Note 8—Guarantees
At March 31, 2021, 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 March 31, 2021, 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 March
●
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 to be
10 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 March 31, 2021, the carrying value of this
guarantee was approximately $
14
●
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 21 years
.
Our maximum potential liability for future
payments, or cost of volume delivery, under these guarantees is estimated
to be $
740
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
16 to 25
years or the life of the venture
.
Our maximum potential amount of future payments
related to these
guarantees is approximately $
180
million and would become payable if APLNG
does not perform.
At
March 31, 2021, the carrying value of these guarantees
was approximately $
11
Other Guarantees
We have other guarantees with maximum future potential payment amounts totaling
approximately
$
730
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 one to
five 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 March 31, 2021, the carrying value of these guarantees
was approximately $
11
Indemnifications
Over the years, we have entered into agreements to
sell ownership interests in certain legal
entities, joint
ventures and assets that gave rise to qualifying
indemnifications.
These agreements include indemnifications
for taxes and environmental liabilities.
Most 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 indemnifications at March 31, 2021,
was approximately $
50
million.
We amortize the 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.
For
additional information about environmental liabilities,
see Note 9—Contingencies and Commitments.