HollyFrontier 2013 Annual Report Download - page 87

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79
The following table presents the pre-tax effect on income due to maturities and fair value adjustments of our economic hedges:
Years Ended December 31,
Location of Gain (Loss) Recognized in Income 2013 2012 2011
(In thousands)
Cost of products sold $ 20,751 $ 12,295 $ 3,219
Operating expenses (5,250) 573 —
Total $ 15,501 $ 12,868 $ 3,219
As of December 31, 2013, we have the following notional contract volumes related to our outstanding derivative contracts serving
as economic hedges:
Notional Contract Volumes by Year of Maturity
Derivative Instrument
Total
Outstanding
Notional 2014 2015 2016 2017 Unit of
Measure
Commodity price swap (WCS spread) - long 6,387,500 6,387,500 — — — Barrels
Commodity price swap (natural gas) - long 38,400,000 9,600,000 9,600,000 9,600,000 9,600,000 MMBTU
Commodity price swap (natural gas) - short 38,400,000 9,600,000 9,600,000 9,600,000 9,600,000 MMBTU
NYMEX futures (WTI) - short 1,946,000 1,946,000 — — — Barrels
Physical contracts - long 300,000 300,000 — — — Barrels
Physical contracts - short 300,000 300,000 — — — Barrels
Interest Rate Risk Management
HEP uses interest rate swaps to manage its exposure to interest rate risk.
As of December 31, 2013, HEP had three interest rate swap contracts that hedge its exposure to the cash flow risk caused by the
effects of LIBOR changes on $305.0 million in credit agreement advances. The first interest rate swap effectively converts $155.0
million of LIBOR based debt to fixed rate debt having an interest rate of 0.99% plus an applicable margin of 2.00% as of
December 31, 2013, which equaled an effective interest rate of 2.99%. This swap matures in February 2016. HEP has two additional
interest rate swaps with identical terms which effectively convert $150.0 million of LIBOR based debt to fixed rate debt having
an interest rate of 0.74% plus an applicable margin of 2.00% as of December 31, 2013, which equaled an effective interest rate of
2.74%. Both of these swap contracts mature in July 2017. All of these swap contracts have been designated as cash flow hedges.
To date, there has been no ineffectiveness on these cash flow hedges.
Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued