Segment Information

9 Months Ended

Sep. 30, 2019

(17) Segment Information

See Note 2(i) to the unaudited condensed consolidated financial statements for a description of the Company’s determination of its reportable segments. Revenues from gathering and processing and water handling and treatment operations were primarily derived from intersegment transactions for services provided to the Company’s exploration and production operations prior to the closing of the Transactions. Through March 12, 2019, the results of Antero Midstream Partners were included in the consolidated financial statements of Antero. Effective March 13, 2019, the results of Antero Midstream Partners are no longer consolidated in Antero’s result; however, the Company’s segment disclosures include the results of our unconsolidated affiliates due to their significance to the Company’s operations. See Note 3 to the unaudited condensed consolidated financial statements for further discussion on the Transactions. 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 (loss) of each segment. General and administrative expenses were 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 were 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 unaudited condensed consolidated financial statements.

The operating results and assets of the Company’s reportable segments were as follows for the three months ended September 30, 2018 and 2019 (in thousands):


	Exploration and production		Marketing	Midstream	Elimination of intersegment transactions	Consolidated total
Three months ended September 30, 2018:
Sales and revenues:
Third-party	$	982,131	89,556	4,845	—	1,076,532
Intersegment		5,197	—	261,360	(266,557)	—
Total	$	987,328	89,556	266,205	(266,557)	1,076,532

Operating expenses:
Lease operating	$	35,124	—	67,608	(66,463)	36,269
Gathering, compression, processing, and transportation		442,602	—	12,701	(128,799)	326,504
Impairment of oil and gas properties		221,094	—	—	—	221,094
Impairment of midstream assets		—	—	1,157	—	1,157
Depletion, depreciation, and amortization		204,465	—	38,721	—	243,186
General and administrative		45,474	—	15,018	(632)	59,860
Other		30,695	151,764	5,219	(4,020)	183,658
Total		979,454	151,764	140,424	(199,914)	1,071,728
Operating income (loss)	$	7,874	(62,208)	125,781	(66,643)	4,804
Equity in earnings of unconsolidated affiliates	$	—	—	10,705	—	10,705
Segment assets	$	13,484,457	20,481	3,411,496	(1,113,899)	15,802,535
Capital expenditures for segment assets	$	485,219	—	149,953	(67,951)	567,221


	Exploration and production		Marketing	Equity Method Investment in Antero Midstream Corporation	Elimination of intersegment transactions and unconsolidated affiliates	Consolidated total
Three months ended September 30, 2019:
Sales and revenues:
Third-party	$	1,070,755	46,645	—	—	1,117,400
Intersegment		1,481	—	243,795	(243,795)	1,481
Total	$	1,072,236	46,645	243,795	(243,795)	1,118,881

Operating expenses:
Lease operating	$	35,928	—	49,050	(49,050)	35,928
Gathering, compression, processing, and transportation		603,860	—	13,091	(13,091)	603,860
Impairment of oil and gas properties		1,041,469	—	—	—	1,041,469
Impairment of midstream assets		—	—	465,278	(457,478)	7,800
Depletion, depreciation, and amortization		241,503	—	24,460	(24,460)	241,503
General and administrative		35,923	—	30,595	(30,595)	35,923
Other		30,060	108,216	3,210	(3,210)	138,276
Total		1,988,743	108,216	585,684	(577,884)	2,104,759
Operating loss	$	(916,507)	(61,571)	(341,889)	334,089	(985,878)
Equity in earnings (loss) of unconsolidated affiliates	$	(117,859)	—	18,478	(18,478)	(117,859)
Investments in unconsolidated affiliates	$	1,819,323	—	672,310	(672,310)	1,819,323
Segment assets	$	16,094,927	25,361	6,445,504	(6,445,504)	16,120,288
Capital expenditures for segment assets	$	292,176	—	120,875	(120,875)	292,176

The operating results and assets of the Company’s reportable segments were as follows for the nine months ended September 30, 2018 and 2019 (in thousands):


	Exploration and production		Marketing	Midstream	Elimination of intersegment transactions	Consolidated total
Nine months ended September 30, 2018:
Sales and revenues:
Third-party	$	2,590,409	488,270	15,299	—	3,093,978
Intersegment		16,251	—	731,473	(747,724)	—
Total	$	2,606,660	488,270	746,772	(747,724)	3,093,978

Operating expenses:
Lease operating	$	98,698	—	184,698	(190,241)	93,155
Gathering, compression, processing, and transportation		1,236,655	—	36,469	(346,896)	926,228
Impairment of oil and gas properties		406,068	—	—	—	406,068
Impairment of midstream assets		—	—	9,658	—	9,658
Depletion, depreciation, and amortization		601,446	—	108,034	—	709,480
General and administrative		138,555	—	44,967	(1,946)	181,576
Other		85,067	560,924	15,129	(11,841)	649,279
Total		2,566,489	560,924	398,955	(550,924)	2,975,444
Operating income (loss)	$	40,171	(72,654)	347,817	(196,800)	118,534
Equity in earnings of unconsolidated affiliates	$	—	—	27,832	—	27,832
Segment assets	$	13,484,457	20,481	3,411,496	(1,113,899)	15,802,535
Capital expenditures for segment assets	$	1,464,041	—	414,833	(202,629)	1,676,245


	Exploration and production		Marketing	Equity Method Investment in Antero Midstream Corporation	Elimination of intersegment transactions and unconsolidated affiliates	Consolidated total
Nine months ended September 30, 2019:
Sales and revenues:
Third-party	$	3,247,214	200,911	50	—	3,448,175
Intersegment		4,999	—	553,471	(550,693)	7,777
Total	$	3,252,213	200,911	553,521	(550,693)	3,455,952

Operating expenses:
Lease operating	$	119,754	—	111,427	(112,664)	118,517
Gathering, compression, processing, and transportation		1,705,709	—	28,324	(138,810)	1,595,223
Impairment of oil and gas properties		1,253,712	—	—	—	1,253,712
Impairment of midstream assets		—	—	472,854	(458,072)	14,782
Depletion, depreciation, and amortization		702,299	—	68,557	(46,850)	724,006
General and administrative		128,213	—	85,026	(66,732)	146,507
Other		112,952	408,839	8,005	(7,002)	522,794
Total		4,022,639	408,839	774,193	(830,130)	4,375,541
Operating income (loss)	$	(770,426)	(207,928)	(220,672)	279,437	(919,589)
Equity in earnings (loss) of unconsolidated affiliates	$	(102,457)	—	34,981	(22,717)	(90,193)
Investments in unconsolidated affiliates	$	1,819,323	—	672,310	(672,310)	1,819,323
Segment assets	$	16,094,927	25,361	6,445,504	(6,445,504)	16,120,288
Capital expenditures for segment assets	$	1,053,210	—	262,065	(208,913)	1,106,362