EXHIBIT 99.7
UNAUDITED PRO FORMA
FINANCIAL STATEMENTS OF ALLIANCE
The following unaudited condensed pro forma combined balance sheet and
unaudited condensed pro forma combined statement of income for Alliance
(collectively, the "unaudited pro forma financial statements") have been
prepared to illustrate the estimated effect of the proposed combination of
Alliance and LaTex pursuant to the Merger and the acquisition of the Bank of
America Overriding Royalty Interest and are based upon the assumptions set forth
below and in the notes to such statements. The respective historical
consolidated financial statements of Alliance and LaTex are included elsewhere
in this Proxy Statement.
The merger will be treated as a purchase and, as a result of the LaTex
shareholders owning approximately 73% of the combined company prior to issuance
of New Alliance Shares, Bank Notes and Bank Warrants to the Bank, LaTex will be
treated as having acquired Alliance. Accordingly, in the unaudited pro forma
financial statements, it is the assets and liabilities of Alliance that are
recorded at fair value while the assets of LaTex are recorded at historical
cost.
The unaudited pro forma financial statements include the unaudited condensed
pro forma combined balance sheet at October 31, 1996, giving effect to the
Merger and the purchase of the Bank of America Overriding Royalty Interest as if
these were consummated on that date. Also presented is the unaudited condensed
pro forma combined statement of income for the year ended April 30, 1996 and the
unaudited condensed pro forma combined statement of income for the six months
ended October 31, 1996 after giving effect to the Merger and the purchase of the
Bank of America Overriding Royalty Interest as if these were consummated on May
1, 1995.
The unaudited pro forma financial statements are prepared in accordance with
US GAAP. The financial statements of Alliance have been prepared in accordance
with UK GAAP and the financial statements of LaTex have been prepared in
accordance with US GAAP. Included are relevant adjustments to the Alliance
financial statements to state these in accordance with US GAAP.
The unaudited pro forma financial statements and accompanying notes, which are
an integral part of such statements, should be read in conjunction with the
respective historical financial statements, including the notes thereto, and
other financial information of Alliance and LaTex included elsewhere in this
Proxy Statement. The unaudited pro forma financial statements are provided for
illustrative purposes only and do not purport to represent what the financial
position or results of operations of Alliance and LaTex would actually have been
if the Merger and the purchase of the Bank of America Overriding Royalty
Interest had in fact occurred on the dates indicated or to project the financial
position or results of operations for any future date or period.
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CONDENSED PRO FORMA COMBINED BALANCE SHEET
AS OF OCTOBER 31, 1996
(UNAUDITED)
ALLIANCE
LATEX UK US GAAP ALLIANCE US PRO FORMA PRO
HISTORICAL GAAP ADJUSTMENTS GAAP ADJUSTMENTS FORMA
----------- --------- ------------ ------------ ------------------ ---------
$000 $000 $000 $000 $000 $000
Assets:
Current assets:
Cash and cash equivalents 20 2,515 - 2,515 - 2,535
Receivables:
Trade 3,209 673 - 673 - 3,882
Other 513 554 (a) (295) 259 - 772
Prepaid expenses - 684 - 684 - 684
Inventory 175 - - - - 175
Other current assets 22 - - - - 22
Assets held for sale 165 - - - 165
-------- -------- ----------- ------- ------ --------
Total current assets 4,104 4,426 (295) 4,131 - 8,235
-------- -------- ----------- ------- -------- --------
Net property, plant and
equipment 29,549 4,368 (b) (1,683) 2,685 (c) 6,228 42,262
(h) 3,800
Other assets:
Notes receivable, net of current 630 - - - - 630
portion
Deposits and other assets 124 - - - - 124
Accounts and notes receivable - related
parties 2 - - - - 2
Intangible assets net of
amortization 1,408 - - - - 1,408
-------- ----------- ------ -------- ------ --------
Total assets 35,817 8,794 (1,978) 6,816 10,028 52,661
======== =========== ====== ======== ======== ========
Liabilities and stockholders'
equity
Current liabilities:
Bank loans and overdrafts - 10 - 10 - 10
Trade accounts payable 9,991 1,043 - 1,043 - 11,034
Accrued expenses 593 383 - 383 (d) 2,300 3,276
Current portion of long term
debt 21,127 6 - 6 (g) (21,127) 6
Other 434 461 - 461 - 895
-------- -------- ----------- ------- -------- --------
Total current liabilities 32,145 1,903 - 1,903 (18,827) 15,221
Long-term debt, excluding current
installments - 88 - 88 (g) 21,127 22,653
(h) 1,438
Other liabilities 615 - - - - 615
-------- -------- ----------- ------- -------- --------
Total liabilities 32,760 1,991 - 1,991 3,738 38,489
-------- -------- ----------- ------- -------- --------
Stockholders' equity:
Ordinary shares, (Pounds)0.01
par value; issued
324,152,633 (Alliance) - 5,105 - 5,105 (e) (5,105) -
Common stock, $0.01 par value (LaTex) 208 - - - (f) (208) -
Ordinary shares, (Pounds)0.40
par value issued
31,052,603 shares issued - - - - (e) 5,105 20,404
(d) 104
(f) 14,299
(h) 896
Series A convertible preferred
stock 4 - - - (f) (4) -
Series B convertible preferred
stock 5 - - - (f) (5) -
Additional paid in capital 19,032 - - - (c) 6,228 9,471
(d) (2,404)
(e) (280)
(f) (14,571)
(h) 1,466
Treasury stock (489) - - - (f) 489 -
Share premium - 20,157 - 20,157 (e) (20,157) -
Merger reserve - 401 - 401 (c) (401) -
Accumulated deficit (15,703) (18,860) (a) (295) (20,838) (e) 20,838 (15,703)
-------- -------- ------- --------- ------
(b) (1,683)
Total stockholders' equity 3,057 6,803 (1,978) 4,825 6,290 14,172
-------- -------- ----------- ------- -------- --------
Total liabilities and
stockholders' equity 35,817 8,794 (1,978) 6,816 10,028 52,661
======== ========= ========== ======== ======= ========
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CONDENSED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED APRIL 30, 1996
(UNAUDITED)
LATEX
HISTORICAL
YEAR ENDED ALLIANCE US
JULY 31, UK GAAP ALLIANCE US PRO FORMA PRO
1996 GAAP ADJUSTMENTS GAAP ADJUSTMENTS FORMA
---------- ---------- --------------- ----------- ------------ ------------
$000 $000 $000 $000 $000 $000
Revenues:
Oil and natural gas sales and
other operating revenues 13,531 3,686 - 3,686 (f) 587 17,804
------- ------- ----------- ------ -------- ------
Costs and expenses:
Exceptional amounts written off
oil and gas interests - - - - -
Exceptional costs arising from
irregularities - (589) (a) (272) (861) - (861)
Direct operating expenses (6,608) (2,262) - (2,262) - (8,870)
Dry hole costs and abandonments (3,586) - - - - (3,586)
Selling, general and
administrative expenses (3,027) (2,629) - (2,629) - (5,656)
Depreciation, depletion and
amortization (4,706) (1,668) (b) 437 (1,231) (c)(1,113) (7,637)
------- ------- ------ ------- -------
(f) (587)
-------
Operating (loss) (4,396) (3,462) 165 (3,297) (1,113) (8,806)
Other income and deductions
Interest (net) (2,205) 229 - 229 - (1,976)
Profit on sale of fixed assets 2,366 - - - - 2,366
Equity losses and asset
write-offs of joint
ventures and affiliates (4,185) (201) - (201) - (4,386)
Foreign exchange losses - (159) - (159) - (159)
------- ------- ----------- ------ ------- --------
Net (loss) from continuing
operations (8,420) (3,593) 165 (3,428) (1,113) (12,961)
======= ======= =========== ======= ======= ========
Loss per share from continuing
operations (cents) (d) (45.3) (d) (43.2) (42.0)
Weighted average number of shares
outstanding (d) 7,929,391 (d) 7,929,391 30,878,178
========= ========== ==========
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CONDENSED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED OCTOBER 31, 1996
(UNAUDITED)
ALLIANCE
LATEX UK US GAAP ALLIANCE US PRO FORMA PRO
HISTORICAL GAAP ADJUSTMENTS GAAP ADJUSTMENTS FORMA
---------- ------ ------------ ----- ------------ ------
$000 $000 $000 $000 $000 $000
Revenues:
Oil and natural gas sales and
other operating revenues 4,690 1,998 - 1,998 (f) 274 6,962
----- ------- ------- ----- ----- -----
Costs and expenses:
Exceptional amounts written off
oil and gas interests (1,548) - - - - (1,548)
Exceptional costs arising from
irregularities - (120) - (120) - (120)
Direct operating expenses (2,697) (816) - (816) - (3,513)
Dry hole costs and abandonments (3,608) - - - - (3,608)
Selling, general and
administrative expenses (2,711) (1,315) - (1,315) - (4,026)
Depreciation, depletion and
amortization (1,871) (821) (b) 308 (513) (c) (596) (3,254)
-------- ------- ---- ------- --------
(f) (274)
-----
Operating (loss) (7,745) (1,074) 308 (766) (596) (9,107)
Other income and deductions
Interest (net) (1,512) 31 - 31 - (1,481)
Profit on sale of fixed assets 614 - - - (e) (542) 72
Equity losses and asset write-offs
of joint ventures and affiliates (4,096) - - - - (4,096)
Foreign exchange gains - 56 - 56 - 56
-------- ------- ----- ------- ------ --------
Net (loss) from continuing
operations (12,739) (987) 308 (679) (1,138) (14,556)
======== ==== ===== ======= ====== ========
Loss per share from continuing
operations (cents) (d) (12.2) (d) (8.4) (46.9)
Weighted average number of
shares outstanding (d) 8,103,816 (d) 8,103,816 31,052,603
========= ========= ==========
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma financial statements include the following adjustments:
CONDENSED PRO FORMA COMBINED BALANCE SHEET
Alliance US GAAP adjustments:
(a) To eliminate from 'other receivables' an amount recognized as a receivable,
under UK GAAP, relating to the right to receive the proceeds of the sale of
Alliance shares resulting from the settlement with Mr. O'Brien. Under US
GAAP, such proceeds are recognized only on receipt.
