
	2020
Asset (liability)	Financial assets at amortized cost		Fair value through profit or loss		Derivatives used for hedging		Financial liabilities at amortized cost		Total
Accounts receivable	$	2,190	$	—	$	—	$	—	$	2,190
Investments	—		305		—		—		305
Other long-term assets	555		—		136		—		691
Accounts payable	—		—		—		(667)		(667)
Accrued liabilities	—		—		—		(2,346)		(2,346)
Other long-term liabilities (1)	—		(52)		(108)		(1,762)		(1,922)
Long-term debt (2)	—		—		—		(21,453)		(21,453)
	$	2,745	$	253	$	28	$	(26,228)	$	(23,202)


	2019
Asset (liability)	Financial assets at amortized cost		Fair value through profit or loss		Derivatives used for hedging		Financial liabilities at amortized cost		Total
Accounts receivable	$	2,465	$	—	$	—	$	—	$	2,465
Investments	—		490		—		—		490
Other long-term assets	652		—		290		—		942
Accounts payable	—		—		—		(816)		(816)
Accrued liabilities	—		—		—		(2,611)		(2,611)
Other long-term liabilities (1)	—		(21)		(91)		(1,904)		(2,016)
Long-term debt (2)	—		—		—		(20,982)		(20,982)
	$	3,117	$	469	$	199	$	(26,313)	$	(22,528)

(1)Includes $1,690 million of lease liabilities (December 31, 2019 – $1,809 million) and $72 million of deferred purchase consideration payable over the next three years (December 31, 2019 – $95 million).

The carrying amounts of the Company’s financial instruments approximated their fair value, except for fixed rate long-term debt. The fair values of the Company’s investments, recurring other long-term assets (liabilities) and fixed rate long-term debt are outlined below:


		2020
	Carrying amount			Fair value
Asset (liability) (1) (2)				Level 1		Level 2		Level 3 (4) (5)
Investments (3)		$	305	$	305	$	—	$	—
Other long-term assets		$	691	$	—	$	136	$	555
Other long-term liabilities		$	(232)	$	—	$	(160)	$	(72)
Fixed rate long-term debt (6) (7)		$	(14,254)	$	(16,598)	$	—	$	—


		2019
	Carrying amount			Fair value
Asset (liability) (1) (2)				Level 1		Level 2		Level 3 (4) (5)
Investments (3)		$	490	$	490	$	—	$	—
Other long-term assets		$	942	$	—	$	290	$	652
Other long-term liabilities		$	(207)	$	—	$	(112)	$	(95)
Fixed rate long-term debt (6) (7)		$	(14,110)	$	(15,938)	$	—	$	—

(1)Excludes financial assets and liabilities where the carrying amount approximates fair value due to the short-term nature of the asset or liability (cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and purchase consideration payable).

The Company periodically uses derivative financial instruments to manage its commodity price, interest rate and foreign currency exposures. These financial instruments are entered into solely for hedging purposes and are not used for speculative purposes.


Asset (liability)	2020		2019
Derivatives held for trading
Natural gas fixed price swaps	$	(5)	$	(3)
Natural gas basis swaps	(40)		(8)
Foreign currency forward contracts	(7)		(10)

Cash flow hedges
Foreign currency forward contracts	(108)		(91)
Cross currency swaps	136		290
	$	(24)	$	178

Included within:
Current portion of other long-term assets	$	5	$	8
Current portion of other long-term liabilities	(131)		(112)
Other long-term assets	131		282
Other long-term liabilities	(29)		—
	$	(24)	$	178

The estimated fair values of derivative financial instruments in Level 2 at each measurement date have been determined based on appropriate internal valuation methodologies and/or third party indications. Level 2 fair values determined using valuation models require the use of assumptions concerning the amount and timing of future cash flows and discount rates. In determining these assumptions, the Company primarily relied on external, readily-observable quoted market inputs as applicable, including crude oil and natural gas forward benchmark commodity prices and volatility, Canadian and United States interest rate yield curves, and Canadian and United States forward foreign exchange rates, discounted to present value as appropriate. The resulting fair value estimates may not necessarily be indicative of the amounts that could be realized or settled in a current market transaction and these differences may be material.


Asset (liability)	2020		2019
Balance – beginning of year	$	178	$	356

Net change in fair value of outstanding derivative financial instruments recognized in:
Risk management activities (1)	(32)		(13)
Foreign exchange	(168)		(231)
Other comprehensive income (loss)	(2)		66


Balance – end of year	(24)		178
Less: current portion	(126)		(104)
	$	102	$	282

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company’s market risk is comprised of commodity price risk, interest rate risk, and foreign currency exchange risk.

The Company periodically uses commodity derivative financial instruments to manage its exposure to commodity price risk associated with the sale of its future crude oil and natural gas production and with natural gas purchases.

Remaining term

Weighted average volume

Weighted average price

Index

Natural Gas

Fixed price swap

Jan 2021

Dec 2021

37,337 GJ/d

$2.03/GJ

AECO

Jan 2021

Dec 2021

31,178 MMBtu/d

US$2.46/MMBtu

DAWN

Jan 2021

Dec 2021

20,808 MMBtu/d

US$2.54/MMBtu

NYMEX

Jan 2021

Dec 2021

17,466 MMBtu/d

US$2.70/MMBtu

SUMAS

Differential swap

Jan 2021

Aug 2021

20,000 GJ/d

$0.29/GJ

AECO-STN 2

Basis swap

Jan 2021

Dec 2023

53,333 MMBtu/d

US$1.23/MMBtu

AECO

Jan 2024

Dec 2025

20,000 MMBtu/d

US$0.97/MMBtu

AECO

Jan 2021

Dec 2021

20,000 MMBtu/d

US$0.09/MMBtu

DAWN

The Company is exposed to interest rate price risk on its fixed rate long-term debt and to interest rate cash flow risk on its floating rate long-term debt. The Company periodically enters into interest rate swap contracts to manage its fixed to floating interest rate mix on long-term debt. Interest rate swap contracts require the periodic exchange of payments without the exchange of the notional principal amounts on which the payments are based. At December 31, 2020, the Company had no interest rate swap contracts outstanding.

