EX-99.1 3 a16-19476_1ex99d1.htm EX-99.1

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

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

 

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

 


 

Halcón  Resources Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2016

(in thousands)

 

 

 

 

 

HK TMS Divestiture

 

 

 

 

 

Halcón

 

Pro Forma

 

Halcón

 

 

 

Historical

 

Adjustments

 

Pro Forma

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

7,173

 

$

7,069

(1)

$

104

 

Accounts receivable

 

112,855

 

1,636

(2)

111,219

 

Receivables from derivative contracts

 

135,455

 

—

 

135,455

 

Restricted cash

 

17,164

 

16,999

(1)

165

 

Inventory

 

1,498

 

—

 

1,498

 

Debt issuance costs, net

 

5,557

 

—

 

5,557

 

Prepaids and other

 

8,694

 

—

 

8,694

 

Total current assets

 

288,396

 

25,704

 

262,692

 

Oil and natural gas properties (full cost method):

 

 

 

 

 

 

 

Evaluated

 

7,679,917

 

507,421

(2)

7,172,496

 

Unevaluated

 

1,180,148

 

—

 

1,180,148

 

Gross oil and natural gas properties

 

8,860,065

 

507,421

 

8,352,644

 

Less - accumulated depletion

 

(6,779,116

)

(493,271

)(2)

(6,285,845

)

Net oil and natural gas properties

 

2,080,949

 

14,150

 

2,066,799

 

Other operating property and equipment:

 

 

 

 

 

 

 

Gas gathering and other operating assets

 

100,355

 

175

(2)

100,180

 

Less - accumulated depreciation

 

(23,155

)

(76

)(2)

(23,079

)

Net other operating property and equipment

 

77,200

 

99

 

77,101

 

Other noncurrent assets:

 

 

 

 

 

 

 

Receivables from derivative contracts

 

5,642

 

—

 

5,642

 

Equity in oil and natural gas partnership

 

11

 

—

 

11

 

Funds in escrow and other

 

1,613

 

—

 

1,613

 

Total assets

 

$

2,453,811

 

$

39,953

 

$

2,413,858

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

242,189

 

$

1,504

(2)

$

240,685

 

Asset retirement obligations

 

412

 

—

 

412

 

Current portion of long-term debt, net

 

2,825,807

 

—

 

2,825,807

 

Total current liabilities

 

3,068,408

 

1,504

 

3,066,904

 

Long-term debt, net

 

—

 

—

 

—

 

Other noncurrent liabilities:

 

 

 

 

 

 

 

Liabilities from derivative contracts

 

194

 

—

 

194

 

Asset retirement obligations

 

48,554

 

1,280

(2)

47,274

 

Other

 

9,283

 

9,121

(3)

162

 

Mezzanine equity:

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

212,503

 

212,503

(4)

—

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

Preferred stock

 

—

 

—

 

—

 

Common stock

 

12

 

—

 

12

 

Additional paid-in capital

 

3,288,371

 

—

 

3,288,371

 

Accumulated deficit

 

(4,173,514

)

(184,455

)(5)

(3,989,059

)

Total stockholders’ equity (deficit)

 

(885,131

)

(184,455

)

(700,676

)

Total liabilities and stockholders’ equity (deficit)

 

$

2,453,811

 

$

39,953

 

$

2,413,858

 

 


 

Halcón  Resources Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2016

(in thousands, except per share amounts)

 

 

 

 

 

HK TMS Divestiture

 

 

 

 

 

Halcón

 

Pro Forma

 

Halcón

 

 

 

Historical

 

Adjustments

 

Pro Forma

 

Operating revenues:

 

 

 

 

 

 

 

Oil, natural gas and natural gas liquids sales:

 

 

 

 

 

 

 

Oil

 

$

174,062

 

$

3,617

(6)

$

170,445

 

Natural gas

 

6,901

 

—

 

6,901

 

Natural gas liquids

 

5,441

 

—

 

5,441

 

Total oil, natural gas and natural gas liquids sales

 

186,404

 

3,617

 

182,787

 

Other

 

1,092

 

1

(6)

1,091

 

Total operating revenues

 

187,496

 

3,618

 

183,878

 

Operating expenses:

 

 

 

 

 

 

 

Production:

 

 

 

 

 

 

 

Lease operating

 

37,559

 

760

(7)

36,799

 

Workover and other

 

15,706

 

14

(7)

15,692

 

Taxes other than income

 

17,011

 

220

(7)

16,791

 

Gathering and other

 

21,903

 

4

(7)

21,899

 

Restructuring

 

5,073

 

—

 

5,073

 

General and administrative

 

66,324

 

78

(7)

66,246

 

Depletion, depreciation and accretion

 

94,937

 

3,640

(8)

91,297

 

Full cost ceiling impairment

 

754,769

 

83,941

(8)

670,828

 

Other operating property and equipment impairment

 

28,056

 

—

 

28,056

 

