ConocoPhillips 10Q 2020 Q2 Quarterly report

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

June 30, 2020

[

]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number:

001-32395

ConocoPhillips

(Exact name of registrant as specified in its charter)

Delaware

01-0562944

(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer

Identification No.)

925 N. Eldridge Parkway

Houston

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

[x] 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

months (or for such shorter period that the registrant

was required to submit such files).

Yes

[x] 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

[x]

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

[

]

[x]

The registrant had

1,072,566,210

shares of common stock, $.01 par value, outstanding

at June 30, 2020.

CONOCOPHILLIPS

TABLE OF CONTENTS

Page

Commonly Used Abbreviations

………………………………………………………………………...

Part I—Financial Information

Item 1. Financial Statements

Consolidated Income Statement

……………………………………………………………………..

Consolidated Statement of Comprehensive Income

…………………………………………………

Consolidated Balance Sheet

…………………………………………………………………………

Consolidated Statement of Cash Flows

……………………………………………………………...

Notes to Consolidated Financial Statements

………………………………………………………...

Supplementary Information—Condensed Consolidating Financial Information

……………………

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

Results of Operations

…………………………………………………………………………

Item 3. Quantitative and Qualitative Disclosures About Market Risk

………………………………..

Item 4. Controls and Procedures

………………………………………………………………………

Part II—Other Information

Item 1. Legal Proceedings

……………………………………………………………………………..

Item 1A. Risk Factors

…………………………………………………………………………………

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

………………………………...

Item 6. Exhibits

………………………………………………………………………………………..

Signature

………………………………………………………………………………………………….

Commonly Used Abbreviations

The following industry-specific, accounting and

other terms, and abbreviations may be commonly

used in this

report.

Currencies

Accounting

$ or USD

U.S. dollar

ARO

asset retirement obligation

CAD

Canadian dollar

ASC

accounting standards codification

EUR

Euro

ASU

accounting standards update

GBP

British pound

DD&A

depreciation, depletion and

amortization

Units of Measurement

FASB

Financial Accounting Standards

BBL

barrel

Board

BCF

billion cubic feet

FIFO

first-in, first-out

BOE

barrels of oil equivalent

G&A

general and administrative

MBD

thousands of barrels per day

GAAP

generally accepted accounting

MCF

thousand cubic feet

principles

MBOD

thousand barrels of oil per day

LIFO

last-in, first-out

million

NPNS

normal purchase normal sale

MMBOE

million barrels of oil equivalent

PP&E

properties, plants and equipment

MMBOD

million barrels of oil per day

SAB

staff accounting bulletin

MBOED

thousands of barrels of oil

VIE

variable interest entity

equivalent per day

MMBTU

million British thermal units

Miscellaneous

MMCFD

million cubic feet per day

EPA

Environmental Protection Agency

European Union

Industry

FERC

Federal Energy Regulatory

CBM

coalbed methane

Commission

E&P

exploration and production

GHG

greenhouse gas

FEED

front-end engineering and design

HSE

health, safety and environment

FPS

floating production system

ICC

International Chamber of

FPSO

floating production, storage and

Commerce

offloading

ICSID

World Bank’s

International

JOA

joint operating agreement

Centre for Settlement of

LNG

liquefied natural gas

Investment Disputes

NGLs

natural gas liquids

IRS

Internal Revenue Service

OPEC

Organization of Petroleum

OTC

over-the-counter

Exporting Countries

NYSE

New York Stock Exchange

PSC

production sharing contract

SEC

U.S. Securities and Exchange

PUDs

proved undeveloped reserves

Commission

SAGD

steam-assisted gravity drainage

TSR

total shareholder return

WCS

Western Canada Select

U.K.

United Kingdom

WTI

West Texas

Intermediate

U.S.

United States of America

PART

FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

Consolidated Income Statement

ConocoPhillips

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Revenues and Other Income

Sales and other operating revenues

2,749

7,953

8,907

17,103

Equity in earnings of affiliates

173

311

361

Gain on dispositions

596

554

Other income (loss)

594

172

(945)

874

Total Revenues and

Other Income

4,016

8,380

8,827

18,437

Costs and Expenses

Purchased commodities

1,130

2,674

3,791

6,349

Production and operating expenses

1,047

1,418

2,220

2,689

Selling, general and administrative expenses

156

129

153

282

Exploration expenses

122

285

232

Depreciation, depletion and amortization

1,158

1,490

2,569

3,036

Impairments

(2)

519

Taxes other than

income taxes

141

194

391

469

Accretion on discounted liabilities

133

173

Interest and debt expense

202

165

404

398

Foreign currency transaction (gain) loss

(83)

Other expenses

(7)

(13)

Total Costs and Expenses

3,995

6,322

10,369

13,692

Income (loss) before income taxes

2,058

(1,542)

4,745

Income tax provision (benefit)

(257)

461

(109)

1,302

Net income (loss)

278

1,597

(1,433)

3,443

Less: net income attributable to noncontrolling interests

(18)

(17)

(46)

(30)

Net Income (Loss) Attributable to ConocoPhillips

260

1,580

(1,479)

3,413

Net Income (Loss) Attributable to ConocoPhillips Per Share

of Common Stock

(dollars)

Basic

0.24

1.40

(1.37)

3.01

Diluted

0.24

1.40

(1.37)

3.00

Average Common

Shares Outstanding

(in thousands)

Basic

1,076,659

1,125,995

1,080,610

1,132,691

Diluted

1,077,606

1,131,242

1,080,610

1,139,511

See Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income

ConocoPhillips

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income (Loss)

278

1,597

(1,433)

3,443

Other comprehensive income (loss)

Defined benefit plans

Reclassification adjustment for amortization of prior

service credit included in net income (loss)

(8)

(10)

(16)

(18)

Net actuarial gain arising during the period

Reclassification adjustment for amortization of net actuarial

losses included in net income (loss)

Income taxes on defined benefit plans

(3)

(5)

(7)

(10)

Defined benefit plans, net of tax

Unrealized holding gain on securities

Income taxes on unrealized holding gain on securities

(2)

(1)

Unrealized holding gain on securities, net of tax

Foreign currency translation adjustments

309

(490)

246

Income taxes on foreign currency translation adjustments

(1)

Foreign currency translation adjustments, net of tax

309

(488)

246

Other Comprehensive Income (Loss), Net

of Tax

320

(468)

276

Comprehensive Income (Loss)

598

1,684

(1,901)

3,719

Less: comprehensive income attributable to noncontrolling

interests

(18)

(17)

(46)

(30)

Comprehensive Income (Loss) Attributable to

ConocoPhillips

580

1,667

(1,947)

3,689

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheet

ConocoPhillips

Millions of Dollars

June 30

December 31

2020

2019

Assets

Cash and cash equivalents

2,907

5,088

Short-term investments

3,985

3,028

Accounts and notes receivable (net of allowance of $

and $

, respectively)

1,399

3,267

Accounts and notes receivable—related parties

133

134

Investment in Cenovus Energy

971

2,111

Inventories

982

1,026

Prepaid expenses and other current assets

676

2,259

Total Current

Assets

11,053

16,913

Investments and long-term receivables

8,334

8,687

Loans and advances—related parties

167

219

Net properties, plants and equipment

(net of accumulated DD&A of $

57,176

and $

55,477

, respectively)

41,120

42,269

Other assets

2,372

2,426

Total Assets

63,046

70,514

Liabilities

Accounts payable

2,060

3,176

Accounts payable—related parties

Short-term debt

146

105

Accrued income and other taxes

312

1,030

Employee benefit obligations

422

663

Other accruals

1,145

2,045

Total Current

Liabilities

4,105

7,043

Long-term debt

14,852

14,790

Asset retirement obligations and accrued environmental

costs

5,465

5,352

Deferred income taxes

3,901

4,634

Employee benefit obligations

1,586

1,781

Other liabilities and deferred credits

1,644

1,864

Total Liabilities

31,553

35,464

Equity

Common stock (

2,500,000,000

shares authorized at $

0.01

par value)

Issued (2020—

1,798,563,079

shares; 2019—

1,795,652,203

shares)

Par value

Capital in excess of par

47,079

46,983

Treasury stock (at cost: 2020—

725,996,869

shares; 2019—

710,783,814

shares)

(47,130)

(46,405)

Accumulated other comprehensive loss

(5,825)

(5,357)

Retained earnings

37,351

39,742

Total Common

Stockholders’ Equity

31,493

34,981

Noncontrolling interests

Total Equity

31,493

35,050

Total Liabilities and

Equity

63,046

70,514

See Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows

ConocoPhillips

Millions of Dollars

Six Months Ended

June 30

2020

2019

Cash Flows From Operating Activities

Net income (loss)

(1,433)

3,443

Adjustments to reconcile net income (loss) to net cash provided

by operating

activities

Depreciation, depletion and amortization

2,569

3,036

Impairments

519

Dry hole costs and leasehold impairments

Accretion on discounted liabilities

133

173

Deferred taxes

(320)

(221)

Undistributed equity earnings

404

362

Gain on dispositions

(554)

(99)

Unrealized (gain) loss on investment in Cenovus Energy

1,140

(373)

Other

(244)

(21)

Working

capital adjustments

Decrease in accounts and notes receivable

1,746

461

Increase in inventories

(27)

(77)

Increase in prepaid expenses and other current assets

(149)

Decrease in accounts payable

(754)

(326)

Decrease in taxes and other accruals

(838)

(494)

Net Cash Provided by Operating Activities

2,262

5,785

Cash Flows From Investing Activities

Capital expenditures and investments

(2,525)

(3,366)

Working

capital changes associated with investing activities

(251)

Proceeds from asset dispositions

1,313

701

Net purchases of investments

(1,030)

(485)

Collection of advances/loans—related parties

Other

(35)

126

Net Cash Used in Investing Activities

(2,462)

(2,938)

Cash Flows From Financing Activities

Repayment of debt

(214)

(38)

Issuance of company common stock

(36)

Repurchase of company common stock

(726)

(2,002)

Dividends paid

(913)

(696)

Other

(28)

(55)

Net Cash Used in Financing Activities

(1,879)

(2,827)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted

Cash

(93)

Net Change in Cash, Cash Equivalents and Restricted Cash

(2,172)

Cash, cash equivalents and restricted cash at beginning

of period

5,362

6,151

Cash, Cash Equivalents and Restricted Cash at End of Period

3,190

6,197

Restricted cash of $

million and $

195

million are included in the "Prepaid expenses and other current assets" and "Other assets" lines,

respectively, of our Consolidated Balance Sheet as of June 30, 2020.

Restricted cash of $

million and $

184

million are included in the "Prepaid expenses and other current assets" and "Other assets" lines,

respectively, of our Consolidated Balance Sheet as of December 31, 2019.

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

ConocoPhillips

Note 1—Basis of Presentation

The interim-period financial information

presented in the financial statements included

in this report is

unaudited and, in the opinion of management,

includes all known accruals and adjustments

necessary for a fair

presentation of the consolidated financial

position of ConocoPhillips and its results

of operations and cash

flows for such periods.

All such adjustments are of a normal and recurring

nature unless otherwise disclosed.

Certain notes and other information have been

condensed or omitted from the interim

financial statements

included in this report.

Therefore, these financial statements should

be read in conjunction with the

consolidated financial statements

and notes included in our 2019 Annual Report

on Form 10-K.

The unrealized (gain) loss on investment in Cenovus

Energy included on our consolidated statement of cash

flows, previously reflected on the line item

“Other” within net cash provided by operating

activities, has been

reclassified in the comparative period to conform

with the current period’s presentation.

Note 2—Changes in Accounting Principles

adopted

the provisions of FASB ASU No. 2016-13, “Measurement of Credit Losses

on Financial

Instruments,” (ASC Topic 326) and its amendments,

beginning

January 1, 2020

This ASU, as amended, sets

forth the current expected credit loss model,

a new forward-looking impairment model

for certain financial

instruments measured at amortized cost basis

based on expected losses rather than incurred losses.

This ASU,

as amended, which primarily applies to our accounts

receivable, also requires credit losses related

to available-

for-sale debt securities to be recorded through an allowance

for credit losses.

The adoption of this ASU did

not have a material impact to our financial statements.

The majority of our receivables are due within

30 days

or less.

We monitor the credit quality of our counterparties through review of collections,

credit ratings, and

other analyses.

We develop our estimated allowance for credit losses primarily using an aging method

and

analyses of historical loss rates as well as consideration

of current and future conditions that could

impact our

counterparties’ credit quality and liquidity.

Note 3—Inventories

Inventories consisted of the following:

Millions of Dollars

June 30

December 31

2020

2019

Crude oil and natural gas

452

472

Materials and supplies

530

554

982

1,026

Inventories valued on the LIFO basis totaled

352

million and $

286

million at June 30, 2020 and December

31, 2019,

respectively.

Due to a precipitous decline in commodity

prices beginning in March this year, we

recorded a lower of cost or market adjustment

in the first quarter of 2020 of $

228

million to our crude oil and

natural gas inventories. The adjustment was included

in the “Purchased commodities” line on our

consolidated

income statement.

Commodity prices have since improved in the

second quarter.

Note 4—Asset Acquisitions and Dispositions

Assets Sold

In May 2020, we completed the divestiture

of our subsidiaries that held our Australia-West assets and

operations, and based on an effective date of January

1, 2019, we received proceeds of $

765

million with an

additional $

200

million due upon final investment decision

of the proposed Barossa development project.

the second quarter of 2020, we recognized a before-tax

gain of $

587

million related to this transaction.

At the

time of disposition, the net carrying value of the

subsidiaries sold was approximately $

0.2

billion, excluding

0.5

billion of cash.

The net carrying value consisted primarily

of $

1.3

billion of PP&E and $

0.1

billion of

other current assets offset by $

0.7

billion of ARO, $

0.3

billion of deferred tax liabilities, and $

0.2

billion of

other liabilities.

The before-tax earnings associated with the subsidiaries

sold, excluding the gain on

disposition noted above, were $

265

million and $

156

million for the six-month periods ended June 30,

2020

and 2019, respectively.

Production associated with the disposed assets

averaged

MBOED in the six-month

period of 2020.

Results of operations for the subsidiaries sold are

reported in our

Asia Pacific and Middle East

segment.

In March 2020, we completed the sale of our Niobrara

interests for approximately $

359

million after

customary adjustments and recognized a before-tax

loss on disposition of $

million.

At the time of

disposition, our interest in Niobrara had a net carrying

value of $

397

million, consisting primarily of $

433

million of PP&E and $

million of ARO.

The before-tax earnings associated with our

interests in Niobrara,

including the loss on disposition, were a loss of $

million and $

million for the six-month periods ended

June 30, 2020 and 2019, respectively.

In February 2020, we sold our Waddell Ranch interests in the Permian Basin for $

184

million after customary

adjustments.

NaN

gain or loss was recognized on the sale.

Production from the disposed Niobrara and Waddell Ranch interests in our

Lower 48

segment averaged

MBOED in 2019.

Planned Acquisition

In July 2020, we signed a definitive agreement

to acquire additional Montney acreage for cash consideration

approximately $

375

million before customary adjustments, plus the

assumption of approximately $

million

in financing obligations for associated partially

owned infrastructure.

This acquisition consists primarily of

undeveloped properties and includes

140,000

net acres in the liquids-rich Inga Fireweed

asset Montney zone,

which is directly adjacent to our existing Montney

position.

Upon completion of this transaction, we will

have

a Montney acreage position of

295,000

net acres with a

100

percent working interest.

The transaction is

subject to regulatory approval, is expected to close

in the third quarter of 2020 and will be reported

in our

Canada segment.

Note 5—Investments, Loans and Long-Term Receivables

APLNG

APLNG executed project financing agreements

for an $

8.5

billion project finance facility in 2012. The $

8.5

billion project finance facility was initially composed

of financing agreements executed by APLNG

with the

Export-Import Bank of the United States for approximately

2.9

billion, the Export-Import Bank of China for

approximately $

2.7

billion, and a syndicate of Australian and international

commercial banks for

approximately $

2.9

billion.

All amounts were drawn from the facility.

APLNG made its first principal and

interest repayment in March 2017 and is scheduled

to make

bi-annual

payments until

March 2029

APLNG made a voluntary repayment of $

1.4

billion to the Export-Import Bank of China

in September 2018.

At the same time, APLNG obtained a United

States Private Placement (USPP) bond facility

of $

1.4

billion.

APLNG made its first interest payment related to

this facility in March 2019, and principal

payments are

scheduled to commence in September 2023, with

bi-annual

payments due on the facility until

September 2030

During the first quarter of 2019, APLNG refinanced

3.2

billion of existing project finance debt through two

transactions.

As a result of the first transaction, APLNG obtained

a commercial bank facility of $

2.6

billion.

APLNG made its first principal and interest

repayment in September 2019 with

bi-annual

payments due on the

facility until

March 2028

Through the second transaction, APLNG obtained

a USPP bond facility of $

0.6

billion.

APLNG made its first interest payment in September

2019, and principal payments are scheduled to

commence in September 2023, with

bi-annual

payments due on the facility until

September 2030.

In conjunction with the $

3.2

billion debt obtained during the first quarter

of 2019 to refinance existing project

finance debt, APLNG made voluntary repayments

of $

2.2

billion and $

1.0

billion to a syndicate of Australian

and international commercial banks and the Export-Import

Bank of China, respectively.

At June 30, 2020, a balance of $

6.5

billion was outstanding on the facilities.

See Note 11—Guarantees, for

additional information.

At June 30, 2020, the carrying value of our equity

method investment in APLNG was $

6,889

million.

The

balance is included in the “Investments and long-term

receivables” line on our consolidated balance

sheet.

Loans and Long-Term Receivables

As part of our normal ongoing business operations,

and consistent with industry practice,

we enter into

numerous agreements with other parties to pursue

business opportunities.

Included in such activity are loans

made to certain affiliated and non-affiliated companies.

At June 30, 2020, significant loans to affiliated

companies included $

272

million in project financing to Qatar Liquefied

Gas Company Limited (3).

