Litigation and other contingencies
A variety of claims have been made against the company and its subsidiaries in a number of lawsuits.
Management has regular litigation reviews, including updates from corporate and outside counsel to assess the need for accounting recognition or disclosure of these contingencies. The company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavourable outcome is reasonably possible and which are significant, the company discloses the nature of the contingency and, where feasible, an estimate of the possible loss. For purposes of the company’s contingency disclosures, "significant" includes material matters, as well as other matters which management believes should be disclosed. Based on a consideration of all relevant facts and circumstances, the company does not believe the ultimate outcome of any currently pending lawsuits against the company will have a material adverse effect on the company’s operations, financial condition, or financial statements taken as a whole.
Additionally, the company has other commitments arising in the normal course of business for operating and capital needs, all of which are expected to be fulfilled with no adverse consequences material to the company’s operations, financial condition, or financial statements taken as a whole. Unconditional purchase obligations, as defined by accounting standards, are long-term commitments that are non-cancellable or cancellable only under certain conditions and that third parties have used to secure financing for the facilities that will provide the contracted goods and services. The company has not entered into any unconditional purchase obligations.
There were outstanding letters of credit aggregating to $668 million at December 31, 2025 (2024 - $475 million), issued as security for financial and performance conditions in relation to certain contracts and commitments. These letters of credit do not reduce any available funds under current borrowing arrangements.
As a result of the completed sale of the remaining company-owned Esso retail sites, the company was contingently liable at December 31, 2025, for guarantees relating to performance under contracts of other third-party obligations totalling $7 million (2024 - $10 million).
In the fourth quarter of 2025, the company recorded contractual obligations associated with the Norman Wells end of field life acceleration (see note 11, "Miscellaneous financial information").