XML 76 R40.htm IDEA: XBRL DOCUMENT v3.20.1
Derivative Instruments, Hedging Activities and Fair Value Measurements (Tables)
 3 Months Ended
Mar. 31, 2020
Derivative Instruments, Hedging Activities and Fair Value Measurements [Abstract]  
Hedging Instruments Under the FASB's Derivative and Hedging Guidance The following table summarizes our portfolio of 30-year forward-starting swaps at March 31, 2020, all of which are associated with the expected future issuance of senior notes. 

Hedged Transaction
Number and Type
of Derivatives
Outstanding
Notional
Amount
Expected
Settlement
Date
Weighted-Average
Fixed Rate
Locked
Accounting
Treatment
Future long-term debt offering
1 forward-starting swap
$75.0
4/2021
2.41%
Cash flow hedge
Future long-term debt offering
5 forward-starting swaps
$500.0
4/2021
2.13%
Cash flow hedge
Future long-term debt offering
2 forward-starting swaps (1)
$150.0
2/2022
1.72%
Cash flow hedge
Future long-term debt offering
1 forward starting swap (1)
$100.0
4/2021
1.46%
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$150.0
2/2022
1.48%
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$100.0
2/2022
0.95%
Cash flow hedge

(1)
These swaps were entered into during the three months ended March 31, 2020.

The following table summarizes our portfolio of commodity derivative instruments outstanding at March 31, 2020 (volume measures as noted):

 
Volume (1)
Accounting
Derivative Purpose
Current (2)
Long-Term (2)
Treatment
Derivatives designated as hedging instruments:
      
Natural gas processing:
      
Forecasted natural gas purchases for plant thermal reduction (billion cubic feet (“Bcf”))
11.9
n/a
Cash flow hedge
Octane enhancement:
      
Forecasted purchase of NGLs (MMBbls)
0.7
n/a
Cash flow hedge
Forecasted sales of octane enhancement products (MMBbls)
13.6
n/a
Cash flow hedge
Natural gas marketing:
      
Forecasted purchase of natural gas (Bcf)
4.5
n/a
Cash flow hedge
Natural gas storage inventory management activities (Bcf)
4.4
n/a
Fair value hedge
NGL marketing:
      
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
126.3
0.4
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
140.0
2.2
Cash flow hedge
NGLs inventory management activities (MMBbls)
0.8
n/a
Fair value hedge
Refined products marketing:
 
    
Forecasted purchases of refined products (MMBbls)
5.1
n/a
Cash flow hedge
Forecasted sales of refined products (MMBbls)
6.8
n/a
Cash flow hedge
Refined products inventory management activities (MMBbls)
0.5
n/a
Fair value hedge
Crude oil marketing:
    
 
Forecasted purchases of crude oil (MMBbls)
24.5
n/a
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
31.4
n/a
Cash flow hedge
Propylene marketing:
      
Forecasted sales of NGLs for propylene marketing activities (MMBbls)
0.6
n/a
Cash flow hedge
Commercial energy:
      
Forecasted purchases of power related to asset operations (terawatt hours (“TWh”))
0.2
n/a
Cash flow hedge
Derivatives not designated as hedging instruments:
      
Natural gas risk management activities (Bcf) (3)
54.5
0.3
Mark-to-market
NGL risk management activities (MMBbls) (3)
15.7
n/a
Mark-to-market
Refined products risk management activities (MMBbls) (3)
5.1
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (3)
33.9
9.0
Mark-to-market
Commercial energy risk management activities (TWh) (3)
0.1
n/a
Mark-to-market

(1)
Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.
(2)
The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2021, December 2020 and December 2022, respectively.
(3)
Reflects the use of derivative instruments to manage risks associated with transportation, processing, storage assets and end use power requirements.

