Current report Amplify Energy Holdings Llc

8-K - Current report

Published: 2017-07-20 16:43:02
Submitted: 2017-07-20
Period Ending In: 2017-07-20
d424608d8k.htm 8-K


ENT> 8-K 1 d424608d8k.htm 8-K

8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 20, 2017 (July 20, 2017)

 

 

AMPLIFY ENERGY CORP.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-35364   82-1326219

(State or other jurisdiction

of Incorporation or Organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

500 Dallas Street, Suite 1600

Houston, Texas

  77002
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (713) 490-8900

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 8.01. Other Events.

As previously disclosed, on January 16, 2017, Memorial Production Partners LP (“MEMP”) and certain of its subsidiaries (collectively with MEMP, the “Debtors”) filed voluntary petitions (the cases commenced thereby, the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Court”). On April 14, 2017, the Court entered an order approving the Second Amended Joint Plan of Reorganization of Memorial Production Partners LP and its affiliated Debtors, dated April 13, 2017 (as amended and supplemented, the “Plan”). On May 4, 2017, the Plan became effective pursuant to its terms and the Debtors emerged from the Chapter 11 Cases. In connection with the Chapter 11 Cases and the Plan, MEMP and certain Consenting Noteholders (as defined in the Plan) effectuated certain restructuring transactions, pursuant to which Amplify Energy Corp., a Delaware corporation (the “Company”), acquired all of the assets of MEMP, and in accordance with the Plan, MEMP will be dissolved. As a result, the Company became the successor reporting company to MEMP pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended.

The purpose of this Current Report on Form 8-K is to, among other things, file the unaudited pro forma condensed consolidated financial information set forth in Item 9.01 below, and to allow such financial information to be incorporated by reference into a future registration statement to be filed with the Securities and Exchange Commission.

Included in this filing as Exhibit 99.1 is the unaudited pro forma condensed consolidated financial information described in Item 9.01(b) giving effect to (i) the transactions set forth in the Plan (the “Reorganization Adjustments”), (ii) the Company’s application of fresh start accounting, (iii) MEMP’s divestiture of certain assets located in the Permian Basin on June 14, 2016 (the “Permian Divestiture”) and (iv) MEMP’s divestiture of certain assets located in Colorado and Wyoming on July 14, 2016 (the “Rockies Divestiture”), in accordance with Financial Accounting Standards Board Accounting Standards Codification 852, Reorganizations.

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed consolidated balance sheet and condensed statement of consolidated operations of the Company as of and for the three months ended March 31, 2017, giving effect to (i) the Reorganization Adjustments and (ii) the Company’s application of fresh start accounting, and the unaudited pro forma condensed statement of consolidated operations of the Company for the year ended December 31, 2016, giving effect to (i) the Reorganization Adjustments, (ii) the Company’s application of fresh start accounting, (iii) the Permian Divestiture and (iv) the Rockies Divestiture, are furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

(d) Exhibits.

 

Exhibit

Number

  

Description

99.1    Amplify Energy Corp. Unaudited Pro Forma Condensed Consolidated Financial Statements


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: July 20, 2017     AMPLIFY ENERGY CORP.
    By:   /s/ Robert L. Stillwell, Jr.
      Name:   Robert L. Stillwell, Jr.
      Title:   Senior Vice President and Chief Financial Officer


EXHIBIT INDEX

 

Exhibit

Number

  

Description

99.1    Amplify Energy Corp. Unaudited Pro Forma Condensed Consolidated Financial Statements
d424608dex991.htm EX-99.1


ENT> EX-99.1 2 d424608dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

AMPLIFY ENERGY CORP.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Introduction

