How are foreign currency contracts valued by Petro Stopping Center?
Petro_Stopping_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
8,088 13,180 Less: netting by counterparty (831) 12,349 Fair value of derivative liabilities Level 1 (49) Level 2 (3,977) Level 3 (6,217) (10,243) Less: netting by counterparty 831 (9,412) Net fair value 2,937#### Level 3 derivatives
The following table shows the changes during the year in the net fair value of derivatives held for trading purposes within level 3 of the fair value hierarchy.
| Oil | Natural gas | Power price | Currency | Total | |
|---|---|---|---|---|---|
| price | price | ||||
| Fair value of contracts at January 1, 2024 | 69 | 595 | (27) | 219 | 856 |
| Gains (losses) recognized in the income statement | (39) | (82) | 212 | (192) | (101) |
| Settlements | (11) | (99) | (343) | (14) | (467) |
| Transfers out of level 3 | 2 | (11) | (77) | — | (86) |
| Net fair value of contracts at December 31, 2024 | 21 | 403 | (235) | 13 | 202 |
| Deferred day-one gains (losses) | 1,003 | ||||
| Derivative asset (liability) | 1,205 | ||||
| $ million | |||||
| Oil price | Natural gas price | Power price | Currency | Total | |
| Fair value of contracts at January 1, 2023 | 49 |
Source: Item 14 — Other investments (FDD pages 131–208)
What This Means (2025 FDD)
According to Petro Stopping Center's 2025 Franchise Disclosure Document, the fair value of currency contracts is detailed in a table that also includes values for oil, natural gas, and power price contracts. The table provides a snapshot of these contracts at different points in time. Specifically, it shows the fair value of currency contracts at the beginning of 2023 and 2024, any gains or losses recognized in the income statement, settlements, transfers out of level 3, and the net fair value of the contracts at the end of 2023 and 2024. These values are expressed in millions of dollars.
For instance, the fair value of currency contracts at January 1, 2023, was $61 million, which increased to $219 million by January 1, 2024. During 2023, Petro Stopping Center recognized gains of $161 million from these contracts, while in 2024, they experienced losses of $192 million. The net fair value of these contracts at December 31, 2023, was $219 million, but it decreased to $13 million by December 31, 2024.
This information is useful for prospective franchisees as it provides insight into how Petro Stopping Center manages and values its financial instruments, including those related to currency. Understanding these valuations can help franchisees assess the financial strategies and risk management practices of the company. However, the FDD does not elaborate on the specific methods or assumptions used to determine the fair value of these contracts, so further inquiry may be needed to fully understand the valuation process.