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FAIR VALUE MEASUREMENTS
12 Months Ended
Dec. 31, 2015
Fair Value Measurements  
Fair Value Measurements

NOTE 15

FAIR VALUE MEASUREMENTS

 

FAIR VALUES – RECURRING

 

The following tables provide fair value measurement information for assets and liabilities that are measured on a recurring basis:

 

(in millions)

 

Fair Value Measurements at December 31, 2015 Using

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Netting and

 

Total

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Collateral

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

557

 

$

87

 

$

 

$

(535)

 

$

109

 

Available for sale investment

 

$

167

 

$

 

$

 

$

 

$

167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

544

 

$

404

 

$

 

$

(525)

 

$

423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Fair Value Measurements at December 31, 2014 Using

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Netting and

 

Total

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Collateral

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

712

 

$

127

 

$

 

$

(742)

 

$

97

 

Available for sale investment

 

$

394

 

$

 

$

 

$

 

$

394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives

 

$

750

 

$

246

 

$

 

$

(756)

 

$

240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FAIR VALUES – NONRECURRING

 

As a result of the sharp decline of the forward price curve during 2015, as well as the decision to sell or exit non-core operations. Occidental recognized approximately $6.5 billion in pre-tax impairment charges related to proved oil and gas properties. Internationally, Occidental recognized $4.7 billion in pre-tax impairment charges related to $1.8 billion in charges in Oman, $1.3 billion in Iraq and Libya, $1 billion in Qatar, and $550 million in Colombia and Bolivia.  Domestically, Occidental recognized approximately $763 million pre-tax impairment charges related to the sale of the Williston assets, $460 million pre-tax impairment charges for assets in the Piceance Basin as well as a $554 million pre-tax impairment charges related to proved oil and gas properties in South Texas.

 

The impairment tests, including the fair value estimation, incorporated a number of assumptions involving expectations of future cash flows.  These assumptions included estimates of future product prices, which Occidental based on forward price curves and, where applicable, contractual prices, estimates of oil and gas reserves, estimates of future expected operating and development costs and a risk adjusted discount rate of 8-20 percent.  These properties were impacted by persistently worldwide low oil and natural gas prices and changing management’s development plans.  Occidental used the income approach to measure the fair value of these properties, using inputs categorized as Level 3 in the fair value hierarchy.

In the fourth quarter 2015, Occidental recognized approximately $814 million in pre-tax impairment charges for a Midstream CO2 treatment plant related to recurring CO2 shortfalls and unpaid penalty fees.

 

In 2015, Occidental recognized approximately $121 million pre-tax charges related to the impairments of Chemical assets.

 

(in millions)

 

Fair Value Measurements at December 31, 2015 Using

 

 

 

Total Pre-tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Non-cash)

 

 

 

 

 

 

 

 

 

Net

 

Impairment

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Book Value (a)

 

Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired proved oil and gas assets - international

 

$

 

$

 

$

2,666 

 

$

7,359 

 

$

4,693 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired proved oil and gas assets - domestic

 

$

 

$

 

$

625 

 

$

1,655 

 

$

1,030 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired Midstream assets

 

$

 

$

 

$

50 

 

$

891 

 

$

841 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired Chemical property, plant, and equipment

 

$

 

$

 

$

 

$

124 

 

$

121 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Fair Value Measurements at September 30, 2015 Using

 

 

 

Total Pre-tax

 

 

 

 

 

 

 

 

 

 

 

(Non-cash)

 

 

 

 

 

 

 

 

 

Net

 

Impairment

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Book Value (a)

 

Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Williston proved oil and gas assets (b)

 

$

 

$

 

$

615 

 

$

1,378 

 

$

763 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

Fair Value Measurements at December 31, 2014 Using

 

 

 

Total Pre-tax

 

 

 

 

 

 

 

 

 

Net

 

(Non-cash)

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Book Value (a)

 

Impairment Loss

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired proved oil and gas assets - domestic

 

$

 

$

 

$

2,249 

 

$

5,008 

 

$

2,759 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired proved oil and gas assets - international

 

$

 

$

 

$

45 

 

$

1,084 

 

$

1,039 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired Chemical property, plant, and equipment

 

$

 

$

 

$

18 

 

$

129 

 

$

111 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Amount represents net book value at date of assessment.

 

(b)

Williston assets sold in November 2015, classified as held for sale and written down to the sales price at September 30, 2015.

 

FINANCIAL INSTRUMENTS FAIR VALUE

 

The carrying amounts of cash and cash equivalents and other on-balance sheet financial instruments, other than fixed-rate debt, approximate fair value. See Note 5 for the fair value of Long-term Debt.