Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - MAGNUM HUNTER RESOURCES CORP | magnum_8k-021210.htm |
| EX-3.1 - CERTIFICATE OF DESIGNATION - MAGNUM HUNTER RESOURCES CORP | magnum_8k-ex0301.htm |
| EX-99.1 - PRESS RELEASE - MAGNUM HUNTER RESOURCES CORP | magnum_8k-ex9901.htm |
EXHIBIT
99.2
UNAUDITED
PRO FORMA COMBINED FINANCIAL DATA
The
following unaudited pro forma combined financial data are derived from the
consolidated financial statements of the Company and certain historical
financial data in respect of various assets acquired by the
Company. The Unaudited Pro Forma Balance Sheet of the Company as of
September 30, 2009 has been prepared assuming the Triad acquisition and all
necessary ancillary transactions had been consummated on September 30,
2009. The Unaudited Pro Forma Income Statement for the year ended
December 31, 2008 and the nine months ended September 30, 2009 have been
prepared assuming the Triad acquisition and all necessary ancillary transactions
had been consummated as of January 1, 2008. The pro forma adjustments set forth
on the attached Unaudited Pro Forma Balance Sheet and Unaudited Pro Forma Income
Statements reflect the following as if they occurred on the dates hereinabove
set forth:
|
(1)
|
Triad
Acquisition. The Triad acquisition as described in the Asset
Purchase Agreement dated October 28, 2009 (including the issuance of the
Redeemable Convertible Preferred Stock as part of the acquisition price of
Triad).
|
|
|
(2)
|
Incurrence
of indebtedness under the New Revolving Credit Facility described in the
commitment letter from Bank of Montreal dated October 23,
2009.
|
|
|
(3)
|
Issuance
of common stock which occurred between October 31, 2009 and February 10,
2010. This is included because it is a required condition to
move forward and close the acquisition.
|
|
|
(4)
|
Issuance
of preferred stock as described elsewhere in this
document. This is included because it is a required
condition to move forward and close the
acquisition.
|
The
Unaudited Pro Forma Balance Sheet reflects the preliminary allocations of the
purchase price for the acquisition of Triad to the assets and liabilities of the
Company. The final allocation of the purchase price, and the resulting effect on
the balance sheet as well as depreciation and depletion expense in the
accompanying Unaudited Pro Forma Combined Income Statements, may differ based on
the actual final allocation of the purchase price.
The
unaudited pro forma combined financial data should be read in conjunction with
the notes thereto and with the consolidated financial statements of the Company
and the notes thereto as filed in the Company's Form 10-K and Form
10-Q.
The
unaudited pro forma combined financial data are not indicative of the financial
position or results of operations of the Company which would actually have
occurred if the transactions described above had occurred at the dates presented
or which may be obtained in the future. Additionally, the final terms
of the Asset Purchase Agreement, the New Revolving Credit Facility, and the
preferred stock issuances differed in certain important respects from those used
in the unaudited pro-forma combined financial data. In addition,
future results may vary significantly from the results reflected in such
statements due to normal oil and natural gas production declines, changes in
prices paid for oil and natural gas, future acquisitions, drilling activity and
other factors.
