Derivatives
For further information regarding the fair value measurement of derivative instruments, including any effect of master netting agreements or collateral, see Note 17. See Note 2 for a discussion of the types of derivatives we use and the reasons for them. We do not designate any of our commodity derivative instruments as hedges for accounting purposes. Our interest rate derivative instruments were designated as fair value accounting hedges.
The following table presents the gross fair values of derivative instruments, excluding cash collateral, and where they appear on the consolidated balance sheets as of December 31, 2013 and 2012:
|
| | | | | | | | | |
| December 31, 2013 | | |
(In millions) | Asset | | Liability | | Balance Sheet Location |
Commodity derivatives | $ | 21 |
| | $ | 53 |
| | Other current assets |
|
| | | | | | | | | |
| December 31, 2012 | | |
(In millions) | Asset | | Liability | | Balance Sheet Location |
Commodity derivatives | $ | 49 |
| | $ | 88 |
| | Other current assets |
Derivatives Designated as Fair Value Accounting Hedges
In 2012, we terminated interest rate swap agreements with a notional amount of $500 million that had been entered into as fair value accounting hedges on our 3.50 percent senior notes due in March 2016. There was a $20 million gain on the termination of the transactions, which has been accounted for as an adjustment to our long-term debt balance. The gain is being amortized over the remaining life of the 3.50 percent senior notes, which reduces our interest expense. The interest rate swaps had no accounting hedge ineffectiveness.
The following table summarizes the pretax effect of derivative instruments designated as accounting hedges of fair value in our consolidated statements of income:
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| | | | | | | | | | | | | |
| | | Gain (Loss) |
(In millions) | Income Statement Location | | 2013 | | 2012 | | 2011 |
Derivative | | | | | | | |
Interest rate | Net interest and other financial income (costs) | | $ | — |
| | $ | 1 |
| | $ | 19 |
|
Hedged Item | | | | | | | |
Long-term debt | Net interest and other financial income (costs) | | $ | — |
| | $ | (1 | ) | | $ | (19 | ) |
Derivatives not Designated as Accounting Hedges
Derivatives that are not designated as accounting hedges may include commodity derivatives used to hedge price risk on (1) inventories, (2) fixed price sales of refined products, (3) the acquisition of foreign-sourced crude oil and (4) the acquisition of ethanol for blending with refined products.
The table below summarizes open commodity derivative contracts for crude oil and refined products as of December 31, 2013.
|
| | | |
| Position | | Total Barrels (In thousands) |
Crude oil(a) | | | |
Exchange-traded | Long | | 10,580 |
Exchange-traded | Short | | (23,900) |
Refined Products(a) | | | |
Exchange-traded | Long | | 3,646 |
Exchange-traded | Short | | (4,175) |
(a)100 percent of these contracts expire in the first quarter of 2014.
The following table summarizes the effect of all commodity derivative instruments in our consolidated statements of income:
|
| | | | | | | | | | | |
(In millions) | Gain (Loss) |
Income Statement Location | 2013 | | 2012 | | 2011 |
Sales and other operating revenues | $ | 12 |
| | $ | 8 |
| | $ | (34 | ) |
Other income | — |
| | — |
| | 1 |
|
Cost of revenues | (180 | ) | | 65 |
| | 182 |
|
Total | $ | (168 | ) | | $ | 73 |
| | $ | 149 |
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