Attached files
file | filename |
---|---|
EX-23.1 - EX-23.1 - CUBIC ENERGY INC | a14-11660_1ex23d1.htm |
EX-99.3 - EX-99.3 - CUBIC ENERGY INC | a14-11660_1ex99d3.htm |
8-K/A - AMENDMENT TO FORM 8-K - CUBIC ENERGY INC | a14-11660_18ka.htm |
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On October 2, 2013, Cubic Energy Inc. (the Company) consummated all of the following transactions, which are referred to herein, collectively, as the Recent Transactions. This date will be considered as the effective date for the purposes of recording the financing transactions, acquisitions and new operations on the books and records of the Company.
Formation of New Subsidiaries
The Company approved the formation and capitalization of two new, wholly owned direct subsidiaries (Cubic Asset Holding, LLC, a Delaware limited liability company (Cubic Asset Holding), and Cubic Louisiana Holding, LLC, a Delaware limited liability company (Cubic Louisiana Holding)) and two new, wholly owned indirect subsidiaries (Cubic Asset LLC, a Delaware limited liability company and a direct subsidiary of Cubic Asset Holding (Cubic Asset), and Cubic Louisiana, LLC, a Delaware limited liability company and a direct subsidiary of Cubic Louisiana Holding (Cubic Louisiana)).
Senior Secured Notes Financing
The Company entered into a Note Purchase Agreement dated October 2, 2013 (the Note Purchase Agreement), pursuant to which the Company issued an aggregate of $66.0 million of senior secured notes due October 2, 2016 (the Notes) to certain purchasers. The Notes bear interest at the rate of 15.5% per annum, in cash, payable quarterly; provided, however, that interest for the first six months following the closing shall be paid 7.0% per annum in cash and 8.5% per annum in additional Notes. The indebtedness under the Note Purchase Agreement is secured by substantially all of the assets of the Company, including a first priority lien over all of the assets of the Company, Cubic Asset and Cubic Asset Holding and a second priority lien over all of the assets of Cubic Louisiana and Cubic Louisiana Holding.
Issuance of Warrants and Series C Redeemable Voting Preferred Stock
Pursuant to the terms of a Warrant and Preferred Stock Agreement, dated as of October 2, 2013 (the Warrant and Preferred Stock Agreement), and in connection with the issuance and sale of the Notes under the Note Purchase Agreement, the Company issued certain warrants and shares of Series C Redeemable Voting Preferred Stock, par value $0.01 per share (the Series C Redeemable Voting Preferred Stock), to certain purchasers of the Notes and their affiliates (the Investors). The Company issued warrants exercisable for (a) an aggregate of 65,834,549 shares of the Companys common stock, par value $0.05 per share (the Common Stock), at an exercise price of $0.01 per share (the Class A Warrants), and (b) an aggregate of 32,917,275 shares of Common Stock, at an exercise price of $0.50 per share (the Class B Warrants and together with the Class A Warrants, the Warrants).
The Company also issued an aggregate of 98,751.824 shares of Series C Redeemable Voting Preferred Stock to the Investors. The holders of the Series C Redeemable Voting Preferred Stock are entitled to vote, together with holders of Common Stock, as a single class with respect to all matters presented to holders of Common Stock of the Company. The holders of Series C Redeemable Voting Preferred Stock are entitled, in the aggregate, to a number of votes equal to the number of shares of Common Stock that would be issuable upon the exercise of all outstanding Warrants on a Full Physical Settlement basis (as defined in the Warrant and Preferred Stock Agreement). The holders of Series C Redeemable Voting Preferred Stock are not entitled to receive any dividends from the Company. Shares of the Series C Redeemable Voting Preferred Stock have a stated value of $0.01 per share and may be redeemed at the option of the holders thereof at any time.
Hedging Transaction
On October 2, 2013, the Company, through its subsidiary Cubic Asset, entered into a Call Option Structured Derivative arrangement with a third party that resulted in the receipt of an upfront payment at closing of approximately $35,000,000, through the sale of calls, which upfront payment approximated fair value of the calls sold at inception. As a result, the Call Option Structured Derivative arrangement was initially recognized and measured at the amount of its upfront payment. Under the terms of the Call Option Structured Derivative arrangement, Cubic Asset sold calls to the third party covering (i) approximately 556,000 barrels of oil at a strike price set between $80 per barrel and $90 per barrel, and
(ii) approximately 51.3 million MMBtus of gas at a strike price set between $3.45 per MMBtu and $3.90 per MMBtu. The scheduled volumes subject to the calls sold relate to production months from November 2013 through December 2018. The Company is subject to the price risks associated with product price changes that differ from the specified call prices. If the market price during the applicable production month is above the applicable strike price, Cubic Asset would be required to pay the third party the difference between the market price and strike price for the amount of production subject to the call. This arrangement does not hedge the Companys risk associated with product price decreases.
On October 2, 2013, the Company, through its subsidiary Cubic Asset, entered into a Fixed Price Swap arrangement. Under the terms of the Fixed Price Swap arrangement, Cubic Asset sold calls to a third party covering approximately 18,000 barrels of oil at a price of $92 per barrel. The scheduled volumes subject to the calls sold relate to production months from November 2013 through October 2016. Cubic Asset is subject to the price risks associated with product price increases above the specified fixed prices. Cubic Asset is using swaps to hedge some of its natural gas production. Cubic Asset receives the fixed price and pays the third party the floating market price during the applicable production month for the amount of production subject to the call.
