CALLON PETROLEUM COMPANY, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On April 19, 2016, Callon Petroleum Company (the “Company”) entered into a definitive purchase and sale agreement for the acquisition of 17,298 gross (14,089 net) acres primarily located in Howard County, Texas, in the central portion of the Midland Basin (the “Acquired Properties”), for an aggregate purchase price of $220 million in cash and 9,333,333 shares of common stock, subject to customary purchase price adjustments. The acquisition closed on May 26, 2016. The Company acquired an 81% average working interest (61% average net revenue interest) in the Acquired Properties.
On April 25, 2016, the Company completed an underwritten public offering of 25,300,000 shares of common stock at $8.50 per share, before underwriting discounts resulting in estimated net proceeds of $206.1 million after deducting $9.0 million of estimated underwriting commissions and issuance costs. Proceeds from the offering were used to fund a portion of the acquisition.
We derived the unaudited pro forma consolidated financial statements from the historical consolidated financial statements of the Company and the statements of revenues and direct operating expenses of the Acquired Properties for the respective periods. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2015 and three months ended March 31, 2016 give effect to the acquisition, borrowings under our senior secured revolving credit facility to fund the acquisition, and the issuances of common stock referred to above as if they occurred on January 1, 2015. The unaudited pro forma consolidated balance sheet as of March 31, 2016 gives effect to such transactions as if they occurred on March 31, 2016.
The pro forma adjustments are based on available information and certain assumptions that we believe are reasonable as of the date of this Current Report on Form 8-K. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma consolidated financial statements. The pro forma adjustments reflected herein are based on management’s expectations regarding the acquisition, the issuances of common stock and the debt transactions discussed above. The acquisition will be accounted for under the purchase method of accounting, which involves determining the fair values of assets acquired and liabilities assumed. The purchase price allocation included in the unaudited pro forma financial statements is preliminary and based on management’s best estimates as of the date of this Current Report on Form 8-K. The preliminary purchase price allocation is subject to change based on numerous factors, including the final adjusted purchase price and the final estimated fair value of the assets acquired and liabilities assumed. Any such adjustments to the preliminary estimates of fair value reflected in the accompanying unaudited pro forma consolidated financial statements could be material.
The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and do not purport to indicate the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the transactions been consummated on the dates or for the periods presented. The unaudited pro forma consolidated financial statements should be read in conjunction with the audited December 31, 2015 consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed on March 3, 2016, the unaudited March 31, 2016 consolidated financial statements contained in the Company’s Quarterly Report on Form 10-Q filed on May 4, 2016, the audited statements of revenues and direct operating expenses of the Acquired Properties for the year ended December 31, 2015 filed with this Current Report on Form 8-K, and the unaudited statements of revenues and direct operating expenses of the Acquired Properties for the three months ended March 31, 2016 filed with this Current Report on Form 8-K.
