Attached files
| file | filename |
|---|---|
| EX-99.1 - US ENERGY CORP | ex99-1.htm |
| EX-23.1 - US ENERGY CORP | ex23-1.htm |
| 8-K/A - US ENERGY CORP | form8-ka.htm |
Exhibit 99.2
PRO FORMA FINANCIAL INFORMATION OF U.S. ENERGY CORP.
Unaudited Pro Forma Condensed Combined Financial Information of U.S. Energy Corp.
Introduction
On September 25, 2020, U.S. Energy Corp. (“U.S. Energy” or the “Company”) acquired certain operated and non-operated properties primarily located in Lea County, New Mexico and Converse County, Wyoming. The acquired properties consist of select upstream assets of FieldPoint Petroleum Corporation (“FieldPoint”) and were acquired pursuant to FieldPoint’s Chapter 7 bankruptcy process (the “FieldPoint Properties”). The purchase price for the FieldPoint Properties was $500 thousand, which was paid in cash plus the assumption of certain liabilities.
The following unaudited pro forma condensed combined financial statements reflect the acquisition of the FieldPoint Properties on a pro forma basis. The unaudited pro forma condensed combined balance sheet of the combined company is based on the historical consolidated balance sheet of U.S. Energy Corp as of December 31, 2019 with adjustments to the accounts to reflect the acquisition of the FieldPoint Properties as if it had occurred on December 31, 2019. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2019 and for the six months ended June 30, 2020 reflect the historical condensed consolidated statements of U.S. Energy for those periods with adjustments to reflect the acquisition of the FieldPoint Properties had it occurred on January 1, 2019.
The unaudited pro forma data presented herein reflects events that are directly attributable to the acquisition of the FieldPoint Properties, are factually supportable, and as they relate to the unaudited pro forma condensed combined statement of operations are expected to have a continuing impact. The unaudited pro forma information presented herein also reflects certain assumptions which management believes are reasonable. Such pro forma financial information is not necessarily indicative of financial results that would have been attained had the acquisition of the FieldPoint Properties occurred on the dates indicated above, or the results of the combined company that may be achieved in the future. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual results may differ from the pro forma results indicated herein. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the acquisition of the FieldPoint Properties.
The unaudited pro forma condensed combined financial statements have been derived from, and should be read in conjunction with, the historical consolidated financial statements.
U.S. ENENGY CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands)
| December 31, 2019 (as reported) | Pro forma Adjustments | December 31, 2019 (Pro forma) | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and equivalents | $ | 1,532 | $ | (609 | )(a) | $ | 1,298 | |||||
| $ | 375 | (b) | ||||||||||
| Oil and natural gas sales receivable | 716 | 716 | ||||||||||
| Marketable equity securities | 307 | 307 | ||||||||||
| Prepaid and other current assets | 138 | 138 | ||||||||||
| Real estate assets held for sale | - | - | ||||||||||
| Total current assets | 2,693 | (234 | ) | 2,459 | ||||||||
| Oil and natural gas properties under full cost method: | ||||||||||||
| Unevaluated properties | 3,741 | 3,741 | ||||||||||
| Evaluated properties | 89,113 | 845 | (a)(c) | 89,958 | ||||||||
| Less accumulated depreciation, depletion, amortization and impairment | (84,400 | ) | (84,400 | ) | ||||||||
| Net oil and natural gas properties | 8,454 | 845 | 9,299 | |||||||||
| Other assets: | ||||||||||||
| Property and equipment, net | 2,115 | 2,115 | ||||||||||
| Right of use asset | 179 | 179 | ||||||||||
| Other assets | 26 | 26 | ||||||||||
| Total other assets | 2,320 | - | 2,320 | |||||||||
| Total assets | $ | 13,467 | $ | 611 | $ | 14,078 | ||||||
| LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable and accrued liabilities | $ | 974 | $ | 974 | ||||||||
| Accrued compensation and benefits | 191 | 191 | ||||||||||
| Current lease obligation | 58 | 58 | ||||||||||
| Total current liabilities | 1,223 | - | 1,223 | |||||||||
