Note 5—Asset Acquisitions and Dispositions
All gains or losses on asset dispositions
are reported before-tax and are included net in
the “Gain on
dispositions” line on our consolidated income
statement.
All cash proceeds are included in the “Cash Flows
From Investing Activities” section of our consolidated
statement of cash flows.
2019
Assets Held for Sale
In October 2019, we entered into an agreement to sell
the subsidiaries that hold our Australia-West assets and
operations to Santos for $
1.39
billion, plus customary adjustments, with an effective
date of January 1, 2019.
In addition, we will receive a payment of $
75
million upon final investment decision of
the Barossa
development project.
These subsidiaries hold our
37.5
percent interest in the Barossa Project and
Caldita
Field, our
56.9
percent interest in the Darwin LNG Facility and
Bayu-Undan Field, our
40
the Greater Poseidon Fields, and our
50
percent interest in the Athena Field.
The net carrying value is
approximately $
0.6
billion, which consisted primarily of $
1.2
0.3
working capital, offset by $
0.7
0.2
billion of deferred tax liabilities.
The assets met held
for sale criteria in the fourth quarter, and as of December 31, 2019
we had reclassified $
1.2
“Prepaid expenses and other current assets” and $
0.7
billion of noncurrent ARO to “Other accruals”
on our
consolidated balance sheet.
The before-tax earnings associated with our
Australia-West subsidiaries were
$
372
364
317
million for the years ended December 31,
2019, 2018 and 2017,
respectively.
This transaction is expected to be completed
in the first quarter of 2020, subject to regulatory
approvals and other specific conditions precedent.
Results of operations for the subsidiaries
to be sold are
reported within our Asia Pacific and Middle East
segment.
In the fourth quarter of 2019, we signed an agreement
to sell our interests in the Niobrara shale play
for $
380
million, plus customary adjustments,
and overriding royalty interests in certain
future wells.
To reduce the
carrying value to fair value, in the fourth quarter
of 2019, we recorded an impairment of $
379
tax for developed properties and exploration expenses
of $
7
million related to leasehold impairment of
undeveloped properties.
Our Niobrara interests to be sold have a net carrying
value of approximately $
390
million, which consisted primarily of $
426
million of PP&E, offset by $
34
million of noncurrent ARO.
The
assets met held for sale criteria in the fourth quarter, and as of December
31, 2019, we had reclassified $
426
million of PP&E to “Prepaid expenses and other
current assets” and $
34
million of noncurrent AROs to “Other
accruals” on our consolidated balance sheet.
The before-tax losses associated with our interests
in Niobrara,
including the $386 million of impairments noted
above, were $
372
12
million for the years ended
December 31, 2019 and 2017,
respectively.
The before-tax earnings associated with our interests
in Niobrara
for the year ended December 31, 2018 was $
35
million.
This transaction is subject to regulatory approval
and
other specific conditions precedent and is expected
to close in the first quarter of 2020.
The Niobrara results of
operations are reported within our Lower 48 segment.
Assets Sold
In January 2019, we entered into agreements to sell
our
12.4
percent ownership interests in the Golden
Pass
LNG Terminal and Golden Pass Pipeline.
We also entered into agreements to amend our contractual
obligations for retaining use of the facilities.
As a result of entering into these agreements, we recorded
a
before-tax impairment of $
60
million in the first quarter of 2019 which is included
in the “Equity in earnings
of affiliates” line on our consolidated income statement.
We completed the sale in the second quarter of 2019.
Results of operations for these assets are reported in
our Lower 48 segment.
See Note 15—Fair Value
Measurement for additional information.
In April 2019, we entered into an agreement to sell
two ConocoPhillips U.K. subsidiaries
to Chrysaor E&P
Limited for $
2.675
billion plus interest and customary adjustments,
with an effective date of January 1, 2018.
On September 30, 2019, we completed the sale for
proceeds of $
2.2
billion and recognized a $
1.7
before-tax and $
2.1
billion after-tax gain associated with this transaction
in 2019.
Together the subsidiaries
sold indirectly held our exploration and production
assets in the U.K.
