Derivatives and Risk Management Activities (Tables)

9 Months Ended

Sep. 30, 2015

Impact of derivative activities recognized in earnings

A summary of the impact of our derivative activities recognized in earnings for the periods indicated is as follows (in millions):


	Three Months Ended September 30, 2015
	Derivatives in Hedging Relationships
	Gain/(Loss)		Other
	Reclassified		Gain/(Loss)		Derivatives Not
	from AOCI		Recognized		Designated
Location of Gain/(Loss)	into Income (1) (2)		in Income (3)		as a Hedge		Total
Commodity Derivatives

Supply and Logistics segment revenues	$	42	$	—	$	14	$	56

Transportation segment revenues		—		—		2		2

Field operating costs		—		—		(9)		(9)

Interest Rate Derivatives

Interest expense		(2)		(2)		—		(4)

Foreign Currency Derivatives

Supply and Logistics segment revenues		—		—		(9)		(9)

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	40	$	(2)	$	(2)	$	36


	Three Months Ended September 30, 2014
	Derivatives in Hedging Relationships
	Gain/(Loss)		Other
	Reclassified		Gain/(Loss)		Derivatives Not
	from AOCI		Recognized		Designated
Location of Gain/(Loss)	into Income (1) (2)		in Income (3)		as a Hedge		Total
Commodity Derivatives

Supply and Logistics segment revenues	$	(4)	$	—	$	(17)	$	(21)

Field operating costs		—		—		(2)		(2)

Interest Rate Derivatives

Interest expense		(1)		—		—		(1)

Foreign Currency Derivatives

Supply and Logistics segment revenues		—		—		(17)		(17)

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	(5)	$	—	$	(36)	$	(41)


	Nine Months Ended September 30, 2015
	Derivatives in Hedging Relationships
	Gain/(Loss)		Other
	Reclassified		Gain/(Loss)		Derivatives Not
	from AOCI		Recognized		Designated
Location of Gain/(Loss)	into Income (1) (2)		in Income (3)		as a Hedge		Total
Commodity Derivatives

Supply and Logistics segment revenues	$	30	$	—	$	24	$	54

Transportation segment revenues		—		—		6		6

Field operating costs		—		—		(11)		(11)

Interest Rate Derivatives

Interest expense		(9)		—		—		(9)

Foreign Currency Derivatives

Supply and Logistics segment revenues		—		—		(26)		(26)

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	21	$	—	$	(7)	$	14


	Nine Months Ended September 30, 2014
	Derivatives in Hedging Relationships
	Gain/(Loss)		Other
	Reclassified		Gain/(Loss)		Derivatives Not
	from AOCI		Recognized		Designated
Location of Gain/(Loss)	into Income (1) (2)		in Income (3)		as a Hedge		Total
Commodity Derivatives

Supply and Logistics segment revenues	$	(12)	$	—	$	(17)	$	(29)

Field operating costs		—		—		(3)		(3)

Interest Rate Derivatives

Interest expense		(4)		—		—		(4)

Foreign Currency Derivatives

Supply and Logistics segment revenues		—		—		(17)		(17)

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	(16)	$	—	$	(37)	$	(53)

⁽¹⁾

Represents gains/(losses) on cash flow hedges reclassified from AOCI to income during the period.

⁽²⁾

During the nine months ended September 30, 2015 we reclassified a loss of approximately $4 million from AOCI to Interest expense as a result of an anticipated hedged transaction that is no longer probable of occurring. All of our anticipated hedged transactions were deemed probable of occurring during the three months ended September 30, 2015 and the three and nine months ended September 30, 2014.

⁽³⁾

Amounts represent ineffective portion of cash flow hedges.

Summary of derivative assets and liabilities on condensed consolidated balance sheets on a gross basis

The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheets on a gross basis as of September 30, 2015 (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	$	7	Other current assets	$	(1)
	Other long-term assets, net		1

Interest rate derivatives				Other current liabilities		(19)
				Other long-term liabilities and deferred credits		(38)
Total derivatives designated as hedging instruments		$	8		$	(58)

Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	220	Other current assets	$	(33)
	Other long-term assets, net		16	Other long-term assets, net		(5)
				Other current liabilities		(19)
				Other long-term liabilities and deferred credits		(3)

Foreign currency derivatives				Other current liabilities		(9)
Total derivatives not designated as hedging instruments		$	236		$	(69)

Total derivatives		$	244		$	(127)

