NOTE 3 – ACQUISITIONS

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 case pricing 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 purchase 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 nine months ended September 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.

The costs associated with the Prize Acquisition of $1.0 million are recorded in the acquisition and transaction costs caption of the consolidated statement of operations for nine months ended September 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 $8.7 million and $15.2 million and operating expenses of $3.4 million and $6.1 million related to the operation of the Prize properties are included in the consolidated statements of operations for the three and nine months ended September 30, 2012. The following unaudited consolidated income statement information provide unaudited actual results for the three months ended September 30, 2012 and pro forma income statement information for the nine months ended September 30, 2012 and for the three and nine months ended September 30, 2011, which assumes the Prize Acquisition 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 of the periods presented, nor are they indicative of future results of operations.


		Three Months Ended				Nine Months Ended
		(Unaudited)				(Unaudited)
		September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
		Actual		Pro Forma		Pro Forma		Pro Forma
Total Revenue	$	64,969	$	72,815	$	205,081	$	221,574
Operating income	$	8,565	$	14,292	$	33,314	$	58,349
Net income (loss)	$	(45,007)	$	107,530	$	51,983	$	97,577
Net income (loss) per unit:
Common unitholders' (basic)	$	(1.25)	$	1.21	$	0.54	$	1.08
Common unitholders' (diluted)	$	(1.25)	$	1.21	$	0.54	$	1.08
Subordinated units (basic)	$	(1.26)	$	1.21	$	0.53	$	1.08
Subordinated units (diluted)	$	(1.26)	$	1.21	$	0.53	$	1.08

On October 26, 2012, we entered into a purchase and sale agreement with a private seller to purchase predominantly oil and natural gas properties in the Ark-La-Tex area for approximately $215 million. Refer to Note 17 – Subsequent Events for further details.