Note 11—Guarantees
At June 30, 2020, we were liable for certain
contingent obligations under various contractual
arrangements as
described below.
We recognize a liability, at inception, for the fair value of our obligation as a guarantor for
newly issued or modified guarantees.
Unless the carrying amount of the liability is
noted below, we have not
recognized a liability because the fair value of the obligation
is immaterial.
In addition, unless otherwise
stated, we are not currently performing with any
significance under the guarantee and expect
future
performance to be either immaterial or have only
a remote chance of occurrence.
APLNG Guarantees
At June 30, 2020, we had outstanding multiple
guarantees in connection with our
37.5
interest in APLNG.
The following is a description of the guarantees
with values calculated utilizing June 2020
●
During the third quarter of 2016, we issued a guarantee
to facilitate the withdrawal of our pro-rata
portion of the funds in a project finance reserve account.
We estimate the remaining term of this
guarantee is
11 years
.
Our maximum exposure under this guarantee is
approximately $
170
and may become payable if an enforcement action
is commenced by the project finance lenders
against APLNG.
At June 30, 2020, the carrying value of this
guarantee was approximately $
14
million.
●
In conjunction with our original purchase of an ownership
interest in APLNG from Origin Energy in
October 2008, we agreed to reimburse Origin Energy for
our share of the existing contingent liability
arising under guarantees of an existing obligation
of APLNG to deliver natural gas under several
sales
agreements with remaining terms of
1 to 22 years
.
Our maximum potential liability for future
payments, or cost of volume delivery, under these guarantees is estimated
to be $
700
($
1.3
billion in the event of intentional or reckless
breach), and would become payable if
APLNG fails
to meet its obligations under these agreements
and the obligations cannot otherwise be mitigated.
Future payments are considered unlikely, as the payments, or cost of volume
delivery, would only be
triggered if APLNG does not have enough natural
gas to meet these sales commitments and if
the
co-venturers do not make necessary equity contributions
into APLNG.
●
We have guaranteed the performance of APLNG with regard to certain other contracts
executed in
connection with the project’s continued development.
The guarantees have remaining terms
of
17 to
25 years or the life of the venture
.
Our maximum potential amount of future payments
related to these
guarantees is approximately $
120
million and would become payable if APLNG
does not perform.
At
June 30, 2020, the carrying value of these guarantees
was approximately $
7
Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling
approximately
$
780
million, which consist primarily of
guarantees of the residual value of leased office buildings,
guarantees
of the residual value of corporate aircrafts,
and a guarantee for our portion of a joint venture’s project finance
reserve accounts.
These guarantees have remaining terms
of
1 to 5 years
and would become payable if certain
asset values are lower than guaranteed amounts at
the end of the lease or contract term, business conditions
decline at guaranteed entities, or as a result of nonperformance
of contractual terms by guaranteed parties.
At June 30, 2020, the carrying value of these
guarantees was approximately $
11
Indemnifications
Over the years, we have entered into agreements to
sell ownership interests in certain corporations,
joint
ventures and assets that gave rise to qualifying
indemnifications.
These agreements include indemnifications
for taxes and environmental liabilities.
The majority of these indemnifications are related
to tax issues and the
majority of these expire in 2021.
Those related to environmental issues have terms
that are generally indefinite
and the maximum amounts of future payments are
generally unlimited.
The carrying amount recorded for
these indemnification obligations at June 30, 2020,
was approximately $
70
indemnification liability over the relevant time
period the indemnity is in effect, if one exists, based
on the
facts and circumstances surrounding each type
of indemnity.
In cases where the indemnification term
is
indefinite, we will reverse the liability when we have
information the liability is essentially
relieved or
amortize the liability over an appropriate time
period as the fair value of our indemnification
exposure
declines.
Although it is reasonably possible future payments
may exceed amounts recorded, due to the nature
of the indemnifications, it is not possible to make
a reasonable estimate of the maximum
potential amount of
future payments.
Included in the recorded carrying amount
at June 30, 2020, were approximately $
30
of environmental accruals for known contamination
that are included in the “Asset retirement
obligations and
accrued environmental costs” line on our consolidated
balance sheet.
For additional information about
environmental liabilities, see Note 12—Contingencies
and Commitments.