EXHIBIT 99.3
Constellation Energy Partners LLC
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
INDEX
Page | ||
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2007 | F-1 | |
Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2006 | F-2 | |
Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2007 | F-3 | |
Notes to Unaudited Pro Forma Condensed Combined Financial Statements | F-4 |
i
Constellation Energy Partners LLC
Unaudited Pro Forma Condensed Combined Statement of Operations
At March 31, 2007
CEP Historical | KPC Historical | Pro Forma Adjustments | CEP Pro Forma | |||||||||||||||
(In 000’s, except share data) | ||||||||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | 8,065 | $ | 114 | $ | 4,498 | b | $ | 12,677 | |||||||||
Accounts receivable | 6,101 | 693 | (693 | ) | i | 6,101 | ||||||||||||
Prepaid expenses | 477 | — | — | 477 | ||||||||||||||
Risk management assets | 2,663 | — | — | 2,663 | ||||||||||||||
Acquisition escrow deposit | 10,020 | — | (10,020 | ) | c | — | ||||||||||||
Other receivable | 19 | 2,400 | (2,400 | ) | i | 19 | ||||||||||||
Total current assets | 27,345 | 3,207 | (8,615 | ) | 21,937 | |||||||||||||
Natural gas properties (See Note 2) | ||||||||||||||||||
Natural gas properties and related equipment | ||||||||||||||||||
Natural gas properties, equipment and facilities | 186,434 | 11,623 | 102,366 | a | 300,423 | |||||||||||||
Material and supplies | 1,486 | — | — | 1,486 | ||||||||||||||
Less accumulated depreciation, depletion and amortization | (13,559 | ) | (1,059 | ) | 1,059 | i | (13,559 | ) | ||||||||||
Net natural gas properties | 174,361 | 10,564 | 103,425 | 288,350 | ||||||||||||||
Other assets | ||||||||||||||||||
Loan Costs | 1,125 | — | 97 | c | 1,222 | |||||||||||||
Other Non-Current Assets | 72 | — | 4,024 | a | 4,096 | |||||||||||||
Risk management assets | 2,529 | — | — | 2,529 | ||||||||||||||
Total assets | $ | 205,432 | $ | 13,771 | $ | 98,931 | $ | 318,134 | ||||||||||
Liabilities and members’ equity (deficit) | ||||||||||||||||||
Liabilities | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Accounts payable | $ | 22 | $ | 805 | $ | (805 | ) | i | $ | 22 | ||||||||
Payable to affiliate | 913 | 4,526 | (4,526 | ) | i | 913 | ||||||||||||
Accrued liabilities | 4,176 | — | 197 | a | 4,373 | |||||||||||||
Royalty payable | 2,135 | — | — | 2,135 | ||||||||||||||
Environmental liability | 721 | — | — | 721 | ||||||||||||||
Mark to market derivative liabilities | 1,618 | — | — | 1,618 | ||||||||||||||
Total current liabilities | 9,585 | 5,331 | (5,134 | ) | 9,782 | |||||||||||||
Other liabilities | ||||||||||||||||||
Asset retirement obligation | 2,786 | — | 3,130 | a | 5,916 | |||||||||||||
Mark to market derivative liabilities | 1,017 | — | — | 1,017 | ||||||||||||||
Debt | 32,000 | — | 50,500 | b | 82,500 | |||||||||||||
Total other liabilities | 35,803 | — | 53,630 | 89,433 | ||||||||||||||
Total liabilities | 45,388 | 5,331 | 48,496 | 99,215 | ||||||||||||||
Class D Interests | 8,000 | — | — | 8,000 | ||||||||||||||
Members’ equity (deficit) | ||||||||||||||||||
Class A units, 273,305 shares authorized, issued and outstanding | 2,974 | 8,440 | (7,263 | ) | b | 4,151 | ||||||||||||
Class B units, 13,301,578 shares authorized, issued and outstanding | 145,737 | — | 57,309 | b | 203,046 | |||||||||||||
Class E units, 90,376 shares authorized, issued and outstanding | — | — | 389 | b | 389 | |||||||||||||
Accumulated other comprehensive income | 3,333 | — | — | 3,333 | ||||||||||||||
Total members’ equity | 152,044 | 8,440 | 50,435 | 210,919 | ||||||||||||||
