Lonestar Resources US (LONE) 8-K Statement of Revenue and Direct Operating Expenses

Exhibit 99.3

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

On June 15, 2017, Lonestar Resources US Inc. (“Lonestar”, the “Company”, “we”, and “our”) acquired certain oil and gas assets in Fayette, Gonzales and Lavaca Counties, Texas (the “Marquis Acquisition”). The unadjusted purchase price for the Marquis Acquisition was approximately $50 million consisting of (i) approximately $44 million in cash and (ii) 1,500,000 million shares of the Company’s Series B Preferred Stock valued at approximately $6 million.  

Also on June 15, 2017, the Company acquired certain oil and gas properties in DeWitt, Gonzales and Karnes Counties, Texas (the “Battlecat Acquisition” and, together with the Marquis Acquisition, the “Acquisitions”).  The unadjusted purchase price for the Battlecat Acquisition was approximately $60 million consisting of (i) $55 million in cash and (ii) 1,184,632, shares of the Company’s Series B Preferred Stock valued at approximately $4.8 million.  

Upon closing of the Acquisitions, Lonestar acquired 115 gross / 80.3 net producing oil and gas wells, with Lonestar owning an average 70% working interest in the producing wells.  The leasehold acquired total 30,219 gross / 21,238 net acres, with Lonestar owning an average 70% working interest in the leasehold.  Lonestar initially identified during the acquisition process 85 gross / 73 net proved undeveloped drilling locations in the Lower Eagle Ford Shale.  The Company has identified an additional 34 gross / 24 net drilling locations in the Lower Eagle Ford Shale to which proved reserves have not been assigned.

The cash consideration for the Acquisitions was provided by (a) the sale of 5,400 shares of Lonestar’s Series A-1 Preferred Stock, par value $0.001 per share (the “Series A-1 Preferred Stock”) and 74,600 shares of Lonestar’s Series A-2 Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred Stock” and, together with the Series A-1 Preferred Stock and the Series A-2 Preferred Stock, the “Series Preferred Stock”) to Chambers Energy Capital III, LP (“Chambers”), in each case at a price of $975 per share for an aggregate amount of approximately $77.7 million (less transaction costs), and (b) borrowings of approximately $23.7 million under Lonestar’s Senior Secured Credit Facility.  The non-cash consideration for the Acquisitions consisted of the issuance of the Company’s Series B Preferred Stock.

Theaccompanying pro forma consolidated financialstatementspresent the Marquis and Battlecat Acquisitions along with (a) the related issuances of Series Preferred Stock and Series B Preferred Stock and (b) borrowings from the Senior Secured Credit Facility.  Theseunauditedstatementshavebeendevelopedbyapplyingproformaadjustmentstoourhistoricalfinancialstatements and the Marquis Acquisition Properties statement of revenue and direct operating expenses and the Battlecat Oil and Gas Holdings, LLC consolidated financial statements for the periods presented.The unauditedproformastatementofincomedatafortheperiodspresentedgiveseffecttothe Marquis and Battlecat Acquisitions and related transactionsas if they had been completed on January 1, 2016.  A pro forma balance sheet is not included in this report as the assets and liabilities were included in the historical balances at September 30, 2017.

The unaudited pro forma consolidated financial statements should be read together with the historical financial statements of Lonestar and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company’s Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2017, the historical statement of revenue and direct operating expenses for the Marquis Acquisition properties filed as Exhibit 99.1 in this Current Report on Form 8-K and the historical Battlecat Oil and Gas Holdings LLC consolidated financial statements filed as Exhibit 99.2 in this Current Report on Form 8-K.

The unaudited pro forma consolidated financial statements are included for informational purposes only and do not purport to reflect the results of operations or financial position that would have occurred had the Marquis and Battlecat Acquisitions and related financing occurred on the assumed acquisition date. Accordingly, they should not be relied upon as indicative of our results of operations or financial position had the Marquis and Battlecat Acquisitions and related financing occurred on the date assumed because they necessarily exclude various operating expenses. Additionally, the unaudited pro forma consolidated financial statements are not a projection of our results of operations or financial position for any future period or date.

