EQUITY METHOD INVESTMENT

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

In May 2018, a subsidiary of KFM entered into agreements with a third party to jointly construct and operate a new crude oil pipeline via creation of Cimarron that we accounted for under the equity method. Cimarron’s proposed pipeline was to extend from our processing plant to Cushing, Oklahoma and was to be constructed and operated by Cimarron, which we determined was controlled by the third-party. During 2018, we invested $17.1 million in Cimarron, but at December 31, 2018, based on our decision to ultimately abandon the project, we reduced our investment to fair value, which we determined was our portion of the estimated cash remaining at Cimarron after satisfaction of liabilities.

In November 2019, Cimarron redeemed its 50% membership interest from the third party for one-half of the remaining cash in Cimarron plus an immaterial amount of other equipment. As a result, we adjusted our preacquisition equity method investment to the fair value of the residual assets remaining in Cimarron, consisting primarily of cash. This resulted in our recognition of a gain of $5.5 million, which is included in “Equity in earnings of unconsolidated subsidiaries” in our consolidated statements of operations. Following this transaction, Cimarron became our wholly owned subsidiary.

Activity in our equity method investment was as follows:



(in thousands)
Balance, as of February 9, 2018	$	—
Capital contributions	17,063
Impairment	(15,963		)
Balance, as of December 31, 2018	1,100
Equity in earnings through November 13, 2019	713
Adjustment of investment in Cimarron to fair value based on assets received	5,503
Ending balance before obtaining control	$	7,316