CONOCOPHILLIPS [COP] Filings

10-Q 1 cop-20240630.htm 10-Q cop-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2024


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

For the transition period from ___________________ to ___________________

Commission file number: 001-32395

ConocoPhillips

(Exact name of registrant as specified in its charter)


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

925 N. Eldridge Parkway, Houston, TX 77079

(Address of principal executive offices) (Zip Code)

281-293-1000

(Registrant's telephone number, including area code)

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


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

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

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

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

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

Emerging growth company ☐

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

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

The registrant had 1,161,249,790 shares of common stock, $.01 par value, outstanding at June 30, 2024.

Table of Contents


			Page
Commonly Used Abbreviations			1

Part I—Financial Information

Item 1. Financial Statements
Consolidated Income Statement			2
Consolidated Statement of Comprehensive Income			3
Consolidated Balance Sheet			4
Consolidated Statement of Cash Flows			5
Notes to Consolidated Financial Statements			6
Note 1—Basis of Presentation			6
Note 2—Inventories			6
Note 3—Acquisitions and Dispositions			6
Note 4—Investments and Long-Term Receivables			7
Note 5—Debt			8
Note 6—Changes in Equity			9
Note 7—Guarantees			10
Note 8—Contingencies, Commitments and Accrued Environmental Costs			11
Note 9—Suspended Wells and Exploration Expenses			13
Note 10—Derivative and Financial Instruments			14
Note 11—Fair Value Measurement			18
Note 12—Accumulated Other Comprehensive Income (Loss)			21
Note 13—Cash Flow Information			21
Note 14—Employee Benefit Plans			22
Note 15—Related Party Transactions			22
Note 16—Sales and Other Operating Revenues			23
Note 17—Earnings Per Share			24
Note 18—Segment Disclosures and Related Information			25
Note 19—Income Taxes			26
Note 20—Announced Acquisition of Marathon Oil Corporation			27
Note 21—New Accounting Standards			27
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			50
Item 4. Controls and Procedures			50

Part II—Other Information

Item 1. Legal Proceedings			50
Item 1A. Risk Factors			51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			53
Item 5. Other Information			53
Item 6. Exhibits			54
Signature			55


Commonly Used Abbreviations			Table of Contents

Commonly Used Abbreviations

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


Currencies		Accounting
$ or USD	U.S. dollar	ARO	asset retirement obligation
CAD	Canadian dollar	ASC	accounting standards codification
EUR	Euro	ASU	accounting standards update
GBP NOK	British pound Norwegian kroner	DD&A	depreciation, depletion and amortization
		FASB	Financial Accounting Standards Board
Units of Measurement
BBL	barrel	FIFO	first-in, first-out
BCF	billion cubic feet	G&A	general and administrative
BOE	barrel of oil equivalent	GAAP	generally accepted accounting principles
MBD	thousand barrels per day
MCF	thousand cubic feet	LIFO	last-in, first-out
MM	million	NPNS	normal purchase normal sale
MMBOE	million barrels of oil equivalent	PP&E	properties, plants and equipment
MBOED	thousand barrels of oil equivalent per day	VIE	variable interest entity
MMBOED	million barrels of oil equivalent per day
MMBTU	million British thermal units	Miscellaneous
MMCFD MTPA	million cubic feet per day million tonnes per annum	CERCLA	Federal Comprehensive Environmental Response Compensation and Liability Act
		DEI	diversity, equity and inclusion
Industry		EPA	Environmental Protection Agency
BLM	Bureau of Land Management	ESG	environmental, social and governance
CBM	coalbed methane	EU	European Union
CCS	carbon capture and storage	FERC	Federal Energy Regulatory Commission
E&P	exploration and production
FEED	front-end engineering and design	GHG	greenhouse gas
FID	final investment decision	HSE	health, safety and environment
FPS	floating production system	ICC	International Chamber of Commerce
FPSO	floating production, storage and	ICSID	World Bank’s International
	offloading		Centre for Settlement of
G&G	geological and geophysical		Investment Disputes
JOA	joint operating agreement	IRS	Internal Revenue Service
LNG	liquefied natural gas	OTC	over-the-counter
NGLs	natural gas liquids	NYSE	New York Stock Exchange
OPEC	Organization of Petroleum	SEC	U.S. Securities and Exchange
	Exporting Countries		Commission
PSC	production sharing contract	TSR	total shareholder return
PUDs	proved undeveloped reserves	U.K.	United Kingdom
SAGD	steam-assisted gravity drainage	U.S.	United States of America
WCS	Western Canadian Select	VROC	variable return of cash
WTI	West Texas Intermediate