Wells Fargo Debt Restructuring
Cubic Louisiana and Wells Fargo Energy Capital, Inc. (WFEC) entered into an Amended and Restated Credit Agreement dated October 2, 2013 (the Credit Agreement). In conjunction with entering into the Credit Agreement, the Company assigned all of its previously held oil and gas interests that it held in Northwest Louisiana to Cubic Louisiana (the Legacy Louisiana Assets). Pursuant to the terms of the Credit Agreement, the Company repaid the $5 million term loan payable to WFEC, and Cubic Louisiana assumed the remaining unpaid debt to WFEC, which amount was $20,865,110 as of that date. That debt is reflected in a term loan bearing interest at the Wells Fargo Bank prime rate, plus 2%, per annum. In the event that Cubic Louisiana does not have available cash to pay interest on the Credit Facility, accrued and unpaid interest will be paid in kind via an additional promissory note. As part of the Credit Agreement, WFEC is providing a revolving credit facility in the amount of up to $10,000,000, bearing interest at the same rate, with all advances under that revolving credit facility to be made in the sole discretion of WFEC. The indebtedness to WFEC pursuant to the Credit Agreement is secured by a first priority lien over all of the assets of Cubic Louisiana and Cubic Louisiana Holding. The other oil and gas properties of Cubic and its other subsidiaries, including the assets acquired from Gastar, Navasota and Tauren, as described below, do not secure the indebtedness under the Credit Agreement.
Conversion of Wallen Note and Series A Convertible Preferred Stock into Series B Convertible Preferred Stock
The Company entered into and consummated the transactions contemplated by a Conversion and Preferred Stock Purchase Agreement dated as of October 2, 2013 (the Conversion Agreement) with Calvin A. Wallen III, the Companys Chairman, President and Chief Executive Officer, and Langtry Mineral & Development, LLC, an entity controlled by Mr. Wallen. Pursuant to the terms of the Conversion Agreement, (a) Langtry was issued 12,047 shares of Series B Convertible Preferred Stock, with an aggregate stated value of $12,047,000, in exchange for the cancellation of all of the issued and outstanding shares of Series A Convertible Preferred Stock held by Langtry and (b) Mr. Wallen was issued 2,115 shares of Series B Convertible Preferred Stock, with an aggregate stated value of $2,115,000, in exchange for the cancellation of a promissory note payable to Mr. Wallen in the principal amount of $2,000,000, plus $114,986 of accrued and unpaid interest.
The Series B Convertible Preferred Stock is entitled to dividends at a rate of 9.5% per annum and, subject to certain limitations, is convertible into the Common Stock at an initial conversion price of $0.50 per share of Common Stock. The holders of the Series B Convertible Preferred Stock are entitled to vote (on an as-converted basis), together with holders of Common Stock, as a single class with respect to all matters presented to holders of Common Stock.
Acquisition of Properties from Gastar
The Company consummated the transactions contemplated by the previously announced Purchase and Sale Agreement dated as of April 19, 2013 (the Gastar Agreement) with Gastar Exploration Texas, LP (Gastar) and Gastar Exploration USA, Inc. Pursuant to the Gastar Agreement, the Company acquired proven reserves, oil & natural gas production and undeveloped leasehold interests in Leon and Robertson Counties, Texas. The acquired properties include approximately 17,400 net acres of leasehold interests. The acquisition price paid by the Company at closing was $39,118,830, following various adjustments set forth in the Gastar Agreement, and net of the various deposits
paid prior to the closing date. For purposes of allocating revenues and expenses and capital costs between Gastar and the Company, such amounts were netted effective January 1, 2013 and have been recorded as an adjustment to the purchase price.
Acquisition of Properties from Navasota
On September 27, 2013, the Company entered into a Purchase and Sale Agreement (the Navasota Agreement) with Navasota Resources Ltd., LLP (Navasota). On October 2, 2013, pursuant to the Navasota Agreement, the Company acquired proven reserves, oil & natural gas production and undeveloped leasehold interests in Leon and Robertson Counties, Texas. The leasehold interests acquired from Navasota generally consist of additional fractional interests in the properties acquired pursuant to the Gastar Agreement, comprising approximately 6,400 net acres. The acquisition price paid by the Company at closing was $19,400,000, prior to certain post-closing adjustments.
Acquisition of Properties from Tauren
The Company entered into and consummated the transactions contemplated by a Purchase and Sale Agreement dated as of October 2, 2013 (the Tauren Agreement) with Tauren Exploration, Inc. (Tauren), an entity controlled by Mr. Wallen. Pursuant to the Tauren Agreement, the Company acquired well bores, proven reserves, oil & natural gas production and undeveloped leasehold interests in the Cotton Valley formation in DeSoto and Caddo Parishes, Louisiana. The acquired properties include approximately 5,600 net acres of leasehold interests. The acquisition price paid by the Company was $4,000,000 in cash and 2,000 shares of the Companys Series B Convertible Preferred Stock with an aggregate stated value of $2,000,000 and a fair value of $708,000. The Tauren Agreement was unanimously approved by the Companys board of directors, excluding Mr. Wallen. In addition, the Company obtained an opinion from Blackbriar Advisors, LLC, which concluded that the terms of the Tauren Agreement were fair, from a financial perspective, to the Company.
The accompanying unaudited condensed pro forma financial statements give effect to the Recent Transactions.
