Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GENERAL

The Company’s results are sensitive to fluctuations in oil, NGL and natural gas prices. Price changes at global prices and levels of production affect the Company’s budgeted 2026 pre-tax cash by approximately $240 million for a $1 per barrel change in WTI price and approximately $25 million for a $1 per barrel change in Brent price. If domestic natural gas prices varied by $0.50 per Mcf, it would have an estimated annual effect on the Company’s budgeted 2026 pre-tax cash of approximately $120 million. These price-change sensitivities include the impact of PSC and similar contract volume changes on income. If production levels differ from the Company’s 2026 budgeted production, the sensitivity of the Company’s results to prices also will change. Marketing results are sensitive to price changes of oil, natural gas and, to a lesser degree, NGL, sulfur and CO2. A $0.25 change in the Midland-to-Gulf-Coast oil spreads impacts budgeted 2026 pre-tax cash by approximately $55 million.

RISK MANAGEMENT

The Company conducts its risk management activities for marketing and trading under the controls and governance of its risk policies. The controls under these policies are implemented and enforced by regulatory compliance and market and credit risk groups which monitor risks by providing independent and separate evaluations and checks. Controls for these activities include limits on value at risk, credit and asset hedges as well as segregation of duties, delegation of authority, price verifications and review of various key performance indicators.

FAIR VALUE OF MARKETING DERIVATIVE CONTRACTS

The Company carries derivative contracts it enters into in connection with its marketing activities at fair value. Fair values for these contracts are derived from Level 1 and Level 2 sources. The fair values in future maturity periods are insignificant.

The following table shows the fair value of the Company’s derivatives (excluding collateral), segregated by maturity periods and by methodology of fair value estimation:

QUANTITATIVE INFORMATION

The Company uses value at risk to estimate the potential effects of changes in fair values of commodity contracts used in trading activities. This measure determines the maximum potential negative one day change in fair value with a 95% level of confidence. Additionally, the Company uses complementary trading limits including position and tenor limits and maintains liquid positions as a result of which market risk typically can be neutralized or mitigated on short notice. As a result of these controls, the Company believes that the market risk of its trading activities is not reasonably likely to have a material adverse effect on its performance.

			table of contents			QUANTITATIVE AND QUALITATIVE DISCLOSURES

GENERAL

As of December 31, 2025, the Company had fixed rate debt with a fair value of $19.4 billion outstanding. A 25-basis point change in Treasury rates would change the fair value of the fixed rate debt approximately $300 million.

As of December 31, 2025, the Company had variable rate debt with a notional value of $1.3 billion outstanding. A 25-basis point increase in SOFR interest rates would increase gross interest expense $3.0 million per year.

The table below provides information about the Company’s long-term debt obligations as of December 31, 2025. Debt amounts represent principal payments by maturity date.

(a)Excluded unamortized debt premiums, net of $1.1 billion and debt issuance costs of $84 million. See Note 5 Long-Term Debt for information regarding debt activity at the date of filing.

The Company’s international operations have limited currency risk. The Company manages its exposure primarily by balancing monetary assets and liabilities and limiting cash positions in foreign currencies to levels necessary for operating purposes. A vast majority of international oil sales are denominated in United States dollars. Additionally, all of the Company’s consolidated international oil and gas subsidiaries have the United States dollar as the functional currency. The effect of exchange rates on transactions in foreign currencies is included in periodic income.

The majority of the Company’s counterparty credit risk is related to the physical delivery of energy commodities to its customers and any inability of these customers to meet their settlement commitments. The Company manages credit risk by selecting counterparties that it believes to be financially strong, by entering into netting arrangements with counterparties and by requiring collateral or other credit risk mitigants, as appropriate. The Company actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. The Company also enters into futures contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk, if any.

As of December 31, 2025, the substantial majority of the credit exposures were with investment grade counterparties. The Company believes its exposure to credit-related losses as of December 31, 2025 was not material and losses associated with credit risk have been insignificant for all years presented.

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