1			ConocoPhillips 2024 Q2 10-Q


Financial Statements			Table of Contents

PART I. Financial Information

Item 1. Financial Statements


Consolidated Income Statement			ConocoPhillips


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2024		2023	2024	2023
Revenues and Other Income
Sales and other operating revenues	$	13,620	12,351	27,468	27,162
Equity in earnings of affiliates	403		412	824	911
Gain (loss) on dispositions	(5)		(1)	88	92
Other income	118		122	232	236
Total Revenues and Other Income	14,136		12,884	28,612	28,401
Costs and Expenses
Purchased commodities	4,858		4,616	10,192	10,754
Production and operating expenses	2,164		1,886	4,179	3,665
Selling, general and administrative expenses	164		205	342	364
Exploration expenses	102		83	214	221
Depreciation, depletion and amortization	2,334		2,010	4,545	3,952
Impairments	34		—	34	1
Taxes other than income taxes	536		512	1,091	1,088
Accretion on discounted liabilities	80		68	160	136
Interest and debt expense	198		179	403	367
Foreign currency transaction (gain) loss	9		(14)	(9)	(58)
Other expenses	(2)		(23)	(6)	(13)
Total Costs and Expenses	10,477		9,522	21,145	20,477
Income (loss) before income taxes	3,659		3,362	7,467	7,924
Income tax provision (benefit)	1,330		1,130	2,587	2,772


Net Income (Loss)	$	2,329	2,232	4,880	5,152

Net Income (Loss) Per Share of Common Stock (dollars)
Basic	$	1.99	1.84	4.15	4.23
Diluted	1.98		1.84	4.14	4.22
Weighted-Average Common Shares Outstanding (in thousands)
Basic	1,168,198		1,207,443	1,173,410	1,213,800
Diluted	1,170,299		1,210,342	1,175,595	1,216,743

See Notes to Consolidated Financial Statements.


			ConocoPhillips 2024 Q2 10-Q			2


Financial Statements			Table of Contents


Consolidated Statement of Comprehensive Income			ConocoPhillips


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2024		2023	2024	2023
Net Income (Loss)	$	2,329	2,232	4,880	5,152
Other comprehensive income (loss)
Defined benefit plans
Reclassification adjustment for amortization of prior service cost (credit) included in net income (loss)	(10)		(10)	(19)	(19)
Net change	(10)		(10)	(19)	(19)

Reclassification adjustment for amortization of net actuarial losses (gains) included in net income (loss)	16		19	32	42
Net change	16		19	32	42

Income taxes on defined benefit plans	(2)		(3)	(4)	(6)
Defined benefit plans, net of tax	4		6	9	17
Unrealized holding gain (loss) on securities	(1)		(3)	(5)	3
Reclassification adjustment for (gain) loss included in net income (loss)	—		(1)	—	(2)
Income taxes on unrealized holding gain (loss) on securities	—		1	1	—
Unrealized holding gain (loss) on securities, net of tax	(1)		(3)	(4)	1


Foreign currency translation adjustments, net of tax	(73)		99	(303)	57
Unrealized gain (loss) on hedging activities	33		—	13	—
Income taxes on unrealized gain (loss) on hedging activities	(7)		—	(3)	—
Unrealized gain (loss) on hedging activities, net of tax	26		—	10	—
Other Comprehensive Income (Loss), Net of Tax	(44)		102	(288)	75


Comprehensive Income (Loss)	$	2,285	2,334	4,592	5,227

See Notes to Consolidated Financial Statements.


3			ConocoPhillips 2024 Q2 10-Q


Financial Statements			Table of Contents


Consolidated Balance Sheet			ConocoPhillips


	Millions of Dollars
	June 30 2024		December 31 2023
Assets
Cash and cash equivalents	$	4,294	5,635
Short-term investments	1,723		971
Accounts and notes receivable (net of allowance of $4 and $3, respectively)	5,285		5,461
Accounts and notes receivable—related parties	22		13

Inventories	1,447		1,398
Prepaid expenses and other current assets	963		852
Total Current Assets	13,734		14,330
Investments and long-term receivables	9,304		9,130

Net properties, plants and equipment (net of accumulated DD&A of $77,911 and $74,361, respectively)	70,226		70,044
Other assets	2,730		2,420
Total Assets	$	95,994	95,924

Liabilities
Accounts payable	$	5,065	5,083
Accounts payable—related parties	91		34
Short-term debt	1,312		1,074
Accrued income and other taxes	2,016		1,811
Employee benefit obligations	516		774
Other accruals	1,324		1,229
Total Current Liabilities	10,324		10,005
Long-term debt	17,040		17,863
Asset retirement obligations and accrued environmental costs	7,238		7,220
Deferred income taxes	8,927		8,813
Employee benefit obligations	990		1,009
Other liabilities and deferred credits	1,730		1,735
Total Liabilities	46,249		46,645

Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2024—2,106,906,457 shares; 2023—2,103,772,516 shares)
Par value	21		21
Capital in excess of par	61,381		61,303
Treasury stock (at cost: 2024—945,656,667 shares; 2023—925,670,961 shares)	(68,005)		(65,640)
Accumulated other comprehensive income (loss)	(5,961)		(5,673)
Retained earnings	62,309		59,268
Total Equity	49,745		49,279
Total Liabilities and Equity	$	95,994	95,924

See Notes to Consolidated Financial Statements.


