Resolute Energy Corp - FORM 8-K/A - EX-99.2

Attached files

file	filename
8-K/A - FORM 8-K/A - Resolute Energy Corp	d517075d8ka.htm
EX-99.1 - EX-99.1 - Resolute Energy Corp	d517075dex991.htm
EX-23.1 - EX-23.1 - Resolute Energy Corp	d517075dex231.htm

Exhibit 99.2

INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS



Pro Forma Consolidated Balance Sheet as of December 31, 2012			2

Pro Forma Consolidated Statement of Income for the Year Ended December 31, 2012			3

Notes to Pro Forma Consolidated Financial Statements			4

RESOLUTE ENERGY CORPORATION

Pro Forma Consolidated Balance Sheet (UNAUDITED)

(in thousands, except share and per share amounts)


	December 31, 2012
	Resolute			Pro Forma Adjustments		Resolute Pro Forma
				(a)
Assets
Current assets:
Cash and cash equivalents	$	934		$	—	$	934
Accounts receivable		78,356			—		78,356
Deferred income taxes		10,757			—		10,757
Derivative instruments		8,523			—		8,523
Prepaid expenses and other current assets		1,691			—		1,691

Total current assets		100,261			—		100,261

Property and equipment, at cost:
Oil and gas properties, full cost method of accounting
Unproved		157,079			111,320		268,399
Proved		1,259,667			144,885		1,404,552
Other property and equipment		5,602			—		5,602
Accumulated depletion, depreciation and amortization		(191,625	)		—		(191,625	)

Net property and equipment		1,230,723			256,205		1,486,928

Other assets:
Restricted cash		18,422			—		18,422
Derivative instruments		475			—		475
Deferred financing costs		13,006			1,700		14,706
Other assets		1,243			—		1,243

Total assets	$	1,364,130		$	257,905	$	1,622,035

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	96,263		$	—	$	96,263
Accrued interest payable		5,698			—		5,698
Asset retirement obligations		3,417			—		3,417
Derivative instruments		31,847			—		31,847

Total current liabilities		137,225			—		137,225

Long term liabilities:
Credit facility		162,000			257,625		419,625
Senior notes, net of accumulated premium amortization of $10 at December 31, 2012		401,865			—		401,865
Asset retirement obligations		15,738			280		16,018
Derivative instruments		8,204			—		8,204
Deferred income taxes		101,914			—		101,914
Other long term liabilities		5,000			—		5,000

Total liabilities		831,946			257,905		1,089,851

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding		—			—		—
Common stock, $0.0001 par value; 225,000,000 shares authorized; issued and outstanding 61,872,694 shares at December 31, 2012		6			—		6
Additional paid-in capital		516,650			—		516,650
Retained earnings (accumulated deficit)		15,528			—		15,528

Total stockholders’ equity		532,184			—		532,184

Total liabilities and stockholders’ equity	$	1,364,130		$	257,905	$	1,622,035

See notes to Pro Forma Consolidated Financial Statements

RESOLUTE ENERGY CORPORATION

Pro Forma Consolidated Statement of Income (UNAUDITED)

(in thousands, except per share data)


	Year Ended December 31, 2012
	Resolute			Celero		RSP		Pro Forma Adjustments			Resolute Pro Forma
				(b)		(b)
Revenue:
Oil	$	240,444		$	34,353	$	78,642	$	(721	)(c)	$	352,718
Gas		16,289			1,420		3,566		(41	)(c)		21,234
Other		1,535			861		8,340		(19	)(c)		10,717

Total revenue		258,268			36,634		90,548		(781	)(c)		384,669

Operating expenses
Lease operating		79,922			14,350		6,391		(59	)(c)		100,604
Production and ad valorem taxes		35,716			2,822		5,802		(280	)(c)		44,060
Depletion, depreciation, amortization, and asset retirement obligation accretion		78,414			—		—		43,629	(d)		122,043
General and administrative		24,032			—		—		—			24,032

Total operating expenses		218,084			17,172		12,193		43,290			290,739

Income from operations		40,184			19,462		78,355		(44,071	)		93,930

Other income (expense):
Interest expense, net		(15,523	)		—		—		(19,416	)(e)		(34,939	)
Realized and unrealized gains on derivative instruments		5,176			—		—		—			5,176
Other income		20			—		—		—			20

Total other expense		(10,327	)		—		—		(19,416	)		(29,743	)

Income (loss) before income taxes		29,857			19,462		78,355		(63,487	)		64,187
Income tax expense		(11,881	)		—		—		(13,665	)(f)		(25,546	)

Net income (loss)	$	17,976		$	19,462	$	78,355	$	(77,152	)	$	38,641

Net income per common share:
Basic	$	0.30									$	0.65
Diluted	$	0.30									$	0.65
Weighted average common shares outstanding:
Basic		59,424										59,424
Diluted		59,452										59,452

See Notes to Pro Forma Consolidated Financial Statements

RESOLUTE ENERGY CORPORATION

Notes to Pro Forma Consolidated Financial Statements for the

Year Ended December 31, 2012 (UNAUDITED)

Note 1 – Basis of Presentation

The accompanying statements present Resolute Energy Corporation’s (“Resolute,” the “Company,” “we,” and “our”) unaudited pro forma consolidated statement of income for the year ended December 31, 2012 and our unaudited pro forma consolidated balance sheet as of December 31, 2012. These unaudited statements have been developed by applying pro forma adjustments to our historical financial statements. The unaudited pro forma statement of income data for the period presented give effect to our acquisition of certain Permian Basin oil and gas properties located primarily in Howard County, Texas, and Lea County, New Mexico (the “Celero Properties”), from Celero Energy II, LP and an affiliate (“Celero”) and certain Permian Basin oil and gas properties near Midland, Texas from RSP Permian, LLC (“RSP”) in December 2012 and March 2013 (the “RSP Properties”) (together the “Permian Acquisitions”) as if they had been completed on January 1, 2012. The unaudited pro forma balance sheet gives effect to the acquisitions as if they had occurred on December 31, 2012.

The pro forma adjustments related to the purchase price allocation of the Permian Acquisitions are preliminary and are subject to revision as additional information becomes available. Revisions to the preliminary purchase price allocation may have a significant impact on the pro forma amounts of total assets, total liabilities and stockholders’ equity and depreciation, depletion and amortization expense. The pro forma adjustments related to the Permian Acquisitions reflect the fair values allocated to our assets as of the acquisition dates and do not necessarily reflect the fair values that would have been recorded if the acquisition had occurred on January 1, 2012.

In connection with the 32.35% interest acquired from RSP on December 28, 2012, we paid $6 million to acquire the option to purchase the remaining undivided 67.65% interest in the RSP Properties at any time through March 22, 2013 (the “Option Properties”). On March 22, 2013, we exercised the option and completed the acquisition of the remaining 67.65% interest in and operatorship of the RSP Properties for a purchase price of approximately $256 million, net of the option fee (the “RSP Acquisition”).

The unaudited pro forma financial statements should be read together with the historical financial statements of Resolute and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and the historical statements of revenue and direct operating expenses for the Celero Properties filed as Exhibit 99.1 to Current Report on Form 8-K/A on March 7, 2013, and the RSP Properties and the related notes filed as Exhibit 99.1 in this Current Report on Form 8-K/A.

The unaudited pro forma consolidated financial statements are included for informational purposes only and do not purport to reflect the results of operations or financial position that would have occurred had the Permian Acquisitions occurred on the acquisition dates. Accordingly, they should not be relied upon as indicative of our results of operations or financial position had the Permian Acquisitions occurred on the dates assumed because they necessarily exclude various operating expenses. Additionally, the unaudited pro forma financial statements are not a projection of our results of operations or financial position for any future period or date.

Note 2 – Adjustments to Unaudited Pro Forma Consolidated Financial Statements

Represents approximately $256 million borrowed on our amended credit facility to fund the purchase of the remaining undivided 67.65% interest in the RSP Properties, deferred financing costs incurred to amend our credit facility and assumed asset retirement obligations associated with the newly acquired properties. In regard to the RSP properties, the Company allocated $111 million to unproved oil and gas properties and $145 million to proved oil and gas properties.

Represents the historical revenue and direct operating expenses of the Permian Acquisitions.

