CONOCOPHILLIPS [COP] Filings

10-Q 1 cop-20240331.htm 10-Q cop-20240331

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, 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 1,169,533,976 shares of common stock, $.01 par value, outstanding at March 31, 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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27

Item 3. Quantitative and Qualitative Disclosures About Market Risk			49

Item 4. Controls and Procedures			49

Part II—Other Information

Item 1. Legal Proceedings			49

Item 1A. Risk Factors			49

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			50

Item 5. Other Information			50

Item 6. Exhibits			51

Signature			52


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	thousands of 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 Q1 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 March 31
	2024		2023
Revenues and Other Income
Sales and other operating revenues	$	13,848	14,811
Equity in earnings of affiliates	421		499
Gain (loss) on dispositions	93		93
Other income	114		114
Total Revenues and Other Income	14,476		15,517
Costs and Expenses
Purchased commodities	5,334		6,138
Production and operating expenses	2,015		1,779
Selling, general and administrative expenses	178		159
Exploration expenses	112		138
Depreciation, depletion and amortization	2,211		1,942
Impairments	—		1
Taxes other than income taxes	555		576
Accretion on discounted liabilities	80		68
Interest and debt expense	205		188
Foreign currency transaction (gain) loss	(18)		(44)
Other expenses	(4)		10
Total Costs and Expenses	10,668		10,955
Income (loss) before income taxes	3,808		4,562
Income tax provision (benefit)	1,257		1,642


Net Income (Loss)	$	2,551	2,920

Net Income (Loss) Per Share of Common Stock (dollars)
Basic	$	2.16	2.38
Diluted	2.15		2.38
Weighted-Average Common Shares Outstanding (in thousands)
Basic	1,177,921		1,220,228
Diluted	1,180,320		1,223,355

See Notes to Consolidated Financial Statements.


			ConocoPhillips 2024 Q1 10-Q			2


Financial Statements			Table of Contents


Consolidated Statement of Comprehensive Income			ConocoPhillips


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Net Income (Loss)	$	2,551	2,920
Other comprehensive income (loss)
Defined benefit plans
Reclassification adjustment for amortization of prior service cost (credit) included in net income (loss)	(9)		(9)
Net change	(9)		(9)

Reclassification adjustment for amortization of net actuarial losses (gains) included in net income (loss)	16		23
Net change	16		23

Income taxes on defined benefit plans	(2)		(3)
Defined benefit plans, net of tax	5		11
Unrealized holding gain (loss) on securities	(4)		6
Reclassification adjustment for (gain) loss included in net income (loss)	—		(1)
Income taxes on unrealized holding gain (loss) on securities	1		(1)
Unrealized holding gain (loss) on securities, net of tax	(3)		4


Foreign currency translation adjustments, net of tax	(230)		(42)
Unrealized gain (loss) on hedging activities	(20)		—
Income taxes on unrealized gain (loss) on hedging activities	4		—
Unrealized gain (loss) on hedging activities, net of tax	(16)		—
Other Comprehensive Income (Loss), Net of Tax	(244)		(27)


Comprehensive Income (Loss)	$	2,307	2,893

See Notes to Consolidated Financial Statements.


3			ConocoPhillips 2024 Q1 10-Q


Financial Statements			Table of Contents


Consolidated Balance Sheet			ConocoPhillips


	Millions of Dollars
	March 31 2024		December 31 2023
Assets
Cash and cash equivalents	$	5,574	5,635
Short-term investments	487		971
Accounts and notes receivable (net of allowance of $4 and $3, respectively)	5,444		5,461
Accounts and notes receivable—related parties	14		13

Inventories	1,443		1,398
Prepaid expenses and other current assets	759		852
Total Current Assets	13,721		14,330
Investments and long-term receivables	9,132		9,130

Net properties, plants and equipment (net of accumulated DD&A of $75,697 and $74,361, respectively)	69,907		70,044
Other assets	2,588		2,420
Total Assets	$	95,348	95,924

Liabilities
Accounts payable	$	5,101	5,083
Accounts payable—related parties	37		34
Short-term debt	1,113		1,074
Accrued income and other taxes	2,116		1,811
Employee benefit obligations	405		774
Other accruals	1,391		1,229
Total Current Liabilities	10,163		10,005
Long-term debt	17,304		17,863
Asset retirement obligations and accrued environmental costs	7,141		7,220
Deferred income taxes	8,776		8,813
Employee benefit obligations	967		1,009
Other liabilities and deferred credits	1,672		1,735
Total Liabilities	46,023		46,645

Equity
Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2024—2,106,777,461 shares; 2023—2,103,772,516 shares)
Par value	21		21
Capital in excess of par	61,300		61,303
Treasury stock (at cost: 2024—937,243,485 shares; 2023—925,670,961 shares)	(66,974)		(65,640)
Accumulated other comprehensive income (loss)	(5,917)		(5,673)
Retained earnings	60,895		59,268
Total Equity	49,325		49,279
Total Liabilities and Equity	$	95,348	95,924

See Notes to Consolidated Financial Statements.


			ConocoPhillips 2024 Q1 10-Q			4


Financial Statements			Table of Contents


Consolidated Statement of Cash Flows			ConocoPhillips


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Cash Flows From Operating Activities
Net income (loss)	$	2,551	2,920
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation, depletion and amortization	2,211		1,942
Impairments	—		1
Dry hole costs and leasehold impairments	19		68
Accretion on discounted liabilities	80		68
Deferred taxes	87		324
Distributions more (less) than income from equity affiliates	308		491
(Gain) loss on dispositions	(93)		(93)

Other	(66)		(35)
Working capital adjustments
Decrease (increase) in accounts and notes receivable	(76)		1,701
Decrease (increase) in inventories	(55)		(45)
Decrease (increase) in prepaid expenses and other current assets	74		255
Increase (decrease) in accounts payable	(85)		(1,266)
Increase (decrease) in taxes and other accruals	30		(928)
Net Cash Provided by Operating Activities	4,985		5,403
Cash Flows From Investing Activities
Capital expenditures and investments	(2,916)		(2,897)
Working capital changes associated with investing activities	169		208
Acquisition of businesses, net of cash acquired	49		—
Proceeds from asset dispositions	173		188
Net sales (purchases) of investments	405		1,065

Other	(21)		(12)
Net Cash Used in Investing Activities	(2,141)		(1,448)
Cash Flows From Financing Activities

Repayment of debt	(505)		(43)
Issuance of company common stock	(61)		(97)
Repurchase of company common stock	(1,325)		(1,700)
Dividends paid	(924)		(1,488)
Other	(10)		2
Net Cash Used in Financing Activities	(2,825)		(3,326)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(73)		(104)
Net Change in Cash, Cash Equivalents and Restricted Cash	(54)		525
Cash, cash equivalents and restricted cash at beginning of period	5,899		6,694
Cash, Cash Equivalents and Restricted Cash at End of Period	$	5,845	7,219

Restricted cash of $271 million and $264 million is included in the "Other assets" line of our Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, respectively.

See Notes to Consolidated Financial Statements.


5			ConocoPhillips 2024 Q1 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
	March 31 2024		December 31 2023
Crude oil and natural gas	$	723	676
Materials and supplies	720		722
Total inventories	$	1,443	1,398

Inventories valued on the LIFO basis	$	437	401

Note 3—Acquisitions and Dispositions

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. As of March 31, 2024, we have made payments of $12 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.

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 billion was allocated to the identifiable assets and liabilities based on fair values as of the acquisition date of October 4, 2023.


			ConocoPhillips 2024 Q1 10-Q			6


Notes to Consolidated Financial Statements			Table of Contents


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-month period ending March 31, 2023, as if we had completed the acquisition on January 1, 2022.


	Millions of Dollars
	Three Months Ended March 31, 2023
Supplemental Pro Forma (unaudited)	As Reported		Pro Forma Surmont	Pro Forma Combined
Total Revenues and Other Income	$	15,517	603	16,120
Income (loss) before income taxes	4,562		70	4,632
Net Income (Loss)	2,920		53	2,973

Earnings per share ($ per share):
Basic net income (loss)	$	2.38		2.43
Diluted net income (loss)	2.38			2.42

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-month period ended March 31, 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.


7			ConocoPhillips 2024 Q1 10-Q


Notes to Consolidated Financial Statements			Table of Contents

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 March 31, 2024, the outstanding balance of APLNG's debt was $4.5 billion under various previously entered facilities. The last principal and interest payment on these facilities is due in September 2030. See Note 8.

At March 31, 2024, the carrying value of our equity method investment in APLNG was approximately $5.2 billion.

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 March 31, 2024, the carrying value of our equity method investment in PALNG was approximately $1.3 billion.

QatarEnergy LNG

Our equity method investments in Qatar include the following:

•QatarEnergy LNG N(3) (N3)—30 percent owned joint venture with affiliates 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 an affiliate of QatarEnergy (75 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 March 31, 2024, the carrying value of our equity method investments in Qatar was approximately $1.1 billion.

Note 5—Debt

Our debt balance at March 31, 2024 was $18.4 billion, compared with $18.9 billion at December 31, 2023. In March 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 March 31, 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 March 31, 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 Q1 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 March 31, 2024
Balances at December 31, 2023	$	21	61,303	(65,640)	(5,673)	59,268	49,279
Net income (loss)						2,551	2,551
Other comprehensive income (loss)					(244)		(244)
Dividends declared
Ordinary ($0.58 per common share)						(687)	(687)
Variable return of cash ($0.20 per common share)						(237)	(237)
Repurchase of company common stock				(1,325)			(1,325)
Excise tax on share repurchases				(9)			(9)
Distributed under benefit plans			(3)				(3)

Balances at March 31, 2024	$	21	61,300	(66,974)	(5,917)	60,895	49,325



	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, 2023
Balances at December 31, 2022	$	21	61,142	(60,189)	(6,000)	53,029	48,003
Net income (loss)						2,920	2,920
Other comprehensive income (loss)					(27)		(27)
Dividends declared
Ordinary ($0.51 per common share)						(625)	(625)
Variable return of cash ($0.60 per common share)						(731)	(731)
Repurchase of company common stock				(1,700)			(1,700)
Excise tax on share repurchases				(15)			(15)
Distributed under benefit plans			(42)				(42)

Balances at March 31, 2023	$	21	61,100	(61,904)	(6,027)	54,593	47,783

Note 7—Suspended Wells

The capitalized cost of suspended wells at March 31, 2024 was $163 million, a decrease of $21 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.


9			ConocoPhillips 2024 Q1 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Note 8—Guarantees

At March 31, 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 March 31, 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 March 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 March 31, 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 22 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $480 million and would become payable if APLNG does not perform. At March 31, 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 March 31, 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 March 31, 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 March 31, 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 9 for additional information about environmental liabilities.


			ConocoPhillips 2024 Q1 10-Q			10


Notes to Consolidated Financial Statements			Table of Contents

Note 9—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 March 31, 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 Q1 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 March 31, 2024, we had performance obligations secured by letters of credit of $369 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 $777 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 Q1 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.


13			ConocoPhillips 2024 Q1 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
	March 31 2024		December 31 2023
Assets
Prepaid expenses and other current assets	$	600	611
Other assets	125		113
Liabilities
Other accruals	569		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 March 31
	2024		2023

Sales and other operating revenues	$	54	28
Other income	—		1
Purchased commodities	(50)		(72)

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


	Open Position Long (Short)
	March 31 2024	December 31 2023
Commodity
Natural gas and power (billions of cubic feet equivalent)
Fixed price	(14)	(12)
Basis	(6)	(2)


			ConocoPhillips 2024 Q1 10-Q			14


Notes to Consolidated Financial Statements			Table of Contents

Interest Rate Derivative Instruments

For the three-month period ended March 31, 2024, we recognized an unrealized loss of $20 million in other comprehensive income related to our share of PALNG's interest rate swaps designated as a cash flow hedge.

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 March 31, 2024, and December 31, 2023:


	Millions of Dollars
	Carrying Amount
	Cash and Cash Equivalents			Short-Term Investments
	March 31 2024		December 31 2023	March 31 2024	December 31 2023
Cash	$	576	474
Demand Deposits	1,553		1,424
Time Deposits
1 to 90 days	3,399		3,713	121	511
91 to 180 days					22
Within one year				3	3
U.S. Government Obligations
1 to 90 days	38		24	—	—
	$	5,566	5,635	124	536


15			ConocoPhillips 2024 Q1 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 March 31, 2024, and December 31, 2023:


	Millions of Dollars
	Carrying Amount
	Cash and Cash Equivalents			Short-Term Investments		Investments and Long-Term Receivables
	March 31 2024		December 31 2023	March 31 2024	December 31 2023	March 31 2024	December 31 2023
Major Security Type
Corporate Bonds	$	—	—	181	201	670	606
Commercial Paper	8		—	98	131
U.S. Government Obligations	—		—	75	89	172	189
U.S. Government Agency Obligations				—	5	7	7
Foreign Government Obligations				7	7	4	4
Asset-Backed Securities				2	2	213	183
	$	8	—	363	435	1,066	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
	March 31 2024		December 31 2023	March 31 2024	December 31 2023
Major Security Type
Corporate Bonds	$	852	806	851	807
Commercial Paper	106		131	106	131
U.S. Government Obligations	249		278	247	278
U.S. Government Agency Obligations	7		12	7	12
Foreign Government Obligations	11		11	11	11
Asset-Backed Securities	215		184	215	185
	$	1,440	1,422	1,437	1,424

As of March 31, 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-month periods ended March 31, 2024 and March 31, 2023, proceeds from sales and redemptions of investments in debt securities classified as available for sale were $222 million and $300 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 Q1 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 March 31, 2024, and December 31, 2023, was $163 million and $181 million, respectively. For these instruments, no collateral was posted at March 31, 2024 and December 31, 2023. If our credit rating had been downgraded below investment grade at March 31, 2024, we would have been required to post $139 million of additional collateral, either with cash or letters of credit.


17			ConocoPhillips 2024 Q1 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 three-month period ended March 31, 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 first quarter of 2024, we made payments of approximately $12 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 March 31, 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). Impact of other unobservable inputs on the fair value as of March 31, 2024 was not significant.


			ConocoPhillips 2024 Q1 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
	March 31, 2024					December 31, 2023
	Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets
Investments in debt securities	$	248	1,189	—	1,437	278	1,146	—	1,424
Commodity derivatives	338		314	73	725	308	301	115	724
Total assets	$	586	1,503	73	2,162	586	1,447	115	2,148

Liabilities
Commodity derivatives	$	371	280	22	673	350	283	14	647
Contingent consideration	—		—	305	305	—	—	312	312
Total liabilities	$	371	280	327	978	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:

March 31, 2024

305

Discounted cash flow

Commodity price outlook* ($/BOE)

$61.13 - $69.70 ($64.48)

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
March 31, 2024
Assets	$	725	41	684	411	273	2	271
Liabilities	673		37	636	411	225	39	186

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

At March 31, 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 Q1 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
	March 31 2024	December 31 2023	March 31 2024	December 31 2023
Financial assets
Commodity derivatives	312	345	312	345
Investments in debt securities	1,437	1,424	1,437	1,424

Financial liabilities
Total debt, excluding finance leases	17,339	17,808	17,789	18,621
Commodity derivatives	223	225	223	225


			ConocoPhillips 2024 Q1 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)	5		(3)	(230)	(16)	(244)
March 31, 2024	$	(388)	(1)	(5,574)	46	(5,917)

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


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Defined benefit plans*	$	5	11

*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 March 31, 2024 and March 31, 2023, respectively. See Note 14.

Note 13—Cash Flow Information


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Cash Payments
Interest	$	254	209
Income taxes	707		1,062

Net Sales (Purchases) of Investments
Short-term investments purchased	$	(118)	(269)
Short-term investments sold	673		1,513
Long-term investments purchased	(199)		(210)
Long-term investments sold	49		31
	$	405	1,065


21			ConocoPhillips 2024 Q1 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 March 31
Service cost	$	12	10	13	10	—	—
Interest cost	19		29	19	28	1	1
Expected return on plan assets	(16)		(41)	(15)	(37)
Amortization of prior service credit	—		—	—	—	(9)	(9)
Recognized net actuarial loss (gain)	2		14	3	17	—	(1)
Settlements	—		—	4	—
Net periodic benefit cost	$	17	12	24	18	(8)	(9)

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.

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 March 31
	2024		2023
Significant Transactions with Equity Affiliates
Operating revenues and other income	$	17	21

Operating expenses and selling, general and administrative expenses	55		78


			ConocoPhillips 2024 Q1 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
	Three Months Ended March 31
	2024		2023
Revenue from contracts with customers	$	12,307	11,964
Revenue from contracts outside the scope of ASC Topic 606
Physical contracts meeting the definition of a derivative	1,565		3,127
Financial derivative contracts	(24)		(280)
Consolidated sales and other operating revenues	$	13,848	14,811

Revenues from contracts outside the scope of ASC Topic 606 relate primarily to physical gas contracts at market prices, which qualify as derivatives accounted for under ASC Topic 815, “Derivatives and Hedging,” and for which we have not elected NPNS. There is no significant difference in contractual terms or the policy for recognition of revenue from these contracts and those within the scope of ASC Topic 606. The following disaggregation of revenues is provided in conjunction with Note 18—Segment Disclosures and Related Information:


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Revenue from Contracts Outside the Scope of ASC Topic 606 by Segment
Lower 48	$	1,259	2,508
Canada	217		567
Europe, Middle East and North Africa	89		52
Physical contracts meeting the definition of a derivative	$	1,565	3,127


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Revenue from Contracts Outside the Scope of ASC Topic 606 by Product
Crude oil	$	—	47
Natural gas	1,199		2,725
Other	366		355
Physical contracts meeting the definition of a derivative	$	1,565	3,127

Practical Expedients

Typically, our commodity sales contracts are less than 12 months in duration; however, in certain specific cases may extend longer, which may be out to the end of field life. We have long-term commodity sales contracts which use prevailing market prices at the time of delivery, and under these contracts, the market-based variable consideration for each performance obligation (i.e., delivery of commodity) is allocated to each wholly unsatisfied performance obligation within the contract. Accordingly, we have applied the practical expedient allowed in ASC Topic 606 and do not disclose the aggregate amount of the transaction price allocated to performance obligations or when we expect to recognize revenues that are unsatisfied (or partially unsatisfied) as of the end of the reporting period.


