UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2010

or

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission file number:

001-32395

ConocoPhillips

(Exact name of registrant as specified in its charter)

	Delaware		01-0562944
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification No.)

600 North Dairy Ashford, Houston, TX 77079
(Address of principal executive offices)            (Zip Code)

281-293-1000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x ] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [x]		Accelerated filer [  ]		Non-accelerated filer [  ]		Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [x]

The registrant had 1,488,318,070 shares of common stock, $.01 par value, outstanding at March 31, 2010.

CONOCOPHILLIPS

TABLE OF CONTENTS

		Page
Part I – Financial Information
Item 1. Financial Statements
Consolidated Income Statement			1
Consolidated Balance Sheet			2
Consolidated Statement of Cash Flows			3
Notes to Consolidated Financial Statements			4
Supplementary Information—Condensed Consolidating Financial Information			25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			47
Item 4. Controls and Procedures			47
Part II – Other Information
Item 1. Legal Proceedings			48
Item 1A. Risk Factors			49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 6. Exhibits			50
Signature			51
EX-12
EX-18
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Consolidated Income Statement		ConocoPhillips

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009		(2)
Revenues and Other Income
Sales and other operating revenues(1)		$	44,821				30,741
Equity in earnings of affiliates			868				373
Other income			73				124
Total Revenues and Other Income			45,762				31,238
Costs and Expenses
Purchased crude oil, natural gas and products			31,521				19,759
Production and operating expenses			2,527				2,545
Selling, general and administrative expenses			444				475
Exploration expenses			383				225
Depreciation, depletion and amortization			2,318				2,230
Impairments			91				3
Taxes other than income taxes(1)			4,037				3,464
Accretion on discounted liabilities			114				104
Interest and debt expense			301				310
Foreign currency transaction (gains) losses			36				131
Total Costs and Expenses			41,772				29,246
Income before income taxes			3,990				1,992
Provision for income taxes			1,878				1,176
Net income			2,112				816
Less: net income attributable to noncontrolling interests			(14	)			(16	)
Net Income Attributable to ConocoPhillips		$	2,098				800
Net Income Attributable to ConocoPhillips Per Share of Common Stock (dollars)
Basic		$	1.41				.54
Diluted			1.40				.54
Dividends Paid Per Share of Common Stock (dollars)(3)		$	.50				.47
Average Common Shares Outstanding (in thousands)
Basic			1,492,861				1,485,890
Diluted			1,503,565				1,495,247
(1)Includes excise taxes on petroleum products sales:		$	3,220				3,060

⁽²⁾Recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, for more information.

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheet		ConocoPhillips

		Millions of Dollars
		March 31				December 31
		2010				2009		*
Assets
Cash and cash equivalents		$	855				542
Accounts and notes receivable (net of allowance of $69 million in 2010 and $76 million in 2009)			10,968				11,861
Accounts and notes receivable—related parties			1,662				1,354
Inventories			7,300				4,940
Prepaid expenses and other current assets			2,808				2,470
Total Current Assets			23,593				21,167
Investments and long-term receivables			36,764				35,742
Loans and advances—related parties			2,560				2,352
Net properties, plants and equipment			86,623				87,708
Goodwill			3,635				3,638
Intangibles			815				823
Other assets			820				708
Total Assets		$	154,810				152,138
Liabilities
Accounts payable		$	14,392				14,168
Accounts payable—related parties			1,545				1,317
Short-term debt			2,763				1,728
Accrued income and other taxes			4,105				3,402
Employee benefit obligations			540				846
Other accruals			3,260				2,234
Total Current Liabilities			26,605				23,695
Long-term debt			26,225				26,925
Asset retirement obligations and accrued environmental costs			8,661				8,713
Joint venture acquisition obligation—related party			4,839				5,009
Deferred income taxes			17,891				17,956
Employee benefit obligations			4,138				4,130
Other liabilities and deferred credits			3,034				3,097
Total Liabilities			91,393				89,525
Equity
Common stock (2,500,000,000 shares authorized at $.01 par value)
Issued (2010—1,735,391,399 shares; 2009—1,733,345,558 shares)
Par value			17				17
Capital in excess of par			43,742				43,681
Grantor trusts (at cost: 2010—38,726,514 shares; 2009—38,742,261 shares)			(666	)			(667	)
Treasury stock (at cost: 2010—208,346,815 shares; 2009—208,346,815 shares)			(16,211	)			(16,211	)
Accumulated other comprehensive income			3,275				3,065
Unearned employee compensation			(69	)			(76	)
Retained earnings			32,749				32,214
Total Common Stockholders’ Equity			62,837				62,023
Noncontrolling interests			580				590
Total Equity			63,417				62,613
Total Liabilities and Equity		$	154,810				152,138

*Recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, for more information.

See Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows		ConocoPhillips

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009		*
Cash Flows From Operating Activities
Net income		$	2,112				816
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization			2,318				2,230
Impairments			91				3
Dry hole costs and leasehold impairments			133				123
Accretion on discounted liabilities			114				104
Deferred taxes			(35	)			(221	)
Undistributed equity earnings			(503	)			(280	)
Gain on asset dispositions			(24	)			(39	)
Other			(187	)			(2	)
Working capital adjustments
Decrease (increase) in accounts and notes receivable			677				1,860
Decrease (increase) in inventories			(2,439	)			(1,454	)
Decrease (increase) in prepaid expenses and other current assets			(398	)			(201	)
Increase (decrease) in accounts payable			396				(529	)
Increase (decrease) in taxes and other accruals			785				(525	)
Net Cash Provided by Operating Activities			3,040				1,885
Cash Flows From Investing Activities
Capital expenditures and investments			(2,071	)			(2,906	)
Proceeds from asset dispositions			132				86
Long-term advances/loans—related parties			(248	)			(88	)
Collection of advances/loans—related parties			27				11
Other			3				(29	)
Net Cash Used in Investing Activities			(2,157	)			(2,926	)
Cash Flows From Financing Activities
Issuance of debt			362				6,033
Repayment of debt			(15	)			(4,102	)
Issuance of company common stock			9				(21	)
Dividends paid on company common stock			(744	)			(696	)
Other			(186	)			(203	)
Net Cash Provided by (Used in) Financing Activities			(574	)			1,011
Effect of Exchange Rate Changes on Cash and Cash Equivalents			4				77
Net Change in Cash and Cash Equivalents			313				47
Cash and cash equivalents at beginning of period			542				755
Cash and Cash Equivalents at End of Period		$	855				802

*Recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, for more information.

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements		ConocoPhillips

Note 1—Interim Financial Information

The interim-period financial information presented in the financial statements included in this report is unaudited and includes all known accruals and adjustments, in the opinion of management, necessary for a fair presentation of the consolidated financial position of ConocoPhillips and its results of operations and cash flows for such periods. All such adjustments are of a normal and recurring nature. To enhance your understanding of these interim financial statements, see the consolidated financial statements and notes included in our 2009 Annual Report on Form 10-K.

Note 2—Changes in Accounting Principles

LUKOIL Accounting
Effective January 1, 2010, we changed the method used to determine our equity-method share of LUKOIL’s earnings. Prior to 2010, we estimated our LUKOIL equity earnings for the current quarter based on current market indicators, publicly available LUKOIL information and other objective data. This earnings estimation process was necessary because, historically, LUKOIL’s accounting cycle close and preparation of U.S. generally accepted accounting principles (GAAP) financial statements occurred subsequent to our reporting deadline, and for certain periods this timing gap exceeded 93 days. Although Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 323, “Investments—Equity Method and Joint Ventures,” provides that when financial statements of an investee are not sufficiently timely, then the investor should record its share of earnings or loss based on the most recently available financial statements, SEC guidance indicates this timing gap should not exceed 93 days. Recently, the timing gap has been reduced to less than 93 days for all reporting periods. Accordingly, we believe it is now preferable to implement a change in accounting principle to record our equity-method share of LUKOIL’s earnings on a one-quarter lag basis, rather than using an earnings estimate for the current quarter. We believe the new method is preferable as it improves reporting reliability, while maintaining an acceptable level of relevance.

This change in accounting principle to a one-quarter lag under ASC Topic 323 has been applied retrospectively, by recasting prior period financial information. The following table summarizes the line items affected on the consolidated income statement:

		Millions of Dollars
		Three Months Ended March 31
		2010												2009
		Computed				As				Effect				As								Effect
		with				Reported				of				Originally				As				of
		Estimate				with Lag				Change				Reported				Adjusted				Change
Equity in earnings of affiliates		$	751				868				117				415				373				(42	)
Provision for income taxes			1,877				1,878				1				1,178				1,176				(2	)
Net Income			1,996				2,112				116				856				816				(40	)
Net Income Attributable to ConocoPhillips			1,982				2,098				116				840				800				(40	)
Net Income Attributable to ConocoPhillips Per Share of Common Stock (dollars)
Basic		$	1.33				1.41				0.08				0.57				0.54				(0.03	)
Diluted			1.32				1.40				0.08				0.56				0.54				(0.02	)

The following table summarizes the line items affected on the consolidated balance sheet:

		Millions of Dollars
		March 31, 2010												December 31, 2009
		Computed				As				Effect				As								Effect
		with				Reported				of				Originally				As				of
		Estimate				with Lag				Change				Reported				Adjusted				Change
Investments and long-term receivables		$	37,098				36,764				(334	)			36,192				35,742				(450	)
Deferred income taxes			17,897				17,891				(6	)			17,962				17,956				(6	)
Retained earnings			33,077				32,749				(328	)			32,658				32,214				(444	)

There was no cumulative impact to retained earnings as of January 1, 2009, as a result of the accounting change. This was due to the impairment of our LUKOIL investment during 2008 to its fair market value on December 31, 2008.

The following table summarizes the line items affected on the consolidated statement of cash flows:

		Millions of Dollars
		Three Months Ended March 31
		2010												2009
		Computed				As				Effect				As								Effect
		with				Reported				of				Originally				As				of
		Estimate				with Lag				Change				Reported				Adjusted				Change
Net income		$	1,996				2,112				116				856				816				(40	)
Deferred taxes			(36	)			(35	)			1				(219	)			(221	)			(2	)
Undistributed equity earnings			(386	)			(503	)			(117	)			(322	)			(280	)			42

Transfers of Financial Assets
In June 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 166, “Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140,” which was codified into FASB ASC Topic 860, “Transfers and Servicing.” This Statement removes the concept of a qualifying special purpose entity (SPE) and the exception for qualifying SPEs from the consolidation guidance. Additionally, the Statement clarifies the requirements for financial asset transfers eligible for sale accounting. This Statement was effective January 1, 2010, and did not impact our consolidated financial statements.

Variable Interest Entities (VIEs)
Also in June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” to address the effects of the elimination of the qualifying SPE concept in SFAS No. 166, and other concerns about the application of key provisions of consolidation guidance for VIEs. This Statement was codified into FASB ASC Topic 810, “Consolidation.” More specifically, Topic 810 requires a qualitative rather than a quantitative approach to determine the primary beneficiary of a VIE, it amends certain guidance pertaining to the determination of the primary beneficiary when related parties are involved, and it amends certain guidance for determining whether an entity is a VIE. Additionally, this Statement requires continuous assessments of whether an enterprise is the primary beneficiary of a VIE. This Statement was effective January 1, 2010, and its adoption did not impact our consolidated financial statements, other than the required disclosures. For additional information, see Note 3—Variable Interest Entities (VIEs).

Note 3—Variable Interest Entities (VIEs)

We hold significant variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. Information on these VIEs follows:

We have a 30 percent ownership interest with a 50 percent governance interest in the OOO Naryanmarneftegaz (NMNG) joint venture to develop resources in the Timan-Pechora province of Russia. The NMNG joint venture is a VIE because we and a related party, OAO LUKOIL, have disproportionate interests. When related parties are involved in a VIE and neither party has the power to direct the activities of the VIE without the consent of the other party, reasonable judgment should take into account the relevant facts and circumstances for the determination of the primary beneficiary. The activities of NMNG are more closely aligned with LUKOIL because they share Russia as a home country, and LUKOIL conducts extensive exploration and production activities in the same province. Additionally, there are no financial guarantees given by LUKOIL or us, and LUKOIL owns 70 percent, versus our 30 percent direct interest. As a result, we have determined we are not the primary beneficiary of NMNG, and we use the equity method of accounting for this investment. The funding of NMNG has been provided with equity contributions, primarily for the development of the Yuzhno Khylchuyu (YK) Field. At March 31, 2010, the book value of our investment in the venture was $1,587 million.

Production from the NMNG joint venture fields is transported via pipeline to LUKOIL’s terminal at Varandey Bay on the Barents Sea and then shipped via tanker to international markets. LUKOIL completed an expansion of the terminal’s gross oil-throughput capacity from 30,000 barrels per day to 240,000 barrels per day, and we participated in the design and financing of the expansion. The terminal entity, Varandey Terminal Company, is a VIE because we and LUKOIL have disproportionate interests. We had an obligation to fund, through loans, 30 percent of the terminal’s expansion costs, but have no governance or direct ownership interest in the terminal. We determined we are not the primary beneficiary for Varandey because LUKOIL has the power to direct the activities that most influence Varandey’s economic performance. We account for our loan to Varandey as a financial asset. Principal repayments began in April 2009. The loan balance outstanding as of March 31, 2010, at current exchange rates, was $275 million.

We have an agreement with Freeport LNG Development, L.P. (Freeport LNG) to participate in a liquefied natural gas (LNG) receiving terminal in Quintana, Texas. We have no ownership in Freeport LNG; however, we own a 50 percent interest in Freeport LNG GP, Inc. (Freeport GP), which serves as the general partner managing the venture. We entered into a credit agreement with Freeport LNG, whereby we agreed to provide loan financing for the construction of the terminal. We also entered into a long-term agreement with Freeport LNG to use 0.9 billion cubic feet per day of regasification capacity. The terminal became operational in June 2008, and we began making payments under the terminal use agreement. Freeport LNG began making loan repayments in September 2008, and the loan balance outstanding as of March 31, 2010, was $691 million. Freeport LNG is a VIE because Freeport GP holds no equity in Freeport LNG, and the limited partners of Freeport LNG do not have any substantive decision making ability. We are not the primary beneficiary because the equity holders of Freeport GP are not related parties and have equally shared power. Neither party has the power to direct the significant activities without the consent of the other party, in which case neither party is considered to be the primary beneficiary. The loan to Freeport LNG is accounted for as a financial asset, and our investment in Freeport GP is accounted for as an equity investment.

Note 4—Inventories

Inventories consisted of the following:

		Millions of Dollars
		March 31				December 31
		2010				2009
Crude oil and petroleum products		$	6,305				3,955
Materials, supplies and other			995				985
		$	7,300				4,940

Inventories valued on the last-in, first-out (LIFO) basis totaled $6,110 million and $3,747 million at March 31, 2010, and December 31, 2009, respectively. The excess of current replacement cost over LIFO cost of inventories amounted to $5,752 million and $5,627 million at March 31, 2010, and December 31, 2009, respectively.

Note 5—Assets Held for Sale

At March 31, 2010, we classified $333 million of noncurrent assets, primarily investments in equity affiliates, as held for sale and most of this amount is included in “Prepaid expenses and other current assets.” We also classified $75 million of noncurrent deferred tax liabilities as current, based on their held for sale status.

In April 2010, we entered into definitive agreements with subsidiaries of Sinopec International Petroleum Exploration and Production Company to sell our 9.03 percent interest in the Syncrude Canada Ltd. joint venture (Syncrude) for approximately $4.65 billion. The transaction is anticipated to close in the third quarter of 2010, subject to Canadian and Chinese government approvals. Syncrude met the held-for-sale criteria during the second quarter, and we expect it to be reflected as held for sale in our June 30, 2010, balance sheet. The carrying value of our Syncrude net assets at March 31, 2010, was $1,793 million. In addition, there is an associated net deferred tax liability of $414 million.

Note 6—Investments, Loans and Long-Term Receivables

LUKOIL
Our ownership interest in LUKOIL was 20 percent at March 31, 2010, based on 851 million shares authorized and issued. For financial reporting under U.S. GAAP, treasury shares held by LUKOIL are not considered outstanding for determining our equity method ownership interest in LUKOIL. Our ownership interest, based on estimated shares outstanding, was 20.09 percent at March 31, 2010.

At March 31, 2010, the book value of our ordinary share investment in LUKOIL was $6,809 million. Our 20 percent share of the net assets of LUKOIL was estimated to be $11,262 million. A majority of this negative basis difference of $4,453 million is being amortized on a straight-line basis over a 22-year useful life as an increase to equity earnings. On March 31, 2010, the closing price of LUKOIL shares on the London Stock Exchange was $56.70 per share, making the total market value of our LUKOIL investment $9,645 million. For additional information about accounting for our LUKOIL investment, see Note 2—Changes in Accounting Principles.

Loans to Related Parties
As part of our normal ongoing business operations and consistent with industry practice, we invest and enter into numerous agreements with other parties to pursue business opportunities, which share costs and apportion

risks among the parties as governed by the agreements. Included in such activity are loans made to certain affiliated companies. Significant loans to affiliated companies at March 31, 2010, included the following:

	•		$691 million in loan financing to Freeport LNG Development, L.P.
	•		$275 million in loan financing at March 2010 exchange rates to Varandey Terminal Company.
	•		$1,051 million in project financing and an additional $91 million of accrued interest to Qatargas 3.
	•		$550 million in loan financing to WRB Refining LLC.

The long-term portion of these loans are included in the “Loans and advances—related parties” line on the consolidated balance sheet, while the short-term portion is in “Accounts and notes receivable—related parties.”

Other Investments
We have investments remeasured at fair value on a recurring basis to support certain nonqualified deferred compensation plans. The fair value of these assets at March 31, 2010, was $329 million, and substantially the entire value is categorized in Level 1 of the fair value hierarchy. These investments are measured at fair value using a market approach based on quotations from national securities exchanges.

Merey Sweeny, L.P. (MSLP) is a limited partnership that owns a 70,000 barrel-per-day delayed coker and related facilities at the Sweeny Refinery used to produce fuel-grade petroleum coke. Prior to August 28, 2009, MSLP was owned 50/50 by us and Petróleos de Venezuela S.A. (PDVSA). Under the agreements that govern the relationships between the partners, certain defaults by PDVSA with respect to supply of crude oil to the Sweeny Refinery gave us the right to acquire PDVSA’s 50 percent ownership interest in MSLP. On August 28, 2009, we exercised that right. PDVSA recently initiated arbitration in the International Chamber of Commerce challenging our actions. We continue to use the equity method of accounting for our investment in MSLP.

Note 7—Properties, Plants and Equipment

Our investment in properties, plants and equipment (PP&E), with the associated accumulated depreciation, depletion and amortization (Accum. DD&A), was:

		Millions of Dollars
		March 31, 2010												December 31, 2009
		Gross				Accum.				Net				Gross				Accum.				Net
		PP&E				DD&A				PP&E				PP&E				DD&A				PP&E
E&P		$	115,611				46,641				68,970				115,224				45,577				69,647
Midstream			124				76				48				123				74				49
R&M			22,835				6,838				15,997				23,047				6,714				16,333
LUKOIL Investment			-				-				-				-				-				-
Chemicals			-				-				-				-				-				-
Emerging Businesses			1,139				301				838				1,198				300				898
Corporate and Other			1,657				887				770				1,650				869				781
		$	141,366				54,743				86,623				141,242				53,534				87,708

Suspended Wells
Our capitalized cost of suspended wells at March 31, 2010, was $976 million, an increase of $68 million from $908 million at year-end 2009. For the category of exploratory well costs capitalized for a period greater than one year as of December 31, 2009, none was charged to dry hole expense during the first three months of 2010.

Note 8—Impairments

As a result of our decision to end our participation in the new refinery project in Yanbu Industrial City, Saudi Arabia, we recorded a before-tax property impairment of $88 million in international R&M to write-off capitalized project costs.

Note 9—Debt

We have two commercial paper programs supported by our $7.85 billion revolving credit facilities: the ConocoPhillips $6.35 billion program, primarily a funding source for short-term working capital needs, and the ConocoPhillips Qatar Funding Ltd. $1.5 billion commercial paper program, which is used to fund commitments relating to the Qatargas 3 Project. Commercial paper maturities are generally limited to 90 days. At both March 31, 2010 and December 31, 2009, we had no direct outstanding borrowings under our revolving credit facilities, but $40 million in letters of credit had been issued. In addition, under the two commercial paper programs, there was $1,662 million of commercial paper outstanding at March 31, 2010, compared with $1,300 million at December 31, 2009. Since we had $1,662 million of commercial paper outstanding and had issued $40 million of letters of credit, we had access to $6.1 billion in borrowing capacity under our revolving credit facilities at March 31, 2010.

At March 31, 2010, we classified $1,113 million of short-term debt as long-term debt, based on our ability and intent to refinance the obligation on a long-term basis under our revolving credit facilities.

Note 10—Joint Venture Acquisition Obligation

We are obligated to contribute $7.5 billion, plus interest, over a 10-year period that began in 2007, to FCCL Partnership. Quarterly principal and interest payments of $237 million began in the second quarter of 2007 and will continue until the balance is paid. Of the principal obligation amount, approximately $668 million was short-term and was included in the “Accounts payable—related parties” line on our March 31, 2010, consolidated balance sheet. The principal portion of these payments, which totaled $162 million in the first three months of 2010, are included in the “Other” line in the financing activities section of our consolidated statement of cash flows. Interest accrues at a fixed annual rate of 5.3 percent on the unpaid principal balance. Fifty percent of the quarterly interest payment is reflected as a capital contribution and is included in the “Capital expenditures and investments” line on our consolidated statement of cash flows.

Note 11—Noncontrolling Interests

Activity for the equity attributable to noncontrolling interests for the first three months of 2010 and 2009 was as follows:

		Millions of Dollars
		2010												2009*
		Common				Non-								Common				Non-
		Stockholders’				Controlling				Total				Stockholders’				Controlling				Total
		Equity				Interest				Equity				Equity				Interest				Equity
Balance at January 1		$	62,023				590				62,613				55,165				1,100				56,265
Net income			2,098				14				2,112				800				16				816
Dividends			(1,563	)			-				(1,563	)			(696	)			-				(696	)
Distributions to noncontrolling interests			-				(24	)			(24	)			-				(17	)			(17	)
Other changes, net**			279				-				279				(214	)			(1	)			(215	)
Balance at March 31		$	62,837				580				63,417				55,055				1,098				56,153

  * Recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, for more information.

** Includes components of other comprehensive income, which are disclosed separately in Note 15—Comprehensive Income.

Note 12—Guarantees

At March 31, 2010, we were liable for certain contingent obligations under various contractual arrangements as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not recognized a liability either because the guarantees were issued prior to December 31, 2002, or because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing with any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence.

Construction Completion Guarantees

•

In December 2005, we issued a construction completion guarantee for 30 percent of the $4 billion in loan facilities of Qatargas 3, which are being used to finance the construction of an LNG train in Qatar. Of the $4 billion in loan facilities, we committed to provide $1.2 billion. The maximum potential amount of future payments to third-party lenders under the guarantee is estimated to be $850 million, which could become payable if the full debt financing is utilized and completion of the Qatargas 3 Project is not achieved. The project financing will be nonrecourse to ConocoPhillips upon certified completion, which is expected in 2011. At March 31, 2010, the carrying value of the guarantee to third-party lenders was $11 million.

Guarantees of Joint Venture Debt

•

In June 2006, we issued a guarantee for our ownership percentage of $2 billion in credit facilities of Rockies Express Pipeline LLC, operated by Kinder Morgan Energy Partners, L.P. At March 31, 2010, the total carrying value of this guarantee was $11 million, and Rockies Express had no amount outstanding under the credit facilities. In April 2010, the credit facilities were reduced to $200 million and our guarantee was released.

•

At March 31, 2010, we had guarantees outstanding for our portion of joint venture debt obligations, which have terms of up to 16 years. The maximum potential amount of future payments under the guarantees is approximately $80 million. Payment would be required if a joint venture defaults on its debt obligations.

Other Guarantees

•

In conjunction with our purchase of a 50 percent ownership interest in Australia Pacific LNG (APLNG) from Origin Energy in October 2008, we agreed to participate, if and when requested, in any parent company guarantees that were outstanding at the time we purchased our interest in APLNG. These parent company guarantees cover the obligation of APLNG to deliver natural gas under several sales agreements with remaining terms of 7 to 22 years. Our maximum potential amount of future payments, or cost of volume delivery, under these guarantees is estimated to be $1,475 million ($3,185 million in the event of intentional or reckless breach) at March 2010 exchange rates based on our 50 percent share of the remaining contracted volumes, which could become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered if APLNG does not have enough natural gas to meet these sales commitments and if the partners do not make necessary equity contributions into APLNG.

•

We have other guarantees with maximum future potential payment amounts totaling $450 million, which consist primarily of guarantees to fund the short-term cash liquidity deficits of certain joint ventures, a guarantee of minimum charter revenue for two LNG vessels, one small construction completion guarantee, guarantees of the lease payment obligations of a joint venture, and guarantees of the residual value of leased corporate aircraft. At March 31, 2010, the carrying value of these guarantees to third-party lenders was $1 million. These guarantees generally extend up to 15 years or life of the venture.

Indemnifications
Over the years, we have entered into various agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to qualifying indemnifications. Agreements associated with these sales include indemnifications for taxes, environmental liabilities, permits and licenses, employee claims, real estate indemnity against tenant defaults, and litigation. The terms of these indemnifications vary greatly. The majority of these indemnifications are related to environmental issues, the term is generally indefinite and the maximum amount of future payments is generally unlimited. The carrying amount recorded for these indemnifications at March 31, 2010, was $396 million. We amortize the indemnification liability over the relevant time period, if one exists, based on the facts and circumstances surrounding each type of indemnity. In cases where the indemnification term is indefinite, we will reverse the liability when we have information the liability is essentially relieved or amortize the liability over an appropriate time period as the fair value of our indemnification exposure declines. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of future payments. Included in the recorded carrying amount were $249 million of environmental accruals for known contamination that are included in asset retirement obligations and accrued environmental costs at March 31, 2010. For additional information about environmental liabilities, see Note 13—Contingencies and Commitments.

Note 13—Contingencies and Commitments

In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of income-tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is less than certain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position

both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental
We are subject to federal, state and local environmental laws and regulations. These may result in obligations to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various sites. When we prepare our consolidated financial statements, we record accruals for environmental liabilities based on management’s best estimates, using all information that is available at the time. We measure estimates and base liabilities on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. Environmental Protection Agency (EPA) or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable.

Although liability of those potentially responsible for environmental remediation costs is generally joint and several for federal sites and frequently so for state sites, we are usually only one of many companies cited at a particular site. Due to the joint and several liabilities, we could be responsible for all cleanup costs related to any site at which we have been designated as a potentially responsible party. If we were solely responsible, the costs, in some cases, could be material to our results of operations, capital resources or liquidity, or to those of one of our segments. However, settlements and costs incurred in matters that previously have been resolved have not been material to our results of operations or financial condition. We have been successful to date in sharing cleanup costs with other financially sound companies. Many of the sites at which we are potentially responsible are still under investigation by the EPA or the state agencies concerned. Prior to actual cleanup, those potentially responsible normally assess the site conditions, apportion responsibility and determine the appropriate remediation. In some instances, we may have no liability or may attain a settlement of liability. Where it appears that other potentially responsible parties may be financially unable to bear their proportional share, we consider this inability in estimating our potential liability, and we adjust our accruals accordingly.

As a result of various acquisitions in the past, we assumed certain environmental obligations. Some of these environmental obligations are mitigated by indemnifications made by others for our benefit and some of the indemnifications are subject to dollar limits and time limits. We have not recorded accruals for any potential contingent liabilities that we expect to be funded by the prior owners under these indemnifications.

We are currently participating in environmental assessments and cleanups at numerous federal Superfund and comparable state sites. After an assessment of environmental exposures for cleanup and other costs, we make accruals on an undiscounted basis (except those acquired in a purchase business combination, which we record on a discounted basis) for planned investigation and remediation activities for sites where it is probable future costs will be incurred and these costs can be reasonably estimated. At March 31, 2010, our balance sheet included a total environmental accrual of $979 million, compared with $1,017 million at December 31, 2009. We expect to incur a substantial amount of these expenditures within the next 30 years. We have not reduced these accruals for possible insurance recoveries. In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

Legal Proceedings
Our legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. Our process facilitates the early evaluation and quantification of potential exposures in

individual cases. This process also enables us to track those cases that have been scheduled for trial, as well as the pace of settlement discussions in individual matters. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, our legal organization believes there is a remote likelihood future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements.

Other Contingencies
We have contingent liabilities resulting from throughput agreements with pipeline and processing companies not associated with financing arrangements. Under these agreements, we may be required to provide any such company with additional funds through advances and penalties for fees related to throughput capacity not utilized. In addition, at March 31, 2010, we had performance obligations secured by letters of credit of $1,850 million (of which $40 million was issued under the provisions of our revolving credit facility, and the remainder was issued as direct bank letters of credit) related to various purchase commitments for materials, supplies, services and items of permanent investment incident to the ordinary conduct of business.

Long-Term Throughput Agreements and Take-or-Pay Agreements
We have certain throughput agreements and take-or-pay agreements to support financing arrangements. The agreements typically provide for natural gas or crude oil transportation to be used in the ordinary course of the company’s business. The aggregate amounts of estimated payments under these various agreements are: 2010—$125 million; 2011—$125 million; 2012—$122 million; 2013—$120 million; 2014—$121 million; and 2015 and after—$308 million. Total payments under the agreements were $114 million in 2009, $119 million in 2008 and $103 million in 2007.

Note 14—Financial Instruments and Derivative Contracts

Derivative Instruments
We use financial and commodity-based derivative contracts to manage exposures to fluctuations in foreign currency exchange rates, commodity prices, and interest rates, or to capture market opportunities. Since we are not currently using hedge accounting, all gains and losses, realized or unrealized, from derivative contracts have been recognized in the consolidated income statement. Gains and losses from derivative contracts held for trading not directly related to our physical business, whether realized or unrealized, have been reported net in other income.

Purchase and sales contracts for commodities that are readily convertible to cash (e.g., crude oil, natural gas and gasoline) are recorded on the balance sheet as derivatives unless the contracts are for quantities we expect to use or sell over a reasonable period in the normal course of business (i.e., contracts eligible for the normal purchases and normal sales exception). We record most of our contracts to buy or sell natural gas and the majority of our contracts to sell power as derivatives, but we do apply the normal purchases and normal sales exception to certain long-term contracts to sell our natural gas production. We generally apply this normal purchases and normal sales exception to eligible crude oil and refined product commodity purchase and sales contracts; however, we may elect not to apply this exception (e.g., when another derivative instrument will be used to mitigate the risk of the purchase or sale contract but hedge accounting will not be applied, in which case both the purchase or sales contract and the derivative contract mitigating the resulting risk will be recorded on the balance sheet at fair value).

We value our exchange-cleared derivatives using closing prices provided by the exchange as of the balance sheet date, and these are classified as Level 1 in the fair value hierarchy. Over-the-counter (OTC) financial swaps and physical commodity forward purchase and sale contracts are generally valued using quotations provided by brokers and price index developers such as Platts and Oil Price Information Service. These quotes are corroborated with market data and are classified as Level 2. In certain less liquid markets or for longer-term contracts, forward prices are not as readily available. In these circumstances, OTC swaps and physical commodity purchase and sale contracts are valued using internally developed methodologies that consider historical relationships among various commodities that result in management’s best estimate of fair value.

These contracts are classified as Level 3. A contract that is initially classified as Level 3 due to absence or insufficient corroboration of broker quotes over a material portion of the contract will transfer to Level 2 when the portion of the trade having no quotes or insufficient corroboration becomes an insignificant portion of the contract. A contract would also transfer to Level 2 if we began using a corroborated broker quote that has become available. Conversely, if a corroborated broker quote ceases to be available or used by us, the contract would transfer from Level 2 to Level 3. There were no transfers in or out of Level 1.

Exchange-cleared financial options are valued using exchange closing prices and are classified as Level 1. Financial OTC and physical commodity options are valued using industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and contractual prices for the underlying instruments, as well as other relevant economic measures. The degree to which these inputs are observable in the forward markets determines whether the options are classified as Level 2 or 3.

We use a mid-market pricing convention (the mid-point between bid and ask prices). When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.

The fair value hierarchy for our derivative assets and liabilities accounted for at fair value on a recurring basis was:

		Millions of Dollars
		March 31, 2010																December 31, 2009
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets
Commodity derivatives		$	2,596				1,744				75				4,415				1,710				1,659				61				3,430
Foreign exchange derivatives			-				30				-				30				-				45				-				45
Total assets			2,596				1,774				75				4,445				1,710				1,704				61				3,475
Liabilities
Commodity derivatives			(2,903	)			(1,541	)			(15	)			(4,459	)			(1,797	)			(1,496	)			(24	)			(3,317	)
Foreign exchange derivatives			-				(36	)			-				(36	)			-				(47	)			-				(47	)
Total liabilities			(2,903	)			(1,577	)			(15	)			(4,495	)			(1,797	)			(1,543	)			(24	)			(3,364	)
Net assets (liabilities)		$	(307	)			197				60				(50	)			(87	)			161				37				111

The derivative values above are based on analysis of each contract as the fundamental unit of account; therefore, derivative assets and liabilities with the same counterparty are not reflected net where the legal right of offset exists. Gains or losses from contracts in one level may be offset by gains or losses on contracts in another level or by changes in values of physical contracts or positions that are not reflected in the table above.

The fair value of net commodity derivatives classified as Level 3 in the fair value hierarchy changed as follows during the first quarters of 2010 and 2009:

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Beginning balance		$	37				40
Total gains (losses), realized and unrealized
Included in earnings			32				26
Included in other comprehensive income			-				-
Purchases, issuances and settlements			(3	)			(10	)
Transfers into Level 3			-				57
Transfers out of Level 3			(6	)			(17	)
Ending balance		$	60				96

The amounts of Level 3 gains (losses) included in earnings were:

		Millions of Dollars
		Three Months Ended
		March 31
		2010												2009
						Purchased												Purchased
		Other				Crude Oil,								Other				Crude Oil,
		Operating				Natural Gas								Operating				Natural Gas
		Revenues				and Products				Total				Revenues				and Products				Total
Total gains (losses) included in earnings		$	44				(12	)			32				27				(1	)			26
Change in unrealized gains (losses) relating to assets held at March 31		$	49				-				49				36				-				36
Change in unrealized gains (losses) relating to liabilities held at March 31		$	(8	)			(11	)			(19	)			(10	)			-				(10	)

Commodity Derivative Contracts—We operate in the worldwide crude oil, refined product, natural gas, natural gas liquids and electric power markets and are exposed to fluctuations in the prices for these commodities. These fluctuations can affect our revenues, as well as the cost of operating, investing and financing activities. Generally, our policy is to remain exposed to the market prices of commodities; however, we use futures, forwards, swaps and options in various markets to balance physical systems, meet customer needs, manage price exposures on specific transactions, and do a limited, immaterial amount of trading not directly related to our physical business. These activities may move our risk profile away from market average prices.

