Derivatives

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

(12) Derivatives

Interest Rate Swaps

In April 2019, we entered into an $850.0 million interest rate swap to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings. Under this arrangement, we pay a fixed interest rate of 2.28% in exchange for LIBOR-based variable interest through December 2021. There was no ineffectiveness related to this hedge.

For the three months ended March 31, 2020, we recorded $13.1 million, net of a tax benefit of $4.0 million, into accumulated other comprehensive loss related to changes in fair value of our interest rate swaps.

For the three months ended March 31, 2020, we realized a loss of $1.3 million related to the monthly settlements of our interest rate swaps, which we recorded into interest expense, net of interest income from accumulated other comprehensive loss. We expect to recognize an additional $16.3 million of interest expense out of accumulated other comprehensive loss over the next twelve months.

The fair value of our interest rate swaps included in our consolidated balance sheets were as follows (in millions):

	March 31, 2020		December 31, 2019
Fair value of derivative liabilities—current	$	(16.1)	$	(5.6)
Fair value of derivative liabilities—long-term	(13.4)		(6.8)
Net fair value of interest rate swaps	$	(29.5)	$	(12.4)

Commodity Swaps

The components of gain on derivative activity in the consolidated statements of operations related to commodity swaps are (in millions):

	Three Months Ended March 31,
	2020		2019
Change in fair value of derivatives	$	13.0	$	(2.0)
Realized gain on derivatives	6.2		3.8
Gain on derivative activity	$	19.2	$	1.8

The fair value of derivative assets and liabilities related to commodity swaps are as follows (in millions):

	March 31, 2020		December 31, 2019
Fair value of derivative assets—current	$	75.0	$	12.9
Fair value of derivative assets—long-term	8.2		4.3
Fair value of derivative liabilities—current	(61.8)		(8.8)
Net fair value of commodity swaps	$	21.4	$	8.4

Set forth below are the summarized notional volumes and fair values of all instruments related to commodity swaps that we held for price risk management purposes and the related physical offsets at March 31, 2020 (in millions). The remaining term of the contracts extend no later than December 2022.

		March 31, 2020
Commodity	Instruments	Unit	Volume	Net Fair Value
NGL (short contracts)	Swaps	Gallons	(155.8)	$	8.9
NGL (long contracts)	Swaps	Gallons	8.1	(0.3)
Natural gas (short contracts)	Swaps	MMBtu	(20.3)	0.5
Natural gas (long contracts)	Swaps	MMBtu	15.0	(0.5)
Crude and condensate (short contracts)	Swaps	MMbbls	(13.2)	(46.0)
Crude and condensate (long contracts)	Swaps	MMbbls	2.1	58.8
Total fair value of commodity swaps				$	21.4

On all transactions where we are exposed to counterparty risk, we analyze the counterparty’s financial condition prior to entering into an agreement, establish limits, and monitor the appropriateness of these limits on an ongoing basis. We primarily deal with financial institutions when entering into financial derivatives on commodities. We have entered into Master ISDAs that allow for netting of swap contract receivables and payables in the event of default by either party. If our counterparties failed to perform under existing commodity swap contracts, the maximum loss on our gross receivable position of $83.2 million as of March 31, 2020 would be reduced to $21.4 million due to the offsetting of gross fair value payables against gross fair value receivables as allowed by the ISDAs.