Assets Held-for-Sale and Discontinued Operations

9 Months Ended

Sep. 30, 2014

Assets Held-for-Sale and Discontinued Operations

Assets Held-for-Sale and Discontinued Operations

Note 12 Assets Held-for-Sale and Discontinued Operations

	September 30,		December 31,
	2014		2013
	(In thousands)
Oil and Gas	$	158,327	$	239,936
Rig Services	—		3,328
	$	158,327	$	243,264

Assets held-for-sale as of September 30, 2014 consisted solely of our oil and gas holdings in the Horn River basin in Western Canada.

We have contracts with pipeline companies to pay specified fees based on committed volumes for gas transport and processing.  At September 30, 2014, our undiscounted contractual commitments for these contracts approximated $95.2 million and we had liabilities of $47.1 million, $23.8 million of which were classified as current and were included in accrued liabilities.  At December 31, 2013, we had liabilities of $113.6 million, $64.4 million of which were classified as current and were included in accrued liabilities. These amounts represent our best estimate of the fair value of the excess capacity of the pipeline commitments calculated using a discounted cash flow model, when considering our disposal plan, current production levels, natural gas prices and expected utilization of the pipeline over the remaining contractual term.  Decreases in actual production or natural gas prices could result in future charges related to excess pipeline commitments.

Discontinued Operations

Our condensed statements of income (loss) from discontinued operations for each operating segment were as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
	(In thousands)
Operating revenues
Oil and Gas	$	2,314		$	1,803		$	10,842		$	23,842
Income (loss) from Oil and Gas discontinued operations:
Income (loss) from discontinued operations	$	(509	)	$	(8,555	)	$	1,027		$	(11,227	)
Less: Impairment charges or other (gains) and losses on sale of wholly owned assets and obligations	(7,312		) (1)	4,834			(5,901		) (1)	47,027
Less: Income tax expense (benefit)	2,798			2,011			2,440			(9,154		)
Income (loss) from Oil and Gas discontinued operations, net of tax	$	4,005		$	(15,400	)	$	4,488		$	(49,100	)

(1) Reflects a gain related to our pipeline contractual commitments resulting from mitigation agreements to transfer pipeline/processing capacity.

During the three months ended September 30, 2014, we sold a large portion of our oil and gas properties located on the North Slope of Alaska. Under the terms of the agreement, we received $35.1 million at closing and expect to receive additional payments of $27.0 million upon certain future dates or the properties achieving certain production targets. In addition, we will retain a working interest at various interests and an overriding royalty interest in the properties at various interests. The working interest is fully carried up to $600 million of total project costs. The transaction generally remains subject to approval of local Alaska regulatory authorities, among other usual and customary conditions. The $22.2 million gain from the transaction is included in losses (gains) on sales and disposals of long-lived assets and other expense (income), net in our Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2014. The retained interest, which is valued at approximately $26.2 million, is no longer classified as assets-held-for-sale and is included in other long-term assets. We have not recast prior period results as the balances are not material to our Consolidated Statements of Income (Loss) for any period.

During the three and nine months ended September 30, 2013, Rig Services contributed operating revenues of $34.8 million and $116.5 million, respectively.  Income from discontinued operations, net of tax was $1.0 million and $14.8 million, respectively, for the same periods.