Exhibit 99.1
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements and explanatory notes give effect to the sale of certain oil and natural gas properties by Alta Mesa Holdings, LP (“Alta Mesa,” “we,” “us”), located in our Eagleville field in the Eagle Ford Shale in South Texas to Memorial Production Partners LP (“Memorial”) on March 25, 2014.
The unaudited pro forma condensed consolidated financial statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes. The unaudited pro forma condensed consolidated financial statements have been prepared utilizing our historical consolidated financial statements, and should be read in conjunction with the historical consolidated financial statements and notes thereto.
The unaudited pro forma consolidated statements of operations have been prepared as if the sale transaction had been consummated on January 1, 2012. The unaudited condensed consolidated balance sheet has been prepared as if the sale transaction had been consummated September 30, 2013.
The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only, are based on certain assumptions that we believe are reasonable, and do not purport to represent our financial condition or our results of operations had the business combinations occurred on the dates noted above or to project the results for any future date or period. In the opinion of management, all adjustments have been made that are necessary to present fairly the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated financial statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes.
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEETS
| | | | | | | | |
| | | | | | | | |
| | | | | | | Pro Forma |
| September 30, | | Pro forma | | September 30, |
| 2013 | | Adjustments | | 2013 |
| | | | | | | | |
| (in thousands) |
ASSETS | | | | | | | | |
CURRENT ASSETS | | | | | | | | |
Cash and cash equivalents | $ | 6,865 | | $ | — | | $ | 6,865 |
Accounts receivable, net | | 43,025 | | | — | | | 43,025 |
Other receivables | | 1,282 | | | — | | | 1,282 |
Prepaid expenses and other current assets | | 3,309 | | | — | | | 3,309 |
Derivative financial instruments | | 10,256 | | | — | | | 10,256 |
TOTAL CURRENT ASSETS | | 64,737 | | | — | | | 64,737 |
PROPERTY AND EQUIPMENT | | | | | | | | |
Oil and natural gas properties, successful efforts method, net | | 746,454 | | | (95,411) | (1) | | 651,043 |
Other property and equipment, net | | 8,724 | | | — | | | 8,724 |
TOTAL PROPERTY AND EQUIPMENT, NET | | 755,178 | | | (95,411) | | | 659,767 |
OTHER ASSETS | | | | | | | | |
Investment in Partnership — cost | | 9,000 | | | — | | | 9,000 |
Deferred financing costs, net | | 11,661 | | | — | | | 11,661 |
Derivative financial instruments | | 6,915 | | | — | | | 6,915 |
Advances to operators | | 3,926 | | | — | | | 3,926 |
Deposits and other assets | | 1,804 | | | — | | | 1,804 |
TOTAL OTHER ASSETS | | 33,306 | | | — | | | 33,306 |
TOTAL ASSETS | $ | 853,221 | | $ | (95,411) | | $ | 757,810 |
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT) | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Accounts payable and accrued liabilities | $ | 101,663 | | $ | — | | $ | 101,663 |
Current portion, asset retirement obligations | | 2,519 | | | — | | | 2,519 |
Derivative financial instruments | | 2,241 | | | — | | | 2,241 |
TOTAL CURRENT LIABILITIES | | 106,423 | | | — | | | 106,423 |
LONG-TERM LIABILITIES | | | | | | | | |
Asset retirement obligations, net of current portion | | 47,855 | | | (286) | (1) | | 47,569 |
Long-term debt | | 703,741 | | | (173,000) | (2) | | 530,741 |
Notes payable to founder | | 23,027 | | | — | | | 23,027 |
Other long-term liabilities | | 2,398 | | | — | | | 2,398 |
TOTAL LONG-TERM LIABILITIES | | 777,021 | | | (173,286) | | | 603,735 |
TOTAL LIABILITIES | | 883,444 | | | (173,286) | | | 710,158 |
PARTNERS’ CAPITAL (DEFICIT) | | (30,223) | | | 77,875 | (1) | | 47,652 |
TOTAL LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) | $ | 853,221 | | $ | (95,411) | | $ | 757,810 |
See notes to the unaudited pro forma condensed consolidated financial statements.
