8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): March 1, 2018

PENN VIRGINIA CORPORATION

(Exact Name of Registrant as Specified in Charter)

Virginia	1-13283	23-1184320
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

14701 St. Mary’s Lane, Suite 275 Houston, Texas	77079
(Address of Principle Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 722-6500

Not Applicable

(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):

☐ 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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

EXPLANATORY NOTE

This Current Report on Form 8-K/A amends and supplements the Current Report on Form 8-K of Penn Virginia Corporation (the “Company”), dated March 1, 2018 and filed with the Securities and Exchange Commission on March 7, 2018 (the “Initial Form 8-K”), which reported under Item 2.01 that on March 1, 2018, the Company completed its acquisition from Hunt Oil Company (“Seller”) of its right, title and interest in and to certain oil and gas assets (the “Hunt Properties”), including oil and gas leases covering approximately 9,700 net acres located primarily in Gonzales and Lavaca Counties, Texas (the “Hunt Acquisition”). This amendment is filed to provide the financial statements of Seller and the pro forma financial information of the Company for such transactions as required by Item 9.01 of Form 8-K. Except as set forth below, the Initial Form 8-K is unchanged.

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of business acquired

The audited statement of revenues and direct operating expenses for the Hunt Properties sold to the Company for the year ended December 31, 2017, including the notes thereto, as filed herewith as Exhibit 99.1.

(b) Pro forma financial information

The unaudited pro forma condensed consolidated financial statements of the Company for the year ended December 31, 2017, including the notes thereto, giving effect to the Hunt Acquisition as filed herewith as Exhibit 99.2.

(d) Exhibits

Exhibit Number	Description
23.1	Consent of KPMG LLP.
99.1	Audited Statement of Revenues and Direct Operating Expenses of the Gonzales and Lavaca Counties, Texas Oil and Gas Properties Sold to Penn Virginia Corporation for the year ended December  31, 2017, including the notes thereto.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Statements of Penn Virginia Corporation for the year ended December 31, 2017, including the notes thereto.

SIGNATURES

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

May 9, 2018	PENN VIRGINIA CORPORATION
	By:	/s/ Steven A. Hartman
		Steven A. Hartman
		Senior Vice President, Chief Financial Officer and Treasurer

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholder

Hunt Oil Company and Subsidiaries:

We consent to the incorporation by reference in the registration statement (No. 333-214709 and 333-216756) on Form S-3 and (No. 333-213979) on Form S-8 of Penn Virginia Corporation and subsidiaries of our report dated May 9, 2018, with respect to the Statement of Revenues and Direct Operating Expenses of the Gonzales and Lavaca Counties, Texas oil and gas properties purchased by Penn Virginia Corporation and subsidiaries from Hunt Oil Company and subsidiaries for the year ended December 31, 2017, which report appears in the Current Report on Form 8-K dated May 9, 2018.

Dallas, Texas

May 9, 2018

EX-99.1

Exhibit 99.1

Independent Auditors’ Report

The Board of Directors and Stockholder

Hunt Oil Company and Subsidiaries:

Report on the Financial Statements

We have audited the accompanying statement of revenues and direct operating expenses (the “Statement”) for Gonzales and Lavaca Counties Texas Oil and Gas Properties (the “Properties”) sold to Penn Virginia Corporation for the year ended December 31, 2017, and the related notes to the Statement.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the Statement in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statement that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant estimates made by management, as well as evaluating the overall presentation of the Statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis of Accounting

The accompanying Statement referred to above was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission. The Statement is not intended to be a complete presentation of the operations of the Properties.

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and direct operating expenses of the Properties for the year ended December 31, 2017 in accordance with U.S. generally accepted accounting principles.

Other Matters

U.S. generally accepted accounting principles require that the Supplementary Oil and Gas Reserve Information contained herein be presented to supplement the basic financial statement. Such supplementary information, although not a part of the basic Statement, is required by the Financial Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic Statement in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic Statement, and other knowledge we obtained during our audit of the basic Statement. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

(signed) KPMG LLP

Dallas, Texas

May 9, 2018

STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES FOR GONZALES AND LAVACA COUNTIES TEXAS OIL AND GAS PROPERTIES SOLD TO PENN VIRGINIA CORPORATION

(AS DESCRIBED IN NOTE 1)

Year Ended December 31, 2017

(in thousands)

	Year Ended December 31, 2017
Operating revenues	$	24,184
Direct operating expenses		5,795
Excess of revenues over direct operating expenses	$	18,389

The accompanying notes are an integral part of the Statement of Revenues and Direct Operating Expenses.

STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES FOR GONZALES AND LAVACA COUNTIES TEXAS OIL AND GAS PROPERTIES SOLD TO PENN VIRGINIA CORPORATION

NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES

Note 1 – Basis of Presentation

On January 2, 2018, Hunt Oil Company (“Hunt”) announced the sale of certain oil and natural gas properties and related assets located primarily in Gonzales and Lavaca Counties, Texas (the “Properties”) to Penn Virginia Corporation (“PVA”) for total consideration of approximately $86 million, subject to certain adjustments. The transaction closed on March 1, 2018.

The accompanying statement of revenues and direct operating expenses was prepared from the historical accounting records of Hunt. This statement is not intended to be a complete financial presentation of the results of operations of the Properties. The statement does not include general and administrative expense, interest income or expense, depreciation, depletion and amortization, any provision for income tax expenses and other income and expense items not directly associated with the Properties. Historical financial statements reflecting financial position, results of operations and cash flows required by United States of America generally accepted accounting principles (“GAAP”) are not presented as such information is not readily available and not meaningful to the Properties. Accordingly, the accompanying statement of revenues and direct operating expenses is presented in lieu of complete financial statements as allowed under Rule 3-05 of Securities and Exchange Commission (“SEC”) Regulation S-X.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on Hunt management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates.

Sales of oil, natural gas and natural gas liquids (“NGL”) are recognized when the product has been delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured, and the sales price is fixed or determinable.

Direct operating expenses primarily include lease operating and production and property taxes. Lease operating costs include expenses such as labor, transportation, disposal, field office, vehicle, supervision, maintenance, tools and supplies and workover expenses. Production and property taxes consist primarily of severance and ad valorem taxes.

Note 2 – Commitments and Contingencies

Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the statement of revenues and direct operating expenses.

Note 3 – Subsequent Events

Management has evaluated subsequent events through May 8, 2018, the date the statement of revenues and direct operating expenses was available to be issued, and has concluded no events need to be reported during this period.

STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES FOR GONZALES AND LAVACA COUNTIES TEXAS OIL AND GAS PROPERTIES SOLD TO PENN VIRGINIA CORPORATION

NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES

Note 4 – Supplemental Oil and Natural Gas Reserve Information (Unaudited)

Estimated Quantities of Proved Oil and Natural Gas Reserves

Estimated quantities of proved oil, natural gas and NGL reserves at December 31, 2017 and changes in the reserves during the year ended December 31, 2017 for the Properties, are shown below.

These reserve estimates have been prepared in accordance with SEC regulations using the average price during the 12-month period, determined as an unweighted average of the first-day-of-the-month price for each month.

							Natural
	Oil			NGLs			Gas			Total
	(MBbl)			(MBbl)			(MMcf)			(MBOE)
Balance as of December 31, 2016		4,917			573			2,774			5,952
Production		(456	)		(36	)		(166	)		(520	)
Extensions and discoveries		211			13			109			242
Revisions		(289	)		(203	)		(842	)		(632	)
Balance as of December 31, 2017		4,382			347			1,874			5,042
Proved developed		3,907			309			1,645			4,490
Proved undeveloped		475			38			230			552
	4,382			347			1,874			5,042

Revisions Other Than Price

Revisions other than price were due primarily to reduced treatable lateral lengths in certain locations partially offset by improved performance.

EX-99.2

Exhibit 99.2

PENN VIRGINIA CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements and explanatory notes (the “Pro Forma Financial Statements”) set forth selected historical consolidated financial information for Penn Virginia Corporation together with its consolidated subsidiaries (“Penn Virginia,” the “Company,” “we,” “us” or “our”). The historical data provided as of and for the year ended December 31, 2017 is derived from the Company’s audited consolidated financial statements.

The Pro Forma Financial Statements are provided for informational and illustrative purposes only and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2017.

The Pro Forma Financial Statements have been prepared primarily to illustrate: (i) an amendment to and an incremental borrowing (the “Amendment”) under the Company’s credit agreement (“Credit Facility”) and (ii) the acquisition by the Company of certain oil and gas assets in the Eagle Ford Shale in South Texas (the “Acquisition”) from Hunt Oil Company (“Hunt”).

The Pro Forma Financial Statements have been prepared giving effect to Amendment and Acquisition as if they occurred on December 31, 2017 with respect to the Pro Forma Condensed Consolidated Balance Sheet and January 1, 2017 with respect to the Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2017.

