10-Q 1 d83722d10q.htm 10-Q 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

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

For the quarterly period ended June 30, 2015

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

 

 

ConocoPhillips

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   01-0562944

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

600 North Dairy Ashford, Houston, TX 77079
(Address of principal executive offices)            (Zip Code)

281-293-1000

(Registrant’s telephone number, including area code)

 

 

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

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

The registrant had 1,233,458,569 shares of common stock, $.01 par value, outstanding at June 30, 2015.

 

 

 


CONOCOPHILLIPS

TABLE OF CONTENTS

 

     Page  

Part I – Financial Information

  

Item 1. Financial Statements

  

Consolidated Income Statement

     1   

Consolidated Statement of Comprehensive Income

     2   

Consolidated Balance Sheet

     3   

Consolidated Statement of Cash Flows

     4   

Notes to Consolidated Financial Statements

     5   

Supplementary Information—Condensed Consolidating Financial Information

     23   

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

     28   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     48   

Item 4. Controls and Procedures

     48   

Part II – Other Information

  

Item 1A. Risk Factors

     48   

Item 6. Exhibits

     49   

Signature

     50   


PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

 

Consolidated Income Statement      ConocoPhillips   

 

                                                           
     Millions of Dollars  
     Three Months     Six Months  
     Ended June 30     Ended June 30  
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Revenues and Other Income

        

Sales and other operating revenues

   $ 8,293        13,821        16,009        29,236   

Equity in earnings of affiliates

     258        672        463        1,244   

Gain on dispositions

     52        7        104        16   

Other income

     57        201        86        253   

 

 

Total Revenues and Other Income

     8,660        14,701        16,662        30,749   

 

 

Costs and Expenses

        

Purchased commodities

     3,230        5,495        6,467        12,622   

Production and operating expenses

     1,798        2,030        3,600        3,925   

Selling, general and administrative expenses

     218        218        377        400   

Exploration expenses

     549        517        1,031        813   

Depreciation, depletion and amortization

     2,329        2,070        4,460        3,962   

Impairments

     78        17        94        18   

Taxes other than income taxes

     225        612        449        1,263   

Accretion on discounted liabilities

     122        120        243        237   

Interest and debt expense

     210        155        412        326   

Foreign currency transaction (gains) losses

     (8     7        (24     25   

 

 

Total Costs and Expenses

     8,751        11,241        17,109        23,591   

 

 

Income (loss) from continuing operations before income taxes

     (91     3,460        (447     7,158   

Provision (benefit) for income taxes

     73        1,395        (569     2,976   

 

 

Income (Loss) From Continuing Operations

     (164     2,065        122        4,182   

Income from discontinued operations*

            33               53   

 

 

Net income (loss)

     (164     2,098        122        4,235   

Less: net income attributable to noncontrolling interests

     (15     (17     (29     (31

 

 

Net Income (Loss) Attributable to ConocoPhillips

   $ (179     2,081        93        4,204   

 

 

Amounts Attributable to ConocoPhillips Common Shareholders:

        

Income (loss) from continuing operations

   $ (179     2,048        93        4,151   

Income from discontinued operations

            33               53   

 

 

Net income (loss)

   $ (179     2,081        93        4,204   

 

 

Net Income (Loss) Attributable to ConocoPhillips Per Share of

Common Stock (dollars)

        

Basic

        

Continuing operations

   $ (0.15     1.65        0.07        3.36   

Discontinued operations

            0.03               0.04   

 

 

Net Income (Loss) Attributable to ConocoPhillips Per Share of Common Stock

   $ (0.15     1.68        0.07        3.40   

 

 

Diluted

        

Continuing operations

   $ (0.15     1.64        0.07        3.34   

Discontinued operations

            0.03               0.04   

 

 

Net Income (Loss) Attributable to ConocoPhillips Per Share of Common Stock

   $ (0.15     1.67        0.07        3.38   

 

 

Dividends Paid Per Share of Common Stock (dollars)

   $ 0.73        0.69        1.46        1.38   

 

 

Average Common Shares Outstanding (in thousands)

        

Basic

     1,241,026        1,236,057        1,240,909        1,235,515   

Diluted

     1,241,026        1,245,155        1,246,130        1,245,211   

 

 
*Net of provision (benefit) for income taxes on discontinued operations of:    $        (10            22   

See Notes to Consolidated Financial Statements.

 

1


Consolidated Statement of Comprehensive Income    ConocoPhillips  

 

                                                           
     Millions of Dollars  
     Three Months Ended     Six Months Ended  
     June 30     June 30  
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Net Income (Loss)

   $ (164     2,098        122        4,235   

 

 

Other comprehensive income (loss)

        

Defined benefit plans

        

Prior service cost arising during the period

     140               140          

Reclassification adjustment for amortization of prior service credit included in net income

     (3     (1     (4     (3

Net actuarial gain arising during the period

     15               15          

Reclassification adjustment for amortization of net actuarial losses included in net income

     102        33        152        66   

Nonsponsored plans*

            (1            5   

Income taxes on defined benefit plans

     (93     (12     (110     (23

 

 

Defined benefit plans, net of tax

     161        19        193        45   

 

 

Foreign currency translation adjustments

     796        668        (1,949     446   

Income taxes on foreign currency translation adjustments

     (9     9        17        5   

 

 

Foreign currency translation adjustments, net of tax

     787        677        (1,932     451   

 

 

Other Comprehensive Income (Loss), Net of Tax

     948        696        (1,739     496   

 

 

Comprehensive Income (Loss)

     784        2,794        (1,617     4,731   

Less: comprehensive income attributable to noncontrolling interests

     (15     (17     (29     (31

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ 769        2,777        (1,646     4,700   

 

 

*Plans for which ConocoPhillips is not the primary obligor—primarily those administered by equity affiliates.

See Notes to Consolidated Financial Statements.

 

2


Consolidated Balance Sheet      ConocoPhillips   

 

                             
     Millions of Dollars  
     June 30     December 31  
     2015     2014  
  

 

 

 

Assets

    

Cash and cash equivalents

   $ 3,813        5,062   

Accounts and notes receivable (net of allowance of $7 million in 2015
and $5 million in 2014)

     5,044        6,675   

Accounts and notes receivable—related parties

     135        132   

Inventories

     1,277        1,331   

Prepaid expenses and other current assets

     1,675        1,868   

 

 

Total Current Assets

     11,944        15,068   

Investments and long-term receivables

     23,902        24,335   

Loans and advances—related parties

     750        804   

Net properties, plants and equipment (net of accumulated depreciation, depletion and amortization of $73,854 million in 2015 and $70,786 million in 2014)

     74,387        75,444   

Other assets

     1,020        888   

 

 

Total Assets

   $ 112,003        116,539   

 

 

Liabilities

    

Accounts payable

   $ 5,833        7,982   

Accounts payable—related parties

     36        44   

Short-term debt

     138        182   

Accrued income and other taxes

     880        1,051   

Employee benefit obligations

     620        878   

Other accruals

     1,227        1,400   

 

 

Total Current Liabilities

     8,734        11,537   

Long-term debt

     24,787        22,383   

Asset retirement obligations and accrued environmental costs

     10,567        10,647   

Deferred income taxes

     14,373        15,070   

Employee benefit obligations

     2,849        2,964   

Other liabilities and deferred credits

     1,724        1,665   

 

 

Total Liabilities

     63,034        64,266   

 

 

Equity

    

Common stock (2,500,000,000 shares authorized at $.01 par value)

    

Issued (2015—1,775,689,242 shares; 2014—1,773,583,368 shares)

    

Par value

     18        18   

Capital in excess of par

     46,244        46,071   

Treasury stock (at cost: 2015—542,230,673 shares; 2014—542,230,673 shares)

     (36,780     (36,780

Accumulated other comprehensive loss

     (3,641     (1,902

Retained earnings

     42,779        44,504   

 

 

Total Common Stockholders’ Equity

     48,620        51,911   

Noncontrolling interests

     349        362   

 

 

Total Equity

     48,969        52,273   

 

 

Total Liabilities and Equity

   $ 112,003        116,539   

 

 

See Notes to Consolidated Financial Statements.

