Attached files
Exhibit 99.1
Petrohawk Energy Corporation
Unaudited Pro Forma Consolidated Balance Sheet
(In thousands)
| March 31, 2010 | ||||||||||||
| Historical | Midstream Adjustments |
Pro Forma | ||||||||||
| Current assets: |
||||||||||||
| Cash |
$ | 1,393 | $ | 342,408 | (1) | $ | 343,801 | |||||
| Accounts receivable |
259,632 | — | 259,632 | |||||||||
| Receivables from derivative contracts |
248,511 | — | 248,511 | |||||||||
| Prepaids and other |
40,886 | — | 40,886 | |||||||||
| Total current assets |
550,422 | 342,408 | 892,830 | |||||||||
| Oil and natural gas properties (full cost method): |
||||||||||||
| Evaluated |
6,464,093 | — | 6,464,093 | |||||||||
| Unevaluated |
2,705,482 | — | 2,705,482 | |||||||||
| Gross oil and natural gas properties |
9,169,575 | — | 9,169,575 | |||||||||
| Less—accumulated depletion |
(4,429,747 | ) | — | (4,429,747 | ) | |||||||
| Net oil and natural gas properties |
4,739,828 | — | 4,739,828 | |||||||||
| Other operating property and equipment: |
||||||||||||
| Gas gathering systems and equipment |
218,289 | — | 218,289 | |||||||||
| Other operating assets |
30,913 | — | 30,913 | |||||||||
| Gross other operating property and equipment |
249,202 | — | 249,202 | |||||||||
| Less—accumulated depreciation |
(22,021 | ) | — | (22,021 | ) | |||||||
| Net other operating property and equipment |
227,181 | — | 227,181 | |||||||||
| Other noncurrent assets: |
||||||||||||
| Goodwill |
932,802 | — | 932,802 | |||||||||
| Other intangible assets |
97,632 | — | 97,632 | |||||||||
| Debt issuance costs, net of amortization |
42,132 | — | 42,132 | |||||||||
| Deferred income taxes |
197,540 | — | 197,540 | |||||||||
| Receivables from derivative contracts |
114,961 | — | 114,961 | |||||||||
| Restricted cash |
36,176 | — | 36,176 | |||||||||
| Assets held for sale |
387,251 | (387,251 | )(2) | — | ||||||||
| Equity investment |
— | 193,626 | (3) | 193,626 | ||||||||
| Other |
3,065 | — | 3,065 | |||||||||
| Total assets |
$ | 7,328,990 | $ | 148,783 | $ | 7,477,773 | ||||||
| Current liabilities: |
||||||||||||
| Accounts payable and accrued liabilities |
$ | 708,477 | $ | — | $ | 708,477 | ||||||
| Deferred income taxes |
65,493 | — | 65,493 | |||||||||
| Liabilities from derivative contracts |
2,346 | — | 2,346 | |||||||||
| Long-term debt |
42,723 | — | 42,723 | |||||||||
| Total current liabilities |
819,039 | — | 819,039 | |||||||||
| Long-term debt |
2,977,425 | (579,000 | )(1) | 2,398,425 | ||||||||
| Other noncurrent liabilities: |
||||||||||||
| Liabilities from derivative contracts |
579 | — | 579 | |||||||||
| Asset retirement obligations |
45,894 | — | 45,894 | |||||||||
| Other |
3,247 | — | 3,247 | |||||||||
| Deferred gain on sale |
— | 727,783 | (2) | 727,783 | ||||||||
| Commitments and contingencies |
||||||||||||
| Stockholders’ equity: |
||||||||||||
| Common stock |
302 | — | 302 | |||||||||
| Additional paid-in capital |
4,602,662 | — | 4,602,662 | |||||||||
| Accumulated deficit |
(1,120,158 | ) | — | (1,120,158 | ) | |||||||
| Total stockholders’ equity |
3,482,806 | — | 3,482,806 | |||||||||
| Total liabilities and stockholders’ equity |
$ | 7,328,990 | $ | 148,783 | $ | 7,477,773 | ||||||
See accompanying notes to the unaudited pro forma consolidated financial statements.
