HollyFrontier 2014 Annual Report Download - page 82

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Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
74
Principal maturities of long-term debt are as follows:
Years Ending December 31, (In thousands)
2015 $ 1,880
2016 2,121
2017 2,393
2018 723,700
2019 3,046
Thereafter 321,027
Total $ 1,054,167
NOTE 12: Derivative Instruments and Hedging Activities
Commodity Price Risk Management
Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined
products, as well as volatility in the price of natural gas used in our refining operations. We periodically enter into derivative
contracts in the form of commodity price swaps and futures contracts to mitigate price exposure with respect to:
• our inventory positions;
• natural gas purchases;
• costs of crude oil and related grade differentials;
• prices of refined products; and
• our refining margins.
Accounting Hedges
We have swap contracts serving as cash flow hedges against price risk on forecasted purchases of natural gas and 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.