Financial Instruments And Derivatives

12 Months Ended

Dec. 31, 2018

Financial Instruments And Derivatives [Abstract]

13. Financial Instruments and Derivatives

Financial Instruments. The estimated fair value of financial instruments at December 31, 2018, and the related hierarchy level for the fair value measurement is as follows:

			At December 31, 2018
			(millions of dollars)

			Fair Value
			Level 1	Level 2	Level 3	Total Gross Assets & Liabilities	Effect of Counterparty Netting	Effect of Collateral Netting	Difference in Carrying Value and Fair Value	Net Carrying Value Presented on the Balance Sheet
Assets
	Derivative assets (1)		297	-	-	297	(151)	(146)	-	-
	Advances to/receivables
		from equity companies (2)(7)	-	2,100	6,293	8,393	-	-	215	8,608
	Other long-term
		financial assets (3)	848	-	974	1,822	-	-	112	1,934

Liabilities
	Derivative liabilities (4)		151	-	-	151	(151)	-	-	-
	Long-term debt (5)		19,029	117	4	19,150	-	-	85	19,235
	Long-term obligations
		to equity companies (7)	-	-	4,330	4,330	-	-	52	4,382
	Other long-term
		financial liabilities (6)	-	-	1,046	1,046	-	-	(3)	1,043

(1) Included in the Balance Sheet line: Notes and accounts receivable, less estimated doubtful amounts
(2) Included in the Balance Sheet line: Investments, advances and long-term receivables
(3) Included in the Balance Sheet lines: Investments, advances and long-term receivables and Other assets, including intangibles, net
(4) Included in the Balance Sheet line: Accounts payable and accrued liabilities
(5) Excluding capitalized lease obligations
(6) Included in the Balance Sheet line: Other long-term obligations
(7) Advances to/receivables from equity companies and long-term obligations to equity companies are mainly designated as hierarchy level 3 inputs. The fair value is calculated by discounting the remaining obligations by a rate consistent with the credit quality and industry of the equity company.

The estimated fair value of total long-term debt, excluding capitalized lease obligations, was $23.7 billion at December 31, 2017, as compared to recorded book values of $23.1 billion at December 31, 2017.

Derivative Instruments. The Corporation’s size, strong capital structure, geographic diversity and the complementary nature of the Upstream, Downstream and Chemical businesses reduce the Corporation’s enterprise-wide risk from changes in commodity prices, currency rates and interest rates. In addition, the Corporation uses commodity-based contracts, including derivatives, to manage commodity price risk and for trading purposes. The Corporation’s commodity derivatives are not accounted for under hedge accounting. At times, the Corporation also enters into forward currency and interest rate derivatives, none of which are material to the Corporation’s financial position as of December 31, 2018 and 2017, or results of operations for the years ended 2018, 2017 and 2016.

Credit risk associated with the Corporation’s derivative position is mitigated by several factors, including the use of derivative clearing exchanges and the quality of and financial limits placed on derivative counterparties. The Corporation maintains a system of controls that includes the authorization, reporting and monitoring of derivative activity.

The carrying values of derivative instruments on the consolidated balance sheet, at December 31, 2017, were gross assets of $25 million, gross liabilities of ($63) million and collateral receivable of $94 million.

At December 31, 2018, the net notional long/(short) position of derivative instruments was (19) million barrels for crude oil and was (9) million barrels for products.

Realized and unrealized gains/(losses) on derivative instruments that were recognized in the Consolidated Statement of Income are included in the following lines on a before-tax basis:

		2018	2017	2016
		(millions of dollars)

Sales and other operating revenue		130	6	(12)
Crude oil and product purchases		(120)	(105)	(69)
	Total	10	(99)	(81)