Attached files
| file | filename |
|---|---|
| EX-99.1 - AUDITED STATEMENT OF REVENUE AND DIRECT OPERATING EXPENSES ASSOCIATED WITH THE T - BARNWELL INDUSTRIES INC | p18-0055_ex991.htm |
| EX-23.1 - CONSENT OF PRICEWATERHOUSECOOPERS LLP - BARNWELL INDUSTRIES INC | p18-0055_ex231.htm |
| 8-K/A - FORM 8-K/A - BARNWELL INDUSTRIES INC | p18-0055_8ka.htm |
Exhibit 99.2
Unaudited Pro Forma Condensed Combined Financial Information
On August 28, 2018, Barnwell Industries, Inc. (the "Company") through its wholly-owned subsidiaries completed the acquisition of working interest in oil and natural gas properties located in the Twining area of Alberta, Canada for $10,500,000 in cash (the "Purchase Price"), which is subject to customary post close adjustments (the "Twining Acquisition").
The unaudited pro forma condensed combined statements of operations for the nine-month period ended June 30, 2018 and the year ended September 30, 2017 presented below have been prepared based on the Company's historical consolidated statements of operations for such periods, and were prepared as if the Twining Acquisition had occurred on October 1, 2016. The unaudited pro forma condensed combined balance sheet at June 30, 2018 presented below was prepared based on the Company's historical consolidated balance sheet at June 30, 2018, and was prepared as if the Twining Acquisition had occurred on June 30, 2018.
Final working capital and other post-closing adjustments have not been reflected in these unaudited pro forma condensed combined financial statements. Further, the initial purchase accounting for the Twining Acquisition is not complete and adjustments to estimated amounts may occur. Additionally, the unaudited pro forma condensed combined financial statements do not reflect costs of integration activities or benefits that may result from other efficiencies.
The pro forma data is based on assumptions and include adjustments as explained in the notes herein. Management believes that the assumptions used to prepare the unaudited pro forma condensed combined financial information and accompanying notes provide a reasonable and reliably determinable basis for presenting the significant effects directly attributable, factually supportable, and expected to have a continuing impact to the Twining Acquisition. The following unaudited pro forma condensed combined statements of operations do not purport to represent what the Company's results of operations would have been in the Twining Acquisition had occurred on October 1, 2016. The unaudited pro forma condensed combined financial information should be read together with the Company's Annual Report on Form 10-K for the year ended September 30, 2017 and the historical Statements of Revenues and Direct Operating Expenses of the Twining Acquisition properties and the notes thereto filed as Exhibit 99.1 to the Current Report on Form 8-K of which this Exhibit 99.2 is a part.
Unless otherwise indicated, all references to "dollars" in this Form 8-K are to United States dollars.
Barnwell Industries, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 2018
|
Barnwell
Industries, Inc. (Historical) |
Pro Forma
Adjustments |
Notes
|
Barnwell
Industries, Inc. Pro Forma as Adjusted |
||
|
ASSETS
|
|||||
|
Current Assets:
|
|||||
|
Cash and cash equivalents
|
$ 13,539,000
|
(10,500,000)
|
{a}
|
$ 3,039,000
|
|
|
Certificates of deposit
|
3,460,000
|
3,460,000
|
|||
|
Accounts and other receivables
|
1,414,000
|
1,414,000
|
|||
|
Income taxes receivable
|
2,231,000
|
2,231,000
|
|||
|
Investment held for sale
|
1,000,000
|
1,000,000
|
|||
|
Other current assets
|
1,269,000
|
1,269,000
|
|||
|
Total current assets
|
22,913,000
