10-Q
CONOCOPHILLIPS (COP)
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
March 31, 2021
d
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.)
925 N. Eldridge Parkway
Houston
,
TX
77079
(Address of principal executive offices) (Zip Code)
281
-
293-1000
(Registrant's telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbols
Name of each exchange on which registered
Common Stock, $.01 Par Value
COP
New York Stock Exchange
7% Debentures due 2029
CUSIP—718507BK1
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
[x] No [
]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit 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, a smaller
reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
[x]
Accelerated filer [
]
Non-accelerated filer [
]
Smaller reporting company
[
]
Emerging growth company
[
]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [
]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [
]
No
[x]
The registrant had
1,349,418,454
shares of common stock, $.01 par value, outstanding at March 31, 2021.
CONOCOPHILLIPS
TABLE OF CONTENTS
Page
Commonly Used Abbreviations
..................................................................................................................
1
Part I—Financial Information
Item 1.
Financial Statements
Consolidated Income Statement
...........................................................................................................
2
Consolidated Statement of Comprehensive Income
............................................................................
3
Consolidated Balance Sheet
.................................................................................................................
4
Consolidated Statement of Cash Flows................................................................................................
5
Notes to Consolidated Financial Statements
........................................................................................
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
.................................................................................................................
31
Item 3.
Quantitative and Qualitative Disclosures
About Market Risk
...................................................
57
Item 4.
Controls and Procedures
............................................................................................................
57
Part II—Other Information
Item 1.
Legal Proceedings
......................................................................................................................
57
Item 1A.
Risk Factors
.............................................................................................................................
57
Item 2.
Unregistered Sales of Equity Securities and Use
of Proceeds ...................................................
58
Item 6.
Exhibits ......................................................................................................................................
59
Signature
.....................................................................................................................................................
60
1
Commonly Used Abbreviations
The following industry-specific, accounting and
other terms, and abbreviations may be commonly
used in this
report.
Currencies
Accounting
$ or USD
U.S. dollar
ARO
asset retirement obligation
CAD
Canadian dollar
ASC
accounting standards codification
EUR
Euro
ASU
accounting standards update
GBP
British pound
DD&A
depreciation, depletion and
amortization
Units of Measurement
FASB
Financial Accounting Standards
BBL
barrel
Board
BCF
billion cubic feet
FIFO
first-in, first-out
BOE
barrels of oil equivalent
G&A
general and administrative
MBD
thousands of barrels per day
GAAP
generally accepted accounting
MCF
thousand cubic feet
principles
MBOD
thousand barrels of oil per day
LIFO
last-in, first-out
MM
million
NPNS
normal purchase normal sale
MMBOE
million barrels of oil equivalent
PP&E
properties, plants and equipment
MMBOD
million barrels of oil per day
SAB
staff accounting bulletin
MBOED
thousands of barrels of oil
VIE
variable interest entity
equivalent per day
MMBOED
millions of barrels of oil
equivalent per day
Miscellaneous
MMBTU
million British thermal units
EPA
Environmental Protection Agency
MMCFD
million cubic feet per day
ESG
Environmental, Social and
Corporate Governance
EU
European Union
Industry
FERC
Federal Energy Regulatory
CBM
coalbed methane
Commission
E&P
exploration and production
GHG
greenhouse gas
FEED
front-end engineering and design
HSE
health, safety and environment
FPS
floating production system
ICC
International Chamber of
FPSO
floating production, storage and
Commerce
offloading
ICSID
World Bank’s
International
G&G
geological and geophysical
Centre for Settlement of
JOA
joint operating agreement
Investment Disputes
LNG
liquefied natural gas
IRS
Internal Revenue Service
NGLs
natural gas liquids
OTC
over-the-counter
OPEC
Organization of Petroleum
NYSE
New York Stock Exchange
Exporting Countries
SEC
U.S. Securities and Exchange
PSC
production sharing contract
Commission
PUDs
proved undeveloped reserves
TSR
total shareholder return
SAGD
steam-assisted gravity drainage
U.K.
United Kingdom
WCS
Western Canada Select
U.S.
United States of America
WTI
West Texas
Intermediate
2
PART
I.
FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
Consolidated Income Statement
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
2021
2020
Revenues and Other Income
Sales and other operating revenues
$
9,826
6,158
Equity in earnings of affiliates
122
234
Gain (loss) on dispositions
233
(42)
Other income (loss)
378
(1,539)
Total Revenues and
Other Income
10,559
4,811
Costs and Expenses
Purchased commodities
4,483
2,661
Production and operating expenses
1,383
1,173
Selling, general and administrative expenses
311
(3)
Exploration expenses
84
188
Depreciation, depletion and amortization
1,886
1,411
Impairments
(3)
521
Taxes other than income
taxes
370
250
Accretion on discounted liabilities
62
67
Interest and debt expense
226
202
Foreign currency transactions (gain) loss
19
(90)
Other expenses
24
(6)
Total Costs and Expenses
8,845
6,374
Income (loss) before income taxes
1,714
(1,563)
Income tax provision
732
148
Net income (loss)
982
(1,711)
Less: net income attributable to noncontrolling interests
-
(28)
Net Income (Loss) Attributable to ConocoPhillips
$
982
(1,739)
Net Income (Loss) Attributable to ConocoPhillips Per Share
of Common Stock
(dollars)
Basic
$
0.75
(1.60)
Diluted
0.75
(1.60)
Average Common
Shares Outstanding
(in thousands)
Basic
1,300,375
1,084,561
Diluted
1,302,691
1,084,561
See Notes to Consolidated Financial Statements.
3
Consolidated Statement of Comprehensive Income
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
2021
2020
Net Income (Loss)
$
982
(1,711)
Other comprehensive income (loss)
Defined benefit plans
Reclassification adjustment for amortization of prior service credit
included in net income (loss)
(9)
(8)
Net actuarial gain arising during the period
75
5
Reclassification adjustment for amortization of net actuarial losses included
in net income (loss)
25
18
Income taxes on defined benefit plans
(21)
(4)
Defined benefit plans, net of tax
70
11
Net unrealized holding loss on securities
(1)
(3)
Income taxes on net unrealized holding loss on securities
-
1
Net unrealized holding loss on securities, net of tax
(1)
(2)
Foreign currency translation adjustments
69
(799)
Income taxes on foreign currency translation adjustments
-
2
Foreign currency translation adjustments, net of tax
69
(797)
Other Comprehensive Income (Loss), Net of
Tax
138
(788)
Comprehensive Income (Loss)
1,120
(2,499)
Less: comprehensive income attributable to noncontrolling
interests
-
(28)
Comprehensive Income (Loss) Attributable to ConocoPhillips
$
1,120
(2,527)
See Notes to Consolidated Financial Statements.
4
Consolidated Balance Sheet
ConocoPhillips
Millions of Dollars
March 31
December 31
2021
2020
Assets
Cash and cash equivalents
$
2,831
2,991
Short-term investments
4,104
3,609
Accounts and notes receivable (net of allowance of $
3
and $
4
, respectively)
4,339
2,634
Accounts and notes receivable—related parties
142
120
Investment in Cenovus Energy
1,564
1,256
Inventories
1,098
1,002
Prepaid expenses and other current assets
536
454
Total Current Assets
14,614
12,066
Investments and long-term receivables
8,286
8,017
Loans and advances—related parties
59
114
Net properties, plants and equipment
(net of accumulated DD&A of $
64,082
and $
62,213
, respectively)
58,270
39,893
Other assets
2,464
2,528
Total Assets
$
83,693
62,618
Liabilities
Accounts payable
$
3,779
2,669
Accounts payable—related parties
22
29
Short-term debt
689
619
Accrued income and other taxes
959
320
Employee benefit obligations
567
608
Other accruals
1,168
1,121
Total Current Liabilities
7,184
5,366
Long-term debt
19,338
14,750
Asset retirement obligations and accrued environmental costs
5,782
5,430
Deferred income taxes
4,982
3,747
Employee benefit obligations
1,530
1,697
Other liabilities and deferred credits
1,722
1,779
Total Liabilities
40,538
32,769
Equity
Common stock (
2,500,000,000
shares authorized at $
.01
par value)
Issued (2021—
2,087,207,067
shares; 2020—
1,798,844,267
shares)
Par value
21
18
Capital in excess of par
60,278
47,133
Treasury stock (at cost: 2021—
737,788,613
shares; 2020—
730,802,089
shares)
(47,672)
(47,297)
Accumulated other comprehensive loss
(5,080)
(5,218)
Retained earnings
35,608
35,213
Total Equity
43,155
29,849
Total Liabilities and Equity
$
83,693
62,618
See Notes to Consolidated Financial Statements.
5
Consolidated Statement of Cash Flows
ConocoPhillips
Millions of Dollars
Three Months Ended
March 31
2021
2020
Cash Flows From Operating Activities
Net Income (Loss)
$
982
(1,711)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation, depletion and amortization
1,886
1,411
Impairments
(3)
521
Dry hole costs and leasehold impairments
6
67
Accretion on discounted liabilities
62
67
Deferred taxes
203
(227)
Undistributed equity earnings
81
31
(Gain) loss on dispositions
(233)
42
Unrealized (gain) loss on investment in Cenovus Energy
(308)
1,691
Other
(581)
(284)
Working
capital adjustments
Decrease (increase) in accounts and notes receivable
(785)
1,041
Decrease (increase) in inventories
(51)
277
Increase in prepaid expenses and other current assets
(43)
(79)
Increase (decrease) in accounts payable
424
(297)
Increase (decrease) in taxes and other accruals
440
(445)
Net Cash Provided by Operating Activities
2,080
2,105
Cash Flows From Investing Activities
Cash acquired from Concho
382
-
Capital expenditures and investments
(1,200)
(1,649)
Working
capital changes associated with investing activities
61
81
Proceeds from asset dispositions
(17)
549
Net purchases of investments
(499)
(935)
Collection of advances/loans—related parties
52
66
Other
6
(44)
Net Cash Used in Investing Activities
(1,215)
(1,932)
Cash Flows From Financing Activities
Repayment of debt
(26)
(24)
Issuance of company common stock
(28)
2
Repurchase of company common stock
(375)
(726)
Dividends paid
(588)
(458)
Other
2
(24)
Net Cash Used in Financing Activities
(1,015)
(1,230)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted
Cash
(2)
(122)
Net Change in Cash, Cash Equivalents and Restricted Cash
(152)
(1,179)
Cash, cash equivalents and restricted cash at beginning of period
3,315
5,362
Cash, Cash Equivalents and Restricted Cash at End of Period
$
3,163
4,183
Restricted cash of $
94
million and $
238
million are included in the “Prepaid expenses and other current assets” and “Other assets” lines,
respectively, of our Consolidated Balance Sheet as of March 31, 2021.
Restricted cash of $
94
million and $
230
million are included in the “Prepaid expenses and other current assets” and “Other assets” lines,
respectively, of our Consolidated Balance Sheet as of December 31, 2020.
See Notes to Consolidated Financial Statements.
6
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 2020 Annual Report on Form
10-K
.
Note 2—Inventories
Inventories consisted of the following:
Millions of Dollars
March 31
December 31
2021
2020
Crude oil and natural gas
$
541
461
Materials and supplies
557
541
$
1,098
1,002
Inventories valued on the LIFO basis totaled
$
352
million and $
282
million at March 31, 2021 and December
31, 2020, respectively.
Note 3—Acquisitions and Dispositions
Acquisition of
Concho Resources Inc.
(Concho)
We completed our acquisition of Concho on
January 15, 2021
and as defined under the terms of the
transaction
agreement, each share of Concho common stock
was exchanged at a fixed ratio of
1.46
for shares of
ConocoPhillips common stock, for total consideration
of $
13.1
billion.
Total Consideration
Number of shares of Concho common stock
issued and outstanding (in thousands)*
194,243
Number of shares of Concho stock awards outstanding
(in thousands)*
1,599
Number of shares exchanged
195,842
Exchange ratio
1.46
Additional shares of ConocoPhillips common stock
issued as consideration (in thousands)
285,929
Average price per share of ConocoPhillips common stock**
$
45.9025
Total Consideration (Millions)
$
13,125
*Outstanding as of January 15, 2021.
**Based on the ConocoPhillips average stock price on January
15, 2021.
7
The transaction was accounted for as a business
combination under FASB ASC 805 using the acquisition
method, which requires assets acquired and liabilities
assumed to be measured at their acquisition date fair
values.
Fair value measurements were made for acquired
assets and liabilities, and adjustments to those
measurements may be made in subsequent periods,
up to one year from the acquisition date as
we identify new
information about facts and circumstances that existed
as of the acquisition date to consider.
Oil and gas
properties were valued using a discounted cash
flow approach incorporating market participant
and internally
generated price assumptions;
production profiles;
and operating and development cost assumptions.
Debt
assumed in the acquisition was valued based on
observable market prices.
The fair values determined for
accounts receivables, accounts payable, and most
other current assets and current liabilities
were equivalent to
the carrying value due to their short-term
nature.
The total consideration of $
13.1
billion was allocated to the
identifiable assets and liabilities based on their
fair values as of January 15, 2021.
Assets Acquired
Millions of Dollars
Cash and cash equivalents
$
382
Accounts receivable, net
742
Inventories
45
Prepaid expenses and other current assets
37
Investments and long-term receivables
333
Net properties, plants and equipment
18,998
Other assets
62
Total assets acquired
$
20,599
Liabilities Assumed
Accounts payable
$
638
Accrued income and other taxes
76
Employee benefit obligations
4
Other accruals
510
Long-term debt
4,696
Asset retirement obligations and accrued environmental
costs
310
Deferred income taxes
1,123
Other liabilities and deferred credits
117
Total liabilities assumed
$
7,474
Net assets acquired
$
13,125
With the completion of the Concho transaction, we acquired proved
and unproved properties of approximately
$
11.9
billion and $
6.9
billion, respectively.
We recognized approximately $
157
million of transaction-related costs that
were expensed in the current
period.
These non-recurring costs related primarily
to fees paid to advisors and the settlement of
share-based
awards for certain Concho employees based
on the terms of the Merger Agreement.
In the first quarter of 2021, we commenced a restructuring program, the scope of which included combining
the operations of the two companies. For the three-month period ending March 31, 2021, we recognized non-
recurring restructuring costs mainly for employee severance and related incremental pension benefit costs of
approximately $134 million.
8
The impact from these transaction and restructuring
costs to the lines of our consolidated income statement
for
the three-month period ending March 31, 2021,
are below:
Millions of Dollars
Transaction Cost
Restructuring Cost
Total Cost
Production and operating expenses
$
56
56
Selling, general and administration expenses
135
45
180
Exploration expenses
18
4
22
Taxes other than income taxes
4
4
Other expenses
29
29
$
157
134
291
On February 8, 2021, we completed a debt exchange
offer related to the debt assumed from Concho.
As a
result of the debt exchange, we recognized an additional
income tax related restructuring charge of $
75
million.
See Note 18—Income Taxes, for additional information.
“Total Revenues and Other Income” and “Net Income (Loss) Attributable to
ConocoPhillips” associated with
the acquired Concho business were approximately
$
1,040
million and $
190
million, respectively, for the three-
month period ending March 31, 2021.
The results associated with the Concho business
include a before- and
after-tax loss of $
173
million and $
132
million, respectively, on the acquired derivative contracts with
settlement dates on or before March 31, 2021, and
an additional before- and after-tax loss of $
132
million and
$
101
million, respectively, for contracts with settlement dates subsequent
to March 31, 2021.
The before-tax
loss is recorded within “Total Revenues and Other Income” on our consolidated income
statement.
For
additional information about the financial derivative
instruments acquired, see Note 10—Derivative
and
Financial Instruments.
The following summarizes the unaudited supplemental
pro forma financial information for the three-month
period ending March 31, 2020, as if we had completed
the acquisition of Concho on January 1, 2020:
Millions of Dollars
Supplemental Pro Forma (unaudited)
Three Months Ended
March 31, 2020
Total revenues and other income
$
7,300
Net loss
(390)
Net loss attributable to ConocoPhillips
(418)
$ per share
Earnings per share:
Three Months Ended
March 31, 2020
Basic net loss
$
(0.31)
Diluted net loss
(0.31)
The unaudited supplemental pro forma financial
information is presented for illustration purposes
only and is
not necessarily indicative of the operating results
that would have occurred had the transaction been
completed
on January 1, 2020, nor is it necessarily indicative
of future operating results of the combined entity.
The
unaudited pro forma financial information
for the three-month period ending March 31, 2020 is
a result of
combining the consolidated income statement
of ConocoPhillips with the results of Concho.
The pro forma
results do not include transaction-related costs,
nor any cost savings anticipated as a result
of the transaction.
The pro forma results include adjustments to
reverse impairment expense of $
10.5
billion and $
1.9
billion
recorded by Concho in the three-month period ending
March 31, 2020, related to oil and gas properties
and
goodwill, respectively.
Other adjustments made relate primarily to
DD&A, which is based on the unit-of-
production method, resulting from the purchase
price allocated to properties, plants and equipment.
We
9
believe the estimates and assumptions are reasonable,
and the relative effects of the transaction are properly
reflected.
Assets Sold
In 2020, we completed the sale of our Australian-West asset and operations.
The sales agreement entitles us to
a $
200
million payment upon a final investment
decision (FID) of the Barossa development
project.
On March
30, 2021, FID was announced and as such,
we recognized a $
200
million gain on disposition in the first
quarter
of 2021.
The purchaser failed to pay the FID bonus when
due.
We intend to take all action required to enforce
our contractual right to the $
200
million, plus interest accruing from the due
date.
Results of operations related
to this transaction are reflected in our Asia Pacific
segment.
In 2017, we completed the sale of our
50
percent nonoperated interest in the Foster Creek
Christina Lake
(FCCL) Partnership, as well as the majority of
our western Canada gas assets to Cenovus Energy.
Consideration for the transaction included a five-year, uncapped
contingent payment.
The contingent payment,
calculated on a quarterly basis, is $6 million CAD for every $1 CAD by which the WCS quarterly average
crude price exceeds $52 CAD per barrel. Contingent payments during the five-year period are recorded as gain
on dispositions on our consolidated income statement and reflected in our Canada segment.
We recorded a
gain on disposition for these contingent payments
of $
26
million for the three-month period of March 31,
2021.
No
contingent payments were recorded in 2020.
Note 4—Investments, Loans and Long-Term Receivables
APLNG
APLNG executed project financing agreements
for an $
8.5
billion project finance facility in 2012.
The $8.5
billion project finance facility was initially composed
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.
All amounts were drawn from the facility.
APLNG made its first principal and
interest repayment in March 2017 and is scheduled
to make
bi-annual
payments until March 2029.
APLNG made a voluntary repayment of $
1.4
billion to the Export-Import Bank of China
in September 2018.
At the same time, APLNG obtained a United
States Private Placement (USPP) bond facility
of $
1.4
billion.
APLNG made its first interest payment related to
this facility in March 2019, and principal
payments are
scheduled to commence in September 2023,
with
bi-annual
payments due on the facility until September
2030.
During the first quarter of 2019, APLNG refinanced
$
3.2
billion of existing project finance debt through two
transactions.
As a result of the first transaction, APLNG
obtained a commercial bank facility of $
2.6
billion.
APLNG made its first principal and interest
repayment in September 2019 with
bi-annual
payments due on the
facility until March 2028.
Through the second transaction, APLNG obtained
a USPP bond facility of $
0.6
billion.
APLNG made its first interest payment in September
2019, and principal payments are scheduled
to
commence in September 2023, with
bi-annual
payments due on the facility until
September 2030.
In conjunction with the $3.2 billion debt obtained
during the first quarter of 2019 to refinance existing
project
finance debt, APLNG made voluntary repayments
of $
2.2
billion and $
1.0
billion to a syndicate of Australian
and international commercial banks and the Export-Import
Bank of China, respectively.
At March 31, 2021, a balance of $
6.0
billion was outstanding on the facilities.
See Note 8—Guarantees, for
additional information.
10
During the fourth quarter of 2020, the estimated
fair value of our investment in APLNG declined
to an amount
below carrying value, primarily due to the weakening
of the U.S. dollar relative to the Australian
dollar.
Based
on a review of the facts and circumstances surrounding
this decline in fair value, we concluded the impairment
was not other than temporary under the guidance
of FASB ASC Topic
323, “Investments – Equity Method and
Joint Ventures.”
Due primarily to an improved outlook for
crude oil prices, the estimated fair value of our
investment increased and is above carrying value
at March 31, 2021.
We will continue to monitor the
relationship between the carrying value and fair
value of APLNG.
Should we determine in the future there has
been a loss in the value of our investment
that is other than temporary, we would record an impairment of our
equity investment, calculated as the total difference between
carrying value and fair value as of the end
of the
reporting period.
At March 31, 2021, the carrying value of our
equity method investment in APLNG was
$
6.6
billion.
The
balance is included in the “Investments and long-term
receivables” line on our consolidated balance
sheet.
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 March 31, 2021, significant loans to affiliated
companies included $
168
million in project financing to Qatar Liquefied
Gas Company Limited (3).
On our consolidated balance sheet, the long-term
portion of these loans is included in the “Loans
and
advances—related parties” line, while the short-term
portion is in the “Accounts and notes receivable—related
parties” line.
Note 5-–Investment in Cenovus Energy
In 2017, we completed the sale of certain assets
to Cenovus Energy (CVE) in which we received
208
million
CVE common shares as consideration.
At March 31, 2021, the investment was included
on our consolidated
balance sheet at fair value of $
1.56
billion, which approximates
10.3
percent of the issued and outstanding
CVE common stock.
The fair value of the
208
million CVE common shares reflects the
closing price of $
7.52
per share on the NYSE on the last trading day
of the quarter.
In the first quarter of 2021, we recognized an
unrealized gain of $
308
million before-tax on our CVE common shares,
compared with an unrealized loss of
$
1,691
million before-tax in the first quarter
of 2020.
The unrealized gain (loss) associated with changes
in
fair value are reflected within the “Other income
(loss)” line on our consolidated income statement
in the first
quarter of 2021 relating to the shares held at the
reporting date.
See Note 11—Fair Value Measurement for
additional information.
Subject to market conditions, we intend to
decrease our investment over time through
market transactions, private agreements or otherwise.
Note 6—Debt
Our debt balance at March 31, 2021, was $
20.0
billion compared with $
15.4
billion at December 31, 2020.
On January 15, 2021, we completed the acquisition
of Concho in an all-stock transaction.
In the acquisition,
we assumed Concho’s publicly traded debt, with an outstanding principal
balance of $
3.9
billion, which was
recorded at fair value of $
4.7
billion on the acquisition date.
Debt assumed consisted of the following:
●
3.75
% Notes due
2027
with principal of $
1,000
million
●
4.3
% Notes due
2028
with principal of $
1,000
million
●
2.4
% Notes due
2031
with principal of $
500
million
●
4.875
% Notes due
2047
with principal of $
800
million
●
4.85
% Notes due
2048
with principal of $
600
million
11
The adjustment to fair value of the senior notes
of approximately $
0.8
billion on the acquisition date will be
amortized as an adjustment to interest expense over
the remaining contractual terms of the
senior notes.
On February 8, 2021, we completed a debt exchange
offer related to the debt assumed from Concho.
Of the
approximately $
3.9
billion in aggregate principal amount of Concho’s senior notes offered in the
exchange,
98
percent, or approximately $
3.8
billion, were tendered and accepted.
The new debt issued by ConocoPhillips
has the same interest rates and maturity dates
as the Concho senior notes.
The portion not exchanged,
approximately $
67
million, remains outstanding across five series
of senior notes issued by Concho.
The debt
exchange was treated as a debt modification
for accounting purposes resulting in a portion
of the unamortized
fair value adjustment of the Concho senior notes
allocated to the new debt issued by ConocoPhillips
on the
settlement date of the exchange.
The new debt issued in the exchange is fully
and unconditionally guaranteed
by ConocoPhillips Company.
See Note 3—Acquisitions and Dispositions,
for more information on the
acquisition.
We have a revolving credit facility totaling $
6.0
billion with an expiration date of May 2023.
Our revolving
credit facility may be used for direct bank borrowings,
the issuance of letters of credit totaling
up to $
500
million, or as support for our commercial paper
program.
The revolving credit facility is broadly syndicated
among financial institutions and does not contain
any material adverse change provisions or any covenants
requiring maintenance of specified financial
ratios or credit ratings.
The facility agreement contains a cross-
default provision relating to the failure to pay principal
or interest on other debt obligations of $
200
million or
more by ConocoPhillips, or any of its consolidated
subsidiaries.
The amount of the facility is not subject to
redetermination prior to its expiration date.
Credit facility borrowings may bear interest at
a margin above rates offered by certain designated banks in the
London interbank market or at a margin above the overnight
federal funds rate or prime rates offered by
certain designated banks in the U.S.
The agreement calls for commitment fees
on available, but unused,
amounts.
The agreement also contains early termination
rights if our current directors or their approved
successors cease to be a majority of the Board
of Directors.
The revolving credit facility supports our ability
to issue up to $
6.0
billion of commercial paper, which is
primarily a funding source for short-term working capital
needs.
Commercial paper maturities are generally
limited to
90 days
, and is included in the short-term debt on our consolidated
balance sheet.
With $
300
million
of commercial paper outstanding and
no
direct borrowings or letters of credit, we had
access to $
5.7
billion in
available borrowing capacity under our revolving credit
facility at March 31, 2021.
At December 31, 2020, we
had $
300
million of commercial paper outstanding
and
no
direct borrowings or letters of credit issued.
In October 2020, Moody’s affirmed its rating of our senior long-term debt of “A3” with a “stable” outlook, and
affirmed its rating of our short-term debt as “Prime-2.” In January 2021, Fitch affirmed its rating of our long-
term debt as “A” with a “stable” outlook and affirmed its rating of our short-term debt as “F1+.” On January
25, 2021, S&P revised its industry risk assessment of the E&P industry to “Moderately High” from
“Intermediate” based on a view of increasing risks from the energy transition, price volatility, and weaker
profitability. On February 11, 2021, S&P downgraded its rating of our long-term debt from “A” to “A-” with a
“stable” outlook and downgraded its rating of our short-term debt from “A-1” to “A-2.” We do not have any
ratings triggers on any of our corporate debt that would cause an automatic default, and thereby impact our
access to liquidity, upon downgrade of our credit ratings. If our credit ratings are downgraded from their
current levels, it could increase the cost of corporate debt available to us and restrict our access to the
commercial paper markets. If our credit rating were to deteriorate to a level prohibiting us from accessing the
commercial paper market, we would still be able to access funds under our revolving credit facility.
At March 31, 2021, we had $
283
million of certain variable rate demand
bonds (VRDBs) outstanding with
maturities ranging through 2035.
The VRDBs are redeemable at the option of the
bondholders on any business
day.
If they are ever redeemed, we have the ability
and intent
to refinance on a long-term basis, therefore, the
VRDBs are included in the “Long-term debt” line
on our consolidated balance sheet.
12
Note 7—Changes in Equity
The following tables reflect the changes in stockholders'
equity:
Millions of Dollars
Attributable to ConocoPhillips
Common Stock
Par
Value
Capital in
Excess of
Par
Treasury
Stock
Accum. Other
Comprehensive
Income (Loss)
Retained
Earnings
Non-
Controlling
Interests
Total
For the three months ended March 31, 2021
Balances at December 31, 2020
$
18
47,133
(47,297)
(5,218)
35,213
29,849
Net income
982
982
Other comprehensive income
138
138
Dividends paid ($
0.43
per common share)
(588)
(588)
Acquisition of Concho
3
13,122
13,125
Repurchase of company common stock
(375)
(375)
Distributed under benefit plans
23
23
Other
1
1
Balances at March 31, 2021
$
21
60,278
(47,672)
(5,080)
35,608
43,155
For the three months ended March 31, 2020
Balances at December 31, 2019
$
18
46,983
(46,405)
(5,357)
39,742
69
35,050
Net income (loss)
(1,739)
28
(1,711)
Other comprehensive loss
(788)
(788)
Dividends paid ($
0.42
per common share)
(458)
(458)
Repurchase of company common stock
(726)
(726)
Distributions to noncontrolling interests and other
(26)
(26)
Distributed under benefit plans
44
44
Other
1
1
2
Balances at March 31, 2020
$
18
47,027
(47,130)
(6,145)
37,545
72
31,387
Note 8—Guarantees
At March 31, 2021, we were liable for certain
contingent obligations under various contractual
arrangements
as described below.
We recognize a liability, at inception, for the fair value of our obligation as a guarantor for
newly issued or modified guarantees.
Unless the carrying amount of the liability is noted
below, we have not
recognized a liability because the fair value of the
obligation is immaterial.
In addition, unless otherwise
stated, we are not currently performing with any
significance under the guarantee and expect future
performance to be either immaterial or have only
a remote chance of occurrence.
13
APLNG Guarantees
At March 31, 2021, we had outstanding multiple
guarantees in connection with our
37.5
percent ownership
interest in APLNG.
The following is a description of the guarantees
with values calculated utilizing March
2021 exchange rates:
●
During the third quarter of 2016, we issued a guarantee
to facilitate the withdrawal of our pro-rata
portion of the funds in a project finance reserve
account.
We estimate the remaining term of this
guarantee to be
10 years
.
Our maximum exposure under this guarantee is
approximately $
170
million
and may become payable if an enforcement action
is commenced by the project finance lenders against
APLNG.
At March 31, 2021, the carrying value of this
guarantee was approximately $
14
million.
●
In conjunction with our original purchase of an ownership
interest in APLNG from Origin Energy in
October 2008, we agreed to reimburse Origin
Energy for our share of the existing contingent liability
arising under guarantees of an existing obligation
of APLNG to deliver natural gas under
several sales
agreements with remaining terms of
1 to 21 years
.
Our maximum potential liability for future
payments, or cost of volume delivery, under these guarantees is estimated
to be $
740
million ($
1.3
billion in the event of intentional or reckless breach)
and would become payable if APLNG fails
to
meet its obligations under these agreements and
the obligations cannot otherwise be mitigated.
Future
payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered
if APLNG does not have enough natural gas
to meet these sales commitments and if the
co-venturers do
not make necessary equity contributions into APLNG.
