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Derivatives | 9 Months Ended
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Sep. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Commodity Derivatives We have exposure to commodity price changes related to our inventory and purchase commitments. We utilize derivative instruments (primarily futures and options contracts traded on the NYMEX) to hedge our exposure to commodity prices, primarily of crude oil, fuel oil and petroleum products. Our decision as to whether to designate derivative instruments as fair value hedges for accounting purposes relates to our expectations of the length of time we expect to have the commodity price exposure and our expectations as to whether the derivative contract will qualify as highly effective under accounting guidance in limiting our exposure to commodity price risk. Most of the petroleum products, including fuel oil that we supply, cannot be hedged with a high degree of effectiveness with derivative contracts available on the NYMEX; therefore, we do not designate derivative contracts utilized to limit our price risk related to these products as hedges for accounting purposes. Typically we utilize crude oil and other petroleum products futures and option contracts to limit our exposure to the effect of fluctuations in petroleum products prices on the future sale of our inventory or commitments to purchase petroleum products, and we recognize any changes in fair value of the derivative contracts as increases or decreases in our cost of sales. The recognition of changes in fair value of the derivative contracts not designated as hedges for accounting purposes can occur in reporting periods that do not coincide with the recognition of gain or loss on the actual transaction being hedged. Therefore we will, on occasion, report gains or losses in one period that will be partially offset by gains or losses in a future period when the hedged transaction is completed. We have designated certain crude oil futures contracts as hedges of crude oil inventory due to our expectation that these contracts will be highly effective in hedging our exposure to fluctuations in crude oil prices during the period that we expect to hold that inventory. We account for these derivative instruments as fair value hedges under the accounting guidance. Changes in the fair value of these derivative instruments designated as fair value hedges are used to offset related changes in the fair value of the hedged crude oil inventory. Any hedge ineffectiveness in these fair value hedges and any amounts excluded from effectiveness testing are recorded as a gain or loss in the Consolidated Statements of Operations. In accordance with NYMEX requirements, we fund the margin associated with our loss positions on commodity derivative contracts traded on the NYMEX. The amount of the margin is adjusted daily based on the fair value of the commodity contracts. The margin requirements are intended to mitigate a party's exposure to market volatility and the associated contracting party risk. We offset fair value amounts recorded for our NYMEX derivative contracts against margin funding as required by the NYMEX in Current Assets - Other in our Consolidated Balance Sheets. At September 30, 2016, we had the following outstanding derivative commodity contracts that were entered into to economically hedge inventory or fixed price purchase commitments.
|  | Sell (Short) Contracts |  | Buy (Long) Contracts
Designated as hedges under accounting rules: |  |  |  |
Crude oil futures: |  |  |  |
Contract volumes (1,000 bbls) |  | 1,058 |  |  | — |
Weighted average contract price per bbl |  | $ | 45.24 |  |  | $ | — |
Not qualifying or not designated as hedges under accounting rules: |  |  |  |
Crude oil futures: |  |  |  |
Contract volumes (1,000 bbls) |  | 1,440 |  |  | 1,388 |
Weighted average contract price per bbl |  | $ | 44.77 |  |  | $ | 44.96 |
Crude oil swaps: |  |  |  |
Contract volumes (1,000 bbls) |  | — |  |  | 60 |
Weighted average contract price per bbl |  | $ | — |  |  | $ | (1.88 | )
Diesel futures: |  |  |  |
Contract volumes (1,000 bbls) |  | 18 |  |  | — |
Weighted average contract price per gal |  | $ | 1.41 |  |  | $ | — |
#6 Fuel oil futures: |  |  |  |
Contract volumes (1,000 bbls) |  | 105 |  |  | 45 |
Weighted average contract price per bbl |  | $ | 35.73 |  |  | $ | 37.02 |
Crude oil options: |  |  |  |
Contract volumes (1,000 bbls) |  | 55 |  |  | 10 |
Weighted average premium received |  | $ | 1.55 |  |  | $ | 0.36 |
Financial Statement Impacts Unrealized gains are subtracted from net income and unrealized losses are added to net income in determining cash flows from operating activities. To the extent that we have fair value hedges outstanding, the offsetting change recorded in the fair value of inventory is also eliminated from net income in determining cash flows from operating activities. Changes in margin deposits necessary to fund unrealized losses also affect cash flows from operating activities. The following tables reflect the estimated fair value gain (loss) position of our derivatives at September 30, 2016 and December 31, 2015: Fair Value of Derivative Assets and Liabilities
| Unaudited Condensed Consolidated Balance Sheets Location |  | Fair Value
| September 30, 2016 |  | December 31, 2015
Asset Derivatives: |  |  |  |  |
Commodity derivatives - futures and call options (undesignated hedges): |  |  |  |  |
