Pioneer PE Holding LLC - FORM 8-K - EX-99.1 - December 16, 2015

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Exhibit 99.1

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL INFORMATION

On December 10, 2015, Parsley Energy Inc., through its subsidiary, Parsley Energy, L.P. (together, the “Company”), closed the sale of approximately 7,300 net acres in north Martin and south Dawson Counties, Texas, with approximately 500 Boe/d of associated net production (collectively, the “Assets”) to ExL Petroleum Management, LLC for net proceeds of approximately $39.5 million.

The following unaudited pro forma consolidated and combined balance sheet and consolidated and combined statements of operations are derived from the historical consolidated and combined and historical condensed, consolidated and combined financial statements of the Company. The unaudited pro forma consolidated and combined balance sheet as of September 30, 2015 gives effect to the disposition of the Assets as if it had occurred on September 30, 2015. The unaudited pro forma consolidated and combined statements of operations for the year ended December 31, 2014 and the nine months ended September 30, 2015 reflect the disposition as if it had occurred on January 1, 2014. The unaudited pro forma consolidated and combined balance sheet and consolidated and combined statements of operations should be read in conjunction with the notes thereto and the historical financial statements, including the notes thereto, of the Company included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2015 and in its Annual Report on Form 10-K for the year ended December 31, 2014.

The preparation of the unaudited pro forma consolidated and combined 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 could differ from those estimates.

The unaudited pro forma consolidated and combined financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transaction occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma consolidated and combined financial information reflect estimates and assumptions that the Company’s management believes to be reasonable.

PARSLEY ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED BALANCE SHEET

SEPTEMBER 30, 2015

 

     9/30/2015
Historical		     Pro Forma
Adjustments		     Pro Forma  
     (In thousands, except share data)  

ASSETS

       

CURRENT ASSETS

       

Cash and cash equivalents

    $ 123,118      $ 39,500  (a)    $ 162,618   

Accounts receivable:

       

Joint interest owners and other

      20,676        —          20,676   

Oil and gas

      23,194        (703 ) (b)      22,491   

Related parties

      587        —          587   

Short-term derivative instruments

      58,404        —          58,404   

Materials and supplies

      —          —          —     

Other current assets

      7,137        —          7,137   
  

 

 

    

 

 

    

 

 

  

Total current assets

      233,116        38,797        271,913   
  

 

 

    

 

 

    

 

 

  

PROPERTY, PLANT AND EQUIPMENT, AT COST

       

Oil and natural gas properties, successful efforts method

      2,248,655        (89,349 ) (c) (f)      2,159,306   

Accumulated depreciation, depletion and amortization

      (252,350 )      11,600  (d)      (240,750 ) 
  

 

 

    

 

 

    

 

 

  

Total oil and natural gas properties, net

      1,996,305        (77,749 )      1,918,556   
  

 

 

    

 

 

    

 

 

  

Other property, plant and equipment, net

      34,703        —          34,703   
  

 

 

    

 

 

    

 

 

  

Total property, plant and equipment, net

      2,031,008        (77,749 )      1,953,259   
  

 

 

    

 

 

    

 

 

  

NONCURRENT ASSETS

       

Long-term derivative instruments

      42,302        —          42,302   

Deferred loan costs, net

      11,600        —          11,600   

Other noncurrent assets

      3,245        —          3,245   
  

 

 

    

 

 

    

 

 

  

Total noncurrent assets

      57,147        —          57,147   
  

 

 

    

 

 

    

 

 

  

TOTAL ASSETS

    $ 2,321,271      $ (38,952 )    $ 2,282,319   
  

 

 

    

 

 

    

 

 

  

LIABILITIES AND EQUITY

       

CURRENT LIABILITIES

       

Accounts payable and accrued expenses

    $ 158,006      $ (186 ) (b)      157,820   

Revenue and severance taxes payable

      36,797        (35 ) (b)      36,762   

Current portion of long-term debt

      868        —          868   

Short-term derivative instruments

      20,149        —          20,149   

Current deferred tax liability

      13,556        —          13,556   

Current portion of asset retirement obligations

      5,023        (512 ) (f)      4,511   
  

 

 

    

 

 

    

 

 

  

Total current liabilities

      234,399        (734 )      233,665   

NONCURRENT LIABILITIES

       

Long-term debt

      556,161        —          556,161   

Asset retirement obligations

      15,042        (1,702 ) (f)      13,340   

Deferred tax liability

      58,115        (16,898 ) (e)      41,217   

Payable pursuant to tax receivable agreement

      50,689        —          50,689   

Long-term derivative instruments

      23,969        —          23,969   

Other noncurrent liabilities

      —          —          —     
  

 

 

    

 

 

    

 

 

  

Total noncurrent liabilities

      703,976        (18,600 )      685,376   

COMMITMENTS AND CONTINGENCIES

       

