EX-99.2 5 ex992proformafinancialstat.htm PRO FORMA FINANCIAL STATEMENTS Ex 99.2 Pro Forma Financial Statements


Exhibit 99.2

CARRIZO OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(in thousands, except per share data)

 
September 30, 2014
 
Historical
 
Pro Forma Adjustments
 
 
Pro Forma
Assets
 
 
 
 
 
 
Total current assets

$145,159

 

($17,149
)
(1)(2)
 

$128,010

Property and equipment
 
 
 
 
 
 
Oil and gas properties, net, full cost method
2,247,567

 
247,383

(1)
 
2,494,950

Other property and equipment, net
7,580

 
—

 
 
7,580

Total property and equipment, net
2,255,147

 
247,383

 
 
2,502,530

Other assets
40,528

 
—

 
 
40,528

Total Assets

$2,440,834

 

$230,234

 
 

$2,671,068

 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
Total current liabilities

$373,526

 

$136,850

(2)(4)
 

$510,376

Long-term debt
1,019,791

 
92,961

(3)
 
1,112,752

Other liabilities
85,638

 
423

(1)
 
86,061

Total liabilities
1,478,955

 
230,234

 
 
1,709,189

Commitments and contingencies
 
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 


Common stock, $0.01 par value
461

 
—

 
 
461

Additional paid-in capital
908,133

 
—

 
 
908,133

Retained earnings
53,285

 
—

 
 
53,285

Total shareholders’ equity
961,879

 
—

 
 
961,879

Total Liabilities and Shareholders’ Equity

$2,440,834

 

$230,234

 
 

$2,671,068


See the accompanying notes to the unaudited pro forma condensed combined financial statements.




CARRIZO OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(in thousands, except per share data)

 
Nine Months Ended September 30, 2014
 
Historical
 
Acquired Properties
 
 
Pro Forma Adjustments
 
 
Pro Forma
Revenues
 
 
 
 
 
 
 
 
 
Crude oil

$469,601

 

$36,046

(1)
 

$—

 
 

$505,647

Natural gas liquids
19,669

 
4,910

(1)
 
—

 
 
24,579

Natural gas
57,642

 
4,475

(1)
 
—

 
 
62,117

Total revenues
546,912

 
45,431

 
 
—

 
 
592,343

 
 
 
 
 
 
 
 
 
 
Costs and Expenses
 
 
 
 
 
 
 
 


Lease operating
51,002

 
5,216

(1)
 
—

 
 
56,218

Production taxes
22,666

 
2,126

(1)
 
—

 
 
24,792

Ad valorem taxes
5,569

 
528

(1)
 
—

 
 
6,097

Depreciation, depletion and amortization
228,912

 
—

 
 
10,439

(2)
 
239,351

General and administrative
65,481

 
—

 
 
—

 
 
65,481

Gain on derivatives, net
(11,153
)
 
—

 
 
—

 
 
(11,153
)
Interest expense, net
36,557

 
—

 
 
4,594

(3)
 
41,151

Other expense, net
1,536

 
—

 
 
—

 
 
1,536

Total costs and expenses
400,570

 
7,870

 
 
15,033

 
 
423,473

 
 
 
 
 
 
 
 
 


Income From Continuing Operations Before Income Taxes
146,342

 
37,561

 
 
(15,033
)
 
 
168,870

Income tax expense
(53,510
)
 
—

 
 
(7,885
)
(4)
 
(61,395
)
Income From Continuing Operations

$92,832

 

$37,561

 
 

($22,918
)
 
 

$107,475

 
 
 
 
 
 

 
 


Income From Continuing Operations Per Common Share


 
 
 
 


 
 


Basic

$2.05

 
 
 
 
 
 
 

$2.37

Diluted

$2.01

 
 
 
 
 
 
 

$2.33

 


 
 
 
 
 
 
 


Weighted Average Common Shares Outstanding


 
 
 
 
 
 
 


Basic
45,277

 
 
 
 
 
 
 
45,277

Diluted
46,109

 
 
 
 
 
 
 
46,109


See the accompanying notes to the unaudited pro forma condensed combined financial statements.




