XML 30 R18.htm IDEA: XBRL DOCUMENT
v3.20.2

Derivatives | 6 Months Ended
--- | ---
Jun. 30, 2020
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 oil 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 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 condensed consolidated balance sheets present derivative assets and liabilities on a net basis. Please read Note 12—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. Our open futures and OTC swaps expire at various dates through December 2020. At June 30, 2020, our open commodity derivative contracts represented (in thousands of barrels):
Contract type |  | Purchases |  | Sales |  | Net
Futures |  | 415 |  |  | — |  |  | 415 |
Swaps |  | 6,920 |  |  | (6,920 | ) |  | — |
Total |  | 7,335 |  |  | (6,920 | ) |  | 415 |
At June 30, 2020, we also had option collars of 75 thousand barrels of crude oil per month that economically hedge our internally consumed fuel at our Hawaii refineries. These option collars have a weighted-average strike price ranging from a floor of $48.77 per barrel to a ceiling of $65.00 per barrel and expire in December 2020. 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. As of June 30, 2020, we had entered into an interest rate swap at an average fixed rate of 3.91% in exchange for the floating interest rate and on the notional amounts due under the Retail Property Term Loan. This swap expires on April 1, 2024, the maturity date of the Retail Property Term Loan. 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 June 30, 2020, 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 June 30, 2020 and December 31, 2019 and their placement within our condensed consolidated balance sheets.
| Balance Sheet Location |  | June 30, 2020 |  | December 31, 2019
|  |  | Asset (Liability)
Commodity derivatives (1) | Prepaid and other current assets |  | $ | 3,177 |  |  | $ | 2,075 |
Commodity derivatives | Other accrued liabilities |  | (6,662 | ) |  | (5,534 | )
J. Aron repurchase obligation derivative | Obligations under inventory financing agreements |  | (56,842 | ) |  | 173 |
MLC terminal obligation derivative | Obligations under inventory financing agreements |  | (9,256 | ) |  | (14,717 | )
Interest rate derivatives | Other accrued liabilities |  | (974 | ) |  | (314 | )
Interest rate derivatives | Other liabilities |  | (2,557 | ) |  | (1,113 | )
_________________________________________________________
(1) | Does not include cash collateral of $2.7 million and $10.3 million recorded in Prepaid and other current assets and $9.5 million and $9.5 million in Other long-term assets as of June 30, 2020 and December 31, 2019, respectively.
The following table summarizes the pre-tax gains (losses) recognized in Net income (loss) 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 June 30, |  | Six Months Ended June 30,
| Statement of Operations Location |  | 2020 |  | 2019 |  | 2020 |  | 2019
Commodity derivatives | Cost of revenues (excluding depreciation) |  | $ | 781 |  |  | $ | (2,755 | ) |  | $ | (56,378 | ) |  | $ | (3,259 | )
J. Aron repurchase obligation derivative | Cost of revenues (excluding depreciation) |  | (10,370 | ) |  | 13,388 |  |  | (57,015 | ) |  | (3,919 | )
MLC terminal obligation derivative | Cost of revenues (excluding depreciation) |  | (26,882 | ) |  | 9,603 |  |  | 56,076 |  |  | (3,339 | )
Interest rate derivatives | Interest expense and financing costs, net |  | (292 | ) |  | (1,471 | ) |  | (2,312 | ) |  | (1,470 | )

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://fasb.org/us-gaap/role/ref/legacyRef -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