ConocoPhillips 10Q 2021 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

[X]

QUARTERLY

REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2021

[

]

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 12 months (or for such shorter period that

the registrant was required to submit and post 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

1,349,418,454

shares of common stock, $.01 par value, outstanding at March 31, 2021.

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

........................................................................................

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

MMBOED

millions of barrels of oil

equivalent per day

Miscellaneous

MMBTU

million British thermal units

EPA

Environmental Protection Agency

MMCFD

million cubic feet per day

ESG

Environmental, Social and

Corporate Governance

European Union

Industry

FERC

Federal Energy Regulatory

CBM

coalbed methane

Commission

E&P

exploration and production

GHG

greenhouse gas

FEED

front-end engineering and design

HSE

health, safety and environment

FPS

floating production system

ICC

International Chamber of

FPSO

floating production, storage and

Commerce

offloading

ICSID

World Bank’s

International

G&G

geological and geophysical

Centre for Settlement of

JOA

joint operating agreement

Investment Disputes

LNG

liquefied natural gas

IRS

Internal Revenue Service

NGLs

natural gas liquids

OTC

over-the-counter

OPEC

Organization of Petroleum

NYSE

New York Stock Exchange

Exporting Countries

SEC

U.S. Securities and Exchange

PSC

production sharing contract

Commission

PUDs

proved undeveloped reserves

TSR

total shareholder return

SAGD

steam-assisted gravity drainage

U.K.

United Kingdom

WCS

Western Canada Select

U.S.

United States of America

WTI

West Texas

Intermediate

PART

FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

Consolidated Income Statement

ConocoPhillips

Millions of Dollars

Three Months Ended

March 31

2021

2020

Revenues and Other Income

Sales and other operating revenues

9,826

6,158

Equity in earnings of affiliates

122

234

Gain (loss) on dispositions

233

(42)

Other income (loss)

378

(1,539)

Total Revenues and

Other Income

10,559

4,811

Costs and Expenses

Purchased commodities

4,483

2,661

Production and operating expenses

1,383

1,173

Selling, general and administrative expenses

311

(3)

Exploration expenses

188

Depreciation, depletion and amortization

1,886

1,411

Impairments

(3)

521

Taxes other than income

taxes

370

250

Accretion on discounted liabilities

Interest and debt expense

226

202

Foreign currency transactions (gain) loss

(90)

Other expenses

(6)

Total Costs and Expenses

8,845

6,374

Income (loss) before income taxes

1,714

(1,563)

Income tax provision

732

148

Net income (loss)

982

(1,711)

Less: net income attributable to noncontrolling interests

(28)

Net Income (Loss) Attributable to ConocoPhillips

982

(1,739)

Net Income (Loss) Attributable to ConocoPhillips Per Share

of Common Stock

(dollars)

Basic

0.75

(1.60)

Diluted

0.75

(1.60)

Average Common

Shares Outstanding

(in thousands)

Basic

1,300,375

1,084,561

Diluted

1,302,691

1,084,561

See Notes to Consolidated Financial Statements.

Consolidated Statement of Comprehensive Income

ConocoPhillips

Millions of Dollars

Three Months Ended

March 31

2021

2020

Net Income (Loss)

982

(1,711)

Other comprehensive income (loss)

Defined benefit plans

Reclassification adjustment for amortization of prior service credit

included in net income (loss)

(9)

(8)

Net actuarial gain arising during the period

Reclassification adjustment for amortization of net actuarial losses included

in net income (loss)

Income taxes on defined benefit plans

(21)

(4)

Defined benefit plans, net of tax

Net unrealized holding loss on securities

(1)

(3)

Income taxes on net unrealized holding loss on securities

Net unrealized holding loss on securities, net of tax

(1)

(2)

Foreign currency translation adjustments

(799)

Income taxes on foreign currency translation adjustments

Foreign currency translation adjustments, net of tax

(797)

Other Comprehensive Income (Loss), Net of

Tax

138

(788)

Comprehensive Income (Loss)

1,120

(2,499)

Less: comprehensive income attributable to noncontrolling

interests

(28)

Comprehensive Income (Loss) Attributable to ConocoPhillips

1,120

(2,527)

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheet

ConocoPhillips

Millions of Dollars

March 31

December 31

2021

2020

Assets

Cash and cash equivalents

2,831

2,991

Short-term investments

4,104

3,609

Accounts and notes receivable (net of allowance of $

and $

, respectively)

4,339

2,634

Accounts and notes receivable—related parties

142

120

Investment in Cenovus Energy

1,564

1,256

Inventories

1,098

1,002

Prepaid expenses and other current assets

536

454

Total Current Assets

14,614

12,066

Investments and long-term receivables

8,286

8,017

Loans and advances—related parties

114

Net properties, plants and equipment

(net of accumulated DD&A of $

64,082

and $

62,213

, respectively)

58,270

39,893

Other assets

2,464

2,528

Total Assets

83,693

62,618

Liabilities

Accounts payable

3,779

2,669

Accounts payable—related parties

Short-term debt

689

619

Accrued income and other taxes

959

320

Employee benefit obligations

567

608

Other accruals

1,168

1,121

Total Current Liabilities

7,184

5,366

Long-term debt

19,338

14,750

Asset retirement obligations and accrued environmental costs

5,782

5,430

Deferred income taxes

4,982

3,747

Employee benefit obligations

1,530

1,697

Other liabilities and deferred credits

1,722

1,779

Total Liabilities

40,538

32,769

Equity

Common stock (

2,500,000,000

shares authorized at $

.01

par value)

Issued (2021—

2,087,207,067

shares; 2020—

1,798,844,267

shares)

Par value

Capital in excess of par

60,278

47,133

Treasury stock (at cost: 2021—

737,788,613

shares; 2020—

730,802,089

shares)

(47,672)

(47,297)

Accumulated other comprehensive loss

(5,080)

(5,218)

Retained earnings

35,608

35,213

Total Equity

43,155

29,849

Total Liabilities and Equity

83,693

62,618

See Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows

ConocoPhillips

Millions of Dollars

Three Months Ended

March 31

2021

2020

Cash Flows From Operating Activities

Net Income (Loss)

982

(1,711)

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

activities

Depreciation, depletion and amortization

1,886

1,411

Impairments

(3)

521

Dry hole costs and leasehold impairments

Accretion on discounted liabilities

Deferred taxes

203

(227)

Undistributed equity earnings

(Gain) loss on dispositions

(233)

Unrealized (gain) loss on investment in Cenovus Energy

(308)

1,691

Other

(581)

(284)

Working

capital adjustments

Decrease (increase) in accounts and notes receivable

(785)

1,041

Decrease (increase) in inventories

(51)

277

Increase in prepaid expenses and other current assets

(43)

(79)

Increase (decrease) in accounts payable

424

(297)

Increase (decrease) in taxes and other accruals

440

(445)

Net Cash Provided by Operating Activities

2,080

2,105

Cash Flows From Investing Activities

Cash acquired from Concho

382

Capital expenditures and investments

(1,200)

(1,649)

Working

capital changes associated with investing activities

Proceeds from asset dispositions

(17)

549

Net purchases of investments

(499)

(935)

Collection of advances/loans—related parties

Other

(44)

Net Cash Used in Investing Activities

(1,215)

(1,932)

Cash Flows From Financing Activities

Repayment of debt

(26)

(24)

Issuance of company common stock

(28)

Repurchase of company common stock

(375)

(726)

Dividends paid

(588)

(458)

Other

(24)

Net Cash Used in Financing Activities

(1,015)

(1,230)

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

Cash

(2)

(122)

Net Change in Cash, Cash Equivalents and Restricted Cash

(152)

(1,179)

Cash, cash equivalents and restricted cash at beginning of period

3,315

5,362

Cash, Cash Equivalents and Restricted Cash at End of Period

3,163

4,183

Restricted cash of $

million and $

238

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

respectively, of our Consolidated Balance Sheet as of March 31, 2021.

Restricted cash of $

million and $

230

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, 2020.

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 2020 Annual Report on Form

10-K

Note 2—Inventories

Inventories consisted of the following:

Millions of Dollars

March 31

December 31

2021

2020

Crude oil and natural gas

541

461

Materials and supplies

557

541

1,098

1,002

Inventories valued on the LIFO basis totaled

352

million and $

282

million at March 31, 2021 and December

31, 2020, respectively.

Note 3—Acquisitions and Dispositions

Acquisition of

Concho Resources Inc.

(Concho)

We completed our acquisition of Concho on

January 15, 2021

and as defined under the terms of the

transaction

agreement, each share of Concho common stock

was exchanged at a fixed ratio of

1.46

for shares of

ConocoPhillips common stock, for total consideration

of $

13.1

billion.

Total Consideration

Number of shares of Concho common stock

issued and outstanding (in thousands)*

194,243

Number of shares of Concho stock awards outstanding

(in thousands)*

1,599

Number of shares exchanged

195,842

Exchange ratio

1.46

Additional shares of ConocoPhillips common stock

issued as consideration (in thousands)

285,929

Average price per share of ConocoPhillips common stock**

45.9025

Total Consideration (Millions)

13,125

*Outstanding as of January 15, 2021.

**Based on the ConocoPhillips average stock price on January

15, 2021.

The transaction was accounted for as a business

combination under FASB ASC 805 using the acquisition

method, which requires assets acquired and liabilities

assumed to be measured at their acquisition date fair

values.

Fair value measurements were made for acquired

assets and liabilities, and adjustments to those

measurements may be made in subsequent periods,

up to one year from the acquisition date as

we identify new

information about facts and circumstances that existed

as of the acquisition date to consider.

Oil and gas

properties were valued using a discounted cash

flow approach incorporating market participant

and internally

generated price assumptions;

production profiles;

and operating and development cost assumptions.

Debt

assumed in the acquisition was valued based on

observable market prices.

The fair values determined for

accounts receivables, accounts payable, and most

other current assets and current liabilities

were equivalent to

the carrying value due to their short-term

nature.

The total consideration of $

13.1

billion was allocated to the

identifiable assets and liabilities based on their

fair values as of January 15, 2021.

Assets Acquired

Millions of Dollars

Cash and cash equivalents

382

Accounts receivable, net

742

Inventories

Prepaid expenses and other current assets

Investments and long-term receivables

333

Net properties, plants and equipment

18,998

Other assets

Total assets acquired

20,599

Liabilities Assumed

Accounts payable

638

Accrued income and other taxes

Employee benefit obligations

Other accruals

510

Long-term debt

4,696

Asset retirement obligations and accrued environmental

costs

310

Deferred income taxes

1,123

Other liabilities and deferred credits

117

Total liabilities assumed

7,474

Net assets acquired

13,125

With the completion of the Concho transaction, we acquired proved

and unproved properties of approximately

11.9

billion and $

6.9

billion, respectively.

We recognized approximately $

157

million of transaction-related costs that

were expensed in the current

period.

These non-recurring costs related primarily

to fees paid to advisors and the settlement of

share-based

awards for certain Concho employees based

on the terms of the Merger Agreement.

In the first quarter of 2021, we commenced a restructuring program, the scope of which included combining

the operations of the two companies. For the three-month period ending March 31, 2021, we recognized non-

recurring restructuring costs mainly for employee severance and related incremental pension benefit costs of

approximately $134 million.

The impact from these transaction and restructuring

costs to the lines of our consolidated income statement

for

the three-month period ending March 31, 2021,

are below:

Millions of Dollars

Transaction Cost

Restructuring Cost

Total Cost

Production and operating expenses

Selling, general and administration expenses

135

180

Exploration expenses

Taxes other than income taxes

Other expenses

157

134

291

On February 8, 2021, we completed a debt exchange

offer related to the debt assumed from Concho.

As a

result of the debt exchange, we recognized an additional

income tax related restructuring charge of $

million.

See Note 18—Income Taxes, for additional information.

“Total Revenues and Other Income” and “Net Income (Loss) Attributable to

ConocoPhillips” associated with

the acquired Concho business were approximately

1,040

million and $

190

million, respectively, for the three-

month period ending March 31, 2021.

The results associated with the Concho business

include a before- and

after-tax loss of $

173

million and $

132

million, respectively, on the acquired derivative contracts with

settlement dates on or before March 31, 2021, and

an additional before- and after-tax loss of $

132

million and

101

million, respectively, for contracts with settlement dates subsequent

to March 31, 2021.

The before-tax

loss is recorded within “Total Revenues and Other Income” on our consolidated income

statement.

For

additional information about the financial derivative

instruments acquired, see Note 10—Derivative

and

Financial Instruments.

The following summarizes the unaudited supplemental

pro forma financial information for the three-month

period ending March 31, 2020, as if we had completed

the acquisition of Concho on January 1, 2020:

Millions of Dollars

Supplemental Pro Forma (unaudited)

Three Months Ended

March 31, 2020

Total revenues and other income

7,300

Net loss

(390)

Net loss attributable to ConocoPhillips

(418)

$ per share

Earnings per share:

Three Months Ended

March 31, 2020

Basic net loss

(0.31)

Diluted net loss

(0.31)

The unaudited supplemental pro forma financial

information is presented for illustration purposes

only and is

not necessarily indicative of the operating results

that would have occurred had the transaction been

completed

on January 1, 2020, nor is it necessarily indicative

of future operating results of the combined entity.

The

unaudited pro forma financial information

for the three-month period ending March 31, 2020 is

a result of

combining the consolidated income statement

of ConocoPhillips with the results of Concho.

The pro forma

results do not include transaction-related costs,

nor any cost savings anticipated as a result

of the transaction.

The pro forma results include adjustments to

reverse impairment expense of $

10.5

billion and $

1.9

billion

recorded by Concho in the three-month period ending

March 31, 2020, related to oil and gas properties

and

goodwill, respectively.

Other adjustments made relate primarily to

DD&A, which is based on the unit-of-

production method, resulting from the purchase

price allocated to properties, plants and equipment.

believe the estimates and assumptions are reasonable,

and the relative effects of the transaction are properly

reflected.

Assets Sold

In 2020, we completed the sale of our Australian-West asset and operations.

The sales agreement entitles us to

a $

200

million payment upon a final investment

decision (FID) of the Barossa development

project.

On March

30, 2021, FID was announced and as such,

we recognized a $

200

million gain on disposition in the first

quarter

of 2021.

The purchaser failed to pay the FID bonus when

due.

We intend to take all action required to enforce

our contractual right to the $

200

million, plus interest accruing from the due

date.

Results of operations related

to this transaction are reflected in our Asia Pacific

segment.

In 2017, we completed the sale of our

percent nonoperated interest in the Foster Creek

Christina Lake

(FCCL) Partnership, as well as the majority of

our western Canada gas assets to Cenovus Energy.

Consideration for the transaction included a five-year, uncapped

contingent payment.

The contingent payment,

calculated on a quarterly basis, is $6 million CAD for every $1 CAD by which the WCS quarterly average

crude price exceeds $52 CAD per barrel. Contingent payments during the five-year period are recorded as gain

on dispositions on our consolidated income statement and reflected in our Canada segment.

