Derivatives and Risk Management Activities (Tables)
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6 Months Ended |
Jun. 30, 2019 |
Derivatives and Risk Management Activities |
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Impact of derivatives recognized in earnings |
A summary of the impact of our derivatives recognized in earnings is as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2019 | Location of Gain/(Loss) | Commodity Derivatives | | Foreign Currency Derivatives | | Preferred Distribution Rate Reset Option | | Interest Rate Derivatives | | Total | Supply and Logistics segment revenues (1) | $ | 56 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 58 |
| Field operating costs (1) | 4 |
| | — |
| | — |
| | — |
| | 4 |
| Interest expense, net (2) | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | Other income/(expense), net (1) | — |
| | — |
| | (7 | ) | | — |
| | (7 | ) | Total gain/(loss) on derivatives recognized in net income | $ | 60 |
| | $ | 2 |
| | $ | (7 | ) | | $ | (3 | ) | | $ | 52 |
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| | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2018 | Location of Gain/(Loss) | Commodity Derivatives | | Foreign Currency Derivatives | | Preferred Distribution Rate Reset Option | | Interest Rate Derivatives | | Total | Supply and Logistics segment revenues (1) | $ | (339 | ) | | $ | (6 | ) | | $ | — |
| | $ | — |
| | $ | (345 | ) | Interest expense, net (2) | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) | Other income/(expense), net (1) | — |
| | — |
| | 8 |
| | — |
| | 8 |
| Total gain/(loss) on derivatives recognized in net income | $ | (339 | ) | | $ | (6 | ) | | $ | 8 |
| | $ | (2 | ) | | $ | (339 | ) |
| | | | | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2019 | Location of Gain/(Loss) | Commodity Derivatives | | Foreign Currency Derivatives | | Preferred Distribution Rate Reset Option | | Interest Rate Derivatives | | Total | Supply and Logistics segment revenues (1) | $ | 231 |
| | $ | 7 |
| | $ | — |
| | $ | — |
| | $ | 238 |
| Field operating costs (1) | 11 |
| | — |
| | — |
| | — |
| | 11 |
| Interest expense, net (2) | — |
| | — |
| | — |
| | (5 | ) | | (5 | ) | Other income/(expense), net (1) | — |
| | — |
| | 16 |
| | — |
| | 16 |
| Total gain/(loss) on derivatives recognized in net income | $ | 242 |
| | $ | 7 |
| | $ | 16 |
| | $ | (5 | ) | | $ | 260 |
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| | | | | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2018 | Location of Gain/(Loss) | Commodity Derivatives | | Foreign Currency Derivatives | | Preferred Distribution Rate Reset Option | | Interest Rate Derivatives | | Total | Supply and Logistics segment revenues (1) | $ | (384 | ) | | $ | (12 | ) | | $ | — |
| | $ | — |
| | $ | (396 | ) | Field operating costs (1) | 1 |
| | — |
| | — |
| | — |
| | 1 |
| Interest expense, net (2) | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | Other income/(expense), net (1) | — |
| | — |
| | 5 |
| | — |
| | 5 |
| Total gain/(loss) on derivatives recognized in net income | $ | (383 | ) | | $ | (12 | ) | | $ | 5 |
| | $ | (1 | ) | | $ | (391 | ) |
| | (1) | Derivatives not designated as a hedge. |