Represents the revenue and direct operating expenses attributable to the Celero Properties that were included in Resolute’s consolidated statement of income for the year ended December 31, 2012.

Represents the increase in depletion, depreciation, amortization and accretion expense computed on a unit of production basis following the fair value allocation of the purchase price to proved and unproved oil and gas properties, as if the Permian Acquisitions were consummated on January 1, 2012.

Represents the net increase in interest expense resulting from the issuance of senior notes at an annual interest rate of 8.50 percent, increased borrowings under our credit facility and increased amortization of deferred financing costs associated with the credit facility. Although the Company anticipates capitalizing interest on qualifying unproved properties in the future, no interest has been capitalized in the pro forma consolidated statement of income.

Assumes an effective tax rate of 39.8% on the incremental income before income taxes for the year ended December 31, 2012. This reflects both the federal and state statutory income tax rates which were in effect during the period presented.

Note 3 – SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)

Estimated Net Quantities of Oil and Gas Reserves

The pro forma estimates of proved oil and gas reserves and discounted future net cash flows for the properties as of December 31, 2012 were prepared by Resolute’s petroleum engineers. Users of this information should be aware that the process of estimating quantities of proved oil and gas reserves is very complex, requiring significant subjective decisions to be made in the evaluation of available geologic, engineering, and economic data for each reservoir. The data for any given reservoir may also change substantially over time as a result of numerous factors, including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variance in available data for various reservoirs make estimates generally less precise than other estimates included in the statement of revenue and direct operating expenses disclosures.

The pro forma estimated proved net recoverable reserves presented below include only those quantities of oil and gas geologic and engineering data that demonstrate with reasonable certainty to be recoverable in future periods from known reservoirs under existing economic, operating and regulatory practices. Proved developed reserves represent only those reserves estimated to be recovered through existing wells. Proved undeveloped reserves include those reserves that may be recovered from new wells on undrilled acreage or from existing wells on which a relatively major expenditure for recompletion or secondary recovery operation is required. All of the pro forma properties’ proved reserves set forth herein are located in the Continental United States. The estimate of reserves and the standardized measure of discounted future net cash flows shown below reflect Resolute Southwest’s development plan for these properties.

The pro forma standardized measure of discounted future cash flows does not purport, nor should it be interpreted to present, estimates of the fair value of the properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs and a discount factor more representative of the time value of money and risks inherent in reserve estimates.

The following tables set forth certain unaudited pro forma information concerning Resolute’s proved oil, gas and NGL reserves for the year ended December 31, 2012, giving effect to the Permian Acquisitions as if they had occurred on January 1, 2012. The Resolute reserves presented below exclude the acquired reserves from the Permian Acquisitions that were displayed in the Resolute 2012 Annual Report on Form 10-K. The following tables provide a summary of the changes in estimated reserves for the periods presented (in thousands).


	Resolute			Celero			RSP			Resolute Pro Forma
	Oil and NGL (Bbl)
Proved reserves:
Balance at January 1, 2012		58,938			2,324			9,261			70,523
Purchase of minerals in place		3,847			—			—			3,847
Production		(2,804	)		(410	)		(1,161	)		(4,375	)
Extensions and discoveries		4,358			1,536			5,308			11,202
Sales of minerals in place		(2,594	)		—			—			(2,594	)
Revisions of previous estimates		1,288			—			—			1,288

Balance at December 31, 2012		63,033			3,450			13,408			79,891

Proved developed reserves:
As of December 31, 2012		37,688			2,180			6,453			46,321
As of December 31, 2011		33,950			2,324			4,440			40,714
Proved undeveloped reserves:
As of December 31, 2012		25,345			1,270			6,955			33,570
As of December 31, 2011		24,988			—			4,821			29,809

	Resolute			Celero			RSP			Resolute Pro Forma
	Gas (Mcf)
Proved reserves:
Balance at January 1, 2012		35,157			1,652			11,686			48,495
Purchase of minerals in place		1,068			—			—			1,068
Production		(3,565	)		(402	)		(1,465	)		(5,432	)
Extensions and discoveries		3,400			1,970			8,591			13,961
Sales of minerals in place		(735	)		—			—			(735	)
Revisions of previous estimates		3,091			—			—			3,091