 

3


Consolidated Statement of Cash Flows      ConocoPhillips   

 

                             
     Millions of Dollars  
     Six Months Ended
June 30
 
     2015     2014*  
  

 

 

 

Cash Flows From Operating Activities

    

Net income

   $ 122        4,235   

Adjustments to reconcile net income to net cash provided by operating activities

    

Depreciation, depletion and amortization

     4,460        3,962   

Impairments

     94        18   

Dry hole costs and leasehold impairments

     713        403   

Accretion on discounted liabilities

     243        237   

Deferred taxes

     (602     633   

Undistributed equity earnings

     (41     681   

Gain on dispositions

     (104     (16

Income from discontinued operations

            (53

Other

     (454     (192

Working capital adjustments

    

Decrease in accounts and notes receivable

     1,419        80   

Decrease (increase) in inventories

     42        (103

Decrease (increase) in prepaid expenses and other current assets

     153        (238

Decrease in accounts payable

     (1,358     (13

Increase (decrease) in taxes and other accruals

     (645     123   

 

 

Net cash provided by continuing operating activities

     4,042        9,757   

Net cash provided by discontinued operations

            130   

 

 

Net Cash Provided by Operating Activities

     4,042        9,887   

 

 

Cash Flows From Investing Activities

    

Capital expenditures and investments

     (5,739     (8,141

Working capital changes associated with investing activities

     (678     84   

Proceeds from asset dispositions

     294        63   

Net purchases of short-term investments

            (8

Collection of advances/loans—related parties

     52        77   

Other

     291        96   

 

 

Net cash used in continuing investing activities

     (5,780     (7,829

Net cash used in discontinued operations

            (63

 

 

Net Cash Used in Investing Activities

     (5,780     (7,892

 

 

Cash Flows From Financing Activities

    

Issuance of debt

     2,498          

Repayment of debt

     (62     (450

Issuance of company common stock

     (46     46   

Dividends paid

     (1,819     (1,711

Other

     (35     (28

 

 

Net Cash Provided by (Used in) Financing Activities

     536        (2,143

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

     (47     44   

 

 

Net Change in Cash and Cash Equivalents

     (1,249     (104

Cash and cash equivalents at beginning of period

     5,062        6,246   

 

 

Cash and Cash Equivalents at End of Period

   $ 3,813        6,142   

 

 

*Certain amounts have been reclassified to conform to current-period presentation. See Note 14Cash Flow Information, in the Notes to the Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

 

4


Notes to Consolidated Financial Statements      ConocoPhillips   

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 and 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 2014 Annual Report on Form 10-K.

The results of operations for our former Nigeria business have been classified as discontinued operations for all periods presented. Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to our continuing operations.

Note 2—Variable Interest Entities (VIEs)

We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. Information on our significant VIE follows:

Australia Pacific LNG Pty Ltd (APLNG)

APLNG is considered a VIE, as it has entered into certain contractual arrangements that provide it with additional forms of subordinated financial support. We are not the primary beneficiary of APLNG because we share with Origin Energy and China Petrochemical Corporation (Sinopec) the power to direct the key activities of APLNG that most significantly impact its economic performance, which involve activities related to the production and commercialization of coalbed methane, as well as liquefied natural gas (LNG) processing and export marketing. As a result, we do not consolidate APLNG, and it is accounted for as an equity method investment.

As of June 30, 2015, we have not provided any financial support to APLNG other than amounts previously contractually required. Unless we elect otherwise, we have no requirement to provide liquidity or purchase the assets of APLNG. See Note 4—Investments, Loans and Long-Term Receivables, and Note 9—Guarantees, for additional information.

Note 3—Inventories

Inventories consisted of the following:

                             
     Millions of Dollars  
     June 30
2015
     December 31
2014
 
  

 

 

 

Crude oil and natural gas

   $ 474         538   

Materials, supplies and other

     803         793   

 

 
   $ 1,277         1,331   

 

 

Inventories valued on the last-in, first-out (LIFO) basis totaled $351 million and $440 million at June 30, 2015 and December 31, 2014, respectively. The estimated excess of current replacement cost over LIFO cost of inventories was approximately $44 million and $6 million at June 30, 2015 and December 31, 2014, respectively.

 

5


Note 4—Investments, Loans and Long-Term Receivables

APLNG

APLNG’s $8.5 billion project finance facility consists of financing agreements executed by APLNG with the Export-Import Bank of the United States for approximately $2.9 billion, the Export-Import Bank of China for approximately $2.7 billion, and a syndicate of Australian and international commercial banks for approximately $2.9 billion. At June 30, 2015, $8.3 billion had been drawn from the facility. In connection with the execution of the project financing, we provided a completion guarantee for our pro-rata share of the project finance facility until the project achieves financial completion. See Note 9—Guarantees, for additional information.

APLNG is considered a VIE, as it has entered into certain contractual arrangements that provide it with additional forms of subordinated financial support. See Note 2—Variable Interest Entities (VIEs), for additional information.

At June 30, 2015, the book value of our equity method investment in APLNG was $12,105 million, net of a $530 million reduction due to cumulative translation effects. The balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet.

FCCL

At June 30, 2015, the book value of our equity method investment in FCCL was $8,979 million, net of a $1,004 million reduction due to cumulative translation effects. The balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet. In the first quarter of 2014, we received a $1.3 billion distribution from FCCL, which is included in the “Undistributed equity earnings” line on our consolidated statement of cash flows.

Loans and Long-Term Receivables

As part of our normal ongoing business operations and consistent with industry practice, we enter into numerous agreements with other parties to pursue business opportunities. Included in such activity are loans made to certain affiliated and non-affiliated companies. At June 30, 2015, significant loans to affiliated companies included $857 million in project financing to Qatar Liquefied Gas Company Limited (3) (QG3).

The long-term portion of these loans is included in the “Loans and advances—related parties” line on our consolidated balance sheet, while the short-term portion is in “Accounts and notes receivable—related parties.”

Note 5—Suspended Wells and Unproved Property Impairments

The capitalized cost of suspended wells at June 30, 2015, was $1,423 million, an increase of $124 million from $1,299 million at year-end 2014. No suspended wells were charged to dry hole expense during the first six months of 2015 relating to exploratory well costs capitalized for a period greater than one year as of December 31, 2014.

In the second quarter of 2015, we decided not to pursue further evaluation of our Lebork, Damnica and Karwia concessions in Poland and Block 37 lease in Angola. Accordingly, we recorded pre-tax impairments of $93 million and $116 million, respectively, for the associated carrying value of capitalized undeveloped leasehold cost. The impairments are included in the “Exploration expenses” line on our consolidated income statement.

 

6


Note 6—Impairments

During the three- and six-month periods ended June 30, 2015 and 2014, we recognized before-tax impairment charges within the following segments:

 

                                                           
     Millions of Dollars  
     Three Months Ended
June 30
     Six Months Ended
June 30
 
     2015      2014      2015      2014  
  

 

 

    

 

 

 

Alaska

   $ 7                 7           

Lower 48

             17                 17   

Europe

     71                 87           

Corporate and Other

                             1   

 

 
   $ 78         17         94         18   

 

 

The three- and six-month periods of 2015 included impairments in our Europe segment of $71 million, primarily as a result of lower natural gas prices.

In addition, during the three-month period ended June 30, 2015, we recognized $209 million of expense in our Other International segment related to impairment of individually significant unproved properties. These unproved property impairments, included in the “Exploration expenses” line on our consolidated income statement, are further discussed in Note 5—Suspended Wells and Unproved Property Impairments.

