DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended |
Sep. 30, 2014 |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES [Abstract] | ' |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | ' |
10. 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, power and fractionation margins. Fractionation margins represent the relative difference between the price we receive from NGL and condensate sales and the corresponding cost of natural gas 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 (i.e., 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 of our cash flows. Based on our risk management policies, all of our derivative financial instruments are employed in connection with an underlying asset, liability and/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 variability in future cash flows associated with the risks discussed above through 2019 in accordance with our risk management policies. |
Accounting Treatment |
Effective January 1, 2014, we elected to prospectively change the presentation of derivative assets and liabilities from a net basis to a gross basis in the Consolidated Statements of Financial Position. We adopted this change to provide more detailed information about the future economic benefits and obligations associated with our derivative activities in our Consolidated Statements of Financial Position. This change had no impact to the Consolidated Statements of Income, Net income (loss) per limited partner unit, or Partners' capital. |
Non-Qualified Hedges |
Many of our derivative financial instruments qualify for hedge accounting treatment as set forth in the authoritative accounting guidance. However, we have transaction types associated with our commodity derivative financial instruments where the hedge structure does not meet the requirements to apply hedge accounting. As a result, these derivative financial instruments do not qualify for hedge accounting and are referred to as non-qualifying. These non-qualifying derivative financial instruments are marked-to-market each period with the change in fair value, representing unrealized gains and losses, included in “Cost of natural gas,” “Operating revenue”, “Power” or “Interest expense” in our consolidated statements of income. These mark-to-market adjustments produce a degree of earnings volatility that can often be significant from period to period, but have no cash flow impact relative to changes in market prices. The cash flow impact occurs when the underlying physical transaction takes place in the future and the associated financial instrument contract settlement is made. |
The following transaction types do not qualify for hedge accounting and contribute to the volatility of our income and cash flows: |
Commodity Price Exposures: |
• Transportation—In our Natural Gas segment, when we transport natural gas from one location to another, the pricing index used for natural gas sales is usually different from the pricing index used for natural gas purchases, which exposes us to market price risk relative to changes in those two indices. By entering into a basis swap, where we exchange one pricing index for another, we can effectively lock in the margin, representing the difference between the sales price and the purchase price, on the combined natural gas purchase and natural gas sale, removing any market price risk on the physical transactions. Although this represents a sound economic hedging strategy, the derivative financial instruments (i.e., the basis swaps) we use to manage the commodity price risk associated with these transportation contracts do not qualify for hedge accounting, since only the future margin has been fixed and not the future cash flow. As a result, the changes in fair value of these derivative financial instruments are recorded in earnings. |
• Storage—In our Natural Gas segment, we use derivative financial instruments (i.e., natural gas, crude oil and NGL swaps) to hedge the relative difference between the injection price paid to purchase and store natural gas, crude oil and NGLs and the withdrawal price at which these commodities are sold from storage. The intent of these derivative financial instruments is to lock in the margin, representing the difference between the price paid for the natural gas, crude oil and NGLs injected and the price received upon withdrawal of these commodities from storage in a future period. We do not pursue cash flow hedge accounting treatment for these storage transactions since the underlying forecasted injection or withdrawal of these commodities, may not occur in the period as originally forecast. This can occur because we have the flexibility to make changes in the underlying injection or withdrawal schedule, based on changes in market conditions. In addition, since the physical commodities are recorded at the lower of cost or market, timing differences can result when the derivative financial instrument is settled in a period that is different from the period the physical commodity is sold from storage. As a result, derivative financial instruments associated with our storage activities can create volatility in our earnings. |
• Condensate, Natural Gas and NGL Options—In our Natural Gas segment, we use options to hedge the forecasted commodity exposure of our condensate, NGLs and natural gas. Although options can qualify for hedge accounting treatment, pursuant to the authoritative accounting guidance, we have elected non-qualifying treatment. As such, our option premiums are expensed as incurred. These derivatives are being marked-to-market, with the changes in fair value recorded to earnings each period. As a result, our operating income is subject to volatility due to movements in the prices of condensate, NGLs and natural gas until the underlying long-term transactions are settled. |
• Optional Natural Gas Processing Volumes—In our Natural Gas segment, we use derivative financial instruments to hedge the volumes of NGLs produced from our natural gas processing facilities. Some of our natural gas contracts allow us the choice of processing natural gas when it is economical and to cease doing so when processing becomes uneconomic. We have entered into derivative financial instruments to fix the sales price of a portion of the NGLs that we produce at our discretion and to fix the associated purchase price of natural gas required for processing. We typically designate derivative financial instruments associated with NGLs we produce per contractual processing requirements as cash flow hedges when the processing of natural gas is probable of occurrence. However, we are precluded from designating the derivative financial instruments as qualifying hedges of the respective commodity price risk when the discretionary processing volumes are subject to change. As a result, our operating income is subject to increased volatility due to fluctuations in NGL prices until the underlying transactions are settled or offset. |
