CONCHO RESOURCES INC. The following discussion is intended to assist you in understanding our business and results of operations together with our present financial condition. This section should be read in conjunction with our historical consolidated financial statements and notes. Certain statements in our discussion below are forward-looking statements. These forward-looking statements involve risks and uncertainties. We caution that a number of factors could cause actual results to differ materially from those implied or expressed by the forward-looking statements. Please see "Cautionary Statement Regarding Forward-Looking Statements." OverviewConcho Resources Inc. ("Concho," the "Company," "we," "us," and "our") is an independent exploration and production company. We are one of the largest operators in thePermian Basin ofWest Texas andSoutheast New Mexico . Concho's legacy in thePermian Basin provides us a deep understanding of operating and geological trends, and we are actively developing our resource base by utilizing large-scale development projects, which include long-lateral wells, enhanced completion techniques and multi-well pad locations, throughout our operating areas. Financial and Operating Performance Our financial and operating performance for the nine months endedSeptember 30, 2020 and 2019 included the following highlights: •Net loss was$9,773 million ($(50.04) per diluted share) as compared to net loss of$234 million ($(1.18) per diluted share) for the nine months endedSeptember 30, 2020 and 2019, respectively. The increase in net loss was primarily due to: •$6,884 million increase in impairments of our proved oil and natural gas properties during the nine months endedSeptember 30, 2020 ; •$2,659 million increase in exploration and abandonments, primarily due to impairments of our unproved oil and natural gas properties during the nine months endedSeptember 30, 2020 ; •$1,836 million increase in impairments of goodwill during the nine months endedSeptember 30, 2020 ; •$1,116 million decrease in oil and natural gas revenues, primarily due to the decrease in commodity price realization per Boe (excluding the effects of derivatives); •$519 million change in other, net due to other expense of$208 million for the nine months endedSeptember 30, 2020 , primarily related to an impairment of one of our equity method investments, as compared to other income of$311 million for the nine months endedSeptember 30, 2019 , primarily due to a gain on the sale of our ownership interest in the subsidiary of one of our equity method investments; and •$203 million decrease in net gain on disposition of assets and other due to a net gain of$99 million related to our contribution of certain water infrastructure assets in exchange for additional ownership interests in the entity during the nine months endedSeptember 30, 2020 , as compared to a net gain of$302 million during the nine months endedSeptember 30, 2019 ; partially offset by: •$1,648 million increase in income tax benefit; •$1,501 million change in (gain) loss on derivatives, net due to a net gain on derivatives of$1,056 million during the nine months endedSeptember 30, 2020 , as compared to a net loss on derivatives of$445 million in 2019; and •$348 million decrease in depreciation, depletion and amortization expense, primarily due to a decrease in the depletion rate per Boe. •Average daily sales volumes of 322 MBoe per day during the nine months endedSeptember 30, 2020 , as compared to 329 MBoe per day during the same period in 2019. •Net cash provided by operating activities increased by$66 million to$2,133 million for the nine months endedSeptember 30, 2020 , as compared to$2,067 million for the nine months endedSeptember 30, 2019 . 25 -------------------------------------------------------------------------------- Table of Contents Commodity Prices Our results of operations are heavily influenced by commodity prices. Commodity prices may fluctuate widely in response to (i) relatively minor changes in the supply of and demand for oil and natural gas, (ii) market uncertainty and (iii) a variety of additional factors that are beyond our control. OnApril 20, 2020 , the price of oil fell below zero to$(37.63) per barrel due in part to a significant decrease in demand as a result of the novel coronavirus ("COVID-19") pandemic and an oversupply of crude oil driven by a dispute between members of theOrganization of Petroleum Exporting Countries ("OPEC") andRussia over production cuts. While oil prices have since recovered, prices remain at depressed levels and remain volatile due to the continued impact of and uncertainty surrounding the COVID-19 pandemic. Factors that may impact future commodity prices, including the price of oil and natural gas, include but are not limited to: •the overall global demand for oil and natural gas; •the domestic and foreign supply of oil and natural gas; •the overall North American oil and natural gas supply and demand fundamentals, including: •the U.S. economy, •weather conditions, and •liquefied natural gas ("LNG") deliveries to and exports fromthe United States ; •economic conditions worldwide, including adverse conditions driven by political, weather or health events, including, but not limited to, the COVID-19 pandemic; •the proximity, capacity, cost and availability of pipelines and other transportation facilities, as well as the availability of commodity processing, gathering and refining capacity; •risks related to the concentration of our operations in thePermian Basin ofWest Texas andSoutheast New Mexico and the level of commodity inventory in thePermian Basin ; •the level of global crude oil, crude oil products and LNG inventories; •volatility and trading patterns in the commodity-futures markets; •political and economic developments in oil and natural gas producing regions, includingAfrica ,South America and theMiddle East ; •the extent to which members ofOPEC and other oil exporting nations are able to influence global oil supply levels; •changes in trade relations and policies, including the imposition of tariffs bythe United States orChina ; •technological advances or social attitudes and policies affecting energy consumption and energy supply; •activism or activities by non-governmental organizations to limit certain sources of capital for the energy sector or restrict the exploration, development and production of oil and natural gas; •the effect of energy conservation efforts, alternative fuel requirements and climate change-related initiatives; •additional restrictions on the exploration, development and production of oil, natural gas and natural gas liquids so as to materially reduce emissions of carbon dioxide and methane greenhouse gases; •political and economic events that directly or indirectly impact the relative strength or weakness of theU.S. dollar, on which oil prices are benchmarked globally, against foreign currencies; •domestic and foreign governmental regulations, including limits onthe United States' ability to export crude oil, and taxation; •the cost and availability of products and personnel needed for us to produce oil and natural gas, including rigs, crews, sand, water and water disposal; •the quality of the oil we produce; and •the price, availability and acceptance of alternative fuels. Although we cannot predict the occurrence of events that may affect future commodity prices, or the degree to which these prices will be affected, the prices for any commodity that we produce will generally approximate current market prices in the geographic region of the production. From time to time, we may hedge a portion of our commodity price risk to mitigate the impact of price volatility on our business. See Notes 6 and 13 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information regarding our commodity derivative positions atSeptember 30, 2020 and additional derivative contracts entered into subsequent toSeptember 30, 2020 , respectively. 