Exhibit 99.2
Triangle Petroleum Corporation
Pro Forma Consolidated Statement of Operations and Comprehensive Income (Loss)
For the Fiscal Year Ended January 31, 2014
(In thousands, except share data - Unaudited)
|
| Triangle |
| Acquired |
| Pro Forma |
| Triangle |
| ||||
|
| Historical |
| Properties |
| Adjustments |
| Pro Forma |
| ||||
|
|
|
| (a) |
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| ||||
REVENUES: |
|
|
|
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|
|
|
|
| ||||
Oil and natural gas sales |
| $ | 160,548 |
| $ | 39,359 |
| $ | — |
| $ | 199,907 |
|
Oilfield services |
| 98,199 |
| — |
| — |
| 98,199 |
| ||||
Total revenues |
| 258,747 |
| 39,359 |
| — |
| 298,106 |
| ||||
EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
Production taxes |
| 18,006 |
| 3,456 |
| — |
| 21,462 |
| ||||
Lease operating expenses |
| 14,454 |
| 9,495 |
| — |
| 23,949 |
| ||||
Gathering, transportation and processing |
| 4,302 |
| 600 |
| — |
| 4,902 |
| ||||
Depreciation and amortization |
| 57,048 |
| — |
| 3,783 | (b) | 60,831 |
| ||||
Accretion and other asset retirement obligation expenses |
| 1,018 |
| — |
| 36 | (b) | 1,054 |
| ||||
Oilfield services |
| 82,327 |
| — |
| — |
| 82,327 |
| ||||
General and administrative: |
|
|
|
|
|
|
| — |
| ||||
Stock-based compensation |
| 7,830 |
| — |
| — |
| 7,830 |
| ||||
Salaries and benefits |
| 17,299 |
| — |
| — |
| 17,299 |
| ||||
Other general and administrative |
| 9,797 |
| — |
| — |
| 9,797 |
| ||||
Total operating expenses |
| 212,081 |
| 13,551 |
| 3,819 |
| 229,451 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
INCOME (LOSS) FROM OPERATIONS |
| 46,666 |
| 25,808 |
| (3,819 | ) | 68,655 |
| ||||
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|
|
|
|
|
|
|
| ||||
OTHER INCOME (EXPENSE): |
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|
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|
|
|
|
|
| ||||
Gain on equity investment derivative |
| 39,785 |
| — |
| — |
| 39,785 |
| ||||
Gain (loss) from derivative activities |
| 1,082 |
| — |
| — |
| 1,082 |
| ||||
Interest expense |
| (7,686 | ) | — |
| (3,444 | )(c) | (11,130 | ) | ||||
Interest income |
| 200 |
| — |
| — |
| 200 |
| ||||
Other income (expense) |
| 1,374 |
| — |
| — |
| 1,374 |
| ||||
Total other income (expense) |
| 34,755 |
| — |
| (3,444 | ) | 31,311 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
NET INCOME (LOSS) BEFORE INCOME TAXES |
| 81,421 |
| 25,808 |
| (7,263 | ) | 99,966 |
| ||||
Income tax provision |
| (7,941 | ) | — |
| (7,633 | )(d) | (15,574 | ) | ||||
NET INCOME (LOSS) |
| $ | 73,480 |
| $ | 25,808 |
| $ | (14,896 | ) | $ | 84,392 |
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| ||||
Net income per common share outstanding: |
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|
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|
|
|
|
| ||||
Basic |
| $ | 1.07 |
|
|
|
|
| $ | 1.23 |
| ||
Diluted |
| $ | 0.91 |
|
|
|
|
| $ | 1.04 |
| ||
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|
| ||||
Weighted average common shares outstanding: |
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|
|
|
|
|
|
|
| ||||
Basic |
| 68,579 |
|
|
|
|
| 68,579 |
| ||||
Diluted |
| 84,558 |
|
|
|
|
| 84,558 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
COMPREHENSIVE INCOME (LOSS): |
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|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 73,480 |
| $ | 25,808 |
| $ | (14,896 | ) | $ | 84,392 |
|
Other comprehensive income (loss) |
| — |
| — |
| — |
| — |
| ||||
Total comprehensive income (loss) |
| $ | 73,480 |
| $ | 25,808 |
| $ | (14,896 | ) | $ | 84,392 |
|
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
Triangle Petroleum Corporation
Pro Forma Consolidated Statement of Operations and Comprehensive Income
For the Six Months Ended July 31, 2014
(In thousands, except share data - Unaudited)
|
| Triangle |
| Acquired |
| Pro Forma |
| Triangle |
| ||||
|
| Historical |
| Properties |
| Adjustments |
| Pro Forma |
| ||||
|
|
|
| (a) |
|
|
|
|
| ||||
REVENUES: |
|
|
|
|
|
|
|
|
| ||||
