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Fair Value Measurements
 6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Common Stock Warrants
As of June 30, 2019 and December 31, 2018, we had 354,350 common stock warrants outstanding. We estimate the fair value of our outstanding common stock warrants using the difference between the strike price of the warrant and the market price of our common stock, which is a Level 3 fair value measurement. As of June 30, 2019 and December 31, 2018, the warrants had a weighted-average exercise price of $0.09 and $0.09 and a remaining term of 3.17 years and 3.67 years, respectively.
The estimated fair value of the common stock warrants was $20.45 and $14.13 per share as of June 30, 2019 and December 31, 2018, respectively.
Derivative Instruments
We utilize crude oil commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil, future purchases and sales of refined products, and cost of crude oil consumed in the refining process. We may utilize interest rate swaps to manage our interest rate risk.
We classify financial assets and liabilities according to the fair value hierarchy. Financial assets and liabilities classified as Level 1 instruments are valued using quoted prices in active markets for identical assets and liabilities. These include our exchange traded futures. Level 2 instruments are valued using quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Our Level 2 instruments include OTC swaps and options. These commodity derivatives are valued using market quotations from independent price reporting agencies and commodity exchange price curves that are corroborated with market data. Level 3 instruments are valued using significant unobservable inputs that are not supported by sufficient market activity. The valuation of our J. Aron and MLC repurchase obligation embedded derivatives requires that we make estimates of the prices and differentials assuming settlement at the end of the reporting period; therefore, they are classified as Level 3 instruments. We do not have other commodity derivatives classified as Level 3 at June 30, 2019 or December 31, 2018. Please read Note 10—Derivatives for further information on derivatives.
Financial Statement Impact
Fair value amounts by hierarchy level as of June 30, 2019 and December 31, 2018 are presented gross in the tables below (in thousands):
 
June 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-Party Netting
 
Net Carrying Value on Balance Sheet (1)
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
1,851

 
$
3,688

 
$
—

 
$
5,539

 
$
(3,809
)
 
$
1,730

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$
—

 
$
—

 
$
(7,246
)
 
$
(7,246
)
 
$
—

 
$
(7,246
)
Commodity derivatives
(976
)
 
(19,711
)
 
—

 
(20,687
)
 
3,809

 
(16,878
)
J. Aron repurchase obligation derivative
—

 
—

 
165

 
165

 
—

 
165

MLC repurchase obligation derivative
—

 
—

 
(5,639
)
 
(5,639
)
 
—

 
(5,639
)
Interest rate derivatives
—

 
(1,474
)
 
—

 
(1,474
)
 
—

 
(1,474
)
Total
$
(976
)
 
$
(21,185
)
 
$
(12,720
)
 
$
(34,881
)
 
$
3,809

 
$
(31,072
)
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-Party Netting
 
Net Carrying Value on Balance Sheet (1)
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
170

 
$
5,234

 
$
—

 
$
5,404

 
$
(431
)
 
$
4,973

Interest rate derivatives
—

 
191

 
—

 
191

 
—

 
191

Total
$
170

 
$
5,425

 
$
—

 
$
5,595

 
$
(431
)
 
$
5,164

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$
—

 
$
—

 
$
(5,007
)
 
$
(5,007
)
 
$
—

 
$
(5,007
)
Commodity derivatives
(870
)
 
(261
)
 
—

 
(1,131
)
 
431

 
(700
)
J. Aron repurchase obligation derivative
—

 
—

 
4,085

 
4,085

 
—

 
4,085

Total
$
(870
)
 
$
(261
)
 
$
(922
)
 
$
(2,053
)
 
$
431

 
$
(1,622
)
_________________________________________________________
(1)
Does not include cash collateral of $12.2 million and $10.9 million as of June 30, 2019 and December 31, 2018, respectively, included within Prepaid and other current assets and Other long-term assets on our condensed consolidated balance sheets.
A roll forward of Level 3 financial instruments measured at fair value on a recurring basis is as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Balance, at beginning of period
$
(26,741
)
 
$
(19,285
)
 
$
(922
)
 
$
(26,372
)
Settlements
(7,898
)
 
—

 
(7,898
)
 
—

Acquired
6,353

 
—

 
(2,301
)
 
—

Total unrealized income (loss) included in earnings
15,566

 
8,726

 
(1,599
)
 
15,813

Balance, at end of period
$
(12,720
)
 
$
(10,559
)
 
$
(12,720
)
 
$
(10,559
)
The carrying value and fair value of long-term debt and other financial instruments as of June 30, 2019 and December 31, 2018 are as follows (in thousands):
 
June 30, 2019
 
Carrying Value
 
Fair Value
5.00% Convertible Senior Notes due 2021 (1) (3)
$
71,621

 
$
101,583

7.75% Senior Secured Notes due 2025 (1)
291,386

 
298,125

Mid Pac Term Loan (2)
1,449

 
1,449

Term Loan B Facility (1)
235,767

 
248,727

Retail Property Term Loan (2)
43,873

 
43,873

Common stock warrants (2)
7,246

 
7,246

 
December 31, 2018
 
Carrying Value
 
Fair Value
5.00% Convertible Senior Notes due 2021 (1) (3)
$
100,411

 
$
121,488

7.75% Senior Secured Notes due 2025 (1)
290,763

 
270,000

Mid Pac Term Loan (2)
1,466

 
1,466

Common stock warrants (2)
5,007

 
5,007

_________________________________________________________
(1)
The fair values measurements of the 5.00% Convertible Senior Notes, 7.75% Senior Secured Notes, and Term Loan B Facility are considered Level 2 measurements as discussed below.
(2)
The fair value of the common stock warrants, Mid Pac Term Loan, and Retail Property Term Loan are considered Level 3 measurements in the fair value hierarchy.
(3)
The carrying value of the 5.00% Convertible Senior Notes excludes the fair value of the equity component, which was classified as equity upon issuance.
The fair value of the 5.00% Convertible Senior Notes was determined by aggregating the fair value of the liability and equity components of the notes. The fair value of the liability component of the 5.00% Convertible Senior Notes was determined using a discounted cash flow analysis in which the projected interest and principal payments were discounted at an estimated market yield for a similar debt instrument without the conversion feature. The equity component was estimated based on the Black-Scholes model for a call option with strike price equal to the conversion price, a term matching the remaining life of the 5.00% Convertible Senior Notes, and an implied volatility based on market values of options outstanding as of June 30, 2019. The fair value of the 5.00% Convertible Senior Notes is considered a Level 2 measurement in the fair value hierarchy.
The fair value of the 7.75% Senior Secured Notes and the Term Loan B Facility were determined using a market approach based on quoted prices. Because the 7.75% Senior Secured Notes and Term Loan B Facility may not be actively traded, the inputs used to measure the fair value are classified as Level 2 inputs within the fair value hierarchy.
The fair value of all non-derivative financial instruments recorded in current assets, including cash and cash equivalents, restricted cash, and trade accounts receivable, and current liabilities, including accounts payable, approximate their carrying value due to their short-term nature.