Fair Value Measures

6 Months Ended

Jun. 30, 2013

Fair Value Measures [Abstract]

Fair Value Measures

Fair Value Measures

The Partnership’s financial assets and liabilities measured at fair value on a recurring basis are derivatives related to commodity swaps and embedded derivatives in the Series A Preferred Units. Derivatives related to commodity swaps are valued using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as 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 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 Measurements at June 30, 2013						Fair Value Measurements at December 31, 2012
	Fair Value Total		Significant Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Fair Value Total		Significant Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Commodity Derivatives:
Natural Gas	$	7	$	7	$	—	$	2	$	2	$	—
NGLs	4		4		—		1		1		—
Condensate	2		2		—		2		2		—
Total Assets	$	13	$	13	$	—	$	5	$	5	$	—
Liabilities:
Commodity Derivatives:
Natural Gas	$	—	$	—	$	—	$	5	$	5	$	—
NGLs	1		1		—		1		1		—
Embedded Derivatives in Series A Preferred Units	47		—		47		25		—		25
Total Liabilities	$	48	$	1	$	47	$	31	$	6	$	25

The following table presents the material unobservable inputs used to estimate the fair value of the embedded derivatives in the Series A Preferred Units:

Unobservable Input	June 30, 2013
Credit Spread	6.39	%
Volatility	20.56	%

Changes in the Partnership’s cost of equity and U.S. Treasury yields would cause a change in the credit spread used to value the embedded derivatives. Changes in the Partnership’s historical unit price volatility would cause a change in the volatility used to value the embedded derivatives.

The following table presents the changes in Level 3 derivatives measured on a recurring basis for the six months ended June 30, 2013. There were no transfers between the fair value hierarchy levels for the six months ended June 30, 2013.

	Embedded Derivatives in Series A Preferred Units
Net liability balance at December 31, 2012	$	25
Change in fair value	22
Net liability balance at June 30, 2013	$	47

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 aggregate fair value and carrying amount of the Senior Notes at June 30, 2013 was $2.40 billion and $2.40 billion, respectively. As of December 31, 2012, the aggregate fair value and carrying amount of the Senior Notes was $2.13 billion and $1.96 billion, respectively. The fair value of the Senior Notes is a Level 1 valuation based on third party market value quotations.