UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(DEBTOR IN POSSESSION)
The following unaudited pro forma condensed consolidated balance sheet and statements of operations are derived from the historical consolidated financial statements of Quicksilver Resources Inc. (“Quicksilver”). The pro forma condensed consolidated balance sheet as of September 30, 2015 gives effect to the deconsolidation of Quicksilver Resources Canada Inc. (“QRCI”) and its wholly owned subsidiaries and its affiliates, including Fortune Creek Gathering and Processing Partnership (collectively the “Canadian Entities”) due to commencement of restructuring proceedings of certain of the Canadian Entities under the Companies Creditors Arrangement Act (Canada) as if it had occurred on September 30, 2015. The pro forma condensed consolidated statement of operations for the year ended December 31, 2014 and the nine months ended September 30, 2015 reflects the deconsolidation of the Canadian Entities as if it had occurred on January 1, 2014. The pro forma statements of operations exclude any recognition of gain or loss related to the deconsolidation of the Canadian Entities as a non-recurring transaction. The unaudited pro forma condensed consolidated balance sheet and statements of operations have been derived from and should be read in conjunction with the related notes and Quicksilver's historical financial statements, including the related notes, included in its 2014 Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2015.
The preparation of the unaudited pro forma consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that affect the reported amounts of revenues and expenses. Actual results could differ from those estimates.
The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of Quicksilver's operations would have been had the deconsolidation of the Canadian Entities occurred on the respective dates assumed, nor is it necessarily indicative of Quicksilver's future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflect estimates and assumptions that Quicksilver believes to be reasonable.
QUICKSILVER RESOURCES INC. (DEBTOR IN POSSESSION)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2015
In thousands
|
| | | | | | | | | | | |
| | Historical | | Pro Forma Adjustments | | Pro Forma |
| | (Restated) | | (a) | | |
| ASSETS |
| Current assets | | | | | |
| Cash and cash equivalents | $ | 175,673 |
| | $ | (20,672 | ) | | $ | 155,001 |
|
| Accounts receivable - net of allowance for doubtful accounts | 27,537 |
| | 9,299 |
| (b) | 36,836 |
|
| Other current assets | 17,794 |
| | (7,320 | ) | | 10,474 |
|
| Total current assets | 221,004 |
| | (18,693 | ) | | 202,311 |
|
| Property, plant and equipment - net | | | | | |
| Oil and gas properties, full cost method | | | | | |
| Evaluated oil and gas properties | 320,111 |
| | (115,929 | ) | | 204,182 |
|
| Unevaluated oil and gas properties | 21,377 |
| | — |
| | 21,377 |
|
| Other property and equipment | 99,332 |
| | (41,450 | ) | | 57,882 |
|
| Property, plant and equipment - net | 440,820 |
| | (157,379 | ) | | 283,441 |
|
| Other assets | 6,640 |
| | (4,665 | ) | | 1,975 |
|
| | $ | 668,464 |
| | $ | (180,737 | ) | | $ | 487,727 |
|
| LIABILITIES AND EQUITY |
| Current liabilities | | | | | |
| Current portion of long-term debt | $ | 156,985 |
| | $ | (78,367 | ) | | $ | 78,618 |
|
| Accounts payable | 19,528 |
| | (1,094 | ) | | 18,434 |
|
| Accrued liabilities | 38,004 |
| | (4,523 | ) | | 33,481 |
|
| Total current liabilities | 214,517 |
| | (83,984 | ) | | 130,533 |
|
| Partnership liability | 87,935 |
| | (87,935 | ) | | — |
|
| Asset retirement obligations | 99,791 |
| | (53,554 | ) | | 46,237 |
|
| Other liabilities | 10,195 |
| | — |
| | 10,195 |
|
| Liabilities subject to compromise | 1,884,128 |
| | — |
| | 1,884,128 |
|
| | | | | | |
| Stockholders' equity | (1,628,102 | ) | | 44,736 |
| (c) | (1,583,366 | ) |
| | $ | 668,464 |
| | $ | (180,737 | ) | | $ | 487,727 |
|
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial information.
QUICKSILVER RESOURCES INC. (DEBTOR IN POSSESSION)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
In thousands, except for per share data
|
| | | | | | | | | | | |
| | Historical | | Pro Forma Adjustments | | Pro Forma |
| | (Restated) | | (a) | | |
| Revenue | | | | | |
| Production | $ | 161,875 |
| | $ | (38,798 | ) | | $ | 123,077 |
|
| Sales of purchased natural gas | 29,921 |
| | — |
| | 29,921 |
|
| Net derivative gains (losses) | 27,863 |
| | (7,833 | ) | | 20,030 |
|
| Other | 7,460 |
| | (1,306 | ) | | 6,154 |
|
| Total revenue | 227,119 |
| | (47,937 | ) | | 179,182 |
|
| Operating expense | | | | | |
| Lease operating | 39,763 |
| | (19,928 | ) | | 19,835 |
|
| Gathering, processing and transportation | 65,270 |
| | (9,803 | ) | | 55,467 |
|
| Production and ad valorem taxes | 8,046 |
| | (2,663 | ) | | 5,383 |
|
| Costs of purchased natural gas | 29,863 |
| | — |
| | 29,863 |
|
| Depletion, depreciation and accretion | 39,793 |
| | (17,494 | ) | | 22,299 |
|
| Impairment | 241,929 |
| | (91,113 | ) | | 150,816 |
|
| General and administrative | 39,312 |
| | (3,253 | ) | | 36,059 |
|
| Other operating | 937 |
| | (774 | ) | | 163 |
|
| Total expense | 464,913 |
| | (145,028 | ) | | 319,885 |
|
| Operating income (loss) | (237,794 | ) | | 97,091 |
| | (140,703 | ) |
| Other income (expense) - net | (26,106 | ) | | 26,245 |
| | 139 |
|
| Fortune Creek accretion | (9,877 | ) | | 9,877 |
| | — |
|
| Interest expense | (43,537 | ) | | 5,401 |
| (b) | (38,136 | ) |
| Reorganization items, net | (148,568 | ) | | — |
| | (148,568 | ) |
| Income (loss) before income taxes | (465,882 | ) | | 138,614 |
| | (327,268 | ) |
| Income tax (expense) benefit | (5,836 | ) | | (657 | ) | | (6,493 | ) |
| Net income (loss) | $ | (471,718 | ) | | $ | 137,957 |
| | $ | (333,761 | ) |
| | | | | | |
| Earnings (loss) per common share - basic | $ | (2.68 | ) | | | | $ | (1.90 | ) |
| Earnings (loss) per common share - diluted | $ | (2.68 | ) | | | | $ | (1.90 | ) |
| Weighted average common shares outstanding - basic | 176,021 |
| | | | 176,021 |
|
| Weighted average common shares outstanding - diluted | 176,021 |
| | | | 176,021 |
|
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial information.
