QEP Resources, Inc.

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SEC Filings

10-Q
QEP RESOURCES, INC. filed this Form 10-Q on 07/25/2018
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During the first half of 2018, G&A expense increased $51.0 million, or 79%, compared to the first half of 2017. During the first half of 2018, QEP incurred $17.4 million in restructuring costs associated with the implementation of our Strategic Initiatives, of which $8.0 million relates to retention expense, $5.1 million of termination benefits $4.0 million of accelerated share-based compensation and $0.3 million related to office lease termination costs (refer to Note 8 – Restructuring, in Item I of Part I of this Quarterly Report on Form 10-Q). In addition to these restructuring related costs, QEP recognized a $16.7 million increase in share-based compensation and changes in the mark-to-market value of the Deferred Compensation Wrap Plan, a $8.2 million increase related to reduced overhead recoveries, primarily associated with our Pinedale Divestiture and a $5.0 million increase in legal and outside expenses related to our Strategic Initiatives.

Production and property taxes. In most states in which QEP operates, QEP pays production taxes based on a percentage of field-level revenue, except in Louisiana, where severance taxes are volume-based. Production and property taxes increased $9.1 million, or 32%, in the second quarter of 2018 compared to the second quarter of 2017, primarily due to increased oil pricing and increased oil and condensate production in the Williston and Permian basins, and increased gas production in Haynesville/Cotton Valley, partially offset by the Pinedale Divestiture.

During the second quarter of 2018, production and property taxes increased $0.60 per Boe, or 29%, compared to the second quarter of 2017, but increased 63% excluding the Pinedale Divestiture. The 63% increase was due to an increase in average field-level equivalent prices in the Permian and Williston basins offset by a lower rate per Boe in Haynesville/Cotton Valley due to lower non-operated ad valorem charges and franchise taxes per Boe.

Production and property taxes increased $8.9 million, or 15%, in the first half of 2018 compared to the first half of 2017, primarily due to increased oil pricing and increased oil and condensate production in the Permian Basin, and increased gas production in Haynesville/Cotton Valley, partially offset by the Pinedale Divestiture.

During the first half of 2018, production and property taxes increased $0.43 per Boe, or 20%, compared to the first half of 2017, but increased 57% excluding the Pinedale Divestiture. The 57% increase was due to an increase in average field-level equivalent prices in the Permian and Williston basins, partially offset by a lower rate per Boe in Haynesville/Cotton Valley due to lower non-operated ad valorem charges and franchise taxes per Boe.

Depreciation, depletion and amortization (DD&A). DD&A expense increased $50.7 million in the second quarter of 2018 compared to the second quarter of 2017, primarily due to increased production and a higher DD&A rate in the Permian Basin and Haynesville/Cotton Valley, partially offset by lower DD&A due to the Pinedale Divestiture.

DD&A expense increased $55.4 million in the first half of 2018 compared to the first half of 2017, primarily due to increased production and a higher DD&A rate in the Permian Basin and Haynesville/Cotton Valley, partially offset by lower DD&A due to the Pinedale Divestiture.

Impairment expense. During the second quarter of 2018, QEP recorded impairment charges of $403.7 million, which were primarily due to the impairment of proved and unproved properties related to the Uinta Basin Divestiture.

During the first half of 2018, QEP recorded impairment charges of $404.4 million, of which $402.8 million of proved and unproved properties impairment was triggered by the Uinta Basin Divestiture and $1.6 million was related to expiring leaseholds on unproved properties and impairment of proved properties related to a divestiture in the Other Northern area.

Net gain (loss) from asset sales, inclusive of restructuring costs. During the second quarter of 2018, QEP recognized a loss on the sale of assets of $3.9 million, primarily related to a pre-tax loss of $1.9 million related to estimated restructuring costs associated with the Uinta Basin Divestiture (refer to Note 8 – Restructuring, in Item I of Part I of this Quarterly Report on Form 10-Q for more information). In addition, QEP recognized a pre-tax loss of $2.0 million related to the divestiture of properties outside our main operating areas in the Uinta Basin and the Other Northern area, and an underground gas storage facility. During the second quarter of 2017, QEP recognized a gain on the sale of assets of $19.8 million related to the sale of non-core Other Northern properties.

During the first half of 2018, QEP recognized a loss on the sale of assets of $0.4 million primarily comprised of $1.9 million of estimated restructuring costs associated with the Uinta Basin Divestiture (refer to Note 8 – Restructuring, in Item I of Part I of this Quarterly Report on Form 10-Q for more information) partially offset by a net pre-tax gain on sale of assets of $1.5 million related to the divestiture of properties outside our main operating areas in the Uinta Basin, Pinedale and the Other Northern area, and an underground gas storage facility. During the first half of 2017, QEP recognized a gain on the sale of assets of $19.8 million related to the sale of non-core Other Northern properties.


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