e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the quarterly period ended June 30, 2008
or
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the transition period
from to
Commission file number: 001-32395
ConocoPhillips
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
01-0562944 |
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer Identification No.) |
|
|
|
600 North Dairy Ashford, Houston, TX 77079
|
(Address of principal
executive offices) (Zip Code)
|
|
|
281-293-1000
(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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The registrant had 1,519,804,610 shares of common stock, $.01 par value, outstanding at June 30,
2008.
CONOCOPHILLIPS
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Consolidated Income Statement
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
Revenues and Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues* |
|
$ |
71,411 |
|
|
|
47,370 |
|
|
|
126,294 |
|
|
|
88,690 |
|
Equity in earnings of affiliates |
|
|
1,812 |
|
|
|
1,506 |
|
|
|
3,171 |
|
|
|
2,435 |
|
Other income |
|
|
130 |
|
|
|
521 |
|
|
|
440 |
|
|
|
1,139 |
|
|
Total Revenues and Other Income |
|
|
73,353 |
|
|
|
49,397 |
|
|
|
129,905 |
|
|
|
92,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil, natural gas and products |
|
|
51,214 |
|
|
|
30,820 |
|
|
|
89,034 |
|
|
|
57,535 |
|
Production and operating expenses |
|
|
3,111 |
|
|
|
2,557 |
|
|
|
5,802 |
|
|
|
5,049 |
|
Selling, general and administrative expenses |
|
|
629 |
|
|
|
604 |
|
|
|
1,155 |
|
|
|
1,131 |
|
Exploration expenses |
|
|
288 |
|
|
|
259 |
|
|
|
597 |
|
|
|
521 |
|
Depreciation, depletion and amortization |
|
|
2,178 |
|
|
|
2,016 |
|
|
|
4,387 |
|
|
|
4,040 |
|
Impairmentexpropriated assets |
|
|
|
|
|
|
4,588 |
|
|
|
|
|
|
|
4,588 |
|
Impairments |
|
|
19 |
|
|
|
98 |
|
|
|
25 |
|
|
|
97 |
|
Taxes other than income taxes* |
|
|
5,796 |
|
|
|
4,697 |
|
|
|
10,951 |
|
|
|
9,071 |
|
Accretion on discounted liabilities |
|
|
96 |
|
|
|
81 |
|
|
|
200 |
|
|
|
160 |
|
Interest and debt expense |
|
|
210 |
|
|
|
319 |
|
|
|
417 |
|
|
|
626 |
|
Foreign currency transaction gains |
|
|
|
|
|
|
(179 |
) |
|
|
(43 |
) |
|
|
(178 |
) |
Minority interests |
|
|
17 |
|
|
|
19 |
|
|
|
36 |
|
|
|
40 |
|
|
Total Costs and Expenses |
|
|
63,558 |
|
|
|
45,879 |
|
|
|
112,561 |
|
|
|
82,680 |
|
|
Income before income taxes |
|
|
9,795 |
|
|
|
3,518 |
|
|
|
17,344 |
|
|
|
9,584 |
|
Provision for income taxes |
|
|
4,356 |
|
|
|
3,217 |
|
|
|
7,766 |
|
|
|
5,737 |
|
|
Net Income |
|
$ |
5,439 |
|
|
|
301 |
|
|
|
9,578 |
|
|
|
3,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Share of Common Stock (dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.54 |
|
|
|
.18 |
|
|
|
6.18 |
|
|
|
2.34 |
|
Diluted |
|
|
3.50 |
|
|
|
.18 |
|
|
|
6.11 |
|
|
|
2.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Paid Per Share of Common Stock (dollars) |
|
$ |
.47 |
|
|
|
.41 |
|
|
|
.94 |
|
|
|
.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Common Shares Outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
1,534,975 |
|
|
|
1,635,848 |
|
|
|
1,548,587 |
|
|
|
1,641,569 |
|
Diluted |
|
|
1,555,447 |
|
|
|
1,657,999 |
|
|
|
1,568,867 |
|
|
|
1,663,618 |
|
|
* Includes excise taxes on petroleum products sales: |
|
$ |
4,091 |
|
|
|
4,069 |
|
|
|
7,948 |
|
|
|
7,910 |
|
See Notes to Consolidated Financial Statements.
1
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30 |
|
|
December 31 |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
787 |
|
|
|
1,456 |
|
Accounts and notes receivable (net of allowance of $62 million in 2008
and $58 million in 2007) |
|
|
17,474 |
|
|
|
14,687 |
|
Accounts and notes receivablerelated parties |
|
|
2,987 |
|
|
|
1,667 |
|
Inventories |
|
|
6,757 |
|
|
|
4,223 |
|
Prepaid expenses and other current assets |
|
|
5,510 |
|
|
|
2,702 |
|
|
Total Current Assets |
|
|
33,515 |
|
|
|
24,735 |
|
Investments and long-term receivables |
|
|
33,814 |
|
|
|
31,457 |
|
Loans and advancesrelated parties |
|
|
1,981 |
|
|
|
1,871 |
|
Net properties, plants and equipment |
|
|
89,990 |
|
|
|
89,003 |
|
Goodwill |
|
|
29,227 |
|
|
|
29,336 |
|
Intangibles |
|
|
873 |
|
|
|
896 |
|
Other assets |
|
|
755 |
|
|
|
459 |
|
|
Total Assets |
|
$ |
190,155 |
|
|
|
177,757 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
21,319 |
|
|
|
16,591 |
|
Accounts payablerelated parties |
|
|
2,042 |
|
|
|
1,270 |
|
Short-term debt |
|
|
385 |
|
|
|
1,398 |
|
Accrued income and other taxes |
|
|
6,699 |
|
|
|
4,814 |
|
Employee benefit obligations |
|
|
681 |
|
|
|
920 |
|
Other accruals |
|
|
3,721 |
|
|
|
1,889 |
|
|
Total Current Liabilities |
|
|
34,847 |
|
|
|
26,882 |
|
Long-term debt |
|
|
21,539 |
|
|
|
20,289 |
|
Asset retirement obligations and accrued environmental costs |
|
|
7,330 |
|
|
|
7,261 |
|
Joint venture acquisition obligationrelated party |
|
|
5,985 |
|
|
|
6,294 |
|
Deferred income taxes |
|
|
21,044 |
|
|
|
21,018 |
|
Employee benefit obligations |
|
|
3,043 |
|
|
|
3,191 |
|
Other liabilities and deferred credits |
|
|
2,825 |
|
|
|
2,666 |
|
|
Total Liabilities |
|
|
96,613 |
|
|
|
87,601 |
|
|
|
|
|
|
|
|
|
|
|
Minority Interests |
|
|
1,144 |
|
|
|
1,173 |
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders Equity |
|
|
|
|
|
|
|
|
Common stock (2,500,000,000 shares authorized at $.01 par value) |
|
|
|
|
|
|
|
|
Issued (20081,727,212,141 shares; 20071,718,448,829 shares) |
|
|
|
|
|
|
|
|
Par value |
|
|
17 |
|
|
|
17 |
|
Capital in excess of par |
|
|
43,261 |
|
|
|
42,724 |
|
Grantor trusts (at cost: 200842,397,731 shares; 200742,411,331 shares) |
|
|
(716 |
) |
|
|
(731 |
) |
Treasury stock (at cost: 2008165,009,800 shares; 2007104,607,149 shares) |
|
|
(12,978 |
) |
|
|
(7,969 |
) |
Accumulated other comprehensive income |
|
|
4,304 |
|
|
|
4,560 |
|
Unearned employee compensation |
|
|
(115 |
) |
|
|
(128 |
) |
Retained earnings |
|
|
58,625 |
|
|
|
50,510 |
|
|
Total Common Stockholders Equity |
|
|
92,398 |
|
|
|
88,983 |
|
|
Total |
|
$ |
190,155 |
|
|
|
177,757 |
|
|
See Notes to Consolidated Financial Statements.
2
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
9,578 |
|
|
|
3,847 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
|
|
Nonworking capital adjustments |
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
4,387 |
|
|
|
4,040 |
|
Impairmentexpropriated assets |
|
|
|
|
|
|
4,588 |
|
Impairments |
|
|
25 |
|
|
|
97 |
|
Dry hole costs and leasehold impairments |
|
|
281 |
|
|
|
281 |
|
Accretion on discounted liabilities |
|
|
200 |
|
|
|
160 |
|
Deferred taxes |
|
|
11 |
|
|
|
180 |
|
Undistributed equity earnings |
|
|
(1,988 |
) |
|
|
(1,235 |
) |
Gain on asset dispositions |
|
|
(213 |
) |
|
|
(927 |
) |
Other |
|
|
(81 |
) |
|
|
88 |
|
Working capital adjustments* |
|
|
|
|
|
|
|
|
Decrease (increase) in accounts and notes receivable |
|
|
(3,625 |
) |
|
|
210 |
|
Increase in inventories |
|
|
(2,537 |
) |
|
|
(271 |
) |
Decrease (increase) in prepaid expenses and other current assets |
|
|
(2,349 |
) |
|
|
285 |
|
Increase in accounts payable |
|
|
5,481 |
|
|
|
1,097 |
|
Increase (decrease) in taxes and other accruals |
|
|
2,851 |
|
|
|
(801 |
) |
|
Net Cash Provided by Operating Activities |
|
|
12,021 |
|
|
|
11,639 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
Capital expenditures and investments |
|
|
(6,720 |
) |
|
|
(5,347 |
) |
Proceeds from asset dispositions |
|
|
441 |
|
|
|
2,215 |
|
Long-term advances/loansrelated parties |
|
|
(154 |
) |
|
|
(326 |
) |
Collection of advances/loansrelated parties |
|
|
4 |
|
|
|
66 |
|
Other |
|
|
7 |
|
|
|
19 |
|
|
Net Cash Used in Investing Activities |
|
|
(6,422 |
) |
|
|
(3,373 |
) |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
2,065 |
|
|
|
765 |
|
Repayment of debt |
|
|
(1,841 |
) |
|
|
(5,121 |
) |
Issuance of company common stock |
|
|
185 |
|
|
|
181 |
|
Repurchase of company common stock |
|
|
(5,008 |
) |
|
|
(2,000 |
) |
Dividends paid on company common stock |
|
|
(1,449 |
) |
|
|
(1,342 |
) |
Other |
|
|
(240 |
) |
|
|
(153 |
) |
|
Net Cash Used in Financing Activities |
|
|
(6,288 |
) |
|
|
(7,670 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
20 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
(669 |
) |
|
|
594 |
|
Cash and cash equivalents at beginning of period |
|
|
1,456 |
|
|
|
817 |
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
787 |
|
|
|
1,411 |
|
|
|
|
*Net of acquisition and disposition of businesses. |
See Notes to Consolidated Financial Statements.
3
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
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 2007 Annual Report on Form 10-K.
Note 2Changes in Accounting Principles
SFAS No. 157
Effective January 1, 2008, we implemented Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, which defines fair value,
establishes a framework for its measurement and expands disclosures about fair value measurements.
We elected to implement this Statement with the one-year deferral permitted by FASB Staff Position
(FSP) 157-2 for nonfinancial assets and nonfinancial liabilities measured at fair value, except
those that are recognized or disclosed on a recurring basis (at least annually). The deferral
applies to nonfinancial assets and liabilities measured at fair value in a business combination;
impaired properties, plants and equipment; intangible assets and goodwill; and initial recognition
of asset retirement obligations and restructuring costs for which we use fair value. We do not
expect any significant impact to our consolidated financial statements when we implement SFAS No.
157 for these assets and liabilities.
Due to our election under FSP 157-2, for 2008, SFAS No. 157 applies to commodity and foreign
currency derivative contracts and certain nonqualified deferred compensation and retirement plan
assets that are measured at fair value on a recurring basis in periods subsequent to initial
recognition. The implementation of SFAS No. 157 did not cause a change in the method of
calculating fair value of assets or liabilities, with the exception of incorporating the impact of
our nonperformance risk on derivative liabilitieswhich was not material. The primary impact from
adoption was additional disclosures.
SFAS No. 157 requires disclosures that categorize assets and liabilities measured at fair value
into one of three different levels depending on the observability of the inputs employed in the
measurement. Level 1 inputs are quoted prices in active markets for identical assets or
liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1
for the asset or liability, either directly or indirectly through market-corroborated inputs.
Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about
pricing by market participants.
We value our exchange-cleared derivatives using unadjusted 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 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 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
4
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 option is
classified as
Level 2 or 3.
As permitted under SFAS No. 157, we use a mid-market pricing convention (the mid-point price 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 financial assets and liabilities accounted for at fair value on a
recurring basis at June 30, 2008, was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
$ |
7,990 |
|
|
|
4,310 |
|
|
|
40 |
|
|
|
12,340 |
|
Foreign exchange derivatives |
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
50 |
|
Nonqualified benefit plans |
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
412 |
|
|
Total assets |
|
|
8,402 |
|
|
|
4,360 |
|
|
|
40 |
|
|
|
12,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
|
(7,887 |
) |
|
|
(4,565 |
) |
|
|
(96 |
) |
|
|
(12,548 |
) |
Foreign exchange derivatives |
|
|
|
|
|
|
(43 |
) |
|
|
|
|
|
|
(43 |
) |
|
Total liabilities |
|
|
(7,887 |
) |
|
|
(4,608 |
) |
|
|
(96 |
) |
|
|
(12,591 |
) |
|
Net assets (liabilities) |
|
$ |
515 |
|
|
|
(248 |
) |
|
|
(56 |
) |
|
|
211 |
|
|
The derivative values above are based on analysis of each contract as the fundamental unit of
account as required by SFAS No. 157. Derivative assets and liabilities with the same counterparty
are not netted where the legal right of offset exists, which is different than the net presentation
basis in Note 13Financial Instruments and Derivative Contracts. 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.
5
Changes in the fair value of net commodity derivatives classified as Level 3 in the fair value
hierarchy during the three- and six-month periods ended June 30, 2008, were:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3) |
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
(53 |
) |
|
|
(34 |
) |
Total gains (losses), realized and unrealized |
|
|
|
|
|
|
|
|
Included in earnings |
|
|
(11 |
) |
|
|
(53 |
) |
Included in other comprehensive income |
|
|
|
|
|
|
|
|
Purchases, issuances and settlements |
|
|
|
|
|
|
24 |
|
Transfers in and/or out of Level 3 |
|
|
8 |
|
|
|
7 |
|
|
Balance at June 30, 2008 |
|
$ |
(56 |
) |
|
|
(56 |
) |
|
The amount of total gains (losses) for the three- and six-month periods included in earnings
attributable to the change in unrealized gains (losses) relating to assets and liabilities held at
June 30, 2008, were:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
Related to assets |
|
$ |
14 |
|
|
|
17 |
|
Related to liabilities |
|
|
(25 |
) |
|
|
(61 |
) |
|
Gains and losses, realized and unrealized, included in earnings for the three- and six-month
periods ending June 30, 2008, were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
|
|
|
|
Purchased |
|
|
|
|
|
|
|
|
|
|
Purchased |
|
|
|
|
|
|
Other |
|
|
Crude Oil, |
|
|
|
|
|
|
Other |
|
|
Crude Oil, |
|
|
|
|
|
|
Operating |
|
|
Natural Gas |
|
|
|
|
|
|
Operating |
|
|
Natural Gas |
|
|
|
|
|
|
Revenues |
|
|
and Products |
|
|
Total |
|
|
Revenues |
|
|
and Products |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gains
(losses) included
in earnings |
|
$ |
(14 |
) |
|
|
3 |
|
|
|
(11 |
) |
|
|
(57 |
) |
|
|
4 |
|
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized gains
(losses) relating
to assets held at
June 30, 2008 |
|
$ |
10 |
|
|
|
4 |
|
|
|
14 |
|
|
|
13 |
|
|
|
4 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
unrealized gains
(losses) relating
to liabilities held
at June 30, 2008 |
|
$ |
(25 |
) |
|
|
|
|
|
|
(25 |
) |
|
|
(61 |
) |
|
|
|
|
|
|
(61 |
) |
|
6
SFAS No. 159
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115. This Statement permits
the election to carry financial instruments and certain other items similar to financial
instruments at fair value on the balance sheet, with all changes in fair value reported in
earnings. By electing the fair value option in conjunction with a derivative, an entity can
achieve an accounting result similar to a fair value hedge without having to comply with complex
hedge accounting rules. We adopted this Statement effective January 1, 2008, but did not make a
fair value election at that time or during the first six months of 2008 for any financial
instruments not already carried at fair value in accordance with other accounting standards.
Accordingly, the adoption of SFAS No. 159 did not impact our consolidated financial statements.
Note 3Variable Interest Entities (VIEs)
We have a 24 percent interest in West2East Pipeline LLC (West2East), a company holding a 100
percent interest in Rockies Express Pipeline LLC (Rockies Express). West2East is a VIE, but we are
not the primary beneficiary. We use the equity method of accounting for our investment. In 2007,
we issued a guarantee
for 24 percent of the $2 billion in credit facilities of Rockies Express. In addition, we have a
guarantee for
24 percent of $600 million of Floating Rate Notes due 2009 issued by Rockies Express. At June 30,
2008, the book value of our investment in West2East was $249 million. See Note 11Guarantees, for
additional information.