The following unaudited pro forma financial information is derived from the historical financial statements of the Company and reflect the impact of the Recent Transactions. The Unaudited Pro Forma Condensed Balance Sheet of the Company as of September 30, 2013 has been prepared assuming the Recent Transactions were consummated on September 30, 2013. The Unaudited Pro Forma Condensed Statements of Operations of the Company for the year ended June 30, 2013 and for the three month period ended September 30, 2013 have been prepared assuming the Recent Transactions were consummated on July 1, 2012. These unaudited pro forma condensed financial statements should be read in conjunction with the notes hereto and the consolidated financial statements and notes thereto of the Company filed on Form 10-K/A for the year ended June 30, 2013 and on Form 10-Q/A for the three months ended September 30, 2013.
The unaudited pro forma condensed financial information is not indicative of the financial position or results of operations of the Company that would have actually occurred if the Recent Transactions 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, reductions in prices paid for oil or natural gas, future acquisitions or dispositions and other factors.
Cubic Energy, Inc.
Unaudited Pro Forma Condensed Balance Sheet
September 30, 2013
|
|
Pro Forma Adjustments |
| |||||||
|
|
Historical |
|
Transactions |
|
Pro Forma |
| |||
ASSETS |
|
|
|
|
|
|
| |||
CURRENT ASSETS: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
|
$ |
182,038 |
|
$ |
25,109,933 |
(a) |
$ |
25,291,971 |
|
Accounts receivable - trade |
|
478,252 |
|
|
|
478,252 |
| |||
Due from Affiliates |
|
21,271 |
|
|
|
21,271 |
| |||
Prepaid expenses |
|
74,758 |
|
|
|
74,758 |
| |||
Total current assets |
|
$ |
756,319 |
|
$ |
25,109,933 |
|
$ |
25,866,252 |
|
|
|
|
|
|
|
|
| |||
PROPERTY, PLANT and EQUIPMENT: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Oil and gas properties, full cost method: Proved properties (including wells and related equipment and facilities) |
|
$ |
33,849,723 |
|
$ |
87,872,402 |
(b) |
$ |
121,722,125 |
|
Unproven properties |
|
|
|
7,101,000 |
(b) |
7,101,000 |
| |||
Office and other equipment |
|
30,227 |
|
|
|
30,227 |
| |||
Oil and gas properties, and equipment, at cost |
|
$ |
33,879,950 |
|
$ |
94,973,402 |
|
$ |
128,853,352 |
|
|
|
|
|
|
|
|
| |||
Less accumulated depreciation, depletion and amortization |
|
19,825,934 |
|
|
|
19,825,934 |
| |||
Oil and gas properties, and equipment, net |
|
$ |
14,054,016 |
|
$ |
94,973,402 |
|
$ |
109,027,418 |
|
|
|
|
|
|
|
|
| |||
OTHER ASSETS: |
|
|
|
|
|
|
| |||
Loan costs |
|
$ |
|
|
$ |
3,993,144 |
(c) |
$ |
3,993,144 |
|
Acquisition costs |
|
$ |
4,700,000 |
|
$ |
(4,700,000 |
)(e) |
$ |
|
|
Total other assets |
|
$ |
4,700,000 |
|
$ |
(706,856 |
) |
$ |
3,993,144 |
|
|
|
|
|
|
|
|
| |||
TOTAL ASSETS |
|
$ |
19,510,335 |
|
$ |
119,376,479 |
|
$ |
138,886,814 |
|
|
|
|
|
|
|
|
| |||
LIABILITIES AND STOCKHOLERS EQUITY |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
CURRENT LIABILITIES: |
|
|
|
|
|
|
| |||
Notes payable - WFEC - term note |
|
$ |
5,000,000 |
|
$ |
(5,000,000 |
)(g) |
$ |
|
|
Notes payable - WFEC - revolver |
|
20,865,110 |
|
|
|
20,865,110 |
| |||
Note payable to affiliate |
|
2,000,000 |
|
(2,000,000 |
)(j) |
|
| |||
Accounts payable and accrued expenses |
|
2,880,559 |
|
(968,298 |
)(j) |
1,912,261 |
| |||
Due to affiliates |
|
4,528,299 |
|
(4,500,000 |
)(f) |
28,299 |
| |||
Total current liabilities |
|
$ |
35,273,968 |
|
$ |
(12,468,298 |
) |
$ |
22,805,670 |
|
|
|
|
|
|
|
|
| |||
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
| |||
Long-term debt |
|
$ |
|
|
$ |
66,000,000 |
(p) |
$ |
59,278,845 |
|
|
|
|
|
(6,720,167 |
)(n) |
|
| |||
|
|
|
|
(988 |
)(r) |
|
| |||
Fair value of derivative |
|
|
|
35,091,536 |
(q) |
35,091,536 |
| |||
Asset Retirement Obligation |
|
|
|
5,449,255 |
(h) |
5,449,255 |
| |||
Total long-term liabilities |
|
$ |
|
|
$ |
99,819,636 |
|
$ |
99,819,636 |
|
|
|
|
|
|
|
|
| |||
Redeemable Preferred stock - Series C voting $0.01 stated value, 98,751.823 shares issued |
|
$ |
|
|
$ |
988 |
(r) |
$ |
988 |
|
|
|
|
|
|
|
|
| |||
STOCKHOLDERS EQUITY: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Preferred stock - Series A - $.01 par value, authorized 165,000 shares, 120,468 issued and outstanding at September 30, 2013 |
|
$ |
1,205 |
|
$ |
(1,205 |
)(i) |
$ |
|
|
Additional paid-in capital |
|
12,045,595 |
|
(12,045,595 |
)(i) |
|
| |||
|
|
|
|
|
|
|
| |||
Preferred stock - Series B - $.01 par value, 16,162 issued |
|
|
|
162 |
(j) |
162 |
| |||
|
|
|
|
15,112,624 |
(j) |
15,112,624 |
| |||
Common stock - $.05 par value, Authorized 200,000,000 shares, 77,505,908 shares issued and outstanding at September 30, 2013 |
|
3,871,670 |
|
|
|
3,871,670 |
| |||
Additional paid-in capital |
|
56,927,219 |
|
6,720,167 |
(n) |
63,647,386 |
| |||
Accumulated deficit |
|
(88,609,322 |
) |
22,238,000 |
(s) |
(66,371,322 |
) | |||
Total stockholders equity |
|
(15,763,633 |
) |
32,025,141 |
|
16,261,508 |
| |||
|
|
|
|
|
|
|
| |||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
$ |
19,510,335 |
|
$ |
119,376,479 |
|
$ |
138,886,814 |
|
See accompanying notes to unaudited pro forma condensed financial statements.
