Chord Energy Corp 8-K/A, filed Dec 20, 2021
Chord Energy Corp (CHRD)
8-K/A
2021-12-20
For: 2021-10-21
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Added on
April 08, 2026
About this 8-K/A
Chord Energy Corp filed this 8-K/A on December 20, 2021, reporting on events of October 21, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________
FORM 8-K/A
(Amendment No. 1)
____________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 2021
____________________________________________________________________
(Exact name of registrant as specified in its charter)
____________________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (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 | ||||||||||||
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. ☐
EXPLANATORY NOTE
On October 22, 2021, Oasis Petroleum Inc. (the “Company”) filed a Current Report on Form 8-K (the “Initial Report”) to report the closing on October 21, 2021 of the Company’s acquisition of approximately 95,000 net acres in the Williston Basin from QEP Energy Company, a wholly-owned subsidiary of Diamondback Energy, Inc. for an aggregate purchase price of $745.0 million (the “Williston Basin Acquisition”). This Current Report on Form 8-K/A (the “Amendment”) amends and supplements the Initial Report to provide the financial statements for the properties acquired in the Williston Basin Acquisition and the pro forma financial information required by Item 9.01 of Form 8-K. No other modifications to the Initial Report are being made by this Amendment. This Amendment should be read in connection with the Initial Report, which provides a more complete description of the Williston Basin Acquisition.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Statements of Revenues and Direct Operating Expenses of the properties acquired in the Williston Basin Acquisition for the years ended December 31, 2020 and 2019 (audited) and for the nine-month periods ended September 30, 2021 and 2020 (unaudited), together with the accompanying Independent Auditor's Report, are set forth in Exhibit 99.1.
(b) Pro Forma Financial Information
The Unaudited Pro Forma Condensed Consolidated Combined Financial Information of the Company as of September 30, 2021 and for the nine months ended September 30, 2021 and the years ended December 31, 2020, 2019 and 2018 are set forth in Exhibit 99.2.
(d) Exhibits
| Exhibit No. | Description of Exhibit | |||||||
| Statements of Revenues and Direct Operating Expenses of the properties acquired in the Williston Basin Acquisition for the years ended December 31, 2020 and 2019 (audited) and for the nine-month periods ended September 30, 2021 and 2020 (unaudited). | ||||||||
| Unaudited Pro Forma Condensed Consolidated Combined Financial Information of the Company as of September 30, 2021 and for the nine months ended September 30, 2021 and the years ended December 31, 2020, 2019 and 2018. | ||||||||
| 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. (Registrant) | |||||||||||||||||
| Date: December 17, 2021 | By: | /s/ Nickolas J. Lorentzatos | |||||||||||||||
| Nickolas J. Lorentzatos | |||||||||||||||||
| Executive Vice President, General Counsel and Corporate Secretary | |||||||||||||||||
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated combined financial information and accompanying notes reflect the pro forma effects of:
1.On November 19, 2020 (the “Emergence Date”), Oasis Petroleum Inc. (the “Company” or “Oasis”) emerged from bankruptcy and adopted fresh start accounting in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification 852, Reorganizations, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. References to “Predecessor” relate to the period from January 1, 2018 through November 19, 2020, and references to “Successor” relate to the period from November 20, 2020 through September 30, 2021.
2.On June 9, 2021, the Company issued $400.0 million of 6.375% senior unsecured notes due June 1, 2026 (the “Oasis Senior Notes”). The Company used the proceeds from the Oasis Senior Notes to finance a portion of the consideration for the Williston Basin Acquisition (defined below).
3.On June 29, 2021, the Company completed the divestiture of its exploration and production assets in the Texas region of the Permian Basin, effective March 1, 2021, to Percussion Petroleum Operating II, LLC for cash proceeds of $347.3 million (the “Permian Basin Sale”). The Company used a portion of the proceeds from the Permian Basin Sale to finance a portion of the consideration for the Williston Basin Acquisition (defined below).
4.On October 21, 2021, the Company completed its acquisition of approximately 95,000 net acres in the Williston Basin, effective April 1, 2021, from QEP Energy Company (“QEP”), a wholly-owned subsidiary of Diamondback Energy Inc., for total cash consideration of $585.8 million (the “Williston Basin Acquisition”). The total cash consideration was comprised of a deposit of $74.5 million paid on May 3, 2021 and $511.3 million paid at closing on October 21, 2021. The Company funded the Williston Basin Acquisition with cash on hand, including proceeds from the Permian Basin Sale and proceeds from the Oasis Senior Notes. The Company expects the Williston Basin Acquisition to qualify as an asset acquisition under accounting principles generally accepted in the United States of America, as the Williston Basin Acquisition does not meet the definition of a business under the FASB Accounting Standards Codification 805, Business Combinations, since substantially all of the fair value of the assets acquired are concentrated in a single asset group.
5.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, the Company will receive $160.0 million in cash and approximately 21 million common units of Crestwood in exchange for its approximate 70% ownership of OMP and its non-economic general partner interest in OMP GP. In connection with and prior to completion of the OMP Merger, the Company expects to contribute substantially all of its remaining midstream assets to OMP in exchange for cash consideration of approximately $6.7 million. Upon closing of the OMP Merger, the Company expects to own approximately 22% of the limited partner interests of Crestwood. As a result of this transaction, the Company will be a single basin exploration and production company. The OMP Merger represents a strategic shift for the Company and qualifies as a discontinued operation in accordance with FASB Accounting Standards Codification 205-20, Presentation of financial statements – Discontinued Operations (“ASC 205-20”). The pro forma adjustments presented herein show the effects of the OMP Merger as discontinued operations under ASC 205-20, as well as the classification of the assets and liabilities as held for sale. The Company expects the OMP Merger to be completed in the first quarter of 2022 and will file a Form 8-K under Item 2.01 upon closing. The pro forma financial information presented in such Form 8-K may contain values, adjustments and other information that differ from those contained in the pro forma financial information presented herein to, among other things, include pro forma financial information to show the pro forma effects of the OMP Merger as a significant disposition. The foregoing differences may be material individually or in the aggregate.
The unaudited pro forma condensed consolidated combined financial information has been derived from the historical consolidated financial statements of the Company and the historical Statements of Revenues and Direct Operating Expenses of properties acquired in the Williston Basin Acquisition (which were derived from information provided by QEP).
The unaudited pro forma condensed consolidated combined balance sheet at September 30, 2021 was prepared as if the Williston Basin Acquisition and OMP Merger had occurred on September 30, 2021. No pro forma adjustments were necessary to reflect the Company’s adoption of fresh start accounting, the Permian Basin Sale and the issuance of the Oasis Senior Notes, as these transactions were already included in the Company’s historical unaudited condensed consolidated balance sheet at September 30, 2021.
1
The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and for the year ended December 31, 2020 were prepared as if the fresh start accounting adjustments recorded on the Emergence Date, the OMP Merger, the Williston Basin Acquisition, the Permian Basin Sale and the issuance of the Oasis Senior Notes 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.
The unaudited pro forma condensed consolidated combined 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 combined financial information and accompanying notes provide a reasonable and reliably determinable basis for presenting the significant effects of the above transactions. The following unaudited pro forma condensed consolidated combined statements of operations do not purport to represent what the Company’s results of operations would have been if the Emergence Date, the Williston Basin Acquisition, the Permian Basin Sale, the issuance of the Oasis Senior Notes and the OMP Merger had occurred on January 1, 2020. The unaudited pro forma condensed consolidated combined financial information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 and the historical Statements of Revenues and Direct Operating Expenses and notes thereto of the Williston Basin Acquisition properties filed as Exhibit 99.1 to the Current Report on Form 8-K of which this Exhibit 99.2 is a part.
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Oasis Petroleum Inc.
Condensed Consolidated Combined Balance Sheet (Unaudited)
As of September 30, 2021
(In thousands, except share data)
| Transaction Accounting Adjustments | |||||||||||||||||||||||||||||||||||
| As Reported | Discontinued Operations | Williston Basin Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | ( | (a) | $ | ( | (b) | $ | |||||||||||||||||||||||||||
| Accounts receivable, net | ( | (a) | |||||||||||||||||||||||||||||||||
| Inventory | ( | (a) | (c) | ||||||||||||||||||||||||||||||||
| Prepaid expenses | ( | (a) | |||||||||||||||||||||||||||||||||
| Other current assets | ( | (a) | |||||||||||||||||||||||||||||||||
| Current assets held for sale | (a) | ||||||||||||||||||||||||||||||||||
| Total current assets | ( | ||||||||||||||||||||||||||||||||||
| Property, plant and equipment | |||||||||||||||||||||||||||||||||||
| Oil and gas properties (successful efforts method) | (a) | (c) | |||||||||||||||||||||||||||||||||
| Other property and equipment | ( | (a) | (c) | ||||||||||||||||||||||||||||||||
| Less: accumulated depreciation, depletion and amortization | ( | (a) | ( | ||||||||||||||||||||||||||||||||
| Total property, plant and equipment, net | ( | ||||||||||||||||||||||||||||||||||
| Restricted cash – non–current | ( | (b) | |||||||||||||||||||||||||||||||||
| Derivative instruments | |||||||||||||||||||||||||||||||||||
| Long-term inventory | (c) | ||||||||||||||||||||||||||||||||||
| Operating right-of-use assets | ( | (a) | |||||||||||||||||||||||||||||||||
| Intangible assets | ( | (a) | |||||||||||||||||||||||||||||||||
| Goodwill | ( | (a) | |||||||||||||||||||||||||||||||||
| Other assets | ( | (a) | ( | (b),(c) | |||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||||||||||||
| Accounts payable | $ | $ | ( | (a) | $ | $ | |||||||||||||||||||||||||||||
| Revenues and production taxes payable | ( | (a) | (c) | ||||||||||||||||||||||||||||||||
| Accrued liabilities | ( | (a) | (c),(d) | ||||||||||||||||||||||||||||||||
| Accrued interest payable | ( | (a) | |||||||||||||||||||||||||||||||||
| Derivative instruments | |||||||||||||||||||||||||||||||||||
| Advances from joint interest partners | |||||||||||||||||||||||||||||||||||
| Current operating lease liabilities | ( | (a) | |||||||||||||||||||||||||||||||||
| Other current liabilities | ( | (a) | |||||||||||||||||||||||||||||||||
| Current liabilities held for sale | (a) | ||||||||||||||||||||||||||||||||||
| Total current liabilities | |||||||||||||||||||||||||||||||||||
| Long-term debt | ( | (a) | |||||||||||||||||||||||||||||||||
| Deferred income taxes | |||||||||||||||||||||||||||||||||||
| Asset retirement obligations | ( | (a) | (c) | ||||||||||||||||||||||||||||||||
| Derivative instruments | |||||||||||||||||||||||||||||||||||
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| Operating lease liabilities | |||||||||||||||||||||||||||||||||||
| Other liabilities | ( | (a) | (c) | ||||||||||||||||||||||||||||||||
| Total liabilities | |||||||||||||||||||||||||||||||||||
Commitments and contingencies | |||||||||||||||||||||||||||||||||||
| Stockholders’ equity | |||||||||||||||||||||||||||||||||||
Common stock, $ | |||||||||||||||||||||||||||||||||||
Treasury stock, at cost: | ( | ( | |||||||||||||||||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||||||||||||||
| Retained earnings | (c) | ||||||||||||||||||||||||||||||||||
| Oasis share of stockholders’ equity | |||||||||||||||||||||||||||||||||||
Non-controlling interests(1) | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | |||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
_______________
(1) The minority interest ownership in OMP held by public unitholders will be eliminated upon completion of the OMP Merger.
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
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Oasis Petroleum Inc.
Condensed Consolidated Combined Statements of Operations (Unaudited)
Nine Months Ended September 30, 2021
(In thousands, except per share data)
| Transaction Accounting Adjustments | Transaction Accounting Adjustments | Other Transaction Accounting Adjustments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As Reported | Discontinued Operations | As Adjusted | Williston Basin Acquisition | Williston Basin Acquisition | Permian Basin Sale | Oasis Senior Notes | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil and gas revenues | $ | $ | ( | (a) | $ | $ | (c) | $ | $ | ( | (f) | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas sales | (b) | ( | (f) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream revenues | ( | (a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease operating expenses | (a) | (c) | ( | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream expenses | ( | (a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | (a) | (c) | ( | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas expenses | (b) | ( | (f) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production taxes | (c) | ( | (f) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ( | (a) | (d) | ( | (f) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exploration expenses | ( | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment | ( | (a) | ( | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | (a) | (e) | ( | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of properties | ( | (g) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss on derivative instruments(1) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | ( | (a) | ( | ( | (i) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense | ( | (a) | ( | (f) | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Net income (loss) from continuing operations including non-controlling interests | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income from continuing operations attributable to non-controlling interests | ( | (a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) from continuing operations attributable to Oasis | $ | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) from continuing operations attributable to Oasis per share: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
_______________
(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 combined financial statements.
