| Acquisitions and Dispositions |
Note 3—Acquisitions and Dispositions Announced Acquisition of Shell Permian Assets In September 2021, we signed a definitive agreement to acquire Shell Enterprises LLC’s assets in the Delaware Basin in an all-cash transaction for $ 9.5 billion before customary adjustments (Shell Permian Acquisition). Assets to be acquired include approximately 225,000 net acres and producing properties located entirely in Texas, as well as over 600 miles of operated crude, gas and water pipelines and infrastructure. The acquisition is anticipated to close in the fourth quarter of 2021, subject to regulatory approval and other customary closing conditions. Under the terms of the agreement, we paid a deposit of $ 475 million which is presented within “Cash Flows from Investing Activities - Other” on our consolidated statement of cash flows. Acquisition of Concho Resources Inc. We completed our acquisition of Concho on January 15, 2021 and as defined under the terms of the transaction agreement, each share of Concho common stock was exchanged for 1.46 shares of ConocoPhillips common stock, for total consideration of $ 13.1 Total Consideration Number of shares of Concho common stock issued and outstanding (in thousands)* 194,243 Number of shares of Concho stock awards outstanding (in thousands)* 1,599 Number of shares exchanged 195,842 1.46 Additional shares of ConocoPhillips common stock issued as consideration (in thousands) 285,929 Average price per share of ConocoPhillips common stock** $ 45.9025 Total Consideration (Millions) $ 13,125 *Outstanding as of January 15, 2021. **Based on the ConocoPhillips average stock price on January 15, 2021. The transaction was accounted for as a business combination under FASB 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 participant and internally generated price assumptions; production profiles; and, operating and development cost assumptions. Debt assumed in the acquisition was valued based on observable market prices. The fair values determined for accounts receivables, accounts payable, and most other current assets and current liabilities were equivalent to the carrying value due to their short-term nature. The total consideration of $ 13.1 billion was allocated to the identifiable assets and liabilities based on their fair values as of January 15, 2021. Assets Acquired Millions of Dollars Cash and cash equivalents $ 382 Accounts receivable, net 745 Inventories 45 Prepaid expenses and other current assets 37 Investments and long-term receivables 333 Net properties, plants and equipment 18,968 Other assets 62 $ 20,572 Liabilities Assumed Accounts payable $ 638 Accrued income and other taxes 49 Employee benefit obligations 4 Other accruals 510 Long-term debt 4,696 Asset retirement obligations and accrued environmental costs 310 Deferred income taxes 1,123 Other liabilities and deferred credits 117 Total liabilities assumed $ 7,447 Net assets acquired $ 13,125 With the completion of the Concho transaction, we acquired proved and unproved properties of approximately $ 11.8 6.9 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. For the three- and nine-month periods ending September 30, 2021, we recognized non-recurring restructuring costs of approximately $ 52 209 million, respectively, mainly for employee severance and related incremental pension benefit costs. The impact from these transaction and restructuring costs to the lines of our consolidated income statement for the nine-month period ending September 30, 2021, are below: Millions of Dollars Restructuring Cost Production and operating expenses $ 110 110 Selling, general and administration expenses 135 64 199 Exploration expenses 18 4 22 Taxes other than income taxes 4 2 6 Other expenses - 29 29 $ 157 209 366 On February 8, 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 From the acquisition date through September 30, 2021, “Total Revenues and Other Income” and “Net Income (Loss) Attributable to ConocoPhillips” associated with the acquired Concho business were approximately $ 4,499 million and $ 1,600 million, respectively. The results associated with the Concho business for the same period include a before- and after-tax loss of $ 305 233 million, respectively, on the acquired derivative contracts. The before-tax loss is recorded within “Total Revenues and Other Income” on our consolidated income statement. The following summarizes the unaudited supplemental pro forma financial information as if we had completed the acquisition of Concho on January 1, 2020: Millions of Dollars Supplemental Pro Forma (unaudited) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Total revenues and other income $ 5,019 16,384 Net loss (565) (1,184) Net loss attributable to ConocoPhillips (565) (1,230) $ per share Earnings per share: Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Basic net loss $ (0.41) (0.90) Diluted net loss (0.41) (0.90) 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 unaudited pro forma financial information for the three- and nine-month periods ending September 30, 2020 is a result of combining the consolidated income statement of ConocoPhillips with the results of Concho. 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 to reverse impairment expense of $ 10.5 1.9 billion related to oil and gas properties and goodwill, respectively, recorded by Concho in the nine-month period ending September 30, 2020. Other adjustments made 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 asset and operations. The sales agreement entitled us to a $ 200 million payment upon a final investment decision (FID) of the Barossa development project. On March 30, 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 have commenced an arbitration proceeding against the purchaser to enforce our contractual right to the $ 200 million, plus interest accruing from the due date. Results of operations related to this transaction are reflected in our Asia Pacific segment. In the third quarter of 2021, we sold our interests in certain noncore assets in our Lower 48 segment for approximately $ 150 million after customary adjustments, recognizing a before-tax gain on sale of approximately $ 26 million. Production from these noncore Lower 48 properties averaged approximately 15 months ended September 30, 2021. 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. For the three- and nine-months ended September 30, 2021, we recorded contingent payments of $ 121 $ 222 million, respectively, relating to previous dispositions. The contingent payments are recorded as gain on disposition on our consolidated income statement and are reflected within our Canada and Lower 48 segments. No contingent payments were recorded in 2020. |