The Company is exposed to foreign currency exchange rate risk in Canada primarily related to its US dollar denominated long-term debt, commercial paper and working capital. The Company is also exposed to foreign currency exchange rate risk on transactions conducted in other currencies and in the carrying value of its foreign subsidiaries. The Company periodically enters into cross currency swap contracts and foreign currency forward contracts to manage known currency exposure on US dollar denominated long-term debt, commercial paper and working capital. The cross currency swap contracts require the periodic exchange of payments with the exchange at maturity of notional principal amounts on which the payments are based.

In addition to the cross currency swap contracts noted above, at December 31, 2020, the Company had US$4,951 million of foreign currency forward contracts outstanding, with original terms of up to 90 days, including US$4,379 million designated as cash flow hedges.

During 2020, the Company settled the US$500 million cross currency swaps designated as cash flow hedges of the US$500 million 3.45% US dollar debt securities due November 2021. The Company realized cash proceeds of $166 million on settlement.

The following table summarizes the annualized sensitivities of the Company’s 2020 net earnings (loss) and other comprehensive loss to changes in the fair value of financial instruments outstanding as at December 31, 2020, resulting from changes in the specified variable, with all other variables held constant. These sensitivities are prepared on a different basis than those sensitivities disclosed in the Company’s other continuous disclosure documents, are limited to the impact of changes in a specified variable applied to financial instruments only and do not represent the impact of a change in the variable on the operating results of the Company taken as a whole. Further, these sensitivities are theoretical, as changes in one variable may contribute to changes in another variable, which may magnify or counteract the sensitivities. In addition, changes in fair value generally cannot be extrapolated because the relationship of a change in an assumption to the change in fair value may not be linear.


	2020				2019
	Increase (decrease) to net earnings		Increase (decrease) to other comprehensive income		Increase (decrease) to net earnings		Increase (decrease) to other comprehensive income
Commodity price risk
Increase AECO fixed price swap $0.10/Mcf	$	(1)	$	—	$	(1)	$	—
Decrease AECO fixed price swap $0.10/Mcf	$	1	$	—	$	1	$	—
Increase natural gas fixed price swap US$0.10 MMBtu	$	(2)	$	—	$	—	$	—
Decrease natural gas fixed price swap US$0.10 MMBtu	$	2	$	—	$	—	$	—
Increase natural gas basis swap US$0.10 MMBtu	$	(8)	$	—	$	(1)	$	—
Decrease natural gas basis swap US$0.10 MMBtu	$	8	$	—	$	1	$	—
Interest rate risk
Increase interest rate 1%	$	(53)	$	(17)	$	(48)	$	(21)
Decrease interest rate 1%	$	53	$	20	$	48	$	24
Foreign currency exchange rate risk
Weakening of the Canadian dollar by US$0.01	$	(126)	$	—	$	(103)	$	—
Strengthening of the Canadian dollar by US$0.01	$	123	$	—	$	100	$	—

The Company’s accounts receivable are mainly with customers in the crude oil and natural gas industry and are subject to normal industry credit risks. The Company manages these risks by reviewing its exposure to individual companies on a regular basis and where appropriate, ensures that parental guarantees or letters of credit are in place to minimize the impact in the event of default. At December 31, 2020, substantially all of the Company’s accounts receivable were due within normal trade terms and the average expected credit loss was approximately 1% of the Company's accounts receivable balance (December 31, 2019 – 1%).

The Company is also exposed to possible losses in the event of nonperformance by counterparties to derivative financial instruments; however, the Company manages this credit risk by entering into agreements with counterparties that are substantially all investment grade financial institutions. At December 31, 2020, the Company had net risk management assets of $129 million with specific counterparties related to derivative financial instruments (December 31, 2019 – $265 million). The carrying amount of financial assets approximates the maximum credit exposure.

Management of liquidity risk requires the Company to maintain sufficient cash and cash equivalents, along with other sources of capital, consisting primarily of cash flow from operating activities, available credit facilities, commercial paper and access to debt capital markets, to meet obligations as they become due. The Company believes it has adequate bank credit facilities to provide liquidity to manage fluctuations in the timing of the receipt and/or disbursement of operating cash flows.


	Less than 1 year		1 to less than 2 years		2 to less than 5 years		Thereafter
Accounts payable	$	667	$	—	$	—	$	—
Accrued liabilities	$	2,346	$	—	$	—	$	—
Long-term debt (1)	$	1,343	$	4,887	$	7,051	$	8,279
Other long-term liabilities (2)	$	345	$	200	$	435	$	942
Interest and other financing expense (3)	$	776	$	693	$	1,619	$	4,452

(2)Lease payments included within other long-term liabilities reflect principal payments only and are as follows; less than one year, $189 million; one to less than two years, $162 million; two to less than five years, $397 million; and thereafter $942 million.

(3)Includes interest and other financing expense on long-term debt and other long-term liabilities. Payments were estimated based upon applicable interest and foreign exchange rates at December 31, 2020.