Hedging Activities and Fair Value Measurements

9 Months Ended

Sep. 30, 2025

Derivative Instruments and Hedges, Assets [Abstract]

Hedging Activities and Fair Value Measurements

Note 14. Hedging Activities and Fair Value Measurements

In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices. In order to manage risks associated with assets, liabilities and certain anticipated future transactions, we use derivative instruments such as futures, forward contracts, swaps, options and other instruments with similar characteristics. Substantially all of our derivatives are used for non-trading activities.

Interest Rate Hedging Activities

We may utilize interest rate swaps, forward-starting swaps, options to enter into forward-starting swaps (“swaptions”), treasury locks and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements. This strategy may be used in controlling our overall cost of capital associated with such borrowings.

Treasury Locks

A treasury lock is an agreement that fixes the price (or yield) of a specified U.S. treasury security for an established period of time. We use treasury lock agreements to hedge our exposure to interest rate changes and to reduce the volatility of financing costs on an expected future debt issuance. Each of our treasury lock transactions was designated as a cash flow hedge of interest payments associated with an anticipated debt issuance.

During 2025, we entered into four treasury lock transactions to fix the seven-year treasury rate at a weighted-average rate of approximately 3.98% on an aggregate notional amount of $750 million. The purpose of these transactions was to hedge the underlying interest rate risk associated with debt issuances that occurred in June 2025. Upon settlement of these treasury lock transactions in May 2025, we received total cash proceeds of $14 million. As cash flow hedges, gains on these derivative instruments are reflected as a component of accumulated other comprehensive income and will be amortized to earnings as a component of interest expense over seven years.

Commodity Hedging Activities

The prices of natural gas, NGLs, crude oil, petrochemicals and refined products, and power are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control. In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps and basis swaps.

At September 30, 2025, our predominant commodity hedging strategies consisted of (i) hedging anticipated future purchases and sales of commodity products associated with transportation, storage and blending activities, (ii) hedging natural gas processing margins, (iii) hedging the fair value of commodity products held in inventory and (iv) hedging anticipated future purchases of power for certain operations in Southeast Texas.

•The objective of our anticipated future commodity purchases and sales hedging program is to hedge the margins of certain transportation, storage, blending and operational activities by locking in purchase and sale prices through the use of derivative instruments and related contracts.

•The objective of our natural gas processing hedging program is to hedge an amount of earnings associated with these activities. We achieve this objective by executing fixed-price sales for a portion of our expected equity production using derivative instruments and related contracts. For certain natural gas processing contracts, the hedging of expected equity NGL production also involves the purchase of natural gas for plant thermal reduction, which is hedged using derivative instruments and related contracts.

•The objective of our inventory hedging program is to hedge the fair value of commodity products currently held in inventory by locking in the sales price of the inventory through the use of derivative instruments and related contracts.

•The objective of our commercial energy hedging program is to hedge anticipated future purchases of power for certain operations in Southeast Texas by locking in purchase prices through the use of derivative instruments and related contracts.

The following table summarizes our portfolio of commodity derivative instruments outstanding at September 30, 2025 (volume measures as noted):

	Volume (1)		Accounting Treatment
Derivative Purpose	Current (2)	Long-Term (2)
Derivatives designated as hedging instruments:
Natural gas processing:
Forecasted sales of natural gas (Bcf)	30.0	22.7	Cash flow hedge
Forecasted sales of NGLs (MMBbls)	2.7	0.2	Cash flow hedge
Octane enhancement:
Forecasted sales of octane enhancement products (MMBbls)	1.9	0.4	Cash flow hedge
Natural gas marketing:
Natural gas storage inventory management activities (Bcf)	1.1	n/a	Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)	217.0	23.9	Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)	217.9	29.2	Cash flow hedge
Refined products marketing:
Forecasted purchases of refined products (MMBbls)	0.6	n/a	Cash flow hedge
Forecasted sales of refined products (MMBbls)	1.8	0.1	Cash flow hedge
Crude oil marketing:
Forecasted purchases of crude oil (MMBbls)	15.3	8.1	Cash flow hedge
Forecasted sales of crude oil (MMBbls)	25.2	16.0	Cash flow hedge
Petrochemical marketing:
Forecasted sales of petrochemical products (MMBbls)	0.1	n/a	Cash flow hedge
Commercial energy:
Forecasted purchases of power related to asset operations (terawatt hours (“TWh”))	1.2	0.5	Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (Bcf) (3)	48.3	n/a	Mark-to-market
NGL risk management activities (MMBbls) (3)	36.4	6.0	Mark-to-market
Refined products risk management activities (MMBbls) (3)	7.2	n/a	Mark-to-market
Crude oil risk management activities (MMBbls) (3)	50.3	n/a	Mark-to-market
Petrochemical risk management activities (MMBbls) (3)	0.3	n/a	Mark-to-market

(1)Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.

