Permian Resources Corp - 10-K filing on 2019-02-25

Transactions with Related Parties

12 Months Ended

Dec. 31, 2018

Note 13—Transactions with Related Parties

Founder Shares

On November 6, 2015, Riverstone purchased 11,500,000 shares of Class B Common Stock (the “founder shares”) from the Company, for an aggregate purchase price of $25,000, or approximately $0.002 per share. In February 2016, Riverstone transferred 40,000 founder shares to each of the Company’s then independent directors (together with Riverstone, the “initial stockholders”) at their original purchase price. On February 24, 2016, the Company effected a stock dividend of approximately 0.125 shares for each outstanding share of Class B Common Stock, resulting in the initial stockholders holding an aggregate of 12,937,000 founder shares. On April 8, 2016, following the expiration of the underwriters’ remaining over-allotment option in connection with the Company’s IPO, Riverstone forfeited 437,500 founder shares, so that the remaining 12,500,000 founder shares held by the initial stockholders would represent 20% of the Company’s then issued and outstanding shares of common stock. On October 11, 2016, all of the outstanding founder shares were automatically converted into shares of Class A Common Stock on a one-for-one basis in connection with the closing of the Business Combination.

Private Placement Warrants

On February 29, 2016, Riverstone purchased 8,000,000 Private Placement Warrants from the Company at a price of $1.50 per whole warrant ($12.0 million in the aggregate) in a private placement that occurred simultaneously with the closing of the Company’s IPO. Each whole Private Placement Warrant is exercisable for one whole share of Class A Common Stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was placed in the Company’s trust account along with the proceeds from its IPO. The Private Placement Warrants will expire at 5:00 p.m., New York City time, on October 11, 2021, or earlier upon redemption or our liquidation. Additionally, the Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by Riverstone or its permitted transferees. If such Private Placement Warrants are not held by Riverstone or its permitted transferees, we may call the Private Placement Warrants for redemption, in whole and not in part, at a price of $0.01 per Private Placement Warrant, upon not less than 30 days’ prior written notice of such redemption to each holder if the reported last sale price of our Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-day trading period ending three business days before we send the notice of redemption.

Amended and Restated Limited Liability Company Agreement of CRP

In connection with the closing of the Business Combination, on October 11, 2016, the Company and the Centennial Contributors entered into CRP’s fifth amended and restated limited liability company agreement (as amended to date, the “A&R LLC Agreement”) to, among other things, set forth our rights and obligations as holders of common membership interests in CRP (the “CRP Common Units”). Under the A&R LLC Agreement, the Centennial Contributors generally have the right to cause CRP to redeem all or a portion of their CRP Common Units in exchange for shares of our Class A Common Stock or, at CRP’s option, an equivalent amount of cash; provided that we may, at our option, effect a direct exchange of cash or Class A Common Stock for such CRP Common Units in lieu of such a redemption by CRP. Upon the future redemption or exchange of CRP Common Units held by a Centennial Contributor, a corresponding number of shares of Class C Common Stock held by such Centennial Contribution will be canceled. The A&R LLC Agreement also includes provisions intended to ensure that we at all times maintain a one-to-one ratio between (a) the number of outstanding shares of Class A Common Stock and the number of CRP Common Units owned by us (subject to certain exceptions) and (b) the number of outstanding shares of our Class C Common Stock and the number of CRP Common Units owned by the Centennial Contributors. This construct is intended to result in the Centennial Contributors having a voting interest in the Company that is identical to the Centennial Contributors’ economic interest in CRP.

Exchange Right

On October 11, 2016, following the closing of the Business Combination, the Company issued 844,079 shares of its Class A Common Stock to an accredited investor at the direction of certain Centennial Contributors affiliated with such investor, in exchange for 844,079 CRP Common Units held by such Centennial Contributors. The exchange was affected in accordance with the A&R LLC Agreement. Upon the exchange of the CRP Common Units, the Company canceled 844,079 shares of its Class C Common Stock held by the Centennial Contributors.

Amended and Restated Registration Rights Agreement

In connection with the closing of the Business Combination, on October 11, 2016, the Company entered into an amended and restated registration rights agreement (the “Registration Rights Agreement”) with certain Riverstone entities, certain of its former and current directors and the Centennial Contributors, pursuant to which such parties are entitled to certain registration rights relating to the resale of certain securities held by them. In connection with the Registration Rights Agreement, the Company filed a Registration Statement on Form S-3 that was declared effective on April 17, 2017.

Subscription Agreements

In connection with the Business Combination, on July 21, 2016, the Company entered into a subscription agreement with Riverstone, pursuant to which Riverstone purchased 81,005,000 shares of Class A Common Stock at the closing of the Business Combination for an aggregate purchase price of approximately $810.0 million.

In connection with the Silverback Acquisition, on November 27, 2016, the Company entered into a subscription agreement with Riverstone, pursuant to which Riverstone agreed to purchase an aggregate of 3,473,590 shares of Class A Common Stock and 104,400 shares of Series B Preferred Stock at the closing for an aggregate purchase price of approximately $430.0 million. Pursuant to the terms thereof, the Series B Preferred Stock converted into 26,100,000 shares of Class A Common Stock on May 25, 2017.

Customer and Supplier Relationships

The Company obtains services related to its drilling and completion activities as well as gas processing from related parties from time to time. The Company believes that the terms of the arrangements with these related parties are no less favorable to either party than those held with unaffiliated parties. The costs incurred for such services are either included as part of oil and natural gas properties in the Consolidated Balance Sheet or as lease operating expense in the Consolidated Statements of Operations and the revenues received are included as oil and gas sales in the Consolidated Statements of Operations. There were no receivables or payables to related parties above as of December 31, 2018 and 2017. The following table summarizes the costs incurred and revenues received for such services:



	For the Year Ended December 31,
(in thousands)	2018		2017		2016
Costs of goods/services provided
Rockpile Energy Services, LLC ⁽¹⁾	$	—	$	—	$	3,320
Permian Tank and Manufacturing, Inc. ⁽²⁾	—		—		791
Liberty Oilfield Services, LLC ⁽²⁾	—		72,551		8,190
Revenues from oil and gas sales
Lucid Energy Delaware, LLC ⁽²⁾	$	3,946	$	—	$	—

⁽¹⁾

This entity is an NGP affiliate. Beginning December 28, 2016, NGP and entities affiliated with NGP were no longer considered related parties of the Company, and any expenses incurred on or after December 28, 2016 with NGP or its affiliates are no longer classified as related party expenses. However, expenses incurred before December 28, 2016 with NGP or its affiliates were classified as related party expenses as NGP beneficially owned more than 10% of equity interest in the Company.

⁽²⁾ These entities are Riverstone affiliates. Riverstone and its affiliates, beneficially own more than 10% equity interest in the Company and are therefore considered related parties. Beginning November 1, 2016, Permian Tank Manufacturing, Inc. (“Permian”) was no longer considered a related party of the Company. Any goods/services acquired on or after November 1, 2016 from Permian are no longer classified as related party transactions.