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8-K - FORM 8-K - MAGNUM HUNTER RESOURCES CORP | l42116e8vk.htm |
EXHIBIT 99.1
UNAUDITED
PRO FORMA COMBINED FINANCIAL DATA
The following Unaudited Pro Forma Combined Financial Data are
derived from the consolidated financial statements of Magnum
Hunter and certain historical financial data in respect of
various assets acquired by Magnum Hunter. The Unaudited Pro
Forma Combined Balance Sheet of Magnum Hunter as of
December 31, 2010 has been prepared assuming the
acquisition of the PostRock assets, NGAS Resources, and NuLoch
Resources and all necessary ancillary transactions had been
consummated on December 31, 2010. The Unaudited Pro Forma
Combined Income Statement for the year ended December 31,
2010 have been prepared assuming the acquisition of the PostRock
assets, NGAS Resources, and NuLoch Resources and all necessary
ancillary transactions had been consummated as of
January 1, 2010. We have also included for clarity
unaudited pro forma combined balance sheet and unaudited
pro forma combined income statements for the combination of
Magnum Hunter, PostRock and NGAS Resources. The pro forma
adjustments set forth on the attached Unaudited Pro Forma
Combined Balance Sheet and Unaudited Pro Forma Combined Income
Statement reflect the following as if they occurred on the dates
hereinabove set forth:
(1) PostRock, NGAS Resources, and NuLoch Resources
Acquisitions. The first and second completed phases of the
acquisition of the PostRock assets as described in the Purchase
and Sale Agreement dated December 24, 2010, the NGAS
Resources acquisition as described in the Arrangement Agreement
dated December 23, 2010, and the NuLoch Resources
acquisition as described in the Arrangement Agreement dated
January 19, 2011.
(2) Incurrence of indebtedness under the proposed new
revolving credit facility to be entered into pursuant to and as
described in the commitment letter from Bank of Montreal dated
January 13, 2011.
(3) Issuance of common stock upon the closing dates of the
acquisition of the PostRock assets NGAS Resources, and NuLoch
Resources.
(4) Payment of change of control compensation in the NGAS
Resources and NuLoch Resources acquisitions.
The Unaudited Pro Forma Balance Sheet reflects the preliminary
adjustments to record the estimated fair values of the assets
and liabilities acquired in the acquisitions of the PostRock
assets, NGAS Resources and NuLoch Resources. The final entries,
and the resulting effect on Magnum Hunters balance sheet
as well as items in Magnum Hunters income statements, may
differ based on the actual determination of the fair values of
the assets acquired and liabilities assumed.
Transaction costs related to these acquisitions will be recorded
as expenses in the periods in which these costs are incurred.
These expenses are not included in the Unaudited Pro Forma
Combined Income Statements.
The Unaudited Pro Forma Combined Financial Data should be read
in conjunction with the notes thereto and with the consolidated
financial statements of Magnum Hunter and the notes thereto as
filed in Magnum Hunters
Form 10-K.
The Unaudited Pro Forma Combined Financial Data are not
indicative of the financial position or results of operations of
Magnum Hunter which would actually have occurred if the
transactions described above had occurred at the dates presented
or which may be obtained in the future. 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.
The Unaudited Pro Forma Combined Financial Data include
financial information received from PostRock and NuLoch
Resources and such financial information has been accepted and
incorporated as presented without independent verification of
such financial information.
