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Derivatives

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

Commodity Derivatives

    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.

    Our open futures and over-the-counter (“OTC”) swaps at June 30, 2021 will settle by October 2021. At June 30, 2021, our open commodity derivative contracts represented (in thousands of barrels):

Contract type						Purchases						Sales						Net
Futures						—						—						—
Swaps						24,200						(23,900)						300
Total						24,200						(23,900)						300

    At June 30, 2021, we also had option collars of 25 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 $36.50 per barrel to a ceiling of $60.00 per barrel and expire in December 2021.

Interest Rate Derivatives

    We are exposed to interest rate volatility in our ABL Revolver, Term Loan B Facility, Supply and Offtake Agreement, and Washington Refinery Intermediation Agreement. We may utilize interest rate swaps to manage our interest rate risk. As of December 31, 2020, we had entered into an interest rate swap at an average fixed rate of 3.91% in exchange for the floating interest rate on the notional amounts due under the Retail Property Term Loan. This swap was set to expire on April 1, 2024, the maturity date of the Retail Property Term Loan. On February 23, 2021, we terminated and repaid all amounts outstanding under the Retail Property Term Loan and the related interest rate swap.

    Our 5.00% Convertible Senior Notes included a redemption option and a related make-whole premium which represented an embedded derivative that was not clearly and closely related to the 5.00% Convertible Senior Notes. As such, we 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. On June 15, 2021, the 5.00% Convertible Senior Notes matured and were paid in full, and the related embedded derivative was settled.

    The following table provides information on the fair value amounts (in thousands) of these derivatives as of June 30, 2021 and December 31, 2020 and their placement within our condensed consolidated balance sheets.

			Balance Sheet Location						June 30, 2021						December 31, 2020
									Asset (Liability)
Commodity derivatives (1)			Prepaid and other current assets						$	3,953					$	1,346
J. Aron repurchase obligation derivative			Obligations under inventory financing agreements						(26,114)						(20,797)
MLC terminal obligation derivative			Obligations under inventory financing agreements						(10,250)						(10,161)
Interest rate derivatives			Other accrued liabilities						—						(966)
Interest rate derivatives			Other liabilities						—						(2,027)

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(1)Does not include cash collateral of $0.4 million and $1.5 million recorded in Prepaid and other current assets as of June 30, 2021 and December 31, 2020, respectively, and $9.5 million in Other long-term assets as of both June 30, 2021 and December 31, 2020.

    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						2021						2020						2021						2020
Commodity derivatives			Cost of revenues (excluding depreciation)						$	(10,223)					$	781					$	(9,592)					$	(56,378)
J. Aron repurchase obligation derivative			Cost of revenues (excluding depreciation)						(4,542)						(10,370)						(5,317)						(57,015)
MLC terminal obligation derivative			Cost of revenues (excluding depreciation)						(31,229)						(26,882)						(55,601)						56,076
Interest rate derivatives			Interest expense and financing costs, net						—						(292)						104						(2,312)

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- References

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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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-URI http://asc.fasb.org/topic&trid=2229140

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 50
-Paragraph 5
-Subparagraph (f)
-URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008

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