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		June 30, 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 (State or other jurisdiction of incorporation or organization)		01-0562944 (I.R.S. Employer 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 1,483,363,225 shares of common stock, $.01 par value, outstanding at June 30, 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					27
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations					32
Item 3.  Quantitative and Qualitative Disclosures About Market Risk					52
Item 4.  Controls and Procedures					52
Part II – Other Information
Item 1.  Legal Proceedings					53
Item 1A.  Risk Factors					55
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds					55
Item 6.  Exhibits					56
Signature					57
EX-12
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
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Consolidated Income Statement		ConocoPhillips

		Millions of Dollars
		Three Months Ended								Six Months Ended
		June 30								June 30
		2010				2009		(2)		2010				2009		(2)
Revenues and Other Income
Sales and other operating revenues (1)		$	45,686				35,448				90,507				66,189
Equity in earnings of affiliates			1,088				632				1,956				1,005
Gain on sale of Syncrude			2,878				-				2,878				-
Other income			475				106				548				230
Total Revenues and Other Income			50,127				36,186				95,889				67,424
Costs and Expenses
Purchased crude oil, natural gas and products			32,088				24,609				63,609				44,368
Production and operating expenses			2,619				2,573				5,146				5,118
Selling, general and administrative expenses			438				476				882				951
Exploration expenses			213				243				596				468
Depreciation, depletion and amortization			2,280				2,347				4,598				4,577
Impairments			1,532				51				1,623				54
Taxes other than income taxes(1)			4,247				3,715				8,284				7,179
Accretion on discounted liabilities			113				108				227				212
Interest and debt expense			349				268				650				578
Foreign currency transaction (gains) losses			54				(142	)			90				(11	)
Total Costs and Expenses			43,933				34,248				85,705				63,494
Income before income taxes			6,194				1,938				10,184				3,930
Provision for income taxes			2,011				1,063				3,889				2,239
Net income			4,183				875				6,295				1,691
Less: net income attributable to noncontrolling interests			(19	)			(16	)			(33	)			(32	)
Net Income Attributable to ConocoPhillips		$	4,164				859				6,262				1,659
Net Income Attributable to ConocoPhillips Per Share of Common Stock (dollars)
Basic		$	2.79				.58				4.20				1.12
Diluted			2.77				.57				4.17				1.11
Dividends Paid Per Share of Common Stock (dollars)		$	.55				.47				1.05				.94
Average Common Shares Outstanding (in thousands)
Basic			1,489,814				1,486,496				1,491,329				1,486,195
Diluted			1,501,257				1,495,700				1,502,529				1,495,474
(1)Includes excise taxes on petroleum products sales:		$	3,417				3,316				6,637				6,376

Consolidated Balance Sheet		ConocoPhillips

		Millions of Dollars
		June 30				December 31
		2010				2009		*
Assets
Cash and cash equivalents		$	4,120				542
Accounts and notes receivable (net of allowance of $77 million in 2010 and $76 million in 2009)			11,074				11,861
Accounts and notes receivable—related parties			2,123				1,354
Inventories			7,119				4,940
Prepaid expenses and other current assets			2,230				2,470
Total Current Assets			26,666				21,167
Investments and long-term receivables			35,957				35,742
Loans and advances—related parties			2,394				2,352
Net properties, plants and equipment			81,269				87,708
Goodwill			3,638				3,638
Intangibles			808				823
Other assets			724				708
Total Assets		$	151,456				152,138
Liabilities
Accounts payable		$	13,683				14,168
Accounts payable—related parties			1,693				1,317
Short-term debt			3,082				1,728
Accrued income and other taxes			4,508				3,402
Employee benefit obligations			667				846
Other accruals			2,035				2,234
Total Current Liabilities			25,668				23,695
Long-term debt			23,197				26,925
Asset retirement obligations and accrued environmental costs			8,389				8,713
Joint venture acquisition obligation—related party			4,666				5,009
Deferred income taxes			17,012				17,956
Employee benefit obligations			3,836				4,130
Other liabilities and deferred credits			2,743				3,097
Total Liabilities			85,511				89,525
Equity
Common stock (2,500,000,000 shares authorized at $.01 par value)
Issued (2010—1,736,403,629 shares; 2009—1,733,345,558 shares)
Par value			17				17
Capital in excess of par			43,869				43,681
Grantor trusts (at cost: 2010—37,798,903 shares; 2009—38,742,261 shares)			(650	)			(667	)
Treasury stock (at cost: 2010—215,241,501 shares; 2009—208,346,815 shares)			(16,601	)			(16,211	)
Accumulated other comprehensive income			1,881				3,065
Unearned employee compensation			(62	)			(76	)
Retained earnings			36,917				32,214
Total Common Stockholders’ Equity			65,371				62,023
Noncontrolling interests			574				590
Total Equity			65,945				62,613
Total Liabilities and Equity		$	151,456				152,138

