Amplify Energy Corp - FORM 8-K - EX-99.1

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8-K - 8-K - Amplify Energy Corp	d214787d8k.htm

Exhibit 99.1

MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Introduction

On June 14, 2016, Memorial Production Partners LP (the “Partnership”) sold certain assets located in the Permian Basin (“Permian Divestiture”) to Boaz Energy II, LLC for total proceeds of approximately $37.4 million, subject to customary post-closing adjustments.

The unaudited pro forma condensed consolidated balance sheet is based on the unaudited condensed consolidated balance sheet of the Partnership as of March 31, 2016 and includes pro forma adjustments to give effect to the Permian Divestiture as if the transaction occurred on March 31, 2016. The unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2016 is based on the unaudited condensed statement of consolidated operations of the Partnership for the three months ended March 31, 2016 and includes pro forma adjustments to give effect to the Permian Divestiture as if the transaction occurred on January 1, 2015. The unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015 is based on the audited statement of consolidated and combined operations of the Partnership for the year ended December 31, 2015 and includes pro forma adjustments to give effect to the Permian Divestiture as if the transaction occurred on January 1, 2015.

The pro forma adjustments to the historical condensed consolidated and 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 no longer have a continuing impact on the Partnership.

MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 2016

(in thousands, except outstanding units)


				Pro Forma
	Historical			Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	836		$	37,425	(a)	$	836
					(37,425	) (b)
Accounts receivable		45,290			—			45,290
Short-term derivative instruments		259,854			—			259,854
Prepaid expenses and other current assets		4,839			—			4,839

Total current assets		310,819			—			310,819
Property and equipment, at cost:
Oil and natural gas properties, successful efforts method		3,639,835			(401,180	) (a)		3,238,655
Support equipment and facilities		206,147			—			206,147
Other		2,491			(37	) (a)		2,454
Accumulated depreciation, depletion and impairment		(1,931,091	)		363,267	(a)		(1,567,824	)

Property and equipment, net		1,917,382			(37,950	)		1,879,432
Long-term derivative instruments		442,616			—			442,616
Restricted investments		154,766			—			154,766
Other long-term assets		4,519			—			4,519

Total assets	$	2,830,102		$	(37,950	)	$	2,792,152


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	6,863		$	—		$	6,863
Accounts payable - affiliates		5,137			—			5,137
Revenues payable		25,427			—			25,427
Accrued liabilities		61,744			(2,804	) (a)		59,656
					716	(c)
Short-term derivative instruments		2,098			—			2,098

Total current liabilities		101,269			(2,088	)		99,181
Long-term debt		1,957,984			(37,425	) (b)		1,920,559
Asset retirement obligations		164,964			(5,727	) (a)		159,237
Long-term derivative instruments		2,161			—			2,161
Deferred tax liabilities		2,158			—			2,158

Total liabilities		2,228,536			(45,240	)		2,183,296
Commitments and contingencies
Equity:
Partners’ equity:
Common units (82,925,302 units outstanding at March 31, 2016)		600,767			7,998	(a)		608,050
					(715	) (c)
General partner (86,797 units outstanding at March 31, 2016)		799			8	(a)		806
					(1	) (c)

Total partners’ equity		601,566			7,290			608,856

Total liabilities and equity	$	2,830,102		$	(37,950	)	$	2,792,152

MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(in thousands, except per share amounts)


				Permian			Pro Forma
	Historical			Divestiture (d)			Adjustments			Pro Forma
Revenues:
Oil & natural gas sales	$	60,623		$	(3,046	)	$	—		$	57,577
Other income		243			(147	)		—			96

Total revenues		60,866			(3,193	)		—			57,673


Costs and expenses:
Lease operating		35,696			(3,068	)		—			32,628
Gathering, processing, and transportation		9,209			(21	)		—			9,188
Exploration		122			(78	)		—			44
Taxes other than income		4,008			(532	)		—			3,476
Depreciation, depletion, and amortization		44,429			(1,346	)		—			43,083
Impairment of proved oil and natural gas properties		8,342			—			—			8,342
General and administrative		13,524			—			—			13,524
Accretion of asset retirement obligations		2,707			(113	)		—			2,594
(Gain) loss on commodity derivative instruments		(51,745	)		—			—			(51,745	)
(Gain) loss on sale of properties		(96	)		—			—			(96	)
Other, net		119			(58	)		—			61

Total costs and expenses		66,315			(5,216	)		—			61,099

Operating income (loss)		(5,449	)		2,023			—			(3,426	)
Other income (expense):
Interest expense, net		(32,552	)		(3	)		227	(e)		(32,328	)

Total other income (expense)		(32,552	)		(3	)		227			(32,328	)

Income (loss) before income taxes		(38,001	)		2,020			227			(35,754	)
Income tax benefit (expense)		(96	)		—			—			(96	)

Net income (loss) attributable to Memorial Production Partners LP	$	(38,097	)	$	2,020		$	227		$	(35,850	)