| Noncurrent liabilities: | ||||||||||||
| Related party secured note payable | - | 375 | (b) | 375 | ||||||||
| Asset retirement obligations | 819 | 236 | (c) | 1,055 | ||||||||
| Warrant liability | 73 | 73 | ||||||||||
| Long-term lease obligation, net of current portion | 142 | 142 | ||||||||||
| Total noncurrent liabilities | 1,034 | 611 | 1,645 | |||||||||
| Total liabilities | 2,257 | 611 | 2,868 | |||||||||
| Preferred stock | 2,000 | 2,000 | ||||||||||
| - | ||||||||||||
| Shareholders’ equity: | - | |||||||||||
| Common stock | 13 | 13 | ||||||||||
| Additional paid-in capital | 136,876 | 136,876 | ||||||||||
| Accumulated deficit | (127,679 | ) | (127,679 | ) | ||||||||
| Total shareholders’ equity | 9,210 | - | 9,210 | |||||||||
| Total liabilities, preferred stock and shareholders’ equity | $ | 13,467 | $ | 611 | $ | 14,078 | ||||||
U.S. ENERGY CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands)
| Year ended December 31, 2019 (as reported) | Pro forma Adjustments | Year ended December 31, 2019 (Pro forma) | ||||||||||
| Revenue | ||||||||||||
| Oil | $ | 6,149 | $ | 1,174 | (d) | $ | 7,323 | |||||
| Natural gas and liquids | 424 | 124 | (d) | 548 | ||||||||
| Saltwater disposal | 82 | (d) | 82 | |||||||||
| Total revenue | 6,573 | 1,380 | 7,953 | |||||||||
| Operating expenses | ||||||||||||
| Oil and natural gas operations: | ||||||||||||
| Lease operating expense | 1,848 | 421 | (d) | 2,269 | ||||||||
| Production taxes | 429 | 120 | (d) | 549 | ||||||||
| Depreciation, depletion, accretion and amortization | 693 | 66 | (e) | 783 | ||||||||
| 24 | (f) | |||||||||||
| Impairment of oil and natural gas properties | - | - | ||||||||||
| General and administrative expenses: | 4,393 | - | 4,393 | |||||||||
| Total operating expenses | 7,363 | 631 | 7,994 | |||||||||
| Operating (loss) income | (790 | ) | 749 | (41 | ) | |||||||
| Other non-operating income (expense): | ||||||||||||
| Loss on marketable equity securities | (229 | ) | - | (229 | ) | |||||||
| Warrant revaluation loss | 352 | 352 | ||||||||||
| Rental property gain (loss) | (72 | ) | (72 | ) | ||||||||
| Other income | 200 | 200 | ||||||||||
| Interest expense, net | (11 | ) | (38 | )(g) | (49 | ) | ||||||
| Total other income (expense) | 240 | (38 | ) | 202 | ||||||||
| (Loss) income before income taxes | (550 | ) | 711 | 161 | ||||||||
| Income tax | - | - | (h) | - | ||||||||
| Net (loss) income | (550 | ) | 711 | 161 | ||||||||
| Accrued preferred stock dividends | (372 | ) | - | (372 | ) | |||||||
| Net loss applicable to common shareholders | $ | (922 | ) | $ | 711 | $ | (211 | ) | ||||
| Pro forma net loss per share data: | ||||||||||||
| Pro forma net loss per share applicable to common shareholders basic and diluted | $ | (0.16 | ) | |||||||||
| Pro forma weighted average shares outstanding basic and diluted | 1,341 | |||||||||||
U.S. ENERGY CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands)
| Six
Months Ended June 30, 2020 (as reported) | Proforma Adjustments | Six
Months Ended June 30, 2020 (Pro forma) | ||||||||||
| Revenue | ||||||||||||
| Oil | $ | 1,056 | $ | 234 | (i) | $ | 1,290 | |||||
| Natural gas and liquids | 56 | 40 | (i) | 96 | ||||||||
| Saltwater disposal | 5 | (i) | 5 | |||||||||
| Total revenue | 1,112 | 279 | 1,391 | |||||||||
| Operating expenses | ||||||||||||
| Oil and natural gas operations: | ||||||||||||
| Lease operating expense | 742 | 187 | (i) | 929 | ||||||||
| Production taxes | 80 | 25 | (i) | 105 | ||||||||
| Depreciation, depletion, accretion and amortization | 210 | 34 | (j) | 256 | ||||||||
| 12 | (k) | |||||||||||
| Impairment of oil and natural gas properties | 1,794 | 1,794 | ||||||||||
| General and administrative expenses: | 939 | 939 | ||||||||||
| Total operating expenses | 3,765 | 258 | 4,023 | |||||||||
| Operating (loss) income | (2,653 | ) | 21 | (2,632 | ) | |||||||
| Other non-operating income (expense): | ||||||||||||
| Loss on real estate held for sale | (651 | ) | (651 | ) | ||||||||
| Impairment of real estate | (403 | ) | (403 | ) | ||||||||
| Loss on marketable equity securities | (121 | ) | (121 | ) | ||||||||
| Warrant revaluation loss | (120 | ) | (120 | ) | ||||||||
| Rental property gain (loss) | (35 | ) | (35 | ) | ||||||||
| Other income | 28 | 28 | ||||||||||
