Exhibit 99.2
Magnum Hunter Resources Corporation
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements give effect to the sale by PRC Williston, LLC and Williston Hunter ND, LLC, both subsidiaries of Magnum Hunter Resources Corporation, (“the Company”), of their rights, title and interest in certain oil and gas properties and assets located in Burke, Renville, Bottineau and McHenry Counties, North Dakota, including operated working interests in approximately 30,000 acres and approximately 180 wells producing primarily from the Madison formation in the Williston Basin (the "ND Properties") to Enduro Operating, LLC for $44.1 million in cash on December 30, 2013, the closing date of the sale and the associated paydown of debt under the Company’s senior revolving credit facility (the “MHR Senior Revolving Credit Facility”).
The unaudited pro forma balance sheet as of September 30, 2013 is based on our unaudited consolidated balance sheet as of September 30, 2013, included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2013, and gives effect to the transaction described above as if it occurred on September 30, 2013.
The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2013 is based on our unaudited consolidated statement of operations for the nine months ended September 30, 2013, included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2013, and gives effect to the transaction described above as if it occurred on January 1, 2012.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2012 is based on our audited consolidated statement of operations for the year ended December 31, 2012, included in our Registration Statement on Form S-1, as amended on December 23, 2013 for the year ended December 31, 2012, and gives effect to the transaction described above as if it occurred on January 1, 2012.
The unaudited pro forma consolidated financial statements presented herein have been included as required by the rules of the Securities and Exchange Commission and are provided for informational purposes only. These unaudited pro forma consolidated financial statements should be read in conjunction with our historical consolidated financial statements and related notes for the periods presented.
The unaudited pro forma consolidated financial statements presented herein are based upon assumptions and include adjustments as explained in the notes to the unaudited pro forma consolidated financial statements, and the actual recording of the transaction could differ. The unaudited pro forma consolidated financial statements presented herein are not necessarily indicative of the financial results that would have occurred had the transaction described above occurred on the dates indicated and should not be viewed as indicative of operations in the future. However, management believes that the assumptions used provide a reasonable basis for presenting the significant effects of the transaction discussed above and that the pro forma adjustments give appropriate effect to those assumptions.
MAGNUM HUNTER RESOURCES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2013
(in thousands)
|
| | | | | | | | | | | | |
| | | Historical | | Pro Forma Adjustments | | Pro Forma |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 55,283 |
| | $ | 21,600 |
| A | $ | 76,883 |
|
| Accounts receivable | | 73,486 |
| | (1,949) |
| A | 71,537 |
|
| Derivative assets | | 1,079 |
| | - |
| | 1,079 |
|
| Inventory | | 11,957 |
| | (634) |
| A | 11,323 |
|
| Investments | | 2,237 |
| | - |
| | 2,237 |
|
| Prepaid expenses and other assets | | 4,732 |
| | - |
| | 4,732 |
|
| Assets held for sale - short term | | 10,380 |
| | - |
| | 10,380 |
|
| Total current assets | | 159,154 |
| | 19,017 |
| | 178,171 |
|
| Property and equipment: | | | | | | |
| Oil and natural gas properties | | 1,347,147 |
| | (81,136) |
| A | 1,266,011 |
|
| Accumulated depletion, depreciation, and amortization, and accretion | | (133,993) |
| | 22,811 |
| A | (111,182) |
|
| Total oil and natural gas properties, net | | 1,213,154 |
| | (58,325) |
| | 1,154,829 |
|
| Gas transportation, gathering, and processing equipment, net | | 258,797 |
| | (229) |
| A | 258,568 |
|
| Total property and equipment, net | | 1,471,951 |
| | (58,554) |
| | 1,413,397 |
|
| Other assets: | | | | | | |
| Deferred financing costs, net of amortization | | 21,169 |
| | - |
| | 21,169 |
|
| Derivatives and other assets | | 392 |
| | - |
| | 392 |
|
| Intangible assets, net | | 7,048 |
| | - |
| | 7,048 |
|
| Goodwill | | 30,602 |
| | - |
| | 30,602 |
|
| Assets held for sale | | 193,255 |
| | - |
| | 193,255 |
|
| Other assets | | 2,245 |
| | - |
| | 2,245 |
|
| Total assets | | $ | 1,885,816 |
| | $ | (39,537 | ) | | $ | 1,846,279 |
|
| | | | | | | |
The accompanying Notes are an integral part of these Unaudited Pro Forma Consolidated Financial Statements.
