Oasis Petroleum Inc.
07/06/2021 | Press release | Distributed by Public on 07/06/2021 15:08
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (Form 8-K)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information is derived from the historical consolidated financial statements and accounting records of Oasis Petroleum Inc. (the 'Company' or 'Oasis'). In May 2020, the SEC adopted Release No. 33-10786 'Amendments to Financial Disclosures about Acquired and Disposed Businesses.' Release No. 33-10786 became effective on January 1, 2021, and the unaudited pro forma condensed consolidated financial information herein is presented in accordance therewith.
The unaudited pro forma condensed consolidated financial information reflects the Permian Basin Sale (defined below), in accordance with Article 11 of Regulation S-X of the Exchange Act. On May 20, 2021, Oasis Petroleum Permian LLC ('OPP'), a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement (the 'Permian PSA') with Percussion Petroleum Operating II, LLC ('Percussion'). Pursuant to the Permian PSA, OPP agreed to sell to Percussion its remaining upstream assets in the Texas region of the Permian Basin for aggregate consideration of up to $450.0 million, consisting of $375.0 million and up to three earn-out payments of $25.0 million per year for each of 2023, 2024 and 2025 if the average daily settlement price of NYMEX West Texas Intermediate crude oil exceeds $60 per barrel for such year (the 'Primary Permian Basin Sale'). The effective date of the Primary Permian Basin Sale was March 1, 2021. On June 29, 2021, the Company closed the Primary Permian Basin Sale, and received net cash proceeds (after purchase price adjustments) of $347.3 million, subject to post-closing adjustments. In addition, the Company previously divested certain wellbore interests in the Texas region of the Permian Basin to separate buyers in the second quarter of 2021 for aggregate consideration of $19.4 million, subject to post-closing adjustments (the 'Additional Permian Basin Sale' and together with the Primary Permian Basin Sale, collectively, the 'Permian Basin Sale'). The Company has retained midstream assets in the Permian Basin through its indirect ownership interest in Panther DevCo LLC ('Panther DevCo'), a wholly-owned subsidiary of Oasis Midstream Partners LP. The Permian Basin Sale does not qualify as discontinued operations as it does not represent a strategic shift that will have a major effect on the Company's operations or financial results. The transaction accounting adjustments related to the Permian Basin Sale are shown as 'Transaction Accounting Adjustments - Permian Basin Sale' below.
The Permian Basin Sale constituted a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the Company prepared the accompanying unaudited pro forma condensed consolidated financial statements to show the pro forma effects of the Permian Basin Sale.
The unaudited pro forma condensed consolidated statements of operations for the three month period ended March 31, 2021, period from January 1, 2020 through November 19, 2020 and period from November 20, 2020 to December 31, 2020 presented below have been derived from the Company's historical consolidated statements of operations and accounting records for such periods, and were prepared as if the Permian Basin Sale had occurred on January 1, 2020. On November 19, 2020, the Company emerged from bankruptcy and adopted fresh start accounting in accordance with the Financial Accounting Standards Board's 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, 2020 through November 19, 2020, and references to 'Successor' relate to the period from November 20, 2020 through December 31, 2020. The unaudited pro forma condensed consolidated balance sheet at March 31, 2021 presented below was derived from the Company's historical unaudited condensed consolidated balance sheet at March 31, 2021 and was prepared as if the Permian Basin Sale had occurred on March 31, 2021.
The unaudited pro forma condensed consolidated 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 financial information and accompanying notes provide a reasonable and reliably determinable basis for presenting the significant effects of the Permian Basin Sale. The following unaudited pro forma condensed consolidated statements of operations do not purport to represent what the Company's results of operations would have been if the Permian Basin Sale had occurred on January 1, 2020. The unaudited pro forma condensed consolidated financial information should be read together with the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the three months ended March 31, 2021.
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Oasis Petroleum Inc.
