XML 39 R16.htm IDEA: XBRL DOCUMENT v3.25.4
DERIVATIVES
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
NOTE 7 - DERIVATIVES

OBJECTIVE AND STRATEGY
The Company uses a variety of derivative financial instruments and physical contracts to manage its exposure to commodity price fluctuations and transportation commitments and to fix margins on the future sale of stored commodity volumes. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. The Company may occasionally use a variety of derivative financial instruments to manage its exposure to foreign currency fluctuations and interest rate risks. The Company also enters into derivative financial instruments for trading purposes. The Company may elect normal purchases and normal sales exclusions when physically delivered commodities are purchased from a vendor or sold to a customer. See Note 1 - Summary of Significant Accounting Policies for the Company’s accounting policy on derivatives.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
As of December 31, 2025, the Company’s derivatives not designated as hedges consisted of marketing derivatives. These instruments are recorded on the balance sheet at fair value, with changes in fair value recognized in earnings through mark‑to‑market adjustments until the underlying physical commodity is delivered or the financial instrument is settled.

MARKETING DERIVATIVES
The Company’s marketing derivative instruments not designated as hedges are short-duration physical and financial forward contracts. A substantial majority of the Company’s physically settled derivative contracts are index-based and carry no mark-to-market valuation in earnings. As of December 31, 2025, the weighted-average settlement prices of these forward contracts were $59.59 per barrel and $2.53 per Mcf for crude oil and natural gas, respectively. The weighted-average settlement prices were $71.07 per barrel and $3.50 per Mcf for crude oil and natural gas, respectively, as of December 31, 2024. Net gains and losses associated with marketing derivative instruments not designated as hedging instruments are recognized in net sales. Derivative settlements and collateralization are classified as cash flows from operating activities unless the derivatives contain an other-than-insignificant financing element, in which case the settlements and collateralization are classified as cash flows from financing activities.
The following table summarizes net short volumes associated with the outstanding marketing commodity derivatives as of December 31:

20252024
Oil commodity contracts
Volume (MMbbl)(59)(34)
Natural gas commodity contracts
Volume (Bcf)(189)(130)

FAIR VALUE OF DERIVATIVES
The Company has categorized its assets and liabilities that are measured at fair value in a three-level fair value hierarchy, based on the inputs to the valuation techniques: Level 1 – using quoted prices in active markets for the assets or liabilities; Level 2 – using observable inputs other than quoted prices for the assets or liabilities; and Level 3 – using unobservable inputs. Transfers between levels, if any, are reported at the end of each reporting period. The following table presents the fair values of the Company’s outstanding derivatives. Fair values are presented at gross amounts below, including when derivatives are subject to netting arrangements, and are presented on a net basis in the Consolidated Balance Sheets.
millionsFair Value Measurements UsingTotal Fair Value
Balance Sheet ClassificationLevel 1Level 2Level 3
Netting (a)
December 31, 2025
Marketing Derivatives
Other current assets$345 $51 $— $(328)$68 
Other long-term assets— — — — — 
Accrued liabilities(336)(24)— 328 (32)
Deferred credits and other liabilities - other— — — — — 
December 31, 2024
Marketing Derivatives
Other current assets$455 $92 $— $(512)$35 
Other long-term assets— 1 — (1)— 
Accrued liabilities(451)(90)— 512 (29)
Deferred credits and other liabilities - other— (2)— 1 (1)
(a)These amounts do not include collateral. The Company netted $29 million of collateral received from brokers against derivative assets and $23 million of collateral deposited with brokers against derivatives liabilities as of December 31, 2025. As of December 31, 2024, the Company netted $12 million of collateral received from brokers against derivative assets and $9 million collateral deposited with brokers against derivative liabilities.

GAINS AND LOSSES ON DERIVATIVES
The following table presents gains and (losses) related to the Company’s derivative instruments in the Consolidated Statements of Operations for the years ended December 31:

millions
Income Statement Classification202520242023
Marketing Derivatives
Net sales (a)
$32 $(374)$(74)
(a)Included derivative and non-derivative marketing activity.

CREDIT RISK
The majority of the Company’s counterparty credit risk is related to the physical delivery of energy commodities to its customers and any inability to meet their settlement commitments. The Company manages credit risk by selecting counterparties that it believes to be financially strong, by entering into netting arrangements with counterparties and by requiring collateral or other credit risk mitigants, as appropriate. The Company actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. The Company also enters into futures contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk, if any.