6
Oasis Petroleum Inc.
Condensed Consolidated Combined Statements of Operations (Unaudited)
Year Ended December 31, 2020
(In thousands, except per share data)
| Transaction Accounting Adjustments | Other Transaction Accounting Adjustments | ||||||||||||||||||||||||||||||||||
| Successor and Predecessor Pro Forma Combined | Williston Basin Acquisition | Williston Basin Acquisition | Permian Basin Sale | Oasis Senior Notes | Pro Forma | ||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Oil and gas revenues | $ | $ | (c) | $ | $ | ( | (f) | $ | $ | ||||||||||||||||||||||||||
| Purchased oil and gas sales | ( | (f) | |||||||||||||||||||||||||||||||||
| Other services revenues | |||||||||||||||||||||||||||||||||||
| Total revenues | ( | ||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||
| Lease operating expenses | (c) | ( | (f) | ||||||||||||||||||||||||||||||||
| Other services expenses | |||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | (c) | ( | (f) | ||||||||||||||||||||||||||||||||
| Purchased oil and gas expenses | ( | (f) | |||||||||||||||||||||||||||||||||
| Production taxes | (c) | ( | (f) | ||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | (d) | ( | (f) | ||||||||||||||||||||||||||||||||
| Exploration expenses | ( | (f) | |||||||||||||||||||||||||||||||||
| Rig termination | ( | (f) | |||||||||||||||||||||||||||||||||
| Impairment | ( | (f) | |||||||||||||||||||||||||||||||||
| General and administrative expenses | (e) | ( | (f) | ||||||||||||||||||||||||||||||||
| Litigation settlement | |||||||||||||||||||||||||||||||||||
| Total operating expenses | ( | ||||||||||||||||||||||||||||||||||
| Gain on sale of properties | (g) | ||||||||||||||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments | |||||||||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | ( | ( | (i) | ( | |||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | |||||||||||||||||||||||||||||||||||
| Other income (expense) | ( | (f) | |||||||||||||||||||||||||||||||||
| Total other income (expense), net | ( | ( | |||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Income tax benefit (expense) | ( | (h) | |||||||||||||||||||||||||||||||||
| Net income (loss) from continuing operations | $ | ( | $ | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis per share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
| Diluted | ( | ( | |||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||
7
Basic | |||||||||||||||||||||||||||||||||||
Diluted | |||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
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Oasis Petroleum Inc.
Condensed Consolidated Combined Statements of Operations (Unaudited)
Year Ended December 31, 2020
(In thousands, except per share data)
| Predecessor | Successor | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction Accounting Adjustments | Transaction Accounting Adjustments | Transaction Accounting Adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Historical Predecessor | Discontinued Operations | Fresh Start Accounting–Discontinued Operations | As Adjusted | Fresh Start Accounting–Continuing Operations | As Further Adjusted(1) | Historical Successor | Discontinued Operations | As Adjusted | Successor and Predecessor Pro Forma Combined(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil and gas revenues | $ | $ | ( | (a) | $ | $ | $ | $ | $ | $ | ( | (a) | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas sales | (b) | (b) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream revenues | ( | (a) | ( | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease operating expenses | (a) | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream expenses | ( | (a) | ( | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | (a) | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas expenses | (b) | (b) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production taxes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | ( | (a) | ( | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exploration expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rig termination | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment | ( | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | (a) | ( | (j) | ( | (m) | (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Litigation settlement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9
| Gain on sale of properties | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net gain (loss) on derivative instruments | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | ( | (a) | ( | ( | ( | (a) | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reorganization items, net | ( | (k) | ( | (n) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense) | ( | (a) | ( | (a) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other income (expense), net | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss from continuing operations before income taxes | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax benefit | (o) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss from continuing operations including non-controlling interests | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) from continuing operations attributable to non-controlling interests | ( | (a) | (l) | ( | (a) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis per share: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10
Diluted | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
_______________
(1) Represents the Company’s results of operations after giving effect to the OMP Merger and fresh start accounting adjustments.
(2) Represents the combined results of operations of the Predecessor and Successor after giving effect to the OMP Merger and fresh start accounting adjustments.
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
11
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 2019
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||||||||||||||||||
As Reported | Discontinued Operations | Pro Forma | |||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Oil and gas revenues | $ | $ | ( | (a) | $ | ||||||||||||||||||
| Purchased oil and gas sales | (b) | ||||||||||||||||||||||
| Midstream revenues | ( | (a) | |||||||||||||||||||||
| Other services revenues | |||||||||||||||||||||||
| Total revenues | ( | ||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Lease operating expenses | (a) | ||||||||||||||||||||||
| Midstream expenses | ( | (a) | |||||||||||||||||||||
| Other services expenses | |||||||||||||||||||||||
| Gathering, processing and transportation expenses | (a) | ||||||||||||||||||||||
| Purchased oil and gas expenses | (b) | ||||||||||||||||||||||
| Production taxes | |||||||||||||||||||||||
| Depreciation, depletion and amortization | ( | (a) | |||||||||||||||||||||
| Exploration expenses | |||||||||||||||||||||||
| Rig termination | |||||||||||||||||||||||
| Impairment | |||||||||||||||||||||||
| General and administrative expenses | (a) | ||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss on sale of properties | ( | ( | |||||||||||||||||||||
| Operating income (loss) | ( | ( | |||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Net loss on derivative instruments | ( | ( | |||||||||||||||||||||
| Interest expense, net of capitalized interest | ( | (a) | ( | ||||||||||||||||||||
| Gain on extinguishment of debt | |||||||||||||||||||||||
| Other income | (a) | ||||||||||||||||||||||
| Total other income (expense), net | ( | ( | |||||||||||||||||||||
| Loss from continuing operations before income taxes | ( | ( | ( | ||||||||||||||||||||
| Income tax benefit | |||||||||||||||||||||||
| Net loss from continuing operations including non-controlling interests | ( | ( | ( | ||||||||||||||||||||
| Net income from continuing operations attributable to non-controlling interests | ( | (a) | |||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Net loss attributable to Oasis from continuing operations per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | |||||||||||||||||||
| Diluted | ( | ( | |||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
12
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 2018
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||||||||||||||||||
As Reported | Discontinued Operations | Pro Forma | |||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Oil and gas revenues | $ | $ | $ | ||||||||||||||||||||
| Purchased oil and gas sales | (b) | ||||||||||||||||||||||
| Midstream revenues | ( | (a) | |||||||||||||||||||||
| Other services revenues | |||||||||||||||||||||||
| Total revenues | ( | ||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Lease operating expenses | (a) | ||||||||||||||||||||||
| Midstream expenses | ( | (a) | |||||||||||||||||||||
| Other services expenses | |||||||||||||||||||||||
| Gathering, processing and transportation expenses | (a) | ||||||||||||||||||||||
| Purchased oil and gas expenses | (b) | ||||||||||||||||||||||
| Production taxes | |||||||||||||||||||||||
| Depreciation, depletion and amortization | ( | (a) | |||||||||||||||||||||
| Exploration expenses | |||||||||||||||||||||||
| Impairment | |||||||||||||||||||||||
| General and administrative expenses | (a) | ||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Gain on sale of properties | |||||||||||||||||||||||
| Operating income (loss) | ( | ( | |||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Net gain on derivative instruments | |||||||||||||||||||||||
| Interest expense, net of capitalized interest | ( | (a) | ( | ||||||||||||||||||||
| Loss on extinguishment of debt | ( | ( | |||||||||||||||||||||
| Total other income (expense), net | ( | ( | |||||||||||||||||||||
| Loss from continuing operations before income taxes | ( | ( | ( | ||||||||||||||||||||
| Income tax benefit | |||||||||||||||||||||||
| Net loss from continuing operations including non-controlling interests | ( | ( | ( | ||||||||||||||||||||
| Net income from continuing operations attributable to non-controlling interests | ( | (a) | |||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis | $ | ( | $ | ( | $ | ( | |||||||||||||||||
| Net loss attributable to Oasis from continuing operations per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | |||||||||||||||||||
| Diluted | ( | ( | |||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
13
Notes to Unaudited Pro Forma Condensed Consolidated Combined Financial Information
1. Basis of Presentation
On October 21, 2021, the Company completed its previously announced acquisition of approximately 95,000 net acres in the Williston Basin, effective April 1, 2021, from QEP Energy Company (“QEP”), a wholly-owned subsidiary of Diamondback Energy Inc., for total cash consideration of $585.8 million (the “Williston Basin Acquisition”). The total cash consideration was comprised of a deposit of $74.5 million paid on May 3, 2021 and $511.3 million paid at closing on October 21, 2021. The Company funded the Williston Basin Acquisition with cash on hand, including proceeds from the divestiture of its exploration and production assets in the Texas region of the Permian Basin on June 29, 2021 (the “Permian Basin Sale”) and proceeds from the issuance of $400.0 million 6.375 % senior unsecured notes due June 1, 2026 (the “Oasis Senior Notes”) on June 9, 2021. The Company expects the Williston Basin Acquisition to qualify as an asset acquisition under accounting principles generally accepted in the United States of America as the Williston Basin Acquisition does not meet the definition of a business under the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, since substantially all of the fair value of the assets acquired are concentrated in a single asset group. The Company has applied the cost accumulation model under FASB ASC 805-50, Business Combinations - Acquisitions of Assets Rather than a Business (“ASC 805-50”), and as such, recognized the Williston Basin Acquisition at cost, which includes transaction costs. The Company does not expect any material deferred income taxes from the Williston Basin Acquisition, as the tax basis of the assets acquired and liabilities assumed was equal to the book basis at closing.
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, the Company will receive $160.0 million in cash and approximately 21 million common units of Crestwood in exchange for its approximate 70 % ownership of OMP and its non-economic general partner interest in OMP GP. In connection with and prior to completion of the OMP Merger, the Company expects to contribute substantially all of its remaining midstream assets to OMP in exchange for cash consideration of approximately $6.7 million. Upon closing of the OMP Merger, the Company expects to own approximately 22 % of the limited partner interests of Crestwood. As a result of this transaction, the Company will be a single basin exploration and production company. The OMP Merger represents a strategic shift for the Company and qualifies as discontinued operations in accordance with FASB ASC 205-20, Presentation of financial statements – Discontinued Operations (“ASC 205-20”). The pro forma adjustments presented herein show the effects of the OMP Merger as discontinued operations under ASC 205-20, as well as the classification of the assets and liabilities as held for sale. The Company expects the OMP Merger to be completed in the first quarter of 2022 and will file a Form 8-K under Item 2.01 upon closing. The pro forma financial information presented in such Form 8-K may contain values, adjustments and other information that differ from those contained in the pro forma financial information presented herein to, among other things, include pro forma financial information to show the pro forma effects of the OMP Merger as a significant disposition. The foregoing differences may be material individually or in the aggregate.
On November 19, 2020 (the “Emergence Date”) the Company emerged from bankruptcy and adopted fresh start accounting in accordance with the FASB ASC 852, Reorganizations, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. References to “Predecessor” relate to the period from January 1, 2018 through November 19, 2020, and references to “Successor” relate to the period from November 20, 2020 through September 30, 2021.
The unaudited pro forma condensed consolidated combined financial information has been derived from the historical consolidated financial statements of the Company and the historical Statements of Revenues and Direct Operating Expenses of properties acquired in the Williston Basin Acquisition (which were derived from information provided by QEP). The unaudited pro forma condensed consolidated combined balance sheet at September 30, 2021 was prepared as if the Williston Basin Acquisition and OMP Merger had occurred on September 30, 2021. No pro forma adjustments were necessary to reflect the Company’s adoption of fresh start accounting, the Permian Basin Sale and the issuance of the Oasis Senior Notes as these transactions were already included in the Company’s historical unaudited condensed consolidated balance sheet at September 30, 2021. The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and for the year ended December 31, 2020 were prepared as if the fresh start accounting adjustments recorded on Emergence Date, the OMP Merger, the Williston Basin Acquisition, the Permian Basin Sale and the issuance of the Oasis Senior Notes 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 FASB ASC 205-20 to show the effects of the OMP Merger for comparative purposes.
