Derivatives and Risk Management Activities (Tables)
|
9 Months Ended |
Sep. 30, 2014
|
Derivative disclosures |
|
Schedule of interest rate risk hedging |
The following table summarizes the terms of our forward starting interest rate swaps as of September 30, 2014 (notional amounts in millions):
Hedged Transaction |
|
Number and Types of
Derivatives Employed |
|
Notional
Amount |
|
Expected
Termination Date |
|
Average Rate
Locked |
|
Accounting
Treatment |
|
Anticipated debt offering |
|
10 forward starting swaps (30-year) |
|
$ |
250 |
|
6/15/2015 |
|
3.60% |
|
Cash flow hedge |
|
|
|
|
|
|
|
Open foreign currency exchange contracts |
The following table summarizes our open forward exchange contracts as of September 30, 2014 (in millions):
|
|
|
|
USD |
|
CAD |
|
Average Exchange Rate USD
to CAD |
|
Forward exchange contracts that exchange CAD for USD: |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
$ |
284 |
|
$ |
319 |
|
$1.00 - $1.12 |
|
|
|
2015 |
|
178 |
|
200 |
|
$1.00 - $1.12 |
|
|
|
|
|
$ |
462 |
|
$ |
519 |
|
$1.00 - $1.12 |
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts that exchange USD for CAD: |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
$ |
284 |
|
$ |
313 |
|
$1.00 - $1.10 |
|
|
|
2015 |
|
178 |
|
195 |
|
$1.00 - $1.09 |
|
|
|
|
|
$ |
462 |
|
$ |
508 |
|
$1.00 - $1.10 |
|
|
Impact of derivative activities recognized in earnings |
A summary of the impact of our derivative activities recognized in earnings for the three and nine months ended September 30, 2014 and 2013 is as follows (in millions):
|
|
Three Months Ended September 30, 2014 |
|
|
Three Months Ended September 30, 2013 |
|
|
|
Derivatives in Hedging
Relationships |
|
|
|
|
|
|
Derivatives in Hedging
Relationships |
|
|
|
|
|
Location of gain/(loss) |
|
Gain/(loss)
reclassified
from
AOCI into
income (1) |
|
Other
gain/(loss)
recognized
in income |
|
Derivatives
Not
Designated
as a
Hedge |
|
Total |
|
|
Gain/(loss)
reclassified
from
AOCI into
income (1) |
|
Other
gain/(loss)
recognized
in income |
|
Derivatives
Not
Designated
as a
Hedge |
|
Total |
|
Commodity Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues |
|
$ |
(4 |
) |
$ |
— |
|
$ |
(17 |
) |
$ |
(21 |
) |
|
$ |
109 |
|
$ |
— |
|
$ |
(91 |
) |
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities segment revenues |
|
— |
|
— |
|
— |
|
— |
|
|
(2 |
) |
— |
|
— |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Field operating costs |
|
— |
|
— |
|
(2 |
) |
(2 |
) |
|
— |
|
— |
|
2 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(1 |
) |
— |
|
— |
|
(1 |
) |
|
(2 |
) |
3 |
|
— |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues |
|
— |
|
— |
|
(17 |
) |
(17 |
) |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense), net |
|
— |
|
— |
|
— |
|
— |
|
|
1 |
|
— |
|
— |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gain/(Loss) on Derivatives Recognized in Net Income |
|
$ |
(5 |
) |
$ |
— |
|
$ |
(36 |
) |
$ |
(41 |
) |
|
$ |
106 |
|
$ |
3 |
|
$ |
(89 |
) |
$ |
20 |
|
|
|
Nine Months Ended September 30, 2014 |
|
|
Nine Months Ended September 30, 2013 |
|
|
|
Derivatives in Hedging
Relationships |
|
|
|
|
|
|
Derivatives in Hedging
Relationships |
|
|
|
|
|
Location of gain/(loss) |
|
Gain/(loss)
reclassified
from
AOCI into
income (1) |
|
Other
gain/(loss)
recognized
in income |
|
Derivatives
Not
Designated
as a
Hedge |
|
Total |
|
|
Gain/(loss)
reclassified
from
AOCI into
income (1) |
|
Other
gain/(loss)
recognized
in income |
|
Derivatives
Not
Designated
as a
Hedge |
|
Total |
|
Commodity Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues |
|
$ |
(12 |
) |
$ |
— |
|
$ |
(17 |
) |
$ |
(29 |
) |
|
$ |
139 |
|
$ |
— |
|
$ |
(34 |
) |
$ |
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities segment revenues |
|
— |
|
— |
|
— |
|
— |
|
|
(14 |
) |
— |
|
— |
