Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements and related notes are presented to show the effects of the sale of the working and net revenue interests of our south Texas and Alabama properties.
The pro forma consolidated statements of operations for the year ended June 30, 2005 are presented to show the net loss from continuing operations as if the sale occurred effective July 1, 2004. The pro forma consolidated statements of operations for the six months ended December 31, 2005 are presented to show the net loss from continuing operations as if the sale occurred effective July 1, 2005. The pro forma condensed consolidated balance sheets are based on the assumption that the sale occurred effective December 31, 2005.
Pro forma data are based on assumptions and include adjustments as explained in the notes to the unaudited pro forma condensed consolidated financial statements. The pro forma data are not necessarily indicative of the financial results that would have been attained had the sale occurred on the dates referenced above and should not be viewed as indicative of operations in future periods. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the notes thereto and our Annual Report on Form 10-K for the year ended June 30, 2005 and our quarterly report on Form 10-Q for the quarter ended December 31, 2005.
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended June 30, 2005
| | | | | | | | | | | | |
| | | Contango
Historical | | | Pro Forma
Adjustments | | | Pro Forma
After Sale | |
REVENUES: | | | | | | | | | | | | |
Natural gas and oil sales | | $ | 4,330,440 | | | $ | (2,598,392 | )(a) | | $ | 1,732,048 | |
| | | | | | | | | | | | |
Total revenues | | | 4,330,440 | | | | (2,598,392 | ) | | | 1,732,048 | |
| | | |
EXPENSES: | | | | | | | | | | | | |
Operating expenses | | | 506,943 | | | | (334,031 | )(b) | | | 172,912 | |
Exploration expenses | | | 6,607,049 | | | | (294,806 | )(c) | | | 6,312,243 | |
Depreciation, depletion and amortization | | | 1,232,624 | | | | (589,026 | )(d) | | | 643,598 | |
Impairment of natural gas and oil properties | | | 236,537 | | | | — | | | | 236,537 | |
General and administrative expense | | | 3,570,957 | | | | — | | | | 3,570,957 | |
| | | | | | | | | | | | |
Total expenses | | | 12,154,110 | | | | (1,217,863 | ) | | | 10,936,247 | |
| | | | | | | | | | | | |
LOSS FROM CONTINUING OPERATIONS | | | (7,823,670 | ) | | | (1,380,529 | ) | | | (9,204,199 | ) |
| | | |
Interest expense | | | (71,506 | ) | | | | | | | (71,506 | ) |
Interest income | | | 431,803 | | | | — | | | | 431,803 | |
Gain on sale of marketable securities | | | 705,147 | | | | — | | | | 705,147 | |
| | | | | | | | | | | | |
LOSS FROM CONTINUING | | | | | | | | | | | | |
OPERATIONS BEFORE INCOME TAXES | | | (6,758,226 | ) | | | (1,380,529 | ) | | | (8,138,755 | ) |
| | | |
Benefit for income taxes | | | (2,350,257 | ) | | | (483,185 | )(e) | | | (2,833,442 | ) |
| | | | | | | | | | | | |
LOSS FROM CONTINUING OPERATIONS | | | (4,407,969 | ) | | | (897,344 | ) | | | (5,305,313 | ) |
| | | |
Preferred stock dividends | | | 420,000 | | | | — | | | | 420,000 | |
| | | | | | | | | | | | |
NET LOSS FROM CONTINUING OPERATIONS | | $ | (4,827,969 | ) | | $ | (897,344 | ) | | $ | (5,725,313 | ) |
| | | | | | | | | | | | |
LOSS FROM CONTINUING OPERATIONS PER SHARE: | | | | | | | | | | | | |
BASIC: | | $ | (0.37 | ) | | | | | | $ | (0.44 | ) |
| | | | | | | | | | | | |
DILUTED: | | $ | (0.37 | ) | | | | | | $ | (0.44 | ) |
| | | | | | | | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | | | | | | | | | | | | |
Basic | | | 13,089,332 | | | | | | | | 13,089,332 | |
| | | | | | | | | | | | |
Diluted | | | 13,089,332 | | | | | | | | 13,089,332 | |
| | | | | | | | | | | | |
The accompanying notes to unaudited pro forma condensed consolidated
financial statements are an integral part of these statements.
