Discontinued Operations

9 Months Ended

Sep. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

In October 2013, Energen Resources completed the sale of its Black Warrior Basin coalbed methane properties in Alabama for $160 million (subject to closing adjustments). The Company will record a pre-tax gain on the sale of approximately $35 million in the fourth quarter of 2013. The sale had an effective date of July 1, 2013 and the proceeds from the sale were used to repay short-term obligations. The property was classified as held-for sale and reflected in discontinued operations during the third quarter of 2013. At December 31, 2012, proved reserves associated with Energen’s Black Warrior Basin properties totaled 97 Bcf of natural gas.

During the third quarter of 2013, Energen Resources classified its North Louisiana/East Texas natural gas and oil properties as held-for-sale and reflected the associated operating results in discontinued operations and began marketing these assets. Energen Resources recognized a non-cash impairment writedown on these properties in the third quarter of 2013 of $24.6 million pre-tax to adjust the carrying amount of these properties to their fair value based on expected future discounted cash flows. This non-cash impairment writedown is reflected in loss on disposal of discontinued operations in the three months and nine months ended September 30, 2013. 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. This nonrecurring impairment writedown is classified as Level 3 fair value. The Company anticipates the sale being completed within the next twelve months and using the proceeds from the sale to repay short-term obligations. At December 31, 2012, proved reserves associated with Energen’s North Louisiana/East Texas properties totaled 20 Bcf of natural gas and 51 MBbl of oil.

The following table details held-for-sale properties by major classes of assets and liabilities:

(in thousands)	September 30, 2013
	Black Warrior Basin			North Louisiana/East Texas			Total
Accounts receivable	$	3,704		$	1,418		$	5,122
Inventories	1,078			63			1,141
Oil and gas properties	304,012			348,380			652,392
Less accumulated depreciation, depletion and amortization	(183,011		)	(293,935		)	(476,946		)
Other property, net	1,970			183			2,153
Total assets held-for-sale	127,753			56,109			183,862
Accounts payable	(1,713		)	(2		)	(1,715		)
Royalty payable	(792		)	(936		)	(1,728		)
Other current liabilities	(358		)	(35		)	(393		)
Other long-term liabilities	(5,377		)	(14,732		)	(20,109		)
Total liabilities held-for-sale	(8,240		)	(15,705		)	(23,945		)
Total held-for-sale properties	$	119,513		$	40,404		$	159,917

During the first quarter of 2012, Energen Resources recognized a non-cash 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. This non-cash impairment writedown is reflected in loss from discontinued operations in the nine months ended September 30, 2012. The impairment was caused by the impact of lower future natural gas prices. This nonrecurring impairment writedown is classified as Level 3 fair value.

Gains and losses on the sale of certain oil and gas properties and any impairments of properties held-for-sale are reported as discontinued operations, with income or loss from operations of the associated properties reported as income or loss from discontinued operations. Accordingly, the results of operations for certain held-for-sale properties were reclassified and reported as discontinued operations for all prior periods presented. Energen Resources may, in the ordinary course of business, be involved in the sale of developed or undeveloped properties. All assets held-for-sale are reported at the lower of the carrying amount or fair value.

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands, except per share data)	2013			2012		2013			2012
Oil and gas revenues	$	18,258		$	18,895	$	55,483		$	57,601
Pretax income (loss) from discontinued operations	$	2,971		$	5,526	$	9,980		$	(6,028	)
Income tax expense (benefit)	1,105			1,975		3,711			(2,044		)
Income (Loss) From Discontinued Operations	$	1,866		$	3,551	$	6,269		$	(3,984	)
Loss on disposal of discontinued operations	$	(24,612	)	$	—	$	(24,612	)	$	—
Income tax benefit	(8,934		)	—		(8,934		)	—
Loss on Disposal of Discontinued Operations	$	(15,678	)	$	—	$	(15,678	)	$	—
Total Income (Loss) From Discontinued Operations	$	(13,812	)	$	3,551	$	(9,409	)	$	(3,984	)
Diluted Earnings Per Average Common Share
Income (Loss) from Discontinued Operations	$	0.03		$	0.05	$	0.09		$	(0.05	)
Loss on Disposal of Discontinued Operations	(0.22		)	—		(0.22		)	—
Total Income (Loss) From Discontinued Operations	$	(0.19	)	$	0.05	$	(0.13	)	$	(0.05	)
Basic Earnings Per Average Common Share
Income (Loss) from Discontinued Operations	$	0.03		$	0.05	$	0.09		$	(0.06	)
Loss on Disposal of Discontinued Operations	(0.22		)	—		(0.22		)	—
Total Income (Loss) From Discontinued Operations	$	(0.19	)	$	0.05	$	(0.13	)	$	(0.06	)