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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number: 001-32395
cop-20220331_g1.jpg
ConocoPhillips
(Exact name of registrant as specified in its charter)
Delaware01-0562944
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
925 N. Eldridge Parkway, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
281-293-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbols
Name of each exchange on which registered
Common Stock, $.01 Par Value
COP
New York Stock Exchange
7% Debentures due 2029
CUSIP—718507BK1
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer        Accelerated filer        Non-accelerated filer        Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The registrant had 1,293,449,547 shares of common stock, $.01 par value, outstanding at March 31, 2022.



Table of Contents


Commonly Used Abbreviations
Commonly Used Abbreviations
The following industry-specific, accounting and other terms, and abbreviations may be commonly used in this report.
Currencies
Accounting
$ or USD
U.S. dollar
ARO
asset retirement obligation
CAD
Canadian dollar
ASC
accounting standards codification
EUR
Euro
ASU
accounting standards update
GBP
British pound
DD&A
depreciation, depletion and amortization
Units of Measurement
FASB
Financial Accounting Standards
Board
BBL
barrel
BCF
billion cubic feet
FIFO
first-in, first-out
BOE
barrels of oil equivalent
G&A
general and administrative
MBD
thousands of barrels per day
GAAP
generally accepted accounting principles
MCF
thousand cubic feet
MBOD
thousand barrels of oil per day
LIFO
last-in, first-out
MM
million
NPNS
normal purchase normal sale
MMBOE
million barrels of oil equivalent
PP&E
properties, plants and equipment
MMBOD
million barrels of oil per day
VIE
variable interest entity
MBOED
thousands of barrels of oil equivalent per day
MMBOED
millions of barrels of oil equivalent per day
Miscellaneous
MMBTU
million British thermal units
DE&I
diversity, equity and inclusion
MMCFD
million cubic feet per day
EPA
Environmental Protection Agency
ESG
Environmental, Social and Corporate Governance
Industry
EU
European Union
BLM
Bureau of Land Management
FERC
Federal Energy Regulatory Commission
CBM
coalbed methane
CCUS
carbon capture utilization and
GHG
greenhouse gas
storage
HSE
health, safety and environment
E&P
exploration and production
ICC
International Chamber of Commerce
FEED
front-end engineering and design
ICSID
World Bank’s International
FPS
floating production system
Centre for Settlement of
FPSOfloating production, storage and Investment Disputes

offloading
IRS
Internal Revenue Service
G&G
geological and geophysical
OTC
over-the-counter
JOA
joint operating agreement
NYSE
New York Stock Exchange
LNG
liquefied natural gas
SEC
U.S. Securities and Exchange
NGLs
natural gas liquids
Commission
OPEC
Organization of Petroleum
TSR
total shareholder return
Exporting Countries
U.K.
United Kingdom
PSC
production sharing contract
U.S.
United States of America
PUDs
proved undeveloped reserves
VROCvariable return of cash
SAGD
steam-assisted gravity drainage
WCS
Western Canada Select
WTI
West Texas Intermediate
1
ConocoPhillips      2022 Q1 10-Q

Financial Statements
PART I. Financial Information
Item 1.    Financial Statements
Consolidated Income Statement
ConocoPhillips

Millions of Dollars

Three Months Ended
March 31
20222021
Revenues and Other Income
Sales and other operating revenues
$17,762 9,826 
Equity in earnings of affiliates
426 122 
Gain on dispositions
817 233 
Other income
286 378 
Total Revenues and Other Income
19,291 10,559 
Costs and Expenses

Purchased commodities
6,751 4,483 
Production and operating expenses
1,581 1,383 
Selling, general and administrative expenses
187 311 
Exploration expenses
69 84 
Depreciation, depletion and amortization
1,823 1,886 
Impairments
2 (3)
Taxes other than income taxes
814 370 
Accretion on discounted liabilities
61 62 
Interest and debt expense
217 226 
Foreign currency transaction loss
24 19 
Other expenses
(136)24 
Total Costs and Expenses
11,393 8,845 
Income before income taxes
7,898 1,714 
Income tax provision
2,139 732 
Net Income
$5,759 982 
Net Income Per Share of Common Stock (dollars)
Basic$4.41 0.75 
Diluted4.39 0.75 
Average Common Shares Outstanding (in thousands)
Basic1,301,930 1,300,375 
Diluted1,307,404 1,302,691 
See Notes to Consolidated Financial Statements.
ConocoPhillips      2022 Q1 10-Q
2