26 -------------------------------------------------------------------------------- Table of Contents The following table sets forth the averageNew York Mercantile Exchange ("NYMEX") oil and natural gas prices for the three and nine months endedSeptember 30, 2020 and 2019, as well as the high and low NYMEX prices for the same periods: Three Months Ended September Nine Months Ended 30, September 30, 2020 2019 2020 2019 Average NYMEX prices: Oil (Bbl)$ 40.87 $ 56.33 $ 38.55 $ 57.03 Natural gas (MMBtu)$ 2.12 $ 2.33 $ 1.91 $ 2.57 High and Low NYMEX prices: Oil (Bbl): High$ 43.39 $ 62.90 $ 63.27 $ 66.30 Low$ 36.76 $ 51.09 $ (37.63) $ 45.41 Natural gas (MMBtu): High$ 2.66 $ 2.68 $ 2.66 $ 3.59 Low$ 1.64 $ 2.07 $ 1.48 $ 2.07 Further, the NYMEX oil price and NYMEX natural gas price reached highs and lows of$41.46 and$37.05 per Bbl and$3.02 and$2.44 per MMBtu, respectively, during the period fromOctober 1, 2020 toOctober 23, 2020 . AtOctober 23, 2020 , the NYMEX oil price and NYMEX natural gas price were$39.85 per Bbl and$2.97 per MMBtu, respectively. We derive a portion of our total natural gas revenues from the value of the natural gas liquids contained in our natural gas, with the remaining portion coming from the value of the dry natural gas residue. The averageMont Belvieu price for a blended barrel of natural gas liquids was$17.58 per Bbl and$16.99 per Bbl during the three months endedSeptember 30, 2020 and 2019, respectively, and$15.27 per Bbl and$20.43 per Bbl during the nine months endedSeptember 30, 2020 and 2019, respectively. Recent Events and Outlook 2020 dividends. OnOctober 26, 2020 , our board of directors approved a cash dividend of$0.20 per share for the fourth quarter of 2020 that is expected to be paid onDecember 18, 2020 to stockholders of record as ofNovember 6, 2020 . Total cash dividends paid to our stockholders during the nine months endedSeptember 30, 2020 were$119 million . Proposed Merger with ConocoPhillips. OnOctober 18, 2020 , we entered into an Agreement and Plan of Merger (the "Merger Agreement") with ConocoPhillips andFalcon Merger Sub Corp. , a wholly owned subsidiary of ConocoPhillips ("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub will merge with and into Concho (the "Merger"), with Concho surviving and continuing as the surviving corporation in the Merger. The closing of the Merger is expected to occur in the first quarter of 2021, subject to the satisfaction of certain regulatory approvals and other customary closing conditions. The Merger Agreement provides that, during the periods from the date of the Merger Agreement until the closing of the Merger, we are subject to certain restrictions that, among other things, restrict our ability to repurchase, redeem or retire any capital stock of the Company. On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each outstanding share of Concho common stock will be converted into the right to receive 1.46 shares of ConocoPhillips common stock. The Merger Agreement provides certain termination rights for each of Concho and ConocoPhillips, including, among others, if the consummation of the Merger does not occur on or beforeApril 30, 2021 . Should certain unlikely events occur under the specified circumstances outlined in the Merger Agreement, we will be required to pay ConocoPhillips a termination fee of$300 million . Additional information on the proposed Merger is included in the Form 8-K filed with theSecurities and Exchange Commission ("SEC") onOctober 19, 2020 . Issuance and redemption of senior notes. OnAugust 10, 2020 , we issued$500 million in aggregate principal amount of 2.4% unsecured senior notes due 2031 (the "2.4% Notes") at a price equal to 99.761 percent of par, for which we received net proceeds of$495 million . We used the net proceeds, together with cash on hand, to redeem the$600 million outstanding principal amount of the 4.375% unsecured senior notes due 2025 (the "4.375% Notes") at a redemption price equal to 103.281 percent of par. 27 -------------------------------------------------------------------------------- Table of Contents We recorded a loss on extinguishment of debt related to the redemption of the 4.375% Notes of$24 million for the three and nine months endedSeptember 30, 2020 . This amount included the premium paid for the early redemption of the 4.375% Notes and the write-off of unamortized deferred loan costs. Share repurchase program. InSeptember 2019 , we announced that our board of directors authorized the initiation of a share repurchase program for up to$1.5 billion of our common stock. InSeptember 2020 , we repurchased and retired 1,027,621 shares under the program at an aggregate cost of$50 million . As ofSeptember 30, 2020 , we have repurchased and retired a total of 5,453,897 shares since the inception of the program at an aggregate cost of$400 million . The Merger Agreement provides that, during the periods from the date of the Merger Agreement until the closing of the Merger, we are subject to certain restrictions that, among other things, restrict our ability to repurchase, redeem or retire any capital stock of the Company. Other events. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial and commodity markets. In addition, the pandemic has resulted in travel restrictions, business closures and the institution of quarantining and other restrictions on movement in many communities. As a result, there has been a significant reduction in demand for and prices of oil and natural gas, which has adversely affected our business and led us to significantly reduce our 2020 planned capital expenditures. There continues to be uncertainty around the extent and duration of disruption, including any resurgence, and we expect that the longer the period of such disruption continues, the greater the adverse impact will be on our business. The degree to which the COVID-19 pandemic or any other public health crisis adversely impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken by governmental authorities and third parties in response to the COVID-19 pandemic, its impact on theU.S. and world economies, theU.S. capital markets and market conditions, and how quickly and to what extent normal economic and operating conditions can resume. Derivative Financial Instruments Derivative financial instrument exposure. AtSeptember 30, 2020 , the fair value of our financial derivatives was a net asset of$165 million . Under the terms of our financial derivative instruments, we do not have exposure to potential "margin calls" on our financial derivative instruments. We currently have no reason to believe that our counterparties to these commodity derivative contracts are not financially viable. The terms of our Credit Facility did not allow us to offset amounts we may owe a lender against amounts we may be owed related to our derivative financial instruments with such party. New commodity derivative contracts. AfterSeptember 30, 2020 , we entered into derivative contracts to hedge additional amounts of estimated future production. Refer to Note 13 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information regarding these commodity derivative contracts. 28 -------------------------------------------------------------------------------- Table of Contents Results of Operations The following table sets forth summary information concerning our production and operating data for the three and nine months endedSeptember 30, 2020 and 2019. Because of normal production declines, increased or decreased drilling activities, fluctuations in commodity prices and the effects of acquisitions and divestitures, the historical information presented below should not be interpreted as being indicative of future results. Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Production and operating data: Net production volumes: Oil (MBbl) 18,472 18,940 55,667 56,602 Natural gas (MMcf) 65,867 68,411 194,914 199,284 Total (MBoe) 29,450 30,342 88,153 89,816 Average daily production volumes: Oil (MBbl) 201 206 203 207 Natural gas (MMcf) 716 744 711 730 Total (MBoe) 320 330 322 329 Average prices per unit: (a) Oil, without derivatives (Bbl)$ 39.23
$ 48.43
$ 1.64
$ 1.68
$ 28.27
$ 34.13
Operating costs and expenses per Boe: (a) Oil and natural gas production$ 3.90
$ 2.41
$ 1.55
$ 9.77 $ 16.07 $ 12.28 $ 15.93 General and administrative$ 2.30 $ 2.50 $ 2.30 $ 2.82
(a) Per unit and per Boe amounts calculated using dollars and volumes rounded to thousands.
