EXHIBIT 99.2
BLACK RIDGE OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(Unaudited)
Property Acquisition
The following unaudited pro forma condensed combined financial information reflects the historical financial statements of Black Ridge Oil & Gas, Inc. (the “Company” and “Black Ridge”) adjusted on a pro forma basis to give effect to its acquisition (the “Acquisition”) of oil and natural gas properties (the “Acquired Properties”) from CP Exploration, LP (“CPX”). On December 13, 2013, the Company acquired oil and natural gas properties from CPX for approximately $20.6 million, net of purchase price adjustments and subject to post-closing adjustments. The Acquired Properties are comprised of leasehold interests in approximately 2,040 net mineral acres in the Williston Basin of North Dakota and interests in 43 gross (0.92 net) producing wells on the acquired leases.
Amended and Restated Credit Agreements
The acquisition of the Acquired Properties was funded with borrowings from our credit agreements (the “Black Ridge Credit Agreements”). On December 13, 2013 we amended the Black Ridge Credit Agreements to facilitate the acquisition.
Our credit agreement with Cadence Bank, N.A. (the “Bank”) (the “Senior Credit Facility”) was amended (the “Amendment”) to add properties acquired in the Acquisition to the mortgage and increases the borrowing base from $7,000,000 to $18,000,000. In addition, the Amendment provides that, for purposes of determining compliance with financial covenants, the Company’s EBITDAX for the third and fourth quarters of 2013 will be subject to pro forma adjustment to include EBITDAX results for the third and fourth quarters of 2013 attributable to properties acquired in the Acquisition. Finally, the Amendment revises the Collateral Coverage Ratio to be not less than 1.25 to 1.0 as of the end of each calendar quarter, commencing with the calendar quarter ending December 31, 2013 in order to be consistent with the Subordinated Credit Facility.
Our credit agreement with Chambers Energy Management, LP, as administrative agent (“Chambers”), and several other lenders (the “Subordinated Credit Facility”) was amended (the “Subordinated Credit Amendment”) to provide that, for purposes of determining compliance with certain financial covenants, Consolidated EBITDA will be subject to pro forma adjustments for (i) the actual earnings derived from properties acquired or disposed of in a material transaction as permitted under the credit agreement, as if the material transaction occurred on the first day of the applicable determination period and (ii) the actual earnings derived from the properties acquired under the Acquisition as if such Acquisition had occurred on July 1, 2013. In addition, the Amendment changes the reference to the amount under the First Lien Carve Out from $10,000,000 to $18,000,000.
Unaudited Pro Forma Condensed Combined Financial Statements
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2013 is based on the unaudited balance sheet of the Company as of September 30, 2013. The pro forma condensed consolidated balance sheet gives effect to the Acquisition as if the Acquisition had occurred on September 30, 2013.
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2013 is provided to update the unaudited pro forma condensed combined statement of operations to the period most recently reported by the Company, is based on the unaudited statement of operations of the Company for the nine months ended September 30, 2013 and the unaudited statement of revenues and direct operating expenses of the Acquired Properties for the nine month period ended September 30, 2013. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 is based on the audited statement of operations of the Company and the audited statement of revenues and direct operating expenses of the Acquired Properties for the year ended December 31, 2012. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2013 and the year ended December 31, 2012 include pro forma adjustments to give effect to the Acquisition as if it had occurred on January 1, 2012, and the amendments of the Black Ridge Credit Agreements.
BLACK RIDGE OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(Unaudited)
The pro forma adjustments reflecting the acquisition of the Acquired Properties include the use of estimates and assumptions as described in the related notes. The pro forma adjustments are based on information available to management at the time these unaudited pro forma condensed combined financial statements were prepared. The Company believes the estimates and assumptions used are reasonable and the significant effects of the transaction are properly reflected. However, the estimates and assumptions are subject to change as additional information becomes available. The pro forma financial statements do not reflect any cost savings (or associated costs to achieve such savings) from operating efficiencies, synergies or other restructuring that could result from the acquisition of the Acquired Properties. Additionally, the unaudited pro forma condensed combined statements of operations exclude the impact of non-recurring expenses the Company has incurred or will incur as a result of the acquisition of the Acquired Properties and related financing, primarily non-capitalizable banking and legal fees.
