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8-K - 8-K - Bonanza Creek Energy, Inc.a13-2742_68k.htm
EX-99.3 - EX-99.3 - Bonanza Creek Energy, Inc.a13-2742_6ex99d3.htm
EX-99.2 - EX-99.2 - Bonanza Creek Energy, Inc.a13-2742_6ex99d2.htm
EX-23.1 - EX-23.1 - Bonanza Creek Energy, Inc.a13-2742_6ex23d1.htm

Exhibit 99.1

 

Item 6.  Selected Financial Data.

 

The following tables set forth selected historical financial data of us and our predecessor, BCEC, as of and for the periods indicated. The consolidated statements of operations data for the years ended December 31, 2007 and 2008 are derived from audited consolidated financial statements of BCEC not included in this report. The consolidated audited financial statements of BCEC for the periods not included in this report were previously filed in BCEI’s Form S-1 (File No. 333-174765). The consolidated statement of operations data for the years ended December 31, 2009 and the period ended December 23, 2010 are derived from the audited consolidated financial statements of BCEC included elsewhere in this report. The consolidated statement of operations data for the eight day period ended December 31, 2010 and year ended December 31, 2011 are derived from the audited consolidated financial statements of BCEI included elsewhere in this report. The consolidated balance sheets data as of December 31, 2007, 2008 and 2009 are derived from the audited consolidated financial statements of BCEC, which are not included in this report. The consolidated audited financial statements of BCEC for the periods not included in this report were previously filed in BCEI’s Form S-1 (File No. 333-174765). The consolidated balance sheet data as of December 31, 2010 and 2011 is derived from our audited consolidated financial statements of BCEI included elsewhere in this report. In management’s opinion, the financial statements include all adjustments necessary for the fair presentation of our financial condition as of such date and our results of operations for such periods.

 

The summary unaudited pro forma statement of operations of Bonanza Creek Energy, Inc. for the year ended December 31, 2010 gives effect to our Corporate Restructuring as if it had occurred on January 1, 2010.

 



 

The selected historical financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Continuing Operations” and both our and our predecessor’s financial statements and the notes to those financial statements included elsewhere in this Current Report on Form 8-K.

 

 

 

 

 

 

 

 

 

 

 

Bonanza Creek Energy, Inc.

 

 

 

Bonanza Creek Energy Company,
LLC (Predecessor)

 

Period
from
Inception

 

 

 

Bonanza

 

 

 

2007

 

2008

 

2009

 

Period
Ended
December 23,
2010(1)

 

(December 23,
2010) to
December 31,
2010

 

Year Ended
December 31,
2011

 

Creek
Energy, Inc.
Pro Forma
2010(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

(in thousands, except per share data)

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil sales

 

$

7,462

 

$

27,171

 

$

22,377

 

$

29,608

 

$

1,200

 

$

79,568

 

$

40,466

 

Natural gas sales

 

1,736

 

5,160

 

3,655

 

6,226

 

207

 

13,442

 

10,253

 

Natural gas liquids and CO2 sales

 

821

 

2,782

 

3,169

 

7,672

 

213

 

12,714

 

8,365

 

Total revenues

 

10,019

 

35,113

 

29,201

 

43,506

 

1,620

 

105,724

 

59,084

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

2,191

 

8,633

 

10,745

 

11,948

 

419

 

18,253

 

14,377

 

Severance and ad valorem taxes

 

514

 

1,439

 

1,984

 

1,468

 

66

 

5,918

 

2,368

 

Depreciation, depletion and amortization

 

3,529

 

11,065

 

12,594

 

12,598

 

436

 

28,014

 

18,856

 

General and administrative

 

4,752

 

7,477

 

7,610

 

8,375

 

324

 

13,164

 

9,339

 

Employee stock compensation(3)

 

 

 

 

 

 

4,449

 

 

Exploration

 

 

9

 

 

226

 

 

878

 

246

 

Impairment of oil and gas properties(4)

 

 

1,594

 

 

 

 

623

 

 

Cancelled private placement(5)

 

 

 

 

2,378

 

 

 

2,378

 

Total operating expenses

 

10,986

 

30,217

 

32,933

 

36,993

 

1,245

 

71,299

 

47,564

 

Income (loss) from operations

 

(967

)

4,896

 

(3,732

)

6,513

 

375

 

34,425

 

11,520

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(1,609

)

(12,227

)

(16,582

)

(18,001

)

(58

)

(4,017

)

(1,263

)

Amortization of debt discount

 

(1,684

)

(5,987

)

(7,963

)

(8,862

)

 

 

 

Write off of deferred financing costs

 

 

