Attached files
file | filename |
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8-K/A - 8-K/A - PostRock Energy Corp | h84194e8vkza.htm |
EX-23.1 - EX-23.1 - PostRock Energy Corp | h84194exv23w1.htm |
EX-99.1 - EX-99.1 - PostRock Energy Corp | h84194exv99w1.htm |
Exhibit 99.2
POSTROCK ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements have been
prepared to assist in the analysis of PostRock Energy Corporations (PostRock) purchase of a
14.9% equity interest in Constellation Energy Partners LLC (CEP) from Constellation Energy Commodities Group, Inc. (CEG), a subsidiary of Constellation
Energy Group, Inc. (the CEP Transaction). In the transaction, PostRock indirectly
acquired 485,065 Class A Units and 3,128,670 Class B Units of CEP. The consideration paid to CEG
was comprised of $6.6 million of cash, one million shares of PostRock common stock and warrants to
acquire an additional 673,822 shares of PostRock common stock. Of the warrants, 224,607 are
exercisable for one year at an exercise price of $6.57 a share, 224,607 are exercisable for two
years at $7.07 a share and 224,608 are exercisable for three years at $7.57 a share. The cash was
funded with borrowings under PostRocks borrowing base credit facility.
In order to present the pro forma condensed consolidated statements of operations for the year
ended December 31, 2010, the pro forma condensed consolidated financial statements assume the
recombination of Quest Resource Corporation (QRCP), Quest Energy Partners, L.P. (QELP) and
Quest Midstream Partners, L.P. (QMLP) occurred on January 1, 2010. The recombination of these
entities occurred on March 5, 2010 and has been accounted for as an equity transaction among the
owners of a consolidated entity. Historical cost accounting has continued to be used, and no gain
or loss was recognized as a result of the transaction. For additional information about the
recombination, see Item 8 of PostRocks Annual Report on Form 10-K for the year ended December 31,
2010 (the Form 10-K).
The unaudited pro forma condensed consolidated statements of operations for the six months
ended June 30, 2011 and the year ended December 31, 2010 assume the CEP Transaction occurred on
January 1 of each period presented. The unaudited pro forma condensed consolidated balance sheet
assumes the CEP Transaction occurred on June 30, 2011. The unaudited pro forma condensed
consolidated financial statements are derived from the historical consolidated financial statements
of PostRock and its Predecessor and are based on assumptions that management believes are
reasonable in the circumstances. This information should be read together with the historical
consolidated financial statements and related notes of PostRock included in the Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 and of
CEP attached to this Current Report on Form 8-K/A as Exhibit 99.1.
The unaudited pro forma condensed consolidated financial information is for illustrative
purposes only. The unaudited pro forma condensed consolidated financial information is not
necessarily indicative of the financial results that would have occurred if the CEP Transaction had
taken place on the dates indicated, nor is it indicative of the future results of PostRock.
Because PostRock indirectly owns a 14.9% equity interest in CEP and has the right, as the
indirect owner of all of the outstanding Class A Units of CEP, to appoint two of the five members
of the Board of Managers of CEP, PostRock has significant influence over CEP. Accordingly, the CEP
Transaction will be accounted for as an equity investment.
