NOTE 3 – ACQUISITIONS AND DIVESTITURES

Year to Date 2012 Acquisitions

On September 17, 2012, we closed on the acquisition of certain oil and natural gas assets from Noble Energy, Inc. (Noble). The acquisition includes approximately 84,000 net acres primarily in the Granite Wash, Cleveland, and various other plays in western Oklahoma and the Texas Panhandle. The amount paid at closing was $594.5 million.

The effective date of the Noble acquisition was April 1, 2012. As of the effective date the estimated proved reserves of the acquired properties were 44 million barrels of oil equivalent (MMBoe). The acquisition adds approximately 25,000 net acres to our Granite Wash core area in the Texas Panhandle with significant resource potential including approximately 600 horizontal drilling locations. The total acreage acquired in western Oklahoma is approximately 59,000 net acres and is characterized by high working interest and operatorship, 95% of which is held by production. We also received four gathering systems as part of the transaction and other miscellaneous assets.

The Noble acquisition is accounted for using the acquisition method under ASC 805, Business Combinations, which requires that the acquired assets and liabilities be recorded at their fair values as of the acquisition date. The following table summarizes the preliminary purchase price and the preliminary estimated values of assets acquired and liabilities assumed. It is based on information available to us at the time these unaudited condensed consolidated financial statements were prepared. We believe these estimates are reasonable; however, the estimates are subject to change as additional information becomes available and is assessed by us (in thousands):



Preliminary Purchase Price
Total consideration given	$	594,463

Preliminary Allocation of Purchase Price
Oil and natural gas properties included in the full cost pool:
Proved oil and natural gas properties	$	260,798
Undeveloped oil and natural gas properties	355,180
Total oil and natural gas properties included in the full cost pool ⁽¹⁾	615,978
Equipment and facilities	25,163
Asset retirement obligation	(46,678		)
Fair value of net assets acquired	$	594,463

(1) We 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.

Pro Forma Financial Information

The following unaudited pro forma financial information is presented to reflect the operations of the acquired assets as if the acquisition had been completed on January 1, 2012 and 2011, respectively. The unaudited pro forma financial information was derived from the historical accounting records of the seller adjusted for estimated transaction costs, depreciation, depletion and amortization, ceiling test impact, general and administrative expenses, capitalized interest, and interest on the $400.0 million of bonds issued along with additional borrowings under our credit facility to finance the acquisition. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transaction occurred on the basis assumed above, nor is such information indicative of our expected future results of operations. The pro forma results of operations do not include any cost savings or other synergies that resulted, or may result, from the acquisition or any estimated costs that will be incurred to integrate these assets. Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(In thousands, except per share data)
Pro forma:
Revenues	$	335,394	$	354,320	$	1,041,350	$	964,165
Net income	$	47,186	$	60,897	$	140,670	$	171,445
Net income per common share:
Basic	$	0.98	$	1.28	$	2.94	$	3.60
Diluted	$	0.98	$	1.27	$	2.92	$	3.58

Year to Date 2012 Divestitures

We completed the following divestitures to-date in 2012, all of which were accounted for as adjustments to the full cost pool with no gain or loss recognized:

•In September 2012, we sold our interest in certain Bakken properties (representing approximately 35% of our total acreage in the Bakken play). The proceeds, net of related expenses were $226.6 million.

•In September 2012, we sold certain oil and natural gas assets located in Brazos and Madison counties of Texas, for approximately $44.1 million.

Other

In conjunction with the acquisition and divestitures completed in the third quarter 2012, we took the necessary steps to secure like-kind exchange tax treatment for the transactions under Section 1031 of the Internal Revenue Code.