Note 7—Debt

We have two commercial paper programs supported by our $7.0 billion revolving credit facility: the ConocoPhillips $6.1 billion program, primarily a funding source for short-term working capital needs, and the ConocoPhillips Qatar Funding Ltd. $900 million program, which is used to fund commitments relating to QG3. Commercial paper maturities are generally limited to 90 days.

At June 30, 2015 and December 31, 2014, we had no direct outstanding borrowings under the revolving credit facility, with no letters of credit as of June 30, 2015 or December 31, 2014. Under the ConocoPhillips Qatar Funding Ltd. commercial paper program, $806 million of commercial paper was outstanding at June 30, 2015, compared with $860 million at December 31, 2014. Since we had $806 million of commercial paper outstanding and had issued no letters of credit, we had access to $6.2 billion in borrowing capacity under our revolving credit facility at June 30, 2015.

At June 30, 2015, we classified $750 million of short-term debt as long-term debt, based on our ability and intent to refinance the obligation on a long-term basis under our revolving credit facility.

In May 2015, we issued notes consisting of:

 

   

The $750 million of 1.50% Notes due 2018.

 

   

The $250 million of Floating Rate Notes due 2018 bearing interest at three-month LIBOR, plus 0.33%.

 

   

The $500 million of 2.20% Notes due 2020.

 

   

The $500 million of Floating Rate Notes due 2022 bearing interest at three-month LIBOR, plus 0.90%.

 

   

The $500 million of 3.35% Notes due 2025.

The net proceeds were used for general corporate purposes.

 

7


Note 8—Noncontrolling Interests

Activity attributable to common stockholders’ equity and noncontrolling interests for the first six months of 2015 and 2014 was as follows:

 

                                                                                         
     Millions of Dollars  
     2015     2014  
     Common
Stockholders’
Equity
    Non-
Controlling
Interest
    Total
Equity
    Common
Stockholders’
Equity
    Non-
Controlling
Interest
    Total
Equity
 
  

 

 

   

 

 

 

Balance at January 1

   $ 51,911        362        52,273        52,090        402        52,492   

Net income

     93        29        122        4,204        31        4,235   

Dividends

     (1,819            (1,819     (1,711            (1,711

Distributions to noncontrolling interests

            (43     (43            (62     (62

Other changes, net*

     (1,565     1        (1,564     732               732   

 

 

Balance at June 30

   $ 48,620        349        48,969        55,315        371        55,686   

 

 

*Includes components of other comprehensive income, which are disclosed separately in the Consolidated Statement of Comprehensive Income.

Note 9—Guarantees

At June 30, 2015, 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 either because the guarantees were issued prior to December 31, 2002, or because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.

APLNG Guarantees

At June 30, 2015, 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 June 2015 exchange rates:

 

   

We have guaranteed APLNG’s performance with regard to a construction contract executed in connection with APLNG’s issuance of the Train 1 and Train 2 Notices to Proceed. We estimate the remaining term of this guarantee is two years. Our maximum potential amount of future payments related to this guarantee is approximately $100 million and would become payable if APLNG cancels the applicable construction contract and does not perform with respect to the amounts owed to the contractor.

 

   

We have issued a construction completion guarantee related to the third-party project financing secured by APLNG. Our maximum potential amount of future payments under the guarantee is estimated to be $3.2 billion, which could be payable if the full debt financing capacity is utilized and completion of the project is not achieved. Our guarantee of the project financing will be released upon meeting certain completion tests with milestones, which we estimate should occur beginning in 2016. Our maximum exposure at June 30, 2015, is $3.1 billion based upon our pro-rata share of the facility used at that date. At June 30, 2015, the carrying value of this guarantee is approximately $114 million.

 

8


   

In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy in October 2008, we agreed to guarantee an existing obligation of APLNG to deliver natural gas under several sales agreements with remaining terms of 1 to 27 years. Our maximum potential amount of future payments, or cost of volume delivery, under these guarantees is estimated to be $1.2 billion ($2.1 billion in the event of intentional or reckless breach), and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the co-venturers do not make necessary equity contributions into APLNG.

 

   

We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of up to 30 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $170 million and would become payable if APLNG does not perform.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling approximately $370 million, which consist primarily of guarantees of the residual value of leased corporate aircraft, a guarantee for our portion of a joint venture’s debt obligations, a guarantee to fund the short-term cash liquidity deficit of a joint venture, and a guarantee of minimum charter revenue for an LNG vessel. These guarantees have remaining terms of up to nine years or the life of the venture and would become payable if, upon sale, certain asset values are lower than guaranteed amounts, business conditions decline at guaranteed entities, or as a result of non-performance of contractual terms by guaranteed parties.

Indemnifications

Over the years, we have entered into agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes, environmental liabilities, employee claims and litigation. The terms of these indemnifications vary greatly. The majority of these indemnifications are related to environmental issues, the term is generally indefinite and the maximum amount of future payments is generally unlimited. The carrying amount recorded for these indemnifications at June 30, 2015, was approximately $90 million. We amortize the indemnification liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of indemnity. In cases where the indemnification term is indefinite, we will reverse the liability when we have information the liability is essentially relieved or amortize the liability over an appropriate time period as the fair value of our indemnification exposure declines. 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. Included in the recorded carrying amount at June 30, 2015, were approximately $40 million of environmental accruals for known contamination that are included in the “Asset retirement obligations and accrued environmental costs” line on our consolidated balance sheet. For additional information about environmental liabilities, see Note 10—Contingencies and Commitments.

On April 30, 2012, the separation of our Downstream businesses was completed, creating two independent energy companies: ConocoPhillips and Phillips 66. In connection with the separation, we entered into an Indemnification and Release Agreement, which provides for cross-indemnities between Phillips 66 and us and established procedures for handling claims subject to indemnification and related matters. We evaluated the impact of the indemnifications given and the Phillips 66 indemnifications received as of the separation date and concluded those fair values were immaterial.

On March 1, 2015, a supplier to one of the refineries that was included in Phillips 66 as part of the separation of our Downstream businesses formally registered Phillips 66 as a party to the supply agreement, thereby triggering a guarantee we provided at the time of separation. Our maximum potential liability for future payments under this guarantee, which would become payable if Phillips 66 does not perform its contractual obligations under the supply agreement, is approximately $1.7 billion. At June 30, 2015, the carrying value of this guarantee is approximately $100 million and the remaining term is nine years. Because Phillips 66 has

 

9


indemnified us for losses incurred under this guarantee, we have recorded an indemnification asset from Phillips 66 of approximately $100 million. The recorded indemnification asset amount represents the estimated fair value of the guarantee; however, if we are required to perform under the guarantee, we would expect to recover from Phillips 66 any amounts in excess of that value, provided Phillips 66 is a going concern.

Note 10—Contingencies and Commitments

A number of lawsuits involving a variety of claims arising in the ordinary course of business have been made 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 minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. 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. When we prepare our consolidated financial statements, we record accruals for environmental liabilities based on management’s best estimates, using all information that is available at the time. We measure estimates and base liabilities 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. Environmental Protection Agency (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.

 

10


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. At June 30, 2015, our balance sheet included a total environmental accrual of $306 million, compared with $344 million at December 31, 2014, for remediation activities in the United States and Canada. We expect to incur a substantial amount of these expenditures within the next 30 years. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

Legal Proceedings

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, personal injury, and property damage. Our primary exposures for such matters relate to alleged royalty underpayments on certain federal, state and privately owned properties and claims of alleged environmental contamination from historic operations. 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.

