UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(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, 2011

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

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 1,413,506,613 shares of common stock, $.01 par value, outstanding at March 31, 2011.

CONOCOPHILLIPS

		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			23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			45
Part II – Other Information
Item 1. Legal Proceedings			46
Item 1A. Risk Factors			47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 6. Exhibits			48
Signature			49
EX-10
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
		March 31
		2011				2010
Revenues and Other Income
Sales and other operating revenues*		$	56,530				44,821
Equity in earnings of affiliates			1,017				868
Gain on dispositions**			616				24
Other income**			84				49
Total Revenues and Other Income			58,247				45,762
Costs and Expenses
Purchased crude oil, natural gas and products			42,376				31,521
Production and operating expenses			2,628				2,527
Selling, general and administrative expenses			499				444
Exploration expenses			176				383
Depreciation, depletion and amortization			2,070				2,318
Impairments			-				91
Taxes other than income taxes*			4,364				4,037
Accretion on discounted liabilities			112				114
Interest and debt expense			262				301
Foreign currency transaction (gains) losses			(36	)			36
Total Costs and Expenses			52,451				41,772
Income before income taxes			5,796				3,990
Provision for income taxes			2,754				1,878
Net income			3,042				2,112
Less: net income attributable to noncontrolling interests			(14	)			(14	)
Net Income Attributable to ConocoPhillips		$	3,028				2,098
Net Income Attributable to ConocoPhillips Per Share of Common Stock (dollars)
Basic		$	2.11				1.41
Diluted			2.09				1.40
Dividends Paid Per Share of Common Stock (dollars)		$	.66				.50
Average Common Shares Outstanding (in thousands)
Basic			1,432,285				1,492,861
Diluted			1,445,477				1,503,565
*Includes excise taxes on petroleum products sales:		$	3,382				3,220
**2010 has been reclassified to conform to current-year presentation.
See Notes to Consolidated Financial Statements.

Consolidated Balance Sheet		ConocoPhillips
		Millions of Dollars
		March 31				December 31
		2011				2010
Assets
Cash and cash equivalents		$	6,172				9,454
Short-term investments*			2,231				973
Accounts and notes receivable (net of allowance of $38 million in 2011 and $32 million in 2010)			14,549				13,787
Accounts and notes receivable—related parties			1,859				2,025
Investment in LUKOIL			-				1,083
Inventories			7,944				5,197
Prepaid expenses and other current assets			2,858				2,141
Total Current Assets			35,613				34,660
Investments and long-term receivables			32,791				31,581
Loans and advances—related parties			2,138				2,180
Net properties, plants and equipment			83,765				82,554
Goodwill			3,630				3,633
Intangibles			797				801
Other assets			909				905
Total Assets		$	159,643				156,314
Liabilities
Accounts payable		$	18,044				16,613
Accounts payable—related parties			2,159				1,786
Short-term debt			605				936
Accrued income and other taxes			5,445				4,874
Employee benefit obligations			632				1,081
Other accruals			2,333				2,129
Total Current Liabilities			29,218				27,419
Long-term debt			22,604				22,656
Asset retirement obligations and accrued environmental costs			9,455				9,199
Joint venture acquisition obligation—related party			4,135				4,314
Deferred income taxes			17,530				17,335
Employee benefit obligations			3,590				3,683
Other liabilities and deferred credits			2,590				2,599
Total Liabilities			89,122				87,205
Equity
Common stock (2,500,000,000 shares authorized at $.01 par value)
Issued (2011—1,744,701,911 shares; 2010—1,740,529,279 shares)
Par value			17				17
Capital in excess of par			44,314				44,132
Grantor trusts (at cost: 2011—36,879,857 shares; 2010—36,890,375 shares)			(632	)			(633	)
Treasury stock (at cost: 2011—294,315,441 shares; 2010—272,873,537 shares)			(21,713	)			(20,077	)
Accumulated other comprehensive income			5,547				4,773
Unearned employee compensation			(41	)			(47	)
Retained earnings			42,480				40,397
Total Common Stockholders’ Equity			69,972				68,562
Noncontrolling interests			549				547
Total Equity			70,521				69,109
Total Liabilities and Equity		$	159,643				156,314
*Includes marketable securities of:		$	1,997				602
See Notes to Consolidated Financial Statements.