			ConocoPhillips 2024 Q2 10-Q			4


Financial Statements			Table of Contents


Consolidated Statement of Cash Flows			ConocoPhillips


	Millions of Dollars
	Six Months Ended June 30
	2024		2023
Cash Flows From Operating Activities
Net income (loss)	$	4,880	5,152
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation, depletion and amortization	4,545		3,952
Impairments	34		1
Dry hole costs and leasehold impairments	48		102
Accretion on discounted liabilities	160		136
Deferred taxes	211		489
Distributions more (less) than income from equity affiliates	364		652
(Gain) loss on dispositions	(88)		(92)

Other	10		(7)
Working capital adjustments
Decrease (increase) in accounts and notes receivable	148		2,246
Decrease (increase) in inventories	(57)		(23)
Decrease (increase) in prepaid expenses and other current assets	(147)		295
Increase (decrease) in accounts payable	(183)		(1,614)
Increase (decrease) in taxes and other accruals	(21)		(2,032)
Net Cash Provided by Operating Activities	9,904		9,257
Cash Flows From Investing Activities
Capital expenditures and investments	(5,885)		(5,820)
Working capital changes associated with investing activities	173		86
Acquisition of businesses, net of cash acquired	49		—
Proceeds from asset dispositions	178		426
Net sales (purchases) of investments	(794)		1,549

Other	(13)		(5)
Net Cash Used in Investing Activities	(6,292)		(3,764)
Cash Flows From Financing Activities
Issuance of debt	—		1,093
Repayment of debt	(563)		(1,200)
Issuance of company common stock	(57)		(95)
Repurchase of company common stock	(2,346)		(3,000)
Dividends paid	(1,839)		(2,838)
Other	(63)		(11)
Net Cash Used in Financing Activities	(4,868)		(6,051)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(69)		(162)
Net Change in Cash, Cash Equivalents and Restricted Cash	(1,325)		(720)
Cash, cash equivalents and restricted cash at beginning of period	5,899		6,694
Cash, Cash Equivalents and Restricted Cash at End of Period	$	4,574	5,974

Restricted cash of $280 million and $264 million is included in the "Other assets" line of our Consolidated Balance Sheet as of June 30, 2024 and December 31, 2023, respectively.

See Notes to Consolidated Financial Statements.


5			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Notes to Consolidated Financial Statements

Note 1—Basis of Presentation

The interim-period financial information presented in the financial statements included in this report is unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair presentation of the consolidated financial position of ConocoPhillips, its results of operations and cash flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2023 Annual Report on Form 10-K.

Note 2—Inventories


	Millions of Dollars
	June 30 2024		December 31 2023
Crude oil and natural gas	$	723	676
Materials and supplies	724		722
Total inventories	$	1,447	1,398

Inventories valued on the LIFO basis	$	409	401

Note 3—Acquisitions and Dispositions

Marathon Oil Corporation Announced Acquisition

For discussion regarding our announced acquisition of Marathon Oil Corporation (Marathon Oil), see Note 20.

Surmont Acquisition

In October 2023, we completed our acquisition of the remaining 50 percent working interest in Surmont, an asset in our Canada segment, from TotalEnergies EP Canada Ltd. The final consideration for the all-cash transaction was $3.0 billion after customary adjustments (CAD $4.1 billion):


Fair value of consideration	Millions of Dollars
Cash paid	$	2,635
Contingent consideration	320
Final Consideration	$	2,955

The contingent consideration arrangement requires additional consideration to be paid to TotalEnergies EP Canada Ltd. up to $0.4 billion CAD over a five-year term. The contingent payments represent $2 million for every dollar that WCS pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved. The undiscounted amount we could pay under this arrangement is up to $0.3 billion USD. The fair value of the contingent consideration on the acquisition date was $320 million and estimated by applying the income approach. For the six-month period ended June 30, 2024, we have made payments of $67 million USD under this arrangement, reflected in the "Other" line within the Financing Activities section of our Consolidated Statement of Cash Flows. See Note 11.

The transaction was accounted for as a business combination under FASB ASC Topic 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. By the end of the first quarter of 2024, we finalized the allocation of the purchase price to specific assets and liabilities. It was based on the fair value of final consideration and the conclusion of the fair value determination of long-lived assets and all other assets acquired and liabilities assumed.