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 our related party, OAO LUKOIL, have
disproportionate interests. We are
not the primary beneficiary of the VIE and we use the equity method of accounting for this
investment. At June 30, 2008, the book value of our investment in the venture was $2,063 million.
Note 4Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30 |
|
|
December 31 |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and petroleum products |
|
$ |
5,854 |
|
|
|
3,373 |
|
Materials, supplies and other |
|
|
903 |
|
|
|
850 |
|
|
|
|
$ |
6,757 |
|
|
|
4,223 |
|
|
Inventories valued on the last-in, first-out (LIFO) basis totaled $5,513 million and $2,974 million
at June 30, 2008, and December 31, 2007, respectively. The remaining inventories were 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 $12,234 million and $6,668 million at
June 30, 2008, and December 31, 2007, respectively.
7
Note 5Assets Held for Sale
Noncurrent assets and noncurrent liabilities classified as current assets and current liabilities
under the held for sale provisions of SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, totaled $1,092 million and $159 million, respectively, at December 31, 2007.
During the first six months of 2008, a portion of these held-for-sale assets were sold, and
additional assets met the held-for-sale criteria. As a result, at June 30, 2008, we classified
$1,179 million of noncurrent assets as Prepaid expenses and other current assets on our
consolidated balance sheet and we classified $303 million of noncurrent liabilities as current
liabilities, consisting of $164 million in Accrued income and other taxes and $139 million in
Other accruals. Contingent upon necessary regulatory approvals, we expect the disposal of these
assets to be substantially completed by the end of 2008.
The major classes of noncurrent assets and noncurrent liabilities held for sale and classified as
current were:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30 |
|
|
December 31 |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Investments and long-term receivables |
|
$ |
7 |
|
|
|
48 |
|
Net properties, plants and equipment |
|
|
973 |
|
|
|
946 |
|
Goodwill |
|
|
188 |
|
|
|
89 |
|
Intangibles |
|
|
2 |
|
|
|
2 |
|
Other assets |
|
|
9 |
|
|
|
7 |
|
|
Total assets |
|
$ |
1,179 |
|
|
|
1,092 |
|
|
Exploration and Production |
|
$ |
432 |
|
|
|
189 |
|
Refining and Marketing |
|
|
747 |
|
|
|
903 |
|
|
|
|
$ |
1,179 |
|
|
|
1,092 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Asset retirement obligations and accrued environmental costs |
|
$ |
108 |
|
|
|
23 |
|
Deferred income taxes |
|
|
164 |
|
|
|
133 |
|
Other liabilities and deferred credits |
|
|
31 |
|
|
|
3 |
|
|
Total liabilities |
|
$ |
303 |
|
|
|
159 |
|
|
Exploration and Production |
|
$ |
191 |
|
|
|
35 |
|
Refining and Marketing |
|
|
112 |
|
|
|
124 |
|
|
|
|
$ |
303 |
|
|
|
159 |
|
|
8
Note 6Investments, Loans and Long-Term Receivables
LUKOIL
Our ownership interest in LUKOIL was 20 percent at June 30, 2008, based on 851 million shares
authorized and issued. For financial reporting under U.S. generally accepted accounting
principles, 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 also 20 percent at June 30, 2008, compared with 20.6 percent at December 31, 2007.
At June 30, 2008, the book value of our ordinary share investment in LUKOIL was $12,393 million.
Our share of the net assets of LUKOIL was estimated to be $9,900 million. This basis difference of
$2,493 million is primarily being amortized on a unit-of-production basis. On June 30, 2008, the
closing price of LUKOIL shares on the London Stock Exchange was $98.60 per share, making the total
market value of our LUKOIL investment $16,773 million.
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. The long-term portion of these loans are
included in the Loans and advancesrelated parties balance sheet line item, while the short-term
portion is included in Accounts and notes receivablerelated parties. Significant loans to
affiliated companies at June 30, 2008, included the following:
|
|
|
$644 million in loan financing and an additional $116 million of accrued interest to
Freeport LNG Development, L.P. for the construction of a liquefied natural gas (LNG) facility. We expect to
provide loan financing of approximately $678 million, excluding accrued interest, for the
construction of the facility. The terminal became operational late in the second quarter
of 2008. |
|
|
|
|
$359 million in loan financing and an additional $46 million of accrued interest to
Varandey Terminal Company associated with the costs of a terminal expansion. We expect our
total financing obligation for the terminal expansion to be approximately $390 million at
current exchange rates, excluding interest to be accrued during construction. |
|
|
|
|
$787 million of project financing and an additional $60 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, excluding accrued
interest. |
9
Note 7Properties, Plants and Equipment
The companys investment in properties, plants and equipment (PP&E), with accumulated depreciation,
depletion and amortization (Accum. DD&A), was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30, 2008 |
|
|
December 31, 2007 |
|
|
|
Gross |
|
|
Accum. |
|
|
Net |
|
|
Gross |
|
|
Accum. |
|
|
Net |
|
|
|
PP&E |
|
|
DD&A |
|
|
PP&E |
|
|
PP&E |
|
|
DD&A |
|
|
PP&E |
|
|
E&P |
|
$ |
107,053 |
|
|
|
34,675 |
|
|
|
72,378 |
|
|
|
102,550 |
|
|
|
30,701 |
|
|
|
71,849 |
|
Midstream |
|
|
114 |
|
|
|
66 |
|
|
|
48 |
|
|
|
267 |
|
|
|
103 |
|
|
|
164 |
|
R&M |
|
|
20,764 |
|
|
|
5,112 |
|
|
|
15,652 |
|
|
|
19,926 |
|
|
|
4,733 |
|
|
|
15,193 |
|
LUKOIL Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging Businesses |
|
|
1,308 |
|
|
|
181 |
|
|
|
1,127 |
|
|
|
1,204 |
|
|
|
138 |
|
|
|
1,066 |
|
Corporate and Other |
|
|
1,499 |
|
|
|
714 |
|
|
|
785 |
|
|
|
1,414 |
|
|
|
683 |
|
|
|
731 |
|
|
|
|
$ |
130,738 |
|
|
|
40,748 |
|
|
|
89,990 |
|
|
|
125,361 |
|
|
|
36,358 |
|
|
|
89,003 |
|
|
Suspended Wells
The companys capitalized cost of suspended wells at June 30, 2008, was $694 million, an increase
of
$105 million from $589 million at year-end 2007. For the category of exploratory well costs
capitalized
for a period greater than one year as of December 31, 2007, $12 million was charged to dry hole
expense during the first six months of 2008.
Note 8Impairments
Expropriated Assets
In the second quarter of 2007, we recorded a noncash impairment, including allocable goodwill, of
$4,588 million before-tax ($4,512 million after-tax) related to our investments in the Petrozuata
and Hamaca heavy-oil ventures and the offshore Corocoro oil development project in Venezuela. See
Note 13Impairments, in our 2007 Annual Report on Form 10-K, for additional information.
Other Impairments
During the first six months of 2008 and 2007, we recognized the following net impairments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
E&P |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
|
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
International |
|
|
1 |
|
|
|
81 |
|
|
|
3 |
|
|
|
175 |
|
R&M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
18 |
|
|
|
16 |
|
|
|
22 |
|
|
|
49 |
|
Increase in fair value of previously impaired assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128 |
) |
|
|
|
$ |
19 |
|
|
|
98 |
|
|
|
25 |
|
|
|
97 |
|
|
10
During the second quarter and six-month period of 2008, property impairments were primarily
associated with planned asset dispositions.
During the second quarter and six-month period of 2007, we recorded property impairments for:
|
|
|
The write-down of held-for-sale assets to fair value, less cost to sell. |
|
|
|
|
Changes in asset retirement obligations for properties at the end of their economic
life. |
|
|
|
|
The write-down of abandoned properties or projects. |
In addition and in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the six-month period of 2007 included a $128 million gain for the subsequent
increase in the fair value of certain assets impaired in the prior year to reflect finalized sales
agreements. This gain was netted with write-downs into the Impairments line of the consolidated
income statement.
Note 9Debt
In January 2008, we reduced our Floating Rate Five-Year Term Note due 2011 from $3 billion to $2
billion, with a subsequent reduction in June 2008 to $1.5 billion. In March 2008, we redeemed our
$300 million 7.125% Debentures due 2028 at a premium of $8 million, plus accrued interest.
In May 2008, we issued notes consisting of $400 million of 4.40% Notes due 2013, $500 million of
5.20% Notes due 2018 and $600 million of 5.90% Notes due 2038. The proceeds from the offering were
used to reduce commercial paper and for general corporate purposes.
At June 30, 2008, we had a $7.5 billion revolving credit facility, which expires in September 2012.
The facility may be used as direct bank borrowings, as support for the ConocoPhillips $7.5 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 June 30, 2008, and December 31, 2007, we had no outstanding borrowings under the
credit facility, but $40 million and $41 million, respectively, in letters of credit had been
issued. Under both commercial paper programs, $1,314 million of commercial paper was outstanding
at June 30, 2008, compared with $725 million at December 31, 2007.
Also at June 30, 2008, we classified $2,264 million of short-term debt as long-term debt, based on
our ability and intent to refinance the obligations on a long-term basis under our revolving credit
facilities.
Note 10Joint Venture Acquisition Obligation
On January 3, 2007, we closed on a business venture with EnCana Corporation. As part of this
transaction, we are obligated to contribute $7.5 billion, plus interest, over a ten-year period,
which began in 2007, to the upstream business venture, FCCL Oil Sands Partnership, which was formed
as a result of the transaction.
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 $609
million is short-term and is included in the Accounts payablerelated parties line on our June
30, 2008, consolidated balance sheet. The principal portion of these payments, which totaled $293
million in the first six months of 2008, is presented on our consolidated statement of cash flows
as an other financing activity. 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.
11
Note 11Guarantees
At June 30, 2008, 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.
Construction Completion Guarantees
|
|
|
In December 2005, we issued a construction completion guarantee for 30 percent of the $4.0
billion in loan facilities of Qatargas 3, which will be used to construct an LNG train in
Qatar. Of the $4.0 billion in loan facilities, ConocoPhillips has committed to provide $1.2
billion. The maximum potential 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, currently expected
in 2010. At June 30, 2008, the carrying value of the guarantee to the third-party lenders
was $11 million. For additional information, see Note 6Investments, Loans and Long-Term
Receivables. |
Guarantees of Joint-Venture Debt
|
|
|
In June 2006, we issued a guarantee for 24 percent of the $2 billion in credit facilities
of Rockies Express Pipeline LLC (Rockies Express), which will be used to construct a natural
gas pipeline across a portion of the United States. At June 30, 2008, Rockies Express had
$740 million outstanding under the credit facilities, with our 24 percent guarantee equaling
$178 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
facility is fully utilized and Rockies Express fails to meet its obligations under the credit
agreement. In addition, we also have a guarantee for 24 percent of $600 million of Floating
Rate Notes due 2009 issued by Rockies Express in September 2007. It is anticipated final
construction completion will be achieved in 2009, and refinancing will take place at that
time, making the debt nonrecourse to ConocoPhillips. At June 30, 2008, the total carrying
value of these guarantees to third-party lenders was $12 million. See Note 3Variable
Interest Entities (VIEs), for additional information. |
|
|
|
At June 30, 2008, we had other guarantees outstanding for our portion of joint-venture
debt obligations, which have terms of up to 17 years. The maximum potential amount of future
payments under the guarantees is approximately $90 million. Payment would be required if a
joint venture defaults on its debt obligations. |
Other Guarantees
|
|
|
The Merey Sweeny, L.P. (MSLP) joint-venture project agreement requires the partners in the
venture to pay cash calls to cover operating expenses in the event the venture does not have
enough cash to cover operating expenses after setting aside the amount required for debt
service over the next 16 years. Although there is no maximum limit stated in the agreement,
the intent is to cover short-term cash deficiencies should they occur. Our maximum potential
future payments under the agreement are currently estimated to be $100 million, assuming such
a shortfall exists at some point in the future due to an extended operational disruption. |
|
|
|
In February 2003, we entered into two agreements establishing separate guarantee
facilities of $50 million each for two LNG ships. Subject to the terms of each such
facility, we will be required to make payments should the charter revenue generated by the
respective ship fall below certain specified minimum thresholds, and we will receive payments
to the extent that such revenues exceed those thresholds. The net maximum future payments
that we may have to make over the 20-year terms of the two agreements could be up to $100
million in total. To the extent we receive any such payments, our |
12
|
|
|
actual gross payments over the 20 years could exceed that amount. In the event either ship is
sold or a total loss occurs, we also may have recourse to the sales or insurance proceeds to
recoup payments made under the guarantee facilities. |
|
|
|
We have guarantees of the residual value of leased corporate aircraft. The maximum
potential payment under these guarantees at June 30, 2008, was $150 million. |
|
|
|
In December 2007, we acquired a 50 percent equity interest in the Keystone Oil Pipeline
(Keystone) to form a 50/50 joint venture with TransCanada Corporation. Keystone plans to
construct a crude oil pipeline originating in Hardisty, Alberta, with delivery points at Wood
River and Patoka, Illinois, and Cushing, Oklahoma. In connection with certain planning and
construction activities, agreements were put in place with third parties to guarantee the
payments due. Our maximum potential amount of future payments under those agreements are
estimated to be $400 million, which could become payable if Keystone fails to meet its
obligations under the agreements noted above and the obligation cannot otherwise be
mitigated. Payments under the guarantees are contingent upon the partners not making
necessary equity contributions into Keystone; therefore, it is considered unlikely that
payments would be required. All but $15 million of the guarantees will terminate after
construction is completed, currently estimated to be in 2010. |
|
|
|
We have other guarantees with maximum future potential payment amounts totaling $200
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, one small construction completion guarantee, guarantees relating to the
startup of a refining joint venture, and guarantees of the lease payment obligations of a
joint venture. These guarantees generally extend up to 10 years or life of the venture and
payment would be required only if the dealer, jobber or lessee goes into default, if the
joint ventures have cash liquidity issues, if a construction project is not completed, or if
a guaranteed party defaults on lease payments. |
Indemnifications
Over the years, we have entered into various agreements to sell ownership interests in certain
corporations and joint ventures and have sold several assets, including downstream and midstream
assets, certain exploration and production assets, and downstream retail and wholesale sites that
gave rise to qualifying indemnifications. Agreements associated with these sales include
indemnifications for taxes, environmental liabilities, permits and licenses, employee claims, real
estate 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 June 30, 2008, was $454 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 carrying
amount recorded were $256 million of environmental accruals for known contamination that is
included in asset retirement obligations and accrued environmental costs at June 30, 2008. For
additional information about environmental liabilities, see Note 12Contingencies and Commitments.
Note 12Contingencies and Commitments
In the case of all known non-income-tax-related contingencies, 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
13
receivables for probable insurance or other third-party recoveries. In the case of
income-tax-related contingencies, we adopted FIN 48, effective January 1, 2007. FIN 48 requires 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 that are 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 that is available at the time. We
measure estimates and base liabilities on currently available facts, existing technology, and
presently enacted laws and regulations, taking into account stakeholder and business
considerations. When measuring environmental liabilities, we also consider our prior experience in
remediation of contaminated sites, other companies cleanup experience, and data released by the
U.S. Environmental Protection Agency (EPA) or other organizations. We consider unasserted claims
in our determination of environmental liabilities and we accrue them in the period that 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 of the cleanup costs related to any site at which we have been
designated as a potentially responsible party. If we were solely responsible, the costs, in some
cases, could be material to our, or one of our segments, results of operations, capital resources
or liquidity. However, settlements and costs incurred in matters that previously have been
resolved 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 the
site conditions, apportion responsibility and determine the appropriate remediation. In some
instances, we may have no liability or may attain a settlement of liability. Where it appears that
other potentially responsible parties may be financially unable to bear their proportional share,
we consider this inability in estimating our potential liability and we adjust our accruals
accordingly.
As a result of various acquisitions in the past, we assumed certain environmental obligations.
Some of these environmental obligations are mitigated by indemnifications made by others for our
benefit and some of the indemnifications are subject to dollar limits and time limits. We 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 that future costs will be incurred and these
costs can be reasonably estimated. At June 30, 2008, our balance
14
sheet included a total environmental accrual of $1,046 million, compared with $1,089 million at
December 31, 2007. 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 which
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 all 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 June 30, 2008, we had performance obligations secured by letters of
credit of $1,967 million (of which $40 million was issued under the provisions of our revolving
credit facility, and
the remainder was issued as direct bank letters of credit) and 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 assets and liabilities were:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30 |
|
|
December 31 |
|
|
|
2008 |
|
|
2007 |
|
Derivative Assets |
|
|
|
|
|
|
|
|
Current |
|
$ |
1,641 |
|
|
|
453 |
|
Long-term |
|
|
322 |
|
|
|
89 |
|
|
|
|
$ |
1,963 |
|
|
|
542 |
|
|
Derivative Liabilities |
|
|
|
|
|
|
|
|
Current |
|
$ |
1,913 |
|
|
|
493 |
|
Long-term |
|
|
251 |
|
|
|
67 |
|
|
|
|
$ |
2,164 |
|
|
|
560 |
|
|
These derivative assets and liabilities appear as prepaid expenses and other current assets, other
assets, other accruals, or other liabilities and deferred credits on the balance sheet.
