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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Values – Recurring

The following tables present assets and liabilities accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 by hierarchy level.


	September 30, 2023
(In millions)	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity(a)	$	—	$	3	$	—	$	3

Interest rate - designated as cash flow hedges	—		25		—		25
Derivative instruments, assets	$	—	$	28	$	—	$	28


	December 31, 2022
(In millions)	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity(a)	$	—	$	10	$	—	$	10
Interest rate - designated as cash flow hedges	—		24		—		24
Derivative instruments, assets	$	—	$	34	$	—	$	34

(a)Commodity derivative instruments are recorded on a net basis in our consolidated balance sheet. See Note 12.

As of September 30, 2023, our commodity derivatives include three-way collars. These instruments are measured at fair value using either a Black-Scholes or a modified Black-Scholes Model. For three-way collars, inputs to the models include commodity prices and implied volatility and are categorized as Level 2 because predominantly all assumptions and inputs are observable in active markets throughout the term of the instruments.

The forward starting 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 details on the forward starting interest rate swaps.

Fair Values – Financial Instruments

Our current assets and liabilities include financial instruments, the most significant of which are receivables, commercial paper borrowings, the current portion of our long-term debt and payables. We believe the carrying values of our receivables, commercial paper borrowings 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, commercial paper borrowings, payables and derivative financial instruments, and their reported fair values by individual balance sheet line item at September 30, 2023 and December 31, 2022.


	September 30, 2023				December 31, 2022
(In millions)	Fair Value		Carrying Amount		Fair Value		Carrying Amount
Financial assets

Other noncurrent assets	$	9	$	27	$	10	$	28
Total financial assets	$	9	$	27	$	10	$	28
Financial liabilities
Other current liabilities	$	132	$	198	$	140	$	204
Long-term debt, including current portion(a)	5,126		5,297		5,806		5,948
Deferred credits and other liabilities	45		45		73		73
Total financial liabilities	$	5,303	$	5,540	$	6,019	$	6,225

(a)Excludes debt issuance costs.

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.

Our fixed rate debt instruments are publicly traded. The fair value of our fixed rate debt is measured using a market approach, based upon quotes from major financial institutions, which are Level 2 inputs. Our floating rate debt is non-public and consists of borrowings under our Term Loan Facility and Revolving Credit Facility. The fair value of our floating rate debt approximates the carrying value and is estimated based on observable market-based inputs, which results in a Level 2 classification.

- 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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