10-Q 1 d84505d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

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 September 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 1,234,641,991 shares of common stock, $.01 par value, outstanding at September 30, 2015.

 

 

 


Table of Contents

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

     25   

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

     30   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     51   

Item 4. Controls and Procedures

     51   

Part II—Other Information

  

Item 1A. Risk Factors

     51   

Item 6. Exhibits

     52   

Signature

     53   


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

 

              
Consolidated Income Statement      ConocoPhillips   

 

                                                           
     Millions of Dollars  
     Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Revenues and Other Income

        

Sales and other operating revenues

   $ 7,262        12,080        23,271        41,316   

Equity in earnings of affiliates

     223        764        686        2,008   

Gain on dispositions

     18        4        122        20   

Other income

     4        69        90        322   

 

 

Total Revenues and Other Income

     7,507        12,917        24,169        43,666   

 

 

Costs and Expenses

        

Purchased commodities

     3,269        4,703        9,736        17,325   

Production and operating expenses

     1,834        2,041        5,434        5,966   

Selling, general and administrative expenses

     293        203        670        603   

Exploration expenses

     1,061        459        2,092        1,272   

Depreciation, depletion and amortization

     2,271        2,096        6,731        6,058   

Impairments

     24        108        118        126   

Taxes other than income taxes

     206        493        655        1,756   

Accretion on discounted liabilities

     122        120        365        357   

Interest and debt expense

     240        149        652        475   

Foreign currency transaction (gains) losses

     (72     (8     (96     17   

 

 

Total Costs and Expenses

     9,248        10,364        26,357        33,955   

 

 

Income (loss) from continuing operations before income taxes

     (1,741     2,553        (2,188     9,711   

Provision (benefit) for income taxes

     (685     904        (1,254     3,880   

 

 

Income (Loss) From Continuing Operations

     (1,056     1,649        (934     5,831   

Income from discontinued operations*

            1,078               1,131   

 

 

Net income (loss)

     (1,056     2,727        (934     6,962   

Less: net income attributable to noncontrolling interests

     (15     (23     (44     (54

 

 

Net Income (Loss) Attributable to ConocoPhillips

   $ (1,071     2,704        (978     6,908   

 

 

Amounts Attributable to ConocoPhillips Common Shareholders:

        

Income (loss) from continuing operations

   $ (1,071     1,626        (978     5,777   

Income from discontinued operations

            1,078               1,131   

 

 

Net income (loss)

   $ (1,071     2,704        (978     6,908   

 

 

Net Income (Loss) Attributable to ConocoPhillips Per Share of

Common Stock (dollars)

        

Basic

        

Continuing operations

   $ (0.87     1.31        (0.80     4.67   

Discontinued operations

            0.87               0.91   

 

 

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

   $ (0.87     2.18        (0.80     5.58   

 

 

Diluted

        

Continuing operations

   $ (0.87     1.31        (0.80     4.63   

Discontinued operations

            0.86               0.91   

 

 

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

   $ (0.87     2.17        (0.80     5.54   

 

 

Dividends Paid Per Share of Common Stock (dollars)

   $ 0.74        0.73        2.20        2.11   

 

 

Average Common Shares Outstanding (in thousands)

        

Basic

     1,242,125        1,238,234        1,241,319        1,236,431   

Diluted

     1,242,125        1,247,436        1,241,319        1,246,788   

 

 
*Net of provision (benefit) for income taxes on discontinued operations of:    $        (6            16   

See Notes to Consolidated Financial Statements.

 

1


Table of Contents
              
Consolidated Statement of Comprehensive Income      ConocoPhillips   

 

                                                           
     Millions of Dollars  
     Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Net Income (Loss)

   $ (1,056     2,727        (934     6,962   

Other comprehensive income (loss)

        

Defined benefit plans

        

Prior service credit arising during the period

     163               303          

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

     (5     (2     (9     (5

Net actuarial loss arising during the period

     (231            (216       

Reclassification adjustment for amortization of net actuarial losses included in net income (loss)

     126        32        278        98   

Nonsponsored plans*

                          5   

Income taxes on defined benefit plans

     (18     (11     (128     (34

 

 

Defined benefit plans, net of tax

     35        19        228        64   

 

 

Foreign currency translation adjustments

     (2,544     (1,947     (4,493     (1,501

Income taxes on foreign currency translation adjustments

     25        15        42        20   

 

 

Foreign currency translation adjustments, net of tax

     (2,519     (1,932     (4,451     (1,481

 

 

Other Comprehensive Loss, Net of Tax

     (2,484     (1,913     (4,223     (1,417

 

 

Comprehensive Income (Loss)

     (3,540     814        (5,157     5,545   

Less: comprehensive income attributable to noncontrolling interests

     (15     (23     (44     (54

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ (3,555     791        (5,201     5,491   

 

 

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

See Notes to Consolidated Financial Statements.

