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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Note 12 — Fair Value Measurements Under GAAP, our Consolidated Balance Sheets reflect a mixture of measurement methods for financial assets and liabilities (“financial instruments”). Derivative financial instruments are reported at fair value on our Consolidated Balance Sheets. Other financial instruments are reported at historical cost or amortized cost on our Consolidated Balance Sheets. The following are additional qualitative and quantitative disclosures regarding fair value measurements of financial instruments. Fair Value of Derivative Financial Instruments Our derivative instruments consist of financially settled commodity swaps, futures, option contracts and fixed-price forward commodity contracts with certain counterparties. We determine the fair value of our derivative contracts using present value methods or standard option valuation models with assumptions about commodity prices based on those observed in underlying markets. We have consistently applied these valuation techniques in all periods presented and we believe we have obtained the most accurate information available for the types of derivative contracts we hold. The fair values of our derivative instruments are sensitive to changes in forward pricing on natural gas, NGLs and crude oil. The financial position of these derivatives at June 30, 2021, a net liability position of ($349.2) million, reflects the present value, adjusted for counterparty credit risk, of the amount we expect to receive or pay in the future on our derivative contracts. If forward pricing on natural gas, NGLs and crude oil were to increase by 10%, the result would be a fair value reflecting a net liability of ($475.9) million. If forward pricing on natural gas, NGLs and crude oil were to decrease by 10%, the result would be a fair value reflecting a net liability of ($222.5) million. Fair Value of Other Financial Instruments Due to their cash or near-cash nature, the carrying value of other financial instruments included in working capital (i.e., cash and cash equivalents, accounts receivable, accounts payable) approximates their fair value. Long-term debt is primarily the other financial instrument for which carrying value could vary significantly from fair value. We determined the supplemental fair value disclosures for our long-term debt as follows:
| • | The TRC Revolver, TRP Revolver, and the Partnership’s Securitization Facility are based on carrying value, which approximates fair value as their interest rates are based on prevailing market rates; and
| • | The Partnership’s senior unsecured notes are based on quoted market prices derived from trades of the debt.
Fair Value Hierarchy We categorize the inputs to the fair value measurements of financial assets and liabilities at each balance sheet reporting date using a three-tier fair value hierarchy that prioritizes the significant inputs used in measuring fair value:
| • | Level 1 – observable inputs such as quoted prices in active markets;
| • | Level 2 – inputs other than quoted prices in active markets that we can directly or indirectly observe to the extent that the markets are liquid for the relevant settlement periods; and
| • | Level 3 – unobservable inputs in which little or no market data exists, therefore we must develop our own assumptions.
The following table shows a breakdown by fair value hierarchy category for (1) financial instruments measurements included on our Consolidated Balance Sheets at fair value and (2) supplemental fair value disclosures for other financial instruments:
|  | June 30, 2021 |
|  | Carrying |  |  | Fair Value |
|  | Value |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Financial Instruments Recorded on Our Consolidated Balance Sheets at Fair Value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets from commodity derivative contracts |  | $ | 83.3 |  |  | $ | 83.3 |  |  | $ | — |  |  | $ | 83.3 |  |  | $ | — |
Liabilities from commodity derivative contracts |  |  | 432.5 |  |  |  | 432.5 |  |  |  | — |  |  |  | 431.0 |  |  |  | 1.5 |
Financial Instruments Recorded on Our Consolidated Balance Sheets at Carrying Value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 209.0 |  |  |  | 209.0 |  |  |  | — |  |  |  | — |  |  |  | — |
TRC Revolver |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
TRP Revolver |  |  | 170.0 |  |  |  | 170.0 |  |  |  | — |  |  |  | 170.0 |  |  |  | — |
Partnership's Senior unsecured notes |  |  | 6,465.7 |  |  |  | 6,933.3 |  |  |  | — |  |  |  | 6,933.3 |  |  |  | — |
Partnership's Securitization Facility |  |  | 360.0 |  |  |  | 360.0 |  |  |  | — |  |  |  | 360.0 |  |  |  | — |
|  | December 31, 2020 |
|  | Carrying |  |  | Fair Value |
|  | Value |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Financial Instruments Recorded on Our Consolidated Balance Sheets at Fair Value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets from commodity derivative contracts |  | $ | 134.8 |  |  | $ | 134.8 |  |  | $ | — |  |  | $ | 134.8 |  |  | $ | — |
Liabilities from commodity derivative contracts |  |  | 186.0 |  |  |  | 186.0 |  |  |  | — |  |  |  | 185.8 |  |  |  | 0.2 |
Financial Instruments Recorded on Our Consolidated Balance Sheets at Carrying Value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 242.8 |  |  |  | 242.8 |  |  |  | — |  |  |  | — |  |  |  | — |
TRC Revolver |  |  | 555.0 |  |  |  | 555.0 |  |  |  | — |  |  |  | 555.0 |  |  |  | — |
TRP Revolver |  |  | 280.0 |  |  |  | 280.0 |  |  |  | — |  |  |  | 280.0 |  |  |  | — |
Partnership's Senior unsecured notes |  |  | 6,585.4 |  |  |  | 7,036.8 |  |  |  | — |  |  |  | 7,036.8 |  |  |  | — |
Partnership's Securitization Facility |  |  | 350.0 |  |  |  | 350.0 |  |  |  | — |  |  |  | 350.0 |  |  |  | — |
Additional Information Regarding Level 3 Fair Value Measurements Included on Our Consolidated Balance Sheets We reported certain of our swaps and option contracts at fair value using Level 3 inputs due to such derivatives not having observable market prices or implied volatilities for substantially the full term of the derivative asset or liability. For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations whose contract length extends into unobservable periods. The fair value of these swaps is determined using a discounted cash flow valuation technique based on a forward commodity basis curve. For these derivatives, the primary input to the valuation model is the forward commodity basis curve, which is based on observable or public data sources and extrapolated when observable prices are not available. The significant unobservable inputs used in the fair value measurements of our Level 3 derivatives were (i) the forward natural gas liquids pricing curves, for which a significant portion of the derivative’s term is beyond available forward pricing and (ii) implied volatilities, which are unobservable as a result of inactive natural gas liquids options trading. The change in the fair value of Level 3 derivatives associated with a 10% change in the forward basis curve where prices are not observable was immaterial. As of June 30, 2021, we had two derivative contracts categorized as Level 3. The following table summarizes the changes in fair value of our financial instruments classified as Level 3 in the fair value hierarchy:
|  |  | Commodity |
|  |  | Derivative Contracts |
|  |  | Asset/(Liability) |
Balance, December 31, 2020 |  | $ | (0.2 | )
New Level 3 derivative instruments |  |  | (0.2 | )
Transfers out of Level 3 (1) |  |  | 0.2 |
Unrealized gain/(loss) included in OCI |  |  | (1.3 | )
Balance, June 30, 2021 |  | $ | (1.5 | )
(1) | Transfers relate to long-term over-the-counter swaps for NGL products for which observable market prices became available for substantially their full term.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Nonfinancial assets and liabilities, such as long-lived assets, are measured at fair value on a nonrecurring basis upon impairment. In the first quarter of 2020, we recorded non-cash pre-tax impairments of $2,442.8 million. The impairment charge is primarily associated with the partial impairment of certain gas processing facilities and gathering systems associated with our Central operations and full impairment of our Coastal operations. For disclosures related to valuation techniques, see Note 4 – Property, Plant and Equipment and Intangible Assets. The techniques described above may produce a fair value calculation that may not be indicative or reflective of future fair values. Furthermore, while we believe our valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial and nonfinancial assets and liabilities could result in a different fair value measurement at the reporting date.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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