Discontinued Operations

12 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

In October 2013, Energen Resources completed the sale of its Black Warrior Basin coalbed methane properties in Alabama for $160 million (subject to closing adjustments). The Company recorded a pre-tax gain on the sale of approximately $35 million in the fourth quarter of 2013 which is reflected in gain on disposal of discontinued operations in the year ended December 31, 2013. The sale had an effective date of July 1, 2013, and the proceeds from the sale were used to repay short-term obligations. The property was classified as held-for-sale and reflected in discontinued operations during the third quarter of 2013. At December 31, 2012, proved reserves associated with Energen’s Black Warrior Basin properties totaled 97 Bcf of natural gas.

In January 2014, Energen Resources signed a purchase and sale agreement on its North Louisiana/East Texas natural gas and oil properties for $31.5 million (subject to closing adjustments). The Company expects to complete the sale in the first quarter of 2014 and will use the proceeds to repay short-term obligations. During the third quarter of 2013, Energen Resources classified these natural gas and oil properties as held-for-sale and reflected the associated operating results in discontinued operations. Energen Resources recognized a non-cash impairment writedown on these properties in the third and fourth quarters of $24.6 million pre-tax and $5.2 million pre-tax, respectively, to adjust the carrying amount of these properties to their fair value based on an estimate of the selling price of the properties. The non-cash impairment writedowns are reflected in gain on disposal of discontinued operations in the year ended December 31, 2013. Significant assumptions in valuing the proved reserves included the reserve quantities, anticipated operating costs, anticipated production taxes, future expected natural gas prices and basis differentials, anticipated production declines, and a discount rate of 10 percent commensurate with the risk of the underlying cash flow estimates. The impairment writedowns are classified as Level 3 fair value. At December 31, 2013, proved reserves associated with Energen’s North Louisiana/East Texas properties totaled 23 Bcf of natural gas and 91 MBbl of oil.

The following table details held-for-sale properties by major classes of assets and liabilities:

(in thousands)	December 31, 2013
	Black Warrior Basin			North Louisiana/East Texas			Total
Accounts receivable	$	2,829		$	1,272		$	4,101
Inventories	—			68			68
Oil and gas properties	—			348,379			348,379
Less accumulated depreciation, depletion and amortization	—			(301,609		)	(301,609		)
Other property, net	—			165			165
Total assets held-for-sale	2,829			48,275			51,104
Accounts payable	(1,732		)	(11		)	(1,743		)
Royalty payable	(550		)	(869		)	(1,419		)
Other current liabilities	(379		)	(21		)	(400		)
Other long-term liabilities	—			(14,983		)	(14,983		)
Total liabilities held-for-sale	(2,661		)	(15,884		)	(18,545		)
Total held-for-sale properties	$	168		$	32,391		$	32,559

During the first quarter of 2012, Energen Resources recognized a non-cash impairment writedown on certain properties in East Texas of $21.5 million pre-tax to adjust the carrying amount of these properties to their fair value based on expected future discounted cash flows. This non-cash impairment writedown is reflected in loss from discontinued operations for the year ended December 31, 2012. The impairment was caused by the impact of lower future natural gas prices. This impairment writedown is classified as Level 3 fair value.

Gains and losses on the sale of certain oil and gas properties and any impairments of properties held-for-sale are reported as discontinued operations, with income or loss from operations of the associated properties reported as income or loss from discontinued operations. Accordingly, the results of operations for certain held-for-sale properties were reclassified and reported as discontinued operations for all prior periods presented. Energen Resources may, in the ordinary course of business, be involved in the sale of developed or undeveloped properties. All assets held-for-sale are reported at the lower of the carrying amount or fair value.

Years ended December 31, (in thousands, except per share data)	2013		2012			2011
Oil and gas revenues	$	60,191	$	76,350		$	110,366
Pretax income (loss) from discontinued operations	$	10,028	$	(2,373	)	$	54,698
Income tax expense (benefit)	2,215		(715		)	19,379
Income (Loss) From Discontinued Operations	$	7,813	$	(1,658	)	$	35,319
Gain on disposal of discontinued operations, net	$	5,605	$	—		$	—
Income tax expense	2,011		—			—
Gain on Disposal of Discontinued Operations, net	$	3,594	$	—		$	—
Total Income (Loss) From Discontinued Operations	$	11,407	$	(1,658	)	$	35,319
Diluted Earnings Per Average Common Share
Income (Loss) from Discontinued Operations	$	0.10	$	(0.02	)	$	0.49
Gain on Disposal of Discontinued Operations, net	0.05		—			—
Total Income (Loss) From Discontinued Operations	$	0.15	$	(0.02	)	$	0.49
Basic Earnings Per Average Common Share
Income (Loss) from Discontinued Operations	$	0.11	$	(0.02	)	$	0.49
Gain on Disposal of Discontinued Operations, net	0.05		—			—
Total Income (Loss) From Discontinued Operations	$	0.16	$	(0.02	)	$	0.49