Financial Statements
Consolidated Statement of Comprehensive Income
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
20222021
Net Income
$5,759 982 
Other comprehensive income
Defined benefit plans

Reclassification adjustment for amortization of prior
   service credit included in net income
(10)(9)
Net change(10)(9)
Net actuarial gain arising during the period
 75 
Reclassification adjustment for amortization of net actuarial
   losses included in net income
16 25 
Net change16 100 
Income taxes on defined benefit plans
(2)(21)
Defined benefit plans, net of tax
4 70 
Unrealized holding loss on securities
(4)(1)
Income taxes on unrealized holding loss on securities
1  
Unrealized holding loss on securities, net of tax
(3)(1)
Foreign currency translation adjustments
141 69 
Foreign currency translation adjustments, net of tax
141 69 
Other Comprehensive Income, Net of Tax
142 138 
Comprehensive Income
$5,901 1,120 
See Notes to Consolidated Financial Statements.

3
ConocoPhillips      2022 Q1 10-Q

Financial Statements
Consolidated Balance Sheet
ConocoPhillips
Millions of Dollars

March 31 2022December 31 2021
Assets


Cash and cash equivalents
$6,414 5,028 
Short-term investments
730 446 
Accounts and notes receivable (net of allowance of $2 and $2, respectively)
7,807 6,543 
Accounts and notes receivable—related parties
72 127 
Investment in Cenovus Energy
 1,117 
Inventories
1,174 1,208 
Prepaid expenses and other current assets
1,389 1,581 
Total Current Assets
17,586 16,050 
Investments and long-term receivables
8,309 7,113 
Net properties, plants and equipment (net of accumulated DD&A of $64,711 and $64,735, respectively)
64,642 64,911 
Other assets
2,771 2,587 
Total Assets
$93,308 90,661 
Liabilities

Accounts payable
$4,875 5,002 
Accounts payable—related parties
22 23 
Short-term debt
1,160 1,200 
Accrued income and other taxes
3,162 2,862 
Employee benefit obligations
446 755 
Other accruals
1,959 2,179 
Total Current Liabilities
11,624 12,021 
Long-term debt
17,586 18,734 
Asset retirement obligations and accrued environmental costs
5,815 5,754 
Deferred income taxes
6,556 6,179 
Employee benefit obligations
1,085 1,153 
Other liabilities and deferred credits
1,424 1,414 
Total Liabilities
44,090 45,255 
Equity

Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2022—2,098,495,534 shares; 2021—2,091,562,747 shares)
Par value
21 21 
Capital in excess of par
60,907 60,581 
Treasury stock (at cost: 2022—805,045,987 shares; 2021—789,319,875 shares)
(52,344)(50,920)
Accumulated other comprehensive loss
(4,808)(4,950)
Retained earnings
45,442 40,674 
Total Equity
49,218 45,406 
Total Liabilities and Equity
$93,308 90,661 
See Notes to Consolidated Financial Statements.
ConocoPhillips      2022 Q1 10-Q
4

Financial Statements
Consolidated Statement of Cash Flows
ConocoPhillips

Millions of Dollars

Three Months Ended
March 31

20222021
Cash Flows From Operating Activities
Net income
$5,759 982 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization
1,823 1,886 
Impairments
2 (3)
Dry hole costs and leasehold impairments
7 6 
Accretion on discounted liabilities
61 62 
Deferred taxes
373 203 
Undistributed equity earnings
220 81 
Gain on dispositions
(817)(233)
Gain on investment in Cenovus Energy
(251)(308)
Other
(152)(581)
Working capital adjustments

Increase in accounts and notes receivable
(1,535)(785)
Decrease (increase) in inventories
27 (51)
Decrease (increase) in prepaid expenses and other current assets
58 (43)
Increase (decrease) in accounts payable
(204)424 
Increase (decrease) in taxes and other accruals
(303)440 
Net Cash Provided by Operating Activities
5,068 2,080 
Cash Flows From Investing Activities

