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EX-99.10 - EX-99.10 - RSP Permian, Inc.d272048dex9910.htm
EX-99.9 - EX-99.9 - RSP Permian, Inc.d272048dex999.htm
EX-99.7 - EX-99.7 - RSP Permian, Inc.d272048dex997.htm
EX-99.6 - EX-99.6 - RSP Permian, Inc.d272048dex996.htm
EX-99.5 - EX-99.5 - RSP Permian, Inc.d272048dex995.htm
EX-99.4 - EX-99.4 - RSP Permian, Inc.d272048dex994.htm
EX-99.3 - EX-99.3 - RSP Permian, Inc.d272048dex993.htm
EX-99.2 - EX-99.2 - RSP Permian, Inc.d272048dex992.htm
EX-99.1 - EX-99.1 - RSP Permian, Inc.d272048dex991.htm
EX-23.3 - EX-23.3 - RSP Permian, Inc.d272048dex233.htm
EX-23.2 - EX-23.2 - RSP Permian, Inc.d272048dex232.htm
EX-23.1 - EX-23.1 - RSP Permian, Inc.d272048dex231.htm
EX-10.2 - EX-10.2 - RSP Permian, Inc.d272048dex102.htm
EX-10.1 - EX-10.1 - RSP Permian, Inc.d272048dex101.htm
EX-4.3 - EX-4.3 - RSP Permian, Inc.d272048dex43.htm
EX-4.2 - EX-4.2 - RSP Permian, Inc.d272048dex42.htm
EX-4.1 - EX-4.1 - RSP Permian, Inc.d272048dex41.htm
8-K - 8-K - RSP Permian, Inc.d272048d8k.htm

Exhibit 99.8

RSP PERMIAN, INC.

PRO FORMA COMBINED BALANCE SHEET

AS OF JUNE 30, 2016

(in thousands)

 

     Historical
RSP Permian
    SHEP I LLC     SHEP II LLC     Pro Forma
Adjustments
           Total  

ASSETS

             

Current Assets:

             

Cash and cash equivalents

   $ 32,855      $ 5,516      $ 4,023      $ (24,539     (a)(b)(d)       $ 17,855   

Accounts receivable:

             

Oil and natural gas sales

     32,005        6,000        4,607        (10,607     (b)         32,005   

Joint interest owners and other

     2,342        —          —          —             2,342   

Derivatives – settled, but uncollected

     246        —          —          —             246   

Short-term derivative instruments

     5,378        —          —          —             5,378   

Prepaid expenses and other current assets

     35        192        62        (254     (b)         35   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Current Assets

     72,861        11,708        8,692        (35,400        57,861   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Property, plant & equipment, at cost:

             

Oil and natural gas properties, successful efforts method

     3,249,109        208,700        344,222        1,941,623        (b)         5,743,654   

Accumulated depreciation, depletion and impairment

     (451,586     (44,431     (6,215     50,646        (b)(c)         (451,586
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Oil and natural gas properties, net

     2,797,523        164,269        338,007        1,992,269           5,292,068   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Other property and equipment

     38,328        —          —          —             38,328   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Property, plant & equipment, at cost

     2,835,851        164,269        338,007        1,992,269           5,330,396   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Restricted cash

     152        —          —          —             152   

Other long-term assets

     15,492        120        —          (120     (b)         15,492   

Debt issuance costs

     —          302        652        (954     (b)         —     

Investment in Midstream Joint Venture

     —          54,642        —          (54,642     (b)         —     
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Assets

   $ 2,924,356      $ 231,041      $ 347,351      $ 1,901,153         $ 5,403,091   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY/MEMBERS’ CAPITAL

             

Current Liabilities:

             

Accounts payable

   $ 11,487      $ 12,795      $ 15,106      $ (25,561     (b)         13,827   

Accrued expenses

     37,277        67        19,061        (19,128     (b)         37,277   

Interest payable

     12,022        —          —          —          (d)         12,022   

Deferred taxes

     —          190        —          (190     (b)         —     

Short-term derivative instruments

     7,131        845        4,121        (4,966     (b)         7,131   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Current Liabilities

