8-K 1 a14-23516_18k.htm 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  November 4, 2014 (October 29, 2014)

 

VENOCO, INC.

DENVER PARENT CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

Venoco, Inc. 001-33152
Denver Parent Corporation 333-191602

 

Venoco, Inc. 77-0323555
Denver Parent Corporation 44-0821005

(State or other jurisdiction of
 incorporation or organization)

 

(Commission file number)

 

(I.R.S. Employer Identification Number)

 

370 17th Street, Suite 3900
Denver, Colorado

 

80202-1370

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (303) 626-8300

 

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o         Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o         Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o         Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o         Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

ITEM 2.01  COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

 

On October 29, 2014, Venoco, Inc. (the “Company”) completed the sale of its West Montalvo properties to an unrelated third party pursuant to a purchase and sale agreement executed on August 18, 2014.  The total purchase price for the properties was $200.2 million in cash, subject to certain closing adjustments.  The Company applied 100% of the net proceeds to reduce the principal balance outstanding on its revolving credit facility.

 

ITEM 9.01                                  FINANCIAL STATEMENTS AND EXHIBITS

 

(b) Pro forma financial information

 

The Venoco, Inc. and Denver Parent Corporation unaudited pro forma condensed consolidated balance sheets as of June 30, 2014 and the unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 and the year ended December 31, 2013, which give effect to the transaction described herein beginning on page F-1 of this report.

 

2


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 4, 2014

 

 

DENVER PARENT CORPORATION

 

VENOCO, INC.

 

 

 

 

 

 

By:

/s/ Mark DePuy

 

Name:

Mark DePuy

 

Title:

Chief Executive Officer, Venoco, Inc.

 

 

President and Chief Operating Officer, Denver Parent Corporation

 

3


 

VENOCO, INC. AND DENVER PARENT CORPORATION

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2014

(In thousands)

 

 

 

Venoco

 

DPC

 

 

 

Historical

 

Pro Forma
Adjustments

 

Pro Forma
As Adjusted

 

Historical

 

Pro Forma
As Adjusted

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

65

 

 

 

65

 

4,541

 

4,541

 

Other current assets

 

29,166

 

(4,348

)(i)

24,818

 

29,093

 

24,745

 

Total current assets

 

29,231

 

(4,348

)

24,883

 

33,634

 

29,286

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, full cost method of accounting

 

 

 

 

 

 

 

 

 

 

 

Proved

 

2,049,899

 

(204,006

)(c),(i),(j),(k)

1,845,893

 

2,049,899

 

1,845,893

 

Unproved

 

8,487

 

—

 

8,487

 

8,487

 

8,487

 

Accumulated depletion

 

(1,380,628

)

—

 

(1,380,628

)

(1,380,628

)

(1,380,628

)

Net oil and gas properties

 

677,758

 

(204,006

)

473,752

 

677,758

 

473,752

 

Other property and equipment, net of accumulated depreciation and amortization

 

15,234

 

—

 

15,234

 

15,234

 

15,234

 

Net property, plant and equipment

 

692,992

 

(204,006

)

488,986

 

692,992

 

488,986

 

Other assets

 

14,533

 

(2,706

)(f)

11,827

 

19,498

 

16,792

 

Total assets

 

736,756

 

(211,060

)

525,696

 

746,124

 

535,064

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

730,000

 

(200,200

)(e)

529,800

 

988,295

 

788,095

 

Other current liabilities

 

76,536

 

(862

)(k)

75,674

 

79,546

 

78,684

 

Total current liabilities

 

806,536

 

(201,062

)

605,474

 

1,067,841

 

866,779

 

Commodity derivatives

 

14,975

 

—

(g)

14,975

 

14,975

 

14,975

 

Asset retirement obligations

 

37,733

 

(7,292

)(c)

30,441

 

37,733

 

30,441

 

Share-based compensation

 

17,018

 

—

 

17,018

 

17,018

 

17,018

 

Total liabilities

 

876,262

 

(208,354

)

667,908

 

1,137,567

 

929,213

 

Stockholders’ equity

 

(139,506

)

(2,706

)(f)

