DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
of the residue natural gas, NGLs and condensate, or an agreed-upon percentage of the proceeds based on
index related prices for the natural gas, NGLs and condensate, regardless of the actual amount of the
sales proceeds we receive. We keep the difference between the proceeds received and the amount
remitted back to the producer. Under percent-of-liquids arrangements, we do not keep any amounts
related to residue natural gas proceeds and only keep amounts related to the difference between the
proceeds received and the amount remitted back to the producer related to NGLs and condensate.
Certain of these arrangements may also result in our returning all or a portion of the residue natural gas
and/or the NGLs to the producer, in lieu of returning sales proceeds. Additionally, these arrangements
may include fee-based components. Our revenues under percent-of-proceeds arrangements relate
directly with the price of natural gas, NGLs and condensate. Our revenues under percent-of-liquids
arrangements relate directly with the price of NGLs and condensate.
•
Propane sales arrangements
— Under propane sales arrangements, we generally purchase propane from
natural gas processing plants and fractionation facilities, and crude oil refineries. We sell propane on a
wholesale basis to retail propane distributors, who in turn resell to their retail customers. Our sales of
propane are not contingent upon the resale of propane by propane distributors to their retail customers.
Our marketing of natural gas and NGLs consists of physical purchases and sales, as well as positions in
derivative instruments.
We recognize revenues for sales and services under the four revenue recognition criteria, as follows:
•
Persuasive evidence of an arrangement exists
— Our customary practice is to enter into a written
contract.
•
Delivery
— Delivery is deemed to have occurred at the time custody is transferred, or in the case of
fee-based arrangements, when the services are rendered. To the extent we retain product as inventory,
delivery occurs when the inventory is subsequently sold and custody is transferred to the third party
purchaser.
•
The fee is fixed or determinable
— We negotiate the fee for our services at the outset of our fee-based
arrangements. In these arrangements, the fees are nonrefundable. For other arrangements, the amount of
revenue, based on contractual terms, is determinable when the sale of the applicable product has been
completed upon delivery and transfer of custody.
•
Collectability is reasonably assured
— Collectability is evaluated on a customer-by-customer basis.
New and existing customers are subject to a credit review process, which evaluates the customers’
financial position (for example, credit metrics, liquidity and credit rating) and their ability to pay. If
collectability is not considered probable at the outset of an arrangement in accordance with our credit
review process, revenue is not recognized until the cash is collected.
We generally report revenues gross in the consolidated statements of operations, as we typically act as the
principal in these transactions, take custody to the product, and incur the risks and rewards of ownership. We
recognize revenues for non-trading commodity derivative activity net in the consolidated statements of
operations as gains and losses from commodity derivative activity
.
These activities include mark-to-market
gains and losses on energy trading contracts and the settlement of financial or physical energy trading contracts.
Quantities of natural gas or NGLs over-delivered or under-delivered related to imbalance agreements with
customers, producers or pipelines are recorded monthly as accounts receivable or accounts payable using
current market prices or the weighted-average prices of natural gas or NGLs at the plant or system. These
balances are settled with deliveries of natural gas or NGLs, or with cash.
Significant Customers
— There were no third party customers that accounted for more than 10% of total
operating revenues for the years ended December 31, 2011, 2010 and 2009. There was one third party customer
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