     67,917        13,897        38,288        (49,845        70,257   

Long-term debt

     687,305        39,000        42,500        373,500        (a)(b)         1,142,305   

Asset retirement obligations

     8,962        1,274        1,233        —             11,469   

Long-term derivative instruments

     —          270        5,050        (5,320     (b)         —     

Deferred tax liabilities

     324,137        —          —          —          (e)         324,137   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Liabilities

     1,088,321        54,441        87,071        318,335           1,548,168   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Stockholders’ Equity/Members’ Capital:

             

Members’ capital

     —          176,600        260,280        (436,880     (b)         —     

Common stock

     1,017        —          —          510        (a)(b)         1,527   

Additional paid-in capital

     1,877,992        —          —          2,019,490        (a)(b)         3,897,482   

Retained earnings

     (42,974     —          —          (302     (a)(b)(d)(e)         (43,276
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Equity

     1,836,035        176,600        260,280        1,582,818           3,855,733   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total Liabilities & Equity

   $ 2,924,356      $ 231,041      $ 347,351      $ 1,901,153         $ 5,403,901   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

 

1


RSP PERMIAN, INC.

PRO FORMA STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(in thousands, except per share amounts)

 

     Historical
RSP Permian
    SHEP I
LLC
    SHEP II
LLC from
January 12,
2016 to

June 30,
2016
    Concho
Properties
Working
Interest
from Jan 1,

2016 to
February 25,
2016
     Pro Forma
Adjustments
         Total  

REVENUES

                

Oil sales

   $ 126,490      $ —        $ —        $ 3,862       $ 30,674      (f)    $ 161,026   

Natural gas sales

     4,940        —          —          186         2,215      (f)      7,341   

NGL sales

     5,871        —          —          —           29      (f)      5,900   

Crude oil, natural gas, and natural gas liquids

     —          19,773        13,627        —           (33,400   (f)      —     

Unrealized gain (loss) on derivatives

     —          (3,634     (9,171     —           12,805      (f)      —     

Realized gain (loss) on derivatives

     —          723        (526     —           (197   (f)      —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Total revenues

   $ 137,301      $ 16,862      $ 3,930      $ 4,048       $ 12,126         $ 174,267   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

OPERATING EXPENSES

                

Lease operating expenses

     27,185        6,299        4,034        1,993         (203   (f)      39,308   

Production and ad valorem taxes

     9,113        820        511        —           203      (f)      10,647   

Depreciation, depletion, and amortization

     91,855        6,733        6,123        —           38      (c)      104,749   

Asset retirement obligation accretion

     236        —          —          —           —             236   

Impairments

     3,350        2,345        92        —           —             5,787   

Exploration

     469        557        —          —           —             1,026   

General and administrative expenses

     17,140        1,505        1,418        —           —             20,063   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Total operating costs and expenses

   $ 149,348      $ 18,259      $ 12,178      $ 1,993       $ 38         $ 181,816   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Gain on sale of assets

     —          —          —          —           —             —     

Operating income

     (12,047     (1,397     (8,248     2,055         12,088           (7,549
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

OTHER INCOME (EXPENSE)

                

Other income

     277        —          —          —           482      (f)      759   

Loss on derivative instruments

     (3,288     —          —          —           (12,608   (f)      (15,896

Interest expense

     (25,895     (431     (472     —           (7,963   (d)      (34,761
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Total other expense

   $ (28,906   $ (431   $ (472   $ —         $ (20,089      $ (49,898
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

INCOME (LOSS) BEFORE TAXES

     (40,953     (1,828     (8,720     2,055         (8,001        (57,447

Income and Franchise Tax Expense

     13,735        —          —          —           5,343      (e)      19,078   

Equity Gain in Midstream Joint Venture

     —          231        —          —           (231   (g)      —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

NET INCOME (LOSS)

   $ (27,218   $ (1,597   $ (8,720   $ 2,055       $ (2,889      $ (38,369
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Per share amounts

                

Basic: Net Loss

   $ (0.27            (h)    $ (0.25

Diluted: Net Loss

   $ (0.27            (h)    $ (0.25

Weighted Average Shares Outstanding

                

Basic

     100,125                    151,125   

Diluted

     100,125                    151,125   

 

2


RSP PERMIAN, INC.