15
Note 14Comprehensive Income
ConocoPhillips comprehensive income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,439 |
|
|
|
301 |
|
|
|
9,578 |
|
|
|
3,847 |
|
After-tax changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net prior service cost |
|
|
(14 |
) |
|
|
5 |
|
|
|
(10 |
) |
|
|
10 |
|
Net actuarial loss |
|
|
(2 |
) |
|
|
14 |
|
|
|
7 |
|
|
|
30 |
|
Nonsponsored plans |
|
|
2 |
|
|
|
|
|
|
|
4 |
|
|
|
(3 |
) |
Foreign currency translation adjustments |
|
|
178 |
|
|
|
1,145 |
|
|
|
(257 |
) |
|
|
1,276 |
|
Hedging activities |
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
|
(3 |
) |
|
Comprehensive income |
|
$ |
5,605 |
|
|
|
1,463 |
|
|
|
9,322 |
|
|
|
5,157 |
|
|
Accumulated other comprehensive income in the equity section of the balance sheet included:
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30 |
|
|
December 31 |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans |
|
$ |
(464 |
) |
|
|
(465 |
) |
Foreign currency translation adjustments |
|
|
4,776 |
|
|
|
5,033 |
|
Deferred net hedging loss |
|
|
(8 |
) |
|
|
(8 |
) |
|
Accumulated other comprehensive income |
|
$ |
4,304 |
|
|
|
4,560 |
|
|
Note 15Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Six Months Ended |
|
|
June 30 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Investment in an upstream business venture through issuance of an
acquisition obligation |
|
$ |
|
|
|
|
7,313 |
|
Investment in a downstream business venture through contribution of
noncash assets and liabilities |
|
|
|
|
|
|
2,415 |
|
|
Cash Payments |
|
|
|
|
|
|
|
|
Interest |
|
$ |
398 |
|
|
|
532 |
|
Income taxes |
|
|
6,405 |
|
|
|
5,525 |
|
|
16
Note 16Employee Benefit Plans
Pension and Postretirement Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
June 30 |
|
|
June 30 |
|
Components of Net Periodic Benefit Cost |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
U.S. |
|
|
Intl. |
|
|
U.S. |
|
|
Intl. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
47 |
|
|
|
24 |
|
|
|
44 |
|
|
|
24 |
|
|
|
4 |
|
|
|
4 |
|
Interest cost |
|
|
62 |
|
|
|
46 |
|
|
|
57 |
|
|
|
41 |
|
|
|
16 |
|
|
|
11 |
|
Expected return on plan assets |
|
|
(56 |
) |
|
|
(45 |
) |
|
|
(51 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
4 |
|
Recognized net actuarial loss (gain) |
|
|
17 |
|
|
|
3 |
|
|
|
16 |
|
|
|
12 |
|
|
|
(6 |
) |
|
|
(6 |
) |
|
Net periodic benefit costs |
|
$ |
72 |
|
|
|
28 |
|
|
|
68 |
|
|
|
42 |
|
|
|
16 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
94 |
|
|
|
47 |
|
|
|
88 |
|
|
|
48 |
|
|
|
7 |
|
|
|
7 |
|
Interest cost |
|
|
124 |
|
|
|
90 |
|
|
|
114 |
|
|
|
79 |
|
|
|
28 |
|
|
|
22 |
|
Expected return on plan assets |
|
|
(112 |
) |
|
|
(89 |
) |
|
|
(102 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
4 |
|
|
|
|
|
|
|
5 |
|
|
|
4 |
|
|
|
5 |
|
|
|
7 |
|
Recognized net actuarial loss (gain) |
|
|
33 |
|
|
|
6 |
|
|
|
31 |
|
|
|
23 |
|
|
|
(10 |
) |
|
|
(10 |
) |
|
Net periodic benefit costs |
|
$ |
143 |
|
|
|
54 |
|
|
|
136 |
|
|
|
82 |
|
|
|
30 |
|
|
|
26 |
|
|
During the first six months of 2008, we contributed $222 million to our domestic qualified and
nonqualified plans and $92 million to our international benefit plans. We currently expect to
contribute a total of $460 million to our domestic plans and $180 million to our international plans in 2008.
Note 17Related Party Transactions
Significant transactions with related parties were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues (a) |
|
$ |
4,001 |
|
|
|
2,884 |
|
|
|
7,172 |
|
|
|
5,502 |
|
Purchases (b) |
|
|
5,693 |
|
|
|
4,089 |
|
|
|
10,092 |
|
|
|
7,299 |
|
Operating expenses and
selling, general and
administrative
expenses (c) |
|
|
127 |
|
|
|
98 |
|
|
|
243 |
|
|
|
206 |
|
Net interest income (d) |
|
|
19 |
|
|
|
26 |
|
|
|
40 |
|
|
|
56 |
|
|
|
|
|
(a) |
|
We sold natural gas to DCP Midstream 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, Merey Sweeny L.P. (MSLP) |
17
|
|
|
|
|
and Hamaca Holding LLC (until expropriation on June 26, 2007) 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, upgraded crude oil from
Petrozuata C.A. (as a related party until expropriation on June 26, 2007) and refined products
from MRC. We also paid fees to various pipeline equity companies for transporting finished
refined products and natural gas, and a price upgrade to MSLP for heavy crude oil 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 Oil Sands
Partnership. See Note 6Investments, Loans and Long-Term Receivables, for additional
information on loans to affiliated companies. |
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, primarily in
the United States and Trinidad. The Midstream segment primarily consists of our 50 percent
equity investment in DCP Midstream. |
|
|
3) |
|
R&MThis segment purchases, refines, markets and transports crude oil and petroleum
products, mainly in the United States, Europe and Asia Pacific. |
|
|
4) |
|
LUKOIL InvestmentThis segment represents our investment in the ordinary shares of
LUKOIL, an international, integrated oil and gas company headquartered in Russia. At June
30, 2008, our ownership interest was 20 percent based on both issued shares and 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
CPChem. |
|
|
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 income and expense,
restructuring charges, and various other corporate activities. Corporate assets include all cash
and cash equivalents. We evaluate performance and allocate resources based on net income. Intersegment sales are at
prices that approximate market.
18
Analysis of Results by Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Sales and Other Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E&P |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
15,964 |
|
|
|
9,465 |
|
|
|
27,511 |
|
|
|
17,737 |
|
International |
|
|
8,471 |
|
|
|
5,480 |
|
|
|
16,912 |
|
|
|
11,493 |
|
Intersegment eliminationsU.S. |
|
|
(2,525 |
) |
|
|
(1,496 |
) |
|
|
(4,637 |
) |
|
|
(2,652 |
) |
Intersegment eliminationsinternational |
|
|
(3,550 |
) |
|
|
(1,476 |
) |
|
|
(5,847 |
) |
|
|
(2,917 |
) |
|
E&P |
|
|
18,360 |
|
|
|
11,973 |
|
|
|
33,939 |
|
|
|
23,661 |
|
|
Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
|
2,100 |
|
|
|
1,109 |
|
|
|
3,742 |
|
|
|
2,214 |
|
Intersegment eliminations |
|
|
(30 |
) |
|
|
(45 |
) |
|
|
(119 |
) |
|
|
(104 |
) |
|
Midstream |
|
|
2,070 |
|
|
|
1,064 |
|
|
|
3,623 |
|
|
|
2,110 |
|
|
R&M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
37,250 |
|
|
|
24,614 |
|
|
|
64,211 |
|
|
|
44,653 |
|
International |
|
|
13,969 |
|
|
|
9,793 |
|
|
|
24,895 |
|
|
|
18,428 |
|
Intersegment eliminationsU.S. |
|
|
(285 |
) |
|
|
(119 |
) |
|
|
(504 |
) |
|
|
(263 |
) |
Intersegment eliminationsinternational |
|
|
(13 |
) |
|
|
(3 |
) |
|
|
(20 |
) |
|
|
(5 |
) |
|
R&M |
|
|
50,921 |
|
|
|
34,285 |
|
|
|
88,582 |
|
|
|
62,813 |
|
|
LUKOIL Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
|
|
3 |
|
|
|
3 |
|
|
|
6 |
|
|
|
6 |
|
|
Emerging Businesses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
|
230 |
|
|
|
131 |
|
|
|
488 |
|
|
|
300 |
|
Intersegment eliminations |
|
|
(179 |
) |
|
|
(91 |
) |
|
|
(356 |
) |
|
|
(205 |
) |
|
Emerging Businesses |
|
|
51 |
|
|
|
40 |
|
|
|
132 |
|
|
|
95 |
|
|
Corporate and Other |
|
|
6 |
|
|
|
5 |
|
|
|
12 |
|
|
|
5 |
|
|
Consolidated sales and other operating revenues |
|
$ |
71,411 |
|
|
|
47,370 |
|
|
|
126,294 |
|
|
|
88,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E&P |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
1,852 |
|
|
|
1,055 |
|
|
|
3,201 |
|
|
|
1,971 |
|
International |
|
|
2,147 |
|
|
|
(3,459 |
) |
|
|
3,685 |
|
|
|
(2,046 |
) |
|
Total E&P |
|
|
3,999 |
|
|
|
(2,404 |
) |
|
|
6,886 |
|
|
|
(75 |
) |
|
Midstream |
|
|
162 |
|
|
|
102 |
|
|
|
299 |
|
|
|
187 |
|
|
R&M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
587 |
|
|
|
1,879 |
|
|
|
1,022 |
|
|
|
2,775 |
|
International |
|
|
77 |
|
|
|
479 |
|
|
|
162 |
|
|
|
719 |
|
|
Total R&M |
|
|
664 |
|
|
|
2,358 |
|
|
|
1,184 |
|
|
|
3,494 |
|
|
LUKOIL Investment |
|
|
774 |
|
|
|
526 |
|
|
|
1,484 |
|
|
|
782 |
|
Chemicals |
|
|
18 |
|
|
|
68 |
|
|
|
70 |
|
|
|
150 |
|
Emerging Businesses |
|
|
8 |
|
|
|
(12 |
) |
|
|
20 |
|
|
|
(13 |
) |
Corporate and Other |
|
|
(186 |
) |
|
|
(337 |
) |
|
|
(365 |
) |
|
|
(678 |
) |
|
Consolidated net income |
|
$ |
5,439 |
|
|
|
301 |
|
|
|
9,578 |
|
|
|
3,847 |
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
June 30 |
|
|
December 31 |
|
|
|
2008 |
|
|
2007 |
|
Total Assets |
|
|
|
|
|
|
|
|
E&P |
|
|
|
|
|
|
|
|
United States |
|
$ |
38,338 |
|
|
|
35,160 |
|
International |
|
|
60,102 |
|
|
|
59,412 |
|
Goodwill |
|
|
25,460 |
|
|
|
25,569 |
|
|
Total E&P |
|
|
123,900 |
|
|
|
120,141 |
|
|
Midstream |
|
|
2,070 |
|
|
|
2,016 |
|
|
R&M |
|
|
|
|
|
|
|
|
United States |
|
|
29,207 |
|
|
|
24,336 |
|
International |
|
|
12,464 |
|
|
|
9,766 |
|
Goodwill |
|
|
3,767 |
|
|
|
3,767 |
|
|
Total R&M |
|
|
45,438 |
|
|
|
37,869 |
|
|
LUKOIL Investment |
|
|
12,697 |
|
|
|
11,164 |
|
Chemicals |
|
|
2,265 |
|
|
|
2,225 |
|
Emerging Businesses |
|
|
1,308 |
|
|
|
1,230 |
|
Corporate and Other |
|
|
2,477 |
|
|
|
3,112 |
|
|
Consolidated total assets |
|
$ |
190,155 |
|
|
|
177,757 |
|
|
Note 19Income Taxes
Our effective tax rate for the second quarter and first six months of 2008 was 44 percent and 45
percent, respectively, compared with 91 percent and 60 percent for the same two periods of 2007.
The change in the effective tax rate for the second quarter and six months of 2008, versus the same periods of
2007, was primarily due to the impact of the expropriation of our oil interests in Venezuela on
2007 results (see the Expropriated Assets section of Note 13Impairments, in our 2007 Annual
Report on Form 10-K, for additional information), partially offset by the impact of a higher
proportion of income in higher tax-rate jurisdictions in 2008. The effective tax rate in excess of
the domestic federal statutory rate of 35 percent was primarily due to the impact of foreign taxes.
Note 20New Accounting Standards
In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations (SFAS No.
141(R)). This Statement will apply to all transactions in which an entity obtains control of one
or more other businesses. In general, SFAS No. 141(R) requires the acquiring entity in a business
combination to recognize the fair value of all the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date as the fair value measurement point; and modifies the
disclosure requirements. This Statement applies prospectively
to business combinations for which the acquisition date is on or after January 1, 2009. However,
starting
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 will impact tax
expense instead of impacting goodwill. We are currently evaluating the changes provided for in
this Statement.
Also in December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51, which changes the classification of
noncontrolling interests, sometimes called a minority interest, in the consolidated financial
statements. Additionally, this Statement establishes a single method of accounting for changes in
a parent companys ownership interest that do not result in deconsolidation and requires a parent
company to recognize a gain or loss when a subsidiary is deconsolidated. This Statement is
effective January 1, 2009, and will be applied prospectively with the
20
exception of the presentation and disclosure requirements which must be applied retrospectively for
all periods presented. We are currently evaluating the impact of this Statement on our consolidated
financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB No. 133. This Statement expands the annual and interim
disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, for derivative instruments within the scope of that Statement. We must adopt SFAS No.
161 no later than January 1, 2009, but it will not have any impact on our consolidated financial statements, other
than the additional disclosures.
21
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.