- 1
-
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
As of
September 30, 2009
(dollars
in thousands)
|
Magnum
Hunter
|
Pro
Forma
|
Note
|
||||||||||||||
|
Historical
|
Adjustments
|
Ref
|
Pro
Forma
|
|||||||||||||
|
ASSETS:
|
||||||||||||||||
|
Current
Assets
|
||||||||||||||||
|
Cash
& Equivalents
|
$ | 2,332 | $ | 4,102 | (6) | $ | 6,434 | |||||||||
|
Accounts
Receivables
|
1,544 | 2,825 | (1) | 4,369 | ||||||||||||
|
Derivative
Assets
|
1,766 | - | 1,766 | |||||||||||||
|
Other
Current Assets
|
154 | 1,131 | (1) | 1,285 | ||||||||||||
|
Total
Current Assets
|
5,796 | 8,058 | 13,854 | |||||||||||||
|
Property
and Equipment
|
||||||||||||||||
|
Oil
and natural gas properties, successful efforts accounting
|
||||||||||||||||
|
Unproved
|
18,594 | 11,396 | (1) | 29,990 | ||||||||||||
|
Proved
Properties, Net
|
35,493 | 58,773 | (1) | 94,266 | ||||||||||||
|
Machinery,
Equipment and Other, net
|
131 | 8,721 | (1) | 8,852 | ||||||||||||
|
Total
Property and Equipment, net
|
54,218 | 78,890 | 133,108 | |||||||||||||
|
Other
Assets
|
||||||||||||||||
|
Derivative
Assets
|
2,067 | - | 2,067 | |||||||||||||
|
Deferred
financing costs, net of amortization
|
888 | 1,501 | (2) | 2,389 | ||||||||||||
|
Other
Assets
|
11 | 417 | (1) | 428 | ||||||||||||
|
TOTAL
ASSETS
|
$ | 62,980 | $ | 88,866 | $ | 151,846 | ||||||||||
|
LIABILITIES
& EQUITY:
|
||||||||||||||||
|
Current
Liabilities
|
||||||||||||||||
|
Accounts
Payable
|
$ | 1,321 | $ | 1,450 | (1) | $ | 2,771 | |||||||||
|
Accrued
Liabilities
|
169 | 546 | (1) | 715 | ||||||||||||
|
Distribution
Payable
|
213 | 1,750 | (1) | 1,963 | ||||||||||||
|
Other
Current Liabilities
|
813 | - | (1) | 813 | ||||||||||||
|
Current
Portion of Equipment Notes
|
867 | (1) | 867 | |||||||||||||
|
Total
Current Liabilities
|
2,516 | 4,613 | 7,129 | |||||||||||||
|
Notes
Payable, Revolving Credit Agreement
|
12,000 | 53,000 | (3) | 65,000 | ||||||||||||
|
Notes
Payable, Term Loan
|
15,000 | (15,000 | ) | (3) | - | |||||||||||
|
Notes
Payable for Equipment, less current portion
|
- | 3,086 | (1) | 3,086 | ||||||||||||
|
Asset
Retirement Obligation
|
1,886 | 139 | (1) | 2,025 | ||||||||||||
|
TOTAL
LIABILITIES
|
31,402 | 45,838 | 77,240 | |||||||||||||
|
Redeemable
Convertible Preferred Stock
|
- | 15,000 | (1) | 15,000 | ||||||||||||
|
Redeemable
Perpetual Preferred Stock, Series C
|
- | 6,835 | (10) | 6,835 | ||||||||||||
|
Shareholders
Equity
|
||||||||||||||||
|
Common
stock, $0.01 par value
|
431 | 133 | (4) | 564 | ||||||||||||
|
Additional
Paid-In-Capital
|
55,694 | 23,136 | (4) | 78,292 | ||||||||||||
| (538 | ) | (10) | ||||||||||||||
|
Accumulated
Deficit
|
(25,802 | ) | (1,538 | ) | (5) | (27,340 | ) | |||||||||
|
Total
MHR Shareholders' Equity
|
30,323 | 21,193 | 51,516 | |||||||||||||
|
Minority
Interest
|
1,255 | - | 1,255 | |||||||||||||
|
Total
Equity
|
31,578 | 21,193 | 52,771 | |||||||||||||
|
TOTAL
LIABILITIES & EQUITY:
|
$ | 62,980 | $ | 88,866 | $ | 151,846 | ||||||||||
See
accompanying notes to Unaudited Pro Forma Combined Financial Data
- 2
-
UNAUDITED
PRO FORMA COMBINED INCOME STATEMENT
Nine
Months Ended September 30, 2009
(dollars
and shares in thousands)
|
Magnum
Hunter
|
Triad
|
Pro
Forma
|
Note
|
||||||||||||||
|
Historical
|
Historical
|
Adjustments
|
Ref
|
Pro
Forma
|
|||||||||||||
|
Revenue:
|
|||||||||||||||||
|
Oil
and Gas Sales
|
$ | 6,566 | $ | 12,684 | $ | - | $ | 19,250 | |||||||||
|
Field
Operations
|
- | 4,997 | - | 4,997 | |||||||||||||
|
Other
Income
|
200 | 68 | - | 268 | |||||||||||||
|
Gain(Loss)
on Sale
|
- | (21 | ) | - | (21 | ) | |||||||||||
|
Total
Revenue
|
6,766 | 17,728 | - | 24,494 | |||||||||||||