Total operating expenses

 

1,041,338

 

88,657

 

952,681

 

Income (loss) from operations

 

(853,842

)

(85,039

)

(768,803

)

Other income (expenses):

 

 

 

 

 

 

 

Net gain (loss) on derivative contracts

 

(35,781

)

—

 

(35,781

)

Interest expense and other, net

 

(106,113

)

(3,003

)(3)

(103,110

)

Gain (loss) on extinguishment of debt

 

81,434

 

—

 

81,434

 

Total other income (expenses)

 

(60,460

)

(3,003

)

(57,457

)

Income (loss) before income taxes

 

(914,302

)

(88,042

)

(826,260

)

Income tax benefit (provision)

 

—

 

—

 

—

 

Net income (loss)

 

(914,302

)

(88,042

)

(826,260

)

Series A preferred dividends

 

(6,396

)

—

 

(6,396

)

Preferred dividends and accretion on redeemable noncontrolling interest

 

(28,517

)

(28,517

)(9)

—

 

Net income (loss) available to common stockholders

 

$

(949,215

)

$

(116,559

)

$

(832,656

)

 

 

 

 

 

 

 

 

Net income (loss) per share of common stock:

 

 

 

 

 

 

 

Basic

 

$

(7.89

)

 

 

$

(6.92

)

Diluted

 

$

(7.89

)

 

 

$

(6.92

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

120,360

 

 

 

120,360

 

Diluted

 

120,360

 

 

 

120,360

 

 


 

Halcón  Resources Corporation and Subsidiaries

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2015

(in thousands, except per share amounts)

 

 

 

 

 

HK TMS Divestiture

 

 

 

 

 

Halcón

 

Pro Forma

 

Halcón

 

 

 

Historical

 

Adjustments

 

Pro Forma

 

Operating revenues:

 

 

 

 

 

 

 

Oil, natural gas and natural gas liquids sales:

 

 

 

 

 

 

 

Oil

 

$

512,346

 

$

16,701

(6)

$

495,645

 

Natural gas

 

22,509

 

—

 

22,509

 

Natural gas liquids

 

13,624

 

—

 

13,624

 

Total oil, natural gas and natural gas liquids sales

 

548,479

 

16,701

 

531,778

 

Other

 

1,799

 

—

 

1,799

 

Total operating revenues

 

550,278

 

16,701

 

533,577

 

Operating expenses:

 

 

 

 

 

 

 

Production:

 

 

 

 

 

 

 

Lease operating

 

103,590

 

2,287

(7)

101,303

 

Workover and other

 

20,862

 

43

(7)

20,819

 

Taxes other than income

 

48,890

 

945

(7)

47,945

 

Gathering and other

 

40,281

 

—

 

40,281

 

Restructuring

 

2,886

 

—

 

2,886

 

General and administrative

 

87,766

 

253

(7)

87,513

 

Depletion, depreciation and accretion

 

364,204

 

15,010

(8)

349,194

 

Full cost ceiling impairment

 

2,626,305

 

235,378

(8)

2,390,927

 

Total operating expenses

 

3,294,784

 

253,916

 

3,040,868

 

Income (loss) from operations

 

(2,744,506

)

(237,215

)

(2,507,291

)

Other income (expenses):

 

 

 

 

 

 

 

Net gain (loss) on derivative contracts

 

310,264

 

—

 

310,264

 

Interest expense and other, net

 

(232,878

)

(2,735

)(3)

(230,143

)

Gain (loss) on extinguishment of debt

 

761,804

 

—

 

761,804

 

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

 

(8,219

)

—

 

(8,219

)

Total other income (expenses)

 

830,971

 

(2,735

)

833,706

 

Income (loss) before income taxes

 

(1,913,535

)

(239,950

)

(1,673,585

)

Income tax benefit (provision)

 

(9,086

)

—

 

(9,086

)

Net income (loss)

 

(1,922,621

)

(239,950

)

(1,682,671

)

Series A preferred dividends

 

(17,517

)

—

 

(17,517

)

Preferred dividends and accretion on redeemable noncontrolling interest

 

(66,820

)

(66,820

)(9)

—

 

Net income (loss) available to common stockholders

 

$

(2,006,958

)

$

(306,770

)

$

(1,700,188

)

 

 

 

 

 

 

 

 

Net income (loss) per share of common stock:

 

 

 

 

 

 

 

Basic

 

$

(18.66

)

 

 

$

(15.81

)

Diluted

 

$

(18.66

)

 

 

$

(15.81

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

107,531

 

 

 

107,531

 

Diluted

 

107,531

 

 

 

107,531

 

 


 

Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

 

(1)         Eliminates cash and restricted cash of HK TMS.

 

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

 

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

 

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

 

(5)         Eliminates HK TMS’s historical accumulated deficit.

 

(6)         Eliminates operating revenues of HK TMS.

 

(7)         Eliminates operating and administrative expenses of HK TMS.

 

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

 

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