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada 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 |
|
$ |
|
|
|
|
47,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,618 |
|
|
|
|
|
|
|
71,411 |
|
Equity in earnings
of affiliates |
|
|
5,466 |
|
|
|
3,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,446 |
|
|
|
(8,896 |
) |
|
|
1,812 |
|
Other income |
|
|
(1 |
) |
|
|
182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
130 |
|
Intercompany
revenues |
|
|
15 |
|
|
|
915 |
|
|
|
19 |
|
|
|
22 |
|
|
|
13 |
|
|
|
9,693 |
|
|
|
(10,677 |
) |
|
|
|
|
|
Total Revenues and
Other Income |
|
|
5,480 |
|
|
|
52,686 |
|
|
|
19 |
|
|
|
22 |
|
|
|
13 |
|
|
|
34,706 |
|
|
|
(19,573 |
) |
|
|
73,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude
oil, natural gas
and products |
|
|
|
|
|
|
44,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,540 |
|
|
|
(10,364 |
) |
|
|
51,214 |
|
Production and
operating expenses |
|
|
|
|
|
|
1,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,807 |
|
|
|
(33 |
) |
|
|
3,111 |
|
Selling, general
and administrative expenses |
|
|
5 |
|
|
|
466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171 |
|
|
|
(13 |
) |
|
|
629 |
|
Exploration expenses |
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243 |
|
|
|
|
|
|
|
288 |
|
Depreciation,
depletion and
amortization |
|
|
|
|
|
|
379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,799 |
|
|
|
|
|
|
|
2,178 |
|
Impairments |
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
19 |
|
Taxes other than
income taxes |
|
|
|
|
|
|
1,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,569 |
|
|
|
(58 |
) |
|
|
5,796 |
|
Accretion on
discounted
liabilities |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
96 |
|
Interest and debt
expense |
|
|
51 |
|
|
|
104 |
|
|
|
18 |
|
|
|
20 |
|
|
|
13 |
|
|
|
213 |
|
|
|
(209 |
) |
|
|
210 |
|
Foreign currency
transaction (gains)
losses |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
58 |
|
|
|
66 |
|
|
|
(126 |
) |
|
|
|
|
|
|
|
|
Minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
17 |
|
|
Total Costs and
Expenses |
|
|
56 |
|
|
|
47,687 |
|
|
|
18 |
|
|
|
78 |
|
|
|
79 |
|
|
|
26,317 |
|
|
|
(10,677 |
) |
|
|
63,558 |
|
|
Income (loss) before
income taxes |
|
|
5,424 |
|
|
|
4,999 |
|
|
|
1 |
|
|
|
(56 |
) |
|
|
(66 |
) |
|
|
8,389 |
|
|
|
(8,896 |
) |
|
|
9,795 |
|
Provision for
income taxes |
|
|
(15 |
) |
|
|
550 |
|
|
|
|
|
|
|
(17 |
) |
|
|
(21 |
) |
|
|
3,859 |
|
|
|
|
|
|
|
4,356 |
|
|
Net Income (Loss) |
|
$ |
5,439 |
|
|
|
4,449 |
|
|
|
1 |
|
|
|
(39 |
) |
|
|
(45 |
) |
|
|
4,530 |
|
|
|
(8,896 |
) |
|
|
5,439 |
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada 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 |
|
$ |
|
|
|
|
30,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,455 |
|
|
|
|
|
|
|
47,370 |
|
Equity in earnings of
affiliates |
|
|
329 |
|
|
|
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780 |
|
|
|
(235 |
) |
|
|
1,506 |
|
Other income |
|
|
4 |
|
|
|
(70 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
587 |
|
|
|
|
|
|
|
521 |
|
Intercompany revenues |
|
|
58 |
|
|
|
791 |
|
|
|
30 |
|
|
|
20 |
|
|
|
12 |
|
|
|
4,754 |
|
|
|
(5,665 |
) |
|
|
|
|
|
Total Revenues and Other
Income |
|
|
391 |
|
|
|
32,268 |
|
|
|
30 |
|
|
|
20 |
|
|
|
12 |
|
|
|
22,576 |
|
|
|
(5,900 |
) |
|
|
49,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil,
natural gas and products |
|
|
|
|
|
|
25,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,989 |
|
|
|
(4,949 |
) |
|
|
30,820 |
|
Production and operating
expenses |
|
|
|
|
|
|
1,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,469 |
|
|
|
(21 |
) |
|
|
2,557 |
|
Selling, general and
administrative expenses |
|
|
6 |
|
|
|
375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235 |
|
|
|
(12 |
) |
|
|
604 |
|
Exploration expenses |
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235 |
|
|
|
|
|
|
|
259 |
|
Depreciation, depletion
and amortization |
|
|
|
|
|
|
361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,655 |
|
|
|
|
|
|
|
2,016 |
|
Impairmentexpropriated
assets |
|
|
|
|
|
|
1,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,663 |
|
|
|
|
|
|
|
4,588 |
|
Impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98 |
|
|
|
|
|
|
|
98 |
|
Taxes other than income
taxes |
|
|
|
|
|
|
1,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,472 |
|
|
|
(70 |
) |
|
|
4,697 |
|
Accretion on discounted
liabilities |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
81 |
|
Interest and debt expense |
|
|
99 |
|
|
|
291 |
|
|
|
28 |
|
|
|
19 |
|
|
|
13 |
|
|
|
482 |
|
|
|
(613 |
) |
|
|
319 |
|
Foreign currency
transaction (gains)
losses |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
91 |
|
|
|
67 |
|
|
|
(347 |
) |
|
|
|
|
|
|
(179 |
) |
Minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
Total Costs and Expenses |
|
|
105 |
|
|
|
31,184 |
|
|
|
28 |
|
|
|
110 |
|
|
|
80 |
|
|
|
20,037 |
|
|
|
(5,665 |
) |
|
|
45,879 |
|
|
Income (loss) before income
taxes |
|
|
286 |
|
|
|
1,084 |
|
|
|
2 |
|
|
|
(90 |
) |
|
|
(68 |
) |
|
|
2,539 |
|
|
|
(235 |
) |
|
|
3,518 |
|
Provision for income
taxes |
|
|
(15 |
) |
|
|
1,090 |
|
|
|
1 |
|
|
|
5 |
|
|
|
6 |
|
|
|
2,130 |
|
|
|
|
|
|
|
3,217 |
|
|
Net Income (Loss) |
|
$ |
301 |
|
|
|
(6 |
) |
|
|
1 |
|
|
|
(95 |
) |
|
|
(74 |
) |
|
|
409 |
|
|
|
(235 |
) |
|
|
301 |
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Six Months Ended June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips
Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada 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 |
|
$ |
|
|
|
|
82,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,698 |
|
|
|
|
|
|
|
126,294 |
|
Equity in earnings
of affiliates |
|
|
9,651 |
|
|
|
6,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,754 |
|
|
|
(16,091 |
) |
|
|
3,171 |
|
Other income |
|
|
(1 |
) |
|
|
487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46 |
) |
|
|
|
|
|
|
440 |
|
Intercompany
revenues |
|
|
24 |
|
|
|
1,632 |
|
|
|
43 |
|
|
|
45 |
|
|
|
27 |
|
|
|
15,743 |
|
|
|
(17,514 |
) |
|
|
|
|
|
Total Revenues and
Other Income |
|
|
9,674 |
|
|
|
91,572 |
|
|
|
43 |
|
|
|
45 |
|
|
|
27 |
|
|
|
62,149 |
|
|
|
(33,605 |
) |
|
|
129,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude
oil, natural gas
and products |
|
|
|
|
|
|
75,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,183 |
|
|
|
(16,679 |
) |
|
|
89,034 |
|
Production and
operating expenses |
|
|
|
|
|
|
2,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,425 |
|
|
|
(70 |
) |
|
|
5,802 |
|
Selling, general
and administrative
expenses |
|
|
7 |
|
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396 |
|
|
|
(33 |
) |
|
|
1,155 |
|
Exploration expenses |
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497 |
|
|
|
|
|
|
|
597 |
|
Depreciation,
depletion and
amortization |
|
|
|
|
|
|
751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,636 |
|
|
|
|
|
|
|
4,387 |
|
Impairments |
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
25 |
|
Taxes other than
income taxes |
|
|
|
|
|
|
2,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,531 |
|
|
|
(119 |
) |
|
|
10,951 |
|
Accretion on
discounted
liabilities |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
200 |
|
Interest and debt
expense |
|
|
128 |
|
|
|
325 |
|
|
|
40 |
|
|
|
39 |
|
|
|
26 |
|
|
|
472 |
|
|
|
(613 |
) |
|
|
417 |
|
Foreign currency
transaction (gains)
losses |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
(7 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
(43 |
) |
Minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
36 |
|
|
Total Costs and
Expenses |
|
|
135 |
|
|
|
82,525 |
|
|
|
40 |
|
|
|
25 |
|
|
|
19 |
|
|
|
47,331 |
|
|
|
(17,514 |
) |
|
|
112,561 |
|
|
Income before
income taxes |
|
|
9,539 |
|
|
|
9,047 |
|
|
|
3 |
|
|
|
20 |
|
|
|
8 |
|
|
|
14,818 |
|
|
|
(16,091 |
) |
|
|
17,344 |
|
Provision for
income taxes |
|
|
(39 |
) |
|
|
987 |
|
|
|
1 |
|
|
|
(13 |
) |
|
|
(13 |
) |
|
|
6,843 |
|
|
|
|
|
|
|
7,766 |
|
|
Net Income |
|
$ |
9,578 |
|
|
|
8,060 |
|
|
|
2 |
|
|
|
33 |
|
|
|
21 |
|
|
|
7,975 |
|
|
|
(16,091 |
) |
|
|
9,578 |
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Six Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada 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 |
|
$ |
|
|
|
|
56,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,798 |
|
|
|
|
|
|
|
88,690 |
|
Equity in earnings of
affiliates |
|
|
3,892 |
|
|
|
3,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,325 |
|
|
|
(6,436 |
) |
|
|
2,435 |
|
Other income |
|
|
4 |
|
|
|
(180 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,315 |
|
|
|
|
|
|
|
1,139 |
|
Intercompany revenues |
|
|
147 |
|
|
|
1,489 |
|
|
|
60 |
|
|
|
39 |
|
|
|
24 |
|
|
|
8,567 |
|
|
|
(10,326 |
) |
|
|
|
|
|
Total Revenues and Other
Income |
|
|
4,043 |
|
|
|
61,855 |
|
|
|
60 |
|
|
|
39 |
|
|
|
24 |
|
|
|
43,005 |
|
|
|
(16,762 |
) |
|
|
92,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil,
natural gas and products |
|
|
|
|
|
|
47,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,620 |
|
|
|
(8,887 |
) |
|
|
57,535 |
|
Production and operating
expenses |
|
|
|
|
|
|
2,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,896 |
|
|
|
(42 |
) |
|
|
5,049 |
|
Selling, general and
administrative expenses |
|
|
9 |
|
|
|
688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
464 |
|
|
|
(30 |
) |
|
|
1,131 |
|
Exploration expenses |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475 |
|
|
|
|
|
|
|
521 |
|
Depreciation, depletion
and amortization |
|
|
|
|
|
|
723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,317 |
|
|
|
|
|
|
|
4,040 |
|
Impairmentexpropriated
assets |
|
|
|
|
|
|
1,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,663 |
|
|
|
|
|
|
|
4,588 |
|
Impairments |
|
|
|
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121 |
|
|
|
|
|
|
|
97 |
|
Taxes other than income
taxes |
|
|
|
|
|
|
2,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,410 |
|
|
|
(137 |
) |
|
|
9,071 |
|
Accretion on discounted
liabilities |
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
160 |
|
Interest and debt
expense |
|
|
211 |
|
|
|
646 |
|
|
|
56 |
|
|
|
38 |
|
|
|
26 |
|
|
|
879 |
|
|
|
(1,230 |
) |
|
|
626 |
|
Foreign currency
transaction (gains)
losses |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
98 |
|
|
|
77 |
|
|
|
(363 |
) |
|
|
|
|
|
|
(178 |
) |
Minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
Total Costs and Expenses |
|
|
220 |
|
|
|
56,837 |
|
|
|
56 |
|
|
|
136 |
|
|
|
103 |
|
|
|
35,654 |
|
|
|
(10,326 |
) |
|
|
82,680 |
|
|
Income (loss) before income
taxes |
|
|
3,823 |
|
|
|
5,018 |
|
|
|
4 |
|
|
|
(97 |
) |
|
|
(79 |
) |
|
|
7,351 |
|
|
|
(6,436 |
) |
|
|
9,584 |
|
Provision for income
taxes |
|
|
(24 |
) |
|
|
1,674 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
4,089 |
|
|
|
|
|
|
|
5,737 |
|
|
Net Income (Loss) |
|
$ |
3,847 |
|
|
|
3,344 |
|
|
|
2 |
|
|
|
(95 |
) |
|
|
(77 |
) |
|
|
3,262 |
|
|
|
(6,436 |
) |
|
|
3,847 |
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
At June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Balance Sheet |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
|
|
|
|
366 |
|
|
|
|
|
|
|
12 |
|
|
|
1 |
|
|
|
408 |
|
|
|
|
|
|
|
787 |
|
Accounts and notes
receivable |
|
|
18 |
|
|
|
13,189 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
23,323 |
|
|
|
(16,077 |
) |
|
|
20,461 |
|
Inventories |
|
|
|
|
|
|
4,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,764 |
|
|
|
(109 |
) |
|
|
6,757 |
|
Prepaid expenses and
other current assets |
|
|
5 |
|
|
|
2,342 |
|
|
|
|
|
|
|
2 |
|
|
|
1 |
|
|
|
3,160 |
|
|
|
|
|
|
|
5,510 |
|
|
Total Current
Assets |
|
|
23 |
|
|
|
19,999 |
|
|
|
8 |
|
|
|
14 |
|
|
|
2 |
|
|
|
29,655 |
|
|
|
(16,186 |
) |
|
|
33,515 |
|
Investments, loans and
long-term receivables* |
|
|
93,749 |
|
|
|
66,090 |
|
|
|
1,700 |
|
|
|
1,421 |
|
|
|
964 |
|
|
|
37,876 |
|
|
|
(166,005 |
) |
|
|
35,795 |
|
Net properties, plants
and equipment |
|
|
|
|
|
|
18,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,136 |
|
|
|
2 |
|
|
|
89,990 |
|
Goodwill |
|
|
|
|
|
|
12,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,497 |
|
|
|
|
|
|
|
29,227 |
|
Intangibles |
|
|
|
|
|
|
792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81 |
|
|
|
|
|
|
|
873 |
|
Other assets |
|
|
14 |
|
|
|
288 |
|
|
|
3 |
|
|
|
4 |
|
|
|
4 |
|
|
|
660 |
|
|
|
(218 |
) |
|
|
755 |
|
|
Total Assets |
|
$ |
93,786 |
|
|
|
118,751 |
|
|
|
1,711 |
|
|
|
1,439 |
|
|
|
970 |
|
|
|
155,905 |
|
|
|
(182,407 |
) |
|
|
190,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1 |
|
|
|
21,851 |
|
|
|
|
|
|
|
6 |
|
|
|
3 |
|
|
|
17,577 |
|
|
|
(16,077 |
) |
|
|
23,361 |
|
Short-term debt |
|
|
|
|
|
|
298 |
|
|
|
950 |
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
(950 |
) |
|
|
385 |
|
Accrued income and
other taxes |
|
|
|
|
|
|
198 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
6,502 |
|
|
|
|
|
|
|
6,699 |
|
Employee benefit
obligations |
|
|
|
|
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268 |
|
|
|
1 |
|
|
|
681 |
|
Other accruals |
|
|
27 |
|
|
|
1,494 |
|
|
|
15 |
|
|
|
15 |
|
|
|
10 |
|
|
|
2,163 |
|
|
|
(3 |
) |
|
|
3,721 |
|
|
Total
Current Liabilities |
|
|
28 |
|
|
|
24,253 |
|
|
|
965 |
|
|
|
21 |
|
|
|
12 |
|
|
|
26,597 |
|
|
|
(17,029 |
) |
|
|
34,847 |
|
Long-term debt |
|
|
4,878 |
|
|
|
5,390 |
|
|
|
749 |
|
|
|
1,250 |
|
|
|
848 |
|
|
|
7,474 |
|
|
|
950 |
|
|
|
21,539 |
|
Asset retirement
obligations
and accrued
environmental costs |
|
|
|
|
|
|
1,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,203 |
|
|
|
|
|
|
|
7,330 |
|
Joint venture acquisition
obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,985 |
|
|
|
|
|
|
|
5,985 |
|
Deferred income taxes |
|
|
(3 |
) |
|
|
3,524 |
|
|
|
|
|
|
|
8 |
|
|
|
2 |
|
|
|
17,529 |
|
|
|
(16 |
) |
|
|
21,044 |
|
Employee benefit
obligations |
|
|
|
|
|
|
2,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
837 |
|
|
|
|
|
|
|
3,043 |
|
Other liabilities and
deferred credits* |
|
|
3,155 |
|
|
|
19,458 |
|
|
|
|
|
|
|
121 |
|
|
|
97 |
|
|
|
18,550 |
|
|
|
(38,556 |
) |
|
|
2,825 |
|
|
Total Liabilities |
|
|
8,058 |
|
|
|
55,958 |
|
|
|
1,714 |
|
|
|
1,400 |
|
|
|
959 |
|
|
|
83,175 |
|
|
|
(54,651 |
) |
|
|
96,613 |
|
Minority interests |
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,159 |
|
|
|
|
|
|
|
1,144 |
|
Retained earnings (deficit) |
|
|
52,112 |
|
|
|
32,012 |
|
|
|
(3 |
) |
|
|
(114 |
) |
|
|
(86 |
) |
|
|
27,512 |
|
|
|
(52,808 |
) |
|
|
58,625 |
|
Other stockholders equity |
|
|
33,616 |
|
|
|
30,796 |
|
|
|
|
|
|
|
153 |
|
|
|
97 |
|
|
|
44,059 |
|
|
|
(74,948 |
) |
|
|
33,773 |
|
|
Total |
|
$ |
93,786 |
|
|
|
118,751 |
|
|
|
1,711 |
|
|
|
1,439 |
|
|
|
970 |
|
|
|
155,905 |
|
|
|
(182,407 |
) |
|
|
190,155 |
|
|
|
|
|
*Includes intercompany loans. |
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
At December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Balance Sheet |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
|
|
|
|
195 |
|
|
|
|
|
|
|
7 |
|
|
|
1 |
|
|
|
1,626 |
|
|
|
(373 |
) |
|
|
1,456 |
|
Accounts and notes
receivable |
|
|
40 |
|
|
|
12,421 |
|
|
|
15 |
|
|
|
12 |
|
|
|
4 |
|
|
|
19,548 |
|
|
|
(15,686 |
) |
|
|
16,354 |
|
Inventories |
|
|
|
|
|
|
2,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,190 |
|
|
|
(10 |
) |
|
|
4,223 |
|
Prepaid expenses and
other current assets |
|
|
9 |
|
|
|