23			ConocoPhillips 2024 Q1 10-Q


Notes to Consolidated Financial Statements			Table of Contents

Receivables and Contract Liabilities

Receivables from Contracts with Customers

At March 31, 2024, the “Accounts and notes receivable” line on our consolidated balance sheet included trade receivables of $4,415 million compared with $4,414 million at December 31, 2023, and included both contracts with customers within the scope of ASC Topic 606 and those that are outside the scope of ASC Topic 606. We typically receive payment within 30 days or less (depending on the terms of the invoice) once delivery is made. Revenues that are outside the scope of ASC Topic 606 relate primarily to physical gas sales contracts at market prices for which we do not elect NPNS and are therefore accounted for as a derivative under ASC Topic 815. There is little distinction in the nature of the customer or credit quality of trade receivables associated with gas sold under contracts for which NPNS has not been elected compared to trade receivables where NPNS has been elected.

Contract Liabilities from Contracts with Customers

We have entered into certain agreements under which we license our proprietary technology, including the Optimized Cascade® process technology, to customers to maximize the efficiency of LNG plants. These agreements typically provide for milestone payments to be made during and after the construction phases of the LNG plant. The payments are not directly related to our performance obligations under the contract and are recorded as deferred revenue to be recognized when the customer is able to benefit from their right to use the applicable licensed technology. Revenue recognized during the three-month period ended March 31, 2024 was immaterial. No revenue was recognized during the three-month period ended March 31, 2023. We expect to recognize the outstanding contract liabilities of $27 million as of March 31, 2024, as revenue during the years 2026, 2028 and 2029.

Note 17—Earnings Per Share

The following table presents the calculation of net income (loss) available to common shareholders and basic and diluted EPS. For the periods presented in the table below, diluted EPS calculated under the two-class method was more dilutive.


	Millions of Dollars (except per share amounts)
	Three Months Ended March 31
	2024		2023
Basic earnings per share

Net Income (Loss)	$	2,551	2,920
Less: Dividends and undistributed earnings
allocated to participating securities	9		11
Net Income (Loss) available to common shareholders	$	2,542	2,909
Weighted-average common shares outstanding (in millions)	1,178		1,220

Net Income (Loss) Per Share of Common Stock	$	2.16	2.38

Diluted earnings per share

Net Income (Loss) available to common shareholders	$	2,542	2,909
Weighted-average common shares outstanding (in millions)	1,178		1,220
Add: Dilutive impact of options and unvested
non-participating RSU/PSUs (in millions)	2		3
Weighted-average diluted shares outstanding (in millions)	1,180		1,223

Net Income (Loss) Per Share of Common Stock	$	2.15	2.38


			ConocoPhillips 2024 Q1 10-Q			24


Notes to Consolidated Financial Statements			Table of Contents

Note 18—Segment Disclosures and Related Information

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide basis. We manage our operations through six operating segments, which are primarily defined by geographic region: Alaska; Lower 48; Canada; Europe, Middle East and North Africa; Asia Pacific; and Other International.

Corporate and Other represents income and costs not directly associated with an operating segment, such as most interest income and expense; impacts from certain debt transactions; consolidating tax adjustments; corporate overhead and certain technology activities, including licensing revenues; and unrealized holding gains or losses on equity securities. All cash and cash equivalents and short-term investments are included in Corporate and Other.

We evaluate performance and allocate resources based on net income (loss). Intersegment sales are at prices that approximate market.

Analysis of Results by Operating Segment


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Sales and Other Operating Revenues


Alaska	$	1,670	1,735
Lower 48	9,309		10,049
Intersegment eliminations	(1)		(4)
Lower 48	9,308		10,045
Canada	1,444		1,183
Intersegment eliminations	(508)		(340)
Canada	936		843
Europe, Middle East and North Africa	1,457		1,702
Asia Pacific	474		464

Corporate and Other	3		22
Consolidated sales and other operating revenues	$	13,848	14,811

Sales and Other Operating Revenues by Geographic Location(1)
U.S.	$	10,980	11,802

Canada	936		843
China	213		202

Libya	500		370
Malaysia	261		261
Norway	624		651
U.K.	333		681
Other foreign countries	1		1
Worldwide consolidated	$	13,848	14,811

Sales and Other Operating Revenues by Product
Crude oil	$	9,563	8,904
Natural gas	1,882		4,412
Natural gas liquids	680		695
Other(2)	1,723		800
Consolidated sales and other operating revenues by product	$	13,848	14,811

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

(2)Includes bitumen and power.


25			ConocoPhillips 2024 Q1 10-Q


Notes to Consolidated Financial Statements			Table of Contents


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Net Income (Loss)
Alaska	$	346	416
Lower 48	1,381		1,852
Canada	180		6
Europe, Middle East and North Africa	304		365
Asia Pacific	512		522
Other International	(1)		1
Corporate and Other	(171)		(242)
Consolidated net income (loss)	$	2,551	2,920


	Millions of Dollars
	March 31 2024		December 31 2023
Total Assets
Alaska	$	16,701	16,174
Lower 48	42,586		42,415
Canada	10,028		10,277
Europe, Middle East and North Africa	8,021		8,396
Asia Pacific	8,530		8,903

Corporate and Other	9,482		9,759
Consolidated total assets	$	95,348	95,924

Note 19—Income Taxes

Our effective tax rate for the three-month periods ended March 31, 2024, and 2023, was 33.0 percent and 36.0 percent, respectively. The change in the effective tax rate for the three-month period ending March 31, 2024 is primarily due to the recognition of a Malaysian tax benefit, described below, and a shift in our mix of income among our tax jurisdictions.

During the first quarter of 2024, we recorded a $76 million tax benefit associated with a deepwater investment tax incentive for Malaysia Blocks J and G.

The Company has ongoing income tax audits in a number of jurisdictions. The government agents in charge of these audits regularly request additional time to complete audits, which we generally grant, and conversely occasionally close audits unpredictably. Within the next twelve months, we may have audit periods close that could significantly impact our total unrecognized tax benefits. The amount of such change is not estimable but could be significant when compared with our total unrecognized tax benefits.

Note 20—New Accounting Standards

In November 2023, the FASB issued ASU No. 2023-07, “Improvements to Reportable Segment Disclosures” which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting.” The amendments do not change how we identify our operating segments. On adoption, the disclosure improvements will be applied retrospectively to prior periods presented. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU.

In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures” which enhances the disclosure requirements within Topic 740 “Income Taxes.” The enhancements will impact our financial statement disclosures only and will be applied prospectively with retrospective application permitted. The ASU is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU.


			ConocoPhillips 2024 Q1 10-Q			26


Management’s Discussion and Analysis			Table of Contents

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

Management’s Discussion and Analysis is the company’s analysis of its financial performance and of significant trends that may affect future performance. It should be read in conjunction with the financial statements and notes. It contains forward-looking statements including, without limitation, statements relating to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The words “ambition," “anticipate,” “believe,” “budget,” “continue,” “could,” “effort,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “target,” “will,” “would” and similar expressions identify forward-looking statements. The company does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995,” beginning on page 47.

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

Business Environment and Executive Overview

ConocoPhillips is one of the world’s leading E&P companies based on production and reserves, with operations and activities in 13 countries. Our diverse, low cost of supply portfolio includes resource-rich unconventional plays in North America; conventional assets in North America, Europe, Africa and Asia; global LNG developments; oil sands in Canada; and an inventory of global exploration prospects. Headquartered in Houston, Texas, at March 31, 2024, we employed approximately 10,000 people worldwide and had total assets of $95 billion.

Overview

At ConocoPhillips, we anticipate that commodity prices will continue to be cyclical and volatile, and our view is that a successful business strategy in the E&P industry must be resilient in lower price environments, while also retaining upside during periods of higher prices. As such, we are unhedged, remain committed to our disciplined investment framework and continually monitor market fundamentals, including the impacts associated with geopolitical tensions and conflicts, OPEC Plus supply updates, global demand for our products, oil and gas inventory levels, governmental policies, inflation and supply chain disruptions.

The macro-environment of the global energy industry, including the energy transition, continues to evolve. We believe ConocoPhillips will continue to play an essential role by executing on three objectives: responsibly meeting energy transition pathway demand, delivering competitive returns on and of capital and focusing on achieving our net-zero operational emissions ambition. We call this our Triple Mandate, and it represents our commitment to create long-term value for our stakeholders.

Our Triple Mandate and our foundational principles guide our differential value proposition to deliver competitive returns to stockholders through price cycles. Our foundational principles consist of maintaining balance sheet strength, providing peer-leading distributions, making disciplined investments and demonstrating responsible and reliable ESG performance.

