| DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES Our net income and cash flows are subject to volatility stemming from changes in interest rates on our variable rate debt obligations and fluctuations in commodity prices of natural gas, NGLs, condensate, crude oil and fractionation margins. Fractionation margins represent the relative difference between the price we receive from NGL and condensate sales and the corresponding commodity costs of natural gas and natural gas liquids we purchase for processing. Our interest rate risk exposure results from changes in interest rates on our variable rate debt and exists at the corporate level where our variable rate debt obligations are issued. Our exposure to commodity price risk exists within each of our segments. We use derivative financial instruments, such as futures, forwards, swaps, options and other financial instruments with similar characteristics, to manage the risks associated with market fluctuations in interest rates and commodity prices, as well as to reduce volatility in our cash flows. Based on our risk management policies, all of our derivative financial instruments, including those that do not qualify for hedge accounting treatment, are employed in connection with an underlying asset, liability or forecasted transaction and are not entered into with the objective of speculating on interest rates or commodity prices. We have hedged a portion of our exposure to the variability in future cash flows associated with the risks discussed above in future periods in accordance with our risk management policies. Our derivative instruments that are designated for hedge accounting under authoritative guidance are classified as cash flow hedges. Derivative Positions Our derivative financial instruments are included at their fair values in the consolidated statements of financial position as follows:
September 30, December 31,
(in millions)
Other current assets $ 137.8 $ 185.5
Other assets, net 55.6 93.3
Accounts payable and other (1) (377.6 ) (315.4 )
Other long-term liabilities (189.8 ) (124.6 )
Due from general partner and affiliates 0.3
$ (374.0 ) $ (160.9 )
(1)
Includes $ 16.2 28.4 The changes in the assets and liabilities associated with our derivatives are primarily attributable to the effects of new derivative transactions we have entered at prevailing market prices, settlement of maturing derivatives and the change in forward market prices of our remaining hedges. Our portfolio of derivative financial instruments is largely comprised of the following contracts: (1) natural gas, (2) NGL, (3) crude oil and (4) interest rates. During the first quarter of 2014, we determined that a portion of forecasted short term debt transactions were not expected to occur, due to changing funding requirements. Since we will require less short-term debt than previously forecasted, we terminated several of our existing interest rate hedges used to lock-in interest rates on our short-term debt issuances as these hedges no longer met the cash flow hedging requirements. These terminations resulted in realized losses of $ 0.8 Our earnings and cash flows are exposed to the variability in longer term interest rates ahead of the anticipated fixed rate debt issuances. Forward starting interest rate swaps are used as cash flow hedges against the effect of future interest rate movements on earnings and cash flow. In order to mitigate the negative effect that increasing interest rates have on our cash flows, in the three months ended September 30, 2014, we purchased 10 2.35 In September 2014, we amended the maturity date on certain interest rate hedges of future debt issuances that were originally set to mature in 2014 and 2016 to better reflect the expected timing of future debt issuances. The ineffective portion of the hedges' fair value in relation to the hedged future debt issuances is recognized in income at the amendment date and each quarter end. For the three and nine months ended September 30, 2015, we recognized in interest expense unrealized losses for hedge ineffectiveness of approximately $ 7.9 22.0 62.2 The table below summarizes our derivative balances by counterparty credit quality (negative amounts represent our net obligations to pay the counterparty).
September 30, 2015 December 31, 2014
(in millions)
Counterparty Credit Quality (1)
AAA $ 0.2 $ 0.1
AA (2) (106.2 ) (49.8 )
A (128.3 ) (129.1 )
Lower than A (139.7 ) 17.9
$ (374.0 ) $ (160.9 )
(1)
As determined by nationally-recognized statistical ratings organizations.