On our consolidated balance sheet, the long-term

portion of these loans is included in the “Loans

and

advances—related parties” line, while the short-term

portion is in the “Accounts and notes receivable—related

parties” line.

Note 6—Investment in Cenovus Energy

On May 17, 2017, we completed the sale of our

percent nonoperated interest in the FCCL Partnership,

well as the majority of our western Canada gas assets,

to Cenovus Energy.

Consideration for the transaction

included

208

million Cenovus Energy common shares, which,

at closing, approximated

16.9

percent of issued

and outstanding Cenovus Energy common stock.

The fair value and cost basis of our investment

208

million Cenovus Energy common shares was $

1.96

billion based on a price of $

9.41

per share on the NYSE on

the closing date.

At June 30, 2020, the investment included on

our consolidated balance sheet was $

971

million and is carried at

fair value.

The fair value of the

208

million Cenovus Energy common shares reflects

the closing price of

4.67

per share on the NYSE on the last trading

day of the quarter, a decrease of $

1.14

billion from its fair

value of $

2.11

billion at year-end 2019.

For the three- and six-month periods ended June

30, 2020, we

recorded an unrealized gain of $

551

million and an unrealized loss of $

1.14

billion, respectively.

For the

three- and six-month periods ended June 30, 2019,

we recorded an unrealized gain of $

million and $

373

million, respectively.

The unrealized gains and losses are recorded within

the “Other income (loss)” line of

our consolidated income statement and are related to

the shares held at the reporting date.

See Note 14—Fair

Value

Measurement, for additional information.

Subject to market conditions, we intend to decrease

our

investment over time through market transactions,

private agreements or otherwise.

Note 7—Suspended Wells

The capitalized cost of suspended wells at June 30,

2020, was $

701

million, a decrease of $

319

million from

year-end 2019 primarily related to our Australia-West divestiture.

See Note 4—Asset Acquisitions and

Dispositions,

for additional information.

Of the well costs capitalized for more than one

year as of December

31, 2019, $

million was charged to dry hole expense during

the first six months of 2020 for

one

suspended

well in the Kamunsu East Field offshore Malaysia.

Note 8—Impairments

During the three-

and six-month periods ended June 30, 2020

and 2019, we recognized before-tax impairment

charges within the following segments:

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Lower 48

513

Europe and North Africa

(4)

(2)

519

We perform impairment reviews when triggering events arise that may impact the

fair value of our assets or

investments.

We observed volatility in commodity prices during the first six-months of 2020.

A decline in commodity

prices beginning in March prompted us to evaluate

the recoverability of the carrying value of our assets

and

whether an other than temporary impairment

occurred for investments in our portfolio.

For certain non-core

natural gas assets in the Lower 48, a significant decrease

in the outlook for current and long-term natural

gas

prices resulted in a decline in the estimated fair

values to amounts below carrying value.

Accordingly, in the

first quarter of 2020, we recorded impairments of

511

million related to these non-core natural gas assets,

primarily for the Wind River Basin operations area consisting of

developed properties in the Madden Field and

the Lost Cabin Gas Plant, which were written down

to fair value.

See Note 14—Fair Value Measurement, for

additional information.

A sustained decline in the current and long-term

outlook on commodity prices could trigger

additional

impairment reviews and possibly result in

future impairment charges.

We recorded a before-tax impairment in the first quarter of 2020 of $

million in our Asia Pacific and Middle

East segment related to the associated carrying value

of capitalized undeveloped leasehold costs for

the

Kamunsu East Field in Malaysia that is no longer

in our development plans.

This charge is included in the

“Exploration expenses” line on our consolidated income

statement and is not reflected in the table above.

Note 9—Debt

Our debt balance as of June 30, 2020 was $

14,998

million compared with $

14,895

million at December 31,

2019.

Our revolving credit facility provides a total commitment

of $

6.0

billion and expires in

May 2023

Our

revolving credit facility may be used for direct

bank borrowings, the issuance of letters of credit

totaling up to

500

million, or as support for our commercial paper

program.

Our commercial paper program consists of

the

ConocoPhillips Company $

6.0

billion program, primarily a funding source for

short-term working capital

needs.

Commercial paper maturities are generally limited

90 days

We had no commercial paper outstanding at June 30, 2020 or December 31, 2019.

We had no direct

outstanding borrowings or letters of credit

under the revolving credit facility at June 30, 2020 or

December 31,

2019.

Since we had

commercial paper outstanding and had issued

letters of credit, we had access to $

6.0

billion in borrowing capacity under our revolving

credit facility at June 30, 2020.

In March 2020, S&P affirmed its “A” rating on our senior long-term debt and revised its outlook to “negative”

from “stable”.

In April 2020, Moody’s affirmed their rating of “A3” with a “stable” outlook.

Our current

rating from Fitch is “A” with a “stable” outlook.

At June 30, 2020, we had $

283

million of certain variable rate demand bonds (VRDBs)

outstanding with

maturities ranging through 2035.

The VRDBs are redeemable at the option of the bondholders

on any business

day.

If they are ever redeemed, we have the ability

and intent to refinance on a long-term basis,

therefore, the

VRDBs are included in the “Long-term debt” line

on our consolidated balance sheet.

Note 10—Changes in Equity

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Loss

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended June 30, 2020

Balances at March 31, 2020

47,027

(47,130)

(6,145)

37,545

31,387

Net income

260

278

Other comprehensive income

320

Dividends paid ($

0.42

per common share)

(455)

Distributions to noncontrolling interests and other

(6)

Disposition

(84)

Distributed under benefit plans

Other

Balances at June 30, 2020

47,079

(47,130)

(5,825)

37,351

31,493

For the six months ended June 30, 2020

Balances at December 31, 2019

46,983

(46,405)

(5,357)

39,742

35,050

Net income (loss)

(1,479)

(1,433)

Other comprehensive loss

(468)

Dividends paid ($

0.84

per common share)

(913)

Repurchase of company common stock

(726)

Distributions to noncontrolling interests and other

(32)

Disposition

(84)

Distributed under benefit plans

Other

Balances at June 30, 2020

47,079

(47,130)

(5,825)

37,351

31,493

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Loss

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended June 30, 2019

Balances at March 31, 2019

46,877

(43,656)

(5,914)

35,534

122

32,981

Net income

1,580

1,597

Other comprehensive income

Dividends paid ($

0.31

per common share)

(346)

Repurchase of company common stock

(1,250)

Distributions to noncontrolling interests and other

(43)

Distributed under benefit plans

Other

Balances at June 30, 2019

46,922

(44,906)

(5,827)

36,769

33,074

For the six months ended June 30, 2019

Balances at December 31, 2018

46,879

(42,905)

(6,063)

34,010

125

32,064

Net income

3,413

3,443

Other comprehensive income

276

Dividends paid ($

0.61

per common share)

(696)

Repurchase of company common stock

(2,002)

Distributions to noncontrolling interests and other

(60)

Distributed under benefit plans

Changes in Accounting Principles*

(40)

Other

Balances at June 30, 2019

46,922

(44,906)

(5,827)

36,769

33,074

*Cumulative effect of the adoption of ASU No. 2018-02,

"Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."

Note 11—Guarantees

At June 30, 2020, we were liable for certain

contingent obligations under various contractual

arrangements as

described below.

We recognize a liability, at inception, for the fair value of our obligation as a guarantor for

newly issued or modified guarantees.

Unless the carrying amount of the liability is

noted below, we have not

recognized a liability because the fair value of the obligation

is immaterial.

In addition, unless otherwise

stated, we are not currently performing with any

significance under the guarantee and expect

future

performance to be either immaterial or have only

a remote chance of occurrence.

APLNG Guarantees

At June 30, 2020, we had outstanding multiple

guarantees in connection with our

37.5

percent ownership

interest in APLNG.

The following is a description of the guarantees

with values calculated utilizing June 2020

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

11 years

Our maximum exposure under this guarantee is

approximately $

170

million

and may become payable if an enforcement action

is commenced by the project finance lenders

against APLNG.

At June 30, 2020, the carrying value of this

guarantee was approximately $

million.

●

In conjunction with our original purchase of an ownership

interest in APLNG from Origin Energy in

October 2008, we agreed to reimburse Origin Energy for

our share of the existing contingent liability

arising under guarantees of an existing obligation

of APLNG to deliver natural gas under several

sales

agreements with remaining terms of

1 to 22 years

Our maximum potential liability for future

payments, or cost of volume delivery, under these guarantees is estimated

to be $

700

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

17 to

25 years or the life of the venture

Our maximum potential amount of future payments

related to these

guarantees is approximately $

120

million and would become payable if APLNG

does not perform.

June 30, 2020, the carrying value of these guarantees

was approximately $

million.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling

approximately

780

million, which consist primarily of

guarantees of the residual value of leased office buildings,

guarantees

of the residual value of corporate aircrafts,

and a guarantee for our portion of a joint venture’s project finance

reserve accounts.

These guarantees have remaining terms

1 to 5 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 June 30, 2020, the carrying value of these

guarantees was approximately $

million.

Indemnifications

Over the years, we have entered into agreements to

sell ownership interests in certain corporations,

joint

ventures and assets that gave rise to qualifying

indemnifications.

These agreements include indemnifications

for taxes and environmental liabilities.

The majority of these indemnifications are related

to tax issues and the

majority of these expire in 2021.

Those related to environmental issues have terms

that are generally indefinite

and the maximum amounts of future payments are

generally unlimited.

The carrying amount recorded for

these indemnification obligations at June 30, 2020,

was approximately $

million.

We amortize the

indemnification liability over the relevant time

period the indemnity is in effect, if one exists, based

on the

facts and circumstances surrounding each type

of indemnity.

In cases where the indemnification term

indefinite, we will reverse the liability when we have

information the liability is essentially

relieved or

amortize the liability over an appropriate time

period as the fair value of our indemnification

exposure

declines.

Although it is reasonably possible future payments

may exceed amounts recorded, due to the nature

of the indemnifications, it is not possible to make

a reasonable estimate of the maximum

potential amount of

future payments.

Included in the recorded carrying amount

at June 30, 2020, were approximately $

million

of environmental accruals for known contamination

that are included in the “Asset retirement

obligations and

accrued environmental costs” line on our consolidated

balance sheet.

For additional information about

environmental liabilities, see Note 12—Contingencies

and Commitments.

Note 12—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

liability when the loss is probable and the amount

is reasonably estimable.

If a range of amounts can be

reasonably estimated and no amount within the range

is a better estimate than any other amount,

then the low

end of the range is accrued.

We do not reduce these liabilities for potential insurance or third-party recoveries.

We accrue receivables for insurance or other third-party recoveries when applicable.

With respect to income

tax-related contingencies, we use a cumulative probability-weighted

loss accrual in cases where sustaining a

tax position is less than certain.

Based on currently available information, we believe

it is remote that future costs related to known

contingent

liability exposures will exceed current accruals by

an amount that would have a material

adverse impact on our

consolidated financial statements.

As we learn new facts concerning contingencies,

we reassess our position

both with respect to accrued liabilities

and other potential exposures.

Estimates particularly sensitive to future

changes include contingent liabilities

recorded for environmental remediation, tax and legal

matters.

Estimated future environmental remediation

costs are subject to change due to such factors

as the uncertain

magnitude of cleanup costs, the unknown time

and extent of such remedial actions that

may be required, and

the determination of our liability in proportion

to that of other responsible parties.

Estimated future costs

related to tax and legal matters are subject to

change as events evolve and as additional

information becomes

available during the administrative and litigation

processes.

Environmental

We are subject to international, federal, state and local environmental laws and regulations.

When we prepare

our consolidated financial statements, we record

accruals for environmental liabilities

based on management’s

best estimates, using all information that is

available at the time.

We measure estimates and base liabilities on

currently available facts, existing technology, and presently enacted laws and

regulations, taking into account

stakeholder and business considerations.

When measuring environmental liabilities,

we also consider our prior

experience in remediation of contaminated sites,

other companies’ cleanup experience, and data released

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

any site at which we have been designated as a

potentially responsible party.

We have been successful to date

in sharing cleanup costs with other financially

sound companies.

Many of the sites at which we are potentially

responsible are still under investigation by the EPA or the agency concerned.

Prior to actual cleanup, those

potentially responsible normally assess the

site conditions, apportion responsibility and determine

the

appropriate remediation.

In some instances, we may have no liability

or may attain a settlement of liability.

Where it appears that other potentially responsible

parties may be financially unable to bear their

proportional

share, we consider this inability in estimating

our potential liability, and we adjust our accruals accordingly.

As a result of various acquisitions in the past,

we assumed certain environmental obligations.

Some of these

environmental obligations are mitigated by indemnifications

made by others for our benefit, and some of the

indemnifications are subject to dollar limits

and time limits.

We are currently participating in environmental assessments and cleanups at numerous

federal Superfund and

comparable state and international sites.

After an assessment of environmental exposures

for cleanup and

other costs, we make accruals on an undiscounted

basis (except those acquired in a purchase

business

combination, which we record on a discounted basis)

for planned investigation and remediation activities

for

sites where it is probable future costs will be incurred

and these costs can be reasonably estimated.

We have

not reduced these accruals for possible insurance recoveries.

At June 30, 2020 and December 31, 2019, our balance

sheet included a total environmental accrual

171

million for remediation activities

in the U.S. and Canada.

We expect to incur a substantial amount of

these expenditures within the next

30 years

In the future, we may be involved in additional

environmental

assessments, cleanups and proceedings.

Legal Proceedings

We are subject to various lawsuits and claims including but not limited to matters

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes, environmental

damages, climate change, personal injury, and property damage.

Our primary exposures for such matters

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties and

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

legal

proceedings against us.

Our process facilitates the early evaluation and quantification

of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

mediation.

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

the

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

of new

accruals, is required.

Other Contingencies

We have contingent liabilities resulting from throughput agreements with pipeline and

processing companies

not associated with financing arrangements.

Under these agreements, we may be required

to provide any such

company with additional funds through advances

and penalties for fees related to throughput capacity

not

utilized.

In addition, at June 30, 2020, we had performance

obligations secured by letters of credit of

196

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.

response to this expropriation, ConocoPhillips

initiated international arbitration on November 2, 2007,

with the

ICSID.

On September 3, 2013, an ICSID arbitration tribunal

held that Venezuela unlawfully expropriated

ConocoPhillips’ significant oil investments

in June 2007.

On January 17, 2017, the Tribunal reconfirmed the

decision that the expropriation was unlawful.

In March 2019, the Tribunal unanimously ordered the

government of Venezuela to pay ConocoPhillips approximately $

8.7

billion in compensation for the

government’s unlawful expropriation of the company’s investments in Venezuela in 2007.

ConocoPhillips has

filed a request for recognition of the award in several

jurisdictions.

On August 29, 2019, the ICSID Tribunal

issued a decision rectifying the award and reducing

it by approximately $

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.

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 $

billion under their

agreements in connection with the expropriation of the

projects and other pre-expropriation fiscal

measures.

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.

To date, ConocoPhillips has

received approximately $

754

million.

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 failed to cure its

breach.

As a result, ConocoPhillips has resumed legal enforcement

actions.

ConocoPhillips has ensured that

the settlement and any actions taken in enforcement

thereof meet all appropriate U.S. regulatory

requirements,

including those related to any applicable sanctions

imposed by the U.S. against Venezuela.

In 2016, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Corocoro project.

On August 2, 2019, the ICC Tribunal

awarded ConocoPhillips approximately $

million 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.

The Office of Natural Resources Revenue (ONRR) has conducted

audits of ConocoPhillips’ payment of

royalties on federal lands and has issued multiple

orders to pay additional royalties to the federal

government.

ConocoPhillips has appealed these orders and strongly

objects to the ONRR claims.

The appeals are pending

with the Interior Board of Land Appeals, except

for one order that is the subject of a lawsuit

ConocoPhillips

filed in 2016 in New Mexico federal court after

its appeal was denied by the Interior Board

of Land Appeals.

Beginning in 2017, cities, counties, and state governments

in California, New York, Washington,

Rhode

Island, Maryland and Hawaii, as well as the Pacific

Coast Federation of Fishermen’s Association, Inc., have

filed lawsuits against oil and gas companies,

including ConocoPhillips, seeking compensatory

damages and

equitable relief to abate alleged climate change impacts.

ConocoPhillips is vigorously defending against

these

lawsuits.

The lawsuits brought by the Cities of San Francisco,

Oakland and New York were dismissed by

federal district courts.

The New York dismissal remains on appeal.

The Ninth Circuit ruled that the San

Francisco and Oakland cases (and other California

cases) should proceed in state court, with that

decision

subject to appeal.

Lawsuits filed by the cities and counties in California,

Washington, and Hawaii are

currently stayed pending resolution of the Ninth Circuit

appeals.

Lawsuits filed in Maryland and Rhode Island

are proceeding in state court while rulings in those

matters, on the issue of whether the

matters should proceed

in state or federal court, are on appeal.

Several Louisiana parishes have filed lawsuits against

oil and gas companies, including ConocoPhillips,

seeking compensatory damages in connection

with historical oil and gas operations in Louisiana.

The lawsuits

are stayed pending an appeal with the Fifth Circuit

on the issue of whether they will proceed in federal

or state

court.

ConocoPhillips will vigorously defend against

these lawsuits.

In 2016, ConocoPhillips, through its subsidiary, The Louisiana Land and Exploration

Company LLC,

submitted claims as the largest private wetlands owner in Louisiana

within the settlement claims

administration process related to the oil spill

in the Gulf of Mexico in April 2010.

In July 2020, the claims

administrator issued an award to the company which,

after fees and expenses, totaled approximately

million.

Note 13—Derivative and Financial Instruments

We use futures, forwards, swaps and options

in various markets to meet our customer needs,

capture market

opportunities and manage foreign exchange currency

risk.

Commodity Derivative Instruments

Our commodity business primarily consists

of natural gas, crude oil, bitumen, LNG and NGLs.

