filings.toolsItem 8. Financial Statements and Supplementary Data
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Item 8. Financial Statements and Supplementary Data
Financial Statements and Supplementary Data
ConocoPhillips
Index to Financial Statements
Page
Reports of Independent Registered Public Accounting Firm
(PCAOB ID #
)
Consolidated Income Statement for the years ended December 31, 2021, 2020 and 2019
Consolidated Statement of Comprehensive Income for the years ended
December 31, 2021, 2020 and 2019
Consolidated Balance Sheet at December 31, 2021 and 2020
Consolidated Statement of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Consolidated Statement of Changes in Equity for the years ended
December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Supplementary Information
ConocoPhillips
2021 10-K
Reports of Management
Management prepared, and is responsible
for,
the consolidated financial statements
and the other information
appearing in this annual report.
The consolidated financial statements
present fairly the company’s
financial
position, results of operations and
cash flows in conformity with accounting
principles generally accepted in the
United States.
In preparing its consolidated financial
statements, the company
includes amounts that are based on
estimates and judgments management
believes are reasonable under the circumstances.
The company’s financial
statements have
been audited by Ernst & Young
LLP,
an independent registered public accounting
firm appointed
by the Audit and Finance Committee of the Board of Directors
and ratified by stockholders.
Management has
made available to Ernst & Young
LLP all of the company’s financial records
and related data, as well as the minutes
of stockholders’ and directors’
meetings.
Assessment of Internal Control Over
Financial Reporting
Management is also responsible for establishing
and maintaining adequate internal
control over financial
reporting.
ConocoPhillips’ internal control
system was designed to
provide reasonable assurance to
the company’s
management and directors regarding
the preparation and fair presentatio
n
of published financial statements.
All internal control systems,
no matter how well designed, have
inherent limitations.
Therefore, even those
systems determined to
be effective can provide
only reasonable assurance with respect
to financial statement
preparation and presentation.
Management assessed the effectiveness
of the company’s internal
control over financial reporting as
of
December 31, 2021.
In making this assessment, it used the criteria set forth
by the Committee of Sponsoring
Organizations of the Treadway
Commission in
Internal Control—Integrated
Framework (2013)
.
Based on our
assessment, we believe the company’s
internal control over financial reporting
was effective as of
December 31, 2021.
Management’s assessment
of, and conclusion on,
the effectiveness of internal control
over
financial reporting did not include the internal controls
of the assets acquired from Shell Enterprise LLC
in
December 2021.
The total assets acquired represented
approximately 10 percent
of the company’s consolidated
total assets at December 31, 2021.
Ernst & Young
LLP has issued an audit report on the company’s
internal control over financial reporting
as of
December 31, 2021, and their report is included herein.
/s/ Ryan M. Lance
/s/ William L. Bullock, Jr.
Ryan M. Lance
William L. Bullock, Jr.
Chairman and
Chief Executive Officer
Executive Vice President and
Chief Financial Officer
ConocoPhillips
2021 10-K
Report of Independent Registered
Public Accounting Firm
To the Stockholders
and the Board of Directors of ConocoPhillips
Opinion on the Financial Statements
We have audited the
accompanying consolidated
balance sheets of ConocoPhillips (the Company) as
of December
31, 2021 and 2020, the related consolidated
income statement, consolidated
statements of comprehensive
income, changes in equity and cash flows for
each of the three years in the period ended December 31, 2021, and
the related notes (collectively referred
to as the “consolidated
financial statements”). In our opinion,
the
consolidated financial statements
present fairly,
in all material respects, the financial position of the Company
as
of December 31, 2021 and 2020, and the results of its operations
and its cash flows for each of the three years
in
the period ended December 31, 2021, in conformity with
U.S. generally accepted accounting
principles.
We also have audited,
in accordance with the standards of the Public
Company Accounting Oversight
Board
(United States) (PCAOB), the Company’s
internal control over financial reporting
as of December 31, 2021, based
on criteria established in Internal
Control–Integrated
Framework issued by the Committee
of Sponsoring
Organizations of the Treadway
Commission (2013 framework) and our report
dated February 17, 2022, expressed
an unqualified opinion thereon.
Basis for Opinion
These financial statements are
the responsibility of the Company’s
management. Our responsibility is to express
an
opinion on the Company’s financial statements
based on our audits. We are a public
accounting firm registered
with the PCAOB and are required to
be independent with respect to the Company
in accordance with the U.S.
federal securities laws and the applicable
rules and regulations of the Securities and Exchange
Commission and the
PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB.
Those standards require that
we plan
and perform the audit to obtain reasonable
assurance about whether the financial statements
are free of material
misstatement, whether due to
error or fraud. Our audits included performing
procedures to assess the risks
of
material misstatement
of the financial statements, whether
due to error or fraud, and performing
procedures that
respond to those risks. Such procedures
included examining, on a test basis, evidence
regarding the amounts and
disclosures in the financial statements.
Our audits also included evaluating the accounting
principles used and
significant estimates made by management,
as well as evaluating the overall
presentation of the financial
statements. We
believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated
below are matters
arising from the current period audit of the
consolidated financial statements
that were communicated
or required to be communicated
to the Audit and
Finance Committee and that: (1) relate
to accounts or disclosures that
are material to the consolidated financial
statements and (2) involved
our especially challenging, subjective or complex judgments.
The communication of
critical audit matters does not
alter in any way our opinion on the consolidated
financial statements, taken
as a
whole, and we are not, by communicating the
critical audit matters below,
providing separate opinions
on the
critical audit matters or on the accounts
or disclosures to which they relate.
ConocoPhillips
2021 10-K
Accounting for asset retirement
obligations for certain offshore properties
Description of
the Matter
At December 31, 2021, the asset retirement
obligation (ARO) balance totaled
$5.9 billion. As
further described in Note 8, the Company records
AROs in the period in which they are
incurred, typically when the asset is installed
at the production location. The estimation
of
obligations related to
certain offshore assets requires
significant judgment given the
magnitude and higher estimation uncertainty
related to plugging and abandonment of wells
and removal and disposal of offshore
oil and gas platforms, facilities
and pipelines costs
(collectively,
removal costs). Furthermore, given
certain of these assets are nearing the end
of their operations, the impact of changes in these AROs
may result in a material impact to
earnings given the relatively short remainin
g
useful lives of the assets.
Auditing the Company’s AROs for
the obligations identified above is
complex and highly
judgmental due to the significant
estimation required by management
in determining the
obligations. In particular,
the estimates were sensitive to
significant subjective assumptions
such as removal cost estimates
and end of field life, which are affected
by expectations
about future market or economic conditions.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding,
evaluated the design and tested
the operating effectiveness
of the Company’s internal
controls over its ARO estimation
process, including management’s
review of the significant assumptions that
have a material effect on the
determination of the
obligations. We also
tested management’s controls
over the completeness and accuracy of
the financial data used in the valuation.
To test
the AROs for the obligations
identified above, our audit procedures included,
among
others, assessing the significant assumptions
and inputs used in the valuation, including
removal cost estimates
and end of field life assumptions. For example,
we evaluated
removal cost estimates
by comparing to settlements and
recent removal activities and costs.
We also compared end of field life
assumptions to production forecasts.
Depreciation, depletion and amortization of proved oil and
gas properties, plants and
equipment
Description of
the Matter
At December 31, 2021, the net book value
of the Company’s proved
oil and gas properties,
plants and equipment (PP&E) was $52 billion, and
depreciation, depletion and amortization
(DD&A) expense was $7.0 billion for the year
then ended. As described in Note 1, under the
successful efforts method of accounting,
DD&A of PP&E on producing hydrocarbon
properties and steam-assisted
gravity drainage facilities
and certain pipeline and liquified
natural gas assets (those which are
expected to have a declining utilization
pattern) are
determined by the unit-of-production
method. The unit-of-production
method uses proved
oil and gas reserves, as estimated
by the Company’s internal
reservoir engineers.
Proved oil and gas reserve
estimates are based on geological and
engineering assessments
of in-place hydrocarbon volumes,
the production plan, historical extraction
recovery and
processing yield factors,
installed plant operating capacity
and approved operating limits.
Significant judgment is required by
the Company’s internal
reservoir engineers in evaluating
geological and engineering data when estimating
proved oil and gas reserves.
Estimating
proved oil and gas reserves also
requires the selection of inputs, including oil and gas
price
assumptions, future operating and
capital costs assumptions and tax
rates by jurisdiction,
among others. Because of the complexity involved
in estimating proved oil and gas
reserves,
management also used an independent petroleum
engineering consulting firm to perform a
review of the processes and controls
used by the Company’s internal
reservoir engineers to
determine estimates of proved
oil and gas reserves.
ConocoPhillips
2021 10-K
Auditing the Company’s DD&A calculation
is complex because of the use of the work of the
internal reservoir engineers and the
independent petroleum engineering consulting firm
and
the evaluation of management’s
determination of the inputs described above used by
the
internal reservoir engineers in estimating
proved oil and gas reserves.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding,
evaluated the design and tested
the operating effectiveness
of the Company’s internal
controls over its processes
to calculate DD&A, including
management’s controls
over the completeness and accuracy
of the financial data provided
to the internal reservoir engineers for
use in estimating proved oil and
gas reserves.
Our audit procedures included, among others,
evaluating the professional
qualifications and
objectivity of the Company’s internal
reservoir engineers primarily responsible
for
overseeing the preparation
of the proved oil and gas reserve
estimates and the independent
petroleum engineering consulting firm used to
review the Company’s
processes and
controls. In addition, in assessing whether we can
use the work of the internal reservoir
engineers, we evaluated the completeness
and accuracy of the financial data and inputs
described above used by the internal reservoir
engineers in estimating proved
oil and gas
reserves by agreeing them to source
documentation and we identified and
evaluated
corroborative and contrary
evidence. We also tested the accuracy
of the DD&A calculation,
including comparing the proved oil and gas
reserve amounts used in the calculation to
the
Company’s reserve report.
Valuation and recognition of
proved and unproved oil & gas properties acquired in
business combinations
Description of
the Matter
During 2021, the Company closed its acquisition of Concho Resources
Inc. and its acquisition
of Permian assets from Shell Enterprises
LLC resulting in the recognition of proved
and
unproved oil and gas properties
within net properties, plants and equipment of $18.9 billion
and $8.6 billion, respectively.
As described in Note 3, the transactions were
accounted for as
business combinations under FASB
ASC 805 using the acquisition method, which requires
assets acquired and liabilities assumed to be measured
at their acquisition date fair values.
Oil and gas properties were valued
using a discounted cash flow approach
based on market
participant assumptions and third party valuation
experts were engaged by the Company
to
prepare fair value estimates.
Significant inputs to the valuation
of proved and unproved oil
and gas properties include estimates
of future commodity price assumptions and
production
profiles of reserve estimates, the
pace of drilling plans, future operating costs
and discount
rates using a market
-based weighted average cost
of capital.
Auditing the Company's accounting for
its valuation of proved and unproved
oil and gas
properties is complex and considerably
judgmental due to the significant estimation
required by management of reserves
and resources associated with the acquired
assets and
the sensitivity of significant assumptions used in determining
the fair value.
In evaluating
the reasonableness of management’s
estimates and assumptions used, the audit
testing
procedures performed required
a high degree of auditor judgment and additional effort,
including involving internal specialists.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding,
evaluated the design and tested
the operating effectiveness
of the Company’s internal
controls over its process
to estimate the fair value of the acquired
proved and unproved
oil and gas properties, including management’s
review of the
significant assumptions used as inputs to
the fair value calculations and final recording
of
the analysis.
ConocoPhillips
2021 10-K
To test
the estimated fair value of the acquired
proved and unproved
oil and gas properties,
our audit procedures included, among others,
evaluating the significant assumptions
used
and testing the completeness and accuracy
of the underlying data supporting the significant
assumptions. For example, we compared
certain significant assumptions
to current industry,
third-party data and historical
results for reasonableness. We
also performed sensitivity
analyses of significant assumptions, to
evaluate the extent of their impact to the
fair value
calculation. In addition, we involved
our valuation specialists to assist
with certain significant
assumptions included in the fair value estimate.
Furthermore, we evaluated
the professional
qualifications and objectivity of the third party
valuation specialist engaged by the Company
to prepare the fair value of the acquired
proved and unproved oil and
gas properties.
/s/ Ernst & Young
LLP
We have served as ConocoPhillips’
auditor since 1949.
Houston, Texas
February 17, 2022
ConocoPhillips
2021 10-K
Report of Independent Registered
Public Accounting Firm
To the Stockholders
and the Board of Directors of ConocoPhillips
Opinion on Internal Control over Financial Reporting
We have audited ConocoPhillips’
internal control over financial reporting
as of December 31, 2021, based on
criteria established in Internal Control
–Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway
Commission (2013 framework) (the COSO criteria).
In our opinion, ConocoPhillips
(the Company) maintained, in all material
respects, effective internal
control over financial reporting
as of
December 31, 2021, based on the COSO criteria. As indicated
under the heading “Assessment
of Internal Control
Over Financial Reporting” in the accompanying Reports of Management,
management’s assessment
of and
conclusion on the effectiveness
of internal control over financial reporting
did not include the internal controls
of
the assets acquired from Shell Enterprise
LLC, which is included in the 2021 consolidated financial
statements of
ConocoPhillips and constituted approximately
10 percent of consolidated total
assets as of December 31, 2021.
Our audit of internal control over
financial reporting of ConocoPhillips also did not
include an evaluation of the
internal control over financial
reporting of the assets acquired from Shell Enterprise
LLC.
We also have audited,
in accordance with the standards of the Public
Company Accounting Oversight
Board
(United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2021 and 2020, the
related consolidated income statement,
consolidated statements
of comprehensive income, changes in equity
and
cash flows for each of the three years
in the period ended December 31, 2021, and the related notes
and our
report dated February 17, 2022, expressed
an unqualified opinion thereon.
Basis for Opinion
The Company’s management
is responsible for maintaining effective
internal control over
financial reporting and
for its assessment of the effectiveness
of internal control over financial reporting
included under the heading
“Assessment
of Internal Control Over Financial Reporting” in the
accompanying “Reports of Management.”
Our
responsibility is to express an opinion
on the Company’s internal control
over financial reporting based on our
audit. We are a public accounting
firm registered with the PCAOB and are
required to be independent with respect
to the Company in accordance with the U.S.
federal securities laws and
the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those
standards require that
we plan and
perform the audit to obtain reasonable
assurance about whether effective
internal control over financial
reporting
was maintained in all material respects.
Our audit included obtaining an understanding
of internal control over financial
reporting, assessing the risk that a
material weakness exists, testing
and evaluating the design and operating
effectiveness of internal control
based
on the assessed risk, and performing such other procedures
as we considered necessary in the circumstances.
We
believe that our audit provides a reasonable
basis for our opinion.
ConocoPhillips
2021 10-K
Definition and Limitations of Internal
Control Over Financial Reporting
A company’s internal
control over financial reporting is a process
designed to provide reasonable assurance
regarding the reliability of financial reporting
and the preparation of financial statements
for external purposes in
accordance with generally accepted
accounting principles. A company’s
internal control over financial reporting
includes those policies and procedures that
(1) pertain to the maintenance of records
that, in reasonable detail,
accurately and fairly reflect
the transactions and dispositions of the assets
of the company; (2) provide reasonable
assurance that transactions
are recorded as necessary to permit preparation
of financial statements in accordance
with generally accepted accounting
principles, and that receipts and expenditures
of the company are being made
only in accordance with authorizations
of management and directors of the company;
and (3) provide reasonable
assurance regarding prevention
or timely detection of unauthorized acquisition, use,
or disposition of the
company’s assets that
could have a material effect
on the financial statements.
Because of its inherent limitations,
internal control over financial reporting
may not prevent or detect
misstatements. Also,
projections of any evaluation
of effectiveness to future periods
are subject to the risk that
controls may become inadequate
because of changes in conditions, or that the
degree of compliance with the
policies or procedures may deteriorate.
/s/
Ernst & Young LLP
Houston, Texas
February 17, 2022
Financial Statements
ConocoPhillips
2021 10-K
Consolidated Income Statement
ConocoPhillips
Years Ended
December 31
Millions of Dollars
2021
2020
2019
Revenues and Other Income
Sales and other operating revenues
$
45,828
18,784
32,567
Equity in earnings of affiliates
Gain on dispositions
1,966
Other income (loss)
1,203
(509)
1,358
Total
Revenues and Other Income
48,349
19,256
36,670
Costs and Expenses
Purchased commodities
18,158
8,078
11,842
Production and operating expenses
5,694
4,344
5,322
Selling, general and administrative
expenses
Exploration expenses
1,457
Depreciation, depletion and amortization
7,208
5,521
6,090
Impairments
Taxes
other than income taxes
1,634
Accretion on discounted liabilities
Interest and debt expense
Foreign currency transaction
(gains) losses
(22)
(72)
Other expenses
Total
Costs and Expenses
35,637
22,396
27,146
Income (loss) before income taxes
12,712
(3,140)
9,524
Income tax provision (benefit)
4,633
(485)
2,267
Net income (loss)
8,079
(2,655)
7,257
Less: net income attributable to noncontrolling
interests
-
(46)
(68)
Net Income (Loss) Attributable
to ConocoPhillips
$
8,079
(2,701)
7,189
Net Income (Loss) Attributable
to ConocoPhillips Per Share
of Common Stock
(dollars)
Basic
$
6.09
(2.51)
6.43
Diluted
6.07
(2.51)
6.40
Average Common Shares
Outstanding
(in thousands)
Basic
1,324,194
1,078,030
1,117,260
Diluted
1,328,151
1,078,030
1,123,536
See Notes to Consolidated Financial Statements.
Financial Statements
ConocoPhillips
2021 10-K
Consolidated Statement
of Comprehensive Income
ConocoPhillips
Years Ended
December 31
Millions of Dollars
2021
2020
2019
Net Income (Loss)
$
8,079
(2,655)
7,257
Other comprehensive income (loss)
Defined benefit plans
Prior service credit arising during the period
-
-
Reclassification adjustment for
amortization of prior
service credit included in net income (loss)
(38)
(32)
(35)
Net change
(38)
(3)
(35)
Net actuarial gain (loss) arising during the period
(210)
(55)
Reclassification adjustment for
amortization of net
actuarial losses included in net income (loss)
Net change
(93)
Nonsponsored plans*
(3)
Income taxes on defined benefit
plans
(108)
(2)
Defined benefit plans, net of tax
(75)
Unrealized holding gain (loss) on
securities
(2)
-
Reclassification adjustment for
loss included in net income
(1)
-
-
Income taxes on unrealized
holding loss on securities
-
-
Unrealized holding gain (loss) on securities,
net of tax
(2)
-
Foreign currency translation
adjustments
(124)
Income taxes on foreign
currency translation adjustments
-
(4)
Foreign currency translation
adjustments, net of tax
(124)
Other Comprehensive Income, Net of Tax
Comprehensive Income (Loss)
8,347
(2,516)
8,003
Less: comprehensive income attributable
to noncontrolling interests
-
(46)
(68)
Comprehensive Income (Loss) Attributable
to ConocoPhillips
$
8,347
(2,562)
7,935
*Plans for which ConocoPhillips is not the primary obligor—primarily those administered by equity
affiliates.
See Notes to Consolidated Financial Statements.
Financial Statements
ConocoPhillips
2021 10-K
Consolidated Balance Sheet
ConocoPhillips
At December 31
Millions of Dollars
2021
2020
Assets
Cash and cash equivalents
$
5,028
2,991
Short-term investments
3,609
Accounts and notes receivable (net of allowance
of $
and $
, respectively)
6,543
2,634
Accounts and notes receivable—related
parties
Investment in Cenovus Energy
1,117
1,256
Inventories
1,208
1,002
Prepaid expenses and other current
assets
1,581
Total
Current Assets
16,050
12,066
Investments and long-term receivables
7,113
8,017
Loans and advances—related parties
-
Net properties, plants and equipment
(net of accumulated DD&A of $
64,735
and $
62,213
, respectively)
64,911
39,893
Other assets
2,587
2,528
Total
Assets
$
90,661
62,618
Liabilities
Accounts payable
$
5,002
2,669
Accounts payable—related
parties
Short-term debt
1,200
Accrued income and other taxes
2,862
Employee benefit obligations
Other accruals
2,179
1,121
Total
Current Liabilities
12,021
5,366
Long-term debt
18,734
14,750
Asset retirement obligations
and accrued environmental costs
5,754
5,430
Deferred income taxes
6,179
3,747
Employee benefit obligations
1,153
1,697
Other liabilities and deferred credits
1,414
1,779
Total
Liabilities
45,255
32,769
Equity
Common stock (
2,500,000,000
shares authorized at $
0.01
par value)
Issued (2021—
2,091,562,747
shares; 2020—
1,798,844,267
shares)
Par value
Capital in excess of par
60,581
47,133
Treasury stock
(at cost: 2021—
789,319,875
shares; 2020—
730,802,089
shares)
(50,920)
(47,297)
Accumulated other comprehensive
loss
(4,950)
(5,218)
Retained earnings
40,674
35,213
Total
Equity
45,406
29,849
Total
Liabilities and Equity
$
90,661
62,618
See Notes to Consolidated Financial Statements.
Financial Statements
ConocoPhillips
2021 10-K
Consolidated Statement
of Cash Flows
ConocoPhillips
Years Ended
December 31
Millions of Dollars
2021
2020
2019
Cash Flows From Operating Activities
Net income (loss)
$
8,079
(2,655)
7,257
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation, depletion and amortization
7,208
5,521
6,090
Impairments
Dry hole costs and leasehold impairments
1,083
Accretion on discounted liabilities
Deferred taxes
1,346
(834)
(444)
Undistributed equity earnings
Gain on dispositions
(486)
(549)
(1,966)
(Gain) loss on CVE common shares
(1,040)
(649)
Other
(788)
(351)
Working capital adjustments
Decrease (increase) in accounts and notes
receivable
(2,500)
Increase in inventories
(160)
(25)
(67)
Decrease (increase) in prepaid expenses
and other current
assets
(649)
Increase (decrease) in accounts payable
1,399
(249)
(378)
Increase (decrease) in taxes
and other accruals
3,181
(695)
(676)
Net Cash Provided by Operating
Activities
16,996
4,802
11,104
Cash Flows From Investing Activities
Capital expenditures and investments
(5,324)
(4,715)
(6,636)
Working capital changes
associated with investing activities
(155)
(103)
Acquisition of businesses, net of cash acquired
(8,290)
-
-
Proceeds from asset dispositions
1,653
1,317
3,012
Net sales (purchases) of investments
3,091
(658)
(2,910)
Collection of advances/loans—related parties
Other
(26)
(108)
Net Cash Used in Investing Activities
(8,544)
(4,121)
(6,618)
Cash Flows From Financing Activities
Issuance of debt
-
-
Repayment of debt
(505)
(254)
(80)
Issuance of company common stock
(5)
(30)
Repurchase of company common
stock
(3,623)
(892)
(3,500)
Dividends paid
(2,359)
(1,831)
(1,500)
Other
(26)
(119)
Net Cash Used in Financing Activities
(6,335)
(2,708)
(5,229)
Effect of Exchange
Rate Changes on Cash, Cash Equivalents
and
Restricted Cash
(34)
(20)
(46)
Net Change in Cash, Cash Equivalents and
Restricted Cash
2,083
(2,047)
(789)
Cash, cash equivalents and restricted
cash at beginning of period
3,315
5,362
6,151
Cash, Cash Equivalents and Restricted
Cash at End of Period
$
5,398
3,315
5,362
Restricted cash of $
million and $
million is included in the “Prepaid expenses and other current assets” and “Other assets”
lines,
respectively, of our Consolidated Balance Sheet as of December 31, 2021.
Restricted cash of $
million and $
million is included in the “Prepaid expenses and other current assets” and “Other assets” lines,
respectively, of our Consolidated Balance Sheet as of December 31, 2020.
See Notes to Consolidated Financial Statements.
Financial Statements
ConocoPhillips
2021 10-K
Consolidated Statement
of Changes in Equity
ConocoPhillips
Millions of Dollars
Attributable to ConocoPhillips
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Non-
Controlling
Interests
Total
Balances at December 31, 2018
$
46,879
(42,905)
(6,063)
34,010
32,064
Net income
7,189
7,257
Other comprehensive loss
Dividends declared—ordinary ($
1.34
per share of common stock)
(1,500)
(1,500)
Repurchase of company common stock
(3,500)
(3,500)
Distributions to noncontrolling interests and other
(128)
(128)
Distributed under benefit plans
Changes in Accounting Principles*
(40)
-
Other
Balances at December 31, 2019
$
46,983
(46,405)
(5,357)
39,742
35,050
Net income (loss)
(2,701)
(2,655)
Other comprehensive income
Dividends declared—ordinary ($
1.69
per share of common stock)
(1,831)
(1,831)
Repurchase of company common stock
(892)
(892)
Distributions to noncontrolling interests and other
(32)
(32)
Disposition
(84)
(84)
Distributed under benefit plans
Other
Balances at December 31, 2020
$
47,133
(47,297)
(5,218)
35,213
-
29,849
Net income
8,079
-
8,079
Other comprehensive income
Dividends declared
Ordinary ($
1.75
per share of common stock)
(2,359)
(2,359)
Variable return of cash ($
0.20
per share of common stock)
(260)
(260)
Acquisition of Concho
13,122
13,125
Repurchase of company common stock
(3,623)
(3,623)
Distributed under benefit plans
Other
-
Balances at December 31, 2021
$
60,581
(50,920)
(4,950)
40,674
-
45,406
*Cumulative effect of the adoption of ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Notes to Consolidated
Financial Statements
Note 1—Accounting Policies
●
Consolidation Principles and Investments
—Our consolidated financial statements
include the accounts of
majority-owned, controlled subsidiaries
and, if applicable, variable interest
entities where we are the
primary beneficiary.
The equity method is used to account for
investments in affiliates
in which we have
the ability to exert significant
influence over the affiliates’ operating
and financial policies.
When we do
not have the ability to exert
significant influence, the investment
is measured at fair value except
when
the investment does not have
a readily determinable fair value.
For those exceptions, it will be measured
at cost minus impairment, plus or minus
observable price changes in orderly transactions for
an identical
or similar investment of the same issuer.
Undivided interests in oil and gas
joint ventures, pipelines,
natural gas plants and terminals
are consolidated on a proportionate
basis.
Other securities and
investments are generally
carried at cost.
We manage our operations
through
six
operating segments,
defined by geographic region:
Alaska; Lower 48; Canada; Europe, Middle
East and North Africa; Asia
Pacific; and Other International.
●
Foreign Currency Translation
—Adjustments resulting from the
process of translating foreign
functional
currency financial statements
into U.S. dollars are included
in accumulated other comprehensive
loss in
common stockholders’ equity.
Foreign currency transaction
gains and losses are included in current
earnings.
Some of our foreign operations
use their local currency as the functional currency.
●
Use of Estimates
—The preparation of financial statements
in conformity with U.S. GAAP requires
management to make estimates
and assumptions that affect the
reported amounts of assets, liabilities,
revenues and expenses and the disclosures
of contingent assets and liabilities.
Actual results could differ
from these estimates.
●
Revenue Recognition
—Revenues associated with
the sales of crude oil, bitumen, natural gas,
LNG, NGLs
and other items are recognized
at the point in time when the customer obtains
control of the asset.
In
evaluating when a customer has control
of the asset, we primarily consider whether the transfer
of legal
title and physical delivery has occurred,
whether the customer has significant risks
and rewards of
ownership and whether the customer has
accepted delivery and a right to payment
exists.
These
products are typically sold at prevailing
market prices.
We allocate variable
market-based consideration
to deliveries (performance obligations)
in the current period as that consideration
relates specifically to
our efforts to transfer
control of current period deliveries
to the customer and represents
the amount we
expect to be entitled to in exchange
for the related products.
Payment is typically due within 30 days or
less.
Revenues associated with transactions
commonly called buy/sell contracts,
in which the purchase and
sale of inventory with the same counterparty
are entered into “in contemplation”
of one another, are
combined and reported net (i.e., on the same income
statement line).
