Note 3 – Acquisitions, Divestitures, and Assets Held for Sale

2014 Acquisition Activity


•	Gooseneck Property Acquisitions. On September 24, 2014, the Company acquired approximately 61,000 net acres of proved and unproved oil and gas properties in its Gooseneck area in North Dakota, along with related equipment, contracts, records, and other assets. Total cash consideration paid by the Company was $325.2 million and the effective date for the acquisition was July 1, 2014.

On October 15, 2014, the Company acquired additional interests in proved and unproved oil and gas properties in its Gooseneck area. Total cash consideration paid by the Company was $84.8 million and the effective date for the acquisition was August 1, 2014.

It was determined that both of these acquisitions met the criteria of a business combination under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The Company allocated the preliminary adjusted purchase price to the acquired assets and liabilities based on fair value as of the respective acquisition dates, as summarized in the table below. These acquisitions are subject to normal post-closing adjustments, which are expected to be completed in the first half of 2015. Refer to Note 11 – Fair Value Measurements for additional discussion on the valuation techniques used in determining the fair value of acquired properties.



	As of September 24, 2014			As of October 15, 2014
Purchase Price	(in thousands)
Cash consideration	$	325,230		$	84,836

Fair value of assets acquired:
Proved oil and gas properties	$	203,493		$	54,360
Unproved oil and gas properties	126,622			29,469
Total fair value of oil and gas properties acquired	330,115			83,829

Working capital	(2,772		)	2,625
Asset retirement obligation	(2,113		)	(1,618		)
Total fair value of net assets acquired	$	325,230		$	84,836

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Rocky Mountain Acquisitions. In addition to the Gooseneck property acquisitions discussed above, the Company acquired other proved and unproved properties in its Rocky Mountain region during 2014 in multiple transactions for approximately $134.5 million in total cash consideration, plus approximately 7,000 net acres of non-core assets in the Company’s Rocky Mountain region. These acquisitions are subject to normal post-closing adjustments, which are expected to be completed in early 2015.

2014 Divestiture Activity


•	Rocky Mountain Divestiture. During the second quarter of 2014, the Company divested certain non-core assets in the Montana portion of the Williston Basin. Total divestiture proceeds were $50.1 million and the final gain on this divestiture was $26.9 million.

The Company recorded $27.6 million of write-downs to fair value less estimated costs to sell for assets that were held for sale during the year ended December 31, 2014, which are reflected as a loss on divestiture activity in the accompanying statements of operations, and mostly offset the gain on the Rocky Mountain divestiture discussed above. Please refer to Assets Held for Sale below for further discussion.

2013 Divestiture Activity

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Mid-Continent Divestitures. In December 2013, the Company divested of certain non-strategic assets located in its Mid-Continent region, with the largest transaction being the sale of the Company’s Anadarko Basin assets. Total divestiture proceeds were $368.5 million and the net gain on these divestitures was $25.3 million. A portion of one transaction was structured to qualify as a like-kind exchange under Section 1031 of the IRC.


•	Rocky Mountain Divestitures. During 2013, the Company divested of certain non-strategic assets located in its Rocky Mountain region. Final divestiture proceeds for these divestitures were $57.1 million and the final net gain was $13.2 million.


•	Permian Divestiture. In December 2013, the Company divested of certain non-strategic assets located in its Permian region. Final proceeds for this divestiture were $14.0 million and the final net loss was $7.0 million.

The Company recorded an immaterial write-down to fair value less estimated costs to sell for assets that were held for sale as of December 31, 2013.

2012 Divestiture Activity

In 2012, the Company divested of various non-strategic properties located in its Rocky Mountain and

Mid-Continent regions. Final divestiture proceeds were $57.9 million and the final net gain on these divestitures was $7.4 million.

During 2012, the Company reclassified a portion of the assets previously held for sale to assets held and used, as the assets were no longer being actively marketed. The assets were measured at the lower of the carrying value of the assets before being classified as held for sale, adjusted for any DD&A that would have been recognized had the assets been continuously held and used, or the fair value of the assets at the date they no longer met the criteria as held for sale. As a result of this measurement, the Company recognized $1.7 million of DD&A expense and a $33.9 million loss on unsuccessful sale of properties, which is included in gain (loss) on divestiture activity in the accompanying statements of operations.

Assets Held for Sale

Assets are classified as held for sale when the Company commits to a plan to sell the assets and there is reasonable certainty the sale will take place within one year. Upon classification as held for sale, long-lived assets are no longer depreciated or depleted, and a measurement for impairment is performed to identify and expense any excess of carrying value over fair value less costs to sell. Subsequent changes to the estimated fair value less the costs to sell will impact the measurement of assets held for sale for which fair value less costs to sell is determined to be less than the carrying value of the assets.

As of December 31, 2014, the accompanying balance sheets present $17.9 million of assets held for sale, net of accumulated DD&A expense. There is a corresponding asset retirement obligation liability of $438,000 for assets held for sale included in the asset retirement obligation financial statement line item. Assets held for sale are recorded at the lesser of their respective carrying value or fair value less estimated costs to sell. Certain assets classified as held for sale during 2014 were written down to fair value less estimated costs to sell, which was recorded in the gain (loss) on divestiture activity line item in the accompanying statements of operations.

Subsequent to December 31, 2014, the Company began marketing its assets in the Arkoma Basin of Oklahoma and in the Arklatex area of east Texas and northern Louisiana and expects the assets to be sold during 2015. These assets did not meet the requirements to be classified as held for sale as of December 31, 2014.

The Company determined that neither these planned nor executed asset sales qualify for discontinued operations accounting under financial statement presentation authoritative guidance.