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Acquisitions and Dispositions | 12 Months Ended
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Dec. 31, 2023
Business Combination, Asset Acquisition And Dispositions [Abstract] |
Acquisitions and Dispositions | Note 3—Acquisitions and Dispositions All gains or losses on asset dispositions are reported before-tax and are included net in the “Gain (loss) on dispositions” line on our consolidated income statement. All cash proceeds and payments are included in the “Cash Flows From Investing Activities” section of our consolidated statement of cash flows. 2023 Surmont Acquisition In October 2023, we completed our acquisition of the remaining 50 percent working interest in Surmont, an asset in our Canada segment, from TotalEnergies EP Canada Ltd. Following the acquisition, we own 100 percent working interest in Surmont. The fair value of total consideration for the all-cash transaction was $3.0 billion (CAD $4.1 billion):
Fair value of consideration | Millions of Dollars
Cash paid | $ | 2,685 |
Contingent consideration | 320 |
Total consideration | $ | 3,005 |
The contingent payment arrangement requires additional consideration to be paid to TotalEnergies EP Canada Ltd. up to $0.4 billion CAD over a five-year term. The contingent payments represent $2.0 million for every dollar that WCS pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved. The range of the undiscounted amounts we could pay under this arrangement is between $0 and $0.3 billion. The fair value of the contingent consideration on the acquisition date was $320 million and estimated by applying the income approach. See Note 13. The transaction is accounted for as a business combination under FASB Topic ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date as we identify new information about facts and circumstances that existed as of the acquisition date to consider. Oil and gas properties were valued using a discounted cash flow approach incorporating market participants and internally generated price assumptions, production profiles and operating and development cost assumptions. The fair values of other assets acquired and liabilities assumed, which included accounts receivable, accounts payable, and most other current assets and current liabilities, were determined to be equivalent to the carrying value due to their short-term nature. The total consideration of $3.0 billion was allocated to the identifiable assets and liabilities based on their fair values as of the acquisition date, October 4, 2023.
Recognized amounts of identifiable assets acquired and liabilities assumed | Millions of Dollars
Oil and gas properties | 3,129 |
Asset retirement obligations | (112) |
Other | (12) |
Total identifiable net assets | $ | 3,005 |
With the completion of the transaction, we acquired proved and unproved properties of approximately $2.9 billion and $0.2 billion, respectively. In anticipation of the acquisition, we entered into, and settled, various foreign exchange forward contracts to purchase CAD and recognized a loss of $112 million in the "Foreign currency transaction (gain) loss" line on our consolidated income statement associated with these forward contracts. The related cash flows are included within "cash flows from investing activities" on our consolidated statement of cash flows. From the acquisition date through December 31, 2023, "Total Revenues and Other Income" and "Net Income (Loss)" associated with the acquired assets were $572 million and $119 million, respectively. Supplemental Pro Forma (unaudited) The following tables summarize the unaudited supplemental pro forma financial information for the year ended December 31, 2023, and 2022, as if we had completed the acquisition on January 1, 2022.
| Millions of Dollars
| Year Ended December 31, 2023
| As reported |  | Pro forma Surmont | Pro forma Combined
Total Revenues and Other Income | $ | 58,574 |  |  | 2,561 |  | 61,135 |
Income (loss) before income taxes | 16,288 |  |  | 659 |  | 16,947 |
Net Income (Loss) | 10,957 |  |  | 501 |  | 11,458 |
Earnings per share: |  |  |  |
Basic net income (loss) | $ | 9.08 |  |  |  | 9.50 |
Diluted net income (loss) | 9.06 |  |  |  | 9.47 |
| Millions of Dollars
| Year Ended December 31, 2022
| As reported |  | Pro forma Surmont | Pro forma Combined
Total Revenues and Other Income | $ | 82,156 |  |  | 3,582 |  | 85,738 |
Income (loss) before income taxes | 28,228 |  |  | 947 |  | 29,175 |
Net Income (Loss) | 18,680 |  |  | 720 |  | 19,400 |
Earnings per share: |  |  |  |
Basic net income (loss) | $ | 14.62 |  |  |  | 15.18 |
Diluted net income (loss) | 14.57 |  |  |  | 15.13 |
