EX-99.2 5 tm2134344d1_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed combined financial information is derived from the historical consolidated financial statements of Laredo Petroleum, Inc. (“Laredo” or the “Company”), the Glasscock Properties (as defined below), Sabalo (as defined below) and Shad Permian, LLC (“Shad”). Unless otherwise stated below, the unaudited pro forma condensed combined financial statements of the Company reflect the historical results of the Company on a pro forma basis to give effect to the following transactions (collectively, the “Transactions”), which are described in further detail below:

 

  • Laredo’s acquisition of certain oil and gas properties in the Midland Basin, including approximately 20,000 net acres located in western Glasscock County, Texas (the “Glasscock Properties”), from Pioneer Natural Resources USA, Inc. (“Pioneer”), DE Midland III, LLC, Parsley Minerals, LLC and Parsley Energy, L.P. for aggregate consideration of $202.5 million based on the closing price of a share of the Company’s common stock on October 18, 2021 (the closing date) (the “Pioneer Acquisition”). The aggregate purchase consideration consisted of (i) $131.6 million in cash, net of closing adjustments; and (ii) 959,691 shares of the Company’s common stock.
  • Laredo’s acquisition of substantially all of the key operating assets consisting of wellbore interests of Sabalo Energy, LLC (“Sabalo Energy”), Sabalo Operating, LLC (“Sabalo Operating” and together with Sabalo Energy, “Sabalo”) on July 1, 2021 (the “Sabalo Acquisition”).

  • Laredo’s acquisition of substantially all of the key operating assets consisting of wellbore interests of Shad on July 1, 2021 (the “Shad Acquisition” and, together with the Sabalo Acquisition, the “Prior Acquisitions”).
  • Laredo’s sale of 37.5% of its working interest in certain oil and gas properties in Glasscock and Reagan Counties, Texas, to an unrelated third party on July 1, 2021 (the “Prior Disposition”).
  • Borrowings under Laredo’s Senior Secured Credit Facility of: i) approximately $20.0 million and $110.0 million on October 7, 2021 and October 18, 2021, respectively, which were used to fund the Pioneer Acquisition and related transaction costs (the “October Borrowing”); and ii) approximately $220.0 million previously used to fund the Prior Acquisitions and related transaction costs (the “Prior Borrowing” and, together with the October Borrowing, the “Borrowings”).

 

The unaudited pro forma condensed combined balance sheet is based on the Company’s historical consolidated balance sheet as of September 30, 2021 and includes pro forma adjustments to give effect to the Pioneer Acquisition and the October Borrowing as if they had occurred on September 30, 2021. The Prior Acquisitions, the Prior Disposition and the Prior Borrowing are reflected in the historical consolidated balance sheet of the Company as of September 30, 2021, and, as such, no pro forma adjustments are made for such transactions in the pro forma condensed combined balance sheet. The unaudited pro forma condensed combined statements of operations of the Company for the year ended December 31, 2020 and nine months ended September 30, 2021 are based on the historical consolidated statements of operations of the Company, giving effect to the Transactions as if they had occurred January 1, 2020.

 

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only to reflect the Transactions and does not represent what Laredo’s results of operations or financial position would actually have been had the transactions occurred on the dates noted above or project its results of operations or financial position for any future periods. The unaudited pro forma condensed combined financial information is intended to provide information about the continuing impact of the Transactions as if they had been consummated earlier. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made.

 

The following unaudited pro forma condensed combined financial information should be read in conjunction with Laredo’s consolidated financial statements and the related notes thereto, which are included in Laredo’s Annual Report on Form 10-K for the year ended December 31, 2020 and its Quarterly Report on Form 10-Q for the nine months ended September 30, 2021; the Glasscock Properties’ statements of revenues and direct operating expenses and the related notes thereto, which are included elsewhere in this filing; and Sabalo’s and Shad’s consolidated financial statements, which are incorporated herein by reference.

 

 

 

 

Laredo Petroleum, Inc.