Other Contingencies

We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at June 30, 2015, we had performance obligations secured by letters of credit of $400 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, we announced we had been unable to reach agreement with respect to our migration to an 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, we filed a request for international arbitration on November 2, 2007, with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). An arbitration hearing was held before an ICSID tribunal during the summer of 2010. On September 3, 2013, an ICSID arbitration tribunal held that Venezuela unlawfully expropriated ConocoPhillips’ significant oil investments in June 2007. A separate arbitration phase is currently proceeding to determine the damages owed to ConocoPhillips for Venezuela’s actions. On October 10, 2014, we filed a separate arbitration under the rules of the International Chamber of Commerce against PDVSA for contractual compensation related to the Petrozuata and Hamaca heavy crude oil projects.

In 2008, Burlington Resources, Inc., a wholly owned subsidiary of ConocoPhillips, initiated arbitration before ICSID against The Republic of Ecuador, as a result of the newly enacted Windfall Profits Tax Law and government-mandated renegotiation of our production sharing contracts. Despite a restraining order issued by the ICSID tribunal, Ecuador confiscated the crude oil production of Burlington and its co-venturer and sold the seized crude oil. In 2009, Ecuador took over operations in Blocks 7 and 21, fully expropriating our assets. In June 2010, the ICSID tribunal concluded it has jurisdiction to hear the expropriation claim. On April 24, 2012,

 

11


Ecuador filed supplemental counterclaims asserting environmental damages, which we believe are not material. The ICSID tribunal issued a decision on liability on December 14, 2012, in favor of Burlington, finding that Ecuador’s seizure of Blocks 7 and 21 was an unlawful expropriation in violation of the Ecuador-U.S. Bilateral Investment Treaty. An additional arbitration phase is now proceeding to determine the damages owed to ConocoPhillips for Ecuador’s actions and to address Ecuador’s counterclaims.

ConocoPhillips served a Notice of Arbitration on the Timor-Leste Minister of Finance in October 2012 for outstanding disputes related to a series of tax assessments. As of June 30, 2015, ConocoPhillips has paid, under protest, tax assessments totaling approximately $237 million, which are primarily recorded in the “Investments and long-term receivables” line on our consolidated balance sheet. The arbitration hearing was conducted in Singapore in June 2014 under the United Nations Commission on International Trade Laws (UNCITRAL) arbitration rules, pursuant to the terms of the Tax Stability Agreement with the Timor-Leste government. Post-hearing briefs from both parties were filed in August 2014. We are now awaiting the Tribunal’s decision. Future impacts on our business are not known at this time.

Note 11—Derivative and Financial Instruments

Derivative Instruments

We use futures, forwards, swaps and options in various markets to meet our customer needs and capture market opportunities. Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG and natural gas liquids.

Our 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 the consolidated statement of cash flows. On our consolidated income statement, realized and unrealized 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 normal purchase normal sale exception are recognized upon settlement. We generally apply this exception to eligible crude contracts. We do not use 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  
     June 30
2015
     December 31
2014
 
  

 

 

 

Assets

     

Prepaid expenses and other current assets

   $ 2,386         4,500   

Other assets

     112         157   

Liabilities

     

Other accruals

     2,398         4,426   

Other liabilities and deferred credits

     101         144   

 

 

 

12


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
June 30
    Six Months Ended
June 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Sales and other operating revenues

   $ 44        184        28        421   

Other income

     2        1        1        2   

Purchased commodities

     (47     (163     (3     (384

 

 

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

 

                             
     Open Position
Long/(Short)
 
     June 30
2015
    December 31
2014
 
  

 

 

 

Commodity

    

Natural gas and power (billions of cubic feet equivalent)

    

Fixed price

     (23     (11

Basis

     (13     18   

 

 

Foreign Currency Exchange Derivatives

We have foreign currency exchange rate risk resulting from international operations. Our foreign currency exchange derivative activity primarily consists of transactions designed to mitigate our cash-related and 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. 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  
     June 30
2015
     December 31
2014
 
  

 

 

 

Assets

     

Prepaid expenses and other current assets

   $ 25         1   

Liabilities

     

Other accruals

     2         1   

 

 

The gains from foreign currency exchange derivatives incurred, and the line item where they appear on our consolidated income statement were:

 

                                                           
     Millions of Dollars  
     Three Months Ended
June 30
    Six Months Ended
June 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Foreign currency transaction gains

   $ (37     (7     (13 )      (7

 

 

 

13


We had the following net notional position of outstanding foreign currency exchange derivatives:

 

                                            
     In Millions
Notional Currency
 
     June 30
2015
     December 31
2014
 
  

 

 

Sell U.S. dollar, buy other currencies*

   USD      55         7   

Buy U.S. dollar, sell other currencies**

   USD      20         44   

Sell British pound, buy euro

   GBP      6           

Buy British pound, sell other currencies***

   GBP      309         20   

 

 

*Primarily Canadian dollar and British pound.

**Primarily Canadian dollar and Norwegian krone.

***Primarily Canadian dollar and euro.

Financial Instruments

We have certain financial instruments on our consolidated balance sheet related to interest-bearing time deposits and commercial paper. These held-to-maturity financial instruments are included in “Cash and cash equivalents” on our consolidated balance sheet if the maturities at the time we made the investments were 90 days or less.

 

                             
     Millions of Dollars  
     Carrying Amount  
     Cash and Cash Equivalents  
     June 30
2015
     December 31
2014
 
  

 

 

 

Cash

   $ 677         946   

Money Market Funds

             50   

Time deposits

     

Remaining maturities from 1 to 90 days

     3,136         3,726   

Commercial paper

     

Remaining maturities from 1 to 90 days

             340   

 

 
   $ 3,813         5,062   

 

 

Credit Risk

Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, over-the-counter (OTC) derivative contracts and trade receivables. Our cash equivalents are placed in high-quality commercial paper, money market funds, government debt securities and time deposits with major international banks and financial institutions.

The credit risk from our OTC derivative contracts, such as forwards and swaps, 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 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 do not generally require collateral to limit the exposure to loss;

 

14


however, we will sometimes use letters of credit, prepayments and 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 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 June 30, 2015 and December 31, 2014, was $100 million and $150 million, respectively. For these instruments, no collateral was posted as of June 30, 2015 or December 31, 2014. If our credit rating had been lowered one level from its “A” rating (per Standard and Poor’s) on June 30, 2015, we would be required to post no additional collateral to our counterparties. If we had been downgraded below investment grade, we would be required to post $100 million of additional collateral, either with cash or letters of credit.

Note 12—Fair Value Measurement

We carry a portion of our assets and liabilities at fair value that are measured at a 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 following hierarchy:

 

   

Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities.

 

   

Level 2: Inputs other than quoted prices that are directly or indirectly observable.

 

   

Level 3: Unobservable inputs that are significant to the fair value of assets or liabilities.

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 that are initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. Transfers occur at the end of the reporting period. There were no material transfers in or out of Level 1 during 2015 or 2014.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair value on a recurring basis primarily include commodity derivatives and certain investments to support nonqualified deferred compensation plans. The deferred compensation investments are measured at fair value using unadjusted prices available from national securities exchanges; therefore, these assets are categorized as Level 1 in the fair value hierarchy. 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 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 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale contracts that are long term in nature and 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.

 

15


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

 

                                                                                                                       
     Millions of Dollars  
     June 30, 2015      December 31, 2014  
     Level 1      Level 2      Level 3      Total      Level 1      Level 2      Level 3      Total  
  

 

 

    

 

 

 

Assets

                       

Deferred compensation investments

   $ 27                         27         297                         297   

Commodity derivatives

     2,236         192         70         2,498         4,221         361         75         4,657   

 

 

Total assets

   $ 2,263         192         70         2,525         4,518         361         75         4,954   

 

 

Liabilities

                       

Commodity derivatives

   $ 2,263         224         12         2,499         4,200         354         16         4,570   

 

 

Total liabilities

   $ 2,263         224         12         2,499         4,200         354         16         4,570   

 

 

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 offset exists.