14
2. Pro Forma Adjustments and Assumptions
Balance Sheet
The unaudited pro forma condensed consolidated combined balance sheet at September 30, 2021 reflects the following adjustments:
(a) Represents the assets and liabilities classified as held for sale in connection with the OMP Merger. The Company expects the OMP Merger to be completed within one year, and as such, has classified the assets and liabilities held for sale as current.
(a) Represents the assets and liabilities classified as held for sale in connection with the OMP Merger. The Company expects the OMP Merger to be completed within one year, and as such, has classified the assets and liabilities held for sale as current.
(b) Represents the cash paid to QEP of $74.5 million on May 3, 2021 and $511.3 million on October 21, 2021 for the Williston Basin Acquisition, as follows:
| (In thousands) | |||||
| Cash and cash equivalents | $ | ||||
| Restricted cash – non–current | |||||
| Other assets | |||||
| Total cash paid | $ | ||||
(c) Represents the allocation of the total cost of the Williston Basin Acquisition to the assets acquired and liabilities assumed, as follows:
| (In thousands) | ||||||||
| Total Cost | ||||||||
| Cash Consideration: | ||||||||
| Cash paid at closing on October 21, 2021 | $ | |||||||
| Cash deposit paid on May 3, 2021 | ||||||||
| Total cash paid | ||||||||
| Liabilities Assumed: | ||||||||
| Asset retirement obligations | ||||||||
| Suspended funds | ||||||||
Unfavorable contracts(1) | ||||||||
| Total liabilities assumed | ||||||||
Transaction costs(2) | ||||||||
| Total cost of Williston Basin Acquisition | $ | |||||||
| Allocation of Total Cost | ||||||||
| Assets | ||||||||
| Inventory | $ | |||||||
Oil and gas properties(3) | ||||||||
| Other property and equipment | ||||||||
| Long-term inventory | ||||||||
15
| Other assets | ||||||||
| Total assets | $ | |||||||
| Liabilities | ||||||||
| Revenues and production taxes payable | $ | ( | ||||||
| Accrued liabilities | ( | |||||||
| Asset retirement obligations | ( | |||||||
| Other liabilities | ( | |||||||
| Total liabilities | $ | ( | ||||||
(1) Represents an estimated aggregate minimum volume commitment (“MVC”) of $21.7 million related to unfavorable contracts acquired in the Williston Basin Acquisition that the Company has determined to be probable and reasonably estimable at the close of the transaction.
(2) Prior to the closing of the Williston Basin Acquisition, the Company expensed $1.8 million of transaction costs as incurred under general and administrative expenses during the nine months ended September 30, 2021. At closing, the Company reduced general and administrative expenses by $1.8 million and recorded these costs as part of the total cost of the Williston Basin Acquisition in accordance with FASB ASC 805-50. In addition, the Company estimates it will accrue an additional $2.3 million of transaction costs that will be recorded as part of the total cost of the Williston Basin Acquisition.
(d) Represents (i) the estimated additional transaction costs from the Williston Basin Acquisition of approximately $2.3 million, and (ii) the current portion of an estimated MVC of $5.5 million assumed in the Williston Basin Acquisition. See footnote (c)
above for additional details.
Statements of Operations
The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and the year ended December 31, 2020, as well as the unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2018 and 2019 reflect the following adjustments:
(a) Represents the classification of revenues and expenses from the OMP Merger as discontinued operations. The Company will have continuing cash outflows to Crestwood following the completion of the OMP Merger for gathering, processing, transportation and water handling costs pursuant to the existing contractual arrangements between the Company and OMP that will be 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 the expected continuing impact.
The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and the year ended December 31, 2020 reflect the following adjustments:
(c) Represents the revenues and direct operating expenses from the oil and gas properties acquired in the Williston Basin Acquisition.
(d) Represents the incremental depreciation, depletion and amortization and accretion expense related to the assets acquired in the Williston Basin Acquisition. Depletion was calculated using the unit-of-production method under the successful efforts method of accounting and was adjusted for (i) the increase in depletion reflecting the acquisition cost and production volumes attributable to the oil and gas properties and (ii) the revision to the depletion rate reflecting the reserve volumes attributable to the oil and gas properties. The pro forma depletion rate attributable to the Williston Basin Acquisition was $8.47
16
accretion expense attributable to asset retirement obligations of $0.3 million and $0.6 million for the nine months ended September 30, 2021, respectively, and $0.3 million and $0.8 million for the year ended December 31, 2020, respectively.
(e) Represents the estimated impact from additional employees hired by the Company in connection with the Williston Basin Acquisition of $2.8 million for the nine months ended September 30, 2021 and $3.7 million for the year ended December 31, 2020. In addition, general and administrative expenses for the nine months ended September 30, 2021 was offset by $1.8 million of transaction costs previously expensed as incurred prior to closing of the Williston Basin Acquisition that were subsequently capitalized and recorded as part of the total cost of the Williston Basin Acquisition at closing in accordance with FASB ASC 805-50.
(f) Represents the elimination of the revenues and expenses associated with the assets divested in the Permian Basin Sale.
(g) The Company recorded a gain on sale of properties of $227.4 million from the Permian Basin Sale in its historical unaudited condensed consolidated financial statements for the nine months ended September 30, 2021. This pro forma adjustment records this gain on sale of properties in the results of operations for the year ended December 31, 2020 and removes it from the results of operations for the nine months ended September 30, 2021.
(h) Represents the estimated income tax impact from the Permian Basin Sale at the applicable state and federal statutory tax rate.
(i) Represents interest expense associated with the Oasis Senior Notes of $11.1 million and amortization of deferred financing costs of $0.7 million during the nine months ended September 30, 2021 and interest expense of $25.5 million and amortization of deferred financing costs of $1.6 million during the year ended December 31, 2020. The Company issued the Oasis Senior Notes on June 9, 2021 and used the proceeds to finance a portion of the Williston Basin Acquisition. The Company’s historical unaudited condensed consolidated financial statements already includes interest expense from the Oasis Senior Notes from June 9, 2021 until September 30, 2021.
(j) Represents the unrecognized compensation cost that was immediately expensed on the Emergence Date primarily for Class B units in OMP GP.
(k) Represents reorganization items recognized on the Emergence Date that are attributable to discontinued operations, as follows:
| (In thousands) | |||||
Gain on debt discharge(1) | $ | ||||
| Gain on revaluation adjustments | |||||
| Total reorganization items, net | $ | ||||
(1) Represents the write-off of a specified default interest charge incurred during 2020 by OMP that was waived on the Emergence Date.
(l) Represents the impacts to non-controlling interests from the application of fresh start accounting attributable to discontinued operations 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.
(m) Represents the immediate vesting on the Emergence Date of Predecessor restricted stock awards of $6.7 million, Predecessor performance share units of $4.7 million, Predecessor phantom unit awards of $1.0 million and unamortized prepaid cash incentives of $4.2 million that were each attributable to continuing operations.
(n) Represents reorganization items recognized on the Emergence Date that are attributable to continuing operations, as follows:
17
| (In thousands) | |||||
| Gain on debt discharge | $ | ||||
| Loss on revaluation adjustments | ( | ||||
| Write-off of unamortized debt discount | ( | ||||
| Professional fees | ( | ||||
| Write-off of unamortized deferred financing costs | ( | ||||
| Debtor-in-possession credit facility fees | ( | ||||
| Total reorganization items, net | $ | ||||
(o) Represents income tax expense of $9.7 million from reorganization adjustments attributable to continuing operations, offset by the income tax benefit from fresh start adjustments of $6.4 million attributable to continuing operations.
3. Supplemental Oil and Gas Reserve Information
Estimated Quantities of Proved Oil and Natural Gas Reserves
The table below summarizes the Company’s estimated net proved reserves at December 31, 2020 based on reports prepared by DeGolyer and MacNaughton, the Company’s independent reserve engineers. In preparing its reports, DeGolyer and MacNaughton evaluated 100% of the reserves and discounted values at December 31, 2020 in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to companies involved in oil and natural gas producing activities.
In addition, the following table also sets forth information as of December 31, 2020 about the estimated net proved reserves attributable to the Permian Basin Sale and Williston Basin Acquisition, and the pro forma estimated net proved reserves of the Company as if the Permian Basin Sale and Williston Basin Acquisition had occurred on December 31, 2020. The reserve estimates attributable to the Permian Basin Sale at December 31, 2020 presented in the table below were derived from the reports prepared by DeGolyer and MacNaughton. The reserve estimates attributable to the Williston Basin Acquisition at December 31, 2020 presented in the table below were prepared based upon information provided by QEP and was prepared in accordance with the authoritative guidance of the FASB and the SEC on oil and natural gas reserve estimation and disclosures.
Reserve estimates are inherently imprecise and are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, reserve estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.
In addition, the following table also sets forth information as of December 31, 2020 about the estimated net proved reserves attributable to the Permian Basin Sale and Williston Basin Acquisition, and the pro forma estimated net proved reserves of the Company as if the Permian Basin Sale and Williston Basin Acquisition had occurred on December 31, 2020. The reserve estimates attributable to the Permian Basin Sale at December 31, 2020 presented in the table below were derived from the reports prepared by DeGolyer and MacNaughton. The reserve estimates attributable to the Williston Basin Acquisition at December 31, 2020 presented in the table below were prepared based upon information provided by QEP and was prepared in accordance with the authoritative guidance of the FASB and the SEC on oil and natural gas reserve estimation and disclosures.
Reserve estimates are inherently imprecise and are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, reserve estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.
| December 31, 2020 | |||||||||||||||||||||||||||||
| OAS Historical | Permian Basin Sale | Williston Basin Acquisition | Pro Forma | ||||||||||||||||||||||||||
Proved Reserves(1) | |||||||||||||||||||||||||||||
| Developed: | |||||||||||||||||||||||||||||
| Oil (MMBbls) | ( | ||||||||||||||||||||||||||||
| Natural gas (Bcf) | ( | ||||||||||||||||||||||||||||
NGL (MMBbls)(2) | |||||||||||||||||||||||||||||
| Total estimated proved developed reserves (MMBoe) | ( | ||||||||||||||||||||||||||||
| Undeveloped: | |||||||||||||||||||||||||||||
| Oil (MMBbls) | ( | ||||||||||||||||||||||||||||
| Natural gas (Bcf) | ( | ||||||||||||||||||||||||||||
NGL (MMBbls)(2) | |||||||||||||||||||||||||||||
| Total estimated proved undeveloped reserves (MMBoe) | ( | ||||||||||||||||||||||||||||
(1) The reserve estimates were prepared using SEC pricing, calculated as the unweighted arithmetic average first-day-of-the-month prices for the prior twelve months. For the Company’s historical reserves, including the reserves attributable to the Permian Basin Sale, SEC pricing was $39.54 per Bbl for crude oil and $2.03 per MMBtu for natural gas for the year ended
18
(2) The reserves attributable to the Williston Basin Acquisition were historically reported by QEP on a three-stream basis, while the Company has historically reported reserves on a two-stream basis.
Changes in commodity prices may significantly impact the Company’s estimates of oil and natural gas reserves. Sustained lower commodity prices can reduce the quantity of the Company’s reserves by causing the economic limit of the proved developed and proved undeveloped wells (the point at which the costs to operate exceed the value of estimated future production, assuming constant prices and costs under SEC rules) to occur earlier in their productive lives than would be the case with higher prices. The undeveloped reserves may also be reduced by the elimination of wells because they would not meet the investment criteria to be economically producible at such prices and costs. The proved undeveloped reserves may also be eliminated by the deferral of drilling of otherwise economic wells beyond the five year proved reserve development horizon as a result of revisions to the Company’s development plan adopted in response to lower prices or otherwise.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
The following table presents the Standardized Measure of Discounted Future Net Cash Flows relating to the proved oil and natural gas reserves of the Company, adjusted for the properties sold in the Permian Basin Sale and the properties acquired in the Williston Basin Acquisition on a pro forma combined basis as of December 31, 2020. The Standardized Measure shown below represents estimates only and should not be construed as the current market value of the Company’s estimated oil and natural gas reserves or those estimated oil and natural gas reserves attributable to the properties sold in the Permian Basin Sale and the properties acquired in the Williston Basin Acquisition.
