Prize Properties

On April 20, 2012 we closed the Prize Acquisition. We acquired predominantly low decline, long life oil properties, almost all of which are located in the Ark-La-Tex area, for $225 million in cash after customary purchase price adjustments. The acquired properties had estimated proved reserves as of December 31, 2011 utilizing SEC prices of 13.3 MMBoe. The acquisition had an effective date of January 1, 2012.

The Prize Acquisition qualified as a business combination and was accounted for under the acquisition method of accounting. Effective April 20, 2012 the results of operations of the acquired Prize assets are included in our unaudited statement of operations for the three and six months ended June 30, 2012. Accordingly, we recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values. The fair value measurements of the oil and gas properties and asset retirement obligations were measured using valuation techniques and inputs that convert future cash flows to a single discounted amount.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition closing date (in thousands):



Oil and gas properties
Evaluated	$	223,740
Unevaluated		9,000
Asset retirement obligation		(4,738)
Environmental liability		(1,891)
Other current liabilities		(993)
Net assets acquired	$	225,118

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. We believe that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Costs associated with the acquisition of Prize totaled $0.6 million of which are recorded in the acquisition and transaction costs caption of the consolidated statement of operations for the three and six months ended June 30, 2012. In conjunction with the Prize Acquisition, we assumed an estimated environmental liability of $1.9 million. Refer to Note 11 – Commitments And Contingencies for further details.

Since the closing date, revenues of $6.5 million and operating expenses of $2.7 million related to the operation of the Prize properties are included in the three and six months ended consolidated results of operations. The following unaudited consolidated income statement information provides unaudited pro forma consolidated income statement information for the three and six months ended June 30, 2012 and unaudited pro forma consolidated income statement information for the three and six months ended June 30, 2011, which assumes the acquisition of Prize had occurred on January 1, 2011. The unaudited pro forma results reflect certain adjustments related to the acquisition, such as increased depreciation and amortization expense on the assets acquired from Prize resulting from the fair value of assets acquired. The unaudited pro forma financial results may not be indicative of the results that would have occurred had the acquisition been completed at the beginning the periods presented, nor are they indicative of future results of operations.


		Three Months Ended				Six Months Ended
		(Unaudited)				(Unaudited)
		June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
		Pro Forma		Pro Forma		Pro Forma		Pro Forma
Total Revenue	$	64,258	$	77,285	$	140,112	$	148,758
Operating Income	$	6,220	$	23,586	$	24,749	$	44,057
Net income (loss)	$	99,929	$	33,380	$	96,990	$	(9,954)
Net income (loss) per unit:
Common unitholders' (basic)	$	2.16		0.45		2.05		(0.13)
Common unitholders' (diluted)	$	1.68		0.45		1.69		(0.13)
Subordinated units (basic)	$	2.14		0.45		1.88		(0.13)
Subordinated units (diluted)	$	1.67		0.45		1.62		(0.13)