Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Derivative Financial Instruments

Schedule of notional amounts of derivative contracts

As of June 30, 2013, the Partnership had the following outstanding commodity contracts that were entered into to manage cash flow risk associated with future sales of NGLs or future purchases of natural gas:

Derivative contracts not designated as hedging instruments	Financial Position	Notional Quantity (net)
Crude Oil (bbl)	Short	1,885,366
Natural Gas (MMBtu)	Long	5,173,965
NGLs (gal)	Short	133,196,994

Schedule reconciling liability recorded for an embedded derivative

See the following table for a reconciliation of the liability recorded for the embedded derivative as of June 30, 2013 (in thousands):

Fair value of commodity contract	$	61,587
Inception value for period from April 1, 2015 to December 31, 2022	(53,507		)
Derivative liability as of June 30, 2013	$	8,080

Schedule of derivative instruments not designated as hedging instruments and their location in the financial statements

The impact of the Partnership’s derivative instruments on its Condensed Consolidated Balance Sheets is summarized below (in thousands):

	Assets				Liabilities
Derivative instruments not designated as hedging instruments and their balance sheet location	June 30, 2013		December 31, 2012		June 30, 2013			December 31, 2012
Commodity contracts(1)
Fair value of derivative instruments — current	$	24,746	$	19,504	$	(17,871	)	$	(27,229	)
Fair value of derivative instruments - long-term	12,418		10,878		(2,010		)	(32,190		)
Total	$	37,164	$	30,382	$	(19,881	)	$	(59,419	)

(1) Includes Embedded Derivatives in Commodity Contracts as discussed above.

The impact of the Partnership’s derivative instruments on its Condensed Consolidated Statements of Operations is summarized below (in thousands):

Derivative contracts not designated as hedging instruments and the location of	Three months ended June 30,						Six months ended June 30,
gain or (loss) recognized in income	2013			2012			2013			2012
Revenue: Derivative gain (loss)
Realized gain (loss)	$	3,089		$	2,841		$	6,987		$	(7,637	)
Unrealized gain	16,610			133,226			12,527			94,989
Total revenue: derivative gain	19,699			136,067			19,514			87,352
Derivative gain (loss) related to purchased product costs
Realized loss	(1,045		)	(7,793		)	(3,125		)	(14,867		)
Unrealized gain	21,477			59,372			34,261			47,646
Total derivative gain related to purchase product costs	20,432			51,579			31,136			32,779
Derivative (loss) gain related to facility expenses
Unrealized (loss) gain	(800		)	1,146			(468		)	2,892
Total gain	$	39,331		$	188,792		$	50,182		$	123,023

Schedule of impact on the balance sheet if Partnership had elected to net derivative positions subject to master netting arrangements

The table below summarizes the impact if the Partnership had elected to net its derivative positions that are subject to master netting arrangements (in thousands):

	Assets							Liabilities
As of June 30, 2013	Gross Amounts of Assets in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet			Net Amount		Gross Amounts of Liabilities in the Consolidated Balance Sheet			Gross Amounts Not Offset in the Consolidated Balance Sheet		Net Amount
Current
Commodity contracts	$	21,546	$	(8,219	)	$	13,327	$	(9,791	)	$	8,219	$	(1,572	)
Embedded derivatives in commodity contracts	3,200		—			3,200		(8,080		)	—		(8,080		)
Total current derivative instruments	24,746		(8,219		)	16,527		(17,871		)	8,219		(9,652		)
Non-current
Commodity contracts	9,941		(1,875		)	8,066		(2,010		)	1,875		(135		)
Embedded derivatives in commodity contracts	2,477		—			2,477		—			—		—
Total non-current derivative instruments	12,418		(1,875		)	10,543		(2,010		)	1,875		(135		)
Total derivative instruments	$	37,164	$	(10,094	)	$	27,070	$	(19,881	)	$	10,094	$	(9,787	)

	Assets							Liabilities
As of December 31, 2012	Gross Amounts of Assets in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet			Net Amount		Gross Amounts of Liabilities in the Consolidated Balance Sheet			Gross Amounts Not Offset in the Consolidated Balance Sheet		Net Amount
Current
Commodity contracts	$	16,438	$	(9,541	)	$	6,897	$	(16,679	)	$	9,541	$	(7,138	)
Embedded derivatives in commodity contracts	3,066		—			3,066		(10,550		)	—		(10,550		)
Total current derivative instruments	19,504		(9,541		)	9,963		(27,229		)	9,541		(17,688		)
Non-current
Commodity contracts	7,798		(2,637		)	5,161		(2,637		)	2,637		—
Embedded derivatives in commodity contracts	3,080		—			3,080		(29,553		)	—		(29,553		)
Total non-current derivative instruments	10,878		(2,637		)	8,241		(32,190		)	2,637		(29,553		)
Total derivative instruments	$	30,382	$	(12,178	)	$	18,204	$	(59,419	)	$	12,178	$	(47,241	)