Fair Value Measures

12 Months Ended

Dec. 31, 2011

Fair Value Measures [Abstract]

Fair Value Measures

Fair Value Measures

The fair value measurement provisions establish a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

• Level 1—unadjusted quoted prices for identical assets or liabilities in active accessible markets;

• Level 2—inputs that are observable in the marketplace other than those classified as Level 1; and

• Level 3—inputs that are unobservable in the marketplace and significant to the valuation.

Entities are encouraged to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation.

The Partnership's financial assets and liabilities measured at fair value on a recurring basis are derivatives related to interest rate swaps, commodity swaps, ethane put options and embedded derivatives in the Series A Preferred Units. Derivatives related to interest rate, commodity swaps and ethane put options are valued using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as future interest rates and commodity prices. These market inputs are utilized in the discounted cash flow calculation considering the instrument's term, notional amount, discount rate and credit risk and are classified as Level 2 in the hierarchy. Embedded derivatives related to Series A Preferred Units are valued using a binomial lattice model. The market inputs utilized in the model include credit spread, probabilities of the occurrence of certain events, common unit price, dividend yield, and expected volatility, and are classified as Level 3 in the hierarchy.

The following table presents the Partnership’s derivative assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurement at December 31, 2011						Fair Value Measurement at December 31, 2010
	Fair Value Total		Level 2		Level 3		Fair Value Total		Level 2		Level 3
Assets
Commodity Derivatives:
Natural Gas	$	3,907	$	3,907	$	—	$	2,481	$	2,481	$	—
Natural Gas Liquids	94		94		—		192		192		—
Condensate	538		538		—		—		—		—
Ethane - Put Options	309		309		—		—		—		—
Total Assets	$	4,848	$	4,848	$	—	$	2,673	$	2,673	$	—
Liabilities
Interest Rate Derivatives	$	470	$	470	$	—	$	2,584	$	2,584	$	—
Commodity Derivatives:
Natural Gas	—		—		—		427		427		—
Natural Gas Liquids	8,561		8,561		—		10,684		10,684		—
Condensate	1,567		1,567		—		3,581		3,581		—
Embedded Derivatives in Series A Preferred Units	39,049		—		39,049		57,023		—		57,023
Total Liabilities	$	49,647	$	10,598	$	39,049	$	74,299	$	17,276	$	57,023

The following table presents the changes in Level 3 derivatives measured on a recurring basis for the years ended December 31, 2011 and 2010. There were no transfers between Level 2 and Level 3 derivatives for the years ended December 31, 2011 and 2010.

	Embedded Derivatives in Series A Preferred Units
Balance at January 1, 2010	$	44,594
Change in fair value	4,039
Balance at May 25, 2010	48,633
Change in fair value	8,390
Balance at December 31, 2010	57,023
Additions	—
Change in fair value	(17,974		)
Balance at December 31, 2011	$	39,049

The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to their short-term maturities. Long-term debt, other than the senior notes, is comprised of borrowings under which interest accrues under a floating interest rate structure. Accordingly, the carrying value approximates fair value.

The following table presents the estimated fair value of senior notes, based on third party market value quotations, as of December 31, 2011 and 2010:

Outstanding Senior Notes	December 31, 2011		December 31, 2010
2016 Notes	$	276,250	$	274,375
2018 Notes	643,500		607,500
2021 Notes	516,250		N/A

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N/A:    The 2021 Notes were issued in May 2011.