5.3.20Derivative Financial Instruments
Further information about the financial risk management objectives and policies, the fair value measurement and hedge accounting of financial derivative instruments is included in Note 5.3.29 ‘Financial Instruments – Fair values and risk management’.
In the ordinary course of business and in accordance with its hedging policies as of December 31, 2016, the Company held multiple forward exchange contracts designated as hedges of expected future transactions for which the Company has firm commitments or forecasts. Furthermore, the Company held several interest rate swap contracts designated as hedges of interest rate financing exposure.
The fair value of the derivative financial instruments included in the statement of financial position is summarized as follows:
Derivative financial instruments
|
31 December 2016 |
31 December 2015 |
|||||
|---|---|---|---|---|---|---|
|
Assets |
Liabilities |
Net |
Assets |
Liabilities |
Net |
|
|
Interest rate swaps cash flow hedge |
6 |
170 |
(164) |
0 |
205 |
(205) |
|
Forward currency contracts cash flow hedge |
7 |
54 |
(47) |
2 |
86 |
(84) |
|
Forward currency contracts fair value through profit and loss |
26 |
12 |
14 |
18 |
41 |
(23) |
|
Total |
38 |
236 |
(198) |
21 |
332 |
(311) |
|
Non-current portion |
8 |
122 |
(113) |
0 |
167 |
(167) |
|
Current portion |
30 |
114 |
(84) |
21 |
164 |
(144) |
The ineffective portion recognized in the income statement (Note 5.3.7 ‘Net financing costs’) arises from cash flow hedges totaling a US$ 2 million loss (2015: US$ 5 million loss). The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the statement of financial position.
Forward Currency Contracts
The gross notional amount of the outstanding forward currency contracts at December 31, 2016 were US$ 2 billion (2015: US$ 2 billion) of which US$ 2 billion will mature in the next twelve months.
The net notional amount of the outstanding forward currency contracts at December 31, 2016 was US$ 1 billion (2015: US$ 1 billion) of which US$ 0 billion will mature in the next twelve months.
Interest Rate Swaps
The gross notional amount of the outstanding interest rate swap contracts at December 31, 2016 were US$ 7 billion (2015: US$ 4 billion) and US$ 7 billion (2015: US$ 7 billion) including forward-start contracts.
The net notional amount of the outstanding interest rate swap contracts at December 31, 2016 were US$ 5 billion (2015: US$ 3 billion) and US$ 5 billion (2015: US$ 6 billion) including forward-start contracts. The increase in the current outstanding interest rate swap notional is due to the start of the derivatives hedging the lease and operating phase of the financing related to FPSOs Cidade de Marica, Cidade de Saquarema and Turritella).
The most important floating rate is the US$ 3-month LIBOR. Details of interest percentages of the long-term debt are included in Note 5.3.24 ‘Loans and borrowings’.