Quarterly report pursuant to Section 13 or 15(d)

Inventory Financing Agreement

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Inventory Financing Agreement
6 Months Ended
Jun. 30, 2017
Inventory Financing Agreement Disclosure [Abstract]  
Inventory Financing Agreement
Inventory Financing Agreement
We have entered into a Supply and Offtake Agreement and other associated agreements (together the “Supply and Offtake Agreement”) with J. Aron & Company (“J. Aron”). Pursuant to the Supply and Offtake Agreement, (i) J. Aron agreed to sell to us, and we agreed to buy from J. Aron, at market prices, crude oil for processing at our refinery and (ii) we agreed to sell, and J. Aron agreed to buy, at market prices, certain refined products produced at our refinery.
The Supply and Offtake Agreement also provided for the sale, at market prices, of our crude oil and certain refined product inventories to J. Aron, the lease to J. Aron of crude oil and refined product storage facilities, and the identification of prospective purchasers of refined products on J. Aron’s behalf.
The Supply and Offtake Agreement has an initial term that expires in May 2021. J. Aron may elect to terminate the Supply and Offtake Agreement prior to the expiration of the initial term beginning in May 2018 and upon each anniversary thereof, on six months prior notice. We may elect to terminate in May 2020 on six months prior notice.
Following expiration or termination of the Supply and Offtake Agreement, we are obligated to purchase the crude oil and refined product inventories then owned by J. Aron and located at the Big Spring refinery at then current market prices.
Associated with the Supply and Offtake Agreement, we have a fair value hedge of our inventory purchase commitment with J. Aron and crude oil inventory consigned to J. Aron (“crude oil consignment inventory”). Additionally, financing charges related to the Supply and Offtake Agreement are recorded as interest expense in the consolidated statements of operations.
At June 30, 2017 and December 31, 2016, we had net current receivables of $24,534 and $10,569, respectively, with J. Aron for purchases and sales, and a consignment inventory receivable representing a deposit paid to J. Aron of $6,290 and $6,290, respectively. At June 30, 2017 and December 31, 2016, we had non-current liabilities for the original financing of $5,888 and $7,550, respectively, net of the related fair value hedge.
Additionally, we had net current payables of $351 and $719 at June 30, 2017 and December 31, 2016, respectively, for forward commitments related to month-end consignment inventory target levels differing from projected levels and the associated pricing with these inventory level differences.