The unaudited pro forma condensed combined financial information is for informational purposes only and is not intended to represent or to be indicative of the results that actually would have occurred had the transactions described above been completed as of the dates set forth in this unaudited pro forma condensed combined financial information and should not be taken as indicative of the Company’s future results of operations. Actual results may differ significantly from that reflected in the unaudited pro forma condensed combined financial information for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma condensed combined financial information and actual results. The unaudited pro forma financial information should be read in conjunction with the accompanying footnotes, the Company’s Quarterly Reports on Form 10-Q for the nine months ended September 30, 2013 and Annual Report on Form 10-K for the years ended December 31, 2012 and 2011, the unaudited Statements of Revenues and Direct Operating Expenses for the nine months ended September 30, 2013 and 2012 and the audited Statements of Revenues and Direct Operating Expenses for the years ended December 31, 2012 and 2011 for the Acquired Properties, both included in this current report, and other information that the Company has filed with the Securities and Exchange Commission.
BLACK RIDGE OIL & GAS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2013
(Unaudited)
| | | Historical | | | Pro Forma | |
| | | Black Ridge | | | Acquired | | | Black Ridge | |
| | | Oil & Gas, Inc. | | | Properties | | | Oil & Gas, Inc. | |
| | | | | | (Note 2) | | | | | |
| ASSETS | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 5,086,978 | | | $ | 18,259,000 | | (a) | $ | 2,718,240 | |
| | | | | | | | (20,627,738 | ) | (b) | | | |
| Accounts receivable | | | 2,144,259 | | | | – | | | | 2,144,259 | |
| Settlement receivable | | | 2,500,000 | | | | – | | | | 2,500,000 | |
| Advances to operators | | | 1,220,576 | | | | – | | | | 1,220,576 | |
| Prepaid expenses | | | 30,791 | | | | – | | | | 30,791 | |
| Total current assets | | | 10,982,604 | | | | (2,368,738 | ) | | | 8,613,866 | |
| | | | | | | | | | | | | |
| Property and equipment: | | | | | | | | | | | | |
| Oil and natural gas properties, full cost method of accounting | | | | | | | | | | | | |
| Proved properties | | | 47,556,747 | | | | 20,463,231 | | (b) | | 68,019,978 | |
| Unproved properties | | | 5,539,955 | | | | 195,780 | | (b) | | 5,735,735 | |
| Other property and equipment | | | 87,218 | | | | – | | | | 87,218 | |
| Total property and equipment | | | 53,183,920 | | | | 20,659,011 | | | | 73,842,931 | |
| Less, accumulated depreciation, amortization, depletion and allowance for impairment | | | (8,443,947 | ) | | | – | | | | (8,443,947 | ) |
| Total property and equipment, net | | | 44,739,973 | | | | 20,659,011 | | | | 65,398,984 | |
| | | | | | | | | | | | | |
| Derivative instruments | | | 6,885 | | | | – | | | | 6,885 | |
| Debt issuance costs, net | | | 691,661 | | | | 141,000 | | (a) | | 832,661 | |
| | | | | | | | | | | | | |
| Total assets | | $ | 56,421,123 | | | $ | 18,431,273 | | | $ | 74,852,396 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | |
| Accounts payable | | $ | 5,014,464 | | | $ | – | | | $ | 5,014,464 | |
| Settlement payable | | | 160,000 | | | | – | | | | 160,000 | |
| Settlement accounts payable, related party | | | 116,234 | | | | – | | | | 116,234 | |
| Accrued expenses | | | 96,916 | | | | – | | | | 96,916 | |
| Derivative instruments | | | 53,110 | | | | – | | | | 53,110 | |
| Total current liabilities | | | 5,440,724 | | | | – | | | | 5,440,724 | |
| | | | | | | | | | | | | |
| Asset retirement obligations | | | 82,319 | | | | 31,273 | | (b) | | 113,592 | |
| Revolving credit facilities and long term debt, net of discounts of $2,717,949 and $-0-, respectively | | | 12,318,718 | | | | 18,400,000 | | (a) | | 30,718,718 | |
| Deferred tax liability | | | 4,117,287 | | | | – | | | | 4,117,287 | |
| | | | | | | | | | | | | |
| Total liabilities | | | 21,959,048 | | | | 18,431,273 | | | | 40,390,321 | |
| | | | | | | | | | | | | |
| Commitments and contingencies | | | – | | | | – | | | | – | |
| | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | |
| Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued and outstanding | | | – | | | | – | | | | – | |
| Common stock, $0.001 par value, 500,000,000 shares authorized, 47,979,990 shares issued and outstanding | | | 47,980 | | | | – | | | | 47,980 | |
| Additional paid-in capital | | | 32,930,595 | | | | – | | | | 32,930,595 | |
| Retained earnings | | | 1,483,500 | | | | – | | | | 1,483,500 | |
| Total stockholders' equity | | | 34,462,075 | | | | – | | | | 34,462,075 | |
| | | | | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 56,421,123 | | | $ | 18,431,273 | | | $ | 74,852,396 | |
The accompanying notes are an integral part of these financial statements.
