ConocoPhillips 10Q 2021 Q3 Quarterly report

ConocoPhillips

2021 Q3 10-Q

Commonly Used Abbreviations

The following industry-specific, accounting

and other terms, and abbreviations may

be commonly used in this

report.

Currencies

Accounting

$ or USD

U.S. dollar

ARO

asset retirement obligation

CAD

Canadian dollar

ASC

accounting standards codification

EUR

Euro

ASU

accounting standards update

GBP

British pound

DD&A

depreciation, depletion and

amortization

Units of Measurement

FASB

Financial Accounting Standards

BBL

barrel

Board

BCF

billion cubic feet

FIFO

first-in, first-out

BOE

barrels of oil equivalent

G&A

general and administrative

MBD

thousands of barrels per day

GAAP

generally accepted accounting

MCF

thousand cubic feet

principles

MBOD

thousand barrels of oil per day

LIFO

last-in, first-out

million

NPNS

normal purchase normal sale

MMBOE

million barrels of oil equivalent

PP&E

properties, plants and equipment

MMBOD

million barrels of oil per day

SAB

staff accounting bulletin

MBOED

thousands of barrels of oil

VIE

variable interest entity

MMBOED

equivalent per day

millions of barrels of oil equivalent

per day

MMBTU

million British thermal units

Miscellaneous

MMCFD

million cubic feet per day

EPA

Environmental Protection

Agency

ESG

Environmental, Social and

Corporate Governance

Industry

European Union

CBM

coalbed methane

FERC

Federal Energy Regulatory

E&P

exploration and production

Commission

FEED

front-end engineering and design

GHG

greenhouse gas

FPS

floating production system

HSE

health, safety and environment

FPSO

floating production, storage

and

ICC

International Chamber of

offloading

Commerce

G&G

geological and geophysical

ICSID

World Bank’s

International

JOA

joint operating agreement

Centre for Settlement of

LNG

liquefied natural gas

Investment Disputes

NGLs

natural gas liquids

IRS

Internal Revenue Service

OPEC

Organization of Petroleum

OTC

over-the-counter

Exporting Countries

NYSE

New York Stock Exchange

PSC

production sharing contract

SEC

U.S. Securities and Exchange

PUDs

proved undeveloped reserves

Commission

SAGD

steam-assisted gravity

drainage

TSR

total shareholder return

WCS

Western Canada Select

U.K.

United Kingdom

WTI

West Texas

Intermediate

U.S.

United States of America

Financial Statements

ConocoPhillips

2021 Q3 10-Q

PART

Financial Information

Item 1.

Financial Statements

Consolidated Income Statement

ConocoPhillips

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Revenues and Other Income

Sales and other operating revenues

11,326

4,386

30,708

13,293

Equity in earnings of affiliates

239

500

346

Gain (loss) on dispositions

(3)

294

551

Other income (loss)

(38)

884

(983)

Total

Revenues and Other Income

11,616

4,380

32,386

13,207

Costs and Expenses

Purchased commodities

4,179

1,839

11,660

5,630

Production and operating expenses

1,389

963

4,151

3,183

Selling, general and administrative

expenses

128

556

249

Exploration expenses

125

206

410

Depreciation, depletion and amortization

1,672

1,411

5,425

3,980

Impairments

(89)

(90)

521

Taxes

other than income taxes

403

179

1,154

570

Accretion on discounted liabilities

186

195

Interest and debt expense

219

200

665

604

Foreign currency transaction

(gain) loss

(10)

(5)

(88)

Other expenses

Total

Costs and Expenses

8,034

4,892

24,010

15,261

Income (loss) before income taxes

3,582

(512)

8,376

(2,054)

Income tax provision (benefit)

1,203

(62)

2,924

(171)

Net income (loss)

2,379

(450)

5,452

(1,883)

Less: net loss attributable to noncontrolling

interests

(46)

Net Income (Loss) Attributable

to ConocoPhillips

2,379

(450)

5,452

(1,929)

Net Income (Loss) Attributable

to ConocoPhillips Per Share

of Common Stock

(dollars)

Basic

1.78

(0.42)

4.10

(1.79)

Diluted

1.78

(0.42)

4.09

(1.79)

Average Common Shares

Outstanding

(in thousands)

Basic

1,332,286

1,077,377

1,327,216

1,079,525

Diluted

1,336,379

1,077,377

1,330,652

1,079,525

See Notes to Consolidated Financial Statements.

Financial Statements

ConocoPhillips

2021 Q3 10-Q

Consolidated Statement

of Comprehensive Income

ConocoPhillips

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income (Loss)

2,379

(450)

5,452

(1,883)

Other comprehensive income (loss)

Defined benefit plans

Reclassification adjustment for

amortization of prior

service credit included in net income (loss)

(9)

(8)

(28)

(24)

Net actuarial gain (loss) arising during the period

(78)

113

(73)

Reclassification adjustment for

amortization of net actuarial

losses included in net income (loss)

133

Income taxes on defined benefit

plans

(9)

(49)

Defined benefit plans, net of tax

(31)

169

(13)

Unrealized holding gain (loss) on securities

(1)

Income taxes on unrealized

holding gain on securities

(1)

Unrealized holding gain (loss) on securities,

net of tax

(1)

Foreign currency translation

adjustments

(237)

188

(72)

(302)

Income taxes on foreign

currency translation adjustments

(1)

Foreign currency translation

adjustments, net of tax

(238)

190

(73)

(298)

Other Comprehensive Income (Loss), Net of Tax

(203)

159

(309)

Comprehensive Income (Loss)

2,176

(291)

5,547

(2,192)

Less: comprehensive income attributable

to noncontrolling interests

(46)

Comprehensive Income (Loss) Attributable

to ConocoPhillips

2,176

(291)

5,547

(2,238)

See Notes to Consolidated Financial Statements.

Financial Statements

ConocoPhillips

2021 Q3 10-Q

Consolidated Balance Sheet

ConocoPhillips

Millions of Dollars

September 30

December 31

2021

2020

Assets

Cash and cash equivalents

9,833

2,991

Short-term investments

678

3,609

Accounts and notes receivable (net of allowance

of $

and $

, respectively)

5,336

2,634

Accounts and notes receivable—related

parties

129

120

Investment in Cenovus Energy

1,416

1,256

Inventories

1,043

1,002

Prepaid expenses and other current

assets

1,746

454

Total

Current Assets

20,181

12,066

Investments and long-term receivables

8,058

8,017

Loans and advances—related parties

114

Net properties, plants and equipment

(net of accumulated DD&A of $

65,223

and $

62,213

, respectively)

56,689

39,893

Other assets

2,376

2,528

Total

Assets

87,304

62,618

Liabilities

Accounts payable

4,101

2,669

Accounts payable—related

parties

Short-term debt

920

619

Accrued income and other taxes

2,082

320

Employee benefit obligations

691

608

Other accruals

2,625

1,121

Total

Current Liabilities

10,449

5,366

Long-term debt

18,748

14,750

Asset retirement obligations

and accrued environmental costs

5,721

5,430

Deferred income taxes

5,630

3,747

Employee benefit obligations

1,162

1,697

Other liabilities and deferred credits

1,479

1,779

Total

Liabilities

43,189

32,769

Equity

Common stock (

2,500,000,000

shares authorized at $

0.01

par value)

Issued (2021—

2,089,046,718

shares; 2020—

1,798,844,267

shares)

Par value

Capital in excess of par

60,431

47,133

Treasury stock

(at cost: 2021—

770,099,851

shares; 2020—

730,802,089

shares)

(49,521)

(47,297)

Accumulated other comprehensive

loss

(5,123)

(5,218)

Retained earnings

38,307

35,213

Total

Equity

44,115

29,849

Total

Liabilities and Equity

87,304

62,618

See Notes to Consolidated Financial Statements.

Financial Statements

ConocoPhillips

2021 Q3 10-Q

Consolidated Statement

of Cash Flows

ConocoPhillips

Millions of Dollars

Nine Months Ended

September 30

2021

2020

Cash Flows From Operating Activities

Net income (loss)

5,452

(1,883)

Adjustments to reconcile net income

(loss) to net cash provided by operating

activities

Depreciation, depletion and amortization

5,425

3,980

Impairments

(90)

521

Dry hole costs and leasehold impairments

114

Accretion on discounted liabilities

186

195

Deferred taxes

895

(428)

Undistributed equity earnings

258

450

Gain on dispositions

(294)

(551)

(Gain) loss on investment in Cenovus

Energy

(743)

1,302

Other

(866)

(188)

Working capital adjustments

Decrease (increase) in accounts and notes

receivable

(1,619)

1,132

Increase in inventories

(13)

(74)

Increase in prepaid expenses and other current

assets

(800)

(49)

Increase (decrease) in accounts payable

682

(583)

Increase (decrease) in taxes

and other accruals

2,648

(808)

Net Cash Provided by Operating

Activities

11,128

3,130

Cash Flows From Investing Activities

Cash acquired from Concho

382

Capital expenditures and investments

(3,767)

(3,657)

Working capital changes

associated with investing activities

(229)

Proceeds from asset dispositions

792

1,312

Net sales (purchases) of investments

2,846

(1,089)

Collection of advances/loans—related parties

105

116

Other

(386)

(31)

Net Cash Provided by (Used in) Investing

Activities

(3,578)

Cash Flows From Financing Activities

Issuance of debt

300

Repayment of debt

(363)

(234)

Issuance of company common stock

(2)

Repurchase of company common

stock

(2,224)

(726)

Dividends paid

(1,750)

(1,367)

Other

(27)

Net Cash Used in Financing Activities

(4,304)

(2,056)

Effect of Exchange

Rate Changes on Cash, Cash Equivalents

and Restricted Cash

(3)

(62)

Net Change in Cash, Cash Equivalents and

Restricted Cash

6,872

(2,566)

Cash, cash equivalents and restricted

cash at beginning of period

3,315

5,362

Cash, Cash Equivalents and Restricted

Cash at End of Period

10,187

2,796

Restricted cash of $

million and $

259

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

assets" lines,

respectively, of our Consolidated Balance Sheet as of September 30, 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

See Item 1A “Risk Factors” for further

ConocoPhillips

2021 Q3 10-Q

Notes to Consolidated

Financial Statements

Note 1—Basis of Presentation

The interim-period financial information

presented in the financial statements

included in this report is unaudited

and, in the opinion of management, includes all known accruals and

adjustments necessary for a fair presentation

of the consolidated financial position of ConocoPhillips

its results of operations and cash flows

for such periods.

All such adjustments are of a normal and recurring

nature unless otherwise disclosed.

Certain notes and other

information have been condensed

or omitted from the interim financial statements

included in this report.

Therefore, these financial statements

should be read in conjunction with the consolidated

financial statements and

notes included in our 2020 Annual Report on Form

10-K.

Note 2—Inventories

Millions of Dollars

September 30

December 31

2021

2020

Crude oil and natural gas

485

461

Materials and supplies

558

541

Total

Inventories

1,043

1,002

Inventories valued on

the LIFO basis

305

282

Note 3—Acquisitions and Dispositions

Announced Acquisition of Shell Permian Assets

In September 2021, we signed a definitive agreement

to acquire Shell Enterprises LLC’s

assets in the Delaware

Basin in an all-cash transaction for $

9.5

billion before customary

adjustments (Shell Permian Acquisition).

Assets

to be acquired include approximately

225,000

net acres and producing properties

located entirely in Texas,

as well

as over

600

miles of operated crude, gas and

water pipelines and infrastructure.

The acquisition is anticipated to

close in the fourth quarter of 2021, subject to regulatory

approval and other customary

closing conditions.

Under

the terms of the agreement, we paid a deposit of $

475

million which is presented within “Cash

Flows from

Investing Activities - Other” on our consolidated statement

of cash flows.

discussion of risks related to the Shell Permian Acquisition.

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 for

1.46

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.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

The transaction was accounted

for as a business combination under FASB

ASC 805 using the acquisition method,

which requires assets acquired and

liabilities assumed to be measured at their acquisition date

fair values.

Fair

value measurements were made

for acquired assets and liabilities, and

adjustments to those measurements

may

be made in subsequent periods, up to one year

from the acquisition date as we identify new information

about

facts and circumstances that

existed as of the acquisition date to

consider.

Oil and gas properties were valued

using a discounted cash flow approach

incorporating market participant

and internally generated price

assumptions; production profiles; and, operating

and development cost assumptions.

Debt assumed in the

acquisition was valued based on observable

market prices.

The fair values determined for

accounts receivables,

accounts payable, and most

other current assets and current liabilities were

equivalent to the carrying value

due to

their short-term nature.

The total consideration

of $

13.1

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

745

Inventories

Prepaid expenses and other current

assets

Investments and long-term receivables

333

Net properties, plants and equipment

18,968

Other assets

Total assets

acquired

20,572

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

7,447

Net assets acquired

13,125

With the completion of the Concho transaction,

we acquired proved and unproved

properties of approximately

11.8

billion and $

6.9

billion, respectively.

We recognized approximately

157

million of transaction-related costs,

all of which were expensed in the first

quarter of 2021.

These non-recurring costs related

primarily to fees paid to advisors

and the settlement of share-

based awards for certain Concho

employees based on the terms of the Merger Agreement.

In the first quarter of 2021, we commenced

a company-wide restructuring program,

the scope of which included

combining the operations of the two companies

as well as other global restructuring activities.

For the three-

and

nine-month periods ending September 30, 2021, we recognized

non-recurring restructuring costs

of approximately

million and $

209

million, respectively,

mainly for employee severance

and related incremental

pension benefit

costs.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

The impact from these transaction and restructuring

costs to the lines of our consolidated income statement

for

the nine-month period ending September 30, 2021, are

below:

Millions of Dollars

Transaction

Cost

Restructuring Cost

Total

Cost

Production and operating expenses

110

Selling, general and administration

expenses

135

199

Exploration expenses

Taxes

other than income taxes

Other expenses

157

209

366

On February 8, 2021, we completed a debt

exchange offer

related to the debt assumed from Concho.

As a result

of the debt exchange, we recognized

an additional income tax related

restructuring charge of $

million.

See

Note 19.

From the acquisition date through

September 30, 2021, “Total Revenues

and Other Income” and “Net Income

(Loss) Attributable to ConocoPhillips”

associated with the acquired Concho business

were approximately $

4,499

million and $

1,600

million, respectively.

The results associated with the Concho business

for the same period

include a before- and after-tax

loss of $

305

million and $

233

million, respectively,

on the acquired derivative

contracts.

The before-tax loss is recorded

within “Total Revenues

and Other Income” on our consolidated

income

statement.

The following summarizes the unaudited

supplemental pro forma financial information

as if we had completed the

acquisition of Concho on January 1, 2020:

Millions of Dollars

Supplemental Pro Forma (unaudited)

Three Months Ended

September 30, 2020

Nine Months Ended

September 30, 2020

Total

revenues and other income

5,019

16,384

Net loss

(565)

(1,184)

Net loss attributable to ConocoPhillips

(565)

(1,230)

$ per share

Earnings per share:

Three Months Ended

September 30, 2020

Nine Months Ended

September 30, 2020

Basic net loss

(0.41)

(0.90)

Diluted net loss

(0.41)

(0.90)

The unaudited supplemental pro forma

financial information is presented

for illustration purposes

only and is not

necessarily indicative of the operating

results that would have occurred

had the transaction been completed on

January 1, 2020, nor is it necessarily indicative of future

operating results of the combined entity.

The unaudited

pro forma financial information

for the three-

and nine-month periods ending September 30, 2020 is

a result of

combining the consolidated income statement

of ConocoPhillips with the results of Concho.

The pro forma results

do not include transaction-related

costs, nor any cost savings

anticipated as a result of the transaction.

The pro

forma results include adjustments

to reverse impairment expense

of $

10.5

billion and $

1.9

billion related to oil and

gas properties and goodwill, respectively,

recorded by Concho in the nine-month

period ending September 30,

2020.

Other adjustments made relate

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

method,

resulting from the purchase price allocated

to properties, plants and equipment.

We believe the estimates

and

assumptions are reasonable, and the relative

effects of the transaction

are properly reflected.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Assets Sold

In 2020, we completed the sale of our Australia

-West asset and operations.

The sales agreement entitled us to a

200

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 have commenced an arbitration

proceeding against the

purchaser 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.

See Note 10.

In the third quarter of 2021, we sold our interests

in certain noncore assets in our Lower 48 segment

for

approximately $

150

million after customary adjustments,

recognizing a before-tax gain

on sale of approximately

million.

Production from these noncore Lower

48 properties averaged

approximately

MBOED in the nine-

months ended September 30, 2021.

We also completed the sale of our

noncore exploration interests

in Argentina,

recognizing a before-tax

loss on disposition of $

179

million. Results of operations

for Argentina were reported

our Other International segment.

For the three- and nine-months ended September

30, 2021, we recorded contingent

payments of $

121

million and

222

million, respectively,

relating to previous dispositions.

The contingent payments are

recorded as gain on

disposition on our consolidated income statement

and are reflected within our Canada

and Lower 48 segments.

NaN

contingent payments were

recorded in 2020.

Note 4—Investments,

Loans and Long-Term

Receivables

Australia Pacific LNG Pty Ltd

(APLNG)

APLNG executed project financing

agreements for an $

8.5

billion project finance facility in 2012.

All amounts were

drawn from the facility.

The project financing facility has been restructured

over time and at September 30, 2021,

this facility was composed of a financing agreement

with the Export-Import Bank of the United States,

commercial bank facility and

United States Private

Placement note facilities.

APLNG made its first principal

and interest repayme

nt in March 2017 and is scheduled to make

bi-annual payments until September

2030.

September 30, 2021, a balance of $

5.7

billion was outstanding on these

facilities.

See Note 9.

During the fourth quarter of 2020, the estimated

fair value of our investment

in APLNG declined to an amount

below carrying value, primarily due to the weakening

of the U.S. dollar relative to the Australian

dollar.

Based on a

review of the facts and circumstances

surrounding this decline in fair value, we concluded

the impairment was not

other than temporary under the guidance of FASB

ASC Topic

323, “Investments – Equity

Method and Joint

Ventures.”

Due primarily to improved outlooks for

commodity prices and the strengthening

of the U.S. dollar

relative to the Australian

dollar during the first nine months of 2021, the estimated

fair value of our investment

increased and is above carrying value at

September 30, 2021.

On October 25, 2021, Origin Energy Limited agreed

to the sale of

percent of their interest

in APLNG for

approximately $

1.6

billion which is expected to close in the fourth

quarter of 2021.

The transaction is subject to

preemption rights in favor

of ConocoPhillips and Sinopec among other considerations.

We will continue to

monitor and evaluate the relationship

between the carrying value and fair value

of APLNG, including any impact

from this announced transaction.

At September 30, 2021, the carrying value

of our equity method investment

in APLNG was $

6.4

billion.

The

balance is included in the “Investments and

long-term receivables” line on our consolidated

balance sheet.

Loans

As part of our normal ongoing business operations,

and consistent with industry practice, we enter

into numerous

agreements with other parties to pursue

business opportunities.

Included in such activity are loans made to

certain affiliated and non-affiliated

companies.

At September 30, 2021, significant loans

to affiliated companies

included $

114

million in project financing to Qatar Liquefied

Gas Company Limited (3), which is recorded

within

the “Accounts

and notes receivable—related

parties” line on our consolidated balance sheet

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 5—Investment in Cenovus

Energy

Our investment in Cenovus Energy

(CVE) shares is carried on our consolidated

balance sheet at fair value of $

1.4

billion based on the closing price of $

10.06

per share on the NYSE on the last trading

day of the quarter.

September 30, 2021 and December 31, 2020, we held

141

million and

208

million shares of CVE common stock,

respectively.

At September 30, 2021, our investment

approximated

percent of the issued and outstanding

CVE

common stock.

During the third quarter,

we sold

million shares of our CVE common stock, recognizing

proceeds of $

404

million.

Since we began disposing of our CVE shares

in May 2021, we have sold

million shares for total proceeds

of $

584

million, of which $

569

million was received by the end of the third

quarter.

Subject to market conditions, we

intend to continue to decrease

our investment over time.

All gains and losses are recognized

within “Other income (loss)” on our consolidated

income statement.

Proceeds

related to the sale of our CVE shares are

presented within “Cash Flows from Investing

Activities” on our

consolidated statement

of cash flows.

See Note 12

for information related

to fair value measurement

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Total

Net gain (loss) on equity securities

(162)

743

(1,302)

Less: Net gain (loss) on equity securities sold during

the period

(50)

177

Unrealized gain (loss) on equity securities

still held at

the reporting date

(162)

566

(1,302)

Note 6—Impairments

During the three-

and nine-month periods ended September 30, 2021 and

2020, we recognized before

-tax

impairment charges within the following

segments:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Alaska

Lower 48

(89)

(93)

514

Europe, Middle East and North Africa

(89)

(90)

521

In the three-month period ended September 30, 2021,

we recorded a credit to impairment

of $

million in our

Lower 48 segment due to a decreased ARO

estimate for a previously

sold asset, in which we retained the ARO

liability.

In the first quarter of 2020, we recorded

impairments of $

511

million related to certain noncore

natural gas assets

in the Lower 48 segment which were written

down to fair value.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 7—Debt

Our debt balance at September 30, 2021, was

19.7

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.

In the first quarter of 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 had

the same interest rates

and maturity dates as the Concho senior notes.

The portion not exchanged, approximately

million, remained 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.

We have a revolving

credit facility totaling $

6.0

billion with an expiration date

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 facility agreement calls for

commitment fees on available,

but unused, amounts.

The facility agreement also contains

early termination rights if our current directors

or their approved successors

cease to be a majority of the Board of Directors.

The revolving credit facility supports

our ability to issue up to $

6.0

billion of commercial paper.

Commercial paper

is generally limited to

maturities of 90 days

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

balance

sheet. With no commercial paper outstanding

and

direct borrowings or letters

of credit, we had access to $

6.0

billion in available borrowing capacity

under our revolving credit facility at

September 30, 2021.

At December 31,

2020, we had $

300

million of commercial paper outstanding

and

direct borrowings or letters of credit

issued.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Following our September 20, 2021, announcement

regarding the Shell Permian

Acquisition,

the three rating

agencies reviewed their pre-announcement

ratings on our debt resulting in the

following:

●

Fitch affirmed its rating of our long-term debt as “A” with a “stable” outlook.

●

S&P affirmed its rating of our long-term debt of “A-” with a “stable” outlook.

●

Moody’s affirmed its rating of our senior long-term debt of “A3” and upgraded the outlook to “positive”

from “stable.”

We do not have any

ratings triggers on any of our

corporate debt that would

cause an automatic default, and

thereby impact our access to liquidity,

upon downgrade of our credit ratings.

If our credit ratings are downgraded

from their current levels, it could

increase the cost of corporate

debt available to us and restrict

our access to the

commercial paper markets.

If our credit rating were to deteriorate

to a level prohibiting us from accessing

the

commercial paper market, we

would still be able to access funds under our revolving

credit facility.

At September 30, 2021, we had $

283

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.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 8—Changes in Equity

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Income (Loss)

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended September 30, 2021

Balances at June 30, 2021

60,337

(48,278)

(4,920)

37,116

44,276

Net income

2,379

Other comprehensive income

(203)

Dividends paid ($

0.43

per common share)

(579)

Dividends payable ($

0.46

per common share)

(609)

Repurchase of company common stock

(1,243)

Distributed under benefit plans

Balances at September 30, 2021

60,431

(49,521)

(5,123)

38,307

44,115

For the nine months ended September 30, 2021

Balances at December 31, 2020

47,133

(47,297)

(5,218)

35,213

29,849

Net income

5,452

Other comprehensive income

Dividends paid ($

1.29

per common share)

(1,750)

Dividends payable ($

0.46

per common share)

(609)

Acquisition of Concho

13,122

13,125

Repurchase of company common stock

(2,224)

Distributed under benefit plans

176

Other

Balances at September 30, 2021

60,431

(49,521)

(5,123)

38,307

44,115

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Income (Loss)

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended September 30, 2020

Balances at June 30, 2020

47,079

(47,130)

(5,825)

37,351

31,493

Net income

(450)

Other comprehensive income

159

Dividends paid ($

0.42

per common share)

(454)

Distributed under benefit plans

Other

Balances at September 30, 2020

47,113

(47,130)

(5,666)

36,448

30,783

For the nine months ended September 30, 2020

Balances at December 31, 2019

46,983

(46,405)

(5,357)

39,742

35,050

Net income

(1,929)

(1,883)

Other comprehensive loss

(309)

Dividends paid ($

1.26

per common share)

(1,367)

Repurchase of company common stock

(726)

Distributions to noncontrolling interests and other

(32)

Dispositions

(84)

Distributed under benefit plans

130

Other

Balances at September 30, 2020

47,113

(47,130)

(5,666)

36,448

30,783

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 9—Guarantees

At September 30, 2021, we were

liable for certain contingent

obligations under various contractual

arrangements

as described below.

We recognize a liability,

at inception, for the fair value

of our obligation as a guarantor

for

newly issued or modified guarantees.

Unless the carrying amount of the liability is noted below,

we have not

recognized a liability because the

fair value of the obligation

is immaterial.

In addition, unless otherwise stated, we

are not currently performing with any

significance under the guarantee and expect

future performance to be

either immaterial or have only a remote

chance of occurrence.

APLNG Guarantees

At September 30, 2021, we had outstanding

multiple guarantees in connection with our

37.5

percent ownership

interest in APLNG.

The following is a description of the guarantees

with values calculated utilizing September

2021

exchange rates:

●

During the third quarter of 2016, we issued a guarantee

to facilitate the withdrawal

of our pro-rata portion

of the funds in a project finance reserve account.

We estimate the remaining

term of this guarantee

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 September 30,

2021, the carrying value of this guarantee

was $

million.

●

In conjunction with our original purchase of an ownership

interest in APLNG from Origin Energy

Limited in

October 2008, we agreed to reimburse

Origin Energy Limited for our share

of the existing contingent liability

arising under guarantees of an existing

obligation of APLNG to deliver natural

gas under several sales

agreements with remaining terms of

1 to 21 years

Our maximum potential liability for future

payments, or

cost of volume delivery,

under these guarantees is estimated

to be $

670

million ($

1.2

billion in the event of

intentional or reckless breach) and

would become payable if APLNG fails

to meet its obligations under these

agreements and the obligations

cannot otherwise be mitigated.

Future payments are considered

unlikely,

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

connection with the project’s continued

development.

The guarantees have

remaining terms of

15 to 24

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.

September 30, 2021, the carrying value of these guarantees

was $

million.

Other Guarantees

We have other guarantees

with maximum future potential payment

amounts totaling approximately

720

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 September

30, 2021, the carrying value of these guarantees

was $

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,

lease commitments and environmental

liabilities.

Those related to environmental

issues have terms that are

generally indefinite and the maximum

amounts of future payments are

generally unlimited.

The carrying amount

recorded for these indemnification

obligations at September 30, 2021, was $

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

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

an appropriate time period as the fair

value of our indemnification exposure

declines.

Although it is reasonably

possible future payments may exceed

amounts recorded, due to the nature

of the indemnifications, it is not

possible to make a reasonable estimate

of the maximum potential amount

of future payments.

See Note 10

for

additional information about environmental

liabilities

Note 10—Contingencies and Commitments

A number of lawsuits involving a variety

of claims arising in the ordinary course of business

have been filed against

ConocoPhillips.

We also may be required

to remove or mitigate

the effects on the environment

of the placement,

storage, disposal or release of

certain chemical, mineral and petroleum

substances at various

active and inactive

sites.

We regularly assess the need for accounting

recognition or disclosure of these contingencies.

In the case of

all known contingencies (other than those related

to income taxes), we accrue

a liability when the loss is probable

and the amount is reasonably estimable.

If a range of amounts can be reasonably

estimated and no amount within

the range is a better estimate

than any other amount, then the low end of the range

is accrued.

We do not reduce

these liabilities for potential insurance

or third-party recoveries.

We accrue receivables for

insurance or other

third-party recoveries when applicable.

With respect to income tax-related

contingencies, we use a cumulative

probability-weighted loss accrual

in cases where sustaining a tax

position is less than certain.

Based on currently available information,

we believe it is remote that future

costs related to known

contingent

liability exposures will exceed

current accruals by an amount that

would have a material adverse

impact on our

consolidated financial statements.

As we learn new facts concerning contingencies,

we reassess our position both

with respect to accrued liabilities and other potential

exposures.

Estimates particularly sensitive to future

changes

include contingent liabilities recorded

for environmental

remediation, tax and legal matters.

Estimated future

environmental remediation

costs are subject to change due to

such factors as the uncertain

magnitude of cleanup

costs, the unknown time and extent of such

remedial actions that may be required,

and the determination of our

liability in proportion to that of other responsible

parties.

Estimated future costs

related to tax and legal

matters

are subject to change as events

evolve and as additional information

becomes available during the administrative

and litigation processes.

Environmental

We are subject to international,

federal, state and

local environmental laws

and regulations and record

accruals for

environmental liabilities based on

management’s best estimates.

These estimates are based on currently

available

facts, existing technology,

and presently enacted laws and regulations,

taking into account stakeholder

and

business considerations.

When measuring environmental liabilities,

we also consider our prior experience in

remediation of contaminated

sites, other companies’ cleanup experience, and data

released by the U.S. EPA

other organizations.

We consider unasserted claims in our determination

of environmental liabilities,

and we

accrue them in the period they are both probable and

reasonably estimable.

Although liability of those potentially responsible

for environmental remediation

costs is generally joint and

several for federal

sites and frequently so for other

sites, we are usually only one of many companies

cited at a

particular site.

Due to the joint and several liabilities, we could

be responsible for all cleanup costs related

to any

site at which we have been designated

as a potentially responsible party.

We have been successful to

date in

sharing cleanup costs with other financially sound

companies.

Many of the sites at which we are potentially

responsible are still under investigation

by the EPA or

the agency concerned.

Prior to actual cleanup, those

potentially responsible normally assess the

site conditions, apportion responsibility and determine

the appropriate

remediation.

In some instances, we may have

no liability or may attain a settlement

of liability.

Where it appears

that other potentially responsible parties may

be financially unable to bear their proportional share,

we consider

this inability in estimating our potential liability,

and we adjust our accruals accordingly.

As a result of various

acquisitions in the past, we assumed certain environmental

obligations.

Some of these environmental obligations

are mitigated by indemnifications

made by others for our benefit, and some of the indemnifications

are subject to

dollar limits and time limits.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

We are currently participating

in environmental assessments

and cleanups at numerous federal

Superfund and

comparable state and

international sites.

After an assessment of environmental

exposures for cleanup and other

costs, we make accruals on an

undiscounted basis (except

those acquired in a purchase business combination,

which we record on a discounted

basis) for planned investigation

and remediation activities for sites where

it is

probable future costs will be incurred

and these costs can be reasonably estimated.

We have not reduced

these

accruals for possible insurance recoveries

At September 30, 2021, our balance sheet included

a total environmental

accrual of $

191

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

In the future, we may be involved

in additional

environmental assessments,

cleanups and proceedings.

Litigation and Other Contingencies

We are subject to various

lawsuits and claims including but not limited to matters

involving oil and gas royalty

and

severance tax payments,

gas measurement and valuation

methods, contract disputes,

environmental damages,

climate change, personal injury,

and property damage.

Our primary exposures for such matters

relate to alleged

royalty and tax underpayments

on certain federal, state

and privately owned properties, claims

of alleged

environmental contamination

from historic operations,

and other contract disputes.

We will continue to defend

ourselves vigorously in these matters.

Our legal organization

applies its knowledge, experience and professional

judgment to the specific characteristics

of our cases, employing a litigation management

process to manage and monitor the legal

proceedings against us.

Our process facilitates the

early evaluation and quantification

of potential exposures in individual cases.

This

process also enables us to track those cases

that have been scheduled for trial and/or

mediation.

Based on

professional judgment and experience

in using these litigation management

tools and available information

about

current developments in all our cases,

our legal organization regularly

assesses the adequacy of current accruals

and determines if adjustment of existing

accruals, or establishment of new accruals, is

required.

We have contingent

liabilities resulting from throughput agreements

with pipeline and processing companies not

associated with financing arrangements.

Under these agreements, we may be required

to provide any such

company with additional funds through

advances and penalties for fees related

to throughput capacity not utilized.

In addition, at September 30, 2021, we had performance

obligations secured by letters

of credit of

281

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

the Venezuelan government’s

Nationalization Decree.

As a result, Venezuela’s

national oil company,

Petróleos de

Venezuela, S.A. (PDVSA),

or its affiliates, directly assumed control

over ConocoPhillips’ interests

in the Petrozuata

and Hamaca heavy oil ventures and

the offshore Corocoro development

project.

In response to this expropriation,

ConocoPhillips initiated international

arbitration on November 2, 2007, with the ICSID.

On September 3, 2013, an

ICSID arbitration tribunal held that Venezuela

unlawfully expropriated ConocoPhillips’

significant oil investments in

June 2007.

On January 17, 2017, the Tribunal reconfirmed

the decision that the expropriation

was unlawful.

March 2019, the Tribunal unan

imously ordered the government of Venezuela

to pay ConocoPhillips approximately

8.7

billion in compensation for the government’s

unlawful expropriation of the company’s

investments in

Venezuela in 2007.

On August 29, 2019, the ICSID Tribunal

issued a decision rectifying the award and

reducing it

by approximately $

227

million.

The award now stands at

8.5

billion plus interest.

The government of Venezuela

sought annulment of the award,

which automatically stayed

enforcement of the award.

