Attached files
| file | filename |
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| 8-K/A - CURRENT REPORT - LILIS ENERGY, INC. | f8ka1081010_recoverystate.htm |
| EX-99.1 - AUDITED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES OF THE STATE LINE FIELD PROPERTIES FOR THE THREE MONTHS ENDED MARCH 31, 2010. - LILIS ENERGY, INC. | f8ka1081010ex99i_recovstate.htm |
EXHIBIT 99.2
RECOVERY ENERGY, INC.
UNADUITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements and related notes give effect to the acquisitions by Recovery Energy, Inc. (“Recovery” or the “Company”) of the State Line Field oil and gas properties (“State Line Field Acquisition Properties”) from Edward Mike Davis, L.L.C. (“Davis” or the “Seller”) for the period ended March 31, 2010.
The unaudited pro forma condensed combined statement of operations is based on the individual statement of operations of Recovery and the statement of revenues and direct operating expenses the State Line Field Acquisition Properties, and combines the results of operations of Recovery and the State Line Field Acquisition Properties for the three months ended March 31, 2010 as if the acquisition occurred on January 1, 2010. The unaudited pro forma condensed combined balance sheet is based on the historical balance sheet of Recovery adjusted for the State Line Field Acquisition Properties transaction, and has been presented to show the effect as if the acquisition occurred as of March 31, 2010.
In March 2010, the Company completed another oil and gas property acqusition (the Albin Field). The pro forma information for the State Line Field Acquisition Properties included in this Form 8-K includes the financial statement effects of the Albin Field acquisition.
Pro forma data is based on assumptions and include adjustments as explained in the notes to the unaudited pro forma condensed combined financial statements. As adjustments are based on currently available information, actual adjustments may differ from the pro forma adjustments; therefore, the pro forma data is not necessarily indicative of the financial results that would have been attained had the State Line Field Acquisition Properties transactions occurred on the dates referenced above, and should not be viewed as indicative of operations in future periods. The unaudited pro forma condensed combined financial statements should be read in conjunction with the notes thereto, Recovery’s Quarterly Report on Form 10-Q for the period ended March 31, 2010, and the Statement of Revenues and Direct Operating Expenses included herein.
RECOVERY ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
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RECOVERY
HISTORICAL
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PREVIOUS
ACQUISITION
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STATE LINE
FIELD
ACQUISITION
PROPERTIES
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PRO FORMA
ADJUSTMENT
(SEE NOTE 2)
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PRO
FORMA
COMBINED
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||||||||||||||||
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REVENUES
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||||||||||||||||||||
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Sales of oil and gas
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$ | 622,595 | $ | 740,501 | $ | 2,442,915 | $ | — | $ | 3,806,011 | ||||||||||
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Operating fees
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1,125 | — | — | — | 1,125 | |||||||||||||||
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Price risk management activities
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(133,369 | ) | — | — | — | (133,369 | ) | |||||||||||||
| 490,351 | 740,501 | 2,442,915 | — | 3,673,767 | ||||||||||||||||
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EXPENSES
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||||||||||||||||||||
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Production costs
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121,877 | 104,605 | 166,408 | — | 392,890 | |||||||||||||||
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Production taxes
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35,488 | 42,209 | 342,008 | — | 419,705 | |||||||||||||||
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Depreciation, depletion, and amortization
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231,917 | 232,387 | — | 2,318,733 | (a,b ) | 2,783,038 | ||||||||||||||
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Impairment of equipment
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— | — | — | — | ||||||||||||||||
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General and administrative
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2,343,321 | (701,290 | ) | — | 317,370 | (c ) | 1,959,401 | |||||||||||||
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Fair value of common stock and warrants issued in attempted property acquisitions
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— | — | — | — | — | |||||||||||||||
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Reorganization and merger costs
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— | — | — | — | — | |||||||||||||||
| 2,732,603 | (322,089 | ) | 508,416 | 2,636,103 | 5,555,034 | |||||||||||||||
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Income (loss) from operations
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(2,242,252 | ) | 1,062,590 | 1,934,499 | (2,636,103 | ) | (1,881,267 | ) | ||||||||||||
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Unrealized gain on lock-up
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15,209 | — | — | — | 15,209 | |||||||||||||||
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Interest income (expense)
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(593,672 | ) | (225,000 | ) | — | (1,627,168 | )(d,e) | (2,445,840 | ) | |||||||||||
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Net income (loss)
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$ | (2,820,715 | ) | $ | 837,590 | $ | 1,934,499 | $ | (4,263,271 | ) | $ | (4,311,898 | ) | |||||||
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Basic net income (loss) per share
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$ | (0.24 | ) | $ | (0.29 | ) | ||||||||||||||
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Diluted net income (loss)per share
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$ | (0.24 | ) | $ | (0.29 | ) | ||||||||||||||
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Weighted average number of shares of common stock outstanding (basic and diluted)
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11,711,037 | 550,000 | - | 2,500,000 | (f ) | 14,761,037 | ||||||||||||||
2
RECOVERY ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2010
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RECOVERY
HISTORICAL
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STATE LINE
FIELD
PRO FORMA
ADJUSTMENTS
(SEE NOTE 3)
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PRO FORMA
COMBINED
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||||||||||
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ASSETS
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||||||||||||
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Current assets
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$ | 3,205,034 | $ | — | $ | 3,205,034 | ||||||
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Oil and gas properties, net, full cost method
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9,793,280 | 16,600,243 | (d) | 26,393,523 | ||||||||
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Other assets
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611,167 | 2,780,774 | (b) | 3,391,941 | ||||||||
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TOTAL ASSETS
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$ | 13,609,481 | $ | 19,381,017 | $ | 32,990,498 | ||||||
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LIABILITIES & SHAREHOLDERS’ EQUITY
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Current liabilities
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$ | 658,310 | $ | 52,147 | (d) | $ | 710,457 | |||||
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Short-term debt