|
(10,500,000)
|
12,413,000
|
||
|
Income taxes receivable, net of current portion
|
460,000
|
460,000
|
|||
|
Deferred income tax assets
|
-
|
-
|
|||
|
Investments
|
1,695,000
|
1,695,000
|
|||
|
Property and equipment
|
58,858,000
|
10,500,000
3,060,000
|
{a}
{a}
|
72,418,000
|
|
|
Accumulated depletion, depreciation, and amortization
|
(55,385,000)
|
(55,385,000)
|
|||
|
Property and equipment, net
|
3,473,000
|
13,560,000
|
17,033,000
|
||
|
Total assets
|
$ 28,541,000
|
$ 3,060,000
|
$ 31,601,000
|
||
|
LIABILITIES AND EQUITY
|
|||||
|
Current liabilities:
|
|||||
|
Accounts payable
|
$ 1,158,000
|
$ 1,158,000
|
|||
|
Accrued capital expenditures
|
184,000
|
184,000
|
|||
|
Accrued operating and other expenses
|
1,013,000
|
1,013,000
|
|||
|
Accrued compensation
|
446,000
|
446,000
|
|||
|
Current portion of asset retirement
obligation
|
410,000
|
218,000
|
{a}
|
628,000
|
|
|
Other current liabilities
|
63,000
|
63,000
|
|||
|
Total current liabilities
|
3,274,000
|
218,000
|
3,492,000
|
||
|
Deferred rent
|
86,000
|
86,000
|
|||
|
Liability for retirement benefits
|
4,064,000
|
4,064,000
|
|||
|
Asset retirement obligation
|
3,809,000
|
2,842,000
|
{a}
|
6,651,000
|
|
|
Deferred income tax liabilities
|
353,000
|
353,000
|
|||
|
Total liabilities
|
11,586,000
|
3,060,000
|
14,646,000
|
||
|
Commitments and contingencies
|
|||||
|
Equity:
|
|||||
|
Common stock, par value $0.50 per share; authorized,
20,000,000 shares: 8,445,060 issued at June 30, 2018
|
4,223,000
|
4,223,000
|
|||
|
Additional paid-in capital
|
1,351,000
|
1,351,000
|
|||
|
Retained earnings
|
14,311,000
|
14,311,000
|
|||
|
Accumulated other comprehensive loss, net
|
(1,228,000)
|
(1,228,000)
|
|||
|
Treasury stock, at cost: 167,900 shares at June 30,
2018
|
(2,286,000)
|
(2,286,000)
|
|||
|
Total stockholders' equity
|
16,371,000
|
16,371,000
|
|||
|
Non-controlling interests
|
584,000
|
584,000
|
|||
|
Total equity
|
16,955,000
|
16,955,000
|
|||
|
Total liabilities and equity
|
$ 28,541,000
|
$ 3,060,000
|
$ 31,601,000
|
See accompanying notes to the unaudited pro forma condensed combined financial statements
Barnwell Industries, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For Nine Months Ended June 30, 2018
|
Barnwell
Industries, Inc. (Historical) |
Pro Forma
Adjustments |
Notes
|
Barnwell
Industries, Inc. Pro Forma as Adjusted |
||
|
Revenues:
|
|||||
|
Oil and natural gas
|
$ 2,428,000
|
4,834,000
|
{b}
|
$ 7,262,000
|
|
|
Contract drilling
|
3,051,000
|
3,051,000
|
|||
|
Sale of interest in leasehold land
|
1,310,000
|
1,310,000
|
|||
|
Gas processing and other
|
210,000
|
210,000
|
|||
|
6,999,000
|
4,834,000
|
11,833,000
|
|||
|
Costs and expenses:
|
|||||
|
Oil and natural gas operating
|
1,777,000
|
2,822,000
232,000
|
{b}
{c}
|
4,831,000
|
|
|
Contract drilling operating
|
2,778,000
|
2,778,000
|
|||
|
General and administrative
|
4,635,000
|
4,635,000
|
|||
|
Depletion, depreciation, and amortization
|
694,000
|
2,145,000
|
{d}
|
2,839,000
|
|
|
Impairment of assets
|
202,000
|
202,000
|
|||
|
Gain on sales of assets
|
(2,250,000)
|
(2,250,000)
|
|||
|
7,836,000
|
5,199,000
|
13,035,000
|
|||
|
Loss before equity in income (loss) of affiliates and income taxes
|
(837,000)
|
(365,000)
|
(1,202,000)
|
||
|
Equity in income (loss) of affiliates
|
(97,000)
|
(97,000)
|
|||
|
(Loss) earnings before income taxes
|
(934,000)
|
(365,000)
|
(1,299,000)
|
||
|
Income tax benefit
|
(469,000)
|
(102,000)
|
{e}
|
(571,000)
|
|
|
Net (loss) earnings
|
(465,000)
|
(263,000)
|
(728,000)
|
||
|
Less: Net earnings (loss) attributable to non-controlling interests
|
247,000
|
247,000
|
|||
|
Net (loss) earnings attributable to Barnwell Industries, Inc.