Total liabilities and members’ equity | $ | 205,432 | $ | 13,771 | $ | 98,931 | $ | 318,134 | ||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-1
Constellation Energy Partners LLC
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2006
CEP Historical | EQR and KPC Historical | Pro Forma Adjustments | CEP Pro Forma | ||||||||||||||
(In 000’s, except share data) | |||||||||||||||||
Revenues | |||||||||||||||||
Gas sales | $ | 36,917 | $ | 18,772 | $ | (1,625 | ) | i | $ | 54,064 | |||||||
Loss from mark-to-market activities | — | — | — | — | |||||||||||||
Total Revenues | 36,917 | 18,772 | (1,625 | ) | 54,064 | ||||||||||||
Expenses: | |||||||||||||||||
Operating expenses: | |||||||||||||||||
Lease operating expenses | 7,234 | 8,806 | (1,625 | ) | i | 14,415 | |||||||||||
Production taxes | 1,783 | 812 | — | 2,595 | |||||||||||||
General and administrative | 4,573 | — | — | h | 4,573 | ||||||||||||
Depreciation, depletion and amortization | 7,444 | 544 | 6,387 | d | 14,375 | ||||||||||||
Accretion expense | 141 | — | 216 | e, i | 357 | ||||||||||||
Total operating expenses | 21,175 | 10,162 | 4,978 | 36,315 | |||||||||||||
Other expense/(income) | |||||||||||||||||
Interest expense | 221 | — | 4,404 | f, g | 4,625 | ||||||||||||
Interest (income) | (468 | ) | — | — | (468 | ) | |||||||||||
Total other expenses/(income) | (247 | ) | — | 4,404 | 4,157 | ||||||||||||
Total expenses | 20,928 | 10,162 | 9,382 | 40,472 | |||||||||||||
Net income (loss) | $ | 15,989 | $ | 8,610 | $ | (11,007 | ) | $ | 13,592 | ||||||||
Other comprehensive income | 13,113 | — | — | 13,113 | |||||||||||||
Comprehensive income (loss) | $ | 29,102 | $ | 8,610 | $ | (11,007 | ) | $ | 26,705 | ||||||||
Earnings per unit - Basic | $ | 1.41 | $ | 0.99 | |||||||||||||
Units outstanding - Basic | 11,320,300 | 2,344,959 | b | 13,665,259 | |||||||||||||
Earnings per unit - Diluted | $ | 1.41 | $ | 0.99 | |||||||||||||
Units outstanding - Diluted | 11,320,300 | 2,344,959 | b | 13,665,259 |
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-2
Constellation Energy Partners LLC
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2007
CEP Historical | EQR and KPC Historical | Pro Forma Adjustments | CEP Pro Forma | |||||||||||
(In 000’s, except share data) | ||||||||||||||
Revenues | ||||||||||||||
Gas sales | $ | 11,307 | $ | 4,221 | $ | (407) | i | $ | 15,121 | |||||
Loss from mark-to-market activities | (2,782) | — | — | (2,782) | ||||||||||
Total Revenues | 8,525 | 4,221 | (407) | 12,339 | ||||||||||
Expenses: | ||||||||||||||
Operating expenses: | ||||||||||||||
Lease operating expenses | 1,595 | 2,015 | (407) | i | 3,203 | |||||||||
Production taxes | 459 | 171 | — | 630 | ||||||||||
General and administrative | 1,619 | — | — | h | 1,619 | |||||||||
Loss on sale of asset | 95 | — | — | 95 | ||||||||||
Depreciation, depletion and amortization | 1,959 | 130 | 1,515 | d, i | 3,604 | |||||||||
Accretion expense | 36 | — | 54 | e | 90 | |||||||||
Total operating expenses | 5,763 | 2,316 | 1,162 | 9,241 | ||||||||||
Other expense/(income) | ||||||||||||||
Interest expense | 559 | — | 1,073 | f, g | 1,632 | |||||||||
Interest (income) | (51) | — | — | (51) | ||||||||||
Total other expenses/(income) | 508 | — | 1,073 | 1,581 | ||||||||||
Total expenses | 6,271 | 2,316 | 2,235 | 10,822 | ||||||||||
Net income (loss) | $ | 2,254 | $ | 1,905 | $ | (2,642) | $ | 1,517 | ||||||
Other comprehensive income | (9,780) | — | — | (9,780) | ||||||||||
Comprehensive income (loss) | $ | (7,526) | $ | 1,905 | $ | (2,642) | $ | (8,263) | ||||||
Earnings per unit—Basic | $ | 0.20 | $ | 0.11 | ||||||||||
Units outstanding—Basic | 11,320,300 | 2,344,959 | b | 13,665,259 | ||||||||||