| | (2) | Derivatives in hedging relationships. |
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Summary of derivative assets and liabilities on Condensed Consolidated Balance Sheets on a gross basis |
The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheet on a gross basis as of June 30, 2019 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives Not Designated As Hedging Instruments | | | | | Balance Sheet Location | | Commodity Derivatives | | Foreign Currency Derivatives | | Preferred Distribution Rate Reset Option | | Total | | Interest Rate Derivatives (1) | | Total Derivatives | Derivative Assets | | | | | | | | | | | | | Other current assets | | $ | 389 |
| | $ | 4 |
| | $ | — |
| | $ | 393 |
| | $ | — |
| | $ | 393 |
| Other long-term assets, net | | 37 |
| | — |
| | — |
| | 37 |
| | — |
| | 37 |
| Other current liabilities | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Other long-term liabilities and deferred credits | | 6 |
| | — |
| | — |
| | 6 |
| | — |
| | 6 |
| Total Derivative Assets | | $ | 432 |
| | $ | 4 |
| | $ | — |
| | $ | 436 |
| | $ | — |
| | $ | 436 |
| | | | | | | | | | | | | | Derivative Liabilities | | | | | | | | | | | | | Other current assets | | $ | (96 | ) | | $ | (1 | ) | | $ | — |
| | $ | (97 | ) | | $ | — |
| | $ | (97 | ) | Other long-term assets, net | | (4 | ) | | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) | Other current liabilities | | (8 | ) | | — |
| | — |
| | (8 | ) | | (43 | ) | | (51 | ) | Other long-term liabilities and deferred credits | | (15 | ) | | — |
| | (20 | ) | | (35 | ) | | — |
| | (35 | ) | Total Derivative Liabilities | | $ | (123 | ) | | $ | (1 | ) | | $ | (20 | ) | | $ | (144 | ) | | $ | (43 | ) | | $ | (187 | ) |
| | (1) | Derivatives in hedging relationships. |
The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheet on a gross basis as of December 31, 2018 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives Not Designated As Hedging Instruments | | | | | Balance Sheet Location | | Commodity Derivatives | | Foreign Currency Derivatives | | Preferred Distribution Rate Reset Option | | Total | | Interest Rate Derivatives (1) | | Total Derivatives | Derivative Assets | | | | | | | | | | | | | Other current assets | | $ | 441 |
| | $ | — |
| | $ | — |
| | $ | 441 |
| | $ | 2 |
| | $ | 443 |
| Other long-term assets, net | | 34 |
| | — |
| | — |
| | 34 |
| | — |
| | 34 |
| Other long-term liabilities and deferred credits | | 3 |
| | — |
| | — |
| | 3 |
| | — |
| | 3 |
| Total Derivative Assets | | $ | 478 |
| | $ | — |
| | $ | — |
| | $ | 478 |
| | $ | 2 |
| | $ | 480 |
| | | | | | | | | | | | | | Derivative Liabilities | | | | | | | | | | | | | Other current assets | | $ | (182 | ) | | $ | — |
| | $ | — |
| | $ | (182 | ) | | $ | — |
| | $ | (182 | ) | Other long-term assets, net | | (7 | ) | | — |
| | — |
| | (7 | ) | | — |
| | (7 | ) | Other current liabilities | | (10 | ) | | (9 | ) | | — |
| | (19 | ) | | (1 | ) | | (20 | ) | Other long-term liabilities and deferred credits | | (9 | ) | | — |
| | (36 | ) | | (45 | ) | | (8 | ) | | (53 | ) | Total Derivative Liabilities | | $ | (208 | ) | | $ | (9 | ) | | $ | (36 | ) | | $ | (253 | ) | | $ | (9 | ) | | $ | (262 | ) |
(1) Derivatives in hedging relationships.
