Variable Interest Entity Arrangements

9 Months Ended

Sep. 30, 2019

Variable Interest Entity Arrangements [Abstract]

Variable Interest Entity Arrangements

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 September 30, 2019.

As the primary beneficiary of this VIE, we consolidate in our 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 our 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, like 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:

	September 30, 2019		December 31, 2018
	(In thousands)
Current assets:
Cash and cash equivalents	$	3	$	5,841
Accounts receivable	18,215		33,207
Prepaid expenses and other	5,921		1,049
Total current assets	24,139		40,097
Property and equipment:
Gas gathering and processing equipment	806,862		767,388
Transportation equipment	3,373		3,086
	810,235		770,474
Less accumulated depreciation, depletion, amortization, and impairment	399,574		364,740
Net property and equipment	410,661		405,734
Right of use asset	5,464		—
Other assets	11,307		17,551
Total assets	$	451,571	$	463,382
Current liabilities:
Accounts payable	$	13,850	$	32,214
Accrued liabilities	5,156		3,688
Current operating lease liability	3,334		—
Current portion of other long-term liabilities	7,017		6,875
Total current liabilities	29,357		42,777
Long-term debt	4,100		—
Operating lease liability	1,938		—
Other long-term liabilities	9,774		14,687
Total liabilities	$	45,169	$	57,464