Derivatives and Risk Management Activities (Tables)

9 Months Ended

Sep. 30, 2013

Derivative disclosures

Open foreign currency exchange contracts

The following table summarizes our open forward exchange contracts as of September 30, 2013 (in millions):

		USD		CAD		Average Exchange Rate USD to CAD
Forward exchange contracts that exchange CAD for USD:
	2013	$	283	$	292	$1.00 - $1.03
	2014	104		108		$1.00 - $1.03
	2015	9		9		$1.00 - $1.04
		$	396	$	409	$1.00 - $1.03
Forward exchange contracts that exchange USD for CAD:
	2013	$	281	$	290	$1.00 - $1.03
	2014	104		108		$1.00 - $1.04
	2015	9		9		$1.00 - $1.06
		$	394	$	407	$1.00 - $1.03
Net position by currency:
	2013	$	2	$	2
	2014	—		—
	2015	—		—
		$	2	$	2

Impact of derivative activities recognized in earnings

A summary of the impact of our derivative activities recognized in earnings for the three and nine months ended September 30, 2013 and 2012 is as follows (in millions):

	Three Months Ended September 30, 2013											Three Months Ended September 30, 2012
	Derivatives in Hedging Relationships											Derivatives in Hedging Relationships
Location of gain/(loss)	Gain/(loss) reclassified from AOCI into income (1)			Other gain/(loss) recognized in income		Derivatives Not Designated as a Hedge			Total			Gain/(loss) reclassified from AOCI into income (1)			Other gain/(loss) recognized in income		Derivatives Not Designated as a Hedge			Total
Commodity Derivatives
Supply and Logistics segment revenues	$	109		$	—	$	(91	)	$	18		$	123		$	—	$	(102	)	$	21
Facilities segment revenues	(2		)	—		—			(2		)	—			—		—			—
Field operating costs	—			—		2			2			—			—		4			4
Interest Rate Derivatives
Interest expense	(2		)	3		—			1			(1		)	—		—			(1		)
Foreign Currency Derivatives
Supply and Logistics segment revenues	—			—		—			—			—			—		4			4
Other income, net	1			—		—			1			1			—		—			1
Total Gain/(Loss) on Derivatives Recognized in Net Income	$	106		$	3	$	(89	)	$	20		$	123		$	—	$	(94	)	$	29

	Nine Months Ended September 30, 2013											Nine Months Ended September 30, 2012
	Derivatives in Hedging Relationships											Derivatives in Hedging Relationships
Location of gain/(loss)	Gain/(loss) reclassified from AOCI into income (1)			Other gain/(loss) recognized in income		Derivatives Not Designated as a Hedge			Total			Gain/(loss) reclassified from AOCI into income (1)			Other gain/(loss) recognized in income			Derivatives Not Designated as a Hedge		Total
Commodity Derivatives
Supply and Logistics segment revenues	$	139		$	—	$	(34	)	$	105		$	62		$	—		$	59	$	121
Facilities segment revenues	(14		)	—		—			(14		)	14			(1		)	—		13
Purchases and related costs	—			—		—			—			41			—			—		41
Field operating costs	—			—		7			7			—			—			2		2
Interest Rate Derivatives
Interest expense	(5		)	3		—			(2		)	(1		)	(1		)	—		(2		)
Foreign Currency Derivatives
Supply and Logistics segment revenues	—			—		—			—			—			—			4		4
Other income, net	4			—		—			4			4			—			—		4
Total Gain/(Loss) on Derivatives Recognized in Net Income	$	124		$	3	$	(27	)	$	100		$	120		$	(2	)	$	65	$	183

(1) During the three months ended September 30, 2013, we reclassified losses of approximately $2 million from AOCI to Facilities segment revenues as a result of anticipated hedged transactions that are probable of not occurring. During the nine months ended September 30, 2013, we reclassified gains of approximately $3 million and losses of approximately $1 million from AOCI to Supply and Logistics segment revenues and Facilities segment revenues, respectively, as a result of anticipated hedged transactions that are probable of not occurring. All of our hedged transactions were deemed probable of occurring during the three and nine months ended September 30, 2012.

Summary of derivative assets and liabilities on condensed consolidated balance sheet

The following table summarizes the derivative assets and liabilities on our condensed consolidated balance sheet on a gross basis as of September 30, 2013 (in millions):

	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
Derivatives designated as hedging instruments:
Commodity derivatives	Other current assets	$	3	Other current assets	$	(13	)
	Other long-term assets	2
Interest rate derivatives	Other long-term assets	17		Other current liabilities	(1		)
Total derivatives designated as hedging instruments		$	22		$	(14	)
Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	67	Other current assets	$	(89	)
	Other long-term assets	7		Other long-term assets	(7		)
	Other current liabilities	1		Other current liabilities	(4		)
				Other long-term liabilities	(1		)
Foreign currency derivatives	Other current assets	1
Total derivatives not designated as hedging instruments		$	76		$	(101	)
Total derivatives		$	98		$	(115	)