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
As of December 31, 2010
As of December 31, 2010
NuLoch |
||||||||||||||||||||||||||||||||||||
Resources |
Combined |
Combined |
||||||||||||||||||||||||||||||||||
NuLoch |
Conversion to |
NuLoch |
Pro Forma for |
Pro Forma for |
||||||||||||||||||||||||||||||||
Magnum |
NGAS |
Resources |
PostRock |
NGAS |
US GAAP and |
Resources |
Magnum Hunter, |
Magnum Hunter, |
||||||||||||||||||||||||||||
Hunter |
Resources |
Historical |
Pro Forma |
Pro Forma |
USD |
Pro Forma |
NGAS and |
NGAS, PostRock |
||||||||||||||||||||||||||||
|
Historical | Historical | (CAN $) | Adjustments | Adjustments | Adjustments | Adjustments | PostRock | and NuLoch | |||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||
CURRENT ASSETS:
|
||||||||||||||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 554,186 | $ | 6,844,475 | $ | 9,673,000 | $ | | $ | | (4) | $ | 14,510 | $ | | $ | 7,398,661 | $ | 17,086,171 | |||||||||||||||||
Accounts receivable
|
11,705,046 | 5,640,891 | 5,200,000 | | | (4) | (319,690 | ) | | 17,345,937 | 22,226,247 | |||||||||||||||||||||||||
Notes receivable
|
| 6,766,451 | | | (2) | (6,766,451 | ) | | | | | |||||||||||||||||||||||||
Prepaids and other current assets
|
867,013 | 552,741 | 507,000 | (1) | 2,658 | | (4) | 761 | | 1,422,412 | 1,930,173 | |||||||||||||||||||||||||
Total current assets
|
13,126,245 | 19,804,558 | 15,380,000 | 2,658 | (6,766,451 | ) | (304,419 | ) | | 26,167,010 | 41,242,591 | |||||||||||||||||||||||||
PROPERTY AND EQUIPMENT (Net of Accumulated Depletion and
Depreciation):
|
||||||||||||||||||||||||||||||||||||
Oil and natural gas properties, successful efforts accounting
|
189,911,500 | 174,630,484 | 101,149,000 | (1) | 13,334,502 | (2) | (60,824,175 | )(4) | (15,953,398 | )(3) | 356,535,437 | 317,052,311 | 758,783,350 | |||||||||||||||||||||||
Equipment and other fixed assets
|
42,689,125 | 9,475,659 | 330,000 | (1) | 3,750 | (2) | 1,279,170 | (4) | 495 | | 53,447,704 | 53,778,199 | ||||||||||||||||||||||||
Total property and equipment, net
|
232,600,625 | 184,106,143 | 101,479,000 | 13,338,252 | (59,545,005 | ) | (15,952,903 | ) | 356,535,437 | 370,500,015 | 812,561,549 | |||||||||||||||||||||||||
OTHER ASSETS:
|
||||||||||||||||||||||||||||||||||||
Other assets
|
561,711 | 258,945 | | | | | | 820,656 | 820,656 | |||||||||||||||||||||||||||
Deferred financing costs, net of amortization
|
2,678,244 | 750,462 | | | (2) | (937,456 | ) | | | 2,491,250 | 2,491,250 | |||||||||||||||||||||||||
Deferred tax asset
|
| | 6,380,000 | | | (4) | 6,737,647 | (3) | (13,117,647 | ) | | | ||||||||||||||||||||||||
Total assets
|
$ | 248,966,825 | $ | 204,920,108 | $ | 123,239,000 | $ | 13,340,910 | $ | (67,248,912 | ) | $ | (9,519,675 | ) | $ | 343,417,790 | $ | 399,978,931 | $ | 857,116,046 | ||||||||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||||||||||||||||||||||||||||
CURRENT LIABILITIES:
|
||||||||||||||||||||||||||||||||||||
Accounts payable
|
$ | 29,839,557 | $ | 5,562,836 | $ | 4,053,000 | $ | | $ | | (4) | $ | 6,080 | $ | | $ | 35,402,393 | $ | 39,461,473 | |||||||||||||||||
Accrued liabilities
|
3,914,136 | 6,134,962 | 13,399,000 | (1) | 369,805 | (2) | 8,681,578 | (4) | 20,099 | (3) | 7,032,198 | 19,100,481 | 39,551,778 | |||||||||||||||||||||||
Revenue payable
|
2,629,999 | | | | | | | 2,629,999 | 2,629,999 | |||||||||||||||||||||||||||
Current portion of notes payable
|
7,132,455 | 53,298,857 | | | (2) | (53,298,857 | ) | | | 7,132,455 | 7,132,455 | |||||||||||||||||||||||||
Warrant liability
|
| | | | (2) | 1,279,834 | | | 1,279,834 | 1,279,834 | ||||||||||||||||||||||||||
Derivative liability
|
718,771 | 2,615,847 | | | (2) | (2,615,847 | ) | | | 718,771 | 718,771 | |||||||||||||||||||||||||
Total current liabilities
|
