Chesapeake Energy 2012 Annual Report Download - page 152

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
142
11. Acquisitions and Divestitures
Acquisition of Bronco Drilling
In June 2011, we acquired Bronco Drilling Company, Inc., a publicly traded contract land drilling services company,
for an aggregate purchase price of approximately $339 million, or $11.00 per share of Bronco common stock. The
acquisition was accounted for as a business combination which, among other things, requires assets acquired and
liabilities assumed to be measured at their acquisition date fair values. Pro forma financial information is not presented
as it would not be materially different from the information presented in the consolidated statement of operations.
The following table summarizes the assets acquired and liabilities assumed:
As of
June 6, 2011
($ in millions)
Current assets ........................................................................................................................... $ 53
Drilling rigs and equipment ........................................................................................................ 290
Goodwill .................................................................................................................................... 28
Intangible assets ....................................................................................................................... 10
Other ......................................................................................................................................... 16
Total assets acquired .......................................................................................................... 397
Current liabilities ........................................................................................................................ 32
Long-term liabilities ................................................................................................................... 1
Deferred income taxes .............................................................................................................. 25
Total liabilities assumed ...................................................................................................... 58
Net assets acquired .................................................................................................................. $ 339
The acquisition date fair value of the consideration transferred was $339 million in cash. We received carryover
tax basis in Bronco's assets and liabilities because the acquisition was not a taxable transaction under the Internal
Revenue Code. Based upon the purchase price allocation, a step-up in basis related to the assets acquired from
Bronco resulted in a net deferred tax liability of approximately $25 million. We recorded goodwill of $28 million, which
represents the amount of the consideration transferred in excess of the fair values assigned to the individual assets
acquired and liabilities assumed. Goodwill is primarily attributable to operational and cost synergies expected to be
realized from the acquisition by integrating Bronco's drilling rigs and assembled workforce and is included in other
long-term assets on our consolidated balance sheets. Goodwill was assigned to drilling rig operations within our oilfield
services segment which is discussed in Note 17. Goodwill recorded in the acquisition is not subject to amortization but
is tested annually for impairment on October 1. None of the goodwill is deductible for tax purposes. See Goodwill in
Note 1 for further discussion. The drilling rigs and equipment we acquired from Bronco are now owned by Nomac
Drilling, L.L.C., a drilling subsidiary of COO.