Note 3 – Divestitures, Assets Held for Sale, and Acquisitions

2015 Divestiture Activity

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Mid-Continent Divestiture. During the second quarter of 2015, the Company divested its Mid-Continent assets in multiple transactions for total divestiture proceeds of $316.8 million and a final net gain of $108.4 million. Certain of these assets were written down by $30.0 million to reflect fair value less estimated costs to sell upon reclassification to assets held for sale as of March 31, 2015. This write-down is reflected in the final net gain of $108.4 million discussed above.

In conjunction with the divestiture of its Mid-Continent assets, the Company closed its Tulsa, Oklahoma office. For the year ended December 31, 2015, the Company recorded $9.3 million of exit and disposal costs, the majority of which were recorded as general and administrative expense in the accompanying statements of operations. Additionally, during the third quarter of 2015, the Company vacated its office space in Tulsa. The Company has subleased the space for a portion of the remaining term. As of December 31, 2015, the Company is obligated to pay lease costs of approximately $4.0 million, net of expected income from office space currently subleased, which will be expensed over the duration of the lease, which expires in 2022. This obligation will decrease if the Company successfully subleases space for additional terms.


•	Permian Divestiture. During the fourth quarter of 2015, the Company divested certain non-core assets in its Permian region. Total divestiture proceeds were $25.1 million and the estimated total net gain on this divestiture was $2.4 million. This divestiture is subject to normal post-closing adjustments, which are expected to occur in the first half of 2016.

Write-downs on certain other assets held for sale and subsequently sold during the year ended December 31, 2015, totaled $68.6 million. Write-downs on assets held for sale are reflected as a loss on divestiture activity which is included in the net gain on divestiture activity line item in the accompanying statements of operations. Please refer to Assets Held for Sale below for further discussion.

2014 Divestiture Activity


•	Rocky Mountain Divestiture. During the second quarter of 2014, the Company divested certain non-core assets in the Montana portion of the Williston Basin. Total divestiture proceeds were $50.1 million and the final net gain on this divestiture was $26.9 million.

The Company recorded $27.6 million of write-downs to fair value less estimated costs to sell for assets that were held for sale during the year ended December 31, 2014, which offset the net gain on the Rocky Mountain divestiture discussed above.

2013 Divestiture Activity

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Mid-Continent Divestitures. In December 2013, the Company divested of certain non-strategic assets located in its Mid-Continent region, with the largest transaction being the sale of the Company’s Anadarko Basin assets. Total divestiture proceeds were $368.5 million and the final net gain on these divestitures was $25.3 million. A portion of one transaction was structured to qualify as a like-kind exchange under Section 1031 of the IRC.


•	Rocky Mountain Divestitures. During 2013, the Company divested of certain non-strategic assets located in its Rocky Mountain region. Final divestiture proceeds for these divestitures were $57.1 million and the final net gain was $13.2 million.


•	Permian Divestiture. In December 2013, the Company divested of certain non-strategic assets located in its Permian region. Final divestiture proceeds were $14.0 million and the final net loss was $7.0 million.

The Company recorded an immaterial write-down to fair value less estimated costs to sell for assets that were held for sale as of December 31, 2013.

Assets Held for Sale

Assets are classified as held for sale when the Company commits to a plan to sell the assets and there is reasonable certainty the sale will take place within one year. Upon classification as held for sale, long-lived assets are no longer depreciated or depleted, and a measurement for impairment is performed to identify and expense any excess of carrying value over fair value less costs to sell. Any subsequent decreases to the estimated fair value less costs to sell impact the measurement of assets held for sale.

As of December 31, 2015, the accompanying balance sheets present $641,000 of assets held for sale. There is a corresponding asset retirement obligation liability of $241,000 for assets held for sale included in the asset retirement obligation financial statement line item. Certain assets classified as held for sale and subsequently sold during 2015 were written down to fair value less estimated costs to sell, as discussed above.

The Company determined that neither these planned nor executed asset sales qualify for discontinued operations accounting under financial statement presentation authoritative guidance.

2015 Acquisition Activity

There was no significant acquisition activity during the year ended December 31, 2015.

2014 Acquisition Activity


•	Gooseneck Property Acquisitions

On September 24, 2014, the Company acquired approximately 61,000 net acres of proved and unproved oil and gas properties in its Gooseneck area in North Dakota, along with related equipment, contracts, records, and other assets. Total cash consideration paid by the Company after final closing adjustments was $321.8 million and the effective date for the acquisition was July 1, 2014.

On October 15, 2014, the Company acquired additional interests in proved and unproved oil and gas properties in its Gooseneck area. Total cash consideration paid by the Company was $84.8 million and the effective date for the acquisition was August 1, 2014.

The Company determined that both of these acquisitions met the criteria of a business combination under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The Company allocated the final adjusted purchase price to the acquired assets and liabilities based on fair value as of the respective acquisition dates, as summarized in the table below. Refer to Note 11 – Fair Value Measurements for additional discussion on the valuation techniques used in determining the fair value of acquired properties.



	Acquisition #1			Acquisition #2
	As of September 24, 2014			As of October 15, 2014
Purchase Price	(in thousands)
Cash consideration	$	321,807		$	84,836

Fair value of assets and liabilities acquired:
Proved oil and gas properties	$	203,467		$	54,612
Unproved oil and gas properties	126,588			29,610
Total fair value of oil and gas properties acquired	330,055			84,222

Working capital	(6,135		)	2,232
Asset retirement obligation	(2,113		)	(1,618		)
Total fair value of net assets acquired	$	321,807		$	84,836

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Rocky Mountain Acquisitions. In addition to the Gooseneck property acquisitions discussed above, the Company acquired other proved and unproved properties in its Rocky Mountain region during 2014, primarily in the Powder River Basin, in multiple transactions for approximately $135.5 million in total cash consideration after final closing adjustments, plus approximately 7,000 net acres of non-core assets in the Company’s Rocky Mountain region.