are vigorously defending them.

Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements

We have certain throughput agreements and take-or-pay agreements in support of financing arrangements. The agreements typically provide for natural gas or crude oil transport and LNG purchase commitments. The fixed and determinable portion of the remaining estimated payments under these various agreements as of June 30, 2023 are: 2023—$4 million; 2024—$7 million; 2025—$7 million; 2026—$7 million; 2027—$7 million; and 2028 and after—$11 billion. Generally, variable components of these obligations include commodity futures prices and inflation rates. Purchases of LNG under these commitments are expected to be offset in the same or approximately same periods by cash received from the related sales transactions.


13			ConocoPhillips 2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

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. Certain of our equity method investments use swaps to manage interest rate risk.

Commodity Derivative Instruments

Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG, NGLs and ~~NGLs.~~power.

Commodity derivative instruments are held at fair value on our consolidated balance sheet. Where these balances have the right of setoff, they are presented on a net basis. Related cash flows are recorded as operating activities on our consolidated statement of cash flows. On our consolidated income statement, gains and losses are recognized either on a gross basis if directly related to our physical business or a net basis if held for trading. Gains and losses related to contracts that meet and are designated with the NPNS exception are recognized upon settlement. We generally apply this exception to eligible crude contracts and certain gas contracts. We do not apply hedge accounting for our commodity derivatives.


17			~~ConocoPhillips 2022 Q3 10-Q~~


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

The following table presents the gross fair values of our commodity derivatives, excluding collateral, ~~and the line items where they appear~~ on our consolidated balance sheet:


		Millions of Dollars				Millions of Dollars
		September 30 2022		December 31 2021		June 30 2023		December 31 2022
Assets	Assets				Assets
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	1,675	1,168	Prepaid expenses and other current assets	$	793	1,795
Other assets	Other assets	267		75	Other assets	182		242
Liabilities	Liabilities				Liabilities
Other accruals	Other accruals	1,668		1,160	Other accruals	749		1,800
Other liabilities and deferred credits	Other liabilities and deferred credits	220		63	Other liabilities and deferred credits	148		210

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

Millions of Dollars
Three Months Ended
September 30
Nine Months Ended
September 30
2022 2021 2022 2021
Sales and other operating revenues $ (129) (483) (549) (862)
Other income (4) 7 (2) 23
Purchased commodities 6 405 352 550

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


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022

Sales and other operating revenues	$	(16)	(13)	12	(420)
Other income	(2)		1	(1)	2
Purchased commodities	16		(55)	(56)	346

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

Open Position
Long (Short)

September 30
2022

December 31
2021

June 30
2023

December 31
2022

Commodity

Natural gas and power (billions of cubic feet equivalent)

Fixed price

(18)

Fixed price

(22)

(14)

Basis

(2)

(22)

Basis

(9)

(8)


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			1814


Notes to Consolidated Financial Statements			Table of Contents

Foreign Currency Exchange Derivatives

At June 30, 2023, we had outstanding foreign currency forward contracts to buy $5.2 billion CAD at $0.751 against the U.S. dollar in anticipation of our planned acquisition of the additional interest in Surmont. See Note 3. The forward contracts are carried at a fair value of $19 million and are reported within the "Prepaid expenses and other current assets" line on our consolidated balance sheet. For the three- and six-month periods ended June 30, 2023, we recorded an unrealized gain of $19 million in the "Foreign currency transaction gain" line on our consolidated income statement.

Interest Rate Derivative Instruments

During 2023, PALNG executed interest rate swaps that had the effect of converting 60 percent of the projected term loans outstanding to finance the cost of development and construction of Phase 1 from floating to fixed rate. These swaps were designated and qualify for hedge accounting under ASC Topic 815, "Derivatives and Hedging", as a cash flow hedge with changes in the fair value of the designated hedging instrument reported as a component of other comprehensive income and reclassified into earnings in the same periods that the hedged transactions will affect earnings. We recognize our proportionate share of PALNG’s adjustments for other comprehensive income as a change to our equity method investment with corresponding adjustments in equity. For the three- and six-month periods ended June 30, 2023, the impact of these adjustments on our financial statements was negligible.

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~~reaching par value at ~~par.~~maturity.

•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 ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021:~~2022:


		Millions of Dollars					Millions of Dollars
		Carrying Amount					Carrying Amount
		Cash and Cash Equivalents			Short-Term Investments			Cash and Cash Equivalents				Short-Term Investments
		September 30 2022		December 31 2021	September 30 2022	December 31 2021				June 30 2023		December 31 2022	June 30 2023	December 31 2022
Cash	Cash	$	664	670					Cash	$	551	593
Demand Deposits	Demand Deposits	1,413		1,554					Demand Deposits	831		1,638
Time Deposits	Time Deposits								Time Deposits
1 to 90 days	1 to 90 days	5,843		2,363	1,591	217			1 to 90 days	4,244		4,116	471	1,288
91 to 180 days	91 to 180 days				137	4			91 to 180 days				85	883
Within one year	Within one year				34	4			Within one year				16	11
U.S. Government Obligations	U.S. Government Obligations								U.S. Government Obligations
1 to 90 days	1 to 90 days	23		431	—	—			1 to 90 days	49		14	—	—
		$	7,943	5,018	1,762	225				$	5,675	6,361	572	2,182


1915			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

The following investments in debt securities classified as available for sale are carried at fair value on our consolidated balance sheet at ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021:~~2022:


		Millions of Dollars								Millions of Dollars
		Carrying Amount								Carrying Amount
		Cash and Cash Equivalents			Short-Term Investments		Investments and Long-Term Receivables			Cash and Cash Equivalents			Short-Term Investments		Investments and Long-Term Receivables
		September 30 2022		December 31 2021	September 30 2022	December 31 2021	September 30 2022	December 31 2021		June 30 2023		December 31 2022	June 30 2023	December 31 2022	June 30 2023	December 31 2022
Major Security Type	Major Security Type								Major Security Type
Corporate Bonds	Corporate Bonds	$	—	3	322	128	287	173	Corporate Bonds	$	—	—	231	323	387	309
Commercial Paper	Commercial Paper	67		7	216	82			Commercial Paper	60		97	139	156
U.S. Government Obligations	U.S. Government Obligations	—		—	101	—	68	2	U.S. Government Obligations	—		—	120	115	161	63
U.S. Government Agency Obligations	U.S. Government Agency Obligations				8	2	—	8	U.S. Government Agency Obligations				17	8	7	5
Foreign Government Obligations	Foreign Government Obligations				3	7	7	2	Foreign Government Obligations				—	—	11	7
Asset-backed Securities	Asset-backed Securities				—	2	118	63	Asset-backed Securities				1	1	116	138
		$	67	10	650	221	480	248		$	60	97	508	603	682	522

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 five years.

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


		Millions of Dollars						Millions of Dollars
		Amortized Cost Basis			Fair Value			Amortized Cost Basis			Fair Value
		September 30 2022		December 31 2021	September 30 2022	December 31 2021		June 30 2023		December 31 2022	June 30 2023	December 31 2022
Major Security Type	Major Security Type						Major Security Type
Corporate Bonds	Corporate Bonds	$	621	305	609	304	Corporate Bonds	$	627	641	618	632
Commercial Paper	Commercial Paper	284		88	283	89	Commercial Paper	199		253	199	253
U.S. Government Obligations	U.S. Government Obligations	172		2	169	2	U.S. Government Obligations	284		181	281	178
U.S. Government Agency Obligations	U.S. Government Agency Obligations	8		10	8	10	U.S. Government Agency Obligations	24		13	24	13
Foreign Government Obligations	Foreign Government Obligations	10		9	10	9	Foreign Government Obligations	11		7	11	7
Asset-backed Securities	Asset-backed Securities	119		65	118	65	Asset-backed Securities	118		139	117	139
		$	1,214	479	1,197	479		$	1,263	1,234	1,250	1,222

As of ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, total unrealized losses for debt securities classified as available for sale with net losses were ~~$17~~$14 million and ~~negligible,~~$12 million, respectively. No allowance for credit losses has been recorded on investments in debt securities which are in an unrealized loss position.

~~Proceeds~~For the three- and six-month periods ended June 30, 2023, proceeds from sales and redemptions of investments in debt securities classified as available for sale were ~~$198~~$251 million and ~~$399~~$551 million, ~~for~~respectively. For the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, 2022, ~~respectively;~~proceeds from sales and ~~$165~~redemptions of investments in debt securities classified as available for sale were $86 million and ~~$485~~$201 million, ~~for the three- and nine-month periods ended September 30, 2021,~~ respectively. Gross realized gains and losses included in earnings from those sales and redemptions were negligible. The cost of securities sold and redeemed is determined using the specific identification method.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			2016


Notes to Consolidated Financial Statements			Table of Contents

Credit Risk

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

The credit risk from our OTC derivative contracts, such as forwards, swaps and options, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared primarily with an exchange clearinghouse and subject to mandatory margin requirements until settled; however, we are exposed to the credit risk of those exchange brokers for receivables arising from daily margin cash calls, as well as for cash deposited to meet initial margin requirements.

Our trade receivables result primarily from our oil and gas operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less, and we continually monitor this exposure and the creditworthiness of the counterparties. We may require collateral to limit the exposure to loss including letters of credit, prepayments and surety bonds, as well as master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due to us.

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

The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were in a liability position at ~~September~~June 30, ~~2022~~2023, and December 31, ~~2021,~~2022, was ~~$377~~$166 million and ~~$281~~$333 million, respectively. For these instruments, no collateral was posted at ~~September~~June 30, ~~2022, was $4~~2023 and $42 million ~~and no~~of collateral was posted at December 31, ~~2021.~~2022. If our credit rating had been downgraded below investment grade at ~~September~~June 30, ~~2022,~~2023, we would have been required to post ~~$314~~$131 million of additional collateral, either with cash or letters of credit.


17			ConocoPhillips 2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 11—Fair Value Measurement

We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed according to the quality of valuation inputs under the fair value hierarchy.

The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2022,~~2023, nor during the year ended December 31, ~~2021.~~2022.


21			~~ConocoPhillips 2022 Q3 10-Q~~


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

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair value on a recurring basis ~~includes our investment in CVE common shares,~~include our investments in debt securities classified as available for sale and commodity derivatives.

•Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are valued using unadjusted prices available from the underlying exchange. Level 1 also includes ~~our investment in common shares of CVE, which is valued using quotes for shares on the NYSE, and~~ our investments in U.S. government obligations classified as available for sale debt securities, which are valued using exchange prices.

•Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing service companies that are all corroborated by market data. Level 2 also includes our investments in debt securities classified as available for sale including investments in corporate bonds, commercial paper, asset-backed securities, U.S. government agency obligations and foreign government obligations that are valued using pricing provided by brokers or pricing service companies that are corroborated with market data.

•Level 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale contracts where a significant portion of fair value is calculated from underlying market data that is not readily available. The derived value uses industry standard methodologies that may consider the historical relationships among various commodities, modeled market prices, time value, volatility factors and other relevant economic measures. The use of these inputs results in management’s best estimate of fair value. Level 3 activity was not material for all periods presented.

The following table summarizes the fair value hierarchy for gross financial assets and liabilities (i.e., unadjusted where the right of setoff exists for commodity derivatives accounted for at fair value on a recurring basis):


		Millions of Dollars										Millions of Dollars
		September 30, 2022					December 31, 2021					June 30, 2023					December 31, 2022
		Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total		Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets	Assets										Assets
Investment in Cenovus Energy		$	—	—	—	—	1,117	—	—	1,117
Investments in debt securities	Investments in debt securities	169		1,028	—	1,197	2	477	—	479	Investments in debt securities	$	275	975	—	1,250	178	1,044	—	1,222
Commodity derivatives	Commodity derivatives	919		977	46	1,942	562	619	62	1,243	Commodity derivatives	479		366	130	975	958	951	128	2,037
Total assets	Total assets	$	1,088	2,005	46	3,139	1,681	1,096	62	2,839	Total assets	$	754	1,341	130	2,225	1,136	1,995	128	3,259

Liabilities	Liabilities										Liabilities
Commodity derivatives	Commodity derivatives	$	927	772	189	1,888	593	543	87	1,223	Commodity derivatives	$	509	370	18	897	906	843	261	2,010
Total liabilities	Total liabilities	$	927	772	189	1,888	593	543	87	1,223	Total liabilities	$	509	370	18	897	906	843	261	2,010


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			2218


Notes to Consolidated Financial Statements			Table of Contents

The following table summarizes those commodity derivative balances subject to the right of setoff as presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of setoff exists.


		Millions of Dollars									Millions of Dollars
					Amounts Subject to Right of Setoff									Amounts Subject to Right of Setoff
		Gross Amounts Recognized		Amounts Not Subject to Right of Setoff	Gross Amounts	Gross Amounts Offset	Net Amounts Presented	Cash Collateral	Net Amounts		Gross Amounts Recognized		Amounts Not Subject to Right of Setoff	Gross Amounts	Gross Amounts Offset	Net Amounts Presented	Cash Collateral	Net Amounts
September 30, 2022
June 30, 2023										June 30, 2023
Assets	Assets	$	1,942	11	1,931	1,099	832	1	831	Assets	$	975	33	942	548	394	5	389
Liabilities	Liabilities	1,888		2	1,886	1,099	787	32	755	Liabilities	897		27	870	548	322	44	278

December 31, 2021
December 31, 2022										December 31, 2022
Assets	Assets	$	1,243	85	1,158	650	508	—	508	Assets	$	2,037	39	1,998	1,176	822	37	785
Liabilities	Liabilities	1,223		82	1,141	650	491	36	455	Liabilities	2,010		20	1,990	1,176	814	52	762

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.

Reported Fair Values of Financial Instruments

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

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

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

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

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

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

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

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

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

The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff exists for commodity derivatives):


	Millions of Dollars
	Carrying Amount		Fair Value
	June 30 2023	December 31 2022	June 30 2023	December 31 2022
Financial assets
Commodity derivatives	422	824	422	824
Investments in debt securities	1,250	1,222	1,250	1,222

Financial liabilities
Total debt, excluding finance leases	15,247	15,323	15,623	15,545
Commodity derivatives	305	782	305	782


2319			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

~~The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff exists for commodity derivatives):~~

Millions of Dollars
Carrying Amount Fair Value
September 30
2022 December 31
2021 September 30
2022 December 31
2021
Financial assets
Investment in CVE common shares $ — 1,117 — 1,117
Commodity derivatives 842 593 842 593
Investments in debt securities 1,197 479 1,197 479
Loans and advances—related parties — 114 — 114
Financial liabilities
Total debt, excluding finance leases 15,679 18,673 15,755 22,451
Commodity derivatives 757 537 757 537

Note 12—Accumulated Other Comprehensive Loss

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

Millions of Dollars

Defined Benefit
Plans
Net Unrealized
Loss on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2021 $ (31) — (4,919) (4,950)
Other comprehensive loss (61) (13) (841) (915)
September 30, 2022 $ (92) (13) (5,760) (5,865)


	Millions of Dollars
	Defined Benefit Plans		Net Unrealized Loss on Securities	Foreign Currency Translation	Accumulated Other Comprehensive Loss
December 31, 2022	$	(448)	(11)	(5,541)	(6,000)
Other comprehensive income	17		1	57	75
June 30, 2023	$	(431)	(10)	(5,484)	(5,925)

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

Millions of Dollars

Three Months Ended
September 30
Nine Months Ended
September 30

2022 2021 2022 2021
Defined benefit plans $ 6 29 22 83


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Defined benefit plans	$	6	12	17	16

The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $1$3 million and $7$3 million for the three-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021,~~2022, respectively, and $6 million and ~~$22~~$5 million for the ~~nine-month~~six-month periods ended

~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021,~~2022, respectively. See Note 14.