Consolidated Statement of Cash Flows		ConocoPhillips
		Millions of Dollars
		Three Months Ended
		March 31
		2011				2010
Cash Flows From Operating Activities
Net income		$	3,042				2,112
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, depletion and amortization			2,070				2,318
Impairments			-				91
Dry hole costs and leasehold impairments			50				133
Accretion on discounted liabilities			112				114
Deferred taxes			87				(35	)
Undistributed equity earnings			(523	)			(503	)
Gain on dispositions			(616	)			(24	)
Other			(185	)			(187	)
Working capital adjustments
Decrease (increase) in accounts and notes receivable			(681	)			677
Decrease (increase) in inventories			(2,669	)			(2,439	)
Decrease (increase) in prepaid expenses and other current assets			(546	)			(398	)
Increase (decrease) in accounts payable			1,753				396
Increase (decrease) in taxes and other accruals			53				785
Net Cash Provided by Operating Activities			1,947				3,040
Cash Flows From Investing Activities
Capital expenditures and investments			(2,884	)			(2,071	)
Proceeds from asset dispositions			1,787				132
Net purchases of short-term investments			(1,170	)			-
Long-term advances/loans—related parties			4				(248	)
Collection of advances/loans—related parties			40				27
Other			12				3
Net Cash Used in Investing Activities			(2,211	)			(2,157	)
Cash Flows From Financing Activities
Issuance of debt			-				362
Repayment of debt			(373	)			(15	)
Issuance of company common stock			75				9
Repurchase of company common stock			(1,636	)			-
Dividends paid on company common stock			(944	)			(744	)
Other			(183	)			(186	)
Net Cash Used in Financing Activities			(3,061	)			(574	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents			43				4
Net Change in Cash and Cash Equivalents			(3,282	)			313
Cash and cash equivalents at beginning of period			9,454				542
Cash and Cash Equivalents at End of Period		$	6,172				855
See Notes to Consolidated Financial Statements.

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 2010 Annual Report on Form 10-K.

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 LUKOIL have disproportionate interests, and LUKOIL was a related party at the inception of the joint venture. Since LUKOIL is no longer a related party, we do not believe NMNG would be a VIE if reconsidered today. LUKOIL owns 70 percent versus our 30 percent direct interest; therefore, 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. The book value of our investment in the venture was $730 million and $735 million at March 31, 2011, and December 31, 2010, respectively.

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 was $642 million at March 31, 2011, and $653 million at December 31, 2010. 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 performed an analysis of the expected losses and determined we are not the primary beneficiary. This expected loss analysis took into account that the credit support arrangement requires Freeport LNG to maintain sufficient commercial insurance to mitigate any loan losses. 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
		March 31				December 31
		2011				2010
Crude oil and petroleum products		$	6,973				4,254
Materials, supplies and other			971				943
		$	7,944				5,197

Inventories valued on the last-in, first-out (LIFO) basis totaled $6,713 million and $4,051 million at March 31, 2011, and December 31, 2010, respectively. The excess of current replacement cost over LIFO cost of inventories amounted to $9,812 million and $6,794 million at March 31, 2011, and December 31, 2010, respectively.

Australia Pacific LNG

In April 2011, Australia Pacific LNG Pty Ltd (APLNG) and China Petrochemical Corporation (Sinopec) signed definitive agreements for supply of up to 4.3 million tonnes per annum of LNG for 20 years. The agreements also specify terms under which Sinopec will subscribe for a 15 percent equity interest in APLNG, with both our ownership interest and Origin Energy’s ownership interest diluting to 42.5 percent. The transaction is subject to satisfaction of certain conditions to closing, currently expected to occur in the third quarter of 2011. At closing, we expect to record a loss on disposition of approximately $250 million after-tax from the dilution.

LUKOIL

We completed the disposition of our interest in LUKOIL during the first quarter of 2011, realizing a before-tax gain of $360 million and cash proceeds of $1,243 million.

Loans and Long-Term Receivables

As part of our normal ongoing business operations and consistent with industry practice, we enter into numerous agreements with other parties to pursue business opportunities. Included in such activity are loans made to certain affiliated and non-affiliated companies. Significant loans to affiliated companies at March 31, 2011, included the following:

	•		$642 million in loan financing to Freeport LNG.
	•		$1,186 million in project financing to Qatar Liquefied Gas Company Limited (3) (QG3).
	•		$550 million in loan financing to WRB Refining LP.

The long-term portion of these loans is 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.”