●
Shipping and Handling Costs
—We typically incur shipping and handling
costs prior to control transferring
to the customer and account for
these activities as fulfillment costs.
Accordingly,
we include shipping and
handling costs in production and operating
expenses for production activities.
Transportation
costs
related to marketing activities
are recorded in purchased commodities.
Freight costs billed to customers
are treated as a component of the transaction
price and recorded as a component of revenue
when the
customer obtains control.
●
Cash Equivalents
—Cash equivalents are highly liquid, short-term
investments that are
readily convertible
to known amounts of cash and have
original maturities of 90 days or less from their date
of purchase.
They are carried at cost plus accrued interest,
which approximates fair value.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
●
Short-Term
Investments
—Short-term investments
include investments in bank time deposits
and
marketable securities (commercial
paper and government obligations)
which are carried at cost plus
accrued interest and have
original maturities of greater than 90 days
but within one year or when the
remaining maturities are within one year.
We also invest in financial instruments
classified as available
for sale debt securities which are carried at
fair value. Those instruments
are included in short-term
investments when they have
remaining maturities within one year as of the balance
sheet date.
●
Long-Term Investments
in Debt Securities
—Long-term investments
in debt securities includes financial
instruments classified as available
for sale debt securities with remaining maturities
greater than one year
as of the balance sheet date.
They are carried at fair value
and presented within the “Investments
and
long-term receivables” line of our consolidated
balance sheet.
●
Inventories
—We have several
valuation methods for our various
types of inventories and consistently
use
the following methods for each type
of inventory.
The majority of our commodity-related inventories
are
recorded at cost using the
LIFO basis.
We measure these inventories
at the lower-of-cost-or-market
in
the aggregate.
Any necessary lower-of-cost-or-market
write-downs at year end are recorded
as
permanent adjustments to the LIFO cost
basis.
LIFO is used to better match current
inventory costs with
current revenues.
Costs include both direct and indirect expenditures
incurred in bringing an item or
product to its existing condition
and location, but not unusual/nonrecurring costs
or research and
development costs.
Materials, supplies and other miscellaneous inventories,
such as tubular goods and
well equipment, are valued using various
methods, including the weighted-average
-cost method and the
FIFO method, consistent with industry
practice.
●
Fair Value Measurements
—Assets and liabilities measured at fair value
and required to be categorized
within the fair value hierarchy
are categorized into
one of three different
levels depending on the
observability of the inputs employed in the measurement.
Level 1 inputs are quoted prices in active
markets for identical assets
or liabilities.
Level 2 inputs are observable inputs other than
quoted prices
included within Level 1 for the asset or liability,
either directly or indirectly through market
-corroborated
inputs.
Level 3 inputs are unobservable inputs for
the asset or liability reflecting significant modifications
to observable related market
data or our assumptions about pricing by market
participants.
●
Derivative Instruments
—Derivative instruments are
recorded on the balance sheet at fair
value.
If the
right of offset exists and certain
other criteria are met, derivative assets
and liabilities with the same
counterparty are netted
on the balance sheet and the collateral payable
or receivable is netted against
derivative assets and derivative
liabilities, respectively.
Recognition and classification of the gain
or loss that results from recording
and adjusting a derivative to
fair value depends on the purpose for
issuing or holding the derivative.
Gains and losses from derivatives
not accounted for as hedges
are recognized immediately in
earnings.
We do not apply hedge accounting
to our derivative instruments.
●
Oil and Gas Exploration and Development
—Oil and gas exploration and
development costs are
accounted for using the successful
efforts method of accounting.
Property Acquisition Costs
—Oil and gas leasehold acquisition costs
are capitalized and included in
the balance sheet caption PP&E.
Leasehold impairment is recognized based on
exploratory
experience and management’s
judgment.
Upon achievement of all conditions necessary for
reserves
to be classified as proved, the associated
leasehold costs are reclassified to proved
properties.
Exploratory Costs
—Geological and geophysical
costs and the costs of carrying and retaining
undeveloped properties are expensed
as incurred.
Exploratory well costs are
capitalized, or
“suspended,”
on the balance sheet pending further evaluation of whether economically
recoverable
reserves have been found.
If economically recoverable reserves
are not found, exploratory
well costs
are expensed as dry holes.
If exploratory wells encounter
potentially economic quantities
of oil and
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
gas, the well costs remain capitalized
on the balance sheet as long as sufficient progress
assessing the
reserves and the economic and operating
viability of the project is being made.
For complex
exploratory discoveries,
it is not unusual to have exploratory
wells remain suspended on the balance
sheet for several years
while we perform additional appraisal
drilling and seismic work on the
potential oil and gas field or while we seek government
or co-venturer approval
of development
plans or seek environmental permitting.
Once all required approvals
and permits have been
obtained, the projects are moved
into the development phase, and the
oil and gas resources are
designated as proved reserves.
Management reviews suspended well balances
quarterly,
continuously monitors the results
of the
additional appraisal drilling and seismic work, and expenses
the suspended well costs as dry holes
when it judges the potential field does not warrant
further investment in the near term.
Development Costs
—Costs incurred to drill and equip development
wells, including unsuccessful
development wells, are capital
ized.
Depletion and Amortization
—Leasehold costs of producing properties
are depleted using the unit-of-
production method based on estimated
proved oil and gas reserves.
Amortization of development
costs is based on the unit-of-production
method using estimated proved
developed oil and gas
reserves.
●
Capitalized Interest
—Interest from external
borrowings is capitalized on
major projects with an expected
construction period of one year or longer.
Capitalized interest
is added to the cost of the underlying asset
and is amortized over the useful lives of the assets
in the same manner as the underlying assets.
●
Depreciation and Amortization
—Depreciation and amortization of PP&E
on producing hydrocarbon
properties and SAGD facilities and
certain pipeline and LNG assets (those which are expected
to have a
declining utilization pattern),
are determined by the unit-of-production
method.
Depreciation and
amortization of all other PP&E are determined by
either the individual-unit-straight-line
method or the
group-straight-line
method (for those individual units that are
highly integrated with other units).
●
Impairment of Properties, Plants and Equipment
—Long-lived assets used in operations are assessed
for
impairment whenever changes in facts
and circumstances indicate a possible
significant deterioration in
the future cash flows expected
to be generated by an asset group.
If there is an indication the carrying
amount of an asset may not be recovered,
a recoverability test
is performed using management’s
assumptions for prices, volumes and future
development plans.
If the sum of the undiscounted cash
flows before income-taxes
is less than the carrying value of the asset group,
the carrying value is written
down to estimated fair value
and reported as an impairment in the period in which
the determination is
made.
Individual assets are grouped for
impairment purposes at the lowest level for
which there are
identifiable cash flows that are largely
independent of the cash flows of other groups
of assets—generally
on a field-by-field basis for E&P assets.
Because there usually is a lack of quoted market
prices for long-
lived assets, the fair value of impaired assets
is typically determined based on the present values
of
expected future cash flows using
discount
rates and prices believed to be consistent
with those used by
principal market participants, or based
on a multiple of operating cash flow validated
with historical
market transactions of similar assets
where possible.
The expected future cash flows used
for impairment reviews and
related fair value calculations
are based
on estimated future production
volumes, commodity prices,
operating costs and capital
decisions,
considering all available evidence at the date
of review.
The impairment review includes cash
flows from
proved developed and undeveloped
reserves, including any development
expenditures necessary to
achieve that production.
Additionally, when probable
and possible reserves exist, an appropriate
risk-
adjusted amount of these reserves may
be included in the impairment calculation.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Long-lived assets committed by
management for disposal within one year are
accounted for at the lower
of amortized cost or fair value,
less cost to sell, with fair value determined
using a binding negotiated
price, if available, or present value
of expected future cash flows
as previously described.
●
Maintenance and Repairs
—Costs of maintenance and repairs,
which are not significant improvements,
are expensed when incurred.
●
Property Dispositions
—When complete units of depreciable
property are sold, the asset cost
and related
accumulated depreciation are
eliminated, with any gain or loss
reflected in the “Gain on dispositions” line
of our consolidated income statement.
When partial units of depreciable property are
disposed of or
retired which do not significantly
alter the DD&A rate, the difference
between asset cost and salvage
value is charged or credited to
accumulated depreciation.
●
Asset Retirement Obligations
and Environmental Costs
—The
fair value of legal obligations
to retire and
remove long-lived assets are recorded
in the period in which the obligation is incurred
(typically when the
asset is installed at the production
location).
Fair value is estimated using
a present value approach,
incorporating assumptions about estimated
amounts and timing of settlements and impacts
of the use of
technologies.
Environmental expenditures
are expensed or capitalized,
depending upon their future economic benefit.
Expenditures relating to an existing
condition caused by past operations,
and those having no future
economic benefit, are expensed.
Liabilities for environmental
expenditures are recorded
on an
undiscounted basis (unless acquired through
a business combination, which we record
on a discounted
basis) when environmental assessments
or cleanups are probable and the costs
can be reasonably
estimated.
Recoveries of environmental
remediation costs from other parties
are recorded as assets
when their receipt is probable and estimable.
●
Impairment of Investments
in Nonconsolidated Entities
—Investments in nonconsolidated
entities are
assessed for impairment whenever changes
in the facts and circumstances
indicate a loss in value has
occurred.
When such a condition is judgmentally determined
to be other than temporary,
the carrying
value of the investment is written
down to fair value.
The fair value of the impaired investment
is based
on quoted market prices, if available,
or upon the present value of expected
future cash flows using
discount rates and prices believed
to be consistent with those used by
principal market participants, plus
market analysis of comparable
assets owned by the investee,
if appropriate.
●
Guarantees
—The fair value of a guarantee
is determined and recorded as a
liability at the time the
guarantee is given.
The initial liability is subsequently reduced as we are
released from exposure
under
the guarantee.
We amortize the guarantee
liability over the relevant time period, if one
exists, based on
the facts and circumstances surrounding
each type of guarantee.
In cases where the guarantee term
is
indefinite, we reverse the liability
when we have information
indicating the liability is essentially relieved
or amortize it over an appropriate
time period as the fair value of our guarantee
exposure declines over
time.
We amortize the guarantee
liability to the related income statement
line item based on the nature
of the guarantee.
When it becomes probable that we will have
to perform on a guarantee, we accrue
a
separate liability if it is reasonably estimable,
based on the facts and circumstances
at that time.
We
reverse the fair value liability
only when there is no further exposure under the
guarantee.
●
Share-Based Compensation
—We recognize share
-based compensation expense over
the shorter of the
service period (i.e., the stated period of time required
to earn the award) or the period beginning at
the
start of the service period and ending when an employee first
becomes eligible for retirement.
We have
elected to recognize expense
on a straight-line basis over the service period for
the entire award, whether
the award was granted
with ratable or cliff vesting.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
●
Income Taxes
—Deferred income taxes
are computed using the liability method
and are provided on all
temporary differences
between the financial reporting basis and the tax
basis of our assets and liabilities,
except for deferred
taxes on income and temporary
differences related
to the cumulative translation
adjustment considered to be permanently
reinvested in certain
foreign subsidiaries and foreign
corporate
joint ventures.
Allowable tax credits are applied currently
as reductions of the provision for
income taxes.
Interest related to
unrecognized tax benefits
is reflected in interest
and debt expense, and penalties
related to unrecognized
tax benefits are reflected
in production and operating
expenses.
●
Taxes
Collected from Customers
and Remitted to Governmental
Authorities
—Sales and value-added
taxes are recorded
net.
●
Net Income (Loss) Per Share of Common
Stock
—Basic net income (loss) per share of common stock
is
calculated based upon the daily weighted-average
number of common shares outstanding
during the
year.
Also, this
calculation includes fully vested stock
and unit awards that have not
yet been issued as
common stock, along with an adjustment
to net income (loss) for dividend equivalents
paid on unvested
unit awards that are considered
participating securities.
Diluted net income per share of common stock
includes unvested stock,
unit or option awards granted
under our compensation plans and vested but
unexercised stock
options, but only to the extent these instruments
dilute net income per share, primarily
under the treasury-stock method.
Diluted net loss per share, which is calculated
the same as basic net
loss per share, does not assume conversion
or exercise of securities that
would have an antidilutive effect.
Treasury stock
is excluded from the daily weighted
-average number of common
shares outstanding in
both calculations.
The earnings per share impact of the participating securities is immaterial.
Note 2—Inventories
Inventories at December 31 were:
Millions of Dollars
2021
2020
Crude oil and natural gas
$
Materials and supplies
Total
inventories
$
1,208
1,002
Inventories valued on
the LIFO basis
$
The estimated excess
of current replacement cost over
LIFO cost of inventories
was approximately $
million
and $
million at December 31, 2021 and 2020, respectively.
Note 3—Asset Acquisitions and Dispositions
All gains or losses on asset dispositions are reported
before-tax and are included
net in the “Gain on dispositions”
line on our consolidated income stat
ement.
All cash proceeds and payments are
included in the “Cash Flows From
Investing Activities” section of our consolidated
statement of cash flows.
During the year,
we completed the acquisitions of Concho Resources
Inc. (Concho) and of Shell Enterprises LLC’s
(Shell) Permian assets.
The acquisitions were accounted for
as business combinations under FASB
Topic ASC 805
using the acquisition method, which requires assets
acquired and liabilities assumed to be measured at their
acquisition date fair values.
Fair value measurements were
made for acquired assets and liabilities, and
adjustments to those measurements
may be made in subsequent periods, up to
one year from the acquisition date
as we identify new information
about facts and circumstances that
existed as of the acquisition date to
consider.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
2021
Acquisition of Concho Resources Inc.
In January 2021, we completed our acquisition of Concho,
an independent oil and gas exploration
and production
company with operations across
New Mexico and West Texas
focused in the Permian Basin.
Total
consideration
for the all-stock transaction
was valued at $
13.1
billion, in which 1.46 shares of ConocoPhillips common stock
were
exchanged for each outstanding
share of Concho common stock.
Total Consideration
Number of shares of Concho common stock issued
and outstanding (in thousands)*
194,243
Number of shares of Concho stock awards
outstanding (in thousands)*
1,599
Number of shares exchanged
195,842
Exchange ratio
1.46
Additional shares of ConocoPhillips common stock
issued as consideration (in thousands)
285,929
Average price per share of ConocoPhillips
common stock**
$
45.9025
Total Consideration
(Millions)
$
13,125
*Outstanding as of January 15, 2021.
**Based on the ConocoPhillips average stock price on January 15, 2021.
Oil and gas properties were valued
using a discounted cash flow approach
incorporating market
participant and
internally generated price assumptions;
production profiles; and operating
and development cost assumptions.
Debt assumed in the acquisition was valued based on
observable market prices.
The fair values determined for
accounts receivable, accounts
payable, and most other current
assets and current liabilities were equivalent
to the
carrying value due to their short-term
nature.
The total consideration of $
13.1
billion was allocated to the
identifiable assets and liabilities based on their fair
values as of January 15, 2021.
Assets Acquired
Millions of Dollars
Cash and cash equivalents
$
Accounts receivable, net
Inventories
Prepaid expenses and other current
assets
Investments and long-term receivables
Net properties, plants and equipment
18,923
Other assets
Total assets
acquired
$
20,527
Liabilities Assumed
Accounts payable
$
Accrued income and other taxes
Employee benefit obligations
Other accruals
Long-term debt
4,696
Asset retirement obligations
and accrued environmental costs
Deferred income taxes
1,071
Other liabilities and deferred credits
Total liabilities
assumed
$
7,402
Net assets acquired
$
13,125
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
With the completion of the Concho transaction,
we acquired proved and unproved
properties of approximately
$
11.8
billion and $
6.9
billion, respectively.
We recognized approximately
$
million of transaction-related costs,
all of which were expensed in the first
quarter of 2021.
These non-recurring costs related
primarily to fees paid to advisors
and the settlement of share-
based awards for certain Concho
employees based on the terms of the Merger Agreement.
In the first quarter of 2021, we commenced
a company-wide restructuring program,
the scope of which included
combining the operations of the two companies
as well as other global restructuring activities.
We recognized
non-recurring restructuring costs
mainly for employee severance and
related incremental pension
benefit costs.
The impact from these transaction and restructuring
costs to the lines of our consolidated income statement
for
the year ended December 31, 2021, are below:
Millions of Dollars
Transaction
Cost
Restructuring Cost
Total
Cost
Production and operating expenses
$
Selling, general and administration
expenses
Exploration expenses
Taxes
other than income taxes
Other expenses
-
$
On February 8, 2021, we completed a debt
exchange offer
related to the debt assumed from Concho.
As a result
of the debt exchange, we recognized
an additional income tax related
restructuring charge of $
million.
From the acquisition date through
December 31, 2021, “Total Revenues
and Other Income” and “Net Income
(Loss) Attributable to ConocoPhillips”
associated with the acquired Concho business
were approximately $
6,571
million and $
2,330
million, respectively.
The results associated with the Concho business
for the same period
include a before- and after-tax
loss of $
million and $
million, respectively,
on the acquired derivative
contracts.
The before-tax loss is recorded
within “Total Revenues
and Other Income” on our consolidated
income
statement.
Acquisition of Shell Permian Assets
In December 2021, we completed our acquisition
of Shell assets in the Permian based Delaware Basin.
The
accounting close date used for reporting
purposes was December 31, 2021.
Assets acquired include approximately
225,000
net acres and producing properties
located entirely in Texas.
Total
consideration for the transaction
was
$
8.7
billion.
Oil and gas properties were valued
using a discounted cash flow approach
incorporating market
participant and
internally generated price assumptions
,
production profiles,
and operating and development cost
assumptions.
The fair values determined for
accounts receivable, accounts
payable, and most other current
assets and current
liabilities were equivalent to the carrying
value due to their short-term
nature.
The total consideration
of $
8.7
billion was allocated to the identifiable
assets and liabilities based on their fair values
at the acquisition date.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Assets Acquired
Millions of Dollars
Accounts receivable, net
$
Inventories
Net properties, plants and equipment
8,624
Other assets
Total assets
acquired
$
9,031
Liabilities Assumed
Accounts payable
$
Accrued income and other taxes
Other accruals
Asset retirement obligations
and accrued environmental costs
Other liabilities and deferred credits
Total liabilities
assumed
$
Net assets acquired
$
8,672
With the completion of the Shell Permian transaction,
we acquired proved and unproved
properties of
approximately $
4.2
billion and $
4.4
billion, respectively.
We recognized approximately
$
million of transaction-
related costs which were expensed
during 2021.
Supplemental Pro Forma (unaudited)
The following tables summarize the
unaudited supplemental pro
forma financial information fo
r
the year ended
December 31, 2021, and 2020, as if we had completed the acquisitions
of Concho and the Shell Permian assets on
January 1, 2020.
Millions of Dollars
Year Ended December 31, 2021
Pro forma
Pro forma
As reported
Shell
Combined
Total
Revenues and Other Income
$
48,349
3,220
51,569
Income (loss) before income taxes
12,712
1,201
13,913
Net Income (Loss) attributable to
ConocoPhillips
8,079
8,999
Earnings per share:
Basic net loss
$
6.09
6.78
Diluted net loss
6.07
6.76
Millions of Dollars
Year Ended December 31, 2020
Pro forma
Pro forma
Pro forma
As reported
Concho
Shell
Combined
Total
Revenues and Other Income
$
19,256
3,762
1,685
24,703
Income (loss) before income taxes
(3,140)
(247)
(2,600)
Net Income (Loss) attributable to
ConocoPhillips
(2,701)
(189)
(2,392)
Earnings per share:
Basic net loss
$
(2.51)
(1.75)
Diluted net loss
(2.51)
(1.75)
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
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 transactions been completed on
January 1, 2020, nor is it necessarily indicative of future
operating results of the combined entity.
The unaudited
pro forma financial information
for the twelve-month period ending December 31, 2020
is a result of combining
the consolidated income statement
of ConocoPhillips with the results of Concho and the assets
acquired from
Shell.
The pro forma results do not
include transaction-related costs,
nor any cost savings anticipated
as a result of
the transactions.
The pro forma results include adjustments
from Concho’s historical
results to reverse
impairment expense of $
10.5
billion and $
1.9
billion related to oil and gas properties
and goodwill, respectively.
Other adjustments made relate primarily to
DD&A, which is based on the unit-of-production
method, resulting
from the purchase price allocated
to properties, plants and equipment.
We believe the estimates
and assumptions
are reasonable, and the relative
effects of the transaction are
properly reflected.
Announced Acquisitions
In December 2021, we announced that we have
notified Origin Energy that we are exercising
our preemption right
to purchase an additional
percent shareholding interest
in APLNG from Origin Energy for $
1.645
billion, which
will be funded from cash on the balance sheet, before
customary adjustments.
The effective date of the
transaction will be July 1, 2020 with closing anticipated
to occur in the first quarter of 2022 subject
to Australian
government approval.
See
and
Assets Sold
In 2020, we completed the sale of our Australia
-West asset and operations.
The sales agreement entitled us to a
$
million payment upon a final investment
decision (FID) of the Barossa development project.
On March 30,
2021, FID was announced and as such, we recognized
a $
million gain on disposition in the first quarter
of 2021.
The purchaser failed to pay the FID bonus
when due.
We have commenced an arbitration
proceeding against the
purchaser to enforce our contractual
right to the $
million, plus interest accruing from the due
date.
Results of
operations related to
this transaction are reflected in
our Asia Pacific segment.
In the second half of 2021, we sold our interests
in certain noncore assets in our Lower 48 segment for
approximately $
million after customary adjustments,
recognizing a before-tax gain
on sale of approximately
$
million.
We also completed the sale of our
noncore exploration
interests in Argentina,
recognizing a before-
tax loss on disposition of $
million.
Results of operations for
Argentina were reported
in our Other
International segment.
In 2021, we recorded contingent
payments of $
million relating to previous dispositions.
The contingent
payments are recorded
as gain on disposition on our consolidated
income statement and are
reflected within our
Canada and Lower 48 segments.
In our Canada segment, the
contingent payment, calculated and paid on a
quarterly basis, is $6 million CAD for every $1 CAD by which the WCS quarterly average crude price exceeds $52
CAD per barrel
.
The term for contingent
payments in our Canada segment ends on
May 16, 2022.
In our Lower 48
segment, the
contingent payment, paid on an annual basis, is calculated monthly at $7 million per month in which
the U.S. Henry Hub price is at or above $3.20 per MMBTU
.
The term for contingent payments
in our Lower 48
segment goes through 2023.
No
contingent payments were
recorded in 2020.
Planned Dispositions
In December 2021, we entered into
an agreement to sell two subsidiaries holding
our Indonesia assets and
operations to MedcoEnergi for
$
1.355
billion, before customary
adjustments, with an effective
date of January 1,
The subsidiaries hold our
percent interest in the Indonesia
Corridor Block Production Sharing Contract
(PSC) and a
percent shareholding interest
in the Transasia Pipeline
Company.
The net carrying value is
approximately $
0.4
billion, which consists primarily of PP&E.
The assets met the held for sale criteria in the fourth
quarter,
and as of December 31, 2021, we have reclassified
$
0.3
billion of PP&E to “Prepaid expenses and
other
current assets” and $
0.1
billion of noncurrent ARO to “Other accruals”
on our consolidated balance sheet.
The
before-tax earnings associated
with our Indonesia subsidiaries were $
million, $
million and $
million for
the years ended December 31, 2021, 2020 and 2019, respectively
.
This transaction is expected to close in
early
2022, subject to regulatory approvals
and other specific conditions precedent.
Results of operations for
the
subsidiaries to be sold are reported within our
Asia Pacific segment.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
In January 2022, we entered into
an agreement to sell our interests
in certain noncore assets in the Lower 48
segment for $
million, before customary adjustments.
This transaction is expected to
close in the second
quarter of 2022.
2020
Asset Acquisition
In August 2020, we completed the acquisition
of additional Montney acreage in Canada from Kelt
Exploration Ltd.
for $
million after customary adjustments,
plus the assumption of $
million in financing obligations
associated with partially owned infrastructure.
This acquisition consisted primarily of undeveloped
properties and
included
140,000
net acres in the liquids-rich Inga Fireweed
asset Montney zone, which is directly
adjacent to our
existing Montney position.
The transaction increased our Montney acreage
position to approximately
295,000
net
acres with a
percent working interest.
This agreement was accounted
for as an asset acquisition resulting
in
the recognition of $
million of PP&E; $
million of ARO and accrued environmental
costs; and $
million of
financing obligations recorded
primarily to long-term debt.
Results of operations for
the Montney asset are
reported in our Canada segment.
Assets Sold
In February 2020, we sold our Waddell Ranch
interests in the Permian Basin
for $
million after customary
adjustments.
No
gain or loss was recognized on the sale.
Results of operations for
the Waddell Ranch interests
sold were reported in our Lower 48 segment.
In March 2020, we completed the sale
of our Niobrara interests
for approximately $
million after customary
adjustments and recognized a
before-tax loss on disposition
of $
million.
At the time of disposition, our interest
in Niobrara had a net carrying value
of $
million, consisting primarily of $
million of PP&E and $
million of
ARO. The before-tax losses
associated with our interests
in Niobrara, including the loss on disposition
noted above
and an impairment of $
million recorded when we signed an
agreement to sell our interests
in the fourth
quarter of 2019, were $
million and $
million for the years ended December 31,
2020 and 2019, respectively.
Results of operations for
the Niobrara interests
sold were reported in our Lower 48 segment.
In May 2020, we completed the divestiture
of our subsidiaries that held our Australia
-West assets and operations,
and based on an effective date
of January 1, 2019, we received proceeds
of $
million.
We recognized a
before-
tax gain of $
million related to this transaction
in 2020.
At the time of disposition, the net carrying value
of the
subsidiaries sold was approximately
$
0.2
billion, excluding $
0.5
billion of cash.
The net carrying value consisted
primarily of $
1.3
billion of PP&E and $
0.1
billion of other current assets offset
by $
0.7
billion of ARO, $
0.3
billion of
deferred tax liabilities, and
$
0.2
billion of other liabilities.
The before-tax earnings associated
with the subsidiaries
sold, including the gain on disposition noted
above, were $
million and $
million for the years ended
December 31, 2020 and 2019, respectively.
Production from the beginning of the year through
the disposition
date in May 2020 averaged
MBOED.
The sales agreement entitled us to
an additional $
million upon FID of
the Barossa development project.
Results of operations for
the subsidiaries sold were reported
in our Asia Pacific
segment.
2019
Assets Sold
In January 2019, we entered into
agreements to sell our
12.4
percent ownership interests
in the Golden Pass LNG
Terminal and
Golden Pass Pipeline.
We also entered into
agreements to amend our contractual
obligations for
retaining use of the facilities.
As a result of entering into these agreements,
we recorded a before
-tax impairment
of $
million in the first quarter of 2019 which is
included in the “Equity in earnings of affiliates”
line on our
consolidated income statement.
We completed the sale in the second
quarter of 2019.
Results of operations for
these assets were reported in our Lower
48 segment.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
In April 2019, we entered into
an agreement to sell two ConocoPhillips
U.K. subsidiaries to Chrysaor E&P Limited
for $
2.675
billion plus interest and customary
adjustments, with an effective date
of January 1, 2018.
On
September 30, 2019, we completed the sale
for proceeds of $
2.2
billion and recognized a $
1.7
billion before-tax
and $
2.1
billion after-tax gain
associated with this transaction in 2019.
Together the
subsidiaries sold indirectly
held our exploration and production
assets in the U.K.
At the time of disposition, the net carrying value
was
approximately $
0.5
billion, consisting primarily of $
1.6
billion of PP&E, $
0.5
billion of cumulative foreign currency
translation adjustments, and $
0.3
billion of deferred tax assets,
offset by $
1.8
billion of ARO and negative $
0.1
billion of working capital.
The before-tax earnings associated
with the subsidiaries sold, including the gain on
dispositions noted above, was $
2.1
billion for the year ended December 31, 2019.
Results of operations for
the
U.K. were reported within our Europe,
Middle East and North Africa segment.
In the second quarter of 2019, we recognized
an after-tax gain
of $
million upon the closing of the sale of our
percent interest in the Greater
Sunrise Fields to the government of Timor-Leste
for $
million.
The Greater
Sunrise Fields were included in our Asia Pacific
segment.
In the fourth quarter of 2019, we sold our interests
in the Magnolia field and platform for
net proceeds of $
million and recognized a before-tax
gain of $
million.
At the time of sale, the net carrying value
consisted of $
million of PP&E offset by $
million of ARO.
The Magnolia results of operations
were reported within our Lower
48 segment.
Note 4—Investments,
Loans and Long-Term
Receivables
Components of investments, loans
and long-term receivables at December 31 were:
Millions of Dollars
2021
2020
Equity investments
$
6,701
7,596
Loans and advances—related parties
-
Long-term receivables
Long-term investments in debt
securities
Other investments
$
7,113
8,131
Equity Investments
Affiliated companies in which we had a significant
equity investment at December 31, 2021,
included:
●
APLNG—
37.5
percent owned joint venture
with Origin Energy (
37.5
percent) and Sinopec (
percent)—
to produce CBM from the Bowen and
Surat basins in Queensland, Australia,
as well as process and export
LNG.
●
Qatar Liquefied Gas Company Limited
(3) (QG3)—
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.
Summarized 100 percent earnings
information for equity method
investments in affiliated
companies,
combined, was as follows:
Millions of Dollars
2021
2020
2019
Revenues
$
11,824
7,931
11,310
Income before income taxes
3,946
1,843
3,726
Net income
2,557
1,426
3,085
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Summarized 100 percent balance sheet information
for equity method investments
in affiliated companies,
combined, was as follows:
Millions of Dollars
2021
2020
Current assets
$
4,493
2,579
Noncurrent assets
36,602
35,257
Current liabilities
3,498
2,110
Noncurrent liabilities
17,465
18,099
Our share of income taxes incurred
directly by an equity method investee
is reported in equity in earnings of
affiliates, and as such is not included in income taxes
on our consolidated financial statements.
At December 31, 2021, retained earnings
included $
million related to the undistributed
earnings of affiliated
companies.
Dividends received from affiliates
were $
1,279
million, $
1,076
million and $
1,378
million in 2021, 2020
and 2019, respectively.
APLNG
APLNG is a joint venture focused on
producing CBM from the Bowen and Surat
basins in Queensland, Australia.
Natural gas is sold to domestic
customers and LNG is processed
and exported to Asia Pacific markets.
Our
investment in APLNG gives us access
to CBM resources in Australia
and enhances our LNG position.
The majority
of APLNG LNG is sold under two long-term sales and purchase
agreements, supplemented with sales
of additional
LNG spot cargoes targeting
the Asia Pacific markets.
Origin Energy,
an integrated Australian
energy company,
is
the operator of APLNG’s
production and pipeline system,
while we operate the LNG facility.
APLNG executed project financing
agreements for an $
8.5
billion project finance facility in 2012.
All amounts were
drawn from the facility.
APLNG achieved financial completion on its original
$
8.5
billion project finance facility
during the third quarter of 2017, resulting in the facility
being nonrecourse.
The project financing facility has been
refinanced over time and at December 31, 2021, this
facility was composed of a financing agreement
with the
Export-Import Bank of the United States,
a commercial bank facility and
two
United States Private
Placement note
facilities.
APLNG made its first principal and interest
repayment in March 2017 and is scheduled to
make
bi-annual
payments until September 2030.
At December 31, 2021, a balance of $
5.7
billion was outstanding on the facilities.
During the fourth quarter of 2021, Origin Energy Limited
agreed to the sale of
percent of their interest in
APLNG
for $
1.645
billion, before customary
adjustments.
ConocoPhillips announced in December 2021 that we were
exercising our preemption
right under the APLNG Shareholders Agreement
to purchase an additional
percent
shareholding interest in APLNG, subject
to government approvals.
The sales price associated with this preemption
right was determined to reflect
a relevant observable market
participant view of APLNG’s
fair value which was
below the carrying value of our existing
investment in APLNG.
Based on a review of the facts and circumstances
surrounding this decline in fair value,
we concluded in the fourth quarter of 2021 the impairment
was other than
temporary under the guidance of FASB
ASC Topic 323,
and the recognition of an impairment of our existing
investment was necessary.
Accordingly,
we recorded a noncash $
million, before-tax and
after-tax impairment
in the fourth quarter of 2021.
The impairment, which is included in the “Impairments” line on
our consolidated
income statement, had the
effect of reducing the carrying value
of our existing investment
to $
5,574
million as of
December 31, 2021.
This carrying value is included in the “Investments
and long-term receivables” line on our
consolidated balance sheet.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The historical cost basis of our
37.5
percent share of net assets on the books
of APLNG was $
5,523
million,
resulting in a basis difference of $
million on our books.
The basis difference, which is substantially
all
associated with PP&E and subject to amortization,
has been allocated on a relative
fair value basis to individual
production license areas owned by APLNG.
Any future additional payments
are expected to be allocated
in a
similar manner.
As the joint venture produces
natural gas from each license, we amortize
the basis difference
allocated to that license using the unit-of-production
method.
Included in net income (loss) attributable
to
ConocoPhillips for 2021, 2020 and 2019 was
after-tax expense
of $
million, $
million and $
million,
respectively,
representing the amortization
of this basis difference on currently
producing licenses.
QG3
QG3 is a joint venture that owns an
integrated large-scale
LNG project located in Qatar.
We provided project
financing, with a current outstanding balance of $
million as described below under “Loans.”
At December 31,
2021, the book value of our equity method investment
in QG3, excluding the project financing, was
$
million.
We have terminal and pipeline
use agreements with Golden Pass
LNG Terminal and affiliated
Golden Pass Pipeline
near Sabine Pass, Texas,
intended to provide us with terminal and
pipeline capacity for the receipt, storage
and
regasification of LNG purchased
from QG3.
We previously held a
12.4
percent interest in Golden
Pass LNG
Terminal and
Golden Pass Pipeline, but we sold those interests
in the second quarter of 2019 while retaining the
basic use agreements.
Currently,
the LNG from QG3 is being sold to markets
outside of the U.S.
Loans
As part of our normal ongoing business operations
and consistent with industry practice,
we enter into numerous
agreements with other parties to pursue
business opportunities.
Included in such activity are loans to certain
affiliated and non-affiliated
companies.
At December 31, 2021, significant loans
to affiliated companies include $
million in project financing to QG3
which is recorded within the “Accounts
and notes receivable—related
parties” line on our consolidated balance
sheet.
QG3 secured project financing of $
4.0
billion in December 2005, consisting of $
1.3
billion of loans from
export credit agencies (ECA), $
1.5
billion from commercial banks
and $
1.2
billion from ConocoPhillips.
The
ConocoPhillips loan facilities have
substantially the same terms as the ECA
and commercial bank facilities.
On
December 15, 2011, QG3 achieved financial completion
and all project loan facilities became nonrecourse
to the
project participants.
Semi-annual
repayments began in January 2011 and
will extend through July 2022.
Note 5—Investment in Cenovus
Energy
Our investment in Cenovus Energy
(CVE) common shares is carried on our balance sheet
at fair value.
December 31
2021
2020
Number of shares of CVE common stock (millions)
Ownership of issued and outstanding common
stock
4.5
%
16.9
Closing price on NYSE on last trading day
($/share)
$
12.28
6.04
Fair Value (millions
of dollars)
$
1,117
1,256
During 2021, we began to dispose of CVE shares,
selling
million shares during the year,
recognizing proceeds of
$
1.18
billion, $
1.14
billion of which was received during the year.
Proceeds related to the sale of our
CVE shares
are presented within “Cash Flows from
Investing Activities” on our consolidated
statement of cash flows.
Subject
to market conditions, we intend
to continue to decrease our investment.
All gains and losses are recognized
within “Other income (loss)” on our consolidated
income statement.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Millions of Dollars
2021
2020
2019
Total
Net gain (loss) on equity securities
$
1,040
(855)
Less: Net gain (loss) on equity securities sold during
the period
Unrealized gain (loss) on equity securities
still held at
the reporting date
$
(855)
Note 6—Suspended Wells and
Exploration Expenses
The following table reflects the net
changes in suspended exploratory
well costs during 2021, 2020 and 2019:
Millions of Dollars
2021
2020
2019
Beginning balance at January 1
$
1,020
Additions pending the determination of proved
reserves
Reclassifications to proved
properties
-
(42)
(11)
Sales of suspended wells
-
(313)
(54)
Charged to dry hole expense
(32)
(147)
(10)
Ending balance at December 31
$
1,020
*Includes $
million of assets held for sale in Australia-West at December 31, 2019.
For additional details on suspended wells charged to dry hole expense, see the Exploration Expenses section
of this Note.
The following table provides an aging
of suspended well balances at December 31:
Millions of Dollars
2021
2020
2019
Exploratory well costs capitalized
for a period of one year or less
$
Exploratory well costs capitalized
for a period greater than one year
Ending balance
$
1,020
*Includes $
million of assets held for sale in Australia-West at December 31, 2019.
Number of projects with exploratory
well costs capitalized for
a period
greater than one year
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following table provides a further
aging of those exploratory
well costs that have been capitalized
for more
than one year since the completion of drilling as of December 31, 2021:
Millions of Dollars
Suspended Since
Total
2018-2020
2015-2017
2004-2014
Willow—Alaska
(1)
-
Surmont—Canada
(1)
PL 1009—Norway
(1)
-
-
PL 891—Norway
(1)
-
-
Narwhal Trend—Alaska
(1)
-
-
WL4-00—Malaysia
(1)
-
-
PL782S—Norway
(1)
-
-
NC 98—Libya
(2)
-
-
Other of $10 million or less each
(1)(2)
Total
$
(1)Additional appraisal wells planned.
(2)Appraisal drilling complete; costs being incurred to assess development.
Exploration Expenses
The charges discussed below are included in the “Exploration
expenses” line on our consolidated income
statement.
2020
In our Alaska segment, we recorded
a before-tax impairment
of $
million for the entire associated
carrying
value of capitalized undeveloped
leasehold costs related to
our Alaska North Slope Gas asset.
We no longer
believe the project will advance,
and there is no current market
for the asset.
In our Other International segment, our interests
in the Middle Magdalena Basin of Colombia are in force
majeure.
As we had no immediate plans to perform
under existing contracts;
therefore, in 2020, we recorded
a before-tax
expense totaling $
million for dry hole costs of a previously
suspended well and an impairment of the associated
capitalized undeveloped leasehold
carrying value.
In our Asia Pacific segment, we recorded
before-tax expense
of $
million related to dry hole costs
of a previously
suspended well and an impairment of the associated capitalized
undeveloped leasehold carrying value associated
with the Kamunsu East Field in Malaysia
that is no longer in our development plans.
2019
In our Lower 48 segment, we recorded
a before-tax impairment
of $
million for the associated carrying value
of
capitalized undeveloped leasehold
costs and dry hole expenses of $
million before-tax
due to our decision to
discontinue exploration
activities related to our Central Louisiana
Austin Chalk acreage.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 7—Impairments
During 2021, 2020 and 2019, we recognized the following
before-tax impairment
charges:
Millions of Dollars
2021
2020
2019
Alaska
$
-
-
Lower 48
(8)
Canada
Europe, Middle East and North Africa
(24)
Asia Pacific
-
-
$
2021
We recorded an impairment
of $
million on our APLNG investment included within
the Asia Pacific segment.
See
and
In our Lower 48 segment, we recorded
a credit to impairment of $
million due to a decreased ARO estimate
for a
previously sold asset, in which we retained
the ARO liability.
This was offset by recorded
impairments of $
million during the fourth quarter of 2021, related
to certain noncore assets
due to changes in development plans.
In our Europe, Middle East and North
Africa segment, we recorded a credit
to impairment of $
million due to
decreased ARO estimates on fields
in Norway which ceased production and
were fully depreciated in prior years.
2020
We recorded impairments
of $
million, primarily related to certain
noncore assets in the Lower 48.
Due to a
significant
decrease in the outlook for current and
long-term natural gas prices
in early 2020, we recorded
impairments of $
million, primarily for the Wind River Basin operations
area, consisting of developed
properties in the Madden Field and the Lost Cabin
Gas Plant, in the first quarter of 2020.
Additionally,
due
primarily to changes in development plans
solidified in the last quarter of 2020, we recognized
additional
impairments of $
million in the Lower 48 during the fourth
quarter.
2019
In the Lower 48, we recorded impairments
of $
million, primarily related to developed
properties in our
Niobrara asset which were written
down to fair value less costs
to sell.
Note 8—Asset Retirement
Obligations and Accrued Environmental
Costs
Asset retirement obligations
and accrued environmental costs
at December 31 were:
Millions of Dollars
2021
2020
Asset retirement obligations
$
5,926
5,573
Accrued environmental costs
Total
asset retirement obligations
and accrued environmental costs
6,113
5,753
Asset retirement obligations
and accrued environmental costs
due within one year*
(359)
(323)
Long-term asset retirement obligations
and accrued environmental costs
$
5,754
5,430
*Classified as a current liability on the balance sheet under “Other accruals.”
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Asset Retirement Obligations
We record the fair value
of a liability for an ARO when it is incurred (typically
when the asset is installed at the
production location).
When the liability is initially recorded, we capitalize
the associated asset retirement
cost by
increasing the carrying amount of the related
PP&E.
If, in subsequent
periods, our estimate of this liability
changes, we will record an adjustment
to both the liability and PP&E.
Over time, the liability increases for the
change in its present value, while the capitalized
cost depreciates over
the useful life of the related asset.
Reductions to estimated liabilities
for assets that are no longer producing
are recorded as a credit to
impairment, if
the asset had been previously impaired, or as a credit
to DD&A, if the asset had not been previously impaired
.
We have numerous
AROs we are required to perform
under law or contract once an asset is permanently
taken
out of service.
Most of these obligations are not
expected to be paid until several
years, or decades, in the future
and will be funded from general company
resources at the time of removal.
Our largest individual obligations
involve plugging and abandonment of wells and
removal and disposal of offshore
oil and gas platforms around
the
world, as well as oil and gas production
facilities and pipelines in Alaska.
During 2021 and 2020, our overall ARO changed as
follows:
Millions of Dollars
2021
2020
Balance at January 1
$
5,573
6,206
Accretion of discount
New obligations
Changes in estimates of existing
obligations
(113)
(307)
Spending on existing obligations
(164)
(116)
Property dispositions
(108)
(771)
Foreign currency translation
(55)
Balance at December 31
$
5,926
5,573
Accrued Environmental Costs
Total
accrued environmental costs
at December 31, 2021 and 2020, were $
million and $
million,
respectively.
We had accrued environmental
costs of $
million and $
million at December 31, 2021 and 2020,
respectively,
related to remediation
activities in the U.S. and Canada.
We had also accrued in Corporate
and Other
$
million and $
million of environmental costs
associated with sites no longer in operation
at December 31,
2021 and 2020, respectively.
In addition, both December 31, 2021 and 2020, included a $
million accrual, where
the company has been named a potentially
responsible party under the Federal Comprehensive
Environmental
Response, Compensation and Liability Act, or similar state
laws.
Accrued environmental liabilities are
expected to
be paid over periods extending up to
years.
Expected expenditures for environmental
obligations acquired in various
business combinations are discounted
using a weighted-average
percent discount factor,
resulting in an accrued balance for acquired
environmental
liabilities of $
million at December 31, 2021.
The total expected future undiscounted
payments related to the
portion of the accrued environmental costs
that have been discounted
are $
million.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 9—Debt
Long-term debt at December 31 was:
Millions of Dollars
2021
2020
9.125
% Debentures due 2021
$
-
2.4
% Notes due 2022
7.65
% Debentures due 2023
3.35
% Notes due 2024
8.2
% Debentures due 2025
3.35
% Notes due 2025
6.875
% Debentures due 2026
4.95
% Notes due 2026
1,250
1,250
7.8
% Debentures due 2027
3.75
% Notes due 2027
-
3.75
% Notes due 2027
-
4.3
% Notes due 2028
-
4.3
% Notes due 2028
-
7.375
% Debentures due 2029
% Debentures due 2029
6.95
% Notes due 2029
1,549
1,549
8.125
% Notes due 2030
2.4
% Notes due 2031
-
2.4
% Notes due 2031
-
7.2
% Notes due 2031
7.25
% Notes due 2031
7.4
% Notes due 2031
5.9
% Notes due 2032
4.15
% Notes due 2034
5.95
% Notes due 2036
5.951
% Notes due 2037
5.9
% Notes due 2038
6.5
% Notes due 2039
2,750
2,750
4.3
% Notes due 2044
5.95
% Notes due 2046
7.9
% Debentures due 2047
4.875
% Notes due 2047
-
4.85
% Notes due 2048
-
4.85
% Notes due 2048
-
Floating rate notes due 2022 at
1.02
% –
1.12
% during 2021 and
1.12
% –
2.81
% during 2020
Marine Terminal
Revenue Refunding Bonds due 2031 at
0.04
% –
0.15
% during
2021 and
0.1
% –
7.5
% during 2020
Industrial Development Bonds due 2035 at
0.04
% –
0.12
% during 2021 and
0.11
% –
7.5
% during 2020
Commercial Paper at
0.05
% –
0.22
% during 2021
-
Other
Debt at face value
17,766
14,292
Finance leases
1,261
Net unamortized premiums, discounts and debt
issuance costs
Total
debt
19,934
15,369
Short-term debt
(1,200)
(619)
Long-term debt
$
18,734
14,750
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
On January 15, 2021, we completed the acquisition of Concho
in an all-stock transaction.
In the acquisition, we
assumed Concho’s publicly
traded debt, with an outstanding principal balance
of $
3.9
billion, which was recorded
at fair value of $
4.7
billion on the acquisition date.
The adjustment to fair value of the senior notes
of
approximately $
0.8
billion on the acquisition date will be amortized as
an adjustment to interest
expense over the
remaining contractual terms
of the senior notes.
In the first quarter of 2021, we completed
a debt exchange offer
related to the debt assumed from
Concho.
Of the
approximately $
3.9
billion in aggregate principal amount
of Concho’s senior notes
offered in the exchange,
percent, or approximately
$
3.8
billion, was tendered and accepted.
The new debt issued by ConocoPhillips had
the same interest rates
and maturity dates as the Concho senior notes.
The portion not exchanged, approximately
$
million, remained outstanding across
five series of senior notes issued by Concho.
The debt exchange was
treated as a debt modification for
accounting purposes resulting in a portion
of the unamortized fair value
adjustment of the Concho senior notes allocated
to the new debt issued by ConocoPhillips on the settlement
date
of the exchange.
The new debt issued in the exchange is
fully and unconditionally guaranteed by
ConocoPhillips
Company.
We have a revolving
credit facility totaling $
6.0
billion with an expiration date
of May 2023.
Our revolving credit
facility may be used for direct
bank borrowings, the issuance of letters
of credit totaling up to $
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 $
million or more by ConocoPhillips, or any
of its consolidated subsidiaries.
The amount of the facility is not subject to redetermination
prior to its expiration
date.
Credit facility borrowings may
bear interest at a margin above
rates offered
by certain designated banks in the
London interbank market or
at a margin above the overnight federal
funds rate or prime rates
offered by certain
designated banks in the U.S.
The facility agreement calls for
commitment fees on available,
but unused, amounts.
The agreement also contains early termination
rights if our current directors
or their approved successors
cease to
be a majority of the Board of Directors.
The revolving credit facility supports
our ability to issue up to $
6.0
billion of commercial paper,
which is primarily a
funding source for short-term
working capital needs.
Commercial paper maturities are generally
limited to
days
.
With no commercial paper outstanding
and
no
direct borrowings or letters
of credit, we had access to
$
6.0
billion in available borrowing capacity
under our revolving credit facility
at December 31, 2021.
We had
no
direct borrowings, letters
of credit, and $
million of commercial paper outstanding
as of December 31, 2020.
For information on Finance Leases,
The current credit ratings on our
long-term debt are:
●
Fitch: “A” with a “stable” outlook
.
●
S&P: “A-” with a “stable” outlook
.
●
Moody’s: “A3” with a “positive” outlook
.
We do not have any
ratings triggers on any of our corporate
debt that would cause an automatic default,
and
thereby impact our access to liquidity,
upon downgrade of our credit ratings.
If our credit ratings are downgraded
from their current levels, it could
increase the cost of corporate
debt available to us and restrict
our access to the
commercial paper markets.
If our credit rating were to
deteriorate to a level
prohibiting us from accessing the
commercial paper market, we
would still be able to access funds under our revolving
credit facility.
At both December 31, 2021 and 2020, we had $
million of certain variable rate
demand bonds (VRDBs)
outstanding with maturities ranging
through 2035.
The VRDBs are redeemable at the option of the bondholders
on any business day.
If they are ever redeemed, we have
the ability and intent to refinance on
a long-term basis,
therefore, the VRDBs are included
in the “Long-term debt” line on our consolidated balance sheet.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 10—Guarantees
At December 31, 2021, we were liable for
certain contingent obligations
under various contractual arrangements
as described below.
We recognize a liability,
at inception, for the fair value
of our obligation as a guarantor
for
newly issued or modified guarantees.
Unless the carrying amount of the liability is noted below,
we have not
recognized a liability because the
fair value of the obligation
is immaterial.
In addition, unless otherwise stated, we
are not currently performing with any
significance under the guarantee and expect
future performance to be
either immaterial or have only a remote
chance of occurrence.
APLNG Guarantees
At December 31, 2021, we had outstanding
multiple guarantees in connection with our
37.5
percent ownership
interest in APLNG.
The following is a description of the guarantees
with values calculated utilizing December 2021
exchange rates:
●
During the third quarter of 2016, we issued a guarantee
to facilitate the withdrawal
of our pro-rata
portion of the funds in a project finance reserve account.
We estimate the remaining
term of this
guarantee to be
years.
Our maximum exposure under this guarantee
is approximately $
million and
may become payable if an enforcement
action is commenced by the project finance lenders
against
APLNG.
At December 31, 2021, the carrying value of this
guarantee is approximately
$
million.
●
In conjunction with our original purchase of an ownership
interest in APLNG from Origin Energy
in
October 2008, we agreed to reimburse
Origin Energy for our share of the existing
contingent liability
arising under guarantees of an existing
obligation of APLNG to deliver natural
gas under several sales
agreements.
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 $
million
($
1.2
billion in the event of intentional
or reckless breach) and would become payable
if APLNG fails to
meet its obligations under these agreements
and the obligations cannot otherwise be mitigated.
Future
payments are considered unlikely,
as the payments, or cost of volume delivery,
would only be triggered if
APLNG does not have enough natural
gas to meet these sales commitments and
if the co-ventures do not
make necessary equity contributions
into APLNG.
●
We have guaranteed
the performance of APLNG with regard
to certain other contracts
executed in
connection with the project’s continued
development.
The guarantees have
remaining terms of
15 to 24
years
or the life of the venture.
Our maximum potential amount of future payments
related to these
guarantees is approximately
$
million and would become payable
if APLNG does not perform.
At
December 31, 2021, the carrying value of these guarantees
was approximately $
million.
Other Guarantees
We have other guarantees
with maximum future potential payment
amounts totaling approximately
$
million,
which consist primarily of guarantees
of the residual value of leased office buildings, guarantees
of the residual
value of corporate aircraft,
and a guarantee for our portion
of a joint venture’s
project finance reserve accounts.
These guarantees have remaining
terms of
one to five years
and would become payable if certain asset
values are
lower than guaranteed amounts
at the end of the lease or contract term, business
conditions decline at
guaranteed entities, or as a result
of nonperformance of contractual
terms by guaranteed parties.
At
December 31, 2021, the carrying value of these guarantees
was approximately $
million.
Indemnifications
Over the years, we have entered
into agreements to sell ownership
interests in certain legal
entities, joint ventures
and assets that gave rise to
qualifying indemnifications.
These agreements include indemnifications for
taxes and
environmental liabilities.
The carrying amount recorded for
these indemnifications at December 31, 2021, was
approximately $
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.
for additional
information about environmental
liabilities.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 11—Contingencies and Commitments
A number of lawsuits involving a variety
of claims arising in the ordinary course of business
have been filed against
ConocoPhillips.
We also may be required
to remove or mitigate
the effects on the environment
of the placement,
storage, disposal or release of
certain chemical, mineral and petroleum
substances at various
active and inactive
sites.
We regularly assess the need for accounting
recognition or disclosure of these contingencies.
In the case of
all known contingencies (other than those related
to income taxes), we accrue
a liability when the loss is probable
and the amount is reasonably estimable.
If a range of amounts can be reasonably
estimated and no amount within
the range is a better estimate
than any other amount, then the low end of the range
is accrued.
We do not reduce
these liabilities for potential insurance
or third-party recoveries.
We accrue receivables for
insurance or other
third-party recoveries when applicable.
With respect to income tax-related
contingencies, we use a cumulative
probability-weighted loss
accrual in cases where sustaining a tax
position is less than certain.
,
for
additional information about income tax
-related contingencies.
Based on currently available information,
we believe it is remote that future
costs related to known
contingent
liability exposures will exceed
current accruals by an amount that
would have a material adverse
impact on our
consolidated financial statements.
As we learn new facts concerning contingencies,
we reassess our position both
with respect to accrued liabilities and other potential
exposures.
Estimates particularly sensitive to future
changes
include contingent liabilities recorded
for environmental
remediation, tax and legal matters.
Estimated future
environmental remediation
costs are subject to change due to
such factors as the uncertain
magnitude of cleanup
costs, the unknown time and extent of such
remedial actions that may be required,
and the determination of our
liability in proportion to that of other responsible
parties.
Estimated future costs
related to tax and legal
matters
are subject to change as events
evolve and as additional information
becomes available during the administrative
and litigation processes.
Environmental
We are subject to international,
federal, state and
local environmental laws
and regulations and record
accruals for
environmental liabilities based on
management’s best estimates
.
These estimates are based on currently
available
facts, existing technology,
and presently enacted laws and regulations,
taking into account stakeholder
and
business considerations.
When measuring environmental liabilities,
we also consider our prior experience in
remediation of contaminated
sites, other companies’ cleanup experience, and data
released by the U.S. EPA
or
other organizations.
We consider unasserted claims in our determination
of environmental liabilities,
and we
accrue them in the period they are both probable and
reasonably estimable.
Although liability of those potentially responsible
for environmental remediation
costs is generally joint and
several for federal
sites and frequently so for other
sites, we are usually only one of many companies
cited at a
particular site.
Due to the joint and several liabilities, we could
be responsible for all cleanup costs related
to any
site at which we have been designated
as a potentially responsible party.
We have been successful to
date in
sharing cleanup costs with other financially sound
companies.
Many of the sites at which we are potentially
responsible are still under investigation
by the EPA or
the agency concerned.
Prior to actual cleanup, those
potentially responsible normally assess the
site conditions, apportion responsibility and determine
the appropriate
remediation.
In some instances, we may have
no liability or may attain a settlement
of liability.
Where it appears
that other potentially responsible parties may
be financially unable to bear their proportional share,
we consider
this inability in estimating our potential liability,
and we adjust our accruals accordingly.
As a result of various
acquisitions in the past, we assumed certain environmental
obligations.
Some of these environmental obligations
are mitigated by indemnifications
made by others for our benefit, and some of the indemnifications
are subject to
dollar limits and time limits.
We are currently participating
in environmental assessments
and cleanups at numerous federal
Superfund and
comparable state and
international sites.
After an assessment of environmental
exposures for cleanup and other
costs, we make accruals on an
undiscounted basis (except
those acquired in a purchase business combination,
which we record on a discounted
basis) for planned investigation
and remediation activities for sites where
it is
probable future costs will be incurred
and these costs can be reasonably estimated.
We have not reduced
these
accruals for possible insurance recoveries.
In the future, we may be involved
in additional environmental
assessments, cleanups and proceedings.
See
,
for a summary of our accrued environmental
liabilities.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
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 December 31, 2021, we had performance
obligations secured by letters
of credit of $
million (issued as direct bank letters of credit)
related to various
purchase commitments for materials,
supplies,
commercial activities and services incident to the ordinary
conduct of business.