1
POSTROCK ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2011
(in thousands)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2011
(in thousands)
PostRock | Pro Forma | Pro Forma | ||||||||||
Historical | Adjustments | PostRock | ||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and equivalents |
$ | 1,305 | $ | | $ | 1,305 | ||||||
Accounts receivable trade, net |
11,092 | | 11,092 | |||||||||
Other receivables |
2,357 | | 2,357 | |||||||||
Inventory |
5,088 | | 5,088 | |||||||||
Other current assets |
7,949 | | 7,949 | |||||||||
Derivative financial instruments |
29,714 | | 29,714 | |||||||||
Total |
57,505 | | 57,505 | |||||||||
Oil and gas properties, full cost accounting, net |
119,443 | | 119,443 | |||||||||
Pipeline assets, net |
60,229 | | 60,229 | |||||||||
Other property and equipment, net |
15,091 | | 15,091 | |||||||||
Investment in Constellation Energy Partners LLC |
| 11,618 | A | 11,618 | ||||||||
Other noncurrent assets, net |
4,932 | | 4,932 | |||||||||
Derivative financial instruments |
30,593 | | 30,593 | |||||||||
Total assets |
$ | 287,793 | $ | 11,618 | $ | 299,411 | ||||||
LIABILITIES AND EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
$ | 6,139 | $ | | $ | 6,139 | ||||||
Revenue payable |
5,557 | | 5,557 | |||||||||
Accrued expenses and other current liabilities |
11,257 | | 11,257 | |||||||||
Litigation reserve |
10,620 | | 10,620 | |||||||||
Current portion of long-term debt |
9,000 | | 9,000 | |||||||||
Derivative financial instruments |
4,669 | | 4,669 | |||||||||
Total |
47,242 | | 47,242 | |||||||||
Derivative financial instruments |
6,050 | | 6,050 | |||||||||
Long-term debt |
183,000 | 7,000 | B | 190,000 | ||||||||
Asset retirement obligations |
7,516 | | 7,516 | |||||||||
Other noncurrent liabilities |
400 | | 400 | |||||||||
Total liabilities |
244,208 | 7,000 | 251,208 | |||||||||
Commitments and contingencies |
||||||||||||
Series A Cumulative Redeemable Preferred Stock |
53,634 | | 53,634 | |||||||||
Stockholders equity |
||||||||||||
Series B Voting Preferred Stock |
2 | | 2 | |||||||||
Common stock |
84 | 10 | C | 94 | ||||||||
Additional paid-in capital |
376,609 | 4,608 | C | 381,217 | ||||||||
Accumulated deficit |
(386,744 | ) | | (386,744 | ) | |||||||
Total deficit |
(10,049 | ) | 4,618 | (5,431 | ) | |||||||
Total liabilities and equity |
$ | 287,793 | $ | 11,618 | $ | 299,411 | ||||||
2
POSTROCK ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2011
(in thousands except per share data)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2011
(in thousands except per share data)
PostRock | Pro Forma | Pro Forma | ||||||||||
Historical | Adjustments | PostRock | ||||||||||
Revenues |
||||||||||||
Oil and gas sales |
$ | 41,762 | $ | | $ | 41,762 | ||||||
Gathering |
2,889 | | 2,889 | |||||||||
Pipeline |
5,639 | | 5,639 | |||||||||
Total |
50,290 | | 50,290 | |||||||||
Costs and expenses |
||||||||||||
Production expense |
23,840 | | 23,840 | |||||||||
Pipeline expense |
3,016 | | 3,016 | |||||||||
General and administrative |
10,036 | | 10,036 | |||||||||
Litigation reserve |
9,600 | | 9,600 | |||||||||
Depreciation, depletion and amortization |
13,727 | | 13,727 | |||||||||
(Gain) loss on sale of assets |
(12,357 | ) | | (12,357 | ) | |||||||
Total |
47,862 | | 47,862 | |||||||||
Operating income (loss) |
2,428 | | 2,428 | |||||||||
Other income (expense) |
||||||||||||
Gain (loss) from derivative financial instruments |
4,747 | | 4,747 | |||||||||
Gain on forgiveness of debt |
1,647 | | 1,647 | |||||||||
Equity in Constellation Energy Partners LLC loss |
| (654 | )D | (654 | ) | |||||||
Other income (expense), net |
170 | | 170 | |||||||||
Interest expense, net |
(5,322 | ) | (140 | )E | (5,462 | ) | ||||||
Total other income (expense) |
1,242 | (794 | ) | 448 | ||||||||
