EX-99.3 4 a14-23633_1ex99d3.htm EX-99.3

Exhibit 99.3

 

ATHLON HOLDINGS LP

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

INTRODUCTION

 

Athlon Holdings LP (“Holdings”), a Delaware limited partnership, is an independent exploration and production company focused on the acquisition, development, and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian Basin.  On June 2, 2014, Holdings acquired certain oil and natural gas properties and related assets in the Midland Basin from Hibernia Holdings, LLC (“Hibernia”) for approximately $394.0 million in cash (the “Hibernia Acquisition”).  On June 3, 2014, Holdings acquired certain oil and natural gas properties and related assets in the Midland Basin from and Piedra Energy II, LLC (“Piedra”) for approximately $292.8 million in cash (the “Piedra Acquisition”).  On August 28, 2014, Holdings acquired certain oil and natural gas properties and related assets in the Midland Basin from Summit West Resources LP and Summit Group (“Summit”) for approximately $202.5 million in cash (the “Summit Acquisition” and together with the Hibernia Acquisition and the Piedra Acquisition, the “Acquisitions”).

 

The accompanying unaudited pro forma financial statements give effect to the Acquisitions, including related financing transactions.  The unaudited pro forma balance sheet assumes that the Summit Acquisition and related financing transactions occurred on June 30, 2014.  The Hibernia Acquisition and the Piedra Acquisition are already reflected in Holdings’ historical consolidated balance sheet as of June 30, 2014.  The unaudited pro forma statements of operations assume that the Acquisitions and related financing transactions occurred on January 1, 2013.

 

The accompanying unaudited pro forma financial statements should be read together with:

 

·                  Holdings’ unaudited consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed with the SEC on August 21, 2014;

·                  Holdings’ audited consolidated financial statements as of and for the year ended December 31, 2013 included in its final prospectus filed with the SEC pursuant to Rule 424(b)(3) of the Securities Act of 1933, as amended (the “Securities Act”), on July 24, 2014;

·                  Hibernia Energy LLC’s audited consolidated financial statements as of and for the year ended December 31, 2013 included in Holdings’ final prospectus filed with the SEC pursuant to Rule 424(b)(3) of the Securities Act on July 24, 2014;

·                  Piedra’s audited Statements of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties for the year ended December 31, 2013 included in Holdings’ final prospectus filed with the SEC pursuant to Rule 424(b)(3) of the Securities Act on July 24, 2014;

·                  Summit’s unaudited Statements of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties for the three and six months ended June 30, 2014 and 2013 included as Exhibit 99.1 to this Current Report on Form 8-K/A; and

·                  Summit’s audited Schedule of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties for the year ended December 31, 2013 included as Exhibit 99.2 to this Current Report on Form 8-K/A.

 

The accompanying unaudited pro forma financial statements were derived by making certain adjustments to Holdings’ historical consolidated financial statements.  The adjustments are based on currently available information and certain estimates and assumptions.  Therefore, the actual adjustments may differ from the pro forma adjustments.  However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the transactions as contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma financial statements.

 

The unaudited pro forma financial statements and related notes are presented for illustrative purposes only.  If the Acquisitions and related financing transactions had occurred in the past, Holdings’ operating results might have been materially different from those presented in the unaudited pro forma financial statements.  The unaudited pro forma financial statements should not be relied upon as an indication of operating results that Holdings would have achieved if the Acquisitions and related financing transactions had taken place on the specified date.  In addition, future results may vary significantly from the results reflected in the unaudited pro forma statements of operations and should not be relied on as an indication of the future results Holdings will have after the completion of the Acquisitions and related financing transactions.

