Acquisitions and Divestitures

Acquisitions

On April 24, 2013 (the “Date of Acquisition”), we acquired producing properties and undeveloped leasehold interests in the Eagle Ford Shale play (the “Acquisition”) from Magnum Hunter Resources Corporation (“MHR”). The Acquisition was originally valued at $401 million with an effective date of January 1, 2013 (the “Effective Date”). On the Date of Acquisition, we paid approximately $380 million in cash, including approximately $19 million of initial purchase price adjustments related to the period from the Effective Date to the Date of Acquisition utilizing a portion of the proceeds from the private placement of $775 million of 8.5% Senior Notes due 2020 (the “2020 Senior Notes”), and issued to MHR 10 million shares of our common stock (the “Shares”) with a fair value of $4.23 per share. Shortly after the Date of Acquisition, certain of our joint interest partners exercised preferential rights related to the Acquisition. We received approximately $21 million from the exercise of these rights, which was recorded as a decrease to our purchase price for the Acquisition.

We incurred $2.4 million of transaction costs associated with the Acquisition, including advisory, legal, due diligence and other professional fees. These costs, as well as fees that we paid to MHR for certain transition services, have been included in the General and administrative caption on our Condensed Consolidated Statements of Operations.

We accounted for the Acquisition by applying the acquisition method of accounting as of the Date of Acquisition. The initial accounting for the Acquisition as presented below is based upon preliminary information and was not complete as of the date our Condensed Consolidated Financial Statements were issued. We received a proposed final settlement from MHR on August 23, 2013. We completed an audit of the settlement statement and submitted our proposed adjustments on October 21, 2013. MHR has 30 days to review and respond to our proposed adjustments. Accordingly, final accounting for the acquired net assets is expected to be completed during the fourth quarter of 2013.

In the three months ended September 30, 2013, we recorded certain measurement period adjustments based on the receipt of additional information which had the effect of increasing the fair value of oil and gas properties by $5.4 million and other assets by $2.0 million with a corresponding increase to accounts payable and accrued expenses of $7.4 million. Accordingly, we have updated the preliminary fair values of net assets acquired from those that were disclosed in our Quarterly Report on Form 10-Q for the period ended June 30, 2013. The following table represents the preliminary fair values assigned to the net assets acquired as of the Date of Acquisition and the consideration transferred:



Assets
Oil and gas properties - proved	$	287,465
Oil and gas properties - unproved	124,232
Accounts receivable, net	50,726
Other assets	2,068
	464,491
Liabilities
Accounts payable and accrued expenses	(62,452		)
Other liabilities	(1,500		)
	(63,952		)
Net assets acquired	$	400,539

Cash, net of amounts received for preferential rights	$	358,239
Fair value of the Shares issued to MHR	42,300
Consideration transferred	$	400,539

The fair values of the acquired net assets were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to valuation of oil and natural gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) future cash flows and (v) a market-based weighted-average cost of capital. Because many of these inputs are not observable, we have classified the initial fair value estimates as Level 3 inputs as that term is defined in U.S. GAAP.

The results of operations attributable to the Acquisition have been included in our Condensed Consolidated Financial Statements from the Date of Acquisition. The following table presents unaudited summary pro forma financial information for the periods presented assuming the Acquisition and the related financing occurred as of January 1, 2012. The pro forma financial information does not purport to represent what our results of operations would have been if the Acquisition had occurred as of this date or the results of operations for any future periods.



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Total revenues	$	121,613		$	97,030		$	340,809		$	288,282
Net loss attributable to common shareholders	$	(99,190	)	$	(30,360	)	$	(139,181	)	$	(28,405	)
Loss per share - basic and diluted	$	(1.52	)	$	(0.54	)	$	(2.13	)	$	(0.51	)

Divestitures

In July 2012, we sold our natural gas assets in West Virginia, Kentucky and Virginia for approximately $100 million. During the three months ended June 30, 2012, we recognized an impairment of $28.6 million related to these assets in advance of the sale, and we recognized a gain of $1.7 million upon completion of the sale during the three months ended September 30, 2012.