MAGNUM HUNTER RESOURCES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2013
(in thousands)
|
| | | | | | | | | | | | |
| | | Historical | | Pro Forma Adjustments | | Pro Forma |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
| Current liabilities: | | | | | | |
| Current portion of notes payable | | $ | 4,144 |
| | $ - |
| | $ | 4,144 |
|
| Accounts payable | | 148,754 |
| | (2,502) |
| A | 146,252 |
|
| Revenue payable | | 12,728 |
| | (2,325) |
| A | 10,403 |
|
| Accrued liabilities | | 57,898 |
| | - |
| | 57,898 |
|
| Derivative liabilities | | 5,913 |
| | - |
| | 5,913 |
|
| Liabilities associated with assets held for sale | | 16,139 |
| | - |
| | 16,139 |
|
| Other liabilities | | 7,336 |
| | (962) |
| A | 6,374 |
|
| Total current liabilities | | 252,912 |
| | (5,789) |
| | 247,123 |
|
| Other liabilities: | | | | | | |
| Long-term debt | | 749,131 |
| | (22,500) |
| A | 726,631 |
|
| Asset retirement obligation | | 19,902 |
| | (3,611) |
| A | 16,291 |
|
| Deferred tax liability | | 32,858 |
| | - |
| | 32,858 |
|
| Derivative liabilities | | 75,997 |
| | - |
| | 75,997 |
|
| Other long term liabilities | | 2,450 |
| | - |
| | 2,450 |
|
| Long-term liabilities associated with assets held for sale | | 14,601 |
| | - |
| | 14,601 |
|
| Total liabilities | | 1,147,851 |
| | (31,900) |
| | 1,115,951 |
|
| | | | | | | |
| Redeemable preferred stock: | | | | | | |
| Series C Cumulative Perpetual Preferred Stock | | 100,000 |
| | - |
| | 100,000 |
|
| Series A Convertible Preferred Units of Eureka Hunter Holdings, LLC | | 128,871 |
| | - |
| | 128,871 |
|
| | | | | | | |
| Shareholders’ equity: | | | | | | |
| Preferred Stock, 10,000,000 shares authorized | | | | | | |
| Series D Cumulative Perpetual Preferred Stock | | 221,244 |
| | - |
| | 221,244 |
|
| Series E Cumulative Convertible Preferred Stock | | 95,069 |
| | - |
| | 95,069 |
|
| Common stock | | 1,716 |
| | - |
| | 1,716 |
|
| Additional paid in capital | | 728,551 |
| | - |
| | 728,551 |
|
| Accumulated deficit | | (525,157) |
| | (7,637) |
| A | (532,794) |
|
| Accumulated other comprehensive loss | | (16,910) |
| | - |
| | (16,910) |
|
| Treasury stock, at cost: | | | | | | |
| Series E Cumulative Preferred Stock | | (2,030) |
| | - |
| | (2,030) |
|
| Common stock | | (1,914) |
| | - |
| | (1,914) |
|
| Total Magnum Hunter Resources Corporation shareholders’ equity | | 500,569 |
| | (7,637) |
| | 492,932 |
|
| Non-controlling interest | | 8,525 |
| | - |
| | 8,525 |
|
| Total shareholders’ equity | | 509,094 |
| | (7,637) |
| | 501,457 |
|
| Total liabilities and shareholders’ equity | | $ | 1,885,816 |
| | $ | (39,537 | ) | | $ | 1,846,279 |
|
The accompanying Notes are an integral part of these Unaudited Pro Forma Consolidated Financial Statements.
MAGNUM HUNTER RESOURCES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013
(in thousands, except share and per share data)
|
| | | | | | | | | | | | |
| | | Historical | | Pro Forma Adjustments | | Pro Forma |
| Revenue: | | | | | | |
| Oil and gas sales | | $ | 138,242 |
| | $ | (10,733 | ) | B | $ | 127,509 |
|
| Gas transportation, gathering, and processing | | 42,415 |
| | - |
| | 42,415 |
|
| Oilfield services | | 13,728 |
| | - |
| | 13,728 |
|
| Gain on sale of assets and other revenue | | 789 |
| | - |
| | 789 |
|
| Total revenue | | 195,174 |
| | (10,733) |
| | 184,441 |
|
| | | | | | | |
| Expenses: | | | | | | |
| Lease operating expenses | | 38,027 |
| | (7,235) |
| B | 30,792 |
|
| Severance taxes and marketing | | 12,313 |
| | (647) |
| B | 11,666 |
|
| Exploration and abandonments | | 73,402 |
| | - |
| | 73,402 |
|
| Impairment of proved oil and gas properties | | 9,968 |
| | (8,497) |
| B | 1,471 |
|
| Gas transportation, gathering, and processing | | 35,830 |
| | - |
| | 35,830 |
|
| Oilfield services | | 11,928 |
| | - |
| | 11,928 |
|
| Depreciation, depletion, amortization, and accretion | | 71,956 |
| | (4,969) |
| B | 66,987 |
|
| Loss on sale of assets | | 42,116 |
| | 29 |
| B | 42,145 |
|
| General and administrative | | 58,559 |
| | (677) |
| B | 57,882 |
|
| Total expenses | | 354,099 |
| | (21,996) |
| | 332,103 |
|
| | | | | | | |
| Operating loss | | (158,925) |
| | 11,263 |
| | (147,662) |
|
| | | | | | | |
| Other income (expense): | | | | | | |
| Interest income | | 172 |
| | - |
| | 172 |
|
| Interest expense | | (53,203) |
| | 518 |
| C | (52,685) |
|
| Loss on derivative contracts | | (30,644) |
| | - |
| | (30,644) |
|
| Other income | | 7,860 |
| | (6) |
| B | 7,854 |
|
| Total other income (expense) | | (75,815) |
| | 512 |
| | (75,303) |
|
| Loss from continuing operations before income tax | | (234,740) |
| | 11,775 |
| | (222,965) |
|
| Income tax benefit | | 40,944 |
| | - |
| D | 40,944 |
|
| Loss from continuing operations | | $ | (193,796 | ) | | 11,775 |
| | $ | (182,021 | ) |
| Weighted average number of common shares outstanding, basic and diluted | | 169,752,042 |
| | | | 169,752,042 |
|
| Loss from continuing operations per share, basic and diluted | | $ | (1.14 | ) | | | | $ | (1.07 | ) |
The accompanying Notes are an integral part of these Unaudited Pro Forma Consolidated Financial Statements.
MAGNUM HUNTER RESOURCES CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(in thousands, except share and per share data)
|
| | | | | | | | | |
| | | Historical | Pro Forma Adjustments | | Pro Forma |
| Revenue: | | | | | |
| Oil and gas sales | | $ | 114,659 |
| (13,080) | B | $ | 101,579 |
|
| Gas transportation, gathering, and processing | | 13,040 |
| - | | 13,040 |
|
| Oilfield services | | 12,333 |
| - | | 12,333 |
|
| Other revenue | | 324 |
| (62) | B | 262 |
|
| Total revenue | | 140,356 |
| (13,142) | | 127,214 |
|
| | | | | | |
| Expenses: | | | | | |
| Lease operating expenses | | 26,839 |
| (7,328) | B | 19,511 |
|
| Severance taxes and marketing | | 7,854 |
| (713) | B | 7,141 |
|
| Exploration and abandonments | | 78,221 |
| (10,461) | B | 67,760 |
|
| Gas transportation, gathering, and processing | | 8,028 |
| - | | 8,028 |
|
| Oilfield services | | 10,037 |
| - | | 10,037 |
|
| Impairment of proved oil and gas properties | | 3,772 |
| (3,632) | B | 140 |
|
| Depreciation, depletion, amortization and accretion | | 59,730 |
| (4,578) | B | 55,152 |
|
| Loss on sale of assets | | 628 |
| (28) | B | 600 |
|
| General and administrative | | 53,454 |
| (1,023) | B | 52,431 |
|
| Total expenses | | 248,563 |
| (27,763) | | 220,800 |
|
| | | | | | |
| Operating loss | | (108,207) |
| 14,621 | | (93,586) |
|
| | | | | | |
| Other income (expense): | | | | | |
| Interest income | | 199 |
| - | | 199 |
|
| Interest expense | | (51,616) |
| 767 | C | (50,849) |
|
| Gain on derivative contracts | | 22,239 |
| - | | 22,239 |
|
| Other income | | (1,583) |
| - | | (1,583) |
|
| Total other income (expense) | | (30,761) |
| 767 | | (29,994) |
|
| Loss from continuing operations before income tax | | (138,968) |
| 15,388 | | (123,580) |
|
| Income tax benefit | | 19,312 |
| - | D | 19,312 |
|
| Loss from continuing operations | | $ | (119,656 | ) | 15,388 | | $ | (104,268 | ) |
| Weighted average number of common shares outstanding, basic and diluted | | 155,743,418 |
| | | 155,743,418 |
|
| Loss from continuing operations per share, basic and diluted | | $ | (0.77 | ) | | | $ | (0.67 | ) |
The accompanying Notes are an integral part of these Unaudited Pro Forma Consolidated Financial Statements.
Magnum Hunter Resources Corporation
Notes to Unaudited Pro Forma Consolidated Financial Statements
|
| |
| A. | To record the sale of the ND Properties for $44.1 million of cash, after customary closing adjustments, on December 30, 2013, the closing date of the sale, the associated paydown of debt under the MHR Senior Revolving Credit Facility. A loss of approximately $7.6 million is reflected in accumulated deficit for the ND Properties transaction as the difference in the consideration received and carrying value of net assets sold. |
|
| |
| B. | The elimination of revenues and expenses attributable to the assets sold in the transaction during the period indicated. |
|
| |
| C. | The adjustment to interest expense to reflect the use of a portion of net proceeds from the transaction to pay down debt under the MHR Senior Revolving Credit Facility as if it had occurred January 1, 2012. The MHR Senior Revolving Credit Facility had a weighted average interest rate of 3.07% and 3.41% for the nine months ended September 30, 2013 and twelve months ended December 31, 2012, respectively. |
|
| |
| D. | The Company provides a valuation allowance against its net deferred tax assets, which consist primarily of net operating loss carryforwards associated with its United States operations. Accordingly, the pro forma adjustment of the net loss from the sale of the ND properties did not result in an adjustment to pro-forma income tax benefit. |
Summary Pro Forma Oil, Gas and Natural Gas Reserves Data (Unaudited)
The table sets forth summary pro forma reserve data at December 31, 2012, which give effect to the disposal of both the ND properties and the Eagle Ford Hunter properties, which have been reported in the historical financial statements as discontinued operations and were sold on April 24, 2013.
Estimated Quantities of Oil and Natural Gas Reserves at December 31, 2012
|
| | | | | | | | |
| | | | | Pro Forma Adjustments | | |
| | | Historical | | Sale of Eagle Ford Hunter | | Sale of ND Properties | | Pro Forma |
| Proved Reserves | | | | | | | | |
| Crude Oil and Liquids (MBbl) | | 45,952 | | (10,992) | | (4,076) | | 30,884 |
| Gas (MMcf) | | 162,620 | | (2,801) | | (1,175) | | 158,644 |
| Total (MBOE) | | 73,055 | | (11,459) | | (4,272) | | 57,324 |
| | | | | | | | | |
| Proved Developed Reserves | | | | | | | | |
| Crude Oil and Liquids (MBbl) | | 22,617 | | (4,034) | | (2,337) | | 16,246 |
| Gas (MMcf) | | 125,526 | | (1,087) | | (1,175) | | 123,264 |
| Total (MBOE) | | 43,538 | | (4,215) | | (2,533) | | 36,790 |
Standardized Measure of Discounted Future Net Cash Flows at December 31, 2012 (in thousands)
|
| | | | | | | | | | | | | | | | |
| | | | | Pro Forma Adjustments | | |
| | | Historical | | Sale of Eagle Ford Hunter | | Sale of ND Properties | | Pro Forma |
| Future cash inflows | | $ | 4,248,384 |
| | $ | (1,055,231 | ) | | $ | (318,965 | ) | | $ | 2,874,188 |
|
| Future production costs | | (1,520,260) |
| | 270,579 |
| | 120,491 |
| | (1,129,190) |
|
| Future development costs | | (603,809) |
| | 227,211 |
| | 13,933 |
| | (362,665) |
|
| Future income tax expense | | (230,500) |
| | 72,160 |
| | 50,951 |
| | (107,389) |
|
| Future net cash flows | | 1,893,815 |
| | (485,281) |
| | (133,590) |
| | 1,274,944 |
|
| 10% annual discount for estimated timing of cash flows | | (1,046,162) |
| | 270,818 |
| | 78,570 |
| | (696,774) |
| Standardized measure of discounted future net cash flows | | $ | 847,653 |
| | $ | (214,463 | ) | | $ | (55,020 | ) | | $ | 578,170 |
|
