SEGMENTS

Segment Descriptions - Our operations are divided into three reportable business segments, as follows:


•	our Natural Gas Gathering and Processing segment gathers, treats and processes natural gas;


•	our Natural Gas Liquids segment gathers, treats, fractionates and transports NGLs and stores, markets and distributes NGL products; and


•	our Natural Gas Pipelines segment operates regulated interstate and intrastate natural gas transmission pipelines and natural gas storage facilities.

Other and eliminations consist of corporate costs, the operating and leasing activities of our headquarters building and related parking facility and eliminations necessary to reconcile our reportable segments to our Consolidated Financial Statements.

Accounting Policies - The accounting policies of the segments are described in Note A of the Notes to Consolidated Financial Statements in our Annual Report, updated as described in Note A of this Quarterly Report. Our chief operating decision-maker reviews the financial performance of each of our three segments, as well as our financial performance as a whole, on a regular basis. Adjusted EBITDA by segment is utilized in this evaluation. We believe this financial measure is useful to investors because it and similar measures are used by many companies in our industry as a measurement of financial performance and is commonly employed by financial analysts and others to evaluate our financial performance and to compare financial performance among companies in our industry. Adjusted EBITDA for each segment is defined as net income adjusted for interest expense, depreciation and amortization, noncash impairment charges, income taxes, allowance for equity funds used during construction, noncash compensation expense and other noncash items. This calculation may not be comparable with similarly titled measures of other companies.

Customers - Our Natural Gas Gathering and Processing segment derives services revenue primarily from crude oil and natural gas producers, which include both large integrated and independent exploration and production companies. The downstream commodity sales customers of our Natural Gas Gathering and Processing segment are primarily utilities, large industrial companies, marketing companies and our NGL affiliate. Our Natural Gas Liquids segment’s customers are primarily NGL and natural gas gathering and processing companies; large integrated and independent crude oil and natural gas production companies; propane distributors; ethanol producers; and petrochemical, refining and NGL marketing companies. Our Natural Gas Pipelines segment’s customers are primarily local natural gas distribution companies, electric-generation companies, large industrial companies, municipalities, producers and marketing companies.

For the three and six months ended June 30, 2018 and 2017, we had no single customer from which we received 10 percent or more of our consolidated revenues.

Operating Segment Information - The following tables set forth certain selected financial information for our operating segments for the periods indicated:



Three Months Ended June 30, 2018	Natural Gas Gathering and Processing			Natural Gas Liquids (a)			Natural Gas Pipelines (b)			Total
	(Thousands of dollars)
NGL and condensate sales	$	447,839		$	2,469,517		$	—		$	2,917,356
Residue natural gas sales	208,618			—			179			208,797
Gathering, processing and exchange services revenue	42,801			96,470			—			139,271
Transportation and storage revenue	—			45,012			93,277			138,289
Other	1,671			2,931			6,336			10,938
Total revenues (c)	700,929			2,613,930			99,792			3,414,651
Cost of sales and fuel (exclusive of depreciation and operating costs)	(442,959		)	(2,183,512		)	(2,637		)	(2,629,108		)
Operating costs	(93,602		)	(99,610		)	(34,959		)	(228,171		)
Equity in net earnings (loss) from investments	(794		)	16,582			20,782			36,570
Noncash compensation expense and other	3,292			4,671			2,388			10,351
Segment adjusted EBITDA	$	166,866		$	352,061		$	85,366		$	604,293

Depreciation and amortization	$	(48,149	)	$	(42,878	)	$	(14,426	)	$	(105,453	)
Capital expenditures	$	108,842		$	216,934		$	20,477		$	346,253

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $294.3 million, of which $255.0 million related to sales within the segment, and cost of sales and fuel of $124.0 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $64.5 million and cost of sales and fuel of $5.8 million.

(c) - Intersegment revenues for the Natural Gas Gathering and Processing, Natural Gas Liquids and Natural Gas Pipelines segments totaled $448.5 million, $3.7 million and $2.5 million, respectively.



