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Derivatives | 3 Months Ended
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Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Commodity Derivatives We utilize commodity derivative contracts to manage our price exposure in our inventory positions, future purchases of crude oil, future purchases and sales of refined products, and crude oil consumption in our refining process. The derivative contracts that we execute to manage our price risk include exchange traded futures, options, and over-the-counter (“OTC”) swaps. Our futures, options, and OTC swaps are marked-to-market and changes in the fair value of these contracts are recognized within Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations. We are obligated to repurchase the crude oil and refined products from J. Aron at the termination of the Supply and Offtake Agreements. Our Washington Refinery Intermediation Agreement contains forward purchase obligations for certain volumes of crude and refined products that are required to be settled at market prices on a monthly basis. We have determined that these obligations under the Supply and Offtake Agreements and Washington Refinery Intermediation Agreement contain embedded derivatives. As such, we have accounted for these embedded derivatives at fair value with changes in the fair value recorded in Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations. We are required under the Supply and Offtake Agreements to hedge the time spread between the period of crude oil cargo pricing and the month of delivery for certain crude oil purchases. We utilize OTC swaps to accomplish this. We have entered into forward purchase contracts for crude oil and forward purchases and sales contracts of refined products. We elect the normal purchases normal sales (“NPNS”) exception for all forward contracts that meet the definition of a derivative and are not expected to net settle. Any gains and losses with respect to these forward contracts designated as NPNS are not reflected in earnings until the delivery occurs. Our open futures and OTC swaps expire at various dates through September 2019. We elect to offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement. Our condensed consolidated balance sheets present derivative assets and liabilities on a net basis. Please read Note 11—Fair Value Measurements for the gross fair value and net carrying value of our derivative instruments. Our cash margin that is required as collateral deposits cannot be offset against the fair value of open contracts except in the event of default. At March 31, 2019, our open commodity derivative contracts represented (in thousands of barrels):
Contract type |  | Purchases |  | Sales |  | Net
Futures |  | 381 |  |  | (253 | ) |  | 128 |
Swaps |  | 6,660 |  |  | (7,000 | ) |  | (340 | )
Total |  | 7,041 |  |  | (7,253 | ) |  | (212 | )
Interest Rate Derivatives We are exposed to interest rate volatility in our ABL Revolver, Term Loan B Facility, Retail Property Term Loan, Supply and Offtake Agreements, and Washington Refinery Intermediation Agreement.We may utilize interest rate swaps to manage our interest rate risk. Our 5.00% Convertible Senior Notes include a redemption option and a related make-whole premium which represent an embedded derivative that is not clearly and closely related to the 5.00% Convertible Senior Notes. As such, we have accounted for this embedded derivative at fair value with changes in the fair value recorded in Interest expense and financing costs, net, on our condensed consolidated statements of operations. As of March 31, 2019, this embedded derivative was deemed to have a de minimis fair value. The following table provides information on the fair value amounts (in thousands) of these derivatives as of March 31, 2019 and December 31, 2018 and their placement within our condensed consolidated balance sheets.
| Balance Sheet Location |  | March 31, 2019 |  | December 31, 2018
|  |  | Asset (Liability)
Commodity derivatives (1) | Prepaid and other current assets |  | $ | 1,407 |  |  | $ | 4,973 |
Commodity derivatives | Other accrued liabilities |  | (2,274 | ) |  | (700 | )
J. Aron repurchase obligation derivative | Obligations under inventory financing agreements |  | (13,222 | ) |  | 4,085 |
MLC repurchase obligation derivative | Obligations under inventory financing agreements |  | (7,230 | ) |  | — |
Interest rate derivatives | Prepaid and other current assets |  | — |  |  | 191 |
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(1) | Does not include cash collateral of $1.3 million and $2.7 million recorded in Prepaid and other current assets and $8.8 million and $8.3 million in Other long-term assets as of March 31, 2019 and December 31, 2018, respectively.
The following table summarizes the pre-tax gains (losses) recognized on our condensed consolidated statements of operations resulting from changes in fair value of derivative instruments not designated as hedges charged directly to earnings (in thousands):
|  |  | Three Months Ended March 31,
| Statement of Operations Location |  | 2019 |  | 2018
Commodity derivatives | Cost of revenues (excluding depreciation) |  | $ | (504 | ) |  | $ | 4,932 |
J. Aron repurchase obligation derivative | Cost of revenues (excluding depreciation) |  | (17,307 | ) |  | 6,342 |
MLC repurchase obligation derivative | Cost of revenues (excluding depreciation) |  | (12,942 | ) |  | — |
Interest rate derivatives | Interest expense and financing costs, net |  | 1 |  |  | 1,236 |

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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 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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