In May, we reconfirmed our 2024 planned return of capital to shareholders of at least $9 billion through our three-tier return of capital framework. We also declared a second quarter ordinary dividend of $0.58 per share and a VROC payment of $0.20 per share.


27			ConocoPhillips 2024 Q1 10-Q


Management’s Discussion and Analysis			Table of Contents

Operationally, we remain focused on safely executing the business while also progressing key strategic initiatives. At Willow, project activity continued to ramp up during our first major winter construction season following FID late last year. In the Lower 48, we continued to execute our program, focusing on operating and capital efficiencies. Internationally, after reaching first production in projects in Canada, Norway and China at the end of 2023, we see production growth as those projects continued to ramp up through additional wells online. Also in March 2024, we received a license extension until 2045 on the partner-operated Heidrun field in Norway.

Production was 1,902 MBOED in the first quarter of 2024, an increase of 110 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, first-quarter 2024 production increased by 43 MBOED or two percent from the same period a year ago.

First-quarter 2024 production resulted in $5.0 billion of cash provided by operating activities. We also returned $1.3 billion to shareholders through share repurchases and $0.9 billion through our ordinary dividend and a VROC. We ended the quarter with cash, cash equivalents, restricted cash and short-term investments totaling $6.3 billion and long-term investments in debt securities of $1.1 billion.

Also in the first quarter of 2024, we re-invested $2.9 billion into the business in the form of capital expenditures and investments, with over half of the expenditures related to flexible, short-cycle unconventional plays in the Lower 48 segment, where our production has access to both domestic and export markets.


			ConocoPhillips 2024 Q1 10-Q			28


Management’s Discussion and Analysis			Table of Contents

Business Environment

Commodity prices are the most significant factor impacting our profitability and related returns on and of capital to our shareholders. Dynamics that could influence world energy markets and commodity prices include, but are not limited to, global economic health, supply or demand disruptions or fears thereof caused by civil unrest, global pandemics, military conflicts, actions taken by OPEC Plus and other major oil producing countries, environmental laws, tax regulations, governmental policies and weather-related disruptions. Our strategy is to create value through price cycles by delivering on the financial, operational and ESG priorities that underpin our value proposition.

Our earnings and operating cash flows generally correlate with price levels for crude oil and natural gas, which are subject to factors external to the company and over which we have no control. The following graph depicts the trend in average benchmark prices for WTI crude oil, Brent crude oil and Henry Hub natural gas:

Brent crude oil prices averaged $83.24 per barrel in the first quarter of 2024, an increase of 2 percent compared with $81.27 per barrel in the first quarter of 2023. WTI at Cushing crude oil prices averaged $76.96 per barrel in the first quarter of 2024, an increase of 1 percent compared with $76.13 per barrel in the first quarter of 2023. Oil prices in the first quarter of 2024 were supported by global oil demand growth, voluntary production cuts by OPEC Plus members and geopolitical risks impacting trade flows.

Henry Hub natural gas prices averaged $2.25 per MMBTU in the first quarter of 2024, a decrease of 35 percent compared with $3.44 per MMBTU in the first quarter of 2023. Henry Hub prices decreased due to mild winter weather resulting in excess North American natural gas storage levels.

Our realized bitumen price averaged $44.30 per barrel in the first quarter of 2024, an increase of 50 percent compared with $29.49 per barrel in the first quarter of 2023. The increase in the first quarter of 2024 was driven by narrowing WCS differentials as a result of improving heavy oil demand in Asia and a more favorable sales mix with a lower proportion sold by rail. We continue to optimize bitumen price realizations through diluent recovery unit operating improvements as well as blending and transportation strategies.

For the first quarter of 2024, our total average realized price was $56.60 per BOE compared with $60.86 per BOE in the first quarter of 2023.


29			ConocoPhillips 2024 Q1 10-Q


Management’s Discussion and Analysis			Table of Contents

Key Operating and Financial Summary

Significant items during the first quarter of 2024 and recent announcements included the following:

•Delivered total company production of 1,902 MBOED;

•Produced 1,046 MBOED in the Lower 48, including 736 MBOED from Permian, 197 MBOED from the Eagle Ford and 96 MBOED from the Bakken;

•Executed a successful first major winter construction season at Willow in Alaska and advanced development of LNG projects in the U.S. and Qatar;

•Continued ramp-up from recent international project startups including Surmont Pad 267 in Canada, several sub-sea tiebacks in Norway and Bohai Phase 4B in China;

•Progressed Montney development program following startup of the second phase of the company's central processing facility in Canada, resulting in record production for the asset;

•Achieved 1,000th LNG cargo export milestone at Australia Pacific LNG Pty Ltd. in April;

•Distributed $2.2 billion to shareholders through a three-tier framework, including $1.3 billion through share repurchases and $0.9 billion through the ordinary dividend and VROC;

•Retired debt of $0.5 billion at maturity; and

•Ended the quarter with cash, cash equivalents, restricted cash and short-term investments of $6.3 billion and long-term investments in debt securities of $1.1 billion.

Outlook

Production

Second quarter 2024 production is expected to be 1.91 to 1.95 MMBOED.

All full-year guidance items remain unchanged.


			ConocoPhillips 2024 Q1 10-Q			30


Results of Operations			Table of Contents

Results of Operations

Unless otherwise indicated, discussion of consolidated results for the three-month period ended March 31, 2024, is based on a comparison with the corresponding period of 2023.

Consolidated Results

A summary of the company's net income (loss) by business segment follows:


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Alaska	$	346	416
Lower 48	1,381		1,852
Canada	180		6
Europe, Middle East and North Africa	304		365
Asia Pacific	512		522
Other International	(1)		1
Corporate and Other	(171)		(242)
Net income (loss)	$	2,551	2,920

Net income (loss) in the first quarter of 2024 decreased $369 million. First quarter earnings were negatively impacted by:

•Lower realized gas and NGL commodity prices.

•Lower commercial performance and timing.

•Higher DD&A expenses due to higher rates across our segments and higher volumes primarily in our Canada segment resulting from our acquisition of additional working interest in Surmont, which closed in October 2023. See Note 3.

•Higher production and operating expenses primarily driven by higher production volumes associated with our acquisition of additional working interest in Surmont in addition to higher expenses in our Lower 48 and Alaska segments due to higher lease operating expenses and well work activities of approximately $55 million and higher transportation related charges of approximately $44 million. See Note 3.

•Lower LNG sales prices, reflected in equity in earnings of affiliates.

Offsets to the earnings decreases include:

•Higher sales volumes driven primarily by our Surmont acquisition in our Canada segment. See Note 3.

•Higher realized bitumen and crude oil prices.

•A tax benefit of $76 million recorded in the first quarter of 2024 associated with deepwater investment tax incentive for Malaysia Blocks J and G. See Note 19.

See the “Segment Results” section for additional information.


31			ConocoPhillips 2024 Q1 10-Q


Results of Operations			Table of Contents

Income Statement Analysis

Unless otherwise indicated, all results in Income Statement Analysis are before-tax.

Sales and other operating revenues decreased $963 million, primarily due to lower realized natural gas and NGL prices, partially offset by higher sales volumes resulting from our acquisition of additional working interest in Surmont in our Canada segment, which closed in October 2023, and higher realized bitumen and crude prices. See Note 3.

Equity in earnings of affiliates decreased $78 million, due to lower earnings driven by lower LNG prices.

Purchased commodities decreased $804 million, primarily due to lower gas prices partially offset by higher purchased volumes across all commodities.

Production and operating expenses increased $236 million, due to higher production volumes resulting from our acquisition of additional working interest in Surmont in our Canada segment in addition to higher expenses in our Lower 48 and Alaska segments due to higher lease operating expenses and well work activities of approximately $55 million and higher transportation related charges of approximately $44 million. S ee Note 3.

DD&A expenses increased $269 million, mainly due to higher rates across our segments as well as higher volumes primarily in our Canada segment resulting from the acquisition of additional working interest in Surmont. See Note 3.

S ee Note 19—Income Taxes for information regarding our Income tax provision (benefit) and effective tax rate.


			ConocoPhillips 2024 Q1 10-Q			32


Results of Operations			Table of Contents

Summary Operating Statistics


	Three Months Ended March 31
	2024	2023
Average Net Production
Crude oil (MBD)
Consolidated operations	928	926
Equity affiliates	16	11
Total crude oil	944	937

Natural gas liquids (MBD)
Consolidated operations	271	264
Equity affiliates	8	7
Total natural gas liquids	279	271

Bitumen (MBD)	129	69

Natural gas (MMCFD)
Consolidated operations	2,035	1,922
Equity affiliates	1,267	1,166
Total natural gas	3,302	3,088

Total Production (MBOED)	1,902	1,792


	Dollars Per Unit
Average Sales Prices
Crude oil (per bbl)
Consolidated operations	$	78.67	77.60
Equity affiliates	76.94		80.97
Total crude oil	78.64		77.65

Natural gas liquids (per bbl)
Consolidated operations	23.35		24.97
Equity affiliates	52.09		57.71
Total natural gas liquids	24.25		25.84

Bitumen (per bbl)	44.30		29.49

Natural gas (per MCF)
Consolidated operations	2.91		5.65
Equity affiliates	8.26		9.95
Total natural gas	5.02		7.30


	Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical, lease rental and other	$	93	70
Leasehold impairment	—		19
Dry holes	19		49
	$	112	138


33			ConocoPhillips 2024 Q1 10-Q


Results of Operations			Table of Contents

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a worldwide basis. At March 31, 2024, our operations were producing in the U.S., Norway, Canada, Australia, China, Malaysia, Qatar and Libya.