Capital expenditures and investments
(3,161)(1,200)
Working capital changes associated with investing activities
363 61 
Acquisition of businesses, net of cash acquired
37 382 
Proceeds from asset dispositions
2,332 (17)
Net purchases of investments
(263)(499)
Collection of advances/loans—related parties
55 52 
Other
26 6 
Net Cash Used in Investing Activities
(611)(1,215)
Cash Flows From Financing Activities
Issuance of debt
2,897  
Repayment of debt
(3,964)(26)
Issuance of company common stock
271 (28)
Repurchase of company common stock
(1,425)(375)
Dividends paid
(864)(588)
Other
(52)2 
Net Cash Used in Financing Activities
(3,137)(1,015)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
21 (2)
Net Change in Cash, Cash Equivalents and Restricted Cash
1,341 (152)
Cash, cash equivalents and restricted cash at beginning of period
5,398 3,315 
Cash, Cash Equivalents and Restricted Cash at End of Period
$6,739 3,163 
Restricted cash of $0 million and $325 million are included in the "Prepaid expenses and other current assets" and "Other assets" lines, respectively, of our Consolidated Balance Sheet as of March 31, 2022.
Restricted cash of $152 million and $218 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, 2021.
See Notes to Consolidated Financial Statements.
5
ConocoPhillips      2022 Q1 10-Q

Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements

Note 1—Basis of Presentation
The interim-period financial information presented in the financial statements included in this report is unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair presentation of the consolidated financial position of ConocoPhillips, its results of operations and cash flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2021 Annual Report on Form 10-K.

Note 2—Inventories
Millions of Dollars
March 31 2022December 31 2021
Crude oil and natural gas
$611 647 
Materials and supplies
563 561 
Total Inventories
$1,174 1,208 
Inventories valued on the LIFO basis
$353 395 

Note 3—Acquisitions and Dispositions
Acquisition of Shell Enterprise LLC's (Shell) Permian Assets
In December 2021, we completed our acquisition of Shell's assets in the Permian based Delaware Basin in an all-cash transaction for $8.6 billion after customary adjustments. Assets acquired include approximately 225,000 net acres and producing properties located entirely in Texas. The acquisition was accounted for as a business combination under FASB Topic ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date as we identify new information about facts and circumstances that existed 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. The fair values determined for accounts receivable, 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 $8.6 billion was allocated to the identifiable assets and liabilities based on their fair values at the acquisition date.

ConocoPhillips      2022 Q1 10-Q
6

Notes to Consolidated Financial Statements
Assets AcquiredMillions of Dollars
Accounts receivable, net$337 
Inventories20 
Net properties, plants and equipment8,582 
Other assets50 
Total assets acquired$8,989 
Liabilities Assumed
Accounts payable$206 
Accrued income and other taxes6 
Other accruals20 
Asset retirement obligations and accrued environmental costs86 
Other liabilities and deferred credits36 
Total liabilities assumed$354 
Net assets acquired$8,635 

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

Supplemental Pro Forma (unaudited)
The following table summarizes the unaudited supplemental pro forma financial information for the three-month period ending March 31, 2021, as if we had completed the acquisition of Shell's Permian assets on January 1, 2020:

Millions of Dollars
Three Months Ended
March 31, 2021
Supplemental Pro Forma (unaudited)As ReportedPro forma ShellPro forma Combined
Total Revenues and Other Income10,559 596 11,155 
Income before income taxes1,714 119 1,833 
Net Income982 91 1,073 
Earnings per share ($ per share):
Basic net income$0.75 0.82 
Diluted net income0.75 0.82 

The unaudited supplemental pro forma financial information is presented for illustration and comparative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been completed on January 1, 2020, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma financial information for the three-month period ending March 31, 2021, is a result of combining the consolidated income statement of ConocoPhillips with the results of the assets acquired from Shell. The pro forma results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction. The pro forma results include adjustments made primarily to DD&A, which is based on the unit-of-production method, resulting from the purchase price allocated to properties, plants and equipment. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected.

7
ConocoPhillips      2022 Q1 10-Q

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

Acquisition of Additional Shareholding Interest in Australia Pacific LNG Pty Ltd (APLNG)
In February 2022, we completed the acquisition of an additional 10 percent interest in APLNG from Origin Energy for approximately $1.4 billion after customary adjustments in an all-cash transaction resulting from the exercise of our preemption right. This increases our ownership in APLNG to 47.5 percent, with Origin Energy and Sinopec owning 27.5 percent and 25 percent, respectively. APLNG is reported as an equity investment in our Asia Pacific segment.