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Schedule of net broker receivable/(payable) |
The following table provides the components of our net broker receivable/(payable): | | | | | | | | | | June 30, 2019 | | December 31, 2018 | Initial margin | $ | 71 |
| | $ | 95 |
| Variation margin returned | (85 | ) | | (91 | ) | Letters of credit | (59 | ) | | (84 | ) | Net broker payable | $ | (73 | ) | | $ | (80 | ) |
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Schedule of derivative financial assets that are subject to offsetting, including enforceable master netting arrangements |
The following table presents information about derivative financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements (in millions): | | | | | | | | | | | | | | | | | | | June 30, 2019 | | | December 31, 2018 | | Derivative Asset Positions | | Derivative Liability Positions | | | Derivative Asset Positions | | Derivative Liability Positions | Netting Adjustments: | |
| | |
| | | |
| | |
| Gross position - asset/(liability) | $ | 436 |
| | $ | (187 | ) | | | $ | 480 |
| | $ | (262 | ) | Netting adjustment | (107 | ) | | 107 |
| | | (192 | ) | | 192 |
| Cash collateral received | (73 | ) | | — |
| | | (80 | ) | | — |
| Net position - asset/(liability) | $ | 256 |
| | $ | (80 | ) | | | $ | 208 |
| | $ | (70 | ) | | | | | | | | | | Balance Sheet Location After Netting Adjustments: | |
| | |
| | | |
| | |
| Other current assets | $ | 223 |
| | $ | — |
| | | $ | 181 |
| | $ | — |
| Other long-term assets, net | 33 |
| | — |
| | | 27 |
| | — |
| Other current liabilities | — |
| | (51 | ) | | | — |
| | (20 | ) | Other long-term liabilities and deferred credits | — |
| | (29 | ) | | | — |
| | (50 | ) | | $ | 256 |
| | $ | (80 | ) | | | $ | 208 |
| | $ | (70 | ) |
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Schedule of derivative financial liabilities that are subject to offsetting, including enforceable master netting arrangements |
The following table presents information about derivative financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements (in millions): | | | | | | | | | | | | | | | | | | | June 30, 2019 | | | December 31, 2018 | | Derivative Asset Positions | | Derivative Liability Positions | | | Derivative Asset Positions | | Derivative Liability Positions | Netting Adjustments: | |
| | |
| | | |
| | |
| Gross position - asset/(liability) | $ | 436 |
| | $ | (187 | ) | | | $ | 480 |
| | $ | (262 | ) | Netting adjustment | (107 | ) | | 107 |
| | | (192 | ) | | 192 |
| Cash collateral received | (73 | ) | | — |
| | | (80 | ) | | — |
| Net position - asset/(liability) | $ | 256 |
| | $ | (80 | ) | | | $ | 208 |
| | $ | (70 | ) | | | | | | | | | | Balance Sheet Location After Netting Adjustments: | |
| | |
| | | |
| | |
| Other current assets | $ | 223 |
| | $ | — |
| | | $ | 181 |
| | $ | — |
| Other long-term assets, net | 33 |
| | — |
| | | 27 |
| | — |
| Other current liabilities | — |
| | (51 | ) | | | — |
| | (20 | ) | Other long-term liabilities and deferred credits | — |
| | (29 | ) | | | — |
| | (50 | ) | | $ | 256 |
| | $ | (80 | ) | | | $ | 208 |
| | $ | (70 | ) |
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Net deferred gain/(loss) recognized in AOCI for derivatives |
The following table summarizes the net unrealized gain/(loss) recognized in AOCI for derivatives (in millions): | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2019 | | 2018 | | 2019 | | 2018 | Interest rate derivatives, net | $ | (35 | ) | | $ | 13 |
| | $ | (58 | ) | | $ | 45 |
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Schedule of derivative financial assets and liabilities accounted for at fair value on a recurring basis, by level within the fair value hierarchy |
The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value as of June 30, 2019 | | | Fair Value as of December 31, 2018 | Recurring Fair Value Measures (1) | | Level 1 | | Level 2 | | Level 3 | | Total | | | Level 1 | | Level 2 | | Level 3 | | Total | Commodity derivatives | | $ | 235 |
| | $ | 80 |
| | $ | (6 | ) | | $ | 309 |
| | | $ | 171 |
| | $ | 87 |
| | $ | 12 |
| | $ | 270 |
| Interest rate derivatives | | — |
| | (43 | ) | | — |
| | (43 | ) | | | — |
| | (7 | ) | | — |
| | (7 | ) | Foreign currency derivatives | | — |
| | 3 |
| | — |
| | 3 |
| | | — |
| | (9 | ) | | — |
| | (9 | ) | Preferred Distribution Rate Reset Option | | — |
| | — |
| | (20 | ) | | (20 | ) | | | — |
| | — |
| | (36 | ) | | (36 | ) | Total net derivative asset/(liability) | | $ | 235 |
| | $ | 40 |
| | $ | (26 | ) | | $ | 249 |
| | | $ | 171 |
| | $ | 71 |
| | $ | (24 | ) | | $ | 218 |
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(1) Derivative assets and liabilities are presented above on a net basis but do not include related cash margin deposits.
