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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number: 001-32395
cplogo_red-black_4c.jpg
ConocoPhillips
(Exact name of registrant as specified in its charter)
Delaware01-0562944
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
925 N. Eldridge Parkway, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
281-293-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbols
Name of each exchange on which registered
Common Stock, $.01 Par Value
COP
New York Stock Exchange
7% Debentures due 2029
CUSIP—718507BK1
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer        Accelerated filer        Non-accelerated filer        Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The registrant had 1,210,058,689 shares of common stock, $.01 par value, outstanding at March 31, 2023.


Table of Contents
Page


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

offloading
ICC
International Chamber of Commerce
G&G
geological and geophysical
ICSID
World Bank’s International
JOA
joint operating agreement
Centre for Settlement of
LNG
liquefied natural gas
Investment Disputes
NGLs
natural gas liquids
IRS
Internal Revenue Service
OPEC
Organization of Petroleum
OTC
over-the-counter
Exporting Countries
NYSE
New York Stock Exchange
PSC
production sharing contract
SEC
U.S. Securities and Exchange
PUDs
proved undeveloped reserves
Commission
SAGD
steam-assisted gravity drainage
TSR
total shareholder return
WCS
Western Canadian Select
U.K.
United Kingdom
WTI
West Texas Intermediate
U.S.
United States of America
VROCvariable return of cash
1
ConocoPhillips      2023 Q1 10-Q

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

Millions of Dollars

Three Months Ended
March 31
20232022
Revenues and Other Income
Sales and other operating revenues
$14,811 17,762 
Equity in earnings of affiliates
499 426 
Gain on dispositions
93 817 
Other income
114 286 
Total Revenues and Other Income
15,517 19,291 
Costs and Expenses

Purchased commodities
6,138 6,751 
Production and operating expenses
1,779 1,581 
Selling, general and administrative expenses
159 187 
Exploration expenses
138 69 
Depreciation, depletion and amortization
1,942 1,823 
Impairments
1 2 
Taxes other than income taxes
576 814 
Accretion on discounted liabilities
68 61 
Interest and debt expense
188 217 
Foreign currency transaction (gain) loss
(44)24 
Other expenses
10 (136)
Total Costs and Expenses
10,955 11,393 
Income before income taxes
4,562 7,898 
Income tax provision
1,642 2,139 
Net Income
$2,920 5,759 
Net Income Per Share of Common Stock (dollars)
Basic$2.38 4.41 
Diluted2.38 4.39 
Average Common Shares Outstanding (in thousands)
Basic1,220,228 1,301,930 
Diluted1,223,355 1,307,404 
See Notes to Consolidated Financial Statements.
ConocoPhillips      2023 Q1 10-Q
2

Financial Statements
Consolidated Statement of Comprehensive Income
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
20232022
Net Income
$2,920 5,759 
Other comprehensive income
Defined benefit plans
Reclassification adjustment for amortization of prior service credit included in net income
(9)(10)
Net change(9)(10)
Reclassification adjustment for amortization of net actuarial losses included in net income
23 16 
Net change23 16 
Income taxes on defined benefit plans
(3)(2)
Defined benefit plans, net of tax
11 4 
Unrealized holding gain (loss) on securities
6 (4)
Reclassification adjustment for gain included in net income(1) 
Income taxes on unrealized holding gain (loss) on securities
(1)1 
Unrealized holding gain (loss) on securities, net of tax
4 (3)
Foreign currency translation adjustments, net of tax
(42)141 
Other Comprehensive Income (Loss), Net of Tax
(27)142 
Comprehensive Income
$2,893 5,901 
See Notes to Consolidated Financial Statements.
3
ConocoPhillips      2023 Q1 10-Q

Financial Statements
Consolidated Balance Sheet
ConocoPhillips
Millions of Dollars

