Note 10. Equity and Distributions

2015 Purchase of Noncontrolling Interest

In connection with the 2015 Beta Acquisition, we purchased the noncontrolling interests in SPBPC. See Note 4 for further information.

2014 Public Equity Offerings

On September 9, 2014, we issued 14,950,000 common units representing limited partner interests in the Partnership (including 1,950,000 common units purchased pursuant to the full exercise of the underwriters’ option to purchase additional common units) to the public at an offering price of $22.29 per unit generating total net proceeds of approximately $321.3 million after deducting underwriting discounts and offering expenses. The net proceeds from the equity offering, including our general partner’s proportionate capital contribution, were used to repay a portion of the outstanding borrowings under our revolving credit facility.

On July 15, 2014, we issued 9,890,000 common units representing limited partner interests in the Partnership (including 1,290,000 common units purchased pursuant to the full exercise of the underwriters’ option to purchase additional common units) to the underwriters at a negotiated price of $22.25 per unit generating total net proceeds of approximately $220.0 million after deducting offering expenses. The net proceeds from the equity offering, including our general partner’s proportionate capital contribution, were used to repay a portion of the outstanding borrowings under our revolving credit facility.

Equity Outstanding

The following table summarizes changes in the number of outstanding units since December 31, 2013:

							General
	Common			Subordinated			Partner
Balance, December 31, 2013		55,877,831			5,360,912			61,300
Common units issued		24,840,000			—			—
Restricted common units issued		684,954			—			—
Restricted common units forfeited		(38,294	)		—			—
Restricted common units repurchased (1)		(42,587	)		—			—
Common units repurchased under repurchase program		(899,912	)		—			—
General partner units issued		—			—			25,497
Balance, December 31, 2014		80,421,992			5,360,912			86,797
Restricted common units issued		827,704			—			—
Restricted common units forfeited		(69,059	)		—			—
Restricted common units repurchased (1)		(87,228	)		—			—
Common units repurchased under repurchase program		(3,547,921	)		—			—
Subordinated units converted to common units		5,360,912			(5,360,912	)		—
Balance, December 31, 2015		82,906,400			—			86,797
Common units issued		1,178,102
Restricted common units issued		50,000			—			—
Restricted common units forfeited		(27,537	)		—			—
Restricted common units repurchased (1)		(279,045	)		—			—
Cancellation of general partner units		—			—			(86,797	)
Balance, December 31, 2016		83,827,920			—			—

(1)

Restricted common units are generally net-settled by unitholders to cover the required withholding tax upon vesting. Unitholders surrendered units with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes. Total payments remitted for the employees’ tax obligations to the appropriate taxing authorities were $0.6 million, $1.3 million and $1.0 million for the years ended December 31, 2016, 2015 and 2014, respectively. These net-settlements had the effect of unit repurchases by the Partnership as they reduced the number of units that would have otherwise been outstanding as a result of the vesting and did not represent an expense to the Partnership.

Restricted common units are a component of common units as presented on our consolidated balance sheets. See Note 12 for additional information regarding restricted common units that were granted during the years ended December 31, 2016, 2015 and 2014.

General Partner Interest and IDRs. On April 27, 2016, we acquired MEMP GP from Memorial Resource for cash consideration of approximately $0.8 million. MEMP GP held an approximate 0.1% general partner interest and 50% of the IDRs in us. In conjunction with the MEMP GP Acquisition, on April 27, 2016, we also entered into an agreement with an NGP affiliate pursuant to which we agreed to acquire the other 50% of the IDRs. The acquisition was accounted for as an equity transaction and no gain or loss was recognized as a result of the acquisition. In connection with the MEMP GP Acquisition, our partnership agreement was amended and restated to convert the 0.1% general partner interest in the Partnership held by MEMP GP into a non-economic general partner interest. Prior to June 1, 2016, Memorial Resource owned 100% of our general partner, which owned 50% of our incentive distribution rights. The Funds collectively indirectly owned 50% of our incentive distribution rights.

Common Units. The common units are a separate class of the limited partner interest in us and have limited voting rights as set forth in our partnership agreement. The holders of units are entitled to participate in partnership distributions as discussed further below under “Cash Distribution Policy” and exercise the rights or privileges available to limited partners under our partnership agreement.

On February 13, 2015, all of the 5,360,912 outstanding subordinated units owned by MRD Holdco were converted into common units. The subordinated units converted on a one-for-one basis into common units upon the payment of MEMP's fourth quarter 2014 distribution. MRD Holdco sold all of the common units during the three months ended June 30, 2015 and no longer owns any of our outstanding common units.

“At-the-Market” Equity Program

On May 25, 2016, the Partnership entered into an equity distribution agreement for the sale of up to $60.0 million of common units under an at-the-market program (the “ATM Program”). Sales of common units, if any, will be made under the ATM Program by means of ordinary brokers’ transactions, through the facilities of the NASDAQ Global Market at market prices, or as otherwise agreed between the Partnership and a sales agent.

During the year ended December 31, 2016, the Partnership sold 1,178,102 common units under the ATM program. The sale of the units generated proceeds of approximately $1.8 million for the year ended December 31, 2016, which was net of approximately $0.5 million in fees. The Partnership used the net proceeds from the sale of common units to repurchase senior notes.

