e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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[X]
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE |
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SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended
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September 30, 2009 |
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or
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[ ] |
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE |
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SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from
to
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Commission file number: |
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001-32395 |
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ConocoPhillips
(Exact name of registrant as specified in its charter)
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Delaware
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01-0562944 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
600 North Dairy Ashford, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
281-293-1000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
[x] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
[x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer [x] |
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Accelerated filer [ ] |
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Non-accelerated filer [ ] |
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Smaller reporting company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes [ ] No
[x]
ConocoPhillips had 1,483,694,303 shares of common stock, $.01 par value, outstanding at September
30, 2009.
CONOCOPHILLIPS
TABLE OF CONTENTS
Item 1. FINANCIAL STATEMENTS
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Consolidated Income Statement
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ConocoPhillips |
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Millions of Dollars |
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Three Months Ended |
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Nine Months Ended |
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September 30 |
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September 30 |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenues and Other Income |
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Sales and other operating revenues* |
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$ |
40,173 |
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70,044 |
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106,362 |
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196,338 |
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Equity in earnings of affiliates |
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1,015 |
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1,214 |
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2,506 |
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4,385 |
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Other income |
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117 |
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115 |
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347 |
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555 |
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Total Revenues and Other Income |
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41,305 |
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71,373 |
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109,215 |
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201,278 |
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Costs and Expenses |
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Purchased crude oil, natural gas and products |
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28,008 |
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49,608 |
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72,376 |
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138,642 |
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Production and operating expenses |
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2,534 |
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3,059 |
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7,652 |
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8,861 |
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Selling, general and administrative expenses |
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427 |
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513 |
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1,378 |
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1,668 |
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Exploration expenses |
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386 |
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267 |
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854 |
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864 |
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Depreciation, depletion and amortization |
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2,327 |
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2,361 |
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6,904 |
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6,748 |
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Impairments |
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Expropriated assets |
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- |
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- |
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51 |
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- |
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Other |
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56 |
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57 |
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59 |
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82 |
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Taxes other than income taxes* |
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4,205 |
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5,619 |
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11,384 |
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16,570 |
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Accretion on discounted liabilities |
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96 |
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114 |
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308 |
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314 |
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Interest and debt expense |
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336 |
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239 |
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914 |
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656 |
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Foreign currency transaction (gains) losses |
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(17 |
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54 |
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(28 |
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11 |
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Total Costs and Expenses |
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38,358 |
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61,891 |
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101,852 |
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174,416 |
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Income before income taxes |
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2,947 |
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9,482 |
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7,363 |
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26,862 |
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Provision for income taxes |
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1,427 |
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4,279 |
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3,673 |
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12,045 |
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Net income |
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1,520 |
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5,203 |
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3,690 |
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14,817 |
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Less: net income attributable to noncontrolling interests |
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(17 |
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(15 |
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(49 |
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(51 |
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Net Income Attributable to ConocoPhillips |
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$ |
1,503 |
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5,188 |
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3,641 |
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14,766 |
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Net Income Attributable to ConocoPhillips Per Share of
Common Stock (dollars)** |
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Basic |
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$ |
1.00 |
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3.43 |
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2.44 |
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9.61 |
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Diluted |
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1.00 |
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3.39 |
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2.43 |
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9.50 |
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Dividends Paid Per Share of Common Stock (dollars) |
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$ |
.47 |
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.47 |
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1.41 |
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1.41 |
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Average Common Shares Outstanding (in thousands) |
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Basic |
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1,488,352 |
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1,510,897 |
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1,486,922 |
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1,535,932 |
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Diluted |
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1,498,204 |
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1,528,187 |
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1,496,391 |
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1,554,952 |
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* Includes excise taxes on petroleum products sales: |
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$ |
3,538 |
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4,022 |
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9,914 |
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11,970 |
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** For the purpose of the earnings per share calculation only, 2009 net income attributable to
ConocoPhillips has been reduced by $12 million for the excess of the amount paid for the
redemption of a noncontrolling interest over its carrying value, which was charged directly to
retained earnings.
See Notes to Consolidated Financial Statements.
1
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Consolidated Balance Sheet
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ConocoPhillips |
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Millions of Dollars |
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September 30 |
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December 31 |
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2009 |
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2008 |
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Assets |
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Cash and cash equivalents |
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$ |
641 |
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755 |
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Accounts and notes receivable (net of allowance of $75 million in 2009
and $61 million in 2008) |
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10,907 |
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10,892 |
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Accounts and notes receivablerelated parties |
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1,623 |
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1,103 |
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Inventories |
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6,268 |
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5,095 |
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Prepaid expenses and other current assets |
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2,814 |
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2,998 |
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Total Current Assets |
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22,253 |
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20,843 |
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Investments and long-term receivables |
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35,664 |
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30,926 |
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Loans and advancesrelated parties |
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2,186 |
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1,973 |
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Net properties, plants and equipment |
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87,136 |
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83,947 |
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Goodwill |
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3,715 |
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3,778 |
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Intangibles |
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831 |
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846 |
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Other assets |
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642 |
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552 |
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Total Assets |
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$ |
152,427 |
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142,865 |
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Liabilities |
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Accounts payable |
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$ |
13,296 |
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12,852 |
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Accounts payablerelated parties |
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1,566 |
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1,138 |
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Short-term debt |
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2,796 |
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370 |
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Accrued income and other taxes |
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3,844 |
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4,273 |
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Employee benefit obligations |
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741 |
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939 |
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Other accruals |
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2,413 |
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2,208 |
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Total Current Liabilities |
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24,656 |
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21,780 |
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Long-term debt |
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27,662 |
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27,085 |
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Asset retirement obligations and accrued environmental costs |
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7,836 |
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7,163 |
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Joint venture acquisition obligationrelated party |
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5,177 |
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5,669 |
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Deferred income taxes |
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18,294 |
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18,167 |
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Employee benefit obligations |
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3,662 |
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4,127 |
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Other liabilities and deferred credits |
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3,043 |
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2,609 |
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Total Liabilities |
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90,330 |
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86,600 |
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Equity |
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Common stock (2,500,000,000 shares authorized at $.01 par value) |
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Issued (20091,731,876,757 shares; 20081,729,264,859 shares) |
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Par value |
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17 |
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17 |
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Capital in excess of par |
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43,583 |
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43,396 |
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Grantor trusts (at cost: 200939,835,639 shares; 200840,739,129 shares) |
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(689 |
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(702 |
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Treasury stock (at cost: 2009 and 2008208,346,815 shares) |
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(16,211 |
) |
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(16,211 |
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Accumulated other comprehensive income (loss) |
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2,712 |
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(1,875 |
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Unearned employee compensation |
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(83 |
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(102 |
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Retained earnings |
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32,181 |
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30,642 |
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Total Common Stockholders Equity |
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61,510 |
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55,165 |
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Noncontrolling interests |
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587 |
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1,100 |
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Total Equity |
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62,097 |
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56,265 |
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Total Liabilities and Equity |
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$ |
152,427 |
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142,865 |
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See Notes to Consolidated Financial Statements.
2
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Consolidated Statement of Cash Flows
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ConocoPhillips |
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Millions of Dollars |
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Nine Months Ended |
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September 30 |
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2009 |
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2008 |
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Cash Flows From Operating Activities |
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Net income |
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$ |
3,690 |
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14,817 |
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Adjustments to reconcile net income to net cash provided by operating activities |
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Depreciation, depletion and amortization |
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6,904 |
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6,748 |
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Impairments |
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|
110 |
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82 |
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Dry hole costs and leasehold impairments |
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471 |
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399 |
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Accretion on discounted liabilities |
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308 |
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314 |
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Deferred taxes |
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(864 |
) |
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59 |
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Undistributed equity earnings |
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(1,818 |
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(2,530 |
) |
Gain on asset dispositions |
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(88 |
) |
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(346 |
) |
Other |
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(151 |
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(185 |
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Working capital adjustments |
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Decrease (increase) in accounts and notes receivable |
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(94 |
) |
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(243 |
) |
Decrease (increase) in inventories |
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(1,026 |
) |
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(2,709 |
) |
Decrease (increase) in prepaid expenses and other current assets |
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(286 |
) |
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(689 |
) |
Increase (decrease) in accounts payable |
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910 |
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1,633 |
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Increase (decrease) in taxes and other accruals |
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(681 |
) |
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2,186 |
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Net Cash Provided by Operating Activities |
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7,385 |
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19,536 |
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Cash Flows From Investing Activities |
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Capital expenditures and investments |
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(8,176 |
) |
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(10,535 |
) |
Proceeds from asset dispositions |
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938 |
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|
729 |
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Long-term advances/loansrelated parties |
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(303 |
) |
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(181 |
) |
Collection of advances/loansrelated parties |
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|
62 |
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|
15 |
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Other |
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|
50 |
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(186 |
) |
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Net Cash Used in Investing Activities |
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(7,429 |
) |
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(10,158 |
) |
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Cash Flows From Financing Activities |
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Issuance of debt |
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|
9,051 |
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|
2,264 |
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Repayment of debt |
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(6,027 |
) |
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(1,857 |
) |
Issuance of company common stock |
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(11 |
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182 |
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Repurchase of company common stock |
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|
- |
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(7,500 |
) |
Dividends paid on company common stock |
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|
(2,090 |
) |
|
|
(2,159 |
) |
Other |
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|
(1,091 |
) |
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|
(426 |
) |
|
Net Cash Used in Financing Activities |
|
|
(168 |
) |
|
|
(9,496 |
) |
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|
|
|
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|
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Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
98 |
|
|
|
(222 |
) |
|
|
|
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Net Change in Cash and Cash Equivalents |
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|
(114 |
) |
|
|
(340 |
) |
Cash and cash equivalents at beginning of period |
|
|
755 |
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|
|
1,456 |
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Cash and Cash Equivalents at End of Period |
|
$ |
641 |
|
|
|
1,116 |
|
|
See Notes to Consolidated Financial Statements.
3
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Notes to Consolidated Financial Statements
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ConocoPhillips |
Note 1Interim Financial Information
The interim-period financial information presented in the financial statements included in this
report is unaudited and includes all known accruals and adjustments, in the opinion of management,
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. To enhance your understanding of these interim financial statements, see the
consolidated financial statements and notes included in our 2008 Annual Report on Form 10-K.
Note 2Changes in Accounting Principles
Codification
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2009-01 in June 2009. This Update, also issued as FASB Statement of Financial Accounting Standards
(SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, is effective for financial statements issued after September 15, 2009.
Update 2009-01 requires that the FASBs Accounting Standards Codification (ASC) become the sole
source of authoritative U.S. generally accepted accounting principles recognized by the FASB for
nongovernmental entities. We adopted this Update effective July 1, 2009.
Subsequent Events
Effective April 1, 2009, we adopted FASB SFAS No. 165, Subsequent Events. This Statement was
codified into FASB ASC Topic 855, Subsequent Events. Topic 855 establishes the accounting for,
and disclosure of, material events that occur after the balance sheet date, but before the
financial statements are issued. In general, these events will be recognized if the condition
existed at the date of the balance sheet, but will not be recognized if the condition did not exist
at the balance sheet date. Disclosure is required for nonrecognized events if required to keep the
financial statements from being misleading. The guidance in this Topic is very similar to previous
guidance provided in auditing literature and, therefore, should not result in significant changes
in practice. Subsequent events have been evaluated through November 3, 2009, the date our interim
financial statements were issued with the filing of our third-quarter 2009 Quarterly Report on Form
10-Q.
Business Combinations
In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations (SFAS No.
141(R)), which was subsequently amended by FASB Staff Position (FSP) FAS 141(R)-1 in April 2009.
This Statement was codified into FASB ASC Topic 805, Business Combinations. Topic 805 applies
prospectively to all transactions in which an entity obtains control of one or more other
businesses on or after January 1, 2009. In general, Topic 805 requires the acquiring entity in a
business combination to recognize the fair value of all assets acquired and liabilities assumed in
the transaction; establishes the acquisition date as the fair value measurement point; and modifies
disclosure requirements. It also modifies the accounting treatment for transaction costs,
in-process research and development, restructuring costs, changes in deferred tax asset valuation
allowances as a result of a business combination, and changes in income tax uncertainties after the
acquisition date. Additionally, effective January 1, 2009, accounting for changes in valuation
allowances for acquired deferred tax assets and the resolution of uncertain tax positions for prior
business combinations impact tax expense instead of goodwill.
Noncontrolling Interests
Effective January 1, 2009, we implemented SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. This Statement was codified into FASB ASC Topic
810, Consolidation. Topic 810 requires noncontrolling interests, previously called minority
interests, to be presented as a separate item in the equity section of the consolidated balance
sheet. It also requires the amount
4
of consolidated net income attributable to noncontrolling interests to be clearly presented on the
face of the consolidated income statement. Additionally, Topic 810 clarifies that changes in a
parents ownership interest in a subsidiary that do not result in deconsolidation are equity
transactions, and that deconsolidation of a subsidiary requires gain or loss recognition in net
income based on the fair value on the deconsolidation date. Topic 810 was applied prospectively
with the exception of presentation and disclosure requirements, which were applied retrospectively
for all periods presented, and did not significantly change the presentation of our consolidated
financial statements. Equity attributable to noncontrolling interests decreased from
$1,100 million at December 31, 2008, to $587 million at September 30, 2009. The decrease primarily
reflects the redemption of the noncontrolling interest in Ashford Energy Capital S.A. during the
third quarter of 2009, resulting in Ashford now being wholly owned by us. See Note 3Variable
Interest Entities for additional information on this redemption.
Derivatives
Effective January 1, 2009, we implemented SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activitiesan amendment of FASB No. 133. This Statement was codified into FASB ASC
Topic 815, Derivatives and Hedging. The amendments to Topic 815 expanded disclosure requirements
to provide greater transparency for derivative instruments. Disclosures previously required only
for the annual financial statements are now required in interim financial statements. In addition,
we now must include an indication of the volume of derivative activity by category (e.g., interest
rate, commodity and foreign currency); derivative gains and losses, by category, for the periods
presented in the financial statements; and expanded disclosures about credit-risk-related
contingent features. See Note 13Financial Instruments and Derivative Contracts for additional
information.
Fair Value Measurement
Following the allowed one-year deferral, effective January 1, 2009, we implemented Topic 820, Fair
Value Measurements and Disclosures for nonfinancial assets and nonfinancial liabilities measured
at fair value on a nonrecurring basis. The implementation covers assets and liabilities measured
at fair value in a business combination; impaired properties, plants and equipment, intangible
assets and goodwill; initial recognition of asset retirement obligations; and restructuring costs
for which we use fair value. In the first nine months of 2009, we did not have a business
combination, impairment of goodwill or intangible asset, or restructuring accrual requiring the use
of fair value. Because there usually is a lack of quoted market prices for long-lived assets, the
fair value of properties, plants and equipment is determined based on the present values of
expected future cash flows using inputs reflecting our estimate of a number of variables used by
industry participants when valuing similar assets, or based on a multiple of operating cash flow
validated with historical market transactions of similar assets where possible. Fair value used in
the initial recognition of asset retirement obligations is determined based on the present value of
expected future dismantlement costs incorporating our estimate of inputs used by industry
participants when valuing similar liabilities. There was no impact to our consolidated financial
statements from the implementation of this Topic for nonfinancial assets and liabilities, and we do
not expect any significant impact to our future consolidated financial statements, other than
additional disclosures.
Equity Method Accounting
In November 2008, the FASB reached a consensus on Emerging Issues Task Force (EITF) Issue No. 08-6,
Equity Method Investment Accounting Considerations (EITF 08-6). EITF 08-6 was issued to clarify
how the application of equity method accounting is affected by SFAS No. 141(R) and SFAS No. 160.
EITF 08-6 was codified into FASB ASC Topic 323, InvestmentsEquity Method and Joint Ventures.
Topic 323 clarifies that an entity shall continue to use the cost accumulation model for its equity
method investments. It also confirms past accounting practices related to the treatment of
contingent consideration and the use of the impairment model for equity investments. Additionally,
it requires an equity method investor to account for a share issuance by an investee as if the
investor had sold a proportionate share of the investment. This Topic was effective January 1,
2009, and applies prospectively.
5
Note 3Variable Interest Entities (VIEs)
We hold significant variable interests in VIEs that have not been consolidated because we are not
considered the primary beneficiary. Information on these VIEs follows. See Note 20New Accounting
Standards for information affecting the accounting for VIEs effective January 1, 2010.
We own a 24 percent interest in West2East Pipeline LLC, a company holding a 100 percent interest in
Rockies Express Pipeline LLC, operated by Kinder Morgan Energy Partners, L.P. Rockies Express is
constructing a natural gas pipeline from Colorado to Ohio. West2East is a VIE because a third
party has a 49 percent voting interest through the end of the construction of the pipeline, but has
no ownership interest. This third party was originally involved in the project, but exited and
retained its voting interest to ensure project completion. We have no voting interest during the
construction phase, but once the pipeline has been completed, our ownership will increase to 25
percent with a voting interest of 25 percent. Additionally, we have contracted for approximately
22 percent of the pipeline capacity for a 10-year period once the pipeline becomes operational.
Construction commenced on the pipeline in 2006. The operator anticipates construction completion
in late 2009 and estimates total construction costs between $6.7 billion and $6.8 billion. Our
portion is being funded by a combination of equity contributions and a guarantee of debt incurred
by Rockies Express. Given our 24 percent ownership and the fact expected returns are shared among
the equity holders in proportion to ownership, we are not the primary beneficiary. We use the
equity method of accounting for our investment. At September 30, 2009, the book value of our
investment in West2East was $739 million.
We have a 30 percent ownership interest with a 50 percent governance interest in the OOO
Naryanmarneftegaz (NMNG) joint venture to develop resources in the Timan-Pechora province of
Russia. The NMNG joint venture is a VIE because we and a related party, OAO LUKOIL, have
disproportionate interests. When related parties are involved in a VIE, reasonable judgment should
take into account the relevant facts and circumstances for the determination of the primary
beneficiary. The activities of NMNG are more closely aligned with LUKOIL because they share Russia
as a home country, and LUKOIL conducts extensive exploration activities in the same province.
Additionally, there are no financial guarantees given by LUKOIL or us, and LUKOIL owns 70 percent,
versus our 30 percent direct interest. As a result, we have determined we are not the primary
beneficiary of NMNG, and we use the equity method of accounting for this investment. The funding of
NMNG has been provided with equity contributions, primarily for the development of the Yuzhno
Khylchuyu (YK) Field. Initial production from YK was achieved in June 2008. At September 30,
2009, the book value of our investment in the venture was $2,013 million.
Production from the NMNG joint venture fields is transported via pipeline to LUKOILs terminal at
Varandey Bay on the Barents Sea and then shipped via tanker to international markets. LUKOIL
completed an expansion of the terminals gross oil-throughput capacity from 30,000 barrels per day
to 240,000 barrels per day, and we participated in the design and financing of the expansion. The
terminal entity, Varandey Terminal Company, is a VIE because we and LUKOIL have disproportionate
interests. We had an obligation to fund, through loans, 30 percent of the terminals expansion
costs, but have no governance or direct ownership interest in the terminal. Similar to NMNG, we
determined we are not the primary beneficiary for Varandey because of LUKOILs ownership, the
activities are in LUKOILs home country, and LUKOIL is the operator of Varandey. We account for
our loan to Varandey as a financial asset. Terminal expansion was completed in June 2008.
Principal repayments began in April 2009. The loan balance outstanding as of September 30, 2009,
at current exchange rates, was $291 million.