Income (loss) before income taxes |
3,670 | (794 | ) | 2,876 | ||||||||
Income taxes |
| | | |||||||||
Net income (loss) |
3,670 | (794 | ) | 2,876 | ||||||||
Net income attributable to non-controlling interest |
| | | |||||||||
Net income (loss) attributable to controlling interest |
3,670 | (794 | ) | 2,876 | ||||||||
Preferred dividends |
(3,774 | ) | | (3,774 | ) | |||||||
Accretion of redeemable preferred stock |
(735 | ) | | (735 | ) | |||||||
Net income (loss) available to common stock |
$ | (839 | ) | $ | (794 | ) | $ | (1,633 | ) | |||
Net income (loss) per common share |
||||||||||||
Basic |
$ | (0.10 | ) | $ | (0.18 | ) | ||||||
Diluted |
$ | (0.10 | ) | $ | (0.18 | ) | ||||||
Weighted average common shares outstanding |
||||||||||||
Basic |
8,283 | 1,000 | 9,283 | |||||||||
Diluted |
8,283 | 1,000 | 9,283 | |||||||||
3
POSTROCK ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2010
(in thousands except per share data)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2010
(in thousands except per share data)
PostRock | PostRock | |||||||||||||||||||||||
Predecessor | Successor | CEP | ||||||||||||||||||||||
January 1 to | March 6 to | Recombination | Transaction | |||||||||||||||||||||
March 5, 2010 | December 31, 2010 | Pro Forma | PostRock | Pro Forma | Pro Forma | |||||||||||||||||||
(Predecessor) | (Successor) | Adjustments | Combined | Adjustments | PostRock | |||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Oil and gas sales |
$ | 18,659 | $ | 69,277 | $ | | $ | 87,936 | $ | | $ | 87,936 | ||||||||||||
Gathering |
1,076 | 4,771 | | 5,847 | | 5,847 | ||||||||||||||||||
Pipeline |
1,749 | 8,380 | | 10,129 | | 10,129 | ||||||||||||||||||
Total |
21,484 | 82,428 | | 103,912 | | 103,912 | ||||||||||||||||||
Costs and expenses |
||||||||||||||||||||||||
Production expense |
8,645 | 38,329 | | 46,974 | | 46,974 | ||||||||||||||||||
Pipeline expense |
1,110 | 5,195 | | 6,305 | | 6,305 | ||||||||||||||||||
General and administrative |
5,735 | 20,705 | | 26,440 | | 26,440 | ||||||||||||||||||
Depreciation, depletion and amortization |
4,164 | 18,683 | | 22,847 | | 22,847 | ||||||||||||||||||
(Gain) loss on sale of assets |
| (13,495 | ) | | (13,495 | ) | | (13,495 | ) | |||||||||||||||
Recovery of misappropriated funds |
| (1,592 | ) | | (1,592 | ) | | (1,592 | ) | |||||||||||||||
Total |
19,654 | 67,825 | | 87,479 | | 87,479 | ||||||||||||||||||
Operating income (loss) |
1,830 | 14,603 | | 16,433 | | 16,433 | ||||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||
Gain (loss) from derivative financial instruments |
25,246 | 47,870 | | 73,116 | | 73,116 | ||||||||||||||||||
Gain on forgiveness of debt |
| 2,909 | | 2,909 | | 2,909 | ||||||||||||||||||
Equity in Constellation Energy Partners LLC loss |
| | | | (11,618 | )D | (11,618 | ) | ||||||||||||||||
Other income (expense), net |
(4 | ) | (24 | ) | | (28 | ) | | (28 | ) | ||||||||||||||
Interest expense, net |
(5,336 | ) | (20,137 | ) | | (25,473 | ) | (281 | )E | (25,754 | ) | |||||||||||||
Total other income (expense) |
19,906 | 30,618 | | 50,524 | (11,899 | ) | 38,625 | |||||||||||||||||
Income (loss) before income taxes |
21,736 | 45,221 | | 66,957 | (11,899 | ) | 55,058 | |||||||||||||||||
Income taxes |
| | | | | | ||||||||||||||||||
Net income (loss) |
21,736 | 45,221 | | 66,957 | (11,899 | ) | 55,058 | |||||||||||||||||
Net income attributable to non-controlling interest |
(9,958 | ) | | 9,958 | F | | | | ||||||||||||||||
Net income (loss) attributable to controlling interest |
11,778 | 45,221 | 9,958 | 66,957 | (11,899 | ) | 55,058 | |||||||||||||||||
Preferred dividends |
| (1,980 | ) | | (1,980 | ) | | (1,980 | ) | |||||||||||||||
Accretion of redeemable preferred stock |
| (327 | ) | | (327 | ) | | (327 | ) | |||||||||||||||
Net income (loss) available to common stock |