Consolidated Statement of Cash Flows		ConocoPhillips

		Millions of Dollars
		Six Months Ended
		June 30
		2010				2009		*
Cash Flows From Operating Activities
Net income		$	6,295				1,691
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization			4,598				4,577
Impairments			1,623				54
Dry hole costs and leasehold impairments			205				238
Accretion on discounted liabilities			227				212
Deferred taxes			(543	)			(603	)
Undistributed equity earnings			(1,189	)			(606	)
Gain on asset dispositions			(3,273	)			(36	)
Other			(543	)			175
Working capital adjustments
Decrease (increase) in accounts and notes receivable			671				65
Decrease (increase) in inventories			(2,401	)			(973	)
Decrease (increase) in prepaid expenses and other current assets			(89	)			(435	)
Increase (decrease) in accounts payable			(106	)			1,020
Increase (decrease) in taxes and other accruals			1,040				(927	)
Net Cash Provided by Operating Activities			6,515				4,452
Cash Flows From Investing Activities
Capital expenditures and investments			(4,080	)			(5,578	)
Proceeds from asset dispositions			5,943				232
Long-term advances/loans—related parties			(269	)			(121	)
Collection of advances/loans—related parties			80				36
Other			9				(77	)
Net Cash Provided by (Used in) Investing Activities			1,683				(5,508	)
Cash Flows From Financing Activities
Issuance of debt			65				9,029
Repayment of debt			(2,435	)			(6,109	)
Issuance of company common stock			35				(21	)
Repurchase of company common stock			(390	)			-
Dividends paid on company common stock			(1,560	)			(1,393	)
Other			(355	)			(406	)
Net Cash Provided by (Used in) Financing Activities			(4,640	)			1,100
Effect of Exchange Rate Changes on Cash and Cash Equivalents			20				89
Net Change in Cash and Cash Equivalents			3,578				133
Cash and cash equivalents at beginning of period			542				755
Cash and Cash Equivalents at End of Period		$	4,120				888

Notes to Consolidated Financial Statements		ConocoPhillips

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.

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 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 June 30
		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		$	1,135				1,088				(47	)			1,076				632				(444	)
Provision for income taxes			2,013				2,011				(2	)			1,068				1,063				(5	)
Net Income			4,228				4,183				(45	)			1,314				875				(439	)
Net Income Attributable to ConocoPhillips			4,209				4,164				(45	)			1,298				859				(439	)
Net Income Attributable to ConocoPhillips Per Share of Common Stock (dollars)
Basic		$	2.82				2.79				(.03	)			.87				.58				(.29	)
Diluted			2.80				2.77				(.03	)			.87				.57				(.30	)

