Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PostRock Energy Corp | d418964d8k.htm |
| EX-2.1 - PURCHASE AGREEMENT - PostRock Energy Corp | d418964dex21.htm |
Exhibit 99.1
POSTROCK ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements have been prepared to assist in the analysis of PostRock Energy Corporation’s (“PostRock”) sale of PostRock KPC Pipeline, LLC (“KPC”) to MV Pipelines, LLC (the “KPC Transaction”). The transaction closed for a gross purchase price of $53.5 million in cash, subject to a working capital purchase price adjustment. Out of the gross proceeds received, $500,000 has been placed in escrow to be released to PostRock upon acceptable clean-up of a site previously owned by KPC.
In order to present the pro forma condensed consolidated statements of operations for the year ended December 31, 2010, the pro forma condensed consolidated financial statements assume the recombination of Quest Resource Corporation, Quest Energy Partners, L.P. and Quest Midstream Partners, L.P. occurred on January 1, 2010. The recombination of these entities occurred on March 5, 2010 and has been accounted for as an equity transaction among the owners of a consolidated entity. Historical cost accounting has continued to be used, and no gain or loss was recognized as a result of the transaction. For additional information about the recombination, see Item 8 of PostRock’s Annual Report on Form 10-K for the year ended December 31, 2010.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2012 and 2011 and the years ended December 31, 2010 and 2011 assume the KPC Transaction occurred on January 1 of each period presented. The unaudited pro forma condensed consolidated balance sheet assumes the KPC Transaction occurred on June 30, 2012. The unaudited pro forma condensed consolidated financial statements are derived from the historical consolidated financial statements of PostRock and its predecessor and are based on assumptions that management believes are reasonable in the circumstances. This information should be read together with the historical consolidated financial statements and related notes of PostRock included in its Annual Report on Form 10-K for the year ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
The unaudited pro forma condensed consolidated financial information is for illustrative purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the financial results that would have occurred if the KPC Transaction had taken place on the dates indicated, nor is it indicative of the future results of PostRock.
PostRock Energy Corporation
Unaudited Condensed Consolidated Balance Sheets
At June 30, 2012
(in thousands)
| PostRock | Pro Forma Adjustments |
PostRock Pro Forma |
||||||||||||
| ASSETS | ||||||||||||||
| Current assets |
||||||||||||||
| Cash and equivalents |
$ | 105 | $ | 2,112 | A | $ | 2,217 | |||||||
| Accounts receivable - trade, net |
6,151 | (983 | ) | B | 5,168 | |||||||||
| Other receivables |
200 | — | 200 | |||||||||||
| Inventory |
1,568 | (61 | ) | B | 1,507 | |||||||||
| Other |
3,884 | 363 | A, B | 4,247 | ||||||||||
| Derivative financial instruments |
34,234 | — | 34,234 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total |
46,142 | 1,431 | 47,573 | |||||||||||
| Oil and gas properties, full cost, net |
118,897 | — | 118,897 | |||||||||||
| Pipeline assets, net |
58,069 | (58,069 | ) | B | — | |||||||||
| Other property and equipment, net |
15,673 | (431 | ) | B | 15,242 | |||||||||
| Equity investment |
10,471 | — | 10,471 | |||||||||||
| Other, net |
1,051 | (530 | ) | B | 521 | |||||||||
| Derivative financial instruments |
17,360 | — | 17,360 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 267,663 | $ | (57,599 | ) | $ | 210,064 | |||||||
|
|
|
|
|
|
|
|||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities |
||||||||||||||
| Accounts payable |
$ | 3,978 | $ | (189 | ) | B | $ | 3,789 | ||||||
| Revenue payable |
3,529 | — | 3,529 | |||||||||||
| Accrued expenses and other |
5,571 | 1,254 | B, C | 6,825 | ||||||||||
| Litigation reserve |
4,415 | — | 4,415 | |||||||||||
| Current portion of long-term debt |
167,355 | (51,000 | ) | A | 116,355 | |||||||||
| Derivative financial instruments |
5,424 | — | 5,424 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total |
190,272 | (49,935 | ) | 140,337 | ||||||||||
| Derivative financial instruments |
2,999 | — | 2,999 | |||||||||||
| Long-term debt |
— | — | — | |||||||||||
| Asset retirement obligations |
12,130 | (1,707 | ) | B | 10,423 | |||||||||
| Other |
348 | — | 348 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
205,749 | (51,642 | ) | 154,107 | ||||||||||
| Commitments and contingencies |
||||||||||||||
| Series A cumulative redeemable preferred stock |
60,463 | — | 60,463 | |||||||||||
