EX-99.2 4 dex992.htm UNAUDITED PRO FORMA COMBINED BALANCE SHEET Unaudited pro forma combined balance sheet

EXHIBIT 99.2

XTO ENERGY INC.

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The accompanying pro forma consolidated financial statements have been prepared by recording pro forma adjustments to the historical consolidated financial statements of XTO Energy Inc. The pro forma consolidated balance sheet as of June 30, 2007 has been prepared as if the Dominion acquisition closed on June 30, 2007. The pro forma consolidated income statement for the year ended December 31, 2006 has been prepared as if the Dominion acquisition closed on January 1, 2006. The pro forma consolidated income statement for the six months ended June 30, 2007 has been prepared as if the Dominion acquisition closed on January 1, 2007. The pro forma consolidated income statement for the six months ended June 30, 2006 has been prepared as if the Dominion acquisition closed on January 1, 2006.

These pro forma consolidated financial statements are not necessarily indicative of the financial position or results of operations that would have occurred had the transactions been effected on the assumed dates. Additionally, future results may vary significantly from the results reflected in the pro forma consolidated income statements due to normal production declines, changes in prices, future transactions and other factors. These statements should be read in conjunction with our audited consolidated financial statements and the related notes for the year ended December 31, 2006 included in our 2006 Form 10-K, our unaudited consolidated financial statements and related notes for the six months ended June 30, 2007 and 2006 included in our Form 10-Q for the quarter ended June 30, 2007 and the statements of revenues and direct operating expenses of the assets acquired from Dominion for the year ended December 31, 2006 and the six months ended June 30, 2007 and 2006.


XTO ENERGY INC.

Pro Forma Consolidated Balance Sheet (Unaudited)

June 30, 2007

 

           Pro Forma
Adjustments
       
     Historical     Dominion
Acquisition
(Note 2)
    Pro Forma  
(in millions, except shares)                   

ASSETS

      

Total Current Assets

   $ 1,938     $  (742)  a)   $ 1,196  
                        

Property and Equipment, at cost - successful

       2,520  (a)  

efforts method

     15,600       32 (b)     18,152  

Accumulated depreciation, depletion and amortization

     (3,250 )     —         (3,250 )
                        

Net Property and Equipment

     12,350       2,552       14,902  
                        

Other Assets

     464       —         464  
                        

TOTAL ASSETS

   $ 14,752     $ 1,810     $ 16,562  
                        

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Total Current Liabilities

   $ 1,147     $ —       $ 1,147  
                        

Long-term Debt

     3,552       1,778  (a)     5,330  
                        

Other Long-term Liabilities

     2,653       32 (b)     2,685  
                        

Stockholders’ Equity:

      

Common stock ($0.01 par value, 1,000,000,000 shares authorized, 389,791,116 shares issued)

     4       —         4  

Additional paid-in capital

     3,123       —         3,123  

Treasury stock, at cost (3,967,061 shares)

     (126 )     —         (126 )

Retained earnings

     4,166       —         4,166  

Accumulated other comprehensive income

     233       —         233  
                        

Total Stockholders’ Equity

     7,400       —         7,400  
                        

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 14,752     $ 1,810     $ 16,562  
                        

See Accompanying Notes to Pro Forma Consolidated Financial Statements.

 

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XTO ENERGY INC.

Pro Forma Consolidated Income Statement (Unaudited)

For the Year Ended December 31, 2006

 

           Pro Forma Adjustments
(Note 2)
       
         Historical         Dominion
Acquisition 
(c)
           Other                 Pro Forma      
(in millions, except per share data)                        

REVENUES

         

Gas and natural gas liquids

   $ 3,490     $ 505    $ —       $ 3,995  

Oil and condensate

     1,002       69      —         1,071  

Gas gathering, processing and marketing

     86       5      —         91  

Other

     (2 )     57      —         55  
                               

Total Revenues

     4,576       636      —         5,212  
                               

EXPENSES

         

