Form 425 WildHorse Resource Devel Filed by: WildHorse Resource Development Corp
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 2018
WildHorse Resource Development Corporation
(Exact name of registrant as specified in its charter)
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Delaware |
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001-37964 |
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81-3470246 |
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(State or other jurisdiction of |
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(Commission File Number) |
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(IRS Employer Identification No.) |
9805 Katy Freeway, Suite 400
Houston, TX 77024
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (713) 568-4910
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:
x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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 x
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. x
Item 8.01. Other Events.
On March 29, 2018, WildHorse Resource Development Corporation (the “Company”), through its wholly owned subsidiary, WildHorse Resources II, LLC, a Delaware limited liability company, completed the sale of certain producing and non-producing oil and natural gas properties (including the Oakfield gathering system) in Harrison, Milam, Panola, Robertson, and San Augustine Counties, Texas and Bienville, Bossier, Cado, Claiborne, De Soto, Jackson, Lincoln, Ouachita, Red River, Sabine, and Webster Parishes, Louisiana to Tanos Energy Holdings III, LLC (the “NLA Divestiture”).
This Current Report on Form 8-K includes as Exhibit 99.1 pro forma financial statements for the nine months ended September 30, 2018 reflecting the NLA Divestiture. These pro forma financial statements update and supplement the Company’s previously filed pro forma financial statements relating to the NLA Divestiture and are being filed to satisfy the requirements of Rule 11-01(a)(4) of Regulation S-X.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018, including notes thereto, which gives effect to the NLA Divestiture, is attached hereto as Exhibit 99.1 and incorporated herein by reference.
(d) Exhibits.
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Exhibit |
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Description |
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99.1 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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WILDHORSE RESOURCE DEVELOPMENT CORPORATION | |
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By: |
/s/ Kyle N. Roane |
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Name: |
Kyle N. Roane |
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Title: |
Executive Vice President, General Counsel and Corporate Secretary |
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Dated: November 14, 2018 |
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INDEX TO FINANCIAL STATEMENTS
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Page |
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WildHorse Resource Development Corporation |
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F-2 | |
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F-3 | |
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Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations |
F-4 |
WILDHORSE RESOURCE DEVELOPMENT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
WildHorse Resource Development Corporation is a publicly traded Delaware corporation, the common stock of which is listed on the New York Stock Exchange (“NYSE”) under the symbol “WRD.” Unless the context requires otherwise, references to “we,” “us,” “our,” “WRD,” or “the Company” are intended to mean the business and operations of WildHorse Resource Development Corporation and its consolidated subsidiaries. We are an independent oil and natural gas company focused on the acquisition, exploitation, development and production of oil, natural gas and NGL resources.
On March 29, 2018, the Company, through its wholly owned subsidiary, WildHorse Resources II, LLC, a Delaware limited liability company, completed the previously disclosed sale of certain producing and non-producing oil and natural gas properties (including the Oakfield gathering system) in Harrison, Milam, Panola, Robertson, and San Augustine Counties, Texas and Bienville, Bossier, Cado, Claiborne, De Soto, Jackson, Lincoln, Ouachita, Red River, Sabine, and Webster Parishes, Louisiana to Tanos Energy Holdings III, LLC for a total net sales price of approximately $206.4 million (the “NLA Divestiture”), including $21.7 million previously received as a deposit, which includes preliminary purchase price adjustments of approximately $0.9 million related to certain assets that were retained pending receipt of a consent to assign certain assets at the initial closing and approximately $9.7 million related to the net cash flows from the effective date to the closing date. We received the necessary consent to assign approximately $0.9 million of certain assets and assigned them to Tanos on August 1, 2018. The Company used the net proceeds to repay borrowings outstanding under its revolving credit facility. This disposition does not qualify as a discontinued operation.
This exhibit updates a previously filed unaudited pro forma condensed consolidated statement of operations for the twelve months ended December 31, 2017 (originally filed on Form 8-K on April 4, 2018) to update for the nine-month period ended September 30, 2018. The pro forma adjustments herein gives effect to the NLA Divestiture and the use of the net proceeds to repay borrowings outstanding under our revolving credit facility as if they both occurred on January 1, 2017.
