Divestitures

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

DIVESTITURES

In August 2018, the Company entered into an agreement with Flywheel Energy Operating, LLC to sell 100% of the equity in the Company’s subsidiaries that owned and operated its Fayetteville Shale E&P and related midstream gathering assets for $1,865 million in cash, subject to customary closing adjustments, with an economic effective date of July 1, 2018.

In December 2018, the Company closed the Fayetteville Shale sale and received approximately $1,650 million, which included purchase price adjustments of approximately $215 million primarily related to the net cash flows from the economic

effective date to the closing date.  The Company allocated the sale proceeds to gain on sale for the non-full cost pool assets and to capitalized costs for the full cost pool assets based on the proportion of the estimated fair values of the underlying assets. The fair values of these assets was estimated primarily using an income approach. Consequently, the Company recognized a gain on the sale of non-full cost pool assets of $17 million and a reduction of $887 million to its full cost pool assets. As the sale did not involve a significant change in proved reserves or significantly alter the relationship between capitalized costs and proved reserves, the Company recognized no gain or loss related to the full cost pool assets sold.

As part of the Fayetteville Shale sale agreement, the Company entered into certain natural gas derivative positions that were subsequently novated to the buyer in conjunction with finalization of the sale. The unrealized fair value of these derivatives at the closing of the sale in December 2018 was a net liability of $151 million, which was transferred to the buyer. The unrealized loss associated with the novated positions was offset by the gain that the Company recognized when the liability was transferred to the buyer. These offsetting amounts were recognized on the consolidated statements of operations in (gain) loss on sale of operating assets, net. In addition, the Company paid $22 million in premiums for these novated derivatives which was recorded as a loss in (gain) loss on sale of operating assets, net in 2018.

The Company retained certain contractual commitments related to firm transportation, with the buyer obligated to pay the transportation provider directly for these charges.  As of December 31, 2019, approximately $108 million of these contractual commitments remain, of which the Company will reimburse the buyer for certain of these potential obligations up to approximately $58 million through 2020 depending on the buyer’s actual use. At December 31, 2019, the Company has recorded a $46 million liability for the estimated future payments. 

In accordance with accounting guidance for Property, Plant and Equipment, assets held for sale are measured at the lower of the carrying value or fair value less costs to sell. Because the assets outside the full cost pool included in the Fayetteville Shale sale met the criteria for held for sale accounting as of September 30, 2018, the Company determined the carrying value of certain non-full cost pool assets exceeded the fair value less costs to sell. As a result, a non-cash impairment charge of $161 million was recorded in the third quarter of 2018, of which $145 million related to midstream gathering assets held for sale and $15 million related to E&P assets held for sale. Additionally, the Company recorded a $1 million non-cash impairment related to other non-core assets that were not included in the sale.

From the proceeds received, $914 million was used to repurchase $900 million of the Company’s outstanding senior notes, including premiums and $9 million in accrued interest paid in December 2018. In addition, $201 million, including approximately $1 million in commissions, was used to repurchase approximately 44 million shares of the Company's outstanding common stock, including $21 million in the first quarter of 2019. The Company earmarked the remaining net proceeds from the sale to supplement 2019 and 2020 Appalachia development and for general corporate purposes. Pending these other uses, a portion of these remaining net proceeds has been used to repay revolving credit facility borrowings until investments are made.

During 2019, the Company sold non-core acreage for $38 million. There was no production or proved reserves associated with this acreage. In addition, during July 2019, the Company sold the land associated with its headquarters office building for $16 million and recognized a $2 million gain on the sale. The Company also from time to time sells leases and other properties whose value, individually, is not material but is reflected in the Company’s financial statements.