The following table summarizes the derivative assets and liabilities on our condensed consolidated balance sheet on a gross basis as of December 31, 2012 (in millions):

	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
Derivatives designated as hedging instruments:
Commodity derivatives	Other current assets	$	45	Other current assets	$	(23	)
	Other long-term assets	11		Other long-term assets	(1		)
Interest rate derivatives				Other long-term liabilities	(38		)
Total derivatives designated as hedging instruments		$	56		$	(62	)
Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	128	Other current assets	$	(115	)
	Other long-term assets	1		Other long-term assets	(3		)
	Other current liabilities	4		Other current liabilities	(7		)
	Other long-term liabilities	2		Other long-term liabilities	(2		)
Total derivatives not designated as hedging instruments		$	135		$	(127	)
Total derivatives		$	191		$	(189	)

Schedule of derivatives assets and liabilities that are subject to offsetting, including enforceable master netting arrangements

The following tables present information about derivatives and financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements at September 30, 2013 and December 31, 2012 (in millions):

	September 30, 2013						December 31, 2012
	Derivative			Derivative			Derivative			Derivative
	Asset Positions			Liability Positions			Asset Positions			Liability Positions
Netting Adjustments:
Gross position - asset/(liability)	$	98		$	(115	)	$	191		$	(189	)
Netting adjustment	(110		)	110			(148		)	148
Cash collateral paid	164			—			41			—
Net position - asset/(liability)	$	152		$	(5	)	$	84		$	(41	)
Balance Sheet Location After Netting Adjustments:
Other current assets	$	133		$	—		$	76		$	—
Other long-term assets	19			—			8			—
Other current liabilities	—			(4		)	—			(3		)
Other long-term liabilities	—			(1		)	—			(38		)
	$	152		$	(5	)	$	84		$	(41	)

Amounts of gain/(loss) recognized in AOCI on derivatives (effective portion)

The net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives during the three and nine months ended September 30, 2013 and 2012 are as follows (in millions):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Commodity derivatives, net	$	66	$	88	$	77	$	88
Interest rate derivatives, net	12		9		63		(19		)
Total	$	78	$	97	$	140	$	69

Financial assets and liabilities within the fair value hierarchy accounted for at fair value on a recurring basis

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, 2013 and December 31, 2012 (in millions):

	Fair Value as of September 30, 2013												Fair Value as of December 31, 2012
Recurring Fair Value Measures (1)	Level 1			Level 2			Level 3			Total			Level 1		Level 2			Level 3		Total
Commodity derivatives	$	(11	)	$	(22	)	$	(1	)	$	(34	)	$	1	$	35		$	4	$	40
Interest rate derivatives	—			16			—			16			—		(38		)	—		(38		)
Foreign currency derivatives	—			1			—			1			—		—			—		—
Total	$	(11	)	$	(5	)	$	(1	)	$	(17	)	$	1	$	(3	)	$	4	$	2

(1) Derivative assets and liabilities are presented above on a net basis but do not include related cash margin deposits.

Reconciliation of changes in fair value of derivatives classified as level 3

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our derivatives classified as level 3 (in millions):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Beginning Balance	$	4		$	36		$	4		$	12
Total gains/(losses) for the period:
Included in earnings (1)	(4		)	(9		)	(1		)	(1		)
Included in other comprehensive income	—			—			—			3
Settlements	(1		)	(4		)	(3		)	(18		)
Derivatives entered into during the period	—			1			(1		)	23
Transfers out of level 3	—			(14		)	—			(9		)
Ending Balance	$	(1	)	$	10		$	(1	)	$	10
Change in unrealized gains/(losses) included in earnings relating to level 3 derivatives still held at the end of the periods	$	(4	)	$	(8	)	$	(1	)	$	25

(1) We reported unrealized gains and losses associated with level 3 commodity derivatives in our condensed consolidated statements of operations as Supply and Logistics segment revenues.

Forward starting interest rate swaps

Derivative disclosures

Schedule of interest rate risk hedging

The following table summarizes the terms of our forward starting interest rate swaps as of September 30, 2013 (notional amounts in millions):

Hedged Transaction	Number and Types of Derivatives Employed	Notional Amount		Expected Termination Date	Average Fixed Rate		Accounting Treatment
Anticipated debt offering	10 forward starting swaps (30-year)	$	250	6/15/2015	3.60	%	Cash flow hedge

Interest Rate Swaps | PNG

Derivative disclosures

Schedule of interest rate risk hedging

The following table summarizes the terms of these swaps (notional amount in millions):

Hedged Transaction	Number and Types of Derivatives Employed	Notional Amount		Termination Dates	Average Fixed Rate		Accounting Treatment
Floating interest rate payments associated with PNG outstanding debt	3 floating-to-fixed swaps	$	100	6/6/2014 8/3/2014	0.95	%	Cash flow hedge