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EXCEL - IDEA: XBRL DOCUMENT - ATLAS AMERICA PUBLIC #11-2002 LTD.Financial_Report.xls
10-Q - 10-Q - ATLAS AMERICA PUBLIC #11-2002 LTD.c23918e10vq.htm
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EX-31.1 - EXHIBIT 31.1 - ATLAS AMERICA PUBLIC #11-2002 LTD.c23918exv31w1.htm
EX-32.1 - EXHIBIT 32.1 - ATLAS AMERICA PUBLIC #11-2002 LTD.c23918exv32w1.htm
EX-32.2 - EXHIBIT 32.2 - ATLAS AMERICA PUBLIC #11-2002 LTD.c23918exv32w2.htm
EX-31.2 - EXHIBIT 31.2 - ATLAS AMERICA PUBLIC #11-2002 LTD.c23918exv31w2.htm
v2.3.0.15
Derivative Instruments
9 Months Ended
Sep. 30, 2011
Derivative Instruments 
DERIVATIVE INSTRUMENTS
NOTE 4 — DERIVATIVE INSTRUMENTS
The MGP, on behalf of the Partnership, historically used a number of different derivative instruments, principally swaps and collars, in connection with its commodity price risk management activities. The MGP entered into financial instruments to hedge the Partnership's forecasted natural gas and crude oil against the variability in expected future cash flows attributable to changes in market prices. Swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas and crude oil is sold. Under swap agreements, the Partnership received or paid a fixed price and received or remitted a floating price based on certain indices for the relevant contract period. Commodity-based option instruments are contractual agreements that grant the right, but not obligation, to purchase or sell natural gas and crude oil at a fixed price for the relevant contract period.
Historically, the MGP has entered into natural gas and crude oil future option contracts and collar contracts on behalf of the Partnership to achieve more predictable cash flows by hedging its exposure to changes in natural gas and oil prices. At any point in time, such contracts included regulated New York Mercantile Exchange ("NYMEX") futures and options contracts and non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally settled with offsetting positions, but may be settled by the delivery of natural gas. Crude oil contracts are based on a West Texas Intermediate ("WTI") index. These contracts qualified and were designated as cash flow hedges and recorded at their fair values.
The MGP formally documented all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This included matching the commodity derivative contracts to the forecasted transactions. The MGP assessed, both at the inception of the derivative and on an ongoing basis, whether the derivative was effective in offsetting changes in the forecasted cash flow of the hedged item. If it determined that a derivative was not effective as a hedge or that it had ceased to be an effective hedge due to the loss of adequate correlation between the hedging instrument and the underlying item being hedged, the MGP discontinued hedge accounting for the derivative and subsequent changes in the derivative fair value, which was determined by the MGP through the utilization of market data, were recognized immediately within gain (loss) on mark-to-market derivatives in the Partnership's statements of operations. For derivatives qualifying as hedges, the Partnership recognized the effective portion of changes in fair value in partners' capital as accumulated other comprehensive income and reclassified the portion relating to commodity derivatives to gas and oil production revenues for the Partnership's derivatives within the Partnership's statements of operations as the underlying transactions were settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, the Partnership recognized changes in fair value within gain (loss) on mark-to-market derivatives in its statements of operations as they occurred.
Prior to the sale on February 17, 2011 of the Transferred Business, Atlas Energy monetized its derivative instruments related to the Transferred Business. The monetized proceeds related to instruments that were originally put into place to hedge future natural gas and oil production of the Transferred Business, including production generated through its drilling partnerships. At September 30, 2011, the Partnership recorded a net receivable from the monetized derivative instruments of $223,200 in accounts receivable-affiliate and $169,800 in long-term receivable-affiliate with the corresponding net unrealized gains in accumulated other comprehensive income on the Partnership's balance sheets, which will be allocated to natural gas and oil production revenue generated over the period of the original instruments' term. As a result of the monetization and the early settlement of natural gas and oil derivative instruments and the unrealized gains recognized in income in prior periods due to natural gas and oil property impairments, the Partnership recorded a net deferred gain on its balance sheets in other comprehensive income of $303,700 as of September 30, 2011. Unrealized gains, net of the MGP's interest, previously recognized into income as a result of prior period impairments included in accumulated other comprehensive income are $89,300. The MGP's portion of the unrealized gains was written-off as part of the terms related to the acquisition of the Transferred Business. For the nine months ended September 30, 2011, the Partnership reclassified $79,700 of unrealized gains previously recognized into income from prior period impairments related to the MGP from a hedge receivable due from affiliate to a non-cash distribution to the MGP. As such, $79,700 was recorded as a distribution to partners on the statement of changes in partners' capital. During the nine months ended September 30, 2011, $163,700 of monetized proceeds were recorded by the Partnership and allocated only to the limited partners. Of the remaining $303,700 of net unrealized gain in accumulated other comprehensive income, the Partnership will reclassify $161,500 of net gains to the Partnership's statements of operations over the next twelve month period and the remaining $142,200 in later periods.
The following tables summarize the fair value of the Partnership's derivative instruments as of December 31, 2010, as well as the gain or loss recognized in the statements of operations for the three and nine months ended September 30, 2011 and 2010:
Fair Value of Derivative Instruments:
             
        Fair Value  
    Balance Sheet   December 31,  
Derivatives in Cash Flow Hedging Relationships   Location   2010  
 
           
Commodity Contracts
  Current assets   $ 378,500  
 
  Long-term assets     370,000  
 
         
 
        748,500  
 
           
 
  Current liabilities     (3,800 )
 
  Long-term liabilities     (65,600 )
 
         
 
        (69,400 )
 
           
 
  Total   $ 679,100  
Effects of Derivative Instruments on Statements of Operations:
                                     
        Three Months Ended     Nine Months Ended  
        September 30,     September 30,     September 30,     September 30,  
        2011     2010     2011     2010  
Derivative in Cash Flow Hedging Relationships
  Gain Recognized in OCI on Derivatives                                
 
                                   
 
  Commodity Contracts   $     $ 381,600     $ 10,300     $ 892,100  
 
                           
                                     
        Three Months Ended     Nine Months Ended  
        September 30,     September 30,     September 30,     September 30,  
        2011     2010     2011     2010  
Location of Gain Reclassified from Accumulated OCI into Income
  Gain Reclassified from OCI into Net Loss                                
 
                                   
 
  Gas and Oil Revenue   $ 53,600     $ 60,200     $ 234,100     $ 153,300