Derivative and Financial Instruments	3 Months Ended
Mar. 31, 2021
Derivative and Financial Instruments [Abstract]
Derivative and Financial Instruments	Note 10—Derivative and Financial Instruments We use futures, forwards, swaps and options in various markets to meet our customer needs, capture market opportunities, and manage foreign exchange currency risk. Commodity Derivative Instruments Our commodity business primarily consists of natural gas, crude oil, bitumen, LNG and NGLs. Commodity derivative instruments are held at fair value on our consolidated balance sheet. Where these balances have the right of setoff, they are presented on a net basis. Related cash flows are recorded as operating activities on our consolidated statement of cash flows. On our consolidated income statement, gains and losses are recognized either on a gross basis if directly related to our physical business or a net basis if held for trading. Gains and losses related to contracts that meet and are designated with the NPNS exception are recognized upon settlement. We generally apply this exception to eligible crude contracts and certain gas contracts. We do not apply hedge accounting for our commodity derivatives. The following table presents the gross fair values of our commodity derivatives, excluding collateral, and the line items where they appear on our consolidated balance sheet: Millions of Dollars March 31 December 31 2021 2020 Assets Prepaid expenses and other current assets $ 232 229 Other assets 46 26 Liabilities Other accruals 221 202 Other liabilities and deferred credits 33 18 The gains (losses) from commodity derivatives incurred, and the line items where they appear on our consolidated income statement were: Millions of Dollars Three Months Ended March 31 2021 2020 Sales and other operating revenues $ (279) 47 Other income (loss) 17 2 Purchased commodities 13 (27) On January 15, 2021, we assumed financial derivative instruments consisting of oil and natural gas swaps following the acquisition of Concho. At the acquisition date, the financial derivative instruments acquired were recognized at fair value as a net liability of $ 456 million with settlement dates under the contracts through December 31, 2022. During the first quarter, we recognized a before-tax loss of $ 173 million on Concho derivative contracts with settlement dates on or before March 31, 2021, and an additional $ 132 million loss related to acquired Concho derivative contracts with settlement dates subsequent to March 31, 2021, for a total before-tax loss of $ 305 million. This loss associated with the acquired financial instruments is recorded within the “Sales and other operating revenues” line on our consolidated income statement. At March 31, 2021, all oil and natural gas derivative financial instruments acquired from Concho were contractually settled. In connection with the settlement, we paid $ 692 million in the first quarter of 2021 and will pay the remaining $ 69 million in the second quarter of 2021. Cash settlements related to the Concho derivative contracts are presented within “Cash Flows From Operating Activities” on our consolidated cash flow statement. The table below summarizes our net exposures resulting from outstanding commodity derivative contracts: Open Position Long/(Short) March 31 December 31 2021 2020 Commodity Natural gas and power (billion cubic feet equivalent) Fixed price 17 (20) Basis (12) (10) Financial Instruments We invest in financial instruments with maturities based on our cash forecasts for the various accounts and currency pools we manage. The types of financial instruments in which we currently invest include: ● Time deposits: Interest bearing deposits placed with financial institutions for a predetermined amount of time. ● Demand deposits: Interest bearing deposits placed with financial institutions. Deposited funds can be withdrawn without notice. ● Commercial paper: Unsecured promissory notes issued by a corporation, commercial bank or government agency purchased at a discount to mature at par. ● U.S. government or government agency obligations: Securities issued by the U.S. government or U.S. government agencies. ● Foreign government obligations: Securities issued by foreign governments. ● Corporate bonds: Unsecured debt securities issued by corporations. ● Asset-backed securities: Collateralized debt securities. The following investments are carried on our consolidated balance sheet at cost, plus accrued interest and the table reflects remaining maturities at March 31, 2021 and December 31, 2020: Millions of Dollars Carrying Amount Cash and Cash Equivalents Short-Term Investments Investments and Long- Term Receivables March 31 December 31 March 31 December 31 March 31 December 31 2021 2020 2021 2020 2021 2020 Cash $ 636 597 Demand Deposits 1,281 1,133 Time Deposits 1 to 90 days 861 1,225 3,625 2,859 91 to 180 days 171 448 Within one year 16 13 One year through five years 2 1 U.S. Government Obligations 1 to 90 days 10 23 - - $ 2,788 2,978 3,812 3,320 2 1 The following investments in debt securities classified as available for sale are carried at fair value on our consolidated balance sheet at March 31, 2021 and December 31, 2020: Millions of Dollars Carrying Amount Cash and Cash Equivalents Short-Term Investments Investments and Long-Term Receivables March 31 December 31 March 31 December 31 March 31 December 31 2021 2020 2021 2020 2021 2020 Major Security Type Corporate Bonds $ - - 114 130 151 143 Commercial Paper 43 13 162 155 U.S. Government Obligations - - 3 4 7 13 U.S. Government Agency Obligations 10 17 Foreign Government Obligations 13 - - 2 Asset-backed Securities - - 49 41 $ 43 13 292 289 217 216 Cash and Cash Equivalents and Short-Term Investments have remaining maturities within one year. Investments and Long-Term Receivables have remaining maturities greater than one year through eight years. The following table summarizes the amortized cost basis and fair value of investments in debt securities classified as available for sale: Millions of Dollars Amortized Cost Basis Fair Value March 31 December 31 March 31 December 31 2021 2020 2021 2020 Major Security Type Corporate bonds $ 264 271 265 273 Commercial paper 205 168 205 168 U.S. government obligations 10 17 10 17 U.S. government agency obligations 10 17 10 17 Foreign government obligations 13 2 13 2 Asset-backed securities 49 41 49 41 $ 551 516 552 518 As of March 31, 2021 and December 31, 2020, total unrealized losses for debt securities classified as available for sale with net losses were negligible. Additionally, at March 31, 2021 and December 31, 2020, investments in these debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded were negligible. For the three-month periods ended March 31, 2021 and March 31, 2020, proceeds from sales and redemptions of investments in debt securities classified as available for sale were $ 147 million and $ 63 million, respectively. Gross realized gains and losses included in earnings from those sales and redemptions were negligible. The cost of securities sold and redeemed is determined using the specific identification method. Credit Risk Financial instruments potentially exposed to concentrations of credit risk consist primarily of cash equivalents, short-term investments, long-term investments in debt securities, OTC derivative contracts and trade receivables. Our cash equivalents and short-term investments are placed in high-quality commercial paper, government money market funds, government debt securities, time deposits with major international banks and financial institutions, high-quality corporate bonds, and foreign government obligations. Our long-term investments in debt securities are placed in high-quality corporate bonds, U.S. government and government agency obligations, asset-backed securities, and time deposits with major international banks and financial institutions. The credit risk from our OTC derivative contracts, such as forwards, swaps and options, derives from the counterparty to the transaction. Individual counterparty exposure is managed within predetermined credit limits and includes the use of cash-call margins when appropriate, thereby reducing the risk of significant nonperformance. We also use futures, swaps and option contracts that have a negligible credit risk because these trades are cleared primarily with an exchange clearinghouse and subject to mandatory margin requirements until settled; however, we are exposed to the credit risk of those exchange brokers for receivables arising from daily margin cash calls, as well as for cash deposited to meet initial margin requirements. Our trade receivables result primarily from our oil and gas operations and reflect a broad national and international customer base, which limits our exposure to concentrations of credit risk. The majority of these receivables have payment terms of 30 days or less, and we continually monitor this exposure and the creditworthiness of the counterparties. At our option, we may require collateral to limit the exposure to loss including, letters of credit, prepayments and surety bonds, as well as master netting arrangements to mitigate credit risk with counterparties that both buy from and sell to us, as these agreements permit the amounts owed by us or owed to others to be offset against amounts due to us. Certain of our derivative instruments contain provisions that require us to post collateral if the derivative exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also permit us to post letters of credit as collateral, such as transactions administered through the New York Mercantile Exchange. The aggregate fair value of all derivative instruments with such credit risk-related contingent features that were in a liability position at March 31, 2021 and December 31, 2020, was $ 22 million and $ 25 million, respectively. For these instruments, no collateral was posted as of March 31, 2021 or December 31, 2020. If our credit rating had been downgraded below investment grade at March 31, 2021, we would have been required to post $ 21 million of additional collateral, either with cash or letters of credit.

