Attached files
| file | filename |
|---|---|
| 8-K - 8-K - W&T OFFSHORE INC | d39678d8k.htm |
| EX-2.1 - EX-2.1 - W&T OFFSHORE INC | d39678dex21.htm |
Exhibit 99.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On August 31, 2015, W&T Offshore, Inc. (“W&T”), as seller, entered into a purchase and sale agreement (the “Purchase Agreement”) with Ajax Resources, LLC (“Ajax”), as buyer. Under the terms of the Purchase Agreement, W&T sold its interest in its Yellow Rose field in the Permian Basin, including approximately 25,800 net acres in Andrews, Martin, Gaines and Dawson counties, Texas, to Ajax for $376,100,000, subject to certain customary purchase price adjustments, including the assumption by Ajax of certain liabilities (the “Disposition”). The Disposition was completed on October 15, 2015, with an effective date of January 1, 2015. W&T was also assigned a non-expense bearing overriding royalty interest (“ORRI”) in production from the working interests assigned to Ajax which percentage varies on a sliding scale from one percent for each month that the prompt month New York Mercantile Exchange (“NYMEX”) trading price for light sweet crude oil is at or below $70 per barrel to a maximum of four percent for each month that such NYMEX trading price is greater than $90 per barrel.
The following unaudited pro forma condensed combined financial information is derived from the historical financial statements of W&T and its consolidated subsidiaries and reflects the impact of the Disposition. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2015 has been prepared assuming Disposition was consummated on June 30, 2015. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the six month period ended June 30, 2015 have been prepared assuming the Disposition was consummated on January 1, 2014.
These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the notes hereto and the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2014, as amended, and the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, each as filed by W&T.
The preparation of the unaudited pro forma financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that affect the reported amounts of revenues and expenses. Actual results may differ from those estimates. However, the pro forma adjustments reflected in the accompanying unaudited pro forma condensed consolidated financial statements reflect estimates, including estimates of post-closing adjustments, and assumptions that W&T’s management believes to be reasonable.
The unaudited pro forma financial information may not be indicative of the financial position or results of operations of W&T which would have actually occurred if the Disposition 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, differences in prices received for oil or natural gas, future acquisitions or dispositions and other factors.
F-1
W&T OFFSHORE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2015
| Historical | Adjustments | Pro Forma | ||||||||||
| (In thousands) | ||||||||||||
| Assets | ||||||||||||
| Current Assets: |
||||||||||||
| Cash and cash equivalents |
$ | 5,671 | $ | 374,744 | (a) | $ | 380,415 | |||||
| Receivables: |
||||||||||||
| Oil and natural gas sales |
51,957 | — | 51,957 | |||||||||
| Joint interest and other |
32,608 | — | 32,608 | |||||||||
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|
|
|
|
|
|
|||||||
| Total receivables |
84,565 | — | 84,565 | |||||||||
| Deferred income taxes |
6,820 | — | 6,820 | |||||||||
| Prepaid expenses and other assets |
27,290 | — | 27,290 | |||||||||
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|||||||
| Total current assets |
124,346 | 374,744 | 499,090 | |||||||||
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| Property and equipment – at cost: |
||||||||||||
| Oil and natural gas properties and equipment |
8,207,165 | (381,477 | )(b) | 7,825,688 | ||||||||
| Furniture, fixtures and other |
23,981 | — | 23,981 | |||||||||
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| Total property and equipment |
8,231,146 | (381,477 | ) | 7,849,669 | ||||||||
| Less accumulated depreciation, depletion and amortization |
6,306,119 | — | 6,306,119 | |||||||||
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| Net property and equipment |
1,925,027 | (381,477 | ) | 1,543,550 | ||||||||
| Restricted deposits for asset retirement obligations |
15,538 | — | 15,538 | |||||||||
| Other assets |
20,066 | — | 20,066 | |||||||||
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| Total assets |
$ | 2,084,977 | $ | (6,733 | ) | $ | 2,078,244 | |||||
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| Liabilities and Shareholders’ Equity | ||||||||||||
| Current Liabilities: |
||||||||||||
| Accounts payable |
$ | 135,165 | $ | — | $ | 135,165 | ||||||
| Undistributed oil and natural gas proceeds |
29,693 | — | 29,693 | |||||||||
| Asset retirement obligations |
41,494 | — | 41,494 | |||||||||
| Accrued liabilities |
13,120 | — | 13,120 | |||||||||
