Note 13. Fair Value Measurements and Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:

Cash, Cash Equivalents, Accounts Receivable and Accounts Payable The carrying amounts approximate fair value due to the short-term nature or maturity of the instruments.

Mutual Fund Investments Our mutual fund investments consist of various publicly-traded mutual funds that include investments ranging from equities to money market instruments. The fair values are based on quoted market prices for identical assets.

Commodity Derivative Instruments Our commodity derivative instruments may include variable to fixed price commodity swaps, two-way collars, three-way collars, swaptions, enhanced swaps and basis swaps. We estimate the fair values of these instruments using published forward commodity price curves as of the date of the estimate. The discount rate used in the discounted cash flow projections is based on published LIBOR rates, Eurodollar futures rates and interest swap rates. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk, and the fair values of commodity derivative instruments in a liability position include a measure of our own nonperformance risk, each based on the current published credit default swap rates. In addition, for collars, we estimate the option values of the put options sold and the contract floors and ceilings using an option pricing model which takes into account market volatility, market prices and contract terms. See Note 8. Derivative Instruments and Hedging Activities.

Deferred Compensation Liability The value is dependent upon the fair values of mutual fund investments and shares of our common stock held in a rabbi trust. See Mutual Fund Investments above.

Stock-Based Compensation Liability A portion of the value of the liability associated with our phantom unit plan is dependent upon the fair value of Noble Energy common stock as of the end of each reporting period. See Note 12. Stock-Based and Other Compensation Plans.

Measurement information for assets and liabilities that are measured at fair value on a recurring basis was as follows:



	Fair Value Measurements Using
(millions)	Quoted Prices in Active Markets (Level 1) ⁽¹⁾			Significant Other Observable Inputs (Level 2) ⁽¹⁾			Significant Unobservable Inputs (Level 3) ⁽¹⁾		Adjustment ⁽²⁾			Fair Value Measurement
December 31, 2017
Financial Assets
Mutual Fund Investments	$	57		$	—		$	—	$	—		$	57
Commodity Derivative Instruments	—			7			—		(5		)	2
Financial Liabilities
Commodity Derivative Instruments	—			(78		)	—		5			(73		)
Portion of Deferred Compensation Liability Measured at Fair Value	(71		)	—			—		—			(71		)
Stock Based Compensation Liability Measured at Fair Value	(10		)	—			—		—			(10		)
December 31, 2016
Financial Assets
Mutual Fund Investments	$	71		$	—		$	—	$	—		$	71
Commodity Derivative Instruments	—			5			—		(5		)	—
Financial Liabilities
Commodity Derivative Instruments	—			(121		)	—		5			(116		)
Portion of Deferred Compensation Liability Measured at Fair Value	(88		)	—			—		—			(88		)
Stock Based Compensation Liability Measured at Fair Value	(9		)	—			—		—			(9		)


⁽¹⁾	See Note 1. Summary of Significant Accounting Policies – Fair Value Measurements for a description of the fair value hierarchy.


⁽²⁾	Amount represents the impact of netting clauses within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:

Asset Impairments In 2017, 2016, and 2015, we determined that the carrying amounts of certain oil and gas assets were not recoverable from future cash flows and, therefore, were impaired. The assets were reduced to their estimated fair values as noted below.

Inventory Impairment In 2016, and 2015, we determined that the carrying amount of certain of our materials and supplies inventory was greater than its net realizable value or not recoverable from future cash flows. These assets were, therefore, adjusted as noted below.

Marcellus Shale Firm Transportation Liability As of December 31, 2017, we had recorded a $90 million liability representing the discounted present value of our remaining obligation under firm transportation contracts. See Note 17 – Commitments and Contingencies.

Information about the impaired assets is as follows:



	Fair Value Measurements Using
Description	Quoted Prices in Active Markets (Level 1) ⁽¹⁾		Significant Other Observable Inputs (Level 2) ⁽¹⁾		Significant Unobservable Inputs (Level 3) ⁽¹⁾		Net Book Value ⁽²⁾		Total Pre-tax (Non-cash) Impairment Loss
(millions)
Year Ended December 31, 2017
Impaired Oil and Gas Properties	$	—	$	—	$	—	$	70	$	70
Year Ended December 31, 2016
Impaired Oil and Gas Properties	—		—		—		92		92
Impaired Materials and Supplies Inventory	—		—		91		105		14
Year Ended December 31, 2015
Impaired Oil and Gas Properties	—		—		752		1,285		533
Impaired Materials and Supplies Inventory	—		—		61		81		20


⁽¹⁾	See Note 1. Summary of Significant Accounting Policies – Fair Value Measurements for a description of the fair value hierarchy.


⁽²⁾	Amount represents net book value at the date of assessment.

The fair values of properties held and used were determined as of the date of the assessment using discounted cash flow models. The discounted cash flows were based on management’s expectations for the future. Inputs included estimates of future crude oil and natural gas production, commodity prices based on commodities sales contract terms or commodity price curves as of the date of the estimate, estimated operating and development costs, and a risk-adjusted discount rate of 10%. The fair values of assets held for sale were based on anticipated sales proceeds less costs to sell. Costs associated with abandoned properties were completely written off. See Note 5. Asset Impairments.

Additional Fair Value Disclosures

Debt The fair value of fixed-rate, public debt is estimated based on the published market prices for the same or similar issues. As such, we consider the fair value of our public, fixed-rate debt to be a Level 1 measurement on the fair value hierarchy.

At December 31, 2017, our variable-rate, non-public debt included the Revolving Credit Facility and the Noble Midstream Services Revolving Credit Facility. The fair value is estimated based on significant other observable inputs. As such, we consider the fair value of these facilities to be a Level 2 measurement on the fair value hierarchy. See Note 10. Long-Term Debt.

Fair value information regarding our debt is as follows:



	December 31, 2017				December 31, 2016
(millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-Term Debt, Net ⁽¹⁾	$	6,586	$	7,142	$	6,739	$	7,112


⁽¹⁾	Excludes unamortized discount, premium, debt issuance costs and capital lease obligations.