UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 2012 (January 7, 2013)
VENOCO, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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333-123711 |
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77-0323555 |
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(State or other jurisdiction of |
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(Commission file number) |
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(I.R.S. Employer |
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370 17th Street, Suite 3900 Denver, Colorado |
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80202-1370 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (303) 626-8300
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On December 31, 2012, Venoco, Inc. (the “Company”) completed the sale of certain properties in the Sacramento Basin and San Joaquin Valley areas of California to an unrelated third party pursuant to a purchase and sale agreement executed on December 21, 2012. The total purchase price for the properties was $250 million, subject to certain closing adjustments, of which $101 million was placed into escrow pending the receipt of consents to assign and the expiration or waiver of preferential purchase rights relating to certain of the properties. Of the $101 million placed into escrow, $73 million was received two days after closing and the remaining $28 million is expected to be released by June 30, 2013. The Company will apply $224 million of the proceeds to pay down a portion of the principal balance outstanding on its second lien term loan facility and $7 million for a prepayment penalty.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information
The Venoco, Inc. unaudited pro forma condensed consolidated balance sheet as of September 30, 2012 and the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2012 and the year ended December 31, 2011, which give effect to the transaction described herein beginning on page F-1 of this report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: January 7, 2013 |
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VENOCO, INC. | |
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By: |
/s/ Edward J. O’Donnell |
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Name: Edward J. O’Donnell | |
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Title: Chief Executive Officer | |
VENOCO, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2012
(In thousands)
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Historical |
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Go-Private |
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Asset Sale |
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Pro Forma |
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ASSETS: |
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Cash and cash equivalents |
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$ |
18,208 |
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$ |
1,007 |
(a),(b),(c ) |
$ |
(9,151 |
)(g),(i),(j),(k) |
$ |
10,064 |
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Other current assets |
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45,872 |
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— |
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(7,198 |
)(i) |
38,674 |
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Total current assets |
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64,080 |
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1,007 |
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(16,349 |
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48,738 |
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Property, plant and equipment, at cost: |
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Oil and gas properties, full cost method of accounting |
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Proved |
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2,118,573 |
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— |
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(260,308 |
)(f),(h),(i),(n),(o) |
1,858,265 |
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Unproved |
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58,734 |
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— |
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(43,357 |
)(o) |
15,377 |
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Accumulated depletion |
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(1,291,751 |
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— |
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— |
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(1,291,751 |
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Net oil and gas properties |
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885,556 |
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— |
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(303,665 |
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581,891 |
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Other property and equipment, net of accumulated depreciation and amortization |
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15,531 |
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— |
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(652 |
)(h) |
14,879 |
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Net property, plant and equipment |
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901,087 |
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— |
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(304,317 |
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596,770 |
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Other assets |
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19,732 |
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9,193 |
(a) |
(4,894 |
)(m) |
24,031 |
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Total assets |
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$ |
984,899 |
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$ |
10,200 |
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$ |
(325,560 |
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$ |
669,539 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY: |
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Current liabilities |
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$ |
108,392 |
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— |
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$ |
(7,991 |
)(k) |
$ |
100,401 |
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Long-term debt |
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719,524 |
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329,700 |
(b) |
(245,255 |
)(g) |
803,969 |
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Commodity derivatives |
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27,608 |
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— |
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(3,740 |
)(j) |
23,868 |
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Asset retirement obligations |
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93,143 |
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— |
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(56,952 |
)(f) |
36,191 |
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Total liabilities |
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948,667 |
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329,700 |
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(313,938 |
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964,429 |
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Stockholders’ equity |
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36,232 |
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(319,500 |
)(c ) |
(11,622 |
)(g),(m) |
(294,890 |
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Total liabilities and stockholders’ equity |
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$ |
984,899 |
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$ |
10,200 |
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$ |
(325,560 |
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$ |
669,539 |
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See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
VENOCO, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(In thousands, except per share amounts)
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Historical |
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Asset Sale |
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Pro Forma |
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REVENUES: |
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Oil and natural gas sales |
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$ |
259,701 |
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$ |
(40,620 |
)(d) |
$ |
219,081 |
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Other |
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4,859 |
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(1,793 |
)(d) |
3,066 |
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Total revenues |
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264,560 |
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(42,413 |
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222,147 |
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EXPENSES: |
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Lease operating expense |
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67,442 |
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(12,236 |
)(d) |
55,206 |
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Property and production taxes |
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8,588 |
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(2,172 |
)(d) |
6,416 |
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Transportation expense |
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5,151 |
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— |
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5,151 |
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Depletion, depreciation and amortization |
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65,707 |
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(36,423 |
)(e),(h) |
29,284 |
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Accretion of asset retirement obligations |
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4,298 |
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(2,527 |
)(f) |
1,771 |
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General and administrative, net of amounts capitalized |
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34,052 |
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(4,066 |