Three Months Ended June 30, 2018	Total Segments			Other and Eliminations			Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	2,917,356		$	(448,556	)	$	2,468,800
Residue natural gas sales	208,797			(3,028		)	205,769
Gathering, processing and exchange services revenue	139,271			—			139,271
Transportation and storage revenue	138,289			(2,495		)	135,794
Other	10,938			(43		)	10,895
Total revenues (a)	$	3,414,651		$	(454,122	)	$	2,960,529

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(2,629,108	)	$	453,290		$	(2,175,818	)
Operating costs	$	(228,171	)	$	(1,982	)	$	(230,153	)
Depreciation and amortization	$	(105,453	)	$	(835	)	$	(106,288	)
Equity in net earnings from investments	$	36,570		$	—		$	36,570
Capital expenditures	$	346,253		$	4,632		$	350,885

(a) - Noncustomer revenue for the three months ended June 30, 2018, totaled $(5.4) million related primarily to losses reclassified from accumulated other comprehensive income from derivatives on commodity contracts.



Three Months Ended June 30, 2017	Natural Gas Gathering and Processing			Natural Gas Liquids (a)			Natural Gas Pipelines (b)			Total
	(Thousands of dollars)
Sales to unaffiliated customers	$	433,088		$	2,196,399		$	95,755		$	2,725,242
Intersegment revenues	252,727			153,286			2,094			408,107
Total revenues	685,815			2,349,685			97,849			3,133,349
Cost of sales and fuel (exclusive of depreciation and operating costs)	(488,891		)	(2,003,601		)	(6,773		)	(2,499,265		)
Operating costs	(72,659		)	(86,977		)	(30,682		)	(190,318		)
Equity in net earnings from investments	3,780			15,062			20,521			39,363
Other	216			(860		)	(255		)	(899		)
Segment adjusted EBITDA	$	128,261		$	273,309		$	80,660		$	482,230

Depreciation and amortization	$	(46,033	)	$	(41,427	)	$	(12,598	)	$	(100,058	)
Capital expenditures	$	37,020		$	12,336		$	26,846		$	76,202

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $289.4 million, of which $249.4 million related to sales within the segment, and cost of sales and fuel of $118.9 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $62.8 million and cost of sales and fuel of $8.3 million.



Three Months Ended June 30, 2017	Total Segments			Other and Eliminations			Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
Sales to unaffiliated customers	$	2,725,242		$	530		$	2,725,772
Intersegment revenues	408,107			(408,107		)	—
Total revenues	$	3,133,349		$	(407,577	)	$	2,725,772

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(2,499,265	)	$	408,243		$	(2,091,022	)
Operating costs	$	(190,318	)	$	(24,770	)	$	(215,088	)
Depreciation and amortization	$	(100,058	)	$	(791	)	$	(100,849	)
Equity in net earnings from investments	$	39,363		$	—		$	39,363
Capital expenditures	$	76,202		$	6,293		$	82,495



Six Months Ended June 30, 2018	Natural Gas Gathering and Processing			Natural Gas Liquids (a)			Natural Gas Pipelines (b)			Total
	(Thousands of dollars)
NGL and condensate sales	$	860,996		$	5,022,287		$	—		$	5,883,283
Residue natural gas sales	463,615			—			5,098			468,713
Gathering, processing and exchange services revenue	81,230			179,728			—			260,958
Transportation and storage revenue	—			98,490			191,615			290,105
Other	3,079			5,894			12,990			21,963
Total revenues (c)	1,408,920			5,306,399			209,703			6,925,022
Cost of sales and fuel (exclusive of depreciation and operating costs)	(935,581		)	(4,464,584		)	(8,091		)	(5,408,256		)
Operating costs	(181,961		)	(188,202		)	(68,149		)	(438,312		)
Equity in net earnings from investments	874			33,006			42,877			76,757
Noncash compensation expense and other	5,165			7,521			2,651			15,337
Segment adjusted EBITDA	$	297,417		$	694,140		$	178,991		$	1,170,548

Depreciation and amortization	$	(95,897	)	$	(85,305	)	$	(27,695	)	$	(208,897	)
Total assets	$	5,585,519		$	8,898,255		$	2,073,043		$	16,556,817
Capital expenditures	$	220,571		$	341,855		$	40,375		$	602,801

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $594.3 million, of which $508.4 million related to sales within the segment, and cost of sales and fuel of $246.8 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $132.5 million and cost of sales and fuel of $14.9 million.

(c) - Intersegment revenues for the Natural Gas Gathering and Processing, Natural Gas Liquids and Natural Gas Pipelines segments totaled $846.3 million, $12.7 million and $4.6 million, respectively.