(142,212

)

(391,443

)

(394,149

)

Total liabilities and stockholders’ equity

 

736,756

 

(211,060

)

525,696

 

746,124

 

535,064

 

 

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

 

F-1


 

VENOCO, INC. AND DENVER PARENT CORPORATION

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(In thousands)

 

 

 

Venoco

 

DPC

 

 

 

Historical

 

Pro Forma
Adjustments

 

Pro Forma
As Adjusted

 

Historical

 

Pro Forma
As Adjusted

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas sales

 

129,101

 

(24,275

)(a)

104,826

 

129,101

 

104,826

 

Other

 

935

 

—

 

935

 

935

 

935

 

Total revenues

 

130,036

 

(24,275

)

105,761

 

130,036

 

105,761

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

Lease operating expense

 

37,653

 

(5,446

)(a)

32,207

 

37,653

 

32,207

 

Property and production taxes

 

4,006

 

(953

)(a)

3,053

 

4,006

 

3,053

 

Transportation expense

 

106

 

(20

)(a)

86

 

106

 

86

 

Depletion, depreciation and amortization

 

22,970

 

(8,177

)(b)

14,793

 

22,970

 

14,793

 

Impairment of oil and natural gas properties

 

817

 

—

 

817

 

817

 

817

 

Accretion of asset retirement obligations

 

1,223

 

(225

)(c)

998

 

1,223

 

998

 

General and administrative, net of amounts capitalized

 

17,652

 

(92

)(d)

17,560

 

17,991

 

17,899

 

Total expenses

 

84,427

 

(14,913

)

69,514

 

84,766

 

69,853

 

Income (loss) from operations

 

45,609

 

(9,362

)

36,247

 

45,270

 

35,908

 

FINANCING COSTS AND OTHER:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

26,291

 

(3,600

)(e)

22,691

 

42,889

 

39,289

 

Amortization of deferred loan costs

 

1,696

 

(730

)(f)

966

 

2,187

 

1,457

 

Commodity derivative losses (gains), net

 

16,815

 

—

(g)

16,815

 

16,815

 

16,815

 

Total financing costs and other

 

44,802

 

(4,330

)

40,472

 

61,891

 

57,561

 

Income (loss) before income taxes

 

807

 

(5,032

)

(4,225

)

(16,621

)

(21,653

)

Income tax provision (benefit)

 

—

 

—

(h)

—

 

—

 

—

 

Net income (loss)

 

807

 

(5,032

)

(4,225

)

(16,621

)

(21,653

)

 

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

 

F-2


 

VENOCO, INC. AND DENVER PARENT CORPORATION

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2013

(In thousands)

 

 

 

Venoco

 

DPC

 

 

 

Historical

 

Pro Forma
Adjustments

 

Pro Forma
As Adjusted

 

Historical

 

Pro Forma
As Adjusted

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas sales

 

313,373

 

(55,462

)(a)

257,911

 

313,373

 

257,911

 

Other

 

4,129

 

(7

)(a)

4,122

 

4,129

 

4,122

 

Total revenues

 

317,502

 

(55,469

)

262,033

 

317,502

 

262,033

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

Lease operating expense

 

77,786

 

(11,268

)(a)

66,518

 

77,786

 

66,518

 

Property and production taxes

 

3,521

 

(921

)(a)

2,600

 

3,521

 

2,600

 

Transportation expense

 

181

 

(38

)(a)

143

 

181

 

143

 

Depletion, depreciation and amortization

 

48,840

 

(16,596

)(b)

32,244

 

48,840

 

32,244

 

Accretion of asset retirement obligations

 

2,477

 

(432

)(c)

2,045

 

2,477

 

2,045

 

General and administrative, net of amounts capitalized

 

50,403

 

(235

)(d)

50,168

 

50,664

 

50,429

 

Total expenses

 

183,208

 

(29,490

)

153,718

 

183,469

 

153,979

 

Income (loss) from operations

 

134,294

 

(25,979

)

108,315

 

134,033

 

108,054

 

FINANCING COSTS AND OTHER:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

65,114

 

(5,954

)(e)