Condensed Consolidated Balance Sheet (Unaudited)
|
March 31, 2021
|
|||||||
| Historical |
Transaction Accounting Adjustments - Permian Basin Sale
|
Pro Forma | |||||
| (In thousands) | |||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 113,054 | $ | 364,333 | (a) | $ | 477,387 |
| Accounts receivable, net | 268,818 | (44,461) | (b) | 224,357 | |||
| Inventory | 29,423 | (853) | (b) | 28,570 | |||
| Prepaid expenses | 8,226 | (129) | (b) | 8,097 | |||
| Other current assets | 3,002 | (5) | (b) | 2,997 | |||
| Total current assets | 422,523 | 318,885 | 741,408 | ||||
| Property, plant and equipment | |||||||
| Oil and gas properties (successful efforts method) | 839,328 | (185,522) | (b) | 653,806 | |||
| Other property and equipment | 936,224 | (2,937) | (b) | 933,287 | |||
| Less: accumulated depreciation, depletion and amortization | (56,003) | 7,567 | (b) | (48,436) | |||
| Total property, plant and equipment, net | 1,719,549 | (180,892) | 1,538,657 | ||||
| Derivative instruments | - | 32,860 | (c) | 32,860 | |||
| Long-term inventory | 15,805 | (3,571) | (b) | 12,234 | |||
| Operating right-of-use assets | 5,486 | - | 5,486 | ||||
| Intangible assets | 42,986 | - | 42,986 | ||||
| Goodwill | 70,534 | - | 70,534 | ||||
| Deferred income taxes | 2,670 | - | 2,670 | ||||
| Other assets | 17,625 | - | 17,625 | ||||
| Total assets | $ | 2,297,178 | $ | 167,282 | $ | 2,464,460 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 6,492 | $ | (397) | (b) | $ | 6,095 |
| Revenues and production taxes payable | 185,044 | (19,772) | (b) | 165,272 | |||
| Accrued liabilities | 152,217 | (34,621) | (b) | 117,596 | |||
| Accrued interest payable | 509 | - | 509 | ||||
| Derivative instruments | 156,450 | - | 156,450 | ||||
| Advances from joint interest partners | 2,661 | (313) | (b) | 2,348 | |||
| Current operating lease liabilities | 2,143 | - | 2,143 | ||||
| Other current liabilities | 3,123 | - | 3,123 | ||||
| Total current liabilities | 508,639 | (55,103) | 453,536 | ||||
| Long-term debt | 674,238 | - | 674,238 | ||||
| Asset retirement obligations | 47,398 | (3,466) | (b) | 43,932 | |||
| Derivative instruments | 96,560 | - | 96,560 | ||||
| Operating lease liabilities | 1,934 | - | 1,934 | ||||
| Other liabilities | 6,406 | - | 6,406 | ||||
| Total liabilities | 1,335,175 | (58,569) | 1,276,606 |
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Commitments and contingencies
|
||||||
| Stockholders' equity | ||||||
| Common stock, $0.01 par value: 60,000,000 shares authorized; 20,093,084 shares issued and 20,093,084 shares outstanding at March 31, 2021 and 20,093,017 shares issued and 20,093,017 shares outstanding at December 31, 2020 | 200 | - | 200 | |||
| Additional paid-in capital | 958,081 | - | 958,081 | |||
| Retained earnings (accumulated deficit) | (93,504) | 225,851 | (b) | 132,347 | ||
| Oasis share of stockholders' equity | 864,777 | 225,851 | 1,090,628 | |||
| Non-controlling interests | 97,226 | - | 97,226 | |||
| Total stockholders' equity | 962,003 | 225,851 | 1,187,854 | |||
| Total liabilities and stockholders' equity | $ | 2,297,178 | $ | 167,282 | $ | 2,464,460 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Oasis Petroleum Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
| Predecessor | |||||||
|
Period from January 1, 2020 through November 19, 2020 |
|||||||
| Historical |
Transaction Accounting Adjustments - Permian Basin Sale
|
Pro Forma | |||||
| Revenues | |||||||
| Oil and gas revenues | $ | 603,585 | $ | (86,734) | (a) | $ | 516,851 |
| Purchased oil and gas sales | 186,367 | (25,060) | (a) | 161,307 | |||
| Midstream revenues | 166,631 | 9,079 | (c) | 175,710 | |||
| Other services revenues | 6,836 | - | 6,836 | ||||
| Total revenues | 963,419 | (102,715) | 860,704 | ||||
| Operating expenses | |||||||
| Lease operating expenses | 118,372 | (16,588) | (a) | 101,784 | |||
| Midstream expenses | 42,987 | 2,869 | (c) | 45,856 | |||