		Millions of Dollars
		Six Months Ended June 30
		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		$	1,886				1,956				70				1,491				1,005				(486	)
Provision for income taxes			3,890				3,889				(1	)			2,246				2,239				(7	)
Net Income			6,224				6,295				71				2,170				1,691				(479	)
Net Income Attributable to ConocoPhillips			6,191				6,262				71				2,138				1,659				(479	)
Net Income Attributable to ConocoPhillips Per Share of Common Stock (dollars)
Basic		$	4.15				4.20				.05				1.44				1.12				(.32	)
Diluted			4.12				4.17				.05				1.43				1.11				(.32	)

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

		Millions of Dollars
		June 30, 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		$	36,337				35,957				(380	)			36,192				35,742				(450	)
Deferred income taxes			17,019				17,012				(7	)			17,962				17,956				(6	)
Retained earnings			37,290				36,917				(373	)			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
		Six Months Ended June 30
		2010												2009
		Computed				As				Effect				As								Effect
		with				Reported				of				Originally				As				of
		Estimate				with Lag				Change				Reported				Adjusted				Change
Net income		$	6,224				6,295				71				2,170				1,691				(479	)
Deferred taxes			(542	)			(543	)			(1	)			(596	)			(603	)			(7	)
Undistributed equity earnings			(1,119	)			(1,189	)			(70	)			(1,092	)			(606	)			486

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.

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).

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 June 30, 2010, the book value of our investment in the venture was $1,495 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 June 30, 2010, at current exchange rates, was $246 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 June 30, 2010, was $676 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.

Inventories consisted of the following:

		Millions of Dollars
		June 30				December 31
		2010				2009
Crude oil and petroleum products		$	6,151				3,955
Materials, supplies and other			968				985
		$	7,119				4,940

Inventories valued on the last-in, first-out (LIFO) basis totaled $5,941 million and $3,747 million at June 30, 2010, and December 31, 2009, respectively. The excess of current replacement cost over LIFO cost of inventories amounted to $5,328 million and $5,627 million at June 30, 2010, and December 31, 2009, respectively.

During the second quarter of 2010, we sold our interest in CFJ Properties, a joint venture which owned and operated Flying J-branded truck travel plazas. The sale resulted in a before-tax gain of $234 million, which is included in the “Other income” line of the consolidated income statement. At June 30, 2010, we no longer had any significant assets or liabilities classified as held for sale.

On June 25, 2010, we sold our 9.03 percent interest in the Syncrude Canada Ltd. joint venture (Syncrude) for $4.6 billion. Syncrude was included in our Exploration and Production segment and had synthetic oil proved reserves of 248 million barrels at December 31, 2009. Production in 2009 was 23,000 barrels per day. The $2.9 billion before-tax gain on this disposition was included as a separate line in the “Total Revenues and Other Income” section of our consolidated income statement. The cash proceeds were included in the “Proceeds from asset dispositions” line within the investing cash flow section of our consolidated statement of cash flows. At the time of disposition, Syncrude had a net carrying value of $1.75 billion, which included $1.97 billion of properties, plants and equipment. During fiscal 2010 until its disposition, Syncrude contributed $327 million in intercompany sales and other operating revenues, and generated income before taxes of $127 million and net income of $93 million.

Our ownership interest in LUKOIL was 19.21 percent at June 30, 2010, based on 851 million shares authorized and issued. Our average ownership interest in the first quarter of 2010, used to record our share of LUKOIL’s first-quarter results on a lag basis, was 20.09 percent. During the second quarter of 2010, we sold 6.7 million shares of LUKOIL, resulting in cash proceeds of $391 million and a net gain on disposition of $99 million, which is included in the “Other income” line of the consolidated income statement.

At June 30, 2010, the book value of our ordinary share investment in LUKOIL was $6,695 million reflecting the recognition of our equity-method share of LUKOIL’s earnings on a one-quarter-lag basis. Our investment book value is lower than our share of the net assets of LUKOIL by approximately $4,234 million. A majority of this negative basis difference is being amortized on a straight-line basis over a 22-year useful life as an increase to equity earnings. On June 30, 2010, the closing price of LUKOIL shares on the London Stock Exchange was $51.90 per share, making the total market value of our LUKOIL investment $8,479 million. For additional information about accounting for our LUKOIL investment, see Note 2—Changes in Accounting Principles.