(2)
Includes $ 16.2 28.4 As the net value of our derivative financial instruments has decreased in response to changes in forward commodity prices and interest rates, our outstanding financial exposure to third parties has also decreased. When credit thresholds are met pursuant to the terms of our International Swaps and Derivatives Association, Inc., or ISDA®, financial contracts, we have the right to require collateral from our counterparties. We include any cash collateral received or posted in the balances listed above. At September 30, 2015 and December 31, 2014, we held $ 16.2 28.4 We have provided letters of credit totaling $ 417.7 329.6 The ISDA® agreements, in combination with our master netting agreements, and credit arrangements governing our interest rate and commodity swaps require that collateral be posted per tiered contractual thresholds based on the credit rating of each counterparty. We generally provide letters of credit to satisfy such collateral requirements under our ISDA® agreements. These agreements will require additional collateral postings of up to 100 In the event that our credit ratings were to decline below the lowest level of investment grade, as determined by Standard & Poor's and Moody's, we would be required to provide additional amounts under our existing letters of credit to meet the requirements of our ISDA® agreements. For example, if our credit ratings had been at the lowest level of investment grade at September 30, 2015, we would have been required to provide additional letters of credit in the amount of $ 83.5 At September 30, 2015 and December 31, 2014, we had credit concentrations in the following industry sectors, as presented below:
September 30, December 31,
(in millions)
United States financial institutions and investment banking entities (1) $ (251.1 ) $ (147.1 )
Non-United States financial institutions (149.9 ) (54.2 )
Other 27.0 40.4
$ (374.0 ) $ (160.9 )
(1)
Includes $ 16.2 28.4 Gross derivative balances are presented below before the effects of collateral received or posted and without the effects of master netting arrangements. Both our assets and liabilities are adjusted for non-performance risk, which is statistically derived. This credit valuation adjustment model considers existing derivative asset and liability balances in conjunction with contractual netting and collateral arrangements, current market data such as credit default swap rates and bond spreads and probability of default assumptions to quantify an adjustment to fair value. For credit modeling purposes, collateral received is included in the calculation of our assets, while any collateral posted is excluded from the calculation of the credit adjustment. Our credit exposure for these over-the-counter, or OTC, derivatives is directly with our counterparty and continues until the maturity or termination of the contracts. Effect of Derivative Instruments on the Consolidated Statements of Financial Position
Asset Derivatives Liability Derivatives
Fair Value at Fair Value at
Financial Position September 30, December 31, September 30, December 31,
Location 2015 2014 2015 2014
(in millions)
Derivatives designated as hedging instruments: (1)
Interest rate contracts Accounts payable and other $ $ $ (319.4 ) $ (241.0 )
Interest rate contracts Other long-term liabilities (168.0 ) (102.0 )
Commodity contracts Other current assets 7.4 26.1
Commodity contracts Other assets 2.1
7.4 28.2 (487.4 ) (343.0 )
Derivatives not designated as hedging instruments:
Commodity contracts Other current assets 130.4 159.4
Commodity contracts Other assets 55.6 91.2
Commodity contracts Accounts payable and other (2) (42.0 ) (46.0 )
Commodity contracts Other long-term liabilities (21.8 ) (22.6 )
Commodity contracts Due from general partner and affiliates 0.3
186.0 250.9 (63.8 ) (68.6 )
Total derivative instruments $ 193.4 $ 279.1 $ (551.2 ) $ (411.6 )
(1)
Includes items currently designated as hedging instruments. Excludes the portion of de-designated hedges which may have a component remaining in AOCI.