| Interest expense, net | (2 | ) | (19 | )(l) | (21 | ) | ||||||
| Total other expense | (1,304 | ) | (19 | ) | (1,323 | ) | ||||||
| Net loss | $ | (3,957 | ) | $ | 2 | $ | (3,955 | ) | ||||
| Accrued preferred stock dividends | (203 | ) | - | (203 | ) | |||||||
| Net loss applicable to common shareholders | $ | (4,160 | ) | $ | 2 | $ | (4,158 | ) | ||||
| Pro forma net loss per share data: | ||||||||||||
| Pro forma net loss per share applicable to common shareholders basic and diluted | $ | (3.01 | ) | |||||||||
| Pro forma weighted average shares outstanding basic and diluted | 1,380 | |||||||||||
U.S. ENERGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
| 1. | Basis of Presentation |
| On September 25, 2020, U.S. Energy acquired certain operated and non-operated properties from FieldPoint pursuant to its chapter 7 bankruptcy for $500 thousand. In addition, U.S. Energy incurred transaction costs of $109 thousand and assumed liabilities of $236 thousand. To finance the acquisition U.S. Energy issued a $375 thousand secured noted payable to APEG Energy II, LP, a related party. | |
| 2. | Adjustments to the Pro Forma Balance Sheet |
| The unaudited pro forma balance sheet has been prepared to show the effect of the acquisition of the FieldPoint Properties as if it had occurred on December 31, 2019. The pro forma balance sheet reflects the following adjustments related to the FieldPoint Properties: | |
| (a) | Represents the pro forma adjustment for the payment of the $500 thousand acquisition price plus transaction costs of $109 thousand. |
| (b) | Represents the pro forma adjustment for proceeds from the $375 thousand related party secured note payable from APEG Energy II, LP, which was used to finance the acquisition of the FieldPoint Properties. |
| (c) | Represents the assumption of asset retirement obligations of $236 thousand related to the acquisition of the FieldPoint Properties. |
| 3. | Adjustment to Pro Forma Statement of Operations for the Year Ended December 31, 2019 |
| The unaudited pro forma statement of operations for the year ended December 31, 2019 gives effect to the following pro forma adjustments to reflect the acquisition of the FieldPoint Properties had it occurred on January 1, 2019: | |
| (d) | Record the revenue and direct operating expenses of the FieldPoint Properties for the year ended December 31, 2019. |
| (e) | Record incremental pro forma depreciation, depletion, amortization in accordance with the full cost method of accounting for oil and gas activities for the year ended December 31, 2019. |
| (f) | Record pro forma incremental accretion expense related to asset retirement obligations assumed in the acquisition of the FieldPoint Properties for the year ended December 31, 2019. |
| (g) | Record pro forma interest expense related to the related party secured note payable from APEG Energy II, LP borrowed to finance the acquisition of the FieldPoint Properties. |
| (h) | The company has a full valuation allowance against the net deferred tax assets. There is no pro forma income tax expense associated with the acquisition of the FieldPoint Properties, as any income tax expense is expected to be offset by the existing deferred tax assets of the U.S. Energy. |
| 4. | Adjustment to Pro Forma Statement of Operations for the Six Months Ended June 30, 2020 |
| The unaudited pro forma statement of operations for the six months ended June 30, 2020 gives effect to the following pro forma adjustments to reflect the acquisition of the FieldPoint Properties had it occurred on January 1, 2019: | |
| (i) | Record the revenue and direct operating expenses of the FieldPoint Properties for the six months ended June 30, 2020. |
| (j) | Record pro forma incremental depreciation, depletion, amortization in accordance with the full cost method of accounting for oil and gas activities for the six months ended June 30, 2020. |
| (k) | Record pro forma incremental accretion expense related to asset retirement obligations assumed in the acquisition of the FieldPoint Properties for the six months ended June 30, 2020. |
| (l) | Record pro forma interest expense for the six months ended June 30, 2020, related to the related party secured note payable from APEG Energy II, LP borrowed to finance the acquisition of the FieldPoint Properties, |