Form 8-K

 

 

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): July 18, 2016 (July 14, 2016)

 

 

MEMORIAL PRODUCTION PARTNERS LP

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-35364   90-0726667

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

500 Dallas Street, Suite 1600

Houston, Texas

  77002
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (713) 490-8900

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:

 

  ¨ 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))

 

 

 


Item 2.01. Completion of Acquisition or Disposition of Assets.

On July 14, 2016, Memorial Production Partners LP sold certain assets located in Colorado and Wyoming to Urban Fund II, LP and Urban Oil and Gas Partners B-1, LP for an adjusted purchase price of approximately $18.1 million in cash, subject to customary post-closing adjustments. This disposition does not qualify as a discontinued operation.

 

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

An unaudited pro forma condensed consolidated balance sheet as of March 31, 2016, an unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2016 and an unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015, including notes thereto, are attached hereto as Exhibit 99.1 and incorporated herein by reference.

(d) Exhibits.

 

Exhibit Number

  

Description

99.1    Unaudited Pro Forma Condensed Consolidated and Combined Financial Statements of Memorial Production Partners LP


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.

 

    MEMORIAL PRODUCTION PARTNERS LP
  By:  

Memorial Production Partners GP LLC,

its general partner

Date: July 18, 2016   By:  

/s/ Jason M. Childress

    Jason M. Childress
    Vice President, General Counsel & Corporate Secretary


EXHIBIT INDEX

 

Exhibit Number

  

Description

99.1    Unaudited Pro Forma Condensed Consolidated and Combined Financial Statements of Memorial Production Partners LP
EX-99.1

Exhibit 99.1

MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Introduction

On July 14, 2016, Memorial Production Partners LP (the “Partnership”) sold certain assets located in Colorado and Wyoming (“Rockies Divestiture”) to Urban Fund II, LP and Urban Oil and Gas Partners B-1, LP for total proceeds of approximately $18.1 million, subject to customary post-closing adjustments. On June 14, 2016, the Partnership sold certain assets located in the Permian Basin (“Permian Divestiture”) to Boaz Energy II, LLC for total proceeds of approximately $37.4 million, subject to customary post-closing adjustments. The Permian Divestiture was previously reported on the Partnership’s Current Report on Form 8-K filed June 20, 2016.

The unaudited pro forma condensed consolidated balance sheet is based on the unaudited condensed consolidated balance sheet of the Partnership as of March 31, 2016 and includes pro forma adjustments to give effect to both the Rockies Divestiture and Permian Divestiture as if the transactions had occurred on March 31, 2016. The unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2016 is based on the unaudited condensed statement of consolidated operations of the Partnership for the three months ended March 31, 2016 and includes pro forma adjustments to give effect to both the Rockies Divestiture and Permian Divestiture as if the transactions had occurred on January 1, 2015. The unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015 is based on the audited statement of consolidated and combined operations of the Partnership for the year ended December 31, 2015 and includes pro forma adjustments to give effect to both the Rockies Divestiture and Permian Divestiture as if the transactions had occurred on January 1, 2015.

The pro forma adjustments to the historical condensed consolidated and combined financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the transactions discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions utilized to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the impact of events that are directly attributable to the transactions, and reflect those items expected to no longer have a continuing impact on the Partnership.


MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 2016

(In thousands, except outstanding units)

 

           Rockies          Permian             
     Historical     Divestiture          Divestiture          Pro Forma  

ASSETS

              

Current assets:

              

Cash and cash equivalents

   $ 836      $ 18,100      (a)    $ 37,425      (d)    $ 836   
       (18,100   (b)      (37,425   (e)   

Accounts receivable

     45,290        —             —             45,290   

Short-term derivative instruments

     259,854        —             —             259,854   

Prepaid expenses and other current assets

     4,839        —             —             4,839   
  

 

 

   

 

 

      

 

 

      

 

 

 

Total current assets

     310,819        —             —             310,819   

Property and equipment, at cost:

              

