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Acquisition of Atlas Energy Inc.
6 Months Ended
Jun. 30, 2011
Acquisition of Atlas Energy, Inc. [Abstract]  
Acquisition of Atlas Energy, Inc.
 
Note 16.  Acquisition of Atlas Energy, Inc.
 
On February 17, 2011, the company acquired Atlas Energy, Inc. (Atlas), which holds one of the premier acreage positions in the Marcellus Shale, concentrated in southwestern Pennsylvania. The aggregate purchase price of Atlas was approximately $4.5 billion, which included approximately $3.0 billion cash for all the common shares of Atlas, a $403 million cash advance to facilitate Atlas’ purchase of a 49 percent interest in Laurel Mountain Midstream LLC and about $1.1 billion of assumed debt. Subsequent to the close of the transaction, the company paid off the assumed debt and made payments of $184 million in connection with Atlas equity awards.
 
The acquisition was accounted for as a business combination (ASC 805) which, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Provisional fair value measurements were made in the first quarter 2011 for acquired assets and assumed liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis is obtained. No adjustments to the provisional measurements were made in the second quarter 2011. The company expects the measurement process will be finalized by the end of 2011.
 
Proforma financial information is not presented as it would not be materially different from the information presented in the Consolidated Statement of Income.
 
The following table summarizes the provisional measurement of the assets acquired and liabilities assumed:
 
         
    At February 17, 2011
    (Millions of dollars)
 
Current assets
    $    150  
Investments and long-term receivables
    456  
Properties
    6,051  
Goodwill
    39  
Other assets
    5  
         
Total assets acquired
    6,701  
         
Current liabilities
    (560 )
Long-term debt and capital leases
    (761 )
Deferred income taxes
    (1,918 )
Other liabilities
    (25 )
         
Total liabilities assumed
    (3,264 )
         
Net assets acquired
    $ 3,437  
         
 
Properties were measured primarily using an income approach. The fair values of the acquired oil and gas properties were based on significant inputs not observable in the market, and thus represent Level 3 measurements. Significant inputs included estimated resource volumes, assumed future production profiles, estimated future commodity prices, a discount rate of 8 percent, and assumptions on the timing and amount of future operating and development costs. All the properties are in the United States and are included in the Upstream segment.
 
The acquisition date fair value of the consideration transferred was $3.4 billion in cash. The $39 million of goodwill was assigned to the Upstream segment and represents the amount of the consideration transferred in excess of the values assigned to the individual assets acquired and liabilities assumed. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. None of the goodwill is deductible for tax purposes. Goodwill recorded in the acquisition is not subject to amortization, but will be tested periodically for impairment as required by the applicable accounting standard (ASC 350).