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Derivative Instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

5. Derivative Instruments

We are exposed to a variety of risks including but not limited to, changes in the prices of commodities that we buy or sell, changes in foreign currency exchange rates, changes in interest rates, and the creditworthiness of each of our counterparties. While we attempt to mitigate these fluctuations through hedging, such hedges may not be fully effective.

Our risk management program includes the following types of derivative instruments:

Fair Value Hedges. Derivative contracts we hold to hedge the risk of changes in the price of our inventory.

Cash Flow Hedges. Derivative contracts we execute to mitigate the risk of price and interest rate volatility in forecasted transactions.

Non-designated Derivatives. Derivatives we primarily transact to mitigate the risk of market price fluctuations in swaps or futures contracts, as well as certain forward fixed price purchase and sale contracts to hedge the risk of currency rate fluctuations and for portfolio optimization.

With the exception of the interest rate swap agreement, which matures in March 2025, the majority of our derivative contracts are expected to settle within the next year. The following table summarizes the gross notional values of our derivative contracts used for risk management purposes (in millions):

Unit

September 30, 2022

Commodity contracts

Long

BBL

69.1

Short

BBL

(48.9)

Foreign currency exchange contracts

Sell U.S. dollar, buy other currencies

USD

(563.9)

Buy U.S. dollar, sell other currencies

USD

828.5

Interest rate contracts

Interest rate swap

USD

300.0

Assets and Liabilities

The following table presents the gross fair value of our derivative instruments and their locations on the Condensed Consolidated Balance Sheets (in millions):

									Gross Derivative Assets												Gross Derivative Liabilities
			Condensed Consolidated Balance Sheets Location						September 30,						December 31,						September 30,						December 31,
Derivative Instruments									2022						2021						2022						2021
Derivatives designated as hedging instruments
Commodity contracts			Short-term derivative assets, net						$	0.4					$	1.8					$	—					$	9.7
			Short-term derivative liabilities, net						8.1						0.1						6.5						0.4
Interest rate contracts			Short-term derivative assets, net						11.1						—						—						—
			Other non-current assets						15.0						5.4						—						—
			Short-term derivative liabilities, net						—						—						—						0.3
Total derivatives designated as hedging instruments									34.7						7.3						6.5						10.4
Derivatives not designated as hedging instruments
Commodity contracts			Short-term derivative assets, net						1,105.7						516.3						580.9						337.5
			Other non-current assets						502.1						112.2						189.5						27.6
			Short-term derivative liabilities, net						566.1						117.6						1,172.6						286.6
			Other long-term liabilities						299.7						15.5						586.8						82.1
Foreign currency contracts			Short-term derivative assets, net						32.6						3.8						24.3						1.7
			Other non-current assets						1.4						0.1						0.6						—
			Short-term derivative liabilities, net						(0.1)						0.8						—						2.6
			Other long-term liabilities						0.2						—						0.2						—
Total derivatives not designated as hedging instruments									2,507.8						766.3						2,554.8						738.1
Total derivatives									$	2,542.5					$	773.6					$	2,561.2					$	748.5

For information regarding our derivative instruments measured at fair value after netting and collateral, see Note 8. Fair Value Measurements.

The following amounts were recorded on our Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges (in millions):

Line item in the Consolidated Balance Sheets in which the hedged item is included						Carrying Amount of Hedged Assets/(Liabilities)												Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Asset/(Liabilities)
						September 30, 2022						December 31, 2021						September 30, 2022						December 31, 2021
Inventory						$	62.4					$	59.3					$	(6.2)					$	0.6

Earnings and Other Comprehensive Income (Loss)

Derivatives Designated as Hedging Instruments

The following table presents, on a pre-tax basis, the location and amount of gains (losses) on fair value and cash flow hedges recognized in income in our Condensed Consolidated Statements of Income and Comprehensive Income (in millions):

						For the Three Months Ended
						September 30, 2022																		September 30, 2021
						Revenue						Cost of revenue						Interest expense and other financing costs, net						Revenue						Cost of revenue						Interest expense and other financing costs, net
Total amounts of income and expense line items in which the effects of fair value or cash flow hedged are recorded						$	15,661.3					$	15,339.0					$	34.0					$	8,350.9					$	8,153.4					$	10.4
Gains (losses) on fair value hedge relationships:
Commodity contracts:
Hedged item						—						(5.8)						—						—						3.1						—
Derivatives designated as hedging instruments						—						5.0						—						—						(4.8)						—
Gains (losses) on cash flow hedge relationships:
Commodity contracts:
Amount of gain (loss) reclassified from Accumulated other comprehensive income (loss) into net income						(20.1)						2.5						—						(20.2)						128.2						—
Interest rate contracts:
Amount of gain (loss) reclassified from Accumulated other comprehensive income (loss) into net income						—						—						(1.3)						—						—						(0.3)
Total amount of income and expense line items excluding the impact of hedges						$	15,681.4					$	15,340.6					$	32.7					$	8,371.0					$	8,279.8					$	10.1