ATLA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
| | | | | | | | |
| | | | | | | | |
| | | | | | | |
| | | | Pro forma | | | Pro Forma |
| | Dec 31, 2012 | | Adjustments | | | Dec 31, 2012 |
| | | | | | | | |
| | | | (in thousands) | | |
REVENUES | | | | | | | | |
Oil, natural gas and natural gas liquids | $ | 332,166 | | $ | (38,682) | (1) | $ | 293,484 |
Other | | 4,567 | | | — | | | 4,567 |
| | 336,733 | | | (38,682) | | | 298,051 |
Unrealized loss — oil and natural gas derivative contracts | | (17,434) | | | — | | | (17,434) |
TOTAL REVENUES | | 319,299 | | | (38,682) | | | 280,617 |
EXPENSES | | | | | | | | |
Lease and plant operating expense | | 69,047 | | | (3,982) | (1) | | 65,065 |
Production and ad valorem taxes | | 23,485 | | | (3,952) | (1) | | 19,533 |
Workover expense | | 12,740 | | | (473) | (1) | | 12,267 |
Exploration expense | | 21,912 | | | — | | | 21,912 |
Depreciation, depletion, and amortization expense | | 109,252 | | | (4,522) | (1) | | 104,730 |
Impairment expense | | 96,227 | | | — | | | 96,227 |
Accretion expense | | 1,813 | | | (10) | (1) | | 1,803 |
General and administrative expense | | 40,222 | | | — | | | 40,222 |
TOTAL EXPENSES | | 374,698 | | | (12,939) | | | 361,759 |
INCOME (LOSS) FROM OPERATIONS | | (55,399) | | | (25,743) | | | (81,142) |
OTHER INCOME (EXPENSE) | | | | | | | | |
Interest expense, net | | (41,833) | | | 4,425 | (2) | | (37,408) |
Litigation settlement | | 1,250 | | | — | | | 1,250 |
TOTAL OTHER INCOME (EXPENSE) | | (40,583) | | | 4,425 | | | (36,158) |
(LOSS) BEFORE INCOME TAXES | | (95,982) | | | (21,318) | | | (117,300) |
PROVISION FOR STATE INCOME TAXES | | 107 | | | — | | | 107 |
NET (LOSS) | $ | (95,875) | | $ | (21,318) | | $ | (117,193) |
See notes to the unaudited pro forma condensed consolidated financial statements.
ALTA MESA HOLDINGS, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013
| | | | | | | | |
| | | | | | | | |
| | | | | | | |
| | | | Pro forma | | | Pro Forma |
| | Sept 30, 2013 | | Adjustments | | | Sept 30, 2013 |
| | | | | (in thousands) | | | |
REVENUES | | | | | | | | |
Oil, natural gas and natural gas liquids | $ | 291,430 | | $ | (61,443) | (1) | $ | 229,987 |
Other | | 1,110 | | | — | | | 1,110 |
| | 292,540 | | | (61,443) | | | 231,097 |
Unrealized gain — oil and natural gas derivative contracts | | (20,405) | | | — | | | (20,405) |
TOTAL REVENUES | | 272,135 | | | (61,443) | | | 210,692 |
EXPENSES | | | | | | | | |
Lease and plant operating expense | | 51,681 | | | (4,475) | (1) | | 47,206 |
Production and ad valorem taxes | | 21,326 | | | (5,361) | (1) | | 15,965 |
Workover expense | | 12,013 | | | (382) | (1) | | 11,631 |
Exploration expense | | 22,374 | | | — | | | 22,374 |
Depreciation, depletion, and amortization expense | | 83,547 | | | (12,043) | (1) | | 71,504 |
Impairment expense | | 28,618 | | | — | | | 28,618 |
Accretion expense | | 1,352 | | | (14) | (1) | | 1,338 |
Loss on sale of assets | | 2,267 | | | — | | | 2,267 |
General and administrative expense | | 32,139 | | | — | | | 32,139 |
TOTAL EXPENSES | | 255,317 | | | (22,275) | | | 233,042 |
INCOME FROM OPERATIONS | | 16,818 | | | (39,168) | | | (22,350) |
OTHER INCOME (EXPENSE) | | | | | | | | |
Interest expense, net | | (40,673) | | | 3,314 | (2) | | (37,359) |
TOTAL OTHER INCOME (EXPENSE) | | (40,673) | | | 3,314 | | | (37,359) |
INCOME BEFORE INCOME TAXES | | (23,855) | | | (35,854) | | | (59,709) |
PROVISION FOR STATE INCOME TAXES | | — | | | — | | | — |
NET INCOME | $ | (23,855) | | $ | (35,854) | | $ | (59,709) |
See notes to the unaudited pro forma condensed consolidated financial statements.
ALTA MESA HOLDINGS, LP
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS
| 1. | | Description of the transaction |
On March 25, 2014 we closed the sale of certain of our properties located primarily in Karnes County, Texas to Memorial Production Partners LP, comprising a portion of our Eagleville field (“Eagleville divestiture”). The properties sold included a working interest in all of our 112 producing wells and five wells in which we own an overriding royalty interest as of the effective date of January 1, 2014. We retained a net profits interest in these wells based on 50% of our original working interest in 2014, declining to 30% in 2015, 15% in 2016, and zero in 2017. Also included in the sale was a 30% undivided interest in all our Eagleville mineral leases and interests, and 30% of our working interest in all our wells in progress on December 31, 2013 or drilled after January 1, 2014. The cash purchase price was $173 million. The purchase and sale agreement provides for customary adjustments to the purchase price for revenues and expenses incurred after the effective date. Cash received was utilized to pay down borrowings under our senior secured revolving credit facility.
As of January 1, 2014, estimated net proved reserves sold were approximately 7.7 MMBOE.
The unaudited pro forma condensed consolidated financial information was prepared under the existing U.S. GAAP standards, which are subject to change and interpretation and was based on the historical consolidated financial statements of Alta Mesa.
The pro forma adjustments to historical financial information are based on currently available information and certain estimates and assumptions and therefore the actual effects of this transaction will differ from the pro forma adjustments.
3. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
The Unaudited Pro Forma Condensed Statements of Operations were prepared assuming the transaction occurred on September 30, 2013.
The unaudited pro forma consolidated balance sheet as of September 30, 2013 reflects the following adjustments:
| (1) | | Adjustment to reflect the Eagleville divestiture providing for: |
| · | | recognition of net cash proceeds received; |
| · | | the elimination of the historical accounts of the assets; |
| · | | recognition of related net gain on sale of $77.9 million; and |
| (2) | | Adjustment to recognize the use of cash proceeds to repay borrowings under our senior secured revolving credit facility. |
| 4. | | Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Statements of Operations |
The Unaudited Pro Forma Condensed Statements of Operations were prepared assuming the transaction occurred on January 1, 2012.
Adjustments to the Pro Forma Condensed Statements of Operations for the twelve months ended December 31, 2012 and the nine months ended September 30, 2013:
| (1) | | Elimination of the revenue and direct operating expenses and depreciation, depletion and amortization of the assets sold; |
| (2) | | Adjustment to interest expense reflecting the repayment of debt under our revolving credit facility as if the sale and repayment had taken place January 1, 2012. The estimated related reduction in our interest expense was computed using actual historical average interest rates for the periods. It also reflects the reduction in cash flow attributable to the sale. |
The gain on sale of the assets is not included as a pro forma adjustment in the pro forma condensed statements of operations as it is a nonrecurring item.
