Fair Value Measurements and Disclosures

12 Months Ended

Dec. 31, 2018

Note 14. Fair Value Measurements and Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis on our consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:

Cash, Cash Equivalents, Accounts Receivable and Accounts Payable The carrying amounts approximate fair value due to the short-term nature or maturity of the instruments.

Mutual Fund Investments Our mutual fund investments consist of various publicly-traded mutual funds that include investments ranging from equities to money market instruments. The fair values are based on quoted market prices for identical assets.

Commodity Derivative Instruments Our commodity derivative instruments may include variable to fixed price commodity swaps, two-way collars, three-way collars, swaptions, enhanced swaps and basis swaps. We estimate the fair values of these instruments using published forward commodity price curves as of the date of the estimate. The discount rate used in the discounted cash flow projections is based on published LIBOR rates, Eurodollar futures rates and interest swap rates. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk, and the fair values of commodity derivative instruments in a liability position include a measure of our own nonperformance risk, each based on the current published credit default swap rates. In addition, for collars, we estimate the option values of the put options sold and the contract floors and ceilings using an option pricing model which considers market volatility, market prices and contract terms. See Note 13. Derivative Instruments and Hedging Activities.

Deferred Compensation Liability The value is dependent upon the fair values of mutual fund investments and shares of our common stock held in a rabbi trust. See Mutual Fund Investments above.

Stock-Based Compensation Liability A portion of the value of the liability associated with our phantom unit plan is dependent upon the fair value of Noble Energy common stock as of the end of each reporting period. See Note 17. Stock-Based and Other Compensation Plans.

Measurement information for assets and liabilities that are measured at fair value on a recurring basis was as follows:



	Fair Value Measurements Using
(millions)	Quoted Prices in Active Markets (Level 1) ⁽¹⁾			Significant Other Observable Inputs (Level 2) ⁽¹⁾			Significant Unobservable Inputs (Level 3) ⁽¹⁾		Adjustment ⁽²⁾			Fair Value Measurement
December 31, 2018
Financial Assets
Mutual Fund Investments	$	38		$	—		$	—	$	—		$	38
Commodity Derivative Instruments	—			187			—		(7		)	180
Financial Liabilities
Commodity Derivative Instruments	—			(34		)	—		7			(27		)
Portion of Deferred Compensation Liability Measured at Fair Value	(43		)	—			—		—			(43		)
Stock Based Compensation Liability Measured at Fair Value	(8		)	—			—		—			(8		)
December 31, 2017
Financial Assets
Mutual Fund Investments	$	57		$	—		$	—	$	—		$	57
Commodity Derivative Instruments	—			7			—		(5		)	2
Financial Liabilities
Commodity Derivative Instruments	—			(78		)	—		5			(73		)
Portion of Deferred Compensation Liability Measured at Fair Value	(71		)	—			—		—			(71		)
Stock Based Compensation Liability Measured at Fair Value	(10		)	—			—		—			(10		)


⁽¹⁾	See Note 1. Summary of Significant Accounting Policies – Fair Value Measurements for a description of the fair value hierarchy.


⁽²⁾	Amount represents the impact of netting clauses within our master agreements that allow us to net cash settle asset and liability positions with the same counterparty.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis on our consolidated balance sheets. See Note 1. Summary of Significant Accounting Policies for the methods and assumptions used to estimate the fair values:

Asset Impairments Impairments are recorded when we determine that the carrying amounts of certain oil and gas properties or midstream facilities are not recoverable from future cash flows, and are calculated using significant unobservable (Level 3) inputs. In 2018, upon classification of the Gulf of Mexico properties as assets held for sale, we recognized impairment expense of $168 million. Additionally, in fourth quarter 2018, we recorded impairment expense of $38 million, $37 million of which related to changes in construction plans for certain midstream assets.

The 2017 impairment of $70 million primarily related to our decision not to pursue development of the Troubadour natural gas discovery in the Gulf of Mexico. The 2016 impairment of $92 million primarily related to a decision to write off certain development concepts associated with the Leviathan natural gas project that were not selected. The assets were reduced to their estimated fair values.

Inventory Impairment In 2016, we determined that the carrying amount of certain of our materials and supplies inventory was greater than its net realizable value, which was calculated using significant unobservable (Level 3) inputs. We recognized a $14 million impairment related to these assets.

Goodwill Impairment In fourth quarter 2018, we determined that the carrying amount of goodwill allocated to our Texas reporting unit was less than its estimated fair value, which was calculated using significant unobservable (Level 3) inputs. As a result, we recognized a goodwill impairment of $1.3 billion. See Note 6. Goodwill Impairment.

Marcellus Shale Firm Transportation Liability In 2017, we recorded liabilities totaling $93 million representing the discounted present value of our remaining obligation under certain firm transportation contracts. See Note 10. Marcellus Shale Firm Transportation Commitments.

Additional Fair Value Disclosures

Debt The fair value of fixed-rate, public debt is estimated based on the published market prices for the same or similar issues. As such, we consider the fair value of our public, fixed-rate debt to be a Level 1 measurement on the fair value hierarchy.

At December 31, 2018, our variable-rate, non-public debt included the Revolving Credit Facility, Noble Midstream Services Revolving Credit Facility and the Noble Midstream Services Term Loan Credit Facility. The fair value is estimated based on significant other observable inputs. As such, we consider the fair value of these facilities to be a Level 2 measurement on the fair value hierarchy. See Note 9. Long-Term Debt.

Fair value information regarding our debt is as follows:



	December 31, 2018				December 31, 2017
(millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-Term Debt, Net ⁽¹⁾	$	6,452	$	6,121	$	6,586	$	7,142

(1)Excludes unamortized discount, premium, debt issuance costs and capital lease obligations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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