The unaudited supplemental pro forma financial information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the transactions been completed on January 1, 2022, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma financial information for the years ending December 31, 2023 and 2022, respectively, is a result of combining the consolidated income statement of ConocoPhillips with the assets acquired from TotalEnergies EP Canada Ltd. The pro forma results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction. The pro forma results include adjustments which relate primarily to DD&A, which is based on the unit-of-production method, resulting from the purchase price allocated to properties, plants and equipment. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected. QatarEnergy LNG NFS(3) (NFS3), formerly Qatar Liquefied Gas Company Limited (12) (QG12) During 2022, we were awarded a 25 percent interest in NFS3, a new joint venture with QatarEnergy, to participate in the North Field South (NFS) LNG project. Formation of NFS3 closed during 2023. NFS3 has a 25 percent interest in the NFS project and is reported as an equity method investment in our Europe, Middle East and North Africa segment. See Note 4. Port Arthur Liquefaction Holdings, LLC (PALNG) During 2023, we acquired a 30 percent interest in PALNG, a joint venture for the development of a large-scale LNG facility for the first phase of the Port Arthur LNG project ("Phase 1"). Sempra PALNG Holdings, LLC owns the remaining 70 percent interest in the joint venture. PALNG is reported as an equity method investment in our Corporate and Other segment. See Note 4. Contingent Payments We recorded contingent payments related to the previous dispositions of our working interests in the Foster Creek Christina Lake Partnership and western Canada gas assets, and our San Juan assets. Contingent payments were recorded as (gain) loss on disposition on our consolidated income statement and reflected within our Canada and Lower 48 segments. In our Canada segment, the contingent payment, calculated and paid quarterly, was $6 million CAD for every $1 CAD by which the WCS quarterly average crude oil price exceeded $52 CAD per barrel. In our Lower 48 segment, the contingent payment, paid annually, was calculated monthly at $7 million per month when the U.S. Henry Hub natural gas price was at or above $3.20 per MMBTU. The term of contingent payments in our Canada segment ended in the second quarter of 2022 and the term of contingent payments in our Lower 48 segment ended at the end of 2023. Contingent payments recorded in the years 2023, 2022 and 2021 were $7 million, $451 million and $369 million, respectively. 2022 Acquisition of Additional Shareholding Interest in Australia Pacific LNG (APLNG) In February 2022, we completed the acquisition of an additional 10 percent interest in APLNG from Origin Energy for approximately $1.4 billion, after customary adjustments, in an all-cash transaction resulting from the exercise of our preemption right. This increased our ownership in APLNG to 47.5 percent, with Origin Energy and Sinopec owning 27.5 percent and 25.0 percent, respectively. APLNG is reported as an equity investment in our Asia Pacific segment. QatarEnergy LNG NFE(4) (NFE4), formerly Qatar Liquefied Gas Company Limited (8) (QG8) During 2022, we were awarded a 25 percent interest in NFE4, a new joint venture with QatarEnergy to participate in the North Field East (NFE) LNG project. NFE4 has a 12.5 percent interest in the NFE project and is reported as an equity method investment in our Europe, Middle East and North Africa segment. See Note 4. Asset Acquisition In September 2022, we completed the acquisition of an additional working interest in certain Eagle Ford acreage in the Lower 48 segment for cash consideration of $236 million after customary adjustments. This agreement was accounted for as an asset acquisition, with the consideration allocated primarily to PP&E. Assets Sold During 2022, we sold our interests in certain noncore assets in our Lower 48 segment for net proceeds of $680 million, with no gain or loss recognized on sale. At the time of disposition, our interest in these assets had a net carrying value of $680 million, consisting of $825 million of assets, primarily related to $818 million of PP&E, and $145 million of liabilities, primarily related to AROs. In March 2022, we completed the divestiture of our subsidiaries that held our Indonesia assets and operations, and based on an effective date of January 1, 2021, we received net proceeds of $731 million after customary adjustments and recognized a $534 million before-tax and $462 million after-tax gain related to this transaction. Together, the subsidiaries sold indirectly held our 54 percent interest in the Indonesia Corridor Block PSC and 35 percent shareholding in the Transasia Pipeline Company. At the time of the disposition, the net carrying value was approximately $0.2 billion, excluding $0.2 billion of cash and restricted cash. The net book value consisted primarily of $0.3 billion of PP&E and $0.1 billion of ARO. The before-tax earnings associated with the subsidiaries sold, excluding the gain on disposition noted above, were $138 million and $604 million for the years ended December 31, 2022 and 2021, respectively. Results of operations for the Indonesia interests sold were reported in our Asia Pacific segment. 