Fair Value Measurements

12 Months Ended

Dec. 31, 2020

The tables on the next page show the fair value hierarchy for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2020 and December 31, 2019.

Marketable Securities The company calculates fair value for its marketable securities based on quoted market prices for identical assets. The fair values reflect the cash that would have been received if the instruments were sold at December 31, 2020.

Derivatives The company records its derivative instruments – other than any commodity derivative contracts that are designated as normal purchase and normal sale – on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income. Derivatives classified as Level 1 include futures, swaps and options contracts traded in active markets such as the New York Mercantile Exchange. Derivatives classified as Level 2 include swaps, options and forward contracts principally with financial institutions and other oil and gas companies, the fair values of which are obtained from third-party broker quotes, industry pricing services and exchanges. The company obtains multiple sources of pricing information for the Level 2 instruments. Since this pricing information is generated from observable market data, it has historically been very consistent. The company does not materially adjust this information.

Properties, Plant and Equipment The company reported impairments for certain upstream properties during 2020 primarily due to downward revisions to its oil and gas price outlook. The impact of these impairments is included in “Depreciation, depletion and amortization” on the Consolidated Statement of Income. The company reported impairments for certain upstream properties in 2019 primarily due to capital allocation decisions and a lower long-term commodity price outlook.

Investments and Advances In 2020, the company fully impaired its investments in Petropiar and Petroboscan in Venezuela. The impact of these impairments is included in “Income (loss) from equity affiliates” on the Consolidated Statement of Income. The company reported impairments for certain upstream equity companies in 2019 primarily due to capital allocation decisions and lower long-term commodity price outlook.

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	At December 31, 2020								At December 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Marketable securities	$	31	$	31	$	—	$	—	$	63	$	63	$	—	$	—
Derivatives	74		37		37		—		11		1		10		—
Total assets at fair value	$	105	$	68	$	37	$	—	$	74	$	64	$	10	$	—
Derivatives	173		58		115		—		74		26		48		—
Total liabilities at fair value	$	173	$	58	$	115	$	—	$	74	$	26	$	48	$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis


	At December 31										At December 31
									Before-Tax Loss										Before-Tax Loss
	Total		Level 1		Level 2		Level 3		Year 2020		Total		Level 1		Level 2		Level 3		Year 2019
Properties, plant and equipment, net (held and used)	$	2,443	$	—	$	20	$	2,423	$	2,599	$	2,177	$	—	$	—	$	2,177	$	2,095
Properties, plant and equipment, net (held for sale)	1,418		—		1,418		—		193		1,412		—		1,412		—		8,702
Investments and advances	28		—		—		28		2,555		52		—		30		22		594
Total nonrecurring assets at fair value	$	3,889	$	—	$	1,438	$	2,451	$	5,347	$	3,641	$	—	$	1,442	$	2,199	$	11,391

At year-end 2020, the company had assets measured at fair value Level 3 using unobservable inputs of $2,451. The carrying value of these assets were written down to fair value based on estimates derived from internal discounted cash flow models. Cash flows were determined using estimates of future production, an outlook of future price based on published prices and a discount rate believed to be consistent with those used by principal market participants. The significant Level 3 inputs were attributed to two assets, one in an international location where volumes and price were primarily based on natural gas, and the second was in a U.S. location where volumes and price were primarily based on crude.

Assets and Liabilities Not Required to Be Measured at Fair Value The company holds cash equivalents and time deposits in U.S. and non-U.S. portfolios. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less and money market funds. “Cash and cash equivalents” had carrying/fair values of $5,596 and $5,686 at December 31, 2020, and December 31, 2019, respectively. The fair values of cash, cash equivalents and bank time deposits are classified as Level 1 and reflect the cash that would have been received if the instruments were settled at December 31, 2020.

“Cash and cash equivalents” do not include investments with a carrying/fair value of $1,141 and $1,225 at December 31, 2020, and December 31, 2019, respectively. At December 31, 2020, these investments are classified as Level 1 and include restricted funds related to certain upstream decommissioning activities, tax payments and a financing program, which are reported in “Deferred charges and other assets” on the Consolidated Balance Sheet. Long-term debt, excluding finance lease liabilities, of $30,805 and $13,659 at December 31, 2020, and December 31, 2019, respectively, had estimated fair values of $34,390 and $14,326, respectively. Long-term debt primarily includes corporate issued bonds. The fair value of corporate bonds is $32,123 and classified as Level 1. The fair value of other long-term debt is $2,267 and classified as Level 2.

The carrying values of short-term financial assets and liabilities on the Consolidated Balance Sheet approximate their fair values. Fair value remeasurements of other financial instruments at December 31, 2020 and 2019, were not material.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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