March 31
2023
December 31
2022
Assets


Cash and cash equivalents
$6,974 6,458 
Short-term investments
1,635 2,785 
Accounts and notes receivable (net of allowance of $3 and $2, respectively)
5,280 7,075 
Accounts and notes receivable—related parties
16 13 
Inventories
1,258 1,219 
Prepaid expenses and other current assets
953 1,199 
Total Current Assets
16,116 18,749 
Investments and long-term receivables
8,197 8,225 
Net properties, plants and equipment (net of accumulated DD&A of $67,691 and $66,630, respectively)
65,090 64,866 
Other assets
2,038 1,989 
Total Assets
$91,441 93,829 
Liabilities

Accounts payable
$5,078 6,113 
Accounts payable—related parties
22 50 
Short-term debt
1,317 417 
Accrued income and other taxes
2,847 3,193 
Employee benefit obligations
420 728 
Other accruals
1,869 2,346 
Total Current Liabilities
11,553 12,847 
Long-term debt
15,266 16,226 
Asset retirement obligations and accrued environmental costs
6,324 6,401 
Deferred income taxes
7,927 7,726 
Employee benefit obligations
1,007 1,074 
Other liabilities and deferred credits
1,581 1,552 
Total Liabilities
43,658 45,826 
Equity

Common stock (2,500,000,000 shares authorized at $0.01 par value)
Issued (2023—2,102,510,826 shares; 2022—2,100,885,134 shares)
Par value
21 21 
Capital in excess of par
61,100 61,142 
Treasury stock (at cost: 2023—892,452,137 shares; 2022—877,029,062 shares)
(61,904)(60,189)
Accumulated other comprehensive loss
(6,027)(6,000)
Retained earnings
54,593 53,029 
Total Equity
47,783 48,003 
Total Liabilities and Equity
$91,441 93,829 
See Notes to Consolidated Financial Statements.
ConocoPhillips      2023 Q1 10-Q
4

Financial Statements
Consolidated Statement of Cash Flows
ConocoPhillips

Millions of Dollars

Three Months Ended
March 31

20232022
Cash Flows From Operating Activities
Net income
$2,920 5,759 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization
1,942 1,823 
Impairments
1 2 
Dry hole costs and leasehold impairments
68 7 
Accretion on discounted liabilities
68 61 
Deferred taxes
324 373 
Undistributed equity earnings
491 220 
Gain on dispositions
(93)(817)
Gain on investment in Cenovus Energy
 (251)
Other
(35)(152)
Working capital adjustments

Decrease (increase) in accounts and notes receivable
1,701 (1,535)
Decrease (increase) in inventories
(45)27 
Decrease in prepaid expenses and other current assets
255 58 
Decrease in accounts payable
(1,266)(204)
Decrease in taxes and other accruals
(928)(303)
Net Cash Provided by Operating Activities
5,403 5,068 
Cash Flows From Investing Activities

Capital expenditures and investments
(2,897)(3,161)
Working capital changes associated with investing activities
208 363 
Acquisition of businesses, net of cash acquired
 37 
Proceeds from asset dispositions
188 2,332 
Net (purchase) sale of investments
1,065 (263)
Collection of advances/loans—related parties
 55 
Other
(12)26 
Net Cash Used in Investing Activities
(1,448)(611)
Cash Flows From Financing Activities
Issuance of debt
 2,897 
Repayment of debt
(43)(3,964)
Issuance of company common stock
(97)271 
Repurchase of company common stock
(1,700)(1,425)
Dividends paid
(1,488)(864)
Other
2 (52)
Net Cash Used in Financing Activities
(3,326)(3,137)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
(104)21 
Net Change in Cash, Cash Equivalents and Restricted Cash
525 1,341 
Cash, cash equivalents and restricted cash at beginning of period
6,694 5,398 
Cash, Cash Equivalents and Restricted Cash at End of Period
$7,219 6,739 
Restricted cash of $245 million is included in the "Other assets" line of our Consolidated Balance Sheet as of March 31, 2023.
Restricted cash of $236 million is included in the "Other assets" line of our Consolidated Balance Sheet as of December 31, 2022.
See Notes to Consolidated Financial Statements.
5
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements

Note 1—Basis of Presentation
The interim-period financial information presented in the financial statements included in this report is unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair presentation of the consolidated financial position of ConocoPhillips, its results of operations and cash flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2022 Annual Report on Form 10-K.