Note 13—Cash Flow Information


	Millions of Dollars
	Six Months Ended June 30
	2023		2022
Cash Payments
Interest	$	358	486
Income taxes	3,202		3,942

Net Sales (Purchases) of Investments
Short-term investments purchased	$	(783)	(1,253)
Short-term investments sold	2,676		613
Long-term investments purchased	(414)		(510)
Long-term investments sold	70		46
	$	1,549	(1,104)


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			2420


Notes to Consolidated Financial Statements			Table of Contents

Note ~~13—Cash Flow Information~~

Millions of Dollars

Nine Months Ended
September 30
Cash Payments 2022 2021
Interest $ 706 695
Income taxes 5,602 358
Net Sales (Purchases) of Investments
Short-term investments purchased $ (2,960) (5,487)
Short-term investments sold 1,297 8,478
Long-term investments purchased (640) (228)
Long-term investments sold 68 83

$ (2,235) 2,846

Income tax payments have increased in the first nine months of 2022 as the company is returning to a tax paying position in the U.S. as well as timing of foreign tax payments primarily in Libya and Norway.

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

~~Note~~ 14—Employee Benefit Plans

Pension and Postretirement Plans

Millions of Dollars
Pension Benefits Other Benefits
2022 2021 2022 2021
U.S. Int'l. U.S. Int'l.
Components of Net Periodic Benefit Cost
Three Months Ended September 30
Service cost $ 13 13 17 15 — —
Interest cost 18 19 12 19 1 1
Expected return on plan assets (10) (31) (22) (30)
Amortization of prior service credit — (1) — — (9) (9)
Recognized net actuarial loss 6 2 9 8 — —
Settlements 9 — 28 —
Net periodic benefit cost $ 36 2 44 12 (8) (8)
Nine Months Ended September 30
Service cost $ 45 39 56 46 1 1
Interest cost 42 61 40 59 3 3
Expected return on plan assets (36) (99) (66) (90)
Amortization of prior service credit — (1) — — (29) (28)
Recognized net actuarial loss 17 6 36 24 — 1
Settlements 31 — 72 —
Curtailments — — 12 — — —
Special Termination Benefits — — 9 — — —
Net periodic benefit cost $ 99 6 159 39 (25) (23)


25			~~ConocoPhillips 2022 Q3 10-Q~~


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


	Millions of Dollars
	Pension Benefits					Other Benefits
	2023			2022		2023	2022
	U.S.		Int'l.	U.S.	Int'l.
Components of Net Periodic Benefit Cost
Three Months Ended June 30
Service cost	$	13	9	16	13	—	1
Interest cost	20		29	12	21	2	1
Expected return on plan assets	(14)		(37)	(13)	(34)	—	—
Amortization of prior service credit	—		—	—	—	(10)	(10)
Recognized net actuarial loss (gain)	3		17	5	2	(1)	—
Settlements	—		—	18	—	—	—
Net periodic benefit cost	$	22	18	38	2	(9)	(8)

Six Months Ended June 30
Service cost	$	26	19	32	26	—	1
Interest cost	39		57	24	42	3	2
Expected return on plan assets	(29)		(74)	(26)	(68)	—	—
Amortization of prior service credit	—		—	—	—	(19)	(20)
Recognized net actuarial loss (gain)	6		34	11	4	(2)	—
Settlements	4		—	22	—	—	—


Net periodic benefit cost	$	46	36	63	4	(18)	(17)

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

During the first ~~nine months~~six months of ~~2022,~~2023, we contributed ~~$68~~$71 million to our domestic benefit plans and ~~$93~~$13 million to our international benefit plans. We expect our total contributions in ~~2022~~2023 to be approximately ~~$95~~$135 million to our domestic qualified and nonqualified pension and postretirement benefit plans and ~~$100~~$65 million to our international qualified and nonqualified pension and postretirement benefit plans.

We recognized a proportionate share of prior actuarial losses from other comprehensive income as pension settlement expense of $9 million and $31 million during the three- and nine-month periods ended September 30, 2022, respectively. In conjunction with the recognition of pension settlement expense, the fair market values of the pension plan assets were updated and the pension benefit obligations of the U.S. qualified pension plan and the U.S. nonqualified supplemental retirement plan were remeasured at September 30, 2022. At the measurement date, the net pension liability increased by $23 million, primarily a result of lower than premised return on assets, partially offset by an increase in the discount rate, resulting in a corresponding decrease to other comprehensive income.

~~The relevant assumptions are summarized in the following table:~~

September 30
2022 December 31
2021
Expected return on plan assets (U.S. qualified pension plan) 5.30 % 3.40
Relevant discount rates
U.S. qualified pension plan 5.65 % 2.85
U.S. nonqualified pension plan 5.60 2.50

Note 15—Related Party Transactions

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

Millions of Dollars

Three Months Ended
September 30
Nine Months Ended
September 30
Significant Transactions with Equity Affiliates 2022 2021 2022 2021
Operating revenues and other income $ 21 22 64 63
Purchases — 1 1 5
Operating expenses and selling, general and administrative expenses 55 45 145 135
Net interest (income) expense* — — (1) (2)

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


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Significant Transactions with Equity Affiliates
Operating revenues and other income	$	23	21	44	43

Operating expenses and selling, general and administrative expenses	72		44	150	90
Net interest income	—		—	—	(1)


21			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			26


Notes to Consolidated Financial Statements			Table of Contents

Note 16—Sales and Other Operating Revenues

Revenue from Contracts with Customers

The following table provides further disaggregation of our consolidated sales and other operating revenues:


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Revenue from contracts with customers	Revenue from contracts with customers	$	15,968	8,880	47,202	23,794	Revenue from contracts with customers	$	11,015	16,728	22,979	31,234
Revenue from contracts outside the scope of ASC Topic 606	Revenue from contracts outside the scope of ASC Topic 606						Revenue from contracts outside the scope of ASC Topic 606
Physical contracts meeting the definition of a derivative	Physical contracts meeting the definition of a derivative	5,012		2,620	12,563	7,348	Physical contracts meeting the definition of a derivative	1,465		4,411	4,592	7,551
Financial derivative contracts	Financial derivative contracts	33		(174)	171	(434)	Financial derivative contracts	(129)		22	(409)	138
Consolidated sales and other operating revenues	Consolidated sales and other operating revenues	$	21,013	11,326	59,936	30,708	Consolidated sales and other operating revenues	$	12,351	21,161	27,162	38,923

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 1718—Segment Disclosures and Related Information:


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Revenue from Outside the Scope of ASC Topic 606 by Segment
Revenue from Contracts Outside the Scope of ASC Topic 606 by Segment							Revenue from Contracts Outside the Scope of ASC Topic 606 by Segment
Lower 48	Lower 48	$	4,275	2,123	10,202	5,934	Lower 48	$	1,081	3,483	3,589	5,927
Canada	Canada	553		266	1,920	776	Canada	204		807	771	1,367
Europe, Middle East and North Africa	Europe, Middle East and North Africa	184		231	441	638	Europe, Middle East and North Africa	180		121	232	257
Physical contracts meeting the definition of a derivative	Physical contracts meeting the definition of a derivative	$	5,012	2,620	12,563	7,348	Physical contracts meeting the definition of a derivative	$	1,465	4,411	4,592	7,551


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Revenue from Outside the Scope of ASC Topic 606 by Product
Revenue from Contracts Outside the Scope of ASC Topic 606 by Product							Revenue from Contracts Outside the Scope of ASC Topic 606 by Product
Crude oil	Crude oil	$	147	215	430	517	Crude oil	$	96	64	143	283
Natural gas	Natural gas	4,355		2,192	11,382	6,423	Natural gas	1,123		4,254	3,848	7,027
Other	Other	510		213	751	408	Other	246		93	601	241
Physical contracts meeting the definition of a derivative	Physical contracts meeting the definition of a derivative	$	5,012	2,620	12,563	7,348	Physical contracts meeting the definition of a derivative	$	1,465	4,411	4,592	7,551

Practical Expedients

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


27			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			22


Notes to Consolidated Financial Statements			Table of Contents

Receivables and Contract Liabilities

Receivables from Contracts with Customers

At ~~September~~June 30, ~~2022,~~2023, the “Accounts and notes receivable” line on our consolidated balance sheet ~~includes~~included trade receivables of ~~$5,701~~$3,511 million compared with ~~$5,268~~$5,241 million at December 31, ~~2021,~~2022, and ~~includes~~included both contracts with customers within the scope of ASC Topic 606 and those that are outside the scope of ASC Topic 606. We typically receive payment within 30 days or less (depending on the terms of the invoice) once delivery is made. Revenues that are outside the scope of ASC Topic 606 relate primarily to physical gas sales contracts at market prices for which we do not elect NPNS and are therefore accounted for as a derivative under ASC Topic 815. There is little distinction in the nature of the customer or credit quality of trade receivables associated with gas sold under contracts for which NPNS has not been elected compared to trade receivables where NPNS has been elected.

Contract Liabilities from Contracts with Customers

We have entered into certain agreements under which we license our proprietary technology, including the Optimized Cascade® process technology, to customers to maximize the efficiency of LNG plants. These agreements typically provide for milestone payments to be made during and after the construction phases of the LNG plant. The payments are not directly related to our performance obligations under the contract and are recorded as deferred revenue to be recognized when the customer is able to benefit from their right to use the applicable licensed technology. No revenue was recognized during the three- and six-month periods ended June 30, 2023. We expect to recognize the outstanding contract liabilities of $19 million as of June 30, 2023, as revenue during 2026.

Note 17—Earnings Per Share

The following table presents the calculation of net income available to common shareholders and basic and diluted EPS. For the periods presented in the table below, diluted EPS calculated under the two-class method was more dilutive.


	Millions of Dollars (except per share amounts)
	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Basic earnings per share

Net Income	$	2,232	5,145	5,152	10,904
Less: Dividends and undistributed earnings
allocated to participating securities	8		17	17	33
Net Income available to common shareholders	$	2,224	5,128	5,135	10,871
Average common shares outstanding (in Millions)	1,207		1,290	1,214	1,296

Net Income Per Share of Common Stock	$	1.84	3.98	4.23	8.39

Diluted earnings per share

Net Income available to common shareholders	$	2,224	5,128	5,135	10,871
Average common shares outstanding (in Millions)	1,207		1,290	1,214	1,296
Add: Dilutive impact of options and unvested
non-participating RSU/PSUs (in Millions)	3		6	3	5
Average diluted shares outstanding (in Millions)	1,210		1,296	1,217	1,301

Net Income Per Share of Common Stock	$	1.84	3.96	4.22	8.36


23			ConocoPhillips 2023 Q2 10-Q


	~~Millions of Dollars~~
~~Contract Liabilities~~
~~At December 31, 2021~~	$Notes to Consolidated Financial Statements	50 Table of Contents
~~Contractual payments received~~	25
~~Revenue recognized~~	~~(56)~~
~~At September 30, 2022~~	$	19

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

Note ~~17—~~18—Segment Disclosures and Related Information

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide basis. We manage our operations through six operating segments, which are primarily defined by geographic region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International.

Corporate and Other represents income and costs not directly associated with an operating segment, such as most interest income and expense; ~~premiums on early retirement of debt;~~impacts from certain debt transactions; consolidating tax adjustments; corporate overhead and certain technology activities, including licensing revenues; and unrealized holding gains or losses on equity securities. ~~Corporate assets include all~~All cash and cash equivalents and short-term ~~investments.~~investments are included in Corporate and Other.

We evaluate performance and allocate resources based on net income (loss). Intersegment sales are at prices that approximate market.

Analysis of Results by Operating Segment


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Sales and Other Operating Revenues


Alaska	$	1,709	2,349	3,444	4,267
Lower 48	8,389		14,458	18,438	26,015
Intersegment eliminations	(1)		(6)	(5)	(13)
Lower 48	8,388		14,452	18,433	26,002
Canada	850		1,794	2,033	3,314
Intersegment eliminations	(401)		(726)	(741)	(1,377)
Canada	449		1,068	1,292	1,937
Europe, Middle East and North Africa	1,369		2,652	3,071	5,241
Asia Pacific	432		638	896	1,388
Other International	—		—	—	—
Corporate and Other	4		2	26	88
Consolidated sales and other operating revenues	$	12,351	21,161	27,162	38,923

Sales and Other Operating Revenues by Geographic Location(1)
United States	$	10,040	16,802	21,842	30,355

Canada	449		1,069	1,292	1,938
China	244		301	446	574
Indonesia	—		—	—	159
Libya	447		351	817	782
Malaysia	189		336	450	654
Norway	577		737	1,228	1,669
United Kingdom	404		1,564	1,085	2,790
Other foreign countries	1		1	2	2
Worldwide consolidated	$	12,351	21,161	27,162	38,923

Sales and Other Operating Revenues by Product
Crude oil	$	8,965	11,494	17,867	21,364
Natural gas	1,860		7,267	6,272	13,265
Natural gas liquids	582		1,042	1,277	1,921
Other(2)	944		1,358	1,746	2,373
Consolidated sales and other operating revenues by product	$	12,351	21,161	27,162	38,923

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

(2)Includes bitumen and power.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			2824


Notes to Consolidated Financial Statements			Table of Contents

~~Analysis of Results by Operating Segment~~

Millions of Dollars

Three Months Ended
September 30
Nine Months Ended
September 30
2022 2021 2022 2021
Sales and Other Operating Revenues
Alaska $ 1,984 1,395 6,251 3,946
Lower 48 14,287 7,566 40,302 19,968
Intersegment eliminations (2) (1) (15) (5)
Lower 48 14,285 7,565 40,287 19,963
Canada 1,348 967 4,662 2,636
Intersegment eliminations (583) (406) (1,960) (1,063)
Canada 765 561 2,702 1,573
Europe, Middle East and North Africa 3,361 1,127 8,602 3,270
Asia Pacific 617 673 2,005 1,880
Other International — 1 — 4
Corporate and Other 1 4 89 72
Consolidated sales and other operating revenues $ 21,013 11,326 59,936 30,708
Sales and Other Operating Revenues by Geographic Location(1)
United States $ 16,269 8,963 46,624 23,978
Canada 764 561 2,702 1,573
China 273 193 847 519
Indonesia — 231 159 634
Libya 317 313 1,099 833
Malaysia 345 249 999 727
Norway 1,042 678 2,711 1,708
United Kingdom 2,002 136 4,792 729
Other foreign countries 1 2 3 7
Worldwide consolidated $ 21,013 11,326 59,936 30,708
Sales and Other Operating Revenues by Product
Crude oil $ 10,353 6,433 31,717 16,725
Natural gas 8,295 4,099 21,560 11,422
Natural gas liquids 989 414 2,909 976
Other(2)
1,376 380 3,750 1,585
Consolidated sales and other operating revenues by product $ 21,013 11,326 59,936 30,708


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Net Income (Loss)
Alaska	$	372	687	788	1,271
Lower 48	1,230		3,581	3,082	6,371
Canada	32		316	38	607
Europe, Middle East and North Africa	264		385	629	797
Asia Pacific	387		525	909	1,661
Other International	(4)		—	(3)	—
Corporate and Other	(49)		(349)	(291)	197
Consolidated net income	$	2,232	5,145	5,152	10,904

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

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

Millions of Dollars
Three Months Ended
September 30
Nine Months Ended
September 30
2022 2021 2022 2021
Net Income (Loss)
Alaska $ 580 405 1,851 935
Lower 48 2,653 1,631 9,024 3,274
Canada 119 155 726 267
Europe, Middle East and North Africa 922 241 1,719 601
Asia Pacific 520 257 2,181 749
Other International (28) (97) (28) (106)
Corporate and Other (239) (213) (42) (268)
Consolidated net income $ 4,527 2,379 15,431 5,452


29			~~ConocoPhillips 2022 Q3 10-Q~~


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


		Millions of Dollars				Millions of Dollars
		September 30 2022		December 31 2021		June 30 2023		December 31 2022
Total Assets	Total Assets				Total Assets
Alaska	Alaska	$	14,787	14,812	Alaska	$	15,455	15,126
Lower 48	Lower 48	42,912		41,699	Lower 48	41,544		42,950
Canada	Canada	6,747		7,439	Canada	6,868		6,971
Europe, Middle East and North Africa	Europe, Middle East and North Africa	8,259		9,125	Europe, Middle East and North Africa	7,632		8,263
Asia Pacific	Asia Pacific	9,996		9,840	Asia Pacific	8,914		9,511
Other International	Other International	4		1	Other International	1		—
Corporate and Other	Corporate and Other	12,132		7,745	Corporate and Other	9,191		11,008
Consolidated net income		$	94,837	90,661
Consolidated total assets					Consolidated total assets	$	89,605	93,829

Note ~~18—~~19—Income Taxes

Our effective tax rate for the three-month periods ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was ~~39.2~~33.6 percent and ~~33.6~~32.8 percent, respectively, and our effective tax rate for the ~~nine-month~~six-month periods ended ~~September~~June 30, 2023 and 2022, ~~and 2021~~ was ~~32.9~~35.0 percent and ~~34.9~~29.9 percent, respectively. ~~Our~~The change in our effective tax rate for the ~~first nine months~~six-month period ended June 30, 2023 is primarily due to the absence of ~~2022 was impacted by the~~a release of tax reserves as described below and a shift in our mix of income among our ~~taxing jurisdictions, the release of~~ tax ~~reserves related to the closing of an IRS audit, a change to our valuation allowance and the impact of the interest deduction related to our debt exchange, as described below.~~jurisdictions.

