Attached files
| file | filename |
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| 8-K - FORM 8-K - EXCO RESOURCES INC | d486775d8k.htm |
| EX-99.1 - EX-99.1 - EXCO RESOURCES INC | d486775dex991.htm |
Exhibit 99.2
EXCO Resources, Inc.
Pro forma financial information and footnotes
for the year ended December 31, 2012
We are an independent oil and natural gas company engaged in the acquisition, exploration, exploitation, development and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays. Our principal operations are conducted in certain key U.S. oil and natural gas areas including East Texas, North Louisiana, Appalachia and the Permian Basin in West Texas. In addition to our oil and natural gas producing operations, we own 50% interests in two midstream joint ventures located in East Texas, North Louisiana and Appalachia.
On February 14, 2013, we formed a partnership with Harbinger Group Inc., or HGI. Pursuant to the agreements governing the transaction, we contributed our conventional non-shale assets in East Texas and North Louisiana and our shallow Canyon Sand and other assets in the Permian Basin of West Texas to the partnership, or the EXCO/HGI Partnership, in exchange for approximately $573.3 million of cash, after customary preliminary purchase price adjustments, and a 25.5% economic interest in the partnership. HGI owns the remaining 74.5% economic interest in the partnership. HGI contributed cash to us in the amount of approximately $348.3 million. The remaining proceeds we received were in the form of a cash distribution from the partnership of $225.0 million from a draw on the EXCO/HGI Partnership’s credit agreement discussed below. The primary strategy of the EXCO/HGI Partnership will be to acquire conventional producing oil and natural gas properties to enhance the partnership’s asset value and cash flow.
In connection with its formation, the EXCO/HGI Partnership entered into a credit agreement, or the EXCO/HGI Partnership Credit Agreement, with an initial borrowing base of $400.0 million, of which $230.0 million was drawn at closing. Borrowings under the EXCO/HGI Partnership Credit Agreement are secured by the properties contributed to the EXCO/HGI Partnership and we do not guarantee the EXCO/HGI Partnership’s debt.
Proceeds from the formation of the EXCO/HGI Partnership were used to reduce outstanding borrowings under our credit agreement, or the EXCO Resources Credit Agreement.
Unaudited pro forma financial information
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to be indicative of the results of operations that would have actually occurred had the above described transaction occurred on the indicated date or that may be achieved in the future. We will account for our 25.5% interest in the assets contributed to the EXCO/HGI Partnership using proportionate consolidation. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with EXCO’s Form 10-K for the year ended December 31, 2012, filed on February 21, 2013. Management believes that the assumptions used in these unaudited pro forma financial statements provide a reasonable basis for presenting the effect of these transactions. As these pro forma financial statements are based on EXCO’s latest financial statements filed with the Securities and Exchange Commission in its Form 10-K for the year ended December 31, 2012, they do not reflect the impact of transactions occurring after December 31, 2012 through the closing date, which could impact the amounts of the transaction entries, including the gain on the divestiture.
Pro forma balance sheet
The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2012 is based on the audited consolidated balance sheet of EXCO as of December 31, 2012. The pro forma consolidated balance sheet gives effect to the EXCO/HGI Partnership and related adjustments as if it had occurred on December 31, 2012.
