Derivatives | 9 Months Ended |
Sep. 30, 2013 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Derivatives | ' |
The Company is exposed to price risks due to fluctuations in the price of crude oil, refined products (primarily in the Company’s fuel products segment) and natural gas. The Company uses various strategies to reduce its exposure to commodity price risk. The Company does not attempt to eliminate all of the Company’s risk as the costs of such actions are believed to be too high in relation to the risk posed to the Company’s future cash flows, earnings and liquidity. The strategies to reduce the Company’s risk utilize both physical forward contracts and financially settled derivative instruments, such as swaps, futures and options, to attempt to reduce the Company’s exposure with respect to: |
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• | crude oil purchases and sales; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | fuel product sales and purchases; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | natural gas purchases; and | | | | | | | | | | | | | | | | | | | | | | | | | | |
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• | fluctuations in the value of crude oil between geographic regions and between the different types of crude oil such as NYMEX WTI, Light Louisiana Sweet (“LLS”), Western Canadian Select (“WCS”), Mixed Sweet Blend (“MSW”) and ICE Brent (“Brent”). | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Company does not hold or issue derivative instruments for trading purposes. |
The Company recognizes all derivative instruments at their fair values (see Note 10) as either current assets or current liabilities on the condensed consolidated balance sheets. Fair value includes any premiums paid or received and unrealized gains and losses. Fair value does not include any amounts receivable from or payable to counterparties, or collateral provided to counterparties. Derivative asset and liability amounts with the same counterparty are netted against each other for financial reporting purposes. The Company’s financial results are subject to the possibility that changes in a derivative’s fair value could result in significant ineffectiveness and potentially no longer qualify it for hedge accounting. The following tables summarize the Company’s gross fair values of its derivative instruments, presenting the impact of offsetting derivative assets and liabilities on the Company’s condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012 (in millions): |
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| 30-Sep-13 | | 31-Dec-12 | | | | |
| Gross Amounts of Recognized Assets | | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | | Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheets | | Gross Amounts of Recognized Assets | | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | | Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheets | | | | |
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Derivative instruments designated as hedges: | | | | | | | | | | | | | | | |
Fuel products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | $ | 47.1 | | | $ | (10.5 | ) | | $ | 36.6 | | | $ | 24.9 | | | $ | (14.4 | ) | | $ | 10.5 | | | | | |
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Gasoline swaps | — | | | — | | | — | | | 5.2 | | | (4.9 | ) | | 0.3 | | | | | |
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Diesel swaps | 12.5 | | | (22.3 | ) | | (9.8 | ) | | 7 | | | (14.9 | ) | | (7.9 | ) | | | | |
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Jet fuel swaps | 1.6 | | | (5.6 | ) | | (4.0 | ) | | 8 | | | (7.8 | ) | | 0.2 | | | | | |
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Total derivative instruments designated as hedges | 61.2 | | | (38.4 | ) | | 22.8 | | | 45.1 | | | (42.0 | ) | | 3.1 | | | | | |
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Derivative instruments not designated as hedges: | | | | | | | | | | | | | | | |
Fuel products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | 2.2 | | | (0.9 | ) | | 1.3 | | | 0.1 | | | (0.1 | ) | | — | | | | | |
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Crude oil basis swaps | — | | | (3.1 | ) | | (3.1 | ) | | 0.1 | | | (0.1 | ) | | — | | | | | |
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Gasoline swaps | 0.2 | | | (0.1 | ) | | 0.1 | | | — | | | — | | | — | | | | | |
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Diesel swaps | 3.6 | | | (0.7 | ) | | 2.9 | | | 5.1 | | | (5.1 | ) | | — | | | | | |
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Jet fuel swaps | 0.4 | | | (0.2 | ) | | 0.2 | | | — | | | — | | | — | | | | | |
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Specialty products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | — | | | — | | | — | | | 1.6 | | | (1.6 | ) | | — | | | | | |
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Natural gas swaps | 0.1 | | | (1.4 | ) | | (1.3 | ) | | — | | | — | | | — | | | | | |
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Total derivative instruments not designated as hedges | 6.5 | | | (6.4 | ) | | 0.1 | | | 6.9 | | | (6.9 | ) | | — | | | | | |
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Total derivative instruments | $ | 67.7 | | | $ | (44.8 | ) | | $ | 22.9 | | | $ | 52 | | | $ | (48.9 | ) | | $ | 3.1 | | | | | |
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| 30-Sep-13 | | 31-Dec-12 | | | | |
| Gross Amounts of Recognized Liabilities | | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | | Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheets | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | | Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheets | | | | |
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Derivative instruments designated as hedges: | | | | | | | | | | | | | | | |
Fuel products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | $ | (8.8 | ) | | $ | 10.5 | | | $ | 1.7 | | | $ | (41.1 | ) | | $ | 14.4 | | | $ | (26.7 | ) | | | | |
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Gasoline swaps | — | | | — | | | — | | | (2.8 | ) | | 4.9 | | | 2.1 | | | | | |
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Diesel swaps | (22.9 | ) | | 22.3 | | | (0.6 | ) | | (25.2 | ) | | 14.9 | | | (10.3 | ) | | | | |
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Jet fuel swaps | (5.6 | ) | | 5.6 | | | — | | | (10.1 | ) | | 7.8 | | | (2.3 | ) | | | | |
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Total derivative instruments designated as hedges | (37.3 | ) | | 38.4 | | | 1.1 | | | (79.2 | ) | | 42 | | | (37.2 | ) | | | | |
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Derivative instruments not designated as hedges: | | | | | | | | | | | | | | | |
Fuel products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | (1.1 | ) | | 0.9 | | | (0.2 | ) | | (10.8 | ) | | 0.1 | | | (10.7 | ) | | | | |
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Crude oil basis swaps | (5.3 | ) | | 3.1 | | | (2.2 | ) | | (3.5 | ) | | 0.1 | | | (3.4 | ) | | | | |
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Gasoline swaps | (0.1 | ) | | 0.1 | | | — | | | (2.2 | ) | | — | | | (2.2 | ) | | | | |
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Diesel swaps | (0.3 | ) | | 0.7 | | | 0.4 | | | (1.2 | ) | | 5.1 | | | 3.9 | | | | | |
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Jet fuel swaps | 0.1 | | | 0.2 | | | 0.3 | | | — | | | — | | | — | | | | | |
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Specialty products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | — | | | — | | | — | | | — | | | 1.6 | | | 1.6 | | | | | |
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Natural gas swaps | (3.0 | ) | | 1.4 | | | (1.6 | ) | | — | | | — | | | — | | | | | |
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Total derivative instruments not designated as hedges | (9.7 | ) | | 6.4 | | | (3.3 | ) | | (17.7 | ) | | 6.9 | | | (10.8 | ) | | | | |
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Total derivative instruments | $ | (47.0 | ) | | $ | 44.8 | | | $ | (2.2 | ) | | $ | (96.9 | ) | | $ | 48.9 | | | $ | (48.0 | ) | | | | |
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The Company accounts for certain derivatives hedging purchases of crude oil and sales of gasoline, diesel and jet fuel as cash flow hedges. The derivatives hedging sales and purchases are recorded to sales and cost of sales, respectively, in the unaudited condensed consolidated statements of operations upon recording the related hedged transaction in sales or cost of sales. The derivatives designated as hedging payments of interest are recorded in interest expense in the unaudited condensed consolidated statements of operations upon payment of interest. The Company assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. Periodically, the Company may enter into crude oil and fuel product basis swaps to more effectively hedge its crude oil purchases and fuel products sales. These derivatives can be combined with a swap contract in order to create a more effective hedge. The Company has entered into crude oil basis swaps for 2013 that do not qualify as cash flow hedges for accounting purposes as they were not entered into simultaneously with a corresponding NYMEX WTI derivative contract. |
To the extent a derivative instrument designated as a hedge is determined to be effective as a cash flow hedge of an exposure to changes in the fair value of a future transaction, the change in fair value of the derivative is deferred in accumulated other comprehensive income (loss), a component of partners’ capital in the condensed consolidated balance sheets, until the underlying transaction hedged is recognized in the unaudited condensed consolidated statements of operations. Hedge accounting is discontinued when it is determined that a derivative no longer qualifies as an effective hedge or when it is no longer probable that the hedged forecasted transaction will occur. When hedge accounting is discontinued because the derivative instrument no longer qualifies as an effective cash flow hedge, the derivative instrument is subject to the mark-to-market method of accounting prospectively. Changes in the mark-to-market fair value of the derivative instrument are recorded to unrealized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. Unrealized gains and losses related to discontinued cash flow hedges that were previously accumulated in accumulated other comprehensive income (loss) will remain in accumulated other comprehensive income (loss) until the underlying transaction is reflected in earnings, unless it is probable that the hedged forecasted transaction will not occur, at which time, associated deferred amounts in accumulated other comprehensive income (loss) are immediately recognized in unrealized gain (loss) on derivative instruments. |
Effective January 1, 2012, hedge accounting was discontinued prospectively for certain crude oil derivative instruments when it was determined that they were no longer highly effective in offsetting changes in the cash flows associated with crude oil purchases at the Company’s Superior refinery due to the volatility in crude oil pricing differentials between heavy crude oil and NYMEX WTI. Effective April 1, 2012, hedge accounting was discontinued prospectively for certain gasoline and diesel derivative instruments associated with gasoline and diesel sales at the Company’s Superior refinery. The discontinuance of hedge accounting on these derivative instruments has caused the Company to recognize the following gains and losses in realized gain (loss) on derivative instruments and unrealized gain (loss) in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012 (in millions): |