The following unaudited pro forma condensed consolidated financial information and explanatory notes set forth selected historical consolidated financial information for the Company (as defined below). The unaudited pro forma condensed consolidated balance sheet is based on the unaudited condensed consolidated balance sheet of the Predecessor (as defined below) as of March 31, 2017 and includes pro forma adjustments to give effect to (i) the transactions set forth in the Plan (as defined below, the “Reorganization Adjustments”) and (ii) fresh start accounting adjustments as if the transactions occurred on March 31, 2017. The unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2017 is based on the unaudited condensed statement of consolidated operations of the Predecessor for the three months ended March 31, 2017 and includes pro forma adjustments to give effect to (i) the Reorganization Adjustments and (ii) fresh start accounting adjustments as if the transactions occurred on January 1, 2016. The unaudited pro forma condensed statement of consolidated operations for the year ended December 31, 2016 is based on the audited statement of consolidated operations of the Predecessor for the twelve months ended December 31, 2016 and includes pro forma adjustments to give effect to (i) the Rockies Divestiture (as defined below); (ii) Permian Divestiture (as defined below); (iii) the Reorganization Adjustments; and (iv) fresh start accounting adjustments as if the transactions occurred on January 1, 2016.

The pro forma adjustments to the historical condensed consolidated financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the transactions discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions utilized to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the impact of events that are directly attributable to the transactions and reflect those items expected to no longer have a continuing impact on the Company.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2017, Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed with the SEC on May 10, 2017, and Current Reports on Form 8-K filed with the SEC on July 18, 2016 and June 20, 2016, respectively.

Although the Company is now classified as a corporation for U.S. federal income tax purposes (in contrast to the Predecessor), the Company does not expect that it will be required to pay any federal income tax for the foreseeable future, and any state income tax payable is not reasonably estimable at this time. Accordingly, the Company has not made any pro forma adjustments for such income taxes.

Background

On January 16, 2017, Memorial Production Partners LP (“MEMP” or the “Predecessor”) and certain of its subsidiaries (collectively with MEMP, the “Debtors”) filed voluntary petitions under Chapter 11 of Title 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”).

On April 14, 2017, the Bankruptcy Court entered an order (the “Confirmation Order”) approving the Second Amended Joint Plan of Reorganization of Memorial Production Partners LP and its affiliated Debtors, dated April 13, 2017 (as amended and supplemented, the “Plan”). On May 4, 2017 (the “Effective Date”), the Debtors satisfied the conditions to effectiveness of the Plan, the Plan became effective in accordance with its terms and Amplify Energy Corp. (the “Company” or “Successor”) emerged from bankruptcy.


In accordance with the Plan, on the Effective Date:

 

    The Company issued (i) 25,000,000 new shares of its common stock at par value of $0.0001 per share (the “New Common Shares”); and (ii) warrants (the “Warrants”) to purchase up to 2,173,913 shares of the Company’s common stock exercisable for a five-year period commencing on the Effective Date entitling their holders upon exercise thereof, on a pro rata basis, to 8% of the total issued and outstanding New Common Shares (including New Common Shares issuable upon full exercise of the Warrants, but excluding any New Common Shares issuable under the Management Incentive Plan ( the “MIP”)), at a per share exercise price of $42.60.

 

    The holders of claims under the Predecessor’s revolving credit facility received a full recovery, consisting of a cash paydown and their pro rata share of the $1 billion exit senior secured reserve-based revolving credit facility (the “Exit Credit Facility”).

 

    The 7.625% senior notes due May 2021 and 6.875% senior notes due August 2021 (collectively, the “Notes”) were cancelled and the Predecessor’s liability thereunder discharged, and the holders of the Notes received (directly or indirectly) their pro rata share of New Common Shares representing, in the aggregate, 98% of the New Common Shares on the Effective Date (subject to dilution by the MIP and the New Common Shares issuable upon exercise of the Warrants). Additionally, the holders of the Notes received their pro rata share of a $24.6 million cash distribution.

 

    The Predecessor’s common units were cancelled, and each common unitholder received its pro rata share of: (i) 2% of the New Common Shares, (ii) the Warrants and (iii) cash in an aggregate amount of approximately $1.3 million.

 

    The holders of administrative expense claims, priority tax claims and other priority claims and general unsecured creditors of the Predecessor received in exchange for their claims payment in full in cash or otherwise had their rights unimpaired under Title 11 of the United States Code.

