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Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2013

Variable Interest Entity

Open Oil and Natural Gas Commodity Derivative Contracts

At June 30, 2013, the Company’s open commodity derivative contracts consisted of the following:

Oil Price Swaps

	Notional (MBbls)			Weighted Average Fixed Price
July 2013 - December 2013	6,211			$	99.19
January 2014 - December 2014	7,511			$	92.42
January 2015 - December 2015	5,076			$	83.69

Natural Gas Price Swaps

	Notional (MMcf)			Weighted Average Fixed Price
July 2013 - December 2013	28,520			$	4.11

Oil Collars - Two-way

	Notional (MBbls)			Collar Range
July 2013 - December 2013	84			$80.00	—	$102.50

Oil Collars - Three-way

	Notional (MBbls)			Sold Put	Purchased Put	Sold Call
January 2014 - December 2014	8,213			$70.00	$90.20	$100.00
January 2015 - December 2015	2,920			$73.13	$90.82	$103.13

Natural Gas Collars

	Notional (MMcf)			Collar Range
July 2013 - December 2013	3,432			$3.78	—	$6.71
January 2014 - December 2014	937			$4.00	—	$7.78
January 2015 - December 2015	1,010			$4.00	—	$8.55

Grey Ranch Plant, L.P

Variable Interest Entity

Assets and Liabilities Included in Unaudited Condensed Consolidated Balance Sheets

GRLP’s assets and liabilities, after considering the effects of intercompany eliminations, included in the accompanying unaudited condensed consolidated balance sheets at June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30, 2013				December 31, 2012
Cash and cash equivalents	$	226			$	1,080
Accounts receivable, net	18				20
Prepaid expenses	33				64
Other current assets	109				109
Total current assets	386				1,273
Other property, plant and equipment, net	1,205				1,246
Total assets	$	1,591			$	2,519
Accounts payable and accrued expenses	$	137			$	274
Total liabilities	$	137			$	274

Royalty Trusts

Variable Interest Entity

Royalty Trust Initial Public Offerings

The following table summarizes information about each Royalty Trust upon completion of its initial public offering:

		Mississippian Trust I				Permian Trust				Mississippian Trust II
Net proceeds of offering (in millions)		$	336.9			$	580.6			$	587.1
Total outstanding common units		21,000,000				39,375,000				37,293,750
Total outstanding subordinated units		7,000,000				13,125,000				12,431,250
Beneficial interest owned by Company(1)		38.4		%		34.3		%		39.9		%
Liquidation date(2)		12/31/2030				3/31/2031				12/31/2031

____________________

(1) Subsequent to the initial public offerings, the Company sold common units of the Mississippian Trust I and the Permian Trust it owned in transactions exempt from registration under Rule 144 under the Securities Act. These transactions decreased the Company’s beneficial interests in the Royalty Trusts. See further discussion of the unit sales below.

(2) At the time each Royalty Trust terminates, 50% of the royalty interests conveyed to the Royalty Trust will automatically revert to the Company, and the remaining 50% will be sold with the proceeds distributed to Royalty Trust unitholders.

Royalty Trusts Distributions

The Royalty Trusts declared and paid quarterly distributions during the three and six-month periods ended June 30, 2013 and 2012 as follows (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Total distributions		$	68,449			$	65,948			$	144,810			$	118,017
Distributions to third-party unitholders		$	47,459			$	44,062			$	98,716			$	76,801

The following distributions are expected to be paid on August 29, 2013 to holders of record as of the close of business on August 14, 2013 (in thousands):

Royalty Trust		Total Distribution				Amount to be Distributed to Third-Party Unitholders
Mississippian Trust I		$	16,920			$	12,512
Permian Trust		30,707				21,353
Mississippian Trust II		33,952				20,422
Total		$	81,579			$	54,287

Open Oil and Natural Gas Commodity Derivative Contracts

The tables below present the open oil and natural gas commodity derivative contracts at June 30, 2013 underlying the derivatives agreements. The combined volume in the tables below reflects the total volume of the Royalty Trusts’ open oil and natural gas commodity derivative contracts.

Oil Price Swaps Underlying the Derivatives Agreements

	Notional (MBbls)			Weighted Average Fixed Price
July 2013 - December 2013	803			$	103.04
January 2014 - December 2014	1,862			$	100.70
January 2015 - December 2015	630			$	101.03

Natural Gas Collars Underlying the Derivatives Agreements

	Notional (MMcf)			Collar Range
July 2013 - December 2013	432			$	4.00		—	$	7.15
January 2014 - December 2014	937			$	4.00		—	$	7.78
January 2015 - December 2015	1,010			$	4.00		—	$	8.55

Oil Price Swaps Underlying the Derivatives Agreements and Novated to the Royalty Trusts

	Notional (MBbls)			Weighted Average Fixed Price
July 2013 - December 2013	627			$	103.27
January 2014 - December 2014	991			$	100.79
January 2015 - March 2015	141			$	100.90

Assets and Liabilities Included in Unaudited Condensed Consolidated Balance Sheets

The Royalty Trusts’ assets and liabilities, after considering the effects of intercompany eliminations, included in the accompanying unaudited condensed consolidated balance sheets at June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30, 2013				December 31, 2012
Cash and cash equivalents(1)	$	7,293			$	7,445
Accounts receivable	28,620				28,596
Derivative contracts	9,864				10,286
Total current assets	45,777				46,327
Investment in royalty interests(2)	1,325,942				1,325,942
Less: accumulated depletion	(148,009		)		(103,746		)
	1,177,933				1,222,196
Derivative contracts	7,594				7,660
Total assets	$	1,231,304			$	1,276,183
Accounts payable and accrued expenses	$	3,081			$	1,101
Total liabilities	$	3,081			$	1,101

____________________

(1) Includes $3.0 million held by the trustee at June 30, 2013 and December 31, 2012 as reserves for future general and administrative expenses.

(2) Investment in royalty interests is included in oil and natural gas properties in the accompanying unaudited condensed consolidated balance sheets, and was determined by allocating the historical net book value of the Company’s full cost pool based on the fair value of each Royalty Trust’s royalty interests relative to the fair value of the Company’s full cost pool.

Royalty Trusts Ownership Interest

The Company’s beneficial interests in the Royalty Trusts at June 30, 2013 and December 31, 2012 were as follows:

	June 30, 2013			December 31, 2012
Mississippian Trust I	26.9	%		26.9	%
Permian Trust	30.5	%		30.5	%
Mississippian Trust II	39.9	%		39.9	%

Pinon Gathering Company LLC

Variable Interest Entity

Schedule Of Amounts Due To/From Variable Interest Entities

Amounts due from and due to PGC as of June 30, 2013 and December 31, 2012 included in the accompanying unaudited condensed consolidated balance sheets are as follows (in thousands):

	June 30, 2013				December 31, 2012
Accounts receivable due from PGC	$	1,744			$	1,976
Accounts payable due to PGC	$	4,661			$	5,053

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The tabular disclosure of the effects of any changes in a parent's ownership interest in a subsidiary on the equity attributable to the parent if the ownership interests in a subsidiary changes during the period. The changes represented by this element did not result in the deconsolidation of the subsidiary.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 810

-SubTopic 10

-Section 55

-Paragraph 4M

-URI http://asc.fasb.org/extlink&oid=18733213&loc=SL4591554-111686



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Accounting Research Bulletin (ARB)

-Number 51

-Paragraph A7

-Appendix A



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Accounting Research Bulletin (ARB)

-Number 51

-Paragraph 38

-Subparagraph d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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Tabular disclosure of the notional amounts of outstanding derivative positions.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 815

-SubTopic 10

-Section 50

-Paragraph 1A

-Subparagraph (d)

-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959

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