| Stockholders’ equity |
||||||||||||||
| Preferred stock |
2 | — | 2 | |||||||||||
| Common stock |
124 | — | 124 | |||||||||||
| Additional paid-in capital |
382,870 | — | 382,870 | |||||||||||
| Accumulated deficit |
(381,545 | ) | (5,957 | ) | D | (387,502 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Total equity |
1,451 | (5,957 | ) | (4,506 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total liabilities and equity |
$ | 267,663 | $ | (57,599 | ) | $ | 210,064 | |||||||
|
|
|
|
|
|
|
|||||||||
PostRock Energy Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Twelve Months Ended December 31, 2010
(in thousands, except per share data)
| PostRock Predecessor January 1, 2010 to March 5, 2010 |
PostRock Successor March 6, 2010 to December 31, 2010 |
Recombination Pro Forma Adjustments |
PostRock Combined |
Pro Forma Adjustments |
PostRock Pro Forma |
|||||||||||||||||||||||
| Revenue |
||||||||||||||||||||||||||||
| Oil and gas sales |
$ | 18,659 | $ | 69,277 | $ | — | $ | 87,936 | $ | — | $ | 87,936 | ||||||||||||||||
| Gathering |
1,076 | 4,771 | — | 5,847 | — | 5,847 | ||||||||||||||||||||||
| Pipeline |
1,749 | 8,380 | — | 10,129 | (10,129 | ) | E | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
21,484 | 82,428 | — | 103,912 | (10,129 | ) | 93,783 | |||||||||||||||||||||
| Costs and expenses |
||||||||||||||||||||||||||||
| Production expense |
8,645 | 38,329 | — | 46,974 | — | 46,974 | ||||||||||||||||||||||
| Pipeline expense |
1,110 | 5,195 | — | 6,305 | (6,305 | ) | E | — | ||||||||||||||||||||
| General and administrative |
5,735 | 19,065 | — | 24,800 | (1,660 | ) | E | 23,140 | ||||||||||||||||||||
| Litigation reserve |
— | 1,640 | — | 1,640 | — | 1,640 | ||||||||||||||||||||||
| Depreciation, depletion and amortization |
4,164 | 18,683 | — | 22,847 | (3,438 | ) | E | 19,409 | ||||||||||||||||||||
| Gain on disposal of assets |
— | (13,495 | ) | — | (13,495 | ) | (77 | ) | E | (13,572 | ) | |||||||||||||||||
| Recovery of misappropriated funds |
— | (1,592 | ) | — | (1,592 | ) | — | (1,592 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
19,654 | 67,825 | — | 87,479 | (11,480 | ) | 75,999 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating income |
1,830 | 14,603 | — | 16,433 | 1,351 | 17,784 | ||||||||||||||||||||||
| Other income (expense) |
||||||||||||||||||||||||||||
| Gain from derivative financial instruments |
25,246 | 47,870 | — | 73,116 | — | 73,116 | ||||||||||||||||||||||
| Gain on forgiveness of debt |
— | 2,909 | — | 2,909 | — | 2,909 | ||||||||||||||||||||||
| Other expense |
(4 | ) | (24 | ) | — | (28 | ) | — | (28 | ) | ||||||||||||||||||
| Interest expense, net |
(5,336 | ) | (20,137 | ) | — | (25,473 | ) | 2,774 | F | (22,699 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
19,906 | 30,618 | — | 50,524 | 2,774 | 53,298 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Income before income taxes |
21,736 | 45,221 | — | 66,957 | 4,125 | 71,082 | ||||||||||||||||||||||
| Income taxes |
— | — | — | — | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income |
21,736 | 45,221 | — | 66,957 | 4,125 | 71,082 | ||||||||||||||||||||||
| Net income attributable to non-controlling interest |
(9,958 | ) | — | 9,958 | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income attributable to controlling interest |
11,778 | 45,221 | 9,958 | 66,957 | 4,125 | 71,082 | ||||||||||||||||||||||
| Preferred stock dividends |
— | (1,980 | ) | — | (1,980 | ) | — | (1,980 | ) | |||||||||||||||||||
| Accretion of redeemable preferred stock |
— | (327 | ) | — | (327 | ) | — | (327 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income available to common stock |
$ | 11,778 | $ | 42,914 | $ | 9,958 | $ | 64,650 | $ | 4,125 | $ | 68,775 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net income per common share |
||||||||||||||||||||||||||||
| Basic |
$ | 0.37 | $ | 5.29 | $ | 7.97 | $ | 8.48 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Diluted |
$ | 0.36 | $ | 4.62 | $ | 6.96 | $ | 7.40 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Weighted average common shares outstanding |
||||||||||||||||||||||||||||
| Basic |
32,137 | 8,110 | 8,110 | 8,110 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Diluted |
32,614 | 9,295 | 9,295 | 9,295 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
PostRock Energy Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Twelve Months Ended December 31, 2011
(in thousands, except per share data)
| PostRock | Pro Forma Adjustments |
PostRock Pro Forma |
||||||||||||||
| Revenue |
||||||||||||||||
| Oil and gas sales |
$ | 79,887 | $ | — | $ | 79,887 | ||||||||||
| Gathering |
5,239 | — | 5,239 | |||||||||||||
| Pipeline |
11,183 | (11,183 | ) | E | — | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
96,309 | (11,183 | ) | 85,126 | ||||||||||||
| Costs and expenses |
||||||||||||||||
| Production expense |
47,136 | — | 47,136 | |||||||||||||
| Pipeline expense |
5,219 | (5,219 | ) | E | — | |||||||||||
| General and administrative |
17,199 | (1,194 | ) | E | 16,005 | |||||||||||
| Litigation reserve |
11,592 | — | E | 11,592 | ||||||||||||
| Depreciation, depletion and amortization |
27,662 | (3,574 | ) | E | 24,088 | |||||||||||
| Gain on disposal of assets |
(10,560 | ) | 3 | E | (10,557 | ) | ||||||||||
| Recovery of misappropriated funds |
— | — | — | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
98,248 | (9,984 | ) | 88,264 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Operating loss |
(1,939 | ) | (1,199 | ) | (3,138 | ) | ||||||||||
| Other income (expense) |
||||||||||||||||
| Gain from derivative financial instruments |
35,429 | — | 35,429 | |||||||||||||
| Loss from equity investment |
(4,607 | ) | — | (4,607 | ) | |||||||||||
| Gain on forgiveness of debt |
1,647 | — | 1,647 | |||||||||||||
| Other income, net |
207 | — | 207 | |||||||||||||
| Interest expense, net |
(10,707 | ) | 556 | F | (10,151 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
21,969 | 556 | 22,525 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income before income taxes |
20,030 | (643 | ) | 19,387 | ||||||||||||
| Income taxes |
— | — | — | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income |
20,030 | (643 | ) | 19,387 | ||||||||||||
| Preferred stock dividends |
(7,779 | ) | — | (7,779 | ) | |||||||||||
| Accretion of redeemable preferred stock |
(1,580 | ) | — | (1,580 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income available to common stock |
$ | 10,671 | $ | (643 | ) | $ | 10,028 | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income per common share |
||||||||||||||||
| Basic |
$ | 1.21 | $ | 1.14 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 0.71 | $ | 0.67 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average common shares outstanding |
||||||||||||||||
| Basic |
8,786 | 8,786 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
15,050 | 15,050 | ||||||||||||||
|
|
|
|
|
|||||||||||||
PostRock Energy Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2011
(in thousands, except per share data)
| PostRock | Pro Forma Adjustments |
PostRock Pro Forma |
||||||||||||||
| Revenue |
||||||||||||||||
| Oil and gas sales |
$ | 41,762 | $ | — | $ | 41,762 | ||||||||||
| Gathering |
2,889 | — | 2,889 | |||||||||||||
| Pipeline |
5,639 | (5,639 | ) | E | — | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
50,290 | (5,639 | ) | 44,651 | ||||||||||||
| Costs and expenses |
||||||||||||||||
| Production expense |
23,840 | — | 23,840 | |||||||||||||
| Pipeline expense |
3,016 | (3,016 | ) | E | — | |||||||||||
| General and administrative |
10,036 | (587 | ) | E | 9,449 | |||||||||||
| Litigation reserve |
9,600 | — | 9,600 | |||||||||||||
| Depreciation, depletion and amortization |
13,727 | (1,821 | ) | E | 11,906 | |||||||||||
| Gain on disposal of assets |
(12,357 | ) | 3 | E | (12,354 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
47,862 | (5,421 | ) | 42,441 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Operating income |
2,428 | (218 | ) | 2,210 | ||||||||||||
| Other income (expense) |
||||||||||||||||
| Realized gain from derivative financial instruments |
15,907 | — | 15,907 | |||||||||||||
| Unrealized loss from derivative financial instruments |
(11,160 | ) | — | (11,160 | ) | |||||||||||
| Loss on equity investment |
— | — | — | |||||||||||||
| Gain on forgiveness of debt |
1,647 | — | 1,647 | |||||||||||||
| Other income, net |
170 | — | 170 | |||||||||||||
| Interest expense, net |
(5,322 | ) | 349 | F | (4,973 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
1,242 | 349 | 1,591 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income before income taxes |
3,670 | 131 | 3,801 | |||||||||||||
| Income taxes |
— | — | — | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income |
3,670 | 131 | 3,801 | |||||||||||||
| Preferred stock dividends |
(3,774 | ) | — | (3,774 | ) | |||||||||||
| Accretion of redeemable preferred stock |
(735 | ) | — | (735 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) available to common stock |
$ | (839 | ) | $ | 131 | $ | (708 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) per common share |
||||||||||||||||
| Basic |
$ | (0.10 | ) | $ | (0.09 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | (0.10 | ) | $ | (0.09 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average common shares outstanding |
||||||||||||||||
| Basic |
8,283 | 8,283 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
8,283 | 8,283 | ||||||||||||||
|
|
|
|
|
|||||||||||||