(2)The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2028, December 2025 and December 2027, respectively.

(3)Reflects the use of derivative instruments to manage risks associated with our transportation, processing and storage assets.

The carrying amount of our inventories subject to fair value hedges was $4 million and $11 million at September 30, 2025 and December 31, 2024, respectively.

Tabular Presentation of Fair Value Amounts, and Gains and Losses on

Derivative Instruments and Related Hedged Items

The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:

	Asset Derivatives						Liability Derivatives
	September 30, 2025			December 31, 2024			September 30, 2025			December 31, 2024
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Commodity derivatives	Current assets	$	258	Current assets	$	210	Current liabilities	$	202	Current liabilities	$	178
Commodity derivatives	Other assets	23		Other assets	22		Other liabilities	19		Other liabilities	4
Total commodity derivatives		281			232			221			182
Total derivatives designated as hedging instruments		$	281		$	232		$	221		$	182
Derivatives not designated as hedging instruments
Commodity derivatives	Current assets	$	194	Current assets	$	324	Current liabilities	$	196	Current liabilities	$	293
Commodity derivatives	Other assets	1		Other assets	19		Other liabilities	1		Other liabilities	20
Total commodity derivatives		195			343			197			313
Total derivatives not designated as hedging instruments		$	195		$	343		$	197		$	313

Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements. The following tables present our derivative instruments subject to such arrangements at the dates indicated:

	Offsetting of Financial Assets and Derivative Assets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet		Amounts of Assets Presented in the Balance Sheet		Gross Amounts Not Offset  in the Balance Sheet						Amounts That Would Have Been Presented On Net Basis
							Financial Instruments		Cash Collateral Received		Cash Collateral Paid
	(i)		(ii)		(iii) = (i) – (ii)		(iv)						(v) = (iii) + (iv)
As of September 30, 2025:
Commodity derivatives	$	476	$	–	$	476	$	(417)	$	(59)	$	–	$	–
As of December 31, 2024:
Commodity derivatives	$	575	$	–	$	575	$	(495)	$	(79)	$	–	$	1

	Offsetting of Financial Liabilities and Derivative Liabilities
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet		Amounts of Liabilities Presented in the Balance Sheet		Gross Amounts Not Offset  in the Balance Sheet						Amounts That Would Have Been Presented On Net Basis
							Financial Instruments		Cash Collateral Received		Cash Collateral Paid
	(i)		(ii)		(iii) = (i) – (ii)		(iv)						(v) = (iii) + (iv)
As of September 30, 2025:
Commodity derivatives	$	418	$	–	$	418	$	(417)	$	–	$	–	$	1
As of December 31, 2024:
Commodity derivatives	$	495	$	–	$	495	$	(495)	$	–	$	–	$	–

Derivative assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets are presented on a gross-basis and determined at the individual transaction level. The tabular presentation above provides a means for comparing the gross amount of derivative assets and liabilities, excluding associated accounts payable and receivable, to the net amount that would likely be receivable or payable under a default scenario based on the existence of rights of offset in the respective derivative agreements. Any cash collateral paid or received is reflected in these tables, but only to the extent that it represents variation margins. Any amounts associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from these tables.

The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives in Fair Value Hedging Relationships	Location	Gain (Loss) Recognized in Income on Derivative
		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2025		2024		2025		2024
Commodity derivatives	Revenue	$	–	$	1	$	4	$	2
Total		$	–	$	1	$	4	$	2

Derivatives in Fair Value Hedging Relationships	Location	Gain (Loss) Recognized in Income on Hedged Item
		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2025		2024		2025		2024
Commodity derivatives	Revenue	$	(2)	$	–	$	(4)	$	5
Total		$	(2)	$	–	$	(4)	$	5

The gain (loss) corresponding to the hedge ineffectiveness on the fair value hedges was negligible for all periods presented. The remaining gain (loss) for each period presented is primarily attributable to prompt-to-forward month price differentials that were excluded from the assessment of hedge effectiveness.