In 2007, ConocoPhillips was unable to reach
agreement with respect to the empresa
mixta structure mandated
by
the Venezuelan government’s
Nationalization Decree.
As a result, Venezuela’s
national oil company,
Petróleos de
Venezuela, S.A. (PDVSA),
or its affiliates, directly assumed control
over ConocoPhillips’ interests
in the Petrozuata
and Hamaca heavy oil ventures and
the offshore Corocoro development
project.
In response to this expropriation,
ConocoPhillips initiated international
arbitration on November 2, 2007, with the ICSID.
On September 3, 2013, an
ICSID arbitration tribunal held that Venezuela
unlawfully expropriated ConocoPhillips’
significant oil investments in
June 2007.
On January 17, 2017, the Tribunal reconfirmed
the decision that the expropriation
was unlawful.
In
March 2019, the Tribunal unanimously
ordered the government of Venezuela
to pay ConocoPhillips approximately
$
8.7
billion in compensation for the government’s
unlawful expropriation of the company’s
investments in
Venezuela in 2007.
On August 29, 2019, the ICSID Tribunal
issued a decision rectifying the award and
reducing it
by approximately $
million.
The award now stands at
$
8.5
billion plus interest.
The government of Venezuela
sought annulment of the award,
which automatically stayed
enforcement of the award.
On September 29, 2021,
the ICSID annulment committee lifted the
stay of enforcement
of the award.
The annulment proceedings have
been suspended as a result of Venezuela’s
non-payment of advances
to cover the costs of these proceedings.
In 2014, ConocoPhillips filed a separate
and independent arbitration under the rules
of the ICC against PDVSA
under the contracts that had established
the Petrozuata
and Hamaca projects.
The ICC Tribunal issued
an award in
April 2018, finding that PDVSA owed ConocoPhillips
approximately $
billion under their agreements in connection
with the expropriation of the projects
and other pre-expropriation fiscal
measures.
In August 2018, ConocoPhillips
entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the
payment period, including initial payments totaling approximately $500 million within a period of 90 days from the
time of signing of the settlement agreement. The balance of the settlement is to be paid quarterly over a period of
four and a half years.
Per the settlement, PDVSA recognized
the ICC award as a judgment in various
jurisdictions,
and ConocoPhillips agreed to suspend
its legal enforcement actions.
ConocoPhillips sent notices of default to
PDVSA on October 14 and November 12, 2019, and
to date PDVSA has failed to
cure its breach.
As a result,
ConocoPhillips has resumed legal enforcement
actions.
To date,
ConocoPhillips has received approximately
$
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.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
In 2016, ConocoPhillips filed a separate
and independent arbitration under the rules
of the ICC against PDVSA
under the contracts that had established
the Corocoro Project.
On August 2, 2019, the ICC Tribunal
awarded
ConocoPhillips approximately
$
million plus interest under the Corocoro
contracts.
ConocoPhillips is seeking
recognition and enforcement
of the award in various jurisdictions.
ConocoPhillips has ensured that all the actions
related to the award meet
all appropriate U.S. regulatory
requirements, including those related
to any applicable
sanctions imposed by the U.S. against
Venezuela.
The Office of Natural Resources
Revenue (ONRR) has conducted audits
of ConocoPhillips’ payment of royalties
on
federal lands and has issued multiple orders
to pay additional royalties
to the federal government.
ConocoPhillips
and the ONRR entered into a settlement
agreement on March 23, 2021, to resolve
the dispute.
All orders and
associated appeals have been withdrawn
with prejudice.
Beginning in 2017, governmental and
other entities in several states
in the U.S. have filed lawsuits against
oil and
gas companies, including ConocoPhillips,
seeking compensatory damages and equitable relief
to abate alleged
climate change impacts.
Additional lawsuits with similar allegations
are expected to be filed.
The amounts
claimed by plaintiffs are unspecified and
the legal and factual issues involved
in these cases are unprecedented.
ConocoPhillips believes these lawsuits are
factually and legally meritless and are
an inappropriate vehicle to
address the challenges associated with climate
change and will vigorously defend
against such lawsuits.
Several Louisiana parishes and the State
of Louisiana have filed
lawsuits under Louisiana’s
State and Local
Coastal Resources Management
Act (SLCRMA) against oil and gas
companies, including ConocoPhillips, seeking
compensatory damages for contamination
and erosion of the Louisiana coastline allegedly
caused by historical oil
and gas operations.
ConocoPhillips entities are defendants
in
of the lawsuits and will vigorously defend
against
them.
Because Plaintiffs’ SLCRMA theories are
unprecedented, there is uncertainty
about these claims (both as to
scope and damages) and 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
percent interest in this
lease and operated these facilities, but
sold its interest approximately
years
ago.
ConocoPhillips continues to evaluate
our exposure in these lawsuits.
On May 10, 2021, ConocoPhillips filed arbitration
under the rules of the Singapore International
Arbitration Centre
(SIAC) against Santos KOTN
Pty Ltd. and Santos Limited for
their failure to timely pay the $
million bonus due
upon FID of the Barossa development project
under the sale and purchase agreement.
Santos KOTN
Pty Ltd. and
Santos Limited have filed a response
and counterclaim, and the arbitration
is underway.
In July 2021, a federal securities class action
was filed against Concho, certain
of Concho’s officers,
and
ConocoPhillips as Concho’s
successor in the United States District Court
for the Southern District of Texas.
On
October 21, 2021, the court issued an order appointing
Utah Retirement Systems
and the Construction Laborers
Pension Trust
for Southern California as lead plaintiffs
(Lead Plaintiffs).
On January 7, 2022, the Lead Plaintiffs filed
their consolidated complaint alleging that
Concho made materially false and misleading
statements regarding
its
business and operations in violation of the federal
securities laws and seeking unspecified damages, attorneys’
fees, costs, equitable/injunctive
relief, and such
other relief that may be deemed appropriate.
We believe the
allegations in the action are without merit, and we
intend to vigorously defend
this litigation.
Long-Term Throughput
Agreements and Take
-or-Pay Agreements
We have certain throughput
agreements and take-or-pay
agreements in support of financing arrangements.
The
agreements typically provide for
natural gas or crude oil transportation
to be used in the ordinary course of
business.
The aggregate amounts of estimated
payments under these various agreements
are: 2022—$
million;
2023—$
million; 2024—$
million; 2025—$
million; 2026—$
million; and 2027 and after—$
million.
Total
payments under the agreements were
$
million in 2021, $
million in 2020 and $
million in 2019.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 12—Derivative and Financial Instruments
We use futures, forwards,
swaps and options in various markets
to meet our customer needs, capture
market
opportunities, and manage foreign exchange
currency risk.
Commodity Derivative Instruments
Our commodity business primarily consists of natural
gas, crude oil, bitumen, LNG and NGLs.
Commodity derivative instruments
are held at fair value on our consolidated
balance sheet.
Where these balances
have the right of setoff,
they are presented on a net basis.
Related cash flows are recorded
as operating activities
on our consolidated statement
of cash flows.
On our consolidated income statement,
gains and losses are
recognized either on a gross
basis if directly related to our physical
business or a net basis if held for trading.
Gains
and losses related to contracts
that meet and are designated with the NPNS exception
are recognized upon
settlement.
We generally apply this
exception to eligible crude contracts
and certain gas contracts.
We do not
apply hedge accounting for our commodity
derivatives.
The following table presents the gross
fair values of our commodity derivatives,
excluding collateral,
and the line
items where they appear on our consolidated
balance sheet:
Millions of Dollars
2021
2020
Assets
Prepaid expenses and other current
assets
$
1,168
Other assets
Liabilities
Other accruals
1,160
Other liabilities and deferred credits
The gains (losses) from commodity derivatives
incurred, and the line items where they appear on our
consolidated
income statement were:
Millions of Dollars
2021
2020
2019
Sales and other operating revenues
$
(228)
Other income (loss)
Purchased commodities
(118)
On January 15, 2021, we assumed financial derivative instruments
consisting of oil and natural gas
swaps in
connection with the acquisition of Concho.
At the acquisition date, the financial derivative
instruments acquired
were recognized at fair
value as a net liability of $
million with settlement dates under the contracts
through
December 31, 2022.
During 2021, we recognized a loss
on settlement of the contracts for
$
million.
This loss
associated with the acquired financial instruments
is recorded within the “Sales and other operating
revenues” line
on our consolidated income statement.
In connection with the settlement, we issued
a cash payment of $
million during 2021.
Cash settlements related to
the derivative contracts
are presented within “Cash Flows From
Operating Activities” on our consolidated
statement of cash flows.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The table below summarizes our material
net exposures resulting from
outstanding commodity derivative
contracts:
Open Position
Long/(Short)
2021
2020
Commodity
Natural gas and power (billions
of cubic feet equivalent)
Fixed price
(20)
Basis
(22)
(10)
Foreign Currency Exchange
Derivatives
We have foreign
currency exchange rate
risk resulting from international
operations.
Our foreign currency
exchange derivative activity
primarily relates to managing our cash
-related foreign currency
exchange rate
exposures, such as firm commitments for
capital programs or local currency
tax payments, dividends and
cash
returns from net investments
in foreign affiliates, and
investments in equity securities.
Our foreign currency exchange
derivative instruments are
held at fair value on our consolidated
balance sheet.
Related cash flows are included
within operating activities on our consolidated
statement of cash flows.
We do
not elect hedge accounting on our foreign
currency exchange derivatives.
The following table presents the gross
fair values of our foreign currency
exchange derivatives,
excluding
collateral, and the line items where
they appear on our consolidated balance
sheet:
Millions of Dollars
2021
2020
Assets
Prepaid expenses and other current
assets
$
Liabilities
Other accruals
The (gains) losses from foreign
currency exchange derivatives
incurred and the line item where they appear
on our consolidated income statement
were:
Millions of Dollars
2021
2020
2019
Foreign currency transaction
(gains) losses
$
(5)
(40)
We had the following net notional
position of outstanding foreign currency
exchange derivatives:
In Millions
Notional Currency
2021
2020
Foreign Currency Exchange
Derivatives
Buy British pound, sell euro
GBP
-
Sell British pound, buy euro
GBP
-
Sell Canadian dollar,
buy U.S. dollar
CAD
-
Buy Canadian dollar,
sell U.S. dollar
CAD
-
Buy Australian dollar,
sell U.S. dollar
AUD
1,850
-
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
At December 31, 2021, we had outstanding foreign currency exchange forward contracts to buy $1.9 billion AUD at
$0.715 AUD against the U.S. dollar in anticipation of our future acquisition of an additional interest in APLNG. At
December 31, 2020, we had outstanding foreign currency exchange forward contracts to sell $0.45 billion CAD at
$0.748 CAD against the U.S. dollar
.
Financial Instruments
We invest in financial
instruments with maturities based on our cash
forecasts for the various
accounts and
currency pools we manage.
The types of financial instruments in which we currently
invest include:
●
Time deposits: Interest bearing deposits
placed with financial institutions for a predetermined
amount of
time.
●
Demand deposits:
Interest bearing deposits placed with financial
institutions.
Deposited funds can be
withdrawn without notice.
●
Commercial paper: Unsecured promissory
notes issued by a corporation, commercial
bank or government
agency purchased at a discount to
mature at par.
●
U.S. government or government
agency obligations: Securities issued by the U.S.
government or U.S.
government agencies.
●
Foreign government obligations:
Securities issued by foreign governments.
●
Corporate bonds:
Unsecured debt securities issued by corporations.
●
Asset-backed securities: Collateralized
debt securities.
The following investments
are carried on our consolidated
balance sheet at cost, plus accrued interest
and the
table reflects remaining maturities
at December 31, 2021 and 2020:
Millions of Dollars
Carrying Amount
Cash and Cash
Equivalents
Short-Term
Investments
Investments and Long-
Term Receivables
2021
2020
2021
2020
2021
2020
Cash
$
Demand Deposits
1,554
1,133
Time Deposits
1 to 90 days
2,363
1,225
2,859
91 to 180 days
Within one year
One year through five years
-
U.S. Government Obligations
1 to 90 days
-
-
$
5,018
2,978
3,320
-
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following investments
in debt securities classified as available for
sale are carried at fair value on
our
consolidated balance sheet at December 31, 2021 and
2020:
Millions of Dollars
Carrying Amount
Cash and Cash
Equivalents
Short-Term
Investments
Investments and Long-
Term Receivables
2021
2020
2021
2020
2021
2020
Major Security Type
Corporate Bonds
$
-
Commercial Paper
U.S. Government Obligations
-
-
-
U.S. Government Agency
Obligations
-
Foreign Government Obligations
-
Asset-backed Securities
-
$
Cash and Cash Equivalents and Short-Term
Investments have
remaining maturities within one year.
Investments and Long-Term
Receivables have remaining
maturities that vary from greater
than one year through
eight years.
The following table summarizes the
amortized cost basis and fair value
of investments in debt securities classified
as available for sale at December 31:
Millions of Dollars
Amortized Cost Basis
Fair Value
2021
2020
2021
2020
Major Security Type
Corporate Bonds
$
Commercial Paper
U.S. Government Obligations
U.S. Government Agency Obligations
Foreign Government Obligations
Asset-Backed Securities
$
As of December 31, 2021 and 2020, total unrealized
losses for debt securities classified as available
for sale with
net losses were negligible.
Additionally,
as of December 31, 2021 and 2020, investments in these
debt securities in
an unrealized loss position for which an
allowance for credit losses has not been
recorded were negligible.
For the years
ended December 31, 2021 and 2020, proceeds from sales and
redemptions of investments
in debt
securities classified as available for sale were
$
million and $
million, respectively.
Gross realized gains and
losses included in earnings from those sales and redemptions
were negligible.
The cost of securities sold and
redeemed is determined using the specific identification
method.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Credit Risk
Financial instruments potentially exposed
to concentrations of credit
risk consist primarily of cash equivalents,
short-term investments, long-term
investments in debt securities,
OTC derivative contracts
and trade receivables.
Our cash equivalents and short-term
investments are placed
in high-quality commercial paper,
government money
market funds, U.S. government
and government agency obligations,
time deposits with major international banks
and financial institutions, high-quality corporate
bonds, foreign government obligations
and asset-backed
securities.
Our long-term investments in debt
securities are placed in high-quality corporate
bonds, asset-backed
securities, U.S. government and government
agency obligations, foreign
government obligations, and
time
deposits with major international banks
and financial institutions.
The credit risk from our OTC derivative
contracts, such as forwards,
swaps and options, derives from the
counterparty to the transaction.
Individual counterparty exposure is
managed within predetermined credit limits
and includes the use of cash-call margins when appropriate,
thereby reducing the risk of significant
nonperformance.
We also use futures, swaps
and option contracts that have
a negligible credit risk because these
trades are cleared primarily with an
exchange clearinghouse and subject to
mandatory margin requirements until
settled; however,
we are exposed to the credit risk
of those exchange brokers
for receivables arising from
daily
margin cash calls, as well as for cash
deposited to meet initial margin requirements.
Our trade receivables result primarily
from our 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 on December 31, 2021 and December 31, 2020, was $
million and $
million, respectively.
For these instruments,
no
collateral was posted as
of December 31, 2021 or December 31, 2020.
If our credit
rating had been downgraded below investment
grade on December 31, 2021, we would
have been required to
post $
million of additional collateral, either with cash
or letters of credit.
Note 13—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 2021 or 2020.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Recurring Fair Value
Measurement
Financial assets and liabilities reported at fair
value on a recurring basis primarily include our investment
in CVE
common shares, our investment
s
in debt securities classified as available for
sale, and commodity derivatives.
●
Level 1 derivative assets and
liabilities primarily represent exchange
-traded futures and options that
are
valued using unadjusted prices available
from the underlying exchange.
Level 1 also includes our investment
in common shares of CVE, which is valued using
quotes for shares on the NYSE, and
our investments in U.S.
government obligations classified
as available for sale debt securities,
which are valued using exchange
prices.
●
Level 2 derivative assets and
liabilities primarily represent OTC
swaps, options and forward
purchase and sale
contracts that are valued
using adjusted exchange prices,
prices provided by brokers
or pricing service
companies that are all corroborated
by market data.
Level 2 also includes our investments
in debt securities
classified as available for sale including
investments in corporate
bonds, commercial paper,
asset-backed
securities, U.S. government agency obligations
and foreign government obligations
that are valued using
pricing provided by brokers
or pricing service companies that are corroborated
with market data.
●
Level 3 derivative assets and
liabilities consist of OTC swaps,
options and forward purchase and
sale contracts
where a significant portion of fair value
is calculated from underlying market
data that is not readily available.
The derived value uses industry standard
methodologies that may consider the historical
relationships among
various commodities, modeled market
prices, time value, volatility factors
and other relevant economic
measures.
The use of these inputs results in management’s
best estimate of fair value.
Level 3 activity was
not material for all periods presented.
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
December 31, 2021
December 31, 2020
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investment in Cenovus Energy
$
1,117
-
-
1,117
1,256
-
-
1,256
Investments in debt securities
-
-
Commodity derivatives
1,243
Total
assets
$
1,681
1,096
2,839
1,415
2,029
Liabilities
Commodity derivatives
$
1,223
Total
liabilities
$
1,223
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following table summarizes those
commodity derivative balances subject to
the right of setoff as
presented on our consolidated
balance sheet.
We have elected to
offset the recognized fair
value amounts for
multiple derivative instruments
executed with the same counterparty
in our financial statements when a legal
right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts Not
Gross
Net
Amounts
Subject to
Gross
Amounts
Amounts
Cash
Net
Recognized
Right of Setoff
Amounts
Offset
Presented
Collateral
Amounts
December 31, 2021
Assets
$
1,243
1,158
-
Liabilities
1,223
1,141
December 31, 2020
Assets
$
Liabilities
At December 31, 2021 and December 31, 2020, we did not present
any amounts gross on our consolidated
balance sheet where we had the right of setoff.
Non-Recurring Fair Value
Measurement
The following table summarizes the
fair value hierarchy
by major category and date of remeasurement
for assets
accounted for at fair value
on a non-recurring basis:
Millions of Dollars
Fair Value Measurements
Using
Fair Value
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
Before-Tax
Loss
Year ended
December 31, 2021
Net PP&E (held for use)
December 31, 2021
$
-
-
Equity Method Investments
December 31, 2021
5,574
-
5,574
-
Year ended December 31,
2020
Net PP&E (held for use)
March 31, 2020
$
-
-
December 31, 2020
-
-
Net PP&E (held for use)
During 2021 and 2020, the estimated fair value
of certain noncore assets included
in our Lower 48 segment
declined to amounts below the carrying values.
The carrying values were written down
to fair value.
The fair
values were estimated based
on internal discounted cash
flow models using the following estimated assumptions:
estimated future production,
an outlook of future prices from a combination
of exchanges (short-term) coupled
with pricing service companies and our internal outlook
(long-term), future operating costs
and capital
expenditures, and a discount rate
believed to be consistent with
those used by principal market participants.
The
range and arithmetic average
of significant unobservable inputs used in the Level
3 fair value measurements for
significant assets were as follows:
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Fair Value
(Millions of
Dollars)
Valuation
Technique
Unobservable Inputs
Range
(Arithmetic Average)
December 31, 2021
Lower 48 Gulf Coast and
Rockies noncore field
$
Discounted
cash flow
Commodity production
(MBOED)
0.2
-
(
5.4
)
Commodity price outlook*
($/BOE)
$
41.45
- $
93.68
($
64.39
)
Discount rate**
7.3
%
-
9.7
% (
8.7
%)
*Commodity price outlook based on a combination of external
pricing service companies' and our internal
outlook for years 2024-2050; future prices escalated
at
2.0
% annually after year 2050.
**Determined as the weighted average cost
of capital of a group of peer companies,
adjusted for risks where appropriate.
Fair Value
(Millions of
Dollars)
Valuation
Technique
Unobservable Inputs
Range
(Arithmetic Average)
March 31, 2020
Wind River Basin
$
Discounted
cash flow
Natural gas production
(MMCFD)
8.4
-
55.2
(
22.9
)
Natural gas price outlook*
($/MMBTU)
$
2.67
- $
9.17
($
5.68
)
Discount rate**
7.9
% -
9.1
% (
8.3
%)
*Henry Hub natural gas price outlook based on a combination
of external pricing service companies' outlooks
for years 2022-2034; future prices escalated
at
2.2
%
annually after year 2034.
**Determined as the weighted average cost
of capital of a group of peer companies,
adjusted for risks where appropriate.
Fair Value
(Millions of
Dollars)
Valuation
Technique
Unobservable Inputs
Range
(Arithmetic Average)
December 31, 2020
Central Basin Platform
$
Discounted
cash flow
Commodity production
(MBOED)
0.5
-
12.7
(
3.4
)
Commodity price outlook*
($/BOE)
$
37.35
- $
115.29
($
73.80
)
Discount rate**
6.8
% -
7.7
% (
7.4
%)
*Commodity price outlook based on a combination of external
pricing service companies' and our internal
outlook for years 2023-2050; future prices escalated
at
2.0
% annually after year 2050.
**Determined as the weighted average cost
of capital of a group of peer companies,
adjusted for risks where appropriate.
Equity Method Investments
During the fourth quarter of 2021, Origin Energy Limited
agreed to the sale of
percent of their interest in
APLNG
for $
1.645
billion, before customary
adjustments.
ConocoPhillips announced in December 2021 that we were
exercising our preemption
right under the APLNG Shareholders Agreement
to purchase an additional 10 percent
shareholding interest in APLNG, subject
to government approvals.
The sales price associated with this preemption
right was determined to reflect
a relevant observable market
participant view of APLNG’s
fair value which was
below the carrying value of our existing
investment in APLNG.
As such, our investment in APLNG was
written
down to its fair value of $
5,574
million, resulting in a before-tax
charge of $
million.
and
.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Reported Fair Values
of Financial Instruments
We used the following methods
and assumptions to estimate the fair value
of financial instruments:
●
Cash and cash equivalents and short-term investments:
The carrying amount reported on the balance
sheet approximates fair
value.
For those investments classified as
available for sale debt securities,
the
carrying amount reported on the balance sheet
is fair value.
●
Accounts and notes receivable (including
long-term and related parties): The carrying
amount reported on
the balance sheet approximates
fair value.
The valuation technique and methods
used to estimate the
fair value of the current portion of fixed
-rate related party
loans is consistent with Loans and advances—
related parties.
●
Investment in Cenovus Energy:
for a discussion of the carrying value and fair
value of our
investment in CVE common shares.
●
Investments in debt securities classified
as available for sale: The fair value
of investments in debt
securities categorized as Level
1 in the fair value hierarchy
is measured using exchange prices.
The fair
value of investments in debt
securities categorized as Level 2 in
the fair value hierarchy
is measured using
pricing provided by brokers
or pricing service companies that are corroborate
d
with market data.
.
●
Loans and advances—related parties: The carrying
amount of floating-rate loans
approximates fair value.
The fair value of fixed-rate
loan activity is measured using market
observable data and is categorized
as
Level 2 in the fair value hierarchy.
●
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
2021
2020
2021
2020
Financial assets
Investment in CVE common shares
$
1,117
1,256
1,117
1,256
Commodity derivatives
Investments in debt securities
Loans and advances—related parties
Financial liabilities
Total
debt, excluding finance leases
18,673
14,478
22,451
19,106
Commodity derivatives
Commodity Derivatives
At December 31, 2021, commodity derivative
assets and liabilities are presented net with
no
obligation to return
cash collateral and $
million of rights to reclaim cash collateral,
respectively.
At December 31, 2020, commodity
derivative assets and liabilities are presented
net with $
million in obligations to return
cash collateral and
$
million of rights to reclaim cash collateral,
respectively.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 14—Equity
Common Stock
The changes in our shares of common stock,
as categorized in the equity section
of the balance sheet, were:
Shares
2021
2020
2019
Issued
Beginning of year
1,798,844,267
1,795,652,203
1,791,637,434
Acquisition of Concho
285,928,872
-
-
Distributed under benefit plans
6,789,608
3,192,064
4,014,769
End of year
2,091,562,747
1,798,844,267
1,795,652,203
Held in Treasury
Beginning of year
730,802,089
710,783,814
653,288,213
Repurchase of common stock
58,517,786
20,018,275
57,495,601
End of year
789,319,875
730,802,089
710,783,814
Preferred Stock
We have authorized
million shares of preferred
stock, par value $
0.01
per share,
none
of which was issued or
outstanding at December 31, 2021 or 2020.
Noncontrolling Interests
In the second quarter of 2020, we completed the divestiture
of our subsidiaries that held our Australia
-West assets
and operations.
These assets included the Darwin LNG and Bayu-Darwin Pipeline operating
joint ventures in which
there was a noncontrolling interest.
As a result, as of December 31, 2021 and 2020, we had no
noncontrolling
interests.
Repurchase of Common Stock
In late 2016, we initiated our current
share repurchase program,
which has a current total program
authorization
of $
billion of our common stock.
In May 2021, we began a paced monetization
of our CVE common shares, the
proceeds of which have been applied to
share repurchases.
Share repurchases since inception of our current
program totaled
million shares at a cost of $
billion through the end of December 2021.
Note 15—Non-Mineral Leases
The company primarily leases office buildings
and drilling equipment, as well as ocean transport
vessels, tugboats,
corporate aircraft,
and other facilities and equipment.
Certain leases include escalation clauses for
adjusting rental
payments to reflect changes in
price indices and other leases include payment provisions
that vary based on the
nature of usage of the leased asset.
Additionally, the company
has executed certain leases that
provide it with the
option to extend or renew the term of
the lease, terminate the lease prior to the end
of the lease term, or
purchase the leased asset as of the end of the lease term.
In other cases, the company has executed
lease
agreements that require it to
guarantee the residual value
of certain leased office buildings.
For additional
information about guarantees,
.
There are no significant restrictions
imposed on us by the lease
agreements with regard to
dividends, asset dispositions or borrowing ability.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Certain arrangements may
contain both lease and non-lease components
and we determine if an arrangement
is
or contains a lease at contract
inception.
We adopted the provisions
of FASB ASU No. 2016-02, “Leases” (ASC
Topic 842) and
its amendments, beginning January 1, 2019.
This ASU superseded the requirements in
FASB ASC
Topic 840 “Leases”
(ASC Topic
840).
Only the lease components of these contractual
arrangements are subject to
the provisions of ASC Topic
842, and any non-lease components
are subject to other applicable accounting
guidance; however,
we have elected to adopt
the optional practical expedient not to
separate lease components
apart from non-lease components for
accounting purposes.
This policy election has been adopted for each of the
company’s leased asset
classes existing as of the effective date
and subject to the transition provisions
of ASC
Topic 842 and will be applied
to all new or modified leases executed on
or after January 1, 2019.
For contractual
arrangements executed
in subsequent periods involving
a new leased asset class, the company will determine
at
contract inception whether it will apply
the optional practical expedient to
the new leased asset class.
Leases are evaluated for classification
as operating or finance leases at the commencement
date of the lease and
right-of-use assets and corresponding
liabilities are recognized on our
consolidated balance sheet based on the
present value of future lease payments
relating to the use of the underlying asset during the lease term.
Future
lease payments include variable lease payments
that depend upon an index or rate
using the index or rate at the
commencement date and probable
amounts owed under residual value
guarantees.
The amount of future lease
payments may be increased to
include additional payments related
to lease extension, termination,
and/or
purchase options when the company has
determined, at or subsequent to lease commencement,
generally due to
limited asset availability or operating
commitments, it is reasonably certain
of exercising such options.
We use our
incremental borrowing rate
as the discount rate in
determining the present value of future
lease payments, unless
the interest rate implicit in
the lease arrangement is readily
determinable.
Lease payments that vary
subsequent
to the commencement date based on future
usage levels, the nature of leased asset activities,
or certain other
contingencies are not included in the measurement
of lease right-of-use assets and corresponding
liabilities.
We
have elected not to record
assets and liabilities on our consolidated balance
sheet for lease arrangements with
terms of 12 months or less.
We often enter into
leasing arrangements acting in the capacity as
operator for and/or
on behalf of certain oil and
gas joint ventures of undivided interests.
