Financial Risk Management Activities

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

In the normal course of our business, we are exposed to commodity risks related to changes in the prices of crude oil and natural gas, as well as changes in interest rates and foreign currency values. In the disclosures that follow, corporate financial risk management activities refer to the mitigation of these risks through hedging activities. We maintain a control environment for all of our financial risk management activities under the direction of our Chief Risk Officer. Our Treasury department is responsible for administering foreign exchange rate and interest rate hedging programs using similar controls and processes, where applicable. Hedging strategies are reviewed annually by the Audit Committee of the Board of Directors.

Corporate Financial Risk Management Activities: Financial risk management activities include transactions designed to reduce risk in the selling prices of crude oil or natural gas we produce or reduce our exposure to foreign currency or interest rate movements. Generally, futures, swaps or option strategies may be used to fix the forward selling price, or establish a floor price or a range banded with a floor and ceiling price, for a portion of our crude oil or natural gas production. Forward contracts or swaps may also be used to purchase certain currencies in which we conduct business with the intent of reducing exposure to foreign currency fluctuations. At December 31, 2023, these forward contracts relate to the British Pound and Malaysian Ringgit. Interest rate swaps may be used to convert interest payments on certain long-term debt from fixed to floating rates.

The notional amounts of outstanding financial risk management derivative contracts were as follows:


	December 31, 2023		December 31, 2022

	(In millions)

Foreign exchange forwards and swaps	$	226	$	177
Interest rate swaps	$	100	$	100

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


	Assets		Liabilities

	(In millions)
December 31, 2023
Derivative Contracts Designated as Hedging Instruments:
Interest rate swaps	$	—	$	(2)
Total derivative contracts designated as hedging instruments	—		(2)
Derivative Contracts Not Designated as Hedging Instruments:
Foreign exchange forwards and swaps	—		(6)
Total derivative contracts not designated as hedging instruments	—		(6)
Gross fair value of derivative contracts	—		(8)
Gross amount offset in the Consolidated Balance Sheet	—		—
Net Amounts Presented in the Consolidated Balance Sheet	$	—	$	(8)

December 31, 2022
Derivative Contracts Designated as Hedging Instruments:


Interest rate swaps	—		(4)
Total derivative contracts designated as hedging instruments	—		(4)
Derivative Contracts Not Designated as Hedging Instruments:
Foreign exchange forwards and swaps	—		(2)
Total derivative contracts not designated as hedging instruments	—		(2)
Gross fair value of derivative contracts	—		(6)
Gross amount offset in the Consolidated Balance Sheet	—		—
Net Amounts Presented in the Consolidated Balance Sheet	$	—	$	(6)

At December 31, 2023 and 2022, the fair value of our interest rate swaps is presented within Accrued liabilities and Other liabilities and deferred credits, respectively, in our Consolidated Balance Sheet. The fair value of our foreign exchange forwards and swaps is presented within Accrued liabilities in our Consolidated Balance Sheet. All fair values in the table above are based on Level 2 inputs.

Crude oil price hedging contracts decreased Sales and other operating revenues by $190 million in 2023 (2022: decrease of $585 million; 2021: decrease of $243 million). The change in fair value of interest rate swaps was an increase of $2 million in 2023 (2022: $6 million decrease; 2021: $3 million decrease) with a corresponding adjustment in the carrying value of the hedged fixed‑rate debt. We recognized net foreign exchange gains of $4 million in 2023 (2022: $16 million losses; 2021: $3 million losses). Offsetting these net foreign exchange gains were net losses from our foreign exchange derivative contracts, that are not designated as hedges, of $2 million in 2023 (2022: $14 million gains; 2021: $1 million gains). Foreign exchange gains and losses, and the gains and losses on our foreign exchange derivative contracts, are recorded in Other, net in the Statement of Consolidated Income.

Credit Risk: We are 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. At December 31, 2023, our accounts receivable were concentrated with the following counterparty industry segments: Integrated companies 40%, Independent E&P companies 37%, Refining and marketing companies 12%, Storage and transportation companies 4%, National oil companies 1%, and Others 6%. We reduce risk related to certain counterparties, where applicable, by using master netting arrangements and requiring collateral, generally cash or letters of credit.

At December 31, 2023, we had outstanding letters of credit totaling $88 million (2022: $83 million).

Fair Value Measurement: At December 31, 2023, our total long-term debt, which was substantially comprised of fixed rate debt instruments, had a carrying value of $8,613 million and a fair value of $9,006 million, based on Level 2 inputs in the fair value measurement hierarchy. We also have short-term financial instruments, primarily cash equivalents, accounts receivable and accounts payable, for which the carrying value approximated fair value at December 31, 2023 and December 31, 2022.