)(l) |
29,986 |
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Total expenses |
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185,238 |
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(57,424 |
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127,814 |
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Income (loss) from operations |
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79,322 |
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15,011 |
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94,333 |
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FINANCING COSTS AND OTHER: |
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Interest expense, net |
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48,089 |
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— |
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48,089 |
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Amortization of deferred loan costs |
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1,751 |
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— |
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1,751 |
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Commodity derivative losses (gains), net |
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72,931 |
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— |
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72,931 |
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Total financing costs and other |
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122,771 |
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— |
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122,771 |
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Income (loss) before income taxes |
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(43,449 |
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15,011 |
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(28,438 |
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Income tax provision (benefit) |
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— |
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— |
(p) |
— |
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Net income (loss) |
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$ |
(43,449 |
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$ |
15,011 |
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$ |
(28,438 |
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Earnings per common share: |
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Basic |
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$ |
(0.74 |
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$ |
(0.48 |
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Diluted |
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$ |
(0.74 |
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$ |
(0.48 |
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Weighted average common shares outstanding: |
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Basic |
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59,045 |
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59,045 |
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Diluted |
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59,045 |
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59,045 |
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See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
VENOCO, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands, except per share amounts)
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Historical |
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Asset Sale |
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Pro Forma |
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REVENUES: |
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Oil and natural gas sales |
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$ |
323,423 |
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$ |
(91,901 |
)(d) |
$ |
231,522 |
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Other |
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5,355 |
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(2,346 |
)(d) |
3,009 |
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Total revenues |
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328,778 |
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(94,247 |
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234,531 |
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EXPENSES: |
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Lease operating expense |
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94,100 |
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(16,579 |
)(d) |
77,521 |
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Property and production taxes |
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6,376 |
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(2,617 |
)(d) |
3,759 |
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Transportation expense |
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9,348 |
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— |
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9,348 |
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Depletion, depreciation and amortization |
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85,817 |
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(49,995 |
)(e),(h) |
35,822 |
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Accretion of asset retirement obligations |
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6,423 |
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(3,465 |
)(f) |
2,958 |
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General and administrative, net of amounts capitalized |
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39,186 |
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(5,691 |
)(l) |
33,495 |
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Total expenses |
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241,250 |
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(78,347 |
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162,903 |
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Income (loss) from operations |
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87,528 |
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(15,900 |
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71,628 |
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FINANCING COSTS AND OTHER: |
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Interest expense, net |
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61,113 |
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— |
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61,113 |
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Amortization of deferred loan costs |
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2,310 |
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— |
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2,310 |
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Interest rate derivative losses (gains), net |
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1,083 |
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— |
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1,083 |
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Loss on extinguishment of debt |
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1,357 |
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— |
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1,357 |
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Commodity derivative losses (gains), net |
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(40,649 |
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— |
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(40,649 |
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Total financing costs and other |
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25,214 |
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— |
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25,214 |
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Income (loss) before income taxes |
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62,314 |
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(15,900 |
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46,414 |
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Income tax provision (benefit) |
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— |
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— |
(p) |
— |
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Net income (loss) |
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$ |
62,314 |
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$ |
(15,900 |
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$ |
46,414 |
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Earnings per common share: |
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Basic |
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$ |
1.02 |
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$ |
0.76 |
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Diluted |
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$ |
1.02 |
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$ |
0.76 |
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Weighted average common shares outstanding: |
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Basic |
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58,106 |
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58,106 |
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Diluted |
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58,236 |
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58,236 |
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See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
Venoco, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements are presented to give effect to the sale on December 31, 2012 by Venoco, Inc. (the “Company” or “Venoco”) certain of its oil and gas properties in the Sacramento Basin of California and certain undeveloped leasehold in the San Joaquin Valley of California (“Asset Sale”). The total purchase price for the properties was $250 million, subject to certain closing adjustments, of which $101 million was placed into escrow pending the receipt of consents to assign and the expiration or waiver of preferential purchase rights relating to certain of the properties. Of the $101 million placed into escrow, $73 million was received two days after closing and the remaining $28 million is expected to be released by June 30, 2013. The unaudited pro forma condensed consolidated financial statements are presented as if the full purchase price of $250 million was received on the closing date.