We have an agreement with Freeport LNG Development, L.P. (Freeport LNG) to participate in a
liquefied natural gas (LNG) receiving terminal in Quintana, Texas. We have no ownership in
Freeport LNG; however, we own a 50 percent interest in Freeport LNG GP, Inc. (Freeport GP), which
serves as the general partner managing the venture. We entered into a credit agreement with
Freeport LNG, whereby we agreed to provide loan financing for the construction of the terminal. We
also entered into a long-term agreement with Freeport LNG to use 0.9 billion cubic feet per day of
regasification capacity. The terminal became operational in June 2008, and we began making
payments under the terminal use agreement. Freeport LNG began making loan repayments in September
2008, and the loan balance outstanding as of September 30, 2009, was $723 million. Freeport LNG is
a VIE because Freeport GP holds no equity in Freeport LNG, and the limited partners of
6
Freeport LNG do not have any substantive decision making ability. We performed an analysis of the
expected losses and determined we are not the primary beneficiary. This expected loss analysis
took into account that the credit support arrangement requires Freeport LNG to maintain sufficient
commercial insurance to mitigate any loan losses. The loan to Freeport LNG is accounted for as a
financial asset, and our investment in Freeport GP is accounted for as an equity investment.
In the third quarter of 2009, Ashford Energy Capital S.A. redeemed for $500 million, plus accrued
dividends, the investment in Ashford held by Cold Spring Finance S.a.r.l. Accordingly, we wholly
own Ashford, and it is no longer a VIE. The difference between the redemption amount and the
carrying value of the investment was $12 million. The redemption amount was included as a cash
outflow in the Other line in the financing activities section of our consolidated statement of
cash flows.
Note 4Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
Crude oil and petroleum products |
|
$ |
5,270 |
|
|
|
4,232 |
|
Materials, supplies and other |
|
|
998 |
|
|
|
863 |
|
|
|
|
$ |
6,268 |
|
|
|
5,095 |
|
|
Inventories valued on the last-in, first-out (LIFO) basis totaled $5,049 million and $3,939 million
at September 30, 2009, and December 31, 2008, respectively. The remaining inventories are valued
under various methods, including first-in, first-out and weighted average. The excess of current
replacement cost over LIFO cost of inventories amounted to $4,898 million and $1,959 million at
September 30, 2009, and December 31, 2008, respectively.
Note 5Assets Held for Sale
In June 2009, we signed an agreement to sell our remaining interest in the Keystone Pipeline to
TransCanada Corporation. The transaction closed in the third quarter of this year.
Note 6Investments, Loans and Long-Term Receivables
LUKOIL
Our ownership interest in LUKOIL was 20 percent at September 30, 2009, based on 851 million shares
authorized and issued. For financial reporting under U.S. generally accepted accounting principles
(GAAP), treasury shares held by LUKOIL are not considered outstanding for determining our equity
method ownership interest in LUKOIL. Our ownership interest, based on estimated shares
outstanding, was 20.09 percent at September 30, 2009.
At September 30, 2009, the book value of our ordinary share investment in LUKOIL was $6,466
million. Our 20 percent share of the net assets of LUKOIL was estimated to be $10,971 million. A
majority of this negative basis difference of $4,505 million is being amortized on a straight-line
basis over a 22-year useful life as an increase to equity earnings. On September 30, 2009, the
closing price of LUKOIL shares on the London Stock Exchange was $54.20 per share, making the total
market value of our LUKOIL investment $9,220 million.
7
Because LUKOILs accounting cycle close and preparation of U.S. GAAP financial statements occur
subsequent to our reporting deadline, our equity earnings are estimated based on current market
indicators, publicly available LUKOIL information and other objective data. Once the difference
between actual and estimated results is known, an adjustment is recorded. Net income attributable
to ConocoPhillips for the third quarter of 2009 included a $33 million positive alignment of our
second-quarter estimate of LUKOILs results to LUKOILs reported results.
Loans to Related Parties
As part of our normal ongoing business operations and consistent with industry practice, we invest
and enter into numerous agreements with other parties to pursue business opportunities, which share
costs and apportion risks among the parties as governed by the agreements. Included in such
activity are loans made to certain affiliated companies. Significant loans to affiliated companies
at September 30, 2009, included the following:
|
|
|
$723 million in loan financing to Freeport LNG Development, L.P. for the construction of
an LNG receiving terminal, which became operational in June 2008. Freeport began making
repayments in September 2008. |
|
|
|
|
$291 million in loan financing at September 2009 exchange rates to Varandey Terminal
Company associated with the costs of a terminal expansion. The terminal expansion was
completed in June 2008. Principal repayments began in April 2009. |
|
|
|
|
$979 million of project financing and an additional $85 million of accrued interest to
Qatargas 3, an integrated project to produce and liquefy natural gas from Qatars North
Field. Our maximum exposure to this financing structure is $1.2 billion. |
|
|
|
|
$174 million of loan financing to WRB Refining LLC to assist it in meeting its operating
and capital spending requirements. |
The long-term portion of these loans are included in the Loans and advancesrelated parties line
on the consolidated balance sheet, while the short-term portion is in Accounts and notes
receivablerelated parties.
Other Investments
We have investments remeasured at fair value on a recurring basis to support certain nonqualified
deferred compensation plans. The fair value of these assets at September 30, 2009, was
$333 million, and substantially the entire value is categorized in Level 1 of the fair value
hierarchy.
As disclosed in our 2008 Form 10-K, late in 2008 Petroleos de Venezuela S.A. (PDVSA) notified us
that January 2009 crude oil supplies nominated for the Sweeny Refinery for processing through
facilities owned by the Merey Sweeny Limited Partnership (MSLP) would not be delivered due to
instructions from the Venezuelan government. In subsequent months of 2009, PDVSA failed to supply
crude oil and/or delivered crude oil not meeting contractual grade specifications. PDVSA also
failed to pay contractually required amounts in connection with their non-delivery or off-spec
delivery. As a result, and in accordance with our rights under the contractual agreements
governing the ownership of MSLP, on August 28, 2009, we exercised our right to acquire PDVSAs 50
percent ownership interest in MSLP. Due to the expected legal challenges to this action by PDVSA,
we will continue to use the equity method of accounting for our investment in MSLP until any legal
challenges are resolved.
8
Note 7Properties, Plants and Equipment
Our investment in properties, plants and equipment (PP&E), with accumulated depreciation, depletion
and amortization (Accum. DD&A), was:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Gross |
|
|
Accum. |
|
|
Net |
|
|
Gross |
|
|
Accum. |
|
|
Net |
|
|
|
PP&E |
|
|
DD&A |
|
|
PP&E |
|
|
PP&E |
|
|
DD&A |
|
|
PP&E |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and Production
(E&P) |
|
$ |
112,407 |
|
|
|
43,184 |
|
|
|
69,223 |
|
|
|
102,591 |
|
|
|
35,375 |
|
|
|
67,216 |
|
Midstream |
|
|
123 |
|
|
|
73 |
|
|
|
50 |
|
|
|
120 |
|
|
|
70 |
|
|
|
50 |
|
Refining and Marketing (R&M) |
|
|
22,890 |
|
|
|
6,662 |
|
|
|
16,228 |
|
|
|
21,116 |
|
|
|
5,962 |
|
|
|
15,154 |
|
LUKOIL Investment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Chemicals |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Emerging Businesses |
|
|
1,172 |
|
|
|
292 |
|
|
|
880 |
|
|
|
1,056 |
|
|
|
293 |
|
|
|
763 |
|
Corporate and Other |
|
|
1,603 |
|
|
|
848 |
|
|
|
755 |
|
|
|
1,561 |
|
|
|
797 |
|
|
|
764 |
|
|
|
|
$ |
138,195 |
|
|
|
51,059 |
|
|
|
87,136 |
|
|
|
126,444 |
|
|
|
42,497 |
|
|
|
83,947 |
|
|
Suspended Wells
The capitalized cost of suspended wells at September 30, 2009, was $858 million, an increase of
$198 million from $660 million at year-end 2008. For the category of exploratory well costs
capitalized for a period greater than one year as of December 31, 2008, $29 million was charged to
dry hole expense during the first nine months of 2009.
Note 8Impairments
Expropriated Assets
In April 2008, Burlington Resources, Inc., a wholly owned subsidiary of ConocoPhillips, initiated
arbitration before the World Banks International Centre for Settlement of Investment Disputes
(ICSID) against The Republic of Ecuador and PetroEcuador as a result of their newly-enacted
Windfall Profits Tax Law and government-mandated renegotiation of our production sharing contracts.
Despite a restraining order issued by the ICSID, Ecuador confiscated Burlington and its
co-venturers crude oil production and sold the illegally seized crude oil. As a result, our
assets in Ecuador were effectively expropriated. Accordingly, in the second quarter of 2009, we
recorded a noncash charge of $51 million before- and after-tax related to the full impairment of
our exploration and production investments in Ecuador. In the third quarter of 2009, Ecuador took
over operations in Block 7 and 21, formalizing the complete expropriation of our assets.
Other Impairments
In the third quarter of 2009, long-lived assets held for sale in the R&M segment with a carrying
amount of $140 million were written down to their fair value of $92 million, less cost to sell of
$5 million, resulting in a before-tax impairment of $53 million. The fair value is a Level 3
measurement in the fair value hierarchy based on a binding negotiated price with a third party,
adjusted for the fair value of certain liabilities retained, and subject to management
approval.
9
Note 9Debt
In February 2009, we issued $1.5 billion of 4.75% Notes due 2014, $2.25 billion of 5.75% Notes due
2019, and $2.25 billion of 6.50% Notes due 2039. In addition, in May 2009, we issued $1.5 billion
of 4.60% Notes due 2015, $1.0 billion of 6.00% Notes due 2020 and an additional $500 million of
6.50% Notes due 2039. The proceeds from the notes were primarily used to reduce outstanding
commercial paper balances and for general corporate purposes.
During the first nine months of 2009, we used proceeds from the issuance of commercial paper to
redeem $284 million of 6.375% Notes and $950 million of Floating Rate Notes upon their maturity.
At September 30, 2009, we had two revolving credit facilities totaling $7.85 billion, consisting of
a $7.35 billion facility, expiring in September 2012, and a $500 million facility expiring in July
2012. The facilities may be used as direct bank borrowings, as support for the ConocoPhillips
$6.35 billion commercial paper program, as support for the ConocoPhillips Qatar Funding Ltd. $1.5
billion commercial paper program, or as support for issuances of letters of credit totaling up to
$750 million. At both September 30, 2009, and December 31, 2008, we had no outstanding borrowings
under the credit facilities, but $40 million in letters of credit had been issued. Under both
ConocoPhillips commercial paper programs, $2,342 million of commercial paper was outstanding at
September 30, 2009, compared with $6,933 million at December 31, 2008.
Since we had $2,342 million of commercial paper outstanding and had issued $40 million of letters
of credit, we had access to $5.5 billion in borrowing capacity under our revolving credit
facilities at September 30, 2009.
At September 30, 2009, we classified $1,037 million of short-term debt as long-term debt, based on
our ability and intent to refinance the obligation on a long-term basis under our revolving credit
facility.
Note 10Joint Venture Acquisition Obligation
We are obligated to contribute $7.5 billion, plus interest, over a 10-year period, beginning in
2007, to FCCL Partnership. Quarterly principal and interest payments of $237 million began in the
second quarter of 2007 and will continue until the balance is paid. Of the principal obligation
amount, approximately $651 million was short-term and was included in the Accounts payablerelated
parties line on our September 30, 2009, consolidated balance sheet. The principal portion of
these payments, which totaled $466 million in the first nine months of 2009, are included in the
Other line in the financing activities section of our consolidated statement of cash flows.
Interest accrues at a fixed annual rate of 5.3 percent on the unpaid principal balance. Fifty
percent of the quarterly interest payment is reflected as a capital contribution and is included in
the Capital expenditures and investments line on our consolidated statement of cash flows.
Note 11Guarantees
At September 30, 2009, we were liable for certain contingent obligations under various contractual
arrangements as described below. We recognize a liability, at inception, for the fair value of our
obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of
the liability is noted below, we have not recognized a liability either because the guarantees were
issued prior to December 31, 2002, or because the fair value of the obligation is immaterial. In
addition, unless otherwise stated we are not currently performing with any significance under the
guarantee and expect future performance to be either immaterial or have only a remote chance of
occurrence.
Construction Completion Guarantees
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|
|
In December 2005, we issued a construction completion guarantee for 30 percent of the
$4 billion in loan facilities of Qatargas 3, which are being used to finance the construction
of an LNG train in Qatar. Of the $4 billion in loan facilities, we committed to provide
$1.2 billion. The maximum potential |
10
|
|
amount of future payments to third-party lenders under the guarantee is estimated to be $850
million, which could become payable if the full debt financing is utilized and completion of
the Qatargas 3 project is not achieved. The project financing will be nonrecourse to
ConocoPhillips upon certified completion, expected in 2011. At September 30, 2009, the
carrying value of the guarantee to third-party lenders was $11 million. |
Guarantees of Joint Venture Debt
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|
|
In June 2006, we issued a guarantee for 24 percent of $2 billion in credit facilities of
Rockies Express Pipeline LLC, operated by Kinder Morgan Energy Partners, L.P. At September
30, 2009, Rockies Express had $1,871 million outstanding under the credit facilities, with
our 24 percent guarantee equaling $449 million. The maximum potential amount of future
payments to third-party lenders under the guarantee is estimated to be $480 million, which
could become payable if the credit facilities are fully utilized and Rockies Express fails to
meet its obligations under the credit agreement. The operator anticipates construction
completion in late 2009. Refinancing of the $2 billion credit facility, which will make the
debt nonrecourse to ConocoPhillips, is expected to begin at that time. At September 30,
2009, the total carrying value of this guarantee to third-party lenders was $11 million. |
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At September 30, 2009, we had guarantees outstanding for our portion of joint venture debt
obligations, which have terms of up to 16 years. The maximum potential amount of future
payments under the guarantees is approximately $80 million. Payment would be required if a
joint venture defaults on its debt obligations. |
Other Guarantees
|
|
|
In conjunction with our purchase of a 50 percent ownership interest in Australia Pacific
LNG (APLNG) from Origin Energy in October 2008, we agreed to participate, if and when
requested, in any parent company guarantees that were outstanding at the time we purchased
our interest in APLNG. These parent company guarantees cover the obligation of APLNG to
deliver natural gas under several sales agreements with remaining terms of eight to 22 years.
Our maximum potential amount of future payments, or cost of volume delivery, under these
guarantees is estimated to be $930 million ($1,940 million in the event of intentional or
reckless breach) based on our 50 percent share of the remaining contracted volumes, which
could 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 partners do not make necessary equity
contributions into APLNG. |
|
|
|
We have other guarantees with maximum future potential payment amounts totaling $520
million, which consist primarily of dealer and jobber loan guarantees to support our
marketing business, guarantees to fund the short-term cash liquidity deficits of certain
joint ventures, a guarantee of minimum charter revenue for two LNG vessels, one small
construction completion guarantee, guarantees relating to the startup of a refining joint
venture, guarantees of the lease payment obligations of a joint venture, and guarantees of
the residual value of leased corporate aircraft. At September 30, 2009, the carrying value
of these guarantees to third-party lenders was $1 million. These guarantees generally extend
up to 15 years or life of the venture. |
In the third quarter of 2009, we sold our remaining ownership interest in four Keystone Pipeline
entities (Keystone) to TransCanada Corporation. As a result, we no longer have any financial
guarantees related to Keystone.
Indemnifications
Over the years, we have entered into various agreements to sell ownership interests in certain
corporations, joint ventures and assets that gave rise to qualifying indemnifications. Agreements
associated with these sales include indemnifications for taxes, environmental liabilities, permits
and licenses, employee claims, real estate
11
indemnity against tenant defaults, and litigation. The terms of these indemnifications vary
greatly. The majority of these indemnifications are related to environmental issues, the term is
generally indefinite and the maximum amount of future payments is generally unlimited. The
carrying amount recorded for these indemnifications at September 30, 2009, was $415 million. We
amortize the indemnification liability over the relevant time period, if one exists, based on the
facts and circumstances surrounding each type of indemnity. In cases where the indemnification
term is indefinite, we will reverse the liability when we have information the liability is
essentially relieved or amortize the liability over an appropriate time period as the fair value of
our indemnification exposure declines. Although it is reasonably possible future payments may
exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a
reasonable estimate of the maximum potential amount of future payments. Included in the recorded
carrying amount were $254 million of environmental accruals for known contamination that are
included in asset retirement obligations and accrued environmental costs at September 30, 2009.
For additional information about environmental liabilities, see Note 12Contingencies and
Commitments.
Note 12Contingencies and Commitments
In the case of all known contingencies (other than those related to income taxes), we accrue a
liability when the loss is probable and the amount is reasonably estimable. If a range of amounts
can be reasonably estimated and no amount within the range is a better estimate than any other
amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential
insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance
or other third-party recoveries. In the case of 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 federal, state and local environmental laws and regulations. These may result in
obligations 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 sites. When
we prepare our consolidated financial statements, we record accruals for environmental liabilities
based on managements best estimates, using all information available at the time. We measure
estimates and base liabilities on currently available facts, existing technology, and presently
enacted laws and regulations, taking into account stakeholder and business considerations. When
measuring environmental liabilities, we also consider our prior experience in remediation of
contaminated sites, other companies cleanup experience, and data released by the U.S.
Environmental Protection Agency (EPA) or other organizations. We consider unasserted claims in our
determination of environmental liabilities, and we accrue them in the period they are both probable
and reasonably estimable.
Although liability of those potentially responsible for environmental remediation costs is
generally joint and several for federal sites and frequently so for state 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
a potentially responsible party. If we were solely responsible, the costs, in some cases, could be
material to our results of operations, capital resources or liquidity, or to those of one of our
segments. However, settlements and costs incurred in matters that previously have been resolved
12
have not been material to our results of operations or financial condition. 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 state
agencies concerned. Prior to actual cleanup, those potentially responsible normally assess 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 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 have
not recorded accruals for any potential contingent liabilities that we expect to be funded by the
prior owners under these indemnifications.
We are currently participating in environmental assessments and cleanups at numerous federal
Superfund and comparable state sites. After an assessment of environmental exposures for cleanup
and other costs, we make accruals on an undiscounted basis (except for those acquired in a purchase
business combination, which we record on a discounted basis) for planned investigation and
remediation activities for sites where it is probable future costs will be incurred and these costs
can be reasonably estimated. At September 30, 2009, our consolidated balance sheet included a
total environmental accrual of $1,001 million, compared with $979 million at December 31, 2008. We
expect to incur the majority of these expenditures within the next 30 years. We have not reduced
these accruals for possible insurance recoveries. In the future, we may be involved in additional
environmental assessments, cleanups and proceedings.
Legal Proceedings
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, as well as the pace of settlement discussions in individual matters.
Based on professional judgment and experience in using these litigation management tools and
available information about current developments in our cases, our legal organization believes
there is a remote likelihood 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.
Other Contingencies
We have contingent liabilities resulting from throughput agreements with pipeline and processing
companies not associated with financing arrangements. Under these agreements, we may be required
to provide any such company with additional funds through advances and penalties for fees related
to throughput capacity not utilized. In addition, at September 30, 2009, we had performance
obligations secured by letters of credit of $2,087 million (of which $40 million was issued under
the provisions of our revolving credit facilities, and the remainder was issued as direct bank
letters of credit) related to various purchase commitments for materials, supplies, services and
items of permanent investment incident to the ordinary conduct of business.
Note 13Financial Instruments and Derivative Contracts
Derivative Instruments
We use financial and commodity-based derivative contracts to manage exposures to fluctuations in
foreign currency exchange rates, commodity prices and interest rates, or to exploit market
opportunities. Since we are not currently using hedge accounting, all gains and losses, realized
or unrealized, from derivative contracts
have been recognized in the consolidated income statement. Gains and losses from derivative
contracts held for trading not directly related to our physical business, whether realized or
unrealized, have been reported net in other income.
13
Purchase and sales contracts for commodities that are readily convertible to cash (e.g., crude oil,
natural gas and gasoline) are recorded on the balance sheet as derivatives unless the contracts are
for quantities we expect to use or sell over a reasonable period in the normal course of business
(i.e., contracts eligible for the normal purchases and normal sales exception). We record most of
our contracts to buy or sell natural gas as derivatives, but we do apply the normal purchases and
normal sales exception to certain long-term contracts to sell our natural gas production. We
generally apply this normal purchases and normal sales exception to eligible crude oil and refined
product commodity purchase and sales contracts; however, we may elect not to apply this exception
(e.g., when another derivative instrument will be used to mitigate the risk of the purchase or sale
contract but hedge accounting will not be applied, in which case both the purchase or sales
contract and the derivative contract mitigating the resulting risk will be recorded on the balance
sheet at fair value).
