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

Divestitures

On March 26, 2018, the Company divested approximately 112,000 net acres of its Powder River Basin assets (the “PRB Divestiture”), for total cash received at closing, net of costs (referred to throughout this report as “net divestiture proceeds”), of $490.8 million, subject to final purchase price adjustments, and recorded an estimated net gain of $410.1 million for the six months ended June 30, 2018.

During the second quarter of 2018, the Company completed the divestitures of its remaining assets in the Williston Basin located in Divide County, North Dakota (the “Divide County Divestiture”) and its Halff East assets in the Midland Basin (the “Halff East Divestiture”), for combined net divestiture proceeds received at closing of $250.8 million, subject to final purchase price adjustments, and recorded a combined estimated net gain of $15.7 million for the six months ended June 30, 2018. Please refer to Note 1 - Summary of Significant Accounting Policies for a discussion of an immaterial non-cash adjustment related to the Divide County Divestiture that was recorded in the second quarter of 2018.

The following table presents loss before income taxes from the Divide County, North Dakota assets sold for the three and six months ended June 30, 2018, and 2017. The Divide County Divestiture was considered a disposal of a significant asset group.



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Loss before income taxes ⁽¹⁾	$	(17,478	)	$	(153,442	)	$	(28,975	)	$	(486,161	)

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⁽¹⁾	Loss before income taxes reflects oil, gas, and NGL production revenue, less oil, gas, and NGL production expense, depletion, depreciation, amortization, and asset retirement obligation liability accretion expense, impairment expense, and net loss on divestiture activity.

On March 10, 2017, the Company closed the divestiture of its outside-operated Eagle Ford shale assets, including its ownership interest in related midstream assets, for net divestiture proceeds received at closing of $747.4 million, and net divestiture proceeds of $744.1 million after final purchase price adjustments. The Company recorded an estimated net gain of $397.4 million for the six months ended June 30, 2017, and a final net gain of $396.8 million related to these divested assets for the year ended December 31, 2017. During the second quarter of 2017, the Company divested of assets located in Williams County, North Dakota, for net divestiture proceeds of $24.6 million.

Assets Held for Sale

Assets are classified as held for sale when the Company commits to a plan to sell the assets and it is probable 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 estimated costs to sell. When assets no longer meet the criteria of assets held for sale, they are measured at the lower of the carrying value of the assets before being classified as held for sale, adjusted for any depletion, depreciation, and amortization expense that would have been recognized, or the fair value at the date they are reclassified to assets held for use. Any gain or loss recognized on assets held for sale or on assets held for sale that are subsequently reclassified to assets held for use is reflected in the net gain (loss) on divestiture activity line item on the accompanying statements of operations. As of June 30, 2018, there were $5.0 million of assets held for sale presented on the accompanying balance sheets.

During the second quarter of 2017, the Company reclassified its retained Divide County assets previously held for sale to assets held for use. A $359.6 million write-down was recorded on these assets in the first quarter of 2017 based on the estimated fair value less selling costs as of March 31, 2017. An additional $166.9 million write-down was recorded in the second quarter of 2017 based on market conditions that existed on the date the Company made its decision to retain these assets.

Acquisitions

During the second quarter of 2018, the Company acquired approximately 720 net acres of unproved properties in Martin County, Texas, for $24.6 million. Under authoritative accounting guidance, this transaction was considered an asset acquisition. Therefore, the properties were recorded based on the fair value of the total consideration transferred on the acquisition date and the transaction costs were capitalized as a component of the cost of the assets acquired. During the first half of 2017, the Company acquired approximately 3,400 net acres of primarily unproved properties in Howard and Martin Counties, Texas, in multiple transactions for a total of $72.3 million of cash consideration, which were accounted for as asset acquisitions.

Also, during the first half of 2017, the Company completed several non-monetary acreage trades of primarily unproved properties in Howard and Martin Counties, Texas, resulting in the Company acquiring approximately 6,550 net acres in exchange for approximately 5,700 net acres, with $279.8 million of carrying value attributed to the properties surrendered by the Company in such trades. These trades were recorded at carryover basis with no gain or loss recognized.