XML 33 R21.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Derivative Instruments | 3 Months Ended
--- | ---
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments We use derivative and non-derivative contracts to engage in trading activities and manage risks related to obtaining adequate supplies and the price fluctuations of natural gas, electricity and propane. Our natural gas, electric and propane distribution operations have entered into agreements with suppliers to purchase natural gas, electricity and propane for resale to our customers. Aspire Energy has entered into contracts with producers to secure natural gas to meet its obligations. Purchases under these contracts typically either do not meet the definition of derivatives or are considered “normal purchases and normal sales” and are accounted for on an accrual basis. Our propane distribution and natural gas marketing operations may also enter into fair value hedges of their inventory or cash flow hedges of their future purchase commitments in order to mitigate the impact of wholesale price fluctuations. As of March 31, 2018, our natural gas and electric distribution operations did not have any outstanding derivative contracts. Hedging Activities in 2018 PESCO enters into natural gas futures contracts associated with the purchase and sale of natural gas to specific customers. These contracts are effective through March 2022, and we designate and account for them as cash flow hedges. There is no ineffective portion of these hedges. At March 31, 2018, PESCO had a total of 22.9 million Dts hedged under natural gas futures contracts, with a liability fair value of approximately $1.6 million. The change in fair value of the natural gas futures contracts is recorded as unrealized gain (loss) in other comprehensive income (loss). Hedging Activities in 2017 In 2017, Sharp entered into futures and swap agreements to mitigate the risk of fluctuations in wholesale propane index prices associated with 7.7 million gallons of propane expected to be purchased from October 2017 through March 2019, of which positions covering 2.1 million gallons of forecasted future purchases were outstanding as of March 31, 2018. Under the futures and swap agreements, Sharp will receive the difference between the index prices (Mont Belvieu prices in October 2017 through March 2019) and the swap prices of $0.59 per gallon, to the extent the index price exceeds the contracted price. If the index prices are lower than the swap prices, Sharp will pay the difference. Sharp received a total of approximately $464,000, which represented the difference between the index prices and the contracted prices during the first quarter of 2018 related to hedging activities originated in 2017 and received $3,000, which represented the mark-to-market activities for the three months ended March 31, 2018. At March 31, 2018, the futures and swap agreements had a fair value asset of approximately $204,000 and a fair value liability of $16,000. The change in the fair value of the swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss). The impact on Sharp's financial instruments that were not designated as hedges in our consolidated financial statements as of March 31, 2018 was $4,000, which was recorded as a decrease in propane costs during the three months ended March 31, 2018 and is associated with 18,000 gallons of propane. In August 2017, PESCO entered into natural gas swap agreements associated with financial contracts acquired in the ARM acquisition to mitigate the risk of fluctuations in wholesale natural gas prices associated with 702,000 Dts of natural gas PESCO expects to purchase through January 2020. We accounted for these swap agreements as cash flow hedges, which have a fair value liability of approximately $404,000 at March 31, 2018. The change in fair value of the natural gas swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss). The impact on PESCO's financial instruments that were not designated as hedges in our consolidated financial statements as of March 31, 2018 was $300,000, which was recorded as an increase in gas costs during the three months ended March 31, 2018 and is associated with 87,500 Dts of natural gas. Balance sheet offsetting PESCO has entered into master netting agreements with counterparties that enable it to net the counterparties' outstanding accounts receivable and payable, which are presented on a net basis in the consolidated balance sheets. The following table summarizes the accounts receivable and payables on a gross and net basis at March 31, 2018 and December 31, 2017:
|  | At March 31, 2018
(in thousands) |  | Gross amounts |  | Amounts offset |  | Net amounts
Accounts receivable |  | $ | 6,555 |  |  | $ | 2,092 |  |  | $ | 4,463 |
Accounts payable |  | $ | 13,912 |  |  | $ | 2,092 |  |  | $ | 11,820 |
|  | At December 31, 2017
(in thousands) |  | Gross amounts |  | Amounts offset |  | Net amounts
Accounts receivable |  | $ | 8,283 |  |  | $ | 2,391 |  |  | $ | 5,892 |
Accounts payable |  | $ | 16,643 |  |  | $ | 2,391 |  |  | $ | 14,252 |
The following tables present information about the fair value and related gains and losses of our derivative contracts. We did not have any derivative contracts with a credit risk-related contingency. The fair values of the derivative contracts recorded in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017, are as follows:
|  | Asset Derivatives
|  |  |  | Fair Value As Of
(in thousands) |  | Balance Sheet Location |  | March 31, 2018 |  | December 31, 2017
Derivatives not designated as hedging instruments |  |  |  |  |  |
Propane swap agreements |  | Derivative assets, at fair value |  | $ | 4 |  |  | $ | 13 |
Derivatives designated as cash flow hedges |  |  |  |  |  |
Natural gas futures contracts |  | Derivative assets, at fair value |  | — |  |  | 92 |
Propane swap agreements |  | Derivative assets, at fair value |  | 204 |  |  | 1,181 |
Total asset derivatives |  |  |  | $ | 208 |  |  | $ | 1,286 |
|  | Liability Derivatives
|  |  |  | Fair Value As Of
(in thousands) |  | Balance Sheet Location |  | March 31, 2018 |  | December 31, 2017
Derivatives not designated as hedging instruments |  |  |  |  |  |
Natural gas futures contracts |  | Derivative liabilities, at fair value |  | $ | 300 |  |  | $5,776
Derivatives designated as cash flow hedges |  |  |  |  |  |
Natural gas futures contracts |  | Derivative liabilities, at fair value |  | 1,639 |  |  | 469 |
Natural gas swap contracts |  | Derivative liabilities, at fair value |  | 404 |  |  | 2 |
Propane swap agreements |  | Derivative liabilities, at fair value |  | 16 |  |  | — |
Total liability derivatives |  |  |  | $ | 2,359 |  |  | $ | 6,247 |
The effects of gains and losses from derivative instruments on the condensed consolidated financial statements are as follows:
|  |  |  | Amount of Gain (Loss) on Derivatives:
|  | Location of Gain |  | For the Three Months Ended March 31,
(in thousands) |  | (Loss) on Derivatives |  | 2018 |  | 2017
Derivatives not designated as hedging instruments |  |  |  |  |  |
Realized gain on forward contracts and options (1) |  | Revenue |  | $ | — |  |  | $ | 112 |
Natural gas futures contracts |  | Cost of sales |  | (2,835 | ) |  | 124 |
Propane swap agreements |  | Cost of sales |  | (9 | ) |  | (4 | )
Derivatives designated as fair value hedges |  |  |  |  |  |
Put /Call option (2) |  | Cost of sales |  | — |  |  | (9 | )
Derivatives designated as cash flow hedges |  |  |  |  |  |
Propane swap agreements |  | Cost of sales |  | (464 | ) |  | 388 |
Propane swap agreements |  | Other comprehensive loss |  | (992 | ) |  | (557 | )
Natural gas futures contracts |  | Cost of sales |  | 298 |  |  | 1,150 |
Natural gas swap contracts |  | Cost of sales |  | (450 | ) |  | 1,087 |
Natural gas futures agreements |  | Other comprehensive income |  | 65 |  |  | — |
Natural gas swap agreements |  | Other comprehensive loss |  | (1,732 | ) |  | — |
Total |  |  |  | $ | (6,119 | ) |  | $ | 2,291 |
(1) | All of the realized and unrealized gain (loss) on forward contracts represents the effect of trading activities on our condensed consolidated statements of income.
(2) | As a fair value hedge with no ineffective portion, the unrealized gains and losses associated with this call option are recorded in cost of sales, offset by the corresponding change in the value of propane inventory (hedged item), which is also recorded in cost of sales. The amounts in cost of sales offset to zero, and the unrealized gains and losses of this put option effectively changed the value of propane inventory on the condensed consolidated balance sheets.

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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration