UNITHOLDERS’ EQUITY AND PARTNERSHIP DISTRIBUTIONS

6 Months Ended

Jun. 30, 2020

UNITHOLDERS’ EQUITY AND PARTNERSHIP DISTRIBUTIONS

The Partnership has general partner and limited partner units. At June 30, 2020, the Partnership had a total of 67,831,342 common units issued and outstanding and 90,709,946 Class B units issued and outstanding, of which 731,500 common units and 90,709,946 Class B units were owned by Diamondback, representing approximately 58% of the Partnership’s total units outstanding. The Operating Company units and the Partnership’s Class B units owned by Diamondback are exchangeable from time to time for the Partnership’s common units (that is, one Operating Company unit and one Partnership Class B unit, together, will be exchangeable for one Partnership common unit).

In March 2019, the Partnership completed an underwritten public offering of 10,925,000 common units, which included 1,425,000 common units issued pursuant to an option to purchase additional common units granted to the underwriters. Following this offering, Diamondback owned approximately 54% of the total Partnership units then outstanding. The Partnership received net proceeds from this offering of approximately $340.6 million, after deducting underwriting discounts and commissions and offering expenses. The Partnership used the net proceeds to purchase units of the Operating Company. The Operating Company in turn used the net proceeds to repay a portion of the outstanding borrowings under its revolving credit facility and finance acquisitions during the period.

The following table summarizes the ownership interest in subsidiary changes during the period:


	Six Months Ended June 30, 2019
	(In thousands)
Net income attributable to the Partnership	$	36,044

Change in ownership of consolidated subsidiaries due to purchase of subsidiary shares in 2019 offering	(71,195)




Change from net loss attributable to the Partnership's shareholders and transfers to non-controlling interest	$	(35,151)

There were no changes in ownership of consolidated subsidiaries during the three and six months ended June 30, 2020 and the three months ended June 30, 2019.

Beginning with the first quarter of 2020, the board of directors of the General Partner revised the distribution policy pursuant to which the Operating Company now distributes 25% of the available cash it generates each quarter to its unitholders (including the Partnership), and pursuant to which the Partnership in turn distributes all of the available cash it receives from the Operating Company to its common unitholders. The Partnership’s available cash, and the available cash of the Operating Company, for each quarter is determined by the board of directors of the General Partner following the end of such quarter. The Operating Company’s available cash generally equals its Adjusted EBITDA for the quarter, less cash needed for debt service and other contractual obligations and fixed charges and reserves for future operating or capital needs that the board of directors of the General Partner deems necessary or appropriate, if any. The Partnership’s available cash for each quarter generally equals its Adjusted EBITDA (which is the Partnership’s proportional share of the available cash of the Operating Company for the quarter), less cash needed for the payment of income taxes by it, if any, and the preferred distribution. Immediately prior to the adoption of this policy, the Operating Company’s policy was to distribute all of its available cash quarterly to its unitholders rather than 25%. The distribution policy was changed to enable the Operating Company to retain cash flow to help strengthen the Partnership’s balance sheet.

The board of directors of the General Partner may change the distribution policies at any time. The Partnership is not required to pay distributions to its common unitholders on a quarterly or other basis.

The following table presents information regarding cash distributions approved by the board of directors of the General Partner for the periods presented:

Amount per Common Unit

Declaration Date

Unitholder Record Date

Payment Date

Q4 2019

0.45

February 7, 2020

February 21, 2020

February 28, 2020

Q1 2020

0.10

April 30, 2020

May 14, 2020

May 21, 2020

Cash distributions will be made to the common unitholders of record on the applicable record date, generally within 60 days after the end of each quarter.

Amendment to LLC Agreement - Tax Allocation

On March 30, 2020, the Partnership, as managing member of the Operating Company, entered into the First Amendment to Second Amended and Restated Limited Liability Company Agreement of the Operating Company (the “Amendment”) to extend the remaining period of special allocations to Diamondback of the Operating Company’s income and gains over losses and deductions (but before depletion) from two to four years.