Note 12 - Related Party Transactions

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note 12. Related Party Transactions

FASB ASC Topic 850, Related Party Disclosures, requires that information about transactions with related parties that would make a difference in decision making shall be disclosed so that users of the financial statements can evaluate their significance.

Earthstone's majority shareholder consists of various investment funds managed by a private equity firm who may manage other investments in entities with which the Company interacts in the normal course of business. On February 12, 2020, the Company sold certain of its interests in oil and natural gas leases and wells in an arm’s length transaction to a portfolio company of Earthstone’s majority shareholder (not under common control) for cash consideration of approximately $0.4 million. 

In connection with the Olenik v. Lodzinski et al. lawsuit described below in Note 13. Commitments and Contingencies, Earthstone’s majority shareholder was also named in the lawsuit. As a result of the Settlement Agreement (defined below), the Company has concluded negotiations with its insurance carrier regarding an allocation of defense costs and settlement contributions above its deductible for all the parties named in the lawsuit. In June 2020, the Company received $0.6 million in preliminary reimbursements from its majority shareholder and as of September 30, 2020 recorded a receivable in the amount of $0.6 million from its majority shareholder based on estimated additional defense costs to finalize the settlement and the respective allocated portion of the settlement payments.