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Derivative instruments | 6 Months Ended
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Jun. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative instruments The Company's policy allows the use of derivative instruments as part of an overall energy price, foreign currency and interest rate risk management program to efficiently manage and minimize commodity price, foreign currency and interest rate risk. As of June 30, 2013, the Company had no outstanding foreign currency hedges. The following information should be read in conjunction with Notes 1 and 7 in the Company's Notes to Consolidated Financial Statements in the 2012 Annual Report. The fair value of derivative instruments must be estimated as of the end of each reporting period and is recorded on the Consolidated Balance Sheets as an asset or a liability. Cascade Cascade has historically utilized natural gas swap agreements to manage a portion of its regulated natural gas supply portfolio in order to manage fluctuations in the price of natural gas related to core customers in accordance with authority granted by the WUTC and OPUC. Core customers consist of residential, commercial and smaller industrial customers. As of June 30, 2013 and December 31, 2012, Cascade has no outstanding swap agreements. As of June 30, 2012, Cascade held a natural gas swap agreement with total forward notional volumes of 123,000 MMBtu. Periodic changes in the fair market value of the derivative instruments are recorded on the Consolidated Balance Sheets as a regulatory asset or a regulatory liability, and settlements of these arrangements are expected to be recovered through the purchased gas cost adjustment mechanism. Gains and losses on the settlements of these derivative instruments are recorded as a component of purchased natural gas sold on the Consolidated Statements of Income as they are recovered through the purchased gas cost adjustment mechanism. Under the terms of these arrangements, Cascade either pays or receives settlement payments based on the difference between the fixed strike price and the monthly index price applicable to each contract. For the three and six months ended June 30, 2012, the change in the fair market value of the derivative instrument of $261,000 and $209,000, respectively, was recorded as a decrease to regulatory assets. Cascade's derivative instrument contains a cross-default provision that states that if Cascade fails to pay certain of its indebtedness, in excess of specified amounts, the counterparty may require early settlement or termination of the derivative instrument in a liability position. The fair value of Cascade's derivative instrument with the credit-risk-related contingent feature that was in a liability position at June 30, 2012, was $228,000. The aggregate fair value of assets that would have been needed to settle the instrument immediately if the credit-risk-related contingent feature were triggered on June 30, 2012, was $228,000. Fidelity At June 30, 2013 and 2012, and December 31, 2012, Fidelity held oil swap and collar agreements with total forward notional volumes of 3.1 million, 3.7 million and 2.6 million Bbl, respectively, and natural gas swap agreements with total forward notional volumes of 21.4 million, 9.1 million and 11.0 million MMBtu, respectively. In addition, at June 30, 2012, Fidelity held natural gas basis swap agreements with total forward notional volumes of 1.7 million MMBtu. Fidelity utilizes these derivative instruments to manage a portion of the market risk associated with fluctuations in the price of oil and natural gas and basis differentials on its forecasted sales of oil and natural gas production. Effective April 1, 2013, Fidelity elected to de-designate all commodity derivative contracts previously designated as cash flow hedges and elected to discontinue hedge accounting prospectively for all of its commodity derivative instruments. When the criteria for hedge accounting is not met or when hedge accounting is not elected, realized gains and losses and unrealized gains and losses are both recorded in operating revenues on the Consolidated Statements of Income. As a result of discontinuing hedge accounting on commodity derivative instruments, gains and losses on the oil and natural gas derivative instruments remain in accumulated other comprehensive income (loss) as of the de-designation