|
$ (712,000)
|
(263,000)
|
$ (975,000)
|
||
|
Basic and diluted net (loss) earnings per common share attributable to Barnwell Industries, Inc. stockholders
|
$ (0.09)
|
$ (0.12)
|
|||
|
Weighted-average number of common shares outstanding:
|
|||||
|
Basic and diluted
|
8,277,160
|
8,277,160
|
See accompanying notes to the unaudited pro forma condensed combined financial statements
Barnwell Industries, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended September 30, 2017
|
Barnwell
Industries, Inc. (Historical) |
Pro Forma
Adjustments |
Notes
|
Barnwell
Industries, Inc. Pro Forma as Adjusted |
||
|
Revenues:
|
|||||
|
Oil and natural gas
|
$ 4,383,000
|
6,517,000
|
{b}
|
$ 10,900,000
|
|
|
Contract drilling
|
3,938,000
|
3,938,000
|
|||
|
Sale of interest in leasehold land
|
4,503,000
|
4,503,000
|
|||
|
Gas processing and other
|
206,000
|
206,000
|
|||
|
13,030,000
|
6,517,000
|
$ 19,547,000
|
|||
|
Costs and expenses:
|
|||||
|
Oil and natural gas operating
|
3,028,000
|
3,637,000
217,000
|
{b}
{c}
|
6,882,000
|
|
|
Contract drilling operating
|
3,231,000
|
3,231,000
|
|||
|
General and administrative
|
6,976,000
|
6,976,000
|
|||
|
Depletion, depreciation, and amortization
|
1,203,000
|
2,859,000
|
{d}
|
4,062,000
|
|
|
Impairment of assets
|
155,000
|
155,000
|
|||
|
Gain on sales of assets
|
(527,000)
|
(527,000)
|
|||
|
Interest expense
|
6,000
|
6,000
|
|||
|
14,072,000
|
6,713,000
|
20,785,000
|
|||
|
Loss before equity in income (loss) of affiliates and income taxes
|
(1,042,000)
|
(196,000)
|
(1,238,000)
|
||
|
Equity in income (loss) of affiliates
|
2,276,000
|
2,276,000
|
|||
|
(Loss) earnings before income taxes
|
1,234,000
|
(196,000)
|
1,038,000
|
||
|
Income tax benefit
|
(1,080,000)
|
(55,000)
|
{e}
|
(1,135,000)
|
|
|
Net (loss) earnings
|
2,314,000
|
(141,000)
|
2,173,000
|
||
|
Less: Net earnings (loss) attributable to non-controlling interests
|
1,143,000
|
1,143,000
|
|||
|
Net (loss) earnings attributable to Barnwell Industries, Inc.
|
$ 1,171,000
|
(141,000)
|
$ 1,030,000
|
||
|
Basic and diluted net (loss) earnings per common share attributable to Barnwell Industries, Inc. stockholders
|
$ 0.14
|
$ 0.12
|
|||
|
Weighted-average number of common shares outstanding:
|
|||||
|
Basic and diluted
|
8,277,160
|
8,277,160
|
See accompanying notes to the unaudited pro forma condensed combined financial statements
Notes to Unaudited Pro Forma Condensed Combined Financial Information
| 6. |
Basis of Presentation
|
On August 28, 2018, Barnwell Industries, Inc. (the "Company") through its wholly-owned subsidiaries completed the acquisition of working interest in oil and natural gas properties located in the Twining area of Alberta, Canada (the "Asset") from Eagle Energy Inc. ("Eagle") for $10,500,000 in cash (the "Purchase Price"), which is subject to customary post close adjustments (the "Twining Acquisition").
The historical financial information is derived from the historical consolidated financial statements of the Company, and the historical statements of revenues and direct operating expenses for the Asset (which are based on information provided by Eagle). The unaudited pro forma condensed combined statements of operations were prepared assuming the Twining Acquisition occurred on October 1, 2016. The unaudited pro forma condensed combined balance sheet at June 30, 2018 was prepared based on the Company's historical consolidated balance sheet at June 30, 2018, and was prepared as if the Twining Acquisition had occurred on June 30, 2018.
The unaudited pro forma condensed combined financial statements and underlying pro forma adjustments are based upon currently available information and certain estimates and assumptions made by the Company's management; therefore, actual results could differ materially from the pro forma information. However, management believes the assumptions provide a reasonable basis for presenting the significant effects of the Twining Acquisition. These unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and may or may not provide an indication of results in the future.
