8-K
Chord Energy Corp (CHRD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________
FORM 8-K
____________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 2022
____________________________________________________________________
OASIS PETROLEUM INC.
(Exact name of registrant as specified in its charter)
____________________________________________________________________
| Delaware | 001-34776 | 80-0554627 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation or organization) | (Commission<br>File Number) | (I.R.S. Employer<br>Identification No.) |
| 1001 Fannin Street, Suite 1500 | ||
| --- | --- | |
| Houston, Texas | 77002 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (281) 404-9500
Not Applicable.
(Former name or former address, if changed since last report)
____________________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||
|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| --- | --- | |||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | OAS | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.02 Termination of a Material Definitive Agreement.
On February 1, 2022 (the “Closing Date”), Oasis Petroleum Inc., a Delaware corporation (the “Company”), announced that on the Closing Date, Oasis Midstream Partners LP (“OMP”) completed the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 25, 2021, by and among OMP, Crestwood Equity Partners LP, a Delaware limited partnership (“Crestwood”), Project Falcon Merger Sub LLC, a Delaware limited liability company and direct wholly owned subsidiary of Crestwood (“Merger Sub”), Project Phantom Merger Sub LLC, a Delaware limited liability company and direct wholly owned subsidiary of Crestwood (“GP Merger Sub”), OMP GP LLC, a Delaware limited liability company and the general partner of OMP (“OMP GP”), and, solely for the purposes of Section 2.1(a)(i) of the Merger Agreement, Crestwood Equity GP LLC, the general partner of Crestwood. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into OMP (the “LP Merger”), with OMP surviving the LP Merger as a subsidiary of Crestwood, and GP Merger Sub merged with and into OMP GP (the “GP Merger” and, together with the LP Merger, the “Mergers”), with OMP GP surviving the GP Merger as a wholly owned subsidiary of Crestwood.
Affiliate Agreements
On February 1, 2022, in connection with the closing of the Mergers and pursuant to the terms of the Merger Agreement, the Company terminated the agreements described below amongst the Company, OMP and certain of their affiliates.
Contribution and Simplification Agreement
On March 22, 2021, OMP entered into a Contribution and Simplification Agreement (the “Contribution and Simplification Agreement”) with OMS Holdings LLC, a Delaware limited liability company (“OMS Holdings”), Oasis Midstream Services LLC, a Delaware limited liability company (“OMS”), OMP GP, OMP Operating LLC, a Delaware limited liability company (“OMP Operating”), OMP DevCo Holdings Corp., a Delaware corporation, Beartooth DevCo LLC, a Delaware limited liability company (“Beartooth DevCo”), Bobcat DevCo LLC, a Delaware limited liability company (“Bobcat DevCo”), OMS Holdings Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of OMS Holdings, and for limited purposes set forth therein, the Company, pursuant to which, among other things, the Company contributed its remaining interests in Beartooth DevCo and Bobcat DevCo to OMP and OMP’s incentive distribution rights were eliminated. The transactions contemplated by the Contribution and Simplification Agreement were consummated on March 30, 2021. The Contribution and Simplification Agreement also implemented among other things, a right of first refusal in favor of OMP with respect to the midstream opportunities in the Painted Woods and City of Williston operating areas of the Company.
Omnibus Agreement
On September 25, 2017, in connection with the closing of OMP’s initial public offering (the “IPO”), OMP entered into an Omnibus Agreement, by and among OMP, the Company, Oasis Petroleum LLC, OMS Holdings, OMS, OMP GP and OMP Operating, pursuant to which, among other things, (a) the Company granted OMP a right of first offer with respect to any midstream assets that the Company or any successor to the Company builds with respect to its current acreage and elects to sell in the future, which right of first offer converts into a right of first refusal upon a change of control of the Company, (b) the Company provided OMP with a license to use certain Company-related names and trademarks in connection with OMP’s operations and (c) the Company and OMP agreed to certain indemnities for environmental and other liabilities.
Services and Secondment Agreement
On September 25, 2017, in connection with the closing of the IPO, OMP entered into a 15-year Services and Secondment Agreement with the Company (the “Services and Secondment Agreement”), pursuant to which the Company performed centralized corporate, general and administrative services for OMP. The Company also seconded to OMP certain of its employees to operate, construct, manage and maintain OMP’s assets. The Services and Secondment Agreement required OMP to reimburse the Company for direct general and administrative expenses incurred by the Company for the provision of the above services. Additionally, OMP reimbursed the Company for compensation and certain other expenses paid to employees of the Company that were seconded to OMP and who spent time managing and operating OMP’s business.
The foregoing summaries of the Contribution and Simplification Agreement, the Omnibus Agreement and the Services and Secondment Agreement do not purport to be complete and are subject to, and qualified in their entirety by, the full text of each such agreement, copies of which are filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2021, Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2017 and Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2017, respectively, and in each case, incorporated herein by reference.
Tax Plan
The Board of Directors of the Company (the “Board”) previously adopted a Tax Benefits Preservation Plan, dated as of August 3, 2021 (the “Tax Plan”), by and between the Company and Computershare Trust Company, N.A., as rights agent.
