Attached files
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| 8-K/A - MAGNUM HUNTER RESOURCES CORPORATION - MAGNUM HUNTER RESOURCES CORP | magnum_8ka-050311.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 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 NuLoch Resources acquisition 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 has been prepared assuming the NuLoch Resources acquisition and all necessary ancillary transactions had been consummated as of January 1, 2010. The pro forma adjustments set forth on the attached Unaudited Pro Forma Combined Balance Sheet and Unaudited Pro Forma Combined Income Statements reflect the following as if they occurred on the dates hereinabove set forth:
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(1)
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NuLoch Resources Acquisition. The NuLoch Resources acquisition as described in the Arrangement Agreement dated January 19, 2011.
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(2)
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Issuance of common stock upon the closing date of the NuLoch Resources acquisition.
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(3)
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Payment of change of control compensation in the NuLoch Resources acquisition.
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The Unaudited Pro Forma Balance Sheet reflects the preliminary adjustments to record the estimated fair values of the assets and liabilities acquired in the acquisition of NuLoch Resources. The final entries, and the resulting effect on Magnum Hunter’s balance sheet as well as items in Magnum Hunter’s 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 Hunter's Form 10-K, as amended.
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 NuLoch Resources and such financial information has been accepted and incorporated as presented without independent verification of such financial information.
-1-
As of December 31, 2010
(in thousands, except shares and per share data)
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Magnum Hunter
Historical
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NuLoch
Resources
Historical
(CAN $)
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NuLoch
Resources
Conversion to
US GAAP and
USD
Adjustments
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NuLoch
Resources
Pro Forma
Adjustments
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Combined
Pro Forma for
Magnum Hunter
and NuLoch
Resources
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$ | 554 | $ | 9,673 | B | $ | 15 | $ | - | $ | 10,242 | |||||||||||
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Accounts receivable
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11,705 | 5,200 | B | (320 | ) | - | 16,585 | |||||||||||||||
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Prepaids and other current assets
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867 | 507 | B | 1 | - | 1,375 | ||||||||||||||||
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Total current assets
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13,126 | 15,380 | (304 | ) | - | 28,202 | ||||||||||||||||
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PROPERTY AND EQUIPMENT (Net of
Accumulated Depletion and Depreciation):
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Oil and natural gas properties, successful efforts accounting
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189,912 | 101,149 | B | (15,953 | ) | A | 362,020 | 637,128 | ||||||||||||||
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Equipment and other fixed assets
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42,689 | 330 | - | - | 43,019 | |||||||||||||||||
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Total property and equipment, net
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232,601 | 101,479 | (15,953 | ) | 362,020 | 680,147 | ||||||||||||||||
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OTHER ASSETS:
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Other assets
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562 | - | - | - | 562 | |||||||||||||||||
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Deferred financing costs, net of amortization
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2,678 | - | - | - | 2,678 | |||||||||||||||||
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Deferred tax asset
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- | 6,380 | B | 6,738 | A | (13,118 | ) | - | ||||||||||||||
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Total assets
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$ | 248,967 | $ | 123,239 | $ | (9,519 | ) | $ | 348,902 | $ | 711,589 | |||||||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$ | 29,840 | $ | 4,053 | B | $ | 8 | $ | - | $ | 33,901 | |||||||||||
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Accrued liabilities
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3,914 | 13,399 | B | 19 | A | 11,130 | 28,462 | |||||||||||||||
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Revenue payable
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2,630 | - | - | - | 2,630 | |||||||||||||||||
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Current portion of notes payable
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7,132 | - | - | - | 7,132 | |||||||||||||||||
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Derivative liability
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719 | - | - | - | 719 | |||||||||||||||||
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Total current liabilities
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44,235 | 17,452 | 27 | 11,130 | 72,844 | |||||||||||||||||
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Deferred income tax
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- | - | - | A | 119,609 | 119,609 | ||||||||||||||||
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Payable on sale of partnership
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641 | - | - | - | 641 | |||||||||||||||||
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Notes payable, less current portion
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26,019 | - | - | - | 26,019 | |||||||||||||||||
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Asset retirement obligation
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4,455 | 1,357 | B | 2 | - | 5,814 | ||||||||||||||||
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Derivative liability
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59 | - | - | - | 59 | |||||||||||||||||
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Other long-term liabilities
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- | - | B | 1,352 | (1,352 | ) | - | |||||||||||||||
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Total liabilities
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75,409 | 18,809 | 1,381 | 129,387 | 224,986 | |||||||||||||||||
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COMMITMENTS AND CONTINGENCIES
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REDEEMABLE PREFERRED STOCK:
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Series C Cumulative Perpetual Preferred Stock
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70,236 | - | - | - | 70,236 | |||||||||||||||||
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SHAREHOLDERS’ EQUITY:
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Shareholders' equity
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101,872 | 104,430 | B | (10,900 | ) | A | 187,873 | 383,275 | ||||||||||||||
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Non-controlling interest
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1,450 | - | - | 31,642 | 33,092 | |||||||||||||||||
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Total Equity
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103,322 | 104,430 | (10,900 | ) | 219,515 | 416,367 | ||||||||||||||||
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Total liabilities and shareholders' equity
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$ | 248,967 | $ | 123,239 | $ | (9,519 | ) | $ | 348,902 | $ | 711,589 | |||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial Data
-2-
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
Year Ended December 31, 2010
(in thousands, except shares and per share data)
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Magnum Hunter
Historical
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NuLoch
Resources
Historical
(CAN $)
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NuLoch
Resources
Conversion to
US GAAP &
USD
Adjustments
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NuLoch
Resources
Pro Forma
Adjustments
|
Combined
Pro Forma for
Magnum Hunter
and NuLoch
Resources
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REVENUE:
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Oil and gas sales
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$ | 27,715 | $ | 13,904 | B | $ | 104 | $ | - | $ | 41,723 | |||||||||||
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Field operations and other
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5,009 | - | - | - | 5,009 | |||||||||||||||||
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Total revenue
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32,724 | 13,904 | 104 | - | 46,732 | |||||||||||||||||
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EXPENSES:
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Lease operating expenses
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10,399 | 4,269 | B | (747 | ) | - | 13,921 | |||||||||||||||
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Severance taxes and marketing
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2,305 | - | B | 1,134 | - | 3,439 | ||||||||||||||||
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Exploration
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936 | - | B | 7,779 | - | 8,715 | ||||||||||||||||
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Field operations
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4,363 | - | - | - | 4,363 | |||||||||||||||||
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Impairment of oil & gas properties
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306 | - | - | - | 306 | |||||||||||||||||
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Impairment of goodwill
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- | - | - | - | - | |||||||||||||||||
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Depreciation, depletion and accretion
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8,923 | 9,480 | B | 2,443 | C | (6,813 | ) | 14,033 | ||||||||||||||
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General and administrative
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24,901 | 3,775 | B | 1,683 | - | 30,359 | ||||||||||||||||
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Total expenses
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52,133 | 17,524 | 12,292 | (6,813 | ) | 75,136 | ||||||||||||||||
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LOSS FROM OPERATIONS
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(19,409 | ) | (3,620 | ) | (12,188 | ) | 6,813 | (28,404 | ) | |||||||||||||
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OTHER INCOME AND (EXPENSE):
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Interest income
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61 | 35 | B | (1 | ) | - | 95 | |||||||||||||||
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Interest expense
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(3,594 | ) | (160 | ) | B | 5 | - | (3,749 | ) | |||||||||||||
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Gain (Loss) on derivative contracts
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814 | - | - | - | 814 | |||||||||||||||||
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Other, net
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- | - | - | - | - | |||||||||||||||||
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Net loss from continuing operations before income taxes and non controlling interest
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(22,128 | ) | (3,745 | ) | (12,184 | ) | 6,813 | (31,244 | ) | |||||||||||||
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Income tax benefit
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- | 1,182 | B | 1,511 | D | (2,693 | ) | - | ||||||||||||||
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Net (income) loss attributable to non-controlling interest
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(129 | ) | - | - | - | (129 | ) | |||||||||||||||
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Net loss attributable to Magnum Hunter from continuing operations
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(22,257 | ) | (2,563 | ) | (10,673 | ) | 4,120 | (31,373 | ) | |||||||||||||
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Income from discontinued operations
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8,457 | - | - | - | 8,457 | |||||||||||||||||
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Net loss
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(13,800 | ) | (2,563 | ) | (10,673 | ) | 4,120 | (22,916 | ) | |||||||||||||
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Dividends on preferred stock
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(2,467 | ) | - | - | - | (2,467 | ) | |||||||||||||||
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Net loss attributable to common shareholders
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$ | (16,267 | ) | $ | (2,563 | ) | $ | (10,673 | ) | $ | 4,120 | $ | (25,383 | ) | ||||||||
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Loss per common share
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Basic and diluted
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$ | (0.25 | ) | $ | (0.25 | ) | ||||||||||||||||
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Weighted average number of common shares outstanding
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Basic and diluted
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63,921,525 | E | 38,596,982 | 102,518,507 | ||||||||||||||||||
See accompanying notes to Unaudited Pro Forma Combined Financial Data
-3-
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Fair value of total purchase price:
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(in thousands,
except shares and
per share data)
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38,596,982 shares of common stock at $7.40 per share
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$ | 285,618 | ||
| 4,275,998 exchangeable shares at $7.40 | 31,642 | |||
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Deferred tax
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119,609 | |||
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Total
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$ | 436,869 | ||
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Amounts recognized for assets acquired and liabilities assumed:
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Working capital
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$ | (9,318 | ) | |
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Oil and gas properties
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447,216 | |||
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Equipment and other fixed assets
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330 | |||
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Asset retirement obligation
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(1,359 | ) | ||
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Total
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$ | 436,869 | ||
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Working capital acquired:
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Cash
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$ | 9,688 | ||
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Accounts receivable
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4,880 | |||
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Prepaid expenses
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508 | |||
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Transaction closing costs
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(6,915 | ) | ||
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Accounts payable
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(4,061 | ) | ||
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Accrued liabilities
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(13,418 | ) | ||
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Total working capital acquired
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$ | (9,318 | ) | |
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(in thousands)
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Deferred
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Book
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Tax
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Asset
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Deferred Income Tax Liability
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Rate
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Basis
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Basis
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Difference
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(Liability)
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PPE US
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38.0% | $ | 294,382 | $ | 29,493 | $ | (264,889 | ) | $ | (100,552 | ) | |||||||||
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PPE Canada
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25.0% | 160,614 | 53,265 | (107,349 | ) | (26,837 | ) | |||||||||||||
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NOL US - 2009
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38.0% | 1,705 | 1,705 | 647 | ||||||||||||||||
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NOL Canada - 2009
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25.0% | 28,530 | 28,530 | 7,133 | ||||||||||||||||
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Net Deferred Tax Liability
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$ | (342,003 | ) | $ | (119,609 | ) | ||||||||||||||
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B.
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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:
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a.
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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 & geophysical costs and general & 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.
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-4-
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b.
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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.
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c.
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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.
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d.
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Due to the adjustments noted above, adjustments to income tax expense or benefit were made to statements presented.
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e.
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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.
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C.
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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.
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D.
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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.
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E.
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Acquisition shares were added to the weighted average number of common shares outstanding as if the shares were issued January 1, 2010.
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-5-