 

2


Table of Contents
              
Consolidated Balance Sheet      ConocoPhillips   

 

                             
     Millions of Dollars  
     September 30     December 31  
     2015     2014  
  

 

 

 

Assets

    

Cash and cash equivalents

   $ 2,413        5,062   

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

     4,332        6,675   

Accounts and notes receivable—related parties

     132        132   

Inventories

     1,143        1,331   

Prepaid expenses and other current assets

     1,644        1,868   

 

 

Total Current Assets

     9,664        15,068   

Investments and long-term receivables

     22,806        24,335   

Loans and advances—related parties

     696        804   

Net properties, plants and equipment (net of accumulated depreciation, depletion and amortization of $74,420 million in 2015 and $70,786 million in 2014)

     71,828        75,444   

Other assets

     955        888   

 

 

Total Assets

   $ 105,949        116,539   

 

 

Liabilities

    

Accounts payable

   $ 5,173        7,982   

Accounts payable—related parties

     38        44   

Short-term debt

     175        182   

Accrued income and other taxes

     659        1,051   

Employee benefit obligations

     861        878   

Other accruals

     1,381        1,400   

 

 

Total Current Liabilities

     8,287        11,537   

Long-term debt

     24,716        22,383   

Asset retirement obligations and accrued environmental costs

     10,279        10,647   

Deferred income taxes

     13,317        15,070   

Employee benefit obligations

     2,864        2,964   

Other liabilities and deferred credits

     1,931        1,665   

 

 

Total Liabilities

     61,394        64,266   

 

 

Equity

    

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

    

Issued (2015—1,776,872,664 shares; 2014—1,773,583,368 shares)

    

Par value

     18        18   

Capital in excess of par

     46,311        46,071   

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

     (36,780     (36,780

Accumulated other comprehensive loss

     (6,125     (1,902

Retained earnings

     40,786        44,504   

 

 

Total Common Stockholders’ Equity

     44,210        51,911   

Noncontrolling interests

     345        362   

 

 

Total Equity

     44,555        52,273   

 

 

Total Liabilities and Equity

   $ 105,949        116,539   

 

 

See Notes to Consolidated Financial Statements.

 

3


Table of Contents
              
Consolidated Statement of Cash Flows      ConocoPhillips   

 

                             
     Millions of Dollars  
     Nine Months Ended
September 30
 
     2015     2014*  
  

 

 

 

Cash Flows From Operating Activities

    

Net income (loss)

   $ (934     6,962   

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

    

Depreciation, depletion and amortization

     6,731        6,058   

Impairments

     118        126   

Dry hole costs and leasehold impairments

     1,238        668   

Accretion on discounted liabilities

     365        357   

Deferred taxes

     (1,284     1,024   

Undistributed equity earnings

     (79     334   

Gain on dispositions

     (122     (20

Income from discontinued operations

            (1,131

Other

     (259     (536

Working capital adjustments

    

Decrease in accounts and notes receivable

     1,913        634   

Decrease (increase) in inventories

     159        (162

Decrease (increase) in prepaid expenses and other current assets

     255        (189

Decrease in accounts payable

     (1,618     (581

Increase (decrease) in taxes and other accruals

     (507     57   

 

 

Net cash provided by continuing operating activities

     5,976        13,601   

Net cash provided by discontinued operations

            157   

 

 

Net Cash Provided by Operating Activities

     5,976        13,758   

 

 

Cash Flows From Investing Activities

    

Capital expenditures and investments

     (7,913     (12,729

Working capital changes associated with investing activities

     (842     394   

Proceeds from asset dispositions

     323        1,434   

Net purchases of short-term investments

            (109

Collection of advances/loans—related parties

     105        143   

Other

     298        (454

 

 

Net cash used in continuing investing activities

     (8,029     (11,321

Net cash used in discontinued operations

            (73

 

 

Net Cash Used in Investing Activities

     (8,029     (11,394

 

 

Cash Flows From Financing Activities

    

Issuance of debt

     2,498          

Repayment of debt

     (92     (505

Issuance of company common stock

     (69     27   

Dividends paid

     (2,741     (2,618

Other

     (50     (20

 

 

Net Cash Used in Financing Activities

     (454     (3,116

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

     (142     (86

 

 

Net Change in Cash and Cash Equivalents

     (2,649     (838

Cash and cash equivalents at beginning of period

     5,062        6,246   

 

 

Cash and Cash Equivalents at End of Period

   $ 2,413        5,408   

 

 

*Certain amounts have been reclassified to conform to current-period presentation. See Note 15–Cash Flow Information, in the Notes to the Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

 

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Table of Contents
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 September 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 5—Investments, Loans and Long-Term Receivables, and Note 10—Guarantees, for additional information.

Note 3—Inventories

Inventories consisted of the following:

 

                             
     Millions of Dollars  
     September 30
2015
     December 31
2014
 
  

 

 

 

Crude oil and natural gas

   $ 388         538   

Materials and supplies

     755         793   

 

 
   $ 1,143         1,331   

 

 

Inventories valued on the last-in, first-out (LIFO) basis totaled $270 million and $440 million at September 30, 2015 and December 31, 2014, respectively.

 

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Table of Contents

Note 4—Assets Held for Sale

On October 5, 2015, we entered into a definitive agreement to sell certain western Canada proved and unproved properties. The transaction is expected to close in the fourth quarter of 2015. As of September 30, 2015, the net carrying value of these assets was approximately $129 million, which primarily included $375 million of properties, plants and equipment (PP&E) and $235 million of asset retirement obligations.