$ | 11,778 | $ | 42,914 | $ | 9,958 | $ | 64,650 | $ | (11,899 | ) | $ | 52,751 | |||||||||||
Net income (loss) per common share |
||||||||||||||||||||||||
Basic |
$ | 1.42 | $ | 5.29 | $ | 7.97 | $ | 5.79 | ||||||||||||||||
Diluted |
$ | 1.42 | $ | 4.62 | $ | 6.96 | $ | 5.12 | ||||||||||||||||
Weighted average common shares outstanding |
||||||||||||||||||||||||
Basic |
8,283 | 8,110 | 8,110 | 1,000 | 9,110 | |||||||||||||||||||
Diluted |
8,283 | 9,295 | 9,295 | 1,000 | 10,295 | |||||||||||||||||||
4
POSTROCK ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Note 1 Description of Transaction
On August 8, 2011, PostRock Energy Corporation (PostRock) purchased a 14.9% equity interest in
Constellation Energy Partners LLC (CEP) from Constellation Energy Commodities Group, Inc.
(CEG), a subsidiary of Constellation Energy Group, Inc. (the CEP Transaction). In the
transaction, PostRock acquired all of the outstanding equity interests in Constellation Energy
Partners Management LLC, which owns (i) 485,065 Class A Units of CEP and (ii) 3,128,670 Class B
Units of CEP. The consideration paid to CEG was comprised of $6.6 million of cash, one million
shares of PostRock common stock and warrants to acquire an additional 673,822 shares of PostRock
common stock. Of the warrants, 224,607 are exercisable for one year at an exercise price of $6.57
a share, 224,607 are exercisable for two years at $7.07 a share and 224,608 are exercisable for
three years at $7.57 a share. The cash was funded with borrowings under PostRocks borrowing base
credit facility.
Note 2 Pro Forma Adjustments
Pro Forma Adjustments: The pro forma adjustments made to the historical consolidated financial
statements of PostRock are described as follows:
A. Reflects the fair value of the consideration paid to CEG plus estimated capitalized
transaction costs associated with the transaction. Warrant valuations were based on the
Black/Scholes option pricing model using the terms of the warrants. The fair value of the
consideration was based on:
i. | $6.6 million of cash consideration | ||
ii. | $0.4 million of estimated cash transaction expenses | ||
iii. | $4.1 million of stock based on 1,000,000 PostRock common shares at a closing stock price on August 8, 2011 of $4.10 per common share | ||
iv. | $0.5 million of warrants based on the Black-Scholes pricing model |
B. Reflects borrowings under PostRocks borrowing base credit facility for the cash
consideration and estimated transaction expenses.
C. Reflects the increase to:
i. | Common stock for the issuance of 1,000,000 shares of PostRock common stock $0.01 par value per share; and | ||
ii. | Additional-paid in capital for the issuance of shares above par value and the fair value of the warrants issued. |
D. Represents PostRocks equity in the comprehensive loss of CEP calculated as 14.9% of CEPs comprehensive
loss for the period.
E. Reflects the increase in interest expense associated with the $7.0 million
borrowing for the cash consideration and the estimated transaction expenses. The interest
calculation is based on the current year average interest rate of approximately 4.01%.
F. Reflects the elimination of the noncontrolling interests reacquired by the
consolidated entity in connection with the recombination.
Omitted Adjustments: PostRock expects to record a nonrecurring bargain purchase gain
during the 12 months following the closing of the CEP Transaction. The fair value of the
consideration paid to CEG plus estimated capitalized transaction costs associated with the CEP
Transaction totaled approximately $11.6 million. At June 30, 2011, 14.9% of CEPs net book value,
which is not necessarily indicative of fair value, was approximately $27.0 million. The calculation
of the fair value of the assets and liabilities is ongoing and the amount of the gain is subject to
change.
5