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

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

For the nine-month period of 2022, our valuation allowance increased by $5 million, compared to a decrease of $156 million for the same period of 2021. The increase in the nine-month period of 2022 relates to the Norway tax law change described above. In addition, our nine-month periods of 2022 and 2021 include impacts from changes in our valuation allowance related to the fair value measurement of our CVE common shares and our expectation of the tax impact related to incremental capital gains and losses. ~~See Note~~ 5.

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

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15 percent minimum tax on book income of certain large corporations, a 1 percent excise tax on net stock repurchases and several tax incentives to promote lower carbon energy. We are continuing to evaluate the impacts of this legislation; however, we do not believe any impacts will be material to our consolidated financial statements.

The Company has ongoing income tax audits in a number of jurisdictions. The government agents in charge of these audits regularly request additional time to complete audits, which we generally grant, and conversely occasionally close audits unpredictably. Within the next twelve months, we may have audit periods close that could significantly impact our total unrecognized tax benefits. The amount of such change is not estimable but could be significant when compared with our total unrecognized tax benefits.


25			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			30


Management’s Discussion and Analysis			Table of Contents

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

Management’s Discussion and Analysis is the company’s analysis of its financial performance and of significant trends that may affect future performance. It should be read in conjunction with the financial statements and notes. It contains forward-looking statements including, without limitation, statements relating to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “budget,” “continue,” “could,” “effort,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “target,” “will,” “would” 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 5247.

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

Business Environment and Executive Overview

ConocoPhillips is one of the world’s ~~largest independent~~leading E&P ~~company~~companies based on production and reserves, with operations and activities in 13 countries. Our diverse, low cost of supply portfolio includes resource-rich unconventional plays in North America; conventional assets in North America, Europe and Asia; LNG developments; oil sands in Canada; and an inventory of global ~~conventional and unconventional~~ exploration prospects. Headquartered in Houston, Texas, at ~~September~~June 30, ~~2022,~~2023, we employed approximately ~~9,400~~9,700 people worldwide and had total assets of ~~$95~~$90 billion.

Overview

~~Overall,~~At ConocoPhillips, we anticipate that commodity prices will continue to be cyclical and volatile, and our view is that a successful business strategy in the E&P industry must be resilient in lower price environments, while also retaining full upside exposure during periods of higher prices. As such, we are unhedged, remain ~~highly~~committed to our disciplined ~~in our~~ investment ~~decisions~~framework and ~~continue to~~continually monitor market fundamentals, including the impacts associated with the conflict in Ukraine, OPEC Plus ~~supply updates,~~crude supplies, global demand for our products, oil and gas inventory levels, governmental policies, inflation and supply chain disruptions and the fluctuating global COVID-19 impacts. During the third quarter of 2022, commodity prices moved in opposite directions, with oil prices decreasing due to macroeconomic concerns while natural gas prices continued to increase as compared with the prior quarter.disruptions.

The macro-environment, including the energy transition, also continues to evolve. We believe ConocoPhillips ~~is playing a valued~~will continue to play an essential role ~~in the energy transition. We are guided~~ by ~~our triple mandate that simultaneously calls for us to~~executing on three objectives: reliably and responsibly ~~deliver oil and gas production to meet~~meeting energy transition pathway demand, ~~deliver~~delivering competitive returns on and of capital and ~~achieve~~focusing on achieving our net-zero ~~operating~~operational emissions ambition. We call this our Triple Mandate, and it represents our commitment to create long-term value for our stakeholders.

Our ~~triple mandate~~value proposition to deliver superior returns to stockholders through price cycles is ~~supported~~guided by ~~financial~~foundational principles and capital allocation priorities ~~designed to allow us to deliver superior returns through the price cycles.~~that support our Triple Mandate. Our ~~financial~~foundational principles consist of maintaining balance sheet strength, providing peer-leading distributions, making disciplined investments and demonstrating responsible and reliable ESG ~~leadership, all~~performance.

In the second quarter of ~~which are in service~~2023, we completed a strategic debt refinancing that extends the weighted average maturity of our portfolio from 15 years to ~~generating competitive financial returns through the price cycles.~~17 years and reduces near term debt maturities. See Note 6.

In July, as a part of ongoing portfolio optimization geared towards our returns-focused value proposition, we executed an agreement to purchase the remaining 50 percent interest in Surmont, an asset in our Canada segment. Surmont's long life and durable, low cost of supply barrels play an important role in our portfolio. The transaction is expected to close in the second half of 2023, subject to regulatory approvals and other customary closing conditions. Upon close, as the 100 percent owner and operator of Surmont, we will seek to optimize the asset while remaining on track to achieve our previously announced corporate emissions intensity objectives. See Note 3.

In the third quarter, total company production was 1,754 MBOED, resulting in cash provided by operating activities of $8.7 billion. We returned $1.5 billion to shareholders through our ordinary dividend and a VROC and $2.8 billion through share repurchases. We ended the quarter with cash, cash equivalents and short-term investments totaling $10.4 billion.

In August 2022, we increased our 2022 expected distributions through our three-tier return of capital framework to $15 billion for the year. This framework includes our ordinary dividend, share repurchases and the VROC tier we introduced last December. In November 2022, we declared an increase to the company's quarterly ordinary dividend from 46 cents per share to 51 cents per share, representing an 11 percent increase. In addition, we also declared our first quarter 2023 VROC payment of 70 cents per share.


31			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			26


Management’s Discussion and Analysis			Table of Contents

~~Demonstrating our commitment~~As the energy transition continues, we expect demand for lower GHG intensity fuels, such as LNG, to ~~further enhance balance sheet strength, in~~grow to displace coal. In the ~~first half~~second quarter of ~~2022,~~2023, we ~~executed several activities focused on debt reduction including debt refinancing and early retirement~~continued pursuing expansion of certain Notes. In aggregate, these transactions reduced the company's total debt by $3 billion. These activities facilitate our ability to achieve our previously announced $5 billion debt reduction target by the end of 2026, while also reducing the company's annual cash interest expense. ~~See Note~~ 6.

~~In 2022, we have taken several steps to expand~~ our global LNG ~~business.~~portfolio. In June, we closed on the ~~first quarter, we increased our equity share in Australia Pacific LNG (APLNG) by 10 percent to 47.5 percent.~~ ~~See Note~~ 3. ~~During 2022 we signed agreements forming two new joint ventures with QatarEnergy that will participate in both the North Field East (NFE) and~~formation of the North Field South (NFS) ~~LNG projects. Subject to regulatory approvals, we will hold a 25 percent interest~~joint venture, Qatar Liquefied Gas Company Limited (12) (QG12). Participation in ~~each joint venture. In NFE~~the Qatar Liquefied Gas Company Limited (8) (QG8) (North Field East) and ~~NFS, our~~QG12 joint ventures will ~~participate with 12.5 percent and 25 percent interests in the respective LNG projects. Additionally, during the third quarter, we agreed~~add approximately 2 MTPA net to ~~LNG receiving terminal services for a 15-year period at the prospective German LNG Terminal in Brunsbuettel, Germany.~~

Domestically, in July 2022, we announced a Heads of Agreement (HOA) with Sempra to potentially acquire a 30 percent direct equity holding in Port Arthur Liquefaction Holdings, LLC and an LNG offtake equivalent to approximately 5 million tonnes per annum from the Port Arthur LNG project. The HOA is a preliminary, non-binding arrangement, with development of the Port Arthur LNG project subject to concluding definitive agreements and resolving a number of risks and uncertainties, including, among others, signing engineering and construction contracts, obtaining financing and reaching a final investment decision between the parties.

In support of our commitment to ESG leadership and excellence, in July 2022, we joined the Oil and Gas Methane Partnership (OGMP) 2.0 initiative. The initiative's mission is to improve industry transparency in methane emissions reporting and encourage progress in reducing those emissions. We believe that applying the rigorous OGMP 2.0 reporting standards across our global assets will be a vital step towards meeting our Paris-aligned climate-risk commitments, including our net-zero ambition for operational emissions by 2050, and will allow us to credibly demonstrate how we are delivering against our methane improvement objectives and targets. In October 2022, we demonstrated further evidence of our commitment by setting a new 2030 methane emissions intensity target of approximately 0.15 percent of gas produced, consistent with our commitment to OGMP 2.0.

As part of our ongoing portfolio high-grading and optimization efforts, in the third quarter, we completed the sale of certain noncore assets in the Lower 48 segment for approximately $300 million after customary adjustments while also coring up other strategic positions in the Lower 48 segment through acquisitions of approximately $300 million after customary adjustments.ConocoPhillips. See Note3. 4. Additionally, we signed 20-year offtake agreements at the Saguaro LNG export facility on the west coast of Mexico for approximately 2.2 MTPA, subject to Mexico Pacific reaching FID and other certain conditions precedent.

In August, we reconfirmed our 2023 planned return of capital to shareholders of $11 billion through our three-tier return of capital framework, significantly exceeding our goal of 30 percent of our anticipated cash provided by operating activities for the full year. We also declared an ordinary dividend of $0.51 per share and a fourth-quarter VROC payment of $0.60 per share.

Operationally, we remain focused on safely executing the business. Production was ~~1,754~~1,805 MBOED in the ~~third~~second quarter of ~~2022,~~2023, an increase of ~~210~~113 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, ~~and the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, third-quarter 2022~~second-quarter 2023 production increased by 30100 MBOED or ~~two~~six percent from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset normal field decline and downtime.

Second-quarter production resulted in $3.9 billion of cash provided by operating activities. We returned $1.3 billion to shareholders through share repurchases and $1.4 billion through our ordinary dividend and a VROC. We ended the quarter with cash, cash equivalents and short-term investments totaling $6.8 billion.

We re-invested ~~$2.5~~$2.9 billion into the business in the form of capital expenditures and investments during the ~~third~~second quarter of ~~2022,~~2023, with over half of the expenditures ~~focused on~~related to flexible, short-cycle unconventional plays in the Lower 48 segment, where our production has access to both domestic and export markets.


27			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			32


Management’s Discussion and Analysis			Table of Contents

Business Environment

Commodity prices are the most significant factor impacting our profitability and related returns on and of capital to our shareholders. Dynamics that could influence world energy markets and commodity prices include, but are not limited to, global economic health, supply or demand disruptions or fears thereof caused by civil unrest, global pandemics, military conflicts, actions taken by OPEC Plus and other major oil producing countries, environmental laws, tax regulations, governmental policies and weather-related disruptions. Our strategy is to create value through price cycles by delivering on the financial, operational and ESG priorities that underpin our value proposition.

Our earnings and operating cash flows generally correlate with price levels for crude oil and natural gas, which are subject to factors external to the company and over which we have no control. The following graph depicts the trend in average benchmark prices for WTI crude oil, Brent crude oil and Henry Hub natural gas:

Brent crude oil prices averaged ~~$100.85~~$78.39 per barrel in the ~~third~~second quarter of ~~2022, an increase~~2023, a decrease of 3731 percent compared with ~~$73.47~~$113.78 per barrel in the ~~third~~second quarter of ~~2021.~~2022. WTI at Cushing crude oil prices averaged ~~$91.56~~$73.78 per barrel in the ~~third~~second quarter of ~~2022, an increase~~2023, a decrease of 3032 percent compared with ~~$70.56~~$108.41 per barrel in the ~~third~~second quarter of ~~2021.~~2022. Oil prices ~~increased as a result of the ongoing global economic recovery following COVID-related impacts as well as supply constraints~~decreased due to ~~Russia's invasion of Ukraine, OPEC plus adherence to agreed production quotas~~persistent macroeconomic headwinds and ~~supply chain bottlenecks limiting growth.~~refinery outages impacting demand concurrent with higher global supplies versus the prior year.

Henry Hub natural gas prices averaged ~~$8.20~~$2.09 per MMBTU in the ~~third~~second quarter of ~~2022, an increase~~2023, a decrease of ~~104~~71 percent compared with ~~$4.02~~$7.17 per MMBTU in the ~~third~~second quarter of ~~2021.~~2022. Henry Hub prices ~~have increased~~decreased due to ~~strong domestic demand led by the power sector, lagging~~higher North American production ~~growth, low~~concurrent with excess inventories and higher export demand via pipelines and LNG. As we move into the fourth quarter of 2022, growing production in the Permian basin is approaching offtake capacity limits in the short term, which is causing regional markers to experience higher differentials to Henry Hub. As additional pipeline infrastructure is expected to be completed in the next 12 to 18 months, we anticipate these differentials to narrow to more historic levels.following a mild winter.

Our realized bitumen price averaged ~~$49.77~~$41.01 per barrel in the ~~third~~second quarter of ~~2022, an increase~~2023, a decrease of 2146 percent compared with ~~$41.19~~$75.42 per barrel in the ~~third~~second quarter of ~~2021.~~2022. The ~~increase~~decrease in the ~~third~~second quarter of ~~2022~~2023 was driven by ~~higher~~lower blend prices for Surmont sales, largely attributed to a ~~strengthening~~weakening of WTI ~~price.~~price and widening WCS differentials. WCS differentials widened due to weaker demand at the U.S. Gulf Coast. We continue to optimize bitumen price realizations through ~~the utilization of downstream~~diluent recovery unit operating improvements as well as blending and transportation ~~solutions and implementation of alternate blend capability, which results in lower diluent costs.~~


33			~~ConocoPhillips 2022 Q3 10-Q~~


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

strategies.