1
|
|
|
|
|
|
|
|
|
|
|
CALLON PETROLEUM COMPANY | ||||||||||
Unaudited Pro Forma Consolidated Balance Sheet | ||||||||||
as of March 31, 2016 | ||||||||||
($ in thousands, except share data) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Historical |
| Acquired Properties Adjustments |
|
|
| Pro forma | |||
ASSETS |
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 9,511 |
| $ | (9,511) |
| (e) |
| $ | — |
Accounts receivable |
| 33,683 |
|
| — |
|
|
|
| 33,683 |
Fair value of derivatives |
| 15,585 |
|
| — |
|
|
|
| 15,585 |
Other current assets |
| 881 |
|
| — |
|
|
|
| 881 |
Total current assets |
| 59,660 |
|
| (9,511) |
|
|
|
| 50,149 |
Oil and natural gas properties, full cost accounting method: |
|
|
|
|
|
|
|
|
|
|
Evaluated properties |
| 2,390,105 |
|
| 96,194 |
| (a) |
|
| 2,486,299 |
Less accumulated depreciation, depletion, amortization and impairment |
| (1,806,509) |
|
| — |
|
|
|
| (1,806,509) |
Net oil and natural gas properties |
| 583,596 |
|
| 96,194 |
|
|
|
| 679,790 |
Unevaluated properties |
| 129,211 |
|
| 233,387 |
| (a) |
|
| 362,598 |
Total oil and natural gas properties |
| 712,807 |
|
| 329,581 |
|
|
|
| 1,042,388 |
Other property and equipment, net |
| 9,757 |
|
| — |
|
|
|
| 9,757 |
Restricted investments |
| 3,315 |
|
| — |
|
|
|
| 3,315 |
Deferred financing costs |
| 3,359 |
|
| — |
|
|
|
| 3,359 |
Other assets, net |
| 366 |
|
| — |
|
|
|
| 366 |
Total assets | $ | 789,264 |
| $ | 320,070 |
|
|
| $ | 1,109,334 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities | $ | 62,536 |
| $ | — |
|
|
| $ | 62,536 |
Accrued interest |
| 5,879 |
|
|
|
|
|
|
| 5,879 |
Cash-settleable restricted stock unit awards |
| 3,798 |
|
| — |
|
|
|
| 3,798 |
Asset retirement obligations |
| 833 |
|
| — |
|
|
|
| 833 |
Fair value of derivatives |
| 688 |
|
| — |
|
|
|
| 688 |
Total current liabilities |
| 73,734 |
|
| — |
|
|
|
| 73,734 |
Senior secured revolving credit facility |
| — |
|
| 4,402 |
| (d) |
|
| 4,402 |
Secured second lien term loan, net of unamortized deferred financing costs |
| 289,062 |
|
| — |
|
|
|
| 289,062 |
Asset retirement obligations |
| 4,427 |
|
| 8 |
| (a) |
|
| 4,435 |
Cash-settleable restricted stock unit awards |
| 2,682 |
|
| — |
|
|
|
| 2,682 |
Fair value of derivatives |
| 3,602 |
|
|
|
|
|
|
| 3,602 |
Other long-term liabilities |
| 211 |
|
| — |
|
|
|
| 211 |
Total liabilities |
| 373,718 |
|
| 4,410 |
|
|
|
| 378,128 |
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
Preferred stock, series A cumulative, $0.01 par value and $50.00 liquidation |
|
|
|
|
|
|
|
|
|
|
preference, 2,500,000 shares authorized: 1,458,948 shares outstanding |
| 15 |
|
| — |
|
|
|
| 15 |
Common stock, $0.01 par value, 150,000,000 shares authorized; |
|
|
|
|
|
|
|
|
|
|
96,093,938 shares outstanding |
| 961 |
|
| 346 |
| (b)(c) |
|
| 1,307 |
Capital in excess of par value |
| 798,532 |
|
| 315,314 |
| (b)(c) |
|
| 1,113,846 |
Accumulated deficit |
| (383,962) |
|
