Derivatives and Risk Management Activities (Tables)

9 Months Ended

Sep. 30, 2017

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 September 30, 2017									Three Months Ended September 30, 2016
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	$	—		$	(226	)	$	(226	)	$	1		$	10		$	11

Transportation segment revenues	—			—			—			—			1			1

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

Interest Rate Derivatives

Interest expense, net	(10		)	—			(10		)	(2		)	—			(2		)

Foreign Currency Derivatives

Supply and Logistics segment revenues	—			3			3			—			(1		)	(1		)

Preferred Distribution Rate Reset Option

Other income/(expense), net	—			2			2			—			17			17

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	(10	)	$	(225	)	$	(235	)	$	(1	)	$	25		$	24



	Nine Months Ended September 30, 2017									Nine Months Ended September 30, 2016
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	$	—		$	(31	)	$	(31	)	$	1		$	(118	)	$	(117	)

Transportation segment revenues	—			—			—			—			4			4

Field operating costs	—			(8		)	(8		)	—			(2		)	(2		)

Depreciation and amortization	(3		)	—			(3		)	—			—			—

Interest Rate Derivatives

Interest expense, net	(16		)	—			(16		)	(8		)	—			(8		)

Foreign Currency Derivatives

Supply and Logistics segment revenues	—			5			5			—			4			4

Preferred Distribution Rate Reset Option

Other income/(expense), net	—			—			—			—			42			42

Total Gain/(Loss) on Derivatives Recognized in Net Income	$	(19	)	$	(34	)	$	(53	)	$	(7	)	$	(70	)	$	(77	)

⁽¹⁾

During the three and nine months ended September 30, 2017, we reclassified losses of approximately $8 million and $10 million to Interest expense, net, respectively, due to anticipated hedged transactions being probable of not occurring. During the nine months ended September 30, 2016 we reclassified losses of approximately $2 million and $2 million to Supply and Logistics segment revenues and Interest expense, net, respectively, due to anticipated hedged transactions being probable of not occurring.

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 September 30, 2017 (in millions):



	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate derivatives	Other current liabilities	$	2	Other current liabilities	$	(26	)
				Other long-term liabilities and deferred credits	(10		)
Total derivatives designated as hedging instruments		$	2		$	(36	)

Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	74	Other current assets	$	(184	)
	Other long-term assets, net	1		Other current liabilities	(97		)
	Other current liabilities	10		Other long-term liabilities and deferred credits	(19		)
	Other long-term liabilities and deferred credits	5

Foreign currency derivatives	Other current assets	6		Other current assets	(2		)
				Other current liabilities	(2		)

Preferred Distribution Rate Reset Option		—		Other long-term liabilities and deferred credits	(33		)
Total derivatives not designated as hedging instruments		$	96		$	(337	)

Total derivatives		$	98		$	(373	)

The following table summarizes the derivative assets and liabilities on our Condensed Consolidated Balance Sheet on a gross basis as of December 31, 2016 (in millions):



	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate derivatives		$	—	Other current liabilities	$	(23	)
				Other long-term liabilities and deferred credits	(27		)
Total derivatives designated as hedging instruments		$	—		$	(50	)

Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	101	Other current assets	$	(344	)
	Other long-term assets, net	2		Other long-term assets, net	(1		)
	Other long-term liabilities and deferred credits	2		Other current liabilities	(14		)
				Other long-term liabilities and deferred credits	(34		)

Foreign currency derivatives	Other current liabilities	3		Other current liabilities	(6		)

Preferred Distribution Rate Reset Option		—		Other long-term liabilities and deferred credits	(32		)
Total derivatives not designated as hedging instruments		$	108		$	(431	)

Total derivatives		$	108		$	(481	)

Schedule of broker receivables and payables

The following table provides the components of our net broker receivable:



	September 30, 2017		December 31, 2016
Initial margin	$	51	$	119
Variation margin posted	143		291
Net broker receivable	$	194	$	410

Schedule of derivative financial assets 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):



	September 30, 2017						December 31, 2016
	Derivative Asset Positions			Derivative Liability Positions			Derivative Asset Positions			Derivative Liability Positions
Netting Adjustments:
Gross position - asset/(liability)	$	98		$	(373	)	$	108		$	(481	)
Netting adjustment	(203		)	203			(350		)	350
Cash collateral paid	194			—			410			—
Net position - asset/(liability)	$	89		$	(170	)	$	168		$	(131	)

Balance Sheet Location After Netting Adjustments:
Other current assets	$	88		$	—		$	167		$	—
Other long-term assets, net	1			—			1			—
Other current liabilities	—			(113		)	—			(40		)
Other long-term liabilities and deferred credits	—			(57		)	—			(91		)
	$	89		$	(170	)	$	168		$	(131	)

Schedule of derivative financial 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):



	September 30, 2017						December 31, 2016
	Derivative Asset Positions			Derivative Liability Positions			Derivative Asset Positions			Derivative Liability Positions
Netting Adjustments:
Gross position - asset/(liability)	$	98		$	(373	)	$	108		$	(481	)
Netting adjustment	(203		)	203			(350		)	350
Cash collateral paid	194			—			410			—
Net position - asset/(liability)	$	89		$	(170	)	$	168		$	(131	)

Balance Sheet Location After Netting Adjustments:
Other current assets	$	88		$	—		$	167		$	—
Other long-term assets, net	1			—			1			—
Other current liabilities	—			(113		)	—			(40		)
Other long-term liabilities and deferred credits	—			(57		)	—			(91		)
	$	89		$	(170	)	$	168		$	(131	)

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

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Interest rate derivatives, net	$	(3	)	$	(20	)	$	(15	)	$	(178	)

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 September 30, 2017												Fair Value as of December 31, 2016
Recurring Fair Value Measures ⁽¹⁾	Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Commodity derivatives	$	(4	)	$	(198	)	$	(8	)	$	(210	)	$	(113	)	$	(171	)	$	(4	)	$	(288	)
Interest rate derivatives	—			(34		)	—			(34		)	—			(50		)	—			(50		)
Foreign currency derivatives	—			2			—			2			—			(3		)	—			(3		)
Preferred Distribution Rate Reset Option	—			—			(33		)	(33		)	—			—			(32		)	(32		)
Total net derivative liability	$	(4	)	$	(230	)	$	(41	)	$	(275	)	$	(113	)	$	(224	)	$	(36	)	$	(373	)


⁽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 September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Beginning Balance	$	(30	)	$	(35	)	$	(36	)	$	11
Net gains/(losses) for the period included in earnings	(8		)	17			(1		)	41
Settlements	(1		)	—			4			(10		)
Derivatives entered into during the period	(2		)	1			(8		)	(59		)
Ending Balance	$	(41	)	$	(17	)	$	(41	)	$	(17	)

Change in unrealized gains/(losses) included in earnings relating to Level 3 derivatives still held at the end of the period	$	(10	)	$	18		$	(8	)	$	43

Interest Rate Swaps

Derivatives and Risk Management Activities

Schedule of terms of outstanding interest rate derivatives

The following table summarizes the terms of our outstanding interest derivatives as of September 30, 2017 (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

16 forward starting swaps (30-year)

400

6/15/2018

2.86

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 September 30, 2017 (in millions):



		USD		CAD		Average Exchange Rate USD to CAD
Forward exchange contracts that exchange CAD for USD:
	2017	$	174	$	215	$1.00 - $1.24
	2018	$	12	$	15	$1.00 - $1.22

Forward exchange contracts that exchange USD for CAD:
	2017	$	307	$	385	$1.00 - $1.26
	2018	$	118	$	147	$1.00 - $1.25