Amendment and Incremental Borrowing

Immediately prior to the Acquisition, the borrowing base under the Credit Facility was redetermined from $237.5 million to $340.0 million pursuant to the Master Assignment, Agreement and Amendment No. 4 to the Credit Facility. We funded the Acquisition with $78.0 million of borrowings under the Credit Facility, cash on hand and $4.3 million of funds previously placed in escrow. We incurred $0.7 million of debt issue costs associated with the Amendment.

Acquisition

In December 2017, we entered into a purchase and sale agreement with Hunt to acquire certain oil and gas assets in the Eagle Ford Shale, primarily in Gonzales and Lavaca Counties, Texas for $86.0 million in cash, subject to adjustments. The Acquisition has an effective date of October 1, 2017 and closed on March 1, 2018, at which time we paid cash consideration of $84.4 million. In connection with the Acquisition, we acquired working interests in certain wells that we previously drilled as operator in which Hunt had rights to participate prior to the transaction closing. Accumulated costs, net of suspended revenues for these wells was $13.8 million, which we have reflected as a component of the total net assets acquired. The Acquisition expanded our core net leasehold position by approximately 9,700 net acres, substantially all of which is held by production, in the northwestern portion of our Eagle Ford Shale acreage. As a result of the Acquisition, we are the operator of substantially all of our Eagle Ford Shale acreage.

We incurred approximately $0.5 million of transaction costs for legal, due diligence and other professional fees associated with the Acquisition.

PENN VIRGINIA CORPORATION

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET

(in thousands except per share data)

	December 31, 2017
			Pro Forma Adjustments
	Historical		Amendment (a)		Acquisition (b)			Pro Forma
Assets
Current assets
Cash and cash equivalents	$	11,017	$	77,292	$	(84,903	)	$	3,406
Accounts receivable, net of allowance for doubtful accounts		69,821		—		(26,629	)		43,192
Other current assets		6,250		—		—			6,250
Total current assets		87,088		77,292		(111,532	)		52,848
Property and equipment, net (full cost method)		529,059		—		98,537			627,596
Deferred income taxes		4,943		—		—			4,943
Other assets		8,507		708		—			9,215
Total assets	$	629,597	$	78,000	$	(12,995	)	$	694,602
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	96,181	$	—	$	(12,851	)	$	83,330
Derivative liabilities		27,777		—		—			27,777
Total current assets		123,958		—		(12,851	)		111,107
Other liabilities		4,833		—		356			5,189
Derivative liabilities		13,900		—		—			13,900
Long-term debt		265,267		78,000		—			343,267
Shareholders’ equity:
Preferred stock of $0.01 par value – 5,000,000 shares authorized; none issued		—		—		—			—
Common stock of $0.01 par value – 45,000,000 shares authorized; 15,018,870 issued		150		—		—			150
Paid-in capital		194,123		—		—			194,123
Retained earnings		27,366		—		(500	)		26,866
Accumulated other comprehensive income		—		—		—			—
Total shareholders’ equity		221,639		—		(500	)		221,139
Total liabilities and shareholders’ equity	$	629,597	$	78,000	$	(12,995	)	$	694,602

See accompanying notes to condensed consolidated pro forma financial statements.

PENN VIRGINIA CORPORATION

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS

(in thousands except per share data)

	For the Year Ended December 31, 2017
				Hunt Historical		Pro Forma Adjustments
	Historical					Amendment			Acquisition			Pro Forma
Revenues
Crude oil	$	140,886		$	23,031	$	—		$	—		$	163,917
Natural gas liquids		10,066			662		—			—			10,728
Natural gas		8,517			491		—			—			9,008
Loss on sales of assets, net		(36	)		—		—			—			(36	)
Other, net		621			—		—			—			621
Total revenues		160,054			24,184		—			—			184,238
Operating expenses
Lease operating		21,784			3,627		—			—			25,411
Gathering, processing and transportation		10,734			845		—			—			11,579
Production and ad valorem taxes		8,814			1,323		—			—			10,137
General and administrative		18,262			—		—			—			18,262
Depreciation, depletion and amortization		48,649			—		—			6,162	(b)		54,811
Total operating expenses		108,243			5,795		—			6,162			120,200
Operating income		51,811			18,389		—			(6,162	)		64,038
Other income (expense)
Interest expense		(6,392	)		—		(3,948	)(a)		—			(10,340	)
Derivatives		(17,819	)		—		—			—			(17,819	)
Other, net		119			—		—			—			119
Income from continuing operations	$	27,719		$	18,389	$	(3,948	)	$	(6,162	)	$	35,998
Income from continuing operations per share:
Basic	$	1.85										$	2.40
Diluted	$	1.84										$	2.39
Weighted average shares outstanding:
Basic		14,996											14,996
Diluted		15,063											15,063

See accompanying notes to condensed consolidated pro forma financial statements.

