Fair Value Measurements and Disclosures

9 Months Ended

Sep. 30, 2019

Note 13. Fair Value Measurements and Disclosures

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Cash and 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. Fair values are based on quoted market prices for identical assets.

Commodity Derivative Instruments We estimate the fair values of our derivative instruments using published forward commodity price curves as of the date of the estimate. The discount rate used in the 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 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 values of put options sold and contract floors and ceilings using an option pricing model which considers market volatility, market prices and contract terms. See Note 12. Derivative Instruments and Hedging Activities.

Deferred Compensation Liability Fair 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 at the end of each reporting period.

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



	Fair Value Measurements Using
(millions)	Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Adjustment ⁽¹⁾			Fair Value Measurement
September 30, 2019
Financial Assets:
Mutual Fund Investments	$	42		$	—		$	—	$	—		$	42
Commodity Derivative Instruments	—			155			—		(40		)	115
Financial Liabilities:
Commodity Derivative Instruments	—			(53		)	—		40			(13		)
Portion of Deferred Compensation Liability Measured at Fair Value	(48		)	—			—		—			(48		)
Stock Based Compensation Liability Measured at Fair Value	(3		)	—			—		—			(3		)
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		)


⁽¹⁾	Amount represents the impact of netting provisions within our master agreements allowing us to net cash settle asset and liability positions with the same counterparty.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Firm Transportation Exit Cost Accrual In January 2019, we recorded a firm transportation exit cost liability at fair value of $92 million, representing the discounted present value of our remaining obligation under a permanent pipeline capacity assignment in the Marcellus Shale. See Note 9. Exit Cost – Transportation Commitments.

Redeemable Noncontrolling Interest In March 2019, we recorded redeemable noncontrolling interest associated with the issuance to GIP of preferred equity in Noble Midstream Partners at fair value of $97 million, including issuance date proceeds of $100 million netted with associated issuance costs of $3 million. See Note 2. Basis of Presentation.

Additional Fair Value Disclosures

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

Our non-public debt, including our Revolving Credit Facility, commercial paper borrowings, Noble Midstream Services Revolving Credit Facility and Noble Midstream Services term loans are subject to variable interest rates. The fair value is estimated based on significant other observable inputs; thus, we consider the fair values to be Level 2 measurements on the fair value hierarchy. See Note 7. Debt.

Fair value information regarding our debt is as follows:



	September 30, 2019				December 31, 2018
(millions)	Carrying Amount		Fair Value ⁽¹⁾		Carrying Amount		Fair Value
Debt ⁽²⁾	$	7,345	$	7,963	$	6,452	$	6,121


⁽¹⁾	As of September 30, 2019, the difference between the carrying amount and the fair value is primarily due to low US treasury rates.

⁽²⁾

Represents total debt excluding finance lease obligations. See Note 7. Debt.

- 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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