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Derivatives | 12 Months Ended
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Dec. 31, 2023
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 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 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 Agreement. Our Washington Refinery Intermediation Agreement contained 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 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 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. We elect to offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement. Our consolidated balance sheets present derivative assets and liabilities on a net basis. Please read Note 16—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 in March 2025. At December 31, 2023, our open commodity derivative contracts represented (in thousands of barrels):
Contract type |  | Purchases |  | Sales |  | Net
Futures |  | 27,604 |  |  | (28,104) |  |  | (500) |
Swaps |  | 36,051 |  |  | (41,790) |  |  | (5,739) |
Total |  | 63,655 |  |  | (69,894) |  |  | (6,239) |
At December 31, 2023, we also had option collars that economically hedge a portion of our internally consumed fuel at our refineries. The following table provides information on these option collars at our refineries as of December 31, 2023:
Total open option collars |  |  |  |  |  |  |  | 1,394 |
Weighted-average strike price - floor (in dollars) |  |  |  |  |  |  |  | $ | 61.69 |
Weighted-average strike price - ceiling (in dollars) |  |  |  |  |  |  |  | $ | 82.97 |
Earliest commencement date |  |  |  |  |  |  |  | January 2024
Furthest expiry date |  |  |  |  |  |  |  | September 2024
Interest Rate Derivatives We are exposed to interest rate volatility in our ABL Credit Facility, LC Facility, Term Loan Credit Agreement, and the Supply and Offtake Agreement. We may utilize interest rate swaps to manage our interest rate risk. On April 12, 2023, we entered into an interest rate collar transaction to manage our interest rate risk related to the Term Loan Credit Agreement. The interest rate collar agreement reduces variable interest rate risk from May 31, 2023, through May 31, 2026, with a notional amount of $300.0 million as of December 31, 2023. The terms of the agreement provide for an interest rate cap of 5.50% and floor of 2.30%, based on the three month SOFR as of the fixing date. We pay variable interest quarterly until the three month SOFR reaches the floor. If the three month SOFR is between the floor and the cap, no payment is due to either party. If the three month SOFR is greater than the cap, the counterparty pays us. The interest rate collar transaction expires on May 31, 2026. As of December 31, 2022, we did not hold any interest rate derivative instruments. 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 May 31, 2026, 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. The following table provides information on the fair value amounts (in thousands) of these derivatives as of December 31, 2023 and 2022 and their placement within our consolidated balance sheets.
|  |  | December 31,
| Balance Sheet Location |  | 2023 |  | 2022
|  |  | Asset (Liability)
Commodity derivatives (1) | Prepaid and other current assets |  | $ | 43,356 |  |  | $ | 495 |
Commodity derivatives (2) | Other accrued liabilities |  | (530) |  |  | (10,989) |
J. Aron repurchase obligation derivative | Obligations under inventory financing agreements |  | (392) |  |  | (12,156) |
MLC terminal obligation derivative | Obligations under inventory financing agreements |  | — |  |  | 14,435 |
Interest rate derivatives | Other liabilities |  | (821) |  |  | — |
_________________________________________________________ (1)Does not include cash collateral of $21.8 million and $40.8 million recorded in Prepaid and other current assets as of December 31, 2023, and December 31, 2022, respectively, and $9.5 million in Other long-term assets as of both December 31, 2023 and December 31, 2022. (2)Does not include $27.2 million recorded in Other accrued liabilities as of December 31, 2023 related to realized derivatives payable. The following table summarizes the pre-tax gains (losses) recognized in Net income (loss) on our consolidated statements of operations resulting from changes in fair value of derivative instruments not designated as hedges charged directly to earnings (in thousands):
|  |  | Year Ended December 31,
| Statement of Operations Classification |  | 2023 |  | 2022 |  | 2021
Commodity derivatives | Cost of revenues (excluding depreciation) |  | $ | (16,701) |  |  | $ | (65,814) |  |  | $ | (22,417) |
J. Aron repurchase obligation derivative | Cost of revenues (excluding depreciation) |  | 11,764 |  |  | 2,995 |  |  | 5,646 |
MLC terminal obligation derivative | Cost of revenues (excluding depreciation) |  | (34,149) |  |  | (49,636) |  |  | (73,256) |
Interest rate derivatives | Interest expense and financing costs, net |  | (821) |  |  | — |  |  | 104 |

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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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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