We value our exchange-cleared derivatives using closing prices provided by the exchange as of the
balance sheet date, and these are classified as Level 1 in the fair value hierarchy.
Over-the-counter (OTC) financial swaps and physical commodity forward purchase and sale contracts
are generally valued using quotations provided by brokers and price index developers such as Platts
and Oil Price Information Service. These quotes are corroborated with market data and are
classified as Level 2. In certain less liquid markets or for longer-term contracts, forward prices
are not as readily available. In these circumstances, OTC swaps and physical commodity purchase
and sale contracts are valued using internally developed methodologies that consider historical
relationships among various commodities that result in managements best estimate of fair value.
These contracts are classified as Level 3.
Exchange-cleared financial options are valued using exchange closing prices and are classified as
Level 1. Financial OTC and physical commodity options are valued using industry-standard models
that consider various assumptions, including quoted forward prices for commodities, time value,
volatility factors, and contractual prices for the underlying instruments, as well as other
relevant economic measures. The degree to which these inputs are observable in the forward markets
determines whether the options are classified as Level 2 or 3.
We use a mid-market pricing convention (the mid-point between bid and ask prices). When
appropriate, valuations are adjusted to reflect credit considerations, generally based on available
market evidence.
The fair value hierarchy for our derivative assets and liabilities accounted for at fair value on a
recurring basis was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
$ |
3,542 |
|
|
|
2,086 |
|
|
|
55 |
|
|
|
5,683 |
|
|
|
4,994 |
|
|
|
2,874 |
|
|
|
112 |
|
|
|
7,980 |
|
Foreign exchange derivatives |
|
|
- |
|
|
|
67 |
|
|
|
- |
|
|
|
67 |
|
|
|
- |
|
|
|
97 |
|
|
|
- |
|
|
|
97 |
|
|
Total assets |
|
|
3,542 |
|
|
|
2,153 |
|
|
|
55 |
|
|
|
5,750 |
|
|
|
4,994 |
|
|
|
2,971 |
|
|
|
112 |
|
|
|
8,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
|
(3,678 |
) |
|
|
(1,767 |
) |
|
|
(18 |
) |
|
|
(5,463 |
) |
|
|
(5,221 |
) |
|
|
(2,497 |
) |
|
|
(72 |
) |
|
|
(7,790 |
) |
Foreign exchange derivatives |
|
|
- |
|
|
|
(63 |
) |
|
|
- |
|
|
|
(63 |
) |
|
|
- |
|
|
|
(93 |
) |
|
|
- |
|
|
|
(93 |
) |
|
Total liabilities |
|
|
(3,678 |
) |
|
|
(1,830 |
) |
|
|
(18 |
) |
|
|
(5,526 |
) |
|
|
(5,221 |
) |
|
|
(2,590 |
) |
|
|
(72 |
) |
|
|
(7,883 |
) |
|
Net assets (liabilities) |
|
$ |
(136 |
) |
|
|
323 |
|
|
|
37 |
|
|
|
224 |
|
|
|
(227 |
) |
|
|
381 |
|
|
|
40 |
|
|
|
194 |
|
|
The derivative values above are based on analysis of each contract as the fundamental unit of
account; therefore, derivative assets and liabilities with the same counterparty are not reflected
net where the legal right of offset exists. Gains or losses from contracts in one level may be
offset by gains or losses on contracts in another level or by changes in values of physical
contracts or positions that are not reflected in the table above.
14
The fair value of net commodity derivatives classified as Level 3 in the fair value hierarchy
changed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
74 |
|
|
|
(56 |
) |
|
|
40 |
|
|
|
(34 |
) |
Total net
gains (losses), realized and unrealized, included in earnings |
|
|
(10 |
) |
|
|
45 |
|
|
|
8 |
|
|
|
(8 |
) |
Net purchases, issuances and settlements |
|
|
(20 |
) |
|
|
20 |
|
|
|
(47 |
) |
|
|
44 |
|
Net transfers in (out) of Level 3 |
|
|
(7 |
) |
|
|
3 |
|
|
|
36 |
|
|
|
10 |
|
|
Ending balance |
|
$ |
37 |
|
|
|
12 |
|
|
|
37 |
|
|
|
12 |
|
|
The amounts of Level 3 gains (losses) included in earnings were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Purchased |
|
|
|
|
|
|
|
|
|
|
Purchased |
|
|
|
|
|
|
Other |
|
|
Crude Oil, |
|
|
|
|
|
|
Other |
|
|
Crude Oil, |
|
|
|
|
|
|
Operating |
|
|
Natural Gas |
|
|
|
|
|
|
Operating |
|
|
Natural Gas |
|
|
|
|
|
|
Revenues |
|
|
and Products |
|
|
Total |
|
|
Revenues |
|
|
and Products |
|
|
Total |
|
|
|
|
|
|
|
|
Three Months Ended
September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains
(losses) included
in earnings |
|
$ |
(10 |
) |
|
|
- |
|
|
|
(10 |
) |
|
|
55 |
|
|
|
(10 |
) |
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized gains
(losses) relating
to assets held at
September 30 |
|
$ |
3 |
|
|
|
- |
|
|
|
3 |
|
|
|
16 |
|
|
|
- |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized gains
(losses) relating
to liabilities held
at September 30 |
|
$ |
(16 |
) |
|
|
- |
|
|
|
(16 |
) |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains
(losses) included
in earnings |
|
$ |
8 |
|
|
|
- |
|
|
|
8 |
|
|
|
(3 |
) |
|
|
(5 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized gains
(losses) relating
to assets held at
September 30 |
|
$ |
11 |
|
|
|
- |
|
|
|
11 |
|
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized gains
(losses) relating
to liabilities held
at September 30 |
|
$ |
(21 |
) |
|
|
- |
|
|
|
(21 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(9 |
) |
|
15
Commodity Derivative ContractsWe operate in the worldwide crude oil, refined product, natural gas,
natural gas liquids and electric power markets and are exposed to fluctuations in the prices for
these commodities. These fluctuations can affect our revenues as well as the cost of our
operating, investing and financing activities. Generally, our policy is to remain exposed to the
market prices of commodities. However, we use futures, forwards, swaps and options in various
markets to balance physical systems, meet customer needs, manage price exposures on specific
transactions, and do a limited, immaterial amount of trading not directly related to our physical
business. These activities may move our risk profile away from market average prices.
The fair value of commodity derivative assets and liabilities at September 30, 2009, and the line
items where they appear on our consolidated balance sheet were:
|
|
|
|
|
|
|
Millions |
|
|
|
of Dollars |
|
Assets |
|
|
|
|
Prepaid expenses and other current assets |
|
$ |
5,254 |
|
Other assets |
|
|
440 |
|
Liabilities |
|
|
|
|
Other accruals |
|
|
5,102 |
|
Other liabilities and deferred credits |
|
|
372 |
|
|
Hedge accounting has not been used for any items in
the table unless specified otherwise. The amounts shown
are presented gross (i.e., without netting assets and
liabilities with the same counterparty where the right
of offset and intent to net exist).
The gains (losses) from commodity derivatives incurred during the three- and nine-month
periods ended September 30, 2009, and the line items where they appear on our consolidated income
statement were:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
Sales and other operating revenues |
|
$ |
727 |
|
|
|
1,118 |
|
Other income |
|
|
(4 |
) |
|
|
21 |
|
Purchased crude oil, natural gas and products |
|
|
(599 |
) |
|
|
(1,554 |
) |
|
Hedge accounting has not been used for any items in the table unless specified otherwise.
The table below summarizes our material net exposures as of September 30, 2009, resulting
from outstanding commodity derivative contracts. These financial and physical derivative contracts
are primarily used to manage price exposure on our underlying operations. The underlying exposures
may be from non-derivative positions such as inventory volumes or firm natural gas transport
contracts. Financial derivative contracts may also offset physical derivative contracts, such as
forward sales contracts.
|
|
|
|
|
|
|
Open Position |
|
|
|
Long / (Short) |
|
Commodity |
|
|
|
|
Crude oil, refined products and natural gas liquids (millions of barrels) |
|
|
(43 |
) |
Natural gas, power and carbon dioxide emissions (billions of cubic feet) |
|
|
|
|
Flat price |
|
|
(68 |
) |
Basis |
|
|
135 |
|
|
16
Currency Exchange Rate Derivative ContractsWe have foreign currency exchange rate risk resulting
from international operations. We do not comprehensively hedge the exposure to movements in
currency exchange rates, although we may choose to selectively hedge certain foreign currency
exchange rate exposures, such as firm commitments for capital projects or local currency tax
payments and dividends.
The fair value of foreign currency derivative assets and liabilities open at September 30, 2009,
and the line items where they appear on our consolidated balance sheet were:
|
|
|
|
|
|
|
Millions |
|
|
of Dollars |
|
Assets |
|
|
|
|
Prepaid expenses and other current assets |
|
$ |
60 |
|
Other assets |
|
|
7 |
|
Liabilities |
|
|
|
|
Other accruals |
|
|
48 |
|
Other liabilities and deferred credits |
|
|
15 |
|
|
Hedge accounting has not been used for any items in the table unless specified otherwise. The amounts shown are presented gross.
Gains and losses from foreign currency derivatives during the three- and nine-month periods
ended September 30, 2009, and the line item where they appear on our consolidated income statement
were:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
Foreign currency transaction (gains) losses |
|
$ |
40 |
|
|
|
(133 |
) |
|
Hedge accounting has not been used for any items in the table unless specified otherwise.
As of September 30, 2009, we had the following net position of outstanding foreign currency
swap contracts, entered into primarily to hedge price exposure in our international operations.
|
|
|
|
|
|
|
|
|
|
|
In Millions |
|
|
|
Notional* |
|
Foreign Currency Swaps |
|
|
|
|
|
|
|
|
Sell U.S. dollar, buy other currencies** |
|
USD |
|
|
3,462 |
|
Buy British pound, sell euro |
|
GBP |
|
|
251 |
|
|
*Denominated in U.S. dollars (USD) and British pounds (GBP).
**Primarily euro (EUR), Canadian dollar (CAD), Norwegian krone (NOK), and British pound (GBP).
Credit Risk
Our financial instruments that are potentially exposed to concentrations of credit risk consist
primarily of cash equivalents, over-the-counter derivative contracts and trade receivables. Our
cash equivalents are placed in high-quality commercial paper, money market funds and time deposits
with major international banks and financial institutions.
The credit risk from our over-the-counter derivative contracts, such as forwards and swaps, derives
from the counterparty to the transaction, typically a major bank or financial institution.
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
contracts, but futures have a negligible credit risk because they are traded on the New York
Mercantile Exchange or the ICE Futures.
17
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.
The aggregate fair value of all derivative instruments with such credit-risk-related contingent
features that were in a liability position on September 30, 2009, was $365 million, for which no
collateral was posted. If our credit rating were lowered one level from its A rating (per
Standard and Poors) on September 30, 2009, we would be required to post no additional collateral to
our counterparties. If we were downgraded below investment grade, we would be required to post
$365 million of additional collateral, either in the form of cash or letters of credit.
Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
|
|
|
Cash and cash equivalents: The carrying amount reported on the balance sheet
approximates fair value. |
|
|
|
Accounts and notes receivable: The carrying amount reported on the balance sheet
approximates fair value. |
|
|
|
Investment in LUKOIL shares: See Note 6Investments, Loans and Long-Term Receivables,
for a discussion of the carrying value and fair value of our investment in LUKOIL shares. |
|
|
|
Debt: The carrying amount of our floating-rate debt approximates fair value. The fair
value of the fixed-rate debt is estimated based on quoted market prices. |
|
|
|
Fixed-rate 5.3 percent joint venture acquisition obligation: Fair value is estimated
based on the net present value of the future cash flows, discounted at a September 30,
2009, effective yield rate of 2.91 percent, based on yields of U.S. Treasury securities of
similar average duration adjusted for our average credit risk spread and the amortizing
nature of the obligation principal. See Note 10Joint Venture Acquisition Obligation, for
additional information. |
|
|
|
Swaps: Fair value is estimated based on forward market prices and approximates the exit
price at period end. When forward market prices are not available, they are estimated
using the forward prices of a similar commodity with adjustments for differences in quality
or location. |
|
|
|
Futures: Fair values are based on quoted market prices obtained from the New York
Mercantile Exchange, the ICE Futures, or other traded exchanges. |
|
|
|
Forward-exchange contracts: Fair value is estimated by comparing the contract rate to
the forward rate in effect on September 30, 2009, and approximates the exit price at that
date. |
Certain of our commodity derivative and financial instruments at September 30, 2009, were:
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Carrying Amount |
|
|
Fair Value |
|
Financial assets |
|
|
|
|
|
|
|
|
Foreign currency derivatives |
|
$ |
67 |
|
|
|
67 |
|
Commodity derivatives |
|
|
1,166 |
|
|
|
1,166 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
Total debt, excluding capital leases |
|
|
30,436 |
|
|
|
32,565 |
|
Joint venture acquisition obligation |
|
|
5,828 |
|
|
|
6,410 |
|
Foreign currency derivatives |
|
|
63 |
|
|
|
63 |
|
Commodity derivatives |
|
|
863 |
|
|
|
863 |
|
|
The amounts shown for derivatives in the preceding table are presented net (i.e., assets and
liabilities with the same counterparty are netted where the right of offset and intent to net
exist). In addition, the commodity
18
derivative assets appear net of $85 million of obligations to
return cash collateral, while the commodity
derivative liabilities appear net of $168 million of rights to reclaim cash collateral. No
collateral was deposited or held for the foreign currency derivatives.
Note 14Comprehensive Income
ConocoPhillips comprehensive income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,520 |
|
|
|
5,203 |
|
|
|
3,690 |
|
|
|
14,817 |
|
After-tax changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net prior service cost |
|
|
3 |
|
|
|
7 |
|
|
|
9 |
|
|
|
(3 |
) |
Net actuarial loss |
|
|
33 |
|
|
|
10 |
|
|
|
100 |
|
|
|
17 |
|
Nonsponsored plans |
|
|
4 |
|
|
|
4 |
|
|
|
2 |
|
|
|
8 |
|
Foreign currency translation adjustments |
|
|
1,672 |
|
|
|
(1,584 |
) |
|
|
4,473 |
|
|
|
(1,841 |
) |
Hedging activities |
|
|
2 |
|
|
|
1 |
|
|
|
3 |
|
|
|
1 |
|
|
Comprehensive income |
|
|
3,234 |
|
|
|
3,641 |
|
|
|
8,277 |
|
|
|
12,999 |
|
Less: comprehensive income attributable to
noncontrolling interests |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
(49 |
) |
|
|
(51 |
) |
|
Comprehensive income attributable to ConocoPhillips |
|
$ |
3,217 |
|
|
|
3,626 |
|
|
|
8,228 |
|
|
|
12,948 |
|
|
Accumulated other comprehensive income (loss) in the equity section of the balance sheet included:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Defined benefit pension plans |
|
$ |
(1,323 |
) |
|
|
(1,434 |
) |
Foreign currency translation adjustments |
|
|
4,042 |
|
|
|
(431 |
) |
Deferred net hedging loss |
|
|
(7 |
) |
|
|
(10 |
) |
|
Accumulated other comprehensive income (loss) |
|
$ |
2,712 |
|
|
|
(1,875 |
) |
|
None of the items within accumulated other comprehensive income (loss) related to noncontrolling
interests.
Note 15Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
Cash Payments |
|
|
|
|
|
|
|
|
Interest |
|
$ |
647 |
|
|
|
475 |
|
Income taxes |
|
|
4,807 |
|
|
|
10,250 |
|
|
19
Note 16Employee Benefit Plans
Pension and Postretirement Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
Components of Net Periodic Benefit Cost |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
U.S. |
|
|
Intl. |
|
|
U.S. |
|
|
Intl. |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
48 |
|
|
|
20 |
|
|
|
46 |
|
|
|
24 |
|
|
|
2 |
|
|
|
2 |
|
Interest cost |
|
|
69 |
|
|
|
38 |
|
|
|
61 |
|
|
|
44 |
|
|
|
12 |
|
|
|
8 |
|
Expected return on plan assets |
|
|
(46 |
) |
|
|
(33 |
) |
|
|
(55 |
) |
|
|
(45 |
) |
|
|
- |
|
|
|
- |
|
Amortization of prior service cost |
|
|
3 |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
2 |
|
|
|
3 |
|
Recognized net actuarial (gain) loss |
|
|
47 |
|
|
|
9 |
|
|
|
15 |
|
|
|
3 |
|
|
|
(4 |
) |
|
|
(3 |
) |
|
Net periodic benefit costs |
|
$ |
121 |
|
|
|
34 |
|
|
|
71 |
|
|
|
26 |
|
|
|
12 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
145 |
|
|
|
58 |
|
|
|
140 |
|
|
|
71 |
|
|
|
6 |
|
|
|
9 |
|
Interest cost |
|
|
208 |
|
|
|
106 |
|
|
|
185 |
|
|
|
134 |
|
|
|
35 |
|
|
|
36 |
|
Expected return on plan assets |
|
|
(138 |
) |
|
|
(92 |
) |
|
|
(167 |
) |
|
|
(134 |
) |
|
|
- |
|
|
|
- |
|
Amortization of prior service cost |
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
6 |
|
|
|
8 |
|
Recognized net actuarial (gain) loss |
|
|
140 |
|
|
|
26 |
|
|
|
48 |
|
|
|
9 |
|
|
|
(11 |
) |
|
|
(13 |
) |
|
Net periodic benefit costs |
|
$ |
363 |
|
|
|
98 |
|
|
|
214 |
|
|
|
80 |
|
|
|
36 |
|
|
|
40 |
|
|
During the first nine months of 2009, we contributed $721 million to our domestic benefit plans and
$116 million to our international benefit plans. We currently expect to make additional
contributions of approximately $29 million to our domestic benefit plans and $24 million to our
international benefit plans for totals of $750 million and $140 million, respectively, in 2009.
Severance Accrual
As a result of the current business environments impact on our operating and capital plans, a
reduction in our overall employee work force is occurring during 2009. Various business units and
staff groups recorded accruals in the fourth quarter of 2008 for severance and related employee
benefits totaling $162 million. The following table summarizes our severance accrual activity:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
Beginning balance |
|
$ |
162 |
|
|
|
- |
|
Accruals |
|
|
5 |
|
|
|
162 |
|
Benefit payments |
|
|
(72 |
) |
|
|
- |
|
Accrual reversals |
|
|
(64 |
) |
|
|
- |
|
|
Ending balance |
|
$ |
31 |
|
|
|
162 |
|
|
The remaining balance at September 30, 2009, of $31 million is classified as short-term.
20
Note 17Related Party Transactions
Significant transactions with related parties were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
Operating revenues and other income (a) |
|
$ |
1,871 |
|
|
|
3,944 |
|
|
|
5,236 |
|
|
|
11,115 |
|
Purchases (b) |
|
|
3,614 |
|
|
|
6,038 |
|
|
|
9,264 |
|
|
|
16,129 |
|
Operating expenses and selling,
general and administrative expenses
(c) |
|
|
85 |
|
|
|
142 |
|
|
|
241 |
|
|
|
385 |
|
Net interest expense (d) |
|
|
19 |
|
|
|
15 |
|
|
|
58 |
|
|
|
55 |
|
|
(a) |
|
We sold natural gas to DCP Midstream, LLC and crude oil to the Malaysian Refining Company
Sdn. Bhd. (MRC), among others, for processing and marketing. Natural gas liquids, solvents
and petrochemical feedstocks were sold to Chevron Phillips Chemical Company LLC (CPChem), gas
oil and hydrogen feedstocks were sold to Excel Paralubes and refined products were sold
primarily to CFJ Properties and LUKOIL. Natural gas, crude oil, blendstock and other
intermediate products were sold to WRB Refining LLC. In addition, we charged several of our
affiliates including CPChem and Merey Sweeny, L.P. (MSLP) for the use of common facilities,
such as steam generators, waste and water treaters, and warehouse facilities. |
|
(b) |
|
We purchased refined products from WRB Refining. We purchased natural gas and natural gas
liquids from DCP Midstream and CPChem for use in our refinery processes and other feedstocks
from various affiliates. We purchased crude oil from LUKOIL and refined products from MRC.