PRO FORMA STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015

(in thousands, except per share amounts)

 

     Historical
RSP
Permian
    SHEP I LLC     Concho Properties
Working Interest
     Pro Forma
Adjustments
         Total  

REVENUES

              

Oil sales

   $ 263,286      $ —        $ 23,713       $ 14,194      (f)    $ 301,193   

Natural gas sales

     10,517        —          1,061         868      (f)      12,446   

NGL sales

     10,189        —          —           14      (f)      10,203   

Crude oil, natural gas, and natural gas liquids

     —          15,381        —           (15,381   (f)      —     

Unrealized gain on derivatives

     —          2,519        —           (2,519   (f)      —     

Realized gain on derivatives

     —          394        —           (394   (f)      —     
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Total revenues

   $ 283,992      $ 18,294      $ 24,774       $ (3,218      $ 323,842   
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

OPERATING EXPENSES

              

Lease operating expenses

     53,124        5,306        9,438         (1,256   (f)      66,612   

Production and ad valorem taxes

     19,995        664        —           1,256      (f)      21,915   

Depreciation, depletion, and amortization

     154,039        8,835        —           31,574      (c)      194,448   

Asset retirement obligation accretion

     336        —          —           —             336   

Impairments

     34,269        8,074        —           —             42,343   

Exploration

     2,380        —          —           —             2,380   

General and administrative expenses

     27,317        4,368        —           —             31,685   
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Total operating costs and expenses

   $ 291,460      $ 27,247      $ 9,438       $ 31,574         $ 359,719   
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Gain on sale of assets

     306        —          —           —             306   

Operating income

     (7,774     (8,953     15,336         (34,792        (36,183
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

OTHER INCOME (EXPENSE)

              

Other income

     469        —          —           3      (f)      472   

Gain (Loss) on derivative instruments

     20,906        —          —           2,913      (f)      23,819   

Interest expense

     (43,538     (278     —           (15,925   (d)      (59,741
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Total other income (expense)

   $ (22,163   $ (278   $ —         $ (13,009      $ (35,450
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

INCOME (LOSS) BEFORE TAXES

     (29,937     (9,231     15,336         (47,801        (71,633

Income and Franchise Tax Expense

     11,683        (199     —           14,884      (e)      26,368   

Equity Losses in Midstream Joint Venture

     —          (474     —           474      (g)      —     
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

NET INCOME (LOSS)

   $ (18,254   $ (9,904   $ 15,336       $ (32,443      $ (45,265
  

 

 

   

 

 

   

 

 

    

 

 

      

 

 

 

Per share amounts

              

Basic: Net Loss

   $ (0.21          (h)    $ (0.33

Diluted: Net Loss

   $ (0.21          (h)    $ (0.33

Weighted Average Shares Outstanding

              

Basic

     86,770                  137,770   

Diluted

     86,770                  137,770   

 

3


RSP PERMIAN, INC.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Introduction

RSP Permian, Inc. (the “Company”) is a Delaware corporation formed as a successor to RSP Permian, L.L.C. (“RSP”) in September 2013 to engage in the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. The following unaudited pro forma combined financial statements of the Company reflect the combined historical results of RSP, Silver Hill Energy Partners I and Silver Hill Energy Partners II, on a pro forma basis to give effect to the following transactions, which are described in further detail below, as if they had occurred on June 30, 2016 for pro forma balance sheet purposes, and on January 1, 2015 for pro forma statements of operations purposes:

The Silver Hill Energy Partners Acquisition. On October 13, 2016, RSP agreed to acquire all of the outstanding membership interests of Silver Hill Energy Partners I (“SHEP I”) and Silver Hill Energy Partners II (“SHEP II”) (collectively, “Silver Hill”). Silver Hill is engaged in the acquisition and development of working and leasehold interests in oil and natural gas properties located in the Permian Basin.