For the ~~third~~second quarter of ~~2022,~~2023, our total average realized price was ~~$83.07~~$54.50 per BOE compared with ~~$56.92~~$88.57 per BOE in the ~~third~~second quarter of ~~2021.~~

~~Key Operating and Financial Summary~~

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

•~~Distributed $4.3 billion to shareholders through a three-tier framework, including $1.5 billion in cash through the ordinary dividend and VROC and $2.8 billion through share repurchases.~~

•~~Increased quarterly dividend by 11 percent to 51 cents per share and raised existing share repurchase authorization by $20 billion.~~

•Expanded global LNG portfolio through participation in QatarEnergy's North Field South LNG project and agreed to terminal services in Germany for a 15-year period at the prospective German LNG Terminal.

•~~Set a new 2030 methane emissions intensity target of approximately 0.15 percent of gas produced, consistent with our commitment to OGMP 2.0.~~

•~~Achieved Lower 48 production milestone of greater than 1,000 MBOED, contributing to record global production of 1,754 MBOED while successfully completing planned maintenance turnarounds.~~

•~~Generated cash provided by operating activities of $8.7 billion.~~

•~~Ended the quarter with cash, cash equivalents and restricted cash of $8.3 billion and short-term investments of $2.4 billion.~~

~~Outlook~~

~~Capital and Production~~

~~Fourth-quarter 2022 production is expected to be 1.74 to 1.80 MMBOED. Full-year production remains unchanged at 1.74 MMBOED.~~

2022 operating capital guidance has been adjusted to $8.1 billion versus the prior guidance of $7.8 billion, reflecting inflationary impacts and partner-operated well mix in the Lower 48. This guidance excludes $1.7 billion of capital associated with the closed acquisitions of an additional 10 percent interest in APLNG and bolt-on acquisitions in the Lower 48 segment.

~~2022 guidance for DD&A has decreased from $7.6 billion to $7.5 billion.~~2022.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			3428


Management’s Discussion and Analysis			Table of Contents

Key Operating and Financial Summary

Significant items during the second quarter of 2023 and recent announcements included the following:

•Delivered record company and Lower 48 production of 1,805 MBOED and 1,063 MBOED, respectively.

•Executed agreement to purchase the remaining 50% interest in Surmont, subject to regulatory approvals and other closing conditions.

•Completed acquisition of an equity interest in Qatar's NFS project.

•Signed 20-year offtake agreements at the Saguaro LNG export facility on the west coast of Mexico for approximately 2.2 MPTA, subject to Mexico Pacific reaching FID.

•Generated cash provided by operating activities of $3.9 billion.

•Distributed $2.7 billion to shareholders through a three-tier framework, including $1.4 billion through the ordinary dividend and VROC and $1.3 billion through share repurchases.

•Ended the quarter with cash, cash equivalents and restricted cash of $6.0 billion and short-term investments of $1.1 billion.

Outlook

Production, Capital and DD&A

Third-quarter 2023 production is expected to be 1.78 to 1.82 MMBOED. Full-year production guidance is now expected to be 1.80 to 1.81 MMBOED, as compared to prior guidance of 1.78 to 1.80 MMBOED.

2023 capital guidance has been narrowed to $10.8 billion to $11.2 billion versus the prior guidance of $10.7 billion to $11.3 billion reflecting ongoing progress on the company's development plans.

2023 guidance for DD&A has increased from $8.1 billion to $8.2 billion.

All guidance excludes any impact from the previously announced Surmont and APLNG transactions.


29			ConocoPhillips 2023 Q2 10-Q


Results of Operations			Table of Contents

Results of Operations

Unless otherwise indicated, discussion of consolidated results for the three- and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022,~~2023, is based on a comparison with the corresponding period of ~~2021.~~2022.

Consolidated Results

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


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Alaska	Alaska	$	580	405	1,851	935	Alaska	$	372	687	788	1,271
Lower 48	Lower 48	2,653		1,631	9,024	3,274	Lower 48	1,230		3,581	3,082	6,371
Canada	Canada	119		155	726	267	Canada	32		316	38	607
Europe, Middle East and North Africa	Europe, Middle East and North Africa	922		241	1,719	601	Europe, Middle East and North Africa	264		385	629	797
Asia Pacific	Asia Pacific	520		257	2,181	749	Asia Pacific	387		525	909	1,661
Other International	Other International	(28)		(97)	(28)	(106)	Other International	(4)		—	(3)	—
Corporate and Other	Corporate and Other	(239)		(213)	(42)	(268)	Corporate and Other	(49)		(349)	(291)	197
Net income	Net income	$	4,527	2,379	15,431	5,452	Net income	$	2,232	5,145	5,152	10,904

Net income in the ~~third~~second quarter of ~~2022 increased $2,148~~2023 decreased $2,913 million. ~~Third~~Second quarter ~~earnings were positively impacted by:~~

•~~Higher realized commodity prices.~~

•~~Higher sales volumes, primarily due to our Shell Permian acquisition, partly offset by assets divested.~~ ~~See Note~~ 3.

•Higher equity in earnings of affiliates, primarily due to higher LNG sales prices as well as higher sales volumes inclusive of the additional 10 percent interest in APLNG we acquired in the first quarter of 2022. ~~See Note~~ 3.

•~~Gains related to certain commodity contracts and price impacts primarily on gas transportation in Europe.~~

~~Third quarter 2022~~ earnings were negatively impacted by:

•Lower realized commodity prices.

•Absence of gains from dispositions related to the sale of certain noncore assets in the Lower 48 segment as well as contingent payments associated with previous asset sales.

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

•Higher production and operating expenses primarily driven by higher production volumes in the Lower 48 segment and increased well work activity.

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

Offsets to the earnings decreases include:

•Lower taxes other than income ~~tax provision.~~taxes primarily driven by lower commodity prices, partially offset by higher production volumes.

•Higher sales volumes driven primarily by development in the Lower 48 segment.

Net income in the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2022, increased $9,979~~2023, decreased $5,752 million. In addition to the items mentioned above, earnings in the ~~nine-month~~six-month period were ~~positively~~negatively impacted by:

��•Gain on dispositions primarily due to a $462 million after-tax gain related to the divestiture of our Indonesia assets, higher contingent payments related to prior dispositions in our Canada and Lower 48 segments, divestiture of noncore assets in our Lower 48 segment in the second quarter of 2022 and absenceAbsence of a ~~$137 million after-tax loss related to the divestiture of noncore assets in our Other International segment in the third quarter of 2021.~~ ~~See Note~~ 3.

•~~Recognized~~ $515 million tax benefit related to the closing of an IRS audit in the first ~~quarter.~~quarter of 2022.

See Note 1819.

•Absence of ~~restructuring and transaction expenses~~gains from dispositions associated with the divestiture of ~~$243 million after-tax related to~~ our ~~Concho acquisition.~~

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

•~~Foreign exchange gains increased $122 million after-tax primarily as a result of the USD strengthening against the Norwegian Kroner.~~

~~In addition to the items mentioned above, earnings~~Indonesia assets in the ~~nine-month period were negatively impacted by:~~

•~~Absence~~first quarter of ~~mark to market gains associated with Cenovus Energy (CVE) shares.~~ ~~See Note~~ 5.2022.

•Absence of ~~$194 million after-tax gain recognized in conjunction~~gains associated with our ~~Australia-West divestiture.~~Cenovus Energy (CVE) common shares which were fully divested in the first quarter of 2022. See Note 95.

Offsets to the earnings decreases in the six-month period include improved commercial performance and timing.

See the “Segment Results” section for additional information.


35			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			30


Results of Operations			Table of Contents

Income Statement Analysis

Unless otherwise indicated, all results in Income Statement Analysis are before-tax.

Sales and other operating revenues for the three- and ~~nine-month~~six-month periods of ~~2022 increased $9,687~~2023 decreased $8,810 million and

~~$29,228~~ $11,761 million, respectively, ~~mainly~~primarily due to ~~higher~~lower realized commodity prices, ~~and~~partially offset by higher sales volumes driven primarily ~~due to~~by development in the Lower 48 segment. Decreases in the six-month period also include the impact of the divestiture of our ~~Shell Permian acquisition, partly offset by~~Indonesia assets ~~divested.~~ ~~See Note~~ 3.in the first quarter of 2022.

Equity in earnings of affiliates ~~for~~in the ~~three- and nine-month periods~~second quarter of ~~2022 increased $322~~2023 decreased $112 million ~~and $1,011 million, respectively,~~ due to ~~higher~~lower earnings primarily driven by ~~higher~~lower LNG and crude prices ~~as well as higher sales volumes inclusive of the additional 10 percent interest in APLNG we acquired in the first quarter of 2022.~~ ~~See Note~~ 3.

Gain (loss) on dispositions infor the ~~third quarter~~three- and six-month periods of ~~2022~~2023 decreased $263 million and $987 million, respectively, primarily due to the absence of ~~contingent payments in our Canada segment and a loss of $76 million primarily related to~~gains associated with the ~~sale~~divestiture of noncore assets in the Lower 48 segment ~~partially offset by~~in the second quarter of 2022, the absence of a loss of $179 million for the sale of noncore assets in our Other International segment divested in the third quarter of 2021. For the nine-month period of 2022, we recognized a gain of $534 million from our Indonesia divestiture and a gain of $80 million for the sale of noncore assets in the Lower 48 from the second quarter. In the nine-month period of 2022, we recognized higher contingent payments associated with previous dispositions in our Canada and Lower 48 segments ~~than in~~as well as the ~~same periods~~divestiture of ~~2021. Offsetting the increase in gains in the nine-month period of 2022 was the absence of a $200 million gain associated with~~ our ~~Australia-West divestiture recognized~~Indonesia assets in the first quarter of ~~2021.~~ ~~See Note~~ 3.

~~Other income~~ ~~for the nine-month period of 2022 decreased $476 million primarily due to the absence of mark to market gains associated with our CVE common shares which were fully divested in the first quarter of~~ 2022.~~See Note~~ 5.

Purchased commodities for the three- and ~~nine-month~~six-month periods of ~~2022 increased $5,072~~2023 decreased $4,618 million and ~~$13,576~~$5,231 million, respectively, primarily due to ~~higher gas, crude~~lower prices across all commodities in the U.S. and ~~power prices and volumes.~~Europe.

Production and operating expenses for the three- and ~~nine-month~~six-month periods of ~~2022~~2023 increased ~~$410~~$145 million and

~~$970~~ $343 million, respectively, primarily due to higher production volumes in the Lower 48 segment and ~~inflationary impacts.~~increased well work activity.

Selling, general and administrative expenses ~~decreased $125~~increased $109 million in the ~~nine-month period~~second quarter of 2023 primarily due to ~~the absence of transaction and restructuring expenses~~mark to market adjustments associated with ~~our Concho acquisition in 2021.~~

~~Exploration expenses~~ ~~for the nine-month period of 2022 increased $95 million primarily due to dry hole expenses in the Europe, Middle East and North Africa and Asia Pacific segments related to 2022 exploration~~certain compensation programs.

DD&A ~~Expenses~~expenses for the three- and ~~nine-month~~six-month periods of ~~2022~~2023 increased $200 million and ~~$80~~$319 million, respectively, mainly due to higher overall production volumes primarily ~~associated with our Shell Permian acquisition~~due to development in the Lower 48 segment and higher rates from impacts to reserve revisions driven by higher operating expenses, partially offset by ~~lower rates from price-related reserve revisions and~~ the absence of DD&A from disposed assets.

Taxes other than income taxes for the three- and ~~nine-month~~six-month periods of ~~2022 increased $440~~2023 decreased $508 million and ~~$1,523~~$746 million, respectively, ~~caused~~driven by ~~higher~~lower commodity prices, ~~and~~partially offset by higher production volumes.

~~Foreign currency transaction (gain) loss~~ ~~for the three- and nine-month periods of 2022 was improved by $83 million and $158 million, respectively, primarily as a result of the USD strengthening against the Norwegian Kroner.~~

Other expenses ~~for~~decreased $109 million in the ~~nine-month period~~second quarter of ~~2022, other expenses decreased $124 million~~2023 primarily related to the absence of premiums paid to repurchase debt in the second quarter of 2022 as well as a gain of ~~$127~~$27 million associated with extinguishment of debt ~~from~~in the ~~first~~second quarter of ~~2022.~~ ~~See Note~~ 6.2023.

See Note 1819—Income Taxes for information regarding our Income tax provision and effective tax rate.


31			ConocoPhillips ~~2022 Q3 10-Q~~			36


~~Results of Operations~~			~~Table of Contents~~

~~Summary Operating Statistics~~

Three Months Ended
September 30 Nine Months Ended
September 30
2022 2021 2022 2021
Average Net Production
Crude oil (MBD)
Consolidated operations 882 802 881 814
Equity affiliates 13 13 13 13
Total crude oil 895 815 894 827
Natural gas liquids (MBD)
Consolidated operations 263 123 238 116
Equity affiliates 8 7 8 8
Total natural gas liquids 271 130 246 124
Bitumen (MBD) 69 69 65 69
Natural gas (MMCFD)
Consolidated operations 1,899 2,144 1,966 2,143
Equity affiliates 1,214 1,033 1,192 1,055
Total natural gas 3,113 3,177 3,158 3,198
Total Production (MBOED)
1,754 1,544 1,731 1,553

Dollars Per Unit
Average Sales Prices
Crude oil (per bbl)
Consolidated operations $ 97.60 70.39 101.19 64.62
Equity affiliates 94.58 73.44 101.38 65.71
Total crude oil 97.56 70.43 101.19 64.63
Natural gas liquids (per bbl)
Consolidated operations 34.83 33.28 39.06 28.02
Equity affiliates 55.51 56.70 64.91 49.81
Total natural gas liquids 35.47 34.79 39.90 29.58
Bitumen (per bbl) 49.77 41.19 63.14 36.61
Natural gas (per MCF)
Consolidated operations 14.14 5.93 10.98 5.02
Equity affiliates 11.37 5.95 10.15 4.48
Total natural gas 13.04 5.94 10.66 4.84

Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical,
lease rental and other
$ 57 65 165 199
Leasehold impairment 7 — 23 1
Dry holes 25 — 113 6
$ 89 65 301 206


37			~~ConocoPhillips 2022 Q3 10-Q~~


~~Results of Operations~~			~~Table of Contents~~

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

~~Total production of 1,754 MBOED increased 210 MBOED or 14 percent in the third quarter of 2022 and 178 MBOED or 11 percent in the nine-month period of 2022, primarily due to:~~

•~~New wells online in the Lower 48, Alaska, Australia and China.~~

•~~Acquisitions including Shell Permian in the Lower 48 and additional working interest at APLNG in Asia Pacific.~~

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

~~Production increases in the third quarter and in the nine-month period of 2022 were partly offset due to:~~

•~~Normal field decline.~~

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

Production for the third quarter of 2022 was 1,754 MBOED, an increase of 210 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions and the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, third-quarter 2022 production increased by 30 MBOED or two percent from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline and downtime.

Production for the first nine months of 2022 was 1,731 MBOED, an increase of 178 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions, the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis and 2021 Winter Storm Uri impacts, production decreased 23 MBOED or one percent from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline; however, production was lower overall primarily due to planned and unplanned downtime.


			~~ConocoPhillips 2022 Q3 10-Q~~			38


~~Results of Operations~~			~~Table of Contents~~

~~Segment Results~~

Unless otherwise indicated, discussion of segment results for the three- and nine-month periods ended September 30, 2022, is based on a comparison with the corresponding period of 2021 and are shown after-tax.