QUICKSILVER RESOURCES INC. (DEBTOR IN POSSESSION)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
In thousands, except for per share data
|
| | | | | | | | | | | |
| | Historical | | Pro Forma Adjustments | | Pro Forma |
| | | | (a) | | |
| Revenue | | | | | |
| Production | $ | 425,154 |
| | $ | (132,767 | ) | | $ | 292,387 |
|
| Sales of purchased natural gas | 70,468 |
| | — |
| | 70,468 |
|
| Net derivative gains (losses) | 65,698 |
| | (18,109 | ) | | 47,589 |
|
| Other | 8,108 |
| | (2,367 | ) | | 5,741 |
|
| Total revenue | 569,428 |
| | (153,243 | ) | | 416,185 |
|
| Operating expense | | | | | |
| Lease operating | 76,975 |
| | (37,024 | ) | | 39,951 |
|
| Gathering, processing and transportation | 136,283 |
| | (43,295 | ) | | 92,988 |
|
| Production and ad valorem taxes | 17,344 |
| | (3,901 | ) | | 13,443 |
|
| Costs of purchased natural gas | 70,376 |
| | — |
| | 70,376 |
|
| Depletion, depreciation and accretion | 61,126 |
| | (23,902 | ) | | 37,224 |
|
| Impairment | 71,988 |
| | (69,403 | ) | | 2,585 |
|
| General and administrative | 47,294 |
| | (3,569 | ) | | 43,725 |
|
| Other operating | 2,608 |
| | (2,114 | ) | | 494 |
|
| Total expense | 483,994 |
| | (183,208 | ) | | 300,786 |
|
| Operating income (loss) | 85,434 |
| | 29,965 |
| | 115,399 |
|
| Other income (expense) - net | (6,581 | ) | | 2,889 |
| | (3,692 | ) |
| Fortune Creek accretion | (15,067 | ) | | 15,067 |
| | — |
|
| Interest expense | (163,286 | ) | | 1,535 |
| (b) | (161,751 | ) |
| Income (loss) before income taxes | (99,500 | ) | | 49,456 |
| | (50,044 | ) |
| Income tax (expense) benefit | (3,600 | ) | | 986 |
| | (2,614 | ) |
| Net income (loss) | $ | (103,100 | ) | | $ | 50,442 |
| | $ | (52,658 | ) |
| | | | | | |
| Earnings (loss) per common share - basic | $ | (0.59 | ) | | | | $ | (0.30 | ) |
| Earnings (loss) per common share - diluted | $ | (0.59 | ) | | | | $ | (0.30 | ) |
| Weighted average common shares outstanding - basic | 173,822 |
| | | | 173,822 |
|
| Weighted average common shares outstanding - diluted | 173,822 |
| | | | 173,822 |
|
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (DEBTOR IN POSSESSION)
| |
| (a) | Reflects the deconsolidation of the Canadian Entities’ assets and liabilities (including intercompany balances) at their historical carrying amounts included in Quicksilver's financial statements as of September 30, 2015. |
| |
| (b) | Accounts receivable has been adjusted to reflect the estimated fair value of our accounts receivable and loan receivable from QRCI. Prior to deconsolidation, both these receivables were considered intercompany balances with QRCI and were eliminated in consolidation. Subsequent to the deconsolidation, these amounts are recorded as balances with QRCI at an estimated fair value based on their carrying amounts. We have estimated a recovery rate based upon the estimated fair value of the net assets of QRCI available for distribution in relation to the secured and unsecured claims in the CCAA filing. |
| |
| (c) | Retained earnings has been adjusted to reflect the impairment loss on our investment in the Canadian Entities and the pro forma adjustments including the estimated fair value of our receivables as discussed above. |
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (DEBTOR IN POSSESSION)
| |
| (a) | Reflects the deconsolidation of production revenue, direct operating expenses and other income/expense from Canadian Entities. |
| |
| (b) | Adjustment to increase interest expense by $6.2 million to reflect the removal of intercompany interest income. |
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014 (DEBTOR IN POSSESSION)
| |
| (a) | Reflects the deconsolidation of production revenue, direct operating expenses and other income/expense from Canadian Entities. |
| |
| (b) | Adjustment to increase interest expense by $8.2 million to reflect the removal of intercompany interest income. |
