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Financial Instruments and Derivative Contracts
0214 - Disclosure - Financial Instruments and Derivative Contracts
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Financial Instruments and Derivative Contracts.
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Financial Instruments and Derivative Contracts.
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This item represents the complete disclosure regarding the fair value of financial instruments, including financial assets...
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 14 - cop:FinancialInstrumentsAndDerivativeContractsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 20pt"><b>Note 14—Financial Instruments and Derivative Contracts</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Derivative Instruments</b><br />
We use financial and commodity-based derivative contracts to manage exposures to fluctuations in
foreign currency exchange rates, commodity prices, and interest rates, or to capture market
opportunities. Since we are not currently using hedge accounting, all gains and losses, realized
or unrealized, from derivative contracts have been recognized in the consolidated income statement.
Gains and losses from derivative contracts held for trading not directly related to our physical
business, whether realized or unrealized, have been reported net in other income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">Purchase and sales contracts for commodities that are readily convertible to cash (e.g., crude oil,
natural gas and gasoline) are recorded on the balance sheet as derivatives unless the contracts are
for quantities we expect to use or sell over a reasonable period in the normal course of business
(i.e., contracts eligible for the normal purchases and normal sales exception). We record most of
our contracts to buy or sell natural gas and the majority of our contracts to sell power as
derivatives, but we do apply the normal purchases and normal sales exception to certain long-term
contracts to sell our natural gas production. We generally apply this normal purchases and normal
sales exception to eligible crude oil and refined product commodity purchase and sales contracts;
however, we may elect not to apply this exception (e.g., when another derivative instrument will be
used to mitigate the risk of the purchase or sale contract but hedge accounting will not be
applied, in which case both the purchase or sales contract and the derivative contract mitigating
the resulting risk will be recorded on the balance sheet at fair value).
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">We value our exchange-cleared derivatives using closing prices provided by the exchange as of the
balance sheet date, and these are classified as Level 1 in the fair value hierarchy.
Over-the-counter (OTC) financial swaps and physical commodity forward purchase and sale contracts
are generally valued using quotations provided by brokers and price index developers such as Platts
and Oil Price Information Service. These quotes are corroborated with market data and are
classified as Level 2. In certain less liquid markets or for longer-term contracts, forward prices
are not as readily available. In these circumstances, OTC swaps and physical commodity purchase
and sale contracts are valued using internally developed methodologies that consider historical
relationships among various commodities that result in management’s best estimate of fair value.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 10pt">These contracts are classified as Level 3. A contract that is initially classified as Level 3 due
to absence or insufficient corroboration of broker quotes over a material portion of the contract
will transfer to Level 2 when the portion of the trade having no quotes or insufficient
corroboration becomes an insignificant portion of the contract. A contract would also transfer to
Level 2 if we began using a corroborated broker quote that has become available. Conversely, if a
corroborated broker quote ceases to be available or used by us, the contract would transfer from
Level 2 to Level 3. There were no transfers in or out of Level 1.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">Exchange-cleared financial options are valued using exchange closing prices and are classified as
Level 1. Financial OTC and physical commodity options are valued using industry-standard models
that consider various assumptions, including quoted forward prices for commodities, time value,
volatility factors, and contractual prices for the underlying instruments, as well as other
relevant economic measures. The degree to which these inputs are observable in the forward markets
determines whether the options are classified as Level 2 or 3.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">We use a mid-market pricing convention (the mid-point between bid and ask prices). When
appropriate, valuations are adjusted to reflect credit considerations, generally based on available
market evidence.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">The fair value hierarchy for our derivative assets and liabilities accounted for at fair value on a
recurring basis was:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="30" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>March 31, 2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000">December 31, 2009</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Total</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="14" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td colspan="14" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commodity derivatives
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>2,596</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,744</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>75</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,415</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,710</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,659</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">61</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,430</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap">
<div style="margin-left:15px; text-indent:-15px">Foreign exchange derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>30</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>30</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,596</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,774</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>75</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,445</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,710</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,704</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">61</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,475</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commodity derivatives
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(2,903</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(1,541</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(15</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(4,459</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,797</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,496</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,317</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange
derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(36</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(36</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(47</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(47</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(2,903</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(1,577</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(15</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(4,495</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,797</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,543</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,364</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net assets (liabilities)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(307</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>197</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>60</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(50</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(87</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">111</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">The derivative values above are based on analysis of each contract as the fundamental unit of
account; therefore, derivative assets and liabilities with the same counterparty are not reflected
net where the legal right of offset exists. Gains or losses from contracts in one level may be
offset by gains or losses on contracts in another level or by changes in values of physical
contracts or positions that are not reflected in the table above.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 10pt">The fair value of net commodity derivatives classified as Level 3 in the fair value hierarchy
changed as follows during the first quarters of 2010 and 2009:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Fair Value Measurements Using Significant Unobservable Inputs (Level 3)</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Beginning balance
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>37</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total gains (losses), realized and unrealized
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Included in earnings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>32</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Included in other comprehensive income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Purchases, issuances and settlements
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(3</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Transfers into Level 3
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">57</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Transfers out of Level 3
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(6</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(17</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Ending balance