Oil, natural gas and natural gas liquids sales |
| $ | 141,340 |
| $ | 11,435 |
| $ | — |
| $ | 152,775 |
|
Oilfield services |
| 100,431 |
| — |
| — |
| 100,431 |
| ||||
Total revenues |
| 241,771 |
| 11,435 |
| — |
| 253,206 |
| ||||
EXPENSES: |
|
|
|
|
|
|
|
|
| ||||
Production taxes |
| 15,025 |
| 1,027 |
| — |
| 16,052 |
| ||||
Lease operating expenses |
| 11,424 |
| 2,938 |
| — |
| 14,362 |
| ||||
Gathering, transportation and processing |
| 7,535 |
| 331 |
| — |
| 7,866 |
| ||||
Depreciation and amortization |
| 47,884 |
| — |
| 2,239 | (b) | 50,123 |
| ||||
Accretion of asset retirement obligations |
| 175 |
| — |
| 18 | (b) | 193 |
| ||||
Oilfield services |
| 71,264 |
| — |
| — |
| 71,264 |
| ||||
General and administrative: |
|
|
|
|
|
|
|
|
| ||||
Stock-based compensation |
| 3,815 |
| — |
| — |
| 3,815 |
| ||||
Salaries and benefits |
| 12,794 |
| — |
| — |
| 12,794 |
| ||||
Other general and administrative |
| 10,883 |
| — |
| — |
| 10,883 |
| ||||
Total operating expenses |
| 180,799 |
| 4,296 |
| 2,257 |
| 187,352 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
INCOME (LOSS) FROM OPERATIONS |
| 60,972 |
| 7,139 |
| (2,257 | ) | 65,854 |
| ||||
|
|
|
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|
|
|
|
|
| ||||
OTHER INCOME (EXPENSE): |
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|
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|
|
| ||||
Gain on equity investment derivatives |
| 2,920 |
| — |
| — |
| 2,920 |
| ||||
Loss from commodity derivative activities |
| (6,377 | ) | — |
| — |
| (6,377 | ) | ||||
Interest expense |
| (8,249 | ) | — |
| (1,435 | )(c) | (9,684 | ) | ||||
Loss from equity investment |
| 64 |
| — |
| — |
| 64 |
| ||||
Interest income |
| 107 |
| — |
| — |
| 107 |
| ||||
Other income |
| 7 |
| — |
| — |
| 7 |
| ||||
Total other income (expense) |
| (11,528 | ) | — |
| (1,435 | ) | (12,963 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
NET INCOME (LOSS) BEFORE INCOME TAXES |
| 49,444 |
| 7,139 |
| (3,692 | ) | 52,891 |
| ||||
Income tax provision |
| (20,350 | ) | — |
| (1,419 | )(d) | (21,769 | ) | ||||
NET INCOME (LOSS) |
| $ | 29,094 |
| $ | 7,139 |
| $ | (5,111 | ) | $ | 31,122 |
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| ||||
Net income per common share outstanding: |
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|
|
|
|
| ||||
Basic |
| $ | 0.34 |
|
|
|
|
| $ | 0.36 |
| ||
Diluted |
| $ | 0.30 |
|
|
|
|
| $ | 0.32 |
| ||
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|
| ||||
Weighted average common shares outstanding: |
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|
|
|
|
|
|
|
| ||||
Basic |
| 86,064 |
|
|
|
|
| 86,064 |
| ||||
Diluted |
| 103,511 |
|
|
|
|
| 103,511 |
| ||||
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|
|
|
|
| ||||
COMPREHENSIVE INCOME: |
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|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 29,094 |
| $ | 7,139 |
| $ | (5,111 | ) | $ | 31,122 |
|
Other comprehensive income (loss) |
| — |
| — |
| — |
| — |
| ||||
Total comprehensive income (loss) |
| $ | 29,094 |
| $ | 7,139 |
| $ | (5,111 | ) | $ | 31,122 |
|
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
Triangle Petroleum Corporation
Note to the Pro Forma Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
On June 30, 2014, Triangle USA Petroleum Corporation, a wholly-owned subsidiary of Triangle Petroleum Corporation, (collectively referred to herein as “Triangle” or the “Company”), acquired from Marathon Oil Company (“MRO”) certain oil and gas leaseholds and related producing properties located in Williams County, North Dakota, Sheridan County, Montana, and Roosevelt County, Montana comprising approximately 41,100 net acres and various other related rights, permits, contracts, equipment and other assets (the “Acquisition” of the “Acquired Properties”) for approximately $90.4 million in cash, which included a net downward adjustment of $9.6 million for certain pre-closing adjustments. Additional post-closing adjustments may be required. The effective date for the Acquisition was January 1, 2014.
We have not included an unaudited pro forma consolidated balance sheet herein as the Acquisition was fully reflected in the Company’s unaudited condensed consolidated balance sheet as of July 31, 2014, included in the Company’s Form 10-Q filed with the Securities and Exchange Commission on September 8, 2014. The unaudited pro forma consolidated statements of operations present the Acquisition as if it had occurred as of February 1, 2013. These unaudited pro forma consolidated statements of operations are not necessarily indicative of the results of operations that would have occurred had the Acquisition been effective on February 1, 2013. Additionally, future results may vary significantly from the results reflected in the unaudited pro forma consolidated statements of operations due to normal production declines, changes in prices, future transactions, and other factors. The Triangle historical results presented in the unaudited pro forma consolidated statement of operations for the six months ended July 31, 2014, include the results from the Acquired Properties for the month of July 31, 2014. Therefore, the adjustments presented for the Acquired Properties only reflect the activity for the five-month period from February 1, 2014 through June 30, 2014.
These unaudited pro forma consolidated statements of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended January 31, 2014, our Quarterly Report on Form 10-Q for the three months ended July 31, 2014, and the Statements of Operating Revenues and Direct Operating Expenses for the properties acquired by Triangle USA Petroleum Corporation for the year ended January 31, 2014, and for the six months ended July 31, 2014 (unaudited).
2. PRO FORMA ADJUSTMENTS TO THE CONSOLIDATED STATEMENT OF OPERATIONS
(a) Operating revenues and direct operating expenses of the Acquired Properties.
(b) Represents the increase in depreciation and amortization and accretion expense computed on a unit of production basis following the fair value allocation of the purchase price to proved and unproved oil and gas properties, as if the Acquisition was consummated on February 1, 2013.
(c) Represents the increase in interest expense resulting from additional borrowings on the Company’s credit facilities, net of incremental amounts of interest which would have been capitalized.
(d) Assumes an effective tax rate of approximately 41% on the incremental income before income taxes for the year ended January 31, 2014, and for the six months ended July 31, 2014. This reflects both the federal and state statutory income tax rates which were in effect during each of the periods presented.
3. PRO FORMA SUPPLEMENTAL OIL AND NATURAL GAS DISCLOSURES
The following pro forma standardized measure of the discounted net future cash flows and changes applicable to the Company’s proved reserves reflect the effect of the Acquisition on the Company’s standardized measure, as if the Acquisition was consummated on February 1, 2013. The future cash flows are discounted at 10% per year and assume continuation of existing economic conditions.
The standardized measure of discounted future net cash flows, in management’s opinion, should be examined with caution. The basis for this table is the reserve studies prepared by the Company’s reserve engineer, which contains imprecise estimates of quantities and rates of production of reserves. Revisions of previous year estimates can have a significant impact on these results. Also, exploration costs in one year may lead to significant discoveries in later years and may significantly change previous estimates of proved reserves and
their valuation. Therefore, the standardized measure of discounted future net cash flow is not necessarily indicative of the fair value of the Company’s proved oil and natural gas properties.
The data presented should not be viewed as representing the expected cash flow from or current value of, existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions. Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions. Actual future prices and costs are likely to be substantially different from the prices and costs utilized in the computation of reported amounts.