On June 5, 2012, the Company’s shareholders (including a majority of the unaffiliated shareholders) approved the merger agreement between the Company and Tim Marquez, Executive Chairman of the Board, to allow Mr. Marquez to acquire all outstanding shares of the common stock of Venoco of which he was not the beneficial owner, and on October 3, 2012 the transaction contemplated by the merger agreement closed. As a result, Venoco’s common stock is no longer publicly traded and the Company is wholly owned by Denver Parent Corporation, an entity owned and controlled by Mr. Marquez and his affiliates. In connection with the closing of the transaction (“Go-Private” transaction), Venoco entered into a fifth amended and restated credit agreement related to its revolving credit facility and entered into a $315 million second lien term loan. The terms of the second lien term loan are summarized in the Company’s September 30, 2012 Form 10-Q. The pro forma effect of the Go-Private transaction is included in the pro forma balance sheet because a major portion of the Asset Sale proceeds were used to pay down debt incurred in connection with the Go-Private transaction.
The pro forma condensed consolidated balance sheet as of September 30, 2012, and the pro forma condensed consolidated statement of operations for the nine months ended September 30, 2012 were derived from and should be read in conjunction with the Company’s September 30, 2012 Form 10-Q, filed on November 7, 2012. The pro forma condensed consolidated statement of operations for the year ended December 31, 2011 was derived from and should be read in conjunction with the Company’s audited financial statements included in the December 31, 2011 Form 10-K, filed on February 16, 2012.
· The unaudited pro forma condensed consolidated balance sheet reflects results as though the Asset Sale and the Go-Private transaction closed on September 30, 2012.
· The unaudited pro forma condensed consolidated statements of operations reflect results as though the Asset Sale closed on January 1, 2011.
The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position for any future period.
2. Pro Forma Adjustments and Assumptions
The unaudited pro forma financial statements have been prepared by adjusting the Company’s historical financial statements as discussed below:
Pro forma adjustments related to the Go-Private transaction:
(a) Represents the pro forma effect on deferred loan costs and related amortization directly attributable to debt incurred for the Go-Private transaction (1st and 2nd Lien credit facilities).
(b) Represents the pro forma effect of new borrowings incurred in connection with the Go-Private transaction of $309 million (net of a 2% original issue discount) under the 8.5% second lien term loan and $21 million under the revolving credit agreement.
(c) Represents the pro forma effect of the buyback of outstanding public shares on stockholders’ equity.
Pro forma adjustments related to Asset Sale:
(d) Represents the pro forma effect on oil and gas revenues, other revenues and related lease operating expenses and production and property taxes directly attributable to the properties sold.
(e) Represents the pro forma effect on depletion expense, which is calculated on the units-of-production method.
(f) Represents the pro forma effect of the removal of the properties sold on the asset retirement obligation, the full cost pool and related accretion expense.
(g) Represents the pro forma effect of the estimated repayment of $224 million of principal and $7 million of premium on the second lien term loan and $21 million under the revolving credit agreement.
(h) Represents the pro forma effect on depreciation and amortization expense and historical cost directly attributable to the properties sold.
(i) Represents the pro forma effect on accounts receivable and equipment inventories related to properties sold.
(j) The Company does not designate commodity derivative contracts as hedges. Therefore, no adjustments were made to derivative gains or losses for the periods presented. However, the Company incurred a $3.7 million realized loss from the early settlement of gas derivative contracts immediately following the Asset Sale, which directly resulted from the properties sold.
(k) Represents the pro forma effect on accounts payable and accrued liabilities related to properties sold.
(l) Represents the pro forma effect on general and administrative expenses, net of amounts capitalized, directly related to properties sold.
(m) Represents the pro forma effect on deferred loan costs attributable to the reduction of debt resulting from application of the proceeds from the Asset Sale.
(n) Represents the allocation of the net proceeds to the full cost pool, with no gain or loss recognized on the transaction.
(o) Represents the sale of unproved properties sold in the Asset Sale.
(p) The Company has provided a full valuation allowance against its net deferred tax assets at December 31, 2011 and September 30, 2012. Therefore, there are no net tax effects to the Company’s income tax provision for the periods presented.