Oil and natural gas properties, successful efforts method

     3,639,835        (128,405   (a)      (401,180   (d)      3,110,250   

Support equipment and facilities

     206,147        —             —             206,147   

Other

     2,491        —             (37   (d)      2,454   

Accumulated depreciation, depletion and impairment

     (1,931,091     92,730      (a)      363,267      (d)      (1,475,094
  

 

 

   

 

 

      

 

 

      

 

 

 

Property and equipment, net

     1,917,382        (35,675        (37,950        1,843,757   

Long-term derivative instruments

     442,616        —             —             442,616   

Restricted investments

     154,766        —             —             154,766   

Other long-term assets

     4,519        —             —             4,519   
  

 

 

   

 

 

      

 

 

      

 

 

 

Total assets

   $ 2,830,102      $ (35,675      $ (37,950      $ 2,756,477   
  

 

 

   

 

 

      

 

 

      

 

 

 

LIABILITIES AND EQUITY

              

Current liabilities:

              

Accounts payable

   $ 6,863      $ —           $ —           $ 6,863   

Accounts payable - affiliates

     5,137        —             —             5,137   

Revenues payable

     25,427        —             —             25,427   

Accrued liabilities

     61,744        363      (c)      (2,804   (d)      60,019   
            716      (f)   

Short-term derivative instruments

     2,098        —             —             2,098   
  

 

 

   

 

 

      

 

 

      

 

 

 

Total current liabilities

     101,269        363           (2,088        99,544   

Long-term debt

     1,957,984        (18,100   (b)      (37,425   (e)      1,902,459   

Asset retirement obligations

     164,964        (11,629   (a)      (5,727   (d)      147,608   

Long-term derivative instruments

     2,161        —             —             2,161   

Deferred tax liabilities

     2,158        —             —             2,158   
  

 

 

   

 

 

      

 

 

      

 

 

 

Total liabilities

     2,228,536        (29,366        (45,240        2,153,930   

Commitments and contingencies

              

Equity:

              

Partners’ equity:

              

Common units (82,925,302 units outstanding at March 31, 2016)

     600,767        (5,940   (a)      7,998      (d)      601,747   
       (363   (c)      (715   (f)   

General partner (86,797 units outstanding at March 31, 2016)

     799        (6   (a)      8      (d)      800   
            (1   (f)   
  

 

 

   

 

 

      

 

 

      

 

 

 

Total partners’ equity

     601,566        (6,309        7,290           602,547   
  

 

 

   

 

 

      

 

 

      

 

 

 

Total liabilities and equity

   $ 2,830,102      $ (35,675      $ (37,950      $ 2,756,477   
  

 

 

   

 

 

      

 

 

      

 

 

 


MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(In thousands, except per unit amounts)

 

     Historical     Rockies
Divestiture

(g)
    Permian
Divestiture

(h)
    Pro Forma
Adjustments
         Pro Forma  

Revenues:

             

Oil & natural gas sales

   $ 60,623      $ (1,784   $ (3,046   $  —           $ 55,793   

Other revenues

     243        —          (147     —             96   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total revenues

     60,866        (1,784     (3,193     —             55,889   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Costs and expenses:

             

Lease operating

     35,696        (1,109     (3,068     —             31,519   

Gathering, processing, and transportation

     9,209        (388     (21     —             8,800   

Exploration

     122        (13     (78     —             31   

Taxes other than income

     4,008        (292     (532     —             3,184   

Depreciation, depletion, and amortization

     44,429        (1,479     (1,346     —             41,604   

Impairment of proved oil and natural gas properties

     8,342        —          —          —             8,342   

General and administrative

     13,524        —          —          —             13,524   

Accretion of asset retirement obligations

     2,707        (263     (113     —             2,331   

(Gain) loss on commodity derivative instruments

     (51,745     —          —          —             (51,745

(Gain) loss on sale of properties

     (96     —          —          —             (96

Other, net

     119        (2     (58     —             59   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total costs and expenses

     66,315        (3,546     (5,216     —             57,553   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Operating income (loss)

     (5,449     1,762        2,023        —             (1,664

Other income (expense):

             

Interest expense, net

     (32,552     —          (3     110      (i)      (32,218
           227      (j)   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Total other income (expense)

     (32,552     —          (3     337           (32,218
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Income (loss) before income taxes

     (38,001     1,762        2,020        337           (33,882

Income tax benefit (expense)

     (96     —          —          —             (96
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) attributable to Memorial Production Partners LP

   $ (38,097   $ 1,762      $ 2,020      $ 337         $ (33,978
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

 

Earnings per unit:

             

Basic and diluted earnings per unit

   $ (0.46            $ (0.41
  

 

 

            

 

 

 

Weighted average limited partner units outstanding:

             

Basic and diluted

     82,935                 82,935   
  

 

 

            

 

 

 


MEMORIAL PRODUCTION PARTNERS LP

UNAUDITED PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED AND COMBINED OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015

(In thousands, except per unit amounts)

 

     Historical     Rockies
Divestiture

(g)
    Permian
Divestiture

(h)
    Pro Forma
Adjustments
          Pro Forma  

Revenues:

            

Oil & natural gas sales

   $ 355,422      $ (12,931   $ (22,615   $ —          $ 319,876   

Pipeline tariff income and other

     2,725        —          (843     —            1,882   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total revenues

     358,147        (12,931     (23,458     —            321,758   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Costs and expenses:

            

Lease operating

     168,199        (5,549     (21,490     —            141,160   

Gathering, processing, and transportation

     34,939        (1,959     (91     —            32,889   

Exploration

     2,317        (47     (109     —            2,161   

Taxes other than income

     25,828        (1,302     (1,998     —            22,528   

Depreciation, depletion, and amortization

     195,814        (5,424     (7,116     —            183,274   

Impairment of proved oil and natural gas properties

     616,784        (55,174     (52,606     —            509,004   

General and administrative

     56,671        —          —          —            56,671   

Accretion of asset retirement obligations

     7,125        (442     (456     —            6,227   

(Gain) loss on commodity derivative instruments

     (462,890     —          —          —            (462,890

(Gain) loss on sale of properties

     (2,998     —          —          —            (2,998

Other, net

     (665     (52     (467     —            (1,184
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total costs and expenses

     641,124        (69,949     (84,333     —            486,842   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating income (loss)

     (282,977     57,018        60,875        —            (165,084

Other income (expense):

            

Interest expense, net

     (114,732     (4     (132     384        (i     (113,691
           793        (j  

Other income (expense)

     43        (100     —          —            (57
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total other income (expense)

     (114,689     (104     (132     1,177          (113,748
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

     (397,666     56,914        60,743        1,177          (278,832

Income tax benefit (expense)

     2,175        —          —          —            2,175   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

     (395,491     56,914        60,743        1,177          (276,657

Net income (loss) attributable to noncontrolling interest

     386        —          —          —            386   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) attributable to Memorial Production Partners LP

   $ (395,877   $ 56,914      $ 60,743      $ 1,177        $ (277,043
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Earnings per unit:

            

Basic and diluted earnings per unit

   $ (4.71           $ (3.29
  

 

 

           

 

 

 

Weighted average limited partner units outstanding:

            

Basic and diluted

     83,528                83,528   
  

 

 

           

 

 

 


MEMORIAL PRODUCTION PARTNERS LP

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED

FINANCIAL STATEMENTS

Note 1. Basis of Presentation

On July 14, 2016, Memorial Production Partners LP (the “Partnership”) sold certain assets located in Colorado and Wyoming (“Rockies Divestiture”) to Urban Fund II, LP and Urban Oil and Gas Partners B-1, LP (collectively, “Urban”) for total proceeds of approximately $18.1 million, subject to customary post-closing adjustments. On June 14, 2016, the Partnership sold certain assets located in the Permian Basin (“Permian Divestiture”) to Boaz Energy II, LLC for total proceeds of approximately $37.4 million, subject to customary post-closing adjustments. The Permian Divestiture was previously reported on the Partnership’s Current Report on Form 8-K filed June 20, 2016.