Commodity derivative instruments are held at fair

value on our consolidated balance sheet.

Where these

balances have the right of setoff, they are presented on a

net basis.

Related cash flows are recorded as

operating activities on our consolidated statement

of cash flows.

On our consolidated income statement,

realized and unrealized 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.

We do not elect hedge accounting for our commodity derivatives.

The following table presents the gross fair values

of our commodity derivatives, excluding

collateral, and the

line items where they appear on our consolidated

balance sheet:

Millions of Dollars

June 30

December 31

2020

2019

Assets

Prepaid expenses and other current assets

316

288

Other assets

Liabilities

Other accruals

310

283

Other liabilities and deferred credits

The gains (losses) from commodity derivatives

incurred, and the line items where they appear on

our

consolidated income statement were:

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Sales and other operating revenues

(50)

(3)

Other income (loss)

Purchased commodities

(31)

(2)

(51)

The table below summarizes our material net exposures

resulting from outstanding commodity

derivative

contracts:

Open Position

Long/(Short)

June 30

December 31

2020

2019

Commodity

Natural gas and power (billions of cubic feet equivalent)

Fixed price

(20)

(5)

Basis

(27)

(23)

Foreign Currency Exchange Derivatives

We have foreign currency exchange rate risk resulting from international operations.

Our foreign currency

exchange derivative activity primarily

relates to managing our cash-related foreign currency

exchange rate

exposures, such as firm commitments for

capital programs or local currency tax payments,

dividends and cash

returns from net investments in foreign affiliates, and investments

in equity securities.

Our foreign currency exchange derivative instruments

are held at fair value on our consolidated

balance sheet.

Related cash flows are recorded as operating

activities on our consolidated statement of cash flows.

We do not

elect hedge accounting on our foreign currency exchange

derivatives.

The following table presents the gross fair values

of our foreign currency exchange derivatives,

excluding

collateral, and the line items where they appear

on our consolidated balance sheet:

Millions of Dollars

June 30

December 31

2020

2019

Assets

Prepaid expenses and other current assets

Liabilities

Other accruals

Other liabilities and deferred credits

The (gains) losses from foreign currency exchange

derivatives incurred, and the line item where

they appear

on our consolidated income statement were:

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Foreign currency transaction (gain) loss

(62)

We had the following net notional position of outstanding foreign currency exchange

derivatives:

In Millions

Notional Currency

June 30

December 31

2020

2019

Foreign Currency Exchange Derivatives

Buy GBP,

sell EUR

GBP

Sell CAD, buy USD

CAD

427

1,337

In the second quarter of 2019, we entered into foreign currency exchange contracts to sell CAD 1.35 billion at

CAD 0.748 against the USD. In the first quarter of 2020, we entered into forward currency exchange contracts

to buy CAD 0.9 billion at CAD 0.718 against the USD

Financial Instruments

We invest in financial instruments with maturities based on our cash forecasts for

the various accounts and

currency pools we manage.

The types of financial instruments in which we

currently invest include:

●

Time deposits: Interest bearing deposits placed with financial

institutions for a predetermined amount

of time.

●

Demand deposits: Interest bearing deposits placed

with financial institutions.

Deposited funds can be

withdrawn without notice.

●

Commercial paper: Unsecured promissory notes issued

by a corporation, commercial bank or

government agency purchased at a discount to mature

at par.

●

U.S. government or government agency obligations:

Securities issued by the U.S. government

or U.S.

government agencies.

●

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:

Millions of Dollars

Carrying Amount

Cash and Cash

Equivalents

Short-Term

Investments

Investments and Long-

Term Receivables

June 30

December 31

June 30

December 31

June 30

December 31

2020

2019

2020

2019

2020

2019

Cash

575

759

Demand Deposits

917

1,483

Time Deposits

Remaining maturities from 1 to 90 days

1,396

2,030

2,339

1,395

Remaining maturities from

91 to 180 days

1,302

465

Remaining maturities within one year

Remaining maturities greater than one

year through five years

Commercial Paper

Remaining maturities from 1 to 90 days

413

1,069

Remaining maturities from

91 to 180 days

U.S. Government Obligations

Remaining maturities from 1 to 90 days

394

2,903

5,079

3,705

2,929

The following investments in debt securities

classified as available for sale are carried on our

consolidated balance

sheet at fair value:

Millions of Dollars

Carrying Amount

Cash and Cash

Equivalents

Short-Term

Investments

Investments and Long-

Term Receivables

June 30

2020

December 31

2019

June 30

2020

December 31

2019

June 30

2020

December 31

2019

Corporate Bonds

Maturities within one year

144

Maturities greater than one year

through five years

134

Commercial Paper

Maturities within one year

126

U.S. Government Obligations

Maturities within one year

Maturities greater than one year

through five years

U.S. Government Agency Obligations

Maturities greater than one year

through five years

Asset-backed Securities

Maturities greater than one year

through five years

280

191

133

The following table summarizes the amortized

cost basis and fair value of investments in

debt securities

classified as available for sale:

Millions of Dollars

June 30, 2020

December 31, 2019

Amortized

Cost Basis

Fair Value

Amortized

Cost Basis

Fair Value

Major Security Type

Corporate bonds

276

278

159

Commercial paper

130

U.S. government obligations

U.S. government agency obligations

Asset-backed securities

472

475

241

As of June 30, 2020 and December 31, 2019, total

unrealized losses for debt securities classified

as available

for sale with net losses were negligible.

Additionally, as of June 30, 2020 and December 31, 2019,

investments

in these debt securities in an unrealized loss position

for which an allowance for credit losses has

not been recorded were negligible.

For the three-

and six-month periods ended June 30, 2020,

proceeds from sales and redemptions of investments

in debt securities classified as available for sale

were $

126

million and $

189

million, respectively.

Gross

realized gains and losses included in earnings from

those sales and redemptions were negligible.

The cost of

securities sold and redeemed is determined

using the specific identification method.

Credit Risk

Financial instruments potentially exposed to concentrations

of credit risk consist primarily of cash equivalents,

short-term investments, long-term investments

in debt securities, OTC derivative contracts and trade

receivables.

Our cash equivalents and short-term investments

are placed in high-quality commercial paper,

government money market funds, government debt

securities, time deposits with major international

banks and

financial

institutions, and high-quality corporate bonds.

Our long-term investments in debt securities

are

placed in high-quality corporate bonds, U.S. government

and government agency obligations, asset-backed

securities, and time deposits with major international

banks and financial institutions.

The credit risk from our OTC derivative contracts,

such as forwards, swaps and options, derives

from the

counterparty to the transaction.

Individual counterparty exposure is managed

within predetermined credit

limits and includes the use of cash-call margins when appropriate,

thereby reducing the risk of significant

nonperformance.

We also use futures, swaps and option contracts that have a negligible credit

risk because

these trades are cleared 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 petroleum 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 do not generally require collateral to limit the exposure to loss;

however, we will sometimes use letters of credit, prepayments

and 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 on June 30, 2020 and December

31, 2019, was $

million and $

million, respectively.

For these instruments,

collateral was posted as of June 30, 2020 or December

31, 2019.

If our credit rating

had been downgraded below investment grade on

June 30, 2020, we would have been required

to post $

million of additional collateral, either with cash or letters

of credit.

Note 14—Fair Value Measurement

We carry a portion of our assets and liabilities at fair value measured at the reporting

date using an exit price

(i.e., the price that would be received to sell an asset

or paid to transfer a liability) and disclosed

according to

the quality of valuation inputs under the following

hierarchy:

●

Level 1: Quoted prices (unadjusted) in an active

market for identical assets or liabilities.

●

Level 2: Inputs other than quoted prices that

are directly or indirectly observable.

●

Level 3: Unobservable inputs that are significant

to the fair value of assets or liabilities.

The classification hierarchy 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

2020 or 2019.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair

value on a recurring basis primarily include

our investment in

Cenovus Energy common shares, our investments in debt

securities classified as available for sale, and

commodity derivatives.

●

Level 1 derivative assets and liabilities primarily

represent exchange-traded futures and options that are

valued using unadjusted prices available from the

underlying exchange.

Level 1 also includes our

investment in common shares of Cenovus Energy, which is valued using quotes for shares

on the NYSE,

and our investments in U.S. government obligations

classified as available for sale debt securities,

which

are valued using exchange prices.

●

Level 2 derivative assets and liabilities primarily

represent OTC swaps, options and forward purchase

and

sale contracts that are valued using adjusted exchange

prices, prices provided by brokers or pricing

service

companies that are all corroborated by market data.

Level 2 also includes our investments in debt

securities classified as available for sale including

investments in corporate bonds, commercial

paper,

asset-backed securities, and U.S. government

agency 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

June 30, 2020

December 31, 2019

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Investment in Cenovus Energy

971

2,111

Investments in debt securities

449

475

216

241

Commodity derivatives

207

120

351

172

114

322

Total assets

1,204

569

1,797

2,308

330

2,674

Liabilities

Commodity derivatives

216

103

335

174

115

311

Total liabilities

216

103

335

174

115

311

The following table summarizes those commodity

derivative balances subject to the right of setoff as

presented on our consolidated balance sheet.

We have elected to offset the recognized fair value amounts for

multiple derivative instruments executed with the

same counterparty in our financial statements

when a legal

right of setoff exists.

Millions of Dollars

Amounts Subject to Right of Setoff

Gross

Amounts Not

Gross

Net

Amounts

Subject to

Gross

Amounts

Cash

Net

Recognized

Right of Setoff

Amounts

Offset

Presented

Collateral

Amounts

June 30, 2020

Assets

351

350

233

117

109

Liabilities

335

333

233

100

December 31, 2019

Assets

322

319

193

126

122

Liabilities

311

307

193

114

102

At June 30, 2020 and December 31, 2019, we did

not present any amounts gross on our consolidated

balance

sheet where we had the right of setoff.

Non-Recurring Fair Value Measurement

The following table summarizes the fair value

hierarchy by major category and date of

remeasurement for

assets accounted for at fair value on a non-recurring

basis:

Millions of Dollars

Fair Value

Measurement

Using

Fair Value

Level 3 Inputs

Before-Tax

Loss

Net PP&E (held for use)

March 31, 2020

510

During the first quarter of 2020

, the estimated fair value of our assets in the Wind River Basin operations

area

declined to an amount below the carrying value.

The Wind River Basin operations area consists of certain

developed natural gas properties in the Madden

Field and the Lost Cabin Gas Plant and is included

in our

Lower 48 segment.

The carrying value was written down to fair value. The fair value was estimated based on

an internal discounted cash flow model using estimates of future production, an outlook of future prices using

a combination of exchanges (short-term) and external pricing services companies (long-term), future operating

costs and capital expenditures, and a discount rate believed to be consistent with those used by principal

market participants.

The range and arithmetic average of significant

unobservable inputs used in the Level 3

fair value measurement were as follows:

Fair Value

(Millions of

Dollars)

Valuation

Technique

Unobservable Inputs

Range

(Arithmetic Average)

March 31, 2020

Wind River Basin

Discounted cash

flow

Natural gas production

(MMCFD)

8.4

55.2

(

22.9

)

Natural gas price outlook*

($/MMBTU)

2.67

- $

9.17

5.68

)

Discount rate**

7.9

9.1

% (

8.3

*Henry Hub natural gas price outlook based on external pricing service

companies' outlooks for years 2022-2034; future prices

escalated at

2.2

% annually after

year 2034.

**Determined as the weighted average cost of capital of a group

of peer companies, adjusted for risks where

appropriate.

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 6—Investment in

Cenovus Energy for a discussion of the

carrying value and fair value of our investment in

Cenovus Energy common shares.

●

Investments in debt securities classified as available

for sale: The fair value of investments in debt

securities categorized as Level 1 in the fair

value hierarchy is measured using exchange

prices.

The

fair value of investments in debt securities

categorized as Level 2 in the fair value hierarchy

measured using pricing provided by brokers or pricing

service companies that are corroborated

with

market data.

See Note 13—Derivatives and Financial Instruments,

for additional information.

●

Loans and advances—related parties: The carrying

amount of floating-rate loans approximates

fair

value.

The fair value of fixed-rate loan activity is

measured using market observable data and is

categorized as Level 2 in the fair value hierarchy.

See Note 5—Investments, Loans and Long-Term

Receivables, for additional information.

●

Accounts payable (including related parties)

and floating-rate debt: The carrying amount of accounts

payable and floating-rate debt reported on the balance

sheet approximates fair value.

●

Fixed-rate debt: The estimated fair value of fixed-rate

debt is measured using prices available

from a

pricing service that is corroborated by market data;

therefore, these liabilities are categorized as Level

2 in the fair value hierarchy.

The following table summarizes the net fair

value of financial instruments (i.e., adjusted

where the right of

setoff exists for commodity derivatives):

Millions of Dollars

Carrying Amount

Fair Value

June 30

December 31

June 30

December 31

2020

2019

2020

2019

Financial assets

Investment in Cenovus Energy

971

2,111

971

2,111

Commodity derivatives

110

125

110

125

Investments in debt securities

475

241

475

241

Total loans and advances—related parties

272

339

272

339

Financial liabilities

Total debt, excluding finance leases

14,156

14,175

18,307

18,108

Commodity derivatives

106

Note 15—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the

equity section of our consolidated balance

sheet included:

Millions of Dollars

Defined

Benefit Plans

Net

Unrealized

Gain on

Securities

Foreign

Currency

Translation

Accumulated

Other

Comprehensive

Income (Loss)

December 31, 2019

(350)

(5,007)

(5,357)

Other comprehensive income (loss)

(488)

(468)

June 30, 2020

(332)

(5,495)

(5,825)

The following table summarizes reclassifications

out of accumulated other comprehensive loss and into

net

income (loss):

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Defined benefit plans

The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $

million and $

million

for the three-month periods ended June 30, 2020 and June 30, 2019, respectively, and $

million and $

million for the six-month periods ended

June 30, 2020 and June 30, 2019, respectively.

See Note 17—Employee Benefit Plans, for additional information.

Note 16—Cash Flow Information

Millions of Dollars

Six Months Ended

June 30

2020

2019

Cash Payments

Interest

397

414

Income taxes

761

1,572

Net Sales (Purchases) of Investments

Short-term investments purchased

(7,021)

(982)

Short-term investments sold

6,147

497

Long-term investments purchased

(208)

Long-term investments sold

(1,030)

(485)

Note 17—Employee Benefit Plans

Pension and Postretirement Plans

Millions of Dollars

Pension Benefits

Other Benefits

2020

2019

2020

2019

U.S.

Int'l.

U.S.

Int'l.

Components of Net Periodic Benefit Cost

Three Months Ended March 31,

June 30,

September 30,

December 31

Service cost

Interest cost

Expected return on plan assets

(21)

(34)

(18)

(35)

Amortization of prior service credit

(1)

(8)

(9)

Recognized net actuarial loss

Settlements

Net periodic benefit cost

(7)

(6)

Six Months Ended March 31,

June 30, September

30,

December 31

Service cost

Interest cost

Expected return on plan assets

(42)

(71)

(36)

(70)

Amortization of prior service credit

(1)

(16)

(17)

Recognized net actuarial loss (gain)

(1)

Settlements

(1)

Net periodic benefit cost

(12)

(13)

The components of net periodic benefit cost, other

than the service cost component, are included

in the “Other

expenses” line item on our consolidated income statement.

During the first six months of 2020, we contributed

million to our domestic benefit plans and $

million

to our international benefit plans.

In 2020, we expect to contribute a total of approximately

130

million to

our domestic qualified and nonqualified pension

and postretirement benefit plans and $

million to our

international qualified and nonqualified pension

and postretirement benefit plans.

Note 18—Related Party Transactions

Our related parties primarily include equity method

investments and certain trusts for the benefit

of employees.

For disclosures on trusts for the benefit of employees,

see Note 17—Employee Benefit Plans.

Significant transactions with our equity affiliates

were:

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Operating revenues and other income

Purchases

Operating expenses and selling, general and administrative

expenses

Net interest income*

(2)

(3)

(4)

(7)

*We paid interest to, or received interest

from, various affiliates.

See Note 5—Investments, Loans and Long-Term Receivables, for additional

information on loans to affiliated companies.

Note 19—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

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Revenue from contracts with customers

1,919

6,633

6,830

13,692

Revenue from contracts outside the scope of ASC Topic 606

Physical contracts meeting the definition of a derivative

856

1,371

2,152

3,452

Financial derivative contracts

(26)

(51)

(75)

(41)

Consolidated sales and other operating revenues

2,749

7,953

8,907

17,103

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 20—Segment Disclosures and Related

Information:

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Revenue from Outside the Scope of ASC Topic 606

by Segment

Lower 48

698

1,111

1,674

2,724

Canada

121

100

300

341

Europe and North Africa

160

178

387

Physical contracts meeting the definition of a derivative

856

1,371

2,152

3,452

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Revenue from Outside the Scope of ASC Topic 606

by Product

Crude oil

165

118

353

Natural gas

763

1,095

1,853

2,863

Other

111

181

236

Physical contracts meeting the definition of a derivative

856

1,371

2,152

3,452

Practical Expedients

Typically,

our commodity sales contracts are less than

12 months in duration; however, in certain specific

cases may extend longer, which may be out to the end of field

life.

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.

Receivables and Contract Liabilities

Receivables from Contracts with Customers

At June 30, 2020, the “Accounts and notes receivable”

line on our consolidated balance sheet,

includes trade

receivables of $

745

million compared with $

2,372

million at December 31, 2019, and includes

both contracts

with customers within the scope of ASC Topic 606 and those that are outside the

scope of ASC Topic 606.

We typically receive payment within 30 days or less (depending on the terms of the invoice) once delivery is

made.

Revenues that are outside the scope of ASC Topic 606 relate primarily to physical

gas sales contracts at

market prices for which we do not elect NPNS and

are therefore accounted for as a derivative

under ASC

Topic 815.

There is little distinction in the nature of the

customer or credit quality of trade receivables

associated with gas sold under contracts for

which NPNS has not been elected compared

to trade receivables

where NPNS has been elected.