If the lease arrangement can be legally enforced
only against us as
operator and there is no separate
arrangement to sublease the underlying
leased asset to our coventurers,
we
recognize at lease commencement
a right-of-use asset and corresponding
lease liability on our consolidated
balance sheet on a gross basis.
While we record lease costs on a
gross basis in our consolidated income statement
and statement of cash flows,
such costs are offset by the reimbursement
we receive from our coventurers
for their
share of the lease cost as the underlying leased asset
is utilized in joint venture activities.
As a result, lease cost is
presented in our consolidated
income statement and statement
of cash flows on a proportional basis.
If we are a
nonoperating coventurer,
we recognize a right-of-use asset and
corresponding lease liability only if we were a
specified contractual party to the lease arrangement
and the arrangement could be legally
enforced against us.
In
this circumstance, we would recogni
ze both the right-of-use asset
and corresponding lease liability on our
consolidated balance sheet on a proportional
basis consistent with our undivided interest
ownership in the related
joint venture.
The company has historically recorded
certain finance leases executed
by investee companies
accounted for under
the proportionate consolidation
method of accounting on its consolidated
balance sheet on a proportional basis
consistent with its ownership
interest in the investee
company.
In addition, the company has historically
recorded
finance lease assets and liabilities associated with certain
oil and gas joint ventures on a proportional
basis
pursuant to accounting guidance applicable
prior to January 1, 2019.
In accordance with the transition
provisions
of ASC Topic 842, and
since we have elected to adopt
the package of optional transition-related
practical
expedients, the historical accounting
treatment for these leases has been carried
forward and is subject to
reconsideration upon the modification
or other required reassessment
of the arrangements prior to lease term
expiration.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following table summarizes the
right-of-use assets and lease liabilities for both
the operating and finance
leases on our consolidated balance sheet as of December 31:
Millions of Dollars
2021
2020
Operating
Leases
Finance
Leases
Operating
Leases
Finance
Leases
Right-of-Use Assets
Properties, plants and equipment
Gross
$
1,812
1,375
Accumulated DD&A
(857)
(721)
Net PP&E
Prepaid expenses and other current
assets
$
Other assets
Lease Liabilities
Short-term debt
**
$
Other accruals
Long-term debt
Other liabilities and deferred credits
Total
lease liabilities
$
1,261
Includes proportionately consolidated finance lease assets of $
million at December 31, 2021 and $
million at December 31, 2020.
**
Includes proportionately consolidated finance lease liabilities of $
million at December 31, 2021 and $
million at December 31, 2020.
Includes proportionately consolidated finance lease liabilities of $
million at December 31, 2021 and $
million at December 31,
The following table summarizes our
lease costs:
Millions of Dollars
2021
2020
2019
Lease Cost
Operating lease cost
$
Finance lease cost
Amortization of right-of-use assets
Interest on lease liabilities
Short-term lease cost
**
Total
lease cost
$
The amounts presented in the table above have not been adjusted to reflect amounts recovered or reimbursed from oil and gas
coventurers.
**
Short-term leases are not recorded on our consolidated balance sheet.
*** Variable lease cost and sublease income are immaterial for the periods presented and therefore are not included in the table above
.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following table summarizes the
lease terms and discount rates
as of December 31:
2021
2020
Lease Term
and Discount Rate
Weighted-average
term (years)
Operating leases
5.97
6.11
Finance leases
7.49
7.12
Weighted-average
discount rate (percent)
Operating leases
2.66
2.78
Finance leases
3.24
4.27
The following table summarizes other
lease information:
Millions of Dollars
2021
2020
2019
Other Information
Cash paid for amounts included in the measurement
of lease liabilities
Operating cash flows from operating
leases
$
Operating cash flows from finance
leases
Financing cash flows from finance leases
Right-of-use assets obtained
in exchange for operating
lease liabilities
$
Right-of-use assets obtained
in exchange for finance lease liabilities
*The amounts presented in the table above have not been adjusted to reflect amounts recovered or reimbursed from oil and gas coventurers.
In addition, pursuant to other applicable accounting guidance, lease payments made in connection with preparing another asset for its
intended use are reported in the "Cash Flows From Investing Activities" section of our consolidated statement of cash flows.
The following table summarizes future
lease payments for operating
and finance leases at December 31, 2021:
Millions of Dollars
Operating
Leases
Finance
Leases
Maturity of Lease Liabilities
2022
$
2023
2024
2025
2026
Remaining years
Total
1,450
Less: portion representing imputed
interest
(62)
(189)
Total
lease liabilities
$
1,261
*Future lease payments for operating and finance leases commencing on or after January 1, 2019, also include payments related to non-lease
components in accordance with our election to adopt the optional practical expedient not to separate lease components apart from non-lease
components for accounting purposes.
In addition, future payments related to operating and finance leases proportionately consolidated by the
company have been included in the table on a proportionate basis consistent with our respective ownership interest in the underlying investee
company or oil and gas venture.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 16—Employee Benefit Plans
Pension and Postretirement
Plans
An analysis of the projected benefit obligations
for our pension plans and accumulated benefit obligations
for
our postretirement health and life
insurance plans follows:
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Change in Benefit Obligation
Benefit obligation at January 1
$
2,548
4,403
2,319
3,880
Service cost
Interest cost
Plan participant contributions
-
-
-
Plan amendments
-
-
-
-
(30)
Actuarial (gain) loss
(117)
(176)
(16)
Benefits paid
(654)
(162)
(241)
(151)
(40)
(49)
Curtailment
-
-
-
Recognition of termination benefits
-
-
-
-
Foreign currency exchange
rate change
-
(81)
-
-
-
Benefit obligation at December 31
$
1,924
4,124
2,548
4,403
*Accumulated benefit obligation portion of above at
December 31:
$
1,793
3,658
2,359
4,095
Change in Fair Value
of Plan Assets
Fair value of plan assets at January
$
1,770
4,793
1,591
4,306
-
-
Actual return on plan assets
-
-
Company contributions
Plan participant contributions
-
-
Benefits paid
(654)
(162)
(241)
(151)
(40)
(49)
Foreign currency exchange
rate change
-
(86)
-
-
-
Fair value of plan assets at December 31
$
1,664
4,812
1,770
4,793
-
-
Funded Status
$
(260)
(778)
(137)
(170)
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Amounts Recognized in the
Consolidated Balance Sheet at
December 31
Noncurrent assets
$
-
-
-
Current liabilities
(29)
(15)
(56)
(11)
(34)
(39)
Noncurrent liabilities
(232)
(288)
(722)
(345)
(103)
(131)
Total
recognized
$
(260)
(778)
(137)
(170)
Weighted-Average
Assumptions Used to
Determine Benefit Obligations at
December 31
Discount rate
2.80
%
2.15
2.30
1.80
2.65
2.15
Rate of compensation increase
4.00
3.40
4.00
3.10
Interest crediting rate
for applicable benefits
2.50
2.10
Weighted-Average
Assumptions Used to
Determine Net Periodic Benefit Cost
for
Years Ended
December 31
Discount rate
2.60
%
1.80
3.05
2.35
2.35
3.10
Expected return on plan assets
5.20
2.50
5.80
3.60
Rate of compensation increase
4.00
3.40
4.00
3.35
Interest crediting rate
for applicable benefits
2.10
4.10
For both U.S. and international pension
plans, the overall expected long-term
rate of return is developed
from the
expected future return of each asset
class, weighted by the expected allocation
of pension assets to that asset
class.
We rely on a variety of independent
market forecasts
in developing the expected rate
of return for each
class of assets.
During 2021, the actuarial gains related
to the benefit obligations for
U.S. and international plans were primarily
related to an increase in the discount
rates.
During 2020 and 2019, the actuarial losses related to
the benefit
obligations for U.S. and international
plans were primarily related to a decrease
in the discount rates.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following tables summarize information
related to the Company's
pension plans with projected and
accumulated benefit obligations
in excess of the fair value of the plans'
assets:
Millions of Dollars
Pension Benefits
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Pension Plans with Projected Benefit Obligation
in
Excess of Plan Assets
Projected benefit obligation
$
2,548
Fair value of plan assets
-
1,770
Pension Plans with Accumulated Benefit
Obligation in
Excess of Plan Assets
Accumulated benefit obligation
$
2,359
Fair value of plan assets
-
1,770
Included in accumulated other comprehensive
income (loss) at December 31 were the following
before-tax
amounts that had not been recognized
in net periodic benefit cost:
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Unrecognized net actuarial loss
(gain)
$
(1)
Unrecognized prior service cost
(credit)
-
-
-
(145)
(182)
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Sources of Change in Other
Comprehensive Income (Loss)
Net gain (loss) arising during the period
$
(83)
(120)
(7)
Amortization of actuarial loss included
in income (loss)*
-
Net change during the period
$
(99)
(6)
Prior service credit (cost) arising during the
period
$
-
-
-
(1)
-
Amortization of prior service (credit)
included in income (loss)
-
(1)
-
(1)
(37)
(31)
Net change during the period
$
-
(1)
-
(2)
(37)
(1)
*Includes settlement (gains) losses recognized in 2021 and 2020.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The components of net periodic benefit cost of all defined
benefit plans are presented in the following
table:
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2019
2021
2020
2019
U.S.
Int’l.
U.S.
Int’l.
U.S.
Int’l.
Components of Net
Periodic Benefit Cost
Service cost
$
Interest cost
Expected return on plan
assets
(80)
(120)
(85)
(145)
(74)
(138)
-
-
-
Amortization of prior
service credit
-
(1)
-
(1)
-
(2)
(37)
(31)
(33)
Recognized net actuarial
loss (gain)
-
(2)
Settlements loss (gain)
-
(1)
-
-
-
-
Curtailment loss
-
-
-
-
-
-
-
-
Net periodic benefit cost
$
(31)
(22)
(26)
The components of net periodic benefit cost,
other than the service cost component, are included
in the “Other
expenses” line item on our consolidated
income statement.
We recognized pension
settlement losses of $
million in 2021, $
million in 2020, and $
million in 2019 as
lump-sum benefit payments from certain
U.S. and international pension
plans exceeded the sum of service and
interest costs for
those plans and led to recognition of settlement
losses.
In determining net pension and other postretirement
benefit costs, we amortize
prior service costs on a straight-
line basis over the average
remaining service period of employees expected to
receive benefits under the plan.
For
net actuarial gains and losses, we amortize
percent of the unamortized balance each year.
We have multiple non-pension
postretirement benefit plans
for health and life insurance.
The health care plans
are contributory and subject to various
cost sharing features, with participant
and company contributions adjusted
annually; the life insurance plans
are noncontributory.
The measurement of the U.S. pre-65 retiree
medical
accumulated postretirement
benefit obligation assumes a health care
cost trend rate of
6.5
percent in 2022 that
declines to
percent by 2028.
The measurement of the U.S. post-65
retiree medical accumulated
postretirement
benefit obligation assumes a health care
cost trend rate of
4.25
percent in 2022 that increases to
percent by
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Plan Assets
We follow a policy of broadly
diversifying pension plan assets across asset
classes and individual holdings.
As a
result, our plan assets have no significant
concentrations of credit risk.
Asset classes that are considered
appropriate include U.S. equities,
non-U.S. equities, U.S. fixed
income, non-U.S. fixed income, real
estate and
private equity investments.
Plan fiduciaries may consider and add other asset classes to
the investment program
from time to time.
The target allocations for
plan assets are
percent equity securities,
percent debt
securities,
percent real estate
and
percent other.
Generally,
the plan investments are publicly
traded,
therefore minimizing liquidity risk
in the portfolio.
The following is a description of the valuation
methodologies used for the pension plan assets.
There have been
no changes in the methodologies used at December 31, 2021 and
●
Fair values of equity securities and government
debt securities categorized in Level
1 are primarily based
on quoted market prices in active
markets for identical assets
and liabilities.
●
Fair values of corporate
debt securities, agency and mortgage-backed
securities and government debt
securities categorized in Level
2 are estimated using recently
executed transactions
and quoted market
prices for similar assets and liabilities in active markets
and for identical assets and liabilities in markets
that are not active.
If there have been no market transactions
in a particular fixed income security,
its fair
value is calculated by pricing models that
benchmark the security against other securities with actual
market prices.
When observable quoted market
prices are not available, fair
value is based on pricing
models that use something other than actual market
prices (e.g., observable inputs such as benchmark
yields, reported trades and issuer spreads
for similar securities), and these securities are categorized
in
Level 3 of the fair value hierarchy.
●
Fair values of investments
in common/collective trusts are
determined by the issuer of each fund based
on the fair value of the underlying assets.
●
Fair values of mutual funds are based
on quoted market prices, which represent
the net asset value of
shares held.
●
Time deposits are valued at cost,
which approximates fair value.
●
Cash is valued at cost, which approximates
fair value.
Fair values of international
cash equivalents
categorized in Level 2 are
valued using observable yield curves, discounting
and interest rates.
U.S. cash
balances held in the form of short-term fund units
that are redeemable at the measurement
date are
categorized as Level 2.
●
Fair values of exchange
-traded derivatives classified
in Level 1 are based on quoted market
prices.
For
other derivatives classified in Level 2, the values
are generally calculated from
pricing models with market
input parameters from third
-party sources.
●
Fair values of insurance contracts
are valued at the present value
of the future benefit payments owed
by
the insurance company to
the plans’ participants.
●
Fair values of real estate
investments are valued
using real estate valuation
techniques and other
methods that include reference
to third-party sources and sales comparables
where available.
●
A portion of U.S. pension plan assets is held as a participating interest
in an insurance annuity contract,
which is calculated as the market
value of investments held under
this contract, less the accumulated
benefit obligation covered by
the contract.
The participating interest is classified as
Level 3 in the fair
value hierarchy as
the fair value is determined via a combination
of quoted market prices, recently
executed transactions,
and an actuarial present value computation
for contract obligations.
At
December 31, 2021, the participating interest
in the annuity contract was valued
at $
million and
consisted of $
million in debt securities, less $
million for the accumulated benefit obligation
covered by the contract.
At December 31, 2020, the participating interest
in the annuity contract was
valued at $
million and consisted of $
million in debt securities, less $
million for the
accumulated benefit obligation
covered by the contract.
The participating interest is not available
for
meeting general pension benefit obligations
in the near term.
No future company contributions
are
required and no new benefits are being accrued under
this insurance annuity contract.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The fair values of our pension plan assets at
December 31, by asset class were as follows:
Millions of Dollars
U.S.
International
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
2021
Equity securities
U.S.
$
-
-
-
-
-
International
-
-
-
-
-
-
Mutual funds
-
-
-
Debt securities
Corporate
-
-
-
-
-
-
Mutual funds
-
-
-
-
-
-
Cash and cash equivalents
-
-
-
-
-
-
Real estate
-
-
-
-
-
-
Total in fair
value hierarchy
$
1,375
Investments measured at net asset value*
Equity securities
Common/collective trusts
$
Debt securities
Common/collective trusts
1,073
3,015
Cash and cash equivalents
-
Real estate
Total**
$
1,580
4,808
*In accordance with FASB ASC Topic 715, “Compensation—Retirement Benefits,”
certain investments that are to be measured at fair value
using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
The fair value
amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Change in
Fair Value of Plan Assets.
**Excludes the participating interest in the insurance annuity contract with a net asset of $
million and net receivables related to security
transactions of $
million.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The fair values of our pension plan assets at
December 31, by asset class were as follows:
Millions of Dollars
U.S.
International
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
2020
Equity securities
U.S.
$
-
-
-
-
-
International
-
-
-
-
-
-
Mutual funds
-
-
-
Debt securities
Corporate
-
-
-
-
-
-
Mutual funds
-
-
-
-
-
-
Cash and cash equivalents
-
-
-
-
-
-
Derivatives
-
-
-
-
-
-
Real estate
-
-
-
-
-
-
Total in fair
value hierarchy
$
1,296
Investments measured at net asset value*
Equity securities
Common/collective trusts
$
Debt securities
Common/collective trusts
3,007
Cash and cash equivalents
-
Real estate
Total**
$
1,675
4,787
*In accordance with FASB ASC Topic 715, “Compensation—Retirement Benefits,”
certain investments that are to be measured at fair value
using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
The fair value
amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Change in
Fair Value of Plan Assets.
**Excludes the participating interest in the insurance annuity contract with a net asset of $
million and net receivables related to security
transactions of $
million.
Level 3 activity was not material for all periods.
Our funding policy for U.S. plans is to contribute
at least the minimum required by the Employee
Retirement
Income Security Act of 1974 and the Internal Revenue
Code of 1986, as amended.
Contributions to foreign plans
are dependent upon local laws and tax
regulations.
In 2022, we expect to contribute
approximately $
million
to our domestic qualified and nonqualified pension
and postretirement benefit plans
and $
million to our
international qualified and nonqualified pension and
postretirement benefit plans.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following benefit payments,
which are exclusive of amounts
to be paid from the insurance annuity contract
and which reflect expected future
service, as appropriate, are expected
to be paid:
Millions of Dollars
Pension
Other
Benefits
Benefits
U.S.
Int’l.
2022
$
2023
2024
2025
2026
2027–2031
The following table summarizes our
severance accrual activity:
Millions of Dollars
2021
2020
2019
Balance at January 1
$
Accruals
(1)
Benefit payments
(116)
(13)
(24)
Balance at December 31
$
Accruals include severance costs
associated with our company-wide restructuring
program.
Of the remaining
balance at December 31, 2021, $
million is classified as short-term.
Defined Contribution Plans
Most U.S. employees are eligible
to participate in the ConocoPhillips Savings
Plan (CPSP).
Employees can deposit
up to
percent of their eligible pay,
subject to statutory limits, in the CPSP to a choice of
investment options.
Employees who participate in the CPSP and contribute
percent of their eligible pay receive
a
percent company
cash match with a potential company
discretionary cash contribution of up
to
percent.
Effective January 1, 2019,
new employees, rehires, and employees
that elected to opt out of Title II of the ConocoPhillips
Retirement Plan are
eligible to receive a Company Retirement
Contribution (CRC) of
percent of eligible pay into
their CPSP.
After
three years
of service with the company,
the employee is
percent vested in any
CRC.
Company contributions
charged to expense for the CPSP and
predecessor plans were $
million in 2021, $
million in 2020, and $
million in 2019.
We have several
defined contribution plans for our
international employees, each with its own
terms and eligibility
depending on location.
Total
compensation expense recognized
for these international plans was
approximately
$
million in 2021, $
million in 2020, and $
million in 2019.
Share-Based Compensation Plans
The 2014 Omnibus Stock and Performance Incentive
Plan of ConocoPhillips (the Plan) was approved
by
shareholders in May 2014, replacing
similar prior plans and providing that no new awards
shall be granted under
the prior plans.
Over its
-year life, the Plan allows the issuance
of up to
million shares of our common stock
for compensation to our employees
and directors; however,
as of the effective date of the
Plan, (i) any shares of
common stock available for
future awards under the prior plans
and (ii) any shares of common stock
represented
by awards granted
under the Plan or the prior plans that are forfeited,
expire or are cancelled without
delivery of
shares of common stock or which result
in the forfeiture of shares
of common stock back to the company
shall be
available for awards
under the Plan.
Of the
million shares available for
issuance under the Plan, no more than
million shares of common stock are
available for incentive stock
options.
The Human Resources and
Compensation Committee of our Board
of Directors is authorized to
determine the types, terms, conditions and
limitations of awards granted.
Awards may be granted
in the form of, but not
limited to, stock options, restricted
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
stock units and performance share units
to employees and non-employee directors
who contribute to the
company’s continued
success and profitability.
Total
share-based compensation expense is
measured using the grant date
fair value for our equity-classified
awards and the settlement date
fair value for our liability-classified awards.
We recognize share
-based
compensation expense over the shorter
of the service period (i.e., the stated period of time required
to earn the
award); or the period beginning at the start
of the service period and ending when an employee first becomes
eligible for retirement, but
not less than six months, as this is the minimum period of time required
for an award to
not be subject to forfeiture.
Our share-based compensation programs
generally provide accelerated
vesting (i.e., a
waiver of the remaining period of service required
to earn an award) for awards
held by employees at the time of
their retirement.
Some of our share-based awards
vest ratably (i.e., portions
of the award vest at different
times)
while some of our awards cliff vest
(i.e., all of the award vests at
the same time).
We recognize
expense on a
straight-line basis over the service period for
the entire award, whether the
award was granted
with ratable or cliff
vesting.
Compensation Expense
—Total
share-based compensation expense recognized
in net income (loss) and the
associated tax benefit were:
Millions of Dollars
2021
2020
2019
Compensation cost
$
Tax benefit
Stock Options
—Stock options granted under
the provisions of the Plan and prior plans permit purchase of our
common stock at exercise
prices equivalent to the average
fair market value of ConocoPhillips
common stock on
the date the options were granted.
The options have terms of 10 years
and generally vest ratably,
with one-third
of the options awarded vesting and
becoming exercisable on
each anniversary date following the date
of grant.
Options awarded to certain employees
already eligible for retirement
vest within six months of the grant
date, but
those options do not become exercisable
until the end of the normal vesting period.
Beginning in 2018, stock
option grants were discontinued
and replaced with three-year,
time-vested restricted
stock units which generally
will be cash-settled for 2018 and 2019 awards
and stock-settled beginning
with 2020 awards.
The following summarizes our stock
option activity for the year ended December 31, 2021:
Millions of Dollars
Weighted-Average
Aggregate
Options
Exercise Price
Intrinsic Value
Outstanding at December 31, 2020
16,922,525
$
55.12
$
Exercised
(3,846,361)
51.40
Expired or cancelled
(1,102,381)
53.47
Outstanding at December 31, 2021
11,973,783
$
56.46
$
Vested at December
31, 2021
11,973,783
$
56.46
$
Exercisable at December 31, 2021
11,973,783
$
56.46
$
The weighted-average remaining
contractual term of outstanding
options, vested options and exercisable
options
at December 31, 2021, were all
3.06
years.
The aggregate intrinsic value
of options exercised was
$
million in
2020 and $
million in 2019.
During 2021, we received $
million in cash and realized a tax
benefit of $
million from the exercise of
options.
At December 31, 2021, all outstanding stock
options were fully vested and there
was no remaining
compensation cost to be recorded.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Stock Unit Program—
Generally,
restricted stock units are granted
annually under the provisions of the Plan and
vest in an aggregate installment
on the third anniversary of the grant
date.
In addition, restricted stock
units
granted under the Plan for a variable
long-term incentive program
vest ratably in three
equal annual installments
beginning on the first anniversary of the grant
date.
Restricted stock units are also
granted ad hoc to attract
or
retain key personnel,
and the terms and conditions under which these restricted
stock units vest vary by award.
Stock-Settled
Upon vesting, these restricted stock
units are settled by issuing one share of ConocoPhillips
common stock per
unit.
Units awarded to retirement
eligible employees vest six months
from the grant date; however,
those units
are not issued as common stock until
the earlier of separation from the company
or the end of the regularly
scheduled vesting period.
Until issued as stock, most recipients
of the restricted stock units receive
a cash
payment of a dividend equivalent or
an accrued reinvested dividend
equivalent that is charged to retained
earnings.
The grant date fair market
value of these restricted stock
units is deemed equal to the average
ConocoPhillips stock price on the grant
date.
The grant date fair market
value of units that do not receive a
dividend equivalent while unvested
is deemed equal to the average
ConocoPhillips stock price on the grant
date,
less the net present value of the dividends that
will not be received.
The following summarizes our stock
-settled stock unit activity for the year
ended December 31, 2021:
Weighted-Average
Millions of Dollars
Stock Units
Grant Date Fair Value
Total
Fair Value
Outstanding at December 31, 2020
6,431,985
$
58.94
Granted
4,590,103
46.56
Forfeited
(566,047)
48.59
Issued
(2,810,730)
54.74
$
Outstanding at December 31, 2021
7,645,311
$
53.81
Not Vested at
December 31, 2021
5,509,133
53.81
At December 31, 2021, the remaining unrecognized
compensation cost from the unvested
stock-settled units was
$
million, which will be recognized over
a weighted-average
period of
1.67
years, the longest period being
2.59
years.
The weighted-average
grant date fair value
of stock unit awards granted
during 2020 and 2019 was $
57.40
and $
67.77
, respectively.
The total fair value of stock
units issued during 2020 and 2019 was $
million and
$
million, respectively.
Cash-Settled
Cash settled executive restricted
stock units granted in 2018 and
2019 replaced the stock option program.
These
restricted stock units, subject to
elections to defer,
will be settled in cash equal to the fair
market value of a share
of ConocoPhillips common stock per unit
on the settlement date and are classified
as liabilities on the balance
sheet.
Units awarded to retirement
eligible employees vest six months
from the grant date; however,
those units
are not settled until the earlier of separation
from the company or the end of the regularly
scheduled vesting
period.
Compensation expense is initially measured
using the average fair market
value of ConocoPhillips common
stock and is subsequently adjusted,
based on changes in the ConocoPhillips stock price through
the end of each
subsequent reporting period, through
the settlement date.
Recipients receive an accrued reinvested
dividend
equivalent that is charged to
compensation expense.
The accrued reinvested dividend
is paid at the time of
settlement, subject to the terms and
conditions of the award.
Beginning with executive restricted
stock units
granted in 2020 awards will be
settled in stock.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following summarizes our cash
-settled stock unit activity for the year
ended December 31, 2021:
Weighted-Average
Millions of Dollars
Stock Units
Grant Date Fair Value
Total
Fair Value
Outstanding at December 31, 2020
614,615
$
39.95
Granted
11,186
57.19
Forfeited
(2,927)
51.43
Issued
(396,398)
50.75
$
Outstanding at December 31, 2021
226,476
$
72.18
Not Vested at
December 31, 2021
59,443
72.18
At December 31, 2021, there was
no
remaining unrecognized compensation
cost to be recorded for the unvested
cash-settled units.
The weighted-average grant
date fair value of stock
unit awards granted during
2020 and 2019
were $
41.59
and $
68.20
, respectively.
The total fair value of stock
units issued during 2020 and 2019 were
negligible and $
million, respectively.
Performance Share Program
—Under the Plan, we also annually grant restricted
performance share units (PSUs) to
senior management.
These PSUs are authorized three years
prior to their effective grant
date (the performance
period).
Compensation expense is initially measured
using the average fair market
value of ConocoPhillips
common stock and is subsequently adjusted,
based on changes in the ConocoPhillips stock price through
the end
of each subsequent reporting period, through
the grant date for stock
-settled awards and the settlement
date for
cash-settled awards.
Stock-Settled
For performance periods beginning before
2009, PSUs do not vest until the employee becomes
eligible for
retirement by reaching age 55
with five years of service, and restrictions
do not lapse until the employee separates
from the company.
With respect to awards for performance
periods beginning in 2009 through 2012, PSUs do not
vest until the earlier of the date the employee
becomes eligible for retirement
by reaching age 55 with five years
of service or five years after the grant
date of the award, and restrictions
do not lapse until the earlier of the
employee’s separation
from the company or five years
after the grant date (although
recipients can elect to defer
the lapsing of restrictions until separation).
We recognize compensation
expense for these awards
beginning on
the grant date and ending on the date
the PSUs are scheduled to vest.
Since these awards are authorized
three
years prior to the effective
grant date, for
employees eligible for retirement
by or shortly after the grant date,
we
recognize compensation expense
over the period beginning on the date of authorization
and ending on the date of
grant.
Until issued as stock, recipients of the PSUs receive
a quarterly cash payment of a dividend
equivalent that
is charged to retained earnings.
Beginning in 2013, PSUs authorized for future grants
will vest, absent employee
election to defer,
upon settlement following the conclusion
of the three-year performance period.
We recognize
compensation expense over the period beginning
on the date of authorization and
ending on the conclusion of the
performance period.
PSUs are settled by issuing one share
of ConocoPhillips common stock per unit.
The following summarizes our stock
-settled Performance Share
Program activity for the year ended
December 31, 2021:
Weighted-Average
Millions of Dollars
Stock Units
Grant Date Fair Value
Total
Fair Value
Outstanding at December 31, 2020
1,736,728
$
50.56
Issued
(287,881)
49.91
$
Outstanding at December 31, 2021
1,448,847
$
50.69
Not Vested at
December 31, 2021
3,191
$
48.61
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
At December 31, 2021, there was
no
remaining unrecognized compensation
cost to be recorded on the unvested
stock-settled performance share
s.