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| EXCO Resources, Inc. | ||||||||||||
| Unaudited Pro forma condensed consolidated balance sheet | ||||||||||||
| As of December 31, 2012 | ||||||||||||
| (in thousands) |
EXCO Resources, Inc. Consolidated |
Pro forma adjustments |
Pro forma EXCO Resources, Inc. Consolidated |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 45,644 | $ | 573,265 | (a) | $ | 45,644 | |||||
| (573,265 | )(d) | |||||||||||
| Restricted cash |
70,085 | 70,085 | ||||||||||
| Accounts receivable, net: |
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| Oil and natural gas |
84,348 | 84,348 | ||||||||||
| Joint interest |
69,446 | 69,446 | ||||||||||
| Interest and other |
15,053 | 15,053 | ||||||||||
| Inventory |
5,705 | 5,705 | ||||||||||
| Derivative financial instruments |
49,500 | (3,055 | )(a) | 46,445 | ||||||||
| Other |
22,085 | 22,085 | ||||||||||
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| Total current assets |
361,866 | 358,811 | ||||||||||
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| Equity investments |
347,008 | 347,008 | ||||||||||
| Oil and natural gas properties (full cost accounting method): |
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| Unproved oil and natural gas properties and development costs not being amortized |
470,043 | (7,661 | )(a) | 462,382 | ||||||||
| Proved developed and undeveloped oil and natural gas properties |
2,715,767 | (209,818 | )(a) | 2,505,949 | ||||||||
| Accumulated depletion |
(1,945,565 | ) | (1,945,565 | ) | ||||||||
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| Oil and natural gas properties, net |
1,240,245 | 1,022,766 | ||||||||||
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| Gas gathering assets |
130,830 | (95,271 | )(a) | 35,559 | ||||||||
| Accumulated depreciation and amortization |
(34,364 | ) | 25,400 | (a) | (8,964 | ) | ||||||
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| Gas gathering assets, net |
96,466 | 26,595 | ||||||||||
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| Office, field and other equipment, net |
20,725 | 20,725 | ||||||||||
| Deferred financing costs, net |
22,584 | 1,177 | (b) | 20,092 | ||||||||
| (3,669 | )(e) | |||||||||||
| Derivative financial instruments |
16,554 | (562 | )(a) | 15,992 | ||||||||
| Goodwill |
218,256 | (52,017 | )(c) | 166,239 | ||||||||
| Other assets |
28 | 28 | ||||||||||
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| Total assets |
$ | 2,323,732 | $ | 1,978,256 | ||||||||
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| Liabilities and shareholders’ equity |
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| Current liabilities: |
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| Accounts payable and accrued liabilities |
$ | 83,240 | (8,127 | )(a) | $ | 76,113 | ||||||
| 1,000 | (e) | |||||||||||
| Revenues and royalties payable |
134,066 | 134,066 | ||||||||||
| Accrued interest payable |
17,029 | 17,029 | ||||||||||
| Current portion of asset retirement obligations |
1,200 | (503 | )(a) | 697 | ||||||||
| Income taxes payable |
— | — | ||||||||||
| Derivative financial instruments |
2,396 | 2,396 | ||||||||||
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| Total current liabilities |
237,931 | 230,301 | ||||||||||
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| Long-term debt |
1,848,972 | 58,650 | (b) | 1,334,357 | ||||||||
| (573,265 | )(d) | |||||||||||
| Deferred income taxes |
— | — | ||||||||||
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| Derivative financial instruments |
26,369 | 26,369 | ||||||||||
| Asset retirement obligations and other long-term liabilities |
61,067 | (25,605 | )(a) | 35,462 | ||||||||
| Commitments and contingencies |
— | — | ||||||||||
| Shareholders’ equity: |
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| Preferred stock, $0.001 par value; 10,000,000 authorized shares; none issued and outstanding | — | — | ||||||||||
| Common stock, $0.001 par value 350,000,000 authorized shares; 218,126,071 shares issued and 217,586,850 shares outstanding at December 31, 2012 | 215 | 215 | ||||||||||
| Additional paid-in capital |
3,200,067 | 3,200,067 | ||||||||||
| Accumulated deficit |
(3,043,410 | ) | 316,533 | (a) | (2,841,036 | ) | ||||||
| (57,473 | )(b) | |||||||||||
| (52,017 | )(c) | |||||||||||
| (4,669 | )(e) | |||||||||||
| Treasury stock, at cost; 539,221 shares at December 31, 2012 |
(7,479 | ) | (7,479 | ) | ||||||||
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| Total shareholders’ equity |
149,393 | 351,767 | ||||||||||
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| Total liabilities and shareholders’ equity |
$ | 2,323,732 | $ | 1,978,256 | ||||||||
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See accompanying notes.
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EXCO Resources, Inc.