We recorded a

gain on disposition for these contingent payments

of $

million for the three-month period of March 31,

2021.

NaN

contingent payments were recorded in 2020.

Note 4—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

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 March 31, 2021, a balance of $

6.0

billion was outstanding on the facilities.

See Note 8—Guarantees, for

additional information.

During the fourth quarter of 2020, the estimated

fair value of our investment in APLNG declined

to an amount

below carrying value, primarily due to the weakening

of the U.S. dollar relative to the Australian

dollar.

Based

on a review of the facts and circumstances surrounding

this decline in fair value, we concluded the impairment

was not other than temporary under the guidance

of FASB ASC Topic

323, “Investments – Equity Method and

Joint Ventures.”

Due primarily to an improved outlook for

crude oil prices, the estimated fair value of our

investment increased and is above carrying value

at March 31, 2021.

We will continue to monitor the

relationship between the carrying value and fair

value of APLNG.

Should we determine in the future there has

been a loss in the value of our investment

that is other than temporary, we would record an impairment of our

equity investment, calculated as the total difference between

carrying value and fair value as of the end

of the

reporting period.

At March 31, 2021, the carrying value of our

equity method investment in APLNG was

6.6

billion.

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 March 31, 2021, significant loans to affiliated

companies included $

168

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 5-–Investment in Cenovus Energy

In 2017, we completed the sale of certain assets

to Cenovus Energy (CVE) in which we received

208

million

CVE common shares as consideration.

At March 31, 2021, the investment was included

on our consolidated

balance sheet at fair value of $

1.56

billion, which approximates

10.3

percent of the issued and outstanding

CVE common stock.

The fair value of the

208

million CVE common shares reflects the

closing price of $

7.52

per share on the NYSE on the last trading day

of the quarter.

In the first quarter of 2021, we recognized an

unrealized gain of $

308

million before-tax on our CVE common shares,

compared with an unrealized loss of

1,691

million before-tax in the first quarter

of 2020.

The unrealized gain (loss) associated with changes

fair value are reflected within the “Other income

(loss)” line on our consolidated income statement

in the first

quarter of 2021 relating to the shares held at the

reporting date.

See Note 11—Fair Value Measurement for

additional information.

Subject to market conditions, we intend to

decrease our investment over time through

market transactions, private agreements or otherwise.

Note 6—Debt

Our debt balance at March 31, 2021, was $

20.0

billion compared with $

15.4

billion at December 31, 2020.

On January 15, 2021, we completed the acquisition

of Concho in an all-stock transaction.

In the acquisition,

we assumed Concho’s publicly traded debt, with an outstanding principal

balance of $

3.9

billion, which was

recorded at fair value of $

4.7

billion on the acquisition date.

Debt assumed consisted of the following:

●

3.75

% Notes due

2027

with principal of $

1,000

million

●

4.3

% Notes due

2028

with principal of $

1,000

million

●

2.4

% Notes due

2031

with principal of $

500

million

●

4.875

% Notes due

2047

with principal of $

800

million

●

4.85

% Notes due

2048

with principal of $

600

million

The adjustment to fair value of the senior notes

of approximately $

0.8

billion on the acquisition date will be

amortized as an adjustment to interest expense over

the remaining contractual terms of the

senior notes.

On February 8, 2021, we completed a debt exchange

offer related to the debt assumed from Concho.

Of the

approximately $

3.9

billion in aggregate principal amount of Concho’s senior notes offered in the

exchange,

percent, or approximately $

3.8

billion, were tendered and accepted.

The new debt issued by ConocoPhillips

has the same interest rates and maturity dates

as the Concho senior notes.

The portion not exchanged,

approximately $

million, remains outstanding across five series

of senior notes issued by Concho.

The debt

exchange was treated as a debt modification

for accounting purposes resulting in a portion

of the unamortized

fair value adjustment of the Concho senior notes

allocated to the new debt issued by ConocoPhillips

on the

settlement date of the exchange.

The new debt issued in the exchange is fully

and unconditionally guaranteed

by ConocoPhillips Company.

See Note 3—Acquisitions and Dispositions,

for more information on the

acquisition.

We have a revolving credit facility totaling $

6.0

billion with an expiration date of May 2023.

Our revolving

credit facility may be used for direct bank borrowings,

the issuance of letters of credit totaling

up to $

500

million, or as support for our commercial paper

program.

The revolving credit facility is broadly syndicated

among financial institutions and does not contain

any material adverse change provisions or any covenants

requiring maintenance of specified financial

ratios or credit ratings.

The facility agreement contains a cross-

default provision relating to the failure to pay principal

or interest on other debt obligations of $

200

million or

more by ConocoPhillips, or any of its consolidated

subsidiaries.

The amount of the facility is not subject to

redetermination prior to its expiration date.

Credit facility borrowings may bear interest at

a margin above rates offered by certain designated banks in the

London interbank market or at a margin above the overnight

federal funds rate or prime rates offered by

certain designated banks in the U.S.

The agreement calls for commitment fees

on available, but unused,

amounts.

The agreement also contains early termination

rights if our current directors or their approved

successors cease to be a majority of the Board

of Directors.

The revolving credit facility supports our ability

to issue up to $

6.0

billion of commercial paper, which is

primarily a funding source for short-term working capital

needs.

Commercial paper maturities are generally

limited to

90 days

, and is included in the short-term debt on our consolidated

balance sheet.

With $

300

million

of commercial paper outstanding and

direct borrowings or letters of credit, we had

access to $

5.7

billion in

available borrowing capacity under our revolving credit

facility at March 31, 2021.

At December 31, 2020, we

had $

300

million of commercial paper outstanding

and

direct borrowings or letters of credit issued.

In October 2020, Moody’s affirmed its rating of our senior long-term debt of “A3” with a “stable” outlook, and

affirmed its rating of our short-term debt as “Prime-2.” In January 2021, Fitch affirmed its rating of our long-

term debt as “A” with a “stable” outlook and affirmed its rating of our short-term debt as “F1+.” On January

25, 2021, S&P revised its industry risk assessment of the E&P industry to “Moderately High” from

“Intermediate” based on a view of increasing risks from the energy transition, price volatility, and weaker

profitability. On February 11, 2021, S&P downgraded its rating of our long-term debt from “A” to “A-” with a

“stable” outlook and downgraded its rating of our short-term debt from “A-1” to “A-2.” We do not have any

ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our

access to liquidity, upon downgrade of our credit ratings. If our credit ratings are downgraded from their

current levels, it could increase the cost of corporate debt available to us and restrict our access to the

commercial paper markets. If our credit rating were to deteriorate to a level prohibiting us from accessing the

commercial paper market, we would still be able to access funds under our revolving credit facility.

At March 31, 2021, 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 7—Changes in Equity

The following tables reflect the changes in stockholders'

equity:

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Income (Loss)

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended March 31, 2021

Balances at December 31, 2020

47,133

(47,297)

(5,218)

35,213

29,849

Net income

982

Other comprehensive income

138

Dividends paid ($

0.43

per common share)

(588)

Acquisition of Concho

13,122

13,125

Repurchase of company common stock

(375)

Distributed under benefit plans

Other

Balances at March 31, 2021

60,278

(47,672)

(5,080)

35,608

43,155

For the three months ended March 31, 2020

Balances at December 31, 2019

46,983

(46,405)

(5,357)

39,742

35,050

Net income (loss)

(1,739)

(1,711)

Other comprehensive loss

(788)

Dividends paid ($

0.42

per common share)

(458)

Repurchase of company common stock

(726)

Distributions to noncontrolling interests and other

(26)

Distributed under benefit plans

Other

Balances at March 31, 2020

47,027

(47,130)

(6,145)

37,545

31,387

Note 8—Guarantees

At March 31, 2021, we were liable for certain

contingent obligations under various contractual

arrangements

as described below.

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

newly issued or modified guarantees.

Unless the carrying amount of the liability is noted

below, we have not

recognized a liability because the fair value of the

obligation is immaterial.

In addition, unless otherwise

stated, we are not currently performing with any

significance under the guarantee and expect future

performance to be either immaterial or have only

a remote chance of occurrence.

APLNG Guarantees

At March 31, 2021, 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 March

2021 exchange rates:

●

During the third quarter of 2016, we issued a guarantee

to facilitate the withdrawal of our pro-rata

portion of the funds in a project finance reserve

account.

We estimate the remaining term of this

guarantee to be

10 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 March 31, 2021, 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 21 years

Our maximum potential liability for future

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

to be $

740

million ($

1.3

billion in the event of intentional or reckless breach)

and would become payable if APLNG fails

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

16 to 25

years or the life of the venture

Our maximum potential amount of future payments

related to these

guarantees is approximately $

180

million and would become payable if APLNG

does not perform.

March 31, 2021, the carrying value of these guarantees

was approximately $

million.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling

approximately

730

million, which consist primarily of

guarantees of the residual value of leased office buildings,

guarantees

of the residual value of corporate aircrafts,

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

reserve accounts.

These guarantees have remaining terms

of one to

five years

and would become payable if

certain asset values are lower

than guaranteed amounts at the end of the lease or

contract term, business

conditions decline at guaranteed entities,

or as a result of nonperformance of contractual

terms by guaranteed

parties.

At March 31, 2021, the carrying value of these guarantees

was approximately $

million.

Indemnifications

Over the years, we have entered into agreements to

sell ownership interests in certain legal

entities, joint

ventures and assets that gave rise to qualifying

indemnifications.

These agreements include indemnifications

for taxes and environmental liabilities.

Most of these indemnifications are related to

tax issues and the

majority of these expire in 2021.

Those related to environmental issues have terms

that are generally indefinite

and the maximum amounts of future payments are

generally unlimited.

The carrying amount recorded for

these indemnifications at March 31, 2021,

was approximately $

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 is

indefinite, we

will reverse the liability when we have information

the liability is essentially relieved or amortize

the liability

over an appropriate time period as the fair value

of our indemnification exposure declines.

Although it is

reasonably possible future payments may exceed

amounts recorded, due to the nature of

the indemnifications,

it is not possible to make a reasonable estimate

of the maximum potential amount of future

payments.

For

additional information about environmental liabilities,

see Note 9—Contingencies and Commitments.

Note 9—Contingencies and Commitments

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

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

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances

at various active

and inactive sites.

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

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue

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 March 31, 2021, our consolidated balance sheet

included a total environmental accrual of $

188

million,

compared with $

180

million at December 31, 2020, for remediation

activities in the U.S. and Canada.

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.

Litigation and Other Contingencies

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

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes,

environmental

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

Our primary exposures for such matters

relate to alleged royalty and tax underpayments on

certain federal, state and privately owned properties

and

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

legal

proceedings against us.

Our process facilitates the early evaluation and

quantification of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

mediation.

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

the

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

of new

accruals, is required.

We have contingent liabilities resulting from throughput agreements with pipeline and

processing companies

not associated with financing arrangements.

Under these agreements, we may be required

to provide any such

company with additional funds through advances

and penalties for fees related to throughput capacity

not

utilized.

In addition, at March 31, 2021, we had performance

obligations secured by letters of credit

of $

309

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.

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 plus interest under the Corocoro contracts.

ConocoPhillips is seeking recognition and enforcement

of the award in various jurisdictions.

ConocoPhillips

has ensured that all the actions related to the award

meet all appropriate U.S. regulatory requirements,

including those related to any applicable sanctions

imposed by the U.S. against Venezuela.

The Office of Natural Resources Revenue (ONRR) has

conducted audits of ConocoPhillips’

payment of

royalties on federal lands and has issued multiple

orders to pay additional royalties to the federal

government.

ConocoPhillips and the ONRR entered into

a settlement agreement on March 23, 2021,

to resolve the dispute.

All orders and associated appeals have been withdrawn

with prejudice.

Beginning in 2017, governmental and other entities

in several states in the U.S. have filed lawsuits against

oil

and gas companies, including ConocoPhillips,

seeking compensatory damages and equitable

relief to abate

alleged climate change impacts.

Additional lawsuits with similar allegations

are expected to be filed.

The

amounts claimed by plaintiffs are unspecified and the legal

and factual issues involved in these cases are

unprecedented.

ConocoPhillips believes these lawsuits are

factually and legally meritless and are an

inappropriate vehicle to address the challenges associated

with climate change and will vigorously defend

against such lawsuits.

Several Louisiana parishes and the State of Louisiana

have filed

lawsuits under Louisiana’s State and Local

Coastal Resources Management Act (SLCRMA)

against oil and gas companies, including ConocoPhillips,

seeking compensatory damages for contamination

and erosion of the Louisiana coastline

allegedly caused by

historical oil and gas operations.

ConocoPhillips entities are defendants in

of the lawsuits and will

vigorously defend against them.

Because Plaintiffs’ SLCRMA theories are unprecedented,

there is uncertainty

about these claims (both as to scope and damages)

and any potential financial impact on the company.

In October 2020, the Bureau of Safety and Environmental

Enforcement (BSEE) ordered the prior owners of

Outer Continental Shelf (OCS) Lease P-0166, including

ConocoPhillips, to decommission the lease facilities,

including two offshore platforms located near Carpinteria,

California.

This order was sent after the current

owner of OCS Lease P-0166 relinquished the

lease and abandoned the lease platforms

and facilities.

BSEE’s

order to ConocoPhillips is premised on its connection

to Phillips Petroleum Company, a legacy company of

ConocoPhillips, which held a historical

percent interest in this lease and operated these

lease facilities, but

sold its interest approximately

30 years

ago.

ConocoPhillips has not had any connection

to the operation or

production on this lease since that time.

ConocoPhillips is challenging this order.

Note 10—Derivative and Financial Instruments

We use futures, forwards, swaps and options in various markets to meet our customer

needs, capture market

opportunities, and manage foreign exchange currency

risk.

Commodity Derivative Instruments

Our commodity business primarily consists

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

Commodity derivative instruments are held at fair

value on our consolidated balance sheet.

Where these

balances have the right of setoff, they are presented on

a net basis.

Related cash flows are recorded as

operating activities on our consolidated statement

of cash flows.

On our consolidated income statement, gains

and losses are recognized either on a gross basis

if directly related to our physical business

or a net basis if held

for trading.

Gains and losses related to contracts that meet

and are designated with the NPNS exception are

recognized upon settlement.

We generally apply this exception to eligible crude contracts and certain gas

contracts.

We do not apply hedge accounting for our commodity derivatives.

The following table presents the gross fair values

of our commodity derivatives, excluding

collateral, and the

line items where they appear on our consolidated

balance sheet:

Millions of Dollars

March 31

December 31

2021

2020

Assets

Prepaid expenses and other current assets

232

229

Other assets

Liabilities

Other accruals

221

202

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

March 31

2021

2020

Sales and other operating revenues

(279)

Other income (loss)

Purchased commodities

(27)

On January 15, 2021, we assumed financial derivative

instruments consisting of oil and natural gas

swaps

following the acquisition of Concho.

At the acquisition date, the financial derivative

instruments acquired

were recognized at fair value as a net liability

of $

456

million with settlement dates under the contracts

through December 31, 2022.

