Acquisition

On July 3, 2013, the Company acquired certain shallow water Gulf of Mexico shelf oil and gas properties (the “Acquired Assets”), for an aggregate cash purchase price of $188.2 million, subject to customary adjustments to reflect an effective date of January 1, 2013 (collectively, the "Gulf of Mexico Acquisition"). The Acquired Assets included 16 wells located on seven platforms.

The aggregate cash purchase price of the Gulf of Mexico Acquisition was financed with the net proceeds from the sale in a private offering under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the "Securities Act"), of $200 million aggregate principal amount of the Company's 10% Senior Notes due 2017. The Company subsequently registered the 10% Senior Notes due 2017 in an exchange offer completed in September 2013 (the "New Notes"). The New Notes have terms that, subject to certain exceptions, are substantially identical to the Company's existing $150 million aggregate principal amount of 10% Senior Notes due 2017. The Company recorded $0.9 million of deferred financing costs related to the New Notes in the second and third quarters of 2013 and an additional $4.0 million of deferred financing costs related to the underwriting fee paid to the initial purchasers of the New Notes on the closing date of July 3, 2013. The Company also incurred $3.9 million of acquisition-related costs, including $2.6 million related to a bridge commitment fee, which were recognized as general and administrative expenses.

The Gulf of Mexico Acquisition is accounted for under the purchase method of accounting, which involves determining the fair value of the assets acquired and liabilities assumed. The following purchase price allocation is preliminary and based on management's best estimates of the fair value of the assets acquired and liabilities assumed as of the date of this Form 10-Q. The preliminary purchase price allocation is subject to change based on numerous factors, including the final adjusted purchase price and the final estimated fair value of the assets acquired and liabilities assumed. Any such adjustments to the preliminary estimates of fair value could be material.

The fair value of proved and unevaluated oil and gas properties was estimated using the income approach based on estimated reserve quantities, costs to produce and develop reserves, and forward prices for oil and gas, which represent Level 2 and Level 3 inputs. Asset retirement obligations were determined in accordance with applicable accounting standards.

The following table summarizes the estimated acquisition date fair values of the net assets acquired (in thousands):



Oil and gas properties	$	191,466
Unevaluated oil and gas properties	12,033
Asset retirement obligations	(15,319		)
Net assets to be acquired	$	188,180

The following unaudited summary pro forma statement of operations for the three and nine month periods ended September 30, 2013 and 2012 has been prepared to give effect to the Gulf of Mexico Acquisition as if it had occurred on January 1, 2012. The pro forma financial information is not necessarily indicative of the results that might have occurred had the transaction taken place on January 1, 2012 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma financial information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities and other factors. Amounts in millions, except per share amounts.



	Three Months Ended September 30,					Nine Months Ended September 30,
	2013		2012			2013		2012

Revenues	$	55,587	$	46,384		$	162,494	$	132,303
Income (Loss) from Operations	4,318		(38,178		)	15,487		(121,955		)
Net Income (Loss) available to common stockholders	3,014		(40,898		)	12,107		(127,306		)

Basic Earnings per Share	$	0.05	$	(0.65	)	$	0.19	$	(2.04	)
Diluted Earnings per Share	$	0.05	$	(0.65	)	$	0.19	$	(2.04	)