Exhibit 99.1

 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Introduction

 

The following unaudited pro forma consolidated financial statements present the historical consolidated financial statements of Carbon Energy Corporation, a Delaware corporation (“Carbon”), adjusted to give effect to the sale of all of the issued and outstanding membership interests of each of Carbon Appalachian Company, LLC, a Delaware limited liability company (“CAC”), and Nytis Exploration Company LLC, a Delaware limited liability company (“Nytis LLC” and together with CAC, the “Disposed Companies”) (the “Transactions”), during the periods presented. The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2020 and for the years ended December 31, 2019 and 2018 give effect to the Transactions as if they were consummated on January 1, 2018, the beginning of the earliest period presented. The unaudited pro forma consolidated balance sheet as of March 31, 2020 gives effect to the Transactions as if they had been consummated on March 31, 2020.

 

The pro forma adjustments (as defined below) are preliminary and are subject to change as additional information becomes available and as additional analyses are performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma consolidated financial statements presented below. Upon completion of the Transactions, final valuations will be performed. Any increases or decreases in the fair value of relevant balance sheet amounts upon completion of the final valuations will result in adjustments to the pro forma balance sheet and/or statements of operations. Such differences may be material.

 

Assumptions and estimates underlying the unaudited adjustments to the pro forma consolidated financial statements (the “pro forma adjustments”) are described in the accompanying notes. The historical consolidated financial statements have been adjusted in the pro forma consolidated financial statements to give effect to pro forma events that are: (1) directly attributable to the Transactions; (2) factually supportable; and (3) with respect to the pro forma statements of operations, expected to have a continuing impact on the results of Carbon following the Transactions. The unaudited pro forma consolidated financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Transactions occurred on the dates indicated. Further, the unaudited pro forma consolidated financial statements do not purport to project the future operating results or financial position of Carbon following the Transactions.

 

The unaudited pro forma consolidated financial statements have been developed from and should be read in conjunction with:

 

●

the accompanying notes to the unaudited pro forma consolidated financial statements;

 

●

the historical audited consolidated financial statements of Carbon for the three months ended March 31, 2020 and for the fiscal years ended December 31, 2019 and 2018, included in Carbon’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020;

 

●

the unaudited combined and consolidated carve-out financial statements for the Disposed Companies as of and for the years ended December 31, 2019 and 2018, included in Carbon’s Definitive Information Statement filed with the Securities and Exchange Commission on May 4, 2020; and

 

●

other information relating to Carbon contained in its Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(In thousands)

 

		As of March 31, 2020
		Historical				Disposition of Business(2a)				Other Adjustments						Pro Forma
ASSETS
Current assets:
Cash and cash equivalents		$	1,740			$	1,999			$	99,204			2c		$	—
											(73,500	)		2c
											(11,569	)		2c
											(4,844	)		2c
											(9,291	)		2c
											259			2g
Restricted Cash			—				—				4,844			2c			4,844
Accounts receivable:
Revenue			10,331				8,899				—						1,432
Joint interest billings and other			1,583				1,367				—						216
Prepaid expenses, deposits and other current assets			2,352				1,043				—						1,309
Commodity derivative asset – current			18,079				9,306				—						8,773
Inventories			1,943				1,510				—						433
Total current assets			36,028				24,124				5,103						17,007
Due from related parties			—				27,653				27,653			2f			—
Property, plant and equipment, at cost:
Oil & gas properties
Proved, net			239,842				97,258				(30,199	)		2e			112,385
Unevaluated			4,906				3,297				—						1,609
Other property and equipment, net			15,768				14,482				—						1,286
			260,516				115,037				(30,199	)					115,280
Investments in affiliates			67				67				46,061			2d			—
											(73,463	)		2d
											27,402			2e
Commodity derivative asset – non-current			5,107				241				—						4,866
Right of use assets			5,689				3,828				—						1,861
Other non-current assets			980				734				3,400			2b			3,646
Total non-current assets			272,359				119,907				(26,799	)					125,653
Total assets		$	308,387			$	171,684			$	5,957					$	142,660

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET — (Continued)
(In thousands)