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>60</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">96</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">The amounts of Level 3 gains (losses) included in earnings were:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22">Three Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="22" style="border-bottom: 1px solid #000000">March 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Purchased</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Purchased</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Other</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Crude Oil,</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Other</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Crude Oil,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Operating</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Natural Gas</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Operating</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Natural Gas</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Revenues</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">and Products</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Total</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Revenues</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">and Products</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">Total</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="10" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td colspan="10" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total gains
(losses) included
in earnings
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>44</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(12</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>32</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">26</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in
unrealized gains
(losses) relating
to assets held at
March 31
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>49</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>49</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in
unrealized gains
(losses) relating
to liabilities held
at
March 31
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(8</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(11</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(19</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt"><b>Commodity Derivative Contracts</b>—We operate in the worldwide crude oil, refined product, natural gas,
natural gas liquids and electric power markets and are exposed to fluctuations in the prices for
these commodities. These fluctuations can affect our revenues, as well as the cost of operating,
investing and financing activities. Generally, our policy is to remain exposed to the market
prices of commodities; however, we use futures, forwards, swaps and options in various markets to
balance physical systems, meet customer needs, manage price exposures on specific transactions, and
do a limited, immaterial amount of trading not directly related to our physical business. These
activities may move our risk profile away from market average prices.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 10pt">The fair value of commodity derivative assets and liabilities and the line items where they appear
on our consolidated balance sheet were:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>March 31</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>3,974</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,084</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>449</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">359</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other accruals
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>4,032</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,006</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities and deferred credits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>435</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">324</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 0pt"><i>Hedge accounting has not been used for any items in the table. The
amounts shown are presented gross (i.e., without netting assets and
liabilities with the same counterparty where the right of offset and
intent to net exist).</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">The gains (losses) from commodity derivatives incurred, and the line items where they appear
on our consolidated income statement were:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Sales and other operating revenues
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>482</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">573</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(10</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Purchased crude oil, natural gas and products
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(507</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(512</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 0pt"><i>Hedge accounting has not been used for any items in the table.</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">The table below summarizes our material net exposures resulting from outstanding commodity
derivative contracts. These financial and physical derivative contracts are primarily used to
manage price exposure on our underlying operations. The underlying exposures may be from
non-derivative positions such as inventory volumes or firm natural gas transport contracts.
Financial derivative contracts may also offset physical derivative contracts, such as forward sales
contracts.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Open Position</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Long/(Short)</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>March 31</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Commodity</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Crude oil, refined products and natural gas liquids (millions of barrels)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(36</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Natural gas and power (billions of cubic feet)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Fixed price
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(96</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(60</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basis
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>163</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">154</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Currency Exchange Rate Derivative Contracts</b>—We have foreign currency exchange rate risk resulting
from international operations. We do not comprehensively hedge the exposure to movements in
currency exchange rates, although we may choose to selectively hedge certain foreign currency
exchange rate exposures, such as firm commitments for capital projects or local currency tax
payments, dividends, and cash returns from net investments in foreign affiliates to be remitted
within the coming year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">The fair value of foreign currency derivative assets and liabilities, and the line items where they
appear on our consolidated balance sheet were:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>March 31</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Prepaid expenses and other current assets
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>29</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other accruals
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>31</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities and deferred credits
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 0pt"><i>Hedge accounting has not been used for any items in the table. The amounts shown are presented gross.</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">Gains and losses from foreign currency derivatives, and the line item where they appear on
our consolidated income statement were:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency transaction (gains) losses
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>46</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 0pt"><i>Hedge accounting has not been used for any items in the table.</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">We had the following net position of outstanding foreign currency swap contracts, entered
into primarily to hedge price exposure in our international operations.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%">    </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">In Millions</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Notional Currency*</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>March 31</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000"> </td>
<td nowrap="nowrap" align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Foreign Currency Swaps</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Sell U.S. dollar, buy other currencies**
</div></td>
<td> </td>
<td align="left">USD        </td>
<td align="right"><b>2,354</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,211</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Buy British pound, sell euro
</div></td>
<td> </td>
<td align="left">EUR</td>
<td align="right"><b>253</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 0pt"> <i>*Denominated in U.S. dollars (USD) and euros (EUR).<br />
**Primarily euro, Canadian dollar, Norwegian krone and British pound.</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt"><b>Credit Risk</b><br />
Financial instruments potentially exposed to concentrations of credit risk consist primarily of
cash equivalents, over-the-counter derivative contracts and trade receivables. Our cash
equivalents are placed in high-quality commercial paper, money market funds and time deposits with
major international banks and financial institutions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">The credit risk from our over-the-counter derivative contracts, such as forwards and swaps, derives
from the counterparty to the transaction, typically a major bank or financial institution.
