Hess 2008 Annual Report Download - page 56

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Gains or losses from sales of physical products are recorded at the time of sale. Total realized gains (losses) on
trading activities amounted to $(317) million in 2008 and $303 million in 2007. Derivative trading transactions are
marked-to-market and unrealized gains or losses are reflected in income currently. The following table provides an
assessment of the factors affecting the changes in fair value of trading activities and represents 100% of the trading
partnership and other trading activities.
2008 2007
(Millions of
dollars)
Fair value of contracts outstanding at the beginning of the year................ $ 154 $ 365
Change in fair value of contracts outstanding at the beginning of the year and still
outstanding at the end of year ...................................... (257) 193
Reversal of fair value for contracts closed during the year.................... 42 (230)
Fair value of contracts entered into during the year and still outstanding ......... 925 (174)
Fair value of contracts outstanding at the end of the year .................... $ 864 $ 154
The Corporation measures fair value and summarizes the sources of fair value for derivatives in accordance
with the provisions of FAS 157. See the discussion on page 35 for more details on how the Corporation measures fair
value.
The following table summarizes the sources of fair values of derivatives used in the Corporation’s trading
activities at December 31, 2008:
Total 2009 2010 2011
2012 and
Beyond
(Millions of dollars)
Source of fair value
Level1.................................... $ 35 $(22) $ 63 $ 2 $ (8)
Level2.................................... 885 564 180 82 59
Level3.................................... (56) (42) (12) (1) (1)
Total .................................... $864 $500 $231 $83 $50
The following table summarizes the receivables net of cash margin and letters of credit relating to the
Corporation’s trading activities and the credit ratings of counterparties at December 31:
2008 2007
(Millions of
dollars)
Investment grade determined by outside sources ............................ $263 $364
Investment grade determined internally* .................................. 133 173
Less than investment grade............................................ 58 55
Fair value of net receivables outstanding at the end of the year ................. $454 $592
* Based on information provided by counterparties and other available sources.
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