Acquisitions and Divestitures

Acquisitions

Undeveloped Eagle Ford Acreage

In July 2014, we entered into a definitive agreement to acquire approximately 13,125 gross (11,660 net) Eagle Ford acres in Lavaca County, Texas for approximately $45 million, of which approximately $34 million will be paid at closing and the balance of approximately $11 million will be paid over time as a drilling carry. The transaction is expected to close in August 2014 and is subject to customary closing conditions.

EF Acquisition

On April 24, 2013 (the “Acquisition Date”), we acquired producing properties and undeveloped leasehold interests in the Eagle Ford. The EF Acquisition was originally valued at $401 million with an effective date of January 1, 2013 (the “Effective Date”). On the Acquisition Date 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 closing, and issued to the seller 10 million shares of our common stock (the “Shares”) with a fair value of $4.23 per share. Shortly after the closing, certain of our joint interest partners exercised preferential rights related to the EF Acquisition. We received approximately $21 million from the exercise of these rights, which was recorded as a decrease to our purchase price for the EF Acquisition. Subsequent to the Acquisition Date and through December 31, 2013, we paid a total of $22.5 million, net to settle working capital adjustments assumed in the EF Acquisition.

Commencing December 2013, we were involved in an arbitration with Magnum Hunter Resources Corporation (“MHR”), the seller in our EF Acquisition. The arbitration related to disputes we had with MHR regarding contractual adjustments to the purchase price for the EF Acquisition and suspense funds that we believed MHR was obligated to transfer to us. Effective with the one-year anniversary of the Acquisition Date, we recorded a receivable for final purchase price adjustments representing management’s estimate of the outcome of the arbitration. On July 29, 2014, we received the arbitrator’s determination, which indicates that MHR is required to pay us approximately $31.0 million of purchase price adjustments and to transfer to us approximately $2.7 million of revenue suspense funds due to partners and royalty owners. The award is consistent with the estimate made by management. We are also entitled to interest on the funds since the Acquisition Date.

We accounted for the EF Acquisition by applying the acquisition method of accounting as of the Acquisition Date. The following table represents the fair values assigned to the net assets acquired and the consideration paid:



Assets
Oil and gas properties - proved	$	267,688
Oil and gas properties - unproved	119,709
Accounts receivable, net	107,345
Other assets	2,068
	496,810
Liabilities
Accounts payable and accrued expenses	94,771
Other liabilities	1,500
	96,271
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 paid	$	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 fair value estimates as level 3 inputs as that term is defined in U.S. GAAP.

The results of operations attributable to the EF Acquisition have been included in our Condensed Consolidated Financial Statements from the Acquisition Date. The following table presents unaudited summary pro forma financial information for the periods presented assuming the EF 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 EF Acquisition had occurred as of this date or the results of operations for any future periods.



	Periods Ended June 30, 2013
	Three Months			Six Months
Total revenues	$	113,735		$	222,799
Net loss attributable to common shareholders	$	(7,896	)	$	(23,412	)
Loss per share - basic and diluted	$	(0.12	)	$	(0.36	)

Divestitures

In July 2014, we sold the rights to construct a crude oil gathering and intermediate transportation system in South Texas and received proceeds of approximately $147 million, net of transaction costs. Concurrent with the sale, we entered into long-term agreements with the buyer to provide us gathering and intermediate pipeline transportation services for a substantial portion of our South Texas crude oil and condensate production.

In June 2014, we entered into a definitive agreement to sell our Selma Chalk assets (primarily natural gas) in Mississippi for gross cash proceeds of $72.7 million. The sale is expected to close in the third quarter of 2014 and we anticipate receiving approximately $71 million of proceeds, net of transaction costs and customary closing adjustments. An impairment charge of $117.9 million was recognized in the three months ended June 30, 2014 with respect to these assets.

In January 2014, we sold our natural gas gathering and gas lift assets in South Texas and received proceeds of approximately $96 million. Concurrent with the sale, we entered into a long-term agreement with the buyer to provide us natural gas gathering and compression services for a substantial portion of our South Texas natural gas production. We realized a gain of $67.3 million of which $56.7 million was recognized upon the closing of the transaction and the remaining $10.6 million was deferred and is being recognized over a twenty-five year period. We amortized $0.1 million and $0.2 million of the deferred gain during the three and six months ended June 30, 2014, respectively. As of June 30, 2014, $0.4 million of the remaining deferred gain is included as a component of Accounts payable and accrued expenses and $10.0 million, representing the noncurrent portion, is included as a component of Other liabilities on our Condensed Consolidated Balance Sheets.