FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF RISK

Fair value of financial instruments

We record certain financial assets and liabilities at fair value at each balance sheet date. The tables below summarize the balances of commodity derivative assets and liabilities at December 31, 2014 and 2013 (in thousands):



	December 31, 2014							December 31, 2013
Derivatives subject to netting arrangements:	Level 1		Netting*			Total		Level 1		Netting*			Total
Commodity derivatives:
Assets	$	3,311	$	(1,637	)	$	1,674	$	36	$	(36	)	$	—
Liabilities	$	1,637	$	(1,637	)	$	—	$	96	$	(36	)	$	60



*	Relates primarily to exchange traded futures. Gain and loss positions on multiple contracts are settled net on a daily basis with the exchange.

“Level 1” measurements are based on inputs consisting of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. These include commodity futures contracts that are traded on an exchange. The valuation of our common stock warrants which were traded on the New York Stock Exchange was also classified as Level 1.

“Level 2” measurements are based on inputs consisting of market observable and corroborated prices for similar commodity derivative contracts. Assets and liabilities classified as Level 2 include over-the-counter ("OTC") traded forwards contracts and swaps.

“Level 3” measurements are obtained using information from a pricing service and internal valuation models incorporating observable and unobservable market data. These include commodity derivatives, such as forwards and swaps for which there is not a highly liquid market, and therefore are not included in Level 2 above.

Financial assets and liabilities are classified 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 measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value levels.

There were no financial assets or liabilities classified as Level 2 or Level 3 during the years ended December 31, 2014, 2013 and 2012, as such no rollforward of activity has been presented.

Commodity derivative contracts

Our consolidated results of operations and cash flows are impacted by changes in market prices for petroleum products. This exposure to commodity price risk is managed, in part, by entering into various commodity derivatives.

We seek to manage the price risk associated with our marketing operations by limiting our net open positions through (i) the concurrent purchase and sale of like quantities of petroleum products to create back-to-back transactions that are intended to lock in positive margins based on the timing, location or quality of the petroleum products purchased and delivered or (ii) derivative contracts. Our storage and transportation assets can also be used to mitigate location and time basis risk. All marketing activities are subject to our Comprehensive Risk Management Policy, which establishes limits in order to manage risk and mitigate financial exposure.

Our commodity derivatives can be comprised of swaps, futures contracts and forward contracts of crude oil and natural gas liquids. These are defined as follows:

Swaps – OTC transactions where a floating price, basis or index is exchanged for a fixed (or a different floating) price, basis or index at a preset schedule in the future, according to an agreed-upon formula.

Futures contracts – Exchange traded contracts to buy or sell a commodity. These contracts are standardized by the exchange in terms of quality, quantity, delivery period and location for each commodity.

Forward contracts – OTC contracts to buy or sell a commodity at an agreed upon future date. The buyer and seller agree on specific terms (price, quantity, delivery period and location) and conditions at the inception of the contract.

The following table sets forth the notional quantities for derivative instruments entered into (in thousands of barrels):



	Year Ended December 31, 2014	Year Ended December 31, 2013	Year Ended December 31, 2012
Sales	6,773	2,595	1,743
Purchases	6,477	2,575	1,636

We have not designated any of our commodity derivative instruments as accounting hedges. We have recorded the fair value of our commodity derivative instruments on our consolidated balance sheets in "other current assets" and "other current liabilities" in the following amounts (in thousands):



December 31, 2014				December 31, 2013
Other Current Assets		Other Current Liabilities		Other Current Assets		Other Current Liabilities
$	1,674	$	—	$	—	$	60

We have posted margin deposits as collateral with brokers who have the right of set off associated with these funds. Our margin deposit balances were $0.8 million and $0.8 million at December 31, 2014 and 2013, respectively. These margin account balances have not been offset against our net commodity derivative instrument (contract) positions. Had these margin account balances been netted against our net commodity derivative instrument (contract) positions as of December 31, 2014 and 2013, we would have had net asset positions of $2.5 million and $0.8 million, respectively.

Realized and unrealized gains (losses) from our commodity derivatives were recorded to product revenue in the following amounts (in thousands):



Year Ended December 31, 2014		Year Ended December 31, 2013			Year Ended December 31, 2012
$	19,305	$	(1,593	)	$	149

Warrants

In addition to the commodity derivatives above, we had $58.1 million of derivative liabilities related to common stock warrants at December 31, 2013, which are not subject to netting arrangements. The warrants were issued upon emergence from bankruptcy and were recorded at fair value on the consolidated balance sheets with changes in the fair value recorded to "other expense (income), net" in our consolidated statements of operations and comprehensive income. For the years ended December 31, 2014, 2013, and 2012, we recorded expense related to the change in fair value of $13.4 million, $46.4 million and $21.3 million, respectively. The warrants expired on November 30, 2014. See Note 18 for additional information.

Concentrations of risk

During the year ended December 31, 2014, one customer of our Crude segment accounted for more than 10% of our consolidated revenue at approximately 36%. We purchased approximately $469 million of product from one third-party supplier of our Crude segment, which represented approximately 29% of our costs of products sold. At December 31, 2014, two customers of our Crude segment accounted for approximately 34% of our consolidated accounts receivable.

Assets and liabilities of subsidiaries outside the United States

The following table summarizes the assets and liabilities (excluding affiliate balances) at December 31, 2014 of our subsidiaries outside the United States (in thousands):



	Canada		United Kingdom		Mexico		Total
Cash and cash equivalents	$	17,710	$	957	$	13,253	$	31,920
Other current assets	58,271		1,854		49,145		109,270
Noncurrent assets	215,386		147,687		44,827		407,900
Total assets	$	291,367	$	150,498	$	107,225	$	549,090
Current liabilities	$	37,713	$	1,442	$	32,527	$	71,682
Noncurrent liabilities	75,977		18,619		1,232		95,828
Total liabilities	113,690		20,061		33,759		167,510
Net assets	$	177,677	$	130,437	$	73,466	$	381,580

Employees

At December 31, 2014, we had approximately 1,080 employees, including approximately 540 employees outside the U.S. Approximately 130 of the employees in Canada and Mexico are represented by labor unions and are subject to collective bargaining agreements governing their employment with us. Of these employees, approximately 70 are subject to collective bargaining agreements that renew annually and 60 have collective bargaining agreements that expire in January 2016. We have never had a labor related work stoppage and believe our employee relations are good.