 

 

(1,663

)

 

 

(1,663

)

Gain on sale of oil and gas properties

 

 

8

 

 

 

 

 

 

Unrealized gain (loss) in fair value of warrant put option(6)

 

(32,302

)

70,972

 

(80,640

)

34,345

 

 

 

 

Unrealized gain (loss) in fair value of commodity derivatives

 

(925

)

48,716

 

(34,589

)

(7,605

)

(514

)

225

 

(8,119

)

Realized gain (loss) on settled commodity derivatives

 

26

 

1,913

 

13,451

 

5,919

 

(47

)

(3,024

)

5,872

 

Other income (loss)

 

(43

)

(229

)

(180

)

19

 

 

(110

)

(46

)

Total other income (expense)

 

(36,537

)

103,166

 

(126,503

)

4,152

 

(619

)

(6,926

)

(5,219

)

Income (loss) from continuing operations before taxes

 

(37,504

)

108,062

 

(130,235

)

10,665

 

(244

)

27,499

 

6,301

 

Income tax benefit (expense)(7)

 

 

 

 

 

90

 

(12,890

)

(2,319

)

Income (loss) from continuing operations

 

(37,504

)

108,062

 

(130,235

)

10,665

 

(154

)

14,609

 

3,982

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations associated with oil and gas properties held for sale (including impairments in 2008, 2009, and 2011 of $24.8 million, $0.6 million, and $3.4 million respectively)(4)

 

(2,856

)

(39,308

)

149

 

64

 

(13

)

(3,610

)

(312

)

Gain on sale of oil and gas properties

 

 

 

303

 

4,055

 

 

 

4,055

 

Income tax (expense) benefit

 

 

 

 

 

5

 

1,692

 

(1,377

)

(Loss) income from discontinued operations

 

(2,856

)

(39,308

)

452

 

4,119

 

(8

)

(1,918

)

2,366

 

Net income (loss)

 

$

(40,360

)

$

68,754

 

$

(129,783

)

$

14,784

 

$

(162

)

$

12,691

 

$

6,348

 

Basic and Diluted Income Per Share(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

$

 

$

0.49

 

$

0.14

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

$

 

$

(0.6

)

$

0.08

 

Net income per common share

 

 

 

 

 

 

 

 

 

$

 

$

0.43

 

$

0.22

 

Weight Average Shares Outstanding, Basic and Diluted

 

 

 

 

 

 

 

 

 

29,123

 

29,576

 

29,123

 

 


(1)                                     We completed our Corporate Restructuring on December 23, 2010.

 

(2)                                     The pro forma information above gives effect to our Corporate Restructuring as if it had occurred on January 1, 2010. See “—Unaudited Pro Forma Financial Data.”

 

(3)                                     In connection with our IPO, the Company distributed 243,945 fully vested shares of common stock previously held in trust to our employees and recorded a $4.1 million stock compensation charge. In addition, the Company distributed the remaining 3,400 shares of our former Class B common stock to our employees. In connection with our IPO, all issued and outstanding shares of our former Class B Common Stock converted into 437,787 shares of restricted common stock, vesting over a three year period and we recorded a $0.1 million stock compensation charge. We expect to recognize employee stock compensation expense relating to these grants during the years ended December 31, 2012, 2013, and 2014 of approximately $2.5 million, $2.5 million, and $2.3 million, respectively, assuming no forfeitures.

 



 

(4)                                     The impairment for the year ended 2008 resulted from a write-down of the carrying value of our oil and natural gas reserves due to depressed year-end prices. The impairment for 2011 was related to steam flooding results in our legacy California assets that were lower than expected and the impairment of one non-core field in Southern Arkansas was related to the loss of a lease.

 

(5)                                     Expenditures in connection with a cancelled private placement of our preferred stock.

 

(6)                                     In connection with its purchase of our senior subordinated notes D.E. Shaw Synoptic Portfolios 5, L.L.C. received warrants to purchase equity interests in our predecessor. These warrants contained a put right exercisable beginning on May 17, 2014. The periods presented for our predecessor reflect the changes in the fair market value of that put option. The warrants and aggregate warrant exercise price were exchanged for shares of our common stock in connection with our Corporate Restructuring.

 

(7)                                     Our predecessor, BCEC, was a partnership for federal income tax purposes and, therefore, was not subject to entity-level taxation. Our pro forma results reflect our taxation as a subchapter “C” corporation at an estimated combined state and federal income tax rate of 36.8%.

 

(8)                                     As a limited liability company, ownership interests in our predecessor were held as units rather than shares.