PENN VIRGINIA CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

1.    Basis of Presentation

The accompanying unaudited Condensed Consolidated Pro Forma Financial Statements present the unaudited Condensed Consolidated Pro Forma Balance Sheet of Penn Virginia assuming the Amendment and Acquisition occurred as of December 31, 2017 and the unaudited Condensed Consolidated Pro Forma Statement of Operations for the year ended December 31, 2017 assuming the Acquisition and Amendment occurred as of January 1, 2017.

The unaudited Condensed Consolidated Pro Forma Financial Statements are presented for illustrative purposes only and do not purport to represent what our financial position or results of operations would have been if the transaction described above had occurred as presented or to project our financial position or results of operations for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments are directly attributable to the transactions and events described above and are expected to have a continuing impact on our results of operations. In the opinion of management, all adjustments necessary to present fairly the unaudited Condensed Consolidated Pro Forma Financial Statements have been made.

The following are descriptions of the columns included in the accompanying unaudited Condensed Consolidated Pro Forma Financial Statements:

Historical – Represents our Condensed Consolidated Balance Sheet as of December 31, 2017 and our Condensed Consolidated Statement of Operations for the year ended December 31, 2017.

Hunt Historical – Represents the historical revenues and direct operating expenses attributable to Hunt’s properties subject to the Acquisition for the year ended December 31, 2017. This information was derived from the audited Statement of Revenues and Direct Operating Expense for the properties subject to the Acquisition included as Exhibit 99.1 to the Current Report on Form 8-K to which these Condensed Consolidated Pro Form Financial Statements are also included as an exhibit. The historical results of operations of Hunt’s properties subject to the Acquisition presented herein are not indicative of the acquired business’s operations going forward due to the integration of the acquired net assets into the Company’s business as well as the omission of certain operating expenses, including general and administrative and depreciation, depletion and amortization (“DD&A”), among others.

Pro Forma Adjustments – Represents the adjustments to our Historical Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Operations required to derive the Pro Forma balance sheet and statements of operations as of and for the year ended December 31, 2017 attributable to the Acquisition.

PENN VIRGINIA CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

2.    Preliminary Acquisition Accounting

The base purchase price under the purchase and sale agreement was $86 million, subject to adjustments. On the closing date of the Acquisition (the “Date of Acquisition”), we paid $84.4 million. We acquired working interests in certain wells that we previously drilled as operator in which Hunt had rights to participate prior to the transaction closing. Accumulated costs, net of suspended revenues for these wells, was $13.8 million, which we have reflected as a component of the total net assets acquired. The Acquisition was funded with a combination of cash on hand and the net proceeds received from borrowings under the Credit Facility. We incurred estimated transaction costs, including due diligence, legal and other professional fees, of approximately $0.5 million associated with the Acquisition.

The Acquisition is being accounted for by applying the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed are presented based on their estimated acquisition date fair values. Estimated transaction costs, including advisory, legal, due diligence and other professional fees associated with the Acquisition, have been expensed as incurred. The fair values of the assets acquired and the liabilities assumed is preliminary and based on information available at the time these pro forma financial statements were issued. Accordingly, the estimates are subject to change as additional information becomes available.

The following tables summarize the preliminary estimated fair values of the net assets acquired and the total acquisition costs incurred on the Date of Acquisition ($ in thousands):

Oil and gas properties – proved	$	82,198
Oil and gas properties – unproved		16,339
Asset retirement obligations		(356	)
Far value of net assets acquired	$	98,181
Cash consideration paid	$	84,403
Accumulated costs, net of suspended revenues, for wells in which Hunt had rights to participate		13,778
Total acquisitions costs incurred	$	98,181

The fair values of the acquired oil and gas net assets were measured using valuation techniques that convert future net cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) estimated future cash flows and (v) a market-based weighted average cost of capital. Other acquired property and equipment assets were valued primarily using a cost approach that incorporated depreciation and obsolescence to the extent applicable on an asset-by-asset basis. Because many of these inputs are not observable, we have classified the initial fair value estimate as a Level 3 input as that term is defined under U.S. generally accepted accounting principles.

3.    Credit Facility Amendment

Immediately prior to the Acquisition, the Credit Facility was amended to increase the borrowing base. Pursuant to the Amendment, our borrowing base increased to $340 million. We incurred a total of approximately $0.7 million in costs in connection with the Amendment. These costs have been capitalized as debt issuance costs and are included under the caption “Other assets” on the Condensed Consolidated Pro Forma Balance Sheet. They are subject to amortization on a straight-line basis over the remaining term of the Credit Facility that ends in September 2020. Upon the closing of the Amendment, we borrowed $78 million under the Credit Facility to supplement cash on hand to fund the Acquisition and related costs.

