XML 28 R14.htm IDEA: XBRL DOCUMENT
v3.24.2

Risk Management (Notes) | 6 Months Ended
--- | ---
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Risk Management | 6. Risk Management Certain of our business activities expose us to risks associated with unfavorable changes in the market price of natural gas, NGL and crude oil. We also have exposure to interest rate and foreign currency risk as a result of the issuance of our debt obligations. Pursuant to our management’s approved risk management policy, we use derivative contracts to hedge or reduce our exposure to some of these risks. Energy Commodity Price Risk Management As of June 30, 2024, we had the following outstanding commodity forward contracts to hedge our forecasted energy commodity purchases and sales:
| Net open position long/(short)
Derivatives designated as hedging contracts |  |  |
Crude oil fixed price | (16.3) |  |  | MMBbl
Natural gas fixed price | (70.2) |  |  | Bcf
Natural gas basis | (44.3) |  |  | Bcf
Derivatives not designated as hedging contracts |  |  |
Crude oil fixed price | (1.1) |  |  | MMBbl
Crude oil basis | (3.4) |  |  | MMBbl
Natural gas fixed price | (7.2) |  |  | Bcf
Natural gas basis | (58.8) |  |  | Bcf
NGL fixed price | (1.4) |  |  | MMBbl
As of June 30, 2024, the maximum length of time over which we have hedged, for accounting purposes, our exposure to the variability in future cash flows associated with energy commodity price risk is through December 2028. Interest Rate Risk Management We utilize interest rate derivatives to hedge our exposure to both changes in the fair value of our fixed rate debt instruments and variability in expected future cash flows attributable to variable interest rate payments. The following table summarizes our outstanding interest rate contracts as of June 30, 2024:
|  | Notional amount |  | Accounting treatment |  | Maximum term |
|  | (In millions) |  |  |  |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Fixed-to-variable interest rate contracts(a) |  | $ | 5,350 |  |  | Fair value hedge |  | March 2035 |
(a)The principal amount of hedged senior notes consisted of $2,100 million included in “Current portion of debt” and $3,250 million included in “Long-term debt” on our accompanying consolidated balance sheets. Foreign Currency Risk Management We utilize foreign currency derivatives to hedge our exposure to variability in foreign exchange rates. The following table summarizes our outstanding foreign currency contracts as of June 30, 2024:
|  | Notional amount |  | Accounting treatment |  | Maximum term |
|  | (In millions) |  |  |  |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |
EUR-to-USD cross currency swap contracts(a) |  | $ | 543 |  |  | Cash flow hedge |  | March 2027 |
(a)These swaps eliminate the foreign currency risk associated with our Euro-denominated debt. Impact of Derivative Contracts on Our Consolidated Financial Statements The following table summarizes the fair values of our derivative contracts included on our accompanying consolidated balance sheets:
Fair Value of Derivative Contracts
| Location |  | Derivatives Asset |  | Derivatives Liability
|  |  | June 30, 2024 |  | December 31, 2023 |  | June 30, 2024 |  | December 31, 2023
|  |  | (In millions)
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |
Energy commodity derivative contracts |  |  |  |  |  |  |  |
| Fair value of derivative contracts/(Fair value of derivative contracts) |  | $ | 30 |  |  | $ | 77 |  |  | $ | (93) |  |  | $ | (75) |
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) |  | 1 |  |  | 12 |  |  | (43) |  |  | (29) |
| Subtotal |  | 31 |  |  | 89 |  |  | (136) |  |  | (104) |
Interest rate contracts |  |  |  |  |  |  |  |
| Fair value of derivative contracts/(Fair value of derivative contracts) |  | — |  |  | — |  |  | (101) |  |  | (120) |
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) |  | 24 |  |  | 37 |  |  | (208) |  |  | (158) |
| Subtotal |  | 24 |  |  | 37 |  |  | (309) |  |  | (278) |
Foreign currency contracts |  |  |  |  |  |  |  |
| Fair value of derivative contracts/(Fair value of derivative contracts) |  | — |  |  | — |  |  | (9) |  |  | (2) |
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) |  | — |  |  | — |  |  | (8) |  |  | (2) |
| Subtotal |  | — |  |  | — |  |  | (17) |  |  | (4) |
| Total |  | 55 |  |  | 126 |  |  | (462) |  |  | (386) |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |
Energy commodity derivative contracts |  |  |  |  |  |  |  |
| Fair value of derivative contracts/(Fair value of derivative contracts) |  | 16 |  |  | 49 |  |  | (25) |  |  | (8) |
| Deferred charges and other assets/(Other long-term liabilities and deferred credits) |  | 1 |  |  | 3 |  |  | (1) |  |  | (1) |
| Total |  | 17 |  |  | 52 |  |  | (26) |  |  | (9) |
| Total derivatives |  | $ | 72 |  |  | $ | 178 |  |  | $ | (488) |  |  | $ | (395) |
The following two tables summarize the fair value measurements of our derivative contracts based on the three levels established by the ASC. The tables also identify the impact of derivative contracts which we have elected to present on our accompanying consolidated balance sheets on a gross basis that are eligible for netting under master netting agreements.