Assets Sold
In March 2022, we completed the divestiture of our subsidiaries that held our Indonesia assets and operations, and based on an effective date of January 1, 2021, we received net proceeds of $731 million after customary adjustments and recognized a $534 million before-tax and $462 million after-tax gain related to this transaction. Together, the subsidiaries sold indirectly held our 54 percent interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and 35 percent shareholding in the Transasia Pipeline Company. At the time of the disposition, the net carrying value was approximately $0.2 billion, excluding $0.2 billion of cash and restricted cash. The net book value consisted primarily of $0.3 billion of PP&E and $0.1 billion of ARO. The before-tax earnings associated with the subsidiaries sold, excluding the gain on disposition noted above, were $138 million and $122 million for the three-month period ended March 31, 2022 and 2021, respectively. Results of operations for the Indonesia interests sold were reported in our Asia Pacific segment.
For the three-months ended March 31, 2022, we recorded contingent payments of $250 million, relating to the previous dispositions of our interest in the Foster Creek Christina Lake Partnership and western Canada gas assets as well as our San Juan assets. The contingent payments are recorded as gain on disposition in our consolidated income statement and are reflected within our Canada and Lower 48 segments. In the first quarter of 2021, we recorded contingent payments of $26 million.

Assets Held for Sale
In January 2022, we entered into an agreement to sell our interests in certain noncore assets in the Lower 48 segment for $440 million, before customary adjustments. These assets have a net carrying value of approximately $289 million, which consisted primarily of $400 million of PP&E and $111 million of liabilities, primarily noncurrent AROs. These assets met held for sale criteria in the first quarter, and as of March 31, 2022, we reclassified the PP&E to "Prepaid expenses and other current assets" and the noncurrent liabilities to "Other accruals" on our consolidated balance sheet. The before-tax earnings associated with these assets were $23.1 million and $0.5 million for the three-month periods ended March 31, 2022 and 2021, respectively. This transaction closed in April 2022.
ConocoPhillips      2022 Q1 10-Q
8

Notes to Consolidated Financial Statements
Note 4—Investments, Loans and Long-Term Receivables
APLNG
APLNG executed project agreements for an $8.5 billion project finance facility in 2012 which became non-recourse following financial completion in 2017. Following restructuring efforts, the facility is currently composed of a financing agreement with the Export-Import Bank of the United States, a commercial bank facility and two United States Private Placement note facilities. APLNG principal and interest payments commenced in March 2017 and are scheduled to occur bi-annually until September 2030. At March 31, 2022, a balance of $5.5 billion was outstanding on these facilities. See Note 8.

In February 2022, we completed the acquisition of an additional 10 percent interest in APLNG from Origin Energy for approximately $1.4 billion resulting from the exercise of our preemption right. This increases our ownership in APLNG to 47.5 percent, with Origin Energy and Sinopec owning 27.5 percent and 25 percent, respectively.
At March 31, 2022, the carrying value of our equity method investment in APLNG was $6.8 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 March 31, 2022, significant loans to affiliated companies included $59 million in project financing to Qatar Liquefied Gas Company Limited (3), which is included within the “Accounts and notes receivable—related parties” line on our consolidated balance sheet.

Note 5—Investment in Cenovus Energy
During 2021, we initiated disposal of our Cenovus Energy (CVE) common shares and at March 31, 2022, we are fully divested of our investment.

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

All gains and losses are recognized within "Other income” on our consolidated income statement. Proceeds related to the sale of our CVE shares are included within “Cash Flows from Investing Activities” on our consolidated statement of cash flows. See Note 11.
Millions of Dollars
Three Months Ended
March 31
20222021
Total Net gain on equity securities
$251 308 
Less: Net gain on equity securities sold during the period
251  
Unrealized gain on equity securities still held at the reporting date
$ 308 
9
ConocoPhillips      2022 Q1 10-Q