The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheets on a gross basis as of December 31, 2014 (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	$	23	Other current assets	$	(12)
	Other long-term assets, net		8	Other long-term assets, net		(1)

Interest rate derivatives				Other current liabilities		(44)
				Other long-term liabilities and deferred credits		(26)
Total derivatives designated as hedging instruments		$	31		$	(83)

Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	439	Other current assets	$	(246)
	Other long-term assets, net		23	Other long-term assets, net		(3)
				Other current liabilities		(35)
				Other long-term liabilities and deferred credits		(5)

Foreign currency derivatives				Other current liabilities		(12)
Total derivatives not designated as hedging instruments		$	462		$	(301)

Total derivatives		$	493		$	(384)

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

The following table presents information about derivatives and financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements as of the dates indicated (in millions):


	September 30, 2015				December 31, 2014
	Derivative		Derivative		Derivative		Derivative
	Asset Positions		Liability Positions		Asset Positions		Liability Positions
Netting Adjustments:
Gross position - asset/(liability)	$	244	$	(127)	$	493	$	(384)
Netting adjustment		(39)		39		(262)		262
Cash collateral paid/(received)		(121)		—		(133)		—
Net position - asset/(liability)	$	84	$	(88)	$	98	$	(122)

Balance Sheet Location After Netting Adjustments:
Other current assets	$	72	$	—	$	71	$	—
Other long-term assets, net		12		—		27		—
Other current liabilities		—		(47)		—		(91)
Other long-term liabilities and deferred credits		—		(41)		—		(31)
	$	84	$	(88)	$	98	$	(122)

Net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives

The net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives for the periods indicated was as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Commodity derivatives, net	$	37	$	2	$	12	$	(10)
Interest rate derivatives, net		(85)		(8)		(40)		(47)
Total	$	(48)	$	(6)	$	(28)	$	(57)

Schedule of derivative financial assets and liabilities by level 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 the dates indicated (in millions):


	Fair Value as of September 30, 2015								Fair Value as of December 31, 2014
Recurring Fair Value Measures (1)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Commodity derivatives	$	90	$	82	$	11	$	183	$	(85)	$	261	$	15	$	191
Interest rate derivatives		—		(57)		—		(57)		—		(70)		—		(70)
Foreign currency derivatives		—		(9)		—		(9)		—		(12)		—		(12)
Total net derivative asset/(liability)	$	90	$	16	$	11	$	117	$	(85)	$	179	$	15	$	109

⁽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 for the periods indicated (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Beginning Balance	$	9	$	1	$	15	$	(3)
Gains for the period included in earnings		2		1		1		—
Settlements		(2)		—		(13)		3
Derivatives entered into during the period		2		1		8		3
Ending Balance	$	11	$	3	$	11	$	3

Change in unrealized gains included in earnings relating to Level 3 derivatives still held at the end of the period	$	4	$	2	$	9	$	3

Interest Rate Swaps

Derivative disclosures

Schedule of terms of forward starting interest rate swaps

We have entered into forward starting interest rate swaps to hedge the underlying benchmark interest rate related to forecasted interest payments through 2049. The following table summarizes the terms of our forward starting interest rate swaps as of September 30, 2015 (notional amounts in millions):

Number and Types of

Notional

Expected

Average Rate

Accounting

Hedged Transaction

Derivatives Employed

Amount

Termination Date

Locked

Treatment

Anticipated interest payments

8 forward starting
swaps (30-year)

200

6/15/2016

3.06

Cash flow hedge

Anticipated interest payments

8 forward starting
swaps (30-year)

200

6/15/2017

3.14

Cash flow hedge

Anticipated interest payments

8 forward starting
swaps (30-year)

200

6/15/2018

3.20

Cash flow hedge

Anticipated interest payments

8 forward starting
swaps (30-year)

200

6/14/2019

2.83

Cash flow hedge

Foreign Currency Derivatives

Derivative disclosures

Open forward exchange contracts

The following table summarizes our open forward exchange contracts as of September 30, 2015 (in millions):


						Average Exchange Rate
		USD		CAD		USD to CAD
Forward exchange contracts that exchange CAD for USD:
	2015	$	152	$	202	$	1.00	-	$	1.33
	2016		57		76	$	1.00	-	$	1.33
		$	209	$	278

Forward exchange contracts that exchange USD for CAD:
	2015	$	173	$	222	$	1.00	-	$	1.28
	2016		57		73	$	1.00	-	$	1.28
		$	230	$	295