CONOCOPHILLIPS (Form: 10-Q, Received: 11/03/2020 11:42:06)

 
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

[

X

]

QUARTERLY

REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2020

or

[

]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission file number:

001-32395

ConocoPhillips

(Exact name of registrant as specified in its charter)

Delaware

01-0562944

(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer

Identification No.)

925 N. Eldridge Parkway

Houston

,

TX

77079

(Address of principal executive offices)

(Zip Code)

281

-

293-1000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the

Act:

Title of each class

Trading symbols

Name of each exchange on which registered

Common Stock, $.01 Par Value

COP

New York Stock Exchange

7% Debentures due 2029

CUSIP—718507BK1

New York Stock Exchange

Indicate by check mark whether the registrant

(1) has filed all reports required to be filed

by Section 13 or

15(d) of the Securities Exchange Act of 1934 during

the preceding 12 months (or for such shorter

period that

the registrant was required to file such reports),

and (2) has been subject to such filing requirements

for the

past 90 days.

Yes

[x] No [

]

Indicate by check mark whether the registrant

has submitted electronically every Interactive

Data File required

to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding

12

months (or for such shorter period that the registrant

was required to submit such files).

Yes

[x] No [

]

Indicate by check mark whether the registrant

is a large accelerated filer, an accelerated filer, a non-accelerated

filer, a smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated

filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in

Rule 12b-2 of the

Exchange Act.

Large accelerated filer

[x]

Accelerated filer [

]

Non-accelerated filer [

]

Smaller reporting company

[

]

Emerging growth company

[

]

If an emerging growth company, indicate by check mark if the registrant has elected

not to use the extended

transition period for complying with any new or

revised financial accounting standards

provided pursuant to

Section 13(a) of the Exchange Act. [

]

Indicate by check mark whether the registrant

is a shell company (as defined in Rule 12b-2 of the

Exchange

Act).

Yes

[

]

No

[x]

The registrant had

1,072,741,643

shares of common stock, $.01 par value, outstanding

at September 30, 2020.

 
CONOCOPHILLIPS

TABLE OF CONTENTS

Page

Commonly Used Abbreviations

………………………………………………………………………...

1

Part I—Financial Information

Item 1. Financial Statements

Consolidated Income Statement

……………………………………………………………………..

.

2

Consolidated Statement of Comprehensive Income

…………………………………………………

.

3

Consolidated Balance Sheet

…………………………………………………………………………

.

4

Consolidated Statement of Cash Flows

……………………………………………………………...

.

5

Notes to Consolidated Financial Statements

………………………………………………………...

.

6

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

Results of Operations

…………………………………………………………………………

.

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

………………………………..

..

59

Item 4. Controls and Procedures

………………………………………………………………………

.

60

Part II—Other Information

Item 1. Legal Proceedings

……………………………………………………………………………..

.

60

Item 1A. Risk Factors

…………………………………………………………………………………

.

60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

………………………………...

.

65

Item 6. Exhibits

………………………………………………………………………………………..

.

66

Signature

………………………………………………………………………………………………….

.

67

 
1

Commonly Used Abbreviations

The following industry-specific, accounting and

other terms, and abbreviations may be commonly

used in this

report.

Currencies

Accounting

$ or USD

U.S. dollar

ARO

asset retirement obligation

CAD

Canadian dollar

ASC

accounting standards codification

EUR

Euro

ASU

accounting standards update

GBP

British pound

DD&A

depreciation, depletion and

amortization

Units of Measurement

FASB

Financial Accounting Standards

BBL

barrel

Board

BCF

billion cubic feet

FIFO

first-in, first-out

BOE

barrels of oil equivalent

G&A

general and administrative

MBD

thousands of barrels per day

GAAP

generally accepted accounting

MCF

thousand cubic feet

principles

MBOD

thousand barrels of oil per day

LIFO

last-in, first-out

MM

million

NPNS

normal purchase normal sale

MMBOE

million barrels of oil equivalent

PP&E

properties, plants and equipment

MMBOD

million barrels of oil per day

SAB

staff accounting bulletin

MBOED

thousands of barrels of oil

VIE

variable interest entity

equivalent per day

MMBTU

million British thermal units

Miscellaneous

MMCFD

million cubic feet per day

EPA

Environmental Protection Agency

ESG

Environmental, Social and

Corporate Governance

Industry

EU

European Union

CBM

coalbed methane

FERC

Federal Energy Regulatory

E&P

exploration and production

Commission

FEED

front-end engineering and design

GHG

greenhouse gas

FPS

floating production system

HSE

health, safety and environment

FPSO

floating production, storage and

ICC

International Chamber of

offloading

Commerce

JOA

joint operating agreement

ICSID

World Bank’s

International

LNG

liquefied natural gas

Centre for Settlement of

NGLs

natural gas liquids

Investment Disputes

OPEC

Organization of Petroleum

IRS

Internal Revenue Service

Exporting Countries

OTC

over-the-counter

PSC

production sharing contract

NYSE

New York Stock Exchange

PUDs

proved undeveloped reserves

SEC

U.S. Securities and Exchange

SAGD

steam-assisted gravity drainage

Commission

WCS

Western Canada Select

TSR

total shareholder return

WTI

West Texas

Intermediate

U.K.

United Kingdom

U.S.

United States of America

 
2

PART

I.

FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

Consolidated Income Statement

ConocoPhillips

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Revenues and Other Income

Sales and other operating revenues

$

4,386

7,756

13,293

24,859

Equity in earnings of affiliates

35

290

346

651

Gain (loss) on dispositions

(3)

1,785

551

1,884

Other income (loss)

(38)

262

(983)

1,136

Total Revenues and

Other Income

4,380

10,093

13,207

28,530

Costs and Expenses

Purchased commodities

1,839

2,710

5,630

9,059

Production and operating expenses

963

1,331

3,183

4,020

Selling, general and administrative expenses

96

87

249

369

Exploration expenses

125

360

410

592

Depreciation, depletion and amortization

1,411

1,566

3,980

4,602

Impairments

2

24

521

26

Taxes other than

income taxes

179

237

570

706

Accretion on discounted liabilities

62

86

195

259

Interest and debt expense

200

184

604

582

Foreign currency transaction (gain) loss

(5)

(21)

(88)

19

Other expenses

20

36

7

58

Total Costs and Expenses

4,892

6,600

15,261

20,292

Income (loss) before income taxes

(512)

3,493

(2,054)

8,238

Income tax provision (benefit)

(62)

422

(171)

1,724

Net income (loss)

(450)

3,071

(1,883)

6,514

Less: net income attributable to noncontrolling interests

-

(15)

(46)

(45)

Net Income (Loss) Attributable to ConocoPhillips

$

(450)

3,056

(1,929)

6,469

Net Income (Loss) Attributable to ConocoPhillips Per Share

of Common Stock

(dollars)

Basic

$

(0.42)

2.76

(1.79)

5.75

Diluted

(0.42)

2.74

(1.79)

5.72

Average Common

Shares Outstanding

(in thousands)

Basic

1,077,377

1,108,555

1,079,525

1,124,558

Diluted

1,077,377

1,113,250

1,079,525

1,131,034

See Notes to Consolidated Financial Statements.

 
3

Consolidated Statement of Comprehensive Income

ConocoPhillips

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Net Income (Loss)

$

(450)

3,071

(1,883)

6,514

Other comprehensive income (loss)

Defined benefit plans

Reclassification adjustment for amortization of prior

service credit included in net income (loss)

(8)

(8)

(24)

(26)

Net actuarial loss arising during the period

(78)

(149)

(73)

(149)

Reclassification adjustment for amortization of net actuarial

losses included in net income (loss)

45

56

81

114

Nonsponsored plans

-

(1)

-

(1)

Income taxes on defined benefit plans

10

30

3

20

Defined benefit plans, net of tax

(31)

(72)

(13)

(42)

Unrealized holding gain on securities

-

-

3

-

Income taxes on unrealized holding gain on securities

-

-

(1)

-

Unrealized holding gain on securities, net of tax

-

-

2

-

Foreign currency translation adjustments

188

247

(302)

493

Income taxes on foreign currency translation adjustments

2

(2)

4

(2)

Foreign currency translation adjustments, net of tax

190

245

(298)

491

Other Comprehensive Income (Loss), Net

of Tax

159

173

(309)

449

Comprehensive Income (Loss)

(291)

3,244

(2,192)

6,963

Less: comprehensive income attributable to noncontrolling

interests

-

(15)

(46)

(45)

Comprehensive Income (Loss) Attributable to

ConocoPhillips

$

(291)

3,229

(2,238)

6,918

See Notes to Consolidated Financial Statements.

 
4

Consolidated Balance Sheet

ConocoPhillips

Millions of Dollars

September 30

December 31

2020

2019

Assets

Cash and cash equivalents

$

2,490

5,088

Short-term investments

4,032

3,028

Accounts and notes receivable (net of allowance of $

4

and $

13

, respectively)

1,984

3,267

Accounts and notes receivable—related parties

135

134

Investment in Cenovus Energy

809

2,111

Inventories

1,034

1,026

Prepaid expenses and other current assets

575

2,259

Total Current

Assets

11,059

16,913

Investments and long-term receivables

8,295

8,687

Loans and advances—related parties

114

219

Net properties, plants and equipment

(net of accumulated DD&A of $

58,726

and $

55,477

, respectively)

41,269

42,269

Other assets

2,420

2,426

Total Assets

$

63,157

70,514

Liabilities

Accounts payable

$

2,217

3,176

Accounts payable—related parties

22

24

Short-term debt

482

105

Accrued income and other taxes

339

1,030

Employee benefit obligations

469

663

Other accruals

1,111

2,045

Total Current

Liabilities

4,640

7,043

Long-term debt

14,905

14,790

Asset retirement obligations and accrued environmental

costs

5,651

5,352

Deferred income taxes

3,854

4,634

Employee benefit obligations

1,661

1,781

Other liabilities and deferred credits

1,663

1,864

Total Liabilities

32,374

35,464

Equity

Common stock (

2,500,000,000

shares authorized at $

0.01

par value)

Issued (2020—

1,798,738,512

shares; 2019—

1,795,652,203

shares)

Par value

18

18

Capital in excess of par

47,113

46,983

Treasury stock (at cost: 2020—

725,996,869

shares; 2019—

710,783,814

shares)

(47,130)

(46,405)

Accumulated other comprehensive loss

(5,666)

(5,357)

Retained earnings

36,448

39,742

Total Common

Stockholders’ Equity

30,783

34,981

Noncontrolling interests

-

69

Total Equity

30,783

35,050

Total Liabilities and

Equity

$

63,157

70,514

See Notes to Consolidated Financial Statements.

 
5

Consolidated Statement of Cash Flows

ConocoPhillips

Millions of Dollars

Nine Months Ended

September 30

2020

2019

Cash Flows From Operating Activities

Net income (loss)

$

(1,883)

6,514

Adjustments to reconcile net income (loss) to net cash provided

by operating

activities

Depreciation, depletion and amortization

3,980

4,602

Impairments

521

26

Dry hole costs and leasehold impairments

114

361

Accretion on discounted liabilities

195

259

Deferred taxes

(428)

(304)

Undistributed equity earnings

450

260

Gain on dispositions

(551)

(1,884)

Unrealized (gain) loss on investment in Cenovus Energy

1,302

(489)

Other

(188)

(331)

Working

capital adjustments

Decrease in accounts and notes receivable

1,132

333

Increase in inventories

(74)

(2)

Increase in prepaid expenses and other current assets

(49)

(29)

Decrease in accounts payable

(583)

(476)

Decrease in taxes and other accruals

(808)

(718)

Net Cash Provided by Operating Activities

3,130

8,122

Cash Flows From Investing Activities

Capital expenditures and investments

(3,657)

(5,041)

Working

capital changes associated with investing activities

(229)

17

Proceeds from asset dispositions

1,312

2,920

Net purchases of investments

(1,089)

(665)

Collection of advances/loans—related parties

116

127

Other

(31)

(146)

Net Cash Used in Investing Activities

(3,578)

(2,788)

Cash Flows From Financing Activities

Issuance of debt

300

-

Repayment of debt

(234)

(59)

Issuance of company common stock

(2)

(39)

Repurchase of company common stock

(726)

(2,751)

Dividends paid

(1,367)

(1,037)

Other

(27)

(73)

Net Cash Used in Financing Activities

(2,056)

(3,959)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and

Restricted Cash

(62)

(68)

Net Change in Cash, Cash Equivalents and Restricted Cash

(2,566)

1,307

Cash, cash equivalents and restricted cash at beginning

of period

5,362

6,151

Cash, Cash Equivalents and Restricted Cash at End of Period

$

2,796

7,458

Restricted cash of $

91

million and $

215

million are included in the "Prepaid expenses and other current assets" and "Other assets" lines,

respectively, of our Consolidated Balance Sheet as of September 30, 2020.

Restricted cash of $

90

million and $

184

million are included in the "Prepaid expenses and other current assets" and "Other assets" lines,

respectively, of our Consolidated Balance Sheet as of December 31, 2019.

See Notes to Consolidated Financial Statements.

 
6

Notes to Consolidated Financial Statements

ConocoPhillips

Note 1—Basis of Presentation

The interim-period financial information

presented in the financial statements included

in this report is

unaudited and, in the opinion of management,

includes all known accruals and adjustments

necessary for a fair

presentation of the consolidated financial

position of ConocoPhillips and its results

of operations and cash

flows for such periods.

All such adjustments are of a normal and recurring

nature unless otherwise disclosed.

Certain notes and other information have been

condensed or omitted from the interim

financial statements

included in this report.

Therefore, these financial statements should

be read in conjunction with the

consolidated financial statements and notes included

in our 2019 Annual Report on Form

10-K.

The unrealized (gain) loss on investment in Cenovus

Energy included on our consolidated statement of cash

flows, previously reflected on the line item

“Other” within net cash provided by operating

activities, has been

reclassified in the comparative period to conform

with the current period’s presentation.

Note 2—Changes in Accounting Principles

We

adopted

the provisions of

FASB ASU No. 2016-13

, “Measurement of Credit Losses on Financial

Instruments,” (ASC Topic 326) and its amendments,

beginning

January 1, 2020

.

This ASU, as amended, sets

forth the current expected credit loss model,

a new forward-looking impairment model

for certain financial

instruments measured at amortized cost basis

based on expected losses rather than incurred losses.

This ASU,

as amended, which primarily applies to our accounts

receivable, also requires credit losses related

to available-

for-sale debt securities to be recorded through an allowance

for credit losses.

The adoption of this ASU did

not have a material impact to our financial statements.

The majority of our receivables are due within

30 days

or less.

We monitor the credit quality of our counterparties through review of collections,

credit ratings, and

other analyses.

We develop our estimated allowance for credit losses primarily using an aging method

and

analyses of historical loss rates as well as consideration

of current and future conditions that could

impact our

counterparties’ credit quality and liquidity.

Note 3—Inventories

Inventories consisted of the following:

Millions of Dollars

September 30

December 31

2020

2019

Crude oil and natural gas

$

503

472

Materials and supplies

531

554

$

1,034

1,026

Inventories valued on the LIFO basis totaled

$

373

million and $

286

million at September 30, 2020 and

December 31, 2019, respectively.

Due to a precipitous decline in commodity prices

beginning in March this

year, we recorded a lower of cost or market adjustment in the first

quarter of 2020 of $

228

million to our crude

oil and natural gas inventories. The adjustment

was included in the “Purchased commodities”

line on our

consolidated income statement.

Commodity prices have improved since the first

quarter.

 
7

Note 4—Asset Acquisitions and Dispositions

Asset Acquisition

In August 2020, we completed the acquisition

of additional Montney acreage in Canada from Kelt

Exploration

Ltd. for $

382

million after customary adjustments, plus the

assumption of $

31

million in financing obligations

associated with partially owned infrastructure.

This acquisition consisted primarily

of undeveloped properties

and included

140,000

net acres in the liquids-rich Inga Fireweed asset

Montney zone, which is directly

adjacent to our existing Montney position.

The transaction increases our Montney acreage

position to

295,000

net acres with a

100

percent working interest.

This agreement was accounted for as an asset acquisition

resulting in the recognition of $

490

million of PP&E; $

77

million of ARO and accrued environmental costs;

and $

31

million of financing obligations recorded primarily

to long-term debt.

Results of operations for the

Montney are reported in our Canada segment.

Assets Sold

In May 2020, we completed the divestiture

of our subsidiaries that held our Australia-West assets and

operations, and based on an effective date of January

1, 2019, we received proceeds of $

765

million with an

additional $

200

million due upon final investment decision

of the proposed Barossa development project.

In

the nine-month period of 2020, we recognized a before-tax

gain of $

587

million related to this transaction.

At

the time of disposition, the net carrying value of

the subsidiaries sold was approximately

$

0.2

billion,

excluding $

0.5

billion of cash.

The net carrying value consisted primarily

of $

1.3

billion of PP&E and $

0.1

billion of other current assets offset by $

0.7

billion of ARO, $

0.3

billion of deferred tax liabilities, and $

0.2

billion of other liabilities.

The before-tax earnings associated with the subsidiaries

sold, including the gain on

disposition noted above, were $

851

million and $

222

million for the nine-month periods ended September

30,

2020 and 2019, respectively.

Production from the beginning of the year through the

disposition date in May

2020 averaged

43

MBOED.

Results of operations for the subsidiaries sold

are reported in our

Asia Pacific

segment.

In March 2020, we completed the sale of our Niobrara

interests for approximately $

359

million after

customary adjustments and recognized a before-tax

loss on disposition of $

38

million.

At the time of

disposition, our interest in Niobrara had a net carrying

value of $

397

million, consisting primarily of $

433

million of PP&E and $

34

million of ARO.

The before-tax earnings associated with our

interests in Niobrara,

including the loss on disposition, were a loss of $

22

million and $

7

million for the nine-month periods ended

September 30, 2020 and 2019, respectively.

In February 2020, we sold our Waddell Ranch interests in the Permian Basin for $

184

million after customary

adjustments.

No

gain or loss was recognized on the sale.

Production from the disposed Niobrara and Waddell Ranch interests in our

Lower 48

segment averaged

15

MBOED in 2019.

Note 5—Investments, Loans and Long-Term Receivables

Australia Pacific LNG Pty Ltd (APLNG)

APLNG executed project financing agreements

for an $

8.5

billion project finance facility in 2012. The $

8.5

billion project finance facility was initially composed

of financing agreements executed by APLNG

with the

Export-Import Bank of the United States for approximately

$

2.9

billion, the Export-Import Bank of China for

approximately $

2.7

billion, and a syndicate of Australian and international

commercial banks for

approximately $

2.9

billion.

All amounts were drawn from the facility.

APLNG made its first principal and

interest repayment in March 2017 and is scheduled

to make

bi-annual

payments until

March 2029

.

APLNG made a voluntary repayment of $

1.4

billion to the Export-Import Bank of China

in September 2018.

At the same time, APLNG obtained a United

States Private Placement (USPP) bond facility

of $

1.4

billion.

APLNG made its first interest payment related to

this facility in March 2019, and principal

payments are

scheduled to commence in September 2023, with

bi-annual

payments due on the facility until

September 2030

.

 
8

During the first quarter of 2019, APLNG refinanced

$

3.2

billion of existing project finance debt through two

transactions.

As a result of the first transaction, APLNG obtained

a commercial bank facility of $

2.6

billion.

APLNG made its first principal and interest

repayment in September 2019 with

bi-annual

payments due on the

facility until

March 2028

.

Through the second transaction, APLNG obtained

a USPP bond facility of $

0.6

billion.

APLNG made its first interest payment in September

2019, and principal payments are scheduled

to

commence in September 2023, with

bi-annual

payments due on the facility until

September 2030.

In conjunction with the $

3.2

billion debt obtained during the first quarter

of 2019 to refinance existing project

finance debt, APLNG made voluntary repayments

of $

2.2

billion and $

1.0

billion to a syndicate of Australian

and international commercial banks and the Export-Import

Bank of China, respectively.

At September 30, 2020, a balance of $

6.2

billion was outstanding on the facilities.

See Note 11—Guarantees,

for additional information.

At September 30, 2020, the carrying value of our

equity method investment in APLNG was $

6,877

million.

The balance is included in the “Investments

and long-term receivables” line on our consolidated

balance sheet.

Loans and Long-Term Receivables

As part of our normal ongoing business operations,

and consistent with industry practice,

we enter into

numerous agreements with other parties to pursue

business opportunities.

Included in such activity are loans

made to certain affiliated and non-affiliated companies.

At September 30, 2020, significant loans

to affiliated

companies included $

219

million in project financing to Qatar Liquefied

Gas Company Limited (3).

On our consolidated balance sheet, the long-term

portion of these loans is included in the “Loans

and

advances—related parties” line, while the short-term

portion is in the “Accounts and notes receivable—related

parties” line.

Note 6—Investment in Cenovus Energy

On May 17, 2017, we completed the sale of our

50

percent nonoperated interest in the FCCL Partnership,

as

well as the majority of our western Canada gas assets,

to Cenovus Energy.

Consideration for the transaction

included

208

million Cenovus Energy common shares, which,

at closing, approximated

16.9

percent of issued

and outstanding Cenovus Energy common stock.

The fair value and cost basis of our investment

in

208

million Cenovus Energy common shares was $

1.96

billion based on a price of $

9.41

per share on the NYSE on

the closing date.

At September 30, 2020, the investment included on

our consolidated balance sheet was $

809

million and is

carried at fair value.

The fair value of the

208

million Cenovus Energy common shares reflects

the closing

price of $

3.89

per share on the NYSE on the last trading day

of the quarter, a decrease of $

1.30

billion from its

fair value of $

2.11

billion at year-end 2019.

For the three- and nine-month periods ended September

30, 2020,

we recorded an unrealized loss of $

162

million and $

1.30

billion, respectively.

For the three- and nine-month

periods ended September 30, 2019, we recorded

an unrealized gain of $

116

million and $

489

million,

respectively.

The unrealized gains and losses are recorded within

the “Other income (loss)” line of our

consolidated income statement and are related to the

shares held at the reporting date.

See Note 14—Fair

Value

Measurement, for additional information.

Subject to market conditions, we intend to decrease

our

investment over time through market transactions,

private agreements or otherwise.

 
9

Note 7—Suspended Wells

The capitalized cost of suspended wells at September

30, 2020, was $

711

million, a decrease of $

309

million

from year-end 2019 primarily related to our Australia-West divestiture.

See Note 4—Asset Acquisitions and

Dispositions,

for additional information.

Of the well costs capitalized for more than one

year as of December

31, 2019, $

20

million was charged to dry hole expense during

the first nine months of 2020 primarily for

one

suspended well in the Kamunsu East Field offshore Malaysia.

Note 8—Impairments

During the three-

and nine-month periods ended September 30, 2020

and 2019, we recognized before-tax

impairment charges within the following segments:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Lower 48

$

1

22

514

22

Europe, Middle East and North Africa

1

2

7

4

$

2

24

521

26

We perform impairment reviews when triggering events arise that may impact the

fair value of our assets or

investments.

We observed volatility in commodity prices during the first nine-months of 2020.

A decline in commodity

prices beginning in March prompted us to evaluate

the recoverability of the carrying value of our assets

and

whether an other than temporary impairment

occurred for investments in our portfolio.

For certain non-core

natural gas assets in the Lower 48, a significant decrease

in the outlook for current and long-term natural

gas

prices resulted in a decline in the estimated fair

values to amounts below carrying value.

Accordingly, in the

first quarter of 2020, we recorded impairments of

$

511

million related to these non-core natural gas assets,

primarily for the Wind River Basin operations area consisting of

developed properties in the Madden Field and

the Lost Cabin Gas Plant, which were written down

to fair value.

See Note 14—Fair Value Measurement, for

additional information.

A sustained decline in the current and long-term

outlook on commodity prices could trigger

additional

impairment reviews and possibly result in

future impairment charges.

The charges discussed below are included in the “Exploration

expenses” line on our consolidated income

statement and are not reflected in the table above.

We recorded a before-tax impairment in the first quarter of 2020 of $

31

million in our Asia Pacific segment

related to the associated carrying value of capitalized

undeveloped leasehold costs for the Kamunsu East

Field

in Malaysia that is no longer in our development

plans.

In the third quarter of 2019, we recorded a before-tax

impairment of $

141

million in our Lower 48 segment for

the associated carrying value of capitalized undeveloped

leasehold costs due to our decision to discontinue

exploration activities in the Central Louisiana Austin

Chalk trend.

 
10

Note 9—Debt

Our debt balance as of September 30, 2020 was $

15,387

million compared with $

14,895

million at December

31, 2019.

Our revolving credit facility provides a total commitment

of $

6.0

billion and expires in

May 2023

.

Our

revolving credit facility may be used for direct

bank borrowings, the issuance of letters of credit

totaling up to

$

500

million, or as support for our commercial paper

program.

Our commercial paper program consists

of the

ConocoPhillips Company $

6.0

billion program, primarily a funding source for

short-term working capital

needs.

Commercial paper maturities are generally limited

to

90 days

.

We issued $

300

million of commercial paper in the third

quarter of 2020, which is included in short-term

debt

on our consolidated balance sheet.

With $

300

million of commercial paper outstanding and

no

direct

borrowings or letters of credit, we had $

5.7

billion in available capacity under the revolving

credit facility at

September 30, 2020.

We had

no

direct outstanding borrowings, letters of credit,

nor outstanding commercial

paper as of December 31, 2019.

In October 2020, S&P affirmed its “A” rating on our senior long-term debt and revised its outlook to “stable”

from “negative,”

Fitch affirmed its rating of “A” with a “stable” outlook

and Moody’s affirmed its rating of

“A3” with a “stable” outlook.

At September 30, 2020, we had $

283

million of certain variable rate demand bonds

(VRDBs) outstanding with

maturities ranging through 2035.

The VRDBs are redeemable at the option of the bondholders

on any business

day.

If they are ever redeemed, we have the ability

and intent to refinance on a long-term basis,

therefore, the

VRDBs are included in the “Long-term debt” line

on our consolidated balance sheet.

 
11

Note 10—Changes in Equity

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Income (Loss)

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended September 30, 2020

Balances at June 30, 2020

$

18

47,079

(47,130)

(5,825)

37,351

31,493

Net loss

(450)

(450)

Other comprehensive income

159

159

Dividends paid ($

0.42

per common share)

(454)

(454)

Distributed under benefit plans

34

34

Other

1

1

Balances at September 30, 2020

$

18

47,113

(47,130)

(5,666)

36,448

30,783

For the nine months ended September 30,

2020

Balances at December 31, 2019

$

18

46,983

(46,405)

(5,357)

39,742

69

35,050

Net income (loss)

(1,929)

46

(1,883)

Other comprehensive loss

(309)

(309)

Dividends paid ($

1.26

per common share)

(1,367)

(1,367)

Repurchase of company common stock

(726)

(726)

Distributions to noncontrolling interests and other

(32)

(32)

Disposition

(84)

(84)

Distributed under benefit plans

130

130

Other

1

2

1

4

Balances at September 30, 2020

$

18

47,113

(47,130)

(5,666)

36,448

-

30,783

Millions of Dollars

Attributable to ConocoPhillips

Common Stock

Par

Value

Capital in

Excess of

Par

Treasury

Stock

Accum. Other

Comprehensive

Income (Loss)

Retained

Earnings

Non-

Controlling

Interests

Total

For the three months ended September 30, 2019

Balances at June 30, 2019

$

18

46,922

(44,906)

(5,827)

36,769

98

33,074

Net income

3,056

15

3,071

Other comprehensive income

173

173

Dividends paid ($

0.31

per common share)

(341)

(341)

Repurchase of company common stock

(749)

(749)

Distributions to noncontrolling interests and other

(20)

(20)

Distributed under benefit plans

32

32

Other

(1)

(1)

Balances at September 30, 2019

$

18

46,954

(45,656)

(5,654)

39,484

93

35,239

For the nine months ended September 30,

2019

Balances at December 31, 2018

$

18

46,879

(42,905)

(6,063)

34,010

125

32,064

Net income

6,469

45

6,514

Other comprehensive income

449

449

Dividends paid ($

0.92

per common share)

(1,037)

(1,037)

Repurchase of company common stock

(2,751)

(2,751)

Distributions to noncontrolling interests and other

(80)

(80)

Distributed under benefit plans

75

75

Changes in Accounting Principles*

(40)

40

-

Other

2

3

5

Balances at September 30, 2019

$

18

46,954

(45,656)

(5,654)

39,484

93

35,239

*Cumulative effect of the adoption of ASU No. 2018-02,

"Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."

 
12

Note 11—Guarantees

At September 30, 2020, we were liable for certain

contingent obligations under various contractual

arrangements as described below.

We recognize a liability, at inception, for the fair value of our obligation as

a guarantor for newly issued or modified guarantees.

Unless the carrying amount of the liability

is noted

below, we have not recognized a liability because the fair value of the obligation

is immaterial.

In addition,

unless otherwise stated, we are not currently

performing with any significance under the guarantee

and expect

future performance to be either immaterial

or have only a remote chance of occurrence.

APLNG Guarantees

At September 30, 2020, we had outstanding multiple

guarantees in connection with our

37.5

percent ownership

interest in APLNG.

The following is a description of the guarantees

with values calculated utilizing

September 2020 exchange rates:

●

During the third quarter of 2016, we issued a guarantee

to facilitate the withdrawal of our pro-rata

portion of the funds in a project finance reserve

account.

We estimate the remaining term of this

guarantee is

10 years

.

Our maximum exposure under this guarantee is

approximately $

170

million

and may become payable if an enforcement action

is commenced by the project finance lenders

against APLNG.

At September 30, 2020, the carrying value of

this guarantee was approximately $

14

million.

●

In conjunction with our original purchase of an ownership

interest in APLNG from Origin Energy in

October 2008, we agreed to reimburse Origin Energy for

our share of the existing contingent liability

arising under guarantees of an existing obligation

of APLNG to deliver natural gas under

several sales

agreements with remaining terms of

1 to 22 years

.

Our maximum potential liability for future

payments, or cost of volume delivery, under these guarantees is estimated

to be $

720

million

($

1.3

billion in the event of intentional or reckless

breach), and would become payable if

APLNG fails

to meet its obligations under these agreements and

the obligations cannot otherwise be mitigated.

Future payments are considered unlikely, as the payments, or cost of volume

delivery, would only be

triggered if APLNG does not have enough natural

gas to meet these sales commitments and if

the

co-venturers do not make necessary equity contributions

into APLNG.

●

We have guaranteed the performance of APLNG with regard to certain other contracts

executed in

connection with the project’s continued development.

The guarantees have remaining terms

of

16 to

25 years or the life of the venture

.

Our maximum potential amount of future payments

related to these

guarantees is approximately $

120

million and would become payable if APLNG

does not perform.

At

September 30, 2020, the carrying value of these

guarantees was approximately $

7

million.

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling

approximately

$

750

million, which consist primarily of

guarantees of the residual value of leased office buildings,

guarantees

of the residual value of corporate aircrafts,

and a guarantee for our portion of a joint venture’s project finance

reserve accounts.

These guarantees have remaining terms

of

1 to 5 years

and would become payable if certain

asset values are lower than guaranteed amounts at

the end of the lease or contract term, business conditions

decline at guaranteed entities, or as a result of nonperformance

of contractual terms by guaranteed parties.

At September 30, 2020, the carrying value of these

guarantees was approximately $

11

million.

Indemnifications

Over the years, we have entered into agreements to

sell ownership interests in certain legal

entities, joint

ventures and assets that gave rise to qualifying

indemnifications.

These agreements include indemnifications

for taxes and environmental liabilities.

The majority of these indemnifications are related

to tax issues and the

majority of these expire in 2021.

Those related to environmental issues have terms

that are generally indefinite

and the maximum amounts of future payments are

generally unlimited.

The carrying amount recorded for

these indemnification obligations at September 30,

2020, was approximately $

50

million.

We amortize the

 
13

indemnification liability over the relevant time

period the indemnity is in effect, if one exists, based

on the

facts and circumstances surrounding each type

of indemnity.

In cases where the indemnification term

is

indefinite, we will reverse the liability when we have

information the liability is essentially

relieved or

amortize the liability over an appropriate time

period as the fair value of our indemnification

exposure

declines.

Although it is reasonably possible future payments

may exceed amounts recorded, due to the nature

of the indemnifications, it is not possible to make

a reasonable estimate of the maximum

potential amount of

future payments.

For additional information about environmental

liabilities, see Note 12—Contingencies and

Commitments.

Note 12—Contingencies and Commitments

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

We also may be required to remove or mitigate the effects on the environment of the

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances

at various active

and inactive sites.

We regularly assess the need for accounting recognition or disclosure of these

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue

a

liability when the loss is probable and the amount

is reasonably estimable.

If a range of amounts can be

reasonably estimated and no amount within the range

is a better estimate than any other amount,

then the low

end of the range is accrued.

We do not reduce these liabilities for potential insurance or third-party recoveries.

We accrue receivables for insurance or other third-party recoveries when applicable.

With respect to income

tax-related contingencies, we use a cumulative probability-weighted

loss accrual in cases where sustaining a

tax position is less than certain.

Based on currently available information, we believe

it is remote that future costs related to known

contingent

liability exposures will exceed current accruals by

an amount that would have a material

adverse impact on our

consolidated financial statements.

As we learn new facts concerning contingencies,

we reassess our position

both with respect to accrued liabilities

and other potential exposures.

Estimates particularly sensitive to future

changes include contingent liabilities

recorded for environmental remediation, tax and legal

matters.

Estimated future environmental remediation

costs are subject to change due to such factors

as the uncertain

magnitude of cleanup costs, the unknown time

and extent of such remedial actions that

may be required, and

the determination of our liability in proportion

to that of other responsible parties.

Estimated future costs

related to tax and legal matters are subject to

change as events evolve and as additional

information becomes

available during the administrative and litigation

processes.

Environmental

We are subject to international, federal, state and local environmental laws and regulations.

When we prepare

our consolidated financial statements, we record

accruals for environmental liabilities based on management’s

best estimates, using all information that is

available at the time.

We measure estimates and base liabilities on

currently available facts, existing technology, and presently enacted laws and

regulations, taking into account

stakeholder and business considerations.

When measuring environmental liabilities,

we also consider our prior

experience in remediation of contaminated sites,

other companies’ cleanup experience, and data released

by

the U.S. EPA or other organizations.

We consider unasserted claims in our determination of environmental

liabilities, and we accrue them in the period they are

both probable and reasonably estimable.

Although liability of those potentially responsible

for environmental remediation costs is generally

joint and

several for federal sites and frequently so for other

sites, we are usually only one of many companies

cited at a

particular site.

Due to the joint and several liabilities, we could

be responsible for all cleanup costs related to

any site at which we have been designated as a

potentially responsible party.

We have been successful to date

in sharing cleanup costs with other financially

sound companies.

Many of the sites at which we are potentially

responsible are still under investigation by the EPA or the agency concerned.

Prior to actual cleanup, those

potentially responsible normally assess the

site conditions, apportion responsibility and determine

the

appropriate remediation.

In some instances, we may have no liability

or may attain a settlement of liability.

Where it appears that other potentially responsible

parties may be financially unable to bear their

proportional

share, we consider this inability in estimating

our potential liability, and we adjust our accruals accordingly.

 
14

As a result of various acquisitions in the past,

we assumed certain environmental obligations.

Some of these

environmental obligations are mitigated by indemnifications

made by others for our benefit, and some of the

indemnifications are subject to dollar limits

and time limits.

We are currently participating in environmental assessments and cleanups at numerous

federal Superfund and

comparable state and international sites.

After an assessment of environmental exposures

for cleanup and

other costs, we make accruals on an undiscounted

basis (except those acquired in a purchase

business

combination, which we record on a discounted basis)

for planned investigation and remediation activities

for

sites where it is probable future costs will be incurred

and these costs can be reasonably estimated.

We have

not reduced these accruals for possible insurance recoveries.

At September 30, 2020, our balance sheet included

a total environmental accrual of $

177

million, compared

with $

171

million at December 31, 2019, for remediation

activities in the U.S. and Canada.

We expect to

incur a substantial amount of these expenditures

within the next

30 years

.

In the future, we may be involved in

additional environmental assessments, cleanups

and proceedings.

Legal Proceedings

We are subject to various lawsuits and claims including but not limited to matters

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes,

environmental

damages, climate change, personal injury, and property damage.

Our primary exposures for such matters

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties and

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

legal

proceedings against us.

Our process facilitates the early evaluation and quantification

of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

mediation.

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

the

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

of new

accruals, is required.

Other Contingencies

We have contingent liabilities resulting from throughput agreements with pipeline and

processing companies

not associated with financing arrangements.

Under these agreements, we may be required

to provide any such

company with additional funds through advances

and penalties for fees related to throughput capacity

not

utilized.

In addition, at September 30, 2020, we had performance

obligations secured by letters of credit

of

$

240

million (issued as direct bank letters of

credit) related to various purchase commitments

for materials,

supplies, commercial activities and services incident

to the ordinary conduct of business.

In 2007, ConocoPhillips was unable to reach agreement

with respect to the empresa mixta structure

mandated

by the Venezuelan government’s Nationalization Decree.

As a result, Venezuela’s

national oil company,

Petróleos de Venezuela, S.A. (PDVSA), or its affiliates, directly assumed control over ConocoPhillips’

interests in the Petrozuata and Hamaca heavy oil

ventures and the offshore Corocoro development project.

In

response to this expropriation, ConocoPhillips

initiated international arbitration on November 2, 2007,

with the

ICSID.

On September 3, 2013, an ICSID arbitration tribunal

held that Venezuela unlawfully expropriated

ConocoPhillips’ significant oil investments

in June 2007.

On January 17, 2017, the Tribunal reconfirmed the

decision that the expropriation was unlawful.

In March 2019, the Tribunal unanimously ordered the

government of Venezuela to pay ConocoPhillips approximately $

8.7

billion in compensation for the

government’s unlawful expropriation of the company’s investments in Venezuela in 2007.

ConocoPhillips has

filed a request for recognition of the award in several

jurisdictions.

On August 29, 2019, the ICSID Tribunal

issued a decision rectifying the award and reducing

it by approximately $

227

million.

The award now stands

at $

8.5

billion plus interest.

The government of Venezuela sought annulment of the award, which

automatically stayed enforcement of the award.

Annulment proceedings are underway.

 
15

In 2014, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Petrozuata and Hamaca projects.

The ICC Tribunal issued

an award in April 2018, finding that PDVSA owed ConocoPhillips

approximately $

2

billion under their

agreements in connection with the expropriation of the

projects and other pre-expropriation fiscal

measures.

In

August 2018, ConocoPhillips entered into a settlement with PDVSA to recover the full amount of this ICC

award, plus interest through the payment period, including initial payments totaling approximately

$500 million within a period of 90 days from the time of signing of the settlement agreement. The balance of

the settlement is to be paid quarterly over a period of four and a half years.

To date, ConocoPhillips has

received approximately $

754

million.

Per the settlement, PDVSA recognized the ICC award

as a judgment in

various jurisdictions, and ConocoPhillips agreed

to suspend its legal enforcement actions.

ConocoPhillips sent

notices of default to PDVSA on October 14 and November

12, 2019, and to date PDVSA has failed to cure its

breach.

As a result, ConocoPhillips has resumed legal enforcement

actions.

ConocoPhillips has ensured that

the settlement and any actions taken in enforcement

thereof meet all appropriate U.S. regulatory

requirements,

including those related to any applicable sanctions

imposed by the U.S. against Venezuela.

In 2016, ConocoPhillips filed a separate and independent

arbitration under the rules of the ICC against

PDVSA under the contracts that had established the

Corocoro Project.

On August 2, 2019, the ICC Tribunal

awarded ConocoPhillips approximately $

33

million plus interest under the Corocoro contracts.

ConocoPhillips is seeking recognition and enforcement

of the award in various jurisdictions.

ConocoPhillips

has ensured that all the actions related to the award

meet all appropriate U.S. regulatory requirements,

including those related to any applicable sanctions

imposed by the U.S. against Venezuela.

The Office of Natural Resources Revenue (ONRR) has conducted

audits of ConocoPhillips’ payment of

royalties on federal lands and has issued multiple

orders to pay additional royalties to the federal

government.

ConocoPhillips has appealed these orders and strongly

objects to the ONRR claims.

The appeals are pending

with the Interior Board of Land Appeals (IBLA),

except for one order that is the subject of

a lawsuit

ConocoPhillips filed in 2016 in New Mexico federal

court after its appeal was denied by the

IBLA.

Beginning in 2017, cities, counties, governments

and other entities in several states in the U.S. have

filed

lawsuits against oil and gas companies, including

ConocoPhillips, seeking compensatory damages

and

equitable relief to abate alleged climate change impacts.

Additional lawsuits with similar allegations

are

expected to be filed.

The amounts claimed by plaintiffs are unspecified and

the legal and factual issues

involved in these cases are unprecedented.

ConocoPhillips believes these lawsuits are factually

and legally

meritless and are an inappropriate vehicle to address

the challenges associated with climate

change and will

vigorously defend against such lawsuits.

Several Louisiana parishes and the State of Louisiana

have filed

43

lawsuits under Louisiana’s State and Local

Coastal Resources Management Act (SLCRMA)

against oil and gas companies, including ConocoPhillips,

seeking compensatory damages for contamination

and erosion of the Louisiana coastline

allegedly caused by

historical oil and gas operations.

ConocoPhillips entities are defendants in

22

of the lawsuits and will

vigorously defend against them.

Because Plaintiffs’ SLCRMA theories are unprecedented,

there is uncertainty

about these claims (both as to scope and damages)

and any potential financial impact on the company.

In 2016, ConocoPhillips, through its subsidiary, The Louisiana Land and Exploration

Company LLC,

submitted claims as the largest private wetlands owner in Louisiana

within the settlement claims

administration process related to the oil spill

in the Gulf of Mexico in April 2010.

In July 2020, the claims

administrator issued an award to the company which,

after fees and expenses, totaled approximately

$

90

million,

which was received in the third quarter of 2020.

In October 2020, the Bureau of Safety and Environmental

Enforcement (BSEE) ordered the prior owners of

Outer Continental Shelf (OCS) Lease P-0166, including

ConocoPhillips, to decommission the lease facilities,

including two offshore platforms located near Carpinteria,

California.

This order was sent after the current

owner of OCS Lease P-0166 relinquished the lease

and abandoned the lease platforms and facilities.

Phillips

Petroleum Company, a legacy company of ConocoPhillips, held a

25

percent interest in this lease and operated

 
16

these facilities, but sold its interest approximately

30 years

ago.

ConocoPhillips has not had any connection to

the operation or production on this lease since that

time.

ConocoPhillips plans to challenge the order.

Note 13—Derivative and Financial Instruments

We use futures, forwards, swaps and options in various markets to meet our customer needs,

capture market

opportunities and manage foreign exchange currency

risk.

Commodity Derivative Instruments

Our commodity business primarily consists

of natural gas, crude oil, bitumen, LNG and NGLs.