The updated unaudited pro forma condensed consolidated statement of operations does not purport to represent what the Company’s results of operations would have been had the NLA Divestiture and the repayment of borrowings outstanding under its revolving credit facility actually occurred on the date indicated above, nor is it indicative of future financial position or results of operations.
The pro forma data presented reflects events directly attributable to the above described transactions and certain assumptions that the Company believes are reasonable. The pro forma 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 pro forma 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 condensed consolidated statement of operations.
The unaudited pro forma condensed consolidated statement of operations and related notes are presented for illustrative purposes only and should be read in conjunction with the notes thereto and with the unaudited financial statements and related notes of the Company.
WILDHORSE RESOURCE DEVELOPMENT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
(in thousands)
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WRD |
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Pro Forma |
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WRD |
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Revenues and other income: |
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Oil sales |
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$ |
625,811 |
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$ |
(1,602 |
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(a) |
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$ |
624,209 |
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Natural gas sales |
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45,034 |
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(21,227 |
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(a) |
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23,807 |
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NGL sales |
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30,999 |
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(329 |
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(a) |
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30,670 |
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Other income |
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1,816 |
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(1,417 |
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(a) |
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399 |
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Total operating revenues and other income |
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703,660 |
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(24,575 |
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679,085 |
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Operating expenses: |
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Lease operating expenses |
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42,736 |
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(3,717 |
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(a) |
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39,019 |
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Gathering, processing and transportation |
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5,053 |
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(1,111 |
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(a) |
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3,942 |
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Taxes other than income tax |
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38,753 |
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(1,351 |
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(a) |
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37,402 |
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Depreciation, depletion and amortization |
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205,419 |
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(6,105 |
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(a) |
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199,314 |
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Impairment of NLA Disposal Group |
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214,274 |
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(214,274 |
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(d) |
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— |
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(Gain) loss on sale of properties |
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(2,950 |
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2,950 |
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(d) |
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— |
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General and administrative |
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41,677 |
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1,287 |
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(a) |
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42,964 |
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Incentive unit compensation expense |
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13,776 |
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— |
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13,776 |
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Exploration expense |
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19,891 |
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94 |
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(a) |
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19,985 |
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Other operating (income) expense |
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938 |
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(517 |
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(a) |
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421 |
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Total operating expense |
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579,567 |
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(222,744 |
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356,823 |
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Income (loss) from operations |
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124,093 |
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198,169 |
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322,262 |
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Other income (expense): |
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Interest expense, net |
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(43,027 |
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1,940 |
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(b) |
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(41,087 |
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Gain (loss) on derivative instruments |
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(227,533 |
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3,435 |
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(a) |
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(224,098 |
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Other income (expense) |
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(272 |
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(204 |
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(a) |
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(476 |
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Total other income (expense) |
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(270,832 |
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5,171 |
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(265,661 |
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Income (loss) before income taxes |
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(146,739 |
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203,340 |
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56,601 |
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Income tax benefit (expense) |
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28,394 |
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(44,226 |
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(c) |
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(15,832 |
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Net income (loss) available to WildHorse Resources |
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(118,345 |
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159,114 |
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40,769 |
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Preferred stock dividends |
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22,106 |
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— |
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22,106 |
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Undistributed earnings allocated to participating securities |
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— |
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4,813 |
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(e) |
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4,813 |
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Net income (loss) available to common shareholders |
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$ |
(140,451 |
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$ |
154,301 |
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$ |
13,850 |
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Earnings per common share: |
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Basic |
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$ |
(1.41 |
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$ |
1.55 |
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$ |
0.14 |
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Diluted |
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$ |
(1.41 |
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$ |
1.55 |
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$ |
0.14 |
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Weighted-average common shares outstanding: |
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Basic |
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99,433 |
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99,433 |
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99,433 |
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Diluted |
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99,433 |
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99,433 |
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99,433 |
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The accompanying notes are an integral part of these unaudited pro forma condensed consolidated statement of operations.