 

                                                                                         
     Millions of Dollars  
     Gross
Amounts
Recognized
     Gross
Amounts
Offset
     Net
Amounts
Presented
     Cash
Collateral
     Gross Amounts
without
Right of Setoff
     Net
Amounts
 
  

 

 

 

June 30, 2015

                 

Assets

   $ 2,498         2,334         164                 12         152   

Liabilities

     2,499         2,334         165         28         9         128   

 

 

December 31, 2014

                 

Assets

   $ 4,657         4,352         305         8         28         269   

Liabilities

     4,570         4,352         218         4         22         192   

 

 

At June 30, 2015 and December 31, 2014, 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 for assets accounted for at fair value on a non-recurring basis:

 

                                            
     Millions of Dollars  
            Fair Value
Measurements Using
 
     Fair Value      Level 3
Inputs
     Before-Tax
Loss
 

June 30, 2015

        

Net PP&E (held for use)

   $ 42         42         70   

 

 

 

16


Net properties, plants and equipment (PP&E) held for use is comprised of various producing properties impaired to their individual fair values less costs to sell. The fair values were determined by internal discounted cash flow models using estimates of future production, prices from futures exchanges and pricing service companies, costs, and a discount rate believed to be consistent with those used by principal market participants.

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: The carrying amount reported on the balance sheet approximates 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.

 

   

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. See Note 4—Investments, Loans and Long-Term Receivables, for additional information.

 

   

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.

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

 

                                                           
     Millions of Dollars  
     Carrying Amount      Fair Value  
     June 30
2015
     December 31
2014
     June 30
2015
     December 31
2014
 
  

 

 

    

 

 

 

Financial assets

           

Deferred compensation investments

   $ 27         297         27         297   

Commodity derivatives

     164         297         164         297   

Total loans and advances—related parties

     861         913         861         913   

Financial liabilities

           

Total debt, excluding capital leases

     24,068         21,707         26,746         25,191   

Commodity derivatives

     137         214         137         214   

 

 

Deferred compensation investments

In May 2015, we liquidated certain deferred compensation investments for proceeds of $267 million, which is included in the “Other” line within “Cash Flows From Investing Activities” on our consolidated statement of cash flows.

 

17


Note 13—Accumulated Other Comprehensive Income

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

 

                                            
     Millions of Dollars  
     Defined
Benefit Plans
    Foreign
Currency
Translation
    Accumulated
Other
Comprehensive
Income (Loss)
 
  

 

 

 

December 31, 2014

   $ (1,261     (641     (1,902

Other comprehensive income (loss)

     193        (1,932     (1,739

 

 

June 30, 2015

   $ (1,068     (2,573     (3,641

 

 

Foreign Currency Translation decreased due to the strengthening of the U.S. dollar relative to the Canadian dollar, Australian dollar and Norwegian krone.

There were no items within accumulated other comprehensive income (loss) related to noncontrolling interests.

The following table summarizes reclassifications out of accumulated other comprehensive income:

 

                                                           
     Millions of Dollars  
     Three Months Ended
June 30
     Six Months Ended
June 30
 
     2015      2014      2015      2014  
  

 

 

    

 

 

 

Defined benefit plans

   $ 64         20         96         40   

 

 

Above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of:

   $ 35         12         52         23   

See Note 15Employee Benefit Plans, for additional information.

           

Note 14—Cash Flow Information

 

                             
     Millions of Dollars  
     Six Months Ended
June  30
 
     2015      2014  
  

 

 

 

Cash Payments

     

Interest

   $ 399         311   

Income taxes*

     172         2,321   

 

 

Net Sales (Purchases) of Short-Term Investments

     

Short-term investments purchased

   $         (492

Short-term investments sold

             484   

 

 
   $         (8

 

 

*Includes $556 million in 2015 related to a refund received from the Internal Revenue Service for 2014 overpaid taxes.

In relation to certain working capital changes associated with investing activities, we reclassified $84 million of the “Decrease in accounts payable” line within “Cash Flows From Operating Activities” to the “Working capital changes associated with investing activities” line within “Cash Flows From Investing Activities” for the six months ended June 30, 2014. There was no impact to “Cash and Cash Equivalents at End of Period.”

 

18


Note 15—Employee Benefit Plans

Pension and Postretirement Plans

 

                                                                                         
     Millions of Dollars  
     Pension Benefits     Other Benefits  
     2015     2014     2015     2014  
  

 

 

   

 

 

 
     U.S.     Int’l.     U.S.     Int’l.              
  

 

 

     

Components of Net Periodic Benefit Cost

            

Three Months Ended June 30

            

Service cost

   $ 36        31        31        28                 

Interest cost

     39        34        41        42        7        7   

Expected return on plan assets

     (53     (43     (53     (46              

Amortization of prior service cost (credit)

     1        (2     2        (2     (2     (1

Recognized net actuarial loss

     29        21        19        14                 

Settlements

     52                                      

 

 

Net periodic benefit cost

   $ 104        41        40        36        5        6   

 

 

Six Months Ended June 30

            

Service cost

   $ 72        63        62        56        1        1   

Interest cost

     79        68        82        84        14        14   

Expected return on plan assets

     (107     (87     (106     (92              

Amortization of prior service cost (credit)

     3        (4     3        (4     (3     (2

Recognized net actuarial loss (gain)

     57        42        38        29        1        (1

Settlements

     52                                      

 

 

Net periodic benefit cost

   $ 156        82        79        73        13        12   

 

 

During the first six months of 2015, we contributed $34 million to our domestic benefit plans and $71 million to our international benefit plans. In 2015, we expect to contribute approximately $110 million to our domestic qualified and nonqualified pension and postretirement benefit plans and $120 million to our international qualified and nonqualified pension and postretirement benefit plans.

During the three-month period ended June 30, 2015, we determined lump-sum benefit payments will exceed the sum of service and interest costs for the fiscal year for the U.S. qualified pension plan and certain U.S. non-qualified supplemental retirement plans. As a result, we recognized a proportionate share of prior actuarial losses from other comprehensive income as pension settlement expense of $52 million. In conjunction with the recognition of pension settlement expense, the assets and pension benefit obligation of the U.S. qualified pension plan were remeasured and the impact on the net pension liability was immaterial.

Due to an ongoing restructuring program in the Europe segment, we recognized additional expense of $10 million associated with employee special termination benefits during the three-month period ended June 30, 2015, and $60 million during the six-month period ended June 30, 2015, of which approximately 62 percent is expected to be recovered from partners.

During the three-month period ended June 30, 2015, there was an amendment to the other postretirement benefit plan. The benefit obligation decreased by $140 million for changes in the substantive plan made to retiree medical benefits. The $140 million decrease consists of a decrease of $91 million related to cost sharing changes for retirees for medical benefits, and a decrease of $49 million associated with excluding employees and retirees of Phillips 66 who were not enrolled in a ConocoPhillips retiree medical plan as of July 1, 2015. In conjunction with the recognition of the changes in the amendment, the benefit obligation was remeasured. At the remeasurement date, the benefit obligation decreased an additional $14 million related to changes in the discount rate and demographics of plan participants. The other postretirement benefits obligation decrease of $154 million resulted in a corresponding increase to other comprehensive income. The

 

19


measurement of the accumulated postretirement benefit obligation for the post-65 retiree medical plan assumes a health care cost trend rate of 2 percent in 2015 that increases to 5 percent in 2018.

Severance Accrual

As a result of the current business environment’s impact on our operating and capital plans, a reduction in our overall employee workforce occurred during 2015. The following table summarizes our severance accrual activity for the six-month period ended June 30, 2015:

 

              
     Millions of Dollars  

Balance at December 31, 2014

   $ 61   

Accruals

     88   

Accrual reversals

     (4

Benefit payments

     (84

Foreign currency translation adjustments

     (2

 

 

Balance at June 30, 2015

   $ 59   

 

 

Of the remaining balance at June 30, 2015, $21 million is classified as short-term.

