Financial Risk Management Activities

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

11. Financial Risk Management Activities

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. 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. Such strategies are subject to certain limitations under the Merger Agreement. 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 March 31, 2024, these forward contracts and swaps 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:


	March 31, 2024		December 31, 2023

	(In millions)


Foreign exchange forwards / swaps	$	259	$	226
Interest rate swaps	$	100	$	100

Derivative contracts designated as hedging instruments:

Crude oil derivatives designated as cash flow hedges: Crude oil hedging contracts decreased Sales and other operating revenues by $34 million in the three months ended March 31, 2023. There were no open crude oil hedging contracts at March 31, 2024 or December 31, 2023, or during the three months ended March 31, 2024.

Interest rate swaps designated as fair value hedges: At March 31, 2024 and December 31, 2023, we had interest rate swaps with gross notional amounts totaling $100 million, which were designated as fair value hedges and relate to debt where we have converted interest payments from fixed to floating rates. 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. The fair value of our interest rate swaps was a liability of $1 million and a liability of $2 million at March 31, 2024 and December 31, 2023, respectively.

Derivative contracts not designated as hedging instruments:

Foreign exchange: Foreign exchange gains and losses, which are reported in Other, net in Revenues and non-operating income in the Statement of Consolidated Income, were net losses of $2 million in the three months ended March 31, 2024 (2023: net gains of $2 million). A component of foreign exchange gains and losses is the result of foreign exchange derivative contracts that are not designated as hedges, which amounted to net gains of $5 million in the three months ended March 31, 2024 (2023: net losses of $2 million). The fair value of our foreign exchange forwards and swaps was nil at March 31, 2024 and a liability of $6 million at December 31, 2023.

Fair Value Measurement:

At March 31, 2024, our total long-term debt, which was substantially comprised of fixed-rate debt instruments, had a carrying value of $8,729 million and a fair value of $8,965 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 March 31, 2024 and December 31, 2023.