
	2025		2024
Asset retirement obligations	$	9,743	$	8,607
Lease liabilities (note 7)	3,106		1,464
Share-based compensation	433		620
Transportation and processing contracts	186		58
Risk management (note 18)	65		8
Other	68		80
	13,601		10,837
Less: current portion	1,665		1,535
	$	11,936	$	9,302

The Company's asset retirement obligations are expected to be settled on an ongoing basis over a period of approximately 60 years and discounted using a weighted average discount rate of 4.9% (2024 – 4.8%; 2023 – 5.2%) and inflation rates of up to 2% (2024 – up to 2%; 2023 – up to 2%). Reconciliations of the discounted asset retirement obligations were as follows:


	2025		2024		2023
Balance – beginning of year	$	8,607	$	7,690	$	6,908
Liabilities incurred	34		28		25
Liabilities acquired, net	489		171		—
Liabilities settled	(771)		(646)		(509)
Asset retirement obligation accretion	380		389		366
Revision of cost, inflation, and timing estimates (1)	1,233		417		621

Change in discount rates	(129)		419		314
Foreign exchange adjustments	(100)		139		(35)
Balance – end of year (2)	9,743		8,607		7,690
Less: current portion	956		787		634
	$	8,787	$	7,820	$	7,056

(1)Includes normal course revisions of cost, inflation, and timing estimates, as well as revisions to decommissioning timing and costs in the North Sea and Offshore Africa (note 6).

(2)The Company's estimate of its total undiscounted and uninflated asset retirement obligations as at December 31, 2025 was $17.6 billion (2024 – $16.1 billion; 2023 – $15.5 billion).


	2025		2024
Exploration and Production
North America	$	4,937	$	4,783
North Sea	2,629		1,724
Offshore Africa	275		197
Oil Sands Mining and Upgrading	1,901		1,902
Midstream and Refining	1		1
	$	9,743	$	8,607

Changes in the Company's discount and inflation rates used to estimate its expected future cash outflow required to settle its asset retirement obligations would have the following impact:


	2025		2024
Discount rate
1% increase	$	(896)	$	(883)
1% decrease	$	1,135	$	1,132
Inflation rate
1% increase	$	1,171	$	1,166
1% decrease	$	(934)	$	(920)

The liability for share-based compensation includes costs incurred under the Company's Stock Option and PSU Plans. The Company's Stock Option Plan provides current employees with the right to elect to receive common shares or a cash payment in exchange for stock options surrendered. The PSU Plan provides certain executive employees of the Company with the right to receive a cash payment, the amount of which is determined with reference to the value of the Company's shares, by individual employee performance, and the extent to which certain other performance measures are met.

The Company recognizes a liability for potential cash settlements under these plans. The current portion of the liability represents the maximum amount of the liability payable within the next twelve month period if all vested stock options and PSUs are settled in cash.


	2025		2024		2023
Balance – beginning of year	$	620	$	780	$	832
Share-based compensation expense	180		279		491
Cash payment for stock options surrendered and PSUs vested	(94)		(84)		(110)
Transferred to common shares	(273)		(358)		(435)
Other	—		3		2
Balance – end of year	433		620		780
Less: current portion	312		463		538
	$	121	$	157	$	242

Included within share-based compensation liability as at December 31, 2025 was $47 million (2024 – $99 million; 2023 – $96 million) related to PSUs granted to certain executive employees.

The fair value of stock options outstanding was estimated using the Black-Scholes valuation model with the following weighted average assumptions:


	2025		2024		2023 (1)
Fair value	$	9.73	$	13.15	$	17.96
Share price	$	46.49	$	44.38	$	43.41
Expected volatility	25.7%		26.4%		30.9%
Expected dividend yield	5.1%		5.1%		4.6%
Risk free interest rate	2.7%		2.9%		3.6%
Expected forfeiture rate	5.3%		5.2%		5.4%
Expected stock option life (2)	3.9 years		4.1 years		4.2 years

(1)Common share, per common share, dividend, and stock option amounts have been updated to reflect the two for one common share split (note 1).

The intrinsic value of vested stock options at December 31, 2025 was $121 million (2024 – $181 million; 2023 – $164 million).