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Derivative Instruments and Hedging Activities (Tables) | 12 Months Ended
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Dec. 31, 2012
Commitment of Foreign Currency Forward Contracts | As at December 31, 2012, the Company was committed to the following foreign currency forward contracts:
|  |  |  |  |  |  |  | Fair Value /Carrying Amount |  |  |  |
|  | Contract Amount in Foreign Currency (millions) |  |  | Average Forward Rate (1) |  |  | of Asset (Liability) |  |  | Expected Maturity |
|  |  |  | Hedge |  |  | Non-hedge |  |  | 2013 |
|  |  |  | $ |  |  | $ |  |  | $ |
|  |  |  | (in millions of U.S. Dollars) |  |  | (in millions of U.S. Dollars) |
Norwegian Kroner |  |  | 201.0 |  |  |  | 5.93 |  |  |  | — |  |  |  | 2.1 |  |  |  | 33.9 |
Euro |  |  | 9.8 |  |  |  | 0.76 |  |  |  | — |  |  |  | (0.1 | ) |  |  | 13.0 |
Canadian Dollar |  |  | 9.3 |  |  |  | 1.01 |  |  |  | 0.2 |  |  |  | — |  |  |  | 9.2 |
British Pound |  |  | 11.3 |  |  |  | 0.64 |  |  |  | 0.3 |  |  |  | 0.4 |  |  |  | 17.6 |
|  |  |  |  |  |  |  |  |  |  | 0.5 |  |  |  | 2.4 |  |  |  | 73.7 |
(1) | Average contractual exchange rate represents the contracted amount of foreign currency one U.S. Dollar will buy.
Commitment of Cross Currency Swaps | As at December 31, 2012, the Company was committed to the following cross currency swaps:
|  | Notional Amount |  |  | Notional Amount |  |  | Floating Rate Receivable |  |  | Floating Rate Payable |  |  |  |  |  | Fair Value / Carrying Amount of Asset / |
Maturity |  |  |  | Reference |  |  |  |  |  | Reference |  |  |  |  |  | Fixed Rate |  |
Date |  | NOK |  |  | USD |  |  | Rate |  |  | Margin |  |  | Rate |  |  | Margin |  |  | Payable |  |  | Liability |
2013 |  |  | 600,000 |  |  |  | 98,500 |  |  |  | NIBOR |  |  |  | 4.75 | % |  |  | LIBOR |  |  |  | 5.04 | % |  |  |  | (1) |  |  | 9,890 |
2015 |  |  | 700,000 |  |  |  | 122,800 |  |  |  | NIBOR |  |  |  | 4.75 | % |  |  |  |  |  |  |  |  |  |  | 5.52 | % |  |  | 3,075 |
2017 |  |  | 600,000 |  |  |  | 101,400 |  |  |  | NIBOR |  |  |  | 5.75 | % |  |  |  |  |  |  |  |  |  |  | 7.49 | % |  |  | 3,545 |
2017 |  |  | 700,000 |  |  |  | 125,000 |  |  |  | NIBOR |  |  |  | 5.25 | % |  |  |  |  |  |  |  |  |  |  | 6.88 | % |  |  | (2,624 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 13,886 |
(1) | LIBOR subsequently fixed at 1.1%, subject to a LIBOR rate receivable cap of 3.5% (see next section).