Notes to Consolidated Financial Statements
Note 6—Debt
Millions of Dollars
March 31 2022December 31 2021
2.4% Notes due 2022
$329 329 
7.65% Debentures due 2023
78 78 
3.35% Notes due 2024
426 426 
2.125% Notes due 2024
900  
8.2% Notes due 2025
134 134 
3.35% Debentures due 2025
199 199 
2.4% Notes due 2025
900  
6.875% Debentures due 2026
67 67 
4.95% Notes due 2026
1,250 1,250 
7.8% Debentures due 2027
203 203 
3.75% Notes due 2027
196 1,000 
4.3% Notes due 2028
223 1,000 
7.375% Debentures due 2029
92 92 
7% Debentures due 2029
112 200 
6.95% Notes due 2029
1,195 1,549 
8.125% Notes due 2030
390 390 
7.4% Notes due 2031
382 500 
7.25% Notes due 2031
400 500 
7.2% Notes due 2031
447 575 
2.4% Notes due 2031
227 500 
5.9% Notes due 2032
505 505 
4.15% Notes due 2034
246 246 
5.95% Notes due 2036
326 500 
5.951% Notes due 2037
645 645 
5.9% Notes due 2038
350 600 
6.5% Notes due 2039
1,588 2,750 
3.758% Notes due 2042
785  
4.3% Notes due 2044
750 750 
5.95% Notes due 2046
329 500 
7.9% Debentures due 2047
60 60 
4.875% Notes due 2047
319 800 
4.85% Notes due 2048
219 600 
3.8% Notes due 2052
1,100  
4.025% Notes due 2062
1,770  
Floating rate notes due 2022 at 1.06% – 1.41% during 2022 and 1.02% –1.12% during 2021
500 500 
Marine Terminal Revenue Refunding Bonds due 2031 at 0.07% – 0.65% during 2022 and 0.04% – 0.15% during 2021
265 265 
Industrial Development Bonds due 2035 at 0.07%% – 0.65% during 2022 and 0.04% – 0.12% during 2021
18 18 
Other35 35 
Debt at face value17,960 17,766 
Finance leases1,308 1,261 
Net unamortized premiums, discounts and debt issuance costs(522)907 
Total debt18,746 19,934 
Short-term debt(1,160)(1,200)
Long-term debt$17,586 18,734 

ConocoPhillips      2022 Q1 10-Q
10

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

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

3.75% Notes due 2027 with principal of $1,000 million (partial repurchase of $804 million)
4.3% Notes due 2028 with principal of $1,000 million (partial repurchase of $777 million)
2.4% Notes due 2031 with principal of $500 million (partial repurchase of $273 million)
4.875% Notes due 2047 with principal of $800 million (partial repurchase of $481 million)
4.85% Notes due 2048 with principal of $600 million (partial repurchase of $381 million)

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

The notes tendered and accepted in the exchange offers were:
7% Debentures due 2029 with principal amount of $200 million (partial exchange of $88 million)
6.95% Notes due 2029 with principal amount of $1,549 million (partial exchange of $354 million)
7.4% Notes due 2031 with principal amount of $500 million (partial exchange of $118 million)
7.25% Notes due 2031 with principal amount of $500 million (partial exchange of $100 million)
7.2% Notes due 2031 with principal amount of $575 million (partial exchange of $128 million)
5.95% Notes due 2036 with principal amount of $500 million (partial exchange of $174 million)
5.9% Notes due 2038 with principal amount of $600 million (partial exchange of $250 million)
6.5% Notes due 2039 with principal amount of $2,750 million (partial exchange of $1,162 million)
5.95% Notes due 2046 with principal amount of $500 million (partial exchange of $171 million)

The notes tendered and accepted were exchanged for the following new notes:
3.758% Note due 2042 with principal amount of $785 million
4.025% Note due 2062 with principal amount of $1,770 million

New Debt Issuance
On March 8, 2022 we issued the following new notes consisting of:
2.125% Notes due 2024 with principal of $900 million
2.4% Notes due 2025 with principal of $900 million
3.8% Notes due 2052 with principal of $1,100 million

In April 2022, we provided formal notice to holders of our 4.95% Notes due 2026 with principal of $1,250 million that we would retire this debt in full per the provisions in the bond indenture, with settlement scheduled for May 2022. Retirement of this bond will be sourced from cash and further accelerates progress towards our debt reduction target.