Note 16—Related Party Transactions

We consider our equity method investments to be related parties. Significant transactions with related parties were:

 

                                                           
     Millions of Dollars  
     Three Months Ended
June 30
    Six Months Ended
June 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Operating revenues and other income

   $ 27        36        52        57   

Purchases

     25        52        47        100   

Operating expenses and selling, general and administrative expenses*

     17        14        35        32   

Net interest (income) expense**

     (2     (12     (4     (24

 

 

* 2014 has been restated to eliminate certain non-related party transactions.

** We paid interest to, or received interest from, various affiliates. See Note 4—Investments, Loans and Long-Term Receivables, for additional information on loans to affiliated companies.

Note 17—Segment Disclosures and Related Information

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

After agreeing to sell our Nigeria business in 2012, we completed the sale in the third quarter of 2014. Results for these operations have been reported as discontinued operations in all periods presented.

Corporate and Other represents costs not directly associated with an operating segment, such as most interest expense, corporate overhead and certain technology activities, including licensing revenues. Corporate assets include all cash and cash equivalents.

We evaluate performance and allocate resources based on net income attributable to ConocoPhillips. Intersegment sales are at prices that approximate market.

 

20


Analysis of Results by Operating Segment

 

                                                           
     Millions of Dollars  
     Three Months Ended
June 30
    Six Months Ended
June 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Sales and Other Operating Revenues

        

Alaska

   $ 1,338        2,407        2,388        4,593   

 

 

Lower 48

     3,176        5,530        6,315        12,114   

Intersegment eliminations

     (13     (22     (35     (60

 

   

 

 

 

Lower 48

     3,163        5,508        6,280        12,054   

 

   

 

 

 

Canada

     653        1,168        1,356        3,027   

Intersegment eliminations

     (79     (145     (189     (490

 

 

Canada

     574        1,023        1,167        2,537   

 

 

Europe

     1,775        2,745        3,329        5,954   

Intersegment eliminations

     (1     (44     (1     (44

 

 

Europe

     1,774        2,701        3,328        5,910   

 

 

Asia Pacific and Middle East

     1,286        2,151        2,674        4,100   

Other International

            3        (5     5   

Corporate and Other

     158        28        177        37   

 

 

Consolidated sales and other operating revenues

   $ 8,293        13,821        16,009        29,236   

 

 

Net Income (loss) Attributable to ConocoPhillips

        

Alaska

   $ 195        627        340        1,225   

Lower 48

     (293     265        (698     589   

Canada

     (166     182        (324     538   

Europe

     37        259        674        606   

Asia Pacific and Middle East

     328        845        723        1,587   

Other International

     (148     121        (241     92   

Corporate and Other

     (132     (251     (381     (486

Discontinued operations

            33               53   

 

 

Consolidated net income (loss) attributable to ConocoPhillips

   $ (179     2,081        93        4,204   

 

 

 

                             
     Millions of Dollars  
     June 30
2015
     December 31
2014
 
  

 

 

 

Total Assets

     

Alaska

   $ 13,193         12,655   

Lower 48

     29,545         30,185   

Canada

     20,623         21,764   

Europe

     15,420         16,125   

Asia Pacific and Middle East

     25,136         25,976   

Other International

     1,645         1,961   

Corporate and Other

     6,441         7,815   

Discontinued operations

             58   

 

 

Consolidated total assets

   $ 112,003         116,539   

 

 

Note 18—Income Taxes

Our effective tax rates from continuing operations for the second quarter and first six months of 2015 were negative 80 percent and positive 127 percent, respectively, compared with positive 40 percent and positive 42 percent for the same periods of 2014. The decrease in the effective tax rate for the second quarter was

 

21


primarily due to our overall pre-tax loss position, the effect of the 2015 Canadian tax law change generating a tax expense, discussed below, and pre-tax income in high tax jurisdictions, partially offset by pre-tax losses in low tax jurisdictions. The increase in the effective tax rate for the first six months of 2015 was primarily due to our overall pre-tax loss position; the effect of the first quarter 2015 U.K. tax law change generating a tax benefit, discussed below; and pre-tax losses in low tax jurisdictions, partially offset by the second quarter 2015 Canadian tax law change and pre-tax income in high tax jurisdictions.

In the United Kingdom, legislation was enacted on March 26, 2015, to decrease the overall U.K. upstream corporation tax rate from 62 percent to 50 percent effective January 1, 2015. As a result, a $555 million net tax benefit for revaluing the U.K. deferred tax liability is reflected in the “Provision (benefit) for income taxes” line on our consolidated income statement.

In Canada, legislation was enacted on June 29, 2015, to increase the overall Canadian corporation tax rate from 25 percent to 27 percent effective July 1, 2015. As a result, a $129 million net tax expense for revaluing the Canadian deferred tax liability is reflected in the “Provision (benefit) for income taxes” line on our consolidated income statement.

Note 19—New Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers,” which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU supersedes the revenue recognition requirements in FASB Accounting Standards Codification Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. Additional disclosures will be required to describe the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The ASU is currently effective for interim and annual periods beginning after December 15, 2016. Early adoption is not permitted. Entities may choose to adopt the standard using either a full retrospective approach or a modified retrospective approach. We are currently evaluating the impact of the adoption of this ASU.

In February 2015, the FASB issued ASU No. 2015-02, “Amendments to the Consolidation Analysis,” which amends existing requirements applicable to reporting entities that are required to evaluate whether certain legal entities should be consolidated. The ASU is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may choose to adopt the standard using either a full retrospective approach or a modified retrospective approach. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements and disclosures.

Note 20—Subsequent Events

In July 2015, we announced our plan to reduce future deepwater exploration spending. The decision will most significantly impact our operated Gulf of Mexico program, where we have provided a notice of termination of the contract for a Gulf of Mexico deepwater drillship. The drillship was scheduled for delivery in late 2015 to begin drilling our operated deepwater well inventory on a three-year term. Under the terms of the contract, we are subject to a termination fee that represents up to two years of contract day rates. The termination fee is reduced for cost savings when the rig is idle and without a contract, as well as if the rig is re-contracted to another party. As a result of this cancellation, we expect to record pre-tax charges in our third quarter 2015 earnings of up to $400 million for the rig termination fee and approximately $60 million for the write-off of certain capitalized rig-related costs.

 

22


Supplementary Information—Condensed Consolidating Financial Information

We have various cross guarantees among ConocoPhillips, ConocoPhillips Company and ConocoPhillips Canada Funding Company I, with respect to publicly held debt securities. ConocoPhillips Company is 100 percent owned by ConocoPhillips. ConocoPhillips Canada Funding Company I is an indirect, 100 percent owned subsidiary of ConocoPhillips Company. ConocoPhillips and ConocoPhillips Company have fully and unconditionally guaranteed the payment obligations of ConocoPhillips Canada Funding Company I, with respect to its publicly held debt securities. Similarly, ConocoPhillips has fully and unconditionally guaranteed the payment obligations of ConocoPhillips Company with respect to its publicly held debt securities. In addition, ConocoPhillips Company has fully and unconditionally guaranteed the payment obligations of ConocoPhillips with respect to its publicly held debt securities. All guarantees are joint and several. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:

 

   

ConocoPhillips, ConocoPhillips Company and ConocoPhillips Canada Funding Company I (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting).

 

   

All other nonguarantor subsidiaries of ConocoPhillips.

 

   

The consolidating adjustments necessary to present ConocoPhillips’ results on a consolidated basis.

This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and notes.

In April 2015, ConocoPhillips received a $2 billion return of capital from ConocoPhillips Company to settle certain accumulated intercompany balances. The transaction, reflected in the second quarter 2015 Condensed Consolidating Financial Information for ConocoPhillips and ConocoPhillips Company, had no impact on our consolidated financial statements.

