Memorial Resource Development Corp. (NASDAQ: MRD) is rearranging a complex corporate seating chart, saying April 28 it will divest one related entity to another.

Memorial Resource said it will sell Memorial Production Partners GP LLC (MEMP GP) to Houston’s Memorial Production Partners LP (NASDAQ: MEMP) for $750,000.

MEMP GP is the general partner of MEMP, a master limited partnership (MLP). MEMP GP holds 50% of Memorial Production’s general partner interest and 50% of the incentive distribution rights (IDRs).

The split-up is expected to close by the end of 2016.

The transaction zeros out Memorial Resource’s interest in MEMP's outstanding common units, IDRs or general partner interest.

The deal also puts space between the new and former CEO of Memorial Resource.

In February, Jay Graham, former co-CEO of WildHorse Resources II became CEO of Memorial Resource, replacing John Weinzierl who became CEO at MEMP, said Gordon Douthat, senior analyst at Wells Fargo Securities.

“Separation of the entities is not surprising, in our view,” Douthat said. The transaction likely will mean some general and administrative savings for Memorial Resource and Douthat saw no impact to the company’s net asset value.

After the transaction closes, MEMP will be fully separated from Memorial Resource and operate as an independent entity.

MEMP said the transaction will benefit unitholders for several reasons, including:

  • Simplification of the corporate and organizational structure;
  • MEMP focuses solely on its asset portfolio;
  • Impact to liquidity minimal; and
  • Allows MEMP to control its own general partner.

Weinzierl, who is also chairman and CEO of MEMP GP, said he has enjoyed working with Memorial Resource and private-equity provider Natural Gas Partners since its 2011 IPO.

“Going forward, we believe a stand-alone entity will best maximize value for all of MEMP's stakeholders," he said.

Graham, who will continue to guide Memorial Resource, said the transaction “better positions both companies as independent and separated entities in today's lower commodity price environment and furthers both companies' goals of increasing shareholder and unitholder value.”

Tudor, Pickering, Holt & Co. (TPH) said the corporate structure cleanup won’t have a meaningful economic impact.

“After the deal, Memorial Resource owns no interest in MEMP and therefore won’t consolidate MEMP’s financials, cleaning up reporting in the process,” TPH said.

Piper Jaffray acted as financial advisor to the Memorial Resource conflicts committee. Morris, Nichols, Arsht & Tunnell LLP acted as legal advisor to the MRD Conflicts Committee.

Akin Gump Strauss Hauer & Feld LLP acted as legal adviser to MEMP and Richards Layton & Finger LLP acted as legal advisor to the MEMP conflicts committee.

Darren Barbee can be reached at dbarbee@hartenergy.com.