In February 2022, we refinanced our revolving credit facility from a total borrowing capacity of $6.0 billion to $5.5 billion with an expiration date of February 2027. Our revolving credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as support for our commercial paper program. The revolving credit facility is broadly syndicated among financial institutions and does not contain any material adverse change provisions or any covenants requiring maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-default provision relating to the failure to pay principal or interest on other debt obligations of $200 million or more by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to redetermination prior to its expiration date.
11
ConocoPhillips      2022 Q1 10-Q

Notes to Consolidated Financial Statements
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 $5.5 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 no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at March 31, 2022. At December 31, 2021, we had no commercial paper outstanding and no direct borrowings or letters of credit issued.
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

We do not have any ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity upon downgrade of our credit ratings. If our credit ratings are downgraded from their current levels, it could increase the cost of corporate debt available to us and restrict our access to the commercial paper markets. If our credit rating were to deteriorate to a level prohibiting us from accessing the commercial paper market, we would still be able to access funds under our revolving credit facility.
At March 31, 2022, 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.
ConocoPhillips      2022 Q1 10-Q
12

Notes to Consolidated Financial Statements
Note 7—Changes in Equity
Millions of Dollars
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
For the three months ended March 31, 2022
Balances at December 31, 2021$21 60,581 (50,920)(4,950)40,674 45,406 
Net income5,759 5,759 
Other comprehensive income142 142 
Dividends declared
Ordinary ($0.46 per common share)
(603)(603)
Variable return of cash ($0.30 per common share)
(390)(390)
Repurchase of company common stock(1,425)(1,425)
Distributed under benefit plans326 326 
Other1 2 3 
Balances at March 31, 2022$21 60,907 (52,344)(4,808)45,442 49,218 
For the three months ended March 31, 2021
Balances at December 31, 2020$18 47,133 (47,297)(5,218)35,213 29,849 
Net income982 982 
Other comprehensive income138 138 
Dividends declared
  Ordinary ($0.43 per common share)
(588)(588)
Acquisition of Concho3 13,122 13,125 
Repurchase of company common stock(375)(375)
Distributed under benefit plans23 23 
Other1 1 
Balances at March 31, 2021
$21 60,278 (47,672)(5,080)35,608 43,155 
13
ConocoPhillips      2022 Q1 10-Q

Notes to Consolidated Financial Statements
Note 8—Guarantees
At March 31, 2022, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.
APLNG Guarantees
At March 31, 2022, we had outstanding multiple guarantees in connection with our 47.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing March 2022 exchange rates:
During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rata portion of the funds in a project finance reserve account. We estimate the remaining term of this guarantee is 9 years. Our maximum exposure under this guarantee is approximately $210 million and may become payable if an enforcement action is commenced by the project finance lenders against APLNG. At March 31, 2022, the carrying value of this guarantee was $14 million.

In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy Limited in October 2008, we agreed to reimburse Origin Energy Limited for our share of the existing contingent liability arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales agreements. The final guarantee expires in the fourth quarter of 2041. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be $910 million ($1.6 billion in the event of intentional or reckless breach) and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the co-ventures do not make necessary equity contributions into APLNG.
We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of 15 to 24 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $290 million and would become payable if APLNG does not perform. At March 31, 2022, the carrying value of these guarantees was approximately $20 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 March 31, 2022, the carrying value of these guarantees was $8 million.
Indemnifications
Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes and environmental liabilities. The carrying amount recorded for these indemnification obligations at March 31, 2022, was $20 million. Those related to environmental issues have terms that are generally indefinite and the maximum amounts of future payments are generally unlimited. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. See Note 9 for additional information about environmental liabilities.
ConocoPhillips      2022 Q1 10-Q
14

Notes to Consolidated Financial Statements
Note 9—Contingencies and Commitments
A number of lawsuits involving a variety of claims arising in the ordinary course of business have been filed against ConocoPhillips. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the low end of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. We accrue receivables for insurance or other third-party recoveries when applicable. With respect to income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.
Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.
Environmental
We are subject to international, federal, state and local environmental laws and regulations and record accruals for environmental liabilities based on management’s best estimates. These estimates are based on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. EPA or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.
Although liability of those potentially responsible for environmental remediation costs is generally joint and several for federal sites and frequently so for other sites, we are usually only one of many companies cited at a particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites at which we are potentially responsible are still under investigation by the EPA or the agency concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit, and some of the indemnifications are subject to dollar limits and time limits.
We are currently participating in environmental assessments and cleanups at numerous federal Superfund and comparable state and international sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those acquired in a purchase business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. We have not reduced these accruals for possible insurance recoveries.
At March 31, 2022, our balance sheet included a total environmental accrual of $184 million, compared with $187 million at December 31, 2021, 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.
15
ConocoPhillips      2022 Q1 10-Q