| — | �� |
|
|
| (383,962) |
Total stockholders' equity |
| 415,546 |
|
| 315,660 |
|
|
|
| 731,206 |
Total liabilities and stockholders' equity | $ | 789,264 |
| $ | 320,070 |
|
|
| $ | 1,109,334 |
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALLON PETROLEUM COMPANY | ||||||||||||||||
Unaudited Pro forma Consolidated Statements of Operations for the Year Ended December 31, 2015 | ||||||||||||||||
($ in thousands, except share data) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Historical |
| Acquired Properties |
|
|
| Pro forma Adjustments |
|
|
| Pro forma | ||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil sales |
| $ | 125,166 |
| $ | — |
|
|
| $ | — |
|
|
| $ | * |
Natural gas sales |
|
| 12,346 |
|
| — |
|
|
|
| — |
|
|
|
| * |
Total operating revenues |
|
| 137,512 |
|
| 19,447 |
| (f) |
|
| — |
|
|
|
| 156,959 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
| 27,036 |
|
| 4,304 |
| (f) |
|
| — |
|
|
|
| 31,340 |
Production taxes |
|
| 9,793 |
|
| 842 |
| (f) |
|
| — |
|
|
|
| 10,635 |
Depreciation, depletion and amortization |
|
| 69,249 |
|
| — |
|
|
|
| 15,374 |
| (g) |
|
| 84,623 |
General and administrative |
|
| 28,347 |
|
| — |
|
|
|
| — |
|
|
|
| 28,347 |
Accretion expense |
|
| 660 |
|
| — |
|
|
|
| 5 |
| (g) |
|
| 665 |
Write-down of oil and natural gas properties |
|
| 208,435 |
|
| — |
|
|
|
| (68,205) |
| (h) |
|
| 140,230 |
Rig termination fee |
|
| 3,075 |
|
| — |
|
|
|
| — |
|
|
|
| 3,075 |
Acquisition expense |
|
| 27 |
|
| — |
|
|
|
| — |
|
|
|
| 27 |
Total operating expenses |
|
| 346,622 |
|
| 5,146 |
|
|
|
| (52,826) |
|
|
|
| 298,942 |
Income (loss) from operations |
|
| (209,110) |
|
| 14,301 |
|
|
|
| 52,826 |
|
|
|
| (141,983) |
Other (income) expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (income) expense |
|
| 21,111 |
|
| — |
|
|
|
| (15,644) |
| (i) |
|
| 5,467 |
Gain on derivative contracts |
|
| (28,358) |
|
| — |
|
|
|
| — |
|
|
|
| (28,358) |
Other income |
|
| (198) |
|
| — |
|
|
|
| — |
|
|
|
| (198) |
Total other income |
|
| (7,445) |
|
| — |
|
|
|
| (15,644) |
|
|
|
| (23,089) |
Income (loss) before income taxes |
|
| (201,665) |
|
| 14,301 |
|
|
|
| 68,470 |
|
|
|
| (118,894) |
Income tax expense |
|
| 38,474 |
|
| — |
|
|
|
| — |
| (j) |
|
| 38,474 |
Net income (loss) |
|
| (240,139) |
|
| 14,301 |
|
|
|
| 68,470 |
|
|
|
| (157,368) |
Preferred stock dividends |
|
| (7,895) |
|
| — |
|
|
|
| — |
|
|
|
| (7,895) |
Income (loss) available to common stockholders |
| $ | (248,034) |
| $ | 14,301 |
|
|
| $ | 68,470 |
|
|
| $ | (165,263) |
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (3.77) |
|
|
|
|
|
|
|
|
|
|
| $ | (1.65) |
Diluted |
| $ | (3.77) |
|
|
|
|
|
|
|
|
|
|
| $ | (1.65) |
Shares used in computing loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 65,708 |
|
|
|
|
|
|
| 34,633 |
| (k) |
|
| 100,341 |
Diluted |
|
| 65,708 |
|
|
|
|
|
|
| 34,633 |
| (k) |
|
| 100,341 |
*No pro forma for oil and natural gas sales.