Pro Forma Condensed Combined Balance Sheet

As of September 30, 2021

(unaudited)

 

   Historical         
(in thousands)  Laredo - As
Reported		   Pioneer Acquisition &
October Borrowing		   Pro Forma
Combined		 
Current assets:               
Cash and cash equivalents  $51,396   $18,868(a)  $70,264 
         (3,200)(b)   (3,200)
Accounts receivable, net   122,657    -    122,657 
Derivatives   3,272    -    3,272 
Other current assets   17,222    909(c)   18,131 
Total current assets   194,547    16,577    211,124 
                
Property and equipment:               
Oil and natural gas properties, full cost method:               
Evaluated properties   8,608,464    223,201(c)   8,831,665 
Unevaluated properties not being depleted   167,219    -    167,219 
Less accumulated depletion and impairment   (6,948,645)   -    (6,948,645)
Oil and natural gas properties, net   1,827,038    223,201    2,050,239 
Midstream service assets, net   107,863    -    107,863 
Other fixed assets, net   32,192    -    32,192 
Property and equipment, net   1,967,093    223,201    2,190,294 
Operating lease right-of-use assets   15,236    -    15,236 
Derivatives   35,742    -    35,742 
Other noncurrent assets, net   46,354    (20,500)(d)   25,854 
Total assets  $2,258,972   $219,278   $2,478,250 
                
Current liabilities:               
Accounts payable and accrued liabilities  $61,341   $-   $61,341 
Accrued capital expenditures   53,655    -    53,655 
Undistributed revenue and royalties   85,265    7,722(c)   92,987 
Derivatives   288,794    -    288,794 
Operating lease liabilities   11,386    -    11,386 
Other current liabilities   74,370    -    74,370 
Total current liabilities   574,811    7,722    582,533 
                
Long-term debt, net   1,349,896    130,000(e)   1,479,896 
Derivatives   37,453    -    37,453 
Asset retirement obligations   55,680    10,635(c)   66,315 
Operating lease liabilities   6,064    -    6,064 
Other noncurrent liabilities   11,006    -    11,006 
Total liabilities   2,034,910    148,357    2,183,267 
                
Stockholders’ equity:               
Preferred Stock   -    -    - 
Common stock   161    10(f)   171 
Additional paid-in capital   2,715,196    70,911(f)   2,786,107 
Accumulated deficit   (2,491,295)   -    (2,491,295)
Total stockholders’ equity   224,062    70,921    294,983 
Total liabilities and equity  $2,258,972   $219,278   $2,478,250 

 

 

 

 

Laredo Petroleum, Inc.

Pro Forma Condensed Combined Statement of Operations

For the Nine Months Ended September 30, 2021

(unaudited)

 

  

Historical

  

Transaction Accounting Adjustments

     
   Laredo - As
Reported		   Prior
Acquisitions		   Pioneer
Acquisition		   Elimination
Adjustments		   Prior
Disposition		   Acquisitions &
Borrowings		   Pro Forma
Combined		 
(in thousands, except for per share data)      (a)   (b)   (c)   (d)         
Revenues:                            
Oil sales  $514,752   $98,628   $39,724   $-   $(62,786)  $-   $590,318 
NGL sales   133,121    4,532    7,231    -    (29,676)   -    115,208 
Natural gas sales   98,186    2,509    3,438    -    (22,681)   -    81,452 
Midstream service revenues   4,292    -    -    -    -    -    4,292 
Sales of purchased oil   173,500    -    -    -    -    -    173,500 
Total revenues   923,851    105,669    50,393    -    (115,143)   -    964,770 
Costs and expenses:                                   
Lease operating expenses   68,526    23,425    7,591    -    (11,098)   -    88,444 
Production and ad valorem taxes   45,957    5,047    2,770    -    (8,221)   -    45,553 
Transportation and marketing expenses   34,477    -    -    -    -    -    34,477 
Midstream service expenses   2,572    -    -    -    -    -    2,572 
Costs of purchased oil   183,458    -    -    -    -    -    183,458 
Organizational restructuring expenses   9,800    -    -    -    -    -    9,800 
General and administrative   49,182    3,149    -    -    -    -    52,331 
Depletion, depreciation and amortization   140,763    25,952    -    -    (17,081)   79,478(e)   229,112 
Impairment expense   1,613    -    -    -    -    -    1,613 
Other operating expenses   4,099    174    -    -    (496)   588(e)   4,365 
Total costs and expenses   540,447    57,747    10,361    -    (36,896)   80,066    651,725 
Gain on sale of oil and natural gas properties, net   93,482    -    -    -    (93,482)   -    - 
Operating income (loss)   476,886    47,922    40,032    -    (171,729)   (80,066)   313,045 
Non-operating income (expense):                                   
Provision for uncollectible receivables   -    (28)   -    28    -    -    - 
Gain (loss) on derivatives, net   (467,547)   (40,821)   -    -    50,226    -    (458,142)
Interest expense   (82,222)   (3,463)   -    3,463    -    (5,421)(f)   (87,643)
Loss on disposal of assets, net   (28)   -    -    -    -    -    (28)
Other income, net   2,236    785    -    (785)   -    -    2,236 
Total non-operating income (expense), net   (547,561)   (43,527)   -    2,706    50,226    (5,421)   (543,577)
Income (loss) before income taxes   (70,675)   4,395    40,032    2,706    (121,503)   (85,487)   (230,532)
Income tax benefit (expense):                                   
Current   (1,300)   (215)   -    -    -    -    (1,515)
Deferred   707    -    -    -    -    -    707 
Total income tax benefit   (593)   (215)   -    -    -    -    (808)
Net income (loss)  $(71,268)  $4,180    40,032   $2,706   $(121,503)  $(85,487)  $(231,340)
                                    
