Attached files
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| 8-K/A - FORM 8-K/A - STONE ENERGY CORP | f8ka030317appalachiaprofor.htm |
Exhibit 99.1
STONE ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On February 27, 2017, Stone Energy Corporation (“Stone”) completed the sale of approximately 86,000 net acres in the Appalachian regions of Pennsylvania and West Virginia (collectively, the “Properties”) to EQT Corporation, through its wholly owned subsidiary EQT Production Company. Additional details of the sale are described in the notes to these financial statements.
The accompanying unaudited pro forma consolidated financial statements and accompanying notes as of and for the year ended December 31, 2016 (the “Pro Forma Statements”), which have been prepared by Stone’s management, have been derived from the historical audited consolidated financial statements of Stone included in the Annual Report on Form 10-K for the year ended December 31, 2016.
The unaudited pro forma consolidated balance sheet was prepared assuming the sale of the Properties, including purchase price adjustments to date, occurred on December 31, 2016. The unaudited pro forma consolidated statement of operations was prepared assuming the sale of the Properties, including purchase price adjustments to date, occurred on January 1, 2016.
The Pro Forma Statements are presented for illustrative purposes only and do not indicate the results of operations or financial position of Stone had the transaction been in effect on the dates or for the periods indicated, or the results of operations or financial position of Stone for any future periods. The Pro Forma Statements should be read in conjunction with Stone’s Annual Report on Form 10-K for the year ended December 31, 2016.
STONE ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2016
(In thousands of dollars)
Assets | Historical | Pro Forma Adjustments | Pro Forma | ||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 190,581 | $ | 515,384 | (a) | $ | 705,965 | ||||
Accounts receivable | 48,464 | 48,464 | |||||||||
Current income tax receivable | 26,086 | 26,086 | |||||||||
Other current assets | 10,151 | 10,151 | |||||||||
Total current assets | 275,282 | 515,384 | 790,666 | ||||||||
Oil and gas properties, full cost method of accounting: | |||||||||||
Proved, net | 437,794 | (178,153 | ) | (b) | 259,641 | ||||||
Unevaluated | 373,720 | (125,915 | ) | (b) | 247,805 | ||||||
Other property and equipment, net | 26,213 | 26,213 | |||||||||
Other assets, net | 26,474 | 26,474 | |||||||||
Total assets | $ | 1,139,483 | $ | 211,316 | $ | 1,350,799 | |||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable to vendors | $ | 19,981 | $ | 19,981 | |||||||
Undistributed oil and gas proceeds | 15,073 | 15,073 | |||||||||
Accrued interest | 809 | 809 | |||||||||
Asset retirement obligations | 88,000 | 88,000 | |||||||||
Current portion of long-term debt | 408 | 408 | |||||||||
Other current liabilities | 18,602 | 18,602 | |||||||||
Total current liabilities | 142,873 | — | 142,873 | ||||||||
Long-term debt | 352,376 | 352,376 | |||||||||
Asset retirement obligations | 154,019 | (8,410 | ) | (c) | 145,609 | ||||||
Other long-term liabilities | 17,315 | 17,315 | |||||||||
Total liabilities not subject to compromise | 666,583 | (8,410 | ) | 658,173 | |||||||
Liabilities subject to compromise | 1,110,182 | 1,110,182 | |||||||||
Total liabilities | 1,776,765 | (8,410 | ) | 1,768,355 | |||||||
Stockholders’ equity: | |||||||||||
Common stock | 56 | 56 | |||||||||
Treasury stock | (860 | ) | (860 | ) | |||||||
Additional paid-in capital | 1,659,731 | 1,659,731 | |||||||||
Accumulated deficit | (2,296,209 | ) | 219,726 | (d) | (2,076,483 | ) | |||||
Total stockholders’ equity | (637,282 | ) | 219,726 | (417,556 | ) | ||||||
Total liabilities and stockholders’ equity | $ | 1,139,483 | $ | 211,316 | $ | 1,350,799 | |||||
See accompanying notes to the unaudited pro forma consolidated financial statements.
