Acquisitions
We intend to be opportunistic in pursuing selective acquisitions of oil or gas properties or
exploration projects. We will consider opportunities located in our current core areas of operation, as
well as projects in other areas that meet our investment criteria.
Eagle Ford Shale
During the fourth quarter of 2010, we completed the acquisition of approximately 60,000 net acres
in the Eagle Ford Shale oil and gas condensate windows in South Texas for approximately $596.3
million in cash. We funded the acquisition primarily with borrowings under our senior revolving credit
facility.
Divestments
Panhandle and South Texas Properties
In December 2011, we completed the divestment of our Texas Panhandle properties to Linn
Energy, LLC. After the exercise of third party preferential rights and preliminary closing adjustments,
we received approximately $554.8 million in cash. At December 31, 2011, we continue to have
interests in approximately 50,000 gross leasehold acres. We expect to receive additional proceeds
from future closings, as may be further modified for additional post-closing adjustments. The cash
proceeds received, net of approximately $6.2 million in transaction costs, were primarily used to reduce
indebtedness. Our aggregate working interest in the Texas Panhandle properties generated total sales
volumes of approximately 84 MMcfe per day during the third quarter of 2011 and had 263 Bcfe of
estimated proved reserves as of December 31, 2010. The transaction was effective November 1, 2011.
In December 2011, we completed the divestment of all our working interests in our South Texas
conventional natural gas properties to a third party. After preliminary closing adjustments, we received
$181.0 million in cash. The cash proceeds received were primarily used to reduce indebtedness. The
transaction was effective September 1, 2011.
The proceeds from the 2011 sales of oil and gas properties were recorded as reductions to
capitalized costs pursuant to full cost accounting rules.
Gulf of Mexico
In December 2010, we completed the divestment of our Gulf of Mexico shallow water shelf
properties to McMoRan. At closing and after preliminary closing adjustments, we received
approximately $86.1 million in cash, which included $11.1 million in working capital adjustments, and
51.0 million shares of McMoRan common stock in exchange for all our interests in our Gulf of Mexico
leasehold located in less than 500 feet of water. The transaction was completed pursuant to an
Agreement and Plan of Merger dated as of September 19, 2010, and effective as of August 1, 2010,
between us and certain of our subsidiaries and McMoRan and certain of its subsidiaries. The
McMoRan shares were valued at approximately $665.9 million based on McMoRan’s closing stock
price of $17.18 on December 30, 2010 discounted to reflect certain limitations on the marketability of
the McMoRan shares under the registration rights agreement and stockholder agreement entered into
by us and McMoRan at the closing of the transaction. The cash proceeds received, net of
approximately $8.8 million in transaction costs, were primarily used to repay outstanding borrowings
under our credit facilities. The proceeds were recorded as reductions to capitalized costs pursuant to
full cost accounting rules.
14