OG&E 2011 Annual Report Download - page 62

Update No. 2011-05." The new standard defers the effective date of
changes from previous accounting guidance that related to the presen-
tation of reclassification adjustments. The new standard is applicable
for all entities that have other comprehensive income. The new standard
is effective for interim and annual reporting periods for fiscal years
beginning after December 15, 2011. The Company adopted this new
standard effective January 1, 2012.
3. Business Combination
On September 23, 2011, Enogex entered into the following agreements:
an agreement with Cordillera, Oxbow and West Canadian Midstream
LLC pursuant to which Enogex agreed to acquire 100 percent of the
membership interest in Roger Mills Gas Gathering, LLC, an Oklahoma
limited liability company that owns an approximately 60-mile natural
gas gathering system located in Roger Mills County and Ellis County,
Oklahoma; an agreement with Cordillera and Oxbow pursuant to which
Enogex agreed to acquire an approximately 30-mile natural gas gather-
ing system located in Roger Mills County, Oklahoma; and agreements
with Cordillera and other producers pursuant to which such producers
agreed to provide Enogex with long-term acreage dedication in the area
served by the gathering systems encompassing approximately 100,000
net acres. The gathering systems are located in the Granite Wash area.
The aggregate purchase price for these transactions was $200.4 million
which was paid in cash primarily from contributions from OGE Energy
and the ArcLight group (as discussed in Note 4) as well as cash gener-
ated from operations and bank borrowings. The transactions closed
on November 1, 2011.
The acquisition described above was accounted for as a business
combination. The purchase price shown below is preliminary and has
been allocated to the identifiable assets acquired and liabilities assumed
based on the estimated fair values at the acquisition date using a third-
party valuation expert. Any amount not allocated to identifiable assets
and liabilities was allocated to goodwill. These allocations may change
in subsequent financial statements. Enogex is currently evaluating the
preliminary purchase price allocation, which will be adjusted as additional
information relative to the fair value of assets and liabilities becomes
available. Enogex expects the purchase price allocations to be completed
by the end of the first quarter of 2012. The following table summarizes
the preliminary purchase price allocation for this acquisition.
(In millions)
Current assets $÷÷5.4
Net property, plant and equipment 24.3
Intangible assets 136.3
Goodwill 39.4
Current liabilities assumed (5.0)
Total $200.4
The goodwill recognized from this acquisition primarily related to the
benefits associated with combining the acquired assets with Enogex’s
existing assets and operations. Enogex believes that the transactions
will provide Enogex with key new opportunities in the Granite Wash area.
All of the goodwill is deductible for tax purposes. The goodwill has been
recorded in the Gathering and Processing segment. At December 31,
2011, there were no changes in the recognized amount of goodwill
resulting from this acquisition.
Intangible assets consist of an identifiable customer contracts and
relationships. The acquired intangible assets will be amortized on a straight-
line basis over the estimated remaining useful life of 15 years. The net
amount of intangible assets and related accumulated amortization was
$134.8 million and $1.5 million, respectively, at December 31, 2011.
4. Noncontrolling Interest Owner
In 2011, OGE Energy and the ArcLight group made contributions to
Enogex Holdings of $70.9 million and $214.6 million, respectively, to
fund a portion of Enogex LLC’s 2011 capital requirements. Also, on
February 1, 2011, OGE Energy sold a 0.1 percent membership interest
in Enogex Holdings to the ArcLight group for $1.9 million. The following
table summarizes changes in OGE Holdings’ and the ArcLight group’s
membership interest in Enogex Holdings in 2011.
OGE ArcLight
(In millions) Holdings Group Total
Balance at December 31, 2010 (units) 90.1 9.9 100.0
Ownership percentage at
December 31, 2010 90.1% 9.9% 100.0%
Sale of 100,000 units of Enogex Holdings(A) (0.1) 0.1 –
Issuance of 4,303,007 units of Enogex Holdings(B) 0.4 3.9 4.3
Issuance of 5,405,405 units of Enogex Holdings(C) 0.5 4.9 5.4
Issuance of 5,725,190 units of Enogex Holdings(D) 2.9 2.8 5.7
Balance at December 31, 2011 (units) 93.8 21.6 115.4
Ownership percentage at
December 31, 2011 81.3% 18.7% 100.0%
(A) On February 1, 2011, OGE Energy sold a 0.1 percent membership interest in Enogex Holdings
to the ArcLight group for $1.9 million.
(B) On February 1, 2011, OGE Energy and the ArcLight group made contributions of $8.0 million
and $71.6 million, respectively, to fund a portion of Enogex LLC’s 2011 capital requirements.
(C) On October 3, 2011, OGE Energy and the ArcLight group made contributions of $10.0 million
and $90.0 million, respectively, to fund a portion of Enogex LLC’s 2011 capital requirements.
(D) On November 1, 2011, OGE Energy and the ArcLight group made contributions of $52.9 million
and $53.0 million, respectively, to fund Enogex’s gas gathering acquisitions as discussed in Note 3.
The following table summarizes changes in OGE Energy’s equity
which represents changes in additional paid-in capital for unrecognized
gains from the sale and issuance of equity interests in Enogex Holdings
to the ArcLight group in 2011.
60 OGE Energy Corp.