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Lonestar Resources US, Inc.
Pro Forma Consolidated Statement of Operations (UNAUDITED)
(In thousands, except per share data)
	Nine Months Ended September 30, 2017
	Lonestar			Marquis (a)		Battlecat (a)		Pro Forma Adjustments				Pro Forma Lonestar
Revenues
Oil sales	$	52,742		$	10,893	$	1,802	$	—			$	65,437
Natural gas sales		5,072			283		—		—				5,355
Natural gas liquid sales		4,820			807		—		—				5,627
Total revenues		62,634			11,983		1,802		—				76,419
Costs and expenses
Lease operating and gas gathering		10,992			3,707		1,116		—				15,815
Production, ad valorem, and severance taxes		3,656			588		83		—				4,327
Rig standby expense		61			—		—		—				61
Depletion, depreciation, and amortization		40,527			—		—		2,694		(b)		43,221
Accretion of asset retirement obligations		96			—		—		—				96
Loss on sale of oil and gas properties		466			—		—		—				466
Impairment of oil and gas properties		27,081			—		—		—				27,081
Stock-based compensation		985			—		—		—				985
General and administrative		7,940			—		—		—				7,940
Acquisition costs		3,063			—		—		—				3,063
Other (income) expense		(62	)		—		—		—				(62	)
Total costs and expenses		94,805			4,295		1,199		2,694				102,993
(Loss) income from operations		(32,171	)		7,688		603		(2,694	)			(26,574	)
Other income (expense)
Interest expense		(15,448	)		—		—		(713	)	(c)		(16,161	)
Amortization of finance costs		(4,368	)		—		—		—				(4,368	)
Unrealized gain on warrants		3,286			—		—		—				3,286
Gain on derivative financial instruments		6,505			—		—		—				6,505
Total other expense, net		(10,025	)		—		—		(713	)			(10,738	)
Income (loss) before income taxes		(42,196	)		7,688		603		(3,407	)			(37,312	)
Income tax (expense) benefit		15,339			—		—		(1,709	)	(e)		13,630
Income (loss) before dividends		(26,857	)		7,688		603		(5,116	)			(23,682	)
Preferred stock dividends		(2,120	)		—		—		(3,600	)	(d)		(5,720	)
Net income (loss) attributable to common stockholders	$	(28,977	)	$	7,688	$	603	$	(8,716	)		$	(29,402	)
Earnings per share:
Basic and diluted	$	(1.33	)									$	(1.35	)
Weighted average shares outstanding - basic and diluted		21,822,015							—				21,822,015

See Notes to Unaudited Pro Forma Consolidated Statements of Operations

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Lonestar Resources US, Inc.
Pro Forma Consolidated Statement of Operations (UNAUDITED)
(In thousands, except per share data)
	Year Ended December 31, 2016
	Lonestar			Marquis (f)		Battlecat (f)		Pro Forma Adjustments				Pro Forma Lonestar
Revenues
Oil sales	$	46,954		$	27,356	$	4,083	$	—			$	78,393
Natural gas sales		7,165			267		10		—				7,442
Natural gas liquid sales		3,853			1,839		10		—				5,702
Total revenues		57,972			29,462		4,103		—				91,537
Costs and expenses
Lease operating and gas gathering		16,232			11,371		1,767		—				29,370
Production, ad valorem, and severance taxes		3,287			1,462		188		—				4,937
Rig standby expense		2,261			—		—		—				2,261
Depletion, depreciation, and amortization		46,888			—		—		10,268		(b)		57,156
Accretion of asset retirement obligations		180			—		—		—				180
Gain on sale of oil and gas properties		(74	)		—		—		—				(74	)
Impairment of oil and gas properties		33,893			—		—		—				33,893
Stock-based compensation		448			—		—		—				448
General and administrative		11,319			—		—		—				11,319
Other expense		1,261			—		—		—				1,261
Total costs and expenses		115,695			12,833		1,955		10,268				140,751
(Loss) income from operations		(57,723	)		16,629		2,148		(10,268	)			(49,214	)
Other income (expense)
Interest expense		(29,583	)		—		—		(1,435	)	(c)		(31,018	)
Gain on disposal of bonds		28,480			—		—		—				28,480
Unrealized gain on warrants		568			—		—		—				568
Loss on derivative financial instruments		(8,672	)		—		—		—				(8,672	)
Total other income (expense), net		(9,207	)		—		—		(1,435	)			(10,642	)
Income (loss) before income taxes		(66,930	)		16,629		2,148		(11,703	)			(59,856	)
Income tax (expense) benefit		(27,405	)		—		—		(2,476	)	(e)		(29,881	)
Income (loss) before dividends		(94,335	)		16,629		2,148		(14,179	)			(89,737	)
Preferred stock dividends		—			—		—		(7,200	)	(d)		(7,200	)
Net income (loss) attributable to common stockholders	$	(94,335	)	$	16,629	$	2,148	$	(21,379	)		$	(96,937	)
Net income (loss) per common share attributable to common stockholders-basic and diluted	$	(11.64	)									$	(11.96	)
Weighted average common shares outstanding–basic and diluted		8,106,931											8,106,931

