XML 55 R35.htm IDEA: XBRL DOCUMENT v2.4.0.8
Financial Risk Management and Trading Activities (Tables)
 9 Months Ended
Sep. 30, 2014
Netting Arrangements on Physical and Financial Derivative Assets and (Liabilities)

The following table provides information about the effect of netting arrangements on the presentation of the Corporation’s physical and financial derivative assets and (liabilities) that are measured at fair value, with the effect of “single counterparty multilateral netting” being included in column (v):

 

 

  

 

 

 

Gross Amounts Offset

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

in the Consolidated

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Physical

 

 

 

 

 

Net Amounts

 

 

Gross Amounts

 

 

 

 

 

  

 

 

 

Derivative

 

 

 

 

 

Presented in

 

 

Not Offset in

 

 

 

 

 

  

 

 

 

and

 

 

 

 

 

the

 

 

the

 

 

 

 

 

  

Gross

 

 

Financial

 

 

Cash

 

 

Consolidated

 

 

Consolidated

 

 

Net

 

 

  

Amounts

 

 

Instruments

 

 

Collateral (a)

 

 

Balance Sheet

 

 

Balance Sheet

 

 

Amounts

 

 

  

(i)

 

 

(ii)

 

 

(iii)

 

 

(iv)=(i)+(ii)+(iii)

 

 

(v)

 

 

(vi)=(iv)+(v)

 

 

  

(In millions)

 

September 30, 2014

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

  

$

3,137

 

 

$

(2,797

) 

 

$

(31

) 

 

$

309

 

 

$

(1

) 

 

$

308

 

Interest rate and other

  

 

88

 

 

 

(7

)

 

 

(2

) 

 

 

79

 

 

 

(2

) 

 

 

77

 

Counterparty netting

  

 

—

  

 

 

(57

) 

 

 

—

  

 

 

(57

) 

 

 

—

  

 

 

(57

) 

Total derivative contracts

  

$

3,225

 

 

$

(2,861

) 

 

$

(33

) 

 

$

331

 

 

$

(3

)

 

$

328

 

 

Liabilities

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

  

$

(3,207

) 

 

$

2,797

 

 

$

98

 

 

$

(312

) 

 

$

1

 

 

$

(311

)

Other

  

 

(13

) 

 

 

7

 

 

 

—

  

 

 

(6

) 

 

 

2

 

 

 

(4

)

Counterparty netting

  

 

—

  

 

 

57

 

 

 

—

  

 

 

57

 

 

 

—

  

 

 

57

 

Total derivative contracts

  

$

(3,220

) 

 

$

2,861

 

 

$

98

 

 

$

(261

) 

 

$

3

 

 

$

(258

)

 

December 31, 2013 (b)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

  

$

3,086

 

 

$

(1,867

) 

 

$

(79

) 

 

$

1,140

 

 

$

(41

) 

 

$

1,099

 

Interest rate and other

  

 

51

 

 

 

(10

) 

 

 

—

  

 

 

41

 

 

 

(3

) 

 

 

38

 

Counterparty netting

  

 

—

  

 

 

(206

) 

 

 

—

  

 

 

(206

) 

 

 

—

  

 

 

(206

) 

Total derivative contracts

  

$

3,137

 

 

$

(2,083

) 

 

$

(79

) 

 

$

975

 

 

$

(44

) 

 

$

931

 

 

Liabilities

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

  

$

(3,212

) 

 

$

1,867

 

 

$

168

 

 

$

(1,177

) 

 

$

41

 

 

$

(1,136

) 

Other

  

 

(12

) 

 

 

10

 

 

 

—

  

 

 

(2

) 

 

 

3

 

 

 

1

 

Counterparty netting

  

 

—

  

 

 

206

 

 

 

—

  

 

 

206

 

 

 

—

  

 

 

206

 

Total derivative contracts

  

$

(3,224

) 

 

$

2,083

 

 

$

168

 

 

$

(973

) 

 

$

44

 

 

$

(929

) 

 

(a)

All cash collateral was offset in the Consolidated Balance Sheet.

(b)

Assets and liabilities in 2013 include amounts relating to the divested energy marketing business.