(b) Includes the effect of net cash receipts from (payments on) derivatives:
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions) 2020 2019 2020 2019
Net cash receipts from (payments on)
derivatives:
Oil derivatives $ 171 $ (21) $ 744 $ (72)
Natural gas derivatives (c) 2 14 45 15
Total $ 173 $ (7) $ 789 $ (57) The presentation of average prices with derivatives is a result of including the net cash receipts from (payments
on) commodity derivatives that are presented in our condensed consolidated statements of cash flows. This
presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our
commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a
manner consistent with the presentation generally used by the investment community.
(c) Includes propane and natural gasoline price swaps.
29--------------------------------------------------------------------------------
Table of Contents
Oil and natural gas revenues. Revenue from oil and natural gas operations was$834 million for the three months endedSeptember 30, 2020 , a decrease of$281 million (25 percent) from$1,115 million for 2019. Revenue from oil and natural gas operations was$2,230 million for the nine months endedSeptember 30, 2020 , a decrease of$1,116 million (33 percent) from$3,346 million for 2019. The decrease was primarily due to the decrease in oil prices (excluding the effects of derivative activities) and production. Specific factors affecting oil and natural gas revenues include the following: Three Months Ended September Nine Months Ended 30, September 30, 2020 2019 2020 2019 Net production volumes: Oil (MBbl) 18,472 18,940 55,667 56,602 Natural gas (MMcf) 65,867 68,411 194,914 199,284 Average prices per unit: Average NYMEX oil price (Bbl)$ 40.87 $ 56.33 $ 38.55 $ 57.03 Realized oil price (Bbl)$ 39.23 $ 54.01 $ 36.41 $ 53.13 Differential to NYMEX$ (1.64) $ (2.32) $ (2.14) $ (3.90) Average NYMEX natural gas price (MMBtu)$ 2.12 $ 2.33 $ 1.91 $ 2.57 Realized natural gas price (Mcf)$ 1.64 $ 1.34 $ 1.04 $ 1.70 Average realized natural gas price as a percentage of NYMEX 77 % 58 % 54 % 66 % •total oil production for the three and nine months endedSeptember 30, 2020 decreased 468 MBbl (2 percent) and 935 MBbl (2 percent), respectively, as compared to the same periods in 2019 primarily due to the sale of ourNew Mexico Shelf assets in 2019, partially offset by additional production from wells completed during 2019 and 2020; •average realized oil price (excluding the effects of derivative activities) decreased 27 percent and 31 percent for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. The decrease in average realized oil price was primarily due to a decrease in the average NYMEX price, partially offset by the narrowing of the basis differential. The basis differential (referred to as the "Mid-Cush differential") between the location ofMidland, Texas andCushing, Oklahoma (settlement location for NYMEX pricing) for our oil directly impacts our realized oil price. For the three months endedSeptember 30, 2020 and 2019, the average market Mid-Cush differentials was a price benefit of$0.14 per Bbl and a price reduction of$0.61 per Bbl, respectively. For the nine months endedSeptember 30, 2020 and 2019, the average market Mid-Cush differentials was a price benefit of$0.22 per Bbl and a price reduction of$2.20 per Bbl, respectively; •total natural gas production for the three and nine months endedSeptember 30, 2020 decreased 2,544 MMcf (4 percent) and 4,370 MMcf (2 percent), respectively, as compared to the same periods in 2019 primarily due to the sale of our New Mexico Shelf assets in 2019, partially offset by additional production from wells completed during 2019 and 2020; and •average realized natural gas price (excluding the effects of derivative activities) increased 22 percent and decreased 39 percent for the three and nine months endedSeptember 30, 2020 , respectively, as compared to the same periods in 2019. The increase in average realized natural gas price for the three months endedSeptember 30, 2020 as compared to the same period in 2019 was primarily due to the narrowing of the gas price differential. The decrease in average realized natural gas price for the nine months endedSeptember 30, 2020 as compared to the same period in 2019 was primarily due to a decrease in the price of natural gas liquids. We derive a portion of our total natural gas revenues from the value of the natural gas liquids contained in our natural gas, with the remaining portion coming from the value of the dry natural gas residue. The averageMont Belvieu price for a blended barrel of natural gas liquids increased from$16.99 per Bbl during the three months endedSeptember 30, 2019 to$17.58 per Bbl during the three months endedSeptember 30, 2020 . The averageMont Belvieu price for a blended barrel of natural gas liquids decreased from$20.43 per Bbl during the nine months endedSeptember 30, 2019 , to$15.27 per Bbl during the nine months endedSeptember 30, 2020 . 30 -------------------------------------------------------------------------------- Table of Contents Oil and natural gas production expenses. The following table provides the components of our oil and natural gas production expenses for the three and nine months endedSeptember 30, 2020 and 2019: Three
Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Lease operating expenses $ 110 $ 3.76 $ 181 $ 5.97
Workover costs 5 0.14 9 0.29
Total oil and natural gas production expenses $ 115 $ 3.90 $ 190 $ 6.26
Nine Months Ended September 30,
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Lease operating expenses $ 391 $ 4.44 $ 524 $ 5.83
Workover costs 15 0.16 28 0.31
Total oil and natural gas production expenses
Lease operating expenses were$110 million ($3.76 per Boe) for the three months endedSeptember 30, 2020 , which was a decrease of$71 million from$181 million ($5.97 per Boe) during the same period in 2019. Lease operating expenses were$391 million ($4.44 per Boe) for the nine months endedSeptember 30, 2020 , which was a decrease of$133 million from$524 million ($5.83 per Boe) during the same period in 2019. The decrease was primarily due to various cost saving initiatives and the New Mexico Shelf divestiture inNovember 2019 , partially offset by additional wells successfully drilled and completed during 2019 and 2020. The decrease in lease operating expenses per Boe was primarily due to the decrease in lease operating expenses noted above. Workover costs were$5 million ($0.14 per Boe) and$9 million ($0.29 per Boe) for the three months endedSeptember 30, 2020 and 2019, respectively. Workover costs were$15 million ($0.16 per Boe) and$28 million ($0.31 per Boe) for the nine months endedSeptember 30, 2020 and 2019, respectively. The decrease in workover costs was primarily the result of the Company's cost saving initiatives. Production and ad valorem taxes. The following table provides the components of our production and ad valorem tax expenses for the three and nine months endedSeptember 30, 2020 and 2019: Three Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Production taxes $ 53 $ 1.78 $ 67 $ 2.23
