Exhibit 99.2
RIVIERA RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On October 8, 2020, Riviera Resources, Inc., (“Riviera” or the “Company”) completed the sale of its wholly owned subsidiary, Blue Mountain Midstream, LLC (“Blue Mountain” and “the Blue Mountain Divestiture”) to Citizen Energy under a Purchase and Sale Agreement dated August 23, 2020, for net cash proceeds of approximately $111 million. During the six months ended June 30, 2020, the Company recorded a noncash impairment charge of approximately $18 million associated with Blue Mountain’s crude oil gathering system assets. The Company anticipates recording an additional noncash impairment charge of approximately $218 million in the third quarter of 2020 associated with Blue Mountain assets.
In addition, as previously reported, on October 1, 2020, the Company completed the sale of its interest in Mid-Continent properties located in Oklahoma (the “Mid-Continent Asset Sale”) to Staghorn Petroleum II, LLC under a Purchase and Sale Agreement dated August 4, 2020, for net cash proceeds of approximately $13 million. During the six months ended June 30, 2020, the Company recorded a noncash impairment charge of approximately $88 million to reduce the carrying value of these assets to fair value.
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2020, gives effect to the Blue Mountain Divestiture and the Mid-Continent Asset Sale as if they were completed as of June 30, 2020. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2020, and for the year ended December 31, 2019, give effect to the Blue Mountain Divestiture and the Mid-Continent Asset Sale as if they were completed as of January 1, 2019.
The following unaudited pro forma condensed consolidated financial statements are derived from historical consolidated financial statements of the Company. The unaudited pro forma condensed consolidated financial statements are for informational and illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the transactions reflected therein had occurred on the dates indicated, nor are such financial statements necessarily indicative of the results of operations in future periods. The assumptions and estimates underlying the adjustments to the unaudited pro forma condensed consolidated financial statements are described in the accompanying notes. The unaudited pro forma condensed consolidated financial information should also be read in conjunction with the Company’s historical financial statements and the notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2019, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that effect the reported amounts of revenues and expenses. Actual results could differ from those estimates.
The unaudited pro forma condensed consolidated financial information does not purport to represent what the actual results of operations would have been had the transaction occurred on the date assumed, nor is it necessarily indicative of the Company’s future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma condensed financial information reflect estimates and assumptions that Company management believes to be reasonable.
RIVIERA RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2020
(in thousands, except per share amounts)
Riviera Resources, Inc. Historical | Blue Mountain Divestiture Pro Forma Adjustments | Mid- Continent Assets Sale Pro Forma Adjustments | Riviera Resources, Inc. Pro Forma | |||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 55,641 | $ | 109,016 | (a | ) | $ | 13,418 | (a | ) | $ | 102,637 | ||||||||||||
(75,438 | ) | (b | ) | |||||||||||||||||||||
Accounts receivable – trade, net | 22,551 | (10,140 | ) | (c | ) | (6,453 | ) | (b | ) | 5,958 | ||||||||||||||
Derivative instruments | 7,059 | — | — | 7,059 | ||||||||||||||||||||
Restricted cash | 24,139 | — | — | 24,139 | ||||||||||||||||||||
Other current assets | 13,057 | (6,768 | ) | (d | ) | (943 | ) | (c | ) | 5,346 | ||||||||||||||
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Total current assets | 122,447 | 16,670 | 6,022 | 145,139 | ||||||||||||||||||||
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Noncurrent assets: | ||||||||||||||||||||||||
Oil and natural gas properties (successful efforts method), net | 37,333 | — | (11,554 | ) | (d | ) | 25,779 | |||||||||||||||||
Other property and equipment, net | 324,185 | (318,125 | ) | (e | ) | (1,887 | ) | (d | ) | 4,173 | ||||||||||||||
Other noncurrent assets | 5,555 | (4,082 | ) | (e | ) | — | 1,473 | |||||||||||||||||
