FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2015

NOTE 9FAIR VALUE MEASUREMENTS

Fair Values - Recurring

The following tables present assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2015 and 2014 (in millions):

	December 31, 2015
	Level 1		Level 2		Level 3		Collateral		Total
Assets:
Commodity derivative instruments, other current assets	$	—	$	87	$	—	$	—	$	87
Liabilities:
Commodity derivative instruments, accrued liabilities	$	—	$	(1)	$	—	$	—	$	(1)

	December 31, 2014
	Level 1		Level 2		Level 3		Collateral		Total
Assets:
Commodity derivative instruments, other current assets	$	—	$	24	$	—	$	—	$	24

Fair Values - Nonrecurring

At year end 2015, we performed impairment tests with respect to our proved and unproved properties triggered by the sharp drop in oil prices in the fourth quarter of 2015. As a result, in the fourth quarter of 2015, we recorded pre-tax asset impairment charges of $4.9 billion on certain proved and unproved properties throughout our asset base. Approximately $100 million of the charge was related to unproved acreage. We evaluate our properties, in part, based on year-end forward price curves, as well as assessing projects we determined we would not pursue in the foreseeable future given the current environment.

As a result of impairment testing in the fourth quarter of 2014, we recorded pre-tax charges of $3.4 billion, of which $2.7 billion was for certain proved properties throughout our asset base to reduce these assets to their estimated fair values.

The fair values of the proved properties held and used were determined as of the date of the assessment using discounted cash flow models based on management’s expectations for the future. Inputs included estimates of future oil and natural gas production, prices based on recent commodity forward price curves as of the date of the estimate, estimated operating and development costs, and a risk-adjusted discount rate.

Financial Instruments Fair Value

The carrying amounts of cash and other on-balance sheet financial instruments, other than fixed-rate debt, approximate fair value.

- 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.

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