date and are reclassified into earnings in future periods as the underlying hedged transactions affect earnings. At April 1, 2013, accumulated other comprehensive income (loss) included $1.8 million of unrealized gains, representing the mark-to-market value of the Company's commodity derivative instruments that qualified as cash flow hedges as of the balance sheet date. The Company expects to reclassify into earnings from accumulated other comprehensive income (loss) the remaining value related to de-designating commodity derivative instruments over the next 18 months. Prior to April 1, 2013, changes in the fair value attributable to the effective portion of the hedging instruments, net of tax, were recorded in stockholders' equity as a component of accumulated other comprehensive income (loss). To the extent that the hedges were not effective or did not qualify for hedge accounting, the ineffective portion of the changes in fair market value was recorded directly in earnings. Gains and losses on the oil and natural gas derivative instruments were reclassified from accumulated other comprehensive income (loss) into operating revenues on the Consolidated Statement of Income at the date the oil and natural gas quantities were settled. Centennial As of June 30, 2013, Centennial had no outstanding interest rate swap agreements. At June 30, 2012 and December 31, 2012, Centennial held interest rate swap agreements with total notional amounts of $60.0 million and $50.0 million, respectively, which were designated as cash flow hedging instruments. Centennial entered into these interest rate derivative instruments to manage a portion of its interest rate exposure on the forecasted issuance of long-term debt. Changes in the fair value attributable to the effective portion of hedging instruments, net of tax, are recorded in stockholders' equity as a component of accumulated other comprehensive income (loss). To the extent that the hedges are not effective, the ineffective portion of the changes in fair market value is recorded directly in earnings. Gains and losses on the interest rate derivatives are reclassified from accumulated other comprehensive income (loss) into interest expense on the Consolidated Statements of Income in the same period the hedged item affects earnings. Fidelity and Centennial There were no components of the derivative instruments' gain or loss excluded from the assessment of hedge effectiveness. Gains and losses must be reclassified into earnings as a result of the discontinuance of cash flow hedges if it is probable that the original forecasted transactions will not occur, and there were no such reclassifications. The gains and losses on derivative instruments were as follows:
| Three Months Ended | Six Months Ended
| June 30, | June 30,
| 2013 | 2012 | 2013 | 2012
| (In thousands)
Commodity derivatives designated as cash flow hedges: |  |  |  |
Amount of gain (loss) recognized in accumulated other comprehensive loss (effective portion), net of tax | $ | — |  | $ | 28,018 |  | $ | (6,154 | ) | $ | 23,863 |
Amount of (gain) loss reclassified from accumulated other comprehensive loss into operating revenues (effective portion), net of tax | (871 | ) | (1,840 | ) | (3,714 | ) | (4,687 | )
Amount of gain (loss) recognized in operating revenues (ineffective portion), before tax | — |  | 3,863 |  | (1,422 | ) | (388 | )
Interest rate derivatives designated as cash flow hedges: |  |  |  |
Amount of gain (loss) recognized in accumulated other comprehensive loss (effective portion), net of tax | 254 |  | (2,245 | ) | 560 |  | (1,357 | )
Amount of loss reclassified from accumulated other comprehensive loss into interest expense (effective portion), net of tax | 475 |  | 6 |  | 546 |  | 21 |
Amount of loss recognized in interest expense (ineffective portion), before tax | (610 | ) | — |  | (769 | ) | — |
Commodity derivatives not designated as hedging instruments: |  |  |  |
Amount of gain recognized in operating revenues, before tax | 13,047 |  | 993 |  | 8,637 |  | 1,048 |
