Segment Information

3 Months Ended

Mar. 31, 2012

Segment Information [Abstract]

Segment Information

Segment Information

The Partnership has the following five reportable segments:

Gathering and Processing. The Partnership provides “wellhead-to-market” services to producers of natural gas, which include transporting raw natural gas from the wellhead through gathering systems, processing raw natural gas to separate NGLs from the raw natural gas and selling or delivering pipeline-quality natural gas and NGLs to various markets and pipeline systems.

Joint Ventures. The Partnership owns investments in four joint ventures:

◦ a 49.99% general partner interest in HPC, which owns RIGS, a 450 mile intrastate pipeline that delivers natural gas from northwest Louisiana to downstream pipelines and markets;

◦ a 50% membership interest in MEP, which owns an interstate natural gas pipeline with approximately 500 miles stretching from southeast Oklahoma through northeast Texas, northern Louisiana and central Mississippi to an interconnect with the Transcontinental Gas Pipe Line system in Butler, Alabama;

◦ a 30% membership interest in Lone Star, an entity owning a diverse set of midstream energy assets including NGL pipelines, storage, fractionation and processing facilities located in the states of Texas, Mississippi and Louisiana; and

◦ a 33.33% membership interest in Ranch JV, which, upon completion of construction in 2012, will process natural gas delivered from the NGLs-rich Bone Spring and Avalon shale formations in west Texas.

Contract Compression. The Partnership owns and operates a fleet of compressors used to provide turn-key natural gas compression services for customer specific systems.

Contract Treating. The Partnership owns and operates a fleet of equipment used to provide treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration and BTU management, to natural gas producers and midstream pipeline companies.

Corporate and Others. The Corporate and Others segment comprises a small regulated pipeline and the Partnership’s corporate offices.

The Partnership accounts for intersegment revenues as if the revenues were to third parties, exclusive of certain cost of capital charges.

Management evaluates the performance of each segment and makes capital allocation decisions through the separate consideration of segment margin and operation and maintenance expenses. Segment margin for the Gathering and Processing and the Corporate and Others segments is defined as total revenues, including service fees, less cost of sales. In the Contract Compression segment and Contract Treating segment, segment margin is defined as revenues less direct costs.

Management believes segment margin is an important measure because it directly relates to volume, commodity price changes, revenue generating horsepower and revenue generating gallons per minute. Operation and maintenance expenses are a separate measure used by management to evaluate performance of field operations. Direct labor, insurance, property taxes, repair and maintenance, utilities and contract services comprise the most significant portion of operation and maintenance expenses. These expenses fluctuate depending on the activities performed during a specific period. The Partnership does not deduct operation and maintenance expenses from total revenues in calculating segment margin because management separately evaluates commodity volume and price changes in segment margin. The Partnership does not record segment margin for the Joint Ventures segment because it records its ownership percentages of the net income of its unconsolidated affiliates as income from unconsolidated affiliates in accordance with the equity method of accounting.

Results for each period, together with amounts related to balance sheets for each segment, are shown below:

	Three Months Ended March 31,
	2012			2011
External Revenues
Gathering and Processing	$	307,167		$	265,972
Joint Ventures	—			—
Contract Compression	37,201			38,436
Contract Treating	9,135			8,433
Corporate and Others	4,396			4,411
Eliminations	—			—
Total	$	357,899		$	317,252
Intersegment Revenues
Gathering and Processing	$	—		$	—
Joint Ventures	—			—
Contract Compression	4,129			6,553
Contract Treating	494			—
Corporate and Others	56			67
Eliminations	(4,679		)	(6,620		)
Total	$	—		$	—
Segment Margin
Gathering and Processing	$	71,335		$	53,800
Joint Ventures	—			—
Contract Compression	38,986			41,440
Contract Treating	7,883			7,251
Corporate and Others	4,648			5,053
Eliminations	(4,606		)	(6,553		)
Total	$	118,246		$	100,991
Operation and Maintenance
Gathering and Processing	$	28,223		$	22,942
Joint Ventures	—			—
Contract Compression	16,407			16,504
Contract Treating	844			734
Corporate and Others	113			45
Eliminations	(4,606		)	(6,553		)
Total	$	40,981		$	33,672

The table below provides a reconciliation of total segment margin to income before income taxes:

	Three Months Ended March 31,
	2012				2011
Total segment margin	$	118,246			$	100,991
Operation and maintenance	(40,981		)		(33,672		)
General and administrative	(15,695		)		(18,997		)
Loss on asset sales, net	(36		)		(28		)
Depreciation and amortization	(51,506		)		(40,236		)
Income from unconsolidated affiliates	31,958				23,808
Interest expense, net	(29,557		)		(20,007		)
Other income and deductions, net	16,522			*	2,414
Income before income taxes	$	28,951			$	14,273

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* Other income and deductions, net for the three months ended March 31, 2012 included a one-time producer payment of $15.6 million related to an assignment of certain contracts.

The table below provides a listing of assets reflected in the consolidated balance sheet for each segment:

	March 31, 2012		December 31, 2011
Gathering and Processing	$	1,978,072	$	1,959,697
Joint Ventures	2,007,414		1,924,705
Contract Compression	1,395,797		1,405,600
Contract Treating	211,593		215,172
Corporate and Others	126,769		62,682
Total	$	5,719,645	$	5,567,856