Net income (loss) per common share:                                   
Basic  $(5.29)                           $(14.38)
Diluted  $(5.29)                           $(14.38)
                                    
Weighted average common shares outstanding:                                   
Basic   13,464                        2,622(g)   16,086 
Diluted   13,464                        2,622(g)   16,086 

 

 

 

 

Laredo Petroleum, Inc.

Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2020

(unaudited)

 

   Historical   Transaction Accounting Adjustments     
   Laredo - As
Reported		   Prior
Acquisitions		   Pioneer
Acquisition		   Elimination
Adjustments		   Prior
Disposition		   Acquisitions &
Borrowings		   Pro Forma
Combined		 
(in thousands, except for per share data)      (a)   (b)   (c)   (d)         
Revenues:                            
Oil sales  $367,792   $134,815   $36,399   $-   $(119,060)  $-   $419,946 
NGL sales   78,246    2,821    5,226    -    (28,268)   -    58,025 
Natural gas sales   50,317    1,103    1,775    -    (18,679)   -    34,516 
Midstream service revenues   8,249    -    -    -    -    -    8,249 
Sales of purchased oil   172,588    -    -    -    -    -    172,588 
Total revenues   677,192    138,739    43,400    -    (166,007)   -    693,324 
Costs and expenses:                                   
Lease operating expenses   82,020    51,371    13,906    -    (23,367)   -    123,930 
Production and ad valorem taxes   33,050    6,624    2,524    -    (12,058)   -    30,140 
Transportation and marketing expenses   49,927    -    -    -    -    -    49,927 
Midstream service expenses   3,762    -    -    -    -    -    3,762 
Costs of purchased oil   194,862    -    -    -    -    -    194,862 
General and administrative   50,534    5,367    -    -         -    55,901 
Organizational restructuring expenses   4,200    -    -    -    -    -    4,200 
Depletion, depreciation and amortization   217,101    100,161    -    -    (63,569)   40,837(e)   294,530 
Impairment expense   899,039    425    -    -    (280,771)   (475,335)(f)   143,358 
Other operating expenses   4,430    335    -    -    (957)   685(e)   4,493 
Total costs and expenses   1,538,925    164,283    16,430    -    (380,722)   (433,813)   905,103 
Gain on sale of oil and natural gas properties   -    -    -    -    93,482    -    93,482 
Operating income (loss)   (861,733)   (25,544)   26,970    -    308,197    433,813    (118,297)
Non-operating income (expense):                                   
Provision for uncollectible receivables   -    (11)   -    11    -    -    - 
Gain on derivatives, net   80,114    20,932    -    -    -    -    101,046 
Interest expense   (105,009)   (7,381)   -    7,381    -    (9,188)(g)   (114,197)
Interest income   -    10    -    (10)   -    -    - 
Gain on extinguishment of debt, net   8,989    -    -    -    -    -    8,989 
Loss on disposal of assets, net   (963)   (4)   -    4    -    -    (963)
Write-off of debt issuance costs   (1,103)   -    -    -    -    -    (1,103)
Other income, net   1,586    (19)   -    19    -    -    1,586 
Total non-operating income (expense), net   (16,386)   13,527    -    7,405    -    (9,188)   (4,642)
Income (loss) before income taxes   (878,119)   (12,017)   26,970    7,405    308,197    424,625    (122,939)
Income tax benefit (expense):                                   
Current   -    (267)   -    -    -    -    (267)
Deferred   3,946    -    -    -    -    -    3,946 
Total income tax benefit (expense)   3,946    (267)   -    -    -    -    3,679 
Net income (loss)  $(874,173)  $(12,284)  $26,970   $7,405   $308,197   $424,625   $(119,260)
                                    
Net income (loss) per common share:                                   
Basic  $(74.92)                           $(7.88)
Diluted  $(74.92)                           $(7.88)
                                    
Weighted average common shares outstanding:                                   
Basic   11,668                        3,467(h)   15,135 
Diluted   11,668                        3,467(h)   15,135 

 

 

 

 

Laredo Petroleum, Inc.

Notes to Pro Forma Condensed Combined Financial Statements

(Unaudited)

 

Note 1. Unaudited Pro Forma Condensed Combined Balance Sheet

 

Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2021

 

The following adjustments have been made to the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2021 to reflect the Pioneer Acquisition and October Borrowing:

 

  a) Represents a $130.0 million increase in cash due to the October Borrowing under the Senior Secured Credit Facility, less final cash purchase price of $131.6 million for the Pioneer Acquisition, net of closing adjustments, less a cash deposit of $20.5 million included in other noncurrent assets as of September 30, 2021.

  b) Reflects $3.2 million of estimated transaction costs related to the Pioneer Acquisition.

  c)

Represents the allocation of the estimated fair value of consideration transferred of $131.6 million of cash, $70.9 million of common stock (based on the closing price of Laredo’s common stock as of October 18, 2021) and $3.2 million of estimated transaction costs to the assets acquired and liabilities assumed in the following allocation adjustments:

·     $0.9 million increase in other current assets related to acquired inventory;

·     $223.2 million increase in evaluated oil and natural gas properties related to acquired reserves;

·     $7.7 million increase in undistributed revenue and royalties related to assumed undistributed revenue and royalties; and

·     $10.6 million increase in asset retirement obligations related to assumed asset retirement obligations.

  d) Represents a cash deposit of $20.5 million made in association with the Pioneer Acquisition prior to September 30, 2021.

  e) Represents the October Borrowing under the Senior Secured Credit Facility in the amount of $20.0 million and $110.0 million on October 7, 2021, and October 18, 2021, respectively.
  f) Represents $70.9 million for the issuance of 959,691 shares of Laredo’s common stock, at $0.01 par value (based on the closing price as of October 18, 2021).

 

The Company expects the Pioneer Acquisition will be accounted for as an asset acquisition as substantially all of the gross assets acquired are concentrated in a group of similar identifiable assets. The consideration paid was allocated to the individual assets acquired and liabilities assumed based on their relative fair values. All transaction costs associated with the Pioneer Acquisition were capitalized. The allocation of the estimated purchase price is based upon management’s estimates of and assumptions related to the fair value of assets acquired and liabilities assumed as of October 18, 2021.

 

For income tax purposes, the Pioneer Acquisition was treated as an asset purchase such that the tax bases in the assets and liabilities reflect the allocated fair value at closing; therefore, the Company does not anticipate a material tax consequence for deferred income taxes related thereto.

 

Note 2. Unaudited Pro Forma Condensed Combined Statements of Operations

 

Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 2021

 

The following adjustments have been made to the accompanying unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2021 to reflect the Prior Acquisitions, Prior Disposition, Borrowings and Pioneer Acquisition:

 

  a) Represents the combined historical statements of operations for Sabalo and Shad for the six months ended June 30, 2021, as incorporated herein by reference.  The Prior Acquisitions closed on July 1, 2021 and the subsequent operating results of the related properties are included in the historical results of the Company presented.  