| Balance sheet asset fair value measurements by level |  | Contracts available for netting |  | Cash collateral held(a) |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Gross amount |  |  |  | Net amount
| (In millions)
As of June 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |
Energy commodity derivative contracts(b) | $ | 27 |  |  | $ | 21 |  |  | $ | — |  |  | $ | 48 |  |  | $ | (25) |  |  | $ | — |  |  | $ | 23 |
Interest rate contracts | — |  |  | 24 |  |  | — |  |  | 24 |  |  | — |  |  | — |  |  | 24 |
As of December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Energy commodity derivative contracts(b) | $ | 65 |  |  | $ | 75 |  |  | $ | — |  |  | $ | 140 |  |  | $ | (16) |  |  | $ | — |  |  | $ | 124 |
Interest rate contracts | — |  |  | 38 |  |  | — |  |  | 38 |  |  | — |  |  | — |  |  | 38 |
| Balance sheet liability fair value measurements by level |  | Contracts available for netting |  | Cash collateral posted(a) |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Gross amount |  |  |  | Net amount
| (In millions)
As of June 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |
Energy commodity derivative contracts(b) | $ | (12) |  |  | $ | (150) |  |  | $ | — |  |  | $ | (162) |  |  | $ | 25 |  |  | $ | (15) |  |  | $ | (152) |
Interest rate contracts | — |  |  | (309) |  |  | — |  |  | (309) |  |  | — |  |  | — |  |  | (309) |
Foreign currency contracts | — |  |  | (17) |  |  | — |  |  | (17) |  |  | — |  |  | — |  |  | (17) |
As of December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Energy commodity derivative contracts(b) | $ | (17) |  |  | $ | (96) |  |  | $ | — |  |  | $ | (113) |  |  | $ | 16 |  |  | $ | (85) |  |  | $ | (182) |
Interest rate contracts | — |  |  | (278) |  |  | — |  |  | (278) |  |  | — |  |  | — |  |  | (278) |
Foreign currency contracts | — |  |  | (4) |  |  | — |  |  | (4) |  |  | — |  |  | — |  |  | (4) |
(a)Any cash collateral paid or received is reflected in this table, but only to the extent that it represents variation margins. Any amount associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from this table. (b)Level 1 consists primarily of NYMEX natural gas futures. Level 2 consists primarily of OTC WTI swaps, NGL swaps and crude oil basis swaps. The following tables summarize the pre-tax impact of our derivative contracts on our accompanying consolidated statements of income and comprehensive income:
Derivatives in fair value hedging relationships |  | Location |  | Gain/(loss) recognized in income on derivative and related hedged item
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  |  |  | 2024 |  | 2023 |  | 2024 |  | 2023
|  |  |  | (In millions)
Interest rate contracts |  | Interest, net |  | $ | 1 |  |  | $ | (99) |  |  | $ | (55) |  |  | $ | 19 |
Hedged fixed rate debt(a) |  | Interest, net |  | $ | — |  |  | $ | 101 |  |  | $ | 57 |  |  | $ | (18) |
(a)As of June 30, 2024, the cumulative amount of fair value hedging adjustments resulted in a decrease of $292 million in the carrying value of our hedged fixed rate debt balance and is included in “Debt fair value adjustments” on our accompanying consolidated balance sheet.