The fair value of commodity derivative assets and liabilities and the line items where they appear on our consolidated balance sheet were:

		Millions of Dollars
		March 31				December 31
		2010				2009
Assets
Prepaid expenses and other current assets		$	3,974				3,084
Other assets			449				359
Liabilities
Other accruals			4,032				3,006
Other liabilities and deferred credits			435				324

Hedge accounting has not been used for any items in the table. The amounts shown are presented gross (i.e., without netting assets and liabilities with the same counterparty where the right of offset and intent to net exist).

The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated income statement were:

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Sales and other operating revenues		$	482				573
Other income			(10	)			8
Purchased crude oil, natural gas and products			(507	)			(512	)

Hedge accounting has not been used for any items in the table.

The table below summarizes our material net exposures resulting from outstanding commodity derivative contracts. These financial and physical derivative contracts are primarily used to manage price exposure on our underlying operations. The underlying exposures may be from non-derivative positions such as inventory volumes or firm natural gas transport contracts. Financial derivative contracts may also offset physical derivative contracts, such as forward sales contracts.

		Open Position
		Long/(Short)
		March 31				December 31
		2010				2009
Commodity
Crude oil, refined products and natural gas liquids (millions of barrels)			(36	)			(16	)
Natural gas and power (billions of cubic feet)
Fixed price			(96	)			(60	)
Basis			163				154

Currency Exchange Rate Derivative Contracts—We have foreign currency exchange rate risk resulting from international operations. We do not comprehensively hedge the exposure to movements in currency exchange rates, although we may choose to selectively hedge certain foreign currency exchange rate exposures, such as firm commitments for capital projects or local currency tax payments, dividends, and cash returns from net investments in foreign affiliates to be remitted within the coming year.

The fair value of foreign currency derivative assets and liabilities, and the line items where they appear on our consolidated balance sheet were:

		Millions of Dollars
		March 31				December 31
		2010				2009
Assets
Prepaid expenses and other current assets		$	29				38
Other assets			1				7
Liabilities
Other accruals			31				40
Other liabilities and deferred credits			5				7

Hedge accounting has not been used for any items in the table. The amounts shown are presented gross.

Gains and losses from foreign currency derivatives, and the line item where they appear on our consolidated income statement were:

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Foreign currency transaction (gains) losses		$	46				(6	)

Hedge accounting has not been used for any items in the table.

We had the following net position of outstanding foreign currency swap contracts, entered into primarily to hedge price exposure in our international operations.

		In Millions
		Notional Currency*
		March 31				December 31
		2010				2009
Foreign Currency Swaps
Sell U.S. dollar, buy other currencies**		USD	2,354				3,211
Buy British pound, sell euro		EUR	253				267

 *Denominated in U.S. dollars (USD) and euros (EUR).
**Primarily euro, Canadian dollar, Norwegian krone and British pound.

Credit Risk
Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, over-the-counter derivative contracts and trade receivables. Our cash equivalents are placed in high-quality commercial paper, money market funds and time deposits with major international banks and financial institutions.

The credit risk from our over-the-counter derivative contracts, such as forwards and swaps, derives from the counterparty to the transaction, typically a major bank or financial institution. Individual counterparty

exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures contracts, but futures have a negligible credit risk because they are traded on the New York Mercantile Exchange or the ICE Futures.

Our trade receivables result primarily from our petroleum operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less, and we continually monitor this exposure and the creditworthiness of the counterparties. We do not generally require collateral to limit the exposure to loss; however, we will sometimes use letters of credit, prepayments, and master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also permit us to post letters of credit as collateral.

The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position on March 31, 2010, and December 31, 2009, was $444 million and $381 million, respectively, for which no collateral was posted in the normal course of business in 2010 and 2009. If our credit rating were lowered one level from its “A” rating (per Standard and Poor’s) on March 31, 2010, we would be required to post no additional collateral to our counterparties. If we were downgraded below investment grade, we would be required to post $444 million of additional collateral, either with cash or letters of credit.

Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:

	•		Cash and cash equivalents: The carrying amount reported on the balance sheet approximates fair value.
	•		Accounts and notes receivable: The carrying amount reported on the balance sheet approximates fair value.
	•		Investment in LUKOIL shares: See Note 6—Investments, Loans and Long-Term Receivables, for a discussion of the carrying value and fair value of our investment in LUKOIL shares.
	•		Debt: The carrying amount of our floating-rate debt approximates fair value. The fair value of the fixed-rate debt is estimated based on quoted market prices.
	•		Fixed-rate 5.3 percent joint venture acquisition obligation: Fair value is estimated based on the net present value of the future cash flows, discounted at a March 31 effective yield rate of 2.65 percent, based on yields of U.S. Treasury securities of similar average duration adjusted for our average credit risk spread and the amortizing nature of the obligation principal. See Note 10—Joint Venture Acquisition Obligation, for additional information.
	•		Swaps: Fair value is estimated based on forward market prices and approximates the exit price at period end. When forward market prices are not available, they are estimated using the forward prices of a similar commodity with adjustments for differences in quality or location.
	•		Futures: Fair values are based on quoted market prices obtained from the New York Mercantile Exchange, the ICE Futures, or other traded exchanges.
	•		Forward-exchange contracts: Fair value is estimated by comparing the contract rate to the forward rate in effect on March 31, 2010, and approximates the exit price at that date.

Certain of our commodity derivative and financial instruments were:

		Millions of Dollars
		Carrying Amount								Fair Value
		March 31				December 31				March 31				December 31
		2010				2009				2010				2009
Financial assets
Foreign currency derivatives		$	30				45				30				45
Commodity derivatives			1,120				823				1,120				823
Financial liabilities
Total debt, excluding capital leases			28,958				28,622				30,951				30,565
Joint venture acquisition obligation			5,507				5,669				6,074				6,276
Foreign currency derivatives			36				47				36				47
Commodity derivatives			842				632				842				632

The amounts shown for derivatives in the preceding table are presented net (i.e., assets and liabilities with the same counterparty are netted where the right of offset and intent to net exist). In addition, the March 31, 2010, commodity derivative assets and liabilities appear net of $82 million of obligations to return cash collateral and $404 million of rights to reclaim cash collateral, respectively. The December 31, 2009, commodity derivative assets and liabilities appear net of $70 million of obligations to return cash collateral and $148 million of rights to reclaim cash collateral, respectively. No collateral was deposited or held for the foreign currency derivatives.

