Derivatives

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

Commodity Derivatives

Our condensed consolidated balance sheets present derivative assets and liabilities on a net basis. Please read Note 13—Fair Value Measurements for the gross fair value and net carrying value of our derivative instruments.

Our open futures and over-the-counter (“OTC”) swaps at September 30, 2023, will settle by December 2024. At September 30, 2023, our open commodity derivative contracts represented (in thousands of barrels):

Contract Type	Purchases	Sales	Net
Futures	31,520	(31,820)	(300)
Swaps	2,935	(6,482)	(3,547)
Total	34,455	(38,302)	(3,847)

At September 30, 2023, we also had option collars that economically hedge a portion of our internally consumed fuel at our refineries. The following table provides information on these option collars at our refineries as of September 30, 2023:

	2023		2024
Average barrels per month	168,333		146,500
Weighted-average strike price - floor (in dollars)	$	65.07	$	60.96
Weighted-average strike price - ceiling (in dollars)	$	88.10	$	83.19
Earliest commencement date	September 2023		January 2024
Furthest expiry date	December 2023		June 2024

At September 30, 2023, we also had open exchange traded future contracts for certain environmental credits that economically hedge a portion of our environmental credit obligations. Our open environmental credit derivative contracts represented 750 thousand credits and will deliver by December 2023.

Interest Rate Derivatives

We are exposed to interest rate volatility in our ABL Credit Facility, LC Facility, Term Loan Credit Agreement, Supply and Offtake Agreement, and Washington Refinery Intermediation Agreement. We may utilize interest rate swaps to manage our interest rate risk. On April 12, 2023, we entered into an interest rate collar transaction to manage our interest rate risk on the Term Loan Credit Agreement. The interest rate collar agreement reduces variable interest rate risk from May 31, 2023, through May 31, 2026, with a notional amount of $300.0 million as of September 30, 2023. The terms of the agreement provide for an interest rate cap of 5.50% and floor of 2.300%, based on the three month SOFR as of the fixing date. We pay variable interest quarterly until the three month SOFR reaches the floor. If the three month SOFR is between the floor and the cap, no payment is due to either party. If the three month SOFR is greater than the cap, the counterparty pays us. The interest rate collar transaction expires on May 31, 2023. As of December 31, 2022, we did not hold any interest rate derivative instruments.

The following table provides information on the fair value amounts (in thousands) of these derivatives as of September 30, 2023 and December 31, 2022, and their placement within our condensed consolidated balance sheets.

	Balance Sheet Location	September 30, 2023		December 31, 2022
		Asset (Liability)
Commodity derivatives (1)	Prepaid and other current assets	$	15,207	$	495
Commodity derivatives	Other accrued liabilities	(33,980)		(10,989)
Environmental credit derivatives	Other accrued liabilities	(1,931)		—
J. Aron repurchase obligation derivative	Obligations under inventory financing agreements	(57,972)		(12,156)
MLC terminal obligation derivative	Obligations under inventory financing agreements	(6,429)		14,435
Interest rate derivatives	Other long-term assets	664		—

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(1)Does not include cash collateral of $22.8 million and $40.8 million recorded in Prepaid and other current assets as of September 30, 2023 and December 31, 2022, respectively, and $9.5 million in Other long-term assets as of both September 30, 2023 and December 31, 2022.

The following table summarizes the pre-tax gains (losses) recognized in Net income (loss) on our condensed consolidated statements of operations resulting from changes in fair value of derivative instruments not designated as hedges charged directly to earnings (in thousands):

		Three Months Ended September 30,				Nine Months Ended September 30,
	Statement of Operations Location	2023		2022		2023		2022
Commodity derivatives	Cost of revenues (excluding depreciation)	$	(72,131)	$	20,728	$	(78,859)	$	(36,750)
J. Aron repurchase obligation derivative	Cost of revenues (excluding depreciation)	(51,344)		58,851		(45,816)		28,811
MLC terminal obligation derivative	Cost of revenues (excluding depreciation)	(37,616)		18,423		(34,149)		(71,769)
Interest rate derivatives	Interest expense and financing costs, net	121		—		664		—