Notes to Consolidated Financial Statements
Litigation and Other Contingencies
We are subject to various lawsuits and claims including, but not limited to, matters involving oil and gas royalty and severance tax payments, gas measurement and valuation methods, contract disputes, environmental damages, climate change, personal injury, and property damage. Our primary exposures for such matters relate to alleged royalty and tax underpayments on certain federal, state and privately owned properties, claims of alleged environmental contamination and damages from historic operations, and climate change. We will continue to defend ourselves vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.
We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at March 31, 2022, we had performance obligations secured by letters of credit of $340 million (issued as direct bank letters of credit) related to various purchase commitments for materials, supplies, commercial activities and services incident to the ordinary conduct of business.
In 2007, ConocoPhillips was unable to reach agreement with respect to the empresa mixta structure mandated by the Venezuelan government’s Nationalization Decree. As a result, Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’ interests in the Petrozuata and Hamaca heavy oil ventures and the offshore Corocoro development project. In response to this expropriation, ConocoPhillips initiated international arbitration on November 2, 2007, with the ICSID. On September 3, 2013, an ICSID arbitration tribunal held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in June 2007. On January 17, 2017, the Tribunal reconfirmed the decision that the expropriation was unlawful. In March 2019, the Tribunal unanimously ordered the government of Venezuela to pay ConocoPhillips approximately $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.
In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $2 billion under their agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures. In August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the payment period, including initial payments totaling approximately $500 million within a period of 90 days from the time of signing of the settlement agreement. The balance of the settlement is to be paid quarterly over a period of four and a half years. Per the settlement, PDVSA recognized the ICC award as a judgment in various jurisdictions, and ConocoPhillips agreed to suspend its legal enforcement actions. ConocoPhillips sent notices of default to PDVSA on October 14 and November 12, 2019, and to date PDVSA has failed to cure its breach. As a result, ConocoPhillips has resumed legal enforcement actions. To date, ConocoPhillips has received approximately $769 million in connection with the ICC award. ConocoPhillips has ensured that the settlement and any actions taken in enforcement thereof meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.
In 2016, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Corocoro Project. On August 2, 2019, the ICC Tribunal awarded ConocoPhillips approximately $33 million plus interest under the Corocoro contracts. ConocoPhillips is seeking recognition and enforcement of the award in various jurisdictions. ConocoPhillips has ensured that all the actions related to the award meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.
ConocoPhillips      2022 Q1 10-Q
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Notes to Consolidated Financial Statements
Beginning in 2017, governmental and other entities in several states in the U.S. have filed lawsuits against oil and gas companies, including ConocoPhillips, seeking compensatory damages and equitable relief to abate alleged climate change impacts. Additional lawsuits with similar allegations are expected to be filed. The amounts claimed by plaintiffs are unspecified and the legal and factual issues involved in these cases are unprecedented. ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against such lawsuits.
Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips, seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by historical oil and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will vigorously defend against them. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty about these claims (both as to scope and damages) and we continue to evaluate our exposure in these lawsuits.
In October 2020, the Bureau of Safety and Environmental Enforcement (BSEE) ordered the prior owners of Outer Continental Shelf (OCS) Lease P-0166, including ConocoPhillips, to decommission the lease facilities, including two offshore platforms located near Carpinteria, California. This order was sent after the current owner of OCS Lease P-0166 relinquished the lease and abandoned the lease platforms and facilities. BSEE’s order to ConocoPhillips is premised on its connection to Phillips Petroleum Company, a legacy company of ConocoPhillips, which held a historical 25 percent interest in this lease and operated these facilities, but sold its interest approximately 30 years ago. ConocoPhillips is challenging the BSEE order but continues to evaluate its exposure in this matter.
On May 10, 2021, ConocoPhillips filed arbitration under the rules of the Singapore International Arbitration Centre (SIAC) against Santos KOTN Pty Ltd. and Santos Limited for their failure to timely pay the $200 million bonus due upon FID of the Barossa development project under the sale and purchase agreement. Santos KOTN Pty Ltd. and Santos Limited have filed a response and counterclaim, and the arbitration is underway.
In July 2021, a federal securities class action was filed against Concho, certain of Concho’s officers, and ConocoPhillips as Concho’s successor in the United States District Court for the Southern District of Texas. On October 21, 2021, the court issued an order appointing Utah Retirement Systems and the Construction Laborers Pension Trust for Southern California as lead plaintiffs (Lead Plaintiffs). On January 7, 2022, the Lead Plaintiffs filed their consolidated complaint alleging that Concho made materially false and misleading statements regarding its business and operations in violation of the federal securities laws and seeking unspecified damages, attorneys’ fees, costs, equitable/injunctive relief, and such other relief that may be deemed appropriate. We believe the allegations in the action are without merit and are vigorously defending this litigation.