• NGL and Crude Oil Forward Contracts—In our Natural Gas segment, we use forward contracts to fix the price of NGLs and crude oil we purchase and to fix the price of NGLs and crude oil that we sell to meet the demands of our customers that sell and purchase NGLs and crude oil. A subgroup of physical NGL and physical crude oil contracts qualify for the normal purchases and normal sales, or NPNS scope exception. All other forward contracts are being marked-to-market each period with the change in fair value recorded in earnings. As a result, our operating income is subject to additional volatility associated with fluctuations in NGL and crude oil prices until the forward contracts are settled. |
• Natural Gas Forward Contracts—In our Natural Gas segment, we use forward contracts to sell natural gas to our customers. A subgroup of physical natural gas contracts qualify for the NPNS scope exception. All other forward contracts are being marked-to-market each period with the change in fair value recorded in earnings. As a result, our operating income is subject to additional volatility associated with the changes in fair value of these contracts. |
• Crude Oil Contracts—In our Liquids segment, we use forward contracts to hedge a portion of the crude oil length inherent in the operation of our pipelines, which we subsequently sell at market rates. These hedges create a fixed sales price for the crude oil that we will receive in the future. We elected not to designate these derivative financial instruments as cash flow hedges, and as a result, will experience some additional volatility associated with fluctuations in crude oil prices until the underlying transactions are settled or offset. |
• Power Purchase Agreements—In our Liquids segment, we use forward physical power agreements to fix the price of a portion of the power consumed by our pumping stations in the transportation of crude oil in our owned pipelines. We designate these derivative agreements as non-qualifying hedges because they fail to meet the criteria for cash flow hedging or the NPNS exception. As various states in which our pipelines operate have legislated either partially or fully deregulated power markets, we have the opportunity to create economic hedges on power exposure. As a result, our operating income is subject to additional volatility associated with changes in the fair value of these agreements due to fluctuations in forward power prices. |
Except for physical power, in all instances related to the commodity exposures described above, the underlying physical purchase, storage and sale of the commodity is accounted for on a historical cost or net realizable value basis rather than on the mark-to-market basis we employ for the derivative financial instruments used to mitigate the commodity price risk associated with our storage and transportation assets. This difference in accounting (i.e., the derivative financial instruments are recorded at fair market value while the physical transactions are recorded at the lower of historical or net realizable value) can and has resulted in volatility in our reported net income, even though the economic margin is essentially unchanged from the date the transactions were consummated. Relating to the power purchase agreements, commodity power purchases are immediately consumed as part of pipeline operations and are subsequently recorded as actual power expenses each period. |
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, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other current assets | | | $ | 37.8 | | | $ | 21.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other assets, net | | | | 36.2 | | | | 74.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accounts payable and other (1) | | | | (25.6 | ) | | | (172.0 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other long-term liabilities | | | | (267.9 | ) | | | (12.3 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Due from general partner and affiliates | | | | 0.4 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | (219.1 | ) | | $ | (88.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ______________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Includes $16.7 million of cash collateral at December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 natural gas, NGL and crude oil sales and purchase contracts. |
The table below summarizes our derivative balances by counterparty credit quality (negative amounts represent our net obligations to pay the counterparty). |
| | | | September 30, | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty Credit Quality (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AAA | | | $ | 0.3 | | | $ | 0.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AA | | | | (91.0 | ) | | | (49.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| A (2) | | | | (134.0 | ) | | | (40.1 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Lower than A | | | | 5.6 | | | | 0.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | (219.1 | ) | | $ | (88.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ______________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| -1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As determined by nationally-recognized statistical ratings organizations. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Includes $16.7 million of cash collateral at December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As the net value of our derivative financial instruments has decreased in response to changes in forward commodity prices, 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 in the balances listed above. When we are in a position of posting collateral to cover our counterparties' exposure to our non-performance, the collateral is provided through letters of credit, which are not reflected above. |
At September 30, 2014, we had no cash collateral on our asset exposures, and at December 31, 2013, we held $16.7 million of cash collateral on our asset exposures, and we have provided letters of credit totaling $183.0 million and $76.1 million relating to our liability exposures pursuant to the margin thresholds in effect, respectively, under our ISDA® agreements. |