During the first quarter, we recognized a before-tax loss of $

173

million on

Concho derivative contracts with settlement dates

on or before March 31, 2021, and an additional

132

million

loss related to acquired Concho derivative contracts

with settlement dates subsequent to March 31,

2021, for a

total before-tax loss of $

305

million.

This loss associated with the acquired financial instruments

is recorded

within the “Sales and other operating revenues”

line on our consolidated income statement.

At March 31, 2021, all oil and natural gas derivative

financial instruments acquired from Concho

were

contractually settled.

In connection with the settlement, we paid $

692

million in the first quarter of 2021 and

will pay the remaining $

million in the second quarter of 2021.

Cash settlements related to the Concho

derivative contracts

are presented within “Cash Flows From

Operating Activities” on our consolidated cash

flow statement.

The table below summarizes our net exposures resulting

from outstanding commodity derivative

contracts:

Open Position

Long/(Short)

March 31

December 31

2021

2020

Commodity

Natural gas and power (billion cubic feet equivalent)

Fixed price

(20)

Basis

(12)

(10)

Financial Instruments

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

the various accounts and

currency pools we manage.

The types of financial instruments in which we

currently invest include:

●

Time deposits: Interest bearing deposits placed with financial

institutions for a predetermined amount

of time.

●

Demand deposits: Interest bearing deposits placed

with financial institutions.

Deposited funds can be

withdrawn without notice.

●

Commercial paper: Unsecured promissory notes issued

by a corporation, commercial bank or

government agency purchased at a discount to

mature at par.

●

U.S. government or government agency obligations:

Securities issued by the U.S. government or

U.S.

government agencies.

●

Foreign government obligations: Securities

issued by foreign governments.

●

Corporate bonds: Unsecured debt securities

issued by corporations.

●

Asset-backed securities: Collateralized debt securities.

The following investments are carried on our

consolidated balance sheet at cost, plus accrued

interest and the

table reflects remaining maturities at March

31, 2021 and December 31, 2020:

Millions of Dollars

Carrying Amount

Cash and Cash Equivalents

Short-Term Investments

Investments and Long-

Term Receivables

March 31

December 31

March 31

December 31

March 31

December 31

2021

2020

2021

2020

2021

2020

Cash

636

597

Demand Deposits

1,281

1,133

Time Deposits

1 to 90 days

861

1,225

3,625

2,859

91 to 180 days

171

448

Within one year

One year through five years

U.S. Government Obligations

1 to 90 days

2,788

2,978

3,812

3,320

The following investments in debt securities

classified as available for sale are carried at

fair value on our

consolidated balance sheet at March 31, 2021

and December 31, 2020:

Millions of Dollars

Carrying Amount

Cash and Cash Equivalents

Short-Term Investments

Investments and Long-Term

Receivables

March 31

December 31

March 31

December 31

March 31

December 31

2021

2020

2021

2020

2021

2020

Major Security Type

Corporate Bonds

114

130

151

143

Commercial Paper

162

155

U.S. Government Obligations

U.S. Government Agency

Obligations

Foreign Government Obligations

Asset-backed Securities

292

289

217

216

Cash and Cash Equivalents and Short-Term Investments have remaining maturities

within one year.

Investments and Long-Term Receivables have remaining maturities

greater than one year through eight years.

The following table summarizes the amortized

cost basis and fair value of investments in

debt securities

classified as available for sale:

Millions of Dollars

Amortized Cost Basis

Fair Value

March 31

December 31

March 31

December 31

2021

2020

2021

2020

Major Security Type

Corporate bonds

264

271

265

273

Commercial paper

205

168

205

168

U.S. government obligations

U.S. government agency obligations

Foreign government obligations

Asset-backed securities

551

516

552

518

As of March 31, 2021 and December 31, 2020,

total unrealized losses for debt securities

classified as available

for sale with net losses were negligible.

Additionally, at March 31, 2021 and December 31, 2020, investments

in these debt securities in an unrealized loss position

for which an allowance for credit losses

has not been

recorded were negligible.

For the three-month periods ended March 31,

2021 and March 31, 2020, proceeds from

sales and redemptions

of investments in debt securities classified

as available for sale were $

147

million and $

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, high-quality corporate

bonds,

and foreign government obligations.

Our long-term

investments in debt securities are placed in high-quality

corporate bonds, U.S. government and government

agency obligations, asset-backed securities,

and time deposits with major international

banks and financial

institutions.

The credit risk from our OTC derivative contracts,

such as forwards, swaps and options, derives

from the

counterparty to the transaction.

Individual counterparty exposure is managed

within predetermined credit

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

thereby reducing the risk of significant

nonperformance.

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

risk because

these trades are cleared primarily with an exchange

clearinghouse and subject to mandatory margin

requirements until settled; however, we are exposed to the credit

risk of those exchange brokers for receivables

arising from daily margin cash calls, as well as for cash

deposited to meet initial margin requirements.

Our trade receivables result primarily

from our oil and gas operations and reflect a broad

national and

international customer base, which limits our

exposure to concentrations of credit risk.

The majority of these

receivables have payment terms of 30 days or less,

and we continually monitor this exposure and

the

creditworthiness of the counterparties.

At our option, we may require collateral to limit

the exposure to loss

including, letters of credit, prepayments and surety

bonds, as well as master netting arrangements

to mitigate

credit risk with counterparties that both buy from

and sell to us, as these agreements permit

the amounts owed

by us or owed to others to be offset against amounts

due to us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative

exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts

with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts

typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert

to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also

permit us to post letters of credit as collateral, such as transactions administered through the New York

Mercantile Exchange.

The aggregate fair value of all derivative

instruments with such credit risk-related contingent

features that were

in a liability position at March 31, 2021 and

December 31, 2020, was $

million and $

million,

respectively.

For these instruments,

collateral was posted as of March 31, 2021 or

December 31, 2020.

our credit rating had been downgraded below investment

grade at March 31, 2021,

we would have been

required to post $

million of additional collateral, either with

cash or letters of credit.

Note 11—Fair Value

Measurement

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

date using an exit

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

an asset or paid to transfer a liability) and disclosed

according to the quality of valuation inputs under

the following hierarchy:

●

Level 1: Quoted prices (unadjusted) in an active

market for identical assets or liabilities.

●

Level 2: Inputs other than quoted prices that

are directly or indirectly observable.

●

Level 3: Unobservable inputs that are significant

to the fair value of assets or liabilities.

The classification of an asset or liability

is based on the lowest level of input significant

to its fair value.

Those

that are initially classified as Level 3 are subsequently

reported as Level 2 when the fair value derived

from

unobservable inputs is inconsequential to the overall

fair value, or if corroborated market data becomes

available.

Assets and liabilities initially reported as Level

2 are subsequently reported as Level 3 if

corroborated market data is no longer available.

There were no material transfers into or

out of Level 3 during

2021 or 2020.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair

value on a recurring basis primarily include

our investment in

Cenovus Energy common shares, our investments in debt

securities classified as available for sale, and

commodity derivatives.

●

Level 1 derivative assets and liabilities primarily

represent exchange-traded futures and options that are

valued using unadjusted prices available from the

underlying exchange.

Level 1 also includes our

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

on the NYSE,

and our investments in U.S. government obligations

classified as available for sale debt securities,

which

are valued using exchange prices.

●

Level 2 derivative assets and liabilities primarily

represent OTC swaps, options and forward purchase

and

sale contracts that are valued using adjusted exchange

prices, prices provided by brokers or pricing

service

companies that are all corroborated by market

data.

Level 2 also includes our investments in

debt

securities classified as available for sale including

investments in corporate bonds, commercial

paper,

asset-backed securities, U.S. government agency

obligations and foreign government obligations

that are

valued using pricing provided by brokers or pricing

service companies that are corroborated

with market

data.

●

Level 3 derivative assets and liabilities consist

of OTC swaps, options and forward purchase and

sale

contracts where a significant portion of fair

value is calculated from underlying market

data that is not

readily available.

The derived value uses industry standard

methodologies that may consider the historical

relationships among various commodities, modeled

market prices, time value, volatility factors

and other

relevant economic measures.

The use of these inputs results in management’s best estimate of fair

value.

Level 3 activity was not material for all

periods presented.

The following table summarizes the fair value

hierarchy for gross financial assets and

liabilities (i.e.,

unadjusted where the right of setoff exists for commodity

derivatives accounted for at fair value on a recurring

basis):

Millions of Dollars

March 31, 2021

December 31, 2020

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Investment in Cenovus Energy

1,564

1,256

Investments in debt securities

542

552

501

518

Commodity derivatives

162

104

278

142

101

255

Total assets

1,736

646

2,394

1,415

602

2,029

Liabilities

Commodity derivatives

155

254

120

220

Total liabilities

155

254

120

220

The following table summarizes those commodity

derivative balances subject to the right of setoff as

presented on our consolidated balance sheet.

We have elected to offset the recognized fair value amounts for

multiple derivative instruments executed with the

same counterparty in our financial statements

when a legal

right of setoff exists.

Millions of Dollars

Amounts Subject to Right of Setoff

Gross

Amounts Not

Gross

Net

Amounts

Subject to

Gross

Amounts

Cash

Net

Recognized

Right of Setoff

Amounts

Offset

Presented

Collateral

Amounts

March 31, 2021

Assets

278

273

197

Liabilities

254

252

197

December 31, 2020

Assets

255

253

157

Liabilities

220

219

157

At March 31, 2021 and December 31, 2020, we

did not present any amounts gross on our

consolidated

balance sheet where we had the right of setoff.

Reported Fair Values of Financial Instruments

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

instruments:

●

Cash and cash equivalents and short-term investments:

The carrying amount reported on the balance

sheet approximates fair value.

For those investments classified as available

for sale debt securities,

the carrying amount reported on the balance sheet

is fair value.

●

Accounts and notes receivable (including long-term

and related parties): The carrying amount

reported on the balance sheet approximates fair

value.

The valuation technique and methods used to

estimate the fair value of the current portion

of fixed-rate related party loans is consistent

with Loans

and advances—related parties.

●

Investment in Cenovus Energy: See Note 5—Investment

in Cenovus Energy for a discussion of the

carrying value and fair value of our investment in

Cenovus Energy common shares.

●

Investments in debt securities classified as available

for sale: The fair value of investments in debt

securities categorized as Level 1 in the fair

value hierarchy is measured using exchange prices.

The

fair value of investments in debt securities

categorized as Level 2 in the fair value hierarchy

measured using pricing provided by brokers or

pricing service companies that are corroborated

with

market data.

See Note 10—Derivatives and Financial Instruments,

for additional information.

●

Loans and advances—related parties: The carrying

amount of floating-rate loans approximates

fair

value.

The fair value of fixed-rate loan activity is

measured using market observable data and is

categorized as Level 2 in the fair value hierarchy.

See Note 4—Investments, Loans and Long-Term

Receivables, for additional information.

●

Accounts payable (including related parties)

and floating-rate debt: The carrying amount of accounts

payable and floating-rate debt reported on the balance

sheet approximates fair value.

●

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

debt is measured using prices available

from a

pricing service that is corroborated by market

data; therefore, these liabilities are categorized

as Level

2 in the fair value hierarchy.

●

Commercial paper: The carrying amount of our

commercial paper instruments approximates

fair value

and is reported on the balance sheet as short-term

debt.

The following table summarizes the net fair

value of financial instruments (i.e., adjusted

where the right of

setoff exists for commodity derivatives):

Millions of Dollars

Carrying Amount

Fair Value

March 31

December 31

March 31

December 31

2021

2020

2021

2020

Financial assets

Investment in Cenovus Energy

1,564

1,256

1,564

1,256

Commodity derivatives

Investments in debt securities

552

518

552

518

Loans and advances—related parties

168

220

168

220

Financial liabilities

Total debt, excluding finance leases

19,154

14,478

22,578

19,106

Commodity derivatives

Note 12—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the

equity section of our consolidated balance

sheet included:

Millions of Dollars

Defined Benefit

Plans

Net Unrealized

Gain (Loss) on

Securities

Foreign

Currency

Translation

Accumulated

Other

Comprehensive

Loss

December 31, 2020

(425)

(4,795)

(5,218)

Other comprehensive income (loss)

(1)

138

March 31, 2021

(355)

(4,726)

(5,080)

The following table summarizes reclassifications

out of accumulated other comprehensive loss and into

net

income (loss):

Millions of Dollars

Three Months Ended

March 31

2021

2020

Defined benefit plans

The above amounts are included in the computation of net periodic benefit

cost and are presented net of tax expense of $

million and

million for the three-month periods ended March 31, 2021 and 2020, respectively.

See Note 14—Employee Benefit Plans, for additional

information.

Note 13—Cash Flow Information

Millions of Dollars

Three Months Ended

March 31

2021

2020

Cash Payments

Interest

233

200

Income taxes

465

Net Sales (Purchases) of Investments

Short-term investments purchased

(3,432)

(3,423)

Short-term investments sold

2,966

2,606

Investments and Long-term receivables purchased

(60)

(143)

Investments and Long-term receivables sold

(499)

(935)

We assumed various financial derivative instruments in the Concho acquisition.

In the first quarter of 2021,

we settled all financial derivative contracts

assumed in the Concho acquisition, including

accelerating

settlement of contracts with settlement

dates after March 31, 2021.

Cash settlements related to financial

derivatives of $

692

million are presented within “Cash Flows From

Operating Activities” on our consolidated

cash flow statement.

See Note 10—Derivative and Financial Instruments,

for additional information.

For the first quarter of 2021, included within

“Cash Flows From Investing Activities”

is $

382

million of cash

received through the addition of cash balances acquired

from Concho.

We had additional non-cash increases

in assets and liabilities associated with the acquisition

of Concho as consideration for the transaction

was

entirely in ConocoPhillips common stock.

See Note 3—Acquisitions and Dispositions

for additional

information on the acquisition.

Note 14—Employee Benefit Plans

Pension and Postretirement Plans

The components of net periodic benefit cost of

all defined benefit plans for the first quarter

are presented in

the following table:

Millions of Dollars

Pension Benefits

Other Benefits

2021

2020

2021

2020

U.S.

Int’l.

U.S.

Int’l.

Components of Net Periodic Benefit Cost

Three Months Ended March 31

Service cost

Interest cost

Expected return on plan assets

(24)

(30)

(21)

(37)

Amortization of prior service credit

(9)

(8)

Recognized net actuarial loss

Settlements

(1)

Curtailments

Special termination benefits

Net periodic benefit cost

(8)

(5)

The components of net periodic benefit cost, other

than the service cost component, are included

in the “Other

expenses” line item on our consolidated income statement.

As part of our restructuring program, we concluded

that actions taken during the three-month

period ended

March 31, 2021, would result in a significant

reduction of future service of active employees

in the U.S.

qualified pension plan, a U.S. nonqualified

supplemental retirement plan and the U.S.

other postretirement

benefit plans.

