notes, but in no event later than May 1, 2015) in exchange for all then outstanding principal and accrued but unpaid interest on our 11 ¾% Senior Subordinated Notes due 2008. As of September 30, 2007 and December 31, 2006, we had outstanding $117.9 million and $111.3 million, respectively of indebtedness under our senior subordinated notes and $5.8 million and $2.2 million of accrued interest, respectively. Interest on the senior subordinated notes accrues at 11 ¾% per annum and is payable semi-annually in the form of additional senior subordinated notes. On April 30, 2007, we paid the accrued interest on the senior subordinated notes by issuing an additional $6.6 million in senior subordinated notes. During August 2007, in accordance with terms of the notes, the maturity date of our 11 ¾% Senior Subordinated Notes was extended to May 1, 2012.
The senior subordinated notes are senior subordinated unsecured obligations and are not guaranteed by any of our subsidiaries. The senior subordinated notes are subordinate in right of payment to the senior notes and are effectively subordinated to all indebtedness and other liabilities of our subsidiaries, including indebtedness under our bank credit facility. Under the terms of the senior subordinated notes, a cross-default provision is provided, where a default or acceleration of any indebtedness or guarantee of the Company, aggregating $5 million or more, results in a default for purposes of the senior subordinated notes. Pursuant to the terms of the senior subordinated notes, under certain conditions, a defined change of control may accelerate the maturity date and require the Company to redeem the senior subordinated notes at 101% of the aggregate principal amount plus accrued interest.
The provision (benefit) for income taxes for the periods presented consisted of the following (in thousands):
Beginning in 2001, we established a valuation allowance which we increased periodically to reflect the uncertainty about the realization of the deferred tax asset. These increases in our valuation allowance are based on uncertainty surrounding our ability to utilize the entire balance of our deferred tax assets based on an analysis of whether we are more likely than not to receive such a benefit and if so, to what extent. During the nine months ended September 30, 2007, we increased our valuation allowance by $7.5 million to $26.6 million based on increases in tax assets in excess of deferred tax liabilities.
On January 1, 2007, we adopted the provisions of FIN 48, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. FIN 48 provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely than-not” of being sustained if the position were to be challenged by a taxing authority. This interpretation impacts our tax position, taken in previous years, with regard to a portion of our reported net operating loss carryovers, or NOL carryovers, available to provide future income tax benefit. We determined that it is more likely than not, that our tax position regarding an immaterial portion of our NOL carryovers will not be sustained upon examination. The tax impact upon adoption is a $2.3 million reduction in the tax benefit of our NOL carryovers, as well as an increase of $1.8 million in tax benefit of increased property. The valuation allowance applicable to the adjustment is correspondingly reduced resulting in no net adjustment to the opening balance of retained earnings as a result of our adoption of FIN 48. Our policy is to recognize accrued interest related to unrecognized tax benefits in interest expense and penalties as general and administrative expense; however, no provisions for interest and or penalties were recorded because the changes impacted years with no taxable income. The Company remains subject to examination by federal and various state jurisdictions for tax years 2001 through 2006.
6. COMMITMENTS AND CONTINGENCIES
Contingent Receivables. The Company engaged a consulting firm to audit a gas processing plant utilized in South Texas. Based on the audit findings, the Company believes the gas processing plant used incorrect volumes to calculate natural gas liquids and therefore, owes the Company additional revenues. However, we believe any revenue due to us may be partially offset by a reciprocal adjustment to residue gas. The Company, at this time, is unable to estimate the net adjustment resulting from the audit findings and accordingly, has not reflected the adjustment in the financial statements. Upon finalization of the audit findings, any adjustment related to the audit findings will be recorded in the Company’s financial statements.
Contingent Liabilities. From time to time, we may be a party to various legal proceedings and regulatory matters arising in the ordinary course of business. Currently, we are a party to litigation arising in the ordinary course of business. While we cannot determine the ultimate liability with respect to all of these matters, management does not expect these matters to have a material adverse effect on our business, financial condition, results of operations or cash flows.
During 2005, we entered into employment agreements with our named officers. During 2006, we entered into one additional employment agreement due to the naming of a new officer and amended the other existing employment agreements. During the first quarter of 2007, two employment contracts terminated in connection with the resignation of two of the company’s officers.
Each employment agreement has an initial term of three years, but will automatically be extended for successive two-year terms on the anniversary date of each year beginning on the second anniversary date of the employee contract unless either party gives not less than 90 days written notice that such party desires not to renew the employment agreement.
Pursuant to the employment agreements, in the event an officer is terminated by us for “cause”, he will receive his accrued, but unpaid compensation, which we refer to as Accrued Obligations, and the continuation of any benefits to the extent required by ERISA. If an officer’s employment with us is terminated by reason of his death or “disability”, we will pay him, or his estate, the amount of compensation he would have otherwise received if his employment had not terminated for a period of six months following the officer’s death or disability. The employment agreements further provide that, if an officer is terminated by us without “cause” or if an officer terminates his employment for “good reason”, we will (i) pay the officer the Accrued Obligations, (ii) pay the officer his current rate of “total compensation” for the remaining term of the employment agreement, and (iii) continue to provide the officer life insurance, disability, health, and other benefits for a period of 12 months, or such longer period as required by ERISA, following his termination. Finally, if an officer’s employment with us terminates without cause or for good reason within one year of a “change in control”, we will provide the officer, in addition to the benefits described above in clauses (i) and (ii) in the case of a termination without cause or for good reason, (x) a lump sum cash payment equal to one times the officer’s current annual rate of “total compensation” (two times such amount in the case of our Chief Executive Officer), and (y) the continuation of the officer’s life insurance, disability, health and other benefits for a period of 24 months, or such longer period as required by ERISA, following his termination.
On May 20, 2005, we adopted an equity incentive plan for certain of our employees and directors, which we amended and restated in December 2005. We refer to this plan as the 2005 Incentive Plan. The purpose of the 2005 Incentive Plan was to advance our interests by encouraging and enabling a larger personal proprietary interest in us by certain key employees and directors. The 2005 Incentive Plan provides for payment of aggregate awards of up to 13.5% of our “Total Eligible Enterprise Value,” which is defined in the 2005 Incentive Plan as the amount by which the present value of the consideration payable to us or our security holders in connection with a “Sale of Ascent,” as defined in the plan, exceeds our “Consolidated Funded Debt,” as defined in the plan. Upon consummation of any Sale of Ascent, all awards granted under the 2005 Incentive Plan become fully vested so long as the holder is still employed by us or in our service. All vested awards are payable in cash or in the same form of consideration received by us or our security holders in such sale, as determined by the committee administering the 2005 Incentive Plan.
No amounts will be payable to the 2005 Incentive Plan participants unless a Sale of Ascent occurs under the 2005 Incentive Plan, if ever.
The Company has not recognized a liability or compensation expense in its consolidated financial statements for the awards issued under the 2005 Incentive Plan due to the contingent nature of the awards. The Company continues to evaluate the probability of a defined Sale of Ascent.
On April 11, 2007, our board of directors adopted a retention bonus plan and granted awards of $0.6 million under the plan to certain key employees. Pursuant to the terms of the plan, awarded bonuses will be payable to employees upon the earliest to occur of
June 30, 2008, if such employee is still an employee of the Company on that date; or upon the employee’s termination from employment by us without cause or by the employee for good reason, as defined by the retention bonus plan. If an employee’s employment is terminated at any time prior to June 30, 2008 for cause, by the employee without good reason, or due to such employee’s death or disability, the employee will have no right to any retention bonus.