On October 30, 2015, we entered into a definitive agreement to sell certain gas producing properties and gathering facilities in Texas and Louisiana. The transaction is expected to close late fourth quarter 2015 or early 2016. As of September 30, 2015, the net carrying value of these assets was approximately $232 million, which primarily included $358 million of PP&E and $126 million of asset retirement obligations.

Note 5—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 September 30, 2015, $8.4 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 10—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 September 30, 2015, the book value of our equity method investment in APLNG was $11,530 million, net of a $1,522 million reduction due to cumulative foreign currency translation effects. The balance is included in the “Investments and long-term receivables” line on our consolidated balance sheet.

FCCL

At September 30, 2015, the book value of our equity method investment in FCCL was $8,346 million, net of a $1,667 million reduction due to cumulative foreign currency 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 September 30, 2015, significant loans to affiliated companies included $804 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.”

 

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Table of Contents

Note 6—Suspended Wells, Unproved Property Impairments and Other Exploration Expenses

The capitalized cost of suspended wells at September 30, 2015, was $1,466 million, an increase of $167 million from $1,299 million at year-end 2014. Three suspended wells in Malaysia totaling $45 million were charged to dry hole expense during the first nine 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.

In the third quarter of 2015, we decided not to conduct further activity on certain Gulf of Mexico leases and to relinquish our Palangkaraya Production Sharing Contract in Indonesia. Accordingly, we recorded pre-tax impairments of $240 million and $105 million, respectively, for the associated carrying value of capitalized undeveloped leasehold cost. Additionally, in line with our July 2015 announcement of plans to reduce future deepwater exploration spending, we have recognized cancellation costs of $335 million and written off $48 million of capitalized rig costs in relation to the termination of our Gulf of Mexico deepwater drillship contract with Ensco in the Lower 48 segment in the third quarter of 2015.

These charges are included in the “Exploration expenses” line on our consolidated income statement.

Note 7—Impairments

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

 

                                                           
     Millions of Dollars  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2015      2014      2015      2014  
  

 

 

    

 

 

 

Alaska

   $ 2         3         9         3   

Lower 48

     6         102         6         119   

Europe

     9         1         96         1   

Asia Pacific and Middle East

     6                 6           

Corporate and Other

     1         2         1         3   

 

 
   $ 24         108         118         126   

 

 

The nine-month period of 2015 included impairments in our Europe segment of $96 million, primarily as a result of lower natural gas prices and reduced volume forecasts.

The three- and nine-month periods of 2014 included an impairment in our Lower 48 segment of $102 million, primarily as a result of reduced volume forecasts.

Unproved property impairments, included in the “Exploration expenses” line on our consolidated income statement, are further discussed in Note 6—Suspended Wells, Unproved Property Impairments and Other Exploration Expenses.

 

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Note 8—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 September 30, 2015 and December 31, 2014, we had no direct outstanding borrowings under the revolving credit facility, with no letters of credit as of September 30, 2015 or December 31, 2014. Under the ConocoPhillips Qatar Funding Ltd. commercial paper program, $803 million of commercial paper was outstanding at September 30, 2015, compared with $860 million at December 31, 2014. Since we had $803 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 September 30, 2015.

At September 30, 2015, we classified $695 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.

Note 9—Noncontrolling Interests

Activity attributable to common stockholders’ equity and noncontrolling interests for the first nine 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 (loss)

     (978     44        (934     6,908        54        6,962   

Dividends

     (2,741            (2,741     (2,618            (2,618

Distributions to noncontrolling interests

            (62     (62            (69     (69

Other changes, net*

     (3,982     1        (3,981     (1,106            (1,106

 

 

Balance at September 30

   $ 44,210        345        44,555        55,274        387        55,661   

 

 

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

 

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Note 10—Guarantees

At September 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 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 September 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 September 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 $90 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 September 30, 2015, is $3.1 billion based upon our pro-rata share of the facility used at that date. At September 30, 2015, the carrying value of this guarantee is approximately $114 million.

 

   

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 $1.1 billion ($1.9 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 $160 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 project finance reserve accounts, 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.

 

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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. In addition we have entered into agreements involving leased facilities that provided for certain indemnifications. These agreements include indemnifications for taxes, environmental liabilities, employee claims, property damage, costs, fees 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 September 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 September 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 11—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 $1.6 billion. At September 30, 2015, the carrying value of this guarantee is approximately $100 million and the remaining term is nine years. Because Phillips 66 has 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 11—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

 

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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.

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 September 30, 2015, our balance sheet included a total environmental accrual of $286 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

 

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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 September 30, 2015, we had performance obligations secured by letters of credit of $388 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, 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 September 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.