Gross and Net Fair Values of Corporate and Trading Derivative Instruments

The table below reflects the gross and net fair values of the risk management and trading derivative instruments and, at December 31, 2013 also includes energy marketing risk management derivative instruments:

 

 

  

Accounts

 

 

Accounts

 

 

  

Receivable

 

 

Payable

 

 

  

(In millions)

 

September 30, 2014

  

 

 

 

 

 

 

 

Derivative contracts designated as hedging instruments

  

 

 

 

 

 

 

 

Commodity

  

$

69

  

 

$

—

 

Interest rate and other

  

 

29

 

 

 

(4

) 

Total derivative contracts designated as hedging instruments

  

 

98

 

 

 

(4

) 

 

Derivative contracts not designated as hedging instruments (a)

  

 

 

 

 

 

 

 

Commodity

  

 

3,068

 

 

 

(3,207

) 

Foreign exchange

  

 

49

 

 

 

(1

) 

Equity and other

  

 

10

 

 

 

(8

) 

Total derivative contracts not designated as hedging instruments

  

 

3,127

 

 

 

(3,216

) 

 

Gross fair value of derivative contracts

  

 

3,225

 

 

 

(3,220

) 

Master netting arrangements

  

 

(2,861

) 

 

 

2,861

 

Cash collateral (received) posted

  

 

(33

) 

 

 

98

 

Net fair value of derivative contracts

  

$

331

 

 

$

(261

) 

 

December 31, 2013 (b)

  

 

 

 

 

 

 

 

Derivative contracts designated as hedging instruments

  

 

 

 

 

 

 

 

Commodity

  

$

11

 

 

$

(3

) 

Interest rate and other

  

 

36

 

 

 

(1

) 

Total derivative contracts designated as hedging instruments

  

 

47

 

 

 

(4

) 

 

Derivative contracts not designated as hedging instruments (a)

  

 

 

 

 

 

 

 

Commodity

  

 

3,075

 

 

 

(3,209

) 

Foreign exchange

  

 

2

 

 

 

(3

) 

Other

  

 

13

 

 

 

(8

) 

Total derivative contracts not designated as hedging instruments

  

 

3,090

 

 

 

(3,220

) 

Gross fair value of derivative contracts

  

 

3,137

 

 

 

(3,224

) 

Master netting arrangements

  

 

(2,083

) 

 

 

2,083

 

Cash collateral (received) posted

  

 

(79

) 

 

 

168

 

Net fair value of derivative contracts

  

$

975

 

 

$

(973

) 

 

(a)

Includes trading derivatives and derivatives used for risk management.

(b)

Assets and liabilities in 2013 include amounts relating to the divested energy marketing business.

Fair Values for Corporation's Net Physical Derivative and Financial Assets and (Liabilities)

The following table provides the Corporation’s net physical derivative and financial assets and (liabilities) that are measured at fair value based on this hierarchy:

 

 

  

 

 

 

 

 

 

 

 

 

Counterparty

 

 

 

 

 

 

 

 

  

Level 1

 

 

Level 2

 

 

Level 3

 

 

netting

 

 

Collateral

 

 

Balance

 

 

  

(In millions)

 

September 30, 2014

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

  

$

210

 

 

$

187

 

 

$

120

 

 

$

(177

) 

 

$

(31

) 

 

$

309

 

Interest rate and other

  

 

5

 

 

 

77

 

 

 

—

 

 

 

(1

) 

 

 

(2

) 

 

 

79

 

Collateral and counterparty netting

  

 

(53

) 

 

 

(4

) 

 

 

—

  

 

 

—

  

 

 

—

  

 

 

(57

) 

Total derivative contracts

  

 

162

 

 

 

260

 

 

 

120

 

 

 

(178

) 

 

 

(33

) 

 

 

331

 

Other assets measured at fair value on a
recurring basis

  

 

33

 

 

 

—

  

 

 

—

  

 

 

—

  

 

 

—

  

 

 

33

 

Total assets measured at fair value
on a recurring basis

  

$

195

 

 

$

260

 

 

$

120

 

 

$

(178

) 

 

$

(33

) 

 

$

364

(a) 

 

Liabilities

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

  

$

(226

) 

 

$

(346

) 

 

$

(15

) 

 

$

177

 

 

$

98

 

 

$

(312

) 

Other

  

 

(2

) 

 

 

—

 

 

 

(5

) 

 

 

1

 

 

 

—

  

 

 

(6

) 

Collateral and counterparty netting

  

 

53

 

 

 

4

 

 

 

—

  

 

 

—

  

 

 

—

  

 

 

57

 

Total derivative contracts

  

 

(175

) 

 

 

(342

) 

 

 

(20

) 

 