 

 

 

 

   Sabalo - As
Reported		   Shad - As
Reported		   Total Prior
Acquisitions		 
(in thousands)               
Revenues:               
Oil sales  $84,606   $14,022   $98,628 
NGL sales   3,841    691    4,532 
Natural gas sales   2,139    370    2,509 
Midstream service revenues   -    -    - 
Sales of purchased oil   -    -    - 
Total revenues   90,586    15,083    105,669 
Costs and expenses:               
Lease operating expenses   19,619    3,806    23,425 
Production and ad valorem taxes   4,314    733    5,047 
Transportation and marketing expenses   -    -    - 
Midstream service expenses   -    -    - 
Costs of purchased oil   -    -    - 
Organizational restructuring expenses   -    -    - 
General and administrative   3,149    -    3,149 
Depletion, depreciation and amortization   20,963    4,989    25,952 
Impairment expense   -    -    - 
Other operating expenses   170    4    174 
Total costs and expenses   48,215    9,532    57,747 
Gain on sale of oil and natural gas properties, net   -    -    - 
Operating income (loss)   42,371    5,551    47,922 
Non-operating income (expense):               
Provision for uncollectible receivables   (28)   -    (28)
Gain (loss) on derivatives, net   (40,821)   -    (40,821)
Interest expense   (3,463)   -    (3,463)
Loss on disposal of assets, net   -    -    - 
Other income, net   785    -    785 
Total non-operating income (expense), net   (43,527)   -    (43,527)
Income (loss) before income taxes   (1,156)   5,551    4,395 
Income tax benefit (expense):               
Current   (127)   (88)   (215)
Deferred   -    -    - 
Total income tax benefit   (127)   (88)   (215)
Net income (loss)  $(1,283)  $5,463   $4,180 

 

  b) Represents the historical statements of revenues and expenses of the Glasscock Properties, which are included elsewhere in this filing.  
  c) Represents adjustments to eliminate the effects of assets and liabilities retained by Sabalo and not associated with the oil and natural gas properties acquired.

 

 

 

 

  d) Represents adjustments to the Company’s historical consolidated statement of operations to remove the effects of the Prior Disposition, a nonrecurring gain of $93.5 million, net of transaction costs, associated with the Prior Disposition, and a gain related to derivatives novated to the acquiree subsequent to July 1, 2021.
  e) Reflects adjustment to depletion, depreciation and amortization expense resulting from the change in basis of property, plant and equipment acquired and an increase in accretion of asset retirement obligations as a result of the Prior Acquisitions, Prior Disposition and Pioneer Acquisition.

  f) Reflects interest expense at the current rate of 2.625% as of November 30, 2021 in respect of the Borrowings. Interest expense for the Prior Borrowing was calculated through June 30, 2021, after which, the interest expense was combined with Laredo’s financial statements. Actual interest expense may be higher or lower depending on fluctuations in interest rates and other market conditions. A one-eighth percent increase or decrease in the interest rate would not have had a material impact on interest expense for the nine months ended September 30, 2021. Estimated amortization of debt issuance costs related to the Borrowings are not considered material and have not been included.

  g)

Adjustment to reflect the following issuances of Laredo common stock as if these shares were outstanding as of the beginning of period presented:

·     2.5 million shares of Laredo common stock issued to Sabalo and Shad as a portion of the consideration for the Prior Acquisitions, and

·     1.0 million shares of Laredo common stock issued to Pioneer as a portion of the consideration for the Pioneer Acquisition.

 

Laredo has not reflected any estimated tax impact related to the Prior Acquisitions, Prior Disposition, Borrowings and Pioneer Acquisition in the accompanying unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2021 because it does not anticipate the impact to be material due to the Company’s net operating loss carryforwards. The Company’s effective tax rate is not meaningful and is expected to remain under 1% due to the full valuation allowance against the Company’s federal and Oklahoma net deferred tax assets.

 

Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2020

 

The following adjustments have been made to the accompanying unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 to reflect the Prior Acquisitions, Prior Disposition, Borrowings and Pioneer Acquisition:

 

  a)

Represents the combined historical statements of operations for Sabalo and Shad for the year ended December 31, 2020, as incorporated herein by reference.

 

 

 

 

   Sabalo - As
Reported		   Shad - As
Reported		   Total Prior
Acquisitions		 
(in thousands)               
Revenues:               
Oil sales  $110,063   $24,752   $134,815 
NGL sales   2,177    644    2,821 
Natural gas sales   1,013    90    1,103 
Midstream service revenues   -    -    - 
Sales of purchased oil   -    -    - 
Total revenues   113,253    25,486    138,739 
Costs and expenses:               
Lease operating expenses   40,110    11,261    51,371 
Production and ad valorem taxes   5,393    1,231    6,624 
Transportation and marketing expenses   -    -    - 
Midstream service expenses   -    -    - 
Costs of purchased oil   -    -    - 
General and administrative   5,367    -    5,367 
Organizational restructuring expenses   -    -    - 
Depletion, depreciation and amortization   80,164    19,997    100,161 
Impairment expense   425    -    425 
Other operating expenses   328    7    335 
Total costs and expenses   131,787    32,496    164,283 
Gain on sale of oil and natural gas properties, net   -    -    - 
Operating income (loss)   (18,534)   (7,010)   (25,544)
Non-operating income (expense):               
Provision for uncollectible receivables   (11)   -    (11)
Gain on derivatives, net   20,932    -    20,932 
Interest expense   (7,381)   -    (7,381)
Interest income   10    -    10 
Gain on extinguishment of debt, net   -    -    - 
Loss on disposal of assets, net   (4)   -    (4)
Write-off of debt issuance costs   -    -    - 
Other income, net   (19)   -    (19)
Total non-operating income (expense), net   13,527    -    13,527 
Income (loss) before income taxes   (5,007)   (7,010)   (12,017)
Income tax benefit (expense):               
Current   (2)   (265)   (267)
Deferred   -    -    - 
Total income tax benefit (expense)   (2)   (265)   (267)
Net income (loss)  $(5,009)  $(7,275)  $(12,284)

 

  b) Represents the historical statements of revenues and expenses of the Glasscock Properties, which are included elsewhere in this filing.  
  c) Represents adjustments to eliminate the effects of assets and liabilities retained by Sabalo and not associated with the oil and natural gas properties acquired.
  d) Represents adjustments to the Company’s historical consolidated statement of operations to remove the effects of the Prior Disposition and recognize a nonrecurring gain of $93.5 million, net of transaction costs, associated with the Prior Disposition.

  e) Reflects adjustment to depletion, depreciation, and amortization expense resulting from the change in basis of property, plant and equipment acquired and an increase in accretion of asset retirement obligations as a result of the Prior Acquisitions, Prior Disposition and Pioneer Acquisition.

  f) Reflects adjustment to impairment expense resulting from the application of the quarterly ceiling test pursuant to the rules governing full cost accounting and due to the change from Sabalo’s and Shad’s historical accounting under the successful efforts method to conform to Laredo’s accounting under the full cost method. The quarterly ceiling test takes into account the change in basis of the oil and gas properties acquired and reserves and historical prices determined using Securities and Exchange Commission (“SEC”) guidelines at the time of each historical quarterly ceiling test.

  g) Reflects interest expense at the current rate of 2.625% as of November 30, 2021 in respect of the Borrowings. Actual interest expense may be higher or lower depending on fluctuations in interest rates and other market conditions. A one-eighth percent increase or decrease in the interest rate would not have had a material impact on interest expense for the year ended December 31, 2020. Estimated amortization of debt issuance costs related to the Borrowings are not considered material and have not been included.

 

 

 

 

  h)

Adjustment to reflect the following issuances of Laredo common stock as if these shares were outstanding as of the beginning of period presented:

·     2.5 million shares of Laredo common stock issued to Sabalo and Shad as a portion of the consideration for the Prior Acquisitions, and

·     1.0 million shares of Laredo common stock issued to Pioneer as a portion of the consideration for the Pioneer Acquisition.

 

Laredo has not reflected any estimated tax impact related to the Prior Acquisitions, Prior Disposition, Borrowings and Pioneer Acquisition in the accompanying unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 because it does not anticipate the impact to be material due to the Company’s net operating loss carryforwards. The Company’s effective tax rate is not meaningful and is expected to remain under 1% due to the full valuation allowance against the Company’s federal and Oklahoma net deferred tax assets.