The weighted-average grant
date fair value of stock-settled
PSUs granted
during 2020 and 2019 was $
58.61
and $
68.90
, respectively.
The total fair value of stock-settled
PSUs issued during
2020 and 2019 was $
million and $
million, respectively.
Cash-Settled
In connection with and immediately following
the separation of our Downstream
businesses in 2012, grants of new
PSUs, subject to a shortened performance period,
were authorized.
Once granted, these PSUs vest,
absent
employee election to defer,
on the earlier of five years after
the grant date of the award
or the date the employee
becomes eligible for retirement.
For employees eligible for retirement
by or shortly after the grant date,
we
recognize compensation expense
over the period beginning on the date of authorization
and ending on the date of
grant.
Otherwise, we recognize compensation
expense beginning on the grant
date and ending on the date the
PSUs are scheduled to vest.
These PSUs are settled in cash equal to the fair
market value of a share
of
ConocoPhillips common stock per unit on
the settlement date and thus are classified
as liabilities on the balance
sheet.
Until settlement occurs,
recipients of the PSUs receive a quarterly cash
payment of a dividend equivalent
that is charged to compensation expense.
Beginning in 2013, PSUs authorized for future
grants will vest upon settlement
following the conclusion of the
three-year performance period.
We recognize compensation
expense over the period beginning on the date
of
authorization and ending at the conclusion
of the performance period.
These PSUs will be settled in cash equal to
the fair market value of a share
of ConocoPhillips common stock per unit
on the settlement date and are
classified
as liabilities on the balance sheet.
For performance periods beginning before
2018, during the performance
period, recipients of the PSUs do not receive a
quarterly cash payment of a dividend
equivalent, but after the
performance period ends, until settlement
in cash occurs, recipients of the PSUs receive
a quarterly cash payment
of a dividend equivalent that is charged
to compensation expense.
For the performance period beginning in 2018,
recipients of the PSUs receive an accrued reinvested
dividend equivalent that is charged
to compensation expense.
The accrued reinvested dividend
is paid at the time of settlement, subject to the terms
and conditions of the
award.
The following summarizes our cash
-settled Performance Share
Program activity for the year ended
December 31, 2021:
Weighted-Average
Millions of Dollars
Stock Units
Grant Date Fair Value
Total
Fair Value
Outstanding at December 31, 2020
124,529
$
39.95
Granted
1,073,228
46.65
Settled
(1,080,078)
48.13
$
Outstanding at December 31, 2021
117,679
$
72.18
At December 31, 2021, all outstanding
cash-settled performance awards
were fully vested and there was
no
remaining compensation cost to
be recorded.
The weighted-average
grant date fair value
of cash-settled PSUs
granted during 2020 and 2019 was $
58.61
and $
68.90
, respectively.
The total fair value of cash-settled
performance share awards
settled during 2020 and 2019 was $
million and $
million, respectively.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
From inception of the Performance Share
Program through 2013,
approved PSU awards were
granted after the
conclusion of performance periods.
Beginning in February 2014, initial target PSU awards
are issued near the
beginning of new performance periods.
These initial target PSU awards
will terminate at the end of the
performance periods and will be settled after the
performance periods have ended.
Also in 2014, initial target PSU
awards were issued for open
performance periods that began in
prior years.
For the open performance period
beginning in 2012, the initial target PSU awards
terminated at the end of the three-year
performance period and
were replaced with approved
PSU awards.
For the open performance period beginning in
2013, the initial target
PSU awards terminated at
the end of the three-year performance period
and were settled after the performance
period ended.
There is no effect on recognition
of compensation expense.
Other
—In addition to the above active programs,
we have outstanding shares
of restricted stock and restricted
stock units that were either issued
as part of our non-employee director compensation
program for current
and
former members of the company’s
Board of Directors,
as part of an executive compensation
program that has
been discontinued or acquired as a result
of an acquisition.
Generally, the recipients
of the restricted shares or
units receive a dividend or dividend equivalent.
The following summarizes the aggregate
activity of these restricted shares
and units for the year ended
December 31, 2021:
Weighted-Average
Millions of Dollars
Stock Units
Grant Date Fair Value
Total
Fair Value
Outstanding at December 31, 2020
970,099
$
47.78
Granted
797,704
46.43
Cancelled
(1,948)
27.80
Issued
(149,488)
46.80
$
Outstanding at December 31, 2021
1,616,367
$
47.24
Not Vested at
December 31, 2021
695,958
$
45.87
At December 31, 2021, the remaining compensation
cost from the unvested
restricted stock was $
million,
which will be recognized over a weighted-average
period of
1.46
years, the longest period being
years. The
weighted-average
grant date fair value
of awards granted during
2020 and 2019 was $
51.46
and $
63.58
,
respectively.
The total fair value of awards
issued during 2020 and 2019 was $
million and $
million,
respectively.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 17—Income Taxes
Components of income tax provision
(benefit) were:
Millions of Dollars
2021
2020
2019
Income Taxes
Federal
Current
$
Deferred
1,161
(625)
(113)
Foreign
Current
3,128
2,545
Deferred
(70)
(323)
State and local
Current
(4)
Deferred
(139)
(8)
Total
tax provision (benefit)
$
4,633
(485)
2,267
Deferred income taxes
reflect the net tax effect
of temporary differences
between the carrying amounts of
assets and liabilities for financial reporting purposes
and the amounts used for tax purposes.
Major components
of deferred tax liabilities and
assets at December 31 were:
Millions of Dollars
2021
2020
Deferred Tax
Liabilities
PP&E and intangibles
$
10,170
7,744
Inventory
Other
Total
deferred tax liabilities
10,427
8,050
Deferred Tax
Assets
Benefit plan accruals
Asset retirement obligations
and accrued environmental costs
2,297
2,262
Investments in joint ventures
1,684
1,653
Other financial accruals and deferrals
Loss and credit carryforwards
7,402
8,904
Other
Total
deferred tax assets
12,930
14,631
Less: valuation allowance
(8,342)
(9,965)
Total
deferred tax assets
net of valuation allowance
4,588
4,666
Net deferred tax liabilities
$
5,839
3,384
At December 31, 2021, noncurrent assets
and liabilities included deferred taxes
of $
million and $
6,179
million,
respectively.
At December 31, 2020, noncurrent assets
and liabilities included deferred taxes
of $
million and
$
3,747
million, respectively.
At December 31, 2021, the loss and credit carryforward
deferred tax assets
were primarily related to U.S.
foreign
tax credit carryforwards
of $
5.5
billion and various jurisdictions net operating
loss and credit carryforwards of $
1.9
billion.
If not utilized, U.S. foreign
tax credits and net operating
losses will begin to expire in 2022.
Our overall deferred
tax liability increased during 2021 by $
1.1
billion due to our Concho acquisition.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following table shows a reconciliation
of the beginning and ending deferred tax
asset valuation allowance for
for 2021, 2020 and 2019:
Millions of Dollars
2021
2020
2019
Balance at January 1
$
9,965
10,214
3,040
Charged to expense (benefit)
(45)
(225)
Other*
(1,578)
(709)
7,399
Balance at December 31
$
8,342
9,965
10,214
*Represents changes due to originating deferred tax asset that have no impact to our effective tax rate, acquisitions/dispositions/revisions and
the effect of translating foreign financial statements.
Valuation allowances
have been established to
reduce deferred tax assets
to an amount that will, more likely than
not, be realized.
At December 31, 2021, we have maintained
a valuation allowance with respect to
substantially all
U.S. foreign tax credit
carryforwards as well as certain
net operating loss carryforwards
for various jurisdictions.
During 2021, the valuation allowance movement
charged to earnings primarily relates
to the fair value
measurement of our CVE common shares that
are not expected to be realized,
and the expected realization of
certain U.S. tax attributes
associated with our planned disposition of our Indonesia assets.
This is partially offset
by Australian tax benefits
associated with our impairment of APLNG that we do not
expect to be realized.
Other
movements are primarily related
to valuation allowances on expiring
tax attributes.
Based on our historical
taxable income, expectations
for the future, and available
tax-planning strategies, management
expects deferred
tax assets, net of valuation
allowances, will primarily be realized as offsets
to reversing deferred
tax liabilities.
For
more information on our pending Indonesia
disposition
During 2020, the valuation allowance movement
charged to earnings primarily related
to capital losses in Australia
and to the fair value measurement of our
CVE common shares that are not expected
to be realized.
Other
movements are primarily related
to valuation allowances on expiring
tax attributes.
On December 2, 2019, the Internal Revenue Service finalized
foreign tax credit regulations
related to the 2017 Tax
Cuts and Jobs Act.
Due to the finalization of these regulations,
in the fourth quarter of 2019 we recognized
$
million of net deferred tax
assets.
Correspondingly,
we recorded $
6,642
million of existing foreign tax
credit
carryovers where recognition
was previously considered to
be remote.
Present legislation still makes
their
realization unlikely and
therefore these credits have
been offset with a full valuation allowance.
At December 31, 2021, unremitted
income considered to be permanently reinvested
in certain foreign subsidiaries
and foreign corporate
joint ventures totaled
approximately $
4,384
million.
Deferred income taxes
have not been
provided on this amount, as we do not plan to
initiate any action that would require
the payment of income taxes.
The estimated amount of additional tax,
primarily local withholding tax, that would
be payable on this income if
distributed is approximately
$
million.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The following table shows a reconciliation
of the beginning and ending unrecognized
tax benefits for 2021,
2020 and 2019:
Millions of Dollars
2021
2020
2019
Balance at January 1
$
1,206
1,177
1,081
Additions based on tax positions related
to the current year
Additions for tax positions of prior years
Reductions for tax positions
of prior years
(5)
(34)
(22)
Settlements
-
(9)
(9)
Lapse of statute
(48)
(1)
(2)
Balance at December 31
$
1,345
1,206
1,177
Included in the balance of unrecognized tax
benefits for 2021, 2020 and 2019 were $
1,261
million, $
1,128
million
and $
1,100
million, respectively,
which, if recognized, would impact our effective
tax rate.
The balance of the
unrecognized tax benefits
increased
in 2021 mainly due to U.S. tax credits acquired
through our Concho
acquisition.
The balance of the unrecognized tax benefits
increased in 2019 mainly due to the treatment
of our
PDVSA settlement.
and
At December 31, 2021, 2020 and 2019, accrued liabilities for
interest and penalties totaled $
million, $
million
and $
million, respectively,
net of accrued income taxes.
Interest and penalties resulted
in a reduction to
earnings of $
million in 2021, a reduction of $
million in 2020, and benefit to earnings of $
million in 2019.
We file tax returns
in the U.S. federal jurisdiction and
in many foreign and state
jurisdictions.
Audits in major
jurisdictions are generally complete as
follows: Canada (2016), U.S. (2017)
and Norway (2020).
Issues in dispute
for audited years and audits
for subsequent years are ongoing
and in various stages of completion in
the many
jurisdictions in which we operate around
the world.
Consequently,
the balance in unrecognized tax benefits
can
be expected to fluctuate from
period to period.
Within the next twelve months, we may
have audit periods close
that could significantly impact our total
unrecognized tax benefits.
It is reasonably possible such changes could be
significant when compared with our total
unrecognized tax benefits, but
the amount of change is not estimable.
In January 2022, the IRS closed the 2017 audit of our U.S. federal
income tax return.
As a result, in the first quarter
of 2022, we will recognize a previously
unrecognized $
million federal tax benefit
related to the recovery
of
outside tax basis previously offset
by a full reserve.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
The amounts of U.S. and foreign income
(loss) before income taxes,
with a reconciliation of tax at
the federal
statutory rate
to the provision for income taxes,
were:
Millions of Dollars
Percent of Pre-Tax
Income (Loss)
2021
2020
2019
2021
2020
2019
Income (loss) before income taxes
United States
$
8,024
(3,587)
4,704
63.1
%
114.2
49.4
Foreign
4,688
4,820
36.9
(14.2)
50.6
$
12,712
(3,140)
9,524
100.0
%
100.0
100.0
Federal statutory
income tax
$
2,670
(659)
2,000
21.0
%
21.0
21.0
Non-U.S. effective tax
rates
1,915
1,399
15.1
(6.2)
14.7
Tax impact of debt
restructuring
-
-
0.6
-
-
Australia disposition
-
(349)
-
-
11.1
-
U.K. disposition
-
-
(732)
-
-
(7.7)
Recovery of outside basis
(55)
(22)
(77)
(0.4)
0.7
(0.8)
Adjustment to tax reserves
(11)
(0.1)
(0.6)
0.1
Adjustment to valuation allowance
(45)
(225)
(0.4)
(14.6)
(2.4)
State income tax
(112)
1.5
3.6
1.3
Malaysia Deepwater Incentive
-
-
(164)
-
-
(1.7)
Enhanced oil recovery credit
(99)
(6)
(27)
(0.8)
0.2
(0.3)
Other
(11)
(9)
(39)
(0.1)
0.3
(0.4)
Tota
l
$
4,633
(485)
2,267
36.4
%
15.5
23.8
Our effective tax rate
for 2021 was driven by our
jurisdictional tax rates for
this profit mix with net favorable
impacts from routine tax credits
and valuation allowance adjustments.
The valuation allowance adjustment is
primarily related to the fair value
measurement and disposition of our CVE common shares
of $
million and the
ability to utilize the U.S. foreign
tax credit and capital loss carryforward
due to our anticipated disposition
of our
Indonesia entities of $
million. This was partially offset by an increase
to our valuation allowance related
to the
tax impact of the impairment of our APLNG investment
of $
million for which we do not expect to receive
a tax
benefit.
Our effective tax rate
for 2020 was impacted by the disposition
of our Australia-West
assets as well as the
valuation allowance related
to the fair value measurement of our
CVE common shares.
The Australia-West
disposition generated a before-tax
gain of $
million with an associated tax benefit
of $
million and resulted in
the de-recognition of deferred
tax assets resulting in $
million of tax expense.
The disposition also generated an
Australia capital loss tax
benefit of $
million which has been fully offset by a valuation
allowance.
Due to
changes in the fair market value
of CVE common shares, the valuation allowance
was increased by $
million to
offset the expected capital
loss.
Our effective tax rate
for 2019 was favorably
impacted by the sale of two of our U.K. subsidiaries. The disposition
generated a before-tax
gain of more than $
1.7
billion with an associated tax
benefit of $
million. The
disposition generated a U.S.
capital loss of approximately
$
2.1
billion which has generated a U.S.
tax benefit of
approximately $
million. The remaining U.S. capital loss has
been recorded as a deferred
tax asset fully offset
with a valuation allowance.
During 2019, we received final partner approval
in Malaysia Block G to claim certain deepwater
tax credits.
As a
result, we recorded an income tax
benefit of $
million.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 18—Accumulated Other Comprehensive
Loss
Accumulated other comprehensive
loss in the equity section of the balance sheet included:
Millions of Dollars
Defined
Benefit Plans
Net
Unrealized
Gain/(Loss)
on Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2018
$
(361)
-
(5,702)
(6,063)
Other comprehensive income (loss)
-
Cumulative effect of adopting
ASU No. 2018-02*
(40)
-
-
(40)
December 31, 2019
(350)
-
(5,007)
(5,357)
Other comprehensive income
(75)
December 31, 2020
(425)
(4,795)
(5,218)
Other comprehensive income (loss)
(2)
(124)
December 31, 2021
$
(31)
-
(4,919)
(4,950)
*We adopted ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," beginning January 1,
During 2019, we recognized $
million of foreign currency translation
adjustments related to the completion
of
our sale of two ConocoPhillips U.K. subsidiaries.
The following table summarizes reclassifications
out of accumulated other comprehensive
loss during the years
ended December 31:
Millions of Dollars
2021
2020
Defined Benefit Plans
$
Above amounts are included in the computation of net periodic benefit cost and
are presented net of tax expense of:
$
See Note 16.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 19—Cash Flow Information
Millions of Dollars
2021
2020
2019
Noncash Investing Activities
Increase (decrease) in PP&E related to
an increase (decrease) in asset
retirement obligations
$
(116)
Cash Payments
Interest
$
Income taxes
2,905
Net Sales (Purchases) of Investments
Short-term investments
purchased
$
(5,554)
(12,435)
(4,902)
Short-term investments
sold
8,810
12,015
2,138
Investments and long-term receivables
purchased
(279)
(325)
(146)
Investments and long-term receivables
sold
-
$
3,091
(658)
(2,910)
The following items are included in the “Cash
Flows from Operating Activities” section
of our consolidated cash
flows.
In 2021, we made a total of $
million in contributions to our U.S. qualified
pension plan.
In 2019, we made a
$
million contribution to our U.K. pension
plan.
We collected $
million in 2019 from PDVSA under settlement
agreements related to an
award issued by the ICC
Tribunal in 2018.
For more information on these
settlements,
See
and
for additional information on cash
and non-cash changes to our consolidated
balance
sheet associated with our Concho acquisition.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 20—Other Financial Information
Millions of Dollars
2021
2020
2019
Interest and Debt Expense
Incurred
Debt
$
Other
Capitalized
(62)
(55)
(57)
Expensed
$
Other Income (Loss)
Interest income
$
Gain (loss) on investment in Cenovus
Energy*
1,040
(855)
Other, net
$
1,203
(509)
1,358
*See Note 5.
Research and Development Expenditures
—expensed
$
Shipping and Handling Costs
$
1,047
1,008
Foreign Currency Transaction
(Gains) Losses
—after-tax
Alaska
$
-
-
-
Lower 48
-
-
-
Canada
(1)
(7)
Europe, Middle East and North Africa
(11)
(15)
-
Asia Pacific
(11)
Other International
Corporate and Other
(7)
(31)
$
(16)
(62)
Millions of Dollars
2021
2020
Properties, Plants and Equipment
Proved properties*
$
114,274
**
94,312
Unproved properties*
10,993
4,141
Other
4,379
3,653
Gross properties, plants and equipment
129,646
102,106
Less: Accumulated depreciation,
depletion and amortization
(64,735)
**
(62,213)
Net properties, plants and equipment
$
64,911
39,893
*Proved and Unproved properties increased by $
20.0
billion and $
6.9
billion, respectively, in 2021 compared with 2020, primarily due to
the Concho and Shell Permian acquisitions.
**Excludes assets classified as held for sale at December 31, 2021.
See Note 3.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 21—Related Party
Transactions
Our related parties primarily include equity method
investments and certain trusts
for the benefit of employees.
For disclosures on trusts for
the benefit of employees,
Significant transactions with our equity
affiliates were:
Millions of Dollars
2021
2020
2019
Operating revenues and other income
$
Purchases
-
Operating expenses and selling, general
and administrative expenses
Net interest income*
(2)
(5)
(13)
*We paid interest to, or received interest from, various affiliates.
See Note 4, for additional information on loans to
affiliated companies.
Note 22—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
2021
2020
2019
Revenue from contracts
with customers
$
34,590
13,662
26,106
Revenue from contracts
outside the scope of ASC Topic
Physical contracts
meeting the definition of a derivative
11,500
5,177
6,558
Financial derivative contracts
(262)
(55)
(97)
Consolidated sales and other operating
revenues
$
45,828
18,784
32,567
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
The following disaggregation
of
revenues is provided in conjunction
with
Note 23—Segment Disclosures and Related Information
Millions of Dollars
2021
2020
2019
Revenue from Outside the Scope of ASC Topic
by Segment
Lower 48
$
9,050
3,966
4,989
Canada
1,457
Europe, Middle East and North Africa
Physical contracts
meeting the definition of a derivative
$
11,500
5,177
6,558
Millions of Dollars
2021
2020
2019
Revenue from Outside the Scope of ASC Topic
by Product
Crude oil
$
Natural gas
10,034
4,339
5,313
Other
Physical contracts
meeting the definition of a derivative
$
11,500
5,177
6,558
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
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.
Receivables and Contract
Liabilities
Receivables from Contracts with Customers
At December 31, 2021, the “Accounts
and notes receivable” line on our consolidated
balance sheet included trade
receivables of $
5,268
million compared with $
1,827
million at December 31, 2020, and included both contracts
with customers within the scope of ASC Topic
606 and those that are outside the scope of ASC Topic
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
There
is little distinction in the nature of the customer
or credit quality of trade receivables
associated with gas sold
under contracts for which NPNS
has not been elected compared with trade
receivables where NPNS has been
elected.
Contract Liabilities from Contracts with Customers
We have entered into contractual arrangements where we license proprietary technology to customers related to
the optimization process for operating LNG plants. The agreements typically provide for negotiated payments to
be made at stated milestones. The payments are not directly related to our performance under the contract and
are recorded as deferred revenue to be recognized as revenue when the customer can utilize and benefit from
their right to use the license. Payments are received in installments over the construction period.
Millions of Dollars
Contract Liabilities
At December 31, 2020
$
Contractual payments received
Revenue recognized
(62)
At December 31, 2021
$
Amounts Recognized in the Consolidated
Balance Sheet at December 31, 2021
Current liabilities
$
We expect to recognize the contract liabilities as of December 31, 2021, as revenue during 2022.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Note 23—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 expense, premiums
on early retirement of debt, corporate
overhead and certain technology activities,
including licensing revenues.
Corporate assets include all cash
and cash equivalents and short-term investments.
We evaluate performance
and allocate resources based
on net income (loss) attributable to ConocoPhillips.
Segment accounting policies are the same as those
in
.
Intersegment sales are at
prices that approximate
market.
In 2021, we completed our acquisition of Concho,
an independent oil and gas exploration
and production company
with operations across New Mexico
and West Texas
as well as our acquisition of Shell’s
Permian assets in the Texas
Delaware Basin.
The accounting close date of the Shell transaction
,
used for reporting purposes, was December
31, 2021.
Results of operations for
Concho and assets acquired from Shell are included in
our Lower 48 segment.
Certain transaction and restructuring
costs associated with these acquisitions
are included in our Corporate and
Other segment.
Analysis of Results by Operating Segment
Millions of Dollars
2021
2020
2019
Sales and Other Operating Revenues
Alaska
$
5,480
3,408
5,483
Intersegment eliminations
-
(11)
-
Alaska
5,480
3,397
5,483
Lower 48
29,306
9,872
15,514
Intersegment eliminations
(12)
(51)
(46)
Lower 48
29,294
9,821
15,468
Canada
4,077
1,666
2,910
Intersegment eliminations
(1,583)
(405)
(1,141)
Canada
2,494
1,261
1,769
Europe, Middle East and North Africa
5,902
1,919
5,101
Intersegment eliminations
-
(2)
-
Europe, Middle East and North Africa
5,902
1,917
5,101
Asia Pacific
2,579
2,363
4,525
Other International
-
Corporate and Other
Consolidated sales and other operating
revenues
$
45,828
18,784
32,567
The market for our products
is large and diverse, therefore,
our sales and other operating revenues
are not
dependent upon any single customer.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Millions of Dollars
2021
2020
2019
Depreciation, Depletion, Amortization
and Impairments
Alaska
$
1,002
Lower 48
4,067
3,358
3,224
Canada
Europe, Middle East and North Africa
Asia Pacific
1,483
1,285
Other International
-
-
-
Corporate and Other
Consolidated depreciation, depletion,
amortization and impairments
$
7,882
6,334
6,495
Equity in Earnings of Affiliates
Alaska
$
(7)
Lower 48
(18)
(11)
(159)
Canada
-
-
-
Europe, Middle East and North Africa
Asia Pacific
Other International
-
-
Corporate and Other
-
-
-
Consolidated equity in earnings of affiliates
$
Income Tax
Provision (Benefit)
Alaska
$
(256)
Lower 48
1,390
(378)
Canada
(185)
(43)
Europe, Middle East and North Africa
2,543
1,425
Asia Pacific
Other International
(53)
(20)
Corporate and Other
(282)
(76)
(233)
Consolidated income tax provision
(benefit)
$
4,633
(485)
2,267
Net Income (Loss) Attributable
to ConocoPhillips
Alaska
$
1,386
(719)
1,520
Lower 48
4,932
(1,122)
Canada
(326)
Europe, Middle East and North Africa
1,167
3,170
Asia Pacific
1,483
Other International
(107)
(64)
Corporate and Other
(210)
(1,880)
Consolidated net income (loss) attributable
to ConocoPhillips
$
8,079
(2,701)
7,189
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Millions of Dollars
2021
2020
2019
Investments in and Advances to
Affiliates
Alaska
$
Lower 48
Canada
-
-
-
Europe, Middle East and North Africa
1,070
Asia Pacific
5,603
6,705
7,265
Other International
-
-
Corporate and Other
-
-
-
Consolidated investments
in and advances to affiliates
$
6,701
7,710
8,453
Total Assets
Alaska
$
14,812
14,623
15,453
Lower 48
41,699
11,932
14,425
Canada
7,439
6,863
6,350
Europe, Middle East and North Africa
9,125
8,756
9,269
Asia Pacific
9,840
11,231
13,568
Other International
Corporate and Other
7,745
8,987
11,164
Consolidated total assets
$
90,661
62,618
70,514
Capital Expenditures and Investments
Alaska
$
1,038
1,513
Lower 48
3,129
1,881
3,394
Canada
Europe, Middle East and North Africa
Asia Pacific
Other International
Corporate and Other
Consolidated capital expenditures
and investments
$
5,324
4,715
6,636
Interest Income and Expense
Interest income
Alaska
$
-
-
-
Lower 48
-
-
-
Canada
-
-
-
Europe, Middle East and North Africa
Asia Pacific
Other International
-
-
-
Corporate and Other
Interest and debt expense
Corporate and Other
$
Sales and Other Operating Revenues
by Product
Crude oil
$
23,648
9,736
18,482
Natural gas
16,904
6,427
8,715
Natural gas liquids
1,668
Other*
3,608
2,093
4,556
Consolidated sales and other operating
revenues by product
$
45,828
18,784
32,567
*Includes LNG and bitumen.
Notes to Consolidated Financial Statements
ConocoPhillips
2021 10-K
Geographic Information
Millions of Dollars
Sales and Other Operating Revenues
(1)
Long-Lived Assets
(2)
2021
2020
2019
2021
2020
2019
United States
$
34,847
13,230
21,159
50,580
24,034
26,566
Australia and Timor-Leste
-
1,647
5,579
6,676
7,228
Canada
2,494
1,261
1,769
6,608
6,385
5,769
China
1,476
1,491
1,447
Indonesia
(3)
Libya
1,102
1,103
Malaysia
1,230
1,252
1,501
1,871
Norway
2,563
1,426
2,349
4,681
5,294
5,258
United Kingdom
2,236
1,649
Other foreign countries
1,087
1,308
Worldwide consolidated
$
45,828
18,784
32,567
71,612
47,603
50,722
(1) Sales and other operating revenues are attributable to countries based on the location of the selling operation.
(2) Defined as net PP&E plus equity investments and advances to affiliated companies.
(3) Met held for sale criteria in 2021 in conjunction with our agreement to sell our subsidiary holding
our Indonesia assets.
Supplementary Data
ConocoPhillips
2021 10-K
Oil and Gas Operations
(Unaudited)
In accordance with FASB
ASC Topic
932, “Extractive Activities—Oil and Gas,”
and regulations of the SEC, we are
making certain supplemental disclosures
about our oil and gas exploration and
production operations.
These disclosures include information about
our consolidated oil and gas activities and our proportionate
share of
our equity affiliates’ oil and gas
activities in our operating segments.
As a result, amounts reported as equity
affiliates in Oil and Gas Operations
may differ from those shown in the
individual segment disclosures reported
elsewhere in this report.
Our disclosures by geographic
area include the U.S., Canada, Europe, Asia Pacific/Middle
East (inclusive of equity affiliates)
,
and Africa.
As required by current authoritative
guidelines, the estimated future date
when an asset will be permanently shut
down for economic reasons is based on
historical 12-month
first-of-month average
prices and current costs.
This
estimated date when production
will end affects the amount of estimated
reserves.
Therefore, as prices and cost
levels change from year to year,
the estimate of proved reserves
also changes.
Generally,
our proved reserves
decrease as prices decline and increase as prices rise.
