Attached files
| file | filename |
|---|---|
| 8-K/A - DIAMONDBACK 8-K/A - Diamondback Energy, Inc. | diamondback8-kax5x3x17.htm |
| EX-99.1 - EXHIBIT 99.1 - Diamondback Energy, Inc. | diamondbackex991-5x3x17.htm |
| EX-23.1 - EXHIBIT 23.1 - Diamondback Energy, Inc. | diamondbackex231-5x3x17.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On February 28, 2017, Diamondback Energy, Inc. completed the acquisition of certain oil and natural gas properties, midstream assets and other related assets in the Delaware Basin (the "Acquisition") from Brigham Resources Operating, LLC ("Brigham"). The following unaudited pro forma condensed combined financial information and related notes are based on the historical financial statements of Diamondback Energy, Inc. and Subsidiaries (“Diamondback” or the “Company,” and also referred to as “we,” “us” or “our”) and Brigham, and have been prepared to give effect to the Acquisition.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 presented below has been prepared based on Diamondback’s historical audited statement of operations for such period, and was prepared as if the Acquisition had occurred on January 1, 2016. The unaudited pro forma combined balance sheet at December 31, 2016 presented below was prepared based on Diamondback’s historical audited consolidated balance sheet at December 31, 2016, and was prepared as if the Acquisition had occurred on December 31, 2016.
The accompanying unaudited pro forma condensed combined financial statements are based on assumptions and include adjustments as explained in the notes thereto. Certain information (including substantial footnote disclosures) included in our annual historical financial statements has been excluded in these unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position that we would have reported had the acquisitions been completed as of the dates presented, and should not be taken as representative of our future consolidated results of operations or financial condition.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of Diamondback included in our Annual Report on Form 10-K for the year ended December 31, 2016 as well as Brigham’s audited historical financial statements and accompanying notes for the year ended December 31, 2016, included as Exhibit 99.1 in this Current Report on Form 8-K.
Diamondback Energy, Inc. and Subsidiaries | |||||||||||||||||||
Unaudited Pro Forma Condensed Combined Balance Sheet | |||||||||||||||||||
As of December 31, 2016 | |||||||||||||||||||
Diamondback | Brigham | Adjustments | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||
(In thousands) | |||||||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 1,666,574 | $ | 4,774 | $ | 1,637 | (a) | $ | (1,627,415 | ) | (b) | $ | 45,570 | ||||||
Restricted cash | 500 | — | — | — | 500 | ||||||||||||||
Accounts receivable: | |||||||||||||||||||
Joint interest and other | 49,476 | 4,082 | — | (4,082 | ) | (b) | 49,476 | ||||||||||||
Oil and natural gas sales | 70,349 | 8,803 | — | (8,803 | ) | (b) | 70,349 | ||||||||||||
Related party | 297 | — | — | — | 297 | ||||||||||||||
Inventories | 1,983 | 410 | — | 429 | (b) | 2,822 | |||||||||||||
Derivative instruments | — | 7 | — | (7 | ) | (b) | — | ||||||||||||
Prepaid expenses and other | 2,987 | 3,452 | — | 8 | (b) | 6,447 | |||||||||||||
Total current assets | 1,792,166 | 21,528 | 1,637 | (1,639,870 | ) | 175,461 | |||||||||||||
Property and equipment: | |||||||||||||||||||
Oil and natural gas properties, at cost, full cost method of accounting | 5,160,261 | 854,290 | 5,485 | (a) | 1,651,017 | (b) | 7,671,053 | ||||||||||||
Pipeline and gas gathering assets | 8,362 | 43,037 | — | 3,711 | (b) | 55,110 | |||||||||||||