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|||||||
| Total current liabilities |
219,472 | — | 219,472 | |||||||||
| Long-term debt, less current maturities |
1,468,870 | — | 1,468,870 | |||||||||
| Asset retirement obligation, less current portion |
348,573 | (6,733 | )(c) | 341,840 | ||||||||
| Deferred income taxes |
34,290 | — | 34,290 | |||||||||
| Other liabilities |
14,560 | — | 14,560 | |||||||||
| Commitments and contingencies |
— | — | — | |||||||||
| Shareholders’ equity: |
||||||||||||
| Preferred stock |
— | — | — | |||||||||
| Common stock |
1 | — | 1 | |||||||||
| Additional paid-in capital |
420,028 | — | 420,028 | |||||||||
| Retained earnings (deficit) |
(396,650 | ) | — | (396,650 | ) | |||||||
| Treasury stock, at cost |
(24,167 | ) | — | (24,167 | ) | |||||||
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| Total shareholders’ equity (deficit) |
(788 | ) | — | (788 | ) | |||||||
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| Total liabilities and shareholders’ equity |
$ | 2,084,977 | $ | (6,733 | ) | $ | 2,078,244 | |||||
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See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-2
W&T OFFSHORE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
| Historical | Adjustments | Pro Forma | ||||||||||
| (In thousands, except per share data) | ||||||||||||
| Revenues |
$ | 276,973 | $ | (22,861 | )(d) | $ | 254,112 | |||||
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| Operating costs and expenses: |
||||||||||||
| Lease operating expenses |
98,461 | (13,095 | )(d) | 85,366 | ||||||||
| Production taxes |
1,637 | (996 | )(d) | 641 | ||||||||
| Gathering and transportation |
9,617 | (755 | )(d) | 8,862 | ||||||||
| Depreciation, depletion, amortization and accretion |
228,809 | (18,963 | )(e) | 209,846 | ||||||||
| Ceiling test write-down of oil and natural gas properties |
513,162 | (38,713 | )(f) | 474,449 | ||||||||
| General and administrative expenses |
40,523 | — | 40,523 | |||||||||
| Derivative (gain) loss |
1,078 | — | 1,078 | |||||||||
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| Total costs and expenses |
893,287 | (72,522 | ) | 820,765 | ||||||||
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| Operating income (loss) |
(616,314 | ) | 49,661 | (566,653 | ) | |||||||
| Interest expense: |
||||||||||||
| Incurred |
49,062 | (3,754 | )(g) | 45,308 | ||||||||
| Capitalized |
(3,807 | ) | 1,461 | (h) | (2,346 | ) | ||||||
| Other (income) expense, net |
1,683 | — | 1,683 | |||||||||
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| Income (loss) before income tax expense (benefit) |
(663,252 | ) | 51,954 | (611,298 | ) | |||||||
| Income tax expense (benefit) |
(147,708 | ) | — | (i) | (147,708 | ) | ||||||
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| Net income (loss) |
$ | (515,544 | ) | $ | 51,954 | $ | (463,590 | ) | ||||
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| Basic and diluted earnings (loss) per common share |
$ | (6.79 | ) | $ | (6.11 | ) | ||||||
| Weighted average common shares outstanding |
75,884 | 75,884 | ||||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-3
W&T OFFSHORE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
| Historical | Adjustments | Pro Forma | ||||||||||
| (In thousands, except per share data) | ||||||||||||
| Revenues |
$ | 948,708 | $ | (92,986 | )(d) | $ | 855,722 | |||||
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| Operating costs and expenses: |
||||||||||||
| Lease operating expenses |
264,751 | (41,137 | )(d) | 223,614 | ||||||||
| Production taxes |
7,932 | (4,505 | )(d) | 3,427 | ||||||||
| Gathering and transportation |
19,821 | (488 | )(d) | 19,333 | ||||||||
| Depreciation, depletion, amortization and accretion |
511,102 | (33,135 | )(e) | 477,967 | ||||||||
| General and administrative expenses |
86,999 | — | 86,999 | |||||||||
| Derivative (gain) loss |
(3,965 | ) | — | (3,965 | ) | |||||||
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| Total costs and expenses |
886,640 | (79,265 | ) | 807,375 | ||||||||
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| Operating income |
62,068 | (13,721 | ) | 48,347 | ||||||||
| Interest expense: |
||||||||||||
| Incurred |
86,922 | (6,464 | )(g) | 80,458 | ||||||||
| Capitalized |
(8,526 | ) | 3,242 | (h) | (5,284 | ) | ||||||
| Other (income) expense, net |
(208 | ) | — | (208 | ) | |||||||
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| Income (loss) before income tax expense (benefit) |
(16,120 | ) | (10,499 | ) | (26,619 | ) | ||||||
| Income tax expense (benefit) |
(4,459 | ) | (3,675 | )(i) | (8,134 | ) | ||||||
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| Net income (loss) |
$ | (11,661 | ) | $ | (6,824 | ) | $ | (18,485 | ) | |||
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| Basic and diluted earnings (loss) per common share |
$ | (0.16 | ) | $ | (0.25 | ) | ||||||
| Weighted average common shares outstanding |
75,609 | 75,609 | ||||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
F-4
W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
On August 31, 2015, W&T Offshore, Inc. (“W&T”), as seller, entered into a purchase and sale agreement (the “Purchase Agreement”) with Ajax Resources, LLC (“Ajax”), as buyer. Under the terms of the Purchase Agreement, W&T sold its interest in its Yellow Rose field in the Permian Basin, including approximately 25,800 net acres in Andrews, Martin, Gaines and Dawson counties, Texas, to Ajax for approximately $376,100,000, subject to certain customary purchase price adjustments, including the assumption by Ajax of certain liabilities (the “Disposition”). The Disposition was completed on October 15, 2015, with an effective date of January 1, 2015. W&T was also assigned a non-expense bearing overriding royalty interest (“ORRI”) in production from the working interests assigned to Ajax which percentage varies on a sliding scale from one percent for each month that the prompt month New York Mercantile Exchange (“NYMEX”) trading price for light sweet crude oil is at or below $70 per barrel to a maximum of four percent for each month that such NYMEX trading price is greater than $90 per barrel.
The unaudited pro forma condensed combined financial statements are derived from the historical financial statements of W&T and its consolidated subsidiaries and reflect the impact of the Disposition. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2015 gives effect to the Disposition as if it occurred on June 30, 2015. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the six month period ended June 30, 2015 give effect to the Disposition as if it occurred on January 1, 2014.
The pro forma adjustments are based on information available to management at the time these unaudited pro forma condensed consolidated financial statements were prepared. W&T believes the estimates, including estimates of post-closing adjustments, and assumptions used are reasonable and the significant effects of the Disposition are properly reflected. However, the estimates and assumptions are subject to change as additional information becomes available.
The unaudited pro forma financial information is for informational purposes only and may not represent or be indicative of the financial position or results that would have actually occurred if the Disposition 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, differences in prices received for oil or natural gas, future acquisitions or dispositions and other factors.
2. Pro Forma Adjustments
Unaudited Pro Forma Condensed Consolidated Balance Sheet
| (a) | Adjustment to reflect the estimated cash received after giving effect to purchase price adjustments relating to a January 1, 2015 effective date. |
| (b) | Adjustment to reflect the estimated net cash and asset retirement obligation assumed by Ajax. We have assumed that no gain or loss will be recorded for the transaction, and that the full cost pool will be reduced by the net proceeds of the sale. |
| (c) | Adjustment to reflect the asset retirement obligation assumed by Ajax. |
Unaudited Pro Forma Condensed Consolidated Statements of Operations
| (d) | Adjustments to reflect revenues and operating expenses relating to the Disposition, partially offset by revenues assumed to be received relating to the ORRI retained by W&T. |
| (e) | Adjustments to compute depreciation, depletion, amortization and accretion under the full cost method, excluding items relating to the Disposition. The computation incorporates the net proceeds from the sale and the reduction in proved reserves, future development costs, capital expenditures and asset retirement obligations. |
F-5
| (f) | Adjustment to compute the pro forma ceiling test write-down as if the properties related to the Disposition were excluded from the computation. The adjustment is the difference between the pro forma computation and the historical amount, which is the estimated impact of the Disposition. |
| (g) | Adjustments to reflect the application of the net proceeds to repay outstanding borrowings under W&T’s revolving bank credit facility, resulting in a net reduction in interest expense. No assumed interest income was attributable to net proceeds in excess of amounts outstanding under W&T’s revolving bank credit facility. |
| (h) | Adjustments to compute amounts recorded for capitalized interest excluding properties related to the Disposition and to compute a revised blended interest rate used for capitalized interest assuming the repayment of outstanding borrowings under W&T’s revolving bank credit facility from the sale proceeds. |
| (i) | For the year ended December 31, 2014, the adjustment to income tax expense utilizes the statutory federal income tax rate of 35%. For the six months ended June 30, 2015, it was estimated that no change to income tax benefit would have occurred as the impact of the Disposition on deferred taxes would be substantially offset by changes in the valuation allowance. |
F-6