 

Note 3. Supplemental Pro Forma Oil and Gas Information

 

The following tables present the estimated pro forma combined net proved developed and undeveloped oil and natural gas reserves as of December 31, 2020 for Laredo, Sabalo, Shad and the Glasscock Properties along with a summary of changes in the quantities of net remaining proved reserves during the year ended December 31, 2020. The pro forma reserve information set forth below gives effect to the Prior Acquisitions, Prior Disposition and Pioneer Acquisition as if they had been completed on January 1, 2020.

 

   Crude Oil (Mbbls) 
   Historical         
   Laredo - As
Reported		   Sabalo - As
Reported		   Shad - As
Reported		   Pioneer
Acquisition - As
Reported		   Prior
Disposition		   Pro Forma
Combined		 
Proved developed and undeveloped reserves:                              
Balance as of January 1, 2020   78,639    36,647    3,841    10,215    (21,837)   107,505 
Revisions of previous estimates   (10,517)   (7,876)   (163)   (3,778)   1,691    (20,643)
Extensions, discoveries and other additions   4,282    32,495    -    988    -    37,765 
Acquisitions of reserves in place   5,182    -    -    -    -    5,182 
Production   (9,827)   (2,618)   (630)   (1,002)   3,410    (10,667)
Balance as of December 31, 2020   67,759    58,648    3,048    6,423    (16,736)   119,142 
                               
Proved developed reserves:                              
Balance as of January 1, 2020   52,711    20,006    3,841    7,096    (21,837)   61,817 
Balance as of December 31, 2020   51,751    15,388    3,048    5,436    (16,736)   58,887 
                               
Proved undeveloped reserves:                              
Balance as of January 1, 2020   25,928    16,641    -    3,120    -    45,689 
Balance as of December 31, 2020   16,008    43,260    -    988    -    60,256 
                               
    Natural Gas (MMcf) 
    Historical           
    Laredo - As
Reported		    Sabalo - As
Reported		    Shad - As
Reported		    Pioneer
Acquisition - As
Reported		    Prior
Disposition		    Pro Forma
Combined		 
Proved developed and undeveloped reserves:                              
Balance as of January 1, 2020   675,237    31,009    5,041    19,373    (238,772)   491,888 
Revisions of previous estimates   34,376    (9,052)   (2,087)   (5,500)   (19,211)   (1,474)
Extensions and discoveries   10,772    29,989    -    1,241    -    42,002 
Purchases of minerals in place   6,948    -    -    -    -    6,948 
Production   (70,049)   (1,803)   (547)   (2,802)   25,710    (49,491)
Balance as of December 31, 2020   657,284    50,143    2,407    12,312    (232,273)   489,873 
                               
Proved developed reserves:                              
Balance as of January 1, 2020   600,334    18,388    5,041    14,113    (238,772)   399,104 
Balance as of December 31, 2020   633,503    9,894    2,407    11,071    (232,273)   424,602 
                               
Proved undeveloped reserves:                              
Balance as of January 1, 2020   74,903    12,621    -    5,260    -    92,784 
Balance as of December 31, 2020   23,781    40,249    -    1,241    -    65,271 
                               

 

 

 

 

    Natural Gas Liquids (Mbbls) 
    Historical           
    Laredo - As
Reported		    Sabalo - As
Reported		    Shad - As
Reported		    Pioneer
Acquisition - As
Reported		    Prior
Disposition		    Pro Forma
Combined		 
Proved developed and undeveloped reserves:                              
Balance as of January 1, 2020   102,198    7,711    1,243    4,568    (36,137)   79,583 
Revisions of previous estimates   6,218    (1,932)   (488)   (1,616)   (2,713)   (531)
Extensions and discoveries   1,811    8,174    -    248    -    10,233 
Purchases of minerals in place   1,310    -    -    -    -    1,310 
Production   (10,615)   (288)   (99)   (364)   3,856    (7,510)
Balance as of December 31, 2020   100,922    13,665    656    2,836    (34,994)   83,085 
                               
Proved developed reserves:                              
Balance as of January 1, 2020   90,861    4,599    1,243    3,254    (36,137)   63,820 
Balance as of December 31, 2020   96,251    2,695    656    2,587    (34,994)   67,195 
                               
Proved undeveloped reserves:                              
Balance as of January 1, 2020   11,337    3,112    -    1,315    -    15,764 
Balance as of December 31, 2020   4,671    10,970    -    248    -    15,889 
                               
    Total Equivalent Reserves (Mboe) 
    Historical           
    Laredo - As
Reported		    Sabalo - As
Reported		    Shad - As
Reported		    Pioneer
Acquisition - As
Reported		    Prior
Disposition		    Pro Forma
Combined		 
Proved developed and undeveloped reserves:                              
Balance as of January 1, 2020   293,377    49,527    5,925    18,012    (97,771)   269,070 
Revisions of previous estimates   1,430    (11,317)   (999)   (6,311)   (4,223)   (21,420)
Extensions and discoveries   7,888    45,667    -    1,443    -    54,998 
Purchases of minerals in place   7,650    -    -    -    -    7,650 
Production   (32,117)   (3,207)   (820)   (1,833)   11,551    (26,426)
Balance as of December 31, 2020   278,228    80,670    4,106    11,311    (90,443)   283,872 
                               
Proved developed reserves:                              
Balance as of January 1, 2020   243,628    27,670    5,925    12,702    (97,771)   192,154 
Balance as of December 31, 2020   253,586    19,732    4,106    9,868    (90,443)   196,849 
                               
Proved undeveloped reserves:                              
Balance as of January 1, 2020   49,749    21,857    -    5,312    -    76,918 
Balance as of December 31, 2020   24,642    60,938    -    1,443    -    87,023 

 

The pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of December 31, 2020 is as follows:

 

   Historical         
(in thousands)  Laredo - As
Reported		   Sabalo - As
Reported		   Shad - As
Reported		   Pioneer
Acquisition - As
Reported		   Prior
Disposition		   Pro Forma
Combined		 
Future cash inflows  $3,824,104   $2,524,116   $130,147   $284,544   $(1,074,768)  $5,688,143 
Future production costs   (1,740,537)   (1,018,511)   (67,317)   (124,450)   520,449    (2,430,366)
Future development costs   (351,568)   (772,141)   (4,245)   (22,002)   23,056    (1,126,900)
Future income tax expenses   (20,076)   (13,252)   (683)   (1,494)   5,643    (29,862)
Future net cash flows   1,711,923    720,212    57,902    136,598    (525,620)   2,101,015 
10% annual discount for estimated timing of cash flows   (697,069)   (405,261)   (19,931)   (59,997)   214,824    (967,434)
Standardized measure of discounted future net cash flows  $1,014,854   $314,951   $37,971   $76,601   $(310,796)  $1,133,581 

 

 

 

 

The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2020 are as follows:

 

   Historical         
(in thousands)  Laredo - As
Reported		   Sabalo - As
Reported		   Shad - As
Reported		   Pioneer
Acquisition - As
Reported		   Prior
Disposition		   Pro Forma
Combined		 
Standardized measure of discounted future net cash flows, beginning of year  $1,662,261   $534,506   $76,370   $181,899   $(578,597)  $1,876,439 
Changes in the year resulting from:                              
Net change in prices and production costs   (770,885)   (201,330)   (17,075)   (71,397)   246,213    (814,474)
Changes in estimated future development costs   64,146    20,624    (221)   (116)   (1,164)   83,269 
Sales, less production costs   (331,358)   (67,750)   (12,994)   (23,696)   130,583    (305,215)
Extensions, discoveries and other additions   60,004    102,442    -    9,891    -    172,337 
Acquisitions of reserves in place   14,208    -    -    -    -    14,208 
Revisions of previous quantity estimates   199    (140,084)   (13,499)   (39,700)   (11,408)   (204,492)
  Previously estimated development costs incurred during the period   186,261    15,453    576    -    (40,054)   162,236 
Net change in income taxes   (1,205)   (1,775)   312    1,055    (1,449)   (3,062)
Accretion of discount   167,227    54,060    7,709    18,375    (58,319)   189,052 
Timing differences and other   (36,004)   (1,195)   (3,207)   290    3,399    (36,717)
Balance at December 31, 2020  $1,014,854   $314,951   $37,971   $76,601   $(310,796)  $1,133,581