Commodity derivative instruments are held at fair

value on our consolidated balance sheet.

Where these

balances have the right of setoff, they are presented on a

net basis.

Related cash flows are recorded as

operating activities on our consolidated statement

of cash flows.

On our consolidated income statement,

realized and unrealized gains and losses are recognized

either on a gross basis if directly related to our

physical

business or a net basis if held for trading.

Gains and losses related to contracts that meet

and are designated

with the NPNS exception are recognized upon settlement.

We generally apply this exception to eligible crude

contracts.

We do not elect hedge accounting for our commodity derivatives.

The following table presents the gross fair values

of our commodity derivatives, excluding

collateral, and the

line items where they appear on our consolidated

balance sheet:

Millions of Dollars

September 30

December 31

2020

2019

Assets

Prepaid expenses and other current assets

$

273

288

Other assets

28

34

Liabilities

Other accruals

258

283

Other liabilities and deferred credits

19

28

The gains (losses) from commodity derivatives

incurred, and the line items where they appear on

our

consolidated income statement were:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Sales and other operating revenues

$

33

4

30

68

Other income (loss)

(2)

3

3

4

Purchased commodities

(27)

(9)

(29)

(60)

 
17

The table below summarizes our material net exposures

resulting from outstanding commodity

derivative

contracts:

Open Position

Long/(Short)

September 30

December 31

2020

2019

Commodity

Natural gas and power (billions of cubic feet equivalent)

Fixed price

(9)

(5)

Basis

(50)

(23)

Foreign Currency Exchange Derivatives

We have foreign currency exchange rate risk resulting from international operations.

Our foreign currency

exchange derivative activity primarily

relates to managing our cash-related foreign currency

exchange rate

exposures, such as firm commitments for

capital programs or local currency tax payments,

dividends and cash

returns from net investments in foreign affiliates, and investments

in equity securities.

Our foreign currency exchange derivative instruments

are held at fair value on our consolidated

balance sheet.

Related cash flows are recorded as operating activities

on our consolidated statement of cash flows.

We do not

elect hedge accounting on our foreign currency exchange

derivatives.

The following table presents the gross fair values

of our foreign currency exchange derivatives,

excluding

collateral, and the line items where they appear

on our consolidated balance sheet:

Millions of Dollars

September 30

December 31

2020

2019

Assets

Prepaid expenses and other current assets

$

16

1

Liabilities

Other accruals

-

20

Other liabilities and deferred credits

-

8

The (gains) losses from foreign currency exchange

derivatives incurred, and the line item where

they appear

on our consolidated income statement were:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Foreign currency transaction (gain) loss

$

7

(24)

(55)

(3)

 
18

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

derivatives:

In Millions

Notional Currency

September 30

December 31

2020

2019

Foreign Currency Exchange Derivatives

Buy GBP,

sell EUR

GBP

3

4

Sell CAD, buy USD

CAD

416

1,337

In the second quarter of 2019, we entered into foreign currency exchange contracts to sell CAD 1.35 billion at

CAD 0.748 against the USD. In the first quarter of 2020, we entered into forward currency exchange contracts

to buy CAD 0.9 billion at CAD 0.718 against the USD

.

Financial Instruments

We invest in financial instruments with maturities based on our cash forecasts for

the various accounts and

currency pools we manage.

The types of financial instruments in which we

currently invest include:

●

Time deposits: Interest bearing deposits placed with financial

institutions for a predetermined amount

of time.

●

Demand deposits: Interest bearing deposits placed

with financial institutions.

Deposited funds can be

withdrawn without notice.

●

Commercial paper: Unsecured promissory notes issued

by a corporation, commercial bank or

government agency purchased at a discount to

mature at par.

●

U.S. government or government agency obligations:

Securities issued by the U.S. government

or U.S.

government agencies.

●

Foreign government obligations: Securities

issued by foreign governments.

●

Corporate bonds: Unsecured debt securities

issued by corporations.

●

Asset-backed securities: Collateralized debt securities.

The following investments are carried on our

consolidated balance sheet at cost, plus accrued

interest:

Millions of Dollars

Carrying Amount

Cash and Cash

Equivalents

Short-Term

Investments

September 30

December 31

September 30

December 31

2020

2019

2020

2019

Cash

$

545

759

Demand Deposits

1,182

1,483

Time Deposits

Remaining maturities from 1 to 90 days

755

2,030

2,961

1,395

Remaining maturities from 91 to 180 days

-

-

741

465

Remaining maturities within one year

-

-

7

-

Commercial Paper

Remaining maturities from 1 to 90 days

-

413

50

1,069

U.S. Government Obligations

Remaining maturities from 1 to 90 days

5

394

-

-

$

2,487

5,079

3,759

2,929

 
19

The following investments in debt securities

classified as available for sale are carried on our

consolidated

balance sheet at fair value:

Millions of Dollars

Carrying Amount

Cash and Cash Equivalents

Short-Term

Investments

Investments and Long-Term

Receivables

September 30

2020

December 31

2019

September 30

2020

December 31

2019

September 30

2020

December 31

2019

Corporate Bonds

Maturities within one year

$

-

1

157

59

-

-

Maturities greater than one year

through five years

-

-

-

-

128

99

Commercial Paper

Maturities within one year

3

8

108

30

-

-

U.S. Government Obligations

Maturities within one year

-

-

8

10

-

-

Maturities greater than one year

through five years

-

-

-

-

13

15

U.S. Government Agency Obligations

Maturities greater than one year

through five years

-

-

-

-

17

-

Foreign Government Obligations

Maturities greater than one year

through five years

-

-

-

-

2

-

Asset-backed Securities

Maturities greater than one year

through five years

-

-

-

-

46

19

$

3

9

273

99

206

133

The following table summarizes the amortized

cost basis and fair value of investments in

debt securities

classified as available for sale:

Millions of Dollars

September 30, 2020

December 31, 2019

Amortized

Cost Basis

Fair Value

Amortized

Cost Basis

Fair Value

Major Security Type

Corporate bonds

$

283

285

159

159

Commercial paper

111

111

38

38

U.S. government obligations

21

21

25

25

U.S. government agency obligations

17

17

-

-

Foreign government obligations

2

2

-

-

Asset-backed securities

46

46

19

19

$

480

482

241

241

As of September 30, 2020 and December 31, 2019,

total unrealized losses for debt securities

classified as

available for sale with net losses were negligible.

Additionally, as of September 30, 2020 and December 31,

2019, investments

in these debt securities in an unrealized loss

position for which an allowance for credit

losses has not been recorded were negligible.

 
20

For the three-

and nine-month periods ended September 30,

2020, proceeds from sales and redemptions of

investments in debt securities classified as available

for sale were $

109

million and $

298

million, respectively.

Gross realized gains and losses included in earnings

from those sales and redemptions were negligible.

The

cost of securities sold and redeemed is determined

using the specific identification method.

Credit Risk

Financial instruments potentially exposed to concentrations

of credit risk consist primarily of cash equivalents,

short-term investments, long-term investments

in debt securities, OTC derivative contracts and trade

receivables.

Our cash equivalents and short-term investments

are placed in high-quality commercial paper,

government money market funds, government debt

securities, time deposits with major international

banks and

financial institutions, and high-quality corporate bonds.

Our long-term investments in debt securities

are

placed in high-quality corporate bonds, U.S. government

and government agency obligations, foreign

government obligations, and asset-backed securities.

The credit risk from our OTC derivative contracts,

such as forwards, swaps and options, derives

from the

counterparty to the transaction.

Individual counterparty exposure is managed

within predetermined credit

limits and includes the use of cash-call margins when appropriate,

thereby reducing the risk of significant

nonperformance.

We also use futures, swaps and option contracts that have a negligible credit

risk because

these trades are cleared with an exchange clearinghouse

and subject to mandatory margin requirements until

settled; however, we are exposed to the credit risk of those exchange

brokers for receivables arising from daily

margin cash calls, as well as for cash deposited to meet

initial margin requirements.

Our trade receivables result primarily

from our petroleum operations and reflect a broad

national and

international customer base, which limits our

exposure to concentrations of credit risk.

The majority of these

receivables have payment terms of

30 days

or less, and we continually monitor this exposure

and the

creditworthiness of the counterparties.

Our collateral requirements will depend on the

creditworthiness of our

counterparties.

At our option, we may require collateral to limit

the exposure to loss including, letters of

credit, prepayments and surety bonds, as well as

master netting arrangements to mitigate

credit risk with

counterparties that both buy from and sell to

us, as these agreements permit the amounts

owed by us or owed

to others to be offset against amounts due to us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative

exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts

with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts

typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert

to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also

permit us to post letters of credit as collateral, such as transactions administered through the New York

Mercantile Exchange.

The aggregate fair value of all derivative

instruments with such credit risk-related contingent

features that were

in a liability position on September 30, 2020 and December

31, 2019, was $

20

million and $

79

million,

respectively.

For these instruments,

no

collateral was posted as of September 30, 2020

or December 31, 2019.

If our credit rating had been downgraded below

investment grade on September 30, 2020, we would

have been

required to post $

16

million of additional collateral, either with

cash or letters of credit.

 
21

Note 14—Fair Value Measurement

We carry a portion of our assets and liabilities at fair value measured at the reporting

date using an exit price

(i.e., the price that would be received to sell an asset

or paid to transfer a liability) and disclosed

according to

the quality of valuation inputs under the following

hierarchy:

●

Level 1: Quoted prices (unadjusted) in an active

market for identical assets or liabilities.

●

Level 2: Inputs other than quoted prices that

are directly or indirectly observable.

●

Level 3: Unobservable inputs that are significant

to the fair value of assets or liabilities.

The classification hierarchy of an asset or liability

is based on the lowest level of input significant

to its fair

value.

Those that are initially classified as Level 3

are subsequently reported as Level 2 when the

fair value

derived from unobservable inputs is inconsequential

to the overall fair value, or if corroborated market

data

becomes available.

Assets and liabilities initially reported as Level

2 are subsequently reported as Level 3 if

corroborated market data is no longer available.

There were no material transfers into or

out of Level 3 during

2020 or 2019.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair

value on a recurring basis primarily include

our investment in

Cenovus Energy common shares, our investments in debt

securities classified as available for sale, and

commodity derivatives.

●

Level 1 derivative assets and liabilities primarily

represent exchange-traded futures and options that are

valued using unadjusted prices available from the

underlying exchange.

Level 1 also includes our

investment in common shares of Cenovus Energy, which is valued using quotes for shares

on the NYSE,

and our investments in U.S. government obligations

classified

as available for sale debt securities, which

are valued using exchange prices.

●

Level 2 derivative assets and liabilities primarily

represent OTC swaps, options and forward purchase

and

sale contracts that are valued using adjusted exchange

prices, prices provided by brokers or pricing

service

companies that are all corroborated by market data.

Level 2 also includes our investments in debt

securities classified as available for sale including

investments in corporate bonds, commercial

paper,

asset-backed securities, U.S. government agency

obligations and foreign government obligations

that are

valued using pricing provided by brokers or pricing

service companies that are corroborated with

market

data.

●

Level 3 derivative assets and liabilities consist

of OTC swaps, options and forward purchase and

sale

contracts where a significant portion of fair

value is calculated from underlying market

data that is not

readily available.

The derived value uses industry standard methodologies

that may consider the historical

relationships among various commodities, modeled

market prices, time value, volatility factors and other

relevant economic measures.

The use of these inputs results in management’s best estimate of fair

value.

Level 3 activity was not material for all periods

presented.

 
22

The following table summarizes the fair value

hierarchy for gross financial assets and liabilities

(i.e.,

unadjusted where the right of setoff exists for commodity

derivatives accounted for at fair value on a recurring

basis):

Millions of Dollars

September 30, 2020

December 31, 2019

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Investment in Cenovus Energy

$

809

-

-

809

2,111

-

-

2,111

Investments in debt securities

21

461

-

482

25

216

-

241

Commodity derivatives

173

117

11

301

172

114

36

322

Total assets

$

1,003

578

11

1,592

2,308

330

36

2,674

Liabilities

Commodity derivatives

$

173

89

15

277

174

115

22

311

Total liabilities

$

173

89

15

277

174

115

22

311

The following table summarizes those commodity

derivative balances subject to the right of setoff as

presented on our consolidated balance sheet.

We have elected to offset the recognized fair value amounts for

multiple derivative instruments executed with the

same counterparty in our financial statements

when a legal

right of setoff exists.

Millions of Dollars

Amounts Subject to Right of Setoff

Gross

Amounts Not

Gross

Net

Amounts

Subject to

Gross

Amounts

Amounts

Cash

Net

Recognized

Right of Setoff

Amounts

Offset

Presented

Collateral

Amounts

September 30, 2020

Assets

$

301

1

300

204

96

5

91

Liabilities

277

-

277

204

73

7

66

December 31, 2019

Assets

$

322

3

319

193

126

4

122

Liabilities

311

4

307

193

114

12

102

At September 30, 2020 and December 31, 2019,

we did not present any amounts gross on our consolidated

balance sheet where we had the right of setoff.

Non-Recurring Fair Value Measurement

The following table summarizes the fair value

hierarchy by major category and date of

remeasurement for

assets accounted for at fair value on a non-recurring

basis:

Millions of Dollars

Fair Value

Measurement

Using

Fair Value

Level 3 Inputs

Before-Tax

Loss

Net PP&E (held for use)

March 31, 2020

$

77

77

510

 
23

During the first quarter of 2020

, the estimated fair value of our assets in the Wind River Basin operations

area

declined to an amount below the carrying value.

The Wind River Basin operations area consists of certain

developed natural gas properties in the Madden

Field and the Lost Cabin Gas Plant and is included

in our

Lower 48 segment.

The carrying value was written down to fair value. The fair value was estimated based on

an internal discounted cash flow model using estimates of future production, an outlook of future prices using

a combination of exchanges (short-term) and external pricing services companies (long-term), future operating

costs and capital expenditures, and a discount rate believed to be consistent with those used by principal

market participants.

The range and arithmetic average of significant

unobservable inputs used in the Level 3

fair value measurement were as follows:

Fair Value

(Millions of

Dollars)

Valuation

Technique

Unobservable Inputs

Range

(Arithmetic Average)

March 31, 2020

Wind River Basin

$

77

Discounted cash

flow

Natural gas production

(MMCFD)

8.4

-

55.2

(

22.9

)

Natural gas price outlook*

($/MMBTU)

$

2.67

- $

9.17

($

5.68

)

Discount rate**

7.9

%

-

9.1

% (

8.3

%)

*Henry Hub natural gas price outlook based on external pricing service

companies' outlooks for years 2022-2034; future prices

escalated at

2.2

% annually after

year 2034.

**Determined as the weighted average cost of capital of a group

of peer companies, adjusted for risks where

appropriate.

Reported Fair Values of Financial Instruments

We used the following methods and assumptions to estimate the fair value of financial

instruments:

●

Cash and cash equivalents and short-term investments:

The carrying amount reported on the balance

sheet approximates fair value.

For those investments classified as available

for sale debt securities,

the carrying amount reported on the balance sheet

is fair value.

●

Accounts and notes receivable (including long-term

and related parties): The carrying amount

reported on the balance sheet approximates fair

value.

The valuation technique and methods used to

estimate the fair value of the current portion

of fixed-rate related party loans is consistent with

Loans

and advances—related parties.

●

Investment in Cenovus Energy: See Note 6—Investment in

Cenovus Energy for a discussion of the

carrying value and fair value of our investment in

Cenovus Energy common shares.

●

Investments in debt securities classified as available

for sale: The fair value of investments in debt

securities categorized as Level 1 in the fair

value hierarchy is measured using exchange

prices.

The

fair value of investments in debt securities

categorized as Level 2 in the fair value hierarchy

is

measured using pricing provided by brokers or pricing

service companies that are corroborated

with

market data.

See Note 13—Derivatives and Financial Instruments,

for additional information.

●

Loans and advances—related parties: The carrying

amount of floating-rate loans approximates

fair

value.

The fair value of fixed-rate loan activity is

measured using market observable data and is

categorized as Level 2 in the fair value hierarchy.

See Note 5—Investments, Loans and Long-Term

Receivables, for additional information.

●

Accounts payable (including related parties)

and floating-rate debt: The carrying amount of accounts

payable and floating-rate debt reported on the balance

sheet approximates fair value.

●

Fixed-rate debt: The estimated fair value of fixed-rate

debt is measured using prices available

from a

pricing service that is corroborated by market data;

therefore, these liabilities are categorized as Level

2 in the fair value hierarchy.

●

Commercial paper: The carrying amount of our

commercial paper instruments approximates

fair value

and is reported on the balance sheet as short-term

debt.

See Note 9—Debt, for additional information.

 
24

The following table summarizes the net fair

value of financial instruments (i.e., adjusted

where the right of

setoff exists for commodity derivatives):

Millions of Dollars

Carrying Amount

Fair Value

September 30

December 31

September 30

December 31

2020

2019

2020

2019

Financial assets

Investment in Cenovus Energy

$

809

2,111

809

2,111

Commodity derivatives

92

125

92

125

Investments in debt securities

482

241

482

241

Total loans and advances—related parties

219

339

219

339

Financial liabilities

Total debt, excluding finance leases

14,482

14,175

18,827

18,108

Commodity derivatives

66

106

66

106

Note 15—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the

equity section of our consolidated balance

sheet included:

Millions of Dollars

Defined

Benefit Plans

Net

Unrealized

Gain on

Securities

Foreign

Currency

Translation

Accumulated

Other

Comprehensive

Loss

December 31, 2019

$

(350)

-

(5,007)

(5,357)

Other comprehensive income (loss)

(13)

2

(298)

(309)

September 30, 2020

$

(363)

2

(5,305)

(5,666)

The following table summarizes reclassifications

out of accumulated other comprehensive loss and into

net

income (loss):

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Defined benefit plans

$

30

36

46

66

The above amounts are included in the computation of net periodic benefit cost and are presented net of tax expense of $

7

million and $

12

million for the three-month periods ended September 30, 2020 and September 30, 2019, respectively, and $

11

million and $

22

million for the

nine-month periods ended September 30, 2020 and September 30, 2019,

respectively.

See Note 17—Employee Benefit Plans, for additional

information.

 
25

Note 16—Cash Flow Information

Millions of Dollars

Nine Months Ended

September 30

2020

2019

Cash Payments

Interest

$

591

614

Income taxes

803

2,210

Net Sales (Purchases) of Investments

Short-term investments purchased

$

(9,662)

(1,894)

Short-term investments sold

8,776

1,229

Long-term investments purchased

(271)

-

Long-term investments sold

68

-

$

(1,089)

(665)

Note 17—Employee Benefit Plans

Pension and Postretirement Plans

Millions of Dollars

Pension Benefits

Other Benefits

2020

2019

2020

2019

U.S.

Int'l.

U.S.

Int'l.

Components of Net Periodic Benefit Cost

Three Months Ended September 30

Service cost

$

21

14

20

19

1

1

Interest cost

17

21

21

25

2

1

Expected return on plan assets

(21)

(37)

(18)

(34)

-

-

Amortization of prior service credit

-

(1)

-

-

(7)

(7)

Recognized net actuarial loss (gain)

12

5

13

7

1

(1)

Settlements

27

-

37

-

-

-

Curtailments

-

-

-

(1)

-

-

Net periodic benefit cost

$

56

2

73

16

(3)

(6)

Nine Months Ended September 30

Service cost

$

63

41

59

56

2

1

Interest cost

51

63

63

77

5

6

Expected return on plan assets

(63)

(108)

(54)

(104)

-

-

Amortization of prior service credit

-

(1)

-

(1)

(23)

(24)

Recognized net actuarial loss (gain)

37

16

39

23

1

(2)

Settlements

28

(1)

54

-

-

-

Curtailments

-

-

-

(1)

-

-

Net periodic benefit cost

$

116

10

161

50

(15)

(19)

The components of net periodic benefit cost, other

than the service cost component, are included in

the “Other

expenses” line item on our consolidated income statement.

During the first nine months of 2020, we contributed

$

87

million to our domestic benefit plans and $

57

million

to our international benefit plans.

In 2020, we expect to contribute a total of approximately

$

135

million to

our domestic qualified and nonqualified pension

and postretirement benefit plans and $

65

million to our

international qualified and nonqualified pension

and postretirement benefit plans.

 
26

During the three-month period ended September

30, 2020, lump-sum benefit payments exceeded

the sum of

service and interest costs for the year for the U.S.

qualified pension plan.

As a result, we recognized a

proportionate share of prior actuarial losses from

other comprehensive income as pension settlement

expense

of $

27

million.

In conjunction with the recognition of pension

settlement expense, the fair market values of

the pension plan assets were updated and the pension

benefit obligation of the plan was

remeasured as of

September 30, 2020.

At the measurement date, the net pension liability

increased by $

78

million, resulting in a

corresponding decrease to other comprehensive loss.

This is primarily a result of a decrease in the discount

rate and reduced long-term lump sum rate assumptions

offset by better actual return on assets compared with

the expected return.

Note 18—Related Party Transactions

Our related parties primarily include equity method

investments and certain trusts for the benefit

of

employees.

For disclosures on trusts for the benefit

of employees, see Note 17—Employee Benefit

Plans.

Significant transactions with our equity affiliates were:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Operating revenues and other income

$

21

23

59

70

Purchases

-

-

-

38

Operating expenses and selling, general and administrative

expenses

16

19

43

47

Net interest income*

(1)

(3)

(5)

(10)

*We paid interest to, or received interest

from, various affiliates.

See Note 5—Investments, Loans and Long-Term Receivables, for additional

information on loans to affiliated companies.