Significant long-term receivables and loans to non-affiliated companies at March 31, 2011, included $372 million related to seller financing of U.S. retail marketing assets. Long-term receivables and the long-term portion of these loans are included in the “Investments and long-term receivables” line item on the consolidated balance sheet, while the short-term portion related to non-affiliate loans is in “Accounts and notes receivable.”

Other

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, 2011, was $358 million, and at December 31, 2010, was $325 million. 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. MSLP processes our long residue, which is produced from heavy sour crude oil, for a processing fee. Fuel-grade petroleum coke is produced as a by-product and becomes the property of MSLP. 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 with the International Chamber of Commerce challenging our actions, and the arbitration process 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
		March 31, 2011												December 31, 2010
		Gross				Accum.				Net				Gross				Accum.				Net
		PP&E				DD&A				PP&E				PP&E				DD&A				PP&E
Exploration and Production (E&P)		$	120,562				53,088				67,474				116,805				50,501				66,304
Midstream			131				81				50				128				80				48
Refining and Marketing (R&M)			23,964				9,347				14,617				23,579				8,999				14,580
LUKOIL Investment			-				-				-				-				-				-
Chemicals			-				-				-				-				-				-
Emerging Businesses			1,031				189				842				981				161				820
Corporate and Other			1,721				939				782				1,732				930				802
		$	147,409				63,644				83,765				143,225				60,671				82,554

The capitalized cost of suspended wells at March 31, 2011, was $1,042 million, an increase of $29 million from $1,013 million at year-end 2010. For the category of exploratory well costs capitalized for a period greater than one year as of December 31, 2010, no wells were charged to dry hole expense during the first three months of 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 QG3 Project. Commercial paper maturities are generally limited to 90 days.

At both March 31, 2011, and December 31, 2010, 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 $1,155 million of commercial paper outstanding at March 31, 2011, compared with $1,182 million at December 31, 2010. Since we had $1,155 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 March 31, 2011.

During the first three months of 2011, a $328 million 9.375% Note was repaid at its maturity.

At March 31, 2011, we classified $1,100 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.

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 $704 million was short-term and was included in the “Accounts payable—related parties” line on our March 31, 2011, consolidated balance sheet. The principal portion of these payments, which totaled $170 million in the first three months of 2011, 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 three months of 2011 and 2010 was as follows:

		Millions of Dollars
		2011												2010
		Common				Non-								Common				Non-
		Stockholders’				Controlling				Total				Stockholders’				Controlling				Total
		Equity				Interest				Equity				Equity				Interest				Equity
Balance at January 1		$	68,562				547				69,109				62,023				590				62,613
Net income			3,028				14				3,042				2,098				14				2,112
Dividends			(944	)			-				(944	)			(1,563	)			-				(1,563	)
Repurchase of company common stock			(1,636	)			-				(1,636	)			-				-				-
Distributions to noncontrolling interests			-				(12	)			(12	)			-				(24	)			(24	)
Other changes, net*			962				-				962				279				-				279
Balance at March 31		$	69,972				549				70,521				62,837				580				63,417

At March 31, 2011, 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 QG3, 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 QG3 Project is not achieved. The project financing will be nonrecourse to ConocoPhillips upon certified completion, which is expected in 2011. At March 31, 2011, the carrying value of the guarantee to third-party lenders was $11 million.

Guarantees of Joint Venture Debt

At March 31, 2011, 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 $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 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 6 to 21 years. Our maximum potential amount of future payments, or cost of volume delivery, under these guarantees is estimated to be $1,603 million ($3,532 million in the event of intentional or reckless breach) at March 2011 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 co-venturers do not make necessary equity contributions into APLNG.
	•		We have other guarantees with maximum future potential payment amounts totaling $390 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.

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, 2011, was $375 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 $240 million of environmental accruals for known contamination that are included in asset retirement obligations and accrued environmental costs at March 31, 2011. For additional information about environmental liabilities, see Note 11—Contingencies and Commitments.

A number of lawsuits involving a variety of claims have been made against ConocoPhillips that arise in the ordinary course of business. We also may be required 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 active and inactive sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. 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. 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. 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, 2011, our balance sheet included a total environmental accrual of $1,011 million, compared with $994 million at December 31, 2010. 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 and/or mediation. 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 regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, are required.

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, 2011, we had performance obligations secured by letters of credit of $1,735 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.