Under the Tax Plan, the Rights (as defined in the Tax Plan) were issued to reduce the risk that the Company’s ability to use its net operating losses and certain other tax attributes (collectively, the “Tax Benefits”) to reduce potential future income tax obligations would become subject to limitations by reason of the Company experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”). The Company generally will experience an ownership change if the percentage of the Company’s stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code, increases by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period (or, if a shorter period, since the Company’s last ownership change). Pursuant to Section 7(a) of the Tax Plan, the Rights will expire at the earliest to occur of, among other things, the close of business on the date set by the Board following a determination by the Board that the Tax Plan is no longer necessary or desirable for the preservation of Tax Benefits or no Tax Benefits are available to be carried forward or are otherwise available.
On February 1, 2022, the Company announced that the Tax Plan will terminate, pursuant to its terms, immediately following the Effective Time (as defined below). Accordingly, at the close of business on February 1, 2022, the Rights became null, void and of no further effect.
The foregoing summary of the Tax Plan does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Tax Plan, a copy of which is filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 4, 2021 and incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information set forth in Item 1.02 of this Current Report on Form 8-K is incorporated herein by reference into this Item 2.01.
On the Closing Date: (i) 6,520,944 common units representing limited partner interests in OMP (“OMP Common Units”) that were issued and outstanding immediately prior to the effective time of the Mergers (the “Effective Time”) and owned by subsidiaries of the Company (such OMP Common Units, the “Sponsor Cash Units”), were converted into $150,000,000 in cash in the aggregate and each other OMP Common Unit issued and outstanding immediately prior to the Effective Time owned by the Company or its subsidiaries (other than OMP) (the “Sponsor Equity Units” and, together with the Sponsor Cash Units, the “Sponsor Units”) were converted into 0.7680 common units representing limited partner interests in Crestwood (the “Crestwood Common Units”); (ii) each OMP Common Unit that was issued and outstanding immediately prior to the Effective Time (other than the Sponsor Units) was converted into 0.8700 Crestwood Common Units and (iii) all of the limited liability company interests of OMP GP that were issued and outstanding as of immediately prior to the Effective Time were converted into $10,000,000 in cash in the aggregate. Upon completion of the Mergers, the Company owned approximately 21.7% of the issued and outstanding Crestwood Common Units.
The foregoing summary of the Merger Agreement and Mergers does not purport to be complete and is subject to, and is qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 28, 2021 and incorporated herein by reference.
Item 3.03 Material Modification of Rights of Security Holders.
The information set forth in Item 1.02 to this Current Report on Form 8-K is incorporated herein by reference in its entirety.
Item 8.01 Other Events.
On February 1, 2022, the Company issued a press release announcing the completion of the Mergers and the termination of the Tax Plan pursuant to its terms. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated financial information, comprised of the unaudited pro forma condensed consolidated balance sheet as of September 30, 2021, the related unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2021, the period from January 1, 2020 through November 19, 2020, the period from November 20, 2020 through December 31, 2020, the year ended December 31, 2019 and the year ended December 31, 2018, and the related notes to the unaudited pro forma condensed consolidated financial information, giving effect to the Mergers as if they occurred on (i) September 30, 2021, in the case of the pro forma balance sheet and (ii) January 1, 2020, in the case of the pro forma statements of operations, are filed herewith.
(d) Exhibits
| Exhibit No. | Description of Exhibit |
|---|---|
| 4.1 | Tax Benefits Preservation Plan, dated as of August 3, 2021, by and between Oasis Petroleum Inc. and Computershare Trust Company, N.A., as rights agent (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on August 4, 2021, and incorporated herein by reference). |
| 99.1 | Press Release, dated February 1, 2022. |
| 99.2 | Unaudited pro forma condensed consolidated financial information of Oasis Petroleum Inc. |
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| OASIS PETROLEUM INC.<br><br>(Registrant) | ||
|---|---|---|
| Date: February 1, 2022 | By: | /s/ Nickolas J. Lorentzatos |
| Nickolas J. Lorentzatos | ||
| Executive Vice President, General Counsel and Corporate Secretary |
Document
Exhibit 99.1
Oasis Petroleum Inc. Announces the Closing of the OMP and Crestwood Merger
HOUSTON, Feb. 1, 2022—Oasis Petroleum Inc. (NASDAQ: OAS) (“Oasis” or the “Company”) today announced the closing of the previously announced merger between Oasis Midstream Partners LP (NASDAQ: OMP) (“OMP”) and Crestwood Equity Partners LP (NYSE: CEQP) (“Crestwood”) (the “OMP-Crestwood Merger”). On December 20, 2021, Oasis filed pro forma financials, which illustrate the combined impacts of Oasis' 2021 upstream acquisitions and divestitures as well as the OMP-Crestwood Merger. Please refer to our website at www.oasispetroleum.com to find the pro forma financials and to see Oasis' investor presentation for more information on the impact of these transactions on Oasis' financial statements. Concurrent with the closing of the OMP-Crestwood Merger, Oasis directors N. John Lancaster Jr. and John Jacobi were appointed to Crestwood's Board of Directors. Both Messrs. Lancaster and Jacobi will continue to serve on Oasis' Board of Directors.
