Riviera Resources (RVRA) 8-K Completion of Acquisition or Disposition of Assets

Exhibit 99.2

RIVIERA RESOURCES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On October 8, 2020, Riviera Resources, Inc., (“Riviera” or the “Company”) completed the sale of its wholly owned subsidiary, Blue Mountain Midstream, LLC (“Blue Mountain” and “the Blue Mountain Divestiture”) to Citizen Energy under a Purchase and Sale Agreement dated August 23, 2020, for net cash proceeds of approximately $111 million. During the six months ended June 30, 2020, the Company recorded a noncash impairment charge of approximately $18 million associated with Blue Mountain’s crude oil gathering system assets. The Company anticipates recording an additional noncash impairment charge of approximately $218 million in the third quarter of 2020 associated with Blue Mountain assets.

In addition, as previously reported, on October 1, 2020, the Company completed the sale of its interest in Mid-Continent properties located in Oklahoma (the “Mid-Continent Asset Sale”) to Staghorn Petroleum II, LLC under a Purchase and Sale Agreement dated August 4, 2020, for net cash proceeds of approximately $13 million. During the six months ended June 30, 2020, the Company recorded a noncash impairment charge of approximately $88 million to reduce the carrying value of these assets to fair value.

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2020, gives effect to the Blue Mountain Divestiture and the Mid-Continent Asset Sale as if they were completed as of June 30, 2020. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2020, and for the year ended December 31, 2019, give effect to the Blue Mountain Divestiture and the Mid-Continent Asset Sale as if they were completed as of January 1, 2019.

The following unaudited pro forma condensed consolidated financial statements are derived from historical consolidated financial statements of the Company. The unaudited pro forma condensed consolidated financial statements are for informational and illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the transactions reflected therein had occurred on the dates indicated, nor are such financial statements necessarily indicative of the results of operations in future periods. The assumptions and estimates underlying the adjustments to the unaudited pro forma condensed consolidated financial statements are described in the accompanying notes. The unaudited pro forma condensed consolidated financial information should also be read in conjunction with the Company’s historical financial statements and the notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2019, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that effect the reported amounts of revenues and expenses. Actual results could differ from those estimates.

The unaudited pro forma condensed consolidated financial information does not purport to represent what the actual results of operations would have been had the transaction occurred on the date assumed, nor is it necessarily indicative of the Company’s future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma condensed financial information reflect estimates and assumptions that Company management believes to be reasonable.

RIVIERA RESOURCES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2020

(in thousands, except per share amounts)

	Riviera Resources, Inc. Historical			Blue Mountain Divestiture Pro Forma Adjustments					Mid- Continent Assets Sale Pro Forma Adjustments					Riviera Resources, Inc. Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	55,641		$	109,016		(a	)	$	13,418		(a	)	$	102,637
					(75,438	)	(b	)
Accounts receivable – trade, net		22,551			(10,140	)	(c	)		(6,453	)	(b	)		5,958
Derivative instruments		7,059			—					—					7,059
Restricted cash		24,139			—					—					24,139
Other current assets		13,057			(6,768	)	(d	)		(943	)	(c	)		5,346
Total current assets		122,447			16,670					6,022					145,139
Noncurrent assets:
Oil and natural gas properties (successful efforts method), net		37,333			—					(11,554	)	(d	)		25,779
Other property and equipment, net		324,185			(318,125	)	(e	)		(1,887	)	(d	)		4,173
Other noncurrent assets		5,555			(4,082	)	(e	)		—					1,473
Total noncurrent assets		367,073			(322,207	)				(13,441	)				31,425
Total assets	$	489,520		$	(305,537	)			$	(7,419	)			$	176,564
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	36,294		$	(11,906	)	(c	)	$	(5,191	)	(b	)	$	19,197
Derivative instruments		766			—					—					766
Other accrued liabilities		9,490			(38	)	(b	)		(1,131	)	(c	)		8,321
Total current liabilities		46,550			(11,944	)				(6,322	)				28,284
Noncurrent liabilities:
Credit facilities		75,400			(75,400	)	(b	)		—					—
Asset retirement obligations and other noncurrent liabilities		19,317			(1,832	)	(e	)		(13,189	)	(d	)		4,296
Total noncurrent liabilities		94,717			(77,232	)				(13,189	)				4,296
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value		—			—					—					—
Common Stock, $0.01 par value		579			—					—					579
Additional paid-in capital		759,186								—					759,186
Accumulated deficit		(411,512	)		(250,880	)	(f	)		12,092		(e	)		(615,781	)
					34,519		(g	)
Total equity		348,253			(216,361	)				12,092					143,984
Total liabilities and equity	$	489,520		$	(305,537	)			$	(7,419	)			$	176,564