Note 15—Comprehensive Income

ConocoPhillips’ comprehensive income was as follows:

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Net income		$	2,112				816
After-tax changes in:
Defined benefit plans
Net prior service cost			2				3
Net actuarial gain			35				34
Nonsponsored plans			2				(1	)
Foreign currency translation adjustments			171				(278	)
Hedging activities			-				(1	)
Comprehensive income			2,322				573
Less: comprehensive income attributable to noncontrolling interests			(14	)			(16	)
Comprehensive income attributable to ConocoPhillips		$	2,308				557

Accumulated other comprehensive income in the equity section of the balance sheet included:

		Millions of Dollars
		March 31				December 31
		2010				2009
Defined benefit plans		$	(1,465	)			(1,504	)
Foreign currency translation adjustments			4,747				4,576
Deferred net hedging loss			(7	)			(7	)
Accumulated other comprehensive income		$	3,275				3,065

None of the items within accumulated other comprehensive income relate to noncontrolling interests.

Note 16—Cash Flow Information

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Cash Payments
Interest		$	322				95
Income taxes			1,596				1,346

On March 24, 2010, we declared a quarterly dividend of 55 cents per share, payable June 1, 2010, to stockholders of record at the close of business on May 24, 2010. This noncash financing activity increased dividends payable and decreased retained earnings $819 million.

Note 17—Employee Benefit Plans

Pension and Postretirement Plans

		Millions of Dollars
		Pension Benefits																Other Benefits
Three Months Ended		March 31																March 31
		2010								2009								2010				2009
		U.S.				Int’l.				U.S.				Int’l.
Components of Net Periodic Benefit Cost
Service cost		$	57				23				48				20				3				2
Interest cost			65				43				69				33				11				12
Expected return on plan assets			(56	)			(38	)			(46	)			(29	)			-				-
Amortization of prior service cost			2				-				3				-				1				2
Recognized net actuarial loss (gain)			42				14				47				8				(2	)			(4	)
Net periodic benefit cost		$	110				42				121				32				13				12

During the first three months of 2010, we contributed $16 million to our domestic benefit plans and $53 million to our international benefit plans.

Note 18—Related Party Transactions

Significant transactions with related parties were:

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Operating revenues (a)		$	1,934				1,473
Purchases (b)			3,439				2,482
Operating expenses and selling, general and administrative expenses (c)			81				85
Net interest expense (d)			19				19

(a)		We sold natural gas to DCP Midstream, LLC and crude oil to the Malaysian Refining Company Sdn. Bhd. (MRC), among others, for processing and marketing. Natural gas liquids, solvents and petrochemical feedstocks were sold to Chevron Phillips Chemical Company LLC (CPChem), gas oil and hydrogen feedstocks were sold to Excel Paralubes and refined products were sold primarily to CFJ Properties and LUKOIL. Natural gas, crude oil, blendstock and other intermediate products were sold to WRB Refining LLC. In addition, we charged several of our affiliates, including CPChem and MSLP, for the use of common facilities, such as steam generators, waste and water treaters, and warehouse facilities.
(b)		We purchased refined products from WRB. We purchased natural gas and natural gas liquids from DCP Midstream and CPChem for use in our refinery processes and other feedstocks from various affiliates. We purchased crude oil from LUKOIL and refined products from MRC. We also paid fees to various pipeline equity companies for transporting finished refined products and natural gas, as well as a price upgrade to MSLP for heavy crude processing. We purchased base oils and fuel products from Excel Paralubes for use in our refinery and specialty businesses.
(c)		We paid processing fees to various affiliates. Additionally, we paid transportation fees to pipeline equity companies.
(d)		We paid and/or received interest to/from various affiliates, including FCCL Partnership. See Note 6—Investments, Loans and Long-Term Receivables, for additional information on loans to affiliated companies.

Note 19—Segment Disclosures and Related Information

We have organized our reporting structure based on the grouping of similar products and services, resulting in six operating segments:

	1)		E&P—This segment primarily explores for, produces, transports and markets crude oil, bitumen, natural gas and natural gas liquids on a worldwide basis.
	2)		Midstream—This segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, predominantly in the United States and Trinidad. The Midstream segment primarily consists of our 50 percent equity investment in DCP Midstream, LLC.
	3)		R&M—This segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia.

	4)		LUKOIL Investment—This segment represents our investment in the ordinary shares of OAO LUKOIL, an international, integrated oil and gas company headquartered in Russia. At March 31, 2010, our ownership interest was 20 percent based on issued shares, and 20.09 percent based on estimated shares outstanding.
	5)		Chemicals—This segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Chemicals segment consists of our 50 percent equity investment in Chevron Phillips Chemical Company LLC.
	6)		Emerging Businesses—This segment represents our investment in new technologies or businesses outside our normal scope of operations.

Corporate and Other includes general corporate overhead, most interest expense and various other corporate activities. Corporate assets include all cash and cash equivalents.

We evaluate performance and allocate resources based on net income attributable to ConocoPhillips. Intersegment sales are at prices that approximate market.

Analysis of Results by Operating Segment

		Millions of Dollars
		Three Months Ended
		March 31
		2010				2009
Sales and Other Operating Revenues
E&P
United States		$	8,192				6,096
International			7,460				6,651
Intersegment eliminations—U.S.			(1,375	)			(859	)
Intersegment eliminations—international			(1,896	)			(1,388	)
E&P			12,381				10,500
Midstream
Total sales			2,078				922
Intersegment eliminations			(116	)			(48	)
Midstream			1,962				874
R&M
United States			21,713				13,000
International			8,913				6,464
Intersegment eliminations—U.S.			(198	)			(117	)
Intersegment eliminations—international			(13	)			(8	)
R&M			30,415				19,339
LUKOIL Investment			-				-
Chemicals			3				3
Emerging Businesses
Total sales			215				154
Intersegment eliminations			(159	)			(137	)
Emerging Businesses			56				17
Corporate and Other			4				8
Consolidated sales and other operating revenues		$	44,821				30,741
Net Income (Loss) Attributable to ConocoPhillips
E&P
United States		$	757				173
International			1,075				527
Total E&P			1,832				700
Midstream			77				123
R&M
United States			12				98
International			(16	)			107
Total R&M			(4	)			205
LUKOIL Investment			387				8	*
Chemicals			110				23
Emerging Businesses			6				-
Corporate and Other			(310	)			(259	)
Net income attributable to ConocoPhillips		$	2,098				800

*LUKOIL Investment recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, for more information.

		Millions of Dollars
		March 31				December 31
		2010				2009
Total Assets
E&P
United States		$	35,754				36,122
International			64,118				64,831
Total E&P			99,872				100,953
Midstream			1,732				2,054
R&M
United States			27,294				24,963
International			9,451				8,446
Goodwill			3,635				3,638
Total R&M			40,380				37,047
LUKOIL Investment			6,809				6,416	*
Chemicals			2,583				2,451
Emerging Businesses			1,019				1,069
Corporate and Other			2,415				2,148
Consolidated total assets		$	154,810				152,138

*LUKOIL Investment recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, for more information.

Note 20—Income Taxes

Our effective tax rates for the first quarters of 2010 and 2009 were 47 percent and 59 percent, respectively. The change in the effective tax rate for the first quarter of 2010, versus the same period of 2009, was primarily due to a higher proportion of income in higher tax rate jurisdictions in 2009. The effective tax rate in excess of the domestic federal statutory rate of 35 percent was primarily due to foreign taxes.