(2)
Liability derivatives exclude $ 16.2 28.4 Accumulated Other Comprehensive Income We record the change in fair value of our highly effective cash flow hedges in AOCI until the derivative financial instruments are settled, at which time they are reclassified to earnings. Also included in AOCI, as of September 30, 2015 and December 31, 2014, are unrecognized losses of approximately $ 23.9 28.4 During the nine months ended September 30, 2015 and 2014, unrealized commodity hedge gains of $ 1.5 0.2 316.5 Effect of Derivative Instruments on the Consolidated Statements of Income and Accumulated Other Comprehensive Income
Amount of Gain
(Loss) Recognized in
Location of Gain Earnings on
(Loss) Recognized in Derivative
Earnings on Derivative (Ineffective Portion
Amount of Gain Location of Gain (Loss) Amount of Gain (Loss) (Ineffective Portion and Amount
Derivatives in Cash (Loss) Recognized in Reclassified from Reclassified from and Amount Excluded from
Flow Hedging AOCI on Derivative AOCI to Earnings AOCI to Earnings Excluded from Effectiveness
Relationships (Effective Portion) (Effective Portion) (Effective Portion) Effectiveness Testing) (1) Testing) (1)
(in millions)
For the three months ended September 30, 2015
Interest rate contracts $ (127.0 ) Interest expense $ (3.7 ) Interest expense $ (7.8 )
Commodity contracts (5.5 ) Commodity Costs 8.6 Commodity Costs (0.1 )
Total $ (132.5 ) $ 4.9 $ (7.9 )
For the three months ended September 30, 2014
Interest rate contracts $ 44.1 Interest expense $ (4.0 ) Interest expense $ (62.2 )
Commodity contracts 11.2 Commodity Costs (2.1 ) Commodity Costs 0.9
Total $ 55.3 $ (6.1 ) $ (61.3 )
For the nine months ended September 30, 2015
Interest rate contracts $ (169.0 ) Interest expense $ (12.0 ) Interest expense $ 24.6
Commodity contracts (16.8 ) Commodity Costs 24.1 Commodity Costs (4.1 )
Total $ (185.8 ) $ 12.1 $ 20.5
For the nine months ended September 30, 2014
Interest rate contracts $ (93.0 ) Interest expense $ (12.1 ) Interest expense $ (73.2 )
Commodity contracts 7.9 Commodity Costs (12.4 ) Commodity Costs 1.5
Total $ (85.1 ) $ (24.5 ) $ (71.7 )
(1)
Includes only the ineffective portion of derivatives that are designated as hedging instruments and does not include net gains or losses associated with derivatives that do not qualify for hedge accounting treatment. Components of Accumulated Other Comprehensive Income/(Loss)
Cash Flow Hedges
2015 2014
(in millions)
Balance at January 1 $ (211.4 ) $ (76.6 )
Other comprehensive loss before reclassifications (1) (170.9 ) (104.6 )
Amounts reclassified from AOCI (2) (3) (6.4 ) 22.2
Net other comprehensive loss $ (177.3 ) $ (82.4 )
Balance at September 30 $ (388.7 ) $ (159.0 )
(1)
Excludes NCI gain of $ 1.8 0.5
(2)
Excludes NCI loss of $ 5.7 2.3
(3)
For additional details on the amounts reclassified from AOCI, reference the Reclassifications from Accumulated Other Comprehensive Income Reclassifications from Accumulated Other Comprehensive Income
For the three months ended For the nine months ended
2015 2014 2015 2014
(in millions)
Losses (gains) on cash flow hedges:
Interest Rate Contracts (1)(2) $ 3.6 $ 4.0 $ 11.9 $ 12.1
Commodity Contracts (3)(4)(5) (6.5 ) 1.6 (18.3 ) 10.1
Total Reclassifications from AOCI $ (2.9 ) $ 5.6 $ (6.4 ) $ 22.2
(1)
Loss reported within Interest expense, net in the consolidated statements of income.
(2)
Excludes NCI gain of $ 0.1
(3)
Loss (gain) reported within Commodity costs in the consolidated statements of income.