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| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | |
| 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | |
Realized gain (loss) on derivative instruments | $ | 1.6 | | | $ | (4.8 | ) | | $ | (2.6 | ) | | $ | 49.7 | | | | | | | | | | | | | |
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Unrealized gain (loss) on derivative instruments | $ | 1.3 | | | $ | (35.0 | ) | | $ | 8.7 | | | $ | (6.8 | ) | | | | | | | | | | | | |
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The amount reclassified from accumulated other comprehensive income (loss) into earnings, as a result of the discontinuance of hedge accounting for certain jet fuel derivative instruments because it was no longer probable that the original forecasted transaction would occur by the end of the originally specified time period, caused the Company to recognize derivative losses of $0.7 million and $1.7 million in realized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2012, respectively. |
For derivative instruments not designated as cash flow hedges and the portion of any cash flow hedge that is determined to be ineffective, the change in fair value of the asset or liability for the period is recorded to unrealized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. Upon the settlement of a derivative not designated as a cash flow hedge, the gain or loss at settlement is recorded to realized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. Ineffectiveness is inherent in the hedging of crude oil and fuel products. Due to the volatility in the markets for crude oil and fuel products, the Company is unable to predict the amount of ineffectiveness each period, determined on a derivative by derivative basis or in the aggregate for a specific commodity, and has the potential for the future loss of hedge accounting. Ineffectiveness and the loss of hedge accounting has resulted in increased volatility in the Company’s financial results. However, even though certain derivative instruments may not qualify for hedge accounting, the Company intends to continue to utilize such instruments as management believes such derivative instruments continue to provide the Company with the opportunity to more effectively stabilize cash flows. |
The Company recorded the following amounts in its condensed consolidated balance sheets, unaudited condensed consolidated statements of operations, unaudited condensed consolidated statements of comprehensive income (loss) and unaudited condensed consolidated statements of partners’ capital as of, and for the three months ended September 30, 2013 and 2012 related to its derivative instruments that were designated as cash flow hedges (in millions): |
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| Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivatives (Effective Portion) | | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Net Income (Loss) (Effective Portion) | | Amount of Gain (Loss) Recognized in Net Income (Loss) on Derivatives (Ineffective Portion) |
| Three Months Ended | | Location of Gain (Loss) | | Three Months Ended | | Location of Gain (Loss) | | Three Months Ended |
| September 30, | | | September 30, | | | September 30, |
Type of Derivative | 2013 | | 2012 | | | 2013 | | 2012 | | | 2013 | | 2012 |
Fuel products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | $ | 59.2 | | | $ | 13 | | | Cost of sales | | $ | 11.1 | | | $ | 8 | | | Unrealized/ Realized | | $ | 11.3 | | | $ | 34.1 | |
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Gasoline swaps | (0.3 | ) | | 8.9 | | | Sales | | (0.1 | ) | | — | | | Unrealized/ Realized | | (0.6 | ) | | (23.1 | ) |
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Diesel swaps | (33.1 | ) | | (49.3 | ) | | Sales | | (4.4 | ) | | (29.2 | ) | | Unrealized/ Realized | | (0.6 | ) | | (1.2 | ) |
Jet fuel swaps | (11.7 | ) | | (56.0 | ) | | Sales | | (0.2 | ) | | (20.4 | ) | | Unrealized/ Realized | | (0.5 | ) | | (4.5 | ) |
Specialty products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | — | | | — | | | Cost of sales | | (0.8 | ) | | (0.2 | ) | | Unrealized/ Realized | | — | | | — | |
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Total | $ | 14.1 | | | $ | (83.4 | ) | | | | $ | 5.6 | | | $ | (41.8 | ) | | | | $ | 9.6 | | | $ | 5.3 | |
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The Company recorded the following gains (losses) in its unaudited condensed consolidated statements of operations for the three months ended September 30, 2013 and 2012 related to its derivative instruments not designated as cash flow hedges (in millions): |
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| Amount of Gain (Loss) Recognized in Realized Gain (Loss) on Derivative Instruments | | Amount of Gain (Loss) Recognized in Unrealized Gain (Loss) on Derivative Instruments | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | | | | | | | | | | | |
| September 30, | | September 30, | | | | | | | | | | | | |
Type of Derivative | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | |
Fuel products segment: | | | | | | | | | | | | | | | | | | | |
Crude oil swaps | $ | 2 | | | $ | (8.9 | ) | | $ | 2.7 | | | $ | 40.2 | | | | | | | | | | | | | |
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Crude oil basis swaps | (0.2 | ) | | — | | | (7.2 | ) | | — | | | | | | | | | | | | | |