578 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
2,114 |
|
|
|
|
|
|
|
2,702 |
|
|
Total Current
Assets |
|
|
49 |
|
|
|
15,237 |
|
|
|
15 |
|
|
|
20 |
|
|
|
5 |
|
|
|
25,478 |
|
|
|
(16,069 |
) |
|
|
24,735 |
|
Investments, loans
and long-term
receivables* |
|
|
86,942 |
|
|
|
57,936 |
|
|
|
1,700 |
|
|
|
1,470 |
|
|
|
997 |
|
|
|
18,972 |
|
|
|
(134,689 |
) |
|
|
33,328 |
|
Net properties, plants
and equipment |
|
|
|
|
|
|
17,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,317 |
|
|
|
9 |
|
|
|
89,003 |
|
Goodwill |
|
|
|
|
|
|
12,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,590 |
|
|
|
|
|
|
|
29,336 |
|
Intangibles |
|
|
|
|
|
|
808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
896 |
|
Other assets |
|
|
8 |
|
|
|
153 |
|
|
|
3 |
|
|
|
5 |
|
|
|
4 |
|
|
|
520 |
|
|
|
(234 |
) |
|
|
459 |
|
|
Total Assets |
|
$ |
86,999 |
|
|
|
104,557 |
|
|
|
1,718 |
|
|
|
1,495 |
|
|
|
1,006 |
|
|
|
132,965 |
|
|
|
(150,983 |
) |
|
|
177,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
6 |
|
|
|
18,792 |
|
|
|
|
|
|
|
10 |
|
|
|
4 |
|
|
|
15,108 |
|
|
|
(16,059 |
) |
|
|
17,861 |
|
Short-term debt |
|
|
1,000 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89 |
|
|
|
|
|
|
|
1,398 |
|
Accrued income and
other taxes |
|
|
|
|
|
|
601 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
4,117 |
|
|
|
97 |
|
|
|
4,814 |
|
Employee benefit
obligations |
|
|
|
|
|
|
509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411 |
|
|
|
|
|
|
|
920 |
|
Other accruals |
|
|
21 |
|
|
|
594 |
|
|
|
20 |
|
|
|
16 |
|
|
|
11 |
|
|
|
1,230 |
|
|
|
(3 |
) |
|
|
1,889 |
|
|
Total Current
Liabilities |
|
|
1,027 |
|
|
|
20,805 |
|
|
|
20 |
|
|
|
26 |
|
|
|
14 |
|
|
|
20,955 |
|
|
|
(15,965 |
) |
|
|
26,882 |
|
Long-term debt |
|
|
3,402 |
|
|
|
5,694 |
|
|
|
1,699 |
|
|
|
1,250 |
|
|
|
848 |
|
|
|
7,396 |
|
|
|
|
|
|
|
20,289 |
|
Asset retirement
obligations and
accrued
environmental costs |
|
|
|
|
|
|
1,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,094 |
|
|
|
|
|
|
|
7,261 |
|
Joint venture
acquisition
obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,294 |
|
|
|
|
|
|
|
6,294 |
|
Deferred income taxes |
|
|
(3 |
) |
|
|
3,050 |
|
|
|
|
|
|
|
32 |
|
|
|
18 |
|
|
|
17,907 |
|
|
|
14 |
|
|
|
21,018 |
|
Employee benefit
obligations |
|
|
|
|
|
|
2,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
899 |
|
|
|
|
|
|
|
3,191 |
|
Other liabilities and
deferred credits* |
|
|
42 |
|
|
|
16,447 |
|
|
|
|
|
|
|
132 |
|
|
|
102 |
|
|
|
15,489 |
|
|
|
(29,546 |
) |
|
|
2,666 |
|
|
Total Liabilities |
|
|
4,468 |
|
|
|
49,455 |
|
|
|
1,719 |
|
|
|
1,440 |
|
|
|
982 |
|
|
|
75,034 |
|
|
|
(45,497 |
) |
|
|
87,601 |
|
Minority interests |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,194 |
|
|
|
(2 |
) |
|
|
1,173 |
|
Retained earnings (deficit) |
|
|
43,988 |
|
|
|
23,952 |
|
|
|
(1 |
) |
|
|
(147 |
) |
|
|
(107 |
) |
|
|
20,738 |
|
|
|
(37,913 |
) |
|
|
50,510 |
|
Other stockholders
equity |
|
|
38,543 |
|
|
|
31,169 |
|
|
|
|
|
|
|
202 |
|
|
|
131 |
|
|
|
35,999 |
|
|
|
(67,571 |
) |
|
|
38,473 |
|
|
Total |
|
$ |
86,999 |
|
|
|
104,557 |
|
|
|
1,718 |
|
|
|
1,495 |
|
|
|
1,006 |
|
|
|
132,965 |
|
|
|
(150,983 |
) |
|
|
177,757 |
|
|
|
|
|
*Includes intercompany loans. |
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Six Months Ended June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Statement of Cash Flows |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities |
|
$ |
5,815 |
|
|
|
189 |
|
|
|
4 |
|
|
|
5 |
|
|
|
|
|
|
|
6,830 |
|
|
|
(822 |
) |
|
|
12,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures and investments |
|
|
|
|
|
|
(2,462 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,611 |
) |
|
|
353 |
|
|
|
(6,720 |
) |
Proceeds from asset dispositions |
|
|
|
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
372 |
|
|
|
(4 |
) |
|
|
441 |
|
Long-term advances/loans
related parties |
|
|
|
|
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,523 |
) |
|
|
2,422 |
|
|
|
(154 |
) |
Collection of advances/loansrelated
parties |
|
|
|
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
(217 |
) |
|
|
4 |
|
Other |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
7 |
|
|
Net Cash Used in Investing Activities |
|
|
|
|
|
|
(2,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,756 |
) |
|
|
2,554 |
|
|
|
(6,422 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
1,967 |
|
|
|
2,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108 |
|
|
|
(2,422 |
) |
|
|
2,065 |
|
Repayment of debt |
|
|
(1,500 |
) |
|
|
(338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(220 |
) |
|
|
217 |
|
|
|
(1,841 |
) |
Issuance of company common stock |
|
|
185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185 |
|
Repurchase of company common stock |
|
|
(5,008 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,008 |
) |
Dividends paid on common stock |
|
|
(1,449 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(1,191 |
) |
|
|
1,195 |
|
|
|
(1,449 |
) |
Other |
|
|
(10 |
) |
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
(349 |
) |
|
|
(240 |
) |
|
Net Cash Provided by (Used in) Financing
Activities |
|
|
(5,815 |
) |
|
|
2,202 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(1,312 |
) |
|
|
(1,359 |
) |
|
|
(6,288 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash
and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents |
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
(1,218 |
) |
|
|
373 |
|
|
|
(669 |
) |
Cash and cash equivalents at beginning
of year |
|
|
|
|
|
|
195 |
|
|
|
|
|
|
|
7 |
|
|
|
1 |
|
|
|
1,626 |
|
|
|
(373 |
) |
|
|
1,456 |
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
|
|
|
|
366 |
|
|
|
|
|
|
|
12 |
|
|
|
1 |
|
|
|
408 |
|
|
|
|
|
|
|
787 |
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Six Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
|
ConocoPhillips |
|
|
ConocoPhillips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips |
|
|
Funding |
|
|
Canada Funding |
|
|
Canada Funding |
|
|
All Other |
|
|
Consolidating |
|
|
Total |
|
Statement of Cash Flows |
|
ConocoPhillips |
|
|
Company |
|
|
Company |
|
|
Company I |
|
|
Company II |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by
(Used in) Operating
Activities |
|
$ |
7,762 |
|
|
|
(777 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
4,755 |
|
|
|
(106 |
) |
|
|
11,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
and investments |
|
|
|
|
|
|
(1,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,301 |
) |
|
|
102 |
|
|
|
(5,347 |
) |
Proceeds from asset
dispositions |
|
|
|
|
|
|
951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,679 |
|
|
|
(415 |
) |
|
|
2,215 |
|
Long-term
advances/loans
related parties |
|
|
|
|
|
|
(118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,137 |
) |
|
|
929 |
|
|
|
(326 |
) |
Collection of
advances/loansrelated
parties |
|
|
|
|
|
|
811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(745 |
) |
|
|
66 |
|
Other |
|
|
1 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
Net Cash Provided by
(Used in) Investing
Activities |
|
|
1 |
|
|
|
514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,759 |
) |
|
|
(129 |
) |
|
|
(3,373 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of debt |
|
|
(36 |
) |
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801 |
|
|
|
(929 |
) |
|
|
765 |
|
Repayment of debt |
|
|
(4,564 |
) |
|
|
(547 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(755 |
) |
|
|
745 |
|
|
|
(5,121 |
) |
Issuance of company
common stock |
|
|
181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181 |
|
Repurchase of company
common stock |
|
|
(2,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,000 |
) |
Dividends paid on
common stock |
|
|
(1,342 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(316 |
) |
|
|
321 |
|
|
|
(1,342 |
) |
Other |
|
|
(2 |
) |
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(513 |
) |
|
|
312 |
|
|
|
(153 |
) |
|
Net Cash Provided by
(Used in) Financing
Activities |
|
|
(7,763 |
) |
|
|
432 |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(783 |
) |
|
|
449 |
|
|
|
(7,670 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate
Changes on Cash and
Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Change in Cash and Cash Equivalents |
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211 |
|
|
|
214 |
|
|
|
594 |
|
Cash and cash
equivalents at
beginning of year |
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1,042 |
|
|
|
(342 |
) |
|
|
817 |
|
|
Cash and Cash
Equivalents at End of
Period |
|
$ |
|
|
|
|
285 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1,253 |
|
|
|
(128 |
) |
|
|
1,411 |
|
|
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 51.
BUSINESS ENVIRONMENT AND EXECUTIVE OVERVIEW
Our Exploration and Production (E&P) segment had net income of $3,999 million in the second quarter
of 2008, which accounted for 74 percent of our total net income in the quarter. This compares with
E&P net income of $2,887 million in the first quarter of 2008, and a loss of $2,404 million in the
second quarter of 2007. In the second quarter of 2007, we recorded a noncash impairment of $4,588
million before-tax ($4,512 million after-tax) related to the expropriation of our oil interests in
Venezuela. For additional information, see the Expropriated Assets section of Note
13Impairments, in our 2007 Annual Report on Form 10-K.
E&P net income in the second quarter of 2008 benefited from an increase in commodity prices.
Industry crude oil prices for West Texas Intermediate averaged $123.98 per barrel in the second
quarter of 2008, or $26.04 per barrel higher than the first quarter of 2008, and $59.09 per barrel
higher than in the same period a year earlier. Crude oil prices were influenced by higher demand
in developing economies; geopolitical supply risks; and a financial sector rotation into commodities
due to fears about the falling value of the U.S. dollar, inflation and risk in credit markets.
Industry natural gas prices for Henry Hub increased during the second quarter of 2008 to $10.94 per
million British thermal units (MMBTU), up $2.91 per MMBTU from the first quarter of 2008. Natural
gas prices trended higher during the second quarter due to the outage of a natural gas hub in the
Gulf of Mexico for a significant portion of the quarter, low storage levels, and a low level of
liquefied natural gas (LNG) imports into the United States. Along with these supply issues, demand
in the United States for natural gas remained in line with year-ago levels despite the increased
prices.
Our Refining and Marketing (R&M) segment had net income of $664 million in the second quarter of
2008, compared with $520 million in the first quarter of 2008, and $2,358 million in the second
quarter of 2007. The increase in net income from the previous quarter was primarily due to higher
worldwide realized refining margins and improved refining operations in the U.S. Gulf Coast and
United Kingdom. This improvement in realized margins was partially offset by a lower net benefit
from asset rationalization efforts, as well as higher turnaround and utility costs. The decrease
in net income from the second quarter of 2007 was primarily due to significantly lower U.S.
refining and marketing margins, a lower net benefit from the companys asset rationalization
efforts and higher turnaround and utility costs.
31
RESULTS OF OPERATIONS
Unless otherwise indicated, discussion of results for the three- and six-month periods ending June
30, 2008, is based on a comparison with the corresponding periods of 2007.
Consolidated Results
A summary of net income (loss) by business segment follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and Production (E&P) |
|
$ |
3,999 |
|
|
|
(2,404 |
) |
|
|
6,886 |
|
|
|
(75 |
) |
Midstream |
|
|
162 |
|
|
|
102 |
|
|
|
299 |
|
|
|
187 |
|
Refining and Marketing (R&M) |
|
|
664 |
|
|
|
2,358 |
|
|
|
1,184 |
|
|
|
3,494 |
|
LUKOIL Investment |
|
|
774 |
|
|
|
526 |
|
|
|
1,484 |
|
|
|
782 |
|
Chemicals |
|
|
18 |
|
|
|
68 |
|
|
|
70 |
|
|
|
150 |
|
Emerging Businesses |
|
|
8 |
|
|
|
(12 |
) |
|
|
20 |
|
|
|
(13 |
) |
Corporate and Other |
|
|
(186 |
) |
|
|
(337 |
) |
|
|
(365 |
) |
|
|
(678 |
) |
|
Net income |
|
$ |
5,439 |
|
|
|
301 |
|
|
|
9,578 |
|
|
|
3,847 |
|
|
Net income was $5,439 million in the second quarter of 2008, compared with $301 million in the
second quarter of 2007. For the six-month periods ended June 30, 2008 and 2007, net income was
$9,578 million and $3,847 million, respectively. The higher results in both 2008 periods were
primarily the result of a complete impairment in 2007 ($4,512 million after-tax) of our oil
interests in Venezuela, resulting from their expropriation on June 26, 2007.
In addition, the results in both 2008 periods benefited from:
|
|
|
Significantly higher crude oil, natural gas and natural gas liquids prices in our E&P
segment. |
|
|
|
|
Increased earnings from our LUKOIL investment, primarily due to higher estimated
realized prices, partially offset by higher estimated taxes. |
These items were partially offset by a decrease in net income from our R&M segment, primarily due
to lower domestic realized refining and marketing margins, and a reduced net benefit from asset
rationalization efforts. In addition, net income decreased due to higher taxes in our E&P segment.
See the Segment Results section for additional information on our segment results.
Income Statement Analysis
Sales and other operating revenues increased 51 percent in the second quarter of 2008 and 42
percent in the six-month period, while purchased crude oil, natural gas and products increased 66
percent and 55 percent, respectively. These increases were mainly the result of higher petroleum
product prices, and higher prices for crude oil, natural gas and natural gas liquids.
32
Equity in earnings of affiliates increased 20 percent in the second quarter of 2008 and 30 percent
in the six-month period, reflecting improved results from:
|
|
|
LUKOIL, primarily reflecting higher estimated realized prices, partially offset by
higher estimated taxes. |
|
|
|
|
DCP Midstream, our midstream joint venture, primarily due to higher realized natural gas
liquids prices and volumes. |
These increases were partially offset by lower earnings from WRB Refining LLC, primarily due to
lower refining margins.
Other income decreased 75 percent and 61 percent during the second quarter and first six months of
2008, respectively. The decrease was primarily due to higher 2007 net gains on asset dispositions
associated with asset rationalization efforts.
Production and operating costs increased 22 percent and 15 percent during the second quarter and
first six months of 2008, respectively. Contributing to the increase were higher maintenance, well
workover and repair costs in E&P and higher turnaround and utility costs in R&M.
Impairmentexpropriated assets reflects a second-quarter 2007 noncash impairment of $4,588 million
before-tax related to the expropriation of our oil interests in Venezuela. For additional
information, see the Expropriated Assets section of Note 13Impairments, in our 2007 Annual
Report on Form 10-K.
Taxes other than income taxes increased 23 percent and 21 percent during the second quarter and
first six months of 2008, respectively, primarily due to increased production taxes in Alaska.
Interest and debt expense decreased 34 percent and 33 percent during both periods of 2008,
respectively, primarily due to lower average debt levels.
