3 unchanged sentences
We evaluate counterparty risks related to our commodity derivative contracts and trade credit.
−Removed: We have all our commodity derivatives with major financial institutions or major energy companies.
+Added: All of our commodity derivatives are with major financial institutions or major energy companies.
Should any of these financial counterparties not perform, we may not realize the benefit of some of our hedges under lower commodity prices, which could have a material adverse effect on our results of operations.
10 unchanged sentences
The primary purpose of our 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.
−Removed: In an effort to reduce the variability of our cash flows, as of September 30, 2020, we have hedged the commodity price associated with a portion of our expected (i) natural gas, NGL, and condensate equity volumes in our Gathering and Processing operations that result from our percent-of-proceeds processing arrangements, (ii) future commodity purchases and sales in our Logistics and Transportation segment and (iii) natural gas transportation basis risk in our Logistics and Transportation segment by entering into derivative instruments.
+Added: In an effort to reduce the variability of our cash flows, as of March 31, 2021, we have hedged the commodity price associated with a portion of our expected (i) natural gas, NGL, and condensate equity volumes in our Gathering and Processing operations that result from our percent-of-proceeds processing arrangements, (ii) future commodity purchases and sales in our Logistics and Transportation segment and (iii) natural gas transportation basis risk in our Logistics and Transportation segment.
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.
−Removed: 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.
+Added: We also enter into commodity financial instruments to help manage other short-term commodity-related business risks of our ongoing operations and in conjunction with marketing opportunities available to us in the operations of our logistics and transportation assets.
+Added: With swaps, we typically receive an agreed fixed price for a specified notional quantity of commodities 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.
24 unchanged sentences
The fair values of our derivative instruments are also influenced by changes in market volatility for option contracts and the discount rates used to determine the present values.
−Removed: The following table shows the effect of hypothetical price movements on the estimated fair value of our derivative instruments as of September 30, 2020:
+Added: The following table shows the effect of hypothetical price movements on the estimated fair value of our derivative instruments as of March 31, 2021:
Result of 10% Price Decrease
1 unchanged sentence
The table above contains all derivative instruments outstanding as of the stated date for the purpose of hedging commodity price risk, which we are exposed to due to our equity volumes and future commodity purchases and sales, as well as basis differentials related to our gas transportation arrangements.
−Removed: Our operating revenues increased (decreased) by $109.2 million and $(61.8) million during the three months ended September 30, 2020 and 2019 and $337.3 million and $(7.7) million during the nine months ended September 30, 2020 and 2019, as a result of transactions accounted for as derivatives.
−Removed: We account for derivatives designated as hedges that mitigate commodity price risk as cash flow hedges.
−Removed: Changes in fair value are deferred in other comprehensive income until the underlying hedged transactions settle.
−Removed: We also enter into derivative instruments to help manage other short-term commodity-related business risks.
−Removed: We have not designated these derivatives as hedges and record changes in fair value and cash settlements to revenues.
−Removed: The estimated fair value of our risk management position has moved from a net liability position of $6.1 million at December 31, 2019 to a net liability position of $15.6 million at September 30, 2020.
+Added: Our operating revenues increased (decreased) by ($134.7) million and $ 161.4 million during the three months ended March 31, 2021 and 2020, as a result of transactions accounted for as derivatives.
+Added: The estimated fair value of our risk management position has moved from a net liability position of $51.2 million at December 31, 2020 to a net liability position of ($90.3) million at March 31, 2021.
The fixed prices we currently expect to receive on derivative contracts are below the aggregate forward prices for commodities related to those contracts, creating this net liability position.
1 unchanged sentence
We are exposed to the risk of changes in interest rates, primarily as a result of variable rate borrowings under the TRC Revolver, the TRP Revolver and the Securitization Facility.
−Removed: Additionally, on and after November 1, 2020, distributions on the Preferred Units will accumulate at an annual floating rate equal to the one-month LIBOR plus 7.71%.
−Removed: As of September 30, 2020, we do not have any interest rate hedges.
+Added: As of March 31, 2021, we do not have any interest rate hedges.
However, we may enter into interest rate hedges in the future with the intent to mitigate the impact of changes in interest rates on cash flows.
−Removed: To the extent that interest rates increase, interest expense for the TRC Revolver, the TRP Revolver and the Securitization Facility, and distributions owed on the Preferred Units, will also increase.
−Removed: As of September 30, 2020, the Partnership had $350.0 million in outstanding variable rate borrowings under the TRP Revolver and the Securitization Facility, and we had outstanding variable rate borrowings of $435.0 million under the TRC Revolver.
−Removed: A hypothetical change of 100 basis points in the rates of our variable interest rate debt and the Partnership’s Preferred Units accumulating at an annual floating rate would impact the Partnership’s annual interest expense by $3.5 million and Preferred Unit distributions by $1.3 million and our consolidated annual interest expense by $7.9 million based on our September 30, 2020 debt balances.
+Added: To the extent that interest rates increase, interest expense for the TRC Revolver, the TRP Revolver and the Securitization Facility will also increase.
+Added: As of March 31, 2021, the Partnership had $270.0 million in outstanding variable rate borrowings under the TRP Revolver and the Securitization Facility and we had outstanding variable rate borrowings of $75.0 million under the TRC Revolver.
+Added: A hypothetical change of 100 basis points in the rate of our variable interest rate debt would impact the Partnership’s annual interest expense by $2.7 million and our consolidated annual interest expense by $3.5 million based on our March 31, 2021 debt balances.
Counterparty Credit Risk
6 unchanged sentences
We have master netting provisions in the International Swap Dealers Association agreements with our derivative counterparties.
−Removed: 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 $67.0 million as of September 30, 2020.
−Removed: The range of losses attributable to our individual counterparties as of September 30, 2020 would be between $1.7 million and $16.9 million, depending on the counterparty in default.
+Added: 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 $45.2 million as of March 31, 2021.
+Added: The range of losses attributable to our individual counterparties as of March 31, 2021 would be between $0.4 million and $19.7 million, depending on the counterparty in default.
Customer Credit Risk
3 unchanged sentences
We have an active credit management process, which is focused on controlling loss exposure due to bankruptcies or other liquidity issues of counterparties.
−Removed: Our allowance for doubtful accounts was $0.1 million and $0.0 million as of September 30, 2020 and December 31, 2019.
−Removed: Changes in the allowance for doubtful accounts were not material for the three and nine months ended September 30, 2020.
−Removed: No customer comprised 10% or greater than our consolidated revenues during the three months ended September 30, 2020.
−Removed: During the nine months ended September 30, 2019, sales of commodities and fees from midstream services provided to Petredec (Europe) Limited comprised approximately 10% of our consolidated revenues.
−Removed: During the three and nine months ended September 30, 2019, sales of commodities and fees from midstream services provided to Petredec (Europe) Limited comprised approximately 11% and 12% of our consolidated revenues.
+Added: Our allowance for doubtful accounts was $4.9 million and $0.1 million as of March 31, 2021 and December 31, 2020.
+Added: Changes in the allowance for doubtful accounts were not material for the three months ended March 31, 2021.
+Added: No customer comprised 10% or greater of our consolidated revenues during the three months ended March 31, 2021.
+Added: During the three months ended March 31, 2020, sales of commodities and fees from midstream services provided to Petredec (Europe) Limited comprised approximately 11% of our consolidated revenues.
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.