~~Alaska~~

Three Months Ended
September 30 Nine Months Ended
September 30

2022 2021 2022 2021
Net Income ($MM)
$ 580 405 1,851 935
Average Net Production
Crude oil (MBD) 171 163 177 179
Natural gas liquids (MBD) 15 13 16 15
Natural gas (MMCFD) 29 11 33 10
Total Production (MBOED) 191 178 198 196
Average Sales Prices
Crude oil ($ per bbl) $ 103.90 72.55 104.83 66.78
Natural gas ($ per MCF) 4.38 2.63 3.82 3.06

The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas. As of September 30, 2022, Alaska contributed 16 percent of our consolidated liquids production and two percent of our consolidated natural gas production.

~~Net Income~~

~~Earnings from Alaska increased $175 million and $916 million in the three- and nine-month periods of 2022, respectively. Increases to earnings are primarily due to higher realized prices.~~

~~Offsets to the earnings increase include higher taxes other than income taxes associated with higher realized commodity prices and higher production volumes.~~

~~Production~~

~~Average production increased 13 MBOED and 2 MBOED in the three- and nine-month periods of 2022, respectively. Increases to production include:~~

•~~New wells online at our Western North Slope assets.~~

•~~Lower turnaround impacts at our Western North Slope assets.~~

•~~Higher gas volumes in our Greater Prudhoe Area.~~

~~Offsets to the production increases include normal field decline.~~


39			~~ConocoPhillips 2022 Q3~~2023 Q2 10-Q


Results of Operations			Table of Contents

Summary Operating Statistics


	Three Months Ended June 30		Six Months Ended June 30
	2023	2022	2023	2022
Average Net Production
Crude oil (MBD)
Consolidated operations	918	857	922	880
Equity affiliates	13	14	12	13
Total crude oil	931	871	934	893

Natural gas liquids (MBD)
Consolidated operations	275	236	270	227
Equity affiliates	8	8	7	7
Total natural gas liquids	283	244	277	234

Bitumen (MBD)	66	59	67	63

Natural gas (MMCFD)
Consolidated operations	1,896	1,872	1,909	1,999
Equity affiliates	1,251	1,235	1,209	1,181
Total natural gas	3,147	3,107	3,118	3,180

Total Production (MBOED)	1,805	1,692	1,798	1,720


	Dollars Per Unit
Average Sales Prices
Crude oil (per bbl)
Consolidated operations	$	74.18	111.49	75.85	102.97
Equity affiliates	75.10		111.97	77.90	105.20
Total crude oil	74.19		111.50	75.88	103.00

Natural gas liquids (per bbl)
Consolidated operations	20.05		42.20	22.41	41.61
Equity affiliates	43.62		72.44	50.13	69.99
Total natural gas liquids	20.72		43.26	23.18	42.57

Bitumen (per bbl)	41.01		75.42	34.93	70.25

Natural gas (per MCF)
Consolidated operations	2.89		10.19	4.27	9.46
Equity affiliates	8.23		10.08	9.06	9.51
Total natural gas	5.04		10.15	6.16	9.48


	Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical, lease rental and other	$	49	46	119	108
Leasehold impairment	11		10	30	16
Dry holes	23		87	72	88
	$	83	143	221	212


			ConocoPhillips 2023 Q2 10-Q			32


Results of Operations			Table of Contents

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide basis. At June 30, 2023, our operations were producing in the U.S., Norway, Canada, Australia, China, Malaysia, Qatar and Libya.

Total production of 1,805 MBOED increased 113 MBOED or 7 percent in the second quarter of 2023 and 78 MBOED or 5 percent in the six-month period of 2023, primarily due to new wells online in the Lower 48, Alaska, Australia, Canada, China, Malaysia and Libya.

Production increases in the second quarter of 2023 were partially offset due to normal field decline.

After adjusting for impacts from closed acquisitions and dispositions, second-quarter 2023 production increased by 100 MBOED or six percent from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset normal field decline and downtime.

Production for the first six months of 2023 was 1,798 MBOED, an increase of 78 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, production increased 82 MBOED or five percent from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset normal field decline and downtime.


33			ConocoPhillips 2023 Q2 10-Q


Results of Operations			Table of Contents

Segment Results

Unless otherwise indicated, discussion of segment results for the three- and six-month periods ended June 30, 2023, is based on a comparison with the corresponding period of 2022 and are shown after-tax.

Alaska


	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Net Income ($MM)	$	372	687	788	1,271

Average Net Production
Crude oil (MBD)	176		177	177	180
Natural gas liquids (MBD)	16		16	18	17
Natural gas (MMCFD)	34		34	38	34
Total Production (MBOED)	198		199	201	203

Average Sales Prices
Crude oil ($ per bbl)	$	76.09	114.77	79.08	105.26
Natural gas ($ per MCF)	4.38		3.34	4.49	3.66

The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas. As of June 30, 2023, Alaska contributed 15 percent of our consolidated liquids production and two percent of our consolidated natural gas production.

Net Income

Earnings from Alaska decreased $315 million and $483 million in the three- and six-month periods of 2023, respectively. Decreases to earnings were primarily due to lower realized crude oil prices.

Offsets to the earnings decreases include lower taxes other than income taxes driven by lower realized crude oil prices.

Production

Average production decreased 1 MBOED and 2 MBOED in the three- and six-month periods of 2023, respectively. Decreases to production were primarily due to normal field decline.

Offsets to the production decreases were new wells online at our Western North Slope and Greater Kuparuk Area assets.


			ConocoPhillips 2023 Q2 10-Q			34


Results of Operations			Table of Contents

Lower 48

Three Months Ended
September 30 Nine Months Ended
September 30
2022 2021 2022 2021
Net Income ($MM)
$ 2,653 1,631 9,024 3,274
Average Net Production
Crude oil (MBD) 537 457 534 442
Natural gas liquids (MBD)* 241 101 216 93
Natural gas (MMCFD)* 1,410 1,389 1,416 1,389
Total Production (MBOED)
1,013 790 986 767
Average Sales Prices
Crude oil ($ per bbl) $ 93.19 68.59 98.64 63.14
Natural gas liquids ($ per bbl) 34.59 32.87 38.74 27.48
Natural gas ($ per MCF) 7.36 4.63 6.28 4.13

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


	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Net Income ($MM)	$	1,230	3,581	3,082	6,371

Average Net Production
Crude oil (MBD)	565		528	563	533
Natural gas liquids (MBD)	252		214	245	203
Natural gas (MMCFD)	1,478		1,411	1,448	1,419
Total Production (MBOED)	1,063		977	1,049	972

Average Sales Prices
Crude oil ($ per bbl)	$	72.06	109.14	73.19	101.34
Natural gas liquids ($ per bbl)	19.61		42.00	22.01	41.26
Natural gas ($ per MCF)	1.43		6.85	2.16	5.74

The Lower 48 segment consists of operations located in the U.S. Lower 48 states, as well as producing properties in the Gulf of Mexico. As of ~~September~~June 30, ~~2022,~~2023, the Lower 48 contributed 64 percent of our consolidated liquids production and 7276 percent of our consolidated natural gas production.

Net Income

Earnings from the Lower 48 ~~increased $1,022~~decreased $2,351 million and ~~$5,750~~$3,289 million in the three- and ~~nine-month~~six-month periods of ~~2022,~~2023, respectively. ~~Increases~~Decreases to earnings include:

•~~Higher~~Lower realized commodity prices.

•Higher ~~sales volumes primarily related to our Shell Permian Acquisition.~~ ~~See Note~~ 3.

~~Offsets to the earnings increase include higher production and operating expenses, taxes other than income taxes and~~ DD&A expenses primarily due to higher ~~prices and~~ production ~~volumes. Partially offsetting the increase in DD&A expenses were lower~~volumes as well as higher rates from ~~price-related~~impacts to reserve ~~revisions.~~revisions driven by higher operating expenses.

•Higher production and operating expenses primarily due to higher production volumes, increased well work activity and inflation.

•Absence of gains on disposition of $63 million related to the sale of certain noncore assets as well as contingent payments associated with previous asset sales.

Offsets to the earnings decrease include:

•Higher sales volumes.

•Lower taxes other than income taxes driven by lower realized crude oil prices.

In addition to the items ~~detailed~~mentioned above, in the ~~nine-month~~six-month period of ~~2022,~~2023, earnings ~~also increased due to the absence of one-time~~ impacts ~~from our Concho acquisition including realized losses on hedges related to derivative positions acquired~~include higher earnings associated with improved commercial performance and ~~higher selling, general and administrative expenses for transaction and restructuring charges.~~ ~~See Note~~ 10.timing.

Production

Average production increased ~~223~~86 MBOED and ~~219~~77 MBOED in the three- and ~~nine-month~~six-month periods of ~~2022,~~2023, respectively. Increases to production ~~include:~~

•~~New~~were primarily due to new wells online from our development programs in ~~Permian,~~the Delaware Basin, Eagle Ford, Midland Basin and Bakken.

•~~Higher volumes due to our Shell Permian acquisition, partly offset by assets divested.~~ ~~See Note~~ 3.

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

Offsets to the production increases ~~include~~were primarily due to normal field decline.

~~Asset Acquisitions and Dispositions~~

We completed multiple divestitures of noncore assets in the nine-month period of 2022 totaling approximately $700 million in proceeds after customary adjustments. Production from these assets averaged approximately 18 MBOED in 2021. In the third quarter of 2022, we also cored up strategic positions through acquisitions of approximately $300 million after customary adjustments. ~~See Note~~ 3.


35			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			40


Results of Operations			Table of Contents

Canada


		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Net Income ($MM)	Net Income ($MM)	$	119	155	726	267	Net Income ($MM)	$	32	316	38	607

Average Net Production	Average Net Production						Average Net Production
Crude oil (MBD)	Crude oil (MBD)	4		8	5	10	Crude oil (MBD)	6		5	6	6
Natural gas liquids (MBD)	Natural gas liquids (MBD)	3		4	3	4	Natural gas liquids (MBD)	3		3	3	3
Bitumen (MBD)	Bitumen (MBD)	69		69	65	69	Bitumen (MBD)	66		59	67	63
Natural gas (MMCFD)	Natural gas (MMCFD)	49		73	59	83	Natural gas (MMCFD)	58		66	61	65
Total Production (MBOED)	Total Production (MBOED)	84		93	83	96	Total Production (MBOED)	85		78	87	83

Average Sales Prices	Average Sales Prices						Average Sales Prices
Crude oil ($ per bbl)	Crude oil ($ per bbl)	$	71.11	58.99	83.36	53.81	Crude oil ($ per bbl)	$	59.40	94.79	62.56	88.04
Natural gas liquids ($ per bbl)	Natural gas liquids ($ per bbl)	29.62		33.47	39.24	28.49	Natural gas liquids ($ per bbl)	17.11		44.93	22.94	43.44
Bitumen ($ per bbl)	Bitumen ($ per bbl)	49.77		41.19	63.14	36.61	Bitumen ($ per bbl)	41.01		75.42	34.93	70.25
Natural gas ($ per MCF)	Natural gas ($ per MCF)	2.40		2.45	3.47	2.36	Natural gas ($ per MCF)	0.56		4.47	2.70	3.88

Average sales prices include unutilized transportation costs.

Our Canadian operations mainly consist of the Surmont oil sands development in Alberta and the liquids-rich Montney unconventional play in British Columbia. As of ~~September~~June 30, ~~2022,~~2023, Canada contributed six percent of our consolidated liquids production and three percent of our consolidated natural gas production.

Net Income

Earnings from Canada decreased ~~$36~~$284 million and ~~increased $459~~$569 million in the three- and ~~nine-month~~six-month periods of ~~2022,~~2023, respectively. ~~In the third quarter, decreases~~Decreases to earnings include:

•Lower realized commodity prices.

•The absence of contingent payments associated with the prior sale of certain assets to CVE. The term for contingent payments infor our Canada segment ended in the second quarter of 2022.~~See Note~~ 3.

•~~Lower sales volumes.~~

•~~Higher production and operating expenses primarily due to higher electricity and fuel gas costs in the Surmont.~~

~~Offsetting the earnings decreases were higher realized crude oil and bitumen prices.~~

In addition to the items detailed above, in the nine-month period of 2022, earnings increased due to higher after-tax gains on disposition related to contingent payments of $282 million in the nine-month period of 2022, associated with the prior sale of certain assets to CVE, compared to $149 million in the same period of 2021. ~~See Note~~ 3.

Production

Average production ~~decreased 9~~increased 7 MBOED and 134 MBOED in the three- and ~~nine-month~~six-month periods of ~~2022,~~2023, respectively. ~~Decreases~~Increases to production include:

•~~Normal field decline.~~

•~~Higher royalty rates across the segment due to higher commodity prices.~~

•~~Planned turnaround in our Montney assets in the third quarter~~Absence of ~~2022.~~

~~Offsets to the production decreases include absence of higher well failures, plant power trips and facility upsets experienced in the third quarter of 2021.~~

~~In addition to the items detailed above, in the nine-month period of 2022, production decreased due to~~ a planned turnaround at the Surmont Central Processing Facility 1 during the second quarter of 2022.

•New wells online from our development program in the Montney.

Offsets to the production increases include downtime and normal field decline.

Planned Acquisition

In July 2023, we executed an agreement to purchase the remaining 50 percent interest in the Surmont asset. The effective date is April 1, 2023 with closing expected in the second half of 2023. This transaction is subject to regulatory approvals and other customary closing conditions. See N ote 3.


41			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			36


Results of Operations			Table of Contents

Europe, Middle East and North Africa


		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Net Income ($MM)	Net Income ($MM)	$	922	241	1,719	601	Net Income ($MM)	$	264	385	629	797

Consolidated Operations	Consolidated Operations						Consolidated Operations
Average Net Production	Average Net Production						Average Net Production
Crude oil (MBD)	Crude oil (MBD)	107		117	104	118	Crude oil (MBD)	113		90	116	101
Natural gas liquids (MBD)	Natural gas liquids (MBD)	4		5	3	4	Natural gas liquids (MBD)	4		3	4	4
Natural gas (MMCFD)	Natural gas (MMCFD)	331		303	323	303	Natural gas (MMCFD)	286		306	313	318
Total Production (MBOED)	Total Production (MBOED)	166		172	161	172	Total Production (MBOED)	165		144	172	158

Average Sales Prices	Average Sales Prices						Average Sales Prices
Crude oil ($ per bbl)	Crude oil ($ per bbl)	$	102.70	72.43	103.03	65.94	Crude oil ($ per bbl)	$	79.64	115.61	81.48	103.21
Natural gas liquids ($ per bbl)	Natural gas liquids ($ per bbl)	51.67		50.32	57.01	40.75	Natural gas liquids ($ per bbl)	37.06		68.00	40.63	60.49
Natural gas ($ per MCF)	Natural gas ($ per MCF)	48.10		11.96	35.35	8.40	Natural gas ($ per MCF)	10.83		28.32	14.31	28.77

Production and sales prices exclude equity affiliates. See Summary Operating Statistics for equity affiliate totals.

The Europe, Middle East and North Africa segment consists of operations principally located in the Norwegian sector of the North Sea and the Norwegian Sea, Qatar, Libya and commercial and terminalling operations in the U.K. ~~During the current year, we have increased our capacity and supply arrangements on future gas purchases, which are primarily offset by future gas sales contracts, primarily in Europe.~~ As of ~~September~~June 30, ~~2022,~~2023, our Europe, Middle East and North Africa operations contributed ~~nine~~10 percent of our consolidated liquids production and 16 percent of our consolidated natural gas production.