 

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Note 12—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  
     September 30
2015
     December 31
2014
 
  

 

 

 

Assets

     

Prepaid expenses and other current assets

   $ 1,532         4,500   

Other assets

     78         157   

Liabilities

     

Other accruals

     1,553         4,426   

Other liabilities and deferred credits

     68         144   

 

 

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
September 30
    Nine Months Ended
September 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Sales and other operating revenues

   $ 89        (185     117        236   

Other income

            1        1        3   

Purchased commodities

     (85     163        (88     (221

 

 

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

 

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

 

 

 

Commodity

    

Natural gas and power (billions of cubic feet equivalent)

    

Fixed price

     (17     (11

Basis

     (18     18   

 

 

 

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Foreign Currency Exchange Derivatives

We have foreign currency exchange rate risk resulting from international operations. Our foreign currency exchange derivative activity primarily relates to managing our cash-related 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  
     September 30
2015
     December 31
2014
 
  

 

 

 

Assets

     

Prepaid expenses and other current assets

   $ 40         1   

Liabilities

     

Other accruals

     3         1   

 

 

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

 

                                                           
     Millions of Dollars  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2015     2014      2015     2014  
  

 

 

    

 

 

 

Foreign currency transaction (gains) losses

   $ (17     5         (30     (2

 

 

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

 

                                            
     In Millions
Notional Currency
 
     September 30
2015
     December 31
2014
 
  

 

 

Sell U.S. dollar, buy other currencies*

   USD              7   

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

   USD      18         44   

Buy British pound, sell other currencies***

   GBP      472         20   

 

 
    * Primarily Canadian dollar.
  ** 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.

 

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

 

 

 

Cash

   $ 546         946   

Money Market Funds

             50   

Time deposits

     

Remaining maturities from 1 to 90 days

     1,867         3,726   

Commercial paper

     

Remaining maturities from 1 to 90 days

             340   

 

 
   $ 2,413         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; 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 September 30, 2015 and December 31, 2014, was $122 million and $150 million, respectively. For these instruments, no collateral was posted as of September 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 September 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 $122 million of additional collateral, either with cash or letters of credit.

 

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Note 13—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.

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  
     September 30, 2015      December 31, 2014  
     Level 1      Level 2      Level 3      Total      Level 1      Level 2      Level 3      Total  
  

 

 

    

 

 

 

Assets

                       

Deferred compensation investments

   $ 22                         22         297                         297   

Commodity derivatives

     1,344         198         68         1,610         4,221         361         75         4,657   

 

 

Total assets

   $ 1,366         198         68         1,632         4,518         361         75         4,954   

 

 

Liabilities

                       

Commodity derivatives

   $ 1,378         228         15         1,621         4,200         354         16         4,570   

 

 

Total liabilities

   $ 1,378         228         15         1,621         4,200         354         16         4,570   

 

 

 

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

 

 

 

September 30, 2015

                 

Assets

   $ 1,610         1,435         175                 17         158   

Liabilities

     1,621         1,435         186         32         9         145   

 

 

December 31, 2014

                 

Assets

   $ 4,657         4,352         305         8         28         269   

Liabilities

     4,570         4,352         218         4         22         192   

 

 

At September 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
 
  

 

 

    

 

 

 

September 30, 2015

        

Net PP&E (held for use)

   $ 42         42         86   

Net PP&E (unproved property)

     104         104         240   

 

 

*Represents the fair value at the time of the impairment.

Net 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.

Net PP&E unproved property is comprised of unproved leaseholds impaired to our best estimate of sales value less costs to sell.

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.

 

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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 5—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  
     September 30      December 31      September 30      December 31  
     2015      2014      2015      2014  
  

 

 

    

 

 

 

Financial assets

           

Deferred compensation investments

   $ 22         297         22         297   

Commodity derivatives

     175         297         175         297   

Total loans and advances—related parties

     805         913         805         913   

Financial liabilities

           

Total debt, excluding capital leases

     24,063         21,707         26,460         25,191   

Commodity derivatives

     154         214         154         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.

Note 14—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
Loss
 
  

 

 

 

December 31, 2014

   $ (1,261     (641     (1,902

Other comprehensive income (loss)

     228        (4,451     (4,223

 

 

September 30, 2015

   $ (1,033     (5,092     (6,125

 

 

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.

 

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

 

                                                           
     Millions of Dollars  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2015      2014      2015      2014  
  

 

 

    

 

 

 

Defined benefit plans

   $ 77         19         173         59   

 

 
Above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of:    $ 44         11         96         34   

See Note 16Employee Benefit Plans, for additional information.

Note 15—Cash Flow Information

 

                             
     Millions of Dollars  
     Nine Months Ended
September 30
 
     2015      2014  
  

 

 

 

Cash Payments

     

Interest

   $ 633         491   

Income taxes*

     376         3,359   

 

 

Net Purchases of Short-Term Investments

     

Short-term investments purchased

   $         (876

Short-term investments sold

             767   

 

 
   $         (109

 

 

*Net of $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 $394 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 nine months ended September 30, 2014. There was no impact to “Cash and Cash Equivalents at End of Period.”