 

1



 

ATHLON HOLDINGS LP

UNAUDITED PRO FORMA BALANCE SHEET

June 30, 2014

(in thousands)

 

 

 

Holdings
Historical

 

Pro Forma
Adjustments

 

Pro Forma as
Adjusted

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

242,895

 

$

(202,505

)(a)

$

40,123

 

 

 

 

 

(267

)(b)

 

 

Accounts receivable

 

81,463

 

 

81,463

 

Inventory

 

1,176

 

132

(a)

1,308

 

Deferred taxes

 

139

 

 

139

 

Other

 

354

 

 

354

 

Total current assets

 

326,027

 

(202,640

)

123,387

 

 

 

 

 

 

 

 

 

Oil and natural gas properties and equipment, at cost - full cost method:

 

 

 

 

 

 

 

Evaluated properties, including wells and related equipment

 

2,070,655

 

93,899

(a)

2,164,554

 

Unevaluated properties

 

555,905

 

109,570

(a)

665,475

 

Accumulated depletion, depreciation, and amortization

 

(227,195

)

 

(227,195

)

 

 

2,399,365

 

203,469

 

2,602,834

 

 

 

 

 

 

 

 

 

Derivatives, at fair value

 

318

 

 

318

 

Debt issuance costs

 

25,908

 

 

25,908

 

Other

 

2,097

 

 

2,097

 

Total assets

 

$

2,753,715

 

$

829

 

$

2,754,544

 

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable:

 

 

 

 

 

 

 

Trade

 

$

9,861

 

$

 

$

9,861

 

Intercompany

 

1,644

 

 

1,644

 

Accrued liabilities:

 

 

 

 

 

 

 

Lease operating

 

9,208

 

 

9,208

 

Production, severance, and ad valorem taxes

 

6,949

 

 

6,949

 

Development capital

 

120,523

 

 

120,523

 

Interest

 

14,293

 

 

14,293

 

Derivatives, at fair value

 

33,542

 

 

33,542

 

Revenue payable

 

32,827

 

 

32,827

 

Other

 

9,555

 

659

(a)

10,214

 

Total current liabilities

 

238,402

 

659

 

239,061

 

 

 

 

 

 

 

 

 

Asset retirement obligations, net of current portion

 

10,496

 

437

(a)

10,933

 

Long-term debt

 

1,150,000

 

 

1,150,000

 

Deferred taxes

 

4,815

 

 

4,815

 

Derivatives, at fair value

 

3,320

 

 

3,320

 

Other

 

140

 

 

140

 

Total liabilities

 

1,407,173

 

1,096

 

1,408,269

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partners’ equity

 

1,346,542

 

(267

)(b)

1,346,275

 

Total liabilities and partner’s equity

 

$

2,753,715

 

$

829

 

$

2,754,544

 

 

The accompanying notes are an integral part of these unaudited pro forma financial statements.

 

2



 

ATHLON HOLDINGS LP

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2014

(in thousands, except per unit amounts)

 

 

 

Holdings
Historical

 

Hibernia Energy
LLC Historical

 

Piedra Historical

 

Summit Historical

 

Stock Offering Pro
Forma
Adjustments

 

Notes Offering Pro
Forma Adjustments

 

Pro Forma
Adjustments

 

Pro Forma as
Adjusted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas revenues

 

$

242,179

 

$

21,436

 

$

14,743

 

$

21,731

 

$

 

$

 

$

 

$

300,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

40,862

 

2,349

 

2,468

 

3,956

 

 

 

 

49,635

 

Depletion, depreciation, and amortization

 

66,546

 

4,830

 

 

 

 

 

9,758

(d)

81,134

 

General and administrative

 

20,858

 

1,710

 

 

 

 

 

 

22,568

 

Acquisition costs

 

1,825

 

 

 

 

 

 

(1,168

)(e)

657

 

Derivative fair value loss

 

43,577

 

3,697

 

 

 

 

 

 

47,274

 

Accretion of discount on asset retierment obligations

 

417

 

10

 

 

 

 

 

60

(f)

487

 

Total expenses

 

174,085

 

12,596

 

2,468

 

3,956

 

 

 

8,650

 

201,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

68,094

 

8,840

 

12,275

 

17,775

 

 

 

(8,650

)

98,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(22,706

)

(820

)

 

 

 

(13,448

)(b)