The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income for the periods indicated:

Derivatives in Cash Flow Hedging Relationships	Change in Value Recognized in Other Comprehensive Income (Loss) on Derivative
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2025		2024		2025		2024
Interest rate derivatives	$	–	$	(4)	$	14	$	(2)
Commodity derivatives – Revenue (1)	77		261		114		186
Commodity derivatives – Operating costs and expenses (1)	(12)		(51)		(27)		(59)
Total	$	65	$	206	$	101	$	125

(1)The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations when the forecasted transactions affect earnings.

Derivatives in Cash Flow Hedging Relationships	Location	Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Income
		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2025		2024		2025		2024
Interest rate derivatives	Interest expense	$	2	$	2	$	5	$	5
Commodity derivatives	Revenue	47		96		100		176
Commodity derivatives	Operating costs and expenses	(12)		(19)		(32)		(52)
Total		$	37	$	79	$	73	$	129

Over the next twelve months, we expect to reclassify $8 million of gains attributable to interest rate derivative instruments from accumulated other comprehensive income to earnings as a decrease in interest expense. Likewise, we expect to reclassify $102 million of net gains attributable to commodity derivative instruments from accumulated other comprehensive income to earnings, with $111 million as an increase in revenue and $9 million as an increase in operating costs and expenses.

The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives Not Designated as Hedging Instruments	Location	Gain (Loss) Recognized in Income on Derivative
		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2025		2024		2025		2024
Commodity derivatives	Revenue	$	(17)	$	(13)	$	30	$	(5)
Commodity derivatives	Operating costs and expenses	(5)		(4)		(4)		(5)
Total		$	(22)	$	(17)	$	26	$	(10)

The $26 million net gain recognized for the nine months ended September 30, 2025 (as noted in the preceding table) from derivatives not designated as hedging instruments consists of $46 million of net realized gains and $20 million of net unrealized mark-to-market losses attributable to commodity derivatives.

Fair Value Measurements

The following tables set forth, by level within the Level 1, 2 and 3 fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated. These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value. Our assessment of the relative significance of such inputs requires judgment.

The values for commodity derivatives are presented before and after the application of CME Rule 814, which deems that financial instruments cleared by the CME are settled daily in connection with variation margin payments. As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.

	At September 30, 2025 Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets:
Commodity derivatives:
Value before application of CME Rule 814	$	276	$	509	$	–	$	785
Impact of CME Rule 814	(98)		(211)		–		(309)
Total commodity derivatives	178		298		–		476
Total	$	178	$	298	$	–	$	476
Financial liabilities:
Commodity derivatives:
Value before application of CME Rule 814	$	194	$	494	$	1	$	689
Impact of CME Rule 814	(28)		(242)		(1)		(271)
Total commodity derivatives	166		252		–		418
Total	$	166	$	252	$	–	$	418

	At December 31, 2024 Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets:
Commodity derivatives:
Value before application of CME Rule 814	$	355	$	443	$	–	$	798
Impact of CME Rule 814	(56)		(167)		–		(223)
Total commodity derivatives	299		276		–		575
Total	$	299	$	276	$	–	$	575
Financial liabilities:
Commodity derivatives:
Value before application of CME Rule 814	$	291	$	404	$	21	$	716
Impact of CME Rule 814	(43)		(157)		(21)		(221)
Total commodity derivatives	248		247		–		495
Total	$	248	$	247	$	–	$	495

In the aggregate, the fair value of our commodity hedging portfolios at September 30, 2025 was a net derivative asset of $96 million prior to the impact of CME Rule 814.

Financial assets and liabilities recorded on the balance sheet at September 30, 2025 using significant unobservable inputs (Level 3) are not material to the Unaudited Condensed Consolidated Financial Statements.

Other Fair Value Information

The carrying amounts of cash and cash equivalents (including restricted cash balances), accounts receivable, commercial paper notes and accounts payable approximate their fair values based on their short-term nature. The estimated total fair value of our fixed-rate debt obligations was $30.6 billion and $28.9 billion at September 30, 2025 and December 31, 2024, respectively. The aggregate carrying value of these debt obligations was $32.5 billion and $31.6 billion at September 30, 2025 and December 31, 2024, respectively. These values are primarily based on quoted market prices for such debt or debt of similar terms and maturities (Level 2) and our credit standing. Changes in market rates of interest affect the fair value of our fixed-rate debt. The carrying values of our variable-rate long-term debt obligations approximate their fair values since the associated interest rates are market-based. We do not have any long-term investments in debt or equity securities recorded at fair value.