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Derivative Instruments
 9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Instruments Derivative Instruments
Interest rate swaps
On March 31, 2020, the Company entered into an interest rate swap agreement ("IRS") to effectively convert a portion of its debt under the New Ultraco Debt Facility from a floating to a fixed-rate basis. The Company entered into two additional IRS agreements during the second quarter of 2020 to convert the remaining portion of its outstanding debt under the New Ultraco Debt Facility excluding the revolver facility. The IRS was designated and qualified as a cash flow hedge. The Company uses the IRS for the management of interest rate risk exposure, as the IRS effectively converts a portion of the Company’s debt from a floating to a fixed rate. The IRS is an agreement between the Company and counterparties to pay, in the future, a fixed-rate payment in exchange for the counterparties paying the Company a variable payment. The amount of the net payment obligation is based on the notional amount of the IRS and the prevailing market interest rates. The Company may terminate the IRS prior to their expiration dates, at which point a realized gain or loss would be recognized. The value of the Company’s commitment would increase or decrease based primarily on the extent to which interest rates move against the rate fixed for each swap.
Tabular disclosure of derivatives location
The following table summarizes the interest rate swaps in place as of September 30, 2020 and December 31, 2019.
Interest Rate Swap detailNotional Amount outstanding
Trade dateFixed rateStart dateEnd dateSeptember 30, 2020December 31, 2019
March 31, 20200.64 %July 27, 2020January 26, 2024$76,101,584 $— 
April 15, 20200.58 %July 27, 2020January 26, 202438,050,792 — 
June 25, 20200.50 %July 27, 2020January 26, 202460,088,292 — 
$174,240,668 $— 
Under these swap contracts, exclusive of applicable margins, the Company will pay fixed rate interest and receive floating-rate interest amounts based on three-month LIBOR settings.
The Company records the fair value of the interest rate swap as an asset or liability on its balance sheet. The effective portion of the swap is recorded in Accumulated other comprehensive loss. The estimated loss that is currently recorded in Accumulated other comprehensive loss as of September 30, 2020 that is expected to be reclassified into the earnings within the next twelve months is $0.5 million. No portion of the cash flow hedges was ineffective during the three and nine months ended September 30, 2020.
The effect of derivative instruments on the Statement of Operations for the three and nine months ended September 30, 2020 is below:

Derivatives designated as hedging instrumentsLocation of loss in Statements of OperationsEffective portion of loss reclassified from Accumulated other Comprehensive loss
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Interest rate swapsInterest expense$105,114 $— $105,114 $— 
The following table shows the interest rate swap liabilities as of September 30, 2020 and December 31, 2019:
Derivatives designated as hedging instrumentsBalance Sheet locationSeptember 30, 2020December 31, 2019
Interest rate swap Fair value of derivative instruments - current$443,745 $— 
Interest rate swap Fair value of derivative instruments - noncurrent$681,000 $— 
Forward freight agreements and bunker swaps
The Company trades in forward freight agreements (“FFAs”) and bunker swaps, with the objective of utilizing this market as economic hedging instruments that reduce the risk of specific vessels to changes in the freight market. The Company’s FFAs and bunker swaps have not qualified for hedge accounting treatment. As such, unrealized and realized gains are recognized as a component of Other expense, net in the Condensed Consolidated Statement of Operations and Derivative asset and Fair value of derivatives in the Condensed Consolidated Balance Sheets. Derivatives are considered to be Level 2 instruments in the fair value hierarchy.

For our bunker swaps, the Company may enter into master netting, collateral and offset agreements with counterparties. As of September 30, 2020, the Company has International Swaps and Derivatives Association ("ISDA") agreements with two applicable banks and financial institutions which contain netting provisions. In addition to a master agreement with the Company
supported by a primary parent guarantee on either side, the Company also has associated credit support agreements in place with the two counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral, when the market value of transactions covered by these agreements exceeds specified thresholds. The Company does not anticipate non-performance by any of the counterparties. As of September 30, 2020, no collateral had been received or pledged related to these derivative instruments.

As of September 30, 2020, the Company had outstanding bunker swap agreements to purchase 3,000 metric tons of high sulfur fuel oil with prices ranging between $266 and $290 and sell 3,000 metric tons of low sulfur fuel oil with prices ranging between $446 and $467 per metric ton, that are expiring at December 31, 2020. The volume represents less than 10% of our estimated consumption on our fleet for the year. The Company had outstanding bunker swap agreements to purchase 10,350 metric tons of low sulfur fuel oil with prices ranging between $186 and $524 per metric ton, that are expiring at December 31, 2020. In addition, the Company had outstanding bunker swap agreements to purchase 2,700 metric tons of low sulfur fuel oil with prices ranging between $282 and $332 per metric ton, that are expiring at December 31, 2021. For the bunker swaps that expired on September 30, 2020, a payable of $0.3 million for realized losses was recorded within Fair value of derivative instruments - current in the Condensed Consolidated Balance Sheet.

As of September 30, 2020, the Company entered into FFAs for 2,025 days covering the time period of October to December 2020 (between 15 and 30 days per month), expiring at the end of each calendar month during 2020. The FFA contract prices range from $7,700 to $11,650 per day. The Company will realize a gain or loss on these FFAs based on the price differential between the average daily BSI rate and the FFA contract price. The gains or losses are recorded in Other expense, net in the Condensed Consolidated Statement of Operations.

The effect of non-designated derivative instruments on the Condensed Consolidated Statements of Operations and Balance Sheets is as follows
For the Three Months EndedFor the Nine Months Ended
Derivatives not designated as hedging instrumentsLocation of (gain)/loss in Statements of OperationsSeptember 30, 2020September 30, 2019September 30, 2020September 30, 2019
FFAs - realized lossRealized and unrealized loss/(gain) on derivative instruments, net$2,088,537 $657,288 $1,404,060 $341,019 
FFAs - unrealized lossRealized and unrealized loss/(gain) on derivative instruments, net1,230,727 1,412,731 3,327,509 598,007 
Bunker swaps - realized (gain)/lossRealized and unrealized loss/(gain) on derivative instruments, net(1,059,570)148,606 (8,295,136)79,269 
Bunker swaps - unrealized loss/(gain)Realized and unrealized loss/(gain) on derivative instruments, net711,659 696,438 (467,107)(378,382)
Total$2,971,353 $2,915,063 $(4,030,674)$639,913 

Derivatives not designated as hedging instrumentsBalance Sheet locationSeptember 30, 2020December 31, 2019
FFAs - Unrealized gainDerivative asset and other current assets$62,310 $475,650 
FFAs - Unrealized lossFair value of derivatives - current2,730,770 — 
Bunker swaps - Unrealized gainDerivative asset and other current assets370,360 96,043 
Bunker swaps - Unrealized lossFair value of derivatives - current548,754 756,229 

Cash Collateral Disclosures
The Company does not offset fair value amounts recognized for derivatives by the right to reclaim cash collateral or the obligation to return cash collateral. The amount of collateral to be posted is defined in the terms of respective master agreements executed with counterparties or exchanges and is required when agreed upon threshold limits are exceeded. As of September 30, 2020 and December 31, 2019, the Company posted cash collateral related to derivative instruments under its collateral security
arrangements of $2.5 million and $0.6 million, respectively, which is recorded within Derivative asset and other current assets in the Condensed Consolidated Balance Sheets.