Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Sanchez Energy Corp | a15-8650_28k.htm |
Exhibit 99.1
Sanchez Energy Corporation
Unaudited Pro Forma Combined Financial Information
On June 30, 2014, Sanchez Energy Corporation (the “Company”) completed its previously announced acquisition of assets in the Eagle Ford Shale in South Texas from SWEPI LP and Shell Gulf of Mexico Inc. (collectively “Shell”, and the assets purchased in such acquisition the “Catarina Assets”) for an aggregate adjusted purchase price of approximately $557.1 million. The effective date of the transaction was January 1, 2014. The purchase price was funded with a portion of the proceeds from the issuance of the $850 million senior unsecured 6.125% notes due 2023 (the “ Notes”) and cash on hand.
On March 31, 2015, SEP Holdings III, LLC, a wholly owned subsidiary of the Company (the “Seller”), completed a transaction under a Purchase and Sale Agreement (the “Purchase Agreement”) with Sanchez Production Partners LP (“SPP” or the “Partnership”) and SPP’s wholly owned subsidiary, SEP Holdings IV, LLC (the “Buyer”). The Purchase Agreement relates to the sale by the Seller to the Buyer of escalating amounts of partial working interests in 59 wellbores at existing producing intervals in the non-operated Palmetto Field in the Eagle Ford with proved reserves of approximately 5.2 MMBOE (the “Palmetto Sale”). The aggregate average working interest percentage initially being conveyed is 18.25% per wellbore and, upon January 1 of each subsequent year after the closing, the Buyer’s working interest will automatically increase (and the Seller’s will correspondingly decrease) in incremental amounts until January 1, 2019, at which point the Buyer will own a 47.5% working interest and the Seller will own a 2.5% working interest in each of the wellbores. In exchange for these assets, the Buyer paid to the Seller consideration consisting of $83.0 million (approximately $81.6 million as adjusted) cash paid to the Seller by the Buyer and 1,052,632 common units of the Partnership valued at approximately $2.0 million issued to the Seller, subject to post-closing adjustments. Also, in anticipation of the transaction, the Company entered into certain gas and oil hedging transactions related to the production of the wellbores with the Royal Bank of Canada. As part of the closing, the Company novated these hedges to SPP and the purchase price was adjusted upward to account for amounts the Company had paid under these hedges. The effective date of the sale was January 1, 2015.
The following unaudited pro forma combined financial information is based on the historical consolidated financial statements of the Company adjusted to reflect the acquisition of the Catarina Assets and the Palmetto Sale. The Company’s historical consolidated balance sheet as of December 31, 2014, has been adjusted to reflect the pro forma effect of the Palmetto Sale as if it had occurred on December 31, 2014. The Company’s historical consolidated statement of operations for the year ended December 31, 2014 has also been adjusted to give pro forma effect to the acquisition of the Catarina Assets and the Palmetto Sale as if they had occurred on January 1, 2014. The unaudited pro forma combined financial information should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2014.
The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations or financial position that the Company would have reported had the acquisition of the Catarina Assets and the Palmetto Sale been completed as of the dates set forth in this unaudited pro forma combined financial information and should not be taken as indicative of the Company’s future combined results of operations or financial position. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.
