Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - Emerald Oil, Inc. | v390668_8ka.htm |
| EX-99.1 - EXHIBIT 99.1 - Emerald Oil, Inc. | v390668_ex99-1.htm |
| EX-23.1 - EXHIBIT 23.1 - Emerald Oil, Inc. | v390668_ex23-1.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Property Acquisition
On September 2, 2014, Emerald Oil, Inc. (the “Company”, or “Emerald”) acquired certain oil and natural gas properties and assets located McKenzie, Billings and Dunn Counties of North Dakota from an unrelated third party (“Liberty Assets”). The total consideration paid was approximately $71.2 million in cash and the assignment of approximately 4,300 net acres located in Williams County, North Dakota.
The foregoing summary of the transaction does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase and Sale Agreement, which was filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on August 4, 2014, and is incorporated herein by reference (the “Purchase and Sale Agreement”). The representations and warranties of the parties in the Purchase and Sale Agreement are, in many respects, qualified by materiality and limited to the knowledge of the entity making the representation and warranty, but their accuracy forms the basis of one of the conditions to the obligations of the parties to complete the transaction. These representations and warranties were made only for purposes of the Purchase and Sale Agreement and as of specific dates, were solely for the benefit of the parties thereto, and are subject to limitations agreed to between the parties, including that they are qualified by disclosures between the parties that are not included with this report. Accordingly, investors and third parties should not rely on these representations and warranties as independent characterizations of the actual state of facts at the time they were made or otherwise but should consider them together with the other information that the Company has disclosed in other filings with the SEC.
In conjunction with the acquisition discussed above, the Company and its lending syndicate entered into an amendment to the Company’s credit facility to increase the borrowing base under the credit facility from $100 million to $200 million. The redetermined borrowing base shall remain in effect until the earlier of (i) the next scheduled redetermination date or (ii) the date the borrowing base is otherwise adjusted pursuant to the terms of the credit facility. The other terms of the credit facility remained unchanged. The Company had zero outstanding under its credit facility, and therefore full availability.
The foregoing description of the amendment to the credit facility is a summary only and is qualified in its entirety by reference to the complete text of the amendment to the Company’s credit facility, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Unaudited Pro Forma Condensed Combined Financial Statements
The following unaudited pro forma condensed combined balance sheet is based on the historical balance sheets of Emerald and the Liberty Assets, giving effect to Emerald’s acquisition of the Liberty assets as if the transaction had occurred on June 30, 2014. The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2013 and the six months ended June 30, 2014 are based on the historical statements of operations of Emerald and the Liberty Assets, giving effect to Emerald’s acquisition of the Liberty Assets as if the transaction had occurred on January 1, 2013. The historical information is derived from the audited financial statements of Emerald for the year ended December 31, 2013 and the unaudited financial statements for the six months ended June 30, 2014. The Liberty Assets’ historical information has been derived from audited statement of operating revenues and direct operating expenses for the year ended December 31, 2013 and the unaudited statement of operating revenues and directing operating expenses for the six months ended June 30, 2014.
The unaudited pro forma condensed combined financial statements are provided for information purposes only and are based on estimates and assumptions as set forth in the notes to such statements. Pursuant to Regulation S-X, Article 11, of the Securities and Exchange Commission, pro forma adjustments include the effects of events that are directly attributable to the acquisition and are factually supportable. As actual adjustments may differ from pro forma adjustments, the unaudited pro forma combined financial information has been prepared for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily indicative of the combined results of operations to be expected in any future period or the results that actually would have been realized had the transaction been completed on January 1, 2013. This information should be read in conjunction with the historical financial statements and related notes of Emerald and the Liberty Assets and in conjunction with the accompanying notes to these unaudited pro forma condensed combined financial statements.
EMERALD OIL, INC. ACQUISITION OF LIBERTY ASSETS
Pro Forma Condensed Combined Balance Sheet
As of June 30, 2014
(in thousands, except share and per share data)
(Unaudited)
| Emerald Oil, Inc. | Pro Forma Adjustments | Reference | Pro Forma Combined | |||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and Cash Equivalents | $ | 134,172 | $ | (72,134 | ) | (a) (b) (c) | $ | 62,038 | ||||||
| Restricted Cash | 6,000 | — | 6,000 | |||||||||||
| Accounts Receivable – Oil and Natural Gas Sales | 9,353 | — | 9,353 | |||||||||||
| Accounts Receivable – Joint Interest Partners | 36,397 | — | 36,397 | |||||||||||
| Other Receivables | 1,600 | — | 1,600 | |||||||||||
| Prepaid Expenses and Other Current Assets | 534 | — | 534 | |||||||||||
| Total Current Assets | 188,056 | (72,134 | ) | 115,922 | ||||||||||
| PROPERTY AND EQUIPMENT | ||||||||||||||
| Oil and Natural Gas Properties, Full Cost Method, at cost: | ||||||||||||||
| Proved Oil and Natural Gas Properties | 378,487 | 56,607 | (a) | 435,094 | ||||||||||
| Unproved Oil and Natural Gas Properties | 122,067 | 15,555 | (a) | 137,622 | ||||||||||
| Equipment and Facilities | 4,110 | — | 4,110 | |||||||||||
| Other Property and Equipment | 1,645 | — | 1,645 | |||||||||||
| Total Property and Equipment | 506,309 | 72,162 | 578,471 | |||||||||||
| Less – Accumulated Depreciation, Depletion and Amortization | (63,202 | ) | — | (63,202 | ) | |||||||||
| Total Property and Equipment, Net | 443,107 | 72,162 | 515,269 | |||||||||||
| Restricted Cash | 4,000 | — | 4,000 | |||||||||||
| Debt Issuance Costs, Net of Amortization | 6,205 | 457 | (b) | 6,662 | ||||||||||
| Deposits on Acquisitions | 304 | — | 304 | |||||||||||
| Other Non-Current Assets | 227 | — | 227 | |||||||||||
| Total Assets | $ | 641,899 | $ | 485 | $ | 642,384 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Accounts Payable | $ | 91,417 | $ | — | $ | 91,417 | ||||||||
| Fair Value of Commodity Derivatives | 5,853 | — | 5,853 | |||||||||||
| Accrued Expenses | 13,238 | (65 | ) | (a) | 13,173 | |||||||||
| Advances from Joint Interest Partners | 3,724 | — | 3,724 | |||||||||||
| Total Current Liabilities | 114,232 | (65 | ) | 114,167 | ||||||||||
| LONG-TERM LIABILITIES | ||||||||||||||
| Convertible Senior Notes | 172,500 | — | 172,500 | |||||||||||
| Asset Retirement Obligations | 1,243 | 1,040 | (a) | 2,283 | ||||||||||
| Warrant Liability | 17,670 | — | 17,670 | |||||||||||
| Other Non-Current Liabilities | 266 | — | 266 | |||||||||||
| Total Liabilities | 305,911 | 975 | 306,886 | |||||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||||
| Preferred Stock – Par Value $.001; 20,000,000 Shares Authorized; | ||||||||||||||
| Series B Voting Preferred Stock – 5,114,633 issued and outstanding at June 30, 2014 and December 31, 2013. Liquidation preference value of $5,115 as of June 30, 2014 and December 31, 2013. | 5 | — | 5 | |||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||
| Common Stock, Par Value $.001; 500,000,000 Shares Authorized, 66,471,276 and 65,840,370 Shares Issued and Outstanding, respectively | 66 | — | 66 | |||||||||||
| Additional Paid-In Capital | 420,571 | — | 420,571 | |||||||||||
| Accumulated Deficit | (84,654 | ) | (490 | ) | (c) | (85,144 | ) | |||||||
| Total Stockholders’ Equity | 335,988 | (490 | ) | 335,498 | ||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 641,899 | $ | 485 | $ | 642,384 | ||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
EMERALD OIL, INC. ACQUISITION OF LIBERTY ASSETS
Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2013
(in thousands, except share and per share data)
(Unaudited)
| Emerald Oil, Inc. | Liberty Assets | Pro Forma Adjustments | Notes | Pro Forma Combined | ||||||||||||||
| (d) | ||||||||||||||||||
| REVENUES | ||||||||||||||||||
| Oil Sales | $ | 52,610 | $ | 10,744 | $ | — | $ | 63,354 | ||||||||||
| Natural Gas Sales | 1,371 | 573 | — | 1,944 | ||||||||||||||
| Net Losses on Commodity Derivatives | (2,657 | ) | — | — | (2,657 | ) | ||||||||||||
| Total Revenues | 51,324 | 11,317 | — | 62,641 | ||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||
| Production Expenses | 8,520 | 2,179 | — | 10,699 | ||||||||||||||
| Production Taxes | 5,703 | 1,082 | — | 6,785 | ||||||||||||||
| General and Administrative Expenses | 30,507 | — | — | 30,507 | ||||||||||||||
| Depletion of Oil and Natural Gas Properties | 17,310 | — | 3,976 | (f) | 21,286 | |||||||||||||
| Depreciation and Amortization | 144 | — | — | 144 | ||||||||||||||
| Accretion of Discount on Asset Retirement Obligations | 32 | — | 7 | (g) | 39 | |||||||||||||
| (Gain) on Sale of Oil and Natural Gas Properties, Net | (7,372 | ) | — | — | (7,372 | ) | ||||||||||||
| Total Operating Expenses | 54,844 | 3,261 | 3,983 | 62,088 | ||||||||||||||
| INCOME (LOSS) FROM OPERATIONS | (3,520 | ) | 8,056 | (3,983 | ) | 553 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||
| Interest Expense | (288 | ) | — | — | (288 | ) | ||||||||||||
| Warrant Revaluation Expense | (7,077 | ) | — | — | (7,077 | ) | ||||||||||||
| Other Income | 3 | — | — | 3 | ||||||||||||||
| Total Other Expense, Net | (7,362 | ) | — | — | (7,362 | ) | ||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | (10,882 | ) | 8,056 | (3,983 | ) | (6,809 | ) | |||||||||||
| INCOME TAX PROVISION | — | — | — | — | ||||||||||||||
| NET INCOME (LOSS) | (10,882 | ) | 8,056 | (3,983 | ) | (6,809 | ) | |||||||||||
| Less: Preferred Stock Dividends and Deemed Dividends | (20,279 | ) | — | — | (20,279 | ) | ||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (31,161 | ) | $ | 8,056 | $ | (3,983 | ) | $ | (27,088 | ) | |||||||
| Net Income (Loss) Per Common Share – Basic and Diluted | $ | (0.75 | ) | $ | (0.65 | ) | ||||||||||||
| Weighted Average Shares Outstanding – Basic and Diluted | 41,383,277 | 41,383,277 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
EMERALD OIL, INC. ACQUISITION OF LIBERTY ASSETS
Pro Forma Condensed Combined Statement of Operations
For the six months ended June 30, 2014
(in thousands, except share and per share data)
(Unaudited)
| Emerald Oil, Inc. | Liberty Assets | Pro Forma Adjustments | Notes | Pro Forma Combined | ||||||||||||||
| (e) | ||||||||||||||||||
| REVENUES | ||||||||||||||||||
| Oil Sales | $ | 48,723 | $ | 8,227 | $ | — | $ | 56,950 | ||||||||||
| Natural Gas Sales | 1,600 | 902 | — | 2,502 | ||||||||||||||
| Net Losses on Commodity Derivatives | (7,462 | ) | — | — | (7,462 | ) | ||||||||||||
| Total Revenues | 42,861 | 9,129 | — | 51,990 | ||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||
| Production Expenses | 6,515 | 1,800 | — | 8,315 | ||||||||||||||
| Production Taxes | 5,490 | 941 | — | 6,431 | ||||||||||||||
| General and Administrative Expenses | 16,125 | — | — | 16,125 | ||||||||||||||
| Depletion of Oil and Natural Gas Properties | 14,878 | — | 2,955 | (f) | 17,833 | |||||||||||||
| Depreciation and Amortization | 147 | — | — | 147 | ||||||||||||||
| Accretion of Discount on Asset Retirement Obligations | 36 | — | 7 | (g) | 43 | |||||||||||||
| Total Operating Expenses | 43,191 | 2,741 | 2,962 | 48,894 | ||||||||||||||
| INCOME (LOSS) FROM OPERATIONS | (330 | ) | 6,388 | (2,962 | ) | 3,096 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||
| Interest Expense | (1,308 | ) | — | — | (1,308 | ) | ||||||||||||
| Warrant Revaluation Expense | (1,967 | ) | — | — | (1,967 | ) | ||||||||||||
| Other Income | 4 | — | — | 4 | ||||||||||||||
| Total Other Expense, Net | (3,271 | ) | — | — | (3,271 | ) | ||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | (3,601 | ) | 6,388 | (2,962 | ) | (175 | ) | |||||||||||
| INCOME TAX PROVISION | — | — | — | — | ||||||||||||||
| NET INCOME (LOSS) | $ | (3,601 | ) | $ | 6,388 | $ | (2,962 | ) | $ | (175 | ) | |||||||
| Net Loss Per Common Share – Basic and Diluted | $ | (0.05 | ) | $ | (0.00 | ) | ||||||||||||
| Weighted Average Shares Outstanding – Basic and Diluted | 66,251,632 | 66,251,632 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed financial statements.
EMERALD OIL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
| 1. | BASIS OF PRESENTATION |
The following table summarizes the purchase price and estimated values of assets acquired and liabilities assumed (in thousands):
| Purchase Price | ||||
| Consideration Given: | ||||
| Cash | $ | 71,187 | ||
| Assignment of oil and natural gas properties | 35,918 | |||
| Liabilities assumed, net | 1,121 | |||
| Total | $ | 108,226 | ||
| Allocation of Purchase Price: | ||||
| Proved oil and natural gas properties | $ | 56,607 | ||
| Unproved oil and natural gas properties | 51,473 | |||
| Liabilities released | 146 | |||
| Total fair value of oil and natural gas properties | $ | 108,226 | ||
| 2. | PRO FORMA ADJUSTMENTS TO THE CONDENSED COMBINED BALANCE SHEET |
| (a) | Reflects the pro forma allocation of the purchase price for the Liberty Assets to the acquired assets and liabilities and the assignment of oil and natural gas assets as consideration to Liberty based on the initial fair values, pending completion of our valuation analysis. |
| (b) | Reflects cash utilized for transaction costs, origination fees and related loan closing costs associated with increasing and amending the existing credit facility and related deferred asset. |
| (c) | Reflects estimated acquisition costs (e.g., attorney, accountant,consulting fees and allocated internal personnel costs) to be incurred in the second half of 2014 of $490,000 associated with the Liberty Assets acquisition. |
| 3. | PRO FORMA ADJUSTMENTS TO THE CONDENSED COMBINED STATEMENT OF OPERATIONS |
| (d) | Operating revenues and direct operating expenses of the Liberty Assets for the year ended December 31, 2013. |
| (e) | Operating revenues and direct operating expenses of the Liberty Assets for the six months ended June 30, 2014. |
| (f) | Reflects additional depletion expense attributable to the interests acquired in the Liberty Operating Assets based on the purchase price allocations. |
| (g) | Reflects additional accretion expense on asset retirement obligations attributable to the interests acquired in the Liberty Operating Assets based on the purchase price allocations. |