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Field operating costs |
|
— |
|
— |
|
(3 |
) |
(3 |
) |
|
— |
|
— |
|
7 |
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(4 |
) |
— |
|
— |
|
(4 |
) |
|
(5 |
) |
3 |
|
— |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues |
|
— |
|
— |
|
(17 |
) |
(17 |
) |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense), net |
|
— |
|
— |
|
— |
|
— |
|
|
4 |
|
— |
|
— |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gain/(Loss) on Derivatives Recognized in Net Income |
|
$ |
(16 |
) |
$ |
— |
|
$ |
(37 |
) |
$ |
(53 |
) |
|
$ |
124 |
|
$ |
3 |
|
$ |
(27 |
) |
$ |
100 |
|
(1) During the three and nine months ended September 30, 2014, all of our hedged transactions were probable of occurring. During the three months ended September 30, 2013 we reclassified losses of $2 million from AOCI to Facilities segment revenues as a result of anticipated hedged transactions that were probable of not occurring. During the nine months ended September 30, 2013, we reclassified gains of $3 million and losses of $1 million from AOCI to Supply and Logistics segment revenues and Facilities segment revenues, respectively, as a result of anticipated hedged transactions that were probable of not occurring.
|
Summary of derivative assets and liabilities on condensed consolidated balance sheet |
The following table summarizes the derivative assets and liabilities on our condensed consolidated balance sheet on a gross basis as of September 30, 2014 (in millions):
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
|
|
Balance Sheet |
|
|
|
|
Balance Sheet |
|
|
|
|
|
Location |
|
Fair Value |
|
|
Location |
|
Fair Value |
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
Other current assets |
|
$ |
7 |
|
|
|
|
|
|
|
|
Other long-term assets |
|
4 |
|
|
|
|
|
|
Interest rate derivatives |
|
|
|
|
|
|
Other current liabilities |
|
$ |
(15 |
) |
Total derivatives designated as hedging instruments |
|
|
|
$ |
11 |
|
|
|
|
$ |
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
Other current assets |
|
$ |
65 |
|
|
Other current assets |
|
$ |
(43 |
) |
|
|
Other long-term assets |
|
5 |
|
|
Other current liabilities |
|
(7 |
) |
|
|
Other current liabilities |
|
2 |
|
|
Other long-term liabilities |
|
(2 |
) |
Foreign currency derivatives |
|
|
|
|
|
|
Other current liabilities |
|
(10 |
) |
Total derivatives not designated as hedging instruments |
|
|
|
$ |
72 |
|
|
|
|
$ |
(62 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total derivatives |
|
|
|
$ |
83 |
|
|
|
|
$ |
(77 |
) |
The following table summarizes the derivative assets and liabilities on our condensed consolidated balance sheet on a gross basis as of December 31, 2013 (in millions):
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
|
|
Balance Sheet |
|
|
|
|
Balance Sheet |
|
|
|
|
|
Location |
|
Fair Value |
|
|
Location |
|
Fair Value |
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
Other current assets |
|
$ |
36 |
|
|
Other current assets |
|
$ |
(24 |
) |
|
|
Other long-term assets |
|
5 |
|
|
|
|
|
|
Interest rate derivatives |
|
Other long-term assets |
|
26 |
|
|
|
|
|
|
Total derivatives designated as hedging instruments |
|
|
|
$ |
67 |
|
|
|
|
$ |
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives |
|
Other current assets |
|
$ |
60 |
|
|
Other current assets |
|
$ |
(117 |
) |
|
|
Other long-term assets |
|
5 |
|
|
Other long-term assets |
|
(6 |
) |
|
|
Other current liabilities |
|
1 |
|
|
Other current liabilities |
|
(5 |
) |
|
|
|
|
|
|
|
Other long-term liabilities |
|
(1 |
) |
Foreign currency derivatives |
|
|
|
|
|
|
Other current liabilities |
|
(4 |
) |
Total derivatives not designated as hedging instruments |
|
|
|
$ |
66 |
|
|
|
|
$ |
(133 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total derivatives |