●
We have guaranteed the performance of APLNG with regard to certain other contracts
executed in
connection with the project’s continued development.
The guarantees have remaining terms
of
16 to 25
years or the life of the venture
.
Our maximum potential amount of future payments
related to these
guarantees is approximately $
180
million and would become payable if APLNG
does not perform.
At
March 31, 2021, the carrying value of these guarantees
was approximately $
11
million.
Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling
approximately
$
730
million, which consist primarily of
guarantees of the residual value of leased office buildings,
guarantees
of the residual value of corporate aircrafts,
and a guarantee for our portion of a joint venture’s project finance
reserve accounts.
These guarantees have remaining terms
of one to
five years
and would become payable if
certain asset values are lower
than guaranteed amounts at the end of the lease or
contract term, business
conditions decline at guaranteed entities,
or as a result of nonperformance of contractual
terms by guaranteed
parties.
At March 31, 2021, the carrying value of these guarantees
was approximately $
11
million.
Indemnifications
Over the years, we have entered into agreements to
sell ownership interests in certain legal
entities, joint
ventures and assets that gave rise to qualifying
indemnifications.
These agreements include indemnifications
for taxes and environmental liabilities.
Most of these indemnifications are related to
tax issues and the
majority of these expire in 2021.
Those related to environmental issues have terms
that are generally indefinite
and the maximum amounts of future payments are
generally unlimited.
The carrying amount recorded for
these indemnifications at March 31, 2021,
was approximately $
50
million.
We amortize the indemnification
liability over the relevant time period the indemnity
is in effect, 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.
For
additional information about environmental liabilities,
see Note 9—Contingencies and Commitments.
14
Note 9—Contingencies and Commitments
A number of lawsuits involving a variety of claims
arising in the ordinary course of business
have been filed
against ConocoPhillips.
We also may be required to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain
chemical, mineral and petroleum substances
at various active
and inactive sites.
We regularly assess the need for accounting recognition or disclosure of these
contingencies.
In the case of all known contingencies (other
than those related to income taxes), we accrue
a
liability when the loss is probable and the amount
is reasonably estimable.
If a range of amounts can be
reasonably estimated and no amount within the range
is a better estimate than any other amount,
then the low
end of the range is accrued.
We do not reduce these liabilities for potential insurance or third-party recoveries.
We accrue receivables for insurance or other third-party recoveries when applicable.
With respect to income
tax-related contingencies, we use a cumulative probability-weighted
loss accrual in cases where sustaining a
tax position is less than certain.
Based on currently available information, we believe
it is remote that future costs related to known
contingent
liability exposures will exceed current accruals by
an amount that would have a material
adverse impact on our
consolidated financial statements.
As we learn new facts concerning contingencies,
we reassess our position
both with respect to accrued liabilities
and other potential exposures.
Estimates particularly sensitive to future
changes include contingent liabilities
recorded for environmental remediation, tax and legal
matters.
Estimated future environmental remediation
costs are subject to change due to such factors
as the uncertain
magnitude of cleanup costs, the unknown time
and extent of such remedial actions that
may be required, and
the determination of our liability in proportion
to that of other responsible parties.
Estimated future costs
related to tax and legal matters are subject to
change as events evolve and as additional
information becomes
available during the administrative and litigation
processes.
Environmental
We are subject to international, federal, state and local environmental laws and regulations.
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. EPA or other organizations.
We consider unasserted claims in our determination of environmental
liabilities, and we accrue them in the period they
are both probable and reasonably estimable.
Although liability of those potentially responsible
for environmental remediation costs is generally
joint and
several for federal sites and frequently so for other
sites, we are usually only one of many companies
cited at a
particular site.
Due to the joint and several liabilities, we could
be responsible for all cleanup costs related
to
any site at which we have been designated as a
potentially responsible party.
We have been successful to date
in sharing cleanup costs with other financially
sound companies.
Many of the sites at which we are potentially
responsible are still under investigation by the
EPA or the agency concerned.
Prior to actual cleanup, those
potentially responsible normally assess the
site conditions, apportion responsibility and determine
the
appropriate remediation.
In some instances, we may have no liability
or may attain a settlement of liability.
Where it appears that other potentially responsible
parties may be financially unable to bear their
proportional
share, we consider this inability in estimating
our potential liability, and we adjust our accruals accordingly.
As a result of various acquisitions in the past,
we assumed certain environmental obligations.
Some of these
environmental obligations are mitigated by indemnifications
made by others for our benefit, and some of the
indemnifications are subject to dollar limits
and time limits.
We are currently participating in environmental assessments and cleanups at numerous
federal Superfund and
comparable state and international sites.
After an assessment of environmental exposures
for cleanup and
other costs, we make accruals on an undiscounted
basis (except those acquired in a purchase
business
combination, which we record on a discounted
basis) for planned investigation and remediation
activities for
sites where it is probable future costs will be incurred
and these costs can be reasonably estimated.
We have
not reduced these accruals for possible insurance recoveries.
15
At March 31, 2021, our consolidated balance sheet
included a total environmental accrual of $
188
million,
compared with $
180
million at December 31, 2020, for remediation
activities in the U.S. and Canada.
We
expect to incur a substantial amount of these expenditures within the next 30 years.
In the future, we may be
involved in additional environmental assessments,
cleanups and proceedings.
Litigation and Other Contingencies
We are subject to various lawsuits and claims including but not limited to matters
involving oil and gas royalty
and severance tax payments, gas measurement and
valuation methods, contract disputes,
environmental
damages, climate change, personal injury, and property damage.
Our primary exposures for such matters
relate to alleged royalty and tax underpayments on
certain federal, state and privately owned properties
and
claims of alleged environmental contamination
from historic operations.
We will continue to defend ourselves
vigorously in these matters.
Our legal organization applies its knowledge, experience
and professional judgment to the specific
characteristics of our cases, employing a litigation
management process to manage and monitor the
legal
proceedings against us.
Our process facilitates the early evaluation and
quantification of potential exposures in
individual cases.
This process also enables us to track those cases that
have been scheduled for trial and/or
mediation.
Based on professional judgment and experience
in using these litigation management tools and
available information about current developments
in all our cases, our legal organization regularly assesses
the
adequacy of current accruals and determines if
adjustment of existing accruals, or establishment
of new
accruals, is required.
We have contingent liabilities resulting from throughput agreements with pipeline and
processing companies
not associated with financing arrangements.
Under these agreements, we may be required
to provide any such
company with additional funds through advances
and penalties for fees related to throughput capacity
not
utilized.
In addition, at March 31, 2021, we had performance
obligations secured by letters of credit
of $
309
million (issued as direct bank letters of credit)
related to various purchase commitments for materials,
supplies,
commercial activities and services incident to
the ordinary conduct of business.
In 2007, ConocoPhillips was unable to reach agreement
with respect to the empresa mixta structure
mandated
by the Venezuelan government’s Nationalization Decree.
As a result, Venezuela’s
national oil company,
Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’
interests in the Petrozuata and Hamaca heavy oil
ventures and the offshore Corocoro development project.
In
response to this expropriation, ConocoPhillips
initiated international arbitration on November 2,
2007, with the
ICSID.
On September 3, 2013, an ICSID arbitration tribunal
held that Venezuela unlawfully expropriated
ConocoPhillips’ significant oil investments
in June 2007.
On January 17, 2017, the Tribunal reconfirmed the
decision that the expropriation was unlawful.
In March 2019, the Tribunal unanimously ordered the
government of Venezuela to pay ConocoPhillips approximately $
8.7
billion in compensation for the
government’s unlawful expropriation of the company’s investments in Venezuela in 2007.
ConocoPhillips has
filed a request for recognition of the award in several
jurisdictions.
On August 29, 2019, the ICSID Tribunal
issued a decision rectifying the award and reducing
it by approximately $
227
million.
The award now stands
at $
8.5
billion plus interest.
The government of Venezuela sought annulment of the award, which
automatically stayed enforcement of the award.
Annulment proceedings are underway.
16
In 2014, ConocoPhillips filed a separate and independent
arbitration under the rules of the ICC against
PDVSA under the contracts that had established the
Petrozuata and Hamaca projects.
The ICC Tribunal issued
an award in April 2018, finding that PDVSA owed
ConocoPhillips approximately $
2
billion under their
agreements in connection with the expropriation of the
projects and other pre-expropriation fiscal
measures.
In
August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC
award, plus interest through the payment period, including initial payments totaling approximately $500
million within a period of 90 days from the time of signing of the settlement agreement. The balance of the
settlement is to be paid quarterly over a period of four and a half years. To date, ConocoPhillips has received
approximately $754 million. Per the settlement, PDVSA recognized the ICC award as a judgment in various
jurisdictions, and ConocoPhillips agreed to suspend its legal enforcement actions. ConocoPhillips sent notices
of default to PDVSA on October 14 and November 12, 2019, and to date PDVSA failed to cure its breach.
As
a result, ConocoPhillips has resumed legal enforcement
actions.
ConocoPhillips has ensured that the
settlement and any actions taken in enforcement
thereof meet all appropriate U.S. regulatory
requirements,
including those related to any applicable sanctions
imposed by the U.S. against Venezuela.
In 2016, ConocoPhillips filed a separate and independent
arbitration under the rules of the ICC against
PDVSA under the contracts that had established the
Corocoro project.
On August 2, 2019, the ICC Tribunal
awarded ConocoPhillips approximately $
33
million plus interest under the Corocoro contracts.
ConocoPhillips is seeking recognition and enforcement
of the award in various jurisdictions.
ConocoPhillips
has ensured that all the actions related to the award
meet all appropriate U.S. regulatory requirements,
including those related to any applicable sanctions
imposed by the U.S. against Venezuela.
The Office of Natural Resources Revenue (ONRR) has
conducted audits of ConocoPhillips’
payment of
royalties on federal lands and has issued multiple
orders to pay additional royalties to the federal
government.
ConocoPhillips and the ONRR entered into
a settlement agreement on March 23, 2021,
to resolve the dispute.
All orders and associated appeals have been withdrawn
with prejudice.
Beginning in 2017, governmental and other entities
in several states in the U.S. have filed lawsuits against
oil
and gas companies, including ConocoPhillips,
seeking compensatory damages and equitable
relief to abate
alleged climate change impacts.
Additional lawsuits with similar allegations
are expected to be filed.
The
amounts claimed by plaintiffs are unspecified and the legal
and factual issues involved in these cases are
unprecedented.
ConocoPhillips believes these lawsuits are
factually and legally meritless and are an
inappropriate vehicle to address the challenges associated
with climate change and will vigorously defend
against such lawsuits.
Several Louisiana parishes and the State of Louisiana
have filed
43
lawsuits under Louisiana’s State and Local
Coastal Resources Management Act (SLCRMA)
against oil and gas companies, including ConocoPhillips,
seeking compensatory damages for contamination
and erosion of the Louisiana coastline
allegedly caused by
historical oil and gas operations.
ConocoPhillips entities are defendants in
22
of the lawsuits and will
vigorously defend against them.
Because Plaintiffs’ SLCRMA theories are unprecedented,
there is uncertainty
about these claims (both as to scope and damages)
and any potential financial impact on the company.
In October 2020, the Bureau of Safety and Environmental
Enforcement (BSEE) ordered the prior owners of
Outer Continental Shelf (OCS) Lease P-0166, including
ConocoPhillips, to decommission the lease facilities,
including two offshore platforms located near Carpinteria,
California.
This order was sent after the current
owner of OCS Lease P-0166 relinquished the
lease and abandoned the lease platforms
and facilities.
BSEE’s
order to ConocoPhillips is premised on its connection
to Phillips Petroleum Company, a legacy company of
ConocoPhillips, which held a historical
25
percent interest in this lease and operated these
lease facilities, but
sold its interest approximately
30 years
ago.
ConocoPhillips has not had any connection
to the operation or
production on this lease since that time.
ConocoPhillips is challenging this order.
17
Note 10—Derivative and Financial Instruments
We use futures, forwards, swaps and options in various markets to meet our customer
needs, capture market
opportunities, and manage foreign exchange currency
risk.
Commodity Derivative Instruments
Our commodity business primarily consists
of natural gas, crude oil, bitumen, LNG and NGLs.
Commodity derivative instruments are held at fair
value on our consolidated balance sheet.
Where these
balances have the right of setoff, they are presented on
a net basis.
Related cash flows are recorded as
operating activities on our consolidated statement
of cash flows.
On our consolidated income statement, gains
and losses are recognized either on a gross basis
if directly related to our physical business
or a net basis if held
for trading.
Gains and losses related to contracts that meet
and are designated with the NPNS exception are
recognized upon settlement.
We generally apply this exception to eligible crude contracts and certain gas
contracts.
We do not apply hedge accounting for our commodity derivatives.
The following table presents the gross fair values
of our commodity derivatives, excluding
collateral, and the
line items where they appear on our consolidated
balance sheet:
Millions of Dollars
March 31
December 31
2021
2020
Assets
Prepaid expenses and other current assets
$
232
229
Other assets
46
26
Liabilities
Other accruals
221
202
Other liabilities and deferred credits
33
18
The gains (losses) from commodity derivatives
incurred, and the line items where they appear
on our
consolidated income statement were:
Millions of Dollars
Three Months Ended
March 31
2021
2020
Sales and other operating revenues
$
(279)
47
Other income (loss)
17
2
Purchased commodities
13
(27)
On January 15, 2021, we assumed financial derivative
instruments consisting of oil and natural gas
swaps
following the acquisition of Concho.
At the acquisition date, the financial derivative
instruments acquired
were recognized at fair value as a net liability
of $
456
million with settlement dates under the contracts
through December 31, 2022.
During the first quarter, we recognized a before-tax loss of $
173
million on
Concho derivative contracts with settlement dates
on or before March 31, 2021, and an additional
$
132
million
loss related to acquired Concho derivative contracts
with settlement dates subsequent to March 31,
2021, for a
total before-tax loss of $
305
million.
This loss associated with the acquired financial instruments
is recorded
within the “Sales and other operating revenues”
line on our consolidated income statement.
18
At March 31, 2021, all oil and natural gas derivative
financial instruments acquired from Concho
were
contractually settled.
In connection with the settlement, we paid $
692
million in the first quarter of 2021 and
will pay the remaining $
69
million in the second quarter of 2021.
Cash settlements related to the Concho
derivative contracts
are presented within “Cash Flows From
Operating Activities” on our consolidated cash
flow statement.
The table below summarizes our net exposures resulting
from outstanding commodity derivative
contracts:
Open Position
Long/(Short)
March 31
December 31
2021
2020
Commodity
Natural gas and power (billion cubic feet equivalent)
Fixed price
17
(20)
Basis
(12)
(10)
Financial Instruments
We invest in financial instruments with maturities based on our cash forecasts for
the various accounts and
currency pools we manage.
The types of financial instruments in which we
currently invest include:
●
Time deposits: Interest bearing deposits placed with financial
institutions for a predetermined amount
of time.
●
Demand deposits: Interest bearing deposits placed
with financial institutions.
Deposited funds can be
withdrawn without notice.
●
Commercial paper: Unsecured promissory notes issued
by a corporation, commercial bank or
government agency purchased at a discount to
mature at par.
●
U.S. government or government agency obligations:
Securities issued by the U.S. government or
U.S.
government agencies.
●
Foreign government obligations: Securities
issued by foreign governments.
●
Corporate bonds: Unsecured debt securities
issued by corporations.
●
Asset-backed securities: Collateralized debt securities.
The following investments are carried on our
consolidated balance sheet at cost, plus accrued
interest and the
table reflects remaining maturities at March
31, 2021 and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-
Term Receivables
March 31
December 31
March 31
December 31
March 31
December 31
2021
2020
2021
2020
2021
2020
Cash
$
636
597
Demand Deposits
1,281
1,133
Time Deposits
1 to 90 days
861
1,225
3,625
2,859
91 to 180 days
171
448
Within one year
16
13
One year through five years
2
1
U.S. Government Obligations
1 to 90 days
10
23
-
-
$
2,788
2,978
3,812
3,320
2
1
19
The following investments in debt securities
classified as available for sale are carried at
fair value on our
consolidated balance sheet at March 31, 2021
and December 31, 2020:
Millions of Dollars
Carrying Amount
Cash and Cash Equivalents
Short-Term Investments
Investments and Long-Term
Receivables
March 31
December 31
March 31
December 31
March 31
December 31
2021
2020
2021
2020
2021
2020
Major Security Type
Corporate Bonds
$
-
-
114
130
151
143
Commercial Paper
43
13
162
155
U.S. Government Obligations
-
-
3
4
7
13
U.S. Government Agency
Obligations
10
17
Foreign Government Obligations
13
-
-
2
Asset-backed Securities
-
-
49
41
$
43
13
292
289
217
216
Cash and Cash Equivalents and Short-Term Investments have remaining maturities
within one year.
Investments and Long-Term Receivables have remaining maturities
greater than one year through eight years.
The following table summarizes the amortized
cost basis and fair value of investments in
debt securities
classified as available for sale:
Millions of Dollars
Amortized Cost Basis
Fair Value
March 31
December 31
March 31
December 31
2021
2020
2021
2020
Major Security Type
Corporate bonds
$
264
271
265
273
Commercial paper
205
168
205
168
U.S. government obligations
10
17
10
17
U.S. government agency obligations
10
17
10
17
Foreign government obligations
13
2
13
2
Asset-backed securities
49
41
49
41
$
551
516
552
518
As of March 31, 2021 and December 31, 2020,
total unrealized losses for debt securities
classified as available
for sale with net losses were negligible.
Additionally, at March 31, 2021 and December 31, 2020, investments
in these debt securities in an unrealized loss position
for which an allowance for credit losses
has not been
recorded were negligible.
For the three-month periods ended March 31,
2021 and March 31, 2020, proceeds from
sales and redemptions
of investments in debt securities classified
as available for sale were $
147
million and $
63
million,
respectively.
Gross realized gains and losses included in
earnings from those sales and redemptions were
negligible.
The cost of securities sold and redeemed is determined
using the specific identification method.
20
Credit Risk
Financial instruments potentially exposed to concentrations
of credit risk consist primarily of cash equivalents,
short-term investments, long-term investments
in debt securities, OTC derivative contracts and trade
receivables.
Our cash equivalents and short-term investments
are placed in high-quality commercial paper,
government money market funds, government debt
securities, time deposits with major international
banks and
financial institutions, high-quality corporate
bonds,
and foreign government obligations.
Our long-term
investments in debt securities are placed in high-quality
corporate bonds, U.S. government and government
agency obligations, asset-backed securities,
and time deposits with major international
banks and financial
institutions.
The credit risk from our OTC derivative contracts,
such as forwards, swaps and options, derives
from the
counterparty to the transaction.
Individual counterparty exposure is managed
within predetermined credit
limits and includes the use of cash-call margins when appropriate,
thereby reducing the risk of significant
nonperformance.
We also use futures, swaps and option contracts that have a negligible credit
risk because
these trades are cleared primarily with an exchange
clearinghouse and subject to mandatory margin
requirements until settled; however, we are exposed to the credit
risk of those exchange brokers for receivables
arising from daily margin cash calls, as well as for cash
deposited to meet initial margin requirements.
Our trade receivables result primarily
from our oil and gas operations and reflect a broad
national and
international customer base, which limits our
exposure to concentrations of credit risk.
The majority of these
receivables have payment terms of 30 days or less,
and we continually monitor this exposure and
the
creditworthiness of the counterparties.
At our option, we may require collateral to limit
the exposure to loss
including, letters of credit, prepayments and surety
bonds, as well as master netting arrangements
to mitigate
credit risk with counterparties that both buy from
and sell to us, as these agreements permit
the amounts owed
by us or owed to others to be offset against amounts
due to us.
Certain of our derivative instruments contain provisions that require us to post collateral if the derivative
exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts
with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts
typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert
to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also
permit us to post letters of credit as collateral, such as transactions administered through the New York
Mercantile Exchange.
The aggregate fair value of all derivative
instruments with such credit risk-related contingent
features that were
in a liability position at March 31, 2021 and
December 31, 2020, was $
22
million and $
25
million,
respectively.
For these instruments,
no
collateral was posted as of March 31, 2021 or
December 31, 2020.
If
our credit rating had been downgraded below investment
grade at March 31, 2021,
we would have been
required to post $
21
million of additional collateral, either with
cash or letters of credit.
Note 11—Fair Value
Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting
date using an exit
price (i.e., the price that would be received to sell
an asset or paid to transfer a liability) and disclosed
according to the quality of valuation inputs under
the 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.
21
The classification of an asset or liability
is based on the lowest level of input significant
to its fair value.
Those
that are initially classified as Level 3 are subsequently
reported as Level 2 when the fair value derived
from
unobservable inputs is inconsequential to the overall
fair value, or if corroborated market data becomes
available.
Assets and liabilities initially reported as Level
2 are subsequently reported as Level 3 if
corroborated market data is no longer available.
There were no material transfers into or
out of Level 3 during
2021 or 2020.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair
value on a recurring basis primarily include
our investment in
Cenovus Energy common shares, our investments in debt
securities classified as available for sale, and
commodity derivatives.
●
Level 1 derivative assets and liabilities primarily
represent exchange-traded futures and options that are
valued using unadjusted prices available from the
underlying exchange.
Level 1 also includes our
investment in common shares of Cenovus Energy, which is valued using quotes for shares
on the NYSE,
and our investments in U.S. government obligations
classified as available for sale debt securities,
which
are valued using exchange prices.
●
Level 2 derivative assets and liabilities primarily
represent OTC swaps, options and forward purchase
and
sale contracts that are valued using adjusted exchange
prices, prices provided by brokers or pricing
service
companies that are all corroborated by market
data.
Level 2 also includes our investments in
debt
securities classified as available for sale including
investments in corporate bonds, commercial
paper,
asset-backed securities, U.S. government agency
obligations and foreign government obligations
that are
valued using pricing provided by brokers or pricing
service companies that are corroborated
with market
data.
●
Level 3 derivative assets and liabilities consist
of OTC swaps, options and forward purchase and
sale
contracts where a significant portion of fair
value is calculated from underlying market
data that is not
readily available.
The derived value uses industry standard
methodologies that may consider the historical
relationships among various commodities, modeled
market prices, time value, volatility factors
and other
relevant economic measures.
The use of these inputs results in management’s best estimate of fair
value.
Level 3 activity was not material for all
periods presented.
The following table summarizes the fair value
hierarchy for gross financial assets and
liabilities (i.e.,
unadjusted where the right of setoff exists for commodity
derivatives accounted for at fair value on a recurring
basis):
Millions of Dollars
March 31, 2021
December 31, 2020
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investment in Cenovus Energy
$
1,564
-
-
1,564
1,256
-
-
1,256
Investments in debt securities
10
542
-
552
17
501
-
518
Commodity derivatives
162
104
12
278
142
101
12
255
Total assets
$
1,736
646
12
2,394
1,415
602
12
2,029
Liabilities
Commodity derivatives
$
155
89
10
254
120
91
9
220
Total liabilities
$
155
89
10
254
120
91
9
220
22
The following table summarizes those commodity
derivative balances subject to the right of setoff as
presented on our consolidated balance sheet.
We have elected to offset the recognized fair value amounts for
multiple derivative instruments executed with the
same counterparty in our financial statements
when a legal
right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts Not
Gross
Net
Amounts
Subject to
Gross
Amounts
Amounts
Cash
Net
Recognized
Right of Setoff
Amounts
Offset
Presented
Collateral
Amounts
March 31, 2021
Assets
$
278
5
273
197
76
1
75
Liabilities
254
2
252
197
55
1
54
December 31, 2020
Assets
$
255
2
253
157
96
10
86
Liabilities
220
1
219
157
62
4
58
At March 31, 2021 and December 31, 2020, we
did not present any amounts gross on our
consolidated
balance sheet where we had the right of setoff.
Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial
instruments:
●
Cash and cash equivalents and short-term investments:
The carrying amount reported on the balance
sheet approximates fair value.
For those investments classified as available
for sale debt securities,
the carrying amount reported on the balance sheet
is fair value.
●
Accounts and notes receivable (including long-term
and related parties): The carrying amount
reported on the balance sheet approximates fair
value.
The valuation technique and methods used to
estimate the fair value of the current portion
of fixed-rate related party loans is consistent
with Loans
and advances—related parties.
●
Investment in Cenovus Energy: See Note 5—Investment
in Cenovus Energy for a discussion of the
carrying value and fair value of our investment in
Cenovus Energy common shares.
●
Investments in debt securities classified as available
for sale: The fair value of investments in debt
securities categorized as Level 1 in the fair
value hierarchy is measured using exchange prices.
The
fair value of investments in debt securities
categorized as Level 2 in the fair value hierarchy
is
measured using pricing provided by brokers or
pricing service companies that are corroborated
with
market data.
See Note 10—Derivatives and Financial Instruments,
for additional information.
●
Loans and advances—related parties: The carrying
amount of floating-rate loans approximates
fair
value.
The fair value of fixed-rate loan activity is
measured using market observable data and is
categorized as Level 2 in the fair value hierarchy.
See Note 4—Investments, Loans and Long-Term
Receivables, for additional information.
●
Accounts payable (including related parties)
and floating-rate debt: The carrying amount of accounts
payable and floating-rate debt reported on the balance
sheet approximates fair value.
●
Fixed-rate debt: The estimated fair value of fixed-rate
debt is measured using prices available
from a
pricing service that is corroborated by market
data; therefore, these liabilities are categorized
as Level
2 in the fair value hierarchy.
●
Commercial paper: The carrying amount of our
commercial paper instruments approximates
fair value
and is reported on the balance sheet as short-term
debt.
23
The following table summarizes the net fair
value of financial instruments (i.e., adjusted
where the right of
setoff exists for commodity derivatives):
Millions of Dollars
Carrying Amount
Fair Value
March 31
December 31
March 31
December 31
2021
2020
2021
2020
Financial assets
Investment in Cenovus Energy
$
1,564
1,256
1,564
1,256
Commodity derivatives
80
88
80
88
Investments in debt securities
552
518
552
518
Loans and advances—related parties
168
220
168
220
Financial liabilities
Total debt, excluding finance leases
19,154
14,478
22,578
19,106
Commodity derivatives
56
59
56
59
Note 12—Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss in the
equity section of our consolidated balance
sheet included:
Millions of Dollars
Defined Benefit
Plans
Net Unrealized
Gain (Loss) on
Securities
Foreign
Currency
Translation
Accumulated
Other
Comprehensive
Loss
December 31, 2020
$
(425)
2
(4,795)
(5,218)
Other comprehensive income (loss)
70
(1)
69
138
March 31, 2021
$
(355)
1
(4,726)
(5,080)
The following table summarizes reclassifications
out of accumulated other comprehensive loss and into
net
income (loss):
Millions of Dollars
Three Months Ended
March 31
2021
2020
Defined benefit plans
$
12
8
The above amounts are included in the computation of net periodic benefit
cost and are presented net of tax expense of $
3
million and
$
2
million for the three-month periods ended March 31, 2021 and 2020, respectively.
See Note 14—Employee Benefit Plans, for additional
information.
24
Note 13—Cash Flow Information
Millions of Dollars
Three Months Ended
March 31
2021
2020
Cash Payments
Interest
$
233
200
Income taxes
53
465
Net Sales (Purchases) of Investments
Short-term investments purchased
$
(3,432)
(3,423)
Short-term investments sold
2,966
2,606
Investments and Long-term receivables purchased
(60)
(143)
Investments and Long-term receivables sold
27
25
$
(499)
(935)
We assumed various financial derivative instruments in the Concho acquisition.
In the first quarter of 2021,
we settled all financial derivative contracts
assumed in the Concho acquisition, including
accelerating
settlement of contracts with settlement
dates after March 31, 2021.
Cash settlements related to financial
derivatives of $
692
million are presented within “Cash Flows From
Operating Activities” on our consolidated
cash flow statement.
See Note 10—Derivative and Financial Instruments,
for additional information.
For the first quarter of 2021, included within
“Cash Flows From Investing Activities”
is $
382
million of cash
received through the addition of cash balances acquired
from Concho.
We had additional non-cash increases
in assets and liabilities associated with the acquisition
of Concho as consideration for the transaction
was
entirely in ConocoPhillips common stock.
See Note 3—Acquisitions and Dispositions
for additional
information on the acquisition.
25
Note 14—Employee Benefit Plans
Pension and Postretirement Plans
The components of net periodic benefit cost of
all defined benefit plans for the first quarter
are presented in
the following table:
Millions of Dollars
Pension Benefits
Other Benefits
2021
2020
2021
2020
U.S.
Int’l.
U.S.
Int’l.
Components of Net Periodic Benefit Cost
Three Months Ended March 31
Service cost
$
21
15
21
14
-
1
Interest cost
13
20
17
22
1
2
Expected return on plan assets
(24)
(30)
(21)
(37)
-
-
Amortization of prior service credit
-
-
-
-
(9)
(8)
Recognized net actuarial loss
15
8
12
6
-
-
Settlements
2
-
1
(1)
-
-
Curtailments
12
-
-
-
-
-
Special termination benefits
9
-
-
-
-
-
Net periodic benefit cost
$
48
13
30
4
(8)
(5)
The components of net periodic benefit cost, other
than the service cost component, are included
in the “Other
expenses” line item on our consolidated income statement.
As part of our restructuring program, we concluded
that actions taken during the three-month
period ended
March 31, 2021, would result in a significant
reduction of future service of active employees
in the U.S.
qualified pension plan, a U.S. nonqualified
supplemental retirement plan and the U.S.
other postretirement
benefit plans.
As a result, we recognized an increase in the benefit
obligation as a curtailment loss of
$
12
million on the U.S. pension benefit plans during
the three-month period ended March 31, 2021.
In
conjunction with the recognition of curtailment
losses, the fair market values of pension plan assets
were
updated, and the pension benefit obligations
of the U.S. qualified pension, a U.S. nonqualified
supplemental
retirement plan and the U.S. other postretirement
benefit plans were remeasured.
At March 31, 2021, the net
pension liability decreased by $
76
million, primarily as a result of discount
rate increases for each plan offset
by lower than premised return on assets on the
U.S. qualified pension plan,
resulting in a corresponding
increase to other comprehensive income.