2015 and 2014 Repurchases of Common Units

In December 2014, the board of directors of our general partner authorized the repurchase of up to $150.0 million of our common units (“MEMP Repurchase Program”). Under the MEMP Repurchase Program, units could be repurchased and retired from time to time at our discretion on the open market. The MEMP Repurchase Program did not obligate us to repurchase any dollar amount or specific number of common units and could have been discontinued at any time. During the year ended December 31, 2015, we repurchased $52.8 million in common units, which represents a repurchase and retirement of 3,547,921 common units under the MEMP Repurchase Program. During the year ended December 31, 2014, we repurchased $12.9 million in common units, which represented a repurchase and retirement of 899,912 common units. The MEMP Repurchase Program expired in December 2015.

Allocations of Net Income (Loss)

Prior to the MEMP GP Acquisition, net income (loss) attributable to the Partnership was allocated between our general partner and the common unitholders in proportion to their pro rata ownership after giving effect to priority earnings allocations in an amount equal to incentive cash distributions allocated to our general partner and the Funds. Net income (loss) attributable to acquisitions accounted for as a transaction between entities under common control in a manner similar to the pooling of interest method prior to their acquisition date is allocated to the previous owners since they were affiliates of our general partner. Subsequent to the MEMP GP Acquisition, net income (loss) attributable to the Partnership is allocated entirely to the common unit holders.

Cash Distribution Policy

In October 2016, the board of directors of our general partner suspended distributions on common units primarily due to the current and expected commodity price environment and market conditions and their impact on our future business as well as restrictions imposed by our debt instruments, including our revolving credit facility. Additionally, under our revolving credit facility, we will not be able to pay distributions to unitholders in any such quarter in the event there exists a borrowing base deficiency or an event of default either before or after giving effect to such distribution or we are not in pro forma compliance with our revolving credit facility after giving effect to such distribution.

Available Cash. Our amended partnership agreement requires that within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement) to our unitholders of record on the applicable record date. Generally, available cash refers to all cash on hand at the end of the quarter less cash reserves established by our general partner to: (i) operate our business (e.g., future capital expenditures, working capital and operating expenses); (ii) comply with applicable law, debt, and other agreements; and (iii) provide funds for distribution to our unitholders for any one or more of the next four quarters. If our general partner so determines, available cash may include borrowings made after the end of the quarter.

Minimum Quarterly Distribution. During the subordination period, the common units had the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $0.4750 per common unit plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus could be made on the subordinated units. These units were deemed “subordinated” because for a period of time, referred to as the subordination period, the subordinated units were not entitled to receive any distributions from operating surplus until the common units had received the minimum quarterly distribution plus any arrearages from prior quarters. Furthermore, no arrearages were paid on the subordinated units. The practical effect of the subordinated units was to increase the likelihood that during the subordination period there would be available cash from operating surplus to be distributed on the common units. The subordination period ended on February 13, 2015.

Cash Distributions to Unitholders

The following table summarizes our declared quarterly cash distribution rates with respect to the quarter indicated (dollars in millions, except per unit amounts):

								Distribution
				Amount		Aggregate		Received by
Quarter	Declaration Date	Record Date	Payment Date	Per Unit		Distribution		Affiliates
2^nd Quarter 2016	July 26, 2016	August 5, 2016	August 12, 2016	$	0.0300	$	2.5	$	< 0.1
1^st Quarter 2016	April 26, 2016	May 6, 2016	May 13, 2016	$	0.0300	$	2.5	$	< 0.1
4^th Quarter 2015	January 26, 2016	February 5, 2016	February 12, 2016	$	0.1000	$	8.3	$	< 0.1
3^rd Quarter 2015	October 26, 2015	November 5, 2015	November 12, 2015	$	0.3000	$	24.9	$	< 0.1
2^nd Quarter 2015	July 24, 2015	August 5, 2015	August 12, 2015	$	0.5500	$	45.7	$	0.1
1^st Quarter 2015	April 24, 2015	May 6, 2015	May 13, 2015	$	0.5500	$	46.3	$	0.2
4^th Quarter 2014	January 26, 2015	February 5, 2015	February 12, 2015	$	0.5500	$	46.3	$	3.1
3^rd Quarter 2014	October 23, 2014	November 5, 2014	November 12, 2014	$	0.5500	$	47.8	$	3.1
2^nd Quarter 2014	July 24, 2014	August 5, 2014	August 12, 2014	$	0.5500	$	39.5	$	3.0
1^st Quarter 2014	April 24, 2014	May 6, 2014	May 13, 2014	$	0.5500	$	33.8	$	3.0

Previous Owners Capital

The following table summarizes our previous owners’ equity transactions related to the Property Swap with respect to the period indicated (dollars in thousands):

	Previous Owners
Balance, December 31, 2013	$	283,405
Net income (loss)		(2,465	)
Contributions		5,990
Distributions		(9,886	)
Distribution of net asset to MRD Holdco		(26,131	)
Tax related effects attributable to Memorial Resource restructuring transactions and initial public offering		(30,483	)
Other		227
Balance, December 31, 2014	$	220,657
Net income (loss)		(2,268	)
Contributions		1,912
Net book value of net assets exchanged		(248,321	)
Deferred tax liability retained by previous owner		28,020
Balance, December 31, 2015	$	—