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Total noncurrent assets | 367,073 | (322,207 | ) | (13,441 | ) | 31,425 | ||||||||||||||||||
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Total assets | $ | 489,520 | $ | (305,537 | ) | $ | (7,419 | ) | $ | 176,564 | ||||||||||||||
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LIABILITIES AND EQUITY | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 36,294 | $ | (11,906 | ) | (c | ) | $ | (5,191 | ) | (b | ) | $ | 19,197 | ||||||||||
Derivative instruments | 766 | — | — | 766 | ||||||||||||||||||||
Other accrued liabilities | 9,490 | (38 | ) | (b | ) | (1,131 | ) | (c | ) | 8,321 | ||||||||||||||
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Total current liabilities | 46,550 | (11,944 | ) | (6,322 | ) | 28,284 | ||||||||||||||||||
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Noncurrent liabilities: | ||||||||||||||||||||||||
Credit facilities | 75,400 | (75,400 | ) | (b | ) | — | — | |||||||||||||||||
Asset retirement obligations and other noncurrent liabilities | 19,317 | (1,832 | ) | (e | ) | (13,189 | ) | (d | ) | 4,296 | ||||||||||||||
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Total noncurrent liabilities | 94,717 | (77,232 | ) | (13,189 | ) | 4,296 | ||||||||||||||||||
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Commitments and contingencies | ||||||||||||||||||||||||
Equity: | ||||||||||||||||||||||||
Preferred Stock, $0.01 par value | — | — | — | — | ||||||||||||||||||||
Common Stock, $0.01 par value | 579 | — | — | 579 | ||||||||||||||||||||
Additional paid-in capital | 759,186 | — | 759,186 | |||||||||||||||||||||
Accumulated deficit | (411,512 | ) | (250,880 | ) | (f | ) | 12,092 | (e | ) | (615,781 | ) | |||||||||||||
34,519 | (g | ) | ||||||||||||||||||||||
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Total equity | 348,253 | (216,361 | ) | 12,092 | 143,984 | |||||||||||||||||||
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Total liabilities and equity | $ | 489,520 | $ | (305,537 | ) | $ | (7,419 | ) | $ | 176,564 | ||||||||||||||
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The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
2
RIVIERA RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2020
(in thousands, except per share amounts)
Riviera Resources, Inc. Historical | Blue Mountain Divestiture Pro Forma Adjustments | Mid- Continent Assets Sale Pro Forma Adjustments | Riviera Resources, Inc. Pro Forma | |||||||||||||||||||||
Revenues and other: | ||||||||||||||||||||||||
Oil, natural gas and natural gas liquids sales | $ | 25,732 | $ | — | $ | (11,665 | ) | (f | ) | $ | 14,067 | |||||||||||||
Gains on commodity derivatives | 6,721 | (466 | ) | (g | ) | — | 6,255 | |||||||||||||||||
Marketing revenues | 55,786 | (53,088 | ) | (g | ) | — | 2,698 | |||||||||||||||||
Other revenues | 40 | — | (8 | ) | (f | ) | 32 | |||||||||||||||||
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88,279 | (53,554 | ) | (11,673 | ) | 23,052 | |||||||||||||||||||
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Expenses: | ||||||||||||||||||||||||
Lease operating expenses | 7,845 | — | (4,904 | ) | (f | ) | 2,941 | |||||||||||||||||
Transportation expenses | 3,383 | — | (2,191 | ) | (f | ) | 1,192 | |||||||||||||||||
Marketing expenses | 38,147 | (38,083 | ) | (g | ) | — | 64 | |||||||||||||||||
General and administrative expenses | 21,123 | (3,246 | ) | (g | ) | — | 17,877 | |||||||||||||||||
Depreciation, depletion and amortization | 15,112 | (5,845 | ) | (h | ) | (4,763 | ) | (g | ) | 4,504 | ||||||||||||||
Impairment of assets held for sale and long-lived assets | 121,658 | (17,856 | ) | (i | ) | (87,683 | ) | (h | ) | 16,119 | ||||||||||||||
Taxes, other than income taxes | 2,590 | (869 | ) | (j | ) | (819 | ) | (i | ) | 902 | ||||||||||||||
(Gains) losses on sale of assets and other, net | (2,031 | ) | 1,091 | (j | ) | — | (940 | ) | ||||||||||||||||
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207,827 | (64,808 | ) | (100,360 | ) | 42,659 | |||||||||||||||||||
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Operating loss | (119,548 | ) | 11,254 | 88,687 | (19,607 | ) | ||||||||||||||||||
Other income and (expenses): | ||||||||||||||||||||||||
Interest expense, net of amounts capitalized | (1,668 | ) | 1,401 | (k | ) | — | (267 | ) | ||||||||||||||||
Other, net | (1,008 | ) | 290 | (k | ) | — | (718 | ) | ||||||||||||||||
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(2,676 | ) | 1,691 | — | (985 | ) | |||||||||||||||||||
