14. Risk Management and Trading Activities

In the normal course of its business, the Corporation is exposed to commodity risks related to changes in the prices of crude oil, natural gas, refined petroleum products and electricity, as well as changes in interest rates and foreign currency values. In the disclosures that follow, risk management activities are referred to as corporate and energy marketing risk management activities. The Corporation also has trading operations, principally through a 50% voting interest in a consolidated partnership, that trades energy-related commodities, securities and derivatives. These activities are also exposed to commodity price risks primarily related to the prices of crude oil, natural gas, refined petroleum products and electricity as well as foreign currency values. In March 2013, the Corporation announced plans to divest the downstream businesses, which include its energy marketing risk management and trading activities. Accordingly, the results from energy marketing risk management and trading activities have been classified as discontinued operations and the related assets and liabilities reported as held for sale in the Consolidated Balance Sheet.

The Corporation maintains a control environment for all of its risk management and trading activities under the direction of its chief risk officer and through its corporate risk policy, which the Corporation’s senior management has approved. Controls include volumetric, term and value at risk limits. The chief risk officer must approve the trading of new instruments and commodities. Risk limits are monitored and reported on a daily basis to business units and senior management. The Corporation’s risk management department also performs independent price verifications (IPV’s) of sources of fair values, validations of valuation models and analyzes changes in fair value measurements on a daily, monthly and/or quarterly basis. The Corporation’s treasury department is responsible for administering foreign exchange rate and interest rate hedging programs using similar controls and processes, where applicable.

The Corporation’s risk management department, in performing the IPV procedures, utilizes independent sources and valuation models that are specific to the individual contracts and pricing locations to identify positions that require adjustments to better reflect the market. This review is performed quarterly and the results are presented to the chief risk officer and senior management. The IPV process considers the reliability of the pricing services through assessing the

number of available quotes, the frequency at which data is available and, where appropriate, the comparability between pricing sources.

Following is a description of the Corporation’s activities that use derivatives as part of their operations and strategies. Derivatives include both financial instruments and forward purchase and sale contracts. Gross notional amounts of both long and short positions are presented in the volume tables below. These amounts include long and short positions that offset in closed positions and have not reached contractual maturity. Gross notional amounts do not quantify risk or represent assets or liabilities of the Corporation, but are used in the calculation of cash settlements under the contracts.

Corporate Risk Management Activities: Corporate risk management activities include transactions designed to reduce risk in the selling prices of crude oil, refined petroleum products or natural gas produced by the Corporation or to reduce exposure to foreign currency or interest rate movements. Generally, futures, swaps or option strategies may be used to fix the forward selling price of a portion of the Corporation’s crude oil, refined petroleum products or natural gas production. Forward contracts may also be used to purchase certain currencies in which the Corporation does business with the intent of reducing exposure to foreign currency fluctuations. These forward contracts comprise various currencies, primarily the British Pound. Interest rate swaps may be used to convert interest payments on certain long-term debt from fixed to floating rates.

The gross volumes of the Corporate risk management derivative contracts outstanding were as follows:


	September 30, 2013		December 31, 2012
Commodity, primarily crude oil (millions of barrels)		8		1
Foreign exchange (millions of U.S. Dollars)	$	55	$	1,285
Interest rate swaps (millions of U.S. Dollars)	$	865	$	880

In the first quarter of 2013, the Corporation entered into Brent crude oil hedges using fixed-price swap contracts to hedge the variability of forecasted future cash flows from 90,000 barrels of oil per day (bopd) of crude oil sales volumes for the remainder of the calendar year at an average price of approximately $109.70 per barrel. In 2012, the Corporation had entered into Brent crude oil hedges using fixed-price swap contracts to hedge 120,000 bopd of crude oil sales volumes for the full year at an average price of $107.70 per barrel. In 2012, the Corporation also realized hedge losses from previously closed Brent crude oil hedges that covered 24,000 bopd during the year.

Realized gains from E&P hedging activities increased Sales and other operating revenues by $2 million and $36 million for the three and nine months ended September 30, 2013, respectively ($1 million and $23 million after-taxes, respectively). Realized losses from E&P hedging activities decreased Sales and other operating revenues by $148 million and $533 million for the three and nine months ended September 30, 2012, respectively ($94 million and $334 million after-taxes, respectively). At September 30, 2013, the after-tax deferred gains in Accumulated other comprehensive income (loss) related to Brent crude oil hedges were $1 million, which will be reclassified into earnings during the remainder of 2013 as the hedged crude oil sales are recognized in earnings. The ineffectiveness from Brent crude oil hedges, recognized immediately in Sales and other operating revenues, resulted in losses of $17 million and $2 million for the three months ended September 30, 2013 and 2012, respectively, and a gain of $1 million and a loss of $10 million for the nine months ended September 30, 2013 and 2012, respectively.

