ENERGY 11, L.P.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
000-55615
|
46-3070515
|
(State or other jurisdiction of
|
(Commission File Number)
|
(IRS Employer
|
incorporation)
|
|
Identification No.)
|
120 W 3rd Street, Suite 220
Fort Worth, Texas
|
|
76102
|
(Address of principal executive offices)
|
|
(Zip Code)
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Exhibit Number
|
|
Title of Document
|
2.1
|
Exclusive Option Agreement dated November 3, 2016 among Energy 11 Operating Company, LLC, Kaiser-Whiting, LLC, and Don P. Millican (incorporated by reference to the Partnership’s Form 8-K filed on November 4, 2016).
|
|
23.1
|
||
99.1
|
||
99.2
|
Date:
|
January 5, 2017
|
|
|
|
|
|
|
|
|
ENERGY 11, L.P.
|
|
|
|
|
|
|
|
By:
|
/s/ David McKenney
|
|
|
|
David McKenney
|
|
|
|
Chief Financial Officer of Energy 11 GP, LLC
|
Independent Auditor’s Report
|
1
|
Balance Sheets
|
3
|
Statements of Income (Loss)
|
4
|
Statements of Members’ Equity
|
5
|
Statements of Cash Flows
|
6
|
Notes to Financial Statements
|
7
|
September 30,
|
December 31,
|
|||||||||||||||||||
2016
|
2015
|
2015
|
2014
|
2013
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
Assets
|
||||||||||||||||||||
Current assets:
|
||||||||||||||||||||
Accrued revenues
|
$
|
78
|
$
|
202
|
$
|
1,515
|
$
|
1,606
|
$
|
490
|
||||||||||
Advances to affiliate
|
1,785
|
3,652
|
1,275
|
-
|
13,680
|
|||||||||||||||
Total current assets
|
1,863
|
3,854
|
2,790
|
1,606
|
14,170
|
|||||||||||||||
Oil and gas properties, full-cost method:
|
||||||||||||||||||||
Properties and equipment
|
189,198
|
372,535
|
187,089
|
342,837
|
437,785
|
|||||||||||||||
Accumulated depreciation, depletion and impairment
|
(118,389
|
)
|
(119,963
|
)
|
(112,729
|
)
|
(100,470
|
)
|
(131,075
|
)
|
||||||||||
Oil and gas properties, net
|
70,809
|
252,572
|
74,360
|
242,367
|
306,710
|
|||||||||||||||
Total assets
|
$
|
72,672
|
$
|
256,426
|
$
|
77,150
|
$
|
243,973
|
$
|
320,880
|
||||||||||
Liabilities and Members’ Equity
|
||||||||||||||||||||
Current liabilities:
|
||||||||||||||||||||
Accounts payable and accrued liabilities
|
$
|
531
|
$
|
4,946
|
$
|
2,008
|
$
|
12,637
|
$
|
7,904
|
||||||||||
Advances from affiliate
|
-
|
-
|
-
|
5,472
|
-
|
|||||||||||||||
Total current liabilities
|
531
|
4,946
|
2,008
|
18,109
|
7,904
|
|||||||||||||||
Asset retirement obligations
|
852
|
1,468
|
814
|
1,261
|
1,766
|
|||||||||||||||
Total liabilities
|
1,383
|
6,414
|
2,822
|
19,370
|
9,670
|
|||||||||||||||
Members’ equity
|
71,289
|
250,012
|
74,328
|
224,603
|
311,210
|
|||||||||||||||
Total liabilities and members’ equity
|
$
|
72,672
|
$
|
256,426
|
$
|
77,150
|
$
|
243,973
|
$
|
320,880
|
For the nine months
ended September 30,
|
For the years ended December 31,
|
|||||||||||||||||||
2016
|
2015
|
2015
|
2014
|
2013
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
Revenues:
|
||||||||||||||||||||
Oil, gas and natural gas liquids sales
|
$
|
13,849
|
$
|
42,361
|
$
|
53,050
|
$
|
143,724
|
$
|
188,412
|
||||||||||
Costs and expenses:
|
||||||||||||||||||||
Lease operating expenses
|
3,713
|
5,925
|
7,187
|
15,228
|
15,692
|
|||||||||||||||
Production taxes
|
1,405
|
5,436
|
6,744
|
17,122
|
22,135
|
|||||||||||||||
Depletion, depreciation, impairment and accretion
|
5,696
|
19,550
|
86,559
|
31,556
|
35,626
|
|||||||||||||||
General and administrative
|
343
|
329
|
