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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2017
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis Common Stock Warrants As of September 30, 2017 and December 31, 2016, we had 354,350 common stock warrants outstanding. We estimate the fair value of our outstanding common stock warrants using the difference between the strike price of the warrant and the market price of our common stock, which is a Level 3 fair value measurement. As of September 30, 2017 and December 31, 2016, the warrants had a weighted-average exercise price of $0.09 and $0.10 and a remaining term of 4.92 years and 5.67 years, respectively. The estimated fair value of the common stock warrants was $20.73 and $14.49 per share as of September 30, 2017 and December 31, 2016, respectively. Derivative Instruments We utilize crude oil commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil, and future sales of refined products. We utilize interest rate swaps to manage our interest rate risk. We classify financial assets and liabilities according to the fair value hierarchy. Financial assets and liabilities classified as Level 1 instruments are valued using quoted prices in active markets for identical assets and liabilities. These include our exchange traded futures. Level 2 instruments are valued using quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Our Level 2 instruments include OTC swaps and options. These commodity derivatives are valued using market quotations from independent price reporting agencies and commodity exchange price curves that are corroborated with market data. Level 3 instruments are valued using significant unobservable inputs that are not supported by sufficient market activity. The valuation of our J. Aron repurchase obligation derivative requires that we make estimates of the prices and differentials assuming settlement at the end of the reporting period; therefore, it is classified as a Level 3 instrument. We do not have other commodity derivatives classified as Level 3 at September 30, 2017 or December 31, 2016. Please read Note 9—Derivatives for further information on derivatives. Financial Statement Impact Fair value amounts by hierarchy level as of September 30, 2017 and December 31, 2016 are presented gross in the tables below (in thousands):
| September 30, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Gross Fair Value |  | Effect of Counter-Party Netting |  | Net Carrying Value on Balance Sheet (1)
Assets |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives | $ | 235 |  |  | $ | 28,733 |  |  | $ | — |  |  | $ | 28,968 |  |  | $ | (26,836 | ) |  | $ | 2,132 |
Interest rate derivatives | — |  |  | 2,966 |  |  | — |  |  | 2,966 |  |  | — |  |  | 2,966 |
Total | $ | 235 |  |  | $ | 31,699 |  |  | $ | — |  |  | $ | 31,934 |  |  | $ | (26,836 | ) |  | $ | 5,098 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Common stock warrants | $ | — |  |  | $ | — |  |  | $ | (7,345 | ) |  | $ | (7,345 | ) |  | $ | — |  |  | $ | (7,345 | )
Commodity derivatives | (150 | ) |  | (26,744 | ) |  | — |  |  | (26,894 | ) |  | 26,836 |  |  | (58 | )
J. Aron repurchase obligation derivative | — |  |  | — |  |  | (24,995 | ) |  | (24,995 | ) |  | — |  |  | (24,995 | )
Total | $ | (150 | ) |  | $ | (26,744 | ) |  | $ | (32,340 | ) |  | $ | (59,234 | ) |  | $ | 26,836 |  |  | $ | (32,398 | )
| December 31, 2016
| Level 1 |  | Level 2 |  | Level 3 |  | Gross Fair Value |  | Effect of Counter-Party Netting |  | Net Carrying Value on Balance Sheet (1)
Assets |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives | $ | 190 |  |  | $ | 26,095 |  |  | $ | — |  |  | $ | 26,285 |  |  | $ | (23,537 | ) |  | $ | 2,748 |
Interest rate derivatives | — |  |  | 3,602 |  |  | — |  |  | 3,602 |  |  | (64 | ) |  | 3,538 |
Total | $ | 190 |  |  | $ | 29,697 |  |  | $ | — |  |  | $ | 29,887 |  |  | $ | (23,601 | ) |  | $ | 6,286 |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Common stock warrants | $ | — |  |  | $ | — |  |  | $ | (5,134 | ) |  | $ | (5,134 | ) |  | $ | — |  |  | $ | (5,134 | )
Commodity derivatives | (54 | ) |  | (24,078 | ) |  | — |  |  | (24,132 | ) |  | 23,537 |  |  | (595 | )
J. Aron repurchase obligation derivative | — |  |  | — |  |  | (20,000 | ) |  | (20,000 | ) |  | — |  |  | (20,000 | )
Interest rate derivatives | — |  |  | (158 | ) |  | — |  |  | (158 | ) |  | 64 |  |  | (94 | )
Total | $ | (54 | ) |  | $ | (24,236 | ) |  | $ | (25,134 | ) |  | $ | (49,424 | ) |  | $ | 23,601 |  |  | $ | (25,823 | )
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(1) | Does not include cash collateral of $7.7 million and $9.7 million as of September 30, 2017 and December 31, 2016, respectively, included within Prepaid and other current assets and Other long-term assets on our condensed consolidated balance sheets.
A roll forward of Level 3 financial instruments measured at fair value on a recurring basis is as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Balance, at beginning of period | $ | (7,324 | ) |  | $ | (8,564 | ) |  | $ | (25,134 | ) |  | $ | (25,867 | )
Settlements | — |  |  | — |  |  | — |  |  | 16,810 |
Total unrealized income (loss) included in earnings | (25,016 | ) |  | (6,618 | ) |  | (7,206 | ) |  | (6,125 | )
Balance, at end of period | $ | (32,340 | ) |  | $ | (15,182 | ) |  | $ | (32,340 | ) |  | $ | (15,182 | )
The carrying value and fair value of long-term debt and other financial instruments as of September 30, 2017 and December 31, 2016 are as follows (in thousands):
| September 30, 2017
| Carrying Value |  | Fair Value (1)
Hawaii Retail Credit Agreement (2) | $ | 83,773 |  |  | $ | 83,773 |
5.00% Convertible Senior Notes due 2021 (3) | 94,328 |  |  | 154,116 |
J. Aron Forward Sale | 27,855 |  |  | 27,523 |
Par Wyoming Holdings Term Loan (2) | 66,091 |  |  | 66,091 |
Wyoming Refining Senior Secured Term Loan (2) | 48,652 |  |  | 48,652 |
Wyoming Refining Senior Secured Revolver (2) | 9,502 |  |  | 9,502 |
Common stock warrants | 7,345 |  |  | 7,345 |
| December 31, 2016
| Carrying Value |  | Fair Value (1)
Hawaii Retail Credit Agreement (2) | $ | 93,853 |  |  | $ | 93,853 |
5.00% Convertible Senior Notes due 2021 (3) | 91,029 |  |  | 122,229 |
Term Loan | 57,426 |  |  | 62,367 |
Par Wyoming Holdings Term Loan (2) | 65,908 |  |  | 65,908 |
Wyoming Refining Senior Secured Term Loan (2) | 55,480 |  |  | 55,480 |
Wyoming Refining Senior Secured Revolver (2) | 6,700 |  |  | 6,700 |
Common stock warrants | 5,134 |  |  | 5,134 |
_________________________________________________________
(1) | The fair values of these instruments are considered Level 3 measurements in the fair value hierarchy with the exception of the fair value measurement of the 5.00% Convertible Senior Notes which is considered a Level 2 measurement as discussed below.
(2) | Fair value approximates carrying value due to the debt’s floating rate interest which approximates current market value.
(3) | The carrying value of the 5.00% Convertible Senior Notes excludes the fair value of the equity component, which was classified as equity upon issuance.
We estimated the fair value of the J. Aron Forward Sale using a discounted cash flow analysis and an assumed yield of 8.00% as of September 30, 2017 by reference to market interest rates for similar debt instruments of comparable companies. We estimated the fair value of the Term Loan using a discounted cash flow analysis and an estimate of the current yield of 11.06% as of December 31, 2016 by reference to market interest rates for term debt of comparable companies. The fair value of the 5.00% Convertible Senior Notes was determined by aggregating the fair value of the liability and equity components of the notes. The fair value of the liability component of the 5.00% Convertible Senior Notes was determined using a discounted cash flow analysis in which the projected interest and principal payments were discounted at an estimated market yield for a similar debt instrument without the conversion feature. The equity component was estimated based on the Black-Scholes model for a call option with strike price equal to the conversion price, a term matching the remaining life of the 5.00% Convertible Senior Notes, and an implied volatility based on market values of options outstanding as of September 30, 2017. The fair value of the 5.00% Convertible Senior Notes is considered a Level 2 measurement in the fair value hierarchy. The fair value of all non-derivative financial instruments recorded in current assets, including cash and cash equivalents, restricted cash, and trade accounts receivable, and current liabilities, including accounts payable, approximate their carrying value due to their short-term nature.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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