(4)
Excludes NCI gain of $ 2.1 0.5
(5)
Excludes NCI loss of $ 5.8 2.3 Effect of Derivative Instruments on Consolidated Statements of Income
For the three months For the nine months
ended September 30, ended September 30,
2015 2014 2015 2014
Derivatives Not Designated Location of Gain or (Loss) Amount of Gain or (Loss) Amount of Gain or (Loss)
as Hedging Instruments Recognized in Earnings Recognized in Earnings (1)(2) Recognized in Earnings (1)(2)
(in millions)
Commodity contracts Transportation and other services (3) $ 8.1 $ 7.0 $ 8.1 $ (0.6 )
Commodity contracts Commodity sales (7.2 ) 7.6 (22.4 ) 10.7
Commodity contracts Commodity sales - affiliate (0.3 ) 0.5
Commodity contracts Commodity costs (4) 40.8 9.5 44.3 (9.9 )
Commodity contracts Power 0.5
Total $ 41.7 $ 24.1 $ 29.7 $ 1.2
(1)
Does not include settlements associated with derivative instruments that settle through physical delivery.
(2)
Includes only net gains or losses associated with those derivatives that do not qualify for hedge accounting treatment and does not include the ineffective portion of derivatives that are designated as hedging instruments.
(3)
Includes settlement gains of $ 7.0 0.6 19.2 0.9
(4)
Includes settlement gains of $ 27.3 0.2 71.0 (8.6) We record the fair market value of our derivative financial and physical instruments in the consolidated statements of financial position as current and long-term assets or liabilities on a gross basis. However, the terms of the ISDA®, which govern our financial contracts and our other master netting agreements, allow the parties to elect in respect of all transactions under the agreement, in the event of a default and upon notice to the defaulting party, for the non-defaulting party to set-off all settlement payments, collateral held and any other obligations (whether or not then due), which the non-defaulting party owes to the defaulting party. The effect of the rights of set-off are outlined below.
Offsetting of Financial Assets and Derivative Assets
As of September 30, 2015
Gross Gross Net Amount Gross (1)
Net Amount
(in millions)
Description:
Derivatives $ 193.4 $ $ 193.4 $ (59.9 ) $ 133.5
As of December 31, 2014
Gross Gross Net Amount Gross (1)
Net Amount
(in millions)
Description:
Derivatives $ 279.1 $ $ 279.1 $ (91.8 ) $ 187.3
(1)
Includes $16.2 million and $28.4 million of cash collateral held at September 30, 2015 and December 31, 2014, respectively.
Offsetting of Financial Liabilities and Derivative Liabilities
As of September 30, 2015
Gross (1) Gross Net Amount Gross (1) Net
(in millions)
Description:
Derivatives $ (567.4 ) $ $ (567.4 ) $ 59.9 $ (507.5 )
As of December 31, 2014
Gross (1) Gross Net Amount Gross (1)
Net Amount
(in millions)
Description:
Derivatives $ (440.0 ) $ $ (440.0 ) $ 91.8 $ (348.2 )
(1)
Includes $16.2 million and $28.4 million of cash collateral at September 30, 2015 and December 31, 2014, respectively. Inputs to Fair Value Derivative Instruments 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 September 30, 2015 and December 31, 2014. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect our valuation of the financial assets and liabilities and their placement within the fair value hierarchy.
September 30, 2015 December 31, 2014
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in millions)
Interest rate contracts $ $ (487.4 ) $ $ (487.4 ) $ $ (343.0 ) $ $ (343.0 )
Commodity contracts:
Financial 17.6 14.3 31.9 41.6 42.7 84.3
Physical 4.6 4.6 19.5 19.5
Commodity options 93.1 93.1 106.7 106.7
(469.8 ) 112.0 (357.8 ) (301.4 ) 168.9 (132.5 )
Cash collateral (16.2 ) (28.4 )
Total $ (374.0 ) $ (160.9 ) Qualitative Information about Level 2 Fair Value Measurements We categorize, as Level 2, the fair value of assets and liabilities that we measure with either directly or indirectly observable inputs as of the measurement date, where pricing inputs are other than quoted prices in active markets for the identical instrument. This category includes both OTC transactions valued using exchange traded pricing information in addition to assets and liabilities that we value using either models or other valuation methodologies derived from observable market data. These models are primarily industry-standard models that consider various inputs including: (1) quoted prices for assets and liabilities; (2) time value; and (3) current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the assets and liabilities, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Qualitative Information about Level 3 Fair Value Measurements Data from pricing services and published indices are used to value our Level 3 derivative instruments, which are fair-valued on a recurring basis. We may also use these inputs with internally developed methodologies that result in our best estimate of fair value. The inputs listed in the table below would have a direct impact on the fair values of the listed instruments. The significant unobservable inputs used in the fair value measurement of the commodity derivatives (natural gas, NGLs, crude oil and power) are forward commodity prices. The significant unobservable inputs used in determining the fair value measurement of options are price and volatility. Increases/(decreases) in the forward commodity price in isolation would result in higher/(lower) fair values for long positions, with offsetting impacts to short positions. Increases/(decreases) in volatility would increase/(decrease) the value for the holder of the option. Generally, a change in the estimate of forward commodity prices is unrelated to a change in the estimate of volatility of prices. A change to the credit valuation adjustment would change the fair value of the positions in opposite directions. Quantitative Information About Level 3 Fair Value Measurements
Fair Value at Range (1)
September 30, Valuation Unobservable Weighted
Contract Type 2015 (2) Technique Input Lowest Highest Average Units
(in millions)
Commodity Contracts - Financial
Natural Gas $ 0.3 Market Approach Forward Gas Price 2.41 3.16 2.84 MMBtu
NGLs $ 14.0 Market Approach Forward NGL Price 0.20 0.99 0.51 Gal
Commodity Contracts - Physical
Natural Gas $ (3.9 ) Market Approach Forward Gas Price 2.33 3.53 2.61 MMBtu
Crude Oil $ (0.4 ) Market Approach Forward Crude Price 31.17 47.93 44.35 Bbl
NGLs $ 8.9 Market Approach Forward NGL Price 0.20 1.39 0.43 Gal
Commodity Options
Natural Gas, Crude and NGLs $ 93.1 Option Model Option Volatility 10 % 62 % 35 %
Total Fair Value $ 112.0
(1)
Prices are in dollars per Millions of British Thermal Units, or MMBtu, for natural gas; dollars per Gallon, or Gal, for NGLs; and dollars per barrel, or Bbl, for crude oil.
(2)
Fair values include credit valuation adjustment losses of approximately $ 0.3
Fair Value at Range (1)
December 31, Valuation Unobservable Weighted
Contract Type 2014 (2) Technique Input Lowest Highest Average Units
(in millions)
Commodity Contracts - Financial
Natural Gas $ 0.6 Market Approach Forward Gas Price 2.55 3.72 3.04 MMBtu
NGLs $ 42.1 Market Approach Forward NGL Price 0.48 1.14 0.64 Gal
Commodity Contracts - Physical
Natural Gas $ 1.5 Market Approach Forward Gas Price 1.55 4.08 3.08 MMBtu
Crude Oil $ (0.9 ) Market Approach Forward Crude Price 49.57 55.60 53.51 Bbl
NGLs $ 18.9 Market Approach Forward NGL Price 0.06 1.21 0.54 Gal
Commodity Options
Natural Gas, Crude and NGLs $ 106.7 Option Model Option Volatility 19 % 94 % 36 %
Total Fair Value $ 168.9
(1)
Prices are in dollars per MMBtu for natural gas, Gal for NGLs and Bbl for crude oil.
(2)
Fair values include credit valuation adjustment losses of approximately $ 1.0 Level 3 Fair Value Reconciliation The table below provides a reconciliation of changes in the fair value of our Level 3 financial assets and liabilities measured on a recurring basis from January 1, 2015 to September 30, 2015. No transfers of assets between any of the Levels occurred during the period.
