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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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This item represents the complete disclosure regarding the fair value of financial instruments, including financial assets...
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<!-- Begin Block Tagged Note 14 - cop:FinancialInstrumentsAndDerivativeContractsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10.5pt; margin-top: 21pt"><b>Note 14—Financial Instruments and Derivative Contracts</b>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt"><b>Derivative Instruments</b>
</div>
<div align="left" style="font-size: 10.5pt">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 cash flow 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: 10.5pt; margin-top: 10.5pt">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 sales 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: 10.5pt; margin-top: 10.5pt">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 sales 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 sales contracts are valued using internally developed methodologies that consider historical
relationships among various commodities that result in management’s best estimate of fair value.
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: 10.5pt; margin-top: 10.5pt">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: 10.5pt; margin-top: 10.5pt">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: 10.5pt; margin-top: 10.5pt">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: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="32%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </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="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>September 30, 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: 10.5pt" 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>
</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>2,766</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,109</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>60</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,935</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>
<div style="margin-left:15px; text-indent:-15px">Interest rate derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>28</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>28</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</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">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>45</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>45</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" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,766</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,182</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>60</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,008</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>
</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">
<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" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commodity derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,989</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>917</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>18</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,924</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,797</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,496</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,317</td>
<td> </td>
</tr>
<tr valign="bottom">
<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> </td>
<td align="right"><b>12</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>-</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,989</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>929</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>18</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,936</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,797</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,543</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,364</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="32" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom">
<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>(223</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>253</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>42</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>72</b></td>
<td> </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>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 21pt">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>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">The fair value of net commodity derivatives classified as Level 3 in the fair value hierarchy
changed as follows:
</div>
<div align="center">
<table style="font-size: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="45%"> </td>
<td width="10%"> </td>
<td width="1%"> </td>
<td width="8%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="8%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30 </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:18px; text-indent:-18px"><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>
<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>41</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74</td>
<td> </td>
<td> </td>
<td> </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:18px; text-indent:-18px">Total net gains (losses), realized and unrealized,
included in earnings
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28</b></td>
<td> </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"><b>60</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net purchases, issuances and settlements
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(20</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(20</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(42</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(47</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">4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65</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>(7</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(14</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(29</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </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>42</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>42</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 3px double #000000"> </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: 10.5pt; margin-top: 10.5pt">The amounts of Level 3 gains (losses) included in earnings were:
</div>
<div align="center">
<table style="font-size: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" 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: 10.5pt" 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: 10.5pt" 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: 10.5pt" 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: 10.5pt" 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>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Three Months Ended
September 30</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>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total gains
(losses) included
in earnings
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>41</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(13</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>28</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:20px; text-indent:-20px">Change in
unrealized gains
(losses) relating
to assets held at
September 30
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>44</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>45</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </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:20px; text-indent:-20px">Change in
unrealized gains
(losses) relating
to liabilities held
at September 30
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(10</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(12</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(22</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nine Months Ended
September 30</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total gains
(losses) included
in earnings
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>95</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(35</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right"><b>60</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </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:20px; text-indent:-20px">Change in
unrealized gains
(losses) relating
to assets held at
September 30
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>84</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>85</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:20px; text-indent:-20px">Change in
unrealized gains
(losses) relating
to liabilities held
at September 30
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(12</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(21</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(33</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21</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">(21</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="24" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 21pt"><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: 10.5pt; margin-top: 10.5pt">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: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="78%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>  September 30</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</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>
</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>
</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>3,695</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>266</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>3,710</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>240</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>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt"><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: 10.5pt; margin-top: 21pt">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: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="45%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
<tr style="font-size: 1px" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"> </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">Sales and other operating revenues
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>227</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">727</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(430</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">1,118</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other income
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(26</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">21</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>(270</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(599</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>596</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,554</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="16" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt"><i>Hedge accounting has not been used for any items in the table.</i>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 21pt">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: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="70%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Open Position</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>  September 30</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</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>
</tr>
<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>(43</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>(76</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 nowrap="nowrap" align="left"> </td>
<td align="right"><b>(110</b></td>
<td nowrap="nowrap"><b>)</b></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>
</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: 10.5pt; margin-top: 10.5pt"><b>Interest Rate Derivative Contracts—</b>During the second quarter of 2010, we executed interest rate
swaps to synthetically convert $500 million of our 4.60% fixed-rate notes due in 2015 to a London
Interbank Offered Rate (LIBOR)-based floating rate. These swaps qualify for and are designated as
fair-value hedges using the short-cut method of hedge accounting. The short-cut method permits the
assumption that changes in the value of the derivative perfectly offset changes in the value of the
debt; therefore, no gain or loss has been recognized due to hedge ineffectiveness.