The relevant discount rates are summarized in
the following table:
March 31
December 31
Discount rate
2021
2020
U.S. qualified pension plan
%
3.00
2.40
U.S. nonqualified pension plan
2.40
1.85
U.S. postretirement benefit plans
2.80
2.20
26
Severance Accrual
The following table summarizes our severance accrual
activity for the three-month period ended March
31,
2021:
Millions of Dollars
Balance at December 31, 2020
$
24
Accruals
101
Benefit payments
(33)
Balance at March 31, 2021
$
92
Accruals in the first quarter of 2021 represent
severance costs associated with our restructuring
program.
Of
the total remaining balance at March 31, 2021,
$
77
million is classified as short-term.
See Note 3—
Acquisitions and Dispositions, for additional
information on the restructuring program.
Note 15—Related Party Transactions
Our related parties primarily include equity method
investments and certain trusts for the benefit
of
employees.
Significant transactions with our equity affiliates
were:
Millions of Dollars
Three Months Ended
March 31
2021
2020
Operating revenues and other income
$
17
17
Operating expenses and selling, general and administrative
expenses
26
15
Net interest (income) expense*
(1)
(2)
*We paid interest to, or received interest from,
various affiliates.
See Note 4—Investments, Loans and Long-Term Receivables, for additional
information on loans to affiliated companies.
Note 16—Sales and Other Operating Revenues
Revenue from Contracts with Customers
The following table provides further disaggregation
of our consolidated sales and other operating
revenues:
Millions of Dollars
Three Months Ended
March 31
2021
2020
Revenue from contracts with customers
$
7,161
4,911
Revenue from contracts outside the scope of ASC
Topic 606
Physical contracts meeting the definition of a derivative
2,974
1,296
Financial derivative contracts
(309)
(49)
Consolidated sales and other operating revenues
$
9,826
6,158
27
Revenues from contracts outside the scope of ASC
Topic 606 relate primarily to physical gas contracts at
market prices which qualify as derivatives accounted
for under ASC Topic 815, “Derivatives and Hedging,”
and for which we have not elected NPNS.
There is no significant difference in contractual
terms or the policy
for recognition of revenue from these contracts
and those within the scope of ASC Topic 606.
The following
disaggregation of revenues is provided in conjunction
with Note 17—Segment Disclosures and Related
Information:
Millions of Dollars
Three Months Ended
March 31
2021
2020
Revenue from Outside the Scope of ASC Topic 606 by Segment
Lower 48
$
2,466
976
Canada
303
179
Europe, Middle East and North Africa
205
141
Physical contracts meeting the definition of a derivative
$
2,974
1,296
Millions of Dollars
Three Months Ended
March 31
2021
2020
Revenue from Outside the Scope of ASC Topic 606 by Product
Crude oil
$
124
92
Natural gas
2,727
1,090
Other
123
114
Physical contracts meeting the definition of a derivative
$
2,974
1,296
Practical Expedients
Typically,
our
commodity
sales
contracts
are
less
than
12
months
in
duration;
however,
in
certain
specific
cases they may extend
longer, which may
be out to the
end of field life.
We have long-term commodity sales
contracts which use prevailing market prices at the time of delivery, and under these contracts, the market-
based variable consideration for each performance obligation (i.e., delivery of commodity) is allocated to each
wholly unsatisfied performance obligation within the contract.
Accordingly,
we have applied the practical
expedient allowed in ASC Topic 606 and do not disclose the aggregate amount of the transaction price
allocated to performance obligations or when we expect to recognize revenues that are unsatisfied (or partially
unsatisfied) as of the end of the reporting period.
Receivables and Contract Liabilities
Receivables from Contracts with Customers
At March 31, 2021, the “Accounts and notes
receivable” line on our consolidated balance sheet
included
trade
receivables of $
3,380
million compared with $
1,827
million at December 31, 2020, and included
both
contracts with customers within the scope of ASC
Topic 606 and those that are outside the scope of ASC
Topic 606.
We typically receive payment within 30 days or less (depending on the terms of the invoice) once
delivery is made.
Revenues that are outside the scope of ASC Topic 606 relate primarily to
physical gas sales
contracts at market prices for which we do not
elect NPNS and are therefore accounted for
as a derivative
under ASC Topic 815.
There is little distinction in the nature
of the customer or credit quality of trade
receivables associated with gas sold under contracts
for which NPNS has not been elected
compared with trade
receivables where NPNS has been elected.
28
Contract Liabilities from Contracts with Customers
We have entered into contractual arrangements where we license proprietary technology to customers related
to the optimization process for operating LNG plants. The agreements typically provide for negotiated
payments to be made at stated milestones. The payments are not directly related to our performance under the
contract and are recorded as deferred revenue to be recognized as revenue when the customer can utilize and
benefit from their right to use the license. Payments are received in installments over the construction period.
Millions of Dollars
Contract Liabilities
At December 31, 2020
$
97
Contractual payments received
7
Revenue recognized
(62)
At March 31, 2021
$
42
Amounts Recognized in the Consolidated
Balance Sheet at March 31, 2021
Current liabilities
$
42
We expect to recognize the contract liabilities at March 31, 2021, as revenue in the first quarter of 2022.
Note 17—Segment Disclosures and Related Information
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on
a worldwide
basis.
We manage our operations through
six
operating segments, which are primarily defined
by geographic
region: Alaska; Lower 48; Canada; Europe,
Middle East and North Africa; Asia Pacific;
and Other
International.
Corporate and Other represents income and costs
not directly associated with an operating
segment, such as
most interest income and expense; premiums on early
retirement of debt; corporate overhead and certain
technology activities, including licensing revenues;
and unrealized holding gains or losses
on equity securities.
Corporate assets include all cash and cash equivalents
and short-term investments.
We evaluate performance and allocate resources based on net income (loss) attributable
to ConocoPhillips.
Intersegment sales are at prices that approximate
market.
Effective with the third quarter of 2020, we restructured our
segments to align with changes to our internal
organization.
The Middle East business was realigned from
the Asia Pacific and Middle East segment to the
Europe and North Africa segment.
The segments have been renamed the Asia Pacific
segment and the Europe,
Middle East and North Africa segment.
We have revised segment information disclosures and segment
performance metrics presented within our results
of operations for the prior comparative periods.
On January 15, 2021, we completed our acquisition
of Concho, an independent oil and gas exploration
and
production company with operations across New
Mexico and West Texas.
Results of operations for Concho
are included in our Lower 48 segment for the current
period.
Certain transaction and restructuring costs
associated with the Concho acquisition are included
in our Corporate and Other segment.
See Note 3—
Acquisitions and Dispositions for additional
information related to our Concho acquisition.
29
Analysis of Results by Operating Segment
Millions of Dollars
Three Months Ended
March 31
2021
2020
Sales and Other Operating Revenues
Alaska
$
1,133
1,113
Lower 48
6,513
3,103
Intersegment eliminations
(2)
(10)
Lower 48
6,511
3,093
Canada
867
513
Intersegment eliminations
(305)
(180)
Canada
562
333
Europe, Middle East and North Africa
978
600
Asia Pacific
577
1,003
Other International
1
3
Corporate and Other
64
13
Consolidated sales and other operating revenues
$
9,826
6,158
Sales and Other Operating Revenues by
Geographic Location
(1)
United States
$
7,707
4,217
Australia
-
437
Canada
562
333
China
155
146
Indonesia
196
204
Libya
230
44
Malaysia
226
216
Norway
412
446
United Kingdom
336
110
Other foreign countries
2
5
Worldwide consolidated
$
9,826
6,158
Sales and Other Operating Revenues by
Product
Crude oil
$
4,495
3,444
Natural gas
4,511
1,655
Natural gas liquids
237
151
Other
(2)
583
908
Consolidated sales and other operating revenues
by product
$
9,826
6,158
(1) Sales and other operating revenues are attributable to countries based on the location of
the selling operation.
(2) Includes LNG and bitumen.
30
Millions of Dollars
Three Months Ended
March 31
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
Alaska
$
159
81
Lower 48
468
(437)
Canada
10
(109)
Europe, Middle East and North Africa
153
201
Asia Pacific
317
272
Other International
(4)
28
Corporate and Other
(121)
(1,775)
Consolidated net income (loss) attributable
to ConocoPhillips
$
982
(1,739)
Millions of Dollars
March 31
December 31
2021
2020
Total Assets
Alaska
$
14,571
14,623
Lower 48
32,474
11,932
Canada
6,925
6,863
Europe, Middle East and North Africa
8,689
8,756
Asia Pacific
11,041
11,231
Other International
229
226
Corporate and Other
9,764
8,987
Consolidated total assets
$
83,693
62,618
Note 18—Income Taxes
Our effective tax rate for the first quarter of 2021
was
42.7
percent compared with negative
9.5
percent for the
first quarter of 2020.
The increase in the effective tax rate for the first
quarter of 2021 is primarily due to a
shift in the mix of our before-tax income between
higher and lower tax jurisdictions and the
impact of the
interest deduction related to our Concho debt
exchange, described below.
This increase is partially offset by a
decrease in our valuation allowance.
Our effective tax rate for the first quarter of 2021 is
adversely impacted by $
75
million due to incremental
interest deductions from the exchange of debt
acquired from Concho offsetting U.S. foreign source revenue
that would otherwise have been offset by foreign tax credits.
See Note 6—Debt,
for additional information on
the debt exchange.
During the first quarter of 2021, our valuation
allowance decreased by $
65
million compared to an increase of
$
346
million for the first quarter of 2020.
The change to our U.S. valuation allowance
for both periods relates
primarily to the fair value measurement of our
Cenovus Energy common shares and our expectation
of the tax
impact related to incremental capital gains and losses.
Our deferred tax liability increased by approximately
$
1.1
billion as part of the liabilities assumed through
our
Concho acquisition.
Additionally, our reserve for unrecognized tax benefits increased by $
150
million related
to tax credit carryovers acquired from Concho that
we do not expect to recognize.
See Note 3—Acquisitions
and Dispositions for more information.
31
Item 2.
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management’s
Discussion and Analysis is the company’s analysis of its financial performance and of
significant trends that may affect future performance.
It should be read in conjunction with the financial
statements and notes.
It contains forward-looking statements including, without limitation,
statements relating
to the company’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe
harbor” provisions of the Private Securities Litigation Reform
Act of 1995.
The words “anticipate,”
“believe,” “budget,” “continue,” “could,” “effort,”
“estimate,” “expect,” “forecast,” “goal,” “guidance,”
“intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,”
“target,” “will,” “would,” and similar expressions identify forward-looking statements.
The company does
not undertake to update, revise or correct any of the forward-looking information unless required to do so
under the federal securities laws.
Readers are cautioned that such forward-looking statements should be read
in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE
PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995,” beginning on page
55.
The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss)
attributable to ConocoPhillips.
BUSINESS ENVIRONMENT AND EXECUTIVE
OVERVIEW
ConocoPhillips is the world’s largest independent E&P company with operations
and activities in 15 countries.
Our diverse, low cost of supply portfolio includes
resource-rich unconventional plays in North
America;
conventional assets in North America, Europe
and Asia; LNG developments; oil sands
in Canada; and an
inventory of global conventional and unconventional
exploration prospects.
Headquartered in Houston, Texas,
at March 31, 2021, we employed approximately
10,300 people worldwide and had total
assets of $84 billion.
Completed Acquisition of Concho Resources Inc.
On January 15, 2021, we completed our acquisition
of Concho Resources Inc. (Concho), an independent
oil
and gas exploration and production company
with operations across New Mexico and West Texas.
The
addition of complementary acreage in the
Delaware and Midland Basins creates a sizeable
Permian presence to
augment our leading unconventional positions
in the Eagle Ford, Bakken and Montney.
Consideration for the all-stock transaction was
valued at $13.1 billion, in which 1.46 shares
of ConocoPhillips
common stock were exchanged for each outstanding
share of Concho common stock, resulting
in the issuance
of approximately 286 million shares of ConocoPhillips
common stock.
We also assumed $3.9 billion in
aggregate principal amount of outstanding debt for
Concho, which was recorded at fair value of $4.7
billion as
of the closing date.
We have made significant progress since the closing of the transaction on achieving
our
previously announced
$750 million of annual cost and capital
savings by 2022.
Transaction and restructuring activities associated with combining
the operations of ConocoPhillips and
Concho resulted in non-recurring expenses for
employee severance payments; incremental
pension benefit
costs related to the workforce reductions; employee
retention costs; employee relocations; fees paid
to
financial, legal, and accounting advisors; and
filing fees.
We recognized $291 million before-tax related to
these costs in the first quarter
of 2021 and expect to incur less of these expenses
throughout the remainder of
the year.
Additionally, we recognized $305 million of before-tax losses on commodity
derivatives related to
hedging positions assumed in the Concho acquisition.
At March 31, 2021, all oil and natural gas derivative
financial instruments acquired from Concho were
contractually settled.
In connection with the settlement, we
paid $692 million in the first quarter of 2021 and
will pay the remaining $69 million in the
second quarter of
2021.
For additional information related to the settlement
of financial derivatives acquired from Concho, see
Note 10—Derivative and Financial Instruments,
in the Notes to Consolidated Financial
Statements.
32
For additional information related to our Concho
acquisition,
see Note 3—Acquisitions and Dispositions
in the
Notes to Consolidated Financial Statements.
Overview
After an unprecedented 2020, the energy landscape improved
in the first quarter of 2021 with oil prices
rallying to peak over $60 per barrel for both Brent
and WTI, a level not seen since the outbreak of the
COVID-
19 pandemic.
Oil prices have benefited from the continuation
of coordinated production cuts by the OPEC
plus countries and capital discipline by independent
oil and gas producers.
Despite the recent upswing in oil prices, we
believe that commodity prices will remain
cyclical and volatile,
and a successful business strategy in the exploration
and production industry must be resilient
in lower price
environments, while retaining upside during periods
of higher prices.
Accordingly, we remain disciplined and
are monitoring market fundamentals, including adherence
of the OPEC plus countries to production cut
agreements
and capital restraint across the broader E&P industry.
Demand is recovering but has yet to reach
pre-pandemic levels.
The speed and extent of this recovery will
be influenced by the easing of COVID-19
restrictions that have reduced economic activity
and depressed the demand for our products.
We believe a successful strategy in the E&P industry is to create value through the price
cycles by delivering
on the foundational principles that underpin our
value proposition; free cash flow generation,
a strong balance
sheet, commitment to differential returns of and on capital,
and ESG leadership.
Our first quarter as a
combined company demonstrated the power of
Concho’s acquired assets to help deliver on our value
proposition.
Total company production was 1,527 MBOED, including 405
MBOED from the Permian Basin,
resulting in net cash provided by operating activities
of $2.1 billion.
We returned 46 percent of this cash to
shareholders with dividends of $0.6 billion and share
repurchases of $0.4 billion, and ended the
quarter with
cash, cash equivalents and short-term investments
totaling $6.9 billion.
Net cash provided by operating
activities in the first quarter was negatively impacted
by approximately $1 billion due to
impacts from settling
outstanding hedging contracts, in addition to transaction
and restructuring costs.
In February 2021, we resumed our share repurchase
program, with $1.5 billion of share repurchases
anticipated in 2021.
As of March 31, 2021, approximately $14.1
billion of repurchase authority remained of
the $25 billion share repurchase program our Board
of Directors had previously authorized.
In May 2021, we announced further progress on
our value proposition principles.
We plan to undertake a
paced monetization program related to the 10 percent
of Cenovus Energy common shares we own.
We
obtained these shares as partial consideration in the
2017 disposition of our Foster Creek Christina
Lake oil
sands and western Canada Deep Basin natural
gas assets.
The proceeds from these sales will be directed
towards our existing share repurchase authorization
and will be incremental to our previously announced
$1.5
billion of share repurchases in 2021.
We plan to fully dispose of our Cenovus shares by year-end 2022,
however,
the sales pace will be guided by market conditions
and we retain discretion to adjust accordingly.
Additionally, in May 2021,
we reaffirmed our commitment to preserving our top-tier
balance sheet with an
intent to reduce the company’s gross debt by $5 billion over five years, driving
a more resilient and efficient
capital structure.
We remain focused on our commitment to ESG leadership and excellence.
This commitment is demonstrated
by our continued progress on specific targets that we set in
October 2020 when we announced our adoption
of
a Paris-aligned climate risk framework, including:
●
Our ambition to become a net-zero company for
operational (scope 1 and scope 2) emissions
by 2050;
●
Targeting a reduction in operational greenhouse gas emissions intensity by 35 to 45 percent
from 2016
levels by 2030;
●
Our ambition to exceed the World Bank Zero Routine Flaring 2030 initiative by five
years;
●
Adding continuous methane monitoring devices to
our operations, with an initial focus on our
Lower
48 facilities;
33
●
Advocating for a U.S. carbon price to address end-use
(scope 3) emissions through our membership
in
the Climate Leadership Council;
●
Including ESG performance in executive and
employee compensation programs; and
●
Increasing internal and external transparency of diversity
and inclusion metrics.
Operationally, we remain focused on safely executing the business.
In the first quarter of 2021, production of
1,527 MBOED was impacted by 50 MBOED of unplanned
downtime in the Lower 48 due to Winter Storm
Uri.
Production increased approximately 238 MBOED
or 18 percent in the first quarter of 2021, compared
with the first quarter of 2020, primarily due to the
acquisition of over 300 MBOED in the
Permian Basin from
Concho, partly offset by the absence of 46 MBOED from
the disposition of our Australia-West assets in the
second quarter of 2020.
Adjusted for all acquisitions and dispositions
in the comparative periods and
excluding Libya, production
decreased 59 MBOED or 4 percent.
We re-invested $1.2 billion back into the business in the form of capital expenditures
during the first quarter,
with over half of our investments focused on flexible,
short-cycle unconventional plays in the Permian,
Eagle
Ford and Bakken where our production is unhedged
and located in tax and royalty regimes.
For the full-year,
we remain disciplined capital allocators with a planned
$5.5 billion of capital expenditures in 2021.
Business Environment
Commodity prices are the most significant
factor impacting our profitability and related reinvestment
of
operating cash flows into our business.
Among other dynamics that could influence
world energy markets and
commodity prices are global economic health, supply
or demand disruptions or fears thereof caused
by civil
unrest, global pandemic or military conflicts,
actions taken by OPEC plus and other major
oil producing
countries, environmental laws, tax regulations,
governmental policies and weather-related
disruptions.
Our
strategy is to create value through price cycles
by delivering on the financial and operational
priorities that
underpin our value proposition.
Our earnings and operating cash flows generally
correlate with industry price levels for crude
oil and natural
gas, the prices of which are subject to factors
external to the company and over which we have
no control.
The
following graph depicts the trend in average benchmark
prices for WTI crude oil, Brent crude oil
and Henry
Hub natural gas:
Brent crude oil prices averaged $60.90 per barrel
in the first quarter of 2021, an increase of 21 percent
compared with $50.31 per barrel in the first
quarter of 2020.
WTI at Cushing crude prices averaged $57.84 per
barrel in the first quarter of 2021, an increase of 26
percent compared with $46.06 per barrel in the
first quarter
34
of 2020.
Oil prices increased due to the recovery from
simultaneous demand and supply shocks experienced
in
the first quarter of 2020.
Henry Hub natural gas prices averaged $2.71
per MMBTU in the first quarter of 2021,
an increase of 39
percent compared with $1.95 per MMBTU in the first
quarter of 2020.
Henry Hub prices are higher due to
Winter Storm Uri and normalization of inventories following
COVID-19 demand losses.
Our realized bitumen price averaged $30.78 per barrel
in the first quarter of 2021, a significant
increase
compared with $5.90 per barrel in the first
quarter of 2020.
The increase in the first quarter of 2021 was
driven
by higher WTI prices and a strengthening
WCS differential to WTI at Hardisty.
We continue to optimize
bitumen price realizations through the utilization
of downstream transportation solutions and implementation
of alternate blend capability which results in lower
diluent costs.
Our total average realized price was $45.36 per
BOE in the first quarter of 2021, compared
with $38.81 per
BOE in the first quarter of 2020, due to the recovery
from simultaneous demand and supply shocks
impacting
all of our produced commodities in 2020.
Key Operating and Financial Summary
Significant items during the first quarter
of 2021 included the following:
●
Completed the Concho acquisition,
enhancing both our asset portfolio and financial framework.
●
Net cash provided by operating activities was $2.1
billion, exceeding capital expenditures
and
investments of $1.2 billion.
●
Net cash provided by operating activities included
approximately $1.0 billion of non-recurring
items
associated with our Concho acquisition.
●
Produced 1,488 MBOED,
excluding Libya, during the first quarter
despite incurring approximately 50
MBOED of unplanned production downtime
throughout Lower 48 caused by Winter Storm Uri.
●
Ended the quarter with cash and cash equivalents totaling
$2.8 billion and short-term investments of
$4.1 billion,
equaling $6.9 billion in ending cash, cash equivalents
and short-term investments.
●
Resumed the share repurchase program at an
annualized level of $1.5 billion.
●
Distributed $0.6 billion in dividends and repurchased
$0.4 billion of shares.
●
Recognized by the Dow Jones Sustainability
Index as the top U.S. ESG performer in the Oil
and Gas
Upstream and Integrated sector.
●
Reaffirmed commitment to preserving a top-tier balance sheet
with intent to reduce the company’s
gross debt by $5 billion over the next five years,
driving a more resilient and efficient capital structure.
●
Announced plans to sell our Cenovus shares in the
open market in a disciplined manner by year-end
2022 beginning in the second quarter of 2021, utilizing
the proceeds to fund incremental
ConocoPhillips share repurchases.
Outlook
Capital and Production
Second-quarter 2021 production is expected to
be 1.50
to 1.54 MMBOED, reflecting the impact from
seasonal
turnarounds planned in our Europe,
Middle East and North Africa and Asia Pacific
segments.
This production
guidance excludes Libya.
In February 2021, we announced 2021 operating
plan capital of $5.5 billion.
The plan includes $5.1 billion to
sustain current production and $0.4 billion
for investment in major projects, primarily
in Alaska, in addition to
ongoing exploration appraisal activity.
35
RESULTS OF OPERATIONS
Effective with the third quarter of 2020, we have restructured our segments to align with
changes to our
internal organization.
The Middle East business was realigned from the Asia Pacific and Middle East
segment
to the Europe and North Africa segment.
The segments have been renamed the Asia Pacific
segment and the
Europe, Middle East and North Africa segment.
We have revised segment information disclosures and
segment performance metrics presented within our results of operations for the
prior period.
Unless otherwise indicated, discussion of results for the three-month period ended
March 31, 2021, is based
on a comparison with the corresponding period of 2020.
Consolidated Results
A summary of the company's net income (loss)
attributable to ConocoPhillips by business segment
follows:
Millions of Dollars
Three Months Ended
March 31
2021
2020
Alaska
$
159
81
Lower 48
468
(437)
Canada
10
(109)
Europe, Middle East and North Africa
153
201
Asia Pacific
317
272
Other International
(4)
28
Corporate and Other
(121)
(1,775)
Net income (loss) attributable to ConocoPhillips
$
982
(1,739)
Net income (loss) attributable to ConocoPhillips
increased $2,721 million in the first quarter of
2021.
Earnings were positively impacted by:
●
An unrealized gain of $308 million after-tax
on our Cenovus Energy (CVE) common shares,
compared with an unrealized loss of $1,691 million
after-tax in the first quarter of 2020.
●
Higher sales volumes, primarily in the Lower
48 due to our Concho acquisition.
For additional
information related to our Concho acquisition,
see Note 3—Acquisitions and Dispositions
in the Notes
to Consolidated Financial Statements.
●
Higher realized commodity prices.
●
Lower impairments, mainly in the Lower 48 due
to the absence of impairments to noncore gas assets.
●
A $194 million after-tax gain recognized for a contingent
payment associated with our Australia-West
divestiture completed in the second quarter
of 2020.
For additional information related to
this gain,
see Note 3—Acquisitions and Dispositions in the
Notes to Consolidated Financial Statements.
●
The absence of a commodity inventory lower of
cost or market adjustment of $170 million
after-tax.
Earnings were negatively impacted by:
●
Higher selling, general and administrative
expenses due to restructuring and transaction expenses
of
approximately $243 million after-tax related
to our Concho acquisition and mark-to-market
impacts
on certain key employee compensation programs.
●
Realized losses on hedges of $233 million after-tax
related to derivative positions acquired in our
Concho acquisition.
See Note 10—Derivative and Financial
Instruments in the Notes to Consolidated
Financial Statements, for additional information.
●
Higher DD&A expenses,
production and operating expenses and taxes
other than income taxes,
primarily due to production from our Concho
acquisition.
See the “Segment Results” section for additional
information.
36
Income Statement Analysis
Sales and other operating revenues increased 60 percent,
mainly due to higher sales volumes and higher
commodity price realizations in the Lower 48, primarily
related to our Concho acquisition.
Equity in earnings of affiliates decreased $112 million due to lower earnings
from QG3 and APLNG because
of lower LNG prices and a higher effective tax rate related
to the equity method investments in our Europe,
Middle East and North Africa segment.
Gain (loss) on dispositions increased $275 million
due to recognizing a $200 million before-tax
contingent
payment associated with our Australia-West divestiture completed in the second quarter
of 2020 and the
absence of a $38 million before-tax loss on disposition
related to the completion of our Niobrara disposition
in
the first quarter of 2020.
For additional information related to the Australia-West related gain on disposition,
see Note 3—Acquisitions and Dispositions in the
Notes to Consolidated Financial Statements.
Other income (loss) increased $1,917 million
primarily due to an unrealized gain of $308 million
before-tax on
our CVE common shares, compared with an unrealized
loss of $1,691 million before-tax in the first
quarter of
2020.
See Note 5—Investment in Cenovus Energy in the
Notes to Consolidated Financial Statements,
for
additional information related to our unrealized
gain (loss) on CVE common shares.
Purchased commodities increased $1,822 million,
primarily due to higher natural gas prices,
partly offset by
lower crude oil volumes purchased.
Production and operating expenses increased $210
million,
primarily due to costs associated with additional
volumes in the Lower 48, mainly related to our
Concho acquisition.
Selling, general and administrative expenses increased
$314 million, primarily due to higher costs associated
with compensation and benefits, including mark-to-market
impacts of certain key employee compensation
programs, and restructuring expenses associated
with our Concho acquisition, including severance
expenses.
Exploration expenses decreased $104 million,
primarily due to the absence of an unproved property
impairment and dry hole expenses related to the
Kamunsu East Field in Malaysia that is no longer in our
development plans and the absence of charges associated
with the early termination of our 2020 winter
exploration program in Alaska.
Depreciation, depletion and amortization
increased $475 million, primarily due to higher
volumes in the Lower
48 associated with our Concho acquisition;
higher volumes in Canada due to Montney
ramp up and our Kelt
acquisition in the third quarter of 2020; and higher
expenses in Alaska due to higher DD&A rates
from price-
related reserve revisions.
Impairments decreased $524 million,
primarily due to the absence of a $511 million before-tax impairment
of
certain noncore gas assets in the Lower 48 due to
a significant decrease in the outlook for natural
gas prices in
the first quarter of 2020.
Taxes other than income taxes increased $120 million, primarily due to
higher volumes in the Lower 48
associated with our Concho acquisition.
Foreign currency transactions
(gain) loss increased $109 million due to the
absence of gains incurred from
foreign currency derivatives.
See Note 18—Income Taxes, in the Notes to Consolidated Financial Statements,
for information regarding our
income tax provision and effective tax rate.
37
Summary Operating Statistics
Three Months Ended
March 31
2021
2020
Average Net
Production
Crude oil (MBD)
Consolidated operations
804
642
Equity affiliates
14
12
Total crude oil
818
654
Natural gas liquids (MBD)
Consolidated operations
105
116
Equity affiliates
8
7
Total natural gas
liquids
113
123
Bitumen (MBD)
70
66
Natural gas (MMCFD)
Consolidated operations
2,074
1,638
Equity affiliates
1,081
1,036
Total natural gas
3,155
2,674
Total
Production
(MBOED)
1,527
1,289
Dollars Per Unit
Average Sales
Prices
Crude oil (per bbl)
Consolidated operations
*
$
57.18
48.77
Equity affiliates
59.73
53.14
Total crude oil
57.22
48.86
Natural gas liquids (per bbl)
Consolidated operations
24.36
12.81
Equity affiliates
48.89
42.41
Total natural gas
liquids
26.44
14.82
Bitumen (per bbl)
30.78
5.90
Natural gas (per mcf)
Consolidated operations
*
4.89
3.60
Equity affiliates
3.54
5.41
Total natural gas
4.42
4.30
Millions of Dollars
Exploration Expenses
General administrative, geological and geophysical, and
lease rental, and other
$
78
121
Leasehold impairment
-
31
Dry holes
6
36
$
84
188
*Average sales prices, including the impact of hedges settling per initial contract terms
in the first quarter of 2021 assumed in our Concho
acquisition, were $55.03 per barrel for crude oil and $4.76 per mcf for natural gas.
As of March 31, 2021, we had settled all oil and gas hedging
positions acquired from Concho.
See Note 10—Derivative and Financial Instruments, in the
Notes to Consolidated Financial Statements.
38
We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on
a worldwide
basis.
At March 31, 2021, our operations were producing
in the U.S., Norway, Canada, Australia, Indonesia,
China, Malaysia, Qatar and Libya.
Total production, including Libya, of 1,527 MBOED increased 238 MBOED
or 18 percent in the first quarter
of 2021, primarily due to:
●
Higher volumes in the Lower 48 due to our
Concho acquisition.
●
New wells online in the Lower 48, Canada,
Norway, China and Malaysia.
●
Higher production in Libya due to the absence
of a forced shutdown of the Es Sider export
terminal
and other eastern export terminals after a period
of civil unrest.
The increase in first quarter 2021 production
was partly offset by:
●
Normal field decline.
●
Disposition activity, including our Australia-West divestiture completed in the second quarter of 2020
and noncore Lower 48 assets disposed in the first
quarter of 2020.
For additional information related
to our Australia-West divestiture, see Note 3—Acquisitions and Dispositions in
the Notes to
Consolidated Financial Statements.
