Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

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Acquisitions
 9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Acquisitions
Acquisitions 

Acquisitions were accounted for under the acquisition method of accounting, which involves determining the fair value of the assets acquired and liabilities assumed under the income approach.

2018 Acquisitions

During the first quarter of 2018, the Company completed acquisitions of additional working interests and acreage in the Company’s existing core operating areas of Monarch and Wildhorse, located in the Permian Basin, for an aggregate total purchase price of approximately $35,900 excluding customary purchase price adjustments.

On August 31, 2018, the Company completed the acquisition of approximately 28,000 net surface acres in the Spur operating area, located in the Delaware Basin, from Cimarex Energy Company, for $539,519, including customary purchase price adjustments (the “Cimarex Asset Acquisition”). The Company issued debt and equity to fund, in part, the Cimarex Asset Acquisition. See Notes 5 and 10 for additional information regarding the Company’s debt obligations and equity offerings. The following table summarizes the estimated acquisition date fair values of the acquisition:
Evaluated oil and natural gas properties
$
253,089

Unevaluated oil and natural gas properties
287,000

Asset retirement obligations
(570
)
Net assets acquired
$
539,519



The preliminary purchase price allocations are subject to change based on numerous factors, including the final adjusted purchase price and the final estimated fair value of the assets acquired and liabilities assumed. Any such adjustments to the preliminary estimates of fair value could be material.

2017 Acquisitions

On February 13, 2017, the Company completed the acquisition of 29,175 gross (16,688 net) acres in the Delaware Basin, primarily located in Ward and Pecos Counties, Texas from American Resource Development, LLC, for $646,559 excluding customary purchase price adjustments (the “Ameredev Transaction”). The Company funded the cash purchase price with the net proceeds of an equity offering (see Note 10 for additional information regarding the equity offering). The Company obtained an 82% average working interest (75% average net revenue interest) in the properties acquired in the Ameredev Transaction.
The following table summarizes the estimated acquisition date fair values of the acquisition:
Evaluated oil and natural gas properties
$
137,368

Unevaluated oil and natural gas properties
509,359

Asset retirement obligations
(168
)
Net assets acquired
$
646,559


On June 5, 2017, the Company completed the acquisition of 7,031 gross (2,488 net) acres in the Delaware Basin, located near the acreage acquired in the Ameredev Transaction discussed above, for $52,500 excluding customary purchase price adjustments. The Company funded the cash purchase price with its available cash and proceeds from the issuance of an additional $200,000 of its 6.125% senior notes due 2024 (see Note 5 for additional information regarding the Company’s debt obligations).

Unaudited pro forma financial statements

The following unaudited summary pro forma financial information for the periods presented is for illustrative purposes only and does not purport to represent what the Company’s results of operations would have been if the Cimarex Asset Acquisition and Ameredev Transaction had occurred as presented, or to project the Company’s results of operations for any future periods:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
(a) 
 
2017
(a) 
 
2018
(a) 
 
2017
(a) 
Revenues
 
$
181,880

 
 
$
107,966

 
 
$
506,864

 
 
$
326,357

 
Income from operations
 
82,057

 
 
42,556

 
 
238,776

 
 
124,005

 
Income available to common stockholders
 
44,703

 
 
26,387

 
 
175,623

 
 
128,716

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.20

 
 
$
0.13

 
 
$
0.82

 
 
$
0.64

 
Diluted
 
$
0.20

 
 
$
0.13

 
 
$
0.82

 
 
$
0.64

 

(a)
The pro forma financial information was prepared assuming the Cimarex Asset Acquisition and the Ameredev Transaction occurred as of January 1, 2017.

The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable, including revenue, lease operating expenses, production taxes, depreciation, depletion and amortization expense, accretion expense, interest expense and capitalized interest.

The properties associated with the Cimarex Asset Acquisition and Ameredev Transaction have been commingled with the Company’s existing properties and it is impractical to provide the stand-alone operational results related to these properties.