Financial Instruments and Derivatives

3 Months Ended

Mar. 31, 2025

Financial Instruments And Derivatives [Abstract]

Financial Instruments and Derivatives

Note 7. Financial Instruments and Derivatives

The estimated fair value of financial instruments and derivatives at March 31, 2025 and December 31, 2024, and the related hierarchy level for the fair value measurement was as follows:

	March 31, 2025
	Fair Value
(millions of dollars)	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
Assets
Derivative assets (1)	5,240	887	—	6,127	(5,516)	(70)	—	541
Advances to/receivables from equity companies (2)(6)	—	2,435	4,688	7,123	—	—	374	7,497
Other long-term financial assets (3)	1,497	—	1,509	3,006	—	—	234	3,240
Liabilities
Derivative liabilities (4)	5,438	859	—	6,297	(5,516)	(268)	—	513
Long-term debt (5)	25,109	2,096	—	27,205	—	—	3,560	30,765
Long-term obligations to equity companies (6)	—	—	1,427	1,427	—	—	(46)	1,381
Other long-term financial liabilities (7)	—	—	557	557	—	—	55	612

 

	December 31, 2024
	Fair Value
(millions of dollars)	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
Assets
Derivative assets (1)	3,223	1,206	—	4,429	(3,913)	(3)	—	513
Advances to/receivables from equity companies (2)(6)	—	2,466	4,167	6,633	—	—	451	7,084
Other long-term financial assets (3)	1,468	—	1,504	2,972	—	—	247	3,219
Liabilities
Derivative liabilities (4)	3,561	1,416	—	4,977	(3,913)	(341)	—	723
Long-term debt (5)	28,884	1,813	—	30,697	—	—	3,935	34,632
Long-term obligations to equity companies (6)	—	—	1,393	1,393	—	—	(47)	1,346
Other long-term financial liabilities (7)	—	—	583	583	—	—	57	640

(1) Included in the Balance Sheet lines: Notes and accounts receivable - net and Other assets, including intangibles - net.

(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 lines: Accounts payable and accrued liabilities and Other long-term obligations.

(5) Excluding finance lease obligations.

(6) 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.

(7) Included in the Balance Sheet line: Other long-term obligations. Includes contingent consideration related to a prior year acquisition where fair value is based on expected drilling activities and discount rates.

At March 31, 2025 and December 31, 2024, respectively, the Corporation had $538 million and $491 million of collateral under master netting arrangements not offset against the derivatives on the Condensed Consolidated Balance Sheet, primarily related to initial margin requirements.

The Corporation may use non-derivative financial instruments, such as its foreign currency-denominated debt, as hedges of its net investments in certain foreign subsidiaries. Under this method, the change in the carrying value of the financial instruments due to foreign exchange fluctuations is reported in accumulated other comprehensive income. As of March 31, 2025, the Corporation has designated $3.2 billion of its Euro-denominated debt and related accrued interest as a net investment hedge of its European business. The net investment hedge is deemed to be perfectly effective.

The Corporation had undrawn short-term committed lines of credit of $0.2 billion and undrawn long-term committed lines of credit of $1.0 billion as of the end of first quarter 2025.

Derivative Instruments

The Corporation’s size, strong capital structure, geographic diversity, and the complementary nature of its business segments 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 to generate returns from trading. Commodity contracts held for trading purposes are presented in the Condensed Consolidated Statement of Income on a net basis in the line “Sales and other operating revenue" and in the Consolidated Statement of Cash Flows in “Cash Flows from Operating Activities”. The Corporation’s commodity derivatives are not accounted for under hedge accounting. At times, the Corporation also enters into currency and interest rate derivatives, none of which are material to the Corporation’s financial position as of March 31, 2025 and December 31, 2024, or results of operations for the periods ended March 31, 2025 and 2024.

The Corporation operates a program to hedge certain of its fixed-rate debt instruments against changes in fair value due to changes in the designated benchmark interest rate. This program utilizes fair value hedge accounting. The derivative (hedging) instruments are fixed-for-floating interest rate swaps, with settlement dates that correspond to the interest payments associated with the fixed-rate debt (hedged item). Changes in the fair values of the hedging instruments are perfectly offset by changes in the fair values of the hedged items; the effects of these changes in fair values are recorded in "Interest expense" in the Consolidated Statement of Income. This program was not material to the Consolidated Financial Statements as of the end of first quarter 2025.

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 net notional long/(short) position of derivative instruments at March 31, 2025 and December 31, 2024, was as follows:

(millions)	March 31, 2025	December 31, 2024
Crude oil (barrels)	35	13
Petroleum products (barrels)	(28)	(32)
Natural gas (MMBTUs)	(702)	(675)

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

(millions of dollars)	Three Months Ended March 31,
	2025	2024
Sales and other operating revenue	19	(792)
Crude oil and product purchases	2	3
Total	21	(789)