 

    The Company entered into a stockholders agreement (the “Stockholders Agreement”) with certain parties pursuant to which the Company agreed to, at the direction of such stockholders, use commercially reasonable efforts to effect the sale of their New Common Shares.

 

    The Company entered into a registration rights agreement (the “Registration Rights Agreement”) with certain parties pursuant to which the Company agreed to, among other things, file a registration statement with the SEC within 90 days of the receipt of a request from the stockholders party thereto covering the offer and resale of the New Common Shares held by such stockholders.

 

    The Company’s MIP became effective, such that an aggregate of 2,322,404 shares of the Company’s common stock are available for grant pursuant to awards under the MIP.

 

    The terms of the Predecessor’s general partner’s board of directors automatically expired on the Effective Date. The Company formed a new seven-member board of directors consisting of the President and Chief Executive Officer, one director of the Predecessor and five new members designated by certain parties to the plan support agreement.

Divestitures

On June 14, 2016, the Predecessor sold certain assets located in the Permian Basin (“Permian Divestiture”) to Boaz Energy II, LLC for total proceeds of approximately $36.7 million, including estimated post-closing adjustments. The Permian Divestiture was previously reported on the Predecessor’s Current Report on Form 8-K filed with the SEC on June 20, 2016. On July 14, 2016, the Predecessor sold certain assets located in Colorado and Wyoming (“Rockies Divestiture”) to Urban Fund II, LP and Urban Oil and Gas Partners B-1, LP for total proceeds of approximately $16.4 million, including final post-closing adjustments. The Rockies Divestiture was previously reported on the Predecessor’s Current Report on Form 8-K filed with the SEC on July 18, 2016.

 

2


Fresh Start Accounting

The Company adopted fresh start accounting on the Effective Date in connection with its emergence from bankruptcy. The Company’s enterprise value, as approved by the Bankruptcy Court, was estimated to be within a range of $700 million to $900 million, with a midpoint estimate of approximately $800 million. The enterprise value represents the estimated fair value of a company’s interest-bearing debt and its shareholders’ equity. Based on the estimates and assumptions utilized in our fresh start accounting process, we estimated the Company’s enterprise value to be approximately $800 million before the consideration of cash and cash equivalents on hand at the Effective Date. As a result, the reorganization value was determined to be $981.4 million at the Effective Date. Reorganization value represents the fair value of the Company’s total assets prior to the consideration of liabilities and is intended to approximate the amount a willing buyer would pay for the assets immediately after a restructuring. The reorganization value, which was derived from the Company’s enterprise value, was allocated to our individual assets based on their estimated fair values.

For purposes of the accompanying unaudited pro forma condensed consolidated financial statements, the Company utilized its estimated enterprise value of $800 million, which was determined as of the Effective Date, and applied such enterprise value as of January 1, 2016 for the unaudited pro forma condensed consolidated statements of operations and as of March 31, 2017 for the unaudited pro forma condensed consolidated balance sheet. Preparation of an actual valuation with assumptions and economic data as of January 1, 2016 would likely result in an enterprise value that is materially different than such valuation as of the Effective Date. The intent of the unaudited pro forma condensed consolidated financial statements is to illustrate the effects of the Plan based on the underlying economic factors as of the Effective Date.

 

3


AMPLIFY ENERGY CORP.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 2017

(In thousands)

 

     Predecessor      Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro Forma  

ASSETS

         

Current assets:

         

Cash and cash equivalents

   $ 80,022      $ (70,853 )(a)    $ —       $ 9,169  

Restricted cash

     —          7,411 (b)      —         7,411  

Accounts receivable

     30,823        —         —         30,823  

Short-term derivative instruments

     42,567        —         —         42,567  

Prepaid expenses and other current assets

     7,512        675 (c)      —         8,187  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     160,924        (62,767     —         98,157  

Property and equipment, net

     1,556,906        —         (899,570 )(j)      657,336  

Long-term derivative instruments

     34,797        —         —         34,797  

Restricted investments

     156,388        —         —         156,388  

Other long-term assets

     1,973        8,575 (d)      —         10,548  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 1,910,988      $ (54,192   $ (899,570   $ 957,226  
  

 

 

    

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

         

Current liabilities:

         

Accounts payable

   $ 2,483      $ 1,257 (e)    $ —       $ 3,740  

Revenues payable

     22,678        —         —         22,678  

Accrued liabilities

     22,318        (2,414 )(f)      (1,717 )(k)      18,187  

Current portion of long-term debt

     454,799        (454,799 )(g)      —         —    
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     502,278        (455,956     (1,717     44,605  

Liabilities subject to compromise

     1,162,305        (1,162,305 )(h)      —         —    

Long-term debt

     —          430,000 (g)      —         430,000  

Asset retirement obligations

     157,390        —         (62,052 )(l)      95,338  

Deferred tax liabilities

     2,206        —         —         2,206  

Other long-term liabilities

     2,629        —         (2,446 )(k)      183  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     1,826,808        (1,188,261     (66,215     572,332  

Commitments and contingencies

         

Stockholders’/ partners’ equity:

         

Predecessor common units

     84,180        (84,180 )(i)      —         —    

Successor common stock

     —          3 (i)      —         3  

Successor additional paid-in capital

     —          1,218,246 (i)      (833,355 )(m)      384,891  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total stockholders’/ partners’ equity

     84,180        1,134,069       (833,355     384,894  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 1,910,988      $ (54,192   $ (899,570   $ 957,226  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

4


AMPLIFY ENERGY CORP.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2017

(In thousands, except per share amounts)

 

           Pro Forma Adjustments        
     Predecessor     Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro Forma  

Revenues:

        

Oil and natural gas sales

   $ 81,284     $ —       $ —       $ 81,284  

Other revenues

     96       —         —         96  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     81,380       —         —         81,380  

Costs and expenses:

        

Lease operating

     25,986       —         —         25,986  

Gathering, processing, and transportation

     8,035       —         —         8,035  

Exploration

     16       —         —         16  

Taxes other than income

     4,266       —         —         4,266  

Depreciation, depletion, and amortization

     27,882       —         (27,882 )(p)      —    
         11,191 (p)      11,191  

Impairment of proved oil and natural gas properties

     —         —         —         —    

General and administrative

     23,370       —         —         23,370  

Accretion of asset retirement obligations

     2,495       —         (2,495 )(p)      —    
         1,747 (p)      1,747  

(Gain) loss on commodity derivative instruments

     (10,241     —         —         (10,241

(Gain) loss on sale of properties

     —         —         —         —    

Other, net

     (8     —         —         (8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     81,801       —         (17,439     64,362  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (421     —         17,439       17,018  

Other income (expense):

        

Interest expense, net

     (8,400     2,622 (n)      —         (5,778

Other income (expense)

     6       —         —         6  

Gain on extinguishment of debt

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (8,394     2,622       —         (5,772
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (8,815     2,622       17,439       11,246  

Reorganization items, net

     (7,653     7,653 (o)      —         —    

Income tax benefit (expense)

     91       —         —         91  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (16,377     10,275       17,439       11,337  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Predecessor/Successor

   $ (16,377   $ 10,275     $ 17,439     $ 11,337  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per unit/share:

        

Basic

   $ (0.20       $ 0.44  
  

 

 

       

 

 

 

Diluted

   $ (0.20       $ 0.44  
  

 

 

       

 

 

 

Weighted average common shares/units outstanding:

        

Basic

     83,810           25,000 (q) 
  

 

 

       

 

 

 

Diluted

     83,810           25,000 (q) 
  

 

 

       

 

 

 

 

5


AMPLIFY ENERGY CORP.

