Acquisitions and divestitures

9 Months Ended

Sep. 30, 2017

Acquisitions and Divestitures [Abstract]

Acquisitions and divestitures

Note 4. Acquisitions and divestitures

Midland Basin acquisition. In July 2017, the Company completed an acquisition in the Midland Basin. As consideration for the acquisition, the Company paid approximately $595 million in cash. The acquisition is subject to customary post-closing adjustments.

Concurrent with the acquisition, the Company entered into a transaction structured as a reverse like-kind exchange (“Reverse 1031 Exchange”) in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”). In connection with the Reverse 1031 Exchange, the Company assigned the ownership of the oil and natural gas properties acquired to a VIE formed by an exchange accommodation titleholder. The Company operates the properties pursuant to a management agreement with the VIE. At September 30, 2017, the Company was determined to be the primary beneficiary of the VIE, as the Company had the ability to control the activities that most significantly impact the VIE’s economic performance. The assets currently held by the VIE attributable to the acquisition will be conveyed to the Company or one of its subsidiaries, and the VIE structure will terminate, upon the earlier of (i) the completion of the Reverse 1031 Exchange or (ii) the expiration of the time allowed by the treasury regulations and published Internal Revenue Service guidance to complete the Reverse 1031 Exchange, which is 180 days from commencement. At September 30, 2017, the VIE’s total assets and liabilities included in the Company’s consolidated balance sheet were approximately $607 million and $605 million, respectively.

Northern Delaware Basin acquisition. In April 2017, the Company closed on the remainder of its acquisition in the Northern Delaware Basin. As consideration for the entire acquisition, the Company paid approximately $160 million in cash, of which $43 million was held in escrow at December 31, 2016, and issued to the seller approximately 2.2 million shares of its common stock with an approximate value of $291 million.

ACC divestiture. In February 2017, the Company closed on the divestiture of its ownership interest in ACC. The Company and its joint venture partner entered into separate agreements to sell 100 percent of their respective ownership interests in ACC. After adjustments for debt and working capital, the Company received cash proceeds from the sale of approximately $801 million. After direct transaction costs, the Company recorded a pre-tax gain on disposition of assets of approximately $655 million. The Company’s net investment in ACC at the time of closing was approximately $129 million.