			ConocoPhillips 2024 Q2 10-Q			6


Notes to Consolidated Financial Statements			Table of Contents

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 of other assets acquired and liabilities assumed, which included accounts receivable, accounts payable, and most other current assets and current liabilities, were determined to be equivalent to the carrying value due to their short-term nature. The total consideration of $3.0 billion was allocated to the identifiable assets and liabilities based on fair values as of the acquisition date of October 4, 2023.


Recognized amounts of identifiable assets acquired and liabilities assumed	Millions of Dollars
Oil and gas properties	$	3,082
Asset retirement obligations	(112)
Other	(15)
Total identifiable net assets	$	2,955

With the completion of the transaction, we have acquired proved and unproved properties of approximately $2.9 billion and $0.2 billion, respectively.

Supplemental Pro Forma (unaudited)

The following table summarizes the unaudited supplemental pro forma financial information for the three- and six-month periods ended June 30, 2023, as if we had completed the acquisition on January 1, 2022.


	Millions of Dollars
	Three Months Ended June 30, 2023				Six Months Ended June 30, 2023
Supplemental Pro Forma (unaudited)	As Reported		Pro Forma Surmont	Pro Forma Combined	As Reported	Pro Forma Surmont	Pro Forma Combined
Total Revenues and Other Income	$	12,884	689	13,573	28,401	1,292	29,693
Income (loss) before income taxes	3,362		159	3,521	7,924	229	8,153
Net Income (Loss)	2,232		121	2,353	5,152	174	5,326

Earnings per share ($ per share):
Basic net income (loss)	$	1.84		1.94	4.23		4.37
Diluted net income (loss)	1.84			1.94	4.22		4.36

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, 2022, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma financial information for the three- and six-month periods ended June 30, 2023, is a result of combining the consolidated income statement of ConocoPhillips with the results of the assets acquired from TotalEnergies EP Canada Ltd. 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 which relate primarily to DD&A, which is based on the unit-of-production method, resulting from the purchase price allocated to oil and gas properties. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected.

Note 4—Investments and Long-Term Receivables

Australia Pacific LNG Pty Ltd. (APLNG)

In Australia, we hold a 47.5 percent shareholding interest in APLNG. At June 30, 2024, the outstanding balance of APLNG's debt was $4.3 billion under various previously entered facilities. The last principal and interest payment on these facilities is due in September 2030. See Note 7.

At June 30, 2024, the carrying value of our equity method investment in APLNG was approximately $5.1 billion.


7			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Port Arthur LNG (PALNG)

In March 2023, we acquired a 30 percent direct equity investment in PALNG, a joint venture for the development of a large-scale LNG facility. At June 30, 2024, the carrying value of our equity method investment in PALNG was approximately $1.5 billion.

Qatar LNG Projects

Our equity method investments in Qatar include the following:

•QatarEnergy LNG N(3) (N3)—30 percent owned joint venture with an affiliate of QatarEnergy (68.5 percent) and Mitsui & Co., Ltd. (1.5 percent)—produces and liquefies natural gas from Qatar’s North Field, as well as exports LNG.

•QatarEnergy LNG NFE(4) (NFE4)—25 percent owned joint venture with affiliates of QatarEnergy (70 percent) and China National Petroleum Corporation (5 percent)—participant in the North Field East LNG project.

•QatarEnergy LNG NFS(3) (NFS3)—25 percent owned joint venture with an affiliate of QatarEnergy (75 percent)—participant in the North Field South LNG project.

At June 30, 2024, the carrying value of our equity method investments in Qatar was approximately $1.2 billion.

During the second quarter of 2024, we were notified that an affiliate of QatarEnergy transferred a 5 percent joint venture interest in NFE4 to an affiliate of China National Petroleum Corporation. As a result, we have concluded NFE4 is a VIE and we are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most significantly impact economic performance of NFE4.

Note 5—Debt

Our debt balance at June 30, 2024 was $18.4 billion, compared with $18.9 billion at December 31, 2023.

In the first quarter of 2024, the company retired $461 million principal amount of our 2.125% Notes at maturity.

Our revolving credit facility provides a total borrowing capacity of $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.

Credit facility borrowings may bear interest at a margin above the Secured Overnight Financing Rate (SOFR). The facility agreement calls for commitment fees on available, but unused, amounts. The facility agreement also contains early termination rights if our current directors or their approved successors cease to be a majority of the Board of Directors.

The revolving credit facility supports our ability to issue up to $5.5 billion of commercial paper. Commercial paper is generally limited to maturities of 90 days and is included in short-term debt on our consolidated balance sheet. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at June 30, 2024, and at December 31, 2023.