Commodity Commodity
Financial Physical Commodity
Contracts Contracts Options Total
(in millions)
Beginning balance as of January 1, 2015 $ 42.7 $ 19.5 $ 106.7 $ 168.9
Transfer in (out) of Level 3 (1)
Gains or losses included in earnings:
Reported in Commodity sales (3.2 ) (3.2 )
Reported in Commodity costs (1.1 ) 18.8 30.2 47.9
Gains or losses included in other comprehensive income:
Reported in Other comprehensive income (loss), net of tax 0.4 0.4
Purchases, issuances, sales and settlements:
Purchases
Sales 2.0 2.0
Settlements (2) (27.7 ) (30.5 ) (45.8 ) (104.0 )
Ending balance as September 30, 2015 $ 14.3 $ 4.6 $ 93.1 $ 112.0
Amounts reported in Commodity sales $ $ (22.7 ) $ $ (22.7 )
Amount of changes in net assets attributable to the change in derivative gains or losses related to assets and liabilities still held at the reporting date:
Reported in Commodity sales $ $ (1.4 ) $ $ (1.4 )
Reported in Commodity costs $ (2.0 ) $ 5.3 $ 30.6 33.9
(1)
Our policy is to recognize transfers as of the last day of the reporting period.
(2)
Settlements represent the realized portion of forward contracts. Fair Value Measurements of Commodity Derivatives The following table provides summarized information about the fair values of expected cash flows of our outstanding commodity based swaps and physical contracts at September 30, 2015 and December 31, 2014.
At September 30, 2015 At December 31, 2014
Wtd. Average Price (2) Fair Value (3) Fair Value (3)
Commodity Notional (1) Receive Pay Asset Liability Asset Liability
(in millions)
Portion of contracts maturing in 2015
Swaps
Receive variable/pay fixed NGL 964,000 $ 22.66 $ 25.42 $ 0.7 $ (3.3 ) $ $ (6.8 )
Crude Oil 350,000 $ 45.54 $ 72.70 $ $ (9.5 ) $ $ (27.4 )
Receive fixed/pay variable NGL 1,913,800 $ 29.66 $ 24.25 $ 11.3 $ (1.0 ) $ 39.2 $
Crude Oil 528,532 $ 86.11 $ 45.66 $ 21.3 $ $ 65.0 $
Receive variable/pay variable Natural Gas 828,000 $ 2.45 $ 2.52 $ $ (0.1 ) $ 1.5 $ (1.7 )
Physical Contracts
Receive variable/pay fixed NGL 50,000 $ 31.63 $ 33.02 $ $ (0.1 ) $ $ (3.6 )
Crude Oil 8,600 $ 45.26 $ 45.12 $ $ $ $
Receive fixed/pay variable NGL 3,048,988 $ 18.83 $ 17.16 $ 6.4 $ (1.3 ) $ 19.8 $
Crude Oil 54,500 $ 42.69 $ 45.80 $ $ (0.2 ) $ 0.5 $
Receive variable/pay variable Natural Gas 54,524,000 $ 2.48 $ 2.49 $ $ (0.8 ) $ 2.2 $ (1.0 )
NGL 5,150,479 $ 20.54 $ 20.07 $ 5.3 $ (2.9 ) $ 3.7 $ (1.0 )
Crude Oil 742,342 $ 43.59 $ 43.90 $ 1.3 $ (1.5 ) $ 0.3 $ (1.7 )
Portion of contracts maturing in 2016
Swaps
Receive variable/pay fixed Natural Gas 16,287 $ 2.72 $ 3.48 $ $ $ $ (0.1 )
NGL 833,500 $ 23.81 $ 30.54 $ $ (5.6 ) $ $
Crude Oil 415,950 $ 49.02 $ 82.69 $ $ (14.0 ) $ $ (8.1 )
Receive fixed/pay variable NGL 1,428,500 $ 31.34 $ 22.26 $ 13.3 $ (0.3 ) $ 9.3 $
Crude Oil 779,270 $ 74.00 $ 49.08 $ 19.3 $ $ 9.1 $
Receive variable/pay variable Natural Gas 5,124,000 $ 2.79 $ 2.76 $ 0.2 $ $ 0.5 $ (0.3 )