7. SUBSEQUENT EVENTS
On October 16, 2007, RAM Energy Resources, Inc. (“RAM”) executed a definitive agreement to acquire us. Consideration for the estimated acquisition price of $289.5 million will be a combination of $185.0 million in cash; a minimum of 20.0 million shares to a maximum of 20.5 million shares of RAM common stock, which is dependent on the price of RAM common stock as defined in the agreement; and 6.2 million RAM warrants. The transaction has been approved by our board of directors and by a majority of our common and preferred stockholders have indicated their intent to vote in favor of the merger. RAM’s board of directors has unanimously approved the transaction and a majority of RAM’s outstanding voting shareholders have indicated their intent to vote in favor of the transaction and the issuance of the shares necessary for a portion of the consideration. The transaction was closed on November 29, 2007.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements of RAM Energy Resources, Inc., or RAM, are based on the historical financial statements of RAM and Ascent Energy Inc., or Ascent, adjusted to reflect (i) the issuance by RAM of 7.5 million shares of its common stock on February 13, 2007, which is referred to as the 2007 offering, and the application of the $28.4 million of net proceeds received from such issuance, and (ii) the acquisition of Ascent by RAM effected by the merger of RAM’s wholly owned subsidiary with and into Ascent, or the merger, along with our $375 million financing that was closed in conjunction therewith. The historical financial information for RAM was derived from its Annual and Quarterly Reports on Form 10-K, Form 10-K/A and Form 10-Q, for the year ended December 31, 2006, and for the nine months ended September 30, 2007. The historical financial information of Ascent was derived from its audited consolidated financial statements for the year ended December 31, 2006 and its unaudited consolidated financial statements for the nine months ended September 30, 2007. The following pro forma information has been prepared in accordance with the rules and regulations of the SEC and, accordingly, includes the effects of purchase accounting resulting from the merger. Upon completion of the merger, RAM caused Ascent to adopt the full cost method of accounting for exploration, development and production of oil and natural gas. The information below reflects the pro forma effect of this change in accounting principle. Otherwise, the pro forma information does not give effect to cost savings, synergies, or other adjustments that may result from the merger. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2007 reflects the merger as if it had occurred as of that date. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2006 and the nine months ended September 30, 2007 reflect the 2007 offering, the merger and the concurrent financing as if each had occurred on January 1, 2006. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the operating results or financial position of RAM that would have occurred if the 2007 offering, the merger and the concurrent financing had been completed as of the dates indicated, nor are they necessarily indicative of the future operating results or financial position of the combined company.
RAM has made an allocation of the purchase price to major categories of assets and liabilities acquired in the merger as reflected in the accompanying unaudited pro forma condensed consolidated financial statements, based on currently available information. The pro forma adjustments represent RAM’s determination of purchase accounting adjustments and are based on available information and certain assumptions that RAM believes to be reasonable. The purchase price allocated to certain assets of Ascent, principally to its property, plant and equipment, including components of such assets, may be subject to further adjustment based on additional information that may become available.
RAM Energy Resources, Inc. |