 

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Table of Contents

Note 16—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 September 30

            

Service cost

   $ 36        31        31        27        2        1   

Interest cost

     41        34        42        42        5        8   

Expected return on plan assets

     (50     (44     (53     (45              

Amortization of prior service cost (credit)

     1        (1     1        (2     (6     (1

Recognized net actuarial loss (gain)

     27        20        19        14               (1

Settlements

     79                                      

Curtailment loss

     35                                      

 

 

Net periodic benefit cost

   $ 169        40        40        36        1        7   

 

 

Nine Months Ended September 30

            

Service cost

   $ 108        94        93        83        3        2   

Interest cost

     120        102        124        126        19        22   

Expected return on plan assets

     (157     (131     (159     (137              

Amortization of prior service cost (credit)

     4        (5     4        (6     (9     (3

Recognized net actuarial loss (gain)

     84        62        57        43        1        (2

Settlements

     131                                      

Curtailment loss

     35                                      

 

 

Net periodic benefit cost

   $ 325        122        119        109        14        19   

 

 

During the first nine months of 2015, we contributed $65 million to our domestic benefit plans and $83 million to our international benefit plans. In 2015, we expect to contribute approximately $100 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.

We recognized a proportionate share of prior actuarial losses from other comprehensive income as pension settlement expense of $79 million and $131 million for the three- and nine-month periods ended September 30, 2015, respectively, related to the U.S. qualified pension plan and certain U.S. nonqualified supplemental retirement plans.

As part of the ongoing restructuring program in the United States, we concluded that actions taken during the three-month period ended September 30, 2015, would result in a significant reduction of future services of active employees in the U.S. qualified pension plan and a U.S. nonqualified supplemental retirement plan. As a result, we recognized an increase in the benefit obligation and a proportionate share of prior service cost from other comprehensive income as a curtailment loss of $35 million on the U.S. qualified pension plan during the three-month period ended September 30, 2015.

In conjunction with the significant reduction of active employees, the net pension benefit obligation of the U.S. qualified pension plan was remeasured. At the measurement date, the net pension liability increased by $181 million to $876 million, resulting in a corresponding decrease to other comprehensive income. Additionally, the pension benefit obligation of a U.S. nonqualified supplemental retirement plan was remeasured. At the measurement date, the pension benefit obligation increased $53 million to $472 million, resulting in a corresponding decrease in other comprehensive income.

 

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Table of Contents

During the three-month period ended September 30, 2015, there was an amendment to the U.S. other postretirement benefit plan. The benefit obligation decreased by $163 million for changes in the plan made to retiree medical benefits. The $163 million decrease consists of $149 million related to the discontinuation of all company premium cost-sharing contributions to the post-65 retiree medical plan after December 31, 2025, and $14 million associated with new participants in the post-65 retiree medical plan after December 31, 2015, no longer being eligible for any company premium cost-sharing contributions. In conjunction with the recognition of the changes in the amendment, the benefit obligation was remeasured but did not result in additional significant change.

During the nine-month period ended September 30, 2015, in addition to the amendment to the U.S. other postretirement benefit plan described above, there was an amendment made to retiree medical benefits that resulted in a decrease of the benefit obligation by $140 million. This decrease consists of $91 million related to cost sharing changes for retirees and $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. The measurements of the accumulated postretirement benefit obligation for the post-65 retiree medical plan assumed a health care cost trend rate of 2 percent in 2015 that increases to 5 percent in 2018.

Due to an ongoing restructuring program in the Europe segment, we recognized additional expense of $15 million and $75 million, respectively, during the three- and nine-month periods ended September 30, 2015, associated with employee special termination benefits, of which approximately 62 percent is expected to be recovered from joint venture partners.

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 is ongoing during 2015. Severance accruals of $202 million and $290 million were recorded during the three- and nine-month periods ended September 30, 2015, respectively. The following table summarizes our severance accrual activity for the nine-month period ended September 30, 2015:

 

              
      Millions of Dollars   

Balance at December 31, 2014

   $ 61   

Accruals

     290   

Accrual reversals

     (2

Benefit payments

     (99

Foreign currency translation adjustments

     (6

 

 

Balance at September 30, 2015

   $ 244   

 

 

Of the remaining balance at September 30, 2015, $201 million is classified as short-term.

 

21


Table of Contents

Note 17—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
September 30
    Nine Months Ended
September 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating revenues and other income

   $ 28        32        80        89   

Purchases

     25        47        72        147   

Operating expenses and selling, general and administrative expenses

     18        21        53        53   

Net interest income*

     (3     (12     (7     (36

 

 

*We paid interest to, or received interest from, various affiliates. See Note 5—Investments, Loans and Long-Term Receivables, for additional information on loans to affiliated companies.

Note 18—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.

Effective November 1, 2015, the Other International and Europe segments will be restructured to align with changes to our internal organization structure. The Libya business will be moved from the Other International segment to the Europe segment, which will be renamed Europe and North Africa. Accordingly, results of operations for the Other International and Europe segments will be revised for current and prior periods beginning in the fourth quarter of 2015. There is no expected impact on our consolidated financial statements, and the impact on our segment presentation is expected to be immaterial.

