WARREN RESOURCES INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - WARREN RESOURCES INC	d262120d8k.htm

Exhibit 99.1

UNITED STATES BANKRUPTCY COURT


*MOR-1*

CASE NAME:	Warren Resources, Inc., et al.	PETITION DATE:	6/2/2016
CASE NUMBER:	16-32760	DISTRICT OF TEXAS:	Southern
		DIVISION:	Houston

MONTHLY OPERATING REPORT SUMMARY: SEPTEMBER 2016


*MONTH*	June			July			August			September			October
REVENUES (MOR-6)		4,988,081			5,650,524			5,110,713			5,193,525			—
INCOME BEFORE INT; DEPREC./TAX (MOR-6)		(1,169,637	)		179,451			678,424			(1,880,108	)		—
NET INCOME (LOSS) (MOR-6)		(10,162,825	)		(6,106,670	)		(5,274,476	)		(6,710,956	)		—
PAYMENTS TO INSIDERS (MOR-9)		57,930			69,200			70,684			73,445			—
PAYMENTS TO PROFESSIONALS (MOR-9)		—			(755,662	)		(1,184,148	)		(482,274	)		—

TOTAL DISBURSEMENTS (MOR-7)		(10,302,272	)		(5,862,446	)		(6,128,341	)		(10,180,882	)		—

***	The original of this document must be filed with the United States Bankruptcy Court and a copy must be sent to the United States Trustee***


REQUIRED INSURANCE MAINTAINED AS OF SIGNATURE DATE		EXP. DATE		CIRCLE ONE
CASUALTY	YES (X) NO ( )	09-01-2017	Are all accounts receivable being collected within terms?	Yes
LIABILITY	YES (X) NO ( )	09-01-2017	Are all post-petition liabilities, including taxes, being paid within terms?		No
VEHICLE	YES (X) NO ( )	09-01-2017	Have any pre-petition liabilities been paid?		No
WORKER’S	YES (X) NO ( )	09-01-2017	If so, describe: Certain payments were made pursuant to First Day Orders
OTHER	YES (X) NO ( )	09-01-2017	Are all funds received being deposited into DIP bank accounts?		No
			Were any assets disposed of outside the normal course of business?	Yes
			If so, describe
			Are all U.S. Trustee Quarterly Fee Payments current?		No
			What is the status of your Plan of Reorganization? Effective on October 5, 2016


Consolidated Debtors	Case Number		September-2016 Disbursements
Warren Resources, Inc. (Effective on October 5, 2016)		16-32760		(5,700,416	)
Warren E&P, Inc. (Effective on October 5, 2016)		16-32761		(4,480,466	)
Warren Resources of California, Inc. (Effective on October 5, 2016)		16-32762		—
Warren Marcellus, LLC (Effective on October 5, 2016)		16-32764		—
Warren Energy Services, LLC (Effective on October 5, 2016)		16-32765		—
Warren Management Corp. (Effective on October 5, 2016)		16-32766

Total consolidated disbursements (MOR-7)				(10,180,882	)


ATTORNEY NAME:		Timothy A. Davidson II
FIRM NAME:		Andrews Kurth LLP
ADDRESS:		600 Travis
		Suite 4200
CITY, STATE, ZIP:		Houston, Texas 77002
TELEPHONE/FAX:		713-220-4200

MOR-1


I certify under penalty of perjury that the following complete Monthly Operating Report (MOR), consisting of MOR-1 through MOR-9 plus attachments, is true and correct.



SIGNED X
		(ORIGINAL SIGNATURE)

TITLE:		President, Chief Executive Officer and Chief Restructuring Officer


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760

COMPARATIVE BALANCE SHEETS


ASSETS	FILING DATE (1) June 2, 2016			MONTH June 2016			MONTH July 2016			MONTH August 2016			MONTH September 2016			MONTH October 2016
CURRENT ASSETS
Cash		13,918,623			11,090,776			11,366,706			12,035,268			7,645,454			—
Accounts Receivable, Net		10,235,813			9,275,942			9,709,987			8,369,870			7,967,479			—
Inventory: Lower of Cost or Market		—			—			—			—			—			—
Prepayments and other current assets		5,656,625			5,188,894			4,668,701			4,399,936			4,692,151			—
Investments (2)		6,087,653			1,844,008			2,126,726			1,851,065			134,043			—
Other (3)		—			—			—			—			1,527,447			—