 

23


                                                                                         
     Millions of Dollars  
     Three Months Ended June 30, 2015  
Income Statement    ConocoPhillips     ConocoPhillips
Company
    ConocoPhillips
Canada
Funding
Company I
    All Other
Subsidiaries
    Consolidating
Adjustments
    Total
Consolidated
 

Revenues and Other Income

            

Sales and other operating revenues

   $        3,102               5,191               8,293   

Equity in earnings of affiliates

     (120     215               138        25        258   

Gain on dispositions

            2               50               52   

Other income

            10               47               57   

Intercompany revenues

     18        82        63        952        (1,115       

 

 

Total Revenues and Other Income

     (102     3,411        63        6,378        (1,090     8,660   

 

 

Costs and Expenses

            

Purchased commodities

            2,568               1,610        (948     3,230   

Production and operating expenses

            395               1,405        (2     1,798   

Selling, general and administrative expenses

     3        162               53               218   

Exploration expenses

            143               406               549   

Depreciation, depletion and amortization

            301               2,028               2,329   

Impairments

                          78               78   

Taxes other than income taxes

            50               175               225   

Accretion on discounted liabilities

            15               107               122   

Interest and debt expense

     121        111        57        86        (165     210   

Foreign currency transaction (gains) losses

     (16     1        146        (139            (8

 

 

Total Costs and Expenses

     108        3,746        203        5,809        (1,115     8,751   

 

 

Income (loss) from continuing operations before income taxes

     (210     (335     (140     569        25        (91

Provision (benefit) for income taxes

     (31     (215     (20     339               73   

 

 

Net income (loss)

     (179     (120     (120     230        25        (164

Less: net income attributable to noncontrolling interests

                          (15            (15

 

 

Net Income (Loss) Attributable to ConocoPhillips

   $ (179     (120     (120     215        25        (179

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ 769        828        (33     988        (1,783     769   

 

 
Income Statement    Three Months Ended June 30, 2014  

Revenues and Other Income

            

Sales and other operating revenues

   $        5,105               8,716               13,821   

Equity in earnings of affiliates

     2,119        2,514               539        (4,500     672   

Gain on dispositions

            2               5               7   

Other income

            27               174               201   

Intercompany revenues

     19        111        71        1,598        (1,799       

 

 

Total Revenues and Other Income

     2,138        7,759        71        11,032        (6,299     14,701   

 

 

Costs and Expenses

            

Purchased commodities

            4,431               2,631        (1,567     5,495   

Production and operating expenses

            481               1,596        (47     2,030   

Selling, general and administrative expenses

     3        156               59               218   

Exploration expenses

            238               279               517   

Depreciation, depletion and amortization

            261               1,809               2,070   

Impairments

            17                             17   

Taxes other than income taxes

            71               541               612   

Accretion on discounted liabilities

            15               105               120   

Interest and debt expense

     148        62        58        72        (185     155   

Foreign currency transaction (gains) losses

     (22     2        151        (124            7   

 

 

Total Costs and Expenses

     129        5,734        209        6,968        (1,799     11,241   

 

 

Income (loss) from continuing operations before income taxes

     2,009        2,025        (138     4,064        (4,500     3,460   

Provision (benefit) for income taxes

     (39     (94     (4     1,532               1,395   

 

 

Income (Loss) From Continuing Operations

     2,048        2,119        (134     2,532        (4,500     2,065   

Income from discontinued operations

     33        33               33        (66     33   

 

 

Net income (loss)

     2,081        2,152        (134     2,565        (4,566     2,098   

Less: net income attributable to noncontrolling interests

                          (17            (17

 

 

Net Income (Loss) Attributable to ConocoPhillips

   $ 2,081        2,152        (134     2,548        (4,566     2,081   

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ 2,777        2,848        (14     3,220        (6,054     2,777   

 

 

 

24


                                                                                         
     Millions of Dollars  
     Six Months Ended June 30, 2015  
Income Statement    ConocoPhillips     ConocoPhillips
Company
    ConocoPhillips
Canada
Funding

Company I
    All Other
Subsidiaries
    Consolidating
Adjustments
    Total
Consolidated
 

Revenues and Other Income

            

Sales and other operating revenues

   $        6,035               9,974               16,009   

Equity in earnings of affiliates

     261        1,028               716        (1,542     463   

Gain on dispositions

            33               71               104   

Other income

            17               69               86   

Intercompany revenues

     37        180        127        1,795        (2,139       

 

 

Total Revenues and Other Income

     298        7,293        127        12,625        (3,681     16,662   

 

 

Costs and Expenses

            

Purchased commodities

            5,128               3,104        (1,765     6,467   

Production and operating expenses

            795               2,839        (34     3,600   

Selling, general and administrative expenses

     6        282               98        (9     377   

Exploration expenses

            343               688               1,031   

Depreciation, depletion and amortization

            560               3,900               4,460   

Impairments

                          94               94   

Taxes other than income taxes

            119               330               449   

Accretion on discounted liabilities

            29               214               243   

Interest and debt expense

     242        212        114        175        (331     412   

Foreign currency transaction (gains) losses

     47               (232     161               (24

 

 

Total Costs and Expenses

     295        7,468        (118     11,603        (2,139     17,109   

 

 

Income (loss) from continuing operations before income taxes

     3        (175     245        1,022        (1,542     (447

Benefit from income taxes

     (90     (436     (9     (34            (569

 

 

Income From Continuing Operations

     93        261        254        1,056        (1,542     122   

Net income

     93        261        254        1,056        (1,542     122   

Less: net income attributable to noncontrolling interests

                          (29            (29

 

 

Net Income Attributable to ConocoPhillips

   $ 93        261        254        1,027        (1,542     93   

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ (1,646     (1,478     (3     (886     2,367        (1,646

 

 
Income Statement    Six Months Ended June 30, 2014  

Revenues and Other Income

            

Sales and other operating revenues

   $        11,248               17,988               29,236   

Equity in earnings of affiliates*

     4,331        4,965               1,260        (9,312     1,244   

Gain on dispositions

            1               15               16   

Other income

            45               208               253   

Intercompany revenues*

     39        265        142        3,241        (3,687       

 

 

Total Revenues and Other Income

     4,370        16,524        142        22,712        (12,999     30,749   

 

 

Costs and Expenses

            

Purchased commodities

            9,948               5,921        (3,247     12,622   

Production and operating expenses

            841               3,134        (50     3,925   

Selling, general and administrative expenses

     6        280               128        (14     400   

Exploration expenses

            382               431               813   

Depreciation, depletion and amortization

            503               3,459               3,962   

Impairments

            18                             18   

Taxes other than income taxes

            164               1,099               1,263   

Accretion on discounted liabilities

            29               208               237   

Interest and debt expense*

     307        132        116        147        (376     326   

Foreign currency transaction (gains) losses

     3        2        12        8               25   

 

 

Total Costs and Expenses

     316        12,299        128        14,535        (3,687     23,591   

 

 

Income from continuing operations before income taxes

     4,054        4,225        14        8,177        (9,312     7,158   

Provision (benefit) for income taxes

     (97     (106     (2     3,181               2,976   

 

 

Income From Continuing Operations

     4,151        4,331        16        4,996        (9,312     4,182   

Income from discontinued operations

     53        53               53        (106     53   

 

 

Net income

     4,204        4,384        16        5,049        (9,418     4,235   

Less: net income attributable to noncontrolling interests

                          (31            (31

 

 

Net Income Attributable to ConocoPhillips

   $ 4,204        4,384        16        5,018        (9,418     4,204   

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ 4,700        4,880        (5     5,475        (10,350     4,700   

 

 
* “Interest and debt expense” for ConocoPhillips was revised to reflect contractually agreed interest rates, with offsetting adjustments in the “Equity in earnings of affiliates” and “Intercompany revenues” lines for ConocoPhillips, ConocoPhillips Company and All Other Subsidiaries. There was no impact to Total Consolidated balances.

