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VARIABLE INTEREST ENTITIES

12 Months Ended

Dec. 31, 2021

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

12.VARIABLE INTEREST ENTITIES

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Cavalier Minerals

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On November 10, 2014, our subsidiary, Alliance Minerals, and Bluegrass Minerals entered into a limited liability company agreement (the "Cavalier Agreement") to create Cavalier Minerals, which was formed to indirectly acquire oil & gas mineral interests through its ownership in AllDale I & II.  Alliance Minerals owns a 96% member interest in Cavalier Minerals, and Bluegrass Minerals owns a 4% member interest in Cavalier Minerals and a profits interest which entitles it to receive distributions equal to 25% of all distributions (including in liquidation) after all members have recovered their investment.  Distributions with respect to Bluegrass Minerals' profits interest will be offset by all distributions received by Bluegrass Minerals from the former general partners of AllDale I & II.  To date, there has been no profits interest distribution.  Bluegrass Minerals was Cavalier Minerals' managing member prior to the AllDale Acquisition (see Note 3 – Acquisitions).  In conjunction with the AllDale Acquisition, we became the managing member in Cavalier Minerals.  Total contributions to and cumulative distributions from Cavalier Minerals are as follows:

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​	​	​	​	​	​	​
​	​	Alliance		​	Bluegrass
​	​	Minerals		​	Minerals
​	​	(in thousands)
Contributions	​	$	143,112	​	$	5,963
Distributions	​	​	109,994	​	​	4,582

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We have concluded that Cavalier Minerals is a VIE which we consolidate as the primary beneficiary because we are the managing member and a substantial equity owner in Cavalier Minerals.  Bluegrass Minerals' equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our consolidated balance sheets.  In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our consolidated statements of operations.

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AllDale III

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In February 2017, Alliance Minerals committed to directly invest $30.0 million in AllDale III which was created for similar investment purposes as AllDale I & II.  Alliance Minerals completed funding of this commitment in 2018. Alliance Minerals' limited partner interest in AllDale III is 13.9%.

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The AllDale III Partnership Agreement includes a 25% profits interest for the general partner, subject to a return hurdle equal to the greater of 125% of cumulative capital contributions and a 10% internal rate of return, and following an 80/20 "catch-up" provision for the general partner.  

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Since AllDale III is structured as a limited partnership with the limited partners 1) not having the ability to remove the general partner and 2) not participating significantly in the operational decisions, we concluded that AllDale III is a VIE.  We are not the primary beneficiary of AllDale III as we do not have the power to direct the activities that most significantly impact AllDale III's economic performance.  We account for our ownership interest in the income or loss of AllDale III as an equity method investment.  We record equity income or loss based on AllDale III's distribution structure.  See Note 13 – Investments for more information.

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See Note 2 – Summary of Significant Accounting Policies for more information on our accounting policy for variable interest entities.

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- References

No definition available.

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- Definition

The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-URI http://asc.fasb.org/topic&trid=2197479

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