Exhibit 99.2
LEGACY RESERVES LP
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2015
| Legacy | Pro Forma Adjustments | Pro Forma | |||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash | $ | 3,661 | $ | (424,815 | ) | (a) | $ | 3,846 | |||
| 425,000 | (b) | ||||||||||
| Accounts receivable, net: | |||||||||||
| Oil and natural gas | 41,235 | — | 41,235 | ||||||||
| Joint interest owners | 12,424 | — | 12,424 | ||||||||
| Other | 254 | — | 254 | ||||||||
| Fair value of derivatives | 63,951 | — | 63,951 | ||||||||
| Prepaid expenses and other current assets | 5,708 | — | 5,708 | ||||||||
| Total current assets | 127,233 | 185 | 127,418 | ||||||||
| Oil and natural gas properties using the successful efforts method, at cost: | |||||||||||
| Proved properties | 2,976,550 | 452,166 | (a) | 3,428,716 | |||||||
| Unproved properties | 48,322 | — | 48,322 | ||||||||
| Accumulated depletion, depreciation, amortization and impairment | (1,626,689 | ) | — | (1,626,689 | ) | ||||||
| 1,398,183 | 452,166 | 1,850,349 | |||||||||
| Other property and equipment, net | 3,269 | — | 3,269 | ||||||||
| Operating rights, net | 2,286 | — | 2,286 | ||||||||
| Fair value of derivatives | 18,605 | — | 18,605 | ||||||||
| Other assets, net | 24,179 | — | 24,179 | ||||||||
| Investment in equity method investee | 624 | — | 624 | ||||||||
| Total assets | $ | 1,574,379 | $ | 452,351 | $ | 2,026,730 | |||||
| LIABILITIES AND PARTNERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,416 | $ | — | $ | 1,416 | |||||
| Accrued oil and natural gas liabilities | 54,667 | — | 54,667 | ||||||||
| Fair value of derivatives | 985 | — | 985 | ||||||||
| Asset retirement obligation | 3,028 | — | 3,028 | ||||||||
| Other | 9,757 | — | 9,757 | ||||||||
| Total current liabilities | 69,853 | — | 69,853 | ||||||||
| Long-term debt | 966,111 | 425,000 | (b) | 1,391,111 | |||||||
| Asset retirement obligation | 241,611 | 27,351 | (a) | 268,962 | |||||||
| Fair value of derivatives | — | — | — | ||||||||
| Other long-term liabilities | 1,294 | — | 1,294 | ||||||||
| Total liabilities | 1,278,869 | 452,351 | 1,731,220 | ||||||||
| Partners’ equity: | |||||||||||
| Series A Preferred equity | 55,192 | — | 55,192 | ||||||||
| Series B Preferred equity | 174,261 | — | 174,261 | ||||||||
| Incentive distribution equity | 30,814 | — | 30,814 | ||||||||
| Limited partners’ equity | 35,261 | — | 35,261 | ||||||||
| General partner’s equity | (18 | ) | — | (18 | ) | ||||||
| Total partners’ equity | 295,510 | — | 295,510 | ||||||||
| Total liabilities and partners’ equity | $ | 1,574,379 | $ | 452,351 | $ | 2,026,730 | |||||
See accompanying notes to unaudited pro forma combined financial statements.
