XML 31 R19.htm IDEA: XBRL DOCUMENT v3.20.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2020
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 December 31, 2019, we had 354,350 common stock warrants outstanding. We estimated 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 December 31, 2019, the warrants had a weighted-average exercise price of $0.09 and a remaining term of 2.67 years. The estimated fair value of the common stock warrants was $23.16 per share as of December 31, 2019.
During January and March 2020, one of our stockholders and its affiliates exercised 354,350 common stock warrants with a fair value of $3.9 million. As a result of this cashless transaction, 350,542 shares of common stock were issued. As of June 30, 2020, we had no common stock warrants outstanding.
Derivative Instruments
We utilize 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 derivatives are valued using market quotations published by commodity exchanges. Level 3 instruments are valued using significant unobservable inputs that are not readily observable in the market. The valuation of the embedded derivatives related to our J. Aron repurchase and MLC terminal obligations is based on estimates of the prices and differentials assuming settlement at the end of the reporting period. Estimates of the J. Aron and MLC settlement prices are based on observable inputs, such as Brent/WTI indices, and contractual price differentials as defined in the Supply and Offtake Agreements and Washington Refinery Intermediation Agreement. Such contractual differentials vary by location and by the type of product and range from a discount of $11.73 per barrel to a premium of $34.72 per barrel as of June 30, 2020. Contractual price differentials are considered unobservable inputs; therefore, these embedded derivatives are classified as Level 3 instruments. We do not have other commodity derivatives classified as Level 3 at June 30, 2020 or December 31, 2019. Please read Note 11—Derivatives for further information on derivatives.
Financial Statement Impact
Fair value amounts by hierarchy level as of June 30, 2020 and December 31, 2019 are presented gross in the tables below (in thousands):
 
June 30, 2020
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-Party Netting
 
Net Carrying Value on Balance Sheet (1)
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
281

 
$
25,579

 
$
—

 
$
25,860

 
$
(22,683
)
 
$
3,177

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
(131
)
 
$
(29,214
)
 
$
—

 
$
(29,345
)
 
$
22,683

 
$
(6,662
)
J. Aron repurchase obligation derivative
—

 
—

 
(56,842
)
 
(56,842
)
 
—

 
(56,842
)
MLC terminal obligation derivative
—

 
—

 
(9,256
)
 
(9,256
)
 
—

 
(9,256
)
Interest rate derivatives
—

 
(3,531
)
 
—

 
(3,531
)
 
—

 
(3,531
)
Total
$
(131
)
 
$
(32,745
)
 
$
(66,098
)
 
$
(98,974
)
 
$
22,683

 
$
(76,291
)
 
December 31, 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
$
4,595

 
$
2,075

 
$
—

 
$
6,670

 
$
(4,595
)
 
$
2,075

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$
—

 
$
—

 
$
(8,206
)
 
$
(8,206
)
 
$
—

 
$
(8,206
)
Commodity derivatives
(10,129
)
 
—

 
—

 
(10,129
)
 
4,595

 
(5,534
)
J. Aron repurchase obligation derivative
—

 
—

 
173

 
173

 
—

 
173

MLC terminal obligation derivative
—

 
—

 
(14,717
)
 
(14,717
)
 
—

 
(14,717
)
Interest rate derivatives
—

 
(1,427
)
 
—

 
(1,427
)
 
—

 
(1,427
)
Total
$
(10,129
)
 
$
(1,427
)
 
$
(22,750
)
 
$
(34,306
)
 
$
4,595

 
$
(29,711
)
_________________________________________________________
(1)
Does not include cash collateral of $12.2 million and $19.8 million as of June 30, 2020 and December 31, 2019, 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 derivative instruments measured at fair value on a recurring basis is as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Balance, at beginning of period
$
4,534

 
$
(26,741
)
 
$
(22,750
)
 
$
(922
)
Settlements
(33,380
)
 
(7,898
)
 
(46,679
)
 
(7,898
)
Acquired
—

 
6,353

 
—

 
(2,301
)
Total gains (losses) included in earnings
(37,252
)
 
15,566

 
3,331

 
(1,599
)
Balance, at end of period
$
(66,098
)
 
$
(12,720
)
 
$
(66,098
)
 
$
(12,720
)
The carrying value and fair value of long-term debt and other financial instruments as of June 30, 2020 and December 31, 2019 are as follows (in thousands):
 
June 30, 2020
 
Carrying Value
 
Fair Value
5.00% Convertible Senior Notes due 2021 (1) (3)
$
46,008

 
$
44,999

7.75% Senior Secured Notes due 2025 (1)
292,649

 
260,922

Mid Pac Term Loan (2)
1,416

 
1,416

Term Loan B Facility (1)
225,116


200,391

Retail Property Term Loan (2)
42,570


42,570

PHL Term Loan (2)
5,871

 
5,871

12.875% Senior Secured Notes due 2026 (1)
98,816

 
106,050

 
December 31, 2019
 
Carrying Value
 
Fair Value
5.00% Convertible Senior Notes due 2021 (1) (3)
$
44,783

 
$
66,477

7.75% Senior Secured Notes due 2025 (1)
292,015

 
309,375

Mid Pac Term Loan (2)
1,433

 
1,433

Term Loan B Facility (1)
230,474

 
240,625

Retail Property Term Loan (2)
43,226

 
43,226

Common stock warrants (2)
8,206

 
8,206

_________________________________________________________
(1)
The fair value measurements of the 5.00% Convertible Senior Notes, 7.75% Senior Secured Notes, Term Loan B Facility, and 12.875% Senior Secured Notes are considered Level 2 measurements in the fair value hierarchy as discussed below.
(2)
The fair value measurements of the common stock warrants, Mid Pac Term Loan, Retail Property Term Loan, and PHL 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, 2020. 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, Term Loan B Facility, and 12.875% Senior Secured Notes were determined using a market approach based on quoted prices. The inputs used to measure the fair value are classified as Level 2
inputs within the fair value hierarchy because the 7.75% Senior Secured Notes, Term Loan B Facility, and 12.875% Senior Secured Notes may not be actively traded.
The Retail Property Term Loan is subject to a market-based floating interest rate. The Mid Pac Term Loan and PHL Term Loan are subject to fixed interest rates of 4.375% and 2.750%, respectively. The carrying values of our Retail Property, Mid Pac, and PHL Term Loans were determined to approximate fair value as of June 30, 2020 and December 31, 2019. 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.