Exhibit 99.1
PRO FORMA FINANCIAL INFORMATION OF
PATINA OIL & GAS CORPORATION
On May 2, 1996, the Company was merged (the "Merger") with Gerrity Oil &
Gas Corporation ("GOG"). Related to the Merger, the Company commenced an
Exchange Offer to exchange the Company's preferred stock for GOG's preferred
stock. The following tables summarize the unaudited pro forma effects on the
Company's financial statements assuming that the Merger and the Exchange Offer
had been consummated on March 31, 1996 (for balance sheet data) and January 1,
1995 and 1996 (for statement of operations data). These transactions will be
accounted for as a purchase of GOG. The pro forma effects of the Merger and the
Exchange Offer are based on assumptions set at the time of the filing of the
Company's registration statement declared effective by the Securities and
Exchange Commission. These assumptions have not been updated to reflect certain
aspects of the transactions which were not known until or subsequent to the
occurrence of the transactions. The pro forma condensed consolidated financial
statements should be read in conjunction with the related historical financial
statements included in the Company's registration statement and in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996.
Future results may differ substantially from pro forma results due to changes in
these assumptions, changes in oil and gas prices, production declines and other
factors. Therefore, pro forma statements cannot be considered indicative of
future operations.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1996
(In thousands)
GOG Pro Forma Unaudited
Historical Historical Adjustments Pro Forma
---------- ---------- ------------ ---------
ASSETS
Current assets $ 9,498 $ 15,308 $ $ 24,806
Oil and gas properties and equipment, net 208,157 293,630 (83,754) (a) 418,033
Other noncurrent assets 728 6,480 (1,458) (a) 5,750
--------- --------- ---------
$ 218,383 $ 315,418 $ 448,589
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 9,498 $ 18,689 $ (5,104) (b) $ 20,583
(2,500) (c)
Deferred taxes and other 25,168 19,058 (34,225) (a) 10,001
Debt to parent 75,000 - (75,000) (b) -
Long-term debt - 117,500 15,884 (a) 215,988
80,104 (b)
2,500 (c)
Preferred stock of subsidiary - - 13,333 (a) 13,333
Stockholders' equity
Preferred stock, $.01 par - 4 7 (a) 11
Common stock, $.01 par 140 138 (78) (a) 200
Capital in excess of par value - 160,524 (80,628) (a) 188,473
108,577 (d)
Investment by parent 108,577 - (108,577) (d) -
Retained earnings (deficit) - (495) 495 (a) -
--------- --------- ---------
108,717 160,171 188,684
--------- --------- ---------
$ 218,383 $ 315,418 $ 448,589
========= ========= =========
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(In thousands, except per share data)
GOG Pro Forma Unaudited
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
Revenues
Oil and gas sales $ 50,073 $ 51,513 $ $ 101,586
Other 29 2,347 2,376
--------- --------- ---------
50,102 53,860 103,962
--------- --------- ---------
Expenses
Direct operating 8,867 8,366 1,575 (e) 18,308
(500) (f)
Exploration 416 285 701
General and administrative 5,974 7,731 (4,705) (f) 7,425
(1,575) (e)
Interest and other 5,476 14,505 (1,049) (g) 18,932
Depletion, depreciation and amortization 32,591 30,333 (7,054) (h) 55,870
Restructuring expenses - 828 828
--------- --------- ---------
53,324 62,048 102,064
--------- --------- ---------
Income (loss) before taxes and dividends on
preferred stock of subsidiary (3,222) (8,188) 1,898
Provision for (benefit from) income taxes (1,128) (215) 2,007 (i) 664
Dividends on preferred stock of subsidiary - - 1,518 (j) 1,518
--------- --------- ---------
Net loss (2,094) (7,973) (284)
Dividends on preferred stock - 4,554 (2,654) (j) 1,900
--------- --------- ---------
Net loss applicable to common stock $ (2,094) $ (12,527) $ (2,184)
========= ========= =========
Net loss per share $ (.15) $ (.11)
========= =========
Weighted average shares outstanding 14,000 20,000
========= =========
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1996
(In thousands, except per share data)
GOG Pro Forma Unaudited
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
Revenues
Oil and gas sales $ 10,634 $ 12,154 $ $ 22,788
Other 20 313 333
--------- --------- ---------
10,654 12,467 23,121
--------- --------- ---------
Expenses
Direct operating 1,955 2,030 394 (e) 4,254
(125) (f)
Exploration 68 59 127
General and administrative 1,543 1,678 (964) (f) 1,863
(394) (e)
Interest and other 1,247 3,408 (166) (g) 4,489
Depletion, depreciation and amortization 6,967 6,677 (1,123) (h) 12,521
--------- --------- ---------
11,780 13,852 23,254
--------- --------- ---------
Loss before taxes and dividends on
preferred stock of subsidiary (1,126) (1,385) (133)
Benefit from income taxes (394) (470) 817 (i) (47)
Dividends on preferred stock of subsidiary - - 380 (j) 380
--------- --------- ---------
Net loss (732) (915) (466)
Dividends on preferred stock - 1,139 (664) (j) 475
--------- --------- ---------
Net loss applicable to common stock $ (732) $ (2,054) $ (941)
========= ========= =========
Net loss per share $ (.05) $ (.05)
========= =========
Weighted average shares outstanding 14,000 20,000
========= =========
The preceding unaudited pro forma condensed consolidated financial
statements reflect the adjustments described below:
Balance Sheet
(a) To reflect the acquisition of GOG, including the issuance of 6,000,000
shares of Common Stock, 3,000,000 Warrants, a warrant to be issued to the prior
chief executive of GOG exercisable for 500,000 shares of Common Stock (the
"Executive Warrant") and 1,066,667 shares of Preferred Stock (reflecting the
estimated exchange of two-thirds of the GOG Preferred Stock pursuant to the
Exchange Offer) at estimated fair value including transaction costs. The
estimated fair value of the common stock issued was based on an assumed trading
price of $8 per share of Common Stock. The trading price was estimated based on
various factors, including the trading price of GOG's Common Stock and trading
multiples of comparable public companies. The fair value of the Warrants and the
Executive Warrant were estimated to be $1.75 and $2.50 per warrant,
respectively, based primarily on a range calculated using the Black-Scholes
options model. The Preferred Stock was valued at $26,667,000 reflecting the
exchange of two-thirds of the GOG Preferred Stock at the liquidation preference
of the newly issued shares. The GOG Preferred Stock was valued at $13,333,000
which was estimated based on the trading price of GOG's Preferred Stock. For
each additional 10% of GOG Preferred Stock exchanged, pro forma preferred stock
of subsidiary would
decrease $4,000,000, preferred stock, $.01 par would increase $1,600 and capital
in excess of par value would increase $3,998,400. No trading market or market
price existed for the Common Stock, Warrants, Executive Warrant, or Preferred
Stock prior to the Merger.