LEGACY RESERVES LP
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2015
| Legacy Historical | Anadarko Acquisitions Historical | Pro Forma Adjustments | Pro Forma | ||||||||||||
| (In thousands, except per unit data) | |||||||||||||||
| Revenues: | |||||||||||||||
| Oil sales | $ | 109,409 | $ | 151 | $ | — | $ | 109,560 | |||||||
| Natural gas liquids (NGL) sales | 9,921 | — | — | 9,921 | |||||||||||
| Natural gas sales | 50,010 | 35,904 | — | 85,914 | |||||||||||
| Total revenues | 169,340 | 36,055 | — | 205,395 | |||||||||||
| Expenses: | |||||||||||||||
| Oil and natural gas production | 94,440 | 12,793 | — | 107,233 | |||||||||||
| Production and other taxes | 8,204 | 1,023 | — | 9,227 | |||||||||||
| General and administrative | 19,259 | — | — | 19,259 | |||||||||||
| Depletion, depreciation, amortization and accretion | 77,265 | — | 9,778 | (a) | 87,043 | ||||||||||
| Impairment of long-lived assets | 209,402 | — | — | 209,402 | |||||||||||
| Loss on disposal of assets | 1,007 | — | — | 1,007 | |||||||||||
| Total expenses | 409,577 | 13,816 | 9,778 | 433,171 | |||||||||||
| Operating income (loss) | (240,237 | ) | 22,239 | (9,778 | ) | (227,776 | ) | ||||||||
| Other income (expense): | |||||||||||||||
| Interest income | 382 | — | — | 382 | |||||||||||
| Interest expense | (35,552 | ) | — | (5,185 | ) | (b) | (40,737 | ) | |||||||
| Equity in income of equity method investee | 103 | — | — | 103 | |||||||||||
| Net gains on commodity derivatives | 6,983 | — | — | 6,983 | |||||||||||
| Other | 702 | — | — | 702 | |||||||||||
| Income (loss) before income taxes | (267,619 | ) | 22,239 | (14,963 | ) | (260,343 | ) | ||||||||
| Income tax benefit | 291 | — | — | 291 | |||||||||||
| Net income (loss) | $ | (267,328 | ) | $ | 22,239 | $ | (14,963 | ) | $ | (260,052 | ) | ||||
| Distributions to Preferred unitholders | $ | (9,500 | ) | (9,500 | ) | ||||||||||
| Net loss attributable to unitholders | $ | (276,828 | ) | $ | (269,552 | ) | |||||||||
| Loss per unit — basic and diluted | $ | (4.02 | ) | $ | (3.91 | ) | |||||||||
| Weighted average number of units used in | |||||||||||||||
| computing net loss per unit — | |||||||||||||||
| Basic | 68,909 | — | 68,909 | ||||||||||||
| Diluted | 68,909 | — | 68,909 | ||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
LEGACY RESERVES LP
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2014
| Legacy Historical | Anadarko Acquisitions Historical | Pro Forma Adjustments | Pro Forma | ||||||||||||
| (In thousands, except per unit data) | |||||||||||||||
| Revenues: | |||||||||||||||
| Oil sales | $ | 396,774 | $ | 542 | $ | — | $ | 397,316 | |||||||
| Natural gas liquids (NGL) sales | 27,483 | 1 | — | 27,484 | |||||||||||
| Natural gas sales | 108,042 | 117,612 | — | 225,654 | |||||||||||
| Total revenues | 532,299 | 118,155 | — | 650,454 | |||||||||||
| Expenses: | |||||||||||||||
| Oil and natural gas production | 198,801 | 31,917 | — | 230,718 | |||||||||||
| Production and other taxes | 31,534 | 6,374 | — | 37,908 | |||||||||||
| General and administrative | 38,980 | — | — | 38,980 | |||||||||||
| Depletion, depreciation, amortization and accretion | 173,686 | — | 23,033 | (a) | 196,719 | ||||||||||
| Impairment of long-lived assets | 448,714 | — | — | 448,714 | |||||||||||
| Gain on disposal of assets | (2,479 | ) | — | — | (2,479 | ) | |||||||||
| Total expenses | 889,236 | 38,291 | 23,033 | 950,560 | |||||||||||
| Operating income (loss) | (356,937 | ) | 79,864 | (23,033 | ) | (300,106 | ) | ||||||||
| Other income (expense): | |||||||||||||||
| Interest income | 873 | — | — | 873 | |||||||||||
| Interest expense | (67,218 | ) | — | (10,370 | ) | (b) | (77,588 | ) | |||||||
| Equity in income of equity method investee | 428 | — | — | 428 | |||||||||||
| Net gains on commodity derivatives | 138,092 | — | — | 138,092 | |||||||||||
| Other | 258 | — | — | 258 | |||||||||||
| Income (loss) before income taxes | (284,504 | ) | 79,864 | (33,403 | ) | (238,043 | ) | ||||||||
| Income tax benefit | 859 | — | — | 859 | |||||||||||
| Net income (loss) | $ | (283,645 | ) | $ | 79,864 | $ | (33,403 | ) | $ | (237,184 | ) | ||||
| Distributions to Preferred unitholders | $ | (11,694 | ) | (11,694 | ) | ||||||||||
| Net loss attributable to unitholders | $ | (295,339 | ) | $ | (248,878 | ) | |||||||||
| Loss per unit — basic and diluted | $ | (4.92 | ) | $ | (4.14 | ) | |||||||||
| Weighted average number of units used in | |||||||||||||||
| computing net loss per unit — | |||||||||||||||
| Basic | 60,053 | — | 60,053 | ||||||||||||
| Diluted | 60,053 | — | 60,053 | ||||||||||||
See accompanying notes to unaudited pro forma combined financial statements.
