EX-99.2 16 dex992.htm QEP RESOURCES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFO QEP Resources, Inc. Unaudited Pro Forma Condensed Consolidated Financial Info

Exhibit 99.2

QEP RESOURCES, INC.

UNAUDITED PRO FORMA

CONSOLIDATED FINANCIAL INFORMATION

Wexpro Company Separation and QEP Resources, Inc. Spinoff

After the Distribution Date, QEP Resources, Inc. (QEP Resources or Company) will not beneficially own any shares of Wexpro Company (Wexpro) common stock and, following such date, will no longer consolidate Wexpro’s financial results, and the historical financial results of Wexpro will be reflected in the Company’s consolidated financial statements as discontinued operations.

Pro Forma Information

The accompanying unaudited pro forma condensed consolidated balance sheet of QEP Resources as of March 31, 2010, is presented as if the separation had occurred on March 31, 2010. The accompanying unaudited pro forma consolidated statements of income of QEP Resources for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007 are presented as if the separation had occurred on January 1, 2007.

The accompanying unaudited pro forma consolidated financial information is presented based on information available, is intended for informational purposes only and is not necessarily indicative of and does not purport to represent the financial condition or operating results that would have actually occurred had the separation occurred as described, nor is it necessarily indicative of QEP Resources’ future financial condition or operating results. In addition, the accompanying unaudited pro forma consolidated financial information does not reflect actions that may be undertaken by management after the separation. The accompanying unaudited pro forma consolidated financial information should be read in conjunction with the notes thereto and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

QEP Resources’ independent registered public accounting firm has not examined, reviewed, compiled or applied agreed upon procedures to the unaudited pro forma consolidated historical financial information presented herein and, accordingly, assumes no responsibility for it.

The following is a brief description of the amounts recorded under each of the column headings in the accompanying unaudited pro forma consolidated balance sheet and the unaudited pro forma consolidated statements of income:

Historical QEP Resources

This column reflects QEP Resources’ historical financial position as of March 31, 2010, and historical operating results for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008, and 2007 prior to any pro forma adjustments described under the headings “Wexpro Separation” and “Other Adjustments” below.

Wexpro Separation

This column reflects Wexpro’s historical financial position as of March 31, 2010, and its historical operating results for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007.

Other Adjustments

This column represents pro forma adjustments for transactions between QEP Resources and Questar, including Wexpro, that were previously eliminated in consolidation or reported as transactions with affiliates or that arose as a direct result of the separation and are reflected in the Company’s consolidated financial position and results of operations upon the completion of the separation. These adjustments are more fully described in the notes to unaudited pro forma consolidated financial information.

 

1

QEP RESOURCES, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

March 31, 2010

(Unaudited)

 

     Historical
QEP Resources		     Wexpro
Separation		     Other
Adjustments		          Pro Forma
QEP Resources		  
     (in millions)  

ASSETS

            

Current Assets

            

Notes receivable

        $ 27.9      (b)    $ 27.9  

Accounts receivable, net

    $ 236.7     $ (7.7 )      8.2      (b)      237.2  

Accounts receivable from affiliates

      31.6       (30.4 )      (1.2 )    (b)   

Fair value of derivative contracts

      313.3              313.3  

Inventories

      78.9       (4.1 )           74.8  

Prepaid expenses and other

      32.5       (1.1 )           31.4  
                                   

Total Current Assets

      693.0       (43.3 )      34.9           684.6  
                                   

Property, Plant and Equipment

      8,500.1       (1,033.2 )           7,466.9  

Accumulated depreciation, depletion and amortization

      (2,688.7 )      443.8            (2,244.9 ) 
                                   

Net Property, Plant and Equipment

      5,811.4       (589.4 )           5,222.0  
                                   

Investment in unconsolidated affiliates

      44.1              44.1  

Goodwill

      60.1              60.1  

Fair value of derivative contracts

      170.4              170.4  

Other noncurrent assets

      24.7       (16.4 )           8.3  
                                   

TOTAL ASSETS

    $ 6,803.7     $ (649.1 )    $ 34.9         $ 6,189.5  
                                   

LIABILITIES AND EQUITY

            

Current Liabilities

            

Checks outstanding in excess of cash balances

    $ 11.5     $ (1.9 )         $ 9.6  

Notes payable

        $ 3.0      (a),(b)      3.0  

Notes payable to Questar

      53.0       (27.9 )      (25.1 )    (b)   