Changes in commodity prices may significantly impact the Company’s estimates of oil and natural gas reserves. Sustained lower commodity prices can reduce the quantity of the Company’s reserves by causing the economic limit of the proved developed and proved undeveloped wells (the point at which the costs to operate exceed the value of estimated future production, assuming constant prices and costs under SEC rules) to occur earlier in their productive lives than would be the case with higher prices. The undeveloped reserves may also be reduced by the elimination of wells because they would not meet the investment criteria to be economically producible at such prices and costs. The proved undeveloped reserves may also be eliminated by the deferral of drilling of otherwise economic wells beyond the five year proved reserve development horizon as a result of revisions to the Company’s development plan adopted in response to lower prices or otherwise.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
| December 31, 2020 | |||||||||||||||||||||||
| OAS Historical | Permian Basin Sale | Williston Basin Acquisition | Pro Forma | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Future cash inflows | $ | $ | ( | $ | $ | ||||||||||||||||||
| Future production costs | ( | $ | ( | ( | |||||||||||||||||||
| Future development costs | ( | $ | ( | ( | |||||||||||||||||||
| Future outflows for income tax | ( | ( | ( | ||||||||||||||||||||
| Future net cash flows | ( | ||||||||||||||||||||||
| 10% annual discount for estimated timing of cash flows | ( | ( | ( | ||||||||||||||||||||
| Standardized measure of discounted future net cash flows | $ | $ | ( | $ | $ | ||||||||||||||||||
19
EXHIBIT 99.1
Williston Basin Properties
Table of Contents
| Page | |||||
INDEPENDENT AUDITOR'S REPORT
To Management of
QEP Energy Company
We have audited the accompanying Statements of Revenues and Direct Operating Expenses of certain oil and natural gas properties (the Properties) of QEP Energy Company, which are subject to the Purchase and Sale Agreement dated May 3, 2021, for the years ended December 31, 2020 and 2019, and the related notes to the Statements of Revenues and Direct Operating Expenses.
Management’s Responsibility for the Statements of Revenues and Direct Operating Expenses
Management is responsible for the preparation and fair presentation of the Statements of Revenues and Direct Operating Expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statements of Revenues and Direct Operating Expenses that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Statements of Revenues and Direct Operating Expenses based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements of Revenues and Direct Operating Expenses are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statements of Revenues and Direct Operating Expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statements of Revenues and Direct Operating Expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statements of Revenues and Direct Operating Expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statements of Revenues and Direct Operating Expenses.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion the accompanying Statements of Revenues and Direct Operating Expenses referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the Properties for each of the years ended December 31, 2020 and 2019, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1 to the Statements of Revenues and Direct Operating Expenses, the accompanying Statements of Revenues and Direct Operating Expenses were prepared for the purpose of presenting the revenues and direct operating expenses of the Properties and are not intended to be a complete presentation of the financial position, results of operations or cash flows of the Properties. Our opinion is not modified with respect to this matter.
WEAVER AND TIDWELL, L.L.P.
Houston, TX
November 18, 2021
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
| Year Ended December 31, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil and condensate, gas and NGL sales | $ | 245,340 | $ | 438,899 | $ | 328,921 | $ | 165,251 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| DIRECT OPERATING EXPENSES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease operating expense | 74,712 | 99,777 | 66,034 | 54,969 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transportation and processing costs | 30,287 | 30,376 | 24,792 | 20,550 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production and property taxes | 24,232 | 41,241 | 28,635 | 16,902 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Direct Operating Expenses | 129,231 | 171,394 | 119,461 | 92,421 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES | $ | 116,109 | $ | 267,505 | $ | 209,460 | $ | 72,830 | |||||||||||||||||||||||||||||||||||||||||||||||||||
REFER TO NOTES ACCOMPANYING THE STATEMENTS OF REVENUES AND DIRECT
OPERATING EXPENSES
NOTES ACCOMPANYING THE STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
Note 1 – Basis of Presentation
On May 3, 2021, QEP Energy Company (“QEP” or the “Company”), a wholly-owned subsidiary of Diamondback Energy, Inc., entered into a definitive purchase and sale agreement with Oasis Petroleum North America LLC (“Oasis” or the “Buyer”), under which Oasis agreed to acquire approximately 95,000 net acres in the Williston Basin in a cash transaction for aggregate consideration of approximately $745.0 million, subject to customary closing adjustments (the “May 2021 Properties Acquired”).
The accompanying Statements of Revenues and Direct Operating Expenses (the “Statements”) are presented on an accrual basis of accounting and relate to the operations of the May 2021 Properties Acquired and have been derived from the historical accounting records of the Company. Certain costs such as depreciation, depletion, and amortization, accretion of asset retirement obligations, general and administrative expenses, interest and corporate income taxes are omitted since these costs were not separately allocated to the working interests of the May 2021 Properties Acquired in the Company’s historical accounting records. In addition, these allocations, if made using historical general and administrative structures and tax burdens, would not produce allocations indicative of the historical performance of the May 2021 Properties Acquired, due to the differing size, structure, operations and accounting policies between QEP and Oasis. As such, the Statements are not intended to be a complete presentation of the revenues and expenses of the May 2021 Properties Acquired. Furthermore, the information may not be representative of future operations due to changes in the business and the exclusion of the omitted information.
Historical financial statements reflecting financial position, results of operations and cash flows required by accounting principles generally accepted in the United States of America (“GAAP”) are not presented as such information is not available on an individual property basis, nor is it practicable to obtain such information in these circumstances. Accordingly, the Statements are presented in lieu of the full financial statements required under Item 3-05 of the Securities and Exchange Commission’s Regulation S-X.
The accompanying Statements for the nine months ended September 30, 2021 and 2020 are unaudited. The unaudited interim Statements have been prepared on the same basis as the annual Statements. In the opinion of management, such unaudited interim statements reflect all adjustments necessary for fair presentation of the excess of revenues over direct operating expenses of the May 2021 Properties Acquired for the nine months ended September 30, 2021 and 2020.
Note 2 – Use of Estimates in Preparation of the Statements of Revenues and Direct Operating Expenses
The preparation of these Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues and direct operating expenses during the respective reporting periods. Actual results may differ from the estimates and assumptions used in the preparation of the Statements.
Note 3 – Risks and Uncertainties
The Company's revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for oil, gas and natural gas liquids (“NGL”), which are affected by many factors outside of QEP's control, including changes in market supply and demand. The novel coronavirus disease (COVID-19) pandemic and related shut-down of various sectors of the global economy resulted in a significant reduction in the global demand for crude oil in 2020. Changes in market supply and demand are also impacted by the Organization of Petroleum Exporting Countries (OPEC) production levels, weather conditions, pipeline capacity constraints, inventory storage levels, basis differentials, export capacity, strength of the U.S. dollar and other factors. Field-level prices received for QEP's oil and gas production have historically been volatile and may be subject to significant fluctuations in the future.
Significant Customers
The Company's five largest customers accounted for 76% and 56% of QEP's revenues for the years ended December 31, 2020 and 2019, respectively. QEP believes that the loss of any of these customers, or any other customer, would not have a material effect on the revenues and direct operating expenses of QEP, since there are numerous potential purchasers of its production.
Note 4 – Commitments and Contingencies
The Company is involved in various commercial and regulatory claims, litigation and other legal proceedings that arise in the ordinary course of its business. In each reporting period, the Company assesses these claims in an effort to determine the degree of probability and range of possible loss for potential accrual in its financial statements. In accordance with Accounting Standards Codification (“ASC”) 450, Contingencies, an accrual is recorded for a loss contingency when its occurrence is probable and damages are reasonably estimable based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes.
Legal proceedings are inherently unpredictable and unfavorable resolutions can occur. Assessing contingencies is highly subjective and requires judgment about uncertain future events. When evaluating contingencies related to legal proceedings, the Company may be unable to estimate losses due to a number of factors, including potential defenses, the procedural status of the matter in question, the presence of complex legal and/or factual issues, the ongoing discovery and/or development of information important to the matter.
Mandan, Hidatsa and Arikara Nation ("MHA Nation") Title Dispute – In June 2018, the MHA Nation notified QEP of its position that QEP has no valid lease covering certain minerals underlying the Missouri and Little Missouri Riverbeds on the Fort Berthold Reservation in North Dakota. The MHA Nation also passed a resolution purporting to rescind those portions of QEP's IMDA lease covering the disputed minerals underlying the Missouri River. QEP responded in September 2018 stating that the minerals underlying the Missouri River are properly leased. In May 2020, the Office of the Solicitor of the United States Department of the Interior (the “Department of Interior”) issued an opinion (the “Missouri River Opinion”) finding that the State of North Dakota, not the MHA Nation, is the legal owner of the minerals underlying the Missouri River. The MHA Nation has filed actions in two federal courts seeking to overturn the May 2020 decision, and in March 2021, the Department of the Interior withdrew the Missouri River Opinion.
Overriding Royalty Interest Litigation – In July 2019, owners of small overriding royalty interests in certain wells in the South Antelope oil and gas field in North Dakota filed suit against QEP, alleging QEP has improperly taken deductions for post-production expenses. On October 18, 2021, the Court granted QEP’s motion of summary judgment and entered a final judgment in QEP’s favor. Plaintiffs may appeal the judgment and must file either a motion to alter/amend the judgment or a notice of appeal.
In many cases, the Company is unable to make an estimate of the range of reasonably possible loss related to its contingencies. To the extent that the Company can reasonably estimate losses for contingencies where the risk of material loss (in excess of accruals, if any) is reasonably possible, the Company estimates such losses to be in a range of zero to approximately $10.0 million, in the aggregate.
Commitments
The Company has contracted with various third parties for gathering and processing services. Market conditions, drilling activity and compensation may prevent full utilization of the contractual capacity. As of December 31, 2020, the annual payments for gathering, processing and fractionation contracts for the corresponding years ended December 31 are as follows:
| Year | Amount | ||||||||||
| (in thousands) | |||||||||||
| 2021 | $ | 8,872 | |||||||||
| 2022 | $ | 8,159 | |||||||||
| 2023 | $ | 7,429 | |||||||||
| 2024 | $ | 5,584 | |||||||||
| 2025 | $ | 3,793 | |||||||||
| After 2025 | $ | 926 | |||||||||
Note 5 – Revenue Recognition
QEP recognizes revenue from the sale of oil and condensate, gas and NGL in the period that the performance obligations are satisfied. QEP's performance obligations are satisfied when the customer obtains control of product, when QEP has no further obligations to perform related to the sale, when the transaction price has been determined and when collectability is probable. The sale of oil and condensate, gas and NGL are made under contracts with customers, which typically include consideration that is based on pricing tied to local indices and volumes delivered in the current month. Reported revenues include estimates for the two most recent months using published commodity price indices and volumes supplied by field operators. Performance obligations under the Company’s contracts with customers are typically satisfied at a point in time through monthly delivery of oil and condensate, gas and/or NGL. The Company’s contracts with customers typically require payment for oil and condensate, gas and NGL sales within 30 days following the calendar month of delivery.
QEP's oil and condensate is typically sold at specific delivery points under contract terms that are common in the industry. QEP's gas and NGL are also sold under contract types that are common in the industry; however, under these contracts, the gas and its components, including NGL, may be sold to a single purchaser or the residue gas and NGL may be sold to separate purchasers. Regardless of the contract type, the terms of these contracts compensate QEP for the value of the residue gas and NGL constituent components at market prices for each product.
For product sales that have a contract term greater than one year, the Company follows ASC 606-10-50-14(a), which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these contracts, each monthly product delivery generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required.
The following table presents QEP’s revenues disaggregated by revenue source:
| Oil and condensate sales | Gas sales | NGL sales | Transportation and processing costs included in revenue | Oil and condensate, gas and NGL sales | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2020 | $ | 250,018 | $ | 18,755 | $ | 14,295 | $ | (37,728) | $ | 245,340 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2019 | $ | 418,514 | $ | 32,828 | $ | 21,747 | $ | (34,190) | $ | 438,899 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2021 (unaudited) | $ | 292,775 | $ | 26,578 | $ | 40,820 | $ | (31,252) | $ | 328,921 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2020 (unaudited) | $ | 173,456 | $ | 11,666 | $ | 7,859 | $ | (27,730) | $ | 165,251 | |||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 – Subsequent Events
In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through November 18, 2021, the date the accompanying Statements were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the accompanying Statements.
Supplemental Oil and Gas Reserve Information (Unaudited)
The Company is making the following supplemental disclosures of oil and gas producing activities in accordance with ASC 932, Extractive Activities - Oil and Gas, as amended by ASU 2010-03, Oil and Gas Reserve Estimation and Disclosures, and SEC Regulation S-X.