PostRock Energy Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2012
(in thousands, except per share data)
| PostRock | Pro Forma Adjustments |
PostRock Pro Forma |
||||||||||||||
| Revenue |
||||||||||||||||
| Oil and gas sales |
$ | 24,272 | $ | — | $ | 24,272 | ||||||||||
| Gathering |
1,173 | — | 1,173 | |||||||||||||
| Pipeline |
6,242 | (6,242 | ) | E | — | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
31,687 | (6,242 | ) | 25,445 | ||||||||||||
| Costs and expenses |
||||||||||||||||
| Production expense |
22,200 | — | 22,200 | |||||||||||||
| Pipeline expense |
1,647 | (1,647 | ) | E | — | |||||||||||
| General and administrative |
8,457 | (623 | ) | E | 7,834 | |||||||||||
| Litigation reserve |
— | — | — | |||||||||||||
| Depreciation, depletion and amortization |
14,794 | (1,692 | ) | E | 13,102 | |||||||||||
| Loss on disposal of assets |
157 | 5 | E | 162 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
47,255 | (3,957 | ) | 43,298 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Operating loss |
(15,568 | ) | (2,285 | ) | (17,853 | ) | ||||||||||
| Other income (expense) |
||||||||||||||||
| Realized gain from derivative financial instruments |
30,703 | — | 30,703 | |||||||||||||
| Unrealized loss from derivative financial instruments |
(18,837 | ) | — | (18,837 | ) | |||||||||||
| Loss on equity investment |
(2,467 | ) | — | (2,467 | ) | |||||||||||
| Gain on forgiveness of debt |
255 | — | 255 | |||||||||||||
| Other income (expense), net |
18 | — | 18 | |||||||||||||
| Interest expense, net |
(5,265 | ) | 45 | F | (5,220 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
4,407 | 45 | 4,452 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Loss before income taxes |
(11,161 | ) | (2,240 | ) | (13,401 | ) | ||||||||||
| Income taxes |
— | — | — | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net loss |
(11,161 | ) | (2,240 | ) | (13,401 | ) | ||||||||||
| Preferred stock dividends |
(4,248 | ) | — | (4,248 | ) | |||||||||||
| Accretion of redeemable preferred stock |
(972 | ) | — | (972 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) available to common stock |
$ | (16,381 | ) | $ | (2,240 | ) | $ | (18,621 | ) | |||||||
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) per common share |
||||||||||||||||
| Basic |
$ | (1.39 | ) | $ | (1.58 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | (1.39 | ) | $ | (1.58 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average common shares outstanding |
||||||||||||||||
| Basic |
11,805 | 11,805 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
11,805 | 11,805 | ||||||||||||||
|
|
|
|
|
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Note 1 — Description of Transaction
On September 28, 2012, the Company consummated the sale of all the issued and outstanding limited liability company interests of its subsidiary PostRock KPC Pipeline, LLC ( “KPC”) to MV Pipelines, LLC (“MV”) for a gross purchase price of $53.5 million which was subject to a working capital adjustment. The Company received $52.9 million in cash at closing, and an additional $500,000 was deposited in escrow to be released to the Company upon acceptable clean-up of a site previously owned by KPC. The cash proceeds were primarily used to repay borrowings under the Company’s credit facility. If the transaction had occurred on June 30, 2012, the gross purchase price, net of the working capital adjustment, would have been $53.6 million. The carrying value of the net assets sold on that date was $57.6 million which would have resulted in a loss on sale of $6.0 million. The loss on sale included $2.0 million in estimated closing-related costs comprised of $1.0 million in legal, professional, and investment banking fees, $500,000 of retention costs and $500,000 in site cleanup costs.
Note 2 — Pro Forma Adjustments
Pro Forma Adjustments: The pro forma adjustments made to the historical consolidated financial statements of PostRock are described as follows:
| A. | Reflects proceeds of $53.6 million received from the sale of which $500,000 was placed in escrow and $51.0 million utilized to pay down debt. |
| B. | Reflects the assets and liabilities sold. |
| C. | Reflects an increase of $2.0 million in accrued liabilities related to selling costs including: |
| i. | $1.0 million in legal, professional, and investment banking fees, |
| ii. | $500,000 in accrued site cleanup costs; and |
| ii. | $500,000 in employee retention costs. |
| D. | Represents the loss on sale as discussed above. |
| E. | Reflects revenues and expenses directly attributable to KPC. |
| F. | Reflects interest charges on borrowings secured by a first priority lien on the net assets of the KPC Pipeline as well as amortization of deferred financing costs related to those borrowings. |