Note 19—Sales and Other Operating Revenues

Revenue from Contracts with Customers

The following table provides further disaggregation

of our consolidated sales and other operating

revenues:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Revenue from contracts with customers

$

3,078

6,240

9,908

19,932

Revenue from contracts outside the scope of ASC Topic 606

Physical contracts meeting the definition of a derivative

1,280

1,529

3,432

4,981

Financial derivative contracts

28

(13)

(47)

(54)

Consolidated sales and other operating revenues

$

4,386

7,756

13,293

24,859

 
27

Revenues from contracts outside the scope of ASC

Topic 606 relate primarily to physical gas contracts at

market prices which qualify as derivatives accounted

for under ASC Topic 815, “Derivatives and Hedging,”

and for which we have not elected NPNS.

There is no significant difference in contractual

terms or the policy

for recognition of revenue from these contracts

and those within the scope of ASC Topic 606.

The following

disaggregation of revenues is provided in conjunction

with Note 20—Segment Disclosures and Related

Information:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Revenue from Outside the Scope of ASC Topic 606

by Segment

Lower 48

$

1,018

1,099

2,692

3,823

Canada

152

86

452

427

Europe, Middle East and North Africa

110

344

288

731

Physical contracts meeting the definition of a derivative

$

1,280

1,529

3,432

4,981

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Revenue from Outside the Scope of ASC Topic 606

by Product

Crude oil

$

100

266

218

619

Natural gas

1,042

1,159

2,895

4,022

Other

138

104

319

340

Physical contracts meeting the definition of a derivative

$

1,280

1,529

3,432

4,981

Practical Expedients

Typically,

our commodity sales contracts are less than

12 months in duration; however, in certain specific

cases may extend longer, which may be out to the end of field

life.

We have long-term commodity sales

contracts which use prevailing market prices at the time of delivery, and under these contracts, the market-

based variable consideration for each performance obligation (i.e., delivery of commodity) is allocated to each

wholly unsatisfied performance obligation within the contract.

Accordingly,

we have applied the practical

expedient allowed in ASC Topic 606 and do not disclose the aggregate amount of the transaction price

allocated to performance obligations or when we expect to recognize revenues that are unsatisfied (or partially

unsatisfied) as of the end of the reporting period.

Receivables and Contract Liabilities

Receivables from Contracts with Customers

At September 30, 2020, the “Accounts and notes

receivable” line on our consolidated balance sheet,

includes

trade receivables of $

1,338

million compared with $

2,372

million at December 31, 2019, and includes both

contracts with customers within the scope of ASC

Topic 606 and those that are outside the scope of ASC

Topic 606.

We typically receive payment within 30 days or less (depending on the terms of the invoice) once

delivery is made.

Revenues that are outside the scope of ASC Topic 606 relate primarily to

physical gas sales

contracts at market prices for which we do not

elect NPNS and are therefore accounted for

as a derivative

under ASC Topic 815.

There is little distinction in the nature

of the customer or credit quality of trade

receivables associated with gas sold under contracts

for which NPNS has not been elected

compared to trade

receivables where NPNS has been elected.

 
28

Contract Liabilities from Contracts with Customers

We have entered into contractual arrangements where we license proprietary technology

to customers related

to the optimization process for operating LNG

plants.

The agreements typically provide for negotiated

payments to be made at stated milestones.

The payments are not directly related to our performance under the

contract and are recorded as deferred revenue to be recognized as revenue when the customer can utilize and

benefit from their right to use the license.

Payments are received in installments over the construction period.

Millions of Dollars

Contract Liabilities

At December 31, 2019

$

80

Contractual payments received

8

At September 30, 2020

$

88

Amounts Recognized in the Consolidated Balance

Sheet at September 30, 2020

Current liabilities

$

47

Noncurrent liabilities

41

$

88

We expect to recognize the contract liabilities as of September 30, 2020, as revenue during 2021 and 2022.

There were

no

revenues recognized for the three- and nine-month

periods ended September 30, 2020.

Note 20—Segment Disclosures and Related Information

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a

worldwide

basis.

We manage our operations through

six

operating segments, which are primarily defined

by geographic

region: Alaska; Lower 48; Canada; Europe,

Middle East and North Africa; Asia Pacific

and Other

International.

Corporate and Other represents income and costs

not directly associated with an operating

segment, such as

most interest expense, corporate overhead and

certain technology activities, including licensing

revenues.

Corporate assets include all cash and cash equivalents

and short-term investments.

We evaluate performance and allocate resources based on net income (loss) attributable

to ConocoPhillips.

Intersegment sales are at prices that approximate

market.

Effective with the third quarter of 2020, we have restructured

our segments to align with changes to our

internal organization.

The Middle East business was realigned from

the Asia Pacific and Middle East segment

to the Europe and North Africa segment.

The segments have been renamed the Asia Pacific

segment and the

Europe, Middle East and North Africa segment.

We have revised segment information disclosures and

segment performance metrics presented within

our results of operations for the current and prior

comparative

periods.

 
29

Analysis of Results by Operating Segment

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Sales and Other Operating Revenues

Alaska

$

864

1,296

2,396

4,129

Intersegment eliminations

(30)

-

(11)

-

Alaska

834

1,296

2,385

4,129

Lower 48

2,323

3,728

6,859

11,690

Intersegment eliminations

(9)

(10)

(47)

(33)

Lower 48

2,314

3,718

6,812

11,657

Canada

348

633

1,026

2,173

Intersegment eliminations

(20)

(273)

(200)

(858)

Canada

328

360

826

1,315

Europe, Middle East and North Africa

432

1,225

1,320

4,084

Asia Pacific

477

1,085

1,930

3,458

Other International

1

-

5

-

Corporate and Other

-

72

15

216

Consolidated sales and other operating revenues

$

4,386

7,756

13,293

24,859

Sales and Other Operating Revenues by Geographic

Location

(1)

United States

$

3,148

5,085

9,209

15,996

Australia

-

412

605

1,282

Canada

328

360

826

1,315

China

161

191

374

593

Indonesia

167

223

503

654

Libya

6

288

50

809

Malaysia

148

258

447

928

Norway

358

632

1,046

1,781

United Kingdom

68

305

224

1,494

Other foreign countries

2

2

9

7

Worldwide consolidated

$

4,386

7,756

13,293

24,859

Sales and Other Operating Revenues by Product

Crude oil

$

2,321

4,612

6,981

14,006

Natural gas

1,509

1,799

4,354

6,717

Natural gas liquids

129

156

364

607

Other

(2)

427

1,189

1,594

3,529

Consolidated sales and other operating revenues by

product

$

4,386

7,756

13,293

24,859

(1) Sales and other operating revenues are attributable to countries based on the location of the selling operation.

(2) Includes LNG and bitumen.

 
30

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

Alaska

$

(16)

306

(76)

1,152

Lower 48

(78)

26

(880)

425

Canada

(75)

51

(270)

273

Europe, Middle East and North Africa

92

2,171

318

3,050

Asia Pacific

25

443

945

1,220

Other International

(8)

73

14

285

Corporate and Other

(390)

(14)

(1,980)

64

Consolidated net income (loss) attributable

to ConocoPhillips

$

(450)

3,056

(1,929)

6,469

Millions of Dollars

September 30

December 31

2020

2019

Total Assets

Alaska

$

15,910

15,453

Lower 48

12,196

14,425

Canada

6,581

6,350

Europe, Middle East and North Africa

8,420

9,269

Asia Pacific

11,359

13,568

Other International

300

285

Corporate and Other

8,391

11,164

Consolidated total assets

$

63,157

70,514

Note 21—Income Taxes

Our effective tax rate was

12

percent in the three-month periods ended September

30, 2020 and 2019.

Both

periods were primarily impacted by shifts

in our before-tax income between higher and

lower tax jurisdictions

as well as the change in our U.S. valuation allowance

driven by the fair value measurement of our Cenovus

Energy common shares.

The three-month period ended September 30, 2019

was also impacted by the

recognition of certain tax incentives in Malaysia.

Our effective tax rates for the nine-month periods ended

September 30, 2020 and 2019 were

8

percent and

21

percent,

respectively.

The nine-month period ended September 30, 2020

was impacted by the same items

noted above.

Additionally, the nine-months ended September 30, 2020 was impacted by the

gain on

disposition recognized for our Australia-West assets of $

587

million with an associated tax benefit of $

10

million, the de-recognition of $

92

million of deferred tax assets recorded as income

tax expense as a result of

this divestiture, and a $

48

million refund from the Alberta Tax and Revenue Administration.

The nine-month

period ended September 30, 2019 was impacted

by the same items noted above in addition to

a benefit of $

262

million related to the recognition of a U.S. capital

loss benefit from our U.K. entity disposition.

As a result of the COVID-19 pandemic and the

resulting economic uncertainty, many countries in which we

operate, including Australia, Canada, Norway and

the U.S., have enacted responsive tax legislation.

During

the second quarter, Norway enacted legislation to accelerate

the recovery of capital expenditures and allow

immediate monetization of tax losses.

As a result, in the second quarter of 2020,

we recorded an increase to

our net deferred tax liability of $

120

million and a decrease to our accrued income

and other taxes liability of

$

124

million.

Legislation in other jurisdictions did not have

a material impact to ConocoPhillips.

 
31

During the three-

and nine-month periods ended September 30, 2020,

our valuation allowance increased by

$

33

million and $

264

million, respectively.

The change to our U.S. valuation allowance

for both periods

relates primarily to the fair value measurement of our

Cenovus Energy common shares and our expectation

of

the tax impact related to incremental capital

gains and losses.

Note 22—Announced Acquisition of Concho

Resources Inc.

On

October 19, 2020

, we announced a definitive agreement (the

Merger Agreement) to acquire

Concho

Resources Inc.

(Concho) in an all-stock transaction valued

at $

9.7

billion based upon closing share prices on

October 16, 2020.

Under the terms of the transaction,

which has been unanimously approved by the board

of

directors of each company, each share of Concho common stock will

be exchanged for a fixed ratio of

1.46

shares of ConocoPhillips common stock.

We will also assume the debt balances of Concho, which were

approximately $

3.9

billion at September 30, 2020.

The transaction is anticipated to close in the first

quarter of 2021, subject to the approval

of both

ConocoPhillips and Concho shareholders,

regulatory clearance, and other customary

closing conditions.

If the

Merger Agreement is terminated under certain circumstances,

we may be required to pay a termination fee of

$

450

million, including if the proposed Merger is terminated

because our board of directors has changed its

recommendation in respect of the stockholder

proposal relating to the Merger.

In addition, we may be required

to reimburse Concho for its expenses in an amount

equal to $

142.5

million if the Merger Agreement is

terminated because of a failure of our stockholders

to approve the stockholder proposal.

See Item 1A. “Risk

Factors” for further discussion of risks related

to the Concho acquisition.

 
32

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Management’s

Discussion and Analysis is the company’s analysis of its financial performance and of

significant trends that may affect future performance.

It should be read in conjunction with the financial

statements and notes.

It contains forward-looking statements including, without limitation,

statements relating

to the company’s

plans, strategies, objectives, expectations

and intentions that are made pursuant to the “safe

harbor” provisions of the Private Securities Litigation Reform

Act of 1995.

The words “anticipate,”

“estimate,” “believe,” “budget,” “continue,”

“could,” “intend,” “may,” “plan,” “potential,” “predict,”

“seek,” “should,” “will,” “would,” “expect,”

“objective,” “projection,” “forecast,” “goal,” “guidance,”

“outlook,” “effort,” “target” and similar expressions identify forward-looking statements.

The company does

not undertake to update, revise or correct any of the forward-looking information unless required to do so

under the federal securities laws.

Readers are cautioned that such forward-looking statements should be read

in conjunction with the company’s disclosures under the heading: “CAUTIONARY STATEMENT FOR THE

PURPOSES OF THE ‘SAFE HARBOR’ PROVISIONS

OF THE PRIVATE SECURITIES LITIGATION

REFORM ACT OF 1995,” beginning on page 57.

The terms “earnings” and “loss” as used in Management’s Discussion and Analysis refer to net income (loss)

attributable to ConocoPhillips.

BUSINESS ENVIRONMENT AND EXECUTIVE

OVERVIEW

ConocoPhillips is an independent E&P company

with operations and activities in 15 countries.

Our diverse,

low cost of supply portfolio includes resource-rich

unconventional plays in North America;

conventional

assets in North America, Europe and Asia; LNG

developments; oil sands assets in Canada;

and an inventory of

global conventional and unconventional exploration

prospects.

At September 30, 2020, we employed

approximately 9,800 people worldwide and had

total assets of $63 billion.

Announced Acquisition of Concho Resources Inc.

and Paris-Aligned

Climate Risk Strategy

On October 19, 2020, we announced entry into

a definitive agreement to acquire Concho

Resources Inc.

(Concho) in an all-stock transaction valued at $9.7

billion based upon closing share prices

on October 16,

2020.

Under the terms of the transaction, each outstanding

share of common stock of Concho will

be

converted into the right to receive 1.46 shares of ConocoPhillips

common stock.

We will also assume the debt

balances of Concho, which were approximately $3.9

billion at September 30, 2020.

The combined companies

are expected to capture $500 million of annual

cost and capital savings by 2022, which

would be sourced from

lower general and administrative costs and a reduction

in our future global new ventures exploration

program.

The transaction is anticipated to close in the first

quarter of 2021, subject to the approval

of both

ConocoPhillips and Concho shareholders, regulatory

clearance, and the satisfaction or waiver of

other

customary closing conditions.

See Item 1A. “Risk Factors” for further

discussion of risks related to the

Concho acquisition.

We also announced the adoption of a Paris-aligned climate risk framework as part of

our continued

commitment to ESG excellence.

This comprehensive climate risk strategy

should enable us to sustainably

meet global energy demand while delivering competitive

returns through the energy transition.

We have set a

target to reduce our gross operated (scope 1 and 2) emissions

intensity by 35 to 45 percent from 2016 levels

by

2030, with an ambition to achieve net zero by

2050 for operated emissions.

We are advocating for reduction

of scope 3 end-use emissions intensity through

our support for a U.S. carbon price and reaffirmed

our

commitment to the Climate Leadership Council.

We have joined the World

Bank Flaring Initiative to work

towards zero routine flaring of gas by 2030.

We are committed to take ESG leadership to the next level as the

first U.S.-based oil and gas company to adopt a Paris-aligned

climate risk strategy.

 
33

Overview

The energy landscape changed dramatically in 2020 with

simultaneous demand and supply shocks that drove

the industry into a severe downturn.

The demand shock was triggered by COVID-19,

which was declared a

global pandemic and caused unprecedented social

and economic consequences.

Mitigation efforts to stop the

spread of this contagious disease included stay-at-home

orders and business closures that caused sharp

contractions in economic activity worldwide.

The supply shock was triggered by disagreements

between

OPEC and Russia, beginning in early March, which

resulted in significant supply coming onto the market

and

an oil price war.

These dual demand and supply shocks caused

oil prices to collapse as we exited the first

quarter.

As we entered the second quarter, predictions of COVID-19 driven global

oil demand losses intensified, with

forecasts of unprecedented demand declines.

Based on these forecasts, OPEC plus nations held

an emergency

meeting, and in April they announced a coordinated

production cut that was unprecedented in both its

magnitude and duration.

The OPEC plus agreement spans from May 2020

until April 2022, with the volume

of production cuts easing over time.

Additionally, non-OPEC plus countries, including the U.S., Canada,

Brazil and other G-20 countries, announced organic reductions

to production through the release of drilling

rigs, frac crews, normal field decline and curtailments.

Despite these planned production decreases, the

supply

cuts were not timely enough to overcome significant

demand decline.

Futures prices for April WTI closed

under $20 a barrel for the first time since

2001, followed by May WTI settling below zero

on the day before

futures contracts expiry, as holders of May futures contracts struggled to

exit positions and avoid taking

physical delivery.

As storage constraints approached, spot prices in

April for certain North American

landlocked grades of crude oil were in the single digits

or even negative for particularly remote or low-grade

crudes, while waterborne priced crudes such as Brent

sold at a relative advantage.

The extreme volatility

experienced in the first half of the year settled down

in the third quarter, with crude oil prices stabilizing

around $40 per barrel.

Since the start of the severe downturn, we have closely

monitored the market and taken prudent actions in

response to this situation.

We entered the year in a position of relative strength, with cash and cash equivalents

of more than $5 billion, short-term investments

of $3 billion, and an undrawn credit facility

of $6 billion,

totaling approximately $14 billion in available

liquidity.

Additionally, we had several entity and asset sales

agreements in place, which generated $1.3 billion

in proceeds from dispositions during the first

nine-months of

2020.

For more information about the sales of our Australia-West and non-core Lower 48 assets,

see Note 4—

Asset Acquisitions and Dispositions in the

Notes to Consolidated Financial Statements.

This relative

advantage allowed us to be measured in our response

to the sudden change in business environment.

In March, we announced an initial set of actions

to address the downturn and followed up with additional

actions in April.

The combined announcements reflected a reduction

in our 2020 operating plan capital of $2.3

billion, a reduction to our operating costs of

$600 million and suspension of our share repurchase

program.

These actions will decrease uses of cash by approximately

$5 billion in 2020.

We also established a

framework for evaluating and implementing economic

production curtailments considering the weakness in

oil

prices during the second quarter of 2020, which resulted

in taking an additional significant step of voluntarily

curtailing production, predominantly from

operated North American assets.

Due to our strong balance sheet,

we were in an advantaged position to forgo some production

and cash flow in anticipation of receiving higher

cash flows for those volumes in the future.

In the second quarter, we curtailed production by an estimated 225 MBOED,

with 145 MBOED of the

curtailments from the Lower 48, 40 MBOED from

Alaska and 30 MBOED from our Surmont operation

in

Canada.

The remainder of the second-quarter curtailments

were primarily in Malaysia.

Other industry

operators also cut production and development plans

and as we progressed through the second quarter, stay-at-

home restrictions eased, which partially restored

lost demand, and WTI and Brent prices exited the

second

quarter around $40 per barrel.

Based on our economic criteria, we began restoring

production from voluntary

curtailments in July, and with oil stabilizing around $40 per barrel, we ended

our curtailment program during

the third quarter.

Curtailments in the third quarter averaged approximately

90 MBOED, with 65 MBOED

attributable to the Lower 48 and 15 MBOED to

Surmont.

 
34

In August 2020, we completed the agreement

to acquire additional Montney acreage for cash

consideration of

approximately $382 million,

subject to customary post-closing adjustments.

As part of the agreement, we

assumed approximately $31 million in financing

obligations for associated partially owned infrastructure.

This

acquisition consisted primarily of undeveloped properties

and included

140,000 net acres in the liquids-rich

Inga Fireweed asset Montney zone, which is

directly adjacent to our existing Montney position.

We now have

a Montney acreage position of 295,000 net acres

with a 100 percent working interest.

On September 30, 2020, we announced our intent

to resume share repurchases; however, we recently

announced the pending acquisition of Concho and

our suspension of share repurchases until

after the

transaction closes.

We ended the third quarter with over $12 billion of liquidity, comprised of $2.5 billion in

cash and cash equivalents, $4.0 billion in short-term

investments, and available borrowings under our credit

facility of $5.7 billion.

On October 9, 2020, we announced an increase

to our quarterly dividend from 42 cents

per share to 43 cents per share.

The dividend is payable on December 1, 2020

to shareholders of record as of

October 19, 2020.

Our expectation is that commodity prices will

remain cyclical and volatile, and a successful

business strategy

in the E&P industry must be resilient in

lower price environments, at the same time retaining

upside during

periods of higher prices.

While we are not impervious to current market

conditions, our decisive actions over

the last several years of focusing on free cash flow generation,

high-grading our asset base, lowering the cost

of supply of our investment resource portfolio,

and strengthening our balance sheet have

put us in a strong

relative position compared to our independent E&P

peers.

Although recent prices have been volatile, we

remain committed to our core value proposition

principles, namely, to focus on financial returns, maintain a

strong balance sheet, deliver compelling returns

of capital, and maintain disciplined capital

investments.

Our workforce and operations have adjusted to

mitigate the impacts of the COVID-19 global

pandemic.

We

have operations in remote areas with confined spaces,

such as offshore platforms, the North Slope of Alaska,

Curtis Island in Australia, western Canada and

Indonesia, where viruses could rapidly spread.

Personnel are

asked to perform a self-assessment for symptoms

of illness each day and, when appropriate,

are subject to

more restrictive measures traveling to and working

on location.

Staffing levels in certain operating locations

have been reduced to minimize health risk exposure

and increase social distancing.

A portion of our office

staff have continued to work successfully remotely, with offices around the world carefully

designing and

executing a flexible, phased reentry, following national, state and local guidelines.

These mitigation measures

have thus far been effective at reducing business operation

disruptions.

Workforce health and safety remains

the overriding driver for our actions and we have

demonstrated our ability to adapt to local

conditions as

warranted.

The marketing and supply chain side of our business

has also adapted in response to COVID-19.

Our

commercial organization managed transportation commitments

during our voluntary curtailment program.

Our supply chain function is proactively working

with vendors to ensure the continuity of our business

operations, monitor distressed service and materials

providers, capture deflation opportunities, and pursue

cost

reduction efforts.

Operationally, we remain focused on safely executing the business.

In the third quarter of 2020, production

of

1,067 MBOED generated cash provided by operating

activities of $0.9 billion.

We invested $1.1 billion into

the business in the form of capital expenditures, including

$0.4 billion of acquisition capital, and paid

dividends to shareholders of $0.5 billion.

Production decreased 299 MBOED or 22 percent

in the third quarter

of 2020, compared to the third quarter of 2019.