(422

)(g)

(37,396

)

Other

 

26

 

1

 

 

 

 

 

 

27

 

Total other expenses

 

(22,680

)

(819

)

 

 

 

(13,448

)

(422

)

(37,369

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

45,414

 

8,021

 

12,275

 

17,775

 

 

(13,448

)

(9,072

)

60,965

 

Income tax provision

 

749

 

 

 

 

 

 

256

(h)

1,005

 

Net income (loss)

 

$

44,665

 

$

8,021

 

$

12,275

 

$

17,775

 

$

 

$

(13,448

)

$

(9,328

)

$

59,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.60

 

Diluted

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

89,629

 

 

 

 

 

 

 

9,162

(a)

 

 

 

 

98,791

 

Diluted

 

89,629

 

 

 

 

 

 

 

9,162

(a)

 

 

 

 

98,791

 

 

The accompanying notes are an integral part of these unaudited pro forma financial statements.

 

3



 

ATHLON HOLDINGS LP

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

For the Year Ended December 31, 2013

(in thousands, except per unit amounts)

 

 

 

Holdings Historical

 

Hibernia Energy
LLC Historical

 

Piedra Historical

 

Summit Historical

 

Stock Offering Pro
Forma Adjustments

 

Notes Offering Pro
Forma
Adjustments

 

Pro Forma
Adjustments

 

Pro Forma as
Adjusted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and natural gas revenues

 

$

299,373

 

$

17,595

 

$

28,862

 

$

45,048

 

$

 

$

 

$

2,006

(c)

$

392,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

53,046

 

2,564

 

5,640

 

6,964

 

 

 

692

(c)

68,906

 

Depletion, depreciation, and amortization

 

87,171

 

3,417

 

 

 

 

 

19,011

(d)

109,599

 

General and administrative

 

20,465

 

3,340

 

 

 

 

 

 

23,805

 

Contract termination fee

 

2,408

 

 

 

 

 

 

 

2,408

 

Acquisition costs

 

421

 

 

 

 

 

 

1,435

(e)

1,856

 

Derivative fair value loss

 

18,115

 

1,821

 

 

 

 

 

 

19,936

 

Accretion of discount on asset retierment obligations

 

675

 

19

 

 

 

 

 

130

(f)

824

 

Total expenses

 

182,301

 

11,161

 

5,640

 

6,964

 

 

 

21,268

 

227,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

117,072

 

6,434

 

23,222

 

38,084

 

 

 

(19,262

)

165,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(36,669

)

(1,160

)

 

 

 

(40,904

)(b)

(58

)(g)

(78,791

)

Other

 

35

 

160

 

 

 

 

 

 

195

 

Total other expenses

 

(36,634

)

(1,000

)

 

 

 

(40,904

)

(58

)

(78,596

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

80,438

 

5,434

 

23,222

 

38,084

 

 

(40,904

)

(19,320

)

86,954

 

Income tax provision

 

1,528

 

 

 

 

 

 

124

(h)

1,652

 

Net income (loss)

 

$

78,910

 

$

5,434

 

$

23,222

 

$

38,084

 

$

 

$

(40,904

)

$

(19,444

)

$

85,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.95

 

Diluted

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

74,771

 

 

 

 

 

 

 

14,806

(a)

 

 

 

 

89,577

 

Diluted

 

74,771

 

 

 

 

 

 

 

14,806

(a)

 

 

 

 

89,577

 

 

The accompanying notes are an integral part of these unaudited pro forma financial statements.

 

4



 

ATHLON HOLDINGS LP

 

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

 

Note 1.         Basis of Presentation

 

Holdings’ historical financial information as of and for the six months ended June 30, 2014 is derived from Holdings’ consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.  Holdings’ historical financial information for the year ended December 31, 2013 is derived from Holdings’ consolidated financial statements included in its final prospectus filed with the SEC pursuant to Rule 424(b)(3) of the Securities Act on July 24, 2014.

