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EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma condensed consolidated statement of income
gives effect to the merger of NORIC Corporation, a New York corporation
("NORIC"), the parent company of North Central Oil Corporation, a Delaware
corporation ("North Central"), with and into Pogo Producing Company, a Delaware
corporation ("Pogo"), with Pogo remaining as the surviving corporation. The
merger was effective on March 14, 2001. Pursuant to the merger agreement among
Pogo and NORIC and certain NORIC shareholders, dated as of November 19, 2000,
former shareholders received 12,615,816 shares of Pogo's common stock and
approximately $344,711,000 in cash. Since NORIC had disposed of all of its
non-oil and gas assets and operations other than its investment in North Central
and cash and cash equivalents generated from the disposition of the non-oil and
gas assets, the following unaudited pro forma condensed consolidated statement
of income is based on the historical income statement for North Central for the
period from January 1, 2001 through March 13, 2001. Commencing March 14, 2001,
North Central's operations are consolidated with the operations of Pogo.
The unaudited pro forma condensed consolidated statement of income presents the
consolidated results of operations of Pogo and North Central as if the proposed
merger had occurred on January 1, 2001.
The accompanying unaudited pro forma condensed consolidated statement of income
reflects the acquisition of NORIC by Pogo under the purchase method of
accounting. Accordingly, the purchase price was allocated to the net assets
acquired based on their estimated fair market values at the date of acquisition.
Such allocations are based on preliminary information and are subject to change
when final valuations are obtained.
The unaudited pro forma condensed consolidated statement of income is presented
for illustration purposes only, and does not necessarily indicate the operating
results that would have occurred if the merger had been completed as of January
1, 2001. The unaudited pro forma condensed consolidated statement of income is
not necessarily indicative of future operating results of the consolidated
enterprise.
The unaudited pro forma condensed consolidated statement of income should be
read in conjunction with the historical consolidated financial statements,
including the notes thereto, of Pogo included in Pogo's Quarterly Report on Form
10-Q for the quarter ended June 30, 2001. The unaudited condensed consolidated
statement of income does not reflect any cost savings or other synergies
anticipated as a result of the merger, nor does it reflect any merger-related
expenses.
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POGO PRODUCING COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,2001
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NORTH PRO FORMA PRO FORMA
POGO CENTRAL ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
Revenues:
Oil and gas sales ............................. $ 328,325 $ 62,852 $ 391,177
Pipeline sales and other ...................... 8,259 138 8,397
Gains (losses) on sales ....................... 2,672 (10) 2,662
--------- -------- -------- ---------
Total ..................................... 339,256 62,980 402,236
--------- -------- -------- ---------
Operating Costs and Expenses:
Lease operating ............................... 55,523 7,588 63,111
Pipeline operating and natural gas purchases .. 8,420 -- 8,420
General and administrative .................... 17,858 23,938 $ (4,933)(a) 19,241
-- -- (6,098)(a) --
-- -- (11,524)(a) --
Exploration ................................... 12,434 465 12,899
Dry hole and impairment ....................... 23,044 3,093 26,137
Depreciation, depletion and amortization ...... 90,532 7,205 11,607 (b) 109,344
--------- -------- -------- ---------
Total ..................................... 207,811 42,289 (10,948) 239,152
--------- -------- -------- ---------
Operating Income .................................. 131,445 20,691 10,948 163,084
Interest:
Charges ....................................... (26,292) (2,626) (3,792)(c) (32,710)
Income ........................................ 1,996 -- 1,996
Capitalized ................................... 14,829 -- 14,829
Minority Interest ................................. (4,998) -- (4,998)
Foreign Currency Transaction Loss ................. (1,006) -- (1,006)
--------- -------- -------- ---------
Income Before Taxes .............................. 115,974 18,065 7,156 141,195
Income Tax Benefit (Expense) ...................... (45,049) (10,356) 1,529 (d) (53,876)
--------- -------- -------- ---------
Net Income ........................................ $ 70,925 $ 7,709 $ 8,685 $ 87,319
========= ======== ======== =========
EARNINGS PER COMMON SHARE
Basic $ 1.46 $ 1.63
Diluted $ 1.31 $ 1.46
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND POTENTIAL COMMON SHARES OUTSTANDING:
Basic 48,425 5,047 53,472
Diluted 58,373 5,047 63,420
See accompanying notes to unaudited pro forma condensed consolidated statement of income
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POGO PRODUCING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
a. To eliminate the North Central merger, phantom share and severance expenses
that were settled immediately prior to the merger, pursuant to terms of the
merger agreement. After the merger Pogo did not offer benefits to the former
employees of North Central which were comparable to, or which would replace,
the phantom share plan.
b. To record additional depreciation, depletion and amortization expense based
on the fair value paid for North Central's properties and equipment.
c. To record interest expense on the acquisition debt that was funded using
Pogo's 8.25% Senior Subordinated Notes, due 2011 and Pogo's revolving bank
credit agreement at Pogo's current rate of 5.2 %. A 1/8% increase or decrease
in the interest rate would change interest expense $32,750 for the six months
ended June 30, 2001.
d. To record income tax effect on the pro forma adjustments based on the 35%
statutory income tax rate, adjusted for the non-deductibility of certain
merger related expenses.