Marathon Petroleum Corp
For the period ended Dec 31, 2025. Filed Feb 26, 2026.
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FY2025 · Filed Feb 26, 2026
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17. Fair Value Measurements
- Fair Value Measurements
Fair Values – Recurring
The following tables present assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2025 and 2024 by fair value hierarchy level. We have elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty, including any related cash collateral as shown below; however, fair value amounts by hierarchy level are presented on a gross basis in the following tables.
| December 31, 2025 | ||||||
|---|---|---|---|---|---|---|
| Fair Value Hierarchy | ||||||
| (Millions of dollars) | Level 1 | Level 2 | Level 3 | Netting and Collateral(a) | Net Carrying Value on Balance Sheet(b) | Collateral Pledged Not Offset |
| Assets: | ||||||
| Commodity contracts | $243 | $— | $— | $(226) | $17 | $10 |
| Liabilities: | ||||||
| Commodity contracts | $236 | $— | $— | $(236) | $— | $— |
| Embedded derivatives in commodity contracts | — | — | 41 | — | 41 | — |
| Contingent consideration, liability | — | — | 236 | — | 236 | — |
| December 31, 2024 | ||||||
|---|---|---|---|---|---|---|
| Fair Value Hierarchy | ||||||
| (Millions of dollars) | Level 1 | Level 2 | Level 3 | Netting and Collateral(a) | Net Carrying Value on Balance Sheet(b) | Collateral Pledged Not Offset |
| Assets: | ||||||
| Commodity contracts | $139 | $— | $— | $(132) | $7 | $16 |
| Liabilities: | ||||||
| Commodity contracts | $144 | $— | $— | $(144) | $— | $— |
| Embedded derivatives in commodity contracts | — | — | 58 | — | 58 | — |
(a)Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of December 31, 2025, cash collateral of $10 million was netted with mark-to-market derivative liabilities. As of December 31, 2024, cash collateral of $12 million was netted with mark-to-market derivative liabilities.
(b)We have no derivative contracts which are subject to master netting arrangements reflected gross on the balance sheet.
Level 3 instruments include a liability for contingent consideration related to the BANGL Acquisition earnout provision and an embedded derivative liability for a natural gas purchase commitment embedded in a keep-whole processing agreement.
The fair value calculation for the contingent consideration liability was estimated using discounted cash flows based on a Monte Carlo simulation. Future earnout payments are tied to the achievement of EBITDA growth from 2026 to 2029, which includes significant unobservable input of forecasted throughput volumes. The earnout payment will continue to be remeasured at fair value each quarter with changes in fair value recognized in earnings until either the EBITDA targets are met or the earnout period ends, with the total payout capped at $275 million.
The fair value calculation for the embedded derivative liability at December 31, 2025 used significant unobservable inputs including: (1) NGL prices interpolated and extrapolated due to inactive markets ranging from $0.60 to $1.19 per gallon with a weighted average of $0.72 per gallon and (2) a 100 percent probability of renewable for the five-year term of the natural gas purchase commitment and related keep-whole processing agreement. Increases or decreases in the fractionation spread result in an increase or decrease in the fair value of the embedded derivative liability.
The following is a reconciliation of the beginning and ending balances recorded for net liabilities classified as Level 3 in the fair value hierarchy.
| (Millions of dollars) | 2025 | 2024 |
|---|---|---|
| Beginning balance | $58 | $61 |
| Contingent consideration(a) | 234 | — |
| Unrealized and realized (gain) loss included in net income(b) | (5) | 10 |
| Settlements of derivative instruments | (10) | (13) |
| Ending balance | $277 | $58 |
| The amount of total (gain) loss for the period included in earnings attributable to the change in unrealized loss relating to liabilities still held at the end of period(b): | $(7) | $7 |
(a)Liability recorded in the third quarter of 2025 related to the BANGL Acquisition earnout provision.
(b)The gain/loss is included in cost of revenues on the consolidated statements of income.
See Note 18 for the income statement impacts of our derivative instruments.
Fair Values – Reported
We believe the carrying value of our other financial instruments, including cash and cash equivalents, receivables, accounts payable and certain accrued liabilities, approximate fair value. Our fair value assessment incorporates a variety of considerations, including the short-term duration of the instruments, historical incurrence of credit losses and expected insignificance of future credit losses, which includes an evaluation of counterparty credit risk. The borrowings under our revolving credit facilities, which include variable interest rates, approximate fair value. The fair value of our long-term debt is estimated based on average bid prices obtained from broker quotes and is categorized in level 3 of the fair value hierarchy. The carrying and fair values of our debt were approximately $32.4 billion and $31.1 billion at December 31, 2025, respectively, and approximately $26.9 billion and $25.0 billion at December 31, 2024, respectively. These carrying and fair values of our debt exclude the unamortized issuance costs, which are netted against our total debt.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.