Halcon Resources: Unaudited Pro Forma Condensed Combined Financial Information

The following excerpt is from the company's SEC filing.

On September 30, 2016 (the “Effective Time”), certain wholly-owned subsidiaries (the “Sellers”) of Halcón Resources Corporation (“Halcón” or the “Company”) executed an Assignment and Assumption Agreement  (the “Assignment Agreement”) with an affiliate of Apollo Global Management (the “Buyer”) pursuant to which the Sellers assigned to Buyer, as of the Effective Time, one hundred percent (100%) of the common shares (the “Membership Interests”) of HK TMS LLC (“HK TMS”), which transaction is referred to as the “HK TMS Divestiture.”  HK TMS was previously a wholly-owned subsidiary of the Company and held all of the Com pany’s oil and natural gas properties in the Tuscaloosa Marine Shale.  In exchange for the assignment of the Membership Interests, the Buyer assumed all obligations relating to the Membership Interests of HK TMS from and after the Effective Time.

The following unaudited pro forma condensed combined financial information and explanatory notes adjust Halcón’s historical statements of operations to give effect to the HK TMS Divestiture as of January 1, 2015 with respect to the statements of operations information for the six months ended June 30, 2016 and the year ended December 31, 2015 and as of June 30, 2016, with respect to the balance sheet information.  The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and are not intended to represent or be indicative of the consolidated results of operations or financial position of Halcón that would have been recorded had the HK TMS Divestiture been completed as of the dates presented and should not be taken as representative of future results of operations or financial position of Halcón.  The unaudited pro forma condensed combined financial statements have been derived from and should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in Halcón’s Annual Report on Form 10-K for the year ended December 31, 2015 (audited) and Quarterly Report on Form 10-Q for the six months ended June 30, 2016 (unaudited), as filed with the Securities and Exchange Commission.

Halcón  Resources Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2016

(in thousands)

HK TMS 

Pro Forma

Historical

Adjustments

Current assets:

Accounts receivable

112,855

111,219

Receivables from derivative contracts

135,455

Restricted cash

17,164

16,999

Inventory

Debt issuance costs, net

Prepaids and other

Total current assets

288,396

25,704

262,692

Oil and natural gas properties (full cost method):

Evaluated

7,679,917

507,421

7,172,496

Unevaluated

1,180,148

Gross oil and natural gas properties

8,860,065

8,352,644

Less - accumulated depletion

(6,779,116

(493,271

(6,285,845

Net oil and natural gas properties

2,080,949

14,150

2,066,799

Other operating property and equipment:

Gas gathering and other operating assets

100,355

100,180

Less - accumulated depreciation

(23,155

(23,079

Net other operating property and equipment

77,200

77,101

Other noncurrent assets:

Equity in oil and natural gas partnership

Funds in escrow and other

Total assets

2,453,811

39,953

2,413,858

Current liabilities:

Accounts payable and accrued liabilities

242,189

240,685

Asset retirement obligations

Current portion of long-term debt, net

2,825,807

Total current liabilities

3,068,408

3,066,904

Long-term debt, net

Other noncurrent liabilities:

Liabilities from derivative contracts

48,554

47,274

Mezzanine equity:

Redeemable noncontrolling interest

212,503

Stockholders’ equity (deficit):

Preferred stock

Common stock

Additional paid-in capital

3,288,371

Accumulated deficit

(4,173,514

(184,455

(3,989,059

Total stockholders’ equity (deficit)

(885,131

(700,676

Total liabilities and stockholders’ equity (deficit)

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2016

(in thousands, except per share amounts)

Operating revenues:

Oil, natural gas and natural gas liquids sales:

174,062

170,445

Natural gas

Natural gas liquids

Total oil, natural gas and natural gas liquids sales

186,404

182,787

Total operating revenues

187,496

183,878

Operating expenses:

Production:

Lease operating

37,559

36,799

Workover and other

15,706

15,692

Taxes other than income

17,011

16,791

Gathering and other

21,903

21,899

Restructuring

General and administrative

66,324

66,246

Depletion, depreciation and accretion

94,937

91,297

Full cost ceiling impairment

754,769

83,941

670,828

Other operating property and equipment impairment

28,056

Total operating expenses

1,041,338

88,657

952,681

Income (loss) from operations

(853,842

(85,039

(768,803

Other income (expenses):

Net gain (loss) on derivative contracts

(35,781

Interest expense and other, net

(106,113

(3,003

(103,110

Gain (loss) on extinguishment of debt

81,434

Total other income (expenses)

(60,460

(57,457

Income (loss) before income taxes

(914,302

(88,042

(826,260

Income tax benefit (provision)

Net income (loss)

Series A preferred dividends

(6,396

Preferred dividends and accretion on redeemable noncontrolling interest

(28,517

Net income (loss) available to common stockholders

(949,215

(116,559

(832,656

Net income (loss) per share of common stock:

Diluted

Weighted average common shares outstanding:

120,360

For the Year Ended December 31, 2015

Operating revenues:

512,346

16,701

495,645

22,509

13,624

548,479

531,778

550,278

533,577

103,590

101,303

20,862

20,819

48,890

47,945

40,281

87,766

87,513

364,204

15,010

349,194

2,626,305

235,378

2,390,927

3,294,784

253,916

3,040,868

(2,744,506

(237,215

(2,507,291

310,264

(232,878

(2,735

(230,143

761,804

Gain (loss) on extinguishment of Convertible Note and modification of February 2012 Warrants

(8,219

830,971

833,706

(1,913,535

(239,950

(1,673,585

(9,086

(1,922,621

(1,682,671

(17,517

(66,820

(2,006,958

(306,770

(1,700,188

(18.66

(15.81

107,531

Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

Eliminates cash and restricted cash of HK TMS.

Eliminates assets and liabilities attributable to HK TMS, including accounts receivable, oil and natural gas properties, other operating property and equipment, accounts payable, and asset retirement obligations.

Eliminates HK TMS’s embedded derivative liability, which was recorded at fair value in the financial statements.

Eliminates the HK TMS preferred shares. As of June 30, 2016, 172,294 preferred shares were outstanding.  The historical preferred shares were accreted up to the estimated required redemption value through June 30, 2016.

Eliminates HK TMS’s historical accumulated deficit.

Eliminates operating revenues of HK TMS.

Eliminates operating and administrative expenses of HK TMS.

Eliminates depletion expense and the full cost ceiling impairments incurred by HK TMS on its oil and natural gas properties.

Eliminates the preferred dividends and the accretion of the preferred shares to the required redemption value.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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