On July 28, 2010, we announced our intention to sell our entire interest in LUKOIL, then consisting of 163,367,629 shares. This decision will be implemented as follows:

	•		On July 28, 2010, we entered into a stock purchase and option agreement (the Agreement) with a wholly owned subsidiary of LUKOIL, pursuant to which such subsidiary will purchase 64,638,729 shares from us at a price of $53.25 per share, or $3.44 billion in total. Closing on this transaction is expected in the third quarter of 2010.
	•		Also pursuant to the Agreement, the LUKOIL subsidiary has a 60-day option, expiring on September 26, 2010, to purchase any or all of our interest remaining at the time of exercise of the option, at a price of $56 per share.
	•		Finally, to the extent all of our remaining interest is not purchased pursuant to the 60-day option, we intend to sell our remaining interest in the open market from time to time, subject to the terms of the Shareholder Agreement, by the end of 2011.

We will continue to use the equity-method of accounting for our interest in LUKOIL until we determine we no longer have significant influence over the operating and financial policies of LUKOIL. Making this determination will involve judgment based on an on-going evaluation of current facts and circumstances, but based on the various voting rights and powers we have under our Shareholder Agreement with LUKOIL and the cumulative stockholder voting rules in Russia, we believe it is likely we would lose significant influence once our ownership interest falls below approximately 10 percent. At the point in the future when we cease using equity-method accounting, we would no longer record equity earnings related to LUKOIL, we would cease to report our share of LUKOIL’s upstream production and proved reserves in our supplemental oil and gas disclosures, and our available-for-sale investment in LUKOIL’s shares would be marked to market each period, with the corresponding gains and losses recorded to other comprehensive income until the shares are sold.

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 June 30, 2010, included the following:

	•		$676 million in loan financing to Freeport LNG Development, L.P.
	•		$246 million in loan financing at June 2010 exchange rates to Varandey Terminal Company.
	•		$1,064 million in project financing and an additional $93 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.”

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 June 30, 2010, was $304 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 has initiated arbitration in the International Chamber of Commerce challenging our actions and this arbitration is underway. We continue to use the equity method of accounting for our investment in MSLP.

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

		Millions of Dollars
		June 30, 2010												December 31, 2009
		Gross				Accum.				Net				Gross				Accum.				Net
		PP&E				DD&A				PP&E				PP&E				DD&A				PP&E
E&P		$	112,753				47,367				65,386				115,224				45,577				69,647
Midstream			124				77				47				123				74				49
R&M			22,648				8,405				14,243				23,047				6,714				16,333
LUKOIL Investment			-				-				-				-				-				-
Chemicals			-				-				-				-				-				-
Emerging Businesses			1,109				298				811				1,198				300				898
Corporate and Other			1,684				902				782				1,650				869				781
		$	138,318				57,049				81,269				141,242				53,534				87,708

The capitalized cost of suspended wells at June 30, 2010, was $1,002 million, an increase of $94 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, no wells were charged to dry hole expense during the first six months of 2010.

During the first six months of 2010 and 2009, we recognized the following before-tax impairment charges:

		Millions of Dollars
		Three Months Ended								Six Months Ended
		June 30								June 30
		2010				2009				2010				2009
E&P
United States		$	-				-				-				-
International			1				51				1				59
R&M
United States			14				-				17				(5	)
International			1,512				-				1,600				-
Emerging Businesses			5				-				5				-
		$	1,532				51				1,623				54

2010
In the second quarter of 2010, due to ongoing unfavorable market conditions and consistent with our strategy of maintaining capital discipline and reducing our downstream portfolio over time, we cancelled plans for a project to upgrade our refinery in Wilhelmshaven, Germany. As a result, the sum of the undiscounted pretax cash flows was less than the carrying value; therefore, the carrying value of $1,764 million was written down to estimated fair value resulting in a before-tax impairment of $1,500 million. The Level 3 fair value was determined considering a discounted cash flow model, cash flow multiples for similar assets and alternative use. The six-month period of 2010 also included a before-tax property impairment of $100 million in international R&M to write-off capitalized project costs, as a result of our decision to end our participation in a new refinery project in Yanbu Industrial City, Saudi Arabia.