Unaudited Pro Forma Combined
Balance Sheet as of December 31, 2014
(in thousands)
|
|
|
Sanchez |
|
Palmetto |
|
Sanchez |
| |||
|
ASSETS |
|
|
|
|
|
|
| |||
|
Current assets: |
|
|
|
|
|
|
| |||
|
Cash and cash equivalents |
|
$ |
473,714 |
|
$ |
81,602 |
(a) |
$ |
555,316 |
|
|
Oil and natural gas receivables |
|
69,795 |
|
— |
|
69,795 |
| |||
|
Joint interest billings receivables |
|
14,676 |
|
— |
|
14,676 |
| |||
|
Accounts receivables - related entities |
|
386 |
|
— |
|
386 |
| |||
|
Fair value of derivative instruments |
|
100,181 |
|
— |
|
100,181 |
| |||
|
Deferred tax asset |
|
— |
|
— |
|
— |
| |||
|
Other current assets |
|
23,002 |
|
— |
|
23,002 |
| |||
|
Total current assets |
|
681,754 |
|
81,602 |
|
763,356 |
| |||
|
Oil and natural gas properties, at cost, using full cost method: |
|
|
|
|
|
|
| |||
|
Unproved oil and natural gas properties |
|
385,827 |
|
— |
|
385,827 |
| |||
|
Proved oil and natural gas properties |
|
2,582,441 |
|
(83,975 |
)(b) |
2,498,466 |
| |||
|
Total oil and natural gas properties |
|
2,968,268 |
|
(83,975 |
) |
2,884,293 |
| |||
|
Less: accumulated depreciation, depletion, amortization and impairment |
|
(706,590 |
) |
— |
|
(706,590 |
) | |||
|
Total oil and natural gas properties, net |
|
2,261,678 |
|
(83,975 |
) |
2,177,703 |
| |||
|
Other assets: |
|
|
|
|
|
|
| |||
|
Debt issuance costs, net |
|
48,168 |
|
— |
|
48,168 |
| |||
|
Fair value of derivative instruments |
|
24,024 |
|
— |
|
24,024 |
| |||
|
Deferred tax asset |
|
40,685 |
|
— |
|
40,685 |
| |||
|
Investments |
|
— |
|
2,000 |
(a) |
2,000 |
| |||
|
Other assets |
|
19,101 |
|
— |
|
19,101 |
| |||
|
Total other assets |
|
131,978 |
|
2,000 |
|
133,978 |
| |||
|
Total assets |
|
$ |
3,075,410 |
|
$ |
(373 |
) |
$ |
3,075,037 |
|
|
|
|
|
|
|
|
|
| |||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
| |||
|
Current liabilities: |
|
|
|
|
|
|
| |||
|
Accounts payable |
|
$ |
29,487 |
|
$ |
— |
|
$ |
29,487 |
|
|
Other payables |
|
4,415 |
|
— |
|
4,415 |
| |||
|
Accrued liabilities |
|
229,888 |
|
— |
|
229,888 |
| |||
|
Deferred tax liability |
|
33,242 |
|
— |
|
33,242 |
| |||
|
Other current liabilities |
|
5,166 |
|
— |
|
5,166 |
| |||
|
Total current liabilities |
|
302,198 |
|
— |
|
302,198 |
| |||
|
Long term debt, net of discount |
|
1,746,263 |
|
— |
|
1,746,263 |
| |||
|
Asset retirement obligations |
|
25,694 |
|
(373 |
)(b) |
25,321 |
| |||
|
Fair value of derivative instruments - long term |
|
889 |
|
— |
|
889 |
| |||
|
Other liabilities |
|
779 |
|
— |
|
779 |
| |||
|
Total liabilities |
|
2,075,823 |
|
(373 |
) |
2,075,450 |
| |||
|
Commitments and contingencies |
|
|
|
|
|
|
| |||
|
Stockholders’ equity: |
|
|
|
|
|
|
| |||
|
Preferred stock |
|
53 |
|
— |
|
53 |
| |||
|
Common stock |
|
586 |
|
— |
|
586 |
| |||
|
Additional paid-in capital |
|
1,064,667 |
|
— |
|
1,064,667 |
| |||
|
Accumulated deficit |
|
(65,719 |
) |
— |
|
(65,719 |
) | |||
|
Total stockholders’ equity |
|
999,587 |
|
— |
|
999,587 |
| |||
|
Total liabilities and stockholders’ equity |
|
$ |
3,075,410 |
|
$ |
(373 |
) |
$ |
3,075,037 |
|
Unaudited Pro Forma Combined
Statement of Operations
For the Year Ended December 31, 2014
(in thousands)
|
|
|
Sanchez |
|
Catarina |
|
Catarina |
|
Palmetto |
|
Pro Forma |
|
Sanchez |
| ||||||
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Oil sales |
|
$ |
538,887 |
|
$ |
70,936 |
|
$ |
— |
|
$ |
(40,053 |
) |
$ |
— |
|
$ |
569,770 |
|
|
Natural gas liquid sales |
|
66,989 |
|
47,954 |
|
— |
|
(2,837 |
) |
— |
|
112,106 |
| ||||||
|
Natural gas sales |
|
60,188 |
|
40,450 |
|
— |
|
(2,378 |
) |
— |
|
98,260 |
| ||||||
|
Total revenues |
|
666,064 |
|
159,340 |
(a) |
— |
|
(45,268 |
)(a) |
— |
|
780,136 |
| ||||||
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Oil and natural gas production expenses |
|
93,581 |
|
43,472 |
(b) |
— |
|
(4,395 |
)(b) |
— |
|
132,658 |
| ||||||
|
Production and ad valorem taxes |
|
37,787 |
|
4,134 |
(c) |
— |
|
(3,163 |
)(c) |
— |
|
38,758 |
| ||||||
|
Depreciation, depletion, amortization and accretion |
|
338,097 |
|
— |
|
— |
|
— |
|
56,212 |
(d) |
394,309 |
| ||||||
|
Impairment of oil and natural gas properties |
|
213,821 |
|
— |
|
— |
|
— |
|
(54,644 |
)(e) |
159,177 |
| ||||||
|
General and administrative |
|
63,692 |
|
— |
|
— |
|
— |
|
— |
|
63,692 |
| ||||||
|
Total operating costs and expenses |
|
746,978 |
|
47,606 |
|
— |
|
(7,558 |
) |
1,568 |
|
788,594 |
| ||||||
|
Operating income (loss) |
|
(80,914 |
) |
111,734 |
|
— |
|
(37,710 |
) |
(1,568 |
) |
(8,458 |
) | ||||||
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Interest and other income |
|
289 |
|
— |
|
— |
|
— |
|
— |
|
289 |
| ||||||
|
Interest expense |
|
(89,800 |
) |
— |
|
(16,735 |
)(f) |
— |
|
— |
|
(106,535 |
) | ||||||
|
Net losses on commodity derivatives |
|
137,205 |
|
— |
|
— |
|
— |
|
— |
|
137,205 |
| ||||||
|
Total other income (expense) |
|
47,694 |
|
— |
|
(16,735 |
) |
— |
|
— |
|
30,959 |
| ||||||
|
Income (loss) before income taxes |
|
(33,220 |
) |
111,734 |
|
(16,735 |
) |
(37,710 |
) |
(1,568 |
) |
22,501 |
| ||||||
|
Income tax expense |
|
(11,429 |
) |
— |
|
— |
|
— |
|
19,172 |
(g) |
7,743 |
| ||||||
|
Net income |
|
(21,791 |
) |
111,734 |
|
(16,735 |
) |
(37,710 |
) |
(20,740 |
) |
14,758 |
| ||||||
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Preferred stock dividends |
|
(33,590 |
) |
— |
|
— |
|
— |
|
— |
|
(33,590 |
) | ||||||
|
Net income (loss) attributable to common stockholders |
|
$ |
(55,381 |
) |
$ |
111,734 |
|
$ |
(16,735 |
) |
$ |
(37,710 |
) |
$ |
(20,740 |
) |
$ |
(18,832 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net income (loss) per common share - basic and diluted |
|
$ |
(1.06 |
) |
|
|
|
|
|
|
|
|
$ |
(0.36 |
) | ||||
|
Weighted average number of shares |
|
52,338 |
|
|
|
|
|
|
|
|
|
52,338 |
| ||||||
Notes to Unaudited Pro Forma
Combined Financial Information
Notes to the Unaudited Pro Forma Combined Balance Sheet
The unaudited pro forma combined balance sheet as of December 31, 2014, includes adjustments to reflect the following:
(a) Represents the increase in cash and cash equivalents and investments resulting from consideration received related to the Palmetto Sale in 2015, including net cash proceeds as well as common units in the Partnership.
(b) Represents the decrease in proved oil and natural gas properties and asset retirement obligations related to the Palmetto Sale in 2015.
Notes to the Unaudited Pro Forma Combined Statement of Operations
The unaudited pro forma combined statement of operations for the year ended December 31, 2014, includes adjustments to reflect the following:
(a) Represents the changes in oil, natural gas liquids and natural gas sales resulting from the Catarina acquisition and the Palmetto Sale completed during 2014 and 2015, respectively.
(b) Represents the changes in oil and natural gas production expenses resulting from the Catarina acquisition and the Palmetto Sale completed during 2014 and 2015, respectively.
(c) Represents the changes in production taxes resulting from the Catarina acquisition and Palmetto Sale completed during 2014 and 2015, respectively.
(d) Represents the changes in depreciation, depletion, amortization and accretion resulting from the Catarina acquisition and the Palmetto Sale completed during 2014 and 2015, respectively.
(e) Represents the decrease in impairment of oil and natural gas properties related to the pro forma effects of combining the Company’s operations with the Catarina assets’ operations and removal of the Palmetto assets’ operations.
(f) Represents the pro forma interest expense and amortization of debt issuance costs related to the issuance of the Notes to fund a portion of the Catarina acquisition during 2014.
(g) Represents the incremental income tax expense related to the pro forma effects of combining the Company’s operations with the Catarina assets’ operations and removal of the Palmetto assets’ operations.
(h) Represents the incremental income allocable to participating securities related to the pro forma effects of combining the Company’s operations with the Catarina assets’ operations and removal of the Palmetto assets’ operations.