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Interest Rate Risk
−Removed: A significant portion of our long-term debt is variable-rate debt.
+Added: A portion of our long-term debt is variable-rate debt.
Changes in interest rates impact the interest payments of our variable-rate debt but generally do not impact the fair value of the liability.
Conversely, changes in interest rates impact the fair value of our fixed-rate debt but do not impact its cash flows.
−Removed: The Revolving Credit Facility is variable-rate debt with interest rates that are generally indexed to bank prime or LIBOR interest rates.
−Removed: At March 31, 2020 , we had $1.5 billion of outstanding borrowings under the Revolving Credit Facility at a weighted average interest rate of 3.36% .
−Removed: A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $1.8 million , based on borrowings outstanding at March 31, 2020 .
−Removed: The Term Credit Agreement is variable-rate debt with interest rates that are generally indexed to bank prime or LIBOR interest rates.
−Removed: At March 31, 2020 , we had $250.0 million of outstanding borrowings under the Term Credit Agreement at an interest rate of 4.05% .
−Removed: A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.3 million , based on borrowings outstanding at March 31, 2020 .
−Removed: Commodity Price and Credit Risk
−Removed: Our operations are subject to certain business risks, including commodity price risk and credit risk.
+Added: The ABL Facility is variable-rate debt with interest rates that are generally indexed to the Wall Street Journal prime rate or LIBOR interest rate (or successor rate).
+Added: At March 31, 2021, we had $4.0 million of outstanding borrowings under the ABL Facility at a weighted average interest rate of 5.25%.
+Added: A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of less than $0.1 million, based on borrowings outstanding at March 31, 2021.
+Added: The Sawtooth credit agreement is variable-rate debt with interest rates that are generally indexed to the rate the lender announces from time to time as its prime rate or base commercial lending rate or LIBOR interest rate (or successor rate).
+Added: At March 31, 2021, we had $5.0 million of outstanding borrowings under the Sawtooth credit agreement at an average interest rate of 2.36%.
+Added: A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of less than $0.1 million, based on borrowings outstanding at March 31, 2021.
+Added: Commodity Price Risk
+Added: Our operations are subject to certain business risks, including commodity price risk.
Commodity price risk is the risk that the market value of crude oil, natural gas liquids, or refined and renewables products will change, either favorably or unfavorably, in response to changing market conditions.
−Removed: Credit risk is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract.
−Removed: Procedures and limits for managing commodity price risks and credit risks are specified in our market risk policy and credit policy, respectively.
+Added: Procedures and limits for managing commodity price risks are specified in our market risk policy.
Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel.
−Removed: Credit risk is monitored daily and exposure is minimized through customer deposits, restrictions on product liftings, letters of credit, and entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions.
−Removed: At March 31, 2020 , our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.
The crude oil, natural gas liquids, and refined and renewables products industries are “margin-based” and “cost-plus” businesses in which gross profits depend on the differential of sales prices over supply costs.
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We engage in various types of forward contracts and financial derivative transactions to reduce the effect of price volatility on our product costs, to protect the value of our inventory positions, and to help ensure the availability of product during periods of short supply.
−Removed: We attempt to balance our contractual portfolio by purchasing volumes when we have a
−Removed: matching purchase commitment from our wholesale and retail customers.
+Added: We attempt to balance our contractual portfolio by purchasing volumes when we have a matching purchase commitment from our wholesale and retail customers.
We may experience net unbalanced positions from time to time.
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Although we use financial derivative instruments to reduce the market price risk associated with forecasted transactions, we do not account for financial derivative transactions as hedges.
−Removed: All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations, regardless of whether the contract is physically or financially settled.
+Added: All changes in the fair value of our physical
+Added: contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our consolidated statements of operations, regardless of whether the contract is physically or financially settled.
The following table summarizes the hypothetical impact on the March 31, 2021 fair value of our commodity derivatives of an increase of 10% in the value of the underlying commodity (in thousands):
To Fair Value
−Removed: Crude oil (Crude Oil Logistics segment)
Crude oil (Water Solutions segment) $ (796)
−Removed: Propane (Liquids and Refined Products segment)
−Removed: Butane (Liquids and Refined Products segment)
−Removed: Refined Products (Liquids and Refined Products segment)
−Removed: Other Products (Liquids and Refined Products segment)
−Removed: Canadian dollars (Liquids and Refined Products segment)
+Added: Crude oil (Crude Oil Logistics segment) $ (8,075)
+Added: Propane (Liquids Logistics segment) $ (1,071)
+Added: Butane (Liquids Logistics segment) $ (3,191)
+Added: Refined Products (Liquids Logistics segment) $ (3,764)
+Added: Other Products (Liquids Logistics segment) $ 7,856
+Added: Canadian dollars (Liquids Logistics segment) $ 175
Changes in commodity prices may also impact the volumes that we are able to transport, dispose, store and market, which also impact our cash flows.
+Added: Our operations are also subject to credit risk, which is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract.
+Added: Procedures and limits for managing credit risk are specified in our credit policy.
+Added: Credit risk is monitored daily and we try to minimize exposure through the following,
+Added: • requiring certain customers to prepay or place deposits for our products and services;
+Added: • requiring certain customers to post letters of credit or other forms of surety;
+Added: • monitoring individual customer receivables relative to previously-approved credit limits;
+Added: • requiring certain customers to take delivery of their contracted volume ratably rather than allow them to take delivery at their discretion;
+Added: • entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions;
+Added: • reviewing the receivable aging regularly to identify issues or trends that may develop;
+Added: • requiring marketing personnel to manage their customers’ receivable position and suspend sales to customers that have not timely paid outstanding invoices.
+Added: At March 31, 2021, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.
We use observable market values for determining the fair value of our derivative instruments.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.