WILDHORSE RESOURCE DEVELOPMENT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLDIATED STATEMENT OF OPERATIONS
Note 1. Basis of Pro Forma Presentation
On March 29, 2018, the Company, through its wholly owned subsidiary, WildHorse Resources II, LLC, a Delaware limited liability company, completed the previously disclosed sale of certain producing and non-producing oil and natural gas properties (including the Oakfield gathering system) in Harrison, Milam, Panola, Robertson, and San Augustine Counties, Texas and Bienville, Bossier, Cado, Claiborne, De Soto, Jackson, Lincoln, Ouachita, Red River, Sabine, and Webster Parishes, Louisiana to Tanos Energy Holdings III, LLC (“Tanos”) for a total net sales price of approximately $206.4 million, including $21.7 million previously received as a deposit, which includes preliminary purchase price adjustments of approximately $0.9 million related to certain assets that were retained pending receipt of a consent to assign certain assets at the initial closing and approximately $9.7 million related to the net cash flows from the effective date to the closing date. We received the necessary consent to assign approximately $0.9 million of certain assets and assigned them to Tanos on August 1, 2018. The Company used the net proceeds to repay borrowings outstanding under its revolving credit facility. This disposition does not qualify as a discontinued operation.
The unaudited pro forma condensed consolidated financial information has been derived from the Company’s historical consolidated financial statements. The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018 gives effect to the NLA Divestiture and the use of the net proceeds to repay borrowings outstanding under our revolving credit facility as if they both occurred on January 1, 2017.
The unaudited pro forma condensed consolidated statement of operations does not purport to represent what the Company’s results of operations would have been had the NLA Divestiture and the repayment of borrowings outstanding under its revolving credit facility actually occurred on the date indicated above, nor is it indicative of future financial position or results of operations.
The unaudited pro forma condensed consolidated statement of operations reflect pro forma adjustments that are described in Note 2 below and are based on available and certain assumptions that the Company believes are reasonable. However, actual results may differ from those reflected in this statement. In our opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The following unaudited pro forma condensed consolidated statement of operations do not purport to represent what the results of operations would have been if the transaction had actually occurred on the date indicated above, nor are they indicative of our future financial position or results of operations. This unaudited pro forma condensed consolidated statement of operations should be read in conjunction with our unaudited historical financial statements and the related notes.
Note 2. Pro Forma Adjustments and Assumptions
The following pro forma adjustments have been applied to the Company’s September 30, 2018 historical condensed consolidated statement of operations to reflect the NLA Divestiture as if it had occurred on January 1, 2017. The pro forma adjustments were based on then-available information and assumptions that management believed to be appropriate in the circumstances.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
The following adjustments were made in the preparation of the unaudited pro forma condensed consolidated statement of operations for nine months ended September 30, 2018:
(a) Pro forma adjustment to reflect the removal of operating revenues and other income, operating expenses (including $0.4 million of Council for Petroleum Accountants Societies overhead for drilling and producing wells and the $0.9 million of Tanos transitional service fees, both of which were components of general and administrative costs) and loss on derivative instruments related to the NLA Divestiture.
(b) Pro forma adjustment to reflect the elimination of interest expense on $206.4 million of borrowings under our revolving credit facility repaid with the NLA Divesture net proceeds and the reversal of capitalized interest associated with our North Louisiana assets. The pro forma interest expense adjustment was based on a weighted-average interest rate of 4.04% for the three months ended March 31, 2018. The table below represents the effects of a one-eighth percentage point change in the interest rate on the pro forma interest associated with these repaid borrowings (dollars in thousands):
WILDHORSE RESOURCE DEVELOPMENT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLDIATED STATEMENT OF OPERATIONS
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Interest Rate |
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Three Months Ended |
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Weighted-average interest rate |
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4.040 |
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$ |
2,085 |
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Weighted-average interest rate - increase 0.125% |
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4.165 |
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$ |
2,149 |
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Weighted-average interest rate - decrease 0.125% |
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3.915 |
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$ |
2,020 |
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(c) Reflects the income tax effect of pro forma adjustments based on the estimated blended federal and state statutory tax rate of 21.75%.
(d) Pro forma adjustment to reflect the elimination of a one-time non-recurring impairment charge of $214.3 million recorded during the nine months ended September 30, 2018 to adjust the carrying amount of the NLA disposal group to its estimated fair value less costs to sell, offset by the recognized estimated gain on sale of $3.0 million.
(e) Pro forma adjustment reflecting the proportionate share of undistributed net income attributable to participating securities.