Physical Contracts
Receive fixed/pay variable NGL 233,952 $ 20.02 $ 19.25 $ 0.2 $ (0.1 ) $ $
Receive variable/pay variable Natural Gas 177,875,634 $ 2.62 $ 2.64 $ $ (3.4 ) $ 0.7 $ (0.4 )
NGL 9,640,509 $ 17.02 $ 16.88 $ 1.6 $ (0.2 ) $ $
Portion of contracts maturing in 2017
Swaps
Receive variable/pay fixed Natural Gas 76,530 $ 2.62 $ 2.97 $ $ $ $
NGL 547,500 $ 19.97 $ 25.86 $ $ (3.2 ) $ $
Crude Oil 547,500 $ 52.74 $ 66.72 $ $ (7.6 ) $ $
Receive fixed/pay variable NGL 547,500 $ 23.59 $ 19.97 $ 2.0 $ $ 0.7 $
Crude Oil 547,500 $ 66.78 $ 52.74 $ 7.6 $ $ 0.8 $
Receive variable/pay variable Natural Gas 8,050,000 $ 2.82 $ 2.77 $ 0.4 $ $ $
Physical Contracts
Receive variable/pay variable Natural Gas 2,187,810 $ 3.03 $ 3.01 $ 0.1 $ $ 0.2 $ (0.1 )
Portion of contracts maturing in 2018
Physical Contracts
Receive variable/pay variable Natural Gas 2,187,810 $ 3.16 $ 3.14 $ 0.1 $ $ $
Portion of contracts maturing in 2019
Physical Contracts
Receive variable/pay variable Natural Gas 2,187,810 $ 3.25 $ 3.22 $ 0.1 $ $ $
Portion of contracts maturing in 2020
Physical Contracts
Receive variable/pay variable Natural Gas 359,640 $ 3.55 $ 3.52 $ $ $ $
(1)
Volumes of natural gas are measured in MMBtu, whereas volumes of NGL and crude oil are measured in Bbl.
(2)
Weighted-average prices received and paid are in $/MMBtu for natural gas and $/Bbl for NGL and crude oil.
(3)
The fair value is determined based on quoted market prices at September 30, 2015 and December 31, 2014, respectively, discounted using the swap rate for the respective periods to consider the time value of money. Fair values exclude credit valuation adjustment gains (losses) of approximately $ 0.4 0.5) The following table provides summarized information about the fair values of expected cash flows of our outstanding commodity options at September 30, 2015 and December 31, 2014.
At September 30, 2015 At December 31, 2014
Strike Market Fair Value (3) Fair Value (3)
Commodity Notional (1) Price (2) Price (2) Asset Liability Asset Liability
(in millions)
Portion of option contracts maturing in 2015
Puts (purchased) Natural Gas 1,012,000 $ 3.90 $ 2.60 $ 1.3 $ $ 3.8 $
NGL 579,600 $ 43.32 $ 23.75 $ 11.4 $ $ 40.2 $
Crude Oil 184,000 $ 81.56 $ 45.77 $ 6.6 $ $ 18.8 $
Calls (written) Natural Gas 322,000 $ 5.05 $ 2.60 $ $ $ $
NGL 372,600 $ 45.80 $ 23.58 $ $ $ $ (0.6 )
Crude Oil 184,000 $ 88.39 $ 45.77 $ $ $ $ (0.4 )
Puts (written) Natural Gas 1,012,000 $ 3.90 $ 2.60 $ $ (1.3 ) $ $ (3.8 )
NGL 23,000 $ 77.28 $ 39.81 $ $ (0.9 ) $ $
Calls (purchased) Natural Gas 322,000 $ 5.05 $ 2.60 $ $ $ $
Portion of option contracts maturing in 2016
Puts (purchased) Natural Gas 1,647,000 $ 3.75 $ 2.80 $ 1.7 $ $ 1.0 $
NGL 2,836,500 $ 39.24 $ 22.88 $ 48.4 $ $ 39.3 $
Crude Oil 805,200 $ 75.91 $ 49.23 $ 21.8 $ $ 14.7 $
Calls (written) Natural Gas 1,647,000 $ 4.98 $ 2.80 $ $ $ $ (0.1 )
NGL 2,836,500 $ 45.14 $ 22.88 $ $ (1.2 ) $ $ (3.2 )