|
Expenses:
|
|||||||||||||||||
|
Lease
Operating Expenses
|
3,807 | 4,701 | - | 8,508 | |||||||||||||
|
Field
Operations
|
- | 4,991 | - | 4,991 | |||||||||||||
|
Exploration
|
392 | 391 | - | 783 | |||||||||||||
|
Depreciation,
Depletion and Accretion
|
3,100 | 3,821 | 850 | (7) | 7,771 | ||||||||||||
|
General
and Administrative
|
4,521 | 1,910 | - | 6,431 | |||||||||||||
|
Total
Expenses
|
11,820 | 15,814 | 850 | 28,484 | |||||||||||||
|
Income
(Loss) From Operations
|
(5,054 | ) | 1,914 | (850 | ) | (3,990 | ) | ||||||||||
|
Other
Income and (Expense)
|
|||||||||||||||||
|
Interest
Income
|
1 | 16 | - | 17 | |||||||||||||
|
Interest
Expense
|
(1,867 | ) | (1,752 | ) | 929 | (8) | (2,690 | ) | |||||||||
|
Bankruptcy
Professional Fees
|
- | (2,728 | ) | - | (2,728 | ) | |||||||||||
|
Gain
(Loss) on Derivative Contracts
|
(1,027 | ) | 600 | - | (427 | ) | |||||||||||
|
Net
Loss
|
(7,947 | ) | (1,950 | ) | 79 | (9,818 | ) | ||||||||||
|
Less:
Net Loss Attributable to Noncontrolling Interest
|
130 | - | - | 130 | |||||||||||||
|
Net
Loss Attributable to Magnum Hunter Resources Corporation
|
(7,817 | ) | (1,950 | ) | 79 | (9,688 | ) | ||||||||||
|
Dividend
on Preferred Stock
|
- | - | (835 | ) | (9),(10) | (835 | ) | ||||||||||
|
Net
Loss Attributable to Common Stockholders
|
$ | (7,817 | ) | $ | (1,950 | ) | $ | (756 | ) | $ | (10,523 | ) | |||||
|
Earnings
Per Common Share
|
|||||||||||||||||
|
Basic
and Diluted
|
$ | (0.21 | ) | $ | (0.21 | ) | |||||||||||
|
Weighted
Average Number of Common Shares Outstanding
|
|||||||||||||||||
|
Basic
and Diluted
|
36,864 | - | 13,298 | (4) | 50,162 | ||||||||||||
See
accompanying notes to Unaudited Pro Forma Combined Financial Data
- 3
-
UNAUDITED
PRO FORMA COMBINED INCOME STATEMENT
Year
Ended December 31, 2008
(dollars
and shares in thousands)
|
Magnum
Hunter
|
Triad
|
Pro
Forma
|
Note
|
||||||||||||||
|
Historical
|
Historical
|
Adjustments
|
Ref
|
Pro
Forma
|
|||||||||||||
|
Revenue:
|
|||||||||||||||||
|
Oil
and Gas Sales
|
$ | 14,486 | $ | 32,570 | $ | - | $ | 47,056 | |||||||||
|
Field
Operations
|
- | 7,771 | - | 7,771 | |||||||||||||
|
Other
Income
|
200 | 1 | - | 201 | |||||||||||||
|
Gain(Loss)
on Sale
|
1,197 | 2,237 | - | 3,434 | |||||||||||||
|
Total
Revenue
|
15,883 | 42,579 | - | 58,462 | |||||||||||||
|
Expenses:
|
|||||||||||||||||
|
Lease
Operating Expenses
|
5,379 | 8,579 | - | 13,958 | |||||||||||||
|
Field
Operations
|
- | 10,161 | - | 10,161 | |||||||||||||
|
Exploration
|
7,349 | 473 | - | 7,822 | |||||||||||||
|
Impairment
of Oil and Gas Properties
|
1,973 | - | - | 1,973 | |||||||||||||
|
Depreciation,
Depletion and Accretion
|
7,682 | 5,833 | 777 | (7) | 14,292 | ||||||||||||
|
General
and Administrative
|
3,964 | 3,587 | - | 7,551 | |||||||||||||
|
Total
Expenses
|
26,347 | 28,633 | 777 | 55,757 | |||||||||||||
|
Income
(Loss) From Operations
|
(10,464 | ) | 13,946 | (777 | ) | 2,705 | |||||||||||
|
Other
Income and (Expense)
|
|||||||||||||||||
|
Interest
Income
|
189 | 110 | - | 299 | |||||||||||||
|
Interest
Expense
|
(2,772 | ) | (4,093 | ) | 1,666 | (8) | (5,199 | ) | |||||||||
|
Bankruptcy
Professional Fees
|
- | (329 | ) | - | (329 | ) | |||||||||||
|
Loss
on Debt Extinguishment
|
(2,791 | ) | - | - | (2,791 | ) | |||||||||||
|
Gain
(Loss) on Derivative Contracts
|
7,311 | (3,397 | ) | - | 3,914 | ||||||||||||
|
Net
Loss
|
(8,527 | ) | 6,237 | 889 | (1,401 | ) | |||||||||||
|
Less:
Net Loss Attributable to Noncontrolling Interest
|
1,640 | - | - | 1,640 | |||||||||||||
|
Net
Loss Attributable to Magnum Hunter Resources Corporation
|
(6,887 | ) | 6,237 | 889 | 239 | ||||||||||||