Notes to pro forma condensed consolidated balance sheet
As of December 31, 2012
(Unaudited)
| (a) | Pro forma adjustment to reflect closing of the EXCO/HGI Partnership on February 14, 2013 for aggregate cash proceeds of $573.3 million, after customary preliminary closing adjustments. The EXCO/HGI Partnership is treated as a conveyance of a partial interest in oil and natural gas properties and accordingly, this pro forma adjustment reflects sale of 74.5% of our economic interest in the oil and natural gas properties and related assets and liabilities effectively sold in the EXCO/HGI Partnership transaction. As set forth in the table below, pro forma adjustments reflect receipt of cash proceeds from the EXCO/HGI Partnership, reduction in EXCO’s historical cost, based upon relative fair value of the assets sold and assets retained, attributable to 74.5% of the assets contributed to the EXCO/HGI Partnership and transfer of 74.5% of asset retirement obligations and other liabilities attributable to the assets contributed to the EXCO/HGI Partnership. |
| (in thousands) |
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| Gross cash proceeds from Partnership | $ | 573,265 | ||
| EXCO’s 25.5% of the EXCO/HGI Partnership Credit Agreement, net of deferred financing costs | (57,375 | ) | ||
| Asset retirement obligations and other liabilities assumed by the EXCO/HGI Partnership | 34,235 | |||
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| Total consideration to EXCO | 550,125 | |||
| Carrying value of unproved properties | (7,661 | ) | ||
| Carrying value of Vernon Gathering and related assets | (69,871 | ) | ||
| Carrying value of swap contracts novated | (3,617 | ) | ||
| Allocated full cost pool capitalized costs attributable to proved properties transferred to the EXCO/HGI Partnership | (209,818 | ) | ||
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| Gain from contribution of assets to EXCO/HGI Partnership (before elimination of goodwill and other items) | $ | 259,158 | ||
| (b) | Pro forma adjustment to reflect EXCO’s proportionate 25.5% of EXCO/HGI Partnership long term debt incurred pursuant to borrowings of $230.0 million under the EXCO/HGI Partnership revolving credit facility at closing and to reflect EXCO’s proportionate 25.5% of deferred financing costs associated with the $400.0 million EXCO/HGI Partnership Credit Agreement. EXCO does not guarantee the EXCO/HGI Partnership’s debt. |
| (c) | Pro forma adjustment to eliminate goodwill attributable to oil and natural gas properties and related assets effectively sold to the EXCO/HGI Partnership based on the relative fair values of the assets sold to total estimated fair value of EXCO’s total oil and natural oil and gas properties, including unproved properties, as of December 31, 2012. |
| (d) | Pro forma adjustment to reflect use of net cash proceeds from the EXCO/HGI Partnership to pay down the EXCO Resources Credit Agreement. |
| (e) | Pro forma adjustment to write off deferred financing costs associated with borrowing base reductions to the EXCO Resources Credit Agreement resulting from the transfer of oil and natural gas properties to the EXCO/HGI Partnership and record estimated expenses payable of $1.0 million incurred in connection with the EXCO/HGI Partnership transaction. |
Pro forma statements of operations
The following unaudited condensed consolidated pro forma financial information presents a statement of operations for the year ended December 31, 2012, which is based on the audited consolidated financial statements for EXCO for the year ended December 31, 2012 and the unaudited statement of revenues and direct operating costs for the year ended December 31, 2012
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with respect to the oil and natural gas properties contributed to the EXCO/HGI Partnership as if it had occurred on January 1, 2012.