 

Hibernia Energy LLC’s historical financial information for the year ended December 31, 2013 is derived from its audited consolidated financial statements included in Holdings’ final prospectus filed with the SEC pursuant to Rule 424(b)(3) of the Securities Act on July 24, 2014.

 

Piedra’s historical financial information for the year ended December 31, 2013 is derived from its audited Schedule of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties included in Holdings’ final prospectus filed with the SEC pursuant to Rule 424(b)(3) of the Securities Act on July 24, 2014.  Piedra’s Schedules of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties are not intended to be a complete presentation of the results of operations of the properties, as they do not include general and administrative expenses, effects of derivative transactions, interest income or expense, depreciation, depletion, and amortization, any provision for income tax expenses, and other income and expense items not directly associated with direct operating revenues from natural gas, natural gas liquids, and crude oil.  As such, they are not indicative of the operating results of the Piedra assets going forward.

 

Summit’s historical financial information for the six months ended June 30, 2014 is derived from its unaudited Statements of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties, which is included as Exhibit 99.1 to this Current Report on Form 8-K/A.  Summit’s historical financial information for the year ended December 31, 2013 is derived from its audited Statements of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties, which is included as Exhibit 99.2 to this Current Report on Form 8-K.  Summit’s Statements of Direct Operating Revenues and Direct Operating Expenses of Certain Oil and Natural Gas Properties are not intended to be a complete presentation of the results of operations of the properties, as they do not include general and administrative expenses, effects of derivative transactions, interest income or expense, depreciation, depletion, and amortization, any provision for income tax expenses, and other income and expense items not directly associated with direct operating revenues from natural gas, natural gas liquids, and crude oil.  As such, they are not indicative of the operating results of the Summit assets going forward.

 

For purposes of the unaudited pro forma balance sheet, it is assumed that the Summit Acquisition and related financing transactions occurred on June 30, 2014.  The Hibernia Acquisition and the Piedra Acquisition are already reflected in Holdings’ historical consolidated balance sheet as of June 30, 2014.  For purposes of the unaudited pro forma statements of operations, it is assumed that the Acquisitions and related financing transactions occurred on January 1, 2013.

 

Note 2.         Pro Forma Adjustments and Assumptions

 

Holdings made the following adjustments and assumptions in the preparation of the unaudited pro forma balance sheet:

 

(a)         To record the Summit Acquisition for $202.5 million in cash and to allocate the purchase price to the assets acquired and liabilities assumed.  The allocation of the purchase price to the assets acquired and liabilities assumed is preliminary and, therefore, subject to change.

 

The allocation of the purchase price of the Summit Acquisition to the fair value of the assets acquired and liabilities assumed is as follows (in thousands):

 

Evaluated, including wells and related equipment

 

$

93,899

 

Unevaluated

 

109,570

 

Inventory

 

132

 

Total assets acquired

 

203,601

 

Other current liabilities

 

659

 

Asset retirement obligations

 

437

 

Total liabilities assumed

 

1,096

 

Fair value of net assets acquired

 

$

202,505

 

 

5



 

ATHLON HOLDINGS LP

 

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS — Continued

 

(b)         Reflects estimated incremental acquisition costs incurred in connection with the consummation of the Acquisitions.  As of June 30, 2014, Holdings had incurred $1.2 million of acquisition costs and expects total acquisition costs to be approximately $1.4 million.

 

Holdings made the following adjustments and assumptions in the preparation of the unaudited pro forma statements of operations:

 

(a)         Reflects Athlon Energy Inc.’s (“Athlon”) April 2014 issuance and sale of 14,806,250 shares of common stock.  Holdings’ Amended and Restated Agreement of Limited Partnership provides that at any time Athlon issues a share of common stock, other than pursuant to an incentive plan or an exchange transaction, the net proceeds or other consideration received by Athlon with respect to such share, if any, shall be concurrently contributed to Holdings and Holdings shall issue to Athlon one New Holdings Unit.

 

(b)         Reflects estimated incremental interest expense and amortization of debt issuance costs associated with the issuance of the 2022 Notes.

 

(c)          A portion of the assets acquired by Hibernia were acquired by them during May 2013.  Reflects the incremental oil and natural gas revenues and production costs associated with those assets from January 1, 2013 through the date Hibernia acquired them.

 

(d)         Reflects incremental depletion, depreciation, and amortization of oil and natural gas properties associated with the Acquisitions.  Costs associated with evaluated properties are amortized using a unit-of-production basis under the full cost method of accounting for oil and natural gas properties.

 

(e)          Reflects estimated acquisition costs incurred in connection with the consummation of the Acquisitions.  As of June 30, 2014, Holdings had incurred $1.2 million of acquisition costs and expects total acquisition costs to be approximately $1.4 million.

 

(f)           Reflects incremental accretion of discount on asset retirement obligations associated with the Acquisitions.

 

(g)          Reflects an increase in unused commitment fees and amortization of debt issuance costs related to Holdings’ credit agreement, partially offset by the elimination of interest expense associated with a portion of the outstanding borrowings under Holdings’ credit agreement.  On a pro forma basis, there would have been no outstanding borrowings under Holdings’ credit agreement as of January 1, 2013.

 

A 1/8% change in LIBOR would have no effect on Holdings’ interest expense as there would have been no variable rate debt outstanding during the periods presented on a pro forma basis.

 

(h)         Reflects estimated increase in income tax provision associated with the reduction in operating income from the Acquisitions and the pro forma adjustments using Holdings’ effective tax rate of 1.6% and 1.9% for the six months ended June 30, 2014 and the year ended December 31, 2013, respectively.

 

Note 3. Pro Forma Earnings Per Unit

 

Holdings’ Amended and Restated Agreement of Limited Partnership also provides that at any time Athlon issues a share of common stock pursuant to an incentive plan, Athlon is deemed to contribute consideration to Holdings equal to value of the share of common stock issued and Holdings shall issue to Athlon one New Holdings Unit.  As a result, Athlon’s unvested stock awards are dilutive to Holdings’ earnings per unit (“EPU”) calculations.  The following table reflects the pro forma allocation of net income to unitholders and EPU computations for the periods indicated:

 

6



 

ATHLON HOLDINGS LP

 

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS — Continued

 

 

 

Six months ended
June 30, 2014

 

Year ended
December 31, 2013

 

 

 

(in thousands, except per unit amounts)

 

Basic EPU

 

 

 

 

 

Numerator:

 

 

 

 

 

Undistributed net income attributable to unitholders

 

$

59,960

 

$

85,302

 

Participation rights of unvested stock awards in undistributed earnings

 

(592

)

(611

)

Basic undistributed net income attributable to unitholders

 

$

59,368

 

$

84,691

 

Denominator:

 

 

 

 

 

Basic weighted average units outstanding

 

98,791

 

89,577

 

Basic EPU attributable to unitholders

 

$

0.60

 

$

0.95

 

 

 

 

 

 

 

Diluted EPU

 

 

 

 

 

Numerator:

 

 

 

 

 

Undistributed net income attributable to unitholders

 

$

59,960

 

$

85,302

 

Participation rights of unvested stock awards in undistributed earnings

 

(592

)

(611

)

Diluted undistributed net income attributable to unitholders

 

$

59,368

 

$

84,691

 

Denominator:

 

 

 

 

 

Diluted weighted average units outstanding

 

98,791

 

89,577

 

Diluted EPU attributable to unitholders

 

$

0.60

 

$

0.95

 

 

Note 4.         Supplementary Information

 

There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures.  Oil and natural gas reserve engineering is and must be recognized as a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in any exact way, and estimates of other engineers might differ materially from those included herein.  The accuracy of any reserve estimate is a function of the quality of available data and engineering, and estimates may justify revisions based on the results of drilling, testing, and production activities.  Accordingly, reserve estimates are often materially different from the quantities of oil and natural gas that are ultimately recovered.  Reserve estimates are integral to management’s analysis of impairment of oil and natural gas properties and the calculation of depletion, depreciation, and amortization on these properties.  Natural gas volumes include natural gas liquids.

 

7



 

ATHLON HOLDINGS LP

 

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS — Continued

 

Holdings’ estimated pro forma net quantities of proved reserves were as follows as of December 31, 2013:

 

 

 

Holdings Historical

 

Hibernia Historical

 

Piedra Historical

 

Summit Historical

 

Total Pro Forma

 

Proved developed reserves:

 

 

 

 

 

 

 

 

 

 

 

Oil (MBbls)

 

26,436

 

4,159

 

2,414

 

2,985

 

35,994

 

Natural gas (MMcf)

 

121,820

 

10,067

 

8,242

 

13,604

 

153,733

 

Combined (MBOE)

 

46,740

 

5,837

 

3,787

 

5,252

 

61,616

 

Proved undeveloped reserves:

 

 

 

 

 

 

 

 

 

 

 

Oil (MBbls)

 

44,738

 

9,695

 

6,868

 

 

61,301

 

Natural gas (MMcf)

 

214,718

 

23,012

 

23,247

 

 

260,977

 

Combined (MBOE)

 

80,524

 

13,530

 

10,743

 

 

104,797

 

Proved reserves:

 

 

 

 

 

 

 

 

 

 

 

Oil (MBbls)

 

71,174

 

13,854

 

9,282

 

2,985

 

97,295

 

Natural gas (MMcf)

 

336,538

 

33,079

 

31,489

 

13,604

 

414,710

 

Combined (MBOE)

 

127,264

 

19,367

 

14,530

 

5,252

 

166,413

 

 

The changes in Holdings’ pro forma proved reserves were as follows for 2013:

 

 

 

Holdings Historical

 

Hibernia Historical

 

Piedra Historical

 

Summit Historical

 

Total Pro Forma

 

 

 

 

 

Natural

 

Oil

 

 

 

Natural

 

Oil

 

 

 

Natural

 

Oil

 

 

 

Natural

 

Oil

 

 

 

Natural

 

Oil

 

 

 

Oil

 

Gas

 

Equivalent

 

Oil

 

Gas

 

Equivalent

 

Oil

 

Gas

 

Equivalent

 

Oil

 

Gas

 

Equivalent

 

Oil

 

Gas

 

Equivalent

 

 

 

(MBbls)

 

(MMcf)

 

(MBOE)

 

(MBbls)

 

(MMcf)

 

(MBOE)

 

(MBbls)

 

(MMcf)

 

(MBOE)

 

(MBbls)

 

(MMcf)

 

(MBOE)

 

(MBbls)

 

(MMcf)

 

(MBOE)

 

Balance, December 31, 2012

 

49,423

 

219,333

 

85,979

 

3,176

 

6,991

 

4,341

 

9,688

 

23,624

 

13,625

 

3,398

 

14,472

 

5,810

 

65,685

 

264,420

 

109,755

 

Purchases of minerals-in-place

 

495

 

2,059

 

838

 

8,288

 

18,262

 

11,332

 

 

 

 

 

 

 

8,783

 

20,321

 

12,170

 

Extensions and discoveries

 

23,895

 

102,820

 

41,031

 

2,248

 

4,977

 

3,078

 

 

 

 

 

 

 

26,143

 

107,797

 

44,109

 

Revisions of previous estimates

 

43

 

22,977

 

3,874

 

304

 

3,220

 

840

 

(139

)

8,527

 

1,282

 

 

 

 

208

 

34,724

 

5,996

 

Production

 

(2,682

)

(10,651

)

(4,458

)

(162

)

(371

)

(224

)

(267

)

(662

)

(377

)

(413

)

(868

)

(558

)

(3,524

)

(12,552

)

(5,617

)

Balance, December 31, 2013

 

71,174

 

336,538

 

127,264

 

13,854

 

33,079

 

19,367

 

9,282

 

31,489

 

14,530

 

2,985

 

13,604

 

5,252

 

97,295

 

414,710

 

166,413

 

 

The following is a pro forma standardized measure of the discounted net future cash flows and changes applicable to proved reserves.  The future net cash flows are discounted at 10% per year and assume continuation of existing economic conditions.

