Exhibit 99.1
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of PDC Energy, Inc. (the "Company") and have been adjusted to give effect to the divestiture of the Company's interests in the Marcellus Shale basin assets and liabilities held by PDC Mountaineer, LLC, a Delaware limited liability company (the “Divestiture”). The unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 gives effect to the Divestiture as if it had occurred on June 30, 2014. The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and the six month periods ended June 30, 2014 and 2013 give effect to the Divestiture as if it had occurred on January 1, 2011. The unaudited pro forma condensed consolidated financial statements include pro forma adjustments that are based on the best information available and assumptions that management believes are reasonable, factually supportable and are expected to have a continuing impact to the Company. The unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not intended to reflect the Company’s financial position and results of operations had the Divestiture and related transactions occurred as of the dates indicated and are not necessarily indicative of the Company’s future financial position or results of operations.
The unaudited pro forma condensed consolidated information should be read in conjunction with the Company's historical consolidated financial statements and accompanying notes which are included in its Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2014, and its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014, as filed with the SEC on August 8, 2014.
The pro forma condensed consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and the six month periods ended June 30, 2014 and 2013 include the following adjustments:
| |
| • | Natural gas, NGL and crude oil sales and well operations, pipeline and other income have been adjusted downward to reflect the reduction in revenue related to the Divestiture; |
| |
| • | Sales from natural gas marketing and cost of natural gas marketing have been adjusted upward to reflect recognition of activity between the gas marketing segment and the Divestiture; |
| |
| • | Commodity price risk management has been adjusted upward/downward to reflect the increase/decrease in gain/loss related to the derivative financial instruments included in the Divestiture; |
| |
| • | Production costs, exploration expense, impairment of natural gas and crude oil properties, depreciation, depletion and amortization, general and administrative expense, accretion of asset retirement obligations, gain (loss) on sale of properties and equipment, interest expense, interest income and provision for income taxes have been adjusted downward to reflect the costs and expenses directly associated with the Divestiture; |
| |
| • | Income taxes are reflected using statutory tax rates; and |
| |
| • | Earnings per share from continuing operations reflect the effect of the above-mentioned revenue and expense adjustments. |
The pro forma condensed consolidated balance sheet as of June 30, 2014 includes the following adjustments:
| |
| • | Net pre-tax proceeds of approximately $190 million, comprised of $150 million in cash and a $40 million promissory note, included in other assets; |
| |