At the time of disposition, the net
carrying value was approximately $
0.5
billion, consisting primarily of $
1.6
0.5
cumulative foreign currency translation adjustments,
and $
0.3
billion of deferred tax assets, offset by $
1.8
billion of ARO and negative $
0.1
billion of working capital.
The before-tax earnings associated with the
subsidiaries sold were $
0.4
0.9
0.3
billion for the years ended December 31, 2019,
2018
and 2017,
respectively.
Results of operations for the U.K. are reported
within our Europe and North Africa
segment.
In the second quarter of 2019, we recognized an
after-tax gain of $
52
million upon the closing of the sale of
our
30
percent interest in the Greater Sunrise Fields
to the government of Timor-Leste for $
350
Greater Sunrise Fields were included in our Asia
Pacific and Middle East segment.
In the fourth quarter of 2019, we sold our interests
in the Magnolia field and platform for net
proceeds of $
16
million and recognized a before-tax gain of $
82
million.
At the time of sale, the net carrying value consisted
of $
4
million of PP&E offset by $
70
million of ARO.
The Magnolia results of operations are reported
within
our Lower 48 segment.
Planned Dispositions
In January 2020, we entered into an agreement to sell
our interests in certain non-core properties
in the Lower
48 segment for $
186
million, plus customary adjustments.
The assets met the held for sale criteria in
January
2020 and the transaction is expected to be completed
in the first quarter of 2020.
No gain or loss is anticipated
on the sale.
This disposition will not have a significant
impact on Lower 48 production.
2018
Assets Sold
In the first quarter of 2018, we completed the sale of
certain properties in the Lower 48 segment
for net
proceeds of $
112
No
gain or loss was recognized on the sale.
In the second quarter of 2018, we
completed the sale of a package of largely undeveloped acreage
in the Lower 48 segment for net proceeds
of
$
105
no
gain or loss was recognized on the sale.
In the third quarter of 2018, we completed a
noncash exchange of undeveloped acreage in
the Lower 48 segment.
The transaction was recorded at fair
value resulting in the recognition of a $
56
million gain.
In the fourth quarter of 2018, we sold several
packages of undeveloped acreage in the Lower
48 segment for total net proceeds of $
162
recognized gains of approximately $
140
On October 31, 2018, we completed the sale of
our interests in the Barnett to Lime Rock Resources
for $
196
million after customary adjustments and recognized
a loss of $
5
million. We recorded impairments of $
87
million in 2018 and $
572
million in 2017 to reduce the net
carrying value of the Barnett to fair value.
At the
time of the disposition, our interest in Barnett had a
net carrying value of $
201
250
million of PP&E and $
49
million of AROs.
The before-tax losses associated with our
interests in the Barnett,
including both the impairments and loss on disposition
noted above, were $
59
566
years 2018 and 2017, respectively.
The Barnett results of operations are included
in our Lower 48 segment.
On December 18, 2018, we completed the sale of
a ConocoPhillips subsidiary to BP.
The subsidiary held
16.5
percent of our 24 percent interest
in the BP-operated Clair Field in the U.K.
We retained a
7.5
interest in the field.
At the same time, we acquired BP’s 39.2 percent nonoperated interest
in the Greater
Kuparuk Area in Alaska, including their 38 percent
interest in the Kuparuk Transportation Company (Kuparuk
Assets).
The transaction was recorded at a fair value
of $
1,743
million and was cash neutral except for
customary adjustments which resulted in net
proceeds of $
253
million.
At closing, our interest in the Clair
Field had a net carrying value of approximately
$
1,028
million consisting primarily of $
1,553
PP&E, $
485
million of deferred tax liabilities, and $
59
million of AROs.
We recognized a before-tax gain of
$
715
million on the transaction.
The 2018 before-tax earnings associated
with our 16.5 interest in the Clair
Field, including the recognized gain, were $
748
million.
The before-tax loss associated with our interest
in the
Clair Field was $
0.4
million for 2017. Results of operations
for our interest in the Clair Field are reported
within our Europe and North Africa segment and
the Kuparuk Assets are included in our
Alaska segment.