Our proved reserves include estimated
quantities related to PSCs, which are
reported under the “economic
interest” method, as well as variable-royalty
regimes, and are subject to fluctuations
in commodity prices,
recoverable operating
expenses and capital costs.
If costs remain stable, reserve quantities
attributable to
recovery of costs will change inversely
to changes in commodity prices.
For example, if prices increase, then
our
applicable reserve quantities would decline.
At December 31, 2021, approximately
4 percent of our total proved
reserves were under PSCs, located
in our Asia Pacific/Middle East geographic
reporting area, and 5 percent of our
total proved reserves
were under a variable-royalty
regime, located in our Canada geographic
reporting area.
Reserves Governance
The recording and reporting of proved
reserves are governed by criteria
established by regulations of the SEC
and
FASB.
Proved reserves are those
quantities of oil and gas, which, by analysis
of geoscience and engineering data,
can be estimated with reasonable certainty
to be economically producible—from a
given date forward,
from
known reservoirs, and under existing
economic conditions, operating methods,
and government regulations—prior
to the time at which contracts providing
the right to operate expire, unless
evidence indicates renewal is
reasonably certain, regardless
of whether deterministic or probabilistic
methods are used for the estimation.
The
project to extract the hydrocarbons
must have commenced or the operator
must be reasonably certain it will
commence the project within a reasonable time.
Proved reserves are further classified
as either developed or undeveloped.
Proved developed reserves are
proved
reserves that can be expected to
be recovered through existing
wells with existing equipment and operating
methods, or in which the cost of the required equipment
is relatively minor compared
with the cost of a new well,
and through installed extraction
equipment and infrastructure operational
at the time of the reserves estimate if
the extraction is by means not involving
a well.
Proved undeveloped reserves are
proved reserves expected
to be
recovered from new wells
on undrilled acreage, or from existing
wells where a relatively major expenditure
is
required for recompletion. Reserves
on undrilled acreage are limited to those
directly offsetting development
spacing areas that are reasonably
certain of production when drilled, unless evidence provided
by reliable
technologies exists that establishes
reasonable certainty of economic producibility
at greater distances.
As defined
by SEC regulations, reliable technologies
may be used in reserve estimation when
they have been demonstrated
in
the field to provide reasonably certain
results with consistency and repeatability
in the formation being evaluated
or in an analogous formation. The technologies
and data used in the estimation of our proved
reserves include, but
are not limited to,
performance-based methods, volumetric
-based methods, geologic maps, seismic interpretation,
well logs, well test data, core
data, analogy and statistical
analysis.
Supplementary Data
ConocoPhillips
2021 10-K
We have a company
-wide, comprehensive, SEC-compliant
internal policy that governs
the determination and
reporting of proved reserves.
This policy is applied by the geoscientists and
reservoir engineers in our business
units around the world.
As part of our internal control process,
each business unit’s reserves processes
and
controls are reviewed
annually by an internal team which is headed by
the company’s Manager of Reserves
Compliance and Reporting.
This team, composed of internal reservoir
engineers, geoscientists, finance personnel
and a senior representative
from DeGolyer and MacNaughton (D&M), a third
-party petroleum engineering
consulting firm, reviews the business
units’ reserves for adherence to SEC
guidelines and company policy through
on-site visits, teleconferences
and review of documentation.
In addition to providing independent reviews,
this
internal team also ensures reserves
are calculated using consistent
and appropriate standards
and procedures.
This team is independent of business unit line management
and is responsible for reporting its findings
to senior
management.
The team is responsible for communicating
our reserves policy and procedures
and is available for
internal peer reviews and consultation
on major projects or technical issues throughout
the year.
All of our proved
reserves held by consolidated companies
and our share of equity affiliates have
been estimated by ConocoPhillips.
During 2021, our processes and controls
used to assess over 90 percent of proved
reserves as of December 31,
2021, were reviewed by D&M.
The purpose of their review was to assess whether
the adequacy and effectiveness
of our internal processes and controls
used to determine estimates of proved
reserves are in accordance with SEC
regulations.
In such review,
ConocoPhillips’ technical staff
presented D&M with an overview of the reserves
data,
as well as the methods and assumptions used in estimating
reserves.
The data presented included pertinent
seismic information, geologic maps,
well logs, production tests, material
balance calculations, reservoir simulation
models, well performance data, operating
procedures and relevant economic
criteria.
Management’s intent
in
retaining D&M to review its processes
and controls was to provide
objective third-party input on these processes
and controls.
D&M’s opinion was the general
processes and controls
employed by ConocoPhillips in estimating its
December 31, 2021, proved reserves for
the properties reviewed are in
accordance with the SEC reserves
definitions.
D&M’s report is
included as Exhibit 99 of this Annual Report on Form 10-K.
The technical person primarily responsible
for overseeing the processes and
internal controls used in the
preparation of the company’s
reserves estimates is the Manager of Reserves
Compliance and Reporting.
This
individual holds a master’s degree in petroleum
engineering.
He is a member of the Society of Petroleum
Engineers with over 25 years of oil and
gas industry experience and has held positions of increasing
responsibility
in reservoir engineering, subsurface and asset
management in the U.S. and several
international field locations.
Engineering estimates of the quantities of proved
reserves are inherently imprecise.
See the “Critical Accounting
Estimates” section of Management’s
Discussion and Analysis of Financial Condition and Results
of Operations for
additional discussion of the sensitivities surrounding these
estimates.
Supplementary Data
ConocoPhillips
2021 10-K
Proved Reserves
Years Ended
Crude Oil
December 31
Millions of Barrels
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
Developed and Undeveloped
Consolidated operations
End of 2018
1,233
1,936
2,533
Revisions
(36)
(1)
(5)
Improved recovery
-
-
-
-
-
Purchases
-
-
-
-
-
Extensions and discoveries
-
-
Production
(74)
(95)
(169)
-
(36)
(31)
(14)
(250)
Sales
-
(2)
(2)
-
(30)
-
-
(32)
End of 2019
1,231
2,028
2,562
Revisions
(297)
(126)
(423)
(2)
(4)
(3)
(428)
Improved recovery
-
-
-
-
-
-
Purchases
-
-
-
-
Extensions and discoveries
-
-
-
Production
(65)
(77)
(142)
(2)
(28)
(25)
(3)
(200)
Sales
-
(14)
(14)
(1)
-
-
-
(15)
End of 2020
1,572
2,051
Revisions
(52)
Improved recovery
-
-
-
-
-
Purchases
-
-
-
-
-
Extensions and discoveries
-
Production
(64)
(160)
(224)
(3)
(29)
(24)
(13)
(293)
Sales
-
(9)
(9)
-
-
-
-
(9)
End of 2021
1,035
1,452
2,487
2,964
Equity affiliates
End of 2018
-
-
-
-
-
-
Revisions
-
-
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
-
Production
-
-
-
-
-
(5)
-
(5)
Sales
-
-
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
Revisions
-
-
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
-
Production
-
-
-
-
-
(5)
-
(5)
Sales
-
-
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
Revisions
-
-
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
-
Production
-
-
-
-
-
(5)
-
(5)
Sales
-
-
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
Total
company
End of 2018
1,233
1,936
2,611
End of 2019
1,231
2,028
2,635
End of 2020
1,572
2,119
End of 2021
1,035
1,452
2,487
3,027
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Crude Oil
December 31
Millions of Barrels
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
Developed
Consolidated operations
End of 2018
1,058
1,404
1,896
End of 2019
1,048
1,382
1,809
End of 2020
1,028
1,415
End of 2021
1,828
2,223
Equity affiliates
End of 2018
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
Undeveloped
Consolidated operations
End of 2018
End of 2019
End of 2020
-
End of 2021
Equity affiliates
End of 2018
-
-
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
-
-
Notable changes in proved crude oil reserves
in the three years ended December 31, 2021,
included:
●
Revisions
: In 2021, Alaska upward revisions
were primarily driven by higher prices.
Downward revisions in Lower 48 were
due to development timing for specific well
locations from unconventional
plays of 203 million barrels and technical
revisions of 35 million barrels, partially offset
by upward revisions due to
higher prices of 115 million barrels and additional
infill drilling in the unconventional plays
of 71 million barrels.
Upward revisions in Europe were
primarily due to higher
prices. In Asia Pacific/Middle East,
increases were due to higher prices of 21 million barrels
and technical revisions of 16
million barrels.
In 2020, Alaska downward revisions
were primarily driven by lower prices of 243 million barrels
and development plan
changes of 54 million barrels.
Downward revisions in Lower
48 were due to lower prices of 89 million barrels
and
development timing for specific well locations
from unconventional plays
of 82 million barrels, partially offset by upward
technical revisions and additional infill drilling
in the unconventional plays
of 45 million barrels.
In 2019, Alaska upward revisions
were due to cost and technical revisions
of 74 million barrels, partially offset by downward
price revisions of 34 million barrels.
Upward revisions in Europe and
Africa were primarily due to infill drilling and technical
revisions.
Downward revisions in Lower 48 were
due to changes in development timing for
specific well locations from the
unconventional plays
of 71 million barrels and price revisions of 22 million barrels, partially
offset by upward revisions
related to infill drilling and improved
well performance of 57 million barrels.
Supplementary Data
ConocoPhillips
2021 10-K
●
Purchases
:
In 2021, Lower 48 purchases were due to
the Concho and Shell Permian acquisitions.
●
Extensions and discoveries
: In 2021, extensions and discoveries in Lower
48 were due to planned development
to add
specific well locations from the unconventional
plays which more than offset the decreases
resulting from development
plan timing in the revisions category.
In 2020, extensions and discoveries in Lower
48 were due to planned development
to add specific well locations from
the
unconventional plays
which more than offset the decreases resulting
from development plan timing in the revisions
category.
In 2019, extensions and discoveries in Lower
48 were due to planned development
to add specific well locations from
the
unconventional plays
which more than offset the decreases in the revisions
category.
In Asia Pacific/Middle East, increases
were due to sanctioning of development
programs in China and Malaysia.
●
Sales
: In 2019, Europe sales represent the disposition
of the U.K. assets.
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Natural Gas Liquids
December 31
Millions of Barrels
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Total
Developed and Undeveloped
Consolidated operations
End of 2018
Revisions
(1)
(11)
(12)
-
(1)
(10)
Improved recovery
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
Production
(5)
(28)
(33)
-
(3)
(1)
(37)
Sales
-
-
-
-
(4)
-
(4)
End of 2019
Revisions
-
(26)
(26)
-
(1)
(26)
Improved recovery
-
-
-
-
-
-
-
Purchases
-
-
-
Extensions and discoveries
-
-
-
Production
(6)
(27)
(33)
(1)
(2)
-
(36)
Sales
-
(5)
(5)
-
-
-
(5)
End of 2020
-
Revisions
(6)
-
-
Improved recovery
-
-
-
-
-
-
-
Purchases
-
-
-
-
Extensions and discoveries
-
-
-
Production
(6)
(50)
(56)
(1)
(2)
-
(59)
Sales
-
(1)
(1)
-
-
-
(1)
End of 2021
-
Equity affiliates
End of 2018
-
-
-
-
-
Revisions
-
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
Production
-
-
-
-
-
(3)
(3)
Sales
-
-
-
-
-
-
-
End of 2019
-
-
-
-
-
Revisions
-
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
Production
-
-
-
-
-
(3)
(3)
Sales
-
-
-
-
-
-
-
End of 2020
-
-
-
-
-
Revisions
-
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
-
Production
-
-
-
-
-
(3)
(3)
Sales
-
-
-
-
-
-
-
End of 2021
-
-
-
-
-
Total
company
End of 2018
End of 2019
End of 2020
End of 2021
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Natural Gas Liquids
December 31
Millions of Barrels
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Total
Developed
Consolidated operations
End of 2018
-
End of 2019
End of 2020
-
End of 2021
-
Equity affiliates
End of 2018
-
-
-
-
-
End of 2019
-
-
-
-
-
End of 2020
-
-
-
-
-
End of 2021
-
-
-
-
-
Undeveloped
Consolidated operations
End of 2018
-
-
End of 2019
-
-
End of 2020
-
-
-
End of 2021
-
-
Equity affiliates
End of 2018
-
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
-
Notable changes in proved NGL reserves
in the three years ended December 31,
2021, included:
●
Revisions
: In 2021, upward revisions
in Lower 48 were due to conversion
of acquired Concho Permian two-stream
contracts
to a three-stream (crude oil, natural
gas and natural gas liquids) basis,
adding 182 million barrels, additional infill drilling in
the unconventional plays
of 44 million barrels, technical revisions
of 21 million barrels and higher prices of 28 million
barrels, partially offset by downward
revisions related to development
timing for specific well locations
from
unconventional plays
of 62 million barrels.
In 2020, downward revisions in Lower
48 were due to lower prices of 33 million barrels
and development timing for specific
well locations from unconventional
plays of 20 million barrels, partially offset
by upward technical revisions
and additional
infill drilling in the unconventional plays
of 27 million barrels.
In 2019, downward revisions in Lower
48 were due to changes in development
timing for specific well locations from
the
unconventional plays
of 32 million barrels and price revisions of 11 million barrels, partially
offset by upward revisions
related to infill drilling and improved
well performance of 32 million barrels.
●
Purchases
: In 2021, Lower 48 purchases were due to
the Shell Permian acquisition.
●
Extensions and discoveries
: In 2021, extensions and discoveries in Lower
48 were due to planned development
to add
specific well locations from the unconventional
plays which more than offset the decreases
in the revisions category.
In 2020, extensions and discoveries in Lower
48 were due to planned development
to add specific well locations from
the
unconventional plays
,
which more than offset the decreases in the revisions
category.
In 2019, extensions and discoveries in Lower
48 were due to planned development
to add specific well locations from
the
unconventional plays
,
which more than offset the decreases in the revisions
category.
●
Sales
: In 2019, Europe sales represent the disposition
of the U.K. assets.
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Natural Gas
December 31
Billions of Cubic Feet
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
Developed and Undeveloped
Consolidated operations
End of 2018
2,736
2,318
5,054
1,212
1,079
7,585
Revisions
(113)
(83)
(2)
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
Extensions and discoveries
-
-
Production
(85)
(252)
(337)
(4)
(178)
(250)
(11)
(780)
Sales
-
(7)
(7)
-
(298)
-
-
(305)
End of 2019
2,688
2,431
5,119
7,259
Revisions
(607)
(439)
(1,046)
(15)
(917)
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
Extensions and discoveries
-
-
-
Production
(85)
(231)
(316)
(16)
(112)
(171)
(2)
(617)
Sales
-
(39)
(39)
-
-
(58)
-
(97)
End of 2020
1,996
2,100
4,096
6,070
Revisions
-
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
2,438
2,438
-
-
-
-
2,438
Extensions and discoveries
-
-
-
Production
(86)
(473)
(559)
(30)
(113)
(147)
(7)
(856)
Sales
-
(270)
(270)
-
-
-
-
(270)
End of 2021
2,625
4,658
7,283
9,137
Equity affiliates
End of 2018
-
-
-
-
-
4,564
-
4,564
Revisions
-
-
-
-
-
(7)
-
(7)
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
Production
-
-
-
-
-
(388)
-
(388)
Sales
-
-
-
-
-
-
-
-
End of 2019
-
-
-
-
-
4,421
-
4,421
Revisions
-
-
-
-
-
(382)
-
(382)
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
Production
-
-
-
-
-
(395)
-
(395)
Sales
-
-
-
-
-
-
-
-
End of 2020
-
-
-
-
-
3,724
-
3,724
Revisions
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
Production
-
-
-
-
-
(390)
-
(390)
Sales
-
-
-
-
-
-
-
-
End of 2021
-
-
-
-
-
3,697
-
3,697
Total
company
End of 2018
2,736
2,318
5,054
1,212
5,643
12,149
End of 2019
2,688
2,431
5,119
5,398
11,680
End of 2020
1,996
2,100
4,096
4,575
9,794
End of 2021
2,625
4,658
7,283
4,461
12,834
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Natural Gas
December 31
Billions of Cubic Feet
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
Developed
Consolidated operations
End of 2018
2,720
1,427
4,147
1,052
6,188
End of 2019
2,601
1,398
3,999
5,793
End of 2020
1,961
1,051
3,012
4,714
End of 2021
2,579
3,100
5,679
7,315
Equity affiliates
End of 2018
-
-
-
-
-
4,059
-
4,059
End of 2019
-
-
-
-
-
3,898
-
3,898
End of 2020
-
-
-
-
-
3,293
-
3,293
End of 2021
-
-
-
-
-
3,204
-
3,204
Undeveloped
Consolidated operations
End of 2018
-
1,397
End of 2019
1,033
1,120
-
1,466
End of 2020
1,049
1,084
-
-
1,356
End of 2021
1,558
1,604
-
1,822
Equity affiliates
End of 2018
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
Natural gas production
in the reserves table may differ
from gas production (delivered
for sale) in our statistics
disclosure, primarily
because the quantities above include gas
consumed in production operations.
Quantities consumed in production operations
are
not significant in the periods presented.
The value of net production consumed
in operations is not reflected in net revenues
and
production expenses, nor do the volumes impact the respective
per unit metrics.
Reserve volumes include natural gas
to be consumed in operations of 2,748 Bcf,
2,286 Bcf and 3,141 Bcf, as
of December 31, 2021,
2020 and 2019, respectively.
These volumes are not included in the calculation of our
Standardized Measure of Discounted
Future
Net Cash Flows Relating to Proved
Oil and Gas Reserve Quantities.
Natural gas reserves are
computed at 14.65 pounds per square inch absolute
and 60 degrees Fahrenheit.
Notable changes in proved natural
gas reserves in the three years
ended December 31, 2021, included:
●
Revisions
: In 2021, upward revisions
in Alaska were due to higher prices of 587 Bcf and technical
revisions of 128 Bcf.
In
Lower 48, upward revisions of 614 Bcf were
due to higher prices, additional infill drilling in the unconventional
plays of 277
Bcf and technical revisions of 60 Bcf,
partially offset by downward
revisions due to development timing for
specific well
locations from unconventional
plays of 498 Bcf and conversion
of previously acquired Permian two-stream
contracted
volumes to a three-stream (crude
oil, natural gas and natural
gas liquids) basis of 412 Bcf.
Upward revisions in Canada were
due to higher prices of 29 Bcf, partially
offset by downward revisions
due to technical revisions of 14 Bcf.
In Europe,
upward revisions were primarily
due to higher prices.
Upward revisions in our consolidated
operations in Asia
Pacific/Middle East were due
to technical revisions of 76 Bcf,
partially offset by price revisions
of 16 Bcf.
In our equity
affiliates in Asia Pacific/Middle East,
upward revisions were due
to higher prices of 124 Bcf and technical and cost
revisions
of 123 Bcf.
In 2020,
downward revisions in Alaska
were primarily due to lower prices.
In Lower 48, downward revisions
of 372 Bcf were
due to lower prices and 154 Bcf were due to development
timing for specific well locations from
unconventional plays,
partially offset by technical revisions
of 87 Bcf.
Downward revisions in our
equity affiliates in Asia Pacific/Middle East
were
Supplementary Data
ConocoPhillips
2021 10-K
due to lower prices of 426 Bcf,
partially offset by performance revisions
of 44 Bcf.
Upward revisions
in our consolidated
operations in Asia Pacific/Middle East
were due to technical revisions
of 88 Bcf and price revisions of 15 Bcf.
In 2019, upward revisions in Europe
were due to technical and cost
revisions.
In Asia Pacific/Middle East upward
revisions
were primarily due to the Indonesia Corridor PSC term
extension.
Downward revisions in Lower 48 were
due to changes in
development timing for specific well locations
from the unconventional plays
of 207 Bcf and price revisions of 125 Bcf,
partially offset by upward
revisions related to infill drilling
and improved well performance of 219 Bcf.
●
Purchases
: In 2021, Lower 48 purchases were due to
the Concho and Shell Permian acquisitions.
In 2020, Canada purchases were due to the acquisition
of additional Montney acreage.
●
Extensions and discoveries
: In 2021, extensions and discoveries in Lower
48 were due to planned development
to add
specific well locations from the unconventional
plays which more than offset the decreases
resulting from development
plan timing in the revisions category.
Extensions and discoveries in Canada were primarily
driven by ongoing drilling
successes in Montney.
In 2020,
extensions and discoveries in Lower
48 were due to planned development
to add specific well locations from
the
unconventional plays
which more than offset the decreases resulting
from development plan timing in the revisions
category.
Extensions and discoveries in Canada were primarily
driven by ongoing drilling successes in Montney.
In 2019, extensions and discoveries in Lower
48 were due to planned development
to add specific well locations from
the
unconventional plays
which more than offset the decreases in the revisions
category.
Extensions and discoveries in our
equity affiliates were due to ongoing
development in APLNG.
●
Sales
: In 2021, Lower 48 sales represent the disposition
of noncore assets.
In 2020, Asia Pacific/Middle East sales
represent the disposition of the Australia
-West assets.
In 2019, Europe sales represent the disposition
of the U.K. assets.
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Bitumen
December 31
Millions of Barrels
Canada
Developed and Undeveloped
Consolidated operations
End of 2018
Revisions
Improved recovery
-
Purchases
-
Extensions and discoveries
Production
(22)
Sales
-
End of 2019
Revisions
(15)
Improved recovery
-
Purchases
-
Extensions and discoveries
Production
(20)
Sales
-
End of 2020
Revisions
(50)
Improved recovery
-
Purchases
-
Extensions and discoveries
-
Production
(25)
Sales
-
End of 2021
Equity affiliates
End of 2018
-
Revisions
-
Improved recovery
-
Purchases
-
Extensions and discoveries
-
Production
-
Sales
-
End of 2019
-
Revisions
-
Improved recovery
-
Purchases
-
Extensions and discoveries
-
Production
-
Sales
-
End of 2020
-
Revisions
-
Improved recovery
-
Purchases
-
Extensions and discoveries
-
Production
-
Sales
-
End of 2021
-
Total
company
End of 2018
End of 2019
End of 2020
End of 2021
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Bitumen
December 31
Millions of Barrels
Canada
Developed
Consolidated operations
End of 2018
End of 2019
End of 2020
End of 2021
Equity affiliates
End of 2018
-
End of 2019
-
End of 2020
-
End of 2021
-
Undeveloped
Consolidated operations
End of 2018
End of 2019
End of 2020
End of 2021
Equity affiliates
End of 2018
-
End of 2019
-
End of 2020
-
End of 2021
-
Notable changes in proved bitumen reserves
in the three years ended December 31, 2021,
included:
●
Revisions
: In 2021, downward revisions
of 64 million barrels were driven by changes in carbon
tax costs
and 39 million barrels due to changes in development
timing for specific pad locations from the Surmont
development program, partially
offset by upward revisions
from price of 53 million barrels.
In 2020,
downward revisions in Canada
were due to changes in development
timing for specific pad
locations from the Surmont development
program of 12 million barrels
with the remaining revisions
primarily related to lower prices.
In 2019, upward revisions in Canada were
due to technical revisions in
Surmont of 70 million barrels,
partially offset by downward
revisions due to changes in development
timing for specific pad locations
from the Surmont development program
of 31 million barrels.
●
Extensions and discoveries
: In 2020,
extensions and discoveries in
Canada were primarily due to planned
development to add specific pad locations
from the Surmont development program,
which more than
offset the decrease in the revisions
category.
In 2019, extensions and discoveries in Canada
were due to planned development to
add specific pad
locations from the Surmont development
program, which offset
the decrease in the revisions category
of
31 million barrels.
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Total Proved
Reserves
December 31
Millions of Barrels of Oil Equivalent
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
Developed and Undeveloped
Consolidated operations
End of 2018
1,795
1,312
3,107
4,383
Revisions
(67)
(23)
Improved recovery
-
-
-
-
-
Purchases
-
-
-
-
-
Extensions and discoveries
-
-
Production
(93)
(165)
(258)
(23)
(68)
(74)
(16)
(439)
Sales
-
(3)
(3)
-
(85)
-
-
(88)
End of 2019
1,779
1,447
3,226
4,414
Revisions
(398)
(226)
(624)
(20)
(3)
(622)
Improved recovery
-
-
-
-
-
-
Purchases
-
-
-
-
Extensions and discoveries
-
-
-
Production
(85)
(142)
(227)
(25)
(49)
(55)
(3)
(359)
Sales
-
(25)
(25)
(1)
-
(10)
-
(36)
End of 2020
1,306
1,273
2,579
3,734
Revisions
(45)
Improved recovery
-
-
-
-
-
Purchases
-
1,169
1,169
-
-
-
-
1,169
Extensions and discoveries
-
Production
(84)
(289)
(373)
(35)
(50)
(48)
(14)
(520)
Sales
-
(54)
(54)
-
-
-
-
(54)
End of 2021
1,555
2,775
4,330
5,388
Equity affiliates
End of 2018
-
-
-
-
-
-
Revisions
-
-
-
-
-
(1)
-
(1)
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
Production
-
-
-
-
-
(73)
-
(73)
Sales
-
-
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
Revisions
-
-
-
-
-
(63)
-
(63)
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
Production
-
-
-
-
-
(73)
-
(73)
Sales
-
-
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
Revisions
-
-
-
-
-
-
Improved recovery
-
-
-
-
-
-
-
-
Purchases
-
-
-
-
-
-
-
-
Extensions and discoveries
-
-
-
-
-
-
Production
-
-
-
-
-
(73)
-
(73)
Sales
-
-
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
Total
company
End of 2018
1,795
1,312
3,107
1,222
5,263
End of 2019
1,779
1,447
3,226
1,146
5,262
End of 2020
1,306
1,273
2,579
4,459
End of 2021
1,555
2,775
4,330
6,101
Supplementary Data
ConocoPhillips
2021 10-K
Years Ended
Total Proved
Reserves
December 31
Millions of Barrels of Oil Equivalent
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
Developed
Consolidated operations
End of 2018
1,617
2,298
3,305
End of 2019
1,582
2,248
3,174
End of 2020
1,186
1,707
2,508
End of 2021
1,424
1,767
3,191
4,020
Equity affiliates
End of 2018
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
Undeveloped
Consolidated operations
End of 2018
1,078
End of 2019
1,240
End of 2020
1,226
End of 2021
1,008
1,139
1,368
Equity affiliates
End of 2018
-
-
-
-
-
-
End of 2019
-
-
-
-
-
-
End of 2020
-
-
-
-
-
-
End of 2021
-
-
-
-
-
-
Natural gas reserves are
converted to barrels of oil equivalent
(BOE) based on a 6:1 ratio: six MCF of natural
gas converts to
one
BOE.
Proved Undeveloped Reserves
The following table shows changes
in total proved undeveloped
reserves for 2021:
Proved Undeveloped Reserves
Millions of Barrels of
Oil Equivalent
End of 2020
1,298
Revisions
(167)
Improved recovery
Purchases
Extensions and discoveries
Sales
-
Transfers
to proved developed
(288)
End of 2021
1,450
Downward revisions were
driven by changes in development timing
of 389 MMBOE primarily in North America and negative
bitumen revisions in Canada due to changes in
carbon tax costs of 65 MMBOE, partially offset
by upward revisions for
Lower 48 infill
drilling of 162 MMBOE and higher prices of 125 MMBOE.
Purchases were driven by Lower 48 due to
the Concho acquisition.
Supplementary Data
ConocoPhillips
2021 10-K
Extensions and discoveries were largely
driven by an addition of 399 MMBOE in Lower 48 for
the continued development of
unconventional plays.
The remaining extensions and discoveries were
driven by the continued development
planned in the other
geographic regions.
Transfers
to proved developed reserves
were driven by the ongoing development
of our assets. Approximately
65 percent of the
transfers were
from the development of our Lower 48 unconventional
plays. The remainder of transfers
were from development
across the other geographic regions.
At December 31, 2021, our PUDs represented
24 percent of total proved
reserves, compared with 29 percent at
December 31, 2020.
Costs incurred for the year ended
December 31, 2021, relating to the development
of PUDs were $3.8 billion.
A portion of our costs
incurred each year relates to development
projects where the PUDs will be converted
to proved developed reserves
in future years.
