XML 30 R18.htm IDEA: XBRL DOCUMENT v3.25.1
Fair Value Measurement
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Note 11—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed according to the quality of valuation inputs under the fair value hierarchy.
The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during the three-month period ended March 31, 2025, nor during the year ended December 31, 2024.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair value on a recurring basis include our investments in debt securities classified as available for sale, commodity derivatives and our contingent consideration arrangement related to the Surmont acquisition. See Note 3.
•Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are valued using unadjusted prices available from the underlying exchange. Level 1 financial assets also include our investments in U.S. government obligations classified as available for sale debt securities, which are valued using exchange prices.
•Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing service companies that are all corroborated by market data. Level 2 financial assets also include our investments in debt securities classified as available for sale including investments in corporate bonds, commercial paper, asset-backed securities, U.S. government agency obligations and foreign government obligations that are valued using pricing provided by brokers or pricing service companies that are corroborated with market data.
•Level 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale contracts where a significant portion of fair value is calculated from underlying market data that is not readily available. The derived value uses industry standard methodologies that may consider the historical relationships among various commodities, modeled market prices, time value, volatility factors and other relevant economic measures. The use of these inputs results in management’s best estimate of fair value. Level 3 commodity derivative activity was not material for all periods presented.
•Level 3 liabilities include the fair value of future quarterly contingent payments to TotalEnergies EP Canada Ltd. in connection with the acquisition of the remaining 50 percent working interest in Surmont. Contingent consideration consists of payments up to approximately $0.4 billion CAD over a five-year term ending in the fourth quarter of 2028. The contingent payments represent $2 million for every dollar that the monthly WCS average pricing exceeds $52 per barrel. The terms include adjustments related to not achieving certain production targets. During the three-month period ended March 31, 2025, we made payments of approximately $39 million USD to TotalEnergies EP Canada Ltd. under this arrangement. These payments are included in the "Other" line within the Financing Activities section of our Consolidated Statement of Cash Flows. The fair value of the remaining contingent consideration as of March 31, 2025, is calculated using the income approach and is largely based on the estimated commodity price outlook using a combination of external pricing service companies' and our internal price outlook (unobservable input) and a discount rate consistent with those used by principal market participants (observable input). The impact of other unobservable inputs on the fair value as of March 31, 2025, was not significant.
The following table summarizes the fair value hierarchy for gross financial assets and liabilities (i.e., unadjusted where the right of setoff exists for commodity derivatives accounted for at fair value on a recurring basis):
Millions of Dollars
March 31, 2025December 31, 2024
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investments in debt securities
$225 1,333 — 1,558 261 1,290 — 1,551 
Commodity derivatives
326 306 31 663 201 252 35 488 
Total assets
$551 1,639 31 2,221 462 1,542 35 2,039 
Liabilities
Commodity derivatives$404 168 86 658 275 160 45 480 
Contingent consideration— — 110 110 — — 145 145 
Total liabilities
$404 168 196 768 275 160 190 625 
The range and arithmetic average of the significant unobservable input used in the Level 3 fair value measurement was as follows:
Fair Value
(Millions of
Dollars)		Valuation
Technique		Unobservable
Input
Range
(Arithmetic Average)
Contingent consideration - Surmont as of:
March 31, 2025
$110 Discounted cash flowCommodity price outlook* ($/BOE)
$48.32 - $58.72 ($53.25)
December 31, 2024
145 
$48.63 - $57.53 ($53.38)
*Commodity price outlook based on a combination of external pricing service companies' outlooks and our internal outlook.

The following table summarizes those commodity derivative balances subject to the right of setoff as presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts
Recognized
Amounts Not
Subject to
Right of Setoff
Gross
Amounts
Gross
Amounts
Offset
Net
Amounts
Presented
Cash
Collateral
Net
Amounts
March 31, 2025
Assets$663 — 663 414 249 — 249 
Liabilities658 — 658 414 244 77 167 
December 31, 2024
Assets$488 — 488 278 210 — 210 
Liabilities480 — 480 278 202 73 129 
At March 31, 2025 and December 31, 2024, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.
Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
•Cash and cash equivalents and short-term investments: The carrying amount reported on the balance sheet approximates fair value. For those investments classified as available for sale debt securities, the carrying amount reported on the balance sheet is fair value.
•Accounts and notes receivable (including long-term and related parties): The carrying amount reported on the balance sheet approximates fair value.
•Investments in debt securities classified as available for sale: The fair value of investments in debt securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The fair value of investments in debt securities categorized as Level 2 in the fair value hierarchy is measured using pricing provided by brokers or pricing service companies that are corroborated with market data. See Note 10.
•Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts payable and floating-rate debt reported on the balance sheet approximates fair value.
•Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in the fair value hierarchy.
•Commercial paper: The carrying amount of our commercial paper instruments approximates fair value and is reported on the balance sheet as short-term debt.
The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff exists for commodity derivatives):
Millions of Dollars
Carrying Amount
Fair Value
March 31
2025		December 31
2024		March 31
2025		December 31
2024
Financial Assets
Commodity derivatives
$249 210 249 210 
Investments in debt securities
1,558 1,551 1,558 1,551 
Financial Liabilities
Total debt, excluding finance leases
22,880 23,384 22,794 22,997 
Commodity derivatives
167 129 167 129