33
Segment Results
E&P
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
Millions of Dollars |
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
$ |
700 |
|
|
|
535 |
|
|
|
1,303 |
|
|
|
1,042 |
|
Lower 48 |
|
|
1,152 |
|
|
|
520 |
|
|
|
1,898 |
|
|
|
929 |
|
|
United States |
|
|
1,852 |
|
|
|
1,055 |
|
|
|
3,201 |
|
|
|
1,971 |
|
International |
|
|
2,147 |
|
|
|
(3,459 |
) |
|
|
3,685 |
|
|
|
(2,046 |
) |
|
|
|
$ |
3,999 |
|
|
|
(2,404 |
) |
|
|
6,886 |
|
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars Per Unit |
|
Average Sales Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (per barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
118.66 |
|
|
|
61.91 |
|
|
|
106.51 |
|
|
|
57.86 |
|
International |
|
|
119.75 |
|
|
|
67.16 |
|
|
|
107.94 |
|
|
|
61.16 |
|
Total consolidated |
|
|
119.24 |
|
|
|
64.55 |
|
|
|
107.27 |
|
|
|
59.61 |
|
Equity affiliates* |
|
|
93.20 |
|
|
|
47.74 |
|
|
|
76.86 |
|
|
|
44.24 |
|
Worldwide E&P |
|
|
118.01 |
|
|
|
61.97 |
|
|
|
105.68 |
|
|
|
57.53 |
|
Natural gas (per thousand cubic feet) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
9.69 |
|
|
|
6.49 |
|
|
|
8.67 |
|
|
|
6.34 |
|
International |
|
|
10.02 |
|
|
|
6.42 |
|
|
|
9.15 |
|
|
|
6.46 |
|
Total consolidated |
|
|
9.87 |
|
|
|
6.45 |
|
|
|
8.94 |
|
|
|
6.41 |
|
Equity affiliates* |
|
|
|
|
|
|
.30 |
|
|
|
|
|
|
|
.30 |
|
Worldwide E&P |
|
|
9.87 |
|
|
|
6.44 |
|
|
|
8.94 |
|
|
|
6.40 |
|
Natural gas liquids (per barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
65.96 |
|
|
|
44.17 |
|
|
|
62.31 |
|
|
|
41.04 |
|
International |
|
|
71.40 |
|
|
|
45.64 |
|
|
|
66.86 |
|
|
|
42.30 |
|
Total consolidated |
|
|
68.42 |
|
|
|
44.80 |
|
|
|
64.40 |
|
|
|
41.60 |
|
Equity affiliates* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide E&P |
|
|
68.42 |
|
|
|
44.80 |
|
|
|
64.40 |
|
|
|
41.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
Worldwide Exploration Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General administrative; geological and geophysical; and
lease rentals |
|
$ |
161 |
|
|
|
126 |
|
|
|
316 |
|
|
|
240 |
|
Leasehold impairment |
|
|
59 |
|
|
|
59 |
|
|
|
119 |
|
|
|
145 |
|
Dry holes |
|
|
68 |
|
|
|
74 |
|
|
|
162 |
|
|
|
136 |
|
|
|
|
$ |
288 |
|
|
|
259 |
|
|
|
597 |
|
|
|
521 |
|
|
|
|
|
*Excludes our equity share of LUKOIL, which is reported in the LUKOIL Investment segment. |
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
Thousands of Barrels Daily |
|
Operating Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil produced |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
|
244 |
|
|
|
267 |
|
|
|
249 |
|
|
|
272 |
|
Lower 48 |
|
|
95 |
|
|
|
105 |
|
|
|
96 |
|
|
|
104 |
|
|
United States |
|
|
339 |
|
|
|
372 |
|
|
|
345 |
|
|
|
376 |
|
Europe |
|
|
194 |
|
|
|
193 |
|
|
|
198 |
|
|
|
214 |
|
Asia Pacific |
|
|
86 |
|
|
|
93 |
|
|
|
88 |
|
|
|
95 |
|
Canada |
|
|
24 |
|
|
|
19 |
|
|
|
23 |
|
|
|
20 |
|
Middle East and Africa |
|
|
78 |
|
|
|
73 |
|
|
|
80 |
|
|
|
84 |
|
Other areas |
|
|
10 |
|
|
|
10 |
|
|
|
10 |
|
|
|
10 |
|
|
Total consolidated |
|
|
731 |
|
|
|
760 |
|
|
|
744 |
|
|
|
799 |
|
Equity affiliates* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
|
25 |
|
|
|
28 |
|
|
|
27 |
|
|
|
26 |
|
Russia and Caspian |
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
Venezuela |
|
|
|
|
|
|
85 |
|
|
|
|
|
|
|
83 |
|
|
|
|
|
772 |
|
|
|
888 |
|
|
|
787 |
|
|
|
923 |
|
|
Natural gas liquids produced |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
|
17 |
|
|
|
18 |
|
|
|
18 |
|
|
|
20 |
|
Lower 48 |
|
|
76 |
|
|
|
71 |
|
|
|
73 |
|
|
|
70 |
|
|
United States |
|
|
93 |
|
|
|
89 |
|
|
|
91 |
|
|
|
90 |
|
Europe |
|
|
19 |
|
|
|
11 |
|
|
|
21 |
|
|
|
12 |
|
Asia Pacific |
|
|
17 |
|
|
|
15 |
|
|
|
15 |
|
|
|
13 |
|
Canada |
|
|
25 |
|
|
|
28 |
|
|
|
26 |
|
|
|
30 |
|
Middle East and Africa |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
156 |
|
|
|
145 |
|
|
|
155 |
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Cubic Feet Daily |
|
Natural gas produced** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska |
|
|
98 |
|
|
|
100 |
|
|
|
99 |
|
|
|
111 |
|
Lower 48 |
|
|
2,034 |
|
|
|
2,219 |
|
|
|
1,998 |
|
|
|
2,205 |
|
|
United States |
|
|
2,132 |
|
|
|
2,319 |
|
|
|
2,097 |
|
|
|
2,316 |
|
Europe |
|
|
880 |
|
|
|
921 |
|
|
|
952 |
|
|
|
1,003 |
|
Asia Pacific |
|
|
616 |
|
|
|
603 |
|
|
|
602 |
|
|
|
601 |
|
Canada |
|
|
1,055 |
|
|
|
1,133 |
|
|
|
1,078 |
|
|
|
1,142 |
|
Middle East and Africa |
|
|
116 |
|
|
|
127 |
|
|
|
110 |
|
|
|
134 |
|
Other areas |
|
|
19 |
|
|
|
21 |
|
|
|
20 |
|
|
|
22 |
|
|
Total consolidated |
|
|
4,818 |
|
|
|
5,124 |
|
|
|
4,859 |
|
|
|
5,218 |
|
Equity affiliates* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Venezuela |
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
4,818 |
|
|
|
5,133 |
|
|
|
4,859 |
|
|
|
5,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Barrels Daily |
|
Mining operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syncrude produced |
|
|
19 |
|
|
|
21 |
|
|
|
20 |
|
|
|
22 |
|
|
|
|
|
*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 the
bitumen and upgrade it into a synthetic crude oil. At June 30, 2008, our E&P operations were
producing in the United States, Norway, the United Kingdom, the Netherlands, Canada, Nigeria,
Ecuador, Argentina, offshore Timor-Leste in the Timor Sea, Australia, China, Indonesia, Algeria,
Libya, Vietnam, and Russia.
The E&P segment reported net income of $3,999 million in the second quarter of 2008, compared with
a net loss of $2,404 million in the second quarter of 2007. In the second quarter of 2007, we
recorded a noncash impairment of $4,588 million before-tax ($4,512 million after-tax) related to
the expropriation
of our oil interests in Venezuela. For additional information, see the Expropriated Assets
section of
Note 13Impairments, in our 2007 Annual Report on Form 10-K. In addition to the impact of the
impairment, results for the second quarter of 2008 reflect higher crude oil, natural gas and
natural gas liquids prices, partially offset by higher production taxes, lower volumes and higher
operating costs.
Net income for the E&P segment for the first six months of 2008 was $6,886 million, compared with a
net loss of $75 million for the corresponding period of 2007. In addition to the impact of the
impairment noted above, the 2008 period benefited from higher crude oil, natural gas and natural
gas liquids prices, partially offset by higher production taxes, lower volumes, higher operating
costs, and a reduced net benefit from asset rationalization efforts. See the Business Environment
and Executive Overview section for additional information on industry crude oil and natural gas
prices.
U.S. E&P
Net income from our U.S. E&P operations increased 76 percent and 62 percent in the second quarter
and six months of 2008, respectively, primarily due to higher crude oil, natural gas and natural
gas liquids prices. The increases were partially offset by higher production taxes in Alaska,
lower crude oil and natural gas volumes and higher operating costs.
U.S. E&P production on a barrel-of-oil-equivalent (BOE) basis averaged 787,000 BOE per day in the
second quarter of 2008, a decrease of 7 percent from 848,000 BOE per day in the second quarter of
2007. The production decrease was primarily due to normal field decline, as well as unplanned
downtime.
We have a long-term terminal use agreement with Freeport LNG Development, L.P. (Freeport) for 0.9
billion cubic feet per day of capacity at Freeports 1.5-billion-cubic-feet-per-day liquefied
natural gas (LNG) receiving terminal in Quintana, Texas. The terminal became operational late in
the second quarter of 2008. Due to present market conditions, which favor the flow of LNG to
European and Asian markets, our near-to-mid-term utilization of the terminal is expected to be
limited. Due to the process-or-pay nature of the terminal use agreement, we are responsible for
monthly payments to Freeport irrespective of whether we are utilizing the terminal for
regasification. However, the financial impact of this capacity underutilization is not expected to
be material to our future earnings or cash flows.
International E&P
Net income from our international E&P operations was $2,147 million and $3,685 million in the
second quarter and first six months of 2008, respectively, compared with a net loss of $3,459
million and $2,046 million in the corresponding periods of 2007. In addition to the impact of the
impairment of our oil interests in Venezuela, the 2008 periods benefited from higher crude oil,
natural gas and natural gas liquids prices, partially offset by lower crude oil and natural gas
volumes, lower foreign currency gains, and higher operating costs and taxes. The first six months
of 2008 were also negatively impacted by a lower net benefit from asset rationalization efforts.
36
International E&P production averaged 944,000 BOE per day in the second quarter of 2008, a decrease
of 9 percent from 1,041,000 BOE per day in the second quarter of 2007. Production decreased
primarily due to the expropriation of our Venezuelan oil projects and normal field decline. These
decreases were partially offset by production from new developments in Indonesia, Norway, the
United Kingdom, and Canada.
Our Syncrude mining operations produced 19,000 barrels per day in the second quarter of 2008,
compared with 21,000 barrels per day in the second quarter of 2007.
Midstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
Millions of Dollars |
|
|
Net Income* |
|
$ |
162 |
|
|
|
102 |
|
|
|
299 |
|
|
|
187 |
|
|
*Includes DCP Midstream-related net income: |
|
$ |
137 |
|
|
|
76 |
|
|
|
255 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars Per Barrel |
|
Average Sales Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. natural gas liquids* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
68.21 |
|
|
|
45.19 |
|
|
|
64.15 |
|
|
|
41.46 |
|
Equity |
|
|
62.53 |
|
|
|
44.30 |
|
|
|
59.51 |
|
|
|
40.43 |
|
|
|
|
|
*Prices are 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* |
|
|
196 |
|
|
|
211 |
|
|
|
197 |
|
|
|
204 |
|
Natural gas liquids fractionated** |
|
|
162 |
|
|
|
176 |
|
|
|
158 |
|
|
|
175 |
|
|
|
|
|
*Includes our share of equity affiliates, except LUKOIL, which is included 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.
Net income from the Midstream segment increased 59 percent and 60 percent in the second quarter and
first six months of 2008. The increase in both periods was primarily due to higher realized
natural gas liquids prices, slightly offset by lower natural gas liquids extraction volumes in our
consolidated operations.
37
R&M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
Millions of Dollars |
|
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
587 |
|
|
|
1,879 |
|
|
|
1,022 |
|
|
|
2,775 |
|
International |
|
|
77 |
|
|
|
479 |
|
|
|
162 |
|
|
|
719 |
|
|
|
|
$ |
664 |
|
|
|
2,358 |
|
|
|
1,184 |
|
|
|
3,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars Per Gallon |
|
U.S. Average Sales Prices* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
$ |
3.23 |
|
|
|
2.50 |
|
|
|
2.89 |
|
|
|
2.19 |
|
Retail |
|
|
3.36 |
|
|
|
2.68 |
|
|
|
3.01 |
|
|
|
2.36 |
|
Distillateswholesale |
|
|
3.73 |
|
|
|
2.24 |
|
|
|
3.33 |
|
|
|
2.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Barrels Daily |
|
Operating Statistics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refining operations* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil capacity |
|
|
2,008 |
|
|
|
2,033 |
|
|
|
2,008 |
|
|
|
2,033 |
|
Crude oil runs |
|
|
1,891 |
|
|
|
1,896 |
|
|
|
1,848 |
|
|
|
1,917 |
|
Capacity utilization (percent) |
|
|
94 |
% |
|
|
93 |
|
|
|
92 |
|
|
|
94 |
|
Refinery production |
|
|
2,095 |
|
|
|
2,087 |
|
|
|
2,043 |
|
|
|
2,119 |
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil capacity |
|
|
670 |
|
|
|
696 |
|
|
|
670 |
|
|
|
696 |
|
Crude oil runs |
|
|
589 |
|
|
|
650 |
|
|
|
583 |
|
|
|
637 |
|
Capacity utilization (percent) |
|
|
88 |
% |
|
|
93 |
|
|
|
87 |
|
|
|
92 |
|
Refinery production |
|
|
592 |
|
|
|
664 |
|
|
|
583 |
|
|
|
654 |
|
Worldwide |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil capacity |
|
|
2,678 |
|
|
|
2,729 |
|
|
|
2,678 |
|
|
|
2,729 |
|
Crude oil runs |
|
|
2,480 |
|
|
|
2,546 |
|
|
|
2,431 |
|
|
|
2,554 |
|
Capacity utilization (percent) |
|
|
93 |
% |
|
|
93 |
|
|
|
91 |
|
|
|
94 |
|
Refinery production |
|
|
2,687 |
|
|
|
2,751 |
|
|
|
2,626 |
|
|
|
2,773 |
|
|
|
|
|
*Includes our share of equity affiliates, except for our share of LUKOIL, which is reported in the LUKOIL Investment segment. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum products sales volumes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
|
|
1,127 |
|
|
|
1,300 |
|
|
|
1,098 |
|
|
|
1,279 |
|
Distillates |
|
|
912 |
|
|
|
827 |
|
|
|
890 |
|
|
|
845 |
|
Other products |
|
|
404 |
|
|
|
503 |
|
|
|
394 |
|
|
|
491 |
|
|
|
|
|
2,443 |
|
|
|
2,630 |
|
|
|
2,382 |
|
|
|
2,615 |
|
International |
|
|
683 |
|
|
|
739 |
|
|
|
650 |
|
|
|
726 |
|
|
|
|
|
3,126 |
|
|
|
3,369 |
|
|
|
3,032 |
|
|
|
3,341 |
|
|
38
The R&M segments operations encompass refining crude oil and other feedstocks into petroleum
products (such as gasoline, distillates and aviation fuels); buying, selling and transporting crude
oil; and buying, selling, transporting, distributing and marketing petroleum products. R&M has
operations mainly in the United States, Europe and Asia Pacific.
Net income from the R&M segment decreased 72 percent during the second quarter of 2008 and 66
percent in the first six months of 2008. The decrease in both periods was primarily due to
significantly lower domestic realized refining and marketing margins. Contributing to the lower
refinery margins in the second quarter of 2008 were decreases in margins for secondary products,
such as fuel oil, natural gas liquids and petroleum coke. Both periods were also impacted by
higher turnaround and utility costs. The results for the six-month period of 2008 also included a
lower net benefit from asset rationalization efforts.
U.S. R&M
Net income from our U.S. R&M operations decreased 69 percent in the second quarter of 2008 and 63
percent in the first six months of 2008. The decrease was primarily the result of lower refining
and marketing margins and higher turnaround and utility costs.
Our U.S. refining capacity utilization rate was 94 percent in the second quarter of 2008, compared
with 93 percent in the second quarter of 2007. The current year rate benefited from lower unplanned
downtime.
International R&M
Net income from our international R&M operations decreased
84 percent in the second quarter of 2008
and 77 percent for the first six months of 2008. Contributing to
the decrease in both periods were lower realized refining margins and a reduced net benefit from our asset rationalization efforts.
Our international refining capacity utilization rate was 88 percent in the second quarter of 2008,
compared with 93 percent in the same quarter of 2007. The utilization rate was primarily impacted
by reduced crude throughput at our Wilhelmshaven, Germany, refinery due to economic conditions, and
planned maintenance at the Humber refinery in the United Kingdom.
LUKOIL Investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Net Income |
|
$ |
774 |
|
|
|
526 |
|
|
|
1,484 |
|
|
|
782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Statistics* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net crude oil production (thousands of barrels daily) |
|
|
387 |
|
|
|
427 |
|
|
|
390 |
|
|
|
411 |
|
Net natural gas production (millions of cubic feet daily) |
|
|
363 |
|
|
|
278 |
|
|
|
383 |
|
|
|
293 |
|
Net refinery crude oil processed (thousands of barrels daily) |
|
|
215 |
|
|
|
184 |
|
|
|
218 |
|
|
|
202 |
|
|
|
*Represents our net share of our estimate of LUKOILs production and processing. |
This segment represents our investment in the ordinary shares of LUKOIL, an international,
integrated oil and gas company headquartered in Russia, which we account for under the equity
method. As of June 30, 2008, our ownership interest in LUKOIL was 20 percent based on issued
shares. Our ownership interest based on estimated shares outstanding, used for equity-method accounting, was
also 20 percent at June 30, 2008. During the second quarter of 2008, our equity-method accounting
ownership percentage was reduced from 20.6 to 20 percent as a result of LUKOILs issuance of
treasury shares in connection with an acquisition.
39
Since 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 operating results, and other objective data. Once the difference between actual
and estimated results is known, an adjustment is recorded. This estimate-to-actual adjustment will
be a recurring component of future period results. The adjustment to first-quarter 2008 estimates,
recorded in the second quarter of 2008, decreased net income $120 million. This compares with a
decrease to net income of $44 million in the second quarter of 2007.
In addition to our estimate of our 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 historical cost of our investment in LUKOIL, and also includes the costs associated with our
employees seconded to LUKOIL.
