Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements [Text Block]

Fair Value Measurements

Fair Values - Recurring

The following tables present assets and liabilities accounted for at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 by fair value hierarchy level.

	March 31, 2016
(In millions)	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity (a)	$	—	$	51	$	—	$	51
Interest rate	—		12		—		12
Derivative instruments, assets	$	—	$	63	$	—	$	63
Derivative instruments, liabilities
Commodity (a)	$	—	$	24	$	—	$	24
Derivative instruments, liabilities	$	—	$	24	$	—	$	24

^(a) Derivative instruments are recorded on a net basis in the company's balance sheet (see Note 12).

	December 31, 2015
(In millions)	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity (a)	$	—	$	51	$	—	$	51
Interest rate	$	—	$	8	$	—	$	8
Derivative instruments, assets	$	—	$	59	$	—	$	59
Derivative instruments, liabilities
Commodity (a)	$	—	$	1	$	—	$	1
Derivative instruments, liabilities	$	—	$	1	$	—	$	1

^(a) Derivative instruments are recorded on a net basis in the company's balance sheet (see Note 12).

Commodity derivatives include three-way collars, extendable three-way collars, call options, swaps and swaptions. These instruments are measured at fair value using either the Black-Scholes Model or the Black Model. Inputs to both models include prices, interest rates, and implied volatility. The inputs to these models are categorized as Level 2 because predominantly all assumptions and inputs are observable in active markets throughout the term of the instruments.

Interest rate swaps are measured at fair value with a market approach using actionable broker quotes, which are Level 2 inputs. See Note 12 for additional discussion of the types of derivative instruments we use.

Fair Values – Goodwill

Unlike long-lived assets, goodwill must be tested for impairment at least annually, or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill is tested for impairment at the reporting unit level. We estimate the fair value of our International E&P reporting unit using a combination of market and income approaches. The market approach referenced observable inputs specific to us and our industry, such as the price of our common equity, our enterprise value, and valuation multiples of us and our peers for the investor analyst community. The income approach utilized discounted cash flows, which were based on forecasted assumptions. Key assumptions to the income approach include future liquid hydrocarbon and natural gas pricing, estimated quantities of liquid hydrocarbons and natural gas proved and probable reserves, estimated timing of production, discount rates, future capital requirements and operating expenses and tax rates. The assumptions used in the income approach are consistent with those that management uses to make business decisions. These valuations methodologies represent Level 3 fair value measurements. A triggering event related to price declines in our common stock required us to reassess our goodwill for impairment as of March 31, 2016. Based on the results of this assessment, we concluded no impairment was required. While the fair value of our International E&P reporting unit exceeded book value, subsequent commodity price and/or common stock declines may cause us to reassess our goodwill for impairment, and could result in non-cash impairment charges in the future.

Fair Values – Financial Instruments

Our current assets and liabilities include financial instruments, the most significant of which are receivables, long-term debt and payables. We believe the carrying values of our receivables and payables approximate fair value. Our fair value assessment incorporates a variety of considerations, including (1) the short-term duration of the instruments, (2) our credit rating, and (3) our historical incurrence of and expected future insignificant bad debt expense, which includes an evaluation of counterparty credit risk.

The following table summarizes financial instruments, excluding receivables, payables and derivative financial instruments, and their reported fair value by individual balance sheet line item at March 31, 2016 and December 31, 2015.

	March 31, 2016				December 31, 2015
	Fair		Carrying		Fair		Carrying
(In millions)	Value		Amount		Value		Amount
Financial assets
Other noncurrent assets	$	115	$	120	$	104	$	118
Total financial assets	$	115	$	120	$	104	$	118
Financial liabilities
Other current liabilities	$	34	$	33	$	34	$	33
Long-term debt, including current portion (a)	6,575		7,291		6,723		7,291
Deferred credits and other liabilities	104		105		97		95
Total financial liabilities	$	6,713	$	7,429	$	6,854	$	7,419

^(a)    Excludes capital leases, debt issuance costs and interest rate swap adjustments.

Fair values of our financial assets included in other noncurrent assets, and of our financial liabilities included in other current liabilities and deferred credits and other liabilities, are measured using an income approach and most inputs are internally generated, which results in a Level 3 classification. Estimated future cash flows are discounted using a rate deemed appropriate to obtain the fair value.

Most of our long-term debt instruments are publicly-traded. A market approach, based upon quotes from major financial institutions, which are Level 2 inputs, is used to measure the fair value of such debt. The fair value of our debt that is not publicly-traded is measured using an income approach. The future debt service payments are discounted using the rate at which we currently expect to borrow. All inputs to this calculation are Level 3.