2009
In April 2008, Burlington Resources, Inc., a wholly owned subsidiary of ConocoPhillips, initiated arbitration before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) against The Republic of Ecuador and PetroEcuador as a result of the newly-enacted Windfall Profits Tax Law and government-mandated renegotiation of our production sharing contracts. Despite a restraining order issued by the ICSID, Ecuador confiscated the crude oil production of Burlington and its co-venturer and sold the illegally seized crude oil. As a result, our assets in Ecuador were effectively expropriated. Accordingly, in the second quarter of 2009, we recorded a noncash charge of $51 million before- and after-tax related to the full impairment of our exploration and production investments in Ecuador. In the third quarter of 2009, Ecuador took over operations in Blocks 7 and 21, formalizing the complete expropriation of our assets. In June 2010, the ICSID tribunal concluded it has jurisdiction to hear Burlington’s expropriation claim. A hearing on case merits is scheduled for October 2010, with a decision on case merits expected in June 2011.

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 June 30, 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 $1,126 million of commercial paper outstanding at June 30, 2010, compared with $1,300 million at December 31, 2009. Since we had $1,126 million of commercial paper outstanding and had

issued $40 million of letters of credit, we had access to $6.7 billion in borrowing capacity under our revolving credit facilities at June 30, 2010.

During the quarter, the $1,264 million 8.75% and the $150 million 9.875% bonds were repaid at their maturity. Additionally, the remaining $750 million balance of the Floating Rate Five-Year Term Notes was repaid prior to maturity.

At June 30, 2010, we classified $1,126 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. Additionally, irrevocable early redemption notices were issued early in the third quarter of 2010 for $2,678 million of bonds. Accordingly, these bonds with due dates beyond one year were classified as short-term debt in our consolidated balance sheet.

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 $677 million was short-term and was included in the “Accounts payable—related parties” line on our June 30, 2010, consolidated balance sheet. The principal portion of these payments, which totaled $325 million in the first six months of 2010, is 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.

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

		Millions of Dollars
		2010												2009*
		Common				Non-								Common				Non-
		Stockholders’				Controlling				Total				Stockholders’				Controlling				Total
		Equity				Interests				Equity				Equity				Interests				Equity
Balance at January 1		$	62,023				590				62,613				55,165				1,100				56,265
Net income			6,262				33				6,295				1,659				32				1,691
Dividends			(1,560	)			-				(1,560	)			(1,393	)			-				(1,393	)
Distributions to noncontrolling interests			-				(48	)			(48	)			-				(54	)			(54	)
Other changes, net**			(1,354	)			(1	)			(1,355	)			3,020				-				3,020
Balance at June 30		$	65,371				574				65,945				58,451				1,078				59,529

At June 30, 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.

•

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 June 30, 2010, the carrying value of the guarantee to third-party lenders was $11 million.

•

In the second quarter of 2010, the credit facilities of Rockies Express Pipeline LLC were reduced, and our guarantee was released.

•

At June 30, 2010, we had guarantees outstanding for our portion of joint venture debt obligations, which have terms of up to 15 years. The maximum potential amount of future payments under the guarantees is approximately $70 million. Payment would be required if a joint venture defaults on its debt obligations.

•

In conjunction with our purchase of a 50 percent ownership interest in Australia Pacific LNG Pty Limited (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 21 years. Our maximum potential amount of future payments, or cost of volume delivery, under these guarantees is estimated to be $1,366 million ($2,951 million in the event of intentional or reckless breach) at June 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 $440 million, which consist primarily of guarantees to fund the short-term cash liquidity deficits of certain joint ventures, guarantees 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. These guarantees generally extend up to 14 years or life of the venture.