		As of March 31, 2020
		Historical				Disposition of Business(2a)						Other Adjustments						Pro Forma
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	30,282			$	19,255					$	259			2g		$	11,286
Firm transportation contract obligations			5,571				3,629						(1,942	)		2e			—
Lease liability – current			1,638				1,120						—						518
Credit facilities and notes payable – current			3,311				3,311			2b			—						—
Total current liabilities			40,802				27,315						(1,683	)					11,804
Non-current liabilities:																			—
Firm transportation contract obligations			8,049				8,049						—						—
Lease liability – non-current			3,966				2,708						—						1,258
Ad valorem taxes payable			3,173				3,173						—						—
Commodity derivative liability – non-current			25				25						—						—
Asset retirement obligations			17,456				12,312						651			2e			5,795
Credit facilities and notes payable – non-current			96,520				70,150			2b			(9,291	)		2c			17,079
Notes payable – related party			46,517				—						—						46,517
Other long-term liability			—				—						—						—
Total non-current liabilities			175,706				96,417						(8,640	)					70,649
Stockholders’ equity:
Preferred stock			1				—						—						1
Common stock			79				—						—						79
Additional paid-in capital			86,037				—						—						86,037
Membership contributions			—				46,061						46,061			2d			—
Accumulated deficit			(26,044	)			477						(55,928	)		2d			(56,302	)
													(1,506	)		2e
													27,653			2f
Total Carbon stockholders’ equity			60,073				46,538						16,280						29,815
Non-controlling interest			31,806				1,414						—						30,392
Total stockholders’ equity			91,879				47,952						16,280						60,207
Total liabilities and stockholders’ equity		$	308,387			$	171,684					$	5,957					$	142,660

 

See the accompanying notes which are an integral part of these unaudited pro forma consolidated financial statements.

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 

		For the Three Months Ended March 31, 2020
		Historical				Disposition of Business				Other Adjustments						Pro Forma
Revenue:
Natural gas sales		$	8,434			$	8,020			$	—					$	414
Natural gas liquids			152			$	—			$	—						152
Oil sales			7,216			$	1,146			$	—						6,070
Transportation and handling			633			$	633			$	—						—
Marketing gas sales			6,318			$	6,318			$	—						—
Commodity derivative gain			19,714			$	6,036			$	—						13,678
Other loss			(2	)		$	(2	)		$	—						—
Total revenue			42,465				22,151				—						20,314
Expenses:
Lease operating expenses			7,372			$	4,146			$	—						3,226
Pipeline operating expenses			2,692			$	2,692			$	—						—
Transportation costs			2,576			$	1,696			$	—						880
Production and property taxes			10			$	(285	)		$	—						295
Marketing gas purchases			3,472			$	3,472			$	—						—
General and administrative			3,303			$	1,750			$	(688	)		2h			865
Depreciation of property, plant and equipment			3,811			$	2,517			$	—						1,294
Accretion of asset retirement obligations			478			$	317			$	—						161
Total expenses			23,714				16,305				(688	)					6,721
Operating income			18,751				5,846				688						13,593
Other expense:
Interest expense			(2,872	)		$	(1,042	)		$	233			2i			(1,597	)
Equity investment loss			(421	)		$	(422	)		$	—						(1	)
Total other expense			(3,293	)			(1,464	)			233						(1,596	)
Income before income taxes			15,548				4,382				921						11,997
Income taxes:
Provision for income taxes			—				—				—						—
Net income attributable before non-controlling interest			15,548				4,382				921						11,997
Net income (loss) attributable to non-controlling interests			5,659				(60	)			—						5,719
Net income attributable to controlling interests before preferred shares			9,799			$	4,442			$	921						6,278
Net income attributable to preferred shares – preferred return			75			$	—			$	—						75
Net income attributable to common shares		$	9,724			$	4,442			$	921					$	6,203

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS — (Continued)
(In thousands, except per share data)

 

		For the Three Months Ended March 31, 2020
		Historical				Disposition of Business				Other Adjustments				Pro Forma
Net income per common share:
Basic		$	1.25											$	0.79
Diluted		$	1.20											$	0.77
Weighted average common shares outstanding:
Basic			7,809												7,809
Diluted			8,090												8,090

  

See the accompanying notes which are an integral part of these unaudited pro forma consolidated financial statements.