In 2007, we announced we had been unable to reach agreement with respect to our migration to an empresa mixta structure mandated by the Venezuelan government’s Nationalization Decree. As a result, Venezuela’s national oil company, PDVSA, or its affiliates directly assumed control over ConocoPhillips’ interests in the Petrozuata and Hamaca heavy oil ventures and the offshore Corocoro development project. In response to this expropriation, we filed a request for international arbitration on November 2, 2007, with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). An arbitration hearing was held during 2010 before ICSID, and the arbitration process is ongoing.

In 2008, Burlington Resources, Inc., a wholly owned subsidiary of ConocoPhillips, initiated arbitration before 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 ICSID, Ecuador confiscated the crude oil production of Burlington and its co-venturer and sold the illegally seized crude oil. In 2009, Ecuador took over operations in Blocks 7 and 21, fully expropriating our assets. In June 2010, the ICSID tribunal concluded it has jurisdiction to hear the expropriation claim. An arbitration hearing on case merits occurred in March 2011. The arbitration process is ongoing.

Financial Instruments

We invest excess cash in financial instruments with maturities based on our cash forecasts for the various currency pools we manage. The maturities of these investments may from time to time extend beyond 90 days. The types of financial instruments in which we currently invest include:

	•		Time Deposits: Interest bearing deposits placed with approved financial institutions.
	•		Commercial Paper: Unsecured promissory notes issued by a corporation, commercial bank, or government agency purchased at a discount to mature at par.
	•		Government or government agency obligations: Negotiable debt obligations issued by a government or government agency.

These financial instruments appear in the “Cash and cash equivalents” line of our consolidated balance sheet if the maturities at the time we made the investments were 90 days or less; otherwise, these held-to-maturity investments are included in the “Short-term investments” line. We held the following financial instruments:

		Millions of Dollars
		Carrying Amount
		Cash & Cash Equivalents								Short-Term Investments*
		March 31				December 31				March 31				December 31
		2011				2010				2011				2010
Cash		$	981				1,284				-				-
Time Deposits
Remaining maturities from 1 to 90 days			3,267				6,154				138				302
Remaining maturities from 91 to 180 days			-				-				96				69
Commercial Paper
Remaining maturities from 1 to 90 days			1,707				1,566				365				525
Remaining maturities from 91 to 180 days			-				-				184				-
Government Obligations
Remaining maturities from 1 to 90 days			217				450				1,287				77
Remaining maturities from 91 to 180 days			-				-				161				-
		$	6,172				9,454				2,231				973

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 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 with fixed minimum notional volumes 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 eligible for and we elect the normal purchases and normal sales exception (i.e. contracts to purchase or sell quantities we expect to use or sell over a reasonable period in the normal course of business). 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 generally 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. Where exchange-provided prices are adjusted or non-exchange quotes are used, we generally classify those exchange-cleared contracts as Level 2. 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 material transfers in or out of 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, 2011																December 31, 2010
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets
Commodity derivatives		$	4,078				1,695				54				5,827				1,957				1,243				63				3,263
Interest rate derivatives			-				14				-				14				-				20				-				20
Foreign currency exchange derivatives			-				12				-				12				-				15				-				15
Total assets			4,078				1,721				54				5,853				1,957				1,278				63				3,298
Liabilities
Commodity derivatives			4,644				1,623				26				6,293				2,230				1,118				36				3,384
Foreign currency exchange derivatives			-				15				-				15				-				9				-				9
Total liabilities			4,644				1,638				26				6,308				2,230				1,127				36				3,393
Net assets (liabilities)		$	(566	)			83				28				(455	)			(273	)			151				27				(95	)

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 right of setoff 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.

As reflected in the table above, Level 3 activity was not material.

Commodity Derivative Contracts—We operate in the worldwide crude oil, bitumen, refined product, natural gas, LNG, 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. We also use the market knowledge gained from these activities to capture market opportunities such as moving physical commodities to more profitable locations, storing commodities to capture seasonal or time premiums, and blending commodities to capture quality upgrades. Derivatives may be used to optimize these activities which 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
		2011				2010
Assets
Prepaid expenses and other current assets		$	5,527				3,073
Other assets			317				211
Liabilities
Other accruals			6,068				3,212
Other liabilities and deferred credits			242				193

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 setoff 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
		2011				2010
Sales and other operating revenues		$	(1,001	)			482
Other income			(7	)			(10	)
Purchased crude oil, natural gas and products			293				(507	)

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
		2011				2010
Commodity
Crude oil, refined products and natural gas liquids (millions of barrels)			(33	)			(16	)
Natural gas and power (billions of cubic feet equivalent)
Fixed price			(87	)			(69	)
Basis			212				(43	)

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
		March 31				December 31
		2011				2010
Assets
Prepaid expenses and other current assets		$	11				11
Other assets			3				9

Hedge accounting was used for all items in the table. The amounts shown are presented gross.