Accounts payable and accrued expenses

      374.1       (42.8 )      16.9      (b)      348.2  

Accounts payable to affiliates

      17.6       (7.7 )      (9.9 )    (b)   

Fair value of derivative contracts

      139.5              139.5  

Deferred income taxes - current

      45.7       4.4            50.1  

Current portion of long-term debt

      150.0              150.0  
                                   

Total Current Liabilities

      791.4       (75.9 )      (15.1 )         700.4  
                                   

Long-term debt, less current portion

      1,198.7         (200.0 )    (a)      998.7  

Deferred income taxes

      1,364.2       (105.5 )           1,258.7  

Asset retirement obligations

      191.3       (52.8 )           138.5  

Fair value of derivative contracts

      111.7              111.7  

Other long-term liabilities

      51.6       (9.6 )           42.0  

EQUITY

            

Common Shareholder’s Equity

      3,040.5       (405.3 )      250.0      (a)      2,885.2  

Noncontrolling interest

      54.3              54.3  
                                   

Total Equity

      3,094.8       (405.3 )      250.0           2,939.5  
                                   

TOTAL LIABILITIES AND EQUITY

    $ 6,803.7     $ (649.1 )    $ 34.9         $ 6,189.5  
                                   

See notes to unaudited pro forma consolidated financial information

 

2

QEP RESOURCES, INC.

PRO FORMA CONSOLIDATED STATEMENT OF INCOME

Three Months Ended March 31, 2010

(Unaudited)

 

     Historical
QEP  Resources		     Wexpro
Separation		     Other
Adjustments		          Pro Forma
QEP Resources 		 
     (in millions, except per share amounts)  

REVENUES

            

From unaffiliated customers

    $ 576.3     $ (6.2 )    $ 10.0      (c)    $ 580.1  

From affiliated companies

      66.5       (60.5 )      (6.0 )    (c)   
                                   

Total Revenues

      642.8       (66.7 )      4.0           580.1  

OPERATING EXPENSES

            

Cost of natural gas and other products sold (excluding operating expenses shown separately)

      173.9         3.9      (c)      177.8  

Operating and maintenance

      56.7       (5.0 )      0.1      (c)      51.8  

General and administrative

      30.1       (4.8 )           25.3  

Production and other taxes

      30.7       (7.8 )           22.9  

Depreciation, depletion and amortization

      163.3       (15.9 )           147.4  

Exploration

      3.6              3.6  

Abandonment and impairment

      7.6              7.6  

Wexpro Agreement-oil income sharing

      0.3       (0.3 )        
                                   

Total Operating Expenses

      466.2       (33.8 )      4.0           436.4  

Net loss from asset sales

      (0.9 )      0.1            (0.8 ) 
                                   

OPERATING INCOME

      175.7       (32.8 )           142.9  

Interest and other income

      1.2       (0.4 )      0.1      (c)      0.9  

Income from unconsolidated affiliates

      0.8              0.8  

Interest expense

      (20.0 )      0.1       (0.1 )    (c)      (20.0 ) 
                                   

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

      157.7       (33.1 )           124.6  

Income taxes

      (57.8 )      11.9            (45.9 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS

      99.9       (21.2 )           78.7  

Net income from continuing operations attributable to noncontrolling interest

      (0.6 )             (0.6 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO QEP RESOURCES

    $ 99.3     $ (21.2 )         $ 78.1  
                                   

Earnings from continuing operations per common share attributable to QEP Resources

            

Basic

             $ 0.45  

Diluted

               0.44  

Weighted-average common shares outstanding (d)

            

Used in basic calculation

               174.9  

Used in diluted calculation

               177.2  

See notes to unaudited pro forma consolidated financial information

 

3

QEP RESOURCES, INC.

PRO FORMA CONSOLIDATED STATEMENT OF INCOME

For the Year Ended December 31, 2009

(Unaudited)

 

     Historical
QEP  Resources		     Wexpro
Separation		     Other
Adjustments		          Pro Forma
QEP Resources 		 
     (in millions, except per share amounts)  

REVENUES

            

From unaffiliated customers

    $ 1,949.0     $ (17.8 )    $ 41.3      (c)    $ 1,972.5  

From affiliated companies

      249.5       (225.1 )      (24.4 )    (c)   
                                   

Total Revenues

      2,198.5       (242.9 )      16.9           1,972.5  

OPERATING EXPENSES

            

Cost of natural gas and other products sold (excluding operating expenses shown separately)