Production

     491       68      —         559  

Taxes, transportation and other

     372       58      —         430  

Exploration

     22       —        —         22  

Depreciation, depletion and amortization

     875       —        238  (d)     1,113  

Accretion of discount in asset retirement obligation

     16       —        2  (e)     18  

Gas gathering and processing

     41       —        —         41  

General and administrative

     189       —        —         189  

Derivative fair value (gain) loss

     (102 )     —        —         (102 )
                               

Total Expenses

     1,904       126      240       2,270  
                               

OPERATING INCOME

     2,672       510      (240 )     2,942  
                               

OTHER (INCOME) EXPENSE

         

Gain on distribution of royalty trust units

     (469 )     —        —         (469 )

Interest expense, net

     180       —        113  (f)     293  
                               

Total Other (Income) Expense

     (289 )     —        113       (176 )
                               

INCOME BEFORE INCOME TAX

     2,961       510      (353 )     3,118  

Income tax expense

     1,101       —        58  (g)     1,159  
                               

NET INCOME

   $ 1,860     $ 510    $ (411 )   $ 1,959  
                               

EARNINGS PER COMMON SHARE

         

Basic

   $ 5.10          $ 5.13  
                     

Diluted

   $ 5.03          $ 5.06  
                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     364.8          17.3  (h)     382.1  
                           

See Accompanying Notes to Pro Forma Consolidated Financial Statements.

 

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XTO ENERGY INC.

Pro Forma Consolidated Income Statement (Unaudited)

For the Six Months Ended June 30, 2007

 

          

Pro Forma Adjustments

(Note 2)

       
         Historical         Dominion
Acquisition 
(c)
           Other                 Pro Forma      
(in millions, except per share data)                        

REVENUES

         

Gas and natural gas liquids

   $ 1,891     $ 233    $ —       $ 2,124  

Oil and condensate

     555       29      —         584  

Gas gathering, processing and marketing

     52       2      —         54  

Other

     —         19      —         19  
                               

Total Revenues

     2,498       283      —         2,781  
                               

EXPENSES

         

Production

     275       38      —         313  

Taxes, transportation and other

     188       32      —         220  

Exploration

     11       —        —         11  

Depreciation, depletion and amortization

     505       —        120  (d)     625  

Accretion of discount in asset retirement obligation

     11       —        1  (e)     12  

Gas gathering and processing

     41       —        —         41  

General and administrative

     108       —        —         108  

Derivative fair value (gain) loss

     (13 )     —        —         (13 )
                               

Total Expenses

     1,126       70      121       1,317  
                               

OPERATING INCOME

     1,372       213      (121 )     1,464  
                               

OTHER EXPENSE

         

Interest expense, net

     94       —        57  (f)     151  
                               

INCOME BEFORE INCOME TAX

     1,278       213      (178 )     1,313  

Income tax expense

     463       —        13  (g)     476  
                               

NET INCOME

   $ 815     $ 213    $ (191 )   $ 837  
                               

EARNINGS PER COMMON SHARE

         

Basic

   $ 2.21          $ 2.18  
                     

Diluted

   $ 2.17          $ 2.14  
                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     369.4          14.9  (h)     384.3  
                           

See Accompanying Notes to Pro Forma Consolidated Financial Statements.

 

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XTO ENERGY INC.

Pro Forma Consolidated Income Statement (Unaudited)

For the Six Months Ended June 30, 2006

 

          

Pro Forma Adjustments

(Note 2)

       
         Historical        

Dominion

Acquisition (c)

           Other                 Pro Forma      
(in millions, except per share data)                        

REVENUES

         

Gas and natural gas liquids

   $ 1,743     $ 265    $ —       $ 2,008  

Oil and condensate

     484       35      —         519  

Gas gathering, processing and marketing

     53       3      —         56  

Other

     1       30      —         31  
                               

Total Revenues

     2,281       333      —         2,614  
                               

EXPENSES

         

Production

     243       31      —         274  

Taxes, transportation and other

     190       33      —         223  

Exploration

     9       —        —         9  

Depreciation, depletion and amortization

     407       —        117  (d)     524  

Accretion of discount in asset retirement obligation

     8       —        1  (e)     9  

Gas gathering and processing

     14       —        —         14  

General and administrative

     115       —        —         115  

Derivative fair value (gain) loss

     (50 )     —        —         (50 )
                               

Total Expenses

     936       64      118       1,118  
                               

OPERATING INCOME

     1,345       269      (118 )     1,496  
                               

OTHER (INCOME) EXPENSE

         

Gain on distribution of royalty trust units

     (469 )     —        —         (469 )

Interest expense, net

     87       —        57  (f)     144  
                               

Total Other (Income) Expense

     (382 )     —        57       (325 )
                               

INCOME BEFORE INCOME TAX

     1,727       269      (175 )     1,821  

Income tax expense

     663       —        34  (g)     697  
                               

NET INCOME

   $ 1,064     $ 269    $ (209 )   $ 1,124  
                               

EARNINGS PER COMMON SHARE

         

Basic

   $ 2.93          $ 2.95  
                     

Diluted

   $ 2.88          $ 2.91  
                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

     363.8          17.3  (h)     381.1  
                           

See Accompanying Notes to Pro Forma Consolidated Financial Statements.

 

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XTO ENERGY INC.

Notes to Pro Forma Consolidated Financial Statements (Unaudited)

 

1. Basis of Presentation

On July 31, 2007, XTO Energy Inc. completed its previously announced purchase of natural gas and oil properties from Dominion Resources, Inc., Dominion Energy, Inc., Dominion Oklahoma Texas Exploration & Production, Inc. and Dominion Reserves, Inc. and their affiliates (“Dominion”), pursuant to the Gulf Coast/Rockies/San Juan Package Purchase Agreement between Dominion and XTO Energy Inc. dated as of June 1, 2007 (“Purchase Agreement”). Closing occurred on July 31, 2007, at a price of $2.5 billion, which includes adjustments for typical closing effects. Post-closing adjustments regarding final net revenues, volume balancing and other effects will be made within eight months. The purchase was funded through the issuance of 17.25 million shares of our common stock in June 2007 for net proceeds of $1.0 billion, the issuance of $1.25 billion of senior notes in July 2007 and with borrowings under our commercial paper program, which was repaid with a portion of the proceeds from the issuance of $1.0 billion of senior notes in August 2007.

The accompanying pro forma consolidated financial statements have been prepared by recording pro forma adjustments to the historical consolidated financial statements of XTO Energy Inc. The pro forma consolidated balance sheet as of June 30, 2007 has been prepared as if the Dominion acquisition closed on June 30, 2007. The pro forma consolidated income statement for the year ended December 31, 2006 has been prepared as if the Dominion acquisition closed on January 1, 2006. The pro forma consolidated income statement for the six months ended June 30, 2007 has been prepared as if the Dominion acquisition closed on January 1, 2007. The pro forma consolidated income statement for the six months ended June 30, 2006 has been prepared as if the Dominion acquisition closed on January 1, 2006. These pro forma consolidated financial statements are not necessarily indicative of the financial position or results of operations that would have occurred had the transactions been effected on the assumed dates because of exclusion of certain operating and overhead expenses.

 

2. Pro Forma Adjustments

Pro forma adjustments necessary to adjust the consolidated balance sheet for the Dominion acquisition are as follows:

 

  (a) To record the acquisition of the properties for a total purchase price of $2.5 billion, $1.0 billion of which was funded through the June 2007 issuance of 17.25 million shares of our common stock and the remainder from issuances of $2.25 billion of senior notes.

 

  (b) To record the estimated asset retirement obligation related to the properties acquired.

Pro Forma adjustments necessary to adjust the consolidated income statements for the Dominion acquisition are as follows:

 

  (c) To record the historical revenue and direct operating expenses.