| EXCO Resources, Inc. | ||||||||||||||
| Unaudited pro forma condensed consolidated statement of operations | ||||||||||||||
| Year ended December 31, 2012 | ||||||||||||||
| (in thousands) |
EXCO Resources, Inc. Consolidated |
Pro forma adjustments |
Pro forma EXCO Resources, Inc. Consolidated |
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| Revenues: |
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| Oil and natural gas |
$ | 546,609 | $ | (118,788 | ) | (1) | $ | 427,821 | ||||||
| Costs and expenses: |
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| Oil and natural gas operating costs |
77,127 | (34,884 | ) | (1) | 42,243 | |||||||||
| Production and ad valorem taxes |
27,483 | (14,122 | ) | (1) | 13,361 | |||||||||
| Gathering and transportation |
102,875 | (9,567 | ) | (1) | 93,308 | |||||||||
| Depletion, depreciation and amortization |
303,156 | (46,199 | ) | (2) | 256,957 | |||||||||
| Write-down of oil and natural gas properties |
1,346,749 | (472,381 | ) | (4) | 874,368 | |||||||||
| Accretion of discount on asset retirement obligations |
3,887 | (1,734 | ) | (3) | 2,153 | |||||||||
| General and administrative |
83,818 | (6,558 | ) | (5) | 77,260 | |||||||||
| (Gain) loss and other operating items |
17,029 | 17,029 | ||||||||||||
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| Total costs and expenses |
1,962,124 | 1,376,679 | ||||||||||||
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| Operating income (loss) |
(1,415,515 | ) | (948,858 | ) | ||||||||||
| Other income (expense): |
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| Interest expense |
(73,492 | ) | 16,423 | (6) | (58,741 | ) | ||||||||
| (1,672 | ) | (7) | ||||||||||||
| Gain on derivative financial instruments |
66,133 | (3,617 | ) | (8) | 62,516 | |||||||||
| Other income |
969 | 969 | ||||||||||||
| Equity income |
28,620 | 28,620 | ||||||||||||
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| Total other income (expense) |
22,230 | 33,364 | ||||||||||||
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| Income (loss) before income taxes |
(1,393,285 | ) | (915,494 | ) | ||||||||||
| Income tax expense |
— | — | ||||||||||||
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| Net income (loss) |
$ | (1,393,285 | ) | $ | (915,494 | ) | ||||||||
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See accompanying notes.
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EXCO Resources, Inc.
Notes to pro forma condensed consolidated statements of operations
For the year ended December 31, 2012
(Unaudited)
| (1) | Pro forma adjustment to eliminate 74.5% of oil and natural gas revenues and direct operating expenses for the year ended December 31, 2012 attributable to the assets contributed to the EXCO/HGI Partnership, representing the economic interest in the properties effectively sold to HGI. |
| (2) | Pro forma adjustment to eliminate depreciation, depletion and amortization attributable to the 74.5% of assets contributed to the EXCO/HGI Partnership for the year ended December 31, 2012 based upon the historical EXCO consolidated depreciation, depletion and amortization rate. |
| (3) | Pro forma adjustment to eliminate 74.5% of accretion of discount on asset retirement obligations (ARO) attributable to the assets contributed to the EXCO/HGI Partnership for the year ended December 31, 2012. |
| (4) | Pro forma adjustment to reflect proportionate elimination of the write-down in the carrying value of oil and natural gas properties contributed to the EXCO/HGI Partnership resulting from the full cost pool ceiling limitation test at December 31, 2012 based upon the relative fair value of assets sold versus assets retained. |
| (5) | Pro forma entry to adjust general and administrative expenses for the year ended December 31, 2012 for 74.5% of estimated costs of agreed-upon personnel related and other administrative services attributable to the EXCO/HGI Partnership pursuant to an Administrative Services Agreement (ASA), executed at closing, between EXCO and HGI. |
| (6) | Pro forma adjustment to reflect reduction in interest expense at an average interest rate of 2.72% plus related amortization of deferred financing costs of $0.8 million, for the year ended December 31, 2012 as a result of pro forma reduction of $573.3 million of EXCO outstanding debt under the EXCO Resources Credit Agreement using proceeds from the EXCO/HGI Partnership transaction, as if the reduction in debt had occurred on January 1, 2012. |
| (7) | Pro forma adjustment to reflect EXCO’s 25.5% proportionate share of EXCO/HGI Partnership interest expense (2.45% interest rate) and amortization of deferred financing costs of $0.9 million for the year ended December 31, 2012 related to EXCO’s proportionate consolidation of the EXCO/HGI Partnership’s $230.0 million of revolving credit debt, as if the borrowings by the EXCO/HGI Partnership had occurred on January 1, 2012. |
| (8) | Pro forma adjustment to eliminate the gain on derivative financial instruments for the year ended December 31, 2012 attributable to 74.5% of the natural gas swap contracts novated to the EXCO/HGI Partnership. |
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