Occidental Petroleum 2003 Annual Report Download - page 42
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Maturity Periods
-------------------------------------------------
2005 2007 2009 Total
Source of to to and Fair
Fair Value 2004 2006 2008 thereafter Value
================ ========== ========== ========== ========== ==========
Prices actively
quoted $ 13 $ 6 $ -- $ -- $ 19
Prices provided
by other
external
sources 7 2 4 3 16
Prices based on
models and
other valuation
methods (3) -- -- -- (3)
---------- ---------- ---------- ---------- ----------
TOTAL $ 17 $ 8 $ 4 $ 3 $ 32
================ ========== ========== ========== ========== ==========
The tables above include the fair value of physical positions and the fair
value of the related financial instruments for trading and marketing operations.
At December 31, 2003 and 2002, the physical positions were a net gain of $10
million and $6 million, respectively. The value of the derivative financial
instruments that offset these physical positions are a net gain of $22 million
and a net loss of $8 million at December 31, 2003 and 2002, respectively. Gains
and losses are netted in the statement of operations. On the balance sheets,
except where a right of set-off exists, gains are recognized as assets and
losses are recognized as liabilities.
COMMODITY HEDGES
On a limited basis, Occidental uses cash-flow hedges for the sale of crude
oil and natural gas production. Crude oil cash-flow hedges were executed for
approximately 20 percent of total U.S. oil production in 2002. Natural gas
cash-flow hedges were executed for approximately 7 percent of total U.S. 2002
gas production. Occidental's commodity cash-flow-hedging instruments in 2002
were highly effective. At December 31, 2002, all of these cash-flow hedges had
been settled. No fair value hedges were used for oil and gas production during
2003 or 2002 and no cash flow hedges were used for the sale of production in
2003.
QUANTITATIVE INFORMATION
Occidental uses value at risk to estimate the potential effects of changes
in fair values of commodity-based derivatives and commodity contracts used in
trading activities. This method determines the maximum potential negative
short-term change in fair value with a 95-percent level of confidence. For
non-trading activities, there were no material amounts outstanding at December
31, 2003.
The value at risk for both oil and natural gas is summarized below:
MARKETING AND TRADING VALUE AT RISK
For the years ended December 31, (in millions) 2003 2002
============================================== ======== ========
Value at Risk - Oil
High during the year $ -- $ 1
Low during the year -- --
Average for the year -- 1
Value at Risk - Natural Gas
High during the year $ 3 $ 1
Low during the year -- --
Average for the year 1 1