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

At June 30, 2024, 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 2024 Q2 10-Q			8


Notes to Consolidated Financial Statements			Table of Contents

Note 6—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 June 30, 2024
Balances at March 31, 2024	$	21	61,300	(66,974)	(5,917)	60,895	49,325
Net income (loss)						2,329	2,329
Other comprehensive income (loss)					(44)		(44)
Dividends declared
Ordinary ($0.58 per common share)						(680)	(680)
Variable return of cash ($0.20 per common share)						(235)	(235)
Repurchase of company common stock				(1,021)			(1,021)
Excise tax on share repurchases				(10)			(10)
Distributed under benefit plans			81				81

Balances at June 30, 2024	$	21	61,381	(68,005)	(5,961)	62,309	49,745

For the six months ended June 30, 2024
Balances at December 31, 2023	$	21	61,303	(65,640)	(5,673)	59,268	49,279
Net income (loss)						4,880	4,880
Other comprehensive income (loss)					(288)		(288)
Dividends declared
Ordinary ($1.16 per common share)						(1,368)	(1,368)
Variable return of cash ($0.40 per common share)						(471)	(471)
Repurchase of company common stock				(2,346)			(2,346)
Excise tax on share repurchases				(19)			(19)
Distributed under benefit plans			78				78

Balances at June 30, 2024	$	21	61,381	(68,005)	(5,961)	62,309	49,745



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

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


9			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 7—Guarantees

At June 30, 2024, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.

APLNG Guarantees

At June 30, 2024, we had multiple guarantees outstanding in connection with our 47.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing June 2024 exchange rates:

•During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rata portion of the funds in a project finance reserve account. We estimate the remaining term of this guarantee to be seven 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 June 30, 2024, the carrying value of this guarantee was approximately $14 million.

•In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy Limited in October 2008, we agreed to reimburse Origin Energy Limited for our share of the existing contingent liability arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales agreements. The final guarantee expires in the fourth quarter of 2041. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be $680 million ($1.1 billion in the event of intentional or reckless breach) and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the co-venturers do not make necessary equity contributions into APLNG.

•We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of 13 to 21 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $490 million and would become payable if APLNG does not perform. At June 30, 2024, the carrying value of these guarantees was approximately $34 million.

QatarEnergy LNG Guarantees

We have guaranteed our portion of certain fiscal and other joint venture obligations as a shareholder in NFE4 and NFS3. These guarantees have an approximate 30-year term with no maximum limit. At June 30, 2024, the carrying value of these guarantees was approximately $14 million.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling approximately $620 million, which consist primarily of guarantees of the residual value of leased office buildings and guarantees of the residual value of corporate aircraft. 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 June 30, 2024, there was no carrying value associated with these guarantees.

Indemnifications

Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes and environmental liabilities. The carrying amount recorded for these indemnification obligations at June 30, 2024, was approximately $20 million. Those related to environmental issues have terms that are generally indefinite, and the maximum amounts of future payments are generally unlimited. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. See Note 8 for additional information about environmental liabilities.


			ConocoPhillips 2024 Q2 10-Q			10


Notes to Consolidated Financial Statements			Table of Contents

Note 8—Contingencies, Commitments and Accrued Environmental Costs

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

For remediation activities in the U.S. and Canada, our consolidated balance sheet included a total environmental accrual of $184 million at both June 30, 2024 and December 31, 2023. 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.


11			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Litigation and Other Contingencies

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

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

We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at June 30, 2024, we had performance obligations secured by letters of credit of $262 million (issued as direct bank letters of credit) related to various purchase commitments for materials, supplies, commercial activities and services incident to the ordinary conduct of business.

In 2007, ConocoPhillips was unable to reach agreement with respect to the empresa mixta structure mandated by the Venezuelan government’s Nationalization Decree. As a result, Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’ interests in the Petrozuata and Hamaca heavy oil ventures and the offshore Corocoro development project. In response to this expropriation, ConocoPhillips initiated international arbitration on November 2, 2007, with the ICSID. On September 3, 2013, an ICSID arbitration tribunal ("Tribunal") held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in June 2007. On January 17, 2017, the Tribunal reconfirmed the decision that the expropriation was unlawful. In March 2019, the Tribunal unanimously ordered the government of Venezuela to pay ConocoPhillips approximately $8.7 billion in compensation for the government’s unlawful expropriation of the company’s investments in Venezuela in 2007. On August 29, 2019, the Tribunal issued a decision rectifying the award and reducing it by approximately $227 million. The award now stands at $8.5 billion plus interest. The government of Venezuela sought annulment of the award, which automatically stayed enforcement of the award. On September 29, 2021, the ICSID annulment committee lifted the stay of enforcement of the award. The annulment proceedings are underway.

In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $2 billion under their agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures. In August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the payment period, including initial payments totaling approximately $500 million within a period of 90 days from the time of signing the settlement agreement. The balance of the settlement was 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 $784 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 2024 Q2 10-Q			12


Notes to Consolidated Financial Statements			Table of Contents

Beginning in 2017, governmental and other entities in several states/territories in the U.S. have filed lawsuits against oil and gas companies, including ConocoPhillips, seeking compensatory damages and equitable relief to abate alleged climate change impacts. Additional lawsuits with similar allegations are expected to be filed. The legal and factual issues are unprecedented, therefore, there is significant uncertainty about the scope of the claims and alleged damages and any potential impact on the Company’s financial condition. ConocoPhillips believes these lawsuits are factually and legally meritless and are an inappropriate vehicle to address the challenges associated with climate change and will vigorously defend against such lawsuits.

Several Louisiana parishes and the State of Louisiana have filed numerous 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. On October 17, 2022, the Fifth Circuit affirmed remand of the lead case to state court and the subsequent request for rehearing was denied. On February 27, 2023, the Supreme Court denied a certiorari petition from the defendants regarding the Fifth Circuit ruling. Accordingly, the federal district courts have issued remands to state court. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty about these claims (both as to scope and damages) and we continue to evaluate our exposure in these lawsuits.

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

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

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

Note 9—Suspended Wells and Exploration Expenses

The capitalized cost of suspended wells at June 30, 2024 was $164 million, a decrease of $20 million from December 31, 2023. In the first quarter of 2024, after further evaluation, we recognized dry hole expenses of $18 million for the suspended Busta discovery well on license PL782S in the North Sea.

Exploration Expenses

In the second quarter of 2024, we recognized $22 million as dry hole expense primarily for two partner operated exploration wells in the Alvheim area of the Norwegian sector of the North Sea.


13			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 10—Derivative and Financial Instruments

We use futures, forwards, swaps and options in various markets to meet our customers' needs, capture market opportunities and manage foreign exchange currency risk.

Commodity Derivative Instruments

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

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

The following table presents the gross fair values of our commodity derivatives, excluding collateral, on our consolidated balance sheet:


	Millions of Dollars
	June 30 2024		December 31 2023
Assets
Prepaid expenses and other current assets	$	512	611
Other assets	123		113
Liabilities
Other accruals	483		567
Other liabilities and deferred credits	104		80

The gains (losses) from commodity derivatives included in our consolidated income statement are presented in the following table:


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2024		2023	2024	2023

Sales and other operating revenues	$	32	(16)	86	12
Other income	—		(2)	—	(1)
Purchased commodities	(29)		16	(79)	(56)

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


	Open Position Long (Short)
	June 30 2024	December 31 2023
Commodity
Natural gas and power (billions of cubic feet equivalent)
Fixed price	(18)	(12)
Basis	9	(2)


			ConocoPhillips 2024 Q2 10-Q			14


Notes to Consolidated Financial Statements			Table of Contents

Interest Rate Derivative Instruments

For the three- and six-month periods ended June 30, 2024, we recognized an unrealized gain of $33 million and $13 million, respectively in other comprehensive income (loss) related to our share of PALNG's interest rate swaps designated as a cash flow hedge. For the three- and six-month periods ended June 30, 2023, the impact of these instruments on our financial statements was negligible.

Financial Instruments

We invest in financial instruments with maturities based on our cash forecasts for the various accounts and currency pools we manage. The types of financial instruments in which we currently invest include:

•Time deposits: Interest bearing deposits placed with financial institutions for a predetermined amount of time.

•Demand deposits: Interest bearing deposits placed with financial institutions. Deposited funds can be withdrawn without notice.

•Commercial paper: Unsecured promissory notes issued by a corporation, commercial bank or government agency purchased at a discount, reaching par value at maturity.

•U.S. government or government agency obligations: Securities issued by the U.S. government or U.S. government agencies.

•Foreign government obligations: Securities issued by foreign governments.

•Corporate bonds: Unsecured debt securities issued by corporations.

•Asset-backed securities: Collateralized debt securities.

The following investments are carried on our consolidated balance sheet at cost, plus accrued interest, and the table reflects remaining maturities at June 30, 2024, and December 31, 2023:


	Millions of Dollars
	Carrying Amount
	Cash and Cash Equivalents			Short-Term Investments
	June 30 2024		December 31 2023	June 30 2024	December 31 2023
Cash	$	662	474
Demand Deposits	1,157		1,424
Time Deposits
1 to 90 days	1,539		3,713	1,270	511
91 to 180 days				20	22
Within one year				6	3
U.S. Government Obligations
1 to 90 days	918		24	—	—
	$	4,276	5,635	1,296	536


15			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

The following investments in debt securities classified as available for sale are carried at fair value on our consolidated balance sheet at June 30, 2024, and December 31, 2023:


