v3.25.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 11 — Fair Value Measurements

 

Under GAAP, our Consolidated Balance Sheets reflect a mixture of measurement methods for financial instruments. Derivative financial instruments are reported at fair value on our Consolidated Balance Sheets. Other financial instruments are reported at historical cost or amortized cost on our Consolidated Balance Sheets. The following are additional qualitative and quantitative disclosures regarding fair value measurements of our financial instruments.

 

Fair Value of Derivative Financial Instruments

 

Our derivative instruments consist of financially settled commodity swaps, futures, option contracts and fixed-price forward commodity contracts with certain counterparties. We determine the fair value of our derivative instruments using present value methods or standard option valuation models with assumptions about commodity prices based on those observed in underlying markets. We have consistently applied these valuation techniques in all periods presented and we believe we have obtained the most accurate information available for the types of derivative instruments we hold.

 

The fair values of our derivative instruments are sensitive to changes in forward pricing on natural gas, NGLs and crude oil. The derivatives at June 30, 2025 represent a net liability position of $122.8 million and reflects the present value, adjusted for counterparty credit risk, of the amount we expect to receive or pay in the future on our derivative instruments. If forward pricing on natural gas, NGLs and crude oil were to increase by 10%, the result would be a fair value reflecting a net liability of $298.5 million. If forward pricing on natural gas, NGLs and crude oil were to decrease by 10%, the result would be a fair value reflecting a net asset of $52.8 million.

 

Fair Value of Other Financial Instruments

 

Due to their cash or near-cash nature, the carrying value of other financial instruments included in working capital (i.e., cash and cash equivalents, accounts receivable, accounts payable) approximates their fair value. Debt is primarily the other financial instrument for which carrying value could vary significantly from fair value. We determined the supplemental fair value disclosures for our current and long-term debt as follows:

 

•
the TRGP Revolver, commercial paper notes and Securitization Facility are based on carrying value, which approximates fair value as their interest rates are based on prevailing market rates; and
•
the TRGP senior unsecured notes and the Partnership’s senior unsecured notes are based on quoted market prices derived from trades of the debt.

 

Fair Value Hierarchy

 

We categorize the inputs to the fair value measurements of financial assets and liabilities at each balance sheet reporting date using a three-tier fair value hierarchy that prioritizes the significant inputs used in measuring fair value:

 

•
Level 1 – observable inputs such as quoted prices in active markets;
•
Level 2 – inputs other than quoted prices in active markets that we can directly or indirectly observe to the extent that the markets are liquid for the relevant settlement periods; and
•
Level 3 – unobservable inputs in which little or no market data exists, therefore we must develop our own assumptions.

 

The following table shows a breakdown by fair value hierarchy category for (i) financial instruments measurements included on our Consolidated Balance Sheets at fair value and (ii) supplemental fair value disclosures for other financial instruments:

 

 

 

June 30, 2025

 

 

 

Carrying

 

 

Fair Value

 

 

 

Value

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Instruments Recorded on Our
Consolidated Balance Sheets at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets from commodity derivative contracts (1)

 

$

103.6

 

 

$

103.6

 

 

$

—

 

 

$

103.6

 

 

$

—

 

Liabilities from commodity derivative contracts (1)

 

 

226.4

 

 

 

226.4

 

 

 

—

 

 

 

225.3

 

 

 

1.1

 

Financial Instruments Recorded on Our
Consolidated Balance Sheets at Carrying Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

113.1

 

 

 

113.1

 

 

 

—

 

 

 

—

 

 

 

—

 

TRGP Revolver and Commercial Paper Program

 

 

667.0

 

 

 

667.0

 

 

 

—

 

 

 

667.0

 

 

 

—

 

TRGP Senior unsecured notes

 

 

10,962.0

 

 

 

11,004.7

 

 

 

—

 

 

 

11,004.7

 

 

 

—

 

Partnership’s Senior unsecured notes

 

 

5,034.4

 

 

 

4,986.5

 

 

 

—

 

 

 

4,986.5

 

 

 

—

 

 

 

 

December 31, 2024

 

 

 

Carrying

 

 

Fair Value

 

 

 

Value

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Instruments Recorded on Our
Consolidated Balance Sheets at Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets from commodity derivative contracts (1)

 

$

87.0

 

 

$

87.0

 

 

$

—

 

 

$

87.0

 

 

$

—

 

Liabilities from commodity derivative contracts (1)

 

 

259.2

 

 

 

259.2

 

 

 

—

 

 

 

259.2

 

 

 

—

 

Financial Instruments Recorded on Our
Consolidated Balance Sheets at Carrying Value:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

157.3

 

 

 

157.3

 

 

 

—

 

 

 

—

 

 

 

—

 

Previous TRGP Revolver and Commercial Paper Program

 

 

1,130.5

 

 

 

1,130.5

 

 

 

—

 

 

 

1,130.5

 

 

 

—

 

TRGP Senior unsecured notes

 

 

7,470.6

 

 

 

7,438.6

 

 

 

—

 

 

 

7,438.6

 

 

 

—

 

Partnership’s Senior unsecured notes

 

 

5,034.4

 

 

 

4,928.0

 

 

 

—

 

 

 

4,928.0

 

 

 

—

 

Securitization Facility

 

 

330.0

 

 

 

330.0

 

 

 

—

 

 

 

330.0

 

 

 

—

 

 

(1)
The fair value of derivative contracts in this table is presented on a different basis than the Consolidated Balance Sheets presentation as disclosed in Note 10 – Derivative Instruments and Hedging Activities. The above fair values reflect the total value of each derivative contract taken as a whole, whereas the Consolidated Balance Sheets presentation is based on the individual maturity dates of estimated future settlements. As such, an individual contract could have both an asset and liability position when segregated into its current and long-term portions for Consolidated Balance Sheets classification purposes.

 

Additional Information Regarding Level 3 Fair Value Measurements Included on Our Consolidated Balance Sheets

We report certain of our swaps at fair value using Level 3 inputs due to such derivative instruments not having observable market prices or implied volatilities for substantially the full term of the derivative asset or liability. For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivative instruments valued using indicative price quotations whose contract length extends into unobservable periods. The fair value of these swaps was determined using a discounted cash flow valuation technique based on a commodity forward curve, which is based on observable or public data sources and extrapolated when observable prices are not available. The significant unobservable inputs used in the fair value measurements of our Level 3 derivatives were the forward NGLs and natural gas pricing curves, for which a significant portion of the derivative instruments’ term is beyond available forward pricing.

 

The following table summarizes the changes in fair value of our financial instruments classified as Level 3 in the fair value hierarchy:

 

 

 

 

Commodity

 

 

 

 

Derivative Contracts

 

 

 

 

Asset (Liability)

 

Balance, December 31, 2024

 

$

—

 

Unrealized gain (loss) included in OCI

 

 

(1.1

)

Balance, June 30, 2025

 

$

(1.1

)