Reportable Segments

9 Months Ended

Sep. 30, 2016

Reportable Segments

Reportable Segments

16. REPORTABLE SEGMENTS

The operating segments, reported separately herein, are best defined as: (1) Midstream and (2) Production. The factors used to identify these reportable segments are based on the nature of the operations that are undertaken by each segment.  We completed the Western Catarina Midstream Acquisition during the fourth quarter of 2015. As such, there were no Midstream segment results for the three and nine months ended September 30, 2015. The Production segment operates to produce crude oil and natural gas. These segments are broadly understood across the petroleum and petrochemical industries.

These functions have been defined as the operating segments of the Partnership because they are the segments (1) that engage in business activities from which revenues are earned and expenses are incurred; (2) whose operating results are regularly reviewed by the Partnership’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance; and (3) for which discrete financial information is available.  Operating segments are evaluated for their contribution to the Partnership’s consolidated results based on operating income, which is defined as segment operating revenues less expenses.

The following tables set forth our segment information for the periods indicated (in thousands):

	Three Months Ended September 30, 2016
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	4,434	$	—	$	4,434
Oil sales		2,159		—		2,159
Natural gas liquids sales		264		—		264
Gathering and transportation sales		—		12,997		12,997
Total operating revenues		6,857		12,997		19,854
Operating expenses:
Lease operating expenses		2,651		116		2,767
Transportation operating expenses		—		3,111		3,111
Cost of sales		99		—		99
Production taxes		290		—		290
General and administrative		4,778		1,508		6,286
Unit compensation expense		90		—		90
Loss on sale of assets		219		—		219
Depreciation, depletion and amortization		2,411		5,096		7,507
Accretion expense		207		64		271
Total operating expenses		10,745		9,895		20,640
Other expense (income)
Operating income (loss)	$	(3,888)	$	3,102	$	(786)

	Three Months Ended September 30, 2015
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	5,730	$	—	$	5,730
Oil sales		19,501		—		19,501
Natural gas liquids sales		394		—		394
Gathering and transportation sales		—		—		—
Total operating revenues		25,625		—		25,625
Operating expenses:
Lease operating expenses		5,194		—		5,194
Cost of sales		139		—		139
Production taxes		443		—		443
General and administrative		7,301		—		7,301
Unit compensation expense		75		—		75
Loss on sale of assets		2		—		2
Depreciation, depletion and amortization		2,851		—		2,851
Asset impairments		937		—		937
Accretion expense		265		—		265
Total operating expenses		17,207		—		17,207
Operating income	$	8,418	$	—	$	8,418

	Nine Months Ended September 30, 2016
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	8,709	$	—	$	8,709
Oil sales		4,746		—		4,746
Natural gas liquids sales		784		—		784
Gathering and transportation sales		—		41,130		41,130
Total operating revenues		14,239		41,130		55,369
Operating expenses:
Lease operating expenses		11,430		488		11,918
Transportation operating expenses		—		9,179		9,179
Cost of sales		292		—		292
Production taxes		837		—		837
General and administrative		12,762		4,221		16,983
Unit compensation expense		1,619		—		1,619
Loss on sale of assets		219		—		219
Depreciation, depletion and amortization		5,560		15,264		20,824
Asset impairments		1,309		—		1,309
Accretion expense		714		187		901
Total operating expenses		34,742		29,339		64,081
Operating income (loss)	$	(20,503)	$	11,791	$	(8,712)

	Nine Months Ended September 30, 2015
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	15,946	$	—	$	15,946
Oil sales		25,104		—		25,104
Natural gas liquids sales		1,280		—		1,280
Gathering and transportation sales		—		—		—
Total operating revenues		42,330		—		42,330
Operating expenses:
Lease operating expenses		15,452		—		15,452
Cost of sales		469		—		469
Production taxes		1,396		—		1,396
General and administrative		18,206		—		18,206
Unit compensation expense		2,463		—		2,463
Gain on sale of assets		(111)		—		(111)
Depreciation, depletion and amortization		9,050		—		9,050
Asset impairments		84,664		—		84,664
Accretion expense		782		—		782
Total operating expenses		132,371		—		132,371
Operating loss	$	(90,041)	$	—	$	(90,041)

The following table summarizes the total assets by operating segment as of September 30, 2016 and December 31, 2015 (in thousands):

		September 30,		December 31,
Segment Assets		2016		2015
Production	$	126,773	$	118,083
Midstream		339,068		353,217
Total assets	$	465,841	$	471,300