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

(In thousands, except per share amounts)

 

           Pro Forma Adjustments        
     Predecessor     Rockies
Divestiture
(s)
    Permian
Divestiture
(t)
    Reorganization
Adjustments
    Fresh Start
Adjustments
    Pro
Forma
 

Revenues:

            

Oil and natural gas sales

   $ 284,051     $ (3,999   $ (6,326   $ —       $ —       $ 273,726  

Other revenues

     529       —         (328     —         —         201  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     284,580       (3,999     (6,654     —         —         273,927  

Costs and expenses:

            

Lease operating

     126,175       (2,671     (4,943     —         —         118,561  

Gathering, processing, and transportation

     34,979       (885     (56     —         —         34,038  

Exploration

     981       (27     (77     —         —         877  

Taxes other than income

     15,540       (448     (701     —         —         14,391  

Depreciation, depletion, and amortization

     171,629       (2,942     (2,474     —         (166,213 )(p)      —    
             58,414 (p)      58,414  

Impairment of proved oil and natural gas properties

     183,437       —         —         —         —         183,437  

General and administrative

     63,280       —         —         —         —         63,280  

Accretion of asset retirement obligations

     10,231       (531     (190     —         (9,510 )(p)      —    
             6,749 (p)      6,749  

(Gain) loss on commodity derivative instruments

     117,105       —         —         —         —         117,105  

(Gain) loss on sale of properties

     (2,754     (4,207     6,086       —         —         (875

Other, net

     516       36       (3     —         —         549  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     721,119       (11,675     (2,358     —         (110,560     596,526  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (436,539     7,676       (4,296     —         110,560       (322,599

Other income (expense):

            

Interest expense, net

     (146,031     —         —         121,997 (n)      —         (24,034

Other income (expense)

     8       —         —         —         —         8  

Gain on extinguishment of debt

     42,337       —         —         (42,337 )(r)      —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (103,686     —         —         79,660       —         (24,026
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (540,225     7,676       (4,296     79,660       110,560       (346,625

Income tax benefit (expense)

     (173     —         —         —         —         (173
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (540,398     7,676       (4,296     79,660       110,560       (346,798
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Predecessor/Successor

   $ (540,398   $ 7,676     $ (4,296   $ 79,660     $ 110,560     $ (346,798
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per unit/share:

            

Basic

   $ (6.48           $ (13.87
  

 

 

           

 

 

 

Diluted

   $ (6.48           $ (13.87
  

 

 

           

 

 

 

Weighted average common shares/units outstanding:

            

Basic

     83,351               25,000 (q) 
  

 

 

           

 

 

 

Diluted

     83,351               25,000 (q) 
  

 

 

           

 

 

 

 

6


AMPLIFY ENERGY CORP.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The following unaudited pro forma condensed consolidated financial information and explanatory notes set forth selected historical consolidated financial information for the Company. The unaudited pro forma condensed consolidated balance sheet is based on the unaudited condensed consolidated balance sheet of the Predecessor as of March 31, 2017 and includes pro forma adjustments to give effect to (i) the Reorganization Adjustments and (ii) fresh start accounting adjustments as if the transactions occurred on March 31, 2017. The unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2017 is based on the unaudited condensed statement of consolidated operations of the Predecessor for the three months ended March 31, 2017 and includes pro forma adjustments to give effect to (i) the Reorganization Adjustments and (ii) fresh start accounting adjustments as if the transactions occurred on January 1, 2016. The unaudited pro forma condensed statement of consolidated operations for the year ended December 31, 2016 is based on the audited statement of consolidated operations of the Predecessor for the twelve months ended December 31, 2016 and includes pro forma adjustments to give effect to (i) the Rockies Divestiture; (ii) the Permian Divestiture; (iii) the Reorganization Adjustments; and (iv) fresh start accounting adjustments as if the transactions occurred on January 1, 2016.

The pro forma adjustments to the historical condensed consolidated financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the transactions discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions utilized to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the impact of events that are directly attributable to the transactions, and reflect those items expected to no longer have a continuing impact on the Company.

