v3.25.4
Fair Value Measurement
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Note 11—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed according to the quality of valuation inputs under the fair value hierarchy.
The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during 2025 or 2024.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair value on a recurring basis include our investments in debt securities classified as available for sale, commodity derivatives, and our contingent consideration arrangement related to the Surmont acquisition. See Note 3.
•Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are valued using unadjusted prices available from the underlying exchange. Level 1 financial assets also include our investments in U.S. government obligations classified as available for sale debt securities, which are valued using exchange prices.
•Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing service companies that are all corroborated by market data. Level 2 financial assets also include our investments in debt securities classified as available for sale including investments in corporate bonds, commercial paper, asset-backed securities, U.S. government agency obligations and foreign government obligations that are valued using pricing provided by brokers or pricing service companies that are corroborated with market data.
•Level 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale contracts where a significant portion of fair value is calculated from underlying market data that is not readily available. The derived value uses industry standard methodologies that may consider the historical relationships among various commodities, modeled market prices, time value, volatility factors and other relevant economic measures. The use of these inputs results in management’s best estimate of fair value. Level 3 commodity derivative activity was not material for all periods presented.
•Level 3 liabilities include the fair value of future quarterly contingent payments associated with the Surmont acquisition. In October 2023, we completed our acquisition of the remaining 50 percent working interest in Surmont, an asset in our Canada segment, from TotalEnergies EP Canada Ltd. The consideration for the acquisition included a contingent consideration arrangement requiring payment of up to $0.4 billion CAD over a five-year term. The contingent payments represent $2 million for every dollar that WCS pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved. The undiscounted amount we could pay under this arrangement was up to $0.3 billion USD at closing.
The following table summarizes the fair value hierarchy for gross financial assets and liabilities (i.e., unadjusted where the right of setoff exists for commodity derivatives accounted for at fair value on a recurring basis):
Millions of Dollars
December 31, 2025December 31, 2024
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
Investments in debt securities$270 1,331 — 1,601 261 1,290 — 1,551 
Commodity derivatives306 230 68 604 201 252 35 488 
Total assets$576 1,561 68 2,205 462 1,542 35 2,039 
Liabilities
Commodity derivatives$354 124 60 538 275 160 45 480 
Contingent consideration— — — — — — 145 145 
Total liabilities$354 124 60 538 275 160 190 625 
For the year ended December 31, 2025, we have made payments of $80 million, and $237 million in total under the contingent consideration arrangement since the date of the Surmont acquisition, included in the "Other" line within the financing activities section of our consolidated statement of cash flows. As of December 31, 2025, the fair value of the contingent consideration liability was zero due to the commodity price outlook over the remaining term. The range and arithmetic average of the significant unobservable input used in the Level 3 fair value measurement was as follows:
Fair Value (Millions of
Dollars)		Valuation
Technique		Unobservable Input
Range
(Arithmetic Average)
Contingent Consideration - Surmont as of:
December 31, 2025$— Discounted cash flowCommodity price outlook* ($/BOE)
$43.17 - $51.97 ($46.47)
December 31, 2024145 
$48.63 - $57.53 ($53.38)
*Commodity price outlook based on a combination of external pricing service companies' outlooks and internal outlook.
The following table summarizes those commodity derivative balances subject to the right of setoff as presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts
Recognized		Amounts Not
Subject to
Right of Setoff		Gross
Amounts		Gross
Amounts
Offset		Net
Amounts
Presented		Cash
Collateral		Net
Amounts
December 31, 2025
Assets$604 2 602 361 241 6 235 
Liabilities538 1 537 361 176 53 123 
December 31, 2024
Assets$488 — 488 278 210 — 210 
Liabilities480 — 480 278 202 73 129 
At December 31, 2025 and 2024, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.
Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
•Cash and cash equivalents and short-term investments: The carrying amount reported on the balance sheet approximates fair value. For those investments classified as available for sale debt securities, the carrying amount reported on the balance sheet is fair value.
•Accounts and notes receivable (including long-term and related parties): The carrying amount reported on the balance sheet approximates fair value.
•Investments in debt securities classified as available for sale: The fair value of investments in debt securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The fair value of investments in debt securities categorized as Level 2 in the fair value hierarchy is measured using pricing provided by brokers or pricing service companies that are corroborated with market data. See Note 10.
•Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts payable and floating-rate debt reported on the balance sheet approximates fair value.
•Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in the fair value hierarchy.
•Commercial paper: The carrying amount of our commercial paper instruments approximates fair value and is reported on the balance sheet as short-term debt.
The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff exists for commodity derivatives):
Millions of Dollars
Carrying AmountFair Value
2025202420252024
Financial assets
Commodity derivatives237 210 237 210 
Investments in debt securities1,601 1,551 1,601 1,551 
Financial liabilities
Total debt, excluding finance leases22,643 23,384 22,698 22,997 
Commodity derivatives124 129 124 129