Derivatives and Risk Management Activities (Tables)

3 Months Ended

Mar. 31, 2016

Derivatives and Risk Management Activities

Impact of derivative activities recognized in earnings

A summary of the impact of our derivative activities recognized in earnings is as follows (in millions):

	Three Months Ended March 31, 2016									Three Months Ended March 31, 2015
Location of Gain/(Loss)	Derivatives in Hedging Relationships			Derivatives Not Designated as a Hedge			Total			Derivatives in Hedging Relationships			Derivatives Not Designated as a Hedge			Total
Commodity Derivatives

Supply and Logistics segment revenues	$	1		$	31		$	32		$	7		$	(34	)	$	(27	)

Transportation segment revenues	—			2			2			—			2			2

Field operating costs	—			(2		)	(2		)	—			(4		)	(4		)

Interest Rate Derivatives

Interest expense, net	(2		)	—			(2		)	(1		)	—			(1		)

Foreign Currency Derivatives

Supply and Logistics segment revenues	—			6			6			—			(17		)	(17		)


Total Gain/(Loss) on Derivatives Recognized in Net Income	$	(1	)	$	37		$	36		$	6		$	(53	)	$	(47	)

Summary of derivative assets and liabilities on Condensed Consolidated Balance Sheets 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, 2016 (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	$	3	Other current assets	$	(2	)

Interest rate derivatives				Other current liabilities	(41		)
				Other long-term liabilities and deferred credits	(97		)

Total derivatives designated as hedging instruments		$	3		$	(140	)


Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	170	Other current assets	$	(78	)
	Other current liabilities	1		Other current liabilities	(13		)
	Other long-term liabilities and deferred credits	2		Other long-term liabilities and deferred credits	(3		)

Foreign currency derivatives	Other current assets	5

Preferred Distribution Rate Reset Option				Other long-term liabilities and deferred credits	(60		)

Total derivatives not designated as hedging instruments		$	178		$	(154	)


Total derivatives		$	181		$	(294	)

The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheet on a gross basis as of December 31, 2015 (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	$	4	Other current assets	$	(2	)

Interest rate derivatives	Other long-term assets, net	1		Other current liabilities	(17		)
				Other long-term liabilities and deferred credits	(33		)

Total derivatives designated as hedging instruments		$	5		$	(52	)


Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	265	Other current assets	$	(35	)
	Other long-term assets, net	10		Other long-term assets, net	(1		)
				Other current liabilities	(13		)
				Other long-term liabilities and deferred credits	(1		)

Foreign currency derivatives				Other current liabilities	(8		)

Total derivatives not designated as hedging instruments		$	275		$	(58	)


Total derivatives		$	280		$	(110	)

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

The following table presents information about derivative financial assets and liabilities that are subject to offsetting, including enforceable master netting arrangements (in millions):

	March 31, 2016						December 31, 2015
	Derivative			Derivative			Derivative			Derivative
	Asset Positions			Liability Positions			Asset Positions			Liability Positions
Netting Adjustments:
Gross position - asset/(liability)	$	181		$	(294	)	$	280		$	(110	)
Netting adjustment	(83		)	83			(38		)	38
Cash collateral received	(17		)	—			(156		)	—

Net position - asset/(liability)	$	81		$	(211	)	$	86		$	(72	)


Balance Sheet Location After Netting Adjustments:
Other current assets	$	81		$	—		$	76		$	—
Other long-term assets, net	—			—			10			—
Other current liabilities	—			(53		)	—			(38		)
Other long-term liabilities and deferred credits	—			(158		)	—			(34		)

	$	81		$	(211	)	$	86		$	(72	)

Net deferred gain/(loss) recognized in AOCI for derivatives

The following table summarizes the net deferred gain/(loss) recognized in AOCI for derivatives (in millions):

	Three Months Ended
	March 31,
	2016			2015
Commodity derivatives, net	$	—		$	3
Interest rate derivatives, net	(90		)	(75		)

Total	$	(90	)	$	(72	)

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

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 (in millions):

	Fair Value as of March 31, 2016											Fair Value as of December 31, 2015
Recurring Fair Value Measures (1)	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3		Total
Commodity derivatives	$	62	$	17		$	1		$	80		$	126	$	90		$	11	$	227
Interest rate derivatives	—		(138		)	—			(138		)	—		(49		)	—		(49		)
Foreign currency derivatives	—		5			—			5			—		(8		)	—		(8		)
Preferred Distribution Rate Reset Option	—		—			(60		)	(60		)	—		—			—		—

Total net derivative asset/(liability)	$	62	$	(116	)	$	(59	)	$	(113	)	$	126	$	33		$	11	$	170

(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 (in millions):

	Three Months Ended
	March 31,
	2016			2015
Beginning Balance	$	11		$	15
Losses for the period included in earnings	(1		)	—
Settlements	(9		)	(12		)
Derivatives entered into during the period	(60		)	2

Ending Balance	$	(59	)	$	5


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

Interest Rate Swaps

Derivatives and Risk Management Activities

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, 2016 (notional amounts in millions):

Hedged Transaction	Number and Types of Derivatives Employed	Notional Amount		Expected Termination Date	Average Rate Locked		Accounting Treatment
Anticipated interest payments	8 forward starting swaps (30-year)	$	200	6/15/2016	3.06	%	Cash flow hedge
Anticipated interest payments	8 forward starting swaps (30-year)	$	200	6/15/2017	3.14	%	Cash flow hedge
Anticipated interest payments	8 forward starting swaps (30-year)	$	200	6/15/2018	3.20	%	Cash flow hedge
Anticipated interest payments	8 forward starting swaps (30-year)	$	200	6/14/2019	2.83	%	Cash flow hedge

Foreign Currency Derivatives

Derivatives and Risk Management Activities

Summary of open forward exchange contracts

The following table summarizes our open forward exchange contracts as of March 31, 2016 (in millions):

		USD		CAD		Average Exchange Rate USD to CAD
Forward exchange contracts that exchange CAD for USD:
	2016	$	147	$	191	$1.00 - $1.30

Forward exchange contracts that exchange USD for CAD:
	2016	$	228	$	302	$1.00 - $1.33