Contract Liabilities from Contracts with Customers

We have entered into contractual arrangements where we license proprietary technology

to customers related

to the optimization process for operating LNG

plants.

The agreements typically provide for negotiated

payments to be made at stated milestones.

The payments are not directly related to our performance under the

contract and are recorded as deferred revenue to be recognized as revenue when the customer can utilize and

benefit from their right to use the license.

Payments are received in installments over the construction period.

Millions of Dollars

Contract Liabilities

As of June 30, 2020 and December 31, 2019

Amounts Recognized in the Consolidated Balance

Sheet at June 30, 2020

Current liabilities

Noncurrent liabilities

We expect to recognize the contract liabilities as of June 30, 2020, as revenue during 2021 and 2022.

There

were

revenues recognized for the three- and six-month

periods ended June 30, 2020.

Note 20—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

operating segments, which are primarily defined

by geographic

region: Alaska, Lower 48, Canada, Europe and North

Africa, Asia Pacific and Middle East, and Other

International.

Corporate and Other represents income and costs

not directly associated with an operating

segment, such as

most interest expense, corporate overhead and

certain technology activities, including licensing

revenues.

Corporate assets include all cash and cash equivalents

and short-term investments.

We evaluate performance and allocate resources based on net income (loss) attributable

to ConocoPhillips.

Intersegment sales are at prices that approximate

market.

Effective in the third quarter of 2020, we will restructure

our segments to align with changes to our internal

organization.

The Middle East business will move from the

Asia Pacific and Middle East segment to the

Europe and North Africa segment.

The segments will be renamed the Asia Pacific

segment and the Europe,

North Africa and Middle East segment.

Accordingly, beginning in the third quarter of 2020 we will revise

segment information disclosures and segment performance

metrics presented within our results of operations

for the current and historical comparative periods.

Analysis of Results by Operating Segment

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Sales and Other Operating Revenues

Alaska

419

1,426

1,532

2,833

Intersegment eliminations

Alaska

438

1,426

1,551

2,833

Lower 48

1,433

3,809

4,536

7,962

Intersegment eliminations

(28)

(11)

(38)

(23)

Lower 48

1,405

3,798

4,498

7,939

Canada

165

717

678

1,540

Intersegment eliminations

(335)

(180)

(585)

Canada

165

382

498

955

Europe and North Africa

288

1,313

888

2,859

Asia Pacific and Middle East

450

1,030

1,453

2,373

Other International

Corporate and Other

144

Consolidated sales and other operating revenues

2,749

7,953

8,907

17,103

Sales and Other Operating Revenues by Geographic

Location

(1)

United States

1,844

5,225

6,061

10,911

Australia

168

311

605

870

Canada

165

382

498

955

China

159

213

402

Indonesia

132

226

336

431

Libya

267

521

Malaysia

334

299

670

Norway

242

561

688

1,149

United Kingdom

485

156

1,189

Other foreign countries

Worldwide consolidated

2,749

7,953

8,907

17,103

Sales and Other Operating Revenues by Product

Crude oil

1,216

4,813

4,660

9,394

Natural gas

1,190

1,915

2,845

4,918

Natural gas liquids

213

235

451

Other

(2)

259

1,012

1,167

2,340

Consolidated sales and other operating revenues

by product

2,749

7,953

8,907

17,103

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

(2) Includes LNG and bitumen.

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

Alaska

(141)

462

(60)

846

Lower 48

(365)

206

(802)

399

Canada

(86)

100

(195)

222

Europe and North Africa

407

614

Asia Pacific and Middle East

662

517

1,060

1,042

Other International

(6)

212

Corporate and Other

185

(193)

(1,590)

Consolidated net income (loss) attributable

to ConocoPhillips

260

1,580

(1,479)

3,413

Millions of Dollars

June 30

December 31

2020

2019

Total Assets

Alaska

16,121

15,453

Lower 48

12,158

14,425

Canada

5,909

6,350

Europe and North Africa

7,204

8,121

Asia Pacific and Middle East

12,404

14,716

Other International

299

285

Corporate and Other

8,951

11,164

Consolidated total assets

63,046

70,514

Note 21—Income Taxes

Our effective tax rate for the three-month period ended June

30, 2020, was negative and is significantly

lower

than the comparative period in 2019 due to a number

of significant transactions, and their

related tax effects,

impacting our $

million before-tax income.

The change in the rate was impacted by the gain on disposition

recognized for our Australia-West assets of $

587

million with an associated tax benefit of

million, the

derecognition of $

million of deferred tax assets recorded as

income tax expense as a result of this

divestiture, a $

million refund from the Alberta Tax & Revenue Administration, and a change

in our U.S.

valuation allowance. For the comparative three-month

period ended June 30, 2019, the effective tax rate was

primarily impacted by a benefit of $

234

million primarily related to the recognition

of U.S. tax basis in our

disposed U.K. subsidiaries.

The effective tax rate for the six-month period ended June

30, 2020 was

percent, compared with

percent

for the same period of 2019.

The effective tax rate was impacted by the items noted

above for the three-month

period ended,

June 30, 2020, as well as a shift in our before-tax

income between higher and lower tax

jurisdictions in 2020.

As a result of the COVID-19 pandemic and the

resulting economic uncertainty, many countries in which we

operate, including Australia, Canada, Norway and

the U.S., have enacted responsive tax legislation.

During

the second quarter,

Norway enacted legislation to accelerate the recovery

of capital expenditures and allow

immediate monetization of tax losses.

As a result,

we have recorded an increase to our net deferred tax

liability of $

120

million and a decrease to our accrued income and

other taxes liability of $

124

million.

Legislation in other jurisdictions did not have a

material impact to ConocoPhillips.

During the three-

and six-month periods ended June 30, 2020,

our valuation allowance decreased by

117

million and increased by $

229

million, respectively, compared to a decrease of $

million and $

191

million for the same periods of 2019.

The change to our U.S. valuation allowance

for both periods relates

primarily to the fair value measurement of our Cenovus

Energy common shares and our expectation of the tax

impact related to incremental capital gains and losses.

Supplementary Information—Condensed Consolidating

Financial Information

We have various cross guarantees among ConocoPhillips, ConocoPhillips Company

and Burlington Resources

LLC, with respect to publicly held debt securities.

ConocoPhillips Company is

100

percent owned by

ConocoPhillips.

Burlington Resources LLC is

100

percent owned by ConocoPhillips Company.

ConocoPhillips and/or ConocoPhillips Company

have fully and unconditionally guaranteed

the payment

obligations of Burlington Resources LLC, with respect

to its publicly held debt securities.

Similarly,

ConocoPhillips has fully and unconditionally

guaranteed the payment obligations of ConocoPhillips

Company

with respect to its publicly held debt securities.

In addition, ConocoPhillips Company

has fully and

unconditionally guaranteed the payment obligations

of ConocoPhillips with respect to its publicly

held debt

securities.

All guarantees are joint and several.

The following condensed consolidating financial

information

presents the results of operations, financial

position and cash flows for:

●

ConocoPhillips, ConocoPhillips Company and

Burlington Resources LLC (in each case, reflecting

investments in subsidiaries utilizing the equity

method of accounting).

●

All other nonguarantor subsidiaries of ConocoPhillips.

●

The consolidating adjustments necessary to present

ConocoPhillips’ results on a consolidated

basis.

This condensed consolidating financial information

should be read in conjunction with the accompanying

consolidated financial statements and notes.

In May 2020, ConocoPhillips received a $

2.2

billion return of earnings and a $

0.8

billion return of capital from

ConocoPhillips Company to settle certain

accumulated intercompany balances.

This transaction had no impact

on our consolidated financial statements.

In May 2020, ConocoPhillips Company received

a $

2.4

billion return of earnings and a $

0.8

billion return of

capital from a nonguarantor subsidiary to settle

certain accumulated intercompany balances.

This transaction

had no impact on our consolidated financial statements.

Millions of Dollars

Three Months Ended June 30, 2020

Income Statement

ConocoPhillips

Company

Burlington

Resources LLC

All Other

Subsidiaries

Consolidating

Adjustments

Total

Consolidated

Revenues and Other Income

Sales and other operating revenues

1,329

1,420

2,749

Equity in earnings (losses) of affiliates

315

231

(304)

(241)

Gain on dispositions

589

596

Other income

563

594

Intercompany revenues

231

(271)

Total Revenues and Other Income

316

2,169

(303)

2,346

(512)

4,016

Costs and Expenses

Purchased commodities

1,188

194

(252)

1,130

Production and operating expenses

218

829

(1)

1,047

Selling, general and administrative expenses

138

156

Exploration expenses

Depreciation, depletion and amortization

160

998

1,158

Impairments

(3)

(2)

Taxes other than income taxes

118

141

Accretion on discounted liabilities

Interest and debt expense

(18)

202

Foreign currency transaction (gains) losses

(18)

Other expenses

(1)

(6)

(7)

Total Costs and Expenses

1,829

2,333

(271)

3,995

Income (loss) before income taxes

245

340

(336)

(241)

Income tax provision (benefit)

(15)

(7)

(260)

(257)

Net income (loss)

260

315

(329)

273

(241)

278

Less: net income attributable to noncontrolling interests

(18)

Net Income (Loss) Attributable to ConocoPhillips

260

315

(329)

255

(241)

260

Comprehensive Income (Loss) Attributable to ConocoPhillips

580

635

(83)

566

(1,118)

580

Income Statement

Three Months Ended June 30, 2019

Revenues and Other Income

Sales and other operating revenues

3,487

4,466

7,953

Equity in earnings of affiliates

1,637

2,088

533

173

(4,258)

173

Gain on dispositions

Other income

127

172

Intercompany revenues

1,782

(1,815)

Total Revenues and Other Income

1,637

5,652

544

6,620

(6,073)

8,380

Costs and Expenses

Purchased commodities

3,124

946

(1,396)

2,674

Production and operating expenses

657

1,113

(353)

1,418

Selling, general and administrative expenses

129

Exploration expenses

122

Depreciation, depletion and amortization

148

1,342

1,490

Impairments

Taxes other than income taxes

161

194

Accretion on discounted liabilities

Interest and debt expense

143

(15)

(66)

165

Foreign currency transaction losses

Other expenses

Total Costs and Expenses

4,275

3,756

(1,815)

6,322

Income before income taxes

1,564

1,377

511

2,864

(4,258)

2,058

Income tax provision (benefit)

(16)

(260)

(4)

741

461

Net income

1,580

1,637

515

2,123

(4,258)

1,597

Less: net income attributable to noncontrolling interests

(17)

Net Income Attributable to ConocoPhillips

1,580

1,637

515

2,106

(4,258)

1,580

Comprehensive Income Attributable to ConocoPhillips

1,667

1,724

623

2,182

(4,529)

1,667

See Notes to Consolidated Financial Statements.

Millions of Dollars

Six Months Ended June 30, 2020

Income Statement

ConocoPhillips

Company

Burlington

Resources LLC

All Other

Subsidiaries

Consolidating

Adjustments

Total

Consolidated

Revenues and Other Income

Sales and other operating revenues

4,232

4,675

8,907

Equity in earnings (losses) of affiliates

(1,366)

351

(730)

309

1,747

311

Gain on dispositions

538

554

Other income (loss)

(1,083)

137

(945)

Intercompany revenues

1,138

(1,211)

Total Revenues and Other Income

(1,366)

3,585

(725)

6,797

536

8,827

Costs and Expenses

Purchased commodities

3,800

1,140

(1,149)

3,791

Production and operating expenses

378

1,842

(2)

2,220

Selling, general and administrative expenses

115

(5)

153

Exploration expenses

241

285

Depreciation, depletion and amortization

307

2,262

2,569

Impairments

516

519

Taxes other than income taxes

320

391

Accretion on discounted liabilities

126

133

Interest and debt expense

137

205

(55)

404

Foreign currency transaction gains

(19)

(64)

(83)

Other expenses

(7)

(6)

(13)

Total Costs and Expenses

143

4,904

6,466

(1,211)

10,369

Income (loss) before income taxes

(1,509)

(1,319)

(792)

331

1,747

(1,542)

Income tax provision (benefit)

(30)

(13)

(113)

(109)

Net income (loss)

(1,479)

(1,366)

(779)

444

1,747

(1,433)

Less: net income attributable to noncontrolling interests

(46)

Net Income (Loss) Attributable to ConocoPhillips

(1,479)

(1,366)

(779)

398

1,747

(1,479)

Comprehensive Loss Attributable to ConocoPhillips

(1,947)

(1,834)

(1,130)

(83)

3,047

(1,947)

Income Statement

Six Months Ended June 30, 2019

Revenues and Other Income

Sales and other operating revenues

7,468

9,635

17,103

Equity in earnings of affiliates

3,527

3,710

1,006

359

(8,241)

361

Gain on dispositions

Other income

552

320

874

Intercompany revenues

2,943

(3,015)

Total Revenues and Other Income

3,528

11,784

1,030

13,351

(11,256)

18,437

Costs and Expenses

Purchased commodities

6,621

2,250

(2,522)

6,349

Production and operating expenses

837

2,204

(354)

2,689

Selling, general and administrative expenses

212

(5)

282

Exploration expenses

138

232

Depreciation, depletion and amortization

284

2,752

3,036

Impairments

Taxes other than income taxes

390

469

Accretion on discounted liabilities

165

173

Interest and debt expense

139

292

(134)

398

Foreign currency transaction losses

Other expenses

(3)

Total Costs and Expenses

146

8,481

8,013

(3,015)

13,692

Income before income taxes

3,382

3,303

963

5,338

(8,241)

4,745

Income tax provision (benefit)

(31)

(224)

(9)

1,566

1,302

Net income

3,413

3,527

972

3,772

(8,241)

3,443

Less: net income attributable to noncontrolling interests

(30)

Net Income Attributable to ConocoPhillips

3,413

3,527

972

3,742

(8,241)

3,413

Comprehensive Income Attributable to ConocoPhillips

3,689

3,803

1,204

3,998

(9,005)

3,689

See Notes to Consolidated Financial Statements.

Millions of Dollars

June 30, 2020

Balance Sheet

ConocoPhillips

Company

Burlington

Resources LLC

All Other

Subsidiaries

Consolidating

Adjustments

Total

Consolidated

Assets

Cash and cash equivalents

1,801

1,106

2,907

Short-term investments

3,934

3,985

Accounts and notes receivable

850

1,944

(1,269)

1,532

Investment in Cenovus Energy

971

Inventories

125

857

982

Prepaid expenses and other current assets

209

466

676

Total Current Assets

7,890

4,424

(1,269)

11,053

Investments, loans and long-term receivables*

29,249

39,784

10,711

13,457

(84,700)

8,501

Net properties, plants and equipment

3,561

37,559

41,120

Other assets

730

248

2,087

(697)

2,372

Total Assets

29,259

51,965

10,961

57,527

(86,666)

63,046

Liabilities and Stockholders’ Equity

Accounts payable

1,394

109

1,846

(1,269)

2,080

Short-term debt

(3)

131

146

Accrued income and other taxes

221

312

Employee benefit obligations

327

422

Other accruals

356

669

1,145

Total Current Liabilities

2,172

158

2,962

(1,269)

4,105

Long-term debt

3,795

6,667

2,123

2,267

14,852

Asset retirement obligations and accrued environmental costs

339

5,126

5,465

Deferred income taxes

4,598

(697)

3,901

Employee benefit obligations

1,186

400

1,586

Other liabilities and deferred credits*

447

5,814

919

8,925

(14,461)

1,644

Total Liabilities

4,324

16,178

3,200

24,278

(16,427)

31,553

Retained earnings

30,793

17,543

1,384

7,680

(20,049)

37,351

Other common stockholders’ equity

(5,858)

18,244

6,377

25,569

(50,190)

(5,858)

Total Liabilities and Stockholders’ Equity

29,259

51,965

10,961

57,527

(86,666)

63,046

*Includes intercompany loans.

Balance Sheet

December 31, 2019

Assets

Cash and cash equivalents

3,439

1,649

5,088

Short-term investments

2,670

358

3,028

Accounts and notes receivable

2,088

3,881

(2,575)

3,401

Investment in Cenovus Energy

2,111

Inventories

168

858

1,026

Prepaid expenses and other current assets

352

1,906

2,259

Total Current Assets

10,828

8,652

(2,575)

16,913

Investments, loans and long-term receivables*

34,076

44,969

11,662

15,612

(97,413)

8,906

Net properties, plants and equipment

3,552

38,717

42,269

Other assets

765

253

2,210

(805)

2,426

Total Assets

34,085

60,114

11,917

65,191

(100,793)

70,514

Liabilities and Stockholders’ Equity

Accounts payable

2,670

3,084

(2,575)

3,200

Short-term debt

(3)

105

Accrued income and other taxes

951

1,030

Employee benefit obligations

508

155

663

Other accruals

408

1,518

2,045

Total Current Liabilities

3,669

5,799

(2,575)

7,043

Long-term debt

3,794

6,670

2,129

2,197

14,790

Asset retirement obligations and accrued environmental costs

322

5,030

5,352

Deferred income taxes

5,438

(804)

4,634

Employee benefit obligations

1,329

452

1,781

Other liabilities and deferred credits*

1,787

7,514

826

9,271

(17,534)

1,864

Total Liabilities

5,662

19,504

3,024

28,187

(20,913)

35,464

Retained earnings

33,184

21,898

2,164

10,481

(27,985)

39,742

Other common stockholders’ equity

(4,761)

18,712

6,729

26,454

(51,895)

(4,761)

Noncontrolling interests

Total Liabilities and Stockholders’ Equity

34,085

60,114

11,917

65,191

(100,793)

70,514

*Includes intercompany loans.

See Notes to Consolidated Financial Statements.

