EX-99.3 5 ex993.htm PRO FORMA CONS'D TXCO WITH OUTPUT FOR 12/31/06 ex993.htm

Exhibit 99.3
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 2007
(In Thousands)
              
Pro Forma
  
         
Pro Forma
    
Consolidated
  
 
TXCO
  
Output
  
Adjustments
    
Balance Sheet
  
Assets
                  
Current Assets
                  
 
Cash and equivalents
 $3,668
  
 $3,180
  
 $       -
    
 $ 6,848
  
 
Accounts receivable, net
      9,725
  
      5,830
  
        (1,216
)
(1)
           14,339
  
 
Federal income tax receivable
      9,734
  
-
  
-
    
             9,734
  
 
Prepaid expenses and other
      3,297
  
         298
  
           (130
)
(1)
             5,690
  
           
         2,225
  
(2)
    
   
Total Current Assets
     26,424
  
      9,308
  
        879
 
  
           36,611
  
Property and Equipment, net
   136,876
  
     98,714
  
       (19,865
)
(1)
         251,850
  
         
      102,587
  
(2)
    
         
         9,452
  
(3)
    
         
        40,953
  
(3)
    
         
        26,673
  
(4)
    
         
     (102,587
)
(5)
    
         
(40,953
)
(5)
    
Other Assets
                  
 
Deferred tax asset
         513
  
-
  
-
    
               513
  
 
Debt issue costs, net of amortization
-
  
         127
  
           (127
)
(3)
                    -
  
 
Other assets
      2,539
  
         371
  
        (2,000
)
(2)
               796
  
           
              22
  
(3)
    
           
           (136
)
(4)
    
   
Total Other Assets
      3,052
  
         498
  
        (2,241
)
  
             1,309
  
Total Assets
 $166,352
  
 $108,520
  
 $14,898
    
 $289,770
  
   
Liabilities and Stockholders' Equity
                  
Current Liabilities
                  
 
Accounts payable, trade
 $10,611
  
 $4,688
  
 $ (102
)
(1)
 $15,038
  
           
  (159
)
(2)
    
 
Undistributed revenue
         429
            
               429
  
 
Notes payable
         262
            
               262
  
 
Derivative settlements payable
           52
            
                 52
  
 
Accrued derivative obligation - short-term
         125
  
      4,515
  
        (2,073
)
(3)
               126
  
           
        (2,441
)
(4)
    
 
Other payables and accrued liabilities
      6,017
  
         424
  
             (59
)
(1)
             6,382
  
   
Total Current Liabilities
     17,496
  
      9,627
  
        (4,834
)
  
           22,289
  
Long-Term Liabilities
                  
 
Long-term debt
     22,851
  
     60,494
  
      121,817
  
(2)
         121,817
  
           
       (22,851
)
(2)
    
           
       (48,519
)
(3)
    
           
       (11,975
)
(4)
    
 
Deferred income taxes
    
     15,140
        
           15,140
  
 
Asset retirement obligation
      3,111
  
         762
  
           (248
)
(1)
             3,625
  
   
Total Long-Term Liabilities
     25,962
  
     76,396
  
        38,224
    
         140,582
  
Stockholders' Equity
                  
 
Preferred stock
             -
                
 
Common stock
         334
      
                3
  
(2)
               337
  
 
Additional paid-in-capital
   122,618
      
         3,997
  
(2)
         126,615
  
 
Retained earnings
         726
  
     22,497
  
       (20,802
)
(1)
           731
  
           
                5
  
(2)
    
           
      100,892
  
(3)
    
           
        40,953
  
(4)
    
           
     (102,587
)
(5)
    
           
(40,953
 ) 
(5)
    
 
Accumulated other comprehensive loss, net of tax
        (319
)
    
 
              (319
)
 
Less treasury stock, at cost
        (465
)
          
              (465
)
   
Total Stockholders' Equity
   122,894
  
     22,497
  
        (18,492
 )   
         126,899
  
Total Liabilities and Stockholders' Equity
 $166,352
  
 $108,520
  
 $14,898
    
 $289,770
  

See accompanying notes to unaudited pro forma consolidated financial statements
 
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Unaudited Pro Forma Consolidated Statement of Operations
Three Months Ended March 31, 2007

(In Thousands, Except per Share Amounts)
              
Pro Forma
  
         
Pro Forma
    
Statement
  
 
TXCO
  
Output
  
Adjustments
    
of Operations
  
Revenues
                  
 
Oil and gas sales
$8,725
  
$6,561
  
 $(1,772)
  