PENN VIRGINIA CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

4.    Pro Forma Adjustments

Condensed Consolidated Balance Sheet

(a) To record: (i) net proceeds received from incremental borrowings of $77.3 million under the Credit Facility net of (ii) cash paid and the capitalization in Other assets of approximately $0.7 million of issue costs associated with the Amendment.

(b) To record: (i) the acquisition of assets ($98.5 million) and liabilities ($0.3 million), (ii) cash consideration paid of $84.4 million; (iii) the transfer of accumulated costs of $26.6 million from accounts receivable to property and equipment for wells drilled by us for which Hunt had rights to participate; (iv) the transfer of suspended revenues of $12.9 million from accounts payable and accrued liabilities to property and equipment for wells drilled by us for which Hunt had rights to participate; and (v) transaction costs paid (approximately $0.5 million) associated with the Acquisition. The transaction costs were expensed as incurred and are presented as a decrease to Retained earnings. This transaction does not include an income tax benefit as our deferred tax assets are fully reserved.

Condensed Consolidated Statements of Operations

(a) To record: (i) contractual interest on the $78 million of incremental borrowings under the Credit Facility estimated at 4.8% ($3.8 million); and (ii) amortization of debt issuance costs attributable to the Amendment ($0.2 million).

(b) To record: (i) DD&A ($6.1 million) as applied to the production (520 MBOE) from the oil and gas assets acquired (520 MBOE) in the Acquisition at a rate of $11.82 per BOE; and (ii) incremental accretion expense attributable to the asset retirement obligations assumed (less than $0.1 million).

5.    Supplemental Information on Oil and Gas Producing Activities

Oil and Gas Reserves

The following table sets forth unaudited pro forma information with respect to our quantities of proved reserves, including changes therein and proved developed and proved undeveloped reserves for the year ended December 31, 2017, giving effect to the Acquisition as if it had occurred on January 1, 2017. The estimates of reserves attributable to the properties acquired in the Acquisition may include Hunt’s development plans for those properties that are different from those that we will ultimately implement.

	Oil (MBbl)						NGLs (MBbl)						Natural Gas (MMcf)						MBOE
Proved Developed and Undevloped Reserves	Historical			Hunt Historical			Historical			Hunt Historical			Historical			Hunt Historical			Pro Forma
December 31, 2016		36,611			4,917			6,765			573			36,682			2,774			55,442
Revisions of previous estimates		(5,735	)		(289	)		(2,071	)		(203	)		(10,468	)		(842	)		(10,182	)
Extensions and discoveries		23,850			210			3,571			13			16,840			108			30,470
Production		(2,764	)		(456	)		(523	)		(36	)		(2,949	)		(166	)		(4,299	)
Purchases of reserves		3,867			—			1,122			—			7,162			—			6,183
December 31, 2017		55,829			4,382			8,864			347			47,267			1,874			77,614
Proved Developed Reserves		22,412			3,907			4,882			309			27,229			1,644			36,322
Proved Undeveloped Reserves		33,417			475			3,982			38			20,038			230			41,292

PENN VIRGINIA CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

Future cash inflows were computed by applying the average prices of oil and gas during the 12-month period prior to the period end determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within the period and estimated costs as of that fiscal year end to the estimated future production of proved reserves. Future prices actually received may materially differ from current prices or the prices used in the standardized measure.

Future production and development costs represent the estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, assuming continuation of existing economic conditions. Future income tax expenses were computed by applying statutory income tax rates to the difference between pre-tax net cash flows relating to our proved reserves and the tax basis of proved oil and gas properties. In addition, the effects of statutory depletion in excess of tax basis, available net operating loss carryforwards and alternative minimum tax credits were used in computing future income tax expense. The resulting annual net cash inflows were then discounted using a 10% annual rate.

The standardized measure of future net cash flows attributable to Hunt’s oil and gas properties was not available. Accordingly, we are unable to prepare a detailed pro forma presentation of the standardized measure giving effect to the Acquisition. Based on our internal estimates, drilling plans and our projected income tax attributes, we have estimated the standardized measure of future net cash flows attributable to oil and gas properties acquired in the Acquisition to be approximately $197 million. Accordingly, we estimate that the pro forma standardized measure of future net cash flows, giving effect to the Acquisition, would be approximately $788 million.