RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2015

The following table sets forth the related party balances as of December 31, 2015 and 2014:



	As of December 31,
	2015			2014
	(in thousands)
GreenHunter ⁽¹⁾
Accounts receivable, net of reserve	$	—		$	21
Accounts payable	$	(24	)	$	(249	)
Liabilities subject to compromise	$	(635	)	$	—
Derivative assets ⁽²⁾	$	—		$	75
Investments ⁽²⁾	$	81		$	1,311
Notes receivable, net of reserve ⁽²⁾	$	—		$	1,224
Prepaid expenses	$	5		$	1,000
Eureka Midstream Holdings ⁽³⁾
Accounts receivable	$	5,467		$	2,898
Accounts payable	$	(1,480	)	$	(2,776	)
Liabilities subject to compromise	$	(15,827	)	$	—
Equity method investment	$	166,099		$	347,191
Pilatus Hunter ⁽⁴⁾
Accounts receivable	$	12		$	12
Classic Petroleum, Inc. ⁽⁵⁾
Liabilities subject to compromise	$	(51	)	$	—

Schedule of Related Party Transactions

The following table sets forth the related party balances as of December 31, 2015 and 2014:



	As of December 31,
	2015			2014
	(in thousands)
GreenHunter ⁽¹⁾
Accounts receivable, net of reserve	$	—		$	21
Accounts payable	$	(24	)	$	(249	)
Liabilities subject to compromise	$	(635	)	$	—
Derivative assets ⁽²⁾	$	—		$	75
Investments ⁽²⁾	$	81		$	1,311
Notes receivable, net of reserve ⁽²⁾	$	—		$	1,224
Prepaid expenses	$	5		$	1,000
Eureka Midstream Holdings ⁽³⁾
Accounts receivable	$	5,467		$	2,898
Accounts payable	$	(1,480	)	$	(2,776	)
Liabilities subject to compromise	$	(15,827	)	$	—
Equity method investment	$	166,099		$	347,191
Pilatus Hunter ⁽⁴⁾
Accounts receivable	$	12		$	12
Classic Petroleum, Inc. ⁽⁵⁾
Liabilities subject to compromise	$	(51	)	$	—

The following table sets forth the related party transaction activities for the years ended December 31, 2015, 2014 and 2013:



	Years Ended
	December 31,
	2015			2014		2013
	(in thousands)
GreenHunter
Production costs ⁽¹⁾	$	3,675		$	4,973	$	3,315
Midstream natural gas gathering, processing, and marketing ⁽¹⁾	$	—		$	652	$	—
Oilfield services ⁽¹⁾	$	298		$	—	$	—
General and administrative ⁽¹⁾	$	23		$	44	$	13
Interest income ⁽²⁾	$	113		$	154	$	205
Miscellaneous income (expense) ⁽²⁾	$	(620	)	$	220	$	220
Loss from equity method investment ⁽²⁾	$	464		$	590	$	730
Capitalized costs incurred ⁽¹⁾	$	508		$	3,149	$	—
Pilatus Hunter, LLC ⁽⁴⁾
General and administrative	$	143		$	281	$	166
Eureka Midstream Holdings (3)
Oil and natural gas sales	$	347		$	—	$	—
Production costs	$	1,181		$	—	$	—
Transportation, processing, and other related costs	$	24,865		$	353	$	—
Oilfield services	$	34		$	—	$	—
General and administrative	$	8		$	32,569	$	—
Gain on deconsolidation of Eureka Midstream Holdings, LLC	$	—		$	509,563	$	—
Gain on dilution of interest in Eureka Midstream Holdings, LLC	$	4,601		$	—	$	—
Loss from equity method investment	$	185,693		$	448	$	—
Loss on extinguishment of Eureka Midstream Holdings Series A Preferred Units	$	—		$	51,692	$	—
Capitalized costs incurred	$	121		$	—	$	—
Classic Petroleum ⁽⁵⁾
Capitalized costs incurred	$	206		$	1,495	$	—
Kirk Trosclair Enterprises, LLC ⁽⁶⁾
General and administrative	$	169		$	—	$	—

_________________________________

⁽¹⁾

GreenHunter is an entity of which Gary C. Evans, the Company’s Chairman and CEO, is the Chairman and a major shareholder. Triad Hunter and VIRCO, wholly owned subsidiaries of the Company, receive services related to brine water and rental equipment from GreenHunter and certain affiliated companies. The Company had approximately $66,000 of accounts receivable from GreenHunter which was fully reserved as of December 31, 2015.

⁽²⁾

On February 17, 2012, the Company sold its wholly owned subsidiary, Hunter Disposal, to GreenHunter Water, LLC (“GreenHunter Water”), a wholly owned subsidiary of GreenHunter. The Company recognized an embedded derivative asset resulting from the conversion option under the convertible promissory note it received as partial consideration for the sale. See “Note 9 - Fair Value of Financial Instruments”. The Company has recorded interest income as a result of the note receivable from GreenHunter. Also as a result of this transaction, the Company has an equity method investment in GreenHunter that is included in derivatives and investment in affiliates - equity method and an available for sale investment in GreenHunter included in investments. Miscellaneous income (expense) includes other than temporary impairment loss on the GreenHunter available for sale security of $0.8 million for the year ended December 31, 2015. See “Note 10 - Investments and Derivatives” for additional information.

⁽³⁾

Following a sequence of transactions up to and including, December 18, 2014, the Company no longer held a controlling financial interest in Eureka Midstream Holdings. The Company deconsolidated Eureka Midstream Holdings and accounts for its retained interest as of December 31, 2015 and 2014 under the equity method of accounting. See “Note 4 - Eureka Midstream Holdings” and “Note 10 - Investments and Derivatives”.


⁽⁴⁾	The Company rented an airplane for business use for certain members of Company management at various times from Pilatus Hunter, LLC, an entity 100% owned by Mr. Evans. Airplane rental expenses are recorded in general and administrative expense.


⁽⁵⁾	Classic Petroleum, Inc. is an entity owned by the brother of James W. Denny, III, the Company’s former Executive Vice President and President of the Company’s Appalachian Division. Triad Hunter received land brokerage services from Classic Petroleum, Inc., including courthouse abstracting, contract negotiations, GIS mapping and leasing services.

⁽⁶⁾

On July 18, 2014, the Company entered into a consulting agreement with Kirk J. Trosclair, a former executive of Alpha Hunter Drilling, a wholly owned subsidiary of the Company. Mr. Trosclair ceased employment with the Company on July 18, 2014 and is currently the Chief Operating Officer of GreenHunter. The agreement has a term of 12 months and provides that Mr. Trosclair will receive monthly compensation of $10,000, and Mr. Trosclair is eligible to continue vesting in previously granted stock options and unvested restricted stock awards, subject to continued service under the consulting agreement. In connection with this agreement, for the year ended December 31, 2015, the Company paid Mr. Trosclair $169,000, which includes reimbursement of expenses incurred on behalf of the Company, and recognized $163,423 in stock compensation expense.

MAGNUM HUNTER RESOURCES CORP 10-K