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RETIREMENT AND DEFERRED COMPENSATION PLANS | 12 Months Ended
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Dec. 31, 2023
Retirement Benefits [Abstract] |
RETIREMENT AND DEFERRED COMPENSATION PLANS | RETIREMENT AND DEFERRED COMPENSATION PLANS The Company provides retirement benefits to its U.S. employees through the use of multiple plans: a 401(k) savings plan, a money purchase retirement plan, a non-qualified retirement savings plan, and a non-qualified restorative retirement savings plan. The 401(k) savings plan provides participating employees the ability to elect to contribute up to 50 percent of eligible compensation to the plan with the Company making matching contributions up to a maximum of 8 percent of each employee’s annual eligible compensation. In addition, the Company contributes 6 percent of each participating employee’s annual eligible compensation to a money purchase retirement plan. The 401(k) savings plan and the money purchase retirement plan are subject to certain annually-adjusted, government-mandated restrictions that limit the amount of employee and Company contributions. For certain eligible employees, the Company also provides a non-qualified retirement savings plan or a non-qualified restorative retirement savings plan. These plans allow the deferral of up to 50 percent of each employee’s base salary, up to 75 percent of each employee’s annual bonus (that accepts employee contributions) and the Company’s matching contributions in excess of the government mandated limitations imposed in the 401(k) savings plan and money purchase retirement plan. Vesting in the Company’s contributions in the 401(k) savings plan, the money purchase retirement plan, the non-qualified retirement savings plan and the non-qualified restorative retirement savings plan occurs at the rate of 20 percent for every completed year of employment. Upon a change in control of ownership of APA, immediate and full vesting occurs. The aggregate annual cost to the Company of all U.S. and international savings plans, the money purchase retirement plan, non-qualified retirement savings plan, and non-qualified restorative retirement savings plan was $44 million, $40 million, and $31 million for 2023, 2022, and 2021, respectively. The Company also provides a funded noncontributory defined benefit pension plan (U.K. Pension Plan) covering certain employees of the Company’s North Sea operations in the U.K. The plan provides defined pension benefits based on years of service and final salary. The plan applies only to employees who were part of BP North Sea’s pension plan as of April 2, 2003, prior to the acquisition of BP North Sea by the Company effective July 1, 2003. Additionally, the Company offers postretirement medical benefits to U.S. employees who meet certain eligibility requirements. Eligible participants receive medical benefits up until the age of 65 or at the date they become eligible for Medicare, provided the participant remits the required portion of the cost of coverage. The plan is contributory with participants’ contributions adjusted annually. The postretirement benefit plan does not cover benefit expenses once a covered participant becomes eligible for Medicare. The following tables set forth the benefit obligation, fair value of plan assets and funded status as of December 31, 2023, 2022, and 2021, and the underlying weighted average actuarial assumptions used for the U.K. Pension Plan and U.S. postretirement benefit plan. The Company uses a measurement date of December 31 for its pension and postretirement benefit plans.