Earnings per unit:
Basic and diluted earnings per unit	$	(0.46	)							$	(0.43	)

Weighted average limited partner units outstanding:
Basic and diluted		82,935									82,935

MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED AND COMBINED OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015

(in thousands, except per share amounts)


				Permian			Pro Forma
	Historical			Divestiture (d)			Adjustments			Pro Forma
Revenues:
Oil & natural gas sales	$	355,422		$	(22,615	)	$	—		$	332,807
Pipeline tariff income and other		2,725			(843	)		—			1,882

Total revenues		358,147			(23,458	)		—			334,689


Costs and expenses:
Lease operating		168,199			(21,490	)		—			146,709
Gathering, processing, and transportation		34,939			(91	)		—			34,848
Exploration		2,317			(109	)		—			2,208
Taxes other than income		25,828			(1,998	)		—			23,830
Depreciation, depletion, and amortization		195,814			(7,116	)		—			188,698
Impairment of proved oil and natural gas properties		616,784			(52,606	)		—			564,178
General and administrative		56,671			—			—			56,671
Accretion of asset retirement obligations		7,125			(456	)		—			6,669
(Gain) loss on commodity derivative instruments		(462,890	)		—			—			(462,890	)
(Gain) loss on sale of properties		(2,998	)		—			—			(2,998	)
Other, net		(665	)		(467	)		—			(1,132	)

Total costs and expenses		641,124			(84,333	)		—			556,791

Operating income (loss)		(282,977	)		60,875			—			(222,102	)
Other income (expense):
Interest expense, net		(114,732	)		(132	)		793	(e)		(114,071	)
Other income (expense)		43			—			—			43

Total other income (expense)		(114,689	)		(132	)		793			(114,028	)

Income (loss) before income taxes		(397,666	)		60,743			793			(336,130	)
Income tax benefit (expense)		2,175			—			—			2,175

Net income (loss)		(395,491	)		60,743			793			(333,955	)
Net income (loss) attributable to noncontrolling interest		386			—			—			386

Net income (loss) attributable to Memorial Production Partners LP	$	(395,877	)	$	60,743		$	793		$	(334,341	)


Earnings per unit:
Basic and diluted earnings per unit	$	(4.71	)							$	(3.97	)

Weighted average limited partner units outstanding:
Basic and diluted		83,528									83,528

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED

FINANCIAL STATEMENTS

Note 1. Basis of Presentation

On June 14, 2016, Memorial Production Partners LP (the “Partnership”) sold certain assets located in the Permian (“Permian Divestiture”) to Boaz Energy II, LLC for total proceeds of approximately $37.4 million, subject to customary post-closing adjustments.

The unaudited pro forma condensed consolidated balance sheet is based on the unaudited condensed consolidated balance sheet of the Partnership as of March 31, 2016 and includes pro forma adjustments to give effect to the Permian Divestiture as if the transaction occurred on March 31, 2016. The unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2016 is based on the unaudited condensed statement of consolidated operations of the Partnership for the three months ended March 31, 2016 and includes pro forma adjustments to give effect to the Permian Divestiture as if the transaction occurred on January 1, 2015. The unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015 is based on the audited statement of consolidated and combined operations of the Partnership for the twelve months ended December 31, 2015 and includes pro forma adjustments to give effect to the Permian Divestiture as if the transaction occurred on January 1, 2015.

The unaudited pro forma condensed consolidated and combined financial information should be read in conjunction with the Partnership’s 2015 Annual Report on Form 10-K filed on February 24, 2016 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed on May 4, 2016.

Note 2. Pro Forma Adjustments and Assumptions

Unaudited Pro Forma Condensed Consolidated Balance Sheet

The following adjustments were made in the preparation of the unaudited pro forma condensed consolidated balance sheet as of March 31, 2016:

(a)

Pro forma adjustments to reflect the closing of the Permian Divestiture, including the receipt of $37.4 million in proceeds, subject to customary post-closing adjustments, the elimination of the associated net assets as of March 31, 2016, and the gain of approximately $8.0 million arising from the transaction as of March 31, 2016.

(b)

Pro forma adjustment to reflect the use of the $37.4 million in proceeds to repay borrowings under the Partnership’s revolving credit facility.

(c)

Pro forma adjustment to reflect estimated professional fees and closing costs related to the Permian Divestiture.

Unaudited Condensed Consolidated and Combined Statement of Operations

The following adjustments were made in the preparation of the unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2016 and the unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015:

(d)

Pro forma adjustment to reflect the removal of operating revenues, operating expenses and capitalized interest related to the Permian Divestiture.

(e)

Pro forma adjustment to reflect the reduction of interest expense, assuming the debt repayments described in (b) above occurred on January 1, 2015 using the Partnership’s revolving credit facility weighted average interest rate of 2.12% and 2.43% for the twelve months ended December 31, 2015 and three months ended March 31, 2016, respectively.

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