Total production in the first quarter of 2024 was 1,902 MBOED, an increase of 110 MBOED or six percent. Production increases include:

•New wells online in the Lower 48, Alaska, Australia, Canada, China, Libya and Norway.

•Our Surmont acquisition, which closed in October 2023.

Production increases were partially offset by normal field decline.

After adjusting for impacts from closed acquisitions and dispositions, first-quarter 2024 production increased by 43 MBOED or two percent from the same period a year ago.


			ConocoPhillips 2024 Q1 10-Q			34


Results of Operations			Table of Contents

Segment Results

Unless otherwise indicated, discussion of segment results for the three-month period ended March 31, 2024, is based on a comparison with the corresponding period of 2023 and are shown after-tax.

Alaska


	Three Months Ended March 31
	2024		2023
Net Income (Loss) ($MM)	$	346	416

Average Net Production
Crude oil (MBD)	180		179
Natural gas liquids (MBD)	14		18
Natural gas (MMCFD)	42		42
Total Production (MBOED)	201		204

Average Sales Prices
Crude oil ($ per bbl)	$	83.59	82.22
Natural gas ($ per MCF)	3.91		4.58

The Alaska segment primarily explores for, produces, transports and markets crude oil, NGLs and natural gas. As of March 31, 2024, Alaska contributed 15 percent of our consolidated liquids production and two percent of our consolidated natural gas production.

Net Income (Loss)

Earnings from Alaska decreased $70 million in the first quarter of 2024. Decreases to earnings include:

•Higher DD&A expenses due to higher rates primarily as a result of year-end downward reserve revisions.

•Higher production and operating expenses primarily due to higher well work activity of $13 million and higher transportation related costs of $11 million.

•Higher exploration expenses primarily due to increased seismic work of $26 million.

Offsets to the earnings decreases were primarily driven by the absence of first-quarter 2023 dry hole expenses.

Production

Average production decreased 3 MBOED in the first quarter of 2024. Decreases to production were primarily due to normal field decline.

Production decreases were partly offset by new wells online and improved performance at our Western North Slope and Greater Kuparuk Area assets.


35			ConocoPhillips 2024 Q1 10-Q


Results of Operations			Table of Contents

Lower 48


	Three Months Ended March 31
	2024		2023
Net Income (Loss) ($MM)	$	1,381	1,852

Average Net Production
Crude oil (MBD)	553		561
Natural gas liquids (MBD)	247		239
Natural gas (MMCFD)	1,479		1,418
Total Production (MBOED)	1,046		1,036

Average Sales Prices
Crude oil ($ per bbl)	$	75.51	74.36
Natural gas liquids ($ per bbl)	22.67		24.58
Natural gas ($ per MCF)	1.57		2.92

The Lower 48 segment consists of operations located in the U.S. Lower 48 states, as well as producing properties in the Gulf of Mexico. As of March 31, 2024, the Lower 48 contributed 60 percent of our consolidated liquids production and 73 percent of our consolidated natural gas production.

Net Income (Loss)

Earnings from the Lower 48 decreased $471 million in the first quarter of 2024. Decreases to earnings include:

•Lower realized natural gas and NGL prices.

•Lower commercial performance and timing.

•Higher production and operating expenses primarily due to increased lease operating expenses of $36 million and increased transportation related costs of $31 million.

•Higher DD&A expenses primarily due to higher rates driven from increased capital additions.

Offsets to the earnings decrease were primarily driven by higher natural gas and NGL sales volumes.

Production

Average production increased 10 MBOED in the first quarter of 2024. Increases to production were primarily due to new wells online from our development programs in the Delaware Basin, Eagle Ford, Midland Basin and Bakken.

Production increases were partly offset by normal field decline.


			ConocoPhillips 2024 Q1 10-Q			36


Results of Operations			Table of Contents

Canada


	Three Months Ended March 31
	2024		2023
Net Income (Loss) ($MM)	$	180	6

Average Net Production
Crude oil (MBD)	18		6
Natural gas liquids (MBD)	6		3
Bitumen (MBD)	129		69
Natural gas (MMCFD)	100		64
Total Production (MBOED)	170		89

Average Sales Prices
Crude oil ($ per bbl)	$	64.40	65.07
Natural gas liquids ($ per bbl)	35.47		29.02
Bitumen ($ per bbl)	44.30		29.49
Natural gas ($ per MCF)*	1.01		4.64

*Average sales prices include unutilized transportation costs.

Our Canadian operations consist of the Surmont oil sands development in Alberta and the Montney unconventional play in British Columbia. As of March 31, 2024, Canada contributed 12 percent of our consolidated liquids production and five percent of our consolidated natural gas production.

Net Income (Loss)

Earnings from Canada increased $174 million in the first quarter of 2024. Increases to earnings include:

•Higher sales volumes primarily related to our Surmont acquisition, which closed in October 2023. See Note 3.

•Higher realized bitumen prices.

Offsets to the earnings increases include:

•Higher production and operating expenses primarily due to higher production volumes as a result of our increased working interest in Surmont. See Note 3.

•Higher DD&A expenses of $51 million primarily due to higher production volumes as a result of our Surmont acquisition, partially offset by lower rates in Surmont.

Production

Average production increased 81 MBOED in the first quarter of 2024. Increases to production include:

•Higher volumes as a result of our increased working interest in Surmont. See Note 3.

•New wells online in the Montney and Surmont.

Production increases were partly offset by normal field decline.


37			ConocoPhillips 2024 Q1 10-Q


Results of Operations			Table of Contents

Europe, Middle East and North Africa


	Three Months Ended March 31
	2024		2023
Net Income (Loss) ($MM)	$	304	365

Consolidated Operations
Average Net Production
Crude oil (MBD)	118		117
Natural gas liquids (MBD)	4		4
Natural gas (MMCFD)	358		342
Total Production (MBOED)	182		178

Average Sales Prices
Crude oil ($ per bbl)	$	84.83	83.52
Natural gas liquids ($ per bbl)	46.32		47.91
Natural gas ($ per MCF)	8.81		17.18

Production and sales prices exclude equity affiliates. See Summary Operating Statistics for equity affiliate totals.

The Europe, Middle East and North Africa segment consists of operations principally located in the Norwegian sector of the North Sea and the Norwegian Sea, Qatar, Libya and commercial and terminalling operations in the U.K. As of March 31, 2024, our Europe, Middle East and North Africa operations contributed nine percent of our consolidated liquids production and 17 percent of our consolidated natural gas production.

Net Income (Loss)

Earnings from Europe, Middle East and North Africa decreased by $61 million in the first quarter of 2024. Decreases to earnings include:

•Lower realized natural gas prices.

•Lower foreign exchange gains of approximately $19 million related to USD and EUR strengthening against the NOK.

Offsets to the earnings decrease were primarily driven by higher sales volumes.

Consolidated Production

Average consolidated production increased 4 MBOED in the first quarter of 2024. Increases to production were primarily due to new wells online and improved performance in both Norway and Libya.

Production increases were partly offset by normal field decline.

Exploration Activity

In the first quarter of 2024, we charged $18 million before-tax as dry hole expense for the Busta suspended discovery well on license PL782S that was drilled in 2019.


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Results of Operations			Table of Contents

Asia Pacific


	Three Months Ended March 31
	2024		2023
Net Income (Loss) ($MM)	$	512	522

Consolidated Operations
Average Net Production
Crude oil (MBD)	59		63
Natural gas (MMCFD)	56		56
Total Production (MBOED)	68		72

Average Sales Prices
Crude oil ($ per bbl)	$	85.05	83.50
Natural gas ($ per MCF)	3.68		4.30

Production and sales prices exclude equity affiliates. See Summary Operating Statistics for equity affiliate totals.

The Asia Pacific segment has operations in China, Malaysia, Australia and commercial operations in China, Singapore and Japan. As of March 31, 2024, Asia Pacific contributed four percent of our consolidated liquids production and three percent of our consolidated natural gas production.

Net Income (Loss)

Earnings from Asia Pacific decreased $10 million in the first quarter of 2024. Decreases to earnings were primarily driven by lower earnings from equity affiliates due to lower LNG sales prices.

Offsets to the earnings decreases were primarily driven by a $76 million tax benefit associated with a deepwater investment tax incentive for Malaysia Blocks J and G. See Note 19.

