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Guarantees | 9 Months Ended
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Sep. 30, 2018
Guarantees [Abstract] |
Guarantees | Note 12—Guarantees At September 30, 2018, 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 because the fair value of the obligation is immaterial. In addition, unless otherwise stated, we are not currently performing wi th any significance under the guarantee and expect future performance to be either immaterial or have only a remote chance of occurrence. APLNG Guarantees At September 30, 2018, we had outstanding multiple guarantees in connection with our 37.5 percent ownership interest in APLNG. The following is a description of the guarantees with values calculated utilizing September 2018 exchange rates: During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rat a portion of the funds in a project finance reserve account. We estimate the remaining term of this guarantee is 12 years. Our maximum exposure under this guarantee is approximately $170 million and may become payabl e if an enforcement action is commenced by the project finance lenders against APLNG. At September 30, 2018, the carrying value of this guarantee was approximately $14 million. For additional information, s ee Note 6—Investments, Loans and Long-Term Receivables. In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy in October 2008, we agreed to reimburse Origin Energy for our share of the existing contingent liability arising under guarante es of an existing obligation of APLNG to deliver natural gas under several sales agreements with remaining terms of up to 24 years. Our maximum potential liability for future payments, or cost of volume delivery, under these guarantees is estimated to be $940 million ($1.58 billion in the event of intentional or reckless breach), and would become payable if APLNG fails to meet its obligations under these agreements and the obligations cannot otherwise be mi tigated. 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 contribut ions into APLNG. We have guaranteed the performance of APLNG with regard to certain other contracts executed in connection with the project’s continued development. The guarantees have remaining terms of up to 27 years or the life of the venture. Our maximum potential amount of future payments related to these guarantees is approximately $140 million and would become payable if APLNG does not perform. Other Guarantees We have other guarantees with maximum future potential payment amounts totaling approx imately $780 million, which consist primarily of guarantees of the residual value of leased office buildings, guarantees of the residual value of leased corporate aircraft, and a guarantee for our portion of a joint venture’s project finan ce reserve accounts. These guarantees have remaining terms of up to four years and would become payable if, upon sale, certain asset values are lower than guaranteed amounts, business conditions decline at guaranteed entities, or as a result of nonperforma nce of contractual terms by guaranteed parties. Indemnifications Over the years, we have entered into agreements to sell ownership interests in certain corporations, joint ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications for taxes, environmental liabilities, employee claims 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 September 30, 2018, was approximately $100 million. We amortize the indemnification liability over the rele vant 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 o r 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 possi ble to make a reasonable estimate of the maximum potential amount of future payments. Included in the recorded carrying amount at September 30, 2018, were approximately $40 million of environmental accruals for known contamination that are included in the “Asset retirement obligations and accrued environmental costs” line on our consolidated balance sheet. For additional information about environmental liabilities, see Note 13—Contingencies and Commitments. In 2012, we completed the separation of our downstream business, creating two independent energy companies: ConocoPhillips and Phillips 66. On March 1, 2015, a supplier to one of the refineries included in Phillips 66 as part of the separation of our downstream businesses formall y registered Phillips 66 as a party to the supply agreement, thereby triggering a guarantee we provided at the time of separation. As of December 31, 2017, the carrying value of this guarantee was $98 million. Because Phillips 66 has indemnified us for l osses incurred under this guarantee, we also recorded an indemnification asset from Phillips 66 of $98 million. During the third quarter of 2018, a termination agreement between the supplier and Phillips 66 was executed, releasing all parties from their respective obligations under the supply agreement. Since all obligations under the supply agreement were satisfied and discharged, the guarantee was terminated. As of September 30, 2018, the carrying value of this guarantee and the associated indemnifica tion asset were removed.

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- Definition The entire disclosure for each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 460 -URI http://asc.fasb.org/topic&trid=2155896 + Details
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