Acquisitions and Divestitures

Permian Basin Acquisition

On February 25, 2014, QEP Energy acquired oil and gas properties in the Permian Basin of Texas for an aggregate purchase price of $942.1 million, subject to post-closing purchase price adjustments (the Permian Basin Acquisition). The acquired properties consist of approximately 26,500 net acres of producing and undeveloped oil and gas properties and approximately 270 vertical producing wells in the Permian Basin, which created a new core area of operation for QEP Energy. The acquisition was funded with $50.0 million of restricted cash, $300.0 million from the Company's expanded term loan and the remainder was funded from its revolving credit facility.

Concurrent with the Permian Basin Acquisition, QEP entered into a transaction structured as a reverse like-kind exchange in accordance with Section 1031 of the Internal Revenue Code. In connection with this reverse like-kind exchange, QEP assigned the ownership of the Permian Basin oil and gas properties acquired to a variable interest entity. QEP operated the properties pursuant to lease and management agreements with that entity, and had a call option which allowed the Company to terminate the exchange transaction at any time up to August 24, 2014, the expiration date of the exchange. Because the Company was the primary beneficiary of these arrangements, the acquired properties are included in its Condensed Consolidated Balance Sheet as of June 30, 2014, and all revenues earned, expenses incurred, and cash flows related to the properties are included in the Company’s Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2014. QEP exercised the call option in connection with certain property divestitures in the second quarter of 2014, as described below under "Divestitures." The lease and management agreements terminated upon the transfer of the acquired properties from the exchange accommodation titleholder to QEP following the exercise of the call option.

The Permian Basin Acquisition meets the definition of a business combination under ASC 805, Business Combinations, as it included significant proved properties. QEP allocated the cost of the Permian Basin Acquisition to assets acquired and liabilities assumed based on fair values as of the acquisition date. Revenues of $61.9 million and net income of $14.0 million were generated from the acquired properties from February 25, 2014, to June 30, 2014, and are included in QEP's Condensed Consolidated Statements of Operations. During the six months ended June 30, 2014, QEP Energy incurred acquisition-related costs of $0.6 million which are included in "General and administrative" on the Condensed Consolidated Statements of Operations for the six months ended June 30, 2014. QEP incurred $1.1 million of debt issuance costs associated with increasing the size of term loan borrowings to fund a portion of the acquisition, which are included in "Other noncurrent assets" on the Condensed Consolidated Balance Sheet as of June 30, 2014.

QEP Energy recorded the Permian Basin Acquisition on its Condensed Consolidated Balance Sheet as of June 30, 2014; however, the final purchase price is subject to post-closing purchase price adjustments. The following table presents a summary of the Company's preliminary purchase accounting entries:



	As of June 30, 2014
	(in millions)
Consideration given:
Cash Consideration	$	945.0
Consideration receivable	(2.9		)
Total consideration given	$	942.1

Amounts recognized for preliminary fair value of assets acquired and liabilities assumed:
Proved properties	$	472.1
Unproved properties	480.9
Asset retirement obligations	(9.7		)
Liabilities assumed	(1.2		)
Total fair value	$	942.1

The following unaudited, pro forma results of operations are provided for the six months ended June 30, 2014, and the three and six months ended June 30, 2013. Pro forma results are not provided for the three months ended June 30, 2014, because the Permian Basin Acquisition occurred during the first quarter of 2014 and therefore there is no pro forma impact on the second quarter of 2014. These supplemental pro forma results of operations are provided for illustrative purposes only and may not be indicative of the actual results that would have been achieved by the acquired properties for the period presented or that may be achieved by such properties in the future. Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors. The pro forma information is based on QEP's consolidated results of operations for the three and six months ended June 30, 2014 and 2013, the acquired properties' historical results of operations, and estimates of the effect of the transaction on the combined results. The pro forma results of operations have been prepared by adjusting the historical results of QEP to include the historical results of the acquired properties based on information provided by the seller and the impact of the preliminary purchase price allocation. The pro forma results of operations do not include any cost savings or other synergies that may result from the Permian Basin Acquisition or any estimated costs that have been or will be incurred by the Company to integrate the acquired properties.



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2013		2014			2014			2013		2013
	Actual		Pro forma		Actual			Pro forma			Actual		Pro forma
					(in millions, except per share data)
Revenues	$	751.0	$	790.1	$	1,820.6		$	1,846.7		$	1,447.5	$	1,521.1
Net income (loss) attributable to QEP	178.4		182.6		(52.6		)	(45.6		)	174.1		186.2
Earnings per common share attributable to QEP
Basic	$	0.99	$	1.02	$	(0.29	)	$	(0.25	)	$	0.97	$	1.04
Diluted	0.99		1.02		(0.29		)	(0.25		)	0.97		1.04

Divestitures

In June 2014, QEP Energy sold its interests in certain non-core properties in the Midcontinent area and other non-core assets in the Williston Basin for total cash proceeds of $702.3 million, subject to post-closing purchase price adjustments, and recorded a pre-tax loss of $200.9 million. An additional $28.7 million of consideration is currently being held in escrow related to unresolved title defects. During the quarter ended June 30, 2014, QEP Energy recorded the loss on its Condensed Consolidated Statement of Operations in "Net loss from asset sales".