Estimated Quantities of Proved Oil and Gas Reserves
Estimates of proved oil and gas reserves have been completed in accordance with professional engineering standards. The estimated proved reserves are inherently imprecise and are continually subject to revisions based on production history, results of additional exploration and development, price changes and other factors. All of QEP’s proved undeveloped (“PUD”) reserves at December 31, 2020 were scheduled to be developed by QEP within five years from the date such locations were initially disclosed as PUD reserves. While the majority of QEP’s PUD reserves are located on leaseholds that are held by production, any PUD locations on expiring leaseholds are scheduled for development during the primary term of the lease. A summary of the Company’s changes in quantities of proved oil and condensate, gas and NGL reserves for the years ended December 31, 2020 and 2019 are as follows:
| Oil and condensate | Gas | NGL | Total | ||||||||||||||||||||||||||||||||
| (Mbbl) | (MMcf) | (Mbbl) | (Mboe) | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | 107,484 | 149,794 | 29,169 | 161,619 | |||||||||||||||||||||||||||||||
Revisions of previous estimates (1) | (25,714) | (4,518) | (6,759) | (33,226) | |||||||||||||||||||||||||||||||
| Production | (7,924) | (13,731) | (2,193) | (12,406) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 73,846 | 131,545 | 20,217 | 115,987 | |||||||||||||||||||||||||||||||
Revisions of previous estimates (2) | (14,966) | (35,055) | (3,717) | (24,526) | |||||||||||||||||||||||||||||||
| Production | (7,148) | (12,278) | (2,097) | (11,291) | |||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 51,732 | 84,212 | 14,403 | 80,170 | |||||||||||||||||||||||||||||||
| Proved developed reserves included above | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 51,376 | 111,425 | 16,994 | 86,941 | |||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 41,076 | 74,951 | 12,782 | 66,350 | |||||||||||||||||||||||||||||||
| Proved undeveloped reserves included above | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 22,470 | 20,120 | 3,223 | 29,046 | |||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 10,656 | 9,261 | 1,621 | 13,820 | |||||||||||||||||||||||||||||||
___________________________
(1)Revisions of previous estimates in 2019 totaling 33,226 Mboe of negative revisions includes: 30,053 Mboe of other revisions, primarily related to PUD removals that will not be developed within five years of the initial date of booking due to the reduction in future capital expenditures; 7,103 Mboe of negative revisions related to pricing, primarily driven by lower oil prices; partially offset by 5,574 Mboe of positive performance revisions.
(2)Revisions of previous estimates in 2020 totaling 24,526 Mboe of negative revisions includes: 24,818 Mboe of negative revisions related to pricing, primarily driven by lower oil prices; partially offset by positive performance revisions and positive revisions related to lower operating costs.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves
Future net cash flows were calculated at December 31, 2020 and 2019 by applying prices, which were the simple average of the first-of-the-month commodity prices, adjusted for location and quality differentials, for each of the 12 months during 2020 and 2019, with consideration of known contractual price changes. The following table provides the benchmark prices per unit, before location and quality differential adjustments, used to calculate the related reserve category:
| Year Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| Average benchmark price per unit: | |||||||||||||||||||||||
| Oil price (per bbl) | $ | 39.57 | $ | 55.51 | |||||||||||||||||||
| Gas price (per MMbtu) | $ | 1.99 | $ | 2.58 | |||||||||||||||||||
Estimates for operating expenses and development costs used to compute future net cash flows were based on current costs as of each year end. All cash flows were discounted at 10% to reflect the time value of cash flows, without regard to the risk of specific properties. The estimated future costs at December 31, 2020 to develop proved undeveloped reserves were approximately $19.4 million in 2021, $28.5 million in 2022, and $37.5 million in 2023. Estimated future development costs include capital spending on major development projects, some of which will take several years to complete.
The assumptions used to derive the standardized measure of discounted future net cash flows are those required by accounting standards and do not necessarily reflect the Company’s expectations. The information may be useful for certain comparative purposes but should not be solely relied upon in evaluating QEP or its performance. Furthermore, information contained in the following table may not represent realistic assessment of future net cash flows, nor should the standardized measure of discounted future net cash flows be viewed as representative of the current value of the Company’s reserves. Management believes that the following factors should be considered when reviewing the information below:
•Future commodity prices received for selling the Company’s net production will likely differ from those required to be used in these calculations.
•Future operating and capital costs will likely differ from those required to be used in these calculations.
•Future market conditions, government regulations, reservoir conditions and risks inherent in the production of oil and condensate and gas may cause production rates in future years to vary significantly from those used in the calculations.
•Future revenues may be subject to different production, severance and property taxation rates.
•The selection of a 10% discount rate is arbitrary and may not be a reasonable factor in adjusting for future economic conditions or in considering the risk that is part of realizing future net cash flows from the reserves.
The standardized measure of discounted future net cash flows relating to proved reserves of the May 2021 Properties Acquired is presented in the table below:
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Future cash inflows | 2,062,726 | 4,490,576 | ||||||||||||||||||
| Future production costs | (1,350,604) | (2,361,899) | ||||||||||||||||||
| Future development costs | (157,014) | (408,393) | ||||||||||||||||||
| Future net cash flows | 555,108 | 1,720,284 | ||||||||||||||||||
| 10% annual discount for estimated timing of net cash flows | (194,782) | (675,153) | ||||||||||||||||||
| Standardized measure of discounted future net cash flows | 360,326 | 1,045,131 | ||||||||||||||||||
The principal sources of changes in the standardized measure of discounted future net cash flows is presented in the table below:
| Year Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Balance at beginning of period | $ | 1,045,131 | $ | 1,891,850 | |||||||||||||||||||
| Sales of oil and condensate, gas and NGL produced, net of production costs | (116,109) | (267,505) | |||||||||||||||||||||
| Net change in sales prices and in production (lifting) costs related to future production | (590,582) | (634,667) | |||||||||||||||||||||
| Net change due to revisions of quantity estimates | (325,594) | (574,002) | |||||||||||||||||||||
| Previously estimated development costs incurred during the period | 45,521 | 73,578 | |||||||||||||||||||||
| Changes in estimated future development costs | 197,447 | 366,692 | |||||||||||||||||||||
| Accretion of discount | 104,513 | 189,185 | |||||||||||||||||||||
| Other | (1) | — | |||||||||||||||||||||
| Net change | (684,805) | (846,719) | |||||||||||||||||||||
| Balance at end of period | $ | 360,326 | $ | 1,045,131 | |||||||||||||||||||
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated combined financial information and accompanying notes reflect the pro forma effects of:
1.On November 19, 2020 (the “Emergence Date”), Oasis Petroleum Inc. (the “Company” or “Oasis”) emerged from bankruptcy and adopted fresh start accounting in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification 852, Reorganizations, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. References to “Predecessor” relate to the period from January 1, 2018 through November 19, 2020, and references to “Successor” relate to the period from November 20, 2020 through September 30, 2021.
2.On June 9, 2021, the Company issued $400.0 million of 6.375% senior unsecured notes due June 1, 2026 (the “Oasis Senior Notes”). The Company used the proceeds from the Oasis Senior Notes to finance a portion of the consideration for the Williston Basin Acquisition (defined below).
3.On June 29, 2021, the Company completed the divestiture of its exploration and production assets in the Texas region of the Permian Basin, effective March 1, 2021, to Percussion Petroleum Operating II, LLC for cash proceeds of $347.3 million (the “Permian Basin Sale”). The Company used a portion of the proceeds from the Permian Basin Sale to finance a portion of the consideration for the Williston Basin Acquisition (defined below).
4.On October 21, 2021, the Company completed its acquisition of approximately 95,000 net acres in the Williston Basin, effective April 1, 2021, from QEP Energy Company (“QEP”), a wholly-owned subsidiary of Diamondback Energy Inc., for total cash consideration of $585.8 million (the “Williston Basin Acquisition”). The total cash consideration was comprised of a deposit of $74.5 million paid on May 3, 2021 and $511.3 million paid at closing on October 21, 2021. The Company funded the Williston Basin Acquisition with cash on hand, including proceeds from the Permian Basin Sale and proceeds from the Oasis Senior Notes. The Company expects the Williston Basin Acquisition to qualify as an asset acquisition under accounting principles generally accepted in the United States of America, as the Williston Basin Acquisition does not meet the definition of a business under the FASB Accounting Standards Codification 805, Business Combinations, since substantially all of the fair value of the assets acquired are concentrated in a single asset group.
5.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, the Company will receive $160.0 million in cash and approximately 21 million common units of Crestwood in exchange for its approximate 70% ownership of OMP and its non-economic general partner interest in OMP GP. In connection with and prior to completion of the OMP Merger, the Company expects to contribute substantially all of its remaining midstream assets to OMP in exchange for cash consideration of approximately $6.7 million. Upon closing of the OMP Merger, the Company expects to own approximately 22% of the limited partner interests of Crestwood. As a result of this transaction, the Company will be a single basin exploration and production company. The OMP Merger represents a strategic shift for the Company and qualifies as a discontinued operation in accordance with FASB Accounting Standards Codification 205-20, Presentation of financial statements – Discontinued Operations (“ASC 205-20”). The pro forma adjustments presented herein show the effects of the OMP Merger as discontinued operations under ASC 205-20, as well as the classification of the assets and liabilities as held for sale. The Company expects the OMP Merger to be completed in the first quarter of 2022 and will file a Form 8-K under Item 2.01 upon closing. The pro forma financial information presented in such Form 8-K may contain values, adjustments and other information that differ from those contained in the pro forma financial information presented herein to, among other things, include pro forma financial information to show the pro forma effects of the OMP Merger as a significant disposition. The foregoing differences may be material individually or in the aggregate.
The unaudited pro forma condensed consolidated combined financial information has been derived from the historical consolidated financial statements of the Company and the historical Statements of Revenues and Direct Operating Expenses of properties acquired in the Williston Basin Acquisition (which were derived from information provided by QEP).
The unaudited pro forma condensed consolidated combined balance sheet at September 30, 2021 was prepared as if the Williston Basin Acquisition and OMP Merger had occurred on September 30, 2021. No pro forma adjustments were necessary to reflect the Company’s adoption of fresh start accounting, the Permian Basin Sale and the issuance of the Oasis Senior Notes, as these transactions were already included in the Company’s historical unaudited condensed consolidated balance sheet at September 30, 2021.
1
The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and for the year ended December 31, 2020 were prepared as if the fresh start accounting adjustments recorded on the Emergence Date, the OMP Merger, the Williston Basin Acquisition, the Permian Basin Sale and the issuance of the Oasis Senior Notes 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.
The unaudited pro forma condensed consolidated combined 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 combined financial information and accompanying notes provide a reasonable and reliably determinable basis for presenting the significant effects of the above transactions. The following unaudited pro forma condensed consolidated combined statements of operations do not purport to represent what the Company’s results of operations would have been if the Emergence Date, the Williston Basin Acquisition, the Permian Basin Sale, the issuance of the Oasis Senior Notes and the OMP Merger had occurred on January 1, 2020. The unaudited pro forma condensed consolidated combined financial information should be read together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 and the historical Statements of Revenues and Direct Operating Expenses and notes thereto of the Williston Basin Acquisition properties filed as Exhibit 99.1 to the Current Report on Form 8-K of which this Exhibit 99.2 is a part.
2
Oasis Petroleum Inc.