Ad valorem taxes 18 0.63 18 0.56
Total production and ad valorem taxes $ 71 $ 2.41 $ 85 $ 2.79
Nine Months Ended September 30,
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Production taxes $ 141 $ 1.59 $ 207 $ 2.31
Ad valorem taxes 55 0.63 48 0.53
Total production and ad valorem taxes $ 196 $ 2.22 Production taxes per unit of production were$1.78 per Boe during the three months endedSeptember 30, 2020 , a decrease of 20 percent from$2.23 per Boe during the same period in 2019. Production taxes per Boe were$1.59 per Boe during the nine months endedSeptember 30, 2020 , a decrease of 31 percent from$2.31 per Boe during the same period in 2019. For the three and nine months endedSeptember 30, 2020 , our revenue per Boe (excluding the effects of derivatives) decreased 23 percent and 32 percent, respectively, as compared to the same periods in 2019. The decrease in production taxes per Boe was primarily due to lower realized revenue per Boe along with a higher percentage of our total production originating inTexas , which has a lower tax rate thanNew Mexico . 31 -------------------------------------------------------------------------------- Table of Contents Production taxes fluctuate with the market value of our production sold, while ad valorem taxes are generally based on the valuation of our oil and natural gas properties at the beginning of the year, which vary across the different areas in which we operate. Ad valorem taxes during the three months endedSeptember 30, 2020 remained consistent with the same period in the prior year. Ad valorem taxes increased$7 million during the nine months endedSeptember 30, 2020 as compared to the same period in 2019, primarily due to additional wells drilled and completed, along with a higher percentage of our wells located inTexas , which has higher ad valorem tax rates thanNew Mexico . Gathering, processing and transportation costs. The following table shows the gathering, processing and transportation costs for the three and nine months endedSeptember 30, 2020 and 2019:
Three Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Gathering, processing and transportation costs $ 46 $ 1.55 $ 25 $ 0.82 Nine Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Gathering, processing and transportation costs $ 139 Gathering, processing and transportation costs were$46 million ($1.55 per Boe) for the three months endedSeptember 30, 2020 , an increase of 84 percent from$25 million ($0.82 per Boe) during same period in 2019. Gathering, processing and transportation costs were$139 million ($1.57 per Boe) for the nine months endedSeptember 30, 2020 , an increase of 90 percent from$73 million ($0.81 per Boe) during same period in 2019. The increase in gathering, processing and transportation costs was primarily due to a marketing contract that began inOctober 2019 that requires us to deliver 50,000 barrels of oil per day throughSeptember 2024 . Exploration and abandonments expense. The following table provides the components of our exploration and abandonments expense for the three and nine months endedSeptember 30, 2020 and 2019: Three Months Ended September Nine Months Ended 30, September 30, (in millions) 2020 2019 2020 2019 Geological and geophysical$ 2 $ 3 $ 6 $ 12 Unproved impairments and leasehold abandonments 3 17 2,724 59 Other 9 6 19 19 Total exploration and abandonments$ 14 $ 26 $ 2,749 $ 90 Our geological and geophysical expense for the periods presented above primarily consists of the costs of acquiring and processing subsurface data to better characterize and develop our resources. We recorded$3 million and$17 million of unproved impairments and leasehold abandonments for the three months endedSeptember 30, 2020 and 2019, respectively, and$2,724 million and$59 million for the nine months endedSeptember 30, 2020 and 2019, respectively. Unproved impairments and leasehold abandonments during the nine months endedSeptember 30, 2020 were primarily related to impairments of certain unproved properties as our future development plans became more uncertain due to significant declines in commodity prices. See Note 5 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information. Leasehold abandonments during the three months endedSeptember 30, 2020 and 2019 and nine months endedSeptember 30, 2019 were primarily related to certain expiring acreage and acreage where we had no future plans to drill located primarily in theDelaware Basin . Other expense for the periods presented above primarily consists of surface and title costs on locations that we no longer intend to drill, certain plugging costs, delay rentals and other exploratory well costs. Other expense for the nine months endedSeptember 30, 2019 included costs related to the abandonment of one exploratory well as a result of certain mechanical issues encountered during the completion of the well that made it unable to produce hydrocarbons. 32 -------------------------------------------------------------------------------- Table of Contents Depreciation, depletion and amortization expense. The following table provides components of our depreciation, depletion and amortization expense for the three and nine months endedSeptember 30, 2020 and 2019:
Three Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Depletion of proved oil and natural gas properties
9.46$ 478 $ 15.80 Depreciation of other property and equipment 9 0.30 9 0.26 Amortization of intangible assets - 0.01 1 0.01
Total depletion, depreciation and amortization
9.77$ 488 $ 16.07
Nine Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
Depletion of proved oil and natural gas properties $ 1,056 $ 11.98 $ 1,405 $ 15.66
Depreciation of other property and equipment 26 0.29 23 0.25
Amortization of intangible assets 1 0.01 3 0.02