						For the Nine Months Ended
						September 30, 2022																		September 30, 2021
						Revenue						Cost of revenue						Interest expense and other financing costs, net						Revenue						Cost of revenue						Interest expense and other financing costs, net
Total amounts of income and expense line items in which the effects of fair value or cash flow hedged are recorded						$	45,165.4					$	44,358.7					$	74.8					$	21,394.2					$	20,821.3					$	29.2
Gains (losses) on fair value hedge relationships:
Commodity contracts:
Hedged item						—						36.4						—						—						29.7						—
Derivatives designated as hedging instruments						—						(47.1)						—						—						(24.5)						—
Gains (losses) on cash flow hedge relationships:
Commodity contracts:
Amount of gain (loss) reclassified from Accumulated other comprehensive income (loss) into net income						(165.7)						2.5						—						(39.3)						246.8						—
Interest rate contracts:
Amount of gain (loss) reclassified from Accumulated other comprehensive income (loss) into net income						—						—						(1.8)						—						—						(1.0)
Total amount of income and expense line items excluding the impact of hedges						$	45,331.2					$	44,350.4					$	73.0					$	21,433.5					$	21,073.2					$	28.2

The following table presents, on a pre-tax basis, the amounts not recorded in Accumulated other comprehensive income (loss) due to intra-period settlement but recognized in Revenue and Cost of revenue in our Condensed Consolidated Statements of Income and Comprehensive Income (in millions):

Gain (Loss) Not Recorded in Accumulated other comprehensive income (loss) Due to Intra-Period Settlement												For the Three Months Ended September 30,												For the Nine Months Ended September 30,
						Location						2022						2021						2022						2021
Commodity contracts						Revenue						$	3.1					$	(143.0)					$	(128.4)					$	(334.1)
Commodity contracts						Cost of revenue						$	(2.9)					$	22.0					$	8.8					$	37.2

For the nine months ended September 30, 2022 and 2021, there were no gains or losses recognized in earnings related to our fair value or cash flow hedges that were excluded from the assessment of hedge effectiveness.

As of September 30, 2022, on a pre-tax basis, $0.1 million and $0.3 million are scheduled to be reclassified from Accumulated other comprehensive income (loss) as an increase to Revenue and a decrease to Cost of revenue, respectively, related to designated commodity cash flow hedges that will mature within the next twelve months.

The following tables present the effect and financial statement location of our derivative instruments in cash flow hedging relationships on Accumulated other comprehensive income (loss) and in our Condensed Consolidated Statements of Income and Comprehensive Income (in millions):

Amount of Gain (Loss) Recognized in Accumulated other comprehensive income (loss), Net of Income Tax (Expense) Benefit						For the Three Months Ended September 30,												For the Nine Months Ended September 30,
						2022						2021						2022						2021
Commodity contracts (Revenue)						$	(5.5)					$	53.7					$	(114.5)					$	(22.3)
Commodity contracts (Cost of revenue)						2.7						17.8						2.0						172.1
Interest rate contracts (Interest expense and other financing costs, net)						$	4.1					$	(0.2)					$	14.1					$	2.8
Total gain (loss)						$	1.2					$	71.4					$	(98.4)					$	152.6

Amount of Gain (Loss) Reclassified from Accumulated other comprehensive income (loss) into Net income (loss), Net of Income Tax (Expense) Benefit												For the Three Months Ended September 30,												For the Nine Months Ended September 30,
						Location						2022						2021						2022						2021
Commodity contracts						Revenue						$	(14.8)					$	(15.5)					$	(121.8)					$	(30.1)
Commodity contracts						Cost of revenue						1.8						95.5						1.8						183.9
Interest rate contracts						Interest expense and other financing costs, net						(0.9)						(0.3)						(1.3)						(0.7)
Total gain (loss)												$	(13.9)					$	79.7					$	(121.3)					$	153.1

Derivatives Not Designated as Hedging Instruments

The following table presents the amount and financial statement location in our Condensed Consolidated Statements of Income and Comprehensive Income of realized and unrealized gains (losses) recognized on derivative instruments not designated as hedging instruments (in millions):

												For the Three Months Ended September 30,												For the Nine Months Ended September 30,
Derivative Instruments - Non-designated						Location						2022						2021						2022						2021
Commodity contracts						Revenue						$	80.3					$	3.3					$	229.2					$	(287.6)
						Cost of revenue						6.3						15.0						(10.7)						321.8
												86.6						18.3						218.5						34.2
Foreign currency contracts						Revenue						0.3						0.9						0.4						1.1
						Other (expense), net						14.2						1.5						18.1						3.4
												14.5						2.4						18.4						4.4
Total gain (loss)												$	101.1					$	20.8					$	236.9					$	38.7

Credit-Risk-Related Contingent Features

We enter into derivative contracts which may require us to post collateral periodically. Certain of these derivative contracts contain credit-risk-related contingent clauses which are triggered by credit events. These credit events may include the requirement to post additional collateral or the immediate settlement of the derivative instruments upon the occurrence of a credit downgrade or if certain defined financial ratios fall below an established threshold.

The following table presents the potential collateral requirements for derivative liabilities with credit-risk-contingent features (in millions):

						September 30, 2022						December 31, 2021
Net derivative liability positions with credit contingent features						$	4.8					$	3.3
Collateral posted and held by our counterparties						—						—
Maximum additional potential collateral requirements						$	4.8					$	3.3

As of September 30, 2022 and December 31, 2021, there was no collateral held by our counterparties on these derivative contracts with credit-risk-contingent features.

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- References

No definition available.

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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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008

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