Exhibit 99.1
Energy Partners, Ltd.
Introduction to the Unaudited Pro Forma Condensed Consolidated
Financial Statements
The following unaudited pro forma condensed consolidated financial statements of Energy Partners, Ltd. (the “Company”) adjust the historical consolidated financial statements of the Company to give effect to i) the disposition of substantially all of its onshore South Louisiana assets, which closed on June 12, 2007, to Castex Energy 2007, L.P. for approximately $72.0 million in cash after preliminary closing adjustments, and ii) the Company’s tender offer to purchase 8,700,000 shares of its common stock at $23.00 per share, the refinancing of its existing revolving credit facility and the refinancing of its 8 3/4% Senior Notes due 2010 completed in April 2007 (collectively, the “Transactions”).
The unaudited pro forma condensed consolidated financial information is based on the Company’s historical consolidated financial information for the year ended December 31, 2006 and the three months ended March 31, 2007 and gives effect to the foregoing transactions as if they were completed on January 1, 2006 for the purposes of the consolidated statements of operations information and on March 31, 2007 for the consolidated balance sheet information.
The unaudited pro forma condensed consolidated statements presented do not purport to represent what the results of operations or financial position of the Company would actually have been had the Transactions occurred on the dates noted above, or to project the results of operations or financial position of the Company for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The adjustments are directly attributable to the Transactions and are expected to have a continuing impact on the financial position and results of operations of the Company. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed consolidated financial information have been made.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the historical consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2006 and the Quarterly Report filed on Form 10-Q for the quarter ended March 31, 2007.
ENERGY PARTNERS, LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2007
(In thousands, except share data)
| Historical | Refinancing Adjustments | Divestiture Adjustments | Pro Forma | |||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 33,912 | $ | 33,912 | ||||||||||
Trade accounts receivable | 72,577 | 72,577 | ||||||||||||
Deferred tax assets | 1,499 | 1,499 | ||||||||||||
Prepaid expenses | 3,682 | 3,682 | ||||||||||||
Total current assets | 111,670 | 111,670 | ||||||||||||
Property and equipment, at cost under the successful efforts method of accounting for oil and natural gas properties | 1,608,002 | (195,986 | )(h) | 1,412,016 | ||||||||||
Less accumulated depreciation, depletion and amortization | (739,267 | ) | 134,910 | (h) | (604,357 | ) | ||||||||
Net property and equipment | 868,735 | 807,659 | ||||||||||||
Other assets | 16,732 | 10,000 | (a) | 23,181 | ||||||||||
| (3,551 | )(b) | |||||||||||||
| $ | 997,137 | $ | 942,510 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 34,981 | $ | 34,981 | ||||||||||
Accrued expenses | 133,156 | 133,156 | ||||||||||||
Fair value of commodity derivative instruments | 2,284 | 2,284 | ||||||||||||
Total current liabilities | 170,421 | 170,421 | ||||||||||||
Long-term debt | 315,000 | (315,000 | )(c) | (71,955 | )(i) | 460,540 | ||||||||
| 532,495 | (d) | |||||||||||||
Deferred tax liabilities | 64,363 | (3,941 | )(e) | 4,145 | (j) | 64,567 | ||||||||
Asset retirement obligation | 68,226 | (634 | )(k) | 67,592 | ||||||||||
Other | 1,584 | 1,584 | ||||||||||||
| 619,594 | 764,704 | |||||||||||||
Total stockholders’ equity | 377,543 | (7,005 | )(f) | 7,368 | (l) | 177,806 | ||||||||
| (200,100 | )(g) | |||||||||||||
Commitments and contingencies | ||||||||||||||
| $ | 997,137 | $ | 942,510 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
ENERGY PARTNERS, LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006
(In thousands, except per share data)
| Historical | Refinancing Adjustments | Divestiture Adjustments | Pro Forma | |||||||||||
Revenue: | ||||||||||||||
Oil and natural gas | $ | 449,186 | (74,827 | )(q) | $ | 374,359 | ||||||||
Other | 364 | 364 | ||||||||||||
| 449,550 | 374,723 | |||||||||||||
Costs and expenses: | ||||||||||||||
Lease operating | 60,836 | (3,446 | )(q) | 57,390 | ||||||||||
Taxes, other than on earnings | 13,632 | (3,633 | )(q) | 9,999 | ||||||||||
Exploration expenditures, dry hole costs and impairments | 136,425 | (42,951 | )(q) | 93,474 | ||||||||||
Depreciation, depletion, amortization and accretion | 202,734 | (64,998 | )(q) | 137,736 | ||||||||||
General and administrative | 120,113 | 120,113 | ||||||||||||
Other expense | 4,022 | 4,022 | ||||||||||||
Total costs and expenses | 537,762 | 422,734 | ||||||||||||
Business interruption recovery | 32,869 | 32,869 | ||||||||||||
Loss from operations | (55,343 | ) | (15,142 | ) | ||||||||||
Other income (expense): | ||||||||||||||
Loss on extinguishment of debt | — | (3,398 | )(m) | (13,043 | ) | |||||||||
| (9,645 | )(n) | |||||||||||||
Interest income | 1,428 | 1,428 | ||||||||||||
Interest expense | (24,570 | ) | (22,607 | )(o) | (47,177 | ) | ||||||||
| (23,142 | ) | (58,792 | ) | |||||||||||
Loss before income taxes. | (78,485 | ) | (73,934 | ) | ||||||||||
Income taxes | 28,085 | (1,468 | )(r) | 26,617 | ||||||||||
Net loss | $ | (50,400 | ) | $ | (47,317 | ) | ||||||||
Basic loss per share | $ | (1.32 | ) | $ | (1.60 | ) | ||||||||
Diluted loss per share | $ | (1.32 | ) | $ | (1.60 | ) | ||||||||
Weighted average common shares used in computing loss per share: | ||||||||||||||
Basic | 38,313 | (8,700 | )(p) | 29,613 | ||||||||||
Diluted | 38,313 | (8,700 | )(p) | 29,613 | ||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
ENERGY PARTNERS, LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007
(In thousands, except per share data)
| Historical | Refinancing Adjustments | Divestiture Adjustments | Pro Forma | |||||||||||
Revenue: | ||||||||||||||
Oil and natural gas | $ | 108,402 | (14,207 | )(q) | $ | 94,195 | ||||||||
Other | 61 | 61 | ||||||||||||
| 108,463 | 94,256 | |||||||||||||
Costs and expenses: | ||||||||||||||
Lease operating | 17,208 | (861 | )(q) | 16,347 | ||||||||||
Taxes, other than on earnings | 2,870 | (1,096 | )(q) | 1,774 | ||||||||||
Exploration expenditures, dry hole costs and impairments | 21,801 | (4,346 | )(q) | 17,455 | ||||||||||
Depreciation, depletion, amortization and accretion | 49,020 | (7,619 | )(q) | 41,401 | ||||||||||
General and administrative | 22,395 | 22,395 | ||||||||||||
Gain on insurance recoveries | (8,084 | ) | (8,084 | ) | ||||||||||
Total costs and expenses | 105,210 | 91,288 | ||||||||||||
Business interruption recovery | 9,084 | 9,084 | ||||||||||||
Income from operations | 12,337 | 12,052 | ||||||||||||
Other income (expense): | ||||||||||||||
Interest income | 180 | 180 | ||||||||||||
Interest expense | (6,757 | ) | (5,038 | )(o) | (11,795 | ) | ||||||||
| (6,577 | ) | (11,615 | ) | |||||||||||
Income before income taxes | 5,760 | 437 | ||||||||||||
Income taxes | (2,064 | ) | 1,906 | (r) | (158 | ) | ||||||||
Net income | $ | 3,696 | $ | 279 | ||||||||||
Basic earnings per share | $ | 0.09 | $ | 0.01 | ||||||||||
Diluted earnings per share | $ | 0.09 | $ | 0.01 | ||||||||||
Weighted average common shares used in computing income per share: | ||||||||||||||
Basic | 40,157 | (8,700 | )(p) | 31,457 | ||||||||||
Diluted | 40,483 | (8,700 | )(p) | 31,783 | ||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
| (a) | Reflects fees paid to refinance existing debt |
| (b) | Reflects write off of deferred financing costs associated with debt extinguishment |
| (c) | Reflects extinguishment of existing debt |
| (d) | Reflects incurrance of new borrowings |
| (e) | Reflects tax effect of write off of deferred financing cost and consent fee paid on 8 3/4% Senior Notes and existing bank facility |
| (f) | Reflects refinancing effect to retained earnings net of income taxes of 36% |
| (g) | Reflects repurchase of 8,700,000 shares of the Company's stock at $23.00 in tender offer |
| (h) | Reflects removal of book value of divested properties and related accumulated depreciation |
| (i) | Reflects payment of borrowings under new bank facility with proceeds from divested properties |
| (j) | Reflects income tax effect of gain on property divestiture at 36% |
| (k) | Reflects removal of asset retirement obligation on divested properties |
| (l) | Reflects divestiture effect to retained earnings net of income taxes on the gain of 36% |
| (m) | Reflects write off of deferred financing costs associated with debt extinguishment |
| (n) | Reflects expensing of fees to extinguish debt |
| Year Ended December 31, 2006 | Three Months Ended March 31, 2007 | |||||||||
(o) | To record the net change in interest expense from: | |||||||||
| The removal of existing interest | $ | (24,570 | ) | $ | (6,757 | ) | ||||
| Interest expense on fixed rate notes of 9.75% | 29,250 | 7,313 | ||||||||
| Interest expense on floating rate notes of 10.48% | 15,720 | 3,930 | ||||||||
| Interest expense on new bank facility of 6.35% | 669 | 167 | ||||||||
| The amortization of deferred financing costs on new borrowings (assuming an average 6.5 year term) | 1,538 | 385 | ||||||||
| $ | 22,607 | $ | 5,038 | |||||||
| (p) | Reflects repurchase of 8,700,000 shares of the Company's stock in tender offer |
| (q) | Reflects the removal of revenues and related direct expenses of divested properties |
| (r) | Reflects an adjustment to income taxes to maintain a rate of 36% of net income (loss) |