In the event that our credit ratings were to decline to 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, 2014, we would have been required to provide additional letters of credit in the amount of $48.8 million. |
At September 30, 2014 and December 31, 2013, we had credit concentrations in the following industry sectors, as presented below: |
| | | | September 30, | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| United States financial institutions and investment banking entities | | | $ | (176.3 | ) | | $ | (85.0 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-United States financial institutions (1) | | | | (49.3 | ) | | | 0.8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | | | | 6.5 | | | | (4.5 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | $ | (219.1 | ) | | $ | (88.7 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
______________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Includes $16.7 million of cash collateral at December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | | | | | | | | | | | | | | | | |
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| | | | | | Asset Derivatives | | Liability Derivatives | | | | | | | | | | | | | | | | | | |
| | | | | | Fair Value at | | Fair Value at | | | | | | | | | | | | | | | | | | |
| | | Financial Position | | | September 30, | | December 31, | | September 30, | | December 31, | | | | | | | | | | | | | | | | | | |
| | | Location | | | 2014 | | 2013 | | 2014 | | 2013 | | | | | | | | | | | | | | | | | | |
| | | | | | (in millions) | | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | Other current assets | | | $ | - | | | $ | 8.1 | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | Other assets | | | | 16.9 | | | | 57.1 | | | | - | | | | - | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | Accounts payable and other(2) | | | | - | | | | 11.9 | | | | (7.8 | ) | | | (145.5 | ) | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | Other long-term liabilities | | | | - | | | | - | | | | (255.0 | ) | | | (11.3 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Other current assets | | | | 3.3 | | | | 2 | | | | - | | | | (0.6 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Other assets | | | | 1.3 | | | | 3.5 | | | | - | | | | (0.5 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Accounts payable and other | | | | - | | | | 1.9 | | | | (2.2 | ) | | | (12.7 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Other long-term liabilities | | | | - | | | | 0.6 | | | | (0.3 | ) | | | (1.4 | ) | | | | | | | | | | | | | | | | | | |
| | | | | | | 21.5 | | | | 85.1 | | | | (265.3 | ) | | | (172.0 | ) | | | | | | | | | | | | | | | | | | |
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| Derivatives not designated as hedging instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Other current assets | | | | 34.5 | | | | 11.8 | | | | - | | | | (0.1 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Other assets | | | | 18 | | | | 17.6 | | | | - | | | | (3.3 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Accounts payable and other | | | | - | | | | 5.4 | | | | (15.6 | ) | | | (16.3 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Other long-term liabilities | | | | - | | | | - | | | | (12.6 | ) | | | (0.2 | ) | | | | | | | | | | | | | | | | | | |
| Commodity contracts | | Due from general partner and affiliates | | | | 0.4 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | |
| | | | | | | 52.9 | | | | 34.8 | | | | (28.2 | ) | | | (19.9 | ) | | | | | | | | | | | | | | | | | | |
| Total derivative instruments | | | | | $ | 74.4 | | | $ | 119.9 | | | $ | (293.5 | ) | | $ | (191.9 | ) | | | | | | | | | | | | | | | | | | |
| ______________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-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 $16.7 million of cash collateral at December 31, 2013. | | | | | | | | | | | | | | | | | | |
Accumulated Other Comprehensive Income |
We record the change in fair value of our derivative financial instruments that qualify for and are designated as a cash flow hedge, which is a hedge of a forecasted transaction or future cash flows, in “Accumulated other comprehensive income”, also referred to as AOCI, a component of “Partners' capital,” until the underlying hedged transaction occurs. Upon settlement of the designated cash flow hedges, gains (losses) are reclassified to earnings. Also included in AOCI, as of September 30, 2014, are unrecognized losses of approximately $29.6 million associated with derivative financial instruments that qualified for and were classified as cash flow hedges of forecasted transactions that were subsequently de-designated, settled, or terminated. These losses are reclassified to earnings over the periods during which the originally hedged forecasted transactions affect earnings. During the nine month period ended September 30, 2014, unrealized commodity hedge losses of $0.2 million were de-designated as a result of the hedges no longer meeting hedge accounting criteria. We estimate that approximately $11.7 million, representing unrealized net losses from our cash flow hedging activities based on pricing and positions at September 30, 2014, will be reclassified from AOCI to earnings during the next 12 months. |
During the first quarter of 2014 it was 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 meet the cash flow hedging requirements. These terminations resulted in realized losses of $0.8 million for the nine month period ended September 30, 2014. |
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 can have on our cash flows, we have purchased 10 year interest rate swaps with a total notional value of $ 2.35 billion as of September 30, 2014. |
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, 2014, interest expense increased due to recognition of unrealized losses for hedge ineffectiveness of approximately $62.2 million associated with interest rate hedges that were originally set to mature in 2014 and 2016. |
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Effect of Derivative Instruments on the Consolidated Statements of Income and Accumulated Other Comprehensive Income | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | 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 month period ended September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | |
Interest rate contracts | | $ | 44.1 | | | Interest expense | | $ | (4.0 | ) | | Interest expense | | $ | (62.2 | ) | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | | 11.2 | | | Cost of natural gas | | | (2.1 | ) | | Cost of natural gas | | | 0.9 | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 55.3 | | | | | $ | (6.1 | ) | | | | $ | (61.3 | ) | | | | | | | | | | | | | | | | | | | | | |
For the three month period ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Interest rate contracts | | $ | 1.7 | | | Interest expense | | $ | (4.2 | ) | | Interest expense | | $ | (1.1 | ) | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | | (17.2 | ) | | Cost of natural gas | | | (0.6 | ) | | Cost of natural gas | | | (0.5 | ) | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | (15.5 | ) | | | | $ | (4.8 | ) | | | | $ | (1.6 | ) | | | | | | | | | | | | | | | | | | | | | |
For the nine month period ended September 30, 2014 | | | | | | | | | | | | | | | | | | | | | | |
Interest rate contracts | | $ | (93.0 | ) | | Interest expense | | $ | (12.1 | ) | | Interest expense | | $ | (73.2 | ) | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | | 7.9 | | | Cost of natural gas | | | (12.4 | ) | | Cost of natural gas | | | 1.5 | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | (85.1 | ) | | | | $ | (24.5 | ) | | | | $ | (71.7 | ) | | | | | | | | | | | | | | | | | | | | | |
For the nine month period ended September 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Interest rate contracts | | $ | 179.3 | | | Interest expense | | $ | (24.3 | ) | | Interest expense | | $ | (0.5 | ) | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | | (8.8 | ) | | Cost of natural gas | | | 3 | | | Cost of natural gas | | | 1.8 | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 170.5 | | | | | $ | (21.3 | ) | | | | $ | 1.3 | | | | | | | | | | | | | | | | | | | | | | |
______________________________ | | | | | | | | | | | | | | | | | | | | |
-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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2013 | | $ | (76.6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Comprehensive Income before reclassifications (1) | | | (104.6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amounts reclassified from AOCI (2) (3) | | | 22.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tax benefit (expense) | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net other comprehensive income | | $ | (82.4 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2014 | | $ | (159.0 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
_______________________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excludes NCI loss of $0.5 million reclassified from AOCI at September 30, 2014. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excludes NCI gain of $2.3 million reclassified from AOCI at September 30, 2014. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
For additional details on the amounts reclassified from AOCI, reference the Reclassifications from Accumulated Other Comprehensive Income table below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Reclassifications from Accumulated Other Comprehensive Income | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | For the three month period ended September 30, | | | For the nine month period ended September 30, | |
| | | | | | | 2014 | | | 2013 | | | 2014 | | 2013 | |
| | | | | | | (in millions) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses (gains) on cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Rate Contracts (1) | | | | | | | | | | $ | 4 | | | | | | | $ | 4.2 | | | | | | | $ | | 12.1 | | | | | | $ | | 24.3 | | |
Commodity Contracts (2) (3) | | | | | | | | | | | 1.6 | | | | | | | | 0.6 | | | | | | | | | 10.1 | | | | | | | | (3.0 | ) | |
Total Reclassifications from AOCI | | | | | | | | | | $ | 5.6 | | | | | | | $ | 4.8 | | | | | | | $ | | 22.2 | | | | | | $ | | 21.3 | | |
______________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss reported within "Interest expense" in the consolidated statements of income. |
-2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss (gain) reported within "Cost of natural gas" in the consolidated statements of income. |
-3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excludes NCI gain of $0.5 million and $2.3 million reclassified from AOCI for the three and nine month periods ending September 30, 2014. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Effect of Derivative Instruments on Consolidated Statements of Income |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | For the three month | | | For the nine month | | | | | | | | | | | | | | | | | | | | | |
period ended | period ended | | | | | | | | | | | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | | | | | | | | | | | | |
| | | | 2014 | | | 2013 (2) | | | 2014 | | | 2013 (2) | | | | | | | | | | | | | | | | | | | | | |
Derivatives Not Designated | | Location of Gain or (Loss) | | Amount of Gain or (Loss) | | | Amount of Gain or (Loss) | | | | | | | | | | | | | | | | | | | | | |
as Hedging Instruments | Recognized in Earnings (1) | Recognized in Earnings (3) | Recognized in Earnings (3) | | | | | | | | | | | | | | | | | | | | |
| | | | (in millions) | | | | | | | | | | | | | | | | | | | |
Interest rate contracts | | Interest expense (4) | | $ | — | | | $ | 0.1 | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | Operating revenue (5) | | | 14.6 | | | | (16.7 | ) | | | 10.1 | | | | (14.0 | ) | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | Operating revenue—Affiliate | | | — | | | | — | | | | 0.5 | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | Power | | | — | | | | 0.1 | | | | 0.5 | | | | 0.3 | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | | Cost of natural gas (6) | | | 9.5 | | | | (21.8 | ) | | | (9.9 | ) | | | (2.6 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 24.1 | | | $ | (38.3 | ) | | $ | 1.2 | | | $ | (16.3 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Does not include settlements associated with derivative instruments that settle through physical delivery. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(2) | The effects of derivative instruments on consolidated statements of income for the three and nine month periods ended September 30, 2013 have been revised to include settlement gains (losses) on derivatives not designated as hedge instruments of $(0.8) million and $1.8 million, respectively. The revisions to the disclosure had no impact on previously reported net income or earnings per unit. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(3) | 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(4) | Includes settlement gains of $0.1 million and $0.3 million for the three and nine month periods ended September 30, 2013, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(5) | Includes settlement gains (losses) of $0.6 million and $(0.7) million for the three month periods ended September 30, 2014 and September 30, 2013, respectively, and $0.9 million and $1.0 million for the nine month periods ended September 30, 2014 and September 30, 2013, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(6) | Includes settlement gains (losses) of $0.2 million and $(0.2) million for the three month periods ended September 30, 2014 and September 30, 2013, respectively, and $(8.6) million and $0.5 million for the nine month periods ended September 30, 2014 and September 30, 2013, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
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 governs 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, 2014 | | | | | | | | | | | | | | | | | | | |
| | Gross | | | Gross Amount | | | Net Amount of Assets | | | Gross Amount | | | Net | | | | | | | | | | | | | | | | | | | |
Amount of | Offset in the | Presented in the | Not Offset in the | Amount | | | | | | | | | | | | | | | | | | |
Recognized | Statement of | Statement of | Statement of | | | | | | | | | | | | | | | | | | | |
Assets | Financial Position | Financial Position | Financial Position | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | |
Description: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives | | $ | 74.4 | | | $ | — | | | $ | 74.4 | | | $ | (33.6 | ) | | $ | 40.8 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 74.4 | | | $ | — | | | $ | 74.4 | | | $ | (33.6 | ) | | $ | 40.8 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2013 | | | | | | | | | | | | | | | | | | | |
| | Gross | | | Gross Amount | | | Net Amount of Assets | | | Gross Amount | | | Net | | | | | | | | | | | | | | | | | | | |
Amount of | Offset in the | Presented in the | Not Offset in the | Amount | | | | | | | | | | | | | | | | | | |
Recognized | Statement of | Statement of | Statement of | | | | | | | | | | | | | | | | | | | |
Assets | Financial Position | Financial Position | Financial Position | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | |
Description: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives | | $ | 119.9 | | | $ | (24.3 | ) | | $ | 95.6 | | | $ | (18.6 | ) | | $ | 77 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 119.9 | | | $ | (24.3 | ) | | $ | 95.6 | | | $ | (18.6 | ) | | $ | 77 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Offsetting of Financial Liabilities and Derivative Liabilities |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2014 | | | | | | | | | | | | | | | | | | | |
| | Gross | | | Gross Amount | | | Net Amount of Liabilities | | | Gross Amount | | | Net | | | | | | | | | | | | | | | | | | | |
Amount of | Offset in the | Presented in the | Not Offset in the | Amount | | | | | | | | | | | | | | | | | | |
Recognized | Statement of | Statement of | Statement of | | | | | | | | | | | | | | | | | | | |
Liabilities | Financial Position | Financial Position | Financial Position | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | |
Description: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives | | $ | (293.5 | ) | | $ | — | | | $ | (293.5 | ) | | $ | 33.6 | | | $ | (259.9 | ) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | (293.5 | ) | | $ | — | | | $ | (293.5 | ) | | $ | 33.6 | | | $ | (259.9 | ) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2013 | | | | | | | | | | | | | | | | | | | |
| | Gross | | | Gross Amount | | | Net Amount of Liabilities | | | Gross Amount | | | Net | | | | | | | | | | | | | | | | | | | |
Amount of | Offset in the | Presented in the | Not Offset in the | Amount | | | | | | | | | | | | | | | | | | |
Recognized | Statement of | Statement of | Statement of | | | | | | | | | | | | | | | | | | | |
Liabilities | Financial Position | Financial Position | Financial Position | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | |
Description: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives (1) | | $ | (208.6 | ) | | $ | 24.3 | | | $ | (184.3 | ) | | $ | 18.6 | | | $ | (165.7 | ) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | (208.6 | ) | | $ | 24.3 | | | $ | (184.3 | ) | | $ | 18.6 | | | $ | (165.7 | ) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes $16.7 million of cash collateral at December 31, 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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, 2014 and December 31, 2013. 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. |
| | | | 30-Sep-14 | | December 31, 2013 | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | (in millions) | | | | |
| Interest rate contracts (1) | | | $ | - | | | $ | (245.9 | ) | | $ | - | | | $ | (245.9 | ) | | $ | - | | | $ | (96.4 | ) | | $ | - | | | $ | (96.4 | ) | | | | |
| Commodity contracts: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Financial | | | | - | | | | 12.1 | | | | 1.8 | | | | 13.9 | | | | - | | | | 6.4 | | | | (6.9 | ) | | | (0.5 | ) | | | | |
| Physical | | | | - | | | | - | | | | 7.6 | | | | 7.6 | | | | - | | | | - | | | | (0.2 | ) | | | (0.2 | ) | | | | |
| Commodity options | | | | - | | | | - | | | | 5.3 | | | | 5.3 | | | | - | | | | - | | | | 8.4 | | | | 8.4 | | | | | |
| Total | | | $ | - | | | $ | (233.8 | ) | | $ | 14.7 | | | $ | (219.1 | ) | | $ | - | | | $ | (90.0 | ) | | $ | 1.3 | | | $ | (88.7 | ) | | | | |
_______________________________________ | | | | |
(1) | | | | |
During the period, there were no significant transfers in or out of any of any of the Levels or between Levels. | | | | |
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 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 significantly 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. An increase to the credit valuation adjustment would change the fair value of the positions. |
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|
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Quantitative Information About Level 3 Fair Value Measurements | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value at | | | | | | | Range (1) | | | | | | | | | | | | | | | | |