Cubic Energy, Inc.
Unaudited Pro Forma Condensed Statements of Operations
Year ended June 30, 2013
|
|
|
|
Pro Forma Adjustments |
|
|
| |||
|
|
|
|
for |
|
|
| |||
|
|
|
|
Recent |
|
|
| |||
|
|
Historical |
|
Transactions |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
| |||
REVENUES: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Natural gas |
|
$ |
3,843,420 |
|
$ |
15,040,866 |
(k) |
$ |
18,884,286 |
|
Condensate and oil |
|
|
|
2,263,322 |
(k) |
2,263,322 |
| |||
NGLs |
|
|
|
107,821 |
(k) |
107,821 |
| |||
Total revenue |
|
$ |
3,843,420 |
|
$ |
17,412,009 |
|
$ |
21,255,429 |
|
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Production taxes |
|
$ |
|
|
$ |
119,636 |
(l) |
$ |
119,636 |
|
Lease operating expense |
|
1,872,186 |
|
9,523,105 |
(l) |
11,395,291 |
| |||
Depreciation, depletion and amortization |
|
3,248,260 |
|
14,629,776 |
(m) |
17,878,036 |
| |||
Accretion of asset retirement obligation |
|
|
|
347,712 |
(o) |
347,712 |
| |||
General and administrative expenses |
|
2,332,946 |
|
|
|
2,332,946 |
| |||
|
|
|
|
|
|
|
| |||
Total expenses |
|
7,453,392 |
|
24,620,229 |
|
32,073,621 |
| |||
|
|
|
|
|
|
|
| |||
(LOSS) INCOME FROM OPERATIONS |
|
$ |
(3,609,972 |
) |
$ |
(7,208,220 |
) |
$ |
(10,818,192 |
) |
|
|
|
|
|
|
|
| |||
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Other income |
|
$ |
666,270 |
|
$ |
|
|
$ |
666,270 |
|
Amortization of debt discount |
|
|
|
(2,772,145 |
)(n) |
|
| |||
Amortization of loan costs |
|
(2,470,516 |
) |
(1,331,048 |
)(d) |
(3,801,564 |
) | |||
Interest expense |
|
(520,000 |
) |
(10,645,774 |
)(p) |
(11,165,774 |
) | |||
|
|
|
|
|
|
|
| |||
Total non-operating income (expense) |
|
(2,324,246 |
) |
(14,748,967 |
) |
(14,301,068 |
) | |||
|
|
|
|
|
|
|
| |||
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES |
|
(5,934,218 |
) |
(21,957,187 |
) |
(27,891,405 |
) | |||
|
|
|
|
|
|
|
| |||
Provision for (benefit of) income taxes |
|
|
|
|
|
|
| |||
NET LOSS |
|
$ |
(5,934,218 |
) |
$ |
(21,957,187 |
) |
$ |
(27,891,405 |
) |
|
|
|
|
|
|
|
| |||
Dividends on preferred shares |
|
(917,300 |
) |
(664,635 |
)(t) |
(1,581,935 |
) | |||
|
|
|
|
|
|
|
| |||
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
|
(6,851,518 |
) |
(22,621,822 |
) |
(29,473,340 |
) | |||
|
|
|
|
|
|
|
| |||
NET LOSS PER COMMON SHARE |
|
|
|
|
|
|
| |||
- basic and diluted |
|
(0.09 |
) |
(0.29 |
) |
(0.38 |
) | |||
|
|
|
|
|
|
|
| |||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
| |||
- basic and diluted |
|
77,263,381 |
|
77,263,361 |
|
77,263,361 |
|
See accompanying notes to unaudited pro forma condensed financial statements.
Cubic Energy, Inc.
Unaudited Pro Forma Condensed Statements of Operations
Three months ended September 30, 2013
|
|
|
|
Pro Forma Adjustments |
|
|
| |||
|
|
|
|
for |
|
|
| |||
|
|
|
|
Recent |
|
|
| |||
|
|
Historical |
|
Transactions |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
| |||
REVENUES: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Natural gas |
|
$ |
866,702 |
|
$ |
3,233,996 |
(k) |
$ |
4,100,698 |
|
Condensate and oil |
|
|
|
588,042 |
(k) |
588,042 |
| |||
NGLs |
|
|
|
12,804 |
(k) |
12,804 |
| |||
Total revenue |
|
$ |
866,702 |
|
$ |
3,834,842 |
|
$ |
4,701,544 |
|
|
|
|
|
|
|
|
| |||
EXPENSES: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Production taxes |
|
$ |
|
|
$ |
30,299 |
(l) |
$ |
30,299 |
|
Lease operating expense |
|
315,628 |
|
1,914,304 |
(l) |
2,229,932 |
| |||
Depreciation, depletion and amortization |
|
691,853 |
|
3,024,201 |
(m) |
3,716,054 |
| |||
Accretion of asset retirement obligation |
|
|
|
86,928 |
(o) |
86,928 |
| |||
General and administrative expenses |
|
1,207,827 |
|
|
|
1,207,827 |
| |||
|
|
|
|
|
|
|
| |||
Total expenses |
|
2,215,308 |
|
5,055,732 |
|
7,271,040 |
| |||
|
|
|
|
|
|
|
| |||
(LOSS) INCOME FROM OPERATIONS |
|
$ |
(1,348,606 |
) |
$ |
(1,220,890 |
) |
$ |
(2,569,496 |
) |
|
|
|
|
|
|
|
| |||
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
| |||
Other income |
|
$ |
9 |
|
$ |
|
|
$ |
9 |
|
Amortization of debt discount |
|
|
|
(696,823 |
)(n) |
(696,823 |
) | |||
Amortization of loan costs |
|
(1,260,659 |
) |
(332,762 |
)(d) |
(1,593,421 |
) | |||
Interest expense |
|
|
|
(2,729,156 |
)(p) |
(2,729,156 |
) | |||
|
|
|
|
|
|
|
| |||
Total non-operating income (expense) |
|
(1,260,650 |
) |
(3,758,742 |
) |
(5,019,392 |
) | |||
|
|
|
|
|
|
|
| |||
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES |
|
(2,609,256 |
) |
(4,979,632 |
) |
(7,588,888 |
) | |||
|
|
|
|
|
|
|
| |||
Provision for (benefit of) income taxes |
|
|
|
|
|
|
| |||
NET LOSS |
|
$ |
(2,609,256 |
) |
$ |
(4,979,632 |
) |
$ |
(7,588,888 |
) |
|
|
|
|
|
|
|
| |||
Dividends on preferred shares |
|
(243,000 |
) |
(135,589 |
)(t) |
(378,589 |
) | |||
|
|
|
|
|
|
|
| |||
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
|
(2,852,256 |
) |
(5,115,221 |
) |
(7,967,477 |
) | |||
|
|
|
|
|
|
|
| |||
NET LOSS PER COMMON SHARE |
|
|
|
|
|
|
| |||
basic and diluted |
|
(0.04 |
) |
(0.07 |
) |
(0.10 |
) | |||
|
|
|
|
|
|
|
| |||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
| |||
basic and diluted |
|
77,431,832 |
|
77,431,832 |
|
77,431,832 |
|
See accompanying notes to unaudited pro forma condensed financial statements.
Pro Forma adjustments
The Unaudited Pro Forma Condensed Balance Sheet as of September 30 2013 and the Unaudited Pro Forma Condensed Statements of Operations for the three months ended September 30, 2013 and for the year ended June 30, 2013 have been derived from the year-end June 30, 2013 audited financial statements of the Company, from the year ended December 31, 2012 audited Statements of Revenue and Direct Operating Expenses of the Acquired Properties, and from the reviewed financial statements of the Company, for the three months ended September 30, 2013 and of the Acquired Properties for the nine months ended September 30, 2013. The pro forma financial information was accumulated from the underlying monthly financial data from each entity during the respective periods, with adjustments made to reflect the application of generally accepted accounting principles for business combinations had such acquisitions been made at the beginning of the reporting period (see table below). The monthly financial data and the adjustments made to reflect the business combination have not been subjected to any auditing or review procedures by our independent registered public accounting firm.