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">The fair value of interest rate 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: 10.5pt; 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="7%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>  September 30</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</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>
</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>
</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>10</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</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>18</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="8" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt"><i>Hedge accounting was used for all items in the table. The amounts shown are presented gross.</i>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 21pt">The (gains) and losses from interest rate derivatives used in a fair-value hedge, losses and
(gains) from changes in the fair value of the hedged debt, and the line item where they appear on
our consolidated income statement were:
</div>
<div align="center">
<table style="font-size: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Recorded in interest and debt expense
</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:30px; text-indent:-15px">From the interest rate derivatives
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"><b>$</b></td>
<td align="right"><b>(14</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"><b>(30</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">From the hedged debt
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>12</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>26</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="17" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 21pt">The extent to which the change in value of the interest rate derivatives differs from the change in
value of the hedged debt is an adjustment to recorded interest expense on the fixed-rate debt that
effectively results in interest expense for the period being recorded at variable-rate LIBOR.
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt"><b>Foreign Exchange Derivatives</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: 10.5pt; margin-top: 10.5pt">The fair value of foreign exchange 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: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>  September 30</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</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>
</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>
</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>44</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>12</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>-</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>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt"><i>Hedge accounting has not been used for any items in the table. The amounts shown are presented gross.</i>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">Gains and losses from foreign exchange derivatives, and the line item where they appear on
our consolidated income statement were:
</div>
<div align="center">
<table style="font-size: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">September 30</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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"><!-- Blank Space -->
<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>
</tr>
<tr>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange transaction (gains) losses
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>18</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>121</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(133</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td colspan="16" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt"><i>Hedge accounting has not been used for any items in the table.</i>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">We had the following net notional position of outstanding foreign exchange derivatives:
</div>
<div align="center">
<table style="font-size: 10.5pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="67%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="10%"> </td>
<td width="1%"> </td>
<td width="2%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">In Millions </td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>September 30</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</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>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Foreign Exchange Derivatives</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>USD</td>
<td align="right"><b>1,061</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">Sell euro, buy British pound
</div></td>
<td> </td>
<td>EUR</td>
<td align="right"><b>248</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">267</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td colspan="9" align="left" style="border-top: 1px solid #000000"> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt">  <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: 10.5pt; margin-top: 21pt"><b>Credit Risk</b><br />
Financial instruments potentially exposed to concentrations of credit risk consist primarily of
cash equivalents, OTC derivative contracts and trade receivables. Our cash equivalents are placed
in high-quality commercial paper, money market funds, government debt securities and time deposits
with major international banks and financial institutions.
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">The credit risk from our OTC derivative contracts, such as forwards and swaps, derives from the
counterparty to the transaction. 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 IntercontinentalExchange
(ICE) Futures.
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">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: 10.5pt; margin-top: 10.5pt">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>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">The aggregate fair value of all derivative instruments with such credit-risk-related contingent
features that were in a liability position on September 30, 2010, and December 31, 2009, was $226
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 September 30, 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
$226 million of additional collateral, either with cash or letters of credit.
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt"><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: 10.5pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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 September 30
effective yield rate of 1.63 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Commodity 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Interest rate swap contracts: Fair value is estimated based on a pricing model and
market observable interest rate swap curves obtained from a third-party market data
provider.</td>
</tr>
</table>
</div>
<div style="margin-top: 0pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.5pt; text-align: left">
<tr valign="top" style="font-size: 10.5pt; color: #000000; background: transparent">
<td width="2%" style="background: transparent"> </td>
<td width="2%" 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 September 30, 2010, and approximates the exit price at that
date.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">Our commodity derivative and financial instruments were:
</div>
<div align="center">
<table style="font-size: 10.5pt; 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: 10.5pt" 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: 10.5pt" 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: 10.5pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2"><b>  September 30</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>  September 30</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right" colspan="2">December 31</td>
<td> </td>
</tr>
<tr style="font-size: 10.5pt" 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>
</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 exchange derivatives
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>45</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>45</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">Interest rate derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>28</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>28</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">Commodity derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>707</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>707</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">823</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in LUKOIL*
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,856</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">-</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,856</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"><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>23,561</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,622</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>27,382</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>5,178</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,669</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5,852</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 exchange derivatives
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>12</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">47</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>12</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>471</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">632</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>471</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>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 8pt; margin-top: 1pt; margin-left: 7px; text-indent: -7px"><i>*Prior to September 30, 2010, our investment in LUKOIL was accounted for using the equity method. See Note
6—Investment, Loans and Long-Term Receivables, for more information.</i>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10.5pt; margin-top: 10.5pt">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 September 30, 2010, commodity derivative assets and liabilities appear
net of $5 million of obligations to return cash collateral and $230 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 or interest rate derivatives.
</div>
</div>
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