Note 10—Derivative and Financial Instruments

We use futures, forwards, swaps and options in various markets to meet our customer

needs, capture market

opportunities, and manage foreign exchange currency

risk.

Commodity Derivative Instruments

Our commodity business primarily consists

of natural gas, crude oil, bitumen, LNG and NGLs.

Commodity derivative instruments are held at fair

value on our consolidated balance sheet.

Where these

balances have the right of setoff, they are presented on

a net basis.

Related cash flows are recorded as

operating activities on our consolidated statement

of cash flows.

On our consolidated income statement, gains

and losses are recognized either on a gross basis

if directly related to our physical business

or a net basis if held

for trading.

Gains and losses related to contracts that meet

and are designated with the NPNS exception are

recognized upon settlement.

We generally apply this exception to eligible crude contracts and certain gas

contracts.

We do not apply hedge accounting for our commodity derivatives.

On January 15, 2021, we assumed financial derivative

instruments consisting of oil and natural gas

swaps

following the acquisition of Concho.

At the acquisition date, the financial derivative

instruments acquired

were recognized at fair value as a net liability

of $

456

million with settlement dates under the contracts

through December 31, 2022.

During the first quarter, we recognized a before-tax loss of $

173

million on

Concho derivative contracts with settlement dates

on or before March 31, 2021, and an additional

132

million

loss related to acquired Concho derivative contracts

with settlement dates subsequent to March 31,

2021, for a

total before-tax loss of $

305

million.

This loss associated with the acquired financial instruments

is recorded

within the “Sales and other operating revenues”

line on our consolidated income statement.