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Reorganization items, net | (494 | ) | — | — | (494 | ) | ||||||||||||||||||
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Loss before income taxes | (122,718 | ) | 12,945 | 88,687 | (21,086 | ) | ||||||||||||||||||
Income tax expense | — | — | (l | ) | — | (j | ) | — | ||||||||||||||||
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Net loss | $ | (122,718 | ) | $ | 12,945 | $ | 88,687 | $ | (21,086 | ) | ||||||||||||||
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Loss per share: | ||||||||||||||||||||||||
Basic and diluted | $ | (2.11 | ) | $ | (0.36 | ) | ||||||||||||||||||
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Weighted average shares outstanding – basic and diluted | 58,098 | 58,098 | ||||||||||||||||||||||
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The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
3
RIVIERA RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2019
(in thousands, except per share amounts)
Riviera Resources, Inc. Historical | Blue Mountain Divestiture Pro Forma Adjustments | Mid- Continent Assets Sale Pro Forma Adjustments | Riviera Resources, Inc. Pro Forma | |||||||||||||||||||||
Revenues and other: | ||||||||||||||||||||||||
Oil, natural gas and natural gas liquids sales | $ | 236,053 | $ | — | $ | (43,036 | ) | (f | ) | $ | 193,017 | |||||||||||||
Gains on commodity derivatives | 10,091 | 541 | (g | ) | — | 10,632 | ||||||||||||||||||
Marketing revenues | 214,280 | (159,706 | ) | (g | ) | (7 | ) | (f | ) | 54,567 | ||||||||||||||
Other revenues | 19,355 | — | (93 | ) | (f | ) | 19,262 | |||||||||||||||||
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479,779 | (159,165 | ) | (43,136 | ) | 277,478 | |||||||||||||||||||
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Expenses: | ||||||||||||||||||||||||
Lease operating expenses | 77,719 | — | (16,319 | ) | (f | ) | 61,400 | |||||||||||||||||
Transportation expenses | 64,149 | — | (4,830 | ) | (f | ) | 59,319 | |||||||||||||||||
Marketing expenses | 166,651 | (126,262 | ) | (g | ) | — | 40,389 | |||||||||||||||||
General and administrative expenses | 61,671 | (16,634 | ) | (g | ) | — | 45,037 | |||||||||||||||||
Exploration costs | 5,122 | — | — | 5,122 | ||||||||||||||||||||
Depreciation, depletion and amortization | 77,089 | (9,525 | ) | (h | ) | (10,171 | ) | (g | ) | 57,393 | ||||||||||||||
Impairment of assets held for sale and long-lived assets | 208,376 | — | — | 208,376 | ||||||||||||||||||||
Taxes, other than income taxes | 15,374 | (1,383 | ) | (j | ) | (1,966 | ) | (i | ) | 12,025 | ||||||||||||||
(Gains) losses on sale of assets and other, net | (20,743 | ) | 1,776 | (j | ) | — | (18,967 | ) | ||||||||||||||||
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655,408 | (152,028 | ) | (33,286 | ) | 470,094 | |||||||||||||||||||
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Operating loss | (175,629 | ) | (7,137 | ) | (9,850 | ) | (192,616 | ) | ||||||||||||||||
Other income and (expenses): | ||||||||||||||||||||||||
Interest expense, net of amounts capitalized | (6,997 | ) | 1,984 | (k | ) | — | (5,013 | ) | ||||||||||||||||
Other, net | (444 | ) | 798 | (k | ) | — | 354 | |||||||||||||||||
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(7,441 | ) | 2,782 | — | (4,659 | ) | |||||||||||||||||||
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Reorganization items, net | 13,359 | — | — | 13,359 | ||||||||||||||||||||
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Loss from continuing operations before income taxes | (169,711 | ) | (4,355 | ) | (9,850 | ) | (183,916 | ) | ||||||||||||||||
Income tax expense | 127,859 | 27,775 | (l | ) | (33,275 | ) | (j | ) | 122,359 | |||||||||||||||
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Loss from continuing operations | $ | (297,570 | ) | $ | (32,130 | ) | $ | 23,425 | $ | (306,275 | ) | |||||||||||||
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Loss per share: | ||||||||||||||||||||||||
Loss from continuing operations per share - basic and diluted | $ | (4.71 | ) | $ | (4.85 | ) | ||||||||||||||||||
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Weighted average shares outstanding - basic and diluted | 63,118 | 63,118 | ||||||||||||||||||||||
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The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
4
RIVIERA RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Historical Riviera Resources, Inc.