We also paid fees to various pipeline equity companies for transporting finished refined
products and natural gas, as well as a price upgrade to MSLP for heavy crude processing. We
purchased base oils and fuel products from Excel Paralubes for use in our refinery and
specialty businesses. |
|
(c) |
|
We paid processing fees to various affiliates. Additionally, we paid crude oil
transportation fees to pipeline equity companies. |
|
(d) |
|
We paid and/or received interest to/from various affiliates, including FCCL Partnership. See
Note 6Investments, Loans and Long-Term Receivables, for additional information on loans to
affiliated companies. |
21
Note 18Segment Disclosures and Related Information
We have organized our reporting structure based on the grouping of similar products and services,
resulting in six operating segments:
|
1) |
|
E&PThis segment primarily explores for, produces, transports and markets crude oil,
natural gas and natural gas liquids on a worldwide basis. |
|
|
2) |
|
MidstreamThis segment gathers, processes and markets natural gas produced by
ConocoPhillips and others, and fractionates and markets natural gas liquids, predominantly
in the United States and Trinidad. The Midstream segment primarily consists of our 50
percent equity investment in DCP Midstream, LLC. |
|
|
3) |
|
R&MThis segment purchases, refines, markets and transports crude oil and petroleum
products, mainly in the United States, Europe and Asia. |
|
|
4) |
|
LUKOIL InvestmentThis segment represents our investment in the ordinary shares of OAO
LUKOIL, an international, integrated oil and gas company headquartered in Russia. At
September 30, 2009, our ownership interest was 20 percent based on issued shares and 20.09
percent based on estimated shares outstanding. |
|
|
5) |
|
ChemicalsThis segment manufactures and markets petrochemicals and plastics on a
worldwide basis. The Chemicals segment consists of our 50 percent equity investment in
Chevron Phillips Chemical Company LLC. |
|
|
6) |
|
Emerging BusinessesThis segment represents our investment in new technologies or
businesses outside our normal scope of operations. |
Corporate and Other includes general corporate overhead, most interest expense and various other
corporate activities. Corporate assets include all cash and cash equivalents. We evaluate
performance and allocate resources based on net income attributable to ConocoPhillips.
Intersegment sales are at prices that approximate market.
22
Analysis of Results by Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Sales and Other Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E&P |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
5,655 |
|
|
|
15,320 |
|
|
|
17,148 |
|
|
|
42,831 |
|
International |
|
|
5,908 |
|
|
|
10,333 |
|
|
|
17,607 |
|
|
|
27,245 |
|
Intersegment eliminationsU.S. |
|
|
(1,225 |
) |
|
|
(2,263 |
) |
|
|
(3,271 |
) |
|
|
(6,900 |
) |
Intersegment eliminationsinternational |
|
|
(1,998 |
) |
|
|
(3,005 |
) |
|
|
(4,783 |
) |
|
|
(8,852 |
) |
|
E&P |
|
|
8,340 |
|
|
|
20,385 |
|
|
|
26,701 |
|
|
|
54,324 |
|
|
Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
|
1,325 |
|
|
|
2,112 |
|
|
|
3,220 |
|
|
|
5,854 |
|
Intersegment eliminations |
|
|
(76 |
) |
|
|
(52 |
) |
|
|
(177 |
) |
|
|
(171 |
) |
|
Midstream |
|
|
1,249 |
|
|
|
2,060 |
|
|
|
3,043 |
|
|
|
5,683 |
|
|
R&M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
21,070 |
|
|
|
33,778 |
|
|
|
52,485 |
|
|
|
97,989 |
|
International |
|
|
9,637 |
|
|
|
14,065 |
|
|
|
24,469 |
|
|
|
38,960 |
|
Intersegment eliminationsU.S. |
|
|
(157 |
) |
|
|
(293 |
) |
|
|
(414 |
) |
|
|
(797 |
) |
Intersegment eliminationsinternational |
|
|
(18 |
) |
|
|
(17 |
) |
|
|
(38 |
) |
|
|
(37 |
) |
|
R&M |
|
|
30,532 |
|
|
|
47,533 |
|
|
|
76,502 |
|
|
|
136,115 |
|
|
LUKOIL Investment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Chemicals |
|
|
2 |
|
|
|
2 |
|
|
|
8 |
|
|
|
8 |
|
|
Emerging Businesses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
|
134 |
|
|
|
303 |
|
|
|
421 |
|
|
|
791 |
|
Intersegment eliminations |
|
|
(90 |
) |
|
|
(244 |
) |
|
|
(331 |
) |
|
|
(600 |
) |
|
Emerging Businesses |
|
|
44 |
|
|
|
59 |
|
|
|
90 |
|
|
|
191 |
|
|
Corporate and Other |
|
|
6 |
|
|
|
5 |
|
|
|
18 |
|
|
|
17 |
|
|
Consolidated sales and other operating revenues |
|
$ |
40,173 |
|
|
|
70,044 |
|
|
|
106,362 |
|
|
|
196,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Attributable to ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E&P |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
327 |
|
|
|
1,606 |
|
|
|
836 |
|
|
|
4,807 |
|
International |
|
|
651 |
|
|
|
2,322 |
|
|
|
1,567 |
|
|
|
6,007 |
|
|
Total E&P |
|
|
978 |
|
|
|
3,928 |
|
|
|
2,403 |
|
|
|
10,814 |
|
|
Midstream |
|
|
62 |
|
|
|
173 |
|
|
|
216 |
|
|
|
472 |
|
|
R&M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
73 |
|
|
|
524 |
|
|
|
133 |
|
|
|
1,546 |
|
International |
|
|
26 |
|
|
|
325 |
|
|
|
119 |
|
|
|
487 |
|
|
Total R&M |
|
|
99 |
|
|
|
849 |
|
|
|
252 |
|
|
|
2,033 |
|
|
LUKOIL Investment |
|
|
545 |
|
|
|
438 |
|
|
|
1,275 |
|
|
|
1,922 |
|
Chemicals |
|
|
104 |
|
|
|
46 |
|
|
|
194 |
|
|
|
116 |
|
Emerging Businesses |
|
|
(2 |
) |
|
|
35 |
|
|
|
- |
|
|
|
55 |
|
Corporate and Other |
|
|
(283 |
) |
|
|
(281 |
) |
|
|
(699 |
) |
|
|
(646 |
) |
|
Consolidated net income attributable to ConocoPhillips |
|
$ |
1,503 |
|
|
|
5,188 |
|
|
|
3,641 |
|
|
|
14,766 |
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
Total Assets |
|
|
|
|
|
|
|
|
E&P |
|
|
|
|
|
|
|
|
United States |
|
$ |
35,773 |
|
|
|
36,962 |
|
International |
|
|
63,642 |
|
|
|
58,912 |
|
|
Total E&P |
|
|
99,415 |
|
|
|
95,874 |
|
|
Midstream |
|
|
1,956 |
|
|
|
1,455 |
|
|
R&M |
|
|
|
|
|
|
|
|
United States |
|
|
25,277 |
|
|
|
22,554 |
|
International |
|
|
9,604 |
|
|
|
7,942 |
|
Goodwill |
|
|
3,715 |
|
|
|
3,778 |
|
|
Total R&M |
|
|
38,596 |
|
|
|
34,274 |
|
|
LUKOIL Investment |
|
|
6,696 |
|
|
|
5,455 |
|
Chemicals |
|
|
2,400 |
|
|
|
2,217 |
|
Emerging Businesses |
|
|
1,072 |
|
|
|
924 |
|
Corporate and Other |
|
|
2,292 |
|
|
|
2,666 |
|
|
Consolidated total assets |
|
$ |
152,427 |
|
|
|
142,865 |
|
|
Note 19Income Taxes
Our effective tax rates for the third quarter and first nine months of 2009 were 48 percent and 50
percent, respectively, compared with 45 percent for each of the same two periods of 2008. The
change in the effective tax rate for the third quarter and nine-month periods of 2009, versus the
corresponding periods of 2008, was primarily due to a higher proportion of income earned in higher
tax jurisdictions in 2009. The effective tax rate in excess of the domestic federal statutory rate
of 35 percent was primarily due to foreign taxes.
Note 20New Accounting Standards
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140. This Statement will be codified primarily into FASB ASC
Topic 860, Transfers and Servicing. This Statement removes the concept of a qualifying special
purpose entity (SPE) and the exception for qualifying SPEs from the consolidation guidance.
Additionally, the Statement clarifies the requirements for financial asset transfers eligible for
sale accounting. This Statement is effective January 1, 2010, and we do not expect any significant
impact to our consolidated financial statements.
Also in June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), to
address the effects of the elimination of the qualifying SPE concept in SFAS No. 166, and other
concerns about the application of key provisions of consolidation guidance for VIEs. This
Statement will be codified primarily into FASB ASC Topic 810, Consolidation. More specifically,
SFAS No. 167 requires a qualitative rather than a quantitative approach to determine the primary
beneficiary of a VIE, it amends certain guidance pertaining to the determination of the primary
beneficiary when related parties are involved, and it amends certain guidance for determining
whether an entity is a VIE. Additionally, this Statement requires continuous assessments of
whether an enterprise is the primary beneficiary of a VIE. This Statement is effective January 1,
2010. We are currently evaluating the impact on our consolidated financial statements.
24
In December 2008, the FASB issued FSP FAS 132(R)-1, Employers Disclosures about Postretirement
Benefit Plan Assets, to improve the transparency associated with disclosures about the plan assets
of a defined benefit pension or other postretirement plan. This Statement was codified into FASB
ASC Topic 715, CompensationRetirement Benefits. Topic 715 requires the disclosure of each major
asset category at fair value using the fair value hierarchy. This Topic is effective for annual
financial statements beginning with the 2009 fiscal year, but will not impact our consolidated
financial statements, other than requiring additional disclosures.
25
Supplementary InformationCondensed Consolidating Financial Information
We have various cross guarantees among ConocoPhillips, ConocoPhillips Company, ConocoPhillips
Australia Funding Company, ConocoPhillips Canada Funding Company I, and ConocoPhillips Canada
Funding Company II, with respect to publicly held debt securities. ConocoPhillips Company is
wholly owned by ConocoPhillips. ConocoPhillips Australia Funding Company is an indirect, wholly
owned subsidiary of ConocoPhillips Company. ConocoPhillips Canada Funding Company I and
ConocoPhillips Canada Funding Company II are indirect, wholly owned subsidiaries of ConocoPhillips.
ConocoPhillips and ConocoPhillips Company have fully and unconditionally guaranteed the payment
obligations of ConocoPhillips Australia Funding Company, ConocoPhillips Canada Funding Company I,
and ConocoPhillips Canada Funding Company II, with respect to their publicly held debt securities.
Similarly, ConocoPhillips has fully and unconditionally guaranteed the payment obligations of
ConocoPhillips Company with respect to its publicly held debt securities. In addition,
ConocoPhillips Company has fully and unconditionally guaranteed the payment obligations of
ConocoPhillips with respect to its publicly held debt securities. All guarantees are joint and
several. The following condensed consolidating financial information presents the results of
operations, financial position and cash flows for:
|
|
|
ConocoPhillips, ConocoPhillips Company, ConocoPhillips Australia Funding Company,
ConocoPhillips Canada Funding Company I, and ConocoPhillips Canada Funding Company II (in
each case, reflecting investments in subsidiaries utilizing the equity method of
accounting). |
|
|
|
|
All other nonguarantor subsidiaries of ConocoPhillips. |
|
|
|
|
The consolidating adjustments necessary to present ConocoPhillips results on a
consolidated basis. |
This condensed consolidating financial information should be read in conjunction with the
accompanying consolidated financial statements and notes.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
Canada |
|
|
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Funding |
|
|
Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Income Statement |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues |
|
$ |
- |
|
|
|
24,981 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,192 |
|
|
|
- |
|
|
|
40,173 |
|
Equity in earnings of affiliates |
|
|
1,609 |
|
|
|
1,728 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
700 |
|
|
|
(3,022 |
) |
|
|
1,015 |
|
Other income (loss) |
|
|
1 |
|
|
|
150 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(34 |
) |
|
|
- |
|
|
|
117 |
|
Intercompany revenues |
|
|
13 |
|
|
|
264 |
|
|
|
11 |
|
|
|
20 |
|
|
|
12 |
|
|
|
5,377 |
|
|
|
(5,697 |
) |
|
|
- |
|
|
Total Revenues and Other Income |
|
|
1,623 |
|
|
|
27,123 |
|
|
|
11 |
|
|
|
20 |
|
|
|
12 |
|
|
|
21,235 |
|
|
|
(8,719 |
) |
|
|
41,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil, natural gas and products |
|
|
- |
|
|
|
22,158 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,395 |
|
|
|
(5,545 |
) |
|
|
28,008 |
|
Production and operating expenses |
|
|
- |
|
|
|
1,057 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,499 |
|
|
|
(22 |
) |
|
|
2,534 |
|
Selling, general and administrative expenses |
|
|
4 |
|
|
|
275 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
143 |
|
|
|
5 |
|
|
|
427 |
|
Exploration expenses |
|
|
- |
|
|
|
90 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
296 |
|
|
|
- |
|
|
|
386 |
|
Depreciation, depletion and amortization |
|
|
- |
|
|
|
432 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,895 |
|
|
|
- |
|
|
|
2,327 |
|
Impairments |
|
|
- |
|
|
|
55 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
56 |
|
Taxes other than income taxes |
|
|
- |
|
|
|
1,304 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,901 |
|
|
|
- |
|
|
|
4,205 |
|
Accretion on discounted liabilities |
|
|
- |
|
|
|
6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
90 |
|
|
|
- |
|
|
|
96 |
|
Interest and debt expense |
|
|
173 |
|
|
|
15 |
|
|
|
10 |
|
|
|
19 |
|
|
|
13 |
|
|
|
241 |
|
|
|
(135 |
) |
|
|
336 |
|
Foreign currency transaction (gains) losses |
|
|
- |
|
|
|
13 |
|
|
|
- |
|
|
|
77 |
|
|
|
69 |
|
|
|
(176 |
) |
|
|
- |
|
|
|
(17 |
) |
|
Total Costs and Expenses |
|
|
177 |
|
|
|
25,405 |
|
|
|
10 |
|
|
|
96 |
|
|
|
82 |
|
|
|
18,285 |
|
|
|
(5,697 |
) |
|
|
38,358 |
|
|
Income (loss) before income taxes |
|
|
1,446 |
|
|
|
1,718 |
|
|
|
1 |
|
|
|
(76 |
) |
|
|
(70 |
) |
|
|
2,950 |
|
|
|
(3,022 |
) |
|
|
2,947 |
|
Provision for income taxes |
|
|
(57 |
) |
|
|
109 |
|
|
|
- |
|
|
|
4 |
|
|
|
(3 |
) |
|
|
1,374 |
|
|
|
- |
|
|
|
1,427 |
|
|
Net income (loss) |
|
|
1,503 |
|
|
|
1,609 |
|
|
|
1 |
|
|
|
(80 |
) |
|
|
(67 |
) |
|
|
1,576 |
|
|
|
(3,022 |
) |
|
|
1,520 |
|
Less: net income attributable to
noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(17 |
) |
|
|
- |
|
|
|
(17 |
) |
|
Net Income (Loss) Attributable to
ConocoPhillips |
|
$ |
1,503 |
|
|
|
1,609 |
|
|
|
1 |
|
|
|
(80 |
) |
|
|
(67 |
) |
|
|
1,559 |
|
|
|
(3,022 |
) |
|
|
1,503 |
|
|
|
Income Statement |
|
Three Months Ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues |
|
$ |
- |
|
|
|
45,549 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
24,495 |
|
|
|
- |
|
|
|
70,044 |
|
Equity in earnings of affiliates |
|
|
5,256 |
|
|
|
3,856 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,181 |
|
|
|
(9,079 |
) |
|
|
1,214 |
|
Other income (loss) |
|
|
(1 |
) |
|
|
135 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19 |
) |
|
|
- |
|
|
|
115 |
|
Intercompany revenues |
|
|
1 |
|
|
|
1,166 |
|
|
|
20 |
|
|
|
22 |
|
|
|
14 |
|
|
|
9,720 |
|
|
|
(10,943 |
) |
|
|
- |
|
|
Total Revenues and Other Income |
|
|
5,256 |
|
|
|
50,706 |
|
|
|
20 |
|
|
|
22 |
|
|
|
14 |
|
|
|
35,377 |
|
|
|
(20,022 |
) |
|
|
71,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil, natural gas and products |
|
|
- |
|
|
|
41,990 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,180 |
|
|
|
(10,562 |
) |
|
|
49,608 |
|
Production and operating expenses |
|
|
- |
|
|
|
1,243 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,841 |
|
|
|
(25 |
) |
|
|
3,059 |
|
Selling, general and administrative expenses |
|
|
7 |
|
|
|
339 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
180 |
|
|
|
(13 |
) |
|
|
513 |
|
Exploration expenses |
|
|
- |
|
|
|
31 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
236 |
|
|
|
- |
|
|
|
267 |
|
Depreciation, depletion and amortization |
|
|
- |
|
|
|
393 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,968 |
|
|
|
- |
|
|
|
2,361 |
|