44,234,918 | 67,612,502 | 17,452,000 | 369,805 | (45,953,292 | ) | 26,179 | 7,032,198 | 66,263,933 | 90,774,310 | ||||||||||||||||||||||||||
Deferred compensation
|
| 985,716 | | | (2) | (985,716 | ) | | | | | |||||||||||||||||||||||||
Deferred income tax
|
| 9,534,798 | | | (2) | (9,534,798 | ) | | (3) | 117,756,387 | | 117,756,387 | ||||||||||||||||||||||||
Payable on sale of partnership
|
640,695 | | | | | | | 640,695 | 640,695 | |||||||||||||||||||||||||||
Notes payable, less current portion
|
26,018,615 | 5,953,259 | | (1) | 5,763,983 | (2) | 47,725,685 | | | 85,461,542 | 85,461,542 | |||||||||||||||||||||||||
Asset retirement obligation
|
4,455,327 | 2,269,442 | 1,357,000 | | | (4) | 2,036 | | 6,724,769 | 8,083,805 | ||||||||||||||||||||||||||
Derivative liability
|
59,181 | 60,397 | | | (2) | (60,397 | ) | | | 59,181 | 59,181 | |||||||||||||||||||||||||
Other long-term liabilities
|
| 1,895,000 | | | | 1,352,025 | (1,352,025 | ) | 1,895,000 | 1,895,000 | ||||||||||||||||||||||||||
Total liabilities
|
75,408,736 | 88,311,114 | 18,809,000 | 6,133,788 | (8,808,518 | ) | 1,380,240 | 123,436,560 | 161,045,120 | 304,670,920 | ||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||||||||||||||||||||||||||||||
REDEEMABLE PREFERRED STOCK:
|
||||||||||||||||||||||||||||||||||||
Series C Cumulative Perpetual Preferred Stock
|
70,236,400 | | | | | | | 70,236,400 | 70,236,400 | |||||||||||||||||||||||||||
SHAREHOLDERS EQUITY:
|
||||||||||||||||||||||||||||||||||||
Shareholders equity
|
101,871,350 | 116,608,994 | 104,430,000 | (1) | 7,207,122 | (2) | (58,440,394 | )(4) | (10,899,915 | )(3) | 219,981,230 | 167,247,072 | 480,758,387 | |||||||||||||||||||||||
Non-controlling interest
|
1,450,339 | | | | | | | 1,450,339 | 1,450,339 | |||||||||||||||||||||||||||
Total Equity
|
103,321,689 | 116,608,994 | 104,430,000 | 7,207,122 | (58,440,394 | ) | (10,899,915 | ) | 219,981230 | 168,697,411 | 482,208,726 | |||||||||||||||||||||||||
Total liabilities and shareholders equity
|
$ | 248,966,825 | $ | 204,920,108 | $ | 123,239,000 | $ | 13,340,910 | $ | (67,248,912 | ) | $ | (9,519,675 | ) | $ | 343,417,790 | $ | 399,978,931 | $ | 857,116,046 | ||||||||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial
Data
UNAUDITED
PRO FORMA COMBINED INCOME STATEMENT
Year Ended December 31, 2010
Year Ended December 31, 2010
Combined |
||||||||||||||||||||||||||||||||||||||||
NuLoch |
Combined |
Pro Forma |
||||||||||||||||||||||||||||||||||||||
Resources |
Pro Forma |
for Magnum |
||||||||||||||||||||||||||||||||||||||
NuLoch |
NGAS |
Conversion to |
NuLoch |
for Magnum |
Hunter, |
|||||||||||||||||||||||||||||||||||
Magnum |
NGAS |
Resources |
PostRock |
Resources |
US GAAP & |
Resources |
Hunter, |
NGAS, |
||||||||||||||||||||||||||||||||
Hunter |
PostRock |
Resources |
Historical |
Pro Forma |
Pro Forma |
USD |
Pro Forma |
NGAS |
PostRock |
|||||||||||||||||||||||||||||||
|
Historical | Historical | Historical | (CAN $) | Adjustments | Adjustments | Adjustments | Adjustments | and PostRock | and NuLoch | ||||||||||||||||||||||||||||||
REVENUE:
|
||||||||||||||||||||||||||||||||||||||||
Oil and gas sales
|
$ | 27,714,542 | $ | 1,912,012 | $ | 23,010,779 | $ | 13,904,000 | $ | | $ | | (4) | $ | 103,699 | $ | | $ | 52,637,333 | $ | 66,645,032 | |||||||||||||||||||
Field operations and other
|
5,009,131 | | 27,809,338 | | | | | | 32,818,469 | 32,818,469 | ||||||||||||||||||||||||||||||
Total revenue
|
32,723,673 | 1,912,012 | 50,820,117 | 13,904,000 | | | 103,699 | | 85,455,802 | 99,463,501 | ||||||||||||||||||||||||||||||
EXPENSES:
|
||||||||||||||||||||||||||||||||||||||||
Lease operating expenses
|
10,399,323 | 643,807 | 14,675,547 | 4,269,000 | | | (4) | (746,693 | ) | | 25,718,677 | 29,240,984 | ||||||||||||||||||||||||||||
Severance taxes and marketing
|