●
Higher unplanned downtime in the Lower 48
due to Winter Storm Uri, which impacted production by
approximately 50 MBOED in the first quarter
of 2021.
Total production,
excluding Libya, of 1,488 MBOED increased
210 MBOED or 16 percent in the first
quarter
of 2021.
Adjusted for acquisitions and dispositions and excluding
Libya, production decreased by 59 MBOED
or 4 percent.
39
Segment Results
Alaska
Three Months Ended
March 31
2021
2020
Net Income Attributable to ConocoPhillips
(millions of dollars)
$
159
81
Average Net Production
Crude oil (MBD)
190
198
Natural gas liquids (MBD)
17
19
Natural gas (MMCFD)
8
8
Total Production
(MBOED)
208
218
Average Sales Prices
Crude oil ($ per bbl)
$
59.56
54.78
Natural gas ($ per mcf)
2.23
3.07
The Alaska segment primarily explores for, produces, transports
and markets crude oil, NGLs and natural gas.
As of March 31, 2021, Alaska contributed 21
percent of our consolidated liquids production
and less than 1
percent of our consolidated natural gas production.
Net Income Attributable to ConocoPhillips
Earnings for Alaska increased by $78 million
in the first quarter of 2021,
compared with the same period of
2020.
Earnings were positively impacted by:
●
The absence of a $96 million after-tax lower of cost
or market commodity inventory adjustment.
●
Higher realized crude oil prices.
●
Lower exploration expenses due to the absence
of charges associated with the early cancellation of our
2020 winter exploration program.
Earnings were negatively impacted by:
●
Higher DD&A expenses, primarily due to higher
DD&A rates from price-related reserve revisions.
●
Lower crude oil sales volumes.
Production
Average production decreased 10 MBOED or 5 percent in the first quarter
of 2021 compared with the same
period of 2020.
The production decrease was primarily due to:
●
Normal field decline.
These production decreases were partly offset by:
●
Improved well performance at the Greater Prudhoe
Area.
40
Lower 48
Three Months Ended
March 31
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
(millions of dollars)
$
468
(437)
Average Net Production
Crude oil (MBD)
416
270
Natural gas liquids (MBD)
79
89
Natural gas (MMCFD)
1,319
679
Total Production
(MBOED)
715
472
Average Sales Prices
Crude oil ($ per bbl)*
$
55.68
40.97
Natural gas liquids ($ per bbl)
23.99
11.85
Natural gas ($ per mcf)*
4.56
1.48
*Average sales prices, including the impact of hedges settling per initial contract
terms in the first quarter of 2021 assumed in our Concho
acquisition, were $51.58 per barrel for crude oil and $4.35 per mcf for natural gas.
As of March 31, 2021, we had settled all oil and gas hedging
positions acquired from Concho.
See Note 10
—
Derivative and Financial Instruments in the Notes to
Consolidated Financial Statements.
The Lower 48 segment consists of operations located
in the contiguous U.S. and the Gulf of Mexico.
As of
March 31, 2021, the Lower 48 contributed 51
percent of our consolidated liquids production
and 64 percent of
our consolidated natural gas production.
Concho Acquisition
On January 15, 2021, we completed our acquisition
of Concho, an independent oil and gas exploration
and
production company with operations across New
Mexico and West Texas.
The addition of complementary
acreage in the Delaware and Midland Basins creates
a sizeable Permian presence to augment
our leading
unconventional positions in the Eagle Ford and
Bakken in the Lower 48.
For additional information related to
this transaction, see Note 3—Acquisitions and
Dispositions in the Notes to Consolidated Financial
Statements.
Net Income (Loss) Attributable to ConocoPhillips
Earnings for the Lower 48 increased by $905
million in the first quarter of 2021, compared
with the same
period of 2020.
Earnings were positively impacted by:
●
Higher sales volumes of crude oil and natural gas
due to our Concho acquisition.
●
Higher realized crude oil, natural gas and NGL
prices.
●
The absence of $399 million in after-tax impairments
related to certain noncore gas assets in the Wind
River Basin operations area.
Earnings were negatively impacted by:
●
Higher DD&A expenses, production and operating
expenses and taxes other than income taxes,
primarily due to higher production from our Concho
acquisition.
●
Realized losses on hedges of $233 million after-tax
related to derivative positions acquired in our
Concho acquisition.
See Note 10—Derivative and Financial
Instruments in the Notes to Consolidated
Financial Statements, for additional information.
●
Higher selling, general and administrative
expenses, primarily due to transaction and restructuring
charges related to our Concho acquisition.
41
Production
Average production increased 243 MBOED in the first quarter of 2021, compared
with the same period of
2020.
The production increase was primarily
due to:
●
Higher volumes in the Permian due to our Concho
acquisition.
●
New wells online from our development programs
in the Eagle Ford, Permian and Bakken.
These production increases were partly offset by:
●
Normal field decline.
●
Higher unplanned downtime, primarily
due to Winter Storm Uri which impacted production by
approximately 50 MBOED in the first quarter
of 2021.
Canada
Three Months Ended
March 31
2021
*
2020
Net Income (Loss) Attributable to ConocoPhillips
(millions of dollars)
$
10
(109)
Average Net Production
Crude oil (MBD)
11
2
Natural gas liquids (MBD)
4
1
Bitumen (MBD)
70
66
Natural gas (MMCFD)
91
20
Total Production
(MBOED)
100
72
Average Sales Prices
Crude oil (per bbl)
$
47.41
-
Natural gas liquids (per bbl)
25.32
-
Bitumen (per bbl)
30.78
5.90
Natural gas (per mcf)
2.37
-
* Average sales prices include unutilized transportation costs.
Our Canadian operations mainly consist of the
Surmont oil sands development in Alberta
and the liquids-rich
Montney unconventional play in British Columbia.
As of March 31, 2021, Canada contributed
9 percent of
our consolidated liquids production and 4 percent
of our consolidated natural gas production.
Net Income (Loss) Attributable to ConocoPhillips
Earnings for Canada increased by $119 million in the first quarter
of 2021, compared with the same period of
2020.
Earnings were positively impacted by:
●
Higher realized commodity prices.
●
The absence of a $31 million after-tax lower of cost
or market adjustment to commodity inventory.
●
Increased liquids and natural gas volumes in the
Montney.
●
A $20 million after-tax gain on disposition related
to a contingent payment associated with the
sale of
certain assets to Cenovus Energy in 2017.
For additional information, see Note 3—Acquisitions
and
Dispositions in the Notes to Consolidated Financial
Statements.
Earnings were negatively impacted by:
●
Higher DD&A expenses, primarily due to increased
Montney production.
●
Higher production and operating expenses,
primarily due to increased Montney production.
42
Production
Total average production increased 28 MBOED in the first quarter of 2021,
compared with the same period of
2020, due to new wells online from Pad 2 and
3 in the Montney, as well as production from our Kelt
acquisition in the third quarter of 2020.
Europe, Middle East and North Africa
Three Months Ended
March 31
2021
2020*
Net Income Attributable to ConocoPhillips
(millions of dollars)
$
153
201
Consolidated Operations
Average Net Production
Crude oil (MBD)
116
93
Natural gas liquids (MBD)
5
5
Natural gas (MMCFD)
309
310
Total Production
(MBOED)
173
150
Average Sales Prices
Crude oil (per bbl)
$
57.75
55.53
Natural gas liquids (per bbl)
34.70
21.54
Natural gas (per mcf)
5.99
3.68
*The prior period has been updated to reflect the Middle East Business Unit
moving from Asia Pacific to the Europe, Middle East and North
Africa segment.
See Note 17—Segment Disclosures and Related Information in the Notes to Consolidated
Financial Statements for additional
information.
The Europe,
Middle East and North Africa segment consists
of operations principally located in the Norwegian
sector of the North Sea; the Norwegian Sea;
Qatar; Libya; and commercial and terminalling
operations in the
U.K.
As of March 31, 2021, our Europe,
Middle East and North Africa operations
contributed 12 percent of
our consolidated liquids production and 15 percent
of our consolidated natural gas production.
Net Income Attributable to ConocoPhillips
Earnings for Europe,
Middle East and North Africa decreased by $48
million in the first quarter of 2021,
compared with the same period of 2020.
Earnings were negatively impacted by:
●
Lower LNG sales prices, reflected in equity in earnings
of affiliates.
●
Higher taxes from our equity method investments.
●
The absence of foreign currency gains.
Earnings were positively impacted by:
●
Higher LNG sales volumes, reflected in equity
in earnings of affiliates.
●
Higher natural gas, crude oil and NGL price realizations.
Consolidated Production
Average consolidated production increased 23 MBOED in the first quarter of 2021
compared with the same
period of 2020.
The production increase was primarily due
to:
●
Higher oil production from Libya due to the absence
of a cessation of production following a period of
civil unrest.
●
New production from Norway drilling activities
including first production from Tor II redevelopment
achieved in December 2020.
These production increases were partly offset by normal
field decline.
43
Asia Pacific
Three Months Ended
March 31
2021
2020*
Net Income Attributable to ConocoPhillips
(millions of dollars)
$
317
272
Consolidated Operations
Average Net Production
Crude oil (MBD)
71
79
Natural gas liquids (MBD)
-
2
Natural gas (MMCFD)
347
621
Total Production
(MBOED)
129
185
Average Sales Prices
Crude oil (per bbl)
$
60.36
54.71
Natural gas liquids (per bbl)
-
39.34
Natural gas (per mcf)
5.88
5.94
*The prior period has been updated to reflect the Middle East Business Unit
moving from Asia Pacific to the Europe, Middle East and North
Africa segment.
See Note 17
—
Segment Disclosures and Related Information in the Notes to Consolidated Financial
Statements for additional
information.
The Asia Pacific segment has operations in China,
Indonesia, Malaysia and Australia.
As of March 31, 2021,
Asia Pacific contributed 7 percent of our consolidated
liquids production and 17 percent of our consolidated
natural gas production.
Net Income Attributable to ConocoPhillips
Earnings for Asia Pacific increased $45 million
in the first quarter of 2021, compared with the same
period of
2020.
The earnings increase was primarily due to:
●
A $200 million gain on disposition related
to a contingent payment from our Australia-West divestiture
completed in the second quarter of 2020.
For additional information related to this
gain, please see Note
3—Acquisitions and Dispositions in the Notes to
Consolidated Financial Statements.
●
Lower exploration expenses, due to the absence
of an unproved property impairment and dry hole
expenses related to the Kamunsu East Field in Malaysia.
Earnings were negatively impacted by:
●
Lower earnings due to our Australia-West divestiture completed in the second quarter
of 2020.
●
Lower equity in earnings of affiliates, primarily due to lower
realized LNG prices.
Consolidated Production
Average consolidated production decreased 56 MBOED
or 30 percent in the first quarter of 2021, compared
with
the same period of 2020.
The decrease was primarily due to:
●
The divestiture of our Australia-West assets that contributed 46 MBOED in first quarter
of 2020.
●
Normal field decline.
These production decreases were partly offset by:
●
Bohai Bay development activity in China, including
first production from Phase 4A Project at the
Penglai 25-6 Field and first production from Malikai
Phase 2 in Malaysia.
44
Bohai Bay Well Control Incident
On April 5, 2021, a shallow gas kick occurred during
drilling operations, resulting in a fire on the
V platform in
Bohai Bay, China.
On April 6, 2021, the fire was extinguished.
We are working with the operator to fully
understand the impacts.
Other International
Three Months Ended
March 31
2021
2020
Net Income (Loss) Attributable to ConocoPhillips
(millions of dollars)
$
(4)
28
The Other International segment consists of exploration
activities in Colombia and Argentina and
contingencies associated with prior operations
in other countries.
Earnings for Other International decreased $32 million
in the first quarter of 2021, compared
with the same
period of 2020.
Earnings were lower primarily due to the absence
of a $29 million after-tax benefit to earnings
from the dismissal of arbitration related to prior
operations in Senegal.
45
Corporate and Other
Millions of Dollars
Three Months Ended
March 31
2021
2020
Net Loss Attributable to ConocoPhillips
Net interest expense
$
(270)
(155)
Corporate general and administrative expenses
(129)
50
Technology
41
1
Other income (expense)
237
(1,671)
$
(121)
(1,775)
Net interest expense consists of interest and financing
expense, net of interest income and capitalized
interest.
Net interest expense increased by $115 million in the first
quarter of 2021, primarily due to higher debt
balances.
See Note 6—Debt in the Notes to Consolidated
Financial Statements for more information
related to
debt acquired in our Concho transaction.
Net interest expense also increased due to lower
interest income
from lower cash and cash equivalent balances and
yield.
Corporate G&A expenses include compensation
programs and staff costs.
These expenses increased by $179
million mainly due to mark-to-market adjustments
associated with certain key employee compensation
programs and restructuring expenses associated
with our Concho acquisition.
For additional information about
restructuring expenses, see Note 14—Employee
Benefit Plans in the Notes to Consolidated Financial
Statements.
Technology includes our investment in new technologies or businesses, as well
as licensing revenues.
Activities are focused on both conventional and tight
oil reservoirs, shale gas, heavy oil, oil
sands, enhanced
oil recovery and LNG.
Earnings from Technology increased $40 million in the first quarter of 2021
primarily
due to higher licensing revenues.
Other income (expense) or “Other” includes certain
foreign currency transaction gains and losses,
environmental costs associated with sites no longer
in operation, other costs not directly associated
with an
operating segment, premiums incurred on the early
retirement of debt, unrealized holding gains or
losses on
equity securities, and pension settlement expense.
Earnings in “Other” increased by $1,908 million
in the first
quarter of 2021,
compared with the same period of 2020,
primarily due to an unrealized gain of $308 million
after-tax in the first quarter of 2021 on our
CVE common shares, compared with an unrealized
loss of $1,691
million after-tax on those shares in the first
quarter of 2020.
46
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
Millions of Dollars
March 31
December 31
2021
2020
Cash and cash equivalents
$
2,831
2,991
Short-term investments
4,104
3,609
Total debt
20,027
15,369
Total equity
43,155
29,849
Percent of total debt to capital*
%
32
34
Percent of floating-rate debt to total debt
5
7
*Capital includes total debt and total equity.
To meet our short- and long-term liquidity requirements, we look to a variety of funding
sources, including
cash generated from operating activities,
our commercial paper and credit facility programs,
and our ability to
sell securities using our shelf registration
statement.
During the first quarter of 2021, the primary uses of
our
available cash were $1,200 million to
support our ongoing capital expenditures and investments
program;
approximately $1.0 billion of hedging, transaction
and restructuring costs; $588 million
to pay dividends;
$499
million of net purchases of investments;
and $375 million to repurchase common stock.
During the first
quarter of 2021, our cash and cash equivalents
decreased by $160 million to $2,831 million.
On January 15, 2021, we completed the acquisition
of Concho in an all-stock transaction.
In the acquisition,
we assumed Concho’s publicly traded debt, which was recorded at fair value
of $4.7 billion on the acquisition
date.
See Note 6—Debt and Note 3—Acquisitions
and Dispositions, in the Notes to Consolidated
Financial
Statements for additional information.
At March 31, 2021, we had cash and cash equivalents
of $2.8 billion, short-term investments of $4.1
billion,
and available borrowing capacity under our credit
facility of $5.7 billion,
totaling over $12 billion of liquidity.
We believe current cash balances and cash generated by operations, together with
access to external sources of
funds as described below in the “Significant Changes
in Capital” section, will be sufficient to meet our funding
requirements in the near- and long-term, including our capital
spending program, dividend payments and
required debt payments.
Significant Changes in Capital
Operating Activities
Cash provided by operating activities was $2,080
million for the first quarter of 2021, compared
with $2,105
million for the first quarter of 2020.
The decrease in cash provided by operating
activities is primarily due to
the settlement of all oil and gas hedging positions
acquired from Concho, normal field decline, transaction
and
restructuring costs, and the divestiture of our Australia-West assets.
The decrease in cash provided by
operating activities was partly offset by higher sales
volumes and higher realized commodity
prices in the
Lower 48, primarily due to our acquisition of
Concho.
Our short-
and long-term operating cash flows are highly
dependent upon prices for crude oil, bitumen, natural
gas, LNG and NGLs.
Prices and margins in our industry have historically
been volatile and are driven by
market conditions over which we have no control.
Absent other mitigating factors, as these
prices and margins
fluctuate, we would expect a corresponding
change in our operating cash flows.
47
The level of absolute production volumes, as
well as product and location mix, impacts our cash flows.
Future production is subject to numerous uncertainties,
including, among others, the volatile crude
oil and
natural gas price environment, which may impact
investment decisions; the effects of price changes
on
production sharing and variable-royalty contracts;
acquisition and disposition of fields; field
production
decline rates; new technologies; operating efficiencies;
timing of startups and major turnarounds; political
instability; weather-related disruptions; and the addition of
proved reserves through exploratory success and
their timely and cost-effective development.
While we actively manage these factors, production
levels can
cause variability in cash flows, although generally
this variability has not been as significant as
that caused by
commodity prices.
To maintain or grow our production volumes, we must continue to add to our proved
reserve base.
See the
“Capital Expenditures and Investments” section,
for information about our capital expenditures
and
investments.
On January 15, 2021, we assumed financial derivative
instruments consisting of oil and natural gas swaps
following the acquisition of Concho.
At March 31, 2021, all oil and natural gas derivative
financial
instruments acquired from Concho were contractually
settled.
In connection with the settlement, we paid $692
million in the first quarter of 2021 and will
pay the remaining $69 million in the second
quarter of 2021.
For
additional information, see Note 10—Derivative
and Financial Instruments in the Notes to
Consolidated
Financial Statements.
Investing Activities
In the first quarter of 2021, we invested $1.2 billion
in capital expenditures.
Our 2021 operating plan capital
expenditures is $5.5 billion compared with
$4.7 billion in 2020.
See the “Capital Expenditures and
Investments” section, for information about our
capital expenditures and investments.
We completed our acquisition of Concho on January 15, 2021.
The assets acquired in the transaction included
$382 million of cash which is reflected in the
“Net Cash Used in Investing Activities” section
of our
consolidated statement of cash flows. See Note 3—Acquisitions
and Dispositions, in the Notes to Consolidated
Financial Statements for additional information.
We invest in short-term investments as part of our cash investment strategy, the primary objective of which is
to protect principal, maintain liquidity and provide
yield and total returns;
these investments include time
deposits, commercial paper as well as debt securities
classified as available for sale.
Funds for short-term
needs to support our operating plan and provide resiliency
to react to short-term price volatility are invested
in
highly liquid instruments with maturities within
the year.
Funds we consider available to maintain resiliency
in longer term price downturns and to capture
opportunities outside a given operating
plan may be invested in
instruments with maturities greater than one year.
Investing activities in the first quarter of 2021 included
net purchases of $499 million of investments,
of which
$466 million was invested in short-term instruments
and $33 million was invested in long-term instruments.
See Note 10—Derivative and Financial Instruments,
in the Notes to Consolidated Financial
Statements for
additional information.
48
Financing Activities
We have a revolving credit facility totaling $6.0 billion, expiring in May 2023.
Our revolving credit facility
may be used for direct bank borrowings, the issuance
of letters of credit totaling up to $500 million,
or as
support for our commercial paper program.
The revolving credit facility is broadly syndicated
among financial
institutions and does not contain any material
adverse change provisions or any covenants
requiring
maintenance
of specified financial ratios or credit ratings.
The facility agreement contains a cross-default
provision relating to the failure to pay principal or
interest on other debt obligations of
$200 million or more
by ConocoPhillips, or any of its consolidated subsidiaries.
The amount of the facility is not subject to
the
redetermination prior to its expiration date.
Credit facility borrowings may bear interest at
a margin above rates offered by certain designated banks in the
London interbank market or at a margin above the overnight
federal funds rate or prime rates offered by
certain designated banks in the U.S.
The agreement calls for commitment fees
on available, but unused,
amounts.
The agreement also contains early termination
rights if our current directors or their approved
successors cease to be a majority of the Board
of Directors.
The revolving credit facility supports the ConocoPhillips
Company’s ability to issue up to $6.0 billion of
commercial paper, which is primarily a funding source for short-term
working capital needs.
Commercial
paper maturities are generally limited to 90 days.
With $300 million of commercial paper outstanding and no
direct borrowings or letters of credit, we had $5.7
billion in available borrowing capacity
under the revolving
credit facility at March 31, 2021.
We may consider issuing additional commercial paper in the future to
supplement our cash position.
On January 15, 2021, we completed the acquisition
of Concho in an all-stock transaction. In the acquisition,
we assumed Concho’s publicly traded debt, which was recorded at fair value
of $4.7 billion on the acquisition
date.
See Note 3—Acquisitions and Dispositions and
Note 6—Debt, in the Notes to Consolidated
Financial
Statements for additional information.
In May 2021, we reaffirmed our commitment to
preserving a top-tier
balance sheet with an intent to reduce the company’s gross debt by $5
billion over the next five years, driving a
more resilient and efficient capital structure.
In October 2020, Moody’s affirmed its rating of our senior long-term debt of “A3”
with a “stable” outlook, and
affirmed its rating of our short-term debt as “Prime-2.”
In January 2021, Fitch affirmed its rating of our long-
term debt as “A” with a “stable” outlook and affirmed its
rating of our short-term debt as “F1+.”
On January
25, 2021, S&P revised the industry risk assessment
for the E&P industry to “Moderately High” from
“Intermediate” based on a view of increasing risks
from the energy transition, price volatility, and weaker
profitability.
On February 11, 2021, S&P downgraded its rating of our long-term debt
from “A” to “A-” with a
“stable” outlook and downgraded its rating of our short-term
debt from “A-1” to “A-2.”
We do not have any
ratings triggers on any of our corporate debt
that would cause an automatic default, and
thereby impact our
access to liquidity, upon downgrade of our credit ratings.
If our credit ratings
are downgraded from their
current levels, it could increase the cost of corporate
debt available to us and restrict our access to
the
commercial paper markets.
If our credit rating were to deteriorate
to a level prohibiting us from accessing the
commercial paper market, we would still
be able to access funds under our revolving credit
facility.
Certain of our project-related contracts, commercial
contracts and derivative instruments contain
provisions
requiring us to post collateral.
Many of these contracts and instruments permit
us to post either cash or letters
of credit as collateral.
At March 31, 2021 and December 31, 2020,
we had direct bank letters of credit of $309
million and $249 million, respectively, which secured performance obligations
related to various purchase
commitments incident to the ordinary conduct of business.
In the event of credit ratings downgrades, we may
be required to post additional letters of
credit.
Shelf Registration
We have a universal shelf registration statement on file with the SEC under which
we have the ability to issue
and sell an indeterminate amount of various types
of debt and equity securities.
49
Guarantor Summarized Financial Information
We have various cross guarantees among ConocoPhillips, ConocoPhillips Company
and Burlington Resources
LLC, with respect to publicly held debt securities.
ConocoPhillips Company is 100 percent
owned by
ConocoPhillips.
Burlington Resources LLC is 100 percent
owned by ConocoPhillips Company.
ConocoPhillips and/or ConocoPhillips Company
have fully and unconditionally guaranteed
the payment
obligations of Burlington Resources LLC, with respect
to its publicly held debt securities.
Similarly,
ConocoPhillips has fully and unconditionally
guaranteed the payment obligations of ConocoPhillips
Company
with respect to its publicly held debt securities.
In addition, ConocoPhillips Company
has fully and
unconditionally guaranteed the payment obligations
of ConocoPhillips with respect to its publicly
held debt
securities.
All guarantees are joint and several.
The following tables present summarized financial
information for the Obligor Group, as defined
below:
●
The Obligor Group will reflect guarantors and
issuers of guaranteed securities consisting of
ConocoPhillips, ConocoPhillips Company and
Burlington Resources LLC.
●
Consolidating adjustments for elimination
of investments in and transactions between the collective
guarantors and issuers of guaranteed securities
are reflected in the balances of the summarized
financial information.
●
Non-Obligated Subsidiaries are excluded
from the presentation.
Upon completion of the Concho Acquisition
on January 15, 2021, we assumed Concho’s publicly traded debt
of approximately $3.9 billion in aggregate principal
amount, which was recorded at fair value
of $4.7 billion
on the acquisition date.
We completed a debt exchange offer that settled on February 8, 2021, of which 98
percent, or approximately $3.8 billion in aggregate
principal amount of Concho’s notes, were tendered and
accepted for new debt issued by ConocoPhillips.
The new debt issued in the exchange is fully
and
unconditionally guaranteed by ConocoPhillips
Company.
Both the guarantor and issuer of the exchange debt
is reflected within the Obligor Group presented
here.
See Note 3—Acquisitions and Dispositions
and Note
6—Debt, in the Notes to Consolidated Financial
Statements for additional information.
Transactions and balances reflecting activity between the Obligors
and Non-Obligated Subsidiaries are
presented below:
Summarized Income Statement Data
Millions of Dollars
Three Months Ended
March 31, 2021
Revenues and Other Income
$
6,607
Income (loss) before income taxes
1,092
Net income (loss)
982
Net Income (Loss) Attributable to ConocoPhillips
982
50
Summarized Balance Sheet Data
Millions of Dollars
March 31
2021
December 31
2020
Current assets
$
9,067
8,535
Amounts due from Non-Obligated Subsidiaries, current
673
440
Noncurrent assets
56,845
37,180
Amounts due from Non-Obligated Subsidiaries, noncurrent
8,528
7,730
Current liabilities
4,564
3,797
Amounts due to Non-Obligated Subsidiaries, current
1,889
1,365
Noncurrent liabilities
24,750
18,627
Amounts due to Non-Obligated Subsidiaries, noncurrent
5,756
3,972
Capital Requirements
For information about our capital expenditures
and investments, see the “Capital Expenditures
and
Investments” section.
Our debt balance as of March 31, 2021, was $20.0
billion compared with $15.4 billion at
December 31, 2020.
The increase of $4.6 billion is due to debt assumed
in the Concho acquisition.
The current portion of debt,
including payments for finance leases, is $0.7
billion.
Payments will be made using current cash balances
and
cash generated by operations.
See Note 6—Debt, in the Notes to Consolidated
Financial Statements for
additional information on debt.
We believe in delivering value to our shareholders through a growing and sustainable
dividend supplemented
by additional returns of capital, including share repurchases.
In 2020, we paid $1.8 billion,
equating to $1.69
per share of common stock, in dividends.
On February 2, 2021, we announced a quarterly
dividend of $0.43
per share.
The dividend was paid on March 1, 2021, to stockholders
of record at the close of business on
February 12, 2021.
On May 4, 2021, we announced a quarterly
dividend of $0.43
per share, payable June 1,
2021, to stockholders of record at the close of business
on May 14, 2021.
In late 2016, we initiated our current share repurchase
program, which has a total program authorization
to
repurchase $25 billion of our common stock.
In February 2021, we resumed the program
at an annualized
level of $1.5 billion.
In May 2021, we announced our plan to dispose
of our 208 million shares of Cenovus
Energy by year-end 2022.
The sales pace will be guided by market conditions,
with ConocoPhillips retaining
discretion to adjust accordingly.
The proceeds from this disposition will be deployed
towards incremental
share repurchases.
In the first quarter of 2021, we repurchased
7 million shares at a cost of $375 million.
Since the inception of the program we have repurchased
196 million shares at a cost of $10.9 billion.
Our dividend and share repurchase programs are
subject to numerous considerations, including
market
conditions, management discretion and other factors.
See “Item 1A—Risk Factors – Our ability to declare
and
pay dividends and repurchase shares is subject to
certain considerations” in Part I—Item
1A in our 2020
Annual Report on Form 10-K.
51
Capital Expenditures and Investments
Millions of Dollars
Three Months Ended
March 31
2021
2020
Alaska
$
235
509
Lower 48
718
776
Canada
33
74
Europe, Middle East and North Africa
121
121
Asia Pacific
76
103
Other International
6
53
Corporate and Other
11
13
Capital expenditures and investments
$
1,200
1,649
During the first quarter of 2021, capital expenditures
and investments supported key exploration
and
development programs, primarily:
●
Development and appraisal activities
in the Lower 48, primarily Permian, Eagle Ford,
and Bakken.
●
Appraisal and development activities
in Alaska related to the Western North Slope and development
activities in the Greater Kuparuk Area.
●
Appraisal activities in liquids-rich plays and optimization
of oils sands development in Canada.
●
Continued development activities across assets
in Norway.
●
Continued development activities in China, Malaysia
and Indonesia.
In February 2021, we announced 2021 operating
plan capital expenditures of $5.5 billion.
The plan includes
$5.1 billion to sustain current production and $0.4
billion for investment in major projects, primarily
in Alaska,
in addition to ongoing exploration appraisal activity.
Contingencies
A number of lawsuits involving a variety of claims
arising in the ordinary course of business
have been filed
against ConocoPhillips.
We also may be required to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain
chemical, mineral and petroleum substances
at various active
and inactive sites.
We regularly assess the need for accounting recognition or disclosure of these
contingencies.
In the case of all known contingencies (other
than those related to income taxes), we accrue
a
liability when the loss is probable and the amount
is reasonably estimable.
If a range of amounts can be
reasonably estimated and no amount within the range
is a better estimate than any other amount,
then the low
end of the range is accrued.
We do not reduce these liabilities for potential insurance or third-party recoveries.
We accrue receivables for insurance or other third-party recoveries when applicable.
With respect to income
tax-related contingencies, we use a cumulative probability-weighted
loss accrual in cases where sustaining a
tax position is less than certain.
Based on currently available information, we believe
it is remote that future costs related to known
contingent
liability exposures will exceed current accruals by
an amount that would have a material
adverse impact on our
consolidated financial statements.
For information on other contingencies, see
Note 9—Contingencies and
Commitments, in the Notes to Consolidated Financial
Statements.
52
Legal and Tax
Matters
We are subject to various lawsuits and claims including but not limited to matters
involving oil and gas royalty
and severance tax payments, gas measurement and
valuation methods, contract disputes,
environmental
damages, climate change, personal injury, and property damage.
Our primary exposures for such matters
relate to alleged royalty and tax underpayments
on certain federal, state and privately owned
properties,
and
claims of alleged environmental contamination
from historic operations.
We will continue to defend ourselves
vigorously in these matters.