 

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Table of Contents

Analysis of Results by Operating Segment

 

                                                           
     Millions of Dollars  
     Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2015     2014     2015     2014  
  

 

 

   

 

 

 

Sales and Other Operating Revenues

        

Alaska

   $ 1,067        2,094        3,455        6,687   

 

 

Lower 48

     3,106        5,082        9,421        17,196   

Intersegment eliminations

     (15     (28     (50     (88

 

 

Lower 48

     3,091        5,054        9,371        17,108   

 

 

Canada

     576        1,086        1,932        4,113   

Intersegment eliminations

     (76     (128     (265     (618

 

 

Canada

     500        958        1,667        3,495   

 

 

Europe

     1,480        2,241        4,809        8,195   

Intersegment eliminations

     (2     (3     (3     (47

 

 

Europe

     1,478        2,238        4,806        8,148   

 

 

Asia Pacific and Middle East

     1,074        1,658        3,748        5,758   

Other International

            60        (5     65   

Corporate and Other

     52        18        229        55   

 

 

Consolidated sales and other operating revenues

   $ 7,262        12,080        23,271        41,316   

 

 

Net Income (Loss) Attributable to ConocoPhillips

        

Alaska

   $ 53        473        393        1,698   

Lower 48

     (852     32        (1,550     621   

Canada

     (145     307        (469     845   

Europe

     (4     213        670        819   

Asia Pacific and Middle East

     258        749        981        2,336   

Other International

     (43     (18     (284     74   

Corporate and Other

     (338     (130     (719     (616

Discontinued operations

            1,078               1,131   

 

 

Consolidated net income (loss) attributable to ConocoPhillips

   $ (1,071     2,704        (978     6,908   

 

 

 

                             
     Millions of Dollars  
     September 30
2015
     December 31
2014
 
  

 

 

    

 

 

 

Total Assets

     

Alaska

   $ 13,212         12,655   

Lower 48

     28,629         30,185   

Canada

     18,999         21,764   

Europe

     14,269         16,125   

Asia Pacific and Middle East

     24,114         25,976   

Other International

     1,674         1,961   

Corporate and Other

     5,052         7,815   

Discontinued operations

             58   

 

 

Consolidated total assets

   $ 105,949         116,539   

 

 

 

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Table of Contents

Note 19—Income Taxes

Our effective tax rates from continuing operations for the third quarter and first nine months of 2015 were 39 percent and 57 percent, respectively, compared with 35 percent and 40 percent for the same periods of 2014. The increase in the effective tax rate for the third quarter of 2015 was primarily due to the absence of the effects of our election of the fair market value method of apportioning interest expense in the third quarter of 2014. The increase in the effective tax rate for the first nine 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; the absence of our election of the fair market value method of apportioning interest expense in the third quarter of 2014; and pre-tax losses in low tax jurisdictions. These items were partially offset by the second quarter 2015 Canadian tax law change, discussed below, 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 20—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” (ASU No. 2014-09), 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.

In August 2015, the FASB issued ASU No. 2015-14, “Deferral of the Effective Date,” which defers the effective date of ASU No. 2014-09. The ASU is now effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for interim and annual periods beginning after December 15, 2016. 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.

 

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Table of Contents

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 had no impact on our consolidated financial statements.

 

25


Table of Contents
                                                                                         
     Millions of Dollars  
     Three Months Ended September 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

   $        2,954               4,308               7,262   

Equity in earnings of affiliates

     (973     (19            559        656        223   

Gain on dispositions

            5               13               18   

Other income (loss)

     (1     (8            13               4   

Intercompany revenues

     19        81        60        862        (1,022       

 

 

Total Revenues and Other Income

     (955     3,013        60        5,755        (366     7,507   

 

 

Costs and Expenses

            

Purchased commodities

            2,623               1,501        (855     3,269   

Production and operating expenses

            390               1,447        (3     1,834   

Selling, general and administrative expenses

     1        239               53               293   

Exploration expenses

            761               300               1,061   

Depreciation, depletion and amortization

            322               1,949               2,271   

Impairments

            1               23               24   

Taxes other than income taxes

            38               168               206   

Accretion on discounted liabilities

            14               108               122   

Interest and debt expense

     121        113        57        113        (164     240   

Foreign currency transaction (gains) losses

     47               (359     240               (72

 

 

Total Costs and Expenses

     169        4,501        (302     5,902        (1,022     9,248   

 

 

Income (loss) from continuing operations before income taxes

     (1,124     (1,488     362        (147     656        (1,741

Provision (benefit) for income taxes

     (53     (515     27        (144            (685

 

 

Net income (loss)

     (1,071     (973     335        (3     656        (1,056

Less: net income attributable to noncontrolling interests

                          (15            (15

 

 

Net Income (Loss) Attributable to ConocoPhillips

   $ (1,071     (973     335        (18     656        (1,071

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ (3,555     (3,457     70        (2,507     5,894        (3,555

 

 
Income Statement    Three Months Ended September 30, 2014  

Revenues and Other Income

            

Sales and other operating revenues

   $        4,672               7,408               12,080   

Equity in earnings of affiliates

     1,722        2,098               975        (4,031     764   

Gain on dispositions

            2               2               4   

Other income

     1        15               53               69   

Intercompany revenues

     20        104        72        1,444        (1,640       

 

 