Net income from the LUKOIL Investment segment increased 47 percent in the second quarter of 2008
and
90 percent in the first six months of 2008. The increase in net income from the second quarter of
2007 was primarily due to higher estimated realized prices, partially offset by higher estimated
taxes and operating costs, as well as the net impact from the alignment of estimated net income to
LUKOILs reported results. The increase in the first six months of 2008 was primarily due to
higher estimated realized prices, partially offset by higher estimated taxes and operating costs.
Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
18 |
|
|
|
68 |
|
|
|
70 |
|
|
|
150 |
|
|
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.
Net income from the Chemicals segment decreased 74 percent and 53 percent in the second quarter of
2008 and first six months of 2008, respectively. The decrease in both periods was due to lower
benzene and polyethylene margins as the result of significant increases in feedstock costs, as well
as higher utility and turnaround costs. This decrease was partially offset by an asset retirement
in 2007. Business conditions in the chemicals and plastics industry are expected to remain
challenging in the near term.
40
Emerging Businesses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power |
|
$ |
26 |
|
|
|
(1 |
) |
|
|
53 |
|
|
|
12 |
|
Other |
|
|
(18 |
) |
|
|
(11 |
) |
|
|
(33 |
) |
|
|
(25 |
) |
|
|
|
$ |
8 |
|
|
|
(12 |
) |
|
|
20 |
|
|
|
(13 |
) |
|
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 other items, such as carbon-to-liquids, technology solutions, and alternative energy
and programs, such as advanced hydrocarbon processes, energy conversion technologies, new
petroleum-based products, and renewable fuels.
The Emerging Businesses segment reported net income of $8 million in the second quarter of 2008,
compared with a net loss of $12 million in the same quarter of 2007. Net income for the first six
months of 2008 was
$20 million, compared with a net loss of $13 million for the same period a year ago. The
improvement for both periods primarily reflects improved international power generation results.
The improvements were partially offset by lower domestic power results and increased technology
spending.
Corporate and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30 |
|
June 30 |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest |
|
$ |
(119 |
) |
|
|
(224 |
) |
|
|
(227 |
) |
|
|
(468 |
) |
Corporate general and administrative expenses |
|
|
(68 |
) |
|
|
(54 |
) |
|
|
(112 |
) |
|
|
(77 |
) |
Acquisition/merger-related costs |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
(29 |
) |
Other |
|
|
1 |
|
|
|
(43 |
) |
|
|
(26 |
) |
|
|
(104 |
) |
|
|
|
$ |
(186 |
) |
|
|
(337 |
) |
|
|
(365 |
) |
|
|
(678 |
) |
|
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 decreased 47
percent in the second quarter of 2008 and 51 percent in the first six months of 2008. The decrease
in both periods was primarily due to lower average debt levels, as well as higher amounts of
interest being capitalized. The first six months of 2008 also benefited from higher interest
income.
Corporate general and administrative expenses increased 26 percent and 45 percent in the second
quarter and first six months of 2008, respectively. The increase in both periods was primarily due
to higher corporate staff costs and benefit-related expenses.
Acquisition-related costs in 2007 included transition costs associated with the Burlington
Resources acquisition.
41
The category Other includes certain foreign currency transaction gains and losses, and
environmental costs associated with sites no longer in operation. Included in the improved results
from Other in the second quarter and first six months of 2008 were foreign currency gains in 2008,
compared with losses in 2007, as well as lower environmental costs.
42
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
At June 30 |
|
|
At December 31 |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
385 |
|
|
|
1,398 |
|
Total debt* |
|
$ |
21,924 |
|
|
|
21,687 |
|
Minority interests |
|
$ |
1,144 |
|
|
|
1,173 |
|
Common stockholders equity |
|
$ |
92,398 |
|
|
|
88,983 |
|
Percent of total debt to capital** |
|
|
19 |
% |
|
|
19 |
|
Percent of floating-rate debt to total debt |
|
|
20 |
% |
|
|
25 |
|
|
|
|
|
*Total debt includes short-term and long-term debt, as shown on our consolidated balance sheet. |
|
**Capital includes total debt, minority interests and common stockholders 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 six months of 2008, we raised $441 million in proceeds from asset dispositions. During the
first six months, available cash was used to support our ongoing capital expenditures and
investments program, repurchase shares of our common stock, provide loan financing to certain
equity affiliates, pay dividends, and meet the funding requirements to FCCL Oil Sands Partnership
(FCCL). Total dividends paid on our common stock during the first six months were $1,449 million.
During the first half of 2008, cash and cash equivalents decreased $669 million to $787 million.
In addition to cash flows from operating activities and proceeds from asset sales, we rely on our
cash balance, commercial paper and credit facility programs, and our shelf registration statements,
to support our short- and long-term liquidity requirements. We anticipate these sources of
liquidity will be adequate to meet our funding requirements in the near- and long-term, including
our capital spending program, our share repurchase programs, dividend payments, required debt
payments and the funding requirements to FCCL.
Significant Sources of Capital
Operating Activities
During the first six months of 2008, cash of $12,021 million was provided by operating activities,
a 3 percent increase from cash from operations of $11,639 million in the corresponding period of
2007. Contributing to the increase were higher commodity prices in our E&P segment, partially
offset by lower U.S. refining and marketing margins, as well as higher volumetric inventory builds
in our R&M segment.
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 six months of 2008 and 2007, we benefited from
favorable crude oil and natural gas prices. 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.
43
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 production decline rates, new technologies, operating efficiency,
weather conditions, the addition of proved reserves through exploratory success, and the timely and
cost-effective development of those proved reserves. 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 experienced with 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, 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 experienced with refining margins.
Asset Sales
Proceeds from asset sales during the first half of 2008 were $441 million, compared with $2,215
million in the same period of 2007. Proceeds for both periods primarily reflect our ongoing
efforts to dispose of assets that no longer fit into our strategic plans or those that could bring
more value by being monetized in the near term.
Commercial Paper and Credit Facilities
At June 30, 2008, we had a $7.5 billion revolving credit facility, which expires in September 2012.
This facility may be used as direct bank borrowings, as support for the ConocoPhillips $7.5
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. The facility is broadly syndicated among financial institutions and does not contain any
material adverse change provisions or any covenants requiring maintenance of specified financial
ratios or ratings. The credit agreement contains a cross-default provision relating to the failure
to pay principal or interest on other debt obligations of $200 million or more by ConocoPhillips,
or by any of its consolidated subsidiaries. At June 30, 2008 and December 31, 2007, we had no
outstanding borrowings under the credit facility, but $40 million and $41 million, respectively, in
letters of credit had been issued. Under both commercial paper programs, $1,314 million of
commercial paper was outstanding at June 30, 2008, compared with $725 million at December 31, 2007.
At June 30, 2008, our primary funding source for short-term working capital needs was the
ConocoPhillips $7.5 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 $1,314 million of
commercial paper outstanding and had issued $40 million of letters of credit, we had access to $6.1
billion in borrowing capacity under our revolving credit facility at June 30, 2008.
Shelf Registrations
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 shelf, in
May 2008, we issued notes consisting of $400 million of 4.40% Notes due 2013, $500 million of 5.20%
Notes due 2018 and $600 million of 5.90% Notes due 2038. The proceeds from the offering were used
to reduce commercial paper and for general corporate purposes.
We also have on file with the SEC a shelf registration statement under which ConocoPhillips Canada
Funding Company I and ConocoPhillips Canada Funding Company II, both wholly owned subsidiaries,
could issue an indeterminate amount of senior debt securities, fully and unconditionally guaranteed
by ConocoPhillips and ConocoPhillips Company.
44
Minority Interests
At June 30, 2008, we had outstanding $1,144 million of equity in less than wholly owned
consolidated subsidiaries held by minority interest owners, including a minority interest of $505
million in Ashford Energy Capital S.A. The remaining minority interest amounts are primarily
related to operating joint ventures we control. The largest of these, $620 million, was related to
the Darwin LNG project located in northern Australia.
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 June 30, 2008, 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, excluding accrued interest. Upon completion certification,
currently expected in 2010, all project loan facilities, including the ConocoPhillips loan
facilities, will become nonrecourse to the project participants. At June 30, 2008,
Qatargas 3 had $2.6 billion outstanding under all the loan facilities, of which
ConocoPhillips provided $787 million, and an additional $60 million of accrued interest. |
|
|
|
|
Rockies Express Pipeline LLC: In June 2006, we issued a guarantee for 24
percent of $2.0 billion in credit facilities issued to Rockies Express Pipeline LLC (Rockies Express).
Rockies Express intends to construct a natural gas pipeline across a portion of the United
States. 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 facility is fully utilized and Rockies
Express fails to meet its obligations under the credit agreement. At June 30, 2008, Rockies
Express had
$740 million outstanding under the credit facilities, with our 24 percent guarantee equaling
$178 million. In addition, we have a 24 percent guarantee on $600 million of Floating Rate
Notes due 2009. It is anticipated that construction completion will be achieved in 2009, and
refinancing will take place at that time, making the debt nonrecourse. |
|
|
|
|
Keystone Oil Pipeline: We own a 50 percent equity interest in the Keystone Oil
Pipeline (Keystone), a joint venture with TransCanada Corporation. Keystone plans to
construct a crude oil pipeline originating in Alberta, with delivery points in Illinois and
Oklahoma. In connection with certain planning and construction activities, agreements were
put in place with third parties to guarantee the payments due under those agreements. Our
maximum potential amount of future payments under those agreements are estimated to be $400
million, which could become payable if Keystone fails to meet its obligations under the
agreements noted above and the obligation cannot otherwise be mitigated. Payments under
the guarantees are contingent upon the partners not making necessary equity contributions
into Keystone; therefore, it is considered unlikely that payments would be required. All
but $15 million of the guarantees will terminate after construction is completed, currently
estimated to be in 2010. |
For additional information about guarantees, see Note 11Guarantees, in the Notes to Consolidated
Financial Statements, which is incorporated herein by reference.
45
Capital Requirements
For information about our capital expenditures and investments, see the Capital Spending section.
Our debt balance at June 30, 2008, was $21.9 billion, a slight increase from the balance at
December 31, 2007.
In January 2008, we reduced our Floating Rate Five-Year Term Note due 2011 from $3 billion to $2
billion, with a subsequent reduction in June 2008 to $1.5 billion. In March 2008, we redeemed our
$300 million 7.125% Debentures due 2028 at a premium of $8 million, plus accrued interest.
On January 3, 2007, we closed on a business venture with EnCana. As part of this transaction, we
are obligated to contribute $7.5 billion, plus interest, over a ten-year period, which began in
2007, to the upstream business venture, FCCL, formed as a result of the transaction. 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 $609 million
is short-term and is included in the Accounts payablerelated parties line on our June 30, 2008,
consolidated balance sheet. The principal portion of these payments, which totaled $293 million in
the first six months of 2008, is presented on our consolidated statement of cash flows as an other
financing activity. 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.
At year-end 2007, approximately $10.1 billion remained authorized for share repurchases in 2008 for
our share repurchase programs announced in 2007. During the first six months of 2008, we
repurchased 60.4 million shares of our common stock at a cost of $5.0 billion. We anticipate
third-quarter 2008 share repurchases to be $2 billion to $3 billion.
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 June 30, 2008,
we had provided $787 million in loan financing, and an additional $60 million of accrued interest.
See the Off-Balance Sheet Arrangements section for additional information on Qatargas 3.
In 2004, we finalized our transaction with Freeport to
participate in a proposed LNG receiving terminal in Quintana, Texas. We entered into a credit
agreement with Freeport to provide loan financing of approximately $678 million, excluding
accrued interest, for the construction of the facility. The terminal became operational late in
the second quarter of 2008. Through June 30, 2008, we had provided $644 million in loan financing,
and an additional $116 million of accrued interest.
In the fall of 2004, ConocoPhillips and LUKOIL agreed to the expansion of the Varandey terminal as
part of our investment in the OOO Naryanmarneftegaz (NMNG) joint venture. We have an obligation to
provide loan financing to Varandey Terminal Company for 30 percent of the costs of the terminal
expansion, but we will have no governance or ownership interest in the terminal. We estimate our
total loan obligation for the terminal expansion to be approximately $390 million at current
exchange rates, excluding interest to be accrued during construction. This amount will be adjusted
as the projects cost estimate and schedule are updated and the ruble exchange rate fluctuates.
Through June 30, 2008, we had provided $359 million in loan financing, and an additional $46
million of accrued interest.
The long-term portion of our loans to Qatargas 3, Freeport and Varandey Terminal Company are
included in the Loans and advancesrelated parties line on the balance sheet, while the
short-term portion is in Accounts and notes receivablerelated parties.
46
Contractual Obligations
Our contractual purchase obligations at June 30, 2008, were estimated to be $166 billion, an
increase of
$40 billion from the amount reported at December 31, 2007, of $126 billion. The increase primarily
results from higher crude oil, natural gas and natural gas liquids prices.
Capital Spending
Capital Expenditures and Investments
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
Six Months Ended |
|
|
|
June 30 |
|
|
|
2008 |
|
|
2007 |
|
E&P |
|
|
|
|
|
|
|
|
United StatesAlaska |
|
$ |
890 |
|
|
|
324 |
|
United StatesLower 48 |
|
|
1,735 |
|
|
|
1,392 |
|
International |
|
|
2,999 |
|
|
|
3,002 |
|
|
|
|
|
5,624 |
|
|
|
4,718 |
|
|
Midstream |
|
|
|
|
|
|
2 |
|
|
R&M |
|
|
|
|
|
|
|
|
United States |
|
|
677 |
|
|
|
388 |
|
International |
|
|
196 |
|
|
|
88 |
|
|
|
|
|
873 |
|
|
|
476 |
|
|
LUKOIL Investment |
|
|
|
|
|
|
|
|
Chemicals |
|
|
|
|
|
|
|
|
Emerging Businesses |
|
|
112 |
|
|
|
65 |
|
Corporate and Other |
|
|
111 |
|
|
|
86 |
|
|
|
|
$ |
6,720 |
|
|
|
5,347 |
|
|
United States |
|
$ |
3,413 |
|
|
|
2,191 |
|
International |
|
|
3,307 |
|
|
|
3,156 |
|
|
|
|
$ |
6,720 |
|
|
|
5,347 |
|
|
E&P
Capital expenditures and investments for E&P during the first six months of 2008 totaled $5.6
billion. The expenditures supported key exploration and development projects including:
|
|
|
Significant U.S. lease acquisitions in the Chukchi Sea federal waters, offshore Alaska,
as well as acquisitions in the deepwater Gulf of Mexico. |
|
|
|
|
Other Alaska activities related to development drilling in the Greater Kuparuk Area,
including West Sak; the Greater Prudhoe Bay Area; the Alpine field, including satellite
field prospects; the Cook Inlet Area; as well as exploration activities. |
|
|
|
|
Oil and natural gas developments in the Lower 48 states, including New Mexico, Texas,
Louisiana, Oklahoma, Montana, North Dakota, Colorado, Wyoming, and offshore in the Gulf of
Mexico. |
|
|
|
|
Investment in the West2East Pipeline LLC (West2East), a company holding a 100 percent
interest in Rockies Express Pipeline LLC (Rockies Express). |
|
|
|
|
The development of the Surmont heavy-oil project, investments related to FCCL, and
development of conventional oil and gas reserves, all in Canada. |
|
|
|
|
Development drilling and facilities projects in the Greater Ekofisk Area and Alvheim
project in the Norwegian North Sea. |
47
|
|
|
The Britannia satellite developments in the U.K. North Sea. |
|
|
|
|
An integrated project to produce and liquefy natural gas from Qatars North field. |
|
|
|
|
The Kashagan field in the Caspian Sea, offshore Kazakhstan. |
|
|
|
|
Development of the Yuzhno Khylchuyu (YK) field in the northern part of Russias
Timan-Pechora province through the NMNG joint venture with LUKOIL. |
|
|
|
|
The Peng Lai 19-3 development in Chinas Bohai Bay. |
|
|
|
|
The Gumusut-Kakap development offshore Sabah, Malaysia. |
|
|
|
|
Projects offshore Block B and onshore South Sumatra in Indonesia. |
During the second quarter of 2008, affiliates of ConocoPhillips and BP Plc formed a limited
liability company to progress the pipeline project named DenaliThe Alaska Gas Pipeline. The
project, which would move approximately four billion cubic feet per day of Alaska natural gas to
North American markets, consists of a gas treatment plant on Alaskas North Slope and a
large-diameter pipeline through Alaska to Alberta, Canada. Should it be required to transport gas
from Alberta, the project also could include a large-diameter pipeline from Alberta to the Lower 48
states. Summer fieldwork related to the project began in late May, primarily in eastern Alaska,
and involves route reconnaissance and environmental studies. In late June 2008, the Federal
Regulatory Commission (FERC) approved the Denali project to use the FERCs prefiling process.
