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Significant Accounting Policies (Policy)
9 Months Ended
Sep. 30, 2013
Significant Accounting Policies [Abstract]  
Basis Of Presentation

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete annual financial statements. During interim periods, the Partnership follows the accounting policies disclosed in its Annual Report on Form 10-K for the year ended December 31, 2012 (“2012 Annual Report”), filed with the Securities and Exchange Commission (“SEC”). The consolidated financial statements for the three and nine months ended September 30, 2013 and 2012 include all adjustments we believe are necessary for a fair statement of the results for the interim periods. The consolidated financial statements include the accounts of the Partnership, its 100% owned subsidiaries, and investments we are deemed to control. All significant intercompany transactions have been eliminated upon consolidation. Prior period amounts have been revised to conform to current period presentation. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2013. These consolidated financial statements and other information included in this quarterly report should be read in conjunction with our consolidated financial statements and notes thereto included in our 2012 Annual Report.

The Partnership’s historical financial statements previously filed with the SEC have been revised in this quarterly report on Form 10-Q to include the results attributable to properties acquired from the Fund in December 2012 as if the Partnership owned such assets for all periods presented by the Partnership including the period from January 1, 2012 to September 30, 2012 as the transaction was between entities under common control. The consolidated financial statements for periods prior to the Partnership’s acquisition of the properties have been prepared from the Predecessor’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if the Partnership had owned the assets during the periods reported. See our accounting policy for transactions between entities under common control set forth in Note 2 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in our 2012 Annual Report.

 

Accounting Policy Updates/Revisions

Accounting Policy Updates

The accounting policies followed by the Partnership are set forth in Note 2 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in our 2012 Annual Report. With the exception of the general and administrative expense allocation, the following additions and modifications to our policies were made during the nine months ended September 30, 2013 to give effect to the controlling interest of ETSWDC.

General And Administrative Expenses Allocation

General and Administrative Expense Allocation

The Partnership reimburses QRM for general and administrative expenses allocated to us based on the estimated use of such services between us and the Fund. The fee includes direct expenses plus an allocation of compensation costs based on employee time expended and other indirect expenses based on multiple operating metrics. If our sponsor raises additional funds in the future, the quarterly administrative services costs will be further divided to include the sponsor’s additional funds as well. QRM has discretion to determine in good faith the proper allocation of the charges pursuant to the Services Agreement. Management believes this allocation methodology is a reasonable method of allocating general and administrative expenses between us and the Fund and provides for a reasonably accurate depiction of what our general and administrative expenses would be on a stand-alone basis without affiliations with the Fund or QRM.

Cash And Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with maturities of three months or less when acquired which are stated at cost and approximate fair value. Our cash and cash equivalents consist of cash in banks and investments in money market accounts.

Investments

Investments

Investments consist of debt and equity securities, all of which are classified as available-for-sale and stated at fair value on our consolidated balance sheet. Accordingly, unrecognized changes in fair value and the related deferred tax effect are excluded from earnings and reported as a separate component within our consolidated statement of other comprehensive income. Changes in fair value of securities sold are computed based on the specific identification of the securities sold and reclassified from other comprehensive income into earnings in the period sold.

Other Property And Equipment

Other Property, Plant and Equipment

Other property, plant and equipment consists of property and equipment related to the disposal of saltwater in our East Texas fields and are held at cost and depreciated on a straight-line basis over 5 to 25 years.

Pensions And Other Postretirement Benefits

Pensions and Other Postretirement Benefits

We recognize the overfunded or underfunded status of the pension and postretirement benefit plans as either assets or liabilities on our consolidated balance sheet. A plan’s funded status is the difference between the fair value of the plan assets and the plan’s benefit obligation. The plan’s benefit obligation is based on estimates using management’s best estimate and judgments which includes independent actuarial service assumptions to determine the plan obligation. We record the plan’s cost and income – unrecognized losses and gains, unrecognized prior service costs and credits and any transition obligations – in our statement of other comprehensive income until they are amortized into earnings as a component of benefit costs.

Asset Retirement Obligations

Asset Retirement Obligations

We have significant obligations to plug and abandon oil, natural gas and saltwater disposal wells and related equipment at the end of oil and natural gas production or saltwater disposal operations. We incur these liabilities upon acquiring or drilling a well. GAAP requires entities to record the fair value of a liability for an asset retirement obligation (“ARO”) in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Over time, changes in the present value of the liability are accreted and expensed. The capitalized asset costs are depleted as a component of the full cost pool. The fair values of additions to the ARO liability are estimated using present value techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandonment costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) inflation factors; and (iv) a credit-adjusted risk free rate. Future revisions to ARO estimates will impact the present value of existing ARO liabilities and corresponding adjustments will be made to the capitalized asset retirement costs balance. Upon settlement of liabilities related to our oil and natural gas properties, we adjust the full cost pool to the extent the actual costs differ from the recorded liability. Upon settlement of liabilities related to our other property, plant and equipment, we record a gain or loss in earnings to the extent the actual costs differ from the recorded liability.

Income Taxes

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

Effective with the acquisition of ETSWDC in August 2013, we adopted ASU 2013-02, Comprehensive Income: Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income (AOCI). The ASU requires aggregated disclosures of amounts reclassified out of AOCI as well as a presentation of changes in AOCI balances by component. The changes in AOCI by component, including amounts reclassified out of AOCI in their entirety are presented in the consolidated statement of comprehensive income. This update did not impact our balance sheet, results of operations or cash flows.

 

In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities (ASU 2011-11).  The objective of this update is to provide enhanced disclosures that will enable the users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position.  The amendment requires entities to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement.  This scope would include financial and derivative instruments that either offset in accordance with U.S. GAAP or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with U.S. GAAP.  This amendment became effective for annual reporting periods beginning on or after January 1, 2013, and the interim periods within those annual periods. We adopted this update, which expanded disclosures, in January 2013 and it did not have a material impact on our financial position, results of operations or cash flows. Refer to Note 6 – Derivative Activities for details on the expanded disclosures.

 

In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU 2011-11. This ASU issuance did not impact our adoption of ASU 2011-11 as noted above.