	Millions of Dollars
	Carrying Amount
	Cash and Cash Equivalents			Short-Term Investments		Investments and Long-Term Receivables
	June 30 2024		December 31 2023	June 30 2024	December 31 2023	June 30 2024	December 31 2023
Major Security Type
Corporate Bonds	$	1	—	247	201	650	606
Commercial Paper	17		—	112	131
U.S. Government Obligations	—		—	43	89	172	189
U.S. Government Agency Obligations				—	5	7	7
Foreign Government Obligations				7	7	4	4
Asset-Backed Securities				18	2	201	183
	$	18	—	427	435	1,034	989

Cash and Cash Equivalents and Short-Term Investments have remaining maturities within one year. Investments and Long-Term Receivables have remaining maturities greater than one year through five years.

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


	Millions of Dollars
	Amortized Cost Basis			Fair Value
	June 30 2024		December 31 2023	June 30 2024	December 31 2023
Major Security Type
Corporate Bonds	$	900	806	898	807
Commercial Paper	129		131	129	131
U.S. Government Obligations	217		278	215	278
U.S. Government Agency Obligations	7		12	7	12
Foreign Government Obligations	11		11	11	11
Asset-Backed Securities	219		184	219	185
	$	1,483	1,422	1,479	1,424

As of June 30, 2024 total unrealized losses for debt securities classified as available for sale with net losses were $5 million. As of December 31, 2023, total unrealized gains for debt securities classified as available for sale with net gains were $5 million. No allowance for credit losses has been recorded on investments in debt securities which are in an unrealized loss position.

For the three- and six-month periods ended June 30, 2024, proceeds from sales and redemptions of investments in debt securities classified as available for sale were $231 million and $455 million, respectively. For the three- and six-month periods ended June 30, 2023, proceeds from sales and redemptions of investments in debt securities classified as available for sale were $251 million and $551 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.


			ConocoPhillips 2024 Q2 10-Q			16


Notes to Consolidated Financial Statements			Table of Contents

Credit Risk

Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, short-term investments, long-term investments in debt securities, OTC derivative contracts and trade receivables. Our cash equivalents 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, and foreign government obligations.

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

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

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

The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were in a liability position at June 30, 2024, and December 31, 2023, was $134 million and $181 million, respectively. For these instruments, collateral posted at June 30, 2024 was $8 million and no collateral was posted at December 31, 2023. If our credit rating had been downgraded below investment grade at June 30, 2024, we would have been required to post $92 million of additional collateral, either with cash or letters of credit.


17			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 11—Fair Value Measurement

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

The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during the six-month period ended June 30, 2024, nor during the year ended December 31, 2023.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair value on a recurring basis include our investments in debt securities classified as available for sale, commodity derivatives and our contingent consideration arrangement related to the Surmont acquisition. See Note 3.

•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 financial assets also include 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 financial assets also include 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 commodity derivative activity was not material for all periods presented.

•Level 3 liabilities include the fair value of future quarterly contingent payments to TotalEnergies EP Canada Ltd. in connection with the acquisition of the remaining 50 percent working interest in Surmont completed in 2023. Contingent consideration consists of total payments up to approximately $0.4 billion CAD over a five-year term ending in the fourth quarter of 2028. The contingent payments represent $2 million for every dollar that the monthly WCS average pricing exceeds $52 per barrel. The terms include adjustments related to not achieving certain production targets. During the six-month period ended June 30, 2024, we made payments of approximately $67 million USD to TotalEnergies EP Canada Ltd. under this arrangement. These payments are recognized in the "Other" line within the Financing Activities section of our Consolidated Statement of Cash Flows. The fair value of the remaining contingent consideration as of June 30, 2024 is calculated using the income approach and is largely based on the estimated commodity price outlook using a combination of external pricing service companies' and our internal price outlook (unobservable input) and a discount rate consistent with those used by principal market participants (observable input). The impact of other unobservable inputs on the fair value as of June 30, 2024 was not significant.


			ConocoPhillips 2024 Q2 10-Q			18


Notes to Consolidated Financial Statements			Table of Contents

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


	Millions of Dollars
	June 30, 2024					December 31, 2023
	Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets
Investments in debt securities	$	215	1,264	—	1,479	278	1,146	—	1,424
Commodity derivatives	298		287	50	635	308	301	115	724
Total assets	$	513	1,551	50	2,114	586	1,447	115	2,148

Liabilities
Commodity derivatives	$	333	240	14	587	350	283	14	647
Contingent consideration	—		—	249	249	—	—	312	312
Total liabilities	$	333	240	263	836	350	283	326	959

The range and arithmetic average of the significant unobservable input used in the Level 3 fair value measurement was as follows:

Fair Value
(Millions of
Dollars)

Valuation
Technique

Unobservable
Input

Range

(Arithmetic Average)

Contingent consideration - Surmont as of:

June 30, 2024

249

Discounted cash flow

Commodity price outlook* ($/BOE)

$59.99 - $67.34 ($62.38)

December 31, 2023

312

$45.48 - $63.04 ($57.45)

*Commodity price outlook based on a combination of external pricing service companies' outlooks and our internal outlook.