2,304,570 | 138,192 | | | | | (4) | 1,133,661 | | 2,442,762 | 3,576,423 | |||||||||||||||||||||||||||||
Exploration
|
936,371 | | | | | | (4) | 7,779,359 | | 936,371 | 8,715,730 | |||||||||||||||||||||||||||||
Field operations
|
4,362,618 | | 18,504,612 | | | | | | 22,867,230 | 22,867,230 | ||||||||||||||||||||||||||||||
Impairment of oil & gas properties
|
305,786 | | | | | | | | 305,786 | 305,786 | ||||||||||||||||||||||||||||||
Impairment of goodwill
|
| | 313,177 | | | | | | 313,177 | 313,177 | ||||||||||||||||||||||||||||||
Depreciation, depletion and accretion
|
8,923,202 | | 13,280,961 | 9,480,000 | (5) | 359,249 | (7) | (6,787,960 | )(4) | 2,442,850 | (13) | (6,818,666 | ) | 15,775,452 | 20,879,636 | |||||||||||||||||||||||||
General and administrative
|
24,900,996 | | 13,620,819 | 3,775,000 | | (8) | (625,344 | )(4) | 1,682,684 | | 37,896,471 | 43,354,155 | ||||||||||||||||||||||||||||
Total expenses
|
52,132,866 | 781,999 | 60,395,116 | 17,524,000 | 359,249 | (7,413,304 | ) | 12,291,861 | (6,818,666 | ) | 106,255,926 | 129,253,121 | ||||||||||||||||||||||||||||
LOSS FROM OPERATIONS
|
(19,409,193 | ) | 1,130,013 | (9,574,999 | ) | (3,620,000 | ) | (359,249 | ) | 7,413,304 | (12,188,162 | ) | 6,818,666 | (20,800,124 | ) | (29,789,620 | ) | |||||||||||||||||||||||
OTHER INCOME AND (EXPENSE):
|
||||||||||||||||||||||||||||||||||||||||
Interest income
|
60,526 | | 821,923 | 35,000 | | (9) | (821,923 | )(4) | (1,029 | ) | | 60,526 | 94,497 | |||||||||||||||||||||||||||
Interest expense
|
(3,593,524 | ) | | (7,093,001 | ) | (160,000 | )(6) | (259,379 | )(10) | 5,487,965 | (4) | 4,704 | | (5,457,939 | ) | (5,613,234 | ) | |||||||||||||||||||||||
Gain (Loss) on derivative contracts
|
814,037 | | (4,394,953 | ) | | | (11) | 4,394,953 | | | 814,037 | 814,037 | ||||||||||||||||||||||||||||
Other, net
|
| | (2,276,948 | ) | | | | | | (2,276,948 | ) | (2,276,948 | ) | |||||||||||||||||||||||||||
Net loss from continuing operations before income taxes and non
controlling interest
|
(22,128,154 | ) | 1,130,013 | (22,517,978 | ) | (3,745,000 | ) | (618,628 | ) | 16,474,299 | (12,184,487 | ) | 6,818,666 | (27,660,448 | ) | (36,771,268 | ) | |||||||||||||||||||||||
Income tax benefit
|
| | 3,024,751 | 1,182,000 | | (12) | (3,024,751 | )(4) | 1,511,415 | (14) | (2,693,415 | ) | | | ||||||||||||||||||||||||||
Net (income) loss attributable to non-controlling interest
|
(128,586 | ) | | | | | | | | (128,586 | ) | (128,586 | ) | |||||||||||||||||||||||||||
Net loss attributable to Magnum Hunter from continuing operations
|
(22,256,740 | ) | 1,130,013 | (19,493,227 | ) | (2,563,000 | ) | (618,628 | ) | 13,449,548 | (10,673,072 | ) | 4,125,251 | (27,789,034 | ) | (36,899,854 | ) | |||||||||||||||||||||||
Income from discontinued operations
|
8,456,811 | | | | | | | | 8,456,811 | 8,456,811 | ||||||||||||||||||||||||||||||
Net loss
|
(13,799,929 | ) | 1,130,013 | (19,493,227 | ) | (2,563,000 | ) | (618,628 | ) | 13,449,548 | (10,673,072 | ) | 4,125,251 | (19,332,223 | ) | (28,443,043 | ) | |||||||||||||||||||||||
Dividends on preferred stock
|
(2,466,679 | ) | | | | | | | | (2,466,679 | ) | (2,466,679 | ) | |||||||||||||||||||||||||||
Net loss attributable to common shareholders
|
$ | (16,266,608 | ) | $ | 1,130,013 | $ | (19,493,227 | ) | $ | (2,563,000 | ) | $ | (618,628 | ) | $ | 13,449,548 | $ | (10,673,072 | ) | $ | 4,125,251 | $ | (21,798,902 | ) | $ | (30,909,722 | ) | |||||||||||||
Loss per common share Basic and diluted
|
$ | (0.25 | ) | $ | (0.30 | ) | $ | (0.27 | ) | |||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding Basic and
diluted
|
63,921,525 | (15 | ) | 946,314 | (15) | 8,033,889 | (15) | 42,804,675 | 72,901,728 | 115,706,403 | ||||||||||||||||||||||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial
Data
NOTES TO