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Gasoline swaps | — | | | 2.4 | | | (0.4 | ) | | (40.9 | ) | | | | | | | | | | | | |
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Diesel swaps | 0.9 | | | 2.8 | | | (1.1 | ) | | (34.2 | ) | | | | | | | | | | | | |
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Jet fuel swaps | 0.7 | | | (0.6 | ) | | 0.5 | | | 0.5 | | | | | | | | | | | | | |
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Specialty products segment: | | | | | | | | | | | | | | | | | | | |
Crude oil swaps | 0.1 | | | — | | | (0.1 | ) | | 1 | | | | | | | | | | | | | |
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Natural gas swaps | — | | | (1.4 | ) | | (0.9 | ) | | 1.6 | | | | | | | | | | | | | |
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Interest rate swaps | — | | | (0.1 | ) | | — | | | 0.1 | | | | | | | | | | | | | |
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Total | $ | 3.5 | | | $ | (5.8 | ) | | $ | (6.5 | ) | | $ | (31.7 | ) | | | | | | | | | | | | |
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The Company recorded the following amounts in its condensed consolidated balance sheets, unaudited condensed consolidated statements of operations, unaudited condensed consolidated statements of other comprehensive income (loss) and its unaudited condensed consolidated statements of partners’ capital as of, and for the nine months ended September 30, 2013 and 2012 related to its derivative instruments that were designated as cash flow hedges (in millions): |
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| Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivatives (Effective Portion) | | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Net Income (Loss) (Effective Portion) | | Amount of Gain (Loss) Recognized in Net Income (Loss) on Derivatives (Ineffective Portion) |
| Nine Months Ended | | Location of Gain (Loss) | | Nine Months Ended | | Location of Gain (Loss) | | Nine Months Ended |
| September 30, | | | September 30, | | | September 30, |
Type of Derivative | 2013 | | 2012 | | | 2013 | | 2012 | | | 2013 | | 2012 |
Fuel products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | $ | 32.5 | | | $ | (85.9 | ) | | Cost of sales | | $ | (2.5 | ) | | $ | 42.6 | | | Unrealized/ Realized | | $ | (16.5 | ) | | $ | 84 | |
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Gasoline swaps | (0.7 | ) | | (31.3 | ) | | Sales | | (0.2 | ) | | (39.2 | ) | | Unrealized/ Realized | | (1.2 | ) | | (38.4 | ) |
Diesel swaps | 8.5 | | | (70.7 | ) | | Sales | | (3.0 | ) | | (52.0 | ) | | Unrealized/ Realized | | (3.9 | ) | | (3.0 | ) |
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Jet fuel swaps | 1 | | | (48.4 | ) | | Sales | | 1.8 | | | (89.0 | ) | | Unrealized/ Realized | | 6 | | | (2.6 | ) |
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Specialty products segment: | | | | | | | | | | | | | | | |
Crude oil swaps | — | | | — | | | Cost of sales | | (0.5 | ) | | (0.2 | ) | | Unrealized/ Realized | | — | | | — | |
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Total | $ | 41.3 | | | $ | (236.3 | ) | | | | $ | (4.4 | ) | | $ | (137.8 | ) | | | | $ | (15.6 | ) | | $ | 40 | |
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The Company recorded the following gains (losses) in its unaudited condensed consolidated statements of operations for the nine months ended September 30, 2013 and 2012 related to its derivative instruments not designated as cash flow hedges (in millions): |
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| Amount of Gain (Loss) Recognized in Realized Gain (Loss) on Derivative Instruments | | Amount of Gain (Loss) Recognized in Unrealized Gain (Loss) on Derivative Instruments | | | | | | | | | | | | |
| Nine Months Ended | | Nine Months Ended | | | | | | | | | | | | |
| September 30, | | September 30, | | | | | | | | | | | | |
Type of Derivative | 2013 | | 2012 | | 2013 | | 2012 | | | | | | | | | | | | |
Fuel products segment: | | | | | | | | | | | | | | | | | | | |
Crude oil swaps | $ | (6.8 | ) | | $ | (16.2 | ) | | $ | 42.5 | | | $ | (40.0 | ) | | | | | | | | | | | | |
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Crude oil basis swaps | 7.3 | | | — | | | (1.9 | ) | | — | | | | | | | | | | | | | |
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Gasoline swaps | 2.9 | | | 13.8 | | | (0.4 | ) | | (1.1 | ) | | | | | | | | | | | | |
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Diesel swaps | 6.4 | | | 8 | | | (4.5 | ) | | 6.7 | | | | | | | | | | | | | |
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Jet fuel swaps | 0.7 | | | (1.7 | ) | | 0.4 | | | — | | | | | | | | | | | | | |
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Specialty products segment: | | | | | | | | | | | | | | | | | | | |
Crude oil swaps | 1.8 | | | — | | | (1.6 | ) | | 1.6 | | | | | | | | | | | | | |
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Natural gas swaps | — | | | (4.9 | ) | | (2.9 | ) | | 2.7 | | | | | | | | | | | | | |
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Interest rate swaps | — | | | (0.7 | ) | | — | | | 1 | | | | | | | | | | | | | |
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Total | $ | 12.3 | | | $ | (1.7 | ) | | $ | 31.6 | | | $ | (29.1 | ) | | | | | | | | | | | | |
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The cash flow impact of the Company’s derivative activities is classified primarily as a change in derivative activity in the operating activities section in the unaudited condensed consolidated statements of cash flows. |
The Company is exposed to credit risk in the event of nonperformance by its counterparties on these derivative transactions. The Company does not expect nonperformance on any derivative instruments, however, no assurances can be provided. The Company’s credit exposure related to these derivative instruments is represented by the fair value of contracts reported as derivative assets. As of September 30, 2013, the Company had seven counterparties, in which derivatives held were net assets, totaling $22.9 million. As of December 31, 2012, the Company had two counterparties, in which the derivatives held were net assets, totaling $3.1 million. To manage credit risk, the Company selects and periodically reviews counterparties based on credit ratings. The Company primarily executes its derivative instruments with large financial institutions that have ratings of at least Baa2 and A- by Moody’s and S&P, respectively. In the event of default, the Company would potentially be subject to losses on derivative instruments with mark to market gains. The Company requires collateral from its counterparties when the fair value of the derivatives exceeds agreed upon thresholds in its master derivative contracts with these counterparties. No such collateral was held by the Company as of September 30, 2013 or December 31, 2012. The Company’s contracts with these counterparties allow for netting of derivative instruments executed under each contract. Collateral received from counterparties is reported in other current liabilities, and collateral held by counterparties is reported in deposits, on the Company’s condensed consolidated balance sheets and is not netted against derivative assets or liabilities. As of September 30, 2013, the Company had provided its counterparties with no collateral. As of December 31, 2012, the Company had provided its counterparties with no collateral except for a $25.0 million letter of credit provided to one counterparty to support crack spread hedging. For financial reporting purposes, the Company does not offset the collateral provided to a counterparty against the fair value of its obligation to that counterparty. Any outstanding collateral is released to the Company upon settlement of the related derivative instrument liability. |
Certain of the Company’s outstanding derivative instruments are subject to credit support agreements with the applicable counterparties which contain provisions setting certain credit thresholds above which the Company may be required to post agreed-upon collateral, such as cash or letters of credit, with the counterparty to the extent that the Company’s mark-to-market net liability, if any, on all outstanding derivatives exceeds the credit threshold amount per such credit support agreement. In certain cases, the Company’s credit threshold is dependent upon the Company’s maintenance of certain corporate credit ratings with Moody’s and S&P. In the event that the Company’s corporate credit rating is lowered below specified levels by Moody’s and S&P, such counterparties would have the right to reduce the applicable threshold to zero and demand full collateralization of the Company’s net liability position on outstanding derivative instruments. As of September 30, 2013 and December 31, 2012, there was a net asset of $5.0 million and a net liability $7.5 million, respectively, associated with the Company’s outstanding derivative instruments subject to such requirements. In addition, the majority of the credit support agreements covering the Company’s outstanding derivative instruments also contain a general provision stating that if the Company experiences a material adverse change in its business, in the reasonable discretion of the counterparty, the Company’s credit threshold could be lowered by such counterparty. The Company does not expect that it will experience a material adverse change in its business. |
The effective portion of the cash flow hedges classified in accumulated other comprehensive income was $31.7 million as of September 30, 2013. The effective portion of the cash flow hedges classified in accumulated other comprehensive loss was $14.0 million as of December 31, 2012. Absent a change in the fair market value of the underlying transactions, the following other comprehensive income (loss) at September 30, 2013 will be reclassified to earnings by December 31, 2016 with balances being recognized as follows (in millions): |
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Year | Accumulated Other Comprehensive Income (Loss) | | | | | | | | | | | | | | | | | | | | | | | | |
2013 | $ | 21.4 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2014 | 9.9 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
2015 | (0.8 | ) | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | 1.2 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total | $ | 31.7 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Based on fair values as of September 30, 2013, the Company expects to reclassify $30.2 million of net gains on derivative instruments from accumulated other comprehensive income to earnings during the next twelve months due to actual crude oil purchases and diesel and jet fuel sales. However, the amounts actually realized will be dependent on the fair values as of the dates of settlement. |
Crude Oil Swap Contracts — Specialty Products Segment |
At September 30, 2013, the Company did not have any crude oil derivatives related to future crude oil purchases in its specialty products segment. |
At December 31, 2012, the Company had purchased a crude oil swap for 200,000 barrels in the second quarter of 2012 related to future crude oil purchases in its specialty products segment, which was not designated as a cash flow hedge. The Company subsequently sold a crude oil derivative swap in the third quarter of 2012, and the net impact of these two derivatives was a net gain of $1.6 million that was recorded to unrealized loss on derivative instruments in the consolidated statements of operations for the year ended December 31, 2012. This gain was realized in January 2013 upon settlement and was recorded to realized gain on derivative instruments in the unaudited condensed consolidated statements of operations. |
Natural Gas Swap Contracts — Specialty Products Segment |
At September 30, 2013, the Company had the following derivatives related to natural gas purchases in its specialty products segment, none of which are designated as cash flow hedges: |
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Natural Gas Swap Contracts by Expiration Dates | MMBtu | | $/MMBtu | | | | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 1,250,000 | | | $ | 4.12 | | | | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 3,100,000 | | | 4.16 | | | | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 3,500,000 | | | 4.27 | | | | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2016 | 2,700,000 | | | 4.42 | | | | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2017 | 1,000,000 | | | 4.29 | | | | | | | | | | | | | | | | | | | | | | |
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Totals | 11,550,000 | | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | $ | 4.26 | | | | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company did not have any natural gas derivatives related to future natural gas purchases in its specialty products segment. |
Crude Oil Contracts — Fuel Products Segment |
Crude Oil Swap Contracts |
At September 30, 2013, the Company had the following derivatives related to crude oil purchases in its fuel products segment, all of which are designated as cash flow hedges: |
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Crude Oil Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 1,104,000 | | | 12,000 | | | $ | 93.41 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 6,068,500 | | | 16,626 | | | 89.93 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 5,329,000 | | | 14,600 | | | 89.08 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2016 | 1,098,000 | | | 3,000 | | | 85.12 | | | | | | | | | | | | | | | | | | | |
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Totals | 13,599,500 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 89.49 | | | | | | | | | | | | | | | | | | | |
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At September 30, 2013, the Company had the following derivatives related to crude oil purchases in its fuel products segment, none of which are designated as cash flow hedges: |
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Crude Oil Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 368,000 | | | 4,000 | | | $ | 96.58 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 411,000 | | | 1,126 | | | 95.21 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 637,500 | | | 1,747 | | | 89.89 | | | | | | | | | | | | | | | | | | | |
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Totals | 1,416,500 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 93.17 | | | | | | | | | | | | | | | | | | | |
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At September 30, 2013, the Company had the following derivatives to sell crude oil in its fuel products segment, none of which are designated as cash flow hedges: |
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Crude Oil Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 92,000 | | | 1,000 | | | $ | 102.3 | | | | | | | | | | | | | | | | | | | |
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Totals | 92,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 102.3 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to crude oil purchases in its fuel products segment, all of which are designated as cash flow hedges: |
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Crude Oil Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 1,665,000 | | | 18,500 | | | $ | 101.67 | | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 1,911,000 | | | 21,000 | | | 100.22 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 1,426,000 | | | 15,500 | | | 95.62 | | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 1,104,000 | | | 12,000 | | | 93.41 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 5,110,000 | | | 14,000 | | | 89.47 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 4,781,500 | | | 13,100 | | | 89.49 | | | | | | | | | | | | | | | | | | | |
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Totals | 15,997,500 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 92.85 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to crude oil purchases in its fuel products segment, none of which are designated as cash flow hedges: |
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Crude Oil Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 630,000 | | | 7,000 | | | $ | 101.34 | | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 455,000 | | | 5,000 | | | 98.56 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 368,000 | | | 4,000 | | | 96.58 | | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 368,000 | | | 4,000 | | | 96.58 | | | | | | | | | | | | | | | | | | | |
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Totals | 1,821,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 98.72 | | | | | | | | | | | | | | | | | | | |
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Crude Oil Basis Swap Contracts |
During 2012 and 2013, the Company entered into crude oil basis swaps to mitigate the risk of future changes in pricing differentials between Canadian heavy crude oil and NYMEX WTI, pricing differentials between LLS and NYMEX WTI and pricing differentials between MSW and NYMEX WTI. At September 30, 2013, the Company had the following derivatives related to crude oil basis swaps in its fuel products segment, none of which are designated as cash flow hedges: |
