Segment Information

6 Months Ended

Jun. 30, 2017

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 processing 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 primarily determined by the respective operating income of each segment.  General and administrative expenses are allocated to the gathering and processing 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 three months ended June 30, 2016 and 2017 (in thousands):

	Exploration and production		Gathering and processing	Water handling and treatment	Marketing	Elimination of intersegment transactions	Consolidated total
Three months ended June 30, 2016:
Sales and revenues:
Third-party	$	(343,394)	3,131	163	90,902	—	(249,198)
Intersegment		3,899	68,785	64,730	—	(137,414)	—
Total	$	(339,495)	71,916	64,893	90,902	(137,414)	(249,198)
Operating expenses:
Lease operating	$	12,257	—	34,317	—	(34,531)	12,043
Gathering, compression, processing, and transportation		267,738	6,997	—	—	(68,675)	206,060
Depletion, depreciation, and amortization		173,015	17,172	7,175	—	—	197,362
General and administrative		47,167	10,138	3,168	—	(371)	60,102
Other		37,848	450	4,294	125,977	(3,461)	165,108
Total		538,025	34,757	48,954	125,977	(107,038)	640,675
Operating income (loss)	$	(877,520)	37,159	15,939	(35,075)	(30,376)	(889,873)
Equity in earnings of unconsolidated affiliates	$	—	484	—	—	—	484
Segment assets	$	11,919,732	1,598,826	569,624	23,045	(552,447)	13,558,780
Capital expenditures for segment assets	$	375,247	48,614	41,589	—	(30,183)	435,267

	Exploration and production		Gathering and processing	Water handling and treatment	Marketing	Elimination of intersegment transactions	Consolidated total
Three months ended June 30, 2017:
Sales and revenues:
Third-party	$	737,229	2,324	868	49,968	—	790,389
Intersegment		3,911	96,438	94,137	—	(194,486)	—
Total	$	741,140	98,762	95,005	49,968	(194,486)	790,389
Operating expenses:
Lease operating	$	17,189	—	41,444	—	(41,641)	16,992
Gathering, compression, processing, and transportation		353,216	9,910	—	—	(96,379)	266,747
Depletion, depreciation, and amortization		170,446	22,494	8,242	—	—	201,182
General and administrative		49,531	10,705	4,084	—	(221)	64,099
Other		39,251	12	4,532	77,421	(3,590)	117,626
Total		629,633	43,121	58,302	77,421	(141,831)	666,646
Operating income (loss)	$	111,507	55,641	36,703	(27,453)	(52,655)	123,743
Equity in earnings of unconsolidated affiliates	$	—	3,623	—	—	—	3,623
Segment assets	$	13,430,135	2,065,899	711,735	14,357	(779,905)	15,442,221
Capital expenditures for segment assets	$	584,832	88,806	58,497	—	(52,487)	679,648

The operating results and assets of the Company’s reportable segments were as follows for the six months ended June 30, 2016 and 2017 (in thousands):

	Exploration and production		Gathering and processing	Water handling and treatment	Marketing	Elimination of intersegment transactions	Consolidated total
Six months ended June 30, 2016:
Sales and revenues:
Third-party	$	274,550	6,718	420	190,118	—	471,806
Intersegment		7,724	134,825	130,919	—	(273,468)	—
Total	$	282,274	141,543	131,339	190,118	(273,468)	471,806
Operating expenses:
Lease operating	$	23,589	—	75,031	—	(75,284)	23,336
Gathering, compression, processing, and transportation		535,183	14,167	—	—	(134,552)	414,798
Depletion, depreciation, and amortization		340,567	34,240	14,137	—	—	388,944
General and administrative		90,719	19,473	6,924	—	(727)	116,389
Other		73,013	899	8,498	263,910	(6,857)	339,463
Total		1,063,071	68,779	104,590	263,910	(217,420)	1,282,930
Operating income (loss)	$	(780,797)	72,764	26,749	(73,792)	(56,048)	(811,124)
Equity in earnings of unconsolidated affiliates	$	—	484	—	—	—	484
Segment assets	$	11,919,732	1,598,826	569,624	23,045	(552,447)	13,558,780
Capital expenditures for segment assets	$	825,077	97,300	78,625	—	(55,612)	945,390

	Exploration and production		Gathering and processing	Water handling and treatment	Marketing	Elimination of intersegment transactions	Consolidated total
Six months ended June 30, 2017:
Sales and revenues:
Third-party	$	1,864,280	4,863	933	115,892	—	1,985,968
Intersegment		8,351	185,558	177,182	—	(371,091)	—
Total	$	1,872,631	190,421	178,115	115,892	(371,091)	1,985,968
Operating expenses:
Lease operating	$	32,931	—	80,066	—	(80,454)	32,543
Gathering, compression, processing, and transportation		700,984	18,024	—	—	(185,432)	533,576
Depletion, depreciation, and amortization		345,415	42,418	16,078	—	—	403,911
General and administrative		100,587	20,843	8,403	—	(1,036)	128,797
Other		92,869	12	8,876	167,414	(7,116)	262,055
Total		1,272,786	81,297	113,423	167,414	(274,038)	1,360,882
Operating income (loss)	$	599,845	109,124	64,692	(51,522)	(97,053)	625,086
Equity in earnings of unconsolidated affiliates	$	—	5,854	—	—	—	5,854
Segment assets	$	13,430,135	2,065,899	711,735	14,357	(779,905)	15,442,221
Capital expenditures for segment assets	$	1,041,782	155,365	95,451	—	(96,716)	1,195,882