13. Fair Value Measurements

Certain of EOG's financial and nonfinancial assets and liabilities are reported at fair value on the Consolidated Balance Sheets. An established fair value hierarchy prioritizes the relative reliability of inputs used in fair value measurements. The hierarchy gives highest priority to Level 1 inputs that represent unadjusted quoted market prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are directly or indirectly observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs and have the lowest priority in the hierarchy. EOG gives consideration to the credit risk of its counterparties, as well as its own credit risk, when measuring financial assets and liabilities at fair value.

The following table provides fair value measurement information within the fair value hierarchy for certain of EOG's financial assets and liabilities carried at fair value on a recurring basis at December 31, 2014 and 2013 (in millions):



	Fair Value Measurements Using:
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
At December 31, 2014
Financial Assets:
Natural Gas Options/Swaptions	$	—	$	100	$	—	$	100
Crude Oil Swaps	—		121		—		121
Crude Oil Options/Swaptions	—		244		—		244

At December 31, 2013
Financial Assets:
Natural Gas Options/Swaptions	$	—	$	8	$	—	$	8
Financial Liabilities:
Crude Oil Swaps	$	—	$	17	$	—	$	17
Crude Oil Options/Swaptions	—		110		—		110
Foreign Currency Rate Swap	—		40		—		40
Interest Rate Swap	—		1		—		1

The estimated fair value of crude oil and natural gas derivative contracts (including options/swaptions) and the interest rate swap contract (see Note 12) was based upon forward commodity price and interest rate curves based on quoted market prices. The estimated fair value of the foreign currency rate swap was based upon forward currency rates. Commodity derivative contracts were valued by utilizing an independent third-party derivative valuation provider who uses various types of valuation models, as applicable.

The initial measurement of asset retirement obligations at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with property, plant and equipment. Significant Level 3 inputs used in the calculation of asset retirement obligations include plugging costs and reserve lives. A reconciliation of EOG's asset retirement obligations is presented in Note 15.

During 2014, proved oil and gas properties and other assets with a carrying amount of $968 million were written down to their fair value of $393 million, resulting in pretax impairment charges of $575 million. Included in the $575 million pretax impairment charges are $58 million of impairments of proved oil and gas properties and other assets for which EOG utilized accepted offers from third-party purchasers as the basis for determining fair value. During 2013, proved and unproved oil and gas properties and other assets with a carrying amount of $400 million were written down to their fair value of $228 million, resulting in pretax impairment charges of $172 million. Included in the $172 million pretax impairment charges are $58 million of impairments of proved oil and gas properties and other assets for which EOG utilized accepted offers from third-party purchasers as the basis for determining fair value. Significant Level 3 inputs associated with the calculation of discounted cash flows used in the impairment analysis include EOG's estimate of future crude oil and natural gas prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data.

Fair Value of Debt. At both December 31, 2014 and 2013, EOG had outstanding $5,890 million aggregate principal amount of debt, which had estimated fair values of approximately $6,242 million and $6,222 million, respectively. The estimated fair value of debt was based upon quoted market prices and, where such prices were not available, other observable (Level 2) inputs regarding interest rates available to EOG at year-end.