CARRIZO OIL & GAS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(in thousands, except per share data)

 
Year Ended December 31, 2013
 
Historical
 
Acquired Properties
 
 
Pro Forma Adjustments
 
 
Pro Forma
Revenues
 
 
 
 
 
 
 

 
Crude oil

$421,311

 

$43,376

(1)
 

$—

 
 

$464,687

Natural gas liquids
15,530

 
5,995

(1)
 
—

 

21,525

Natural gas
83,341

 
6,168

(1)
 
—

 

89,509

Total revenues
520,182

 
55,539

 
 
—

 

575,721

 
 
 
 
 
 


 

 
Costs and Expenses
 
 
 
 
 
 
 



Lease operating
46,828

 
3,904

(1)
 
—

 

50,732

Production taxes
19,811

 
2,601

(1)
 
—

 

22,412

Ad valorem taxes
8,701

 
689

(1)
 
—

 

9,390

Depreciation, depletion and amortization
214,291

 
—

 
 
19,743

(2)

234,034

General and administrative
77,492

 
—

 
 
—

 

77,492

Loss on derivatives, net
18,417

 
—

 
 
—

 

18,417

Interest expense, net
54,689

 
—

 
 
6,297

(3)

60,986

Loss on sale of oil and gas properties
45,377

 
—

 
 
—

 
 
45,377

Other income, net
(185
)
 
—

 
 
—

 

(185
)
Total costs and expenses
485,421

 
7,194

 
 
26,040

 

518,655

 
 
 
 
 
 


 

 
Income From Continuing Operations Before Income Taxes
34,761

 
48,345

 
 
(26,040
)
 

57,066

Income tax expense
(12,903
)
 
—

 
 
(7,807
)
(4)
 
(20,710
)
Income From Continuing Operations

$21,858

 

$48,345

 
 

($33,847
)
 
 

$36,356

 


 
 
 
 
 
 

 
Income From Continuing Operations Per Common Share


 
 
 
 
 
 

 
Basic

$0.54

 
 
 
 
 
 
 

$0.89

Diluted

$0.53

 
 
 
 
 
 
 

$0.88

 
 
 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding
 
 
 
 
 
 
 
 
 
Basic
40,781

 
 
 
 
 
 
 
40,781

Diluted
41,355

 
 
 
 
 
 
 
41,355


See the accompanying notes to the unaudited pro forma condensed combined financial statements.