Oasis announced today the termination of the Tax Benefits Preservation Plan (the “Tax Plan”) that was originally put in place in August 2021 to help preserve Oasis's ability to utilize its net operating losses and certain other tax benefits (“Tax Benefits”). In December 2021, Oasis recognized gain for income tax purposes as a result of certain restructuring transactions. Additionally, the cash consideration of $160MM paid to Oasis as part of the OMP-Crestwood Merger also resulted in Oasis recognizing gain for income tax purposes. In light of the gain recognized as a result of the restructuring transactions and the OMP-Crestwood Merger, Oasis determined that the Tax Plan was no longer necessary or desirable for the preservation of the Tax Benefits.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, derivative instruments, capital expenditure levels and other guidance included in this press release, as well as the impact of the novel coronavirus 2019 ("COVID-19") pandemic on the Company's operations. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, risks that the benefits anticipated from the OMP-Crestwood Merger may not be realized, the ability of Crestwood to successfully integrate OMP's operations and employees and realize anticipated synergies and cost savings, the potential impact of the OMP-Crestwood Merger on relationships, including with employees, suppliers, customers, competitors and credit rating agencies, changes in crude oil and natural gas prices, developments in the global economy, particularly the public health crisis related to the COVID-19 pandemic and the adverse impact thereof on demand for crude oil and natural gas, the outcome of government policies and actions, including actions taken to address the COVID-19 pandemic and to maintain the functioning of national and global economies and markets, the impact of Company actions to protect the health and safety of employees, vendors, customers, and communities, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, the ability to realize the anticipated benefits from the Williston Basin acquisition and Permian Basin divestitures, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company's business and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the U.S. Securities and Exchange Commission. Additionally, the unprecedented nature of the COVID-19 pandemic and the related decline of the oil and gas exploration and production industry may make it particularly difficult to identify risks or predict the degree to which identified risks will impact the Company's business and financial condition. Because considerable uncertainty exists with respect to the future pace and extent of a global economic recovery from the effects of the COVID-19 pandemic, the Company cannot predict whether or when crude oil production and economic activities will return to normalized levels.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
About Oasis Petroleum Inc.
Oasis Petroleum Inc. is an independent exploration and production company with quality and sustainable long-lived assets in the Williston Basin. The Company is uniquely positioned with a best-in-class balance sheet and is focused on rigorous capital discipline and generating free cash flow by operating efficiently, safely and responsibly to develop its unconventional onshore oil-rich resources in the continental United States. For more information, please visit the Company's website at www.oasispetroleum.com.
For further information: Oasis Petroleum Inc.: Danny Brown, Chief Executive Officer; Michael H. Lou, Chief Financial Officer and Executive Vice President; Bob Bakanauskas, Director, Investor Relations, (281) 404-9600, ir@oasispetroleum.com
Document
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information and accompanying notes reflect the pro forma effects of the OMP Merger (defined below) completed on February 1, 2022.
On October 25, 2021, Oasis Midstream Partners LP (“OMP”) and OMP GP LLC (“OMP GP”) entered into an Agreement and Plan of Merger (the “OMP Merger”) with Crestwood Equity Partners LP (“Crestwood”). Pursuant to the terms of the OMP Merger, Oasis Petroleum Inc. (the “Company” or “Oasis”) received consideration of $160.0 million in cash and approximately 21 million common units of Crestwood in exchange for the Company’s approximate 70% ownership of OMP and all of the limited liability company interests of OMP GP. In connection with and prior to completion of the OMP Merger, the Company contributed substantially all of its remaining midstream assets to OMP in exchange for cash consideration of $6.7 million. Upon closing of the OMP Merger on February 1, 2022, the Company owns approximately 21.7% of the issued and outstanding common units of Crestwood. In addition, the Company appointed two directors to the Board of Directors of Crestwood GP Equity LLC, a Delaware limited liability company and the general partner of Crestwood (“Crestwood GP”), in connection with the execution of a director nomination agreement at closing, pursuant to which Crestwood granted Oasis director designation rights. Pursuant to the director nomination agreement, for so long as Oasis and its affiliates own 15% of the issued and outstanding Crestwood common units, Oasis may designate two directors to the board of Crestwood GP. Oasis may designate one director if Oasis and its affiliates hold at least 10% (but less than 15%) of the issued and outstanding Crestwood common units. The OMP Merger was unanimously approved by the Board of Directors of both Oasis and Crestwood and was also unanimously approved by the Board of Directors and Conflicts Committee of OMP GP. The OMP Merger represents a strategic shift for the Company and qualifies for reporting as a discontinued operation in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20, Presentation of financial statements – Discontinued Operations (“ASC 205-20”).
Upon closing of the OMP Merger, the Company has the ability to exercise significant influence over Crestwood due to its approximate 21.7% ownership of Crestwood’s issued and outstanding common units and director designation rights. The Company expects to account for its investment in Crestwood under the equity method of accounting in accordance with FASB ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”). The pro forma financial information and historical financial statements related to the acquired equity method investment are not included in this Form 8-K report and will be filed by amendment within 71 calendar days after the date on which this Form 8-K report is required to be filed.
The unaudited pro forma condensed consolidated financial information has been derived from the historical consolidated financial statements of the Company. On November 19, 2020 (the “Emergence Date”), the Company emerged from bankruptcy and adopted fresh start accounting in accordance with FASB ASC 852, Reorganizations (“ASC 852”), which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. References to “Successor” relate to the Company’s financial position and results of operations as of and subsequent to the Emergence Date. References to “Predecessor” relate to the Company’s financial position prior to, and its results of operations through and including, the Emergence Date. The unaudited pro forma condensed consolidated balance sheet at September 30, 2021 was prepared as if the OMP Merger had occurred on September 30, 2021. The unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2021, the period from January 1, 2020 through November 19, 2020 and the period from November 20, 2020 through December 31, 2020 were prepared as if the OMP Merger had occurred on January 1, 2020. In addition, the unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2018 and 2019 were included in accordance with ASC 205-20 to show the effects of the OMP Merger as a discontinued operation for comparative purposes. In accordance with Regulation S-X 11-02, the unaudited pro forma condensed consolidated statements of operations are presented through income from continuing operations.
The unaudited pro forma condensed consolidated financial statements and underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by the Company’s management; accordingly, actual results could differ materially from the pro forma information. Management believes that the assumptions used to prepare the unaudited pro forma condensed consolidated financial information and accompanying notes provide a reasonable and reliably determinable basis for presenting the significant effects of the above transaction. The following unaudited pro forma condensed consolidated statements of operations do not purport to represent what the Company’s results of operations would have been if the OMP Merger had occurred on January 1, 2020. The unaudited pro forma condensed consolidated financial information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021.
Oasis Petroleum Inc.
Condensed Consolidated Balance Sheet (Unaudited)
As of September 30, 2021
(In thousands, except share data)
| Transaction Accounting Adjustments | |||||||
|---|---|---|---|---|---|---|---|
| As Reported | OMP Merger | Pro Forma | |||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 448,608 | $ | (23,032) | (a) | $ | 585,576 |
| 160,000 | (b) | ||||||
| Accounts receivable, net | 269,740 | (5,225) | (a) | 264,515 | |||
| Inventory | 28,309 | (10,149) | (a) | 18,160 | |||
| Prepaid expenses | 4,274 | (1,061) | (a) | 3,213 | |||
| Other current assets | 2,326 | (152) | (a) | 2,174 | |||
| Total current assets | 753,257 | 120,381 | 873,638 | ||||
| Property, plant and equipment | |||||||
| Oil and gas properties (successful efforts method) | 733,585 | 2,760 | (a) | 736,345 | |||
| Other property and equipment | 962,174 | (914,330) | (a) | 47,844 | |||
| Less: accumulated depreciation, depletion and amortization | (112,915) | 29,549 | (a) | (83,366) | |||
| Total property, plant and equipment, net | 1,582,844 | (882,021) | 700,823 | ||||
| Restricted cash – non–current | 400,000 | — | 400,000 | ||||
| Derivative instruments | 39,717 | — | 39,717 | ||||
| Equity method investment in unconsolidated affiliate | — | 591,780 | (c) | 591,780 | |||
| Long-term inventory | 17,510 | — | 17,510 | ||||
| Operating right-of-use assets | 5,115 | (917) | (a) | 4,198 | |||
| Intangible assets | 41,624 | (40,958) | (a) | 666 | |||
| Goodwill | 70,534 | (70,534) | (a) | — | |||
| Other assets | 88,911 | (1,607) | (a) | 87,304 | |||
| Total assets | $ | 2,999,512 | $ | (283,876) | $ | 2,715,636 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 5,522 | $ | (489) | (a) | $ | 5,033 |
| Revenues and production taxes payable | 232,217 | (1,336) | (a) | 230,881 | |||
| Accrued liabilities | 129,000 | (34,537) | (a) | 163,779 | |||
| 60,881 | (d) | ||||||
| 8,435 | (e) | ||||||
| Accrued interest payable | 26,361 | (18,412) | (a) | 7,949 | |||
| Derivative instruments | 266,337 | — | 266,337 | ||||
| Advances from joint interest partners | 1,874 | — | 1,874 | ||||
| Current operating lease liabilities | 1,914 | (973) | (a) | 941 | |||
| Other current liabilities | 1,859 | (564) | (a) | 9,657 | |||
| 8,362 | (f) | ||||||
| Total current liabilities | 665,084 | 21,367 | 686,451 | ||||
| Long-term debt | 1,041,895 | (650,390) | (a) | 391,505 | |||
| Deferred income taxes | 984 | — | 984 | ||||
| Asset retirement obligations | 45,974 | (885) | (a) | 45,089 | |||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Derivative instruments | 142,516 | — | 142,516 | ||||