On September 29, 2021,

the ICSID annulment committee lifted the

stay of enforcement

of the award.

The annulment proceedings have

been suspended as a result of Venezuela’s

non-payment of advances

to cover the costs of these proceedings.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

In 2014, ConocoPhillips filed a separate

and independent arbitration under the rules

of the ICC against PDVSA

under the contracts that had established

the Petrozuata

and Hamaca projects.

The ICC Tribunal issued

an award in

April 2018, finding that PDVSA owed ConocoPhillips

approximately $

billion under their agreements in connection

with the expropriation of the projects

and other pre-expropriation fiscal

measures.

In August 2018, ConocoPhillips

entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the

payment period, including initial payments totaling approximately $500 million within a period of 90 days from the

time of signing of the settlement agreement. The balance of the settlement is to be paid quarterly over a period of

four and a half years.

Per the settlement, PDVSA recognized

the ICC award as a judgment in various

jurisdictions,

and ConocoPhillips agreed to suspend

its legal enforcement actions.

ConocoPhillips sent notices of default to

PDVSA

on October 14 and November 12, 2019, and to

date PDVSA has failed to cure

its breach.

As a result,

ConocoPhillips has resumed legal enforcement

actions.

To date,

ConocoPhillips has received approximately

766

million in connection with the ICC award.

ConocoPhillips has ensured that

the settlement and any actions taken

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

federal lands and has issued multiple orders

to pay additional royalties

to the federal government.

ConocoPhillips

and the ONRR entered into a settlement

agreement on March 23, 2021, to resolve

the dispute.

All orders and

associated appeals have been withdrawn

with prejudice.

Beginning in 2017, cities, counties, governments

and other entities in several states

in the U.S. have filed lawsuits

against oil and gas companies,

including ConocoPhillips, seeking compensatory

damages and equitable relief to

abate alleged climate change impacts.

Additional lawsuits with similar allegations are

expected to be filed.

The

amounts claimed by plaintiffs are

unspecified and the legal and factual issues

involved in these cases are

unprecedented.

ConocoPhillips believes these lawsuits

are factually and legally meritless and

are an inappropriate

vehicle to address the challenges associated

with climate change and will vigorously

defend against such lawsuits.

Several Louisiana parishes and the State

of Louisiana have filed

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

of the lawsuits and will vigorously defend

against

them.

Because Plaintiffs’ SLCRMA theories are

unprecedented, there is uncertainty

about these claims (both as to

scope and damages) and we continue to

evaluate our exposure in these

lawsuits.

In October 2020, the Bureau of Safety

and Environmental Enforcement

(BSEE) ordered the prior owners of Outer

Continental Shelf (OCS) Lease P-0166,

including ConocoPhillips, to decommission

the lease facilities, including two

offshore platforms located

near Carpinteria, California.

ConocoPhillips is challenging this order.

This order was

sent after the current owner of OCS Lease P-0166

relinquished the lease and abandoned the lease platforms

and

facilities.

BSEE’s order to

ConocoPhillips is premised on its connection to

Phillips Petroleum Company,

a legacy

company of ConocoPhillips, which held a historical

percent interest in this

lease and operated these facilities,

but sold its interest approximately

30 years

ago.

ConocoPhillips continues to evaluate

its exposure in this matter.

On May 10, 2021, ConocoPhillips filed arbitration

under the rules of the Singapore International

Arbitration Centre

(SIAC) against Santos KOTN

Pty Ltd. and Santos Limited for

their failure to timely pay the $

200

million bonus due

upon FID of the Barossa development project

under the sale and purchase agreement.

Santos KOTN

Pty Ltd. and

Santos Limited have filed a counterclaim,

and the arbitration is underway.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 11—Derivative and Financial Instruments

We use futures, forwards,

swaps and options in various markets

to meet our customer needs, capture

market

opportunities and manage foreign exchange

currency risk.

Commodity Derivative Instruments

Our commodity business primarily consists of natural

gas, crude oil, bitumen, LNG and NGLs.

Commodity derivative instruments

are held at fair value on our consolidated

balance sheet.

Where these balances

have the right of setoff,

they are presented on a net basis.

Related cash flows are recorded

as operating

activities

on our consolidated statement

of cash flows.

On our consolidated income statement,

gains and losses are

recognized either on a gross

basis if directly related to our physical

business or a net basis if held for trading.

Gains

and losses related to contracts

that meet and are designated with the NPNS

exception are recognized

upon

settlement.

We generally apply this

exception to eligible crude contracts

and certain gas contracts.

We do not

apply hedge accounting for our commodity

derivatives.

The following table presents the gross

fair values of our commodity derivatives,

excluding collateral,

and the line

items where they appear on our consolidated

balance sheet:

Millions of Dollars

September 30

December 31

2021

2020

Assets

Prepaid expenses and other current

assets

1,601

229

Other assets

109

Liabilities

Other accruals

1,681

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

Nine Months Ended

September 30

2021

2020

2021

2020

Sales and other operating revenues

(483)

(862)

Other income (loss)

(2)

Purchased commodities

405

(27)

550

(29)

On January 15, 2021, we assumed financial derivative instruments

consisting of oil and natural gas

swaps in

connection with the acquisition of Concho.

At the acquisition date, the financial derivative

instruments acquired

were recognized at fair

value as a net liability of $

456

million with settlement dates under the contracts

through

December 31, 2022.

During the first quarter of 2021, we recognized

a 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 all

remaining Concho derivative contracts

with settlement dates subsequent

to March 31, 2021, for a total 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.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

By the end of March 2021, all oil and natural

gas derivative financial instruments

acquired from Concho were

contractually settled.

In connection with the settlement, we issued

a cash payment of $

692

million in the first

quarter of 2021 and $

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 statement

of cash

flows.

The table below summarizes our material

net exposures resulting from

outstanding commodity derivative

contracts:

Open Position

Long/(Short)

September 30

December 31

2021

2020

Commodity

Natural gas and power (billions

of cubic feet equivalent)

Fixed price

(20)

Basis

(19)

(10)

Financial Instruments

We invest in financial

instruments with maturities based on our cash

forecasts for the various

accounts and

currency pools we manage.

The types of financial instruments in which we currently

invest include:

●

Time deposits: Interest bearing deposits

placed with financial institutions for a predetermined

amount of

time.

●

Demand deposits: Interest bearing deposits

placed with financial institutions.

Deposited funds can be

withdrawn without notice.

●

Commercial paper: Unsecured promissory

notes issued by a corporation, commercial

bank or government

agency purchased at a discount to

mature at par.

●

U.S. government or government

agency obligations: Securities issued by the U.S.

government or U.S.

government agencies.

●

Foreign government obligations:

Securities issued by foreign governments.

●

Corporate bonds: Unsecured debt

securities issued by corporations.

●

Asset-backed securities: Collateralized

debt securities.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

The following investments are

carried on our consolidated balance sheet at cost, plus accrued

interest and the table

reflects remaining maturities at September 30, 2021 and

December 31, 2020:

Millions of Dollars

Carrying Amount

Cash and Cash Equivalents

Short-Term

Investments

Investments and Long-Term

Receivables

September 30

December 31

September 30

December 31

September 30

December 31

2021

2020

2021

2020

2021

2020

Cash

634

597

Demand Deposits

1,847

1,133

Time Deposits

1 to 90 days

7,226

1,225

469

2,859

91 to 180 days

448

Within one year

One year through five years

U.S. Government

Obligations

1 to 90 days

9,723

2,978

482

3,320

The following investments in debt securities

classified as available for sale are carried at

fair value on our consolidated

balance sheet at September 30, 2021 and December 31, 2020:

Millions of Dollars

Carrying Amount

Cash and Cash Equivalents

Short-Term

Investments

Investments and Long-Term

Receivables

September 30

December 31

September 30

December 31

September 30

December 31

2021

2020

2021

2020

2021

2020

Major Security Type

Corporate Bonds

113

130

184

143

Commercial Paper

110

155

U.S. Government

Obligations

U.S. Government

Agency Obligations

Foreign Government

Obligations

Asset-backed

Securities

110

196

289

260

216

Cash and Cash Equivalents and Short-Term

Investments have remaining maturities

within one year.

Investments and Long-Term

Receivables have remaining maturities greater

than one year through eight years.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

The following table summarizes the

amortized cost basis and fair value

of investments in debt securities classified

as available for sale:

Millions of Dollars

Amortized Cost Basis

Fair Value

September 30

December 31

September 30

December 31

2021

2020

2021

2020

Major Security Type

Corporate bonds

296

271

297

273

Commercial paper

179

168

179

168

U.S. government obligations

U.S. government agency obligations

Foreign government obligations

Asset-backed securities

565

516

566

518

At September 30, 2021 and December 31, 2020, total

unrealized losses for debt

securities classified as available for

sale with net losses were negligible.

Additionally, at

September 30, 2021 and December 31, 2020, investment

these debt securities in an unrealized loss position

for which an allowance for

credit losses has not been recorded

were negligible.

For the three-

and nine-month periods ended September 30, 2021, proceeds

from sales and redemptions of

investments in debt securities classified

as available for sale were $

165

million and $

485

million, respectively.

For

the three-

and nine-month periods ended September 30, 2020,

proceeds from sales and redemptions of

investments in debt securities classified

as available for sale were $

109

million and $

298

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, U.S. government

and government agency obligations,

time deposits with major international banks

and financial institutions, high-quality corporate

bonds, foreign government obligations

and asset-backed

securities.

Our long-term investments in debt

securities are placed in high-quality corporate

bonds, asset-backed

securities, U.S. government and government

agency obligations, foreign

government obligations, and

time

deposits with major international banks

and financial institutions.

The credit risk from our OTC derivative

contracts, such as forwards,

swaps and options, derives from the

counterparty to the transaction.

Individual counterparty exposure

is managed within predetermined credit limits

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

thereby reducing the risk of significant

nonperformance.

We also use futures, swaps

and option contracts that have

a negligible credit risk because these

trades are cleared primarily with an

exchange clearinghouse and subject to

mandatory margin requirements until

settled; however,

we are exposed to the credit risk

of those exchange brokers

for receivables arising from

daily

margin cash calls, as well as for cash

deposited to meet initial margin requirements.

Our trade receivables result primarily

from our oil and gas operations

and reflect a broad national and

international customer base, which limits

our exposure to concentrations

of credit risk.

The majority of these

receivables have payment

terms of

30 days

or less, and we continually monitor this exposure

and the

creditworthiness of the counterparties.

We may require collateral

to limit the exposure to loss including,

letters of

credit, prepayments and surety

bonds, as well as master netting arrangements

to mitigate credit risk with

counterparties that both buy from and

sell to us, as these agreements permit the amounts

owed by us or owed to

others to be offset against

amounts due to us.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

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

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

threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for

lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below

investment grade. Cash is the primary collateral in all contracts; however, many also permit us to post letters of

credit as collateral, such as transactions administered through the New York Mercantile Exchange.

The aggregate fair value

of all derivative instruments with such credit

risk-related contingent

features that were in

a liability position at September 30, 2021 and December 31,

2020, was $

455

million and $

million, respectively.

For these instruments,

collateral was posted at

September 30, 2021 or December 31, 2020.

If our credit rating

had been downgraded below investment

grade at September 30, 2021, we

would have been required to post

396

million of additional collateral, either with cash

or letters of credit.

Note 12—Fair Value

Measurement

We carry a portion of our assets and liabilities

at fair value that are measured

at the reporting date using an exit

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

asset or paid to transfer

a liability) and disclosed according to

the quality of valuation inputs under the following hierarchy:

●

Level 1: Quoted prices (unadjusted) in an

active market for identical

assets or liabilities.

●

Level 2: Inputs other than quoted prices that are

directly or indirectly observable.

●

Level 3: Unobservable inputs that are

significant to the fair value of assets

or liabilities.

The classification of an asset or liability is based on the lowest

level of input significant to its fair value.

Those that

are initially classified as Level 3 are subsequently

reported as Level 2 when the fair value derived

from unobservable

inputs is inconsequential to the overall

fair value, or if corroborated

market data becomes available.

Assets and

liabilities initially reported as Level 2 are subsequently

reported as Level 3 if corroborated

market data is no longer

available.

There were no material transfers

into or out of Level 3 during the three-

and nine-month periods ended

September 30, 2021, nor during the year ended December

31, 2020.

Recurring Fair Value

Measurement

Financial assets and liabilities reported at fair

value on a recurring basis primarily include our investment

in CVE

common shares, our investments

in debt securities classified as available for

sale, and commodity derivatives.

●

Level 1 derivative assets and

liabilities primarily represent exchange-traded

futures and options that are

valued using unadjusted prices available

from the underlying exchange.

Level 1 also includes our

investment in common shares

of CVE, which is valued using quotes for shares

on the NYSE, and our

investments in U.S. government

obligations classified as available for

sale debt securities, which are

valued using exchange prices.

●

Level 2 derivative assets and

liabilities primarily represent OTC

swaps, options and forward

purchase and

sale contracts that are

valued using adjusted exchange

prices, prices provided by brokers

or pricing

service companies that are all corroborated

by market data.

Level 2 also includes our investments

in debt

securities classified as available for sale including

investments in corporate

bonds, commercial paper,

asset-backed securities, U.S. government

agency obligations and foreign

government obligations

that are

valued using pricing provided by brokers

or pricing service companies that are corroborated

with market

data.

●

Level 3 derivative assets and

liabilities consist of OTC swaps,

options and forward purchase and

sale

contracts where a significant

portion of fair value is calculated

from underlying market data

that is not

readily available.

The derived value uses industry standard

methodologies that may consider the

historical relationships

among various commodities, modeled market

prices, time value,

volatility factors

and other relevant economic measures.

The use of these inputs results in management’s

best estimate of

fair value.

Level 3 activity was not material for

all periods presented.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

The following table summarizes the

fair value hierarchy

for gross financial assets and liabilities (i.e., unadjusted

where the right of setoff exists

for commodity derivatives accounted

for at fair value on a recurring

basis):

Millions of Dollars

September 30, 2021

December 31, 2020

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Investment in CVE shares

1,416

1,256

Investments in debt securities

560

566

501

518

Commodity derivatives

882

788

1,710

142

101

255

Total

assets

2,304

1,348

3,692

1,415

602

2,029

Liabilities

Commodity derivatives

893

723

159

1,775

120

220

Total

liabilities

893

723

159

1,775

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

September 30, 2021

Assets

1,710

113

1,597

883

714

Liabilities

1,775

129

1,646

883

763

729

December 31, 2020

Assets

255

253

157

Liabilities

220

219

157

At September 30, 2021 and December 31, 2020, we

did not present any amounts

gross on our consolidated

balance sheet where we had the right of setoff.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Reported Fair Values

of Financial Instruments

We used the following methods

and assumptions to estimate the fair value

of financial instruments:

●

Cash and cash equivalents and short-term investments:

The carrying amount reported on the balance

sheet approximates fair

value.

For those investments classified as

available for sale debt securities, the

carrying amount reported on the balance sheet

is fair value.

●

Accounts and notes receivable (including

long-term and related parties): The carrying

amount reported on

the balance sheet approximates

fair value.

The valuation technique and methods used to

estimate the

fair value of the current portion of fixed

-rate related party

loans is consistent with Loans and advances—

related parties.

●

Investment in CVE:

See Note 5

for a discussion of the carrying value and fair

value of our investment in

CVE common shares.

●

Investments in debt securities classified

as available for sale: The fair value

of investments in debt

securities categorized as Level

1 in the fair value hierarchy

is measured using exchange prices.

The fair

value of investments in debt

securities categorized as Level 2 in

the fair value hierarchy

is measured using

pricing provided by brokers

or pricing service companies that are corroborated

with market data.

See

Note 11.

●

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

Level 2 in the fair value hierarchy.

See Note 4.

●

Accounts payable (including

related parties) and floating-rate

debt: The carrying amount of accounts

payable and floating-rate

debt reported on the balance sheet approximates

fair value.

●

Fixed-rate debt: The estimated

fair value of fixed-rate

debt is measured using prices available from

pricing service that is corroborated

by market data; therefore,

these liabilities are categorized

as Level 2 in

the fair value hierarchy.

●

Commercial paper: The carrying amount of our commercial

paper instruments approximates

fair value

and is reported on the balance sheet as short-term

debt.

The following table summarizes the

net fair value of financial instruments

(i.e., adjusted where the right of setoff

exists for commodity derivatives):

Millions of Dollars

Carrying Amount

Fair Value

September 30

December 31

September 30

December 31

2021

2020

2021

2020

Financial assets

Investment in CVE shares

1,416

1,256

1,416

1,256

Commodity derivatives

827

Investments in debt securities

566

518

566

518

Loans and advances—related parties

114

220

114

220

Financial liabilities

Total

debt, excluding finance leases

18,815

14,478

22,797

19,106

Commodity derivatives

858

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 13—Accumulated Other Comprehensive

Loss

Accumulated other comprehensive

loss in the equity section of our consolidated balance sheet included:

Millions of Dollars

Defined Benefit

Plans

Net Unrealized

Gain (Loss) on

Securities

Foreign

Currency

Translation

Accumulated

Other

Comprehensive

Loss

December 31, 2020

(425)

(4,795)

(5,218)

Other comprehensive income (loss)

169

(1)

(73)

September 30, 2021

(256)

(4,868)

(5,123)

The following table summarizes reclassifications

out of accumulated other comprehensive

loss and into net

income (loss):

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

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 September 30, 2021 and September 30, 2020, respectively, and $

million and $

million for the

nine-month periods ended September 30, 2021 and September 30, 2020, respectively

See Note 15.

Note 14—Cash Flow Information

Millions of Dollars

Nine Months Ended

September 30

Cash Payments

2021

2020

Interest

695

591

Income taxes

358

803

Net Sales (Purchases) of Investments

Short-term investments

purchased

(5,487)

(9,662)

Short-term investments

sold

8,478

8,776

Long-term investments purchased

(228)

(271)

Long-term investments sold

2,846

(1,089)

We paid a deposit of $

475

million under the terms of the agreement of the Shell Permian

Acquisition.

This deposit

is included within the “Cash Flows from Investing

Activities - Other” on our consolidated statement of cash

flows.

for additional information on cash

and non-cash changes to our consolidated

balance sheet associated

with our Concho acquisition and information on

the announced Shell transaction.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 15—Employee Benefit Plans

Pension and Postretirement

Plans

Millions of Dollars

Pension Benefits

Other Benefits

2021

2020

2021

2020

U.S.

Int'l.

U.S.

Int'l.

Components of Net Periodic Benefit Cost

Three Months Ended September 30

Service cost

Interest cost

Expected return on plan assets

(22)

(30)

(21)

(37)

Amortization of prior service credit

(1)

(9)

(7)

Recognized net actuarial loss

Settlements

Net periodic benefit cost

(8)

(3)

Nine Months Ended September 30

Service cost

Interest cost

Expected return on plan assets

(66)

(90)

(63)

(108)

Amortization of prior service credit

(1)

(28)

(23)

Recognized net actuarial loss

Settlements

(1)

Curtailments

Special Termination

Benefits

Net periodic benefit cost

159

116

(23)

(15)

The components of net periodic benefit cost,

other than the service cost component, are included

in the “Other

expenses” line item on our consolidated

income statement.

We recognized a proportionate

share of prior actuarial losses from other comprehensive

income as pension

settlement expense of $

million and $

million during the three- and nine-month periods

ended September 30,

2021, respectively.

As part of our company-wide restructuring

program, we concluded that

actions taken during

the first quarter of 2021, would result

in a significant reduction of future service of active employees

in the U.S.

qualified pension plan, a U.S. nonqualified supplemental

retirement plan and the U.S.

other postretirement benefit

plans.

As a result, we recognized an increase

in the benefit obligation as a curtailment

loss of $

million on the

U.S. pension benefit plans.

In conjunction with the recognition of pension settlement

expense, the fair market

values of the pension plan assets were updated

and the pension benefit obligations of the U.S.

qualified pension

plan and the U.S. nonqualified supplemental

retirement plan were remeasured

at September 30, 2021.

At the

measurement date, the net pension

liability decreased by $

106

million compared to December 31, 2020, primarily

a result of an increase in the discount rate,

resulting in a corresponding increase to

other comprehensive income.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

The relevant assumptions are

summarized in the following table:

September 30

December 31

2021

2020

Expected return on plan assets

3.40

5.80

Relevant discount rates

U.S. qualified pension plan

2.80

2.40

U.S. nonqualified pension plan

2.30

1.85

During the first nine months of 2021, we contributed

409

million to our domestic benefit plans and $

104

million

to our international benefit plans.

In 2021, we expect to contribute a

total of approximately $

475

million to our

domestic qualified and nonqualified pension and postretirement

benefit plans and $

115

million to our

international qualified and nonqualified pension and

postretirement benefit plans.

Severance Accrual Activity

Millions of Dollars

Balance at December 31, 2020

Accruals

165

Benefit payments

(102)

Balance at September 30, 2021

Accruals include severance costs

associated with our company-wide restructuring

program.

Of the remaining

balance at September 30, 2021, $

million is classified as short-term.

for information relating to

our

Concho acquisition.

Note 16—Related Party

Transactions

Our related parties primarily include equity method

investments and certain trusts

for the benefit of employees.

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

Significant Transactions

with Equity Affiliates

2021

2020

2021

2020

Operating revenues and other income

Purchases

Operating expenses and selling, general

and administrative

expenses

135

Net interest (income) expense*

(1)

(2)

(5)

*We paid interest to,

or received interest from, various affiliates

See Note 4

for information related

to loans to

equity affiliates.

Notes to Consolidated Financial Statements

Note 18—Segment Disclosures and Related Information

ConocoPhillips

2021 Q3 10-Q

Note 17—Sales and Other Operating Revenues

Revenue from Contracts

with Customers

The following table provides further

disaggregation of our consolidated

sales and other operating revenues:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Revenue from contracts

with customers

8,880

3,078

23,794

9,908

Revenue from contracts

outside the scope of ASC Topic

606

Physical contracts

meeting the definition of a derivative

2,620

1,280

7,348

3,432

Financial derivative contracts

(174)

(434)

(47)

Consolidated sales and other operating

revenues

11,326

4,386

30,708

13,293

Revenues from contracts

outside the scope of ASC Topic

606 relate primarily to physical

gas contracts at market

prices which qualify as derivatives accounted

for under ASC Topic

815, “Derivatives and Hedging,”

and for which

we have not elected NPNS.

There is no significant difference

in contractual terms or the policy for

recognition of

revenue from these contracts

and those within the scope of ASC Topic

606.

The following disaggregation

revenues is provided in conjunction

with

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Revenue from Outside the Scope of ASC Topic

606

by Segment

Lower 48

2,123

1,018

5,934

2,692

Canada

266

152

776

452

Europe, Middle East and North Africa

231

110

638

288

Physical contracts

meeting the definition of a derivative

2,620

1,280

7,348

3,432

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Revenue from Outside the Scope of ASC Topic

606

by Product

Crude oil

215

100

517

218

Natural gas

2,192

1,042

6,423

2,895

Other

213

138

408

319

Physical contracts

meeting the definition of a derivative

2,620

1,280

7,348

3,432

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Practical Expedients

Typically,

our commodity sales contracts are

less than 12 months in duration; however,

in certain specific cases

they may extend longer,

which may be out to the end of field life.

We have long-term commodity sales contracts

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

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

performance obligation within the contract.

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 September 30, 2021, the “Accounts

and notes receivable” line on our consolidated

balance sheet, includes

trade receivables of $

4,262

million compared with $

1,827

million at December 31, 2020, and includes both

contracts with customers

within the scope of ASC Topic

606 and those that are outside the scope of ASC Topic

606.

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

Revenues that are outside the scope

of ASC Topic 606 relate

primarily to physical gas sales contracts

at market

prices for which we do not elect NPNS and are

therefore accounted

for as a derivative under ASC Topic

815.

There

is little distinction in the nature of the customer

or credit quality of trade receivables

associated with gas sold

under contracts for which NPNS

has not been elected compared to trade

receivables where NPNS has been

elected.

Contract Liabilities from Contracts

with Customers

We have entered

into contractual arrangements

where we license proprietary technology

to customers related

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 September 30, 2021

Amounts Recognized in the Consolidated

Balance Sheet at September 30, 2021

Current liabilities

For the nine-month period of 2021, we recognized revenue of $62 million in the “Sales and other operating

revenues” line on our consolidated income statement. NaN revenue was recognized during the three-month period

ended September 30, 2021. We expect to recognize the contract liabilities as of September 30, 2021, as revenue

during 2022.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Note 18—Segment Disclosures and Related

Information

We explore for,

produce, transport and market

crude oil, bitumen, natural gas,

LNG and NGLs on a worldwide

basis.

We manage our operations

through

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.

On January 15, 2021, we completed our acquisition

of Concho, an independent oil and gas exploration

and

production company with operations

across New Mexico and West

Texas.

Results of operations for

Concho are

included in our Lower 48 segment for the current

period.

Certain transaction and restructuring

costs associated

with the Concho acquisition are included in our Corporate

and Other segment.

Notes to Consolidated Financial Statements

ConocoPhillips

2021 Q3 10-Q

Analysis of Results by Operating Segment

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Sales and Other Operating Revenues

Alaska

1,395

864

3,946

2,396

Intersegment eliminations

(30)

(11)

Alaska

1,395

834

3,946

2,385

Lower 48

7,566

2,323

19,968

6,859

Intersegment eliminations

(1)

(9)

(5)

(47)

Lower 48

7,565

2,314

19,963

6,812

Canada

967

348

2,636

1,026

Intersegment eliminations

(406)

(20)

(1,063)

(200)

Canada

561

328

1,573

826

Europe, Middle East and North Africa

1,127

432

3,270

1,320

Asia Pacific

673

477

1,880

1,930

Other International

Corporate and Other

Consolidated sales and other operating

revenues

11,326

4,386

30,708

13,293

Sales and Other Operating Revenues

by Geographic Location

(1)

United States

8,963

3,148

23,978

9,209

Australia

605

Canada

561

328

1,573

826

China

193

161

519

374

Indonesia

231

167

634

503

Libya

313

833

Malaysia

249

148

727

447

Norway

678

358

1,708

1,046

United Kingdom

136

729

224

Other foreign countries

Worldwide consolidated

11,326

4,386

30,708

13,293

Sales and Other Operating Revenues

by Product

Crude oil

6,433

2,321

16,725

6,981

Natural gas

4,099

1,509

11,422

4,354

Natural gas liquids

414

129

976

364

Other

(2)

380

427

1,585

1,594

Consolidated sales and other operating

revenues by product

11,326

4,386

30,708

13,293

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

(2) Includes LNG and bitumen.

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income (Loss) Attributable

to ConocoPhillips

Alaska

405

(16)

935

(76)

Lower 48

1,631

(78)

3,274

(880)

Canada

155

(75)

267

(270)

Europe, Middle East and North Africa

241

601

318

Asia Pacific

257

749

945

Other International

(97)

(8)

(106)

Corporate and Other

(213)

(390)

(268)

(1,980)

Consolidated net income (loss) attributable

to ConocoPhillips

2,379

(450)

5,452

(1,929)

Notes to Consolidated Financial Statements

For additional information relating to the debt exchange, see Note

ConocoPhillips

2021 Q3 10-Q

Millions of Dollars

September 30

December 31

2021

2020

Total Assets

Alaska

14,617

14,623

Lower 48

33,200

11,932

Canada

6,797

6,863

Europe, Middle East and North Africa

8,956

8,756

Asia Pacific

10,657

11,231

Other International

226

Corporate and Other

13,076

8,987

Consolidated total assets

87,304

62,618

Note 19—Income Taxes

Our effective tax rate

for the three-month periods ended

September 30, 2021 and 2020 was

percent and

percent, respectively.

Both periods were primarily impacted by

shifts in our before-tax income between

higher

and lower tax jurisdictions as well as the change in

our U.S. valuation allowance

driven by the fair value

measurement of our CVE common shares.

Our effective tax rate

for the nine-month periods ended September

30, 2021 and 2020 was

percent and

percent,

respectively,

and both periods were impacted by the

same items noted above.

Our 2021 effective tax

rate was 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.

The nine-month period ending September 30, 2020,

also reflects the tax impact of the gain

on disposition

recognized for the Australia-West

divestiture.

During the three and nine-month periods of 2021, our valuation

allowance decreased by $

million and $

156

million, respectively,

compared to increases of $

million and $

264

million for the same periods of 2020.

The

change to our U.S. valuation

allowance for all periods relates

primarily to the fair value measurement of our

CVE

common shares and our expectation

of the tax impact related to incremental

capital gains and losses.

The Company has ongoing income tax audits

in numerous jurisdictions which are occasionally

extended or

completed earlier than anticipated.

Within the next twelve months we may

have audit periods close that could

significantly impact our total unrecognized

tax benefits.

The amount of such change and the associated

impact on

our financial statements is not estimable

at this time.

Our deferred tax liability

increased by approximately

1.1

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.

Management’s Discussion and Analysis

ConocoPhillips

2021 Q3 10-Q

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Management’s Discussion and Analysis is the company’s

analysis of its financial performance and of significant

trends that may affect future performance.

It should be read in conjunction with the financial statements

and

notes.

It contains forward-looking statements

including, without limitation, statements

relating to the company’s

plans, strategies, objectives, expectations

and intentions that are made pursuant to

the “safe harbor” provisions of

the Private Securities Litigation Reform Act of 1995.

The words “anticipate,”

“believe,” “budget,”

“continue,”

“could,”

“effort,”

“estimate,”

“expect,”

“forecast,”

“goal,”

“guidance,”

“intend,”

“may,”

“objective,”

“outlook,”

“plan,” “potential,”

“predict,” “projection,”

“seek,” “should,”

“target,”

“will,” “would,”

and similar expressions

identify forward-looking statements.

The company does not undertake

to update, revise or correct any of the

forward-looking information unless required to do so under

the federal securities laws.

Readers are cautioned that

such forward-looking statements

should be read in conjunction with the company’s

disclosures under the heading:

“CAUTIONARY STATEMENT

FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS

OF THE PRIVATE

SECURITIES

LITIGATION REFORM

ACT OF 1995,”

beginning on page 57.

The terms “earnings” and “loss” as used in Management’s

Discussion and Analysis refer to net income (loss)

attributable to ConocoPhillips.

Business Environment and Executive Overview

ConocoPhillips is the world’s

largest independent E&P company

with operations and activities in 14 countries.

Our

diverse, low cost of supply portfolio

includes resource-rich unconventional

plays in North America; conventional

assets in North America, Europe, and Asia; LNG

developments; oil sands in Canada; and an inventory

of global

conventional and unconventional

exploration prospects.

Headquartered in Houston, Texas,

at September 30,

2021, we employed approximately

9,900 people worldwide and had total assets

of $87 billion.

Completed and Announced Acquisitions

On January 15, 2021, we completed our acquisition

of Concho Resources Inc. (Concho), an independent

oil and gas

exploration and production

company with operations across

New Mexico and West Texas.

The addition of

complementary acreage in the Delaware

and Midland Basins resulted in a significant

Permian presence to augment

our leading unconventional positions

in the Eagle Ford, Bakken and

Montney.

In September 2021, we signed a definitive agreement

to acquire Shell Enterprises LLC

’s assets in

the Delaware

Basin (Shell Permian Acquisition) in an all-cash transaction

for $9.5 billion before customary

adjustments.

Assets

to be acquired include approximately

225,000 net acres and producing properties

located entirely in Texas,

as well

as over 600 miles of operated crude, gas

and water pipelines and infrastructure.

This acquisition further enhances

our already sizeable Permian

position, and we believe that our development,

operational and commercial

expertise will deliver significant incremental

value.

This acquisition is expected to close in the

fourth quarter of

2021, subject to regulatory approval

and other customary closing conditions.

Factors” for further discussion of the risks related to the Shell Permian Acquisition.

See Item 1A “Risk

Overview

While commodity prices in the third quarter of 2021 improve

to pre-pandemic levels,

we expect that they will

continue to be cyclical and volatile.

Our view is that a successful business strategy

in the E&P industry must be

resilient in lower price environments,

while also retaining upside during periods

of higher prices.

As such, we are

unhedged, remain highly disciplined in our investment

decisions and continually monitor market

fundamentals

including OPEC plus updates regarding

supply guidance and inventory

levels.

Demand continues to recover but

has yet to regain pre

-pandemic levels.

The speed and extent of this recovery

will be influenced by continual easing

of COVID-19 restrictions that have

reduced economic activity and depressed

the demand for our products globally.

Management’s Discussion and Analysis

ConocoPhillips

2021 Q3 10-Q

The energy macro-environment

including energy transition, continues

to evolve.

We believe ConocoPhillips can

play a valued role in the energy

transition.

We have adopted a triple mandate

that simultaneously calls for

meeting energy pathway demand,

delivering competitive returns of and on

capital, and achieving our net-zero

ambition on operational (scope 1 and 2) emissions.

Our triple mandate is supported by financial principles

and capital allocation priorities that

should allow us to

deliver superior returns through the price cycles

Our financial principles consist of maintaining

balance sheet

strength, providing peer-leading

distributions, making disciplined investment

s, and delivering ESG excellence,

all of

which are in service to delivering competitive financial

returns.

Our completed and announced acquisitions

this

year further reinforce our value

proposition.

In the third quarter,

total company production

was 1,544 MBOED

resulting in cash provided by operating

activities of $4.8 billion.

In the nine-month period ended September 30,

2021, we generated $11.1 billion in

cash provided by operating activities,

returning $1.8 billion to shareholders

through dividends and $2.2 billion through share

repurchases.

We ended the quarter with cash,

cash equivalents

and short-term investments totaling

$10.5 billion.