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

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RIVIERA RESOURCES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2020

(in thousands, except per share amounts)

	Riviera Resources, Inc. Historical			Blue Mountain Divestiture Pro Forma Adjustments					Mid- Continent Assets Sale Pro Forma Adjustments					Riviera Resources, Inc. Pro Forma
Revenues and other:
Oil, natural gas and natural gas liquids sales	$	25,732		$	—				$	(11,665	)	(f	)	$	14,067
Gains on commodity derivatives		6,721			(466	)	(g	)		—					6,255
Marketing revenues		55,786			(53,088	)	(g	)		—					2,698
Other revenues		40			—					(8	)	(f	)		32
		88,279			(53,554	)				(11,673	)				23,052
Expenses:
Lease operating expenses		7,845			—					(4,904	)	(f	)		2,941
Transportation expenses		3,383			—					(2,191	)	(f	)		1,192
Marketing expenses		38,147			(38,083	)	(g	)		—					64
General and administrative expenses		21,123			(3,246	)	(g	)		—					17,877
Depreciation, depletion and amortization		15,112			(5,845	)	(h	)		(4,763	)	(g	)		4,504
Impairment of assets held for sale and long-lived assets		121,658			(17,856	)	(i	)		(87,683	)	(h	)		16,119
Taxes, other than income taxes		2,590			(869	)	(j	)		(819	)	(i	)		902
(Gains) losses on sale of assets and other, net		(2,031	)		1,091		(j	)		—					(940	)
		207,827			(64,808	)				(100,360	)				42,659
Operating loss		(119,548	)		11,254					88,687					(19,607	)
Other income and (expenses):
Interest expense, net of amounts capitalized		(1,668	)		1,401		(k	)		—					(267	)
Other, net		(1,008	)		290		(k	)		—					(718	)
		(2,676	)		1,691					—					(985	)
Reorganization items, net		(494	)		—					—					(494	)
Loss before income taxes		(122,718	)		12,945					88,687					(21,086	)
Income tax expense		—			—		(l	)		—		(j	)		—
Net loss	$	(122,718	)	$	12,945				$	88,687				$	(21,086	)
Loss per share:
Basic and diluted	$	(2.11	)											$	(0.36	)
Weighted average shares outstanding – basic and diluted		58,098													58,098

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

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RIVIERA RESOURCES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2019

(in thousands, except per share amounts)

	Riviera Resources, Inc. Historical			Blue Mountain Divestiture Pro Forma Adjustments					Mid- Continent Assets Sale Pro Forma Adjustments					Riviera Resources, Inc. Pro Forma
Revenues and other:
Oil, natural gas and natural gas liquids sales	$	236,053		$	—				$	(43,036	)	(f	)	$	193,017
Gains on commodity derivatives		10,091			541		(g	)		—					10,632
Marketing revenues		214,280			(159,706	)	(g	)		(7	)	(f	)		54,567
Other revenues		19,355			—					(93	)	(f	)		19,262
		479,779			(159,165	)				(43,136	)				277,478
Expenses:
Lease operating expenses		77,719			—					(16,319	)	(f	)		61,400
Transportation expenses		64,149			—					(4,830	)	(f	)		59,319
Marketing expenses		166,651			(126,262	)	(g	)		—					40,389
General and administrative expenses		61,671			(16,634	)	(g	)		—					45,037
Exploration costs		5,122			—					—					5,122
Depreciation, depletion and amortization		77,089			(9,525	)	(h	)		(10,171	)	(g	)		57,393
Impairment of assets held for sale and long-lived assets		208,376			—					—					208,376
Taxes, other than income taxes		15,374			(1,383	)	(j	)		(1,966	)	(i	)		12,025
(Gains) losses on sale of assets and other, net		(20,743	)		1,776		(j	)		—					(18,967	)
		655,408			(152,028	)				(33,286	)				470,094
Operating loss		(175,629	)		(7,137	)				(9,850	)				(192,616	)
Other income and (expenses):
Interest expense, net of amounts capitalized		(6,997	)		1,984		(k	)		—					(5,013	)
Other, net		(444	)		798		(k	)		—					354
		(7,441	)		2,782					—					(4,659	)
Reorganization items, net		13,359			—					—					13,359
Loss from continuing operations before income taxes		(169,711	)		(4,355	)				(9,850	)				(183,916	)
Income tax expense		127,859			27,775		(l	)		(33,275	)	(j	)		122,359
Loss from continuing operations	$	(297,570	)	$	(32,130	)			$	23,425				$	(306,275	)
Loss per share:
Loss from continuing operations per share - basic and diluted	$	(4.71	)											$	(4.85	)
Weighted average shares outstanding - basic and diluted		63,118													63,118

