COMSTOCK RESOURCES INC - FORM 8-K/A - EX-99.2 - EXHIBIT 99.2 - May 16, 2012

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8-K/A - COMSTOCK RESOURCES, INC. FORM 8-K/A - COMSTOCK RESOURCES INCform8kmay162012.htm
Exhibit 99.2
 
 
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Introduction

Comstock Resources, Inc. ("Comstock" or the "Company") completed the sale of oil and gas properties (collectively, the "Divestiture Properties") on February 23, 2012 and on May 1, 2012.  These properties were located in Tyler and Polk counties in South Texas and Lincoln Parish in North Louisiana.  Total net cash proceeds received from the sales of the Divestiture Properties were approximately $123.3 million. These proceeds were used to repay outstanding borrowings on the Company’s revolving bank credit facility.  Proved reserves sold totaled approximately 63 billion cubic feet of natural gas equivalent as of January 1, 2012,  the effective date for both of the transactions.  Daily production from the Divestiture Properties averaged approximately 11.5 million cubic feet of natural gas equivalent per day during the three months ended March 31, 2012.

 Following are the unaudited pro forma financial statements of Comstock for the year ended December 31, 2011 and the three months ended March 31, 2012, which give effect to the sale of the Divestiture Properties.  The unaudited pro forma condensed balance sheet as of March 31, 2012 assumes the sales of the Divestiture Properties occurred as of that date.  The unaudited pro forma statements of operations assume that the sale transactions occurred on January 1, 2011.  Pro forma adjustments are presented in the notes to the unaudited pro forma financial statements.       

The pro forma adjustments are based upon available information and assumptions that the management of Comstock believes are reasonable.  The pro forma financial statements do not purport to represent the financial position or results of operations of Comstock which would have occurred had the sale transactions been consummated on the dates indicated or Comstock's financial position or results of operations for any future date or period.  The unaudited pro forma financial statements and accompanying notes should be read together with the historical consolidated financial statements of Comstock filed with its Form 10-K for the year ended December 31, 2011 and its Form 10-Q for the three months ended March 31, 2012.












 
 
 
 
 
 
 

 







 
1
 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

AS OF MARCH 31, 2012
(in thousands)


   
Historical
    
Pro Forma Adjustments
    
Pro Forma
  
 
ASSETS
 
Cash and Cash Equivalents
  
$
3,750
    
$
113,786
  
(a)
$
3,750
  
             
(113,786
)
(c)
      
Restricted Cash
    
9,549
      
(9,549
)
(c)
  
—
  
Marketable Securities
    
17,154
      
—
      
17,154
  
Assets Held for Sale
    
91,520
      
(91,520
)
(b)
  
—
  
Other Current Assets
    
54,826
      
—
      
54,826
  
Total Current Assets
    
176,799
      
(101,069
)
    
75,730
  
Property and Equipment
    
2,517,672
      
—
      
2,517,672
  
Other Assets
    
16,201
      
—
      
16,201
  
Total Assets
  
$
2,710,672
    
$
(101,069
)
  
$
2,609,603
  


LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
Accounts Payable
  
$
148,633
    
$
—
    
$
148,633
  
Accrued Expenses and Other Current Liabilities
    
101,427
      
(822
)
(b)
  
100,605
  
Total Current Liabilities
    
250,060
      
(822
)
    
249,238
  
Long-term Debt, Less Current Portion
    
1,207,042
      
(123,335
)
(c)
  
1,083,707
  
Deferred Taxes Payable
    
208,078
      
8,427
  
(d)
  
216,505
  
Other Liabilities
    
18,135
      
—
      
18,135
  
Stockholders' Equity
    
1,027,357
      
14,661
  
(e)
  
1,042,018
  
Total Liabilities and Stockholders' Equity
  
$
2,710,672
    
$
(101,069
)
  
$
2,609,603
  









 

 




See accompanying notes to unaudited pro forma
consolidated financial statements

 
2
 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

FOR THE YEAR ENDED DECEMBER 31, 2011
(in thousands except per share amounts)


   
Historical
    
Pro Forma
Adjustments
    
Pro Forma
  
Revenues:
                        
Oil and gas sales
  
$
434,367
  
$
  
(37,425
)
(f)
$
396,942
  
                         
Operating expenses:
                        
Production taxes
    
3,670
      
(2,031
)
(f)
  
1,639
  
Gathering and transportation
    
28,491
      
(1,015
)
(f)
  
27,476
  
Lease operating
    
46,552
      
(5,391
)
(f)
  
41,161
  
Exploration
    
10,148
      
—
      
10,148
  
Depreciation, depletion and amortization
    
290,776
      
(9,990
)
(g)
  
280,786
  
Impairment of oil and gas properties
    
60,817
      
—
      
60,817
  
Loss on sale of  properties
    
57
      
—
      
57
  
General and administrative, net
    
35,172
      
—
      
35,172
  
Total operating expenses
    
475,683
      
(18,427
)
    
457,256
  
                         
Operating loss
    
(41,316
)
    
(18,998
)
    
(60,314
)
                         
Other income (expenses):
                        
Interest expense
    
(42,688
)
    
1,825
  
(h)
  
(40,863
)
Gain on sale of marketable securities
    
35,118
      
—
      
35,118
  
Other income
    
790
      
—
      
790
  
Total other income (expenses)
    
(6,780
)
    
1,825
      
(4,955
)
Loss before income taxes
    
(48,096
)
    
(17,173
)
    
(65,269
)
Benefit from income taxes
    
14,624
      
6,268
  
(i)
  
20,892
  
Net loss from continuing operations
  
$
(33,472
)
  
$
(10,905
)
  
$
(44,377
)
                         
Net loss per share:
                        
Basic
  
$
(0.73
)
          
$
(0.96
)
Diluted
  
$
(0.73
)
          
$
(0.96
)
                         
Weighted average common and common stock equivalent shares outstanding:
                        
Basic
    
45,997
              
45,997
  
Diluted
    
45,997
              
45,997
  




 

 

See accompanying notes to unaudited pro forma
consolidated financial statements.

 
3
 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

FOR THE THREE MONTHS ENDED MARCH 31, 2012
(in thousands except per share amounts)


   
Historical
    
Pro Forma
Adjustments
    
Pro Forma
  
Revenues:
                        
Oil and gas sales
  
$
110,335
    
$
(7,561
)
(f)
$
102,774
  
Gain on sale of assets
    
6,727
      
(6,727
)
(j)
  
—
  
     Total revenues
    
117,062
      
(14,288
)
    
102,774
  
                         
Operating expenses:
                        
Production taxes
    
3,637
      
(412
)
(f)
  
3,225
  
Gathering and transportation
    
7,892
      
(231
)
(f)
  
7,661
  
Lease operating
    
14,749
      
(1,192
)
(f)
  
13,557
  
Exploration
    
1,353
      
—
      
1,353
  
Depreciation, depletion and amortization
    
79,097
      
—
  
 
  
79,097
  
Impairment of oil and gas properties
    
49
      
—
      
49
  
General and administrative, net
    
8,798
      
—
      
8,798
  
Total operating expenses
    
115,575
      
(1,835
)
    
113,740
  
                         
Operating income (loss)
    
1,487
      
(12,453
)
    
(10,966
)
                         
Other income (expenses):
                        
Interest expense
    
(13,237
)
    
1,026
  
(h)
  
(12,211
)
Gain on sale of marketable securities
    
26,621
      
—
      
26,621
  
Other income (expense)
    
(23
)
    
—
      
(23
)
Total other income (expenses)
    
13,361
      
1,026
      
14,387
  
                         
Income (loss) before income taxes
    
14,848
      
(11,427
)
    
3,421
  
Benefit from (provision for) income taxes
    
(7,989
)
    
4,171
  
(i)
  
(3,818
)
Net income (loss) from continuing operations
  
$
6,859
    
$
(7,256
)
  
$
(397
)
                         
Net income (loss) per share:
                        
Basic
  
$
0.14
            
$
(0.01
)
Diluted
  
$
0.14
            
$
(0.01
)
                         
Weighted average common and common stock equivalent shares outstanding:
                        
Basic
    
46,372
              
46,372
  
Diluted
    
46,372
              
46,372
  





See accompanying notes to unaudited pro forma
consolidated financial statements.

 
4
 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited pro forma condensed consolidated balance sheet as of March 31, 2012 reflects the following adjustments:

(a)  
Adjustment to recognize the net cash proceeds of $113.8 million for the Divestiture Property sale transaction that closed on May 1, 2012.  This amount represents the sales price of $118.5 million less purchase price adjustments and transaction costs.

(b)  
Adjustment to eliminate the carrying value of the properties and the related asset retirement obligation which were sold on May 1, 2012.  The carrying value of the Divestiture Properties was reclassified to Assets Held for Sale on the consolidated balance sheet during the quarter ended March 31, 2012.
 
(c)  
Adjustment to reflect repayment of a portion of the outstanding balance of the Company's outstanding borrowings under its bank credit facility following the closing of the last sale transaction and upon completion of a reverse tax free exchange transaction.  The balance in restricted cash, which included the net proceeds from the Divestiture Property sales transaction which closed in February 2012, was held by an exchange accommodation titleholder until the tax free exchange transaction was completed.

(d)  
Adjustment for income taxes payable associated with the gain on the sale of the assets which closed on May 1, 2012.  The Divestiture Properties were part of a reverse like-kind exchange transaction in accordance with Section 1031 of the Internal Revenue Code, and the income taxes on the sale of these properties are accordingly being deferred.

(e)  
Adjustment to reflect in retained earnings the pro forma net gain on disposal of $23.1 million ($14.7 million after income taxes) from the sale of the Divestiture Properties that closed on May 1, 2012.  This gain reflects the sales price of $118.5 million, less the closing adjustments and transaction costs of $4.7 million, the carrying value of the assets of $91.5 million, the asset retirement obligation sold of $0.8 million, and deferred income taxes of $8.4 million, which were provided at the Company's estimated combined federal and state tax rate of 36.5%.  The net gain from the sale of a portion of the Divestiture Properties which closed in February 2012 ($6.7 million or $4.2 million after income taxes) is included in the Results of Operations for the three months ended March 31, 2012 and in retained earnings at March 31, 2012.

No depletion, depreciation and amortization expense ("DD&A") expense and no asset retirement obligation accretion expense were recognized for the Divestiture Properties during the three months ended March 31, 2012 as they were classified as Assets Held for Sale on the consolidated balance sheet during this period.

The accompanying unaudited pro forma statements of operations for the year ended December 31, 2011 and the three months ended March 31, 2012 reflect the following adjustments:

(f)  
Adjustment to reverse operating revenues and direct operating costs attributable to the Divestiture Properties.
 
(g)  
Adjustment for the reversal of DD&A expense for the Divestiture Properties, including a reduction of the accretion expense related to asset retirement obligations.

(h)  
Adjustment to interest expense to reflect the use of the cash proceeds to reduce borrowings under the Company's bank credit facility.

(i)  
Adjustment for the income tax consequences of the pro forma adjustments at the Company's estimated combined federal and state tax rate of 36.5%.

(j)  
Adjustment to eliminate the gain realized on the sale of Divestiture Properties that closed on February 23, 2012 which was included in the results of operations for the three months ended March 31, 2012.
 
 
 
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