Pro Forma Combined Condensed Statement of Operations |
Year ended December 31, 2006 |
(in thousands, except shares and per share amounts) |
| | | | | | | | | |
| Historical | | Adjustments | | |
| RAM | | Ascent | | Combining(1) | | Financing(2) | | Pro Forma |
Revenues and Other Operating Income | | | | | | | | | |
Oil | $ 48,013 | | $ 37,821 | | $ - | | $ - | | $ 85,834 |
Natural gas | 14,232 | | 30,719 | | | | | | 44,951 |
NGLs | 5,770 | | 4,981 | | | | | | 10,751 |
Oil and natural gas sales | 68,015 | | 73,521 | | | | | | 141,536 |
Realized and unrealized gains (losses)
on derivatives | 1,589 | | 8,235 | | (6,517) | (a) | | | 3,307 |
Other | 640 | | - | | | | | | 640 |
| | | | | | | | | |
Total revenues and other operating income | 70,244 | | 81,756 | | (6,517) | | - | | 145,483 |
| | | | | | | | | |
Operating Expenses: | | | | | | | | | |
Oil & natural gas production and ad valorem taxes | 3,329 | | 3,636 | | | | | | 6,965 |
Oil & natural gas production expenses | 18,266 | | 13,228 | | | | | | 31,494 |
Exploration expense | - | | 14,398 | | (14,398) | (b) | | | - |
Amortization and depreciation | 13,252 | | 23,390 | | 8,994 | (c) | | | 45,636 |
Accretion expense | 535 | | 1,053 | | | | | | 1,588 |
Property impairments | - | | 1,768 | | (1,768) | (d) | | | - |
Share-based compensation | 2,308 | | - | | | | | | 2,308 |
General & administrative, overhead and other expenses, net of operator's overhead fees | 9,300 | | 13,107 | | (1,412) | (e) | | | 20,995 |
| | | | | | | | | |
Total operating expenses | 46,990 | | 70,580 | | (8,584) | | - | | 108,986 |
| | | | | | | | | |
Operating income (loss) | 23,254 | | 11,176 | | 2,067 | | - | | 36,497 |
| | | | | | | | | |
Other Income (Expense): | | | | | | | | | |
Interest income | 309 | | 918 | | | | | | 1,227 |
Interest expense | (17,050) | | (24,403) | | | | 1,253 | | (40,200) |
Other Expense | - | | - | | | | | | - |
| | | | | | | | | |
Income (Loss) Before Income Taxes | 6,513 | | (12,309) | | 2,067 | | 1,253 | | (2,476) |
| | | | | | | | | |
Income Tax Provision (Benefit) | 1,465 | | (569) | | (1,441) | (f) | - | | (545) |
| | | | | | | | | |
Net Income (Loss) | 5,048 | | (11,740) | | 3,508 | | 1,253 | | (1,931) |
Preferred Stock Dividends | - | | (3,332) | | 3,332 | (g) | - | | - |
| | | | | | | | | |
Net Income (Loss) Attributable to Common Shareholders | $ 5,048 | | $ (15,072) | | $ 6,840 | | $ 1,253 | | $ (1,931) |
| | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | |
Basic | $0.16 | | | | | | | | ($0.03) |
Diluted | $0.16 | | | | | | | | ($0.03) |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | |
Basic | 30,808,065 | | | | 26,283,339 | (h,i) | | | 57,091,404 |
Diluted | 32,105,885 | | | | 26,283,339 | (h,i) | | | 58,389,224 |
| | | | | | | | | |
| | | | | | | | | | | |
RAM Energy Resources, Inc. |
Pro Forma Combined Condensed Statement of Operations |
Nine Months ended September 30, 2007 |
(in thousands, except shares and per share amounts) |
| | | | | | | | | |
| Historical | | Adjustments | | |
| RAM | | Ascent | | Combining(1) | | Financing(2) | | Pro Forma |
Revenues and Other Operating Income | | | | | | | | | |
Oil | $ 35,022 | | $ 23,929 | | $ - | | $ - | | $ 58,951 |
Natural gas | 12,255 | | 18,999 | | | | | | 31,254 |
NGLs | 5,238 | | 2,989 | | | | | | 8,227 |
Oil and natural gas sales | 52,515 | | 45,917 | | | | | | 98,432 |
Realized and unrealized gains (losses) on derivatives | (2,437) | | (8,607) | | 6,476 | (a) | | | (4,568) |
Other | 395 | | - | | | | | | 395 |
| | | | | | | | | |
Total revenues and other operating income | 50,473 | | 37,310 | | 6,476 | | - | | 94,259 |
| | | | | | | | | |
Operating Expenses: | | | | | | | | | |
Oil & natural gas production and ad valorem taxes | 2,960 | | 2,857 | | | | | | 5,817 |
Oil & natural gas production expenses | 14,868 | | 9,837 | | | | | | 24,705 |
Exploration expense | - | | 1,636 | | (1,636) | (b) | | | - |
Amortization and depreciation | 11,467 | | 16,752 | | 3,926 | (c) | | | 32,145 |
Accretion expense | 436 | | 753 | | | | | | 1,189 |
Property impairments | - | | - | | - | (d) | | | - |
Share-based compensation | 702 | | - | | | | | | 702 |
General & administrative, overhead and other expenses, net of operator’s overhead fees | 7,348 | | 9,810 | | (1,056) | (e) | | | 16,102 |
| | | | | | | | | |
Total operating expenses | 37,781 | | 41,645 | | 1,234 | | - | | 80,660 |
| | | | | | | | | |
Operating income (loss) | 12,692 | | (4,335) | | 5,242 | | - | | 13,599 |
| | | | | | | | | |
Other Income (Expense): | | | | | | | | | |
Interest income | 877 | | 255 | | | | | | 1,132 |
Interest expense | (12,582) | | (21,434) | | | | 5,835 | | (28,181) |
Other Expense | - | | - | | | | | | - |
| | | | | | | | | |
Income (Loss) Before Income Taxes | 987 | | (25,514) | | 5,242 | | 5,835 | | (13,450) |
| | | | | | | | | |
Income Tax Provision (Benefit) | (4,105) | | (249) | | (5,237) | (f) | - | | (9,591) |
| | | | | | | | | |
Net Income (Loss) | 5,092 | | (25,265) | | 10,479 | | 5,835 | | (3,859) |
Preferred Stock Dividends | - | | (2,490) | | 2,490 | (g) | | | - |
| | | | | | | | | |
Net Income (Loss) Attributable to Common Shareholders | $ 5,092 | | $ (27,755) | | $ 12,969 | | $ 5,835 | | $ (3,859) |
| | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | |
Basic | $ 0.13 | | | | | | | | $ (0.07) |
Diluted | $ 0.13 | | | | | | | | $ (0.07) |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | |
Basic | 39,276,241 | | | | 18,783,339 | (h,i) | 58,059,580 | | |
Diluted | 39,399,262 | | | | 18,783,339 | (h,i) | 58,182,601 | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
RAM ENERGY RESOURCES, INC. |
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION |
| | | | | | | | | | |
Statements of Operations |
| | | | | | | | | | |
Note (1) -- | | | | | | | | |
| Adjustments to combine the entities and properties presented; adjustment of depreciation and amortization to consider carrying amounts after purchase allocations and application of the full cost method of accounting to acquired properties; interest on debt incurred or reduced by the transactions; adjustments to costs and expenses to give effect to contractual terms of the Ascent Merger; and adjustment of income taxes resulting from other adjustments. Such adjustments include: |
| | | | | | | | | | Nine Months |
| | | | | | | | Year Ended | | Ended |
| | | | | | | | December 31, | | September 30, |
| | | | | | | | 2006 | | 2007 |
| | | | | | | | (in thousands) |
| | | | | | | | | | |
(a) | Elimination of realized and unrealized derivative gains or | | | |
| losses of Ascent due to all derivative assets and | | | |
| liabilities assumed by sellers at date of merger | ($8,235) | | 8,607 |
| Ratio of RAM's realized and unrealized derivative gains | | | |
| or losses to oil and gas revenues applied to Ascent's oil | | | |
| and gas sales (derivative contracts similar to those of | | | |
| RAM will be put in place following the merger) | 1,718 | | (2,131) |
| | Adjustment | | | ($6,517) | | $6,476 |
| | | | | | | | | | |
(b) | Elimination of exploration expense to reflect full cost | | | |
| method of accounting: | | | (14,398) | | (1,636) |
| | | | | | | | | | |
(c) | Adjust depreciation and amortization to reflect changes in the asset values after acquisition: |
| | | | | | | | | | |
| | Acquired basis | | | $45,636 | | $32,145 |
| | Historical basis | | | 36,642 | | 28,219 |
| | Adjustment | | | 8,994 | | 3,926 |
| | | | | | | | | | |
(d) | Elimination of property impairment to reflect full cost | | | |
| method of accounting: | | | (1,768) | | - |
| | | | | | | | | | |
(e) | Adjustment to reflect capitalization of certain geological and geophysical costs associated with |
| development and exploration activities of internal staff to reflect full cost method of accounting. |
| | | | | | | | | | |
| | | | | | | | ($1,412) | | ($1,057) |
| | | | | | | | | | |
(f) | Income tax effect of adjustments to Pro Forma Income (loss) | | |
| before income taxes to RAM's historical effective rate: | ($1,441) | | ($5,237) |