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 June 30, 2010, was $406 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 $251 million of environmental accruals for known contamination that are included in asset retirement obligations and accrued environmental costs at June 30, 2010. For additional information about environmental liabilities, see 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.

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 June 30, 2010, our balance sheet included a total environmental accrual of $971 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.

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.

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 June 30, 2010, we had performance obligations secured by letters of credit of $2,038 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.

Our obligation under throughput agreements to support third-party shipper financing arrangements for a crude oil transportation system commenced during the second quarter of 2010. The aggregate amounts of estimated payments under these agreements are: 2010—$50 million; 2011—$211 million; 2012—$248 million; 2013—$247 million; 2014—$247 million; and 2015 and after—$3,958 million.

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 cash flow 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 sales 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 sales 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 sales 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
		June 30, 2010																December 31, 2009
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets
Commodity derivatives		$	2,775				1,603				62				4,440				1,710				1,659				61				3,430
Interest rate derivatives			-				16				-				16				-				-				-				-
Foreign exchange derivatives			-				57				-				57				-				45				-				45
Total assets			2,775				1,676				62				4,513				1,710				1,704				61				3,475
Liabilities
Commodity derivatives			(2,838	)			(1,399	)			(21	)			(4,258	)			(1,797	)			(1,496	)			(24	)			(3,317	)
Foreign exchange derivatives			-				(18	)			-				(18	)			-				(47	)			-				(47	)
Total liabilities			(2,838	)			(1,417	)			(21	)			(4,276	)			(1,797	)			(1,543	)			(24	)			(3,364	)
Net assets (liabilities)		$	(63	)			259				41				237				(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:

		Millions of Dollars
		Three Months Ended								Six Months Ended
		June 30								June 30
		2010				2009				2010				2009
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Beginning balance		$	60				96				37				40
Total net gains (losses), realized and unrealized, included in earnings			-				(8	)			32				18
Net purchases, issuances and settlements			(19	)			(17	)			(22	)			(27	)
Transfers into Level 3			1				20				1				61
Transfers out of Level 3			(1	)			(17	)			(7	)			(18	)
Ending balance		$	41				74				41				74

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

		Millions of Dollars
		2010												2009
						Purchased												Purchased
		Other				Crude Oil,								Other				Crude Oil,
		Operating				Natural Gas								Operating				Natural Gas
		Revenues				and Products				Total				Revenues				and Products				Total
Three Months Ended June 30
Total gains (losses) included in earnings		$	10				(10	)			-				(8	)			-				(8	)
Change in unrealized gains (losses) relating to assets held at June 30		$	31				1				32				3				-				3
Change in unrealized gains (losses) relating to liabilities held at June 30		$	(19	)			(9	)			(28	)			(9	)			-				(9	)
Six Months Ended June 30
Total gains (losses) included in earnings		$	54				(22	)			32				19				(1	)			18
Change in unrealized gains (losses) relating to assets held at June 30		$	64				1				65				21				-				21
Change in unrealized gains (losses) relating to liabilities held at June 30		$	(16	)			(17	)			(33	)			(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
		June 30				December 31
		2010				2009
Assets
Prepaid expenses and other current assets		$	4,124				3,084
Other assets			320				359
Liabilities
Other accruals			3,931				3,006
Other liabilities and deferred credits			331				324

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								Six Months Ended
		June 30								June 30
		2010				2009				2010				2009
Sales and other operating revenues		$	(1,139	)			(182	)			(657	)			391
Other income			(20	)			14				(30	)			22
Purchased crude oil, natural gas and products			1,373				(443	)			866				(955	)

