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.

The following tables present financial information for each operating segment for the periods indicated based on our operating segments (in thousands):


	Three Months Ended September 30,
	2019				2018
	Production		Midstream		Production		Midstream
Segment revenues
Natural gas sales	$	177	$	—	$	166	$	—
Oil sales		4,769		—		2,848		—
Natural gas liquid sales		115		—		408		—
Gathering and transportation sales		—		1,720		—		1,582
Gathering and transportation lease revenues		—		14,135		—		13,148
Total segment revenues		5,061		15,855		3,422		14,730

Segment operating costs
Lease operating expenses		1,636		469		1,597		308
Transportation operating expenses		—		2,752		—		3,061
Production taxes		165		—		292		—
Gain on sale of assets		—		—		(238)		—
Depreciation, depletion and amortization		1,077		5,364		1,202		5,305
Accretion expense		49		83		48		75
Total segment operating costs		2,927		8,668		2,901		8,749

Segment other income
Earnings from equity investments		—		780		—		2,313
Total segment other income		—		780		—		2,313
Segment operating income	$	2,134	$	7,967	$	521	$	8,294


	Nine Months Ended September 30,
	2019				2018
	Production		Midstream		Production		Midstream
Segment revenues
Natural gas sales	$	543	$	—	$	865	$	—
Oil sales		7,841		—		7,894		—
Natural gas liquid sales		411		—		1,403		—
Gathering and transportation sales		—		5,105		—		4,931
Gathering and transportation lease revenues		—		46,361		—		38,634
Total segment revenues		8,795		51,466		10,162		43,565

Segment operating costs
Lease operating expenses		4,643		1,242		4,993		890
Transportation operating expenses		—		8,476		—		8,979
Production taxes		489		—		901		—
Gain on sale of assets		—		—		(2,626)		—
Depreciation, depletion and amortization		3,000		16,044		3,816		15,864
Accretion expense		149		242		151		221
Total segment operating costs		8,281		26,004		7,235		25,954

Segment other income
Earnings from equity investments		—		3,013		—		9,696
Total segment other income		—		3,013		—		9,696
Segment operating income (loss)	$	514	$	28,475	$	2,927	$	27,307


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Reconciliation of segment operating income to net income (loss)
Total production operating income	$	2,134	$	521	$	514	$	2,927
Total midstream operating income		7,967		8,294		28,475		27,307
Total segment operating income		10,101		8,815		28,989		30,234

General and administrative expense		(4,317)		(5,109)		(13,237)		(17,193)
Unit-based compensation expense		(271)		(155)		(1,081)		(2,940)
Interest expense, net		(12,141)		(2,786)		(17,741)		(8,165)
Other income (expense)		31		(352)		98		(1,876)
Income tax expense		(213)		—		(335)		—
Net income (loss)	$	(6,810)	$	413	$	(3,307)	$	60

The following table summarizes the total assets by operating segment as of September 30, 2019 and December 31, 2018 and total capital expenditures for the nine months ended September 30, 2019 and the year ended December 31, 2018 (in thousands):


	September 30, 2019
	Production		Midstream		Corporate (a)		Total
Other financial information
Total assets	$	48,418	$	404,967	$	5,340	$	458,725
Capital expenditures(b)	$	130	$	728	$	—	$	858


	December 31, 2018
	Production		Midstream		Corporate (a)		Total
Other financial information
Total assets	$	53,556	$	429,523	$	3,606	$	486,685
Capital expenditures(b)	$	11	$	4,856	$	—	$	4,867

(a)

Corporate assets not reviewed by the CODM on a segment basis consists of cash, certain prepaid expenses, office furniture, and other assets.

(b)

Inclusive of capital contributions made to equity method investments.