As a result, we recognized an increase in the benefit

obligation as a curtailment loss of

million on the U.S. pension benefit plans during

the three-month period ended March 31, 2021.

conjunction with the recognition of curtailment

losses, the fair market values of pension plan assets

were

updated, and the pension benefit obligations

of the U.S. qualified pension, a U.S. nonqualified

supplemental

retirement plan and the U.S. other postretirement

benefit plans were remeasured.

At March 31, 2021, the net

pension liability decreased by $

million, primarily as a result of discount

rate increases for each plan offset

by lower than premised return on assets on the

U.S. qualified pension plan,

resulting in a corresponding

increase to other comprehensive income.

The relevant discount rates are summarized in

the following table:

March 31

December 31

Discount rate

2021

2020

U.S. qualified pension plan

3.00

2.40

U.S. nonqualified pension plan

2.40

1.85

U.S. postretirement benefit plans

2.80

2.20

Severance Accrual

The following table summarizes our severance accrual

activity for the three-month period ended March

31,

2021:

Millions of Dollars

Balance at December 31, 2020

Accruals

101

Benefit payments

(33)

Balance at March 31, 2021

Accruals in the first quarter of 2021 represent

severance costs associated with our restructuring

program.

the total remaining balance at March 31, 2021,

million is classified as short-term.

See Note 3—

Acquisitions and Dispositions, for additional

information on the restructuring program.

Note 15—Related Party Transactions

Our related parties primarily include equity method

investments and certain trusts for the benefit

employees.

Significant transactions with our equity affiliates

were:

Millions of Dollars

Three Months Ended

March 31

2021

2020

Operating revenues and other income

Operating expenses and selling, general and administrative

expenses

Net interest (income) expense*

(1)

(2)

*We paid interest to, or received interest from,

various affiliates.

See Note 4—Investments, Loans and Long-Term Receivables, for additional

information on loans to affiliated companies.

Note 16—Sales and Other Operating Revenues

Revenue from Contracts with Customers

The following table provides further disaggregation

of our consolidated sales and other operating

revenues:

Millions of Dollars

Three Months Ended

March 31

2021

2020

Revenue from contracts with customers

7,161

4,911

Revenue from contracts outside the scope of ASC

Topic 606

Physical contracts meeting the definition of a derivative

2,974

1,296

Financial derivative contracts

(309)

(49)

Consolidated sales and other operating revenues

9,826

6,158

Revenues from contracts outside the scope of ASC

Topic 606 relate primarily to physical gas contracts at

market prices which qualify as derivatives accounted

for under ASC Topic 815, “Derivatives and Hedging,”

and for which we have not elected NPNS.

There is no significant difference in contractual

terms or the policy

for recognition of revenue from these contracts

and those within the scope of ASC Topic 606.

The following

disaggregation of revenues is provided in conjunction

with Note 17—Segment Disclosures and Related

Information:

Millions of Dollars

Three Months Ended

March 31

2021

2020

Revenue from Outside the Scope of ASC Topic 606 by Segment

Lower 48

2,466

976

Canada

303

179

Europe, Middle East and North Africa

205

141

Physical contracts meeting the definition of a derivative

2,974

1,296

Millions of Dollars

Three Months Ended

March 31

2021

2020

Revenue from Outside the Scope of ASC Topic 606 by Product

Crude oil

124

Natural gas

2,727

1,090

Other

123

114

Physical contracts meeting the definition of a derivative

2,974

1,296

Practical Expedients

Typically,

our

commodity

sales

contracts

are

less

than

months

duration;

however,

certain

specific

cases they may extend

longer, which may

be out to the

end of field life.

We have long-term commodity sales

contracts which use prevailing market prices at the time of delivery, and under these contracts, the market-

based variable consideration for each performance obligation (i.e., delivery of commodity) is allocated to each

wholly unsatisfied performance obligation within the contract.

Accordingly,

we have applied the practical

expedient allowed in ASC Topic 606 and do not disclose the aggregate amount of the transaction price

allocated to performance obligations or when we expect to recognize revenues that are unsatisfied (or partially

unsatisfied) as of the end of the reporting period.

Receivables and Contract Liabilities

Receivables from Contracts with Customers

At March 31, 2021, the “Accounts and notes

receivable” line on our consolidated balance sheet

included

trade

receivables of $

3,380

million compared with $

1,827

million at December 31, 2020, and included

both

contracts with customers within the scope of ASC

Topic 606 and those that are outside the scope of ASC

Topic 606.

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

delivery is made.

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

physical gas sales

contracts at market prices for which we do not

elect NPNS and are therefore accounted for

as a derivative

under ASC Topic 815.

There is little distinction in the nature

of the customer or credit quality of trade

receivables associated with gas sold under contracts

for which NPNS has not been elected

compared with trade

receivables where NPNS has been elected.

Contract Liabilities from Contracts with Customers

We have entered into contractual arrangements where we license proprietary technology to customers related

to the optimization process for operating LNG plants. The agreements typically provide for negotiated

payments to be made at stated milestones. The payments are not directly related to our performance under the

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

benefit from their right to use the license. Payments are received in installments over the construction period.

Millions of Dollars

Contract Liabilities

At December 31, 2020

Contractual payments received

Revenue recognized

(62)

At March 31, 2021

Amounts Recognized in the Consolidated

Balance Sheet at March 31, 2021

Current liabilities

We expect to recognize the contract liabilities at March 31, 2021, as revenue in the first quarter of 2022.

Note 17—Segment Disclosures and Related Information

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

a worldwide

basis.

We manage our operations through

operating segments, which are primarily defined

by geographic

region: Alaska; Lower 48; Canada; Europe,

Middle East and North Africa; Asia Pacific;

and Other

International.

Corporate and Other represents income and costs

not directly associated with an operating

segment, such as

most interest income and expense; premiums on early

retirement of debt; corporate overhead and certain

technology activities, including licensing revenues;

and unrealized holding gains or losses

on equity securities.

Corporate assets include all cash and cash equivalents

and short-term investments.

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

to ConocoPhillips.

Intersegment sales are at prices that approximate

market.

Effective with the third quarter of 2020, we restructured our

segments to align with changes to our internal

organization.

The Middle East business was realigned from

the Asia Pacific and Middle East segment to the

Europe and North Africa segment.

The segments have been renamed the Asia Pacific

segment and the Europe,

Middle East and North Africa segment.

We have revised segment information disclosures and segment

performance metrics presented within our results

of operations for the prior comparative periods.

On January 15, 2021, we completed our acquisition

of Concho, an independent oil and gas exploration

and

production company with operations across New

Mexico and West Texas.

Results of operations for Concho

are included in our Lower 48 segment for the current

period.

Certain transaction and restructuring costs

associated with the Concho acquisition are included

in our Corporate and Other segment.

See Note 3—

Acquisitions and Dispositions for additional

information related to our Concho acquisition.

Analysis of Results by Operating Segment

Millions of Dollars

Three Months Ended

March 31

2021

2020

Sales and Other Operating Revenues

Alaska

1,133

1,113

Lower 48

6,513

3,103

Intersegment eliminations

(2)

(10)

Lower 48

6,511

3,093

Canada

867

513

Intersegment eliminations

(305)

(180)

Canada

562

333

Europe, Middle East and North Africa

978

600

Asia Pacific

577

1,003

Other International

Corporate and Other

Consolidated sales and other operating revenues

9,826

6,158

Sales and Other Operating Revenues by

Geographic Location

(1)

United States

7,707

4,217

Australia

437

Canada

562

333

China

155

146

Indonesia

196

204

Libya

230

Malaysia

226

216

Norway

412

446

United Kingdom

336

110

Other foreign countries

Worldwide consolidated

9,826

6,158

Sales and Other Operating Revenues by

Product

Crude oil

4,495

3,444

Natural gas

4,511

1,655

Natural gas liquids

237

151

Other

(2)

583

908

Consolidated sales and other operating revenues

by product

9,826

6,158

(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

March 31

2021

2020

Net Income (Loss) Attributable to ConocoPhillips

Alaska

159

Lower 48

468

(437)

Canada

(109)

Europe, Middle East and North Africa

153

201

Asia Pacific

317

272

Other International

(4)

Corporate and Other

(121)

(1,775)

Consolidated net income (loss) attributable

to ConocoPhillips

982

(1,739)

Millions of Dollars

March 31

December 31

2021

2020

Total Assets

Alaska

14,571

14,623

Lower 48

32,474

11,932

Canada

6,925

6,863

Europe, Middle East and North Africa

8,689

8,756

Asia Pacific

11,041

11,231

Other International

229

226

Corporate and Other

9,764

8,987

Consolidated total assets

83,693

62,618

Note 18—Income Taxes

Our effective tax rate for the first quarter of 2021

was

42.7

percent compared with negative

9.5

percent for the

first quarter of 2020.

The increase in the effective tax rate for the first

quarter of 2021 is primarily due to a

shift in the mix of our before-tax income between

higher and lower tax jurisdictions and the

impact of the

interest deduction related to our Concho debt

exchange, described below.

This increase is partially offset by a

decrease in our valuation allowance.

Our effective tax rate for the first quarter of 2021 is

adversely impacted by $

million due to incremental

interest deductions from the exchange of debt

acquired from Concho offsetting U.S. foreign source revenue

that would otherwise have been offset by foreign tax credits.

See Note 6—Debt,

for additional information on

the debt exchange.

During the first quarter of 2021, our valuation

allowance decreased by $

million compared to an increase of

346

million for the first quarter of 2020.

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.

Our deferred tax liability increased by approximately

1.1

billion as part of the liabilities assumed through

our

Concho acquisition.

Additionally, our reserve for unrecognized tax benefits increased by $

150

million related

to tax credit carryovers acquired from Concho that

we do not expect to recognize.

See Note 3—Acquisitions

and Dispositions for more information.

Item 2.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Management’s

Discussion and Analysis is the company’s analysis of its financial performance and of

significant trends that may affect future performance.

It should be read in conjunction with the financial

statements and notes.

It contains forward-looking statements including, without limitation,

statements relating

to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe

harbor” provisions of the Private Securities Litigation Reform

Act of 1995.

The words “anticipate,”

“believe,” “budget,” “continue,” “could,” “effort,”

“estimate,” “expect,” “forecast,” “goal,” “guidance,”

“intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,”

“target,” “will,” “would,” and similar expressions identify forward-looking statements.

The company does

not undertake to update, revise or correct any of the forward-looking information unless required to do so

under the federal securities laws.

Readers are cautioned that such forward-looking statements should be read

in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE

PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS

OF THE PRIVATE SECURITIES LITIGATION

REFORM ACT OF 1995,” beginning on page

55.

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

attributable to ConocoPhillips.

BUSINESS ENVIRONMENT AND EXECUTIVE

OVERVIEW

ConocoPhillips is the world’s largest independent E&P company with operations

and activities in 15 countries.

Our diverse, low cost of supply portfolio includes

resource-rich unconventional plays in North

America;

conventional assets in North America, Europe

and Asia; LNG developments; oil sands

in Canada; and an

inventory of global conventional and unconventional

exploration prospects.

Headquartered in Houston, Texas,

at March 31, 2021, we employed approximately

10,300 people worldwide and had total

assets of $84 billion.

Completed Acquisition of Concho Resources Inc.

On January 15, 2021, we completed our acquisition

of Concho Resources Inc. (Concho), an independent

oil

and gas exploration and production company

with operations across New Mexico and West Texas.

The

addition of complementary acreage in the

Delaware and Midland Basins creates a sizeable

Permian presence to

augment our leading unconventional positions

in the Eagle Ford, Bakken and Montney.

Consideration for the all-stock transaction was

valued at $13.1 billion, in which 1.46 shares

of ConocoPhillips

common stock were exchanged for each outstanding

share of Concho common stock, resulting

in the issuance

of approximately 286 million shares of ConocoPhillips

common stock.

We also assumed $3.9 billion in

aggregate principal amount of outstanding debt for

Concho, which was recorded at fair value of $4.7

billion as

of the closing date.

We have made significant progress since the closing of the transaction on achieving

our

previously announced

$750 million of annual cost and capital

savings by 2022.

Transaction and restructuring activities associated with combining

the operations of ConocoPhillips and

Concho resulted in non-recurring expenses for

employee severance payments; incremental

pension benefit

costs related to the workforce reductions; employee

retention costs; employee relocations; fees paid

financial, legal, and accounting advisors; and

filing fees.

We recognized $291 million before-tax related to

these costs in the first quarter

of 2021 and expect to incur less of these expenses

throughout the remainder of

the year.

Additionally, we recognized $305 million of before-tax losses on commodity

derivatives related to

hedging positions assumed in the Concho acquisition.

At March 31, 2021, all oil and natural gas derivative

financial instruments acquired from Concho were

contractually settled.

In connection with the settlement, we

paid $692 million in the first quarter of 2021 and

will pay the remaining $69 million in the

second quarter of

2021.

For additional information related to the settlement

of financial derivatives acquired from Concho, see

Note 10—Derivative and Financial Instruments,

in the Notes to Consolidated Financial

Statements.

For additional information related to our Concho

acquisition,

see Note 3—Acquisitions and Dispositions

in the

Notes to Consolidated Financial Statements.

Overview

After an unprecedented 2020, the energy landscape improved

in the first quarter of 2021 with oil prices

rallying to peak over $60 per barrel for both Brent

and WTI, a level not seen since the outbreak of the

COVID-

19 pandemic.

Oil prices have benefited from the continuation

of coordinated production cuts by the OPEC

plus countries and capital discipline by independent

oil and gas producers.

Despite the recent upswing in oil prices, we

believe that commodity prices will remain

cyclical and volatile,

and a successful business strategy in the exploration

and production industry must be resilient

in lower price

environments, while retaining upside during periods

of higher prices.

Accordingly, we remain disciplined and

are monitoring market fundamentals, including adherence

of the OPEC plus countries to production cut

agreements

and capital restraint across the broader E&P industry.

Demand is recovering but has yet to reach

pre-pandemic levels.

The speed and extent of this recovery will

be influenced by the easing of COVID-19

restrictions that have reduced economic activity

and depressed the demand for our products.

We believe a successful strategy in the E&P industry is to create value through the price

cycles by delivering

on the foundational principles that underpin our

value proposition; free cash flow generation,

a strong balance

sheet, commitment to differential returns of and on capital,

and ESG leadership.

Our first quarter as a

combined company demonstrated the power of

Concho’s acquired assets to help deliver on our value

proposition.

Total company production was 1,527 MBOED, including 405

MBOED from the Permian Basin,

resulting in net cash provided by operating activities

of $2.1 billion.

We returned 46 percent of this cash to

shareholders with dividends of $0.6 billion and share

repurchases of $0.4 billion, and ended the

quarter with

cash, cash equivalents and short-term investments

totaling $6.9 billion.

Net cash provided by operating

activities in the first quarter was negatively impacted

by approximately $1 billion due to

impacts from settling

outstanding hedging contracts, in addition to transaction

and restructuring costs.

In February 2021, we resumed our share repurchase

program, with $1.5 billion of share repurchases

anticipated in 2021.

As of March 31, 2021, approximately $14.1

billion of repurchase authority remained of

the $25 billion share repurchase program our Board

of Directors had previously authorized.