TOTAL CURRENT ASSETS		35,898,715			27,399,619			27,872,120			26,656,139			21,966,574			—

PROPERTY, PLANT & EQUIP. @ COST		27,636,990			27,667,366			27,668,188			26,736,430			26,752,786			—
Less Accumulated Depreciation		(26,305,548	)		(26,365,769	)		(26,424,438	)		(25,525,382	)		(25,576,602	)		—
NET BOOK VALUE OF PP & E		1,331,442			1,301,597.45			1,243,749.55			1,211,047.22			1,176,184.26			—
OTHER ASSETS
1. Deferred Financing Costs (4)		10,598,434			10,400,273			10,202,112			10,003,951			—			—
2. Oil & Gas Properties (5)		115,893,656			113,741,170			112,477,430			110,262,603			31,169,593			—
3. Oil & Gas Properties, Other		14,657,923			14,657,923			14,657,923			14,749,009			14,735,769			—
4. Notes Receivable		2,948,592			2,948,592			2,948,592			2,948,592			2,948,592			—
5. Midstream Assets		20,012,903			19,895,178			19,810,941			19,693,105			19,575,269			—

TOTAL ASSETS	$	201,341,665			190,344,353			189,212,867			185,524,446			91,571,981			—

(1)	Information as of May 31, 2016.

(2)	United States Treasury Bonds secured against Convertible Debentures were liquidated in September 2016 per the Plan of Reorganization confirmed on September 14, 2016.

(3)	Other represents proceeds from the liquidation of United States Treasury Bonds per note 2.

(4)	Deferred Financing Costs were reclassed to debt to align with new Generally Accepted Accounting Principles.

(5)	An impairment charge ($90,849,000) was booked in September 2016 to reflect an updated reserve report.


MOR-2		Revised 07/01/98


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760

COMPARATIVE BALANCE SHEETS


LIABILITIES & OWNER’S EQUITY	FILING DATE (1) June 2, 2016			MONTH June 2016			MONTH July 2016			MONTH August 2016			MONTH September 2016			MONTH October 2016
LIABILITIES
POST-PETITION LIABILITIES (MOR-4)		—			6,242,054			8,131,936			5,415,483			8,730,077			—
PRE-PETITION LIABILITIES
Notes Payable - Secured		—			—			—			—			—			—
Priority Debt (2)		477,338,089			477,515,421			475,858,222			475,481,564			465,465,666			—
Federal Income Tax		—			—			—			—			—			—
FICA/Withholding		—			—			—			—			—			—
Unsecured Debt		—			—			—			—			—			—
Other (3)		80,997,280			73,618,449			78,658,748			83,153,643.14			81,158,781.02			—

TOTAL PRE-PETITION LIABILITIES		558,335,368			551,133,870			554,516,970			558,635,208			546,624,447			—

TOTAL LIABILITIES		558,335,368			557,375,925			562,648,906			564,050,690			555,354,524			—

OWNER’S EQUITY (DEFICIT)
PREFERRED STOCK		128,437			128,437			128,437			128,437			128,437			—
COMMON STOCK		8,520			8,520			8,520			8,520			8,520			—
ADDITIONAL PAID-IN CAPITAL		517,385,291			517,510,247			517,212,450			517,396,721			517,467,844			—
RETAINED EARNINGS: Filing Date		(874,515,951	)		(874,515,951	)		(874,515,951	)		(874,515,951	)		(874,515,951	)		—
RETAINED EARNINGS: Post Filing Date		—			(10,162,825	)		(16,269,495	)		(21,543,971	)		(28,254,927	)		—
RETAINED EARNINGS: Prior period adjustments (4)		—			—			—			—			(78,616,466	)

TOTAL OWNER’S EQUITY (NET WORTH)		(356,993,703	)		(367,031,572	)		(373,436,039	)		(378,526,244	)		(463,782,543	)		—

LIABILITIES & OWNERS EQUITY	$	201,341,665		$	190,344,353		$	189,212,867		$	185,524,446		$	91,571,981			0

(1)	Information as of May 31, 2016.

(2)	Reduction between August and September 2016 relates to Deferred Financing Costs that were reclassed to debt to align with new Generally Accepted Accounting Principles.

(3)	Pursuant to court order, prepetition lease operating expenses continue to be due and payable post petition.

(4)	Adjustments primarily relate to the impairement of Oil and Gas properties ($90,849,000), decrease in depreciation, depletion and amortization ($12,475,000) and other non-cash audit adjustments.


MOR-3		Revised 07/01/98


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760

SCHEDULE OF POST-PETITION LIABILITIES


	FILING DATE June 2, 2016		MONTH June 2016		MONTH July 2016		MONTH August 2016		MONTH September 2016		MONTH October 2016
*TRADE ACCOUNTS PAYABLE*		—		930,910		2,396,078		210,402		1,947,027		—
TAX PAYABLE
Federal Payroll Taxes		—		—		—		—		—		—
State Payroll Taxes		—		—		—		—		—		—
Ad Valorem Taxes		—		29,161		61,055		48,161		67,739		—
Other Taxes		—		45,949		127,750		72,224		623,179		—

TOTAL TAXES PAYABLE (1)		—		75,110		188,805		120,386		690,917		—

SECURED DEBT POST-PETITION		—		—		—		—		—		—
ACCRUED INTEREST PAYABLE		—		—		—		—		—		—
OTHER ACCRUED LIABILITIES
1. PAYROLL (2)		—		225,437		275,210		74,564		115,317		—
2. LEASE OPERATING & G&A (3)		—		3,555,832		3,542,704		3,742,000		4,746,000		—
3. ROYALTIES (4)		—		1,454,765		1,729,138		1,268,131		1,230,816		—

TOTAL POST-PETITION LIABILITIES (MOR-3)	$	—	$	6,242,054	$	8,131,936	$	5,415,483	$	8,730,077	$	—

(1)	The balance represents the movement of accounts between August 31 and September 30, 2016.

(2)	Represents a timing difference for the payment of the debtor’s bi-weekly payroll.

(3)	September 2016 includes unpaid restructuring professional fees ($4,446,000) and lease operating expense ($300,000).

(4)	Represents proceeds from gross production receipts that are payable to third-party working interests.


MOR-4		Revised 07/01/98


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760

AGING OF POST-PETITION LIABILITIES: SEPTEMBER 2016


DAYS	TOTAL		TRADE ACCOUNTS		FEDERAL TAXES		STATE TAXES		AD VALOREM, OTHER TAXES		OTHER
0-30		8,730,077		1,947,027		—		—		690,917		6,092,133
31-60		—		—		—		—		—		—
61-90		—		—		—		—		—		—
91+		—		—		—		—		—		—

TOTAL		8,730,077	$	1,947,027	$	0	$	0	$	690,917	$	6,092,133

AGING OF ACCOUNTS RECEIVABLE (2)


MONTH	June 2, 2016 (1)		June 2016		July 2016		August 2016		September 2016		October 2016
0-30 DAYS		6,072,541		5,983,435		7,195,913		6,501,753		6,110,307		—
31-60 DAYS		—		—		—		—		—		—
61-90 DAYS		—		—		—		—		—		—
91+ DAYS		4,163,272		3,292,507		2,514,074		1,868,117		1,857,172		—

TOTAL	$	10,235,813	$	9,275,942	$	9,709,987	$	8,369,870	$	7,967,479	$	0

(1)	Information as of May 31, 2016.

(2)	Warren’s Accounts Receivable accounts do not represent any Oil and Gas production that has not been sold.


MOR-5


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760

STATEMENT OF INCOME (LOSS)


	MONTH June 2016			MONTH July 2016			MONTH August 2016			MONTH September 2016			MONTH October 2016		FILING TO DATE
REVENUES (MOR-1)		4,988,081			5,650,524			5,110,713			5,193,525			—		20,942,843
TOTAL COST OF REVENUES		(2,660,189	)		(3,912,326	)		(2,621,030	)		(4,716,316	)		—		(13,909,861	)
GROSS PROFIT		2,327,892			1,738,198			2,489,683			477,209			—		7,032,982
OPERATING EXPENSES:
Selling & Marketing		—			—			—			—			—		—
General & Administrative		(3,497,529	)		(1,558,747	)		(1,811,259	)		(2,357,317	)		—		(9,224,852	)
Other		—			—			—			—			—		—

TOTAL OPERATING EXPENSES		(3,497,529	)		(1,558,747	)		(1,811,259	)		(2,357,317	)		—		(9,224,852	)

INCOME BEFORE INT, DEPR/TAX (MOR-1)		(1,169,637	)		179,451			678,424			(1,880,108	)		—		(2,191,870	)
INTEREST EXPENSE (1)		(3,441,934	)		(3,570,906	)		(3,570,905	)		(3,503,861	)		—		(14,087,606	)
DEPRECIATION		(2,601,328	)		(2,566,888	)		(2,581,624	)		(1,000,532	)		—		(8,750,372	)
OTHER (INCOME) EXPENSE (2)		(2,949,926	)		(148,327	)		199,629			(326,455	)		—		(3,225,079	)
OTHER ITEMS		—			—			—			—			—		—

TOTAL INT, DEPR & OTHER ITEMS		(8,993,188	)		(6,286,121	)		(5,952,900	)		(4,830,848	)		—		(26,063,057	)

NET INCOME BEFORE TAXES		(10,162,825	)		(6,106,670	)		(5,274,476	)		(6,710,956	)		—		(28,254,927	)
FEDERAL INCOME TAXES		—			—			—			—			—		—

NET INCOME (LOSS) (MOR-1)		(10,162,825	)		(6,106,670	)		(5,274,476	)		(6,710,956	)		—		(28,254,927	)

Accrual Accounting Required, Otherwise Footnote with Explanation.

September 2016 notes:

(1)	Deferred Financing Costs ($198,161) and Interest Expenses ($3,305,700)

(2)	Accretion of asset retirement obligations ($249,914), Loss on derivative instruments ($143,917), Gain on USTB investment ($343,725), Loss on contingent consideration ($50,000), Other Expenses ($102,349) relating to non-cash audit adjustments and dividends and preferred stock accretion ($124,000).


MOR-6


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760


CASH RECEIPTS AND DISBURSEMENTS	MONTH June 2016			MONTH July 2016			MONTH August 2016			MONTH September 2016			MONTH October 2016		FILING TO DATE
1. CASH-BEGINNING OF MONTH		12,858,577			11,072,052			11,366,700			12,035,268			—		12,858,577
RECEIPTS:
2. CASH SALES		—			—			—			—			—		—
3. COLLECTION OF ACCOUNTS RECEIVABLE		8,515,748			6,157,094			6,796,909			5,791,068			—		27,260,818
4. LOANS & ADVANCES (attach list)		—			—			—			—			—		—
5. SALE OF ASSETS		—			—			—			—			—		—
6. OTHER (attach list)		—			—			—			—			—		—

TOTAL RECEIPTS		8,515,748			6,157,094			6,796,909			5,791,068			—		—

(Withdrawal) Contribution by Individual Debtor MFR-2*		—			—			—			—			—		—
DISBURSEMENTS:
7. NET PAYROLL		(569,986	)		(684,643	)		(1,030,642	)		(658,240	)		—		(2,943,512	)
8. PAYROLL TAXES PAID		—			—			—			—			—		—
9. SALES, USE & OTHER TAXES PAID		(57,036	)		(23,150	)		(110,175	)		(210	)		—		(190,571	)
10. SECURED/RENTAL/LEASES		—			—			—			—			—		—
11. UTILITIES & TELEPHONE		—			—			—			—			—		—
12. INSURANCE		—			—			—			—			—		—
13. INVENTORY PURCHASES		—			—			—			—			—		—
14. VEHICLE EXPENSES		—			—			—			—			—		—
15. TRAVEL & ENTERTAINMENT		—			—			—			—			—		—
16. REPAIRS, MAINTENANCE & SUPPLIES		(2,228,526	)		(1,586,412	)		(2,019,135	)		(1,169,762	)		—		(7,003,835	)
17. ADMINISTRATIVE & SELLING		(227,951	)		(460,266	)		(680,085	)		(102,602	)		—		(1,470,905	)
18. OTHER (2)		(1,558,563	)		(2,213,085	)		(1,104,157	)		(1,687,583	)		—		(6,563,388	)

TOTAL DISBURSEMENTS FROM OPERATIONS		(4,642,062	)		(4,967,557	)		(4,944,193	)		(3,618,398	)		—		—

19. PROFESSIONAL FEES		—			(755,662	)		(1,184,148	)		(482,274	)		—		(2,422,083	)
20. U.S. TRUSTEE FEES		—			(24,700	)		—			—			—		(24,700	)
21. OTHER REORGANIZATION EXPENSES (3)		(5,660,210	)		(114,527	)		—			(6,080,210	)		—		(11,854,947	)

TOTAL DISBURSEMENTS (4)		(10,302,272	)		(5,862,446	)		(6,128,341	)		(10,180,882	)		—		—

22. NET CASH FLOW		(1,786,524	)		294,648			668,568			(4,389,814	)		—		(5,213,122	)
23. CASH - END OF MONTH (MOR-2) (1)		11,072,052			11,366,700			12,035,268			7,645,453			—		7,645,454

(1)	June 2016 closing cash balance does not reconcile to balance sheet cash due to the exclusion of one bank account held in the name of “Warren Development Corp.” totalling $18,722.46.

September 2016 notes:

(2)	Other represents royalty payments on land assets ($1,687,583).

(3)	Other Reorganization Expenses, includes First Lien Adequate Protection ($5,697,135) and Utility Adequate Assurance Deposit ($383,075).

(4)	Includes all checks written, wire transfers made from, or any other withdrawal from the bank accounts listed on MOR-8. No amounts have been paid from the accounts of others on the debtor’s behalf.


