Divestitures

9 Months Ended

Sep. 30, 2011

Divestitures

Divestitures

Divestitures

Constellation Energy Partners LLC

In August 2011, we sold a majority of our interests in Constellation Energy Partners LLC (CEP) to PostRock Energy Corporation (PostRock). Under the terms of the agreement, PostRock received all of our Class A member interests, which includes the right to appoint two of the five members of CEP's board of directors, and approximately 3.1 million units of our Class B member interests. In return, we received $6.6 million in cash, one million shares of PostRock common stock and warrants to acquire an additional 673,822 shares of PostRock common stock. As a result of this transaction, we recorded a pre-tax gain of $11.4 million in the "Net Gain on Divestitures" line in our Consolidated Statements of Income (Loss).

        We have retained a portion of the voting Class B member interests and other classes of non-voting member interests in CEP. However, since we no longer have significant influence over CEP's activities following the sale of the Class A and some of the Class B member interests, these retained interests do not qualify for the equity method of accounting. Therefore, we will account for each of the retained interests as either available for sale securities or as cost method investments. Upon the cessation of equity method accounting, we reclassified our remaining balance in accumulated other comprehensive income to earnings, recognizing a pre-tax gain of $11.6 million in the "Net Gain on Divestitures" line in our Consolidated Statements of Income (Loss).

Quail Run Energy Center

In December 2010, we signed an agreement to sell our Quail Run Energy Center (Quail Run), a 550 MW natural gas plant in west Texas, to High Plains Diversified Energy Corporation (HPDEC). This agreement was contingent upon HPDEC obtaining financing through the sale of municipal bonds.

        In June 2011, we terminated the agreement to sell Quail Run based on the buyer's inability to satisfy all of the conditions for the sale.