Note 2—Inventories
Millions of Dollars
March 31
2023
December 31
2022
Crude oil and natural gas
$666 641 
Materials and supplies
592 578 
Total Inventories
$1,258 1,219 
Inventories valued on the LIFO basis
$445 396 

Note 3—Investments and Long-Term Receivables
Australia Pacific LNG Pty Ltd (APLNG)
In 2012, APLNG executed an $8.5 billion project finance facility that became non-recourse following financial completion in 2017. The facility is currently composed of a financing agreement with the Export-Import Bank of the United States, a commercial bank facility and two United States Private Placement note facilities. APLNG principal and interest payments commenced in March 2017 and are scheduled to occur bi-annually until September 2030. At March 31, 2023, a balance of $4.9 billion was outstanding on these facilities. See Note 7.
At March 31, 2023, the carrying value of our equity method investment in APLNG was approximately $5.8 billion. This balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet.
Port Arthur Liquefaction Holdings, LLC (PALNG)
In March 2023, we acquired a 30 percent direct equity investment in PALNG, a joint venture for the development of a large-scale LNG facility for the first phase of the Port Arthur LNG project ("Phase 1"). Sempra PALNG Holdings, LLC owns the remaining 70 percent interest in the joint venture. At March 31, 2023, the carrying value of our equity method investment in PALNG was approximately $0.4 billion. This balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet and is reported in our Corporate and Other segment.
ConocoPhillips      2023 Q1 10-Q
6

Notes to Consolidated Financial Statements
Note 4—Investment in Cenovus Energy
During the first quarter of 2022, we sold our remaining 91 million common shares of Cenovus Energy (CVE), recognizing proceeds of $1.4 billion and a net gain of $251 million. The gain was recognized within "Other income” on our consolidated income statement. Proceeds related to the sale of our CVE shares were included within "Cash Flows From Investing Activities" on our consolidated statement of cash flows.

Note 5—Debt
Our debt balance at March 31, 2023 was $16.6 billion compared with $16.6 billion at December 31, 2022.

Our revolving credit facility provides a total borrowing capacity of $5.5 billion with an expiration date of February 2027. Our revolving credit facility may be used for direct bank borrowings, the issuance of letters of credit totaling up to $500 million, or as support for our commercial paper program. The revolving credit facility is broadly syndicated among financial institutions and does not contain any material adverse change provisions or any covenants requiring maintenance of specified financial ratios or credit ratings. The facility agreement contains a cross-default provision relating to the failure to pay principal or interest on other debt obligations of $200 million or more by ConocoPhillips, or any of its consolidated subsidiaries. The amount of the facility is not subject to redetermination prior to its expiration date.
Credit facility borrowings may bear interest at a margin above the Secured Overnight Financing Rate (SOFR). The facility agreement calls for commitment fees on available, but unused, amounts. The facility agreement also contains early termination rights if our current directors or their approved successors cease to be a majority of the Board of Directors.
The revolving credit facility supports our ability to issue up to $5.5 billion of commercial paper. Commercial paper is generally limited to maturities of 90 days and is included in short-term debt on our consolidated balance sheet. With no commercial paper outstanding and no direct borrowings or letters of credit, we had access to $5.5 billion in available borrowing capacity under our revolving credit facility at March 31, 2023. At December 31, 2022, we had no commercial paper outstanding and no direct borrowings or letters of credit issued.