356
|
556
|
180
|
|||||||||||||||
Total costs and expenses
|
11,157
|
31,240
|
100,846
|
64,462
|
73,633
|
|||||||||||||||
Operating income (loss)
|
2,692
|
11,121
|
(47,796
|
)
|
79,262
|
114,779
|
||||||||||||||
Gain on distribution to member
|
-
|
-
|
46,671
|
196,153
|
-
|
|||||||||||||||
Net income (loss)
|
$
|
2,692
|
$
|
11,121
|
$
|
(1,125
|
)
|
$
|
275,415
|
$
|
114,779
|
Contributed Capital
|
Distributions
|
Accumulated Earnings
|
Total Members’ Equity
|
|||||||||||||
December 31, 2012
|
$
|
108,571
|
$
|
(55,146
|
)
|
$
|
222,891
|
$
|
276,316
|
|||||||
Net income
|
-
|
-
|
114,779
|
114,779
|
||||||||||||
Contributions
|
100
|
-
|
-
|
100
|
||||||||||||
Distributions
|
-
|
(79,985
|
)
|
-
|
(79,985
|
)
|
||||||||||
December 31, 2013
|
108,671
|
(135,131
|
)
|
337,670
|
311,210
|
|||||||||||
Net income
|
-
|
-
|
275,415
|
275,415
|
||||||||||||
Contributions
|
45,531
|
-
|
-
|
45,531
|
||||||||||||
Distributions
|
-
|
(407,553
|
)
|
-
|
(407,553
|
)
|
||||||||||
December 31, 2014
|
154,202
|
(542,684
|
)
|
613,085
|
224,603
|
|||||||||||
Net loss
|
-
|
-
|
(1,125
|
)
|
(1,125
|
)
|
||||||||||
Contributions
|
18,803
|
-
|
-
|
18,803
|
||||||||||||
Distributions
|
-
|
(167,953
|
)
|
-
|
(167,953
|
)
|
||||||||||
December 31, 2015
|
$
|
173,005
|
$
|
(710,637
|
)
|
$
|
611,960
|
$
|
74,328
|
For the nine months
ended September 30,
|
For the years ended December 31,
|
|||||||||||||||||||
2016
|
2015
|
2015
|
2014
|
2013
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||||||
Cash Flows from Operating Activities
|
||||||||||||||||||||
Net income (loss)
|
$
|
2,692
|
$
|
11,121
|
$
|
(1,125
|
)
|
$
|
275,415
|
$
|
114,779
|
|||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||||||||||
Gain on distribution to members
|
-
|
-
|
(46,671
|
)
|
(196,153
|
)
|
-
|
|||||||||||||
Depletion, depreciation, impairment and accretion
|
5,696
|
19,550
|
86,559
|
31,556
|
35,626
|
|||||||||||||||
Value of services contributed by affiliate
|
75
|
75
|
100
|
100
|
100
|
|||||||||||||||
Change in:
|
||||||||||||||||||||
Accrued revenues
|
1,437
|
1,404
|
91
|
(1,116
|
)
|
769
|
||||||||||||||
Accounts payable and accrued liabilities
|
(1,477
|
)
|
(7,691
|
)
|
(10,629
|
)
|
4,733
|
(11,628
|
)
|
|||||||||||
Affiliate advances, net
|
(510
|
)
|
(9,124
|
)
|
(6,747
|
)
|
19,152
|
(9,516
|
)
|
|||||||||||
Net cash provided by operating activities
|
7,913
|
15,335
|
21,578
|
133,687
|
130,130
|
|||||||||||||||
Cash Flows from Investing Activities
|
||||||||||||||||||||
Additions to properties and equipment
|
(2,107
|
)
|
(29,548
|
)
|
(30,720
|
)
|
(70,859
|
)
|
(50,145
|
)
|
||||||||||
Cash Flows from Financing Activities
|
||||||||||||||||||||
Contributions from members
|
3,578
|
18,703
|
18,703
|
4,725
|
-
|
|||||||||||||||
Distributions to members
|
(9,384
|
)
|
(4,490
|
)
|
(9,561
|
)
|
(67,553
|
)
|
(79,985
|
)
|
||||||||||
Net cash provided by (used in) financing activities
|
(5,806
|
)
|
14,213
|
9,142
|
(62,828
|
)
|
(79,985
|
)
|
||||||||||||
Net change in cash
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Cash, beginning of year
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Cash, end of year
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Noncash Investing and Financing Activities
|
||||||||||||||||||||
Additions to asset retirement obligations
|
$
|
2
|
$
|
150
|
$
|
232
|
$
|
220
|
$
|
152
|
||||||||||
Property contributions by members
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
40,706
|
$
|
-
|
||||||||||
Property distributions to member
|
$
|
-
|
$
|
-
|
$
|
158,392
|
$
|
340,000
|
$
|
-
|
For the nine months
ended September 30,
|
For the years ended December 31,
|
|||||||||||||||||||
2016
|
2015
|
2015
|
2014
|
2013
|
||||||||||||||||
Balance, beginning of year
|
$
|
814
|
$
|
1,261
|
$
|
1,261
|
$
|
1,766
|
$
|
1,518
|
||||||||||
Liabilities incurred
|
2
|
150
|
232
|
220
|
152
|
|||||||||||||||
Accretion expense
|
36
|
57
|
107
|
104
|
96
|
|||||||||||||||
Distributed to member
|
-
|
-
|
(786
|
)
|
(829
|
)
|
-
|
|||||||||||||
Balance, end of period
|
$
|
852
|
$
|
1,468
|
$
|
814
|
$
|
1,261
|
$
|
1,766
|
(a)
|
Reserve Quantity Information
|
As of December 31,
|
||||||||||||||||||||||||
2015
|
2014
|
2013
|
||||||||||||||||||||||
(amounts in thousands)
|
||||||||||||||||||||||||
Oil
(Bbls)
|
Gas
(Mcf)
|
Oil
(Bbls)
|
Gas
(Mcf)
|
Oil
(Bbls)
|
Gas
(Mcf)
|
|||||||||||||||||||
Proved developed and undeveloped reserves:
|
||||||||||||||||||||||||
Beginning of year
|
18,429
|
17,279
|
24,170
|
21,909
|
23,859
|
16,867
|
||||||||||||||||||
Contributed reserves
|
-
|
-
|
2,162
|
2,013
|
-
|
-
|
||||||||||||||||||
Distributed reserves
|
(6,044
|
)
|
(6,473
|
)
|
(10,011
|
)
|
(9,220
|
)
|
-
|
-
|
||||||||||||||
Revisions of previous estimates
|
(4,927
|
)
|
(4,218
|
)
|
4,268
|
3,705
|
2,619
|
6,175
|
||||||||||||||||
Production
|
(1,436
|
)
|
(152
|
)
|
(2,160
|
)
|
(1,128
|
)
|
(2,308
|
)
|
(1,133
|
)
|
||||||||||||
End of year
|
6,022
|
6,436
|
18,429
|
17,279
|
24,170
|
21,909
|
||||||||||||||||||
Proved developed reserves:
|
||||||||||||||||||||||||
Beginning of year
|
13,517
|
13,188
|
20,515
|
18,871
|
20,492
|
14,627
|
||||||||||||||||||
End of year
|
6,022
|
6,436
|
13,517
|
13,188
|
20,515
|
18,871
|
2015
|
2014
|
2013
|
||||||||||
(amounts in thousands)
|
||||||||||||
Future cash inflows
|
$
|
255,730
|
$
|
1,408,668
|
$
|
1,842,929
|
||||||
Future production costs
|
121,101
|
411,501
|
491,238
|
|||||||||
Future development costs
|
433
|
89,399
|
81,167
|
|||||||||
Future net cash flows
|
134,196
|
907,768
|
1,270,524
|
|||||||||
10% annual discount for timing of cash flows
|
(59,836
|
)
|
(447,463
|
)
|
(687,570
|
)
|
||||||
Standardized measure
|
$
|
74,360
|
$
|
460,305
|
$
|
582,954
|
2015
|
2014
|
2013
|
||||||||||
Representative NYMEX prices:
|
||||||||||||
Natural gas (MMBtu)
|
$
|
2.58
|
$
|
4.42
|
$
|
3.65
|
||||||
Oil (Bbl)
|
$
|
50.28
|
$
|
93.00
|
$
|
97.98
|
2015
|
2014
|
2013
|
||||||||||
(amounts in thousands)
|
||||||||||||
Sales of oil and gas production
|
$
|
(39,119
|
)
|
$
|
(111,373
|
)
|
$
|
(150,585
|
)
|
|||
Change in prices and production costs
|
(305,972
|
)
|
(14,905
|
)
|
(30,856
|
)
|
||||||
Contributed reserves
|
-
|
46,267
|
-
|
|||||||||
Distribution of reserves
|
(135,160
|
)
|
(203,609
|
)
|
-
|
|||||||
Development costs incurred
|
31,110
|
72,876
|
61,433
|
|||||||||
Changes in estimated development costs
|
57,856
|
(81,108
|
)
|
(66,351
|
)
|
|||||||
Accretion of discount
|
46,031
|
58,295
|
48,967
|
|||||||||
Revisions of quantity estimates
|
(59,197
|
)
|
115,945
|
134,414
|
||||||||
Timing and other
|
18,506
|
(5,037
|
)
|
(17,996
|
)
|
|||||||
Change in standardized measure
|
$
|
(385,945
|
)
|
$
|
(122,649
|
)
|
$
|
(20,974
|
)
|
Energy 11, L.P.