| Other services expenses | 6,658 | - | 6,658 | ||||
| Gathering, processing and transportation expenses | 85,896 | (5,042) | (a) | 80,854 | |||
| Purchased oil and gas expenses | 185,893 | (25,670) | (a) | 160,223 | |||
| Production taxes | 45,439 | (3,841) | (a) | 41,598 | |||
| Depreciation, depletion and amortization | 291,115 | (36,672) | (a) | 254,443 | |||
| Exploration expenses | 2,748 | (468) | (a) | 2,280 | |||
| Rig termination | 1,279 | (1,279) | (a) | - | |||
| Impairment | 4,937,143 | (996,266) | (a) | 3,940,877 | |||
| General and administrative expenses | 145,294 | (2,333) | (a) | 142,961 | |||
| Litigation settlement | 22,750 | - | 22,750 | ||||
| Total operating expenses | 5,885,574 | (1,085,290) | 4,800,284 | ||||
| Gain on sale of properties | 10,396 | 225,851 | (b) | 236,247 | |||
| Operating income (loss) | (4,911,759) | 1,208,426 | (3,703,333) | ||||
| Other income (expense) | |||||||
| Net gain on derivative instruments | 233,565 | - | 233,565 | ||||
| Interest expense, net of capitalized interest | (181,484) | - | (181,484) | ||||
| Gain on extinguishment of debt | 83,867 | - | 83,867 | ||||
| Reorganization items, net | 786,831 | 123,238 | (a) | 910,069 | |||
| Other income (expense) | 1,407 | 4 | (a) | 1,411 | |||
| Total other income (expense), net | 924,186 | 123,242 | 1,047,428 | ||||
| Income (loss) before income taxes | (3,987,573) | 1,331,668 | (2,655,905) | ||||
| Income tax benefit (expense) | 262,962 | (81,051) | (d) | 181,911 | |||
| Net income (loss) including non-controlling interests | (3,724,611) | 1,250,617 | (2,473,994) | ||||
| Less: Net loss attributable to non-controlling interests | (84,283) | - | (84,283) | ||||
| Net income (loss) attributable to Oasis | $ | (3,640,328) | $ | 1,250,617 | $ | (2,389,711) | |
| Loss attributable to Oasis per share: | |||||||
|
Basic
|
$ | (11.46) | $ | (7.52) | |||
|
Diluted
|
(11.46) | (7.52) | |||||
| Weighted average shares outstanding: | |||||||
|
Basic
|
317,644 | - | 317,644 | ||||
|
Diluted
|
317,644 | - | 317,644 |
| Successor | |||||||
|
Period from November 20, 2020 through December 31, 2020 |
|||||||
| Historical |
Transaction Accounting Adjustments - Permian Basin Sale
|
Pro Forma | |||||
| Revenues | |||||||
| Oil and gas revenues | $ | 86,442 | $ | (12,554) | (a) | $ | 73,888 |
| Purchased oil and gas sales | 7,227 | (72) | (a) | 7,155 | |||
| Midstream revenues | 26,031 | 903 | (b) | 26,934 | |||
| Other services revenues | 215 | - | 215 | ||||
| Total revenues | 119,915 | (11,723) | 108,192 | ||||
| Operating expenses | |||||||
| Lease operating expenses | 17,841 | (1,679) | (a) | 16,162 | |||
| Midstream expenses | 10,572 | 314 | (b) | 10,886 | |||
| Gathering, processing and transportation expenses | 9,124 | (363) | (a) | 8,761 | |||
| Purchased oil and gas expenses | 7,357 | 116 | (a) | 7,473 | |||
| Production taxes | 5,938 | (580) | (a) | 5,358 | |||
| Depreciation, depletion and amortization | 16,094 | (2,403) | (a) | 13,691 | |||
| General and administrative expenses | 14,224 | (107) | (a) | 14,117 | |||
| Total operating expenses | 81,150 | (4,702) | 76,448 | ||||
| Gain on sale of properties | 11 | - | 11 | ||||
| Operating income (loss) | 38,776 | (7,021) | 31,755 | ||||
| Other expense | |||||||
| Net loss on derivative instruments | (84,615) | - | (84,615) | ||||
| Interest expense, net of capitalized interest | (3,168) | - | (3,168) | ||||
| Other expense | (402) | (267) | (a) | (669) | |||
| Total other expense | (88,185) | (267) | (88,452) | ||||
| Loss before income taxes | (49,409) | (7,288) | (56,697) | ||||
| Income tax benefit | 3,447 | - | (c) | 3,447 | |||
| Net loss including non-controlling interests | (45,962) | (7,288) | (53,250) | ||||
| Less: Net income attributable to non-controlling interests | 3,950 | - | 3,950 | ||||
| Net loss attributable to Oasis | $ | (49,912) | $ | (7,288) | $ | (57,200) | |
| Loss attributable to Oasis per share: | |||||||
|
Basic
|
$ | (2.50) | $ | (2.86) | |||
|
Diluted