In May 2021, we announced further progress on

our value proposition principles.

We plan to undertake a

paced monetization program related to the 10 percent

of Cenovus Energy common shares we own.

obtained these shares as partial consideration in the

2017 disposition of our Foster Creek Christina

Lake oil

sands and western Canada Deep Basin natural

gas assets.

The proceeds from these sales will be directed

towards our existing share repurchase authorization

and will be incremental to our previously announced

$1.5

billion of share repurchases in 2021.

We plan to fully dispose of our Cenovus shares by year-end 2022,

however,

the sales pace will be guided by market conditions

and we retain discretion to adjust accordingly.

Additionally, in May 2021,

we reaffirmed our commitment to preserving our top-tier

balance sheet with an

intent to reduce the company’s gross debt by $5 billion over five years, driving

a more resilient and efficient

capital structure.

We remain focused on our commitment to ESG leadership and excellence.

This commitment is demonstrated

by our continued progress on specific targets that we set in

October 2020 when we announced our adoption

a Paris-aligned climate risk framework, including:

●

Our ambition to become a net-zero company for

operational (scope 1 and scope 2) emissions

by 2050;

●

Targeting a reduction in operational greenhouse gas emissions intensity by 35 to 45 percent

from 2016

levels by 2030;

●

Our ambition to exceed the World Bank Zero Routine Flaring 2030 initiative by five

years;

●

Adding continuous methane monitoring devices to

our operations, with an initial focus on our

Lower

48 facilities;

●

Advocating for a U.S. carbon price to address end-use

(scope 3) emissions through our membership

the Climate Leadership Council;

●

Including ESG performance in executive and

employee compensation programs; and

●

Increasing internal and external transparency of diversity

and inclusion metrics.

Operationally, we remain focused on safely executing the business.

In the first quarter of 2021, production of

1,527 MBOED was impacted by 50 MBOED of unplanned

downtime in the Lower 48 due to Winter Storm

Uri.

Production increased approximately 238 MBOED

or 18 percent in the first quarter of 2021, compared

with the first quarter of 2020, primarily due to the

acquisition of over 300 MBOED in the

Permian Basin from

Concho, partly offset by the absence of 46 MBOED from

the disposition of our Australia-West assets in the

second quarter of 2020.

Adjusted for all acquisitions and dispositions

in the comparative periods and

excluding Libya, production

decreased 59 MBOED or 4 percent.

We re-invested $1.2 billion back into the business in the form of capital expenditures

during the first quarter,

with over half of our investments focused on flexible,

short-cycle unconventional plays in the Permian,

Eagle

Ford and Bakken where our production is unhedged

and located in tax and royalty regimes.

For the full-year,

we remain disciplined capital allocators with a planned

$5.5 billion of capital expenditures in 2021.

Business Environment

Commodity prices are the most significant

factor impacting our profitability and related reinvestment

operating cash flows into our business.

Among other dynamics that could influence

world energy markets and

commodity prices are global economic health, supply

or demand disruptions or fears thereof caused

by civil

unrest, global pandemic or military conflicts,

actions taken by OPEC plus and other major

oil producing

countries, environmental laws, tax regulations,

governmental policies and weather-related

disruptions.

Our

strategy is to create value through price cycles

by delivering on the financial and operational

priorities that

underpin our value proposition.

Our earnings and operating cash flows generally

correlate with industry price levels for crude

oil and natural

gas, the prices of which are subject to factors

external to the company and over which we have

no control.

The

following graph depicts the trend in average benchmark

prices for WTI crude oil, Brent crude oil

and Henry

Hub natural gas:

Brent crude oil prices averaged $60.90 per barrel

in the first quarter of 2021, an increase of 21 percent

compared with $50.31 per barrel in the first

quarter of 2020.

WTI at Cushing crude prices averaged $57.84 per

barrel in the first quarter of 2021, an increase of 26

percent compared with $46.06 per barrel in the

first quarter

of 2020.

Oil prices increased due to the recovery from

simultaneous demand and supply shocks experienced

the first quarter of 2020.

Henry Hub natural gas prices averaged $2.71

per MMBTU in the first quarter of 2021,

an increase of 39

percent compared with $1.95 per MMBTU in the first

quarter of 2020.

Henry Hub prices are higher due to

Winter Storm Uri and normalization of inventories following

COVID-19 demand losses.

Our realized bitumen price averaged $30.78 per barrel

in the first quarter of 2021, a significant

increase

compared with $5.90 per barrel in the first

quarter of 2020.

The increase in the first quarter of 2021 was

driven

by higher WTI prices and a strengthening

WCS differential to WTI at Hardisty.

We continue to optimize

bitumen price realizations through the utilization

of downstream transportation solutions and implementation

of alternate blend capability which results in lower

diluent costs.

Our total average realized price was $45.36 per

BOE in the first quarter of 2021, compared

with $38.81 per

BOE in the first quarter of 2020, due to the recovery

from simultaneous demand and supply shocks

impacting

all of our produced commodities in 2020.

Key Operating and Financial Summary

Significant items during the first quarter

of 2021 included the following:

●

Completed the Concho acquisition,

enhancing both our asset portfolio and financial framework.

●

Net cash provided by operating activities was $2.1

billion, exceeding capital expenditures

and

investments of $1.2 billion.

●

Net cash provided by operating activities included

approximately $1.0 billion of non-recurring

items

associated with our Concho acquisition.

●

Produced 1,488 MBOED,

excluding Libya, during the first quarter

despite incurring approximately 50

MBOED of unplanned production downtime

throughout Lower 48 caused by Winter Storm Uri.

●

Ended the quarter with cash and cash equivalents totaling

$2.8 billion and short-term investments of

$4.1 billion,

equaling $6.9 billion in ending cash, cash equivalents

and short-term investments.

●

Resumed the share repurchase program at an

annualized level of $1.5 billion.

●

Distributed $0.6 billion in dividends and repurchased

$0.4 billion of shares.

●

Recognized by the Dow Jones Sustainability

Index as the top U.S. ESG performer in the Oil

and Gas

Upstream and Integrated sector.

●

Reaffirmed commitment to preserving a top-tier balance sheet

with intent to reduce the company’s

gross debt by $5 billion over the next five years,

driving a more resilient and efficient capital structure.

●

Announced plans to sell our Cenovus shares in the

open market in a disciplined manner by year-end

2022 beginning in the second quarter of 2021, utilizing

the proceeds to fund incremental

ConocoPhillips share repurchases.

Outlook

Capital and Production

Second-quarter 2021 production is expected to

be 1.50

to 1.54 MMBOED, reflecting the impact from

seasonal

turnarounds planned in our Europe,

Middle East and North Africa and Asia Pacific

segments.

This production

guidance excludes Libya.

In February 2021, we announced 2021 operating

plan capital of $5.5 billion.

The plan includes $5.1 billion to

sustain current production and $0.4 billion

for investment in major projects, primarily

in Alaska, in addition to

ongoing exploration appraisal activity.

RESULTS OF OPERATIONS

Effective with the third quarter of 2020, we have restructured our segments to align with

changes to our

internal organization.

The Middle East business was realigned from the Asia Pacific and Middle East

segment

to the Europe and North Africa segment.

The segments have been renamed the Asia Pacific

segment and the

Europe, Middle East and North Africa segment.

We have revised segment information disclosures and

segment performance metrics presented within our results of operations for the

prior period.

Unless otherwise indicated, discussion of results for the three-month period ended

March 31, 2021, is based

on a comparison with the corresponding period of 2020.

Consolidated Results

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

attributable to ConocoPhillips by business segment

follows:

Millions of Dollars

Three Months Ended

March 31

2021

2020

Alaska

159

Lower 48

468

(437)

Canada

(109)

Europe, Middle East and North Africa

153

201

Asia Pacific

317

272

Other International

(4)

Corporate and Other

(121)

(1,775)

Net income (loss) attributable to ConocoPhillips

982

(1,739)

Net income (loss) attributable to ConocoPhillips

increased $2,721 million in the first quarter of

2021.

Earnings were positively impacted by:

●

An unrealized gain of $308 million after-tax

on our Cenovus Energy (CVE) common shares,

compared with an unrealized loss of $1,691 million

after-tax in the first quarter of 2020.

●

Higher sales volumes, primarily in the Lower

48 due to our Concho acquisition.

For additional

information related to our Concho acquisition,

see Note 3—Acquisitions and Dispositions

in the Notes

to Consolidated Financial Statements.

●

Higher realized commodity prices.

●

Lower impairments, mainly in the Lower 48 due

to the absence of impairments to noncore gas assets.

●

A $194 million after-tax gain recognized for a contingent

payment associated with our Australia-West

divestiture completed in the second quarter

of 2020.

For additional information related to

this gain,

see Note 3—Acquisitions and Dispositions in the

Notes to Consolidated Financial Statements.

●

The absence of a commodity inventory lower of

cost or market adjustment of $170 million

after-tax.

Earnings were negatively impacted by:

●

Higher selling, general and administrative

expenses due to restructuring and transaction expenses

approximately $243 million after-tax related

to our Concho acquisition and mark-to-market

impacts

on certain key employee compensation programs.

●

Realized losses on hedges of $233 million after-tax

related to derivative positions acquired in our

Concho acquisition.

See Note 10—Derivative and Financial

Instruments in the Notes to Consolidated

Financial Statements, for additional information.

●

Higher DD&A expenses,

production and operating expenses and taxes

other than income taxes,

primarily due to production from our Concho

acquisition.

See the “Segment Results” section for additional

information.

Income Statement Analysis

Sales and other operating revenues increased 60 percent,

mainly due to higher sales volumes and higher

commodity price realizations in the Lower 48, primarily

related to our Concho acquisition.

Equity in earnings of affiliates decreased $112 million due to lower earnings

from QG3 and APLNG because

of lower LNG prices and a higher effective tax rate related

to the equity method investments in our Europe,

Middle East and North Africa segment.

Gain (loss) on dispositions increased $275 million

due to recognizing a $200 million before-tax

contingent

payment associated with our Australia-West divestiture completed in the second quarter

of 2020 and the

absence of a $38 million before-tax loss on disposition

related to the completion of our Niobrara disposition

the first quarter of 2020.

For additional information related to the Australia-West related gain on disposition,

see Note 3—Acquisitions and Dispositions in the

Notes to Consolidated Financial Statements.

Other income (loss) increased $1,917 million

primarily due to an unrealized gain of $308 million

before-tax on

our CVE common shares, compared with an unrealized

loss of $1,691 million before-tax in the first

quarter of

2020.

See Note 5—Investment in Cenovus Energy in the

Notes to Consolidated Financial Statements,

for

additional information related to our unrealized

gain (loss) on CVE common shares.

Purchased commodities increased $1,822 million,

primarily due to higher natural gas prices,

partly offset by

lower crude oil volumes purchased.

Production and operating expenses increased $210

million,

primarily due to costs associated with additional

volumes in the Lower 48, mainly related to our

Concho acquisition.

Selling, general and administrative expenses increased

$314 million, primarily due to higher costs associated

with compensation and benefits, including mark-to-market

impacts of certain key employee compensation

programs, and restructuring expenses associated

with our Concho acquisition, including severance

expenses.

Exploration expenses decreased $104 million,

primarily due to the absence of an unproved property

impairment and dry hole expenses related to the

Kamunsu East Field in Malaysia that is no longer in our

development plans and the absence of charges associated

with the early termination of our 2020 winter

exploration program in Alaska.

Depreciation, depletion and amortization

increased $475 million, primarily due to higher

volumes in the Lower

48 associated with our Concho acquisition;

higher volumes in Canada due to Montney

ramp up and our Kelt

acquisition in the third quarter of 2020; and higher

expenses in Alaska due to higher DD&A rates

from price-

related reserve revisions.

Impairments decreased $524 million,

primarily due to the absence of a $511 million before-tax impairment

certain noncore gas assets in the Lower 48 due to

a significant decrease in the outlook for natural

gas prices in

the first quarter of 2020.

Taxes other than income taxes increased $120 million, primarily due to

higher volumes in the Lower 48

associated with our Concho acquisition.

Foreign currency transactions

(gain) loss increased $109 million due to the

absence of gains incurred from

foreign currency derivatives.

See Note 18—Income Taxes, in the Notes to Consolidated Financial Statements,

for information regarding our

income tax provision and effective tax rate.

Summary Operating Statistics

Three Months Ended

March 31

2021

2020

Average Net

Production

Crude oil (MBD)

Consolidated operations

804

642

Equity affiliates

Total crude oil

818

654

Natural gas liquids (MBD)

Consolidated operations

105

116

Equity affiliates

Total natural gas

liquids

113

123

Bitumen (MBD)

Natural gas (MMCFD)

Consolidated operations

2,074

1,638

Equity affiliates

1,081

1,036

Total natural gas

3,155

2,674

Total

Production

(MBOED)

1,527

1,289

Dollars Per Unit

Average Sales

Prices

Crude oil (per bbl)

Consolidated operations

57.18

48.77

Equity affiliates

59.73

53.14

Total crude oil

57.22

48.86

Natural gas liquids (per bbl)

Consolidated operations

24.36

12.81

Equity affiliates

48.89

42.41

Total natural gas

liquids

26.44

14.82

Bitumen (per bbl)

30.78

5.90

Natural gas (per mcf)

Consolidated operations

4.89

3.60

Equity affiliates

3.54

5.41

Total natural gas

4.42

4.30

Millions of Dollars

Exploration Expenses

General administrative, geological and geophysical, and

lease rental, and other

121

Leasehold impairment

Dry holes

188

*Average sales prices, including the impact of hedges settling per initial contract terms

in the first quarter of 2021 assumed in our Concho

acquisition, were $55.03 per barrel for crude oil and $4.76 per mcf for natural gas.

As of March 31, 2021, we had settled all oil and gas hedging

positions acquired from Concho.

See Note 10—Derivative and Financial Instruments, in the

Notes to Consolidated Financial Statements.

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

a worldwide

basis.

At March 31, 2021, our operations were producing

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

China, Malaysia, Qatar and Libya.

Total production, including Libya, of 1,527 MBOED increased 238 MBOED

or 18 percent in the first quarter

of 2021, primarily due to:

●

Higher volumes in the Lower 48 due to our

Concho acquisition.

●

New wells online in the Lower 48, Canada,

Norway, China and Malaysia.

●

Higher production in Libya due to the absence

of a forced shutdown of the Es Sider export

terminal

and other eastern export terminals after a period

of civil unrest.

The increase in first quarter 2021 production

was partly offset by:

●

Normal field decline.

●

Disposition activity, including our Australia-West divestiture completed in the second quarter of 2020

and noncore Lower 48 assets disposed in the first

quarter of 2020.

For additional information related

to our Australia-West divestiture, see Note 3—Acquisitions and Dispositions in

the Notes to

Consolidated Financial Statements.

●

Higher unplanned downtime in the Lower 48

due to Winter Storm Uri, which impacted production by

approximately 50 MBOED in the first quarter

of 2021.