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended December 31, 2005
| | | | | | | | | | | | |
| | | Contango
Historical | | | Pro Forma
Adjustments | | | Pro Forma
After Sale | |
REVENUES: | | | | | | | | | | | | |
Natural gas and oil sales | | $ | 3,010,274 | | | $ | (2,094,468 | )(f) | | $ | 915,806 | |
| | | | | | | | | | | | |
Total revenues | | | 3,010,274 | | | | (2,094,468 | ) | | | 915,806 | |
| | | |
EXPENSES: | | | | | | | | | | | | |
Operating expenses | | | 279,489 | | | | (201,887 | )(g) | | | 77,602 | |
Exploration expenses | | | 1,919,411 | | | | (1,185,308 | )(h) | | | 734,103 | |
Depreciation, depletion and amortization | | | 673,857 | | | | (361,455 | )(i) | | | 312,402 | |
General and administrative expense | | | 2,021,974 | | | | — | | | | 2,021,974 | |
| | | | | | | | | | | | |
Total expenses | | | 4,894,731 | | | | (1,748,650 | ) | | | 3,146,081 | |
| | | | | | | | | | | | |
LOSS FROM CONTINUING OPERATIONS | | | (1,884,457 | ) | | | (345,818 | ) | | | (2,230,275 | ) |
| | | |
Interest expense | | | (192 | ) | | | — | | | | (192 | ) |
Interest income | | | 399,368 | | | | — | | | | 399,368 | |
Gain on sale of assets and other | | | 241,686 | | | | — | | | | 241,686 | |
| | | | | | | | | | | | |
LOSS FROM CONTINUING | | | | | | | | | | | | |
OPERATIONS BEFORE INCOME TAXES | | | (1,243,595 | ) | | | (345,818 | ) | | | (1,589,413 | ) |
| | | |
Benefit for income taxes | | | (506,521 | ) | | | (121,036 | )(e) | | | (627,557 | ) |
| | | | | | | | | | | | |
LOSS FROM CONTINUING OPERATIONS | | | (737,074 | ) | | | (224,782 | ) | | | (961,856 | ) |
| | | |
Preferred stock dividends | | | 301,000 | | | | — | | | | 301,000 | |
| | | | | | | | | | | | |
NET LOSS FROM CONTINUING OPERATIONS | | $ | (1,038,074 | ) | | $ | (224,782 | ) | | $ | (1,262,856 | ) |
| | | | | | | | | | | | |
LOSS FROM CONTINUING OPERATIONS PER SHARE: | | | | | | | | | | | | |
BASIC: | | $ | (0.07 | ) | | | | | | $ | (0.09 | ) |
| | | | | | | | | | | | |
DILUTED: | | $ | (0.07 | ) | | | | | | $ | (0.09 | ) |
| | | | | | | | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | | | | | | | | | | | | |
Basic | | | 14,586,862 | | | | | | | | 14,586,862 | |
| | | | | | | | | | | | |
Diluted | | | 14,586,862 | | | | | | | | 14,586,862 | |
| | | | | | | | | | | | |
The accompanying notes to unaudited pro forma condensed consolidated
financial statements are an integral part of these statements.