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Reconciliation of changes in fair value of derivatives classified as Level 3 |
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our derivatives classified as Level 3 (in millions): | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2019 | | 2018 | | 2019 | | 2018 | Beginning Balance | $ | (10 | ) | | $ | (26 | ) | | $ | (24 | ) | | $ | (30 | ) | Net gains/(losses) for the period included in earnings | (5 | ) | | 7 |
| | 18 |
| | 5 |
| Settlements | (3 | ) | | 1 |
| | (11 | ) | | 7 |
| Derivatives entered into during the period | (8 | ) | | — |
| | (9 | ) | | — |
| Ending Balance | $ | (26 | ) | | $ | (18 | ) | | $ | (26 | ) | | $ | (18 | ) | | | | | | | | | Change in unrealized gains/(losses) included in earnings relating to Level 3 derivatives still held at the end of the period | $ | (13 | ) | | $ | 7 |
| | $ | 9 |
| | $ | 5 |
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Commodity Derivatives |
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Derivatives and Risk Management Activities |
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Summary of open derivative positions |
The following table summarizes our open derivative positions utilized to hedge the price risk associated with anticipated purchases and sales related to our natural gas processing and NGL fractionation activities as of June 30, 2019: | | | | | | | | Notional Volume | | | | | (Short)/Long | | Remaining Tenor | Natural gas purchases | | 77.8 Bcf | | December 2022 | Propane sales | | (10.8) MMbls | | March 2021 | Butane sales | | (3.2) MMbls | | March 2021 | Condensate sales (WTI position) | | (1.2) MMbls | | March 2021 | Power supply requirements (1) | | 1.1 TWh | | December 2022 |
(1) Power position to hedge a portion of our power supply requirements at our Canadian natural gas processing and fractionation plants.
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Interest Rate Derivatives |
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Derivatives and Risk Management Activities |
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Schedule of terms of outstanding interest rate derivatives |
The following table summarizes the terms of our outstanding interest rate derivatives as of June 30, 2019 (notional amounts in millions): | | | | | | | | | | | | | | | Hedged Transaction | | Number and Types of Derivatives Employed | | Notional Amount | | Expected Termination Date | | Average Rate Locked | | Accounting Treatment | Anticipated interest payments | | 8 forward starting swaps (30-year) | | $ | 200 |
| | 12/13/2019 | | 2.34 | % | | Cash flow hedge | Anticipated interest payments | | 8 forward starting swaps (30-year) | | $ | 200 |
| | 6/15/2020 | | 3.06 | % | | Cash flow hedge |
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Foreign Currency Derivatives |
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Derivatives and Risk Management Activities |
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Summary of open derivative positions |
The following table summarizes our open forward exchange contracts as of June 30, 2019 (in millions): | | | | | | | | | | | | | | | | | | USD | | CAD | | Average Exchange Rate USD to CAD | Forward exchange contracts that exchange CAD for USD: | | | | |
| | |
| | | | | 2019 | | $ | 63 |
| | $ | 83 |
| | $1.00 - $1.32 | | | | | | | | | | Forward exchange contracts that exchange USD for CAD: | | | | |
| | |
| | | | | 2019 | | $ | 165 |
| | $ | 220 |
| | $1.00 - $1.33 |
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