Derivatives and Risk Management Activities (Tables)
|
12 Months Ended |
Dec. 31, 2014
|
Derivative disclosures |
|
Impact of derivative activities recognized in earnings |
A summary of the impact of our derivative activities recognized in earnings for the years ended December 31, 2014, 2013 and 2012 is as follows (in millions):
|
|
Year Ended December 31, 2014
|
|
|
|
Derivatives in Hedging Relationships
|
|
|
|
|
|
|
Location of gain/(loss)
|
|
Gain/(loss) reclassified from AOCI into income (1) (2)
|
|
Other gain/(loss) recognized in income
|
|
Derivatives Not Designated as a Hedge
|
|
|
Total
|
|
Commodity Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues
|
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
206
|
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
Field operating costs
|
|
—
|
|
—
|
|
(21
|
)
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(5
|
)
|
—
|
|
—
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues
|
|
—
|
|
—
|
|
(28
|
)
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense), net
|
|
2
|
|
—
|
|
—
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gain/(Loss) on Derivatives Recognized in Net Income
|
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
157
|
|
|
$
|
153
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
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
|
|
Commodity Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues
|
|
$
|
78
|
|
$
|
(1
|
)
|
$
|
(116
|
)
|
|
$
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Facilities segment revenues
|
|
(10
|
)
|
(1
|
)
|
—
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Field operating costs
|
|
—
|
|
—
|
|
8
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(7
|
)
|
3
|
|
—
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense), net
|
|
5
|
|
—
|
|
—
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gain/(Loss) on Derivatives Recognized in Net Income
|
|
$
|
66
|
|
$
|
1
|
|
$
|
(108
|
)
|
|
$
|
(41
|
)
|
|
|
Year Ended December 31, 2012
|
|
|
|
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
|
|
Commodity Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues
|
|
$
|
12
|
|
$
|
—
|
|
$
|
60
|
|
|
$
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities segment revenues
|
|
3
|
|
(1
|
)
|
1
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases and related costs
|
|
45
|
|
—
|
|
1
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
Field operating costs
|
|
—
|
|
—
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(8
|
)
|
1
|
|
—
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Logistics segment revenues
|
|
—
|
|
—
|
|
(1
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense), net
|
|
6
|
|
—
|
|
—
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gain/(Loss) on Derivatives Recognized in Net Income
|
|
$
|
58
|
|
$
|
—
|
|
$
|
62
|
|
|
$
|
120
|
|
|
(1)
| |
During the years ended December 31, 2014 and 2012, all of our hedged transactions were probable of occurring. During the year ended December 31, 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. |
|
(2)
| |
During the year ended December 31, 2014 we reclassified gains of $7 million from AOCI to Supply and Logistics segment revenues associated with inventory valuation adjustments on the related hedged inventory. |
|
Summary of derivative assets and liabilities on consolidated balance sheet on a gross basis |
The following table summarizes the derivative assets and liabilities on our Consolidated Balance Sheet on a gross basis as of December 31, 2014 (in millions):
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Balance Sheet
|
|
Fair
|
|
|
Balance Sheet
|
|
Fair
|
|
|
|
Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
|
Other current assets
|
|
$
|
23
|
|
|
Other current assets
|
|
$
|
(12
|
)
|
|
|
Other long-term assets
|
|
8
|
|
|
Other long-term assets
|
|
(1
|
)
|
Interest rate derivatives
|
|
|
|
|
|
|
Other current liabilities
|
|
(44
|
)
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
(26
|
)
|
Total derivatives designated as hedging instruments
|
|
|
|
$
|
31
|
|
|
|
|
$
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
|
Other current assets
|
|
$
|
439
|
|
|
Other current assets
|
|
$
|
(246
|
)
|
|
|
Other long-term assets
|
|
23
|
|
|
Other long-term assets
|
|
(3
|
)
|
|
|
|
|
|
|
|
Other current liabilities
|
|
(35
|
)
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
(5
|
)
|
Foreign currency derivatives
|
|
|
|
|
|
|
Other current liabilities
|
|
(12
|
)
|
Total derivatives not designated as hedging instruments
|
|
|
|
$
|
462
|
|
|
|
|
$
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
493
|
|
|
|
|
$
|
(384
|
)
|
The following table summarizes the derivative assets and liabilities on our Consolidated Balance Sheet on a gross basis as of December 31, 2013 (in millions):
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Balance Sheet
|
|
Fair
|
|
|
Balance Sheet
|
|
Fair
|
|
|
|
Location
|
|
Value
|
|
|
Location
|
|
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 as of the dates indicated (in millions):
|
|
December 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Derivative
|
|
Derivative
|
|
|
Derivative
|
|
Derivative
|
|
|
|
Asset Positions
|
|
Liability Positions
|
|
|
Asset Positions
|
|
Liability Positions
|
|
Netting Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Gross position - asset/(liability)