Impairments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
57 |
|
|
|
- |
|
|
|
57 |
|
Taxes other than income taxes |
|
|
- |
|
|
|
1,280 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,396 |
|
|
|
(57 |
) |
|
|
5,619 |
|
Accretion on discounted liabilities |
|
|
- |
|
|
|
14 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
|
- |
|
|
|
114 |
|
Interest and debt expense |
|
|
97 |
|
|
|
132 |
|
|
|
17 |
|
|
|
19 |
|
|
|
14 |
|
|
|
246 |
|
|
|
(286 |
) |
|
|
239 |
|
Foreign currency transaction (gains) losses |
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
(71 |
) |
|
|
(99 |
) |
|
|
206 |
|
|
|
- |
|
|
|
54 |
|
|
Total Costs and Expenses |
|
|
104 |
|
|
|
45,440 |
|
|
|
17 |
|
|
|
(52 |
) |
|
|
(85 |
) |
|
|
27,410 |
|
|
|
(10,943 |
) |
|
|
61,891 |
|
|
Income before income taxes |
|
|
5,152 |
|
|
|
5,266 |
|
|
|
3 |
|
|
|
74 |
|
|
|
99 |
|
|
|
7,967 |
|
|
|
(9,079 |
) |
|
|
9,482 |
|
Provision for income taxes |
|
|
(36 |
) |
|
|
618 |
|
|
|
1 |
|
|
|
7 |
|
|
|
17 |
|
|
|
3,672 |
|
|
|
- |
|
|
|
4,279 |
|
|
Net income |
|
|
5,188 |
|
|
|
4,648 |
|
|
|
2 |
|
|
|
67 |
|
|
|
82 |
|
|
|
4,295 |
|
|
|
(9,079 |
) |
|
|
5,203 |
|
Less: net income attributable to
noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(15 |
) |
|
|
- |
|
|
|
(15 |
) |
|
Net Income Attributable to ConocoPhillips |
|
$ |
5,188 |
|
|
|
4,648 |
|
|
|
2 |
|
|
|
67 |
|
|
|
82 |
|
|
|
4,280 |
|
|
|
(9,079 |
) |
|
|
5,188 |
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Nine Months Ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
Canada |
|
|
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Funding |
|
|
Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Income Statement |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues |
|
$ |
- |
|
|
|
64,437 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
41,925 |
|
|
|
- |
|
|
|
106,362 |
|
Equity in earnings of affiliates |
|
|
3,925 |
|
|
|
4,238 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,714 |
|
|
|
(7,371 |
) |
|
|
2,506 |
|
Other income (loss) |
|
|
- |
|
|
|
469 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(122 |
) |
|
|
- |
|
|
|
347 |
|
Intercompany revenues |
|
|
29 |
|
|
|
866 |
|
|
|
40 |
|
|
|
57 |
|
|
|
35 |
|
|
|
12,850 |
|
|
|
(13,877 |
) |
|
|
- |
|
|
Total Revenues and Other Income |
|
|
3,954 |
|
|
|
70,010 |
|
|
|
40 |
|
|
|
57 |
|
|
|
35 |
|
|
|
56,367 |
|
|
|
(21,248 |
) |
|
|
109,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil, natural gas and products |
|
|
- |
|
|
|
56,296 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29,331 |
|
|
|
(13,251 |
) |
|
|
72,376 |
|
Production and operating expenses |
|
|
2 |
|
|
|
3,271 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,452 |
|
|
|
(73 |
) |
|
|
7,652 |
|
Selling, general and administrative expenses |
|
|
12 |
|
|
|
907 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
467 |
|
|
|
(8 |
) |
|
|
1,378 |
|
Exploration expenses |
|
|
- |
|
|
|
206 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
648 |
|
|
|
- |
|
|
|
854 |
|
Depreciation, depletion and amortization |
|
|
- |
|
|
|
1,272 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,632 |
|
|
|
- |
|
|
|
6,904 |
|
Impairments |
|
|
- |
|
|
|
50 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
60 |
|
|
|
- |
|
|
|
110 |
|
Taxes other than income taxes |
|
|
- |
|
|
|
3,671 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,732 |
|
|
|
(19 |
) |
|
|
11,384 |
|
Accretion on discounted liabilities |
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
265 |
|
|
|
- |
|
|
|
308 |
|
Interest and debt expense |
|
|
452 |
|
|
|
100 |
|
|
|
36 |
|
|
|
58 |
|
|
|
40 |
|
|
|
754 |
|
|
|
(526 |
) |
|
|
914 |
|
Foreign currency transaction (gains) losses |
|
|
- |
|
|
|
(30 |
) |
|
|
- |
|
|
|
132 |
|
|
|
178 |
|
|
|
(308 |
) |
|
|
- |
|
|
|
(28 |
) |
|
Total Costs and Expenses |
|
|
466 |
|
|
|
65,786 |
|
|
|
36 |
|
|
|
190 |
|
|
|
218 |
|
|
|
49,033 |
|
|
|
(13,877 |
) |
|
|
101,852 |
|
|
Income (loss) before income taxes |
|
|
3,488 |
|
|
|
4,224 |
|
|
|
4 |
|
|
|
(133 |
) |
|
|
(183 |
) |
|
|
7,334 |
|
|
|
(7,371 |
) |
|
|
7,363 |
|
Provision for income taxes |
|
|
(153 |
) |
|
|
299 |
|
|
|
1 |
|
|
|
6 |
|
|
|
(20 |
) |
|
|
3,540 |
|
|
|
- |
|
|
|
3,673 |
|
|
Net income (loss) |
|
|
3,641 |
|
|
|
3,925 |
|
|
|
3 |
|
|
|
(139 |
) |
|
|
(163 |
) |
|
|
3,794 |
|
|
|
(7,371 |
) |
|
|
3,690 |
|
Less: net income attributable to
noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(49 |
) |
|
|
- |
|
|
|
(49 |
) |
|
Net Income (Loss) Attributable to
ConocoPhillips |
|
$ |
3,641 |
|
|
|
3,925 |
|
|
|
3 |
|
|
|
(139 |
) |
|
|
(163 |
) |
|
|
3,745 |
|
|
|
(7,371 |
) |
|
|
3,641 |
|
|
|
Income Statement |
|
Nine Months Ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues |
|
$ |
- |
|
|
|
128,145 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
68,193 |
|
|
|
- |
|
|
|
196,338 |
|
Equity in earnings of affiliates |
|
|
14,907 |
|
|
|
10,713 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,935 |
|
|
|
(25,170 |
) |
|
|
4,385 |
|
Other income (loss) |
|
|
(2 |
) |
|
|
622 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(65 |
) |
|
|
- |
|
|
|
555 |
|
Intercompany revenues |
|
|
25 |
|
|
|
2,798 |
|
|
|
63 |
|
|
|
67 |
|
|
|
41 |
|
|
|
25,463 |
|
|
|
(28,457 |
) |
|
|
- |
|
|
Total Revenues and Other Income |
|
|
14,930 |
|
|
|
142,278 |
|
|
|
63 |
|
|
|
67 |
|
|
|
41 |
|
|
|
97,526 |
|
|
|
(53,627 |
) |
|
|
201,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil, natural gas and products |
|
|
- |
|
|
|
117,520 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,363 |
|
|
|
(27,241 |
) |
|
|
138,642 |
|
Production and operating expenses |
|
|
- |
|
|
|
3,690 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,266 |
|
|
|
(95 |
) |
|
|
8,861 |
|
Selling, general and administrative expenses |
|
|
14 |
|
|
|
1,124 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
576 |
|
|
|
(46 |
) |
|
|
1,668 |
|
Exploration expenses |
|
|
- |
|
|
|
131 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
733 |
|
|
|
- |
|
|
|
864 |
|
Depreciation, depletion and amortization |
|
|
- |
|
|
|
1,144 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,604 |
|
|
|
- |
|
|
|
6,748 |
|
Impairments |
|
|
- |
|
|
|
21 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
61 |
|
|
|
- |
|
|
|
82 |
|
Taxes other than income taxes |
|
|
- |
|
|
|
3,819 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,927 |
|
|
|
(176 |
) |
|
|
16,570 |
|
Accretion on discounted liabilities |
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
271 |
|
|
|
- |
|
|
|
314 |
|
Interest and debt expense |
|
|
225 |
|
|
|
457 |
|
|
|
57 |
|
|
|
58 |
|
|
|
40 |
|
|
|
718 |
|
|
|
(899 |
) |
|
|
656 |
|
Foreign currency transaction (gains) losses |
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
(85 |
) |
|
|
(106 |
) |
|
|
186 |
|
|
|
- |
|
|
|
11 |
|
|
Total Costs and Expenses |
|
|
239 |
|
|
|
127,965 |
|
|
|
57 |
|
|
|
(27 |
) |
|
|
(66 |
) |
|
|
74,705 |
|
|
|
(28,457 |
) |
|
|
174,416 |
|
|
Income before income taxes |
|
|
14,691 |
|
|
|
14,313 |
|
|
|
6 |
|
|
|
94 |
|
|
|
107 |
|
|
|
22,821 |
|
|
|
(25,170 |
) |
|
|
26,862 |
|
Provision for income taxes |
|
|
(75 |
) |
|
|
1,605 |
|
|
|
2 |
|
|
|
(6 |
) |
|
|
4 |
|
|
|
10,515 |
|
|
|
- |
|
|
|
12,045 |
|
|
Net income |
|
|
14,766 |
|
|
|
12,708 |
|
|
|
4 |
|
|
|
100 |
|
|
|
103 |
|
|
|
12,306 |
|
|
|
(25,170 |
) |
|
|
14,817 |
|
Less: net income attributable to
noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(51 |
) |
|
|
- |
|
|
|
(51 |
) |
|
Net Income Attributable to ConocoPhillips |
|
$ |
14,766 |
|
|
|
12,708 |
|
|
|
4 |
|
|
|
100 |
|
|
|
103 |
|
|
|
12,255 |
|
|
|
(25,170 |
) |
|
|
14,766 |
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
Canada |
|
|
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Funding |
|
|
Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Balance Sheet |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
- |
|
|
|
185 |
|
|
|
- |
|
|
|
13 |
|
|
|
1 |
|
|
|
506 |
|
|
|
(64 |
) |
|
|
641 |
|
Accounts and notes receivable |
|
|
25 |
|
|
|
5,849 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,911 |
|
|
|
(6,255 |
) |
|
|
12,530 |
|
Inventories |
|
|
- |
|
|
|
3,566 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,702 |
|
|
|
- |
|
|
|
6,268 |
|
Prepaid expenses and other current assets |
|
|
11 |
|
|
|
1,219 |
|
|
|
- |
|
|
|
6 |
|
|
|
4 |
|
|
|
1,583 |
|
|
|
(9 |
) |
|
|
2,814 |
|
|
|
Total Current Assets |
|
|
36 |
|
|
|
10,819 |
|
|
|
- |
|
|
|
19 |
|
|
|
5 |
|
|
|
17,702 |
|
|
|
(6,328 |
) |
|
|
22,253 |
|
Investments, loans and long-term receivables* |
|
|
69,534 |
|
|
|
87,167 |
|
|
|
770 |
|
|
|
1,363 |
|
|
|
925 |
|
|
|
48,112 |
|
|
|
(170,021 |
) |
|
|
37,850 |
|
Net properties, plants and equipment |
|
|
- |
|
|
|
19,675 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
67,461 |
|
|
|
- |
|
|
|
87,136 |
|
Goodwill |
|
|
- |
|
|
|
3,715 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,715 |
|
Intangibles |
|
|
- |
|
|
|
773 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
58 |
|
|
|
- |
|
|
|
831 |
|
Other assets |
|
|
56 |
|
|
|
218 |
|
|
|
2 |
|
|
|
4 |
|
|
|
20 |
|
|
|
400 |
|
|
|
(58 |
) |
|
|
642 |
|
|
|
Total Assets |
|
$ |
69,626 |
|
|
|
122,367 |
|
|
|
772 |
|
|
|
1,386 |
|
|
|
950 |
|
|
|
133,733 |
|
|
|
(176,407 |
) |
|
|
152,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1 |
|
|
|
10,036 |
|
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
|
|
11,073 |
|
|
|
(6,255 |
) |
|
|
14,862 |
|
Short-term debt |
|
|
1,300 |
|
|
|
1,282 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
214 |
|
|
|
- |
|
|
|
2,796 |
|
Accrued income and other taxes |
|
|
- |
|
|
|
399 |
|
|
|
- |
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
3,448 |
|
|
|
- |
|
|
|
3,844 |
|
Employee benefit obligations |
|
|
- |
|
|
|
518 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
223 |
|
|
|
- |
|
|
|
741 |
|
Other accruals |
|
|
172 |
|
|
|
814 |
|
|
|
19 |
|
|
|
32 |
|
|
|
22 |
|
|
|
1,363 |
|
|
|
(9 |
) |
|
|
2,413 |
|
|
|
Total Current Liabilities |
|
|
1,473 |
|
|
|
13,049 |
|
|
|
21 |
|
|
|
33 |
|
|
|
23 |
|
|
|
16,321 |
|
|
|
(6,264 |
) |
|
|
24,656 |
|
Long-term debt |
|
|
13,310 |
|
|
|
4,061 |
|
|
|
749 |
|
|
|
1,250 |
|
|
|
849 |
|
|
|
7,443 |
|
|
|
- |
|
|
|
27,662 |
|
|
|
Asset retirement obligations and accrued
environmental costs |
|
|
- |
|
|
|
1,164 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,672 |
|
|
|
- |
|
|
|
7,836 |
|
Joint venture acquisition obligation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,177 |
|
|
|
- |
|
|
|
5,177 |
|
Deferred income taxes |
|
|
(4 |
) |
|
|
2,573 |
|
|
|
- |
|
|
|
14 |
|
|
|
15 |
|
|
|
15,696 |
|
|
|
- |
|
|
|
18,294 |
|
Employee benefit obligations |
|
|
- |
|
|
|
2,862 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
800 |
|
|
|
- |
|
|
|
3,662 |
|
Other liabilities and deferred credits* |
|
|
125 |
|
|
|
24,846 |
|
|
|
- |
|
|
|
27 |
|
|
|
15 |
|
|
|
16,285 |
|
|
|
(38,255 |
) |
|
|
3,043 |
|
|
|
Total Liabilities |
|
|
14,904 |
|
|
|
48,555 |
|
|
|
770 |
|
|
|
1,324 |
|
|
|
902 |
|
|
|
68,394 |
|
|
|
(44,519 |
) |
|
|
90,330 |
|
Retained earnings |
|
|
25,668 |
|
|
|
8,717 |
|
|
|
- |
|
|
|
(14 |
) |
|
|
4 |
|
|
|
9,082 |
|
|
|
(11,276 |
) |
|
|
32,181 |
|
Other common stockholders equity |
|
|
29,054 |
|
|
|
65,095 |
|
|
|
2 |
|
|
|
76 |
|
|
|
44 |
|
|
|
55,670 |
|
|
|
(120,612 |
) |
|
|
29,329 |
|
Noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
587 |
|
|
|
- |
|
|
|
587 |
|
|
|
Total Liabilities and Equity |
|
$ |
69,626 |
|
|
|
122,367 |
|
|
|
772 |
|
|
|
1,386 |
|
|
|
950 |
|
|
|
133,733 |
|
|
|
(176,407 |
) |
|
|
152,427 |
|
|
|
*Includes intercompany loans. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
December 31, 2008 |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
- |
|
|
|
8 |
|
|
|
- |
|
|
|
10 |
|
|
|
1 |
|
|
|
750 |
|
|
|
(14 |
) |
|
|
755 |
|
Accounts and notes receivable |
|
|
13 |
|
|
|
10,541 |
|
|
|
15 |
|
|
|
- |
|
|
|
- |
|
|
|
21,314 |
|
|
|
(19,888 |
) |
|
|
11,995 |
|
Inventories |
|
|
- |
|
|
|
2,909 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,287 |
|
|
|
(101 |
) |
|
|
5,095 |
|
Prepaid expenses and other current assets |
|
|
10 |
|
|
|
1,170 |
|
|
|
- |
|
|
|
14 |
|
|
|
10 |
|
|
|
1,794 |
|
|
|
- |
|
|
|
2,998 |
|
|
|
Total Current Assets |
|
|
23 |
|
|
|
14,628 |
|
|
|
15 |
|
|
|
24 |
|
|
|
11 |
|
|
|
26,145 |
|
|
|
(20,003 |
) |
|
|
20,843 |
|
Investments, loans and long-term receivables* |
|
|
61,144 |
|
|
|
83,645 |
|
|
|
1,699 |
|
|
|
1,183 |
|
|
|
802 |
|
|
|
44,629 |
|
|
|
(160,203 |
) |
|
|
32,899 |
|
Net properties, plants and equipment |
|
|
- |
|
|
|
19,017 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
64,928 |
|
|
|
2 |
|
|
|
83,947 |
|
Goodwill |
|
|
- |
|
|
|
3,778 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,778 |
|
Intangibles |
|
|
- |
|
|
|
784 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
62 |
|
|
|
- |
|
|
|
846 |
|
Other assets |
|
|
13 |
|
|
|
243 |
|
|
|
2 |
|
|
|
109 |
|
|
|
183 |
|
|
|
286 |
|
|
|
(284 |
) |
|
|
552 |
|
|
|
Total Assets |
|
$ |
61,180 |
|
|
|
122,095 |
|
|
|
1,716 |
|
|
|
1,316 |
|
|
|
996 |
|
|
|
136,050 |
|
|
|
(180,488 |
) |
|
|
142,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
- |
|
|
|
17,566 |
|
|
|
- |
|
|
|
2 |
|
|
|
1 |
|
|
|
16,309 |
|
|
|
(19,888 |
) |
|
|
13,990 |
|
Short-term debt |
|
|
- |
|
|
|
301 |
|
|
|
950 |
|
|
|
- |
|
|
|
- |
|
|
|
68 |
|
|
|
(949 |
) |
|
|
370 |
|
Accrued income and other taxes |
|
|
- |
|
|
|
233 |
|
|
|
- |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
4,042 |
|
|
|
- |
|
|
|
4,273 |
|
Employee benefit obligations |
|
|
- |
|
|
|
702 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
237 |
|
|
|
- |
|
|
|
939 |
|
Other accruals |
|
|
25 |
|
|
|
883 |
|
|
|
18 |
|
|
|
15 |
|
|
|
10 |
|
|
|
1,280 |
|
|
|
(23 |
) |
|
|
2,208 |
|
|
|
Total Current Liabilities |
|
|
25 |
|
|
|
19,685 |
|
|
|
968 |
|
|
|
16 |
|
|
|
10 |
|
|
|
21,936 |
|
|
|
(20,860 |
) |
|
|
21,780 |
|
Long-term debt |
|
|
7,703 |
|
|
|
5,364 |
|
|
|
749 |
|
|
|
1,250 |
|
|
|
848 |
|
|
|
10,221 |
|
|
|
950 |
|
|
|
27,085 |
|
Asset retirement obligations and accrued
environmental costs |
|
|
- |
|
|
|
1,101 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,062 |
|
|
|
- |
|
|
|
7,163 |
|
Joint venture acquisition obligation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,669 |
|
|
|
- |
|
|
|
5,669 |
|
Deferred income taxes |
|
|
(4 |
) |
|
|
2,882 |
|
|
|
- |
|
|
|
9 |
|
|
|
34 |
|
|
|
15,258 |
|
|
|
(12 |
) |
|
|
18,167 |
|
Employee benefit obligations |
|
|
- |
|
|
|
3,367 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
760 |
|
|
|
- |
|
|
|
4,127 |
|
Other liabilities and deferred credits* |
|
|
4,954 |
|
|
|
24,609 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,976 |
|
|
|
(43,930 |
) |
|
|
2,609 |
|
|
|
Total Liabilities |
|
|
12,678 |
|
|
|
57,008 |
|
|
|
1,717 |
|
|
|
1,275 |
|
|
|
892 |
|
|
|
76,882 |
|
|
|
(63,852 |
) |
|
|
86,600 |
|
Retained earnings |
|
|
24,130 |
|
|
|
4,792 |
|
|
|
(3 |
) |
|
|
125 |
|
|
|
167 |
|
|
|
7,234 |
|
|
|
(5,803 |
) |
|
|
30,642 |
|
Other common stockholders equity |
|
|
24,372 |
|
|
|
60,295 |
|
|
|
2 |
|
|
|
(84 |
) |
|
|
(63 |
) |
|
|
50,834 |
|
|
|
(110,833 |
) |
|
|
24,523 |
|
Noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,100 |
|
|
|
- |
|
|
|
1,100 |
|
|
|
Total Liabilities and Equity |
|
$ |
61,180 |
|
|
|
122,095 |
|
|
|
1,716 |
|
|
|
1,316 |
|
|
|
996 |
|
|
|
136,050 |
|
|
|
(180,488 |
) |
|
|
142,865 |
|
|
|
*Includes intercompany loans.