Total production,

excluding Libya, of 1,488 MBOED increased

210 MBOED or 16 percent in the first

quarter

of 2021.

Adjusted for acquisitions and dispositions and excluding

Libya, production decreased by 59 MBOED

or 4 percent.

Segment Results

Alaska

Three Months Ended

March 31

2021

2020

Net Income Attributable to ConocoPhillips

(millions of dollars)

159

Average Net Production

Crude oil (MBD)

190

198

Natural gas liquids (MBD)

Natural gas (MMCFD)

Total Production

(MBOED)

208

218

Average Sales Prices

Crude oil ($ per bbl)

59.56

54.78

Natural gas ($ per mcf)

2.23

3.07

The Alaska segment primarily explores for, produces, transports

and markets crude oil, NGLs and natural gas.

As of March 31, 2021, Alaska contributed 21

percent of our consolidated liquids production

and less than 1

percent of our consolidated natural gas production.

Net Income Attributable to ConocoPhillips

Earnings for Alaska increased by $78 million

in the first quarter of 2021,

compared with the same period of

2020.

Earnings were positively impacted by:

●

The absence of a $96 million after-tax lower of cost

or market commodity inventory adjustment.

●

Higher realized crude oil prices.

●

Lower exploration expenses due to the absence

of charges associated with the early cancellation of our

2020 winter exploration program.

Earnings were negatively impacted by:

●

Higher DD&A expenses, primarily due to higher

DD&A rates from price-related reserve revisions.

●

Lower crude oil sales volumes.

Production

Average production decreased 10 MBOED or 5 percent in the first quarter

of 2021 compared with the same

period of 2020.

The production decrease was primarily due to:

●

Normal field decline.

These production decreases were partly offset by:

●

Improved well performance at the Greater Prudhoe

Area.

Lower 48

Three Months Ended

March 31

2021

2020

Net Income (Loss) Attributable to ConocoPhillips

(millions of dollars)

468

(437)

Average Net Production

Crude oil (MBD)

416

270

Natural gas liquids (MBD)

Natural gas (MMCFD)

1,319

679

Total Production

(MBOED)

715

472

Average Sales Prices

Crude oil ($ per bbl)*

55.68

40.97

Natural gas liquids ($ per bbl)

23.99

11.85

Natural gas ($ per mcf)*

4.56

1.48

*Average sales prices, including the impact of hedges settling per initial contract

terms in the first quarter of 2021 assumed in our Concho

acquisition, were $51.58 per barrel for crude oil and $4.35 per mcf for natural gas.

As of March 31, 2021, we had settled all oil and gas hedging

positions acquired from Concho.

See Note 10

—

Derivative and Financial Instruments in the Notes to

Consolidated Financial Statements.

The Lower 48 segment consists of operations located

in the contiguous U.S. and the Gulf of Mexico.

As of

March 31, 2021, the Lower 48 contributed 51

percent of our consolidated liquids production

and 64 percent of

our consolidated natural gas production.

Concho Acquisition

On January 15, 2021, we completed our acquisition

of Concho, an independent oil and gas exploration

and

production company with operations across New

Mexico and West Texas.

The addition of complementary

acreage in the Delaware and Midland Basins creates

a sizeable Permian presence to augment

our leading

unconventional positions in the Eagle Ford and

Bakken in the Lower 48.

For additional information related to

this transaction, see Note 3—Acquisitions and

Dispositions in the Notes to Consolidated Financial

Statements.

Net Income (Loss) Attributable to ConocoPhillips

Earnings for the Lower 48 increased by $905

million in the first quarter of 2021, compared

with the same

period of 2020.

Earnings were positively impacted by:

●

Higher sales volumes of crude oil and natural gas

due to our Concho acquisition.

●

Higher realized crude oil, natural gas and NGL

prices.

●

The absence of $399 million in after-tax impairments

related to certain noncore gas assets in the Wind

River Basin operations area.

Earnings were negatively impacted by:

●

Higher DD&A expenses, production and operating

expenses and taxes other than income taxes,

primarily due to higher production from our Concho

acquisition.

●

Realized losses on hedges of $233 million after-tax

related to derivative positions acquired in our

Concho acquisition.

See Note 10—Derivative and Financial

Instruments in the Notes to Consolidated

Financial Statements, for additional information.

●

Higher selling, general and administrative

expenses, primarily due to transaction and restructuring

charges related to our Concho acquisition.

Production

Average production increased 243 MBOED in the first quarter of 2021, compared

with the same period of

2020.

The production increase was primarily

due to:

●

Higher volumes in the Permian due to our Concho

acquisition.

●

New wells online from our development programs

in the Eagle Ford, Permian and Bakken.

These production increases were partly offset by:

●

Normal field decline.

●

Higher unplanned downtime, primarily

due to Winter Storm Uri which impacted production by

approximately 50 MBOED in the first quarter

of 2021.

Canada

Three Months Ended

March 31

2021

2020

Net Income (Loss) Attributable to ConocoPhillips

(millions of dollars)

(109)

Average Net Production

Crude oil (MBD)

Natural gas liquids (MBD)

Bitumen (MBD)

Natural gas (MMCFD)

Total Production

(MBOED)

100

Average Sales Prices

Crude oil (per bbl)

47.41

Natural gas liquids (per bbl)

25.32

Bitumen (per bbl)

30.78

5.90

Natural gas (per mcf)

2.37

* Average sales prices include unutilized transportation costs.

Our Canadian operations mainly consist of the

Surmont oil sands development in Alberta

and the liquids-rich

Montney unconventional play in British Columbia.

As of March 31, 2021, Canada contributed

9 percent of

our consolidated liquids production and 4 percent

of our consolidated natural gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings for Canada increased by $119 million in the first quarter

of 2021, compared with the same period of

2020.

Earnings were positively impacted by:

●

Higher realized commodity prices.

●

The absence of a $31 million after-tax lower of cost

or market adjustment to commodity inventory.

●

Increased liquids and natural gas volumes in the

Montney.

●

A $20 million after-tax gain on disposition related

to a contingent payment associated with the

sale of

certain assets to Cenovus Energy in 2017.

For additional information, see Note 3—Acquisitions

and

Dispositions in the Notes to Consolidated Financial

Statements.

Earnings were negatively impacted by:

●

Higher DD&A expenses, primarily due to increased

Montney production.

●

Higher production and operating expenses,

primarily due to increased Montney production.

Production

Total average production increased 28 MBOED in the first quarter of 2021,

compared with the same period of

2020, due to new wells online from Pad 2 and

3 in the Montney, as well as production from our Kelt

acquisition in the third quarter of 2020.

Europe, Middle East and North Africa

Three Months Ended

March 31

2021

2020*

Net Income Attributable to ConocoPhillips

(millions of dollars)

153

201

Consolidated Operations

Average Net Production

Crude oil (MBD)

116

Natural gas liquids (MBD)

Natural gas (MMCFD)

309

310

Total Production

(MBOED)

173

150

Average Sales Prices

Crude oil (per bbl)

57.75

55.53

Natural gas liquids (per bbl)

34.70

21.54

Natural gas (per mcf)

5.99

3.68

*The prior period has been updated to reflect the Middle East Business Unit

moving from Asia Pacific to the Europe, Middle East and North

Africa segment.

See Note 17—Segment Disclosures and Related Information in the Notes to Consolidated

Financial Statements for additional

information.

The Europe,

Middle East and North Africa segment consists

of operations principally located in the Norwegian

sector of the North Sea; the Norwegian Sea;

Qatar; Libya; and commercial and terminalling

operations in the

U.K.

As of March 31, 2021, our Europe,

Middle East and North Africa operations

contributed 12 percent of

our consolidated liquids production and 15 percent

of our consolidated natural gas production.

Net Income Attributable to ConocoPhillips

Earnings for Europe,

Middle East and North Africa decreased by $48

million in the first quarter of 2021,

compared with the same period of 2020.

Earnings were negatively impacted by:

●

Lower LNG sales prices, reflected in equity in earnings

of affiliates.

●

Higher taxes from our equity method investments.

●

The absence of foreign currency gains.

Earnings were positively impacted by:

●

Higher LNG sales volumes, reflected in equity

in earnings of affiliates.

●

Higher natural gas, crude oil and NGL price realizations.

Consolidated Production

Average consolidated production increased 23 MBOED in the first quarter of 2021

compared with the same

period of 2020.

The production increase was primarily due

to:

●

Higher oil production from Libya due to the absence

of a cessation of production following a period of

civil unrest.

●

New production from Norway drilling activities

including first production from Tor II redevelopment

achieved in December 2020.

These production increases were partly offset by normal

field decline.

Asia Pacific

Three Months Ended

March 31

2021

2020*

Net Income Attributable to ConocoPhillips

(millions of dollars)

317

272

Consolidated Operations

Average Net Production

Crude oil (MBD)

Natural gas liquids (MBD)

Natural gas (MMCFD)

347

621

Total Production

(MBOED)

129

185

Average Sales Prices

Crude oil (per bbl)

60.36

54.71

Natural gas liquids (per bbl)

39.34

Natural gas (per mcf)

5.88

5.94

*The prior period has been updated to reflect the Middle East Business Unit

moving from Asia Pacific to the Europe, Middle East and North

Africa segment.

See Note 17

—

Segment Disclosures and Related Information in the Notes to Consolidated Financial

Statements for additional

information.

The Asia Pacific segment has operations in China,

Indonesia, Malaysia and Australia.

As of March 31, 2021,

Asia Pacific contributed 7 percent of our consolidated

liquids production and 17 percent of our consolidated

natural gas production.

Net Income Attributable to ConocoPhillips

Earnings for Asia Pacific increased $45 million

in the first quarter of 2021, compared with the same

period of

2020.

The earnings increase was primarily due to:

●

A $200 million gain on disposition related

to a contingent payment from our Australia-West divestiture

completed in the second quarter of 2020.

For additional information related to this

gain, please see Note

3—Acquisitions and Dispositions in the Notes to

Consolidated Financial Statements.

●

Lower exploration expenses, due to the absence

of an unproved property impairment and dry hole

expenses related to the Kamunsu East Field in Malaysia.

Earnings were negatively impacted by:

●

Lower earnings due to our Australia-West divestiture completed in the second quarter

of 2020.

●

Lower equity in earnings of affiliates, primarily due to lower

realized LNG prices.

Consolidated Production

Average consolidated production decreased 56 MBOED

or 30 percent in the first quarter of 2021, compared

with

the same period of 2020.

The decrease was primarily due to:

●

The divestiture of our Australia-West assets that contributed 46 MBOED in first quarter

of 2020.

●

Normal field decline.

These production decreases were partly offset by:

●

Bohai Bay development activity in China, including

first production from Phase 4A Project at the

Penglai 25-6 Field and first production from Malikai

Phase 2 in Malaysia.

Bohai Bay Well Control Incident

On April 5, 2021, a shallow gas kick occurred during

drilling operations, resulting in a fire on the

V platform in

Bohai Bay, China.

On April 6, 2021, the fire was extinguished.

We are working with the operator to fully

understand the impacts.

Other International

Three Months Ended

March 31

2021

2020

Net Income (Loss) Attributable to ConocoPhillips

(millions of dollars)

(4)

The Other International segment consists of exploration

activities in Colombia and Argentina and

contingencies associated with prior operations

in other countries.

Earnings for Other International decreased $32 million

in the first quarter of 2021, compared

with the same

period of 2020.

Earnings were lower primarily due to the absence

of a $29 million after-tax benefit to earnings

from the dismissal of arbitration related to prior

operations in Senegal.

Corporate and Other

Millions of Dollars

Three Months Ended

March 31

2021

2020

Net Loss Attributable to ConocoPhillips

Net interest expense

(270)

(155)

Corporate general and administrative expenses

(129)

Technology

Other income (expense)

237

(1,671)

(121)

(1,775)

Net interest expense consists of interest and financing

expense, net of interest income and capitalized

interest.

Net interest expense increased by $115 million in the first

quarter of 2021, primarily due to higher debt

balances.

See Note 6—Debt in the Notes to Consolidated

Financial Statements for more information

related to

debt acquired in our Concho transaction.

Net interest expense also increased due to lower

interest income

from lower cash and cash equivalent balances and

yield.

Corporate G&A expenses include compensation

programs and staff costs.

These expenses increased by $179

million mainly due to mark-to-market adjustments

associated with certain key employee compensation

programs and restructuring expenses associated

with our Concho acquisition.

For additional information about

restructuring expenses, see Note 14—Employee

Benefit Plans in the Notes to Consolidated Financial

Statements.

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

as licensing revenues.

Activities are focused on both conventional and tight

oil reservoirs, shale gas, heavy oil, oil

sands, enhanced

oil recovery and LNG.

Earnings from Technology increased $40 million in the first quarter of 2021

primarily

due to higher licensing revenues.

Other income (expense) or “Other” includes certain

foreign currency transaction gains and losses,

environmental costs associated with sites no longer

in operation, other costs not directly associated

with an

operating segment, premiums incurred on the early

retirement of debt, unrealized holding gains or

losses on

equity securities, and pension settlement expense.

Earnings in “Other” increased by $1,908 million

in the first

quarter of 2021,

compared with the same period of 2020,

primarily due to an unrealized gain of $308 million

after-tax in the first quarter of 2021 on our

CVE common shares, compared with an unrealized

loss of $1,691

million after-tax on those shares in the first

quarter of 2020.

CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators

Millions of Dollars

March 31

December 31

2021

2020

Cash and cash equivalents

2,831

2,991

Short-term investments

4,104

3,609

Total debt

20,027

15,369

Total equity

43,155

29,849

Percent of total debt to capital*

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 quarter of 2021, the primary uses of

our

available cash were $1,200 million to

support our ongoing capital expenditures and investments

program;

approximately $1.0 billion of hedging, transaction

and restructuring costs; $588 million

to pay dividends;

$499

million of net purchases of investments;

and $375 million to repurchase common stock.

During the first

quarter of 2021, our cash and cash equivalents

decreased by $160 million to $2,831 million.

On January 15, 2021, we completed the acquisition

of Concho in an all-stock transaction.

In the acquisition,

we assumed Concho’s publicly traded debt, which was recorded at fair value

of $4.7 billion on the acquisition

date.

See Note 6—Debt and Note 3—Acquisitions

and Dispositions, in the Notes to Consolidated

Financial

Statements for additional information.

At March 31, 2021, we had cash and cash equivalents

of $2.8 billion, short-term investments of $4.1

billion,

and available borrowing capacity under our credit

facility of $5.7 billion,

totaling over $12 billion of liquidity.

We believe current cash balances and cash generated by operations, together with

access to external sources of

funds as described below in the “Significant Changes

in Capital” section, will be sufficient to meet our funding

requirements in the near- and long-term, including our capital

spending program, dividend payments and

required debt payments.

Significant Changes in Capital

Operating Activities

Cash provided by operating activities was $2,080

million for the first quarter of 2021, compared

with $2,105

million for the first quarter of 2020.

The decrease in cash provided by operating

activities is primarily due to

the settlement of all oil and gas hedging positions

acquired from Concho, normal field decline, transaction

and

restructuring costs, and the divestiture of our Australia-West assets.