| Operating lease liabilities | 1,706 | — | 1,706 | ||||
| Other liabilities | 8,022 | (6,358) | (a) | 1,664 | |||
| Total liabilities | 1,906,181 | (636,266) | 1,269,915 | ||||
| Commitments and contingencies | |||||||
| Stockholders’ equity | |||||||
| Common stock, $0.01 par value: 60,000,000 shares authorized; 20,096,011 shares issued and 19,905,228 shares outstanding at September 30, 2021 and 20,093,017 shares issued and 20,093,017 shares outstanding at December 31, 2020 | 200 | — | 200 | ||||
| Treasury stock, at cost: 190,783 shares at September 30, 2021 and no shares at December 31, 2020 | (14,560) | — | (14,560) | ||||
| Additional paid-in capital | 866,992 | — | 866,992 | ||||
| Retained earnings | 51,810 | 541,279 | (g) | 593,089 | |||
| Oasis share of stockholders’ equity | 904,442 | 541,279 | 1,445,721 | ||||
| Non-controlling interests | 188,889 | (188,889) | (a) | — | |||
| Total stockholders’ equity | 1,093,331 | 352,390 | 1,445,721 | ||||
| Total liabilities and stockholders’ equity | $ | 2,999,512 | $ | (283,876) | $ | 2,715,636 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 2021 (Successor)
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||
|---|---|---|---|---|---|---|---|
| As Reported | OMP Merger | Pro Forma | |||||
| Revenues | |||||||
| Oil and gas revenues | $ | 782,324 | $ | (866) | (a) | $ | 781,458 |
| Purchased oil and gas sales | 183,885 | 92,465 | (b) | 276,350 | |||
| Midstream revenues | 183,807 | (183,807) | (a) | — | |||
| Other services revenues | 542 | — | 542 | ||||
| Total revenues | 1,150,558 | (92,208) | 1,058,350 | ||||
| Operating expenses | |||||||
| Lease operating expenses | 98,888 | 47,526 | (a) | 146,414 | |||
| Midstream expenses | 83,841 | (83,841) | (a) | — | |||
| Other services expenses | 47 | — | 47 | ||||
| Gathering, processing and transportation expenses | 52,596 | 38,324 | (a) | 90,920 | |||
| Purchased oil and gas expenses | 187,745 | 88,044 | (b) | 275,789 | |||
| Production taxes | 50,933 | — | 50,933 | ||||
| Depreciation, depletion and amortization | 112,581 | (28,605) | (a) | 83,976 | |||
| Exploration expenses | 1,936 | — | 1,936 | ||||
| Impairment | 5 | (2) | (a) | 3 | |||
| General and administrative expenses | 60,461 | 1,039 | (a) | 61,500 | |||
| Total operating expenses | 649,033 | 62,485 | 711,518 | ||||
| Gain on sale of properties | 228,473 | — | 228,473 | ||||
| Operating income | 729,998 | (154,693) | 575,305 | ||||
| Other expense | |||||||
| Net loss on derivative instruments(1) | (550,342) | — | (550,342) | ||||
| Interest expense, net of capitalized interest | (49,421) | 26,372 | (a) | (23,049) | |||
| Other expense | (859) | 63 | (a) | (796) | |||
| Total other expense | (600,622) | 26,435 | (574,187) | ||||
| Income from continuing operations before income taxes | 129,376 | (128,258) | 1,118 | ||||
| Income tax expense | — | — | — | ||||
| Net income from continuing operations | 129,376 | (128,258) | 1,118 | ||||
| Net income from continuing operations attributable to non-controlling interests | 27,654 | (27,654) | (a) | — | |||
| Net income from continuing operations attributable to Oasis | $ | 101,722 | $ | (100,604) | $ | 1,118 | |
| Net earnings from continuing operations attributable to Oasis per share: | |||||||
| Basic | $ | 5.11 | $ | 0.06 | |||
| Diluted | 4.96 | 0.05 | |||||
| Weighted average shares outstanding: | |||||||
| Basic | 19,905 | 19,905 | |||||
| Diluted | 20,508 | 20,508 |
_______________
(1) The Company recorded an unrealized loss on derivative instruments of $390.3 million during the nine months ended September 30, 2021.
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
| Predecessor | Successor | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Period from January 1, 2020 through November 19, 2020 | Period from November 20, 2020 through December 31, 2020 | ||||||||||||||
| Transaction Accounting Adjustments | Transaction Accounting Adjustments | ||||||||||||||
| Historical Predecessor | OMP Merger | Pro Forma | Historical Successor | OMP Merger | Pro Forma | ||||||||||
| Revenues | |||||||||||||||
| Oil and gas revenues | $ | 603,585 | $ | (2,075) | (a) | $ | 601,510 | $ | 86,442 | $ | (297) | (a) | $ | 86,145 | |
| Purchased oil and gas sales | 186,367 | 50,744 | (b) | 237,111 | 7,227 | 13,406 | (b) | 20,633 | |||||||
| Midstream revenues | 166,631 | (166,631) | (a) | — | 26,031 | (26,031) | (a) | — | |||||||
| Other services revenues | 6,836 | — | 6,836 | 215 | — | 215 | |||||||||
| Total revenues | 963,419 | (117,962) | 845,457 | 119,915 | (12,922) | 106,993 | |||||||||
| Operating expenses | |||||||||||||||
| Lease operating expenses | 118,372 | 42,034 | (a) | 160,406 | 17,841 | 4,676 | (a) | 22,517 | |||||||
| Midstream expenses | 42,987 | (42,987) | (a) | — | 10,572 | (10,572) | (a) | — | |||||||
| Other services expenses | 6,658 | — | 6,658 | — | — | — | |||||||||
| Gathering, processing and transportation expenses | 85,896 | 31,988 | (a) | 117,884 | 9,124 | 4,074 | (a) | 13,198 | |||||||