We do not have any ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our access to liquidity upon downgrade of our credit ratings. If our credit ratings are downgraded from their current levels, it could increase the cost of corporate debt available to us and restrict our access to the commercial paper markets. If our credit ratings were to deteriorate to a level prohibiting us from accessing the commercial paper market, we would still be able to access funds under our revolving credit facility.
At March 31, 2023, we had $283 million of certain variable rate demand bonds (VRDBs) outstanding with maturities ranging through 2035. The VRDBs are redeemable at the option of the bondholders on any business day. If they are ever redeemed, we have the ability and intent to refinance on a long-term basis, therefore, the VRDBs are included in the “Long-term debt” line on our consolidated balance sheet.
7
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
Note 6—Changes in Equity
Millions of Dollars
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
For the three months ended March 31, 2023
Balances at December 31, 2022$21 61,142 (60,189)(6,000)53,029 48,003 
Net income2,920 2,920 
Other comprehensive loss(27)(27)
Dividends declared
Ordinary ($0.51 per common share)
(625)(625)
Variable return of cash ($0.60 per common share)
(731)(731)
Repurchase of company common stock(1,700)(1,700)
Excise tax on share repurchases(15)(15)
Distributed under benefit plans(42)(42)
Other 
Balances at March 31, 2023$21 61,100 (61,904)(6,027)54,593 47,783 
Millions of Dollars
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
For the three months ended March 31, 2022
Balances at December 31, 2021$21 60,581 (50,920)(4,950)40,674 45,406 
Net income5,759 5,759 
Other comprehensive income142 142 
Dividends declared
Ordinary ($0.46 per common share)
(603)(603)
Variable return of cash ($0.30 per common share)
(390)(390)
Repurchase of company common stock(1,425)(1,425)
Distributed under benefit plans
326 326 
Other1 2 3 
Balances at March 31, 2022
$21 60,907 (52,344)(4,808)45,442 49,218 
ConocoPhillips      2023 Q1 10-Q
8

Notes to Consolidated Financial Statements
Note 7—Guarantees
At March 31, 2023, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.
APLNG Guarantees
At March 31, 2023, we had outstanding multiple guarantees in connection with our 47.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing March 2023 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 eight years. Our maximum exposure under this guarantee is approximately $210 million and may become payable if an enforcement action is commenced by the project finance lenders against APLNG. At March 31, 2023, the carrying value of this guarantee was approximately $14 million.

In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy Limited in October 2008, we agreed to reimburse Origin Energy Limited for our share of the existing contingent liability arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales agreements. The final guarantee expires in the fourth quarter of 2041. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be $760 million ($1.3 billion in the event of intentional or reckless breach) and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the co-venturers do not make necessary equity contributions into APLNG.
We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of 14 to 23 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $390 million and would become payable if APLNG does not perform. At March 31, 2023, the carrying value of these guarantees was approximately $29 million.

Qatar Liquefied Gas Company Limited (8) (QG8) Guarantee
We have guaranteed our portion of certain fiscal and other joint venture obligations as a shareholder in QG8. This guarantee has an approximate 30-year term with no maximum limit. At March 31, 2023, the carrying value of this guarantee was approximately $7 million.

Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling approximately $600 million, which consist primarily of guarantees of the residual value of leased office buildings and guarantees of the residual value of corporate aircraft. These guarantees have remaining terms of two to four years and would become payable if certain asset values are lower than guaranteed amounts at the end of the lease or contract term, business conditions decline at guaranteed entities, or as a result of nonperformance of contractual terms by guaranteed parties. At March 31, 2023, there was no carrying value associated with these guarantees.
Indemnifications
Over the years, we have entered into agreements to sell ownership interests in certain legal entities, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes and environmental liabilities. The carrying amount recorded for these indemnification obligations at March 31, 2023 was approximately $20 million. Those related to environmental issues have terms that are generally indefinite, and the maximum amounts of future payments are generally unlimited. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. See Note 8 for additional information about environmental liabilities.
9
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
Note 8—Contingencies and Commitments
A number of lawsuits involving a variety of claims arising in the ordinary course of business have been filed against ConocoPhillips. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various active and inactive sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the low end of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. We accrue receivables for insurance or other third-party recoveries when applicable. With respect to income tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.
Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.
Environmental
We are subject to international, federal, state and local environmental laws and regulations and record accruals for environmental liabilities based on management’s best estimates. These estimates are based on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. EPA or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.
Although liability of those potentially responsible for environmental remediation costs is generally joint and several for federal sites and frequently so for other sites, we are usually only one of many companies cited at a particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites at which we are potentially responsible are still under investigation by the EPA or the agency concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly. As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit, and some of the indemnifications are subject to dollar limits and time limits.
We are currently participating in environmental assessments and cleanups at numerous CERCLA and other comparable state and international sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those acquired in a purchase business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. We have not reduced these accruals for possible insurance recoveries.
For remediation activities in the U.S. and Canada, our balance sheet included a total environmental accrual of $182 million at both March 31, 2023 and December 31, 2022. We expect to incur a substantial amount of these expenditures within the next 30 years. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.
ConocoPhillips      2023 Q1 10-Q
10