|
|
|
$ |
133 |
|
|
|
|
$ |
(157 |
) |
|
Schedule of derivatives assets and liabilities that are subject to offsetting, including enforceable master netting arrangements |
The following tables present information about derivatives and financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements at September 30, 2014 and December 31, 2013 (in millions):
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
Derivative |
|
Derivative |
|
|
Derivative |
|
Derivative |
|
|
|
Asset Positions |
|
Liability Positions |
|
|
Asset Positions |
|
Liability Positions |
|
|
|
|
|
|
|
|
|
|
|
|
Netting Adjustments: |
|
|
|
|
|
|
|
|
|
|
Gross position - asset/(liability) |
|
$ |
83 |
|
$ |
(77 |
) |
|
$ |
133 |
|
$ |
(157 |
) |
Netting adjustment |
|
(45 |
) |
45 |
|
|
(148 |
) |
148 |
|
Cash collateral paid/(received) |
|
35 |
|
— |
|
|
161 |
|
— |
|
Net position - asset/(liability) |
|
$ |
73 |
|
$ |
(32 |
) |
|
$ |
146 |
|
$ |
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location After Netting Adjustments: |
|
|
|
|
|
|
|
|
|
|
Other current assets |
|
$ |
64 |
|
$ |
— |
|
|
$ |
116 |
|
$ |
— |
|
Other long-term assets |
|
9 |
|
— |
|
|
30 |
|
— |
|
Other current liabilities |
|
— |
|
(30 |
) |
|
— |
|
(8 |
) |
Other long-term liabilities |
|
— |
|
(2 |
) |
|
— |
|
(1 |
) |
|
|
$ |
73 |
|
$ |
(32 |
) |
|
$ |
146 |
|
$ |
(9 |
) |
|
Net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives |
The net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives for the three and nine months ended September 30, 2014 and 2013 are as follows (in millions):
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Commodity derivatives, net |
|
$ |
2 |
|
$ |
66 |
|
$ |
(10 |
) |
$ |
77 |
|
Interest rate derivatives, net |
|
(8 |
) |
12 |
|
(47 |
) |
63 |
|
Total |
|
$ |
(6 |
) |
$ |
78 |
|
$ |
(57 |
) |
$ |
140 |
|
|
Derivative financial assets and liabilities within the fair value hierarchy accounted for at fair value on a recurring basis |
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 as of September 30, 2014 and December 31, 2013 (in millions):
|
|
Fair Value as of September 30, 2014 |
|
|
Fair Value as of December 31, 2013 |
|
Recurring Fair Value Measures (1) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Commodity derivatives |
|
$ |
6 |
|
$ |
22 |
|
$ |
3 |
|
$ |
31 |
|
|
$ |
16 |
|
$ |
(59 |
) |
$ |
(3 |
) |
$ |
(46 |
) |
Interest rate derivatives |
|
— |
|
(15 |
) |
— |
|
(15 |
) |
|
— |
|
26 |
|
— |
|
26 |
|
Foreign currency derivatives |
|
— |
|
(10 |
) |
— |
|
(10 |
) |
|
— |
|
(4 |
) |
— |
|
(4 |
) |
Total net derivative asset/(liability) |
|
$ |
6 |
|
$ |
(3 |
) |
$ |
3 |
|
$ |
6 |
|
|
$ |
16 |
|
$ |
(37 |
) |
$ |
(3 |
) |
$ |
(24 |
) |
(1) Derivative assets and liabilities are presented above on a net basis but do not include related cash margin deposits.
|
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 |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Beginning Balance |
|
$ |
1 |
|
$ |
4 |
|
$ |
(3 |
) |
$ |
4 |
|
Unrealized gains/(losses): |
|
|
|
|
|
|
|
|
|
Included in earnings (1) |
|
1 |
|
(4 |
) |
— |
|
(1 |
) |
Included in other comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
Settlements |
|
— |
|
(1 |
) |
3 |
|
(3 |
) |
Derivatives entered into during the period |
|
1 |
|
— |
|
3 |
|
(1 |
) |
Transfers out of Level 3 |
|
— |
|
— |
|
— |
|
— |
|
Ending Balance |
|
$ |
3 |
|
$ |
(1 |
) |
$ |
3 |
|
$ |
(1 |
) |
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains/(losses) included in earnings relating to Level 3 derivatives still held at the end of the periods |
|
$ |
2 |
|
$ |
(4 |
) |
$ |
3 |
|
$ |
(1 |
) |
(1) We reported unrealized gains and losses associated with Level 3 commodity derivatives in our condensed consolidated statements of operations as Supply and Logistics segment revenues.
|