Acquisitions
In May 2018, we completed the acquisition of
Anadarko’s
22
percent nonoperated interest in the Western
North Slope of Alaska, as well as its interest
in the Alpine Transportation Pipeline for $
386
customary adjustments.
This transaction was accounted for as a business
combination resulting in the
recognition of approximately $
297
million of proved property and $
114
million of unproved property within
PP&E, $
20
14
million of investments, and $
59
million of AROs. These assets are
included in our Alaska segment.
As discussed in the Clair Field transaction with BP
above, we acquired BP’s Kuparuk Assets on December 18,
2018.
The transaction was accounted for as an asset acquisition
with a net acquisition cost of $
1,490
comprised of the fair value of $
1,743
million associated with the disposed 16.5
percent of our 24 percent
interest in the Clair Field, reduced by the net proceeds
of $253 million.
Accordingly, we recorded
approximately $
1.9
billion to proved property within PP&E, $
42
15
investments, $
374
100
million decrease to net working capital.
The Kuparuk Assets
are included in our Alaska segment.
2017
Assets Sold
On May 17, 2017, we completed the sale of our
50 percent nonoperated interest in the Foster
Creek Christina
Lake (FCCL) Partnership, as well as the majority
of our western Canada gas assets to Cenovus
Energy.
Consideration for the transaction was $
11.0
billion in cash after customary adjustments,
208
Energy common shares and a five-year uncapped contingent
payment.
The value of the shares at closing was
$
1.96
billion based on a price of $
9.41
The contingent payment, calculated and paid
on a quarterly basis, is $6 million CAD for every $1 CAD by which the WCS quarterly average crude price
exceeds $52 CAD per barrel.
Contingent payments received during the five-year
period are reflected as “Gain
on dispositions” on our consolidated income statement.
We reported before-tax equity earnings associated
with FCCL of $
197
million for 2017.
We reported a before-tax loss of $
26
million for the western Canada gas
producing properties for 2017.
We recorded gains on dispositions for these contingent payments of $
114
million and $
95
million for the years 2019 and 2018, respectively.
At closing, the carrying value of our equity investment
in FCCL was $
8.9
billion.
The carrying value of our
interest in the western Canada gas assets was $
1.9
billion consisting primarily of $
2.6
offset by AROs of $
585
million and approximately $
100
million of environmental and other accruals.
A gain
of $
2.1
billion was included in the “Gain on dispositions”
line on our consolidated income statement in 2017.
Both FCCL and the western Canada gas assets
were reported in our Canada segment.
For more information on the Canada disposition
and our investment in Cenovus Energy see Note 7—
Investment in Cenovus Energy, Note 15—Fair Value Measurement, and Note 20—Accumulated Other
Comprehensive Loss.
In July 2017, we completed the sale of our interests
in the San Juan Basin to an affiliate of Hilcorp Energy
Company for $
2.5
billion in cash after customary adjustments
and recognized a loss on disposition of
$
22
The transaction includes a contingent payment of up to $300 million. The six-year contingent
payment, effective beginning January 1, 2018, is due annually for the periods in which the monthly U.S. Henry
Hub price is at or above $3.20 per MMBTU.
In 2018, we recorded a gain on dispositions
for these contingent
payments of $
28
No
contingent payments were recorded in 2019.
In the second quarter of 2017, we
recorded an impairment of $
3.3
billion to reduce the carrying value of our
interests in the San Juan Basin to
fair value.
At the time of disposition, the San Juan Basin
interests had a net carrying value of approximately
$
2.5
2.9
406
million of liabilities, primarily AROs.
The before-
tax loss associated with our interests in the San Juan
Basin, including both the $3.3 billion impairment
and $22
million loss on disposition noted above, was $
3.2
billion for 2017.
The San Juan Basin results were reported
In September 2017, we completed the sale of our
interest in the Panhandle assets for $
178
customary adjustments and recognized a loss on
disposition of $
28
million.
At the time of the disposition, the
carrying value of our interest was $
206
million, consisting primarily of $
279
72
of AROs.
Including the $28 million loss on disposition
noted above, we reported a before-tax loss for the
Panhandle properties of $
14
million for 2017.
The Panhandle results were reported in
our Lower 48 segment.