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Crude Oil Basis Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Differential to NYMEX WTI ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 794,000 | | | 8,630 | | | $ | (17.92 | ) | | | | | | | | | | | | | | | | | | |
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Totals | 794,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | (17.92 | ) | | | | | | | | | | | | | | | | | | |
At December 31, 2012, the Company had the following derivatives related to crude oil basis swaps in its fuel products segment, none of which are designated as cash flow hedges: |
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Crude Oil Basis Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Differential to NYMEX WTI ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 180,000 | | | 2,000 | | | $ | (23.75 | ) | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 364,000 | | | 4,000 | | | (27.38 | ) | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 184,000 | | | 2,000 | | | (23.75 | ) | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 184,000 | | | 2,000 | | | (23.75 | ) | | | | | | | | | | | | | | | | | | |
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Totals | 912,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average differential | | | | | $ | (25.20 | ) | | | | | | | | | | | | | | | | | | |
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During the third quarter of 2013, the Company entered into crude oil basis swaps for 250,000 barrels related to future crude oil purchases and sales to mitigate the risk of future changes in pricing differentials between Brent and NYMEX WTI on the Company’s reselling of crude oil. The net impact of these derivative instruments, none of which are designated as cash flow hedges, was a net gain of $0.1 million that has been recorded to unrealized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2013. The net impact of these derivative instruments will be realized upon settlement in the fourth quarter of 2013 and will be recorded to realized gain (loss) on derivative instruments in the consolidated statements of operations. |
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At December 31, 2012, the Company did not have any crude oil basis swaps related to future crude oil purchases and sales to mitigate the risk of future changes in pricing differentials between Brent and NYMEX WTI. |
Fuel Products Swap Contracts — Fuel Products Segment |
Diesel Swap Contracts |
At September 30, 2013, the Company had the following derivatives related to diesel sales in its fuel products segment, all of which are designated as cash flow hedges: |
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Diesel Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 828,000 | | | 9,000 | | | $ | 120.82 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 4,793,500 | | | 13,133 | | | 116.88 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 4,781,500 | | | 13,100 | | | 115.81 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2016 | 1,098,000 | | | 3,000 | | | 111.93 | | | | | | | | | | | | | | | | | | | |
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Totals | 11,501,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 116.25 | | | | | | | | | | | | | | | | | | | |
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At September 30, 2013, the Company had the following derivatives related to diesel sales in its fuel products segment, none of which are designated as cash flow hedges: |
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Diesel Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 276,000 | | | 3,000 | | | $ | 124.17 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 501,000 | | | 1,373 | | | 122.49 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 637,500 | | | 1,747 | | | 118.16 | | | | | | | | | | | | | | | | | | | |
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Totals | 1,414,500 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 120.87 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to diesel sales in its fuel products segment, all of which are designated as cash flow hedges: |
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Diesel Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Second Quarter 2013 | 546,000 | | | 6,000 | | | $ | 122.74 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 874,000 | | | 9,500 | | | 122.23 | | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 828,000 | | | 9,000 | | | 120.82 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 3,835,000 | | | 10,507 | | | 116 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 4,781,500 | | | 13,100 | | | 115.81 | | | | | | | | | | | | | | | | | | | |
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Totals | 10,864,500 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 117.13 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to diesel sales in its fuel products segment, none of which are designated as cash flow hedges: |
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Diesel Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 540,000 | | | 6,000 | | | $ | 130.57 | | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 364,000 | | | 4,000 | | | 126.82 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 276,000 | | | 3,000 | | | 124.17 | | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 276,000 | | | 3,000 | | | 124.17 | | | | | | | | | | | | | | | | | | | |
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Totals | 1,456,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 127.2 | | | | | | | | | | | | | | | | | | | |