1.Basis of Presentation:
The financial statements included in this report present a pro forma combined balance sheet and pro forma combined results of operations reflecting the pro forma effect of certain transactions, discussed in detail below, entered into by Legacy Reserves LP ("Legacy").
The unaudited pro forma combined balance sheet as of June 30, 2015 included in this report gives effect to Legacy's July 31, 2015 acquisition of 100% of the issued and outstanding limited liability company membership interests in Dew Gathering LLC, a Texas limited liability company, which owns directly and indirectly natural gas gathering and processing assets natural gas gathering and processing assets (the "WGR Acquisition") acquired from WGR Operating LP ("WGR"), as well as certain oil and natural gas properties and exploration and production assets (the "Anadarko E&P Acquisition," and together with the WGR Acquisition, the "Anadarko Acquisitions") acquired from Anadarko E&P Onshore LLC ("Anadarko") assuming the acquisitions occurred on June 30, 2015.
The unaudited pro forma combined balance sheet as of June 30, 2015 is derived from the historical consolidated financial statements of Legacy and the purchase price allocation of the Anadarko Acquisitions.
The unaudited pro forma combined statements of operations for the six months ended June 30, 2015 and the year ended December 31, 2014 give effect to the Anadarko Acquisitions assuming the acquisitions occurred on January 1, 2014. They are derived from the historical consolidated financial statements of Legacy, the combined historical statements of revenues and direct operating expenses of the Anadarko Acquisitions and combined pro forma adjustments based on assumptions Legacy has deemed appropriate.
The related pro forma combined adjustments are described below. In the opinion of Legacy's management, all adjustments have been made that are necessary to present the pro forma combined financial statements in accordance with the Securities and Exchange Commision's (the "SEC") Regulation S-X.
The unaudited pro forma combined balance sheet and statements of operations are presented for illustrative purposes only, and do not purport to be indicative of the financial position or results of operations that would actually have occurred if the Anadarko Acquisitions had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from the results reflected in such statements due to factors described in "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2014 and elsewhere in Legacy's reports and filings with the SEC. The unaudited pro forma combined balance sheet and statements of operations should be read in conjunction with our historical consolidated financial statements and the notes thereto included in our Annual Reports on Form 10-K for the year ended December 31, 2014 and on our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2015 and March 31, 2015.
The pro forma combined statements should also be read in conjunction with the historical financial statements and the notes thereto of the acquired business reflected therein as filed herewith by Legacy with the SEC.
2.Pro Forma Adjustments
The unaudited pro forma combined financial statements reflect the following adjustments:
a.To record the Anadarko Acquisitions and related incremental depreciation, depletion and amortization, using the units of production method, and accretion of associated asset retirement obligation.
