Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2013

Acquisitions and divestitures [Abstract]

Acquisitions and Divestitures

ACQUISITIONS AND DIVESTITURES

On September 17, 2012, we closed on the acquisition of certain oil and natural gas assets from Noble Energy, Inc. (Noble). The acquisition included approximately 83,000 net acres primarily in the Granite Wash, Cleveland, and various other plays in western Oklahoma and the Texas Panhandle. The amount paid after final closing adjustments was $592.6 million.

As of April 1, 2012, the effective date of the Noble acquisition, the estimated proved reserves of the acquired properties were 44 million barrels of oil equivalent (MMBoe). The acquisition added approximately 24,000 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 was 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 was 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 purchase price and the estimated values of assets acquired and liabilities assumed. It was based on information available to us at the time the 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):

Adjusted Purchase Price
Total consideration given	$	592,627
Adjusted Allocation of Purchase Price
Oil and natural gas properties included in the full cost pool:
Proved oil and natural gas properties	$	260,799
Undeveloped oil and natural gas properties	353,343
Total oil and natural gas properties included in the full cost pool (1)	614,142
Equipment and facilities	25,163
Asset retirement obligation	(46,678		)
Fair value of net assets acquired	$	592,627

(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, 2011. 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		2012
	(In thousands, except per share data)
Pro forma:
Revenues	$	335,394	$	1,041,350
Net income	$	47,186	$	140,670
Net income per common share:
Basic	$	0.98	$	2.94
Diluted	$	0.98	$	2.92

2012 Divestitures

We completed the following divestitures 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 (located in North Dakota). 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.

2013 Divestitures

In August 2013, we sold additional Bakken property interests. The proceeds, net of related expenses, were $57.1 million. These proceeds were accounted for as adjustments to the full cost pool with no gain or loss recognized.

Other

The acquisition and divestitures completed in the third quarter 2012, were structured to allow us to secure like-kind exchange tax treatment for the transactions under Section 1031 of the Internal Revenue Code.