Petrohawk Energy Corporation
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands)
| Three Months Ended March 31, 2010 | ||||||||||||
| Historical | Midstream Adjustments |
Pro Forma | ||||||||||
| Operating revenues: |
||||||||||||
| Oil and natural gas |
$ | 300,591 | $ | — | $ | 300,591 | ||||||
| Marketing |
130,119 | — | 130,119 | |||||||||
| Midstream |
9,606 | (6,398 | )(4) | 3,208 | ||||||||
| Total operating revenues |
440,316 | (6,398 | ) | 433,918 | ||||||||
| Operating expenses: |
||||||||||||
| Marketing |
136,622 | — | 136,622 | |||||||||
| Production: |
||||||||||||
| Lease operating |
17,395 | — | 17,395 | |||||||||
| Workover and other |
2,378 | — | 2,378 | |||||||||
| Taxes other than income |
12,843 | (659 | )(4) | 12,184 | ||||||||
| Gathering, transportation and other |
29,380 | (5,104 | )(4) | 50,688 | ||||||||
| 26,412 | (5) | |||||||||||
| General and administrative |
32,208 | (992 | )(4) | 31,216 | ||||||||
| Depletion, depreciation and amortization |
106,074 | (2,445 | )(6) | 103,629 | ||||||||
| Total operating expenses |
336,900 | 17,212 | 354,112 | |||||||||
| Income from operations |
103,416 | (23,610 | ) | 79,806 | ||||||||
| Other income (expenses): |
||||||||||||
| Net gain on derivative contracts |
214,703 | — | 214,703 | |||||||||
| Interest expense and other |
(62,846 | ) | 3,462 | (7) | (59,384 | ) | ||||||
| Amortization of deferred gain |
— | 19,960 | (8) | 19,960 | ||||||||
| Equity investment income |
— | 8,706 | (9) | 8,706 | ||||||||
| Total other income (expenses) |
151,857 | 32,128 | 183,985 | |||||||||
| Income before income taxes |
255,273 | 8,518 | 263,791 | |||||||||
| Income tax provision |
(99,138 | ) | (3,308 | )(10) | (102,446 | ) | ||||||
| Net income |
$ | 156,135 | $ | 5,210 | $ | 161,345 | ||||||
See accompanying notes to the unaudited pro forma consolidated financial statements.
Petrohawk Energy Corporation
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands)
| Year Ended December 31, 2009 | ||||||||||||||||||||
| Historical | Permian Adjustments |
Petrohawk Pro Forma |
Midstream Adjustments |
Petrohawk Pro Forma Adjusted |
||||||||||||||||
| Operating revenues: |
||||||||||||||||||||
| Oil and natural gas |
$ | 732,137 | $ | (51,821 | )(11) | $ | 680,316 | $ | — | $ | 680,316 | |||||||||
| Marketing |
320,121 | — | 320,121 | — | 320,121 | |||||||||||||||
| Midstream |
31,325 | — | 31,325 | (15,038 | )(4) | 16,287 | ||||||||||||||
| Total operating revenues |
1,083,583 | (51,821 | ) | 1,031,762 | (15,038 | ) | 1,016,724 | |||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Marketing |
316,987 | — | 316,987 | — | 316,987 | |||||||||||||||
| Production: |
||||||||||||||||||||
| Lease operating |
78,698 | (13,473 | )(11) | 65,225 | — | 65,225 | ||||||||||||||
| Workover and other |
2,749 | (526 | )(11) | 2,223 | — | 2,223 | ||||||||||||||
| Taxes other than income |
57,712 | (3,099 | )(11) | 54,613 | (374 | )(4) | 54,239 | |||||||||||||
| Gathering, transportation and other |
90,365 | (1,243 | )(11) | 89,122 | (9,573 | )(4) | 134,770 | |||||||||||||
| 55,221 | (5) | |||||||||||||||||||
| General and administrative |
113,232 | — | 113,232 | (3,468 | )(4) | 109,764 | ||||||||||||||
| Depletion, depreciation and amortization |
396,644 | (31,877 | )(12) |
|
364,767 |
|
(6,607 | )(6) | 358,160 | |||||||||||
| Full cost ceiling impairment |
1,838,444 | (180,580 | )(13) | 1,657,864 | — | 1,657,864 | ||||||||||||||
| Total operating expenses |
2,894,831 | (230,798 | ) | 2,664,033 | 35,199 | 2,699,232 | ||||||||||||||
| (Loss) income from operations |
(1,811,248 | ) | 178,977 | (1,632,271 | ) | (50,237 | ) | (1,682,508 | ) | |||||||||||
| Other income (expenses): |
||||||||||||||||||||
| Net gain on derivative contracts |
260,248 | — | 260,248 | — | 260,248 | |||||||||||||||
| Interest expense and other |
(229,419 | ) | — | (229,419 | ) | 324 | (7) | (229,095 | ) | |||||||||||
| Amortization of deferred gain |
— | — | — | 48,675 | (8) | 48,675 | ||||||||||||||
| Equity investment income |
— | — | — | 16,106 | (9) | 16,106 | ||||||||||||||
| Total other income (expenses) |
30,829 | — | 30,829 | 65,105 | 95,934 | |||||||||||||||
| (Loss) income before income taxes |
(1,780,419 | ) | 178,977 | (1,601,442 | ) | 14,868 | (1,586,574 | ) | ||||||||||||
| Income tax benefit (provision) |
754,968 | (75,893 | )(10) | 679,075 | (6,305 | )(10) | 672,770 | |||||||||||||
| Net (loss) income |
$ | (1,025,451 | ) | $ | 103,084 | $ | (922,367 | ) | $ | 8,563 | $ | (913,804 | ) | |||||||
See accompanying notes to the unaudited pro forma consolidated financial statements.