 

 

 

Bonanza Creek Energy
Company, LLC (Predecessor)

 

Bonanza Creek
Energy, Inc.

 

 

 

As of December 31,

 

As of December 31,

 

 

 

2007

 

2008

 

2009

 

2010

 

2011

 

 

 

(in thousands)

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

$

4,088

 

$

2,522

 

$

 

$

2,090

 

Property and equipment, net

 

51,093

 

182,976

 

177,126

 

481,374

 

618,229

 

Oil and gas properties held for sale, less accumulated depreciation and depletion

 

38,553

 

12,304

 

11,241

 

15,208

 

9,896

 

Total assets

 

97,044

 

241,625

 

211,552

 

516,104

 

664,349

 

Long term debt, including current portion:

 

 

 

 

 

 

 

 

 

 

 

Credit facility

 

27,274

 

107,000

 

99,000

 

55,400

 

6,600

 

Senior subordinated notes, net of discount

 

51,561

 

75,499

 

92,442

 

 

 

Subordinated unsecured note

 

 

10,000

 

10,799

 

 

 

Warrant put options(1)

 

42,851

 

828

 

81,468

 

 

 

Total members’/stockholders’ equity (deficit)

 

(33,566

)

35,988

 

(93,795

)

356,380

 

527,982

 

 

 

 

 

 

 

 

 

 

 

 

Bonanza Creek Energy, Inc.

 

 

 

Bonanza Creek Energy Company, LLC
(Predecessor)

 

Period
from
Inception

 

 

 

 

 

Year Ended December 31,

 

Period
Ended
December 23,

 

(December 23,
2010) to
December 31,

 

Year
Ended
December 31,

 

 

 

2007

 

2008

 

2009

 

2010(2)

 

2010

 

2011

 

 

 

(in thousands)

 

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

(561

)

$

11,128

 

$

11,134

 

$

22,759

 

$

(1,633

)

$

57,603

 

Net cash provided by (used in) investing activities

 

(43,265

)

(79,581

)

(7,185

)

(32,127

)

(817

)

(158,902

)

Net cash provided by (used in) financing activities

 

38,787

 

72,541

 

(5,515

)

9,297

 

 

103,389

 

 


(1)                                 The warrants and aggregate warrant exercise price were exchanged for shares of our common stock in connection with our Corporate Restructuring.

 

(2)                                 We completed our Corporate Restructuring on December 23, 2010.

 



 

Unaudited Pro Forma Financial Information

 

We completed our Corporate Restructuring on December 23, 2010. The following unaudited pro forma financial information shows the pro forma effect of our Corporate Restructuring. We have not included a pro forma balance sheet since the effects of our Corporate Restructuring are reflected in the December 31, 2010 balance sheet included elsewhere in this Current Report on Form 8-K. The unaudited pro forma statement of operations for the year ended December 31, 2010 was prepared as if our Corporate Restructuring had occurred at January 1, 2010.

 

The accompanying financial information was from the historical accounting records. We made no additional pro forma adjustment to general and administrative expense since we were the operator of these properties prior to the acquisitions.

 

The following unaudited pro forma financial statements do not purport to represent what our actual results of operations would have been if this acquisition had occurred on January 1, 2010. The unaudited pro forma financial statements should be read in conjunction with our historical financial statements and related notes for the periods presented included elsewhere in this Current Report on Form 8-K.

 

 

 

Bonanza
Creek
Energy
Company, LLC
Period Ended
December 23,
2010

 

Holmes
Eastern
Company, LLC
Period Ended
December 23,
2010

 

Bonanza
Creek
Energy, Inc.
Period from
Inception
(December 23,
2010) to
December 31,
2010

 

Pro Forma
Adjustments

 

Bonanza
Creek
Energy, Inc.
Year Ended
December 31,
2010

 

 

 

 

 

 

 

 

 

(unaudited)

 

(unaudited)

 

 

 

(in thousands, except per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Oil, natural gas, natural gas liquids and CO2 sales

 

$

43,506

 

$

13,958

 

$

1,620

 

$

 

$

59,084

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

11,948

 

2,010

 

419

 

 

14,377

 

Severance and ad valorem taxes

 

1,468

 

834

 

66

 

 

2,368

 

Exploration

 

227

 

19

 

 

 

246

 

Depreciation, depletion and amortization(1)

 

12,598

 

3,006

 

436

 

2,816

 

18,856

 

General and administrative

 

8,375

 

640

 

324

 

 

9,339

 

Cancelled private placement

 

2,378

 

 

 

 

2,378

 

Total operating expenses

 

36,994

 

6,509

 

1,245

 

2,816

 

47,564

 

Income from operations

 

6,512

 