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(1) | To record the second phase of the acquisition of the PostRock assets for an estimated purchase price of $13.3 million. The first phase of the acquisition closed December 30, 2010. The estimated purchase price includes cash payment and issuance of common stock of Magnum Hunter, which is based on the closing price of $7.97 per share on January 14, 2011, the closing date for the second phase of the acquisition of the PostRock assets. The purchase and sale agreement for the PostRock properties had valued the common stock at $6.21 per share based on the volume weighted average price of Magnum Hunters common stock for the 10 consecutive trading days prior to execution of the agreement on December 24, 2010. 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 following table summarizes the assets acquired and purchase price paid: |
Fair value of total purchase price:
|
||||||||
946,314 shares of common stock issued on January 14,
2011 valued at $7.97 per share
|
$ | 7,542,122 | ||||||
Cash paid on January 14, 2011 with funds to be borrowed
under the proposed new revolving line of credit agreement
|
5,763,983 | |||||||
Net operations since effective date
|
8,963 | |||||||
Total
|
$ | 13,315,068 | ||||||
Amounts recognized for assets acquired and liabilities assumed:
|
||||||||
Working capital
|
$ | (23,184 | ) | |||||
Oil and gas properties
|
13,334,502 | |||||||
Equipment and other fixed assets
|
3,750 | |||||||
Total
|
$ | 13,315,068 | ||||||
Working capital acquired:
|
||||||||
Prepaid expenses
|
$ | 2,658 | ||||||
Transfer tax payable
|
(25,842 | ) | ||||||
Total working capital acquired
|
$ | (23,184 | ) | |||||
(2) | To record the acquisition of NGAS Resources assets for an estimated purchase price of $119.2 million. The estimated purchase price includes the estimated shares of common stock of Magnum Hunter to be issued to shareholders of NGAS Resources, the estimated shares of common stock of Magnum Hunter issued to certain holders of NGAS Resources convertible notes, payment to Seminole to restructure a gas gathering and transportation agreement, the assumption of the senior credit facility of NGAS Resources, the assumption of certain notes payable related to equipment included in the transaction, and the payoff in cash of the remaining NGAS Resources convertible notes. 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 following table summarizes the assets acquired, liabilities assumed, and purchase price paid: |
Fair value of total purchase price:
|
||||||||
Estimated 6,634,026 shares of common stock at estimated
$7.34 per share(a)
|
$ | 48,693,751 | ||||||
Estimated 1,399,863 shares of common stock at estimated
$7.34 per share(a)
|
10,275,000 | |||||||
Senior credit facility assumed
|
34,000,000 | |||||||
Estimated NGAS Resources convertible notes to be paid off in
cash at closing
|
13,528,944 | |||||||
Other long-term debt assumed
|
6,150,000 | |||||||
Change in control payments in cash(b)
|
5,000,000 | |||||||
Common stock warrants and options
|
1,564,677 | |||||||
Total
|
$ | 119,212,372 | ||||||
Amounts recognized for assets acquired and liabilities assumed:
|
||||||||
Working capital
|
$ | (1,443,269 | ) | |||||
Bonds and deposits
|
258,945 | |||||||
Oil and gas properties
|
113,806,309 | |||||||
Equipment and other fixed assets
|
10,754,829 | |||||||
Other long term liabilities
|
(4,164,442 | ) | ||||||
Total
|
$ | 119,212,372 | ||||||
Working capital acquired:
|
||||||||
Cash
|
$ | 6,844,475 | ||||||
Accounts receivable
|
5,640,891 | |||||||
Prepaid expenses
|
552,741 | |||||||
Accounts payable
|
(5,562,836 | ) | ||||||
Accrued liabilities
|
(736,452 | ) | ||||||
Transaction closing costs
|
(3,432,923 | ) | ||||||
Drilling advances
|
(4,749,165 | ) | ||||||
Total working capital acquired
