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Fair Value Measurements
 6 Months Ended
Jun. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. This includes not only the credit standing of counterparties involved and the impact of credit enhancements but also the impact of the Company’s own nonperformance risk on its liabilities.
The Company applies fair value measurements to its commodity derivative instruments based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

•
Level 1—Quoted prices in active markets for identical assets and liabilities. Instruments categorized in Level 1 primarily consist of financial instruments such as exchange-traded derivative instruments.
•
Level 2—Inputs other than quoted prices recorded in Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 primarily include non-exchange traded derivatives such as over-the-counter commodity forwards and swaps and options.
•
Level 3—Unobservable inputs for the asset or liability, including situations where there is little, if any, observable market activity for the asset or liability.
As the fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3), the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. In these cases, the lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy.
Non-Derivative Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts receivable-affiliates, accounts payable, accounts payable-affiliates, and accrued liabilities recorded in the condensed combined and consolidated balance sheets approximate fair value due to the short-term nature of these items. The carrying amount of long-term debt recorded in the condensed combined and consolidated balance sheets approximates fair value because of the variable rate nature of the Company’s long-term debt. The fair value of the payable pursuant to tax receivable agreement-affiliate is not determinable due to the affiliate nature and terms of the associated agreement with the affiliate.
Derivative Instruments
The following table presents assets and liabilities measured and recorded at fair value in the Company’s condensed combined and consolidated balance sheets on a recurring basis by and their level within the fair value hierarchy as of (in thousands): 

Level 1

Level 2

Level 3

Total
June 30, 2015
 

 

 

 
Non-trading commodity derivative assets
$
—


$
892


$
—


$
892

Trading commodity derivative assets
—


32


—


32

Total commodity derivative assets
$
—


$
924


$
—


$
924

Non-trading commodity derivative liabilities
$
(2,285
)

$
(6,943
)

$
—


$
(9,228
)
Trading commodity derivative liabilities
(100
)

(28
)

—


(128
)
Total commodity derivative liabilities
$
(2,385
)

$
(6,971
)

$
—


$
(9,356
)

Level 1

Level 2

Level 3

Total
December 31, 2014







Non-trading commodity derivative assets
$
—


$
80


$
—


$
80

Trading commodity derivative assets
—


136


—


136

Total commodity derivative assets
$
—


$
216


$
—


$
216

Non-trading commodity derivative liabilities
$
(6,810
)

$
(5,017
)

$
—


$
(11,827
)
Trading commodity derivative liabilities
(32
)

(145
)

—


(177
)
Total commodity derivative liabilities
$
(6,842
)

$
(5,162
)

$
—


$
(12,004
)

The Company had no financial instruments measured using level 3 at June 30, 2015 and December 31, 2014. The Company had no transfers of assets or liabilities between any of the above levels during the six months ended June 30, 2015 and the year ended December 31, 2014.
The Company’s derivative contracts include exchange-traded contracts fair valued utilizing readily available quoted market prices and non-exchange-traded contracts fair valued using market price quotations available through brokers or over-the-counter and on-line exchanges. In addition, in determining the fair value of the Company’s derivative contracts, the Company applies a credit risk valuation adjustment to reflect credit risk which is calculated based on the Company’s or the counterparty’s historical credit risks. As of June 30, 2015 and December 31, 2014, the credit risk valuation adjustment was not material.