In February

2021, we resumed our share repurchase

program at an annualized

level of $1.5 billion, which we

increased in the second quarter to an annualized

level of $2.5 billion for 2021.

Additionally, in

May 2021 we announced a paced monetization

program related to the

208 million shares of

Cenovus Energy (CVE) common shares

owned at that time.

We plan to fully dispose of our CVE shares

by year-end

2022, however,

the sales pace for the remaining shares will

be guided by market conditions,

and we retain

discretion to adjust accordingly.

During the third quarter of 2021, we sold 47 million shares

for $404 million and

inception to date have sold

67 million shares for $584 million.

Proceeds from the disposition of CVE shares

will be

deployed toward incremental

share repurchases.

See Note 5.

In September 2021, we declared an increase

in the company’s quarterly

ordinary dividend from 43 cents per share

to 46 cents per share, representing

a 7 percent increase.

The dividend is payable on December 1, 2021,

stockholders of record

at the close of business on October 28, 2021.

Planned distributions for 2021 amount to

a total of approximately $6 billion

between dividends

and share

repurchases combined.

Additionally in September 2021, we demonstrated

our commitment to preserving our ‘A’

-rated balance sheet by

restating our intent

to reduce the company’s

gross debt by $5 billion over five years

through natural and

accelerated maturities.

In conjunction with our Shell Permian Acquisition announcement

we also communicated an increase

to our

planned disposition target that was

initially set in June at $2 to $3 billion by 2022.

We are now targeting

$4 to $5

billion in disposition proceeds by 2023, with the additional

$2 billion sourced primarily from the Permian

Basin as

part of our ongoing portfolio high-grading and

optimization efforts.

To date,

we have generated

$0.2 billion in

disposition proceeds.

The proceeds from these transactions will be used

in accordance with the company’s

priorities, including returns of capital

to shareholders and reduction of gross

debt.

Management’s Discussion and Analysis

ConocoPhillips

2021 Q3 10-Q

In September 2021, in conjunction with the announcement

of the Shell Permian Acquisition,

we reaffirmed our

commitment to ESG leadership and

excellence by announcing an improvement

to our operational GHG emissions

intensity reduction targets

by 2030.

Our Paris-aligned climate-risk commitment

now includes:

●

Net-zero ambition for

operational (scope 1 and 2) emissions

by 2050 with active advocacy for a price

carbon to address end-use (scope 3) emissions;

●

Targeting

a reduction in gross operated

and net equity operational GHG emissions intensity

by 40 to 50

percent from 2016 levels by 2030, an

improvement from the previously

announced target of 35 to 45

percent on only a gross operated

basis;

●

Zero routine flaring by 2030, with an

ambition to get there by 2025;

●

10 percent reduction target

for methane emissions intensity

by 2025 from a 2019 baseline, in addition to

the 65 percent reductions we have

made since 2015;

●

Adding continuous methane detection devices

to our operations,

with an initial focus on the larger Lower

48 facilities;

●

Dedicated low carbon technology

organization responsible

for identifying and prioritizing global emissions

reduction initiatives and opportunities associated

with the energy transition including carbon capture,

utilization and storage

(CCUS) and hydrogen; and

●

ESG performance factoring into

executive and employee compensation

programs.

Operationally,

we remain focused on safely

executing the business.

Production was 1,544 MBOED in the third

quarter of 2021, an increase of 477 MBOED or 45 percent,

compared with the third quarter of 2020, primarily

due

to the addition of approximately

343 MBOED in the Permian Basin from our Concho

acquisition and the absence of

last year’s economic curtailments

predominantly in North American operated

assets as a result of lower oil prices.

We re-invested

$1.3 billion into the business in the form of capital

expenditures during the third quarter,

with over

half of our investments focused

on flexible, short-cycle unconventional

plays in the Lower 48 segment where our

production is liquids-weighted and

has access to both domestic and export markets

For the full year,

we remain

disciplined with our allocation of capital with a

planned $5.3 billion program excluding

the impacts of the recently

announced Shell Permian Acquisition which is anticipated

to close in the fourth quarter.

Business Environment

Commodity prices are the most significant

factor impacting our profitability and

related reinvestment of operating

cash flows into our business.

Dynamics that could influence world energy markets

and commodity prices are

global economic health, supply or demand disruptions

or fears thereof caused by civil

unrest, global pandemics,

military conflicts, actions taken

by OPEC plus and other major oil producing countries,

environmental laws, tax

regulations, governmental policies,

and weather-related disruptions.

Our strategy is to create

value through price

cycles by delivering on the financial, operational

and ESG priorities that underpin our value proposition

Our earnings and operating cash flows

generally correlate with

price levels for crude oil and natural

gas, which are

subject to factors external

to the company and over which we have

no control.

The following graph depicts the

trend in average benchmark prices

for WTI crude oil, Brent crude oil and

Henry Hub natural gas:

Management’s Discussion and Analysis

ConocoPhillips

2021 Q3 10-Q

Q3'19

Q4'19

Q1'20

Q2'20

Q3'20

Q4'20

Q1'21

Q2'21

Q3'21

WTI/Brent

$/Bbl

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

Quarterly Averages

WTI - $/Bbl

Brent - $/Bbl

HH - $/MMBTU

$/MMBTU

Brent crude oil prices averaged

$73.47 per barrel in the third quarter of 2021, an increase

of 71 percent compared

with $43.00 per barrel in the third quarter of 2020.

WTI at Cushing crude oil prices averaged

$70.56 per barrel in

the third quarter of 2021, an increase of 72 percent

compared with $40.93 per barrel in the third

quarter of 2020.

Oil prices increased alongside the ongoing global economic

recovery following 2020’s

COVID impacts as well as

OPEC plus supply restraint,

continued capital discipline by U.S. E&P’s

and various unplanned supply disruptions in

producing countries.

Henry Hub natural gas prices averaged

$4.02 per MMBTU in the third quarter

of 2021, an increase of 103 percent

compared with $1.98 per MMBTU in the third

quarter of 2020.

Henry Hub prices have increased due to

healthy

domestic demand accompanied by record

levels of feedgas demand for

LNG exports to Europe and Asia.

Our realized bitumen price averaged

$41.19 per barrel in the third quarter of 2021, an

increase of 160 percent

compared with $15.87 per barrel in the third

quarter of 2020.

The increase in the third quarter of 2021 was driven

by higher blend price for Surmont sales, largely

attributed to a strengthening

of WTI price.

We continue to

optimize bitumen price realizations

through the utilization of downstream

transportation solutions

and

implementation of alternate

blend capability which results in lower diluent

costs.

For the third quarter of 2021 our total

average realized

price increased to $56.92 per BOE compared

with $30.94

per BOE in the third quarter of 2020.

Management’s Discussion and Analysis

ConocoPhillips

2021 Q3 10-Q

Key Operating and Financial

Summary

Significant items during the third quarter

of 2021 and recent announcements included the following:

●

Delivered strong operational

performance across the company’s

asset base, including successful planned

maintenance turnarounds, resulting

in third quarter production of 1,507 MBOED,

excluding Libya.

●

Net cash provided by operating

activities was $4.8 billion, exceeding capital

expenditures and investments

of $1.3 billion.

●

Distributed a total of $4.0 billion to

shareholders year to date,

comprised of $2.2 billion in share

repurchases and $1.8 billion in dividends as

part of the company’s plan to return

approximately $6.0

billion to shareholders during 2021.

●

Announced an increase to the quarterly dividend

by 7 percent to 46 cents per share.

●

Ended the quarter with cash and cash equivalents

totaling $9.8 billion and short-term investments

of $0.7

billion, equaling $10.5 billion in ending cash, cash equivalents

and short-term investments.

●

As part of a commitment to ESG excellence,

announced an improvement to

the company’s scope

1 and 2

GHG emissions intensity reduction targets

from a 2016 baseline to 40 to 50 percent

on a net equity and

gross operated basis, from

the previous target of 35 to 45 percent

on only a gross operated basis

●

Announced highly accretive pending acquisition

of Shell Enterprises LLC’s complementary

Delaware Basin

position in the Permian for $9.5 billion in cash,

before customary closing adjustments.

●

Generated approximately

$0.2 billion in disposition proceeds from Lower 48 noncore

asset sales as part of

the company’s target

to generate $4 to $5 billion in proceeds

by 2023.

Production from the disposed

assets average approximately

15 MBOED in the first nine months of 2021.

Outlook

Capital,

Cost and Production

Fourth-quarter 2021 production is

expected to be 1.53 to 1.57 MMBOED.

This guidance excludes Libya

and

impacts from pending acquisitions.

Guidance regarding capital and

cost are unchanged.

This production guidance includes the impact of planned conversion

of the significant majority of previously

acquired Concho two-stream contracted

volumes to a three-stream (crude oil,

natural gas and natural

gas liquids)

reporting basis as Concho volumes are integrated

into the company’s

commercial activities.

The conversion to

three-stream reporting is neutral

to earnings.

Effective in the fourth

quarter,

this conversion is expected

to add

production of approximately

40 MBOED and increase revenue and operating

costs by roughly $70 million.

Depreciation, Depletion and Amortization

Our proved reserve estimates

are greatly impacted by commodity

price fluctuations, and generally decrease

prices decline and increase as prices rise.

Proved reserves estimates

were updated and increased in the current

quarter utilizing historical twelve-month

first-of-month average

prices, which decreased third quarter DD&A

expense by approximately

$240 million before-tax.

As such, the company reduced its 2021 DD&A expense

guidance by $0.3 billion to $7.1 billion.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Results of Operations

Unless otherwise indicated, discussion of results for the three

and nine-month periods ended September 30, 2021,

is based on a comparison with the corresponding periods of 2020.

Consolidated Results

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

to ConocoPhillips by business segment follows:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Alaska

405

(16)

935

(76)

Lower 48

1,631

(78)

3,274

(880)

Canada

155

(75)

267

(270)

Europe, Middle East and North Africa

241

601

318

Asia Pacific

257

749

945

Other International

(97)

(8)

(106)

Corporate and Other

(213)

(390)

(268)

(1,980)

Net income (loss) attributable to

ConocoPhillips

2,379

(450)

5,452

(1,929)

Net income (loss) attributable to

ConocoPhillips in the third quarter of 2021 increased

$2,829 million.

Third

quarter earnings were positively impacted

by:

●

Higher realized commodity prices.

●

Higher sales volumes, primarily due to our Concho

acquisition and absence of production curtailments in

our North American operated

assets.

●

Higher equity in earnings of affiliates, primarily due to

higher LNG sales prices.

●

A gain of $17 million after-tax on our CVE common shares

in the third quarter of 2021, as compared to a

$162 million after-tax loss on those shares

in the third quarter of 2020.

See Note 5.

Third quarter 2021 net income increases

were partly offset by:

●

Higher production and operating expenses

and taxes other than income taxes,

primarily due to higher

sales volumes.

●

Higher DD&A expenses caused by higher production

volumes, partially offset by lower rates

driven from

price-related reserve revisions

due to higher commodity prices in 2021.

Net income (loss) attributable to

ConocoPhillips in the nine-month period ended September

30, 2021, increased

$7,381 million.

●

Inclusive of the third quarter gain associated

with our CVE common shares, in the nine-month period we

recognized a gain of $743 million

after-tax on our CVE common shares,

compared with an after-tax loss of

$1,302 million in the nine-month period of 2020.

In addition to the items detailed above,

earnings in the nine-month period were positively

impacted by:

●

Lower impairments of $611 million, primarily due to a

credit recognized for a decrease

in the ARO

estimate of a previously sold asset,

in which we retained the ARO liability,

as well as the absence of

impairments recognized in the prior period

for non-core gas assets

in our Lower 48 segment.

See Note 6.

●

An after-tax gain of $194 million recognized

for a FID bonus associated with our

Australia-West divestiture

completed in the second quarter of 2020.

●

Lower exploration expenses

due to the absence of charges associated

with the early cancellation of our

2020 winter exploration program

as well as the absence of 2020 dry hole expenses in Alaska

and

unproved property impairment

and dry hole expenses for the Kamunsu

East Field in Malaysia,

which is no

longer in our development plans.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

In addition to the items detailed above,

the increases in earnings in the nine-month period ended September

30,

2021, were partly offset by:

●

Absence of a $597 million after-tax gain

on our Australia-West

divestiture completed in May

2020.

●

Restructuring and transaction expenses

of $288 million after-tax associated

with the Concho acquisition

and mark-to-market impacts on certain

key employee compensation

programs.

●

Realized losses on hedges of $233 million after

-tax related to derivative

positions assumed through our

Concho acquisition.

These derivative positions were settled

entirely within the first quarter of 2021.

See

Note 11.

●

Absence of gains recorded in

2020 from foreign currency derivatives.

See the “Segment Results” section for additional

information.

Income Statement Analysis

Unless otherwise indicated, all results in Income Statement

Analysis are before-tax.

Sales and other operating revenues

for the three-

and nine-month periods of 2021 increased $6,940 million

and

$17,415 million, respectively,

mainly due to higher realized commodity

prices and higher sales volumes.

Equity in earnings of affiliates for

the three-

and nine-month periods of 2021 increased $204 million and

$154

million, respectively,

primarily due to higher earnings driven by higher LNG and

crude prices, partially offset by a

higher effective tax rate

related to equity method

investments in our Europe,

Middle East, and North Africa

segment.

Gain (loss) on dispositions in the third quarter of 2021 recognized

a loss of $179 million for the sale of noncore

assets in our Other International segment. Offsetting

the loss were gains recognized

for contingent payments

associated with previous dispositions

in our Canada and Lower 48 segments and gains

on sales of certain noncore

assets in our Lower 48 segment.

For the nine-month period of 2021, net gains on dispositions

decreased $257

million primarily due to the absence of a $587 million gain

associated with our Australia

-West divestiture,

partially

offset by a $200 million FID bonus recognized

in the first quarter of 2021 associated with

our Australia-West

divestiture.

Other income (loss) for the three-

and nine-month periods of 2021 increased $87 million

and $1,867 million,

respectively.

During these periods in 2021, we recognized

gains of $17 million and $743 million, respectively,

our CVE common shares,

compared with losses of $162 million and $1,302 million for

the same periods in 2020.

Purchased commodities for the three

and nine-month periods of 2021 increased $2,340 million and

$6,030

million, respectively,

primarily due to higher gas and crude prices and

volumes.

Production and operating expenses

for the three-

and nine-month periods of 2021 increased $426 million

and

$968 million, respectively,

primarily in line with higher production volumes.

Selling, general and administrative

expenses increased $307 million in the nine-month

period of 2021, primarily

due to transaction and restructuring

expenses associated with our Concho acquisition

and higher costs associated

with compensation and benefits, including mark-to

-market impacts of certain key

employee compensation

programs.

Exploration expenses for

the nine-month period of 2021 decreased $204 million, primarily

due to the absence of

charges associated with the early cancellation

of our 2020 winter exploration

program as well as the absence of

2020 dry hole expenses in Alaska and an unproved

property impairment and dry hole expenses related

to the

Kamunsu

East Field in Malaysia.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

DD&A for the three-

and nine-month periods of 2021 increased $261 million and

$1,445 million, respectively,

mainly due to higher production volumes

partly offset by lower rates

from price-related reserve revisions

Impairments decreased $91 million in the third

quarter of 2021, primarily due to a decrease in an ARO

estimate for

a previously sold asset, in which we retained

the ARO liability.

The decrease of $611 million in the nine-month

period of 2021 was also impacted by the absence

of impairments

recorded for certain non-core

gas assets in our

Lower 48 segment.

Taxes

other than income taxes for

the three-

and nine-month periods of 2021 increased $224 million and

$584

million, respectively,

caused by higher sales volumes primarily in Lower

48 and higher commodity prices.

Foreign currency transaction

(gain) loss for the nine-month period of 2021 was

impaired by $107 million due to the

absence of derivative gains and

other remeasurements.

See

Note 19—Income Taxes

for information regarding

our income tax provision

(benefit) and effective tax

rate.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Summary Operating Statistics

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Average Net Production

Crude oil (MBD)

Consolidated operations

802

535

814

546

Equity affiliates

Total

crude oil

815

548

827

559

Natural gas liquids (MBD)

Consolidated operations

123

116

Equity affiliates

Total

natural gas liquids

130

124

104

Bitumen (MBD)

Natural gas (MMCFD)

Consolidated operations

2,144

1,201

2,143

1,353

Equity affiliates

1,033

1,034

1,055

1,042

Total

natural gas

3,177

2,235

3,198

2,395

Total Production

(MBOED)

1,544

1,067

1,553

1,112

Dollars Per Unit

Average Sales Prices

Crude oil (per bbl)

Consolidated operations*

70.39

39.49

64.62

39.04

Equity affiliates

73.44

37.56

65.71

38.22

Total

crude oil

70.43

39.45

64.63

39.02

Natural gas liquids (per bbl)

Consolidated operations

33.28

13.73

28.02

11.72

Equity affiliates

56.70

30.21

49.81

31.65

Total

natural gas liquids

34.79

15.29

29.58

13.45

Bitumen (per bbl)

41.19

15.87

36.61

2.90

Natural gas (per MCF)

Consolidated operations*

5.93

2.77

5.02

3.07

Equity affiliates

5.95

2.61

4.48

3.98

Total

natural gas

5.94

2.70

4.84

3.47

Millions of Dollars

Exploration Expenses

General administrative,

geological and geophysical,

lease rental, and other

199

296

Leasehold impairment

Dry holes

125

206

410

*Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our

Concho

acquisition, were $63.95 per barrel for crude oil and $4.98 per mcf for natural gas for the nine-month

period ended September 30, 2021.