| Purchased oil and gas expenses | 185,893 | 43,163 | (b) | 229,056 | 7,357 | 12,921 | (b) | 20,278 | |||||||
| Production taxes | 45,439 | — | 45,439 | 5,938 | — | 5,938 | |||||||||
| Depreciation, depletion and amortization | 291,115 | (20,113) | (a) | 271,002 | 16,094 | (2,305) | (a) | 13,789 | |||||||
| Exploration expenses | 2,748 | — | 2,748 | — | — | — | |||||||||
| Rig termination | 1,279 | — | 1,279 | — | — | — | |||||||||
| Impairment | 4,937,143 | (111,613) | (a) | 4,825,530 | — | — | — | ||||||||
| General and administrative expenses | 145,294 | 310 | (a) | 144,700 | 14,224 | 579 | (a) | 14,803 | |||||||
| (904) | (d) | ||||||||||||||
| Litigation settlement | 22,750 | — | 22,750 | — | — | — | |||||||||
| Total operating expenses | 5,885,574 | (58,122) | 5,827,452 | 81,150 | 9,373 | 90,523 | |||||||||
| Gain on sale of properties | 10,396 | — | 10,396 | 11 | — | 11 | |||||||||
| Operating income (loss) | (4,911,759) | (59,840) | (4,971,599) | 38,776 | (22,295) | 16,481 | |||||||||
| Other income (expense) | |||||||||||||||
| Net gain (loss) on derivative instruments | 233,565 | — | 233,565 | (84,615) | — | (84,615) | |||||||||
| Interest expense, net of capitalized interest | (181,484) | 39,648 | (a) | (141,836) | (3,168) | 1,148 | (a) | (2,020) | |||||||
| Gain on extinguishment of debt | 83,867 | — | 83,867 | — | — | — | |||||||||
| Reorganization items, net | 786,831 | (120,915) | (e) | 665,916 | — | — | — | ||||||||
| Other income (expense) | 1,407 | (136) | (a) | 1,271 | (402) | 1 | (a) | (401) | |||||||
| Total other income (expense), net | 924,186 | (81,403) | 842,783 | (88,185) | 1,149 | (87,036) | |||||||||
| Loss from continuing operations before income taxes | (3,987,573) | (141,243) | (4,128,816) | (49,409) | (21,146) | (70,555) | |||||||||
| Income tax benefit (expense) | 262,962 | (8,362) | (c) | 254,600 | 3,447 | — | 3,447 | ||||||||
| Net loss from continuing operations | (3,724,611) | (149,605) | (3,874,216) | (45,962) | (21,146) | (67,108) | |||||||||
| Net income (loss) from continuing operations attributable to non-controlling interests | (84,283) | 6,546 | (a) | — | 3,950 | (3,950) | (a) | — | |||||||
| 77,737 | (f) | ||||||||||||||
| Net loss from continuing operations attributable to Oasis | $ | (3,640,328) | $ | (233,888) | $ | (3,874,216) | $ | (49,912) | $ | (17,196) | $ | (67,108) | |||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Net loss from continuing operations attributable to Oasis per share: | |||||||||||||||
| Basic | $ | (11.46) | $ | (12.20) | $ | (2.50) | $ | (3.36) | |||||||
| Diluted | (11.46) | (12.20) | (2.50) | (3.36) | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 317,644 | 317,644 | 19,991 | 19,991 | |||||||||||
| Diluted | 317,644 | 317,644 | 19,991 | 19,991 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 2019 (Predecessor)
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||
|---|---|---|---|---|---|---|---|
| As Reported | OMP Merger | Pro Forma | |||||
| Revenues | |||||||
| Oil and gas revenues | $ | 1,408,771 | $ | (962) | (a) | $ | 1,407,809 |
| Purchased oil and gas sales | 408,791 | 72,223 | (b) | 481,014 | |||
| Midstream revenues | 212,208 | (212,208) | (a) | — | |||
| Other services revenues | 41,974 | — | 41,974 | ||||
| Total revenues | 2,071,744 | (140,947) | 1,930,797 | ||||
| Operating expenses | |||||||
| Lease operating expenses | 223,384 | 65,306 | (a) | 288,690 | |||
| Midstream expenses | 62,146 | (62,146) | (a) | — | |||
| Other services expenses | 28,761 | — | 28,761 | ||||
| Gathering, processing and transportation expenses | 128,806 | 45,220 | (a) | 174,026 | |||
| Purchased oil and gas expenses | 409,180 | 65,734 | (b) | 474,914 | |||
| Production taxes | 112,592 | — | 112,592 | ||||
| Depreciation, depletion and amortization | 787,192 | (15,552) | (a) | 771,640 | |||
| Exploration expenses | 6,658 | — | 6,658 | ||||
| Rig termination | 384 | — | 384 | ||||
| Impairment | 10,257 | — | 10,257 | ||||
| General and administrative expenses | 143,506 | 5,089 | (a) | 148,595 | |||
| Total operating expenses | 1,912,866 | 103,651 | 2,016,517 | ||||
| Loss on sale of properties | (4,455) | — | (4,455) | ||||
| Operating income (loss) | 154,423 | (244,598) | (90,175) | ||||
| Other income (expense) | |||||||
| Net loss on derivative instruments | (106,314) | — | (106,314) | ||||
| Interest expense, net of capitalized interest | (176,223) | 16,936 | (a) | (159,287) | |||
| Gain on extinguishment of debt | 4,312 | — | 4,312 | ||||
| Other income | 440 | 129 | (a) | 569 | |||
| Total other income (expense), net | (277,785) | 17,065 | (260,720) | ||||
| Loss from continuing operations before income taxes | (123,362) | (227,533) | (350,895) | ||||
| Income tax benefit | 32,715 | — | 32,715 | ||||
| Net loss from continuing operations | (90,647) | (227,533) | (318,180) | ||||