Total depletion, depreciation and amortization $ 1,083 Oil price used to estimate proved oil reserves at period end$ 39.71 $ 54.27
Natural gas price used to estimate proved natural gas reserves at period end
$ 1.97 $ 2.87 Depletion of proved oil and natural gas properties was$279 million ($9.46 per Boe) for the three months endedSeptember 30, 2020 , a decrease of$199 million (42 percent) from$478 million ($15.80 per Boe) during the same period in 2019. Depletion of proved oil and natural gas properties was$1,056 million ($11.98 per Boe) for the nine months endedSeptember 30, 2020 , a decrease of$349 million (25 percent) from$1,405 million ($15.66 per Boe) during the same period in 2019. The decrease in depletion expense was primarily due to the decrease in depletion rate per Boe. The decrease in depletion expense per Boe was primarily due to impairment charges recognized during the first quarter of 2020, as discussed below, partially offset by certain downward adjustments to our economically recoverable proved oil and natural gas reserves. Impairments of long-lived assets. During the nine months endedSeptember 30, 2020 , we recognized impairment charges of approximately$7.8 billion attributable to the decrease in value of our proved oil and natural gas reserves in both theMidland Basin andDelaware Basin , primarily due to the significant decline in commodity prices. During the three and nine months endedSeptember 30, 2019 , we recognized impairment charges of$20 million and$888 million , respectively. During the second quarter of 2019, we recognized an impairment charge of$868 million that was primarily attributable to certain downward adjustments to our economically recoverable proved oil and natural gas reserves associated with properties in our Yeso field. During the third quarter of 2019, we recognized an additional impairment charge of$20 million , primarily to reduce the carrying value of the remaining assets in the Yeso field to their fair value. Our Yeso field was primarily composed of the New Mexico Shelf assets that were classified as held for sale atSeptember 30, 2019 and were subsequently sold inNovember 2019 . See Note 5 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information on the fair value assumptions used for long-lived assets. Impairments of goodwill. AtMarch 31, 2020 , we performed a goodwill impairment test and impaired our entire goodwill balance of$1.9 billion , which is reflected on the consolidated statement of operations for the nine months endedSeptember 30, 2020 . The impairment was primarily due to a decline in our market capitalization along with declines in observable control premiums. During the three and nine months endedSeptember 30, 2019 , we recognized an impairment charge to goodwill of$81 million that was attributable to the New Mexico Shelf divestiture. See Note 2 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information on the impairment of goodwill. 33 -------------------------------------------------------------------------------- Table of Contents General and administrative expenses. The following table provides components of our general and administrative expenses for the three and nine months endedSeptember 30, 2020 and 2019:
Three Months Ended
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
General and administrative expenses $ 55 $ 1.79 $ 60 $ 2.01
Less: Operating fee reimbursements (3) (0.11) (5) (0.15)
Non-cash stock-based compensation 18 0.62 20 0.64
Total general and administrative expenses $ 70 $ 2.30 $ 75 $ 2.50
Nine Months Ended September 30,
2020 2019
(in millions, except per unit amounts) Amount Per Boe Amount Per Boe
General and administrative expenses$ 163 $ 1.84
Less: Operating fee reimbursements (12)
(0.14) (13) (0.14)
Non-cash stock-based compensation 53 0.60
67 0.74
Total general and administrative expenses$ 204 $ 2.30
Total general and administrative expenses were$70 million ($2.30 per Boe) for the three months endedSeptember 30, 2020 , a decrease of$5 million (7 percent) from$75 million ($2.50 per Boe) during the same period in 2019. Total general and administrative expenses were$204 million ($2.30 per Boe) for the nine months endedSeptember 30, 2020 , a decrease of$50 million (20 percent) from$254 million ($2.82 per Boe) during the same period in 2019. The decrease in cash general and administrative expenses during the three months endedSeptember 30, 2020 as compared to 2019 was primarily due to lower employee headcount and various cost saving initiatives. The decrease in cash general and administrative expenses during the nine months endedSeptember 30, 2020 as compared to 2019 was primarily due to lower employee headcount, lower variable compensation accruals and various cost saving initiatives. The decrease in non-cash stock-based compensation expenses during the three months endedSeptember 30, 2020 as compared to 2019 was primarily due to lower employee headcount. The decrease in non-cash stock-based compensation expenses during the nine months endedSeptember 30, 2020 as compared to 2019 was primarily due to lower employee headcount, the lapse of restrictions of certain equity awards inJuly 2019 that were granted in conjunction with the acquisition ofRSP Permian, Inc. and the modification of certain awards related to our voluntary separation program ("VSP") implemented inMay 2020 . The decrease in total general and administrative expenses per Boe was primarily the result of the decrease in total general and administrative expenses noted above, partially offset by lower production volumes. We receive fees for the operation of jointly-owned oil and natural gas properties during the drilling and production phases and record such reimbursements as reductions to general and administrative expenses on the condensed consolidated statements of operations. We earned reimbursements of$3 million and$5 million during the three months endedSeptember 30, 2020 and 2019, respectively, and$12 million and$13 million during the nine months endedSeptember 30, 2020 and 2019, respectively. Gain (loss) on derivatives, net. The following table sets forth the net gain (loss) on derivatives for the three and nine months endedSeptember 30, 2020 and 2019: Three Months Ended September Nine Months Ended 30, September 30, (in millions) 2020 2019 2020 2019 Gain (loss) on derivatives, net: Oil derivatives$ (115) $ 355 $ 1,213 $ (506) Natural gas derivatives (a) (84) 42 (157) 61 Total$ (199) $ 397 $ 1,056 $ (445)
(a) Includes propane and natural gasoline price swaps.