Net Income

Earnings from Europe, Middle East and North Africa ~~increased~~decreased by ~~$681~~$121 million and ~~$1,118~~$168 million in the three- and

~~nine-month~~ six-month periods of ~~2022,~~2023, respectively. ~~Increases~~Decreases to earnings include:

•~~Higher~~Lower realized commodity prices.

•~~Gains related~~Lower earnings from equity affiliates due to ~~certain commodity contracts and price impacts primarily on gas transportation in Europe.~~lower LNG sales prices.

•~~Foreign~~Less foreign exchange gains asrelated to the USD ~~strengthened~~strengthening against the Norwegian Kroner.

Offsets to the earnings decreases include:

•~~Higher equity~~Improved commercial performance and timing.

•Absence of the establishment of a valuation allowance against certain deferred tax assets associated with changes to the Petroleum Tax System in ~~earnings~~Norway in the second quarter of ~~affiliates, primarily due to higher LNG sales prices.~~2022.

Consolidated Production

Average consolidated production ~~decreased 6~~increased 21 MBOED and 1114 MBOED in the three- and ~~nine-month~~six-month periods of ~~2022,~~2023, respectively. ~~Decreases~~Increases to production include:

•~~Normal field decline.~~

•~~Curtailed production in Libya due to the force majeure at the Es Sider export terminal in July.~~

~~Offsets to the production decreases include new wells online, improved performance and higher exports in Norway.~~

~~In addition to the items detailed above, in the nine-month period~~Absence of ~~2022, production also decreased due to field-wide~~fieldwide turnarounds in the Greater Ekofisk Area of Norway in the second quarter of 2022.

~~Force Majeure in Libya~~

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

~~Exploration Activity~~

The fourth and last well from our 2022 operated exploration and appraisal campaign in Norway was drilled in the third quarter. In total for the year, we drilled four operated wells, all of which were determined to be dry holes, including the Slagugle appraisal well which effectively delineated the 2020 discovery. Slagugle is a discovery we are continuing to evaluate.


			~~ConocoPhillips 2022 Q3 10-Q~~			42


~~Results of Operations~~			~~Table of Contents~~

~~Asia Pacific~~

Three Months Ended
September 30 Nine Months Ended
September 30
2022 2021 2022 2021
Net Income ($MM)
$ 520 257 2,181 749
Consolidated Operations
Average Net Production
Crude oil (MBD) 63 57 61 65
Natural gas (MMCFD) 80 368 135 358
Total Production (MBOED)
76 119 84 125
Average Sales Prices
Crude oil ($ per bbl) $ 108.99 74.66 110.25 67.41
Natural gas ($ per MCF) 4.18 6.66 6.05 6.30

The Asia Pacific segment has operations in China, Malaysia, Australia and commercial operations in Singapore and Japan. As of September 30, 2022, Asia Pacific contributed five percent of our consolidated liquids production and seven percent of our consolidated natural gas production.

~~Net Income~~

~~Earnings from Asia Pacific increased $263 million and $1,432 million in the three- and nine-month periods of 2022, respectively. Increases to earnings include:~~

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

•~~Higher realized crude oil prices.~~

~~Offsets~~Additional interest acquired in Libya's Waha Concession that increased our interest 4.1 percent to ~~the earnings increases include:~~

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

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

~~In addition to the items detailed above,~~20.4 percent in the ~~nine-month period of 2022, earnings impacts include:~~

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

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

•~~Lower DD&A expenses associated with lower production volumes primarily driven by the divestiture of our Indonesia assets.~~

~~Consolidated Production~~

~~Average consolidated production decreased 43 MBOED and 41 MBOED in the three- and nine-month periods of 2022, respectively. Decreases to production include:~~

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

•~~Normal field decline.~~Improved well performance in Norway.

Offsets to the production ~~decreases~~increases include ~~Bohai Bay development activity in China.~~normal field decline.

~~Asset Acquisitions and Dispositions~~

~~In the first quarter of~~Qatar Interest

During 2022, we ~~completed the acquisition of an additional 10~~were awarded a 25 percent interest in ~~APLNG increasing our ownership~~QG12, a new joint venture with QatarEnergy to ~~47.5 percent. Also~~participate in the ~~first quarter, we completed the divestiture~~NFS LNG project. Formation of ~~our subsidiaries that held our Indonesia assets and operations. Production from the disposed assets averaged approximately 33 MBOED~~QG12 closed in ~~the~~

~~three-months ended March 31, 2022.~~June 2023. See Note s 3and 4.


4337			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q


Results of Operations			Table of Contents

Asia Pacific


	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Net Income ($MM)	$	387	525	909	1,661

Consolidated Operations
Average Net Production
Crude oil (MBD)	58		57	60	60
Natural gas (MMCFD)	40		55	49	163
Total Production (MBOED)	65		66	68	87

Average Sales Prices
Crude oil ($ per bbl)	$	78.64	117.14	81.07	110.89
Natural gas ($ per MCF)	4.10		4.17	4.22	6.53

Production and sales prices exclude equity affiliates. See Summary Operating Statistics for equity affiliate totals.

The Asia Pacific segment has operations in China, Malaysia, Australia and commercial operations in China, Singapore and Japan. As of June 30, 2023, Asia Pacific contributed five percent of our consolidated liquids production and three percent of our consolidated natural gas production.

Net Income

Earnings from Asia Pacific decreased $138 million and $752 million in the three- and six-month periods of 2023, respectively. Decreases to earnings include:

•Lower realized commodity prices.

•Lower earnings from equity affiliates due to lower LNG sales prices.

Offsets to the earnings decreases include lower taxes other than income taxes driven by lower realized commodity prices.

In addition to the items mentioned above, in the six-month period of 2023, earnings impacts include:

•Decrease due to the absence of an after-tax gain of $534 million associated with the divestiture of our Indonesia assets in the first quarter of 2022.

•Decrease due to lower sales volumes primarily driven by the divestiture of our Indonesia assets in the first quarter of 2022.

Consolidated Production

Average consolidated production decreased 1 MBOED and 19 MBOED in the three- and six-month periods of 2023, respectively. Decreases to production were primarily due to normal field decline.

Offsets to the production decreases include:

•Bohai Bay development activity and production optimization in China.

•First production from development activity in Gumusut Phase 3 in Malaysia.

In addition to the items mentioned above, in the six-month period of 2023, production also decreased due to the divestiture of our Indonesia assets in the first quarter of 2022.

Planned Acquisition

In March 2023, we announced that, subject to the closing of EIG's transaction with Origin Energy, we intend to take over operatorship of the upstream assets and purchase up to an additional 2.49 percent shareholding interest in Australia Pacific LNG Pty Ltd (APLNG). Both EIG's transaction with Origin Energy and our shareholder acquisition are subject to Australian regulatory approvals and other customary closing conditions. See Note 3.


			ConocoPhillips 2023 Q2 10-Q			38


Results of Operations			Table of Contents

Other International

Three Months Ended
September 30 Nine Months Ended
September 30
2022 2021 2022 2021
Net Loss ($MM)
$ (28) (97) (28) (106)



	Three Months Ended June 30			Six Months Ended June 30
	2023		2022	2023	2022
Net Loss ($MM)	$	(4)	—	(3)	—

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

Earnings from our Other International operations improved $69 million in the third quarter of 2022 and $78 million in the nine-month period ended September 30, 2022, compared with the same periods of 2021 primarily due to the absence of a $137 million after-tax loss on divestiture related to our Argentina exploration interests in the third quarter of 2021, partially offset by higher taxes related to legal settlements in the third quarter of 2022.

Corporate and Other


		Millions of Dollars						Millions of Dollars
		Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30
		2022		2021	2022	2021		2023		2022	2023	2022
Net Income (Loss)	Net Income (Loss)						Net Income (Loss)
Net interest expense	Net interest expense	$	(125)	(176)	(507)	(627)	Net interest expense	$	(86)	(164)	(176)	(382)
Corporate general and administrative expenses	Corporate general and administrative expenses	(62)		(57)	(157)	(251)	Corporate general and administrative expenses	(96)		(16)	(186)	(95)
Technology	Technology	(8)		(6)	41	31	Technology	(11)		(9)	(5)	49
Other income (expense)	Other income (expense)	(44)		26	581	579	Other income (expense)	144		(160)	76	625
		$	(239)	(213)	(42)	(268)		$	(49)	(349)	(291)	197

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest. Net interest expense improved by ~~$51~~$78 million and ~~$120~~$206 million in the three- and ~~nine-month~~six-month periods of ~~2022,~~2023, respectively, primarily due to higher interest income as well as lower interest ~~expenses as a result of our debt reduction transactions. Improvement in the nine-month period also includes the absence of a prior year tax adjustment.~~expenses.

Corporate G&A expenses include compensation programs and staff costs. InCorporate G&A expenses increased $80 million and $91 million in the ~~nine-month period~~three- and six-month periods of ~~2022 these expenses decreased by $94 million~~2023, respectively, primarily due to ~~the absence of restructuring expenses~~mark to market adjustments associated with ~~our 2021 acquisition of Concho Resources Inc.~~certain compensation programs.

Technology includes our investment in low-carbon technologies as well as other new technologies or businesses ~~as well as~~and licensing revenues. ~~Activities~~Other new technologies or businesses and licensing activities are focused on both conventional and tight oil reservoirs, shale gas, ~~heavy oil,~~ oil sands, enhanced oil recovery, as well as LNG. See Note 16.Earnings from Technology decreased $54 million in the six-month period of 2023, primarily due to lower licensing revenues.

Other income (expense) or “Other” includes certain ~~corporate~~consolidating tax-related items, foreign currency transaction gains and losses, environmental costs associated with sites no longer in operation, other costs not directly associated with an operating segment, gains/losses on the early retirement of debt, holding gains or losses on equity securities, and pension settlement expense. In the ~~third~~second quarter of ~~2022,~~2023, “Other” ~~decreased $70~~increased $304 million primarily due to a consolidating tax adjustment, the absence of ~~unrealized gains~~premiums paid on the early retirement of debt in 2022 coupled with a gain on the early retirement of debt in 2023 and foreign exchange impacts. In the six-month period of 2023, "Other" decreased $549 million. Decreases include the absence of a $474 million federal tax benefit, the absence of $251 million gain associated with our CVE common shares, which were fully divested in the first quarter of 2022, and ~~foreign currency transaction losses. For the nine-month period of 2022,~~ "~~Other~~" ~~increased $2 million due to the IRS closing the 2017 audit of our U.S. federal income tax return resulting in a $474 million federal tax benefit,~~ the absence of ~~a release of a $92 million deferred tax asset associated with prior dispositions and recognizing~~ an after-tax gain of $62 million associated with ~~the~~ debt restructuring transactions. ~~These increases~~The decreases were offset by the increases described above as well as the absence of ~~$492 million in gains related to our CVE common shares and a~~ $101 million tax impact associated with the disposition of our Indonesia ~~assets.~~assets in the first quarter of 2022. See Note 5for information on our CVE common shares, Note 186~~for information about the tax benefit,~~ ~~Note~~ 6 for information regarding our debt transactions andNote 319for information ~~on our Indonesia divestiture.~~regarding income taxes.


39			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			44


Capital Resources and Liquidity			Table of Contents

Capital Resources and Liquidity

Financial Indicators


		Millions of Dollars					Millions of Dollars
		September 30 2022			December 31 2021		June 30 2023			December 31 2022
Cash and cash equivalents	Cash and cash equivalents	$	8,010		5,028	Cash and cash equivalents	$	5,735		6,458
Short-term investments	Short-term investments	2,412			446	Short-term investments	1,080			2,785
Total debt	Total debt	16,961			19,934	Total debt	16,444			16,643
Total equity	Total equity	49,079			45,406	Total equity	47,531			48,003
Percent of total debt to capital*	Percent of total debt to capital*	26		%	31	Percent of total debt to capital*	26		%	26
Percent of floating-rate debt to total debt	Percent of floating-rate debt to total debt	2		%	4	Percent of floating-rate debt to total debt	2		%	2

*Capital includes total debt and total equity.

To meet our ~~short-~~short-term and long-term liquidity requirements, we look to a variety of funding sources, including cash generated from operating activities, our commercial paper and credit facility programs, and our ability to sell securities using our shelf registration statement. During the first ~~nine~~six months of ~~2022,~~2023, the primary uses of our available cash were ~~$7.6~~$5.8 billion to support our ongoing capital expenditures and investments program, ~~$6.5~~$3.0 billion to repurchase common stock, ~~$3.0 billion net to reduce debt as part of refinancing transactions~~ and ~~retirements, $3.3~~$2.8 billion to pay ~~dividends, including~~ the ordinary dividend and ~~a VROC, and $2.2 billion net purchases of investments.~~VROC.

At ~~September~~June 30, ~~2022,~~2023, we had total liquidity of ~~$15.9~~$12.3 billion,~~, including~~ comprised of cash and cash ~~equivalen~~tsequivalents of ~~$8.0~~$5.7 billion,, short-term investments of ~~$2.4~~$1.1 billion,, and available borrowing capacity under our credit facility of $5.5 billion. We beli~~We believe~~eve current cash balances and cash generated by operating activities, together with access to external sources of funds as described below in the “Significant Changes in Capital” section, will be sufficient to meet our funding requirements in the near- and long-term, including our capital spending program, acquisitions, dividend payments and debt obligations.

Significant Changes in Capital

Operating Activities

Cash provided by operating activities was ~~$21.7~~$9.3 billion for the first ~~nine~~six months of ~~2022,~~2023, compared with ~~$11.1~~$13.0 billion for the corresponding period of ~~2021.~~2022. The ~~increase in cash provided by operating activities~~decrease is primarily due to ~~higher~~lower realized commodity prices across all products, partially offset by higher produced sales volumes ~~mostly due to our acquisition of Shell Permian assets, and~~in the absence of the 2021 settlement of all oil and gas hedging positions acquired from Concho. The increase in cash provided by operating activities was partly offset by foreign tax and royalty payments primarily in Libya and Norway in addition to U.S. tax payments.Lower 48.

Our ~~short-~~short-term and long-term operating cash flows are highly dependent upon prices for crude oil, bitumen, natural gas, LNG and NGLs. Prices and margins in our industry have historically been volatile and are driven by market conditions over which we have no control. Absent other mitigating factors, as these prices and margins fluctuate, we would expect a corresponding change in our operating cash flows.

The level of production volumes, as well as product and location mix, impacts our cash flows. Future production is subject to numerous uncertainties, including, among others, the volatile crude oil and natural gas price environment, which may impact investment decisions; the effects of price changes on production sharing and variable-royalty contracts; acquisition and disposition of fields; field production decline rates; new technologies; operating efficiencies; timing of startups and major turnarounds; political instability; impacts of a global pandemic; weather-related disruptions; and the addition of proved reserves through exploratory success and their timely and cost-effective development. While we actively manage for these factors, production levels can cause variability in cash flows, although generally this variability has not been as significant as that caused by commodity prices.

To maintain or grow our production volumes, we must continue to add to our proved reserve base. See the “Capital Expenditures and Investments” section.