|
(2.50) | (2.86) | |||||
| Weighted average shares outstanding: | |||||||
|
Basic
|
19,991 | - | 19,991 | ||||
|
Diluted
|
19,991 | - | 19,991 |
| Three Months Ended March 31, 2021 | |||||||
| Historical |
Transaction Accounting Adjustments - Permian Basin Sale
|
Pro Forma | |||||
| Revenues | |||||||
| Oil and gas revenues | $ | 245,461 | $ | (34,966) | (a) | $ | 210,495 |
| Purchased oil and gas sales | 48,460 | (11,879) | (a) | 36,581 | |||
| Midstream revenues | 61,312 | 1,720 | (b) | 63,032 | |||
| Other services revenues | 226 | - | 226 | ||||
| Total revenues | 355,459 | (45,125) | 310,334 | ||||
| Operating expenses | |||||||
| Lease operating expenses | 35,260 | (4,619) | (a) | 30,641 | |||
| Midstream expenses | 27,898 | 668 | (b) | 28,566 | |||
| Gathering, processing and transportation expenses | 15,711 | 921 | (a) | 16,632 | |||
| Purchased oil and gas expenses | 48,410 | (11,578) | (a) | 36,832 | |||
| Production taxes | 16,280 | (1,701) | (a) | 14,579 | |||
| Depreciation, depletion and amortization | 39,990 | (5,185) | (a) | 34,805 | |||
| Exploration expenses | 423 | 58 | (a) | 481 | |||
| Impairment | 3 | (3) | (a) | - | |||
| General and administrative expenses | 20,737 | (108) | (a) | 20,629 | |||
| Total operating expenses | 204,712 | (21,547) | 183,165 | ||||
| Gain on sale of properties | 88 | - | 88 | ||||
| Operating income (loss) | 150,835 | (23,578) | 127,257 | ||||
| Other income (expense) | |||||||
| Net loss on derivative instruments | (181,515) | - | (181,515) | ||||
| Interest expense, net of capitalized interest | (8,697) | - | (8,697) | ||||
| Other income | 458 | 285 | (a) | 743 | |||
| Total other income (expense), net | (189,754) | 285 | (189,469) | ||||
| Loss before income taxes | (38,919) | (23,293) | (62,212) | ||||
| Income tax benefit | 3,654 | - | (c) | 3,654 | |||
| Net loss including non-controlling interests | (35,265) | (23,293) | (58,558) | ||||
| Less: Net income attributable to non-controlling interests | 8,327 | - | 8,327 | ||||
| Net loss attributable to Oasis | $ | (43,592) | $ | (23,293) | $ | (66,885) | |
| Loss attributable to Oasis per share: | |||||||
|
Basic
|
$ | (2.18) | $ | (3.34) | |||
|
Diluted
|
(2.18) | (3.34) | |||||
| Weighted average shares outstanding: | |||||||
|
Basic
|
20,000 | - | 20,000 | ||||
|
Diluted
|
20,000 | - | 20,000 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
1. Basis of Presentation
On June 29, 2021, the Company completed the Primary Permian Basin Sale, with an effective date of March 1, 2021, to divest its remaining upstream assets in the Texas region of the Permian Basin for aggregate consideration of up to $450.0 million, consisting of $375.0 million and up to three earn-out payments of $25.0 million per year for each of 2023, 2024 and 2025. In addition, the Company completed the Additional Permian Basin Sale to separate buyers in the second quarter of 2021 to divest certain wellbore interests in the Texas region of the Permian Basin. The unaudited pro forma condensed consolidated financial information has been derived from the historical consolidated financial statements and accounting records of the Company. The unaudited pro forma condensed consolidated balance sheet at March 31, 2021 was prepared as if the Permian Basin Sale had occurred on March 31, 2021. The unaudited pro forma condensed consolidated statements of operations for the three month period ended March 31, 2021, period from January 1, 2020 through November 19, 2020 and period from November 20, 2020 to December 31, 2020 were prepared as if the Permian Basin Sale had occurred on January 1, 2020. On November 19, 2020, the Company emerged from bankruptcy and adopted fresh start accounting in accordance with the Financial Accounting Standards Board's 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, 2020 through November 19, 2020, and references to 'Successor' relate to the period from November 20, 2020 through December 31, 2020.