Millions of Dollars

Six Months Ended June 30, 2020

Statement of Cash Flows

ConocoPhillips

Company

Burlington

Resources LLC

All Other

Subsidiaries

Consolidating

Adjustments

Total

Consolidated

Cash Flows From

Operating Activities

Net Cash Provided by Operating Activities

2,115

1,926

2,751

(4,566)

2,262

Cash Flows From Investing Activities

Capital expenditures and investments

(322)

(14)

(2,203)

(2,525)

Working capital changes associated

with investing activities

(49)

(202)

(251)

Proceeds from asset dispositions

765

1,327

1,174

(1,953)

1,313

Sales (purchases) of short-term investments

(1,324)

294

(1,030)

Long-term advances/loans—related parties

(10)

Collection of advances/loans—related parties

(71)

Intercompany cash management

(1,339)

(269)

(22)

1,630

Other

(35)

Net Cash Provided by (Used in) Investing Activities

(574)

(576)

(36)

724

(2,000)

(2,462)

Cash Flows From Financing Activities

Issuance of debt

(10)

Repayment of debt

(285)

(214)

Issuance of company common stock

(93)

Repurchase of company common stock

(726)

Dividends paid

(913)

(2,990)

(3,200)

6,190

(913)

Other

(439)

408

(28)

Net Cash Used in Financing Activities

(1,541)

(2,990)

(3,914)

6,566

(1,879)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted

Cash

(93)

Net Change in Cash, Cash Equivalents and Restricted Cash

(1,640)

(532)

(2,172)

Cash, cash equivalents and restricted cash at beginning of period

3,443

1,919

5,362

Cash, Cash Equivalents and Restricted Cash at End of Period

1,803

1,387

3,190

Statement of Cash Flows

Six Months Ended June 30, 2019*

Cash Flows From Operating Activities

Net Cash Provided by (Used in) Operating Activities

1,571

5,050

(40)

4,768

(5,564)

5,785

Cash Flows From Investing Activities

Capital expenditures and investments

(653)

(2,882)

169

(3,366)

Working capital changes associated

with investing activities

(17)

Proceeds from asset dispositions

217

559

(75)

701

Purchases of short-term investments

(50)

(435)

(485)

Long-term advances/loans—related parties

(19)

Collection of advances/loans—related parties

(89)

Intercompany cash management

1,082

(3,256)

2,134

Other

118

126

Net Cash Provided by (Used in) Investing Activities

1,082

(3,533)

(551)

(2,938)

Cash Flows From Financing Activities

Issuance of debt

(19)

Repayment of debt

(21)

(106)

(38)

Issuance of company common stock

(79)

(36)

Repurchase of company common stock

(2,002)

Dividends paid

(696)

(1,660)

(3,983)

5,643

(696)

Other

(94)

(55)

Net Cash Used in Financing Activities

(2,653)

(1,681)

(4,033)

5,540

(2,827)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted

Cash

(1)

Net Change in Cash, Cash Equivalents and Restricted Cash

(165)

211

Cash, cash equivalents and restricted cash at beginning of period

1,428

4,723

6,151

Cash, Cash Equivalents and Restricted Cash at End of Period

1,263

4,934

6,197

*Revised to reclassify certain intercompany

distributions from Operating Activities to ‘Proceeds

from asset dispositions’ within Investing Activities

based on the nature of the distributions.

There was no impact to Total

Consolidated results.

See Notes to Consolidated Financial Statements.

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,”

“estimate,” “believe,” “budget,” “continue,”

“could,” “intend,” “may,” “plan,” “potential,” “predict,”

“seek,” “should,” “will,” “would,” “expect,”

“objective,” “projection,” “forecast,” “goal,” “guidance,”

“outlook,” “effort,” “target” 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 59.

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

attributable to ConocoPhillips.

BUSINESS ENVIRONMENT AND EXECUTIVE

OVERVIEW

ConocoPhillips is an independent E&P company

with operations and activities in 16 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 assets in Canada;

and an inventory of

global conventional and unconventional exploration

prospects.

At June 30, 2020, we employed approximately

9,700 people worldwide and had total assets

of $63 billion.

Overview

The energy landscape changed dramatically in 2020 with

simultaneous demand and supply shocks that drove

the industry into a severe downturn.

The demand shock was triggered by COVID-19,

which was declared a

global pandemic and caused unprecedented social

and economic consequences.

Mitigation efforts to stop the

spread of this contagious disease included stay-at-home

orders and business closures that caused sharp

contractions in economic activity worldwide.

The supply shock was triggered by disagreements

between

OPEC and Russia, beginning in early

March, which resulted in significant supply coming

onto the market and

an oil price war.

These dual demand and supply shocks caused

oil prices to collapse as we exited the first

quarter.

As we entered the second quarter, predictions of COVID-19 driven global

oil demand losses intensified, with

forecasts of unprecedented demand declines.

Based on these forecasts, OPEC plus nations held

an emergency

meeting, and in April they announced a coordinated

production cut that was unprecedented in both its

magnitude and duration.

The OPEC plus countries agreed to cut production

by 9.7 MMBOD in May and June,

9.6 MMBOD in July, and 7.7 MMBOD from August to December.

From January 2021 to April 2022, they

agreed to cut production by 5.8 MMBOD.

Additionally, non-OPEC plus countries, including the U.S.,

Canada, Brazil and other G-20 countries,

announced organic reductions to production through the

release of

drilling rigs, frac crews, normal field decline

and curtailments.

Despite these planned production decreases,

the supply cuts were not timely enough to overcome

significant demand decline.

Futures prices for April WTI

closed under $20 a barrel for the first time

since 2001, followed by May WTI settling below zero on the

day

before futures contracts expiry, as holders of May futures contracts struggled to

exit positions and avoid taking

physical delivery.

As storage constraints approached, spot prices in

April for certain North American

landlocked grades of crude oil were in the single digits

or even negative for particularly remote or low-grade

crudes, while waterborne priced crudes such as Brent

sold at a relative advantage.

Since the start of the severe downturn, we have closely

monitored the market and taken prudent actions in

response to this situation.

We entered the year in a position of relative strength, with cash and cash equivalents

of more than $5 billion, short-term investments

of $3 billion, and an undrawn credit facility

of $6 billion,

totaling approximately $14 billion in available

liquidity.

Additionally, we had several entity and asset sales

agreements in place, which generated $1.3 billion

in proceeds from dispositions during the first

six-months of

2020.

For more information about the sales of our Australia-West and non-core Lower 48 assets,

see Note 4—

Asset Acquisitions and Dispositions in the

Notes to Consolidated Financial Statements.

This relative

advantage allowed us to be measured in our response

to the sudden change in business environment.

In March, we announced an initial set of actions

to address the downturn and followed up with additional

actions in April.

The combined announcements reflected a reduction

in our 2020 operating plan capital of $2.3

billion, a reduction to our operating costs of

$600 million and suspension of our share repurchase

program.

These actions will decrease uses of cash by over

$5 billion in 2020.

We also established a framework for

evaluating and implementing economic curtailments

considering the weakness in oil prices during the

second

quarter of 2020,

which resulted in taking an additional significant

step of curtailing production, predominantly

from operated North American assets.

Due to our strong balance sheet, we were in an advantaged

position to

forgo some production and cash flow in anticipation

of receiving higher cash flows for those volumes

in the

future.

In the second quarter, we curtailed production by an estimated 225 MBOED,

with 145 MBOED of the

curtailments from the Lower 48, 40 MBOED from

Alaska and 30 MBOED from our Surmont operation

Canada.

The remainder of the second-quarter curtailments

were primarily in Malaysia.

Other industry

operators also cut production and development plans

and as we progressed through the second quarter, stay-at-

home restrictions eased, which partially restored

lost demand, and WTI and Brent prices exited the

second

quarter around $40 per barrel.

While we remain cautious regarding the recent

oil market recovery and continue to monitor

global market

conditions and COVID-19 hotspots around the world,

based on our economic criteria, we restored

curtailed

production in Alaska during July.

We also brought some curtailed volumes in the Lower 48 back online and

expect to be fully restored in September.

At Surmont, we began restoring production in

July, though the ramp

will be slower due to planned turnarounds in the

third quarter and limited staffing in the fields as a COVID-19

mitigation measure.

We continue to monitor pricing and evaluate curtailments across our assets on a month-

by-month basis.

At June 30, 2020,

we had $12.9 billion of liquidity, comprised of $2.9 billion in cash and

cash equivalents,

$4.0 billion in short-term investments, and an undrawn

credit facility of $6 billion.

On July 8, 2020, we

announced a quarterly dividend of 42 cents per share

to be distributed on September 1, 2020 to shareholders

record as of July 20, 2020.

In July 2020, we signed a definitive agreement

to acquire additional Montney acreage for cash

consideration of

approximately $375 million before customary adjustments,

plus the assumption of approximately $30 million

in financing obligations for associated partially

owned infrastructure.

This acquisition consists primarily of

undeveloped properties and includes 140,000

net acres in the liquids-rich Inga Fireweed asset

Montney zone,

which is directly adjacent to our existing Montney

position, as well as 15 MBOED of production.

Upon

completion of this transaction, we will have a Montney

acreage position of 295,000 net acres with a 100

percent working interest.

The transaction is subject to regulatory

approval and is expected to close in the third

quarter of 2020 with an effective date of July 1, 2020.

Our expectation is that commodity prices will

remain cyclical and volatile, and a successful

business strategy

in the E&P industry must be resilient in

lower price environments, at the same time retaining

upside during

periods of higher prices.

While we are not impervious to current market

conditions, our decisive actions over

the last several years of focusing on free cash flow generation,

high-grading our asset base, lowering the cost

of supply of our investment resource base, and strengthening

our balance sheet have put us in a strong relative

position compared to our independent E&P peers.

Although recent prices have been extremely volatile,

remain committed to our core value proposition

principles, namely, to focus on financial returns, maintain a

strong balance sheet, deliver compelling returns

of capital, and maintain disciplined capital

investments.

Our workforce and operations have adjusted to

mitigate the impacts of the COVID-19 global

pandemic.

have operations in remote areas with confined spaces,

such as offshore platforms, the North Slope of Alaska,

Curtis Island in Australia, western Canada and

Indonesia, where viruses could rapidly spread.

Personnel are

asked to perform a self-assessment for symptoms

of illness each day and, when appropriate,

are subject to

more restrictive measures traveling to and working

on location.

Staffing levels in certain operating locations

have been reduced to minimize health risk exposure

and increase social distancing.

A large portion of our

office staff have been successfully working remotely, with offices around the world carefully designing

and

executing a flexible, phased reentry, following national, state and local guidelines.

Workforce health and

safety remains the overriding driver for our actions

and we have demonstrated our ability

to adapt to local

conditions as warranted.

These mitigation measures have thus far been effective

at protecting employees’

health and reducing business operation disruptions.

The marketing and supply chain side of our business

has also adapted in response to COVID-19.

Our

commercial organization is managing transportation commitments

considering curtailment measures.

Our

supply chain function is proactively working with

vendors to ensure the continuity of our

business operations,

monitor distressed service and materials providers,

capture deflation opportunities, and pursue cost

reduction

efforts.

Operationally, we remain focused on safely executing the business.

In the second quarter of 2020, production

of 981 MBOED generated cash from operating activities

of $0.2 billion.

We invested $0.9 billion into the

business in the form of capital expenditures and

paid dividends to shareholders of $0.5 billion.

Production

decreased 351 MBOED or 26 percent in the second

quarter of 2020, compared to the second quarter

of 2019,

primarily due to curtailments and the divestiture

of our U.K. assets in the third quarter of 2019, the

divestiture

of our Australia-West business and several non-core assets in the Lower 48 during the

first six-months of

2020, and the declaration of force majeure in Libya

in February 2020.

Excluding Libya, and adjusting for

closed dispositions and estimated curtailments,

production in the second quarter of 2020 was slightly

higher

than the same period a year ago.

In the first half of the year we recognized a $1.1

billion before and after-tax unrealized loss

on our 208 million

Cenovus Energy common shares and $0.4 billion after-tax

in impairments due to low domestic natural

gas

prices.

Persistent low commodity prices may result in

further proved and unproved property impairments,

including to certain equity method investments.

Q2'18

Q3'18

Q4'18

Q1'19

Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

WTI/Brent

$/Bbl

WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Prices

Quarterly Averages

WTI - $/Bbl

Brent - $/Bbl

HH - $/MMBTU

Business Environment

Commodity prices are the most significant

factor impacting our profitability and related reinvestment

operating cash flows into our business.

Among other dynamics that could influence world

energy markets and

commodity prices are global economic health, supply

or demand disruptions or fears thereof caused

by civil

unrest, global pandemics, military conflicts,

actions taken by OPEC plus and other major

oil producing

countries, environmental laws, tax regulations,

governmental policies and weather-related

disruptions.

Our

strategy is to create value through price cycles

by delivering on the financial and operational

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 $29.20 per barrel

in the second quarter of 2020,

a decrease of 58 percent

compared with $68.82 per barrel in the second quarter

of 2019.

WTI at Cushing crude oil prices averaged

$27.85 per barrel in the second quarter of 2020,

a decrease of 53 percent compared with $59.80 per

barrel in

the second quarter of 2019.

Oil prices fell significantly as producers failed to

reduce output sufficiently or

timely enough to offset the demand reduction due to COVID-19.

Henry Hub natural gas prices averaged $1.71

per MMBTU in the second quarter of 2020,

a decrease of 35

percent compared with $2.64 per MMBTU in the second

quarter of 2019.

Henry Hub prices decreased due to

high storage levels and weak domestic and LNG feedstock

demand.

Our realized bitumen price averaged negative $23.11 per barrel

in the second quarter of 2020, a decrease of

$60 per barrel compared with $37.20 per barrel

in the second quarter of 2019.

The decrease in the second

quarter of 2020 was driven by lower blend price

for Surmont sales, largely attributed to a weakening

WTI

price and a narrowing spread between the local market

and U.S. sales points, which challenged

both pipeline

and rail economics.

As a result, we curtailed production, and an increasing

portion of remaining blend sales

were directed to the lower priced local market.

In addition, we incurred unutilized transportation

costs which

negatively impacted our realized bitumen price.

Our total average realized price was $23.09 per BOE

in the second quarter of 2020, compared

with $50.50 per

BOE in the second quarter of 2019.

Key Operating and Financial Summary

Significant items during the second quarter

of 2020 included the following:

●

Ended the quarter with cash, cash equivalents and

restricted cash totaling $3.2 billion and

short-term

investments of $4.0 billion.

●

Produced 981 MBOED excluding Libya; curtailed

approximately 225 MBOED.

●

Completed the Australia-West divestiture, generating $0.8 billion in proceeds.

●

Distributed $0.5 billion in dividends.

●

In July, announced a planned bolt-on acquisition of adjacent acreage in the liquids-rich

Montney.

Outlook

Capital and Production

In February 2020, we announced 2020 operating

plan capital of $6.5 billion to $6.7 billion.

In response to the

recent oil market downturn, we announced capital

expenditure reductions totaling $2.3 billion.

This does not

include capital for acquisitions.

In July 2020, we announced a planned bolt-on

acquisition in the liquids-rich

area of the Montney for approximately $0.4 billion.

In the second quarter, we curtailed production by an estimated 225 MBOED,

with 145 MBOED of the

curtailments from the Lower 48, 40 MBOED from

Alaska and 30 MBOED from our Surmont operation

Canada.

The remainder of the second-quarter curtailments

were primarily in Malaysia.

Prices rebounded off

their second quarter lows, with Brent crude at

the end of June near $40 per barrel, and based

on our economic

criteria, we restored curtailed production in Alaska

during July.

We also brought some curtailed volumes in

the Lower 48 back online and expect to be fully

restored in September.

At Surmont, we began restoring

production in July, though the ramp will be slower due to planned turnarounds in

the third quarter and limited

staffing in the fields as a COVID-19 mitigation measure.

We continue to monitor pricing and evaluate

curtailments across our assets on a month-by-month

basis.

Estimated curtailments for the third quarter of 2020

are 115 MBOED.

Depreciation, Depletion and Amortization

DD&A expense was $1.2 billion in the second quarter

of 2020.

Proved reserves estimates were updated in the

current quarter utilizing trailing twelve-month

oil and gas prices, which increased second

quarter DD&A

expense by approximately $70 million before-tax.

If oil and gas prices persist at depressed levels,

our reserve

estimates may decrease further, which could incrementally increase

the rate used to determine DD&A expense

on our unit-of-production method properties.

RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three-

and six-month periods ended June 30, 2020, is

based on a comparison with the corresponding periods of 2019.

Consolidated Results

A summary of the company's net income (loss)

attributable to ConocoPhillips by business segment

follows:

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Alaska

(141)

462

(60)

846

Lower 48

(365)

206

(802)

399

Canada

(86)

100

(195)

222

Europe and North Africa

407

614

Asia Pacific and Middle East

662

517

1,060

1,042

Other International

(6)

212

Corporate and Other

185

(193)

(1,590)

Net income (loss) attributable to ConocoPhillips

260

1,580

(1,479)

3,413

Net income attributable to ConocoPhillips

in the second quarter of 2020 decreased $1,320 million.

Earnings

were negatively impacted by:

●

Lower realized commodity prices.

●

Lower sales volumes, primarily due to production

curtailments across our North American

operated

assets and the divestiture of our U.K. assets in

the third quarter of 2019 and Australia-West assets in

the second quarter of 2020.

●

The absence of a $234 million U.S. tax benefit

related to the recognition of U.S. tax basis in

our

disposed U.K. subsidiaries.

●

The absence of $115 million benefit related to the settlement

of certain tax disputes and enhanced oil

recovery credits.

●

The release of $92 million of deferred tax assets

in our Corporate segment as a result of the

Australia-

West divestiture.

●

The absence of other income of $84 million after-tax

related to our settlement agreement with

Petróleos de Venezuela, S.A. (PDVSA).

Second quarter 2020 net income decreases were partly

offset by:

●

Higher gain on dispositions primarily due to

a $597 million after-tax gain related to our Australia-

West divestiture.

●

A $521

million higher after-tax unrealized gain on our

Cenovus Energy common shares reflected in

other income.