Note 10—Derivative and Financial Instruments
We use futures, forwards, swaps and options in various markets to meet our customer needs, capture market opportunities and manage foreign exchange currency risk.
Commodity Derivative Instruments
Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG and NGLs.
Commodity derivative instruments are held at fair value on our consolidated balance sheet. Where these balances have the right of setoff, they are presented on a net basis. Related cash flows are recorded as operating activities on our consolidated statement of cash flows. On our consolidated income statement, gains and losses are recognized either on a gross basis if directly related to our physical business or a net basis if held for trading. Gains and losses related to contracts that meet and are designated with the NPNS exception are recognized upon settlement. We generally apply this exception to eligible crude contracts and certain gas contracts. We do not apply hedge accounting for our commodity derivatives.
17
ConocoPhillips      2022 Q1 10-Q

Notes to Consolidated Financial Statements
The following table presents the gross fair values of our commodity derivatives, excluding collateral, and the line items where they appear on our consolidated balance sheet:
Millions of Dollars
March 31
2022
December 31
2021
Assets
Prepaid expenses and other current assets
$1,471 1,168 
Other assets
154 75 
Liabilities
Other accruals
1,474 1,160 
Other liabilities and deferred credits
143 63 
The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated income statement were:
Millions of Dollars
Three Months Ended
March 31
20222021
Sales and other operating revenues
$(407)(279)
Other income
1 17 
Purchased commodities
401 13 
In the three months ended March 31, 2021, we recognized a $305 million loss on settlement of derivative contracts acquired through the Concho transaction. This loss is recorded within the “Sales and other operating revenues” line on our consolidated income statement. In connection with this settlement, we issued a cash payment of $692 million in the first quarter of 2021 and $69 million in the second quarter of 2021 which are included within “Cash Flows From Operating Activities” on our consolidated statement of cash flows.
The table below summarizes our material net exposures resulting from outstanding commodity derivative contracts:
Open Position
Long/(Short)
March 31
2022
December 31
2021
Commodity
Natural gas and power (billions of cubic feet equivalent)
Fixed price7 4 
Basis(5)(22)

ConocoPhillips      2022 Q1 10-Q
18

Notes to Consolidated Financial Statements
Financial Instruments
We invest in financial instruments with maturities based on our cash forecasts for the various accounts and currency pools we manage. The types of financial instruments in which we currently invest include:
Time deposits: Interest bearing deposits placed with financial institutions for a predetermined amount of time.
Demand deposits: Interest bearing deposits placed with financial institutions. Deposited funds can be withdrawn without notice.
Commercial paper: Unsecured promissory notes issued by a corporation, commercial bank or government agency purchased at a discount to mature at par.
U.S. government or government agency obligations: Securities issued by the U.S. government or U.S. government agencies.
Foreign government obligations: Securities issued by foreign governments.
Corporate bonds: Unsecured debt securities issued by corporations.
Asset-backed securities: Collateralized debt securities.
The following investments are carried on our consolidated balance sheet at cost, plus accrued interest and the table reflects remaining maturities at March 31, 2022 and December 31, 2021:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
March 31
2022
December 31
2021
March 31
2022
December 31
2021
Cash$594 670 
Demand Deposits
1,459