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALLON PETROLEUM COMPANY | ||||||||||||||||
Unaudited Pro forma Consolidated Statements of Operations for the Three Months Ended March 31, 2016 | ||||||||||||||||
($ in thousands, except share data) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Historical |
| Acquired Properties |
|
|
| Pro forma Adjustments |
|
|
| Pro forma | ||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil sales |
| $ | 27,443 |
| $ | — |
|
|
| $ | — |
|
|
| $ | * |
Natural gas sales |
|
| 3,255 |
|
| — |
|
|
|
| — |
|
|
|
| * |
Total operating revenues |
|
| 30,698 |
|
| 5,375 |
| (l) |
|
| — |
|
|
|
| 36,073 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
| 6,957 |
|
| 1,446 |
| (l) |
|
| — |
|
|
|
| 8,403 |
Production taxes |
|
| 2,220 |
|
| 335 |
| (l) |
|
| — |
|
|
|
| 2,555 |
Depreciation, depletion and amortization |
|
| 15,722 |
|
| — |
|
|
|
| 4,255 |
| (m) |
|
| 19,977 |
General and administrative |
|
| 5,562 |
|
| — |
|
|
|
| — |
|
|
|
| 5,562 |
Accretion expense |
|
| 180 |
|
| — |
|
|
|
| (27) |
| (m) |
|
| 153 |
Write-down of oil and natural gas properties |
|
| 34,776 |
|
| — |
|
|
|
| 91,971 |
| (n) |
|
| 126,747 |
Acquisition expense |
|
| 48 |
|
| — |
|
|
|
| — |
|
|
|
| 48 |
Total operating expenses |
|
| 65,465 |
|
| 1,781 |
|
|
|
| 96,199 |
|
|
|
| 163,445 |
Income (loss) from operations |
|
| (34,767) |
|
| 3,594 |
|
|
|
| (96,199) |
|
|
|
| (127,372) |
Other (income) expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (income) expense |
|
| 5,491 |
|
| — |
|
|
|
| (3,817) |
| (o) |
|
| 1,674 |
Loss on derivative contracts |
|
| 932 |
|
| — |
|
|
|
| — |
|
|
|
| 932 |
Other income |
|
| (81) |
|
| — |
|
|
|
| — |
|
|
|
| (81) |
Total other (income) expenses |
|
| 6,342 |
|
| — |
|
|
|
| (3,817) |
|
|
|
| 2,525 |
Income (loss) before income taxes |
|
| (41,109) |
|
| 3,594 |
|
|
|
| (92,382) |
|
|
|
| (129,897) |
Income tax expense |
|
| — |
|
| — |
|
|
|
| — |
| (p) |
|
| — |
Net income (loss) |
|
| (41,109) |
|
| 3,594 |
|
|
|
| (92,382) |
|
|
|
| (129,897) |
Preferred stock dividends |
|
| (1,824) |
|
| — |
|
|
|
| — |
|
|
|
| (1,824) |
Income (loss) available to common stockholders |
| $ | (42,933) |
| $ | 3,594 |
|
|
| $ | (92,382) |
|
|
| $ | (131,721) |
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.51) |
|
|
|
|
|
|
|
|
|
|
| $ | (1.11) |
Diluted |
| $ | (0.51) |
|
|
|
|
|
|
|
|
|
|
| $ | (1.11) |
Shares used in computing loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 83,582 |
|
|
|
|
|
|
| 34,633 |
| (q) |
|
| 118,215 |
Diluted |
|
| 83,582 |
|
|
|
|
|
|
| 34,633 |
| (q) |
|
| 118,215 |
*No pro forma for oil and natural gas sales.
4
1. Basis of Presentation
On April 19, 2016, the Callon Petroleum Company (the “Company”) entered into a definitive purchase and sale agreement for the acquisition of 17,298 gross (14,089 net) acres primarily located in Howard County, Texas, in the central portion of the Midland Basin (the “Acquired Properties”), for an aggregate purchase price of $220 million in cash and 9,333,333 shares of common stock, subject to customary purchase price adjustments. The acquisition closed on May 26, 2016. The Company acquired an 81% average working interest (61% average net revenue interest) in the Acquired Properties.
On April 25, 2016, the Company completed an underwritten public offering of 25,300,000 shares of common stock at $8.50 per share, before underwriting discounts resulting in estimated net proceeds of $206.1 million after deducting $9.0 million of estimated underwriting commissions and issuance costs. Proceeds from the offering were used to fund a portion of the acquisition.