Financial Instruments

We invest in financial instruments with maturities based on our cash forecasts for

the various accounts and

currency pools we manage.

The types of financial instruments in which we

currently invest include:

●

Time deposits: Interest bearing deposits placed with financial

institutions for a predetermined amount

of time.

●

Demand deposits: Interest bearing deposits placed

with financial institutions.

Deposited funds can be

withdrawn without notice.

●

Commercial paper: Unsecured promissory notes issued

by a corporation, commercial bank or

government agency purchased at a discount to

mature at par.

●

U.S. government or government agency obligations:

Securities issued by the U.S. government or

U.S.

government agencies.

●

Foreign government obligations: Securities

issued by foreign governments.

●

Corporate bonds: Unsecured debt securities

issued by corporations.

●

Asset-backed securities: Collateralized debt securities.

The following investments are carried on our

consolidated balance sheet at cost, plus accrued

interest and the

table reflects remaining maturities at March

31, 2021 and December 31, 2020:

The following investments in debt securities

classified as available for sale are carried at

fair value on our

consolidated balance sheet at March 31, 2021

and December 31, 2020:

Millions of Dollars

Carrying Amount

Cash and Cash Equivalents

Short-Term Investments

Investments and Long-Term

Receivables

March 31

December 31

March 31

December 31

March 31

December 31

2021

2020

2021

2020

2021

2020

Major Security Type

Corporate Bonds

114

130

151

143

Commercial Paper

162

155

U.S. Government Obligations

U.S. Government Agency

Obligations

Foreign Government Obligations

Asset-backed Securities

292

289

217

216

Cash and Cash Equivalents and Short-Term Investments have remaining maturities

within one year.

Investments and Long-Term Receivables have remaining maturities

greater than one year through eight years.

As of March 31, 2021 and December 31, 2020,

total unrealized losses for debt securities

classified as available

for sale with net losses were negligible.

Additionally, at March 31, 2021 and December 31, 2020, investments

in these debt securities in an unrealized loss position

for which an allowance for credit losses

has not been

recorded were negligible.

For the three-month periods ended March 31,

2021 and March 31, 2020, proceeds from

sales and redemptions

of investments in debt securities classified

as available for sale were $

147

million and $

million,

respectively.

Gross realized gains and losses included in

earnings from those sales and redemptions were

negligible.

The cost of securities sold and redeemed is determined

using the specific identification method.

Credit Risk

Financial instruments potentially exposed to concentrations

of credit risk consist primarily of cash equivalents,

short-term investments, long-term investments

in debt securities, OTC derivative contracts and trade

receivables.

Our cash equivalents and short-term investments

are placed in high-quality commercial paper,

government money market funds, government debt

securities, time deposits with major international

banks and

financial institutions, high-quality corporate

bonds,

and foreign government obligations.

Our long-term

investments in debt securities are placed in high-quality

corporate bonds, U.S. government and government

agency obligations, asset-backed securities,

and time deposits with major international

banks and financial

institutions.

The credit risk from our OTC derivative contracts,

such as forwards, swaps and options, derives

from the

counterparty to the transaction.

Individual counterparty exposure is managed

within predetermined credit

limits and includes the use of cash-call margins when appropriate,

thereby reducing the risk of significant

nonperformance.

We also use futures, swaps and option contracts that have a negligible credit

risk because

these trades are cleared primarily with an exchange

clearinghouse and subject to mandatory margin

requirements until settled; however, we are exposed to the credit

risk of those exchange brokers for receivables

arising from daily margin cash calls, as well as for cash

deposited to meet initial margin requirements.

Our trade receivables result primarily

from our oil and gas operations and reflect a broad

national and

international customer base, which limits our

exposure to concentrations of credit risk.

The majority of these

receivables have payment terms of 30 days or less,

and we continually monitor this exposure and

the

creditworthiness of the counterparties.

At our option, we may require collateral to limit

the exposure to loss

including, letters of credit, prepayments and surety

bonds, as well as master netting arrangements

to mitigate

credit risk with counterparties that both buy from

and sell to us, as these agreements permit

the amounts owed

by us or owed to others to be offset against amounts

due to us.

Certain of our derivative instruments contain provisions that require us to post collateral if the derivative

exposure exceeds a threshold amount. We have contracts with fixed threshold amounts and other contracts

with variable threshold amounts that are contingent on our credit rating. The variable threshold amounts

typically decline for lower credit ratings, while both the variable and fixed threshold amounts typically revert

to zero if we fall below investment grade. Cash is the primary collateral in all contracts; however, many also

permit us to post letters of credit as collateral, such as transactions administered through the New York

Mercantile Exchange.

The aggregate fair value of all derivative

instruments with such credit risk-related contingent

features that were

in a liability position at March 31, 2021 and

December 31, 2020, was $

million and $

million,

respectively.

For these instruments,

collateral was posted as of March 31, 2021 or

December 31, 2020.

our credit rating had been downgraded below investment

grade at March 31, 2021,

we would have been

required to post $

million of additional collateral, either with

cash or letters of credit.