| Net income from continuing operations attributable to non-controlling interests | 37,596 | (37,596) | (a) | — | |||
| Net loss from continuing operations attributable to Oasis | $ | (128,243) | $ | (189,937) | $ | (318,180) | |
| Net loss from continuing operations attributable to Oasis per share: | |||||||
| Basic | $ | (0.41) | $ | (1.01) | |||
| Diluted | (0.41) | (1.01) | |||||
| Weighted average shares outstanding: | |||||||
| Basic | 315,002 | 315,002 | |||||
| Diluted | 315,002 | 315,002 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 2018 (Predecessor)
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||
|---|---|---|---|---|---|---|---|
| As Reported | OMP Merger | Pro Forma | |||||
| Revenues | |||||||
| Oil and gas revenues | $ | 1,590,024 | $ | — | $ | 1,590,024 | |
| Purchased oil and gas sales | 550,344 | 1,464 | (b) | 551,808 | |||
| Midstream revenues | 120,504 | (120,504) | (a) | — | |||
| Other services revenues | 61,075 | — | 61,075 | ||||
| Total revenues | 2,321,947 | (119,040) | 2,202,907 | ||||
| Operating expenses | |||||||
| Lease operating expenses | 193,912 | 53,611 | (a) | 247,523 | |||
| Midstream expenses | 32,758 | (32,758) | (a) | — | |||
| Other services expenses | 41,200 | — | 41,200 | ||||
| Gathering, processing and transportation expenses | 107,193 | 24,770 | (a) | 131,963 | |||
| Purchased oil and gas expenses | 553,461 | 1,445 | (b) | 554,906 | |||
| Production taxes | 133,696 | — | 133,696 | ||||
| Depreciation, depletion and amortization | 636,296 | (12,285) | (a) | 624,011 | |||
| Exploration expenses | 27,432 | — | 27,432 | ||||
| Impairment | 384,228 | — | 384,228 | ||||
| General and administrative expenses | 121,346 | 6,403 | (a) | 127,749 | |||
| Total operating expenses | 2,231,522 | 41,186 | 2,272,708 | ||||
| Gain on sale of properties | 28,587 | — | 28,587 | ||||
| Operating income (loss) | 119,012 | (160,226) | (41,214) | ||||
| Other income (expense) | |||||||
| Net gain on derivative instruments | 28,457 | — | 28,457 | ||||
| Interest expense, net of capitalized interest | (159,085) | 2,343 | (a) | (156,742) | |||
| Loss on extinguishment of debt | (13,848) | — | (13,848) | ||||
| Total other income (expense), net | (144,355) | 2,343 | (142,012) | ||||
| Loss from continuing operations before income taxes | (25,343) | (157,883) | (183,226) | ||||
| Income tax benefit | 5,843 | — | 5,843 | ||||
| Net loss from continuing operations | (19,500) | (157,883) | (177,383) | ||||
| Net income from continuing operations attributable to non-controlling interests | 15,796 | (15,796) | (a) | — | |||
| Net loss from continuing operations attributable to Oasis | $ | (35,296) | $ | (142,087) | $ | (177,383) | |
| Net loss from continuing operations attributable to Oasis per share: | |||||||
| Basic | $ | (0.11) | $ | (0.58) | |||
| Diluted | (0.11) | (0.58) | |||||
| Weighted average shares outstanding: | |||||||
| Basic | 307,480 | 307,480 | |||||
| Diluted | 307,480 | 307,480 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
- Basis of Presentation
On October 25, 2021, OMP and OMP GP entered into the OMP Merger with Crestwood. Pursuant to the terms of the OMP Merger, the Company received $160.0 million in cash and approximately 21 million common units of Crestwood in exchange for its approximate 70% ownership of OMP and all of the limited liability company interests of OMP GP. In connection with and prior to completion of the OMP Merger, the Company contributed substantially all of its remaining midstream assets to OMP in exchange for cash consideration of $6.7 million. The OMP Merger was completed on February 1, 2022. Upon closing of the OMP Merger, the Company owns approximately 21.7% of the issued and outstanding common units of Crestwood. In addition, the Company appointed two directors to the Board of Directors of Crestwood GP in connection with the execution of a director nomination agreement at closing.
The OMP Merger represents a strategic shift for the Company and qualifies for reporting as a discontinued operation in accordance with ASC 205-20. At closing, the Company will account for the derecognition of OMP from its consolidated financial statements in accordance with FASB ASC 810-10, Consolidation (“ASC 810-10”). In accordance with ASC 810-10, since the Company no longer controls OMP, the Company will deconsolidate OMP from its consolidated financial statements by derecognizing the assets, liabilities and equity of OMP, including non-controlling interests. Upon deconsolidation, the Company expects to record a gain under income from discontinued operations, net of income tax. In accordance with Article 11 of Regulation S-X, the pro forma adjustments presented herein do not show the effects of the estimated gain on sale of $549.6 million (including estimated transaction costs of $17.9 million) on the pro forma unaudited condensed consolidated statements of operations since this item will be recorded to income from discontinued operations.