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Table of Contents The following table represents our net cash receipts from (payments on) derivatives for the three and nine months endedSeptember 30, 2020 and 2019: Three Months Ended September Nine Months Ended 30, September 30, (in millions) 2020 2019 2020 2019 Net cash receipts from (payments on) derivatives: Oil derivatives$ 171 $ (21) $ 744 $ (72) Natural gas derivatives (a) 2 14 45 15 Total$ 173 $ (7) $ 789 $ (57)
(a) Includes propane and natural gasoline price swaps.
Our earnings are affected by the changes in value of our derivatives portfolio between periods and the related cash settlements of those derivatives, which could be significant. To the extent the future commodity price outlook declines between measurement periods, we will have mark-to-market gains; while to the extent the future commodity price outlook increases between measurement periods, we will have mark-to-market losses. See Note 5 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information regarding significant judgments made in classifying financial instruments in the fair value hierarchy. Net (gain) loss on disposition of assets and other. During the three and nine months endedSeptember 30, 2020 , we recorded a net loss on disposition of assets of$1 million and a net gain on disposition of assets of$99 million , respectively. The net gain during the nine months endedSeptember 30, 2020 was primarily due to our contribution of certain water infrastructure assets toSolaris Midstream Holdings, LLC ("Solaris") in exchange for additional ownership interests in the entity. During the three and nine months endedSeptember 30, 2019 , we recorded a net gain on disposition of assets of$303 million and$302 million , respectively, primarily related to our contribution of certain water infrastructure assets to Solaris in exchange for cash and an equity ownership interest in the entity. Interest expense. The following table sets forth interest expense, weighted average interest rates and weighted average debt balances for the three and nine months endedSeptember 30, 2020 and 2019: Three Months Ended September Nine Months Ended 30, September 30, (in millions) 2020 2019 2020 2019 Interest expense, as reported$ 44 $ 46 $ 127 $ 141 Capitalized interest 3 6 14 15 Interest expense, excluding impact of capitalized interest$ 47 $ 52
Weighted average interest rate - credit facility - % 4.0 % 3.0 % 4.3 % Weighted average interest rate - senior notes 4.3 % 4.4 % 4.3 % 4.4 % Total weighted average interest rate 4.3 % 4.3 % 4.3 % 4.4 % Weighted average credit facility balance $ -$ 458 $ 12 $ 530 Weighted average senior notes balance 4,059 4,000 4,020 4,000 Total weighted average debt balance$ 4,059 $ 4,458
The decrease in interest expense during the three and nine months endedSeptember 30, 2020 as compared to the same periods in 2019 was primarily due to the decrease in the weighted average Credit Facility balance. Loss on extinguishment of debt. We recorded a loss on extinguishment of debt of$24 million for the three and nine months endedSeptember 30, 2020 related to the redemption of the 4.375% Notes. See Note 7 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information. Other, net. During the three months endedSeptember 30, 2020 , we recorded other income of$5 million primarily due to a gain related to our share of the partner contribution to one of our equity method investments partially offset by$6 million of charges related to the VSP. During the nine months endedSeptember 30, 2020 , we recorded other expense of$208 million , primarily due to a$204 million other-than-temporary impairment of an equity method investment and$36 million of certain charges related to the VSP, partially offset by a gain related to our share of the partner contribution to one of our equity method investments, certain reimbursements received during 2020 and other income. During the nine months endedSeptember 30 , 35
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2019, we recorded other income of
Income tax provisions. We recorded income tax expense of$26 million and$222 million for the three months endedSeptember 30, 2020 and 2019, respectively, and an income tax benefit of$1.7 billion and$25 million for the nine months endedSeptember 30, 2020 and 2019, respectively. During the nine months endedSeptember 30, 2020 , we recorded impairments of proved and unproved oil and natural gas properties of$7.8 billion and$2.7 billion , respectively, which caused our deferred tax balance to change from a net deferred tax liability to a net deferred tax asset, resulting in a valuation allowance against our deferred tax assets. We recognized the valuation allowance as an ordinary item in our estimated annual effective tax rate. At the end of each interim period, we apply an estimated annualized effective tax rate to the current period income or loss before income taxes, which can produce interim effective tax rate fluctuations. Our effective income tax rates were (75) percent and 29 percent for the three months endedSeptember 30, 2020 and 2019, respectively, and 15 percent and 10 percent for the nine months endedSeptember 30, 2020 and 2019, respectively. The difference between theU.S. federal statutory rate of 21 percent and our effective tax rate for the three months endedSeptember 30, 2020 was primarily due to the increase in valuation allowance, and the difference for the nine months endedSeptember 30, 2020 was primarily due to the impact of the nondeductible goodwill impairment reported discretely and the increase in valuation allowance, partially offset by state income tax benefits. The difference between theU.S. federal statutory rate of 21 percent and our effective tax rate for the three and nine months endedSeptember 30, 2019 was primarily due to research and development credits, net of unrecognized benefits, recorded in 2019, and the impact of permanent differences between book and taxable income (loss). 36 -------------------------------------------------------------------------------- Table of Contents Capital Commitments,Capital Resources and Liquidity Capital commitments. Our primary needs for cash are for (i) the development, exploration and acquisition of oil and natural gas assets, (ii) midstream joint ventures and other capital commitments, (iii) payment of contractual obligations and (iv) working capital obligations. Funding for these cash needs may be provided by any combination of internally-generated cash flow, financing under our Credit Facility, proceeds from the disposition of assets or alternative financing sources, as discussed in "- Capital resources" below. 