|
Kaiser-Whiting
|
Pro Forma
|
Energy 11, L.P.
|
||||||||||||||
Historical
|
Historical
|
Adjustments
|
Notes
|
Pro Forma as Adjusted
|
|||||||||||||
(1)
|
|
(2)
|
|
||||||||||||||
Assets
|
|||||||||||||||||
Cash and cash equivalents
|
$
|
15,078,130
|
$
|
-
|
$
|
(130,000,000
|
)
|
(A)
|
$
|
9,178,130
|
|||||||
40,000,000
|
(B)
|
||||||||||||||||
84,100,000
|
(C)
|
||||||||||||||||
Oil, natural gas and natural gas liquids revenue receivable
|
2,749,070
|
1,863,000
|
-
|
4,612,070
|
|||||||||||||
Other current assets
|
61,153
|
-
|
-
|
61,153
|
|||||||||||||
Total Current Assets
|
17,888,353
|
1,863,000
|
(5,900,000
|
)
|
13,851,353
|
||||||||||||
Oil, natural gas and NGL interests, net
|
153,426,891
|
70,809,000
|
58,711,000
|
(A)
|
282,946,891
|
||||||||||||
Total Assets
|
$
|
171,315,244
|
$
|
72,672,000
|
$
|
52,811,000
|
$
|
296,798,244
|
|||||||||
|
|||||||||||||||||
Liabilities and Partners’ Equity
|
|||||||||||||||||
Note payable
|
$
|
-
|
$
|
-
|
$
|
40,000,000
|
(B)
|
$
|
40,000,000
|
||||||||
Accounts payable and accrued expenses
|
3,701,300
|
1,383,000
|
-
|
5,084,300
|
|||||||||||||
|
|||||||||||||||||
Total Current Liabilities
|
3,701,300
|
1,383,000
|
40,000,000
|
45,084,300
|
|||||||||||||
|
|||||||||||||||||
Limited partners’ interest
|
167,615,671
|
71,289,000
|
(71,289,000
|
)
|
(D)
|
251,715,671
|
|||||||||||
84,100,000
|
(C)
|
||||||||||||||||
General partners’ interest
|
(1,727
|
)
|
-
|
-
|
(1,727
|
)
|
|||||||||||
Class B Units
|
-
|
-
|
-
|
-
|
|||||||||||||
|
|||||||||||||||||
Total Partners’ Equity
|
167,613,944
|
71,289,000
|
12,811,000
|
251,713,944
|
|||||||||||||
|
|||||||||||||||||
Total Liabilities and Partners’ Equity
|
$
|
171,315,244
|
$
|
72,672,000
|
$
|
52,811,000
|
$
|
296,798,244
|
|
Energy 11, L.P.
|
Kaiser-Whiting
|
|||||||||||||||
Historical
|
Historical
|
Energy 11, L.P.
