Acquisitions & Divestitures

9 Months Ended

Sep. 30, 2019

Acquisitions & Divestitures [Text Block]

Acquisitions

During the nine months ended September 30, 2019, QEP acquired various oil and gas properties, which primarily included proved leasehold acreage in the Permian Basin for an aggregate purchase price of $3.6 million, subject to post-closing purchase price adjustments.

During the nine months ended September 30, 2018, QEP acquired various oil and gas properties, which primarily included proved and unproved leasehold acreage in the Permian Basin for an aggregate purchase price of $48.3 million. Of the $48.3 million, $37.6 million was related to acquisitions from various entities that owned additional oil and gas interests in certain properties included in the 2017 acquisition of oil and gas properties in the Permian Basin (the 2017 Permian Basin Acquisition) on substantially the same terms and conditions as the 2017 Permian Basin Acquisition.

Divestitures

In February 2018, QEP's Board of Directors unanimously approved certain strategic and financial initiatives including plans to market its assets in the Williston Basin, the Uinta Basin and Haynesville/Cotton Valley and focus its activities in the Permian Basin. The Company subsequently closed the sale of its Uinta Basin assets in the third quarter of 2018 and the sale of the Haynesville/Cotton Valley assets in the first quarter of 2019. In November 2018, the Company's wholly owned subsidiary, QEP Energy Company, entered into a purchase and sale agreement for its assets in the Williston Basin, however, in February 2019, the Company agreed with the buyer to terminate the purchase and sale agreement.

Haynesville/Cotton Valley Divestiture

In January 2019, QEP closed the sale of its assets in Haynesville/Cotton Valley (Haynesville Divestiture), and in July 2019 QEP reached final settlement on asserted title defects. QEP received net cash proceeds of $633.9 million during the nine months ended September 30, 2019. The total pre-tax loss on sale was $4.0 million, of which $1.0 million was recognized during the nine months ended September 30, 2019, within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the Condensed Consolidated Statements of Operations. Included in the $1.0 million pre-tax loss on sale is $1.4 million of restructuring costs related to the Haynesville Divestiture. Refer to Note 9 – Restructuring for more information. As of December 31, 2018, it was deemed unlikely that there will be any significant changes to the Haynesville Divestiture, and therefore the assets and liabilities associated with the Haynesville Divestiture were classified as noncurrent assets and liabilities held for sale, on the Condensed Consolidated Balance Sheets.

During the nine months ended September 30, 2019, QEP accounted for revenues and expenses related to Haynesville/Cotton Valley, including the pre-tax loss on sale of $1.0 million, as income from continuing operations on the Condensed Consolidated Statements of Operations because the Haynesville Divestiture did not cause a strategic shift for the Company and therefore did not qualify as discontinued operations under ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. During the three months ended September 30, 2019, QEP recorded a net loss before income taxes related to the divested Haynesville/Cotton Valley properties of $0.2 million, which includes a pre-tax loss on sale of $0.3 million. During the nine months ended September 30, 2019, QEP recorded net income before income taxes related to the divested Haynesville/Cotton Valley properties of $3.1 million, which includes the pre-tax loss on sale of $1.0 million. For the three and nine months ended September 30, 2018, QEP recorded net income before income taxes related to the divested Haynesville/Cotton Valley properties of $18.0 million and $37.7 million, respectively.

The following table presents the carrying amounts of the major classes of assets and liabilities related to the Haynesville Divestiture classified as noncurrent assets and liabilities held for sale on the Condensed Consolidated Balance Sheets:



	December 31, 2018⁽¹⁾
	(in millions)
Assets
Current assets, total	$	1.2
Net Property, Plant and Equipment	683.7
Other noncurrent assets	7.8
Noncurrent assets held for sale	$	692.7
Liabilities
Current liabilities, total	$	3.4
Asset retirement obligations, current	0.7
Asset retirement obligations, long-term	56.9
Other long-term liabilities	0.3
Other long-term liabilities held for sale	$	61.3

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⁽¹⁾	The Haynesville Divestiture closed in January 2019, therefore there are no assets and liabilities held for sale as of September 30, 2019.

Uinta Basin Divestiture

In September 2018, QEP sold its natural gas and oil producing properties, undeveloped acreage and related assets located in the Uinta Basin for net cash proceeds of $153.0 million (Uinta Basin Divestiture). During the nine months ended September 30, 2019, QEP recorded a pre-tax loss on sale of $0.2 million due to post-closing purchase price adjustments, which were recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs". For the three and nine months ended September 30, 2018, QEP recorded a net loss before income taxes related to the divested Uinta Basin assets of $4.4 million and $419.3 million, respectively, which both include a pre-tax loss on sale of $12.4 million. The net loss before income taxes was primarily due to an impairment charge on proved and unproved properties of $402.8 million recognized as a result of signing the purchase and sale agreement.

Other Divestitures

During the nine months ended September 30, 2019, QEP received net cash proceeds of $42.7 million and recorded a net pre-tax gain on sale of $3.7 million, primarily related to the divestiture of properties outside its main operating areas and the sale of corporate equipment.

During the nine months ended September 30, 2018, QEP received net cash proceeds of $64.5 million and recorded a pre-tax gain on sale of $39.1 million, primarily related to the divestiture of properties outside its main operating areas in the Uinta Basin, Pinedale and Other Northern area, and the sale of an underground gas storage facility.

These gains and losses were recorded within "Net gain (loss) from asset sales, inclusive of restructuring costs" on the Condensed Consolidated Statements of Operations.