In July 2008, we announced the signing of an interim agreement with the Abu Dhabi National Oil
Company (ADNOC) to develop the Shah gas field in Abu Dhabi. Final project agreements are expected
to be completed by year-end 2008. ADNOC will have a 60 percent interest and we will have a 40
percent interest in the project.
R&M
Capital spending for R&M during the first six months of 2008 totaled $873 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 pipeline development and refinery
upgrade projects to increase crude oil capacity, expand conversion capability and increase clean
product yield.
Major project activities in progress include:
|
|
|
Expansion of a hydrocracker at the Rodeo facility of our San Francisco refinery. |
|
|
|
|
Investment in the Keystone Oil Pipeline. |
|
|
|
|
U.S. programs aimed at air emission reductions. |
Through our joint ventures with TransCanada, we plan to expand the Keystone crude oil pipeline
system and provide additional capacity of 500,000 barrels per day from western Canada to the U.S.
Gulf Coast. Targeted for completion in 2012, this expansion would increase the capacity of the
Keystone pipeline system to approximately 1.1 million barrels per day.
In May 2008, we and the Saudi Arabian Oil Company announced the two companies had approved
continued funding for the development of the Yanbu Export Refinery project. Each company would be
responsible for marketing one-half of the refinerys production. The refinery is targeted to start
up in 2013.
48
Contingencies
Legal and Tax Matters
We accrue for non-income-tax-related contingencies 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 adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109 (FIN 48), effective January 1, 2007. FIN 48 requires 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 are 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 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 81 through 84 of our 2007 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,
2007, we reported we had been notified of potential liability under CERCLA and comparable state
laws at 68 sites around the United States. At June 30, 2008, we reopened and closed one site,
resolved and closed four sites, and received two new notices of potential liability, leaving 66
unresolved sites where we have been notified of potential liability.
At June 30, 2008, our balance sheet included a total environmental accrual of $1,046 million,
compared with $1,089 million at December 31, 2007. We expect to incur a substantial majority 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 environmental laws and regulations.
49
NEW ACCOUNTING STANDARDS
In December 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141
(Revised), Business Combinations (SFAS No. 141(R)). This Statement will apply to all
transactions in which an entity obtains control of one or more other businesses. In general, SFAS
No. 141(R) requires the acquiring entity in a business combination to recognize the fair value of
all the assets acquired and liabilities assumed in the transaction; establishes the
acquisition-date as the fair value measurement point; and modifies the disclosure requirements.
This Statement applies prospectively to business combinations for which the acquisition date is on
or after January 1, 2009. However, starting 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 will impact tax expense instead of impacting goodwill. We are currently
evaluating the changes provided for in this Statement.
Also in December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51, which changes the classification of
noncontrolling interests, sometimes called a minority interest, in the consolidated financial
statements. Additionally, this Statement establishes a single method of accounting for changes in
a parent companys ownership interest that do not result in deconsolidation and requires a parent
company to recognize a gain or loss when a subsidiary is deconsolidated. This Statement is
effective January 1, 2009, and will be applied prospectively with the exception of the presentation
and disclosure requirements which must be applied retrospectively for all periods presented. We
are currently evaluating the impact of this Statement on our consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activitiesan amendment of FASB No. 133. This Statement expands the annual and interim
disclosure requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, for derivative instruments within the scope of that Statement. We must adopt SFAS No.
161 no later than
January 1, 2009, but it will not have any impact on our consolidated financial statements, other
than the additional disclosures.
OUTLOOK
In E&P, we expect our third-quarter 2008 production to be similar to the level in the second
quarter of 2008. We expect full-year 2008 production will be consistent with our operating plan.
In R&M, we expect our U.S. crude oil capacity utilization in the third quarter of 2008 to be
similar to the second quarter. In international refining, utilization at our Wilhelmshaven
refinery will continue to be impacted by hydro-skimming margins.
50
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 relating to our operations 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 and involve risks,
uncertainties and assumptions 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:
|
|
|
Fluctuations in crude oil, natural gas and natural gas liquids prices, refining and
marketing margins and margins for our chemicals business. |
|
|
|
|
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. |
|
|
|
|
Unsuccessful exploratory drilling activities or the inability to obtain access to
exploratory acreage. |
|
|
|
|
Failure of new products and services to achieve market acceptance. |
|
|
|
|
Unexpected changes in costs or technical requirements for constructing, modifying or
operating facilities for exploration and production, manufacturing, refining or
transportation projects. |
|
|
|
|
Unexpected technological or commercial difficulties in manufacturing, refining, or
transporting our products, including synthetic crude oil and chemicals products. |
|
|
|
|
Lack of, or disruptions in, adequate and reliable transportation for our crude oil,
natural gas, natural gas liquids, LNG and refined products. |
|
|
|
|
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. |
|
|
|
|
Failure to complete definitive agreements and feasibility studies for, and to timely
complete construction of, announced and future LNG, refinery and transportation projects. |
|
|
|
|
Potential disruption or interruption of our operations due to accidents, extraordinary
weather events, civil unrest, political events or terrorism. |
|
|
|
|
International monetary conditions and exchange controls. |
|
|
|
|
Substantial investment or reduced demand for products as a result of existing or future
environmental rules and regulations. |
|
|
|
|
Liability for remedial actions, including removal and reclamation obligations, under
environmental regulations. |
|
|
|
|
Liability resulting from litigation. |
|
|
|
|
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. |
|
|
|
|
Changes in tax and other laws, regulations (including alternative energy mandates), or
royalty rules applicable to our business. |
|
|
|
|
Inability to obtain economical financing for projects, construction or modification of
facilities and general corporate purposes. |
|
|
|
|
The operation and financing of our midstream and chemicals joint ventures. |
51
|
|
|
The factors set forth under the heading Risk Factors on pages 34 through 39 of our
2007 Annual Report on Form 10-K. |
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the six months ended June 30, 2008, does not differ materially
from that discussed under Item 7A of ConocoPhillips Annual Report on Form 10-K for the year ended
December 31, 2007.
Item 4. CONTROLS AND PROCEDURES
As of June 30, 2008, with the participation of our management, our Chairman, President and Chief
Executive Officer (principal executive officer) and our Executive 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, President and Chief Executive
Officer and our Executive Vice President, Finance, and Chief Financial Officer concluded that our
disclosure controls and procedures were operating effectively as of
June 30, 2008.
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.
52
PART II. OTHER INFORMATION
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 second quarter of 2008 and any material developments with respect to matters
previously reported in ConocoPhillips 2007 Annual Report on Form 10-K or first-quarter 2008 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 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 and/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 U.S. Securities and Exchange
Commission 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.
New Matters
On July 16, 2008, ConocoPhillips received a demand from the Bay Area Air Quality Management
District (BAAQMD) to settle 24 Notices of Violation (NOVs) issued in late 2006 and 2007 for alleged
violations of air pollution control regulations at the San Francisco refinery. The amount of the
settlement demand is $304,500. We intend to work with BAAQMD to resolve these NOVs.
On June 19, 2008, the Trainer refinery received a demand for stipulated penalties under the
Refinery Enforcement Initiative Consent Decree in the amount of $110,000 for alleged violations
associated with its leak detection and repair program. We intend to work with U.S. EPA and the
Pennsylvania Department of Environmental Protection (PADEP) to resolve this matter.
On June 2, 2008, the Billings refinery received a Violation Letter from the Montana Department of
Environmental Quality (MDEQ) for opacity and nickel emissions, which occurred during startup of the
cat cracker in April 2007. The letter also alleged certain monitoring quality assurance/quality
control violations. The letter requests a penalty of $604,000. We intend to work with the MDEQ to
resolve this matter.
Matters Previously Reported
The South Coast Air Quality Management District (SCAQMD) conducted an audit of the Los Angeles
refinery to assess compliance with applicable local, state, and federal regulations related to
fugitive emissions. As a result of the audit, SCAQMD issued three NOVs alleging multiple counts of
noncompliance. We reached an agreement with SCAQMD to settle two of the three NOVs for $42,500 and
are working with SCAQMD to resolve the third NOV.
On September 25, 2007, the Sweeny refinery received a draft order to resolve a July 6, 2007, Notice
of Enforcement (NOE) relating to alleged violations of the Texas Clean Air Act. The allegations
relate to compliance with limitations contained in the refinerys Title V operating permit and one
emission event. In November 2007, we paid $114,450 as a penalty and agreed to fund a Supplemental
Environmental Project (SEP) in the same amount. The settlement was approved by the Texas
Commission on Environmental Quality (TCEQ) on May 22, 2008.
53
In June 2007, the U.S. EPA informed the Ferndale refinery it will seek penalties for Ferndales
alleged failure to
comply with certain portions of the Benzene Waste Operations rule. The government alleges the
facility has not complied with certain equipment maintenance and inspection rules since 1993. The
parties have reached an agreement, which resolves the matter. The agreement specifies a penalty of
$60,000, an SEP valued at $200,000 and injunctive actions. The agreement has been incorporated
into an amendment to an existing consent decree, which was lodged on June 24, 2008.
The U.S. EPA and the PADEP informed the Trainer refinery they intend to seek penalties for acid gas
flaring which allegedly occurred between April 2, 2007, and May 19, 2007. The parties have reached
an agreement, which resolves the matter. The agreement has been incorporated into an amendment to
an existing consent decree, which was lodged on June 24, 2008.
On April 30, 2007, the Borger refinery received an offer to settle a range of violations alleged in
a
March 16, 2007, NOE issued by the TCEQ. The alleged violations relate to air quality permit
limits,
emission events, testing requirements, and reporting or recordkeeping requirements. In November
2007,
we submitted payment of a penalty of $84,900 and agreed to fund an SEP valued at $84,900. The
settlement was approved by the TCEQ on May 13, 2008.
In March 2005, ConocoPhillips Pipe Line Company (CPPL) received a Notice of Probable Violation and
Proposed Civil Penalty from the Department of Transportations Pipeline and Hazardous Materials
Safety Administration (DOT) alleging violation of DOT operation and safety regulations at certain
facilities in Kansas, Missouri, Illinois, Indiana, Wyoming and Nebraska. DOT is proposing
penalties in the amount of $184,500. An information hearing was held on September 24, 2007. CPPL
has provided additional information in support of its position. A DOT ruling is not anticipated
until the fourth quarter of 2008.
In August of 2003, EPA Region 6 issued a Show Cause Order alleging violations of the Federal Clean
Water Act at the Borger refinery. The alleged violations relate primarily to discharges of
selenium and reported exceedances of permit limits for whole effluent toxicity. On April 7, 2008,
a Consent Decree (CD) was lodged in the federal court for the Northern District of Texas, Amarillo
Division. The CD requires a penalty of
$1.2 million and an SEP valued at $600,000. After public notice and comment, the judge approved
the consent decree and the penalty has been paid.
54
Item 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in the Risk Factors section
of our Annual Report on Form 10-K for the year ended December 31, 2007.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Dollars |
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
Value of Shares |
|
|
|
|
|
|
|
Average Price |
|
|
Part of Publicly |
|
|
that May Yet Be |
|
|
|
Total Number of |
|
|
Paid per Total |
|
|
Announced Plans or |
|
|
Purchased Under the |
|
Period |
|
Shares Purchased |
* |
|
Shares Purchased |
|
|
Programs |
** |
|
Plans or Programs |
** |
|
April 1-30, 2008 |
|
|
10,761,518 |
|
|
$ |
80.26 |
|
|
|
10,755,700 |
|
|
$ |
6,737 |
|
May 1-31, 2008 |
|
|
9,236,776 |
|
|
|
89.03 |
|
|
|
9,217,080 |
|
|
|
5,916 |
|
June 1-30, 2008 |
|
|
8,894,997 |
|
|
|
93.43 |
|
|
|
8,864,300 |
|
|
|
5,088 |
|
|
|
Total |
|
|
28,893,291 |
|
|
$ |
87.12 |
|
|
|
28,837,080 |
|
|
|
|
|
|
|
|
|
|
|
*Includes the repurchase of common shares from company employees in connection with the companys broad-based employee incentive plans. |
|
**On January 12, 2007, we announced a stock repurchase program that provided for the repurchase of up to $1 billion of the companys
common stock. On February 9, 2007, we announced plans to repurchase $4 billion of our common stock in 2007, including the $1 billion
announced on January 12, 2007. On July 9, 2007, we announced plans to repurchase up to $15 billion of the companys common stock through
the end of 2008, which included the $2 billion remaining under the previously announced $4 billion program. Acquisitions for the share
repurchase programs are made at managements discretion, at prevailing prices, subject to market conditions and other factors.
Repurchases may be increased, decreased or discontinued at any time without prior notice. Shares of stock repurchased under the plans
are held as treasury shares. |
55
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual stockholders meeting on May 14, 2008. A brief description of each proposal and
the voting results follow:
A company proposal to elect three directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
Voted For |
|
|
Voted Against |
|
|
Abstain |
|
|
|
|
Harold W. McGraw III |
|
|
1,350,374,854 |
|
|
|
29,576,891 |
|
|
|
16,553,718 |
|
James J. Mulva |
|
|
1,352,429,492 |
|
|
|
29,441,436 |
|
|
|
14,634,207 |
|
Bobby S. Shackouls |
|
|
1,352,499,577 |
|
|
|
27,226,764 |
|
|
|
16,779,121 |
|
Those directors whose term of office continued were as follows: Richard L. Armitage, Richard H.
Auchinleck, James E. Copeland, Jr., Kenneth M. Duberstein, Ruth R. Harkin, Harald J. Norvik,
William K. Reilly, Victoria J. Tschinkel, Kathryn C. Turner and William E. Wade, Jr.
Results of other matters submitted to a vote were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
Voted For |
|
|
Voted Against |
|
|
Abstain |
|
|
Broker Nonvotes |
|
|
|
|
Proposal to Amend
By-Laws and
Certificate of
Incorporation for Annual
Election of
Directors |
|
|
1,363,589,104 |
|
|
|
18,979,597 |
|
|
|
13,936,563 |
|
|
|
|
|
Ratification to
Appoint Ernst &
Young as
ConocoPhillips
Independent
Registered Public
Accounting Firm |
|
|
1,375,375,305 |
|
|
|
7,831,658 |
|
|
|
13,298,300 |
|
|
|
|
|
Stockholder
Proposal to Report
on Recognition of
Indigenous Rights |
|
|
89,602,302 |
|
|
|
910,866,101 |
|
|
|
195,582,036 |
|
|
|
200,455,024 |
|
Stockholder
Proposal for
Advisory Vote on
Executive
Compensation |
|
|
469,972,284 |
|
|
|
664,403,359 |
|
|
|
61,672,997 |
|
|
|
200,456,823 |
|
Stockholder
Proposal on
Political
Contributions |
|
|
287,338,404 |
|
|
|
730,470,975 |
|
|
|
178,241,060 |
|
|
|
200,455,024 |
|
Stockholder
Proposal on
Greenhouse Gas
Reduction |
|
|
293,016,777 |
|
|
|
704,412,443 |
|
|
|
198,621,220 |
|
|
|
200,455,023 |
|
Stockholder
Proposal on
Community
Accountability |
|
|
85,871,110 |
|
|
|
914,130,286 |
|
|
|
196,049,043 |
|
|
|
200,455,024 |
|
Stockholder
Proposal on
Drilling in
Sensitive/Protected
Areas |
|
|
267,528,860 |
|
|
|
737,075,568 |
|
|
|
191,444,012 |
|
|
|
200,457,023 |
|
Stockholder
Proposal on
Environment Impact |
|
|
276,223,532 |
|
|
|
728,791,844 |
|
|
|
191,035,065 |
|
|
|
200,455,022 |
|
Stockholder
Proposal on Global
Warming |
|
|
36,783,213 |
|
|
|
967,166,684 |
|
|
|
192,100,693 |
|
|
|
200,454,873 |
|
All three nominated directors were elected, the appointment of the independent auditors was ratified, and a management
proposal providing for the annual election of directors was approved. The eight stockholder proposals presented were
not approved.
56
Item 6. EXHIBITS
Exhibits
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation |
|
|
|
3.3
|
|
Amended and Restated By-Laws |
|
|
|
10
|
|
First and Second Amendments to the ConocoPhillips Directors Charitable Gift Program. |
|
|
|
12
|
|
Computation of Ratio of Earnings to Fixed Charges. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934. |
|
|
|
32
|
|
Certifications pursuant to 18 U.S.C. Section 1350. |
57
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
CONOCOPHILLIPS
|
|
|
/s/ Rand C. Berney
|
|
|
Rand C. Berney |
|
|
Vice President and Controller
(Chief Accounting and Duly Authorized Officer) |
|
|
July 29, 2008
58
EXHIBIT INDEX
Exhibits
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation |
|
|
|
3.3
|
|
Amended and Restated By-Laws |
|
|
|
10
|
|
First and Second Amendments to the ConocoPhillips Directors Charitable Gift Program. |
|
|
|
12
|
|
Computation of Ratio of Earnings to Fixed Charges. |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934. |
|
|
|
32
|
|
Certifications pursuant to 18 U.S.C. Section 1350. |