Significant Acquisitions

9 Months Ended

Sep. 30, 2011

Significant Acquisitions [Abstract]

SIGNIFICANT ACQUISITIONs

3. SIGNIFICANT ACQUISITIONS

Meridian Acquisition

On and effective May 13, 2010, Alta Mesa Acquisition Sub, LLC (“AMAS”), a wholly owned subsidiary of Alta Mesa Holdings, LP, acquired 100% of the shares of and merged with The Meridian Resource Corporation (“Meridian”), with AMAS as the surviving entity. Meridian was a publicly traded company engaged in exploration for and production of oil and natural gas. The oil and natural gas properties of Meridian were similar and in some cases proximate to our areas of operation. Meridian shareholders were paid in cash, funded by proceeds of our credit facility as well as a $50 million equity contribution from our private equity partner Alta Mesa Investment Holdings Inc., an affiliate of Denham Commodities Partners Fund IV LP (“AMIH”). The merger increased the oil portion of our reserves portfolio, improving the balance of our reserves between oil and natural gas, and provided significant additions to our library of 3-D seismic data.

Total cost of the acquisition was $158 million. It was recorded using the acquisition method of accounting. The purchase price was allocated to acquired assets and assumed liabilities based on their estimated fair values at date of acquisition. Acquisition-related costs of approximately $532,000 were recorded in general and administrative expense for the year ended December 31, 2010.

Sydson Acquisition

On April 21, 2011, we purchased from Sydson Energy and certain of its related parties (together, “Sydson” and the “Sydson acquisition”) certain oil and natural gas assets primarily located in Texas and South Louisiana in which we had jointly participated with Sydson. The purchase price was $27.5 million in cash (a total cost of $28.4 million including abandonment liabilities we assumed). Total net proved reserves acquired are estimated to be 800 MBOE (5 Bcfe), 45% of which is oil. By virtue of this acquisition, we increased our after payout net revenue interest in the Eagle Ford Shale by over 50% at the time of the acquisition. Funding for the acquisition was provided through our credit facility. In addition, litigation associated with a portion of the assets purchased was resolved as a result of the transaction.

TODD Acquisition

On June 17, 2011, we purchased from Texas Oil Distribution & Development, Inc. and Matrix Petroleum LLC and certain other parties (together, “TODD” and the “TODD acquisition”) certain oil and natural gas assets primarily located in Texas and South Louisiana in which we had jointly participated with TODD. The purchase price was $22.5 million in cash (a total cost of $23.4 million including abandonment liabilities we assumed). Total net proved reserves acquired are estimated to be 700 MBOE (4 Bcfe), 36% of which is oil. By virtue of this acquisition, we increased our after payout net revenue interest in the Eagle Ford Shale by an additional 15% at the time of the acquisition. Funding for the acquisition was provided through our credit facility. In addition, litigation associated with TODD was resolved as a result of the transaction.

A summary of the consideration paid and the allocations of the purchase prices (which are preliminary for the Sydson and TODD acquisitions) are as follows (dollars in thousands):

Summary of Consideration:	Meridian		Sydson		TODD
Cash	$	30,948	$	27,500	$	22,500
Debt retired		82,000		—		—
Debt assumed		5,346		—		—
Working capital deficit (1)		753		—		—
Other liabilities assumed		7,971		—		—
Fair value of asset retirement obligations assumed		30,920		922		863
Total	$	157,938	$	28,422	$	23,363
Summary of Purchase Price Allocations:
Proved oil and natural gas properties	$	144,325	$	18,330	$	15,223
Unproved oil and natural gas properties		3,113		10,092		8,140
Other tangible assets		10,500		—		—
Total	$	157,938	$	28,422	$	23,363

(1) Meridian working capital deficit included a cash balance of $11,589,000.

The revenue and earnings related to the Meridian, Sydson, and TODD acquisitions are included in our consolidated statement of income for the nine months ended September 30, 2011. The revenue and earnings related to the Meridian acquisition are also included in our consolidated statement of income for the nine months ended September 30, 2010. Revenue and earnings, had the acquisitions occurred on January 1, 2010, are provided below. This unaudited pro forma information has been derived from historical information and is for illustrative purposes only. The unaudited pro forma financial information does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during these periods.

	(Unaudited)
	Revenue		Income
	(dollars in thousands)
Actual results of Meridian included in our statement of income for the nine months ended September 30, 2011	$	98,949	$	49,803
Actual results of Sydson included in our statement of income for the period April 21, 2011 through September 30, 2011	$	4,521	$	1,904
Actual results of TODD included in our statement of income for the period June 17, 2011 through September 30, 2011	$	1,518	$	119
Pro forma results for the combined entity for the nine months ended September 30, 2011	$	266,816	$	54,995
Pro forma results for the combined entity for the nine months ended September 30, 2010	$	208,004	$	52,222