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EXHIBIT 99.3
SANTA FE SNYDER CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma condensed combined financial statements
of Santa Fe Energy Resources, Inc. ("Santa Fe"), and related notes thereto,
illustrate the effects of the merger of Snyder Oil Corporation ("Snyder") into
Santa Fe.
Effective May 5, 1999, Snyder, a Delaware corporation, merged with and into
Santa Fe, also a Delaware corporation, pursuant to an Agreement and Plan of
Merger dated January 13, 1999, between Snyder and Santa Fe. In connection with
the merger, Santa Fe changed its name to "Santa Fe Snyder Corporation" ("Santa
Fe Snyder" or the "Company"). In the merger, each issued and outstanding share
of common stock of Snyder, par value $.01 per share ("Snyder Common Stock") was
converted into 2.05 shares of common stock, par value $.01 per share, of Santa
Fe Snyder (the "Santa Fe Snyder Common Stock"). The exchange ratio was
determined through arm's length negotiations between the parties. Santa Fe
Snyder issued approximately 68.8 million shares of Santa Fe Snyder Common
Stock.
The merger of Snyder has been accounted for in the Pro Forma Statements
using the purchase method of accounting. Consequently, the unaudited pro forma
condensed combined balance sheet (the "Pro Forma Balance Sheet") as of March 31,
1999 reflects the recording of assets acquired and liabilities assumed of Snyder
at estimated fair value as if the merger had occurred on that date. The
unaudited pro forma combined statements of operations are prepared for the three
months ended March 31, 1999 and March 31, 1998 and the year ended December 31,
1998 and illustrate the effects of the merger as if it had occurred on January
1, 1998.
Accounting rules require that Santa Fe Snyder periodically review the
carrying value of its oil and gas properties for possible impairment. Based on
specific market factors and circumstances at the time of prospective impairment
reviews, and the continuing evaluation of development plans, production data,
economics and other factors, as appropriate, Santa Fe Snyder may be required to
write down the carrying value of its oil and gas properties. A writedown
constitutes a charge to earnings, which does not impact Santa Fe Snyder's cash
flows from operating activities.
Based primarily on its long-term outlook for future commodities prices,
management expects to record an impairment charge of approximately $150 million
to $250 million, on a pre-tax basis, pursuant to the provisions of Statement of
Financial Accounting Standards No. 121. Any writedown would likely have a
material adverse effect on Santa Fe Snyder's net income in the period taken,
but would not affect the Company's cash flows.
The Pro Forma Statements should be read in conjunction with the historical
consolidated financial statements of Santa Fe and Snyder, including the notes
thereto, incorporated herein by reference. The management of Santa Fe Snyder
believes that the assumptions utilized provide a reasonable basis for presenting
the significant effects of the merger and that the pro forma adjustments give
appropriate effect to those assumptions and are properly applied in the pro
forma financial information. The Pro Forma Statements do not purport to be
indicative of the financial position or results of operations of Santa Fe Snyder
had the merger occurred on the dates mentioned above, nor are the Pro Forma
Statements necessarily indicative of the future financial position or results of
operations of Santa Fe Snyder.
