ConocoPhillips(COP) - 2025 Q2 - Quarterly Report

Commonly Used Abbreviations Part I—Financial Information Item 1. Financial Statements ConocoPhillips' unaudited consolidated financial statements for Q2 2025 and FY2024, covering income, comprehensive income, balance sheet, and cash flow, are presented for review Consolidated Income Statement Net income decreased for Q2 and H1 2025 due to lower realized prices, despite higher sales volumes Consolidated Income Statement Data | Metric | Three Months Ended June 30, 2025 (Millions of Dollars) | Three Months Ended June 30, 2024 (Millions of Dollars) | Six Months Ended June 30, 2025 (Millions of Dollars) | Six Months Ended June 30, 2024 (Millions of Dollars) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Sales and other operating revenues | $14,004 | $13,620 | $30,521 | $27,468 | | Total Revenues and Other Income | $14,740 | $14,136 | $31,841 | $28,612 | | Total Costs and Expenses | $11,723 | $10,477 | $24,358 | $21,145 | | Income (loss) before income taxes | $3,017 | $3,659 | $7,483 | $7,467 | | Income tax provision (benefit) | $1,046 | $1,330 | $2,663 | $2,587 | | Net Income (Loss) | $1,971 | $2,329 | $4,820 | $4,880 | | Basic EPS ($) | $1.56 | $1.99 | $3.80 | $4.15 | | Diluted EPS ($) | $1.56 | $1.98 | $3.79 | $4.14 | Consolidated Statement of Comprehensive Income Comprehensive income increased for Q2 and H1 2025, primarily due to positive foreign currency translation adjustments, despite lower net income Consolidated Statement of Comprehensive Income Data | Metric | Three Months Ended June 30, 2025 (Millions of Dollars) | Three Months Ended June 30, 2024 (Millions of Dollars) | Six Months Ended June 30, 2025 (Millions of Dollars) | Six Months Ended June 30, 2024 (Millions of Dollars) | | :---------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net Income (Loss) | $1,971 | $2,329 | $4,820 | $4,880 | | Other Comprehensive Income (Loss), Net of Tax | $492 | $(44) | $571 | $(288) | | Comprehensive Income (Loss) | $2,463 | $2,285 | $5,391 | $4,592 | - Foreign currency translation adjustments significantly impacted Other Comprehensive Income (Loss), shifting from a $(303) million loss in H1 2024 to a $554 million gain in H1 2025[14] Consolidated Balance Sheet Total assets and liabilities slightly decreased from December 31, 2024, to June 30, 2025, while total equity increased Consolidated Balance Sheet Data | Metric | June 30, 2025 (Millions of Dollars) | December 31, 2024 (Millions of Dollars) | | :------------------------------------------------------------------------------------------------ | :-------------- | :---------------- | | Total Current Assets | $13,939 | $15,647 | | Investments and long-term receivables | $10,361 | $9,869 | | Net properties, plants and equipment (net of accumulated DD&A) | $95,242 | $94,356 | | Other assets | $3,057 | $2,908 | | Total Assets | $122,599 | $122,780 | | Total Current Liabilities | $10,986 | $12,124 | | Long-term debt | $23,115 | $23,289 | | Total Liabilities | $57,027 | $57,984 | | Total Equity | $65,572 | $64,796 | | Total Liabilities and Equity | $122,599 | $122,780 | Consolidated Statement of Cash Flows Net cash from operating activities slightly decreased in H1 2025, while investing activities used less cash and financing activities used more Consolidated Statement of Cash Flows Data | Metric | Six Months Ended June 30, 2025 (Millions of Dollars) | Six Months Ended June 30, 2024 (Millions of Dollars) | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net Cash Provided by Operating Activities | $9,600 | $9,904 | | Net Cash Used in Investing Activities | $(4,807) | $(6,292) | | Net Cash Used in Financing Activities | $(5,620) | $(4,868) | | Net Change in Cash, Cash Equivalents and Restricted Cash | $(679) | $(1,325) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $5,226 | $4,574 | - Net cash provided by operating activities decreased by $304 million in H1 2025, primarily due to changes in operational working capital driven by tax payment timing, partly offset by lower accounts receivable[19][216] - Net cash used in investing activities decreased by $1,485 million, largely due to higher proceeds from asset dispositions ($1,341 million in H1 2025 vs. $178 million in H1 2024) and working capital changes[19] - Net cash used in financing activities increased by $752 million, mainly due to higher share repurchases ($2,722 million in H1 2025 vs. $2,346 million in H1 2024) and dividends paid ($1,982 million in H1 2025 vs. $1,839 million in H1 2024)[19] Notes to Consolidated Financial Statements Note 1—Basis of Presentation Interim financial statements are unaudited, include all necessary adjustments, and should be read with the 2024 Annual Report on Form 10-K - The interim financial information is unaudited and includes all known accruals and adjustments necessary for a fair presentation[21] - These financial statements should be read in conjunction with the consolidated financial statements and notes included in the 2024 Annual Report on Form 10-K[21] Note 2—Inventories Total inventories slightly increased from December 31, 2024, to June 30, 2025, with crude oil and natural gas as the largest component Inventories Data | Category | June 30, 2025 (Millions of Dollars) | December 31, 2024 (Millions of Dollars) | | :------------------------ | :-------------- | :---------------- | | Crude oil and natural gas | $1,013 | $907 | | Materials and supplies | $884 | $902 | | Total inventories | $1,897 | $1,809 | | Inventories valued on the LIFO basis | $588 | $578 | Note 3—Acquisitions and Dispositions ConocoPhillips acquired Marathon Oil for $16.5 billion in November 2024 and completed asset dispositions generating $1.3 billion in proceeds - Acquisition of Marathon Oil Corporation completed in November 2024, valued at $16.5 billion, primarily through the exchange of 0.255 shares of ConocoPhillips common stock for each Marathon Oil share[23] - Acquired proved properties of approximately $13 billion ($12 billion in Lower 48, $1 billion in Equatorial Guinea) and unproved properties of approximately $11 billion in Lower 48[28] - Recognized approximately $585 million pre-tax in transaction-related costs to date, including $17 million and $40 million in the three- and six-month periods of 2025, respectively[29] - Sold noncore assets in the Lower 48 segment for $581 million in Q1 2025, recognizing a $64 million pre-tax gain[33] - Sold interests in the Ursa and Europa fields and Ursa Oil Pipeline Company LLC for $718 million in Q2 2025, recognizing a $274 million pre-tax gain[34] - Signed an agreement in July 2025 to divest Lower 48 assets in the Anadarko Basin for approximately $1.3 billion, expected to close in Q4 2025[35] Note 4—Investments and Long-Term Receivables Significant equity method investments in LNG projects, including APLNG, PALNG, and Qatar LNG, totaled approximately $8.3 billion at June 30, 2025 - Carrying value of equity method investment in Australia Pacific LNG (APLNG) was approximately $5.2 billion at June 30, 2025[36] - Carrying value of equity method investment in Port Arthur LNG (PALNG) was approximately $1.6 billion at June 30, 2025[37] - Carrying value of equity method investments in Qatar LNG (N3, NFE4, NFS3 joint ventures) was approximately $1.5 billion at June 30, 2025[38][43] Note 5—Debt Total debt decreased to $23.5 billion at June 30, 2025, due to $0.7 billion in principal retirement, and the $5.5 billion credit facility was refinanced - Total debt balance at June 30, 2025, was $23.5 billion, down from $24.3 billion at December 31, 2024[39] - Retired $0.2 billion principal amount of 3.35% Notes in May 2025 and $0.5 billion of other debt in Q1 2025[39] - Refinanced revolving credit facility in February 2025, maintaining $5.5 billion aggregate principal amount and extending expiration to February 2030[40] - Had access to $5.5 billion in available borrowing capacity under the revolving credit facility at June 30, 2025, with no commercial paper outstanding[42] - Current long-term debt credit ratings are Fitch: "A" (stable), S&P: "A-" (stable), Moody's: "A2" (stable)[230] Note 6—Suspended Wells and Exploration Expenses Capitalized costs for suspended wells increased by $13 million to $209 million, primarily due to a successful Norwegian Sea appraisal well - Capitalized cost of suspended wells increased by $13 million to $209 million at June 30, 2025, from December 31, 2024[46] - A $77 million increase in suspended wells costs resulted from the second Slagugle appraisal well in the Norwegian Sea confirming hydrocarbons[46] - Recognized dry hole expenses of $36 million in Q1 2025 related to previously suspended wells in the Asia Pacific segment[47] Note 7—Changes in Equity Total equity increased to $65.572 billion at June 30, 2025, driven by net income and other comprehensive income, offset by dividends and share repurchases Changes in Equity Data | Metric | December 31, 2024 (Millions of Dollars) | Six Months Ended June 30, 2025 (Millions of Dollars) | June 30, 2025 (Millions of Dollars) | | :-------------------------------- | :---------------- | :----------------------------- | :-------------- | | Balances at Beginning of Period | $64,796 | | | | Net income (loss) | | $4,820 | | | Other comprehensive income (loss) | | $571 | | | Dividends declared | | $(1,982) | | | Repurchase of company common stock | | $(2,722) | | | Excise tax on share repurchases | | $(25) | | | Distributed under