Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Segment Reporting Disclosure [Text Block]

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. This segment also includes the Partnership's investment in Ranch JV, which processes natural gas delivered from the NGLs-rich Bone Spring and Avalon shale formations in west Texas. The Partnership initially included Ranch JV in the Joint Ventures segment upon formation in December 2011 until March 31, 2012, during which time Ranch JV's only activity was the construction of capital projects.

Joint Ventures. The Partnership's Joint Ventures segment includes the following:

◦ 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; and

◦ 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.

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 June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
External Revenues
Gathering and Processing	$	263,100		$	303,203		$	570,267		$	569,175
Joint Ventures	—			—			—			—
Contract Compression	36,237			38,072			73,438			76,508
Contract Treating	7,388			10,842			16,523			19,275
Corporate and Others	5,251			4,381			9,647			8,792
Eliminations	—			—			—			—
Total	$	311,976		$	356,498		$	669,875		$	673,750
Intersegment Revenues
Gathering and Processing	$	—		$	—		$	—		$	—
Joint Ventures	—			—			—			—
Contract Compression	4,432			2,917			8,561			9,470
Contract Treating	685			—			1,179			—
Corporate and Others	53			110			109			177
Eliminations	(5,170		)	(3,027		)	(9,849		)	(9,647		)
Total	$	—		$	—		$	—		$	—
Segment Margin
Gathering and Processing	$	79,416		$	50,495		$	150,751		$	104,295
Joint Ventures	—			—			—			—
Contract Compression	38,015			36,973			77,001			78,413
Contract Treating	7,241			7,701			15,124			14,952
Corporate and Others	5,497			4,762			10,145			9,815
Eliminations	(5,008		)	(2,908		)	(9,614		)	(9,461		)
Total	$	125,161		$	97,023		$	243,407		$	198,014
Operation and Maintenance
Gathering and Processing	$	28,791		$	19,528		$	57,014		$	42,470
Joint Ventures	—			—			—			—
Contract Compression	14,142			16,310			30,549			32,702
Contract Treating	822			675			1,666			1,409
Corporate and Others	245			397			358			442
Eliminations	(5,008		)	(2,914		)	(9,614		)	(9,467		)
Total	$	38,992		$	33,996		$	79,973		$	67,556

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012				2011
Total segment margin	$	125,161		$	97,023		$	243,407			$	198,014
Operation and maintenance	(38,992		)	(33,996		)	(79,973		)		(67,556		)
General and administrative	(16,476		)	(17,551		)	(32,171		)		(36,660		)
Loss on asset sales, net	(1,548		)	(153		)	(1,584		)		(181		)
Depreciation and amortization	(45,132		)	(40,503		)	(96,638		)		(80,739		)
Income from unconsolidated affiliates	34,185			32,167			66,143				55,975
Interest expense, net	(27,934		)	(24,689		)	(57,491		)		(44,696		)
Loss on debt refinancing, net	(7,820		)	—			(7,820		)		—
Other income and deductions, net	7,921			2,641			24,443			*	5,055
Income before income taxes	$	29,365		$	14,939		$	58,316			$	29,212

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* Other income and deductions, net for the six months ended June 30, 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:

	June 30, 2012		December 31, 2011
Gathering and Processing	$	2,062,306	$	1,959,697
Joint Ventures	2,080,163		1,924,705
Contract Compression	1,405,989		1,405,600
Contract Treating	219,377		215,172
Corporate and Others	64,727		62,682
Total	$	5,832,562	$	5,567,856