Adjusting for estimated curtailments of approximately

90

MBOED, closed acquisitions and dispositions

and Libya, third quarter 2020 production

would have been 1,155

MBOED, a decrease of 46 MBOED or 4 percent

compared with the third quarter of 2019.

This decrease was

primarily due to normal field decline, partly offset by new

wells online in the Lower 48, Canada and China.

Production from Libya averaged 1 MBOED as it

remained in force majeure during the third

quarter.

Force

majeure was lifted in October and plans to resume

production and exports are ongoing.

 
35

-

1

2

3

4

20

40

60

80

Q3'18

Q4'18

Q1'19

Q2'19

Q3'19

Q4'19

Q1'20

Q2'20

Q3'20

WTI/Brent

$/Bbl

WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Prices

Quarterly Averages

WTI - $/Bbl

Brent - $/Bbl

HH - $/MMBTU

HH

Business Environment

Commodity prices are the most significant

factor impacting our profitability and related reinvestment

of

operating cash flows into our business.

Among other dynamics that could influence world

energy markets and

commodity prices are global economic health, supply

or demand disruptions or fears thereof caused

by civil

unrest, global pandemics, military conflicts,

actions taken by OPEC plus and other major

oil producing

countries, environmental laws, tax regulations,

governmental policies and weather-related

disruptions.

Our

strategy is to create value through price cycles

by delivering on the financial and operational

priorities that

underpin our value proposition.

Our earnings and operating cash flows generally

correlate with price levels for crude oil

and natural gas, which

are subject to factors external to the company and over

which we have no control.

The following graph depicts

the trend in average benchmark prices for WTI

crude oil, Brent crude oil and Henry Hub natural

gas:

Brent crude oil prices averaged $43.00 per barrel

in the third quarter of 2020,

a decrease of 31 percent

compared with $61.94 per barrel in the third

quarter of 2019.

WTI at Cushing crude oil prices averaged

$40.93 per barrel in the third quarter of 2020,

a decrease of 27 percent compared with

$56.44 per barrel in the

third quarter of 2019.

Oil prices are lower due to high inventory levels

and contractions in economic activity

due to COVID-19 restrictions.

Henry Hub natural gas prices averaged $1.98

per MMBTU in the third quarter of 2020,

a decrease of 11

percent compared with $2.23 per MMBTU in the third

quarter of 2019.

Current period Henry Hub prices are

depressed due to high storage levels and seasonally

weak demand.

Our realized bitumen price averaged $15.87 per barrel

in the third quarter of 2020, a decrease of 51

percent

compared with $32.54 per barrel in the third

quarter of 2019.

The decrease in the third quarter of 2020 was

driven by a lower blend price for Surmont sales, largely attributed

to a weaker WTI price and a narrower

spread between the local market and U.S. sales

points, which challenged both pipeline and rail

economics.

In

addition, we incurred unutilized transportation

costs which negatively impacted our realized

bitumen price.

Our total average realized price was $30.94 per

BOE in the third quarter of 2020, compared with

$47.07 per

BOE in the third quarter of 2019.

 
36

Key Operating and Financial Summary

Significant items during the third quarter of 2020

and recent announcements included the following:

●

Produced 1,066 MBOED excluding Libya in the third

quarter;

curtailed approximately 90 MBOED.

●

Distributed $0.5 billion in dividends and announced

an increase to the quarterly dividend.

●

Ended the quarter with cash, cash equivalents and

restricted cash totaling $2.8

billion and short-term

investments of $4.0 billion.

●

As part of a commitment to ESG excellence, announced

adoption of a Paris-aligned climate risk

framework to achieve net zero

operated emissions by 2050.

●

Completed bolt-on acquisition of adjacent acreage

in the liquids-rich Montney in Canada for $0.4

billion.

●

Announced agreement to acquire Concho in an

all-stock transaction for 1.46 shares of ConocoPhillips

common stock per share of Concho.

Outlook

Capital and Production

In February 2020, we announced 2020 operating

plan capital of $6.5 billion to $6.7 billion.

In response to the

oil market downturn earlier this year, we announced capital

expenditure reductions totaling $2.3 billion.

Full

year 2020 operating plan capital is now expected

to be $4.3 billion.

This does not include approximately $0.5

billion of capital for acquisitions completed during

the year, of which $0.4 billion was for bolt-on acreage in

the liquids rich area of the Montney.

Fourth quarter 2020 production is expected to

be 1,125 to 1,165 MBOED, resulting in anticipated

full-year

2020 production of 1,115 to 1,125 MBOED.

This outlook excludes Libya.

Depreciation, Depletion and Amortization

DD&A expense was $4.0 billion in the nine-month

period of 2020.

Proved reserves estimates were updated

in

the interim periods of 2020 utilizing trailing

twelve-month oil and gas prices, which increased DD&A

expense

in the nine-month period of 2020 by approximately

$195 million before-tax.

If oil and gas prices persist at

depressed levels, our reserve estimates may

decrease further, which could incrementally increase the rate used

to determine DD&A expense on our unit-of-production

method properties.

Impairments

In October 2020, we announced an agreement to acquire

Concho, thereby significantly expanding our

unconventional acreage position in the Permian Basin.

The planned addition of unproved properties

in the

Delaware and Midland Basins would reduce our

need for resource additions through organic exploration,

and

we expect to decrease capital allocated to our global

new ventures exploration program going forward.

An

evaluation of our exploration program is ongoing

and may result in future impairments.

This transaction is

anticipated to close in the first

quarter of 2021, subject to the approval of both ConocoPhillips

and Concho

shareholders, regulatory clearance, and other customary

closing conditions.

 
37

RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three-

and nine-month periods ended September 30,

2020, is based on a comparison with the corresponding periods

of 2019.

Effective with the third quarter of 2020, we have restructured our segments to align with

changes to our

internal organization.

The Middle East business was realigned from the Asia Pacific and Middle East

segment

to the Europe and North Africa segment.

The segments have been renamed the Asia Pacific segment

and the

Europe, Middle East and North Africa segment.

We have revised segment information disclosures and

segment performance metrics presented within our results of operations for the

current and prior comparative

periods.

Consolidated Results

A summary of the company's net income (loss)

attributable to ConocoPhillips by business segment

follows:

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Alaska

$

(16)

306

(76)

1,152

Lower 48

(78)

26

(880)

425

Canada

(75)

51

(270)

273

Europe, Middle East and North Africa

92

2,171

318

3,050

Asia Pacific

25

443

945

1,220

Other International

(8)

73

14

285

Corporate and Other

(390)

(14)

(1,980)

64

Net income (loss) attributable to ConocoPhillips

$

(450)

3,056

(1,929)

6,469

Net income (loss) attributable to ConocoPhillips

in the third quarter of 2020 decreased $3,506 million.

Earnings were negatively impacted by:

●

The absence of a $1.8 billion after-tax gain associated

with the completion of the sale of two

ConocoPhillips U.K. subsidiaries.

●

Lower realized commodity prices.

●

Lower sales volumes, primarily due to normal field

decline, production curtailments across our

North

American operated assets and the divestiture of our

U.K. assets in the third quarter of 2019 and

Australia-West assets in the second quarter of 2020.

●

A $162 million after-tax unrealized loss on our Cenovus

Energy (CVE) common shares in the third

quarter of 2020, as compared to a $116 million after-tax gain

on those shares in the third quarter of

2019.

●

Lower equity in earnings of affiliates, primarily due to

lower LNG sales prices.

●

The absence of a $164 million income tax benefit

related to deepwater incentive tax credits

recognized

for Malaysia Block G.

 
38

Third quarter 2020 net income decreases were partly

offset by:

●

Lower production and operating expenses, primarily

due to the absence of costs related to our U.K.

and Australia-West divestitures and decreased wellwork and transportation costs

resulting from

production curtailments across our North American

operated assets.

●

Lower exploration expenses, primarily

due to the absence of $186 million after-tax of leasehold

impairment and dry hole costs associated with

our decision to discontinue exploration

activities in the

Central Louisiana Austin Chalk trend.

●

Lower DD&A, primarily due to lower volumes resulting

from production curtailments and our

Australia-West divestiture, partly offset by higher DD&A rates due to price-related downward reserve

revisions.

Net income (loss) attributable to ConocoPhillips

in the nine-month period ended September 30, 2020,

decreased $8,398 million.

Earnings were negatively impacted by:

●

Lower realized commodity prices.

●

Lower sales volumes, primarily due to normal field

decline, production curtailments across our

North

American operated assets and the divestiture of

our U.K. assets in the third quarter of 2019

and our

Australia-West assets in the second quarter of 2020.

●

The absence of a $2.1

billion after-tax gain associated with the completion

of the sale of two

ConocoPhillips U.K. subsidiaries.

●

A $1.3 billion after-tax unrealized loss on our CVE

common shares in the nine-month period of 2020,

as compared to a $0.5 billion after-tax gain on those

shares in the nine-month period of 2019.

●

Higher impairments of approximately $400 million

after-tax, primarily related to non-core gas assets

in our Lower 48 segment.

●

The absence of other income of $317 million after-tax

related to our settlement agreement with

PDVSA.

●

Lower equity in earnings of affiliates, primarily due to

lower LNG sales prices, partly offset by the

absence of $120 million after-tax of impairments

to equity method investments.

The decreases in earnings in the nine-month period

ended September 30, 2020,

were partly offset by:

●

A $597 million after-tax gain on dispositions related

to our Australia-West divestiture.

●

Lower production and operating expenses, primarily

due to decreased wellwork and transportation

costs resulting from production curtailments across

our North American operated assets as well

as the

absence of costs related to our U.K. and Australia-West divestitures.

●

Lower DD&A expenses, primarily due to lower volumes

related to production curtailments and our

Australia-West and U.K. divestitures, partly offset by higher DD&A rates due to price-related

downward reserve revisions.

●

Lower exploration expenses, primarily due

to the absence of $194 million after-tax of leasehold

impairment and dry hole costs associated with

our decision to discontinue exploration

activities in the

Central Louisiana Austin Chalk trend.

See the “Segment Results” section for additional

information.

 
39

Income Statement Analysis

Sales and other operating revenues for the three-

and nine-month periods of 2020 decreased

$3,370 million and

$11,566 million,

respectively, mainly due to lower realized commodity prices and lower sales

volumes.

Sales

volumes decreased due to normal field decline,

production curtailments from our North American

operated

assets and the divestiture of our U.K. assets in

the third quarter of 2019 and our Australia-West assets in the

second quarter of 2020.

Equity in earnings of affiliates for the three-

and nine-month periods of 2020 decreased

$255 million and $305

million,

respectively, primarily due to lower earnings from QG3 and APLNG as a result

of lower LNG sales

prices.

Partly offsetting this decrease was the absence of impairments

related to equity method investments in

our Lower 48 segment of $155 million in the

nine-month period of 2019.

Gain on dispositions for the three-

and nine-month periods of 2020 decreased $1,788

million and $1,333

million,

respectively, primarily due to the absence of a $1.8 billion before-tax gain associated

with the

completion of the sale of two ConocoPhillips

U.K. subsidiaries.

Partly offsetting the decrease in the nine-

month period of 2020, was a $587 million before-tax

gain associated with our Australia-West divestiture.

For

more information related to our Australia-West divestiture,

see Note 4—Asset Acquisitions and Dispositions

in the Notes to Consolidated Financial Statements.

Other income (loss) for the third quarter of 2020

decreased $300 million, primarily

due to an unrealized loss of

$162 million before-tax on our CVE common shares

in the third quarter of 2020, and the absence

of a $116

million before-tax gain on those shares in the third

quarter of 2019.

Other income (loss) for the nine-month

period of 2020 decreased $2,119 million,

primarily due to an unrealized loss of $1,302

million before-tax on

our CVE common shares in the nine-month period

of 2020, and the absence of a $489 million

before-tax gain

on those shares in the nine-month period of 2019.

Additionally, other income (loss) in the nine-month period

of 2020 decreased due to the absence of $325 million

before-tax related to our settlement agreement with

PDVSA.

For discussion of our Cenovus Energy shares, see Note

6—Investment in Cenovus Energy, in the Notes to

Consolidated Financial Statements.

For discussion of our PDVSA settlement, see Note

12—Contingencies

and Commitments, in the Notes to Consolidated Financial

Statements.

Purchased commodities for the three- and nine-month

periods

of 2020 decreased $871 million and $3,429

million,

respectively, primarily due to lower natural gas and crude oil prices and lower

crude oil and natural

gas volumes purchased.

Production and operating expenses for the three-

and nine-month periods of 2020 decreased

$368 million and

$837 million,

respectively, primarily due to decreased wellwork and transportation costs

associated with

production curtailments across our North American

operated assets as well as the absence of costs

related to

our U.K. and Australia-West divestitures.

Additionally, in the nine-month period of 2020, production and

operating expenses decreased due to lower legal

accruals in our Lower 48 and Other International

segments.

Selling, general and administrative expenses decreased

$120 million in the nine-month period of 2020,

primarily due to lower costs associated with compensation

and benefits, including mark to market impacts

of

certain key employee compensation programs.

Exploration expenses for the three- and nine-month

periods of 2020 decreased $235 million

and $182 million,

respectively, primarily due to the absence of a $141 million before-tax leasehold

impairment expense due to

our decision to discontinue exploration activities

in the Central Louisiana Austin Chalk trend and lower

dry

hole costs in the Lower 48, primarily

related to this play; partly offset by higher dry hole expenses in

Alaska.

In addition to the items detailed above, in the nine-month

period of 2020, the decrease in exploration expenses

were partly offset by an unproved property impairment

and dry hole expenses related to the Kamunsu East

Field in Malaysia that is no longer in our development

plans and charges related to the early termination of the

Alaska winter exploration program.

 
40

DD&A for the three-

and nine-month periods of 2020 decreased

$155 million and $622 million, respectively,

mainly due to lower production volumes because of

production curtailments and the divestiture

of our

Australia-West asset, partly offset by higher DD&A rates due to price-related downward

reserve revisions.

In

addition to the items detailed above, DD&A in the

nine-month period of 2020 decreased due to our

U.K.

divestiture, which met held-for-sale status in the

second quarter of 2019.

For more information regarding the

Australia-West divestiture, see Note 4—Asset Acquisitions and Dispositions in the Notes

to Consolidated

Financial Statements.

Impairments increased $495 million in

the nine-month period of 2020, primarily due to

a $511 million before-

tax impairment of certain non-core gas assets in

our Lower 48 segment because of a significant

decrease in the

outlook for natural gas prices.

See Note 8—Impairments in the Notes to Consolidated

Financial Statements,

for additional information.

Taxes other than income taxes for the three-

and nine-month periods of 2020 decreased

$58 million and $136

million, respectively, primarily due to lower commodity prices and sales volumes.

Foreign currency

transaction (gain) loss decreased $107 million

in the nine-month period of 2020,

resulting

from gains recognized from foreign currency derivatives

and other foreign currency remeasurements.

See

Note 13—Derivative and Financial Instruments

in the Notes to Consolidated Financial Statements,

for

additional information.

See Note 21—Income Taxes, in the Notes to Consolidated Financial Statements,

for information regarding our

income tax provision (benefit) and effective tax rate.

 
41

Summary Operating Statistics

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Average Net Production

Crude oil (MBD)

Consolidated operations

535

696

546

696

Equity affiliates

13

14

13

13

Total crude oil

548

710

559

709

Natural gas liquids (MBD)

Consolidated operations

89

106

97

106

Equity affiliates

8

8

7

8

Total natural gas liquids

97

114

104

114

Bitumen (MBD)

49

63

50

59

Natural gas (MMCFD)

Consolidated operations

1,201

1,795

1,353

1,783

Equity affiliates

1,034

1,076

1,042

1,043

Total natural gas*

2,235

2,871

2,395

2,826

Total Production

(MBOED)

1,067

1,366

1,112

1,353

Dollars Per Unit

Average Sales Prices

Crude oil (per bbl)

Consolidated operations

$

39.49

59.56

39.04

61.26

Equity affiliates

37.56

59.91

38.22

61.23

Total crude oil

39.45

59.57

39.02

61.26

Natural gas liquids (per bbl)

Consolidated operations

13.73

14.33

11.72

18.90

Equity affiliates

30.21

30.18

31.65

36.49

Total natural gas liquids

15.29

15.59

13.45

20.24

Bitumen (per bbl)

15.87

32.54

2.90

34.11

Natural gas (per MCF)

Consolidated operations

2.77

3.73

3.07

4.37

Equity affiliates

2.61

6.40

3.98

6.48

Total natural gas

2.70

4.74

3.47

5.17

Millions of Dollars

Exploration Expenses

General administrative, geological and geophysical,

lease rental, and other

$

81

67

296

231

Leasehold impairment

-

154

31

196

Dry holes

44

139

83

165

$

125

360

410

592

*Represents quantities available for sale and excludes gas equivalent of natural gas

liquids included above.

 
42

We explore for, produce, transport and market crude oil, bitumen, natural gas, LNG and NGLs on a

worldwide

basis.

At September 30, 2020,

our operations were producing in the U.S., Norway, Canada, Australia,

Indonesia, China, Malaysia,

Qatar and Libya.

Total production decreased 299 MBOED or 22 percent in the third quarter of 2020,

primarily due to:

●

Normal field decline.

●

The divestiture of our U.K. assets in the third

quarter of 2019, our Australia-West assets in the second

quarter of 2020, and non-core Lower 48 assets in

the first quarter of 2020.

●

Production curtailments, primarily from

our North American operated assets.

●

Less production in Libya due to the forced shutdown

of the Es Sider export terminal and other

eastern

export terminals after a period of civil unrest.

The decrease in third quarter 2020 production was

partly offset by:

●

New wells online in the Lower 48, Canada and China.

Total production decreased 241 MBOED or 18 percent in the nine-month period of

2020,

primarily due to:

●

Normal field decline.

●

Production curtailments, primarily from

our North American operated assets and Malaysia.

●

The divestiture of our U.K. assets in the third

quarter of 2019, our Australia-West assets in the second

quarter of 2020, and non-core Lower 48 assets in

the first quarter of 2020.

●

Lower production in Libya due to the forced shutdown

of the Es Sider export terminal and other

eastern export terminals after a period of civil unrest

in the first quarter of 2020.

The decrease in production during the nine-month period

of 2020 was partly offset by:

●

New wells online in the Lower 48, Canada, Norway, Alaska and China.

Production excluding Libya was 1,066 MBOED in

the third quarter of 2020, a decrease

of 256 MBOED

compared with the same period of 2019.

Adjusting for estimated curtailments of approximately

90 MBOED,

closed acquisitions and dispositions and Libya, third

quarter 2020 production would have been 1,155

MBOED,

a decrease of 46 MBOED or 4 percent compared with

the third quarter of 2019.

This decrease was primarily

due to normal field decline,

partly offset by new wells online in the Lower 48, Canada

and China.

Production

from Libya averaged 1 MBOED as it remained in

force majeure during the third quarter.

Production excluding Libya was 1,108 MBOED in

the nine-month period of 2020, a decrease

of 202 MBOED

compared with the same period of 2019.

Adjusting for estimated curtailments of approximately

105 MBOED,

closed acquisitions and dispositions and Libya, nine-month

period 2020 production would have been 1,186

MBOED, an

increase of 6 MBOED compared with the same

period a year ago.

This increase was primarily

due to new wells online in the Lower 48, Canada,

Norway,

Alaska, and China, partly offset by normal field

decline.

Production from Libya averaged 4 MBOED

as it has been in force majeure for most

of the year.

 
43

Segment Results

Alaska

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Net income (loss) attributable to ConocoPhillips

($MM)

$

(16)

306

(76)

1,152

Average Net Production

Crude oil (MBD)

184

190

179

200

Natural gas liquids (MBD)

14

11

15

15

Natural gas (MMCFD)

14

6

10

7

Total Production

(MBOED)

201

202

195

216

Average Sales Prices

Crude oil ($ per bbl)

$

40.88

62.78

41.92

64.34

Natural gas ($ per MCF)

2.48

3.01

2.71

3.23

The Alaska segment primarily explores for, produces, transports

and markets crude oil, NGLs and natural gas.

As of September 30, 2020, Alaska contributed

28 percent of our consolidated liquids production

and less than

1 percent of our consolidated natural gas production.

Earnings from Alaska decreased $322 million

in the third quarter of 2020,

primarily driven by lower realized

crude oil prices and higher DD&A expense due

to increased DD&A rates from price-related

downward reserve

revisions.

Partly offsetting the decrease in earnings were lower production

and operating expenses, primarily

at the Greater Prudhoe Area.

Earnings from Alaska decreased $1,228 million

in the nine-month period of 2020, primarily

driven by lower

realized crude oil prices and lower sales volumes

due to production curtailments at our

operated assets on the

North Slope—the Greater Kuparuk Area (GKA)

and Western North Slope (WNS).

Partly offsetting the

earnings decrease was lower production and

operating expenses primarily associated with

lower transportation

and terminaling costs as well as lower wellwork

across our assets.

Average production decreased 1 MBOED in the third quarter of 2020, primarily

due to normal field decline,

partly offset by lower planned downtime and new wells

online.

Average production decreased 21 MBOED in

the nine-month period of 2020, primarily due to

normal field decline and curtailments at

our operated assets on

the North Slope—GKA and WNS, partly offset by new

wells online.

Curtailment Update

Based on our economic criteria, we restored curtailed

production in Alaska during July.

