Reporting Segments

6 Months Ended

Jun. 30, 2017

Reporting Segments

Reporting Segments

16. REPORTING SEGMENTS

“Midstream” and “Production” best describe the operating segments of the businesses that we separately report. The factors used to identify these reporting segments are based on the nature of the operations that are undertaken by each segment. The Midstream segment operates the gathering, processing and transportation of crude oil, natural gas and NGLs. 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 June 30, 2017
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	2,252	$	—	$	2,252
Oil sales		8,109		—		8,109
Natural gas liquids sales		492		—		492
Gathering and transportation sales		—		14,176		14,176
Total operating revenues		10,853		14,176		25,029
Operating expenses:
Lease operating expenses		3,648		233		3,881
Transportation operating expenses		—		3,032		3,032
Cost of sales		40		—		40
Production taxes		353		—		353
General and administrative		4,892		1,461		6,353
Unit-based compensation expense		780		—		780
Depreciation, depletion and amortization		2,924		6,013		8,937
Accretion expense		172		68		240
Total operating expenses		12,809		10,807		23,616
Operating income (loss)	$	(1,956)	$	3,369	$	1,413

	Three Months Ended June 30, 2016
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	600	$	—	$	600
Oil sales		(2,756)		—		(2,756)
Natural gas liquids sales		244		—		244
Gathering and transportation sales		—		14,258		14,258
Total operating revenues		(1,912)		14,258		12,346
Operating expenses:
Lease operating expenses		3,905		273		4,178
Transportation operating expenses		—		3,014		3,014
Cost of sales		63		—		63
Production taxes		326		—		326
General and administrative		3,550		1,428		4,978
Unit-based compensation expense		1,091		—		1,091
Depreciation, depletion and amortization		1,035		5,094		6,129
Accretion expense		253		62		315
Total operating expenses		10,223		9,871		20,094
Operating income (loss)	$	(12,135)	$	4,387	$	(7,748)

	Six Months Ended June 30, 2017
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	5,031	$	—	$	5,031
Oil sales		19,459		—		19,459
Natural gas liquids sales		959		—		959
Gathering and transportation sales		—		25,387		25,387
Total operating revenues		25,449		25,387		50,836
Operating expenses:
Lease operating expenses		8,372		492		8,864
Transportation operating expenses		—		6,328		6,328
Cost of sales		77		—		77
Production taxes		826		—		826
General and administrative		8,996		2,966		11,962
Unit compensation expense		1,320		—		1,320
Depreciation, depletion and amortization		6,205		14,913		21,118
Asset impairments		4,688		—		4,688
Accretion expense		364		134		498
Total operating expenses		30,848		24,833		55,681
Operating income (loss)	$	(5,399)	$	554	$	(4,845)

	Six Months Ended June 30, 2016
	Production		Midstream		Total
Operating revenues
Natural gas sales	$	4,275	$	—	$	4,275
Oil sales		2,587		—		2,587
Natural gas liquids sales		520		—		520
Gathering and transportation sales		—		28,133		28,133
Total operating revenues		7,382		28,133		35,515
Operating expenses:
Lease operating expenses		8,780		371		9,151
Transportation operating expenses		—		6,068		6,068
Cost of sales		193		—		193
Production taxes		547		—		547
General and administrative		7,984		2,713		10,697
Unit-based compensation expense		1,529		—		1,529
Depreciation, depletion and amortization		3,149		10,168		13,317
Asset impairments		1,309		—		1,309
Accretion expense		507		123		630
Total operating expenses		23,998		19,443		43,441
Operating income (loss)	$	(16,616)	$	8,690	$	(7,926)

The following table summarizes the total assets by operating segment as of June 30, 2017 and December 31, 2016 (in thousands):

	June 30,		December 31,
	2017		2016
Segment Assets
Production	$	205,482	$	207,219
Midstream		341,833		332,486
Total assets	$	547,315	$	539,705