ACQUISITION AND DISPOSITION OF OIL AND GAS PROPERTIES

During the first quarter of 2012, Energen Resources recognized a noncash impairment writedown on certain properties in East Texas of $21.5 million pre-tax to adjust the carrying amount of these properties to their fair value based on expected future discounted cash flows. Significant assumptions in valuing the proved reserves included the reserve quantities, anticipated operating costs, anticipated production taxes, future expected natural gas prices and basis differentials, anticipated production declines, and a discount rate of 10 percent commensurate with the risk of the underlying cash flow estimates. The impairment was caused by the impact of lower future natural gas prices. During the first quarter of 2012, future natural gas price curves shifted significantly lower, especially in the next 5 years. This nonrecurring impairment writedown is classified as Level 3 fair value.

On February 21, 2012, Energen Resources entered into a definitive agreement with BHP Billiton (BHP) to buy a 50 percent undivided interest in three existing wells in Reeves County, Texas, from Energen Resources for approximately $18 million. As a result of purchasing the wells, and subject to initiating horizontal completions of two of the wells, BHP will own a 50 percent undivided interest in 4,829 net acres. BHP will carry Energen Resources in completion operations of the two wells. The agreement also included the option for BHP to purchase from Energen Resources a 50 percent undivided interest in 51,720 net acres in the Permian Basin. On May 1, 2012, BHP elected not to exercise the option.

On February 14, 2012, Energen completed the purchase of certain properties in the Permian Basin for a cash purchase price of $63 million (subject to closing adjustments). This purchase had an effective date of December 1, 2011. Energen acquired total proved reserves of approximately 8.1 million barrels of oil equivalent (MMBOE). Of the proved reserves acquired, an estimated 81 percent are undeveloped. Approximately 64 percent of the proved reserves are oil, 22 percent are natural gas liquids and natural gas comprises the remaining 14 percent. Energen Resources used its credit facilities and internally generated cash flows to finance the acquisition. Pro forma financial information for this acquisition is not presented because it would not be materially different from the information presented in the consolidated statements of income.

The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized as of February 14, 2012. The purchase price allocation is preliminary and subject to adjustment as the final closing statement is not complete.



(in thousands)
Consideration given
Cash (net)	$	63,294
Recognized amounts of identifiable assets acquired and liabilities assumed
Proved properties	$	62,565
Unproved leasehold properties	911
Accounts receivable	44
Accounts payable	(16		)
Asset retirement obligation	(210		)
Total identifiable net assets	$	63,294

Included in the Company’s consolidated results of operations for the three months ended March 31, 2012, were $1.7 million of operating revenues and $1.0 million in operating income resulting from the operation of the properties acquired above.

On December 27, 2011, Energen completed the purchase of certain properties in the Permian Basin for a cash purchase price of $56 million (subject to closing adjustments). This purchase had an effective date of July 1, 2011. Energen acquired total proved reserves of approximately 3.4 MMBOE. Of the proved reserves acquired, an estimated 77 percent are undeveloped. Approximately 61 percent of the proved reserves are oil, 24 percent are natural gas liquids and natural gas comprises the remaining 15 percent. Energen Resources used its credit facilities and internally generated cash flows to finance the acquisition. Pro forma financial information for this acquisition is not presented because it would not be materially different from the information presented in the consolidated statements of income.

The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized as of December 27, 2011. The purchase price allocation is preliminary and subject to adjustment as the final closing statement is not complete.



(in thousands)
Consideration given
Cash (net)	$	55,994
Recognized amounts of identifiable assets acquired and liabilities assumed
Proved properties	$	32,045
Unproved leasehold properties	23,686
Accounts receivable	680
Accounts payable	(244		)
Asset retirement obligation	(173		)
Total identifiable net assets	$	55,994

The impact to operating revenues and operating income from this acquisition was not material for the year ended December 31, 2011.

On November 16, 2011, Energen completed the purchase of certain liquids-rich properties in the Permian Basin for a cash purchase price of $162 million . This purchase had an effective date of August 1, 2011. Energen acquired total proved reserves of approximately 13.6 million MMBOE. Of the proved reserves acquired, an estimated 76 percent are undeveloped. Approximately 59 percent of the proved reserves are oil, 25 percent are natural gas liquids and natural gas comprises the remaining 16 percent. Energen Resources used its credit facilities and internally generated cash flows to finance the acquisition. Pro forma financial information for this acquisition is not presented because it would not be materially different from the information presented in the consolidated statements of income.

The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized as of November 16, 2011, (including the effects of closing adjustments).



(in thousands)
Consideration given
Cash (net)	$	161,967
Recognized amounts of identifiable assets acquired and liabilities assumed
Proved properties	$	151,544
Unproved leasehold properties	7,883
Accounts receivable	3,070
Accounts payable	(388		)
Asset retirement obligation	(142		)
Total identifiable net assets	$	161,967

The impact to operating revenues and operating income from this acquisition was not material for the year ended December 31, 2011.

In July 2011, Energen completed the purchase of liquids-rich properties in the Permian Basin for a cash purchase price of approximately $20 million. In April 2011, Energen completed the purchase of unproved leasehold properties for a cash purchase price of approximately $37 million covering an estimated 11,000 net acres in the Permian Basin.