Derivatives and Risk Management Activities (Tables)

3 Months Ended

Mar. 31, 2015

Impact of derivative activities recognized in earnings

A summary of the impact of our derivative activities recognized in earnings for the three months ended March 31, 2015 and 2014 is as follows (in millions):

	Three Months Ended March 31, 2015									Three Months Ended March 31, 2014
Location of gain/(loss)	Derivatives in Hedging Relationships (1)			Derivatives Not Designated as a Hedge			Total			Derivatives in Hedging Relationships (1)			Derivatives Not Designated as a Hedge			Total
Commodity Derivatives

Supply and Logistics segment revenues	$	7		$	(34	)	$	(27	)	$	(19	)	$	—		$	(19	)

Transportation segment revenues	—			2			2			—			—			—

Field operating costs	—			(4		)	(4		)	—			(1		)	(1		)

Interest Rate Derivatives

Interest expense	(1		)	—			(1		)	(1		)	—			(1		)

Foreign Currency Derivatives

Supply and Logistics segment revenues	—			(17		)	(17		)	—			(9		)	(9		)

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	6		$	(53	)	$	(47	)	$	(20	)	$	(10	)	$	(30	)

(1)

Represents gains/(losses) on cash flow hedges reclassified from AOCI to income during the period.

Summary of derivative assets and liabilities on condensed consolidated balance sheet on a gross basis

The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheet on a gross basis as of March 31, 2015 (in millions):


	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
Derivatives designated as hedging instruments:
Commodity derivatives	Other current assets	$	18	Other long-term liabilities and deferred credits	$	(2	)
	Other long-term liabilities and deferred credits	3

Interest rate derivatives				Other current liabilities	(64		)
				Other long-term liabilities and deferred credits	(80		)
Total derivatives designated as hedging instruments		$	21		$	(146	)

Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	205	Other current assets	$	(47	)
	Other long-term assets, net	18		Other current liabilities	(40		)
	Other long-term liabilities and deferred credits	2		Other long-term liabilities and deferred credits	(13		)

Foreign currency derivatives				Other current liabilities	(4		)
Total derivatives not designated as hedging instruments		$	225		$	(104	)

Total derivatives		$	246		$	(250	)

The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheet on a gross basis as of December 31, 2014 (in millions):

	Asset Derivatives			Liability Derivatives
	Balance Sheet	Fair		Balance Sheet	Fair
	Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity derivatives	Other current assets	$	23	Other current assets	$	(12	)
	Other long-term assets, net	8		Other long-term assets, net	(1		)

Interest rate derivatives				Other current liabilities	(44		)
				Other long-term liabilities and deferred credits	(26		)
Total derivatives designated as hedging instruments		$	31		$	(83	)

Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	439	Other current assets	$	(246	)
	Other long-term assets, net	23		Other long-term assets, net	(3		)
				Other current liabilities	(35		)
				Other long-term liabilities and deferred credits	(5		)

Foreign currency derivatives				Other current liabilities	(12		)
Total derivatives not designated as hedging instruments		$	462		$	(301	)

Total derivatives		$	493		$	(384	)

Schedule of derivative financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements

The following tables present information about derivatives and financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements as of the dates indicated (in millions):

	March 31, 2015						December 31, 2014
	Derivative			Derivative			Derivative			Derivative
	Asset Positions			Liability Positions			Asset Positions			Liability Positions
Netting Adjustments:
Gross position - asset/(liability)	$	246		$	(250	)	$	493		$	(384	)
Netting adjustment	(52		)	52			(262		)	262
Cash collateral paid/(received)	(112		)	—			(133		)	—
Net position - asset/(liability)	$	82		$	(198	)	$	98		$	(122	)

Balance Sheet Location After Netting Adjustments:
Other current assets	$	64		$	—		$	71		$	—
Other long-term assets, net	18			—			27			—
Other current liabilities	—			(108		)	—			(91		)
Other long-term liabilities and deferred credits	—			(90		)	—			(31		)
	$	82		$	(198	)	$	98		$	(122	)

Net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives

The net deferred gain/(loss), including tax effects, recognized in AOCI for derivatives for the three months ended March 31, 2015 and 2014 was as follows (in millions):

	Three Months Ended
	March 31,
	2015			2014
Commodity derivatives, net	$	3		$	(12	)
Interest rate derivatives, net	(75		)	(20		)
Total	$	(72	)	$	(32	)

Schedule of derivative financial assets and liabilities by level within the fair value hierarchy accounted for at fair value on a recurring basis

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 (in millions):

	Fair Value as of March 31, 2015										Fair Value as of December 31, 2014
Recurring Fair Value Measures (1)	Level 1		Level 2			Level 3		Total			Level 1			Level 2			Level 3		Total
Commodity derivatives	$	16	$	123		$	5	$	144		$	(85	)	$	261		$	15	$	191
Interest rate derivatives	—		(144		)	—		(144		)	—			(70		)	—		(70		)
Foreign currency derivatives	—		(4		)	—		(4		)	—			(12		)	—		(12		)
Total net derivative asset/(liability)	$	16	$	(25	)	$	5	$	(4	)	$	(85	)	$	179		$	15	$	109

(1)

Derivative assets and liabilities are presented above on a net basis but do not include related cash margin deposits.

Reconciliation of changes in fair value of derivatives classified as Level 3

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our derivatives classified as Level 3 for the three months ended March 31, 2015 and 2014 (in millions):

	Three Months Ended
	March 31,
	2015			2014
Beginning Balance	$	15		$	(3	)
Total gains/(losses) for the period:
Settlements	(12		)	3
Derivatives entered into during the period	2			1
Ending Balance	$	5		$	1

Change in unrealized gains/(losses) included in earnings relating to Level 3 derivatives still held at the end of the period	$	2		$	1

Interest Rate Swaps

Derivative disclosures

Schedule of terms of forward starting interest rate swaps

The following table summarizes the terms of our forward starting interest rate swaps as of March 31, 2015 (notional amounts in millions):

Hedged Transaction

Number and Types of
Derivatives Employed

Notional
Amount

Expected
Termination Date

Average Rate
Locked

Accounting
Treatment

Anticipated debt offering

10 forward starting swaps (30-year)

250

6/15/2015

3.60%

Cash flow hedge

Anticipated debt offering

8 forward starting swaps (30-year)

200

6/15/2016

3.06%

Cash flow hedge

Anticipated debt offering

8 forward starting swaps (30-year)

200

6/15/2017

3.14%

Cash flow hedge

Anticipated debt offering

8 forward starting swaps (30-year)

200

6/15/2018

3.20%

Cash flow hedge

Anticipated debt offering

8 forward starting swaps (30-year)

200

6/14/2019

2.83%

Cash flow hedge

Foreign Currency Derivatives

Derivative disclosures

Open forward exchange contracts

The following table summarizes our open forward exchange contracts as of March 31, 2015 (in millions):

		USD		CAD		Average Exchange Rate USD to CAD
Forward exchange contracts that exchange CAD for USD:
	2015	$	147	$	187	$1.00 - $1.27
	2016	5		7		$1.00 - $1.27
		$	152	$	194

Forward exchange contracts that exchange USD for CAD:
	2015	$	181	$	225	$1.00 - $1.24
	2016	5		7		$1.00 - $1.27
		$	186	$	232