Condensed Consolidated Combined Balance Sheet (Unaudited)
As of September 30, 2021
(In thousands, except share data)
| Transaction Accounting Adjustments | |||||||||||||||||||||||||||||||||||
| As Reported | Discontinued Operations | Williston Basin Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 448,608 | $ | (23,032) | (a) | $ | (111,296) | (b) | $ | 314,280 | |||||||||||||||||||||||||
| Accounts receivable, net | 269,740 | (5,225) | (a) | — | 264,515 | ||||||||||||||||||||||||||||||
| Inventory | 28,309 | (10,149) | (a) | 4,954 | (c) | 23,114 | |||||||||||||||||||||||||||||
| Prepaid expenses | 4,274 | (1,061) | (a) | — | 3,213 | ||||||||||||||||||||||||||||||
| Other current assets | 2,326 | (152) | (a) | — | 2,174 | ||||||||||||||||||||||||||||||
| Current assets held for sale | — | 1,035,656 | (a) | — | 1,035,656 | ||||||||||||||||||||||||||||||
| Total current assets | 753,257 | 996,037 | (106,342) | 1,642,952 | |||||||||||||||||||||||||||||||
| Property, plant and equipment | |||||||||||||||||||||||||||||||||||
| Oil and gas properties (successful efforts method) | 733,585 | 2,760 | (a) | 620,953 | (c) | 1,357,298 | |||||||||||||||||||||||||||||
| Other property and equipment | 962,174 | (914,330) | (a) | 1,315 | (c) | 49,159 | |||||||||||||||||||||||||||||
| Less: accumulated depreciation, depletion and amortization | (112,915) | 29,549 | (a) | — | (83,366) | ||||||||||||||||||||||||||||||
| Total property, plant and equipment, net | 1,582,844 | (882,021) | 622,268 | 1,323,091 | |||||||||||||||||||||||||||||||
| Restricted cash – non–current | 400,000 | — | (400,000) | (b) | — | ||||||||||||||||||||||||||||||
| Derivative instruments | 39,717 | — | — | 39,717 | |||||||||||||||||||||||||||||||
| Long-term inventory | 17,510 | — | 3,748 | (c) | 21,258 | ||||||||||||||||||||||||||||||
| 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) | (69,980) | (b),(c) | 17,324 | |||||||||||||||||||||||||||||
| Total assets | $ | 2,999,512 | $ | — | $ | 49,694 | $ | 3,049,206 | |||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||||||||||||||
| Accounts payable | $ | 5,522 | $ | (489) | (a) | $ | — | $ | 5,033 | ||||||||||||||||||||||||||
| Revenues and production taxes payable | 232,217 | (1,336) | (a) | 8,997 | (c) | 239,878 | |||||||||||||||||||||||||||||
| Accrued liabilities | 129,000 | (34,537) | (a) | 7,831 | (c),(d) | 102,294 | |||||||||||||||||||||||||||||
| 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) | — | 1,295 | ||||||||||||||||||||||||||||||
| Current liabilities held for sale | — | 713,944 | (a) | — | 713,944 | ||||||||||||||||||||||||||||||
| Total current liabilities | 665,084 | 657,633 | 16,828 | 1,339,545 | |||||||||||||||||||||||||||||||
| Long-term debt | 1,041,895 | (650,390) | (a) | — | 391,505 | ||||||||||||||||||||||||||||||
| Deferred income taxes | 984 | — | — | 984 | |||||||||||||||||||||||||||||||
| Asset retirement obligations | 45,974 | (885) | (a) | 14,850 | (c) | 59,939 | |||||||||||||||||||||||||||||
| Derivative instruments | 142,516 | — | — | 142,516 | |||||||||||||||||||||||||||||||
3
| Operating lease liabilities | 1,706 | — | — | 1,706 | |||||||||||||||||||||||||||||||
| Other liabilities | 8,022 | (6,358) | (a) | 16,216 | (c) | 17,880 | |||||||||||||||||||||||||||||
| Total liabilities | 1,906,181 | — | 47,894 | 1,954,075 | |||||||||||||||||||||||||||||||
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 | — | 1,800 | (c) | 53,610 | ||||||||||||||||||||||||||||||
| Oasis share of stockholders’ equity | 904,442 | — | 1,800 | 906,242 | |||||||||||||||||||||||||||||||
Non-controlling interests(1) | 188,889 | — | — | 188,889 | |||||||||||||||||||||||||||||||
| Total stockholders’ equity | 1,093,331 | — | 1,800 | 1,095,131 | |||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,999,512 | $ | — | $ | 49,694 | $ | 3,049,206 | |||||||||||||||||||||||||||
_______________
(1) The minority interest ownership in OMP held by public unitholders will be eliminated upon completion of the OMP Merger.
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
4
Oasis Petroleum Inc.
Condensed Consolidated Combined Statements of Operations (Unaudited)
Nine Months Ended September 30, 2021
(In thousands, except per share data)
| Transaction Accounting Adjustments | Transaction Accounting Adjustments | Other Transaction Accounting Adjustments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As Reported | Discontinued Operations | As Adjusted | Williston Basin Acquisition | Williston Basin Acquisition | Permian Basin Sale | Oasis Senior Notes | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil and gas revenues | $ | 782,324 | $ | (866) | (a) | $ | 781,458 | $ | 328,921 | (c) | $ | — | $ | (70,278) | (f) | $ | — | $ | 1,040,101 | ||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas sales | 183,885 | 92,465 | (b) | 276,350 | — | — | (21,282) | (f) | — | 255,068 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream revenues | 183,807 | (183,807) | (a) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services revenues | 542 | — | 542 | — | — | — | — | 542 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 1,150,558 | (92,208) | 1,058,350 | 328,921 | — | (91,560) | — | 1,295,711 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease operating expenses | 98,888 | 47,526 | (a) | 146,414 | 66,034 | (c) | — | (11,675) | (f) | — | 200,773 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream expenses | 83,841 | (83,841) | (a) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services expenses | 47 | — | 47 | — | — | — | — | 47 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 52,596 | 38,324 | (a) | 90,920 | 24,792 | (c) | — | (2,542) | (f) | — | 113,170 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas expenses | 187,745 | 88,044 | (b) | 275,789 | — | — | (23,663) | (f) | — | 252,126 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Production taxes | 50,933 | — | 50,933 | 28,635 | (c) | — | (3,324) | (f) | — | 76,244 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | 112,581 | (28,605) | (a) | 83,976 | — | 68,645 | (d) | (8,621) | (f) | — | 144,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exploration expenses | 1,936 | — | 1,936 | — | — | (331) | (f) | — | 1,605 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment | 5 | (2) | (a) | 3 | — | — | (3) | (f) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 60,461 | 1,039 | (a) | 61,500 | — | 951 | (e) | (860) | (f) | — | 61,591 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 649,033 | 62,485 | 711,518 | 119,461 | 69,596 | (51,019) | — | 849,556 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of properties | 228,473 | — | 228,473 | — | — | (227,415) | (g) | — | 1,058 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | 729,998 | (154,693) | 575,305 | 209,460 | (69,596) | (267,956) | — | 447,213 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss on derivative instruments(1) | (550,342) | — | (550,342) | — | — | — | — | (550,342) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | (49,421) | 26,372 | (a) | (23,049) | — | — | — | (11,797) | (i) | (34,846) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense | (859) | 63 | (a) | (796) | — | — | 275 | (f) | — | (521) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total other expense | (600,622) | 26,435 | (574,187) | — | — | 275 | (11,797) | (585,709) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 129,376 | (128,258) | 1,118 | 209,460 | (69,596) | (267,681) | (11,797) | (138,496) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
5
| Net income (loss) from continuing operations including non-controlling interests | 129,376 | (128,258) | 1,118 | 209,460 | (69,596) | (267,681) | (11,797) | (138,496) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income from continuing operations attributable to non-controlling interests | 27,654 | (27,654) | (a) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) from continuing operations attributable to Oasis | $ | 101,722 | $ | (100,604) | $ | 1,118 | $ | 209,460 | $ | (69,596) | $ | (267,681) | $ | (11,797) | $ | (138,496) | |||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) from continuing operations attributable to Oasis per share: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 5.11 | $ | (6.96) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | 4.96 | (6.96) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic | 19,905 | 19,905 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted | 20,508 | 19,905 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
_______________
(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 combined financial statements.
6
Oasis Petroleum Inc.
Condensed Consolidated Combined Statements of Operations (Unaudited)
Year Ended December 31, 2020
(In thousands, except per share data)
| Transaction Accounting Adjustments | Other Transaction Accounting Adjustments | ||||||||||||||||||||||||||||||||||
| Successor and Predecessor Pro Forma Combined | Williston Basin Acquisition | Williston Basin Acquisition | Permian Basin Sale | Oasis Senior Notes | Pro Forma | ||||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| Oil and gas revenues | $ | 687,655 | $ | 245,340 | (c) | $ | — | $ | (99,289) | (f) | $ | — | $ | 833,706 | |||||||||||||||||||||
| Purchased oil and gas sales | 257,744 | — | — | (25,132) | (f) | — | 232,612 | ||||||||||||||||||||||||||||
| Other services revenues | 7,051 | — | — | — | — | 7,051 | |||||||||||||||||||||||||||||
| Total revenues | 952,450 | 245,340 | — | (124,421) | — | 1,073,369 | |||||||||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||||||||
| Lease operating expenses | 182,923 | 74,712 | (c) | — | (22,336) | (f) | — | 235,299 | |||||||||||||||||||||||||||
| Other services expenses | 6,658 | — | — | — | — | 6,658 | |||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 131,082 | 30,287 | (c) | — | (6,662) | (f) | — | 154,707 | |||||||||||||||||||||||||||
| Purchased oil and gas expenses | 249,334 | — | — | (25,554) | (f) | — | 223,780 | ||||||||||||||||||||||||||||
| Production taxes | 51,377 | 24,232 | (c) | — | (4,421) | (f) | — | 71,188 | |||||||||||||||||||||||||||
| Depreciation, depletion and amortization | 284,791 | — | 96,885 | (d) | (39,798) | (f) | — | 341,878 | |||||||||||||||||||||||||||
| Exploration expenses | 2,748 | — | — | (209) | (f) | — | 2,539 | ||||||||||||||||||||||||||||
| Rig termination | 1,279 | — | — | (1,279) | (f) | — | — | ||||||||||||||||||||||||||||
| Impairment | 4,825,530 | — | — | (995,682) | (f) | — | 3,829,848 | ||||||||||||||||||||||||||||
| General and administrative expenses | 142,885 | — | 3,668 | (e) | (3,461) | (f) | — | 143,092 | |||||||||||||||||||||||||||
| Litigation settlement | 22,750 | — | — | — | — | 22,750 | |||||||||||||||||||||||||||||
| Total operating expenses | 5,901,357 | 129,231 | 100,553 | (1,099,402) | — | 5,031,739 | |||||||||||||||||||||||||||||
| Gain on sale of properties | 10,407 | — | — | 227,415 | (g) | — | 237,822 | ||||||||||||||||||||||||||||
| Operating income (loss) | (4,938,500) | 116,109 | (100,553) | 1,202,396 | — | (3,720,548) | |||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments | 148,950 | — | — | — | — | 148,950 | |||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | (143,856) | — | — | — | (27,156) | (i) | (171,012) | ||||||||||||||||||||||||||||
| Gain on extinguishment of debt | 83,867 | — | — | — | — | 83,867 | |||||||||||||||||||||||||||||
| Other income (expense) | 870 | — | — | (5) | (f) | — | 865 | ||||||||||||||||||||||||||||
| Total other income (expense), net | 89,831 | — | — | (5) | (27,156) | 62,670 | |||||||||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | (4,848,669) | 116,109 | (100,553) | 1,202,391 | (27,156) | (3,657,878) | |||||||||||||||||||||||||||||
| Income tax benefit (expense) | 269,743 | — | — | (81,051) | (h) | — | 188,692 | ||||||||||||||||||||||||||||
| Net income (loss) from continuing operations | $ | (4,578,926) | $ | 116,109 | $ | (100,553) | $ | 1,121,340 | $ | (27,156) | $ | (3,469,186) | |||||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis per share: | |||||||||||||||||||||||||||||||||||
| Basic | $ | (229.05) | $ | (173.54) | |||||||||||||||||||||||||||||||
| Diluted | (229.05) | (173.54) | |||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||
7
Basic | 19,991 | 19,991 | |||||||||||||||||||||||||||||||||
Diluted | 19,991 | 19,991 | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
8
Oasis Petroleum Inc.