(b) To adjust the oil and gas properties as at October 31, 1996 to reflect the
cumulative effect of the ceiling test write down made in the year ended
April 30, 1995 under US GAAP. Under US GAAP ceiling tests are computed at
current prices discounted to present value at 10%; under UK GAAP, a ceiling
test is based on the company's best estimate of the future cash flows from
the underlying properties.
Pro forma adjustments:
(c) To record the Alliance oil and gas properties at their fair values under US
GAAP.
The purchase price has been derived from Alliance's market capitalization
at the date of the announcement of the merger based on a price of 2 pence
per share and 324,152,640 shares in issue. This has been converted to U.S.
dollars at a rate of US$1.5511:(Pounds)1. The costs of the acquisition have
also been included to arrive at a total consideration of $11,053,000 which
has been allocated as follows:
$000
------
Fixed assets 8,913
Cash 2,515
Other net current assets and liabilities (281)
Debt (94)
------
11,053
======
(d) To record an accrual for the expenses of the merger and the share issue
(including the restructuring fee payable to Bank of America of $200,000
which is to be settled by the issue of 156,250 shares).
(e) To eliminate the existing capital and reserves of Alliance (other than the
par value of the Ordinary shares) from the condensed pro forma combined
balance sheet.
(f) To record the par value of the New Alliance shares to be issued as a
consequence of the Merger and their exchange for the whole of the issued
share capital of LaTex. This represents 21,448,787 shares of 40p each at an
exchange rate of $1.6667:(Pounds)1.
(g) To record the revised maturity of LaTex's bank borrowing following the
renegotiation referred to under "Alliance-Financing" in this Proxy
Statement.
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(h) To record the issue of 1,343,750 shares of 40p each, Loan notes convertible
into up to 1,078,125 New Alliance Shares and 1,210,938 warrants to acquire
shares at an option price of (Pound)1.00 per share to Bank of America in
exchange for the Overriding Royalty Interest.
CONDENSED PRO FORMA COMBINED STATEMENTS OF INCOME
Alliance US GAAP adjustments:
(a) To eliminate income recognized under UK GAAP, relating to the right to
receive proceeds from the sale of Alliance shares resulting from the
settlement with Mr. O'Brien. Under US GAAP, such proceeds are recognized
only on receipt.
(b) To adjust the depreciation, depletion and amortization charge to reflect
the ceiling test write down adjustment made in the condensed pro forma
combined balance sheet described above.
Pro forma adjustments:
(c) To adjust the depreciation, depletion and amortization charge to reflect
the adjustments made to Alliance's oil and gas properties restated at their
fair value under US GAAP using LaTex accounting policies. LaTex uses the
successful efforts method of accounting for oil and gas properties whereas
Alliance uses the full cost method.
(d) The weighted average number of shares outstanding and the loss per share
have been calculated after giving retroactive effect to the proposed 40:1
reverse stock split.
(e) To reflect the sale of oil and gas properties by Alliance under LaTex's
accounting policies. Alliance uses the full cost method under which
(generally) the proceeds of the sale of oil and gas properties reduces the
carrying value of the full cost pool. Under the successful efforts method
used by LaTex the profit or loss on disposal of each property is recognized
in the income statement at the time of sale.
(f) To reflect the acquisition of the Overriding Royalty Interest.
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