was primarily due to an increase in the insurance liability discount rate. As of December 31, 2015, Front Street began discounting the liability cash flows by using the market yields on the underlying assets backing the liabilities less the non-performance spread to reflect uncertainty. In prior periods, the discount rate was based on risk-free rates plus non-performance spreads less a risk margin.
Selling, acquisition, operating and general expenses. Selling, acquisition, operating and general expenses of the Insurance segment decreased slightly to $2.4 million for the Fiscal 2016 Quarter as compared to $2.5 million for the Fiscal 2015 Quarter.
Energy Segment
Prior to October 31, 2014, the operating results of Compass represented our 74.4% proportionate interest. Operating results after October 31, 2014 represent 100.0% of Compass’ consolidated results. Presented below is a table that summarizes the results of operations of our Energy segment and compares the amount of change between the respective fiscal periods (in millions):
|
| | | | | | | | | | | | |
| | Fiscal Quarter |
| | 2016 | | 2015 | | Increase / (Decrease) |
Oil and natural gas revenues | | $ | 16.8 |
| | $ | 34.3 |
| | $ | (17.5 | ) |
Oil and natural gas direct operating costs | | 17.1 |
| | 20.5 |
| | (3.4 | ) |
Oil and natural gas operating margin | | (0.3 | ) | | 13.8 |
| | (14.1 | ) |
Selling, acquisition, operating and general expenses | | 9.8 |
| | 18.8 |
| | (9.0 | ) |
Impairment of oil and natural gas properties | | 54.4 |
| | 190.0 |
| | (135.6 | ) |
Operating loss - Energy segment | | $ | (64.5 | ) | | $ | (195.0 | ) | | $ | 130.5 |
|
Oil and natural gas production, revenues. Oil and natural gas revenues for the Fiscal 2016 Quarter decreased $17.5 million, or 51.0%, to $16.8 million compared with $34.3 million for the Fiscal 2015 Quarter. The decrease was primarily due to lower prices of oil, natural gas and natural gas liquids and natural production declines coupled with the effect of the Compass Asset Sale.
Direct operating costs and expenses. The Energy segment’s oil and natural gas direct operating costs and expenses for the Fiscal 2016 Quarter were $17.1 million, a decrease of $3.4 million from $20.5 million for the Fiscal 2015 Quarter. This decrease was mainly as a result of the Compass Asset Sale.
Direct operating costs and expenses for the Fiscal 2016 Quarter and the Fiscal 2015 Quarter are presented as follows (in millions):
|
| | | | | | | | | | | |
| Fiscal Quarter |
| 2016 | | 2015 | | Increase /(Decrease) |
Oil and natural gas operating costs | $ | 10.7 |
| | $ | 13.2 |
| | $ | (2.5 | ) |
Gathering and transportation costs | 3.3 |
| | 4.0 |
| | (0.7 | ) |
Production and ad valorem taxes | 3.1 |
| | 3.3 |
| | (0.2 | ) |
Total direct operating costs | $ | 17.1 |
| | $ | 20.5 |
| | $ | (3.4 | ) |
Selling, acquisition, operating and general expenses. The Energy segment’s selling, acquisition, operating and general expenses for the Fiscal 2016 Quarter decreased $9.0 million, or 47.9%, to $9.8 million compared with $18.8 million for the Fiscal 2015 Quarter. The decrease was primarily due to a decrease in depletion expense of $7.3 million, which was mainly as a result of the Compass Asset Sale.
Impairment of oil and natural gas properties. The Energy segment recognized ceiling test impairments to its proved oil and natural gas properties of $54.4 million for the Fiscal 2016 Quarter. The impairment was due to the continued decline in oil and natural gas prices. The Energy segment recognized a ceiling test impairment of $190.0 million for the Fiscal 2015 Quarter primarily due to differences in the oil and natural gas prices utilized in the purchase price allocation at the formation of Compass and the prices used in the ceiling test calculation, as well as the acquisition of EXCO Resources, Inc.’s (“EXCO”) remaining 25.5% interest in Compass. See Note 2, Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements to the accompanying Condensed Consolidated Financial Statements for additional information regarding the ceiling test impairments.
