Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Partnership’s results of operations could be materially impacted by changes in NGL prices and interest rates. In an effort to manage its exposure to these risks, the Partnership periodically enters into various derivative instruments, including commodity and interest rate hedges. All derivatives and hedging instruments are included on the balance sheet as an asset or a liability measured at fair value and changes in fair value are recognized currently in earnings. All of the Partnership's derivatives are non-hedge derivatives and therefore all changes in fair values are recognized as gains and losses in the earnings of the periods in which they occur.

(a)    Commodity Derivative Instruments

The Partnership from time to time has used derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect on the value of a liability or future purchase that results from a change in commodity price.  The Partnership has established a hedging policy and monitors and manages the commodity market risk associated with potential commodity risk exposure.  In addition, the Partnership has focused on utilizing counterparties for these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction. The Partnership has entered into hedging transactions as of December 31, 2019 to protect a portion of its commodity price risk exposure. These hedging arrangements are in the form of swaps for NGLs. The Partnership has instruments totaling a gross notional quantity of 452 barrels settling during the period from January 31, 2020 through February 29, 2020. At December 31, 2018, the Partnership had instruments totaling a gross notional quantity of 55 barrels settling during the period from January 31, 2019 through February 28, 2019. These instruments settle against the applicable pricing source for each grade and location.

(b)    Interest Rate Derivative Instruments

The Partnership is exposed to market risks associated with interest rates. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. The Partnership periodically enters into interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and its senior unsecured notes. No such swaps were utilized during the period of January 1, 2017 through December 31, 2019.     

(c)    Tabular Presentation of Gains and Losses on Derivative Instruments

The following table summarizes the fair values and classification of the Partnership’s derivative instruments in its Consolidated Balance Sheets:

	Fair Values of Derivative Instruments in the Consolidated Balance Sheet
	Derivative Assets					Derivative Liabilities
		Fair Values					Fair Values
	Balance Sheet Location	December 31, 2019		December 31, 2018		Balance Sheet Location	December 31, 2019		December 31, 2018
Derivatives not designated as hedging instruments:	Current:
Commodity contracts	Fair value of derivatives	$	—	$	4	Fair value of derivatives	$	667	$	—
Total derivatives not designated as hedging instruments		$	—	$	4		$	667	$	—

Effect of Derivative Instruments on the Consolidated Statement of Operations For the Years Ended December 31, 2019, 2018, and 2017

	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of (Gain) or Loss Recognized in Income on Derivatives
		2019		2018			2017
Derivatives not designated as hedging instruments:
Commodity contracts	Cost of products sold	5,137		(14,024		)	1,304
Total derivatives not designated as hedging instruments		$	5,137	$	(14,024	)	$	1,304