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 asphalt product and residual fuel terminalling services, including storage, blending, processing and throughput services. On July 12, 2018, the Partnership sold three asphalt facilities. See Note 6 for additional information. The Partnership has 53 terminalling facilities located in 26 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 pipeline systems that gather 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. The Partnership refers to its pipeline system located in Oklahoma and the Texas Panhandle as the Mid-Continent pipeline system. Crude oil product sales revenues consist of sales proceeds recognized for the sale of crude oil to third-party customers.

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 storage facilities located along pipeline gathering and transportation systems.

The Partnership’s management evaluates segment performance based upon operating margin, excluding amortization and depreciation, which includes revenues from related parties and external customers and operating expense, excluding depreciation and amortization. Operating margin, excluding depreciation and amortization (in the aggregate and by segment) is presented in the following table. The Partnership computes the components of operating margin, excluding depreciation and amortization 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, excluding depreciation and amortization 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, excluding depreciation and amortization 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):



	Three Months ended June 30,				Six Months ended June 30,
	2018		2019		2018		2019
Asphalt Terminalling Services
Service revenue:
Third-party revenue	$	6,639	$	6,850	$	11,771	$	13,831
Related-party revenue	5,981		3,981		12,302		8,098
Lease revenue:
Third-party revenue	10,016		9,819		19,473		19,582
Related-party revenue	7,475		4,812		15,178		9,752
Total revenue for reportable segment	30,111		25,462		58,724		51,263
Operating expense, excluding depreciation and amortization	13,393		11,670		26,728		23,955
Operating margin, excluding depreciation and amortization	$	16,718	$	13,792	$	31,996	$	27,308
Total assets (end of period)	$	167,849	$	149,603	$	167,849	$	149,603

Crude Oil Terminalling Services
Service revenue:
Third-party revenue	$	2,910	$	4,020	$	7,496	$	7,594
Intersegment revenue	170		278		170		576
Lease revenue:
Third-party revenue	12		—		27		—
Total revenue for reportable segment	3,092		4,298		7,693		8,170
Operating expense, excluding depreciation and amortization	913		1,017		2,188		2,299
Operating margin, excluding depreciation and amortization	$	2,179	$	3,281	$	5,505	$	5,871
Total assets (end of period)	$	67,150	$	67,272	$	67,150	$	67,272



	Three Months ended June 30,						Six Months ended June 30,
	2018			2019			2018			2019
Crude Oil Pipeline Services
Service revenue:
Third-party revenue	$	1,045		$	1,972		$	3,105		$	4,470
Related-party revenue	82			101			82			203
Lease revenue:
Third-party revenue	177			—			412			—
Product sales revenue:
Third-party revenue	45,612			59,636			49,120			118,560
Total revenue for reportable segment	46,916			61,709			52,719			123,233
Operating expense, excluding depreciation and amortization	2,542			2,749			5,327			5,471
Intersegment operating expense	1,156			1,704			1,599			3,331
Third-party cost of product sales	20,041			20,510			22,678			45,097
Related-party cost of product sales	23,747			36,421			23,747			67,195
Operating margin, excluding depreciation and amortization	$	(570	)	$	325		$	(632	)	$	2,139
Total assets (end of period)	$	152,105		$	94,436		$	152,105		$	94,436

Crude Oil Trucking Services
Service revenue
Third-party revenue	$	3,509		$	2,885		$	9,049		$	5,718
Intersegment revenue	986			1,426			1,429			2,755
Lease revenue:
Third-party revenue	32			—			129			—
Product sales revenue:
Third-party revenue	3			—			9			—
Total revenue for reportable segment	4,530			4,311			10,616			8,473
Operating expense, excluding depreciation and amortization	4,727			4,242			11,101			8,462
Operating margin, excluding depreciation and amortization	$	(197	)	$	69		$	(485	)	$	11
Total assets (end of period)	$	3,402		$	4,951		$	3,402		$	4,951

Total operating margin, excluding depreciation and amortization⁽¹⁾	$	18,130		$	17,467		$	36,384		$	35,329

Total Segment Revenues	$	84,649		$	95,780		$	129,752		$	191,139
Elimination of Intersegment Revenues	(1,156		)	(1,704		)	(1,599		)	(3,331		)
Consolidated Revenues	$	83,493		$	94,076		$	128,153		$	187,808

____________________

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



	Three Months ended June 30,						Six Months ended June 30,
	2018			2019			2018			2019
Operating margin, excluding depreciation and amortization	$	18,130		$	17,467		$	36,384		$	35,329
Depreciation and amortization	(7,413		)	(6,237		)	(14,779		)	(12,971		)
General and administrative expense	(4,486		)	(2,962		)	(8,707		)	(6,655		)
Asset impairment expense	—			(1,114		)	(616		)	(2,233		)
Gain on sale of assets	599			81			363			1,805
Other income	—			268			—			268
Gain on sale of unconsolidated affiliate	—			—			2,225			—
Interest expense	(5,024		)	(4,134		)	(8,593		)	(8,405		)
Income before income taxes	$	1,806		$	3,369		$	6,277		$	7,138