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Nine Months Ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
Canada |
|
|
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Funding |
|
|
Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Statement of Cash Flows |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Operating Activities |
|
$ |
(4,739 |
) |
|
|
5,941 |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
8,126 |
|
|
|
(1,946 |
) |
|
|
7,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures and investments |
|
|
- |
|
|
|
(2,572 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,150 |
) |
|
|
546 |
|
|
|
(8,176 |
) |
Proceeds from asset dispositions |
|
|
- |
|
|
|
593 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
664 |
|
|
|
(319 |
) |
|
|
938 |
|
Long-term advances/loansrelated parties |
|
|
- |
|
|
|
(164 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(464 |
) |
|
|
325 |
|
|
|
(303 |
) |
Collection of advances/loansrelated parties |
|
|
- |
|
|
|
148 |
|
|
|
950 |
|
|
|
- |
|
|
|
- |
|
|
|
3,796 |
|
|
|
(4,832 |
) |
|
|
62 |
|
Other |
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31 |
|
|
|
- |
|
|
|
50 |
|
|
Net Cash Provided by (Used in) Investing Activities |
|
|
- |
|
|
|
(1,976 |
) |
|
|
950 |
|
|
|
- |
|
|
|
- |
|
|
|
(2,123 |
) |
|
|
(4,280 |
) |
|
|
(7,429 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
8,909 |
|
|
|
299 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
168 |
|
|
|
(325 |
) |
|
|
9,051 |
|
Repayment of debt |
|
|
(2,011 |
) |
|
|
(4,093 |
) |
|
|
(950 |
) |
|
|
- |
|
|
|
- |
|
|
|
(3,805 |
) |
|
|
4,832 |
|
|
|
(6,027 |
) |
Issuance of company common stock |
|
|
(11 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11 |
) |
Dividends paid on company common stock |
|
|
(2,090 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,896 |
) |
|
|
1,896 |
|
|
|
(2,090 |
) |
Other |
|
|
(58 |
) |
|
|
6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(812 |
) |
|
|
(227 |
) |
|
|
(1,091 |
) |
|
Net Cash Provided by (Used in) Financing Activities |
|
|
4,739 |
|
|
|
(3,788 |
) |
|
|
(950 |
) |
|
|
- |
|
|
|
- |
|
|
|
(6,345 |
) |
|
|
6,176 |
|
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes
on Cash and Cash Equivalents |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
98 |
|
|
|
- |
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
- |
|
|
|
177 |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
(244 |
) |
|
|
(50 |
) |
|
|
(114 |
) |
Cash and cash equivalents at beginning of period |
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
10 |
|
|
|
1 |
|
|
|
750 |
|
|
|
(14 |
) |
|
|
755 |
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
- |
|
|
|
185 |
|
|
|
- |
|
|
|
13 |
|
|
|
1 |
|
|
|
506 |
|
|
|
(64 |
) |
|
|
641 |
|
|
|
Statement of Cash Flows |
|
Nine Months Ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Operating Activities |
|
$ |
8,852 |
|
|
|
1,769 |
|
|
|
6 |
|
|
|
(1 |
) |
|
|
- |
|
|
|
11,922 |
|
|
|
(3,012 |
) |
|
|
19,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures and investments |
|
|
- |
|
|
|
(3,901 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,341 |
) |
|
|
707 |
|
|
|
(10,535 |
) |
Proceeds from asset dispositions |
|
|
- |
|
|
|
251 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
658 |
|
|
|
(180 |
) |
|
|
729 |
|
Long-term advances/loansrelated parties |
|
|
- |
|
|
|
(400 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,812 |
) |
|
|
3,031 |
|
|
|
(181 |
) |
Collection of advances/loansrelated parties |
|
|
- |
|
|
|
224 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12 |
|
|
|
(221 |
) |
|
|
15 |
|
Other |
|
|
- |
|
|
|
(183 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3 |
) |
|
|
- |
|
|
|
(186 |
) |
|
Net Cash Provided by (Used in) Investing Activities |
|
|
- |
|
|
|
(4,009 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9,486 |
) |
|
|
3,337 |
|
|
|
(10,158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
2,136 |
|
|
|
2,671 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
488 |
|
|
|
(3,031 |
) |
|
|
2,264 |
|
Repayment of debt |
|
|
(1,500 |
) |
|
|
(350 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(228 |
) |
|
|
221 |
|
|
|
(1,857 |
) |
Issuance of company common stock |
|
|
182 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
182 |
|
Repurchase of company common stock |
|
|
(7,500 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,500 |
) |
Dividends paid on company common stock |
|
|
(2,159 |
) |
|
|
- |
|
|
|
(6 |
) |
|
|
- |
|
|
|
- |
|
|
|
(3,134 |
) |
|
|
3,140 |
|
|
|
(2,159 |
) |
Other |
|
|
(11 |
) |
|
|
126 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(14 |
) |
|
|
(527 |
) |
|
|
(426 |
) |
|
Net Cash Provided by (Used in) Financing Activities |
|
|
(8,852 |
) |
|
|
2,447 |
|
|
|
(6 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,888 |
) |
|
|
(197 |
) |
|
|
(9,496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes
on Cash and Cash Equivalents |
|
|
- |
|
|
|
(158 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(64 |
) |
|
|
- |
|
|
|
(222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
- |
|
|
|
49 |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(516 |
) |
|
|
128 |
|
|
|
(340 |
) |
Cash and cash equivalents at beginning of period |
|
|
- |
|
|
|
195 |
|
|
|
- |
|
|
|
7 |
|
|
|
1 |
|
|
|
1,626 |
|
|
|
(373 |
) |
|
|
1,456 |
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
- |
|
|
|
244 |
|
|
|
- |
|
|
|
6 |
|
|
|
1 |
|
|
|
1,110 |
|
|
|
(245 |
) |
|
|
1,116 |
|
|
30
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
Managements Discussion and Analysis contains forward-looking statements including, without
limitation, statements relating to our 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 intends, believes, expects, plans, scheduled, should,
anticipates, estimates, and similar expressions identify forward-looking statements. We do not
undertake to update, revise or correct any of the forward-looking information. Readers are
cautioned that such forward-looking statements should be read in conjunction with the 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 49.
The terms earnings and loss as used in Managements Discussion and Analysis refer to net income
(loss) attributable to ConocoPhillips.
BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW
ConocoPhillips is an international, integrated energy company. We are the third-largest integrated
energy company in the United States, based on market capitalization. At September 30, 2009, we had
approximately 30,100 employees and total assets of $152 billion.
The energy industry continued to be characterized by economic volatility during the third quarter
and first nine months of 2009. The price of West Texas Intermediate (WTI) benchmark crude oil
peaked during mid-2008 at almost $150 per barrel, and fell sharply throughout the remainder of the
year to the low-$30-per-barrel range. Since the end of 2008, crude oil prices have trended upward,
with WTI averaging $68.19 per barrel in the third quarter of 2009, or $8.65 higher than the second
quarter of 2009. The improvement in crude oil prices during 2009 was influenced by expectations of
stabilization and eventual recovery of the world economy.
In the United States, industry natural gas prices for Henry Hub decreased during the third quarter
of 2009, averaging $3.39 per million British thermal units, down $0.12 compared with the second
quarter of 2009, and down $6.86 compared with the third quarter of 2008. Domestic natural gas
prices trended downward mostly due to continued strong natural gas production in the Lower 48,
primarily as a result of unconventional natural gas production, and lower demand due to the U.S.
recession. As a result of the changes in supply and demand, natural gas storage levels are higher
than both the five-year average and the levels at the end of the third quarter of 2008.
Against this economic backdrop, our Exploration and Production (E&P) segment had earnings of
$978 million in the third quarter of 2009. This compares with E&P earnings of $725 million in the
second quarter of 2009 and $3,928 million in the third quarter of 2008.
Global refining margins remained weak in the third quarter of 2009, as demand, particularly for
distillates, continued to be suppressed by the global economic slowdown. In addition, the
compressed differential in prices for high-quality crude oil, compared with those of lower-quality
crude oil, reduced margins for those refineries configured to capitalize on the ability to process
lower-quality crudes. Weak refining margins significantly impacted our Refining and Marketing
(R&M) segment, which reported earnings of $99 million in the third quarter of 2009, compared with a
loss of $52 million in the second quarter of 2009 and earnings of $849 million in the third quarter
of 2008.
Our LUKOIL Investment segment had earnings of $545 million in the third quarter of 2009, compared
with $682 million in the second quarter of 2009, and $438 million in the third quarter of 2008.
For the nine-month periods, our equity earnings from LUKOIL were $1,275 million in 2009, compared
with $1,922 million in 2008. These results indicate LUKOIL was also negatively impacted by lower
commodity prices and refining margins.
31
RESULTS OF OPERATIONS
Unless otherwise indicated, discussion of results for the three- and nine-month periods ended
September 30, 2009, is based on a comparison with the corresponding periods of 2008.
Consolidated Results
A summary of earnings (loss) by business segment follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
Exploration and Production (E&P) |
|
$ |
978 |
|
|
|
3,928 |
|
|
|
2,403 |
|
|
|
10,814 |
|
Midstream |
|
|
62 |
|
|
|
173 |
|
|
|
216 |
|
|
|
472 |
|
Refining and Marketing (R&M) |
|
|
99 |
|
|
|
849 |
|
|
|
252 |
|
|
|
2,033 |
|
LUKOIL Investment |
|
|
545 |
|
|
|
438 |
|
|
|
1,275 |
|
|
|
1,922 |
|
Chemicals |
|
|
104 |
|
|
|
46 |
|
|
|
194 |
|
|
|
116 |
|
Emerging Businesses |
|
|
(2 |
) |
|
|
35 |
|
|
|
- |
|
|
|
55 |
|
Corporate and Other |
|
|
(283 |
) |
|
|
(281 |
) |
|
|
(699 |
) |
|
|
(646 |
) |
|
Net income attributable to ConocoPhillips |
|
$ |
1,503 |
|
|
|
5,188 |
|
|
|
3,641 |
|
|
|
14,766 |
|
|
Earnings were $1,503 million in the third quarter of 2009, compared with $5,188 million in the
third quarter of 2008. For the nine-month periods ended September 30, 2009 and 2008, earnings were
$3,641 million and $14,766 million, respectively. The decrease from both 2008 periods was
primarily the result of:
|
|
|
Substantially lower prices for crude oil, natural gas and natural gas liquids in our E&P
segment. |
|
|
|
Lower results from our R&M segment, reflecting lower refining margins. |
See the Segment Results section for additional information on our segment results.
Income Statement Analysis
Sales and other operating revenues decreased 43 percent in the third quarter of 2009 and 46
percent in the nine-month period, while purchased crude oil, natural gas and products
decreased 44 percent and 48 percent, respectively. These decreases were mainly the result of
significantly lower prices for petroleum products, crude oil, natural gas and natural gas liquids.
Equity in earnings of affiliates decreased 16 percent in the third quarter of 2009,
primarily due to reduced earnings from DCP Midstream, LLC. Equity earnings decreased 43 percent in
the nine-month period, reflecting reduced earnings from LUKOIL; DCP Midstream; FCCL Partnership;
Merey Sweeny, L.P. (MSLP); Malaysian Refining Company Sdn. Bhd.; and WRB Refining LLC. The
decreases were mainly the result of lower commodity prices and refining margins.
Other income decreased 37 percent during the first nine months of 2009. The decrease was
primarily due to 2008 gains related to asset dispositions in our E&P and R&M segments.
Production and operating expenses decreased 17 percent in the third quarter of 2009 and 14
percent in the nine-month period. Contributing to these decreases were lower utilities costs,
favorable foreign exchange impacts, and our emphasis on cost reduction.
32
Selling, general and administrative expenses decreased 17 percent in both comparative
periods of 2009, mostly due to reduced expenses as a result of disposition of U.S. and
international marketing assets.
Exploration expenses increased 45 percent in the third quarter of 2009, predominantly due
to higher dry hole costs.
Taxes other than income taxes decreased 25 percent in the third quarter of 2009 and 31
percent in the nine-month period, primarily due to lower production taxes resulting from lower
crude oil prices, as well as reduced excise taxes on petroleum product sales.
Interest and debt expense increased 41 percent and 39 percent in the third quarter and
first nine months of 2009 as a result of a higher average debt level, partially offset by lower
interest rates. Interest expense also increased in the nine month period as a result of lower
capitalized interest.
33
Segment Results
E&P
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Millions of Dollars |
|
Net Income (Loss) Attributable to ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
$ |
356 |
|
|
|
556 |
|
|
|
1,004 |
|
|
|
1,859 |
|
Lower 48 |
|
|
(29 |
) |
|
|
1,050 |
|
|
|
(168 |
) |
|
|
2,948 |
|
|
United States |
|
|
327 |
|
|
|
1,606 |
|
|
|
836 |
|
|
|
4,807 |
|
International |
|
|
651 |
|
|
|
2,322 |
|
|
|
1,567 |
|
|
|
6,007 |
|
|
|
|
$ |
978 |
|
|
|
3,928 |
|
|
|
2,403 |
|
|
|
10,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars Per Unit
|
|
|
|
Average Sales Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (per barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
66.22 |
|
|
|
118.90 |
|
|
|
53.43 |
|
|
|
110.26 |
|
International |
|
|
67.56 |
|
|
|
110.84 |
|
|
|
55.85 |
|
|
|
108.94 |
|
Total consolidated |
|
|
67.01 |
|
|
|
114.20 |
|
|
|
54.80 |
|
|
|
109.53 |
|
Equity affiliates* |
|
|
58.07 |
|
|
|
88.32 |
|
|
|
48.85 |
|
|
|
81.74 |
|
Worldwide E&P |
|
|
65.92 |
|
|
|
112.19 |
|
|
|
54.15 |
|
|
|
107.84 |
|
Natural gas (per thousand cubic feet) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
2.99 |
|
|
|
8.64 |
|
|
|
3.27 |
|
|
|
8.66 |
|
International |
|
|
4.26 |
|
|
|
9.13 |
|
|
|
4.81 |
|
|
|
9.14 |
|
Total consolidated |
|
|
3.69 |
|
|
|
8.91 |
|
|
|
4.14 |
|
|
|
8.93 |
|
Equity affiliates* |
|
|
2.57 |
|
|
|
- |
|
|
|
2.26 |
|
|
|
- |
|
Worldwide E&P |
|
|
3.67 |
|
|
|
8.91 |
|
|
|
4.10 |
|
|
|
8.93 |
|
Natural gas liquids (per barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
32.45 |
|
|
|
68.84 |
|
|
|
28.28 |
|
|
|
64.53 |
|
International |
|
|
37.48 |
|
|
|
68.78 |
|
|
|
33.06 |
|
|
|
67.46 |
|
Total consolidated |
|
|
34.62 |
|
|
|
68.81 |
|
|
|
30.33 |
|
|
|
65.85 |
|
Worldwide E&P |
|
|
34.62 |
|
|
|
68.81 |
|
|
|
30.33 |
|
|
|
65.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars
|
|
|
|
Worldwide Exploration Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General administrative; geological and geophysical; and lease rentals |
|
$ |
153 |
|
|
|
149 |
|
|
|
383 |
|
|
|
465 |
|
Leasehold impairment |
|
|
71 |
|
|
|
60 |
|
|
|
163 |
|
|
|
179 |
|
Dry holes |
|
|
162 |
|
|
|
58 |
|
|
|
308 |
|
|
|
220 |
|
|
|
|
$ |
386 |
|
|
|
267 |
|
|
|
854 |
|
|
|
864 |
|
|
* Excludes our equity share of LUKOIL, which is reported in the LUKOIL Investment segment.
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Thousands of Barrels Daily |
|
Operating Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil produced |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
|
218 |
|
|
|
218 |
|
|
|
236 |
|
|
|
239 |
|
Lower 48 |
|
|
91 |
|
|
|
85 |
|
|
|
92 |
|
|
|
92 |
|
|
United States |
|
|
309 |
|
|
|
303 |
|
|
|
328 |
|
|
|
331 |
|
Europe |
|
|
207 |
|
|
|
221 |
|
|
|
223 |
|
|
|
205 |
|
Asia Pacific |
|
|
110 |
|
|
|
87 |
|
|
|
114 |
|
|
|
88 |
|
Canada |
|
|
24 |
|
|
|
25 |
|
|
|
24 |
|
|
|
24 |
|
Middle East and Africa |
|
|
75 |
|
|
|
73 |
|
|
|
75 |
|
|
|
78 |
|
Other areas |
|
|
- |
|
|
|
9 |
|
|
|
5 |
|
|
|
9 |
|
|
Total consolidated |
|
|
725 |
|
|
|
718 |
|
|
|
769 |
|
|
|
735 |
|
Equity affiliates* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
45 |
|
|
|
32 |
|
|
|
40 |
|
|
|
29 |
|
Russia and Caspian |
|
|
59 |
|
|
|
31 |
|
|
|
54 |
|
|
|
21 |
|
|
|
|
|
829 |
|
|
|
781 |
|
|
|
863 |
|
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas liquids produced |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
|
11 |
|
|
|
13 |
|
|
|
16 |
|
|
|
16 |
|
Lower 48 |
|
|
77 |
|
|
|
74 |
|
|
|
75 |
|
|
|
73 |
|
|
United States |
|
|
88 |
|
|
|
87 |
|
|
|
91 |
|
|
|
89 |
|
Europe |
|
|
14 |
|
|
|
15 |
|
|
|
17 |
|
|
|
19 |
|
Asia Pacific |
|
|
18 |
|
|
|
19 |
|
|
|
17 |
|
|
|
17 |
|
Canada |
|
|
23 |
|
|
|
24 |
|
|
|
24 |
|
|
|
25 |
|
Middle East and Africa |
|
|
3 |
|
|
|
3 |
|
|
|
2 |
|
|
|
3 |
|
|
|
|
|
146 |
|
|
|
148 |
|
|
|
151 |
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Cubic Feet Daily
|
|
|
|
Natural gas produced** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
|
105 |
|
|
|
102 |
|
|
|
93 |
|
|
|
100 |
|
Lower 48 |
|
|
1,938 |
|
|
|
1,971 |
|
|
|
1,992 |
|
|
|
1,989 |
|
|
United States |
|
|
2,043 |
|
|
|
2,073 |
|
|
|
2,085 |
|
|
|
2,089 |
|
Europe |
|
|
702 |
|
|
|
847 |
|
|
|
850 |
|
|
|
918 |
|
Asia Pacific |
|
|
726 |
|
|
|
648 |
|
|
|
719 |
|
|
|
617 |
|
Canada |
|
|
1,063 |
|
|
|
1,061 |
|
|
|
1,101 |
|
|
|
1,072 |
|
Middle East and Africa |
|
|
124 |
|
|
|
122 |
|
|
|
119 |
|
|
|
114 |
|
Other areas |
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
19 |
|
|
Total consolidated |
|
|
4,658 |
|
|
|
4,769 |
|
|
|
4,874 |
|
|
|
4,829 |
|
Equity affiliates* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
88 |
|
|
|
- |
|
|
|
86 |
|
|
|
- |
|
|
|
|
|
4,746 |
|
|
|
4,769 |
|
|
|
4,960 |
|
|
|
4,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Barrels Daily
|
|
|
|
Mining operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syncrude produced |
|
|
25 |
|
|
|
24 |
|
|
|
21 |
|
|
|
21 |
|
|
|
|
|
* |
Excludes our equity share of LUKOIL, which is reported in the LUKOIL Investment
segment. |
** |
Represents quantities available for sale. Excludes gas equivalent of natural gas liquids shown
above. |
35
The E&P segment explores for, produces, transports and markets crude oil, natural gas and natural
gas liquids on a worldwide basis. It also mines deposits of oil sands in Canada to extract bitumen
and upgrade it into a synthetic crude oil. At September 30, 2009, our E&P operations were
producing in the United States, Norway, the United Kingdom, Canada, Australia, offshore Timor-Leste
in the Timor Sea, Indonesia, China, Vietnam, Libya, Nigeria, Algeria, and Russia.
Earnings from the E&P segment decreased 75 percent and 78 percent in the third quarter and first
nine months of 2009, primarily due to substantially lower crude oil, natural gas and natural gas
liquids prices. This decrease was partially offset by lower Alaska and Lower 48 production taxes
due to lower prices, higher international volumes and improved operating costs. See the Business
Environment and Executive Overview section for additional information on industry crude oil and
natural gas prices.
U.S. E&P
Earnings from our U.S. E&P operations decreased 80 percent in the third quarter and 83 percent in
the first nine months of 2009 due to significantly lower crude oil, natural gas and natural gas
liquids prices, partially offset by lower production taxes and lower operating costs.
U.S. E&P production on a barrel-of-oil-equivalent (BOE) basis averaged 737,000 BOE per day in the
third quarter of 2009; this compares with 736,000 in the third quarter of 2008. Less unplanned
downtime and improved well performance were mostly offset by field decline.
International E&P
Earnings from our international E&P operations decreased 72 percent in the third quarter and 74
percent in the first nine months of 2009, primarily as a result of significantly lower crude oil,
natural gas and natural gas liquids prices, partially offset by higher volumes and lower operating
costs.