|
|||||||||||||||
Year Ended
|
Year Ended
|
Pro Forma
|
Pro Forma as
|
||||||||||||||
|
12/31/2015 | 12/31/2015 |
Adjustments
|
Notes
|
Adjusted
|
||||||||||||
(1) | (2) | ||||||||||||||||
Revenue
|
|||||||||||||||||
Oil, natural gas and natural gas liquids revenues
|
$
|
703,806
|
$
|
53,050,000
|
$
|
5,608,862
|
(E)
|
$
|
59,362,668
|
||||||||
Operating costs and expenses
|
|||||||||||||||||
Lease operating expenses
|
149,072
|
7,187,000
|
-
|
7,336,072
|
|||||||||||||
Gathering and processing expenses
|
18,139
|
-
|
5,608,862
|
(E)
|
5,627,001
|
||||||||||||
Production taxes
|
74,460
|
6,744,000
|
-
|
6,818,460
|
|||||||||||||
Management fees
|
252,524
|
-
|
-
|
252,524
|
|||||||||||||
Acquisition related costs
|
313,366
|
-
|
(313,366
|
)
|
(F)
|
-
|
|||||||||||
General and administrative expenses
|
745,884
|
356,000
|
-
|
1,101,884
|
|||||||||||||
Depreciation, depletion, impairment and amortization
|
392,084
|
86,559,000
|
(86,452,000
|
)
|
(G)
|
18,707,013
|
|||||||||||
18,207,929
|
(H)
|
||||||||||||||||
Total operating costs and expenses
|
1,945,529
|
100,846,000
|
(62,948,575
|
)
|
39,842,954
|
||||||||||||
Operating income (loss)
|
(1,241,723
|
)
|
(47,796,000
|
)
|
68,557,437
|
19,519,714
|
|||||||||||
Interest expense, net
|
321,093
|
-
|
6,119,320
|
(I)
|
8,440,413
|
||||||||||||
2,000,000
|
(J)
|
||||||||||||||||
|
|||||||||||||||||
Gain on distribution to member
|
-
|
46,671,000
|
(46,671,000
|
)
|
(K)
|
-
|
|||||||||||
Net income (loss)
|
$
|
(1,562,816
|
)
|
$
|
(1,125,000
|
)
|
$
|
13,767,117
|
$
|
11,079,301
|
|||||||
Basic and diluted net income (loss) per common unit
|
$
|
(1.70
|
)
|
$
|
0.95
|
||||||||||||
Weighted average common units outstanding
- basic and diluted
|
920,668
|
10,741,237
|
(L)
|
11,661,905
|
|
Energy 11, L.P.
|
Kaiser-Whiting
|
|||||||||||||||
Historical
|
Historical
|
Energy 11, L.P.
|
|||||||||||||||
Nine Months Ended
|
Nine Months Ended
|
Pro Forma
|
Pro Forma as
|
||||||||||||||
|
9/30/2016 | 9/30/2016 |
Adjustments
|
Notes
|
Adjusted
|
||||||||||||
(1) | (2) | ||||||||||||||||
Revenue
|
|||||||||||||||||
Oil, natural gas and natural gas liquids revenues
|
$
|
15,285,257
|
$
|
13,849,000
|
$
|
1,464,225
|
(E)
|
$
|
30,598,482
|
||||||||
Operating costs and expenses
|
|||||||||||||||||
Lease operating expenses
|
2,861,836
|
3,713,000
|
-
|
6,574,836
|
|||||||||||||
Gathering and processing expenses
|
1,461,551
|
-
|
1,464,225
|
(E)
|
2,925,776
|
||||||||||||
Production taxes
|
1,417,691
|
1,405,000
|
-
|
2,822,691
|
|||||||||||||
Management fees
|
886,306
|
-
|
-
|
886,306
|
|||||||||||||
General and administrative expenses
|
981,861
|
343,000
|
-
|
1,324,861
|
|||||||||||||
Depreciation, depletion, impairment and amortization
|
7,519,677
|
5,696,000
|
(5,660,000
|
)
|
(G)
|
12,987,268
|
|||||||||||
5,431,591
|
(H)
|
||||||||||||||||
Total operating costs and expenses
|
15,128,922
|
11,157,000
|
1,235,816
|
27,521,738
|
|||||||||||||
Operating income
|
156,335
|
2,692,000
|
228,409
|
3,076,744
|
|||||||||||||
Interest expense, net
|
6,119,320
|
-
|
(6,119,320
|
)
|
(I)
|
1,500,000
|
|||||||||||
1,500,000
|
(J)
|
||||||||||||||||
|
|||||||||||||||||
Net income (loss)
|
$
|
(5,962,985
|
)
|
$
|
2,692,000
|
$
|
4,847,729
|
$
|
1,576,744
|
||||||||
Basic and diluted net income (loss) per common unit
|
$
|
(0.96
|
)
|
$
|
0.11
|
||||||||||||
Weighted average common units outstanding
- basic and diluted
|
6,210,346
|
8,372,617
|
(L)
|
14,582,963
|