Fair Value Measurement	3 Months Ended
Mar. 31, 2021
Fair Value Measurement [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 following hierarchy: ● Level 1: Quoted prices (unadjusted) in an active market for identical assets or liabilities. ● Level 2: Inputs other than quoted prices that are directly or indirectly observable. ● Level 3: Unobservable inputs that are significant to the fair value of assets or liabilities. 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 2021 or 2020. Recurring Fair Value Measurement Financial assets and liabilities reported at fair value on a recurring basis primarily include our investment in Cenovus Energy common shares, our investments in debt securities classified as available for sale, and commodity derivatives. ● 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 also includes our investment in common shares of Cenovus Energy, which is valued using quotes for shares on the NYSE, and 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 also includes 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 activity was not material for all periods presented. 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 March 31, 2021 December 31, 2020 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Investment in Cenovus Energy $ 1,564 - - 1,564 1,256 - - 1,256 Investments in debt securities 10 542 - 552 17 501 - 518 Commodity derivatives 162 104 12 278 142 101 12 255 Total assets $ 1,736 646 12 2,394 1,415 602 12 2,029 Liabilities Commodity derivatives $ 155 89 10 254 120 91 9 220 Total liabilities $ 155 89 10 254 120 91 9 220 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 Not Gross Net Amounts Subject to Gross Amounts Amounts Cash Net Recognized Right of Setoff Amounts Offset Presented Collateral Amounts March 31, 2021 Assets $ 278 5 273 197 76 1 75 Liabilities 254 2 252 197 55 1 54 December 31, 2020 Assets $ 255 2 253 157 96 10 86 Liabilities 220 1 219 157 62 4 58 At March 31, 2021 and December 31, 2020, 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. The valuation technique and methods used to estimate the fair value of the current portion of fixed-rate related party loans is consistent with Loans and advances—related parties. ● Investment in Cenovus Energy: See Note 5—Investment in Cenovus Energy for a discussion of the carrying value and fair value of our investment in Cenovus Energy common shares. ● 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—Derivatives and Financial Instruments, for additional information. ● Loans and advances—related parties: The carrying amount of floating-rate loans approximates fair value. The fair value of fixed-rate loan activity is measured using market observable data and is categorized as Level 2 in the fair value hierarchy. See Note 4—Investments, Loans and Long-Term Receivables, for additional information. ● 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 Amount Fair Value March 31 December 31 March 31 December 31 2021 2020 2021 2020 Financial assets Investment in Cenovus Energy $ 1,564 1,256 1,564 1,256 Commodity derivatives 80 88 80 88 Investments in debt securities 552 518 552 518 Loans and advances—related parties 168 220 168 220 Financial liabilities Total debt, excluding finance leases 19,154 14,478 22,578 19,106 Commodity derivatives 56 59 56 59

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 following hierarchy:

●

Level 1: Quoted prices (unadjusted) in an active

market for identical assets or liabilities.

●

Level 2: Inputs other than quoted prices that

are directly or indirectly observable.

●

Level 3: Unobservable inputs that are significant

to the fair value of assets or liabilities.

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

2021 or 2020.

Recurring Fair Value Measurement

Financial assets and liabilities reported at fair

value on a recurring basis primarily include

our investment in

Cenovus Energy common shares, our investments in debt

securities classified as available for sale, and

commodity derivatives.

●

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 also includes our

investment in common shares of Cenovus Energy, which is valued using quotes for shares

on the NYSE,

and 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 also includes 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 activity was not material for all

periods presented.

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

March 31, 2021

December 31, 2020

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

Investment in Cenovus Energy

1,564

1,256

Investments in debt securities

542

552

501

518

Commodity derivatives

162

104

278

142

101

255

Total assets

1,736

646

2,394

1,415

602

2,029

Liabilities

Commodity derivatives

155

254

120

220

Total liabilities

155

254

120

220

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 Not

Gross

Net

Amounts

Subject to

Gross

Amounts

Cash

Net

Recognized

Right of Setoff

Amounts

Offset

Presented

Collateral

Amounts

March 31, 2021

Assets

278

273

197

Liabilities

254

252

197

December 31, 2020

Assets

255

253

157

Liabilities

220

219

157

At March 31, 2021 and December 31, 2020, 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.

The valuation technique and methods used to

estimate the fair value of the current portion

of fixed-rate related party loans is consistent

with Loans

and advances—related parties.

●

Investment in Cenovus Energy: See Note 5—Investment

in Cenovus Energy for a discussion of the

carrying value and fair value of our investment in

Cenovus Energy common shares.

●

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

measured using pricing provided by brokers or

pricing service companies that are corroborated

with

market data.

See Note 10—Derivatives and Financial Instruments,

for additional information.

●

Loans and advances—related parties: The carrying

amount of floating-rate loans approximates

fair

value.

The fair value of fixed-rate loan activity is

measured using market observable data and is

categorized as Level 2 in the fair value hierarchy.

See Note 4—Investments, Loans and Long-Term

Receivables, for additional information.

●

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 Amount

Fair Value

March 31

December 31

March 31

December 31

2021

2020

2021

2020

Financial assets

Investment in Cenovus Energy

1,564

1,256

1,564

1,256

Commodity derivatives

Investments in debt securities

552

518

552

518

Loans and advances—related parties

168

220

168

220

Financial liabilities

Total debt, excluding finance leases

19,154

14,478

22,578

19,106

Commodity derivatives

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details