Condensed Consolidated Combined Statements of Operations (Unaudited)
Year Ended December 31, 2020
(In thousands, except per share data)
| Predecessor | Successor | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction Accounting Adjustments | Transaction Accounting Adjustments | Transaction Accounting Adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Historical Predecessor | Discontinued Operations | Fresh Start Accounting–Discontinued Operations | As Adjusted | Fresh Start Accounting–Continuing Operations | As Further Adjusted(1) | Historical Successor | Discontinued Operations | As Adjusted | Successor and Predecessor Pro Forma Combined(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oil and gas revenues | $ | 603,585 | $ | (2,075) | (a) | $ | — | $ | 601,510 | $ | — | $ | 601,510 | $ | 86,442 | $ | (297) | (a) | $ | 86,145 | $ | 687,655 | ||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas sales | 186,367 | 50,744 | (b) | — | 237,111 | — | 237,111 | 7,227 | 13,406 | (b) | 20,633 | 257,744 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream revenues | 166,631 | (166,631) | (a) | — | — | — | — | 26,031 | (26,031) | (a) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services revenues | 6,836 | — | — | 6,836 | — | 6,836 | 215 | — | 215 | 7,051 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 963,419 | (117,962) | — | 845,457 | — | 845,457 | 119,915 | (12,922) | 106,993 | 952,450 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease operating expenses | 118,372 | 42,034 | (a) | — | 160,406 | — | 160,406 | 17,841 | 4,676 | (a) | 22,517 | 182,923 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Midstream expenses | 42,987 | (42,987) | (a) | — | — | — | — | 10,572 | (10,572) | (a) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other services expenses | 6,658 | — | — | 6,658 | — | 6,658 | — | — | — | 6,658 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gathering, processing and transportation expenses | 85,896 | 31,988 | (a) | — | 117,884 | — | 117,884 | 9,124 | 4,074 | (a) | 13,198 | 131,082 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased oil and gas expenses | 185,893 | 43,163 | (b) | — | 229,056 | — | 229,056 | 7,357 | 12,921 | (b) | 20,278 | 249,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Production taxes | 45,439 | — | — | 45,439 | — | 45,439 | 5,938 | — | 5,938 | 51,377 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization | 291,115 | (20,113) | (a) | — | 271,002 | — | 271,002 | 16,094 | (2,305) | (a) | 13,789 | 284,791 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Exploration expenses | 2,748 | — | — | 2,748 | — | 2,748 | — | — | — | 2,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rig termination | 1,279 | — | — | 1,279 | — | 1,279 | — | — | — | 1,279 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment | 4,937,143 | (111,613) | (a) | — | 4,825,530 | — | 4,825,530 | — | — | — | 4,825,530 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 145,294 | 310 | (a) | (904) | (j) | 144,700 | (16,618) | (m) | 128,082 | 14,224 | 579 | (a) | 14,803 | 142,885 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Litigation settlement | 22,750 | — | — | 22,750 | — | 22,750 | — | — | — | 22,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 5,885,574 | (57,218) | (904) | 5,827,452 | (16,618) | 5,810,834 | 81,150 | 9,373 | 90,523 | 5,901,357 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
9
| Gain on sale of properties | 10,396 | — | — | 10,396 | — | 10,396 | 11 | — | 11 | 10,407 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | (4,911,759) | (60,744) | 904 | (4,971,599) | 16,618 | (4,954,981) | 38,776 | (22,295) | 16,481 | (4,938,500) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net gain (loss) on derivative instruments | 233,565 | — | — | 233,565 | — | 233,565 | (84,615) | — | (84,615) | 148,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | (181,484) | 39,648 | (a) | — | (141,836) | — | (141,836) | (3,168) | 1,148 | (a) | (2,020) | (143,856) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | 83,867 | — | — | 83,867 | — | 83,867 | — | — | — | 83,867 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reorganization items, net | 786,831 | — | (120,915) | (k) | 665,916 | (665,916) | (n) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense) | 1,407 | (136) | (a) | — | 1,271 | — | 1,271 | (402) | 1 | (a) | (401) | 870 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other income (expense), net | 924,186 | 39,512 | (120,915) | 842,783 | (665,916) | 176,867 | (88,185) | 1,149 | (87,036) | 89,831 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss from continuing operations before income taxes | (3,987,573) | (21,232) | (120,011) | (4,128,816) | (649,298) | (4,778,114) | (49,409) | (21,146) | (70,555) | (4,848,669) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income tax benefit | 262,962 | — | — | 262,962 | 3,334 | (o) | 266,296 | 3,447 | — | 3,447 | 269,743 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss from continuing operations including non-controlling interests | (3,724,611) | (21,232) | (120,011) | (3,865,854) | (645,964) | (4,511,818) | (45,962) | (21,146) | (67,108) | (4,578,926) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) from continuing operations attributable to non-controlling interests | (84,283) | 6,546 | (a) | 77,737 | (l) | — | — | — | 3,950 | (3,950) | (a) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis | $ | (3,640,328) | $ | (27,778) | $ | (197,748) | $ | (3,865,854) | $ | (645,964) | $ | (4,511,818) | $ | (49,912) | $ | (17,196) | $ | (67,108) | $ | (4,578,926) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss from continuing operations attributable to Oasis per share: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | (11.46) | $ | (2.50) | $ | (229.05) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | (11.46) | (2.50) | (229.05) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic | 317,644 | 19,991 | 19,991 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10
Diluted | 317,644 | 19,991 | 19,991 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
_______________
(1) Represents the Company’s results of operations after giving effect to the OMP Merger and fresh start accounting adjustments.
(2) Represents the combined results of operations of the Predecessor and Successor after giving effect to the OMP Merger and fresh start accounting adjustments.
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated combined financial statements.
11
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 2019
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||||||||||||||||||
As Reported | Discontinued Operations | 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 including non-controlling interests | (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 attributable to Oasis from continuing operations 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 combined financial statements.
12
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 2018
(In thousands, except per share data)
| Transaction Accounting Adjustments | |||||||||||||||||||||||
As Reported | Discontinued Operations | 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 including non-controlling interests | (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 attributable to Oasis from continuing operations 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 combined financial statements.
13
Notes to Unaudited Pro Forma Condensed Consolidated Combined Financial Information
1. Basis of Presentation
On October 21, 2021, the Company completed its previously announced acquisition of approximately 95,000 net acres in the Williston Basin, effective April 1, 2021, from QEP Energy Company (“QEP”), a wholly-owned subsidiary of Diamondback Energy Inc., for total cash consideration of $585.8 million (the “Williston Basin Acquisition”). The total cash consideration was comprised of a deposit of $74.5 million paid on May 3, 2021 and $511.3 million paid at closing on October 21, 2021. The Company funded the Williston Basin Acquisition with cash on hand, including proceeds from the divestiture of its exploration and production assets in the Texas region of the Permian Basin on June 29, 2021 (the “Permian Basin Sale”) and proceeds from the issuance of $400.0 million 6.375% senior unsecured notes due June 1, 2026 (the “Oasis Senior Notes”) on June 9, 2021. The Company expects the Williston Basin Acquisition to qualify as an asset acquisition under accounting principles generally accepted in the United States of America as the Williston Basin Acquisition does not meet the definition of a business under the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, since substantially all of the fair value of the assets acquired are concentrated in a single asset group. The Company has applied the cost accumulation model under FASB ASC 805-50, Business Combinations - Acquisitions of Assets Rather than a Business (“ASC 805-50”), and as such, recognized the Williston Basin Acquisition at cost, which includes transaction costs. The Company does not expect any material deferred income taxes from the Williston Basin Acquisition, as the tax basis of the assets acquired and liabilities assumed was equal to the book basis at closing.
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, the Company will receive $160.0 million in cash and approximately 21 million common units of Crestwood in exchange for its approximate 70% ownership of OMP and its non-economic general partner interest in OMP GP. In connection with and prior to completion of the OMP Merger, the Company expects to contribute substantially all of its remaining midstream assets to OMP in exchange for cash consideration of approximately $6.7 million. Upon closing of the OMP Merger, the Company expects to own approximately 22% of the limited partner interests of Crestwood. As a result of this transaction, the Company will be a single basin exploration and production company. The OMP Merger represents a strategic shift for the Company and qualifies as discontinued operations in accordance with FASB ASC 205-20, Presentation of financial statements – Discontinued Operations (“ASC 205-20”). The pro forma adjustments presented herein show the effects of the OMP Merger as discontinued operations under ASC 205-20, as well as the classification of the assets and liabilities as held for sale. The Company expects the OMP Merger to be completed in the first quarter of 2022 and will file a Form 8-K under Item 2.01 upon closing. The pro forma financial information presented in such Form 8-K may contain values, adjustments and other information that differ from those contained in the pro forma financial information presented herein to, among other things, include pro forma financial information to show the pro forma effects of the OMP Merger as a significant disposition. The foregoing differences may be material individually or in the aggregate.
On November 19, 2020 (the “Emergence Date”) the Company emerged from bankruptcy and adopted fresh start accounting in accordance with the FASB ASC 852, Reorganizations, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. References to “Predecessor” relate to the period from January 1, 2018 through November 19, 2020, and references to “Successor” relate to the period from November 20, 2020 through September 30, 2021.
The unaudited pro forma condensed consolidated combined financial information has been derived from the historical consolidated financial statements of the Company and the historical Statements of Revenues and Direct Operating Expenses of properties acquired in the Williston Basin Acquisition (which were derived from information provided by QEP). The unaudited pro forma condensed consolidated combined balance sheet at September 30, 2021 was prepared as if the Williston Basin Acquisition and OMP Merger had occurred on September 30, 2021. No pro forma adjustments were necessary to reflect the Company’s adoption of fresh start accounting, the Permian Basin Sale and the issuance of the Oasis Senior Notes as these transactions were already included in the Company’s historical unaudited condensed consolidated balance sheet at September 30, 2021. The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and for the year ended December 31, 2020 were prepared as if the fresh start accounting adjustments recorded on Emergence Date, the OMP Merger, the Williston Basin Acquisition, the Permian Basin Sale and the issuance of the Oasis Senior Notes 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 FASB ASC 205-20 to show the effects of the OMP Merger for comparative purposes.
14
The unaudited pro forma condensed consolidated combined 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 combined financial statements are provided for illustrative purposes only and may or may not provide an indication of results in the future.
2. Pro Forma Adjustments and Assumptions
Balance Sheet
The unaudited pro forma condensed consolidated combined balance sheet at September 30, 2021 reflects the following adjustments:
(a) Represents the assets and liabilities classified as held for sale in connection with the OMP Merger. The Company expects the OMP Merger to be completed within one year, and as such, has classified the assets and liabilities held for sale as current.
(a) Represents the assets and liabilities classified as held for sale in connection with the OMP Merger. The Company expects the OMP Merger to be completed within one year, and as such, has classified the assets and liabilities held for sale as current.
(b) Represents the cash paid to QEP of $74.5 million on May 3, 2021 and $511.3 million on October 21, 2021 for the Williston Basin Acquisition, as follows:
| (In thousands) | |||||
| Cash and cash equivalents | $ | 111,296 | |||
| Restricted cash – non–current | 400,000 | ||||
| Other assets | 74,506 | ||||
| Total cash paid | $ | 585,802 | |||
(c) Represents the allocation of the total cost of the Williston Basin Acquisition to the assets acquired and liabilities assumed, as follows:
| (In thousands) | ||||||||
| Total Cost | ||||||||
| Cash Consideration: | ||||||||
| Cash paid at closing on October 21, 2021 | $ | 511,296 | ||||||
| Cash deposit paid on May 3, 2021 | 74,506 | |||||||
| Total cash paid | 585,802 | |||||||
| Liabilities Assumed: | ||||||||
| Asset retirement obligations | 14,850 | |||||||
| Suspended funds | 8,997 | |||||||
Unfavorable contracts(1) | 21,724 | |||||||
| Total liabilities assumed | 45,571 | |||||||
Transaction costs(2) | 4,123 | |||||||
| Total cost of Williston Basin Acquisition | $ | 635,496 | ||||||
| Allocation of Total Cost | ||||||||
| Assets | ||||||||
| Inventory | $ | 4,954 | ||||||
Oil and gas properties(3) | 620,953 | |||||||
| Other property and equipment | 1,315 | |||||||
| Long-term inventory | 3,748 | |||||||
15
| Other assets | 4,526 | |||||||
| Total assets | $ | 635,496 | ||||||
| Liabilities | ||||||||
| Revenues and production taxes payable | $ | (8,997) | ||||||
| Accrued liabilities | (5,508) | |||||||
| Asset retirement obligations | (14,850) | |||||||
| Other liabilities | (16,216) | |||||||
| Total liabilities | $ | (45,571) | ||||||
(1) Represents an estimated aggregate minimum volume commitment (“MVC”) of $21.7 million related to unfavorable contracts acquired in the Williston Basin Acquisition that the Company has determined to be probable and reasonably estimable at the close of the transaction.
(2) Prior to the closing of the Williston Basin Acquisition, the Company expensed $1.8 million of transaction costs as incurred under general and administrative expenses during the nine months ended September 30, 2021. At closing, the Company reduced general and administrative expenses by $1.8 million and recorded these costs as part of the total cost of the Williston Basin Acquisition in accordance with FASB ASC 805-50. In addition, the Company estimates it will accrue an additional $2.3 million of transaction costs that will be recorded as part of the total cost of the Williston Basin Acquisition.