Notes to Consolidated Financial Statements
Litigation and Other Contingencies
We are subject to various lawsuits and claims including, but not limited to, matters involving oil and gas royalty and severance tax payments, gas measurement and valuation methods, contract disputes, environmental damages, climate change, personal injury, and property damage. Our primary exposures for such matters relate to alleged royalty and tax underpayments on certain federal, state and privately owned properties, claims of alleged environmental contamination and damages from historic operations, and climate change. We will continue to defend ourselves vigorously in these matters.
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in individual cases. This process also enables us to track those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required.
We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at March 31, 2023, we had performance obligations secured by letters of credit of $329 million (issued as direct bank letters of credit) related to various purchase commitments for materials, supplies, commercial activities and services incident to the ordinary conduct of business.
In 2007, ConocoPhillips was unable to reach agreement with respect to the empresa mixta structure mandated by the Venezuelan government’s Nationalization Decree. As a result, Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’ interests in the Petrozuata and Hamaca heavy oil ventures and the offshore Corocoro development project. In response to this expropriation, ConocoPhillips initiated international arbitration on November 2, 2007, with the ICSID. On September 3, 2013, an ICSID arbitration tribunal ("Tribunal") held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in June 2007. On January 17, 2017, the Tribunal reconfirmed the decision that the expropriation was unlawful. In March 2019, the Tribunal unanimously ordered the government of Venezuela to pay ConocoPhillips approximately $8.7 billion in compensation for the government’s unlawful expropriation of the company’s investments in Venezuela in 2007. On August 29, 2019, the Tribunal issued a decision rectifying the award and reducing it by approximately $227 million. The award now stands at $8.5 billion plus interest. The government of Venezuela sought annulment of the award, which automatically stayed enforcement of the award. On September 29, 2021, the ICSID annulment committee lifted the stay of enforcement of the award. The annulment proceedings are underway.
In 2014, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Petrozuata and Hamaca projects. The ICC Tribunal issued an award in April 2018, finding that PDVSA owed ConocoPhillips approximately $2 billion under their agreements in connection with the expropriation of the projects and other pre-expropriation fiscal measures. In August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC award, plus interest through the payment period, including initial payments totaling approximately $500 million within a period of 90 days from the time of signing the settlement agreement. The balance of the settlement 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 $775 million in connection with the ICC award. ConocoPhillips has ensured that the settlement and any actions taken in enforcement thereof meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.
In 2016, ConocoPhillips filed a separate and independent arbitration under the rules of the ICC against PDVSA under the contracts that had established the Corocoro Project. On August 2, 2019, the ICC Tribunal awarded ConocoPhillips approximately $33 million plus interest under the Corocoro contracts. ConocoPhillips is seeking recognition and enforcement of the award in various jurisdictions. ConocoPhillips has ensured that all the actions related to the award meet all appropriate U.S. regulatory requirements, including those related to any applicable sanctions imposed by the U.S. against Venezuela.