●

Lower production and operating expenses,

primarily due to decreased wellwork and transportation

costs associated with production curtailments

across our North American operated assets as well

the absence of costs related to our U.K. divestiture.

●

Lower DD&A primarily due to lower volumes related

to production curtailments and the cessation of

DD&A related to our Australia-West divestiture, partly offset by higher DD&A rates due to

price-

related downward reserve revisions.

Net loss attributable to ConocoPhillips in

the six-month period ended June 30, 2020, decreased

$4,892 million.

Earnings were negatively impacted by:

●

Lower realized commodity prices.

●

Lower sales volumes, primarily due to normal field

decline, production curtailments across our

North

American operated assets and the divestiture of our

U.K. assets in the third quarter of 2019 and our

Australia-West assets in the second quarter of 2020.

●

A $1,140 million after-tax unrealized loss on our

Cenovus Energy common shares in the six-month

period of 2020, reflected in other income, as compared

to a $373 million after-tax unrealized gain in

the six-month period of 2019.

●

Higher impairments of $400 million after-tax,

primarily related to non-core gas assets in our Lower

segment.

●

The absence of a $234 million U.S. tax benefit

related to the recognition of U.S. tax basis in

our

disposed U.K. subsidiaries.

●

The absence of other income of $231 million after-tax

related to our settlement agreement with

PDVSA.

●

The absence of a $115 million benefit related to the settlement

of certain tax disputes and enhanced oil

recovery credits.

●

The release of $92 million of deferred tax assets

in our Corporate segment as a result of our Australia-

West divestiture.

The decreases in earnings in the six-month period

ended June 30, 2020,

were partly offset by:

●

Higher gain on dispositions primarily due to

a $597 million after-tax gain related to our Australia-

West

divestiture.

●

Lower production and operating expenses,

primarily due to decreased wellwork and transportation

costs associated with production curtailments

across our North American operated assets

as well as

the absence of costs related to our U.K. divestiture.

●

Lower DD&A primarily due to lower volumes related

to production curtailments and the cessation

DD&A related to our Australia-West divestiture, partly offset by higher DD&A rates due to

price-

related downward reserve revisions.

●

The absence of impairments related to equity method

investments of $120 million after-tax in the

Lower 48, recorded within equity in earnings of affiliates.

See the “Segment Results” section for additional

information.

Income Statement Analysis

Sales and other operating revenues for the three-

and six-month periods of 2020 decreased $5,204

million and

$8,196 million,

mainly due to lower realized commodity prices

and lower sales volumes due to production

curtailments from our North American operated

assets and the divestiture of our U.K. assets

in the third quarter

of 2019 and our Australia-West assets in the second quarter of 2020.

Equity in earnings of affiliates for the three-

and six-month periods of 2020 decreased

$96 million and $50

million primarily due to lower earnings from QG3

and APLNG as a result of lower LNG prices and

sales

volumes for both affiliates and lower oil prices at QG3.

Partly offsetting the decrease in equity in earnings of

affiliates were the absence of impairments related

to equity method investments in our Lower 48 segment

$95 million in the second quarter of 2019 and $155

million in the six-month period of 2019.

Gain on dispositions for the three-

and six-month periods of 2020 increased $514

million and $455 million

primarily due to a $587 million before-tax gain associated

with our Australia-West divestiture.

For more

information, see Note 4—Asset Acquisitions

and Dispositions in the Notes to Consolidated

Financial

Statements.

Other income (loss) for the second quarter of 2020

increased $422 million, primarily due to

$521 million

higher before-tax unrealized gain on our Cenovus

Energy common shares, partly offset by the absence of $89

million before-tax related to our settlement

agreement with PDVSA.

Other income in the six-month period of

2020 decreased $1,819 million, primarily due to a $1.14

billion before-tax unrealized loss on our Cenovus

Energy common shares compared to a $373 million before-tax

unrealized gain on those shares in the six-

month period of 2019 and the absence of $236 million

before-tax related to our settlement agreement

with

PDVSA.

For discussion of our Cenovus Energy shares, see Note

6—Investment in Cenovus Energy, in the Notes to

Consolidated Financial Statements.

For discussion of our PDVSA settlement, see Note

12—Contingencies

and Commitments, in the Notes to Consolidated Financial

Statements.

Purchased commodities for the three- and six-month

periods

of 2020 decreased $1,544 million and $2,558

million,

respectively, primarily due to lower crude oil and natural gas volumes purchased

and lower natural gas

and crude oil prices.

Production and operating expenses for the three-

and six-month periods of 2020 decreased $371

million and

$469 million, respectively, mainly due to lower costs associated with the divestiture

of our U.K. and Australia-

West assets, and decreased production volumes, primarily due to production curtailments,

and lower legal

accruals in our Lower 48 and Other International

segments.

Selling, general and administrative expenses decreased

$129 million in the six-month period of 2020,

primarily

due to lower costs associated with compensation

and benefits, including mark to market

impacts of certain key

employee compensation programs.

DD&A for the three-

and six-month periods of 2020 decreased

$332 million and $467 million, respectively,

mainly due to lower production volumes related to

production curtailments and the divestiture

of our

Australia-West and U.K. assets, partly offset by higher DD&A rates due to price-related downward

reserve

revisions.

For more information regarding the Australia-West divestiture, see Note 4—Asset Acquisitions

and

Dispositions in the Notes to Consolidated Financial

Statements.

Impairments increased $517 million in

the six-month period of 2020, primarily due to a $511 million before-

tax impairment of certain non-core gas assets in

our Lower 48 segment due to a significant

decrease in the

outlook for natural gas prices.

See Note 8—Impairments in the Notes to Consolidated

Financial Statements,

for additional information.

Foreign currency transaction (gain) loss decreased $123

million in the six-month period of 2020, primarily

due

to gains recognized from foreign currency derivatives.

See Note 13—Derivative and Financial Instruments

the Notes to Consolidated Financial Statements,

for additional information.

See Note 21—Income Taxes, in the Notes to Consolidated Financial Statements,

for information regarding our

income tax provision (benefit) and effective tax rate.

Summary Operating Statistics

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Average Net Production

Crude oil (MBD)

474

702

564

708

Natural gas liquids (MBD)

118

108

114

Bitumen (MBD)

Natural gas (MMCFD)*

2,277

2,768

2,475

2,804

Total Production

(MBOED)

981

1,332

1,135

1,346

Dollars Per Unit

Average Sales Prices

Crude oil (per bbl)

25.10

64.88

38.80

62.14

Natural gas liquids (per bbl)

9.88

21.65

12.63

22.71

Bitumen (per bbl)

(23.11)

37.20

(3.09)

35.00

Natural gas (per MCF)

3.22

4.76

3.81

5.39

Millions of Dollars

Exploration Expenses

General administrative, geological and geophysical,

lease rental, and other

215

164

Leasehold impairment

Dry holes

122

285

232

*Represents quantities available for sale and excludes gas equivalent of natural gas

liquids included above.

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a

worldwide

basis.

At June 30, 2020, our operations were producing

in the U.S., Norway, Canada, Australia, Indonesia,

China, Malaysia,

Qatar and Libya.

Total production decreased 351 MBOED or 26 percent in the second quarter of 2020,

primarily due to:

●

Production curtailments, primarily from

our North American operated assets and Malaysia.

●

Normal field decline.

●

The divestiture of our U.K. assets in the third

quarter of 2019, our Australia-West assets in the second

quarter of 2020, and non-core Lower 48 assets in

the first quarter of 2020.

●

No production in Libya due to the forced shutdown

of the Es Sider export terminal and other

eastern

export terminals after a period of civil unrest.

The decrease in second quarter 2020 production was

partly offset by:

●

New wells online in the Lower 48, Canada, Norway

and China.

Total production decreased 211 MBOED or 16 percent in the six-month period of 2020,

primarily due to:

●

Normal field decline.

●

Production curtailments, primarily from

our North American operated assets and Malaysia.

●

The divestiture of our U.K. assets in the third

quarter of 2019, our Australia-West assets in the second

quarter of 2020, and non-core Lower 48 assets in

the first quarter of 2020.

●

Lower production in Libya due to the forced shutdown

of the Es Sider export terminal and other

eastern export terminals after a period of civil unrest

in the first quarter of 2020.

The decrease in production during the six-month period

of 2020 was partly offset by:

●

New wells online in the Lower 48, Norway, Canada and China.

Production excluding Libya was 981 MBOED in

the second quarter of 2020, a decrease of

309 MBOED

compared with the same period of 2019.

Adjusting for closed dispositions and Libya, production

decreased

212 MBOED primarily due to production curtailments

and normal field decline, partly offset by new wells

online in the Lower 48, Norway, Canada and China.

Excluding closed dispositions, estimated curtailment

impacts of 225 MBOED and Libya, production was

slightly higher compared with the same

period a year ago.

Production excluding Libya was 1,130 MBOED in

the six-month period of 2020, a decrease

of 173 MBOED

compared with the same period of 2019.

Adjusting for closed dispositions and Libya, production

decreased 79

MBOED primarily due to normal field decline

and production curtailments, partly offset by new wells

online

in the Lower 48, Norway, Canada and China.

Segment Results

Alaska

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

($MM)

(141)

462

(60)

846

Average Net Production

Crude oil (MBD)

153

199

175

205

Natural gas liquids (MBD)

Natural gas (MMCFD)

Total Production

(MBOED)

167

217

192

223

Average Sales Prices

Crude oil ($ per bbl)

26.81

67.57

42.52

65.11

Natural gas ($ per MCF)

2.56

3.19

2.82

3.31

The Alaska segment primarily explores for, produces, transports

and markets crude oil, NGLs and natural gas.

As of June 30, 2020, Alaska contributed 26 percent

of our worldwide liquids production and less than

percent of our worldwide natural gas production.

Earnings from Alaska decreased $603 million

and $906 million in the three-

and six-month periods of 2020,

respectively, primarily driven by lower realized crude oil prices,

lower crude oil sales volumes due to

production curtailments at our operated assets on

the North Slope—the Greater Kuparuk Area

(GKA) and

Western North Slope (WNS)—and the absence of $81 million of tax benefits related

to the settlement of

certain tax disputes and enhanced

oil recovery credits.

Average production decreased 50 MBOED and 31 MBOED in the three- and six-month

periods of 2020,

primarily due to curtailments at our operated assets

on the North Slope—GKA and WNS—and normal

field

decline, partly offset by new wells online at WNS.

Curtailment Update

The second quarter 2020 production impact from

curtailments in Alaska was estimated to be

40 MBOED.

Based on our economic criteria, we restored curtailed

production in Alaska during July.

Lower 48

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

($MM)

(365)

206

(802)

399

Average Net Production

Crude oil (MBD)

166

269

218

257

Natural gas liquids (MBD)

Natural gas (MMCFD)

486

593

582

581

Total Production

(MBOED)

311

450

392

432

Average Sales Prices

Crude oil ($ per bbl)

19.87

59.17

32.92

56.31

Natural gas liquids ($ per bbl)

6.95

17.91

9.81

19.20

Natural gas ($ per MCF)

1.18

2.10

1.36

2.41

The Lower 48 segment consists of operations located

in the U.S. Lower 48 states, as well as producing

properties in the Gulf of Mexico.

As of June 30, 2020, the Lower 48 contributed

41 percent of our worldwide

liquids production and 24 percent of our worldwide

natural gas production.

Earnings from the Lower 48 decreased $571 million

and $1,201 million in the three-

and six-month periods of

2020, respectively, primarily due to lower realized crude oil, NGL and natural

gas prices and lower sales

volumes due to production curtailments.

The earnings decrease in the three- and six-month

periods of 2020

were partly offset by lower DD&A expense, lower production

and operating expenses, and increased equity in

earnings of affiliates.

DD&A expense in the second quarter of 2020 decreased

due to lower production

volumes, primarily associated with curtailments,

partly offset by higher DD&A rates driven by price-related

downward reserve revisions.

In addition to the items detailed above, in the six-month

period of 2020, earnings

decreased due to a $399 million after-tax impairment

related to certain non-core gas assets in the

Wind River

Basin operations area, partly offset by the absence of $120

million of impairments in equity method

investments.

See Note 8—Impairments and Note 14—Fair

Value

Measurement in the Notes to Consolidated

Financial Statements, for additional information

related to the Wind River Basin operations area impairment.

Total average production decreased 139 MBOED and 40 MBOED in the three-

and six-month periods of 2020,

respectively, primarily due to normal field decline, production curtailments

and higher unplanned downtime.

Partly offsetting the production decrease, was new production

from unconventional assets in the Eagle Ford,

Permian and Bakken.

Curtailment Update

The second quarter 2020 production impact from

curtailments in the Lower 48 was estimated

to be 145

MBOED.

Based on our economic criteria, we brought some

curtailed volumes in the Lower 48 back online

July and expect to be fully restored by September.

Canada

Three Months Ended

Six Months Ended

June 30

2020

2019**

2020

2019**

Net Income (Loss) Attributable to ConocoPhillips

($MM)

(86)

100

(195)

222

Average Net Production

Crude oil (MBD)

Natural gas liquids (MBD)

Bitumen (MBD)

Natural gas (MMCFD)

Total Production

(MBOED)

Average Sales Prices*

Crude oil ($ per bbl)

8.69

15.39

Natural gas liquids ($ per bbl)

1.64

1.89

Natural gas ($ per MCF)

0.79

1.05

Bitumen ($ per bbl)

(23.11)

37.20

(3.09)

35.00

*Average sales prices in the second quarter of 2020 include unutilized transportation costs.

**Average prices for sales of bitumen excludes additional value realized from the purchase and sale of third-party volumes for optimization of

our pipeline capacity between Canada and the U.S. Gulf Coast.

Our Canadian operations mainly consist of an oil

sands development in the Athabasca Region of

northeastern

Alberta and a liquids-rich unconventional play

in western Canada.

As of June 30, 2020, Canada contributed 8

percent of our worldwide liquids production and

less than 1 percent of our worldwide natural

gas production.

Earnings from Canada decreased $186 million

and $417 million in the three-

and six-month periods of 2020,

primarily because of lower bitumen price realizations,

production curtailments at Surmont,

the absence of a

$41 million gain on dispositions related to a contingent

payment, and the absence of a $25 million tax

benefit

due to a four year phased four percent reduction in Alberta’s corporate income

tax rate.

Partly offsetting this

decrease in earnings was a $48 million refund from

the Alberta Tax & Revenue Administration in the second

quarter of 2020.

In addition to the items detailed above, in the

six-month period of 2020, earnings decreased

due to the absence of a $68 million tax

benefit related to a tax settlement.

Total average production decreased 6 MBOED in the second quarter of 2020, primarily

due to production

curtailments at Surmont, partly offset by the absence of a planned

turnaround at Surmont and new production

from Pad 1 at Montney.

Total average production increased 1 MBOED in the six-month period of 2020,

primarily due to first production from Pad 1 at

Montney commencing February 2020 and the

absence of a

planned turnaround at Surmont, partly offset by curtailments

at Surmont.

Curtailment Update

The second quarter 2020 production impact from

curtailments in Canada was estimated to be 30

MBOED net.

Based on our economic criteria, we began to restore

some curtailed production at Surmont

in July.

Planned Acquisition

In July 2020, we signed a definitive agreement

to acquire additional Montney acreage for cash consideration

approximately $375 million before customary adjustments,

plus the assumption of approximately $30 million

in financing obligations for associated partially

owned infrastructure.

This acquisition primarily consists of

undeveloped properties and includes 140,000

net acres in the liquids-rich Inga Fireweed asset

Montney zone,

which is directly adjacent to our existing Montney

position,

as well as 15 MBOED of production.

Upon

completion of this transaction, we will have a Montney

acreage position of 295,000 net acres with a 100

percent working interest.

The transaction is subject to regulatory

approval and is expected to close in the third

quarter of 2020 with an effective date of July 1, 2020.

Europe and North Africa

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income Attributable to ConocoPhillips

($MM)

407

614

Average Net Production

Crude oil (MBD)

130

141

Natural gas liquids (MBD)

Natural gas (MMCFD)

264

518

287

560

Total Production

(MBOED)

124

223

137

242

Average Sales Prices

Crude oil ($ per bbl)

32.32

69.65

44.70

66.16

Natural gas liquids ($ per bbl)

16.76

32.00

18.75

31.49

Natural gas ($ per MCF)

2.21

4.42

3.03

5.58

The Europe and North Africa segment consists

of operations principally located in the Norwegian

sector of the

North Sea and the Norwegian Sea, Libya and commercial

operations in the U.K.

As of June 30, 2020, our

Europe and North Africa operations contributed

12 percent of our worldwide liquids production

and 12 percent

of our worldwide natural gas production.

Earnings for Europe and North Africa decreased by

$396 million and $528 million in the three- and six-month

periods of 2020, respectively, primarily due to our U.K. divestiture in the third

quarter of 2019, the absence of

a U.S. tax benefit of $234 million associated

with the recognition of U.S. tax basis in our

disposed U.K.

subsidiaries, and lower crude oil and natural gas realizations.

Average production decreased 99 MBOED and 105 MBOED in the three-

and six-month periods of 2020,

respectively, primarily due to our U.K. disposition in the third quarter of 2019,

lower production in Libya due

to a cessation of production following a period

of civil unrest, and normal field decline.

Partly offsetting these

decreases in production were the absence of planned

turnarounds at the Greater Ekofisk

Area and new wells

online in Norway.

Force Majeure in Libya

Production ceased February 12, 2020 due to a forced

shutdown of the Es Sider export terminal

and other

eastern export terminals after a period of civil unrest.

It is unknown when exports will resume.