BLACK RIDGE OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013
(Unaudited)
| | | Nine Months Ended September 30, 2013 | |
| | | Historical | | | Pro Forma | |
| | | Black Ridge | | | Acquired | | | Pro Forma | | | Black Ridge | |
| | | Oil & Gas, Inc. | | | Properties | | | Adjustments | | | Oil & Gas, Inc. | |
| | | | | | | | | | | (Note 3) | | | | | |
| Oil and gas sales | | $ | 6,674,940 | | | $ | 3,496,228 | | (a) | $ | – | | | $ | 10,171,168 | |
| Loss on settled derivatives | | | (21,184 | ) | | | – | | | | – | | | | (21,184 | ) |
| Unrealized loss on derivative instruments | | | (46,225 | ) | | | – | | | | – | | | | (46,225 | ) |
| Total revenues | | | 6,607,531 | | | | 3,496,228 | | | | – | | | | 10,103,759 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Production expenses | | | 813,023 | | | | 319,030 | | (a) | | – | | | | 1,132,053 | |
| Production taxes | | | 722,986 | | | | 330,663 | | (a) | | – | | | | 1,053,649 | |
| General and administrative | | | 1,715,287 | | | | – | | | | – | | | | 1,715,287 | |
| Depletion of oil and gas properties | | | 2,633,309 | | | | – | | | | 1,395,644 | | (b) | | 4,028,953 | |
| Accretion of discount on asset retirement obligations | | | 4,774 | | | | – | | | | 2,700 | | (c) | | 7,474 | |
| Depreciation and amortization | | | 17,454 | | | | – | | | | – | | | | 17,454 | |
| Total operating expenses | | | 5,906,833 | | | | 649,693 | | | | 1,398,344 | | | | 7,954,870 | |
| | | | | | | | | | | | | | | | | |
| Net operating income (loss) | | | 700,698 | | | | 2,846,535 | | | | (1,398,344 | ) | | | 2,148,889 | |
| | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest income | | | 341 | | | | – | | | | – | | | | 341 | |
| Interest (expense) | | | (1,523,599 | ) | | | – | | | | (1,004,576 | ) | (d) | | (2,528,175 | ) |
| Total other income (expense) | | | (1,523,258 | ) | | | – | | | | (1,004,576 | ) | | | (2,527,834 | ) |
| | | | | | | | | | | | | | | | | |
| Income (loss) before provision for income taxes | | | (822,560 | ) | | | 2,846,535 | | | | (2,402,920 | ) | | | (378,945 | ) |
| | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | 615,409 | | | | – | | | | (173,010 | ) | (e) | | 442,399 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | (207,151 | ) | | $ | 2,846,535 | | | $ | (2,575,930 | ) | | $ | 63,454 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding - basic | | | 47,979,990 | | | | | | | | | | | | 47,979,990 | |
| Weighted average common shares outstanding - fully diluted | | | 47,979,990 | | | | | | | | | | | | 48,602,474 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share - basic | | $ | (0.00 | ) | | | | | | | | | | $ | 0.00 | |
| Net income (loss) per common share - fully diluted | | $ | (0.00 | ) | | | | | | | | | | $ | 0.00 | |
The accompanying notes are an integral part of these financial statements.