| | | | | | | | | | |
(g) | Adjustments resulting from contractual requirements of the purchase and sale agreement |
| whereby Ascent's preferred stock and dividends are cancelled. | | |
| | | | | | | | $3,332 | | $1,630 |
| | | | | | | | | | |
(h) | Adjustment to give effect to shares issued in | | | |
| February, 2007 | 7,500 | | - |
| | | | | | | | | | |
(i) | Adjustment to give effect to shares issued to Ascent shareholders per terms of the merger |
| agreement: | | | | | | |
| | | | | | | | | | |
| Initial Parent Common Stock Number | 20,500 | | 20,500 |
| Hedge Contract Adjustment to shares issued | (1,717) | | (1,717) |
| | | | | | | | 18,783 | | 18,783 |
| | | | | | | | | | |
| | | | | | | | | | Nine Months |
| | | | | | | | Year Ended | | Ended |
| | | | | | | | December 31, | | September 30, |
| | | | | | | | 2006 | | 2007 |
Note (2) -- | | | | | | (in thousands) |
| Adjustments to interest expense due to merger financing: | | | |
| | | | | | | | | | |
| | Effect of new Financing at combined rate of | | | |
| | | 10.76% per annum | | | ($33,189) | | ($24,861) |
| | Interest on 11 1/2% senior notes due 2008 | (3,266) | | (2,449) |
| | Write-off and amortization of fees associated with | | | |
| | | Financing | | | (3,745) | | (870) |
| | | | | | | | (40,200) | | (28,181) |
| | Historical interest expense | | 41,453 | | 34,016 |
| | Adjustment | | | $1,253 | | $5,835 |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
RAM Energy Resources, Inc. |
Pro Forma Combined Condensed Balance Sheet |
At September 30, 2007 |
(in thousands) |
| | | | | | | | | |
| | Historical | | Adjustments | | |
| | RAM | | Ascent | | Combining(1) | | Financing(2) | | Pro Forma |
| ASSETS | | | | | | | | | |
| | | | | | | | | | |
| Current Assets | | | | | | | | | |
| Cash and cash equivalents | $ 26,986 | | $ 4,883 | | $ (201,718) | (a) | $ 177,466 | (a) | $ 7,617 |
| Accounts receivable: | | | | | | | | | |
| Oil and gas sales | 7,448 | | 5,630 | | | | | | 13,078 |
| Joint interest | 387 | | 428 | | | | | | 815 |
| Income taxes | 37 | | - | | | | | | 37 |
| Other | 325 | | 34 | | | | | | 359 |
| Derivative asset | - | | 846 | | (846) | (c) | | | - |
| Inventory | - | | 637 | | | | | | 637 |
| Prepaid expenses | 498 | | 340 | | | | | | 838 |
| Other current assets | 269 | | - | | | | | | 269 |
| | | | | | | | | | |
| Total current assets | 35,950 | | 12,798 | | (202,564) | | 177,466 | | 23,650 |
| | | | | | | | | | |
| Property and equipment (net) | 166,391 | | 194,334 | | 153,250 | (b) | | | 513,975 |
| Other assets | 3,831 | | 3,040 | | (2,223) | (c) | 5,009 | (a) | 7,713 |
| | | | | | | | 188 | (b) | |
| | | | | | | | (2,132) | (c) | |
| Total assets | $ 206,172 | | $ 210,172 | | $ (51,537) | | $ 180,531 | | $ 545,338 |
| | | | | | | | | | |
| Liabilities and Stockholders' Equity (Deficit) | | | | | | | | | |
| | | | | | | | | | |
| Current liabilities | | | | | | | | | |
| Accounts payable: | | | | | | | | | |
| Trade | $ 7,900 | | $ 2,859 | | $ 1,260 | (d) | $ - | | $ 12,019 |
| Oil & gas proceeds due others | 4,766 | | 3,996 | | - | | - | | 8,762 |
| Other | 348 | | - | | - | | - | | 348 |
| Related party | 40 | | - | | - | | - | | 40 |
| Accrued liabilities: | - | | 7,990 | | (3,315) | (d) | - | | 4,775 |
| | | | | | 100 | (e) | | | |
| Fair value of derivatives | 1,098 | | 3,310 | | (3,310) | (d) | - | | 1,098 |
| Other current liabilities | - | | 4,675 | | (4,675) | (d) | 188 | | 188 |
| Compensation | 682 | | - | | - | | - | | 682 |
| Interest | 1,846 | | 479 | | (479) | (d) | - | | 1,846 |
| Accrued abandonment costs | - | | 1,415 | | - | | - | | 1,415 |
| Income taxes payable | 402 | | - | | - | | - | | 402 |
| Long-term debt due within one year | 28,565 | | 249 | | | | - | | 28,814 |
| Total current liabilities | 45,647 | | 24,973 | | (10,419) | | 188 | | 60,389 |
| | | | | | | | | | |
| Senior notes | - | | 159,910 | | (159,910) | (d) | | | - |
| Bank credit facility and other long-term debt | 119,171 | | 84,384 | | (84,384) | (d) | 182,475 | (a) | 301,646 |