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 

		For the Year Ended December 31, 2019
		Historical				Disposition of Business				Other Adjustments						Pro Forma
Revenue:
Natural gas sales		$	56,468			$	55,279			$	—					$	1,189
Natural gas liquids			578			$	—			$	—						578
Oil sales			36,795			$	5,806			$	—						30,989
Transportation and handling			1,928			$	1,928			$	—						—
Marketing gas sales			16,920			$	16,920			$	—						—
Commodity derivative gain (loss)			3,044			$	8,208			$	—						(5,164	)
Other (loss) income			892			$	243			$	—						649
Total revenue			116,625				88,384				—						28,241
Expenses:
Lease operating expenses			29,714			$	16,038			$	—						13,676
Pipeline operating expenses			11,153			$	11,153			$	—						—
Transportation costs			6,086			$	3,698			$	—						2,388
Production and property taxes			5,507			$	3,674			$	—						1,833
Marketing gas purchases			18,684			$	18,684			$	—						—
General and administrative			16,342			$	7,147			$	(2,750	)		2h			6,443
General and administrative – related party reimbursement			—			$	—			$	—						—
Depreciation of property, plant and equipment			15,757			$	11,152			$	—						4,605
Accretion of asset retirement obligations			1,625			$	1,084			$	—						541
Impairment of oil and gas properties			—			$	—			$	—						—
Total expenses			104,868				72,630				(2,750	)					29,486
Operating income			11,757				15,754				2,750						(1,245	)
Other income and (expense):
Interest income			2			$	2			$	—						—
Interest expense			(12,850	)		$	(5,359	)		$	867			2i			(6,624	)
Other expenses			—			$	—			$	—						—
Warrant derivative income			—			$	—			$	—						—
Equity investment income (loss)			90			$	93			$	—						(3	)
Gain on sale of oil and gas properties			—			$	—			$	—						—
Total other income and (expense)			(12,758	)			(5,264	)			867						(6,627	)
Loss before income taxes			(1,001	)			10,490				3,617						(7,872	)
Income taxes:
Provision for income taxes			—				—				—						—
Net income attributable before non-controlling interest			(1,001	)			10,490				3,617						(7,872	)
Net income (loss) attributable to non-controlling interests			(2,098	)		$	(195	)		$	—						(1,903	)
Net income (loss) attributable to controlling interests before preferred shares			1,097			$	10,684			$	3,617						(5,969	)
Net income attributable to preferred shares – preferred return			300			$	—			$	—						300
Net income attributable to common shares		$	797			$	10,684			$	3,617					$	(6,269	)

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS — (Continued)
(In thousands, except per share data)

		For the Year Ended December 31, 2019
		Historical				Disposition of Business				Other Adjustments				Pro Forma
Net income (loss) per common share:
Basic		$	0.10											$	(0.80	)
Diluted		$	0.10											$	(0.77	)
Weighted average common shares outstanding:
Basic			7,794												7,794
Diluted			8,095												8,095

 

See the accompanying notes which are an integral part of these unaudited pro forma consolidated financial statements.

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 

		For the Year Ended December 31, 2018
		Historical				Disposition of Business				Other Adjustments						Pro Forma
Revenue:
Natural gas sales		$	16,018			$	14,778			$	—					$	1,240
Natural gas liquids			1,143			$	—			$	—						1,143
Oil sales			30,891			$	5,724			$	—						25,167
Transportation and handling			—			$	—			$	—						—
Marketing gas sales			—			$	—			$	—						—
Commodity derivative gain (loss)			4,894			$	(45	)		$	—						4,939
Other (loss) income			105			$	80			$	—						25
Total revenue			53,051				20,537				—						32,514
Expenses:
Lease operating expenses			15,960			$	7,229			$	—						8,731
Pipeline operating expenses			—			$	—			$	—						—
Transportation costs			4,453			$	2,519			$	—						1,934
Production and property taxes			1,813			$	1,035			$	—						778
Marketing gas purchases			—			$	—			$	—						—
General and administrative			15,778			$	3,536			$	(750	)		2j			5,546
											(3,947	)		2k
											(1,999	)		2n
General and administrative – related party reimbursement			(4,547	)		$	(600	)		$	3,947			2k			—
Depreciation of property, plant and equipment			8,108			$	4,398			$	—						3,710
Accretion of asset retirement obligations			868			$	476			$	—						392
Impairment of oil and gas properties			—			$	—			$	—						—
Total expenses			42,433				18,593				(2,749	)					21,091
Operating income			10,618				1,944				2,749						11,423
Other income and (expense):
Interest income			2			$	2			$	—						—
Interest expense			(5,922	)		$	(8	)		$	1,814			2l			(4,100	)
Other expenses			(3	)		$	—			$	—						(3	)
Warrant derivative income			225			$	(2	)		$	—						227
Equity investment income (loss)			2,469			$	85			$	(2,383	)		2m			1
Gain on sale of oil and gas properties			5,390			$	—			$	—						5,390
Total other income and (expense)			2,161				77				(569	)					1,515
Loss before income taxes			12,779				2,021				2,180						12,938
Income taxes:
Provision for income taxes			—				—				—						—
Net income attributable before non-controlling interest			12,779				2,021				2,180						12,938
Net income (loss) attributable to non-controlling interests			4,375			$	(82	)		$	—						4,457
Net income (loss) attributable to controlling interests before preferred shares			8,404			$	2,103			$	2,179						8,481
Net income attributable to preferred shares – beneficial conversion feature			1,125			$	—			$	—						1,125
Net income attributable to preferred shares – preferred return			224			$	—			$	—						224
Net income attributable to common shares		$	7,055			$	2,103			$	2,179					$	7,132

 

 

CARBON ENERGY CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS — (Continued)
(In thousands, except per share data)

		For the Year Ended December 31, 2018
		Historical				Disposition of Business				Other Adjustments				Pro Forma
Net income (loss) per common share:
Basic		$	0.94											$	0.95
Diluted		$	0.87											$	0.91
Weighted average common shares outstanding:
Basic			7,525												7,525
Diluted			7,839												7,839

 

See the accompanying notes which are an integral part of these unaudited pro forma consolidated financial statements.

 

 

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

 

1. Basis of Pro Forma Presentation

 

The pro forma adjustments have been prepared as if the Transactions had taken place on March 31, 2020 in the case of the pro forma balance sheet and on January 1, 2018 in the case of the pro forma statements of operations. The pro forma adjustments are described in Note 2. “Unaudited Pro Forma Adjustments” to these unaudited pro forma consolidated financial statements.

 

The pro forma adjustments represent management’s estimates based on information available as of the date of this document and are subject to change as additional information becomes available and additional analyses are performed. The pro forma financial statements do not reflect transaction or other costs following the Transactions that are not expected to have a continuing impact. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing the Transactions are not included in the pro forma statements of operations. However, the impact of such transaction expenses is reflected in the pro forma balance sheet.

 

2. Unaudited Pro Forma Adjustments

 

The following notes describe the basis for and/or assumptions regarding the pro forma adjustments included in the Company’s unaudited pro forma statements.

 

All dollar amounts (except share and per share data) presented in the notes to our unaudited pro forma condensed consolidated financial statements are stated in thousands of dollars, unless otherwise noted. Amounts may not foot due to rounding.

 

(a)

Recording of the disposition of CAC and Nytis LLC

 

The amounts include the assets and liabilities attributable to the business being sold.

 

(b)

Recording of the net proceeds, net of estimated transaction related expenses

 

Set forth below is a calculation of the net proceeds. The fair value of the contingent payment receivable of $3,400 has been estimated using a discounted, probability-weighted model based on Nymex strip pricing for Henry Hub as of April 3, 2020.

 

	Cash proceeds from sale, net of adjustments		$	99,204
	Contingent payment receivable			3,400
	Less: repayment of Credit Facility with Prosperity Bank			(73,500	)
	Less: transaction costs, including legal, accounting and severance-related items			(11,569	)
	Net proceeds		$	17,535

 

(c)

Recording of repayment of Credit Facility with Prosperity Bank and promissory notes held by entities managed by Old Ironsides Energy, LLC

 

The March 31, 2020 pro forma payoff of the Credit Facility was initially estimated at $73,500, the outstanding amount under the Credit Facility. However, the ultimate payoff at the closing of the Transactions, after consideration of principal payments made between April 1, 2020 and May 26, 2020, was approximately $72,300. The difference of approximately $1,200 in funds will be utilized to make a minimum $10,500 payment to Old Ironsides Energy, LLC. 

