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Acquisitions and Dispositions | 3 Months Ended
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Mar. 31, 2024
Business Combination, Asset Acquisition And Dispositions [Abstract] |
Acquisitions and Dispositions | Note 3—Acquisitions and Dispositions 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. The final consideration for the all-cash transaction was $3.0 billion after customary adjustments (CAD $4.1 billion):
Fair value of consideration | Millions of Dollars
Cash paid | $ | 2,635 |
Contingent consideration | 320 |
Final Consideration | $ | 2,955 |
The contingent consideration 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 million for every dollar that WCS pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved. The undiscounted amount we could pay under this arrangement is up to $0.3 billion USD. The fair value of the contingent consideration on the acquisition date was $320 million and estimated by applying the income approach. As of March 31, 2024, we have made payments of $12 million USD under this arrangement, reflected in the "Other" line within the Financing Activities section of our Consolidated Statement of Cash Flows. See Note 11. The transaction was accounted for as a business combination under FASB ASC Topic 805 using the acquisition method, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. By the end of the first quarter of 2024, we finalized the allocation of the purchase price to specific assets and liabilities. It was based on the fair value of final consideration and the conclusion of the fair value determination of long-lived assets and all other assets acquired and liabilities assumed. Oil and gas properties were valued using a discounted cash flow approach incorporating market participant 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 billion was allocated to the identifiable assets and liabilities based on fair values as of the acquisition date of October 4, 2023.
Recognized amounts of identifiable assets acquired and liabilities assumed | Millions of Dollars
Oil and gas properties | $ | 3,082 |
Asset retirement obligations | (112) |
Other | (15) |
Total identifiable net assets | $ | 2,955 |
With the completion of the transaction, we have acquired proved and unproved properties of approximately $2.9 billion and $0.2 billion, respectively. Supplemental Pro Forma (unaudited) The following table summarizes the unaudited supplemental pro forma financial information for the three-month period ending March 31, 2023, as if we had completed the acquisition on January 1, 2022.
| Millions of Dollars
| Three Months Ended March 31, 2023 |  |
Supplemental Pro Forma (unaudited) | As Reported | Pro Forma Surmont | Pro Forma Combined |  |  |  |
Total Revenues and Other Income | $ | 15,517 |  | 603 |  | 16,120 |  |  |  |  |
Income (loss) before income taxes | 4,562 |  | 70 |  | 4,632 |  |  |  |  |
Net Income (Loss) | 2,920 |  | 53 |  | 2,973 |  |  |  |  |
Earnings per share ($ per share): |  |  |  |  |  |  |
Basic net income (loss) | $ | 2.38 |  |  | 2.43 |  |  |  |  |
Diluted net income (loss) | 2.38 |  |  | 2.42 |  |  |  |  |
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, 2022, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma financial information for the three-month period ended March 31, 2023, is a result of combining the consolidated income statement of ConocoPhillips with the results of 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 oil and gas properties. We believe the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected.

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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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