Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2014

Acquisitions and divestitures [Abstract]

Acquisitions and Divestitures

On September 17, 2012, we closed on the acquisition of certain oil and natural gas assets from Noble Energy, Inc. (Noble). After final closing adjustments, 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 adjusted amount paid was $592.6 million.

As of the effective date of the Noble acquisition (April 1, 2012), 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 other plays in western Oklahoma and the Texas Panhandle was approximately 59,000 net acres and is characterized by high working interest and operatorship, 95% of which was 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 required that the acquired assets and liabilities be recorded at their fair values as of the acquisition date. The following table summarizes the adjusted purchase price and the estimated values of assets acquired and liabilities assumed. It was based on information available to us at the time these consolidated financial statements were prepared and we believe these estimates are reasonable(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
Unproved oil and natural gas properties	353,343
Total oil and natural gas properties included in the full cost pool (1)	614,142
Gas gathering and processing equipment and other	25,163
Asset retirement obligation	(46,678		)
Fair value of net assets acquired	$	592,627

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(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. 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 Notes issued along with additional borrowings under our credit agreement 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.

	Twelve months ended December 31,
	2012
	(In thousands, except per share amounts)
Pro forma:
Revenues	$	1,376,393
Net income	$	83,940
Net income per common share:
Basic	$	1.75
Diluted	$	1.74

From September 17, 2012, the date of the acquisition, through December 31, 2012, the portion of our revenues that were attributable to Noble were $21.4 million with a net loss of $0.8 million.

2012 Divestitures

In September 2012, we sold our interest in certain Bakken properties. The proceeds, net of related expenses were$226.6 million. In addition, we sold certain oil and natural gas assets located in Brazos and Madison Counties, Texas, for approximately $44.1 million. Proceeds from these dispositions reduced the net book value of the full cost pool with no gain or loss recognized.

2012 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.

2013 Divestitures and Assets Held for Sale

In August 2013, we sold additional Bakken property interests. The proceeds, net of related expenses, were $57.1 million. In addition, we had other non-core asset sales with proceeds, net of related expenses, of $21.7 million for 2013. Proceeds from these dispositions reduced the net book value of the full cost pool with no gain or loss recognized.

During 2013, we sold five 2,000-3,000 horsepower drilling rigs to unaffiliated third-parties for a gain of $16.5 million. Four of our idle drilling rigs were classified as assets held for sale at December 31, 2013.

2014 Divestitures

The four drilling rigs classified as assets held for sale at December 31, 2013 were sold to an unaffiliated third party in the first quarter of 2014. The proceeds of this sale, less costs to sell, exceeded the $16.3 million net book value of the drilling rigs, both in the aggregate and for each drilling rig, resulting in a gain of $9.6 million.

We sold non-core oil and natural gas assets, net of related expenses, for $33.1 million during 2014. Proceeds from those dispositions reduced the net book value of our full cost pool with no gain or loss recognized.