Derivatives

For further information regarding the fair value measurement of derivative instruments, see Note 14. All of our commodity derivatives and historical interest rate derivatives are subject to enforceable master netting arrangements or similar agreements under which we may report net amounts. The following tables present the gross fair values of derivative instruments and the reported net amounts where they appear on the consolidated balance sheets.



	September 30, 2017
(In millions)	Asset		Liability		Net Asset (Liability)			Balance Sheet Location
Not Designated as Hedges
Commodity	$	10	$	1	$	9		Other current assets
Commodity	—		4		(4		)	Deferred credits and other liabilities
Total Not Designated as Hedges	$	10	$	5	$	5
Total	$	10	$	5	$	5



	December 31, 2016
(In millions)	Asset		Liability		Net Asset (Liability)			Balance Sheet Location
Fair Value Hedges
Interest rate	$	3	$	—	$	3		Other current assets
Interest rate	1		—		1			Other noncurrent assets
Cash Flow Hedges
Interest rate	$	64	$	—	$	64		Other noncurrent assets
Total Designated Hedges	$	68	$	—	$	68

Not Designated as Hedges
Commodity	$	—	$	60	$	(60	)	Other current liabilities
Total Not Designated as Hedges	$	—	$	60	$	(60	)
Total	$	68	$	60	$	8

Derivatives Designated as Fair Value Hedges

During the third quarter of 2017, we terminated all of our interest rate swaps designated as fair value hedges. The pretax effects of derivative instruments designated as hedges of fair value in our consolidated statements of income has a gross impact that is not material to net interest and other in all periods presented. Additionally, there is no ineffectiveness related to fair value hedges in all periods presented.

The following table presents, by maturity date, information about our interest rate swap agreements, including the weighted average, London Interbank Offer Rate (“LIBOR”) based, floating rate.



	September 30, 2017				December 31, 2016
	Aggregate Notional Amount		Weighted Average, LIBOR		Aggregate Notional Amount		Weighted Average, LIBOR
Maturity Dates	(in millions)		Floating Rate		(in millions)		Floating Rate
October 1, 2017	$	—	—	%	$	600	5.10	%
March 15, 2018	$	—	—	%	$	300	5.04	%

Derivatives Not Designated as Hedges

Interest Rate Swaps

During the third quarter of 2016, we entered into forward starting interest rate swaps to hedge the variations in cash flows related to fluctuations in long term interest rates from debt that were probable to be refinanced by us in 2018, specifically interest rate risk associated with future changes in the benchmark treasury rate. We designated these derivative instruments as cash flow hedges. During the second quarter of 2017, we de-designated the forward starting interest rate swaps previously designated as cash flow hedges. In the third quarter of 2017, the forecasted transaction consummated and we issued $1 billion in senior unsecured notes. See Note 17 for further detail. As a result, we terminated our forward starting interest rate swaps receiving proceeds of $54 million. We recognized a gain of $47 million, of which $46 million is related to deferred gains reclassified from accumulated other comprehensive income, in net interest and other in the third quarter of 2017.

The following table presents, by maturity date, information about our terminated forward starting interest rate swap agreements, including the rate.



	September 30, 2017				December 31, 2016
	Aggregate Notional Amount		Weighted Average, LIBOR		Aggregate Notional Amount		Weighted Average, LIBOR
Maturity Dates	(in millions)		Fixed Rate		(in millions)		Fixed Rate
March 15, 2018	$	—	—	%	$	750	1.57	%

The following table sets forth the net impact of the terminated forward starting interest rate swap derivatives de-designated as cash flow hedges on other comprehensive income (loss).



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2017			2016		2017			2016
Interest Rate Swaps
Beginning balance	$	46		$	—	$	60		$	—
Change in fair value recognized in other comprehensive income	—			2		(13		)	2
Reclassification from other comprehensive income	(46		)	—		(47		)	—
Ending balance	$	—		$	2	$	—		$	2

Commodity Derivatives

We have entered into multiple crude oil and natural gas derivatives indexed to NYMEX WTI and Henry Hub related to a portion of our forecasted United States E&P sales through December 2018. These commodity derivatives consist of three-way collars, swaps, swaptions, basis swaps, and call options. Three-way collars consist of a sold call (ceiling), a purchased put (floor) and a sold put. The ceiling price is the maximum we will receive for the contract volumes, the floor is the minimum price we will receive, unless the market price falls below the sold put strike price. In this case, we receive the NYMEX WTI/Henry Hub price plus the difference between the floor and the sold put price. These commodity derivatives were not designated as hedges. The following table sets forth outstanding derivative contracts as of September 30, 2017 and the weighted average prices for those contracts:



Crude Oil
	2017	2018
	Fourth Quarter	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Three-Way Collars ^(a)
Volume (Bbls/day)	50,000	75,000	75,000	62,000	62,000
Weighted average price per Bbl:
Ceiling	$60.37	$56.24	$56.24	$56.08	$56.08
Floor	$54.80	$51.33	$51.33	$50.50	$50.50
Sold put	$47.80	$44.73	$44.73	$43.61	$43.61
Swaps ^(b)(c)
Volume (Bbls/day)	20,000	—	—	—	—
Weighted average price per Bbl	$51.37	—	—	—	—
Sold call options ^(d)
Volume (Bbls/day)	35,000	—	—	—	—
Weighted average price per Bbl	$61.91	—	—	—	—
Basis Swaps ^(e)
Volume (Bbls/day)	—	5,000	5,000	10,000	10,000
Weighted average price per Bbl	—	$(0.60)	$(0.60)	$(0.67)	$(0.67)


^(a)	Between September 30, 2017 and October 30, 2017, we entered into 10,000 Bbls/day of three-way collars for July - December 2018 with an average ceiling price of $58.07, a floor price of $53.70, and a sold put price of $47.00.


^(b)	The counterparties have the option to execute fixed-price swaps (swaptions) at a weighted average price of $52.67 per Bbl indexed to NYMEX WTI, which is exercisable on December 29, 2017. If the counterparties exercise, the term of the fixed-price swaps would be from January - June 2018 and, if all such options are exercised, for 10,000 Bbls/day.


^(c)	Between September 30, 2017 and October 30, 2017, we entered into 40,000 Bbls/day of fixed-price swaps for November - December 2017 with a weighted average price of $54.11.


^(d)	Call options settle monthly.


^(e)	The basis differential price is between WTI Midland and WTI Cushing.



Natural Gas
	2017	2018
	Fourth Quarter	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Three-Way Collars
Volume (MMBtu/day)	120,000	200,000	160,000	160,000	160,000
Weighted average price per MMBtu:
Ceiling	$3.71	$3.79	$3.61	$3.61	$3.61
Floor	$3.14	$3.08	$3.00	$3.00	$3.00
Sold put	$2.60	$2.55	$2.50	$2.50	$2.50
Swaps
Volume (MMBtu/day)	20,000	—	—	—	—
Weighted average price per MMBtu	$2.93	—	—	—	—

The mark-to-market impact and settlement of these commodity derivative instruments appears in sales and other operating revenues in our consolidated statements of income for the three and nine month periods ended September 30, 2017 and 2016, respectively. The three and nine month periods ended September 30, 2017 impact was a net loss of $22 million and a net gain $115 million compared to a net gain of $42 million and a net loss of $48 million for the same respective period in 2016. Net settlements of commodity derivative instruments for the three and nine month periods ended September 30, 2017 were gains of $34 million and $51 million compared to gains of $17 million and $41 million for the respective period in 2016.