Fair Value Measurements and Disclosures

6 Months Ended

Jun. 30, 2018

Note 6. 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 4. Derivative Instruments and Hedging Activities.

Investment in Tamar Petroleum Ltd Our investment in shares of Tamar Petroleum was acquired on March 14, 2018. The fair value of these shares is determined at the end of each quarter based on the trading price of Tamar Petroleum shares on the Tel Aviv Stock Exchange and is reduced by a 15% discount. The discount rate is based on analysis of historical discounts realized in private placements of public common stock, which we believe represents a reasonable estimate of the impact of the temporary lock-up provisions applicable to the shares we own. See Note 2. Basis of Presentation and Note 3. Acquisitions and Divestitures.

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.

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) ⁽²⁾			Significant Unobservable Inputs (Level 3) ⁽³⁾		Adjustment ⁽⁴⁾			Fair Value Measurement
June 30, 2018
Financial Assets:
Mutual Fund Investments	$	57		$	—		$	—	$	—		$	57
Commodity Derivative Instruments	—			72			—		(43		)	29
Investment in Tamar Petroleum Ltd. (38,495,575 Shares)⁽⁵⁾	—			150			—		—			150
Financial Liabilities:
Commodity Derivative Instruments	—			(378		)	—		43			(335		)
Portion of Deferred Compensation Liability Measured at Fair Value	(73		)	—			—		—			(73		)
Stock Based Compensation Liability Measured at Fair Value	(12		)	—			—		—			(12		)
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		)


⁽¹⁾	Level 1 measurements are fair value measurements which use quoted market prices (unadjusted) in active markets for identical assets or liabilities. We use Level 1 inputs when available as Level 1 inputs generally provide the most reliable evidence of fair value.


⁽²⁾	Level 2 measurements are fair value measurements which use inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.


⁽³⁾	Level 3 measurements are fair value measurements which use unobservable inputs.


⁽⁴⁾	Amount represents the impact of netting provisions within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.


⁽⁵⁾	As of June 30, 2018, the closing price on the TASE of publicly traded and unrestricted shares of Tamar Petroleum Ltd. was $4.60 per share.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities such, as oil and gas properties, goodwill and other intangible assets, are not required to be measured at fair value on a recurring basis. However, these assets are assessed for impairment, and a resulting asset impairment would require the asset be recorded at fair value.

Asset Impairments During first quarter 2018, upon classification of the Gulf of Mexico properties as assets held for sale, we recognized an impairment of $168 million. See Note 3. Acquisitions and Divestitures. For second quarter 2018 and the first six months of 2017, we had no adjustments in fair value related to oil and gas properties.

Additional Fair Value Disclosures

Investment in CNX Midstream Partners Our investment in CNX Midstream Partners, which is included in our Midstream reportable segment, is accounted for using the equity method. The fair value of the investment is based on the published market price of the common units for the date indicated below.



	June 30, 2018				December 31, 2017
(millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Investment in CNX Midstream Partners (14,217,198 Common Units and 21,692,198 Common Units, respectively) ⁽¹⁾	$	49	$	276	$	70	$	364


⁽¹⁾	During second quarter 2018, we sold 7.5 million common units, reducing our ownership in CNX Midstream Partners. See Note 3. Acquisitions and Divestitures.

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.

Our Revolving Credit Facility, the Noble Midstream Services Revolving Credit Facility and the Leviathan Term Loan Facility are variable-rate, non-public debt. 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 5. Debt.

Fair value information regarding our debt is as follows:



	June 30, 2018				December 31, 2017
(millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-Term Debt ⁽¹⁾	$	6,422	$	6,591	$	6,586	$	7,142

⁽¹⁾

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

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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