Discontinued Operations

12 Months Ended

Dec. 31, 2014

Discontinued Operations [Abstract]

Discontinued Operations

4. DISCONTINUED OPERATIONS

Divestiture of Utica Shale Oil and Natural Gas Assets

The Partnership and an affiliate of Wexford Capital participated with Gulfport to acquire interests in a portfolio of oil and natural gas leases in the Utica Shale. During the year ended December 31, 2011, the Partnership completed the acquisitions of interests in a portfolio of leases in the Utica Shale region of eastern Ohio, which consisted of a 10.8% interest in approximately 80,000 acres. During the third quarter of 2012, the Partnership completed an exchange of its initial 10.8% position for a pro rata interest in 125,000 acres under lease by Gulfport and an affiliate of Wexford Capital. The non-cash transaction was an exchange of the Partnership’s operating interest for the operating interest owned by another party in order to diversify the Partnership’s risk in its oil and gas investment. Thus, the Partnership determined that the non-cash exchange of the Partnership’s ownership interest in the Utica acreage did not result in any gain or loss. Also during the third quarter of 2012, the Partnership’s position was adjusted to a 5% net interest in the 125,000 acres, or approximately 6,250 net acres. As of December 31, 2013, the Partnership had invested approximately $31.1 million for its pro rata interest in the Utica Shale portfolio of oil and gas leases, which consisted of a 5% interest in a total of approximately 152,300 gross acres, or approximately 7,615 net acres. In addition, per the joint operating agreement among the Partnership, Gulfport and an affiliate of Wexford Capital, the Partnership had funded its proportionate share of drilling costs to Gulfport for wells being drilled on the Partnership’s acreage. As of December 31, 2013, the Partnership had funded approximately $23.3 million of drilling costs. The Partnership’s investment in the Utica Shale oil and gas leases as well as the proportionate amount of funded drilling costs are recorded in Non-current assets held for sale in the unaudited condensed consolidated statements of financial position as of December 31, 2013. For the year ended December 31, 2013, the Partnership recorded revenue from its Utica Shale investment of approximately $5.6 million and recognized pre-tax profit of approximately $1.3 million, which is recorded in Income from discontinued operations in the consolidated statements of operations and comprehensive income.

In March 2014, the Partnership completed a purchase and sale agreement (the “Purchase Agreement”) with Gulfport to sell the Partnership’s oil and natural gas properties in the Utica Shale region for approximately $184.0 million (the “Purchase Price”). The Purchase Agreement was effective as of January 1, 2014 and the Purchase Price was adjusted for any unsettled expenditures made and/or proceeds received from the Partnership’s portion of its Utica Shale properties prior to the effective date. At the closing of the Purchase Agreement, the Partnership was immediately due approximately $179.0 million, net of any adjustments described above, and the remaining approximately $5.0 million was scheduled to be paid within approximately 90 days of March 20, 2014, subject to ongoing legal title work related to specific properties. In December 2014, the Partnership settled the remaining $5.0 million due from Gulfport based upon net amounts payable from the Partnership to Gulfport prior to the effective date of the Purchase Agreement as well as amounts due the Partnership related to legal reviews of the properties subject to the Purchase Agreement and other unsettled items due to the Partnership prior to the effective date of the Purchase Agreement. The net effect of this settlement resulted in the Partnership paying Gulfport approximately $46,000 in December 2014. The Partnership recorded a gain of approximately $121.7 million during the year ended December 31, 2014 related to this sale, which is recorded in Income from discontinued operations in the consolidated statements of operations and comprehensive income. The gain from the Utica Shale transaction is included in the (Gain) on sale/disposal of assets—net line in the operating activities section of the Partnership’s consolidated statements of cash flows. The proceeds from the Utica Shale transaction are included in the Proceeds from sales of property, plant, and equipment line in the investing activities section of the Partnership’s consolidated statements of cash flows.

Other Oil and Natural Gas Activities

In January 2014, the Partnership received approximately $8.4 million of net proceeds from the sale by Blackhawk Midstream LLC (“Blackhawk”) of its equity interest in two entities, Ohio Gathering Company, LLC and Ohio Condensate Company, LLC, to Summit Midstream Partners, LLC. As part of the joint operating agreement for the Utica Shale investment discussed above, the Partnership had the right to approximately 5% of the proceeds of the sale by Blackhawk. The Partnership recorded this $8.4 million in Income from discontinued operations in the consolidated statements of operations and comprehensive income. The gain from the Blackhawk transaction is included in the (Gain) on sale/disposal of assets—net line in the operating activities section of the Partnership’s consolidated statements of cash flows. The proceeds from the Blackhawk transaction are included in the Proceeds from sales of property, plant, and equipment line in the investing activities section of the Partnership’s consolidated statements of cash flows.