single pricing point at which our swap contracts will meet the collateral thresholds as we may transact multiple
commodities with the same counterparty. As of February 23, 2012, DCP Midstream, LLC had issued and
outstanding parental guarantees totaling $70.0 million in favor of certain counterparties to our commodity
derivative instruments to mitigate a portion of our collateral requirements with these counterparties. We pay
DCP Midstream, LLC a fee of 0.50% per annum on these guarantees. As of February 23, 2012, we had a
contingent letter of credit facility for up to $10.0 million, on which we pay a fee of 0.50% per annum. As of
February 23, 2012, we had no letters of credit issued on this facility; we will pay a net fee of 1.75% per annum
on letters of credit issued on this facility. This contingent letter of credit facility was issued directly by a
financial institution and does not reduce the available capacity under our credit facility. These parental
guarantees and contingent letter of credit facility reduce the amount of cash we may be required to post as
collateral. As of February 23, 2012, we had no cash collateral posted with counterparties. Depending on daily
commodity prices, the amount of collateral posted can go up or down on a daily basis. Predetermined collateral
thresholds for commodity derivative instruments guaranteed by DCP Midstream, LLC are generally dependent
on DCP Midstream, LLC’s credit rating and the thresholds would be reduced to zero in the event DCP
Midstream, LLC’s credit rating were to fall below investment grade.
Discovery is owned 40% by us and 60% by Williams Partners, LP. Discovery is managed by a
two-member management committee, consisting of one representative from each owner. The members of the
management committee have voting power corresponding to their respective ownership interests in
Discovery. All actions and decisions relating to Discovery require the unanimous approval of the owners except
for a few limited situations. Discovery must make quarterly distributions of available cash (generally, cash from
operations less required and discretionary reserves) to its owners. The management committee, by majority
approval, will determine the amount of the distributions. In addition, the owners are required to offer to
Discovery all opportunities to construct pipeline laterals within an “area of interest.” Calls for capital
contributions are determined by a vote of the management committee and require unanimous approval of both
owners in most instances.
Southeast Texas is owned 33.33% by us and 66.67% by two wholly-owned subsidiaries of DCP
Midstream, LLC. Southeast Texas is managed by a three-member management committee, consisting of one
representative appointed by us and two representatives from DCP Midstream, LLC. The members of the
management committee have voting power corresponding to their respective ownership interests in Southeast
Texas. Southeast Texas must make quarterly distributions of available cash (generally, cash from operations
less required and discretionary reserves) to its owners. In the event Southeast Texas has insufficient available
cash for a quarterly distribution (including pursuant to our fee-based arrangement), DCP Midstream, LLC will
assign its distribution rights, or contribute any distribution deficiency to Southeast Texas, the sole use of which
shall be to pay the distribution deficiency owing to us related to our fee-based arrangement on storage and
transportation gross margin, based on storage capacity and tailgate volumes. The management committee, by
majority approval, will determine the amount of the distributions. Calls for capital contributions are determined
by a vote of the management committee and require unanimous approval of the owners except in certain
situations, such as the breach or default of a material agreement or payment obligation, that are reasonably
likely to have a material adverse effect on the business, operations or financial condition of Southeast Texas.
On February 27, 2012, we entered into agreements with DCP Midstream, LLC, to acquire the remaining
66.67% interest in Southeast Texas for aggregate consideration of $240.0 million. This acquisition is expected
to close by the second quarter of 2012.
Working Capital
— Working capital is the amount by which current assets exceed current liabilities.
Current assets are reduced by our quarterly distributions, which are required under the terms of our partnership
agreement based on Available Cash, as defined in the partnership agreement. In general, our working capital is
impacted by changes in the prices of commodities that we buy and sell, inventory levels and other business
factors that affect our net income and cash flows. Our working capital is also impacted by the timing of
operating cash receipts and disbursements, borrowings of and payments on debt, capital expenditures, and
increases or decreases in restricted investments and other long-term assets.
We had a working capital deficit of $29.3 million as of December 31, 2011, compared to working capital
of $20.8 million as of December 31, 2010. Included in these working capital amounts are net derivative
working capital liabilities of $37.3 million and $41.1 million as of December 31, 2011 and December 31, 2010,
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