Part IV
Item 15.
Exhibits and Financial Statement Schedules
XTO ENERGY INC. Notes to Consolidated Financial Statements
13. Acquisitions
On July 31, 2007, we acquired both producing and unproved properties from Dominion Resources, Inc. for $2.5 billion, subject to typical post-closing adjustments. These properties are located in the Rocky Mountain Region, the San Juan Basin and South Texas. The acquisition was funded by the issuance of 21.6 million shares of our common stock in June 2007 for net proceeds of $1.0 billion (Note 9), the issuance of $1.25 billion of senior notes in July 2007 and with borrowings under our commercial paper program, which was repaid with a portion of the proceeds from the issuance of $1.0 billion of senior notes in August 2007 (Note 4). After recording asset retirement obligation of $32 million, other liabilities and transaction costs of $18 million, the purchase price allocated to proved properties was $2.5 billion and unproved properties was $73 million. The purchase price allocation is preliminary and subject to adjustment pending final determination of the fair value of certain assets acquired.
As part of the acquisition, Dominion retained interests in certain of the acquired properties. Under the terms of the acquisition and the retained interest agreements, Dominion retained the rights to approximately 13 Bcf of gas beginning from the date of acquisition through February 2009 (Note 8).
In October 2007, we announced that we acquired both producing and unproved properties in the Barnett Shale from multiple parties for approximately $550 million. These acquisitions were funded by borrowings under our commercial paper program and are subject to typical post-closing adjustments.
We expect to complete acquisitions of both producing and unproved properties for approximately $1.0 billion during the first quarter of 2008. These acquisitions will be funded both by commercial paper borrowings and by proceeds from the February 2008 common stock offering (Note 9) and are subject to typical post-closing adjustments.
On February 28, 2006, we acquired proved and unproved properties in East Texas and Mississippi from Total E&P USA, Inc. for $300 million. The acquisition was funded by bank borrowings.
On June 30, 2006, we acquired Peak Energy Resources, Inc., which operated gas-producing properties and owned unproved properties in the Barnett Shale in the Fort Worth Basin. The total purchase price was $108 million, which was primarily funded by issuance of 3.2 million shares of common stock valued at $102 million, $5 million cash for additional leasehold interests and $1 million cash for other transaction costs. After recording estimated deferred taxes of $36 million and other liabilities, the purchase price allocated to proved properties was $97 million and unproved properties was $53 million.
In March 2005, we traded nonoperated producing properties owned by us in the San Juan and Permian basins and in Alaska for producing properties owned by ConocoPhillips in the East Texas Freestone Trend, the San Juan Basin and the Permian Basin Goldsmith Field. The properties exchanged by each party had an approximate value of $74 million. We accounted for this transaction as an exchange of similar productive assets used in oil and gas producing activities, under APB Opinion No. 29 and SFAS No. 19, resulting in no gain or loss recognized on the exchange. We operate the properties that we received in this exchange.
To further establish our presence in the Barnett Shale in the Fort Worth Basin, we acquired Antero Resources Corporation on April 1, 2005. Antero Resources owned operated gas-producing properties and unproved properties in the Barnett Shale. In the transaction, we paid cash of $342 million, issued 16.7 million shares of our common stock, and issued warrants that expire April 1, 2010 to purchase an additional 2.6 million shares of our common stock at $20.78 per share (as adjusted by antidilution adjustments resulting from the distribution of Hugoton Royalty Trust units (Note 9)). We also assumed $218 million of bank debt from Antero. The cash portion of the acquisition was funded with borrowings under our revolving credit facility. At closing, bank debt assumed from Antero Resources was repaid with borrowings under our revolving credit facility.
The following is the final calculation of the purchase price of Antero Resources Corporation and the allocation to assets and liabilities as of April 1, 2005. The fair value of consideration issued is determined as of January 10, 2005, the date the acquisition was announced.
(in millions) |
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| Consideration issued to Antero Resources stockholders: | ||
| 16.7 million shares of common stock (at fair value of $19.78 per share) | $ | 330 |
| Warrants to purchase 2.6 million shares of common stock at $20.78 per share (at fair value of $6.51 per warrant) |
17 | |
| 347 | ||
| Cash paid | 342 | |
| Total purchase price | 689 | |
Fair value of liabilities assumed: |
||
| Current liabilities | 114 | |
| Long-term debt | 218 | |
| Asset retirement obligation | 4 | |
| Other long-term liabilities | 11 | |
| Deferred income taxes | 225 | |
| Total purchase price plus liabilities assumed | $ | 1,261 |
Fair value of assets acquired: |
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| Cash and cash equivalents | $ | 2 |
| Other current assets | 55 | |
| Proved properties | 634 | |
| Unproved properties | 180 | |
| Other property and equipment, primarily gathering and pipeline assets | 35 | |
| Acquired gas gathering contracts | 140 | |
| Goodwill (none deductible for income taxes) | 215 | |
| Total fair value of assets acquired | $ | 1,261 |
In May 2005, we acquired producing properties in East Texas and northwestern Louisiana from Plains Exploration & Production Company for an adjusted purchase price of $336 million. The acquisition was funded with borrowings under our revolving credit facility.
In June 2005, we entered an agreement with ExxonMobil Corporation to develop acreage in the northeastern portion of the Piceance Basin in northwest Colorado. Under the terms of the agreement, we have farmed in a 50% working interest ownership in approximately 69,500 contiguous gross acres east of ExxonMobil’s Piceance Creek Unit which we operate.
In July 2005, we acquired producing properties in the Permian Basin of West Texas and New Mexico from ExxonMobil Corporation for an adjusted purchase price of $200 million. The acquisition was funded with borrowings under our revolving credit facility.
In September 2005, we traded nonoperated producing properties in the Permian Basin of West Texas for producing properties owned by Occidental Petroleum in the Permian Basin of New Mexico. We accounted for this transaction as an exchange of nonmonetary assets in accordance with SFAS No. 153. This exchange resulted in the recognition of a $10 million gain.
Acquisitions were recorded using the purchase method of accounting. The following presents our unaudited pro forma results of operations for 2007, 2006 and 2005, as if the 2007 Dominion acquisition was made at the beginning of 2006 and 2007, and the 2005 Antero Resources acquisition was made at the beginning of 2005. These pro forma results are not necessarily indicative of future results.
Pro Forma (Unaudited) |
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December 31 |
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(in millions, except per share data) |
2007 |
2006 |
2005 |
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| Revenues | $ | 5,843 | $ | 5,212 | $ | 3,555 |
| Net income | $ | 1,718 | $ | 1,959 | $ | 1,155 |
| Earnings per common share: | ||||||
| Basic | $ | 3.57 | $ | 4.10 | $ | 2.55 |
| Diluted | $ | 3.52 | $ | 4.05 | $ | 2.50 |
| Weighted average shares outstanding: | ||||||
| Basic | 481.2 | 477.6 | 452.2 | |||
| Diluted | 488.2 | 483.8 | 461.2 | |||