MOR-7


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760


				CASH ACCOUNT RECONCILIATION
				MONTH OF		September 2016


BANK NAME	JP MORGAN CHASE		JP MORGAN CHASE			JP MORGAN CHASE			JP MORGAN CHASE		MERRILL LYNCH		JP MORGAN CHASE			JP MORGAN CHASE		JP MORGAN CHASE		JP MORGAN CHASE
ACCOUNT NUMBER	3794		5477			7471			2692		7789 & 7B88		3751			6115		2888		5209
*ACCOUNT TYPE*	CDA BY GSO		*PAYROLL*			*OPERATIONS*			*CD-COLLATERAL*		*STOCK* *OPTIONS*		*DISBURSEMENT*			*CHECKING*		*CHECKING*		*OPERATIONS*			*TOTAL (1)*
CASE NAME	Warren Resources, Inc.		Warren Resources, Inc.			Warren Resources, Inc.			Warren Resources, Inc.		Warren Resources, Inc.		Warren E&P, Inc.			Warren E&P, Inc.		Warren Resources of California, Inc.		Warren Energy Services, LLC
CASE NUMBER	16-32760		16-32760			16-32760			16-32760		16-32760		16-32761			16-32761		16-32762		16-32765			n/a
BANK BALANCE	$	—	$	—		$	2,007,725		$	—	$	—	$	7,581,811		$	—	$	—	$	—		$	9,589,537
DEPOSITS IN TRANSIT	$	—	$	—		$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—
OUTSTANDING CHECKS	$	—	$	—		$	—		$	—	$	—	$	(1,944,083	)	$	—	$	—	$	—		$	(1,944,083	)
ADJUSTED BANK BALANCE	$	—	$	—		$	2,007,725		$	—	$	—	$	5,637,728		$	—	$	—	$	—		$	7,645,453
BEGINNING CASH - PER BOOKS	$	—	$	106,785		$	7,520,741		$	—	$	—	$	4,407,742		$	—	$	—	$	—		$	12,035,268
RECEIPTS	$	—	$	—		$	80,616		$	—	$	—	$	5,466,683		$	—	$	—	$	243,769		$	5,791,068
TRANSFERS OUT OF ACCOUNT	$	—	$	(106,362	)	$	—		$	—	$	—	$	—		$	—	$	—	$	(243,769	)	$	(350,131	)
TRANSFERS INTO ACCOUNT	$	—	$	—		$	106,362		$	—	$	—	$	243,769		$	—	$	—	$	—		$	350,131
CHECKS/OTHER DISBURSEMENTS	$	—	$	(423	)	$	(5,699,992	)	$	—	$	—	$	(4,480,466	)	$	—	$	—	$	—		$	(10,180,882	)
ENDING CASH - PER BOOKS	$	—	$	(0	)	$	2,007,725		$	—	$	—	$	5,637,728		$	—	$	—	$	—		$	7,645,453


MOR-8


CASE NAME:		Warren Resources, Inc., et al.
CASE NUMBER:		16-32760

PAYMENTS TO INSIDERS AND PROFESSIONALS

Of the total disbursements shown for the month, list the amount paid to insiders (as defined in Section 101(31)(A)-(F) of the U.S. Bankruptcy Code) and the professionals. Also, for insiders, identify the type of compensation paid (e.g., salary, commission, bonus, etc.) (Attach additional pages as necessary).


INSIDERS: NAME/COMP TYPE	MONTH June 2016		MONTH July 2016		MONTH August 2016		MONTH September 2016		MONTH October 2016
1. James A Watt		17,691		27,450		27,450		27,615		—
2. Frank T. Smith Jr.		17,684		17,684		17,684		17,997		—
3. John R. Powers		11,484		11,758		13,242		15,524		—
4. Zach Waite		11,071		12,308		12,308		12,308		—

TOTAL INSIDERS (MOR-1)		57,930		69,200		70,684		73,445		—


PROFESSIONALS	MONTH June 2016		MONTH July 2016			MONTH August 2016			MONTH September 2016			MONTH October 2016
1. Andrews Kurth LLP		—		—			(521,467	)		(415,165	)		—
2. Jefferies LLC		—		—			—			—			—
3. Deloitte Transactions and Business Analytics LLP		—		—			(340,539	)		—			—
4. Epiq Systems		—		—			(211,790	)		(67,109	)		—
5. Kirkland & Ellis LLP		—		(755,662	)		(110,352	)		—			—
6. Bracewell & Giuliani LLP		—		—			—			—			—
7. Stroock & Stroock & Lavan LLP		—		—			—			—			—

TOTAL PROFESSIONALS (MOR-1)		—		(755,662	)		(1,184,148	)		(482,274	)		—


MOR-9

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