Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements are presented to give effect to the disposition on October 22, 2007 of all the outstanding shares of wholly-owned subsidiary Sino-American Energy Corporation for $210.4 million in cash (the “Disposition”).
The unaudited pro forma condensed consolidated income statement for the year ended December 31, 2006 has been derived from our consolidated income statement for the year ended December 31, 2006. The unaudited pro forma condensed consolidated income statement should be read together with our consolidated income statement and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007 and the unaudited pro forma condensed consolidated income statement for the six months ended June 30, 2007 have been derived from our interim consolidated financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007 and should be read in conjunction with those financial statements, including the notes thereto.
The unaudited pro forma condensed consolidated financial statements are based on the following assumptions and adjustments:
• | the unaudited pro forma balance sheet is presented as if the Disposition occurred on June 30, 2007; | ||
• | the unaudited pro forma income statements present our operations as if the Disposition had occurred on January 1, 2006; and | ||
• | the unaudited pro forma estimates of proved reserves and unaudited pro forma standardized measure of discounted future net cash flows related to proved oil and gas reserves give effect to the Disposition as if it had occurred at December 31, 2006. |
Pursuant to Securities and Exchange Commission rules for pro forma financial statements, no pro forma adjustments were made with respect to the following:
• | reductions in general and administrative expense to reflect cost savings associated with the reduction in our technical and administrative staff resulting from the Disposition; | ||
• | increases in assumed interest income associated with the investment of the proceeds received from the Disposition. |
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only. The financial results may have been different if the Disposition had occurred as of the dates indicated above. This financial information does not purport to indicate the future results of operations or financial position. These pro forma condensed consolidated statements of operations do not include the gain on disposition to be recorded in the fourth quarter of 2007 or the effects of the use of proceeds from the disposition.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands of U.S. dollars)
(Amounts in thousands of U.S. dollars)
June 30, 2007 | |||||||||||||
Sino-American | |||||||||||||
Disposition | |||||||||||||
Historical | Pro Forma | ||||||||||||
Consolidated | Adjustments | Pro Forma | |||||||||||
Current assets | |||||||||||||
Cash and cash equivalents | 17,481 | (18,600 | ) | (b) | 207,535 | ||||||||
208,654 | (a) | ||||||||||||
Restricted cash | 1,874 | — | 1,874 | ||||||||||
Accounts receivable | 108,597 | (6,137 | ) | (b) | 102,460 | ||||||||
Deferred tax asset | 8,512 | — | 8,512 | ||||||||||
Derivative asset | 1,412 | — | 1,412 | ||||||||||
Inventory | 13,166 | (75 | ) | (b) | 13,091 | ||||||||
Prepaid drilling costs and other current assets | 649 | — | 649 | ||||||||||
Total current assets | 151,691 | 183,842 | 335,533 | ||||||||||
Oil and gas properties net, using the full cost method of accounting | |||||||||||||
Proved | 1,332,960 | (70,310 | ) | (b) | 1,262,650 | ||||||||
Unproved | 77,764 | (42,310 | ) | (b) | 35,454 | ||||||||
Capital assets | 1,679 | — | 1,679 | ||||||||||
Other | 2,407 | — | 2,407 | ||||||||||
Total assets | 1,566,501 | 71,222 | 1,637,723 | ||||||||||
Current liabilities | |||||||||||||
Accounts payable and accrued liabilities | 122,639 | (2,644 | ) | (b) | 119,995 | ||||||||
Current taxes payable | 6,133 | (5,580 | ) | (b) | 31,091 | ||||||||
30,538 | (a) | ||||||||||||
Capital cost accrual | 85,115 | — | 85,115 | ||||||||||
Total current liabilities | 213,887 | 22,314 | 236,201 | ||||||||||
Long-term debt | 300,000 | — | 300,000 | ||||||||||
Deferred income tax liability | 300,400 | (6,445 | ) | (b) | 293,955 | ||||||||
Other long-term obligations | 26,071 | (1,362 | ) | (b) | 24,709 | ||||||||
Shareholders’ equity | |||||||||||||
Share capital | 478 | — | 478 | ||||||||||
Treasury stock | (16,744 | ) | — | (16,744 | ) | ||||||||
Retained earnings | 740,444 | 56,715 | 797,159 | ||||||||||
Accumulated other comprehensive income | 1,965 | — | 1,965 | ||||||||||
Total Shareholders’ equity | 726,143 | 56,715 | 782,858 | ||||||||||
Total liabilities and shareholders’ equity | 1,566,501 | 71,222 | 1,637,723 | ||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(Amounts in thousands of U.S. dollars, except per share data)
(Amounts in thousands of U.S. dollars, except per share data)
Six Months Ended June 30, 2007 | |||||||||||||||||
Historical | Sino-American | Pro Forma | |||||||||||||||
Consolidated | Disposition | Adjustments | Pro Forma | ||||||||||||||
Revenues | |||||||||||||||||
Natural gas sales | 263,705 | — | — | 263,705 | |||||||||||||
Oil sales | 69,310 | (45,568 | ) | — | (d) | 23,742 | |||||||||||
Total operating revenues | 333,015 | (45,568 | ) | — | 287,447 | ||||||||||||
Expenses | |||||||||||||||||
Production expenses and taxes | 66,665 | (10,734 | ) | — | (d) | 55,931 | |||||||||||
Depletion and depreciation | 73,263 | (11,043 | ) | — | (d) | 62,220 | |||||||||||
General and administrative | 6,943 | (304 | ) | (177 | ) | (d)(e) | 6,462 | ||||||||||
Total operating expenses | 146,871 | (22,081 | ) | (177 | ) | 124,613 | |||||||||||
Operating income | 186,144 | (23,487 | ) | 177 | 162,834 | ||||||||||||
Other income (expense) | |||||||||||||||||
Interest expense | (6,921 | ) | — | — | (6,921 | ) | |||||||||||
Interest income | 636 | — | — | 636 | |||||||||||||
Total other income | (6,285 | ) | — | — | (6,285 | ) | |||||||||||
Income before income tax provision | 179,859 | (23,487 | ) | 177 | 156,549 | ||||||||||||
Income tax provision | 64,199 | (8,220 | ) | 62 | (d)(c) | 56,041 | |||||||||||
Net income | 115,660 | (15,267 | ) | 115 | 100,508 | ||||||||||||
Earnings per share: | |||||||||||||||||
Basic | $ | 0.76 | $ | 0.66 | |||||||||||||
Diluted | $ | 0.73 | $ | 0.63 | |||||||||||||
Weighted average common shares outstanding for | |||||||||||||||||
Basic earnings per share | 151,975 | 151,975 | |||||||||||||||
Diluted earnings per share | 159,056 | 159,056 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(Amounts in thousands of U.S. dollars, except per share data)
(Amounts in thousands of U.S. dollars, except per share data)
Year Ended December 31, 2006 | |||||||||||||||||
Historical | Sino-American | Pro Forma | |||||||||||||||
Consolidated | Disposition | Adjustments | Pro Forma | ||||||||||||||
Revenues | |||||||||||||||||
Natural gas sales | 470,324 | — | — | 470,324 | |||||||||||||
Oil sales | 122,343 | (84,008 | ) | — | (d) | 38,335 | |||||||||||
Total operating revenues | 592,667 | (84,008 | ) | — | 508,659 | ||||||||||||
Expenses | |||||||||||||||||
Production expenses and taxes | 110,009 | (17,321 | ) | — | (d) | 92,688 | |||||||||||
Depletion and depreciation | 93,499 | (13,822 | ) | — | (d) | 79,677 | |||||||||||
General and administrative | 14,935 | (50 | ) | (354 | ) | (d)(e) | 14,531 | ||||||||||
Total operating expenses | 218,443 | (31,193 | ) | (354 | ) | 186,896 | |||||||||||
Operating income | 374,224 | (52,815 | ) | 354 | 321,763 | ||||||||||||
Other income (expense) | |||||||||||||||||
Interest expense | (3,909 | ) | — | — | (3,909 | ) | |||||||||||
Interest income | 1,943 | — | — | 1,943 | |||||||||||||
Total other income | (1,966 | ) | — | — | (1,966 | ) | |||||||||||
Income before income tax provision | 372,258 | (52,815 | ) | 354 | 319,797 | ||||||||||||
Income tax provision | 141,063 | (18,850 | ) | 124 | (d)(c) | 122,337 | |||||||||||
Net income | 231,195 | (33,965 | ) | 230 | 197,460 | ||||||||||||
Earnings per share: | |||||||||||||||||
Basic | $ | 1.50 | $ | 1.28 | |||||||||||||
Diluted | $ | 1.43 | $ | 1.22 | |||||||||||||
Weighted average common shares outstanding for | |||||||||||||||||
Basic earnings per share | 153,879 | 153,879 | |||||||||||||||
Diluted earnings per share | 161,615 | 161,615 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
Ultra Petroleum Corp.