Interest Rate Swap Agreements | As at December 31, 2012, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt, restricted cash deposits and EURIBOR-based debt, whereby certain of the Company’s floating-rate debt and restricted cash deposits were swapped with fixed-rate obligations or fixed-rate deposits:
|  | Interest Rate Index |  |  | Principal Amount $ |  |  | Fair Value / Carrying Amount of Asset / (Liability) $ |  |  | Weighted- Average Remaining Term (years) |  |  | Fixed Interest Rate (%) (1) |
LIBOR-Based Debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar-denominated interest rate swaps (2) |  |  | LIBOR |  |  |  | 412,880 |  |  |  | (110,590 | ) |  |  | 24.1 |  |  |  | 4.9 |
U.S. Dollar-denominated interest rate swaps (3) |  |  | LIBOR |  |  |  | 3,170,273 |  |  |  | (515,124 | ) |  |  | 7.9 |  |  |  | 4.1 |
U.S. Dollar-denominated interest rate swaps (4) |  |  | LIBOR |  |  |  | 98,500 |  |  |  | (782 | ) |  |  | 0.9 |  |  |  | 1.1 |
LIBOR-Based Restricted Cash Deposit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar-denominated interest rate swaps (2) |  |  | LIBOR |  |  |  | 469,260 |  |  |  | 165,688 |  |  |  | 24.1 |  |  |  | 4.8 |
EURIBOR-Based Debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Euro-denominated interest rate swaps (5) (6) |  |  | EURIBOR |  |  |  | 341,382 |  |  |  | (41,329 | ) |  |  | 11.5 |  |  |  | 3.1 |
|  |  |  |  |  |  | 4,492,295 |  |  |  | (502,137 | ) |  |  |  |  |  |  |  |
(1) | Excludes the margins the Company pays on its variable-rate debt, which, as of December 31, 2012, ranged from 0.3% to 4.25%.
(2) | Principal amount reduces quarterly.
(3) | Principal amount of $200 million is fixed at 2.14%, unless LIBOR exceeds 6%, in which case the Company pays a floating rate of interest.
(4) | The floating LIBOR rate receivable is capped at 3.5%, which effectively results in a fixed rate of 1.12% unless LIBOR exceeds 3.5%, in which case the Company’s related interest rate effectively floats at LIBOR reduced by 2.38%.
(5) | Principal amount reduces monthly to 70.1 million Euros ($92.5 million) by the maturity dates of the swap agreements.
(6) | Principal amount is the U.S. Dollar equivalent of 258.8 million Euros.
Location and Fair Value Amounts of Derivative Instruments | 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 |  |  |  |  |  |  |  |  | Current |  |  |  |
|  | Portion of |  |  |  |  |  |  |  |  | Portion of |  |  |  |
|  | Derivative |  |  | Derivative |  |  | Accrued |  |  | Derivative |  |  | Derivative |
|  | Assets |  |  | Assets |  |  | Liabilities |  |  | Liabilities |  |  | Liabilities |
As at December 31, 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  |  | 441 |  |  |  | — |  |  |  | — |  |  |  | (1 | ) |  |  | — |
Derivatives not designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  |  | 2,506 |  |  |  | — |  |  |  | — |  |  |  | (60 | ) |  |  | — |
Interest rate swap agreements |  |  | 16,927 |  |  |  | 144,247 |  |  |  | (22,312 | ) |  |  | (115,774 | ) |  |  | (525,225 | )
Cross currency swap agreements |  |  | 11,795 |  |  |  | 4,334 |  |  |  | 719 |  |  |  | — |  |  |  | (2,962 | )
|  |  | 31,669 |  |  |  | 148,581 |  |  |  | (21,593 | ) |  |  | (115,835 | ) |  |  | (528,187 | )
As at December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  |  | 1,551 |  |  |  | 28 |  |  |  | — |  |  |  | (1,192 | ) |  |  | (264 | )
Derivatives not designated as a cash flow hedge: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency contracts |  |  | 2,592 |  |  |  | 3 |  |  |  | — |  |  |  | (6,248 | ) |  |  | (832 | )
Interest rate swap agreements |  |  | 15,608 |  |  |  | 139,651 |  |  |  | (24,750 | ) |  |  | (109,897 | ) |  |  | (568,446 | )
Cross currency swap agreements |  |  | 1,576 |  |  |  | 875 |  |  |  | 225 |  |  |  | — |  |  |  | — |
Foinaven embedded derivative |  |  | 3,385 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  |  | 24,712 |  |  |  | 140,557 |  |  |  | (24,525 | ) |  |  | (117,337 | ) |  |  | (569,542 | )
Effective Portion of Gains (Losses) on Foreign Currency Contracts | For the periods indicated, the following table presents the effective portion of gains (losses) on foreign currency contracts designated and qualifying as cash flow hedges that was recognized in (1) accumulated other comprehensive income (loss) (or AOCI), (2) recorded in accumulated other comprehensive income (loss) during the term of the hedging relationship and reclassified to earnings, and (3) the ineffective portion of gains (losses) on derivative instruments designated and qualifying as cash flow hedges.
