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RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2019
RELATED PARTY TRANSACTIONS [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 18. RELATED PARTY TRANSACTIONS

 

As a result of the Restructuring, EnerVest is no longer a related party to the Company. However, Harvest will continue its relationship with EnerVest through an agreement for EnerVest to operate its properties. See Note 14 for additional information regarding the Services Agreement.

 

Prior to emergence from bankruptcy, the Predecessor’s general partner was EV Energy GP, and the general partner of its general partner was EV Management. EV Management is a wholly owned subsidiary of EnerVest. EnerVest and its affiliates also had a significant interest in the Partnership through their 71.25% ownership of EV Energy GP which, in turn, owned a 2% general partner interest in the Partnership and all of its incentive distribution rights. In addition, the Predecessor’s board of directors included directors who were also executives of EnerVest. As a result, EnerVest was considered a related party to the Predecessor.

 

However, in accordance with the Plan, EV Energy GP, the Predecessor’s general partner, was dissolved following the Effective Date, and the terms of the Predecessor’s board of directors automatically expired on the Effective Date. The Successor formed a new five-member board of directors which does not consist of any members of EnerVest management. As a result, EnerVest is not considered a related party to the Successor.

 

Pursuant to a services agreement, referred to as an omnibus agreement, the Predecessor paid EnerVest $7.2 million for general and administrative services provided during the five months ended May 31, 2018. Under the omnibus agreement, the Predecessor also paid EnerVest $14.1 million during the year ended December 31, 2017. These fees were based on an allocation of charges between EnerVest and EVEP based on the estimated use of such services by each party, and the Partnership believed that the allocation method employed by EnerVest was reasonable and reflective of the estimated level of costs the Partnership would have incurred on a standalone basis. These fees are included in “General and administrative expenses” in the consolidated statements of operations.

 

The Partnership also entered into operating agreements with EnerVest whereby EnerVest Operating, a subsidiary of EnerVest acted as contract operator of the oil and natural gas wells and related gathering systems and production facilities in which EVEP owned an interest. The Predecessor reimbursed EnerVest approximately $8.4 million in the five months ended May 31, 2018, for direct expenses incurred in the operation of its wells and related gathering systems and production facilities and for the allocable share of the costs of EnerVest employees who performed services on its properties. Under that operating agreement, the Predecessor also reimbursed EnerVest approximately $20.1 million during the year ended December 31, 2017, for direct expenses incurred. As the vast majority of such expenses were charged to the Partnership on an actual basis (i.e., no mark–up or subsidy is charged or received by EnerVest), EVEP believed that the aforementioned services were provided to the Partnership at fair and reasonable rates relative to the prevailing market and were representative of what the amounts would have been on a standalone basis. These costs are included in “Lease operating expenses” in the consolidated statements of operations. Additionally, in its role as contract operator, this EnerVest subsidiary also collected proceeds from oil, natural gas and natural gas liquids sales and distributed them to the Partnership and other working interest owners.

 

Effective November 1, 2011, EVEP, along with certain institutional partnerships managed by EnerVest, sold a portion of its unproved, undeveloped Utica acreage in ten Ohio counties to Total E&P USA, Inc. A portion of the purchase price was paid in cash with the balance payable in the form of a carried interest in future development activity. In early 2017, the allocated share of the Carry for one of the institutional partnerships was completely utilized. As such, that institutional partnership purchased Carry rights from us and the other institutional partnerships equal to the benefit to be received from Total for their continued participation in the Carry. EVEP’s share of this benefit was $0.7 million for the five months ended May 31, 2018 and was $2.5 million for the year ended December 31, 2017. These purchased Carry rights were recorded as reimbursements to oil and gas properties.

 

In 2011, EVEP and certain institutional partnerships managed by EnerVest carved out 7.5% overriding royalty interests from certain Underlying Properties, which the Partnership believed may be prospective for the Utica Shale, and contributed the ORRI to a newly formed limited partnership. EnerVest is the general partner of this partnership. The ORRI entitles the partnership to an average approximate 5.64% of the gross revenues from the Underlying Properties. EVEP owned a 48% limited partner interest in the partnership and account for the investment using the equity method of accounting. See Note 4 for additional information.