INVESTMENTS

3 Months Ended

Mar. 31, 2020

INVESTMENTS

INVESTMENTS

11.INVESTMENTS

AllDale III

As discussed in Note 10 – Variable Interest Entities, we account for our ownership interest in the income or loss of AllDale III as an equity method investment.  We record equity income or loss based on AllDale III's distribution structure.  The changes in our equity method investment in AllDale III for each of the periods presented were as follows:

	Three Months Ended
	March 31,
	2020		2019
	(in thousands)
Beginning balance	$	28,529	$	28,974
Equity method investment income		451		324
Distributions received		(593)		(528)
Other		(273)		—
Ending balance	$	28,114	$	28,770

As discussed in Note 4 – Long-Lived Asset Impairments, there is uncertainty related to energy demand as a result of a) weak electricity demand and b) an oversupply and lack of storage for oil and natural gas, both due in part to the COVID-19 pandemic, which could impact our investment in AllDale III.  As a result we compared the fair value of our investment to its carrying value and concluded that the fair value exceeded the carrying value and no impairment in our investment was necessary.  To calculate the fair value of the investment we used an income approach utilizing a discounted cash flow model based on our estimate of both volume, prices and expenses from information available to us.  Key assumptions used in our valuation are not observable in active markets; therefore, the fair value measurements represent Level 3 fair value measurements.  The cash flow estimates used in our assessment, by their very nature, are dependent on conditions that could materially change in future periods based on new information.  If in future periods changes to these estimates were to materially reduce our expected cash flows, an impairment of our investment could be necessary.

Kodiak

On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak Gas Services, LLC ("Kodiak"), a privately-held company providing large-scale, high-utilization gas compression assets to customers operating primarily in the Permian Basin.  This structured investment provided us with a quarterly cash or payment-in-kind return.  On February 8, 2019, Kodiak redeemed our preferred interest for $135.0 million in cash resulting in an $11.5 million gain due to an early redemption premium. The gain is included in the Equity securities income line item.  We no longer hold any ownership interests in Kodiak.  Prior to redemption, we accounted for our ownership interests in Kodiak as equity securities without readily determinable fair values.