Earnings per unit—Diluted | $ | 0.20 | $ | 0.11 | ||||||||||
Units outstanding—Diluted | 11,320,300 | 2,344,959 | b | 13,665,259 |
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-3
Constellation Energy Partners LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined balance sheet as of March 31, 2007, is derived from:
• | the historical consolidated financial statements of Constellation Energy Partners LLC (“CEP,” or the “Company”); |
• | the historical statements of Kansas Processing EQR, LLC (“KPC”) and |
• | the preliminary purchase price allocation of certain oil and natural gas properties and other related assets including the processing and gathering system acquired from KPC (referred to as the “EnergyQuest Assets”) acquired from EnergyQuest Resources, L.P. (“EQR”). |
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2006, and the three months ended March 31, 2007, are derived from:
• | the historical consolidated financial statements of CEP; |
• | the historical statements of direct revenues and direct operating expenses of EQR and |
• | the historical financial statements of KPC. |
The unaudited pro forma condensed combined balance sheet gives effect to the acquisition of the EnergyQuest Assets and the related financing activities as if the transactions had occurred on March 31, 2007. The unaudited pro forma condensed combined statement of operations gives effect to the acquisition of the EnergyQuest Assets and the related financing activities as if the transactions had occurred on January 1, 2006.
The unaudited pro forma condensed combined financial statements reflect the following transactions:
• | the acquisition of the EnergyQuest Assets; |
• | the equity issuance of additional Class B and the Class E units on April 23, 2007, used to finance the acquisition of the EnergyQuest Assets and |
• | an increase in debt on April 19, 2007, used to finance the acquisition of the EnergyQuest Assets and to fund certain investment capital expenditures in the Robinson’s Bend Field. |
The unaudited pro forma condensed combined balance sheet and statement 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 transactions described 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 Quarterly Report on Form 10-Q for the three months ended March 31, 2007, in our Annual Report on Form 10-K for the year ended December 31, 2006 or elsewhere in the Company’s reports and filings with the Securities and Exchange Commission (“SEC”). The following unaudited pro forma condensed 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 Report on Form 10-K for the year ended December 31, 2006 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2007.
F-4
The pro forma statements should also be read in conjunction with the statements of direct revenues and direct operating expenses for EQR and the notes thereto and the consolidated financial statements of KPC included elsewhere in this Form 8-K/A.
2. ACQUISITION AND PRELIMINARY PURCHASE PRICE ALLOCATION
The acquisition of the EnergyQuest Assets was completed on April 23, 2007, effective January 31, 2007. The Company acquired certain oil and natural gas properties from EQR for approximately $115.0 million, subject to customary closing adjustments.
The acquisition included estimated proved reserves of approximately 43 Bcfe and over 600 gross producing wells on approximately 96,000 gross acres in Kansas and Oklahoma. Also included were support equipment and facilities, including certain pipeline gathering systems and the outstanding membership interests in six limited liability companies that primarily operate related support facilities.