International E&P production averaged 1,029,000 BOE per day in the third quarter of 2009, an
increase of 4 percent from 988,000 in the third quarter of 2008. The increase was predominantly
due to new production in China, Russia, Australia, Canada, Vietnam, the United Kingdom and Norway.
In addition, production increased due to less unplanned downtime and impacts from the royalty
framework in Alberta, Canada. These increases were partially offset by field decline and planned
downtime. Our Syncrude mining operations produced 25,000 barrels per day in the third quarter of
2009, compared with 24,000 barrels per day in the third quarter of 2008.
36
Midstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Millions of Dollars |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to ConocoPhillips* |
|
$ |
62 |
|
|
|
173 |
|
|
|
216 |
|
|
|
472 |
|
|
* Includes DCP Midstream-related earnings: |
|
$ |
26 |
|
|
|
153 |
|
|
|
128 |
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars Per Barrel
|
|
|
|
Average Sales Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. natural gas liquids* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
34.66 |
|
|
|
67.39 |
|
|
|
30.23 |
|
|
|
65.23 |
|
Equity affiliates |
|
|
28.89 |
|
|
|
60.46 |
|
|
|
26.26 |
|
|
|
59.82 |
|
|
* Based on index prices from the Mont Belvieu and Conway market hubs that are weighted by natural gas liquids component and location mix. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Barrels Daily
|
|
|
|
Operating Statistics* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas liquids extracted |
|
|
194 |
|
|
|
176 |
|
|
|
185 |
|
|
|
190 |
|
Natural gas liquids fractionated** |
|
|
164 |
|
|
|
181 |
|
|
|
166 |
|
|
|
166 |
|
|
|
|
|
* |
Includes our share of equity affiliates, except LUKOIL, which is reported in the LUKOIL Investment segment.
|
** |
Excludes DCP Midstream. |
The Midstream segment purchases raw natural gas from producers and gathers natural gas
through an extensive network of pipeline gathering systems. The natural gas is then processed to
extract natural gas liquids from the raw gas stream. The remaining residue gas is marketed to
electrical utilities, industrial users and gas marketing companies. Most of the natural gas
liquids are fractionatedseparated into individual components like ethane, butane and propaneand
marketed as chemical feedstock, fuel or blendstock. The Midstream segment consists of our 50
percent equity investment in DCP Midstream, LLC, as well as our other natural gas gathering and
processing operations, and natural gas liquids fractionation and marketing businesses, primarily in
the United States and Trinidad.
Earnings from the Midstream segment decreased 64 percent and 54 percent in the third quarter and
first nine months of 2009. The decrease in the third quarter was primarily due to lower natural
gas liquids prices experienced by equity affiliates DCP Midstream and Phoenix Park Gas Processors
Limited, slightly offset by higher volumes. Earnings for the nine-month period of 2009 were also
impacted by lower natural gas liquids prices, partially offset by the recognition of an $88 million
after-tax benefit in the first quarter of 2009 resulting from a DCP Midstream subsidiary converting
subordinated units to common units.
37
R&M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Millions of Dollars |
|
Net Income Attributable to ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
73 |
|
|
|
524 |
|
|
|
133 |
|
|
|
1,546 |
|
International |
|
|
26 |
|
|
|
325 |
|
|
|
119 |
|
|
|
487 |
|
|
|
|
$ |
99 |
|
|
|
849 |
|
|
|
252 |
|
|
|
2,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars Per Gallon
|
|
|
|
U.S. Average Wholesale Prices* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
|
$ |
2.04 |
|
|
|
3.21 |
|
|
|
1.77 |
|
|
|
3.00 |
|
Distillates |
|
|
1.90 |
|
|
|
3.56 |
|
|
|
1.66 |
|
|
|
3.41 |
|
|
*
Excludes excise taxes. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Barrels Daily
|
|
|
|
Operating Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refining operations* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil capacity |
|
|
1,986 |
|
|
|
2,008 |
|
|
|
1,986 |
|
|
|
2,008 |
|
Crude oil processed |
|
|
1,841 |
|
|
|
1,813 |
|
|
|
1,762 |
|
|
|
1,837 |
|
Capacity utilization (percent) |
|
|
93 |
% |
|
|
90 |
|
|
|
89 |
|
|
|
91 |
|
Refinery production |
|
|
2,017 |
|
|
|
1,975 |
|
|
|
1,918 |
|
|
|
2,020 |
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil capacity |
|
|
671 |
|
|
|
670 |
|
|
|
671 |
|
|
|
670 |
|
Crude oil processed |
|
|
541 |
|
|
|
505 |
|
|
|
531 |
|
|
|
557 |
|
Capacity utilization (percent) |
|
|
81 |
% |
|
|
75 |
|
|
|
79 |
|
|
|
83 |
|
Refinery production |
|
|
548 |
|
|
|
523 |
|
|
|
541 |
|
|
|
562 |
|
Worldwide |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil capacity |
|
|
2,657 |
|
|
|
2,678 |
|
|
|
2,657 |
|
|
|
2,678 |
|
Crude oil processed |
|
|
2,382 |
|
|
|
2,318 |
|
|
|
2,293 |
|
|
|
2,394 |
|
Capacity utilization (percent) |
|
|
90 |
% |
|
|
87 |
|
|
|
86 |
|
|
|
89 |
|
Refinery production |
|
|
2,565 |
|
|
|
2,498 |
|
|
|
2,459 |
|
|
|
2,582 |
|
|
* Includes our share of equity affiliates, except LUKOIL, which is reported in the LUKOIL Investment segment. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum products sales volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
|
|
1,188 |
|
|
|
1,089 |
|
|
|
1,136 |
|
|
|
1,095 |
|
Distillates |
|
|
906 |
|
|
|
858 |
|
|
|
860 |
|
|
|
880 |
|
Other products |
|
|
420 |
|
|
|
365 |
|
|
|
375 |
|
|
|
384 |
|
|
|
|
|
2,514 |
|
|
|
2,312 |
|
|
|
2,371 |
|
|
|
2,359 |
|
International |
|
|
626 |
|
|
|
634 |
|
|
|
622 |
|
|
|
645 |
|
|
|
|
|
3,140 |
|
|
|
2,946 |
|
|
|
2,993 |
|
|
|
3,004 |
|
|
The R&M segments operations encompass refining crude oil and other feedstocks into petroleum
products (such as gasoline, distillates and aviation fuel); buying, selling and transporting crude
oil; and buying, transporting, distributing and marketing petroleum products. R&M has operations
mainly in the United States, Europe and the Asia Pacific Region.
38
R&M reported earnings of $99 million during the third quarter of 2009, compared with earnings of
$849 million in the same period of 2008. The decrease in earnings was primarily due to lower U.S.
and international refining margins and lower international marketing margins, partially offset by
positive foreign currency exchange impacts and lower domestic utility costs.
R&Ms earnings for the first nine months of 2009 and 2008 were $252 million and $2,033 million,
respectively. Earnings decreased primarily as a result of significantly lower U.S. and
international refining margins, lower refining and marketing volumes, lower international marketing
margins and a lower net benefit from asset rationalization efforts. These decreases were partially
offset by lower utilities and maintenance costs and positive foreign currency exchange impacts.
U.S. R&M
In the third quarter of 2009, our U.S. R&M operations reported earnings of $73 million, compared
with earnings of $524 million in the same period of 2008. Earnings for the first nine months of
2009 and 2008 were $133 million and $1,546 million, respectively.
Our U.S. refining capacity utilization rate was 93 percent in the third quarter of 2009, compared
with 90 percent in the same quarter of 2008. The current-year rate was mainly affected by run
reductions due to market conditions, while the prior-year rate was impacted by downtime associated
with hurricanes.
International R&M
International R&M reported earnings of $26 million in the third quarter of 2009 and earnings of
$119 million in the first nine months of 2009. This compares with earnings of $325 million and
$487 million for the corresponding periods of 2008.
Our international refining capacity utilization rate was 81 percent in the third quarter of 2009,
compared with 75 percent in the same quarter of 2008. The utilization rate for both periods
reflects run reductions in response to current market conditions. In addition, the prior-year rate
was impacted by turnaround activity.
LUKOIL Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to ConocoPhillips |
|
$ |
545 |
|
|
|
438 |
|
|
|
1,275 |
|
|
|
1,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net crude oil produced (thousands of barrels daily) |
|
|
382 |
|
|
|
371 |
|
|
|
388 |
|
|
|
384 |
|
Net natural gas produced (millions of cubic feet daily) |
|
|
253 |
|
|
|
303 |
|
|
|
281 |
|
|
|
356 |
|
Net refinery crude oil processed (thousands of barrels daily) |
|
|
273 |
|
|
|
228 |
|
|
|
241 |
|
|
|
222 |
|
|
|
|
|
* |
Represents our net share of our estimate of LUKOILs production and processing. |
This segment represents our investment in the ordinary shares of OAO LUKOIL, an
international, integrated oil and gas company headquartered in Russia, which we account for under
the equity method. As of September 30, 2009, our ownership interest in LUKOIL was 20 percent based
on authorized and issued shares. Our ownership interest based on estimated shares outstanding,
used for equity method accounting, was 20.09 percent.
Because LUKOILs accounting cycle close and preparation of U.S. generally accepted accounting
principles financial statements occur subsequent to our reporting deadline, our equity earnings and
statistics for our LUKOIL investment are estimated based on current market indicators, publicly
available LUKOIL information and other objective data. Once the difference between actual and
estimated results is known, an adjustment is
39
recorded. This estimate-to-actual adjustment will be a recurring component of future period
results. In addition to our estimated equity share of LUKOILs earnings, this segment reflects the
amortization of the basis difference between our equity interest in the net assets of LUKOIL and
the book value of our investment, and also includes the costs associated with our employees
seconded to LUKOIL.
Earnings from the LUKOIL Investment segment increased 24 percent in the third quarter of 2009,
primarily due to lower extraction tax and export tariff rates and improved volumes, partially
offset by lower refined products and crude oil prices. Earnings for the nine-month period
decreased 34 percent, primarily due to lower prices, partially offset by lower extraction tax and
export tariff rates and improved volumes. Results for both comparative periods included a benefit
from basis difference amortization, in addition to a third-quarter 2009 $33 million positive
alignment of second-quarter estimated earnings to LUKOILs reported results, compared with a
$101 million negative alignment in the third quarter of 2008.
Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to ConocoPhillips |
|
$ |
104 |
|
|
|
46 |
|
|
|
194 |
|
|
|
116 |
|
|
The Chemicals segment consists of our 50 percent interest in Chevron Phillips Chemical Company LLC
(CPChem), which we account for under the equity method. CPChem uses natural gas liquids and other
feedstocks to produce petrochemicals. These products are then marketed and sold, or used as
feedstocks to produce plastics and commodity chemicals.
Earnings from the Chemicals segment were $104 million in the third quarter of 2009, compared with
$46 million in the third quarter of 2008. Chemicals earnings were $194 million in the first nine
months of 2009, compared with $116 million in 2008. The increase for both comparative periods is
primarily due to lower utility and other operating costs, partially offset by lower margins in the
olefins and polyolefins business line. In addition, third-quarter earnings benefitted from higher
margins in the specialties, aromatics and styrenics business line.
40
Emerging Businesses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30 |
|
|
September 30 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net Income (Loss) Attributable to ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power
|
|
$ |
22 |
|
|
|
53 |
|
|
|
73 |
|
|
|
106 |
|
Other
|
|
|
(24 |
) |
|
|
(18 |
) |
|
|
(73 |
) |
|
|
(51 |
) |
|
|
|
$ |
(2 |
) |
|
|
35 |
|
|
|
- |
|
|
|
55 |
|
|
The Emerging Businesses segment represents our investment in new technologies or businesses outside
our normal scope of operations. Activities within this segment are currently focused on power
generation and innovation of new technologies, such as those related to conventional and
nonconventional hydrocarbon recovery (including heavy oil), refining, alternative energy, biofuels
and the environment.
Losses from the Emerging Businesses segment were $2 million in the third quarter of 2009, compared
with earnings of $35 million in the same quarter of 2008. Emerging Businesses broke even in the
first nine months of 2009, compared with $55 million in earnings in the nine-month period of 2008.
The decline in both periods was primarily due to lower international power results. The nine-month
period of 2009 was also impacted by higher technology development expenses.
Corporate and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net Income (Loss) Attributable to ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest |
|
$ |
(245 |
) |
|
|
(149 |
) |
|
|
(610 |
) |
|
|
(376 |
) |
Corporate general and administrative expenses |
|
|
(5 |
) |
|
|
(41 |
) |
|
|
(77 |
) |
|
|
(153 |
) |
Other |
|
|
(33 |
) |
|
|
(91 |
) |
|
|
(12 |
) |
|
|
(117 |
) |
|
|
|
$ |
(283 |
) |
|
|
(281 |
) |
|
|
(699 |
) |
|
|
(646 |
) |
|
Net interest consists of interest and financing expense, net of interest income and capitalized
interest, as well as premiums incurred on the early retirement of debt. Net interest increased 64
percent in the third quarter of 2009 and 62 percent in the first nine months of 2009. The increase
in both comparative periods was primarily due to higher average debt levels, partially offset by
lower interest rates. Capitalized interest was also lower in the nine-month period of 2009.
Corporate general and administrative expenses decreased 88 percent in the third quarter of 2009 and
50 percent in the first nine months of 2009 due to decreased costs related to compensation plans
and overhead. The category Other includes certain foreign currency transaction gains and losses,
environmental costs associated with sites no longer in operation, and other costs not directly
associated with an operating segment. Changes in the Other category reflect higher foreign
currency transaction gains in both comparative periods.
41
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
September 30 |
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
Short-term debt |
|
$ |
2,796 |
|
|
|
370 |
|
Total debt* |
|
$ |
30,458 |
|
|
|
27,455 |
|
Total equity |
|
$ |
62,097 |
|
|
|
56,265 |
|
Percent of total debt to capital** |
|
|
33 |
% |
|
|
33 |
|
Percent of floating-rate debt to total debt |
|
|
15 |
% |
|
|
37 |
|
|
|
|
|
* |
Total debt includes short- and long-term debt, as shown on our consolidated balance sheet.
|
** |
Capital includes total debt and total equity.
|
To meet our short- and long-term liquidity requirements, we look to a variety of funding
sources. Cash generated from operating activities is the primary source of funding. In addition,
during the first nine months of 2009, we issued $9 billion of long-term notes, and we raised $938
million in proceeds from asset sales. During the first nine months of 2009, available cash was
primarily used to support our ongoing capital expenditures and investments program, repay
commercial paper and other debt, pay dividends, and meet the funding requirements to FCCL
Partnership. Total dividends paid on our common stock during the first nine months of 2009 were
$2,090 million. During the first nine months of 2009, cash and cash equivalents decreased
$114 million to $641 million.
In addition to cash flows from operating activities and proceeds from asset sales, we rely on our
commercial paper and credit facility program, and our shelf registration statement to support our
short- and long-term liquidity requirements. The credit markets, including the commercial paper
markets in the United States, have recently experienced adverse conditions. Although we have not
been materially impacted by these conditions, continuing volatility in the credit markets may
increase costs associated with issuing commercial paper or other debt instruments due to increased
spreads over relevant interest rate benchmarks. Such volatility may also affect our ability, the
ability of our joint ventures and equity affiliates, and the ability of third parties with whom we
seek to do business, to access those credit markets. Notwithstanding these adverse market
conditions, we believe current cash and short-term investment balances and cash generated by
operations, together with access to external sources of funds as described below in the
Significant Sources of Capital section, will be sufficient to meet our funding requirements in
the near- and long-term, including our capital spending program, dividend payments, required debt
payments and the funding requirements to FCCL.
Significant Sources of Capital
Operating Activities
During the first nine months of 2009, cash of $7,385 million was provided by operating activities,
a 62 percent decrease from cash from operations of $19,536 million in the corresponding period of
2008. The decline was primarily due to significantly lower commodity prices and refining margins.
While the stability of our cash flows from operating activities benefits from geographic diversity
and the effects of upstream and downstream integration, our short- and long-term operating cash
flows are highly dependent upon prices for crude oil, natural gas and natural gas liquids, as well
as refining and marketing margins. During the first nine months of 2009, crude oil and natural gas
prices, as well as refining margins, were significantly lower than in the same period of 2008.
These prices and margins 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.
The level of our production volumes of crude oil, natural gas and natural gas liquids also impacts
our cash flows. These production levels are impacted by such factors as acquisitions and
dispositions of fields, field
42
production decline rates, new technologies, operating efficiency, weather conditions, and new
discoveries 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
historically this variability has not been as significant as that caused by commodity prices.
In addition, the level and quality of output from our refineries impacts our cash flows. The
output at our refineries is impacted by such factors as operating efficiency, maintenance
turnarounds, market conditions, feedstock availability and weather conditions. We actively manage
the operations of our refineries and, typically, any variability in their operations has not been
as significant to cash flows as that caused by refining margins.
Asset Sales
Proceeds from asset sales during the first nine months of 2009 were $938 million, compared with
$729 million in the same period of 2008. In the third quarter of 2009, we closed on the sale of
our ownership interest in the Keystone Pipeline. In January of 2009, we closed on the sale of a
large part of our remaining U.S. retail marketing assets, which included seller financing in the
form of a $370 million five-year note and letters of credit totaling $54 million.
In October 2009, we announced a plan to raise approximately $10 billion from asset dispositions
over the next two years. We will work to identify the assets and begin marketing efforts over the
near term, with disposition candidates across the companys operations being considered. Proceeds
would be targeted toward debt reduction.
Commercial Paper and Credit Facilities
At September 30, 2009, we had two revolving credit facilities totaling $7.85 billion, consisting of
a $7.35 billion facility, expiring in September 2012, and a $500 million facility scheduled to
expire in July 2012. The facilities may be used as direct bank borrowings, as support for the
ConocoPhillips $6.35 billion commercial paper program, as support for the ConocoPhillips Qatar
Funding Ltd. $1.5 billion commercial paper program, or as support for issuances of letters of
credit totaling up to $750 million. At both September 30, 2009, and December 31, 2008, we had no
outstanding borrowings under the credit facilities, but $40 million in letters of credit had been
issued. Under both ConocoPhillips commercial paper programs, $2,342 million of commercial paper
was outstanding at September 30, 2009, compared with $6,933 million at December 31, 2008.
At September 30, 2009, our primary funding source for short-term working capital needs was the
ConocoPhillips $6.35 billion commercial paper program. Commercial paper maturities are generally
limited to 90 days. The ConocoPhillips Qatar Funding Ltd. $1.5 billion commercial paper program is
used to fund commitments relating to the Qatargas 3 project. Since we had $2,342 million of
commercial paper outstanding and had issued $40 million of letters of credit, we had access to $5.5
billion in borrowing capacity under our revolving credit facilities at September 30, 2009.
Shelf Registration
We have a universal shelf registration statement on file with the U.S. Securities and Exchange
Commission (SEC) under which we, as a well-known seasoned issuer, have the ability to issue and
sell an indeterminate amount of various types of debt and equity securities. Under this SEC shelf
registration, in February 2009, we issued $1.5 billion of 4.75% Notes due 2014, $2.25 billion of
5.75% Notes due 2019, and $2.25 billion of 6.50% Notes due 2039. In addition, in May 2009, we
issued $1.5 billion of 4.60% Notes due 2015, $1.0 billion of 6.00% Notes due 2020 and an additional
$500 million of 6.50% Notes due 2039. The proceeds from the sale of these notes were primarily
used to reduce outstanding commercial paper balances and for general corporate purposes.
Noncontrolling Interests
At September 30, 2009, and December 31, 2008, we had $587 million and $1,100 million, respectively,
of equity in less than wholly owned consolidated subsidiaries held by noncontrolling interest
owners. The decline from year-end 2008 was primarily due to Ashford Energy Capital S.A. redeeming
for $500 million,
43
plus accrued dividends, the investment in Ashford held by Cold Spring Finance S.a.r.l. in the third
quarter of 2009. The remaining noncontrolling interests at September 30, 2009, primarily represent
operating joint ventures we control. The largest of these, amounting to $560 million, was related
to Darwin liquefied natural gas (LNG) operations, located in Australias Northern Territory.
