Our acquisition strategy could fail or present unanticipated problems for our business in the
future, which could adversely affect our ability to make acquisitions or realize anticipated
benefits of those acquisitions.
Our growth strategy may include acquiring oil and gas businesses and properties. We may not be
able to identify suitable acquisition opportunities or finance and complete any particular acquisition
successfully. Furthermore, acquisitions involve a number of risks and challenges, including:
• diversion of management’s attention;
• the need to integrate acquired operations;
• potential loss of key employees of the acquired companies;
• difficulty in assessing recoverable reserves, exploration potential, future production rates,
operating costs, infrastructure requirements, future oil and natural gas prices, environmental
and other liabilities, and other factors beyond our control;
• potential lack of operating experience in a geographic market of the acquired business; and
• an increase in our expenses and working capital requirements.
Assessments associated with an acquisition are inexact and their accuracy is inherently uncertain.
In connection with our assessments, we perform a review of the acquired properties which we believe
is generally consistent with industry practices. However, such a review will not reveal all existing or
potential problems. In addition, our review may not permit us to become sufficiently familiar with the
properties to fully assess their deficiencies and capabilities. We do not inspect every oil and gas well or
the facilities associated with those wells. Even when we perform inspections, we do not always
discover structural, subsurface and environmental problems that may exist or arise. As a result of
these factors, the purchase price we pay to acquire oil and gas properties may exceed the value we
realize.
Any of these factors could adversely affect our ability to achieve anticipated levels of cash flows
from the acquired businesses or realize other anticipated benefits of those acquisitions.
Our results of operations could be adversely affected as a result of goodwill impairments.
In a purchase transaction, goodwill represents the excess of the purchase price plus the liabilities
assumed (including deferred income taxes recorded in connection with the transaction) over the fair
value of the net assets acquired. At December 31, 2011, goodwill totaled $535 million and represented
approximately 5% of our total assets.
Goodwill is not amortized; instead it is tested at least annually for impairment at a level of reporting
referred to as a reporting unit. Impairment occurs when the carrying amount of goodwill exceeds its
implied fair value. An impairment of goodwill could significantly reduce earnings during the period in
which the impairment occurs and would result in a corresponding reduction to goodwill and equity.
See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Critical Accounting Policies and Estimates – Goodwill.
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