 

25


                                                                                         
     Millions of Dollars  
     June 30, 2015  
Balance Sheet    ConocoPhillips     ConocoPhillips
Company
     ConocoPhillips
Canada
Funding
Company I
    All Other
Subsidiaries
     Consolidating
Adjustments
    Total
Consolidated
 

Assets

              

Cash and cash equivalents

   $        35         8        3,770                3,813   

Accounts and notes receivable

     12        1,950         15        6,492         (3,290     5,179   

Inventories

            199                1,078                1,277   

Prepaid expenses and other current assets

     1        656         20        1,043         (45     1,675   

 

 

Total Current Assets

     13        2,840         43        12,383         (3,335     11,944   

Investments, loans and long-term receivables*

     52,063        70,361         3,777        30,775         (132,324     24,652   

Net properties, plants and equipment

            9,924                64,463                74,387   

Other assets

     7        143         300        1,310         (740     1,020   

 

 

Total Assets

   $ 52,083        83,268         4,120        108,931         (136,399     112,003   

 

 

Liabilities and Stockholders’ Equity

              

Accounts payable

   $        4,153         4        5,002         (3,290     5,869   

Short-term debt

     (9     1         5        141                138   

Accrued income and other taxes

            128                752                880   

Employee benefit obligations

            445                175                620   

Other accruals

     170        273         63        766         (45     1,227   

 

 

Total Current Liabilities

     161        5,000         72        6,836         (3,335     8,734   

Long-term debt

     7,513        10,661         2,969        3,644                24,787   

Asset retirement obligations and accrued environmental costs

            1,320                9,247                10,567   

Deferred income taxes

            331                14,048         (6     14,373   

Employee benefit obligations

            1,991                858                2,849   

Other liabilities and deferred credits*

     2,348        6,845         1,072        16,542         (25,083     1,724   

 

 

Total Liabilities

     10,022        26,148         4,113        51,175         (28,424     63,034   

Retained earnings

     36,258        21,707         (842     18,366         (32,710     42,779   

Other common stockholders’ equity

     5,803        35,413         849        39,041         (75,265     5,841   

Noncontrolling interests

                           349                349   

 

 

Total Liabilities and Stockholders’ Equity

   $ 52,083        83,268         4,120        108,931         (136,399     112,003   

 

 

*Includes intercompany loans.

              
Balance Sheet    December 31, 2014  

Assets

              

Cash and cash equivalents

   $        770         7        4,285                5,062   

Accounts and notes receivable

     20        2,813         22        6,671         (2,719     6,807   

Inventories

            281                1,050                1,331   

Prepaid expenses and other current assets

     6        754         15        1,138         (45     1,868   

 

 

Total Current Assets

     26        4,618         44        13,144         (2,764     15,068   

Investments, loans and long-term receivables*

     55,568        70,732         3,965        32,467         (137,593     25,139   

Net properties, plants and equipment

            9,730                65,714                75,444   

Other assets

     40        67         208        1,338         (765     888   

 

 

Total Assets

     55,634        85,147         4,217        112,663         (141,122     116,539   

 

 

Liabilities and Stockholders’ Equity

              

Accounts payable

     1        4,149         14        6,581         (2,719     8,026   

Short-term debt

     (5     6         5        176                182   

Accrued income and other taxes

            117                934                1,051   

Employee benefit obligations

            595                283                878   

Other accruals

     170        337         71        868         (46     1,400   

 

 

Total Current Liabilities

     166        5,204         90        8,842         (2,765     11,537   

Long-term debt

     7,541        8,197         2,974        3,671                22,383   

Asset retirement obligations and accrued environmental costs

            1,328                9,319                10,647   

Deferred income taxes

            265                14,811         (6     15,070   

Employee benefit obligations

            2,162                802                2,964   

Other liabilities and deferred credits*

     2,577        7,391         1,142        17,218         (26,663     1,665   

 

 

Total Liabilities

     10,284        24,547         4,206        54,663         (29,434     64,266   

Retained earnings

     37,983        21,448         (1,096     17,355         (31,186     44,504   

Other common stockholders’ equity

     7,367        39,152         1,107        40,283         (80,502     7,407   

Noncontrolling interests

                           362                362   

 

 

Total Liabilities and Stockholders’ Equity

   $ 55,634        85,147         4,217        112,663         (141,122     116,539   

 

 

*Includes intercompany loans.

 

26


                                                                                         
     Millions of Dollars  
     Six Months Ended June 30, 2015  
Statement of Cash Flows    ConocoPhillips     ConocoPhillips
Company
    ConocoPhillips
Canada
Funding
Company I
     All Other
Subsidiaries
    Consolidating
Adjustments
    Total
Consolidated
 

Cash Flows From Operating Activities

             

Net Cash Provided by (Used in) Operating Activities

     (124     348        1         3,623        194        4,042   

 

 

Cash Flows From Investing Activities

             

Capital expenditures and investments

            (1,642             (4,773     676        (5,739

Working capital changes associated with investing activities

            (27             (651            (678

Proceeds from asset dispositions

     2,000        94                205        (2,005     294   

Long-term advances/loans—related parties

            (179             (551     730          

Collection of advances/loans—related parties

                           152        (100     52   

Intercompany cash management

     (231     (574             805                 

Other

            292                (1            291   

 

 

Net Cash Provided by (Used in) Investing Activities

     1,769        (2,036             (4,814     (699     (5,780

 

 

Cash Flows From Financing Activities

             

Issuance of debt

            3,049                179        (730     2,498   

Repayment of debt

            (100             (62     100        (62

Issuance of company common stock

     172                              (218     (46

Dividends paid

     (1,819                    (24     24        (1,819

Other

     2        (1,996             630        1,329        (35

 

 

Net Cash Provided by (Used in) Financing Activities

     (1,645     953                723        505        536   

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

                           (47            (47

 

 

Net Change in Cash and Cash Equivalents

            (735     1         (515            (1,249

Cash and cash equivalents at beginning of period

            770        7         4,285               5,062   

 

 

Cash and Cash Equivalents at End of Period

   $        35        8         3,770               3,813   

 

 
Statement of Cash Flows    Six Months Ended June 30, 2014*  

Cash Flows From Operating Activities

             

Net cash provided by continuing operating activities

   $ 14,876        55        31         9,868        (15,073     9,757   

Net cash provided by discontinued operations

            170                232        (272     130   

 

 

Net Cash Provided by Operating Activities

     14,876        225        31         10,100        (15,345     9,887   

 

 

Cash Flows From Investing Activities

             

Capital expenditures and investments

            (1,981             (7,106     946        (8,141

Working capital changes associated with investing activities

            40                44               84   

Proceeds from asset dispositions

     16,912        13                60        (16,922     63   

Net purchases of short-term investments

                           (8            (8

Long-term advances/loans—related parties

            (546             (7     553          

Collection of advances/loans—related parties

            30                47               77   

Intercompany cash management

     (29,908     33,248                (3,340              

Other

            103                (7            96   

 

 

Net cash provided by (used in) continuing investing activities

     (12,996     30,907                (10,317     (15,423     (7,829

Net cash used in discontinued operations

            (1             (63     1        (63

 

 

Net Cash Provided by (Used in) Investing Activities

     (12,996     30,906                (10,380     (15,422     (7,892

 

 

Cash Flows From Financing Activities

             

Issuance of debt

                           553        (553       

Repayment of debt

     (400                    (50            (450

Issuance of company common stock

     234                              (188     46   

Dividends paid

     (1,711     (15,088             (275     15,363        (1,711

Other

     (3     (16,876             875        15,976        (28

 

 

Net cash provided by (used in) continuing financing activities

     (1,880     (31,964             1,103        30,598        (2,143

Net cash used in discontinued operations

                           (169     169          

 

 

Net Cash Provided by (Used in) Financing Activities

     (1,880     (31,964             934