Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information

Segment Information

(11)Segment Information

See note 2(f) for a description of the Company’s determination of its reportable segments.  Revenues from gathering and compression and water handling and treatment operations are primarily derived from intersegment transactions for services provided to the Company’s exploration and production operations.  Marketing revenues are primarily derived from activities to purchase and sell third-party natural gas and NGLs and to market excess firm transportation capacity to third parties.

Operating segments are evaluated based on their contribution to consolidated results, which is determined by the respective operating income of each segment.  General and administrative expenses are allocated to the gathering and compression and water handling and treatment segments based on the nature of the expenses and on a combination of the segments’ proportionate share of the Company’s consolidated property and equipment, capital expenditures, and labor costs, as applicable.  General and administrative expenses related to the marketing segment are not allocated because they are immaterial.  Other income, income taxes, and interest expense are primarily managed and evaluated on a consolidated basis.  Intersegment sales are transacted at prices which approximate market.  Accounting policies for each segment are the same as the Company’s accounting policies described in note 2 to the condensed consolidated financial statements.

The operating results and assets of the Company’s reportable segments were as follows for the nine months ended September 30, 2015 and 2016 (in thousands):

	Exploration and production		Gathering and compression	Water handling	Marketing	Elimination of intersegment transactions	Consolidated total
Three months ended September 30, 2015:
Sales and revenues:
Third-party	$	1,403,275	3,468	959	35,633	—	1,443,335
Intersegment		398	55,790	21,487	—	(77,675)	—
Total	$	1,403,673	59,258	22,446	35,633	(77,675)	1,443,335
Operating expenses:
Lease operating	$	10,721	—	3,973	—	(3,908)	10,786
Gathering, compression, processing, and transportation		211,469	4,699	—	—	(55,866)	160,302
Depletion, depreciation, and amortization		166,900	15,282	6,485	—	—	188,667
General and administrative expense		46,165	11,265	2,577	—	(322)	59,685
Other operating expenses		28,044	(7,863)	800	61,799	—	82,780
Total		463,299	23,383	13,835	61,799	(60,096)	502,220
Operating income (loss)	$	940,374	35,875	8,611	(26,166)	(17,579)	941,115
Segment assets	$	11,940,524	1,410,920	487,734	5,847	(267,951)	13,577,074
Capital expenditures for segment assets	$	399,695	82,768	45,151	—	(17,579)	510,035

	Exploration and production		Gathering and compression	Water handling	Marketing	Elimination of intersegment transactions	Consolidated total
Three months ended September 30, 2016:
Sales and revenues:
Third-party	$	1,016,458	2,745	224	97,076	—	1,116,503
Intersegment		3,990	75,319	72,187	—	(151,496)	—
Total	$	1,020,448	78,064	72,411	97,076	(151,496)	1,116,503
Operating expenses:
Lease operating	$	13,710	—	28,978	—	(28,834)	13,854
Gathering, compression, processing, and transportation		303,753	6,400	—	—	(75,238)	234,915
Depletion, depreciation, and amortization		172,735	18,540	7,838	—	—	199,113
General and administrative expense		44,637	10,282	3,033	—	(375)	57,577
Other operating expenses		31,266	(1,708)	3,070	114,611	(3,527)	143,712
Total		566,101	33,514	42,919	114,611	(107,974)	649,171
Operating income (loss)	$	454,347	44,550	29,492	(17,535)	(43,522)	467,332
Segment assets	$	12,966,493	1,669,667	562,995	33,114	(603,016)	14,629,253
Capital expenditures for segment assets	$	909,837	56,836	58,730	—	(43,343)	982,060

The operating results and assets of the Company’s reportable segments were as follows for the nine months ended September 30, 2015 and 2016 (in thousands):

	Exploration and production		Gathering and compression	Water handling and treatment	Marketing	Elimination of intersegment transactions	Consolidated total
Nine months ended September 30, 2015:
Sales and revenues:
Third-party	$	2,891,410	8,433	6,651	143,242	—	3,049,736
Intersegment		1,025	159,661	80,886	—	(241,572)	—
Total	$	2,892,435	168,094	87,537	143,242	(241,572)	3,049,736
Operating expenses:
Lease operating	$	24,981	—	16,576	—	(15,996)	25,561
Gathering, compression, processing, and transportation		630,708	19,792	—	—	(159,867)	490,633
Depletion, depreciation, and amortization		483,991	45,255	18,767	—	—	548,013
General and administrative expense		140,821	30,685	7,238	—	(819)	177,925
Other operating expenses		113,881	25	2,437	214,201	—	330,544
Total		1,394,382	95,757	45,018	214,201	(176,682)	1,572,676
Operating income (loss)	$	1,498,053	72,337	42,519	(70,959)	(64,890)	1,477,060
Segment assets	$	11,940,524	1,410,920	487,734	5,847	(267,951)	13,577,074
Capital expenditures for segment assets	$	1,590,904	282,813	79,227	—	(64,890)	1,888,054

	Exploration and production		Gathering and compression	Water handling and treatment	Marketing	Elimination of intersegment transactions	Consolidated total
Nine months ended September 30, 2016:
Sales and revenues:
Third-party	$	1,291,008	9,463	644	287,194	—	1,588,309
Intersegment		11,714	210,144	203,106	—	(424,964)	—
Total	$	1,302,722	219,607	203,750	287,194	(424,964)	1,588,309
Operating expenses:
Lease operating	$	37,299	—	104,009	—	(104,118)	37,190
Gathering, compression, processing, and transportation		838,936	20,567	—	—	(209,790)	649,713
Depletion, depreciation, and amortization		513,302	52,780	21,975	—	—	588,057
General and administrative expense		135,356	29,755	9,957	—	(1,102)	173,966
Other operating expenses		104,279	(809)	11,568	378,521	(10,384)	483,175
Total		1,629,172	102,293	147,509	378,521	(325,394)	1,932,101
Operating income (loss)	$	(326,450)	117,314	56,241	(91,327)	(99,570)	(343,792)
Segment assets	$	12,966,493	1,669,667	562,995	33,114	(603,016)	14,629,253
Capital expenditures for segment assets	$	1,734,914	154,136	137,355	—	(98,955)	1,927,450