The Equity Offering. For purposes of the unaudited pro forma combined financial statements, the “Equity Offering” is defined as the issuance and sale to the public of 20 million shares of the Company’s common stock in October 2016, resulting in $780 million of proceeds, net of underwriting discounts, commissions and offering-related expenses.

The unaudited pro forma combined statements of operations of the Company for the year ended December 31, 2015 are based on the audited historical statements of operations of the Company for the year ended December 31, 2015, adjusted to give effect to the Silver Hill acquisitions and the aforementioned Equity Offering as if they occurred on January 1, 2015.

The unaudited pro forma combined statements of operations of the Company for the six months ended June 30, 2016 are based on the unaudited historical statements of operations of the Company for the six months ended June 30, 2016, adjusted to give effect to the Silver Hill acquisitions and the aforementioned Equity Offerings as if they occurred on January 1, 2015. The unaudited pro forma combined consolidated balance sheet of the Company as of June 30, 2106 is based on the unaudited historical consolidated balance sheet of the Company as of June 30, 2016, adjusted to give effect to the Silver Hill acquisitions and the aforementioned Equity Offerings as if they occurred on June 30, 2016.

The pro forma data presented reflect events directly attributable to the described transactions and certain assumptions that the Company believes are reasonable. The pro forma data are not necessarily indicative of financial results that would have been attained had the described transactions occurred on the dates indicated above because they necessarily exclude various operating expenses, such as incremental general and administrative expenses that may be necessary to run the combined companies. The adjustments are based on currently available information and certain estimates and assumptions. Management believes that the assumptions provide a reasonable basis for presenting the significant effects of the transactions as contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma financial statements.

The unaudited pro forma financial statements and related notes are presented for illustrative purposes only. If the Equity Offering and the Silver Hill acquisitions contemplated herein had occurred in the past, the Company’s operating results might have been materially different from those presented in the unaudited pro forma financial statements. The unaudited pro forma combined financial statements should not be relied upon as an indication of operating results that the Company would have achieved if the transactions contemplated herein had taken place on the specified date. In addition, future results may vary significantly from the results reflected in the unaudited pro forma financial statements of operations and should not be relied on as an indication of the future results the Company will have after the completion of the transactions noted in these unaudited pro forma combined financial statements.

The following notes discuss the columns presented and the entries made to the unaudited combined financial statements.

 

4


RSP Permian, Inc. This column represents the unaudited historical statements of operations and consolidated balance sheet for the Company for the applicable period.

SHEP I. This column represents the unaudited historical statements of operations and consolidated balance sheet for SHEP I for the applicable period.

SHEP II. This column represents the unaudited historical statements of operations and consolidated balance sheet for the SHEP II for the applicable period.

Concho Properties Working Interest. This column represents the unaudited historical statement of operations for an acquiree of SHEP II. These assets were comprise solely of working interests in producing oil and gas properties.

Note 1 – Pro Forma Adjustments

Pro Forma Adjustments. We made the following adjustments in the preparation of the unaudited pro forma statements of operations.

 

  (a) Adjustments to reflect the Equity Offering, additional borrowings under the Company’s credit facility, and related proceeds.

 

  (b) Adjustments to reflect the purchase of SHEP I and SHEP II, elimination of assets owned by SHEP I and SHEP II but retained by the selling shareholders of Silver Hill, and elimination of SHEP I and SHEP II equity balances.

The purchase price of the SHEP I and SHEP II acquisitions is estimated at $2.5 billion and is comprised of the fair value of 31 million shares of RSP common stock issued to the selling shareholders of Silver Hill, with estimated value of $1.24 billion, along with $1.211 billion of cash paid to those same selling shareholders, and liabilities assumed.

 

  (c) Adjustments to historical depreciation, depletion, and amortization of SHEP I and SHEP II for the step up of oil and natural gas properties to estimated fair value. The initial allocation of value was approximately $2.0 billion to unproved property and $0.5 billion to proved property.

 

  (d) Adjustments to reflect the increase in interest expense on approximately $455.0 million of borrowings by RSP to fund the SHEP I and SHEP II acquisitions, using an interest rate of 3.5% which was the prime rate on our credit facility at June 30, 2016.