Schedule Of Condensed Financial Statements

Supplementary Information—Condensed Consolidating Financial Information

We have various cross guarantees among ConocoPhillips, ConocoPhillips Company, ConocoPhillips Australia Funding Company, ConocoPhillips Canada Funding Company I, and ConocoPhillips Canada Funding Company II, with respect to publicly held debt securities. ConocoPhillips Company is wholly owned by ConocoPhillips. ConocoPhillips Australia Funding Company is an indirect, wholly owned subsidiary of ConocoPhillips Company. ConocoPhillips Canada Funding Company I and ConocoPhillips Canada Funding Company II are indirect, wholly owned subsidiaries of ConocoPhillips. ConocoPhillips and ConocoPhillips Company have fully and unconditionally guaranteed the payment obligations of ConocoPhillips Australia Funding Company, ConocoPhillips Canada Funding Company I, and ConocoPhillips Canada Funding Company II, with respect to their publicly held debt securities. Similarly, ConocoPhillips has fully and unconditionally guaranteed the payment obligations of ConocoPhillips Company with respect to its publicly held debt securities. In addition, ConocoPhillips Company has fully and unconditionally guaranteed the payment obligations of ConocoPhillips with respect to its publicly held debt securities. All guarantees are joint and several. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:

	•		ConocoPhillips, ConocoPhillips Company, ConocoPhillips Australia Funding Company, ConocoPhillips Canada Funding Company I, and ConocoPhillips Canada Funding Company II (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting).
	•		All other nonguarantor subsidiaries of ConocoPhillips.
	•		The consolidating adjustments necessary to present ConocoPhillips’ results on a consolidated basis.

This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements and notes.

To facilitate the restructuring of certain legal entities within the Canada operating unit, ConocoPhillips Canada Funding Company I (CFC I) entered into a transaction with another wholly owned subsidiary of ConocoPhillips (included in the “All Other Subsidiaries” column) whereby it acquired an investment in certain preferred shares of a Canadian legal entity within the ConocoPhillips group, in exchange for a non-interest-bearing demand note payable. The value ascribed to the preferred shares and note payable represented the redemption price for both. This noncash transaction was effective December 31, 2009. As a result, the balance sheet of CFC I reflects a short-term investment of $2,973 million and a corresponding amount in short-term debt. In January 2010, the preferred shares acquired under the above transaction were resold to the original holder at the same value as the original purchase price, as satisfaction of the obligation under the demand note payable. As these transactions were completed between wholly owned subsidiaries of ConocoPhillips, there is no impact on the consolidated results in either period.

Certain amounts in 2009 have been recast to reflect a change in accounting principle. See Note 2—Changes in Accounting Principles, in the Notes to Consolidated Financial Statements, for more information.

		Millions of Dollars
		Three Months Ended March 31, 2010
										ConocoPhillips				ConocoPhillips				ConocoPhillips
										Australia				Canada				Canada
						ConocoPhillips				Funding				Funding				Funding				All Other				Consolidating				Total
Income Statement		ConocoPhillips				Company				Company				Company I				Company II				Subsidiaries				Adjustments				Consolidated
Revenues and Other Income
Sales and other operating revenues		$	-				27,922				-				-				-				16,899				-				44,821
Equity in earnings of affiliates			2,232				2,400				-				-				-				678				(4,442	)			868
Other income (loss)			-				86				-				-				-				(13	)			-				73
Intercompany revenues			1				267				11				21				13				5,470				(5,783	)			-
Total Revenues and Other Income			2,233				30,675				11				21				13				23,034				(10,225	)			45,762
Costs and Expenses
Purchased crude oil, natural gas and products			-				25,127				-				-				-				11,951				(5,557	)			31,521
Production and operating expenses			-				1,105				-				-				-				1,450				(28	)			2,527
Selling, general and administrative expenses			4				322				-				-				-				125				(7	)			444
Exploration expenses			-				172				-				-				-				211				-				383
Depreciation, depletion and amortization			-				419				-				-				-				1,899				-				2,318
Impairments			-				3				-				-				-				88				-				91
Taxes other than income taxes			-				1,209				-				-				-				2,828				-				4,037
Accretion on discounted liabilities			-				15				-				-				-				99				-				114
Interest and debt expense			203				13				10				19				13				234				(191	)			301
Foreign currency transaction (gains) losses			-				30				-				31				49				(74	)			-				36
Total Costs and Expenses			207				28,415				10				50				62				18,811				(5,783	)			41,772
Income before income taxes			2,026				2,260				1				(29	)			(49	)			4,223				(4,442	)			3,990
Provision for income taxes			(72	)			28				-				3				(5	)			1,924				-				1,878
Net income			2,098				2,232				1				(32	)			(44	)			2,299				(4,442	)			2,112
Less: net income attributable to noncontrolling interests			-				-				-				-				-				(14	)			-				(14	)
Net Income Attributable to ConocoPhillips		$	2,098				2,232				1				(32	)			(44	)			2,285				(4,442	)			2,098
		Millions of Dollars
		Three Months Ended March 31, 2009
										ConocoPhillips				ConocoPhillips				ConocoPhillips
										Australia				Canada				Canada
						ConocoPhillips				Funding				Funding				Funding				All Other				Consolidating				Total
Income Statement		ConocoPhillips				Company				Company				Company I				Company II				Subsidiaries				Adjustments				Consolidated
Revenues and Other Income
Sales and other operating revenues		$	-				17,534				-				-				-				13,207				-				30,741
Equity in earnings of affiliates			889				915				-				-				-				239				(1,670	)			373
Other income (loss)			(2	)			203				-				-				-				(77	)			-				124
Intercompany revenues			1				382				17				18				11				3,504				(3,933	)			-
Total Revenues and Other Income			888				19,034				17				18				11				16,873				(5,603	)			31,238
Costs and Expenses
Purchased crude oil, natural gas and products			-				14,841				-				-				-				8,587				(3,669	)			19,759
Production and operating expenses			2				1,094				-				-				-				1,475				(26	)			2,545
Selling, general and administrative expenses			3				323				-				1				1				157				(10	)			475
Exploration expenses			-				65				-				-				-				160				-				225
Depreciation, depletion and amortization			-				425				-				-				-				1,805				-				2,230
Impairments			-				(5	)			-				-				-				8				-				3
Taxes other than income taxes			-				1,155				-				-				-				2,327				(18	)			3,464
Accretion on discounted liabilities			-				18				-				-				-				86				-				104
Interest and debt expense			130				69				15				19				13				274				(210	)			310
Foreign currency transaction (gains) losses			-				7				-				(38	)			(7	)			169				-				131
Total Costs and Expenses			135				17,992				15				(18	)			7				15,048				(3,933	)			29,246
Income before income taxes			753				1,042				2				36				4				1,825				(1,670	)			1,992
Provision for income taxes			(47	)			153				1				1				(4	)			1,072				-				1,176
Net income			800				889				1				35				8				753				(1,670	)			816
Less: net income attributable to noncontrolling interests			-				-				-				-				-				(16	)			-				(16	)
Net Income Attributable to ConocoPhillips		$	800				889				1				35				8				737				(1,670	)			800