At December 31, 2011, the aggregate fair value of the fixed price commodity swaps and collar
arrangements described above was a net loss of $40.1 million.
Our annual sensitivities for 2012 as shown in the table below, exclude the impact from non-cash
mark-to-market on our commodity derivatives. We utilize crude oil and NGL derivatives to mitigate a portion
of our commodity price exposure for NGLs, and show our sensitivity to changes in the relationship between the
pricing of NGLs and crude oil. For fixed price natural gas and crude oil, the sensitivities are associated with our
unhedged volumes. For our NGL to crude oil price relationship, the sensitivity is associated with both hedged
and unhedged equity volumes.
Commodity Sensitivities Excluding Non-Cash Mark-To-Market
Per Unit Decrease
Unit of
Measurement
Estimated
Decrease in
Annual Net
Income
Attributable
to Partners
(Millions)
Natural gas prices . . . . . . . . . . . . . . . . . . . . . . . . $
1.00 MMBtu
$1.7
Crude oil prices (a) . . . . . . . . . . . . . . . . . . . . . . . $
5.00 Barrel
$3.6
NGL to crude oil price relationship (b) . . . . . . . . 5 percentage point
change Barrel
$7.2
(a) Assuming 60% NGL to crude oil price relationship. At crude oil prices outside of our collar range of
approximately $80.00 to $97.40, this sensitivity decreases by $0.8 million.
(b) Assuming 60% NGL to crude oil price relationship and $90.00 /Bbl crude oil price. Generally, this
sensitivity changes by $0.8 million for each $10.00/Bbl change in the price of crude oil. As crude oil prices
increase from $90.00 /Bbl, we become slightly more sensitive to the change in the relationship of NGL
prices to crude oil prices. As crude oil prices decrease from $90.00 /Bbl, we become less sensitive to the
change in the relationship of NGL prices to crude oil prices.
In addition to the linear relationships in our commodity sensitivities above, additional factors cause us to
be less sensitive to commodity price declines. A portion of our net income is derived from fee-based contracts
and a certain percentage of liquids processing arrangements that contain minimum fee clauses in which our
processing margins convert to fee-based arrangements as NGL prices decline.
The above sensitivities exclude the impact from arrangements where producers on a monthly basis may
elect to not process their natural gas in which case we retain a portion of the customers’ natural gas in lieu of
NGLs as a fee. The above sensitivities also exclude certain related processing arrangements where we control
the processing or by-pass of the production based upon individual economic processing conditions. Under each
of these types of arrangements, our processing of the natural gas would yield favorable processing margins.
Less than 10% of our gas throughput is associated with these arrangements.
We estimate the following non-cash sensitivities in 2012 related to the mark-to-market on our commodity
derivatives associated with our commodity cash flow protection activities:
Non-Cash Mark-To-Market Commodity Sensitivities
Per Unit Increase
Unit of
Measurement
Estimated
Mark-to-Market
Impact (Decrease
in Net Income
Attributable to
Partners)
(Millions)
Natural gas prices . . . . . . . . . . . . . . . . . . . . . . . . .
$1.00 MMBtu
$ 1.5
Crude oil prices . . . . . . . . . . . . . . . . . . . . . . . . . .
$5.00
Barrel
$12.0
NGL prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.10
Gallon
$ 2.4
While the above commodity price sensitivities are indicative of the impact that changes in commodity
prices may have on our annualized net income, changes during certain periods of extreme price volatility and
99