11
ConocoPhillips      2023 Q1 10-Q

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

Several Louisiana parishes and the State of Louisiana have filed 43 lawsuits under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA) against oil and gas companies, including ConocoPhillips, seeking compensatory damages for contamination and erosion of the Louisiana coastline allegedly caused by historical oil and gas operations. ConocoPhillips entities are defendants in 22 of the lawsuits and will vigorously defend against them. On October 17, 2022, the Fifth Circuit affirmed remand of lead cases to state court and the subsequent request for rehearing was denied. On February 27, 2023, the Supreme Court denied a certiorari petition from the defendants regarding the Fifth Circuit ruling. Accordingly, the federal district courts have issued remands to state court. Because Plaintiffs’ SLCRMA theories are unprecedented, there is uncertainty about these claims (both as to scope and damages) and we continue to evaluate our exposure in these lawsuits.
In October 2020, the Bureau of Safety and Environmental Enforcement (BSEE) ordered the prior owners of Outer Continental Shelf (OCS) Lease P-0166, including ConocoPhillips, to decommission the lease facilities, including two offshore platforms located near Carpinteria, California. This order was sent after the current owner of OCS Lease P-0166 relinquished the lease and abandoned the lease platforms and facilities. BSEE’s order to ConocoPhillips is premised on its connection to Phillips Petroleum Company, a legacy company of ConocoPhillips, which held a historical 25 percent interest in this lease and operated these facilities but sold its interest approximately 30 years ago. ConocoPhillips continues to evaluate its exposure in this matter.

On May 10, 2021, ConocoPhillips filed arbitration under the rules of the Singapore International Arbitration Centre (SIAC) against Santos KOTN Pty Ltd. and Santos Limited for their failure to timely pay the $200 million bonus due upon final investment decision of the Barossa development project under the sale and purchase agreement for the sale of our Australia-West asset and operations. The matter was resolved in April 2023 to our satisfaction.

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. On February 23, 2023, a Magistrate Judge issued a Memorandum and Recommendation (R&R) recommending the defendants’ Motion to Dismiss be denied. The defendants have filed objections to the R&R. We believe the allegations in the action are without merit and are vigorously defending this litigation.

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

Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput 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 transport and LNG purchase commitments. The fixed and determinable portion of estimated payments under these various agreements are: 2023—$7 million; 2024—$7 million; 2025—$7 million; 2026—$7 million; 2027—$7 million; and 2028 and after—$11 billion. Generally, variable components of these obligations include commodity futures prices and inflation rates. Purchases of LNG under these commitments are expected to be offset in the same or approximately same periods by cash received from the related sales transactions.
ConocoPhillips      2023 Q1 10-Q
12

Notes to Consolidated Financial Statements
Note 9—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
March 31
2023
December 31
2022
Assets
Prepaid expenses and other current assets
$983 1,795 
Other assets
235 242 
Liabilities
Other accruals
969 1,800 
Other liabilities and deferred credits
198 210 
The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated income statement were:
Millions of Dollars
Three Months Ended
March 31
20232022
Sales and other operating revenues
$28 (407)
Other income
1 1 
Purchased commodities
(72)401 
The table below summarizes our net exposures resulting from outstanding commodity derivative contracts:
Open Position
Long (Short)
March 31
2023
December 31
2022
Commodity
Natural gas and power (billions of cubic feet equivalent)
Fixed price(16)(14)
Basis(39)(8)

13
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
Financial Instruments
We invest in financial instruments with maturities based on our cash forecasts for the various accounts and currency pools we manage. The types of financial instruments in which we currently invest include:
Time deposits: Interest bearing deposits placed with financial institutions for a predetermined amount of time.
Demand deposits: Interest bearing deposits placed with financial institutions. Deposited funds can be withdrawn without notice.
Commercial paper: Unsecured promissory notes issued by a corporation, commercial bank or government agency purchased at a discount, reaching par value at maturity.
U.S. government or government agency obligations: Securities issued by the U.S. government or U.S. government agencies.
Foreign government obligations: Securities issued by foreign governments.
Corporate bonds: Unsecured debt securities issued by corporations.
Asset-backed securities: Collateralized debt securities.
The following investments are carried on our consolidated balance sheet at cost, plus accrued interest, and the table reflects remaining maturities at March 31, 2023, and December 31, 2022:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
March 31
2023
December 31
2022
March 31
2023
December 31
2022
Cash$676 593 
Demand Deposits
1,174 1,638 
Time Deposits
1 to 90 days
4,257 4,116 985 1,288 
91 to 180 days
16 883 
Within one year
91 11 
U.S. Government Obligations
1 to 90 days
754 14   
$6,861 6,361 1,092 2,182 
ConocoPhillips      2023 Q1 10-Q
14

