XML 32 R21.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Derivative Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities Disclosure | 13. Derivative Financial Instruments We use derivative financial instruments to reduce our exposure to changes in prices for natural gas that will be purchased in the future. Natural gas is the largest and most volatile component of our manufacturing cost for nitrogen-based products. From time to time, we may also use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates. The derivatives that we use to reduce our exposure to changes in prices for natural gas are primarily natural gas fixed price swaps, basis swaps and options traded in the over-the-counter markets. These natural gas derivatives settle using primarily a NYMEX futures price index, which represents the basis for fair value at any given time. We enter into natural gas derivative contracts with respect to natural gas to be consumed by us in the future, and settlements of those derivative contracts are scheduled to coincide with our anticipated purchases of natural gas used to manufacture nitrogen products during those future periods. We use natural gas derivatives as an economic hedge of natural gas price risk, but without the application of hedge accounting. As a result, changes in fair value of these contracts are recognized in earnings. As of March 31, 2024, we had natural gas derivative contracts covering certain periods through March 2025. As of March 31, 2024, our open natural gas derivative contracts consisted of natural gas fixed price swaps and basis swaps for 8.0 million MMBtus of natural gas. As of December 31, 2023, we had open natural gas derivative contracts consisting of natural gas fixed price swaps, basis swaps and options for 49.0 million MMBtus of natural gas. For the three months ended March 31, 2024, we used derivatives to cover approximately 55% of our natural gas consumption. The effect of derivatives in our consolidated statements of operations is shown in the table below.
| Gain (loss) recognized in income
|  |  |  |  | Three months ended March 31,
| Location |  |  |  |  |  | 2024 |  | 2023 |  |
|  |  |  |  |  |  | (in millions)
Unrealized net gains on natural gas derivatives | Cost of sales |  |  |  |  |  | $ | 33 |  |  | $ | 72 |  |  |
Realized net losses on natural gas derivatives | Cost of sales |  |  |  |  |  | (37) |  |  | (118) |  |  |
Net derivative losses |  |  |  |  |  |  | $ | (4) |  |  | $ | (46) |  |  |
The fair values of derivatives on our consolidated balance sheets are shown below. As of March 31, 2024 and December 31, 2023, none of our derivative instruments were designated as hedging instruments. See Note 9—Fair Value Measurements for additional information on derivative fair values.
| Asset Derivatives |  | Liability Derivatives
| Balance Sheet Location |  | March 31, 2024 |  | December 31, 2023 |  | Balance Sheet Location |  | March 31, 2024 |  | December 31, 2023
|  |  | (in millions) |  |  |  | (in millions)
Natural gas derivatives | Other current assets |  | $ | 1 |  |  | $ | 1 |  |  | Other current liabilities |  | $ | (2) |  |  | $ | (35) |
Most of our International Swaps and Derivatives Association (ISDA) agreements contain credit-risk-related contingent features such as cross default provisions. In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades or, under certain ISDA agreements, may require us to collateralize derivatives in a net liability position. As of March 31, 2024 and December 31, 2023, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $1 million and $34 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates. The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event. As of March 31, 2024 and December 31, 2023, we had no cash collateral on deposit with counterparties for derivative contracts. The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of March 31, 2024 and December 31, 2023:
| Amounts presented in consolidated balance sheets(1) |  | Gross amounts not offset in consolidated balance sheets |  |
|  | Financial instruments |  | Cash collateral received (pledged) |  | Net amount
| (in millions)
March 31, 2024 |  |  |  |  |  |  |
Total derivative assets | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |
Total derivative liabilities | (2) |  |  | — |  |  | — |  |  | (2) |
Net derivative liabilities | $ | (1) |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |
December 31, 2023 |  |  |  |  |  |  |
Total derivative assets | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |
Total derivative liabilities | (35) |  |  | — |  |  | — |  |  | (35) |
Net derivative liabilities | $ | (34) |  |  | $ | — |  |  | $ | — |  |  | $ | (34) |
_______________________________________________________________________________ (1)We report the fair values of our derivative assets and liabilities on a gross basis on our consolidated balance sheets. As a result, the gross amounts recognized and net amounts presented are the same. We do not believe the contractually allowed netting, close-out netting or setoff of amounts owed to, or due from, the counterparties to our ISDA agreements would have a material effect on our financial position.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration