Acquisitions

6 Months Ended

Jun. 30, 2012

Note 4— Acquisitions

ING Asset Acquisition

On April 22 and June 29, 2011, Nytis LLC effected an initial and subsequent close, respectively, under a February 14, 2011 Asset Purchase Agreement, as amended (the “ING APA”) with The Interstate Natural Gas Company, LLC and certain related parties, as seller (hereafter collectively referred to as “ING”), of certain gas and oil assets (the “ING Assets”). The initial closing was held on April 22, 2011 for the purchase of approximately 45 natural gas wells for approximately $1.5 million. The subsequent closing was held on June 29, 2011 for the purchase of the remaining assets consisting of interests in approximately 385 producing wells (total 430 producing wells), natural gas gathering and compression facilities and other related assets, for approximately $23.2 million. The Company paid a total of approximately $25.9 million cash for the ING Assets which included additional purchase price adjustments and $600,000 consideration for extending the date of the final closing.

The Company acquired these assets to obtain proved developed producing reserves that were proximate and complimentary to the Company’s then current production and reserve base. The ING Assets consisted of certain natural gas properties, natural gas gathering and compression facilities and other related assets located in eastern Kentucky and four counties in West Virginia. Specifically, the ING Assets included (i) some but not all of ING’s leases and interests in natural gas and oil leases, and wells and wellbores and related natural gas production equipment; (ii) partnership interests in various general partnerships that own comparable natural gas and oil assets as to which ING was the managing general partner, and where Nytis LLC succeeded to ING’s position as managing general partner, (iii) partnership interests in other general partnerships in which ING owned partnership interests, but was not the managing general partner; (iv) natural gas gathering and compression facilities related only to the acquired properties; and (v) various other contracts, and insignificant amounts of vehicles and equipment and easements and rights-of-way relating to or used in connection with the ownership and operation of the ING assets.

Nytis LLC assumed certain obligations to transport gas from wells that are owned by ING (or its affiliates) that Nytis LLC did not acquire, as well as obligations under other contracts and agreements that Nytis LLC acquired at the final closing.

The ING 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 acquisition date (the date on which the Company obtained control of the properties).

ING Asset Acquisition Pro Forma

As stated above, on June 29, 2011, the Company completed an acquisition of oil and gas properties from ING. Below are consolidated results of operations for the three and six months ended June 30, 2011 as though the ING acquisition had been completed as of January 1, 2011.

The unaudited pro forma consolidated results reflect significant pro forma adjustments related to funding the acquisition through the issuance of common stock, additional depreciation expense, costs directly attributable to the acquisition and costs incurred as a result of the merger with SLSC.

	Unaudited Pro Forma Consolidated Results
	For Three Months Ended			For Six Months Ended
(in thousands, except share data)	June 30, 2011			June 30, 2011

Revenue	$	3,914		$	7,619

Net loss before non-controlling interests	$	(357	)	$	(7,487	)

Net income attributable to non-controlling interests	$	(142	)	$	(345	)

Net loss attributable to controlling interests	$	(499	)	$	(7,832	)

Net loss per share (basic)	$	(0.01	)	$	(0.17	)
Net loss per share (diluted)	$	(0.01	)	$	(0.17	)

Alerion Drilling I, LLC Asset Acquisition

Prior to the final closing of the ING APA, a portion of the ING Assets acquired by Nytis LLC from ING were held in the Alerion Partnership. ING’s interest in the Alerion Partnership was fifty percent (50%) and the remaining interest of the Alerion Partnership was owned by Alerion Drilling. Immediately prior to the ING final closing, ING and Alerion Drilling distributed all the assets of the Alerion Partnership to ING and Alerion Drilling, including the portion thereof (the “Alerion Partnership Assets”) that Nytis LLC purchased from ING under the ING APA.

On June 6, 2011, Nytis LLC entered into an Asset Purchase Agreement with Alerion Drilling to acquire Alerion Drilling’s fifty percent (50%) interest in the Alerion Partnership Assets. On July 27, 2011, Nytis LLC closed the acquisition of Alerion’s interest in the Alerion Partnership Assets under the Alerion APA and, as a consequence acquired the remaining interest in the Alerion Partnership Assets that it had acquired from ING at the final closing. The purchase price paid by Nytis LLC for Alerion Drilling’s share of such assets was approximately $1.2 million including purchase price adjustments.