Notes to Consolidated Financial Statements
The following investments in debt securities classified as available for sale are carried at fair value on our consolidated balance sheet at March 31, 2023, and December 31, 2022:
Millions of Dollars
Carrying Amount
Cash and Cash EquivalentsShort-Term InvestmentsInvestments and Long-Term
Receivables
March 31
2023
December 31
2022
March 31
2023
December 31
2022
March 31
2023
December 31
2022
Major Security Type
Corporate Bonds
$  307 323 391 309 
Commercial Paper
101 97 136 156 
U.S. Government Obligations12  87 115 96 63 
U.S. Government Agency Obligations
13 8 7 5 
Foreign Government Obligations
  7 7 
Asset-backed Securities
 1 111 138 
$113 97 543 603 612 522 
Cash and Cash Equivalents and Short-Term Investments have remaining maturities within one year.
Investments and Long-Term Receivables have remaining maturities greater than one year through five years.
The following table summarizes the amortized cost basis and fair value of investments in debt securities classified as available for sale:
Millions of Dollars
Amortized Cost Basis
Fair Value
March 31
2023
December 31
2022
March 31
2023
December 31
2022
Major Security Type
Corporate Bonds
$705 641 698 632 
Commercial Paper
237 253 237 253 
U.S. Government Obligations
197 181 195 178 
U.S. Government Agency Obligations
20 13 20 13 
Foreign Government Obligations
7 7 7 7 
Asset-backed Securities
112 139 111 139 
$1,278 1,234 1,268 1,222 
As of March 31, 2023 and December 31, 2022, total unrealized losses for debt securities classified as available for sale with net losses were $11 million and $12 million, respectively. No allowance for credit losses has been recorded on investments in debt securities which are in an unrealized loss position.
For the three-month periods ended March 31, 2023 and March 31, 2022, proceeds from sales and redemptions of investments in debt securities classified as available for sale were $300 million and $115 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.
15
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
Credit Risk
Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, short-term investments, long-term investments in debt securities, OTC derivative contracts and trade receivables. Our cash equivalents and short-term investments are placed in high-quality commercial paper, government money market funds, U.S. government and government agency obligations, time deposits with major international banks and financial institutions, high-quality corporate bonds, foreign government obligations and asset-backed securities. Our long-term investments in debt securities are placed in high-quality corporate bonds, asset-backed securities, U.S. government and government agency obligations, and foreign government obligations.
The credit risk from our OTC derivative contracts, such as forwards, swaps and options, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared primarily with an exchange clearinghouse and subject to mandatory margin requirements until settled; however, we are exposed to the credit risk of those exchange brokers for receivables arising from daily margin cash calls, as well as for cash deposited to meet initial margin requirements.
Our trade receivables result primarily from our oil and gas operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less, and we continually monitor this exposure and the creditworthiness of the counterparties. We may require collateral to limit the exposure to loss including letters of credit, prepayments and surety bonds, as well as master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due to us.
Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also permit us to post letters of credit as collateral, such as transactions administered through the New York Mercantile Exchange.
The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were in a liability position at March 31, 2023 and December 31, 2022, was $166 million and $333 million, respectively. For these instruments, no collateral was posted at March 31, 2023 and $42 million of collateral was posted at December 31, 2022. If our credit rating had been downgraded below investment grade at March 31, 2023, we would have been required to post $140 million of additional collateral, either with cash or letters of credit.
ConocoPhillips      2023 Q1 10-Q
16

Notes to Consolidated Financial Statements
Note 10—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed according to the quality of valuation inputs under the fair value hierarchy.
The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during the three-month period ended March 31, 2023, nor during the year ended December 31, 2022.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair value on a recurring basis include our investments in debt securities classified as available for sale 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 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
March 31, 2023December 31, 2022
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investments in debt securities
$195 1,073  1,268 178 1,044  1,222 
Commodity derivatives
640 464 114 1,218 958 951 128 2,037 
Total assets
$835 1,537 114 2,486 1,136 1,995 128 3,259 
Liabilities
Commodity derivatives$663 485 19 1,167 906 843 261 2,010 
Total liabilities
$663 485 19 1,167 906 843 261 2,010 
17
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
The following table summarizes those commodity derivative balances subject to the right of setoff as presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts
Recognized
Amounts Not
Subject to
Right of Setoff
Gross
Amounts
Gross
Amounts
Offset
Net
Amounts
Presented
Cash
Collateral
Net
Amounts
March 31, 2023
Assets$1,218 30 1,188 726 462  462 
Liabilities1,167 24 1,143 726 417 35 382 
December 31, 2022
Assets$2,037 39 1,998 1,176 822 37 785 
Liabilities2,010 20 1,990 1,176 814 52 762 
At March 31, 2023 and December 31, 2022, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.

Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
Cash and cash equivalents and short-term investments: The carrying amount reported on the balance sheet approximates fair value. For those investments classified as available for sale debt securities, the carrying amount reported on the balance sheet is fair value.
Accounts and notes receivable (including long-term and related parties): The carrying amount reported on the balance sheet approximates fair value.
Investments in debt securities classified as available for sale: The fair value of investments in debt securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The fair value of investments in debt securities categorized as Level 2 in the fair value hierarchy is measured using pricing provided by brokers or pricing service companies that are corroborated with market data. See Note 9.
Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts payable and floating-rate debt reported on the balance sheet approximates fair value.
Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in the fair value hierarchy.
Commercial paper: The carrying amount of our commercial paper instruments approximates fair value and is reported on the balance sheet as short-term debt.
The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff exists for commodity derivatives):
Millions of Dollars
Carrying Amount
Fair Value
March 31
2023
December 31
2022
March 31
2023
December 31
2022
Financial assets
Commodity derivatives
492 824 492 824 
Investments in debt securities
1,268 1,222 1,268 1,222 
Financial liabilities
Total debt, excluding finance leases
15,316 15,323 15,914 15,545 
Commodity derivatives
406 782 406 782 
ConocoPhillips      2023 Q1 10-Q
18

Notes to Consolidated Financial Statements
Note 11—Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss in the equity section of our consolidated balance sheet includes:

Millions of Dollars

Defined Benefit
Plans
Net Unrealized
Loss on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2022$(448)(11)(5,541)(6,000)
Other comprehensive income (loss)
11 4 (42)(27)
March 31, 2023$(437)(7)(5,583)(6,027)
The following table summarizes reclassifications out of accumulated other comprehensive loss and into net income:

Millions of Dollars

Three Months Ended
March 31

20232022
Defined benefit plans
$11 4 
The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $3 million and $2 million for the three-month periods ended March 31, 2023 and March 31, 2022, respectively. See Note 13.

Note 12—Cash Flow Information

Millions of Dollars

Three Months Ended
March 31
20232022
Cash Payments
Interest
$209 287 
Income taxes
1,062 1,640 
Net Sales (Purchases) of Investments
Short-term investments purchased
$(269)(521)
Short-term investments sold
1,513 306 
Long-term investments purchased
(210)(66)
Long-term investments sold
31 18 

$1,065 (263)

19
ConocoPhillips      2023 Q1 10-Q

Notes to Consolidated Financial Statements
Note 13—Employee Benefit Plans
Pension and Postretirement Plans
Millions of Dollars
Pension Benefits
Other Benefits
2023202220232022
U.S.
Int'l.
U.S.
Int'l.
Components of Net Periodic Benefit Cost
Three Months Ended March 31
Service cost
$13 10 16 13   
Interest cost
19 28 12 21 1 1 
Expected return on plan assets
(15)(37)(13)(34)
Amortization of prior service credit
    (9)(10)
Recognized net actuarial loss
3 17 6 2 (1) 
Settlements
4  4  
Net periodic benefit cost
$24 18 25 2 (9)(9)
The components of net periodic benefit cost, other than the service cost component, are included in the "Other expenses" line of our consolidated income statement.

Note 14—Related Party Transactions
Our related parties primarily include equity method investments and certain trusts for the benefit of employees.

Millions of Dollars

Three Months Ended
March 31
20232022
Significant Transactions with Equity Affiliates
Operating revenues and other income
$21 22 
Operating expenses and selling, general and administrative expenses