XML 42 R23.htm IDEA: XBRL DOCUMENT v3.22.0.1
Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
Commodity Price Risk Management
Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas used in our refining operations. We periodically enter into derivative contracts in the form of commodity price swaps, forward purchase and sales and futures contracts to mitigate price exposure with respect to our inventory positions, natural gas purchases, sales prices of refined products and crude oil costs.

Foreign Currency Risk Management
We are exposed to market risk related to the volatility in foreign currency exchange rates. We periodically enter into derivative contracts in the form of foreign exchange forward contracts to mitigate the exposure associated with fluctuations on intercompany notes with our foreign subsidiaries that are not denominated in the U.S. dollar.

Accounting Hedges
We had swap contracts serving as cash flow hedges against price risk on forecasted purchases of natural gas that matured as of December 31, 2021. We also periodically have swap contracts to lock in basis spread differentials on forecasted purchases of crude oil and forward sales contracts that lock in the prices of future sales of crude oil and refined product. These contracts have been designated as accounting hedges and are measured at fair value with offsetting adjustments (gains / losses) recorded directly to other comprehensive income. These fair value adjustments are later reclassified to earnings as the hedging instruments mature.

The following table presents the pre-tax effect on other comprehensive income (“OCI”) and earnings due to fair value adjustments and maturities of hedging instruments under hedge accounting:
Net Unrealized Gain (Loss) Recognized in OCIGain (Loss) Reclassified into Earnings
Derivatives Designated as Cash Flow Hedging InstrumentsYears Ended December 31,Statement of Operations LocationYears Ended December 31,
202120202019202120202019
(In thousands)
Commodity contracts$31 $(4,871)$(5,349)Sales and other revenues$(19,239)$(5,168)$(1,799)
Cost of products sold— 4,281 22,876 
Operating expenses1,660 (1,717)(1,364)
Total$31 $(4,871)$(5,349)$(17,579)$(2,604)$19,713 

Economic Hedges
We have commodity contracts including NYMEX futures contracts to lock in prices on forecasted purchases and sales of inventory and forward purchase and sell contracts, as well as periodically have contracts to lock in basis spread differentials on forecasted purchases of crude oil and swap contracts to lock in the crack spread of WTI and gasoline, that serve as economic hedges (derivatives used for risk management, but not designated as accounting hedges). We also have forward currency contracts to fix the rate of foreign currency. In addition, our catalyst financing arrangements discussed in Note 13 could require repayment under certain conditions based on the future pricing of platinum, which is an embedded derivative. These contracts are measured at fair value with offsetting adjustments (gains / losses) recorded directly to earnings.

The following table presents the pre-tax effect on earnings due to maturities and fair value adjustments of our economic hedges:
Gain (Loss) Recognized in Earnings
Derivatives Not Designated as Hedging InstrumentsYears Ended December 31,
Statement of Operations Location202120202019
(In thousands)
Commodity contractsCost of products sold$(22,909)$18,646 $(8,475)
Interest expense11,816 (4,250)(6,427)
Foreign currency contractsGain (loss) on foreign currency transactions(4,013)(7,300)(17,430)
Total$(15,106)$7,096 $(32,332)
As of December 31, 2021, we have the following notional contract volumes related to outstanding derivative instruments (all maturing in 2022):
Total Outstanding NotionalUnit of Measure
Derivatives designated as hedging instruments:
Forward crude oil contracts - short70,000 Barrels
Derivatives not designated as hedging instruments:
NYMEX futures (WTI) - short
495,000 Barrels
Forward gasoline contracts - long40,000 Barrels
Foreign currency forward contracts
450,686,305 U. S. dollar
Forward commodity contracts (platinum)
38,723 Troy ounces

The following table presents the fair value and balance sheet locations of our outstanding derivative instruments. These amounts are presented on a gross basis with offsetting balances that reconcile to a net asset or liability position on our consolidated balance sheets. We present on a net basis to reflect the net settlement of these positions in accordance with provisions of our master netting arrangements.
Derivatives in Net Asset PositionDerivatives in Net Liability Position
Gross AssetsGross Liabilities Offset in Balance SheetNet Assets Recognized in Balance SheetGross LiabilitiesGross Assets Offset in Balance SheetNet Liabilities Recognized in Balance Sheet
 (In thousands)
December 31, 2021
Derivatives designated as cash flow hedging instruments:
Commodity forward contracts$— $— $— $238 $— $238 
$— $— $— $238 $— $238 
Derivatives not designated as cash flow hedging instruments:
NYMEX futures contracts$— $— $— $1,269 $— $1,269 
Commodity forward contracts286 — 286 328 — 328 
Foreign currency forward contracts
7,494 (1,317)6,177 — — — 
$7,780 $(1,317)$6,463 $1,597 $— $1,597 
Total net balance$6,463 $1,835 
Balance sheet classification:Prepayment and other$6,463 Accrued liabilities$1,835 
Derivatives in Net Asset PositionDerivatives in Net Liability Position
Gross AssetsGross Liabilities Offset in Balance SheetNet Assets Recognized in Balance SheetGross LiabilitiesGross Assets Offset in Balance SheetNet Liabilities Recognized in Balance Sheet
 (In thousands)
December 31, 2020
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts
$— $— $— $359 $— $359 
$— $— $— $359 $— $359 
Derivatives not designated as cash flow hedging instruments:
NYMEX futures contracts$— $— $— $418 $— $418 
Commodity forward contracts275 — 275 196 — 196 
Foreign currency forward contracts
— — — 23,005 — 23,005 
$275 $— $275 $23,619 $— $23,619 
Total net balance$275 $23,978 
Balance sheet classification:Prepayments and other$275 Accrued liabilities$23,978 

At December 31, 2021, we had a pre-tax net unrealized loss of $0.3 million classified in accumulated other comprehensive income that relates to all accounting hedges having contractual maturities through 2022, which, assuming commodity prices remain unchanged, will be effectively transferred from accumulated other comprehensive income into the statement of operations as the hedging instruments contractually mature over the next three-month period.