Note 2. Acquisitions and Divestitures

Fair Value. 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 intentions do not impact the measurement of fair value unless those assumptions are consistent with market participant views.

The fair value of oil and natural gas properties is based on significant inputs not observable in the market, which the FASC Fair Value Measurements and Disclosures topic defines as Level 3 inputs. Key assumptions may include: (1) NYMEX oil and natural gas futures (this input is observable); (2) dollar-per-acre values of recent sale transactions (this input is observable); (3) projections of the estimated quantities of oil and natural gas reserves, including those classified as proved, probable and possible; (4) estimated oil and natural gas pricing differentials; (5) projections of future rates of production; (6) timing and amount of future development and operating costs; (7) projected costs of CO₂ (to a market participant); (8) projected reserve recovery factors; and (9) risk-adjusted discount rates.

2013 Acquisition

Cedar Creek Anticline Acquisition. In January 2013, we entered into an agreement to acquire producing assets in the Cedar Creek Anticline ("CCA") of Montana and North Dakota from a wholly-owned subsidiary of ConocoPhillips Company ("ConocoPhillips") for $1.05 billion. On March 27, 2013, we closed the acquisition for $989.0 million in cash after preliminary closing adjustments, primarily for revenues and costs of the purchased properties from the January 1, 2013 effective date to the closing date. We funded the acquisition with a portion of the cash proceeds from the Bakken Exchange Transaction (described below) from which $1.05 billion was placed in qualifying trust accounts in order to qualify the acquisition for like-kind-exchange treatment under federal income tax rules. This $1.05 billion of cash was classified as Restricted Cash in our December 31, 2012 Consolidated Balance Sheet. This acquisition meets the definition of a business under the FASC Business Combinations topic. As such, we estimated the fair value of assets acquired and liabilities assumed as of March 27, 2013, the closing date of the acquisition, using a discounted future net cash flow model. The current purchase price allocation is preliminary, pending final closing adjustments, and further evaluation of the oil and natural gas properties, other assets and related asset retirement obligations.

The following table presents a summary of the preliminary fair value of assets acquired and liabilities assumed in the CCA acquisition:



In thousands
Consideration:
Cash payment ⁽¹⁾	$	988,982

Fair value of assets acquired and liabilities assumed:
Oil and natural gas properties
Proved	771,487
Unevaluated	222,820
Other assets	1,884
Asset retirement obligations	(7,209		)
	$	988,982

(1)

This cash payment was made through a qualified intermediary from cash placed in qualifying trust accounts from a portion of the proceeds received from the Bakken Exchange Transaction (as defined below) in order to enable a like-kind-exchange transaction for federal income tax purposes. As such, this amount is not reflected as a cash payment to purchase oil and natural gas properties in our Unaudited Condensed Consolidated Statement of Cash Flows.

2012 Acquisitions and Divestitures

Bakken Exchange Transaction. In late 2012, we closed a sale and exchange transaction (the "Bakken Exchange Transaction") with Exxon Mobil Corporation and its wholly-owned subsidiary XTO Energy Inc. (collectively, “ExxonMobil”) in which we sold to ExxonMobil our Bakken area assets in North Dakota and Montana in exchange for (1) $1.3 billion in cash (after preliminary closing adjustments), (2) ExxonMobil's operating interests in Webster Field in Texas and Hartzog Draw Field in Wyoming, and (3) approximately a one-third overriding royalty ownership interest in ExxonMobil's CO₂ reserves in LaBarge Field in Wyoming. No adjustments were made during the first quarter of 2013 to the preliminary fair value of the assets acquired and liabilities assumed as previously disclosed in our Form 10-K.

Thompson Field Acquisition. In June 2012, we acquired a nearly 100% working interest and 84.7% net revenue interest in Thompson Field for $366.2 million after closing adjustments. 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.

Unaudited Pro Forma Acquisition Information. The following combined pro forma total revenues and other income and net income are presented as if the CCA Acquisition, Bakken Exchange Transaction and Thompson Field acquisition had occurred on January 1, 2012:



	Three Months Ended
	March 31,
In thousands, except per share data	2013		2012
Pro forma total revenues and other income	$	665,260	$	686,049
Pro forma net income	115,591		133,531
Pro forma net income per common share
Basic	$	0.31	$	0.35
Diluted	0.31		0.34

Other 2012 Divestiture. In February 2012, we completed the sale of certain non-core assets primarily located in central and southern Mississippi and in southern Louisiana for net proceeds of $141.8 million, after final closing adjustments. The sale had an effective date of December 1, 2011, and we did not record a gain or loss on the sale in accordance with the full cost method of accounting.