EX-99.2 4 dex992.htm THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF XTO ENERGY INC The unaudited pro forma condensed combined balance sheet of XTO Energy Inc

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, 2008 has been prepared as if the Hunt Petroleum acquisition closed on June 30, 2008. The pro forma consolidated income statements for the year ended December 31, 2007 and for the six months ended June 30, 2008 and 2007 have been prepared as if the Hunt Petroleum acquisition closed on January 1, 2007.

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, 2007 included in our 2007 Form 10-K, our unaudited consolidated financial statements and related notes for the six months ended June 30, 2008 and 2007 included in our Form 10-Q for the quarter ended June 30, 2008 and the statements of combined revenues and direct operating expenses of the assets acquired from Hunt Petroleum for the year ended December 31, 2007 and the six months ended June 30, 2008 and 2007.


XTO ENERGY INC.

Pro Forma Consolidated Balance Sheet (Unaudited)

June 30, 2008

 

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

ASSETS

      

Current Assets:

      

Cash and cash equivalents

   $ 49     $ (49 )   $ —    

Other current assets

     2,289       292       2,581  
                        

Total Current Assets

     2,338       243       2,581  
                        

Property and Equipment, at cost—successful efforts method

     26,188       4,385       30,573  

Accumulated depreciation, depletion and amortization

     (4,689 )     —         (4,689 )
                        

Net Property and Equipment

     21,499       4,385       25,884  
                        

Other Assets

     500       1,237       1,737  
                        

TOTAL ASSETS

   $ 24,337     $ 5,865     $ 30,202  
                        

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Total Current Liabilities

   $ 3,600     $ 353     $ 3,953  
                        

Long-term Debt

     7,993       2,678       10,671  
                        

Other Liabilities:

      

Other Long-term Liabilities

     293       3       296  

Asset Retirement Obligation

     553       155       708  

Deferred income tax payable

     2,924       1,079       4,003  
                        

Total Other Liabilities

     3,770       1,237       5,007  
                        

Stockholders’ Equity:

      

Common stock ($0.01 par value, 1,000,000,000 shares authorized, 516,740,791 historical and 540,240,791 pro forma shares issued)

     5       —         5  

Additional paid-in capital

     4,491       1,597       6,088  

Treasury stock, at cost (5,167,942 historical and pro forma shares)

     (134 )     —         (134 )

Retained earnings

     5,855       —         5,855  

Accumulated other comprehensive loss

     (1,243 )     —         (1,243 )
                        

Total Stockholders’ Equity

     8,974       1,597       10,571  
                        

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 24,337     $ 5,865     $ 30,202  
                        

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, 2007

 

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

REVENUES

         

Gas and natural gas liquids

   $ 4,214     $ 506    $ —       $ 4,720  

Oil and condensate

     1,204       287      —         1,491  

Gas gathering, processing and marketing

     100       —        —         100  

Other

     (5 )     12      —         7  
                               

Total Revenues

     5,513       805      —         6,318  
                               

EXPENSES

         

Production

     615       116      —         731  

Taxes, transportation and other

     444       34      —         478  

Exploration

     52       —        —         52  

Depreciation, depletion and amortization

     1,187       —        346 (c)     1,533  

Accretion of discount in asset retirement obligation

     22       —        10 (d)     32  

Gas gathering and processing

     81       —        —         81  

General and administrative

     231       —        —         231  

Derivative fair value (gain) loss

     (11 )     —        —         (11 )
                               

Total Expenses

     2,621       150      356       3,127  
                               

OPERATING INCOME

     2,892       655      (356 )     3,191  
                               

OTHER EXPENSE

         

Interest expense, net

     250       —        156 (e)     406  
                               

INCOME BEFORE INCOME TAX

     2,642       655      (512 )     2,785  

Income tax expense

     951       —        52 (f)     1,003  
                               

NET INCOME

   $ 1,691     $ 655    $ (564 )   $ 1,782  
                               

EARNINGS PER COMMON SHARE

         

Basic

   $ 3.58          $ 3.60  
                     

Diluted

   $ 3.53          $ 3.55  
                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

         

Basic

     471.9          23.5 (g)     495.4  
                           

Diluted

     479.0          23.5 (g)     502.5  
                           

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, 2008

 

