identify primary suppliers as those individually representing 10% or more of our total natural gas supply. We
had one supplier of natural gas representing 10% or more of our total natural gas supply during the year ended
December 31, 2011. We actively seek new supplies of natural gas, both to offset natural declines in the
production from connected wells and to increase throughput volume. We obtain new natural gas supplies in our
operating areas by contracting for production from new wells, connecting new wells drilled on dedicated
acreage, or by obtaining natural gas that has been directly received or released from other gathering systems.
We sell natural gas to marketing affiliates of natural gas pipelines, marketing affiliates of integrated oil
companies, marketing affiliates of DCP Midstream, LLC, national wholesale marketers, industrial end-users
and gas-fired power plants. We typically sell natural gas under market index related pricing terms. The NGLs
extracted from the natural gas at our processing plants are sold at market index prices to DCP Midstream, LLC
or its affiliates, or to third parties. In addition, under our merchant arrangements, we use a subsidiary of DCP
Midstream, LLC as our agent to purchase natural gas from third parties at pipeline interconnect points, as well
as residue gas from our Minden and Ada processing plants, and then resell the aggregated natural gas to third
parties.
We manage the commodity price risk of our supply portfolio and sales portfolio with both physical and
financial transactions. As a service to our customers, we may enter into physical fixed price natural gas
purchases and sales, utilizing financial derivatives to swap this fixed price risk back to market index. We may
enter into financial derivatives to lock in time spreads and price differentials across the Pelico system to
maximize the value of pipeline and storage capacity. We also gather, process and transport natural gas under
fee-based transportation contracts. Our Southeast Texas system also manages the value of pipeline and storage
capacity in a similar manner, although our 33.33% distributions for the first seven years are fee-based such that
we are not exposed to that activity.
NGL Logistics Segment
Our pipelines, fractionation facilities and storage facility provide transportation, fractionation and storage
services for customers, primarily on a fee basis. We have entered into contractual arrangements with DCP
Midstream, LLC and others that generally require customers to pay us to transport or store NGLs pursuant to a
fee-based rate that is applied to volumes. Therefore, the results of operations for this business segment are
generally dependent upon the volume of product transported, fractionated or stored and the level of fees
charged to customers. We do not take title to the products transported on our NGL pipelines, fractionated in our
fractionation facilities or stored in our storage facility; rather, the customer retains title and the associated
commodity price risk. DCP Midstream, LLC provides 100% of volumes transported on the Wattenberg,
Seabreeze and Wilbreeze pipelines. For the Black Lake pipeline, any line loss or gain in NGLs is allocated to
the shipper. The volumes of NGLs transported on our pipelines are dependent on the level of production of
NGLs from processing plants connected to our NGL pipelines. When natural gas prices are high relative to
NGL prices, it is less profitable to process natural gas because of the higher value of natural gas compared to
the value of NGLs and because of the increased cost of separating the NGLs from the natural gas. As a result,
we have experienced periods in the past, in which higher natural gas prices reduce the volume of NGLs
extracted at plants connected to our NGL pipelines and, in turn, lower the NGL throughput on our assets. In the
transportation markets we serve, our pipelines are the sole pipeline facility transporting NGLs from the supply
source. DCP Midstream, LLC, the largest gatherer and processor in the DJ Basin, delivers NGLs to our
fractionation facilities under a long-term fractionation agreement. Our storage facility in Marysville, Michigan
provides storage and related services primarily to depositories operating in the liquid hydrocarbons industry.
Wholesale Propane Logistics Segment
We operate a wholesale propane logistics business in the mid-Atlantic, upper midwest and northeastern
United States. We purchase large volumes of propane supply from natural gas processing plants and
fractionation facilities, and crude oil refineries, primarily located in the Texas and Louisiana Gulf Coast area,
Canada and other international sources, and transport these volumes of propane supply by pipeline, rail or ship
to our terminals and storage facilities in the mid-Atlantic, midwest and the northeastern areas of the United
States. We identify primary suppliers as those individually representing 10% or more of our total propane
supply. Our three primary suppliers of propane, two of which are affiliated entities, represented approximately
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