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SANTA FE SNYDER CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(In Millions)
March 31, 1999
---------------------------------------------
Pro Forma
Combining Pro Forma
Santa Fe Snyder Adjustments Combined
-------- ------ ----------- ----------
ASSETS
Current assets $ 112.7 $ 32.3 $ -- $ 145.0
Investments -- 26.3 -- 26.3
(548.7)(a)
Property, plant and equipment, at cost 1,988.7 548.7 663.1 (b) 2,739.9
88.1 (b)
Accumulated depletion, depreciation,
amortization and impairment (1,287.3) (202.7) 202.7 (a) (1,287.3)
---------- -------- -------- ---------
Property, plant and equipment, net 701.4 346.0 405.2 1,452.6
Other Assets 29.9 4.4 (19.4)(d) 14.9
---------- -------- -------- ---------
Total Assets $ 844.0 $ 409.0 $ 385.8 $ 1,638.8
========== ======== ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 100.1 $ 67.1 $ 8.1 (b)$ 175.3
Long-term debt 361.9 206.8 (0.9)(a) 567.8
Deferred revenues and other liabilities 45.5 18.8 -- 64.3
Deferred income taxes -- -- 88.1 (b) 68.3
(0.4)(c)
(19.4)(d)
Shareholders' equity
Common stock 1.0 0.4 (0.4)(a) 1.8
0.8 (b)
Paid-in capital 728.2 239.0 (239.0)(a) 1,153.6
425.4 (b)
(0.6)(a)
Retained Earnings (Deficit) (384.6) 0.6 (0.7)(c) (385.3)
Treasury stock (7.0) (46.2) 46.2 (a) (7.0)
Unamortized restricted stock awards (1.1) -- 1.1 (c) --
Unrealized gain or loss on investments -- (77.5) 77.5 (a) --
---------- -------- -------- ---------
Total Liabilities and Shareholders' Equity $ 844.0 $ 409.0 $ 385.8 $ 1,638.8
========== ======== ======== =========
The accompanying notes are an integral part of these pro forma condensed
combined financial statements.
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SANTA FE SNYDER CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In Millions, Except Per Share Amounts)
THREE MONTHS ENDED MARCH 31, 1999
----------------------------------------------
PRO FORMA
COMBINING PRO FORMA
SANTA FE SNYDER ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
Revenues:
Sales of crude oil, liquids and natural gas $ 67.9 $ 30.0 $ -- $ 97.9
Gas transportation, processing and marketing -- 0.6 -- 0.6
Other 0.3 -- -- 0.3
--------- -------- -------- -------
Total revenues 68.2 30.6 -- 98.8
--------- -------- -------- -------
Costs and expenses:
Production and operating 28.3 7.5 -- 35.8
Exploration, including dry hole costs 11.2 11.9 -- 23.1
Depletion, depreciation and amortization 31.9 13.9 6.1 (a) 51.9
General and administrative 5.4 4.3 -- 9.7
Taxes other than income 3.5 1.5 -- 5.0
Loss (gain) on disposition of assets 0.1 (0.4) -- (0.3)
--------- -------- -------- -------
Total costs and expenses 80.4 38.7 6.1 125.2
--------- -------- -------- -------
Income (loss) from operations (12.2) (8.1) (6.1) (26.4)
Interest income 0.4 0.2 -- 0.6
Interest expense (6.8) (4.4) -- (11.2)
Interest capitalized 1.3 -- -- 1.3
Other income (expense) -- (0.2) -- (0.2)
--------- -------- -------- -------
Income (loss) before income taxes (17.3) (12.5) (6.1) (35.9)
Current income tax (expense) benefit (0.7) -- -- (0.7)
Deferred income tax (expense) benefit 5.9 4.4 2.5 (b) 12.8
--------- -------- -------- -------
Net income (loss) $ (12.1) $ (8.1) $ (3.6) $ (23.8)
========= ======== ======== =======
Net income (loss) per common share,
basic and diluted $ (0.12) $ (0.24) $ (0.14)
========= ======== =======
Weighted average number of shares outstanding 102.2 33.4 170.7
========= ======== =======
The accompanying notes are an integral part of these pro forma condensed
combined financial statements.