Balance at December 31, 2012		38,416			3,220			18,812			60,448

Proved developed reserves:
As of December 31, 2012		20,750			1,738			9,519			32,007
As of December 31, 2011		17,523			1,652			4,207			23,382
Proved undeveloped reserves:
As of December 31, 2012		17,666			1,482			9,293			28,441
As of December 31, 2011		17,634			—			7,479			25,113


	Resolute			Celero			RSP			Resolute Pro Forma
	Total (Boe)
Proved reserves:
Balance at January 1, 2012		64,798			2,599			11,208			78,605
Purchase of minerals in place		4,025			—			—			4,025
Production		(3,398	)		(477	)		(1,405	)		(5,280	)
Extensions and discoveries		4,924			1,864			6,740			13,528
Sales of minerals in place		(2,717	)		—			—			(2,717	)
Revisions of previous estimates		1,804			—			—			1,804

Balance at December 31, 2012		69,436			3,986			16,543			89,965

Proved developed reserves:
As of December 31, 2012		41,147			2,470			8,040			51,657
As of December 31, 2011		36,871			2,599			5,141			44,611
Proved undeveloped reserves:
As of December 31, 2012		28,289			1,516			8,503			38,308
As of December 31, 2011		27,927			—			6,067			33,994

Standardized Measure of Discounted Future Net Cash Flows

The pro forma standardized measure related to proved oil, gas and NGL reserves, which give effect to the Celero Properties and RSP Properties, is summarized below. The Resolute standardized measure presented below excludes the acquired reserves from the Permian Acquisitions that was displayed in the Resolute 2012 Annual Report on Form 10-K. This summary is based on a valuation of proved reserves using discounted cash flows based on SEC pricing applicable for each year, costs and economic conditions and a 10% discount rate. The additions to proved reserves from new discoveries and extensions and the impact of changes in prices and costs associated with proved reserves could vary significantly from year to year. Accordingly, the information presented below is not an estimate of fair value and should not be considered indicative of any trends.

Standardized Measure of Oil and Gas


	Year Ended December 31, 2012
	Resolute			Celero			RSP			Resolute Pro Forma
	(in thousands)
Future cash inflows	$	5,375,091		$	286,943		$	1,004,490		$	6,666,524
Future production costs		(2,443,260	)		(139,016	)		(299,604	)		(2,881,880	)
Future development costs		(749,491	)		(35,489	)		(146,940	)		(931,920	)
Future income tax expense		(580,468	)		(41,602	)		(206,440	)		(828,510	)

Future net cash flows		1,601,872			70,836			351,506			2,024,214
Discount of 10% per annum		(854,093	)		(3,443	)		(101,824	)		(959,360	)

Standardized measure of discounted future net cash flows	$	747,779		$	67,393		$	249,682		$	1,064,854

During recent years, prices paid for oil and gas have fluctuated significantly. Estimated discounted future net cash flows in the table above for December 31, 2012 were computed using an average NYMEX price of $94.71 per Bbl of oil and $2.76 per MMBtu of gas.

The following table sets forth the pro forma changes in standardized measure of discounted future net cash flows relating to proved oil and gas reserves for the periods indicated.

Changes in Standardized Measure


	Year Ended December 31, 2012
	Resolute			Celero			RSP			Resolute Pro Forma
	(in thousands)
Standardized measure, beginning of year	$	816,162		$	30,413		$	120,497		$	967,072
Sales of oil and gas produced, net		(157,008	)		(19,462	)		(78,355	)		(254,825	)
Changes in estimated future development costs		(102,420	)		(17,002	)		(76,140	)		(195,562	)
Accretion of discount		76,699			4,828			19,127			100,654
Revisions, extensions and discoveries		144,565			56,163			230,584			431,312
Net change in income taxes		95,264			(9,075	)		(35,230	)		50,959
Other		(125,483	)		21,528			69,199			(34,756	)

Standardized measure, end of year	$	747,779		$	67,393		$	249,682		$	1,064,854

Resolute Energy Corp - FORM 8-K/A - EX-99.2 - April 5, 2013

Attached files

Resolute Energy Corp Reports