On a pro forma basis, the Company is expected to have the following equity
instruments outstanding upon consummation of the Merger and the Exchange Offer
(other than shares owned by the Company or GOG):
Shares/Warrants
Outstanding
---------------
Common Stock 20,000,000
Preferred Stock 1,066,667
Warrants 3,000,000
Executive Warrant 500,000
In addition, GOG will have outstanding 1,012,000 Depository Shares
representing interests in GOG Preferred Stock.
(b) To reflect the repayment of the payable to parent through borrowings
under the Company's credit facility.
(c) To reflect the refinancing of GOG's current maturities of debt to
long-term debt through borrowings under the Company's credit facility.
(d) To reclassify the Company's investment by parent to capital in excess
of par value to reflect the Company's new capital structure.
Statement of Operations
(e) To conform the financial statement presentation by GOG of various
overhead charges and recoveries to a basis consistent with that of the Company.
(f) To reflect the reduction in direct operating and general and
administrative expenses that result from the elimination of redundant personnel,
lease space and other corporate services. Under the Merger Agreement, the
Company and SOCO have entered into a Corporate Services Agreement under which
SOCO will provide certain services to the Company so that it will not need to
have these tasks performed by the Company's employees. Administrative
efficiencies from combining headquarters and field operations and eliminating
duplicate executive, professional and administrative personnel are expected to
total approximately $4.7 million per year. Based upon a detailed analysis of the
expenses and personnel that will be required to provide such services following
the GOG Merger, management has estimated that future annual recurring general
and administrative expenses will approximate $5.0 million per year, net of
reimbursements.
(g) To adjust interest expense to reflect the refinancing or payment of (i)
$33.3 million (or 33.3%) of GOG's 11.75% Senior subordinated Notes, (ii) GOG's
bank borrowings under the terms of the Company's credit facility, (iii) the
payable to parent and (iv) transaction costs. The interest expense reflects the
Eurodollar Margin set forth in the credit facilities, which margin was applied
to the current Eurodollar Rate resulting in an average borrowing rate of
approximately 6.75%. Under the terms of GOG's Senior Subordinated Notes, GOG is
obligated to purchase any notes put to GOG at a price of 101% of the principal
amount thereof upon certain asset sales or dispositions. For each $10,000,000
change in the amount of Notes refinanced, pro forma interest expense, net income
and earnings per share would change by $475,000, $308,000 and $0.02 per share
for the year ended December 31, 1995 and $119,000, $77,000 and zero per share
for the three months ended March 31, 1996. The net decrease in interest expense
is attributable to the lower interest rate relating to the bank borrowings used
to refinance GOG's Senior Subordinated Notes, as described above, offset
somewhat by the increased debt level.
(h) To adjust depletion, depreciation and amortization of oil and gas
properties based on the purchase price allocated to GOG oil and gas properties
and the use of a combined depletion, depreciation and amortization rate. The
combined rate utilized for 1995 was $5.73 per BOE reflecting a rate of $5.65 per
BOE for the first nine months (based on reserve quantities as of December 31,
1994) and $6.02 per BOE for the last three months (based on reserve quantities
as of December 31, 1995). The rate utilized for the three months ended March 31,
1996 was $6.32 per BOE based on reserve quantities as of December 31, 1995.
(i) To record the estimated provision for income taxes to reflect the
anticipated effective income tax rate of the combined entity after the Merger.
(j) To reduce dividends paid on GOG Preferred Stock (reflecting the
estimated exchange of two-thirds of the GOG Preferred Stock pursuant to the
Exchange Offer) and reclassify dividends paid on the remaining outstanding
shares of GOG Preferred Stock. For each additional 10% of GOG Preferred Stock
exchanged, pro forma dividends on preferred stock of subsidiary would decrease
and net income would increase $455,000 and $114,000, dividends on preferred
stock would increase $285,000 and $71,000 and net income per share would
increase $.01 and zero for the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively.