2. Acquisitions and Divestitures

Acquisitions. On May 24, 2012, investment funds managed by Apollo (collectively, "the Apollo Funds") and other investors acquired all of the equity of EP Energy Global LLC for approximately $7.2 billion. The Acquisition was funded with approximately $3.3 billion in equity contributions and the issuance of approximately $4.25 billion of debt. In conjunction with the Acquisition, a portion of the proceeds were also used to repay approximately $960 million outstanding under predecessor’s revolving credit facility at that time. See Note 7 for additional discussion of debt.

The purchase transaction was accounted for under the acquisition method of accounting which requires, among other items, that assets and liabilities assumed be recognized on the consolidated balance sheet at their fair values as of the Acquisition date. Our consolidated balance sheet for all periods includes the following purchase price allocation based on available information to specific assets and liabilities assumed based on estimates of fair values and costs. There was no goodwill associated with the transaction.

Allocation of purchase price	May 24, 2012
	(in millions)
Current assets	$	587
Non-current assets	446
Property, plant and equipment	6,897
Current liabilities	(420		)
Non-current liabilities	(297		)
Total purchase price	$	7,213

The unaudited pro forma information below for the years ended December 31, 2012 and 2011 has been derived from the historical consolidated financial statements and has been prepared as though the Acquisition occurred as of the beginning of January 1, 2011. The unaudited pro forma information does not purport to represent what our results of operations would have been if such transactions had occurred on such date.

	Year ended December 31, 2012		Year ended December 31, 2011
	(in millions)
Operating Revenues	$	1,659	$	1,756
Net Income	143		454

In conjunction with the Acquisition, approximately $330 million in transaction, advisory, and other fees were incurred, of which $142 million were capitalized as debt issue costs and $15 million were capitalized as prepaid costs in other assets on our balance sheet. The remaining $173 million in fees were reflected in general and administrative expense in our income statement. Additionally, during the successor period in 2012 we recorded approximately $48 million related to transition and restructuring costs, including severance charges totaling approximately $17 million ($4 million related to divested assets). These amounts, substantially all of which had been paid as of December 31, 2012, were included as general and administrative expenses in our income statement.

Discontinued Operations. In June 2013, we entered into three separate agreements to sell our CBM properties located in the Raton, Black Warrior and Arkoma basins; our Arklatex conventional natural gas assets located in East Texas and North Louisiana and our legacy South Texas conventional natural gas assets. We completed these sales in 2013 for total consideration of approximately $1.3 billion and recorded a gain on the sale of approximately $468 million. In July 2013, we entered into a Quota Purchase Agreement to sell our Brazil operations which is expected to close in 2014. The sale is subject to Brazilian regulatory approval as well as certain other customary closing conditions. During 2013, we recorded $34 million of impairment charges ($10 million based on a comparison of the fair market value of our Brazil operations to its underlying carrying value when we entered into the purchase and sale agreement and $24 million to impair earnings subsequent to entering into that agreement. We estimated the fair value of our Brazil operations (representing a Level 3 fair value measurement) based primarily on sales proceeds expected to be received less estimates of retained liabilities.

In February 2014, we sold additional domestic natural gas assets in our Atklatex area for approximately $16 million and expect to record a gain on the sale of approximately $12 million in 2014.

We have reflected the domestic natural gas assets sold as discontinued operations in all successor periods and reflected our Brazilian operations as discontinued operations in all periods presented in these consolidated financial statements. For periods prior to the Acquisition, the predecessor applied the full cost method of accounting for oil and natural gas properties where capitalized costs were aggregated by country (e.g., U.S.); accordingly, these domestic assets sold did not qualify for, and have not been reflected as, discontinued operations in the predecessor financial statement periods.

Summarized operating results and financial position data of our discontinued operations were as follows (in millions):

	Successor					Predecessor
	Year ended December 31, 2013			March 23 to December 31, 2012		January 1 to May 24, 2012			Year ended December 31, 2011
Operating revenues	$	297		$	262	$	46		$	111

Operating expenses
Natural gas purchases	19			23		—			—
Transportation costs	18			22		—			—
Lease operating expense	76			65		16			40
Depreciation, depletion and amortization	48			59		12			33
Impairment and ceiling test charges	44			—		—			152
Other expense	41			50		20			31
Total operating expenses	246			219		48			256

Gain on sale of assets	468			—		—			—
Other (expense) income	(2		)	3		(5		)	(1		)
Income (loss) from discontinued operations before income taxes	517			46		(7		)	(146		)
Income tax expense (benefit)	7			2		2			(23		)
Income (loss) from discontinued operations, net of tax	$	510		$	44	$	(9	)	$	(123	)

	December 31, 2013		December 31, 2012
Assets of discontinued operations
Current assets	$	26	$	95
Property, plant and equipment, net	52		1,019
Other non-current assets	10		13
Total assets of discontinued operations	$	88	$	1,127
Liabilities of discontinued operations
Accounts payable	$	39	$	84
Other current liabilities	10		16
Asset retirement obligations	37		146
Other non-current liabilities	5		7
Total liabilities of discontinued operations	$	91	$	253

Other Divestitures. During 2013, we (i) received approximately $10 million from the sale of certain domestic oil and natural gas properties and (ii) sold our approximate 49% equity interest in Four Star Oil & Gas Company (Four Star) for proceeds of approximately $183 million. We did not record a gain or loss on the sale of these other domestic properties; however, in connection with entering into the sale of Four Star, we recorded a $20 million impairment in earnings from unconsolidated affiliates. See Note 10 for further discussion.

In 2012, we sold our interests in Egypt for approximately $22 million and sold oil and natural gas properties located in the Gulf of Mexico for a net purchase price of approximately $79 million. We did not record a gain or loss on any of these sales as the purchase price allocated to the assets sold was reflective of the estimated sales price of these properties and the relationship between capitalized costs and proved reserves was not altered.

During 2011, the predecessor sold non-core domestic oil and natural gas properties in several transactions from which they received proceeds that totaled approximately $612 million. The predecessor did not record a gain or loss on any of these sales.