The total consideration was $118.0 million which consisted of cash of $114.8 million and the assumption of an estimated asset retirement obligation of $3.1 million and other miscellaneous liabilities of $0.1 million. The purchase price allocation of the total consideration of $118.0 million is as follow:
Natural Gas and Oil Properties | $ | 106.1 million | ||
Pipelines | 5.7 million | |||
Investment in Unconsolidated Affiliates | 4.0 million | |||
Unproved Properties | 1.6 million | |||
Other PP&E | 0.5 million | |||
Land | 0.1 million | |||
Asset Retirement Obligation | (3.1 million | ) | ||
Other Miscellaneous Liabilities | (0.1 million | ) | ||
Total | $ | 114.8 million | ||
The preliminary purchase price allocation used for the purpose of this pro forma financial information is based on preliminary appraisals, evaluations of proved oil and natural gas reserves, discounted cash flows, quoted market prices and other estimates by management. The purchase price allocation related to the acquisition of the EnergyQuest Assets is preliminary and subject to change, pending finalization of the valuation of the assets and liabilities acquired.
3. PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed combined financial statements have been adjusted to reflect the following:
a. | the purchase of the EnergyQuest Assets as detailed in Note 2 |
b. | the issuance and sale of 90,376 Class E Units and 2,207,684 New Common Units for approximately $58.8 million and borrowings of $50.5 million under the reserve-based credit facility to fund the remaining balance of the purchase price and certain investment capital expenditures in the Robinson’s Bend Field |
c. | the use of $10 million borrowed under the reserve-based credit facility to fund an escrow account related to the purchase of the EnergyQuest Assets and the related debt issuance costs of approximately $0.1 million |
d. | recording incremental depreciation, depletion and amortization expense related to the acquired EnergyQuest Assets based on the relative fair value allocation of the purchase price to the acquired assets |
e. | recording incremental accretion expense related to the assumed asset retirement obligation |
F-5
f. | recording incremental interest expense at 7.235% associated with the increase in long-term debt of approximately $60.5 million incurred to fund the balance of the purchase price, the escrow deposit and certain investment capital expenditures in the Robinson’s Bend Field. A 0.125% increase or decrease in this rate results in a $0.1 million change in interest expense. |
g. | recording incremental amortization of additional debt issuance costs associated with the increase in the reserve-based credit facility |
h. | no incremental pro forma adjustments for general and administrative expenses have been reflected for any costs associated with the Transition Services Agreement where EQR will operate the EnergyQuest Assets and conduct a specified drilling program on CEP’s behalf. The Transition Services Agreement provides for a reimbursement of EQR’s actual costs plus a 10% premium for any general and administrative services that CEP specifically requests. This amount may not be indicative of any actual future general and administrative costs incurred by CEP. Under this agreement, CEP estimates that the monthly requested general and administrative services will be approximately $140,000 per month. |
i. | to reflect the historical financial statement data for KPC, the allocated fair market value for the acquired KPC assets, and to eliminate intercompany activities between EQR and KPC, and to eliminate historical balances not acquired in the KPC asset acquisition. |
4. DEBT
On March 7, 2007, the Company borrowed an additional $10.0 million under its reserve-based credit facility to fund an escrow account for the purchase of the EnergyQuest Assets. On April 19, 2007, the Company borrowed an additional $50.5 million to fund the remaining balance of the purchase price and to fund certain investment capital expenditures in the Robinson’s Bend Field. The interest rate on these borrowings is LIBOR plus an applicable margin, or 7.235%.
The borrowing base on the reserve-based credit facility was increased to $105.0 million in April 2007 and the total debt outstanding on the facility is $82.5 million. Debt issuance costs related to the increase were approximately $0.1 million which are being amortized over the life of the facility. The reserve-based credit facility will mature in October 2010.
