Discontinued Operations

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Note 20.  Discontinued Operations

As discussed in Note 2, HighMount and the CAC business are classified and presented as discontinued operations.

The Consolidated Statements of Income include discontinued operations of HighMount as follows:

Year Ended December 31	2014		2013		2012
(In millions)
Revenues:
Other revenue, primarily operating	$	150	$	259	$	297
Total		150		259		297
Expenses:
Impairment of goodwill				584
Other operating expenses
Impairment of natural gas and oil properties		29		291		680
Operating		173		252		239
Interest		8		17		14
Total		210		1,144		933
Loss before income tax		(60)		(885)		(636)
Income tax benefit		4		311		229
Results of discontinued operations, net of income tax		(56)		(574)		(407)
Impairment loss, net of tax benefit of $62		(138)
Loss from discontinued operations	$	(194)	$	(574)	$	(407)

In 2014, 2013 and 2012, HighMount recorded ceiling test impairment charges of $29 million, $291 million and $680 million ($19 million, $186 million and $433 million after tax) related to the carrying value of its natural gas and oil properties. The 2014 write-down was primarily attributable to insufficient reserve additions from recent exploration activities due to variability in well performance where HighMount was testing different horizontal target zones and hydraulic fracture designs. The 2013 write-downs were primarily attributable to negative reserve revisions due to variability in well performance where HighMount was testing different horizontal target zones and hydraulic fracture designs and due to reduced average NGL prices used in the ceiling test calculations. The write-downs in 2012 were the result of significant declines in natural gas and NGL prices. Had the effects of HighMount’s cash flow hedges not been considered in calculating the ceiling limitation, the impairments would have been $29 million, $301 million and $737 million ($18 million, $192 million and $469 million after tax) for the years ended December 31, 2014, 2013 and 2012.

Recognition of a ceiling test impairment charge was considered a triggering event for purposes of assessing any potential impairment of goodwill at HighMount under a two-step process. The first step compared HighMount’s estimated fair value to its carrying value. Due to the continued low market prices for natural gas and NGLs, the history of quarterly ceiling test write-downs during 2012 and 2013 and the then potential for future impairments, and negative reserve revisions recognized during 2013, HighMount reassessed its goodwill impairment analysis. To determine fair value, HighMount used a market approach which required significant estimates and assumptions and utilized significant unobservable inputs, representing a Level 3 fair value measurement. These estimates and assumptions primarily included, but were not limited to, earnings before interest, tax, depreciation and amortization, production and reserves, control premium, discount rates and required capital expenditures. These valuation techniques were based on analysis of comparable public companies, adjusted for HighMount’s growth profile. In the first step, HighMount determined that its carrying value exceeded its fair value requiring HighMount to perform the second step and to estimate the fair value of its assets and liabilities. The carrying value of goodwill was limited to the amount that HighMount’s estimated fair value exceeded the fair value of assets and liabilities. As a result, HighMount recorded a goodwill impairment charge of $584 million ($382 million after tax) for the year ended December 31, 2013, consisting of all of its remaining goodwill.

The Consolidated Statements of Income include discontinued operations of the CAC business as follows:

Year Ended December 31	2014		2013		2012
(In millions)
Revenues:
Net investment income	$	94	$	168	$	172
Investment gains		3		11		9
Other revenues				2		2
Total		97		181		183
Expenses:
Insurance claims and policyholders’ benefits		75		141		167
Other operating expenses		2		3		3
Total		77		144		170
Income before income tax		20		37		13
Income tax expense		(6)		(15)		(5)
Results of discontinued operations, net of income tax		14		22		8
Loss on sale, net of tax benefit of $40		(211)
Amounts attributable to noncontrolling interests		20		(2)		(1)
Income (loss) from discontinued operations	$	(177)	$	20	$	7

The following table presents the assets and liabilities of HighMount reported as discontinued operations as follows:

December 31, 2013	HighMount		Eliminations			Total
(In millions)
Assets:
Investments, including cash	$	29				$	29
Receivables		143	$	(120	)		23
Property, plant and equipment		974					974
Deferred income taxes		517		(517	)		-
Other assets		15					15
Total assets of discontinued operations	$	1,678	$	(637	)	$	1,041
Liabilities:
Short term debt	$	21				$	21
Long term debt		481					481
Other liabilities		130					130
Total liabilities of discontinued operations	$	632	$	-		$	632