2021 During the year, we completed the acquisitions of Concho Resources Inc. (Concho) and of Shell Enterprises LLC’s (Shell) Permian assets. The acquisitions were accounted for as business combinations under FASB Topic ASC 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. We completed the final allocation of the purchase price to acquired assets and liabilities of Concho by the end of the year, and by the end of the first quarter of 2022 for the Shell assets. It was based on the fair value of the long-lived assets and the conclusion of the fair value determination of all other assets and liabilities acquired. Acquisition of Concho Resources Inc. In January 2021, we completed our acquisition of Concho, an independent oil and gas exploration and production company with operations across New Mexico and West Texas focused in the Permian-based Delaware and Midland Basins. Total consideration for the all-stock transaction was valued at $13.1 billion, in which 1.46 shares of ConocoPhillips common stock were exchanged for each outstanding share of Concho common stock. We recognized approximately $157 million of transaction-related costs, all of which were expensed in the first quarter of 2021. These non-recurring costs related primarily to fees paid to advisors and the settlement of share-based awards for certain Concho employees based on the terms of the Merger Agreement. In the first quarter of 2021, we commenced a company-wide restructuring program, the scope of which included combining the operations of the two companies as well as other global restructuring activities. We recognized non-recurring restructuring costs mainly for employee severance and related incremental pension benefit costs. The impact from the transaction and restructuring costs to the lines of our consolidated income statement for the year ended December 31, 2021, are below:
| Millions of Dollars
| Transaction Cost | Restructuring Cost | Total Cost
Production and operating expenses |  | 128 |  | 128 |
Selling, general and administration expenses | 135 |  | 67 |  | 202 |
Exploration expenses | 18 |  | 8 |  | 26 |
Taxes other than income taxes | 4 |  | 2 |  | 6 |
Other expenses | — |  | 29 |  | 29 |
| $ | 157 |  | 234 |  | 391 |
In February 2021, we completed a debt exchange offer related to the debt assumed from Concho. As a result of the debt exchange, we recognized an additional income tax-related restructuring charge of $75 million. From the acquisition date through December 31, 2021, “Total Revenues and Other Income” and “Net Income (Loss)” associated with the acquired Concho business were approximately $6,571 million and $2,330 million, respectively. The results associated with the Concho business for the same period include a before- and after-tax loss of $305 million and $233 million, respectively, on the acquired derivative contracts. The before-tax loss is recorded within “Total Revenues and Other Income” on our consolidated income statement. See Note 12. Acquisition of Shell Permian Assets In December 2021, we completed our acquisition of Shell assets in the Permian based Delaware Basin. The accounting close date used for reporting purposes was December 31, 2021. Assets acquired include approximately 225,000 net acres and producing properties located entirely in Texas. Total consideration for the transaction was $8.6 billion. We recognized approximately $44 million of transaction-related costs which were expensed in 2021. Supplemental Pro Forma (unaudited) The following table summarizes the unaudited supplemental pro forma financial information for the year ended December 31, 2021, as if we had completed the acquisition of the Shell Permian assets on January 1, 2020.
| Millions of Dollars
| Year Ended December 31, 2021
| As reported |  |  | Pro forma Shell | Pro forma Combined
Total Revenues and Other Income | $ | 48,349 |  |  |  | 3,220 |  | 51,569 |
Income (loss) before income taxes | 12,712 |  |  |  | 1,201 |  | 13,913 |
Net Income (Loss) | 8,079 |  |  |  | 920 |  | 8,999 |
Earnings per share: |  |  |  |  |
Basic net income (loss) | $ | 6.09 |  |  |  |  | 6.78 |
Diluted net income (loss) | 6.07 |  |  |  |  | 6.76 |
The unaudited supplemental pro forma financial information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been completed on January 1, 2020, nor is it necessarily indicative of future operating results of the combined entity. The pro forma results do not include transaction-related costs, nor any cost savings anticipated as a result of the transaction. The pro forma includes adjustments which relate primarily to DD&A, which is based on the unit-of-production method, resulting from the purchase price allocated to properties, plants and equipment. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected. Assets Sold In 2020, we completed the sale of our Australia-West assets and operations. The sales agreement entitled us to a $200 million payment upon a FID of the Barossa development project. In March 2021, FID was announced and as such, we recognized a $200 million gain on disposition in the first quarter of 2021. The purchaser failed to pay the FID bonus when due. We filed an arbitration proceeding against the purchaser to enforce our contractual right to the $200 million, plus interest accruing from the due date and the matter was resolved in April 2023 to our satisfaction. Results of operations related to this transaction are reflected in our Asia Pacific segment. See Note 11. In the second half of 2021, we sold our interests in certain noncore assets in our Lower 48 segment for approximately $250 million after customary adjustments, recognizing a before-tax gain on sale of approximately $58 million. We also completed the sale of our noncore exploration interests in Argentina, recognizing a before-tax loss on disposition of $179 million. Results of operations for Argentina were reported in our Other International segment.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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