Fair Value Measurements

The three levels of the fair value hierarchy of inputs the company uses to measure the fair value of an asset or liability are described as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. For the company, Level 1 inputs include exchange-traded futures contracts for which the parties are willing to transact at the exchange-quoted price and marketable securities that are actively traded.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly. For the company, Level 2 inputs include quoted prices for similar assets or liabilities, prices obtained through third-party broker quotes and prices that can be corroborated with other observable inputs for substantially the complete term of a contract.

Level 3: Unobservable inputs. The company does not use Level 3 inputs for any of its recurring fair value measurements. Level 3 inputs may be required for the determination of fair value associated with certain nonrecurring measurements of nonfinancial assets and liabilities.

The fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at September 30, 2018, and December 31, 2017, is as follows:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

(Millions of dollars)



	At September 30, 2018								At December 31, 2017
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Marketable Securities	$	60	$	60	$	—	$	—	$	9	$	9	$	—	$	—
Derivatives	16		1		15		—		22		—		22		—
Total Assets at Fair Value	$	76	$	61	$	15	$	—	$	31	$	9	$	22	$	—
Derivatives	84		52		32		—		124		78		46		—
Total Liabilities at Fair Value	$	84	$	52	$	32	$	—	$	124	$	78	$	46	$	—

Marketable Securities The company calculates fair value for its marketable securities based on quoted market prices for identical assets. The fair values reflect the cash that would have been received if the instruments were sold at September 30, 2018.

Derivatives The company records its derivative instruments — other than any commodity derivative contracts that are designated as normal purchase and normal sale — on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income. Derivatives classified as Level 1 include futures, swaps and options contracts traded in active markets such as the New York Mercantile Exchange. Derivatives classified as Level 2 include swaps, options and forward contracts principally with financial institutions and other oil and gas companies, the fair values of which are obtained from third-party broker quotes, industry pricing services and exchanges. The company obtains multiple sources of pricing information for the Level 2 instruments. Since this pricing information is generated from observable market data, it has historically been very consistent. The company does not materially adjust this information.

Assets carried at fair value at September 30, 2018, and December 31, 2017, are as follows:

Cash and Cash Equivalents The company holds cash equivalents in U.S. and non-U.S. portfolios. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less, and money market funds. “Cash and cash equivalents” had carrying/fair values of $9.7 billion and $4.8 billion at September 30, 2018, and December 31, 2017, respectively. The fair values of cash and cash equivalents are classified as Level 1 and reflect the cash that would have been received if the instruments were settled at September 30, 2018.

Restricted Cash had a carrying/fair value of $1.1 billion and $1.1 billion at September 30, 2018, and December 31, 2017, respectively. At September 30, 2018, restricted cash is classified as Level 1 and includes restricted funds related to certain upstream abandonment activities and a financing program, which are reported in "Prepaid expenses and other current assets" and “Deferred charges and other assets” on the Consolidated Balance Sheet.

Long-Term Debt had a net carrying value, excluding amounts reclassified from short-term, of $19.9 billion and $23.5 billion at September 30, 2018, and December 31, 2017, respectively. The fair value of long-term debt at September 30, 2018, and December 31, 2017 was $19.8 billion and $23.9 billion, respectively. Long-term debt primarily includes corporate issued bonds. The fair value of corporate bonds classified as Level 1 is $19.0 billion. The fair value of other long-term debt classified as Level 2 is $0.8 billion.

The carrying values of other short-term financial assets and liabilities on the Consolidated Balance Sheet approximate their fair values. Fair value remeasurements of other financial instruments at September 30, 2018, and December 31, 2017, were not material.

The fair value hierarchy for assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2018, is as follows:

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

(Millions of dollars)



	At September 30, 2018
									Before-Tax Loss
	Total		Level 1		Level 2		Level 3		Three Months Ended		Nine Months Ended
	Total		Level 1		Level 2		Level 3		Three Months Ended		Nine Months Ended
Properties, plant and equipment, net (held and used)	$	—	$	—	$	—	$	—	$	—	$	—
Properties, plant and equipment, net (held for sale)	212		—		—		212		290		586
Investments and advances	56		—		—		56		43		44
Total Assets at Fair Value	$	268	$	—	$	—	$	268	$	333	$	630

Properties, plant and equipment The company did not have any individually material impairments of long-lived assets measured at fair value on a nonrecurring basis to report in third quarter 2018.

Investments and advances The company did not have any material impairments of investments and advances measured at fair value on a nonrecurring basis to report in third quarter 2018.