Individual counterparty
exposure is managed within predetermined credit limits and includes the use of cash-call margins
when appropriate, thereby reducing the risk of significant nonperformance. We also use futures
contracts, but futures have a negligible credit risk because they are traded on the New York
Mercantile Exchange or the ICE Futures.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">Our trade receivables result primarily from our petroleum operations and reflect a broad national
and international customer base, which limits our exposure to concentrations of credit risk. The
majority of these receivables have payment terms of 30 days or less, and we continually monitor
this exposure and the creditworthiness of the counterparties. We do not generally require
collateral to limit the exposure to loss; however, we will sometimes use letters of credit,
prepayments, and master netting arrangements to mitigate credit risk with counterparties that both
buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be
offset against amounts due us.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">Certain of our derivative instruments contain provisions that require us to post collateral if the
derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and
other contracts with variable threshold amounts that are contingent on our credit rating. The
variable threshold amounts typically decline for lower credit ratings, while both the variable and
fixed threshold amounts typically revert to zero if we fall below investment grade. Cash is the
primary collateral in all contracts; however, many also permit us to post letters of credit as
collateral.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt">The aggregate fair value of all derivative instruments with such credit-risk-related contingent
features that were in a liability position on March 31, 2010, and December 31, 2009, was $444
million and $381 million, respectively, for which no collateral was posted in the normal course of
business in 2010 and 2009. If our credit rating were lowered one level from its “A” rating (per
Standard and Poor’s) on March 31, 2010, we would be required to post no additional collateral to
our counterparties. If we were downgraded below investment grade, we would be required to post
$444 million of additional collateral, either with cash or letters of credit.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Fair Values of Financial Instruments</b><br />
We used the following methods and assumptions to estimate the fair value of financial instruments:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Cash and cash equivalents: The carrying amount reported on the balance sheet
approximates fair value.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Accounts and notes receivable: The carrying amount reported on the balance sheet
approximates fair value.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Investment in LUKOIL shares: See Note 6—Investments, Loans and Long-Term Receivables,
for a discussion of the carrying value and fair value of our investment in LUKOIL shares.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Debt: The carrying amount of our floating-rate debt approximates fair value. The fair
value of the fixed-rate debt is estimated based on quoted market prices.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Fixed-rate 5.3 percent joint venture acquisition obligation: Fair value is estimated
based on the net present value of the future cash flows, discounted at a March 31 effective
yield rate of 2.65 percent, based on yields of U.S. Treasury securities of similar average
duration adjusted for our average credit risk spread and the amortizing nature of the
obligation principal. See Note 10—Joint Venture Acquisition Obligation, for additional
information.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Swaps: Fair value is estimated based on forward market prices and approximates the exit
price at period end. When forward market prices are not available, they are estimated
using the forward prices of a similar commodity with adjustments for differences in quality
or location.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Futures: Fair values are based on quoted market prices obtained from the New York
Mercantile Exchange, the ICE Futures, or other traded exchanges.</td>
</tr>
<tr>
<td style="font-size: 0pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Forward-exchange contracts: Fair value is estimated by comparing the contract rate to
the forward rate in effect on March 31, 2010, and approximates the exit price at that date.</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 10pt">Certain of our commodity derivative and financial instruments were:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000">Millions of Dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Carrying Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>March 31</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>March 31</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 1px">
<td> </td>
<td> </td>
<td colspan="6" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td colspan="6" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Financial assets</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency derivatives
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>30</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>30</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commodity derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,120</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,120</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Financial liabilities</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total debt, excluding capital leases
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28,958</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,622</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>30,951</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,565</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Joint venture acquisition obligation
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>5,507</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,669</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,074</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,276</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign currency derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>36</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>36</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commodity derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>842</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">632</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>842</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">632</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="16" align="left" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 20pt">The amounts shown for derivatives in the preceding table are presented net (i.e., assets and
liabilities with the same counterparty are netted where the right of offset and intent to net
exist). In addition, the March 31, 2010, commodity derivative assets and liabilities appear net of
$82 million of obligations to return cash collateral and $404 million of rights to reclaim cash
collateral, respectively. The December 31, 2009, commodity derivative assets and liabilities
appear net of $70 million of obligations to return cash collateral and $148 million of rights to
reclaim cash collateral, respectively. No collateral was deposited or held for the foreign
currency derivatives.
</div>
</div>
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