As of

March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

We explore for,

produce, transport and market

crude oil, bitumen, natural gas,

LNG and NGLs on a worldwide

basis.

At September 30, 2021, our operations

were producing in the U.S., Norway,

Canada, Australia, Indonesia,

China, Malaysia, Qatar and Libya.

Total

production of 1,544 MBOED increased 477 MBOED or

45 percent in the third quarter of 2021 and 441

MBOED or 40 percent in the nine-month period of 2021, primarily

due to:

●

Higher volumes in the Lower 48 due to our Concho acquisition.

●

New wells online in the Lower 48, Canada, Norway

and Malaysia.

●

Higher volumes in our North American operated

assets due to the absence of production curtailments.

●

Higher production in Libya due the absence of a forced

shutdown of the Es Sider export terminal and

other eastern export terminals after

a period of civil unrest.

●

Improved well performance in

Norway,

Canada, Alaska and China.

Production increases

in the third quarter and in the nine-month period of 2021 were

partly offset by normal field

decline.

In addition to the normal field decline, in the nine-month period

of 2021, production also decreased due to:

●

Absence of production from Australia

-West due to our second quarter

2020 disposition.

●

Higher unplanned downtime in the Lower 48 due to Winter

Storm Uri, which impacted production by

approximately 50 MBOED in the first

quarter of 2021.

Production excluding Libya

for the third quarter of 2021 was

1,507 MBOED, an increase of 441 MBOED from the

same period a year ago.

After adjusting for closed acquisitions

and dispositions as well as estimated impacts from

the 2020 curtailment program,

third-quarter 2021 production increased

26 MBOED or 2 percent.

This increase

was primarily due to new production from

the Lower 48 and other development programs

across the portfolio,

partially offset by normal field decline.

Production from Libya averaged

37 MBOED.

Production excluding Libya

for the nine-month period of 2021 was 1,514 MBOED,

an increase of 406 MBOED from

the same period a year ago.

After adjusting for closed acquisitions

and dispositions as well as impacts from the

2020 curtailment program and

Winter Storm Uri impacts from 2021, production

increased 17 MBOED or 1 percent.

This increase was primarily due to new production

from the Lower 48 and other development

programs across the

portfolio, partially offset by

normal field decline.

Production from Libya averaged

39 MBOED.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Segment

Results

Alaska

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income (Loss) Attributable

to ConocoPhillips

($MM)

405

(16)

935

(76)

Average Net Production

Crude oil (MBD)

163

184

179

Natural gas liquids (MBD)

Natural gas (MMCFD)

Total Production

(MBOED)

178

201

196

195

Average Sales Prices

Crude oil ($ per bbl)

72.55

40.88

66.78

41.92

Natural gas ($ per MCF)

2.63

2.48

3.06

2.71

The Alaska segment primarily explores for,

produces, transports and markets

crude oil, NGLs and natural gas.

As of

September 30, 2021, Alaska contributed

19 percent of our consolidated liquids production

and less than 1 percent

of our consolidated natural

gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings from Alaska increased

$421 million in the third quarter of 2021 and $1,011 million

in the nine-month

period of 2021, respectively.

In the third quarter,

increases to earnings include:

●

Higher realized crude oil prices.

●

Lower DD&A expenses primarily driven by

lower production volumes and lower rates

in the quarter from

price-related reserve revisions

Offsets to the earnings increase include

●

Lower volumes due to a July turnaround

at our Western North Slope assets.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also increased due to:

●

Lower exploration expenses

due to the absence of charges associated

with the early cancellation of our

2020 winter exploration program

as well as the absence of 2020 dry hole expenses.

●

Higher volumes due to the absence of production

curtailments.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also decreased due to:

●

Higher DD&A expenses primarily caused by higher

rates in the first half of 2021.

Production

Average production

decreased 23 MBOED in the third quarter of 2021 and increased

1 MBOED in the nine-month

period of 2021, respectively.

In the third quarter of 2021, decreases to production

include:

●

Normal field decline.

●

A July turnaround at our Western

North Slope assets.

More than offsetting the items

detailed above, in the nine-month period of 2021, production

increased due to:

●

Absence of curtailments.

●

Improved performance in the Greater

Prudhoe Area and Western

North Slope assets.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Willow Update

In August 2021, an Alaska federal

judge vacated the U.S. government’s

approval granted

to our planned Willow

project previously approved

by the Bureau of Land Management (BLM) in October 2020.

The Department of

Justice did not appeal the decision and neither did we.

We believe the best path forward

is to work closely with

the BLM and engage directly with the relevant

agencies to address the matters

described in the decision.

In the

interim, we are continuing with FEED

work in service of a final investment decision.

Lower 48

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income (Loss) Attributable

to ConocoPhillips

($MM)

1,631

(78)

3,274

(880)

Average Net Production*

Crude oil (MBD)

457

197

442

211

Natural gas liquids (MBD)

101

Natural gas (MMCFD)

1,389

566

1,389

577

Total Production

(MBOED)

790

359

767

381

Average Sales Prices

Crude oil ($ per bbl)**

68.59

36.43

63.14

34.02

Natural gas liquids ($ per bbl)

32.87

13.51

27.48

10.96

Natural gas ($ per MCF)**

4.63

1.63

4.13

1.45

*Subsequent to the current period, we anticipate a change in both product mix and average net production

attributed to the planned conversion

of previously acquired two-stream contracted volumes to three-stream.

**Average sales prices, including the impact of hedges settling per initial contract terms in the first quarter of 2021 assumed in our Concho

acquisition, were $61.90 per barrel for crude oil and $4.07 per mcf for natural gas for the nine-month

period ended September 30, 2021.

As of

March 31, 2021, we had settled all oil and gas hedging positions acquired from Concho.

The Lower 48 segment consists of operations

located in the U.S. Lower 48 states,

as well as producing properties in

the Gulf of Mexico.

As of September 30, 2021, the Lower 48 contributed

54 percent of our consolidated liquids

production and 65 percent of our consolidated

natural gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings from the Lower 48 increased $1,709

million in the third quarter of 2021 and increased

$4,154 million in

the nine-month period of 2021, respectively.

In the third quarter,

increases to earnings include:

●

Higher realized crude oil, natural

gas and NGL prices.

●

Higher sales volumes of crude oil and natural

gas due to our Concho acquisition and the absence of

production curtailments.

Offsets to the earnings increase include:

●

Higher DD&A expenses, production and operating

expenses and taxes other than

income taxes primarily

due to higher production volumes.

Partially offsetting the increase

in DD&A expenses were lower rates

from price-related reserve revisions.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also increased due to

●

The absence of $399 million in after-tax impairments

related to certain noncore

gas assets.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also decreased due to:

●

Impacts resulting from our Concho Acquisition,

including higher selling, general and administrative

expenses for transaction and restructuring

charges, as well as realized losses

on derivative settlements.

and

Note 11.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Production

Average production increased

431 MBOED and 386 MBOED in the three-

and nine-month periods of 2021,

respectively.

In the third quarter,

increases to production include:

●

Higher volumes due to our Concho acquisition.

●

New wells online from our development programs

in Permian, Eagle Ford

and Bakken.

●

Absence of curtailments.

Offsets to the production increases

include:

●

Normal field decline.

In addition to normal field decline,

in the nine-month period of 2021, production also

decreased due to:

●

Higher unplanned downtime, primarily due to Winter

Storm Uri.

Asset Acquisitions and Dispositions

In September 2021, we announced the Shell Permian

Acquisition for $9.5 billion in cash before

customary

adjustments.

The transaction is anticipated to

close in the fourth quarter of 2021, subject to regulatory

approval

and other customary closing conditions.

See Item 1A “Risk Factors” for further discussion of risks

Additionally in September 2021, we completed

divestitures

of certain noncore assets in our Lower 48 segment

recording proceeds of approximately

$150 million.

Production from these assets averaged

approximately 15

MBOED in the nine-months ended September 30, 2021.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Canada

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income (Loss) Attributable

to ConocoPhillips

($MM)

155

(75)

267

(270)

Average Net Production

Crude oil (MBD)

Natural gas liquids (MBD)

Bitumen (MBD)

Natural gas (MMCFD)

Total Production

(MBOED)

Average Sales Prices

Crude oil ($ per bbl)

58.99

25.16

53.81

15.39

Natural gas liquids ($ per bbl)

33.47

5.99

28.49

1.89

Bitumen ($ per bbl)

41.19

15.87

36.61

2.90

Natural gas ($ per MCF)

2.45

0.71

2.36

1.05

Average sales prices include unutilized transportation costs.

Our Canadian operations mainly consist

of the Surmont oil sands development in Alberta

and the liquids-rich

Montney unconventional

play in British Columbia.

As of September 30, 2021, Canada contributed 8 percent

of our

consolidated liquids production and

4 percent of our consolidated natural

gas production.

Net Income (Loss) Attributable to ConocoPhillips

Earnings from Canada increased $230 million

and $537 million,

respectively,

in the three-

and nine-month periods

of 2021.

Increases to earnings include:

●

Higher realized bitumen and crude oil prices.

●

Higher sales volumes in our Surmont and Montney

assets.

●

After-tax gains

on disposition related to contingent

payments of $77 million and $149 million in

the three-

and nine-month periods of 2021, respectively,

associated with the sale of certain assets

to CVE in 2017.

Offsets to the earnings increase include

●

Higher production and operating expenses

primarily due to increased Surmont and Montney

production.

Production

Average production

increased 29 MBOED in the third quarter of 2021 and

increased 34 MBOED in the nine-month

period of 2021, respectively.

In the third quarter,

increases to production include:

●

Absence of curtailments.

●

Absence of third quarter 2020 turnaround

activity in the Surmont.

●

New wells online in the Montney.

●

Production from our Kelt acquisition

completed in the third quarter of 2020.

Offsets to the production increases

include:

●

Higher well failures, plant power trips

and facility upsets in the Surmont.

In addition to the items detailed above,

in the nine-month period of 2021, production also increased

due to:

●

Improved well performance in

the Surmont.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Europe, Middle East and North Africa

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income Attributable

to ConocoPhillips

($MM)

241

601

318

Consolidated Operations

Average Net Production

Crude oil (MBD)

117

118

Natural gas liquids (MBD)

Natural gas (MMCFD)

303

256

303

276

Total Production

(MBOED)

172

125

172

133

Average Sales Prices

Crude oil ($ per bbl)

72.43

41.79

65.94

43.72

Natural gas liquids ($ per bbl)

50.32

23.50

40.75

20.01

Natural gas ($ per MCF)

11.96

2.40

8.40

2.85

The Europe, Middle East and North Africa

segment consists of operations

principally located in the Norwegian

sector of the North Sea and the Norwegian Sea, Qatar,

Libya and commercial operations

in the U.K.

As of

September 30, 2021, our Europe, Middle East

and North Africa operations contributed

12 percent of our

consolidated liquids production and

14 percent of our consolidated natural

gas production.

Net Income Attributable to ConocoPhillips

Earnings from Europe, Middle East

and North Africa increased by $149 million and $283 million in the three

and

nine-month periods of 2021, respectively.

Increases to earnings include:

●

Higher realized natural

gas, crude oil and NGL prices.

●

Higher LNG sales prices, reflected in equity in earnings

of affiliates.

●

Higher sales volumes of crude oil and LNG.

Offsets to the earnings increases

include:

●

Higher taxes.

●

Higher production and operating expenses

and DD&A expenses.

Consolidated Production

Average consolidated

production increased 47 MBOED and 39 MBOED in the three

and nine-month periods of

2021, respectively.

Increases to production

include:

●

Higher production in Libya due to the absence of a

forced shutdown of the Es Sider export

terminal and

other eastern export terminals after

a period of civil unrest.

●

Improved well performance in

Norway.

●

New production from Norway

drilling activities including our Tor

II redevelopment project with first

production in December 2020.

Offsets to the production increases

include:

●

Normal field decline.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Asia Pacific

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income Attributable

to ConocoPhillips

($MM)

257

749

945

Consolidated Operations

Average Net Production

Crude oil (MBD)

Natural gas liquids (MBD)

Natural gas (MMCFD)

368

322

358

455

Total Production

(MBOED)

119

125

147

Average Sales Prices

Crude oil ($ per bbl)

74.66

42.79

67.41

42.94

Natural gas liquids ($ per bbl)

33.21

Natural gas ($ per MCF)

6.66

5.33

6.30

5.42

The Asia Pacific segment has operations

in China, Indonesia, Malaysia and Australia.

As of September 30, 2021, Asia

Pacific contributed 7 percent

of our consolidated liquids production

and 17 percent of our consolidated natural

gas

production.

Net Income Attributable to ConocoPhillips

Earnings from Asia Pacific increased

$232 million in the third quarter of 2021 and decreased $196 million

in the nine-

month period of 2021, respectively.

In the third quarter,

increases to earnings include:

●

Higher crude oil and natural gas

prices.

●

Higher LNG sales prices, reflected in equity in earnings

of affiliates.

●

Lower DD&A expenses in the third quarter

of 2021 primarily driven by lower production volumes

and

lower rates from price-related

reserve revisions.

In addition to the items detailed above,

in the nine-month period of 2021, earnings also increased due to:

●

A $200 million gain on disposition related

to a FID bonus from our Australia-West

divestiture.

For additional

information related to

this FID bonus, see

Note 3

and

Note 10

●

Lower production and operating

expenses related to the absence of Australia

-West.

Offsetting the items detailed

above, in the nine-month period of 2021, earnings decreased

due to:

●

Absence of a $597 million after-tax gain

related to our Australia

-West divestiture.

●

Absence of sales volumes associated with Australia

-West.

Consolidated Production

Average consolidated

production decreased 6 MBOED and 22 MBOED in the three

and nine-month periods of 2021,

respectively.

In the third quarter,

the primary decrease to production was

normal field decline.

Partly offsetting the decrease

in production was:

●

Increased production in Malaysia

associated with Malikai Phase 2 first

production and ramp-up.

●

Bohai Bay development activity in

China.

In addition to normal field decline, in the nine-month period

of 2021, production also decreased due to:

●

The divestiture of our Australia

-West assets that contributed

23 MBOED in the nine-month period of 2020.

In addition to the items detailed above,

in the nine-month period of 2021, production also increased

due to:

●

The absence of curtailments across the segment

and increased demand in Indonesia from coal supply

restrictions.

Results of Operations

ConocoPhillips

2021 Q3 10-Q

Other International

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Income (Loss) Attributable

to ConocoPhillips

($MM)

(97)

(8)

(106)

The Other International segment consists

of exploration and appraisal

activities in Colombia as well as

contingencies associated with prior operations

in other countries.

Earnings from our Other International

operations decreased $89 million and $120

million in the three-

and nine-

month periods of 2021, respectively,

due to a loss on divestiture related to

our Argentina exploration

interests in

the third quarter as well as an absence of a $29 million after

-tax benefit to earnings from the dismissal

arbitration related to

prior operations in Senegal recognized

in the first quarter of 2020.

for additional

information

regarding the divestiture.

Corporate and Other

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Net Loss Attributable to

ConocoPhillips

Net interest expense

(176)

(179)

(627)

(508)

Corporate general and administrative

expenses

(57)

(50)

(251)

(90)

Technology

(6)

(8)

(16)

Other income (expense)

(153)

579

(1,366)

(213)

(390)

(268)

(1,980)

Net interest expense consists

of interest and financing expense,

net of interest income and capitalized

interest.

Net interest expense increased

by $119 million in the nine-month period of 2021 primarily due

to higher debt

balances assumed due to our Concho acquisition.

See Note 7.

Corporate G&A expenses include compensation

programs and staff

costs.

These expenses increased by $7 million

in the three-month period of 2021 primarily due to mark

to market adjustments

associated with certain

compensation programs.

For the nine-month period of 2021, Corporate

G&A expenses increased by $161 million

primarily due to restructuring expenses associated

with our Concho acquisition.

See Note 15.

Technology includes

our investment in new technologies

or businesses, as well as licensing revenues.

Activities are

focused on both conventional

and tight oil reservoirs, shale gas,

heavy oil, oil sands, enhanced oil recovery,

as well

as LNG.

Earnings from Technology

increased $47 million in the nine-month period of 2021

primarily due to higher

licensing revenues.