 
44

Lower 48

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

($MM)

$

(78)

26

(880)

425

Average Net Production

Crude oil (MBD)

197

277

211

264

Natural gas liquids (MBD)

68

84

74

80

Natural gas (MMCFD)

566

649

577

604

Total Production

(MBOED)

359

469

381

444

Average Sales Prices

Crude oil ($ per bbl)

$

36.43

54.38

34.02

55.63

Natural gas liquids ($ per bbl)

13.51

13.04

10.96

17.03

Natural gas ($ per MCF)

1.63

1.80

1.45

2.19

The Lower 48 segment consists of operations located

in the U.S. Lower 48 states, as well as producing

properties in the Gulf of Mexico.

As of September 30, 2020, the Lower 48 contributed

41 percent of our

consolidated liquids production and 43 percent

of our consolidated natural gas production.

Earnings from the Lower 48 decreased $104 million

in the third quarter of 2020,

primarily due to lower sales

volumes due to normal field decline and production

curtailments and lower realized crude oil

prices.

Partly

offsetting this decrease in earnings were lower exploration

expenses due to the absence of $186 million

after-

tax of leasehold impairment and dry hole costs

associated with our decision to discontinue

exploration

activities in the Central Louisiana Austin Chalk

trend; lower DD&A expense due to lower volumes,

partly

offset by higher DD&A rates due to price-related reserve

revisions; and higher other income due to a favorable

$70 million after-tax settlement.

Earnings from the Lower 48 decreased $1,305

million in the nine-month period of 2020,

primarily due to

lower realized crude oil,

NGL and natural gas prices;

lower crude oil sales volumes due to normal

field decline

and production curtailments;

and a $399 million after-tax impairment related

to certain non-core gas assets in

the Wind River Basin operations area.

Partly offsetting this decrease in earnings was the

absence of $194

million after-tax of leasehold impairment

and dry hole costs associated with our decision

to discontinue

exploration activities in the Central Louisiana

Austin Chalk trend; lower DD&A expense due to

lower

volumes, partly offset by higher DD&A rates due to price-related

reserve revisions; and the absence of $120

million of impairments in equity method investments.

See Note 8—Impairments and Note 14—Fair

Value

Measurement in the Notes to Consolidated Financial

Statements, for additional information

related to the Wind

River Basin operations area impairment.

Total average production decreased 110 MBOED and 63 MBOED in the three-

and nine-month periods of

2020, respectively, primarily due to normal field decline and production curtailments.

Partly offsetting the

production decrease was new production from unconventional

assets in the Eagle Ford, Permian and Bakken.

Curtailment Update

The third quarter 2020 production impact from

curtailments in the Lower 48 was estimated

to be 65 MBOED.

Based on our economic criteria, we began restoring

curtailed volumes in July and ended

our curtailment

program by the end of the third quarter.

 
45

Canada

Three Months Ended

Nine Months Ended

September 30

September 30

2020*

2019**

2020*

2019**

Net Income (Loss) Attributable to ConocoPhillips

($MM)

$

(75)

51

(270)

273

Average Net Production

Crude oil (MBD)

6

1

4

1

Natural gas liquids (MBD)

2

-

2

-

Bitumen (MBD)

49

63

50

59

Natural gas (MMCFD)

43

9

35

8

Total Production

(MBOED)

64

66

62

62

Average Sales Prices

Crude oil ($ per bbl)

$

25.16

-

19.84

-

Natural gas liquids ($ per bbl)

5.99

-

3.60

-

Bitumen ($ per bbl)

15.87

32.54

2.90

34.11

Natural gas ($ per MCF)

0.71

-

0.91

-

*Average sales prices include unutilized transportation costs.

**Average prices for sales of bitumen excludes additional value realized from the purchase and sale of third-party volumes for optimization of

our pipeline capacity between Canada and the U.S. Gulf Coast.

Our Canadian operations mainly consist of an oil

sands development in the Athabasca Region of

northeastern

Alberta and a liquids-rich unconventional play

in western Canada.

As of September 30, 2020, Canada

contributed 8 percent of our consolidated liquids

production and 3 percent of our consolidated

natural gas

production.

Earnings from Canada decreased $126 million

and $543 million,

respectively, in the three-

and nine-month

periods of 2020, primarily due to lower bitumen

and crude oil price realizations,

lower sales volumes related to

production curtailments,

higher DD&A expense associated with increased

production from the Montney and

price-related reserve revisions, and lower gain on

dispositions related to the absence of

contingent payments.

Partly offsetting the decreases in earnings in both periods

were higher sales volumes from new wells online

at

Montney.

Total average production decreased 2 MBOED in the third quarter of 2020, primarily

due to production

curtailments and a planned turnaround at Surmont,

partly offset by new wells online at Montney.

Total

average production was flat in the nine-month period

of 2020, with production decreases from curtailments

at

Surmont offset by new wells online at Montney and lower

planned downtime at Surmont.

Curtailment Update

The third quarter 2020 production impact from

curtailments in Canada was estimated to be 15 MBOED

net.

Based on our economic criteria, we began to restore

curtailed production at Surmont in July and ended

our

voluntary curtailment program by the end of the third

quarter.

Completed Acquisition

In August 2020, we completed the agreement

to acquire additional Montney acreage for cash

consideration of

approximately $382 million, subject to customary

post-closing adjustments.

As part of the agreement, we

assumed approximately $31 million in financing

obligations for associated partially owned infrastructure.

This

acquisition consisted primarily of undeveloped properties

and included

140,000 net acres in the liquids-rich

Inga Fireweed asset Montney zone, which is directly

adjacent to our existing Montney position.

We now have

a Montney acreage position of 295,000 net acres

with a 100 percent working interest.

 
46

Europe, Middle East and North Africa

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

*

2020

2019

*

Net Income Attributable to ConocoPhillips

($MM)

$

92

2,171

318

3,050

Consolidated Operations

Average Net Production

Crude oil (MBD)

77

149

82

143

Natural gas liquids (MBD)

5

7

5

7

Natural gas (MMCFD)

256

473

276

531

Total Production

(MBOED)

125

235

133

238

Average Sales Prices

Crude oil ($ per bbl)

$

41.79

63.47

43.72

65.17

Natural gas liquids ($ per bbl)

23.50

23.20

20.01

28.65

Natural gas ($ per MCF)

2.40

3.60

2.85

4.98

*Prior periods have been updated to reflect the Middle East Business Unit moving from Asia Pacific to the

Europe, Middle East and North

Africa segment.

See Note 20

—

Segment Disclosures and Related Information in the Notes to Consolidated Financial Statements

for additional

information.

The Europe,

Middle East and North Africa segment consists

of operations principally located in the Norwegian

sector of the North Sea and the Norwegian Sea,

Qatar, Libya and commercial operations in the U.K.

As of

September 30, 2020, our Europe,

Middle East and North Africa operations contributed

13 percent of our

consolidated liquids production and 20 percent

of our consolidated natural gas production.

Earnings for Europe,

Middle East and North Africa decreased by $2,079

million and $2,732 million in the

three- and nine-month periods of 2020, respectively, primarily due to impacts

associated with our U.K.

divestiture in 2019.

We recorded a $1.8 billion and $2.1 billion after-tax gain in the three-and nine-month

periods of 2019, respectively, associated with the completion of the sale of two

ConocoPhillips U.K.

subsidiaries.

In addition to the items detailed above, earnings

in both periods decreased due to lower equity

in

earnings of affiliates,

primarily due to lower LNG sales prices;

and lower realized crude oil prices in Norway.

Consolidated production decreased 110 MBOED and 105 MBOED

in the three-

and nine-month periods of

2020, respectively, primarily due to our U.K. disposition in the third quarter of

2019,

lower production in

Libya due to a cessation of production following

a period of civil unrest and normal field decline.

In addition

to the items detailed above, in the nine-month period

of 2020, the production decrease was partly

offset by new

wells online

in Norway.

Force Majeure in Libya

Production ceased February 12, 2020, due to a forced

shutdown of the Es Sider export terminal

and other

eastern export terminals after a period of civil unrest.

Force majeure was lifted on October 23, 2020.

Plans to

resume production and exports are ongoing.

 
47

Asia Pacific

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

*

2020

2019

*

Net Income Attributable to ConocoPhillips

($MM)

$

25

443

945

1,220

Consolidated Operations

Average Net Production

Crude oil (MBD)

71

79

70

88

Natural gas liquids (MBD)

-

4

1

4

Natural gas (MMCFD)

322

658

455

633

Total Production

(MBOED)

125

193

147

198

Average Sales Prices

Crude oil ($ per bbl)

$

42.79

62.01

42.94

64.75

Natural gas liquids ($ per bbl)

-

30.13

33.21

38.13

Natural gas ($ per MCF)

5.33

5.78

5.42

6.01

*Prior periods have been updated to reflect the Middle East Business Unit moving to

the Europe, Middle East and North Africa segment.

See

Note 20—Segment Disclosures and Related Information in the Notes to Consolidated

Financial Statements for additional information.

The Asia Pacific segment has operations in China,

Indonesia, Malaysia and Australia.

As of September 30,

2020, Asia Pacific contributed 10 percent of our consolidated

liquids production and 33 percent of our

consolidated natural gas production.

Earnings decreased $418 million in the third

quarter of 2020, mainly due to the sale of our disposed

Australia-

West assets;

the absence of a $164 million income tax benefit

related to deepwater incentive tax credits from

the

Malaysia Block G; and lower equity in earnings

of affiliates, primarily due to lower LNG sales prices.

Earnings decreased $275 million in the nine-month

period of 2020, primarily due to lower realized

crude oil and

natural gas prices; lower oil sales volumes, primarily

related to curtailments in Malaysia; lower equity in

earnings of affiliates, mainly due to lower LNG sales prices;

and the absence of a $164 million income tax

benefit related to deepwater incentive tax credits

from the Malaysia Block G.

The decrease was partly offset by

a $597 million after-tax gain on disposition related

to our Australia-West divestiture.

Consolidated production decreased 68 MBOED and

51 MBOED in the three-

and nine-month periods of 2020,

primarily due to the divestiture of our Australia-West assets, normal field decline, the expiration

of the Panyu

production license in China and higher unplanned

downtime due to the rupture of a third-party

pipeline

impacting gas production from the Kebabangan

Field in Malaysia.

Partly offsetting these production decreases,

was new production from development activity

at Bohai Bay in China and Malaysia.

Asset Disposition

In the second quarter of 2020, we completed the divestiture

of our Australia-West assets and operations, and

based on an effective date of January 1, 2019, we received

proceeds of $765 million in May with an additional

$200 million due upon final investment

decision of the proposed Barossa development

project.

Production from

the beginning of the year through the disposition

date in May 2020 averaged 43 MBOED and proved

reserves

associated with the disposed assets was approximately

17 MMBOE at year-end 2019.

For additional information

related to this transaction, see Note 4—Asset Acquisitions

and Dispositions.

 
48

Other International

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

($MM)

$

(8)

73

14

285

The Other International segment consists of exploration

and appraisal activities in Colombia and Argentina.

Earnings from our Other International operations

decreased $81 million and $271 million in

the three- and

nine-month periods of 2020, respectively.

The decrease in earnings was primarily due

to the absence of

recognizing $86 million and $317 million after-tax

in other income from a settlement award with PDVSA

associated with prior operations in Venezuela,

in the three-

and nine-month periods of 2019, respectively.

See

Note 12—Contingencies and Commitments in

the Notes to Consolidated Financial Statements,

for additional

information.

 
49

Corporate and Other

Millions of Dollars

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Net Income (Loss) Attributable to ConocoPhillips

Net interest expense

$

(179)

(123)

(508)

(450)

Corporate general and administrative expenses

(50)

(34)

(90)

(148)

Technology

(8)

43

(16)

129

Other income (expense)

(153)

100

(1,366)

533

$

(390)

(14)

(1,980)

64

Net interest expense consists of interest and financing

expense, net of interest income and capitalized

interest.

Net interest expense increased by $56 million

and $58 million in the three-and nine-month periods

of 2020,

respectively, primarily due to lower interest income related to lower cash and cash

equivalent balances and

higher interest expense.

Corporate G&A expenses include compensation

programs and staff costs.

These expenses increased by $16

million and decreased by $58 million in the three-

and nine-month periods of 2020,

respectively, primarily due

to mark to market adjustments associated with certain

compensation programs.

Technology includes our investment in new technologies or businesses, as well as licensing

revenues.

Activities are focused on both conventional and tight

oil reservoirs, shale gas, heavy oil, oil

sands, enhanced

oil recovery, as well as LNG.

Earnings from Technology decreased by $51 million and $145 million in the

three-and nine-month periods

of 2020, respectively, primarily due to lower licensing revenues.

Other income (expense) or “Other” includes certain

corporate tax-related items, foreign currency

transaction

gains and losses, environmental costs associated

with sites no longer in operation, other costs not directly

associated with an operating segment, premiums

incurred on the early retirement of debt, unrealized

holding

gains or losses on equity securities, and pension settlement

expense.

“Other”

decreased by $253 million in the

third quarter of 2020,

primarily due to an unrealized loss of $162 million

after-tax on our CVE common shares

in the third quarter of 2020, and the absence of a

$116 million after-tax gain on those shares in the third quarter

of 2019.

In the nine-month period of 2020, “Other” decreased

by $1,899 million,

primarily due to an

unrealized loss of $1,302 million after-tax

on our CVE common shares in the nine-month

period of 2020, and

the absence of a $489 million after-tax gain on those

shares in the nine-month period of 2019.

 
50

CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators

Millions of Dollars

September 30

December 31

2020

2019

Short-term debt

$

482

105

Total debt

15,387

14,895

Total equity

30,783

35,050

Percent of total debt to capital*

33

%

30

Percent of floating-rate debt to total debt

7

%

5

*Capital includes total debt and total equity.

To meet our short-

and long-term liquidity requirements, we look

to a variety of funding sources, including

cash generated from operating activities,

our commercial paper and credit facility programs,

and our ability to

sell securities using our shelf registration

statement.

During the first nine months of 2020, the primary uses

of

our available cash were $3,657 million to support

our ongoing capital expenditures and investments

program,

including the $382 million of cash used to acquire

additional Montney acreage, $1,089 million

for net

purchases of investments,

$726 million to repurchase common stock,

and $1,367 million to pay dividends.

During the first nine months of 2020, our cash,

cash equivalents and restricted cash decreased

by $2,566

million to $2,796 million.

We entered the year with a strong balance sheet including cash and cash equivalents

of over $5 billion, short-

term investments of $3 billion, and an undrawn

credit facility of $6 billion, totaling

approximately $14 billion

in available liquidity.

This strong foundation allowed us to be measured

in our response to the sudden change

in business environment as we exited the first

quarter of 2020.

In response to the oil market downturn

earlier

this year, we announced the following capital, operating cost

and share repurchase reductions.

We reduced our

2020 operating plan capital expenditures by a total

of $2.3 billion, or approximately thirty-five

percent of the

original guidance.

We suspended our share repurchase program, further reducing cash outlays by

approximately $2 billion.

We also reduced our operating costs by approximately $0.6 billion, or roughly ten

percent of the original 2020 guidance.

Collectively, these actions represent a reduction in 2020 cash uses of

approximately $5 billion versus the original operating

plan.

Considering the weakness in oil prices during the

second quarter of 2020, we established a

framework for

evaluating and implementing economic curtailments,

which resulted in taking an additional significant

step of

curtailing production, predominantly from

operated North American assets.

Due to our strong balance sheet,

we were in an advantaged position to forgo some production

and cash flow in anticipation of receiving higher

cash flows for those volumes in the future.

Based on our economic criteria, we began restoring

production

from voluntary curtailments in July, and with oil stabilizing around $40 per barrel, we

ended our curtailment

program by the end of the third quarter.

At the end of the third quarter, we had cash and cash equivalents of

$2.5 billion, short-term investments of

$4.0 billion, and available borrowing capacity under

our credit facility of $5.7 billion, totaling

over $12 billion

of liquidity.

We believe current cash balances and cash generated by operations, the recent adjustments

to our

operating plan, together with access to external sources

of funds as described below in the “Significant

Sources

of Capital” section, will be sufficient to meet our funding

requirements in the near- and long-term, including

our capital spending program, dividend payments

and required debt payments.

 
51

Significant Sources of Capital

Operating Activities

Cash provided by operating activities was $3.1 billion

for the first nine months of 2020, compared with $8.1

billion for the corresponding period of 2019.

The decrease in cash provided by operating

activities is primarily

due to lower realized commodity prices, normal

field decline, production curtailments,

the divestiture of our

U.K. and Australia-West assets, and the absence in 2020 of payments under our settlement

agreement with

PDVSA.

Our short-

and long-term operating cash flows are highly

dependent upon prices for crude oil, bitumen, natural

gas, LNG and NGLs.

Prices and margins in our industry have historically

been volatile and are driven by

market conditions over which we have no control.

Absent other mitigating factors, as these prices

and margins

fluctuate, we would expect a corresponding change

in our operating cash flows.

The level of absolute production volumes, as well

as product and location mix, impacts our cash flows.

Production levels are impacted by such factors as

the volatile crude oil and natural gas

price environment,

which may impact investment decisions; the

effects of price changes on production sharing and variable-

royalty contracts; acquisition and disposition of fields;

field production decline rates; new technologies;

operating efficiencies; timing of startups and major turnarounds;

political instability; global pandemics and

associated demand decreases; weather-related disruptions;

and the addition of proved reserves through

exploratory success and their timely and cost-effective

development.

While we actively manage these factors,

production levels can cause variability in cash flows,

although generally this variability has not been

as

significant as that caused by commodity prices.

To maintain or grow our production volumes, we must continue to add to our

proved reserve base.

Due to

recent capital reductions, our reserve replacement could

be delayed thus limiting our ability to

replace depleted

reserves.

Investing Activities

Proceeds from asset sales in the first nine months

of 2020 were $1.3 billion

compared with $2.9 billion in the

corresponding period of 2019.

In the second quarter of 2020, we completed

the divestiture of our Australia-

West assets and operations.

Based on an effective date of January 1, 2019 and customary

closing adjustments,

we received cash proceeds of $765 million in

the second quarter with another $200 million

payment due upon

final investment decision of the proposed Barossa

development project.

In the first quarter of 2020, proceeds

from asset sales were $549 million, which included

the sale of our Niobrara interests and Waddell Ranch

interests in the Lower 48 for proceeds of $359 million

and $184 million, respectively.

See Note 4—Asset

Acquisitions and Dispositions in the Notes to Consolidated

Financial Statements, for additional information

on

these transactions.

Proceeds from asset sales in the first nine months

of 2019 were $2.9 billion,

which consisted primarily of $2.2

billion related to the sale of two ConocoPhillips

U.K. subsidiaries, $350 million from the sale of our

30 percent

interest in the Greater Sunrise Fields

and $77 million of contingent payments from

Cenovus Energy.

Commercial Paper and Credit Facilities

We have a revolving credit facility totaling $6.0 billion, expiring in May 2023.

Our revolving credit facility

may be used for direct bank borrowings, the issuance

of letters of credit totaling up to $500 million, or

as

support for our commercial paper program.

The revolving credit facility is broadly syndicated

among financial

institutions and does not contain any material

adverse change provisions or any covenants

requiring

maintenance of specified financial ratios or credit

ratings.

The facility agreement contains a cross-default

provision relating to the failure to pay principal or interest

on other debt obligations of $200 million or more

by ConocoPhillips, or any of its consolidated subsidiaries.

The amount of the facility is not subject to

redetermination prior to its expiration date.

Credit facility borrowings may bear interest at a margin above

rates offered by certain designated banks in the

London interbank market or at a margin above the overnight

federal funds rate or prime rates offered by

 
52

certain designated banks in the U.S.

The agreement calls for commitment fees

on available, but unused,

amounts.

The agreement also contains early termination

rights if our current directors or their approved

successors cease to be a majority of the Board of

Directors.

The revolving credit facility supports the ConocoPhillips

Company $6.0 billion commercial paper program,

which is primarily a funding source for short-term

working capital needs.

Commercial paper maturities are

generally limited to 90 days.

With $300 million of commercial paper outstanding and no direct

borrowings or

letters of credit, we had $5.7 billion in available

borrowing capacity under the revolving credit facility

at

September 30, 2020.

We may consider issuing additional commercial paper in the future to supplement

our

cash position.

Despite recent volatility and price weakness for energy issuers

in the debt capital markets, we believe the

company continues to have access to the markets

based on the composition of our balance sheet

and asset

portfolio.

In October 2020, S&P affirmed its “A” rating on our senior

long-term debt and revised its outlook to “stable”

from “negative,” Fitch affirmed its rating of “A” with a “stable”

outlook and Moody’s affirmed its rating of

“A3” with a “stable” outlook.

We do not have any ratings triggers on any of our corporate debt that would

cause an automatic default, and thereby impact

our access to liquidity, in the event of a downgrade of our

credit rating.

If our credit rating were downgraded, it could

increase the cost of corporate debt available to

us

and potentially restrict our access to the commercial

paper and debt capital markets.

If our credit rating were

to deteriorate to a level prohibiting us from

accessing the commercial paper and debt capital

markets, we

would still be able to access funds under our revolving

credit facility.

Certain

of our project-related contracts, commercial

contracts and derivative instruments contain

provisions

requiring us to post collateral.

Many of these contracts and instruments permit

us to post either cash or letters

of credit as collateral.

At September 30, 2020 and December 31, 2019, we had

direct bank letters of credit of

$240 million and $277 million, respectively, which secured performance

obligations related to various

purchase commitments incident to the ordinary conduct

of business.

In the event of credit ratings downgrades,

we may be required to post additional letters

of credit.

Shelf Registration

We have a universal shelf registration statement on file with the SEC under which we

have the ability to issue

and sell an indeterminate amount of various types

of debt and equity securities.