The unaudited pro forma condensed consolidated 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 Permian Basin Sale. These unaudited pro forma condensed consolidated 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 balance sheet at March 31, 2021 reflects the following adjustments:
(a) This adjustment represents the receipt of cash proceeds from the Permian Basin Sale (subject to post-closing adjustments) of $364.3 million, net of purchase price adjustments and estimated selling costs. The following table presents the estimated cash proceeds from the Permian Basin Sale (in thousands):
| Gross cash proceeds: | ||
|
Primary Permian Basin Sale
|
$ | 375,000 |
|
Additional Permian Basin Sale
|
5,670 | |
| Total gross cash proceeds | 380,670 | |
| Closing adjustments: | ||
|
Primary Permian Basin Sale
|
(27,743) | |
|
Additional Permian Basin Sale
|
13,756 | |
| Total closing adjustments | (13,987) | |
| Less: estimated selling costs | (2,350) | |
| Net cash proceeds | $ | 364,333 |
(b) These adjustments represent the elimination of assets and liabilities attributable to the Permian Basin Sale. The adjustments do not reflect any third party receivables which could arise from the assignment to Percussion of the existing midstream commercial agreements with Panther DevCo for crude oil and produced water services pursuant to the Permian PSA.
(c) This adjustment represents the preliminary estimated fair value of Contingent Consideration (defined below) associated with the Primary Permian Basin Sale. Pursuant to the Permian PSA, the Company is entitled to three earn-out payments (the 'Contingent Consideration') of $25.0 million per year for each of 2023, 2024 and 2025 if the average daily settlement price of NYMEX West Texas Intermediate crude oil exceeds $60 per barrel for such year. If the NYMEX West Texas Intermediate crude oil price for calendar year 2023 or 2024 is less than $45 per barrel, then each calendar year thereafter Percussion's obligation to make an earn-out payment is terminated. The Contingent Consideration was determined to be an embedded derivative that was bifurcated, accounted for separately and recognized at fair value. Fair value was determined by a third party valuation specialist using a Monte Carlo simulation model.
Statements of Operations
The unaudited pro forma condensed consolidated statement of operations of the Predecessor from January 1, 2020 through November 19, 2020 reflect the following adjustments:
(a) These adjustments represent the elimination of the revenues and expenses associated with the assets divested in the Permian Basin Sale.
(b) This adjustment reflects the estimated gain of $225.9 million arising from the Permian Basin Sale. The calculation of the gain on sale is not complete as it is based on certain preliminary information and does not reflect final working capital and other post-closing adjustments. The following table presents the components of the estimated gain on sale (in thousands):
| Net cash proceeds | $ | 364,333 |
| Contingent consideration | 32,860 | |
| Total consideration | 397,193 | |
| Less: cost basis of net assets | (171,342) | |
| Estimated gain on sale | $ | 225,851 |
(c) These adjustments represent midstream revenues and expenses associated with services provided by Panther DevCo to OPP and previously eliminated in consolidation. At closing, such commercial agreements for crude oil and produced water services were assigned to Percussion in the Permian PSA.
(d) This adjustment represents the estimated income tax impact from the Permian Basin Sale at the applicable state and federal statutory tax rate.
The unaudited pro forma condensed consolidated statement of operations of the Successor from November 20, 2020 through December 31, 2020 reflect the following adjustments:
(a) These adjustments represent the elimination of the revenues and expenses associated with the assets divested in the Permian Basin Sale.
(b) These adjustments represent midstream revenues and expenses associated with services provided by Panther DevCo to OPP and previously eliminated in consolidation. At closing, such commercial agreements for crude oil and produced water services were assigned to Percussion in the Permian PSA.
(c) The estimated income tax effect is zero due to the Company recording a full valuation allowance against substantially all deferred tax assets in the first quarter of 2020.
The unaudited pro forma condensed consolidated statement of operations for the three month period ended March 31, 2021 reflect the following adjustments:
(a) These adjustments represent the elimination of the revenues and expenses associated with the assets divested in the Permian Basin Sale.
(b) These adjustments represent midstream revenues and expenses associated with services provided by Panther DevCo to OPP and previously eliminated in consolidation. At closing, such commercial agreements for crude oil and produced water services were assigned to Percussion in the Permian PSA.
(c) The estimated income tax effect is zero due to the Company recording a full valuation allowance against substantially all deferred tax assets in the first quarter of 2020.