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Discontinued operations | 12 Months Ended
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Dec. 31, 2015
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued operations | Discontinued Operations In the second quarter of 2015, the Company began the marketing and sale process of Fidelity with an anticipated sale to occur within one year. In the third and fourth quarters of 2015 and the first quarter of 2016, the Company entered into purchase and sale agreements to sell the vast majority of Fidelity's assets, comprising greater than 93 percent of total production for 2014. The completion of the majority of these sales occurred in the fourth quarter of 2015 and the Company continues to market the remaining assets of Fidelity. The sale of Fidelity is part of the Company's strategic plan to grow its capital investments in the remaining business segments and to focus on creating a greater long-term value. The assets and liabilities for these operations have been classified as held for sale and the results of operations are shown in income (loss) from discontinued operations, other than certain general and administrative costs and interest expense which do not meet the criteria for income (loss) from discontinued operations. The Company's consolidated financial statements and accompanying notes for current and prior periods have been restated. At the time the assets were classified as held for sale, depreciation, depletion and amortization expense was no longer recorded. The carrying amounts of the major classes of assets and liabilities that are classified as held for sale on the Company's Consolidated Balance Sheets at December 31 were as follows:
| 2015 |  | 2014 |
| (In thousands)
Assets |  |
Current assets: |  |
Receivables, net | $ | 13,387 |  | $ | 94,132 |
Inventories | 1,308 |  | 11,401 |
Commodity derivative instruments | — |  | 18,335 |
Prepayments and other current assets | 9,886 |  | 7,309 |
Total current assets held for sale | 24,581 |  | 131,177 |
Noncurrent assets: |  |
Investments | 37 |  | 37 |
Net property, plant and equipment | 793,422 |  | 1,618,099 |
Deferred income taxes | 127,655 |  | — |
Other | 161 |  | 2,334 |
Less allowance for impairment of assets held for sale | 754,541 |  | — |
Total noncurrent assets held for sale | 166,734 |  | 1,620,470 |
Total assets held for sale | $ | 191,315 |  | $ | 1,751,647 |
Liabilities |  |
Current liabilities: |  |
Long-term debt due within one year | $ | — |  | $ | 897 |
Accounts payable | 25,013 |  | 103,556 |
Taxes payable | 1,052 |  | 19,900 |
Deferred income taxes | 3,620 |  | 8,206 |
Accrued compensation | 13,080 |  | 5,373 |
Other accrued liabilities | 4,838 |  | 16,796 |
Total current liabilities held for sale | 47,603 |  | 154,728 |
Noncurrent liabilities: |  |
Deferred income taxes | — |  | 238,391 |
Other liabilities | — |  | 57,050 |
Total noncurrent liabilities held for sale | — |  | 295,441 |
Total liabilities held for sale | $ | 47,603 |  | $ | 450,169 |
At December 31, 2015, the Company’s deferred tax assets included in assets held for sale were largely comprised of $78.9 million of federal and state net operating loss carryforwards and $38.1 million of basis differences on oil and natural gas producing properties. At December 31, 2014, the Company’s deferred tax liabilities included in liabilities held for sale were largely comprised of $270.0 million of basis differences on oil and natural gas producing properties offset in part by $26.4 million of asset retirement obligations. The Company had federal income tax net operating loss carryforwards of $208.2 million at December 31, 2015, and no federal income tax net operating loss carryforwards at December 31, 2014. At December 31, 2015 and 2014, the Company had various state income tax net operating loss carryforwards of $201.4 million and $5.9 million, respectively. The federal net operating loss carryforwards expire in 2036 if not utilized. The state net operating loss carryforwards are due to expire between 2016 and 2036. It is likely a portion of the benefit from the state carryforwards will not be realized; therefore, valuation allowances of $300,000 and $253,000 have been provided in 2015 and 2014, respectively. The Company performed a fair value assessment of the assets and liabilities classified as held for sale. In the second quarter of 2015, the estimated fair value was determined using the income and the market approaches. The income approach was determined by using the present value of future estimated cash flows. The income approach considered management’s views on current operating measures as well as assumptions pertaining to market forces in the oil and gas industry including estimated reserves, estimated prices, market differentials, estimates of well operating and future development costs and timing of operations. The estimated cash flows were discounted using a rate believed to be consistent with those used by principal market participants. The market approach was provided by a third party and based on market transactions involving similar interests in oil and natural gas properties. The fair value assessment indicated an impairment based on the carrying value exceeding the estimated fair value, which resulted in the Company writing down Fidelity’s assets at June 30, 2015, and recording an impairment of $400.0 million ($252.0 million after tax) during the second quarter of 2015. In the third quarter of 2015, the estimated fair value of Fidelity was determined by agreed upon pricing in the purchase and sale agreements for the assets subject to the agreements, the majority of which closed during the fourth quarter of 2015, including customary purchase price adjustments. The values received in the bid proposals were lower than originally anticipated due to lower commodity prices than those projected in the second quarter of 2015. For those assets for which a purchase and sale agreement has not been entered into, which the Company is continuing to market, the fair value was determined based on the market approach utilizing multiples based on similar interests in oil and natural gas properties. The fair value assessment indicated an impairment based on the current carrying value exceeding the estimated fair value, which resulted in the Company writing down Fidelity’s assets at September 30, 2015, and recording an impairment of $356.1 million ($224.4 million after tax). In the fourth quarter of 2015, the fair value assessment was determined using the market approach based on purchase and sale agreements, one of which has been signed and one of which the Company is currently negotiating. The estimated fair value exceeded the carrying value and the Company recorded an impairment reversal of $1.6 million ($1.0 million after tax) in the fourth quarter of 2015. The impairments were included in operating expenses from discontinued operations. The estimated fair value of Fidelity's assets have been categorized as Level 3 in the fair value hierarchy. At December 31, 2015, the Company has accrued liabilities of approximately $2.5 million for estimated transaction costs which will result in future cash expenditures. In addition to the estimated transaction costs, and due in part to the change in plans to sell the assets of Fidelity rather than sell Fidelity as a company, Fidelity incurred and expensed approximately $4.9 million of exit and disposal costs in 2015 and expects to incur an additional $6.1 million of exit and disposal costs in 2016. The exit and disposal costs are associated with severance and other related matters, excluding the office lease expenses discussed in the following paragraph. The majority of these exit and disposal activities are expected to be completed by the end of the second quarter of 2016. Fidelity is vacating its office space in Denver, Colorado. An amendment of lease has been executed with payments of $4.2 million required under the lease in 2016. A termination payment of $3.3 million was made during the fourth quarter of 2015 and existing office furniture and fixtures will be relinquished to the lessor in 2016. Unforeseen events and changes in circumstances and market conditions and material differences in the value of the assets held for sale due to changes in estimates of future cash flows could negatively affect the estimated fair value of Fidelity and result in additional impairment charges. Various factors, including oil and natural gas prices, market differentials and changes in estimates of reserve quantities could result in future impairments of the Company's assets held for sale. Historically, the Company used the full-cost method of accounting for its oil and natural gas production activities. Under this method, all costs incurred in the acquisition, exploration and development of oil and natural gas properties are capitalized and amortized on the units-of-production method based on total proved reserves. Prior to the oil and natural gas properties being classified as held for sale, capitalized costs were subject to a "ceiling test" that limits such costs to the aggregate of the present value of future net cash flows from proved reserves discounted at 10 percent, as mandated under the rules of the SEC, plus the cost of unproved properties not subject to amortization, plus the effects of cash flow hedges, less applicable income taxes. Proved reserves and associated future cash flows are determined based on SEC Defined Prices and exclude cash outflows associated with asset retirement obligations that have been accrued on the balance sheet. If capitalized costs, less accumulated amortization and related deferred income taxes, exceed the full-cost ceiling at the end of any quarter, a permanent noncash write-down is required to be charged to earnings in that quarter regardless of subsequent price changes. The Company's capitalized cost under the full-cost method of accounting exceeded the full-cost ceiling at March 31, 2015. SEC Defined Prices, adjusted for market differentials, were used to calculate the ceiling test. Accordingly, the Company was required to write down its oil and natural gas producing properties. The Company recorded a $500.4 million ($315.3 million after tax) noncash write-down in operating expenses from discontinued operations in the first quarter of 2015. On February 10, 2014, the Company entered into agreements to purchase working interests and leasehold positions in oil and natural gas production assets in the southern Powder River Basin of Wyoming. The effective date of the acquisition was October 1, 2013, and the closing occurred on March 6, 2014. The total purchase price, including purchase price adjustments, for acquisitions in 2014 was approximately $209.2 million, including the above acquisition which is reflected in discontinued operations. Pro forma financial amounts reflecting the effects of the acquisitions are not presented, as such acquisitions were not material to the Company's financial position or results of operations. In 2007, Centennial Resources sold CEM to Bicent. In connection with the sale, Centennial Resources agreed to indemnify Bicent and its affiliates from certain third party claims arising out of or in connection with Centennial Resources' ownership or operation of CEM prior to the sale. In addition, Centennial had previously guaranteed CEM's obligations under a construction contract. The Company incurred legal expenses and had a benefit related to the resolution of this matter in the second quarter of 2014, which are reflected in discontinued operations in the consolidated financial statements and accompanying notes. The reconciliation of the major classes of income and expense constituting pretax income (loss) from discontinued operations to the after-tax net income (loss) from discontinued operations of the Company's Consolidated Statements of Income at December 31 were as follows:
| 2015 |  | 2014 |  | 2013 |
| (In thousands)
Operating revenues | $ | 184,853 |  | $ | 547,571 |  | $ | 536,023 |
Operating expenses | 1,423,037 |  | 378,891 |  | 364,120 |
Operating income (loss) | (1,238,184 | ) | 168,680 |  | 171,903 |
Other income | 2,374 |  | 1,163 |  | 549 |
Interest expense | 235 |  | 110 |  | 114 |
Income (loss) from discontinued operations before income taxes | (1,236,045 | ) | 169,733 |  | 172,338 |
Income taxes | (463,660 | ) | 54,558 |  | 62,459 |
Income (loss) from discontinued operations | $ | (772,385 | ) | $ | 115,175 |  | $ | 109,879 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=51716988&loc=SL51721533-107759 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721665-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5C -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721675-107760 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3A -URI http://asc.fasb.org/extlink&oid=51719941&loc=SL51724579-110230 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721663-107760 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=51719941&loc=d3e2941-110230 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51717284&loc=d3e1361-107760 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5B -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721673-107760 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3A -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721659-107760 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721671-107760 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5D -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721677-107760 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=51717284&loc=d3e1474-107760 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=51717284&loc=SL51721683-107760 + Details
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