17. 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 (“CODM”) 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.


	Three Months Ended June 30,
	2018				2017
	Production		Midstream		Production		Midstream
Segment revenues
Natural gas sales	$	226	$	—	$	2,252	$	—
Oil sales		1,584		—		8,109		—
Natural gas liquid sales		400		—		492		—
Gathering and transportation sales		—		1,661		—		14,176
Gathering and transportation lease revenues		—		13,168		—		—
Total segment revenues		2,210		14,829		10,853		14,176

Segment operating costs
Lease operating expenses		1,644		363		3,648		233
Transportation operating expenses		—		3,071		—		3,032
Cost of sales		—		—		40		—
Production taxes		287		—		353		—
Gain on sale of assets		(2,388)		—		—		—
Depreciation, depletion and amortization		1,251		5,294		2,924		6,013
Accretion expense		49		74		172		68
Total segment operating costs		843		8,802		7,137		9,346

Segment other income
Earnings from equity investments		—		3,111		27		1,015
Total segment other income		—		3,111		27		1,015

Segment operating income	$	1,367	$	9,138	$	3,743	$	5,845


	Six Months Ended June 30,
	2018				2017
	Production		Midstream		Production		Midstream
Segment revenues
Natural gas sales	$	699	$	—	$	5,031	$	—
Oil sales		5,046		—		19,459		—
Natural gas liquid sales		995		—		959		—
Gathering and transportation sales		—		3,349		—		25,387
Gathering and transportation lease revenues		—		25,486		—		—
Total segment revenues		6,740		28,835		25,449		25,387

Segment operating costs
Lease operating expenses		3,396		582		8,372		492
Transportation operating expenses		—		5,918		—		6,328
Cost of sales		—		—		77		—
Production taxes		609		—		826		—
Gain on sale of assets		(2,388)		—		—		—
Depreciation, depletion and amortization		2,614		10,559		6,205		14,913
Asset impairments		—		—		4,688		—
Accretion expense		103		146		364		134
Total segment operating costs		4,334		17,205		20,532		21,867

Segment other income (loss)
Earnings (loss) from equity investments		—		7,383		(109)		1,633
Total segment other income (loss)		—		7,383		(109)		1,633

Segment operating income	$	2,406	$	19,013	$	4,808	$	5,153


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Reconciliation of segment operating income to net income (loss)
Total production operating income	$	1,367	$	3,743	$	2,406	$	4,808
Total midstream operating income		9,138		5,845		19,013		5,153
Total segment operating income		10,505		9,588		21,419		9,961

General and administrative expense		(6,919)		(6,353)		(12,084)		(11,962)
Unit-based compensation expense		(1,347)		(780)		(2,785)		(1,320)
Interest expense, net		(2,780)		(1,896)		(5,379)		(3,779)
Other expense(a)		(1,254)		—		(1,524)		—
Net income (loss)	$	(1,795)	$	559	$	(353)		(7,100)

(a)

Other expense in 2017 excludes earnout rebate. As the rebate is reviewed by the CODM at the segment level, it was included in the Midstream segment operating costs.

The following table summarizes the total assets and capital expenditures by operating segment based on the segment realignment as of June 30, 2018 and December 31, 2017 (in thousands):


	June 30, 2018
	Production		Midstream		Corporate (a)		Total
Other financial information
Total assets	$	53,240	$	446,800	$	3,382	$	503,422
Capital expenditures(b)	$	205	$	3,940	$	—	$	4,145


	December 31, 2017
	Production		Midstream		Corporate (a)		Total
Other financial information
Total assets	$	58,623	$	468,656	$	1,144	$	528,423
Capital expenditures(b)	$	441	$	46,452	$	—	$	46,893

	(a)		Corporate assets not reviewed by the CODM on a segment basis consists of cash, certain prepaids, office furniture, and other assets.
	(b)		Inclusive of capital contributions made to equity method investments.