      411.1         16.7      (c)      427.8  

Operating and maintenance

      222.8       (21.2 )      0.1      (c)      201.7  

General and administrative

      108.6       (17.0 )      0.1      (c)      91.7  

Production and other taxes

      82.9       (20.0 )           62.9  

Depreciation, depletion and amortization

      617.9       (58.8 )           559.1  

Exploration

      25.0              25.0  

Abandonment and impairment

      20.3              20.3  

Wexpro Agreement-oil income sharing

      1.0       (1.0 )        
                                   

Total Operating Expenses

      1,489.6       (118.0 )      16.9           1,388.5  

Net gain from asset sales

      1.2       0.3            1.5  
                                   

OPERATING INCOME

      710.1       (124.6 )           585.5  

Interest and other income

      7.0       (3.2 )      0.7      (c)      4.5  

Income from unconsolidated affiliates

      2.7              2.7  

Unrealized and realized loss on basis-only swaps

      (189.6 )             (189.6 ) 

Interest expense

      (70.3 )      0.9       (0.7 )    (c)      (70.1 ) 
                                   

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

      459.9       (126.9 )           333.0  

Income taxes

      (163.8 )      46.2            (117.6 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS

      296.1       (80.7 )           215.4  

Net income from continuing operations attributable to noncontrolling interest

      (2.6 )             (2.6 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO QEP RESOURCES

    $ 293.5     $ (80.7 )         $ 212.8  
                                   

Earnings from continuing operations per common share attributable to QEP Resources

            

Basic

             $ 1.22  

Diluted

               1.21  

Weighted-average common shares outstanding (d)

            

Used in basic calculation

               174.1  

Used in diluted calculation

               176.3  

See notes to unaudited pro forma consolidated financial information

 

4

QEP RESOURCES, INC.

PRO FORMA CONSOLIDATED STATEMENT OF INCOME

For the Year Ended December 31, 2008

(Unaudited)

 

     Historical
QEP  Resources		     Wexpro
Separation		     Other
Adjustments		          Pro Forma
QEP Resources 		 
     (in millions, except per share amounts)  

REVENUES

            

From unaffiliated customers

    $ 2,297.2     $ (31.1 )    $ 52.7      (c)    $ 2,318.8  

From affiliated companies

      232.9       (209.9 )      (23.0 )    (c)   
                                   

Total Revenues

      2,530.1       (241.0 )      29.7           2,318.8  

OPERATING EXPENSES

            

Cost of natural gas and other products sold (excluding operating expenses shown separately)

      575.1         29.5      (c)      604.6  

Operating and maintenance

      243.6       (23.5 )      0.1      (c)      220.2  

General and administrative

      91.7       (13.7 )      0.1      (c)      78.1  

Production and other taxes

      144.6       (37.7 )           106.9  

Depreciation, depletion and amortization

      410.0       (48.5 )           361.5  

Exploration

      29.3              29.3  

Abandonment and impairment

      45.4              45.4  

Wexpro Agreement-oil income sharing

      6.1       (6.1 )        
                                   

Total Operating Expenses

      1,545.8       (129.5 )      29.7           1,446.0  

Net gain from asset sales

      60.2       0.2            60.4  
                                   

OPERATING INCOME

      1,044.5       (111.3 )           933.2  

Interest and other income

      14.6       (6.6 )      2.2      (c)      10.2  

Income from unconsolidated affiliates

      1.7              1.7  

Unrealized and realized loss on basis-only swaps

      (79.2 )             (79.2 ) 

Interest expense

      (62.2 )      2.7       (2.2 )    (c)      (61.7 ) 
                                   

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

      919.4       (115.2 )           804.2  

Income taxes

      (324.9 )      41.3            (283.6 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS

      594.5       (73.9 )           520.6  

Net income from continuing operations attributable to noncontrolling interest

      (9.0 )             (9.0 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO QEP RESOURCES

    $ 585.5     $ (73.9 )         $ 511.6  
                                   

Earnings from continuing operations per common share attributable to QEP Resources

            

Basic

             $ 2.96  

Diluted

               2.90  

Weighted-average common shares outstanding (d)

            

Used in basic calculation

               172.8  

Used in diluted calculation

               176.1  

See notes to unaudited pro forma consolidated financial information

 

5

QEP RESOURCES, INC.