Our legal organization applies its knowledge, experience
and professional judgment to the specific
characteristics of our cases, employing a litigation
management process to manage and monitor the
legal
proceedings against us.
Our process facilitates the early evaluation and
quantification of potential exposures in
individual cases.
This process also enables us to track those cases that
have been scheduled for trial and/or
mediation.
Based on professional judgment and experience
in using these litigation management tools and
available information about current developments
in all our cases, our legal organization regularly assesses
the
adequacy of current accruals and determines if
adjustment of existing accruals, or establishment
of new
accruals, is required.
Environmental
We are subject to the same numerous international, federal, state and local environmental
laws and regulations
as other companies in our industry.
For a discussion of the most significant
of these environmental laws and
regulations, including those with associated remediation
obligations, see the “Environmental” section in
Management’s Discussion and Analysis of Financial Condition and Results
of Operations on pages 64–66
of
our 2020 Annual Report on Form 10-K.
We occasionally receive requests for information or notices of potential liability
from the EPA and state
environmental agencies alleging that we are
a potentially responsible party under the Federal
Comprehensive
Environmental Response, Compensation and
Liability Act (CERCLA) or an equivalent
state statute.
On
occasion, we also have been made a party to cost
recovery litigation by those agencies or by private
parties.
These requests, notices and lawsuits assert potential
liability for remediation costs at various sites
that typically
are not owned by us, but allegedly contain waste attributable
to our past operations.
As of March 31, 2021,
there were 15 sites around the U.S. in
which we were identified as a potentially responsible
party under
CERCLA and comparable state laws.
At March 31, 2021,
our balance sheet included a total environmental
accrual of $188 million, compared with
$180 million at December 31, 2020,
for remediation activities in the U.S. and
Canada.
We expect to incur a
substantial amount of these expenditures within
the next 30 years.
Notwithstanding any of the foregoing, and as
with other companies engaged in similar businesses,
environmental costs and liabilities are inherent
concerns in our operations and products, and there
can be no
assurance that material costs and liabilities
will not be incurred.
However, we currently do not expect any
material adverse effect upon our results of operations or financial
position as a result of compliance with
current environmental laws and regulations.
53
Climate Change
Continuing political and social attention to the
issue of global climate change has resulted in
a broad range of
proposed or promulgated state, national and international
laws focusing on GHG reduction.
These proposed or
promulgated laws apply or could apply in countries
where we have interests or may have interests
in the future.
Laws in this field continue to evolve, and
while it is not possible to accurately estimate either
a timetable for
implementation or our future compliance costs
relating to implementation, such laws, if
enacted, could have a
material impact on our results of operations and
financial condition.
For examples of legislation or precursors
for possible regulation and factors on which the
ultimate impact on our financial performance
will depend, see
the “Climate Change” section in Management’s Discussion and Analysis
of Financial Condition and Results of
Operations on pages 67–69 of our 2020 Annual
Report on Form 10-K.
Climate Change Litigation
Beginning in 2017, governmental and other entities
in several states in the U.S. have filed lawsuits
against oil
and gas companies, including ConocoPhillips,
seeking compensatory damages and equitable
relief to abate
alleged climate change impacts.
Additional lawsuits with similar allegations
are expected to be filed.
The
amounts claimed by plaintiffs are unspecified and the legal
and factual issues involved in these cases are
unprecedented.
ConocoPhillips believes these lawsuits are
factually and legally meritless and are an
inappropriate vehicle to address the challenges
associated with climate change and will
vigorously defend
against such lawsuits.
Several Louisiana parishes and the State of Louisiana
have filed 43 lawsuits under Louisiana’s State and Local
Coastal Resources Management Act (SLCRMA)
against oil and gas companies, including ConocoPhillips,
seeking compensatory damages for contamination
and erosion of the Louisiana coastline
allegedly caused by
historical oil and gas operations.
ConocoPhillips entities are defendants
in 22 of the lawsuits and will
vigorously defend against them.
Because Plaintiffs’ SLCRMA theories are unprecedented,
there is uncertainty
about these claims (both as to scope and damages)
and any potential financial impact on the company.
Company Response to Climate-Related Risks
The company has responded by putting in place
a Sustainable Development Risk Management
Standard
covering the assessment and registering of significant
and high sustainable development risks based on their
consequence and likelihood of occurrence.
We have developed a company-wide Climate Change Action Plan
with the goal of tracking mitigation activities
for each climate-related risk included in the corporate
Sustainable Development Risk Register.
The risks addressed in our Climate Change Action
Plan fall into four broad categories:
●
GHG-related legislation and regulation.
●
GHG emissions management.
●
Physical climate-related impacts.
●
Climate-related disclosure and reporting.
Emissions are categorized into three different scopes.
Gross operated Scope 1 and Scope 2 GHG emissions
help us understand our climate transition
risk.
●
Scope 1 emissions are direct GHG emissions
from sources that we own or control.
●
Scope 2 emissions are GHG emissions from
the generation of purchased electricity or
steam that we
consume.
Scope 3 emissions are indirect emissions
from sources that we neither own nor control.
54
We announced in October 2020 the adoption of a Paris-aligned climate risk framework
with the objective of
implementing a coherent set of choices designed
to facilitate the success of our existing exploration
and
production business through the energy transition.
Given the uncertainties remaining about how the
energy
transition will evolve, the strategy aims to be robust
across a range of potential future outcomes.
The strategy is comprised of four pillars:
●
Targets:
Our target framework consists of a hierarchy of targets, from a long-term
ambition that sets
the direction and aim of the strategy, to a medium-term performance target for GHG emissions
intensity, to shorter-term targets for flaring and methane intensity reductions. These
performance
targets are supported by lower-level internal business
unit goals to enable the company to achieve the
company-wide targets.
We have set a target to reduce our gross operated (scope 1 and 2) emissions
intensity by 35 to 45 percent from 2016 levels by
2030, with an ambition to achieve net-zero
operated
emissions by 2050.
We have joined the World
Bank Flaring Initiative to work towards
zero routine
flaring of gas by 2030.
●
Technology choices:
We expanded our Marginal Abatement Cost Curve process to provide a broader
range of opportunities for emission reduction
technology.
●
Portfolio
choices: Our corporate authorization process requires
all qualifying projects to include a
GHG price in their project approval economics.
Different GHG prices are used depending on the
region or jurisdiction.
Projects in jurisdictions with existing GHG
pricing regimes incorporate the
existing GHG price and forecast into their
economics.
Projects where no existing GHG pricing
regime exists utilize a scenario forecast from
our internally consistent World Energy Model.
In this
way, both existing and emerging regulatory requirements are considered in our
decision-making.
The
company does not use an estimated market cost
of GHG emissions when assessing reserves
in
jurisdictions without existing GHG regulations.
●
External engagement:
Our external engagement aims to differentiate ConocoPhillips
within the oil and
gas sector with our approach to managing climate-related
risk.
We are a Founding Member of the
Climate Leadership Council (CLC), an international
policy institute founded in collaboration
with
business and environmental interests to develop
a carbon dividend plan.
Participation in the CLC
provides another opportunity for ongoing dialogue
about carbon pricing and framing the issues
in
alignment with our public policy principles.
We also belong to and fund Americans For Carbon
Dividends, the education and advocacy branch of
the CLC.
55
CAUTIONARY STATEMENT
FOR THE PURPOSES OF THE “SAFE HARBOR”
PROVISIONS OF
THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements
within the meaning of Section 27A of the Securities
Act of
1933 and Section 21E of the Securities Exchange
Act of 1934.
All statements other than statements of
historical fact included or incorporated by reference
in this report, including, without limitation,
statements
regarding our future financial position, business
strategy, budgets, projected revenues, projected costs and
plans, objectives of management for future operations,
the anticipated benefits of the transaction
between us
and Concho, the anticipated impact of the transaction
on the combined company’s business and future
financial and operating results, the expected amount
and the timing of synergies from the transaction
are
forward-looking statements.
Examples of forward-looking statements contained
in this report include our
expected production growth and outlook on the
business environment generally, our expected capital budget
and capital expenditures, and discussions concerning
future dividends.
You can often identify our forward-
looking statements by the words “anticipate,” “believe,”
“budget,” “continue,” “could,” “effort,” “estimate,”
“expect,” “forecast,” “intend,” “goal,” “guidance,”
“may,” “objective,” “outlook,” “plan,” “potential,”
“predict,” “projection,” “seek,” “should,” “target,” “will,”
“would” and similar expressions.
We based the forward-looking statements on our current expectations, estimates
and projections about
ourselves and the industries in which we operate in
general.
We caution you these statements are not
guarantees of future performance as they involve
assumptions that, while made in good faith,
may prove to be
incorrect, and involve risks and uncertainties
we cannot predict.
In addition, we based many of these forward-
looking statements on assumptions about future events
that may prove to be inaccurate.
Accordingly, our
actual outcomes and results may differ materially from
what we have expressed or forecast in the forward-
looking statements.
Any differences could result from a variety of factors
and uncertainties, including, but not
limited to, the following:
●
The impact of public health crises, including pandemics
(such as COVID-19) and epidemics and any
related company or government policies or
actions.
●
Global and regional changes in the demand, supply, prices, differentials or other market
conditions
affecting oil and gas, including changes resulting from a
public health crisis or from the imposition or
lifting of crude oil production quotas or other
actions that might be imposed by OPEC
and other
producing countries and the resulting company
or third-party actions in response to such changes.
●
Fluctuations in crude oil, bitumen, natural gas,
LNG and NGLs prices, including a prolonged
decline
in these prices relative to historical or future
expected levels.
●
The impact of significant declines in prices for crude
oil, bitumen, natural gas, LNG and NGLs,
which
may result in recognition of impairment charges on
our long-lived assets, leaseholds and
nonconsolidated equity investments.
●
Potential failures or delays in achieving expected
reserve or production levels from existing
and future
oil and gas developments, including due to operating
hazards, drilling risks and the inherent
uncertainties in predicting reserves and reservoir
performance.
●
Reductions in reserves replacement rates, whether
as a result of the significant declines in commodity
prices or otherwise.
●
Unsuccessful exploratory drilling activities
or the inability to obtain access to exploratory acreage.
●
Unexpected changes in costs or technical requirements
for constructing, modifying or operating E&P
facilities.
●
Legislative and regulatory initiatives
addressing environmental concerns, including initiatives
addressing the impact of global climate change or further
regulating hydraulic fracturing, methane
emissions, flaring or water disposal.
●
Lack of, or disruptions in, adequate and reliable
transportation for our crude oil, bitumen, natural
gas,
LNG and NGLs.
●
Inability to timely obtain or maintain permits,
including those necessary for construction, drilling
and/or development, or inability to make capital
expenditures required to maintain compliance
with
any necessary permits or applicable laws or regulations.
56
●
Failure to complete definitive agreements and feasibility
studies for, and to complete construction of,
announced and future E&P and LNG development
in a timely manner (if at all) or on
budget.
●
Potential disruption or interruption of our operations
due to accidents, extraordinary weather
events,
civil unrest, political events, war, terrorism, cyber attacks,
and information technology failures,
constraints or disruptions.
●
Changes in international monetary conditions and
foreign currency exchange rate fluctuations.
●
Changes in international trade relationships,
including the imposition of trade restrictions
or tariffs
relating to crude oil, bitumen, natural gas,
LNG, NGLs and any materials or products (such
as
aluminum and steel) used in the operation of our
business.
●
Substantial investment in and development use
of, competing or alternative energy sources, including
as a result of existing or future environmental rules
and regulations.
●
Liability for remedial actions, including removal
and reclamation obligations, under existing
and
future environmental regulations and litigation.
●
Significant operational or investment changes imposed
by existing or future environmental statutes
and regulations, including international agreements
and national or regional legislation and regulatory
measures to limit or reduce GHG emissions.
●
Liability resulting from litigation, including the
potential for litigation related to the transaction
with
Concho, or our failure to comply with applicable
laws and regulations.
●
General domestic and international economic and
political developments, including armed
hostilities;
expropriation of assets; changes in governmental
policies relating to crude oil, bitumen, natural
gas,
LNG and NGLs pricing;
regulation or taxation; and other political, economic
or diplomatic
developments.
●
Volatility
in the commodity futures markets.
●
Changes in tax and other laws, regulations (including
alternative energy mandates), or royalty rules
applicable to our business.
●
Competition and consolidation in the oil and gas
E&P industry.
●
Any limitations on our access to capital or increase
in our cost of capital, including as a result
of
illiquidity or uncertainty in domestic or international
financial markets or investment sentiment.
●
Our inability to execute, or delays in the completion,
of any asset dispositions or acquisitions
we elect
to pursue.
●
Potential failure to obtain, or delays in obtaining,
any necessary regulatory approvals for
pending or
future asset dispositions or acquisitions,
or that such approvals may require modification
to the terms
of the transactions or the operation of our remaining
business.
●
Potential disruption of our operations as a result
of pending or future asset dispositions or acquisitions,
including the diversion of management time and
attention.
●
Our inability to deploy the net proceeds from any
asset dispositions that are pending or
that we elect to
undertake in the future in the manner and timeframe
we currently anticipate, if at all.
●
Our inability to liquidate the common stock issued
to us by Cenovus Energy as part of our sale of
certain assets in western Canada at prices we deem
acceptable, or at all.
●
The operation and financing of our joint ventures.
●
The ability of our customers and other contractual
counterparties to satisfy their obligations to
us,
including our ability to collect payments
when due from the government of Venezuela or PDVSA.
●
Our inability to realize anticipated cost savings
and capital expenditure reductions.
●
The inadequacy of storage capacity for our products,
and ensuing curtailments, whether voluntary
or
involuntary, required to mitigate this physical constraint.
●
Our ability to successfully integrate Concho’s business and fully achieve
the expected benefits and
cost reductions associated with the transaction
with Concho in a timely manner or at all.
●
The risk that we will be unable to retain and hire
key personnel.
●
Unanticipated difficulties or expenditures relating to integration
with Concho.
●
Uncertainty as to the long-term value of our common
stock.
●
The diversion of management time on integration-related
matters.
●
The factors generally described in Part I—Item
1A in our 2020 Annual Report on Form
10-K and any
additional risks described in our other filings
with the SEC.
57
Item 3.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Other information about market risks for
the three months ended March 31, 2021, does
not differ materially
from that discussed under Item 7A in our 2020
Annual Report on Form 10-K.
Item 4.
CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to ensure information required
to be disclosed in
reports we file or submit under the Securities
Exchange Act of 1934, as amended (the Act),
is recorded,
processed, summarized and reported within the
time periods specified in SEC rules and forms,
and that such
information is accumulated and communicated
to management, including our principal executive
and principal
financial officers, as appropriate, to allow timely decisions
regarding required disclosure.
As of March 31,
2021, with the participation of our management,
our Chairman and Chief Executive Officer (principal
executive officer) and our Executive Vice President and Chief Financial Officer (principal
financial officer)
carried out an evaluation, pursuant to Rule 13a-15(b)
of the Act, of ConocoPhillips’ disclosure controls
and
procedures (as defined in Rule 13a-15(e) of the
Act).
Based upon that evaluation, our Chairman and
Chief
Executive Officer and our Executive Vice President and Chief Financial Officer concluded
our disclosure
controls and procedures were operating effectively as of
March 31, 2021.
There have been no changes in our internal
control over financial reporting, as defined
in Rule 13a-15(f) of the
Act, in the period covered by this report that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART
II.
OTHER INFORMATION
Item 1.
LEGAL PROCEEDINGS
There are no new material legal proceedings
or material developments with respect to
matters previously
disclosed in Item 3 of our 2020 Annual Report
on Form 10-K.
Item 1A. Risk Factors
There have been no material changes from the
risk factors disclosed in Item 1A of our 2020
Annual Report on
Form 10-K.
58
Item 2.
UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Millions of Dollars
Period
Total Number
of Shares
Purchased
*
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate Dollar
Value
of Shares
That May Yet Be
Purchased Under the
Plans or Programs
January 1-31, 2021
-
$
-
-
$
14,483
February 1-28, 2021
1,767,507
48.49
1,767,507
14,397
March 1-31, 2021
5,219,017
55.43
5,219,017
14,108
6,986,524
6,986,524
*There were no repurchases of common stock from company employees in connection with the company's broad-based employee incentive plans.
In late 2016, we initiated our current share repurchase
program, which has a current total program
authorization of $25 billion of our common stock.
In February 2021,
we resumed
our share repurchase
program at an annualized level of $1.5 billion.
In May 2021, we announced a plan to dispose
of our 208
million shares of Cenovus Energy by year-end 2022.
The sales pace will be guided by market
conditions, with
ConocoPhillips retaining discretion to adjust accordingly.
The proceeds from this disposition will be deployed
towards incremental share repurchases.
As of March 31, 2021,
we had repurchased $10.9 billion of shares, with $14.1
billion remaining under our
current authorization.
Repurchases are made at management’s discretion, at prevailing prices, subject
to
market conditions and other factors.
Except as limited by applicable legal requirements,
repurchases may be
increased, decreased or discontinued at any time
without prior notice.
Shares of stock repurchased under the
plan are held as treasury shares.
See the “Our ability to declare and pay dividends
and repurchase shares is
subject to certain considerations” section in Risk
Factors on page 31 of our 2020 Annual Report
on
Form 10-K.
59
Item 6.
EXHIBITS
10.1*
Form of Retention Award Terms and Conditions, as part of the Restricted Stock Unit Award,
granted under the 2014 Omnibus Stock and Performance Incentive Plan of ConocoPhillips,
10.2*
Amendment and Restatement of ConocoPhillips Executive Severance Plan, dated January 15,
10.3*
Form of Inducement Grant Award Agreement under the 2014 Omnibus Stock and Performance
Incentive Plan of ConocoPhillips, dated January 15, 2021.
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
32*
Certifications pursuant to 18 U.S.C. Section 1350.
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Schema Document.
101.CAL*
Inline XBRL Calculation Linkbase Document.
101.LAB*
Inline XBRL Labels Linkbase Document.
101.PRE*
Inline XBRL Presentation Linkbase Document.
101.DEF*
Inline XBRL Definition Linkbase Document.
104*
Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
60
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this
report
to be signed on its behalf by the undersigned thereunto
duly authorized.
CONOCOPHILLIPS
/s/ Kontessa S. Haynes-Welsh
Kontessa S. Haynes-Welsh
Chief Accounting Officer
May 6, 2021
d033121dex101
Exhibit 10.1
1
January 1, 2021
RETENTION
GRANT
AGREEMENT
Employee
Name:
ID Number:
Payroll Country:
Number
of Restricted Stock Units
Granted:
Grant Date:
Grant Price:
Vesting Schedule:
This
grant vests
one-half of the award
on the first anniversary
of the Grant Date
and
the
remainder
on
the
second
anniversary
of
the
Grant
Date,
subject
to
the
Employee’s
continued
employment through the applicable
vesting date,
or the Employee’s earlier termination by
the
Company
without Cause
or by the Employee for Good Reason
(as those
terms are defined in the Further Terms and
Conditions below).
Further Terms
and Conditions
1.
Type and Size of Grant
.
Subject to the
2014 Omnibus Stock
and Performance
Incentive
Plan
(the
Plan)
and
this
Agreement,
the
Company
grants
to
the
employee
named
above
(the
Employee)
Restricted
Stock Units,
the number of which
is set forth above.
2.
Grant Date, Price, and Plan
.
The Grant
Date and
the Grant Price are
as set
forth
above
.
Awards
are made
under the Plan.
This
Award is made in lieu of a
bonus.
3.
Vesting,
Restrictions, Forfeiture,
and Lapse of
Restrictions
.
The Restricted Stock Units subject
hereto may be
canceled or forfeited as
set forth herein.
Except as
otherwise noted
in this Agreement
,
the
following
summary
table
describes restrictions
and
terms,
forfeiture,
and
lapse of
restrictions,
subject to the more
detailed provisions
set forth below:
Exhibit 10.1
2
Summary
Table
Summary of Termination
Rules
Status
Termination
Date
Forfeiture or Lapsing
of Restrictions
Layoff
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Disability
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Death
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Divestitures,
outsourcing,
and
moves to joint ventures
Any date after
Grant Date
Canceled upon Termination,
unless
approved
otherwise
Without Cause
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Good Reason
Any date after
Grant Date
Restrictions lapse
on
Termination
date
All other Terminations
To the extent
vested
Restrictions lapse
on
vesting
date,
To the extent not
vested
Canceled upon Termination
(a)
Vesting.
The Restricted
Stock Units granted
under this Agreement
shall vest as set forth in
the
Vesting
Schedule above.
All
vesting shall
be
in
whole
shares, and
fractions
shall be
rounded
down to nearest
whole share.
(b)
Restrictions
and Terms.
(i)
The
Award
shall
be
held
in
escrow
by
the
Company
until
the
lapsing of
restrictions
placed upon
the Award.
The
Employee shall not
have the
right to sell, transfer, assign, or
otherwise
dispose
of
Restricted
Stock
Units
granted
in
the
Award
until
the
escrow is
terminated.
Except
as
set
forth
below,
the
Award
shall
be
forfeited
and
the
related
Restricted
Stock Units canceled
upon the Employee’s Termination of Employment
with
the Company
prior to vesting in
accordance
with paragraph (a) above.
Restrictions shall
lapse on the
Restricted
Stock Units as
they become
vested in accordance
with paragraph
(a) above.
Restrictions
shall lapse
on the Restricted Stock
Units granted
in the Award
on
the day following the Employee’s Termination of Employment
with the Company, if the
Award
has
not
been
canceled
prior
to
that
day.
Upon
the
lapsing of
restrictions,
the
number of shares
of unrestricted Stock equal
to the number
of shares
of Restricted Stock
Units
for
which
the
restrictions
have
so
lapsed
shall be
registered
in
the
Employee’s
name,
and
the
related
shares
of
Restricted
Stock
Units
shall
be
canceled;
provided,
however,
that
in
places where
it
is determined
by
the
Administrator that
payout in the
form of unrestricted Stock is
prohibited by law, regulation, or decree,
or where the
cost of
legal
compliance to
issue the
unrestricted
Stock
would
be
unreasonably expensive, the
Fair
Market Value
of such unrestricted Stock
shall be paid in
cash instead of settlement
of
the
Award
in
unrestricted
Stock.
Cash payouts are only permitted
where such legal
restrictions exist.
Settlement
of the Award in unrestricted Stock
or cash payout,
if
any,
shall be
made when
the
restrictions
lapse, but in
any event, shall be
made no later
than
March 15 of the year
following the year in
which such
restrictions lapse.
(ii)
Restricted
Stock Units do
not have any voting rights
or other rights generally
associated
with
Stock
and
are
merely
an
obligation
of
the
Company
to
make
settlement
in
accordance
with
the
terms
and
conditions
applicable
to
such
Restricted
Stock
Units.
Restricted
Stock Units shall accrue
a dividend equivalent
at such times
as a cash dividend
is
paid
on
the
Stock
of
the
Company,
which
dividend
equivalent shall
be
credited
as
Exhibit 10.1
3
reinvested in
additional Restricted
Stock Units as
of the date
such dividends are
payable,
and
such
Restricted
Stock
Units
shall
be
subject
to
these
terms
and
conditions.
The
number
of
Restricted
Stock
Units
acquired
through
this
reinvestment
of
dividend
equivalents shall
be
calculated using
the
Fair
Market Value
at the time
of the dividend
equivalent is
accrued.
Restricted Stock
Units acquired
from dividend equivalents
shall be
paid at the time and
in the manner
of settlement of
the Restricted
Stock Units as
set forth
in section 3(b)(i).
(c)
Termination of Employment.
(i)
General
Rule
for
Termination.
If,
prior
to
the
date on
which
in
accordance with
the
schedule
set
forth
in
the
Award,
the
Employee's
employment
with
a
Participating
Company
shall
be
terminated
for
any
reason except
death,
Disability,
or
Layoff,
any
Restricted
Stock Units remaining
in escrow
pursuant to such
Award shall be canceled and
all rights thereunder shall
cease; provided that
the Authorized Party may, in its
or his sole
discretion,
determine
that
all
or
any
portion
of
an
Award
shall not
be
canceled due to
Termination of Employment.
(ii)
Layoff.
If,
after
the
date
the
Award
is
granted,
the
Employee's employment
with
a
Participating Company shall
be terminated by
reason of Layoff, the Employee
shall retain
all
rights
provided
by
the
Award
at
the
time
of
such
Termination
of E
mployment.
In
such
case,
the
restrictions
on
the
Award
shall lapse
on
the
date of
Termination
of
the
Employee from the employ of the
Company and
its subsidiaries,
and settlement shall
be
made in accordance
with the settlement
provisions above.
(iii)
Disability
.
If,
after
t
he
date
the
Award
is
granted,
the
Employee
shall
terminate
employment
following
Disability
of the Employee
,
the Employee
shall retain all rights
provided by the
Award at the time of such Termination of Employment.
In such
case, the
restrictions on the
Award shall lapse on the
date of Termination of Employment from the
employ of the
Company and
its subsidiaries,
and settlement shall
be made in accordance
with the settlement
provisions above.
(iv)
Death.
If, after the date an
Award is granted, the Employee shall
die while in
the employ
of a Participating Company
,
or after Termination of Employment
by reason
of Disability,
or
Layoff (and
prior
to the cancellation of
the Award),
the executor or
administrator of
the estate of the
Employee or the person
or persons
to whom the
Award shall
have
been
validly
transferred
by
the
executor
or
the
administrator
pursuant
to will
or the laws of
descent and distribution
shall have
the right to settlement
of the Award to the same
extent
the Employee would have,
had the Employee
not died.
In such
case, the
restrictions
on
the
Award
shall
lapse
upon
the
determination
of
death
by
the
Administrator,
and
settlement shall
be made in accordance
with the settlement
provisions above.
No transfer
of
an
Award,
or
of
the
unrestricted
Stock
or
other
proceeds
of
an
Award,
by
the
Employee by will or by
the laws
of descent and
distribution shall be
effective to bind
the
Company unless
the Administrator shall
have been
furnished with written notice
thereof
and a copy of
the will and
such other evidence
as the Administrator may
deem necessary
to establish the
validity of the transfer
and the
acceptance
by the transferee or transferees
of the terms
and conditions
of such Award.
(v)
Transfers and
Leaves.
Transfer
of
employment between Participating
Companies shall
not constitute Termination of Employment for the purpose
of any Award granted
under
the Program.
Whether any
leave of absence
shall constitute
Termination of Employment
for
the
purposes of
any
Award
granted
under
the
Program
shall be
determined
by the
Administrator,
in each case in accordance with applicable law and
by application of
the
policies and
procedures adopted
by the Company in
relation to such
leave of absence.
(vi)
Divestiture,
Outsourcing,
or
Move
to
Joint
Venture
.
If,
after
the
date the
Award
is
granted, the Employee ceases
to be employed by
Participating Company as
a result
of (a)
the
outsourcing
of
a
function,
(b)
the
sale or
transfer
of
all
or
a
portion
of
the equity
interest
of
such
Participating
Company
(removing
it
from
the
controlled
group
of
companies
of which the
Company is a
part), (c) the sale
of all or substantially
all
of
the
Exhibit 10.1
4
assets of such
Participating Company to
another employer outside
of the controlled group
of
corporations
(whether
the
Employee
is offered
employment or
accepts employment
with
the
other
employer),
(d)
the
Termination
of
the
Employee
by
a
Participating
Company followed
by
employment
within
a
reasonable time
with
a
company or other
entity in which
the Company
owns, directly or indirectly, at least a
50% interest, prior
to
exercise
of an Award,
or (e) any other sale
of assets
determined by the
Authorized
Party
to be considered a
divestiture under this
program, the Authorized Party may, in its or
his
sole discretion, determine that all
or a portion of any
such Award shall
not
be
canceled.
In such cases,
the restrictions on the
Award shall lapse on the
date of Termination
of
the
Employee from the employ of the
Company and
its subsidiaries,
and settlement shall
be
made in accordance
with the
settlement provisions
above.
(vii)
Termination
without
Cause.
If,
after the
date the Award
is granted, the
Company shall
terminate
employment
of
the
Employee
without
Cause,
the
Employee
shall retain
all
rights provided by the
Award at the time of such
Termination of Employment.
In
such
case, the restrictions
on the Award shall
lapse on the
date of Termination of Employment
from
the
employ
of
the
Company and
its
subsidiaries, and
settlement shall be made in
accordance
with the settlement
provisions above;
provided, however, that the Employee
shall not
be entitled to the vesting
for Termination without Cause
described herein
unless
the
Employee
first
executes a
written
release substantially
in the form
provided by the
Company and, to
the extent
such release
is revocable by its
terms, only if the
Employee
does not
revoke
it,
which
such release must be executed and delivered
to the Company
within 30 days
of the Employee’s Termination
.
(viii)
Termination
with
Good
Reason.
If,
after the
date the Award
is granted, the
Employee
shall
terminate
employment
for
Good
Reason,
the
Employee
shall
retain
all
rights
provided by the
Award at the time of such Termination of Employment.
In such
case, the
restrictions on the
Award shall lapse on the
date of Termination of Employment from the
employ of the
Company and
its subsidiaries,
and settlement shall
be made in accordance
with the settlement
provisions above;
provided, however, that the Employee shall not
be
entitled
to
the
vesting
for
Good
Reason
described
herein
unless
the
Employee
first
executes a
written release
substantially
in the form provided by the Company
and, to
the
extent
such release
is revocable
by
its
terms,
only
if
the
Employee
does not revoke it,
which such release
must be executed
and delivered
to the Company
within 30 days of the
Employee’s Termination.
(ix)
Change
of Control.
Upon a
Change
of Control, the following shall
apply to any
Award:
(1)
Each Employee shall
immediately become
fully vested in
such Award that is not
assumed by, or substituted for, by an acquirer in
connection with
the
Change
of
Control, and such
Award shall not thereafter be forfeitable for any
reason, except
as set forth in Section 3(c).
(2)
With
regard
to
any
other
Award,
each Employee
shall become
fully
vested in
such Award upon incurring a Severance
following such Change
of Control,
and
such Award shall not thereafter be
forfeitable for any reason, except
as set
forth
in Section 3(c).
