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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2016
Fair Value Measurements |
Fair Value Measurements | 9. Fair Value Measurements Occidental has categorized its assets and liabilities that are measured at fair value in a three-level fair value hierarchy, based on the inputs to the valuation techniques: Level 1 — using quoted prices in active markets for the assets or liabilities; Level 2 — using observable inputs other than quoted prices for the assets or liabilities; and Level 3 — using unobservable inputs. Transfers between levels, if any, are recognized at the end of each reporting period. Fair Values — Recurring Occidental primarily applies the market approach for recurring fair value measurements, maximizes its use of observable inputs and minimizes its use of unobservable inputs. Occidental utilizes the mid-point between bid and ask prices for valuing the majority of its assets and liabilities measured and reported at fair value. In addition to using market data, Occidental makes assumptions in valuing its assets and liabilities, including assumptions about the risks inherent in the inputs to the valuation technique. For assets and liabilities carried at fair value, Occidental measures fair value using the following methods:
| Ø |  | Occidental values exchange-cleared commodity derivatives using closing prices provided by the exchange as of the balance sheet date. O ccidental values its available for sale investment based on the common stock closing share price as of the balance sheet date. These derivatives and investments are classified as Level 1.
| Ø |  | Over-the-Counter (OTC) bilateral financial commodity contracts, foreign exchange contracts, options and physical commodity forward purchase and sale contracts are generally classified as Level 2 and are generally valued using quotations provided by brokers or industry-standard models that consider various inputs, including quoted forward prices for commodities, time value, volatility factors, credit risk and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument, and can be derived from observable data or are supported by observable prices at which transactions are executed in the marketplace.
| Ø |  | Occidental values commodity derivatives based on a market approach that considers various assumptions, including quoted forward commodity prices and market yield curves. The assumptions used include inputs that are generally unobservable in the marketplace or are observable but have been adjusted based upon various assumptions, and the fair value is designated as Level 3 within the valuation hierarchy.
Occidental generally uses an income approach to measure fair value when observable inputs are unavailable. This approach utilizes management’s judgments regarding expectations of projected cash flows, and discounts those cash flows using a risk adjusted discount rate. The following tables provide fair value measurement information for such assets and liabilities that are measured on a recurring basis as of September 30, 2016 and December 31, 2015 (in millions):
Fair Value Measurements at September 30, 2016: |  |  |  |  |  |  |  |  |  |  |
Description |  | Level 1 |  | Level 2 |  | Level 3 |  | Netting and Collateral |  | Total Fair Value |
Assets: |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | 129 |  | $ | 55 |  | $ | — |  | $ | (149) |  | $ | 35 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | 150 |  | $ | 310 |  | $ | — |  | $ | (171) |  | $ | 289 |
Fair Value Measurements at December 31, 2015: |  |  |  |  |  |  |  |  |  |
Description |  | Level 1 |  | Level 2 |  | Level 3 |  | Netting and Collateral |  | Total Fair Value
Assets: |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | 557 |  | $ | 87 |  | $ | — |  | $ | (535) |  | $ | 109
Available for sale investment |  | $ | 167 |  | $ | — |  | $ | — |  | $ | — |  | $ | 167
Liabilities: |  |  |  |  |  |  |  |  |  |
Commodity derivatives |  | $ | 544 |  | $ | 404 |  | $ | — |  | $ | (525) |  | $ | 423
Fair Values — Nonrecurring During the three and nine months ended September 30, 2016, Occidental did not have any assets or liabilities measured at fair value on a nonrecurring basis. The following table provides fair value measurement for such proved domestic and international oil and gas properties that are measured on a nonrecurring basis as of December 31, 2015. The impairment tests, including the fair value estimation, incorporated a number of assumptions involving expectations of future cash flows. These assumptions included estimates of future product prices, which Occidental based on forward price curves as of balance sheet date and, where applicable, contractual prices, estimates of oil and gas reserves, estimates of future expected operating and development costs, and a risk adjusted discount rate of 8 to 20 percent. These properties were impacted by persistently low worldwide oil and natural gas prices and changing development plans. Occidental used the income approach to measure the fair value of these properties, using inputs categorized as Level 3 in the fair value hierarchy.
(in millions) |  | Fair Value Measurements at December 31, 2015 Using |  | Net Book |  | Total Pre-tax (Non-cash) Impairment |
Description |  | Level 1 |  | Level 2 |  | Level 3 |  | Value (a) |  | Loss |
Assets: |  |  |  |  |  |  |  |  |  |  |
Impaired proved oil and gas assets - international |  | $ | — |  | $ | — |  | $ | 2,666 |  | $ | 7,359 |  | $ | 4,693 |
Impaired proved oil and gas assets - domestic |  | $ | — |  | $ | — |  | $ | 625 |  | $ | 1,655 |  | $ | 1,030 |
Impaired Midstream assets |  | $ | — |  | $ | — |  | $ | 50 |  | $ | 891 |  | $ | 841 |
Impaired Chemical property, plant, and equipment |  | $ | — |  | $ | — |  | $ | 3 |  | $ | 124 |  | $ | 121 |
(a) Amount represents net book value at date of assessment. Other Financial Instruments The carrying amounts of cash and cash equivalents and other on-balance-sheet financial instruments, other than long-term fixed-rate debt, approximate fair value. The cost, if any, to terminate Occidental’s off-balance-sheet financial instruments is not significant. Occidental estimates the fair value of fixed-rate debt based on the quoted market prices for those instruments or on quoted market yields for similarly rated debt instruments, taking into account such instruments’ maturities. The estimated fair value of Occidental’s debt as of September 30, 2016 and December 31, 2015 was $9.1 billion and $8.4 billion, respectively, and its carrying value net of unamortized discount as of September 30, 2016 and December 31, 2015, was $8.3 billion. The majority of Occidental’s debt is classified as Level 1, with $68 million classified as Level 2.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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