5. EQUITY ISSUANCE
On March 9, 2007, the Company entered into a Class E Unit and Common Unit Purchase Agreement (the “Unit Purchase Agreement”) with certain unaffiliated third-party investors (the “Purchasers”) to sell 90,376 Class E Units representing limited liability company interests (the “Class E Units”) and 2,207,684 common units representing Class B limited liability company interests (the “New Common Units”) in a private placement (the “Private Placement”) for an aggregate purchase price of approximately $60 million. The Company issued and sold 90,376 Class E Units and 2,207,684 New Common Units to the Purchasers pursuant to the Unit Purchase Agreement on April 23, 2007. The Company used the proceeds from the Private Placement, together with funds available under the Company’s reserve-based credit facility, to fund the purchase price of the EnergyQuest Assets. Transaction costs were approximately $1.2 million. At the issuance of the Class E and New Common Units, additional Class A units were issued such that the total outstanding amount remained at 2% of all outstanding units.
In connection with the Unit Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers dated April 23, 2007. Pursuant to the Registration Rights Agreement, the Company is required to prepare and file a registration statement within 75 days of the closing of the Private Placement (the “Closing Date”), and use its commercially reasonable efforts to cause the registration statement to become effective no later than 120 days following the Closing Date. In addition, the Registration Rights Agreement gives the Purchasers piggyback registration rights under certain circumstances. These registration rights are transferable to affiliates and, in certain circumstances, to third parties.
If the registration statement is not declared effective within 150 days after the Closing Date, then the Company must pay each Purchaser, as liquidated damages, 0.25% of the sum of the product of $25.84 times the number of Class E Units purchased by such Purchaser plus the product of $26.12 times the number of New Common Units purchased by such Purchaser (the “Liquidated Damages Multiplier”) per 30-day period for the first 90 days following the 150th day after the Closing Date, increasing by an additional 0.25% of the Liquidated Damages Multiplier per 30-day period for each subsequent 30 days, up to a maximum of 1.00% of the Liquidated Damages Multiplier per 30-day period. There is no limitation on the aggregate amount of the liquidated damages the Company must pay each Purchaser.
F-6
6. SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (Unaudited)
The following table sets forth certain unaudited pro forma information concerning the Company’s proved oil and natural gas reserves for the year ended December 31, 2006, giving effect to the transaction relating to the acquisition of the EnergyQuest Assets as if it had occurred on January 1, 2006. The information excludes reserves related to royalty and net profit interests. The Company’s estimate of proved reserves is based on the quantities of natural gas that engineering and geological analyses demonstrate, with reasonable certainty, to be recoverable from established reservoirs in the future under current operating and economic parameters. 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 represents estimates only and should not be construed as being exact.
Natural Gas Reserves—MMCF
Year-Ended December 31, 2006 | |||||||||
CEP Historical | EQR Historical | CEP Pro Forma | |||||||
Beginning Balance | 112,025 | 39,822 | 151,847 | ||||||
Extensions and discoveries | — | 5,334 | 5,334 | ||||||
Revisions of previous estimates | 12,952 | (1,668 | ) | 11,284 | |||||
Production | (4,641 | ) | (2,279 | ) | (6,920 | ) | |||
End of year | 120,336 | 41,209 | 161,545 | ||||||
Total developed reserves | 97,387 | 23,479 | 120,866 | ||||||
F-7
Oil, Condensate, and Liquids—BBLS
Year-Ended December 31, 2006 | |||||||||
CEP Historical | EQR Historical | CEP Pro Forma | |||||||
Beginning Balance | — | 8 | 8 | ||||||
Revisions of previous estimates | — | 8 | 8 | ||||||
Production | — | (2 | ) | (2 | ) | ||||
End of year | — | 14 | 14 | ||||||
Total Developed Reserves | — | 14 | 14 | ||||||
Natural Gas Reserves—MMCFE | |||||||||
Year-Ended December 31, 2006 | |||||||||
CEP Historical | EQR Historical | CEP Pro Forma | |||||||
Beginning Balance | 112,025 | 39,873 | 151,898 | ||||||
Extensions and discoveries | — | 5,334 | 5,334 | ||||||
Revisions of previous estimates | 12,952 | (1,621 | ) | 11,331 | |||||
Production | (4,641 | ) | (2,293 | ) | (6,934 | ) | |||
End of year | 120,336 | 41,293 | 161,629 | ||||||
Total developed reserves | 97,387 | 23,563 | 120,950 | ||||||
The following table sets forth certain unaudited pro forma information for the Company’s standardized measure of discounted cash flows relating to proved oil and natural gas reserves as of December 31, 2006, giving effect to the transaction relating to the acquisition of the EnergyQuest Assets as if it had occurred on January 1, 2006. Certain information concerning the assumptions used in computing the valuation of proved reserves and their inherent limitations are discussed below.