Other income (expense) or “Other” includes certain corporate

tax-related items, foreign

currency transaction gains

and losses, environmental costs

associated with sites no longer in operation,

other costs not directly associated

with an operating segment, premiums

incurred on the early retirement of debt,

holding gains or losses on equity

securities, and pension settlement expense.

For the three-

and nine-month periods of 2021, “Other” increased

$179 million and $1,945 million, respectively.

During these periods in 2021, we recognized

gains of $17 million and

$743 million, respectively,

on our CVE common shares, compared

with losses of $162 million and $1,302 million for

the same periods in 2020.

Partially offsetting the impact on

the nine-month period was the release of a $92

million deferred tax asset

associated with our Australia West

divestiture.

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

Capital Resources and Liquidity

Financial Indicators

Millions of Dollars

September 30

December 31

2021

2020

Cash and cash equivalents

9,833

2,991

Short-term investments

678

3,609

Total

debt

19,668

15,369

Total

equity

44,115

29,849

Percent of total debt to

capital*

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 nine months of 2021, the primary uses of our

available cash were $3.8 billion to

support our ongoing capital expenditures

and investments program

;

$2.2 billion

to repurchase common stock

$1.8 billion to pay dividends, and $1.1 billion of hedging, transaction

and

restructuring costs.

During the first nine months of 2021, our cash and cash

equivalents increased by $6.8 billion

to $9.8 billion.

At September 30, 2021, we had cash

and cash equivalents of $9.8 billion, short-term investments

of $0.7 billion,

and available borrowing capacity

under our credit facility of $6.0 billion, totaling

approximately $16.5 billion of

liquidity.

We believe current cash

balances and cash generated by

operating activities, together with access

external sources of funds as described below in the “Significant

Changes in Capital” section, will be sufficient to

meet our funding requirements in the near-

and long-term, including our capital spending prog

ram,

acquisitions,

dividend payments and debt obligations

On September 20, 2021, we signed a definitive agreement

for the Shell Permian Acquisition for

$9.5 billion in cash

before customary adjustments

The effective date of the transaction

is July 1, 2021, and we expect to close in the

fourth quarter of 2021 subject to regulatory

clearance and the satisfaction

of other customary closing conditions.

The transaction will be funded from available

cash, and we expect our remaining cash

to meet our obligations and

business needs.

Significant Changes in Capital

Operating Activities

Cash provided by operating activities was

$11.1 billion for the first nine months

of 2021, compared with $3.1

billion for the corresponding period of 2020.

The increase in cash provided by operating

activities is primarily due

to higher realized commodity prices and

higher sales volumes mostly due to our acquisition of Concho.

The

increase in cash provided by operating

activities was partly offset by the settlement

of all oil and gas hedging

positions acquired from Concho,

and transaction and restructuring cost

Our short-

and long-term operating cash flows

are highly dependent upon prices for crude oil, bitumen,

natural

gas, LNG and NGLs.

Prices and margins in our industry have historically

been volatile and are driven by market

conditions over which we have

no control.

Absent other mitigating factors,

as these prices and margins fluctuate,

we would expect a corresponding change

in our operating cash flows.

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

The level of production volumes, as well as

product and location mix, impacts our cash

flows.

Future production is

subject to numerous uncertainties, including,

among others, the volatile crude oil and natural

gas price

environment, which may impact

investment decisions; the effects

of price changes on production sharing and

variable-royalty contracts;

acquisition and disposition of fields; field production decline rates;

new technologies;

operating efficiencies; timing of startups

and major turnarounds; political instability;

impacts of a global pandemic;

weather-related disruptions; and

the addition of proved reserves through

exploratory success and their timely and

cost-effective development.

While we actively manage these factors,

production levels can cause variability

cash flows, although generally this

variability has not been as significant as that caused

by commodity prices.

To maintain

or grow our production volumes, we must

continue to add to our proved

reserve base.

See the

“Capital Expenditures and Investments”

section, for information about

our capital expenditures and investments.

On January 15, 2021, we assumed financial derivative instruments

consisting of oil and natural gas

swaps in

connection with our acquisition of Concho.

At March 31, 2021, all oil and natural

gas derivative financial

instruments acquired from Concho

were contractually settled.

In the first six months of 2021, we paid $761 million

relating to these settlements.

“Risk Factors” for further discussion of risks related to the Shell Permian Acquisition.

Investing Activities

For the first nine months of 2021, we invested

$3.8 billion in capital expenditures.

Our 2021 operating plan capital

expenditures is currently expected

to be $5.3 billion compared with $4.7 billion in 2020.

See the “Capital

Expenditures and Investments”

section, for information about our capital

expenditures and investments.

For additional information on Acquisitions

& Dispositions discussed below,

see Note 3.

We completed our acquisition

of Concho on January 15, 2021.

The assets acquired in the transaction

included

$382 million of cash.

In May 2021, we announced and began

a paced monetization of our investment

in CVE common shares with the

plan to direct proceeds toward

our existing share repurchase program.

We expect to fully dispose

of our CVE

shares by year-end 2022, however,

the sales pace will be guided by market conditions,

and we retain discretion to

adjust accordingly.

Since we began our monetization program,

we have sold 67 million CVE shares,

representing

32% of our holdings at December 31, 2020, receiving $569

million of cash proceeds.

See Note 5.

Other proceeds

from dispositions include our sale of certain noncore

assets in our Lower 48 segment for approximately

$150

million and contingent payments

associated with previous divestitures.

In September 2021, we signed a definitive agreement

to acquire the Shell Permian assets

for $9.5 billion, before

customary adjustments.

Under the terms of the agreement, we paid a deposit

of $475 million which is presented

within “Cash Flows from Investing

Activities - Other” on our consolidated statement

of cash flows.

See Item 1A

We invest in short

-term investments as part of our

cash investment strategy,

the primary objective of which is to

protect principal, maintain liquidity

and provide yield and total returns;

these investments include time deposits,

commercial paper,

as well as debt securities classified as available

for sale.

Funds for short-term needs

to support

our operating plan and provide resiliency

to react to short-term price volatility

are invested in highly liquid

instruments with maturities within the year.

Funds we consider available to maintain

resiliency in longer term

price downturns and to capture opportunities

outside a given operating plan may

be invested in instruments

with

maturities greater than one year.

Investing activities in the first

nine months of 2021 included net sales of $2,846 million of investments.

We sold

$2,991 million of short-term instruments

and invested $145 million in long-term instruments

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

Financing Activities

We have a revolving

credit facility totaling $6.0 billion,

expiring in May 2023.

Our revolving credit facility

may be

used for direct bank borrowings,

the issuance of letters of credit totaling

up to $500 million, or as support for our

commercial paper program.

With no commercial paper outstanding

and no direct borrowings or letters

of credit,

we had access to $6.0 billion in available borrowing

capacity under our revolving credit

facility at September 30,

2021.

On January 15, 2021, we completed the acquisition

of Concho in an all-stock transaction.

In the acquisition, we

assumed Concho’s publicly

traded debt, which was recorded

at fair value of $4.7 billion on the acquisition

date.

June 2021, we reaffirmed our commitment

to preserving our ‘A’

-rated balance sheet by restating

our intent to

reduce gross debt by $5 billion over

the next five years, driving a more

resilient and efficient capital

structure.

The current credit ratings on our

long-term debt are:

●

Fitch: “A”

with a “stable” outlook

●

S&P:

“A-” with a “stable”

outlook

●

Moody’s: “A3”

with a “positive” outlook

for additional information on our Concho

acquisition and

Note 7

for additional information on debt

revolving credit facility and credit

ratings.

Certain of our project-related

contracts, commercial contracts

and derivative instruments contain

provisions

requiring us to post collateral.

Many of these contracts and instruments

permit us to post either cash or letters

credit as collateral.

At September 30, 2021 and December 31, 2020, we

had direct bank letters of credit

of $281

million and $249 million, respectively,

which secured performance obligations

related to various purchase

commitments incident to the ordinary

conduct of business.

In the event of credit ratings

downgrades, we may be

required to post additional letters

of credit.

Shelf Registration

We have a universal

shelf registration statement

on file with the SEC under which we have the

ability to issue and

sell an indeterminate number of various

types of debt and equity securities.

Capital Requirements

For information about our capital

expenditures and investments,

see the “Capital Expenditures and Investments”

section.

In addition to our capital expenditure and

investments

program, we anticipate completing

the Shell

Permian Acquisition in the fourth quarter

for $9.5 billion before customary

adjustments.

Our debt balance at September 30, 2021, was

$19.7 billion, compared with $15.4 billion at December 31, 2020.

The net increase is primarily due to $4.7 billion of debt assumed

in the Concho acquisition.

The current portion of

debt, including payments for finance

leases, is $920 million.

Payments will be made using current

cash balances

and cash generated by

operations.

See Note 7.

We believe in delivering va

lue to our shareholders through

a growing and sustainable dividend supplemented

additional returns of capital, including share

repurchases.

In 2020, we paid $1.8 billion, equating to $1.69 per

share of common stock, in dividends.

In the first nine months of 2021, we paid dividends totaling

$1.8 billion, the

equivalent of $1.29 per share.

On September 20, 2021, we announced an increase

in our quarterly dividend from

$0.43 per share to $0.46 per share,

representing a 7 percent increase.

The dividend is payable December 1, 2021,

to stockholders of record

at the close of business on October 28, 2021.

We anticipate returning

approximately

$2.4 billion to shareholders in dividends

in 2021, or $1.75 per share.

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

In late 2016, we initiated our current

share repurchase program,

which has a total program authorization

of $25

billion.

In May 2021, we began a paced monetization

of our CVE shares, the proceeds of which, have

been applied

to share repurchases.

The pace of CVE share sales will be guided by market conditions,

and we retain the

discretion to adjust accordingly.

In the nine months ended September 30, 2021, we repurchased

39.3 million

shares at a cost of $2,224 million, $561 million of which

was funded using CVE share proceeds.

Since the inception

of the share repurchase program,

we have repurchased 228 million shares

at a cost of $12.7 billion.

Our total

planned distributions for 2021, including dividends

and share repurchases, is approximately

$6.0 billion.

Our dividend and share repurchase programs

are subject to numerous considerations,

including market conditions,

management discretion and other factors.

See “Item 1A—Risk Factors

– Our ability to declare and pay dividends

and repurchase shares is subject to certain

considerations” in Part

I—Item 1A in our 2020 Annual Report on Form

10-K.

Capital Expenditures and Investments

Millions of Dollars

Nine Months Ended

September 30

2021

2020

Alaska

698

882

Lower 48

2,250

1,398

Canada

129

593

Europe, Middle East and North Africa

385

410

Asia Pacific

235

280

Other International

Corporate and Other

Capital expenditures and investments

3,767

3,657

During the first nine months of 2021, capital expenditures

and investments supported

key development programs,

primarily:

●

Development activities in the Lower 48, primarily Permian,

Eagle Ford and Bakken.

●

Appraisal and development activities in Alaska

related to the Western

North Slope and development

activities in the Greater Kuparuk Area.

●

Appraisal activities in liquids-rich plays

and optimization of oils sands development in Canada.

●

Continued development activities across

assets in Norway.

●

Continued development activities in China,

Malaysia and Indonesia.

In February 2021, we announced 2021 operating plan

capital expenditures of $5.5 billion.

In June 2021, we

reduced capital guidance to $5.3 billion, recognizing

synergistic savings

from our Concho acquisition.

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

Guarantor Summarized Financial

Information

We have various

cross guarantees among our Obligor group;

ConocoPhillips, ConocoPhillips Company

and

Burlington Resources LLC,

with respect to publicly held debt securities.

ConocoPhillips Company is 100 percent

owned by ConocoPhillips.

Burlington Resources LLC is

100 percent owned by ConocoPhillips

Company.

ConocoPhillips and/or ConocoPhillips

Company have fully and unconditionally

guaranteed the payment obligations

of Burlington Resources LLC,

with respect to its publicly held debt securities.

Similarly, ConocoPhillips

has fully and

unconditionally guaranteed the payment

obligations of ConocoPhillips Company

with respect to its publicly held

debt securities.

In addition, ConocoPhillips Company has

fully and unconditionally guaranteed the payment

obligations of ConocoPhillips with respect

to its publicly held debt securities.

All guarantees are joint and several.

The following tables present summarized

financial information for

the Obligor Group, as defined below:

●

The Obligor Group will reflect guarantors

and issuers of guaranteed securities consisting

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

and

Note 7

for additional information relating

to the Concho transaction.

Transactions

and balances reflecting activity between the Obligors

and Non-Obligated Subsidiaries

are presented

below:

Summarized Income Statement

Data

Millions of Dollars

Nine Months Ended

September 30, 2021

Revenues and Other Income

20,893

Income (loss) before income taxes*

5,445

Net income (loss)

5,452

Net Income (Loss) Attributable

to ConocoPhillips

5,452

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

Summarized Balance Sheet Data

Millions of Dollars

September 30

December 31

2021

2020

Current assets

12,955

8,535

Amounts due from Non-Obligated Subsidiaries, current

1,194

440

Noncurrent assets

59,997

37,180

Amounts due from Non-Obligated Subsidiaries, noncurrent

8,223

7,730

Current liabilities

7,059

3,797

Amounts due to Non-Obligated Subsidiaries,

current

2,778

1,365

Noncurrent liabilities

28,336

18,627

Amounts due to Non-Obligated Subsidiaries,

noncurrent

10,304

3,972

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

Contingencies

A number of lawsuits involving a variety

of claims arising in the ordinary course of business

have been filed against

ConocoPhillips.

We also may be required

to remove or mitigate

the effects on the environment

of the placement,

storage, disposal or release of

certain chemical, mineral and petroleum

substances at various

active and inactive

sites.

We regularly assess the need for accounting

recognition or disclosure of these contingencies.

In the case of

all known contingencies (other than those related

to income taxes), we accrue

a liability when the loss is probable,

and the amount is reasonably estimable.

If a range of amounts can be reasonably

estimated and no amount within

the range is a better estimate

than any other amount, then the low end of the range

is accrued.

We do not reduce

these liabilities for potential insurance

or third-party recoveries.

We accrue receivables for

insurance or other

third-party recoveries when applicable.

With respect to income tax-related

contingencies, we use a cumulative

probability-weighted loss accrual

in cases where sustaining a tax

position is less than certain.

Based on currently available information,

we believe it is remote that future

costs related to known

contingent

liability exposures will exceed

current accruals by an amount that

would have a material adverse

impact on our

consolidated financial statements.

See Note 10

Legal and Tax

Matters

We are subject to various

lawsuits and claims including but not limited to matters

involving oil and gas royalty

and

severance tax payments,

gas measurement and valuation

methods, contract disputes,

environmental damages,

climate change, personal injury,

and property damage.

Our primary exposures for such matters

relate to alleged

royalty and tax underpayments

on certain federal, state

and privately owned properties, claims

of alleged

environmental contamination

from historic operations,

and other contract disputes.

We will continue to defend

ourselves vigorously in these matters.

Our legal organization

applies its knowledge, experience and professional

judgment to the specific characteristics

of our cases, employing a litigation management

process to manage and monitor the legal

proceedings against us.

Our process facilitates the

early evaluation and quantification

of potential exposures in individual cases.

This

process also enables us to track those cases

that have been scheduled for trial and/or

mediation.

Based on

professional judgment and experience

in using these litigation management

tools and available information

about

current developments in all our cases,

our legal organization regularly

assesses the adequacy of current accruals

and determines if adjustment of existing

accruals, or establishment of new accruals, is

required.

Environmental

We are subject to the same numerous

international, federal,

state and local environmental

laws and regulations as

other companies in our industry.

For a discussion of the most significant of these environmental

laws and

regulations, including those with associated

remediation obligations, see the “Environmental”

section in

Management’s Discussion and Analysis

of Financial Condition and Results of Operations on pages

64–66 of our

2020 Annual Report on Form 10-K.

We occasionally receive requests

for information or notices of potential

liability from the EPA

and state

environmental agencies alleging

that we are a potentially responsible

party under the Federal Comprehensive

Environmental Response,

Compensation and Liability Act (CERCLA) or an equivalent

state statute.

On occasion, we

also have been made a party to cost

recovery litigation by those agencies

or by private parties.

These requests,

notices and lawsuits assert potential liability for

remediation costs at various

sites that typically are not owned by

us, but allegedly contain waste

attributable to our past operations.

As of September 30, 2021, there were 15 sites

around the U.S. in which we were

identified as a potentially responsible

party under CERCLA and comparable state

laws.

At September 30, 2021, our balance sheet included

a total environmental

accrual of $191 million, compared with

$180 million at December 31, 2020, for remediation

activities in the U.S. and Canada.

We expect to incur a

substantial amount of these expe

nditures within the next 30 years.

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

Notwithstanding any of the foregoing,

and as with other companies engaged in similar businesses,

environmental

costs and liabilities are inherent

concerns in our operations and products,

and there can be no assurance that

material costs and liabilities will not be incurred.