(6)
 $14,594
  
           
1,080
    (10)    
 
Gas gathering operations
2,494
            
             2,494
  
 
Other operating income
1
  
92
  
 
    
                 93
  
   
Total Revenues
11,220
  
6,653
  
        (692)
    
           17,181
  
  
Costs and Expenses
                  
 
Lease operations
2,660
  
1,625
  
(119
)
(6)
4,166
  
 
Production taxes
494
  
363
        
857
  
 
Exploration expenses, including dry hole costs
375
            
375
  
 
Impairments and abandonments
686
            
686
  
 
Gas gathering operations
2,881
            
2,881
  
 
Depreciation, depletion and amortization
4,916
  
3,096
  
 (1,004
)
(6)
8,474
  
             
1,466
  
(7)
    
 
General and administrative
1,804
  
1,488
  
(737
)
(8)
2,555
  
   
Total Costs and Expenses
13,816
  
6,572
  
(394
)
  
19,994
  
  
(Loss) from Operations
(2,596
)
81
  
(298
)
  
(2,813
)
  
Other Income (Expense)
                  
 
Derivative mark-to-market loss
-
            
-
  
 
Derivative settlements loss
-
            
-
  
 
Interest expense
(277
)
(1,409
)
(1,083
)
(9)
(2,769
)
 
Interest income
26
  
39
        
65
  
 
Loan fee amortization
(10
)
-
        
(10
)
   
Total Other Income (Expense)
(261
)
(1,370
)
(1,083
  )  
 (2,714
)
  
(Loss) before income taxes
(2,857
)
(1,289
)
(1,381
)
  
(5,527
)
Income tax (benefit) expense
(965
)
    
(908
)
(11)
 (1,873
)
  
Net (Loss)
$(1,892
)
$(1,289
)
$(473
)
  
$(3,654
)
  
(Loss) Per Share
                  
   
Basic (loss) per share
$(0.06
)
          
 $(0.11
)
   
Diluted (loss) per share
$(0.06
)
          
 $(0.11
)
  
Shares outstanding
                  
 
Basic
32,985
      
339
  
(12)
33,324
  
 
Diluted
32,985
      
339
  
(12)
33,324
  
 
See accompanying notes to unaudited pro forma consolidated financial statements

- 2 -


Notes to March 31, 2007 Unaudited Pro Forma Consolidated Statements:
 
(1)
 
In accordance with the terms of the asset purchase agreement between TXCO and Output, TXCO did not acquire all or a portion of the assets, assume the liabilities or retain the equity represented in the applicable line items from Output.
 
(2)
Reflects TXCO's new credit facility and common stock issued to complete the Output acquisition and funds utilized to pay off the old credit facility.
 
(3)
Reflects acquisition adjustment of Output's assets, liabilities and equity and the pay off of Output's existing debt.
 
(4)
Reflects acquisition adjustment of OPEX's assets, liabilities and equity and the pay off of OPEX's existing debt.
 
(5)
Eliminate intercompany transactions for consolidation.
 
(6)
Represents revenue and expenses directly related to Output's California operations that were not acquired by TXCO.
 
(7)
Adjustment to depletion expense reflecting the  $36 million step-up in oil and gas properties as a result of the acquisition.
 
(8)
Represents salary and payroll related expenses of non-continuing employees of Output and certain professional fees not expected to occur in the combined organization.  As a result of the acquisition, the positions of the non-continuing employees of Output were eliminated and the non-continuing employees are not employed by TXCO Resources.
 
(9)
Represents additional interest expense due to new debt structure as a result of the acquisition of Output.
 
 (10) Reflects elimination of hedging transactions as a result of the termination of the hedges in connection with the acquisition. 
   
(11)
Reflects an adjustment to record income tax expense on Output's pretax income and for the effects of the pro forma adjustments using TXCO's effective tax rate of 34%.  Calculated as follows:
 
 
Output's 3/31/2007 loss before taxes
$
(1,289
)
 
Net effect of pro forma adjustments on income before taxes
  
(1,381
)
 
Pro forma loss before taxes
  
(2,670
)
 
TXCO's effective tax rate
  
34%
  
 
Output's provision for decreased income taxes at TXCO's effective rate
  
(908
)
 
Less Output's 3/31/2007 income tax expense
  
-
  
 
Pro forma adjustment to decrease provision for income taxes
$
(908
)
 
(12)
Reflects additional shares issued as partial funding for the acquisition of Output.


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