|
|
$
|
493
|
|
$
|
(384
|
)
|
|
$
|
133
|
|
$
|
(157
|
)
|
Netting adjustment
|
|
(262
|
)
|
262
|
|
|
(148
|
)
|
148
|
|
Cash collateral paid/(received)
|
|
(133
|
)
|
—
|
|
|
161
|
|
—
|
|
Net position - asset/(liability)
|
|
$
|
98
|
|
$
|
(122
|
)
|
|
$
|
146
|
|
$
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location After Netting Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
71
|
|
$
|
—
|
|
|
$
|
116
|
|
$
|
—
|
|
Other long-term assets
|
|
27
|
|
—
|
|
|
30
|
|
—
|
|
Other current liabilities
|
|
—
|
|
(91
|
)
|
|
—
|
|
(8
|
)
|
Other long-term liabilities
|
|
—
|
|
(31
|
)
|
|
—
|
|
(1
|
)
|
|
|
$
|
98
|
|
$
|
(122
|
)
|
|
$
|
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 years ended December 31, 2014 are as follows (in millions):
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
Commodity derivatives, net
|
|
$
|
15
|
|
$
|
37
|
|
$
|
56
|
|
Interest rate derivatives, net
|
|
(103
|
)
|
73
|
|
(13
|
)
|
Foreign currency derivatives, net
|
|
2
|
|
—
|
|
—
|
|
Total
|
|
$
|
(86
|
)
|
$
|
110
|
|
$
|
43
|
|
|
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 December 31, 2014 and December 31, 2013 (in millions):
|
|
Fair Value as of December 31, 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
|
|
$
|
(85
|
)
|
$
|
261
|
|
$
|
15
|
|
$
|
191
|
|
|
$
|
16
|
|
$
|
(59
|
)
|
$
|
(3
|
)
|
$
|
(46
|
)
|
Interest rate derivatives
|
|
—
|
|
(70
|
)
|
—
|
|
(70
|
)
|
|
—
|
|
26
|
|
—
|
|
26
|
|
Foreign currency derivatives
|
|
—
|
|
(12
|
)
|
—
|
|
(12
|
)
|
|
—
|
|
(4
|
)
|
—
|
|
(4
|
)
|
Total net derivative asset/(liability)
|
|
$
|
(85
|
)
|
$
|
179
|
|
$
|
15
|
|
$
|
109
|
|
|
$
|
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):
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
2013
|
|
Beginning Balance
|
|
$
|
(3
|
)
|
$
|
4
|
|
Total gains/(losses) for the period:
|
|
|
|
|
|
Included in earnings (1)
|
|
—
|
|
(1
|
)
|
Included in other comprehensive income
|
|
—
|
|
—
|
|
Settlements
|
|
3
|
|
(3
|
)
|
Derivatives entered into during the period
|
|
15
|
|
(3
|
)
|
Transfers out of Level 3
|
|
—
|
|
—
|
|
Ending Balance
|
|
$
|
15
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
Change in unrealized gains/(losses) included in earnings relating to Level 3 derivatives still held at the end of the periods
|
|
$
|
15
|
|
$
|
(4
|
)
|
|
(1)
| |
We reported unrealized gains and losses associated with Level 3 commodity derivatives in our Consolidated Statements of Operations as Supply and Logistics segment revenues. |
|
Interest Rate Derivatives |
|
Derivative disclosures |
|
Schedule of terms of forward starting interest rate swaps |
The following table summarizes the terms of our forward starting interest rate swaps as of December 31, 2014 (notional amounts in millions):
Hedged Transaction
|
|
Number and Types of Derivatives Employed
|
|
Notional Amount
|
|
Expected Termination Date
|
|
Average Rate Locked
|
|
Accounting Treatment
|
|
Anticipated PAA debt offering
|
|
10 forward starting swaps (30-year)
|
|
$
|
250
|
|
6/15/2015
|
|
3.60%
|
|
Cash flow hedge
|
|
Anticipated PAA debt offering
|
|
8 forward starting swaps (30-year)
|
|
$
|
200
|
|
6/15/2016
|
|
3.06%
|
|
Cash flow hedge
|
|
Anticipated PAA debt offering
|
|
8 forward starting swaps (30-year)
|
|
$
|
200
|
|
6/15/2017
|
|
3.14%
|
|
Cash flow hedge
|
|
Anticipated PAA debt offering
|
|
8 forward starting swaps (30-year)
|
|
$
|
200
|
|
6/15/2018
|
|
3.20%
|
|
Cash flow hedge
|
|
|
Summary of activity related to terminated interest rate derivatives |
The following table summarizes activity related to terminated interest rate derivatives (all of which were designated as cash flow hedges) for the years ended December 31, 2014, 2013 and 2012 (notional amounts and cash received/(paid) in millions):
Hedged Transaction
|
|
Number and Types of Derivatives Terminated
|
|
Notional Amount
|
|
Cash Received/(Paid)
|
|
Average Rate Locked
|
|
PAA’s April 2014 senior note issuance
|
|
5 treasury lock agreements
|
|
$
|
250
|
|
$
|
(7
|
)
|
3.62%
|
|
PAA’s August 2013 senior note issuance (1)
|
|
5 forward starting swaps (30-year)
|
|
$
|
125
|
|
$
|
11
|
|
3.39%
|
|
PAA’s December 2012 senior note issuance
|
|
6 forward starting swaps (30-year)
|
|
$
|
250
|
|
$
|
(89
|
)
|
4.24%
|
|
PAA’s March 2012 senior note issuance (2)
|
|
4 forward starting swaps (10-year)
|
|
$
|
200
|
|
$
|
(24
|
)
|
3.46%
|
|
|
(1)
| |
A gain of approximately $3 million was immediately recognized in interest expense attributable to the ineffective portion of these swaps upon termination. |
|
(2)
| |
A loss of approximately $1 million was immediately recognized in interest expense attributable to the ineffective portion of these swaps upon termination. |
|
Foreign Currency Derivatives |
|
Derivative disclosures |
|
Open forward exchange contracts |
The following table summarizes our open forward exchange contracts as of December 31, 2014 (in millions):
|
|
|
|
USD
|
|
CAD
|
|
Average Exchange Rate USD to CAD
|
|
Forward exchange contracts that exchange CAD for USD:
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$
|
460
|
|
$
|
535
|
|
$1.00 - $1.16
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts that exchange USD for CAD:
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$
|
345
|
|
$
|
387
|
|
$1.00 - $1.12
|
|
|