2020 Asset Transactions

6 Months Ended

Jun. 30, 2020

Nonmonetary Transactions [Abstract]

2020 Asset Transactions

2020 Asset Transactions

2020 Asset Exchange Transactions. During the first and second quarters of 2020, the Company closed on various acreage trade agreements (collectively, the 2020 Asset Exchange Transactions), pursuant to which the Company exchanged approximately 11,700 aggregate net revenue interest acres across Greene, Allegheny and Westmoreland Counties, Pennsylvania and Wetzel and Marshall Counties, West Virginia for approximately 11,700 aggregate net revenue interest acres across Greene and Washington Counties, Pennsylvania and Wetzel County, West Virginia. As a result of the 2020 Asset Exchange Transactions, the Company recognized a loss of $6.7 million and $55.6 million in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the three and six months ended June 30, 2020, respectively. The fair value of leases acquired were based on inputs that are not observable in the market and, as such, is a Level 3 fair value measurement. See Note 4 for a description of the fair value hierarchy. Key assumptions used in the fair value calculation included market-based prices for comparable acreage.

2020 Divestiture. On May 11, 2020, the Company closed a transaction to sell certain non-strategic assets located in Pennsylvania and West Virginia (the 2020 Divestiture) for an aggregate purchase price of approximately $125 million in cash, subject to customary purchase price adjustments and the Contingent Consideration defined and discussed below. Pennsylvania assets sold included 80 Marcellus wells and approximately 33 miles of gathering lines; West Virginia assets sold included 809 conventional wells and approximately 154 miles of gathering lines. In addition, the 2020 Divestiture relieved the Company of approximately

$49 million in asset retirement obligations and other liabilities associated with the sold assets. Proceeds from the sale were used to pay down the Company's term loan facility. See Note 6.

The purchase and sale agreement for the 2020 Divestiture provides for additional cash bonus payments (the Contingent Consideration) payable to the Company of up to $20 million. Such Contingent Consideration is conditioned upon the three-month average of the NYMEX Henry Hub natural gas settlement price relative to stated floor and target price thresholds beginning on August 31, 2020 and ending on November 30, 2022. The Contingent Consideration represents an embedded derivative that had no fair value as of both May 11, 2020 and June 30, 2020. The fair value of the Contingent Consideration was based on significant inputs that were interpolated from observable market data and, as such, is a Level 2 fair value measurement. See Note 4 for a description of the fair value hierarchy.

As a result of the 2020 Divestiture, the Company recognized a loss of $42.5 million in loss on sale/exchange of long-lived assets in the Statements of Condensed Consolidated Operations during the second quarter of 2020.