2016 Permian Basin Acquisition

In October 2016, QEP acquired oil and gas properties in the Permian Basin for an aggregate purchase price of approximately $591.0 million, subject to customary post-closing purchase price adjustments (the 2016 Permian Basin Acquisition). The 2016 Permian Basin Acquisition consists of approximately 9,600 net acres in Martin County, Texas, which are primarily held by production from existing vertical wells. The 2016 Permian Basin Acquisition was funded with cash on hand, which included proceeds from an equity offering in June 2016.

The 2016 Permian Basin Acquisition meets the definition of a business combination under ASC 805, Business Combinations, as it includes significant proved properties. QEP allocated the cost of the 2016 Permian Basin Acquisition to assets acquired and liabilities assumed based on fair values as of the acquisition date. Revenues of $4.7 million and net income of $1.1 million were generated from the acquired properties during the three months ended March 31, 2017, and are included in QEP's Condensed Consolidated Statements of Operations. In conjunction with the 2016 Permian Basin Acquisition, the Company recorded an $18.2 million bargain purchase gain in 2016. The acquisition resulted in a bargain purchase gain primarily as a result of an increase in future oil prices from the execution of the purchase and sale agreement to the closing date of the acquisition. During the three months ended March 31, 2017, the Company reduced the bargain purchase gain by $0.4 million due to purchase price adjustments. The bargain purchase gain is reported on the Condensed Consolidated Statements of Operations within "Interest and other income (expense)".

The following table presents a summary of the Company's purchase accounting entries (in millions) as of March 31, 2017:



Consideration:
Total consideration	$	591.0

Amounts recognized for fair value of assets acquired and liabilities assumed:
Proved properties	$	406.2
Unproved properties	214.2
Asset retirement obligations	(11.6		)
Bargain purchase gain	(17.8		)
Total fair value	$	591.0

The following unaudited, pro forma results of operations are provided for the three months ended March 31, 2016. Pro forma results are not provided for the three months ended March 31, 2017, because the 2016 Permian Basin Acquisition occurred during the fourth quarter of 2016, and therefore the 2016 Permian Basin Acquisition results are included in QEP's results of operations for the three months ended March 31, 2017. 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 periods 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 condensed consolidated results of operations for the three months ended March 31, 2016, 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 2016 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 March 31, 2016
	Actual			Pro forma
	(in millions, except per share amounts)
Revenues	$	261.3		$	265.9
Net income (loss)	$	(863.8	)	$	(864.6	)
Earnings (loss) per common share
Basic	$	(4.55	)	$	(4.56	)
Diluted	$	(4.55	)	$	(4.56	)

Other Acquisitions

During the three months ended March 31, 2017, QEP acquired various oil and gas properties, primarily proved and unproved leaseholds and additional surface acreage in the Permian Basin, for an aggregate purchase price of $68.2 million. In conjunction with these acquisitions, the Company recorded $5.3 million of goodwill. The goodwill is reported on the Condensed Consolidated Balance Sheets within "Other noncurrent assets". During the three months ended March 31, 2016, QEP acquired various oil and gas properties, which primarily included additional interests in QEP's operated wells and the associated leasehold in the Permian and Williston basins, for an aggregate purchase price of $21.0 million. In conjunction with the acquisitions, the Company recorded $3.7 million of goodwill, all of which was subsequently impaired in 2016.

Divestitures

During the three months ended March 31, 2016, QEP received proceeds of $22.9 million and recorded a pre-tax gain on sale of $0.5 million, primarily related to the divestiture of certain non-core properties in the Other Southern area. These gains and losses are reported on the Condensed Consolidated Statements of Operations within "Net gain (loss) from asset sales".