Consolidated Production

Average consolidated production decreased 4 MBOED in the first quarter of 2024. Decreases to production were primarily due to normal field decline.

Production decreases were partly offset by Bohai Bay development activity in China.


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Results of Operations			Table of Contents

Other International



	Three Months Ended March 31
	2024		2023
Net Income (Loss) ($MM)	$	(1)	1

The Other International segment consists of activities associated with prior operations in other countries.

Corporate and Other


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Net Income (Loss)
Net interest expense	$	(93)	(90)
Corporate general and administrative expenses	(105)		(90)
Technology	(24)		6
Other income (expense)	51		(68)
	$	(171)	(242)

Net interest expense consists of interest and financing expense, net of interest income and capitalized interest.

Corporate G&A expenses include compensation programs and staff costs. Corporate G&A expenses increased $15 million in the first quarter of 2024, primarily due to mark-to-market adjustments associated with certain compensation programs.

Technology includes our investments in low-carbon and other new technologies or businesses and licensing revenues. Other new technologies or businesses and licensing activities are focused on both conventional and tight oil reservoirs, shale gas, oil sands, enhanced oil recovery, as well as LNG.

Other income (expense) or “Other” includes certain consolidating tax-related items, foreign currency transaction gains and losses, environmental costs associated with sites no longer in operation, other costs not directly associated with an operating segment, gains/losses on the early retirement of debt, holding gains or losses on equity securities and pension settlement expense. In the first quarter of 2024, “Other” improved $119 million primarily due to the absence of a first-quarter 2023 consolidating tax adjustment as well as higher tax benefits related to stock compensation in the first quarter of 2024.


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Capital Resources and Liquidity			Table of Contents

Capital Resources and Liquidity

Financial Indicators


	Millions of Dollars
	March 31 2024			December 31 2023
Cash and cash equivalents	$	5,574		5,635
Short-term investments	487			971
Total debt	18,417			18,937
Total equity	49,325			49,279
Percent of total debt to capital*	27		%	28
Percent of floating-rate debt to total debt	2		%	2

*Capital includes total debt and total equity.

To meet our short-term and long-term liquidity requirements, we look to a variety of funding sources, including cash generated from operating activities, our commercial paper and credit facility programs, and our ability to sell securities using our shelf registration statement. During the first three months of 2024, the primary uses of our available cash were $2.9 billion to support our ongoing capital expenditures and investments program, $1.3 billion to repurchase common stock, $0.9 billion to pay the ordinary dividend and VROC, and $0.5 billion to retire debt at maturity.

At March 31, 2024, we had total liquidity of $11.6 billion, comprised of cash and cash equivalents of $5.6 billion, short-term investments of $0.5 billion, and available borrowing capacity under our credit facility of $5.5 billion. In addition, we have $1.1 billion of long-term investments in debt securities. We believe current cash balances and cash generated by operating activities, together with access to external sources of funds as described below in the “Significant Changes in Capital” section, will be sufficient to meet our funding requirements in the near- and long-term, including our capital spending program, acquisitions, dividend payments and debt obligations.

Significant Changes in Capital

Operating Activities

Cash provided by operating activities was $5.0 billion for the first three months of 2024, compared with $5.4 billion for the corresponding period of 2023. The decrease is primarily due to lower realized natural gas prices, partially offset by higher bitumen prices and higher production volumes.

Our short-term and long-term operating cash flows are highly dependent upon prices for crude oil, bitumen, natural gas, LNG and NGLs. Prices and margins in our industry have historically been volatile and are driven by market conditions over which we have no control. Absent other mitigating factors, as these prices and margins fluctuate, we would expect a corresponding change in our operating cash flows.

The level of production volumes, as well as product and location mix, impacts our cash flows. Future production is subject to numerous uncertainties, including, among others, the volatile crude oil and natural gas price environment, which may impact investment decisions; the effects of price changes on production sharing and variable-royalty contracts; acquisition and disposition of fields; field production decline rates; new technologies; operating efficiencies; timing of startups and major turnarounds; political instability; impacts of a global pandemic; weather-related disruptions; and the addition of proved reserves through exploratory success and their timely and cost-effective development. While we actively manage for these factors, production levels can cause variability in cash flows, although generally this variability has not been as significant as that caused by commodity prices.

To maintain or grow our production volumes, we must continue to add to our proved reserve base. See the “Capital Expenditures and Investments” section.


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Capital Resources and Liquidity			Table of Contents

Investing Activities

For the first three months of 2024, we invested $2.9 billion in capital expenditures and investments. Our 2024 operating plan capital expenditures are currently expected to be between $11.0 billion to $11.5 billion. Our 2023 capital expenditures and investments were $11.2 billion. See the “Capital Expenditures and Investments” section.

In the first three months of 2024, we invested $0.3 billion in LNG projects, including Port Arthur Liquefaction Holdings, LLC (PALNG), QatarEnergy LNG NFE(4) (NFE4), and QatarEnergy LNG NFS(3) (NFS3).

We invest in short-term and long-term investments as part of our cash investment strategy, the primary objective of which is to protect principal, maintain liquidity and provide yield and total returns. These investments include time deposits, commercial paper and debt securities classified as available for sale. Funds for short-term needs to support our operating plan and provide resiliency to react to short-term price volatility are invested in highly liquid instruments with maturities less than one year. Funds we consider available to maintain resiliency in longer term price downturns and to capture opportunities outside a given operating plan may be invested in instruments with maturities greater than one year.

Investing activities in the first three months of 2024 included net sales of $405 million of investments. We had net sales of $555 million of short-term investments and net purchases of $150 million of long-term investments. See Note 13.

Financing Activities

We have a revolving credit facility totaling $5.5 billion with an expiration date of February 2027. The credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as support for our commercial paper program. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at March 31, 2024.

Our debt balance at March 31, 2024 was $18.4 billion compared with $18.9 billion at December 31, 2023. The current portion of debt, including future payments for finance leases, is $1.1 billion at March 31, 2024. In March 2024, the company retired $461 million principal amount of our 2.125% Notes at maturity. Debt payments are expected to be made using current cash balances and cash provided by operating activities.

In March 2024, Moody's affirmed our long-term credit rating included below. 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: "A2" with a "stable" outlook

See Note 5 for additional information on debt and the revolving credit facility.

Certain of our project-related contracts, commercial contracts and derivative instruments contain provisions requiring us to post collateral. Many of these contracts and instruments permit us to post either cash or letters of credit as collateral. At March 31, 2024, and December 31, 2023, we had direct bank letters of credit of $369 million and $340 million, respectively, which secured performance obligations related to various purchase commitments incident to the ordinary conduct of business. In the event of a credit rating downgrade, we may be required to post additional letters of credit.

Shelf Registration

We have a universal shelf registration statement on file with the SEC under which we have the ability to issue and sell an indeterminate number of various types of debt and equity securities.


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Capital Resources and Liquidity			Table of Contents

Capital Requirements

For information about our capital expenditures and investments, see the “Capital Expenditures and Investments” section.

We believe in delivering value to our shareholders through our current three-tier return of capital framework. The framework is structured to deliver a compelling, growing ordinary dividend, a discretionary VROC payment, and through-cycle share repurchases. The VROC provides a flexible tool for meeting our commitment of returning greater than 30 percent of cash from operating activities during periods where commodity prices are meaningfully higher than our planning price range. Our expected 2024 total return of capital is at least $9 billion.

In the first three months of 2024, we paid ordinary dividends of $0.58 per share and VROC payments of $0.20 per share. In the first three months of 2023, we paid ordinary dividends of $0.51 per share and VROC payments of $0.70 per share.

In May 2024, we declared an ordinary dividend of $0.58 per share and a VROC payment of $0.20 per share, payable June 3, 2024, to shareholders of record on May 13, 2024.

In late 2016, we initiated our current share repurchase program. As of October 2022, we had announced a total authorization to repurchase up to $45 billion of our common stock. Repurchases are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. As of March 31, 2024, share repurchases since the inception of our current program totaled 395.0 million shares and $30.1 billion. In the three months ended March 31, 2024, we repurchased 11.6 million shares for a cost of $1.3 billion.

See Part I—Item 1A—Risk Factors – “Our ability to execute our capital return program is subject to certain considerations” in our 2023 Annual Report on Form 10-K.

Capital Expenditures and Investments


	Millions of Dollars
	Three Months Ended March 31
	2024		2023
Alaska	$	720	406
Lower 48	1,616		1,704
Canada	152		136
Europe, Middle East and North Africa	219		209
Asia Pacific	45		63

Corporate and Other	164		379
Capital expenditures and investments	$	2,916	2,897

During the first three months of 2024, capital expenditures and investments supported key operating activities and acquisitions, primarily:

•Appraisal and development activities in Alaska related to the Western North Slope, inclusive of Willow, and development activities in the Greater Kuparuk Area.

•Development activities in the Lower 48, primarily in the Delaware Basin, Eagle Ford, Midland Basin and Bakken.

•Appraisal and development activities in the Montney as well as development and optimization of Surmont in Canada.

•Development activities across assets in Norway.