59,160

 

86,640

 

80,686

 

Amortization of deferred loan costs

 

3,705

 

(1,329

)(f)

2,376

 

4,754

 

3,425

 

Loss on extinguishment of debt

 

38,549

 

—

 

38,549

 

58,472

 

58,472

 

Commodity derivative losses (gains), net

 

12,607

 

—

(g)

12,607

 

12,607

 

12,607

 

Total financing costs and other

 

119,975

 

(7,283

)

112,692

 

162,473

 

155,190

 

Income (loss) before income taxes

 

14,319

 

(18,696

)

(4,377

)

(28,440

)

(47,136

)

Income tax provision (benefit)

 

—

 

—

(h)

—

 

—

 

—

 

Net income (loss)

 

14,319

 

(18,696

)

(4,377

)

(28,440

)

(47,136

)

 

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

 

F-3


 

Venoco, Inc. and Denver Parent Corporation

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

 

1.                                      Basis of Presentation

 

The unaudited pro forma condensed consolidated financial statements are presented to give effect to the sale on October 29, 2014 by Venoco, Inc. (“Venoco”), a wholly-owned subsidiary of Denver Parent Corporation (“DPC”), of Venoco’s West Montalvo oil and gas properties (“Asset Sale”) to an unrelated third party.  The total purchase price for the properties was $200.2 million in cash, subject to certain closing adjustments.

 

The pro forma condensed consolidated balance sheets as of June 30, 2014, and the pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 were derived from and should be read in conjunction with the Quarterly Report on Form 10-Q of Venoco and DPC for the quarter ended June 30, 2014, filed on August 19, 2014.  The pro forma condensed consolidated statements of operations for the year ended December 31, 2013 was derived from and should be read in conjunction with the audited financial statements included in the Annual Report on Form 10-K of Venoco and DPC for the year ended December 31, 2013, filed on April 10, 2014.

 

·                  The unaudited pro forma condensed consolidated balance sheet reflects results as though the Asset Sale closed on June 30, 2014.

 

·                  The unaudited pro forma condensed consolidated statements of operations reflect results as though the Asset Sale closed on January 1, 2013.

 

The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position for any future period.

 

2.                                      Pro Forma Adjustments and Assumptions

 

The unaudited pro forma financial statements have been prepared by adjusting the historical financial statements of Venoco and DPC (collectively, the “Company”) as discussed below.  The same adjustments were made to each company’s financial statements.

 

Pro forma adjustments related to the Asset Sale:

 

(a)                                 Represents the pro forma effect on oil and gas revenues, other revenues and related lease operating expenses, production and property taxes and transportation expenses directly attributable to the properties sold.

(b)                                 Represents the pro forma effect on depletion expense, which is calculated on the units-of-production method.

(c)                                  Represents the pro forma effect of the removal of the properties sold on the asset retirement obligation, the full cost pool and related accretion expense.

(d)                                 Represents the pro forma effect on general and administrative expenses, net of amounts capitalized, directly related to properties sold.

(e)                                  Represents the pro forma effect of the estimated repayment of $200.2 million of principal under the revolving credit agreement and the related pro forma effects on interest expense from that reduction in the principal amount outstanding under the revolving credit agreement.

(f)                                   Represents the pro forma effect on deferred loan costs attributable to the reduction of debt resulting from application of the proceeds from the Asset Sale and the related pro forma effects on amortization of deferred loan costs.

(g)                                  The Company does not designate commodity derivative contracts as hedges. Therefore, no adjustments were made to derivative gains or losses for the periods presented.

 

F-4


 

(h)                                 The Company has provided a full valuation allowance against its net deferred tax assets at December 31, 2013 and June 30, 2014. Therefore, there are no net tax effects to the Company’s income tax provision for the periods presented.

(i)                                     Represents the pro forma effect on accounts receivable and equipment inventories related to properties sold.

(j)                                    Represents the allocation of the net proceeds to the full cost pool, with no gain or loss recognized on the transaction.

(k)                                 Represents the pro forma effect on accounts payable and accrued liabilities related to properties sold.

 

F-5