Acquisitions and Divestitures

2015 Acquisitions

Acquisition of Piñon Gathering Company, LLC. In October 2015, the Company acquired all of the assets of and terminated a gathering agreement with Piñon Gathering Company, LLC (“PGC’) for $48.0 million in cash and $78.0 million principal amount of newly issued 8.75% Senior Secured Notes due 2020 (“PGC Senior Secured Notes”). PGC owns approximately 370 miles of gathering lines supporting the natural gas production from the Company's Piñon field in the West Texas Overthrust (“WTO”). The transaction resulted in the termination of the Company’s gas gathering agreement with PGC under which it was required to compensate PGC for any throughput shortfalls below a required minimum volume. The fair value of the consideration paid by the Company, including discount attributable to the PGC Senior Secured Notes, was approximately $98.3 million and was allocated on a fair value basis between the assets acquired (approximately $47.3 million) and a loss on the termination of the gathering contract (approximately $51.0 million). See Note 4 for further discussion of the gathering agreement with PGC.

Acquisition of Rockies Properties. In December 2015, the Company acquired approximately 135,000 net acres in the North Park Basin in the Rockies, in Jackson County, Colorado. The Company paid approximately $191.1 million in cash, including post-closing adjustments, and received $3.1 million from the seller for overriding royalty interests. Also included in the acquisition were working interests in 16 wells previously drilled on the acreage.

2014 Divestiture

Sale of Gulf of Mexico and Gulf Coast Properties. On February 25, 2014, the Company sold subsidiaries that owned the Company’s Gulf of Mexico and Gulf Coast oil and natural gas properties (the “Gulf Properties”) for approximately $702.6 million, net of working capital adjustments and post-closing adjustments, and the buyer’s assumption of approximately $366.0 million of related asset retirement obligations to Fieldwood Energy LLC (“Fieldwood”). This transaction did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the Company recorded the proceeds as a reduction of its full cost pool with no gain or loss on the sale. See Note 21 for discussion of Fieldwood’s related party affiliation with the Company.

In accordance with the terms of the sale, the Company agreed to guarantee on behalf of Fieldwood certain plugging and abandonment obligations associated with the Gulf Properties for a period of up to one year from the date of closing. The Company recorded a liability equal to the fair value of these guarantees, or $9.4 million, at the time the transaction closed. As of December 31, 2014, the fair value of the guarantees was approximately $5.1 million. See Note 5 for additional discussion of the determination of the guarantee’s fair value. The guarantee did not include a limit on the potential future payments for which the Company could be obligated; however, Fieldwood agreed to indemnify the Company for any costs it incurred as a result of the guarantee and to use its best efforts to pay any amounts sought from the Company by the Bureau of Ocean Energy Management (“BOEM”) that arose prior to the expiration of the guarantee. The Company did not incur any costs as a result of this guarantee and was released from the obligation during the third quarter of 2015. Additionally, Fieldwood maintained, for a period of up to one year from the closing date, restricted deposits held in escrow for plugging and abandonment obligations associated with the Gulf Properties. In the first quarter of 2015, the Company received its share of such deposits, net of any amounts payable to Fieldwood, or $12.0 million, in accordance with the terms of the sale.

The following table presents revenues and expenses, including direct operating expenses, depletion, accretion of asset retirement obligations and general and administrative expenses, for the Gulf Properties included in the accompanying consolidated statements of operations for the years ended December 31, 2014 and 2013 (in thousands):



	Year Ended December 31,
	2014(1)		2013
Revenues	$	90,920	$	627,236
Expenses	$	63,674	$	491,991

____________________


(1)	Includes revenues and expenses through February 25, 2014, the date of the sale.

2013 Divestiture

Sale of Permian Properties. On February 26, 2013, the Company sold its oil and natural gas properties in the Permian Basin area of west Texas, excluding the assets associated with the SandRidge Permian Trust area of mutual interest (the “Permian Properties”) for $2.6 billion, including certain post-closing adjustments that were finalized in the third quarter of 2013. This transaction resulted in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the Company recorded a $398.9 million loss on the sale. The loss is included in loss on sale of assets in the accompanying consolidated statement of operations for the year ended December 31, 2013. The loss was calculated based on a comparison of proceeds received and the asset retirement obligations attributable to the Permian Properties that were assumed by the buyer to the sum of (i) an allocation of the historical net book value of the Company’s proved oil and natural gas properties attributable to the Permian Properties, (ii) the historical cost of unproved acreage sold and (iii) costs incurred by the Company to sell these properties. The allocated net book value attributable to the Permian Properties was calculated based on the relative fair value of the Permian Properties and the remaining proved oil and natural gas properties retained by the Company as of the date of sale. A portion of the loss totaling $71.7 million was allocated to noncontrolling interests and is reflected in net income attributable to noncontrolling interest in the accompanying consolidated statement of operations for the year ended December 31, 2013.

The following table presents revenues and direct operating expenses of the Permian Properties included in the accompanying consolidated statement of operations for the year ended December 31, 2013 (in thousands):



	Year Ended December 31, 2013(1)
Revenues	$	68,027
Direct operating expenses	$	17,453

____________________


(1)	Includes revenues and direct operating expenses through February 26, 2013, the date of sale.