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 2005
| | | | | | | | | | | | | | |
| | | Contango
Historical | | Pro Forma
Adj. (1) | | | Pro Forma
Adj. (2) | | | Pro Forma
After Sale |
| Assets | | | | | | | | | | | | | | |
Cash and cash equivalents and short-term investments | | $ | 23,012,829 | | $ | 11,122,805 | | | $ | — | | | $ | 34,135,634 |
Other current assets | | | 1,656,845 | | | — | | | | — | | | | 1,656,845 |
| | | | | | | | | | | | | | |
Total current assets | | | 24,669,674 | | | 11,122,805 | | | | — | | | | 35,792,479 |
| | | | |
Net property and equipment | | | 26,175,466 | | | (4,562,333 | ) | | | (12,991 | ) | | $ | 21,600,142 |
Other assets | | | 11,408,997 | | | — | | | | — | | | | 11,408,997 |
| | | | | | | | | | | | | | |
Total assets | | $ | 62,254,137 | | $ | 6,560,472 | | | $ | (12,991 | ) | | $ | 68,801,618 |
| | | | | | | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | |
Current liabilities | | $ | 1,196,236 | | $ | 10,000 | | | $ | — | | | $ | 1,206,236 |
Income taxes payable | | | — | | | 1,784,938 | | | | — | | | | 1,784,938 |
| | | | | | | | | | | | | | |
Total current liabilities | | | 1,196,236 | | | 1,794,938 | | | | — | | | | 2,991,174 |
Asset Retirement Obligation | | | 11,093 | | | — | | | | (11,093 | ) | | | — |
| | | | | | | | | | | | | | |
Total liabilities | | | 1,207,329 | | | 1,794,938 | | | | (11,093 | ) | | | 2,991,174 |
Stockholders’ equity | | | 61,046,808 | | | 4,765,534 | | | | (1,898 | ) | | | 65,810,444 |
| | | | | | | | | | | | | | |
Total liabilities and stockholders equity | | $ | 62,254,137 | | $ | 6,560,472 | | | $ | (12,991 | ) | | $ | 68,801,618 |
| | | | | | | | | | | | | | |
The accompanying notes to unaudited pro forma condensed consolidated
financial statements are an integral part of these statements.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The unaudited pro forma consolidated statements of operations for the year ended June 30, 2005, are based on our audited financial statements for the year ended June 30, 2005 and the adjustments and assumptions described below.
Pro Forma Adjustments
The unaudited pro forma consolidated statements of operations for the year ended June 30, 2005 reflect the following adjustments:
| | a. | Removal of the natural gas and oil sales associated with our south Texas and Alabama natural gas and oil interests. |
| | b. | Removal of the operating expenses associated with our south Texas and Alabama natural gas and oil interests. |
| | c. | Removal of the dry hole costs and geological & geophysical costs associated with our south Texas and Alabama natural gas and oil interests. |
| | d. | Removal of the depreciation, depletion and amortization expense (“DD&A”) associated with our south Texas and Alabama natural gas and oil interests. |
| | e. | Recording of a pro forma income tax provision, assuming a 35% rate, based on the pro forma change in loss from continuing operations before income taxes. |
The unaudited pro forma consolidated statements of operations for the six months ended December 31, 2005 and unaudited pro forma condensed consolidated balance sheets as of December 31, 2005 are based on our unaudited financial statements for the six months ended December 31, 2005 and the adjustments and assumptions described below.
Pro Forma Adjustments
The unaudited pro forma consolidated statements of operations for the six months ended December 31, 2005 reflect the following adjustments:
| | f. | Removal of the natural gas and oil sales associated with our south Texas and Alabama natural gas and oil interests. |
| | g. | Removal of the operating expenses associated with our south Texas and Alabama natural gas and oil interests. |
| | h. | Removal of the dry hole costs and geological & geophysical costs associated with our south Texas and Alabama natural gas and oil interests. |
| | i. | Removal of the depreciation, depletion and amortization expense (“DD&A”) associated with our south Texas and Alabama natural gas and oil interests. |
The unaudited pro forma balance sheet reflects the following adjustments:
| | 1. | Recording of the proceeds from the sale of our south Texas and Alabama natural gas and oil interests, transaction costs, and primary legal and accounting fees, relating to the sale and removal of associated net proved property basis with the offsetting gain, net of applicable taxes, to retained earnings. |
| | 2. | Removal of plug and abandonment obligations associated with our south Texas and Alabama natural gas and oil as a result of the sale. |