See Notes to Unaudited Pro Forma Consolidated Statements of Operations

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Note 1 – ADJUSTMENTS TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

a. Represents the historical revenue and direct operating expenses of the Marquis and Battlecat Properties for the period from January 1, 2017 to June 15, 2017 (date of acquisitions).

b. Represents the increase in depletion, depreciation, amortization and accretion expense computed on a unit of production basis following the fair value allocation of the purchase price to prove oil and gas properties, as if the Marquis and Battlecat Acquisitions were consummated on January 1, 2016.

c. Represents the net increase in interest expense resulting from the incremental borrowings from the Senior Secured Credit Facility, assuming an average annual rate of interest of 6.0%, which was the approximate average annual rate of interest for the borrowing associated with the Marquis and Battlecat Acquisitions.

d. Represents dividends on the Series A Preferred Stock issued in connection with the acquisitions.

e. Pro forma adjusted income tax benefit is approximately $13.6 million for the nine months ended September 30, 2017 and approximately $29.8 million in income tax expense for the year ended December 31, 2016 based on the utilization of the Company’s corporate income tax rate of 35% applied to the pro forma net income after pro forma adjustments of the Marquis and Battlecat Acquisition Properties.

f. Represents the historical revenue and direct operating expenses of the Marquis and Battlecat Properties for the year ended December 31, 2016.

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Note 2 – SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)

Estimated Net Quantities of Oil and Gas Reserves

TheproformaestimatesofprovedoilandgasreservesanddiscountedfuturenetcashflowsforthepropertiesasofDecember31,2016werepreparedinternally by Lonestar’spetroleumengineers.Usersofthisinformationshouldbeawarethattheprocessofestimatingquantitiesofprovedoilandgasreservesisvery complex,requiringsignificantsubjectivedecisionstobemadeintheevaluationofavailablegeologic,engineering,andeconomicdataforeachreservoir.The dataforanygivenreservoirmayalsochangesubstantiallyovertimeasaresultofnumerousfactors,including,butnotlimitedto,additionaldevelopmentactivity, evolvingproductionhistoryandcontinualreassessmentoftheviabilityofproductionundervaryingeconomicconditions.Asaresult,revisionstoexistingreserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variance in available data for various reservoirs make estimates generally less precise than other estimates includedinthestatementofrevenueanddirectoperatingexpensesdisclosures.

Theproformaestimatedprovednetrecoverablereservespresentedbelowincludeonlythosequantitiesofoilandgasgeologicandengineeringdatathat demonstratewithreasonablecertaintytoberecoverableinfutureperiodsfromknownreservoirsunderexistingeconomic,operatingandregulatory practices. Proved developed reserves represent only those reserves estimated to be recovered through existing wells. Proved undeveloped reserves include thosereservesthatmayberecoveredfromnewwellsonundrilledacreageorfromexistingwellsonwhicharelativelymajorexpenditureforrecompletionor secondaryrecoveryoperationisrequired.Alloftheproformaproperties'provedreservessetforthhereinarelocatedintheContinentalUnitedStates.The estimateofreservesandthestandardizedmeasureofdiscountedfuturenetcashflowsshownbelowreflectLonestar’sdevelopmentplanforthese properties.

The following tables set forth certain unaudited pro forma information concerning Lonestar’s proved oil, gas and NGL reserves for the year ended December31,2016,givingeffecttothe Marquis and Battlecat Acquisitions as if they had occurred on January 1, 2016. The following tables provide a summary of the changes in estimated reserves for the periods presented.

	Lonestar			Marquis			Battlecat			Pro Forma Lonestar
	(Mboe)			(Mboe)			(Mboe)			(Mboe)
Proved reserves as of January 1, 2016		40,202			20,540			836			61,578
Revisions of previous estimates  (1)		(2,456	)		(13,310	)		(426	)		(16,192	)
Extensions, discoveries and other additions		6,660			—			—			6,660
Purchases of reserves in place		339			—			114			453
Sales of reserves in place		(2,048	)		—			—			(2,048	)
Production		(2,157	)		(954	)		(102	)		(3,213	)
Proved reserves as of December 31, 2016		40,540			6,276			422			47,238
Proved developed reserves:
As of December 31, 2016		10,998			4,745			422			16,166
Proved undeveloped reserves:
As of December 31, 2016		29,542			1,531			—			31,073

(1) Included in revisions during 2016, were negative price revisions of approximately 13.0 MMBoe primarily as a result of the average oil price of $42.75 in the January 1, 2017 reserves as compared to $50.28 in the January 1, 2016 reserves.  Included in negative price revisions were 40 gross (39 net) PUD locations that were removed as a result of the lower price.  

