During the fourth quarter of 2016, Targa Resources Partners LP (the
Partnership
,
we
or
our
) concluded that we should revise supplementary information regarding the notional volumes of NGL futures contracts on the Intercontinental Exchange
(
ICE
) previously reported in our Form 10-Q for the quarter ended September 30, 2016. We utilize those ICE futures to hedge future commodity purchases and sales in our Logistics and Marketing segment. We concluded that
these revisions to the notional volumes of the NGL futures positions on ICE as of September 30, 2016 were not material, and had no effect on our Consolidated Balance Sheet, Consolidated Statement of Operations, Consolidated Statement of
Comprehensive Income (Loss), Consolidated Statement of Changes in Owners Equity, or Consolidated Statement of Cash Flows.
The following tables
reflect the impact of the error and the revised notional volumes of NGL futures contracts, which were previously reported in the Derivative Instruments and Hedging Activities note of the Partnerships Form 10-Q for the quarter ended
September 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
Instrument
|
|
Unit
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
As reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL
|
|
Futures
|
|
Bbl/d
|
|
|
85,887
|
|
|
|
50,889
|
|
|
|
5,000
|
|
|
|
|
|
As corrected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL
|
|
Futures
|
|
Bbl/d
|
|
|
20,055
|
|
|
|
3,789
|
|
|
|
411
|
|
|
|
|
|
|
The revised notional volumes of our commodity derivative contracts as disclosed in Note 12 to the interim financial statements for the quarter ended September 30, 2016 were as follows:
|
|
|
|
|
|
|
|
|
Commodity
|
|
Instrument
|
|
Unit
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
Natural Gas
|
|
Swaps
|
|
MMBtu/d
|
|
|
134,436
|
|
|
|
92,448
|
|
|
|
68,800
|
|
|
|
29,683
|
|
Natural Gas
|
|
Basis Swaps
|
|
MMBtu/d
|
|
|
95,979
|
|
|
|
58,026
|
|
|
|
|
|
|
|
|
|
Natural Gas
|
|
Options
|
|
MMBtu/d
|
|
|
22,900
|
|
|
|
22,900
|
|
|
|
9,486
|
|
|
|
|
|
NGL
|
|
Swaps
|
|
Bbl/d
|
|
|
5,073
|
|
|
|
3,875
|
|
|
|
2,678
|
|
|
|
1,779
|
|
NGL
|
|
Futures
|
|
Bbl/d
|
|
|
20,055
|
|
|
|
3,789
|
|
|
|
411
|
|
|
|
|
|
NGL
|
|
Options
|
|
Bbl/d
|
|
|
920
|
|
|
|
1,468
|
|
|
|
1,676
|
|
|
|
|
|
Condensate
|
|
Swaps
|
|
Bbl/d
|
|
|
2,770
|
|
|
|
1,850
|
|
|
|
1,350
|
|
|
|
223
|
|
Condensate
|
|
Options
|
|
Bbl/d
|
|
|
790
|
|
|
|
1,380
|
|
|
|
691
|
|
|
|
590
|
|
In addition, Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk of the Partnerships Form
10-Q for the quarter ended September 30, 2016 has been amended as noted below to reflect the revised notional volumes of the ethane (C2-ICE) futures contracts, propane (C3-ICE) futures contracts and normal butane (NC4-ICE) futures contracts.
Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Commodity Price Risk
Our principal market risks
are our exposure to changes in commodity prices, particularly to the prices of natural gas, NGLs and crude oil and changes in interest rates.
A
significant portion of our revenues are derived from percent-of-proceeds contracts under which we receive a portion of the natural gas and/or NGLs or equity volumes as payment for services. The prices of natural gas and NGLs are subject to
fluctuations in response to changes in supply, demand, market uncertainty and a variety of additional factors beyond our control. We monitor these risks and enter into hedging transactions designed to mitigate the impact of commodity price
fluctuations on our business. Cash flows from a derivative instrument designated as a hedge are classified in the same category as the cash flows from the item being hedged.
The primary purpose of the commodity risk management activities is to hedge some of the exposure to commodity price risk and reduce fluctuations in our
operating cash flow due to fluctuations in commodity prices. In an effort to reduce the variability of our
1
cash flows, as of September 30, 2016, we have hedged the commodity price associated with a portion of our expected (i) natural gas equity volumes in our Gathering and Processing
operations and (ii) NGL and condensate equity volumes in our Gathering and Processing operations that result from our percent-of-proceeds processing arrangements by entering into derivative instruments. We hedge a higher percentage of our
expected equity volumes in the current year compared to future years, for which we hedge incrementally lower percentages of expected equity volumes. With swaps, we typically receive an agreed fixed price for a specified notional quantity of natural
gas or NGLs and we pay the hedge counterparty a floating price for that same quantity based upon published index prices. Since we receive from our customers substantially the same floating index price from the sale of the underlying physical
commodity, these transactions are designed to effectively lock-in the agreed fixed price in advance for the volumes hedged. In order to avoid having a greater volume hedged than our actual equity volumes, we typically limit our use of swaps to hedge
the prices of less than our expected natural gas and NGL equity volumes. We utilize purchased puts (or floors) and calls (or caps) to hedge additional expected equity commodity volumes without creating volumetric risk. We may buy calls in connection
with swap positions to create a price floor with upside. We intend to continue to manage our exposure to commodity prices in the future by entering into derivative transactions using swaps, collars, purchased puts (or floors) or other derivative
instruments as market conditions permit.
When entering into new hedges, we intend to generally match the NGL product composition and the NGL and natural
gas delivery points to those of our physical equity volumes. The NGL hedges cover specific NGL products based upon the expected equity NGL composition. We believe this strategy avoids uncorrelated risks resulting from employing hedges on crude oil
or other petroleum products as proxy hedges of NGL prices. The natural gas and NGL hedges fair values are based on published index prices for delivery at various locations and we seek to closely approximate the actual natural gas
and NGL delivery points. A portion of our condensate sales are hedged using crude oil hedges that are based on the NYMEX futures contracts for West Texas Intermediate light, sweet crude.
A majority of these commodity price hedging transactions are typically documented pursuant to a standard International Swap Dealers Association form with
customized credit and legal terms. The principal counterparties (or, if applicable, their guarantors) have investment grade credit ratings. Our payment obligations in connection with substantially all of these hedging transactions and any additional
credit exposure due to a rise in natural gas and NGL prices relative to the fixed prices set forth in the hedges are secured by a first priority lien in the collateral securing the Partnerships senior secured indebtedness that ranks equal in
right of payment with liens granted in favor of the Partnerships senior secured lenders. Absent federal regulations resulting from the Dodd-Frank Act, and as long as this first priority lien is in effect, we expect to have no obligation to
post cash, letters of credit or other additional collateral to secure these hedges at any time, even if a counterpartys exposure to our credit increases over the term of the hedge as a result of higher commodity prices or because there has
been a change in our creditworthiness. A purchased put (or floor) transaction does not expose our counterparties to credit risk, as we have no obligation to make future payments beyond the premium paid to enter into the transaction; however, we are
exposed to the risk of default by the counterparty, which is the risk that the counterparty will not honor its obligation under the put transaction.
We
also enter into commodity price hedging transactions using futures contracts on futures exchanges. Exchange traded futures are subject to exchange margin requirements, so we may have to increase our cash deposit due to a rise in natural gas and NGL
prices. Unlike bilateral hedges, we are not subject to counterparty credit risks when using futures.
For all periods presented, we have entered into
hedging arrangements for a portion of our forecasted equity volumes. During the three months ended September 30, 2016 and 2015, our operating revenues increased (decreased) by net hedge adjustments on commodity derivative contracts of
$11.2 million and $21.8 million. During the nine months ended September 30, 2016 and 2015, our operating revenues increased (decreased) by net hedge adjustments on commodity derivative contracts of $56.9 million and $60.7 million.
2
As of September 30, 2016, we had the following derivative instruments designated as hedging instruments that
will settle during the years ending below:
NATURAL GAS
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Type
|
|
|
|
Price
|
|
|
|
|
|
MMBtu/d
|
|
|
|
|
|
|
Index
|
|
$/MMBtu
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Swap
|
|
IF-NGPL MC
|
|
|
3.93
|
|
|
|
|
|
|
|
3,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Swap
|
|
IF-Waha
|
|
|
2.96
|
|
|
|
|
|
|
|
77,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
Swap
|
|
IF-Waha
|
|
|
2.79
|
|
|
|
|
|
|
|
|
|
|
|
62,900
|
|
|
|
|
|
|
|
|
|
|
|
(4.0
|
)
|
Swap
|
|
IF-Waha
|
|
|
2.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,900
|
|
|
|
|
|
|
|
(2.4
|
)
|
Swap
|
|
IF-Waha
|
|
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,683
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,736
|
|
|
|
62,900
|
|
|
|
57,900
|
|
|
|
29,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
|
Call Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar
|
|
IF-Waha
|
|
|
2.85
|
|
|
|
3.47
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
Collar
|
|
IF-Waha
|
|
|
3.00
|
|
|
|
3.67
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
Collar
|
|
IF-Waha
|
|
|
3.25
|
|
|
|
4.20
|
|
|
|
|
|
|
|
|
|
|
|
1,849
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
1,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap
|
|
IF-PB
|
|
|
3.12
|
|
|
|
|
|
|
|
18,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
Swap
|
|
IF-PB
|
|
|
2.51
|
|
|
|
|
|
|
|
|
|
|
|
10,900
|
|
|
|
|
|
|
|
|
|
|
|
(1.5
|
)
|
Swap
|
|
IF-PB
|
|
|
2.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,900
|
|
|
|
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,508
|
|
|
|
10,900
|
|
|
|
10,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
|
Call Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar
|
|
IF-PB
|
|
|
2.65
|
|
|
|
3.31
|
|
|
|
15,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
Collar
|
|
IF-PB
|
|
|
2.80
|
|
|
|
3.50
|
|
|
|
|
|
|
|
15,400
|
|
|
|
|
|
|
|
|
|
|
|
0.7
|
|
Collar
|
|
IF-PB
|
|
|
3.00
|
|
|
|
3.65
|
|
|
|
|
|
|
|
|
|
|
|
7,637
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,400
|
|
|
|
15,400
|
|
|
|
7,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap
|
|
NG-NYMEX
|
|
|
4.12
|
|
|
|
|
|
|
|
34,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
Swap
|
|
NG-NYMEX
|
|
|
4.11
|
|
|
|
|
|
|
|
|
|
|
|
18,082
|
|
|
|
|
|
|
|
|
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,239
|
|
|
|
18,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap
|
|
NG-NYMEX-mtm
|
|
|
3.11
|
|
|
|
|
|
|
|
497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
Swap
|
|
NG-NYMEX-mtm
|
|
|
3.17
|
|
|
|
|
|
|
|
|
|
|
|
566
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497
|
|
|
|
566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swap
|
|
EP_PERMIAN
|
|
|
(0.1703
|
)
|
|
|
|
|
|
|
17,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
Basis Swap
|
|
EP_PERMIAN
|
|
|
(0.1444
|
)
|
|
|
|
|
|
|
|
|
|
|
9,041
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,120
|
|
|
|
9,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swap
|
|
PEPL
|
|
|
(0.3278
|
)
|
|
|
|
|
|
|
17,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
Basis Swap
|
|
PEPL
|
|
|
(0.3308
|
)
|
|
|
|
|
|
|
|
|
|
|
9,041
|
|
|
|
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,120
|
|
|
|
9,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swap
|
|
PEPL-mtm
|
|
|
(0.1870
|
)
|
|
|
|
|
|
|
16,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
Basis Swap
|
|
PEPL-mtm
|
|
|
(0.2025
|
)
|
|
|
|
|
|
|
|
|
|
|
14,959
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,576
|
|
|
|
14,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Type
|
|
|
|
Price
|
|
|
|
|
|
MMBtu/d
|
|
|
|
|
|
|
Index
|
|
$/MMBtu
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Basis Swap
|
|
TENN_800
|
|
|
(0.0567)
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
Basis Swap
|
|
TENN_800
|
|
|
(0.0575)
|
|
|
|
|
|
|
|
|
|
|
|
12,493
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
12,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis Swap
|
|
NGPL_TXOK
|
|
|
(0.0967)
|
|
|
|
|
|
|
|
10,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
Basis Swap
|
|
WAHA
|
|
|
(0.1283)
|
|
|
|
|
|
|
|
10,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
|
|
|
|
|
|
|
|
|
Basis Swap
|
|
TRANSCO_Z4
|
|
|
0.0225
|
|
|
|
|
|
|
|
9,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
Basis Swap
|
|
TRANSCO_Z4
|
|
|
0.0225
|
|
|
|
|
|
|
|
|
|
|
|
12,492
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,945
|
|
|
|
12,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
253,315
|
|
|
|
173,374
|
|
|
|
78,286
|
|
|
|
29,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Type
|
|
|
|
Price
|
|
|
|
|
|
Bbl/d
|
|
|
|
|
|
|
Index
|
|
$/gal
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Swap
|
|
C2-OPIS-MB
|
|
|
0.2209
|
|
|
|
|
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.0
|
)
|
Swap
|
|
C2-OPIS-MB
|
|
|
0.2517
|
|
|
|
|
|
|
|
|
|
|
|
1,857
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
Swap
|
|
C2-OPIS-MB
|
|
|
0.2648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,318
|
|
|
|
|
|
|
|
(0.7
|
)
|
Swap
|
|
C2-OPIS-MB
|
|
|
0.2925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
870
|
|
|
|
1,857
|
|
|
|
1,318
|
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
C2-OPIS-MB
|
|
|
0.2694
|
|
|
|
|
|
|
|
|
|
|
|
548
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
Option
|
|
C2-OPIS-MB
|
|
|
0.2963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,644
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
548
|
|
|
|
1,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
C2-OPIS-MB
|
|
|
0.2200
|
|
|
|
|
|
|
|
707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
Future
|
|
C2-OPIS-MB
|
|
|
0.2713
|
|
|
|
|
|
|
|
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
707
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
C2-ICE
|
|
|
0.1942
|
|
|
|
|
|
|
|
5,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
Future
|
|
C2-ICE
|
|
|
0.2593
|
|
|
|
|
|
|
|
|
|
|
|
2,315
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
Future
|
|
C2-ICE
|
|
|
0.2956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411
|
|
|
|
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
5,489
|
|
|
|
2,315
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap
|
|
C3-OPIS-MB
|
|
|
0.7959
|
|
|
|
|
|
|
|
3,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.6
|
|
Swap
|
|
C3-OPIS-MB
|
|
|
0.7396
|
|
|
|
|
|
|
|
|
|
|
|
1,528
|
|
|
|
|
|
|
|
|
|
|
|
4.4
|
|
Swap
|
|
C3-OPIS-MB
|
|
|
0.5125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
870
|
|
|
|
|
|
|
|
(0.5
|
)
|
Swap
|
|
C3-OPIS-MB
|
|
|
0.5125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
870
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
3,883
|
|
|
|
1,528
|
|
|
|
870
|
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
C3-OPIS-MB
|
|
|
0.4948
|
|
|
|
|
|
|
|
435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
Future
|
|
C3-OPIS-MB
|
|
|
0.5433
|
|
|
|
|
|
|
|
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
435
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
C3-ICE
|
|
|
0.4576
|
|
|
|
|
|
|
|
8,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
Future
|
|
C3-ICE
|
|
|
0.5237
|
|
|
|
|
|
|
|
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
8,043
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
NC4-OPIS-MB
|
|
|
0.6358
|
|
|
|
|
|
|
|
2,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
Future
|
|
NC4-ICE
|
|
|
0.6080
|
|
|
|
|
|
|
|
3,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
Swap
|
|
C5-OPIS-MB
|
|
|
0.9600
|
|
|
|
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
Swap
|
|
C5-OPIS-MB
|
|
|
0.9943
|
|
|
|
|
|
|
|
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
Swap
|
|
C5-OPIS-MB
|
|
|
0.9943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
490
|
|
|
|
|
|
|
|
(0.9
|
)
|
Swap
|
|
C5-OPIS-MB
|
|
|
1.0520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
320
|
|
|
|
490
|
|
|
|
490
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
|
Call Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar
|
|
C2-OPIS-MB
|
|
|
0.200
|
|
|
|
0.235
|
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.0
|
)
|
Collar
|
|
C2-OPIS-MB
|
|
|
0.240
|
|
|
|
0.290
|
|
|
|
|
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
410
|
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Type
|
|
|
|
Price
|
|
|
|
|
|
Bbl/d
|
|
|
|
|
|
|
Index
|
|
$/gal
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
|
Call Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar
|
|
C3-OPIS-MB
|
|
|
0.560
|
|
|
|
0.68000
|
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0
|
|
Collar
|
|
C3-OPIS-MB
|
|
|
0.570
|
|
|
|
0.68625
|
|
|
|
|
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
380
|
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
|
Call Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar
|
|
C5-OPIS-MB
|
|
|
1.200
|
|
|
|
1.390
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
Collar
|
|
C5-OPIS-MB
|
|
|
1.210
|
|
|
|
1.415
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
Collar
|
|
C5-OPIS-MB
|
|
|
1.230
|
|
|
|
1.385
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
130
|
|
|
|
130
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
26,048
|
|
|
|
9,132
|
|
|
|
4,765
|
|
|
|
1,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Type
|
|
|
|
Price
|
|
|
|
|
|
Bbl/d
|
|
|
|
|
|
|
Index
|
|
$/Bbl
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Swap
|
|
NY-WTI
|
|
|
59.98
|
|
|
|
|
|
|
|
2,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.8
|
|
Swap
|
|
NY-WTI
|
|
|
56.15
|
|
|
|
|
|
|
|
|
|
|
|
1,850
|
|
|
|
|
|
|
|
|
|
|
|
3.0
|
|
Swap
|
|
NY-WTI
|
|
|
47.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350
|
|
|
|
|
|
|
|
(3.0
|
)
|
Swap
|
|
NY-WTI
|
|
|
52.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,770
|
|
|
|
1,850
|
|
|
|
1,350
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Price
|
|
|
Call Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collar
|
|
NY-WTI
|
|
|
57.08
|
|
|
|
67.97
|
|
|
|
790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
Collar
|
|
NY-WTI
|
|
|
54.04
|
|
|
|
64.09
|
|
|
|
|
|
|
|
1,380
|
|
|
|
|
|
|
|
|
|
|
|
2.7
|
|
Collar
|
|
NY-WTI
|
|
|
49.76
|
|
|
|
58.50
|
|
|
|
|
|
|
|
|
|
|
|
691
|
|
|
|
|
|
|
|
0.1
|
|
Collar
|
|
NY-WTI
|
|
|
48.00
|
|
|
|
56.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
590
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
790
|
|
|
|
1,380
|
|
|
|
691
|
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
3,560
|
|
|
|
3,230
|
|
|
|
2,041
|
|
|
|
813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2016, we had the following derivative instruments that are not designated as hedges and are
marked-to-market:
NATURAL GAS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument Type
|
|
|
|
|
Price
|
|
|
MMBtu/d
|
|
|
|
|
|
|
Index
|
|
|
$/MMBtu
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Basis Swap
|
|
|
Various
|
|
|
|
(0.0597
|
)
|
|
|
62,235
|
|
|
|
40,511
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.2
|
)
|
These contracts may expose us to the risk of financial loss in certain circumstances. Generally, our hedging arrangements
provide us protection on the hedged volumes if prices decline below the prices at which these hedges are set. If prices rise above the prices at which they have been hedged, we will receive less revenue on the hedged volumes than we would receive in
the absence of hedges (other than with respect to purchased calls). For derivative instruments not designated as cash flow hedges, these contracts are marked-to-market and recorded in revenues.
We account for the fair value of our financial assets and liabilities using a three-tier fair value hierarchy, which prioritizes the significant inputs used
in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets;
6
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no
market data exists, therefore requiring an entity to develop its own assumptions. We determine the value of our derivative contracts utilizing a discounted cash flow model for swaps and a standard option pricing model for options, based on inputs
that are readily available in public markets. For the contracts that have inputs from quoted prices, the classification of these instruments is Level 2 within the fair value hierarchy. For those contracts which we are unable to obtain quoted prices
for at least 90% of the full term of the commodity swap and options, the valuations are classified as Level 3 within the fair value hierarchy. See Note 13 - Fair Value Measurements in this Quarterly Report for more information regarding
classifications within the fair value hierarchy.
Interest Rate Risk
We are exposed to the risk of changes in interest rates, primarily as a result of variable rate borrowings under the TRP Revolver and the Securitization
Facility. As of September 30, 2016, we do not have any interest rate hedges. However, we may in the future enter into interest rate hedges intended to mitigate the impact of changes in interest rates on cash flows. To the extent that
interest rates increase, interest expense for the TRP Revolver and the Securitization Facility will also increase. As of September 30, 2016, we had $225.0 million in outstanding variable rate borrowings under the TRP Revolver and the
Securitization Facility. A hypothetical change of 100 basis points in the interest rate of our variable rate debt would impact our annual interest expense by $2.3 million.
Counterparty Credit Risk
We are subject to risk
of losses resulting from nonpayment or nonperformance by our counterparties. The credit exposure related to commodity derivative instruments is represented by the fair value of the asset position (i.e. the fair value of expected future receipts) at
the reporting date. Our futures contracts have limited credit risk since they are cleared through an exchange and are settled daily. Should the creditworthiness of one or more of the counterparties decline, our ability to mitigate nonperformance
risk is limited to a counterparty agreeing to either a voluntary termination and subsequent cash settlement or a novation of the derivative contract to a third party. In the event of a counterparty default, we may sustain a loss and our cash
receipts could be negatively impacted. We have master netting provisions in the International Swap Dealers Association agreements with all of our derivative counterparties. These netting provisions allow us to net settle asset and liability
positions with the same counterparties within the same Targa entity, and would reduce our maximum loss due to counterparty credit risk by $30.6 million as of September 30, 2016. The range of losses attributable to our individual
counterparties would be between less than $0.5 million and $13.7 million, depending on the counterparty in default.
Customer Credit Risk
We extend credit to customers and other parties in the normal course of business. We have an established policy and various procedures to manage
our credit exposure risk, including initial and subsequent credit risk analyses, credit limits and terms and credit enhancements when necessary. We use credit enhancements including (but not limited to) letters of credit, prepayments, parental
guarantees and rights of offset to limit credit risk to ensure that our established credit criteria are followed and financial loss is mitigated or minimized.
We have an active credit management process, which is focused on controlling loss exposure to bankruptcies or other liquidity issues of counterparties. If an
assessment of uncollectible accounts resulted in a 1% reduction of our third-party accounts receivable, annual operating income would decrease by $5.5 million in the year of the assessment.
7