|  | 2023 |  | 2022 |  | 2021
|  | Pension Benefits |  | Postretirement Benefits |  | Pension Benefits |  | Postretirement Benefits |  | Pension Benefits |  | Postretirement Benefits
|  | (In millions)
Change in Projected Benefit Obligation |  |  |  |  |  |  |  |  |  |  |  |
Projected benefit obligation at beginning of year |  | $ | 108 |  |  | $ | 15 |  |  | $ | 211 |  |  | $ | 20 |  |  | $ | 233 |  |  | $ | 20 |
Service cost |  | 1 |  |  | 1 |  |  | 2 |  |  | 1 |  |  | 3 |  |  | 1 |
Interest cost |  | 5 |  |  | 1 |  |  | 3 |  |  | — |  |  | 3 |  |  | — |
Foreign currency exchange rates |  | 6 |  |  | — |  |  | (21) |  |  | — |  |  | (2) |  |  | — |
Actuarial losses (gains) |  | 3 |  |  | — |  |  | (79) |  |  | (5) |  |  | (5) |  |  | 1 |
Plan settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | (17) |  |  | — |
Benefits paid |  | (5) |  |  | (3) |  |  | (8) |  |  | (3) |  |  | (4) |  |  | (4) |
Retiree contributions |  | — |  |  | 1 |  |  | — |  |  | 2 |  |  | — |  |  | 2 |
Projected benefit obligation at end of year |  | 118 |  |  | 15 |  |  | 108 |  |  | 15 |  |  | 211 |  |  | 20 |
Change in Plan Assets |  |  |  |  |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of year |  | 137 |  |  | — |  |  | 254 |  |  | — |  |  | 262 |  |  | — |
Actual return (loss) on plan assets |  | 8 |  |  | — |  |  | (87) |  |  | — |  |  | 11 |  |  | — |
Foreign currency exchange rates |  | 8 |  |  | — |  |  | (26) |  |  | — |  |  | (3) |  |  | — |
Employer contributions |  | 2 |  |  | 1 |  |  | 4 |  |  | 2 |  |  | 5 |  |  | 2 |
Plan settlements |  | — |  |  | — |  |  | — |  |  | — |  |  | (17) |  |  | — |
Benefits paid |  | (5) |  |  | (3) |  |  | (8) |  |  | (4) |  |  | (4) |  |  | (4) |
Retiree contributions |  | — |  |  | 2 |  |  | — |  |  | 2 |  |  | — |  |  | 2 |
Fair value of plan assets at end of year |  | 150 |  |  | — |  |  | 137 |  |  | — |  |  | 254 |  |  | — |
Funded status at end of year |  | $ | 32 |  |  | $ | (15) |  |  | $ | 29 |  |  | $ | (15) |  |  | $ | 43 |  |  | $ | (20) |
Amounts recognized in Consolidated Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |
Current liability |  | $ | — |  |  | $ | (2) |  |  | $ | — |  |  | $ | (2) |  |  | $ | — |  |  | $ | (2) |
Non-current asset (liability) |  | 32 |  |  | (13) |  |  | 29 |  |  | (13) |  |  | 43 |  |  | (18) |
|  | $ | 32 |  |  | $ | (15) |  |  | $ | 29 |  |  | $ | (15) |  |  | $ | 43 |  |  | $ | (20) |
Pre-tax Amounts Recognized in Accumulated Other Comprehensive Income (Loss) |  |  |  |  |  |  |  |  |  |  |  |
Accumulated gain (loss) |  | $ | (12) |  |  | $ | 16 |  |  | $ | (10) |  |  | $ | 18 |  |  | $ | 1 |  |  | $ | 14 |
Weighted Average Assumptions used as of December 31 |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 4.80 | % |  | 5.00 | % |  | 5.00 | % |  | 5.29 | % |  | 1.80 | % |  | 2.57 | %
Salary increases |  | 4.60 | % |  | N/A |  | 4.70 | % |  | N/A |  | 4.90 | % |  | N/A
Expected return on assets |  | 4.80 | % |  | N/A |  | 4.70 | % |  | N/A |  | 1.90 | % |  | N/A
Healthcare cost trend |  |  |  |  |  |  |  |  |  |  |  |
Initial |  | N/A |  | 6.25 | % |  | N/A |  | 6.50 | % |  | N/A |  | 6.25 | %
Ultimate in 2030 |  | N/A |  | 5.25 | % |  | N/A |  | 5.25 | % |  | N/A |  | 5.00 | %
As of December 31, 2023, 2022, and 2021, the accumulated benefit obligation for the U.K. Pension Plan was $112 million, $89 million, and $205 million, respectively. The Company’s defined benefit pension plan assets are held by a non-related trustee who has been instructed to invest the assets under a cash flow driven investment strategy. The Company intends to invest in primarily low risk debt securities that will provide a reasonable rate of return focused on cash flow timing such that the benefits promised to members are provided when due. The U.K. Pension Plan policy is to target an ongoing funding level of 100 percent through prudent investments and includes policies and strategies such as investment goals, risk management practices, and permitted and prohibited investments. A breakout of allocations for the Company's plan asset holdings are summarized below:
|  | Percentage of Plan Assets at Year-End
|  | 2023 |  | 2022
Asset Category |  |  |  |
Global equities |  | — | % |  | 6 | %
Multi-asset credit |  | 59 | % |  | 40 | %
Nominal bonds |  | 6 | % |  | 24 | %
Inflation-linked bonds |  | 33 | % |  | 28 | %
Cash |  | 2 | % |  | 2 | %
Total |  | 100 | % |  | 100 | %
The plan’s assets do not include any direct ownership of equity or debt securities of the Company. The fair value of plan assets at December 31, 2023 and 2022 are based upon unadjusted quoted prices for identical instruments in active markets, which is a Level 1 fair value measurement. The following tables present the fair values of plan assets for each major asset category based on the nature and significant concentration of risks in plan assets at December 31, 2023 and 2022:
|  | December 31,
|  | 2023 |  | 2022
|  | (In millions)
Asset Category |  |  |  |
Global equities |  | $ | — |  |  | $ | 9 |
Multi-asset credit |  | 88 |  |  | 55 |
Nominal bonds |  | 9 |  |  | 32 |
Inflation-linked bonds |  | 50 |  |  | 39 |
Cash |  | 3 |  |  | 2 |
Total |  | $ | 150 |  |  | $ | 137 |
The expected long-term rate of return on assets assumptions are derived relative to the yield on long-dated fixed-interest bonds issued by the U.K. government (gilts). For equities, outperformance relative to gilts is assumed to be 3.5 percent per year. The following tables set forth the components of the net periodic cost and the underlying weighted average actuarial assumptions used for the pension and postretirement benefit plans as of December 31, 2023, 2022, and 2021:
|  | 2023 |  | 2022 |  | 2021
|  | Pension Benefits |  | Postretirement Benefits |  | Pension Benefits |  | Postretirement Benefits |  | Pension Benefits |  | Postretirement Benefits
|  | (In millions)
Components of Net Periodic Benefit Cost |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 1 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 1 |  |  | $ | 3 |  |  | $ | 1 |
Interest cost |  | 5 |  |  | 1 |  |  | 3 |  |  | — |  |  | 3 |  |  | — |
Expected return on assets |  | (7) |  |  | — |  |  | (4) |  |  | — |  |  | (4) |  |  | — |
Amortization of loss |  | — |  |  | (2) |  |  | — |  |  | (1) |  |  | — |  |  | (1) |
Settlement loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Net periodic benefit cost |  | $ | (1) |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for the Years Ended December 31 |  |  |  |  |  |  |  |  |  |  |  |
Discount rate |  | 5.00 | % |  | 5.29 | % |  | 1.80 | % |  | 2.57 | % |  | 1.40 | % |  | 2.06 | %
Salary increases |  | 4.70 | % |  | N/A |  | 4.90 | % |  | N/A |  | 4.50 | % |  | N/A
Expected return on assets |  | 4.70 | % |  | N/A |  | 1.90 | % |  | N/A |  | 1.50 | % |  | N/A
Healthcare cost trend |  |  |  |  |  |  |  |  |  |  |  |
Initial |  | N/A |  | 6.50 | % |  | N/A |  | 6.25 | % |  | N/A |  | 6.00 | %
Ultimate in 2030 |  | N/A |  | 5.25 | % |  | N/A |  | 5.00 | % |  | N/A |  | 5.00 | %
The Company expects to contribute approximately $2 million to its pension plan and $2 million to its postretirement benefit plan in 2024. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|  | Pension Benefits |  | Postretirement Benefits
|  | (In millions)
2024 |  | $ | 5 |  |  | $ | 2 |
2025 |  | 5 |  |  | 2 |
2026 |  | 5 |  |  | 1 |
2027 |  | 6 |  |  | 1 |
2028 |  | 6 |  |  | 1 |
Years 2029-2033 |  | 34 |  |  | 6 |

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