Financial Risk Management Activities

12 Months Ended

Dec. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

19. Financial Risk Management Activities

In the normal course of our business, we are exposed to commodity risks related to changes in the prices of crude oil and natural gas, as well as changes in interest rates and foreign currency values. In the disclosures that follow, corporate financial risk management activities refer to the mitigation of these risks through hedging activities. We maintain a control environment for all of our financial risk management activities under the direction of our Chief Risk Officer. Our Treasury department is responsible for administering foreign exchange rate and interest rate hedging programs using similar controls and processes, where applicable. Hedging strategies are reviewed annually by the Audit Committee of the Board of Directors.

Corporate Financial Risk Management Activities:

Financial risk management activities include transactions designed to reduce risk in the selling prices of crude oil or natural gas we produce or reduce our exposure to foreign currency or interest rate movements. Generally, futures, swaps or option strategies may be used to fix the forward selling price, or establish a floor price or a range banded with a floor and ceiling price, for a portion of our crude oil or natural gas production. Such strategies are subject to certain limitations under the Merger Agreement. Forward contracts or swaps may also be used to purchase certain currencies in which we conduct business with the intent of reducing exposure to foreign currency fluctuations. At December 31, 2024, these forward contracts and swaps relate to the British Pound and Malaysian Ringgit. Interest rate swaps may be used to convert interest payments on certain long-term debt from fixed to floating rates.

The notional amounts of outstanding financial risk management derivative contracts were as follows:


	December 31, 2024		December 31, 2023

	(In millions)

Foreign exchange forwards and swaps	$	189	$	226
Interest rate swaps	$	—	$	100

Derivative contracts designated as hedging instruments:

Crude oil derivatives designated as cash flow hedges: Crude oil hedging contracts decreased Sales and other operating revenues by $190 million in 2023 (2022: decrease of $585 million). There were no open crude oil hedging contracts during 2024.

Interest rate swaps designated as fair value hedges: At December 31, 2023, we had interest rate swaps with gross notional amounts totaling $100 million, which were designated as fair value hedges and relate to debt where we have converted interest payments from fixed to floating rates. These interest rate swaps expired in July 2024. Changes in the fair value of interest rate swaps and the hedged fixed-rate debt are recorded in Interest expense in the Statement of Consolidated Income. The fair value of our interest rate swaps was a liability of $2 million at December 31, 2023.

Derivative contracts not designated as hedging instruments:

Foreign exchange: Foreign exchange gains and losses, which are reported in Other, net in Revenues and non-operating income in the Statement of Consolidated Income, were gains of $3 million in 2024 (2023: $2 million gains; 2022: $2 million losses). A component of foreign exchange gains and losses is the result of foreign exchange derivative contracts that are not designated as hedges, which amounted to net losses of $1 million in 2024 (2023: $2 million losses; 2022: $14 million gains). The fair value of our foreign exchange forwards and swaps was an asset of less than $1 million at December 31, 2024 (2023: $6 million liability).

Credit Risk: We are exposed to credit risks that may at times be concentrated with certain counterparties, groups of counterparties or customers. Accounts receivable are generated from a diverse domestic and international customer base. At December 31, 2024, our accounts receivable were concentrated with the following counterparty industry segments: Integrated companies 42%, Independent E&P companies 36%, Refining and marketing companies 12%, Storage and transportation companies 3%, National oil companies 2%, and Others 5%. We reduce risk related to certain counterparties, where applicable, by using master netting arrangements and requiring collateral, generally cash or letters of credit.

At December 31, 2024, we had outstanding letters of credit totaling $85 million (2023: $88 million).

Fair Value Measurement: At December 31, 2024, our total long-term debt, which was substantially comprised of fixed rate debt instruments, had a carrying value of $8,578 million and a fair value of $8,750 million, based on Level 2 inputs in the fair value measurement hierarchy. We also have short-term financial instruments, primarily cash equivalents, accounts receivable and accounts payable, for which the carrying value approximated fair value at December 31, 2024 and December 31, 2023.