(3)
In the event
of vesting of an Award pursuant to
either Section 3(ix)(1) or Section
3(ix)(2),
all restrictions and
other limitations
applicable to
any Restricted
Stock
granted in any
Award shall lapse.
With regard to such
Restricted
Stock,
it
shall
become
free
of
all
restrictions
and
become transferable.
With
regard
to
such
Restricted
Stock
Units,
all
restrictions
and
other
limitations
applicable to
the
Restricted
Stock
Units shall lapse
and the Restricted
Stock Units shall
be
settled
in
unrestricted
Stock
or
cash at
the
same times
and
upon
the
same events as it
would
otherwise have
been made
in
accordance with
the
settlement provisions
above.
(x)
Notwithstanding
anything
herein
to
the
contrary,
in
the
event that
this
Award
or
the
dividend
equivalents
associated with
this
Award
are
includible
in
income
pursuant
to
Exhibit 10.1
5
section
409A
of
the
Internal
Revenue
Code,
settlement
of
the
Award
or
any
other
distribution
hereunder
due
to
S
e
paration
from
S
ervice
with
the
Company
and
its
subsidiaries
shall
not
be
made
to
a
“specified
employee”
(as
that
term
is
defined
in
section 409A(a)(2)(B)(i))
prior
to six months after
the specified employee’s
Separation
from Service from the Company and
its subsidiaries
(or, if earlier,
the date
of death of the
specified employee).
(d)
Detrimental Activities,
Suspension
of Award,
and Required
Recoupment.
(i)
If the Authorized Party determines
that, subsequent
to the grant of any
Award but prior to
any Change of Control, the
Employee has
engaged or
is engaging
in any activity
which,
in the sole judgment
of the Authorized Party, is or may
be detrimental to
the Company
or
a
subsidiary,
the
Authorized
Party
may
cancel
all
or
part
of
the
Restricted Stock
or
Restricted Stock
Units held
in escrow pursuant to
the Award
or Awards
granted to that
Employee.
Upon any
Change
of Control, the Authorized Party
may cancel
all or part
of
the
Restricted
Stock
or
Restricted
Stock
Units
held
in
escrow pursuant
to
the
Award
granted
to
the
Employee
only
upon
a
determination
by
the
Authorized
Party
that
the
Employee has
given the Company
Cause for such
cancellation.
(ii)
If
the
Authorized
Party,
in
its
or
his
sole
discretion,
determines
that
the
lapsing
of
restrictions on Restricted
Stock or Restricted
Stock Units held
in escrow
pursuant
to
any
Award
has the
possibility of
violating
any
law,
regulation,
or
decree pertaining
to the
Company,
any of its
subsidiaries, or the Employee,
the Authorized Party
may freeze or
suspend the Employee’s right to settlement
or payout of the
Award until such time as the
lapse of restrictions would
no longer, in the sole
discretion of the
Authorized Party,
have
the possibility
of violating such
law, regulation, or decree.
(iii)
Notwithstanding anything
herein
to
the
contrary,
any
Award
is subject to forfeiture
or
recoupment, in whole or
in part, under applicable
law, including the Sarbanes-Oxley Act
and the Dodd-Frank Act.
4.
Assignment
of Award upon Death
.
Rights under
the Plans
and this
Agreement cannot
be assigned
or transferred other than by
(i) will or (ii) the laws
of descent
and distribution.
5.
Tax
Withholding
.
In
all
cases the
Employee
will
be
responsible to
pay all required
withholding
taxes associated
with the Award.
Should a withholding tax
obligation
arise with
regard to the Award
or the lapsing
of restrictions on
Restricted
Stock Units granted
in the Award, the withholding tax may
be
satisfied
by
withholding
shares
of
Stock.
The
value
of
the
shares of
Stock
withheld
for
this
purpose
shall
be
consistent
with
applicable
laws
and
regulations.
W
hen
necessary,
lapsing
of
restrictions
may
be accelerated by the Authorized
Party to
the extent necessary to provide shares of
Stock to satisfy
any withholding tax obligation.
This
withholding tax obligation
includes, but
is
not
limited to, federal, state,
and local
taxes, including applicable
non-U.S. taxes.
6.
Shareholder
Rights
for
Restricted
Stock
Units
.
The
Employee
shall
not
have the
rights
of
a
shareholder until
the
Restricted Stock Unit has been canceled and ownership of
shares of Stock has
been transferred to
the Employee.
As described
above, the Company
may pay
dividend equivalents
with regard to Restricted
Stock Units in
certain circumstances.
7.
Certain Adjustments
.
In the
event
certain
corporate
transactions,
recapitalizations,
or stock
splits
occur
while Restricted
Stock
or Restricted
Stock
Units
are outstanding,
the
Grant
Price
and
the
number
of
shares
of Restricted
Stock
Option
Shares
or Restricted
Stock
Units
shall be
correspondingly
adjusted.
8.
Relationship
to
the
Plan
.
In
addition
to
the
terms
and
conditions described
in
this
Agreement,
Awards
are
subject to
all
other
applicable provisions
of
the Plan.
The decisions of the Committee
with
respect
to
questions
arising
as
to
the
interpretation
of
the
Plan
or
this
Agreement
and
as to
findings of fact shall
be final, conclusive, and
binding.
9.
No
Employment
Guarantee
.
No
provision
of
this
Agreement
shall
confer
any
right
upon
the
Employee to continued
employment with any
Participating Company.
Exhibit 10.1
6
10.
Governing
Law
.
This Agreement
shall be governed by
and construed and enforced in
accordance
with the laws of
the State of
Delaware.
11.
Amendment
.
Without
the
consent
of
the
Employee,
this
Agreement
may
be
amended
or
supplemented
(i) to cure any
ambiguity or to correct or
supplement any
provision herein which
may
be
defective
or
inconsistent
with
any
other
provision
herein,
or
(ii)
to
add
to
the
covenants and
agreements of
the Company
for the benefit of an
Employee or to add
to the rights
of an Employee
or
to
surrender
any
right
or
power
reserved
to
or
conferred
upon
the
Company in
this
Agreement,
provided,
in
each case,
that
such changes or
corrections
shall not
adversely affect the rights
of the
Employee with respect
to the grant
of an Award evidenced
hereby without the
Employee’s
consent,
or (iii) to make such
other changes
as the Company, upon advice
of counsel, determines
are necessary
or advisable
because of the
adoption or promulgation of, or change
in or of the
interpretation of,
any
law or governmental
rule or regulation, including
any applicable
federal or state securities
or tax laws.
Exhibit 10.1
7
DEFINITIONS
Capitalized terms
not defined below
shall have the
meanings set forth
in the Plan.
“Authorized
Party”
means the person
who is
authorized to approve
an Award, exercise discretion, or take
action under the
Administrative Procedure for the Restricted
Stock Program and
pursuant to the
Program.
With regard to Senior Officers, the Committee
is the
Authorized Party.
With regard to other Employees,
the Chief Executive
Officer is the Authorized
Party,
although the Committee
may act
concurrently as
the
Authorized Party.
“Award”
means the
Restricted Stock
Units granted
to
the
Employee
pursuant
to
the
foregoing
terms,
conditions, and limitations.
“Cause”
means “Cause”
as that term is
defined in the
Key Employee Change
in Control Severance
Plan
of ConocoPhillips applied
as if an
Employee were a
participant under such
plan
.
“Change of Control”
has the
meaning set forth in Attachment
A to these
Terms and Conditions.
“Committee”
means
the Compensation
Committee of the
Board of Directors
of the Company.
“Company”
means
ConocoPhillips a
Delaware corporation.
“Disability”
means
a disability for which the
employee in
question has
been determined
to be entitled
to
either (i) benefits under
the applicable
plan of long-term disability of the
Company or its
subsidiaries
or
(ii)
disability
benefits
under
the
Social
Security
Act.
In
the
absence of
any
such determination,
the
Authorized Party may make
a determination that the
employee has
a Disability.
“Fair Market
Value”
means, as of a
particular date, the mean
between the
highest and lowest
sales
price
per
share
of
such
Stock
on
the
consolidated
transaction
reporting
system
for
the
principal
national
securities
exchange on which
shares of Stock are
listed on
that date, or, if there shall
have
been
no
such
sale so reported
on that date,
on the next
preceding date
on which such
a sale was so reported,
or,
at
the
discretion of the
Committee, the price
prevailing on the
exchange
at a
designated
time.
“Good
Reason”
means
“Good Reason”
as that term is
defined in the
Key Employee Change in
Control
Severance Plan
of ConocoPhillips applied
as if an
Employee were a
participant under such
plan
.
“Grant
Price”
means
the
Fair
Market Value
for
one
share of
Stock
as of
the
date of
the
grant
of
an
Award.
Grant price is
not adjusted
for any restrictions applicable
to the Award.
“Key Employee
Change in Control
Severance
Plan of ConocoPhillips”
means the
plan of that
name (or
a successor plan
to the plan
of that name) in
effect on an
applicable Change
of Control.
If no plan of that
name (or successor
plan to the
plan of that
name) is in effect on an
applicable Change
of Control, it
shall
mean instead the
plan of that
name in effect
on the date of the
Award.
“Layoff”
means
an
applicable
Termination
of
Employment
due
to
layoff
under
the
ConocoPhillips
Severance Pay
Plan, the ConocoPhillips Executive
Severance Plan, or the
ConocoPhillips
Key Employee
Change
in Control Severance Plan, or layoff or redundancy
under any similar
layoff or redundancy
plan
which the
Company or its subsidiaries
may adopt from time
to time.
If all or any portion of
the
benefits
under
the
redundancy
or
layoff
plan
are
contingent
on
the
employee’s
signing
a
general
release
of
liability,
such Termination
shall not
be
considered as
a “Layoff” for
purposes of this Award
unless the
employee executes
and does not revoke
a general release of liability,
acceptable to the Company,
under
the
terms
of
such layoff
or
redundancy plan.
In
order
to
be
considered a
layoff
for
purposes of
this
Award, the Termination of E
mployment must also
be considered
a Separation from
Service.
“Participating
Company”
includes
ConocoPhillips
and
its
100%
owned
subsidiaries, including
both
those directly
owned and
those owned through subsidiaries,
whose
participation has
been approved
by the
Authorized Party.
Exhibit 10.1
8
“Restricted Stock
Unit”
means a
unit equal to
one share of Stock
(as determined
by the Authorized
Party)
that is subject
to forfeiture provisions or that has
certain restrictions
attached to
the ownership
thereof.
“Senior Officer”
means the
Chairman of the
Board, the CEO, all
other executive officers of the
Company
(determined
in
accordance
with
the
Company’s
custom and
practice pursuant
to
section 16(b)
of
the
Securities Exchange
Act of 1934, as
amended), all other employees
of the Company
who report
directly
to the CEO
and whose salary
grade is 23 or higher, and all
other employees
of the Company
whose
salary
grade is 26 or higher.
“Separation
from
Service”
means “separation from service” as that term
is used in section 409A of
the
Internal Revenue
Code.
“Severance”
means “Severance” as that term is defined in the Key Employee Change in Control
Severance
Plan of ConocoPhillips applied as if an Employee were a participant under such
plan
and
shall
also
incorporate
the
meaning
of
the
term
“Cause”
contained
in
the
definition
of
“Severance”
in such plan but shall substitute the definition of “Good Reason” contained
in
this
Inducement
Grant Agreement for the definition of “Good Reason” contained in such plan.
“Stock”
means
shares of common stock
of the Company, par value
$.01.
Stock may also
be referred to as
“Common Stock.”
“Terminatio
n”
and
“
Termination
of
Employment”
each
mean
cessation
of
employment
with
the
Participating
Companies, determined
in
accordance with
the
policies and practices of
the Participating
Company for whom
the Employee was
last performing services.
Exhibit 10.1
9
Attachment A
Change of Control
The following definitions
apply to the
Change of
Control provision
in Section 10
of the Plan.
“Affiliate” shall have
the meaning
ascribed to such
term in Rule
12b-2 of the General
Rules and Regulations
under the Exchange
Act, as
in effect at the time of determination.
“Associate”
shall mean, with reference to
any Person, (a) any corporation,
firm,
partnership, association, unincorporated
organization or other
entity
(other than the Company
or a
subsidiary of the
Company) of which
such Person
is an officer or general partner (or officer
or general
partner of a general
partner) or is, directly or indirectly, the Beneficial
Owner of 10% or
more of any class
of equity securities,
(b) any trust or other estate
in which such
Person has a
substantial beneficial interest
or as to which
such Person serves
as trustee or in
a similar fiduciary capacity
and (c) any relative
or
spouse of such
Person, or any relative of
such spouse,
who has the same
home as such Person.
“Beneficial Owner”
shall mean,
with reference to
any securities,
any Person
if:
(a)
such
Person
or
any
of
such
Person’s
Affiliates
and
Associates,
directly
or
indirectly,
is
the
“beneficial
owner”
of
(as
determined
pursuant
to
Rule 13d
-3
of
the
General
Rules
and
Regulations
under
the
Exchange
Act,
as
in
effect
at
the
time
of
determination)
such
securities
or
otherwise
has
the
right
to
vote
or
dispose
of
such
securities;
(b)
such
Person
or
any
of
such
Person’s
Affiliates
and
Associates,
directly
or
indirectly,
has
the
right or
obligation
to
acquire
such
securities
(whether
such
right or
obligation is exercisable
or effective immediately or only
after the passage of time or
the
occurrence
of
an
event)
pursuant
to
any
agreement,
arrangement
or
understanding
(whether
or
not
in
writing) or
upon
the exercise
of
conversion
rights, exchange
rights,
other rights, warrants or options,
or otherwise; provided, however, that a Person shall not
be
deemed
the
Beneficial
Owner
of,
or
to
“beneficially
own,”
(i) securities
tendered
pursuant
to
a
tender
or
exchange
offer
made
by
such
Person
or any
of
such
Person’s
Affiliates
or
Associates
until
such
tendered
securities
are
accepted
for
purchase
or
exchange
or (ii) securities issuable upon exercise of Exempt Rights; or
(c)
such
Person
or
any
of
such
Person’s
Affiliates
or
Associates
(i) has
any
agreement,
arrangement
or
understanding
(whether
or
not
in
writing)
with
any
other
Person (or any Affiliate
or Associate thereof) that beneficially owns such
securities
for
the
purpose
of
acquiring,
holding,
voting
(except
as
set
forth
in
the
proviso
to
subsection
(a) of this definition) or disposing of such securities or (ii)
is
a
member
of
a
group (as that term is used in Rule 13d
-5(b) of the General Rules and Regulations
under
the Exchange Act) that includes
any other Person that beneficially owns such securities;
provided,
however, that nothing in this definition shall cause a Person engaged in business as an
underwriter
of securities
to be the Beneficial Owner of, or to “beneficially own,” any securities
acquired
through such Person’s
participation in good faith in a firm commitment underwriting
until the expiration of
40 days after the date of such acquisition.
For purposes hereof, “voting” a
security shall include
voting, granting a proxy,
consenting, or making a request or demand
relating to corporate
action (including, without limitation, a demand for a shareholder list, to call
a shareholder
meeting or to inspect corporate books and records) or otherwise giving an
authorization
(within the meaning of section 14(a) of the Exchange Act) in respect of such
security.
Exhibit 10.1
10
The terms “beneficially
own” and
“beneficially owning”
shall have
meanings that
are
correlative to this
definition of the term “Beneficial
Owner.”
“Board” shall have
the meaning
set forth in the Plan.
“Change of Control” shall
mean any
of the following occurring on
or after the Grant
Date:
(a)
any Person (other
than an Exempt Person) shall become the Beneficial Owner
of 20%
or more of the shares of Common Stock then outstanding or 20% or more
of
the
combined
voting power of the Voting
Stock of the Company then outstanding; provided,
however,
that
no
Change
of
Control
shall
be
deemed
to
occur
for
purposes
of
this
subsection
(a)
if
such
Person
shall become
a Beneficial
Owner
of
20%
or more
of
the
shares of
Common Stock then outstanding or 20% or more of the combined voting power
of
the
Voting
Stock
of
the
Company
then
outstanding
solely
as
a
result
of
(i)
any
acquisition
directly from the Company or (ii) any acquisition
by a Person
pursuant
to
a
transaction
that complies with clauses (i), (ii), and (iii)
of subsection
(c) of this definition;
(b)
individuals
who, as of the Grant Date, constitute the Board (the
“Incumbent
Board”)
cease
for
any
reason
to
constitute
at
least
a
majority
of
the Board;
provided,
however,
that
any
individual
becoming
a director
subsequent
to the
Grant Date
whose
election, or nomination
for election by the Company’s shareholders, was approved
by
a
vote of at least a majority of the directors
then comprising the Incumbent Board
shall
be
considered
as though such individual were a member of the Incumbent Board; provided,
further,
that there shall be excluded, for this purpose, any such individual
whose
initial
assumption
of office occurs as a result of any actual or threatened election
contest
with
respect to the election or removal
of directors or other actual or threatened solicitation
of
proxies or consents
by or on behalf of a Person other than the Board;
(c)
the
Company
shall
consummate
a
reorganization,
merger,
statutory
share
exchange,
consolidation,
or
similar
transaction
involving
the
Company
or
any
of
its
subsidiaries
or
sale
or
other
disposition
of
all
or
substantially
all
of
the
assets
of
the
Company,
or the acquisition of assets or securities of another entity by the
Company
or
any of
its subsidiaries (a “Business
Combination”), in each case, unless, following
such
Business Combination,
(i) 50% or more of the then outstanding shares of common
stock
of
the
corporation
,
or
common
equity
securities
of
an entity
other
than
a corporation,
resulting
from
such
Business
Combination
and
the combined
voting power
of
the then
outstanding
Voting
Stock
of
such
corporation
or
other
entity
are
beneficially
owned,
directly
or
indirectly,
by all
or substantially
all of
the Persons
who
were the
Beneficial
Owners
of
the
outstanding
Common
Stock
immediately
prior
to
such
Business
Combination
in substantially the same proportions as their ownership, immediately prior
to
such
Business
Combination,
of
the
outstanding
Common
Stock,
(ii) no
Person
(excluding any
Exempt Person or any Person beneficially owning, immediately
prior
to
such Business
Combination, directly or indirectly,
20% or more of
the
Common
Stock
then outstanding
or 20% or more of the combined voting power of the
Voting
Stock
of
the Company
then outstanding) beneficially owns, directly or indirectly, 20% or more
of
the
then
outstanding
shares
of
common
stock
of
the
cor
poration,
or
common
equity
securities of
an entity other than a corporation,
resulting from such Business Combination
or the combined
voting power of the then outstanding Voting
Stock of such corporation
or other entity,
and (iii) at least a majority of the members
of the board of directors of the
corporation,
or
the
body
which
is
most
analogous
to
the
board
of
directors
of
a
corporation
if
not
a
corporation,
resulting
from
such
Business
Combination
were
Exhibit 10.1
11
members
of the Incumbent Board
at the time of the initial agreement or initial action
by
the Board providing
for such Business Combination; or
(d)
the
shareholders
of
the
Company
shall
approve
a
complete
liquidation
or
dissolution
of the Company unless such liquidation or dissolution is approved as part of a
transaction
that complies with clauses (i), (ii), and (iii)
of subsection
(c) of this definition.
“Common Stock”
shall have
the meaning set
forth in the Plan.
“Company”
shall have the
meaning set forth in the
Plan.
“Exchange Act” shall
mean the
Securities Exchange
Act of 1934, as
amended.
“Exempt Person” shall
mean any
of the Company, any entity
controlled by the
Company,
any employee
benefit plan (or related
trust) sponsored
or maintained by
the Company
or any entity
controlled by the
Company, and any Person
organized, appointed, or established
by the Company
for or
pursuant to the
terms of any
such employee benefit
plan.
“Exempt Rights”
shall mean
any rights to purchase
shares of Common
Stock or other
Voting
Stock of the Company
if at the
time of the issuance
thereof such
rights are not
separable
from such
Common Stock or other
Voting
Stock (
i.e.
, are
not transferable otherwise
than in connection
with a
transfer of the underlying Common
Stock or other Voting Stock), except
upon the occurrence
of a
contingency, whether such
rights exist
as of the Grant Date
or are thereafter issued
by the Company
as a
dividend on shares
of Common Stock or
other Voting Securities or otherwise.
“Person” shall
mean any individual, firm, corporation, partnership,
association, trust,
unincorporated organization, or other
entity.
“Voting Stock” shall mean, (i) with respect
to a corporation, all securities
of such
corporation of any class
or series that are
entitled to vote
generally in the
election of, or to appoint by
contract, directors of such
corporation (excluding any class
or series
that would be
entitled so
to vote by
reason of the
occurrence of any
contingency, so long as such contingency
has not
occurred) and (ii) with
respect to an entity
which is
not a corporation, all securities
of any class
or series that are
entitled to vote
generally in the
election of, or to appoint
by contract, members
of the body
which is
most analogous
to
the board of directors
of a corporation.
d033121dex102
Exhibit 10.
2
1
ORIGINAL FOR EXECUTION
APPROVED
VICE PRESIDENT
HUMAN
RESOURCES
EFFECTIVE JANUARY
15,
202
1
CONOCOPHILLIPS
EXECUTIVE SEVERANCE PLAN
(Amended and Restated Effective as of January
15,
202
1)
Effective
October
1, 2004,
the Company
adopted
the
ConocoPhillips
Executive
Severance
Plan
(the
"Plan")
for
the
benefit
of
certain
employees
of
the
Company
and
its
subsidiaries.
It was amended and
restated effective January 1,
2005 and December 31, 2008.
This
amendment
and
restatement
of
the
Plan
shall
be
effective
January
15,
202
1.
Any
Eligible
Employee
(as
defined
below) having
a Severance
Date
(as defined
below) prior
to January
15,
202
1, shall have benefits under
this Plan determined in
accordance with the
provisions of this Plan
as
they
existed
prior
to
this
amendment
and
restatement.
Any
Eligible Employee
(as
defined
below)
having
a
Severance
Date
(as
defined
below)
on
or
after
January
15,
202
1, shall
have
benefits
under this Plan determined in accordance with the provisions of this Plan
pursuant to this
amendment
and restatement.
All capitalized
terms used
herein
are defined
in Section
1 hereof.
This
Plan
is intended
to
be
a
plan
maintained
primarily
for
the
purpose
of
providing
deferred
compensation
for
a select
group
of
management
or highly
compensated
employees,
within the
meaning of Title I
of the
Employee Retirement Income Security Act
of 1974, as
amended and shall
be interpreted
in a manner consistent with such intention.
SECTION
1
.
DEFINITIONS
.
As hereinafte
r used:
1
.1
"Board" means
the Board of
Directors of the Company.
1.2
"Cause"
means
(i)
the
willful
and
continued
failure
by
the
Eligible
Employee
to
substantially
perform
the
Eligible
Employee's
duties
with
the
Employer
(other
than
any
such
failure
resulting
from
the Eligible
Employee's
incapacity
due
to physical
or
mental
illness),
or
(ii) the
willful
engaging,
not
in
good
faith,
by
the
Eligible
Employee
in
conduct
which
is
demonstrably
injurious to the Company or any of its subsidiaries, monetarily or otherwise.
1
.3
"Code" means the
Internal Revenue Code of 1986,
as it
may be amended from time
to
time.
1
.4
"Company"
means ConocoPhillips or any successors
thereto.
1.5
“Controlled
Group”
shall mean
ConocoPhillips
and its Subsidiaries.
1
.
6
"Credited
Compensation"
of
a
Severed
Employee
means
the
aggregate
of
the
Severed
Employee's
annual
base
salary
plus
his
or
her
annual
incentive
compensation,
each
as further
described
below.
For
purposes
of
this
definition,
(a) annual
base
salary
shall
be
determined
immediately
prior to the Severance
Date and (b) annual
incentive
compensation shall be deemed
to
equal
the
Severed
Employee’s
most
recently
established
target
(determined
at
one
hundred
percent of
target) for annual
incentive
compensation for such employee prior to such employee’s
Severance
Date
pursuant
to
the
Variable
Cash
Incentive
Program
or
its
successor
program
maintain
ed by the Employer
.
Exhibit 10.
2
2
1.
7
"Effective
Date" means, as applicable,
the date first stated above
as the original
effective
date of this Plan or the effective
date of this Plan as amended and restated.
1
.
8
"Eligible Employee" means
any employee that
is a Tier
1 Employee or a Tier
2 Employee,
other than those
employees who are listed on Exhibit B.
1
.
9
"Employer" means
the Company or any of its subsidiaries.
1
.
10
"Person"
mean
s
any
individual,
firm,
corporation,
partnership,
association,
trust,
unincorporated
organization, or other entity.
1
.1
1
"Plan" means
the ConocoPhillips
Executive
Severance Plan, as set forth herein, as it may
be amended
from time to time.
1
.1
2
"Plan
Administrator"
means
the
person
or
persons
appointed
from
time to
time
by
the
Board, which
appointment may be revoked at any time by the Board.
1
.1
3
"Retirement
Plans"
means the ConocoPhillips Retirement
Plan
and the
ConocoPhillips
Key
Employee
Supplemental Retirement Plan.
1.14
“
Salary
Grade
”
means
a
classification
level
for
Employees
under
the
practices
of
the
Company
[this is
ConocoPhillips
Company].
Where Salary
Grades
are used
in
this Procedure,
they are depicted
under the U.S.
practices for the Company.
Practices may vary in
other countries
or particular subsidiaries, and Salary
Grades shall
be transposed as
necessary to reflect the
practice
in the relevan
t
country
or subsidiary.
1.1
5
"Separation from
Service" means
the date on which the Participant separates
from service
with the Controlled Group
within the meaning of Code section 409A, whether by reason of death,
disability,
retirement, or otherwise.
In determining Separation from
Service, with regard
to
a bona
fide leave
of absence that is
due to any medically determinable
physical or mental
impairment that
can be expected
to result
in death or can
be expected to
last for a continuous
period of not less
than
six months, where
such impairment causes the Employee to be unable to perform the
duties of his
or her
position of
employment
or any
substa
ntially similar position
of employment,
a 29-month
period
of
absence
shall
be
substituted
for
the
six-month
period
set
forth
in
section
1.409A-
1(h)(1)(i) of
the regulations issued
under section 409A of the Code, as allowed thereunder.
1
.1
6
"Severance"
means
the
termination
of
an
Eligible
Employee's
employment
with
the
Employer by
the Employer other than for Cause.
An Eligible
Employee
will not be considered
to
have incurred
a Severance if his
employment is discontinued by reason of
the Eligible
Employee's
death or a physical
or mental condition causing such Eligible
Employee's inability to substantially
perform
his duties with
the Employer and entitling
him or her to benefits under any long-term
sick
pay or disability income
policy or program of
the Employer.
Furthermore, an Eligible Employee
will
not
be
considered
to
have
incurred
a
Severance
if
employment
with
the
Employer
is
discontinued
after the
Eligible
Employee has been offered employment with
another employer that
has purchased
a subsidiary or division of the Company or all or substantially all of the assets of a
subsidiary
or division of the Company
and the offer of employment from the other employer is at
the same or greater salary and the same or
greater target bonus as the
Eligible Employee has
at that
time
from
the
Employer.
Still
further,
an
Eligible
Employee
will
not
be
considered
to
have
incurred
a Severance if employment with the
Employer is discontinued and
the Eligible
Employee
is
also
eligible
for
payments
under
the
ConocoPhillips
Key
Employee
Change
in
Control
Severance
Plan, effective October 1, 2004, or as subsequently amended, or under the Conoco Inc.
Key
Employee
Severance
Plan,
as
amended
and
restated
effective
October
1,
2001,
and
as
Exhibit 10.
2
3
subsequently
amende
d.
Furthermore, in order to be considered a Severance, the termination must
also meet the requirements
of a Separation from Service.
1
.1
7
"Severance
Date" means the date on which an Eligible Employee incurs a Severance.
1
.1
8
"Severance
Pay" means the payment determined pursuant to Section
2.1 hereof.
1
.1
9
"Severed Employee"
means an Eligible Employee who has incurred a Severance.
1.
20
"Subsi
di
ary" means
any
corporation or other entity
that is
treated as
a single employer with
ConocoPhillips
,
under
section
414(b)
or
(c)
of
the
Code;
provided,
that
in
making
this
determination, in applying section 1563(a)(1), (2), and
(3) of
the Code
for purposes of determining
a
controlled
group
of
corporations
under
section
414(b)
of
the
Code
and
for
purposes
of
determining
trades
or
businesses
(whether
or
not
incorporated)
under
common
control
under
regulation
section 1.414(c)
-2 for purposes
of section
414(c) of
the Code,
the
language “at
least
80%” shall be used
without substitution as allowed under regulations pursuant to section 409A
of
the Code.
1
.
2
1
"Tier
1
Employee"
means any
employee
of the
Employer
who is
in
Salary
Grade
26
or
above
(under the Salary Grade
schedule
of the Company
on the Effective
Date, with appropriate
adjustment
for any subsequent change in such
Salary Grade schedule) on the Severance Date.
1
.
2
2
"Tier
2 Employee" means
any employee
of the Empl
oyer,
other than a Tier
1 Employee,
who
is
in
Salary Grade
23
or
above
(under
the Salary
Grade
schedule
of
the Company
on the
Effective
Date, with
appropriate
adjustment
for
any
subsequent
change
in
such
Salary
Grade
schedule)
on the Severance Date.
SECTI
ON
2
.
BENEFITS
.
2
.
1
Subject to Section
2.7
, each Severed Employee
shall be entitled to receive Severance
Pay
equal to the
sum of the amounts
determined under Sections
2.1(a), (b), and (c).
Furthermore, for
purposes
of Employer compensation plans, programs, and arrangements, each Severed Employee
shall be considered
to have been laid off by the Employer.
(a)
The amount that is the Severed
Employee's Credited
Compensation, multiplied
by
(i) 2, in the case of a Tier 1 Employee
or (ii) 1.5 in the case of a Tier 2 Employee.