Derivatives in cash flow hedging relationships |  | Gain/(loss) recognized in OCI on derivative(a) |  | Location |  | Gain/(loss) reclassified from Accumulated OCI into income
|  | Three Months Ended June 30, |  |  |  | Three Months Ended June 30,
|  | 2024 |  | 2023 |  |  |  | 2024 |  | 2023
|  | (In millions) |  |  |  | (In millions)
Energy commodity derivative contracts |  | $ | (12) |  |  | $ | 50 |  |  | Revenues—Commodity sales |  | $ | (27) |  |  | $ | 18 |
|  |  |  |  |  | Costs of sales |  | (2) |  |  | (20) |
Foreign currency contracts |  | (3) |  |  | 13 |  |  | Other, net |  | (4) |  |  | 4 |
Total |  | $ | (15) |  |  | $ | 63 |  |  | Total |  | $ | (33) |  |  | $ | 2 |
Derivatives in cash flow hedging relationships |  | Gain/(loss) recognized in OCI on derivative(a) |  | Location |  | Gain/(loss) reclassified from Accumulated OCI into income
|  | Six Months Ended June 30, |  |  |  | Six Months Ended June 30,
|  | 2024 |  | 2023 |  |  |  | 2024 |  | 2023
|  | (In millions) |  |  |  | (In millions)
Energy commodity derivative contracts |  | $ | (105) |  |  | $ | 185 |  |  | Revenues—Commodity sales |  | $ | (7) |  |  | $ | 83 |
|  |  |  |  |  | Costs of sales |  | (9) |  |  | (27) |
Interest rate contracts |  | 13 |  |  | — |  |  | Interest, net |  | 4 |  |  | — |
Foreign currency contracts |  | (13) |  |  | 16 |  |  | Other, net |  | (17) |  |  | 10 |
Total |  | $ | (105) |  |  | $ | 201 |  |  | Total |  | $ | (29) |  |  | $ | 66 |
(a)We expect to reclassify approximately $78 million of loss associated with cash flow hedge price risk management activities included in our accumulated other comprehensive loss balance as of June 30, 2024 into earnings during the next twelve months (when the associated forecasted transactions are also expected to impact earnings); however, actual amounts reclassified into earnings could vary materially as a result of changes in market prices.
Derivatives not designated as accounting hedges |  | Location |  | Gain/(loss) recognized in income on derivatives
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  |  |  | 2024 |  | 2023 |  | 2024 |  | 2023
|  |  |  | (In millions)
Energy commodity derivative contracts |  | Revenues—Commodity sales |  | $ | 2 |  |  | $ | 10 |  |  | $ | (9) |  |  | $ | 31 |
|  | Costs of sales |  | (18) |  |  | 51 |  |  | (32) |  |  | 120 |
|  | Earnings from equity investments |  | — |  |  | — |  |  | — |  |  | 1 |
Interest rate contracts |  | Interest, net |  | — |  |  | 7 |  |  | (2) |  |  | 12 |
Total(a) |  |  |  | $ | (16) |  |  | $ | 68 |  |  | $ | (43) |  |  | $ | 164 |
(a)The three and six months ended June 30, 2024 amounts include an approximate loss of $14 million and an approximate gain of $10 million, respectively, and the three and six months ended June 30, 2023 amounts include approximate gains of $7 million and $35 million, respectively, associated with natural gas, crude and NGL derivative contract settlements. Credit Risks In conjunction with certain derivative contracts, we are required to provide collateral to our counterparties, which may include posting letters of credit or placing cash in margin accounts. As of June 30, 2024 and December 31, 2023, we had no outstanding letters of credit supporting our commodity price risk management program. As of June 30, 2024 we had cash margins of $12 million posted by us with our counterparties as collateral and reported within “Restricted deposits” on our accompanying consolidated balance sheet. As of December 31, 2023, we had cash margins of $63 million posted by our counterparties with us as collateral and reported within “Other current liabilities” on our accompanying consolidated balance sheet. The cash margin balance at June 30, 2024 represents the initial margin requirements of $27 million, offset by counterparty variation margin requirements of $15 million. We also use industry standard commercial agreements that allow for the netting of exposures associated with transactions executed under a single commercial agreement. Additionally, we generally utilize master netting agreements to offset credit exposure across multiple commercial agreements with a single counterparty. We also have agreements with certain counterparties to our derivative contracts that contain provisions requiring the posting of additional collateral upon a decrease in our credit rating. As of June 30, 2024, based on our current mark-to-market positions and posted collateral, we estimate that if our credit rating were downgraded one notch, we would not be required to post additional collateral. If we were downgraded two notches, we estimate that we would be required to post $99 million of additional collateral.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration