DCP SOUTHEAST TEXAS HOLDINGS, GP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Years Ended December 31, 2011, 2010 and 2009
We manage our overall risk at the portfolio level, and in the execution of our strategy, we may use a
combination of financial instruments, which may be classified within any level. Since Level 1 and Level 2 risk
management instruments are not included in the rollforward below, the gains or losses in the table do not reflect
the effect of our total risk management activities. During the year ended December 31, 2011, we had no
derivative financial instruments classified as Level 3.
Commodity Derivative Instruments
Current
Assets
Long-Term
Assets
Current
Liabilities
Long-Term
Liabilities
(Millions)
Year ended December 31, 2010:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.8 $ 0.5 $(0.8) $(0.3)
Net realized and unrealized gains (losses) included in earnings . . . 0.1
(0.5) —
0.3
Transfers into Level 3 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —
Transfers out of Level 3 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) —
0.3 —
Purchases, issuances and settlements, net . . . . . . . . . . . . . . . . . . . . (0.4) —
0.5 —
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ — $ —
Net unrealized gains (losses) still held included in earnings (b) . . . $ — $ — $ — $ —
(a) Amounts transferred in and amounts transferred out are reflected at fair value as of the end of the period.
(b) Represents the amount of total gains or losses for the period, included in gains or losses from commodity
derivative activity, net, attributable to change in unrealized gains or losses relating to assets and liabilities
classified as Level 3 that are still held as of December 31, 2010.
During the year ended December 31, 2011, we settled the $2.1 million contingent consideration, which
was classified as Level 3, associated with our acquisition of the Raywood processing plant and Liberty
gathering system from Ceritas. During the year ended December 31, 2010, we recognized the fair value of
contingent consideration of $3.1 million in relation to our acquisition of the Raywood processing plant and
Liberty gathering system, which was recorded to other current liabilities in our consolidated balance sheets.
During the year ended December 31, 2010, we reassessed the $3.1 million fair value of the contingent
consideration and adjusted the liability to $2.1 million. Accordingly, we recognized approximately $1.0 million
in other income in our consolidated statements of operations during the year ended December 31, 2010.
During the years ended December 31, 2011 and 2010, we had no transfers into or out of Levels 1 and 2. To
qualify as a transfer, the asset or liability must have existed in the previous reporting period and moved into a
different level in the current period.
Estimated Fair Value of Financial Instruments
We have determined fair value amounts using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we
could realize in a current market exchange. The use of different market assumptions and/or estimation methods
may have a material effect on the estimated fair value amounts.
The fair value of accounts receivable and accounts payable are not materially different from their carrying
amounts because of the short-term nature of these instruments. Unrealized gains and unrealized losses on
derivative instruments are carried at fair value.
214