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
		March 31
		2011				2010
Recorded in interest and debt expense
From the interest rate derivatives		$	2				-
From the hedged debt			(5	)			-

Hedge accounting was used for all items in the table. The amounts shown are presented gross.

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 floating-rate LIBOR plus the swap spread.

Foreign Currency Exchange Derivatives—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 exchange derivative assets and liabilities, and the line items where they appear on our consolidated balance sheet were:

		Millions of Dollars
		March 31				December 31
		2011				2010
Assets
Prepaid expenses and other current assets		$	12				14
Other assets			-				1
Liabilities
Other accruals			12				7
Other liabilities and deferred credits			3				2

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

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

		Millions of Dollars
		Three Months Ended
		March 31
		2011				2010
Foreign exchange transaction (gains) losses		$	3				46

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

We had the following net notional position of outstanding foreign currency exchange derivatives:

		In Millions
		Notional Currency*
		March 31				December 31
		2011				2010
Foreign Currency Exchange Derivatives
Sell U.S. dollar, buy other currencies**		USD	382				569
Sell euro, buy British pound		EUR	96				253

  *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, OTC derivative contracts and trade receivables. Our cash equivalents and short-term investments are placed in high-quality commercial paper, money market funds, government debt securities and time deposits with major international banks and financial institutions.

The credit risk from our OTC derivative contracts, such as forwards and swaps, derives from the counterparty to the transaction. 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 March 31, 2011, and December 31, 2010, was $273 million and $225 million, respectively, for which no collateral was posted. If our credit rating were lowered one level from its “A” rating (per Standard and Poor’s) on March 31, 2011, 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 $273 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, cash equivalents and short-term investments: 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: We completed the disposition of our interest in LUKOIL during the first quarter of 2011. At December 31, 2010, our investment in LUKOIL was carried at fair value of $1,083 million, reflecting a closing price of LUKOIL American Depositary Receipts (ADRs) on the London Stock Exchange of $56.50 per share.
	•		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 March 31, 2011, and December 31, 2010, effective yield rates of 2.01 percent and 1.87 percent, respectively, 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 8—Joint Venture Acquisition Obligation, for additional information.
	•		Commodity 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, fair value is 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.

	•		Interest rate swap contracts: Fair value is estimated based on a pricing model and market observable interest rate swap curves obtained from a third-party market data provider.
	•		Forward-exchange contracts: Fair values are estimated by comparing the contract rate to the forward rates in effect at the end of the respective reporting periods, and approximate the exit prices at those dates.

Our commodity derivative and financial instruments were:

		Millions of Dollars
		Carrying Amount								Fair Value
		March 31				December 31				March 31				December 31
		2011				2010				2011				2010
Financial assets
Foreign currency exchange derivatives		$	12				15				12				15
Interest rate derivatives			14				20				14				20
Commodity derivatives			658				624				658				624
Investment in LUKOIL			-				1,083				-				1,083
Financial liabilities
Total debt, excluding capital leases			23,172				23,553				25,446				26,144
Joint venture acquisition obligation			4,839				5,009				5,367				5,600
Foreign currency exchange derivatives			15				9				15				9
Commodity derivatives			539				426				539				426

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 setoff and intent to net exist). In addition, the March 31, 2011, commodity derivative assets and liabilities appear net of $16 million of obligations to return cash collateral and $601 million of rights to reclaim cash collateral, respectively. The December 31, 2010, commodity derivative assets and liabilities appear net of $5 million of obligations to return cash collateral and $324 million of rights to reclaim cash collateral, respectively. No collateral was deposited or held for the foreign currency derivatives or interest rate derivatives.

Note 13—Comprehensive Income

ConocoPhillips’ comprehensive income was as follows:

		Millions of Dollars
		Three Months Ended
		March 31
		2011				2010
Net income		$	3,042				2,112
After-tax changes in:
Defined benefit plans
Net prior service cost			1				2
Net actuarial gain			33				35
Nonsponsored plans			3				2
Net reclassification adjustment for gain on securities recognized in net income			(158	)			-
Foreign currency translation adjustments			894				171
Hedging activities			1				-
Comprehensive income			3,816				2,322
Less: comprehensive income attributable to noncontrolling interests			(14	)			(14	)
Comprehensive income attributable to ConocoPhillips		$	3,802				2,308

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

		Millions of Dollars
		March 31				December 31
		2011				2010
Defined benefit pension liability adjustments		$	(1,321	)			(1,358	)
Net unrealized gain on securities			-				158
Foreign currency translation adjustments			6,874				5,980
Deferred net hedging loss			(6	)			(7	)
Accumulated other comprehensive income		$	5,547				4,773

There were no items within accumulated other comprehensive income related to noncontrolling interests.

Note 14—Cash Flow Information

		Millions of Dollars
		Three Months Ended
		March 31
		2011				2010
Cash Payments
Interest		$	286				322
Income taxes			2,722				1,596
Net Purchases of Short-Term Investments
Short-term investments purchased		$	(2,101	)			-
Short-term investments sold			931				-
		$	(1,170	)			-

Note 15—Employee Benefit Plans

Pension and Postretirement Plans

		Millions of Dollars
		Pension Benefits																Other Benefits
Three Months Ended		March 31																March 31
		2011								2010								2011				2010
		U.S.				Int’l.				U.S.				Int’l.
Components of Net Periodic Benefit Cost
Service cost		$	64				24				57				23				3				3
Interest cost			62				44				65				43				10				11
Expected return on plan assets			(70	)			(43	)			(56	)			(38	)			-				-
Amortization of prior service cost			2				-				2				-				(2	)			1
Recognized net actuarial loss (gain)			41				11				42				14				(1	)			(2	)
Net periodic benefit cost		$	99				36				110				42				10				13

During the first three months of 2011, we contributed $208 million to our domestic benefit plans and $53 million to our international benefit plans.

Note 16—Related Party Transactions

Significant transactions with related parties were:

		Millions of Dollars
		Three Months Ended
		March 31
		2011				2010
Operating revenues and other income (a)		$	1,816				1,934
Purchases (b)			4,354				3,439
Operating expenses and selling, general and administrative expenses (c)			105				81
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), and gas oil and hydrogen feedstocks were sold to Excel Paralubes. The first quarter of 2010 included sales of refined products to CFJ Properties and LUKOIL, which were no longer considered related parties beginning in the third and fourth quarters of 2010, respectively, due to the sales of our interests. Natural gas, crude oil, blendstock and other intermediate products were sold to WRB Refining LP. 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 refined products from MRC. The first quarter of 2010 included purchases of crude oil from LUKOIL, which was no longer considered a related party beginning in the fourth quarter of 2010. 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 lubricants 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 4—Investments, Loans and Long-Term Receivables, for additional information on loans to affiliated companies.

Note 17—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, LNG 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.
	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 past investment in the ordinary shares of OAO LUKOIL, an international, integrated oil and gas company headquartered in Russia. In the first quarter of 2011, we completed the divestiture of our entire interest in LUKOIL.
	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 CPChem.
	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 and short-term investments.

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
		2011				2010
Sales and Other Operating Revenues
E&P
United States		$	7,755				8,192
International			7,920				7,460
Intersegment eliminations—U.S.			(1,688	)			(1,375	)
Intersegment eliminations—international			(2,067	)			(1,896	)
E&P			11,920				12,381
Midstream
Total sales			2,328				2,078
Intersegment eliminations			(156	)			(116	)
Midstream			2,172				1,962
R&M
United States			29,953				21,713
International			12,744				8,913
Intersegment eliminations—U.S.			(265	)			(198	)
Intersegment eliminations—international			(13	)			(13	)
R&M			42,419				30,415
LUKOIL Investment			-				-
Chemicals			3				3
Emerging Businesses
Total sales			156				215
Intersegment eliminations			(145	)			(159	)
Emerging Businesses			11				56
Corporate and Other			5				4
Consolidated sales and other operating revenues		$	56,530				44,821

Net Income Attributable to ConocoPhillips
E&P
United States		$	863				757
International			1,489				1,075
Total E&P			2,352				1,832
Midstream			73				77
R&M
United States			402				12
International			80				(16	)
Total R&M			482				(4	)
LUKOIL Investment			239				387
Chemicals			193				110
Emerging Businesses			(7	)			6
Corporate and Other			(304	)			(310	)
Net income attributable to ConocoPhillips		$	3,028				2,098

