19 .	OPERATING SEGMENTS

The Partnership’s operations consist of

four

reportable segments: (i) asphalt terminalling services, (ii) crude oil terminalling services, (iii) crude oil pipeline services and (iv) crude oil trucking services.

ASPHALT TERMINALLING SERVICES

— The Partnership provides liquid asphalt terminalling services at its

terminalling facilities located in

states.

CRUDE OIL TERMINALLING SERVICES

— The Partnership provides crude oil terminalling services at its terminalling facility located in Oklahoma.

CRUDE OIL PIPELINE SERVICES

— The Partnership owns and operates its Mid-Continent pipeline system that gathers crude oil purchased by its customers and transports it to refiners, to common carrier pipelines for ultimate delivery to refiners or to terminalling facilities owned by the Partnership and others. Crude oil marketing revenues consist of sales proceeds recognized for the sale of crude oil to

third

-party customers. Revenue for the sale of crude oil is recognized when title to the crude oil transfers to the customer and is based on contractual prices for the sale of crude oil.

CRUDE OIL TRUCKING SERVICES

— The Partnership uses its owned and leased tanker trucks to gather crude oil for its customers at remote wellhead locations generally

not

covered by pipeline and gathering systems and to transport the crude oil to aggregation points and terminalling facilities located along pipeline gathering and transportation systems. On

April 24, 2018,

the Partnership sold the producer field services business. As a result of the sale of the producer field services business, the Partnership changed the name of this operating segment to crude oil trucking services during the

second

quarter of

2018.

See Note

for additional information.

The Partnership’s management evaluates performance based upon segment operating margin, which includes revenues from related parties and external customers and operating expense excluding depreciation and amortization. The non-GAAP measure of operating margin (in the aggregate and by segment) is presented in the following table. The Partnership computes the components of operating margin by using amounts that are determined in accordance with GAAP. The Partnership accounts for intersegment product sales as if the sales were to

third

parties, that is, at current market prices. A reconciliation of operating margin to income before income taxes, which is its nearest comparable GAAP financial measure, is included in the following table. The Partnership believes that investors benefit from having access to the same financial measures being utilized by management. Operating margin is an important measure of the economic performance of the Partnership’s core operations. This measure forms the basis of the Partnership’s internal financial reporting and is used by its management in deciding how to allocate capital resources among segments. Income before income taxes, alternatively, includes expense items, such as depreciation and amortization, general and administrative expenses and interest expense, which management does

not

consider when evaluating the core profitability of the Partnership’s operations.

The following table reflects certain financial data for each segment for the periods indicated (in thousands):

	Year ended December 31,
	2018			2019
Asphalt Terminalling Services
Service revenue:
Third-party revenue	$	26,108		$	28,689
Related-party revenue		21,686			15,787
Lease revenue:
Third-party revenue		41,319			41,712
Related-party revenue		25,961			20,443
Product sales revenue:
Related-party revenue		482			-
Total revenue for reportable segments		115,556			106,631
Operating expense, excluding depreciation and amortization		49,229			46,271
Operating margin, excluding depreciation and amortization	$	66,327		$	60,360
Additions to long-lived assets	$	30,068		$	7,841
Total assets (end of period)	$	138,245		$	140,299

Crude Oil Terminalling Services
Service revenue:
Third-party revenue	$	11,928		$	15,365
Intersegment revenue		704			931
Lease revenue:
Third-party revenue		45			-
Total revenue for reportable segments		12,677			16,296
Operating expense, excluding depreciation and amortization		3,899			4,531
Operating margin, excluding depreciation and amortization	$	8,778		$	11,765
Additions to long-lived assets	$	3,394		$	883
Total assets (end of period)	$	68,480		$	65,112

Crude Oil Pipeline Services
Service revenue:
Third-party revenue	$	6,396		$	6,691
Related-party revenue		445			266
Lease revenue:
Third-party revenue		484			-
Product sales revenue:
Third-party revenue		235,428			231,051
Total revenue for reportable segments		242,753			238,008
Operating expense, excluding depreciation and amortization		11,828			10,743
Intersegment operating expense		5,284			6,486
Third-party cost of product sales		126,776			83,319
Related-party cost of product sales		102,469			134,162
Operating margin, excluding depreciation and amortization	$	(3,604	)	$	3,298
Additions to long-lived assets	$	19,654		$	1,854
Total assets (end of period)	$	112,429		$	90,939

	Year ended December 31,
	2018			2019
Crude Oil Trucking Services
Service revenue:
Third-party revenue	$	14,324		$	11,066
Intersegment revenue		4,580			5,555
Lease revenue:
Third-party revenue		219			-
Product sales revenue:
Third-party revenue		10			-
Total revenue for reportable segments		19,133			16,621
Operating expense, excluding depreciation and amortization		19,575			16,211
Operating margin, excluding depreciation and amortization		(442	)		410
Additions to long-lived assets		3,243			2,168
Total assets (end of period)	$	4,150		$	5,590

Total operating margin, excluding depreciation and amortization(1)	$	71,059		$	75,833

Total segment revenues	$	390,119		$	377,556
Elimination of intersegment revenues		(5,284	)		(6,486	)
Consolidated revenues	$	384,835		$	371,070

(

)

The following table reconciles segment operating margin, excluding depreciation and amortization to income (loss) before income taxes (in thousands):

	Year ended December 31,
	2018			2019
Operating margin (excluding depreciation and amortization)	$	71,059		$	75,833
Depreciation and amortization		(29,359	)		(25,533	)
General and administrative expenses		(15,995	)		(14,095	)
Asset impairment expense		(53,068	)		(2,476	)
Gain on sale of assets		149			453
Other income		-			268
Gain on sale of unconsolidated affiliate		2,225			-
Interest expense		(16,860	)		(15,975	)
Income (loss) before income taxes	$	(41,849	)	$	18,475