| | | September 30, | | Valuation | | Unobservable | | | | | | | Weighted | | | | | | | | | | | | | | |
Contract Type | | 2014 (2) | | Technique | | Input | | | Lowest | | Highest | | Average | Units | | | | | | | | | | | | | |
Commodity Contracts - Financial | | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | |
Natural Gas | | | | | $ | (0.6 | ) | | Market Approach | | Forward Gas Price | | | | 3.49 | | | | 4.74 | | | | 4.01 | | MMBtu | | | | | | | | | | | | | |
NGLs | | | | | $ | 2.4 | | | Market Approach | | Forward NGL Price | | | | 0.24 | | | | 1.98 | | | | 1.18 | | Gal | | | | | | | | | | | | | |
Commodity Contracts - Physical | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Natural Gas | | | | | $ | 1.8 | | | Market Approach | | Forward Gas Price | | | | 2.03 | | | | 4.83 | | | | 4.04 | | MMBtu | | | | | | | | | | | | | |
Crude Oil | | | | | $ | (1.5 | ) | | Market Approach | | Forward Crude Price | | | | 83.03 | | | | 94.98 | | | | 90.86 | | Bbl | | | | | | | | | | | | | |
NGLs | | | | | $ | 7.4 | | | Market Approach | | Forward NGL Price | | | | 0.23 | | | | 2.05 | | | | 1.08 | | Gal | | | | | | | | | | | | | |
Power | | | | | $ | (0.1 | ) | | Market Approach | | Forward Power Price | | | | 36.21 | | | | 39.49 | | | | 37.84 | | MWh | | | | | | | | | | | | | |
Commodity Options | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Natural Gas, Crude and NGLs | | | | | $ | 5.3 | | | Option Model | | Option Volatility | | | | 14 | % | | | 40 | % | | | 28 | % | | | | | | | | | | | | | | |
Total Fair Value | | | | | $ | 14.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(1) | Prices are in dollars per Millions of British Thermal Units, or MMBtu, for Natural Gas; dollars per Gallon, or Gal, for NGLs; dollars per barrel, or Bbl, for Crude Oil; and dollars per Megawatt hour, or MWh, for Power. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(2) | Fair values include credit valuation adjustments of approximately $0.1 million of losses. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Quantitative Information About Level 3 Fair Value Measurements | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value at | | | | | | | Range(1) | | | | | | | | | | | | | | | | |
| | | December 31, | | Valuation | | Unobservable | | | | | | | Weighted | | | | | | | | | | | | | | |
Contract Type | | 2013 (2) | | Technique | | Input | | | Lowest | | Highest | | Average | Units | | | | | | | | | | | | | |
Commodity Contracts - Financial | | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | |
Natural Gas | | | | | $ | - | | | Market Approach | | Forward Gas Price | | | | 3.64 | | | | 4.41 | | | | 4.14 | | MMBtu | | | | | | | | | | | | | |
NGLs | | | | | $ | (6.9 | ) | | Market Approach | | Forward NGL Price | | | | 1 | | | | 2.13 | | | | 1.38 | Gal | | | | | | | | | | | | | | |
Commodity Contracts - Physical | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Natural Gas | | | | | $ | 1.1 | | | Market Approach | | Forward Gas Price | | | | 3.36 | | | | 4.82 | | | | 4.15 | | MMBtu | | | | | | | | | | | | | |
Crude Oil | | | | | $ | (0.5 | ) | | Market Approach | | Forward Crude Oil Price | | | | 86.37 | | | | 103.04 | | | | 97.24 | Bbl | | | | | | | | | | | | | | |
NGLs | | | | | $ | (0.1 | ) | | Market Approach | | Forward NGL Price | | | | 0.02 | | | | 2.19 | | | | 0.95 | Gal | | | | | | | | | | | | | | |
Power | | | | | $ | (0.7 | ) | | Market Approach | | Forward Power Price | | | | 32.4 | | | | 38.98 | | | | 35.07 | MWh | | | | | | | | | | | | | | |
Commodity Options | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Natural Gas, Crude and NGLs | | | | | $ | 8.4 | | | Option Model | | Option Volatility | | | | 18 | % | | | 44 | % | | | 28 | % | | | | | | | | | | | | | | |
Total Fair Value | | | | | $ | 1.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
-1 | | | | | | | | | | | | | |
Prices are in dollars per Millions of British Thermal Units, or MMBtu, for Natural Gas; dollars per Gallon, or Gal, for NGLs; dollars per barrel, or Bbl, for Crude Oil; and dollars per Megawatt hour, or MWh, for Power. | | | | | | | | | | | | | |
-2 | | | | | | | | | | | | | |
Fair values include credit valuation adjustments of approximately $0.1 million of gains. | | | | | | | | | | | | | |
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|
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, 2014 to September 30, 2014. 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, 2014 | | | | | $ | (6.9 | ) | | $ | (0.2 | ) | | $ | 8.4 | | | $ | 1.3 | | | | | | | | | | | | | | | | | | | | |
Transfer in (out) of Level 3 (1) | | | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | | |
Gains or losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Included in earnings | | | | | | (3.9 | ) | | | 11.1 | | | | (1.1 | ) | | | 6.1 | | | | | | | | | | | | | | | | | | | | |
Included in other comprehensive income | | | | | | (0.2 | ) | | | - | | | | - | | | | (0.2 | ) | | | | | | | | | | | | | | | | | | | |
Purchases, issuances, sales and settlements: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchases | | | | | | - | | | | - | | | | 0.4 | | | | 0.4 | | | | | | | | | | | | | | | | | | | | |
Sales | | | | | | - | | | | - | | | | (1.6 | ) | | | (1.6 | ) | | | | | | | | | | | | | | | | | | | |
Settlements (2) | | | | | | 12.8 | | | | (3.3 | ) | | | (0.8 | ) | | | 8.7 | | | | | | | | | | | | | | | | | | | | |
Ending balance as September 30, 2014 | | | | | $ | 1.8 | | | $ | 7.6 | | | $ | 5.3 | | | $ | 14.7 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amount of changes in net assets attributable to the change in derivative | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
gains or losses related to assets still held at the reporting date | | | | | $ | 2.4 | | | $ | 7.2 | | | $ | (1.8 | ) | | $ | 7.8 | | | | | | | | | | | | | | | | | | | | |
Amounts reported in operating revenue | | | | | $ | - | | | $ | 11.2 | | | $ | - | | | $ | 11.2 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-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. | | | | | | | | | | | | | | | | | | | |
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|
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, 2014 and December 31, 2013. |
| | | | At September 30, 2014 | | At December 31, 2013 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 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 2014 | | | | | | | | | | | | | | | | | | | | | |