In addition, upon closing of the OMP Merger, the Company has the ability to exercise significant influence over Crestwood due to its approximate 21.7% ownership of Crestwood’s issued and outstanding common units and director designation rights. The Company expects to account for its investment in Crestwood under the equity method of accounting in accordance with ASC 323. The pro forma financial information and historical financial statements related to the acquired equity method investment are not included in this Form 8-K report and will be filed by amendment within 71 calendar days after the date on which this Form 8-K report is required to be filed.
The unaudited pro forma condensed consolidated financial information has been derived from the historical consolidated financial statements of the Company. The unaudited pro forma condensed consolidated balance sheet at September 30, 2021 was prepared as if the OMP Merger had occurred on September 30, 2021. The unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2021, the period from January 1, 2020 through November 19, 2020 and the period from November 20, 2020 through December 31, 2020 were prepared as if the OMP Merger had occurred on January 1, 2020. In addition, the unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2018 and 2019 were included in accordance with ASC 205-20 to show the effects of the OMP Merger as a discontinued operation for comparative purposes. In accordance with Regulation S-X 11-02, the unaudited pro forma condensed consolidated statements of operations are presented through income from continuing operations.
The unaudited pro forma condensed consolidated financial statements and underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by management; accordingly, actual results could differ materially from the pro forma information. Management believes the assumptions provide a reasonable and reliably determinable basis for presenting the significant effects of the transactions described above. These unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and may or may not provide an indication of results in the future.
- Pro Forma Adjustments and Assumptions
Balance Sheet
The unaudited pro forma condensed consolidated balance sheet at September 30, 2021 reflects the following adjustments:
(a) Represents the derecognition of assets, liabilities and equity components of OMP in connection with the OMP Merger.
(b) Represents the cash consideration received upon closing of the OMP Merger.
(c) Represents the estimated fair value of equity consideration received in the OMP Merger calculated as 21 million common units representing limited partner interests in Crestwood multiplied by the closing price of Crestwood’s publicly traded common units on February 1, 2022 of $28.18 per common unit.
(d) Represents intercompany payables from Oasis to OMP for midstream services as of September 30, 2021. The Company will have continuing cash outflows to Crestwood for gathering, processing, transportation and water handling costs pursuant to the existing contractual arrangements between the Company and OMP that were assigned to Crestwood at closing.
(e) Represents the estimated transaction costs from the OMP Merger incurred by Oasis. Excludes estimated transaction costs from the OMP Merger of $9.5 million that were incurred by OMP.
(f) Represents the estimated income tax impact from the OMP Merger.
(g) Represents the impact to retained earnings from the estimated gain recorded in connection with the OMP Merger of $549.6 million, offset by the estimated income tax impact from the OMP Merger of $8.4 million. The estimated gain was calculated as follows:
| (In thousands) | ||
|---|---|---|
| Cash consideration | $ | 160,000 |
| Fair value of equity consideration | 591,780 | |
| Carrying amount of non-controlling interests in OMP | 188,889 | |
| Less: | ||
| Carrying amount of OMP assets | $ | 1,096,537 |
| Carrying amount of OMP liabilities | (723,400) | |
| Carrying amount of OMP net assets | $ | 373,137 |
| Estimated transaction costs(1) | 17,891 | |
| Gain from OMP Merger | $ | 549,641 |
(1) Includes estimated transaction costs of $8.4 million incurred by Oasis and $9.5 million incurred by OMP.
Statements of Operations
The unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2021, the period from January 1, 2020 through November 19, 2020, the period from November 20, 2020 through December 31, 2020, the year ended December 31, 2019 and the year ended December 31, 2018 reflect the following adjustments:
(a) Represents the derecognition of revenues and expenses from the OMP Merger. The Company will have continuing cash outflows to Crestwood for gathering, processing, transportation and water handling costs pursuant to the existing contractual arrangements between the Company and OMP that were assigned to Crestwood at closing. Historically, these transactions were eliminated within lease operating expenses and gathering, processing and transportation expenses for operated properties and within oil and gas revenues for non-operated properties.
(b) Represents the purchase of residue gas and natural gas liquids (“NGLs”), which were subsequently sold to third parties. The Company has historically eliminated the intercompany purchase of residue gas and NGLs from OMP in its consolidated financial statements within midstream expenses. In addition, the subsequent sale of residue gas and NGLs to third parties that was purchased from OMP has historically been reported within midstream revenues. The Company has reclassified these transactions to purchased oil and gas expenses and purchased oil and gas sales, respectively, to reflect their continuing impact.
(c) Represents the estimated income tax impact from the OMP Merger.
(d) Represents the unrecognized compensation cost that was immediately expensed on the Emergence Date primarily for Class B units in OMP GP.
(e) Represents reorganization items recognized on the Emergence Date, as follows:
| (In thousands) | ||
|---|---|---|
| Gain on debt discharge(1) | $ | 28,014 |
| Gain on revaluation adjustments | 92,901 | |
| Total reorganization items, net | $ | 120,915 |
(1) Represents the write-off of a specified default interest charge incurred during 2020 by OMP that was waived on the Emergence Date.
(f) Represents the impacts to non-controlling interests from the application of fresh start accounting during 2020 as follows: (i) net loss from fresh start adjustments attributable to non-controlling interests of $86.8 million; offset by (ii) net income from reorganization adjustments attributable to non-controlling interests of $9.1 million.
11