Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

v3.24.2.u1
Related Party Transactions
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
Related party transactions

NOTE 13. RELATED PARTY TRANSACTIONS

In the normal course of business, we have entered into transactions with related parties where the Wilks Parties hold a controlling financial interest. For the three and six months ended June 30, 2024 and 2023, the Company had related party transactions with the following related party entities:

 

•
Automatize, LLC (“Automatize”) is a logistics broker that facilitates the last-mile delivery of proppants on behalf of its customers, including the Company. Amounts paid to Automatize include costs passed through to third-party trucking companies and a commission retained by Automatize. These payments are recorded in cost of revenues, exclusive of depreciation and depletion in our unaudited condensed consolidated statements of operations.
•
Cisco Logistics, LLC (“Cisco Logistics”) is a logistics company that delivers sand and equipment on behalf of its customers, including the Company. Amounts paid to Cisco Logistics are recorded in cost of revenues, exclusive of depreciation and depletion in our unaudited condensed consolidated statements of operations.
•
Equify Financial, LLC (“Equify Financial”) is a finance company that provides equipment and other financing to its customers, including the Company. Amounts paid to Equify Financial are recorded in interest expense in our unaudited condensed consolidated statements of operations and repayments of long-term debt in our unaudited condensed consolidated statements of cash flows.
•
Wilks Brothers, LLC (“Wilks Brothers”) is a management company which provides administrative support to various businesses within its portfolio. Wilks Brothers and certain entities under its control will at times incur expenses on our behalf, billing us for these expenses at cost as well as certain management fees. Amounts paid to Wilks Brothers are generally recorded in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
•
Interstate Explorations, LLC (“Interstate”) is an exploration and development company for which we perform pressure pumping services.
•
Flying A Pump Services, LLC (“Flying A”) is an oilfield services company which provides pressure pumping, acid and cementing services, to which we rent and sell equipment and frac fleet components.
•
MC Estates, LLC, The Shops at Willow Park, and FTSI Industrial, LLC (collectively, the “Related Lessors”) own various industrial parks and office space leased by us. Amounts paid to the Related Lessors are recorded in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
•
Wilks Construction Company, LLC (“Wilks Construction”) is a construction company that has built and made renovations to several buildings for us. Amounts paid to Wilks Construction are recorded as capital expenditures in our unaudited condensed consolidated statements of cash flows.
•
3 Twenty-Three, LLC (“3 Twenty-Three”) is a payroll administrator which performs payroll services on behalf of its customers, including us. Amounts paid to 3 Twenty-Three are recorded in cost of revenues, exclusive of depreciation and depletion and selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
•
Wilks Earthworks, LLC ("Wilks Earthworks") is an oilfield services company that provides mining, wet and dry loading, hauling and other services and equipment to its customers, including us. These payments are recorded in cost of revenues, exclusive of depreciation and depletion, in our unaudited condensed consolidated statements of operations.
•
Carbo Ceramics Inc. (“Carbo”) is a provider of ceramic proppant which will at times purchase conventional proppant from us to act as a broker for its customers. Additionally, we will at times purchase manufactured proppant from Carbo for the stimulation services segment.
•
Cisco Aero, LLC ("AERO") is a private aviation company. Amounts paid to AERO are recorded as selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.
•
FHE USA LLC (“FHE”) is a subsidiary of BPC that provides production and well completion equipment used at the wellsite. Amounts paid to FHE are recorded as capital expenditures in our unaudited condensed consolidated statements of cash flows. With the acquisition of BPC, any transactions between our subsidiaries and FHE subsequent to the acquisition will be eliminated in consolidation for future periods.

 

The following table summarizes revenue from related parties:

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Flying A

 

$

6.5

 

 

$

2.7

 

 

$

11.7

 

 

$

4.2

 

Carbo

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.7

 

Total

 

$

6.5

 

 

$

2.7

 

 

$

11.7

 

 

$

4.9

 

The following table summarizes expenditures with related parties:

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Automatize

 

$

20.4

 

 

$

46.5

 

 

$

41.7

 

 

$

89.8

 

FHE

 

 

—

 

 

 

0.1

 

 

 

—

 

 

 

1.0

 

Wilks Brothers

 

 

2.6

 

 

 

5.9

 

 

 

4.7

 

 

 

12.2

 

Related Lessors

 

 

3.1

 

 

 

4.4

 

 

 

6.3

 

 

 

6.9

 

Wilks Construction

 

 

—

 

 

 

1.9

 

 

 

—

 

 

 

6.8

 

Wilks Earthworks

 

 

4.5

 

 

 

3.3

 

 

 

6.1

 

 

 

4.8

 

Equify Financial

 

 

2.6

 

 

 

2.2

 

 

 

4.7

 

 

 

4.4

 

Cisco Aero

 

 

2.2

 

 

 

—

 

 

 

2.2

 

 

 

—

 

3 Twenty-Three

 

 

—

 

 

 

1.3

 

 

 

—

 

 

 

1.3

 

Carbo

 

 

0.2

 

 

 

0.3

 

 

 

0.5

 

 

 

1.0

 

Total

 

$

35.6

 

 

$

65.9

 

 

$

66.2

 

 

$

128.2

 

The following table summarizes accounts receivable–related party:

 

 

June 30,
2024

 

 

December 31,
2023

 

Flying A

 

$

11.1

 

 

$

5.9

 

Carbo

 

 

0.2

 

 

 

0.5

 

Interstate

 

 

0.3

 

 

 

0.4

 

Total accounts receivable — related party

 

$

11.6

 

 

$

6.8

 

The following table summarizes accounts payable–related party:

 

 

June 30,
2024

 

 

December 31,
2023

 

Automatize

 

$

7.8

 

 

$

11.6

 

Wilks Brothers

 

 

4.5

 

 

 

7.8

 

Wilks Earthworks

 

 

1.0

 

 

 

1.1

 

Related Lessors

 

 

0.3

 

 

 

0.1

 

Equify

 

 

1.3

 

 

 

0.3

 

Cisco Aero

 

 

1.7

 

 

 

—

 

Carbo

 

 

0.1

 

 

 

1.0

 

Total accounts payable — related party

 

$

16.7

 

 

$

21.9

 

In June 2023, we arranged to sell certain surplus equipment and inventory components and to assign certain pre-orders for equipment to Flying A, at prices which we believe to be fair market value, for a total consideration of $36.3 million. We received the proceeds from this transaction in June 2023. Subsequent to June 30, 2023, Flying A requested changes to the mix of the assets being sold to it by the Company without altering the total consideration, and the Company and Flying A agreed to add to the transaction agreement a most favored nation clause on pricing and a condition to closing that the Company’s Audit Committee approve the final mix of assets to be transferred to Flying A. We delivered $28.9 million of these components to Flying A in 2023. In January 2024, we agreed to sell $8.4 million of additional equipment to Flying A under similar terms. We received the proceeds from this additional transaction in January 2024. We delivered $6.1 million of product to Flying A in the six months ended June 30, 2024. We expect to deliver all remaining product to Flying A in 2024.

We accounted for the unapplied proceeds from these transactions as related party deposits presented as "Other current liabilities - related party" in our unaudited condensed consolidated balance sheets.

Immediately subsequent to the AST acquisition, AST conveyed to the Wilks Parties substantially all of AST’s owned real property in exchange for cash consideration of approximately $23 million. We now lease such real property from the Wilks Party in exchange for aggregate monthly lease payments totaling $30.2 million through May 2034. The cash consideration received was equal to the carrying value of these assets.