Variable Interest Entity Arrangements

3 Months Ended

Mar. 31, 2019

Variable Interest Entity Arrangements [Abstract]

VARIABLE INTEREST ENTITY ARRANGEMENTSOn April 3, 2018 we sold 50% of the ownership interest in Superior. The 50% interest in Superior we sold was acquired by SP Investor Holdings, LLC, a holding company jointly owned by OPTrust and funds managed and/or advised by Partners Group, a global private markets investment manager. Superior will be governed and managed under the Amended and Restated Limited Liability Company Agreement and the MSA. The MSA is between our affiliate, SPC Midstream Operating, L.L.C. (the

Operator) and Superior. The Operator is owned 100% by Unit Corporation. Under the guidance in ASC 810, Consolidation, we have determined that Superior is a VIE. The two variable interests applicable to Unit include the 50% equity investment in Superior and the MSA. The MSA houses the power to direct the activities that most significantly impact Superior's operating performance. The MSA is a separate variable interest. Unit through the MSA has the power to direct Superior’s most significant activities; reciprocally the equity investors lack the power to direct the activities that most significantly impact the entity’s economic performance. Because of this, Unit is considered the primary beneficiary. There have been no changes to the primary beneficiary during the quarter ended March 31, 2019.

As the primary beneficiary of this VIE, we consolidate in the financial statements the financial position, results of operations and cash flows of this VIE, and all intercompany balances and transactions between us and the VIE are eliminated in the consolidated financial statements. Cash distributions of income, net of agreed on expenses, and estimated expenses are allocated to the equity owners as specified in the relevant agreements.

On the sale or liquidation of Superior, distributions would occur in the order and priority specified in the relevant agreements.

As the Operator, we provide services, such as operations and maintenance support, accounting, legal, and human resources to Superior for a monthly service fee of $255,970. Superior's creditors have no recourse to our general credit. Superior's credit agreement is not guaranteed by Unit. The obligations under Superior's credit agreement are secured by, among other things, mortgage liens on certain of Superior’s processing plants and gathering systems.

The carrying value of Superior's assets and liabilities, after eliminations of any intercompany transactions and balances, in the consolidated balance sheets were as follows:


	March 31, 2019		December 31, 2018
	(In thousands)

Current assets:
Cash and cash equivalents	$	3,128	$	5,841
Accounts receivable	23,331		33,207
Prepaid expenses and other	2,446		1,049
Total current assets	28,905		40,097
Property and equipment:
Gas gathering and processing equipment	781,970		767,388
Transportation equipment	3,264		3,086
	785,234		770,474
Less accumulated depreciation, depletion, amortization, and impairment	376,006		364,740
Net property and equipment	409,228		405,734
Right of use asset	2,779		—
Other assets	16,048		17,551
Total assets	$	456,960	$	463,382

Current liabilities:
Accounts payable	$	24,246	$	32,214
Accrued liabilities	3,153		3,688
Current operating lease liability	1,702		—
Current portion of other long-term liabilities	6,923		6,875
Total current liabilities	36,024		42,777
Long-term debt less debt issuance costs	—		—
Operating lease liability	937		—
Other long-term liabilities	13,048		14,687
Total liabilities	$	50,009	$	57,464