Derivative Assets and Liabilities Balance Sheet The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:



Asset Derivatives
 
Liability Derivatives
 
March 31, 2020
 
December 31, 2019
 
March 31, 2020
 
December 31, 2019
 
Balance
Sheet
Location
Fair
Value
 
Balance
Sheet
Location
Fair
Value
 
Balance
Sheet
Location
Fair
Value
 
Balance
Sheet
Location
Fair
Value
Derivatives designated as hedging instruments
                              
Interest rate derivatives
Current assets
$
–
  
Current assets
$
–
  
Current
liabilities
$
–
  
Current
liabilities
$
6.7
Interest rate derivatives
Other assets
  
–
  
Other assets
  
–
  
Other liabilities
  
258.3
  
Other liabilities
  
6.8
Total interest rate derivatives
    
–
      
–
      
258.3
      
13.5
Commodity derivatives
Current assets
  
310.7
 
Current assets
  
116.5
 
Current
liabilities
  
244.6
 
Current
liabilities
  
107.1
Commodity derivatives
Other assets
 
–
 
Other assets
 
–
 
Other liabilities
 
–
 
Other liabilities
 
–
Total commodity derivatives
    
310.7
      
116.5
      
244.6
      
107.1
Total derivatives designated as hedging instruments
  
$
310.7
    
$
116.5
    
$
502.9
    
$
120.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
                              
Commodity derivatives
Current assets
$
55.1
 
Current assets
$
10.7
 
Current
liabilities
$
24.6
 
Current
liabilities
$
8.6
Commodity derivatives
Other assets
 
5.1
 
Other assets
  
0.6
 
Other liabilities
  
3.0
 
Other liabilities
  
0.5
Total commodity derivatives
 
 
60.2
 
 
  
11.3
 
 
  
27.6
 
 
  
9.1
Total derivatives not designated as hedging instruments
  
$
60.2
    
$
11.3
    
$
27.6
    
$
9.1
Offsetting Financial Assets Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements.  The following tables present our derivative instruments subject to such arrangements at the dates indicated:

 
Offsetting of Financial Assets and Derivative Assets
  
 
Gross
Amounts of
Recognized
Assets
  
Gross
Amounts
Offset in the
Balance Sheet
  
Amounts
of Assets
Presented
in the
Balance Sheet
  
Gross Amounts Not Offset
in the Balance Sheet
  
Amounts That
Would Have
Been Presented
On Net Basis
  
Financial
Instruments
  
Cash
Collateral
Received
  
Cash
Collateral
Paid
  
 
(i)
  
(ii)
  
(iii) = (i) – (ii)
  
(iv)
  
(v) = (iii) + (iv)
  
As of March 31, 2020:
                                          
Commodity derivatives
  
$
370.9
    
$
–
    
$
370.9
    
$
(267.0
)
  
$
–
    
$
(100.6
)
  
$
3.3
  
As of December 31, 2019:
                                                        
Commodity derivatives
  
$
127.8
    
$
–
    
$
127.8
    
$
(115.3
)
  
$
–
    
$
(11.0
)
  
$
1.5
  

Offsetting Financial Liabilities
 
Offsetting of Financial Liabilities and Derivative Liabilities
  
 
Gross
Amounts of
Recognized
Liabilities
  
Gross
Amounts
Offset in the
Balance Sheet
  
Amounts
of Liabilities
Presented
in the
Balance Sheet
  
Gross Amounts Not Offset
in the Balance Sheet
  
Amounts That
Would Have
Been Presented
On Net Basis
  
Financial
Instruments
    
Cash
Collateral
Received
    
Cash
Collateral
Paid
  
 
(i)
  
(ii)
  
(iii) = (i) – (ii)
  
(iv)
  
(v) = (iii) + (iv)
  
As of March 31, 2020:
                                          
Interest rate derivatives
  
$
258.3
    
$
–
    
$
258.3
    
$
–
    
$
–
    
$
–
    
$
258.3
  
Commodity derivatives
    
272.2
      
–
      
272.2
      
(267.0
)
    
–
      
–
      
5.2
  
As of December 31, 2019:
                                                        
Interest rate derivatives
  
$
13.5
    
$
–
    
$
13.5
    
$
–
    
$
–
    
$
–
    
$
13.5
  
Commodity derivatives
    
116.2
      
–
      
116.2
      
(115.3
)
    
–
      
–
      
0.9
  

Derivative Instruments Effects on Statements of Operations The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives in Fair Value
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Derivative
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2020
    
2019
  
Commodity derivatives
Revenue
  
$
3.9
    
$
(8.5
)
Total
 
  
$
3.9
    
$
(8.5
)

Derivatives in Fair Value
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Hedged Item
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2020
    
2019
  
Commodity derivatives
Revenue
  
$
(8.2
)
  
$
9.9
  
Total
 
  
$
(8.2
)
  
$
9.9
  
Derivative Instruments Effects on Statements of Comprehensive Income


Derivatives in Cash Flow
Hedging Relationships
  
Change in Value Recognized in
Other Comprehensive Income (Loss)
on Derivative
  
 
  
For the Three Months
Ended March 31,
  
 
  
2020
    
2019
  
Interest rate derivatives
  
$
(292.0
)
  
$
–
  
Commodity derivatives – Revenue (1)
    
477.8
      
(86.7
)
Commodity derivatives – Operating costs and expenses (1)
    
(2.7
)
    
(8.5
)
Total
  
$
183.1
    
$
(95.2
)

(1)
The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations upon settlement of the underlying derivative transactions, as appropriate.
Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income/(Loss) to Income
Derivatives in Cash Flow
Hedging Relationships
Location
  
Gain (Loss) Reclassified from
Accumulated Other
Comprehensive Income (Loss)
to Income
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2020
    
2019
  
Interest rate derivatives
Interest expense
  
$
(23.5
)
  
$
(9.2
)
Commodity derivatives
Revenue
    
154.4
      
65.3
  
Commodity derivatives
Operating costs and expenses
    
1.2
      
(7.0
)
Total
 
  
$
132.1
    
$
49.1
  
Gain/(Loss) Recognized in Income on Derivative The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives Not Designated
as Hedging Instruments
Location
  
Gain (Loss) Recognized in
Income on Derivative
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2020
    
2019
  
Commodity derivatives
Revenue
  
$
63.5
    
$
95.1
  
Commodity derivatives
Operating costs and expenses
    
(0.1
)
    
0.1
  
Total
    
$
63.4
    
$
95.2
  
Fair Value Measurements of Financial Assets and Liabilities Measured on a Recurring Basis The values for commodity derivatives are presented before and after the application of Chicago Mercantile Exchange (“CME”) Rule 814, which deems that financial instruments cleared by the CME are settled daily in connection with variation margin payments.  As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms.  Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.

 
  
At March 31, 2020
Fair Value Measurements Using
        
 
  
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
    
Total
  
Financial assets:
                        
Commodity derivatives:
                        
Value before application of CME Rule 814
  
$
764.5
    
$
938.1
    
$
14.3
    
$
1,716.9
  
Impact of CME Rule 814
    
(723.9
)
    
(609.7
)
    
(12.4
)
    
(1,346.0
)
Total commodity derivatives
    
40.6
      
328.4
      
1.9
      
370.9
  
Total
  
$
40.6
    
$
328.4
    
$
1.9
    
$
370.9
  
 
                                
Financial liabilities:
                                
Interest rate derivatives
  
$
–
    
$
258.3
    
$
–
    
$
258.3
  
Commodity derivatives:
                                
Value before application of CME Rule 814
    
531.1
      
912.9
      
5.3
      
1,449.3
  
Impact of CME Rule 814
    
(490.9
)
    
(685.5
)
    
(0.7
)
    
(1,177.1
)
Total commodity derivatives
    
40.2
      
227.4
      
4.6
      
272.2
  
Total
  
$
40.2
    
$
485.7
    
$
4.6
    
$
530.5
  

 
  
At December 31, 2019
Fair Value Measurements Using
        
 
  
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
    
Total
  
Financial assets:
                        
Commodity derivatives:
                        
Value before application of CME Rule 814
  
$
53.4
    
$
343.7
    
$
0.1
    
$
397.2
  
Impact of CME Rule 814
    
(47.0
)
    
(222.4
)
    
–
      
(269.4
)
Total commodity derivatives
    
6.4
      
121.3
      
0.1
      
127.8
  
Total
  
$
6.4
    
$
121.3
    
$
0.1
    
$
127.8
  
 
                                
Financial liabilities:
                                
Liquidity Option (see Note 8)
  
$
–
    
$
–
    
$
509.6
    
$
509.6
  
Interest rate derivatives
    
–
      
13.5
      
–
      
13.5
  
Commodity derivatives:
                                
Value before application of CME Rule 814
    
88.1
      
273.6
      
0.3
      
362.0
  
Impact of CME Rule 814
    
(81.9
)
    
(163.9
)
    
–
      
(245.8
)
Total commodity derivatives
    
6.2
      
109.7
      
0.3
      
116.2
  
Total
  
$
6.2
    
$
123.2
    
$
509.9
    
$
639.3