Based on June 30, 2013, fair values, over the next 12 months net losses of approximately $1.5 million (after tax) are estimated to be reclassified from accumulated other comprehensive income (loss) into earnings, as the hedged transactions affect earnings. Certain of Fidelity's derivative instruments contain cross-default provisions that state if Fidelity or any of its affiliates fail to pay certain of their indebtedness, in excess of specified amounts, the counterparties may require early settlement or termination of the derivative instruments in liability positions. The aggregate fair value of Fidelity's derivative instruments with credit-risk-related contingent features that are in a liability position at June 30, 2013 and 2012, and December 31, 2012, were $1.4 million, $7.8 million and $6.3 million, respectively. The aggregate fair value of assets that would have been needed to settle the instruments immediately if the credit-risk-related contingent features were triggered on June 30, 2013 and 2012, and December 31, 2012, were $1.4 million, $7.8 million and $6.3 million, respectively. The location and fair value of the gross amount of the Company's derivative instruments on the Consolidated Balance Sheets were as follows:
Asset Derivatives | Location on Consolidated Balance Sheets | Fair Value at June 30, 2013 | Fair Value at June 30, 2012 | Fair Value at December 31, 2012
|  | (In thousands)
Designated as hedges: |  |  |
Commodity derivatives | Commodity derivative instruments | $ | — |  | $ | 36,360 |  | $ | 18,084 |
| Other assets - noncurrent | — |  | 11,445 |  | — |
|  | — |  | 47,805 |  | 18,084 |
Not designated as hedges: |  |  |  |
Commodity derivatives | Commodity derivative instruments | 9,797 |  | 640 |  | 220 |
| Other assets - noncurrent | 1,447 |  | 212 |  | — |
|  | 11,244 |  | 852 |  | 220 |
Total asset derivatives |  | $ | 11,244 |  | $ | 48,657 |  | $ | 18,304 |
Liability Derivatives | Location on Consolidated Balance Sheets | Fair Value at June 30, 2013 | Fair Value at June 30, 2012 | Fair Value at December 31, 2012
|  | (In thousands)
Designated as hedges: |  |  |
Commodity derivatives | Commodity derivative instruments | $ | — |  | $ | 789 |  | $ | — |
Interest rate derivatives | Other accrued liabilities | — |  | 6,963 |  | 6,255 |
|  | — |  | 7,752 |  | 6,255 |
Not designated as hedges: |  |  |  |  |  |
Commodity derivatives | Commodity derivative instruments | 1,388 |  | 248 |  | — |
|  | 1,388 |  | 248 |  | — |
Total liability derivatives |  | $ | 1,388 |  | $ | 8,000 |  | $ | 6,255 |
All of the Company's commodity and interest rate derivative instruments at June 30, 2013 and 2012, and December 31, 2012, were subject to legally enforceable master netting agreements. However, the Company's policy is to not offset fair value amounts for derivative instruments and, as a result, the Company's derivative assets and liabilities are presented gross on the Consolidated Balance Sheets. The gross derivative assets and liabilities (excluding settlement receivables and payables that may be subject to the same master netting agreements) presented on the Consolidated Balance Sheets and the amount eligible for offset under the master netting agreements is presented in the following table:
June 30, 2013 | Gross Amounts Recognized on the Consolidated Balance Sheets | Gross Amounts Not Offset on the Consolidated Balance Sheets | Net
| (In thousands)
Assets: |  |  |
Commodity derivatives | $ | 11,244 |  | $ | (1,388 | ) | $ | 9,856 |
Total assets | $ | 11,244 |  | $ | (1,388 | ) | $ | 9,856 |
Liabilities: |  |  |
Commodity derivatives | $ | 1,388 |  | $ | (1,388 | ) | $ | — |
Total liabilities | $ | 1,388 |  | $ | (1,388 | ) | $ | — |
June 30, 2012 | Gross Amounts Recognized on the Consolidated Balance Sheets | Gross Amounts Not Offset on the Consolidated Balance Sheets | Net
| (In thousands)
Assets: |  |  |
Commodity derivatives | $ | 48,657 |  | $ | (809 | ) | $ | 47,848 |
Total assets | $ | 48,657 |  | $ | (809 | ) | $ | 47,848 |
Liabilities: |  |  |
Commodity derivatives | $ | 1,037 |  | $ | (809 | ) | $ | 228 |
Interest rate derivatives | 6,963 |  | — |  | 6,963 |
Total liabilities | $ | 8,000 |  | $ | (809 | ) | $ | 7,191 |
December 31, 2012 | Gross Amounts Recognized on the Consolidated Balance Sheets | Gross Amounts Not Offset on the Consolidated Balance Sheets | Net
| (In thousands)
Assets: |  |  |
Commodity derivatives | $ | 18,304 |  | $ | — |  | $ | 18,304 |
Total assets | $ | 18,304 |  | $ | — |  | $ | 18,304 |
Liabilities: |  |  |
Interest rate derivatives | $ | 6,255 |  | $ | — |  | $ | 6,255 |
Total liabilities | $ | 6,255 |  | $ | — |  | $ | 6,255 |

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- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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