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Jet Fuel Swap Contracts |
At September 30, 2013, the Company had the following derivatives related to jet fuel sales in its fuel products segment, all of which are designated as cash flow hedges: |
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Jet Fuel Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 276,000 | | | 3,000 | | | $ | 122.36 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 1,275,000 | | | 3,493 | | | 116.64 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2015 | 547,500 | | | 1,500 | | | 112.51 | | | | | | | | | | | | | | | | | | | |
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Totals | 2,098,500 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 116.31 | | | | | | | | | | | | | | | | | | | |
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At September 30, 2013, the Company had the following derivatives to purchase jet fuel in its fuel products segment, none of which are designated as cash flow hedges: |
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Jet Fuel Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Calendar Year 2014 | 90,000 | | | 247 | | | $ | 116.71 | | | | | | | | | | | | | | | | | | | |
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Totals | 90,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 116.71 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to jet fuel sales in its fuel products segment, all of which are designated as cash flow hedges: |
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Jet Fuel Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 1,035,000 | | | 11,500 | | | $ | 127.39 | | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 819,000 | | | 9,000 | | | 129.2 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 368,000 | | | 4,000 | | | 125.13 | | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 276,000 | | | 3,000 | | | 122.36 | | | | | | | | | | | | | | | | | | | |
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Calendar Year 2014 | 1,275,000 | | | 3,493 | | | 116.64 | | | | | | | | | | | | | | | | | | | |
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Totals | 3,773,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 123.56 | | | | | | | | | | | | | | | | | | | |
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Gasoline Swap Contracts |
At September 30, 2013, the Company did not have derivatives related to gasoline sales in its fuel products segment designated as cash flow hedges. |
At September 30, 2013, the Company had the following derivatives related to gasoline sales in its fuel products segment, none of which are designated as cash flow hedges: |
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Gasoline Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 92,000 | | | 1,000 | | | $ | 105.5 | | | | | | | | | | | | | | | | | | | |
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Totals | 92,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 105.5 | | | | | | | | | | | | | | | | | | | |
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At September 30, 2013, the Company had the following derivatives related to gasoline purchases in its fuel products segment, none of which are designated as cash flow hedges: |
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Gasoline Swap Contracts by Expiration Dates | Barrels Purchased | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
Fourth Quarter 2013 | 92,000 | | | 1,000 | | | $ | 105 | | | | | | | | | | | | | | | | | | | |
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Totals | 92,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 105 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to gasoline sales in its fuel products segment, all of which are designated as cash flow hedges: |
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Gasoline Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 630,000 | | | 7,000 | | | $ | 113.59 | | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 546,000 | | | 6,000 | | | 116.32 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 184,000 | | | 2,000 | | | 114.73 | | | | | | | | | | | | | | | | | | | |
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Totals | 1,360,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 114.84 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company had the following derivatives related to gasoline sales in its fuel products segment, none of which are designated as cash flow hedges: |
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Gasoline Swap Contracts by Expiration Dates | Barrels Sold | | BPD | | Average Swap ($/Bbl) | | | | | | | | | | | | | | | | | | |
First Quarter 2013 | 90,000 | | | 1,000 | | | $ | 105.5 | | | | | | | | | | | | | | | | | | | |
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Second Quarter 2013 | 91,000 | | | 1,000 | | | 105.5 | | | | | | | | | | | | | | | | | | | |
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Third Quarter 2013 | 92,000 | | | 1,000 | | | 105.5 | | | | | | | | | | | | | | | | | | | |
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Fourth Quarter 2013 | 92,000 | | | 1,000 | | | 105.5 | | | | | | | | | | | | | | | | | | | |
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Totals | 365,000 | | | | | | | | | | | | | | | | | | | | | | | |
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Average price | | | | | $ | 105.5 | | | | | | | | | | | | | | | | | | | |
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At December 31, 2012, the Company did not have any derivatives related to gasoline purchases in its fuel products segment designated as cash flow hedges. |