PRO FORMA CONSOLIDATED STATEMENT OF INCOME

For the Year Ended December 31, 2007

(Unaudited)

 

     Historical
QEP  Resources		     Wexpro
Separation		     Other
Adjustments		          Pro Forma
QEP Resources 		 
     (in millions, except per share amounts)  

REVENUES

            

From unaffiliated customers

    $ 1,671.3     $ (21.6 )    $ 38.4      (c)    $ 1,688.1  

From affiliated companies

      172.1       (155.7 )      (16.4 )    (c)   
                                   

Total Revenues

      1,843.4       (177.3 )      22.0           1,688.1  

OPERATING EXPENSES

            

Cost of natural gas and other products sold (excluding operating expenses shown separately)

      474.7         21.8      (c)      496.5  

Operating and maintenance

      187.9       (16.5 )           171.4  

General and administrative

      91.3       (14.7 )      0.2      (c)      76.8  

Production and other taxes

      81.6       (20.0 )           61.6  

Depreciation, depletion and amortization

      295.1       (31.2 )           263.9  

Exploration

      22.0              22.0  

Abandonment and impairment

      11.2              11.2  

Wexpro Agreement-oil income sharing

      4.9       (4.9 )        
                                   

Total Operating Expenses

      1,168.7       (87.3 )      22.0           1,103.4  

Net loss from asset sales

      (1.3 )      0.7             (0.6 ) 
                                   

OPERATING INCOME

      673.4       (89.3 )           584.1  

Interest and other income

      9.7       (1.9 )           7.8  

Income from unconsolidated affiliates

      8.9              8.9  

Unrealized and realized gain on basis-only swaps

      5.7              5.7  

Interest expense

      (35.6 )      2.0             (33.6 ) 
                                   

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

      662.1       (89.2 )           572.9  

Income taxes

      (241.3 )      30.0             (211.3 ) 
                                   

NET INCOME FROM CONTINUING OPERATIONS

    $ 420.8     $ (59.2 )         $ 361.6  
                                   

Earnings from continuing operations per common share

            

Basic

             $ 2.10  

Diluted

               2.05  

Weighted-average common shares outstanding (d)

            

Used in basic calculation

               172.0  

Used in diluted calculation

               175.9  

See notes to unaudited pro forma consolidated financial information

 

6

Notes to Unaudited Pro Forma Consolidated Financial Information

Note 1: Unaudited pro forma adjustments to condensed consolidated balance sheet as of March 31, 2010.

The pro forma adjustments to QEP Resources’ unaudited consolidated balance sheet as of March 31, 2010, relate to (1) the elimination of the assets, liabilities and equity of Wexpro and (2) other adjustments as follows:

 

  (a) An adjustment to reflect a $250.0 million cash contribution from Questar to QEP Resources in connection with the QEP Resources Spinoff and Wexpro Separation. Proceeds were used to repay debt.

 

  (b) Adjustments for transactions between QEP Resources and Questar, including Wexpro, that were eliminated in consolidation or reported as transactions with affiliates in the preparation of QEP Resources’ historical consolidated financial statements, but that are reflected as assets and liabilities in the amounts and descriptions presented under the column heading “Pro Forma QEP Resources” upon the completion of the QEP Resources Spinoff and Wexpro Separation.

Note 2: Unaudited pro forma adjustments to consolidated statements of income for three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007.

The pro forma adjustments to QEP Resources’ unaudited consolidated statements of income for the three months ended March 31, 2010, and for the years ended December 31, 2009, 2008 and 2007, relate to (1) the elimination of the results of operations of Wexpro and (2) other adjustments as follows:

 

  (c) Adjustments to revenues, costs of products sold, operating and maintenance expenses, general and administrative expenses, interest income and interest expense related to transactions between QEP Resources and Questar, including Wexpro, that were eliminated in consolidation or reported as transactions with affiliates in the preparation of QEP Resources’ historical consolidated financial statements, but that are reflected as revenues, costs of products sold, operating and maintenance expenses, general and administrative expenses, interest income and interest expense in the amounts and descriptions presented under the column heading “Pro Forma QEP Resources” upon the completion of the QEP Resources Spinoff and Wexpro Separation.

Note 3: Earnings from continuing operations per common share attributable to QEP Resources for three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007.

 

  (d) Because the QEP Resources Spinoff resulted in the issuance of QEP Resources shares and rights to receive or acquire shares in an amount that equaled the number of Questar shares and rights to receive or acquire shares, the pro forma basic and diluted weighted-average common shares outstanding for QEP Resources equal Questar’s for the corresponding periods.

 

7