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.

For information about guarantees, see Note 11—Guarantees, in

the Notes to Consolidated Financial

Statements, which is incorporated herein by reference.

 
53

Guarantor Summarized Financial Information

We have various cross guarantees among ConocoPhillips, ConocoPhillips Company

and Burlington Resources

LLC, with respect to publicly held debt securities.

ConocoPhillips Company is 100 percent

owned by

ConocoPhillips.

Burlington Resources LLC is 100 percent

owned by ConocoPhillips Company.

ConocoPhillips and/or ConocoPhillips Company

have fully and unconditionally guaranteed

the payment

obligations of Burlington Resources LLC, with respect

to its publicly held debt securities.

Similarly,

ConocoPhillips has fully and unconditionally

guaranteed the payment obligations of ConocoPhillips

Company

with respect to its publicly held debt securities.

In addition, ConocoPhillips Company

has fully and

unconditionally guaranteed the payment obligations

of ConocoPhillips with respect to its publicly

held debt

securities.

All guarantees are joint and several.

In March of 2020, the SEC adopted amendments

to simplify the financial disclosure requirements

for

guarantors and issuers of guaranteed securities

registered under Rule 3-10 of Regulation S-X.

Based on our

evaluation of our existing guarantee relationships,

we qualify for the transition to alternative disclosures.

We

have elected early voluntary compliance with

the final amendments beginning in the third

quarter of 2020.

Accordingly, condensed consolidating information by guarantor and issuer of guaranteed

securities will no

longer be reported, and alternative disclosures

of summarized financial information for the

consolidated

Obligor Group is presented.

The following tables present summarized financial

information for the Obligor

Group, as defined below:

●

The Obligor Group will reflect guarantors and

issuers of guaranteed securities consisting of

ConocoPhillips, ConocoPhillips Company and

Burlington Resources LLC.

●

Consolidating adjustments for elimination

of investments in and transactions between the collective

guarantors and issuers of guaranteed securities

are reflected in the balances of the summarized

financial

information.

●

Non-Obligated Subsidiaries are excluded from

this presentation.

Transactions and balances reflecting

activity between the Obligors and Non-Obligated

Subsidiaries are presented below:

Summarized Income Statement Data

Millions of Dollars

Nine Months Ended

September 30, 2020

Revenues and Other Income

$

5,690

Income (loss) before income taxes

(2,018)

Net income (loss)

(1,929)

Net Income (Loss) Attributable to ConocoPhillips

(1,929)

Summarized Balance Sheet Data

Millions of Dollars

September 30

2020

December 31

2019

Current assets

$

7,890

10,829

Amounts due from Non-Obligated Subsidiaries, current

473

732

Noncurrent assets

40,026

43,194

Amounts due from Non-Obligated Subsidiaries, noncurrent

7,622

7,977

Current liabilities

3,247

3,813

Amounts due to Non-Obligated Subsidiaries, current

1,361

1,836

Noncurrent liabilities

20,444

21,787

Amounts due to Non-Obligated Subsidiaries, noncurrent

5,725

6,974

 
54

Capital Requirements

For information about our capital expenditures

and investments, see the “Capital Expenditures”

section.

Our debt balance at September 30, 2020,

was $15,387 million, compared with $14,895 million

at December

31, 2019.

Maturities of debt for the remainder of 2020,

and for each of the years 2021 through 2024, are:

$367

million, $281 million, $998 million, $256 million

and $577 million, respectively.

On February 4, 2020, we announced a quarterly

dividend of 42 cents per share.

The dividend was paid on

March 2, 2020, to stockholders of record at the close

of business on February 14, 2020.

On April 30, 2020, we

announced a quarterly dividend of 42 cents per share.

The dividend was paid on June 1, 2020, to

stockholders

of record at the close of business on May 11, 2020.

On July 8, 2020, we announced a quarterly dividend of

42

cents per share, payable September 1, 2020, to stockholders

of record at the close of business on July 20,

2020.

On October 9, 2020, we announced an increase to

our quarterly dividend from 42 cents per share

to 43 cents

per share.

The dividend is payable on December 1, 2020

to shareholders of record as of October 19, 2020.

In late 2016, we initiated our current share repurchase

program.

As of September 30, 2020, we had announced

a total authorization to repurchase $25 billion

of our common stock.

As of December 31, 2019, we had

repurchased $9.6 billion of shares.

In the first quarter of 2020, we repurchased

an additional $0.7 billion of

shares before suspending repurchases during

the second and third quarters of 2020.

On September 30, 2020,

we announced our intent to resume share repurchases;

however, we recently announced the pending

acquisition of Concho, and our suspension of share

repurchases until after the transaction closes.

Capital Expenditures

Millions of Dollars

Nine Months Ended

September 30

2020

2019

Alaska

$

882

1,207

Lower 48

1,398

2,613

Canada

593

315

Europe, Middle East and North Africa

410

537

Asia Pacific

280

322

Other International

66

1

Corporate and Other

28

46

Capital expenditures and investments

$

3,657

5,041

During the first nine months of 2020, capital expenditures

and investments supported key exploration and

development programs, primarily:

●

Development,

appraisal and exploration activities in the

Lower 48, including Eagle Ford, Permian

Unconventional and Bakken.

●

Appraisal,

exploration and development activities

in Alaska related to the Western North Slope;

development activities in the Greater Kuparuk

Area and the Greater Prudhoe Area.

●

Development and exploration activities across

assets in Norway.

●

Appraisal activities in the liquids-rich portion

of the Montney in Canada and optimization

of oil sands

development.

●

Continued development in China, Malaysia,

Australia and Indonesia.

●

Lease acquisition and appraisal activities

in Argentina.

 
55

In February 2020, we announced 2020 operating

plan capital of $6.5 billion to $6.7 billion.

In response to the

oil market downturn earlier this year, we announced capital

expenditure reductions totaling $2.3 billion.

Full

year 2020 operating plan capital is now expected

to be $4.3 billion.

This does not include approximately $0.5

billion of capital for acquisitions completed during

the year, of which $0.4 billion was for bolt-on acreage in

the liquids rich area of the Montney.

In August 2020, we completed the acquisition

of additional Montney acreage in Canada for $382 million

after

customary adjustments, plus the assumption of

$31 million in financing obligations associated

with partially

owned infrastructure.

See Note 4—Asset Acquisitions and Dispositions,

in the Notes to Consolidated

Financial Statements, for additional information.

Contingencies

A number of lawsuits involving a variety of claims

arising in the ordinary course of business

have been filed

against ConocoPhillips.

We also may be required to remove or mitigate the effects on the environment of the

placement, storage, disposal or release of certain

chemical, mineral and petroleum substances

at various active

and inactive sites.

We regularly assess the need for accounting recognition or disclosure of these

contingencies.

In the case of all known contingencies (other

than those related to income taxes), we accrue a

liability when the loss is probable and the amount

is reasonably estimable.

If a range of amounts can be

reasonably estimated and no amount within the range

is a better estimate than any other amount,

then the

minimum of the range is accrued.

We do not reduce these liabilities for potential insurance or third-party

recoveries.

We accrue receivables for insurance or other third-party recoveries when applicable.

With respect

to income-tax-related contingencies, we use a

cumulative probability-weighted loss accrual

in cases where

sustaining a tax position is less than certain.

Based on currently available information, we believe

it is remote that future costs related to known

contingent

liability exposures will exceed current accruals by

an amount that would have a material

adverse impact on our

consolidated financial statements.

As we learn new facts concerning contingencies,

we reassess our position

both with respect to accrued liabilities

and other potential exposures.

Estimates particularly sensitive to future

changes include contingent liabilities

recorded for environmental remediation, legal and

tax 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 legal and tax matters are subject to

change as events evolve and as additional

information becomes

available during the administrative and litigation

processes.

For information on other contingencies, see

Note 12—Contingencies and Commitments, in

the Notes to Consolidated Financial Statements.

Legal and Tax Matters

We are subject to various lawsuits and claims including but not limited to matters

involving oil and gas royalty

and severance tax payments, gas measurement and

valuation methods, contract disputes,

environmental

damages, climate change, personal injury, and property damage.

Our primary exposures for such matters

relate to alleged royalty and tax underpayments

on certain federal, state and privately owned

properties and

claims of alleged environmental contamination

from historic operations.

We will continue to defend ourselves

vigorously in these matters.

Our legal organization applies its knowledge, experience

and professional judgment to the specific

characteristics of our cases, employing a litigation

management process to manage and monitor the

legal

proceedings against us.

Our process facilitates the early evaluation and quantification

of potential exposures in

individual cases.

This process also enables us to track those cases that

have been scheduled for trial and/or

mediation.

Based on professional judgment and experience

in using these litigation management tools and

available information about current developments

in all our cases, our legal organization regularly assesses

the

adequacy of current accruals and determines if

adjustment of existing accruals, or establishment

of new

accruals, is required.

 
56

Environmental

We are subject to the same numerous international, federal, state and local environmental

laws and regulations

as other companies in our industry.

For a discussion of the most significant

of these environmental laws and

regulations, including those with associated remediation

obligations, see the “Environmental” section in

Management’s Discussion and Analysis of Financial Condition and Results

of Operations on pages 60–62 of

our 2019 Annual Report on Form 10-K.

We occasionally receive requests for information or notices of potential liability

from the EPA and state

environmental agencies alleging that we are

a potentially responsible party under the Federal

Comprehensive

Environmental Response, Compensation and Liability

Act (CERCLA) or an equivalent state statute.

On

occasion, we also have been made a party to cost

recovery litigation by those agencies or by private

parties.

These requests, notices and lawsuits assert potential

liability for remediation costs at various sites

that typically

are not owned by us, but allegedly contain waste attributable

to our past operations.

As of September 30,

2020, there were 15 sites around the U.S. in which

we were identified as a potentially responsible

party under

CERCLA and comparable state laws.

At September 30, 2020, our balance sheet included

a total environmental accrual of $177 million,

compared

with $171 million at December 31, 2019, for remediation

activities in the U.S. and Canada.

We expect to

incur a substantial amount of these expenditures

within the next 30 years.

Notwithstanding any of the foregoing, and as with

other companies engaged in similar businesses,

environmental costs and liabilities are inherent

concerns in our operations and products, and there

can be no

assurance that material costs and liabilities

will not be incurred.

However, we currently do not expect any

material adverse effect upon our results of operations or financial

position as a result of compliance with

current environmental laws and regulations.

Climate Change

Continuing political and social attention to the

issue of global climate change has resulted in

a broad range of

proposed or promulgated state, national and international

laws focusing on GHG reduction.

These proposed or

promulgated laws apply or could apply in countries

where we have interests or may have interests

in the future.

Laws in this field continue to evolve, and while

it is not possible to accurately estimate either

a timetable for

implementation or our future compliance costs

relating to implementation, such laws, if

enacted, could have a

material impact on our results of operations and

financial condition.

Examples of legislation and precursors

for possible regulation that do or could affect our operations

include:

●

The EPA’s

and U.S. Department of Transportation’s joint promulgation of a Final Rule on April

1,

2010, that triggered regulation of GHGs under the

Clean Air Act, may trigger more climate-based

claims for damages, and may result in longer agency

review time for development projects.

●

New Mexico’s Energy,

Minerals and Natural Resources Department

has proposed natural gas waste

rules as part of New Mexico’s statewide, enforceable regulatory framework

to secure reductions in oil

and gas sector emissions and to prevent natural gas

waste from new and existing sources.

For other examples of legislation or precursors for

possible regulation and factors on which

the ultimate impact

on our financial performance will depend, see the

“Climate Change” section in Management’s Discussion and

Analysis of Financial Condition and Results of Operations

on pages 63–65 of our 2019 Annual Report on

Form 10-K.

We announced in October 2020 the adoption of a Paris-aligned climate risk framework

as part of our continued

commitment to ESG excellence.

This comprehensive climate risk strategy

should enable us to sustainably

meet global energy demand while delivering competitive

returns through the energy transition.

We have set a

target to reduce our gross operated (scope 1 and 2) emissions

intensity by 35 to 45 percent from 2016 levels

by

2030, with an ambition to achieve net zero by

2050 for operated emissions.

We are advocating for reduction

of scope 3 end-use emissions intensity through

our support for a U.S. carbon price.

We have joined the World

Bank Flaring Initiative to work towards zero routine

flaring of gas by 2030.

We are committed to take ESG

 
57

leadership to the next level as the first U.S.-based

oil and gas company to adopt a Paris-aligned

climate risk

strategy.

In December 2018, we became a Founding Member

of the Climate Leadership Council (CLC), an

international

policy institute founded in collaboration with business

and environmental interests to develop a carbon

dividend plan.

Participation in the CLC provides another

opportunity for ongoing dialogue about carbon

pricing and framing the issues in alignment with our

public policy principles.

We also belong to and fund

Americans For Carbon Dividends, the education

and advocacy branch

of the CLC.

In our October 2020 Paris

aligned-climate risk framework announcement,

we reaffirmed our commitment to the Climate Leadership

Council.

Beginning in 2017, cities, counties, governments

and other entities in several states in the U.S. have

filed

lawsuits against oil and gas companies, including

ConocoPhillips, seeking compensatory damages

and

equitable relief to abate alleged climate change impacts.

Additional lawsuits with similar allegations

are

expected to be filed.

The amounts claimed by plaintiffs are unspecified and

the legal and factual issues

involved in these cases are unprecedented.

ConocoPhillips believes these lawsuits are factually

and legally

meritless and are an inappropriate vehicle to address

the challenges associated with climate

change and will

vigorously defend against such lawsuits.

Several Louisiana parishes and the State of Louisiana

have filed 43 lawsuits under Louisiana’s State and Local

Coastal Resources Management Act (SLCRMA)

against oil and gas companies, including ConocoPhillips,

seeking compensatory damages for contamination

and erosion of the Louisiana coastline

allegedly caused by

historical oil and gas operations.

ConocoPhillips entities are defendants in

22 of the lawsuits and will

vigorously defend against them.

Because Plaintiffs’ SLCRMA theories are unprecedented,

there is uncertainty

about these claims (both as to scope and damages)

and any potential financial impact on the company.

CAUTIONARY STATEMENT

FOR THE PURPOSES OF THE “SAFE HARBOR”

PROVISIONS OF

THE PRIVATE

SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements

within the meaning of Section 27A of the Securities

Act of

1933 and Section 21E of the Securities Exchange Act

of 1934.

All statements other than statements of

historical fact included or incorporated by reference

in this report, including, without limitation,

statements

regarding our future financial position, business

strategy, budgets, projected revenues, projected costs and

plans, objectives of management for future operations,

the anticipated benefits of the proposed transaction

between us and Concho, the anticipated impact

of the proposed transaction on the combined company’s

business and future financial and operating results,

the expected amount and the timing of synergies from

the

proposed transaction, and the anticipated closing

date for the proposed transaction are forward-looking

statements.

Examples of forward-looking statements contained

in this report include our expected production

growth and outlook on the business environment

generally, our expected capital budget and capital

expenditures, and discussions concerning future

dividends.

You can often identify our forward-looking

statements by the words “anticipate,” “estimate,”

“believe,” “budget,” “continue,” “could,”

“intend,” “may,”

“plan,” “potential,” “predict,” “seek,” “should,”

“will,” “would,” “expect,” “objective,” “projection,”

“forecast,” “goal,” “guidance,” “outlook,” “effort,” “target”

and similar expressions.

 
58

We based the forward-looking statements on our current expectations, estimates

and projections about

ourselves and the industries in which we operate in

general.

We caution you these statements are not

guarantees of future performance as they involve

assumptions that, while made in good faith,

may prove to be

incorrect, and involve risks and uncertainties

we cannot predict.

In addition, we based many of these forward-

looking statements on assumptions about future events

that may prove to be inaccurate.

Accordingly, our

actual outcomes and results may differ materially from

what we have expressed or forecast in the forward-

looking statements.

Any differences could result from a variety of factors

and uncertainties, including, but not

limited to, the following:

●

The impact of public health crises, including pandemics

(such as COVID-19) and epidemics and any

related company or government policies or

actions.

●

Global and regional changes in the demand, supply, prices, differentials or other market

conditions

affecting oil and gas, including changes resulting from a public

health crisis or from the imposition or

lifting of crude oil production quotas or other

actions that might be imposed by OPEC

and other

producing countries and the resulting company

or third-party actions in response to such changes.

●

Fluctuations in crude oil, bitumen, natural gas,

LNG and NGLs prices, including a prolonged

decline

in these prices relative to historical or future

expected levels.

●

The impact of significant declines in prices for

crude oil, bitumen, natural gas, LNG and NGLs,

which

may result in recognition of impairment charges on our

long-lived assets, leaseholds and

nonconsolidated equity investments.

●

Potential failures or delays in achieving expected

reserve or production levels from existing

and future

oil and gas developments, including due to operating

hazards, drilling risks and the inherent

uncertainties in predicting reserves and reservoir

performance.

●

Reductions in reserves replacement rates, whether

as a result of the significant declines in commodity

prices or otherwise.

●

Unsuccessful exploratory drilling activities

or the inability to obtain access to exploratory acreage.

●

Unexpected changes in costs or technical requirements

for constructing, modifying or operating E&P

facilities.

●

Legislative and regulatory initiatives

addressing environmental concerns, including initiatives

addressing the impact of global climate change or further

regulating hydraulic fracturing, methane

emissions, flaring or water disposal.

●

Lack of, or disruptions in, adequate and reliable

transportation for our crude oil, bitumen, natural

gas,

LNG and NGLs.

●

Inability to timely obtain or maintain permits,

including those necessary for construction, drilling

and/or development, or inability to make capital

expenditures required to maintain compliance

with

any necessary permits or applicable laws or regulations.

●

Failure to complete definitive agreements and feasibility

studies for, and to complete construction of,

announced and future E&P and LNG development

in a timely manner (if at all) or on budget.

●

Potential disruption or interruption of our operations

due to accidents, extraordinary weather events,

civil unrest, political events, war, terrorism, cyber attacks,

and information technology failures,

constraints or disruptions.

●

Changes in international monetary conditions and

foreign currency exchange rate fluctuations.

●

Changes in international trade relationships,

including the imposition of trade restrictions

or tariffs

relating to crude oil, bitumen, natural gas, LNG,

NGLs and any materials or products (such as

aluminum and steel) used in the operation of our

business.

●

Substantial investment in and development use

of, competing or alternative energy sources, including

as a result of existing or future environmental

rules and regulations.

●

Liability for remedial actions, including removal

and reclamation obligations, under existing

and

future environmental regulations and litigation.

●

Significant operational or investment changes imposed

by existing or future environmental

statutes

and regulations, including international agreements

and national or regional legislation and regulatory

measures to limit or reduce GHG emissions.

 
59

●

Liability resulting from litigation, including the

potential for litigation related to the

proposed

transaction, or our failure to comply with applicable

laws and regulations.

●

General domestic and international economic and

political developments, including armed

hostilities;

expropriation of assets; changes in governmental

policies relating to crude oil, bitumen, natural

gas,

LNG and NGLs pricing, regulation or taxation;

and other political, economic or diplomatic

developments.

●

Volatility

in the commodity futures markets.

●

Changes in tax and other laws, regulations (including

alternative energy mandates), or royalty rules

applicable to our business.

●

Competition and consolidation in the oil and gas E&P

industry.

●

Any limitations on our access to capital or increase

in our cost of capital, including as a result

of

illiquidity or uncertainty in domestic or international

financial markets.

●

Our inability to execute, or delays in the completion,

of any asset dispositions or acquisitions

we elect

to pursue.

●

Potential failure to obtain, or delays in obtaining, any

necessary regulatory approvals for

pending or

future asset dispositions or acquisitions,

or that such approvals may require modification

to the terms

of the transactions or the operation of our remaining

business.

●

Potential disruption of our operations as a result

of pending or future asset dispositions or acquisitions,

including the diversion of management time and attention.

●

Our inability to deploy the net proceeds from any

asset dispositions that are pending or

that we elect to

undertake in the future in the manner and timeframe

we currently anticipate, if at all.

●

Our inability to liquidate the common stock issued

to us by Cenovus Energy as part of our sale of

certain assets in western Canada at prices we deem

acceptable, or at all.

●

The operation and financing of our joint ventures.

●

The ability of our customers and other contractual

counterparties to satisfy their obligations to

us,

including our ability to collect payments when

due from the government of Venezuela or PDVSA.

●

Our inability to realize anticipated cost savings and

capital expenditure reductions.

●

The inadequacy of storage capacity for our products,

and ensuing curtailments, whether voluntary

or

involuntary, required to mitigate this physical constraint.

●

Our ability to successfully integrate Concho’s business.

●

The risk that the expected benefits and cost

reductions associated with the proposed transaction

may

not be fully achieved in a timely manner, or at all.

●

The risk that we or Concho will be unable to retain

and hire key personnel.

●

The risk associated with our and Concho’s ability to obtain the approvals of

our respective

stockholders required to consummate the proposed

transaction and the timing of the closing

of the

proposed transaction, including the risk that

the conditions to the transaction are not satisfied

on a

timely basis or at all or the failure of the transaction

to close for any other reason or to close on the

anticipated terms, including the anticipated tax treatment.

●

The risk that any regulatory approval, consent or

authorization that may be required for

the proposed

transaction is not obtained or is obtained subject

to conditions that are not anticipated.

●

Unanticipated difficulties or expenditures relating to

the transaction, the response of business

partners

and retention as a result of the announcement and

pendency of the transaction.

●

Uncertainty as to the long-term value of our common

stock.

●

The diversion of management time on transaction-related

matters.