|
Dividend
on Preferred Stock
|
(734 | ) | - | (1,112 | ) | (9),(10) | (1,846 | ) | |||||||||
|
Net
Loss Attributable to Common Stockholders
|
$ | (7,621 | ) | $ | 6,237 | $ | (223 | ) | $ | (1,607 | ) | ||||||
|
Earnings
Per Common Share
|
|||||||||||||||||
|
Basic
and Diluted
|
$ | (0.21 | ) | $ | (0.03 | ) | |||||||||||
|
Weighted
Average Number of Common Shares Outstanding
|
|||||||||||||||||
|
Basic
and Diluted
|
36,714 | - | 13,298 | (4) | 50,012 | ||||||||||||
See
accompanying notes to Unaudited Pro Forma Combined Financial Data
- 4
-
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(dollars
in thousands)
|
(1)
|
To
record the acquisition of Triad’s assets for an estimated purchase price
of $85,568. The estimated purchase price includes the payoff in
cash of loans under Triad’s existing revolving and term credit agreement,
the payoff in cash of existing debtor in possession financing, the payoff
in cash of certain other Triad liabilities and costs at closing, the
assumption of certain notes payable related to equipment included in the
transaction, the assumption of certain other current liabilities of Triad,
and the issuance of Redeemable Convertible Preferred Stock of the Company.
The acquisition is accounted for under the purchase method of
accounting. All assets acquired and liabilities assumed are
recorded at fair market value as determined by management. As noted above,
these are preliminary estimates and are subject to
adjustment. The Company expects to incur legal and professional
fees connected with this transaction of $650, which will be expensed. The
following table summarizes the assets acquired and purchase price
paid:
|
|
ASSETS
ACQUIRED (at fair market value):
|
||||
|
Unproved
oil and gas properties
|
$
|
11,396
|
||
|
Proved
oil and gas properties
|
58,773
|
|||
|
Equipment
and other fixed assets
|
8,721
|
|||
|
Other
non current assets
|
417
|
|||
|
Cash
and cash equivalents
|
2,305
|
|||
|
Accounts
receivable
|
2,825
|
|||
|
Other
current assets
|
1,131
|
|||
|
Total
assets acquired
|
$
|
85,568
|
||
|
PURCHASE
PRICE (at fair market value)
|
||||
|
Cash
payments at closing:
|
||||
|
Payoff
Triad Revolver
|
$
|
55,000
|
||
|
Payoff
DIP loan
|
500
|
|||
|
Payoff
other Triad liabilities at closing
|
7,230
|
|||
|
Total
cash payments
|
62,730
|
|||
|
Liabilities
assumed:
|
||||
|
Notes
payable for equipment
|
3,953
|
|||
|
ARO
assumed
|
139
|
|||
|
Accounts
payable
|
1,450
|
|||
|
Accrued
liabilities
|
546
|
|||
|
Distribution
payable
|
1,750
|
|||
|
Other
current liabilities
|
-
|
|||
|
Total
liabilities assumed
|
7,838
|
|||
|
Redeemable
Convertible Preferred Stock
|
||||
|
Stated
value $15 million, reflected at estimated current fair market
value
|
15,000
|
|||
|
Total
purchase price paid
|
$
|
85,568
|
||
|
Decrease
in cash from the acquisition:
|
||||
|
Cash
payment portion of purchase price
|
$
|
62,730
|
||
|
Estimated
legal and professional transaction fees
|
650
|
|||
|
Less
Cash and equivalents acquired from Triad
|
(2,305
|
)
|
||
|
Net
decrease in cash from the acquisition
|
$
|
61,075
|
||
- 5
-
|
(2)
|
To
record the estimated deferred financing fees associated with the Company’s
New Revolving Credit Facility, of $2,389, net of write off of $888, for
the Company’s existing facility which is being extinguished and replaced
as part of this transaction. The resulting net change to
deferred financing costs is:
|
|
New
Credit Facility debt issuance costs
|
$
|
2,389
|
||
|
Unamortized
debt issuance costs expensed
|
(888
|
)
|
||
|
Net
change to Deferred financing costs
|
$
|
1,501
|
|
(3)
|
To
record new borrowings and refinancing associated with the Triad
acquisition as follows:
|
|
New
Revolving Credit Facility
|
$
|
65,000
|
||
|
Repay
Company’s previous Revolving Credit Facility
|
(12,000
|
)
|
||
|
Net
change to revolving facility
|
53,000
|
|||
|
Repay
Company’s previous Term Loan Facility
|
(15,000
|
)
|
||
|
Fees
paid on new credit facility
|
(2,389
|
)
|
||
|
Net
proceeds from New Credit Facility
|
$
|
35,611
|
|
(4)
|
To
record the issuance of common stock for the purpose of securing cash
necessary for the acquisition of Triad. The issuance occurred
at various times between October 31, 2009 and February 10,
2010. We issued approximately 13.3 million common shares and
approximately 1.7 million warrants for net proceeds of approximately
$23,843. The Company’s common stock has a par value of one cent per
share. The Company incurred fees of $574 to register the common
and preferred stock under a universal shelf
registration.
|
|
(5)
|
To
record the Company's charge against earnings of ($1,538) resulting from
the estimated legal and professional fees incurred in the Triad
acquisition of $650 (see Note 1) and the write-off of deferred financing
costs related to the previous credit facility of $888 (see Note
2).
|
- 6
-
|
(6)
|
To
record the change in cash as a result of the Triad acquisition,
the borrowing and repayment under the new and old revolving credit
facilities, respectively, and the net proceeds from the planned issuance
of common stock. The following table summarizes the changes in cash and
equivalents as reflected on the pro forma balance
sheet:
|
|
Net
proceeds from New Credit Facility (see Note 3)
|
$
|
35,611
|
||
|
Net
proceeds from the issuance of common stock (see Note 4)
|
23,843
|
|||
|
Net
proceeds from the issuance of preferred stock (see Note
10)
|
6,297
|
|||
|
Fees
paid for the registration of common and preferred stocks (see Note
4)
|
(574)
|
|||
|
Net
change in cash from the acquisition of Triad (see Note 1)
|
(61,074
|
)
|
||
|
Net
change to cash and cash equivalents
|
$
|
4,102
|
|
(7)
|
To
record the pro forma adjustment to depletion and depreciation expense as
the result of treating the acquisition of Triad as if it had occurred
January 1, 2008. Depletion was calculated using the units of production
method. Depreciation was computed using the straight-line
method based on the following useful
lives:
|
|
Gas
gathering system
|
20
years
|
|
Disposal
well
|
20
years
|
|
Machinery
and equipment
|
5
- 10 years
|
|
(8)
|
To
record the pro forma adjustment to interest expense as the result of
treating the acquisition of Triad, the borrowing and repayment under the
new and old revolving credit agreements, and the proceeds from the
issuance of common stock and preferred stock as if they
occurred January 1, 2008.
|
|
(9)
|
To
record the effect of the issuance of the Redeemable Convertible Preferred
Stock as if it had been issued at January 1, 2008. For the nine month
period in 2009, the dividend adjustment reflects cash dividends of $309.
For the one year period in 2008, the dividend adjustment reflects cash
dividends of $412.
|
|
(10)
|
To
record the effect of the issuance of the Series C Preferred Stock for the
purpose of securing cash necessary for the acquisition of Triad as if it
had been issued at January 1, 2008. The Series C Preferred
Stock will have a stated value of $6,835 and will pay a 10.25% cash
dividend. Net proceeds after selling expenses of $538 were
$6,297. For the nine month period in 2009, the dividend
adjustment reflects cash dividends of $525. For the one year
period in 2008, the dividend adjustment reflects cash dividends of
$701.
|
- 7
-