| • | The adjustment to other current assets, properties and equipment, net, other assets, current liabilities, long-term debt, deferred income taxes, asset retirement obligations and other liabilities reflects a reduction in the book value of the assets and related liabilities being divested; and |
| |
| • | The after-tax net gain on the transaction is reflected as an adjustment to retained earnings, deferred income taxes, current assets and current liabilities. |
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| | | | | | | | | | | | | | | | | | | | | | | |
| PDC ENERGY, INC. |
| Pro Forma Condensed Consolidated Statements of Operations |
| (unaudited; in thousands, except per share data) |
| | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2014 | | 2013 |
| | As Reported | | Pro Forma Adjustments | | Pro Forma | | As Reported | | Pro Forma Adjustments | | Pro Forma |
| Revenues: | | | | | | | | | | | |
| Natural gas, NGLs and crude oil sales | $ | 269,768 |
| | $ | (18,738 | ) | | $ | 251,030 |
| | $ | 156,976 |
| | $ | (7,331 | ) | | $ | 149,645 |
|
| Sales from natural gas marketing | 49,352 |
| | 16,080 |
| | 65,432 |
| | 31,749 |
| | 7,488 |
| | 39,237 |
|
| Commodity price risk management gain (loss), net | (80,566 | ) | | 3,014 |
| | (77,552 | ) | | 2,369 |
| | (306 | ) | | 2,063 |
|
| Well operations, pipeline income and other | 1,180 |
| | (51 | ) | | 1,129 |
| | 2,037 |
| | (22 | ) | | 2,015 |
|
| Total revenues | 239,734 |
| | 305 |
| | 240,039 |
| | 193,131 |
| | (171 | ) | | 192,960 |
|
| Costs, expenses and other: | | | | | | | | | | | |
| Production costs | 47,958 |
| | (6,102 | ) | | 41,856 |
| | 32,034 |
| | (3,378 | ) | | 28,656 |
|
| Cost of natural gas marketing | 49,298 |
| | 16,080 |
| | 65,378 |
| | 31,801 |
| | 7,488 |
| | 39,289 |
|
| Exploration expense | 584 |
| | (1 | ) | | 583 |
| | 3,126 |
| | (321 | ) | | 2,805 |
|
| Impairment of natural gas and crude oil properties | 1,917 |
| | (160 | ) | | 1,757 |
| | 47,961 |
| | (403 | ) | | 47,558 |
|
| General and administrative expense | 64,277 |
| | (2,352 | ) | | 61,925 |
| | 30,898 |
| | (1,979 | ) | | 28,919 |
|
| Depreciation, depletion, and amortization | 100,382 |
| | (7,856 | ) | | 92,526 |
| | 55,749 |
| | (4,830 | ) | | 50,919 |
|
| Accretion of asset retirement obligations | 1,716 |
| | (33 | ) | | 1,683 |
| | 2,320 |
| | (10 | ) | | 2,310 |
|
| (Gain) loss on sale of properties and equipment | 362 |
| | 193 |
| | 555 |
| | (47 | ) | | 16 |
| | (31 | ) |
| Total cost, expenses and other | 266,494 |
| | (231 | ) | | 266,263 |
| | 203,842 |
| | (3,417 | ) | | 200,425 |
|
| Income (loss) from operations | (26,760 | ) | | 536 |
| | (26,224 | ) | | (10,711 | ) | | 3,246 |
| | (7,465 | ) |
| Interest expense | (25,890 | ) | | 1,513 |
| | (24,377 | ) | | (26,446 | ) | | 520 |
| | (25,926 | ) |
| Interest income | 403 |
| | (132 | ) | | 271 |
| | 3 |
| | — |
| | 3 |
|
| Income (loss) from continuing operations before income taxes | (52,247 | ) | | 1,917 |
| | (50,330 | ) | | (37,154 | ) | | 3,766 |
| | (33,388 | ) |
| Provision for income taxes | 21,933 |
| | (728 | ) | | 21,205 |
| | 12,701 |
| | (1,431 | ) | | 11,270 |
|
| Income (loss) from continuing operations attributable to shareholders | $ | (30,314 | ) | | $ | 1,189 |
| | $ | (29,125 | ) | | $ | (24,453 | ) | | $ | 2,335 |
| | $ | (22,118 | ) |
| | | | | | | | | | | | |
| Earnings per share from continuing operations: | | | | | | | | | | | |
| Basic | $ | (0.85 | ) | | | | $ | (0.82 | ) | | $ | (0.81 | ) | | | | $ | (0.73 | ) |