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SANTA FE SNYDER CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In Millions, Except Per Share Amounts)
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------
PRO FORMA
COMBINING PRO FORMA
SANTA FE SNYDER ADJUSTMENT COMBINED
-------- ------- ---------- ----------
Revenues:
Sales of crude oil, liquids and natural gas $ 68.6 $ 32.8 $ -- $ 101.4
Gas transportation, processing and marketing -- 0.9 -- 0.9
Other 0.2 -- -- 0.2
-------- ------- ------- --------
Total revenues 68.8 33.7 -- 102.5
-------- ------- ------- --------
Costs and expenses:
Production and operating 25.3 6.6 -- 31.9
Cost of gas and transportation -- 0.4 -- 0.4
Exploration, including dry hole costs 12.2 3.2 -- 15.4
Depletion, depreciation and amortization 28.1 11.8 5.7 (a) 45.6
General and administrative 4.4 4.2 -- 8.6
Taxes other than income 4.1 1.8 -- 5.9
-------- ------- ------- --------
Total costs and expenses 74.1 28.0 5.7 107.8
-------- ------- ------- --------
Income (loss) from operations (5.3) 5.7 (5.7) (5.3)
Interest income 2.2 1.1 -- 3.3
Interest expense (3.8) (3.9) -- (7.7)
Interest capitalized 1.7 -- -- 1.7
Other income (expense) -- (0.1) -- (0.1)
-------- ------- ------- -------
Income (loss) before income taxes (5.2) 2.8 (5.7) (8.1)
Current income tax (expense) benefit 2.6 -- -- 2.6
Deferred income tax (expense) benefit 2.3 (1.0) 2.0 (b) 3.3
-------- ------- ------- -------
Net income (loss) $ (0.3) $ 1.8 $ (3.7) $ (2.2)
======== ======= ======= =======
Net income (loss) per common share,
Basic $ -- $ 0.06 $ (0.01)
======== ======= =======
Diluted $ -- $ 0.05 $ (0.01)
======== ======= =======
Weighted average number of shares outstanding 102.7 33.4 171.2
======== ======= =======
The accompanying notes are an integral part of these pro forma condensed
combined financial statements.
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SANTA FE SNYDER CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In Millions, Except Per Share Amounts)
YEAR ENDED ENDED DECEMBER 31, 1998
----------------------------------------------
PRO FORMA
COMBINING PRO FORMA
SANTA FE SNYDER ADJUSTMENT COMBINED
--------- --------- ---------- -----------
Revenues:
Sales of crude oil, liquids and natural gas $ 290.4 $ 133.2 $ -- $ 423.6
Gas transportation, processing and marketing -- 4.6 -- 4.6
Other 0.6 0.2 -- 0.8
--------- ------- ------- ---------
Total revenues 291.0 138.0 -- 429.0
--------- ------- ------- ---------
Costs and expenses:
Production and operating 112.5 31.0 -- 143.5
Cost of gas and transportation -- 3.3 -- 3.3
Exploration, including dry hole costs 71.1 48.3 -- 119.4
Depletion, depreciation and amortization 136.1 54.0 25.8 (a) 215.9
Impairment of oil and gas properties 87.8 5.5 93.3
General and administrative 19.7 16.4 -- 36.1
Taxes other than income 16.3 7.5 -- 23.8
Loss (gain) on disposition of assets 1.5 (3.3) -- (1.8)
--------- ------- ------- ---------
Total costs and expenses 445.0 162.7 25.8 633.5
--------- ------- ------- ---------
Income (loss) from operations (154.0) (24.7) (25.8) (204.5)
Interest income 6.2 2.4 -- 8.6
Interest expense (22.0) (15.7) -- (37.7)
Interest capitalized 7.2 -- -- 7.2
Other income (expense) (0.3) -- -- (0.3)
--------- ------- ------- ---------
Income (loss) before income taxes (162.9) (38.0) (25.8) (226.7)
Current income tax (expense) benefit 11.4 -- -- 11.4
Deferred income tax (expense) benefit 52.8 13.3 9.0 (b) 75.1
--------- ------- ------- -------
Net income (loss) $ (98.7) $ (24.7) $ (16.8) $(140.2)
========= ======= ======= =======
Net income (loss) per common share,
basic and diluted $ (0.96) $ (0.74) $ (0.82)
========= ======= =======
Weighted average number of shares outstanding 102.6 33.4 171.1
========= ======= =======
The accompanying notes are an integral part of these pro forma condensed
combined financial statements
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SANTA FE SNYDER CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The Pro Forma Condensed Combined Balance Sheet is presented as if the
merger of Snyder into Santa Fe occurred on March 31, 1999. The Pro Forma
Condensed Combined Statements of Operations have been prepared as if the merger
had been consummated as of January 1, 1998.
The merger of Snyder has been accounted for in the Pro Forma Statements
using the purchase method of accounting. The total value to be allocated
between the net assets of Snyder was determined based on the estimated fair
value of the Santa Fe Common Stock offered to the Snyder stockholders and the
estimated fair value of replacement options to be issued, as increased to
reflect the incremental cash expenses incurred to effect the merger. The fair
value of Santa Fe Common Stock utilized in the purchase price calculation was
$6.09375, which represents the average market price prior to and after the
public announcement of the proposed merger.
