DISCOVERY PRODUCER SERVICES, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Description of Business
Unless the context clearly indicates otherwise, references in this report to “we”, “our”, “us” or similar
language refer to Discovery Producer Services LLC and its wholly owned subsidiary, Discovery Gas
Transmission LLC (DGT). We are a Delaware limited liability company formed on June 24, 1996 for the
purpose of constructing and operating a cryogenic natural gas processing plant near Larose, Louisiana and a
natural gas liquids fractionator near Paradis, Louisiana. DGT is a Delaware limited liability company formed on
June 24, 1996 for the purpose of constructing and operating a natural gas pipeline from offshore deep water in
the Gulf of Mexico to our gas processing plant in Larose, Louisiana. We have since connected several laterals
to the DGT pipeline to expand our presence in the Gulf.
We are owned 60% by Williams Field Services Group, LLC (a wholly owned subsidiary of Williams
Partners L.P. (WPZ)) and 40% by DCP Assets Holding, LP a wholly owned subsidiary of DCP Midstream
Partners, LP (DCP)). Williams Field Services Group, LLC is our operator. Herein, The Williams Companies,
Inc. who controls WPZ through its general partner interest and its subsidiaries, including WPZ and Williams
Field Services Group, LLC, are collectively referred to as “Williams.”
We evaluated our disclosure of subsequent events through the date, February 29, 2012, that our financial
statements were issued.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation.
The consolidated financial statements have been prepared based upon accounting
principles generally accepted in the United States and include the accounts of the parent and our wholly owned
subsidiary, DGT. Intercompany accounts and transactions have been eliminated.
Use of Estimates.
The preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Significant Estimates and assumptions include:
Asset retirement obligations
Depreciable asset lives
Cash and Cash Equivalents.
The cash and cash equivalent balance is primarily invested in funds with
high-quality, short-term securities and instruments that are issued or guaranteed by the U.S. government. These
securities have maturities of three months or less when acquired.
Trade Accounts Receivable.
Trade accounts receivable are carried on a gross basis, with no discounting,
less an allowance for doubtful accounts. We do not recognize an allowance for doubtful accounts at the time the
revenue that generates the accounts receivable is recognized. We estimate the allowance for doubtful accounts
based on existing economic conditions, the financial condition of the customers, and the amount and age of past
due accounts. Receivables are considered past due if full payment is not received by the contractual due date.
Past due accounts are generally written off against the allowance for doubtful accounts only after all collection
attempts have been exhausted. There was no allowance for doubtful accounts at December 31, 2011 and 2010.
Insurance Receivable.
Hurricane Katrina damaged our pipeline and onshore facilities in 2005, and
Hurricane Ike damaged the mainline and a lateral in 2008. Expenditures incurred for the repair of these
damages that we considered probable of recovery when incurred are recorded as insurance receivable. We
expense expenditures up to the insurance deductible, amounts not covered by insurance and amounts
subsequently determined not to be recoverable. The remaining insurance receivable related to Hurricane
Katrina and Ike was received in 2011.
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