At September 30, 2013 and December 31, 2012, the Corporation had interest rate swaps with gross notional amounts of $865 million and $880 million, respectively, which were designated as fair value hedges. Changes in the fair value of interest rate swaps and the hedged fixed-rate debt are recorded in Interest expense in the Statement of Consolidated Income. For the three months ended September 30, 2013 and 2012, the Corporation recorded increases of $1 million and $7 million, respectively, and a decrease of $27 million and an increase of $17 million (excluding accrued interest) for the nine months ended September 30, 2013 and 2012, respectively, in the fair value of interest rate swaps and a corresponding adjustment in the carrying value of the hedged fixed-rate debt.

Gains or losses on foreign exchange contracts that are not designated as hedges are recognized immediately in Other, net in Revenues and non-operating income in the Statement of Consolidated Income. Net realized and unrealized pre-tax gains and losses on foreign exchange contracts amounted to gains of $4 million and $31 million for the three months ended

September 30, 2013 and 2012, respectively and a loss of $36 million and a gain of $35 million for the nine months ended September 30, 2013 and 2012, respectively.

Energy Marketing Risk Management Activities: In its energy marketing activities, the Corporation sells refined petroleum products, natural gas and electricity principally to commercial and industrial businesses at fixed and floating prices for varying periods of time. Commodity contracts such as futures, forwards, swaps and options, together with physical assets such as storage and pipeline capacity, are used to obtain supply and reduce margin volatility or lower costs related to sales contracts with customers.

The gross volumes of the Corporation’s energy marketing commodity contracts outstanding were as follows:


	September 30, 2013		December 31, 2012
Crude oil and refined petroleum products (millions of barrels)		20		26
Natural gas (millions of mcf*)		4,032		2,938
Electricity (millions of megawatt hours)		238		278

*	One mcf represents one thousand cubic feet.

The changes in fair value of certain energy marketing commodity contracts that are not designated as hedges, as well as revenues from the sales contracts, supply contract purchases and net settlements from financial derivatives related to these energy marketing activities, are recognized currently in Income from discontinued operations in the Statement of Consolidated Income. Net realized and unrealized pre-tax gains and losses on derivative contracts not designated as hedges amounted to a loss of $125 million and a gain of $66 million for the three months ended September 30, 2013 and 2012, respectively, and a loss of $49 million and a gain of $145 million for the nine months ended September 30, 2013 and 2012, respectively.

At September 30, 2013, a portion of energy marketing commodity contracts were designated as cash flow hedges to hedge variability of expected future cash flows of forecasted supply transactions. The Corporation recorded the effective portion of changes in the fair value of cash flow hedges as a component of Accumulated other comprehensive income (loss) in the Consolidated Balance Sheet and then reclassified amounts to Income from discontinued operations in the Statement of Consolidated Income as the hedged transactions were recognized in earnings. After-tax deferred losses relating to energy marketing activities recorded in Accumulated other comprehensive income (loss) were $9 million at September 30, 2013 and $22 million at December 31, 2012.

Trading Activities: Trading activities are conducted principally through a trading partnership in which the Corporation has a 50% voting interest. This consolidated entity operates to generate earnings through various strategies primarily using energy-related commodities, securities and derivatives. The Corporation also takes trading positions for its own account. The information that follows represents 100% of the trading partnership and the Corporation’s proprietary trading accounts.

The gross volumes of derivative contracts outstanding related to trading activities were as follows:


	September 30, 2013		December 31, 2012
Commodity
Crude oil and refined petroleum products (millions of barrels)		1,624		1,179
Natural gas (millions of mcf)		3,116		3,377
Electricity (millions of megawatt hours)		5		19
Foreign exchange (millions of U.S. Dollars)	$	89	$	412
Other
Interest rate (millions of U.S. Dollars)	$	49	$	167
Equity securities (millions of shares)		14		14

Pre-tax unrealized and realized gains (losses) recorded in Income from discontinued operations in the Statement of Consolidated Income from trading activities amounted to the following:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013		2012
	(In millions)
Commodity	$	6		$	75	$	53	$	83
Foreign exchange		(1	)		1		—		3
Other		9			9		17		8

Total	$	14		$	85	$	70	$	94

Fair Value Measurements: The Corporation generally enters into master netting arrangements to mitigate legal and counterparty credit risk. Master netting arrangements are generally accepted overarching master contracts that govern all individual transactions with the same counterparty entity as a single legally enforceable agreement. The U.S. Bankruptcy Code provides for the enforcement of certain termination and netting rights under certain types of contracts upon the bankruptcy filing of a counterparty, commonly known as the “safe harbor” provisions. If a master netting arrangement provides for termination and netting upon the counterparty’s bankruptcy, these rights are generally enforceable with respect to “safe harbor” transactions. If these arrangements provide the right of offset and the Corporation’s intent and practice is to offset amounts in the case of such a termination, the Corporation’s policy is to record the fair value of derivative assets and liabilities on a net basis.

In the normal course of business the Corporation relies on legal and credit risk mitigation clauses providing for adequate credit assurance as well as close-out netting, including two-party netting and single counterparty multilateral netting. As applied to the Corporation, “two-party netting” is the right to net amounts owing under safe harbor transactions between a single defaulting counterparty entity and a single Hess entity, and “single counterparty multilateral netting” is the right to net amounts owing under safe harbor transactions among a single defaulting counterparty entity and multiple Hess entities. The Corporation is reasonably assured that these netting rights would be upheld in a bankruptcy proceeding in the U.S. in which the defaulting counterparty is a debtor under the U.S. Bankruptcy Code.

The following table provides information about the effect of netting arrangements on the presentation of the Corporation’s physical and financial derivative assets and (liabilities) that are measured at fair value, with the effect of single counterparty multilateral netting being included in column (iv):


				Gross Amounts Offset in the Consolidated Balance Sheet						Net Amounts			Gross Amounts
	Gross Amounts			Physical Derivative and Financial Instruments			Cash Collateral*			Presented in the Consolidated Balance Sheet			Not Offset in the Consolidated Balance Sheet			Net Amounts
	(i)			(ii)			(ii)			(iii) = (i) + (ii)			(iv)			(v) = (iii) + (iv)
	(In millions)
September 30, 2013
Assets
Derivative contracts
Commodity	$	3,186		$	(2,530	)	$	(19	)	$	637		$	(30	)	$	607
Interest rate and other		62			(11	)		(4	)		47			(2	)		45
Counterparty netting		—			(80	)		—			(80	)		—			(80	)

Total derivative contracts	$	3,248		$	(2,621	)	$	(23	)	$	604		$	(32	)	$	572

September 30, 2013
Liabilities
Derivative contracts
Commodity	$	(3,320	)	$	2,530		$	99		$	(691	)	$	30		$	(661	)
Other		(12	)		11			—			(1	)		2			1
Counterparty netting		—			80			—			80			—			80

Total derivative contracts	$	(3,332	)	$	2,621		$	99		$	(612	)	$	32		$	(580	)


December 31, 2012
Assets
Derivative contracts
Commodity	$	3,253		$	(2,661	)	$	(34	)	$	558		$	(45	)	$	513
Interest rate and other		100			(8	)		—			92			(6	)		86
Counterparty netting		—			(81	)		—			(81	)		—			(81	)

Total derivative contracts	$	3,353		$	(2,750	)	$	(34	)	$	569		$	(51	)	$	518


Liabilities
Derivative contracts
Commodity	$	(3,312	)	$	2,661		$	5		$	(646	)	$	45		$	(601	)
Other		(10	)		8			—			(2	)		6			4
Counterparty netting		—			81			—			81			—			81

Total derivative contracts	$	(3,322	)	$	2,750		$	5		$	(567	)	$	51		$	(516	)

*	There is no cash collateral that was not offset in the Consolidated Balance Sheet.

Included in net assets and liabilities that were offset in the Consolidated Balance Sheet as reflected in column (iii) of the table above were the assets and liabilities related to the Corporation’s discontinued operations in the amounts of $541 million and $611 million as of September 30, 2013, respectively ($483 million and $565 million as of December 31, 2012). The amounts at September 30, 2013 were classified as held for sale in the Consolidated Balance Sheet. The remainder of net assets and liabilities that were offset in the Consolidated Balance Sheet as reflected in column (iii) of the table above, related to the Corporation’s continuing operations and were included in Accounts receivable – Trade and Accounts payable, respectively.