| Diluted | $ | (0.85 | ) | | | | $ | (0.82 | ) | | $ | (0.81 | ) | | | | $ | (0.73 | ) |
| | | | | | | | | | | | |
| Weighted-average common shares outstanding: | | | | | | | | | | | |
| Basic | 35,726 |
| | | | 35,726 |
| | 30,301 |
| | | | 30,301 |
|
| Diluted | 35,726 |
| | | | 35,726 |
| | 30,301 |
| | | | 30,301 |
|
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PDC ENERGY, INC. |
| Pro Forma Condensed Consolidated Statements of Operations |
| (unaudited; in thousands, except per share data) |
| | | | | | | | | | | | | | | | | | |
| | Year Ended December, 31 |
| | 2013 | | 2012 | | 2011 |
| | As Reported | | Pro Forma Adjustments | | Pro Forma | | As Reported | | Pro Forma Adjustments | | Pro Forma | | As Reported | | Pro Forma Adjustments | | Pro Forma |
| Revenues: | | | | | | | | | | | | | | | | | |
| Natural gas, NGL and crude oil sales | $ | 359,398 |
| | $ | (18,603 | ) | | $ | 340,795 |
| | $ | 238,361 |
| | $ | (10,371 | ) | | $ | 227,990 |
| | $ | 223,297 |
| | $ | (7,250 | ) | | $ | 216,047 |
|
| Sales from natural gas marketing | 69,787 |
| | 17,350 |
| | 87,137 |
| | 45,371 |
| | 10,689 |
| | 56,060 |
| | 63,470 |
| | 11,305 |
| | 74,775 |
|
| Commodity price risk management gain (loss), net | (23,905 | ) | | (14 | ) | | (23,919 | ) | | 32,339 |
| | (3,060 | ) | | 29,279 |
| | 46,090 |
| | (6,873 | ) | | 39,217 |
|
| Well operations, pipeline income and other | 6,034 |
| | (32 | ) | | 6,002 |
| | 4,534 |
| | (38 | ) | | 4,496 |
| | 4,432 |
| | (19 | ) | | 4,413 |
|
| Total revenues | 411,314 |
| | (1,299 | ) | | 410,015 |
| | 320,605 |
| | (2,780 | ) | | 317,825 |
| | 337,289 |
| | (2,837 | ) | | 334,452 |
|
| | | | | | | | | | | | | | | | | | |
| Costs, expenses and other: | | | | | | | | | | | | | | | | | |
| Production costs | 73,390 |
| | (8,540 | ) | | 64,850 |
| | 54,700 |
| | (5,317 | ) | | 49,383 |
| | 44,832 |
| | (2,579 | ) | | 42,253 |
|
| Cost of natural gas marketing | 70,084 |
| | 17,350 |
| | 87,434 |
| | 45,023 |
| | 10,689 |
| | 55,712 |
| | 62,831 |
| | 11,305 |
| | 74,136 |
|
| Exploration expense | 7,039 |
| | (705 | ) | | 6,334 |
| | 20,894 |
| | (2,692 | ) | | 18,202 |
| | 5,734 |
| | (2,670 | ) | | 3,064 |
|
| Impairment of natural gas and crude oil properties | 53,435 |
| | (926 | ) | | 52,509 |
| | 5,895 |
| | (875 | ) | | 5,020 |
| | 2,301 |
| | (591 | ) | | 1,710 |
|
| General and administrative expense | 63,969 |
| | (4,012 | ) | | 59,957 |
| | 58,815 |
| | (4,031 | ) | | 54,784 |
| | 61,454 |
| | (4,265 | ) | | 57,189 |
|
| Depreciation, depletion and amortization | 127,260 |
| | (11,636 | ) | | 115,624 |
| | 98,778 |
| | (7,667 | ) | | 91,111 |
| | 87,633 |
| | (4,613 | ) | | 83,020 |
|
| Accretion of asset retirement obligations | 4,586 |
| | (20 | ) | | 4,566 |
| | 3,687 |
| | (17 | ) | | 3,670 |
| | 1,398 |
| | — |
| | 1,398 |
|
| (Gain) loss on sale of properties and equipment | 1,392 |
| | 630 |
| | 2,022 |
| | (4,353 | ) | | 4,170 |
| | (183 | ) | | (196 | ) | | 113 |
| | (83 | ) |
| Total costs, expenses and other | 401,155 |
| | (7,859 | ) | | 393,296 |
| | 283,439 |
| | (5,740 | ) | | 277,699 |
| | 265,987 |
| | (3,300 | ) | | 262,687 |
|
| Income from operations | 10,159 |
| | 6,560 |
| | 16,719 |
| | 37,166 |
| | 2,960 |
| | 40,126 |
| | 71,302 |
| | 463 |
| | 71,765 |
|
| Loss on extinguishment of debt | — |
| | — |
| | — |
| | (23,283 | ) | | — |
| | (23,283 | ) | | — |
| | — |
| | — |
|
| Interest expense | (51,898 | ) | | 1,755 |
| | (50,143 | ) | | (48,287 | ) | | 783 |
| | (47,504 | ) | | (36,985 | ) | | 228 |
| | (36,757 | ) |
| Interest income | 470 |
| | (11 | ) | | 459 |
| | 8 |
| | (2 | ) | | 6 |
| | 47 |
| | (3 | ) | | 44 |
|
| Income (loss) from continuing operations before income taxes | (41,269 | ) | | 8,304 |
| | (32,965 | ) | | (34,396 | ) | | 3,741 |
| | (30,655 | ) | | 34,364 |
| | 688 |
| | 35,052 |
|
| Provision for income taxes | 14,797 |
| | (3,156 | ) | | 11,641 |
| | 12,701 |
| | (1,422 | ) | | 11,279 |
| | (11,800 | ) | | (261 | ) | | (12,061 | ) |
Income (loss) from continuing operations attributable to shareholders
| $ | (26,472 | ) | | $ | 5,148 |
| | $ | (21,324 | ) | | $ | (21,695 | ) | | $ | 2,319 |
| | $ | (19,376 | ) | | $ | 22,564 |
| | $ | 427 |
| | $ | 22,991 |
|
| | | | | | | | | | | | | | | | | | |
| Earnings per share from continuing operations: | | | | | | | | | | | | | | | | | |
| Basic | $ | (0.82 | ) | | | | $ | (0.66 | ) | | $ | (0.78 | ) | | | | $ | (0.70 | ) | | $ | 0.96 |
| | | | $ | 0.98 |
|
| Diluted | $ | (0.82 | ) | | | | $ | (0.66 | ) | | $ | (0.78 | ) | | | | $ | (0.70 | ) | | $ | 0.95 |
| | | | $ | 0.96 |
|
| | | | | | | | | | | | | | | | | | |
| Weighted-average common shares outstanding: | | | | | | | | | | | | | | | | | |
| Basic | 32,426 |
| | | | 32,426 |
| | 27,677 |
| | | | 27,677 |
| | 23,521 |
| | | | 23,521 |
|
| Diluted | 32,426 |
| | | | 32,426 |
| | 27,677 |
| | | | 27,677 |
| | 23,871 |
| | | | 23,871 |
|
|
| | | | | | | | | | | |
| PDC ENERGY, INC. |
| Pro Forma Condensed Consolidated Balance Sheet |
| (unaudited; in thousands, except share and per share data) |
| | | | | | |
| | June 30, 2014 |
| | As Reported | | Pro Forma Adjustments | | Pro Forma |
| Assets | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | $ | 40,357 |
| | $ | 149,512 |
| | $ | 189,869 |
|
| Other current assets | 173,211 |
| | (18,849 | ) | | 154,362 |
|
| Total current assets | 213,568 |
| | 130,663 |
| | 344,231 |
|
| Properties and equipment, net | 1,828,721 |
| | (170,415 | ) | | 1,658,306 |
|
| Other assets | 44,136 |
| | 33,181 |
| | 77,317 |
|
| Total Assets | $ | 2,086,425 |
| | $ | (6,571 | ) | | $ | 2,079,854 |
|
| | | | | | |
Liabilities and Shareholders' Equity
| | | | | |
| Liabilities | | | | | |
| Current liabilities | $ | 381,335 |
| | $ | 8,779 |
| | $ | 390,114 |
|
| Long-term debt | 562,000 |
| | (62,000 | ) | | 500,000 |
|
| Deferred income taxes | 116,948 |
| | 2,040 |
| | 118,988 |
|
| Asset retirement obligations | 38,911 |
| | (265 | ) | | 38,646 |
|
| Other liabilities | 43,960 |
| | (2,632 | ) | | 41,328 |
|
| Total liabilities | 1,143,154 |
| | (54,078 | ) | | 1,089,076 |
|
| | | | | | |
| Commitments and contingent liabilities | | | | | |
| | | | | | |
| Equity | | | | | |
| Shareholders' equity: | | | | | |
| Preferred shares, par value $0.01 per share; authorized 50,000,000 shares; issued: none | — |
| | — |
| | — |
|
| Common shares, par value $0.01 per share; 150,000,000 authorized shares; issued: 35,857,560 | 359 |
| | — |
| | 359 |
|
| Additional paid-in capital | 681,019 |
| | — |
| | 681,019 |
|
| Retained earnings | 262,953 |
| | 47,507 |
| | 310,460 |
|
| Treasury shares, at cost 18,580 | (1,060 | ) | | — |
| | (1,060 | ) |
| Total shareholders' equity | 943,271 |
| | 47,507 |
| | 990,778 |
|
Total Liabilities and Equity
| $ | 2,086,425 |
| | $ | (6,571 | ) | | $ | 2,079,854 |
|