On July 31, 2015, Legacy closed the Anadarko Acquisitions for a net purchase price of $424.8 million. The allocation of purchase price to the fair value of the acquired assets and liabilities assumed was as follows:
| Proved oil and natural gas properties including related equipment | $ | 452,166 | |
| Total assets | 452,166 | ||
| Future oil and gas property abandonment costs | (27,351 | ) | |
| Fair value of net assets acquired | $ | 424,815 | |
b.To record the draw of $425 million in aggregate principal amount on Legacy's credit facility to fund the Acquisitions and the associated interest expense.
3.Oil, Natural Gas and NGL Reserve Disclosures
The following table sets forth certain unaudited pro forma information concerning our proved oil, natural gas and NGL reserves as of December 31, 2013 and 2014, giving effect to the Anadarko Acquisitions. There are numerous uncertainties inherent in estimating the quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve data represent estimates only and should not be construed as being exact:
| Oil (MBbls) | ||||||||
| Legacy Historical | Anadarko Acquisitions | Pro Forma Total | ||||||
| Total Proved Reserves: | ||||||||
| Balance, December 31, 2013 | 57,030 | 4 | 57,034 | |||||
| Purchases of minerals-in-place | 7,506 | — | 7,506 | |||||
| Sales of minerals-in-place | (176 | ) | — | (176 | ) | |||
| Extensions and discoveries | — | — | — | |||||
| Revisions from drilling and recompletions | 888 | — | 888 | |||||
| Revisions of previous estimates due to price | (3,110 | ) | 15 | (3,095 | ) | |||
| Revisions of previous estimates due to performance | (429 | ) | — | (429 | ) | |||
| Production | (4,784 | ) | (6 | ) | (4,790 | ) | ||
| Balance, December 31, 2014 | 56,925 | 13 | 56,938 | |||||
| Proved Developed Reserves: | ||||||||
| December 31, 2013 | 48,775 | 4 | 48,779 | |||||
| December 31, 2014 | 47,203 | 13 | 47,216 | |||||
| Proved Undeveloped Reserves: | ||||||||
| December 31, 2013 | 8,255 | — | 8,255 | |||||
| December 31, 2014 | 9,722 | — | 9,722 | |||||
| Gas (MMcf) | ||||||||
| Legacy Historical | Anadarko Acquisitions | Pro Forma Total | ||||||
| Total Proved Reserves: | ||||||||
| Balance, December 31, 2013 | 159,020 | 467,322 | 626,342 | |||||
| Purchases of minerals-in-place | 289,523 | — | 289,523 | |||||
| Sales of minerals-in-place | (808 | ) | — | (808 | ) | |||
| Extensions and discoveries | — | — | — | |||||
| Revisions from drilling and recompletions | 2,594 | — | 2,594 | |||||
| Revisions of previous estimates due to price | (969 | ) | 51,741 | 50,772 | ||||
| Revisions of previous estimates due to performance | (5,449 | ) | — | (5,449 | ) | |||
| Production | (25,936 | ) | (27,416 | ) | (53,352 | ) | ||
| Balance, December 31, 2014 | 417,975 | 491,647 | 909,622 | |||||
| Proved Developed Reserves: | ||||||||
| December 31, 2013 | 139,789 | 467,322 | 607,111 | |||||
| December 31, 2014 | 402,802 | 491,647 | 894,449 | |||||
| Proved Undeveloped Reserves: | ||||||||
| December 31, 2013 | 19,231 | — | 19,231 | |||||
| December 31, 2014 | 15,173 | — | 15,173 | |||||
| NGL (MBbls) | ||||||||
| Legacy Historical | Anadarko Acquisitions | Pro Forma Total | ||||||
| Total Proved Reserves: | ||||||||
| Balance, December 31, 2013 | 4,075 | — | 4,075 | |||||
| Purchases of minerals-in-place | 8,480 | — | 8,480 | |||||
| Sales of minerals-in-place | — | — | — | |||||
| Extensions and discoveries | — | — | — | |||||
| Revisions from drilling and recompletions | 33 | — | 33 | |||||
| Revisions of previous estimates due to price | 371 | — | 371 | |||||
| Revisions of previous estimates due to performance | 149 | — | 149 | |||||
| Production | (735 | ) | — | (735 | ) | |||
| Balance, December 31, 2014 | 12,373 | — | 12,373 | |||||
| Proved Developed Reserves: | ||||||||
| December 31, 2013 | 3,870 | — | 3,870 | |||||
| December 31, 2014 | 12,073 | — | 12,073 | |||||
| Proved Undeveloped Reserves: | ||||||||
| December 31, 2013 | 205 | — | 205 | |||||
| December 31, 2014 | 300 | — | 300 | |||||
Summarized in the following tables is information for our standardized measure of discounted cash flows relating to proved reserves as of December 31, 2014. Future cash flows are computed by applying the 12-month un-weighted first-day-of-the-month average price for the year ended December 31, 2014 to the year-end quantity of proved reserves. Future production, development, site restoration and abandonment costs are derived based on current costs assuming continuation of existing economic conditions. Federal income taxes have not been deducted from future production revenues in the calculation of standardized measure as each partner is separately taxed on their share of Legacy's taxable income. The information should be viewed only as a form of standardized disclosure concerning possible future cash flows that would result under the assumptions used, but should not be viewed as indicative of fair value. Reference is made to our Annual Report on Form 10-K for the year ended December 31, 2014 as well as to the combined historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from Anadarko for a discussion of the assumptions used in preparing the information presented.
| December 31, 2014 | |||||||||||
| Legacy Historical | Anadarko Acquisitions | Pro Forma Total | |||||||||
| (In thousands) | |||||||||||
| Future production revenues | $ | 7,243,050 | $ | 1,996,871 | $ | 9,239,921 | |||||
| Future costs: | |||||||||||
| Production | (3,457,818 | ) | (772,201 | ) | (4,230,019 | ) | |||||
| Development | (473,954 | ) | — | (473,954 | ) | ||||||
| Future net cash flows before income taxes | 3,311,278 | 1,224,670 | 4,535,948 | ||||||||
| 10% annual discount for estimated timing of cash flows | (1,556,664 | ) | (717,930 | ) | (2,274,594 | ) | |||||
| Standardized measure of discounted net cash flows | $ | 1,754,614 | $ | 506,740 | $ | 2,261,354 | |||||
The following table sets forth the principal sources of change in discounted future net cash flows:
| Year ended December 31, 2014 | |||||||||||
| Legacy Historical | Anadarko Acquisitions | Pro Forma Total | |||||||||
| (In thousands) | |||||||||||
| Increase (decrease): | |||||||||||
| Sales, net of production costs | $ | (301,964 | ) | $ | (79,865 | ) | $ | (381,829 | ) | ||
| Net change in sales prices, net of production costs | (213,617 | ) | 173,905 | (39,712 | ) | ||||||
| Changes in estimated future development costs | 64,273 | — | 64,273 | ||||||||
| Extensions and discoveries, net of future production | |||||||||||
| and development costs | — | — | — | ||||||||
| Revisions of previous estimates due to infill drilling, | |||||||||||
| recompletions and stimulations | 39,228 | — | 39,228 | ||||||||
| Revisions of previous quantity estimates due to performance | (39,227 | ) | — | (39,227 | ) | ||||||
| Previously estimated development costs incurred | 51,085 | — | 51,085 | ||||||||
| Purchases of minerals-in place | 472,057 | — | 472,057 | ||||||||
| Sales of minerals-in-place | (2,932 | ) | — | (2,932 | ) | ||||||
| Other | (26,758 | ) | — | (26,758 | ) | ||||||
| Accretion of discount | 155,489 | 3,268 | 158,757 | ||||||||
| Net increase | 197,634 | 97,308 | 294,942 | ||||||||
| Standardized measure of discounted future net cash flows: | |||||||||||
| Beginning of year | 1,556,980 | 409,432 | 1,966,412 | ||||||||
| End of year | $ | 1,754,614 | $ | 506,740 | $ | 2,261,354 | |||||