Standardized Measure of Discounted Future Net Cash Flows

Theproformastandardizedmeasurerelatedtoprovedoil,gasandNGLreserves,whichgiveeffecttothe Marquis and Battlecat Acquisition Properties,issummarized below. This summary is based on a valuation of proved reserves using discounted cash flows based on SEC pricing applicable for each year, costs and economicconditionsanda10%discountrate.Theadditionstoprovedreservesfromnewdiscoveriesandextensionsandtheimpactofchangesinpricesand costsassociatedwithprovedreservescouldvarysignificantlyfromyeartoyear.Accordingly,theinformationpresentedbelowisnotanestimateoffairvalueand shouldnotbeconsideredindicativeofanytrends.

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Theproformastandardizedmeasureofdiscountedfuturecashflowsdoesnotpurport,norshoulditbeinterpretedtopresent,estimatesofthefairvalueof the properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipatedfuturechangesinpricesandcostsandadiscountfactormorerepresentativeofthetimevalueofmoneyandrisksinherentinreserveestimates.The followingsummarysetsforthfuturenetcashflowsrelatingtoprovedoilandgasreservesbasedonthestandardizedmeasureprescribedbyFASBASCTopic 932.

Standardized Measure of Oil and Gas

	December 31, 2016
	Lonestar			Marquis			Battlecat			Pro Forma Lonestar
	(in thousands)
Future cash inflows	$	1,206,106		$	206,104		$	16,681		$	1,428,891
Future Cost
Production		(452,784	)		(139,210	)		(8,308	)		(600,302	)
Development		(358,543	)		(23,734	)		—			(382,277	)
Future inflows before income tax		394,779			43,160			8,373			446,312
Future income tax expense		(55,097	)		(15,106	)		(63	)		(70,266	)
Future net cash flows		339,682			28,054			8,310			376,046
Discount of 10% per annum		(193,849	)		(2,228	)		(2,581	)		(198,658	)
Standardized measure of discounted future net cash flows	$	145,833		$	25,826		$	5,729		$	177,388

In accordance with SEC and Financial Accounting Standards Board (“FASB”) requirements, our estimated net proved reserves and standardized measure atDecember31,2016utilizedprices(subsequentlyadjustedforqualityandbasisdifferentials)basedonthetwelvemonthunweightedaverageofthefirstofthe monthpricesofWestTexasIntermediate(“WTI”) oilpricewhichequatesto$42.75perBbl, approximately $12.40 per Bbl of NGL calculated as 29% of the WTI oil price per Bbl,andanaverage Henry Hub spot gas price which equates to $2.48perMMBtuofgas.

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Thefollowingtablesetsforththeproformachangesinstandardizedmeasureofdiscountedfuturenetcashflowsrelatingtoprovedoilandgasreservesfor the periodsindicated.

Changes in Standardized Measure

	December 31, 2016
	Lonestar			Marquis			Battlecat			Pro Forma Lonestar
	(in thousands)
Standardized measure, beginning of year	$	268,426		$	95,553		$	10,257		$	374,236
Accretion of discount		29,430			9,555			1,033			40,018
Net change in sales price net of production costs		(66,406	)		(36,512	)		(5,339	)		(108,257	)
Changes in estimated future development costs		(5,036	)		29,562			5,702			30,228
Extensions, discoveries and improved recovery		17,674			—			—			17,674
Purchase of minerals in place		3,280			—			1,215			4,495
Changes of production rates (timing) and other		(26,987	)		(40	)		4,154			(22,873	)
Revision of quantity estimates		(23,573	)		(41,757	)		(9,179	)		(74,509	)
Net change in income taxes		5,229			(13,906	)		34			(8,643	)
Sales of oil and gas produced, net of production costs		(39,151	)		(16,629	)		(2,148	)		(57,928	)
Sales of minerals in place		(17,053	)		—			—			(17,053	)
Standardized measure, end of year	$	145,833		$	25,826		$	5,729		$	177,388

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