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EXHIBIT 99.3
INDEX TO UNAUDITED PRO FORM COMBINED FINANCIAL STATEMENTS
OF THE MERIDIAN RESOURCE CORPORATION
Unaudited Pro Forma Combined Financial Information.............................P-2
Pro Forma Combined Balance Sheet as of June 30, 1997...........................P-3
Pro Forma Combined Statements of Operations for the six
months ended June 30, 1997............................................P-4
Pro Forma Combined Statements of Operations for the year
ended December 31, 1996...............................................P-5
Pro Forma Combined Statements of Operations for the year
ended December 31, 1995...............................................P-6
Pro Forma Combined Statements of Operations for the year
ended December 31, 1994...............................................P-7
Notes to Unaudited Pro Forma Combined Financial Statements.....................P-8
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Financial Statements (the "Pro Forma
Statements") have been prepared assuming the Merger is accounted for as a
pooling of interests.
The unaudited Pro Forma Combined Balance Sheet as of June 30, 1997 has been
prepared as if the combination of TMRC and Cairn had been consummated on June
30, 1997. The unaudited Pro Forma Statements of Operations for the six months
ended June 30, 1997 and for each of the three years in the period ended December
31, 1996, are based on the Consolidated Financial Statements of TMRC and the
Consolidated Financial Statements of Cairn and include, in the opinion of the
managements of TMRC and Cairn, all adjustments necessary to present fairly the
results of such periods and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations for
each of TMRC and Cairn incorporated herein by reference. The unaudited Pro Forma
Statements of Operations for the six months ended June 30, 1997 have been
derived from, and should be read in conjunction with, the unaudited Consolidated
Financial Statements of TMRC included in TMRC's Quarterly Report on Form 10-Q
for the three months ended June 30, 1997 and the unaudited Consolidated
Financial Statements of Cairn included in Exhibit 99.2 to this Curren Report on
Form 8-K. The unaudited Pro Forma Statements of Operations for each of the three
years in the period ended December 31, 1996 have been derived from, and should
be read in conjunction with, the audited Consolidated Financial Statements of
TMRC included in TMRC'S Annual Report on Form 10-K for the year ended December
31, 1996 and the audited Consolidated Financial Statements of Cairn included in
Exhibit 99.2 to this Current Report on Form 8-K.
The Pro Forma Statements are presented for illustrative purposes only and
are not necessarily indicative of actual results of operations or financial
position that would have been achieved had the Merger been consummated as
presented. Neither are they necessarily indicative of future results.
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THE MERIDIAN RESOURCE CORPORATION AND CAIRN ENERGY USA, INC.
PRO FORMA COMBINED BALANCE SHEET
UNAUDITED
AS OF JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
PRO FORMA
TMRC CAIRN ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
CURRENT ASSETS:
Cash and cash equivalents......................... $ 3,262 $ 3,915 $ -- $ 7,177
Accounts receivable, net.......................... 9,631 4,962 -- 14,593
Due from affiliates............................... 1,670 -- -- 1,670
Prepaid expenses and other........................ 393 626 -- 1,019
-------- -------- ------- ---------
Total current assets...................... 14,956 9,503 -- 24,459
-------- -------- ------- ---------
Oil and natural gas properties, full cost method
(including $71,843 not subject to depletion)...... 120,700 223,516 -- 344,216
Land................................................ 478 -- -- 478
Equipment........................................... 3,342 967 -- 4,309
-------- -------- ------- ---------
124,520 224,483 -- 349,003
Less accumulated depletion and depreciation......... (24,027) (83,106) (1,259)(1) (108,392)
-------- -------- ------- ---------
100,493 141,377 (1,259) 240,611
-------- -------- ------- ---------
Other assets, net................................... 357 1,010 -- 1,367
-------- -------- ------- ---------
Total assets.............................. $115,806 $151,890 $(1,259) $ 266,437
======== ======== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. $ 11,012 $ 5,519 $ -- $ 16,531
Revenue and royalty payable....................... 5,362 -- -- 5,362
Accrued liabilities............................... 5,174 2,940 10,000(2) 18,114
Current maturities of long-term debt.............. -- 10,000 (10,000)(3) --
-------- -------- ------- ---------
Total current liabilities................. 21,548 18,459 -- 40,007
-------- -------- ------- ---------
LONG-TERM DEBT...................................... 6,500 40,000 10,000 (3) 56,500
DEFERRED INCOME TAXES............................... 5,177 -- (3,970)(2)(6) 1,207
COMMITMENTS AND CONTINGENCIES.......................
