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 table below summarizes the balances of commodity derivative assets and liabilities at December 31, 2015 and 2014 (in thousands):



	December 31, 2015							December 31, 2014
Derivatives subject to netting arrangements:	Level 1		Netting⁽¹⁾			Total		Level 1		Netting⁽¹⁾			Total
Commodity derivatives:
Assets	$	131	$	(131	)	$	—	$	3,311	$	(1,637	)	$	1,674
Liabilities	$	470	$	(131	)	$	339	$	1,637	$	(1,637	)	$	—



(1)	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, 2015, 2014 and 2013, as such no rollforward of Level 3 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,
	2015	2014	2013
Sales	23,228	6,773	2,595
Purchases	22,946	6,477	2,575

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, 2015				December 31, 2014
Other Current Assets		Other Current Liabilities		Other Current Assets		Other Current Liabilities
$	—	$	339	$	1,674	$	—

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 $2.9 million and $0.8 million at December 31, 2015 and 2014, 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, 2015 and 2014, we would have had net asset positions of $2.6 million and $2.5 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,
	2015		2014		2013
Realized and unrealized gain (loss)	$	8,146	$	19,305	$	(1,593	)

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 were 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, and 2013, we recorded expense related to the change in fair value of $13.4 million and $46.4 million, respectively. The warrants expired on November 30, 2014. See Note 17 for additional information.

Concentrations of risk

During the year ended December 31, 2015, two customers primarily of our Crude Supply and Logistics segment accounted for more than 10% of our consolidated revenue with revenues of $457.3 million and $146.2 million. We purchased approximately $232.6 million of product from two third-party suppliers of our Crude Supply and Logistics segment, which represented approximately 24% of our costs of products sold. At December 31, 2015, one customer, primarily of our Crude Supply and Logistics segment, accounted for approximately 39% of our consolidated accounts receivable.

Our SemGas segment has a significant concentration of producers which account for a large portion of our SemGas segment's volumes. During the year ended December 31, 2015, three producers accounted for approximately 92% of our total processed volumes. During the year ended December 31, 2015, three producers accounted for 93% of our total gathered volumes. Additionally, all of the processing and gathering volumes from these customers are produced in the Northern Oklahoma region.

Our SemCAMS processing plants require a minimum rate of sulfur tonnage to operate, and to comply with the regulatory requirements for air emissions. We have several large producers that provide significant sour gas to our plants. If these producers shut in their sour gas production due to current commodity prices, it could result in regulatory non-compliance, as well as operating and financial impacts to SemCAMS.

Assets and liabilities of subsidiaries outside the United States

The following table summarizes the assets and liabilities (excluding affiliate balances) at December 31, 2015 of our subsidiaries outside the United States (in thousands):



	Canada		United Kingdom		Mexico		Total
Cash and cash equivalents	$	20,729	$	8,014	$	17,338	$	46,081
Other current assets	47,267		3,413		31,616		82,296
Noncurrent assets	273,967		144,367		40,654		458,988
Total assets	$	341,963	$	155,794	$	89,608	$	587,365

Current liabilities	$	40,541	$	5,660	$	15,868	$	62,069
Noncurrent liabilities	47,971		15,633		1,167		64,771
Total liabilities	88,512		21,293		17,035		126,840
Net assets	$	253,451	$	134,501	$	72,573	$	460,525

Employees

At December 31, 2015, we had approximately 1,160 employees, including approximately 555 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 that number, approximately 68 employees have collective bargaining agreements that renew annually and 60 have collective bargaining agreements that expired in January 2016 and are currently being renegotiated. We have never had a labor related work stoppage and believe our employee relations are good.