NOTE 2. PRO FORMA ADJUSTMENTS
Pro Forma Balance Sheet
(a) To reverse Snyder's historical property, plant and equipment, accumulated
depletion, depreciation and amortization and shareholders' equity as a
result of the application of purchase accounting and to adjust long-term
debt to fair market value.
(b) To record the preliminary pro forma allocation of the purchase price of the
merger of Snyder to property, plant and equipment using the purchase method
of accounting. The total of the value of the approximate 68.8 million shares
issued ($417.1 million), the fair value of the net liabilities assumed
($228.8 million, which is the remainder of liabilities assumed minus assets
acquired), the estimated fair value of 4.5 million Santa Fe Snyder
replacement options to be issued ($9.1 million) and the value of certain
liabilities incurred as a result of the merger has been allocated to
property, plant and equipment as follows:
IN MILLIONS
------------
Common stock issued . . . . . . . . . . . . . . . . . . $ 417.1
Fair value of replacement options . . . . . . . . . . . 9.1
Other accrued merger costs . . . . . . . . . . . . . . . 5.6
------------
Sub-total . . . . . . . . . . . . . . . . . . . . . . 431.8
Liabilities assumed:
Current liabilities . . . . . . . . . . . . . . . . . 67.1
Long-term debt at fair value . . . . . . . . . . . . 205.9
Other long-term obligations . . . . . . . . . . . . . 18.8
Assets acquired:
Current assets . . . . . . . . . . . . . . . . . . . (32.3)
Investments . . . . . . . . . . . . . . . . . . . . . (26.3)
Other long-term assets . . . . . . . . . . . . . . . (4.4)
------------
Allocated to property, plant and equipment . . . . . . . $ 660.6
============
Other accrued merger costs include those capitalizable costs incurred
to consummate the transaction, consisting primarily of professional
fees. These costs, along with the write off of certain lease obligations
($2.5 million) are reflected in current liabilities on the pro forma
balance sheet.
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SANTA FE SNYDER CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The purchase price allocation is preliminary principally due to the
fact that management is in the process of assessing and formulating
its integration plans, which are expected to include employee
separations, employee relocations, elimination of duplicative
facilities and other restructuring actions. These restructuring costs
are anticipated to qualify as assumed liabilities in the merger upon
finalization of these plans. In addition, the Company is in the
process of finalizing business and capital spending plans which will
impact the ultimate purchase price allocation to oil and gas
properties. Such amounts cannot be estimated at this time.
In addition, the Company has recorded an $88.1 million deferred tax
liability related to the estimated difference between the book basis and
the tax basis in the oil and gas properties acquired. Such amount is
allocated to property, plant and equipment.
(c) As a result of the merger, certain restricted unit awards of Santa Fe vest,
resulting in a charge to earnings, net of tax, of the unrecognized
portion of such awards.
(d) Included in Santa Fe's "Other Assets" line item at March 31, 1999 is a net
deferred tax asset of $19.4 million. As a result of a deferred tax
liability arising from the merger, this amount has been reclassified to
"Deferred income taxes" for pro forma purposes.
Pro Forma Statements of Operations
Certain reclassification adjustments to line items were made to the Snyder
statements of operations for the three months ended March 31, 1999 and March 31,
1998 and the year ended December 31, 1998 to conform to Santa Fe's
presentation. The material adjustment made was a reclassification of
production taxes ($1.5 million, $1.8 million and $7.5 million, respectively)
from production and operating expense to taxes other than income taxes. These
adjustments do not affect net income and are not presented on the pro forma
statements.
(a) To record the additional depletion, depreciation and amortization expense of
$6.1 million, $5.7 million and $25.8 million related to the excess of the
estimated fair value over the historical basis of the property, plant and
equipment for the three months ended March 31, 1999 and March 31, 1998 and
the year ended December 31, 1998, respectively.
(b) To record income taxes at an effective rate of 35%.