RECEIVABLES

12 Months Ended

Dec. 31, 2019

Accounts Receivable



(in thousands)	December 31, 2019			December 31, 2018
Production and processing sales and fees	$	40,858		$	51,004
Joint interest billings	12,845			18,147
Pooling interest⁽¹⁾	7,901			18,786
Allowance for doubtful accounts	(417		)	(95		)
Total accounts receivable, net	$	61,187		$	87,842

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(1)	Pooling interest relates to Oklahoma’s forced pooling process which permits mineral interest owners the option to participate in the drilling of proposed wells. The pooling interest listed above represents unbilled costs for wells where the option remains pending. Depending upon the mineral owner’s decision, these costs will be billed to them or added to oil and gas properties.

Related Party Receivables



(in thousands)	December 31, 2019			December 31, 2018
Related party receivables	$	12,144		$	12,376
Allowance for doubtful accounts	(12,144		)	(9,035		)
Related party receivables, net	—			3,341

Notes receivable from related parties	13,403			13,403
Allowance for doubtful accounts	(13,403		)	(13,403		)
Notes receivable from related parties, net	—			—
Related party receivables, net	$	—		$	3,341

At December 31, 2019, we had receivables, including notes receivable from HMI totaling approximately $23.2 million. Because HMI disputes its obligations under the promissory notes with us and challenges other amounts due us, we had fully reserved the outstanding receivables at December 31, 2019 based upon our assessment regarding collectibility.

Additionally, at December 31, 2019, we had receivables of $2.3 million from KFM’s former owner, KFM Holdco, LLC (“KFM Holdco”), relating to transaction costs paid on KFM Holdco’s behalf before the Business Combination. During 2019, we fully

reserved this receivable based upon our assessment regarding collectibility. We have filed suit against KFM Holdco to seek payment for this receivable.

Management Services Agreement with HMI



(in thousands)
HMI related party receivable at December 31, 2018	$	10,066
Additions	832
Payments	(1,073		)
HMI related party receivable at December 31, 2019	9,825
Allowance for doubtful accounts⁽¹⁾	(9,825		)
Balance at December 31, 2019, net	$	—

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(1)	$9.0 million of the allowance was recognized during the 2018 Successor Period.

Our management services agreement with HMI (the “HMI Agreement”) was terminated effective January 31, 2019. During the transition period, HMI agreed to pay us (i) for all services performed, (ii) an amount equal to our costs and expenses incurred in connection with providing the services as provided for in the approved budget and (iii) an amount equal to our costs and expenses reimbursable pursuant to the HMI Agreement. As of December 31, 2019, and December 31, 2018, approximately $9.8 million and $10.1 million, respectively, were due from HMI for reimbursement of costs and expenses which are recorded as “Related party receivables, net” in the balance sheets. HMI has disputed certain of the amounts we billed. We are pursuing remedies under applicable law in connection with repayment of this receivable. There is no guarantee that HMI will pay the amounts it owes or amounts that may become due pursuant to indemnification obligations which became more uncertain when HMI filed for bankruptcy protection in January 2020. As a result of these circumstances, we have recognized an allowance for uncollectible accounts of $9.8 million and $9.0 million as of December 31, 2019 and December 31, 2018, respectively, to fully provide for the unremitted balances.

We may also be subject to future contingent liabilities for the non-STACK assets for which we should have been indemnified, including liabilities associated with litigation relating to the non-STACK assets. As of December 31, 2019 and December 31, 2018, we have established no liabilities for contingent obligations associated with non-STACK assets owned by High Mesa.

Promissory notes receivable

High Mesa Services, LLC (“HMS”), a subsidiary of HMI, defaulted under the terms of a promissory note with us when it did not pay us on February 28, 2019, and HMS has failed to cure such default. We subsequently declared all amounts owed under the note immediately due and payable and we have fully reserved the promissory note balance, including interest paid-in-kind, totaling $1.7 million as of December 31, 2019 and December 31, 2018.

In addition, we have a note receivable from HMS which matured on December 31, 2019, and bears interest at 8% per annum, which may be paid-in-kind and added to the principal amount. HMI disputes its obligations under the note. As of December 31, 2019, and December 31, 2018, the note receivable balance, including interest paid-in-kind, amounted to $11.7 million, for each respective period. This balance was fully reserved at the end of both periods. We oppose HMI’s claims and believe HMI’s obligations under the notes to be valid assets and that the full amount is payable to us. We are pursuing remedies under applicable law in connection with repayment of the promissory notes.

We believe there is substantial doubt about HMI’s ability to make payment and honor its indemnification, which is further complicated by HMI’s filing for bankruptcy protection in January 2020. As a result of the potential conflict of interest from certain of AMR’s directors who are also controlling holders of HMI, AMR’s disinterested directors have responsibility to address any potential conflicts of interest with respect to this matter.

Activity in our allowances for doubtful accounts for trade and related party receivables was as follows:



	Successor						Predecessor
(in thousands)	Year Ended December 31, 2019			February 9, 2018 Through December 31, 2018			January 1, 2018 Through February 8, 2018
Trade receivables:
Balance at beginning of period	$	95		$	415		$	415
Charged to expense	332			25			—
Deductions	(10		)	(345		)	—
Balance at end of period	$	417		$	95		$	415

Related party receivables:
Balance at beginning of period	$	22,438		$	—		$	—
Charged to expense	3,196			22,438			—
Deductions	(87		)	—			—
Balance at end of period	$	25,547		$	22,438		$	—