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

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RIVIERA RESOURCES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Historical Riviera Resources, Inc.

These amounts represent the Company’s condensed consolidated historical balance sheet and statements of operations. Amounts as of June 30, 2020, and for the six months ended June 30, 2020, were derived from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. Amounts for the year ended December 31, 2019, were derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company’s historical financial statements and the notes thereto. During 2019 and 2020, the Company completed divestitures for which the related activity is not required to be reflected in the adjustments to the unaudited pro forma condensed consolidated financial statements included herein. Substantially all of the revenues reported on the historical condensed consolidated statements of operations included herein relates to properties that have been divested.

The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (i) directly attributable to the transaction, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, expected to have a continuing impact on the results following the transactions and events.

Note 1. Blue Mountain Divestiture Pro Forma Adjustments

(a) Reflects cash proceeds received of approximately $110 million, net of Blue Mountain cash balance of approximately $941,000.

(b) Reflects payment in full of the Blue Mountain senior secured revolving loan facility and accrued interest.

(c) Reflects elimination of outstanding accounts receivable – trade, net and accounts payable and accrued expenses.

(d) Reflects elimination of other current assets.

(e) Reflects elimination of property, plant and equipment, other noncurrent assets, asset retirement obligations and other noncurrent liabilities.

(f) Reflects elimination of the Company’s equity in Blue Mountain and the loss recognized from the divestiture.

(g) Reflects elimination of revenues and operating expenses.

(h) Reflects elimination of depreciation and amortization expenses.

(i) Reflects elimination of noncash impairment charge recorded during the six months ended June 30, 2020, associated with Blue Mountain’s crude oil gathering system assets.

(j) Reflects elimination of taxes, other than income taxes and (gains) losses on sale of assets and other, net.

(k) Reflects elimination of interest expense and other, net.

(l) Reflects elimination of deferred income tax benefit, determined using the Company’s statutory tax rate and the book and tax basis difference associated with Blue Mountain. There is no adjustment for the six months ended June 30, 2020, because a full valuation allowance was recorded against the Company’s net deferred tax assets.

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RIVIERA RESOURCES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS - Continued

Note 2. Mid-Continent Asset Sale Pro Forma Adjustments

(a) Reflects cash proceeds received of approximately $13 million.

(b) Reflects elimination of outstanding accounts receivable – trade, net and accounts payable and accrued expenses.

(c) Reflects elimination of other current assets and other accrued liabilities.

(d) Reflects elimination of oil and natural gas properties, property, plant and equipment, other noncurrent assets, asset retirement obligations and other noncurrent liabilities.

(e) Reflects net impact recognized from the sale of these assets.

(f) Reflects elimination of revenues and direct operating expenses associated with these assets.

(g) Reflects elimination of depreciation, depletion and amortization expenses.

(h) Reflects elimination of noncash impairment charge recorded during the six months ended June 30, 2020.

(i) Reflects elimination of taxes, other than income taxes.

(j) Reflects elimination of deferred income tax expense, determined using the Company’s statutory tax rate, associated with recording a full valuation allowance against the Company’s net deferred tax assets. There is no adjustment for the six months ended June 30, 2020, because a full valuation allowance was recorded against the Company’s net deferred tax assets.

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