| Swaps | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay fixed | | Natural Gas | | | 668,692 | | | $ | 4 | | | $ | 3.91 | | | $ | 0.1 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 623,000 | | | $ | 56.02 | | | $ | 56.64 | | | $ | 0.3 | | | $ | (0.7 | ) | | $ | 0.6 | | | $ | (0.4 | ) | | | | | | |
| | | | Crude Oil | | | 95,000 | | | $ | 89.87 | | | $ | 92.56 | | | $ | - | | | $ | (0.3 | ) | | $ | - | | | $ | - | | | | | | | |
| | Receive fixed/pay variable | | Natural Gas | | | 2,380,100 | | | $ | 4.26 | | | $ | 4.09 | | | $ | 0.5 | | | $ | (0.1 | ) | | $ | 0.1 | | | $ | (1.0 | ) | | | | | | |
| | | | NGL | | | 2,021,140 | | | $ | 51.91 | | | $ | 50.97 | | | $ | 3.7 | | | $ | (1.8 | ) | | $ | 4.8 | | | $ | (12.7 | ) | | | | | | |
| | | | Crude Oil | | | 457,764 | | | $ | 95.26 | | | $ | 90.14 | | | $ | 2.7 | | | $ | (0.4 | ) | | $ | 3.4 | | | $ | (5.4 | ) | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 19,562,500 | | | $ | 4.03 | | | $ | 4.02 | | | $ | 0.6 | | | $ | (0.5 | ) | | $ | 0.6 | | | $ | (0.1 | ) | | | | | | |
| | Physical Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay fixed | | Natural Gas | | | 313,224 | | | $ | 3.89 | | | $ | 1.23 | | | $ | 0.8 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 550,000 | | | $ | 42.4 | | | $ | 43.88 | | | $ | - | | | $ | (0.8 | ) | | $ | 0.9 | | | $ | (0.9 | ) | | | | | | |
| | | | Crude Oil | | | 45,000 | | | $ | 90.85 | | | $ | 93.9 | | | $ | - | | | $ | (0.1 | ) | | $ | - | | | $ | - | | | | | | | |
| | Receive fixed/pay variable | | Natural Gas | | | 185,506 | | | $ | 4.03 | | | $ | 3.97 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 3,504,872 | | | $ | 39.2 | | | $ | 37.85 | | | $ | 5.1 | | | $ | (0.4 | ) | | $ | 0.4 | | | $ | (2.6 | ) | | | | | | |
| | | | Crude Oil | | | 75,000 | | | $ | 93.08 | | | $ | 90.62 | | | $ | 0.2 | | | $ | - | | | $ | - | | | $ | (0.4 | ) | | | | | | |
| | Pay fixed | | Power (4) | | | 14,716 | | | $ | 37.84 | | | $ | 46.59 | | | $ | - | | | $ | (0.1 | ) | | $ | - | | | $ | (0.7 | ) | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 72,613,470 | | | $ | 4.02 | | | $ | 4.02 | | | $ | 0.9 | | | $ | (1.1 | ) | | $ | 0.9 | | | $ | (0.4 | ) | | | | | | |
| | | | NGL | | | 10,947,422 | | | $ | 42.8 | | | $ | 42.61 | | | $ | 2.7 | | | $ | (0.6 | ) | | $ | 5.8 | | | $ | (3.7 | ) | | | | | | |
| | | | Crude Oil | | | 758,914 | | | $ | 88.26 | | | $ | 90.52 | | | $ | 0.8 | | | $ | (2.5 | ) | | $ | 1.1 | | | $ | (1.2 | ) | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portion of contracts maturing in 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Swaps | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay fixed | | Natural Gas | | | 316,837 | | | $ | 3.91 | | | $ | 3.93 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 145,850 | | | $ | 72.56 | | | $ | 78.2 | | | $ | - | | | $ | (0.8 | ) | | $ | - | | | $ | - | | | | | | | |
| | | | Crude Oil | | | 456,000 | | | $ | 87.81 | | | $ | 92.94 | | | $ | - | | | $ | (2.3 | ) | | $ | - | | | $ | - | | | | | | | |
| | Receive fixed/pay variable | | Natural Gas | | | 809,761 | | | $ | 4.56 | | | $ | 4.21 | | | $ | 0.3 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 1,024,750 | | | $ | 54.42 | | | $ | 52.36 | | | $ | 3.1 | | | $ | (1.0 | ) | | $ | 1.5 | | | $ | (1.1 | ) | | | | | | |
| | | | Crude Oil | | | 1,303,165 | | | $ | 96.75 | | | $ | 87.78 | | | $ | 11.7 | | | $ | - | | | $ | 8.3 | | | $ | - | | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 42,725,000 | | | $ | 3.92 | | | $ | 3.94 | | | $ | 0.8 | | | $ | (1.7 | ) | | $ | 0.1 | | | $ | - | | | | | | | |
| | Physical Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay fixed | | NGL | | | 95,000 | | | $ | 46.73 | | | $ | 48.37 | | | $ | - | | | $ | (0.2 | ) | | $ | - | | | $ | - | | | | | | | |
| | Receive fixed/pay variable | | NGL | | | 586,394 | | | $ | 49.38 | | | $ | 47.79 | | | $ | 1 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 108,991,322 | | | $ | 4.05 | | | $ | 4.05 | | | $ | 1.4 | | | $ | (0.7 | ) | | $ | 0.5 | | | $ | (0.1 | ) | | | | | | |
| | | | NGL | | | 3,094,719 | | | $ | 61.4 | | | $ | 61.19 | | | $ | 1.2 | | | $ | (0.5 | ) | | $ | - | | | $ | - | | | | | | | |
| | | | Crude Oil | | | 151,000 | | | $ | 90.3 | | | $ | 88.89 | | | $ | 0.2 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
Portion of contracts maturing in 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Swaps | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay fixed | | Natural Gas | | | 181,435 | | | $ | 3.78 | | | $ | 3.85 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | Crude Oil | | | 68,250 | | | $ | 86.36 | | | $ | 90 | | | $ | - | | | $ | (0.2 | ) | | $ | - | | | $ | - | | | | | | | |
| | Receive fixed/pay variable | | Crude Oil | | | 68,250 | | | $ | 90.89 | | | $ | 86.36 | | | $ | 0.3 | | | $ | - | | | $ | 0.7 | | | $ | - | | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 12,027,000 | | | $ | 3.96 | | | $ | 3.98 | | | $ | 0.1 | | | $ | (0.3 | ) | | $ | - | | | $ | - | | | | | | | |
| | Physical Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 34,560,879 | | | $ | 4.06 | | | $ | 4.05 | | | $ | 0.7 | | | $ | (0.4 | ) | | $ | 0.1 | | | $ | - | | | | | | | |
Portion of contracts maturing in 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Physical Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Receive variable/pay variable | | Natural Gas | | | 14,299,743 | | | $ | 4.27 | | | $ | 4.26 | | | $ | 0.2 | | | $ | (0.1 | ) | | $ | - | | | $ | - | | | | | | | |
| | ______________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-1 | | | | | | |
Volumes of natural gas are measured in MMBtu, whereas volumes of NGL and crude oil are measured in Bbl. Our power purchase agreements are measured in MWh. | | | | | | |
-2 | | | | | | |
Weighted average prices received and paid are in $/MMBtu for natural gas, $/Bbl for NGL and crude oil and $/MWh for power. | | | | | | |
-3 | | | | | | |
The fair value is determined based on quoted market prices at September 30, 2014 and December 31, 2013, respectively, discounted using the swap rate for the respective periods to consider the time value of money. Fair values are presented in millions of dollars and exclude credit valuation adjustments of approximately $0.2 million of losses and $0.1 million of gains at September 30, 2014 and December 31, 2013, respectively. | | | | | | |
-4 | | | | | | |
For physical power, the receive price shown represents the index price used for valuation purposes. | | | | | | |
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The following table provides summarized information about the fair values of expected cash flows of our outstanding commodity options at September 30, 2014 and December 31, 2013. |