2020 capital budget and costs incurred. InMarch 2020 , in response to the substantial decrease in oil and natural gas prices, we announced that we reduced our 2020 planned capital expenditures to approximately$1.6 billion from the original plan of$2.6 billion to$2.8 billion . Our costs incurred on oil and natural gas properties, excluding acquisitions, during the nine months endedSeptember 30, 2020 totaled$1.2 billion . Our capital expenditures during the nine months endedSeptember 30, 2020 were primarily funded from cash flows from operations. We expect to fund the remaining 2020 capital expenditures with operating cash flows. Other than the customary purchase of leasehold acreage, our capital budgets are exclusive of acquisitions. We do not have a specific acquisition budget since the timing and size of acquisitions are difficult to forecast. We evaluate opportunities to purchase or sell oil and natural gas properties in the marketplace and could participate as a buyer or seller of properties at various times. We seek to acquire oil and natural gas properties that provide opportunities for the addition of reserves and production through a combination of development, high-potential exploration and control of operations that will allow us to apply our operating expertise. 2020 dividends. OnOctober 26, 2020 , our board of directors approved a cash dividend of$0.20 per share for the fourth quarter of 2020 that is expected to be paid onDecember 18, 2020 to stockholders of record as ofNovember 6, 2020 . Total cash dividends paid to our stockholders during the nine months endedSeptember 30, 2020 were$119 million . Any payment of future dividends will be at the discretion of our board of directors and may be suspended at any time. Share repurchase program. InSeptember 2019 , we announced that our board of directors authorized the initiation of a share repurchase program for up to$1.5 billion of our common stock. The Merger Agreement provides that, during the periods from the date of the Merger Agreement until the closing of the Merger, we are subject to certain restrictions that, among other things, restrict our ability to repurchase, redeem or retire any capital stock of the Company. DuringJanuary 2020 , we repurchased and retired 1,125,906 shares under the program at an aggregate cost of$100 million . DuringSeptember 2020 , we repurchased and retired 1,027,621 shares under the program at an aggregate cost of$50 million . We have not made any other repurchases in 2020. As ofSeptember 30, 2020 , we had repurchased and retired a total of 5,453,897 shares since the inception of the program at an aggregate cost of$400 million . Acquisitions. The following table reflects our expenditures for acquisitions of proved and unproved properties for the nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September 30, (in millions) 2020 2019 Property acquisition costs: Proved $ 21 $ - Unproved (a) 8 33 Total property acquisition costs $
29
(a) Unproved property acquisition costs relate primarily to budgeted unproved leasehold acreage acquisitions.
Contractual obligations. Our contractual obligations include long-term debt, cash interest expense on debt, derivative liabilities, asset retirement obligations, employment agreements with officers, purchase obligations, operating and finance lease obligations and other obligations. SinceDecember 31, 2019 , there have been the following material changes in our contractual obligations: •decrease in our derivative liability, which was$52 million atSeptember 30, 2020 ; and •$100 million decrease in principal amount of long-term debt due to the redemption of our 4.375% Notes, partially offset by the issuance of our 2.4% Notes during the third quarter of 2020. In connection with the proposed Merger, the Merger Agreement provides certain termination rights under which we may exercise and effectively terminate the Merger Agreement. Should certain unlikely events occur under the specified circumstances outlined in the Merger Agreement, we will be required to pay ConocoPhillips a termination fee of$300 million . 37 -------------------------------------------------------------------------------- Table of Contents See Note 13 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information regarding the proposed Merger. Off-balance sheet arrangements. Currently, we do not have any material off-balance sheet arrangements. Capital resources. Our primary sources of liquidity have been cash flows generated from (i) operating activities, (ii) borrowings under our Credit Facility, (iii) asset dispositions and (iv) proceeds from bond and equity offerings. AtSeptember 30, 2020 , we had a cash balance of$402 million and did not have any borrowings under our Credit Facility. AtSeptember 30, 2020 , we had approximately$2.0 billion of unused commitments under our Credit Facility. The following table summarizes the changes in our cash and cash equivalents for the nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September 30, (in millions) 2020 2019 Net cash provided by operating activities$ 2,133 $ 2,067 Net cash used in investing activities (1,397) (2,020) Net cash used in financing activities (404) (47) Net increase in cash and cash equivalents $
332 $ -
Cash flow from operating activities. The$66 million increase in operating cash flows during the nine months endedSeptember 30, 2020 , as compared to the same period in 2019, was primarily due to an increase of$846 million in net cash settlements received from derivatives, lower operating costs and positive changes in working capital, partially offset by the decrease in oil and natural gas revenues. Our net cash provided by operating activities included a benefit of$171 million and a reduction of$8 million for the nine months endedSeptember 30, 2020 and 2019, respectively, associated with changes in working capital items. Changes in working capital items adjust for the timing of receipts and payments of actual cash. Cash flow from investing activities. Our investing activities consist primarily of drilling and completion activity, acquisitions and divestitures. For the nine months endedSeptember 30, 2020 , our net cash used in investing activities was$1.4 billion , which consisted primarily of our investment of$1.2 billion for additions to oil and natural gas properties. Additionally, we completed acquisitions of oil and natural gas properties of$45 million . Our capital expenditures for the nine months endedSeptember 30, 2020 were funded primarily with cash flows from operations. For the nine months endedSeptember 30, 2019 , our net cash used in investing activities was$2.0 billion , which consisted primarily of our investment of$2.3 billion for additions to oil and natural gas properties. This was partially offset by$393 million of cash proceeds from asset dispositions primarily due to the sale of our ownership interest in the subsidiary of Oryx and the contribution of certain water infrastructure assets to Solaris. In addition, we received a$93 million deposit for the divestiture of the New Mexico Shelf assets. We used the proceeds from these and other divestitures to repay a portion of our outstanding balance under our Credit Facility. Our capital expenditures for the nine months endedSeptember 30, 2019 were funded with cash flows from operations and borrowings under our Credit Facility. Cash flow from financing activities. For the nine months endedSeptember 30, 2020 , our net cash used in financing activities was$404 million , primarily due to the redemption of our$600 million outstanding principal amount of the 4.375% Notes,$150 million of common stock repurchases under our share repurchase program and$119 million of dividends paid on our common stock, partially