FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2018



NOTE 16	FAIR VALUE MEASUREMENTS

FAIR VALUES – RECURRING

In January 2012, Occidental entered into a long-term contract to purchase CO₂. This contract contains a price adjustment clause that is linked to changes in NYMEX crude oil prices. Occidental determined that the portion of this contract linked to NYMEX oil prices is not clearly and closely related to the host contract, and Occidental therefore bifurcated this embedded pricing feature from its host contract and accounts for it at fair value in the consolidated financial statements.

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, 2018, Using							Netting and Collateral		Total Fair Value

Description		Level 1		Level 2		Level 3
Liabilities:
Embedded derivative	Accrued liabilities	$	—	$	66	$	—	$	—	$	66
Embedded derivative	Deferred credits and liabilities	$	—	$	116	$	—	$	—	$	116



(in millions)	Fair Value Measurements at December 31, 2017, Using							Netting and Collateral		Total Fair Value

Description		Level 1		Level 2		Level 3
Liabilities:
Embedded derivative	Accrued liabilities	$	—	$	39	$	—	$	—	$	39
Embedded derivative	Deferred credits and liabilities	$	—	$	147	$	—	$	—	$	147

FAIR VALUES – NONRECURRING

During 2018, Occidental recognized pre-tax impairment and related charges of $416 million primarily related to Qatar ISND and ISSD proved properties and inventory. The fair value of the proved properties was measured based on the income approach, which 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, estimates of oil and gas reserves, estimates of future expected operating and capital costs and a risk-adjusted discount rate of 10 percent. These inputs are categorized as Level 3 in the fair value hierarchy. As the end of the contract period for Qatar approaches, significant changes to estimated future cash flows could result in additional impairment charges.

During 2017, Occidental recognized pre-tax impairment charges of $397 million primarily related to held for sale non-core proved and unproved Permian acreage. Assumptions for proved and unproved properties classified as held for sale include estimated third-party prices to be received based on recent transactions of similar acreage.

During 2016, Occidental recognized pre-tax impairment charges of $15 million related to proved oil and gas properties.

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 6 for the fair value of Long-term Debt.

- 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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