 

178

 

 

 

98

 

 

 

(261

) 

Other liabilities measured at
fair value on a recurring basis

  

 

(31

) 

 

 

—

  

 

 

—

  

 

 

—

  

 

 

—

  

 

 

(31

) 

Total liabilities measured at
fair value on a recurring basis

  

$

(206

) 

 

$

(342

) 

 

$

(20

) 

 

$

178

 

 

$

98

 

 

$

(292

)(b) 

Other fair value measurement disclosures
Long-term debt (c)

  

$

—

  

 

$

(7,307

) 

 

$

—

  

 

$

—

  

 

$

—

  

 

$

(7,307

) 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty

 

 

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

netting

 

 

Collateral

 

 

Balance

 

 

 

(In millions)

 

December 31, 2013 (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

254

 

 

$

579

 

 

$

494

 

 

$

(108

) 

 

$

(79

)

 

$

1,140

 

Interest rate and other

 

 

2

 

 

 

37

 

 

 

3

 

 

 

(1

) 

 

 

—

 

 

 

41

 

Collateral and counterparty netting

 

 

(15

) 

 

 

(191

) 

 

 

—

  

 

 

—

  

 

 

—

 

 

 

(206

) 

Total derivative contracts

 

 

241

 

 

 

425

 

 

 

497

 

 

 

(109

) 

 

 

(79

)

 

 

975

 

Other assets measured at fair value on a
recurring basis

 

 

—

  

 

 

—

  

 

 

—

  

 

 

—

  

 

 

—

 

 

 

—

  

Total assets measured at fair value
on a recurring basis

 

$

241

 

 

$

425

 

 

$

497

 

 

$

(109

)

 

$

(79

)

 

$

975

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

(97

)

 

$

(1,071

)

 

$

(285

) 

 

$

108

 

 

$

168

 

 

$

(1,177

) 

Other

 

 

—

 

 

 

(3

)

 

 

—

  

 

 

1

 

 

 

—

 

 

 

(2

) 

Collateral and counterparty netting

 

 

15

 

 

 

191

 

 

 

—

  

 

 

—

 

 

 

—

 

 

 

206

 

Total derivative contracts

 

 

(82

)

 

 

(883

)

 

 

(285

) 

 

 

109

 

 

 

168

 

 

 

(973

) 

Other liabilities measured at
fair value on a recurring basis

 

 

(31

)

 

 

—

 

 

 

—

  

 

 

—

 

 

 

—

 

 

 

(31

) 

Total liabilities measured at
fair value on a recurring basis

 

$

(113

)

 

$

(883

)

 

$

(285

) 

 

$

109

 

 

$

168

 

 

$

(1,004

) 

Other fair value measurement disclosures
Long-term debt (c)

 

$

—

 

 

$

(6,641

)

 

$

—

  

 

$

—

 

 

$

—

 

 

$

(6,641

) 

 

(a)

Includes a total of $162 million of Level 1, $260 million of Level 2 and $119 million of Level 3 assets that relate to the Corporation’s continuing operations.

(b)

Includes a total of $174 million of Level 1, $341 million of Level 2 and $18 million of Level 3 liabilities that relate to the Corporation’s continuing operations.

(c)

Long-term debt, including current maturities, had a carrying value of $5,996 million and $5,798 million at September 30, 2014 and December 31, 2013, respectively.

(d)

Assets and liabilities in 2013 include amounts relating to the divested energy marketing business.

Net Transfers into and Out of Each Level of Fair Value Hierarchy

The following table provides net transfers into and out of each level of the fair value hierarchy:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2014 

 

  

2013 

 

 

2014

 

 

2013

 

 

 

(In millions)

 

Transfers into Level 1

 

$

40

 

 

$

18

 

 

$

30

 

 

$

(1

)

Transfers out of Level 1

 

 

2

 

 

 

15

 

 

 

1

 

 

 

77

 

 

 

$

42

 

 

$

33

 

 

$

31

 

 

$

76

 

 

Transfers into Level 2

 

$

(6

)

 

$

(11

)

 

$

(22

)

 

$

(103

)

Transfers out of Level 2

 

 

(106

)

 

 

(2

)

 

 

(102

)

 

 

16

 

 

 

$

(112

)

 

$

(13

)

 

$

(124

)

 

$

(87

)

Transfers into Level 3

 

$

67

 

 

$

(14

)

 

$

74

 

 

$

(12

)

Transfers out of Level 3

 

