v3.10.0.1
Derivative Instruments
 9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative Instruments
Interest rate swap agreements

The Company uses derivatives in accordance with its overall risk management policies. The Company enters into interest rate swap agreements which exchange a receipt of floating interest for a payment of fixed interest to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company has not designated, for accounting purposes, its interest rate swaps as cash flow hedges of its U.S. Dollar LIBOR-denominated borrowings.

As at September 30, 2018, the Company was committed to the following interest rate swap agreements:
 
 
Interest Rate
 
Notional Amount
 
Fair Value / Carrying Amount of Asset
 
Remaining Term
 
Fixed Interest Rate
 
 Index
 
$
 
$
 
(years)
 
(%) (1)
LIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
 
 
U.S. Dollar-denominated interest rate swaps (2)
LIBOR
 
104,133

 
 
1,770

 
 
2.3
 
1.46
U.S. Dollar-denominated interest rate swaps
LIBOR
 
150,000

 
 
4,720

 
 
2.3
 
1.55
U.S. Dollar-denominated interest rate swaps
LIBOR
 
50,000

 
 
2,014

 
 
2.3
 
1.16
 
(1)
Excludes the margin the Company pays on its variable-rate debt, which, as of September 30, 2018, ranged from 0.30% to 2.75%.
(2)
Notional amount reduces quarterly.

The Company is potentially exposed to credit loss in the event of non-performance by the counterparty to the interest rate swap agreements in the event that the fair value results in an asset being recorded. In order to minimize counterparty risk, the Company only enters into interest rate swap agreements with counterparties that are rated A– or better by Standard & Poor’s or A3 or better by Moody’s at the time transactions are entered into.
Stock purchase warrant
During 2017, the Company had one stock purchase warrant, which had entitled it to purchase up to 750,000 shares of common stock of TIL at certain conditions at pre-determined prices. The stock purchase warrant was not exercised and was canceled upon completion of the TIL merger in November 2017 (notes 6 and 18).

Time-charter swap agreement
Effective June 1, 2016, the Company entered into a time-charter swap agreement for 55% of two Aframax equivalent vessels. Under such agreement, the Company received $27,776 per day, less a 1.25% brokerage commission, and paid 55% of the net revenue distribution of two Aframax equivalent vessels employed in the Company’s Aframax RSA, less $500 per day, for a period of 11 months plus an additional two months at the counterparty’s option. The purpose of the agreement was to reduce the Company’s exposure to spot tanker market rate variability for certain of its vessels that are employed in the Aframax RSA. The Company did not designate, for accounting purposes, the time-charter swap as a cash flow hedge. As of May 1, 2017, the time-charter swap counter-party did not exercise the two-month option and as such, the agreement was completed as of June 30, 2017.
Forward freight agreements
The Company uses forward freight agreements (or FFAs) in non-hedge-related transactions to increase or decrease its exposure to spot market rates, within defined limits. Net gains and losses from FFAs are recorded within realized and unrealized gain (loss) on derivative instruments in the Company's consolidated statements of loss.
The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s consolidated balance sheets.
 
Current portion of derivative assets
 
Derivative assets
 
Accounts receivables (Accrued liabilities)
 
$
 
$
 
$
As at September 30, 2018

 

 

     Interest rate swap agreements
2,973

 
5,531

 
394

     Forward freight agreements
102

 
—

 
(4
)
 
3,075

 
5,531

 
390

 
 
 
 
 
 
As at December 31, 2017
 
 
 
 
 
     Interest rate swap agreements
1,016

 
4,226

 
(39
)
 
1,016

 
4,226

 
(39
)


Realized and unrealized gains (losses) relating to the interest rate swaps, stock purchase warrant, time-charter swap and forward freight agreements are recognized in earnings and reported in realized and unrealized gain (loss) on derivative instruments in the Company’s consolidated statements of loss as follows:
 
Three Months Ended
 
Three Months Ended
 
September 30, 2018
 
September 30, 2017
 
Realized gains (losses)
Unrealized gains (losses)
Total
 
Realized (losses) gains
Unrealized
gains (losses)
Total
 
$
$
$
 
$
$
$
Interest rate swap agreements
711

13

724

 
(154
)
401

247

Forward freight agreements
(119
)
(9
)
(128
)
 
234

(91
)
143

 
592

4

596

 
80

310

390

 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
Realized gains (losses)
Unrealized gains
Total
 
Realized (losses) gains
Unrealized gains (losses)
Total
 
$
$
$
 
$
$
$
Interest rate swap agreements
1,575

3,262

4,837

 
(894
)
2

(892
)
Stock purchase warrant
—

—

—

 
—

(287
)
(287
)
Time-charter swap agreement
—

—

—

 
1,106

(875
)
231

Forward freight agreements
(137
)
25

(112
)
 
347

(108
)
239

 
1,438

3,287

4,725

 
559

(1,268
)
(709
)