(2) ACQUISITIONS

On December 22, 2014, the Company completed the acquisition of certain oil and gas assets from a subsidiary of Chesapeake Energy Corporation covering approximately 413,000 net acres in West Virginia and southwest Pennsylvania targeting natural gas, NGLs and crude oil contained in the Upper Devonian, Marcellus and Utica Shales for approximately $5.0 billion, subject to customary closing adjustments (the “Chesapeake Property Acquisition”). The transaction was temporarily financed using a $4.5 billion 364-day senior unsecured bridge term loan credit facility and a $500 million two-year unsecured term loan. The Company repaid all principal and interest outstanding on the $4.5 billion bridge term loan credit facility on January 23, 2015 after permanent financing was finalized. See Note 16 – Subsequent Events for further details.

The following table summarizes the consideration paid for the Chesapeake Property Acquisition and the fair value of the assets acquired and liabilities assumed as of the acquisition date. The purchase price allocation is preliminary and subject to adjustment. These amounts will be finalized as soon as possible, but no later than one year from the acquisition date.


		For the year ended December 31, 2014
Consideration:		(in millions)
Cash	$	4,978
Recognized amounts of identifiable assets acquired and liabilities assumed:
Assets acquired:
Proved natural gas and oil properties		1,424
Unproved natural gas and oil properties		3,605
Other property and equipment		19
Inventory		2
Other receivables		27
Total assets acquired		5,077
Liabilities assumed:
Asset retirement obligations		(42)
Other long term liabilities		(57)
Total liabilities assumed		(99)
	$	4,978

The Chesapeake Property Acquisition qualified as a business combination, and as such, the Company estimated the fair value of the assets acquired and liabilities assumed as of the December 22, 2014 acquisition date. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Fair value measurements also utilize assumptions of market participants. The Company used a discounted cash flow model and made market assumptions as to future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. These assumptions represent Level 3 inputs, as defined in Note 7 – Fair Value.

The Company recorded the assets acquired and liabilities assumed in the Chesapeake Property Acquisition at their estimated fair value of approximately $5.0 billion, which the Company considers to be representative of the price paid by a typical market participant. This measurement resulted in no goodwill or bargain purchase being recognized. In addition, the Company included $1 million in general and administrative expenses and $5 million in interest expense for fees related to the Chesapeake Property Acquisition on its Consolidated Statement of Operations for the year ended December 31, 2014. The Company included $47 million in other current assets and $1 million in other assets for unamortized fees related to the bridge facility and term loan facility, respectively, for the Chesapeake Property Acquisition on its Consolidated Balance Sheet as of December 31, 2014. In January 2015, the Company repaid in full amounts outstanding on its bridge facility. Therefore, the Company will expense the $47 million of short-term unamortized debt issuance costs associated with the bridge facility in January 2015.

The results of operations of the Chesapeake Property Acquisition have been included in the Company’s consolidated financial statements since the December 22, 2014 closing date, including approximately $10 million of total revenue and $2 million of operating income. Summarized below are the consolidated results of operations for the years ended December 31, 2014 and 2013, on an unaudited pro forma basis, as if the acquisition and related financing had occurred on January 1, 2013. The unaudited pro forma financial information was derived from the historical consolidated statement of operations of the Company and the statement of revenues and direct operating expenses for the Chesapeake Property Acquisition properties. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the acquisition and related financing occurred on the basis assumed above, nor is such information indicative of the Company’s expected future results of operations.


	For the year ended
	December 31,
	2014		2013
	(in millions) (unaudited)

Revenues	$	4,440	$	3,713
Net Income		927		684

In December 2014, a subsidiary of the Company and a subsidiary of Statoil ASA entered into a purchase and sale agreement in which the Company’s subsidiary will acquire certain oil and gas assets covering approximately 30,000 acres in West Virginia and southwest Pennsylvania comprising approximately 20% of Statoil’s interests in that acreage for approximately $365 million, subject to other customary adjustments (the “Statoil Property Acquisition”). All of these assets are also assets in which the Company has acquired interests under the Chesapeake Property Acquisition. This transaction closed in January 2015 and was funded with the revolving credit facility. See Note 16 – Subsequent Events for details regarding the closing of this transaction.

In December 2014, the Company announced that it had signed an agreement to purchase oil and gas assets including approximately 46,700 net acres in northeast Pennsylvania from WPX Energy, Inc. for approximately $300 million, subject to customary closing conditions (the “WPX Property Acquisition”). This acreage was producing approximately 50 million net cubic feet of gas per day from 63 operated horizontal wells as of December 2014. As part of this transaction, the Company will assume firm transportation capacity of 260 million cubic feet of gas per day predominantly on the Millennium pipeline effective upon closing. This transaction closed in January 2015 and was funded with the revolving credit facility. See Note 16 – Subsequent Events for details regarding the closing of this transaction.

In March 2014 and July 2014, the Company entered into several agreements to purchase approximately 380,000 net acres in northwest Colorado principally in the Niobrara formation for approximately $215 million. The Company utilized its revolving credit facility to finance these acquisitions. The Company closed the acquisitions in the second and third quarters and accounted for them as asset acquisitions.

In April 2013, the Company entered into a definitive purchase agreement to acquire natural gas properties located in Pennsylvania prospective for the Marcellus Shale for approximately $82 million, subject to closing conditions. The Company utilized its revolving credit facility to finance the acquisition. The Company closed the acquisition during the second quarter of 2013 and accounted for it as an asset acquisition.