The table below reflects the gross and net fair values of the corporate and energy marketing risk management and trading derivative instruments:


	Accounts Receivable			Accounts Payable
	(In millions)
September 30, 2013
Derivative contracts designated as hedging instruments
Commodity	$	23		$	(5	)
Interest rate and other		40			(1	)

Total derivative contracts designated as hedging instruments		63			(6	)


Derivative contracts not designated as hedging instruments*
Commodity		3,163			(3,315	)
Foreign exchange		—			(1	)
Other		22			(10	)

Total derivative contracts not designated as hedging instruments		3,185			(3,326	)


Gross fair value of derivative contracts		3,248			(3,332	)
Master netting arrangements		(2,621	)		2,621
Cash collateral (received) posted		(23	)		99

Net fair value of derivative contracts	$	604		$	(612	)


December 31, 2012
Derivative contracts designated as hedging instruments
Commodity	$	65		$	(124	)
Interest rate and other		72			(2	)

Total derivative contracts designated as hedging instruments		137			(126	)


Derivative contracts not designated as hedging instruments*
Commodity		3,188			(3,188	)
Foreign exchange		14			—
Other		14			(8	)

Total derivative contracts not designated as hedging instruments		3,216			(3,196	)


Gross fair value of derivative contracts		3,353			(3,322	)
Master netting arrangements		(2,750	)		2,750
Cash collateral (received) posted		(34	)		5

Net fair value of derivative contracts	$	569		$	(567	)

*	Includes trading derivatives and derivatives used for risk management.

The Corporation determines fair value in accordance with the fair value measurements accounting standard (Accounting Standards Codification 820 — Fair Value Measurements and Disclosures), which established a hierarchy that categorizes the sources of inputs, which generally range from quoted prices for identical instruments in a principal trading market (Level 1) to estimates determined using related market data (Level 3). Measurements derived indirectly from observable inputs or from quoted prices from markets that are less liquid are considered Level 2.

When Level 1 inputs are available within a particular market, those inputs are selected for determination of fair value over Level 2 or 3 inputs in the same market. To value derivatives that are characterized as Level 2 and 3, the Corporation uses observable inputs for similar instruments that are available from exchanges, pricing services or broker quotes. These observable inputs may be supplemented with other methods, including internal extrapolation or interpolation, that result in the most representative prices for instruments with similar characteristics. Multiple inputs may be used to measure fair value, however, the level of fair value for each physical derivative and financial asset or liability presented below is based on the lowest significant input level within this fair value hierarchy.

The following table provides the Corporation’s net physical derivative and financial assets and (liabilities) that are measured at fair value based on this hierarchy:


	Level 1			Level 2			Level 3			Counterparty netting			Collateral			Balance
	(In millions)
September 30, 2013
Assets
Derivative contracts
Commodity	$	131		$	417		$	150		$	(42	)	$	(19	)	$	637
Interest rate and other		10			40			2			(1	)		(4	)		47
Collateral and counterparty netting		(32	)		(47	)		(1	)		—			—			(80	)

Total derivative contracts		109			410			151			(43	)		(23	)		604
Other assets measured at fair value on a recurring basis		8			—			—			—			—			8

Total assets measured at fair value on a recurring basis	$	117		$	410		$	151		$	(43	)	$	(23	)	$	612	(a)


Liabilities
Derivative contracts
Commodity	$	(75	)	$	(627	)	$	(130	)	$	42		$	99		$	(691	)
Other		—			(2	)		—			1			—			(1	)
Collateral and counterparty netting		32			47			1			—			—			80

Total derivative contracts		(43	)		(582	)		(129	)		43			99			(612	)
Other liabilities measured at fair value on a recurring basis		(22	)		—			—			—			—			(22	)

Total liabilities measured at fair value on a recurring basis	$	(65	)	$	(582	)	$	(129	)	$	43		$	99		$	(634	)(b)

Other fair value measurement disclosures Long-term debt	$	—		$	(6,606	)	$	—		$	—		$	—		$	(6,606	)

(a)

Includes a total of $63 million of Commodity and Interest rate and other Level 2 assets that relate to the Corporation’s continuing operations.

(b)

Includes $1 million of Commodity and Other Level 2 liabilities that relate to the Corporation’s continuing operations.


	Level 1			Level 2			Level 3			Counterparty netting			Collateral			Balance
	(In millions)
December 31, 2012
Assets
Derivative contracts
Commodity	$	94		$	445		$	243		$	(190	)	$	(34	)	$	558
Interest rate and other		6			86			1			(1	)		—			92
Collateral and counterparty netting		(23	)		(54	)		(4	)		—			—			(81	)

Total derivative contracts		77			477			240			(191	)		(34	)		569
Other assets measured at fair value on a recurring basis		5			49			—			(2	)		—			52

Total assets measured at fair value on a recurring basis	$	82		$	526		$	240		$	(193	)	$	(34	)	$	621


Liabilities
Derivative contracts
Commodity	$	(83	)	$	(657	)	$	(101	)	$	190		$	5		$	(646	)
Other		(1	)		(2	)		—			1			—			(2	)
Collateral and counterparty netting		23			54			4			—			—			81

Total derivative contracts		(61	)		(605	)		(97	)		191			5			(567	)
Other liabilities measured at fair value on a recurring basis		(40	)		(2	)		(2	)		2			—			(42	)

Total liabilities measured at fair value on a recurring basis	$	(101	)	$	(607	)	$	(99	)	$	193		$	5		$	(609	)

Other fair value measurement disclosures Long-term debt	$	—		$	(8,887	)	$	—		$	—		$	—		$	(8,887	)

The following table provides net transfers into and out of each level of the fair value hierarchy:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(In millions)
Transfers into Level 1	$	18		$	85		$	(1	)	$	244
Transfers out of Level 1		15			(38	)		77			210

	$	33		$	47		$	76		$	454


Transfers into Level 2	$	(11	)	$	48		$	(103	)	$	(245	)
Transfers out of Level 2		(2	)		(131	)		16			(288	)

	$	(13	)	$	(83	)	$	(87	)	$	(533	)


Transfers into Level 3	$	(14	)	$	50		$	(12	)	$	100
Transfers out of Level 3		(6	)		(14	)		23			(21	)

	$	(20	)	$	36		$	11		$	79

The Corporation’s policy is to recognize transfers in and transfers out as of the end of the reporting period. Transfers between levels result from the passage of time as contracts move closer to their maturities, fluctuations in the market liquidity for certain contracts and/or changes in the level of significance of fair value measurement inputs.

The following table provides changes in physical derivatives and financial assets and (liabilities) that are measured at fair value based on Level 3 inputs, which are all related to discontinued operations:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(In millions)
Balance at beginning of period	$	107		$	87		$	141		$	(143	)
Unrealized pre-tax gains (losses)
Included in earnings (a)		(61	)		(26	)		(122	)		(72	)
Included in other comprehensive income (loss) (b)		—			—			—			43
Purchases (c)		4			14			44			244
Sales (c)		(1	)		(9	)		(32	)		(266	)
Settlements (d)		(7	)		15			(20	)		232
Transfers into Level 3		(14	)		50			(12	)		100
Transfers out of Level 3		(6	)		(14	)		23			(21	)

Balance at end of period	$	22		$	117		$	22		$	117

(a)

All of the unrealized pre-tax gains and losses included in earnings were reflected in Income from discontinued operations in the Statement of Consolidated Income.

(b)

The unrealized pre-tax gains (losses) included in Other comprehensive income (loss) are reflected in the Change in fair value of cash flow hedges in the Statement of Consolidated Comprehensive Income.

(c)

Purchases and sales primarily represent option premiums paid or received, respectively, during the reporting period and are reflected in Income from discontinued operations in the Statement of Consolidated Income.

(d)

Settlements represent realized gains (losses) on derivatives settled during the reporting period and are reflected in Income from discontinued operations in the Statement of Consolidated Income.

The significant unobservable inputs used in Level 3 fair value measurements for the Corporation’s physical commodity contracts and derivative instruments primarily include less liquid delivered locations for physical commodity contracts or volatility assumptions for out-of-the-money options. The following table provides information about the Corporation’s significant recurring unobservable inputs used in the Level 3 fair value measurements. Natural gas contracts are usually quoted and transacted using basis pricing relative to an active pricing location (e.g., Henry Hub), for which price inputs represent the approximate value of differences in geography and local market conditions. All other price inputs below represent full contract prices. Significant changes in any of the inputs below, independently or correlated, may result in a different fair value.


	Unit of Measurement	Range / Weighted Average
September 30, 2013
Assets
Commodity contracts with a fair value of $150 million (a) Contract prices
Crude oil and refined petroleum products	$ / bbl (c)		$ 71.23 - 163.44 / 113.54
Electricity	$ / MWH (d)		$ 23.80 - 102.25 / 37.09

Basis prices
Natural gas	$ / MMBTU (e)		$ (1.76) - 10.15 / 0.11

Contract volatilities
Crude oil and refined petroleum products	%		14.00 - 21.00 / 17.00
Natural gas	%		19.00 - 31.00 / 23.00
Electricity	%		16.00 - 29.00 / 23.00

September 30, 2013
Liabilities
Commodity contracts with a fair value of $130 million (b) Contract prices
Crude oil and refined petroleum products	$ / bbl (c)	$ 89.82 - 130.53 / 116.97
Electricity	$ / MWH (d)	$ 24.75 - 81.18 / 39.94

Basis prices
Natural gas	$ / MMBTU (e)	$ (1.75) - 10.15 / 0.73

Contract volatilities
Crude oil and refined petroleum products	%	14.00 - 21.00 / 16.00


December 31, 2012
Assets
Commodity contracts with a fair value of $243 million Contract prices
Crude oil and refined petroleum products	$ / bbl (c)	$79.35 -144.27 / 113.06
Electricity	$ / MWH (d)	$23.37 - 79.27 / 40.81

Basis prices
Natural gas	$ / MMBTU (e)	$ (0.47) - 6.66 / 0.39

Contract volatilities
Crude oil and refined petroleum products	%	23.00 - 27.00 / 26.00
Natural gas	%	21.00 - 36.00 / 25.00
Electricity	%	18.00 - 40.00 / 28.00


Liabilities
Commodity contracts with a fair value of $101 million Contract prices
Crude oil and refined petroleum products	$ / bbl (c)	$83.49 -133.38 / 109.94
Electricity	$ / MWH (d)	$25.01 - 72.60 / 40.38

Basis prices
Natural gas	$ / MMBTU (e)	$ (0.72) - 6.66 / 1.26

Contract volatilities
Crude oil and refined petroleum products	%	24.00 - 27.00 / 26.00
Natural gas	%	21.00 - 28.00 / 22.00

(a)

Included in Assets held for sale.

(b)

Included in Liabilities associated with assets held for sale.

(c)

Price per barrel.

(d)

Price per megawatt hour.

(e)

Price per million British thermal unit.

Note:

Fair value measurement for all recurring inputs was performed using a combination of income and market approach techniques.

Credit Risk: The Corporation is exposed to credit risks that may at times be concentrated with certain counterparties, groups of counterparties or customers. Accounts receivable are generated from a diverse domestic and international customer base. As of September 30, 2013, the Corporation’s net Accounts receivable — Trade related to continuing operations were concentrated with the following counterparty and customer industry segments: Integrated Oil Companies — 51%, Refiners — 24%, Financial Institutions — 11% and Government Entities — 9%. As of December 31, 2012, the Corporation’s net Accounts receivable — Trade, which included the receivables for the downstream businesses, were concentrated as follows: Integrated Oil Companies — 23%, Refiners — 15%, Government Entities — 11%, Real Estate — 8%, Services — 8% and Manufacturing — 6%. The Corporation reduces its risk related to certain counterparties by using master netting arrangements and requiring collateral, generally cash or letters of credit. The Corporation records the cash collateral received or posted as an offset to the fair value of derivatives executed with the same counterparty. At September 30, 2013 and December 31, 2012, the Corporation held cash from counterparties of $23 million and $34 million, respectively. The Corporation posted cash to counterparties at September 30, 2013 and December 31, 2012, of $99 million and $5 million, respectively.

At September 30, 2013, the Corporation had outstanding letters of credit totaling $522 million ($746 million at December 31, 2012), primarily issued to satisfy margin requirements (approximately $405 million related to discontinued operations at September 30, 2013). Certain of the Corporation’s agreements also contain contingent collateral provisions that could require the Corporation to post additional collateral if the Corporation’s credit rating declines. As of September 30, 2013, the net liability related to both realized and unrealized derivative contracts with contingent collateral provisions was approximately $142 million, primarily related to discontinued operations ($435 million at December 31, 2012). There was no cash collateral posted on those derivatives at September 30, 2013 or December 31, 2012. At September 30, 2013 and at December 31, 2012, all three major credit rating agencies that rate the Corporation’s debt had assigned an investment grade rating. If two of the three agencies were to downgrade the Corporation’s rating to below investment grade, as of September 30, 2013, the Corporation would be required to post additional collateral of approximately $95 million ($275 million at December 31, 2012).