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares
authorized, 33,464,000 shares issued........... 146 176 14(4) 336
Additional paid-in capital........................ 76,240 94,859 (14)(4) 171,085
Accumulated earnings (deficit).................... 7,723 (1,604) (7,289)(1)(2)(6) (1,170)
Unamortized deferred compensation................. (448) -- -- (448)
Treasury stock, 60,000 shares at cost............. (1,080) -- -- (1,080)
-------- -------- ------- ---------
Total stockholders' equity................ 82,581 93,431 (7,289) 168,723
-------- -------- ------- ---------
Total liabilities and stockholders'
equity.................................. $115,806 $151,890 $(1,259) $ 266,437
======== ======== ======= =========
Common shares issued................................ 14,453 17,566 1,405(4) 33,424
======== ======== ======= =========
The accompanying notes are an integral part of these pro forma combined
financial statements.
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THE MERIDIAN RESOURCE CORPORATION AND
CAIRN ENERGY USA, INC. COMBINED
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
TMRC CAIRN ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
REVENUES:
Oil and natural gas............................. $14,945 $14,583 $ -- $29,528
Interest and other.............................. 302 135 -- 437
------- ------- ------- -------
15,247 14,718 -- 29,965
------- ------- ------- -------
COST AND EXPENSES:
Oil and natural gas operating................... 1,860 1,765 -- 3,625
Depletion, depreciation and amortization........ 5,579 7,234 396(5) 13,209
General and administrative...................... 2,612 1,052 -- 3,664
Interest........................................ 64 1,799 -- 1,863
------- ------- ------- -------
10,115 11,850 396 22,361
------- ------- ------- -------
INCOME BEFORE INCOME TAXES........................ 5,132 2,868 (396) 7,604
INCOME TAX EXPENSE................................ 1,797 -- 865(6) 2,662
------- ------- ------- -------
NET INCOME........................................ $ 3,335 $ 2,868 $(1,261) $ 4,942
======= ======= ======= =======
NET INCOME PER COMMON AND COMMON EQUIVALENT
SHARE........................................... $ 0.21 $ 0.16 -- $ 0.14
======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding.............................. 15,814 17,566 1,900 35,280
======= ======= ======= =======
The accompanying notes are an integral part of these pro forma combined
financial statements.
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THE MERIDIAN RESOURCE CORPORATION AND
CAIRN ENERGY USA, INC. COMBINED
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
TMRC CAIRN ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
REVENUES:
Oil and natural gas............................. $25,107 $30,016 $ -- $55,123
Interest and other.............................. 1,280 330 -- 1,610
------- ------- ------- -------
26,387 30,346 -- 56,733
------- ------- ------- -------
COST AND EXPENSES:
Oil and natural gas operating................... 2,642 3,731 -- 6,373
Depletion, depreciation and amortization........ 9,014 15,973 460(5) 25,447
General and administrative...................... 4,223 1,481 -- 5,704
Interest........................................ 20 2,523 -- 2,543
------- ------- ------- -------
15,899 23,708 460 40,067
------- ------- ------- -------
INCOME BEFORE INCOME TAXES........................ 10,488 6,638 (460) 16,666
INCOME TAX EXPENSE (BENEFIT)...................... 3,354 -- (3,380)(6) (26)
------- ------- ------- -------
NET INCOME........................................ $ 7,134 $ 6,638 $ 2,920 $16,692
======= ======= ======= =======
NET INCOME PER COMMON AND COMMON EQUIVALENT
SHARE........................................... $ 0.45 $ 0.38 -- $ 0.47
======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding.............................. 15,720 17,559 2,056 35,335
======= ======= ======= =======
The accompanying notes are an integral part of these pro forma combined
financial statements.
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THE MERIDIAN RESOURCE CORPORATION AND
CAIRN ENERGY USA, INC. COMBINED
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
TMRC CAIRN ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
REVENUES:
Oil and natural gas............................. $11,224 $25,742 $ -- $36,966
Interest and other.............................. 1,043 221 -- 1,264
------- ------- ----- -------
12,267 25,963 -- 38,230
------- ------- ----- -------
COST AND EXPENSES:
Oil and natural gas operating................... 1,600 3,101 -- 4,701
Depletion, depreciation and amortization........ 4,999 13,616 (70)(5) 18,545
General and administrative...................... 3,135 1,511 -- 4,646
Interest........................................ 50 2,500 -- 2,550
Other........................................... 300 -- -- 300
------- ------- ----- -------
10,084 20,728 (70) 30,742
------- ------- ----- -------
INCOME BEFORE INCOME TAXES........................ 2,183 5,235 70 7,488
INCOME TAX EXPENSE................................ 30 -- -- 30
------- ------- ----- -------
NET INCOME........................................ $ 2,153 $ 5,235 $ 70 $ 7,458
======= ======= ===== =======
NET INCOME PER COMMON AND COMMON EQUIVALENT
SHARE........................................... $ 0.16 $ 0.32 -- $ 0.23
======= ======= ===== =======
Weighted average common and common equivalent
shares outstanding.............................. 13,580 16,422 1,947 31,949
======= ======= ===== =======
The accompanying notes are an integral part of these pro forma combined
financial statements.