Crude Oil 805,200 $ 86.68 $ 49.23 $ $ (0.2 ) $ $ (2.7 )
Puts (written) Natural Gas 1,647,000 $ 3.75 $ 2.80 $ $ (1.7 ) $ $ (1.0 )
NGL 91,500 $ 39.06 $ 25.26 $ $ (1.3 ) $ $
Calls (purchased) Natural Gas 1,647,000 $ 4.98 $ 2.80 $ $ $ 0.1 $
NGL 91,500 $ 46.41 $ 25.26 $ $ $ $
Portion of option contracts maturing in 2017
Puts (purchased) NGL 1,277,500 $ 25.26 $ 24.76 $ 5.5 $ $ 1.2 $
Crude Oil 547,500 $ 63.00 $ 52.74 $ 7.5 $ $ 4.1 $
Calls (written) NGL 1,277,500 $ 29.46 $ 24.76 $ $ (3.0 ) $ $ (0.7 )
Crude Oil 547,500 $ 71.45 $ 52.74 $ $ (1.1 ) $ $ (3.3 )
(1)
Volumes of natural gas are measured in MMBtu, whereas volumes of NGL and crude oil are measured in Bbl.
(2)
Strike and market prices are in $/MMBtu for natural gas and in $/Bbl for NGL and crude oil.
(3)
The fair value is determined based on quoted market prices at September 30, 2015 and December 31, 2014, respectively, discounted using the swap rate for the respective periods to consider the time value of money. Fair values exclude credit valuation adjustment losses of approximately $ 0.4 0.7 Fair Value Measurements of Interest Rate Derivatives We enter into interest rate swaps, caps and derivative financial instruments with similar characteristics to manage the cash flow associated with future interest rate movements on our indebtedness. The following table provides information about our current interest rate derivatives for the specified periods.
Average Fair Value (2)
Date of Maturity & Contract Type Accounting Treatment Notional Fixed Rate (1) September 30, 2015 December 31, 2014
(dollars in millions)
Contracts maturing in 2015
Interest Rate Swaps Pay Fixed Cash Flow Hedge $ 510 1.53 % $ $ (0.2 )
Contracts maturing in 2016
Interest Rate Swaps Pay Fixed Cash Flow Hedge $ 90 0.55 % $ (0.1 ) $ (0.1 )
Contracts maturing in 2017
Interest Rate Swaps Pay Fixed Cash Flow Hedge $ 500 2.21 % $ (10.5 ) $ (12.9 )
Contracts maturing in 2018
Interest Rate Swaps Pay Fixed Cash Flow Hedge $ 810 2.24 % $ (9.0 ) $ (1.3 )
Contracts maturing in 2019
Interest Rate Swaps Pay Fixed Cash Flow Hedge $ 620 2.96 % $ (7.9 ) $ (3.3 )
Contracts settling prior to maturity
2015 Pre-issuance Hedges Cash Flow Hedge $ 1,000 5.48 % $ (313.0 ) $ (258.3 )
2016 Pre-issuance Hedges Cash Flow Hedge $ 500 4.21 % $ (85.3 ) $ (63.4 )
2017 Pre-issuance Hedges Cash Flow Hedge $ 500 3.69 % $ (52.7 ) $ (36.0 )
2018 Pre-issuance Hedges Cash Flow Hedge $ 350 3.08 % $ (13.4 ) $ (4.9 )
(1)
Interest rate derivative contracts are based on the one-month or three-month London Interbank Offered Rate, or LIBOR.
(2)
The fair value is determined from quoted market prices at September 30, 2015 and December 31, 2014, respectively, discounted using the swap rate for the respective periods to consider the time value of money. Fair values exclude credit valuation adjustment gains of approximately $ 4.5 37.4 |
