Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2019

Acquisitions and Divestitures [Abstract]

4. Acquisitions and Divestitures of Oil and Gas Properties

2019 Acquisitions and Divestitures

The Company did not have any material acquisitions or divestitures for the three and six months ended June 30, 2019. See “Note 1. Nature of Operations” for details of the proposed Merger which was announced on July 15, 2019.

2018 Acquisitions and Divestitures

Devon Acquisition. On August 13, 2018, the Company entered into a purchase and sale agreement with Devon Energy Production Company, L.P. (“Devon”), a subsidiary of Devon Energy Corporation, to acquire oil and gas properties in the Delaware Basin in Reeves and Ward counties, Texas (the “Devon Properties”) for an agreed upon price of $215.0 million, with an effective date of April 1, 2018, subject to customary purchase price adjustments (the “Devon Acquisition”). The Company paid $21.5 million as a deposit on August 13, 2018, paid $183.4 million upon initial closing on October 17, 2018, and received $8.3 million as a post-closing adjustment on March 28, 2019, for an aggregate purchase price of $196.6 million.

The Devon Acquisition was accounted for as a business combination, therefore, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated acquisition date fair values based on then currently available information. A combination of a discounted cash flow model and market data was used by a third-party valuation specialist in determining the fair value of the oil and gas properties. Significant inputs into the calculation included future commodity prices, estimated volumes of oil and gas reserves, expectations for timing and amount of future development and operating costs, future plugging and abandonment costs and a risk adjusted discount rate. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date.



	Preliminary Purchase Price Allocation
	(In thousands)
Assets
Other current assets		$216
Oil and gas properties
Proved properties	47,118
Unproved properties	150,253
Total oil and gas properties		$197,371
Total assets acquired		$197,587

Liabilities
Revenues and royalties payable		$786
Asset retirement obligations	170
Total liabilities assumed		$956
Net Assets Acquired		$196,631

The results of operations for the Devon Acquisition have been included in the Company’s consolidated statements of income since the October 17, 2018 closing date, including total revenues and net income attributable to common shareholders for the three and six months ended June 30, 2019 as shown in the table below:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	(In thousands)
Total revenues		$4,342		$8,718

Net Income Attributable to Common Shareholders		$2,020		$4,716

Eagle Ford Divestiture. On December 11, 2017, the Company entered into a purchase and sale agreement with EP Energy E&P Company, L.P. to sell a portion of its assets in the Eagle Ford Shale for an agreed upon price of $245.0 million, with an effective date of October 1, 2017, subject to adjustment and customary terms and conditions. The Company received $24.5 million as a deposit on December 11, 2017, $211.7 million upon closing on January 31, 2018, $10.0 million for leases that were not conveyed at closing on February 16, 2018, and paid $0.5 million as a post-closing adjustment on July 19, 2018, for aggregate net proceeds of $245.7 million.

Niobrara Divestiture. On November 20, 2017, the Company entered into a purchase and sale agreement to sell substantially all of its assets in the Niobrara Formation for an agreed upon price of $140.0 million, with an effective date of October 1, 2017, subject to customary purchase price adjustments. The Company received $14.0 million as a deposit on November 20, 2017, $122.6 million upon closing on January 19, 2018, and paid $1.0 million as a post-closing adjustment on August 14, 2018, for aggregate net proceeds of $135.6 million. As part of this divestiture, the Company agreed to a contingent consideration arrangement (the “Contingent Niobrara Consideration”), which was determined to be an embedded derivative. See “Note 13. Derivative Instruments” and “Note 14. Fair Value Measurements” for further discussion.

The aggregate net proceeds for each of the 2018 divestitures discussed above were recognized as a reduction of proved oil and gas properties with no gain or loss recognized.