Gross amount of recognized assets | Current Assets - Other |  | $ | 300 |  |  | $ | 1,703 |
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets | Current Assets - Other |  | (300 | ) |  | (388 | )
Net amount of assets presented in the Unaudited Condensed Consolidated Balance Sheets |  |  | $ | — |  |  | $ | 1,315 |
Commodity derivatives - futures and call options (designated hedges): |  |  |  |  |
Gross amount of recognized assets | Current Assets - Other |  | $ | 4,924 |  |  | $ | — |
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets | Current Assets - Other |  | (4,924 | ) |  | — |
Net amount of assets presented in the Unaudited Condensed Consolidated Balance Sheets |  |  | $ | — |  |  | $ | — |
Liability Derivatives: |  |  |  |  |
Commodity derivatives - futures and call options (undesignated hedges): |  |  |  |  |
Gross amount of recognized liabilities | Current Assets - Other (1) |  | $ | (1,085 | ) |  | $ | (388 | )
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets | Current Assets - Other (1) |  | 1,085 |  |  | 388 |
Net amount of liabilities presented in the Unaudited Condensed Consolidated Balance Sheets |  |  | $ | — |  |  | $ | — |
Commodity derivatives - futures and call options (designated hedges): |  |  |  |  |
Gross amount of recognized liabilities | Current Assets - Other (1) |  | $ | (8,097 | ) |  | $ | (23 | )
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets | Current Assets - Other (1) |  | 8,097 |  |  | 23 |
Net amount of liabilities presented in the Unaudited Condensed Consolidated Balance Sheets |  |  | $ | — |  |  | $ | — |
(1) | These derivative liabilities have been funded with margin deposits recorded in our Unaudited Condensed Consolidated Balance Sheets under Current Assets - Other.
Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists. Accordingly, we also offset derivative assets and liabilities with amounts associated with cash margin. Our exchange-traded derivatives are transacted through brokerage accounts and are subject to margin requirements as established by the respective exchange. On a daily basis, our account equity (consisting of the sum of our cash balance and the fair value of our open derivatives) is compared to our initial margin requirement resulting in the payment or return of variation margin. As of September 30, 2016, we had a net broker receivable of approximately $3.6 million (consisting of initial margin of $4.2 million and decreased by $0.6 million of variation margin). As of December 31, 2015, we had a net broker receivable of approximately $5.5 million (consisting of initial margin of $4.4 million increased by $1.1 million of variation margin). At September 30, 2016 and December 31, 2015, none of our outstanding derivatives contained credit-risk related contingent features that would result in a material adverse impact to us upon any change in our credit ratings. Effect on Operating Results
|  |  | Amount of Gain (Loss) Recognized in Income
| Unaudited Condensed Consolidated Statements of Operations Location |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2016 |  | 2015 |  | 2016 |  | 2015
Commodity derivatives - futures and call options: |  |  |  |  |  |  |  |  |
Contracts designated as hedges under accounting guidance | Supply and logistics product costs |  | $ | 1,672 |  |  | $ | 621 |  |  | $ | (8,279 | ) |  | $ | (1,214 | )
Contracts not considered hedges under accounting guidance | Supply and logistics product costs |  | (262 | ) |  | 11,559 |  |  | (3,744 | ) |  | 6,545 |
Total commodity derivatives |  |  | $ | 1,410 |  |  | $ | 12,180 |  |  | $ | (12,023 | ) |  | $ | 5,331 |

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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 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: 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=64837297&loc=SL5624171-113959 Reference 3: 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=64837297&loc=d3e41620-113959 Reference 4: 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=64837297&loc=SL5624163-113959 Reference 5: 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=64837297&loc=SL5579240-113959 Reference 6: 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=64837297&loc=SL5624177-113959 Reference 7: 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=35736893&loc=d3e80784-113994 Reference 8: 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=64837297&loc=d3e41641-113959 Reference 9: 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=64837297&loc=SL5579245-113959 Reference 10: 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=64837297&loc=SL5624258-113959 Reference 11: 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=35736893&loc=d3e80748-113994 Reference 12: 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=64837297&loc=SL5708775-113959 Reference 13: 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=64837297&loc=SL5708773-113959 Reference 14: 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=64837297&loc=SL5618551-113959 Reference 15: 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=64837297&loc=SL5580258-113959 Reference 16: 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=64837297&loc=SL5624181-113959 Reference 17: 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 18: 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=64837297&loc=d3e41638-113959 Reference 19: 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 + Details
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