STOCKHOLDERS’ EQUITY

       

Preferred Stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding

      —          —       

Common Stock

        —       

Class A, $0.01 par value, 600,000,000 shares authorized, 123,817,542 issued and 123,721,449 outstanding at September 30, 2015 and 93,937,947 issued and 93,901,208 outstanding at December 31, 2014

      1,230        —          1,230   

Class B, $0.01 par value, 125,000,000 shares authorized, 32,145,296 issued and outstanding at September 30, 2015 and at December 31, 2014

      321        —          321   

Additional paid in capital

      1,041,988        —          1,041,988   

Retained earnings

      26,108        (14,586 )(g)      11,522   

Treasury Stock, at cost, 96,093 shares at September 30, 2015 and 36,739 at December 31, 2014

      (77 )      —          (77 ) 
  

 

 

    

 

 

    

 

 

  

Total stockholders’ equity

      1,069,570        —          1,054,984   

Noncontrolling interest

      313,326        (5,032 ) (g)      308,294   
  

 

 

    

 

 

    

 

 

  

Total equity

      1,382,896        (19,618 )      1,363,278   
  

 

 

    

 

 

    

 

 

  

TOTAL LIABILITIES AND EQUITY

    $ 2,321,271      $ (38,952 )      2,282,319   
  

 

 

    

 

 

    

 

 

  

The accompanying notes are an integral part of these unaudited pro forma consolidated and combined financial statements.

PARSLEY ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED

STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

 

     9/30/2015
Historical		     Pro Forma
Adjustments		     Pro Forma  
     (In thousands, except share data)  

REVENUES

       

Oil sales

    $ 158,776      $ (6,751 ) (h)    $ 152,025   

Natural gas sales

      20,712        (170 ) (h)      20,542   

Natural gas liquids sales

      17,817        (291 ) (h)      17,526   
  

 

 

    

 

 

    

 

 

  

Total revenues

      197,305        (7,212 )      190,093   
  

 

 

    

 

 

    

 

 

  

OPERATING EXPENSES

       

Lease operating expenses

      49,993        (2,525 ) (h)      47,468   

Production and ad valorem taxes

      13,397        (393 ) (i)      13,004   

Depreciation, depletion and amortization

      127,873        (3,652 ) (j)      124,221   

General and administrative expenses

      38,088        —          38,088   

Exploration costs

      8,558        —          8,558   

Stock based compensation

      5,855        —          5,855   

Accretion of asset retirement obligations

      657        (72 ) (k)      585   

Rig termination

      8,970        —          8,970   

Other operating expenses

      256        —          256   
  

 

 

    

 

 

    

 

 

  

Total operating expenses

      253,647        (6,642 )      247,005   

Gain on sale of property

      2,331        —          2,331   
  

 

 

    

 

 

    

 

 

  

OPERATING INCOME (LOSS)

      (54,011 )      (570 )      (54,581 ) 
  

 

 

    

 

 

    

 

 

  

OTHER INCOME (EXPENSE)

       

Interest expense, net

      (33,176 )      —          (33,176 ) 

Derivative income (loss)

      23,699        —          23,699   

Other income (expense)

      1,260        —          1,260   
  

 

 

    

 

 

    

 

 

  

Total other income (expense), net

      (8,217 )      —          (8,217 ) 
  

 

 

    

 

 

    

 

 

  

INCOME (LOSS) BEFORE INCOME TAXES

      (62,228 )      (570 )      (62,798 ) 

INCOME TAX BENEFIT (EXPENSE)

      15,133        285  (l)      15,418   
  

 

 

    

 

 

    

 

 

  

NET INCOME (LOSS)

      (47,095 )      (285 )      (47,380 ) 
  

 

 

    

 

 

    

 

 

  

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

      11,851        141  (m)      11,992   
  

 

 

    

 

 

    

 

 

  

NET INCOME (LOSS) ATTRIBUTABLE TO PARSLEY ENERGY, INC. STOCKHOLDERS

    $ (35,244 )    $ (144 )    $ (35,388 ) 
  

 

 

    

 

 

    

 

 

  

Net income (loss) per common share:

       

Basic

    $ (0.33 )    $ (0.00 )    $ (0.33 ) 

Diluted

    $ (0.33 )    $ (0.00 )    $ (0.33 ) 

Weighted average common shares outstanding:

       

Basic

      106,212        —          106,212   

Diluted

      106,212        —          106,212   

The accompanying notes are an integral part of these unaudited pro forma consolidated and combined financial statements.

PARSLEY ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

 

     12/31/2014
Historical		     Pro Forma
Adjustments		     Pro Forma  
     (In thousands, except share data)  

REVENUES

       

Oil sales

    $ 232,554      $ (19,339 ) (h)    $ 213,215   

Natural gas and natural gas liquids sales

      69,203        (1,317 ) (h)      67,886   
  

 

 

    

 

 

    

 

 

  

Total revenues

      301,757        (20,656 )      281,101   
  

 

 

    

 

 

    

 

 

  

OPERATING EXPENSES

       

Lease operating expenses

      38,071        (3,558 ) (h)      34,513   

Production and ad valorem taxes

      18,941        (1,241 ) (i)      17,700   

Depreciation, depletion and amortization

      94,297        (5,222 ) (j)      89,075   

General and administrative expenses

      34,997        —          34,997   

Exploration costs

      3,136        —          3,136   

Acquisition costs

      2,527        —          2,527   

Incentive unit compensation

      51,088        —          51,088   

Stock based compensation

      2,209        —          2,209   

Accretion of asset retirement obligations

      512        (60 ) (k)      452   
  

 

 

    

 

 

    

 

 

  

Total operating expenses

      245,778        (10,081 )      235,697   

(Loss) gain on sale of property

      (2,097 )      —          (2,097 ) 
  

 

 

    

 

 

    

 

 

  

OPERATING INCOME (LOSS)

      53,882        (10,575 )      43,307   
  

 

 

    

 

 

    

 

 

  

OTHER INCOME (EXPENSE)

       

Interest expense, net

      (38,607 )      —          (38,607 ) 

Rig termination costs

      (765 )      —          (765 ) 

Prepayment premium on extinguishment of debt

      (5,107 )      —          (5,107 ) 

Income from equity investment

      348          348   

Derivative income (loss)

      83,858        —          83,858   

Other income (expense)

      (419 )      —          (419 ) 
  

 

 

    

 

 

    

 

 

  

Total other income (expense), net

      39,308        —          39,308   
  

 

 

    

 

 

    

 

 

  

INCOME (LOSS) BEFORE INCOME TAXES

      93,190        (10,575 )      82,615   

INCOME TAX BENEFIT (EXPENSE)

      (36,468 )      (1,570 ) (l)      (38,038 ) 
  

 

 

    

 

 

    

 

 

  

NET INCOME (LOSS)

      56,722        (12,145 )      44,577   
  

 

 

    

 

 

    

 

 

  

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

      (33,293 )      1,505   (m)      (31,788 ) 
  

 

 

    

 

 

    

 

 

  

NET INCOME (LOSS) ATTRIBUTABLE TO PARSLEY ENERGY, INC. STOCKHOLDERS

    $ 23,429      $ (10,640 )    $ 12,789   
  

 

 

    

 

 

    

 

 

  

Net income (loss) per common share:

       

Basic

    $ 0.42      $ (0.19 )    $ 0.23   

Diluted

    $ 0.42      $ (0.19 )    $ 0.23   

Weighted average common shares outstanding:

       

Basic

      55,136        —          55,136   

Diluted

      55,239        —          55,239   

The accompanying notes are an integral part of these unaudited pro forma consolidated and combined financial statements.

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED BALANCE SHEET

 

(a) Adjustment to reflect the $39.5 million in cash from the sale of the Company’s divested Assets.
(b) Adjustment to reflect decrease in oil and gas receivables and payables attributable to Assets.
(c) Adjustment to reduce oil and natural gas properties for the historical cost of Assets.
(d) Adjustment to reflect allocation of accumulated depreciation, depletion and amortization related to Assets. The Company follows the successful efforts method of accounting. The allocation of accumulated depreciation, depletion and amortization was based on the percentage of production attributable to Assets.
(e) Adjustment to reflect the change in the current income taxes payable, non-current income taxes payable, and deferred income tax liability associated with the sale of the Company’s Assets.
(f) Adjustment to reflect elimination of $2.2M of asset retirement obligations associated with the Company’s divested Assets and the associated asset retirement cost capitalized to oil and natural gas properties.
(g) Adjustment to reflect recognition of loss, changed in deferred tax liability, oil and gas revenue and related payables associated with the sale of the Assets.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

 

(h) Adjustment to eliminate revenue and direct operating expenses of divested Assets.
(i) Adjustment to eliminate production taxes for the production of oil, natural gas and NGL related to divested Assets.
(j) Adjustment to eliminate depreciation, depletion and amortization (DD&A) expense based on production volumes attributable to the divested Assets.
(k) Adjustment to eliminate accretion expense based on allocated asset retirement obligation cost attributable to the divested Assets.
(l) Adjustment to reflect income tax expense based on the Company’s historical statutory rate, 24.32%, applied to the cumulative effect of changes referenced within the unaudited pro forma consolidated and combined statement of operations.
(m) Reflects the reduction in consolidated and combined net income attributable to noncontrolling interest for the Assets historical results of operations. The noncontrolling interest was 20.60%.

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