The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017, Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed with the SEC on May 10, 2017, and Current Reports on Form 8-K filed with the SEC on July 18, 2016 and June 20, 2016, respectively.

Note 2. Pro Forma Adjustments and Assumptions

Unaudited Pro Forma Condensed Consolidated Balance Sheet

The following adjustments were made in the preparation of the unaudited pro forma condensed consolidated balance sheet as of March 31, 2017:

Reorganization Adjustments

 

(a) Adjustments to cash and cash equivalents including the following (in thousands):

 

Payment on the Predecessor’s revolving credit facility

   $ (24,799

Payment to holders of the Notes

     (24,639

Payment of fees related to Exit Credit Facility

     (8,575

Funding of the professional fees escrow account

     (7,411

Payment of professional fees

     (4,295

Contribution from management

     1,500  

Payment to Predecessor common unit holders

     (1,250

Other

     (1,384
  

 

 

 

Change in cash and cash equivalents

   $ (70,853
  

 

 

 

 

(b) Reflects the transfer to restricted cash to fund the professional fees escrow account.

 

(c) Reflects the pre-payment of certain professional fees.

 

(d) Reflects the deferred financing costs related to the Exit Credit Facility.

 

(e) Reflects recognition of payables for general unsecured claims.

 

7


(f) Reflects a decrease in accrued liabilities related to payment of professional fees.

 

(g) Reflects a repayment of $24.8 million on the Predecessor’s revolving credit facility and the reclassification of $430.0 million in borrowings under the Exit Credit Facility to long-term debt.

 

(h) As part of the Plan, the Bankruptcy Court approved the settlement of certain allowable claims, reported as liabilities subject to compromise in our historical condensed consolidated balance sheet. As a result, the Company recognized a gain of $763.9 million on the settlement of liabilities subject to compromise. The gain on settlement was determined to be nonrecurring in nature and as such was not included in the unaudited pro forma condensed statement of consolidated operations as an adjustment to reorganization items, net for the three months ended March 31, 2017. Settlement of liabilities subject to compromise and the resulting net gain were determined as follows (in thousands):

 

Accounts payable

   $ 1,257  

Accrued interest payable

     49,796  

Debt

     1,111,252  
  

 

 

 

Total liabilities subject to compromise of Predecessor

     1,162,305  

Recognition of payables for general unsecured claims

     (1,257

Recognition of settlement with holders of the Notes

     (24,639

Issuance of common stock to holders of the Notes

     (372,504
  

 

 

 

Gain on settlement of liabilities subject to compromise

   $ 763,905  
  

 

 

 

 

(i) Net increase in our stockholders’/partners’ equity reflects the following (in thousands):

 

Issuance of common stock to holders of the Notes

   $ 372,504  

Issuance of common stock to Predecessor common unit holders

     7,602  

Issuance of warrants to Predecessor common unit holders

     4,788  

Cancellation of Predecessor common units issued and outstanding

     84,180  

Recognition on gain on settlement of liabilities subject to compromise

     763,905  

Recognition of issuance of common stock to Predecessor common unit holders

     (7,602

Recognition of issuance of warrants to Predecessor common unit holders

     (4,788

Recognition of contribution from management

     1,500  

Recognition of settlement with Predecessor common unit holders

     (1,250

Par value of common stock

     (3

Other

     (2,590
  

 

 

 

Change in Successor additional paid-in capital

     1,218,246  

Par value of common stock

     3  

Predecessor common units issued and outstanding

     (84,180
  

 

 

 

Net increase in equity account

   $ 1,134,069  
  

 

 

 

Fresh Start Adjustments

 

(j) Reflects the fresh start accounting adjustments to record property and equipment, net at its estimated fair value and eliminate the historical accumulated depreciation, depletion and impairment amount. The fair values of proved and unproved oil and natural gas properties and support equipment and facilities were estimated using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. The factors to determine fair value include, but are not limited to, estimates of: (i) economic reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital. The fresh start adjustments to property and equipment, net are as follows (in thousands):

 

     Predecessor      Fresh Start
Adjustments
     Successor  

Property and equipment at cost:

        

Proved oil and natural gas properties

   $ 3,119,878      $ (2,610,817    $ 509,061  

Support equipment and facilities

     199,304        (101,724      97,580  

Unproved oil and natural gas properties

     —          44,688        44,688  

Other

     15,394        (9,387      6,007  
  

 

 

    

 

 

    

 

 

 

Property and equipment

     3,334,576        (2,677,240      657,336  

Accumulated depreciation, depletion and impairments

     (1,777,670      1,777,670        —    
  

 

 

    

 

 

    

 

 

 

Property and equipment, net

   $ 1,556,906      $ (899,570    $ 657,336  
  

 

 

    

 

 

    

 

 

 

 

8


(k) Reflects the write-off of the deferred rent and loss on sublease liabilities.

 

(l) Reflects a decrease of $62.1 million for asset retirement obligations. The fair value of asset retirement obligations was estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plugging and abandonment costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk free rate.

 

(m) Reflects the cumulative impact of our fresh start accounting adjustments discussed above.

Unaudited Pro Forma Condensed Statement of Consolidated Operations

The following adjustments were made in the preparation of the unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2017 and for the year ended December 31, 2016.

 

(n) Adjustments to interest expense, net reflect the following (in thousands):

 

     Year Ended
December 31, 2016
     Three Months Ended
March 31, 2017
 

Elimination of historical interest expense associated with:

     

Predecessor revolving credit facility

   $ 25,432      $ 4,716  

7.625% senior notes due May 2021

     51,263        2,120  

6.875% senior notes due August 2022

     32,724        1,375  

Amortization and write off of deferred financing costs

     22,106        —    

Amortization and write off of senior notes discount

     13,185        —    

Capitalized interest

     (492      —    

Pro forma interest expense, net associated with:

     

Exit Credit Facility (1)

     (20,425      (5,036

Amortization of deferred financing costs

     (2,213      (553

Capitalized interest

     417        —    
  

 

 

    

 

 

 

Net pro forma adjustment to interest expense, net

   $ 121,997      $ 2,622  
  

 

 

    

 

 

 

 

(1) The Company calculated the above interest expense based on $430.0 million of outstanding borrowings under the Exit Credit Facility and an estimated 4.75% interest rate at the Effective Date. A 1/8% change in the effective interest rate would result in a change to interest expense of approximately $0.5 million for the year ended December 31, 2016 and $0.1 million for the three months ended March 31, 2017.

 

(o) Reflects the removal of reorganization items, net which represents charges for professional fees and other costs directly attributable to the Chapter 11 Cases that will not have a continuing effect on the Company. The Company recognized a gain of $763.9 million on the settlement of liabilities subject to compromise, as described above. The gain on settlement was determined to be nonrecurring in nature and as such was not included in the unaudited pro forma condensed statement of consolidated operations as an adjustment to reorganization items, net for the three months ended March 31, 2017.

 

(p) Reflects adjustment to depreciation, depletion, and amortization and accretion of asset retirement obligations due to recording balances at fair value as a result of the adoption of fresh start accounting as of the Effective Date. The Company did not adjust impairment expense as a result of the depreciation, depletion, and amortization adjustment.

 

(q) Reflects (i) the cancellation of the Predecessor’s common units that were authorized and outstanding prior to the Effective Date and (ii) the issuance of 25,000,000 New Common Shares.

 

(r) Reflects the elimination of the gain on extinguishment of debt related to the repurchases of certain of the Notes. The remaining outstanding Notes were cancelled on the Effective Date in accordance with the Plan.

 

9


(s) Reflects the removal of operating revenues, operating expenses and the associated (gain) loss on sale of properties related to the Rockies Divestiture.

 

(t) Reflects the removal of operating revenues, operating expenses and the associated (gain) loss on sale of properties related to the Permian Divestiture.

 

10

Additional Files
FileSequenceDescriptionTypeSize
0001193125-17-232105.txt   Complete submission text file   244090

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