01—Abstract
Summary
Summary of the 10-K/A filed March 25, 2011. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K/A (Amendment No. 1) for ConocoPhillips (COP), filed March 25, 2011, does not contain new ConocoPhillips financial results.
It was filed solely to add separate financial statements of OAO LUKOIL under Rule 3-09 of Regulation S-X, because ConocoPhillips holds an equity stake in LUKOIL that is significant enough to require them. The amendment states it does not update or modify ConocoPhillips' financial position, results, cash flows, or disclosures from the original 10-K filed February 23, 2011, and does not reflect events after that date. Investors looking for ConocoPhillips' own performance should refer to the original 2010 Form 10-K.
The LUKOIL statements included are a mix of unaudited interim data for the six months ended June 30, 2010 and audited annual data for 2007-2009 (audited by ZAO KPMG, with a report dated March 19, 2010). At June 30, 2010, LUKOIL reported total assets of $82.4 billiona, total equity of $59.1 billion, and net income attributable to the company of $4.0 billion for the six months, up from $3.2 billion a year earlier. Full-year 2009 net income attributable to LUKOIL was $7.0 billion, with sales of $81.1 billion.
For ConocoPhillips shareholders, the most relevant context is LUKOIL's scale and the subsequent event disclosed in the statements: in July 2010, a LUKOIL subsidiary agreed to buy 64.6 million LUKOIL shares from a ConocoPhillips subsidiary for $3.44 billionb ($53.25 per share), finalized in August 2010. The agreement also gave LUKOIL a 60-day option to buy the remaining 98.7 million shares held by ConocoPhillips at $56 per share.
02—Key points
Key Highlights
- Purpose: Amendment No. 1 to the 2010 Form 10-K, filed only to provide OAO LUKOIL financial statements under Rule 3-09 of Regulation S-X; it does not change ConocoPhillips' own financial statements or disclosures.
- LUKOIL scale at June 30, 2010: total assets of $82.4 billion, total equity of $59.1 billion, and total liabilities of $23.3 billion (unaudited).
- LUKOIL H1 2010 performance: sales of $49.8 billion and net income attributable to LUKOIL of $4.0 billion, versus $34.9 billion and $3.2 billion in H1 2009.
- LUKOIL FY2009 (audited, KPMG): sales of $81.1 billion, net income attributable to LUKOIL of $7.0 billion, and basic/diluted EPS of $8.28.
- Subsequent event: in August 2010, a LUKOIL subsidiary bought 64.6 million LUKOIL shares from a ConocoPhillips subsidiary for $3.44 billion ($53.25/share), with a 60-day option on the remaining 98.7 million shares at $56/share.
- Reserves and operations: LUKOIL reported 13.7 billion barrels of proved oil reserves at year-end 2009 (consolidated and equity companies combined), with the majority in Russia.
- Related-party ties: LUKOIL's statements disclose a joint venture with ConocoPhillips (NMNG, Timan-Pechora), with ConocoPhillips loans to NMNG of $1.495 billion outstanding at June 30, 2010.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2010filed March 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $56.22B$149.34B | −62.4% |
| R&D Expenses | $172.00M$190.00M | −9.5% |
| SG&A Expenses | $809.00M$1.83B | −55.8% |
| Operating Expenses | $45.46B$41.89B | +8.5% |
| Operating Income | $10.25B$3.72B | +175.3% |
| Interest Expense | $1.40B$1.49B | −5.7% |
| Net Income | $11.36B$4.41B | +157.3% |
| EPS (Basic) | $7.68$2.96 | +159.5% |
| EPS (Diluted) | $7.62$2.94 | +159.2% |
| Shares Outstanding (Basic) | 1.48M1.49B | −99.9% |
| Shares Outstanding (Diluted) | 1.49M1.50B | −99.9% |
05—Questions
Frequently Asked Questions
Why was this 10-K/A filed, and does it change ConocoPhillips' 2010 results?
It was filed to add separate financial statements of OAO LUKOIL required under Rule 3-09 of Regulation S-X. The amendment states that it does not update or modify ConocoPhillips' financial position, results of operations, cash flows, or disclosures from the original February 23, 2011 10-K, and does not reflect later events.
Are the LUKOIL financial statements audited?
Only partly. The June 30, 2010 interim statements and the six-month 2010 and 2009 periods are unaudited. The annual statements for 2007-2009 are audited by ZAO KPMG, with an unqualified opinion dated March 19, 2010. The interim statements note they have not been audited and could change if an audit were performed.
What did ConocoPhillips do with its LUKOIL shares?
According to the subsequent events note, in July 2010 a LUKOIL subsidiary agreed to buy 64.6 million LUKOIL shares from a ConocoPhillips subsidiary for $3.44 billion ($53.25 per share), finalized in August 2010. A 60-day option to buy the remaining 98.7 million shares held by ConocoPhillips at $56 per share was also granted. This amendment does not itself describe ConocoPhillips' accounting or valuation of that stake.
What are the main risks flagged in the LUKOIL statements?
The statements highlight Russian business risk, including political and economic change and a taxation environment described as unclear and subject to assertive enforcement. They also disclose anti-monopoly penalties (about $278 million for 2008-2009 in the 2010 interim notes), ongoing litigation including the Archangel Diamond Corporation case in Colorado, and cost recovery disputes with Kazakhstan. Management believes none of these will have a material adverse effect.
06—Continue