Asia Pacific and Middle East

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income Attributable to ConocoPhillips

($MM)

662

517

1,060

1,042

Average Net Production

Crude oil (MBD)

Consolidated operations

Equity affiliates

Total crude oil

103

104

Natural gas liquids (MBD)

Consolidated operations

Equity affiliates

Total natural gas liquids

Natural gas (MMCFD)

Consolidated operations

423

578

522

622

Equity affiliates

1,056

1,064

1,046

1,026

Total natural gas

1,479

1,642

1,568

1,648

Total Production

(MBOED)

331

388

354

390

Average Sales Prices

Crude oil ($ per bbl)

Consolidated operations

27.98

69.78

43.02

65.93

Equity affiliates

25.32

63.98

38.52

61.94

Total crude oil

27.45

68.91

42.26

65.43

Natural gas liquids ($ per bbl)

Consolidated operations

27.90

39.97

33.21

40.05

Equity affiliates

23.93

41.72

32.38

40.09

Total natural gas liquids

24.90

41.05

32.59

40.07

Natural gas ($ per MCF)

Consolidated operations

4.74

5.89

5.45

6.14

Equity affiliates

3.90

5.81

4.65

6.53

Total natural gas

4.14

5.84

4.92

6.38

The Asia Pacific and Middle East segment has

operations in China, Indonesia, Malaysia,

Australia and Qatar.

As of June 30, 2020, Asia Pacific and Middle East

contributed 13 percent of our worldwide liquids production

and 63 percent of our worldwide natural gas

production.

Earnings increased $145 million and $18 million

in the three-

and six-month periods of 2020, primarily due to

$597 million after-tax gain on disposition related

to our Australia-West divestiture and the cessation of DD&A

expense associated with our previously held-for-sale Australia-West assets.

Partly offsetting the increase in

earnings, were lower oil, LNG and natural gas prices,

lower LNG sales volumes associated with our disposed

Australia-West assets, and lower oil sales volumes,

primarily related to curtailments in Malaysia.

Average production decreased 57 MBOED and 36 MBOED in the three-

and six-month periods of 2020,

primarily due to the divestiture of our Australia-West assets, normal field decline, the expiration

of the Panyu

production license in China, higher unplanned downtime

due to the rupture of a third-party pipeline impacting

gas production from the Kebabangan field in

Malaysia, and curtailments in Malaysia.

Partly offsetting these

production decreases, were new production from development

activity at Bohai Bay in China and production

increases from Malaysia, including first oil

from Gumusut Phase 2 in the third quarter of

2019.

Asset Disposition Update

In the second quarter of 2020, we completed the divestiture

of our Australia-West assets and operations, and

based on an effective date of January 1, 2019, we received

proceeds of $765 million in May with an additional

$200 million due upon final investment decision

of the proposed Barossa development project.

Production from

the disposed assets averaged 35 MBOED for the six-month

period of 2020, and proved reserves were

approximately 17 MMBOE at year-end 2019.

For additional information related to this

transaction, see Note 4—

Asset Acquisitions and Dispositions.

Other International

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

($MM)

(6)

212

The Other International segment consists of exploration

activities in Colombia, Chile and Argentina.

Earnings from our Other International operations

decreased $87 million and $190 million in

the three- and six-

month periods of 2020, respectively.

The decrease in earnings was primarily

due to the absence of recognizing

$84 million and $231 million in other income related

to a settlement award with PDVSA associated

with prior

operations in Venezuela,

in the three- and six-month periods of 2019, respectively.

See Note 12—

Contingencies and Commitments in the Notes to Consolidated

Financial Statements, for additional

information.

Corporate and Other

Millions of Dollars

Three Months Ended

Six Months Ended

June 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

Net interest expense

(174)

(131)

(329)

(327)

Corporate general and administrative expenses

(90)

(49)

(40)

(114)

Technology

(9)

(10)

(8)

Other income (expense)

458

(3)

(1,213)

433

185

(193)

(1,590)

Net interest expense consists of interest and financing

expense, net of interest income and capitalized

interest.

Net interest expense increased by $43 million

in the second quarter of 2020, primarily due to

higher interest

from an absence of the settlement of certain

tax disputes and lower interest income from lower

cash and cash

equivalent balances.

Corporate G&A expenses include compensation

programs and staff costs.

These expenses increased by $41

million and decreased by $74 million in the three-

and six-month periods of 2020, respectively, primarily due

to mark to market adjustments associated with certain

compensation programs.

Technology includes our investment in new technologies or businesses, as well as licensing

revenues.

Activities are focused on both conventional and tight

oil reservoirs, shale gas, heavy oil, oil

sands, enhanced

oil recovery, as well as LNG.

Earnings from Technology decreased $94 million in the six-month period of

2020 primarily due to lower licensing revenues.

Other income (expense) or “Other” includes certain

corporate tax-related items, foreign currency

transaction

gains and losses, environmental costs associated

with sites no longer in operation, other costs not directly

associated with an operating segment, premiums

incurred on the early retirement of debt, unrealized

holding

gains or losses on equity securities, and pension settlement

expense.

“Other” increased by $461 million in the

second quarter of 2020,

primarily due to $521 million higher after-tax

unrealized gain on our Cenovus Energy

common shares,

partly offset by the release of a $92 million deferred tax

asset related to our Australia-West

divestiture.

In the six-month period of 2020, “Other” decreased

by $1,646 million primarily due to a $1,140

million after-tax unrealized loss on our Cenovus

Energy common shares reflected in other income as compared

to a $373 million after-tax unrealized gain in the

six-month period of 2019.

CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators

Millions of Dollars

June 30

December 31

2020

2019

Short-term debt

146

105

Total debt

14,998

14,895

Total equity

31,493

35,050

Percent of total debt to capital*

Percent of floating-rate debt to total debt

*Capital includes total debt and total equity.

To meet our short-

and long-term liquidity requirements, we look

to a variety of funding sources, including

cash generated from operating activities,

our commercial paper and credit facility programs,

and our ability to

sell securities using our shelf registration

statement.

During the first six months of 2020, the primary uses of

our available cash were $2,525 million to support

our ongoing capital expenditures and investments

program,

$1,030 million net purchases of investments,

$726 million to repurchase common stock,

and $913 million to

pay dividends.

During the first six months of 2020, our cash and cash

equivalents decreased by $2,181 million

to $2,907 million.

We entered the year with a strong balance sheet including cash and cash equivalents

of over $5 billion, short-

term investments of $3 billion, and an undrawn

credit facility of $6 billion, totaling

approximately $14 billion

of liquidity.

This strong foundation allowed us to be measured

in our response to the sudden change in

business environment we experienced in the first

quarter of 2020.

In response to the recent oil market

downturn, we announced the following capital,

operating cost and share repurchase reductions.

We reduced

our 2020 operating plan capital expenditures by a

total of $2.3 billion, or approximately thirty-five

percent of

the original guidance.

We suspended our share repurchase program for the remainder of 2020, further

reducing cash outlays by approximately $2.3 billion

in 2020.

We are also reducing our operating costs by

approximately $0.6 billion, or roughly ten percent

of the original 2020 guidance.

Collectively, these actions

represent a reduction in 2020 cash uses of over $5

billion versus the original operating plan.

We also established a framework for evaluating and implementing economic curtailments

considering the

weakness in oil prices during the second quarter of

2020, which resulted in taking an additional

significant step

of curtailing production, predominantly from operated

North American assets.

Due to our strong balance

sheet, we were in an advantaged position to forgo some production

and cash flow in anticipation of receiving

higher cash flows for those volumes in the future.

We ended the second quarter with cash and cash equivalents of $2.9 billion, short-term

investments of $4.0

billion, and an undrawn credit facility of $6 billion,

totaling $12.9 billion of liquidity.

We believe current cash

balances and cash generated by operations, the recent

adjustments to our operating plan, together with

access

to external sources of funds as described below in

the “Significant Sources of Capital”

section, will be

sufficient to meet our funding requirements in the near-

and long-term, including our capital spending

program, dividend payments and required debt payments.

Significant Sources of Capital

Operating Activities

Cash provided by operating activities was $2,262

million for the first six months of 2020, compared

with

$5,785 million for the corresponding period of 2019.

The decrease in cash provided by operating activities

primarily due to lower realized commodity prices,

production curtailments and the divestiture

of our U.K. and

Australia-West assets.

Our short-

and long-term operating cash flows are highly

dependent upon prices for crude oil, bitumen, natural

gas, LNG and NGLs.

Prices and margins in our industry have historically

been volatile and are driven by

market conditions over which we have no control.

Absent other mitigating factors, as these prices

and margins

fluctuate, we would expect a corresponding change

in our operating cash flows.

The level of absolute production volumes, as well

as product and location mix, impacts our cash flows.

Production levels are impacted by such factors as

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; global pandemics and

associated demand decreases; weather-related disruptions;

and the addition of proved reserves through

exploratory success and their timely and cost-effective

development.

While we actively manage these factors,

production levels can cause variability in cash

flows, although generally this variability has not

been as

significant as that caused by commodity prices.

To maintain or grow our production volumes, we must continue to add to our

proved reserve base.

Due to

recent capital reductions, our reserve replacement

efforts could be delayed thus limiting our ability

to replace

depleted reserves.

Investing Activities

Proceeds from asset sales in the first six months

of 2020 were $1.3 billion

compared with $0.7 billion in the

corresponding period of 2019.

In the second quarter of 2020, we completed

the divestiture of our Australia-

West assets and operations.

Based on an effective date of January 1, 2019 and customary

closing adjustments,

we received cash proceeds of $765 million in

the second quarter with another $200 million

payment due upon

final investment decision of the proposed Barossa

development project.

In the first quarter of 2020, proceeds

from asset sales were $549 million, which included

the sale of our Niobrara interests and Waddell Ranch

interests in the Lower 48 for proceeds of $359 million

and $184 million, respectively.

See Note 4—Asset

Acquisitions and Dispositions in the Notes to Consolidated

Financial Statements, for additional information

these transactions.

Proceeds from asset sales in the first six months

of 2019 were $701 million,

which consisted primarily of $350

million from the sale of our 30 percent interest in

the Greater Sunrise Fields and deposits

of $268 million

related to an April 2019 agreement to sell

two ConocoPhillips U.K. subsidiaries.

Commercial Paper and Credit Facilities

We have a revolving credit facility totaling $6.0 billion, expiring in May 2023.

Our revolving credit facility

may be used for direct bank borrowings, the issuance

of letters of credit totaling up to $500 million, or

support for our commercial paper program.

The revolving credit facility is broadly syndicated

among financial

institutions and does not contain any material

adverse change provisions or any covenants

requiring

maintenance of specified financial ratios or credit

ratings.

The facility agreement contains a cross-default

provision relating to the failure to pay principal or interest

on other debt obligations of $200 million or more

by ConocoPhillips, or any of its consolidated subsidiaries.

The amount of the facility is not subject to

redetermination prior to its expiration date.

Credit facility borrowings may bear interest at a margin above

rates offered by certain designated banks in the

London interbank market or at a margin above the overnight

federal funds rate or prime rates offered by

certain designated banks in the United States.

The agreement calls for commitment fees

on available, but

unused, amounts.

The agreement also contains early termination

rights if our current directors or their

approved successors cease to be a majority of the

Board of Directors.

The revolving credit facility supports the ConocoPhillips

Company $6.0 billion commercial paper program,

which is primarily a funding source for short-term

working capital needs.

Commercial paper maturities are

generally limited to 90 days.

We had no commercial paper outstanding at June 30, 2020 or December 31, 2019.

We had no direct

outstanding borrowings or letters of credit

under the revolving credit facility at June 30, 2020 or

December 31,

2019.

Since we had no commercial paper outstanding

and had issued no letters of credit, we had

access to

$6.0 billion in borrowing capacity under our revolving

credit facility at June 30, 2020.

We may consider

issuing commercial paper in the future to supplement

our cash position as appropriate.

Despite recent volatility and price weakness for energy issuers

in the debt capital markets, we believe the

company continues to have access to the markets

based on the composition of our balance sheet

and asset

portfolio.

In March 2020, S&P affirmed its “A” rating on our senior

long-term debt and revised its outlook to “negative”

from “stable.”

In April 2020, Moody’s affirmed their rating of “A3” with a “stable” outlook.

Our current

rating from Fitch is “A” 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, in the event of a

downgrade of our credit rating.

If our credit rating were downgraded, it could

increase the cost of corporate

debt available to us and potentially restrict

our access to the commercial paper and debt capital

markets.

If our

credit rating were to deteriorate to a level prohibiting

us from accessing the commercial paper and

debt capital

markets, we would still be able to access funds

under our revolving credit facility.

Certain of our project-related contracts, commercial

contracts and derivative instruments contain

provisions

requiring us to post collateral.

Many of these contracts and instruments permit

us to post either cash or letters

of credit as collateral.

At June 30, 2020 and December 31, 2019, we had

direct bank letters of credit of $196

million and $277 million, respectively, which secured performance obligations

related to various purchase

commitments incident to the ordinary conduct of

business.

In the event of credit ratings downgrades, we may

be required to post additional letters of

credit.

Shelf Registration

We have a universal shelf registration statement on file with the U.S. SEC under which

we have the ability to

issue and sell an indeterminate amount of various

types of debt and equity securities.

Off-Balance Sheet Arrangements

As part of our normal ongoing business operations

and consistent with normal industry practice,

we enter into

numerous agreements with other parties to pursue

business opportunities, which share costs

and apportion

risks among the parties as governed by the agreements.

For information about guarantees, see Note 11—Guarantees, in

the Notes to Consolidated Financial

Statements, which is incorporated herein by reference.

Capital Requirements

For information about our capital expenditures

and investments, see the “Capital Expenditures”

section.

Our debt balance at June 30, 2020, was $14,998

million, compared with $14,895 million

at December 31,

2019.

Maturities of debt for the remainder of 2020,

and for each of the years 2021 through 2024,

are: $81

million, $255 million, $971 million, $229 million

and $573 million, respectively.

On February 4, 2020, we announced a quarterly

dividend of $0.42 per share.

The dividend was paid on March

2, 2020,

to stockholders of record at the close of business

on February 14, 2020.

On April 30, 2020, we

announced a quarterly dividend of $0.42 per share.

The dividend was paid on June 1, 2020, to stockholders

record at the close of business on May 11, 2020.

On July 8, 2020,

we announced a quarterly dividend of $0.42

per share, payable September 1, 2020,

to stockholders of record at the close of business

on July 20,

2020.

In late 2016, we initiated our current share repurchase

program.

As of June 30, 2020, we had announced a

total authorization to repurchase $25 billion of our

common stock.

As of December 31, 2019, we had

repurchased $9.6 billion of shares.

In the first quarter of 2020, we repurchased

an additional $726 million of

shares.

On April 16, 2020, as a response to the oil market

price downturn, we announced we were suspending

our share repurchase program.

Since our share repurchase program began in November

2016, we have

repurchased 184 million shares at a cost of $10.4

billion through June 30, 2020.

Capital Expenditures

Millions of Dollars

Six Months Ended

June 30

2020

2019

Alaska

732

780

Lower 48

1,130

1,770

Canada

142

232

Europe and North Africa

251

339

Asia Pacific and Middle East

188

219

Other International

Corporate and Other

Capital expenditures and investments

2,525

3,366

During the first six months of 2020, capital expenditures

and investments supported key exploration and

development programs, primarily:

●

Development,

appraisal and exploration activities in

the Lower 48, including Eagle Ford, Permian

Unconventional and Bakken.

●

Appraisal,

exploration and development activities

in Alaska related to the Western North Slope;

development activities in the Greater Kuparuk

Area and the Greater Prudhoe Area.

●

Development and exploration activities across

assets in Norway.

●

Appraisal activities in the liquids-rich portion

of the Montney in Canada and optimization

of oil sands

development.

●

Continued development in China, Malaysia,

Australia and Indonesia.

●

Lease acquisition and exploration activities

in Argentina.

In February 2020, we announced 2020 operating

plan capital expenditures of $6.5 billion to $6.7 billion.

response to the recent oil market downturn, we announced

reductions to this plan totaling $2.3 billion,

approximately 35 percent.

The capital reductions are sourced to the segments

in the amount of $1.4 billion to

Lower 48, $0.4 billion to Alaska, $0.2 billion

to Canada and $0.3 billion to all other segments

and exploration.

This does not include capital for acquisitions.

In July 2020, we signed a definitive agreement

to acquire additional Montney acreage for cash

consideration of

approximately $375 million before customary adjustments,

plus the assumption of approximately $30 million

in financing obligations for associated partially

owned infrastructure.

This acquisition primarily consists of

undeveloped properties and includes 140,000

net acres in the liquids-rich Inga Fireweed asset

Montney zone,

which is directly adjacent to our existing Montney

position, as well as 15 MBOED of production.

Upon

completion of this transaction, we will have a Montney

acreage position of 295,000 net acres with a 100

percent working interest.

The transaction is subject to regulatory

approval and is expected to close in the third

quarter of 2020 with an effective date of July 1, 2020.

Contingencies

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

We also may be required to remove or mitigate the effects on the environment of the

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances

at various active

and inactive sites.

We regularly assess the need for accounting recognition or disclosure of these

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue

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

minimum 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, legal and

tax 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 legal and tax matters are subject to

change as events evolve and as additional

information becomes

available during the administrative and litigation

processes.

For information on other contingencies, see

Note 12—Contingencies

and Commitments, in the Notes to Consolidated

Financial Statements.

Legal and Tax Matters

We are subject to various lawsuits and claims including but not limited to matters

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes,

environmental

damages, climate change, personal injury, and property damage.

Our primary exposures for such matters

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties and

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

legal

proceedings against us.

Our process facilitates the early evaluation and quantification

of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

mediation.

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

the

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

of new

accruals, is required.

Environmental

We are subject to the same numerous international, federal, state and local environmental

laws and regulations

as other companies in our industry.

For a discussion of the most significant

of these environmental laws and

regulations, including those with associated remediation

obligations, see the “Environmental” section in

Management’s Discussion and Analysis of Financial Condition and Results

of Operations on pages 60–62 of

our 2019 Annual Report on Form 10-K.

We occasionally receive requests for information or notices of potential liability

from the EPA and state

environmental agencies alleging that we are

a potentially responsible party under the Federal

Comprehensive

Environmental Response, Compensation and Liability

Act (CERCLA) or an equivalent state statute.

occasion, we also have been made a party to cost

recovery litigation by those agencies or by private

parties.