|
$ | (1,443,269 | ) | |||||
(a) | The closing stock price on February 25, 2011 for Magnum Hunter was used to estimate the value of the shares to be issued in the NGAS Resources acquisition. The final entries and the resulting effect on Magnum Hunters balance sheet may differ as they will be based on the actual stock price at the date of closing. | |
(b) | Pursuant to the arrangement agreement, these payments may be paid in cash or Magnum Hunter common stock or any combination thereof, as determined by Magnum Hunter in its sole discretion, except for the payment of approximately $855,000 that must be paid in cash. The closing stock price on the date of grant of any such change in control payment will be used to calculate the number of shares of common stock to be issued. |
(3) | To record the acquisition of NuLoch Resources assets for an estimated purchase price of $431.9 million. The estimated purchase price includes the estimated shares of common stock of Magnum Hunter to be issued to shareholders of NuLoch Resources and the deferred tax liability resulting from the acquisition. 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 following table summarizes the assets acquired, liabilities assumed, and purchase price paid: |
Fair value of total purchase price:
|
||||||||
Estimated 42,804,675 shares of common stock at estimated
$7.34 per share(a)
|
$ | 314,186,315 | ||||||
Deferred income tax liability (see schedule below)
|
117,756,387 | |||||||
Total
|
$ | 431,942,702 | ||||||
Amounts recognized for assets acquired and liabilities assumed:
|
||||||||
Working capital
|
$ | (8,759,796 | ) | |||||
Oil and gas properties
|
441,731,039 | |||||||
Equipment and other fixed assets
|
330,495 | |||||||
Asset retirement obligation
|
(1,359,036 | ) | ||||||
Total
|
$ | 431,942,702 | ||||||
Working capital acquired:
|
||||||||
Cash
|
$ | 9,687,510 | ||||||
Accounts receivable
|
4,880,310 | |||||||
Prepaid expenses
|
507,761 | |||||||
Transaction closing costs
|
(6,357,198 | ) | ||||||
Accounts payable
|
(4,059,080 | ) | ||||||
Accrued liabilities
|
(13,419,099 | ) | ||||||
Total working capital acquired
|
$ | (8,759,796 | ) | |||||
(a) | The closing common stock price on February 25, 2011 for Magnum Hunter was used to estimate the value of the shares to be issued in the NuLoch Resources acquisition. The final entries, and the resulting effect on Magnum Hunters balance sheet may differ as they will be based on the actual stock price at the date of closing. |
Deferred |
||||||||||||||||||||
Book |
Tax |
Asset |
||||||||||||||||||
Deferred Income Tax Liability
|
Rate | Basis | Basis | Difference | (Liability) | |||||||||||||||
PPE US
|
38.0 | % | $ | 290,675,762 | $ | 29,492,753 | $ | (261,183,009 | ) | $ | (99,145,087 | ) | ||||||||
PPE Canada
|
25.0 | % | 158,829,050 | 53,264,982 | (105,564,068 | ) | (26,391,000 | ) | ||||||||||||
NOL US 2009
|
38.0 | % | 1,704,787 | 1,704,787 | 647,100 | |||||||||||||||
NOL Canada 2009
|
25.0 | % | 28,530,348 | 28,530,348 | 7,132,600 | |||||||||||||||
Net Deferred Tax Liability
|
$ | (336,511,932 | ) | $ | (117,756,387 | ) | ||||||||||||||
(4) | To record the adjustment to NuLoch Resources historical financial statements prepared in accordance with Canadian GAAP and in Canadian dollars to United States GAAP and United States dollars. The adjustment includes: |
a. | To convert Canadian GAAP full cost accounting to US GAAP successful efforts accounting for oil and gas properties. This has reduced the net book value (NBV) of property and equipment as all geological and geophysical costs and general and administrative costs capitalized under Canadian GAAP have been expensed to conform with US GAAP. The NBV has also decreased due to all unsuccessful exploratory wells being expensed. The resulting change in NBV of oil and gas properties along with the reduction of depletion on a field level basis resulted in lower depletion expense over the periods presented. |