 

In management’s opinion, the standardized measure of discounted future net cash flows should be examined with caution.  The basis for this table is the reserve studies prepared by petroleum engineers, which contain imprecise estimates of quantities and rates of production of reserves.  Revisions of previous year estimates can have a significant impact on these results.  Also, exploration costs in one year may lead to significant discoveries in later years and may significantly change previous estimates of proved reserves and their valuation.  Therefore, the standardized measure of discounted future net cash flows is not necessarily indicative of the fair value of Holdings’ evaluated oil and natural gas properties.

 

The data presented should not be viewed as representing the expected cash flow from or current value of, existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions.  Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions.  Actual future prices and costs are likely to be substantially different from the prices and costs utilized in the computation of reported amounts.

 

Holdings’ pro forma standardized measure of discounted future net cash flows was as follows as of December 31, 2013:

 

 

 

Holdings Historical

 

Hibernia Historical

 

Piedra Historical

 

Summit Historical

 

Pro Forma as
Adjusted

 

 

 

(in thousands)

 

Future cash inflows

 

$

8,053,437

 

$

1,491,194

 

$

1,073,809

 

$

339,909

 

$

10,958,349

 

Future production costs

 

(2,421,186

)

(326,331

)

(321,907

)

(110,428

)

(3,179,852

)

Future development costs

 

(1,242,817

)

(202,159

)

(160,555

)

 

(1,605,531

)

Future income taxes

 

(56,374

)

(10,438

)

(7,517

)

(2,380

)

(76,709

)

Future net cash flows

 

4,333,060

 

952,266

 

583,830

 

227,101

 

6,096,257

 

10% annual discount

 

(2,721,172

)

(605,100

)

(369,043

)

(110,592

)

(3,805,907

)

Standardized measure of discounted estimated future net cash flows

 

$

1,611,888

 

$

347,166

 

$

214,787

 

$

116,509

 

$

2,290,350

 

 

8



 

ATHLON HOLDINGS LP

 

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS — Continued

 

The changes in Holdings’ pro forma standardized measure of discounted estimated future net cash flows were as follows for 2013:

 

 

 

Holdings Historical

 

Hibernia Historical

 

Piedra Historical

 

Summit Historical

 

Pro Forma as
Adjusted

 

 

 

(in thousands)

 

Net change in prices and production costs

 

$

250,716

 

$

40,254

 

$

1,918

 

$

13,557

 

$

306,445

 

Purchases of minerals-in-place

 

11,601

 

127,844

 

 

 

139,445

 

Extensions, discoveries, and improved recovery

 

448,208

 

60,044

 

 

 

508,252

 

Revisions of previous quantity estimates

 

50,202

 

15,232

 

19,199

 

 

84,633

 

Production, net of production costs

 

(246,327

)

(15,031

)

(23,223

)

(38,084

)

(322,665

)

Previously estimated development costs incurred during the period

 

130,900

 

6,292

 

23,238

 

 

160,430

 

Accretion of discount

 

86,658

 

13,315

 

17,172

 

13,105

 

130,250

 

Change in estimated future development costs

 

(17,389

)

31,100

 

554

 

 

14,265

 

Net change in income taxes

 

(7,948

)

(2,968

)

(343

)

101

 

(11,158

)

Change in timing and other

 

54,353

 

13,350

 

6,974

 

(2,026

)

72,651

 

Net change in standardized measure

 

760,974

 

289,432

 

45,489

 

(13,347

)

1,082,548

 

Standardized measure, beginning of year

 

850,914

 

57,734

 

169,298

 

129,856

 

1,207,802

 

Standardized measure, end of year

 

$

1,611,888

 

$

347,166

 

$

214,787

 

$

116,509

 

$

2,290,350

 

 

9