The accompanying unaudited consolidated pro forma financial statements present the consolidated financial statements of the Company, assuming the acquisition, borrowings under our senior secured revolving credit facility (the “Credit Facility”) to fund the acquisition, and the issuances of common stock discussed above, occurred as of March 31, 2016 for purposes of the pro forma consolidated balance sheet as of March 31, 2016, and assuming such transactions occurred as of January 1, 2015 for purposes of the pro forma consolidated statements of operations for the year ended December 31, 2015 and three months ended March 31, 2016.
The unaudited consolidated pro forma financial statements are presented for illustrative purposes only and do not purport to represent what the Company’s financial position or results of operations would have been if the acquisition, borrowings under our Credit Facility to fund the acquisition, and the issuances of common stock had occurred as presented, or to project the Company’s financial position or results of operations for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments are directly attributable to the acquisition, borrowings under our Credit Facility to fund the acquisition, and the issuance of common stock and are expected to have a continuing impact on the Company’s results of operations. In the opinion of management, all adjustments necessary to present fairly the unaudited consolidated pro forma financial statements have been made.
2. Preliminary Purchase Accounting
The acquisition closed on May 26, 2016, for an aggregate purchase price of $220 million in cash and 9,333,333 shares of common stock, subject to customary purchase price adjustments. The acquisition will be accounted for using the purchase method of accounting. Accordingly, the assets acquired and liabilities assumed are presented based on their estimated acquisition date fair values. The purchase price allocation below is preliminary and based on management’s best estimates as of the date of this Current Report on Form 8-K. The preliminary purchase price allocation is subject to change based on numerous factors, including the final adjusted purchase price and the final estimated fair value of the assets acquired and liabilities assumed. Any such adjustments to the preliminary estimates of fair value could be material.
The following table summarizes the estimated acquisition date fair values of the net assets to be acquired in the Acquisition (in thousands):
|
|
|
|
Oil and natural gas properties |
| $ | 96,194 |
Unevaluated oil and natural gas properties |
|
| 233,387 |
Asset retirement obligations |
|
| (8) |
Net assets to be acquired |
| $ | 329,573 |
3. Pro Forma Adjustments
Pro forma Consolidated Balance Sheet as of March 31, 2016
(a) | To record the estimated fair value of the assets acquired and the liabilities assumed in the acquisition. |
5
(b) | To record the issuance of 25,300,000 shares of common stock at $8.50 per share, before underwriting discounts resulting in estimated net proceeds of $206.1 million after deducting $9.0 million of estimated underwriting commissions and issuance costs. The estimated net proceeds were used to partially fund the acquisition. |
(c) | To record the 9,333,333 shares of common stock issued as part of the purchase price at an assumed offering price of $11.74, which is the last reported sale price of our common stock on the New York Stock Exchange on May 26, 2016. The issued stock was used to partially fund the acquisition. |
(d) | To record borrowings under the Credit Facility to partially fund the acquisition. |
(e) | To record the net cash impact of the above pro forma adjustments. |
Pro forma Statement of Operations for the year ended December 31, 2015
(f) | To record the historical revenues and direct operating expenses related to the Acquired Properties. |
(g) | To record depreciation, depletion, and amortization and accretion of the asset retirement obligations related to the Acquired Properties. |
(h) | To record an adjustment to the write down of oil and natural gas properties. The Company uses the full cost method of accounting for its exploration and development activities. Under full cost accounting rules, capitalized costs of oil and natural gas properties, net of accumulated depreciation, depletion and amortization and deferred income taxes, may not exceed the present value of estimated future net cash flows from proved oil and natural gas reserves, discounted at 10%, plus the lower of cost or fair value of unevaluated properties, net of related tax effects (the “ceiling test calculation”). The present value of estimated net cash flows related to the Acquired Properties were derived from records of the Sellers and the development plans for those properties may be different from those that the Company will ultimately implement. As a result of including the Acquired Properties in the ceiling test calculation, the Company calculated a $140.3 million pro forma write down of oil and gas properties. |
(i) | To record $1.4 million of interest expense related to the borrowings under Credit Facility, offset by $17.0 million of estimated interest costs capitalized to unevaluated oil and gas properties. The Company capitalizes interest on unevaluated oil and gas properties. |
(j) | The Company typically provides for income taxes at a statutory rate of 35%, but as a result of the write-downs of oil and natural gas properties recognized in the third and fourth quarters of 2015, the Company has incurred a cumulative three year loss resulting in no income tax expense. |
(k) | To record the issuance of the shares of common stock previously mentioned in note (c) and (d). |
Pro forma Statement of Operations for the three months ended March 31, 2016
(l) | To record the historical revenues and direct operating expenses related to the Acquired Properties. |
(m) | To record depreciation, depletion, and amortization and accretion of the asset retirement obligations related to the Acquired Properties. |
(n) | To record the write down of oil and natural gas properties. As previously discussed, the Company included the Acquired Properties in the ceiling test calculation. The present value of estimated net cash flows related to the Acquired Properties was derived from the development plan of those properties that the Company plans to implement. As a result of including the Acquired Properties in the ceiling test calculation, the Company calculated a $127.1 million pro forma write down of oil and gas properties. |
(o) | To record $0.4 million of interest expense related to the borrowings under Credit Facility, offset by $4.2 million of estimated interest costs capitalized to unevaluated oil and gas properties. The Company capitalizes interest on unevaluated oil and gas properties. |
(p) | The Company typically provides for income taxes at a statutory rate of 35%, but as a result of the write-down of oil and natural gas properties recognized in the second half of 2015 and the first quarter of 2016, the Company has incurred a cumulative three year loss resulting in no income tax expense. |
(q) | To record the issuance of the shares of common stock previously mentioned in note (c) and (d). |
4. Supplemental Oil and Gas Disclosures
The following table sets forth unaudited pro forma information with respect to the Company’s estimated proved reserves, including changes therein, and proved developed and proved undeveloped reserves for the year ended December 31, 2015, giving effect to the
6
acquisition as if it had occurred on January 1, 2015. The estimates of reserves attributable to the Acquisition may include development plans for those properties which are different from those that the Company will ultimately implement. Reserve estimates are inherently imprecise, require extensive judgments of reservoir engineering data and are generally less precise than estimates made in connection with financial disclosures.
|
|
|
|
|
|
|
|
| Changes in Reserve Quantities | ||||
|
| Historical |
| Acquired Properties (a) |
| Pro forma |
Proved developed and undeveloped reserves: |
|
|
|
|
|
|
Oil (MBbls): |
|
|
|
|
|
|
Proved reserves as of December 31, 2014 |
| 25,733 |
| 10,478 |
| 36,211 |
Revisions to previous estimates |
| (1,632) |
| 5,792 |
| 4,160 |
Sale of reserves in place (net of purchases) |
| 2,909 |
| — |
| 2,909 |
Extensions and discoveries |
| 19,127 |
| 9,810 |
| 28,937 |
Production |
| (2,789) |
| (458) |
| (3,247) |
Proved reserves as of December 31, 2015 |
| 43,348 |
| 25,622 |
| 68,970 |
Natural Gas (MMcf): |
|
|
|
|
|
|
Proved reserves as of December 31, 2014 |
| 42,548 |
| 18,047 |
| 60,595 |
Revisions to previous estimates |
| 4,870 |
| 7,287 |
| 12,157 |
Sale of reserves in place (net of purchases) |
| 2,810 |
| — |
| 2,810 |
Extensions and discoveries |
| 19,621 |
| 15,326 |
| 34,947 |
Production |
| (4,312) |
| (854) |
| (5,166) |
Proved reserves as of December 31, 2015 |
| 65,537 |
| 39,806 |
| 105,343 |
(a) | Proved reserves related to NGL volumes for the Acquired Properties are included in natural gas volumes. |
The following tables present the unaudited pro forma standardized measure of future net cash flows related to proved oil and gas reserves together with changes therein, as defined by ASC Topic 932, for the year ended December 31, 2015, giving effect to the acquisition as if it had occurred on January 1, 2015. Future production and development costs are based on current costs with no escalations. Estimated future cash flows have been discounted to their present values based on a 10% annual discount rate. We have assumed the federal tax rate of 35% on the Acquired Properties. The disclosures below do not purport to present the fair market value of the Company’s oil and gas reserves. An estimate of the fair market value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, a discount factor more representative of the time value of money, and risks inherent in reserve estimates.
|
|
|
|
|
|
|
|
|
|
|
|
| Standardized Measure | ||||||
|
|
| For the Year Ended December 31, 2015 | ||||||
|
| Historical |
|
| Acquired Properties |
| Pro forma | ||
Future cash inflows |
| $ | 2,227,463 |
| $ | 1,320,143 |
| $ | 3,547,606 |
Future costs - |
|
|
|
|
|
|
|
|
|
Production |
|
| (827,555) |
|
| (355,048) |
|
| (1,182,603) |
Development and net abandonment |
|
| (239,100) |
|
| (294,638) |
|
| (533,738) |
Future net inflows before income taxes |
|
| 1,160,808 |
|
| 670,457 |
|
| 1,831,265 |
Future income taxes |
|
| — |
|
| (54,703) |
|
| (54,703) |
Future net cash flows |
|
| 1,160,808 |
|
| 615,754 |
|
| 1,776,562 |
10% discount factor |
|
| (589,918) |
|
| (466,729) |
|
| (1,056,647) |
Standardized measure of discounted future net cash flows |
| $ | 570,890 |
| $ | 149,025 |
| $ | 719,915 |
7
The following table presents unaudited pro forma changes in the standardized measure of discounted future net cash flows for the year
ended December 31, 2015 relating to proved oil and natural gas reserves of the Company and the Acquired Properties.
|
|
|
|
|
|
|
|
|
|
|
|
| Changes in Standardized Measure | ||||||
|
|
| For the Year Ended December 31, 2015 | ||||||
|
| Historical |
|
| Acquired Properties |
| Pro forma | ||
Standardized measure at the beginning of the period |
| $ | 579,542 |
| $ | 123,415 |
| $ | 702,957 |
Changes |
|
|
|
|
|
|
|
|
|
Sales and transfers, net of production costs |
|
| (110,476) |
|
| (17,573) |
|
| (128,049) |
Net change in sales and transfer prices, net of production costs |
|
| (286,660) |
|
| (123,284) |
|
| (409,944) |
Net change due to purchases and sales of in place reserves |
|
| 37,616 |
|
| — |
|
| 37,616 |
Extensions, discoveries, and improved recovery, net of future |
|
|
|
|
|
|
|
|
|
production and development costs incurred |
|
| 184,469 |
|
| 116,430 |
|
| 300,899 |
Changes in future development cost |
|
| 108,216 |
|
| 27,736 |
|
| 135,952 |
Revisions of quantity estimates |
|
| (12,625) |
|
| 60,431 |
|
| 47,806 |
Accretion of discount |
|
| 62,968 |
|
| 17,076 |
|
| 80,044 |
Net change in income taxes |
|
| 35,407 |
|
| (12,715) |
|
| 22,692 |
Changes in production rates, timing and other |
|
| (27,567) |
|
| (42,491) |
|
| (70,058) |
Aggregate change |
|
| (8,652) |
|
| 25,610 |
|
| 16,958 |
Standardized measure at the end of period |
| $ | 570,890 |
| $ | 149,025 |
| $ | 719,915 |
The historical twelve-month average prices of oil and natural gas used in determining standardized measure as of December 31, 2015, were:
|
|
|
|
|
|
|
|
| Historical |
| Acquired Properties | ||
Average 12-month price, net of differentials, per Mcf of natural gas |
| $ | 2.73 |
| $ | 3.33 |
Average 12-month price, net of differentials, per barrel of oil |
| $ | 47.25 |
| $ | 46.31 |
8