Total Revenues and Other Income

     1,743        6,891        72        9,882        (5,671     12,917   

 

 

Costs and Expenses

            

Purchased commodities

            4,036               2,139        (1,472     4,703   

Production and operating expenses

            414               1,617        10        2,041   

Selling, general and administrative expenses

     2        136        1        65        (1     203   

Exploration expenses

            331               128               459   

Depreciation, depletion and amortization

            273               1,823               2,096   

Impairments

            104               4               108   

Taxes other than income taxes

            69               424               493   

Accretion on discounted liabilities

            14               106               120   

Interest and debt expense

     134        77        58        57        (177     149   

Foreign currency transaction (gains) losses

     33        3        (208     164               (8

 

 

Total Costs and Expenses

     169        5,457        (149     6,527        (1,640     10,364   

 

 

Income from continuing operations before income taxes

     1,574        1,434        221        3,355        (4,031     2,553   

Provision (benefit) for income taxes

     (52     (288     9        1,235               904   

 

 

Income From Continuing Operations

     1,626        1,722        212        2,120        (4,031     1,649   

Income from discontinued operations

     1,078        1,078               61        (1,139     1,078   

 

 

Net income

     2,704        2,800        212        2,181        (5,170     2,727   

Less: net income attributable to noncontrolling interests

                          (23            (23

 

 

Net Income Attributable to ConocoPhillips

   $ 2,704        2,800        212        2,158        (5,170     2,704   

 

 

Comprehensive Income Attributable to ConocoPhillips

   $ 791        887        29        255        (1,171     791   

 

 

 

26


Table of Contents
                                                                                         
     Millions of Dollars  
     Nine Months Ended September 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

   $        8,989               14,282               23,271   

Equity in earnings of affiliates

     (712     1,009               1,275        (886     686   

Gain on dispositions

            38               84               122   

Other income (loss)

     (1     9               82               90   

Intercompany revenues

     56        261        187        2,657        (3,161       

 

 

Total Revenues and Other Income

     (657     10,306        187        18,380        (4,047     24,169   

 

 

Costs and Expenses

            

Purchased commodities

            7,751               4,605        (2,620     9,736   

Production and operating expenses

            1,185               4,286        (37     5,434   

Selling, general and administrative expenses

     7        521               151        (9     670   

Exploration expenses

            1,104               988               2,092   

Depreciation, depletion and amortization

            882               5,849               6,731   

Impairments

            1               117               118   

Taxes other than income taxes

            157               498               655   

Accretion on discounted liabilities

            43               322               365   

Interest and debt expense

     363        325        171        288        (495     652   

Foreign currency transaction (gains) losses

     94               (591     401               (96

 

 

Total Costs and Expenses

     464        11,969        (420     17,505        (3,161     26,357   

 

 

Income (loss) from continuing operations before income taxes

     (1,121     (1,663     607        875        (886     (2,188

Provision (benefit) for income taxes

     (143     (951     18        (178            (1,254

 

 

Net income (loss)

     (978     (712     589        1,053        (886     (934

Less: net income attributable to noncontrolling interests

                          (44            (44

 

 

Net Income (Loss) Attributable to ConocoPhillips

   $ (978     (712     589        1,009        (886     (978

 

 

Comprehensive Income (Loss) Attributable to ConocoPhillips

   $ (5,201     (4,935     67        (3,393     8,261        (5,201

 

 
Income Statement    Nine Months Ended September 30, 2014  

Revenues and Other Income

            

Sales and other operating revenues

   $        15,920               25,396               41,316   

Equity in earnings of affiliates

     6,053        7,063               2,235        (13,343     2,008   

Gain on dispositions

            3               17               20   

Other income

     1        60               261               322   

Intercompany revenues

     59        369        214        4,685        (5,327       

 

 

Total Revenues and Other Income

     6,113        23,415        214        32,594        (18,670     43,666   

 

 

Costs and Expenses

            

Purchased commodities

            13,984               8,060        (4,719     17,325   

Production and operating expenses

            1,255               4,751        (40     5,966   

Selling, general and administrative expenses

     8        416        1        193        (15     603   

Exploration expenses

            713               559               1,272   

Depreciation, depletion and amortization

            776               5,282               6,058   

Impairments

            122               4               126   

Taxes other than income taxes

            233               1,523               1,756   

Accretion on discounted liabilities

            43               314               357   

Interest and debt expense

     441        209        174        204        (553     475   

Foreign currency transaction (gains) losses

     36        5        (196     172               17   

 

 

Total Costs and Expenses

     485        17,756        (21     21,062        (5,327     33,955   

 

 

Income from continuing operations before income taxes

     5,628        5,659        235        11,532        (13,343     9,711   

Provision (benefit) for income taxes

     (149     (394     7        4,416               3,880   

 

 

Income From Continuing Operations

     5,777        6,053        228        7,116        (13,343     5,831   

Income from discontinued operations

     1,131        1,131               114        (1,245     1,131   

 

 

Net income

     6,908        7,184        228        7,230        (14,588     6,962   

Less: net income attributable to noncontrolling interests

                          (54            (54

 

 