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

REVENUES

         

Gas and natural gas liquids

   $ 2,747     $ 379    $ —       $ 3,126  

Oil and condensate

     803       198      —         1,001  

Gas gathering, processing and marketing

     60       —        —         60  

Other

     (1 )     6      —         5  
                               

Total Revenues

     3,609       583      —         4,192  
                               

EXPENSES

         

Production

     408       59      —         467  

Taxes, transportation and other

     348       23      —         371  

Exploration

     32       —        —         32  

Depreciation, depletion and amortization

     796       —        175 (c)     971  

Accretion of discount in asset retirement obligation

     14       —        5 (d)     19  

Gas gathering and processing

     45       —        —         45  

General and administrative

     178       —        —         178  

Derivative fair value (gain) loss

     (42 )     —        —         (42 )
                               

Total Expenses

     1,779       82      180       2,041  
                               

OPERATING INCOME

     1,830       501      (180 )     2,151  
                               

OTHER EXPENSE

         

Interest expense, net

     193       —        78 (e)     271  
                               

INCOME BEFORE INCOME TAX

     1,637       501      (258 )     1,880  

Income tax expense

     597       —        89 (f)     686  
                               

NET INCOME

   $ 1,040     $ 501    $ (347 )   $ 1,194  
                               

EARNINGS PER COMMON SHARE

         

Basic

   $ 2.07          $ 2.27  
                     

Diluted

   $ 2.04          $ 2.24  
                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

         

Basic

     502.4          23.5 (g)     525.9  
                           

Diluted

     510.3          23.5 (g)     533.8  
                           

See Accompanying Notes to Pro Forma Consolidated Financial Statements.

 

4


XTO ENERGY INC.

Pro Forma Consolidated Income Statement (Unaudited)

For the Six Months Ended June 30, 2007

 

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

REVENUES

         

Gas and natural gas liquids

   $ 1,891     $ 252    $ —       $ 2,143  

Oil and condensate

     555       118      —         673  

Gas gathering, processing and marketing

     52       —        —         52  

Other

     —         4      —         4  
                               

Total Revenues

     2,498       374      —         2,872  
                               

EXPENSES

         

Production

     275       59      —         334  

Taxes, transportation and other

     188       15      —         203  

Exploration

     11       —        —         11  

Depreciation, depletion and amortization

     505       —        170 (c)     675  

Accretion of discount in asset retirement obligation

     11       —        5 (d)     16  

Gas gathering and processing

     41       —        —         41  

General and administrative

     108       —        —         108  

Derivative fair value (gain) loss

     (13 )     —        —         (13 )
                               

Total Expenses

     1,126       74      175       1,375  
                               

OPERATING INCOME

     1,372       300      (175 )     1,497  
                               

OTHER EXPENSE

         

Interest expense, net

     94       —        78 (e)     172  
                               

INCOME BEFORE INCOME TAX

     1,278       300      (253 )     1,325  

Income tax expense

     463       —        17 (f)     480  
                               

NET INCOME

   $ 815     $ 300    $ (270 )   $ 845  
                               

EARNINGS PER COMMON SHARE

         

Basic

   $ 1.77          $ 1.74  
                     

Diluted

   $ 1.74          $ 1.72  
                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

         

Basic

     461.7          23.5 (g)     485.2  
                           

Diluted

     469.2          23.5 (g)     492.7  
                           

See Accompanying Notes to Pro Forma Consolidated Financial Statements.

 

5


XTO ENERGY INC.

Notes to Pro Forma Consolidated Financial Statements (Unaudited)

 

1. Basis of Presentation

In September 2008, we acquired Hunt Petroleum Corporation and other associated entities for approximately $4.2 billion, which was funded by cash of $2.6 billion and the issuance of 23.5 million shares of common stock to the seller valued at $1.6 billion. Hunt Petroleum owned natural gas and oil producing properties primarily concentrated in our Eastern Region, including East Texas and central and north Louisiana. Additional producing properties, both onshore and offshore, are along the Gulf Coast of Texas, Louisiana, Mississippi and Alabama. Non-operating interests, including producing and undeveloped acreage in the North Sea, were also conveyed in the transaction. The cash portion of the transaction was funded by a combination of operating cash flow, commercial paper and the August 2008 issuance of senior notes.