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10,321,250 | 15,000,000 | (a) | 25,321,250 | ||||||||
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Abandonment obligation
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252,925 | 149,151 | (d) | 402,076 | ||||||||
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Deferred taxes
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— | — | — | |||||||||
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Shareholders’ equity
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2,376,996 | 4,179,719 | (b,c) | 6,556,715 | ||||||||
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TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
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$ | 13,609,481 | $ | 19,381,017 | $ | 32,990,498 | ||||||
3
RECOVERY ENERGY, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
1. Basis of Presentation:
In April, 2010, the Company acquired the State Line Field Acquisition Properties from Davis for approximately $15,000,000 and 2,500,000 shares of the Company’s common stock.
The unaudited pro forma statement of operations for the three months ended March 31, 2010 is based on the unaudited financial statements of Recovery for the three months ended March 31, 2010 and the audited statement of revenues and direct operating expenses for the State Line Field Acquisition Properties for the three months ended March 31, 2010.
The Previous Acquisition included in the pro forma statement of operations represent the Albin Field properties acquired by the Company on March 19, 2010.
The pro forma adjustments and assumptions are described below.
2. Adjustments to Pro Forma Statement of Operations:
The unaudited pro forma statement of operations gives effect to the following pro forma adjustments necessary to reflect the acquisition and additional debt and equity outlined in Note 3 below:
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a.
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Record incremental pro forma depreciation, depletion, and amortization expense of $2,315,750 recorded in accordance with the full cost method of accounting for oil and gas activities based on the purchase price allocation to depreciable and depletable assets.
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b.
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Record pro forma accretion expense of $2,983 on the asset retirement obligation on the State Line Field Acquisition Properties in accordance with ASC 410.20.
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c.
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Record expense associated with the overriding royalty interest of $317,370 awarded to two members of management.
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d.
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Record interest expense for the debt of approximately $15.0 million incurred in conjunction with the purchase of the State Line Field Acquisition Properties at a weighted average balance outstanding of $14.5 million and a rate of 15% per annum based on the terms of the debt agreement. A one tenth of one percent change in interest rate would have an approximately $14,500 annual impact on the interest expense.
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e.
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Record amortization expense of $1,083,418 for the deferred financing costs associated with the new debt agreement.
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f.
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Represents the weighted average shares outstanding on the 2,500,000 shares issued as part of the acquisition price assuming they were issued on January 1, 2010.
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3. Adjustments to Pro Forma Balance Sheet:
The unaudited pro forma balance sheet has been prepared to show the effect as if the acquisition of State Line Field Acquisition Properties by Recovery had occurred as of March 31, 2010. The pro forma balance sheet reflects the following adjustments related to State Line Field Acquisition Properties activity as if the acquisition had occurred on March 31, 2010:
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a.
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Record the financing of the acquisition funded by borrowings from a new debt agreement.
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b.
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Record the deferred financing costs which were paid in the form of common stock and will be amortized over the life of the loan as a component of interest expense.
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c.
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Record the non-cash compensation expense associated with the overriding royalty interest of $317,370 awarded to two members of management.
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d.
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Record the preliminary pro forma allocation of the purchase price of the State Line Field Acquisition Properties using the purchase method of accounting. The following is a calculation and allocation of the purchase price to the acquired assets and liabilities based on their fair values.
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4
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Purchase Price:
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||||
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Cash payment funded by borrowing from new debt agreement and stock
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$
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16,875,000
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||
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Less: Value attributable to override royalty interest paid to placement agent
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(158,685)
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(i)
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||
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Value attributable to override royalty interest awarded to management
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(317,370)
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(ii)
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||
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Net purchase price attributable to allocation
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16,398,945
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|||
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Preliminary allocation of purchase price:
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||||
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Oil and gas properties
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$
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16,600,243
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||
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Total assets acquired
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16,600,243
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|||
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Asset retirement obligation
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$ |
149,151
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||
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Accounts Payable
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52,147
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|||
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Total liabilities acquired
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201,298 | |||
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Net assets acquired
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$
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16,398,945
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||
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(i)
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Represents value of override royalty interest awarded to placement agent and recorded as deferred financing costs.
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(ii)
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Represents value of override royalty interest awarded to two members of management and recorded as compensation expense.
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5