 

  (e) Reflects the estimated incremental income tax provision associated with the Company’s historical results of operations, the SHEP I and SHEP II results of operations, and pro forma adjustments, assuming these earnings had been subject to federal income tax as a subchapter C corporation using an effective tax rate of approximately 35.5%, which is inclusive of federal and state income taxes.

 

  (f) Adjustments to reclassify certain revenues and expenses of SHEP I and SHEP II to conform with the Company’s presentation of these revenues and expenses.

 

  (g) Adjustments to eliminate equity gains and losses from a joint venture owned by SHEP I that will not be purchased by RSP.

 

  (h) Basic and diluted earnings per share is based on the sale of 20 million shares of the Company’s common stock in the public offering and then the issuance of 31 million shares of the Company’s common stock as consideration in the purchase of SHEP I and SHEP II.

 

5


Note 2 – Pro Forma Supplemental Oil and Natural Gas Reserve Information

The following tables set forth certain unaudited pro forma information concerning the Company’s proved crude oil, natural gas and natural gas liquids (“NGLs”) reserves for the year December 31, 2015, giving effect to the acquisitions of SHEP I and SHEP II as if it had occurred on January 1, 2015. There are numerous uncertainties inherent in estimating the quantities of proved reserves and projecting future rates of production and timing of development costs. The estimates of reserves, and the standardized measure of future net cash flow, shown below, reflects SHEP I and SHEP II’s development plan for their properties, rather than the Company’s development plan for the properties. The following reserve data represent estimates only and should not be construed as being precise. SHEP I and SHEP II natural gas reserves include NGLs.

 

           Natural
gas
                Oil           NGLs     Total  
     (MMCF)     (MBbls)     (MBbls)     (MBoe)  
     RSP
Historical
    SHEP I
Historical
    SHEP II
Historical
    RSP
Historical
    SHEP I
Historical
    SHEP II
Historical
    RSP
Historical
    RSP Pro
Forma
 

Proved developed and undeveloped reserves:

                

As of December 31, 2014

     92,422        3,038        4,313        69,273        1,452        2,699        21,739        111,792   

Revisions of previous estimates

     (20,205     (2,515     (2,151     (12,886     (993     (1,056     (4,251     (23,331

Extensions, discoveries, and other additions

     55,313        12,030        14,876        50,375        7,718        9,258        6,971        88,025   

Purchases of minerals in place

     10,968        —          —          10,178        —          —          2,373        14,379   

Production

     (4,991     (324     (359     (5,805     (335     (566     (1,045     (8,697
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2015

     133,507        12,229        16,679        111,135        7,842        10,335        25,787        182,168   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proved developed reserves:

                

December 31, 2014

     35,921        440        2,119        27,716        396        1,281        8,221        44,027   

December 31, 2015

     56,640        3,770        5,726        44,128        2,182        3,668        11,020        72,021   

Proved undeveloped reserves:

                

December 31, 2014

     56,501        2,598        2,194        41,557        1,056        1,418        13,518        67,765   

December 31, 2015

     76,867        8,459        10,952        67,007        5,660        6,667        14,767        110,147   

 

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Standardized Measure of Discounted Future Net Cash Flows

Summarized in the following table is information for the standardized measure of discounted cash flows relating to proved reserves as of December 31, 2015, giving effect to the acquisitions of SHEP I and SHEP II. The standardized measure of discounted future net cash flows does not purport to be, nor should it be interpreted to present, the fair value of the oil and natural gas reserves of the property. An estimate of fair value would take into account, among other things, the recovery of reserves not presently classified as proved, the value of unproved properties, and consideration of expected future economic and operating conditions.

The estimates of future cash flows and future production and development costs as of December 31, 2015 are based on the unweighted arithmetic average first-day-of-the-month price for the preceding 12-month period. Estimated future production of proved reserves and estimated future production and development costs of proved reserves are based on current costs and economic conditions. All wellhead prices are held flat over the forecast period for all reserve categories. The estimated future net cash flows are then discounted at a rate of 10%.