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THE MERIDIAN RESOURCE CORPORATION AND
CAIRN ENERGY USA, INC. COMBINED
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
TMRC CAIRN ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
REVENUES:
Oil and natural gas............................... $7,466 $9,494 $ -- $16,960
Interest and other................................ 394 398 -- 792
------ ------ ------ -------
7,860 9,892 -- 17,752
------ ------ ------ -------
COST AND EXPENSES:
Oil and natural gas operating..................... 921 2,274 -- 3,195
Depletion, depreciation and amortization.......... 3,069 4,328 391(5) 7,788
General and administrative........................ 2,433 1,522 -- 3,955
Interest.......................................... 17 1,114 -- 1,131
------ ------ ------ -------
6,440 9,238 391 16,069
------ ------ ------ -------
INCOME BEFORE INCOME TAXES.......................... 1,420 654 (391) 1,683
INCOME TAX EXPENSE.................................. 22 -- -- 22
------ ------ ------ -------
NET INCOME.......................................... $1,398 $ 654 $ (391) $ 1,661
====== ====== ====== =======
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE... $ 0.12 $ 0.05 -- $ 0.06
====== ====== ====== =======
Weighted average common and common equivalent shares
outstanding....................................... 11,769 13,259 1,459 26,487
====== ====== ====== =======
The accompanying notes are an integral part of these pro forma combined
financial statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Under the terms of the Merger Agreement, the holders of the Cairn Common
Stock will receive 1.08 newly issued shares of TMRC Common Stock for each share
of Cairn Common Stock held by them at the Effective Time. The business
combination will be accounted for using the pooling of interests method of
accounting.
PRO FORMA ADJUSTMENTS
The accompanying Pro Forma Combined Balance Sheet as of June 30, 1997, has
been prepared as if the combination of TMRC and Cairn had occurred on that date
and includes the following adjustments to reflect the combination as a pooling
of interest:
(1) To adjust accumulated depletion to reflect the consolidation of
TMRC's and Cairn's full cost pools and reserves.
(2) To record the estimated costs to complete the combination of TMRC
and Cairn under pooling of interest accounting which will be expensed when
the merger is consummated. These costs, which are primarily related to
transaction and severance costs, are currently estimated to be
approximately $10.0 million, before tax benefit of $1.4 million.
(3) To reflect the debt classification under a new credit
facility entered into in connection with the business combination.
(4) To adjust common stock and additional paid-in capital for the
1,445,000 shares of TMRC Common Stock to be issued to Cairn stockholders
based on shares outstanding at June 30, 1997.
The accompanying Pro Forma Combined Statements of Operations for each of
the three years ended December 31, 1996, and for the six months ended June 30,
1997, have been prepared by combining the historical results of TMRC and Cairn
for such periods and reflect the following adjustments:
(5) To reflect the effects of a combined depletion rate. Depletion
expense was increased by $0.4 million, $0.5 million and $0.4 million for
the six months ended June 30, 1997 and the years ended 1996, and 1994,
respectively. Depletion expense was decreased by $0.1 million in 1995.
(6) To reflect the $3.4 million deferred income tax benefit for the
reduction in the valuation allowance on Cairn's deferred tax assets as of
and for the year ended December 31, 1996, based on expected utilization of
net operating loss carryforwards and to record $0.9 million of additional
deferred tax expense for the six months ended June 30, 1997.
PRO FORMA NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The pro forma weighted average common and common equivalent shares
outstanding have been computed by adjusting the historical weighted average
outstanding common and common equivalent shares of TMRC for the shares assumed
to be issued in exchange for the outstanding Cairn common shares, the dilutive
effect of common stock equivalents arising from the assumption of the Cairn
options and giving effect to TMRC's General Partner Warrants.
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PRO FORMA COMBINED SUPPLEMENTAL OIL AND GAS RESERVE AND STANDARDIZED MEASURE
INFORMATION
The following is a summary of pro forma combined quantities of proved
reserves prepared by combining the historical results of TMRC and Cairn, derived
from estimates prepared or reviewed by Ryder Scott. See the historical financial
statements of TMRC and Cairn, incorporated by reference herein under "Certain
Documents Incorporated by Reference".
PRO FORMA COMBINED ESTIMATED QUANTITIES OF PROVED RESERVES
(IN THOUSANDS)
OIL GAS
(BBL) (MCF)
----- -------
December 31, 1993........................................... 2,329 65,394
Production................................................ (163) (7,116)
Revisions................................................. (26) (524)
Discoveries and extensions................................ 991 19,348
Purchase of reserves in place............................. 32 3,018
Sale of reserves in place................................. (256) (2,902)
----- -------
December 31, 1994........................................... 2,907 77,218
Production................................................ (650) (14,598)
Revisions................................................. (125) 5,742
Discoveries and extensions................................ 1,542 24,691
Sale of reserves in place................................. (111) (2,060)
----- -------
December 31, 1995........................................... 3,563 90,993
Production................................................ (751) (15,783)
Revisions................................................. 647 (4,418)
Discoveries and extensions................................ 5,956 36,614
----- -------
December 31, 1996........................................... 9,415 107,406
===== =======
PRO FORMA COMBINED ESTIMATED QUANTITIES OF PROVED DEVELOPED RESERVES
(IN THOUSANDS)
OIL GAS
(BBL) (MCF)
----- ------
December 31, 1993........................................... 668 31,375
December 31, 1994........................................... 2,396 60,573
December 31, 1995........................................... 2,569 76,944
December 31, 1996........................................... 4,361 81,192
The following is a summary of a pro forma combined standardized measure of
discounted future net cash flows related to TMRC's pro forma combined proved
oil, natural gas and natural gas liquids reserves. Such information has been
derived from valuations of proved reserves using discounted cash flows estimated
or reviewed by Ryder Scott. The additions to proved reserves from new
discoveries and extension could vary significantly from year to year;
additionally, the impact of changes to reflect current prices and costs of
reserves proved in prior years could also be significant. Accordingly, the
information presented below should neither be viewed as an estimate of the fair
value of TMRC's or Cairn's oil and natural gas properties following the
combination of TMRC and Cairn, nor should it be considered indicative of any
trends.
The estimated discounted future net cash flows from estimated proved
reserves are based on prices and costs as of the date of the estimate unless
such prices or costs are contractually determined at such date. Actual future
prices and costs may be materially higher or lower. Actual future net revenues
also will be affected by factors such as actual production, supply and demand
for oil and natural gas, curtailments or
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increases in consumption by natural gas purchasers, changes in governmental
regulations or taxation and the impact of inflation on costs. Future income tax
expense has been reduced for the effect of available net operating loss
carryforwards.
PRO FORMA COMBINED STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1996 1995
--------- ---------
Future cash inflows......................................... $ 671,123 $ 284,204
Future production and development costs..................... (111,159) (57,968)
Future income tax expense................................... (121,347) (26,600)
--------- ---------
Future net cash flows....................................... 438,617 199,636
Discount to present value at 10% annual rate................ (124,994) (49,773)
--------- ---------
Standardized measure of discounted future net cash flows.... $ 313,623 $ 149,863
========= =========
The following are the principal sources of change in the pro forma combined
standardized measure of discounted future net cash flows:
PRO FORMA CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
(IN THOUSANDS)
1996 1995 1994
-------- -------- --------
BALANCE AT BEGINNING OF PERIOD............................. $149,863 $100,782 $ 90,904
-------- -------- --------
SALES OF OIL AND GAS, NET OF PRODUCTION COSTS.............. (48,750) (32,265) (13,765)
REVISIONS TO RESERVES PROVED IN PRIOR YEARS:
Changes in prices and production costs................... 104,249 20,316 (24,323)
Revisions of previous quantity estimates................. (756) 9,839 (400)
ADDITIONS TO PROVED RESERVES:
Acquisitions of reserves in place........................ -- -- 1,531
Sales of reserves in place............................... -- (3,262) (6,119)
Current year discoveries, extensions and improved
recovery.............................................. 167,080 56,603 30,758
Changes in estimated future development costs............ (7,597) (20,751) (8,622)
Development costs incurred during the period that reduce
future development costs.............................. 11,723 19,242 11,683
Accretion of discount.................................... 16,182 10,485 10,165
Net change in income taxes............................... (63,476) (13,199) 9,383
Change in production rates (timing) and other............ (14,895) 2,073 (413)
-------- -------- --------
Net increase............................................. 163,760 49,081 9,878
-------- -------- --------
BALANCE AT END OF PERIOD................................... $313,623 $149,863 $100,782
======== ======== ========
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