benefit plans | | $114 | | | Balances at End of Period | | | $65,572 | Note 8—Guarantees ConocoPhillips is liable for contingent obligations related to APLNG, QatarEnergy LNG, and Equatorial Guinea, totaling $1.5 billion in maximum potential payments - APLNG guarantees include a $210 million maximum exposure for a project finance reserve account (carrying value $14 million) and a $620 million maximum potential liability for natural gas delivery sales agreements[53] - Other APLNG performance guarantees have a maximum potential of $570 million (carrying value $39 million)[53] - QatarEnergy LNG guarantees have no maximum limit, with a carrying value of approximately $14 million[50] - Equatorial Guinea guarantees have a maximum potential of $116 million, with a carrying value of approximately $4 million[51] - Indemnification obligations recorded at $40 million at June 30, 2025, with generally indefinite terms and unlimited maximum amounts for environmental issues[54] Note 9—Contingencies, Commitments and Accrued Environmental Costs ConocoPhillips faces various lawsuits and claims, including environmental remediation, accruing liabilities when probable and estimable, with $206 million in environmental costs - Accrues liabilities for known contingencies when the loss is probable and reasonably estimable, using the low end of a range if no better estimate[55] - Total accrued environmental costs for remediation activities in the U.S. and Canada were $206 million at June 30, 2025, and December 31, 2024[60] - An ICSID tribunal upheld an $8.5 billion award plus interest against Venezuela for unlawful expropriation, and ICC arbitrations resulted in additional awards of approximately $2 billion and $33 million plus interest against PDVSA. The company has received approximately $791 million related to the first ICC award[64] - Vigorously defending against climate change lawsuits filed by governmental entities in several U.S. states/territories, believing them to be factually and legally meritless[66] Note 10—Derivative and Financial Instruments ConocoPhillips uses commodity and interest rate derivatives to manage market risks and invests in financial instruments, primarily debt securities, managed by cash forecasts - Commodity derivative instruments are held at fair value; gross fair values (excluding collateral) at June 30, 2025, were $583 million in assets and $558 million in liabilities[74][75] - PALNG dedesignated remaining interest rate swaps as cash flow hedges in Q1 2025, recognizing a gain of $18 million (Q2 2025) and $33 million (H1 2025) in "Equity in earnings of affiliates"[76][77] - Investments in debt securities classified as available for sale totaled $1,585 million at fair value at June 30, 2025[80][81] - Manages credit risk for OTC derivative contracts through predetermined credit limits and cash-call margins; trade receivables have a broad customer base and short payment terms[84][85] - Aggregate fair value of derivative instruments with credit risk-related contingent features in a liability position was $82 million at June 30, 2025; a downgrade below investment grade would require $43 million in additional collateral[87] Note 11—Fair Value Measurement Certain assets and liabilities are measured at fair value using a hierarchy, including debt securities, commodity derivatives, and contingent consideration for the Surmont acquisition Fair Value Measurement Data | Category | Level 1 (Millions of Dollars) | Level 2 (Millions of Dollars) | Level 3 (Millions of Dollars) | Total (Millions of Dollars) | | :-------------------------- | :------ | :------ | :------ | :------ | | Investments in debt securities | $244 | $1,341 | $0 | $1,585 | | Commodity derivatives (Assets) | $301 | $251 | $31 | $583 | | Commodity derivatives (Liabilities) | $333 | $173 | $52 | $558 | | Contingent consideration | $0 | $0 | $99 | $99 | - The fair value of contingent consideration for the Surmont acquisition was $99 million at June 30, 2025, with $56 million in payments made during H1 2025[93][94] Note 12—Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) improved to $(5,902) million at June 30, 2025, primarily due to positive foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) Data | Component | December 31, 2024 (Millions of Dollars) | Other Comprehensive Income (Loss) (H1 2025) (Millions of Dollars) | June 30, 2025 (Millions of Dollars) | | :-------------------------------- | :---------------- | :------------------------------------------ | :-------------- | | Defined Benefit Plans | $(390) | $13 | $(377) | | Unrealized Holding Gain/(Loss) on Securities | $3 | $4 | $7 | | Foreign Currency Translation | $(6,104) | $554 | $(5,550) | | Unrealized Gain/(Loss) on Hed