(12) Derivatives

Commodity Swaps

The Partnership manages its exposure to fluctuation in commodity prices by hedging the impact of market fluctuations. Swaps are used to manage and hedge price and location risk related to these market exposures. Swaps are also used to manage margins on offsetting fixed-price purchase or sale commitments for physical quantities of natural gas and NGLs. The Partnership does not designate transactions as cash flow or fair value hedges for hedge accounting treatment under FASB ASC 815. Therefore, changes in the fair value of the Partnership's derivatives are recorded in revenue in the period incurred.

The Partnership commonly enters into various types of derivative financial transactions including "swing swaps," "third party on-system financial swaps," "storage swaps," "basis swaps," "processing margin swaps," "liquids swaps" and "put options." Swing swaps are generally short-term in nature (one month), and are usually entered into to protect against changes in the volume of daily versus first-of-month index priced gas supplies or markets. Third party on-system financial swaps are hedges that the Partnership enters into on behalf of its customers who are connected to its systems, wherein the Partnership fixes a supply or market price for a period of time for its customers and simultaneously enters into the derivative transaction. Storage swap transactions protect against changes in the value of gas that the Partnership has stored to serve various operational requirements. Basis swaps are used to hedge basis location price risk due to buying gas into one of the Partnership's systems on one index and selling gas off that same system on a different index. Processing margin financial swaps are used to hedge fractionation spread risk at the Partnership's processing plants relating to the option to process versus bypassing its equity gas. Liquids financial swaps are used to hedge price risk on liquid swaps not otherwise designated as cash flow hedges. Put options are purchased to hedge against declines in pricing and as such represent options, not obligations, to sell the related underlying volumes at a fixed price.

The components of loss on derivative activity in the consolidated statements of operations relating to commodity swaps are as follows for the period from March 7, 2014 through March 31, 2014 (in millions):




Change in fair value of derivatives	$	(0.7	)
Realized losses on derivatives	(0.6		)
Loss on derivative activity	$	(1.3	)

The fair value of derivative assets and liabilities relating to commodity swaps are as follows (in millions):



	March 31, 2014
Fair value of derivative assets — current	$	0.5
Fair value of derivative assets — long term	0.5
Fair value of derivative liabilities — current	(0.9		)
Fair value of derivative liabilities— long term	(0.9		)
Net fair value of derivatives	$	(0.8	)

Set forth below is the summarized notional volumes and fair value of all instruments held for price risk management purposes and related physical offsets at March 31, 2014. The remaining term of the contracts extend no later than December 2016.



			March 31, 2014
Commodity	Instruments	Unit	Volume		Fair Value
			(In millions)

NGL (short contracts)	Swaps	Gallons	(69.0	)	$	(0.5	)
NGL (long contracts)	Swaps	Gallons	54.8		(0.5		)
Natural Gas (long contracts)	Swaps	Mmbtu	0.3		0.1
Condensate (short contracts)	Swaps	Bbl	(0.1	)	0.1
Total fair value of derivatives					$	(0.8	)

On all transactions where the Partnership is exposed to counterparty risk, the Partnership analyzes the counterparty's financial condition prior to entering into an agreement, establishes limits and monitors the appropriateness of these limits on an ongoing basis. The Partnership primarily deals with two types of counterparties, financial institutions and other energy companies, when entering into financial derivatives on commodities. The Partnership has entered into Master International Swaps and Derivatives Association Agreements ("ISDAs") that allow for netting of swap contract receivables and payables in the event of default by either party. If the Partnership's counterparties failed to perform under existing swap contracts, the Partnership's maximum loss as of March 31, 2014 of $0.7 million would be reduced to $0.3 million due to the offsetting of gross fair value payables against gross fair value receivables as allowed by the ISDAs.

Fair Value of Derivative Instruments

Assets and liabilities related to the Partnership's derivative contracts are included in the fair value of derivative assets and liabilities and the profit and loss on the mark to market value of these contracts are recorded net as a loss on derivatives in the consolidated statement of operations. The Partnership estimates the fair value of all of its derivatve contracts using actively quoted prices. The estimated fair value of derivative contracts by maturity date was as follows (in millions):



	Maturity Periods
	Less than one year			One to two years			More than two years			Total fair value
March 31, 2014	$	(0.4	)	$	(0.1	)	$	(0.3	)	$	(0.8	)