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Related Party Transactions
3 Months Ended
Mar. 31, 2016
Related Party Transactions [Abstract]  
Related Party Transactions

11. RELATED PARTY TRANSACTIONS

We are controlled by our general partner.  The sole member of our general partner is Manager, which has no officers. In May 2014, we entered into the Services Agreement with Manager pursuant to which Manager provides services that we require to operate our business, including overhead, technical, administrative, marketing, accounting, operational, information systems, financial, compliance, insurance, professionals and acquisition, disposition and financing services.  In connection with providing the services under the Services Agreement, Manager receives compensation consisting of: (i) a quarterly fee equal to 0.375% of the value of our properties other than our assets located in the Mid-Continent region, (ii) a $1,000,000 administrative fee, with $500,000 paid on May 8, 2014 and $500,000 paid on July 1, 2014, the date that Manager provided notice of its commitment to provide services under the services agreement, (iii) reimbursement for all allocated overhead costs as well as any direct third-party costs incurred and (iv) for each asset acquisition, asset disposition and financing, a fee not to exceed 2% of the value of such transaction.  Each of these fees, not including the reimbursement of costs, will be paid in cash unless Manager elects for such fee to be paid in our equity.   The Services Agreement has a ten-year term and will be automatically renewed for an additional ten years unless both Manager and the Company provide notice to terminate the agreement.  During the three months ended March 31, 2016, we expensed $1.4 million to Manager pursuant to the Services Agreement, which will be paid in Q2 2016.  During the three months ended March 31, 2015, we paid $0.9 million to Manager under the Services Agreement.

Manager utilizes SOG to provide the services under the Services Agreement.  In May 2014, we entered into a Contract Operating Agreement with SOG pursuant to which SOG either provides services to operate, develop and produce our oil and natural gas properties or engages a third-party operator to do so, other than with respect to our properties in the Mid-Continent Region.  We also have entered into the Geophysical Seismic Data Use License Agreement with SOG pursuant to which SOG provides us a non-exclusive, royalty-free license to use seismic, geophysical and geological information relating to our oil and natural gas properties that is proprietary to SOG and not restricted by agreements that SOG has with landowners or seismic data vendors.

The Partnership has entered into a Firm Gathering and Processing Agreement with SN for an initial term of 15 years under which production from approximately 35,000 acres in Dimmit County and Webb County, Texas will be dedicated for gathering by Catarina Midstream, LLC (“Catarina Midstream”). In addition, for the first five years of the Gathering Agreement, SN Catarina, LLC will be required to meet a minimum quarterly volume delivery commitment of 10,200 barrels per day of crude oil and condensate and 142,000 Mcf per day of natural gas, subject to certain adjustments. 

As of March 31, 2016 and December 31, 2015, the Partnership had a net receivable from related parties of $1.9  million and $1.5 million, respectively, which are included in “Accounts receivable – related entities” in the condensed consolidated balance sheets. As of March 31, 2016 and December 31, 2015, the Partnership also had a net payable from related parties of $3.0 million and $1.0 million respectively. The net receivables/payable as of March 31, 2016 and December 31, 2015 consist primarily of revenues receivable from oil and natural gas production, offset by costs associated with that production and obligations for general and administrative costs. 

On March 31, 2015, the Partnership and SN entered into a Purchase and Sale Agreement for the Eagle Ford acquisition for total consideration of $85.0 million. After $1.4 million in normal and customary closing adjustments, consideration paid at closing consisted of $81.6 million cash paid by us to SN and 105,263 of our common units issued to SN with an aggregate consideration value of $2,000,000.  In connection with the purchase agreement, we entered into a registration rights agreement with SN pursuant to which we granted certain registration rights related to the common unit consideration received.  As of December 31, 2015, there were no common units held by Sanchez Energy or related subsidiaries thereof.  All 105,263 common units issued as consideration for the Eagle Ford acquisition were repurchased in connection with the Western Catarina Midstream acquisition in October 2015. See further discussion of the transaction in Note 3, “Acquisitions.”

In October 2015, the Partnership and Sanchez Energy consummated the Western Catarina Midstream acquisition for total consideration of approximately $345.8 million in cash, subject to closing and post-closing adjustments. Concurrently with the signing of the Western Catarina Midstream acquisition purchase and sale agreement, we entered into a 15-year gas gathering and processing agreement with Sanchez Energy. For the three months ended March 31, 2016, Sanchez Energy paid us approximately $9.6 million pursuant to the terms of the gathering and processing agreement. See further discussion of the transaction in Note 3, “Acquisitions.”