However,

we currently do not expect any material

adverse effect

upon our results of operations or financial position

as a result of compliance with current environmental

laws and

regulations.

Environmental Litigation

Several Louisiana parishes and the State

of Louisiana have filed 43 lawsuits under Louisiana’s

State and Local

Coastal Resources Management

Act (SLCRMA) against oil and gas

companies, including ConocoPhillips, seeking

compensatory damages for contamination

and erosion of the Louisiana coastline allegedly

caused by historical oil

and gas operations.

ConocoPhillips entities are defendants

in 22 of the lawsuits and will vigorously defend

against

them.

Because Plaintiffs’ SLCRMA theories are

unprecedented, there is uncertainty

about these claims (both as to

scope and damages) and we continue to

evaluate our exposure in these

lawsuits.

Climate Change

Continuing political and social attention

to the issue of global climate change has resulted

in a broad range of

proposed or promulgated

state, national and international

laws focusing on GHG reduction.

These proposed or

promulgated laws apply

or could apply in countries where we have

interests or may have

interests in the future.

Laws in this field continue to evolve,

and while it is not possible to accurately estimate

either a timetable for

implementation or our future compliance costs

relating to implementation, such

laws, if enacted, could have a

material impact on our results of operations

and financial condition.

For examples of legislation or precursors

for

possible regulation and factors

on which the ultimate impact on our financial performance

will depend, see the

“Climate Change” section in Management’s

Discussion and Analysis of Financial Condition and Results

Operations on pages 67–69 of our 2020 Annual

Report on Form 10-K.

Climate Change Litigation

Beginning in 2017, governmental and

other entities in several states

in the U.S. have filed lawsuits against

oil and

gas companies, including ConocoPhillips,

seeking compensatory damages and equitable relief

to abate alleged

climate change impacts.

Additional lawsuits with similar allegations

are expected to be filed.

The amounts

claimed by plaintiffs are unspecified and

the legal and factual issues involved

in these cases are unprecedented.

ConocoPhillips believes these lawsuits are

factually and legally meritless and are

an inappropriate vehicle to

address the challenges associated with climate

change and will vigorously defend

against such lawsuits.

Company Response to Climate

-Related Risks

The company has responded by putting

in place a Sustainable Development Risk Management

Standard covering

the assessment and registering of significant

and high sustainable development risks

based on their consequence

and likelihood of occurrence.

We have developed a

company-wide Climate Change Action Plan

with the goal of

tracking mitigation activities for

each climate-related risk included in the corporate

Sustainable Development Risk

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

consume.

Scope 3 emissions are indirect emissions from

sources that we neither own nor control.

Capital Resources and Liquidity

ConocoPhillips

2021 Q3 10-Q

We announced in October 2020 the adoption

of a Paris-aligned climate risk framework

with the objective of

implementing a coherent set of choices designed

to facilitate the success

of our existing exploration

and

production business through the energy transition.

Given the uncertainties remaining about

how the energy

transition

will evolve, the strategy aims to

be robust across a range of potential

future outcomes.

The strategy is comprised of four

pillars:

●

Targets

Our target framework

consists of a hierarchy

of targets, from a long-term ambition

that sets the

direction and aim of the strategy,

to a medium-term performance target

for GHG emissions intensity,

shorter-term targets for

flaring and methane intensity reductions.

These performance targets are

supported by lower-level internal

business unit goals to enable the company to

achieve the company-

wide targets.

In September 2021, we increased our interim

operational target and

have set it to reduce

our gross operated and net

equity (scope 1 and 2) emissions intensity by

40 to 50 percent from 2016

levels by 2030, an improvement from

the previously announced target

of 35 to 45 percent on only a gross

operated basis,

with an ambition to achieve net-zero

operated emissions by 2050.

We have joined the

World Bank Flaring Initiative to

work towards zero

routine flaring of associated gas

by 2030, with an

ambition to meet that goal by 2025.

●

Technology choices:

We expanded our Marginal

Abatement Cost Curve process

to provide a broader

range of opportunities for emission

reduction technology.

●

Portfolio choices: Our corporate

authorization process requires

all qualifying projects to include a GHG

price in their project approval economics.

Different GHG prices are used

depending on the region or

jurisdiction.

Projects in jurisdictions with existing GHG pricing regimes

incorporate the existing

GHG price

and forecast into

their economics.

Projects where no existing GHG pricing regime

exists utilize a scenario

forecast from our internally

consistent World

Energy Model.

In this way,

both existing and emerging

regulatory requirements are

considered in our decision-making.

The company does not use an estimated

market cost of GHG emissions when assessing

reserves in jurisdictions without existing GHG regulations.

●

External engagement:

Our external engagement aims to

differentiate ConocoPhillips

within the oil and

gas sector with our approach to managing

climate-related risk.

We are a Founding Member of the

Climate Leadership Council (CLC), an international

policy institute founded in collaboration

with business

and environmental interests

to develop a carbon dividend plan.

Participation in the CLC provides

another

opportunity for ongoing dialogue about carbon

pricing and framing the issues in alignment with our public

policy principles.

We also belong to and fund Americans For

Carbon Dividends, the education and

advocacy branch of the CLC.

Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the

Private Securities Litigation Reform Act

of 1995

This report includes forward-looking statements

within the meaning of Section 27A of the Securities Act of 1933

and Section 21E of the Securities Exchange Act of 1934.

All statements other than

statements of historical

fact

included or incorporated by

reference in this report, including, without

limitation, statements

regarding our future

financial position, business strategy,

budgets, projected revenues,

projected costs and plans, objectives

management for future operations,

the anticipated benefits of the transaction

between us and Concho Resources

Inc. (Concho), including the expected amount and

the timing of synergies from such transaction,

the anticipated

closing of the acquisition of assets from Shell Enterprises

LLC (Shell), and the anticipated impact of the Concho

and

Shell transactions on the combined company’s

business and future financial and operating results

are forward-

looking statements.

Examples of forward-looking statements

contained in this report include our expected

production growth and outlook on the business

environment generally,

our expected capital budget

and capital

expenditures, and discussions concerning future

dividends.

You can often

identify our forward-looking statements

by the words “anticipate,”

“believe,” “budget,”

“continue,”

“could,”

“effort,”

“estimate,”

“expect,”

“forecast,”

“intend,”

“goal,”

“guidance,”

“may,”

“objective,”

“outlook,”

“plan,” “potential,”

“predict,” “projection,”

“seek,”

“should,”

“target,”

“will,” “would” and similar

expressions.

ConocoPhillips

2021 Q3 10-Q

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

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

disruptions.

●

Changes in international monetary

conditions and foreign currency exchange

rate fluctuations.

●

Changes in international trade relationships,

including the imposition of trade restrictions or

tariffs

relating to crude oil, bitumen, natural

gas, LNG, NGLs and any materials or products

(such as aluminum

and steel) used in the operation of our business.

●

Substantial investment

in and development use of, competing

or alternative energy sources, including

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.

ConocoPhillips

2021 Q3 10-Q

●

Liability resulting from litigation,

including litigation related to

the transaction with Concho, or our failure

to comply with applicable laws and regulations.

●

General domestic and international

economic and political developments, including armed

hostilities;

expropriation of assets; changes in governmental

policies relating to crude oil, bitumen, natural

gas, LNG

and NGLs pricing; regulation or taxation;

and other political, economic or diplomatic developments.

●

Volatility in the commodity futures

markets.

●

Changes in tax and other laws, regulations

(including alternative energy mandates),

or royalty rules

applicable to our business.

●

Competition and consolidation in the oil and gas

E&P industry.

●

Any limitations on our access to capital

or increase in our cost of capital, including

as a result of illiquidity

or uncertainty in domestic or international

financial markets or investment

sentiment.

●

Our inability to execute, or delays

in the completion, of any asset dispositions or acquisitions

we elect to

pursue.

●

Potential failure to obtain,

or delays in obtaining, any necessary

regulatory approvals

for pending or

future asset dispositions or acquisitions, or that such

approvals may require modification

to the terms of

the transactions or the operation

of our remaining business.

●

Potential disruption of our operations

as a result of pending or future asset dispositions or acquisitions,

including the diversion of management time and

attention.

●

Our inability to deploy the net proceeds from any

asset dispositions that are pending or that we elect

undertake in the future in the manner and

timeframe we currently anticipate,

if at all.

●

Our inability to liquidate the common stock

issued to us by Cenovus Energy as part of our sale of certain

assets in western Canada at prices we deem acceptable,

or at all.

●

The operation and financing of our joint ve

ntures.

●

The ability of our customers and other contractual

counterparties to satisfy their obligations

to us,

including our ability to collect payments

when due from the government of Venezuela

or PDVSA.

●

Our inability to realize anticipated

cost savings and capital expenditure

reductions.

●

The inadequacy of storage capacity

for our products, and ensuing curtailments,

whether voluntary or

involuntary,

required to mitigate this physical

constraint.

●

Our ability to successfully integrate

Concho’s business and

fully achieve the expected benefits and cost

reductions associated with the transaction

with Concho in a timely manner or at all.

●

The risk that we will be unable to retain

and hire key personnel.

●

Unanticipated difficulties or expenditures

relating to integration with Concho.

●

The risk that the conditions to close the acquisition

of assets from Shell are not satisfied on

a timely basis

or at all, or the failure of the transaction

to close for any reason.

●

The risk that any regulatory

approval, consent or authorization

that may be required for

the proposed

acquisition of assets from Shell is not obtained

or is obtained subject to conditions that are not

anticipated.

●

Unanticipated integration

issues relating to the proposed acquisition

of assets from Shell, such as

potential disruptions of our ongoing business and

higher than anticipated integration

costs.

●

Uncertainty as to the long-term value of our

common stock.

●

The diversion of management time on integration

-related matters.

●

The factors generally described

in Part I—Item 1A in our 2020 Annual Report

on Form 10-K and any

additional risks described in our other filings with the SEC.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Information about market

risks for the nine months ended September

30, 2021, does not differ materially from

that discussed under Item 7A in our 2020 Annual Report

on Form 10-K.

ConocoPhillips

2021 Q3 10-Q

Item 4.

Controls and Procedures

We maintain disclosure

controls and procedures

designed to ensure information required

to be disclosed in

reports we file or submit under the Securities Exchange

Act of 1934, as amended (the Act), is recorded, processed,

summarized and reported within the

time periods specified in SEC rules and forms, and

that such information is

accumulated and communicated

to management, including our principal executive

and principal financial officers,

as appropriate, to allow timely decisions

regarding required disclosure.

At September 30, 2021, with the

participation of our management, our Chairman and

Chief Executive Officer (principal executive

officer) and our

Executive Vice President and Chief

Financial Officer (principal financial officer) carried

out an evaluation, pursuant

to Rule 13a-15(b) of the Act, of ConocoPhillips’ disclosure

controls and procedures

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

the Act).

Based upon that evaluation, our Chairman

and Chief Executive Officer and our Executive

Vice President

and Chief Financial Officer concluded our disclosure

controls and procedures were

operating effectively

September 30, 2021.

There have been no changes in our internal

control over financial reporting, as defined in

Rule 13a-15(f) of the Act,

in the period covered by this report that

have materially affected,

or are reasonably likely to

materially affect, our

internal control over financial

reporting.

PART

II.

Other Information

Item 1.

Legal Proceedings

The interim-period financial information

presented in the financial statements

included in this report is unaudited.

There are no new material legal

proceedings or material developments

with respect to matters

previously

disclosed in Item 3 of our 2020 Annual Report on Form

10-K.

Item 1A.

Risk Factors

Other than the risk factors set forth

below, there

have been no material changes

to the risk factors disclosed

in our

Annual Report on Form 10-K for the

fiscal year ended December 31, 2020.

Risks Related to the Proposed Shell Permian

Acquisition

Our ability to complete the Shell Permian

Acquisition is subject to various closing conditions,

including regulatory

clearance, which may impose conditions that could adversely

affect us or cause the acquisition not to be

completed.

The Shell Permian Acquisition is subject to a number of conditions

to closing as specified in the definitive

agreement signed on September 20, 2021 (Purchase

Agreement), including but not limited to

the expiration or

termination of the waiting period under the Hart-Scott

-Rodino Antitrust Improvements

Act of 1976, as

amended. No assurance can be given that

the required regulatory clearance

will be obtained or that the other

required conditions to closing will be satisfied,

and, if the regulatory clearance is obtained

and the required

conditions are satisfied, no assurance

can be given as to the terms, conditions and

timing of such clearance,

including whether any required conditions

will materially adversely affect

ConocoPhillips following the Shell

Permian Acquisition.

Any delay in closing the Shell Permian

Acquisition could cause ConocoPhillips not to

realize,

or to be delayed in realizing, some or all of the benefits that

we expect to achieve if the Shell Permian

Acquisition

is successfully closed within its expected time frame.

ConocoPhillips

2021 Q3 10-Q

The termination of the Purchase Agreement could negatively

impact our business and in some circumstances, we

could forfeit a portion of the purchase price.

If the Shell Permian Acquisition is not completed

for any reason, including if the above

closing conditions are not

satisfied, our ongoing business may be adversely

affected and, without realizing

any of the expected benefits of

having completed the Shell Permian

Acquisition, we would be subject to a number

of risks, including the following:

●

We may experience negative

reactions from the financial markets,

including negative impacts on the

trading price of our common stock; and

●

We will be required to pay

our costs relating to the Shell Permian Acquisition,

such as legal and

accounting costs and associated

fees and expenses, whether or not the Shell Permian

Acquisition is

completed.

Additionally, upon

entry into the Purchase Agreement, 5%

(the Deposit) of the $9.5 billion (Base Purchase Price)

was paid to Shell.

If the Purchase Agreement is terminated

solely as a result of the material breach or failure

any of our representations,

warranties or covenants

included in the Purchase Agreement, the Deposit will not

refunded.

Integrating the assets acquired in the Shell Permian Acquisition

may be more difficult, costly or time-consuming

than expected and we may fail to realize

the full anticipated benefits of the transaction, which may adversely

affect our business results and negatively affect the value of our common stock.

We may encounter difficulties

integrating the assets acquired

from Shell into our business and realizing the

anticipated benefits of the transaction

or such benefits may take longer

to realize than expected.

The Shell

Permian Acquisition is expected to

add approximately 225,000 net acres,

thereby increasing our unconventional

position in Permian by nearly 30 percent.

There are a large number of processes,

policies, procedures, operations

and technologies and systems

that must be integrated

in connection with the Shell Permian Acquisition and the

integration of Shell’s

assets.

It is possible that the integration process

could result in the disruption of our ongoing

business; inconsistencies in standards,

controls, procedures and

policies; unexpected integration

issues; higher

than expected integration

costs and an overall post

-completion integration process

that takes longer than

originally anticipated.

We will be required to devote

management attention

and resources to integrating

the

business practices and operations,

and prior to closing the transaction, management attention

and resources will

be required to plan for such integration.

An inability to realize the full extent

of the anticipated benefits of the

Shell Permian Acquisition, as well as any delays

encountered in the integration

process, could have an adverse

effect on our revenues or

on our level of expenses and operating

results, which may adversely affect

the value of

our common stock.

In addition, the actual integration may

result in additional and unforeseen expenses.

Although

we expect that the strategic

benefits, and additional income, as well as the realization

of other efficiencies related

to the integration of the Shell assets,

may offset incremental

transaction-related costs

over time, if we are not able

to adequately address integration

challenges, we may be unable to successfully

integrate operations

or realize the

anticipated benefits of the integration

of the Shell assets.

ConocoPhillips

2021 Q3 10-Q

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Millions of Dollars

Period

Total

Number of

Purchased

Average Price Paid

per Share

Total

Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Programs

Approximate Dollar

Value of Shares That

May Yet Be Purchased

Under the Plans or

Programs

July 1-31, 2021

7,118,526

58.18

7,118,526

13,088

August 1-31, 2021

7,530,282

55.61

7,530,282

12,669

September 1-30, 2021

6,990,322

58.70

6,990,322

12,259

21,639,130

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

employee incentive plans.

In late 2016, we initiated our current

share repurchase program,

which has a total program authorization

of $25

billion of our common stock.

At September 30, 2021, we had repurchased

$12.7 billion of shares, with $12.3

billion remaining under our current authorization.

Repurchases are made at management’s

discretion, at

prevailing prices, subject to market

conditions and other factors.

Except as limited by applicable legal

requirements, repurchases

may be increased, decreased or discontinued

at any time without prior notice.

of stock repurchased under the plan are

held as treasury shares.

See the “Our ability to declare and pay

dividends

and repurchase shares is subject to certain

considerations” section in Risk Factors

on page 31 of our 2020 Annual

Report on Form 10-K.

Purchase and Sale Agreement, dated as of September 20, 2021, by and between Shell Enterprises

ConocoPhillips

2021 Q3 10-Q

Item 6.

Exhibits

10.1*

LLC and ConocoPhillips Company.

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.