UNAUDITED PRO FORMA SUPPLEMENTARY OIL AND GAS DISCLOSURES
UNAUDITED PRO FORMA SUPPLEMENTARY OIL AND GAS DISCLOSURES
Estimated Net Quantities of Proved Oil and Gas Reserves
The following pro forma estimated reserve quantities show the effect of the Disposition as if it had occurred on December 31, 2006.
Less: | ||||||||||||
Sino-American | ||||||||||||
Energy Corp. | ||||||||||||
Consolidated | Disposition | Pro Forma | ||||||||||
Proved developed and undeveloped: | ||||||||||||
Oil and condensate (Bbls) | 21,829,300 | 3,986,700 | 17,842,600 | |||||||||
Natural gas (Mcf) | 2,258,100,700 | 0 | 2,258,100,700 | |||||||||
Total proved reserves (Mcfe) | 2,389,076,500 | 23,920,200 | 2,365,156,300 | |||||||||
Proved developed: | ||||||||||||
Oil and condensate (MMBbls) | 9,208,000 | 2,686,000 | 6,522,000 | |||||||||
Natural gas (Bcf) | 842,969,000 | 0 | 842,969,000 | |||||||||
Total proved developed reserves (Bcfe) | 898,217,000 | 16,116,000 | 882,101,000 | |||||||||
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves (US$000)
The following pro forma standardized measure of discounted future net cash flows shows the effect of the Disposition as if it had occurred on December 31, 2006.
Less: | ||||||||||||
Sino-American | ||||||||||||
Energy Corp. | ||||||||||||
Consolidated | Disposition | Pro Forma | ||||||||||
Future cash inflows | $ | 11,425,185 | $ | 185,659 | $ | 11,239,526 | ||||||
Less related future: | ||||||||||||
Production costs | (3,042,177 | ) | (67,750 | ) | (2,974,427 | ) | ||||||
Development and abandonment costs | (1,680,808 | ) | (5,915 | ) | (1,674,893 | ) | ||||||
Future net cash flows before income taxes | 6,702,200 | 111,994 | 6,590,206 | |||||||||
Future income tax expense | (2,224,419 | ) | (6,710 | ) | (2,217,709 | ) | ||||||
Future net cash flows before 10% discount | 4,477,781 | 105,284 | 4,372,497 | |||||||||
10% annual discount for estimating timing of cash flows | (2,606,228 | ) | (18,811 | ) | (2,587,417 | ) | ||||||
Standardized measure of discounted future net cash flows | $ | 1,871,553 | $ | 86,473 | $ | 1,785,080 | ||||||
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Assumptions:
(a) | Represents cash proceeds of $210.4 million less transactions costs of $1.7 million related to the Disposition. |
• | net cash received of $210.4 million, equal to gross proceeds on the sale of $223.0 million, less preliminary sale price adjustments of $12.6 million for working capital and other closing adjustments. | ||
• | a pretax gain of $87.3 million and related tax expense of $30.5 million, for an after-tax gain of $56.8 million. This pro forma gain and tax information was developed by comparing the actual proceeds received at October 22, 2007 to the balance sheet at June 30, 2007. Had the proceeds been computed using the working capital at June 30, 2007, the proceeds and pretax gain presented in the pro forma could have been approximately $17 million higher. |
The proceeds included in the pro forma condensed consolidated balance sheet are equal to the amount of cash received at the closing date (October 22, 2007), which was based on an estimate of working capital at that date. Approximately 60 days after closing, the proceeds will be adjusted to reflect actual working capital at the closing date; the adjustments to proceeds along with other changes in the balance sheet from June 30, 2007 through closing will change the actual gain to be recorded in the fourth quarter of 2007.
(b) Represents the deconsolidation of assets and liabilities of Sino-American Energy Corporation.
(c) | Represents adjustment to reflect income tax expense for the effects of the pro forma adjustments based on the federal statutory income tax rate of 35%. |
(d) | Represents adjustments to eliminate the revenues and expenses of Sino -American Energy Corporation for the year ended December 31, 2006 and the six months ended June 30, 2007. |
(e) | Represents adjustment to eliminate the salaries and other direct general and administrative expenses attributable to Sino-American Energy Corporation. |