Acquisitions and divestitures

2013 Acquisition and divestitures

Cabot Acquisition. In late 2013, we acquired additional oil and natural gas properties consisting of approximately 131,000 (66,000 net) acres in the Panhandle Marmaton play from Cabot Oil & Gas Corporation for approximately $153,858, net of pre-closing purchase price adjustments and subject to post closing adjustments ( the “Cabot Acquisition”). The Cabot Acquisition expanded our presence in the Panhandle Marmaton play, adding oil and natural gas reserves and production to our existing asset base in this area.

Our acquisition qualified as a business combination for accounting purposes and, as such, we estimated the fair value of the acquired properties as of the December 18, 2013 acquisition date, which was the date on which we obtained control of the properties. The fair value of the assets and liabilities acquired was estimated using assumptions that represent Level 3 inputs. See “Note 7—Fair value measurements” for additional discussion of the measurement inputs.

We estimated the consideration paid for these properties approximated the fair value that would be paid by a typical market participant. As a result, no goodwill or bargain purchase gain was recognized in conjunction with the purchase. Acquisition-related costs of $951 have been expensed as incurred in general and administrative expense in the accompanying consolidated statements of operations for the year ended December 31, 2013. Due to the timing of the acquisition, the effect of the acquired properties on our revenues and earnings for the year ended December 31, 2013 was not material.

The following table summarizes the consideration paid to acquire the properties and the amounts of the assets acquired and liabilities assumed as of December 18, 2013. The purchase price allocation is preliminary and subject to adjustment upon the final closing settlement that we expect to complete during the second quarter of 2014.



Consideration paid
Cash, net of purchase price adjustments	$	153,858
Fair value of identifiable assets acquired and liabilities assumed
Oil and natural gas properties
Proved	$	67,275
Unevaluated	87,663
Asset retirement obligations	(1,080		)
Fair value of net identifiable assets acquired	$	153,858

The following unaudited pro forma combined results of operations for the years ended December 31, 2013 and 2012 are presented as though we completed the Cabot Acquisition as of January 1, 2012. The pro forma combined results of operations for the years ended December 31, 2013 and 2012 have been prepared by adjusting the historical results of the acquired properties and estimates of the effect of the transaction on the combined results. These supplemental pro forma results of operations are provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved had the transaction been in effect for the periods presented or that may be achieved by us in the future. Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors. The pro forma information below includes adjustments for depletion, depreciation, amortization and accretion expense, interest expense, acquisition costs, and related income tax effects.



	Year ended December 31,
	2013		2012
Revenues	$	690,564	$	599,344
Operating expenses	$	448,751	$	402,677
Net income	$	76,552	$	78,089

Sale of Certain Non-Strategic Oil and Natural Gas Properties. During 2013, we sold various oil and natural gas properties for total cash proceeds of approximately $109,710 subject to post-closing adjustments. These included properties in Creek, Love and Carter counties, Oklahoma, that were sold for approximately $61,440 and properties in Texas County, Oklahoma, that were sold for approximately $17,800. In accordance with the full cost method of accounting, we reduced our full cost pool by the amount of the net proceeds and did not record a gain or loss on the sale.

2012 Divestitures

Sale of Certain Mature Oil and Natural Gas Properties. On May 30, 2012, we sold certain mature oil and natural gas properties located in our Velma Area in southern Oklahoma for a cash price of $37,000 subject to post-closing adjustments. In accordance with the full cost method of accounting, we reduced our full cost pool by the amount of the net proceeds and did not record a gain or loss on the sale.

2011 Divestitures

Sale of Rocky Mountain Properties. On November 28, 2011, we sold certain non-strategic oil and natural gas properties located in our Rocky Mountains area to Charger Resources, LLC for a cash price of approximately $33,100. In accordance with the full cost method of accounting, we reduced our full cost pool by the amount of the net proceeds and did not record a gain or loss on the sale.

Sale of Remaining Assets of Green Country Supply, Inc. On November 7, 2011, we sold substantially all the remaining assets of Green Country Supply, Inc., a wholly owned subsidiary, for a cash price of $4,433. We recorded a gain on the sale of $2,630, which is included in “Other income” on the consolidated statements of operations.