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Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
76
Accounting Hedges
We have swap contracts serving as cash flow hedges against price risk on forecasted purchases of natural gas. We also have forward
sales contracts that lock in the prices of future sales of refined product. Additionally, we had swap contracts serving as cash flow
hedges against price risk on forecasted purchases of WTI crude oil and forecasted sales of refined product. These contracts have
been designated as accounting hedges and are measured at fair value with offsetting adjustments (gains/losses) recorded directly
to other comprehensive income. These fair value adjustments are later reclassified to earnings as the hedging instruments mature.
On a quarterly basis, hedge ineffectiveness is measured by comparing the change in fair value of the swap contracts against the
expected future cash inflows/outflows on the respective transaction being hedged. Any hedge ineffectiveness is also recognized
in earnings.
The following table presents the pre-tax effect on other comprehensive income (“OCI”) and earnings due to fair value adjustments
and maturities of commodity price swaps and forward sales under hedge accounting:
Unrealized
Gain (Loss)
Recognized in
OCI
Gain (Loss) Recognized in
Earnings Due to Settlements
Gain (Loss) Attributable to
Hedge Ineffectiveness
Recognized in Earnings
Location Amount Location Amount
(In thousands)
Year Ended December 31, 2015
Commodity price swaps
Change in fair value $ (3,983) Sales and other
revenues $ 245,819 Sales and other
revenues $ (274)
Gain reclassified to earnings due to
settlements (49,592) Cost of products
sold (179,700) Cost of products
sold 4,376
Amortization of discontinued hedges
reclassified to earnings 1,080 Operating
expenses (17,607) Operating
expenses 547
Total $ (52,495) $ 48,512 $ 4,649
Year Ended December 31, 2014
Commodity price swaps
Change in fair value $ 107,518 Sales and other
revenues $ 88,326 Sales and other
revenues $ 274
Gain reclassified to earnings due to
settlements (52,884) Cost of products
sold (37,313) Cost of products
sold (4,377)
Amortization of discontinued hedges
reclassified to earnings 1,080 Operating
expenses 791 Operating
expenses (547)
Total $ 55,714 $ 51,804 $ (4,650)
Year Ended December 31, 2013
Commodity price swaps
Change in fair value $ (8,808) Sales and other
revenues $ (20,060)
Gain reclassified to earnings due to
settlements (16,410) Cost of products
sold 38,949 Sales and other
revenues $ 45
Amortization of discontinued hedges
reclassified to earnings 900 Operating
expenses (3,379) Cost of products
sold 515
Total $ (24,318) $ 15,510 $ 560
As of December 31, 2015, we have the following notional contract volumes related to outstanding derivative instruments serving
as cash flow hedges against price risk on forecasted transactions:
Notional Contract Volumes
by Year of Maturity
Derivative instruments
Total
Outstanding
Notional 2016 2017 Unit of
Measure
Natural gas price swaps - long 19,200,000 9,600,000 9,600,000 MMBTU
Forward gasoline and diesel contracts - long 525,000 525,000 — Barrels
Forward gasoline and diesel contracts - short 625,000 625,000 — Barrels
Physical crude contracts - short 38,000 38,000 — Barrels