 

	Cash proceeds from sale, net of adjustments		$	99,204
	Less: repayment of Credit Facility with Prosperity Bank			(73,500	)
	Less: transaction costs			(11,569	)
	Less: funds to be held in escrow (restricted cash)			(4,844	)
	Less: proceeds retained by Nytis Exploration (USA) Inc.			—
	Net cash proceeds from sale		$	9,291
	Partial repayment of promissory notes			(9,291	)
	Total cash proceeds less repayment of debt		$	—

 

 

(d)

The estimated loss on the sale of the business if we had completed the sale as of March 31, 2020 is calculated as follows:

 

	Net proceeds less transaction costs (Note 2(b))		$	17,535
	Net assets sold			(73,463	)
	Loss on sale		$	(55,928	)

 

Carbon’s Investments in affiliates account (representing its investments in Nytis LLC and CAC) is eliminated against Nytis LLC’s and CAC’s Membership contributions account when presented on a consolidated basis, as represented in the Historical balance sheet above. Therefore, when Nytis LLC and CAC are represented on a combined standalone basis (without consolidating with Carbon), an adjustment of $46,061 to reverse the effects of this elimination is required to re-establish the Investment in affiliates balance on Carbon’s balance sheet. Net assets sold are removed from Carbon’s Investments in affiliates account. The loss on sale is adjusted within accumulated deficit.

 

(e)

Recording reversal of historical purchase price accounting basis step up

 

In December 2018, Carbon purchased Old Ironsides’ membership interests in CAC, requiring Carbon to consolidate CAC. Historical purchase price accounting entries associated with the consolidation of CAC included (i) a step up in basis of the purchased proved oil and gas assets of $30,199, which is reversed above; (ii) an increase in firm transportation contract obligations of $1,942, which is reversed above; (iii) a decrease in asset retirement obligation of $651, which is reversed above; (iv) an adjustment to Carbon’s investment in CAC of $27,402, which is reversed above within Investments in affiliates; and (v) an increase in intercompany receivable between Carbon and CAC of $1,506, which is reversed above within accumulated deficit as a partial offset to the elimination described in Note 2(f).

 

(f)

Recording elimination of intercompany balances between Carbon and the disposed entities of CAC and Nytis LLC

 

(g)

Presentation adjustment

 

A reclassification entry is made between cash and cash equivalents and accounts payable to reflect a pro forma zero cash balance.

 

(h)

Recording reduction in staffing and consulting expenses associated with disposed assets

 

(i)

Recording reduction in interest expense associated with partial payment of the promissory notes held by entities managed by Old Ironsides Energy, LLC (See Note 2(c))

 

(j)

Recording reduction of approximately $750 in consulting expenses associated with the disposition of CAC and Nytis LLC

 

(k)

Prior to Carbon’s consolidation of CAC in December 2018, Carbon earned management fees from CAC, which were included within General and administrative – related party reimbursement on its consolidated statements of operations. An adjustment is made to eliminate these management fees and the associated staffing costs incurred at Carbon in providing those services, each in the amount of $3,947 (after giving effect to the $600 partial elimination associated with the disposition of CAC and Nytis LLC).

 

(l)

Recording reduction in interest expense associated with prior credit facility at Carbon that was collateralized by the Nytis LLC assets

 

 

(m)

Recording elimination of CAC-related equity investment income

 

Prior to Carbon’s consolidation of CAC in December 2018, Carbon accounted for its minority equity interest in CAC as an equity investment. The adjustment removes the associated equity investment income.

 

(n)

Recording elimination of expenses associated with abandoned equity raise

 

In 2018, Carbon incurred $1,999 in non-recurring expenses associated with a potential equity raise that was abandoned.

 

3. Supplemental Financial Data — Oil and Gas Producing Activities

 

Estimated Proved Oil, Natural Gas, and Natural Gas Liquid Reserves

 

The following tables present the estimated pro forma net proved, net proved developed, and net proved undeveloped oil, natural gas, and natural gas liquid reserves as of December 31, 2019, along with a summary of changes in the net proved oil, natural gas, and natural gas liquids reserves during the year ended December 31, 2019. The pro forma reserve information set forth below gives effect to the Transactions as if they had been completed on January 1, 2019. Proved oil, natural gas, and natural gas liquid reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Proved developed oil, natural gas, and natural gas liquids reserves are proved reserves that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well or (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. Proved undeveloped oil, natural gas, and natural gas liquids reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

 

		Oil MBbls
		Historical				Disposition of Business				Pro Forma
Proved reserves, beginning of year			18,898				1,382				17,516
Revisions of previous estimates			(1,362	)			1				(1,363	)
Extensions and discoveries			826				—				826
Production			(589	)			(109	)			(480	)
Purchases of reserves in-place			—				—				—
Sales of reserves in-place			(31	)			(27	)			(4	)
Proved reserves, end of year			17,742				1,247				16,495
Proved developed reserves at:
End of year			12,972				1,247				11,725
Proved undeveloped reserves at:
End of year			4,770				—				4,770

 

 

		Natural Gas MMcf
		Historical				Disposition of Business				Pro Forma
Proved reserves, beginning of year			455,400				433,296				22,104
Revisions of previous estimates			24,194				27,052				(2,858	)
Extensions and discoveries			1,187				—				1,187
Production			(21,436	)			(21,026	)			(410	)
Purchases of reserves in-place			—				—				—
Sales of reserves in-place			(8,980	)			(8,980	)			—
Proved reserves, end of year			450,365				430,342				20,023
Proved developed reserves at:
End of year			444,104				430,342				13,762
Proved undeveloped reserves at:
End of year			6,261				—				6,261

 

		NGL MBbls
		Historical				Disposition of Business				Pro Forma
Proved reserves, beginning of year			1,923				—				1,923
Revisions of previous estimates			(618	)			—				(618	)
Extensions and discoveries			77				—				77
Production			(36	)			—				(36	)
Purchases of reserves in-place			—				—				—
Sales of reserves in-place			—				—				—
Proved reserves, end of year			1,346				—				1,346
Proved developed reserves at:
End of year			936				—				936
Proved undeveloped reserves at:
End of year			410				—				410

 

		Total MMcfe
		Historical				Disposition of Business				Pro Forma
Proved reserves, beginning of year			580,326				441,586				138,740
Revisions of previous estimates			12,310				27,055				(14,745	)
Extensions and discoveries			6,605				—				6,605
Production			(25,182	)			(21,680	)			(3,502	)
Purchases of reserves in-place			—				—				—
Sales of reserves in-place			(9,166	)			(9,143	)			(23	)
Proved reserves, end of year			564,893				437,818				127,075
Proved developed reserves at:
End of year			527,555				437,818				89,737
Proved undeveloped reserves at:
End of year			37,338				—				37,338

  

 

Standardized Measure of Discounted Future Net Cash Flows

 

The pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of December 31, 2019 is as follows. Changes in the demand for oil and natural gas, inflation, and other factors make such estimates inherently imprecise and subject to substantial revision. This table should not be construed to be an estimate of the current market value of our proved reserves. Management does not rely upon the information that follows in making investment decisions.

 

		December 31, 2019
(in thousands)		Historical				Disposition of Business				Pro Forma
Future cash inflows		$	2,212,049			$	1,098,503			$	1,113,546
Future production costs			(1,306,608	)			(665,403	)			(641,204	)
Future development costs			(77,952	)			—				(77,952	)
Future income taxes			(146,951	)			(63,757	)			(83,194	)
Future net cash flows			680,539				369,343				311,196
10% annual discount			(408,691	)			(235,265	)			(173,426	)
Standardized measure of discounted future net cash flows		$	271,848			$	134,078			$	137,770

 

The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2019 are as follows:

 

		December 31, 2019
(in thousands)		Historical				Disposition of Business				Pro Forma
Standardized measure of discounted future net cash flows, beginning of period		$	392,068			$	190,360			$	201,708
Sales of oil and gas, net of production costs and taxes			(49,746	)			(34,787	)			(14,959	)
Price revisions			(158,799	)			(98,429	)			(60,370	)
Extensions, discoveries and improved recovery, less related costs			10,822				—				10,822
Changes in estimated future development costs			(3,041	)			(157	)			(2,884	)
Development costs incurred during the period			6,685				542				6,143
Quantity revisions			5,565				26,321				(20,756	)
Accretion of discount			39,207				19,036				20,171
Net changes in future income taxes			39,929				17,932				21,997
Purchases of reserves-in-place			—				—				—
Sales of reserves-in-place			(4,004	)			(3,954	)			(49	)
Changes in production rate timing and other			(6,838	)			17,214				(24,052	)
Standardized measure of discounted future net cash flows, end of period		$	271,848			$	134,078			$	137,770

 

The twelve-month weighted averaged adjusted prices in effect at December 31, 2019 were as follows:

 

		2019
Oil (per Bbl)		$	55.69
Natural Gas (per Mcf)		$	2.58