RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Partnership Agreement

The second amended and restated agreement of limited partnership, dated as of May 9, 2018, as amended as of May 10, 2018 (the “Partnership Agreement”), requires the Partnership to reimburse the General Partner for all direct and indirect expenses incurred or paid on the Partnership’s behalf and all other expenses allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership’s business. The Partnership Agreement does not set a limit on the amount of expenses for which the General Partner and its affiliates may be reimbursed. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for the Partnership or on the Partnership’s behalf and expenses allocated to the General Partner by its affiliates. The General Partner is entitled to determine the expenses that are allocable to the Partnership. For the three months ended March 31, 2020 and 2019, the General Partner allocated $0.9 million and $0.6 million, respectively, to the Partnership.

Tax Sharing

In connection with the closing of the IPO, the Partnership entered into a tax sharing agreement with Diamondback, dated June 23, 2014, pursuant to which the Partnership agreed to reimburse Diamondback for its share of state and local income and other taxes for which the Partnership’s results are included in a combined or consolidated tax return filed by Diamondback with respect to taxable periods including or beginning on June 23, 2014. The amount of any such reimbursement is limited to the tax the Partnership would have paid had it not been included in a combined group with Diamondback. Diamondback may use its tax attributes to cause its combined or consolidated group, of which the Partnership may be a member for this purpose, to owe less or no tax. In such a situation, the Partnership agreed to reimburse Diamondback for the tax the Partnership would have owed had the tax attributes not been available or used for the Partnership’s benefit, even though Diamondback had no cash tax expense for that period. For the three months ended March 31, 2020, the Partnership did not accrue any state income tax expense. For the three months ended March 31, 2019, the Partnership accrued state income tax expense of $47,364 for its share of Texas margin tax for which the Partnership’s results are included in a combined tax return filed by Diamondback.

Lease Bonus

During the three months ended March 31, 2020, Diamondback, either directly or through its consolidated subsidiaries, paid the Partnership $0.3 million in lease bonus payments to extend the term of one lease and $1.3 million in lease bonus payments for one new lease. During the three months ended March 31, 2019, Diamondback paid the Partnership $198 in lease bonus payments to extend the term of one lease and $3,101 in lease bonus payments for two new leases.

Surface Use

Diamondback periodically pays the Partnership for surface use charges and right of way easements related to properties that Diamondback leases from the Partnership. During the three months ended March 31, 2020 and 2019, Diamondback paid the Partnership $0.1 million and less than $0.1 million, respectively.