XML 18 R39.htm IDEA: XBRL DOCUMENT v2.4.1.9
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