Net Income Attributable to ConocoPhillips

   $ 6,908        7,184        228        7,176        (14,588     6,908   

 

 

Comprehensive Income Attributable to ConocoPhillips

   $ 5,491        5,767        24        5,730        (11,521     5,491   

 

 

 

27


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

Assets

              

Cash and cash equivalents

   $        23         9        2,381                2,413   

Accounts and notes receivable

     16        1,794         22        6,886         (4,254     4,464   

Inventories

            158                985                1,143   

Prepaid expenses and other current assets

     1        716         27        944         (44     1,644   

 

 

Total Current Assets

     17        2,691         58        11,196         (4,298     9,664   

Investments, loans and long-term receivables*

     48,575        68,865         3,630        29,886         (127,454     23,502   

Net properties, plants and equipment

            9,558                62,270                71,828   

Other assets

     8        221         422        1,098         (794     955   

 

 

Total Assets

   $ 48,600        81,335         4,110        104,450         (132,546     105,949   

 

 

Liabilities and Stockholders’ Equity

              

Accounts payable

   $        5,021         16        4,428         (4,254     5,211   

Short-term debt

     (9     1         5        178                175   

Accrued income and other taxes

            118                541                659   

Employee benefit obligations

            618                243                861   

Other accruals

     101        487         79        758         (44     1,381   

 

 

Total Current Liabilities

     92        6,245         100        6,148         (4,298     8,287   

Long-term debt

     7,516        10,660         2,967        3,573                24,716   

Asset retirement obligations and accrued environmental costs

            1,300                8,979                10,279   

Deferred income taxes

                           13,398         (81     13,317   

Employee benefit obligations

            2,058                806                2,864   

Other liabilities and deferred credits*

     3,342        7,409         964        16,115         (25,899     1,931   

 

 

Total Liabilities

     10,950        27,672         4,031        49,019         (30,278     61,394   

Retained earnings

     34,265        20,734         (506     18,231         (31,938     40,786   

Other common stockholders’ equity

     3,385        32,929         585        36,855         (70,330     3,424   

Noncontrolling interests

                           345                345   

 

 

Total Liabilities and Stockholders’ Equity

   $ 48,600        81,335         4,110        104,450         (132,546     105,949   

 

 

*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.

              

 

28


Table of Contents
                                                                                         
     Millions of Dollars  
     Nine Months Ended September 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

     (263     (110     2         6,165        182        5,976   

 

 

Cash Flows From Investing Activities

             

Capital expenditures and investments

            (2,346             (6,640     1,073        (7,913

Working capital changes associated with investing activities

            (15             (827            (842

Proceeds from asset dispositions

     2,000        190                232        (2,099     323   

Long-term advances/loans—related parties

            (248             (1,973     2,221          

Collection of advances/loans—related parties

                           205        (100     105   

Intercompany cash management

     764        (892             128                 

Other

            297                1               298   

 

 

Net Cash Provided by (Used in) Investing Activities

     2,764        (3,014             (8,874     1,095        (8,029

 

 

Cash Flows From Financing Activities

             

Issuance of debt

            4,471                248        (2,221     2,498   

Repayment of debt

            (100             (92     100        (92

Issuance of company common stock

     237                              (306     (69

Dividends paid

     (2,741                    (124     124        (2,741

Other

     3        (1,994             915        1,026        (50

 

 

Net Cash Provided by (Used in) Financing Activities

     (2,501     2,377                947        (1,277     (454

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

                           (142            (142

 

 

Net Change in Cash and Cash Equivalents

            (747     2         (1,904            (2,649

Cash and cash equivalents at beginning of period

            770        7         4,285               5,062   

 

 

Cash and Cash Equivalents at End of Period

   $        23        9         2,381               2,413   

 

 
Statement of Cash Flows    Nine Months Ended September 30, 2014*  

Cash Flows From Operating Activities

             

Net cash provided by (used in) continuing operating activities

   $ 14,722        (180     10         14,063        (15,014     13,601   

Net cash provided by discontinued operations

            202                408        (453     157   

 

 

Net Cash Provided by Operating Activities

     14,722        22        10         14,471        (15,467     13,758   

 

 

Cash Flows From Investing Activities

             

Capital expenditures and investments

            (3,235             (11,132     1,638        (12,729

Working capital changes associated with investing activities

            34                360               394   

Proceeds from asset dispositions

     16,912        1,386                105        (16,969     1,434   

Net purchases of short-term investments

                           (109            (109

Long-term advances/loans—related parties

            (635             (7     642          

Collection of advances/loans—related parties

            47                112        (16     143   

Intercompany cash management

     (28,922     33,392                (4,470              

Other

            (429             (25            (454

 

 

Net cash provided by (used in) continuing investing activities

     (12,010     30,560                (15,166     (14,705     (11,321

Net cash provided by (used in) discontinued operations

            133                (73     (133     (73

 

 

Net Cash Provided by (Used in) Investing Activities

     (12,010     30,693                (15,239     (14,838     (11,394

 

 

Cash Flows From Financing Activities

             

Issuance of debt

                           642        (642       

Repayment of debt

     (400     (16             (105     16        (505

Issuance of company common stock

     308