(b)
The
amount
that
is th
e
present
value,
determined
as
of
the
Severed
Employee's
Severance
Date, of the increase
in benefits
under the Retirement Plans that would
result
if
the
Severed
Employee
was
credited
with
the
following
number
of
additional
years of age and service under the
Retirement Plans:
(i) 2, in the case
of
a Tier 1 Employee
or (ii) 1.5, in the case of a Tier 2
Employee; provided, however,
that
in
calculating
(b), if
the Severed
Employee
is entitled
under
the Retirement
Plans
to
any additional
credited service
due
to
the circumstances
of the
Severed
Employee’s
termination,
then
the
amount
of
the
present
value
of
the
increased
benefits
called for in the determination
of (b) shall be reduced by
the amount of
the
present value
of the increased
benefits under the Retirement
Plans calculated after
taking into account
the circumstances of
the Severed Employee’s
termination, but
not
below
zero.
Present
value
shall
be
determined
based
on
the
assumptions
utilized
under
the
ConocoPhillips
Retirement
Plan
for
purposes
of
determining
contributions
under Code Section 412 for the most recently completed plan year.
(c)
The amount that is equal to either (i) or (ii), as applicable,
plus either (iii) or (iv),
as applicable,
plus (v), if applicable, plus (vi), if applicable:
Exhibit 10.
2
4
(i)
If the Severed Employee
was enrolled in company-sponsored medical
coverage on
the Severance Date, an amount equal to 6 times the difference
between
the COBRA participant contribution rate and the active
employee
contribution
rate, each as of the Severance Date, for the type of coverage
in which the Tier 2 Employee
was enrolled.
(ii)
If the Severed Employee
was not enrolled in company-sponsored medical
coverage on
the Severance Date, an amount equal to 18 times the
difference
between the COBRA participant contribution rate and the
active employee
contribution rate, each as of the Severance Date, for
medical coverage.
(iii)
If the Severed Employee
was enrolled in company-sponsored dental
coverage on
the Severance Date, an amount equal to 6 times the difference
between
the COBRA participant contribution rate and the active
employee
contribution
rate, each as of the Severance Date, for the type of coverage
in which the Tier 2 Employee
was enrolled.
(iv)
If the Severed Employee
was not enrolled in company-sponsored dental
coverage on
the Severance Date, an amount equal to 18 times the
difference
between the COBRA participant contribution rate and the
active employee
contribution rate, each as of the Severance Date, for
dental coverage.
(v)
In the case of a Tier 1 Employee,
an amount equal to the sum of 6 times
the COBRA participant
contribution rate, as of the Severance Date, for
medical coverage
plus 6 times the COBRA participant contribution rate,
as of the Severance
Date, for dental coverage.
(vi)
If any persons
qualified as eligible dependents of the Severed Employee
under the applicable
company-sponsored medical or dental coverage in
which the Severed
Employee was enrolled on the Severance
Date, an
amount
equal to the sum of
the differences, for each such eligible
dependent,
between the COBRA eligible dependent contribution rate and
the eligible dependent
contribution rate for eligible dependents of active
employees,
each as of the Severance Date, for the medical and/or dental
coverage in which
the Severed Employee
was enrolled on the Severance
Date, as applicable,
times the factor set forth in the applicable Section
2.1(c)(i) or (ii), (c)(iii) or (iv), and (c)(v); provided,
that if the Severed
Employee
was not enrolled for medical or dental coverage, then the
eligibility and amount
for each dependent shall be determined as if the
Severed Employee
had been enrolled in medical coverage or dental
coverage,
as applicable, on the Severance Date.
2
.
2
Subject to Section 2.7, Severance
Pay (as well as
any amount
payable pursuant to Section
2.4 hereof)
shall be paid to an eligible
Severed Employee in a cash lump sum on the first business
day
immediately
following 10
days after
the end
of the
period
for executing
and
delivering
the
Severed Employee's
release, as set forth in Section 2.7.
2
.
3
Subject to Section 2.7, for
a period of (a) 24 months, in the case of a Tier 1 Employee or
(b) 18 months,
in the case of a Tier 2 Employee,
beginning the first of the month following the
termination of
active employee benefits, the Company shall arrange to provide the Severed
Employee
and his eligible dependents certain benefits, as enumerated below,
similar to those the
Severed Employee
and his eligible
dependents had
immediately prior to the Severed Employee's
Severance
Date.
These benefits will be provided at no greater cost to the Severed Employee than
active employee
rates for the plan year of coverage provided the benefits continue to be offered
by the Company
to active employees and the Severed Employee and his eligible dependents
Exhibit 10.
2
5
meet the same eligibility criteria for the benefits
as an active employee and dependents of an
active employee.
Depending on coverages prior to the Severed Employee's Severance Date, these
benefits
could include the following, but do not include any other benefits offered by the
Company:
Life Insurance, which includes Basic, Executive Basic, Supplemental, and Dependent
Life; and Personal
Accident Insur
ance.
Severed employees may also continue Long Term Care
and Executive
Life directly through the vendor to be paid for by the Severed Employee.
Nothing
herein shall prevent
a Severed Employee or eligible dependents of a Severed Employee from
electing to receive
COBRA continuation coverage of health
benefits subject to COBRA, in
accordance
with the applicable provisions of the law and the applicable plans.
While as an
active employee
the Severed Employee may have been able to make employee contributions or
pay premiums
for certain coverage through a pre-tax salary reduction arrangement, that will not
continue
after the Severed Employee's Severance Date.
The cost of these benefits will not be
adjusted
to reflect that the Severed Employee's cost will no lon
ger be pre-tax.
All other active
employee
benefits, not specifically mentioned above, are excluded, although if any of the
benefits
specifically mentioned above are replaced with a similar benefit after the Severed
Employee's
Severance Date, such replacement benefits are to be considered as mentioned
specifically
above even though their names, terms, and conditions may have been changed.
Such
benefits
shall not be provided (except to the extent as may be required by law) during any period
when the Severed
Employee is eligible to
receive such
benefits from another employer or from
an Employer or if the Severed
Employee has resumed working for an Employer.
The Severed
Employee
is obligated to inform the Company when
or if they become eligible to
receive such
benefits
from another employer.
2
.4
Each Severed Employee
shall be entitled to receive the employee's full
salary through the
Severance
Date and, subject
to Section 2.7
but notwithstanding
any provision
of the Company's
Vari
able Cash Incentive
Program or similar annual
bonus
incentive plan to the contrary,
shall be
eligible
for consideration
for an award
under such
program or plan
when awards
are made
with
regard to the fiscal
year under such
program or plan in which the Severance Date occurred.
2
.5
Each
party
to any
dispute concerning
this Plan
shall be
responsible
for that
party’s
own
legal fees and
expenses;
provided, however,
that the arbitrator appointed
pursuant to Section 3.2
of this Plan
may award reasonable legal
fees and expenses to
an Eligible
Employee if the
arbitrator
determines
that the Company’s
denial of the claim of the Eligible
Employee
was not reasonable.
2
.6
The Company
shall be en
titled to withhold and/or to
cause to be withheld from
amounts
to
be paid to the Severed
Employee
hereunder any federal, state, or local withholding or other taxes
or charges which it is from
time to time required to withhold.
2
.7
No Severed
Employee
shall be eligible
to receive
Severance
Pay or
other
benefits
under
the
Plan
unless
he
or
she
first executes
a
written
release
substantially
in
the
form
attached
as
Exhibit A hereto (or, if the Severed
Employee was not a United
States employee, a similar release
which is in accordance with the applicable laws in
the relevant jurisdiction) and, to the
extent such
release is revocable
by its terms, only if the
Severed Employee
does not revoke
it, and unless he
or she also,
at the request
of the Company,
executes a written agreement not to compete
with the
Company,
with such terms and conditions as may be proposed by the Company at
the time.
Such
release and,
if requested,
such agreement
not to
compete
must be executed
and delivered
to
the
Company
within 30 days of the Employee’s Severance
Date.
SECTION
3
.
PLAN ADMINISTRATION
.
3
.
1
The
Plan
Administrator
shall administer
the Plan
and
may
interpret
the
Plan, prescribe,
amend,
and
rescind
rules
and
regulations
under
the
Plan
and
make
all
other
determinations
Exhibit 10.
2
6
necessary or advisable for the administration
of the
Plan, subject
to
the provisions of the
Plan.
The
Plan Administrator shall have
absolute discretion and authority in carrying out its
responsibilities,
and all interpretations
of the Plan,
determinations
of eligibility under the Plan,
determinations to
grant or deny
benefits under
the Plan, or findings of
fact or resolutions related
to the Plan and its
administration
that are made by the Plan Administrator
shall be binding, final,
and conclusive on
all parties.
3
.
2
In the event of a claim by an Eligible Employee as to
the amount or timi
ng of any payment
or benefit,
such Eligible Employee
shall present the
reason for
his or
her claim in
writing to
the
Plan
Administrator.
The
Plan Administrator
shall, within
14 days
after
receipt
of
such
written
claim, send a
written notification to the
Eligible Employee as
to
its disposition.
Except as
provided
in the preceding portion
of this
Section 3.2, all disputes under this
Plan shall be settled
exclusively
by binding arbitration
in Houston, Texas, in accordance
with the rules
of the American Arbitration
Association
then in effect.
Judgment may be entered on the arbitrator's award in any
court having
jurisdiction.
3
.
3
The Plan Administrator may delegate
any of its
duties hereunder to such
person or persons
from time to time as it may designate.
3
.
4
The Plan Administrator
is empowered, on behalf
of the Plan, to engage accountants, legal
counsel,
and such other personnel as
it deems necessary
or advisable to assist
it in
the performance
of its duties under
the Plan.
The functions of any
such persons engaged by
the Plan Administrator
shall be limited to the
specified
services and duties for which they are engaged,
and such persons
shall
have
no
other
duties,
obligations
or
responsibilities
under
the
Plan.
Such
persons
shall
exercise no discretionary authority or
discretionary control
respecting the
management of the
Plan.
All reasonable
expenses thereof shall be borne by the Employer.
SECTION
4
.
DURATION;
AMENDMENT;
AND TERMINATION
.
4.1
This Plan shall be effective on the Effective Date.
This Plan shall continue
in effect unless
and until it is terminated
as provided in Section 4.2
.
4.2
This
Plan
may
be
amended
from
time
to
time
during
its
term
by
the
Company
acting
through its Board
of Directors or,
to the
extent authorized
by the Board of
Directors, its officers.
The Company
may,
by action of its
Board of
Directors, terminate this Plan at
any time.
SECTION
5
.
GENERAL PROVISIONS
.
5
.
1
Except
as
otherwise
provided
herein
or
by
law,
no
right
or
interest
of
any
Eligible
Employee
under the Plan shall be assignable
or transferable, in whole or in part, either directly
or
by operation
of law
or otherwise,
including
without limitation
by execution,
levy,
garnishment,
attachment,
pledge,
or
in
any
manner;
no
attempted
assignment
or
transfer
thereof
shall
be
effective;
and no right or
interest of
any Eligible
Employee
under the Plan
shall be liable
for,
or
subject to,
any obligation
or liability
of such
Eligible Employee.
When a payment
is due under
this Plan to
a Severed Employee
who is
unable to care for his or
her affairs, payment may
be made
directly to his or her legal guardian or personal
representative.
5
.
2
If
any
Employer is
obligated
by
law or
by contract
to pay
severance
pay,
a
termination
indemnity,
notice pay,
or the like, to a Severed Employee, or if any Employer is obligated by law
to
provide
advance
notice
of
separation
("Notice
Period")
to
a
Severed
Employee,
then
any
Severance
Pay hereunder to such
Severed Employee
shall be reduced
by the amount
of any
such
severance
pay, termination indemnity,
notice pay, or the like, as applicable, and
by the amount
of
Exhibit 10.
2
7
any
compensation
received
during any
Notice
Period.
This
provision
specifically
includes
any
payments
or obligations
under
the
ConocoPhillips
Severance
Pay Plan,
as
effective
March 13,
2004,
and as
subsequently
amended.
Furthermore,
if an Eligible
Employee
has willful
and bad
faith conduct demonstrably injurious to
Company or
its
subsidiaries, monetarily or otherwise, after
receiving Severance
Pay, the Company may offset
an amount equal to
such Severance Pay against
any other amounts
due from other plans or programs, unless otherwise required by law.
5
.
3
Neither
the establishment of the Plan, nor any modification thereof,
nor the creation of
any
fund,
trust, or account,
nor the payment
of any
benefits shall be construed
as giving any Eligible
Employee,
or any person whomsoever, the right to
be retained in the service of the Employer, and
all Eligible Employees shall
remain subject to
discharge to the
same extent as if
the Plan had never
been adopted.
5
.
4
If
any
provision
of
this
Plan
shall
be
held
invalid
or
unenforceable,
such
invalidity
or
unenforceability
shall not affect
any other provisions hereof, and this Plan shall be construed and
enforced
as if such provisions had not been included.
5
.
5
This Plan
shall be
binding upon the
heirs, executors, administrators,
successors, and assigns
of
the
parties,
including
each
Eligible
Employee,
present
and
future,
and
any
successor
to the
Employer.
5
.
6
The headings
and captions
herein are provided
for reference
and convenience only,
shall
not be considered
part of the Plan, and shall not be employed in the construction of the Plan.
5
.
7
The Plan shall not be funded.
No Eligible
Employee
shall have any right
to, or interest in,
any assets
of
any Employer
that may
be applied
by the
Employer to
the payment
of benefits
or
other rights under this Plan.
5
.
8
Any notice or
other communication required or
permitted pursuant to
the terms
hereof shall
have been
duly given when
delivered or mailed
by United States Mail,
first
-class, postage prepaid,
addresse
d
to the intended recipient at his, her or its
last known address.
5
.
9
This Plan shall be construed
and enforced according to the laws of the State
of Delaware.
CONOCOPHILLIPS
By:___________
__________________________
Dated:_______________________
Heather G. Sirdashney
Vice President,
Human Resources
Exhibit 10.
2
8
Exhibit A
Date of Delivery
to Employee:
_______________
Deadline
for Receipt by
the
Company:
________________
WAIVER AND
RELEASE OF
CLAIMS
Introduction and
General Information to
Employee.
Signing this Waiver
and
Release of
Claims is
one
condition to
receiving certain benefit
payments (“Benefits”)
under
the ConocoPhillips
Executive Severance
Plan (the
“Plan”)
offered
by
ConocoPhillips (the
“Company”).
You
should thoroughly
review
and
understand
the
effect of
this
Waiver
and
Release of Claims and consult with
an attorney before signing it.
To the
extent you have any claims covered
by this
Waiver
and
Release of
Claims, you will
be giving up
potentially valuable rights
by
signing.
You
may take
time to
consider whether
or not to sign this Waiver and Release of Claims.
If you sign this Waiver and Release of Claims
and
deliver it to the
Company as
set forth below, and if the
Company’s
designated
recipient
receives
the Waiver and Release
of Claims on or before the date indicated
above as the “Deadline for Receipt
by the Company,” and you do not revoke
the Waiver and Release
of Claims
within seven
(7) days following
receipt, you
will
be entitled
to Benefits
under the
Plan
if you
are
otherwise eligible.
If the
signed Waiver
and Release
of Claims
is not
received by
the deadline,
or if
you revoke
it during the seven
(7) day period following receipt, no Benefits
will be paid.
1.
General Release.
In consideration of, and subject to, the
payments to be made to
me by the
Company or
any of its
subsidiaries, pursuant to the Plan,
which I acknowledge that
I would
not otherwise be entitled
to receive, I
hereby waive
any claims I may have
for employment or re-employment by the Company
or any subsidiary
or parent
of
the
Company after the
date hereof,
and
I further agree
to and
do
release and forever
discharge the
Company or any
subsidiary or parent
of the Company, and their respective
past and present officers, directors, shareholders, employees,
agents, and assigns, as well as any
employee benefit plans maintained by the Company or any subsidiary or parent of
the Company and fiduciaries, employees, and agents of such
plans, and any related parties (all
of which are hereafter
referred to as
the “Released
Parties”) from any and
all claims
and causes
of action, known or unknown,
arising out
of
or
relating to my employment
with the Company
or any subsidiary
or parent of the
Company (including
the termination
of
that employment), except claims
that the law
does
not permit
me to waive
by signing
this Waiver
and Release
of Claims.
Such possible
claims or causes
of action include, but
are not limited to,
wrongful
discharge, contract,
breach
of contract,
tort, fraud, the Civil Rights Acts
(including, but not limited to, Title
VII of the
Civil Rights Act of
1964 and sections
1981 and 1983
of the Civil
Rights Act of 1866),
the Age Discrimination in Employment Act (“ADEA”),
the Worker
Adjustment and
Retraining Notification Act
(“WARN”), the
Employee
Retirement Income
Security Act
(“ERISA”),
the
Americans with
Disabilities Act
(“ADA”), the
Americans with
Disabilities Act
Amendments Act
(“ADAAA”), the
Family and Medical Leave Act (“FMLA”), the Texas Labor Code, and any other federal, state,
or local legislation or
common law relating to employment
or discrimination in employment
or otherwise, except
as specifically excluded in
paragraph 4 below.
2.
Extent of
Release.
For the
purpose
of implementing
a
full and
complete
release
and
discharge
of the
Released
Parties, I expressly
acknowledge
that the release
I am giving in
this
document is
intended to include
in its effect,
without
limitation,
all claims I
may
have against
the Released
Parties, whether
known, unknown,
or suspected at
the
time I
delivered to
the
designated recipient
for the
Company this
signed Waiver
and
Release of
Claims,
and
regardless of
whether the knowledge
of such
claims, or the
facts upon
which they
might be based,
would materially have
affected
my
decision to sign this Waiver and Release of Claims, and that the consideration given
under this Waiver and Release of
Claims is also
for the release
of those claims
and contemplates
the extinguishment
of any such
claims. In furtherance
of
this Waiver and Release of Claims, I waive any rights provided
by California Civil Code section 1542
or other similar
local, state, provincial, or federal law. Section 1542 states:
“A general release
does not extend to claims which the creditor does not know or suspect to
exist
in
his
favor
at the
time
of
executing
the
release,
which if
known
by
him
must
have
materially affected his settlement with the debtor.”
PLEASE READ CAREFULLY
THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS
Exhibit 10.
2
9
Some of the types of
claims that I acknowledge
I am releasing, although there
may be
others not listed here, are
claims
I may have under any
applicable labor
agreement and claims under
any federal, state, or local statute,
ordinance, order,
or law arising
out of or relating
to the terms
and conditions
of my
employment
with the Company
and the
termination
of
my employment, including claims
such as:
a.
Discrimination on the basis of sex, race,
color, national origin,
religion, sexual orientation, disability,
veteran status,
or any other legally
protected
status;
b.
Harassment,
wrongful discharge,
or retaliation,
including
retaliatory
discharge,
arising
under
local, state,
or federal law, including any worker’s compensation
or whistleblower
statute;
c.
Any
other possible
restrictions on
the Company’s
ability to
end
its
employees’ employment
at will,
including but not limited to (i) violation of public
policy, (ii)
breach of any express
or implied covenant of the
employment contract, and
(iii) breach of any covenant
of good faith and
fair dealing;
d.
Unpaid wages,
including, but not limited to claims
for unpaid
overtime,
break, meal, or
rest periods;
e.
Amounts determined under an incentive compensation or bonus program of
the Company,
including,
but not limited to, the
varying amounts at
its
discretion;
f.
Civil claims of
negligence, defamation, business disparagement, invasion of privacy, personal injury,
fraud, misrepresentation, or infliction of emotional
or mental distress;
g.
Matters for which a civil action
may be brought under section 502
or section 510 of ERISA, except as
specifically excluded
in paragraph 4
below (“Exceptions
to Release”);
and
h.
Claims for breach
of any agreement(s)
ancillary to my
employment with the
Company.
3.
Release
of Claims
under
Age
Discrimination
in
Employment Act.
In consideration
for receiving
the
Benefits
from the Company or any of its subsidiaries, I specifically waive all existing rights and claims I may have against the
Released Parties
under the Age
Discrimination in Employment Act, 29 USC
§ 621
et seq., and
any
other applicable
federal, state,
or local
statute or
law
involving age
discrimination.
I acknowledge
that
the
Benefits
constitute
independent
consideration for
this
release of
liability and
are
in addition to
any
other payment to
which I
am
entitled.
I further
acknowledge
that I have
been advised
to consult
with an attorney
of my own choosing
before executing this
Waiver and
Release of Claims.
4.
Exceptions to Release.
The Waiver and Release
of Claims
does not release
any claims related
to:
a.
The business expense
reimbursement policy of the
Company or any
of its subsidiaries;
b.
Claims pursuant to
section 502(a)(1)(B) of ERISA to recover benefits
under the terms
of the employee
benefit plans
of
the
Company or
any
of its
subsidiaries as applicable
to
me
on the
date of
my employment
termination;
c.
Claims made for work-related injuries under
applicable worker’s
compensation
statutes;
d.
Any claim that
may arise
after the
date this
signed Waiver
and Release of Claims
is delivered to the
designated
recipient for the Company;
and
e.
My rights to indemnification under any
indemnification agreement,
applicable law, and the
certificates
of incorporation and bylaws of
the
Company or of
any subsidiary of the
Company, and my
rights under any
directors’ and officers’ liability insurance
policy covering me.
Nothing in this Waiver and Release of Claims, however, will limit my right to report possible violations
of law to any
governmental agency, make other
disclosures
that are protected under the
whistleblower provisions of federal, state,
or
local law, or
testify, assist,
or participate
in an investigation,
hearing, or
proceeding
conducted
by
the EEOC, EPA, DOL,
SEC, IRS, or any other governmental agency.
Nothing in this
Waiver and Release
of Claims
limits my right to receive
an award
or incentive payment
for information provided to any governmental
agency.
5.
Review Period and Revocation
Period.
I acknowledge
that I have been given a period of twenty-one (21)
calendar
days within
which to
review
and consider
the provisions
of this
Waiver and
Release
of Claims,
whether
I choose
to do
so or not.
I understand
and acknowledge
that
the Company
has advised
me in writing
that
I have
seven
(7) calendar
days following the timely delivery to
the designated representative of the
Company of this properly executed
Waiver
and Release of Claims
to revoke my acceptance
of this Waiver and Release of
Claims.
I understand the
revocation can
be made by delivering
a written notice of revocation
to ConocoPhillips, Attn: Dan
Mecham,
925 N. Eldridge Parkway,
Houston, Texas
77079.
I understand and
acknowledge
that Dan Mecham
is the
designated
recipient for
the Company
of
this Waiver
and Release
of Claims
and that
I must
deliver
to him
at the foregoing
address
this signed
Waiver and Release
of Claims
on or before the
deadline set
out above
in order to be
entitled to receive
the Benefits.
I understand that
for
the
revocation to be effective, the Company through the designated recipient must receive written notice no later than the
close of business
on the seventh day after I deliver to the
designated recipient for the
Company this
signed Waiver and
Release of Claims.
This
Waiver and Release
of Claims
shall not
become effective or
enforceable, and the
Plan Benefits
Exhibit 10.
2
10
will not become payable until aft
er the seven-day revocation period has expired, but in no event prior to
the effective
date of my termination of employment, whether designated
as a layoff or other form
of termination of employment.
I
acknowledge
that I have had
adequate time
to read and consider this
Waiver and Release of Claims
before executing it.
I acknowledge
that I have signed this Waiver and Release of Claims voluntarily, knowingly,
of my own free
will, with
the intent to be
legally bound by the same, and
without reservation or duress, and that no promises or
representations
have been made
to
me by
any person
to induce
me to
do so
other than
the promise of
Benefits set forth
in the
first
paragraph above
and the
Company’s acknowledgment
of my rights reserved
under the fourth paragraph above.
6.
Choice of
Laws.
I understand,
acknowledge, and agree that
this Waiver
and
Release of Claims
shall be
construed, interpreted, governed, and enforced
in accordance
with the laws of
the State of Texas, without giving effect
to any conflict
of law principles.
I agree that
all disputes
and actions
arising out
of or
relating
to this Waiver
and Release
of Claims
shall be
litigated solely
and exclusively
in the state
or federal courts
located in
Harris
County, Texas.
I submit
to the personal
jurisdiction of said
courts for purposes
of any such disputes
or actions.
Employee Signature:
____________________________
Date:
________________________
Employee Name Printed:
________________________
Employee No:
________________
Exhibit 10.
2
11
Exhibit B
Employees
Ineligible for Executive Severance Plan
Employees
of Concho
Resources Inc. or any
of its subsidiaries,
including but not limited to COG
Operating LLC, who are participants
in but do not waive all benefits
under the Concho
Resources
Inc. Executiv
e
Severance Plan.
d033121dex103
Exhibit 10.
3
1
January 15, 2021
INDUCEMENT
GRANT
AGREEMENT
Employee
Name:
ID Number:
Payroll Country:
United States
of America
Number
of Restricted Stock Units
Granted:
Grant Date:
Grant Price:
Vesting Schedule:
The
restrictions lapse
and the units
vest on
the third anniversary of the Grant
Date.
Further Terms
and Conditions
1.
Type and Size of Grant
.
Subject to the
2014 Omnibus Stock
and Performance
Incentive
Plan
(the
Plan)
and
this
Agreement,
the
Company
grants
to
the
employee
named
above
(the
Employee)
Restricted
Stock Units,
the number of which
is set forth above.
2.
Grant Date, Price, and Plan
.
The Grant
Date and
the Grant Price are
as set
forth
above
.
Awards
are made
under the Plan.
This
Award is made in lieu of a
bonus.
3.
Vesting,
Restrictions, Forfeiture,
and Lapse of
Restrictions
.
The Restricted Stock Units subject
hereto may be
canceled or forfeited as
set forth herein.
Except as
otherwise noted
in this Agreement
,
the
following
summary
table
describes restrictions
and
terms,
forfeiture,
and
lapse of
restrictions,
subject to the more
detailed provisions
set forth below:
Summary
Table
Summary of Termination
Rules
Status
Termination
Date
Forfeiture or Lapsing
of Restrictions
Layoff
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Disability
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Death
Any date after
Grant Date
Restrictions lapse
on
Termination
date
Divestitures,
outsourcing,
and
moves to joint ventures
Any date after
Grant Date
Canceled upon Termination,
unless
approval
otherwise
All other Terminations
To the extent
vested
Restrictions lapse
on
vesting
date,
To the extent not
vested
Canceled upon Termination
Exhibit 10.
3
2
(a)
Vesting.
The Restricted
Stock Units granted
under this Agreement
shall vest as set forth in
the
Vesting
Schedule above.
All
vesting shall
be
in
whole
shares, and
fractions
shall be
rounded
down to nearest
whole share.
(b)
Restrictions
and Terms.
(i)
The
Award
shall
be
held
in
escrow
by
the
Company
until
the
lapsing of
restrictions
placed upon
the Award.
The
Employee shall not
have the
right to sell, transfer, assign, or
otherwise
dispose
of
Restricted
Stock
Units
granted
in
the
Award
until
the
escrow is
terminated.
Except
as
set
forth
below,
the
Award
shall
be
forfeited
and
the
related
Restricted
Stock Units canceled
upon the Employee’s Termination of Employment
with
the Company
prior to vesting in
accordance
with paragraph (a) above.
Restrictions shall
lapse on the
Restricted
Stock Units as
they become
vested in accordance
with paragraph
(a) above.
Restrictions
shall lapse
on the Restricted Stock
Units granted
in the Award
on
the day following the Employee’s Termination of Employment
with the Company, if the
Award
has
not
been
canceled
prior
to
that
day.
Upon
the
lapsing of
restrictions,
the
number of shares
of unrestricted Stock equal
to the number
of shares
of Restricted Stock
Units
for
which
the
restrictions
have
so
lapsed
shall be
registered
in
the
Employee’s
name,
and
the
related
shares
of
Restricted
Stock
Units
shall
be
canceled;
provided,
however,
that
in
places where
it
is determined
by
the
Administrator that
payout in the
form of unrestricted Stock is
prohibited by law, regulation, or decree,
or where the
cost of
legal
compliance to
issue the
unrestricted
Stock
would
be
unreasonably expensive, the
Fair
Market Value
of such unrestricted Stock
shall be paid in
cash instead of settlement
of
the
Award
in
unrestricted
Stock.
Cash payouts are only permitted
where such legal
restrictions exist.
Settlement of the Award in unrestricted
Stock or cash
payout,
if
any,
shall be
made when
the
restrictions
lapse, but in
any event, shall be
made no later
than
March 15 of the year
following the
year in which
such restrictions
lapse.
(ii)
Restricted
Stock Units do
not have any voting
rights or other rights generally
associated
with
Stock,
and
are
merely
an
obligation
of
the
Company
to
make
settlement
in
accordance
with
the
terms
and
conditions
applicable
to
such
Restricted
Stock
Units.
Restricted
Stock Units shall accrue
a dividend equivalent
at such times
as a cash dividend
is
paid
on
the
Stock
of
the
Company,
which
dividend
equivalent shall
be
credited
as
reinvested in
additional Restricted
Stock Units as of the
date such dividends
are payable,
and
such
Restricted
Stock
Units
shall
be
subject
to
these
terms
and
conditions.
The
number
of
Restricted
Stock
Units
acquired
through
this
reinvestment
of
dividend
equivalents shall
be
calculated using
the
Fair
Market Value
at the time
of the dividend
equivalent is
accrued.
Restricted
Stock Units acquired
from dividend equivalents
shall be
paid at the time and
in the manner
of settlement of
the Restricted
Stock Units as
set forth
in section 3(b)(i).
(c)
Termination of Employment.
(i)
General
Rule
for
Termination.
If,
prior
to
the
date on
which
in
accordance with
the
schedule
set
forth
in
the
Award,
the
Employee's
employment
with
a
Participating
Company
shall
be
terminated
for
any
reason except
death,
Disability,
or
Layoff,
any
Restricted
Stock Units remaining
in escrow
pursuant to such
Award shall be canceled and
all rights thereunder shall
cease; provided that the
Authorized Party may, in its or his
sole
discretion,
determine
that
all
or
any
portion
of
an
Award
shall not
be
canceled due to
Termination of Employment.
(ii)
Layoff.
If,
after
the
date
the
Award
is
granted,
the
Employee's employment
with
a
Participating Company shall
be terminated by
reason of Layoff, the
Employee shall retain
all
rights
provided
by
the
Award
at
the
time
of
such
Termination
of E
mployment.