●

The risk factors generally described in Part II—Item

1A in this report, in Part I—Item 1A in our 2019

Annual Report on Form 10-K, in our Forms 8-K

filed with the SEC on May 20, 2020 and September

8, 2020, respectively, and any additional risks described in our other filings with

the SEC.

Item 3.

QUANTITATIVE

AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Information about market risks for the nine months

ended September 30, 2020, does not differ materially

from

that discussed under Item 7A in our 2019 Annual Report

on Form 10-K.

 
60

Item 4.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure information required

to be disclosed in

reports we file or submit under the Securities

Exchange Act of 1934, as amended (the Act),

is recorded,

processed, summarized and reported within the

time periods specified in SEC rules and forms,

and that such

information is accumulated and communicated

to management, including our principal executive

and principal

financial officers, as appropriate, to allow timely decisions

regarding required disclosure.

As of September 30,

2020, with the participation of our management,

our Chairman and Chief Executive Officer (principal

executive officer) and our Executive Vice President and Chief Financial Officer (principal

financial officer)

carried out an evaluation, pursuant to Rule 13a-15(b)

of the Act, of ConocoPhillips’ disclosure controls

and

procedures (as defined in Rule 13a-15(e) of the Act).

Based upon that evaluation, our Chairman and

Chief

Executive Officer and our Executive Vice President and Chief Financial Officer concluded

our disclosure

controls and procedures were operating effectively as of September

30, 2020.

There have been no changes in our internal

control over financial reporting, as defined in

Rule 13a-15(f) of the

Act, in the period covered by this report that

have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

PART

II.

OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

There are no new material legal proceedings

or material developments with respect to matters

previously

disclosed in Item 3 of our 2019 Annual Report on

Form 10-K.

Item 1A.

RISK FACTORS

Other than the risk factors set forth below, there have been no material changes

to the risk factors disclosed in

our Annual Report on Form 10-K for the fiscal

year ended December 31, 2019.

Risks Related to the Business

Existing and future laws, regulations and internal

initiatives relating to global climate change,

such as

limitations on GHG emissions, may impact or limit

our business plans, result in significant expenditures,

promote alternative uses of energy or reduce demand

for our products.

Continuing political and social attention to the

issue of global climate change has resulted in

both existing and

pending international agreements and national,

regional or local legislation and regulatory

measures to limit

GHG emissions, such as cap and trade regimes, carbon

taxes, restrictive permitting, increased fuel efficiency

standards and incentives or mandates for renewable

energy.

For example, in December 2015, the U.S. joined

the international community at the 21st Conference

of the Parties of the United Nations Framework

Convention on Climate Change in Paris that

prepared an agreement requiring member countries

to review and

represent a progression in their intended GHG

emission reduction goals every five years

beginning in 2020.

While the U.S. announced its intention to withdraw

from the Paris Agreement, there is no guarantee

that the

commitments made by the U.S. will not be implemented,

in whole or in part, by U.S. state and local

governments or by major corporations headquartered

in the U.S.

In addition, our operations continue in

countries around the world which are party to, and

have not announced an intent to withdraw

from, the Paris

Agreement.

The implementation of current agreements and

regulatory measures, as well as any future

agreements or measures addressing climate

change and GHG emissions, may adversely impact

the demand for

our products, impose taxes on our products or operations

or require us to purchase emission credits

or reduce

emission of GHGs from our operations.

As a result, we may experience declines in commodity

prices or incur

substantial capital expenditures and compliance,

operating, maintenance and remediation costs,

any of which

may have an adverse effect on our business and results

of operations.

 
61

Compliance with the various climate change related

internal initiatives described in the “Business

Environment

and Executive Overview” section of Management’s Discussion and Analysis

of Financial Condition and

Results of Operations may increase costs, require

us to purchase emission credits, or limit

or impact our

business plans, potentially resulting in the reduction

to the economic end-of-field life of certain

assets and an

impairment of the associated net book value.

Additionally, increasing attention to global climate change has resulted in pressure

upon shareholders,

financial institutions and/or financial markets

to modify their relationships with oil and gas companies

and to

limit investments and/or funding to such companies,

which could increase our costs or otherwise

adversely

affect our business and results of operations.

Furthermore, increasing attention to global climate

change has resulted in an increased likelihood

of

governmental investigations and private litigation,

which could increase our costs or otherwise adversely

affect

our business.

Beginning in 2017, cities, counties, governments

and other entities in several states in the U.S.

have filed lawsuits against oil and gas companies,

including ConocoPhillips, seeking compensatory

damages

and equitable relief to abate alleged climate change

impacts.

Additional lawsuits with similar allegations

are

expected to be filed.

The amounts claimed by plaintiffs are unspecified

and the legal and factual issues

involved in these cases are unprecedented.

ConocoPhillips believes these lawsuits are factually

and legally

meritless and are an inappropriate vehicle to address

the challenges associated with climate

change and will

vigorously defend against such lawsuits.

The ultimate outcome and impact to us cannot

be predicted with

certainty, and we could incur substantial legal costs associated with defending these

and similar lawsuits in the

future.

In addition, although we design and operate our

business operations to accommodate expected

climatic

conditions, to the extent there are significant

changes in the earth’s climate, such as more severe or frequent

weather conditions in the markets where we operate

or the areas where our assets reside, we could

incur

increased expenses, our operations could be adversely

impacted, and demand for our products could

fall.

For more information on legislation or precursors

for possible regulation relating to global climate

change that

affect or could affect our operations and a description of the company’s response, see the

“Contingencies—

Climate Change” section of Management’s Discussion and Analysis of

Financial Condition and Results of

Operations.

Our business has been, and will continue to

be, affected by the coronavirus (COVID-19) pandemic.

The COVID-19 outbreak and the measures put

in place to address it have negatively impacted

the global

economy, disrupted global supply chains, reduced global demand for oil

and gas, and created significant

volatility and disruption of financial and commodity

markets.

Public health officials have recommended or

mandated certain precautions to mitigate

the spread of COVID-19, including limiting non-essential

gatherings

of people, ceasing all non-essential travel

and issuing “social or physical distancing” guidelines,

“shelter-in-

place” orders and mandatory closures or reductions

in capacity for non-essential businesses.

The full impact of

the COVID-19 pandemic remains uncertain

and will depend on the severity, location and duration of the

effects and spread of the disease, the effectiveness and duration

of actions taken by authorities to contain the

virus or treat its effect, and how quickly and to what

extent economic conditions improve.

According to the

National Bureau of Economic Research, as a result

of the pandemic and its broad reach across the

entire

economy, the U.S. entered a recession in early 2020.

We have already been impacted by the COVID-19 pandemic.

See Management’s Discussion and Analysis of

Financial Condition and Results of Operations, for

additional information on how we have

been impacted and

the steps we have taken in response.

Our business is likely to be further negatively

impacted by the COVID-19 pandemic.

These impacts could

include but are not limited to:

●

Continued reduced demand for our products

as a result of reductions in travel and commerce;

 
62

●

Disruptions in our supply chain due in part to scrutiny

or embargoing of shipments from infected areas

or invocation of force majeure clauses in commercial

contracts due to restrictions imposed as a result

of the global response to the pandemic;

●

Failure of third parties on which we rely, including our suppliers, contract

manufacturers, contractors,

joint venture partners and external business partners,

to meet their obligations to the company, or

significant disruptions in their ability to

do so, which may be caused by their own financial

or

operational difficulties or restrictions imposed in

response to the disease outbreak;

●

Reduced workforce productivity caused by, but not limited to, illness, travel

restrictions, quarantine,

or government mandates;

●

Business interruptions resulting from a portion of

our workforce continuing to telecommute,

as well as

the implementation and maintenance of protections

for employees commuting for work, such as

personnel screenings and self-quarantines before or

after travel;

and

●

Voluntary

or involuntary curtailments to support oil prices

or alleviate storage shortages for our

products.

Any of these factors, or other cascading effects of the

COVID-19 pandemic that are not currently foreseeable,

could materially increase our costs, negatively impact

our revenues and damage our financial condition,

results

of operations, cash flows and liquidity position.

The pandemic continues to progress and evolve,

and the full

extent and duration of any such impacts cannot

be predicted at this time because of the sweeping

impact of the

COVID-19 pandemic on daily life around the world.

We have been negatively affected and are likely to continue to be negatively affected by the recent

swift and

sharp drop in commodity prices.

The oil and gas business is fundamentally a commodity

business and prices for crude oil, bitumen,

natural gas,

NGLs and LNG can fluctuate widely depending

upon global events or conditions that affect supply and

demand.

Recently, there has been a precipitous decrease in demand for oil globally, largely caused by the

dramatic decrease in travel and commerce resulting

from the COVID-19 pandemic.

See Management’s

Discussion and Analysis of Financial Condition

and Results of Operations, for additional information

on

commodity prices and how we have been impacted.

There is no assurance of when or if commodity

prices will

return to pre-COVID-19 levels.

The speed and extent of any recovery remains uncertain

and is subject to

various risks, including the duration, impact and actions

taken to stem the proliferation of the COVID-19

pandemic, the extent to which those nations party

to the OPEC plus production agreement decide

to increase

production of crude oil, bitumen, natural gas and

NGLs and other risks described in this Quarterly

Report on

Form 10-Q

or in our Annual Report on Form 10-K for the

fiscal year ended December 31, 2019.

Even after a recovery, our industry will continue to be exposed to the effects of changing

commodity prices

given the volatility in commodity price drivers and

the worldwide political and economic

environment

generally, as well as continued uncertainty caused by armed hostilities

in various oil-producing regions around

the globe.

Our revenues, operating results and future rate

of growth are highly dependent on the prices

we

receive for our crude oil, bitumen, natural gas, NGLs

and LNG.

Many of the factors influencing these prices

are beyond our control.

Lower crude oil, bitumen, natural gas, NGL and LNG

prices may have a material adverse effect on our

revenues, earnings, cash flows and liquidity, and may also affect the amount of dividends

we elect to declare

and pay on our common stock.

As a result of the oil market downturn earlier

this year, we suspended our share

repurchase program.

Lower prices may also limit the amount of reserves

we can produce economically, thus

adversely affecting our proved reserves, reserve replacement

ratio and accelerating the reduction in our

existing reserve levels as we continue production

from upstream fields.

Prolonged lower crude oil prices may

affect certain decisions related to our operations, including

decisions to reduce capital investments or decisions

to shut-in production.

Significant reductions in crude oil, bitumen, natural

gas, NGLs and LNG prices could also

require us to reduce

our capital expenditures, impair the carrying value

of our assets or discontinue the classification

of certain

 
63

assets as proved reserves.

In the nine-month period of 2020, we recognized

several impairments, which are

described in Note 8—Impairments.

If the outlook for commodity prices remains

low relative to historic levels,

and as we continue to optimize our investments and

exercise capital flexibility, it is reasonably likely we will

incur future impairments to long-lived assets used

in operations, investments in nonconsolidated

entities

accounted for under the equity method and unproved

properties.

If oil and gas prices persist at depressed

levels, our reserve estimates may decrease further, which could

incrementally increase the rate used to

determine DD&A expense on our unit-of-production

method properties.

See Management’s Discussion and

Analysis for further examination of DD&A

rate impacts versus comparative periods.

Although it is not

reasonably practicable to quantify the impact

of any future impairments or estimated change to

our unit-of-

production at this time, our results of operations

could be adversely affected as a result.

Risks Related to the Proposed Acquisition of

Concho Resources Inc. (Concho)

Our ability to complete the acquisition of Concho

is subject to various closing conditions,

including

approval by our and Concho’s stockholders and regulatory clearance, which may

impose conditions that

could adversely affect us or cause the acquisition not to be

completed.

On October 18, 2020, we entered into a definitive

agreement (the Merger Agreement)

to acquire Concho, one

of the largest unconventional shale producers in the Permian

Basin.

The Merger is subject to a number of conditions to closing

as specified in the Merger Agreement.

These

closing conditions include, among others, (1) the

receipt of the required approvals from

ConocoPhillips

stockholders and Concho stockholders, (2) the expiration

or termination of the waiting period under the

Hart-

Scott-Rodino Antitrust Improvements Act of 1976,

as amended (the HSR Act) and (3) the

absence of any

governmental order or law that makes consummation

of the Merger illegal or otherwise prohibited.

No

assurance can be given that the required stockholder

approvals and regulatory clearance be obtained

or that the

required conditions to closing will be satisfied,

and, if all required approvals and regulatory

clearance are

obtained and the required conditions are satisfied,

no assurance can be given as to the terms,

conditions and

timing of such approvals and clearance,

including whether any required conditions

will materially adversely

affect the combined company following the acquisition.

Any delay in completing the Merger could cause the

combined company not to realize, or to be delayed

in realizing, some or all of the benefits

that we and Concho

expect to achieve if the Merger is successfully completed

within its expected time frame.

We can provide no assurance that these conditions will not result in the abandonment

or delay of the

acquisition.

The occurrence of any of these events individually

or in combination could have a material

adverse effect on our results of operations and the trading

price of our common stock.

The termination of the Merger Agreement could

negatively impact our business or result

in our having to

pay a termination fee.

If the Merger is not completed for any reason, including

as a result of a failure to obtain the required approvals

from our stockholders or Concho’s stockholders, our ongoing business may

be adversely affected and, without

realizing any of the expected benefits of having completed

the Merger, we would be subject to a number of

risks, including the following:

●

we may experience negative reactions from the

financial markets, including negative impacts

on our

stock price;

●

we may experience negative reactions from our commercial

and vendor partners and employees; and

●

we will be required to pay our costs relating to

the Merger, such as financial advisory, legal, financing

and accounting costs and associated fees and expenses,

whether or not the Merger is completed.

Additionally, if the Merger Agreement is terminated under certain circumstances, we

may be required

to pay a termination fee of $450 million, including

if the proposed Merger is terminated because our Board

of

Directors has changed its recommendation in respect

of the stockholder proposal relating to the Merger.

In

 
64

addition, we may be required to reimburse Concho

for its expenses in an amount equal

to $142.5 million, if the

Merger Agreement is terminated because of a failure of our

stockholders to approve the stockholder proposal.

Whether or not the Merger is completed, the announcement

and pendency of the Merger could cause

disruptions in our business, which could have an

adverse effect on our business and financial results.

Whether or not the Merger is completed, the announcement

and pendency of the Merger could cause

disruptions in our business.

Specifically:

●

our and Concho’s current and prospective employees will experience uncertainty

about their future

roles with the combined company, which might adversely affect the two companies’ abilities

to retain

key managers and other employees;

●

uncertainty regarding the completion of the Merger may

cause our and Concho’s commercial and

vendor partners or others that deal with us or Concho

to delay or defer certain business decisions

or to

decide to seek to terminate, change or renegotiate

their relationships with us or Concho, which

could

negatively affect our respective revenues, earnings and cash

flows;

●

the Merger Agreement restricts us and our subsidiaries

from taking specified actions during the

pendency of the Merger without Concho’s consent,

which may prevent us from making appropriate

changes to our business or organizational structure

or prevent us from pursuing attractive business

opportunities or strategic transactions that may

arise prior to the completion of the Merger; and

●

the attention of our and Concho’s management may be directed toward

the completion of the Merger,

as well as integration planning, which could otherwise

have been devoted to day-to-day operations or

to other opportunities that may have been beneficial

to our business.

We have and will continue to divert significant management resources in an effort to complete

the Merger and

are subject to restrictions contained in the Merger Agreement

on the conduct of our business.

If the Merger is

not completed, we will have incurred significant

costs, including the diversion of management resources,

for

which we will have received little or no benefit.

The market value of our common stock could

decline if large amounts of our common

stock are sold

following the Concho acquisition.

If the Merger is consummated, ConocoPhillips will

issue shares of ConocoPhillips common stock

to former

Concho stockholders.

Former Concho stockholders may decide not to

hold the shares of ConocoPhillips

common stock that they will receive in the Merger, and ConocoPhillips

stockholders may decide to reduce

their investment in ConocoPhillips as a result

of the changes to ConocoPhillips’ investment

profile as a result

of the Merger.

Other Concho stockholders, such as funds

with limitations on their permitted holdings of

stock

in individual issuers, may be required to sell the

shares of ConocoPhillips common stock that

they receive in

the Merger.

Such sales of ConocoPhillips common stock

could have the effect of depressing the market price

for ConocoPhillips common stock.

Combining our business with Concho’s may be more difficult, costly or time-consuming

than expected and

the combined company may fail to realize

the anticipated benefits of the Merger, which may adversely affect

the combined company’s business results and negatively affect the value of the combined

company’s

common stock.

The success of the Merger will depend on, among other

things, the ability of the two companies to combine

their businesses in a manner that facilitates

growth opportunities and realizes expected cost

savings.

The

combined company may encounter difficulties in integrating

our and Concho’s businesses and realizing the

anticipated benefits of the Merger.

The combined company must achieve the

anticipated improvement in free

cash flow generation and returns and achieve the

planned cost savings without adversely affecting current

revenues or compromising the disciplined investment

philosophy for future growth.

If the combined company

is not able to successfully achieve these objectives,

the anticipated benefits of the Merger may not be

realized

fully, or at all, or may take longer to realize than expected.

 
65

The Merger involves the combination of two companies

which currently operate, and until the completion

of

the Merger will continue to operate, as independent public

companies.

There can be no assurances that our

respective businesses can be integrated successfully.

It is possible that the integration process could result

in

the loss of key employees from both companies;

the loss of commercial and vendor partners;

the disruption of

our, Concho’s or both companies’ ongoing businesses;

inconsistencies in standards, controls, procedures

and

policies;

unexpected integration issues;

higher than expected integration costs and an overall

post-completion

integration process that takes longer than originally

anticipated.

The combined company will be required

to

devote management attention and resources to integrating

its business practices and operations, and prior

to the

Merger, management attention and resources will be required to plan for

such integration.

An inability to realize the full extent of the anticipated

benefits of the Merger and the other transactions

contemplated by the Merger Agreement, as well as any delays

encountered in the integration process, could

have an adverse effect upon the revenues, level of expenses

and operating results of the combined company,

which may adversely affect the value of the common stock

of the combined company.

In addition, the actual integration may result

in additional and unforeseen expenses, and the

anticipated

benefits of the integration plan may not be realized.

There are a large number of processes, policies,

procedures, operations and technologies and systems

that must be integrated in connection with

the Merger

and the integration of Concho’s business.

Although we expect that the elimination of duplicative

costs,

strategic benefits, and additional income, as well

as the realization of other efficiencies related to the

integration of the business, may offset incremental transaction

and Merger-related costs over time, any net

benefit may not be achieved in the near term

or at all.

If we and Concho are not able to adequately

address

integration challenges, we may be unable to successfully

integrate operations or realize the anticipated

benefits

of the integration of the two companies.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Millions of Dollars

Period

Total Number of

Shares

Purchased

*

Average Price

Paid per Share

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Programs

Approximate Dollar

Value

of Shares That

May Yet Be

Purchased Under the

Plans or Programs

July 1-31, 2020

-

$

-

-

$

14,649

August 1-31, 2020

-

-

-

14,649

September 1-30, 2020

-

-

-

14,649

-

$

-

-

*There were no repurchases of common stock from company employees in connection with the company's broad-based employee incentive plans.

In late 2016, we initiated our current share repurchase

program.

As of September 30, 2020, we had announced

a total authorization to repurchase $25 billion

of our common stock.

As of December 31, 2019, we had

repurchased $9.6 billion of shares.

In the first quarter of 2020, we repurchased

an additional $726 million of

shares.

On April 16, 2020, as a response to the oil market

downturn, we announced we were suspending our

share repurchase program,

and on September 30, 2020, we announced our

intent to resume share repurchases

of $1 billion in the fourth quarter;

however, on October 19, 2020 we announced that we had entered

into a

definitive agreement to acquire Concho and would

suspend share repurchases until after

the transaction closes.

The transaction is expected to close in the first

quarter of 2021.

Acquisitions for the share repurchase program

are made at management’s discretion, at prevailing prices, subject to market

conditions and other factors.

Except as limited by applicable legal requirements,

repurchases may be increased, decreased or discontinued

at

any time without prior notice.

Shares of stock repurchased under the plan are

held as treasury shares.

See the

“Our ability to declare and pay dividends and repurchase

shares is subject to certain considerations” section

in

Risk Factors on pages 21–22 of our 2019 Annual

Report on Form 10-K.

 
66

Item 6.

EXHIBITS

2.1

Agreement and Plan of Merger, dated as of October 18, 2020, among ConocoPhillips, Falcon 

Merger Sub Corp. and Concho Resources Inc. (incorporated by reference to Exhibit 2.1 to the 

Current Report of ConocoPhillips on Form 8-K filed on October 19, 2020; File No. 001-32395)

10.1*

Successor Trustee Agreement of the Deferred Compensation Trust Agreement for Non-

Employee Directors of ConocoPhillips, dated July 31, 2020.

10.2*

First Amendment to the Successor Trustee Agreement of the Deferred Compensation Trust 

Agreement for Non-Employee Directors of ConocoPhillips, dated August 4, 2020.

22*

Subsidiary Guarantors of Guaranteed Securities.

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.

101.INS*

Inline XBRL Instance Document.

101.SCH*

Inline XBRL Schema Document.

101.CAL*

Inline XBRL Calculation Linkbase Document.

101.LAB*

Inline XBRL Labels Linkbase Document.

101.PRE*

Inline XBRL Presentation Linkbase Document.

101.DEF*

Inline XBRL Definition Linkbase Document.

104*

Cover Page Interactive Data File (formatted

as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

 
67

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/ Catherine A. Brooks

Catherine A. Brooks

Vice President and Controller

(Chief Accounting and Duly Authorized Officer)

November 3, 2020