| Derivative obligation | 685 | | 13,383 | | (13,383) | (d) | - | | 685 |
| Other long-term debt due after one year | 2,612 | | 27,217 | | (27,217) | (d) | - | | 2,612 |
| Deferred and other income taxes | 23,162 | | 900 | | 42,199 | (d) | (810) | (b) | 65,451 |
| Liability for asset retirement obligation | 11,295 | | 8,774 | | - | | | | 20,069 |
| Commitments and contingencies | - | | 611 | | | | | | 611 |
| Stockholders' equity (deficit) | 3,600 | | (109,980) | | 103,842 | (d) | (1,322) | (b) | 93,875 |
| | | | | | 97,735 | (e) | | | |
| Total liabilities and stockholders' equity (deficit) | $ 206,172 | | $ 210,172 | | $ (51,537) | | $ 180,531 | | $ 545,338 |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
RAM ENERGY RESOURCES, INC. |
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION |
| | | | | | | | | |
Balance Sheet | | | | | | |
| | | | | | | | | |
(1) | Record the Ascent Acquisition as if consummated on September 30, 2007: |
| (a) | | Purchase price: | | | | |
| | | | Cash | | | | ($185,000) |
| | | | Working capital (as defined) adjustment | (2,190) |
| | | | Tax Burden Adjustment | | | 30 |
| | | | Hedge Contract Adjustment | | 15,882 |
| | | | | | | | | (171,278) |
| | | | Additional hedging liabilities to be settled | (30,440) |
| | | | | Total cash consideration | | (201,718) |
| | | | Accrue estimated costs of merger | | (1,260) |
| | | | | Total consideration | | | ($202,978) |
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| (b) | | Allocation to property and equipment: | | |
| | | | Purchase price - oil and natural gas properties | $306,644 |
| | | | Ascent - historical book basis | | 195,593 |
| | | | | Net increase in book basis | | 111,051 |
| | | | Deferred taxes on increased book basis | 42,199 |
| | | | | Increase (decrease) in assets | | $153,250 |
| | | | | | | | | |
| (c) | | Write-off assets assumed by seller: | | |
| | | | Derivative assets settled at closing | | ($846) |
| | | | Non-current derivative assets and deferred loan fees | |
| | | | | on indebtedness assumed by seller | | (2,223) |
| | | | | Increase (decrease) in assets | | ($3,069) |
| | | | | | | | | |
| | | | | Total net increase (decrease) in assets | ($51,537) |
| | | | | | | | | |
| (d) | | Accrued liabilities assumed by seller | | ($3,315) |
| | | Accrue direct costs of merger | | | 1,260 |
| | | Long-term derivative liabilities settled at closing | (21,368) |
| | | Indebtedness settled at closing | | | (271,990) |
| | | Increase in deferred tax liability due to write-up of oil and | |
| | | | natural gas properties | | | 42,199 |
| | | Equity of seller | | | | 103,842 |
| | | | net increase (decrease) in liabilities and equity | ($149,372) |
| | | | | | | | | |
| (e) | | Issue 18.783 million shares of equity @ $5.056 | |
| | | | Common stock | | | $103,657 |
| | | | Additional paid-in capital | | | (8,680) |
| | | Issue warrants on 6.2 million shares @$0.461 | 2,858 |
| | | Reduce additional paid-in capital by estimate of future | |
| | | | registration costs of stock issuance | | (100) |
| | | Accrued liabilities | | | | 100 |
| | | | | | | | | $97,835 |
| | | | | | | | | |
| | | | total net increase (decrease) in liabilities and equity | ($51,537) |
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(2) | Record net proceeds of Financing by RAM: | | | |
| | | | | | | | | |
| (a) | | Bank credit facility - $175 revolving credit, $200 term loan | $182,475 |
| | | Less costs and expenses | | | (5,009) |
| | | Net proceeds from the Financing | | $177,466 |
| | | | | | | | | |
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| (b) | | Deferred loan costs | | | $188 |
| | | Other accrued current liabilities | | (188) |
| | | | To record loan fees due in one year | | $ - |
| | | | | | | | | |
| (c) | | Write-off of deferred loan costs on prior bank credit facility | ($2,132) |
| | | tax effect at 38% | | | | (810) |
| | | Adjustment to accumulated deficit | | ($1,322) |
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