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Business Acquisitions
9 Months Ended
Sep. 30, 2012
Business Acquisitions

Note 3 — Business Acquisitions

On September 28, 2012, pursuant to the terms of the previously announced Agreement and Plan of Merger dated June 3, 2012, we acquired 100 percent of the outstanding common stock of CREDO Petroleum Corporation (Credo) in an all cash transaction for $14.50 per share, representing an equity purchase price of approximately $146,445,000. In addition, we paid in full $8,770,000 of Credo’s outstanding debt. In first nine months 2012, we have incurred approximately $5,709,000 in costs to outside advisors related to this transaction, which are included in general and administrative expenses. Third quarter 2012 mineral resource segment earnings associated with this acquisition were not significant.

The following summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of September 28, 2012. Due to closing the transaction on the last business day of the quarterly reporting period, the preliminary allocation is subject to change as we obtain additional information during the acquisition measurement period, in particular, the estimated value assigned to oil and natural gas properties and equipment, goodwill and deferred tax liability.

 

     Preliminary Purchase  Price
Allocation
     (In thousands)

Cash and short-term investments

     $ 2,300  

Receivables

       9,213  

Oil and natural gas properties and equipment

       139,907  

Other properties and equipment

       1,375  

Goodwill and other intangible assets

       55,954  

Other

       676  
    

 

 

 

Total assets acquired

       209,425  
    

 

 

 

Accounts payable and accrued liabilities

       26,626  

Deferred tax liability

       26,276  

Other liabilities

       1,308  
    

 

 

 

Total liabilities assumed

       54,210  
    

 

 

 

Estimated fair value of net assets acquired

     $ 155,215  
    

 

 

 

The following unaudited pro forma information for the third quarter and first nine months ended 2012 and 2011 represents the results of our consolidated operations as if the acquisition of Credo had occurred on January 1, 2011. This information is based on historical results of operations, adjusted for certain estimated accounting adjustments and does not purport to represent our actual results of operations if the transaction would have occurred on January 1, 2011, nor is it necessarily indicative of future results.

 

     Third Quarter      First Nine Months  
     2012      2011      2012      2011  
     (In thousands)  

Revenues

   $ 46,972       $ 30,729       $ 122,057       $ 93,372   

Net income (loss)

     5,508         36,495         11,571         20,132   

In first quarter 2012, we acquired from CL Realty, L.L.C. and Temco Associates, LLC, the ventures’ interest in 17 residential and mixed-use real estate projects for $47,000,000. Subsequent to closing of these acquisitions, we received $23,370,000 from the ventures, representing our pro-rata share of distributable cash. The purchase price was allocated to the acquired assets and liabilities based on their estimated fair value: $31,891,000 to real estate; $14,236,000 to investment in unconsolidated ventures; $1,385,000 to other assets; and $512,000 to liabilities directly related to the real estate acquired. Transaction costs of about $463,000 are included in other operating expense in first nine months 2012.

The acquired assets and operating results are included within our real estate segment and represented approximately 1,130 fully developed lots, 4,900 planned lots and over 460 commercial acres on the date of acquisition, principally in the major markets of Texas. Pro forma consolidated operating income (loss) assuming these acquisitions had occurred at the beginning of 2011 would not be significantly different than reported.