On September 19, 2012, we entered into a definitive exchange agreement with Exxon Mobil Corporation and its wholly-owned subsidiary XTO Energy Inc. (collectively, “ExxonMobil”) to sell ExxonMobil our Bakken area assets in North Dakota and Montana in exchange for total consideration consisting of $1.6 billion cash (subject to closing adjustments), and ExxonMobil's operating interests in the Webster Field in Texas and the Hartzog Draw Field in Wyoming (the “Pending Exchange Transaction”). The Pending Exchange Transaction is expected to close around the end of November 2012 with an effective date of July 1, 2012 and is subject to customary closing conditions, including satisfactory completion of customary title and environmental due diligence. The cash portion of the sales price is subject to adjustments for revenues and costs of the respective assets from the effective date to the closing date. The Pending Exchange Transaction agreement contains termination rights for both parties, including such rights based on the failure to close the transaction by January 31, 2013.

In June 2012, we acquired a nearly 100% working interest and 84.7% net revenue interest in Thompson Field for $366.2 million after preliminary closing adjustments. The field is located approximately 18 miles west of Hastings Field, which is an enhanced oil recovery (“EOR”) field that Denbury is currently flooding with CO2, and is the current terminus of the Green Pipeline which transports CO2 from the Jackson Dome, located near Jackson, Mississippi. Thompson Field is similar to Hastings Field, producing oil from the Frio zone at similar depths, and is also expected to be an ideal candidate for a CO2 flood. Under the terms of the Thompson Field acquisition agreement, the seller will retain approximately a 5% gross revenue interest (less severance taxes) once average monthly oil production exceeds 3,000 Bbls/d after the initiation of CO2 injection.

This acquisition meets the definition of a business under the FASC Business Combinations topic. As such, Denbury estimated the fair value of assets acquired and liabilities assumed as of June 1, 2012, the closing date of the acquisition. The FASC Fair Value Measurements and Disclosures topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (often referred to as the “exit price”). The fair value measurement is based on the assumptions of market participants and not those of the reporting entity. Therefore, entity-specific assumptions should not impact the measurement of fair value unless those assumptions are consistent with market participant views.

In applying these accounting principles, Denbury estimated the fair value of the assets acquired less liabilities assumed on the acquisition date to be approximately $238.9 million. This measurement resulted in the recognition of goodwill of approximately $127.2 million, which represents the excess of the cash paid to acquire the field over the acquisition date estimated fair value. This resultant goodwill is due primarily to two factors. The first factor is the decrease in average NYMEX oil futures prices between the date of signing the purchase agreement on April 24, 2012 and closing the purchase on June 1, 2012. The second factor is the fair value assigned to the estimated oil reserves recoverable through a CO2 EOR project. By building an 18-mile extension of the Green Pipeline, Denbury will have access to its CO2 reserves at Jackson Dome, one of the few known significant natural sources of CO2 in the United States, and the largest known source east of the Mississippi River, allowing Denbury to carry out CO2 EOR activities in this field at a lower cost than other market participants. However, the FASC Fair Value Measurements and Disclosures does not allow entity-specific assumptions in the measurement of fair value. Therefore, we estimated the fair value of the oil reserves recoverable through CO2 EOR using a higher estimated cost of CO2 to other market participants, which lowers the discounted net revenue stream used in making the fair value estimate related to this field.

The fair value of Thompson Field assets acquired and liabilities assumed was based on significant inputs not observable in the market, which FASC Fair Value Measurements and Disclosures topic defines as Level 3 inputs. Key assumptions include (1) NYMEX oil futures prices (this input is observable), (2) estimated quantities of oil reserves, (3) projections of future rates of production, (4) timing and amount of estimated future development and operating costs, (5) projected cost of CO2 to a market participant, (6) projected recovery factors, and (7) risk-adjusted discount rates. The fair value of the oil and natural gas properties was determined using a risk-adjusted after-tax discounted cash flow analysis. Denbury applies full cost accounting rules, and all of the goodwill is deductible for tax purposes as property cost. The following table presents a summary of the preliminary fair value of the Thompson Field assets acquired and liabilities assumed.

In thousands
Consideration:
	Cash payment⁽¹⁾		$	366,178

Less: Fair value of assets acquired and liabilities assumed:⁽²⁾
	Oil and natural gas properties
		Proved		232,467
		Unevaluated		4,151
	Pipelines and plants			2,000
	Other assets			3,637
	Asset retirement obligations			(3,306)
				238,949
Goodwill			$	127,229

(1)		See Divestitures below for additional information regarding restricted cash and the like-kind exchange transaction utilized to fund the purchase.
(2)		Fair value of the assets acquired and liabilities assumed is preliminary, pending final closing adjustments and further evaluation of reserves and asset retirement obligations.

In August 2011, we acquired the remaining 57.5% working interest in the Riley Ridge Federal Unit (“Riley Ridge”), located in the LaBarge Field of southwestern Wyoming. Riley Ridge contains natural gas resources, as well as helium and CO2 resources. The purchase included a 57.5% interest in a gas plant which will separate the helium and natural gas from the commingled gas stream, and interests in certain surrounding properties. We previously acquired the other 42.5% interest in Riley Ridge and the gas plant in October 2010. The purchase price for the August 2011 acquisition was approximately $214.8 million after closing adjustments, including a $15.0 million deferred payment to be made at the time the Riley Ridge gas plant is operational and meets specific performance conditions. The gas plant is currently undergoing readiness testing, and we expect it to become operational in mid-2013.

The August 2011 acquisition of Riley Ridge meets the definition of a business under the FASC Business Combinations topic. The fair values assigned to assets acquired and liabilities assumed in the August 2011 acquisition have been finalized and no adjustments have been made to fair value amounts previously disclosed in our Form 10-K for the period ended December 31, 2011.

Based on the immateriality of revenues and expenses related to the combined acquisitions of Thompson and Riley Ridge during the periods presented, pro forma information has not been disclosed.

In February 2012, we completed the sale of certain non-core assets primarily located in central and southern Mississippi and in southern Louisiana for $155.0 million to a privately held entity in which a member of our Board of Directors serves as chairman of the board, in a sale for which there was a competing bid contained in a multi-property purchase proposal. We realized net proceeds of $141.8 million, after final closing adjustments. The sale had an effective date of December 1, 2011 and consequently, operating revenues of $13.5 million after the effective date, net of capital and lease operating expenditures, along with any other purchase price adjustments, were adjustments to the selling price.

In April 2012, we completed the sale of certain non-operated assets in the Paradox Basin of Utah for $75.0 million. The sale had an effective date of January 1, 2012 and proceeds received after consideration of final closing adjustments totaled $68.5 million. Closing adjustments included operating net revenues after January 1, 2012, net of capital and lease operating expenditures, along with other purchase price adjustments.

We did not record a gain or loss on either of the above sales of properties in accordance with the full cost method of accounting.

Of the proceeds from these property sales before final closing adjustments, $212.5 million was paid directly to a qualified intermediary and later released to fund a portion of the acquisition cost of Thompson Field (see June 2012 Acquisition of Reserves in the Gulf Coast region at Thompson Field above). Since the $212.5 million in cash proceeds was paid to a qualified intermediary in order to enable a like-kind exchange transaction for federal income tax purposes, this amount is not reflected as a receipt of cash from the sale of oil and natural gas properties and equipment, nor as a cash payment to purchase oil and natural gas properties in the investing activity in our Consolidated Statement of Cash Flows.