Other property and equipment | 58,290 | 1,008 | — | (1,008 | ) | (b) | 58,290 | ||||||||||||
Accumulated depletion, depreciation, amortization and impairment | (1,836,056 | ) | (441,739 | ) | 45,026 | (a) | 396,713 | (b) | (1,836,056 | ) | |||||||||
Net property and equipment | 3,390,857 | 456,596 | 50,511 | 2,050,433 | 5,948,397 | ||||||||||||||
Funds held in escrow | 121,391 | — | — | (121,388 | ) | (b) | 3 | ||||||||||||
Derivative instruments | 709 | — | — | — | 709 | ||||||||||||||
Other assets | 44,557 | 1,245 | — | (1,245 | ) | (b) | 44,557 | ||||||||||||
Total assets | $ | 5,349,680 | $ | 479,369 | $ | 52,148 | $ | 287,930 | $ | 6,169,127 | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Accounts payable-trade | $ | 47,648 | $ | 39,485 | $ | — | $ | (39,485 | ) | (b) | $ | 47,648 | |||||||
Accounts payable-related party | 1 | — | — | — | 1 | ||||||||||||||
Accrued capital expenditures | 60,350 | — | — | — | 60,350 | ||||||||||||||
Other accrued liabilities | 55,330 | 55,330 | |||||||||||||||||
Revenue and royalties payable | 23,405 | 7,292 | — | 1,431 | (b) | 32,128 | |||||||||||||
Derivative instruments | 22,608 | 10,113 | — | (10,113 | ) | (b) | 22,608 | ||||||||||||
Total current liabilities | 209,342 | 56,890 | — | (48,167 | ) | 218,065 | |||||||||||||
Long-term debt | 1,105,912 | 120,000 | — | (120,000 | ) | (b) | 1,105,912 | ||||||||||||
Derivative instruments | — | 2,615 | — | (2,615 | ) | (b) | — | ||||||||||||
Asset retirement obligations | 16,134 | 3,859 | — | (2,309 | ) | (b) | 17,684 | ||||||||||||
Deferred income taxes | — | 134 | — | (134 | ) | (b) | — | ||||||||||||
Total liabilities | 1,331,388 | 183,498 | — | (173,225 | ) | 1,341,661 | |||||||||||||
Commitments and contingencies | |||||||||||||||||||
Stockholders’ equity: | |||||||||||||||||||
Common stock | 901 | — | — | 77 | (b) | 978 | |||||||||||||
Additional paid-in capital | 4,215,955 | 636,211 | 5,378 | (a) | 167,508 | (b) | 5,025,052 | ||||||||||||
Accumulated deficit | (519,394 | ) | (340,340 | ) | 46,770 | (a) | 293,570 | (b) | (519,394 | ) | |||||||||
Total Diamondback Energy, Inc. stockholders' equity | 3,697,462 | 295,871 | 52,148 | 461,155 | 4,506,636 | ||||||||||||||
Non-controlling interest | 320,830 | — | — | — | 320,830 | ||||||||||||||
Total equity | 4,018,292 | 295,871 | 52,148 | 461,155 | 4,827,466 | ||||||||||||||
Total liabilities and equity | $ | 5,349,680 | $ | 479,369 | $ | 52,148 | $ | 287,930 | $ | 6,169,127 | |||||||||
Diamondback Energy, Inc. and Subsidiaries | |||||||||||||||||||
Unaudited Pro Forma Condensed Combined Statements of Operations | |||||||||||||||||||
For the Year Ended December 31, 2016 | |||||||||||||||||||
Diamondback | Brigham | Adjustments | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||||
Revenues: | |||||||||||||||||||
Oil sales | $ | 470,528 | $ | 90,138 | $ | 1,646 | (a) | $ | — | $ | 562,312 | ||||||||
Natural gas sales | 22,506 | 2,725 | 35 | (a) | — | 25,266 | |||||||||||||
Natural gas liquid sales | 34,073 | 3,488 | 45 | (a) | — | 37,606 | |||||||||||||
Midstream services | — | 2,117 | — | — | 2,117 | ||||||||||||||
Total revenues | 527,107 | 98,468 | 1,726 | — | 627,301 | ||||||||||||||
Costs and expenses: | |||||||||||||||||||
Lease operating expenses | 82,428 | 17,755 | (29 | ) | (a) | — | 100,154 | ||||||||||||
Production and ad valorem taxes | 34,456 | 5,821 | 89 | (a) | — | 40,366 | |||||||||||||
Gathering and transportation | 11,606 | — | — | — | 11,606 | ||||||||||||||
Depreciation, depletion and amortization | 178,015 | 43,634 | 78 | (a) | (23,393 | ) | (c) | 198,334 | |||||||||||
Impairment of oil and natural gas properties | 245,536 | 189,827 | (67 | ) | (a) | — | 435,296 | ||||||||||||
Impairment of field inventories | — | 501 | — | (501 | ) | (d) | — | ||||||||||||
Bad debt expense | — | 344 | — | — | 344 | ||||||||||||||
General and administrative expenses | 42,619 | 7,212 | — | (7,212 | ) | (d) | 42,619 | ||||||||||||
Asset retirement obligation accretion expense | 1,064 | — | — | 90 | (f) | 1,154 | |||||||||||||
Total costs and expenses | 595,724 | 265,094 | 71 | (31,016 | ) | 829,873 | |||||||||||||
Income (loss) from operations | (68,617 | ) | (166,626 | ) | 1,655 | 31,016 | (202,572 | ) | |||||||||||
Other income (expense) | |||||||||||||||||||
Interest income (expense) | (40,684 | ) | (399 | ) | — | 399 | (d) | (40,684 | ) | ||||||||||
Other income | 3,064 | — | — | — | 3,064 | ||||||||||||||
Other expense | — | (500 | ) | — | 500 | (d) | — | ||||||||||||
Gain on derivative instruments, net | (25,345 | ) | (12,031 | ) | — | 12,031 | (d) | (25,345 | ) | ||||||||||
Loss on extinguishment of debt | (33,134 | ) | — | — | — | (33,134 | ) | ||||||||||||
Total other expense, net | (96,099 | ) | (12,930 | ) | — | 12,930 | (96,099 | ) | |||||||||||
Income (loss) before income taxes | (164,716 | ) | (179,556 | ) | 1,655 | 43,946 | (298,671 | ) | |||||||||||
Provision for (benefit from) income taxes | 192 | (492 | ) | — | 492 | (e) | 192 | ||||||||||||
Net income (loss) | (164,908 | ) | (179,064 | ) | 1,655 | 43,454 | (298,863 | ) | |||||||||||
Net income attributable to non-controlling interest | 126 | — | — | — | 126 | ||||||||||||||
Net income (loss) attributable to Diamondback Energy, Inc. | $ | (165,034 | ) | $ | (179,064 | ) | $ | 1,655 | $ | 43,454 | $ | (298,989 | ) | ||||||
Diamondback Energy Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. | DESCRIPTION OF THE ACQUISITION |
On February 28, 2017, Diamondback completed the acquisition of certain oil and natural gas properties, midstream service assets and other related assets from Brigham. Diamondback used the net proceeds from its December 2016 equity offering, net proceeds from its December 2016 debt offering, cash on hand and other financing sources to fund the cash portion of the purchase price for this acquisition.
We refer to the acquisition of the oil and natural gas properties, midstream assets and other related assets from Brigham as the "Acquisition."
2. | BASIS OF PRESENTATION |
The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting in accordance with generally accepted accounting principles in the United States (GAAP) and were derived based on the historical financial statements of Diamondback and the financial statements of Brigham after giving effect to the Acquisition and after applying the reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined balance sheet as of December 31, 2016 is presented as if the Acquisition had occurred on December 31, 2016. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 is presented as if the Acquisition had occurred on January 1, 2016.
The unaudited pro forma condensed combined financial statements are presented for information purposes only and are not intended to reflect the results of operations or financial position of the combined company that would have resulted had the Acquisition been effective during the period presented or the results that may be obtained by the combined company in the future. Additionally, the unaudited pro forma condensed combined financial statements should be read in conjunction with the historical audited consolidated financial statements and accompanying notes of Diamondback included in our Annual Report on Form 10-K for the year ended December 31, 2016 as well as Brigham's historical audited financial statements and accompanying notes for the year ended December 31, 2016, included as Exhibit 99.1 in this Current Report on Form 8-K/A.
3. | ADJUSTMENTS |
(a) | Reflects exclusion of Brigham Illinois Basin assets not included in the Acquisition and inclusion of additional net mineral acres included in the Acquisition. |
4. | PRO FORMA ADJUSTMENTS |
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial statements. Such information does not purport to be indicative of the results of operations or financial position that actually would have resulted had the Acquisition occurred on the date indicated, nor is it indicative of the results that may be expected in future periods. The pro forma adjustments are based upon information and assumptions available at the time of filing the Current Report on Form 8-K/A to which these unaudited pro forma condensed combined financial statements are an exhibit.
(b) | To eliminate the assets, liabilities and net investment not acquired or assumed in the Acquisition, to record the Acquisition for $1.74 billion in cash and 7.69 million shares, and to allocate the purchase price to the assets acquired and liabilities assumed. The allocation of the purchase price to the assets acquired and liabilities assumed is preliminary and, therefore, subject to change. Any future adjustments to the allocation of the purchase price are not expected to have a material effect on Diamondback’s financial condition, results of operations or cash flows. |
The allocation of the purchase price of the Acquisition to the fair value of the assets acquired and liabilities assumed is as follows (in thousands): | |||
Proved oil and natural gas properties | $ | 387,571 | |
Unevaluated oil and natural gas properties | 2,122,415 | ||
Midstream assets | 47,554 | ||
Prepaid capital costs | 3,460 | ||
Oil inventory | 839 | ||
Revenues payable | (8,723 | ) | |
Asset retirement obligations | (1,550 | ) | |
$ | 2,551,566 | ||
Diamondback Energy Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(c) | Reflects depletion, depreciation and amortization of oil and natural gas properties associated with the Acquisition recorded on a combined basis under the full cost method. |
(d) | Reflects elimination of Brigham expenses not associated with the Acquisition. |
(e) | Reflects elimination of income tax benefit of Brigham as income tax provision is calculated on a combined basis. |
(f) | Reflects the calculation of asset retirement obligation accretion expense on a combined basis. |
4. | SUPPLEMENTAL PRO FORMA COMBINED OIL AND GAS RESERVE AND STANDARDIZED MEASURE INFORMATION (Unaudited) |
The following table sets forth unaudited pro forma information with respect to Diamondback’s estimated proved reserves, including changes therein, and proved developed and proved undeveloped reserves for the year ended December 31, 2016, giving effect to the Acquisition as if it had occurred on January 1, 2016. The estimates of reserves attributable to the Acquisition may include development plans for those properties which are different from those that the Company will ultimately implement. Reserve estimates are inherently imprecise, require extensive judgments of reservoir engineering data and are generally less precise than estimates made in connection with financial disclosures.
Diamondback Historical | Brigham | Total Pro Forma | ||||||||||||||||||||||||||
Oil (MBbls) | Natural Gas Liquids (MBbls) | Natural Gas (MMcf) | Oil (MBbls) | Natural Gas Liquids (MBbls) | Natural Gas (MMcf) | Oil (MBbls) | Natural Gas Liquids (MBbls) | Natural Gas (MMcf) | ||||||||||||||||||||
Proved Developed and Undeveloped Reserves: | ||||||||||||||||||||||||||||
As of January 1, 2015 | 105,979 | — | 26,004 | — | 149,503 | 31,804 | 5,276 | 25,877 | 137,783 | 31,280 | 175,380 | |||||||||||||||||
Extensions and discoveries | 55,069 | — | 13,962 | — | 64,758 | 11,419 | 1,913 | 7,856 | 66,488 | 15,875 | 72,614 | |||||||||||||||||
Revisions of previous estimates | (12,483 | ) | — | (1,888 | ) | — | (34,519 | ) | 4,607 | 711 | 2,825 | (7,876 | ) | (1,177 | ) | (31,694 | ) | |||||||||||
Purchase of reserves in place | 2,171 | — | 1,455 | — | 5,582 | (10,941 | ) | (1,774 | ) | (11,163 | ) | (8,770 | ) | (319 | ) | (5,581 | ) | |||||||||||
Production | (11,562 | ) | — | (2,399 | ) | — | (10,428 | ) | (2,267 | ) | (370 | ) | (1,609 | ) | (13,829 | ) | (2,769 | ) | (12,037 | ) | ||||||||
As of December 31, 2016 | 139,174 | 37,134 | 174,896 | 34,622 | 5,756 | 23,786 | 173,796 | 42,890 | 198,682 | |||||||||||||||||||
Proved Developed Reserves: | ||||||||||||||||||||||||||||
December 31, 2016 | 79,457 | 22,080 | 105,399 | 12,506 | 2,318 | 16,500 | 91,963 | 24,398 | 121,899 | |||||||||||||||||||
Proved Undeveloped Reserves: | ||||||||||||||||||||||||||||
December 31, 2016 | 59,717 | 15,054 | 69,497 | 22,117 | 3,439 | 27,844 | 81,834 | 18,493 | 97,341 | |||||||||||||||||||
The following pro forma standardized measure of the discounted net future cash flows and changes applicable to proved reserves reflect the effect of income taxes assuming the Acquisition had been subject to federal income tax at a rate of 35%. The future net cash flows are based on a 10% annual discount rate. The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted as representing current value to Diamondback. Material revisions to estimates of proved reserves may occur in the future; development and production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used; and actual costs may vary.
Diamondback Historical | Brigham | Pro Forma as Adjusted | |||||||||
(In thousands) | |||||||||||
Future cash inflows | $ | 6,275,705 | $ | 1,478,098 | $ | 7,753,803 | |||||
Future development costs | (617,636 | ) | (489,787 | ) | (1,107,423 | ) | |||||
Future production costs | (1,392,852 | ) | (428,316 | ) | (1,821,168 | ) | |||||
Future production taxes | (459,244 | ) | — | (459,244 | ) | ||||||
Future income tax expenses | (75,595 | ) | (7,469 | ) | (83,064 | ) | |||||
Future net cash flows | 3,730,378 | 552,526 | 4,282,904 | ||||||||
10% discount to reflect timing of cash flows | (2,018,965 | ) | (328,150 | ) | (2,347,115 | ) | |||||
Standardized measure of discounted future net cash flows | $ | 1,711,413 | $ | 224,376 | $ | 1,935,789 | |||||
Diamondback Energy Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
The changes in Diamondback’s pro forma standardized measure of discounted estimated future net cash flows were as follows for 2016:
Diamondback Historical | Brigham | Pro Forma as Adjusted | |||||||||
(In thousands) | |||||||||||
Standardized measure of discounted future net cash flows at the beginning of the period | $ | 1,418,133 | $ | 255,044 | $ | 1,673,177 | |||||
Sales of oil and natural gas, net of production costs | (411,558 | ) | (77,295 | ) | (488,853 | ) | |||||
Purchase of minerals in place | 37,661 | (35,341 | ) | 2,320 | |||||||
Extensions and discoveries, net of future development costs | 779,359 | 56,180 | 835,539 | ||||||||
Previously estimated development costs incurred during the period | 85,696 | (53,143 | ) | 32,553 | |||||||
Net changes in prices and production costs | (150,509 | ) | (20,339 | ) | (170,848 | ) | |||||
Changes in estimated future development costs | 20,647 | 35,749 | 56,396 | ||||||||
Revisions of previous quantity estimates | (123,795 | ) | 25,903 | (97,892 | ) | ||||||
Accretion of discount | 143,134 | 35,015 | 178,149 | ||||||||
Net change in income taxes | (30,530 | ) | (142 | ) | (30,672 | ) | |||||
Net changes in timing of production and other | (56,825 | ) | 2,358 | (54,467 | ) | ||||||
Standardized measure of discounted future net cash flows at the end of the period | $ | 1,711,413 | $ | 223,989 | $ | 1,935,402 | |||||