NOTE 4 — ACQUISITIONS

Partnership Third Party Acquisitions

Prize Acquisition

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 $225.1 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 costs associated with the Prize Acquisition of $1.1 million are recorded in “Acquisition and transaction costs” in the consolidated statement of operations for the year ended December 31, 2012. In conjunction with the Prize Acquisition, we assumed an estimated environmental liability of $1.9 million. Refer to Note 9 – Commitments And Contingencies for further details. Since the closing date, revenues of $24.6 million and operating expenses of $8.3 million related to the operation of the Prize properties are included in the consolidated statements of operations for the year ended December 31, 2012. The Prize Acquisition qualified as a business combination and was accounted for under the purchase method of accounting. The fair value measurements of the oil and gas properties and asset retirement obligations were measured using valuation techniques and unobservable inputs that convert future cash flows to a single discounted amount.

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


Oil and gas properties
Evaluated	$	226,670
Unevaluated		6,100
Asset retirement obligation		(4,738)
Environmental liability		(1,891)
Other current liabilities		(993)
Net assets acquired	$	225,148

The above estimated preliminary 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.

East Texas Oil Field Acquisition

On December 4, 2012 we closed the East Texas Oil Field Acquisition. We acquired the East Texas Oil Field Properties for $214.3 million in cash subject to customary purchase price adjustments. The acquired properties had estimated proved reserves of 10.8 MMBoe as of December 31, 2011 utilizing SEC case pricing. The acquisition had an effective date of November 1, 2012. The costs associated with the East Texas Oil Field Acquisition of $0.3 million are recorded in “Acquisition and transaction costs” in the consolidated statement of operations for the year ended December 31, 2012. Since the closing date, revenues of $3.1 million and operating expenses of $1.1 million related to the operation of the East Texas Oil Field Properties are included in the consolidated statement of operations for the year ended December 31, 2012. The East Texas Oil Field Acquisition qualified as a business combination and was accounted for under the purchase method of accounting. The fair value measurements of the oil and gas properties and asset retirement obligations were measured using valuation techniques and unobservable inputs that convert future cash flows to a single discounted amount.

The following table summarizes the estimated preliminary fair values of the assets acquired and liabilities assumed as of the acquisition closing date:


Oil and gas properties
Evaluated	$	215,693
Unevaluated		5,400
Other Assets		1,900
Asset retirement obligation		(9,843)
Other current liabilities		(1,190)
Net assets acquired	$	211,960
Estimated Purchase Price Adjustment ⁽¹⁾		2,346
Cash paid at closing		214,306

⁽¹⁾	Receivable from seller for customary purchase price adjustments recorded in prepaid and other current assets.

Pro forma Financial Data

The following unaudited pro forma financial information presents a summary of the Partnership’s consolidated results of operations for the years ended December 31, 2012 and 2011, assuming the Prize Acquisition and the East Texas Oil Field Acquisition had been completed as of January 1, 2011, including adjustments, such as increased depreciation and amortization expense on the assets acquired from the Prize Acquisition and the East Texas Oil Field Acquisition to reflect the values assigned to the net assets acquired. The pro forma financial information is not necessarily indicative of the results of operations if the acquisitions had been effective as of this date.


		Year Ended
		(Unaudited)
		December 31, 2012		December 31, 2011
		Pro Forma		Pro Forma
Total revenues	$	429,296	$	443,948
Operating income	$	96,177	$	125,322
Net income	$	100,834	$	115,842
Net income per unit:
Common unitholders' (basic)	$	0.63	$	0.69
Common unitholders' (diluted)	$	0.60	$	0.69
Subordinated units (basic and diluted)	$	0.66	$	0.69

Partnership Affiliated Acquisitions

On December 28, 2012, we completed our acquisition of the December 2012 Transferred Properties from the Fund in exchange of $28.6 million in cash, after customary purchase price adjustments, and the assumption of $115 million in debt. The net assets were recorded by the Partnership using historical book value of the Fund as the acquisition is a transaction between entities under common control. Our historical financial statements were revised to include the results attributable to the December 2012 Transferred Properties as if we owned the properties for all periods presented in our consolidated financial statements. See Note 1 – Organization and Operations for further disclosures regarding this transaction. See Note 2 – Summary of Significant Accounting Policies for further discussion regarding the accounting policies for transactions between entities under common control.

Effective October 1, 2011, we completed our acquisition of the October 2011 Transferred Properties from the Fund for an aggregate purchase price of $578.8 million (after customary purchase price adjustments). The net assets were recorded by the Partnership using historical book value of the Fund as the acquisition is a transaction between entities under common control. See Note 1 – Organization and Operations for further disclosures regarding this transaction.

The Partnership’s Allocation of Melrose Acquisition by the Predecessor

A portion of the October 2011 Transferred Properties includes the Predecessor’s assets acquired from Melrose Energy Company (“the Melrose Acquisition”), on December 22, 2010 subsequent to our IPO, which qualifies as a business combination. The following table summarizes our allocated share of the consideration paid by the Predecessor for Melrose and our allocated share of the final fair value of the assets acquired and liabilities assumed as of December 22, 2010.


Allocated cost of Predecessor's acquisition	$	77,763

Oil and gas properties	$	82,781
Asset retirement obligations		(5,018)
Total identifiable net assets	$	77,763

Predecessor Third Party Acquisition

Denbury Properties

On May 14, 2010, the Predecessor completed an acquisition to acquire certain oil and natural gas properties from Denbury Resources, Inc. (“Denbury”) for $893 million (the “Denbury Properties”). The Denbury Properties are located in the Permian Basin, Mid Continent and Ark-La-Tex. Total proved reserves of the acquired properties were estimated to be 77 MMBoe as of May 14, 2010. Summarized below are the consolidated results of operations for 2010 for the Predecessor, on an unaudited basis, as if the acquisition had occurred on January 1, 2010.


	2010
	Actual		Pro Forma
Revenues	$	253,386	$	343,190
Net Income (Loss)	$	31,913	$	98,455