HollyFrontier 2014 Annual Report Download - page 83

Download and view the complete annual report

Please find page 83 of the 2014 HollyFrontier annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
75
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 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, 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) Sales and other
revenues $ 45
Gain reclassified to earnings due to
settlements (16,410) Cost of products
sold 38,949 Cost of products
sold 515
Amortization of discontinued hedges
reclassified to earnings 900 Operating
expenses (3,379)
Total $ (24,318) $ 15,510 $ 560
Year Ended December 31, 2012
Commodity price swaps
Change in fair value $ (248,399) Sales and other
revenues $ (98,750) Sales and other
revenues $ (491)
Loss reclassified to earnings due to
settlements 55,175 Operating
expenses 43,575 Cost of products
sold (515)
Total $ (193,224) $ (55,175) $ (1,006)
As of December 31, 2014, we have the following notional contract volumes related to outstanding derivative instruments serving
as cash flow hedges against price risk on forecasted purchases of natural gas and crude oil and sales of refined products:
Notional Contract Volumes by Year of
Maturity
Derivative instruments
Total
Outstanding
Notional 2015 2016 2017 Unit of
Measure
Natural gas - long 28,800,000 9,600,000 9,600,000 9,600,000 MMBTU
WTI crude oil - long 4,380,000 4,380,000 — — Barrels
Ultra-low sulfur diesel - short 4,380,000 4,380,000 — — Barrels
In 2013, we dedesignated certain commodity price swaps (long positions) that previously received hedge accounting treatment.
These contracts now serve as economic hedges against price risk on forecasted natural gas purchases totaling 28,800,000 MMBTU's
to be purchased ratably through 2017. As of December 31, 2014, we have an unrealized loss of $3.2 million classified in accumulated
other comprehensive income that relates to the application of hedge accounting prior to dedesignation that is amortized as a charge
to operating expenses as the contracts mature.
Economic Hedges
We also have swap contracts that serve as economic hedges (derivatives used for risk management, but not designated as accounting
hedges) to fix our purchase price on forecasted purchases of WTI crude oil, and to lock in the spread between WTI and WCS and
WTS on forecasted purchases of crude oil inventory. Also, we have NYMEX futures contracts to lock in prices on forecasted
purchases of inventory. These contracts are measured at fair value with offsetting adjustments (gains/losses) recorded directly to
income.