b. | To adjust NuLoch Resources for the conversion to US GAAP of an acquisition it completed in 2009. This adjustment resulted in the recording of additional fair value of oil and gas property and equipment of $8,969,000 and the value of shares issued increasing by $660,000 (Canadian GAAP value at announcement date vs US GAAP at closing date). These adjustments resulted in a future tax asset reduction of $2,242,000. |
c. | To adjust for Canadian GAAP Flow-through shares for treatment under US GAAP. This resulted in an increase to additional paid in capital and a decrease in deferred tax asset. |
d. | Due to the adjustments noted above, adjustments to income tax expense or benefit were made to statements presented. |
e. | To convert NuLoch Resources balance sheet as of December 31, 2010, and income statement for the year ended December 31, 2010 from Canadian dollars to United States dollars using the applicable conversion factors. |
(5) | To record the pro forma adjustment to depletion and depreciation expense as the result of treating the acquisition of the PostRock assets as if it had occurred January 1, 2010. Depletion was calculated using the units of production method. |
(6) | To record the pro forma adjustment to interest expense as the result of treating the cash paid in the acquisition of the PostRock assets as if it had been borrowed January 1, 2010. |
(7) | To record the pro forma adjustment to NGAS Resources depletion and depreciation expense as the result of treating the acquisition of NGAS Resources as if it had occurred January 1, 2010. Depletion was calculated using the units of production method. |
(8) | To record the pro forma adjustment to NGAS Resources refinancing costs amortized as the result of treating the acquisition of NGAS Resources as if it had occurred January 1, 2010. |
(9) | To record the pro forma adjustment to NGAS Resources interest income on notes receivable as the result of restructuring a gas gathering and transportation agreement as if it had occurred January 1, 2010. |
(10) | To record the pro forma adjustment to NGAS Resources interest expense as the result of treating the acquisition of NGAS Resources and the payment of assumed debt using Magnum Hunters credit facility as if it had occurred January 1, 2010. |
(11) | To record the pro forma adjustment to NGAS Resources gain (loss) on derivative contracts as the result of treating the acquisition of NGAS Resources as if it had occurred January 1, 2010. The derivative loss reported by NGAS Resources was the result of the convertible feature on certain notes payable which will be paid at closing. |
(12) | To record the pro forma adjustment to NGAS Resources income tax benefit on its income statements as the result of treating the acquisition of NGAS Resources as if it had occurred January 1, 2010. The deferred tax liability and income tax benefit on the NGAS Resources financial statements will be eliminated as the result of the fair market value adjustment to the oil and gas properties resulting from the acquisition. |
(13) | To record the pro forma adjustment to NuLoch Resources depletion and depreciation expense as the result of treating the acquisition of NuLoch Resources as if it had occurred January 1, 2010. Depletion was calculated using the units of production method. |
(14) | To record the pro forma adjustment to NuLoch Resources income tax benefit as the result of treating the acquisition of NuLoch Resources as if it had occurred January 1, 2010. |
(15) | Acquisition shares were added to the weighted average number of common shares outstanding as if the shares were issued January 1, 2010. |