Year Ended December 31, 2012 |  | Year Ended December 31, 2011
Balance Sheet (AOCI) |  | Statement of Loss |  | Balance Sheet (AOCI) |  |  | Statement of Loss
Effective Portion |  | Effective |  |  | Ineffective Portion |  |  |  |  | Effective Portion |  |  | Effective Portion |  |  | Ineffective Portion |  |  |
2,412 |  |  | — |  |  |  | — |  |  | Vessel operating expenses |  |  | 2,007 |  |  |  | 918 |  |  |  | (568 | ) |  | Vessel operating expenses
|  |  | 1,436 |  |  |  | (660 | ) |  | General and administrative expenses |  |  |  |  |  |  | 4,636 |  |  |  | (223 | ) |  | General and administrative expenses
2,412 |  |  | 1,436 |  |  |  | (660 | ) |  |  |  |  | 2,007 |  |  |  | 5,554 |  |  |  | (791 | ) |  |
Year Ended December 31, 2010
Balance Sheet (AOCI) |  |  | Statement of Loss
Effective Portion |  |  | Effective Portion |  |  | Ineffective Portion |  |  |
| (3,559) |  |  |  | (680 | ) |  |  | (3,473 | ) |  | Vessel operating expenses
|  |  |  |  | (2,360 | ) |  |  | (1,402 | ) |  | General and administrative expenses
| (3,559) |  |  |  | (3,040 | ) |  |  | (4,875 | ) |  |
Effect of (Loss) Gain on Derivatives Not Designated as Hedging Instruments | The effect of the (loss) gain on derivatives not designated as hedging instruments in the statements of loss are as follows:
|  | Year Ended |  |  | Year Ended |  |  | Year Ended |
|  | December 31, |  |  | December 31, |  |  | December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | $ |  |  | $ |  |  | $ |
Realized (losses) gains relating to: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  | (123,277 | ) |  |  | (132,931 | ) |  |  | (154,098 | )
Interest rate swap agreement amendments |  |  | — |  |  |  | (149,666 | ) |  |  | — |
Foreign currency forward contracts |  |  | 1,155 |  |  |  | 9,965 |  |  |  | (2,274 | )
Forward freight agreements and bunker fuel swap contracts |  |  | — |  |  |  | 36 |  |  |  | (7,914 | )
Foinaven embedded derivative |  |  | 11,452 |  |  |  | — |  |  |  | — |
|  |  | (110,670 | ) |  |  | (272,596 | ) |  |  | (164,286 | )
Unrealized gains (losses) relating to: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements |  |  | 26,770 |  |  |  | (58,405 | ) |  |  | (146,780 | )
Foreign currency forward contracts |  |  | 6,933 |  |  |  | (11,399 | ) |  |  | 6,307 |
Forward freight agreements and bunker fuel swap contracts |  |  | — |  |  |  | — |  |  |  | (108 | )
Foinaven embedded derivative |  |  | (3,385 | ) |  |  | (322 | ) |  |  | 5,269 |
|  |  | 30,318 |  |  |  | (70,126 | ) |  |  | (135,312 | )
Total realized and unrealized losses on derivative instruments |  |  | (80,352 | ) |  |  | (342,722 | ) |  |  | (299,598 | )
Effect of Gain (Loss) on Cross Currency Swaps | Realized and unrealized gains (losses) of the cross currency swaps are recognized in earnings and reported in foreign currency exchange gain (loss) in the consolidated statements of loss. The effect of the gain (loss) on cross currency swaps on the consolidated statements of loss is as follows:
|  | Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | $ |  |  | $ |  |  | $ |
Realized gains |  |  | 3,628 |  |  |  | 2,881 |  |  |  | 198 |
Unrealized gains (losses) |  |  | 10,715 |  |  |  | (1,583 | ) |  |  | 4,034 |
Total realized and unrealized gains on cross currency swaps |  |  | 14,343 |  |  |  | 1,298 |  |  |  | 4,232 |

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