 

  (d) To record estimated depreciation and depletion expense using the unit-of-production method, based on estimated proved reserves and the adjusted purchase price of properties acquired.

 

  (e) To record accretion of discount expense related to the estimated asset retirement obligation for the properties acquired.

 

  (f) To record interest expense related to long-term debt of $1.8 billion used to partially finance the acquisition, based on the weighted average interest rate for $2.25 billion of senior notes offered in July 2007 and August 2007.

 

  (g) To record income tax expense for acquisition net income, as pro forma adjusted, at a 36.7% effective tax rate.

 

  (h) To increase weighted average shares outstanding related to the June 2007 issuance of 17.25 million shares of common stock used to fund $1.0 billion of the purchase price.

 

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3. Pro Forma Supplemental Oil and Gas Reserve Information

Estimated Quantities of Pro Forma Proved Oil and Gas Reserves

Pro forma reserve estimates at December 31, 2006 are based on reports prepared by independent petroleum engineers for proved reserves of XTO Energy and for proved reserves of the Dominion acquisition, using December 31, 2006 prices and costs.

Proved reserves are estimated quantities of crude oil, natural gas and natural gas liquids which, based on geologic and engineering data, are estimated to be reasonably recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those which are expected to be recovered through existing wells with existing equipment and operating methods. Because of inherent uncertainties and the limited nature of reservoir data, such estimates are subject to change as additional information becomes available.

Pro Forma Proved Oil and Gas Reserves at December 31, 2006

 

    

Gas

      (Mcf)      

   Natural Gas
Liquids
(Bbls)
  

Oil

  (Bbls) (a)  

   Natural Gas
Equivalents
(Mcf)
(in millions)                    

Proved reserves

   7,931.2        53.0      222.4    9,583.5

Proved developed reserves

   5,214.6    40.1    174.5    6,502.0

 

(a) Includes an insignificant amount of natural gas liquids from Dominion. XTO was unable to obtain separate reserve amounts for the Dominion natural gas liquids.

Standardized Measure of Discounted Future Net Cash Flows Relating to Pro Forma Proved Oil and Gas Reserves

The standardized measure of discounted future net cash flows and changes in such cash flows are prepared using assumptions required by the Financial Accounting Standards Board. Such assumptions include the use of year-end prices for oil and gas and year-end costs for estimated future development and production expenditures to produce year-end estimated proved reserves. Year-end prices are not adjusted for the effect of hedge derivatives. Discounted future net cash flows are calculated using a 10% rate.

The standardized measure does not represent our estimate of future net cash flows or the value of proved oil and gas reserves. Probable and possible reserves, which may become proved in the future, are excluded from the calculations. Furthermore, year-end prices used to determine the standardized measure of discounted cash flows are influenced by seasonal demand and other factors and may not be the most representative in estimating future revenues or reserve data.

 

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Pro Forma Standardized Measure of Discounted Future Net Cash Flows at December 31, 2006

 

(in millions)       

Future cash inflows

   $ 56,729  

Future costs:

  

Production

     (16,074 )

Development

     (4,743 )
        

Future net cash inflows before income tax

     35,912  

Future income tax

     (11,525 )
        

Future net cash flows

     24,387  

10% annual discount

     (12,485 )
        

Standardized measure of discounted future net cash flows

   $ 11,902  
        

Pro Forma Changes in Standardized Measure of Discounted Future Net Cash Flows

 

(in millions)       

Standardized measure at January 1, 2006

   $ 19,292  
        

Revisions:

  

Prices and costs

     (12,530 )

Quantity estimates

     1,100  

Accretion of discount

     1,866  

Future development costs

     (2,481 )

Income tax

     4,874  

Production rates and other

     (85 )
        

Net revisions

     (7,256 )

Extensions, additions and discoveries

     2,243  

Production

     (4,091 )

Development costs

     1,977  

Purchases in place

     396  

Sales in place

     (659 )
        

Net change

     (7,390 )
        

Standardized measure at December 31, 2006

   $ 11,902  
        

 

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