45			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			40


Capital Resources and Liquidity			Table of Contents

Investing Activities

For the first ~~nine~~six months of ~~2022,~~2023, we inv~~ested $7.6~~invested $5.8 billion in capital expenditures a~~nd investments; $1.7 billion of which was acquisition capital for the additional 10 percent interest in APLNG~~ and ~~acquisition of certain Lower 48 assets, and the remainder funding our operating capital program.~~investments. Our ~~2022~~2023 operating plan capital expenditures are currently expected to be ~~$8.1~~between $10.8 billion ~~versus the prior guidance of $7.8 billion, reflecting inflationary impacts and partner-operated well mix in the L48.~~to $11.2 billion. This guidance excludes ~~approximately $1.7 billion of acquisition capital.~~any impact from the previously announced Surmont and APLNG transactions. Our ~~2021~~2022 capital expenditures and investments were ~~$5.3~~$10.2 billion. See the “Capital Expenditures and Investments” section.

In May 2021, we initiated the monetization of our investment in CVE common shares with the plan to direct proceeds toward our existing share repurchase program. We began disposing of our CVE shares in May 2021, and by the end of the first ~~quarter,~~six months of 2023, we ~~fully divested~~invested $0.9 billion in LNG projects, including PALNG, QG8, and QG12. See Note 3.

Proceeds from asset sales were $0.4 billion in the first six months of ~~our investment, recognizing~~2023 compared with $3.0 billion for the corresponding period in 2022. In the first six months of 2022, we received proceeds of $1.4 billion infor the ~~first quarter~~sale of ~~2022. Since inception, we have generated total~~our remaining 91 million common shares of CVE, proceeds of ~~$2.5 billion.~~ ~~See Note~~ 5. ~~Other proceeds~~$1.2 billion primarily from ~~dispositions received~~asset divestitures in ~~the current year include~~ our ~~divestitures in~~ Asia Pacific and Lower 48 segments ~~for approximately $1.4 billion~~ after customary adjustments and ~~$500 million~~$0.4 billion in contingent payments associated with prior divestitures. S~~ee Note~~ 3.

In the third quarter, we completed the sale of certain noncore assets in the Lower 48 segment for approximately $300 million after customary adjustments while also coring up other strategic positions in the Lower 48 segment through acquisitions of approximately $300 million after customary adjustments. See Note3 5.

We invest in short-term and long-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~~returns. These investments include time deposits, commercial paper, as well as debt securities classified as available for sale. Funds for short-term needs to support our operating plan and provide resiliency to react to short-term price volatility are invested in highly liquid instruments with maturities within the year. Funds we consider available to maintain resiliency in longer term price downturns and to capture opportunities outside a given operating plan may be invested in instruments with maturities greater than one year.

Investing activities in the first ~~nine~~six months of ~~2022~~2023 included net ~~purchases~~sales of ~~$2,235~~$1,549 million of investments. We had net ~~purchases~~sales of ~~$1,663~~$1,893 million of short-term instruments and ~~$572~~net purchases of $344 million of long-term instruments. See Note 13.

In July 2023, we executed an agreement to purchase the remaining 50 percent interest in Surmont from TotalEnergies EP Canada Ltd. for approximately $4.0 billion CAD ($3.0 billion), subject to customary adjustments. The transaction is subject to contingent payments for a five-year term of up to approximately $440 million CAD ($325 million), subject to certain production targets being achieved. Closing of this transaction is anticipated in the second half of 2023, subject to regulatory approvals and other customary closing conditions.

Financing Activities

~~In February 2022, we refinanced our~~We have a revolving credit facility ~~from a total aggregate principal amount of $6.0 billion to~~totaling $5.5 billion with an expiration date of February 2027. The credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as support for our commercial paper program. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at ~~September~~June 30, ~~2022.~~2023.

In the second quarter of 2023, we initiated and completed concurrent debt transactions as part of our debt refinancing strategy that extends the weighted average maturity of our portfolio from 15 years to 17 years and reduces our near-term debt maturities. The refinancing consisted of tender offers to repurchase existing debt with cash and a new debt issuance to fund the repurchase. See Note 6.

Our debt balance at ~~September~~June 30, ~~2022~~2023 was ~~$17.0~~$16.4 billion compared with ~~$19.9~~$16.6 billion at December 31, ~~2021.~~2022. The current portion of debt, including payments for finance leases, is $879 million.~~$0.7 billion~~. Payments ~~will~~are expected to be made using current cash balances and cash generated by operating activities.

In the second quarter of 2022, we repurchased notes and retired floating rate debt and in the first quarter of 2022, we executed a debt refinancing comprised of concurrent transactions including new debt issuances, a cash tender offer and debt exchange offers. In aggregate, the transactions reduced the company's total debt by $3.0 billion. The refinancing facilitatesMay 2023, S&P affirmed our ~~ability to achieve our previously announced $5 billion debt reduction target by the end of 2026 while also reducing the company's annual cash interest expense.~~long-term credit rating included below.

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

•Fitch: “A” with a “stable” outlook

•S&P: “A-” with a “stable” outlook

•Moody's: "A2" with a "stable" outlook

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


41			ConocoPhillips 2023 Q2 10-Q


Capital Resources and Liquidity			Table of Contents

Certain of our project-related contracts, commercial contracts and derivative instruments contain provisions requiring us to post collateral. Many of these contracts and instruments permit us to post either cash or letters of credit as collateral. At ~~September~~June 30, ~~2022~~2023, and December 31, ~~2021,~~2022, we had direct bank letters of credit of $261 million and ~~$337~~$368 million, respectively, which secured performance obligations related to various purchase commitments incident to the ordinary conduct of business. In the event of a credit rating downgrade, we may be required to post additional letters of credit.


			~~ConocoPhillips 2022 Q3 10-Q~~			46


~~Capital Resources and Liquidity~~			~~Table of Contents~~

Shelf Registration

We have a universal shelf registration statement on file with the SEC under which we have the ability to issue and sell an indeterminate number of various types of debt and equity securities.

Capital Requirements

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

~~In 2021, as part of~~We believe in delivering value to our ~~objective to maintain a strong balance sheet, we announced~~shareholders through our intention to reduce our total debt by $5 billion by the end of 2026. In the first half of 2022, we executed concurrent debt refinancing transactions, repurchased existing notes, and retired floating rates notes upon natural maturity, that in aggregate reduced the company's total debt by $3 billion and progressed the achievement of our debt reduction target while also lowering our annual cash interest expense and extending the weighted average maturity of our debt portfolio. ~~See Note~~ 6.

~~In December 2021, we announced our expected 2022 return of capital program and the initiation of a~~current three-tier return of capital framework. The framework is structured to deliver a compelling, growing ordinary dividend, a discretionary VROC payment, and through-cycle share repurchases. ~~In addition to the ordinary dividend and share repurchases, beginning in December 2021, the framework includes the addition of a discretionary VROC tier.~~ The VROC ~~will provide~~provides a flexible tool for meeting our commitment of returning greater than 30 percent of cash from operating activities during periods where commodity prices are meaningfully higher than our planning price range. Our expected ~~2022~~2023 total return of capital ~~return~~ is ~~$15~~$11 billion.

In the first ~~nine~~six months of 2023, we paid ordinary dividends of $1.02 cents per common share and VROC payments of $1.30 cents per common share. In the first six months of 2022, we paid ordinary dividends of ~~$1.38~~$0.92 cents per common share and VROC ~~dividends~~payments of ~~$1.20~~$0.50 cents per common share.

In ~~the first nine months of 2021, we paid ordinary dividends of $1.29 per common share. In November 2022,~~August 2023, we declared both an ~~increase in the company's quarterly~~ ordinary dividend ~~from 46~~of $0.51 cents per share ~~to 51 cents per share representing an 11 percent increase. In addition, we declared~~and a VROC ~~dividend~~payment of 70$0.60 cents per share. The ordinary dividend of 51$0.51 cents per share is payable ~~December~~September 1, ~~2022, to shareholders of record on November 15, 2022. The VROC of 70 cents per share is payable January 13,~~ 2023, to shareholders of record on ~~December 27, 2022.~~August 16, 2023. The VROC of $0.60 cents per share is payable October 16, 2023, to shareholders of record on September 28, 2023.

In late 2016, we initiated our current share repurchase program. As of ~~September 30, 2022, share repurchases since the inception of our current program totaled 312 million shares and $20.7 billion. In the nine months ended September 30,~~October 2022, we ~~repurchased 65 million shares for~~had announced a ~~cost of $6.5 billion. In October 2022, our Board of Directors approved an increase~~total authorization to ~~our authorization from $25 billion~~repurchase up to $45 billion of our common ~~stock to support our plan for future share repurchases.~~stock. Repurchases are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. As of June 30, 2023, share repurchases since the inception of our current program totaled 362.9 million shares and $26.4 billion. In the six months ended June 30, 2023, we repurchased 28.1 million shares for a cost of $3.0 billion.

See Part I—Item 1A—Risk Factors – “Our ability to execute our capital return program is subject to certain considerations” in our ~~2021~~2022 Annual Report on Form 10-K.


47			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			42


Capital Resources and Liquidity			Table of Contents

Capital Expenditures and Investments


		Millions of Dollars			Millions of Dollars
		Nine Months Ended September 30			Six Months Ended June 30
		2022	2021		2023		2022
Alaska	Alaska	740	698	Alaska	$	769	471
Lower 48	Lower 48	4,120	2,250	Lower 48	3,357		2,347
Canada	Canada	382	129	Canada	228		247
Europe, Middle East and North Africa	Europe, Middle East and North Africa	531	385	Europe, Middle East and North Africa	567		364
Asia Pacific	Asia Pacific	1,791	235	Asia Pacific	142		1,664
Other International	Other International	—	33	Other International	—		—
Corporate and Other	Corporate and Other	62	37	Corporate and Other	757		36
Capital expenditures and investments	Capital expenditures and investments	7,626	3,767	Capital expenditures and investments	$	5,820	5,129

During the first ~~nine~~six months of ~~2022,~~2023, capital expenditures and investments supported key operating activities and acquisitions, primarily:

•~~Development activities in the Lower 48, primarily in the Permian, Eagle Ford and Bakken and inclusive of our recent acquisitions.~~

•Appraisal and development activities in Alaska related to the Western North Slope and development activities in the Greater Kuparuk Area.

•Development activities in the Lower 48, primarily in the Delaware Basin, Eagle Ford, Midland Basin and Bakken.

•Appraisal and development activities in the Montney as well as development and optimization of oil sands ~~development~~ in Canada.

•Development ~~and exploration~~ activities across assets in Norway.

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

•~~Acquisition capital~~Capital primarily associated with ~~additional interest~~our investments in ~~APLNG~~PALNG, QG8, and ~~in certain Lower 48 assets.~~QG12.

Our ~~2022~~2023 operating plan capital expenditure guidance is currently expected to be ~~$8.1~~$10.8 billion to $11.2 billion. This guidance excludes ~~approximately $1.7 billion of acquisition capital.~~any impact from the previously announced Surmont and APLNG transactions. Our operating plan capital was ~~$5.3~~$10.2 billion in ~~2021.~~2022.


43			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			48


Capital Resources and Liquidity			Table of Contents

Guarantor Summarized Financial Information

We have various cross guarantees among our Obligor group; ConocoPhillips, ConocoPhillips Company and Burlington Resources LLC, with respect to publicly held debt securities. ConocoPhillips Company is 100 percent owned by ConocoPhillips. Burlington Resources LLC is 100 percent owned by ConocoPhillips Company. ConocoPhillips and/or ConocoPhillips Company have fully and unconditionally guaranteed the payment obligations of Burlington Resources LLC, with respect to its publicly held debt securities. Similarly, ConocoPhillips has fully and unconditionally guaranteed the payment obligations of ConocoPhillips Company with respect to its publicly held debt securities. In addition, ConocoPhillips Company has fully and unconditionally guaranteed the payment obligations of ConocoPhillips with respect to its publicly held debt securities. All guarantees are joint and several.

The following tables present summarized financial information for the Obligor Group, as defined below:

•The Obligor Group will reflect guarantors and issuers of guaranteed securities consisting of ConocoPhillips, ConocoPhillips Company and Burlington Resources LLC.

•Consolidating adjustments for elimination of investments in and transactions between the collective guarantors and issuers of guaranteed securities are reflected in the balances of the summarized financial information.

•Non-Obligated Subsidiaries are excluded from the presentation.

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

Summarized Income Statement Data


	Millions of Dollars
	~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023
Revenues and Other Income	$	~~42,822~~18,194
Income before income taxes*	~~15,081~~5,098

Net Income	~~15,431~~5,152

*Includes approximately ~~$7.4~~$3.6 billion of purchased commodities expense for transactions with Non-Obligated Subsidiaries.

Summarized Balance Sheet Data


		Millions of Dollars				Millions of Dollars
		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Current assets	Current assets	$	10,428	7,689	Current assets	$	7,254	10,766
Amounts due from Non-Obligated Subsidiaries, current	Amounts due from Non-Obligated Subsidiaries, current	1,613		1,927	Amounts due from Non-Obligated Subsidiaries, current	1,559		1,892
Noncurrent assets	Noncurrent assets	77,913		69,841	Noncurrent assets	86,501		79,269
Amounts due from Non-Obligated Subsidiaries, noncurrent	Amounts due from Non-Obligated Subsidiaries, noncurrent	8,421		7,281	Amounts due from Non-Obligated Subsidiaries, noncurrent	7,752		6,552
Current liabilities	Current liabilities	9,186		8,005	Current liabilities	6,078		8,201
Amounts due to Non-Obligated Subsidiaries, current	Amounts due to Non-Obligated Subsidiaries, current	3,355		3,477	Amounts due to Non-Obligated Subsidiaries, current	2,771		3,248
Noncurrent liabilities	Noncurrent liabilities	36,634		30,677	Noncurrent liabilities	46,702		40,389
Amounts due to Non-Obligated Subsidiaries, noncurrent	Amounts due to Non-Obligated Subsidiaries, noncurrent	20,946		13,007	Amounts due to Non-Obligated Subsidiaries, noncurrent	31,465		24,594


			ConocoPhillips 2023 Q2 10-Q			44


Capital Resources and Liquidity			Table of Contents

Contingencies

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


49			~~ConocoPhillips 2022 Q3 10-Q~~


~~Capital Resources and Liquidity~~			~~Table of Contents~~

Legal and Tax Matters

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

Environmental

We are subject to the same numerous international, federal, state and local environmental laws and regulations as other companies in our industry. For a discussion of the most significant of these environmental laws and regulations, including those with associated remediation obligations, see the “Environmental” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages ~~58–60~~54–56 of our ~~2021~~2022 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)~~CERCLA or an equivalent state statute. On occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain waste attributable to our past operations. As of ~~September~~June 30, ~~2022,~~2023, there were 15 sites around the U.S. in which we were identified as a potentially responsible party under CERCLA and comparable state laws.

Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses, environmental costs and liabilities are inherent concerns in our operations and products, and there can be no assurance that material costs and liabilities will not be incurred. However, we currently do not expect any material adverse effect upon our results of operations or financial position as a result of compliance with current environmental laws and regulations.

See Part I—Item 1A—Risk Factors – "We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations" in our ~~2021~~2022 Annual Report on Form 10-K and Note 9 for information on environmental litigation.

Climate Change

Continuing political and social attention to the issue of global climate change has resulted in a broad range of proposed or promulgated state, national and international laws focusing on GHG emissions 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 orand precursors for possible regulation ~~and factors on which the ultimate impact on~~that do or could affect our ~~financial performance will depend,~~operations, see the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages ~~61–63~~56–57 of our ~~2021~~2022 Annual Report on Form 10-K.