These amounts represent the Company’s condensed consolidated historical balance sheet and statements of operations. Amounts as of June 30, 2020, and for the six months ended June 30, 2020, were derived from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. Amounts for the year ended December 31, 2019, were derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company’s historical financial statements and the notes thereto. During 2019 and 2020, the Company completed divestitures for which the related activity is not required to be reflected in the adjustments to the unaudited pro forma condensed consolidated financial statements included herein. Substantially all of the revenues reported on the historical condensed consolidated statements of operations included herein relates to properties that have been divested.
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (i) directly attributable to the transaction, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, expected to have a continuing impact on the results following the transactions and events.
Note 1. Blue Mountain Divestiture Pro Forma Adjustments
(a) | Reflects cash proceeds received of approximately $110 million, net of Blue Mountain cash balance of approximately $941,000. |
(b) | Reflects payment in full of the Blue Mountain senior secured revolving loan facility and accrued interest. |
(c) | Reflects elimination of outstanding accounts receivable – trade, net and accounts payable and accrued expenses. |
(d) | Reflects elimination of other current assets. |
(e) | Reflects elimination of property, plant and equipment, other noncurrent assets, asset retirement obligations and other noncurrent liabilities. |
(f) | Reflects elimination of the Company’s equity in Blue Mountain and the loss recognized from the divestiture. |
(g) | Reflects elimination of revenues and operating expenses. |
(h) | Reflects elimination of depreciation and amortization expenses. |
(i) | Reflects elimination of noncash impairment charge recorded during the six months ended June 30, 2020, associated with Blue Mountain’s crude oil gathering system assets. |
(j) | Reflects elimination of taxes, other than income taxes and (gains) losses on sale of assets and other, net. |
(k) | Reflects elimination of interest expense and other, net. |
(l) | Reflects elimination of deferred income tax benefit, determined using the Company’s statutory tax rate and the book and tax basis difference associated with Blue Mountain. There is no adjustment for the six months ended June 30, 2020, because a full valuation allowance was recorded against the Company’s net deferred tax assets. |
5
RIVIERA RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 2. Mid-Continent Asset Sale Pro Forma Adjustments
(a) | Reflects cash proceeds received of approximately $13 million. |
(b) | Reflects elimination of outstanding accounts receivable – trade, net and accounts payable and accrued expenses. |
(c) | Reflects elimination of other current assets and other accrued liabilities. |
(d) | Reflects elimination of oil and natural gas properties, property, plant and equipment, other noncurrent assets, asset retirement obligations and other noncurrent liabilities. |
(e) | Reflects net impact recognized from the sale of these assets. |
(f) | Reflects elimination of revenues and direct operating expenses associated with these assets. |
(g) | Reflects elimination of depreciation, depletion and amortization expenses. |
(h) | Reflects elimination of noncash impairment charge recorded during the six months ended June 30, 2020. |
(i) | Reflects elimination of taxes, other than income taxes. |
(j) | Reflects elimination of deferred income tax expense, determined using the Company’s statutory tax rate, associated with recording a full valuation allowance against the Company’s net deferred tax assets. There is no adjustment for the six months ended June 30, 2020, because a full valuation allowance was recorded against the Company’s net deferred tax assets. |
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