In
such
case,
the
restrictions
on
the
Award
shall lapse
on
the
date of
Termination
of
the
Employee from the employ of the
Company and
its subsidiaries,
and settlement shall
be
made in accordance
with the settlement
provisions above.
Exhibit 10.
3
3
(iii)
Disability
.
If,
after
the
date
the
Award
is
granted,
the
Employee
shall
terminate
employment
following
Disability
of the Employee
,
the Employee
shall retain all rights
provided by the
Award at the time of such Termination of Employment.
In such
case, the
restrictions on the
Aw
ard shall
lapse on the
date of Termination of Employment from the
employ of the
Company and
its subsidiaries,
and settlement shall
be made in accordance
with the settlement
provisions above.
(iv)
Death.
If, after the date an
Award is granted, the Employee shall
die while in
the employ
of a Participating Company
,
or after Termination of Employment
by reason
of Disability,
or
Layoff (and
prior
to the cancellation of
the Award),
the executor or
administrator of
the estate of the
Employee or the person
or persons
to whom the
Award shall
have
been
validly
transferred
by
the
executor
or
the
administrator
pursuant
to will
or the laws of
descent and distribution
shall have
the right to settlement
of the Award to the same
extent
the Employee would have,
had the Employee
not died.
In such
case, the
restrictions
on
the
Award
shall
lapse
upon
the
determination
of
death
by
the
Administrator,
and
settlement shall
be made in accordance
with the settlement
provisions above.
No transfer
of
an
Award,
or
of
the
unrestricted
Stock
or
other
proceeds
of
an
Award,
by
the
Employee by will or by
the laws
of descent and
distribution shall be
effective to bind
the
Company unless
the Administrator shall
have been
furnished with written notice thereof
and a copy of
the will and
such other evidence
as the Administrator may
deem necessary
to establish the
validity of the transfer
and the
acceptance
by the transferee or transferees
of the terms
and conditions
of such Award.
(v)
Transfers and
Leaves.
Transfer
of
employment between Participating
Companies shall
not constitute Termination of Employment for the purpose
of any Award granted
under
the Program.
Whether any
leave of absence
shall constitute
Termination of Employment
for
the
purposes of
any
Award
granted
under
the
Program
shall be
determined
by the
Administrator,
in each case in accordance with applicable law and
by application of
the
policies and
procedures adopted
by the Company in
relation to such
leave of absence.
(vi)
Divestiture,
Outsourcing,
or
Move
to
Joint
Venture
.
If,
after
the
date the
Award
is
granted, the Employee ceases
to be employed by
Participating Company as
a result
of (a)
the
outsourcing
of
a
function,
(b)
the
sale or
transfer
of
all
or
a
portion
of
the equity
interest
of
such
Participating
Company
(removing
it
from
the
controlled
group
of
companies
of which the
Company is a
part), (c) the sale
of all or substantially
all
of
the
assets of such
Participating Company to
another employer outside
of the controlled group
of
corporations
(whether
the
Employee
is offered
employment or
accepts employment
with
the
other
employer),
(d)
the
Termination
of
the
Employee
by
a
Participating
Company followed
by
employment
within
a
reasonable time
with
a
company or other
entity in which
the Company
owns, directly or indirectly, at least
a 50% interest, prior
to
exercise
of an Award,
or (e) any other sale
of assets
determined by the
Authorized
Party
to be considered a
divestiture under this
program, the Authorized Party may, in its or
his
sole discretion, determine that all
or a portion of any
such Award shall
not
be
canceled.
In such cases,
the restrictions on the
Award shall lapse on the
date of Termination
of
the
Employee from the employ of the
Company and
its subsidiaries,
and settlement shall
be
made in accordance
with the settlement
provisions above.
(vii)
Change
of Control.
Upon a
Change
of Control, the following shall
apply to any
Award:
(1)
Each Employee shall
immediately become
fully vested in
such Award that is not
assumed
by,
or
substituted
for,
an
acquirer
in
connection with
the
Change of
Control, and such
Award shall not thereafter be
forfeitable for any reason, except
as set forth in Section 3(c).
(2)
With
regard
to
any
other
Award,
each Employee
shall become
fully
vested in
such Award upon incurring a Severance
following such Change
of Control,
and
such Award shall not thereafter be
forfeitable for any reason, except
as set
forth
in Section 3(c).
Exhibit 10.
3
4
(3)
In the event
of vesting of an Award pursuant to
either Section 3(vii)(1) or Section
3(vii)(2),
all restrictions
and other limitations
applicable to
any Restricted Stock
granted in any
Award shall lapse.
With regard to such
Restricted
Stock,
it
shall
become
free
of
all
restrictions
and
become transferable.
With
regard
to
such
Restricted
Stock
Units,
all
restrictions
and
other
limitations
applicable to
the
Restricted
Stock Units shall lapse
and the Restricted
Stock Units shall
be
settled
in
unrestricted
Stock
or
cash at
the
same times
and
upon
the
same events as it
would
otherwise have
been made
in
accordance with
the
settlement provisions
above.
(viii)
Notwithstanding
anything
herein
to
the
contrary,
in
the
event that
this
Award
or
the
dividend
equivalents
associated with
this
Award
are
includible
in
income
pursuant
to
section
409A
of
the
Internal
Revenue
Code,
settlement
of
the
Award
or
any
other
distribution
hereunder
due
to
S
eparation
from
S
ervice
with
the
Company
and
its
subsidiaries
shall
not
be
made
to
a
“specified
employee”
(as
that
term
is
defined
in
section 409A(a)(2)(B)(i))
prior
to six months af
ter the specified employee’s
Separation
from Service from the Company and
its subsidiaries
(or, if earlier,
the date
of death of the
specified employee).
(d)
Detrimental Activities,
Suspension
of Award,
and Required
Recoupment.
(i)
If the Authorized Party determines
that, subsequent
to the grant
of any Award but prior to
any Change of Control, the
Employee has
engaged or
is engaging
in any activity
which,
in the sole judgment
of the Authorized Party, is or may
be detrimental to
the Company
or
a
subsidiary,
the
Authorized
Party
may
cancel
all
or
part
of
the
Restricted Stock
or
Restricted Stock
Units held
in escrow pursuant to
the Award
or Awards
granted to that
Employee.
Upon any
Change
of Control, the Authorized Party
may cancel
all or part
of
the
Restricted
Stock
or
Restricted
Stock
Units
held
in
escrow pursuant
to
the
Award
granted
to
the
Employee
only
upon
a
determination
by
the
Authorized
Party
that
the
Employee has
given the Company
Cause for such
cancellation.
(ii)
If
the
Authorized
Party,
in
its
or
his
sole
discretion,
determines
that
the
lapsing
of
restrictions on Restricted
Stock or Restricted
Stock Units held
in escrow
pursuant
to
any
Award
has the
possibility of
violating
any
law,
regulation,
or
decree pertaining
to the
Company,
any of its
subsidiaries, or the
Employee, the
Authorized Party
may freeze or
suspend the Employee’s right to settlement
or payout of the
Award until such time as the
lapse of restrictions would
no longer, in the sole
discretion of the
Authorized Party, have
the possibility
of violating such
law, regulation, or decree.
(iii)
Notwithstanding anything
herein
to
the
contrary,
any
Award
is subject to forfeiture
or
recoupment, in whole or
in part, under applicable
law, including the Sarbanes-Oxley Act
and the Dodd-Frank Act.
4.
Assignment
of Award upon Death
.
Rights under
the Plans
and this
Agreement cannot
be assigned
or transferred other than by
(i) will or (ii) the laws
of descent
and distribution.
5.
Tax
Withholding
.
In
all
cases the
Employee
will
be
responsible to
pay all required
withholding
taxes associated
with the Award.
Should a withholding tax
obligation
arise with
regard to the Award
or the lapsing
of restrictions on
Restricted
Stock Units granted
in the Award, the withholding tax may
be
satisfied
by
withholding
shares
of
Stock.
The
value
of
the
shares of
Stock
withheld
for
this
purpose
shall
be
consistent
with
applicable
laws
and
regulations.
When
necessary,
lapsing
of
restrictions
may
be accelerated by the Authorized
Party to
the extent necessary to provide shares of
Stock to satisfy
any withholding tax obligation.
This
withholding tax obligation
includes, but
is
not
limited to, federal, state, and
local taxes,
including applicable
non-U.S. taxes.
6.
Shareholder
Rights
for
Restricted
Stock
Units
.
The
Employee
shall
not
have the
rights
of
a
shareholder until
the
Restricted Stock Unit has been canceled and ownership of
shares of Stock has
been transferred to
the Employee.
As described
above, the Company
may pay
dividend equivalents
with regard to Restricted
Stock Units in
certain circumstances.
Exhibit 10.
3
5
7.
Certain Adjustments
.
In the
event
certain
corporate
transactions,
recapitalizations,
or stock
splits
occur
while Restricted
Stock
or Restricted
Stock
Units
are outstanding,
the
Grant
Price
and
the
number
of
shares
of Restricted
Stock
Option
Shares
or Restricted
Stock
Units
shall
be correspondingly
adjusted.
8.
Relationship
to
the
Plan
.
In
addition
to
the
terms
and
conditions described
in
this
Agreement,
Awards
are
subject to
all
other
applicable provisions
of
the Plan.
The decisions of the Committee
with
respect
to
questions
arising
as
to
the
interpretation
of
the
Plan
or
this
Agreement
and
as to
findings of fact shall
be final, conclusive, and
binding.
9.
No
Employment
Guarantee
.
No
provision
of
this
Agreement
shall
confer
any
right
upon
the
Employee to continued
employment with any
Participating Company.
10.
Governing
Law
.
This Agreement
shall be governed by
and construed and enforced in
accordance
with the
laws of the State
of Delaware.
11.
Amendment
.
Without
the
consent
of
the
Employee,
this
Agreement
may
be
amended
or
supplemented
(i) to cure any
ambiguity or to correct or
supplement any
provision herein which
may
be
defective
or
inconsistent
with
any
other
provision
herein,
or
(ii)
to
add
to
the
covenants and
agreements of
the Company
for the benefit of an
Employee or to add
to the rights
of an Employee
or
to
surrender
any
right
or
power
reserved
to
or
conferred
upon
the
Company in
this
Agreement,
provided,
in
each case,
that
such changes or
corrections
shall not
adversely affect the rights
of the
Employee with respect
to the grant
of an Award evidenced
hereby without the
Employee’s
consent,
or (iii) to make such
other changes
as the Company, upon advice
of counsel, determines
are necessary
or advisable
because of the
adoption or promulgation of, or change
in or of the
interpretation of,
any
law or governmental
rule or regulation, including
any applicable
federal or state
securities
or tax laws.
Exhibit 10.
3
6
DEFINITIONS
Capitalized terms
not defined below
shall have the
meanings set forth
in the Plan.
“Authorized
Party”
means the person
who is
authorized to approve
an Award, exercise discretion, or take
action under the
Administrative Procedure for the Restricted
Stock Program and
pursuant to the
Program.
With regard to Senior Officers, the Committee
is the
Authorized Party.
With regard to other Employees,
the Chief Executive
Officer is the Authorized
Party,
although the Committee
may act
concurrently as
the
Authorized Party.
“Award”
means the
Restricted Stock
Units granted
to
the
Employee
pursuant
to
the
foregoing
terms,
conditions, and limitations.
“Cause”
means “Cause”
as that term is
defined in the
Key Employee Change
in Control Severance
Plan
of ConocoPhillips applied
as if an
Employee were a
participant under such
plan
.
“Change of Control”
has the
meaning set forth in Attachment
A to these
Terms and Conditions.
“Committee”
means
the Compensation
Committee of the
Board of Directors
of the Company.
“Company”
means
ConocoPhillips a
Delaware corporation.
“Disability”
means
a disability for which the
employee in
question has
been determined
to be entitled
to
either (i) benefits under
the applicable
plan of long-term disability of the
Company or its
subsidiaries
or
(ii)
disability
benefits
under
the
Social
Security
Act.
In
the
absence of
any
such determination,
the
Authorized Party may make
a determination that the
employee has
a Disability.
“Fair Market
Value”
means, as of a
particular date, the mean
between the
highest and lowest
sales
price
per
share
of
such
Stock
on
the
consolidated
transaction
reporting
system
for
the
principal
national
securities
exchange on which
shares of Stock are
listed on
that date, or, if there shall
have
been
no
such
sale so reported
on that date,
on the next
preceding date
on which such
a sale was so reported,
or,
at
the
discretion of the
Committee, the price
prevailing on the
exchange
at a
designated
time.
“Good
Reason”
means “Good Reason” as that term is
defined in the
Key Employee Change in
Control
Severance Plan
of ConocoPhillips applied
as if an
Employee were a
participant under such
plan.
“Grant
Price”
means
the
Fair
Market Value
for
one
share of
Stock
as of
the
date of
the
grant
of
an
Award.
Grant price is
not adjusted
for any restrictions applicable
to the Award.
“Key Employee
Change in Control
Severance
Plan of ConocoPhillips”
means the
plan of that
name (or
a successor plan
to the plan
of that name) in
effect on an
applicable Change
of Control.
If no plan of that
name (or successor
plan to the
plan of that
name) is in effect on an
applicable Change
of Control, it
shall
mean instead the
plan of that
name in effect
on the date of the
Award.
“Layoff”
means
an
applicable
Termination
of
Employment
due
to
layoff
under
the
ConocoPhillips
Severance Pay
Plan, the ConocoPhillips Executive
Severance Plan, or the
ConocoPhillips
Key Employee
Change
in Control Severance Plan, or layoff or redundancy
under any similar
layoff or redundancy
plan
which the
Company or its subsidiaries
may adopt from time
to time.
If all or any portion of
the
benefits
under
the
redundancy
or
layoff
plan
are
contingent
on
the
employee’s
signing
a
general
release
of
liability,
such Termination
shall not
be
considered as
a “Layoff” for
purposes of this Award
unless the
employee executes
and does not revoke a
general release of liability,
acceptable to the Company,
under
the
terms
of
such layoff
or
redundancy plan.
In
order
to
be
considered a
layoff
for
purposes of
this
Award, the Termination of E
mployment must also
be considered
a Separation from Service.
“Participating
Company”
includes
ConocoPhillips
and
its
100%
owned
subsidiaries, including
both
those directly
owned and
those owned through subsidiaries,
whose
participation has
been approved
by the
Authorized Party.
Exhibit 10.
3
7
“Restricted Stock
Unit”
means
a unit equal
to one share of
Stock (as determined
by the Authorized
Party)
that is subject
to forfeiture provisions or that has
certain restrictions
attached to
the ownership
thereof.
“Senior Officer”
means the
Chairman of the
Board, the CEO, all
other executive officers of
the Company
(determined
in
accordance
with
the
Company’s
custom and
practice pursuant
to
section 16(b)
of
the
Securities Exchange
Act of 1934, as
amended), all other employees
of the Company
who report
directly
to the CEO
and whose salary
grade is 23 or higher, and all
other employees
of the Company
whose
salary
grade is 26 or higher.
“Separation
from
Service”
means “separation from service” as that term
is used in section 409A of
the
Internal Revenue
Code.
“Severance”
means “Severance” as that term is defined in the Key Employee Change in Control
Severance
Plan of ConocoPhillips applied as if an Employee were a participant under such plan,
and
shall
also
incorporate
the
meaning
of
the
term
“Cause”
contained
in
the
definition
of
“Severance”
in such plan but shall substitute the definition of “Good Reason” contained
in
this
Inducement
Grant Agreement for the definition of “Good Reason” contained in such plan.
“Stock”
means
shares of common stock
of the Company, par value
$.01.
Stock may also
be referred to as
“Common Stock.”
“Terminatio
n”
and
“
Termination
of
Employment”
each
mean
cessation
of
employment
with
the
Participating
Companies, determined
in
accordance with
the
policies and practices of
the Participating
Company for whom
the Employee was
last performing services.
Exhibit 10.
3
8
Attachment A
Change of Control
The following definitions
apply to the
Change of
Control provision
in Section 10
of the Plan.
“Affiliate” shall have
the meaning
ascribed to
such term in Rule 12b-2
of the General
Rules and Regulations
under the Exchange
Act, as
in effect at the time of determination.
“Associate”
shall mean, with reference to
any Person, (a) any corporation,
firm,
partnership, association, unincorporated
organization or
other entity
(other than the Company
or a
subsidiary of the
Company) of which
such Person
is an officer or general partner (or officer
or general
partner of a general
partner) or is, directly or indirectly, the Beneficial
Owner of 10% or
more of any class
of equity securities,
(b) any trust or other estate
in which such
Person has a
substantial beneficial interest
or as to which
such Person serves
as trustee or in
a similar fiduciary capacity
and (c) any relative
or
spouse of such
Person, or any relative
of such
spouse, who has
the same home
as such Person.
“Beneficial Owner”
shall mean,
with reference to
any securities,
any Person
if:
(a)
such
Person
or
any
of
such
Person’s
Affiliates
and
Associates,
directly
or
indirectly,
is
the
“beneficial
owner”
of
(as
determined
pursuant
to
Rule
13d
-3
of
the
General
Rules
and
Regulations
under
the
Exchange
Act,
as
in
effect
at
the
time
of
determination)
such
securities
or
otherwise
has
the
right
to
vote
or
dispose
of
such
securities;
(b)
such
Person
or
any
of
such
Person’s
Affiliates
and
Associates,
directly
or
indirectly,
has
the
right or
obligation
to
acquire
such
securities
(whether
such
right or
obligation is exercisable
or effective immediately or only
after the passage of time or
the
occurrence
of
an
event)
pursuant
to
any
agreement,
arrangement
or
understanding
(whether
or
not
in
writing) or
upon
the exercise
of
conversion
rights, exchange
rights,
other rights, warrants or options,
or otherwise; provided, however, that
a Person shall not
be
deemed
the
Beneficial
Owner
of,
or
to
“beneficially
own,”
(i) securities
tendered
pursuant
to
a
tender
or
exchange
offer
made
by
such
Person
or any
of
such
Person’s
Affiliates
or
Associates
until
such
tendered
securities
are
accepted
for
purchase
or
exchange
or (ii) securities issuable upon exercise of Exempt Rights; or
(c)
such
Person
or
any
of
such
Person’s
Affiliates
or
Associates
(i) has
any
agreement,
arrangement
or
understanding
(whether
or
not
in
writing)
with
any
other
Person (or any Affiliate
or Associate thereof) that beneficially owns such
securities
for
the
purpose
of
acquiring,
holding,
voting
(except
as
set
forth
in
the
proviso
to
subsection
(a) of this definition) or disposing of such securities or (ii)
is
a
member
of
a
group (as that term is used in Rule 13d
-5(b) of the General Rules and Regulations
under
the Exchange Act) that includes
any other Person that beneficially owns such securities;
provided,
however, that nothing in this definition shall cause a Person engaged
in business as an
underwriter
of securities
to be the Beneficial Owner of, or to “beneficially own,” any securities
acquired
through such Person’s
participation in good faith in a firm commitment underwriting
until the expiration of
40 days after the date of such acquisition.
For purposes hereof, “voting” a
security shall include
voting, granting a proxy,
consenting or making a request or demand
relating to corporate
action (including, without limitation, a demand for a shareholder list, to call
a shareholder
meeting or to inspect corporate books and records) or otherwise giving an
authorization
(within the meaning of section 14(a) of the Exchange Act) in respect of such
security.
Exhibit 10.
3
9
The terms “beneficially
own” and
“beneficially owning”
shall have
meanings that are
correlative to this
definition of the term “Beneficial
Owner.”
“Board” shall have
the meaning
set forth in the Plan.
“Change of Control” shall
mean any
of the following occurring on
or after the Grant
Date:
(a)
any Person (other
than an Exempt Person) shall become
the Beneficial Owner
of 20%
or more of the shares of Common Stock then outstanding or 20% or more
of
the
combined
voting power of the Voting
Stock of the Company then outstanding; provided,
however,
that
no
Change
of
Control
shall
be
deemed
to
occur
for
purposes
of
this
subsection
(a)
if
such
Person
shall become
a Beneficial
Owner
of
20%
or more
of
the
shares of
Common Stock then outstanding or 20% or more of the combined voting power
of
the
Voting
Stock
of
the
Company
then
outstanding
solely
as
a
result
of
(i)
any
acquisition
directly from the Company or (ii) any acquisition
by a Person
pursuant
to
a
transaction
that complies with clauses (i), (ii), and (iii)
of subsection
(c) of this definition;
(b)
individuals
who, as of the Grant Date,
constitute the Board (the
“Incumbent
Board”)
cease
for
any
reason
to
constitute
at
least
a
majority
of
the Board;
provided,
however,
that
any
individual
becoming
a director
subsequent
to the
Grant Date
whose
election, or nomination
for election by the Company’s shareholders, was approved
by
a
vote of at least a majority of the directors
then comprising the Incumbent Board
shall
be
considered
as though such individual were a member of the Incumbent Board; provided,
further,
that there shall be excluded, for this purpose, any such individual
whose
initial
assumption
of office occurs as a result of any actual or threatened election
contest
with
respect to the election or removal
of directors or other actual or threatened solicitation
of
proxies or consents
by or on behalf
of a Person other than the Board;
(c)
the
Company
shall
consummate
a
reorganization,
merger,
statutory
share
exchange,
consolidation,
or
similar
transaction
involving
the
Company
or
any
of
its
subsidiaries
or
sale
or
other
disposition
of
all
or
substantially
all
of
the
assets
of
the
Company,
or the acquisition of assets or securities of another entity by the
Company
or
any of
its subsidiaries (a “Business
Combination”), in each case, unless, following
such
Business Combination,
(i) 50% or more of the then outstanding shares of common
stock
of
the
corporation
,
or
common
equity
securities
of
an entity
other
than
a corporation,
resulting
from
such
Business
Combination
and
the combined
voting power
of
the then
outstanding
Voting
Stock
of
such
corporation
or
other
entity
are
beneficially
owned,
directly
or
indirectly,
by all
or substantially
all of
the Persons
who
were the
Beneficial
Owners
of
the
outstanding
Common
Stock
immediately
prior
to
such
Business
Combination
in substantially the same proportions as their ownership, immediately prior
to
such
Business
Combination,
of
the
outstanding
Common
Stock,
(ii) no
Person
(excluding any
Exempt Person or any Person beneficially owning, immediately
prior
to
such Business
Combination, directly or indirectly,
20% or more of
the
Common
Stock
then outstanding
or 20% or more of the combined voting power of the
Voting
Stock
of
the Company
then outstanding) beneficially owns, directly or indirectly,
20% or more
of
the
then
outstanding
shares
of
common
stock
of
the
corporation,
or
common
equity
securities of
an entity other than a corporation,
resulting from such Business Combination
or the combined
voting power of the then outstanding Voting
Stock of such corporation
or other entity,
and (iii) at least a majority of the members
of the board of directors of the
corporation,
or
the
body
which
is
most
analogous
to
the
board
of
directors
of
a
corpora
tion
if
not
a
corporation,
resulting
from
such
Business
Combination
were
Exhibit 10.
3
10
members
of the Incumbent Board
at the time of the initial agreement or initial action
by
the Board providing
for such Business Combination; or
(d)
the
shareholders
of
the
Company
shall
approve
a
complete
liquidation
or
dissolution
of the Company unless such liquidation or dissolution is approved as part of a
transaction
that complies with clauses (i), (ii), and (iii)
of subsection
(c) of this definition.
“Common Stock”
shall have
the meaning set forth in the
Plan.
“Company”
shall have the
meaning set forth in the
Plan.
“Exchange Act” shall
mean the
Securities Exchange
Act of 1934, as
amended.
“Exempt Person” shall
mean any
of the Company, any entity
controlled by the
Company,
any employee
benefit plan (or related
trust) sponsored
or maintained by
the Company
or any entity
controlled by the
Company, and any Person
organized, appointed, or established
by the Company
for or
pursuant to the
terms of any
such employee benefit
plan.
“Exempt Rights”
shall mean
any rights to purchase
shares of Common
Stock or other
Voting
Stock of the Company
if at the
time of the issuance
thereof such
rights are not
separable
from such
Common Stock or other
Voting
Stock (
i.e.
, are
not transferable otherwise
than in connection
with a
transfer of the underlying Common
Stock or other Voting Stock), except
upon the occurrence
of a
contingency, whether such
rights exist
as of the Grant Date
or are thereafter issued
by the Company
as a
dividend on shares
of Common Stock or
other Voting Securities or otherwise.
“Person” shall
mean any individual, firm, corporation, partnership,
association, trust,
unincorporated organization, or other
entity.
“Voting Stock” shall mean, (1) with respect
to a corporation, all securities
of such
corporation of any class
or series that are
entitled to vote
generally in the
election of, or to appoint
by
contract, directors of such
corporation (excluding any class
or series
that would be
entitled so
to vote by
reason of the
occurrence of any
contingency, so long as such contingency
has not
occurred) and (ii) with
respect to an entity
which is
not a corporation, all securities
of any class
or series that are
entitled to vote
generally in the
election of, or to appoint
by contract, members
of the body which
is most
analogous
to
the board of directors
of a corporation.
d033120dex311
Exhibit 31.1
CERTIFICATION
I, Ryan M. Lance, certify that:
1.
I have reviewed this quarterly report on Form
10-Q
of ConocoPhillips;
2.
Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit
to
state a material fact necessary to make the statements
made, in light of the circumstances under
which
such statements were made, not misleading with
respect to the period covered by this
report;
3.
Based on my knowledge, the financial statements,
and other financial information included in this
report,
fairly present in all material respects the financial
condition, results of operations and cash
flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing
and maintaining disclosure
controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and
have:
(a)
Designed such disclosure controls and procedures,
or caused such disclosure controls
and
procedures to be designed under our supervision,
to ensure that material information relating
to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
(b)
Designed such internal control over financial reporting,
or caused such internal control over
financial reporting to be designed under our supervision,
to provide reasonable assurance regarding
the reliability of financial reporting and the preparation
of financial statements for external
purposes in accordance with generally accepted
accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in
this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of
the end of the period covered by this report based
on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control
over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter
in
the case of an annual report) that has materially
affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of
internal control over financial reporting, to the
registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses
in the design or operation of internal
control
over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that
involves management or other employees who
have a
significant role in the registrant’s internal control over financial reporting.
May 6, 2021
/s/ Ryan M. Lance
Ryan M. Lance
Chairman and
Chief Executive Officer
d033120dex312
Exhibit 31.2
CERTIFICATION
I, William L.
Bullock, Jr.,
certify that:
1.
I have
reviewed this quarterly report on Form 10
-Q
of ConocoPhillips;
2.
Based on my knowledge,
this report does not contain
any untrue
statement of a material fact
or omit to
state a material
fact
necessary to make the statements made,
in
light of the circumstances
under which
such statements
were
made,
not misleading with respect to the period covered by
this report;
3.
Based on my knowledge,
the financial statements,
and other financial information
included in
this report,
fairly present in all material
respects the financial condition,
results of operations
and cash
flows of the
registrant as of, and
for, the periods presented in this report;
4.
The registrant’s
other certifying
officer and
I are responsible for establishing and
maintaining disclosure
controls and
procedures (as defined in Exchange Act Rules
13a
-15(e) and 15d
-15(e))
and internal control
over financial
reporting (as defined in Exchange
Act Rules 13a
-15(f) and 15d
-15(f))
for the registrant and
have:
(a)
Designed such disclosure
controls and procedures,
or caused
such disclosure controls and
procedures to be designed
under our supervision, to ensure
that
material information
relating to
the
registrant, including its
consolidated
subsidiaries, is made known to us by others within those
entities, particularly during
the period in which this report
is being prepared;
(b)
Designed such internal
control over financial
reporting, or caused such internal control over
financial
reporting to be designed under our
supervision, to provide reasonable
assurance regarding
the reliability of financial
reporting and the preparation
of financial statements for external
purposes in accordance
with
generally accepted
accounting principles;
(c)
Evaluated
the effectiveness of the registrant’s disclosure controls
and procedures
and presented
in
this report our conclusions
about
the effectiveness of the disclosure controls and
procedures, as of
the end of the period covered
by this report based
on such evaluation;
and
(d)
Disclosed in this report any
change in the registrant’s
internal control over
financial
reporting that
occurred during the registrant’s
most recent
fiscal quarter (the registrant’s
fourth fiscal quarter
in
the case of an annual
report) that has
materially affected,
or is reasonably likely to materially
affect,
the registrant’s internal control over financial
reporting; and
5.
The registrant’s
other certifying
officer and
I have disclosed, based on our most
recent evaluation
of
internal control over financial
reporting, to the registrant’s
auditors and
the audit committee
of the
registrant’s board
of directors (or persons performing the
equivalent
functions):
(a)
All significant deficiencies
and material weaknesses
in
the design or operation
of internal control
over financial
reporting which are reasonably
likely to adversely affect
the registrant’s ability to
record, process, summarize
and report financial information;
and
(b)
Any fraud,
whether or not material, that
involves management
or other employees who have a
significant role in the registrant’s
internal control over financial
reporting.
May 6, 2021
/s/ William
L. Bullock
,
Jr.
William L. Bullock
,
Jr.
Executive Vice
President and
Chief Financial Officer
d033120dex32
Exhibit 32
CERTIFICATIONS
PURSUANT TO 18 U.S.C.
SECTION 1350
In connection
with the Quarterly Report of ConocoPhillips
(the Company)
on Form 10-Q for the period ended
March 31, 2021, as filed
with the U.S. Securities and
Exchange
Commission on the date hereof
(the Report),
each of the undersigned hereby
certifies, pursuant
to 18 U.S.C. Section 1350, as adopted
pursuant to Section
906 of the Sarbanes
-Oxley
Act of 2002, that
to their knowledge:
(1)
The Report fully complies with
the requirements of Sections
13(a) or 15(d) of the
Securities
Exchange
Act of 1934; and
(2)
The information
contained in the
Report fairly presents, in
all material respects, the
financial
condition and
results of operations
of the Company.
May 6, 2021
/s/ Ryan M. Lance
Ryan
M. Lance
Chairman
and
Chief Executive Officer
/s/ William
L. Bullock
,
Jr.
William L. Bullock
,
Jr.
Executive Vice
President and
Chief Financial Officer