CARRIZO OIL & GAS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION
On October 24, 2014, Carrizo Oil & Gas, Inc. (the “Company”) completed the acquisition of interests in oil and gas properties (“the Properties”) from Eagle Ford Minerals, LLC (“EFM”) primarily in LaSalle, Atascosa and McMullen Counties, Texas in the Eagle Ford Shale (the “Eagle Ford Shale Transaction”). The Eagle Ford Shale Transaction had an effective date of October 1, 2014, with an agreed upon purchase price of $250.0 million, subject to post-closing and working capital adjustments. The Company paid approximately $93.0 million at closing, which represented $100.0 million of the agreed upon purchase price, less $7.0 million of working capital adjustments, which was funded with borrowings under its revolving credit facility. The Company is required to pay the remaining portion of the agreed upon purchase price of $150.0 million no later than February 16, 2015, which is expected to be funded with borrowings under the revolving credit facility. Prior to the Eagle Ford Shale Transaction, the Company and EFM were joint working interest owners in the Properties, for which the Company acted as the operator and owned an approximate 75% working interest in all of such Properties. After giving effect to the Eagle Ford Shale Transaction, the Company holds an approximate 100% working interest in the Properties.
The Company issued $300.0 million aggregate principal amount of 7.50% Senior Notes due 2020 in a private placement which closed on October 30, 2014. A portion of the net proceeds from the offering of such 7.50% Senior Notes was used to repay the borrowings under the revolving credit facility for the payment of the initial portion of the agreed upon purchase price of the Eagle Ford Shale Transaction. The Company has presented the effects of financing of the Eagle Ford Shale Transaction with borrowings under the revolving credit facility rather than with the net proceeds from the senior notes offering as the Company had availability to fund the Eagle Ford Shale Transaction with borrowings under the revolving credit facility and the senior notes offering was not directly related to the Eagle Ford Shale Transaction.
The following unaudited pro forma combined financial information is presented to illustrate the effect of the Eagle Ford Shale Transaction on the Company's historical financial position and results of operations. The unaudited pro forma condensed combined balance sheet as of September 30, 2014 is based on the historical consolidated balance sheet as of September 30, 2014 assuming the Eagle Ford Shale Transaction occurred on September 30, 2014. The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2014 and the year ended December 31, 2013 are based on the historical consolidated statements of income for such periods after giving effect to the Eagle Ford Shale Transaction as if it had occurred on January 1, 2013. The unaudited pro forma combined financial information should be read in conjunction with the Company’s historical consolidated financial statements and notes thereto contained in the Company’s 2013 Annual Report on Form 10-K, filed on March 3, 2014, and its quarterly reports on Form 10-Q filed on May 7, 2014, August 5, 2014 and November 6, 2014 and the audited combined statements of revenues and direct operating expenses filed herewith.
The unaudited pro forma condensed combined balance sheet is based on the preliminary allocation of the purchase price and working capital adjustments before certain post-closing adjustments which will relate to any differences between estimated and actual revenues, operating expenses and capital expenditures prior to the October 1, 2014 effective date and therefore will not affect the purchase price. Purchase price adjustments will relate to the revenues, operating expenses and capital expenditures from the October 1, 2014 effective date and the October 24, 2014 closing date and are not reflected in the unaudited pro forma condensed combined balance sheet. As a result, the final purchase price may be different than the preliminary purchase price.
The unaudited pro forma combined financial information does not purport to represent what the statements of income would have been had the Eagle Ford Shale Transaction occurred on January 1, 2013, nor is it indicative of the Company’s future operating results. The Company's management believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to the Eagle Ford Shale Transaction.




2. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The unaudited pro forma condensed combined balance sheet as of September 30, 2014 reflects the following pro forma adjustments:
(1)
The Eagle Ford Shale Transaction is accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standards Board Accounting Standard Codification Topic 805, Business Combinations. Under the acquisition method, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated acquisition date fair values. Purchase price adjustments will relate to the revenues, operating expenses and capital expenditures from the October 1, 2014 effective date and the October 24, 2014 closing date. The preliminary allocation of the purchase price is presented below:
Assets
 
(In thousands)
Current assets
 

$485

Oil and gas properties
 
247,383

Total assets acquired
 

$247,868

 
 
 
Liabilities
 
 
Other liabilities
 

$423

Total liabilities assumed
 
423

Net Assets Acquired
 

$247,445


(2)
Reflect the $7.0 million of net working capital adjustments received at closing.
(3)
Reflect the borrowings under the revolving credit facility to fund the initial portion of the agreed upon purchase price paid at closing of $100.0 million less the $7.0 million of net working capital adjustments received at closing.
(4)
Reflect the present value of expected cash to be paid for the remaining balance due to EFM for the Eagle Ford Shale Transaction, subject to post-closing adjustments, on or prior to February 16, 2015, which the Company expects to fund with borrowings under the revolving credit facility.
3. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2014 and the year ended December 31, 2013 reflect the following pro forma adjustments:
(1)
Record the revenues and direct operating expenses of the Properties.
(2)
Adjust depreciation, depletion and amortization to give effect to the acquisition of the Properties.
(3)
Increase interest expense, net primarily resulting from the amounts outstanding under the revolving credit facility used to fund the acquisition of the Properties. A 1/8% change in the interest rate associated with revolving credit facility would result in a change in interest expense, net of approximately $0.1 million and $0.2 million for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively.
(4)
Record income tax effect of the revenues and direct operating expenses of the Properties as well as pro forma adjustments using the U.S. federal statutory rate of 35%.