The decrease in cash provided by

operating activities was partly offset by higher sales

volumes and higher realized commodity

prices in the

Lower 48, primarily due to our acquisition of

Concho.

Our short-

and long-term operating cash flows are highly

dependent upon prices for crude oil, bitumen, natural

gas, LNG and NGLs.

Prices and margins in our industry have historically

been volatile and are driven by

market conditions over which we have no control.

Absent other mitigating factors, as these

prices and margins

fluctuate, we would expect a corresponding

change in our operating cash flows.

The level of absolute production volumes, as

well as product and location mix, impacts our cash flows.

Future production is subject to numerous uncertainties,

including, among others, the volatile crude

oil and

natural gas price environment, which may impact

investment decisions; the effects of price changes

production sharing and variable-royalty contracts;

acquisition and disposition of fields; field

production

decline rates; new technologies; operating efficiencies;

timing of startups and major turnarounds; political

instability; weather-related disruptions; and the addition of

proved reserves through exploratory success and

their timely and cost-effective development.

While we actively manage these factors, production

levels can

cause variability in cash flows, although generally

this variability has not been as significant as

that caused by

commodity prices.

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

reserve base.

See the

“Capital Expenditures and Investments” section,

for information about our capital expenditures

and

investments.

On January 15, 2021, we assumed financial derivative

instruments consisting of oil and natural gas swaps

following the acquisition of Concho.

At March 31, 2021, all oil and natural gas derivative

financial

instruments acquired from Concho were contractually

settled.

In connection with the settlement, we paid $692

million in the first quarter of 2021 and will

pay the remaining $69 million in the second

quarter of 2021.

For

additional information, see Note 10—Derivative

and Financial Instruments in the Notes to

Consolidated

Financial Statements.

Investing Activities

In the first quarter of 2021, we invested $1.2 billion

in capital expenditures.

Our 2021 operating plan capital

expenditures is $5.5 billion compared with

$4.7 billion in 2020.

See the “Capital Expenditures and

Investments” section, for information about our

capital expenditures and investments.

We completed our acquisition of Concho on January 15, 2021.

The assets acquired in the transaction included

$382 million of cash which is reflected in the

“Net Cash Used in Investing Activities” section

of our

consolidated statement of cash flows. See Note 3—Acquisitions

and Dispositions, in the Notes to Consolidated

Financial Statements for additional information.

We invest in short-term investments as part of our cash investment strategy, the primary objective of which is

to protect principal, maintain liquidity and provide

yield and total returns;

these investments include time

deposits, commercial paper as well as debt securities

classified as available for sale.

Funds for short-term

needs to support our operating plan and provide resiliency

to react to short-term price volatility are invested

highly liquid instruments with maturities within

the year.

Funds we consider available to maintain resiliency

in longer term price downturns and to capture

opportunities outside a given operating

plan may be invested in

instruments with maturities greater than one year.

Investing activities in the first quarter of 2021 included

net purchases of $499 million of investments,

of which

$466 million was invested in short-term instruments

and $33 million was invested in long-term instruments.

See Note 10—Derivative and Financial Instruments,

in the Notes to Consolidated Financial

Statements for

additional information.

Financing Activities

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

Our revolving credit facility

may be used for direct bank borrowings, the issuance

of letters of credit totaling up to $500 million,

or as

support for our commercial paper program.

The revolving credit facility is broadly syndicated

among financial

institutions and does not contain any material

adverse change provisions or any covenants

requiring

maintenance

of specified financial ratios or credit ratings.

The facility agreement contains a cross-default

provision relating to the failure to pay principal or

interest on other debt obligations of

$200 million or more

by ConocoPhillips, or any of its consolidated subsidiaries.

The amount of the facility is not subject to

the

redetermination prior to its expiration date.

Credit facility borrowings may bear interest at

a margin above rates offered by certain designated banks in the

London interbank market or at a margin above the overnight

federal funds rate or prime rates offered by

certain designated banks in the U.S.

The agreement calls for commitment fees

on available, but unused,

amounts.

The agreement also contains early termination

rights if our current directors or their approved

successors cease to be a majority of the Board

of Directors.

The revolving credit facility supports the ConocoPhillips

Company’s ability to issue up to $6.0 billion of

commercial paper, which is primarily a funding source for short-term

working capital needs.

Commercial

paper maturities are generally limited to 90 days.

With $300 million of commercial paper outstanding and no

direct borrowings or letters of credit, we had $5.7

billion in available borrowing capacity

under the revolving

credit facility at March 31, 2021.

We may consider issuing additional commercial paper in the future to

supplement our cash position.

On January 15, 2021, we completed the acquisition

of Concho in an all-stock transaction. In the acquisition,

we assumed Concho’s publicly traded debt, which was recorded at fair value

of $4.7 billion on the acquisition

date.

See Note 3—Acquisitions and Dispositions and

Note 6—Debt, in the Notes to Consolidated

Financial

Statements for additional information.

In May 2021, we reaffirmed our commitment to

preserving a top-tier

balance sheet with an intent to reduce the company’s gross debt by $5

billion over the next five years, driving a

more resilient and efficient capital structure.

In October 2020, Moody’s affirmed its rating of our senior long-term debt of “A3”

with a “stable” outlook, and

affirmed its rating of our short-term debt as “Prime-2.”

In January 2021, Fitch affirmed its rating of our long-

term debt as “A” with a “stable” outlook and affirmed its

rating of our short-term debt as “F1+.”

On January

25, 2021, S&P revised the industry risk assessment

for the E&P industry to “Moderately High” from

“Intermediate” based on a view of increasing risks

from the energy transition, price volatility, and weaker

profitability.

On February 11, 2021, S&P downgraded its rating of our long-term debt

from “A” to “A-” with a

“stable” outlook and downgraded its rating of our short-term

debt from “A-1” to “A-2.”

We do not have any

ratings triggers on any of our corporate debt

that would cause an automatic default, and

thereby impact our

access to liquidity, upon downgrade of our credit ratings.

If our credit ratings

are downgraded from their

current levels, it could increase the cost of corporate

debt available to us and restrict our access to

the

commercial paper markets.

If our credit rating were to deteriorate

to a level prohibiting us from accessing the

commercial paper market, we would still

be able to access funds under our revolving credit

facility.

Certain of our project-related contracts, commercial

contracts and derivative instruments contain

provisions

requiring us to post collateral.

Many of these contracts and instruments permit

us to post either cash or letters

of credit as collateral.

At March 31, 2021 and December 31, 2020,

we had direct bank letters of credit of $309

million and $249 million, respectively, which secured performance obligations

related to various purchase

commitments incident to the ordinary conduct of business.

In the event of credit ratings downgrades, we may

be required to post additional letters of

credit.

Shelf Registration

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

we have the ability to issue

and sell an indeterminate amount of various types

of debt and equity securities.

Guarantor Summarized Financial Information

We have various cross guarantees among ConocoPhillips, ConocoPhillips Company

and Burlington Resources

LLC, with respect to publicly held debt securities.

ConocoPhillips Company is 100 percent

owned by

ConocoPhillips.

Burlington Resources LLC is 100 percent

owned by ConocoPhillips Company.

ConocoPhillips and/or ConocoPhillips Company

have fully and unconditionally guaranteed

the payment

obligations of Burlington Resources LLC, with respect

to its publicly held debt securities.

Similarly,

ConocoPhillips has fully and unconditionally

guaranteed the payment obligations of ConocoPhillips

Company

with respect to its publicly held debt securities.

In addition, ConocoPhillips Company

has fully and

unconditionally guaranteed the payment obligations

of ConocoPhillips with respect to its publicly

held debt

securities.

All guarantees are joint and several.

The following tables present summarized financial

information for the Obligor Group, as defined

below:

●

The Obligor Group will reflect guarantors and

issuers of guaranteed securities consisting of

ConocoPhillips, ConocoPhillips Company and

Burlington Resources LLC.

●

Consolidating adjustments for elimination

of investments in and transactions between the collective

guarantors and issuers of guaranteed securities

are reflected in the balances of the summarized

financial information.

●

Non-Obligated Subsidiaries are excluded

from the presentation.

Upon completion of the Concho Acquisition

on January 15, 2021, we assumed Concho’s publicly traded debt

of approximately $3.9 billion in aggregate principal

amount, which was recorded at fair value

of $4.7 billion

on the acquisition date.

We completed a debt exchange offer that settled on February 8, 2021, of which 98

percent, or approximately $3.8 billion in aggregate

principal amount of Concho’s notes, were tendered and

accepted for new debt issued by ConocoPhillips.

The new debt issued in the exchange is fully

and

unconditionally guaranteed by ConocoPhillips

Company.

Both the guarantor and issuer of the exchange debt

is reflected within the Obligor Group presented

here.

See Note 3—Acquisitions and Dispositions

and Note

6—Debt, in the Notes to Consolidated Financial

Statements for additional information.

Transactions and balances reflecting activity between the Obligors

and Non-Obligated Subsidiaries are

presented below:

Summarized Income Statement Data

Millions of Dollars

Three Months Ended

March 31, 2021

Revenues and Other Income

6,607

Income (loss) before income taxes

1,092

Net income (loss)

982

Net Income (Loss) Attributable to ConocoPhillips

982

Summarized Balance Sheet Data

Millions of Dollars

March 31

2021

December 31

2020

Current assets

9,067

8,535

Amounts due from Non-Obligated Subsidiaries, current

673

440

Noncurrent assets

56,845

37,180

Amounts due from Non-Obligated Subsidiaries, noncurrent

8,528

7,730

Current liabilities

4,564

3,797

Amounts due to Non-Obligated Subsidiaries, current

1,889

1,365

Noncurrent liabilities

24,750

18,627

Amounts due to Non-Obligated Subsidiaries, noncurrent

5,756

3,972

Capital Requirements

For information about our capital expenditures

and investments, see the “Capital Expenditures

and

Investments” section.

Our debt balance as of March 31, 2021, was $20.0

billion compared with $15.4 billion at

December 31, 2020.

The increase of $4.6 billion is due to debt assumed

in the Concho acquisition.

The current portion of debt,

including payments for finance leases, is $0.7

billion.

Payments will be made using current cash balances

and

cash generated by operations.

See Note 6—Debt, in the Notes to Consolidated

Financial Statements for

additional information on debt.

We believe in delivering value to our shareholders through a growing and sustainable

dividend supplemented

by additional returns of capital, including share repurchases.

In 2020, we paid $1.8 billion,

equating to $1.69

per share of common stock, in dividends.

On February 2, 2021, we announced a quarterly

dividend of $0.43

per share.

The dividend was paid on March 1, 2021, to stockholders

of record at the close of business on

February 12, 2021.

On May 4, 2021, we announced a quarterly

dividend of $0.43

per share, payable June 1,

2021, to stockholders of record at the close of business

on May 14, 2021.

In late 2016, we initiated our current share repurchase

program, which has a total program authorization

repurchase $25 billion of our common stock.

In February 2021, we resumed the program

at an annualized

level of $1.5 billion.

In May 2021, we announced our plan to dispose

of our 208 million shares of Cenovus

Energy by year-end 2022.

The sales pace will be guided by market conditions,

with ConocoPhillips retaining

discretion to adjust accordingly.

The proceeds from this disposition will be deployed

towards incremental

share repurchases.

In the first quarter of 2021, we repurchased

7 million shares at a cost of $375 million.

Since the inception of the program we have repurchased

196 million shares at a cost of $10.9 billion.

Our dividend and share repurchase programs are

subject to numerous considerations, including

market

conditions, management discretion and other factors.

See “Item 1A—Risk Factors – Our ability to declare

and

pay dividends and repurchase shares is subject to

certain considerations” in Part I—Item

1A in our 2020

Annual Report on Form 10-K.

Capital Expenditures and Investments

Millions of Dollars

Three Months Ended

March 31

2021

2020

Alaska

235

509

Lower 48

718

776

Canada

Europe, Middle East and North Africa

121

Asia Pacific

103

Other International

Corporate and Other

Capital expenditures and investments

1,200

1,649

During the first quarter of 2021, capital expenditures

and investments supported key exploration

and

development programs, primarily:

●

Development and appraisal activities

in the Lower 48, primarily Permian, Eagle Ford,

and Bakken.

●

Appraisal and development activities

in Alaska related to the Western North Slope and development

activities in the Greater Kuparuk Area.

●

Appraisal activities in liquids-rich plays and optimization

of oils sands development in Canada.

●

Continued development activities across assets

in Norway.

●

Continued development activities in China, Malaysia

and Indonesia.

In February 2021, we announced 2021 operating

plan capital expenditures of $5.5 billion.

The plan includes

$5.1 billion to sustain current production and $0.4

billion for investment in major projects, primarily

in Alaska,

in addition to ongoing exploration appraisal activity.

Contingencies

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

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

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances

at various active

and inactive sites.

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

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue

liability when the loss is probable and the amount

is reasonably estimable.

If a range of amounts can be

reasonably estimated and no amount within the range

is a better estimate than any other amount,

then the low

end of the range is accrued.

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

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

With respect to income

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

loss accrual in cases where sustaining a

tax position is less than certain.

Based on currently available information, we believe

it is remote that future costs related to known

contingent

liability exposures will exceed current accruals by

an amount that would have a material

adverse impact on our

consolidated financial statements.

For information on other contingencies, see

Note 9—Contingencies and

Commitments, in the Notes to Consolidated Financial

Statements.

Legal and Tax

Matters

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

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes,

environmental

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

Our primary exposures for such matters

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties,

and

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

legal

proceedings against us.

Our process facilitates the early evaluation and

quantification of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

mediation.

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

the

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

of new

accruals, is required.

Environmental

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

laws and regulations

as other companies in our industry.

For a discussion of the most significant

of these environmental laws and

regulations, including those with associated remediation

obligations, see the “Environmental” section in

Management’s Discussion and Analysis of Financial Condition and Results

of Operations on pages 64–66

our 2020 Annual Report on Form 10-K.

We occasionally receive requests for information or notices of potential liability

from the EPA and state

environmental agencies alleging that we are

a potentially responsible party under the Federal

Comprehensive

Environmental Response, Compensation and

Liability Act (CERCLA) or an equivalent

state statute.

occasion, we also have been made a party to cost

recovery litigation by those agencies or by private

parties.

These requests, notices and lawsuits assert potential

liability for remediation costs at various sites

that typically

are not owned by us, but allegedly contain waste attributable

to our past operations.

As of March 31, 2021,

there were 15 sites around the U.S. in

which we were identified as a potentially responsible

party under

CERCLA and comparable state laws.

At March 31, 2021,

our balance sheet included a total environmental

accrual of $188 million, compared with

$180 million at December 31, 2020,

for remediation activities in the U.S. and

Canada.

We expect to incur a

substantial amount of these expenditures within

the next 30 years.

Notwithstanding any of the foregoing, and as

with other companies engaged in similar businesses,

environmental costs and liabilities are inherent

concerns in our operations and products, and there

can be no

assurance that material costs and liabilities

will not be incurred.