45			ConocoPhillips 2023 Q2 10-Q


Capital Resources and Liquidity			Table of Contents

Company Response to Climate-Related Risks

Our current Climate Risk Strategy and actions for our oil and gas operations are aligned with the aims of the Paris Agreement while being responsive to shareholder interests for long-term value and competitive returns. It is also aligned with our Triple Mandate to responsibly meet energy transition pathway demand, deliver competitive returns on and of capital and achieve our net-zero operational emissions ambition.

In 2020 we became the first U.S.-based oil and gas company to adopt a Paris-aligned climate-risk strategy with an ambition to become a net-zero company for operational (Scope 1 and 2) emissions by 2050. The objective of our Climate Risk Strategy is to manage climate-related risk, optimize opportunities and better equip the company to respond to evolving investor sentiment, technologies for emissions reduction, alternative energy technologies and uncertainties such as government policies. The strategy sets out our choices around portfolio composition, emissions reductions, targets and incentives, emissions-related technology development, and our climate-related policy and financial sector engagement.

In early 2022, we published our Plan for the Net-Zero Energy Transition (the 'Plan'), to outline how we intend to apply our strategic capabilities and resources to meet the challenges posed by climate change in an economically viable, accountable and actionable way that balances the interests of our stakeholders. A progress report on the Plan was published in March 2023.

Key elements of our plan include:

•Maintain strategic flexibility:

◦Build a resilient asset portfolio with a focus on low cost of supply and low GHG intensity to meet transition pathway energy demand.

◦Commit to capital discipline through use of a fully burdened cost of supply, including cost of carbon, as the primary basis for capital allocation.

◦Track the energy transition through a comprehensive scenario planning process to calibrate and understand alternative energy transition pathways and test the resilience of our corporate strategy to climate risk.

•Reduce Scope 1 and 2 emissions:

◦Set targets for emissions over which we have ownership and control, with an ambition to become a net-zero company for Scope 1 and 2 emissions by 2050.

•Address Scope 3 emissions:

◦Advocate for a well-designed, economy-wide price on carbon and engage in development of other policies and legislation to address end-use emissions.

◦Work with our suppliers for alignment on GHG emissions reductions.

•Contribute to the energy transition:

◦Build an attractive LNG portfolio.

◦Evaluate potential investments in emerging energy transition and low-carbon technologies.

Our Plan recognizes the importance of reducing society’s end-use emissions to meet global climate goals. As an upstream producer, we do not control how our total production is ultimately processed into consumer products. This is why we have consistently taken a prominent role in advocating for a well-designed, economy-wide price on carbon and engaged in development of other policies or legislation that could address end-use emissions. We have also expanded policy advocacy beyond carbon pricing to include regulatory action, such as support for the direct regulation of methane.

See Part I—Item 1A—Risk Factors – "Existing and future laws, regulations and internal initiatives relating to global climate changes, such as limitations on GHG emissions may impact or limit our business plans, result in significant expenditures, promote alternative uses of energy or reduce demand for our products" and "Broader investor and societal attention to and efforts to address global climate change may limit who can do business with us or our access to capital and could subject us to litigation"in our ~~2021~~2022 Annual Report on Form 10-K and Note 9 for information on climate change litigation.


			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			50


~~Capital Resources and Liquidity~~			~~Table of Contents~~

~~Company Response to Climate-Related Risks~~

The company has responded by putting in place a Sustainable Development Risk Management Standard covering the assessment and registration of significant and high sustainable development risks based on their consequence and likelihood of occurrence. We have developed a company-wide Climate Change Action Plan with the goal of tracking mitigation activities for each climate-related risk included in the corporate Sustainable Development Risk Register.

~~The risks addressed in our Climate Change Action Plan fall into four broad categories:~~

•~~GHG-related legislation and regulation.~~

•~~GHG emissions management.~~

•~~Physical climate-related impacts.~~

•~~Climate-related disclosure and reporting.~~

We announced in October 2020 the adoption of a Paris-aligned climate risk framework with the objective of implementing a coherent set of choices designed to facilitate the success of our existing exploration and production business through the energy transition. Given the uncertainties remaining about how the energy transition will evolve, the strategy aims to be robust across a range of potential future outcomes.

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

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

~~Our Plan includes the following:~~

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

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

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

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

•~~Achieving zero routine flaring by 2025.~~

•~~Achieving a near-zero methane intensity target, defined as 1.5 kilograms of carbon dioxide equivalent per BOE or approximately 0.15 percent of natural gas produced by 2030.~~

•~~Address end-use emissions: Advocate for a well-designed, economy-wide price on carbon and other policies that would address end-use demand and emissions from high-carbon intensity energy use.~~

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

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

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

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

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


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			Table of Contents

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, and objectives of management for future operations, 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,~~Fluctuations in crude oil, bitumen, natural gas, LNG and NGLs prices, including ~~pandemics (such as COVID-19) and epidemics and any related company~~a prolonged decline in these prices relative to historical or ~~government policies or actions.~~future expected levels.

•Global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including changes as a result of any ongoing military conflict, including the conflict between Russia and Ukraine, and the global response to such conflict, security threats on facilities and infrastructure, or from a public health crisis or from the imposition or lifting of crude oil production quotas or other actions that might be imposed by OPEC and other producing countries and the resulting company or third-party actions in response to such changes.

•~~Fluctuations in crude oil, bitumen, natural gas, LNG and NGLs prices, including a prolonged decline in these prices relative to historical or future expected levels.~~

•The impact of significant declines in prices for crude oil, bitumen, natural gas, LNG and NGLs, which may result in recognition of impairment charges on our long-lived assets, leaseholds and nonconsolidated equity investments.

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

•Potential failures or delays in achieving expected reserve or production levels from existing and future oil and gas developments, including due to operating hazards, drilling risks and the inherent uncertainties in predicting reserves and reservoir performance.

•Reductions in reserves replacement rates, whether as a result of the significant declines in commodity prices or otherwise.

•Unsuccessful exploratory drilling activities or the inability to obtain access to exploratory acreage.

•Unexpected changes in costs, inflationary pressures or technical requirements for constructing, modifying or operating E&P facilities.

•Legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring or water disposal.

•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.

•Substantial investment in and development use of, competing or alternative energy sources, including as a result of existing or future environmental rules and regulations.

•The impact of broader societal attention to and efforts to address climate change may impact our access to capital and insurance.

•Potential failures or delays in delivering on our current or future low-carbon strategy, including our inability to develop new technologies.

•The impact of public health crises, including pandemics (such as COVID-19) and epidemics and any related company or government policies or actions.


47			ConocoPhillips 2023 Q2 10-Q


			Table of Contents

•Lack of, or disruptions in, adequate and reliable transportation for our crude oil, bitumen, natural gas, LNG and NGLs.

•Inability to timely obtain or maintain permits, including those necessary for construction, drilling and/or development, or inability to make capital expenditures required to maintain compliance with any necessary permits or applicable laws or regulations.

•Failure to complete definitive agreements and feasibility studies for, and to complete construction of, announced and future E&P and LNG development in a timely manner (if at all) or on budget.


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			~~Table of Contents~~

•Potential disruption or interruption of our operations and any resulting consequences due to accidents, extraordinary weather events, supply chain disruptions, civil unrest, political events, war, terrorism, ~~cyber attacks,~~cybersecurity threats, and information technology failures, constraints or disruptions.

•Changes in international monetary conditions and foreign currency exchange rate fluctuations.

•Changes in international trade relationships, including the imposition of trade restrictions or tariffs relating to crude oil, bitumen, natural gas, LNG, NGLs and any materials or products (such as aluminum and steel) used in the operation of our business, including any sanctions imposed as a result of any ongoing military conflict, including the conflict between Russia and Ukraine.

•~~Substantial investment in and development use of, competing or alternative energy sources, including as a result of existing or future environmental rules and regulations.~~

•Liability for remedial actions, including removal and reclamation obligations, under existing and future environmental regulations and litigation.

•Liability resulting from litigation, including litigation directly or indirectly related to the transaction with Concho Resources Inc., or our failure to comply with applicable laws and regulations.

•General domestic and international economic and political developments, including armed hostilities; expropriation of assets; changes in governmental policies relating to crude oil, bitumen, natural gas, LNG and NGLs ~~pricing;~~pricing, including the imposition of price caps; regulation or taxation; and other political, economic or diplomatic developments, including as a result of any ongoing military conflict, including the conflict between Russia and Ukraine.

•Volatility in the commodity futures markets.

•Changes in tax and other laws, regulations (including alternative energy mandates) or royalty rules applicable to our business.

•Competition and consolidation in the oil and gas E&P ~~industry.~~industry, including competition for personnel and equipment.

•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.~~sentiment, including as a result of increased societal attention to and efforts to address climate change.

•Our inability to execute, or delays in the completion of, any asset dispositions or acquisitions we elect to pursue.

•Potential failure to obtain, or delays in obtaining, any necessary regulatory approvals for pending or future asset dispositions or acquisitions, or that such approvals may require modification to the terms of the transactions or the operation of our remaining business.

•Potential disruption of our operations as a result of pending or future asset dispositions or acquisitions, including the diversion of management time and attention.

•Our inability to deploy the net proceeds from any asset dispositions that are pending or that we elect to undertake in the future in the manner and timeframe we currently anticipate, if at all.

•The operation and financing of our joint ventures.

•The ability of our customers and other contractual counterparties to satisfy their obligations to us, including our ability to collect payments when due from the government of Venezuela or PDVSA.

•Our inability to realize anticipated cost savings and capital expenditure reductions.

•The inadequacy of storage capacity for our products, and ensuing curtailments, whether voluntary or involuntary, required to mitigate this physical constraint.

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

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

•Uncertainty as to the long-term value of our common stock.

•The ~~diversion of management time on integration-related matters.~~

•~~The~~ factors generally described in Part I—Item 1A in our ~~2021~~2022 Annual Report on Form 10-K and any additional risks described in our other filings with the SEC.


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			Table of Contents

Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market Risk

Information about market risks for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 does not differ materially from that discussed under Item 7A in our ~~2021~~2022 Annual Report on Form ~~10-K.~~10-K except for foreign currency exchange risks.

Foreign Currency Exchange Risk

At June 30, 2023, we had outstanding foreign currency exchange forward contracts to buy $5.2 billion CAD at $0.751 against the U.S. dollar in anticipation of our future acquisition of the additional interest in Surmont. The forward contracts have a gross notional value of $5.2 billion CAD and are carried at a fair value of $19 million. Based on the assumed volatility in the fair value, the net fair value of these foreign currency contracts at June 30, 2023, was a before-tax gain of $19 million. Based on an adverse hypothetical 10 percent change in the June 30, 2023 exchange rate, this would result in an additional before-tax loss of approximately $350 million. The sensitivity analysis is based on changing one assumption while holding all other assumptions constant, which in practice may be unlikely to occur, as changes in some of the assumptions may be correlated. The contracts will settle in the second half of 2023.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. At ~~September~~June 30, ~~2022,~~2023, with the participation of our management, our Chairman and Chief Executive Officer (principal executive officer) and our Executive Vice President and Chief Financial Officer (principal financial officer) carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of ConocoPhillips’ disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded our disclosure controls and procedures were operating effectively at ~~September~~June 30, ~~2022.~~2023.

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

ConocoPhillips has elected to use a $1 million threshold for disclosing certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party. ConocoPhillips believes proceedings under this threshold are not material to ConocoPhillips' business and financial condition. Applying this threshold, there are no such proceedings to disclose for the quarter ended ~~September~~June 30, ~~2022.~~2023. See Note 9 for information regarding other legal and administrative proceedings.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Item 1A of our ~~2021~~2022 Annual Report on Form 10-K.


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			Table of Contents

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

Issuer Purchases of Equity Securities

Millions of Dollars
Period
Total Number of
Shares
Purchased*
Average Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares That
May Yet Be Purchased
Under the Plans or
Programs
July 1 - 31, 2022 4,670,147 $ 86.98 4,670,147 $ 6,729
August 1 - 31, 2022 10,943,703 101.96 10,943,703 5,614
September 1 - 30, 2022 11,700,114 109.21 11,700,114 4,336
27,313,964 27,313,964


					Millions of Dollars
Period	Total Number of Shares Purchased*	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
April 1 - 30, 2023	2,924,079	$	104.80	2,924,079	$	19,584
May 1 - 31, 2023	4,401,055	101.07		4,401,055	19,139
June 1 - 30, 2023	5,356,292	102.44		5,356,292	18,591
	12,681,426			12,681,426

*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. As of ~~September 30,~~October 2022, we had ~~repurchased $20.7 billion of shares. In October 2022, our Board of Directors approved an increase~~announced a total authorization to ~~our authorization from $25 billion~~repurchase up to $45 billion of our common ~~stock to support our plan for future share repurchases.~~stock. As of June 30, 2023, we had repurchased $26.4 billion of shares. Repurchases are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. Except as limited by applicable legal requirements, repurchases may be increased, decreased or discontinued at any time without prior notice. Shares of stock repurchased under the plan are held as treasury shares. See Part I—Item 1A—Risk Factors – “Our ability to execute our capital return program is subject to certain considerations” in our ~~2021~~2022 Annual Report on Form 10-K.

Item 5. Other Information

Insider Trading Arrangements

During the three-month period ended June 30, 2023, no officers or directors of the company have adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.


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			Table of Contents

Item 6. Exhibits


10.13.1			FSecond Amended and Restated Bylaws, dated ~~orm of Key Employee Awar~~ May ~~d Terms and Conditions, as part of the ConocoPhillips Targeted Variable Long Term Incentive Program, granted under the 2014~~16, 2023.

10.1			2023 Omnibus Stock and Performance ~~Performance~~ Incentive Plan of ConocoPhillips ~~dated August 1, 2022.~~(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of ConocoPhillips filed on May 18, 2023; File No. 001-32395).

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

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

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

101.INS*			Inline XBRL Instance Document.

101.SCH*			Inline XBRL Schema Document.

101.CAL*			Inline XBRL Calculation Linkbase Document.

101.LAB*			Inline XBRL Labels Linkbase Document.

101.PRE*			Inline XBRL Presentation Linkbase Document.

101.DEF*			Inline XBRL Definition Linkbase Document.

104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.


51			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			56


			Table of Contents

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			CONOCOPHILLIPS

			/s/ ~~Kontessa S. Haynes-Welsh~~Christopher P. Delk
			~~Kontessa S. Haynes-Welsh~~Christopher P. Delk
			~~Chief Accounting Officer~~Vice President, Controller
			and General Tax Counsel
~~November~~August 3, ~~2022~~2023


57			ConocoPhillips ~~2022 Q3~~2023 Q2 10-Q			52


			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			3126

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5449

Item 4. Controls and Procedures			5449

Part II—Other Information

Item 1. Legal Proceedings			5449

Item 1A. Risk Factors			5449

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5550

Item 5. Other Information			50

Item 6. ~~Exhibits~~Exhibits			5651

Signature			5752


	Millions of Dollars
	Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021
Supplemental Pro Forma (unaudited)	As Reported		Pro forma Shell	Pro forma Combined	As Reported	Pro forma Shell	Pro forma Combined
Total Revenues and Other Income	11,616		882	12,498	32,386	2,277	34,663
Income before income taxes	3,582		364	3,946	8,376	780	9,156
Net Income	2,379		279	2,658	5,452	597	6,049

Earnings per share ($ per share):
Basic net income	$	1.78		1.99	4.10		4.55
Diluted net income	1.78			1.98	4.09		4.54


	September 30 2022		December 31 2021
Expected return on plan assets (U.S. qualified pension plan)	5.30	%	3.40

Relevant discount rates
U.S. qualified pension plan	5.65	%	2.85
U.S. nonqualified pension plan	5.60		2.50