| | | | At September 30, 2014 | | At December 31, 2013 | | | | | | |
| | | | | | | | 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 2014 | | | | | | | | | | | | | | | | | | | | |
| | Puts (purchased) | | Natural Gas | | | 1,104,000 | | | $ | 3.9 | | | $ | 4.1 | | | $ | 0.1 | | | $ | - | | | $ | 0.7 | | | $ | - | | | | | | | |
| | | | NGL | | | 193,200 | | | $ | 54.79 | | | $ | 52.43 | | | $ | 0.9 | | | $ | - | | | $ | 2.9 | | | $ | - | | | | | | | |
| | Calls (written) | | NGL | | | 115,000 | | | $ | 60.92 | | | $ | 54.59 | | | $ | - | | | $ | (0.1 | ) | | $ | - | | | $ | (1.0 | ) | | | | | | |
| | Puts (written) | | Natural Gas | | | 1,104,000 | | | $ | 3.9 | | | $ | 4.1 | | | $ | - | | | $ | (0.1 | ) | | $ | - | | | $ | (0.5 | ) | | | | | | |
| | | | NGL | | | 32,200 | | | $ | 66.36 | | | $ | 51.7 | | | $ | - | | | $ | (0.5 | ) | | $ | - | | | $ | - | | | | | | | |
| | Calls (purchased) | | NGL | | | 46,000 | | | $ | 50.4 | | | $ | 43.84 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | Portion of option contracts maturing in 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Puts (purchased) | | Natural Gas | | | 4,015,000 | | | $ | 3.9 | | | $ | 4 | | | $ | 1.4 | | | $ | - | | | $ | 1.7 | | | $ | - | | | | | | | |
| | | | NGL | | | 1,350,500 | | | $ | 48.75 | | | $ | 50.62 | | | $ | 5.5 | | | $ | - | | | $ | 6 | | | $ | - | | | | | | | |
| | | | Crude Oil | | | 547,500 | | | $ | 85.42 | | | $ | 87.76 | | | $ | 2.3 | | | $ | - | | | $ | 1.8 | | | $ | - | | | | | | | |
| | Calls (written) | | Natural Gas | | | 1,277,500 | | | $ | 5.05 | | | $ | 4 | | | $ | - | | | $ | (0.1 | ) | | $ | - | | | $ | (0.3 | ) | | | | | | |
| | | | NGL | | | 529,250 | | | $ | 55.18 | | | $ | 50.29 | | | $ | - | | | $ | (1.7 | ) | | $ | - | | | $ | (1.0 | ) | | | | | | |
| | | | Crude Oil | | | 547,500 | | | $ | 91.75 | | | $ | 87.76 | | | $ | - | | | $ | (2.1 | ) | | $ | - | | | $ | (1.9 | ) | | | | | | |
| | Puts (written) | | Natural Gas | | | 4,015,000 | | | $ | 3.9 | | | $ | 4 | | | $ | - | | | $ | (1.4 | ) | | $ | - | | | $ | - | | | | | | | |
| | Calls (purchased) | | Natural Gas | | | 1,277,500 | | | $ | 5.05 | | | $ | 4 | | | $ | 0.1 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | Portion of option contracts maturing in 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Puts (purchased) | | Natural Gas | | | 1,647,000 | | | $ | 3.75 | | | $ | 4.08 | | | $ | 0.5 | | | $ | - | | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 1,281,000 | | | $ | 41.82 | | | $ | 44.06 | | | $ | 6.5 | | | $ | - | | | | - | | | | - | | | | | | | |
| | | | Crude Oil | | | 439,200 | | | $ | 80 | | | $ | 85.93 | | | $ | 2 | | | $ | - | | | | - | | | | - | | | | | | | |
| | Calls (written) | | Natural Gas | | | 1,647,000 | | | $ | 4.98 | | | $ | 4.08 | | | $ | - | | | $ | (0.3 | ) | | $ | - | | | $ | - | | | | | | | |
| | | | NGL | | | 1,281,000 | | | $ | 48.59 | | | $ | 44.06 | | | $ | - | | | $ | (5.6 | ) | | | - | | | | - | | | | | | | |
| | | | Crude Oil | | | 439,200 | | | $ | 92.25 | | | $ | 85.93 | | | $ | - | | | $ | (2.2 | ) | | | - | | | | - | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
______________________________ | | | | | | |
-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, 2014 and December 31, 2013, respectively, discounted using the swap rate for the respective periods to consider the time value of money. Fair values are presented in millions of dollars. | | | | | | |
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) at | | | | | | | | | | | | | | | | | | | |
Date of Maturity & Contract Type | | Accounting Treatment | | | Notional | | Fixed Rate (1) | | 30-Sep-14 | | December 31, 2013 | | | | | | | | | | | | | | | | | | | |
| | | | | | (dollars in millions) | | | | | | | | | | | | | | | | | | | |
Contracts maturing in 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate Swaps—Pay Fixed | | Cash Flow Hedge | | | $ | 510 | | | 1.53 | % | | $ | (1.9 | ) | | $ | (6.8 | ) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contracts maturing in 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate Swaps—Pay Fixed | | Cash Flow Hedge | | | $ | 90 | | | 0.55 | % | | $ | - | | | | - | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contracts maturing in 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate Swaps—Pay Fixed | | Cash Flow Hedge | | | $ | 450 | | | 2.21 | % | | $ | (12.2 | ) | | $ | (13.8 | ) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contracts maturing in 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate Swaps—Pay Fixed | | Cash Flow Hedge | | | $ | 810 | | | 2.24 | % | | $ | 1.4 | | | $ | 3.3 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contracts maturing in 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate Swaps—Pay Fixed | | Cash Flow Hedge | | | $ | 620 | | | 2.96 | % | | $ | (1.0 | ) | | $ | - | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contracts settling prior to maturity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014—Pre-issuance Hedges (3) | | Cash Flow Hedge | | | $ | - | | | 0 | % | | $ | - | | | $ | (132.7 | ) | | | | | | | | | | | | | | | | | | | |
| 2015—Pre-issuance Hedges | | Cash Flow Hedge | | | $ | 1,000 | | | 5.48 | % | | $ | (208.5 | ) | | | - | | | | | | | | | | | | | | | | | | | | |
| 2016—Pre-issuance Hedges | | Cash Flow Hedge | | | $ | 500 | | | 4.21 | % | | $ | (38.0 | ) | | $ | 60.8 | | | | | | | | | | | | | | | | | | | | |
| 2017—Pre-issuance Hedges | | Cash Flow Hedge | | | $ | 500 | | | 3.69 | % | | $ | (10.8 | ) | | | - | | | | | | | | | | | | | | | | | | | | |
| 2018—Pre-issuance Hedges | | Cash Flow Hedge | | | $ | 350 | | | 3.08 | % | | $ | 12.4 | | | | - | | | | | | | | | | | | | | | | | | | | |
| __________________________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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, 2014 and December 31, 2013, respectively, discounted using the swap rate for the respective periods to consider the time value of money. Fair values are presented in millions of dollars and exclude credit valuation adjustments of approximately $12.7 million of gains at September 30, 2014 and $7.1 million of losses at December 31, 2013. | | | | | | | | | | | | | | | | | | | |
(3) | | | | | | | | | | | | | | | | | | | |
Includes $16.7 million of cash collateral at December 31, 2013. | | | | | | | | | | | | | | | | | | | |
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