These requests, notices and lawsuits assert potential

liability for remediation costs at various sites

that typically

are not owned by us, but allegedly contain waste attributable

to our past operations.

As of June 30, 2020, there

were 15 sites around the U.S.

in which we were identified as a potentially responsible

party under CERCLA

and comparable state laws.

At June 30, 2020 and December 31, 2019, our balance

sheet included a total environmental accrual of

$171

million for remediation activities in the

U.S. and Canada.

We expect to incur a substantial amount of these

expenditures within the next 30 years.

Notwithstanding any of the foregoing, and as with

other companies engaged in similar businesses,

environmental costs and liabilities are inherent

concerns in our operations and products, and there

can be no

assurance that material costs and liabilities

will not be incurred.

However, we currently do not expect any

material adverse effect upon our results of operations or financial

position as a result of compliance with

current environmental laws and regulations.

Climate Change

Continuing political and social attention to the

issue of global climate change has resulted in

a broad range of

proposed or promulgated state, national and international

laws focusing on GHG reduction.

These proposed or

promulgated laws apply or could apply in countries

where we have interests or may have interests

in the future.

Laws in this field continue to evolve, and while

it is not possible to accurately estimate either

a timetable for

implementation or our future compliance costs

relating to implementation, such laws, if

enacted, could have a

material impact on our results of operations and

financial condition.

Examples of legislation and precursors

for possible regulation that do or could affect our operations

include:

●

The EPA’s

and U.S. Department of Transportation’s joint promulgation of a Final Rule on April

2010, that triggered regulation of GHGs under the

Clean Air Act, may trigger more climate-based

claims for damages, and may result in longer

agency review time for development projects.

●

Colorado’s HB-19 1261, approved May 30, 2019, introducing statewide goals

to reduce 2025 GHG

emissions by at least 26 percent, 2030 GHG emissions

by at least 50 percent, and 2050 GHG

emissions by at least 90 percent of the levels of GHG

emissions that existed in 2005.

For other examples of legislation or precursors for

possible regulation and factors on which

the ultimate impact

on our financial performance will depend, see the

“Climate Change” section in Management’s Discussion and

Analysis of Financial Condition and Results of Operations

on pages 63–65 of our 2019 Annual Report on

Form 10-K.

In December 2018, we became a Founding Member

of the Climate Leadership Council (CLC), an

international

policy institute founded in collaboration with business

and environmental interests to develop a carbon

dividend plan.

Participation in the CLC provides another

opportunity for ongoing dialogue about carbon

pricing and framing the issues in alignment with our

public policy principles.

We also belong to and fund

Americans For Carbon Dividends, the education

and advocacy branch of the CLC.

Beginning in 2017, cities, counties, and state governments

in California, New York, Washington,

Rhode

Island, Maryland and Hawaii, as well as the Pacific

Coast Federation of Fishermen’s Association, Inc., have

filed lawsuits against oil and gas companies,

including ConocoPhillips, seeking compensatory

damages and

equitable relief to abate alleged climate change impacts.

ConocoPhillips is vigorously defending against

these

lawsuits.

The lawsuits brought by the Cities of San Francisco,

Oakland and New York were dismissed by

federal district courts.

The New York dismissal remains on appeal.

The Ninth Circuit ruled that the San

Francisco and Oakland cases (and other California

cases) should proceed in state court, with that

decision

subject to appeal.

Lawsuits filed by the cities and counties in California,

Washington, and Hawaii are

currently stayed pending resolution of the Ninth Circuit

appeals.

Lawsuits filed in Maryland and Rhode Island

are proceeding in state court while rulings in those

matters, on the issue of whether the

matters should proceed

in state or federal court, are on appeal.

Several Louisiana parishes have filed lawsuits against

oil and gas companies, including ConocoPhillips,

seeking compensatory damages in connection

with historical oil and gas operations in Louisiana.

The lawsuits

are stayed pending an appeal with the Fifth Circuit

on the issue of whether they will proceed in federal

or state

court.

ConocoPhillips will vigorously defend against

these lawsuits.

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,”

“estimate,” “believe,” “budget,” “continue,” “could,”

“intend,” “may,” “plan,” “potential,” “predict,” “seek,”

“should,” “will,” “would,” “expect,” “objective,”

“projection,” “forecast,” “goal,” “guidance,” “outlook,”

“effort,” “target” 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,

including, but not limited to, the

following:

●

The impact of public health crises, including pandemics

(such as COVID-19) and epidemics and any

related company or government policies or

actions.

●

Global and regional changes in the demand, supply, prices, differentials or other market

conditions

affecting oil and gas, including changes resulting from a public

health crisis or from the imposition or

lifting of crude oil production quotas or other

actions that might be imposed by OPEC

and other

producing countries and the resulting company

or third-party actions in response to such changes.

●

Fluctuations in crude oil, bitumen, natural gas,

LNG and NGLs prices, including a prolonged

decline

in these prices relative to historical or future

expected levels.

●

The impact of significant declines in prices for crude

oil, bitumen, natural gas, LNG and NGLs,

which

may result in recognition of impairment charges on our

long-lived assets, leaseholds and

nonconsolidated equity investments.

●

Potential failures or delays in achieving expected

reserve or production levels from existing

and future

oil and gas developments, including due to operating

hazards, drilling risks and the inherent

uncertainties in predicting reserves and reservoir

performance.

●

Reductions in reserves replacement rates, whether

as a result of the significant declines in commodity

prices or otherwise.

●

Unsuccessful exploratory drilling activities

or the inability to obtain access to exploratory acreage.

●

Unexpected changes in costs or technical requirements

for constructing, modifying or operating E&P

facilities.

●

Legislative and regulatory initiatives

addressing environmental concerns, including initiatives

addressing the impact of global climate change or further

regulating hydraulic fracturing, methane

emissions, flaring or water disposal.

●

Lack of, or disruptions in, adequate and reliable

transportation for our crude oil, bitumen, natural

gas,

LNG and NGLs.

●

Inability to timely obtain or maintain permits,

including those necessary for construction, drilling

and/or development, or inability to make capital

expenditures required to maintain compliance

with

any necessary permits or applicable laws or regulations.

●

Failure to complete definitive agreements and feasibility

studies for, and to complete construction of,

announced and future E&P and LNG development

in a timely manner (if at all) or on budget.

●

Potential disruption or interruption of our operations

due to accidents, extraordinary weather

events,

civil unrest, political events, war, terrorism, cyber attacks,

and information technology failures,

constraints or disruptions.

●

Changes in international monetary conditions and

foreign currency exchange rate fluctuations.

●

Changes in international trade relationships,

including the imposition of trade restrictions

or tariffs

relating to crude oil, bitumen, natural gas, LNG,

NGLs and any materials or products (such as

aluminum and steel) used in the operation of our

business.

●

Substantial investment in and development use

of, competing or alternative energy sources, including

as a result of existing or future environmental

rules and regulations.

●

Liability for remedial actions, including removal

and reclamation obligations, under existing

and

future environmental regulations and litigation.

●

Significant operational or investment changes imposed

by existing or future environmental

statutes

and regulations, including international agreements

and national or regional legislation and regulatory

measures to limit or reduce GHG emissions.

●

Liability resulting from litigation or our failure

to comply with applicable laws and regulations.

●

General domestic and international economic and

political developments, including armed

hostilities;

expropriation of assets; changes in governmental

policies relating to crude oil, bitumen, natural

gas,

LNG and NGLs pricing, regulation or taxation;

and other political, economic or diplomatic

developments.

●

Volatility

in the commodity futures markets.

●

Changes in tax and other laws, regulations (including

alternative energy mandates), or royalty rules

applicable to our business.

●

Competition and consolidation in the oil and gas

E&P industry.

●

Any limitations on our access to capital or increase

in our cost of capital, including as a result

illiquidity or uncertainty in domestic or international

financial markets.

●

Our inability to execute, or delays in the completion,

of any asset dispositions or acquisitions

we elect

to pursue.

●

Potential failure to obtain, or delays in obtaining, any

necessary regulatory approvals for

pending or

future asset dispositions or acquisitions,

or that such approvals may require modification

to the terms

of the transactions or the operation of our remaining

business.

●

Potential disruption of our operations as a result

of pending or future asset dispositions or acquisitions,

including the diversion of management time and attention.

●

Our inability to deploy the net proceeds from any

asset dispositions that are pending or

that we elect to

undertake in the future in the manner and timeframe

we currently

anticipate, if at all.

●

Our inability to liquidate the common stock issued

to us by Cenovus Energy as part of our sale of

certain assets in western Canada at prices we deem

acceptable, or at all.

●

The operation and financing of our joint ventures.

●

The ability of our customers and other contractual

counterparties to satisfy their obligations to

us,

including our ability to collect payments when

due from the government of Venezuela or PDVSA.

●

Our inability to realize anticipated cost savings and

capital expenditure reductions.

●

The inadequacy of storage capacity for our products,

and ensuing curtailments, whether voluntary

involuntary, required to mitigate this physical constraint.

●

The risk factors generally described in Part II—Item

1A in this report, in Part I—Item 1A in our 2019

Annual Report on Form 10-K, and any additional

risks described in our other filings with

the SEC.

Item 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Information about market risks for the six months

ended June 30, 2020, does not differ materially

from that

discussed under Item 7A in our 2019 Annual Report

on Form 10-K.

Item 4.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure information required

to be disclosed in

reports we file or submit under the Securities

Exchange Act of 1934, as amended (the Act),

is recorded,

processed, summarized and reported within the

time periods specified in SEC rules and forms,

and that such

information is accumulated and communicated

to management, including our principal

executive and principal

financial officers, as appropriate, to allow timely decisions

regarding required disclosure.

As of June 30, 2020,

with the participation of our management, our Chairman

and Chief Executive Officer (principal executive

officer) and our Executive Vice President and Chief Financial Officer (principal financial

officer) carried out

an evaluation, pursuant to Rule 13a-15(b) of

the Act, of ConocoPhillips’ disclosure controls

and procedures (as

defined in Rule 13a-15(e) of the Act).

Based upon that evaluation, our Chairman and

Chief Executive Officer

and our Executive Vice President and Chief Financial Officer concluded our disclosure

controls and

procedures were operating effectively as of June 30, 2020.

There have been no changes in our internal

control over financial reporting, as defined in

Rule 13a-15(f) of the

Act, in the period covered by this report that

have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

PART

II.

OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

There are no new material legal proceedings

or material developments with respect to matters

previously

disclosed in Item 3 of our 2019 Annual Report on

Form 10-K.

Item 1A.

RISK FACTORS

Other than the risk factors set forth below, there have been no material

changes to the risk factors disclosed in

our Annual Report on Form 10-K for the fiscal

year ended December 31, 2019.

Our business has been, and will continue to

be, affected by the coronavirus (COVID-19) pandemic.

The COVID-19 outbreak and the measures put

in place to address it have negatively impacted

the global

economy, disrupted global supply chains, reduced global demand for oil

and gas, and created significant

volatility and disruption of financial and commodity

markets.

Public health officials have recommended or

mandated certain precautions to mitigate

the spread of COVID-19, including limiting non-essential

gatherings

of people, ceasing all non-essential travel

and issuing “social or physical distancing” guidelines,

“shelter-in-

place” orders and mandatory closures or reductions

in capacity for non-essential businesses.

The full impact of

the COVID-19 pandemic remains uncertain

and will depend on the severity, location and duration of the

effects and spread of the disease, the effectiveness and duration

of actions taken by authorities to contain the

virus or treat its effect, and how quickly and to what extent

economic conditions improve.

According to the

National Bureau of Economic Research, as a result

of the pandemic and its broad reach across the

entire

economy, the U.S. entered a recession in early 2020.

We have already been impacted by the COVID-19 pandemic.

See Management’s Discussion and Analysis of

Financial Condition and Results of Operations, for

additional information on how we have

been impacted and

the steps we have taken in response.

Our business is likely to be further negatively

impacted by the COVID-19 pandemic. These impacts

could

include but are not limited to:

●

Continued reduced demand for our products

as a result of reductions in travel and commerce;

●

Disruptions in our supply chain due in part to scrutiny

or embargoing of shipments from infected areas

or invocation of force majeure clauses in commercial

contracts due to restrictions imposed as a result

of the global response to the pandemic;

●

Failure of third parties on which we rely, including our suppliers, contract

manufacturers, contractors,

joint venture partners and external business partners,

to meet their obligations to the company, or

significant disruptions in their ability to

do so, which may be caused by their own financial

operational difficulties or restrictions imposed in

response to the disease outbreak;

●

Reduced workforce productivity caused by, but not limited to, illness, travel

restrictions, quarantine,

or government mandates;

●

Business interruptions resulting from a significant

amount of our employees telecommuting

compliance with social distancing guidelines and

shelter-in-place orders, as well as the

implementation of protections for employees continuing

to commute for work, such as personnel

screenings and self-quarantines before or after

travel; and

●

Voluntary

or involuntary curtailments to support oil prices

or alleviate storage shortages for our

products.

Any of these factors, or other cascading effects of the

COVID-19 pandemic that are not currently foreseeable,

could materially increase our costs, negatively impact

our revenues and damage our financial condition,

results

of operations, cash flows and liquidity position.

The pandemic continues to progress and evolve,

and the full

extent and duration of any such impacts cannot

be predicted at this time because of the sweeping

impact of the

COVID-19 pandemic on daily life around the world.

We have been negatively affected and are likely to continue to be negatively affected by the recent

swift and

sharp drop in commodity prices.

The oil and gas business is fundamentally a commodity

business and prices for crude oil, bitumen,

natural gas,

NGLs and LNG can fluctuate widely depending

upon global events or conditions that affect supply and

demand.

Recently, there has been a precipitous decrease in demand for oil globally, largely caused by the

dramatic decrease in travel and commerce resulting

from the COVID-19 pandemic.

See Management’s

Discussion and Analysis of Financial Condition

and Results of Operations, for additional information

commodity prices and how we have been impacted.

There is no assurance of when or if commodity

prices will

return to pre-COVID-19 levels.

The speed and extent of any recovery remains uncertain

and is subject to

various risks, including the duration, impact and actions

taken to stem the proliferation of the COVID-19

pandemic, the extent to which those nations party

to the OPEC plus production agreement decide

to increase

production of crude oil, bitumen, natural gas, NGLs

and LNG, and other risks described in this

Quarterly

Report on Form 10-Q or in our Annual Report

on Form 10-K for the fiscal year ended

December 31, 2019.

Even after a recovery, our industry will continue to be exposed to the effects of changing

commodity prices

given the volatility in commodity price drivers

and the worldwide political and economic

environment

generally, as well as continued uncertainty caused by armed hostilities

in various oil-producing regions around

the globe.

Our revenues, operating results and future rate

of growth are highly dependent on the prices

receive for our crude oil, bitumen, natural gas, NGLs

and LNG.

Many of the factors influencing these prices

are beyond our control.

Lower crude oil, bitumen, natural gas, NGL and LNG

prices may have a material adverse effect on our

revenues, operating income, cash flows and liquidity, and may also affect the amount

of dividends we elect to

declare and pay on our common stock.

As a result of the recent market downturn, we

have suspended our

share repurchase program.

Lower prices may also limit the amount of reserves

we can produce economically,

thus adversely affecting our proved reserves, reserve replacement

ratio and accelerating the reduction in our

existing reserve levels as we continue production

from upstream fields.

Prolonged lower crude oil prices may

affect certain decisions related to our operations, including

decisions to reduce capital investments

or decisions

to shut-in production.

Due to ongoing uncertainty and volatility, we are suspending all further

guidance for

2020, including guidance related to capital

expenditures and production and our previous

2020 guidance

should not be relied upon.

Significant reductions in crude oil, bitumen, natural

gas, NGLs and LNG prices could also

require us to reduce

our capital expenditures, impair the carrying value

of our assets or discontinue the classification

of certain

assets as proved reserves.

In the first six-month period of 2020, we recognized

several impairments, which are

described in Note 8—Impairments.

If the outlook for commodity prices remain

low relative to their historic

levels, and as we continue to optimize our investments

and exercise capital flexibility, it is reasonably likely

we will incur future impairments to long-lived assets

used in operations, investments in nonconsolidated

entities accounted for under the equity method and unproved

properties.

If oil and gas prices persist at

depressed levels, our reserve estimates may

decrease further, which could incrementally increase the rate used

to determine DD&A expense on our unit-of-production

method properties.

See Management’s Discussion and

Analysis for further examination of DD&A

rate impacts versus comparative periods.

Although it is not

reasonably practicable to quantify the impact

of any future impairments or estimated change to our

unit-of-

production at this time, our results of operations

could be adversely affected as a result.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Millions of Dollars

Period

Total Number of

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, 2020

14,649

May 1-31, 2020

14,649

June 1-30, 2020

14,649

*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 June 30, 2020, we had announced a

total authorization to repurchase $25 billion of our

common stock.

As of December 31, 2019, we had

repurchased $9.6 billion of shares.

In the first quarter of 2020, we repurchased

an additional $726 million of

shares.

On April 16, 2020, as a response to the oil market

downturn, we announced we were suspending our

share repurchase program.

Acquisitions for the share repurchase program

are made at management’s

discretion, at prevailing prices, subject to market conditions

and other factors.

Except as limited by applicable

legal requirements, repurchases may be increased, decreased

or discontinued at any time without prior notice.

Shares of stock repurchased under the plan are

held as treasury shares.

See the “Our ability to declare and pay

dividends and repurchase shares is subject to

certain considerations” section in Risk Factors

on pages 21–22 of

our 2019 Annual Report on Form 10-K.

Item 6.

EXHIBITS

10.1*

Letter Agreement with Don E. Wallette, Jr., dated August 3, 2020.

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.

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/ Catherine A. Brooks

Catherine A. Brooks

Vice President and Controller

(Chief Accounting and Duly Authorized Officer)

August 4, 2020

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