Goodwill Impairment

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill Impairment

Note 6. Goodwill Impairment

As of December 31, 2017 and through September 30, 2018, our consolidated balance sheet included goodwill of $1.4 billion, of which $1.3 billion, resulting from the Clayton Williams Energy Acquisition, was allocated to our Texas reporting unit, included

within our oil and gas exploration and production segment, and $110 million was allocated to our Midstream reporting unit. We conducted our annual goodwill impairment assessment as of September 30, 2018. At that time, we concluded that goodwill was not impaired.

In fourth quarter 2018, we considered changes to facts and circumstances, particularly the decline in WTI strip pricing, increase in operating and capital costs, as well as our development plan, and concluded that it was more likely than not that the fair value of our Texas reporting unit was less than its carrying amount. For purposes of determining the goodwill impairment, we estimated the implied fair value of the goodwill using a variety of valuation methods, including the income and market approaches. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions for future crude oil and natural gas production, commodity prices based on forward commodity price curves, operating and development costs and other factors. The analysis indicated that the implied fair value of our Texas reporting unit goodwill was zero and we recognized a loss of $1.3 billion.