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Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Income Tax Expense (Benefit)

ConocoPhillips, income tax expense (benefit), continuing operations

US$ in millions

	12 months ended:	Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Federal
	Foreign
	State and local
	Current
	Federal
	Foreign
	State and local
	Deferred
	Income tax provision (benefit)

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	ConocoPhillips’s current increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	ConocoPhillips’s deferred increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Income tax provision (benefit)	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	ConocoPhillips’s income tax provision (benefit) increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Effective Income Tax Rate (EITR)

ConocoPhillips, effective income tax rate (EITR) reconciliation

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Federal statutory income tax rate
	Non-U.S. effective tax rates
	Canada disposition
	U.K. disposition
	Recovery of outside basis
	Adjustment to tax reserves
	Adjustment to valuation allowance
	APLNG impairment
	State income tax
	Malaysia Deepwater Incentive
	Enhanced oil recovery credit
	U.K. rate change
	Canada rate change
	U.S. fair value election
	Other
	Effective income tax rate, before Tax Legislation
	Tax Legislation
	Effective income tax rate

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

Item	Description	The company
Effective income tax rate, before Tax Legislation	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	ConocoPhillips’s effective income tax rate, before Tax Legislation decreased from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

ConocoPhillips, components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Benefit plan accruals
	Asset retirement obligations and accrued environmental costs
	Investments in joint ventures
	Other financial accruals and deferrals
	Loss and credit carryforwards
	Other
	Deferred tax assets
	Valuation allowance
	Net deferred tax assets
	PP&E and intangibles
	Investment in joint ventures
	Inventory
	Deferred state income tax
	Partnership income deferral
	Other
	Deferred tax liabilities
	Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

Item	Description	The company
Deferred tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	ConocoPhillips’s deferred tax assets increased from 2017 to 2018 and from 2018 to 2019.
Net deferred tax assets	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	ConocoPhillips’s net deferred tax assets decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Net deferred tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	ConocoPhillips’s net deferred tax assets (liabilities) increased from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

ConocoPhillips, deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Deferred tax assets
	Deferred tax liabilities

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

Item	Description	The company
Deferred tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	ConocoPhillips’s deferred tax assets increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.
Deferred tax liabilities	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	ConocoPhillips’s deferred tax liabilities decreased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

ConocoPhillips, adjustments to financial statements

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Common Stockholders’ Equity
	Common stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Common stockholders’ equity (adjusted)
	Adjustment to Net Income (loss) Attributable To ConocoPhillips
	Net income (loss) attributable to ConocoPhillips (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (loss) attributable to ConocoPhillips (adjusted)

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

ConocoPhillips, Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

ConocoPhillips, adjusted financial ratios

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	ConocoPhillips’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	ConocoPhillips’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	ConocoPhillips’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	ConocoPhillips’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	ConocoPhillips’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

ConocoPhillips, Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss) attributable to ConocoPhillips
	Sales and other operating revenues
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss) attributable to ConocoPhillips
	Sales and other operating revenues
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

2019 Calculations

¹ Net profit margin = 100 × Net income (loss) attributable to ConocoPhillips ÷ Sales and other operating revenues
= 100 × ÷ =

² Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to ConocoPhillips ÷ Sales and other operating revenues
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	ConocoPhillips’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Sales and other operating revenues
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Sales and other operating revenues
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

2019 Calculations

¹ Total asset turnover = Sales and other operating revenues ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Sales and other operating revenues ÷ Adjusted total assets
= ÷ =

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	ConocoPhillips’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Financial Leverage

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Common stockholders’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted common stockholders’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

2019 Calculations

¹ Financial leverage = Total assets ÷ Common stockholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted common stockholders’ equity
= ÷ =

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	ConocoPhillips’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss) attributable to ConocoPhillips
	Common stockholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss) attributable to ConocoPhillips
	Adjusted common stockholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

2019 Calculations

¹ ROE = 100 × Net income (loss) attributable to ConocoPhillips ÷ Common stockholders’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Adjusted net income (loss) attributable to ConocoPhillips ÷ Adjusted common stockholders’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	ConocoPhillips’s adjusted ROE improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Return on Assets (ROA)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss) attributable to ConocoPhillips
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss) attributable to ConocoPhillips
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2020-02-18), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23).

2019 Calculations

¹ ROA = 100 × Net income (loss) attributable to ConocoPhillips ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Adjusted net income (loss) attributable to ConocoPhillips ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	ConocoPhillips’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

	ConocoPhillips	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

ConocoPhillips (NYSE:COP)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

ConocoPhillips, Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

ConocoPhillips, Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)