F-8
Future cash inflows are calculated by applying year-end prices of natural gas, relating to the proved reserves, to the year-end quantities of those reserves. Future cash inflows exclude the impact of the Company’s hedging program and mark-to-market derivatives. Future development and production costs represent the estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, assuming continuation of existing economic conditions. In addition, asset retirement obligations are included within future production and development costs. There are no future income tax expenses because the Company is a non-taxable entity.
The assumptions used to compute estimated future cash inflows do not necessarily reflect expectations of actual revenues or costs or their present value. In addition, variations from expected production rates could result directly or indirectly from factors outside of the Company’s control, such as unexpected delays in development, changes in prices or regulatory or environmental policies. The reserve valuation further assumes that all reserves will be disposed of by production; however, if reserves are sold in place, additional economic considerations could also affect the amount of cash eventually realized.
Standardized Measure
Year-Ended December 31, 2006 | |||||||||
CEP Historical | EQ Historical | CEP Pro Forma | |||||||
Future cash inflows | 677,866 | 216,410 | 894,276 | ||||||
Future production costs | (257,502 | ) | (79,642 | ) | (337,144 | ) | |||
Future estimated development costs | (64,673 | ) | (24,629 | ) | (89,302 | ) | |||
Future net cash inflows | 355,691 | 112,139 | 467,830 | ||||||
10% annual discount for estimated timing of cash flows | (235,504 | ) | (52,037 | ) | (287,541 | ) | |||
Standardized measure of discounted estimated future net cash flows | 120,187 | 60,102 | 180,289 | ||||||
The following table sets forth certain unaudited pro forma information for the principal sources of changes in discounted future net cash flows from the Company’s proved oil and natural gas reserves for the year ended December 31, 2006, giving effect to the transaction relating to the acquisition of the EnergyQuest Assets as if it had occurred on January 1, 2006.
F-9
Changes in Standardized Measure
Year-Ended December 31, 2006 | |||||||||
CEP Historical | EQ Historical | CEP Pro Forma | |||||||
Beginning of the period | 295,435 | 109,627 | 405,062 | ||||||
Sales and transfer of natural gas and oil, net of production costs | (40,064 | ) | (11,996 | ) | (52,060 | ) | |||
Net changes in prices and production costs related to future production | (193,499 | ) | (52,950 | ) | (246,449 | ) | |||
Development costs incurred during the period | 12,292 | 1,457 | 13,749 | ||||||
Changes in extensions and discoveries | — | 9,239 | 9,239 | ||||||
Revisions of previous quantity estimates | 18,435 | (3,013 | ) | 15,422 | |||||
Accretion discount | 29,624 | 10,963 | 40,587 | ||||||
Other | (2,036 | ) | (3,225 | ) | (5,261 | ) | |||
Standardized measure of discounted estimated future net cash flows | 120,187 | 60,102 | 180,289 | ||||||
7. SUBSEQUENT EVENT
On June 26, 2007, a special meeting of CEP’s common unitholders was held. At this meeting, the common unitholders approved the conversion of all outstanding Class E units into common units. As a result of the approval, all 90,376 of the Company’s outstanding Class E units have been canceled and the same number of common units have been issued to the former holders of the Class E units. To facilitate the conversion, the common unitholders approved both a change in the terms of the Company’s Class E units to provide that each Class E unit is convertible into the Company’s common units, and the issuance of additional common units upon the conversion of the Class E units.
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