Fair-Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair-Value Measurements

Fair-Value Measurements

We classify financial assets and liabilities into the following three levels based on the inputs used to measure fair value:

(1) Level 1 fair values are based on observable inputs such as quoted prices in active markets for identical assets and liabilities;

(2) Level 2 fair values are based on pricing inputs other than quoted prices in active markets for identical assets and liabilities and are either directly or indirectly observable as of the measurement date; and

(3) Level 3 fair values are based on unobservable inputs in which little or no market data exists.

As required by fair value accounting guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value requires judgment and may affect the placement of assets and liabilities within the fair value hierarchy levels.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2017 and December 31, 2016.

	Fair Value at								Fair Value at
	September 30, 2017								December 31, 2016
Recurring Fair Value Measures	Level 1			Level 2		Level 3			Level 1			Level 2		Level 3
Commodity derivatives:
Assets	$	546		$	—	$	—		$	3,764		$	—	$	—
Liabilities	$	(3,810	)	$	—				$	(11,278	)	$	—	$	—
Preferred Distribution Rate Reset Election	$	—		$	—	$	(36,726	)	$	—		$	—	$	—

Rollforward of Level 3 Fair Value Measurements

The following table provides a reconciliation of changes in fair value at the beginning and ending balances for our derivatives classified as level 3:

	Three Months Ended September 30,	Nine Months Ended September 30,
	2017	2017
Beginning Balance	—	—
Initial valuation of Preferred Distribution Rate Reset Election	(34,450)	(34,450)
Net Loss for the period included in earnings	(2,276)	(2,276)
Ending Balance	(36,726)	(36,726)

Our commodity derivatives include exchange-traded futures and exchange-traded options contracts. The fair value of these exchange-traded derivative contracts is based on unadjusted quoted prices in active markets and is, therefore, included in Level 1 of the fair value hierarchy.

The fair value of embedded derivative feature is based on a valuation model that estimates the fair value of the convertible preferred units with and without a Rate Reset Election. This model contains inputs, including our common unit price, a ten year history of the dividend yield, default probabilities and timing estimates which involve management judgment. A significant increase or decrease in the value of these inputs could result in a material change in fair value to this embedded derivative feature. We report unrealized gains and losses associated with this embedded derivative in our Unaudited Condensed Consolidated Statements of Operations as Other income (expense), net.

See Note 14 for additional information on our derivative instruments.

Other Fair Value Measurements

We believe the debt outstanding under our credit facility approximates fair value as the stated rate of interest approximates current market rates of interest for similar instruments with comparable maturities. At September 30, 2017 our senior unsecured notes had a carrying value and fair value of $2.4 billion compared to $1.8 billion and $1.9 billion, respectively, at December 31, 2016. The fair value of the senior unsecured notes is determined based on trade information in the financial markets of our public debt and is considered a Level 2 fair value measurement.