 

3

 

 

 

(6

)

 

 

19

 

 

 

23

 

 

 

$

70

 

 

$

(20

)

 

$

93

 

 

$

11

 

 
Changes in Physical Derivatives and Financial Assets and (Liabilities) Primarily Related to Commodities that are Measured at Fair Value Based on Level 3 Inputs

The following table provides changes in physical derivatives and financial assets and (liabilities) primarily related to commodities that are measured at fair value based on Level 3 inputs:

 

 

  

Three Months Ended

 

 

Nine Months Ended

 

 

  

September 30,

 

 

September 30,

 

 

  

2014 

 

  

2013 

 

 

2014 

 

 

2013 

 

 

  

(In millions)

 

Balance at beginning of period

  

$

40

 

  

$

107

 

 

$

212

 

 

$

141

 

Unrealized pre-tax gains (losses) included in earnings (a)

 

 

(10

)  

  

 

(61

) 

 

 

(310

) 

 

 

(122

)

Purchases (b)

 

 

7

 

 

 

4

 

 

 

18

 

 

 

44

 

Sales (b)

 

 

(7

) 

 

 

(1

)

 

 

(17

)

 

 

(32

) 

Settlements (c)

 

 

—

 

 

 

(7

)

 

 

104

 

 

 

(20

) 

Transfers into Level 3

 

 

67

 

 

 

(14

)

 

 

74

 

 

 

(12

) 

Transfers out of Level 3

 

 

3

 

 

 

(6

)

 

 

19

 

 

 

23

 

Balance at end of period

  

$

100

 

  

$

22

 

 

$

100

 

 

$

22

 

 

(a)

The unrealized pre-tax gains and (losses) included in earnings were reflected in Sales and other operating revenues and Income from discontinued operations in the Statement of Consolidated Income.

(b)

Purchases and sales primarily represent option premiums paid or received, respectively, during the reporting period and were reflected in Sales and other operating revenues and Income from discontinued operations in the Statement of Consolidated Income.

(c)

Settlements represent realized gains and (losses) on derivatives settled during the reporting period and were reflected in Sales and other operating revenues and Income from discontinued operations in the Statement of Consolidated Income.

Commodity Contracts with a Fair Value

The significant unobservable inputs used in Level 3 fair value measurements for the Corporation’s physical commodity contracts and derivative instruments primarily include less liquid delivered locations for physical commodity contracts or volatility assumptions for out-of-the-money options. The following table provides information about the Corporation's significant recurring unobservable inputs used in the Level 3 fair value measurements. Natural gas contracts are usually quoted and transacted using basis pricing relative to an active pricing location (e.g. Henry Hub), for which price inputs represent the approximate value of differences in geography and local market conditions. All other price inputs in the table below represent full contract prices. Significant changes in any of the inputs, independently or correlated, may result in a different fair value.

 

 

 

Unit of

 

Range /

 

 

Measurement

 

Weighted Average

September 30, 2014

 

 

 

 

Assets

 

 

 

 

Commodity contracts with a fair value of $120 million

 

 

 

 

Contract prices

 

 

 

 

Crude oil and refined petroleum products

 

$ / bbl (a)

 

$73.58 - 119.76 / 95.97

Basis prices

 

 

 

 

Natural gas

 

$ / MMBTU (c)

 

$(0.65) - 4.01 / 3.57

 

Contract volatilities

 

 

 

 

Crude oil and refined petroleum products

 

%

 

16.00 - 19.00 / 17.00

Natural gas

 

%

 

18.00 - 39.00 / 29.00

 

Liabilities

 

 

 

 

Commodity contracts with a fair value of $15 million

 

 

 

 

Contract prices

 

 

 

 

Crude oil and refined petroleum products

 

$ / bbl (a)

 

$82.54 - 122.95 / 102.77

Contract volatilities

 

 

 

 

Crude oil and refined petroleum products

 

%

 

16.00 - 20.00 / 19.00

 

 

 

 

 

December 31, 2013 (d)

 

 

 

 

Assets

 

 

 

 

Commodity contracts with a fair value of $494 million

 

 

 

 

Contract prices

 

 

 

 

Crude oil and refined petroleum products

 

$ / bbl (a)

 

$78.45 - 228.86 / 118.68

Electricity

 

$ / MWH (b)

 

$19.52 - 165.75 / 45.76

Basis prices

 

 

 

 

Natural gas

 

$ / MMBTU (c)

 

$(4.99) - 18.10 / 0.23

Contract volatilities

 

 

 

 

Crude oil and refined petroleum products

 

%

 

16.00 - 18.00 / 17.00

Natural gas

 

%

 

17.00 - 35.00 / 22.00

Electricity

 

%

 

16.00 - 36.00 / 23.00

 

Liabilities

 

 

 

 

Commodity contracts with a fair value of $285 million

 

 

 

 

Contract prices

 

 

 

 

Crude oil and refined petroleum products

 

$ / bbl (a)

 

$57.45 - 183.89 / 122.54

Electricity

 

$ / MWH (b)

 

$26.48 - 155.33 / 43.12

Basis prices

 

 

 

 

Natural gas

 

$ / MMBTU (c)

 

$(1.90) - 18.00 / (0.62)

Contract volatilities

 

 

 

 

Crude oil and refined petroleum products

 

%

 

16.00 - 17.00 / 17.00

Natural gas

 

%

 

34.00 - 35.00 / 35.00

Electricity

 

%

 

16.00 - 36.00 / 22.00

 

(a)

Price per barrel.

(b)

Price per megawatt hour.

(c)

Price per million British thermal unit.

(d)

Assets and liabilities in 2013 include amounts relating to the divested energy marketing business.

Note:

Fair value measurement for all recurring inputs was performed using a combination of income and market approach techniques.

Corporate Risk Management [Member]
  
Gross Volumes of Corporation's Derivative Contracts Outstanding

The gross volumes of the risk management derivative contracts outstanding were as follows:

 

 

  

September 30,

 

  

December 31,

 

 

  

2014

 

  

2013

 

Commodity, primarily crude oil (millions of barrels)

  

 

15

 

  

 

9

 

Foreign exchange (millions of USD *)

  

$

1,197

 

  

$

220

 

Interest rate swaps (millions of USD)

  

$

1,300

 

  

$

865

 

 

*

Denominated in U.S. dollars (USD).

Net Realized and Unrealized Pre-Tax Gains (Losses) on Derivative Contracts Not Designated as Hedges

Net realized and unrealized pre-tax gains (losses) on derivative contracts used in Financial Risk Management activities and not designated as hedges amounted to the following:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2014 

 

 

2013 

 

 

2014 

 

 

2013 

 

 

 

(In millions)

 

Foreign exchange

 

$

81

 

 

$

4

 

 

$

68

 

 

$

(36

)

Commodity

 

 

4

 

 

 

—

 

 

 

7

 

 

 

—

 

Total

 

$

85

 

 

$

4

 

 

$

75

 

 

$

(36

)

 
Trading Activities [Member]
  
Gross Volumes of Corporation's Derivative Contracts Outstanding

The gross volumes of derivative contracts outstanding related to trading activities were as follows:

 

 

  

September 30,

 

  

December 31,

 

 

  

2014 

 

  

2013 

 

Commodity

  

 

 

 

  

 

 

 

Crude oil and refined petroleum products (millions of barrels)

  

 

1,810

 

  

 

1,815

 

Natural gas (millions of mcf)

  

 

2,519

 

  

 

2,735

 

Electricity (millions of megawatt hours)

  

 

1

 

  

 

1

 

Foreign exchange (millions of USD)

  

$

55

 

  

$

52

 

Interest rate (millions of USD)

 

$

29

 

 

$

—

 

Equity securities (millions of shares)

  

 

7

 

  

 

11

 

 
Net Realized and Unrealized Pre-Tax Gains (Losses) on Derivative Contracts Not Designated as Hedges

Pre-tax unrealized and realized gains (losses) recorded in the Statement of Consolidated Income from trading activities amounted to the following:

 

 

  

Three Months Ended

 

 

Nine Months Ended

 

 

  

September 30,

 

 

September 30,

 

 

  

2014 

 

  

2013 

 

 

2014 

 

 

2013 

 

 

  

(In millions)

 

Commodity

  

$

52

  

  

$

6

 

 

$

147

 

 

$

53

 

Foreign exchange

  

 

2

  

  

 

(1

) 

 

 

1

 

 

 

—

  

Equity and other

  

 

14

  

  

 

9

 

 

 

34

 

 

 

17

 

Total *

  

$

68

  

  

$

14

 

 

$

182

 

 

$

70

 

 

*

The unrealized pre-tax gains and losses included in earnings were primarily reflected in Sales and other operating revenues.