The accompanying pro forma consolidated financial statements have been prepared by recording pro forma adjustments to our historical consolidated financial statements. The pro forma consolidated balance sheet as of June 30, 2008 has been prepared as if the Hunt acquisition closed on June 30, 2008. The pro forma consolidated income statements for the year ended December 31, 2007 and for the six months ended June 30, 2008 and 2007 have been prepared as if the Hunt acquisition closed on January 1, 2007. 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 the exclusion of certain operating and overhead expenses.

 

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2. Pro Forma Adjustments

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

 

  (a) To record the acquisition of the assets and liabilities acquired for a total purchase price of $4.2 billion, $2.25 billion of which was funded through the issuance of senior notes, $1.6 billion from the issuance to the seller of 23.5 million shares of our common stock and the remainder from cash on hand and commercial paper borrowings. The following is the preliminary calculation of the purchase price of Hunt Petroleum Corporation and the allocation to assets and liabilities. The purchase price allocation is subject to adjustment, pending final determination of the tax bases and the fair value of certain assets acquired and liabilities assumed.

 

(in millions)     

Consideration issued to Hunt owners:

  

23.5 million shares of common stock (at fair value of $67.95 per share)

   $ 1,597

Cash paid

     2,588
      

Total purchase price

     4,185

Fair value of liabilities assumed:

  

Current liabilities

     353

Long-term debt

     337

Asset retirement obligation

     155

Other long-term liabilities

     3

Deferred income taxes

     1,079
      

Total purchase price plus liabilities assumed

   $ 6,112
      

Fair value of assets acquired:

  

Cash and cash equivalents

   $ 198

Other current assets

     292

Proved properties

     4,155

Unproved properties

     160

Other property and equipment

     70

Goodwill (non-deductible for income taxes)

     1,237
      

Total fair value of assets acquired

   $ 6,112
      

 

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

 

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

 

  (c) 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.

 

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

 

  (e) To record interest expense related to long-term debt of $2.7 billion, of which $2.6 billion was used to finance the cash portion of the purchase price. The remaining increase in long-term debt was the result of Hunt’s assumed debt, net of cash on hand. The interest is based on the weighted average interest rate for the senior notes offered in August 2008 and the weighted average interest rate on our commercial paper borrowings.

 

  (f) To record income tax expense for acquisition net income, as pro forma adjusted, at a 36.6% effective tax rate.

 

  (g) To increase weighted average shares outstanding related to the issuance to the seller of 23.5 million shares of our common stock.

 

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, 2007 are based on reports prepared by independent petroleum engineers for our proved reserves and for proved reserves of the Hunt acquisition, using December 31, 2007 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, 2007

 

     Gas
(Mcf)
   Natural Gas
Liquids
(Bbls)
   Oil
(Bbls)
   Natural Gas
Equivalents
(Mcf)
(in millions)                    

Proved reserves

   10,138.6    78.2    265.6    12,201.3

Proved developed reserves

   6,383.6    59.3    199.7    7,937.5

 

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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.

Pro Forma Standardized Measure of Discounted Future Net Cash Flows at December 31, 2007

 

(in millions)       

Future cash inflows

   $ 93,599  

Future costs:

  

Production

     (23,829 )

Development

     (7,027 )

Future income tax

     (19,872 )
        

Future net cash flows

     42,871  

10% annual discount

     (21,421 )
        

Standardized measure of discounted future net cash flows

   $ 21,450  
        

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

 

(in millions)       

Standardized measure at January 1, 2007

   $ 12,492  
        

Revisions:

  

Prices and costs

     8,561  

Quantity estimates

     2,099  

Accretion of discount

     1,200  

Future development costs

     (3,426 )

Income tax

     (3,874 )

Production rates and other

     (163 )
        

Net revisions

     4,397  

Extensions, additions and discoveries

     3,753  

Production

     (5,014 )

Development costs

     2,491  

Purchases in place

     3,353  

Sales in place

     (22 )
        

Net change

     8,958  
        

Standardized measure at December 31, 2007

   $ 21,450  
        

 

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