STONE ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
(In thousands, except per share amounts)
Historical | Pro Forma Adjustments | Pro Forma | |||||||||
Operating revenue: | |||||||||||
Oil production | $ | 281,246 | $ | (9,268 | ) | (a) | $ | 271,978 | |||
Natural gas production | 64,601 | (25,276 | ) | (a) | 39,325 | ||||||
Natural gas liquids production | 28,888 | (22,142 | ) | (a) | 6,746 | ||||||
Other operational income | 2,657 | (1,593 | ) | (a) | 1,064 | ||||||
Total operating revenue | 377,392 | (58,279 | ) | 319,113 | |||||||
Operating expenses: | |||||||||||
Lease operating expenses | 79,650 | (11,644 | ) | (a) | 68,006 | ||||||
Transportation, processing and gathering expenses | 27,760 | (28,089 | ) | (a) | (329 | ) | |||||
Production taxes | 3,148 | (2,387 | ) | (a) | 761 | ||||||
Depreciation, depletion and amortization | 220,079 | (53,841 | ) | (c) | 166,238 | ||||||
Write-down of oil and gas properties | 357,431 | (325,835 | ) | (c) | 31,596 | ||||||
Accretion expense | 40,229 | (232 | ) | (b) | 39,997 | ||||||
Salaries, general and administrative expenses | 58,928 | 58,928 | |||||||||
Incentive compensation expense | 13,475 | 13,475 | |||||||||
Restructuring fees | 29,597 | 29,597 | |||||||||
Other operational expenses | 55,453 | 55,453 | |||||||||
Derivative expense, net | 810 | 810 | |||||||||
Total operating expenses | 886,560 | (422,028 | ) | 464,532 | |||||||
Loss from operations | (509,168 | ) | 363,749 | (145,419 | ) | ||||||
Other (income) expenses: | |||||||||||
Interest expense | 64,458 | 64,458 | |||||||||
Interest income | (550 | ) | (550 | ) | |||||||
Other income | (1,439 | ) | (1,439 | ) | |||||||
Other expense | 596 | 596 | |||||||||
Reorganization items | 10,947 | 10,947 | |||||||||
Total other expenses | 74,012 | — | 74,012 | ||||||||
Loss before income taxes | (583,180 | ) | 363,749 | (219,431 | ) | ||||||
Provision (benefit) for income taxes: | |||||||||||
Current | (5,674 | ) | (5,674 | ) | |||||||
Deferred | 13,080 | 13,080 | |||||||||
Total income taxes | 7,406 | — | 7,406 | ||||||||
Net loss | $ | (590,586 | ) | $ | 363,749 | $ | (226,837 | ) | |||
Basic loss per share | $ | (105.63 | ) | $ | (40.57 | ) | |||||
Diluted loss per share | $ | (105.63 | ) | $ | (40.57 | ) | |||||
Average shares outstanding | 5,591 | 5,591 | |||||||||
Average shares outstanding assuming dilution | 5,591 | 5,591 | |||||||||
See accompanying notes to the unaudited pro forma consolidated financial statements.
STONE ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
On February 27, 2017, Stone completed the sale of approximately 86,000 net acres in the Appalachian regions of Pennsylvania and West Virginia to EQT Corporation, through its wholly owned subsidiary EQT Production Company, referred to herein as the “Properties.” The net cash proceeds received from the sale totaled approximately $515.4 million, representing gross proceeds of $527.0 million adjusted by $4.5 million for preliminary purchase price adjustments for operations related to the Sold Properties after June 1, 2016, the effective date of the transaction. Estimated transaction costs associated with the sale are approximately $7.1 million.
The historical financial information has been derived from the historical audited consolidated financial statements of Stone included in the Annual Report on Form 10-K for the year ended December 31, 2016. The unaudited pro forma consolidated balance sheet was prepared as if the sale occurred as of December 31, 2016. The unaudited pro forma consolidated statement of operations was prepared as if the sale occurred as of January 1, 2016.
The pro forma adjustments are based on actual information and estimates made by management. These unaudited pro forma consolidated financial statements are provided for illustrative purposes only and do not purport to represent what Stone’s financial position or results of operations would have been if the sale of the Properties had occurred as presented, or to project Stone’s financial position or results of operations for any future periods. The pro forma adjustments related to the sale of the Properties are based on management’s best estimates as of the date of this Current Report on Form 8-K/A. Such pro forma adjustments are subject to change based on numerous factors, including the final purchase price adjustments and the final allocation of oil and gas properties to the Properties sold under the full cost method of accounting, and any such adjustments could be material.
Note 2 – Pro Forma Adjustments
The unaudited pro forma consolidated balance sheet at December 31, 2016 reflects the following adjustments:
(a) | Adjustment for net cash proceeds of approximately $515.4 million, which represents the gross sales price of $527.0 million, less purchase price adjustments of $4.5 million and estimated transaction costs of $7.1 million. |
(b) | Adjustment to eliminate the net carrying value allocated to the Properties. |
(c) | Adjustment to eliminate the asset retirement obligations associated with the Properties. |
(d) | Adjustment to record the estimated gain on the sale of the Properties as follows: |
(in thousands) | ||||
Gross proceeds | $527,000 | |||
Add: Transfer of asset retirement obligations | 8,410 | |||
Less: Purchase price adjustments | (4,529 | ) | ||
Transaction costs | (7,087 | ) | ||
Carrying value of properties sold | (304,068 | ) | ||
Gain on sale | $219,726 | |||
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2016 reflects the following adjustments:
(a) | Adjustment to revenue and direct operating expenses associated with the Properties. The pro forma remaining net credit in transportation, processing and gathering expenses includes a $7.9 million recoupment of prior period expenses against Federal royalties. |
(b) | Adjustment to eliminate accretion expense attributable to asset retirement obligations associated with the Properties. |
(c) | Adjustment to depreciation, depletion and amortization expense and write-down of oil and gas properties to reflect the sale of the Properties. |
The above pro forma adjustments have no effect on income taxes as a result of the valuation allowance recorded with respect to Stone's deferred tax assets.