At the end of 2021, approximately
93 percent of total PUDs were under development
or scheduled for development
within five
years of initial disclosure, including all of our Lower
48 PUDs. The remaining PUDs are in major development
areas which are
currently producing and within our Canada
and Asia Pacific/Middle East geographic
areas.
Results of Operations
The company’s results
of operations from oil and gas
activities for the years 2021, 2020 and 2019 are
shown in the following tables.
Non-oil and gas activities, such as pipeline and marine operations,
LNG operations, crude oil and gas marketing
activities, and the
profit element of transportation
operations in which we have an
ownership interest are
excluded.
Additional information about
selected line items within the results of operations
tables is shown below:
●
Sales include sales to unaffiliated entities attributable
primarily to the company’s
net working interests and royalty
interests.
Sales are net of fees to transport
our produced hydrocarbons
beyond the production function to
a final delivery
point using transportation operations
which are not consolidated.
●
Transportation
costs reflect fees to transport
our produced hydrocarbons
beyond the production function to a
final delivery
point using transportatio
n
operations which are consolidated.
●
Other revenues include gains and losses
from asset sales, certain amounts resulting from
the purchase and sale of
hydrocarbons, and other miscellaneous
income.
●
Production costs include costs incurred
to operate and maintain
wells, related equipment and facilities
used in the
production of petroleum liquids and natural
gas.
●
Taxes
other than income taxes include
production, property and other non-income taxes.
●
Depreciation of support equipment is reclassified as
applicable.
●
Other related expenses include inventory
fluctuations, foreign currency transaction
gains and losses and other
miscellaneous expenses.
Supplementary Data
ConocoPhillips
2021 10-K
Results of Operations
Year Ended
Millions of Dollars
December 31, 2021
Lower
Total
Asia Pacific/
Other
Alaska
U.S.
Canada
Europe
Middle East
Africa
Areas
Total
Consolidated operations
Sales
$
4,832
14,093
18,925
1,219
3,568
2,525
-
27,154
Transfers
-
-
-
-
-
-
Transportation costs
(626)
-
(626)
-
-
-
-
-
(626)
Other revenues
(5)
(161)
Total revenues
4,224
14,228
18,452
1,542
3,563
2,762
1,058
(161)
27,216
Production costs excluding taxes
1,073
2,414
3,487
-
5,001
Taxes
other than income taxes
1,379
1,531
Exploration expenses
Depreciation, depletion and
amortization
4,053
4,917
-
6,966
Impairments
(8)
(3)
(24)
-
-
(14)
Other related expenses
(31)
(19)
(22)
(42)
(63)
Accretion
-
-
1,720
6,675
8,395
2,171
1,330
(189)
13,265
Income tax provision (benefit)
1,467
1,845
1,673
(53)
4,974
Results of operations
$
1,342
5,208
6,550
(136)
8,291
Equity affiliates
Sales
$
-
-
-
-
-
-
-
Transfers
-
-
-
-
-
1,797
-
-
1,797
Transportation costs
-
-
-
-
-
-
-
-
-
Other revenues
-
-
-
-
-
-
-
Total revenues
-
-
-
-
-
2,547
-
-
2,547
Production costs excluding taxes
-
-
-
-
-
-
-
Taxes
other than income taxes
-
-
-
-
-
-
-
Exploration expenses
-
-
-
-
-
-
-
Depreciation, depletion and
amortization
-
-
-
-
-
Impairments
-
-
-
-
-
-
-
Other related expenses
-
-
-
-
-
-
-
Accretion
-
-
-
-
-
-
-
-
-
-
-
-
(205)
-
-
(205)
Income tax provision (benefit)
-
-
-
-
-
(42)
-
-
(42)
Results of operations
$
-
-
-
-
-
(163)
-
-
(163)
Supplementary Data
ConocoPhillips
2021 10-K
Year Ended
Millions of Dollars
December 31, 2020
Lower
Total
Asia Pacific/
Other
Alaska
U.S.
Canada
Europe
Middle East
Africa
Areas
Total
Consolidated operations
Sales
$
2,944
3,421
6,365
1,560
1,717
-
10,001
Transfers
-
-
-
-
-
Transportation costs
(587)
-
(587)
-
-
(19)
-
-
(606)
Other revenues
(1)
(20)
(21)
(21)
Total revenues
2,360
3,401
5,761
1,539
2,465
10,185
Production costs excluding taxes
1,058
1,399
2,457
3,741
Taxes
other than income taxes
Exploration expenses
1,099
1,172
1,456
Depreciation, depletion and
amortization
2,544
3,384
-
5,290
Impairments
-
-
-
-
Other related expenses
(58)
(25)
(29)
(54)
Accretion
-
-
(1,051)
(1,733)
(2,784)
(503)
1,058
(103)
(1,943)
Income tax provision (benefit)
(271)
(430)
(701)
(191)
(20)
(431)
Results of operations
$
(780)
(1,303)
(2,083)
(312)
(83)
(1,512)
Equity affiliates
Sales
$
-
-
-
-
-
-
-
Transfers
-
-
-
-
-
1,205
-
-
1,205
Transportation costs
-
-
-
-
-
-
-
-
-
Other revenues
-
-
-
-
-
-
-
Total revenues
-
-
-
-
-
1,696
-
-
1,696
Production costs excluding taxes
-
-
-
-
-
-
-
Taxes
other than income taxes
-
-
-
-
-
-
-
Exploration expenses
-
-
-
-
-
-
-
Depreciation, depletion and
amortization
-
-
-
-
-
-
-
Impairments
-
-
-
-
-
-
-
-
-
Other related expenses
-
-
-
-
-
(2)
-
-
(2)
Accretion
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Income tax provision (benefit)
-
-
-
-
-
-
-
Results of operations
$
-
-
-
-
-
-
-
Supplementary Data
ConocoPhillips
2021 10-K
Year Ended
Millions of Dollars
December 31, 2019
Lower
Total
Asia Pacific/
Other
Alaska
U.S.
Canada
Europe
Middle East
Africa
Areas
Total
Consolidated operations
Sales
$
4,883
6,356
11,239
3,207
3,032
-
19,106
Transfers
-
-
-
-
-
Transportation costs
(629)
-
(629)
-
-
(41)
-
-
(670)
Other revenues
1,785
2,449
Total revenues
4,319
6,434
10,753
4,992
3,452
1,020
21,338
Production costs excluding taxes
1,235
1,578
2,813
(8)
4,615
Taxes
other than income taxes
(2)
Exploration expenses
Depreciation, depletion and
amortization
2,804
3,504
1,172
-
5,785
Impairments
-
-
-
-
Other related expenses
(12)
(38)
(42)
Accretion
-
-
1,929
2,547
3,207
1,426
8,520
Income tax provision (benefit)
(74)
2,406
Results of operations
$
1,485
1,956
2,616
6,114
Equity affiliates
Sales
$
-
-
-
-
-
-
-
Transfers
-
-
-
-
-
2,229
-
-
2,229
Transportation costs
-
-
-
-
-
-
-
-
-
Other revenues
-
-
-
-
-
-
-
Total revenues
-
-
-
-
-
2,859
-
-
2,859
Production costs excluding taxes
-
-
-
-
-
-
-
Taxes
other than income taxes
-
-
-
-
-
-
-
Exploration expenses
-
-
-
-
-
-
-
-
-
Depreciation, depletion and
amortization
-
-
-
-
-
-
-
Impairments
-
-
-
-
-
-
-
-
-
Other related expenses
-
-
-
-
-
-
-
Accretion
-
-
-
-
-
-
-
-
-
-
-
-
1,098
-
-
1,098
Income tax provision (benefit)
-
-
-
-
-
-
-
Results of operations
$
-
-
-
-
-
-
-
Supplementary Data
ConocoPhillips
2021 10-K
Statistics
Net Production
2021
2020
2019
Thousands of Barrels Daily
Crude Oil
Consolidated operations
Alaska
Lower 48
United States
Canada
Europe
Asia Pacific
Africa
Total
consolidated operations
Equity affiliates—
Asia Pacific/Middle East
Total
company
Delaware Basin Area (Lower 48)*
Greater Prudhoe Area (Alaska)*
Natural Gas Liquids
Consolidated operations
Alaska
Lower 48
United States
Canada
-
Europe
Asia Pacific
-
Total
consolidated operations
Equity affiliates—
Asia Pacific/Middle East
Total
company
Delaware Basin Area (Lower 48)*
Greater Prudhoe Area (Alaska)*
Bitumen
Consolidated operations—
Canada
Total
company
Natural Gas
Millions of Cubic Feet Daily
Consolidated operations
Alaska
Lower 48
1,340
United States
1,356
Canada
Europe
Asia Pacific
Africa
Total
consolidated operations
2,109
1,339
1,753
Equity affiliates—
Asia Pacific/Middle East
1,053
1,055
1,052
Total
company
3,162
2,394
2,805
Delaware Basin Area (Lower 48)*
Greater Prudhoe Area (Alaska)*
*At year-end 2021, the Delaware Basin Area in Lower 48 contained more than 15 percent of our total proved reserves. At year-end 2021, 2020
and 2019, the Greater Prudhoe Area in Alaska contained more than 15 percent of our total proved reserves.
Supplementary Data
ConocoPhillips
2021 10-K
Average Sales Prices
2021
2020
2019
Crude Oil Per Barrel
Consolidated operations
Alaska*
$
60.81
33.72
55.85
Lower 48
66.12
35.17
55.30
United States
64.53
34.48
55.54
Canada
56.38
23.57
40.87
Europe
68.94
42.80
65.12
Asia Pacific
70.36
42.84
65.02
Africa
69.06
48.64
64.47
Total
international
68.85
42.39
64.85
Total
consolidated operations
65.53
36.69
58.51
Equity affiliates
—Asia Pacific/Middle East
69.45
39.02
61.32
Total
operations
65.59
36.75
58.57
Natural Gas Liquids Per Barrel
Consolidated operations
Lower 48
$
30.63
12.13
16.83
United States
30.63
12.13
16.85
Canada
31.18
5.41
19.87
Europe
43.97
23.27
29.37
Asia Pacific
-
33.21
37.85
Total
international
37.50
20.25
32.29
Total
consolidated operations
31.04
12.90
18.73
Equity affiliates
—Asia Pacific/Middle East
54.16
32.69
36.70
Total
operations
32.45
14.61
20.09
Bitumen Per Barrel
Consolidated operations—
Canada
$
37.52
8.02
**
31.72
Natural Gas Per Thousand Cubic Feet
Consolidated operations
Alaska
$
2.81
2.91
3.19
Lower 48
4.38
1.65
2.12
United States
4.38
1.66
2.12
Canada
2.54
1.21
0.49
Europe
13.75
3.23
4.92
Asia Pacific*
6.56
5.27
5.73
Africa
3.73
3.71
4.87
Total
international
8.91
4.31
5.35
Total
consolidated operations
6.00
3.13
4.19
Equity affiliates
—Asia Pacific/Middle East
5.31
3.71
6.29
Total
operations
5.77
3.38
4.99
*Average sales prices for Alaska crude oil and Asia Pacific natural gas above reflect a reduction for transportation costs in which we
have an ownership interest that are incurred subsequent to the terminal point of the production function.
Accordingly, the average sales prices
differ from those discussed in Item 7 of Management's Discussion and Analysis of Financial
Condition and Results of Operations.
**Average sales prices include unutilized transportation costs.
Supplementary Data
ConocoPhillips
2021 10-K
2021
2020
2019
Average Production Costs
Per Barrel of Oil Equivalent*
Consolidated operations
Alaska
$
14.92
14.60
15.52
Lower 48
8.48
9.93
9.59
United States
9.78
11.51
11.52
Canada
15.10
14.29
16.53
Europe
9.88
8.97
11.22
Asia Pacific
10.21
9.26
8.74
Africa
2.95
6.38
4.46
Total
international
10.53
10.11
10.26
Total
consolidated operations
9.99
10.99
10.99
Equity affiliates—
Asia Pacific/Middle East
4.60
4.01
4.68
Average Production Costs
Per Barrel—Bitumen
Consolidated operations—
Canada
$
13.41
12.45
13.74
Taxes
Other Than Income Taxes
Per Barrel of Oil Equivalent
Consolidated operations
Alaska
$
6.15
4.08
3.87
Lower 48
3.29
1.87
2.65
United States
3.87
2.62
3.05
Canada
0.67
0.62
0.78
Europe
0.73
0.65
0.48
Asia Pacific
1.99
0.81
0.76
Africa
0.07
0.91
0.19
Total
international
1.06
0.72
0.60
Total
consolidated operations
3.06
1.91
2.03
Equity affiliates—
Asia Pacific/Middle East
11.52
6.96
11.46
Depreciation, Depletion and Amortization Per Barrel of Oil Equivalent
Consolidated operations
Alaska
$
12.02
11.59
8.80
Lower 48
14.24
18.05
17.03
United States
13.79
15.86
14.35
Canada
11.16
13.08
10.00
Europe
17.13
16.24
12.75
Asia Pacific
17.25
15.66
16.55
Africa
2.40
2.43
2.36
Total
international
14.25
15.01
12.99
Total
consolidated operations
13.92
15.54
13.78
Equity affiliates—
Asia Pacific/Middle East
8.29
7.89
8.09
*Includes bitumen.
Supplementary Data
ConocoPhillips
2021 10-K
Development and Exploration Activities
The following two tables summarize
our net interest in productive
and dry exploratory and development
wells in
the years ended December 31, 2021, 2020 and 2019.
A “development well”
is a well drilled within the proved area
of a reservoir to the depth of a stratigraphic
horizon known to be productive.
An “exploratory
well” is a well drilled
to find and produce crude oil or natural
gas in an unknown field or a new reservoir within a proven
field.
Exploratory wells also include wells drilled in areas
near or offsetting current production,
or in areas where well
density or production history have
not achieved statistical certainty
of results.
Excluded from the exploratory
well
count are stratigraphic
-type exploratory wells, primarily relating
to oil sands delineation wells located in Canada
and CBM test wells located in Asia
Pacific/Middle East.
Net Wells Completed
Productive
Dry
2021
2020
2019
2021
2020
2019
Exploratory
Consolidated operations
Alaska
-
-
-
Lower 48
-
-
United States
Canada
-
-
-
-
Europe
-
-
-
Asia Pacific/Middle East
Africa
-
-
-
-
-
Other areas
-
-
-
-
-
Total
consolidated operations
Equity affiliates
Asia Pacific/Middle East
-
-
-
Total
equity affiliates
-
-
-
Development
Consolidated operations
Alaska
-
-
-
Lower 48
-
-
-
United States
-
-
-
Canada
-
-
-
-
Europe
-
-
-
Asia Pacific/Middle East
-
-
-
Africa
-
-
-
Other areas
-
-
-
-
-
-
Total
consolidated operations
-
-
-
Equity affiliates
Asia Pacific/Middle East
-
-
-
Total
equity affiliates
-
-
-
*Our total proportionate interest was less than one.
Supplementary Data
ConocoPhillips
2021 10-K
The table below represents the status
of our wells drilling at December 31, 2021, and includes wells in the
process of drilling or in active completion.
It also represents gross and net
productive wells, including producing
wells and wells capable of production at
December 31, 2021.
Wells at December 31, 2021
Productive
In Progress
Oil
Gas
Gross
Net
Gross
Net
Gross
Net
Consolidated operations
Alaska
1,602
-
-
Lower 48
16,306
8,015
5,091
2,211
United States
17,908
8,955
5,091
2,211
Canada
Europe
Asia Pacific/Middle East
Africa
Other areas
-
-
-
-
-
-
Total
consolidated operations
19,797
9,439
5,347
2,382
Equity affiliates
Asia Pacific/Middle East
-
-
4,908
1,171
Total
equity affiliates
-
-
4,908
1,171
Acreage at December 31, 2021
Thousands of Acres
Developed
Undeveloped
Gross
Net
Gross
Net
Consolidated operations
Alaska
1,341
1,329
Lower 48
4,096
2,538
10,514
8,233
United States
4,759
3,017
11,855
9,562
Canada
3,433
1,948
Europe
Asia Pacific/Middle East
10,451
6,930
Africa
12,545
2,049
Other areas
-
-
Total
consolidated operations
6,765
3,765
39,378
20,985
Equity affiliates
Asia Pacific/Middle East
1,039
3,807
Total equity
affiliates
1,039
3,807
Supplementary Data
ConocoPhillips
2021 10-K
Costs Incurred
Year Ended
Millions of Dollars
December 31
Lower
Total
Asia Pacific/
Other
Alaska
U.S.
Canada
Europe
Middle East
Africa
Areas
Total
2021
Consolidated operations
Unproved property acquisition
$
11,261
11,262
-
-
-
-
11,266
Proved property acquisition
-
16,101
16,101
-
-
-
-
16,102
27,362
27,363
-
-
-
-
27,368
Exploration
1,053
Development
2,461
3,410
-
4,440
$
1,034
30,588
31,622
32,861
Equity affiliates
Unproved property acquisition
$
-
-
-
-
-
-
-
-
-
Proved property acquisition
-
-
-
-
-
-
-
-
-
-
-
Exploration
-
-
-
-
-
-
-
Development
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
2020
Consolidated operations
Unproved property acquisition
$
-
-
Proved property acquisition
-
-
-
-
-
-
-
Exploration
Development
1,758
2,503
-
3,501
$
1,036
1,946
2,982
4,901
Equity affiliates
Unproved property acquisition
$
-
-
-
-
-
-
-
-
-
Proved property acquisition
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exploration
-
-
-
-
-
-
-
Development
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
2019
Consolidated operations
Unproved property acquisition
$
-
-
-
Proved property acquisition
-
-
-
-
-
-
Exploration
1,103
Development
1,125
3,028
4,153
-
5,501
$
1,508
3,579
5,087
7,193
Equity affiliates
Unproved property acquisition
$
-
-
-
-
-
-
-
Proved property acquisition
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Exploration
-
-
-
-
-
-
-
Development
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
Supplementary Data
ConocoPhillips
2021 10-K
Capitalized Costs
At December 31
Millions of Dollars
Lower
Total
Asia Pacific/
Other
Alaska
U.S.
Canada
Europe
Middle East
Africa
Areas
Total
2021
Consolidated operations
Proved property
$
22,750
58,561
81,311
7,380
14,514
12,226
-
116,397
Unproved property
1,402
7,704
9,106
1,517
10,993
24,152
66,265
90,417
8,897
14,669
12,318
1,080
127,390
Accumulated depreciation,
depletion and amortization
11,945
29,975
41,920
2,749
10,166
9,240
64,506
$
12,207
36,290
48,497
6,148
4,503
3,078
-
62,884
Equity affiliates
Proved property
$
-
-
-
-
-
10,357
-
-
10,357
Unproved property
-
-
-
-
-
2,162
-
-
2,162
-
-
-
-
-
12,519
-
-
12,519
Accumulated depreciation,
depletion and amortization
-
-
-
-
-
8,539
-
-
8,539
$
-
-
-
-
-
3,980
-
-
3,980
2020
Consolidated operations
Proved property
$
21,819
37,452
59,271
7,255
14,931
11,913
-
94,312
Unproved property
1,398
2,029
1,529
4,141
23,217
38,083
61,300
8,784
15,082
12,002
1,056
98,453
Accumulated depreciation,
depletion and amortization
11,098
27,948
39,046
2,431
10,015
8,567
60,455
$
12,119
10,135
22,254
6,353
5,067
3,435
37,998
Equity affiliates
Proved property
$
-
-
-
-
-
10,310
-
-
10,310
Unproved property
-
-
-
-
-
2,187
-
-
2,187
-
-
-
-
-
12,497
-
-
12,497
Accumulated depreciation,
depletion and amortization
-
-
-
-
-
6,959
-
-
6,959
$
-
-
-
-
-
5,538
-
-
5,538
Supplementary Data
ConocoPhillips
2021 10-K
Standardized Measure of
Discounted Future Net Cash Flows Relatin
g
to Proved Oil and Gas Reserve Quantities
In accordance with SEC and FASB
requirements, amounts were
computed using 12-month average
prices (adjusted only for existing
contractual terms) and end-of-year
costs, appropriate statutory
tax rates and a prescri
bed 10 percent discount factor.
Twelve-
month average prices are calculated
as the unweighted arithmetic average
of the first-day-of-the-month
price for each month within
the 12-month period prior to the end of the reporting period.
For all years, continuation of year
-end economic conditions was
assumed.
The calculations were based on estimates
of proved reserves, which are revised
over time as new data becomes available.
Probable or possible reserves, which may become
proved in the future, were not considered.
The calculations also require
assumptions as to the timing of future production
of proved reserves and the timing and amount
of future development costs,
including dismantlement, and future production
costs, including taxes other than
income taxes.
While due care was taken in
its preparation, we do not represent
that this data is the fair value of our
oil and gas properties, or a fair
estimate of the present value
of cash flows to be obtained from their development
and production.
Discounted Future Net Cash Flows
Millions of Dollars
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
2021
Consolidated operations
Future cash inflows
$
65,910
125,197
191,107
10,847
21,670
11,583
15,778
250,985
Less:
Future production costs
34,444
43,034
77,478
4,960
6,090
4,987
94,316
Future development costs
8,033
13,386
21,419
3,960
1,314
28,029
Future income tax provisions
5,310
13,167
18,477
8,345
1,542
13,506
41,987
Future net cash flows
18,123
55,610
73,733
4,847
3,275
3,740
1,058
86,653
10 percent annual discount
7,963
22,290
30,253
1,639
33,958
Discounted future net cash flows
$
10,160
33,320
43,480
3,208
2,579
2,810
52,695
Equity affiliates
Future cash inflows
$
-
-
-
-
-
27,851
-
27,851
Less:
Future production costs
-
-
-
-
-
15,491
-
15,491
Future development costs
-
-
-
-
-
1,649
-
1,649
Future income tax provisions
-
-
-
-
-
3,071
-
3,071
Future net cash flows
-
-
-
-
-
7,640
-
7,640
10 percent annual discount
-
-
-
-
-
2,640
-
2,640
Discounted future net cash flows
$
-
-
-
-
-
5,000
-
5,000
Total
company
Discounted future net cash flows
$
10,160
33,320
43,480
3,208
2,579
7,810
57,695
Supplementary Data
ConocoPhillips
2021 10-K
Millions of Dollars
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada*
Europe
Middle East
Africa
Total
2020
Consolidated operations
Future cash inflows
$
30,145
31,533
61,678
4,198
9,857
7,940
9,997
93,670
Less:
Future production costs
22,905
17,582
40,487
4,316
4,770
3,838
1,277
54,688
Future development costs
7,932
12,799
20,731
3,688
1,289
26,919
Future income tax provisions
-
-
1,075
7,571
9,289
Future net cash flows
(692)
(868)
1,132
1,738
2,774
10 percent annual discount
(1,501)
(820)
(2,321)
(396)
(1,900)
Discounted future net cash flows
$
1,596
2,405
(472)
1,015
1,332
4,674
Equity affiliates
Future cash inflows
$
-
-
-
-
-
17,284
-
17,284
Less:
Future production costs
-
-
-
-
-
10,239
-
10,239
Future development costs
-
-
-
-
-
1,186
-
1,186
Future income tax provisions
-
-
-
-
-
1,728
-
1,728
Future net cash flows
-
-
-
-
-
4,131
-
4,131
10 percent annual discount
-
-
-
-
-
1,269
-
1,269
Discounted future net cash flows
$
-
-
-
-
-
2,862
-
2,862
Total
company
Discounted future net cash flows
$
1,596
2,405
(472)
1,015
4,194
7,536
*Undiscounted future net cash flows related to the proved oil and gas reserves disclosed for Canada for the year ending
December 31, 2020, are negative due to the
inclusion of asset retirement costs and certain indirect costs in the calculation of the standardized measure of discounted future net cash flows. These costs are not
required to be included in the economic limit test for proved developed reserves as defined in Regulation S-X Rule 4-10.
Future net cash flows for Canada were also
impacted by lower 12-month average pricing for bitumen and crude oil in 2020.
Commodity prices have since improved in the current environment.
Supplementary Data
ConocoPhillips
2021 10-K
Millions of Dollars
Lower
Total
Asia Pacific/
Alaska
U.S.
Canada
Europe
Middle East
Africa
Total
2019
Consolidated operations
Future cash inflows
$
70,341
53,400
123,741
8,244
16,919
13,084
15,582
177,570
Less:
Future production costs
40,464
22,194
62,658
4,525
5,843
5,162
1,314
79,502
Future development costs
9,721
14,083
23,804
4,143
2,179
31,187
Future income tax provisions
3,904
2,793
6,697
-
4,201
1,931
12,747
25,576
Future net cash flows
16,252
14,330
30,582
3,142
2,732
3,812
1,037
41,305
10 percent annual discount
6,571
4,311
10,882
1,198
13,933
Discounted future net cash flows
$
9,681
10,019
19,700
1,944
2,174
2,977
27,372
Equity affiliates
Future cash inflows
$
-
-
-
-
-
31,671
-
31,671
Less:
Future production costs
-
-
-
-
-
16,157
-
16,157
Future development costs
-
-
-
-
-
1,218
-
1,218
Future income tax provisions
-
-
-
-
-
3,086
-
3,086
Future net cash flows
-
-
-
-
-
11,210
-
11,210
10 percent annual discount
-
-
-
-
-
4,040
-
4,040
Discounted future net cash flows
$
-
-
-
-
-
7,170
-
7,170
Total
company
Discounted future net cash flows
$
9,681
10,019
19,700
1,944
2,174
10,147
34,542
Supplementary Data
ConocoPhillips
2021 10-K
Sources of Change in Discounted
Future Net Cash Flows
Millions of Dollars
Consolidated Operations
Equity Affiliates
Total Company
2021
2020
2019
2021
2020
2019
2021
2020
2019
Discounted future net cash flows
at the beginning of the year
$
4,674
27,372
35,434
2,862
7,170
7,929
7,536
34,542
43,363
Changes during the year
Revenues less production
costs for the year
(20,000)
(5,198)
(13,424)
(1,389)
(897)
(1,673)
(21,389)
(6,095)
(15,097)
Net change in prices and
production costs
50,956
(34,307)
(13,538)
3,822
(4,769)
(422)
54,778
(39,076)
(13,960)
Extensions, discoveries and
improved recovery,
less
estimated future costs
10,420
2,985
(44)
10,376
3,245
Development costs for the year
4,396
3,593
5,333
4,487
3,785
5,572
Changes in estimated future
development costs
(33)
(104)
(205)
(21)
(137)
Purchases of reserves in place,
less estimated future costs
17,833
-
(3)
-
17,833
(2)
Sales of reserves in place,
less estimated future costs
(468)
(302)
(1,997)
-
-
-
(468)
(302)
(1,997)
Revisions of previous quantity
estimates
2,985
(2,299)
2,099
(42)
3,163
(2,341)
2,168
Accretion of discount
3,984
5,144
1,308
4,788
6,013
Net change in income taxes
(19,032)
10,189
4,767
(760)
(80)
(19,792)
10,779
4,687
Total changes
48,021
(22,698)
(8,062)
2,138
(4,308)
(759)
50,159
(27,006)
(8,821)
Discounted future net cash flows
at year end
$
52,695
4,674
27,372
5,000
2,862
7,170
57,695
7,536
34,542
●
The net change in prices and production costs
is the beginning-of-year reserve-production
forecast multiplied by the net annual
change in the per-unit sales price and production
cost, discounted at 10 percent.
●
Purchases and sales of reserves in place, along with extensions,
discoveries and improved recovery,
are calculated using
production forecasts
of the applicable reserve quantities for the year
multiplied by the 12-month average
sales prices, less
future estimated costs, discounted
at 10 percent.
●
Revisions of previous quantity estimates
are calculated using production
forecast changes for
the year,
including changes in the
timing of production, multiplied by the 12-month average
sales prices, less future estimated costs,
discounted at 10 percent.
●
The accretion of discount is 10 percent of the prior
year’s discounted future
cash inflows, less future production
and
development costs.
●
The net change in income taxes
is the annual change in the discounted future
income tax provisions.
ConocoPhillips
2021 10-K
Previous: Item 7A. Quantitative and Qualitative Disclosures about Market Risk · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and