Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Amplify Energy Corp | d804126d8k.htm |
| EX-10.1 - EX-10.1 - Amplify Energy Corp | d804126dex101.htm |
| EX-99.1 - EX-99.1 - Amplify Energy Corp | d804126dex991.htm |
Exhibit 99.2
INDEX TO FINANCIAL STATEMENTS
| Page | ||
| MEMORIAL PRODUCTION PARTNERS LP |
||
| Unaudited Pro Forma Condensed Combined Financial Statements |
||
| Introduction |
F-2 | |
| Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2014 |
F-3 | |
| Unaudited Pro Forma Condensed Combined Statement of Operations for the Six Months Ended June 30, 2014 |
F-4 | |
| Notes to Unaudited Pro Forma Condensed Combined Financial Statements |
F-6 |
F-1
MEMORIAL PRODUCTION PARTNERS LP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
On July 1, 2014, Memorial Production Partners LP (“Partnership”) acquired certain oil producing properties and related facilities located in the Lost Soldier and Wertz fields in Wyoming from Merit Energy Company and certain of its affiliates (“Merit Energy”) for an adjusted purchase price of approximately $915.1 million, subject to customary post-closing adjustments, with an effective date of April 1, 2014 (the “Wyoming Acquisition”). The following unaudited pro forma condensed combined financial information reflects the historical financial statements of the Partnership adjusted on a pro forma basis to give effect to the Wyoming Acquisition.
The unaudited pro forma condensed combined balance sheet is based on the unaudited June 30, 2014 Partnership balance sheet and includes pro forma adjustments to give effect to the Wyoming Acquisition as if that transaction occurred on June 30, 2014. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2014 is based on the unaudited statement of operations of the Partnership and the unaudited statement of revenues and direct operating expenses of the Wyoming Acquisition for the six months ended June 30, 2014, and includes pro forma adjustments to give effect to the Wyoming Acquisition as if the transaction occurred on January 1, 2013.
The pro forma adjustments to the historical combined financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the transactions discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions utilized to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the impact of events that are directly attributable to the transactions, and reflect those items expected to have a continuing impact on the Partnership.
The unaudited pro forma combined financial statements of the Partnership are not necessarily indicative of the results that actually would have occurred if the Partnership had completed the Wyoming Acquisition or the related financing transactions on the dates indicated or which could be achieved in the future because they necessarily exclude various operating expenses.
F-2
MEMORIAL PRODUCTION PARTNERS LP
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2014
| Partnership Historical |
Pro Forma Adjustments |
Partnership Pro Forma |
||||||||||
|
|
|
|||||||||||
| ASSETS |
||||||||||||
| Current assets: |
||||||||||||
| Cash and cash equivalents |
$ | 349 | $ | 917,434 | (a) | $ | 349 | |||||
| (917,434) | (b) | |||||||||||
| Accounts receivable: |
||||||||||||
| Oil and natural gas sales |
50,264 | -- | 50,264 | |||||||||
| Joint interest owners and other |
11,943 | -- | 11,943 | |||||||||
| Short-term derivative instruments |
1,436 | -- | 1,436 | |||||||||
| Prepaid expenses and other current assets |
9,403 | -- | 9,403 | |||||||||
|
|
|
|
|
|||||||||
| Total current assets |
73,395 | -- | 73,395 | |||||||||
| Property and equipment, at cost: |
||||||||||||
| Oil and natural gas properties, successful efforts method |
2,107,459 | 924,191 | (b) | 3,031,650 | ||||||||
| Other |
2,917 | -- | 2,917 | |||||||||
| Accumulated depreciation, depletion and impairment |
(487,409) | -- | (487,409) | |||||||||
|
|
|
|
|
|||||||||
| Oil and natural gas properties, net |
1,622,967 | 924,191 | (b) | 2,547,158 | ||||||||
| Long-term derivative instruments |
1,149 | -- | 1,149 | |||||||||
| Restricted investments |
75,506 | -- | 75,506 | |||||||||
| Other long–term assets |
86,332 | (67,666) | (b) | 18,666 | ||||||||
|
|
|
|
|
|||||||||
| Total assets |
$ | 1,859,349 | $ | 856,525 | $ | 2,715,874 | ||||||
|
|
|
|
|
|||||||||
| LIABILITIES AND EQUITY |
||||||||||||
| Current liabilities: |
||||||||||||
| Accounts payable |
$ | 18,207 | $ | -- | $ | 18,207 | ||||||
| Accounts payable – affiliates |
2,409 | -- | 2,409 | |||||||||
| Revenues payable |
23,487 | -- | 23,487 | |||||||||
| Accrued liabilities |
54,455 | 5,592 | (b) | 60,047 | ||||||||
| Short-term derivative instruments |
45,188 | -- | 45,188 | |||||||||
|
|
|
|
|
|||||||||
| Total current liabilities |
143,746 | 5,592 | 149,338 | |||||||||
| Long-term debt |
1,148,806 | 847,434 | (a) | 1,996,240 | ||||||||
| Asset retirement obligations |
103,513 | 3,499 | (b) | 107,012 | ||||||||
| Long-term derivative instruments |
90,696 | -- | 90,696 | |||||||||
| Other long-term liabilities |
3,804 | -- | 3,804 | |||||||||
|
|
|
|
|
|||||||||
| Total liabilities |
1,490,565 | 856,525 | 2,347,090 | |||||||||
| Commitments and contingencies |
||||||||||||
| Equity: |
||||||||||||
| Partners’ equity (deficit): |
||||||||||||
| Common units (56,467,187 units outstanding at June 30, 2014 and 55,877,831 units outstanding at December 31, 2013) |
389,906 | -- | 389,906 | |||||||||
| Subordinated units (5,360,912 units outstanding at June 30, 2014 and December 31, 2013) |
(27,222) | -- | (27,222) | |||||||||
| General partner (61,920 units outstanding at June 30, 2014 and 61,300 units outstanding at December 31, 2013) |
529 | -- | 529 | |||||||||
|
|
|
|
|
|||||||||
| Total partners’ equity |
363,213 | -- | 363,213 | |||||||||
| Noncontrolling interests |
5,571 | -- | 5,571 | |||||||||
|
|
|
|
|
|||||||||
| Total equity |
368,784 | -- | 368,784 | |||||||||
|
|
|
|
|
|||||||||
| Total liabilities and equity |
$ | 1,859,349 | $ | 856,525 | $ | 2,715,874 | ||||||
|
|
|
|
|
|||||||||
The accompanying notes are an integral part of this unaudited pro forma financial information.
F-3
MEMORIAL PRODUCTION PARTNERS LP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2014
| Partnership Historical |
Wyoming Historical |
Pro Forma Adjustments |
Partnership Pro Forma Combined |
|||||||||||||
|
|
|
|||||||||||||||
| Revenues: |
||||||||||||||||
| Oil & natural gas sales |
$ | 222,546 | $ | 91,199 | $ | -- | $ | 313,745 | ||||||||
| Pipeline tariff income and other |
1,741 | -- | -- | 1,741 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total revenues |
224,287 | 91,199 | -- | 315,486 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Costs and expenses: |
||||||||||||||||
| Lease operating |
54,055 | 24,608 | -- | 78,663 | ||||||||||||
| Pipeline operating |
1,165 | -- | 1,165 | |||||||||||||
| Exploration |
210 | -- | -- | 210 | ||||||||||||
| Production and ad valorem taxes |
12,660 | 11,943 | -- | 24,603 | ||||||||||||
| Depreciation, depletion, and amortization |
61,902 | -- | 29,194 | (c) | 91,096 | |||||||||||
| General and administrative |
20,546 | -- | -- | 20,546 | ||||||||||||
| Accretion of asset retirement obligations |
2,723 | -- | 140 | (c) | 2,863 | |||||||||||
| (Gain) loss on commodity derivative instruments |
185,112 | -- | -- | 185,112 | ||||||||||||
| Other, net |
(12) | -- | -- | (12) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total costs and expenses |
338,361 | 36,551 | 29,334 | 404,246 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Operating income (loss) |
(114,074) | 54,648 | (29,334) | (88,760) | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense, net |
(34,114) | -- | (11,440) | (d) | (45,554) | |||||||||||
| (222) | (e) | (222) | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Total other income (expense) |
(34,114) | -- | (11,662) | (45,776) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Income (loss) before income taxes |
(148,188) | 54,648 | (40,996) | (134,536) | ||||||||||||
| Income tax benefit (expense) |
(75) | -- | -- | (75) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net income (loss) |
(148,263) | 54,648 | (40,996) | $ | (134,611) | |||||||||||
| Net income (loss) attributable to noncontrolling interest |
43 | -- | -- | 43 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable Memorial Production Partners LP |
$ | (148,306) | $ | 54,648 | $ | (40,996) | $ | (134,654) | ||||||||
|
|
|
|
|
|||||||||||||
| Historical and pro forma net income (loss) available to limited partners (Note 3): |
||||||||||||||||
| Net income (loss) available to limited partners |
$ | (148,245) | $ | (134,606) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Earnings per unit: |
||||||||||||||||
| Basic and diluted earnings per unit |
$ | (2.42) | $ | (2.19) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average limited partner units outstanding: |
||||||||||||||||
| Basic and diluted |
61,358 | 61,358 | ||||||||||||||
|
|
|
|
|
|||||||||||||
F-4
MEMORIAL PRODUCTION PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
On July 1, 2014, Memorial Production Partners LP (“Partnership”) acquired certain oil producing properties and related facilities located in the Lost Soldier and Wertz fields in Wyoming from Merit Energy Company and certain of its affiliates (“Merit Energy”) for an adjusted purchase price of approximately $915.1 million, subject to customary post-closing adjustments, with an effective date of April 1, 2014 (the “Wyoming Acquisition”). The following unaudited pro forma condensed combined financial information reflects the historical financial statements of the Partnership adjusted on a pro forma basis to give effect to the Wyoming Acquisition.
The Partnership funded the Wyoming Acquisition through borrowings under its $2.0 billion multi-year revolving credit facility. Upon the closing of the Wyoming Acquisition, the borrowing base under the Partnership’s revolving credit facility was increased from $870.0 million to $1.44 billion.
The unaudited pro forma condensed combined balance sheet is based on the unaudited June 30, 2014 Partnership balance sheet and includes pro forma adjustments to give effect to the Wyoming Acquisition as if that transaction occurred on June 30, 2014. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2014 is based on the unaudited statement of operations of the Partnership and the unaudited statement of revenues and direct operating expenses of the Wyoming Acquisition for the six months ended June 30, 2014, and includes pro forma adjustments to give effect to the Wyoming Acquisition as if the transaction occurred on January 1, 2013.
The pro forma adjustments to the audited historical combined financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the transactions discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions utilized to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the impact of events that are directly attributable to the transactions, and reflect those items expected to have a continuing impact on the Partnership.
The Partnership believes that the assumptions used in the preparation of these unaudited pro forma condensed combined financial statements provide a reasonable basis for presenting the effects directly attributable to the transactions described above. These unaudited pro forma condensed combined financial statements and the notes thereto should be read in conjunction with:
| • | the Partnership’s Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2013; |
| • | the Partnership’s Quarterly Report on Form 10-Q for the six months ended June 30, 2014; and |
| • | Other information that the Partnership has filed with the SEC. |
F-5
MEMORIAL PRODUCTION PARTNERS LP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 2. Pro Forma Adjustments and Assumptions
Unaudited Pro Forma Condensed Combined Balance Sheet
The following adjustments were made in the preparation of the unaudited pro forma condensed combined balance sheet:
| (a) | Pro forma adjustment to reflect the cash proceeds related to borrowings by the Partnership of $847.4 million, which includes $2.3 million of deferred financing costs, under its revolving credit facility as well as the release of a deposit of $70.0 million. |
| (b) | Pro forma adjustments to record the use of the $847.4 million of borrowings under the Partnership’s revolving credit facility and application of a deposit of $70.0 million to fund the Wyoming Acquisition: |
| (1) | To reflect estimated deferred financing costs of $2.3 million related to additional borrowings under the Partnership’s revolving credit facility; and |
| (2) | To reflect a $915.1 million cash payment to Merit Energy for the purchase price and record the estimated fair value of the assets acquired and liabilities assumed. |
Unaudited Pro Forma Condensed Combined Statements of Operations
The following adjustments were made in the preparation of the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2014:
| (c) | Pro forma adjustment to reflect the depletion and depreciation on property and equipment and the accretion expense on asset retirement obligations associated with the Wyoming Acquisition. |
| (d) | Pro forma adjustment to reflect the incurrence of interest expense on $847.4 million of additional borrowings under our revolving credit facility used to fund the Wyoming Acquisition. For the six months ended June 30, 2014, pro forma interest expense was based on a rate of 2.70%. A one-eighth percentage point change in the interest rate would change pro forma interest associated with these additional borrowings by $0.5 million for the six months ended June 30, 2014. |
| (e) | Pro forma adjustment to reflect the amortization of deferred financing costs as if the borrowing costs associated with the Wyoming Acquisition were incurred on January 1, 2013. |
Note 3. Historical and Pro Forma Net Income Per Limited Partner Unit
The following sets forth the calculation of earnings (loss) per unit, or EPU, for the six months ended June 30, 2014 (in thousands, except per unit amounts):
| Historical | Pro Forma | |||||||
|
|
|
|||||||
| Net income (loss) attributable to Memorial Production Partners LP |
$ | (148,306) | $ | (134,654) | ||||
| Less: General partner’s 0.1% interest in net income (loss) |
(148) | (135) | ||||||
| Less: IDRs attributable to corresponding period |
87 | 87 | ||||||
|
|
|
|
|
|||||
| Net income (loss) available to limited partners |
$ | (148,245) | $ | (134,606) | ||||
|
|
|
|
|
|||||
| Weighted average limited partner units outstanding: |
||||||||
| Common units |
55,997 | 55,997 | ||||||
| Subordinated units |
5,361 | 5,361 | ||||||
|
|
|
|
|
|||||
| Total |
61,358 | 61,358 | ||||||
|
|
|
|
|
|||||
| Basic and diluted EPU |
$ | (2.42) | $ | (2.19) | ||||
|
|
|
|
|
|||||
F-6