The following table is a reconciliation, by six month periods, to show how we split the audited year end December 31, 2012 and unaudited nine months ended September 30, 2013, in order to create the adjustments to revenue and direct operating expenses to be reflective of our fiscal year ended June 30, 2013 and three months ended September 30, 2013, as described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES IN |
|
|
|
|
|
|
|
|
|
|
|
DIRECT OPERATING EXPENSES: |
|
|
|
EXCESS OF |
| ||||
|
|
REVENUES: |
|
|
|
|
|
Lease |
|
|
|
Total direct |
|
DIRECT |
| ||||
DATES |
|
Natural Gas |
|
Condensate |
|
NGLs |
|
Total revenue |
|
Production |
|
operating |
|
Volume |
|
operating |
|
OPERATING |
|
GASTAR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals as of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2012 - June 30, 2012 |
|
4,113,519 |
|
880,200 |
|
|
|
4,993,719 |
|
45,735 |
|
2,741,006 |
|
948,531 |
|
3,735,272 |
|
1,258,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2012 - December 31, 2012 |
|
5,377,620 |
|
751,683 |
|
|
|
6,129,303 |
|
42,431 |
|
2,630,862 |
|
1,042,601 |
|
3,715,894 |
|
2,413,409 |
|
January 1, 2013 - June 30, 2013 |
|
5,232,071 |
|
674,326 |
|
|
|
5,906,397 |
|
37,289 |
|
2,071,456 |
|
1,202,894 |
|
3,311,639 |
|
2,594,758 |
|
Balance at June 30, 2013 |
|
10,609,691 |
|
1,426,009 |
|
|
|
12,035,700 |
|
79,720 |
|
4,702,318 |
|
2,245,495 |
|
7,027,533 |
|
5,008,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2013 - September 30, 2013 |
|
2,286,526 |
|
310,709 |
|
|
|
2,597,235 |
|
16,838 |
|
792,923 |
|
643,816 |
|
1,453,577 |
|
1,143,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAVASOTA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals as of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2012 - June 30, 2012 |
|
1,594,255 |
|
398,664 |
|
|
|
1,992,919 |
|
14,555 |
|
1,015,992 |
|
|
|
1,030,547 |
|
962,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2012 - December 31, 2012 |
|
2,093,758 |
|
343,286 |
|
|
|
2,437,044 |
|
14,517 |
|
1,120,292 |
|
|
|
1,134,809 |
|
1,302,235 |
|
January 1, 2013 - June 30, 2013 |
|
2,036,724 |
|
439,914 |
|
|
|
2,476,638 |
|
21,011 |
|
972,243 |
|
|
|
993,254 |
|
1,483,384 |
|
Balance at June 30, 2013 |
|
4,130,482 |
|
783,200 |
|
|
|
4,913,682 |
|
35,528 |
|
2,092,535 |
|
|
|
2,128,063 |
|
2,785,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2013 - September 30, 2013 |
|
906,086 |
|
266,563 |
|
|
|
1,172,649 |
|
12,304 |
|
395,639 |
|
|
|
407,943 |
|
764,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TAUREN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals as of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2012 - June 30, 2012 |
|
98,651 |
|
48,379 |
|
46,571 |
|
193,600 |
|
6,599 |
|
257,496 |
|
|
|
264,095 |
|
(70,495 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2012 - December 31, 2012 |
|
116,969 |
|
26,571 |
|
26,707 |
|
170,247 |
|
3,757 |
|
280,896 |
|
|
|
284,653 |
|
(114,406 |
) |
January 1, 2013 - June 30, 2013 |
|
183,724 |
|
27,542 |
|
81,114 |
|
292,380 |
|
631 |
|
201,861 |
|
|
|
202,492 |
|
89,888 |
|
Balance at June 30, 2013 |
|
300,693 |
|
54,113 |
|
107,821 |
|
462,627 |
|
4,388 |
|
482,757 |
|
|
|
487,145 |
|
(24,518 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2013 - September 30, 2013 |
|
41,384 |
|
10,770 |
|
12,804 |
|
64,958 |
|
1,157 |
|
81,926 |
|
|
|
83,083 |
|
(18,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTALS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2012 (a) |
|
13,394,772 |
|
2,448,783 |
|
73,277 |
|
15,916,832 |
|
127,594 |
|
8,046,544 |
|
1,991,132 |
|
10,165,270 |
|
5,751,562 |
|
Nine months ended September 30, 2013 (a) |
|
10,686,515 |
|
1,729,824 |
|
93,918 |
|
12,510,257 |
|
89,230 |
|
4,516,048 |
|
1,846,710 |
|
6,451,989 |
|
6,058,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2013 (b) |
|
15,040,866 |
|
2,263,322 |
|
107,821 |
|
17,412,009 |
|
119,636 |
|
7,277,610 |
|
2,245,495 |
|
9,642,741 |
|
7,769,268 |
|
Three months ended September 30, 2013 (b) |
|
3,233,996 |
|
588,042 |
|
12,804 |
|
3,834,842 |
|
30,299 |
|
1,270,488 |
|
643,816 |
|
1,944,603 |
|
1,890,239 |
|
(a) Reflects amounts in the audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 2012 and; the unaudited Statement of Revenues and Direct Operating Expenses for the nine months ended September 30, 2013, respectively.
(b) Reflects the aggregate of the amounts set forth above for each of the Acquired Properties for the respective periods.
The following tables show the purchase price allocation and reconciliation to cash paid at closing of the acquisition on October 2, 2013:
|
|
Gastar |
|
Navasota |
|
Tauren |
|
Total |
|
Assets acquired: |
|
|
|
|
|
|
|
|
|
Unproved |
|
6,029,000 |
|
1,072,000 |
|
|
|
7,101,000 |
|
Proved developed and undeveloped |
|
42,097,666 |
|
18,828,737 |
|
26,946,000 |
|
87,872,403 |
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
48,126,666 |
|
19,900,737 |
|
26,946,000 |
|
94,973,403 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed: |
|
|
|
|
|
|
|
|
|
Asset Retirement Obligation |
|
(4,289,616 |
) |
(1,159,639 |
) |
|
|
(5,449,255 |
) |
|
|
|
|
|
|
|
|
|
|
Total Purchase Price |
|
43,837,050 |
|
18,741,098 |
|
26,946,000 |
|
89,524,148 |
|
Reconciliation of Purchase Price Allocation and cash paid at closing |
|
Gastar |
|
Navasota |
|
Tauren |
|
|
|
|
|
|
|
|
|
Total purchase price allocation |
|
43,837,050 |
|
18,741,098 |
|
26,946,000 |
|
Add: miscellaneous post-closing adjustments |
|
51,780 |
|
658,902 |
|
|
|
Less: Series B preferred stock valuation (non-cash) |
|
|
|
|
|
(708,000 |
) |
Less: Bargain purchase gain (non-cash) |
|
|
|
|
|
(22,238,000 |
) |
Less: down payment on purchase price |
|
(4,700,000 |
) |
|
|
|
|
Cash paid at closing |
|
39,188,830 |
|
19,400,000 |
|
4,000,000 |
|
(a) To record the net cash proceeds received from the investors and the upfront payment from the Call Option Structured Derivative by the Company, net of initial purchasers discount and expenses and less the net purchase price of the Acquired Properties.
Reconciliation of cash/cash equivalents
provided by October 2, 2013 transactions
Proceeds from Senior Notes |
|
$ |
65,242,424 |
|
Proceeds from Call Option Structured Derivative contracts |
|
$ |
35,091,536 |
|
|
|
$ |
100,333,960 |
|
|
|
|
| |
Purchase price at closing - Gastar |
|
(39,188,830 |
) | |
Purchase price at closing - Navasota |
|
(19,400,000 |
) | |
Purchase price at closing - Tauren |
|
(4,000,000 |
) | |
Gastar - post closing adjustment |
|
51,780 |
| |
Navasota - post closing adjustments (leasehold loss and revenue adjustments) |
|
658,902 |
| |
Repayment of short-term advances for acquisition - Gastar |
|
(4,700,000 |
) | |
Wells Fargo paydown |
|
(5,000,000 |
) | |
Transaction costs |
|
(2,487,349 |
) | |
Legal fees |
|
(1,101,660 |
) | |
Landman fees |
|
(56,870 |
) | |
|
|
(75,224,027 |
) | |
|
|
|
| |
Total adjustment to cash/cash equivalents |
|
25,109,933 |
|
(b) To record additional property, plant and equipment acquired (full cost method) as of September 30, 2013 for the Acquired Properties, net of purchase price adjustments of $3.4 million to reflect the effective date of January 1, 2013, for the Gastar portion of the Acquired Properties.
(c) To record the $3.9 million in loan costs at September 30, 2013.
(d) To record loan costs amortization associated with the financing and the Acquired Properties in the amount of $1,331,048 for the year ended June 30, 2013 and in the amount of $332,762 for the three months ended September 30, 2013.
(e) To record the application of the $4.7 million deposit previously paid for the Acquired Properties at September 30, 2013.
(f) To record payments to affiliates of $4.5 million for short-term advances.
(g) To record the retirement of the Wells Fargo Energy Capital $5 million senior term note outstanding balance at September 30, 2013.
(h) To record asset retirement obligation liability at September 30, 2013 for the Acquired Properties.
(i) To record the conversion of 120,468 shares of Series A Convertible Preferred Stock of the Company held by Langtry Mineral & Development, LLC completed on October 2, 2013.
(j) To record the issuance of 16,162 shares of the Companys Series B Convertible Preferred Stock, as consideration for converting all of the issued and outstanding shares of Series A Convertible Preferred Stock and as repayment of the $2 million note and accrued interest owed to Mr. Wallen, by the Company.
(k) To record natural gas, condensate and oil and NGLs sales revenues for the Acquired Properties for the year ended June 30, 2013 and for the three months ended September 30, 2013, as applicable.
(l) To record direct operating expenses for the Acquired Properties for the year ended June 30, 2013 and for the three months ended September 30, 2013, as applicable.
(m) To record additional depreciation, depletion and amortization (DD&A) expense for the Acquired Properties for the year ended June 30, 2013 and for the three months ended September 30, 2013, as applicable under the full cost method of accounting. The properties acquired from Navasota generally consist of additional percentage interests in the same oil and gas properties acquired from Gastar. Therefore, in preparing these reserve estimates, the Company used data previously prepared by a third party reservoir engineering firm. We estimated the proved reserves attributable to the properties acquired from Navasota as of December 31, 2012 based on the reserve report obtained with respect to the properties acquired from Gastar, but giving effect to the increased percentage interests. In order to provide reserve estimates as of June 30, 2013, the end of our latest fiscal year, we subtracted actual production from these properties for the period from January 1, 2013 through June 30, 2013 from that combined estimate as of December 31, 2012.The properties acquired from Tauren generally consist of additional percentage interests in the same oil and gas properties previously held by us. Therefore, we estimated the proved reserves attributable to the properties acquired from Tauren as of June 30, 2013 based on the reserve report previously obtained by us covering those properties, but giving effect to the increased percentage interests.
