Transactions With Related Parties

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Transactions With Related Parties

Unit Petroleum Company serves as the general partner of 15 oil and gas limited partnerships. Two investments by third parties and 13 (the employee partnerships) were formed to allow certain of our qualified employees and our directors to participate in Unit Petroleum’s oil and gas exploration and production operations. The partnerships for the third party investments were formed in 1984 and two in 1986. Effective December 31, 2014, the 1984 partnership was dissolved. Employee partnerships have been formed for each year beginning with 1984 and ending with 2011. Interests in the employee partnerships were offered to the employees of Unit and its subsidiaries whose annual base compensation was at least a specified amount and to the directors of Unit.

The employee partnerships formed in 1984 through 1990 were consolidated into a single consolidating partnership in 1993 and the employee partnerships formed in 1991 through 1999 were also consolidated into the consolidating partnership in 2002. The consolidation of the 1991 through the 1999 employee partnerships was done by the general partners under the authority contained in the respective partnership agreements and did not involve any vote, consent or approval by the limited partners. The employee partnerships have each had a set percentage (ranging from 1% to 15%) of our interest in most of the oil and natural gas wells we drill or acquire for our own account during the particular year for which the partnership was formed. The total interest the employees have in our oil and natural gas wells by participating in these partnerships does not exceed one percent.

Amounts received in the years ended December 31, from both public and private Partnerships for which Unit is a general partner are as follows:

	2014		2013		2012
	(In thousands)
Contract drilling	$	4	$	16	$	246
Well supervision and other fees	435		470		434
General and administrative expense reimbursement	39		36		39

Related party transactions for contract drilling and well supervision fees are the related party’s share of such costs. These costs are billed to related parties on the same basis as billings to unrelated parties for such services. General and administrative reimbursements are both direct general and administrative expense incurred on the related party’s behalf and indirect expenses allocated to the related parties. Such allocations are based on the related party’s level of activity and are considered by management to be reasonable.

The Chairman of our Board, John Nikkel is a 6.5% owner of Toklan Oil and Gas Company (Toklan), an oil and gas exploration and production company located in Tulsa, Oklahoma. Mr. Nikkel's son, Robert Nikkel is Toklan's President, and he owns approximately 35.3% of the company. In the ordinary course of business, there were two wells drilled for Toklan during 2014, with no activity in 2013 or 2012. Under its usual standard dayrate contract terms available generally to all similarly-situated customers at that time and in the same general drilling area, the Company received payments from Toklan of approximately $1.1 million in 2014 and had an accounts receivable balance of $0.4 million at December 31, 2014. The Company also paid royalties in 2014, in the ordinary course of business, of approximately $0.2 million to Toklan. There were no amounts to disclose for 2013 or 2012.

One of our directors, G. Bailey Peyton IV, also serves as the President and a significant investor in Upland Resources, L.L.C., a small independent oil and natural gas exploration company, and as Manager of Peyton Royalties, LP, a family-controlled limited partnership that owns royalty rights in wells in the Texas and Oklahoma Panhandles. In the ordinary course of business, there were no wells drilled for Upland Resources, L.L.C. during 2014 or 2013 and the Company drilled three wells during 2012, under its usual standard dayrate contracts, in which Upland Resources, L.L.C. was a participant, for which the Company received payments of approximately $1.6 million from Upland Resources, L.L.C. The Company also paid royalties, primarily due to its status as successor in interest to prior transactions and as operator of the wells involved and, in some cases, as lessee, with respect to certain wells in which Mr. Peyton, members of Mr. Peyton's family, and Peyton Royalties, LP have an interest. Such payments totaled approximately $1.3 million, $1.4 million, and $1.2 million during 2014, 2013, and 2012, respectively. 

Our Audit Committee and the board, in accordance with our related party transaction policy, have determined that these arrangements are in the best interest of the Company.