Six Months Ended June 30, 2018	Total Segments			Other and Eliminations			Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
NGL and condensate sales	$	5,883,283		$	(857,466	)	$	5,025,817
Residue natural gas sales	468,713			(778		)	467,935
Gathering, processing and exchange services revenue	260,958			(21		)	260,937
Transportation and storage revenue	290,105			(4,589		)	285,516
Other	21,963			438			22,401
Total revenues (a)	$	6,925,022		$	(862,416	)	$	6,062,606

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(5,408,256	)	$	864,412		$	(4,543,844	)
Operating costs	$	(438,312	)	$	(2,045	)	$	(440,357	)
Depreciation and amortization	$	(208,897	)	$	(1,628	)	$	(210,525	)
Equity in net earnings from investments	$	76,757		$	—		$	76,757
Total assets	$	16,556,817		$	356,903		$	16,913,720
Capital expenditures	$	602,801		$	12,551		$	615,352

(a) - Noncustomer revenue for the six months ended June 30, 2018, totaled $(14.4) million related primarily to losses reclassified from accumulated other comprehensive income from derivatives on commodity contracts.



Six Months Ended June 30, 2017	Natural Gas Gathering and Processing			Natural Gas Liquids (a)			Natural Gas Pipelines (b)			Total
	(Thousands of dollars)
Sales to unaffiliated customers	$	833,237		$	4,440,399		$	200,679		$	5,474,315
Intersegment revenues	513,854			301,270			3,988			819,112
Total revenues	1,347,091			4,741,669			204,667			6,293,427
Cost of sales and fuel (exclusive of depreciation and operating costs)	(977,275		)	(4,052,294		)	(23,376		)	(5,052,945		)
Operating costs	(143,987		)	(165,417		)	(62,245		)	(371,649		)
Equity in net earnings from investments	6,410			28,784			43,733			78,927
Other	(11		)	(1,204		)	839			(376		)
Segment adjusted EBITDA	$	232,228		$	551,538		$	163,618		$	947,384

Depreciation and amortization	$	(91,001	)	$	(82,542	)	$	(25,141	)	$	(198,684	)
Total assets	$	5,310,946		$	8,168,567		$	1,951,423		$	15,430,936
Capital expenditures	$	100,171		$	32,789		$	51,860		$	184,820

(a) - Our Natural Gas Liquids segment has regulated and nonregulated operations. Our Natural Gas Liquids segment’s regulated operations had revenues of $585.7 million, of which $502.3 million related to sales within the segment, and cost of sales and fuel of $235.4 million.

(b) - Our Natural Gas Pipelines segment has regulated and nonregulated operations. Our Natural Gas Pipelines segment’s regulated operations had revenues of $131.7 million and cost of sales and fuel of $22.4 million.



Six Months Ended June 30, 2017	Total Segments			Other and Eliminations			Total
	(Thousands of dollars)
Reconciliations of total segments to consolidated
Sales to unaffiliated customers	$	5,474,315		$	1,068		$	5,475,383
Intersegment revenues	819,112			(819,112		)	—
Total revenues	$	6,293,427		$	(818,044	)	$	5,475,383

Cost of sales and fuel (exclusive of depreciation and operating costs)	$	(5,052,945	)	$	818,080		$	(4,234,865	)
Operating costs	$	(371,649	)	$	(32,644	)	$	(404,293	)
Depreciation and amortization	$	(198,684	)	$	(1,584	)	$	(200,268	)
Equity in net earnings from investments	$	78,927		$	—		$	78,927
Total assets	$	15,430,936		$	1,241,987		$	16,672,923
Capital expenditures	$	184,820		$	10,412		$	195,232



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018			2017
	(Thousands of dollars)
Reconciliation of net income to total segment adjusted EBITDA
Net income	$	282,179	$	175,991	$	548,228		$	362,176
Add:
Interest expense, net of capitalized interest	113,496		118,473		229,221			234,935
Depreciation and amortization	106,288		100,849		210,525			200,268
Income taxes	87,531		43,844		163,302			98,785
Noncash compensation expense	12,140		3,260		21,366			4,907
Other corporate costs and noncash items (a)	2,659		39,813		(2,094		)	46,313
Total segment adjusted EBITDA	$	604,293	$	482,230	$	1,170,548		$	947,384

(a) - Includes our April 2017 $20 million contribution of Series E Preferred Stock to the Foundation and costs related to the Merger Transaction of $22.8 million and $29.5 million for the three and six months ended June 30, 2017, respectively.