Petrohawk Energy Corporation
Notes to Unaudited Pro Forma Consolidated Financial Statements
Note 1—Basis of Presentation
The unaudited pro forma financial information is presented to illustrate the effect of the disposition of Petrohawk’s Permian Basin properties and the disposition of the Company’s Haynesville Shale midstream operations on its operating results. The unaudited pro forma balance sheet as of March 31, 2010 is based on the historical statements of Petrohawk as of March 31, 2010 after giving effect to the disposition of the Company’s Haynesville Shale midstream operations as if it had occurred on March 31, 2010. The unaudited pro forma statements of operations for the three months ended March 31, 2010 and the fiscal year ended December 31, 2009 are based on the historical financial statements of Petrohawk for such periods after giving effect to the two dispositions as if they had occurred on January 1, 2009. The unaudited pro forma financial information should be read in conjunction with Petrohawk’s historical consolidated financial statements and notes thereto contained in Petrohawk’s 2009 Annual Report on Form 10-K filed on February 23, 2010, and Petrohawk’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010, filed on May 5, 2010.
The preparation of the unaudited pro forma consolidated 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 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 transactions occurred on the respective date 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 financial information reflect estimates and assumptions that the Company’s management believes to be reasonable.
Note 2—Pro Forma Adjustments
The unaudited pro forma consolidated balance sheet at March 31, 2010 reflects the following adjustments:
| (1) | Adjustment to reflect the $921 million of cash proceeds primarily used to repay the Company’s outstanding balance under its senior revolving credit facility; |
| (2) | Adjustment to eliminate assets held for sale associated with the sale of the Company’s Haynesville Shale midstream operations and recognition of the estimated gain on sale which will be deferred. In conjunction with the creation of the joint venture, the Company agreed to deliver minimum annual quantities of natural gas to KinderHawk Field Services LLC (KinderHawk) over the next five years (the Gathering Agreement). In addition, during the 2010 and 2011 fiscal years, the Company and Kinder Morgan Energy Partners, L.P. (Kinder Morgan) are required to make pro-rata additional capital contributions to fund capital expenditures in accordance with pre-approved fiscal year annual budgets up to a maximum requirement of $201.3 million each, less amounts expended during 2010 prior to closing. As a result, the Company will amortize its deferred gain over the next five years; and |
| (3) | Adjustment to record the Company’s 50 percent membership interest in KinderHawk. |
The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2010 and for the year ended December 31, 2009 reflect the following adjustments:
| (4) | Adjustment to eliminate operating revenues and expenses associated with the disposition of the Haynesville Shale midstream assets; |
| (5) | Adjustment to gross up the Company’s historical gathering, transportation and other expense associated with the estimated gathering and treating fees that will now be paid to KinderHawk and not eliminated in consolidation in conjunction with the minimum annual volume commitment by the Company discussed above. The gathering fee will be equal to $0.34 per thousand cubic feet of the Company’s natural gas delivered at KinderHawk’s receipt points. The treating fee will be charged for natural gas delivered containing more than 2% by volume of carbon dioxide. For gas delivered containing between 2% and 5.5% carbon dioxide, the treating fee will be between $0.030 and $0.345 per Mcf, and for gas containing over 5.5% carbon dioxide, the treating fee will start at $0.365 per Mcf and increase on a scale of $0.09 per Mcf for each additional 1% of carbon dioxide content; |
| (6) | To adjust historical depreciation expense associated with the disposition of the Haynesville Shale midstream assets as if it had occurred on January 1, 2009. Depreciation expense is calculated using the straight-line method; |
| (7) | Adjustments to reduce interest expense and other for the repayment of $579 million in outstanding borrowings under the Company’s senior revolving credit facility as of January 1, 2009; |
| (8) | Adjustment to record the amortization of the Company’s estimated deferred gain on the disposition of its Haynesville Shale midstream assets; |
| (9) | Adjustment to recognize income attributable to the Company’s 50% equity investment in KinderHawk; |
| (10) | Adjustment to record income taxes on the unaudited pro forma consolidated results of operations based on the Company’s historical effective tax rates of 38.8% and 42.4% for the three months ended March 31, 2010 and the fiscal year ended December 31, 2009, respectively; |
| (11) | Reflects the elimination of operating revenues and expenses associated with the sale of the Company’s Permian Basin properties; |
| (12) | To adjust historical depletion expense associated with oil and natural gas properties as if the sale of the Permian Basin properties had occurred on January 1, 2009. Depletion expense is calculated using the unit of production method under full cost accounting; and |
| (13) | Adjustment to allocate a portion of the full cost ceiling impairments recognized by the Company in 2009 to the Permian Basin properties that were sold based upon relative proved reserve volumes. |
Under a transition services agreement between the Company and Kinder Morgan, the Company will provide management and administrative services to KinderHawk for the operation of the assets through December 2010, in return for a monthly fee of approximately $880,000. The transition services agreement can be extended monthly for up to an additional five months. This monthly fee is directly attributable to the transaction and has been excluded from the pro forma financial statements as it represents a material nonrecurring fee.