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 Recognized		Amounts Not Subject to Right of Setoff	Gross Amounts	Gross Amounts Offset	Net Amounts Presented	Cash Collateral	Net Amounts
June 30, 2024
Assets	$	635	16	619	368	251	1	250
Liabilities	587		16	571	368	203	41	162

December 31, 2023
Assets	$	724	39	685	375	310	4	306
Liabilities	647		34	613	375	238	47	191

At June 30, 2024 and December 31, 2023, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.


19			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

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.

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

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

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

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

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


	Millions of Dollars
	Carrying Amount		Fair Value
	June 30 2024	December 31 2023	June 30 2024	December 31 2023
Financial assets
Commodity derivatives	266	345	266	345
Investments in debt securities	1,479	1,424	1,479	1,424

Financial liabilities
Total debt, excluding finance leases	17,318	17,808	17,321	18,621
Commodity derivatives	178	225	178	225


			ConocoPhillips 2024 Q2 10-Q			20


Notes to Consolidated Financial Statements			Table of Contents

Note 12—Accumulated Other Comprehensive Income (Loss)

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


	Millions of Dollars
	Defined Benefit Plans		Unrealized Holding Gain/(Loss) on Securities	Foreign Currency Translation	Unrealized Gain/(Loss) on Hedging Activities	Accumulated Other Comprehensive Income/(Loss)
December 31, 2023	$	(393)	2	(5,344)	62	(5,673)
Other comprehensive income (loss)	9		(4)	(303)	10	(288)
June 30, 2024	$	(384)	(2)	(5,647)	72	(5,961)

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


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2024		2023	2024	2023
Defined benefit plans*	$	4	6	9	17

*The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $2 million and $3 million for the three-month periods ended June 30, 2024 and June 30, 2023, respectively, and $4 million and $6 million for the six-month periods ended

June 30, 2024 and June 30, 2023, respectively. See Note 14.

Note 13—Cash Flow Information


	Millions of Dollars
	Six Months Ended June 30
	2024		2023
Cash Payments
Interest	$	404	358
Income taxes	2,067		3,202

Net Sales (Purchases) of Investments
Short-term investments purchased	$	(1,502)	(783)
Short-term investments sold	971		2,676
Long-term investments purchased	(347)		(414)
Long-term investments sold	84		70
	$	(794)	1,549


21			ConocoPhillips 2024 Q2 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 14—Employee Benefit Plans

Pension and Postretirement Plans


	Millions of Dollars
	Pension Benefits					Other Benefits
	2024			2023		2024	2023
	U.S.		Int'l.	U.S.	Int'l.
Components of Net Periodic Benefit Cost
Three Months Ended June 30
Service cost	$	13	9	13	9	1	—
Interest cost	19		28	20	29	2	2
Expected return on plan assets	(17)		(40)	(14)	(37)
Amortization of prior service credit	—		—	—	—	(10)	(10)
Recognized net actuarial loss (gain)	2		14	3	17	—	(1)
Settlements	—		—	—	—
Net periodic benefit cost	$	17	11	22	18	(7)	(9)

Six Months Ended June 30
Service cost	$	25	19	26	19	1	—
Interest cost	38		57	39	57	3	3
Expected return on plan assets	(33)		(81)	(29)	(74)
Amortization of prior service credit	—		—	—	—	(19)	(19)
Recognized net actuarial loss (gain)	4		28	6	34	—	(2)
Settlements	—		—	4	—


Net periodic benefit cost	$	34	23	46	36	(15)	(18)

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

During the first six months of 2024, we contributed $9 million to our domestic benefit plans and $46 million to our international benefit plans. We expect our total contributions in 2024 to be approximately $100 million to our domestic qualified and unqualified pension and postretirement benefit plans and $85 million to our international qualified and nonqualified pension and postretirement benefit plans.

Note 15—Related Party Transactions

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


	Millions of Dollars
	Three Months Ended June 30			Six Months Ended June 30
	2024		2023	2024	2023
Significant Transactions with Equity Affiliates
Operating revenues and other income	$	23	23	41	44

Operating expenses and selling, general and administrative expenses	57		72	112	150


			ConocoPhillips 2024 Q2 10-Q			22


Notes to Consolidated Financial Statements			Table of Contents

Note 16—Sales and Other Operating Revenues

Revenue from Contracts with Customers

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

Millions of Dollars