Off-Balance Sheet Arrangements
As part of our normal ongoing business operations and consistent with normal industry practice, we
enter into numerous agreements with other parties to pursue business opportunities, which share
costs and apportion risks among the parties as governed by the agreements. At September 30, 2009,
we were liable for certain contingent obligations under the following contractual arrangements:
|
|
|
Qatargas 3: We own a 30 percent interest in Qatargas 3, an integrated project
to produce and liquefy natural gas from Qatars North Field. Our interest is held through
a jointly owned company, Qatar Liquefied Gas Company Limited (3), for which we use the
equity method of accounting. Qatargas 3 secured project financing of $4 billion in
December 2005, consisting of $1.3 billion of loans from export credit agencies (ECA),
$1.5 billion from commercial banks, and $1.2 billion from ConocoPhillips. The
ConocoPhillips loan facilities have substantially the same terms as the ECA and commercial
bank facilities. Prior to project completion certification, all loans, including the
ConocoPhillips loan facilities, are guaranteed by the participants based on their
respective ownership interests. Accordingly, our maximum exposure to this financing
structure is $1.2 billion. Upon completion certification, currently expected in 2011, all
project loan facilities, including the ConocoPhillips loan facilities, will become
nonrecourse to the project participants. At September 30, 2009, Qatargas 3 had
approximately $3.5 billion outstanding under all the loan facilities, of which
ConocoPhillips provided $979 million, and an additional $85 million of accrued interest. |
|
|
|
Rockies Express Pipeline: In June 2006, we issued a guarantee for 24 percent of
$2 billion in credit facilities issued to Rockies Express Pipeline LLC, operated by Kinder
Morgan Energy Partners, L.P. The maximum potential amount of future payments to
third-party lenders under the guarantee is estimated to be $480 million, which could become
payable if the credit facilities are fully utilized and Rockies Express fails to meet its
obligations under the credit agreement. At September 30, 2009, Rockies Express had $1,871
million outstanding under the credit facilities, with our 24 percent guarantee equaling
$449 million. The operator anticipates construction completion in late 2009. Refinancing
of the $2 billion credit facility, which will make the debt nonrecourse to ConocoPhillips,
is expected to begin at that time. Construction cost estimates have increased
significantly from original projections, and additional increases or other changes related
to the investment may impact whether an other-than-temporary impairment of our equity
investment is required. |
For additional information about guarantees, see Note 11Guarantees, in the Notes to Consolidated
Financial Statements, which is incorporated herein by reference.
Capital Requirements
For information about our capital expenditures and investments, see the Capital Spending section.
During the first nine months of 2009, we used proceeds from the issuance of commercial paper to
redeem $284 million of 6.375% Notes and $950 million of Floating Rate Notes upon their maturity.
Our debt balance at September 30, 2009, was $30.5 billion, an increase of $3.0 billion from the
balance at December 31, 2008.
We are obligated to contribute $7.5 billion, plus interest, over a 10-year period, beginning in
2007, to FCCL. Quarterly principal and interest payments of $237 million began in the second
quarter of 2007 and will continue until the balance is paid. Of the principal obligation amount,
approximately $651 million was short-term and was included in the Accounts payablerelated
parties line on our September 30, 2009, consolidated balance sheet. The principal portion of
these payments, which totaled $466 million in the first nine months of 2009, is included in the
Other line in the financing activities section of our consolidated
44
statement of cash flows.
Interest accrues at a fixed annual rate of 5.3 percent on the unpaid principal balance. Fifty
percent of the quarterly interest payment is reflected as a capital contribution and is included in
the Capital expenditures and investments line on our consolidated statement of cash flows.
In December 2005, we entered into a credit agreement with Qatargas 3, whereby we will provide loan
financing of approximately $1.2 billion for the construction of an LNG train in Qatar. This
financing will represent 30 percent of the projects total debt financing. Through September 30,
2009, we had provided $979 million in loan financing, and an additional $85 million of accrued
interest. See the Off-Balance Sheet Arrangements section for additional information on Qatargas
3.
We have provided loan financing to WRB Refining LLC, to assist it in meeting its operating and
capital spending requirements. At September 30, 2009, $174 million of such financing was
outstanding, of which $150 million was classified as long-term.
In October 2009, we announced a quarterly dividend of $0.50 per share, a 6 percent increase over
the prior dividend rate. The dividend is payable December 1, 2009, to shareholders of record at
the close of business on October 30, 2009. Also in October, we announced a preliminary 2010
capital program budget of $11 billion, which includes capital expenditures and investments, as well
as principal contributions on a joint venture acquisition obligation.
Capital Spending
Capital Expenditures and Investments
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Nine Months Ended |
|
|
|
September 30 |
|
|
|
2009 |
|
|
2008 |
|
E&P |
|
|
|
|
|
|
|
|
United StatesAlaska |
|
$ |
638 |
|
|
|
1,083 |
|
United StatesLower 48 |
|
|
2,124 |
|
|
|
2,887 |
|
International |
|
|
3,875 |
|
|
|
4,733 |
|
|
|
|
|
|
6,637 |
|
|
|
8,703 |
|
|
|
Midstream |
|
|
4 |
|
|
|
- |
|
|
|
R&M |
|
|
|
|
|
|
|
|
United States |
|
|
1,079 |
|
|
|
1,092 |
|
International |
|
|
292 |
|
|
|
455 |
|
|
|
|
|
|
1,371 |
|
|
|
1,547 |
|
|
|
LUKOIL Investment |
|
|
- |
|
|
|
- |
|
Chemicals |
|
|
- |
|
|
|
- |
|
Emerging Businesses |
|
|
89 |
|
|
|
137 |
|
Corporate and Other |
|
|
75 |
|
|
|
148 |
|
|
|
|
|
$ |
8,176 |
|
|
|
10,535 |
|
|
|
United States |
|
$ |
3,930 |
|
|
|
5,210 |
|
International |
|
|
4,246 |
|
|
|
5,325 |
|
|
|
|
|
$ |
8,176 |
|
|
|
10,535 |
|
|
|
45
E&P
Capital spending for E&P during the first nine months of 2009 totaled $6,637 million. The
expenditures supported key exploration and development projects including:
|
|
|
Alaska activities related to development drilling in the Greater Kuparuk Area, the
Greater Prudhoe Bay Area, the Western North Slope (including satellite field prospects) and
the Cook Inlet Area; and exploration. |
|
|
|
Oil and natural gas developments in the Lower 48, including New Mexico, Texas,
Louisiana, Oklahoma, Montana, North Dakota, Wyoming, and offshore in the Gulf of Mexico. |
|
|
|
Investment in West2East Pipeline LLC, a company holding a 100 percent interest in
Rockies Express Pipeline LLC. |
|
|
|
Oil sands projects, primarily those associated with FCCL, and ongoing natural gas
projects in Canada. |
|
|
|
In the North Sea, the Greater Ekofisk Area, and various southern and central North Sea
assets. |
|
|
|
An integrated project to produce and liquefy natural gas from Qatars North Field. |
|
|
|
The Kashagan Field in the Caspian Sea, offshore Kazakhstan. |
|
|
|
Advancement of coalbed methane projects in Australia associated with the Australia
Pacific LNG joint venture. |
|
|
|
The Peng Lai 19-3 development in Chinas Bohai Bay. |
|
|
|
The Browse Basin exploration drilling program, northwest shelf, offshore Australia. |
|
|
|
The Gumusut Field offshore Malaysia. |
|
|
|
The North Belut Field in Block B, as well as other projects offshore Block B and onshore
South Sumatra in Indonesia. |
|
|
|
Fields offshore Vietnam. |
|
|
|
Onshore developments in Nigeria. |
R&M
Capital spending for R&M during the first nine months of 2009 totaled $1,371 million and included
projects to meet environmental standards and improve the operating integrity, safety and energy
efficiency of processing units. Capital also was spent on refinery upgrade projects to expand
conversion capability and increase clean product yield.
Major project activities included:
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Expansion of a hydrocracker at the Rodeo facility of our San Francisco Refinery. |
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Design activities toward the upgrade of the Wilhelmshaven Refinery. |
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U.S. programs aimed at reliability, maintenance and air emission reductions. |
Contingencies
Legal and Tax Matters
We accrue a liability for known contingencies (other than those related to income taxes) when a
loss is probable and the amounts can be reasonably estimated. If a range of amounts can be
reasonably estimated and no amount within the range is a better estimate than any other amount,
then the minimum of the range is accrued. In the case of 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.
Environmental
We are subject to the same numerous international, federal, state and local environmental laws and
regulations as other companies in the petroleum exploration and production, refining, and crude oil
and refined product marketing and transportation businesses. For a discussion of the most
significant of these environmental laws
46
and regulations, including those with associated remediation obligations, see the Environmental
section in Managements Discussion and Analysis of Financial Condition and Results of Operations on
pages 63 through 65 of our 2008 Annual Report on Form 10-K.
We, from time to time, receive requests for information or notices of potential liability from the
Environmental Protection Agency 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 wastes attributable to our past operations. As of December 31,
2008, we reported we had been notified of potential liability under CERCLA and comparable state
laws at 65 sites around the United States. At September 30, 2009, we resolved and closed one site,
re-opened one site, and received one notice of potential liability, leaving 66 unresolved sites
where we have been notified of potential liability.
At September 30, 2009, our balance sheet included a total environmental accrual of $1,001 million,
compared with $979 million at December 31, 2008. 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 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 on our results of operations or financial position as a
result of compliance with current environmental laws and regulations.
Climate Change
There has been a broad range of proposed or promulgated state, national and international laws
focusing on greenhouse gas (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 they are likely to be increasingly widespread and stringent, at this
stage it is not possible to accurately estimate either a timetable for implementation or our future
compliance costs relating to implementation. Compliance with changes in laws, regulations and
obligations that create a GHG emission trading scheme or GHG reduction policies generally could
significantly increase costs or reduce demand for fossil energy derived products. For examples of
legislation or precursors for possible regulation that do or could affect our operations, see the
Climate Change section in Managements Discussion and Analysis of Financial Condition and Results
of Operations on pages 65 through 66 of our 2008 Annual Report on Form 10-K.
NEW ACCOUNTING STANDARDS
In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 166,
Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. This
Statement will be codified primarily into FASB ASC Topic 860, Transfers and Servicing. This
Statement removes the concept of a qualifying special purpose entity (SPE) and the exception for
qualifying SPEs from the consolidation guidance. Additionally, the Statement clarifies the
requirements for financial asset transfers eligible for sale accounting. This Statement is
effective January 1, 2010, and we do not expect any significant impact to our consolidated
financial statements.
Also in June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), to
address the effects of the elimination of the qualifying SPE concept in SFAS No. 166, and other
concerns about the application of key provisions of consolidation guidance for VIEs. This
Statement will be codified primarily into FASB ASC Topic 810, Consolidation. More specifically,
SFAS No. 167 requires a qualitative rather than a quantitative approach to determine the primary
beneficiary of a variable interest entity (VIE), it amends certain guidance pertaining to the
determination of the primary beneficiary when related
47
parties are involved, and it amends certain guidance for determining whether an entity is a VIE.
Additionally, this Statement requires continuous assessments of whether an enterprise is the
primary beneficiary of a VIE. This Statement is effective January 1, 2010. We are currently
evaluating the impact on our consolidated financial statements.
In December 2008, the FASB issued FASB Staff Position (FSP) FAS 132(R)-1, Employers Disclosures
about Postretirement Benefit Plan Assets, to improve the transparency associated with disclosures
about the plan assets of a defined benefit pension or other postretirement plan. This Statement
was codified into FASB ASC Topic 715, CompensationRetirement Benefits. Topic 715 requires the
disclosure of each major asset category at fair value using the fair value hierarchy. This topic
is effective for annual financial statements beginning with the 2009 fiscal year, but will not
impact our consolidated financial statements, other than requiring additional disclosures.
OUTLOOK
In E&P, we anticipate our fourth quarter 2009 production will be higher than the third quarter of
2009, and we expect full-year 2009 E&P production to be more than 3 percent higher than that for
full-year 2008. In R&M, we expect our crude oil capacity utilization rate for the full year of
2009 to be in the mid-80-percent range, as a result of planned maintenance at several facilities
and the potential for ongoing weak margins.
Natural gas prices, particularly in North America, have continued to trend downward in 2009, as
have worldwide refining margins. In conjunction with our long-range planning efforts, we perform
an annual review for property impairments in the fourth quarter. We
also evaluate our equity investments for other-than-temporary impairment. During the fourth quarter, as we
finalize our commodity price, refining margin, and foreign exchange rate outlook, as well as
capital spending and operating plan assumptions, and the determination of year-end hydrocarbon
reserves, it is reasonably possible non-cash impairments of some of our properties and equity
investments may be required. Although it is too early to provide a reliable estimate of the
possible financial impact of these trends and uncertainties, at certain natural gas price and
refining margin forecasts, and foreign exchange rate assumptions, this impact could be significant.
48
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. You can identify our
forward-looking statements by the words anticipate, estimate, believe, continue, could,
intend, may, plan, potential, predict, should, will, expect, objective,
projection, forecast, goal, guidance, outlook, effort, target 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 that 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, including the following:
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Fluctuations in crude oil, natural gas and natural gas liquids prices, refining and
marketing margins, and margins for our chemicals business. |
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Potential failure or delays in achieving expected reserve or production levels from
existing and future oil and gas development projects due to operating hazards, drilling
risks and the inherent uncertainties in predicting oil and gas reserves and oil and gas
reservoir performance. |
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Unsuccessful exploratory drilling activities or the inability to obtain access to
exploratory acreage. |
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Failure of new products and services to achieve market acceptance. |
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Unexpected changes in costs or technical requirements for constructing, modifying or
operating facilities for exploration and production, manufacturing, refining or
transportation projects. |
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Unexpected technological or commercial difficulties in manufacturing, refining or
transporting our products, including synthetic crude oil and chemicals products. |
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Lack of, or disruptions in, adequate and reliable transportation for our crude oil,
natural gas, natural gas liquids, LNG and refined products. |
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Inability to timely obtain or maintain permits, including those necessary for
construction of LNG terminals or regasification facilities, or refinery projects; comply
with government regulations; or make capital expenditures required to maintain compliance. |
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Failure to complete definitive agreements and feasibility studies for, and to timely
complete construction of, announced and future exploration and production, LNG, refinery
and transportation projects. |
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Potential disruption or interruption of our operations due to accidents, extraordinary
weather events, civil unrest, political events or terrorism. |
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International monetary conditions and exchange controls. |
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Substantial investment or reduced demand for products as a result of existing or future
environmental rules and regulations. |
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Liability for remedial actions, including removal and reclamation obligations, under
environmental regulations. |
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Liability resulting from litigation. |
49
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General domestic and international economic and political developments, including armed
hostilities; expropriation of assets; changes in governmental policies relating to crude
oil, natural gas, natural gas liquids or refined product pricing, regulation or taxation;
other political, economic or diplomatic developments; and international monetary
fluctuations. |
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Changes in tax and other laws, regulations (including alternative energy mandates), or
royalty rules applicable to our business. |
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Limited access to capital or significantly higher cost of capital related to illiquidity
or uncertainty in the domestic or international financial markets. |
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Delays in, or our inability to implement, our recently announced asset disposition plan. |
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Inability to obtain economical financing for projects, construction or modification of
facilities and general corporate purposes. |
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The operation and financing of our midstream and chemicals joint ventures. |
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The factors generally described in Item 1ARisk Factors in our 2008 Annual Report on
Form 10-K. |
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the nine months ended September 30, 2009, does not differ
materially
from that discussed under Item 7A in our 2008 Annual Report on Form 10-K.
Item 4. CONTROLS AND PROCEDURES
As of September 30, 2009, with the participation of our management, our Chairman and Chief
Executive Officer (principal executive officer) and our Senior Vice President, Finance, and Chief
Financial Officer (principal financial officer) carried out an evaluation, pursuant to Rule
13a-15(b) of the Securities Exchange Act of 1934, as amended (the Act), of the effectiveness of the
design and operation 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 Senior Vice President, Finance, and Chief Financial Officer concluded that our disclosure
controls and procedures were operating effectively as of September 30, 2009.
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.
50
PART II. OTHER INFORMATION
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Item 1. LEGAL PROCEEDINGS |
The following is a description of reportable legal proceedings including those involving
governmental authorities under federal, state and local laws regulating the discharge of materials
into the environment for this reporting period. The following proceedings include those matters
that arose during the third quarter of 2009 and any material developments with respect to matters
previously reported in ConocoPhillips 2008 Annual Report on Form 10-K or first- and second-quarter
2009 Quarterly Reports on Form 10-Q. While it is not possible to accurately predict the final
outcome of these pending proceedings, if any one or more of such proceedings were decided adversely
to ConocoPhillips, we expect there would be no material effect on our consolidated financial
position. Nevertheless, such proceedings are reported pursuant to the U.S. Securities and Exchange
Commissions (SEC) regulations.
Our U.S. refineries are implementing two separate consent decrees regarding alleged violations of
the Federal Clean Air Act with the U.S. Environmental Protection Agency (EPA), six states and one
local air pollution agency. Some of the requirements and limitations contained in the decrees
provide for stipulated penalties for violations. Stipulated penalties under the decrees are not
automatic, but must be requested by one of the agency signatories. As part of periodic reports
under the decrees or other reports required by permits or regulations, we occasionally report
matters which could be subject to a request for stipulated penalties. If a specific request for
stipulated penalties meeting the reporting threshold set forth in SEC rules is made pursuant to
these decrees based on a given reported exceedance, we will separately report that matter and the
amount of the proposed penalty.
Matters Previously Reported
The South Coast Air Quality Management District (SCAQMD) conducted an audit of the Los Angeles
Refinery in August 2008 to assess compliance with applicable local, state and federal regulations
related to fugitive emissions. As a result of the audit, on August 28, 2008, SCAQMD issued five
Notice of Violations (NOVs) alleging noncompliance. SCAQMD assessed a penalty of $85,000 for three
of the NOVs, which we have paid. On July 6, 2009, SCAQMD issued a demand to settle one of the two
remaining NOVs, along with a demand to settle seven additional NOVs issued in 2008 and 2009 that
allege violations of SCAQMD and other air pollution control regulations. We and SCAQMD have
settled these NOVs for $132,500.
51
Item 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Item 1A of our 2008 Annual
Report on Form 10-K.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
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Millions of Dollars |
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Total Number of |
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Approximate Dollar |
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Shares Purchased |
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Value of Shares |
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as Part of Publicly |
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that May Yet Be |
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Total Number of |
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Average Price |
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Announced Plans |
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Purchased Under the |
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Period |
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Shares Purchased |
* |
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Paid per Share |
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or Programs |
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Plans or Programs |
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July 1-31, 2009 |
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112,299 |
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$ 39.98 |
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- |
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$ - |
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August 1-31, 2009 |
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- |
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- |
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- |
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- |
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September 1-30, 2009 |
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8,046 |
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46.47 |
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- |
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- |
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Total |
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120,345 |
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$ 40.42 |
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- |
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* Represents the repurchase of common shares from company employees in connection with the companys broad-based employee
incentive plans. |
52
Item 6. EXHIBITS
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12
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Computation of Ratio of Earnings to Fixed Charges. |
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31.1
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934. |
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31.2
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934. |
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32
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Certifications pursuant to 18 U.S.C. Section 1350. |
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101.INS
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XBRL Instance Document |
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101.SCH
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XBRL Schema Document |
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101.CAL
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XBRL Calculation Linkbase Document |
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101.DEF
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XBRL Definition Linkbase Document |
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101.LAB
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XBRL Labels Linkbase Document |
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101.PRE
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XBRL Presentation Linkbase Document |
53
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.
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CONOCOPHILLIPS |
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/s/ Glenda M. Schwarz
Glenda
M. Schwarz |
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Vice President and Controller |
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(Chief Accounting and Duly Authorized Officer) |
November 3, 2009
54