The following table provides a pro forma rollforward of the total proved reserves for the year ended January 31, 2014, as well as pro forma proved developed and proved undeveloped reserves at the beginning and end of the year, as if the Acquisition reflected occurred on February 1, 2013:
|
| Triangle Historical |
| Marathon Acquisition |
| Pro Forma |
| ||||||||||
|
| Crude Oil |
| Natural Gas |
| NGL |
| Crude Oil |
| Natural Gas |
| Crude Oil |
| Natural Gas |
| NGL |
|
|
| (Mbbls) |
| (MMcf) |
| (Mbbls) |
| (Mbbls) |
| (MMcf) |
| (Mbbls) |
| (MMcf) |
| (Mbbls) |
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Total proved reserves at January 31, 2013 |
| 12,539 |
| 12,585 |
| — |
| — |
| — |
| 12,539 |
| 12,585 |
| — |
|
Revisions of previous estimates |
| 2,727 |
| (859 | ) | 1,762 |
| 84 |
| (73 | ) | 2,811 |
| (932 | ) | 1,762 |
|
Purchase of reserves |
| 6,836 |
| 4,714 |
| 690 |
| 2,442 |
| 2,296 |
| 9,278 |
| 7,010 |
| 690 |
|
Extensions, discoveries and other additions |
| 12,059 |
| 11,064 |
| 1,599 |
| — |
| — |
| 12,059 |
| 11,064 |
| 1,599 |
|
Sale of reserves |
| (491 | ) | (374 | ) | — |
| — |
| — |
| (491 | ) | (374 | ) | — |
|
Production |
| (1,754 | ) | (626 | ) | (70 | ) | (417 | ) | (242 | ) | (2,171 | ) | (868 | ) | (70 | ) |
Total proved reserves at January 31, 2014 |
| 31,916 |
| 26,504 |
| 3,981 |
| 2,109 |
| 1,981 |
| 34,025 |
| 28,485 |
| 3,981 |
|
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Proved developed reserves: |
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|
|
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|
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|
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|
|
|
|
|
Beginning of year |
| 4,985 |
| 5,906 |
| — |
| — |
| — |
| 4,985 |
| 5,906 |
| — |
|
End of year |
| 13,734 |
| 10,930 |
| 1,440 |
| 2,109 |
| 1,981 |
| 15,843 |
| 12,911 |
| 1,440 |
|
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|
|
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|
|
|
|
|
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|
|
|
|
|
Proved undeveloped reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
| 7,555 |
| 6,679 |
| — |
| — |
| — |
| 7,555 |
| 6,679 |
| — |
|
End of year |
| 18,182 |
| 15,574 |
| 2,541 |
| — |
| — |
| 18,182 |
| 15,574 |
| 2,541 |
|
The pro forma standardized measure of discounted estimated future net cash flows was as follows as of January 31, 2014 (in thousands):
|
| Triangle |
| Marathon |
| Income Tax |
|
|
| ||||
|
| Historical |
| Acquisition |
| Adjustment |
| Pro Forma |
| ||||
|
|
|
|
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|
| ||||
Future cash inflows |
| $ | 3,252,079 |
| $ | 202,452 |
| $ | — |
| $ | 3,454,531 |
|
Future costs: |
|
|
|
|
|
|
|
|
| ||||
Production |
| (1,118,508 | ) | (118,894 | ) | — |
| (1,237,402 | ) | ||||
Development |
| (505,432 | ) | — |
| — |
| (505,432 | ) | ||||
Future income tax expense |
| (364,340 | ) | — |
| (5,150 | ) | (369,490 | ) | ||||
Future net cash flows |
|
|
|
|
|
|
|
|
| ||||
10% discount factor |
| (690,564 | ) | (26,970 | ) | 2,814 |
| (714,720 | ) | ||||
Standardized measure of discounted future net cash flows relating to proved reserves |
| $ | 573,235 |
| $ | 56,588 |
| $ | (2,336 | ) | $ | 627,487 |
|
The changes in the pro forma standardized measure of discounted estimated future net cash flows were as follows for the Company’s 2014 fiscal year (in thousands):
|
| Triangle |
| Marathon |
|
|
|
|
| ||||
|
| Historical |
| Acquisition |
| Adjustment |
| Pro Forma |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Standardized measure, beginning of period |
| $ | 211,352 |
| $ | — |
| $ | — |
| $ | 211,352 |
|
Extensions and discoveries, net of future production and development costs |
| 333,140 |
| — |
| — |
| 333,140 |
| ||||
Sales, net of production costs |
| (123,786 | ) | (25,816 | ) | — |
| (149,602 | ) | ||||
Previously estimated development costs incurred during the period |
| 66,724 |
| — |
| — |
| 66,724 |
| ||||
Revision of quantity estimates |
| 73,598 |
| — |
| — |
| 73,598 |
| ||||
Net change in prices, net of production costs | �� | 19,173 |
| 5,799 |
| — |
| 24,972 |
| ||||
Acquisition of reserves |
| 99,683 |
| 67,166 |
| — |
| 166,849 |
| ||||
Divestiture of reserves |
| (7,341 | ) | — |
| — |
| (7,341 | ) | ||||
Accretion of discount |
| 22,486 |
| 9,439 |
| — |
| 31,925 |
| ||||
Changes in future development costs |
| 7,699 |
| — |
| — |
| 7,699 |
| ||||
Change in income taxes |
| (91,161 | ) | — |
| (2,336 | ) | (93,497 | ) | ||||
Change in production rates, timing and other |
| (38,332 | ) | — |
| — |
| (38,332 | ) | ||||
Standardized measure, end of period |
| $ | 573,235 |
| $ | 56,588 |
| $ | (2,336 | ) | $ | 627,487 |
|