Acquisitions |
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Acquisitions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions |
2. Acquisitions On August 10, 2011, we completed the acquisition of Shell Offshore Inc.'s ("Shell") 64.3% interest in the Fairway Field along with a like interest in the associated Yellowhammer gas processing plant (the "Fairway Properties"). The stated purchase price was $55.0 million, subject to certain adjustments, including adjustments from an effective date of September 1, 2010 until the closing date of August 10, 2011. Taking into account such adjustments, as of September 30, 2011, the cash purchase price component was $40.0 million. The decrease of $15.0 million primarily reflects net production cash flow, partially offset by plugging and abandonment costs incurred, from the effective date of September 1, 2010 to the closing date. The purchase price is subject to further post-effective date adjustments and final settlement is expected to occur in the first quarter of 2012. We assumed the asset retirement obligations ("ARO") associated with the properties and plant which we have currently estimated to be $7.8 million. We are finalizing our assessment of the fair values of the assets acquired and liabilities assumed. Therefore, the purchase price allocation as described in the following table is preliminary and is subject to change. The acquisition was funded from borrowings under our revolving bank credit facility.
The following table presents the preliminary purchase price allocation for the acquisition of the Fairway Properties (in thousands):
On May 11, 2011, we completed the acquisition of approximately 21,900 gross acres (21,500 net acres) of oil and gas leasehold interests in the West Texas Permian Basin (the "Permian Basin Properties") from Opal Resources LLC and Opal Resources Operating Company LLC ("Opal"). The stated purchase price was $366.3 million, subject to certain adjustments, including adjustments from an effective date of January 1, 2011 until the closing date of May 11, 2011. Taking into account such adjustments, as of September 30, 2011, the purchase price was $397.1 million. The increase of $30.8 million primarily reflects drilling costs in excess of cash flow from the effective date of January 1, 2011 to the closing date. Although further adjustments could occur to the purchase price, no further adjustments are expected at this time. The acquisition was funded from cash on hand and borrowings under our revolving bank credit facility. The following table presents the purchase price allocation for the acquisition of the Permian Basin Properties (in thousands):
For the three months ended September 30, 2011, the Permian Basin Properties and the Fairway Properties accounted for $21.6 million of revenue, $8.8 million of direct operating expenses, $7.2 million of depreciation, depletion, amortization and accretion ("DD&A") and $2.0 million of income taxes, resulting in $3.6 million of net income. For the nine months ended September 30, 2011, the Permian Basin Properties and the Fairway Properties accounted for $32.8 million of revenue, $10.7 million of direct operating expenses, $9.6 million of DD&A and $4.4 million of income taxes, resulting in $8.1 million of net income. Such amounts are for the period from each respective close date to September 30, 2011. The net income attributable to these properties does not reflect certain expenses, such as general and administrative expenses and interest expense; therefore, this information is not intended to report results as if these operations were managed on a stand-alone basis. In addition, the Permian Basin Properties and the Fairway Properties are not recorded in a separate entity for tax purposes; therefore, income tax was estimated using the federal statutory tax rate. Expenses associated with acquisition activities and transition activities related to these acquisitions for the three and nine months ended September 30, 2011 were $0.8 million and $1.4 million, respectively, and are included in general and administrative expenses. Pro forma financial statements have been prepared due to the Permian Basin Properties being significant. The Fairway Properties acquisition, which was not significant, was combined with the Permian Basin Properties to disclose the effect of both acquisitions. The unaudited pro forma financial information was computed as if these two acquisitions had been completed on January 1, 2010. The historical financial information is derived from the unaudited historical consolidated financial statements of W&T and the unaudited historical statements of the sellers. The pro forma adjustments were based on estimates by management and information believed to be directly related to the purchase of the Permian Basin Properties and the Fairway Properties. The pro forma financial information is not necessarily indicative of the results of operations had the purchase occurred on January 1, 2010. If the transactions had been in effect for the periods indicated, the results may have been substantially different. For example, we may have operated the assets differently than the sellers, realized sales prices may have been different and costs of operating the properties may have been different. The following table presents a summary of our pro forma condensed combined statements of income for the nine months ended September 30, 2011 and 2010 (in thousands except earnings per share):
The purchase price of both acquisitions may be subject to further adjustments. For these pro forma financial statements, we assumed the transactions were financed with borrowings from the revolving bank credit facility because the cash and cash equivalents balances for the assumed acquisition date was less than the cash and cash equivalents on hand used on the actual closing dates of the two acquisitions. Also, we assumed that the revolving bank credit facility capacity would have been increased due to the increase in reserves. The following adjustments were made in the preparation of the condensed combined statement of income:
During 2010, we closed on two acquisition transactions. The first closed on April 30, 2010. Through our wholly-owned subsidiary, W&T Energy VI, LLC ("Energy VI"), we acquired all of Total E&P USA's ("Total") interest, including production platforms and facilities, in three federal offshore lease blocks located in the Gulf of Mexico and assumed the asset retirement obligations ("ARO") for plugging and abandonment of the acquired interests. The adjusted purchase price was $121.3 million. The properties acquired from Total (the "Matterhorn/Virgo Properties") are producing interests and include a 100% working interest in the Matterhorn field (Mississippi Canyon block 243) and a 64% working interest in the Virgo field (Viosca Knoll blocks 822 and 823). The second closed on November 4, 2010. Through Energy VI, we acquired all of Shell's interests, including production platforms and facilities, in three federal offshore lease blocks located in the Gulf of Mexico and assumed the ARO for plugging and abandonment of the acquired interests. The adjusted purchase price was $134.2 million. The properties acquired from Shell (the "Tahoe/Droshky Properties") are producing interests and include a 70% working interest in the Tahoe field (Viosca Knoll 783), 100% working interest in the Southeast Tahoe field (Viosca Knoll 784) and a 6.25% of 8/8ths overriding royalty interest in the Droshky field (Green Canyon 244). |