However, we currently do not expect any

material adverse effect upon our results of operations or financial

position as a result of compliance with

current environmental laws and regulations.

Climate Change

Continuing political and social attention to the

issue of global climate change has resulted in

a broad range of

proposed or promulgated state, national and international

laws focusing on GHG reduction.

These proposed or

promulgated laws apply or could apply in countries

where we have interests or may have interests

in the future.

Laws in this field continue to evolve, and

while it is not possible to accurately estimate either

a timetable for

implementation or our future compliance costs

relating to implementation, such laws, if

enacted, could have a

material impact on our results of operations and

financial condition.

For examples of legislation or precursors

for possible regulation and factors on which the

ultimate impact on our financial performance

will depend, see

the “Climate Change” section in Management’s Discussion and Analysis

of Financial Condition and Results of

Operations on pages 67–69 of our 2020 Annual

Report on Form 10-K.

Climate Change Litigation

Beginning in 2017, governmental and other entities

in several states in the U.S. have filed lawsuits

against oil

and gas companies, including ConocoPhillips,

seeking compensatory damages and equitable

relief to abate

alleged climate change impacts.

Additional lawsuits with similar allegations

are expected to be filed.

The

amounts claimed by plaintiffs are unspecified and the legal

and factual issues involved in these cases are

unprecedented.

ConocoPhillips believes these lawsuits are

factually and legally meritless and are an

inappropriate vehicle to address the challenges

associated with climate change and will

vigorously defend

against such lawsuits.

Several Louisiana parishes and the State of Louisiana

have filed 43 lawsuits under Louisiana’s State and Local

Coastal Resources Management Act (SLCRMA)

against oil and gas companies, including ConocoPhillips,

seeking compensatory damages for contamination

and erosion of the Louisiana coastline

allegedly caused by

historical oil and gas operations.

ConocoPhillips entities are defendants

in 22 of the lawsuits and will

vigorously defend against them.

Because Plaintiffs’ SLCRMA theories are unprecedented,

there is uncertainty

about these claims (both as to scope and damages)

and any potential financial impact on the company.

Company Response to Climate-Related Risks

The company has responded by putting in place

a Sustainable Development Risk Management

Standard

covering the assessment and registering of significant

and high sustainable development risks based on their

consequence and likelihood of occurrence.

We have developed a company-wide Climate Change Action Plan

with the goal of tracking mitigation activities

for each climate-related risk included in the corporate

Sustainable Development Risk Register.

The risks addressed in our Climate Change Action

Plan fall into four broad categories:

●

GHG-related legislation and regulation.

●

GHG emissions management.

●

Physical climate-related impacts.

●

Climate-related disclosure and reporting.

Emissions are categorized into three different scopes.

Gross operated Scope 1 and Scope 2 GHG emissions

help us understand our climate transition

risk.

●

Scope 1 emissions are direct GHG emissions

from sources that we own or control.

●

Scope 2 emissions are GHG emissions from

the generation of purchased electricity or

steam that we

consume.

Scope 3 emissions are indirect emissions

from sources that we neither own nor control.

We announced in October 2020 the adoption of a Paris-aligned climate risk framework

with the objective of

implementing a coherent set of choices designed

to facilitate the success of our existing exploration

and

production business through the energy transition.

Given the uncertainties remaining about how the

energy

transition will evolve, the strategy aims to be robust

across a range of potential future outcomes.

The strategy is comprised of four pillars:

●

Targets:

Our target framework consists of a hierarchy of targets, from a long-term

ambition that sets

the direction and aim of the strategy, to a medium-term performance target for GHG emissions

intensity, to shorter-term targets for flaring and methane intensity reductions. These

performance

targets are supported by lower-level internal business

unit goals to enable the company to achieve the

company-wide targets.

We have set a target to reduce our gross operated (scope 1 and 2) emissions

intensity by 35 to 45 percent from 2016 levels by

2030, with an ambition to achieve net-zero

operated

emissions by 2050.

We have joined the World

Bank Flaring Initiative to work towards

zero routine

flaring of gas by 2030.

●

Technology choices:

We expanded our Marginal Abatement Cost Curve process to provide a broader

range of opportunities for emission reduction

technology.

●

Portfolio

choices: Our corporate authorization process requires

all qualifying projects to include a

GHG price in their project approval economics.

Different GHG prices are used depending on the

region or jurisdiction.

Projects in jurisdictions with existing GHG

pricing regimes incorporate the

existing GHG price and forecast into their

economics.

Projects where no existing GHG pricing

regime exists utilize a scenario forecast from

our internally consistent World Energy Model.

In this

way, both existing and emerging regulatory requirements are considered in our

decision-making.

The

company does not use an estimated market cost

of GHG emissions when assessing reserves

jurisdictions without existing GHG regulations.

●

External engagement:

Our external engagement aims to differentiate ConocoPhillips

within the oil and

gas sector with our approach to managing climate-related

risk.

We are a Founding Member of the

Climate Leadership Council (CLC), an international

policy institute founded in collaboration

with

business and environmental interests to develop

a carbon dividend plan.

Participation in the CLC

provides another opportunity for ongoing dialogue

about carbon pricing and framing the issues

alignment with our public policy principles.

We also belong to and fund Americans For Carbon

Dividends, the education and advocacy branch of

the CLC.

CAUTIONARY STATEMENT

FOR THE PURPOSES OF THE “SAFE HARBOR”

PROVISIONS OF

THE PRIVATE

SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements

within the meaning of Section 27A of the Securities

Act of

1933 and Section 21E of the Securities Exchange

Act of 1934.

All statements other than statements of

historical fact included or incorporated by reference

in this report, including, without limitation,

statements

regarding our future financial position, business

strategy, budgets, projected revenues, projected costs and

plans, objectives of management for future operations,

the anticipated benefits of the transaction

between us

and Concho, the anticipated impact of the transaction

on the combined company’s business and future

financial and operating results, the expected amount

and the timing of synergies from the transaction

are

forward-looking statements.

Examples of forward-looking statements contained

in this report include our

expected production growth and outlook on the

business environment generally, our expected capital budget

and capital expenditures, and discussions concerning

future dividends.

You can often identify our forward-

looking statements by the words “anticipate,” “believe,”

“budget,” “continue,” “could,” “effort,” “estimate,”

“expect,” “forecast,” “intend,” “goal,” “guidance,”

“may,” “objective,” “outlook,” “plan,” “potential,”

“predict,” “projection,” “seek,” “should,” “target,” “will,”

“would” and similar expressions.

We based the forward-looking statements on our current expectations, estimates

and projections about

ourselves and the industries in which we operate in

general.

We caution you these statements are not

guarantees of future performance as they involve

assumptions that, while made in good faith,

may prove to be

incorrect, and involve risks and uncertainties

we cannot predict.

In addition, we based many of these forward-

looking statements on assumptions about future events

that may prove to be inaccurate.

Accordingly, our

actual outcomes and results may differ materially from

what we have expressed or forecast in the forward-

looking statements.

Any differences could result from a variety of factors

and uncertainties, including, but not

limited to, the following:

●

The impact of public health crises, including pandemics

(such as COVID-19) and epidemics and any

related company or government policies or

actions.

●

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

conditions

affecting oil and gas, including changes resulting from a

public health crisis or from the imposition or

lifting of crude oil production quotas or other

actions that might be imposed by OPEC

and other

producing countries and the resulting company

or third-party actions in response to such changes.

●

Fluctuations in crude oil, bitumen, natural gas,

LNG and NGLs prices, including a prolonged

decline

in these prices relative to historical or future

expected levels.

●

The impact of significant declines in prices for crude

oil, bitumen, natural gas, LNG and NGLs,

which

may result in recognition of impairment charges on

our long-lived assets, leaseholds and

nonconsolidated equity investments.

●

Potential failures or delays in achieving expected

reserve or production levels from existing

and future

oil and gas developments, including due to operating

hazards, drilling risks and the inherent

uncertainties in predicting reserves and reservoir

performance.

●

Reductions in reserves replacement rates, whether

as a result of the significant declines in commodity

prices or otherwise.

●

Unsuccessful exploratory drilling activities

or the inability to obtain access to exploratory acreage.

●

Unexpected changes in costs or technical requirements

for constructing, modifying or operating E&P

facilities.

●

Legislative and regulatory initiatives

addressing environmental concerns, including initiatives

addressing the impact of global climate change or further

regulating hydraulic fracturing, methane

emissions, flaring or water disposal.

●

Lack of, or disruptions in, adequate and reliable

transportation for our crude oil, bitumen, natural

gas,

LNG and NGLs.

●

Inability to timely obtain or maintain permits,

including those necessary for construction, drilling

and/or development, or inability to make capital

expenditures required to maintain compliance

with

any necessary permits or applicable laws or regulations.

●

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

aluminum and steel) used in the operation of our

business.

●

Substantial investment in and development use

of, competing or alternative energy sources, including

as a result of existing or future environmental rules

and regulations.

●

Liability for remedial actions, including removal

and reclamation obligations, under existing

and

future environmental regulations and litigation.

●

Significant operational or investment changes imposed

by existing or future environmental statutes

and regulations, including international agreements

and national or regional legislation and regulatory

measures to limit or reduce GHG emissions.

●

Liability resulting from litigation, including the

potential for litigation related to the transaction

with

Concho, or our failure to comply with applicable

laws and regulations.

●

General domestic and international economic and

political developments, including armed

hostilities;

expropriation of assets; changes in governmental

policies relating to crude oil, bitumen, natural

gas,

LNG and NGLs pricing;

regulation or taxation; and other political, economic

or diplomatic

developments.

●

Volatility

in the commodity futures markets.

●

Changes in tax and other laws, regulations (including

alternative energy mandates), or royalty rules

applicable to our business.

●

Competition and consolidation in the oil and gas

E&P industry.

●

Any limitations on our access to capital or increase

in our cost of capital, including as a result

illiquidity or uncertainty in domestic or international

financial markets or investment sentiment.

●

Our inability to execute, or delays in the completion,

of any asset dispositions or acquisitions

we elect

to pursue.

●

Potential failure to obtain, or delays in obtaining,

any necessary regulatory approvals for

pending or

future asset dispositions or acquisitions,

or that such approvals may require modification

to the terms

of the transactions or the operation of our remaining

business.

●

Potential disruption of our operations as a result

of pending or future asset dispositions or acquisitions,

including the diversion of management time and

attention.

●

Our inability to deploy the net proceeds from any

asset dispositions that are pending or

that we elect to

undertake in the future in the manner and timeframe

we currently anticipate, if at all.

●

Our inability to liquidate the common stock issued

to us by Cenovus Energy as part of our sale of

certain assets in western Canada at prices we deem

acceptable, or at all.

●

The operation and financing of our joint ventures.

●

The ability of our customers and other contractual

counterparties to satisfy their obligations to

us,

including our ability to collect payments

when due from the government of Venezuela or PDVSA.

●

Our inability to realize anticipated cost savings

and capital expenditure reductions.

●

The inadequacy of storage capacity for our products,

and ensuing curtailments, whether voluntary

involuntary, required to mitigate this physical constraint.

●

Our ability to successfully integrate Concho’s business and fully achieve

the expected benefits and

cost reductions associated with the transaction

with Concho in a timely manner or at all.

●

The risk that we will be unable to retain and hire

key personnel.

●

Unanticipated difficulties or expenditures relating to integration

with Concho.

●

Uncertainty as to the long-term value of our common

stock.

●

The diversion of management time on integration-related

matters.

●

The factors generally described in Part I—Item

1A in our 2020 Annual Report on Form

10-K and any

additional risks described in our other filings

with the SEC.

Item 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Other information about market risks for

the three months ended March 31, 2021, does

not differ materially

from that discussed under Item 7A in our 2020

Annual Report on Form 10-K.

Item 4.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure information required

to be disclosed in

reports we file or submit under the Securities

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

is recorded,

processed, summarized and reported within the

time periods specified in SEC rules and forms,

and that such

information is accumulated and communicated

to management, including our principal executive

and principal

financial officers, as appropriate, to allow timely decisions

regarding required disclosure.

As of March 31,

2021, with the participation of our management,

our Chairman and Chief Executive Officer (principal

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

financial officer)

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

of the Act, of ConocoPhillips’ disclosure controls

and

procedures (as defined in Rule 13a-15(e) of the

Act).

Based upon that evaluation, our Chairman and

Chief

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

our disclosure

controls and procedures were operating effectively as of

March 31, 2021.

There have been no changes in our internal

control over financial reporting, as defined

in Rule 13a-15(f) of the

Act, in the period covered by this report that

have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

PART

II.

OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

There are no new material legal proceedings

or material developments with respect to

matters previously

disclosed in Item 3 of our 2020 Annual Report

on Form 10-K.

Item 1A. Risk Factors

There have been no material changes from the

risk factors disclosed in Item 1A of our 2020

Annual Report on

Form 10-K.

Item 2.

UNREGISTERED SALES OF EQUITY

SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Millions of Dollars

Period

Total Number

of Shares

Purchased

Average Price

Paid per Share

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans

or Programs

Approximate Dollar

Value

of Shares

That May Yet Be

Purchased Under the

Plans or Programs

January 1-31, 2021

14,483

February 1-28, 2021

1,767,507

48.49

1,767,507

14,397

March 1-31, 2021

5,219,017

55.43

5,219,017

14,108

6,986,524

*There were no repurchases of common stock from company employees in connection with the company's broad-based employee incentive plans.

In late 2016, we initiated our current share repurchase

program, which has a current total program

authorization of $25 billion of our common stock.

In February 2021,

we resumed

our share repurchase

program at an annualized level of $1.5 billion.

In May 2021, we announced a plan to dispose

of our 208

million shares of Cenovus Energy by year-end 2022.

The sales pace will be guided by market

conditions, with

ConocoPhillips retaining discretion to adjust accordingly.

The proceeds from this disposition will be deployed

towards incremental share repurchases.

As of March 31, 2021,

we had repurchased $10.9 billion of shares, with $14.1

billion remaining under our

current authorization.

Repurchases are made at management’s discretion, at prevailing prices, subject

market conditions and other factors.

Except as limited by applicable legal requirements,

repurchases may be

increased, decreased or discontinued at any time

without prior notice.

Shares of stock repurchased under the

plan are held as treasury shares.

See the “Our ability to declare and pay dividends

and repurchase shares is

subject to certain considerations” section in Risk

Factors on page 31 of our 2020 Annual Report

Form 10-K.

Item 6.

EXHIBITS

10.1*

Form of Retention Award Terms and Conditions, as part of the Restricted Stock Unit Award,

granted under the 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips,

dated January 1, 2021.

10.2*

Amendment and Restatement of ConocoPhillips Executive Severance Plan, dated January 15,

2021.

10.3*

Form of Inducement Grant Award Agreement under the 2014 Omnibus Stock and Performance

Incentive Plan of ConocoPhillips, dated January 15, 2021.

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/ Kontessa S. Haynes-Welsh

Kontessa S. Haynes-Welsh

Chief Accounting Officer

May 6, 2021

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