•Continued development activities in Malaysia and China.

•Investments in PALNG, NFE4, and NFS3.

Our 2024 operating plan capital expenditure guidance is currently expected to be $11.0 billion to $11.5 billion. Our operating plan capital was $11.2 billion in 2023.


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Capital Resources and Liquidity			Table of Contents

Guarantor Summarized Financial Information

We have various cross guarantees among our Obligor Group; ConocoPhillips, ConocoPhillips Company and Burlington Resources LLC, with respect to publicly held debt securities. ConocoPhillips Company is 100 percent owned by ConocoPhillips. Burlington Resources LLC is 100 percent owned by ConocoPhillips Company. ConocoPhillips and/or ConocoPhillips Company have fully and unconditionally guaranteed the payment obligations of Burlington Resources LLC, with respect to its publicly held debt securities. Similarly, ConocoPhillips has fully and unconditionally guaranteed the payment obligations of ConocoPhillips Company with respect to its publicly held debt securities. In addition, ConocoPhillips Company has fully and unconditionally guaranteed the payment obligations of ConocoPhillips with respect to its publicly held debt securities. All guarantees are joint and several.

The following tables present summarized financial information for the Obligor Group, as defined below:

•The Obligor Group will reflect guarantors and issuers of guaranteed securities consisting of ConocoPhillips, ConocoPhillips Company and Burlington Resources LLC.

•Consolidating adjustments for elimination of investments in and transactions between the collective guarantors and issuers of guaranteed securities are reflected in the balances of the summarized financial information.

•Non-Obligated Subsidiaries are excluded from the presentation.

Transactions and balances reflecting activity between the Obligors and Non-Obligated Subsidiaries are presented below:

Summarized Income Statement Data


	Millions of Dollars
	Three Months Ended March 31, 2024
Revenues and Other Income	$	9,190
Income (loss) before income taxes*	2,462

Net Income (Loss)	2,551

*Includes approximately $1.9 billion of purchased commodities expense for transactions with Non-Obligated Subsidiaries.

Summarized Balance Sheet Data


	Millions of Dollars
	March 31, 2024		December 31, 2023
Current assets	$	6,236	8,008
Amounts due from Non-Obligated Subsidiaries, current	1,443		1,565
Noncurrent assets	94,794		91,155
Amounts due from Non-Obligated Subsidiaries, noncurrent	9,550		8,936
Current liabilities	7,938		7,337
Amounts due to Non-Obligated Subsidiaries, current	4,643		3,990
Noncurrent liabilities	50,232		49,105
Amounts due to Non-Obligated Subsidiaries, noncurrent	32,859		31,241


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Capital Resources and Liquidity			Table of Contents

Contingencies

We are subject to legal proceedings, claims and liabilities that arise in the ordinary course of business. We accrue for losses associated with legal claims when such losses are considered probable and the amounts can be reasonably estimated. See Note 9.

Legal and Tax Matters

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

Environmental

We are subject to the same numerous international, federal, state and local environmental laws and regulations as other companies in our industry. For a discussion of the most significant of these environmental laws and regulations, including those with associated remediation obligations, see the “Environmental” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 56–58 of our 2023 Annual Report on Form 10-K.

We occasionally receive requests for information or notices of potential liability from the EPA and state environmental agencies alleging that we are a potentially responsible party under the CERCLA or an equivalent state statute. On occasion, we also have been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not owned by us, but allegedly contain waste attributable to our past operations. As of March 31, 2024, there were 15 sites around the U.S. in which we were identified as a potentially responsible party under CERCLA and comparable state laws.

Notwithstanding any of the foregoing, and as with other companies engaged in similar businesses, environmental costs and liabilities are inherent concerns in our operations and products, and there can be no assurance that material costs and liabilities will not be incurred. However, we currently do not expect any material adverse effect upon our results of operations or financial position as a result of compliance with current environmental laws and regulations.

See Part I—Item 1A—Risk Factors – "We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations," in our 2023 Annual Report on Form 10-K and Note 9 for information on environmental litigation.

Climate Change

Continuing political and social attention to the issue of global climate change has resulted in a broad range of proposed or promulgated state, national and international laws and regulations focusing on GHG or methane emissions reduction. These proposed or promulgated laws apply or could apply in countries where we have interests or may have interests in the future. Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a material impact on our results of operations and financial condition. For examples of legislation and precursors for possible regulation that do or could affect our operations, see the “Climate Change” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 58–59 of our 2023 Annual Report on Form 10-K.


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Capital Resources and Liquidity			Table of Contents

Company Response to Climate-Related Risks

In 2020, we adopted a Paris-aligned climate-related risk framework with an ambition to reduce our operational (Scope 1 and 2) emissions to net-zero by 2050. The objective of our Climate Risk Strategy is to manage climate-related risk, optimize opportunities and equip the company to respond to changes in key uncertainties, including government policies around the world, technologies for emissions reduction, alternative energy technologies and changes in consumer trends. The strategy sets out our choices around portfolio composition, emissions reductions, targets and incentives, emissions-related technology development, and our climate-related policy and finance sector engagement.

An important component of our Climate Risk Strategy is the Plan for the Net-Zero Energy Transition (the 'Plan'). The Plan outlines how we intend to play a valued role in the energy transition by executing on our Triple Mandate to: reliably and responsibly meet energy transition pathway demand, deliver competitive returns on and of capital and focus on achieving our net-zero operational emissions ambition. The Plan also outlines how we intend to apply our strategic capabilities and resources to meet the challenges posed by climate change in an economically viable, accountable and actionable way that balances the interests of our stakeholders.

Key elements of the Plan include:

•Maintaining strategic flexibility

◦Building a resilient asset portfolio with a focus on low cost of supply and low GHG intensity to meet transition pathway energy demand.

◦Committing to capital discipline through use of a fully burdened cost of supply, including cost of carbon, as the basis for capital allocation.

•Reducing Scope 1 and 2 emissions

◦Setting targets for emissions over which we have ownership and control, with an ambition to become a net-zero company for Scope 1 and 2 emissions by 2050.

•Addressing Scope 3 emissions

◦Advocating for a well-designed, economy-wide price on carbon and engaging in development of other policy and legislation to address end-use emissions.

◦Working with our suppliers for alignment on GHG emissions reductions.

•Contributing to an orderly transition

◦Building an attractive LNG portfolio.

◦Evaluating potential investments in emerging energy transition and low-carbon technologies.

Our Plan does not include a Scope 3 (end-use) emissions target. We recognize that end-use emissions must be reduced to meet global climate objectives. However, it is our view that supply-side constraints through Scope 3 targets for North American and European upstream oil and gas producers would be counterproductive to climate goals. In the absence of policy measures that address global demand and with the shape and pace of technology and policy yet to be determined, setting and meeting Scope 3 targets would require a shift of production to other global operators that have established less ambitious targets or no targets to reduce their own operational emissions or do not have any other ambitions or plans to manage climate-related risks, potentially eroding energy security and affordability as well as undercutting global climate change objectives. This is why we have consistently taken a prominent role in advocating for a well-designed, economy wide price on carbon and engaged in development of other policies or legislation that could address end-use emissions from high-carbon intensity energy use. We have also expanded policy advocacy beyond carbon pricing to include regulatory action, such as support for the direct regulation of methane.

In support of addressing our Scope 1 and 2 emissions, in 2023, we made progress in several key areas:

•Continued to refine our Paris-aligned climate risk strategy.

•Accelerated our GHG intensity reduction target to 50-60 percent by 2030 from a 2016 baseline for both gross operated and net equity emissions.

•Achieved the Gold Standard Pathway in the Oil and Gas Methane Partnership 2.0 Initiative.

•Implemented our new near-zero 2030 methane emissions intensity target of approximately 1.5 kilogram carbon dioxide equivalent per BOE or of 0.15 percent of gas produced.

Our emissions reduction efforts and net-zero ambition are supported by our multi-disciplinary Low-Carbon Technology organization. See Part I—Item 1A—Risk Factors – "Existing and future laws, regulations and internal initiatives relating to global climate changes, such as limitations on GHG emissions, may impact or limit our business plans, result in significant expenditures, promote alternative uses of energy or reduce demand for our products," and "Broader investor and societal attention to and efforts to address global climate change may limit who can do business with us or our access to financial markets and could subject us to litigation," in our 2023 Annual Report on Form 10-K and Note 9 for information on climate change litigation.


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			Table of Contents

Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included or incorporated by reference in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans, and objectives of management for future operations, are forward-looking statements. Examples of forward-looking statements contained in this report include our expected production growth and outlook on the business environment generally, our expected capital budget and capital expenditures, and discussions concerning future dividends. You can often identify our forward-looking statements by the words “ambition,” “anticipate,” “believe,” “budget,” “continue,” “could,” “effort,” “estimate,” “expect,” “forecast,” “intend,” “goal,” “guidance,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “target,” “will,” “would” and similar expressions.

We based the forward-looking statements on our current expectations, estimates and projections about ourselves and the industries in which we operate in general. We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors and uncertainties, including, but not limited to, the following:

•Fluctuations in crude oil, bitumen, natural gas, LNG and NGLs prices, including a prolonged decline in these prices relative to historical or future expected levels.

•Global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including changes as a result of any ongoing military conflict, including the conflicts in Ukraine and the Middle East, and the global response to such conflict; security threats on facilities and infrastructure; a public health crisis; from the imposition or lifting of crude oil production quotas or other actions that might be imposed by OPEC and other producing countries; or the resulting company or third-party actions in response to such changes.

•The impact of significant declines in prices for crude oil, bitumen, natural gas, LNG and NGLs, which may result in recognition of impairment charges on our long-lived assets, leaseholds and nonconsolidated equity investments.

•The potential for insufficient liquidity or other factors, such as those described herein, that could impact our ability to repurchase shares and declare and pay dividends, whether fixed or variable.

•Potential failures or delays in achieving expected reserve or production levels from existing and future oil and gas developments, including due to operating hazards, drilling risks and the inherent uncertainties in predicting reserves and reservoir performance.

•Reductions in reserves replacement rates, whether as a result of the significant declines in commodity prices or otherwise.

•Unsuccessful exploratory drilling activities or the inability to obtain access to exploratory acreage.

•Unexpected changes in costs, inflationary pressures or technical requirements for constructing, modifying or operating E&P facilities.

•Legislative and regulatory initiatives addressing environmental concerns, including initiatives addressing the impact of global climate change or further regulating hydraulic fracturing, methane emissions, flaring, water disposal or LNG exports.

•Significant operational or investment changes imposed by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce GHG emissions.

•Substantial investment in and development of or use of competing or alternative energy sources, including as a result of existing or future environmental rules and regulations.

•The impact of broader societal attention to and efforts to address climate change may impact our access to capital and insurance.

•Potential failures or delays in delivering on our current or future low-carbon strategy, including our inability to develop new technologies.

•The impact of public health crises, including pandemics (such as COVID-19) and epidemics, and any related company or government policies or actions.


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•Lack of, or disruptions in, adequate and reliable transportation for our crude oil, bitumen, natural gas, LNG and NGLs.

•Inability to timely obtain or maintain permits, including those necessary for construction, drilling and/or development, or inability to make capital expenditures required to maintain compliance with any necessary permits or applicable laws or regulations.

•Failure to complete definitive agreements and feasibility studies for, and to complete construction of, announced and future E&P and LNG development in a timely manner (if at all) or on budget.

•Potential disruption or interruption of our operations and any resulting consequences due to accidents, extraordinary weather events; supply chain disruptions; civil unrest; political events; war; terrorism; cybersecurity threats and information technology failures, constraints or disruptions.

•Changes in international monetary conditions and foreign currency exchange rate fluctuations.

•Changes in international trade relationships, including the imposition of trade restrictions or tariffs relating to crude oil, bitumen, natural gas, LNG, NGLs, carbon and any materials or products (such as aluminum and steel) used in the operation of our business, including any sanctions imposed as a result of any ongoing military conflict, including the conflicts in Ukraine and the Middle East.

•Liability for remedial actions, including removal and reclamation obligations, under existing and future environmental regulations and litigation.

•Liability resulting from litigation, including litigation directly or indirectly related to the transaction with Concho Resources Inc., or our failure to comply with applicable laws and regulations.

•General domestic and international economic and political developments, including armed hostilities; expropriation of assets; changes in governmental policies relating to crude oil, bitumen, natural gas, LNG, NGLs and carbon pricing, including the imposition of price caps; regulation or taxation; and other political, economic or diplomatic developments, including as a result of any ongoing military conflict, including the conflicts in Ukraine and the Middle East.

•Volatility in the commodity futures markets.

•Changes in tax and other laws, regulations (including alternative energy mandates) or royalty rules applicable to our business.

•Competition and consolidation in the oil and gas E&P industry, including competition for personnel and equipment.

•Any limitations on our access to capital or increase in our cost of capital, including as a result of illiquidity or uncertainty in domestic or international financial markets or investment sentiment, including as a result of increased societal attention to and efforts to address climate change.

•Our inability to execute, or delays in the completion of, any asset dispositions or acquisitions we elect to pursue.

•Potential failure to obtain, or delays in obtaining, any necessary regulatory approvals for pending or future asset dispositions or acquisitions, or that such approvals may require modification to the terms of the transactions or the operation of our remaining business.

•Potential disruption of our operations as a result of pending or future asset dispositions or acquisitions, including the diversion of management time and attention.

•Our inability to deploy the net proceeds from any asset dispositions that are pending or that we elect to undertake in the future in the manner and timeframe we currently anticipate, if at all.

•The operation and financing of our joint ventures.

•The ability of our customers and other contractual counterparties to satisfy their obligations to us, including our ability to collect payments when due from the government of Venezuela or PDVSA.

•Our inability to realize anticipated cost savings and capital expenditure reductions.

•The inadequacy of storage capacity for our products, and ensuing curtailments, whether voluntary or involuntary, required to mitigate this physical constraint.

•The risk that we will be unable to retain and hire key personnel.

•Uncertainty as to the long-term value of our common stock.

•The factors generally described in Part I—Item 1A in our 2023 Annual Report on Form 10-K and any additional risks described in our other filings with the SEC.


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			Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information about market risks for the three months ended March 31, 2024 does not differ materially from that discussed under Item 7A in our 2023 Annual Report on Form 10-K.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures designed to ensure information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. At March 31, 2024, with the participation of our management, our Chairman and Chief Executive Officer (principal executive officer) and our Executive Vice President and Chief Financial Officer (principal financial officer) carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of ConocoPhillips’ disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our Chairman and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded our disclosure controls and procedures were operating effectively at March 31, 2024.

In the third quarter of 2023, we began a multi-year implementation of an updated global enterprise resource planning system (ERP). As a result, we have made corresponding changes to our business processes and information systems, updating applicable internal controls over financial reporting where necessary. As the phased implementation of the ERP system progresses, we expect to continue to modify or change certain processes and procedures which may result in further changes to our internal controls over financial reporting.

There have been no other changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

ConocoPhillips has elected to use a $1 million threshold for disclosing certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party. ConocoPhillips believes proceedings under this threshold are not material to ConocoPhillips' business and financial condition. Applying this threshold, there are no such proceedings to disclose for the quarter ended March 31, 2024. See Note 9 for information regarding other legal and administrative proceedings.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Item 1A of our 2023 Annual Report on Form 10-K.


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

Issuer Purchases of Equity Securities


					Millions of Dollars
Period	Total Number of Shares Purchased*	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
January 1 - 31, 2024	1,732,172	$	111.55	1,732,172	$	15,997
February 1 - 29, 2024	3,841,551	111.51		3,841,551	15,569
March 1 - 31, 2024	5,998,801	117.25		5,998,801	14,866
	11,572,524			11,572,524

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

In late 2016, we initiated our current share repurchase program. As of October 2022, we had announced a total authorization to repurchase up to $45 billion of our common stock. As of March 31, 2024, we had repurchased $30.1 billion of shares. Repurchases are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. Except as limited by applicable legal requirements, repurchases may be increased, decreased or discontinued at any time without prior notice. Shares of stock repurchased under the plan are held as treasury shares. See Part I—Item 1A—Risk Factors – “Our ability to execute our capital return program is subject to certain considerations” in our 2023 Annual Report on Form 10-K.

Item 5. Other Information

Insider Trading Arrangements

During the three-month period ended March 31, 2024, no officer or director of the company adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.


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Item 6. Exhibits


10.1*			Form of Performance Share Unit Award Terms and Conditions for Performance Period 24, a s part of the ConocoPhillips Performance Share Program granted under the 2023 Omnibus Stock and Performance Incentive Plan of ConocoPhillips, dated February 13, 2024.

10.2*			Form of Executive Restricted Stock Unit Award Terms and Conditions, as part of the ConocoPhillips Executive Restricted Stock Unit Program, granted under the 2023 Omnibus Stock and Performance Incentive Plan of ConocoPhillips, dated February 13, 2024.

10.3*			Form of 2024 Retention Award Terms and Conditions, granted under the 2023 Omnibus Stock and Performance Incentive Plan of ConocoPhillips.

10.4*			Form of 2024 Inducement Award Terms and Conditions, granted under the 2023 Omnibus Stock and Performance Incentive Plan of ConocoPhillips.

31.1*			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32**			Certifications pursuant to 18 U.S.C. Section 1350.

101.INS*			Inline XBRL Instance Document.

101.SCH*			Inline XBRL Schema Document.

101.CAL*			Inline XBRL Calculation Linkbase Document.

101.LAB*			Inline XBRL Labels Linkbase Document.

101.PRE*			Inline XBRL Presentation Linkbase Document.

101.DEF*			Inline XBRL Definition Linkbase Document.

104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

**Furnished herewith.


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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			CONOCOPHILLIPS

			/s/ Christopher P. Delk
			Christopher P. Delk
			Vice President, Controller
			and General Tax Counsel
May 2, 2024


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