Standardized measure of discounted future net cash flow - Acquisitions
|
|
Historic |
|
Gastar |
|
Navasota |
|
Tauren |
|
Pro forma |
|
Balances as of June 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
Future cash flows |
|
242,990,435 |
|
48,195,800 |
|
24,246,100 |
|
236,866,070 |
|
552,298,405 |
|
Future production costs |
|
(29,432,000 |
) |
(21,278,900 |
) |
(8,992,800 |
) |
(23,689,977 |
) |
(83,393,677 |
) |
Future development costs |
|
(111,455,400 |
) |
(7,662,000 |
) |
(2,347,900 |
) |
(116,009,562 |
) |
(237,474,862 |
) |
Future severance tax expense |
|
(13,268,035 |
) |
(3,295,100 |
) |
(1,556,300 |
) |
(12,864,647 |
) |
(30,984,082 |
) |
Future income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future net cash flows |
|
88,835,000 |
|
15,959,800 |
|
11,349,100 |
|
84,301,884 |
|
200,445,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ten percent annual discount for estimated timing of net cash flows |
|
(49,787,200 |
) |
(5,574,000 |
) |
(2,278,300 |
) |
(49,206,619 |
) |
(106,846,119 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Standardized measure of discounted future net cash flows |
|
39,047,800 |
|
10,385,800 |
|
9,070,800 |
|
35,095,265 |
|
93,599,665 |
|
|
|
Historic |
|
Gastar |
|
Navasota |
|
Tauren |
|
Pro forma |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of June 30, 2012 |
|
29,976,209 |
|
43,593,300 |
|
19,477,200 |
|
25,493,931 |
|
118,540,640 |
|
Sale of oil and gas produced |
|
(1,971,234 |
) |
(4,807,426 |
) |
(2,785,619 |
) |
24,518 |
|
(9,539,761 |
) |
Net changes in prices and production costs |
|
(695,805 |
) |
(28,391,658 |
) |
(10,549,093 |
) |
4,038,360 |
|
(35,598,196 |
) |
Extensions and discoveries |
|
12,195,100 |
|
|
|
|
|
|
|
12,195,100 |
|
Revision of previous quantity estimates |
|
11,285,959 |
|
(1,245,668 |
) |
622,429 |
|
22,245,127 |
|
32,907,847 |
|
Accretion of discount |
|
2,997,621 |
|
4,359,330 |
|
1,947,720 |
|
2,549,393 |
|
11,854,064 |
|
Net change in income taxes |
|
526,854 |
|
|
|
|
|
|
|
526,854 |
|
Changes in future development costs |
|
48,872,306 |
|
(267,135 |
) |
87,947 |
|
27,105,957 |
|
75,799,075 |
|
Changes in timing and other changes |
|
(64,139,210 |
) |
(2,854,943 |
) |
270,216 |
|
(46,362,021 |
) |
(113,085,958 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Change in standardized measure |
|
9,071,591 |
|
(33,207,500 |
) |
(10,406,400 |
) |
9,601,334 |
|
(24,940,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of June 30, 2013 |
|
39,047,800 |
|
10,385,800 |
|
9,070,800 |
|
35,095,265 |
|
93,599,665 |
|
(n) To record the fair value of the newly issued Class A Warrants and Class B Warrants issued in connection with the borrowings to fund the Acquired Properties recorded as a debt discount and an increase to additional paid-in-capital and to record the amortization of the debt discount over the term of the borrowings, for the year ended June 30, 2013 and for the three months ended September 30, 2013.
(o) To record additional accretion expense on the asset retirement obligation for the Acquired Properties for the year ended June 30, 2013 and for the three months ended September 30, 2013.
(p) To record interest expense based on borrowings to fund the acquisition of the Acquired Properties, net of the repayment of the $5 million senior term note to Wells Fargo Energy Capital, resulting in an approximate increase in interest expense of $10,645,774 for the year ended June 30, 2013 and $2,729,156 for the three months ended September 30, 2013. The interest on the indebtedness pursuant to the Notes is fixed at 15.5% per annum. The indebtedness to Wells Fargo Energy Capital bears interest at a rate equal to the Wells Fargo Bank prime rate, plus 2% per annum. During the periods presented, the interest rate on the indebtedness to Wells Fargo Energy Capital was 5.25%. A 1/8% change in this interest rate would have caused pro forma interest expense, and net income, to change by $26,081 for the year ended June 30, 2013, and $6,250 for the three months ended September 30, 2013.
(q) To record the $35.1 million upfront payment to the Company from the Call Option Structured Derivative arrangement at September 30, 2013. The upfront payment approximated fair value of the calls sold at inception. As a result, the Call Option Structured Derivative arrangement was initially recognized and measured at the amount of its upfront payment. Under the terms of the Call Option Structured Derivative arrangement, Cubic Asset sold calls to the third party covering (i) approximately 556,000 barrels of oil at a strike price set between $80 per barrel and $90 per barrel, and (ii) approximately 51.3 million MMBtus of gas at a strike price set between $3.45 per MMBtu and $3.90 per MMBtu. The scheduled volumes subject to the calls sold relate to production months from November 2013 through December 2018. The Company is subject to the price risks associated with product price changes that differ from the specified call prices. The Company, through its subsidiary Cubic Asset, entered into a Fixed Price Swap arrangement. Under the terms of the Fixed Price Swap arrangement, Cubic Asset sold calls to a third party covering approximately 18,000 barrels of oil at a price of $92 per barrel. The scheduled volumes subject to the calls sold relate to production months from November 2013 through October 2016. Cubic Asset is subject to the price risks associated with product price increases above the specified fixed prices. These third parties have a junior lien position on both of the assets of Cubic Asset and Cubic Louisiana.
(r) To record 98,751.823 shares of Series C Redeemable Voting Preferred Stock issued and outstanding as of October 2, 2013. These shares have a stated valued at $0.01 per share and were recorded at that amount. These are voting shares, but are not entitled to dividends. They are redeemable at their stated value, which is an aggregate of $988. This amount was recorded as a long-term liability on the balance sheet for the three months ended September 30, 2013.
(s) To record gain on acquisition of Tauren assets that were acquired for $4,000,000 of cash and 2,000,000 shares of Series B preferred stock with a fair value of $708,000. The acquisition was valued at $26,946,000 that resulted in a gain of $22,238,000 record in retained earnings.
(t) To record the adjustment due to the conversion of Series A preferred stock and loan to Series B preferred stock to arrive at a, Series B preferred stock dividend of $1,581,935 for the year ended June 30, 2013 and $378,589 for the three months ended September 30, 2013.