The Company has adopted the Financial Accounting Standards Board's Account Standards Update ASU 2017-01. For the purposes of the unaudited pro forma condensed combined financial statements, the Company determined that the Twining Acquisition qualifies as an asset purchase. As a result, the Company has allocated the purchase price of the acquired assets to oil and natural gas properties based on the Assets' relative fair value.
| 7. |
Pro Forma Adjustments
|
Balance Sheet. The unaudited pro forma condensed combined balance sheet at June 30, 2018 reflects the following adjustments:
| (a) |
Reflects the cash consideration for the Twining Acquisition and anticipated purchase price allocation, subject to customary adjustments, including acquisition costs of approximately $10,500,000 and estimated asset retirement obligations of approximately $3,060,000.
|
Statement of Operations. The unaudited pro forma condensed combined statement of operations for the nine-month period ended June 30, 2018 and the year ended September 30, 2017 reflect the following adjustments:
| (b) |
Revenues are net of royalties and direct operating expenses of the oil and natural gas properties acquired in the Twining Acquisition. Adjustments were made to the presentation for the Assets financial results to conform with the presentation of the Company's Condensed Combined Statement of Operations. Unaudited periods for Revenues and Direct operating statements were derived from Eagle's historical financial information. See tables presented below.
|
|
Nine months
ended September 30,
2016
|
Three months
ended December 31, 2016 |
Twelve months
ended
December 31, 2016 |
|
|
Unaudited
|
Unaudited
|
As Audited
|
|
|
Revenues
|
$ 3,517,000
|
$ 1,360,000
|
$ 4,877,000
|
|
Direct operating expenses
|
(2,544,000)
|
(854,000)
|
(3,398,000)
|
|
Revenues in excess of direct operating expenses
|
$ 973,000
|
$ 506,000
|
$ 1,479,000
|
|
Nine months
ended September 30,
2017
|
Three months
ended December 31, 2017 |
Twelve months
ended
December 31, 2017 |
|
|
Unaudited
|
Unaudited
|
As Audited
|
|
|
Revenues
|
$ 5,157,000
|
$ 1,597,000
|
$ 6,754,000
|
|
Direct operating expenses
|
(2,783,000)
|
(1,148,000)
|
(3,931,000)
|
|
Revenues in excess of direct operating expenses
|
$ 2,374,000
|
$ 449,000
|
$ 2,823,000
|
|
Six months
ended
June 30,
2018
|
|||
|
Unaudited
|
|||
|
Revenues
|
$ 3,237,000
|
||
|
Direct operating expenses
|
(1,674,000)
|
||
|
Revenues in excess of direct operating expenses
|
$ 1,563,000
|
|
Three months
ended
December 31,
2016
|
Nine months
ended September 30,
2017
|
Twelve months
ended September 30, 2017 |
|
|
Unaudited
|
Unaudited
|
Unaudited
|
|
|
Revenues
|
$ 1,360,000
|
$ 5,157,000
|
$ 6,517,000
|
|
Direct operating expenses
|
(854,000)
|
(2,783,000)
|
(3,637,000)
|
|
Revenues in excess of direct operating expenses
|
$ 506,000
|
$ 2,374,000
|
$ 2,880,000
|
|
Three months
ended
December 31,
2017
|
Six months
ended June 30,
2018
|
Nine months
ended June 30,
2018
|
|
|
Unaudited
|
Unaudited
|
Unaudited
|
|
|
Revenues
|
$ 1,597,000
|
$ 3,237,000
|
$ 4,834,000
|
|
Direct operating expenses
|
(1,148,000)
|
(1,674,000)
|
(2,822,000)
|
|
Revenues in excess of direct operating expenses
|
$ 449,000
|
$ 1,563,000
|
$ 2,012,000
|
| (c) |
Accretion related to Asset Retirement Obligation of the Asset.
|
| (d) |
Depreciation, depletion and amortization ("DD&A") related to the Asset. DD&A was calculated using the unit-of-production method under the full cost method of accounting. Depletion was calculated using historical production quantities.
|
| (e) |
Reflects a current tax benefit at the statutory rate applicable for the entities for both the nine months ended June 30, 2018 and the year ended September 30, 2017. Changes to the Company's valuation allowance have not been included in the pro forma condensed statements of operations. Management is continuing to assess the tax impact of the acquisition.
|
| 8. |
Supplemental Oil and Gas Reserve Information
|
The Company has not provided pro forma supplemental oil and gas disclosures due to the misalignment of financial year ends as Eagle's results are reported on a year end period ending December 31 while the Company's is September 30.