offset by$495 million of net proceeds from the issuance of the 2.4% Notes. See Note 7 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for additional information on the redemption and issuance of our 4.375% Notes and 2.4% Notes, respectively. For the nine months endedSeptember 30, 2019 , our net cash used in financing activities was$47 million primarily due to$75 million of dividends paid on our common stock and a decrease in book overdrafts of$104 million , partially offset by$153 million of net borrowings under our Credit Facility. Advances on our Credit Facility bear interest, at our option, based on: (i) an alternative base rate ("ABR"), which is equal to the highest of (a) the prime rate ofJPMorgan Chase Bank (3.25 percent atSeptember 30, 2020 ), (b) the federal funds effective rate plus 0.5 percent, and 38 -------------------------------------------------------------------------------- Table of Contents (c) the London Interbank Offered Rate ("LIBOR") plus 1.0 percent; or (ii) LIBOR. Our Credit Facility's interest rates and commitment fees on the unused portion of the available commitment vary depending on our credit ratings from Moody's Investors Service, Inc. ("Moody's") and S&P Global Ratings ("S&P"). At our current credit ratings, LIBOR Rate Loans and ABR Loans bear interest margins of 150 basis points and 50 basis points per annum, respectively, and commitment fees on the unused portion of the available commitment are 25 basis points per annum. In conducting our business, we may utilize various financing sources, including the issuance of (i) fixed and floating rate debt, (ii) convertible securities, (iii) preferred stock, (iv) common stock and (v) other securities. Historically, we have demonstrated our use of the capital markets by issuing common stock and senior unsecured debt. There are no assurances that we can access the capital markets to obtain additional funding, if needed, and at cost and terms that are favorable to us. We may also sell assets and issue securities in exchange for oil and natural gas assets or interests in energy companies. Additional securities may be of a class senior to common stock with respect to such matters as dividends and liquidation rights and may also have other rights and preferences as determined from time to time. Utilization of some of these financing sources may require approval from the lenders under our Credit Facility. Liquidity. Our primary sources of liquidity have been cash flows generated from operating activities and the available borrowing capacity under our Credit Facility. AtSeptember 30, 2020 , our commitments from our bank group under the Credit Facility totaled$2.0 billion , all of which were unused. Debt ratings. We receive debt credit ratings from S&P, Moody's and Fitch Ratings and are designated as investment grade with all three agencies. In determining our ratings, the agencies perform regular reviews and consider a number of qualitative and quantitative factors including, but not limited to: the industry in which we operate, production growth opportunities, liquidity, debt levels and asset and reserve mix. A downgrade in our credit ratings could (i) negatively impact our cost of capital and our ability to effectively execute aspects of our strategy, (ii) affect our ability to raise debt in the public debt markets, and the cost of any new debt could be much higher than our outstanding debt and (iii) negatively affect our ability to obtain additional financing or the interest rate, fees and other terms associated with such additional financing. Further, if we are unable to maintain credit ratings of "Ba2" or better from Moody's and "BB" or better from S&P, the investment grade period under our Credit Facility will automatically terminate and cause our Credit Facility to once again be secured by a first lien on substantially all of our oil and natural gas properties and by a pledge of the equity interests in our subsidiaries. These and other impacts of a downgrade in our credit ratings could have an adverse effect on our business, financial condition and results of operations. As of the filing of this Quarterly Report on Form 10-Q, no changes in our credit ratings have occurred; however, we cannot be certain that our credit ratings will not be downgraded in the future. Book capitalization and current ratio. Our net book capitalization atSeptember 30, 2020 was$11.2 billion , consisting of cash and cash equivalents of$402 million , debt of$3.9 billion and stockholders' equity of$7.8 billion . Our net book capitalization atDecember 31, 2019 was$21.8 billion , consisting of cash and cash equivalents of$70 million , debt of$4.0 billion and stockholders' equity of$17.8 billion . Our ratio of net debt to net book capitalization was 31 percent and 18 percent atSeptember 30, 2020 andDecember 31, 2019 , respectively. Our ratio of current assets to current liabilities was 1.73 to 1.0 atSeptember 30, 2020 , as compared to 0.89 to 1.0 atDecember 31, 2019 . 39 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies, Practices and Estimates Our historical condensed consolidated financial statements and related notes to condensed consolidated financial statements contain information that is pertinent to our management's discussion and analysis of financial condition and results of operations. Preparation of financial statements in conformity with accounting principles generally accepted inthe United States requires that our management make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. However, the accounting principles used by us generally do not change our reported cash flows or liquidity. Interpretation of the existing rules must be done and judgments made on how the specifics of a given rule apply to us. In management's opinion, the more significant reporting areas impacted by management's judgments and estimates are the choice of accounting method for oil and natural gas activities, oil and natural gas reserve estimation, asset retirement obligations, impairment of long-lived assets, valuation of stock-based compensation, valuation of business combinations, accounting and valuation of nonmonetary transactions, litigation and environmental contingencies, valuation of financial derivative instruments, uncertain tax positions and income taxes. Management's judgments and estimates in all the areas listed above are based on information available from both internal and external sources, including engineers, geologists and historical experience in similar matters. Actual results could differ from the estimates as additional information becomes known. There have been no material changes in our critical accounting policies and procedures during the nine months endedSeptember 30, 2020 . See our disclosure of critical accounting policies in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC onFebruary 19, 2020 . New accounting pronouncements issued but not yet adopted. See Note 2 of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Condensed Consolidated Financial Statements (Unaudited)" for information regarding new accounting pronouncements issued but not yet adopted. 40
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