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)
		June 30				December 31
		2010				2009
Commodity
Crude oil, refined products and natural gas liquids (millions of barrels)			(35	)			(16	)
Natural gas and power (billions of cubic feet)
Fixed price			(85	)			(60	)
Basis			123				154

Interest Rate Derivative Contracts—During the second quarter of 2010, we executed interest rate swaps to synthetically convert $500 million of our 4.60% fixed-rate notes due in 2015 to a London Interbank Offered Rate (LIBOR)-based floating rate. These swaps qualify for and are designated as fair-value hedges using the short-cut method of hedge accounting. The short-cut method permits the assumption that changes in the value of the derivative perfectly offset changes in the value of the debt; therefore, no gain or loss has been recognized due to hedge ineffectiveness.

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

		Millions of Dollars
		June 30				December 31
		2010				2009
Assets
Prepaid expenses and other current assets		$	7				-
Other assets			9				-

The (gains) and losses from interest rate derivatives used in a fair-value hedge, losses and (gains) from changes in the fair value of the hedged debt, and the line item where they appear on our consolidated income statement were:

		Millions of Dollars
		Three Months Ended								Six Months Ended
		June 30								June 30
		2010				2009				2010				2009
Recorded in interest and debt expense
From the interest rate derivatives		$	(16	)			-				(16	)			-
From the hedged debt			14				-				14				-

The extent to which the change in value of the interest rate derivatives differs from the change in value of the hedged debt is an adjustment to recorded interest expense on the fixed-rate debt that effectively results in interest expense for the period being recorded at variable-rate LIBOR.

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
		June 30				December 31
		2010				2009
Assets
Prepaid expenses and other current assets		$	50				38
Other assets			7				7
Liabilities
Other accruals			18				40
Other liabilities and deferred credits			-				7

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								Six Months Ended
		June 30								June 30
		2010				2009				2010				2009
Foreign currency transaction (gains) losses		$	57				(166	)			103				(172	)

We had the following net position of outstanding foreign currency swap contracts:

		In Millions
		Notional Currency*
						June 30				December 31
						2010				2009
Foreign Currency Swaps
Sell U.S. dollar, buy other currencies**		USD					1,647				3,211
Buy British pound, sell euro		EUR					285				267

  *Denominated in U.S. dollars (USD) and euros (EUR).

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 IntercontinentalExchange (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 June 30, 2010, and December 31, 2009, was $272 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 June 30, 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 $272 million of additional collateral, either with cash or letters of credit.

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 June 30 effective yield rate of 2.25 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 June 30, 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
		June 30				December 31				June 30				December 31
		2010				2009				2010				2009
Financial assets
Foreign currency derivatives		$	57				45				57				45
Interest rate derivatives			16				-				16				-
Commodity derivatives			702				823				702				823
Financial liabilities
Total debt, excluding capital leases			26,243				28,622				29,312				30,565
Joint venture acquisition obligation			5,343				5,669				5,949				6,276
Foreign currency derivatives			18				47				18				47
Commodity derivatives			441				632				441				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 June 30, 2010, commodity derivative assets and liabilities appear net of $133 million of obligations to return cash collateral and $212 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 or interest rate derivatives.

ConocoPhillips’ comprehensive income was as follows:

		Millions of Dollars
		Three Months Ended								Six Months Ended
		June 30								June 30
		2010				2009		*		2010				2009		*
Net income		$	4,183				875				6,295				1,691
After-tax changes in:
Defined benefit pension plans
Net prior service cost			2				3				4				6
Net actuarial loss			35				33				70				67
Non-sponsored plans			19				(1	)			21				(2	)
Foreign currency translation adjustments			(1,449	)			3,079				(1,278	)			2,801
Hedging activities			(1	)			2				(1	)			1
Comprehensive income			2,789				3,991				5,111				4,564
Less: comprehensive income attributable to noncontrolling interests			(19	)			(16	)			(33	)			(32	)
Comprehensive income attributable to ConocoPhillips		$	2,770				3,975				5,078				4,532