BLACK RIDGE OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(Unaudited)
| | | Year Ended December 31, 2012 | |
| | | Historical | | | Pro Forma | |
| | | Black Ridge | | | Acquired | | | Pro Forma | | | Black Ridge | |
| | | Oil & Gas, Inc. | | | Properties | | | Adjustments | | | Oil & Gas, Inc. | |
| | | | | | | | | | | (Note 4) | | | | | |
| Oil and gas sales | | $ | 6,022,540 | | | $ | 3,260,954 | | (a) | $ | – | | | $ | 9,283,494 | |
| Total revenues | | | 6,022,540 | | | | 3,260,954 | | | | – | | | | 9,283,494 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Production expenses | | | 649,603 | | | | 210,159 | | (a) | | – | | | | 859,762 | |
| Production taxes | | | 692,527 | | | | 368,543 | | (a) | | – | | | | 1,061,070 | |
| General and administrative | | | 3,530,643 | | | | – | | | | – | | | | 3,530,643 | |
| Depletion of oil and gas properties | | | 2,443,482 | | | | – | | | | 1,338,458 | | (b) | | 3,781,940 | |
| Accretion of discount on asset retirement obligations | | | 4,557 | | | | – | | | | 2,500 | | (c) | | 7,057 | |
| Depreciation and amortization | | | 24,206 | | | | – | | | | – | | | | 24,206 | |
| Total operating expenses | | | 7,345,018 | | | | 578,702 | | | | 1,340,958 | | | | 9,264,678 | |
| | | | | | | | | | | | | | | | | |
| Net operating income (loss) | | | (1,322,478 | ) | | | 2,682,252 | | | | (1,340,958 | ) | | | 18,816 | |
| | | | | | | | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest income | | | 1,872 | | | | – | | | | – | | | | 1,872 | |
| Interest (expense) | | | (1,193,278 | ) | | | – | | | | (1,838,935 | ) | (d) | | (3,032,213 | ) |
| Settlement income | | | 17,020,759 | | | | – | | | | – | | | | 17,020,759 | |
| Settlement expenses | | | (5,874,864 | ) | | | – | | | | – | | | | (5,874,864 | ) |
| Total other income (expense) | | | 9,954,489 | | | | – | | | | (1,838,935 | ) | | | 8,115,554 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before provision for income taxes | | | 8,632,011 | | | | 2,682,252 | | | | (3,179,893 | ) | | | 8,134,370 | |
| | | | | | | | | | | | | | | | | |
| Provision for income taxes | | | (3,720,601 | ) | | | – | | | | 194,080 | | (e) | | (3,526,521 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | 4,911,410 | | | $ | 2,682,252 | | | $ | (2,985,813 | ) | | $ | 4,607,849 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding - basic | | | 47,789,225 | | | | | | | | | | | | 47,789,225 | |
| Weighted average common shares outstanding - fully diluted | | | 48,061,239 | | | | | | | | | | | | 48,061,239 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share - basic | | $ | 0.10 | | | | | | | | | | | $ | 0.10 | |
| Net income (loss) per common share - fully diluted | | $ | 0.10 | | | | | | | | | | | $ | 0.10 | |
The accompanying notes are an integral part of these financial statements.
BLACKRIDGE OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 – Financial Statement Presentation
The unaudited pro forma condensed combined balance sheet as of September 30, 2013 was derived from the unaudited balance sheet as of September 30, 2013 together with pro forma adjustments to give effect to the transaction as if it occurred on September 30, 2013.
The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 were derived from the unaudited statement of revenues and direct operating expenses of the Acquired Properties for the nine month period ended September 30, 2013, and the audited statement of revenues and direct operating expenses for the year ended December 31, 2012, together with pro forma adjustments to give effect to the acquisition as if it occurred on January 1, 2012.
These unaudited pro forma condensed combined financial statements are provided for illustrative purposes and do not purport to represent what the Company’s results of operations or financial position would have been if such transactions had occurred on the above mentioned dates. These statements were prepared based on accounting principles generally accepted in the United States. The use of estimates is required and actual results could differ from the estimates used. The Company believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to the acquisition.
Note 2 – Adjustments to Pro Forma Condensed Combined Balance Sheet as of September 30, 2013
| (a) | Reflects borrowings under the Black Ridge Credit Agreements. Deferred financing costs incurred in connection with the amendments to the credit agreements and the increase in the borrowing base were approximately $141,000. |
| (b) | Reflects the acquisition of the Acquired Properties for $20,627,738 after customary preliminary purchase price adjustments. The following table summarizes the purchase price and preliminary allocation of the purchase price to the assets acquired and liabilities assumed: |
| Purchase price of Acquired Properties | | $ | 20,627,738 | |
| | | | | |
| Preliminary Allocation of Purchase Price | | | | |
| Proved Oil and Gas Properties | | $ | 20,463,231 | |
| Unproved Oil and gas Properties | | | 195,780 | |
| Total fair value of oil and gas properties | | | 20,659,011 | |
| Asset retirement obligations | | | (31,273 | ) |
| Fair value of net assets acquired | | $ | 20,627,738 | |
Note 3 – Adjustments to Pro Forma Condensed Combined Statement of Operations for the Nine Months Ended September 30, 2013
| (a) | Operating revenues and direct operating expenses of the interests acquired in the Acquired Properties for the nine months ended September 30, 2013. |
| (b) | Reflects additional depletion attributable to the interests acquired in the Acquired Properties based on the preliminary purchase price allocations and historical depletion rates. |
| (c) | Reflects accretion of discount on asset retirement obligation attributable to the Acquired Properties. |
| (d) | Adjustment to (1) eliminate historical interest expense on the Company's debt, which was repaid at closing of the combination Senior Secured and the Subordinated debt instruments that were used to finance the CPX acquisition, (2) record interest expense at 3.75% on the Senior Notes, (3) record cash interest of 10%, non-cash PIK interest of 4%, (4) amortize of the original issue discount on the Subordinated debt, (5) amortize estimated debt issuance costs of $187,000 related the new financing and (6) amortize the non-cash value of the warrants issued to the subordinated debt holders of $452,000. The pro forma adjustment for the nine months ended September 30, 2013 reflects interest expense and amortization of debt issuance and warrant costs for the nine month period. |
| (e) | Reflects adjustment to the income tax provision for the estimated impact of the Acquired Properties’ revenue and direct operating expenses. Income taxes were adjusted using a combined federal and state tax rate of 39%. |
BLACKRIDGE OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 4 – Adjustments to Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2012
| (a) | Operating revenues and direct operating expenses of the interests acquired in the Acquired Properties for the year ended December 31, 2012. |
| (b) | Reflects additional depletion attributable to the interests acquired in the Acquired Properties based on the preliminary purchase price allocations and historical depletion rates. |
| (c) | Reflects accretion of discount on asset retirement obligation attributable to the Acquired Properties. |
| (d) | Adjustment to (1) eliminate historical interest expense on the Company's debt, which was repaid at closing of the combination Senior Secured and Subordinated debt instruments that were used to finance the CPX acquisition, (2) record interest expense at 3.75% on Senior Notes, (3) record cash interest of 10%, non-cash PIK interest of 4%, (4) amortize of the original issue discount on the Subordinated debt, (5) amortize estimated debt issuance costs of $250,000 related the new financing and (6) amortize the non-cash value of the warrants issued to the subordinated debt holders of $603,000. The pro forma adjustment for the year ended December 31, 2012 reflects interest expense and amortization of debt issuance costs and warrant costs for the full year. |
| (e) | Reflects adjustment to the income tax provision for the estimated impact of the Acquired Properties’ revenue and direct operating expenses. Income taxes were adjusted using a combined federal and state tax rate of 39%. |