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves is as follows:

 

     December 31, 2015  
     RSP
Historical
     SHEP I
Historical
     SHEP II Historical      RSP Pro
Forma
 
(in thousands)   

 

                      

Future cash inflows

   $ 5,964,332       $ 383,872       $ 541,964       $ 6,890,168   

Future production costs

     (1,855,044      (130,061      (156,706      (2,141,811

Future development costs

     (1,187,244      (78,366      (82,700      (1,348,310

Future income tax expense (1)

     (699,070      (2,015      (2,845      (703,930
  

 

 

    

 

 

    

 

 

    

 

 

 

Future net cash flows

     2,222,974         173,430         299,713         2,696,117   

10% discount for estimated timing of cash flows

     (1,426,958      (103,413      (163,339      (1,693,710
  

 

 

    

 

 

    

 

 

    

 

 

 

Standardized measure of discounted future net cash flows

   $ 796,016       $ 70,017       $ 136,374       $ 1,002,407   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Future net cash flows for SHEP I and SHEP II do not include the effects of income taxes on future revenues because those entities are limited liability companies not subject to entity-level income taxation. Accordingly, no provision for federal has been provided because taxable income was passed through to their equity holders. Had SHEP I and SHEP II been subject to entity-level income taxation for federal purposes, it is estimated the additional taxes would be $41.3 million and $62.6 million for SHEP I and SHEP II, respectively.

In the foregoing determination of future cash inflows, sales prices used for gas and oil for December 31, 2015 were estimated using the average price during the 12-month period, determined as the unweighted arithmetic average of the first-day-of-the-month price for each month. Prices were adjusted by lease for quality, transportation fees and regional price differentials. Future costs of developing and producing the proved gas and oil reserves reported at the end of each year shown were based on costs determined at each such year-end, assuming the continuation of existing economic conditions.

It is not intended that the FASB’s standardized measure of discounted future net cash flows represent the fair market value of the Company’s proved reserves. The Company cautions that the disclosures shown are based on estimates of proved reserve quantities and future production schedules which are inherently imprecise and subject to revision, and the 10% discount rate is arbitrary. In addition, costs and prices as of the measurement date are used in the determinations, and no value may be assigned to probable or possible reserves.

 

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Changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves are as follows:

 

            December 31, 2015                
     RSP Historical      SHEP I Historical      SHEP II Historical      RSP Pro Forma  
(in thousands)                            

Standardized measure of discounted future net cash flows, beginning of year

   $ 876,131       $ 26,624       $ 56,619       $ 959,374   

Changes in the year resulting from:

           

Sales, less production taxes

     (210,874      (9,411      (15,336      (235,621

Revisions of previous quantity estimates

     (192,081      (16,709      (4,332      (213,122

Extensions, discoveries, and other additions

     440,744         69,595         118,162         628,501   

Net change in prices and production costs

     (537,613      (9,170      (29,308      (576,091

Changes in estimated future development costs

     14,480         —           —           14,480   

Previously estimated development costs incurred during the period

     107,829         —           700         108,529   

Divestiture of reserves

     —           —           —           —     

Purchases of minerals in place

     95,207         —           —           95,207   

Accretion of discount

     131,764         2,706         5,764         140,234   

Net change in income taxes

     164,377         (516      (389      163,472   

Timing differences and other

     (93,948      6,898         4,494         (82,556
  

 

 

    

 

 

    

 

 

    

 

 

 

Standardized measure of discounted future net cash flows, end of year

   $ 796,016       $ 70,017       $ 136,374       $ 1,002,407   
  

 

 

    

 

 

    

 

 

    

 

 

 

Estimates of economically recoverable oil and natural gas reserves and of future net revenues are based upon a number of variable factors and assumptions, all of which are to some degree subjective and may vary considerably from actual results. Therefore, actual production, revenues, development and operating expenditures may not occur as estimated. The reserve data are estimates only, are subject to many uncertainties and are based on data gained from production histories and on assumptions as to geologic formations and other matters. Actual quantities of oil and natural gas may differ materially from the amounts estimated.

 

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