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) acres in the Eagle Ford in Lavaca County, Texas. The transaction closed in August 2014 for a purchase price of $45.6 million, of which $34.9 million was paid at closing and the balance of $10.7 million will be paid over the next three years as a drilling carry.

EF Acquisition

On April 24, 2013 (the “Acquisition Date”), we acquired producing properties and undeveloped leasehold interests in the Eagle Ford (the “EF Acquisition”). 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 Magnum Hunter Resources Corporation (“MHR”), the seller in the EF Acquisition, 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 arbitration with MHR. 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. In July 2014, we received the arbitrator’s determination, which required MHR to pay us a total of $35.1 million, including purchase price adjustments, revenue suspense funds due to partners and royalty owners and interest ($1.3 million) on the funds since the Acquisition Date. Payment of the arbitration settlement was made by MHR in August 2014.

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.



	Nine Months Ended
	September 30, 2013
Total revenues	$	344,412
Net loss attributable to common shareholders	$	(124,172	)
Loss per share – basic and diluted	$	(1.84	)

Divestitures

In July 2014, we sold the rights to construct a crude oil gathering and intermediate transportation system in South Texas to Republic Midstream, LLC (“Republic”) for proceeds of $147.1 million, net of transaction costs. Concurrent with the sale, we entered into long-term agreements with Republic to provide us gathering and intermediate pipeline transportation services for a substantial portion of our current and future South Texas crude oil and condensate production. We realized a gain of $147.1 million, of which $63.0 million was recognized upon the closing of the transaction and the remaining $84.1 million was deferred and will be recognized over a twenty-five year period beginning after the system has been constructed and is operational, currently expected to be 2015. The deferred gain is included as a component of Other liabilities on our Condensed Consolidated Balance Sheets.

In July 2014, we sold our Selma Chalk assets in Mississippi for proceeds of $67.9 million, 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 to American Midstream Partners, LP (“AMID”) for proceeds of approximately $96 million, net of transaction costs. Concurrent with the sale, we entered into a long-term agreement with AMID to provide us natural gas gathering, compression and gas lift services for a substantial portion of our current and future 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 $0.3 million of the deferred gain during the three and nine months ended September 30, 2014, respectively. As of September 30, 2014, $0.4 million of the remaining deferred gain is included as a component of Accounts payable and accrued expenses and $9.9 million, representing the noncurrent portion, is included as a component of Other liabilities on our Condensed Consolidated Balance Sheets.