Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting standards for fair value measurement (ASC 820) establish a framework for measuring fair value and stipulate disclosures about fair value measurements. The standards apply to recurring and nonrecurring fair value measurements of financial and nonfinancial assets and liabilities. Among the required disclosures is the fair value hierarchy of inputs the company uses to value an asset or a liability. The three levels of the fair value hierarchy are described as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. For the company, Level 1 inputs include exchange-traded futures contracts for which the parties are willing to transact at the exchange-quoted price and marketable securities that are actively traded.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly. For the company, Level 2 inputs include quoted prices for similar assets or liabilities, prices obtained through third-party broker quotes and prices that can be corroborated with other observable inputs for substantially the complete term of a contract.

Level 3: Unobservable inputs. The company does not use Level 3 inputs for any of its recurring fair value measurements. Level 3 inputs may be required for the determination of fair value associated with certain nonrecurring measurements of nonfinancial assets and liabilities.

The fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012 is as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

(Millions of dollars)

	At March 31, 2013								At December 31, 2012
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Marketable Securities	$	266	$	266	$	—	$	—	$	266	$	266	$	—	$	—
Derivatives	64		2		62		—		86		21		65		—
Total Assets at Fair Value	$	330	$	268	$	62	$	—	$	352	$	287	$	65	$	—
Derivatives	110		106		4		—		149		148		1		—
Total Liabilities at Fair Value	$	110	$	106	$	4	$	—	$	149	$	148	$	1	$	—

Marketable Securities The company calculates fair value for its marketable securities based on quoted market prices for identical assets. The fair values reflect the cash that would have been received if the instruments were sold at March 31, 2013.

Derivatives The company records its derivative instruments — other than any commodity derivative contracts that are designated as normal purchase and normal sale — on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income. For derivatives with identical or similar provisions as contracts that are publicly traded on a regular basis, the company uses the market values of the publicly traded instruments as an input for fair value calculations.

The company’s derivative instruments principally include futures, swaps, options and forward contracts for crude oil, natural gas and refined products. Derivatives classified as Level 1 include futures, swaps and options contracts traded in active markets such as the New York Mercantile Exchange.

Derivatives classified as Level 2 include swaps, options and forward contracts principally with financial institutions and other oil and gas companies, the fair values of which are obtained from third-party broker quotes, industry pricing services and exchanges. The company obtains multiple sources of pricing information for the Level 2 instruments. Since this pricing information is generated from observable market data, it has historically been very consistent. The company does not materially adjust this information. The company incorporates internal review, evaluation and assessment procedures, including a comparison of Level 2 fair values derived from the company’s internally developed forward curves (on a sample basis), with the pricing information to document reasonable, logical and supportable fair value determinations and proper level of classification.

Assets carried at fair value at March 31, 2013, and December 31, 2012, are as follows:

Cash and Cash Equivalents and Time Deposits The company holds cash equivalents and bank time deposits in U.S. and non-U.S. portfolios. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less, and money market funds. “Cash and cash equivalents” had carrying/fair values of $17.4 billion and $20.9 billion at March 31, 2013, and December 31, 2012, respectively. The instruments held in “Time deposits” are bank time deposits with maturities greater than 90 days and had carrying/fair values of $1.4 billion and $0.7 billion at March 31, 2013, and December 31, 2012, respectively. The fair values of cash, cash equivalents and bank time deposits are classified as Level 1 and reflect the cash that would have been received if the instruments were settled at March 31, 2013.

Restricted Cash had a carrying/fair value of $1.1 billion and $1.5 billion at March 31, 2013, and December 31, 2012, respectively. At March 31, 2013, restricted cash is classified as Level 1 and is reported in “Deferred charges and other assets” on the face of the Consolidated Balance Sheet, and includes restricted funds related to certain Upstream abandonment activities, tax payments, funds held in escrow for an asset acquisition and a capital investment project.

The carrying values of other short-term financial assets and liabilities, including short-term debt reclassified to long-term, on the consolidated balance sheet approximate their fair values. Fair value remeasurements of other financial instruments at March 31, 2013 and 2012 were not material.

The fair value hierarchy for assets and liabilities measured at fair value on a nonrecurring basis at March 31, 2013 is as follows:

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

(Millions of dollars)

	At March 31, 2013
	Total		Level 1		Level 2		Level 3		Before-Tax Loss
Properties, plant and equipment, net (held and used)	$	—	$	—	$	—	$	—	$	4
Properties, plant and equipment, net (held for sale)	104		—		—		104		78
Investments and advances	—		—		—		—		—
Total Assets at Fair Value	$	104	$	—	$	—	$	104	$	82

Properties, plant and equipment The company did not have any material impairments of long-lived assets measured at fair value on a nonrecurring basis to report in first quarter2013.

Investments and advances The company did not have any impairments of investments and advances measured at fair value on a nonrecurring basis to report in first quarter2013.