Divestitures

Permian Basin Acquisition. In August 2016, the Company acquired approximately 28,000 net acres in the Permian Basin, with net production of approximately 1,400 barrels of oil equivalent per day ("BOEPD"), from an unaffiliated third party for $429 million, including normal closing adjustments. The acquisition was accounted for using the acquisition method under ASC 805, "Business Combinations," which requires acquired assets and liabilities to be recorded at fair value as of the acquisition date.

The following table represents the preliminary allocation of the acquisition price to the assets acquired and the liabilities assumed based on their fair value at the acquisition date, pending final post-close adjustments:



Assets acquired:
Proved properties	$	79
Unproved properties	348
Other property and equipment	5
Liabilities assumed:
Asset retirement obligations	(3		)
Net assets acquired	$	429

The fair value measurements of the net assets acquired are based on inputs that are not observable in the market and, therefore, represent Level 3 inputs in the fair value hierarchy (see Note D for a description of the input levels in the fair value hierarchy). The Company calculated the fair values of the acquired proved properties and asset retirement obligations using a discounted future cash flow model that utilizes management's estimates of (i) proved reserves, (ii) forecasted production rates, (iii) future operating, development and plugging and abandonment costs, (iv) future commodity prices and (v) a discount rate of 10 percent for proved properties and seven percent for asset retirement obligations. The Company calculated the fair values of the acquired unproved properties based on the average price per acre in comparable market transactions.

In connection with the acquisition, the Company incurred acquisition related costs (primarily consulting, advisory and legal fees) of approximately $1.0 million. The operating results included in the Company's accompanying consolidated statements of operations from the date of acquisition to September 30, 2016, and the operating results that would have been recognized had the acquisition occurred on January 1, 2016, are not material to the Company's accompanying consolidated statements of operations.

EFS Midstream Divestiture. In July 2015, the Company sold its 50.1 percent equity interest in EFS Midstream LLC ("EFS Midstream") to an unaffiliated third party, with the Company receiving total consideration of $1.0 billion, of which $530 million was received in cash and the remaining $501 million was in the form of a note, which was payable to the Company in July 2016. The Company recorded a net gain on the disposition of $777 million during the three and nine months ended September 30, 2015. In July 2016, the Company received the remaining cash payment of $501 million, which settled the outstanding note receivable.