Crestwood Transaction And Midstream Operations

9 Months Ended

Sep. 30, 2011

Crestwood Transaction And Midstream Operations [Abstract]

Crestwood Transaction And Midstream Operations

2.  CRESTWOOD TRANSACTION AND MIDSTREAM OPERATIONS

     In October 2010, we completed the sale of all of our interests in KGS to Crestwood.  We received net proceeds of $700 million and recognized a gain of $473.2 million during the fourth quarter of 2010.  We have the right to collect up to an additional $72 million in future earn-out payments in 2012 and 2013, although we have recognized no assets related to these opportunities.  

     The operating results of KGS, as classified in our 2010 statement of income, are summarized below:

	For the Three			For the Nine
	Months Ended			Months Ended
	September 30, 2010			September 30, 2010
	(In thousands)
Revenue from third parties	$	4,371		$	11,928
GPT expense (1)		(20,923	)		(55,261	)
Ad valorem taxes		1,032			3,597
Other operations		1,101			3,099
DD&A		5,710			16,759
General and administrative expense		3,290			5,035
Operating results of midstream operations		14,161			38,699
Interest and other expense		(2,527	)		(6,916	)
Results of midstream operations before income tax		11,634			31,783
Income tax expense		(4,101	)		(11,235	)
Results of midstream operations, net of income tax	$	7,533		$	20,548

⁽¹⁾ Our KGS operations earned revenue from gathering and processing of our natural gas and NGL production.  This revenue was consolidated as a reduction of processing, gathering and transportation expense for purposes of presenting our consolidated statements of income.

          In the third quarter of 2010, our board of directors also approved a plan for disposal of the HCDS, which is included in our midstream segment.  We conducted an impairment analysis of the HCDS and recognized a charge of $28.6 million for impairment in the third quarter of 2010. At December 31, 2010, we presented HCDS assets and liabilities held for sale as follows:

	December 31,
	2010
Assets:
Accounts receivable — net	$	57
Property, plant and equipment — net		27,121
Total	$	27,178
Liabilities:
Other non-current liabilities	$	1,431
Total	$	1,431

          We have discontinued our efforts to actively market the HCDS assets to prospective buyers and GAAP generally limits reporting such items as held for sale to one year. As a result, we no longer report the HCDS in our financial statements as an asset held for sale.  

          Note 3 to the consolidated financial statements in our 2010 Annual Report on Form 10-K contains additional information regarding the Crestwood Transaction.