(3) Includes $583.5 million recorded to proved developed oil and gas properties and $22.6 million recorded to proved undeveloped oil and gas properties.
(d) Represents (i) the estimated additional transaction costs from the Williston Basin Acquisition of approximately $2.3 million, and (ii) the current portion of an estimated MVC of $5.5 million assumed in the Williston Basin Acquisition. See footnote (c)
above for additional details.
Statements of Operations
The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and the year ended December 31, 2020, as well as the unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2018 and 2019 reflect the following adjustments:
(a) Represents the classification of revenues and expenses from the OMP Merger as discontinued operations. The Company will have continuing cash outflows to Crestwood following the completion of the OMP Merger for gathering, processing, transportation and water handling costs pursuant to the existing contractual arrangements between the Company and OMP that will be 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 the expected continuing impact.
The unaudited pro forma condensed consolidated combined statements of operations for the nine month period ended September 30, 2021 and the year ended December 31, 2020 reflect the following adjustments:
(c) Represents the revenues and direct operating expenses from the oil and gas properties acquired in the Williston Basin Acquisition.
(d) Represents the incremental depreciation, depletion and amortization and accretion expense related to the assets acquired in the Williston Basin Acquisition. Depletion was calculated using the unit-of-production method under the successful efforts method of accounting and was adjusted for (i) the increase in depletion reflecting the acquisition cost and production volumes attributable to the oil and gas properties and (ii) the revision to the depletion rate reflecting the reserve volumes attributable to the oil and gas properties. The pro forma depletion rate attributable to the Williston Basin Acquisition was $8.47 per barrel of oil equivalent. This adjustment also includes the depreciation expense attributable to other property, plant and equipment and
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accretion expense attributable to asset retirement obligations of $0.3 million and $0.6 million for the nine months ended September 30, 2021, respectively, and $0.3 million and $0.8 million for the year ended December 31, 2020, respectively.
(e) Represents the estimated impact from additional employees hired by the Company in connection with the Williston Basin Acquisition of $2.8 million for the nine months ended September 30, 2021 and $3.7 million for the year ended December 31, 2020. In addition, general and administrative expenses for the nine months ended September 30, 2021 was offset by $1.8 million of transaction costs previously expensed as incurred prior to closing of the Williston Basin Acquisition that were subsequently capitalized and recorded as part of the total cost of the Williston Basin Acquisition at closing in accordance with FASB ASC 805-50.
(f) Represents the elimination of the revenues and expenses associated with the assets divested in the Permian Basin Sale.
(g) The Company recorded a gain on sale of properties of $227.4 million from the Permian Basin Sale in its historical unaudited condensed consolidated financial statements for the nine months ended September 30, 2021. This pro forma adjustment records this gain on sale of properties in the results of operations for the year ended December 31, 2020 and removes it from the results of operations for the nine months ended September 30, 2021.
(h) Represents the estimated income tax impact from the Permian Basin Sale at the applicable state and federal statutory tax rate.
(i) Represents interest expense associated with the Oasis Senior Notes of $11.1 million and amortization of deferred financing costs of $0.7 million during the nine months ended September 30, 2021 and interest expense of $25.5 million and amortization of deferred financing costs of $1.6 million during the year ended December 31, 2020. The Company issued the Oasis Senior Notes on June 9, 2021 and used the proceeds to finance a portion of the Williston Basin Acquisition. The Company’s historical unaudited condensed consolidated financial statements already includes interest expense from the Oasis Senior Notes from June 9, 2021 until September 30, 2021.
(j) Represents the unrecognized compensation cost that was immediately expensed on the Emergence Date primarily for Class B units in OMP GP.
(k) Represents reorganization items recognized on the Emergence Date that are attributable to discontinued operations, 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.
(l) Represents the impacts to non-controlling interests from the application of fresh start accounting attributable to discontinued operations 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.
(m) Represents the immediate vesting on the Emergence Date of Predecessor restricted stock awards of $6.7 million, Predecessor performance share units of $4.7 million, Predecessor phantom unit awards of $1.0 million and unamortized prepaid cash incentives of $4.2 million that were each attributable to continuing operations.
(n) Represents reorganization items recognized on the Emergence Date that are attributable to continuing operations, as follows:
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| (In thousands) | |||||
| Gain on debt discharge | $ | 964,569 | |||
| Loss on revaluation adjustments | (225,336) | ||||
| Write-off of unamortized debt discount | (38,373) | ||||
| Professional fees | (16,352) | ||||
| Write-off of unamortized deferred financing costs | (12,739) | ||||
| Debtor-in-possession credit facility fees | (5,853) | ||||
| Total reorganization items, net | $ | 665,916 | |||
(o) Represents income tax expense of $9.7 million from reorganization adjustments attributable to continuing operations, offset by the income tax benefit from fresh start adjustments of $6.4 million attributable to continuing operations.
3. Supplemental Oil and Gas Reserve Information
Estimated Quantities of Proved Oil and Natural Gas Reserves
The table below summarizes the Company’s estimated net proved reserves at December 31, 2020 based on reports prepared by DeGolyer and MacNaughton, the Company’s independent reserve engineers. In preparing its reports, DeGolyer and MacNaughton evaluated 100% of the reserves and discounted values at December 31, 2020 in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to companies involved in oil and natural gas producing activities.
In addition, the following table also sets forth information as of December 31, 2020 about the estimated net proved reserves attributable to the Permian Basin Sale and Williston Basin Acquisition, and the pro forma estimated net proved reserves of the Company as if the Permian Basin Sale and Williston Basin Acquisition had occurred on December 31, 2020. The reserve estimates attributable to the Permian Basin Sale at December 31, 2020 presented in the table below were derived from the reports prepared by DeGolyer and MacNaughton. The reserve estimates attributable to the Williston Basin Acquisition at December 31, 2020 presented in the table below were prepared based upon information provided by QEP and was prepared in accordance with the authoritative guidance of the FASB and the SEC on oil and natural gas reserve estimation and disclosures.
Reserve estimates are inherently imprecise and are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, reserve estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.
In addition, the following table also sets forth information as of December 31, 2020 about the estimated net proved reserves attributable to the Permian Basin Sale and Williston Basin Acquisition, and the pro forma estimated net proved reserves of the Company as if the Permian Basin Sale and Williston Basin Acquisition had occurred on December 31, 2020. The reserve estimates attributable to the Permian Basin Sale at December 31, 2020 presented in the table below were derived from the reports prepared by DeGolyer and MacNaughton. The reserve estimates attributable to the Williston Basin Acquisition at December 31, 2020 presented in the table below were prepared based upon information provided by QEP and was prepared in accordance with the authoritative guidance of the FASB and the SEC on oil and natural gas reserve estimation and disclosures.
Reserve estimates are inherently imprecise and are generally based upon extrapolation of historical production trends, analogy to similar properties and volumetric calculations. Accordingly, reserve estimates are expected to change, and such changes could be material and occur in the near term as future information becomes available.
| December 31, 2020 | |||||||||||||||||||||||||||||
| OAS Historical | Permian Basin Sale | Williston Basin Acquisition | Pro Forma | ||||||||||||||||||||||||||
Proved Reserves(1) | |||||||||||||||||||||||||||||
| Developed: | |||||||||||||||||||||||||||||
| Oil (MMBbls) | 85.4 | (13.2) | 41.1 | 113.3 | |||||||||||||||||||||||||
| Natural gas (Bcf) | 262.7 | (20.8) | 75.0 | 316.9 | |||||||||||||||||||||||||
NGL (MMBbls)(2) | — | — | 12.8 | 12.8 | |||||||||||||||||||||||||
| Total estimated proved developed reserves (MMBoe) | 129.2 | (16.7) | 66.4 | 178.9 | |||||||||||||||||||||||||
| Undeveloped: | |||||||||||||||||||||||||||||
| Oil (MMBbls) | 34.3 | (11.0) | 10.7 | 34.0 | |||||||||||||||||||||||||
| Natural gas (Bcf) | 113.5 | (16.3) | 9.3 | 106.5 | |||||||||||||||||||||||||
NGL (MMBbls)(2) | — | — | 1.6 | 1.6 | |||||||||||||||||||||||||
| Total estimated proved undeveloped reserves (MMBoe) | 53.3 | (13.7) | 13.8 | 53.4 | |||||||||||||||||||||||||
(1) The reserve estimates were prepared using SEC pricing, calculated as the unweighted arithmetic average first-day-of-the-month prices for the prior twelve months. For the Company’s historical reserves, including the reserves attributable to the Permian Basin Sale, SEC pricing was $39.54 per Bbl for crude oil and $2.03 per MMBtu for natural gas for the year ended
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December 31, 2020. For the reserves data provided by QEP attributable to the Williston Basin Acquisition, SEC pricing was $39.57 per Bbl for crude oil and $1.99 per MMBtu for natural gas for the year ended December 31, 2020. These prices were adjusted by location and quality differentials.
(2) The reserves attributable to the Williston Basin Acquisition were historically reported by QEP on a three-stream basis, while the Company has historically reported reserves on a two-stream basis.
Changes in commodity prices may significantly impact the Company’s estimates of oil and natural gas reserves. Sustained lower commodity prices can reduce the quantity of the Company’s reserves by causing the economic limit of the proved developed and proved undeveloped wells (the point at which the costs to operate exceed the value of estimated future production, assuming constant prices and costs under SEC rules) to occur earlier in their productive lives than would be the case with higher prices. The undeveloped reserves may also be reduced by the elimination of wells because they would not meet the investment criteria to be economically producible at such prices and costs. The proved undeveloped reserves may also be eliminated by the deferral of drilling of otherwise economic wells beyond the five year proved reserve development horizon as a result of revisions to the Company’s development plan adopted in response to lower prices or otherwise.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
The following table presents the Standardized Measure of Discounted Future Net Cash Flows relating to the proved oil and natural gas reserves of the Company, adjusted for the properties sold in the Permian Basin Sale and the properties acquired in the Williston Basin Acquisition on a pro forma combined basis as of December 31, 2020. The Standardized Measure shown below represents estimates only and should not be construed as the current market value of the Company’s estimated oil and natural gas reserves or those estimated oil and natural gas reserves attributable to the properties sold in the Permian Basin Sale and the properties acquired in the Williston Basin Acquisition.
Changes in commodity prices may significantly impact the Company’s estimates of oil and natural gas reserves. Sustained lower commodity prices can reduce the quantity of the Company’s reserves by causing the economic limit of the proved developed and proved undeveloped wells (the point at which the costs to operate exceed the value of estimated future production, assuming constant prices and costs under SEC rules) to occur earlier in their productive lives than would be the case with higher prices. The undeveloped reserves may also be reduced by the elimination of wells because they would not meet the investment criteria to be economically producible at such prices and costs. The proved undeveloped reserves may also be eliminated by the deferral of drilling of otherwise economic wells beyond the five year proved reserve development horizon as a result of revisions to the Company’s development plan adopted in response to lower prices or otherwise.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
The following table presents the Standardized Measure of Discounted Future Net Cash Flows relating to the proved oil and natural gas reserves of the Company, adjusted for the properties sold in the Permian Basin Sale and the properties acquired in the Williston Basin Acquisition on a pro forma combined basis as of December 31, 2020. The Standardized Measure shown below represents estimates only and should not be construed as the current market value of the Company’s estimated oil and natural gas reserves or those estimated oil and natural gas reserves attributable to the properties sold in the Permian Basin Sale and the properties acquired in the Williston Basin Acquisition.
| December 31, 2020 | |||||||||||||||||||||||
| OAS Historical | Permian Basin Sale | Williston Basin Acquisition | Pro Forma | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Future cash inflows | $ | 5,197,220 | $ | (1,010,896) | $ | 2,062,726 | $ | 6,249,050 | |||||||||||||||
| Future production costs | (2,792,921) | 404,546 | $ | (1,350,604) | (3,738,979) | ||||||||||||||||||
| Future development costs | (610,658) | 177,445 | $ | (157,014) | (590,227) | ||||||||||||||||||
| Future outflows for income tax | (232,849) | 64,673 | (10,945) | (179,121) | |||||||||||||||||||
| Future net cash flows | 1,560,792 | (364,232) | 544,163 | 1,740,723 | |||||||||||||||||||
| 10% annual discount for estimated timing of cash flows | (611,915) | 203,962 | (192,758) | (600,711) | |||||||||||||||||||
| Standardized measure of discounted future net cash flows | $ | 948,877 | $ | (160,270) | $ | 351,405 | $ | 1,140,012 | |||||||||||||||
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