7,449

 

375

 

(2,816

)

11,520

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Other income (loss)

 

19

 

(65

)

 

 

(46

)

Write off of deferred financing costs

 

(1,663

)

 

 

 

(1,663

)

Unrealized gain on fair value of warrant put option(2)

 

34,345

 

 

 

(34,345

)

 

Amortization of debt discount(3)

 

(8,862

)

 

 

8,862

 

 

Realized gain on settled commodity derivatives

 

5,919

 

 

(47

)

 

5,872

 

Unrealized loss in fair value of commodity derivatives

 

(7,605

)

 

(514

)

 

(8,119

)

Interest expense(4)

 

(18,001

)

(439

)

(57

)

17,234

 

(1,263

)

Total other income (expense)

 

4,152

 

(504

)

(618

)

(8,249

)

(5,219

)

Income (loss) from continuing operations

 

10,664

 

6,945

 

(243

)

(11,065

)

6,301

 

Pro forma income tax expense(5)

 

 

 

 

 

 

 

(2,319

)

(2,319

)

Income (loss) from continuing operations

 

 

 

 

 

 

 

 

 

$

3,982

 

(Loss) income from operations associated with oil and gas properties held for sale

 

65

 

 

(13

)

(364

)

(312

)

Gain on sale of oil and gas properties

 

4,055

 

 

 

 

4,055

 

Pro forma income tax (expense) benefit(5)

 

 

 

 

(1,377

)

(1,377

)

Income from discontinued operations

 

4,120

 

 

(13

)

(1,741

)

2,366

 

Net Income

 

$

14,784

 

$

6,945

 

$

(256

)

$

(15,125

)

$

6,348

 

Basic and diluted income per share

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

$

0.14

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

$

0.08

 

Net income per common share

 

 

 

 

 

 

 

 

 

$

0.22

 

 



 


(1)                                 Pro forma depletion expense gives effect to our Corporate Restructuring which required the application of purchase accounting. The expense was calculated using estimated proved reserves as of the beginning of the period, production for the applicable period, and the fair value of the purchase price allocated to proved oil and gas properties.

 

(2)                                 BCEC issued an aggregate of 33,089 warrants to purchase Class A units during 2006, 2007, and 2008 in connection with the sale of senior subordinated notes. These warrants included a one time right and option to put the warrants back to BCEC at fair market value less the exercise price. This pro forma adjustment reverses the mark-to-market income for the warrant put right that was recorded during 2010. This presentation assumes that the warrants were exercised on January 1, 2010 in connection with a recapitalization.

 

(3)                                 During 2010, BCEC recorded accretion expense for the subordinated debt discount. This pro forma adjustment reverses the accretion expense recorded during 2010. This presentation assumes that the subordinated debt was paid off on January 1, 2010 in connection with a recapitalization.

 

(4)                                 This pro forma adjustment reduces interest expense by $10.9 million for BCEC interest expense that was paid in kind during 2010, a further reduction to interest expense for the amortization of debt issuance costs related to BCEC’s second lien term loan that was entered into during 2010, and a further reduction for cash interest expense paid on the revolving credit facilities of BCEC and HEC and BCEC’s related party note payable during 2010. This presentation assumes that BCEC’s subordinated debt, the second lien term loan and BCEC’s related party note payable were paid off and the balance outstanding on our revolving credit facility was reduced on January 1, 2010 in connection with a recapitalization.

 

(5)                                 Pro forma income taxes related to our pre-tax income for the year ended December 31, 2010 and is based on our expected tax rate of 36.8%.

 

Pro Forma Reserve Quantity and Standardized Measure Information

 

The following table sets forth certain unaudited pro forma information concerning our proved oil and gas reserves giving effect to our Corporate Restructuring as if it had occurred on January 1, 2010. The following estimates of proved oil and gas reserves, both developed and undeveloped, represent interests we acquired in our Corporate Restructuring, and are located solely within the United States. Proved reserves represent estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells for which relatively major expenditures are required for completion.

 

The estimate of proved reserves and related valuations for the period ended December 23, 2010 was based upon a report prepared by Cawley, Gillespie & Associates, Inc. Petroleum Consultants as of December 31, 2010, adjusted for eight days of operations. The estimates of proved reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes and other factors. These estimates do not include probable or possible reserves. The information provided does not represent our estimate of expected future cash flows or value of proved oil and gas reserves.

 



 

Changes in estimated reserve quantities:

 

 

 

Oil (MBbl)

 

Natural Gas (MMcf)

 

 

 

Bonanza
Creek
Energy
Company, LLC

 

Holmes
Eastern
Company, LLC

 

Pro Forma
Combined

 

Bonanza
Creek
Energy
Company, LLC

 

Holmes
Eastern
Company, LLC

 

Pro Forma
Combined

 

Balance—December 31, 2009

 

15,270

 

6,118

 

21,388

 

27,610

 

16,565

 

44,175

 

Extensions and discoveries

 

1,258

 

50

 

1,308

 

2,249

 

228

 

2,477

 

Sales of minerals in place

 

(559

)

 

(559

)

 

 

 

Production

 

(595

)

(138

)

(733

)

(1,309

)

(781

)

(2,090

)

Revisions to previous estimates

 

1,302

 

(308

)

994

 

12,674

 

5,690

 

18,364

 

Balance—December 23, 2010

 

16,676

 

5,722

 

22,398

 

41,224

 

21,702

 

62,926

 

Proved developed reserves:

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

4,710

 

1,292

 

6,002

 

7,021

 

5,346

 

12,367

 

December 23, 2010

 

6,465

 

1,734

 

8,199

 

13,703

 

6,413

 

20,116

 

Proved undeveloped reserves:

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

10,560

 

4,826

 

15,386

 

20,589

 

11,219

 

31,808

 

December 23, 2010

 

10,211

 

3,988

 

14,199

 

27,521

 

15,289

 

42,810

 

 

The following table sets forth unaudited pro forma information concerning the discounted future net cash flows from our proved oil and gas reserves as of December 23, 2010, net of income tax expense, and giving effect to our Corporate Restructuring as if it had occurred on January 1, 2010. Future income tax expenses are calculated by applying appropriate year-end tax rates to future pretax net cash flows relating to proved oil and natural gas reserves. Future income tax expenses give effect to permanent differences, tax credits and loss carryforwards relating to the proved oil and natural gas reserves. Future net cash flows are discounted at a rate of 10% annually to derive the Standardized Measure. This calculation procedure does not necessarily result in an estimate of the fair market value or the present value of our oil and natural gas properties.

 



 

Standardized Measure from estimated production of proved oil and gas reserves as of December 23, 2010 (in thousands):

 

 

 

Bonanza
Creek
Energy
Company, LLC

 

Holmes
Eastern
Company, LLC

 

Pro Forma
Combined

 

Future cash flows

 

$

1,366,948

 

$

528,802

 

$

1,895,750

 

Future production costs

 

(434,498

)

(138,515

)

(573,013

)

Future development costs

 

(222,007

)

(130,202

)

(352,209

)

Future income tax expense

 

(126,005

)

(57,242

)

(183,247

)

Future net cash flows

 

584,438

 

202,843

 

787,281

 

10% annual discount for estimated timing of cash flows

 

(299,329

)

(113,149

)

(412,478

)

Standardized Measure

 

$

285,109

 

$

89,694

 

$

374,803

 

 

Future cash flows as shown above were reported without consideration for the effects of derivative transactions outstanding at each period end.

 

Changes in Standardized Measure from proved oil and gas reserves (in thousands):

 

 

 

Bonanza
Creek
Energy
Company, LLC

 

Holmes
Eastern
Company, LLC

 

Pro Forma
Combined

 

Beginning of period

 

$

185,704

 

$

58,150

 

$

243,854

 

Sale of oil and gas produced, net of production costs

 

(31,916

)

(11,113

)

(43,029

)

Net changes in prices and production costs

 

97,744

 

42,468

 

140,212

 

Extensions, discoveries and improved recoveries

 

17,405

 

590

 

17,995

 

Development costs incurred

 

21,615

 

9,342

 

30,957

 

Changes in estimated development cost

 

(30,350

)

(14,006

)

(44,356

)

Sales of mineral in place

 

(10,799

)

 

(10,799

)

Revisions of previous quantity estimates

 

65,959

 

11,833

 

77,792

 

Net change in income taxes

 

(38,932

)

(10,019

)

(48,951

)

Accretion of discount

 

20,368

 

7,183

 

27,551

 

Changes in production rates and other

 

(11,689

)

(4,734

)

(16,423

)

End of period

 

$

285,109

 

$

89,694

 

$

374,803

 

 

Average wellhead prices inclusive of adjustments for quality and location used in determining future net revenues related to the Standardized Measure calculation as of December 23, 2010 were calculated using the first-day-of-the-month price for each of the 12 months that made up the reporting period.

 

 

 

Bonanza
Creek
Energy
Company, LLC

 

Holmes
Eastern
Company, LLC

 

Oil (per Bbl)

 

$

74.77

 

$

75.33

 

Gas (per Mcf)

 

$

4.72

 

$

4.98