		Millions of Dollars
		March 31				December 31
		2011				2010
Total Assets
E&P
United States		$	35,379				35,607
International			65,170				63,086
Total E&P			100,549				98,693
Midstream			2,069				2,506
R&M
United States			28,899				26,028
International			10,355				8,463
Goodwill			3,630				3,633
Total R&M			42,884				38,124
LUKOIL Investment			-				1,129
Chemicals			2,794				2,732
Emerging Businesses			988				964
Corporate and Other			10,359				12,166
Consolidated total assets		$	159,643				156,314

Note 18—Income Taxes

Our effective tax rates for the first quarter of 2011 and 2010 were 48 percent and 47 percent, respectively. The effective tax rate in excess of the domestic federal statutory rate of 35 percent was primarily due to foreign taxes.

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, ConocoPhillips Canada Funding Company I and ConocoPhillips Canada Funding Company II are indirect, wholly owned subsidiaries of ConocoPhillips Company. 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. Certain previously reported amounts appearing on the 2010 income statement have been reclassified to conform to current-year presentation.

		Millions of Dollars
		Three Months Ended March 31, 2011
										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		$	-				35,729				-				-				-				20,801				-				56,530
Equity in earnings of affiliates			3,235				3,439				-				-				-				543				(6,200	)			1,017
Gain on dispositions			-				268				-				-				-				348				-				616
Other income			-				53				-				-				-				31				-				84
Intercompany revenues			1				903				11				23				9				8,643				(9,590	)			-
Total Revenues and Other Income			3,236				40,392				11				23				9				30,366				(15,790	)			58,247
Costs and Expenses
Purchased crude oil, natural gas and products			-				33,441				-				-				-				18,144				(9,209	)			42,376
Production and operating expenses			-				1,152				-				-				-				1,566				(90	)			2,628
Selling, general and administrative expenses			5				318				-				-				-				160				16				499
Exploration expenses			-				50				-				-				-				126				-				176
Depreciation, depletion and amortization			-				387				-				-				-				1,683				-				2,070
Taxes other than income taxes			-				1,248				-				-				-				3,116				-				4,364
Accretion on discounted liabilities			-				17				-				-				-				95				-				112
Interest and debt expense			315				107				10				19				8				110				(307	)			262
Foreign currency transaction (gains) losses			-				(17	)			-				37				(3	)			(53	)			-				(36	)
Total Costs and Expenses			320				36,703				10				56				5				24,947				(9,590	)			52,451
Income (loss) before income taxes			2,916				3,689				1				(33	)			4				5,419				(6,200	)			5,796
Provision for income taxes			(112	)			454				-				1				10				2,401				-				2,754
Net income (loss)			3,028				3,235				1				(34	)			(6	)			3,018				(6,200	)			3,042
Less: net income attributable to noncontrolling interests			-				-				-				-				-				(14	)			-				(14	)
Net Income (Loss) Attributable to ConocoPhillips		$	3,028				3,235				1				(34	)			(6	)			3,004				(6,200	)			3,028
Income Statement		Three Months Ended March 31, 2010
Revenues and Other Income
Sales and other operating revenues		$	-				27,922				-				-				-				16,899				-				44,821
Equity in earnings of affiliates			2,232				2,320				-				-				-				678				(4,362	)			868
Gain on dispositions			-				10				-				-				-				14				-				24
Other income (loss)			-				76				-				-				-				(27	)			-				49
Intercompany revenues			1				267				11				21				13				5,470				(5,783	)			-
Total Revenues and Other Income			2,233				30,595				11				21				13				23,034				(10,145	)			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			-				41				-				-				-				342				-				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				28,284				10				50				62				18,942				(5,783	)			41,772
Income (loss) before income taxes			2,026				2,311				1				(29	)			(49	)			4,092				(4,362	)			3,990
Provision for income taxes			(72	)			79				-				3				(5	)			1,873				-				1,878
Net income (loss)			2,098				2,232				1				(32	)			(44	)			2,219				(4,362	)			2,112
Less: net income attributable to noncontrolling interests			-				-				-				-				-				(14	)			-				(14	)
Net Income (Loss) Attributable to ConocoPhillips		$	2,098				2,232				1				(32	)			(44	)			2,205				(4,362	)			2,098