The unaudited pro forma condensed consolidated balance sheet is based on the unaudited condensed consolidated balance sheet of the Partnership as of March 31, 2016 and includes pro forma adjustments to give effect to both the Rockies Divestiture and Permian Divestiture as if the transactions had occurred on March 31, 2016. The unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2016 is based on the unaudited condensed statement of consolidated operations of the Partnership for the three months ended March 31, 2016 and includes pro forma adjustments to give effect to both the Rockies Divestiture and Permian Divestiture as if the transactions had occurred on January 1, 2015. The unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015 is based on the audited statement of consolidated and combined operations of the Partnership for the year ended December 31, 2015 and includes pro forma adjustments to give effect to both the Rockies Divestiture and Permian Divestiture as if the transactions had occurred on January 1, 2015.

The pro forma adjustments to the historical condensed consolidated and combined financial statements are based on currently available information and certain estimates and assumptions. The actual effect of the transactions discussed in the accompanying notes ultimately may differ from the unaudited pro forma adjustments included herein. However, management believes that the assumptions utilized to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions and that the unaudited pro forma adjustments are factually supportable, give appropriate effect to the impact of events that are directly attributable to the transactions, and reflect those items expected to no longer have a continuing impact on the Partnership.

The unaudited pro forma condensed consolidated and combined financial information should be read in conjunction with the Partnership’s 2015 Annual Report on Form 10-K filed on February 24, 2016, Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed on May 4, 2016 and Current Report on Form 8-K filed June 20, 2016.

Note 2. Pro Forma Adjustments and Assumptions

Unaudited Pro Forma Condensed Consolidated Balance Sheet

The following adjustments were made in the preparation of the unaudited pro forma condensed consolidated balance sheet as of March 31, 2016:

 

  (a) Pro forma adjustments to reflect the closing of the Rockies Divestiture, including the receipt of $18.1 million in proceeds, subject to customary post-closing adjustments, the elimination of the associated net assets as of March 31, 2016, and the loss of $5.9 million arising from the transaction as of March 31, 2016.

 

  (b) Pro forma adjustment to reflect the use of the $18.1 million in proceeds from the Rockies Divestiture to repay borrowings under the Partnership’s revolving credit facility.

 

  (c) Pro forma adjustment to reflect estimated professional fees and closing costs related to the Rockies Divestiture.


  (d) Pro forma adjustments to reflect the closing of the Permian Divestiture, including the receipt of $37.4 million in proceeds, subject to customary post-closing adjustments, the elimination of the associated net assets as of March 31, 2016, and the gain of $8.0 million arising from the transaction as of March 31, 2016.

 

  (e) Pro forma adjustment to reflect the use of the $37.4 million in proceeds from the Permian Divestiture to repay borrowings under the Partnership’s revolving credit facility.

 

  (f) Pro forma adjustment to reflect estimated professional fees and closing costs related to the Permian Divestiture.

Unaudited Condensed Consolidated and Combined Statement of Operations

The following adjustments were made in the preparation of the unaudited pro forma condensed statement of consolidated operations for the three months ended March 31, 2016 and the unaudited pro forma condensed statement of consolidated and combined operations for the year ended December 31, 2015:

 

  (g) Pro forma adjustment to reflect the removal of operating revenues, operating expenses and capitalized interest related to the Rockies Divestiture.

 

  (h) Pro forma adjustment to reflect the removal of operating revenues, operating expenses and capitalized interest related to the Permian Divestiture.

 

  (i) Pro forma adjustment to reflect the reduction of interest expense related to the Rockies Divestiture, assuming the debt repayments described in (b) above occurred on January 1, 2015 using the Partnership’s revolving credit facility weighted average interest rate of 2.12% and 2.43% for the twelve months ended December 31, 2015 and three months ended March 31, 2016, respectively.

 

  (j) Pro forma adjustments to reflect the reduction of interest expense related to the Permian Divestiture, assuming the debt repayments described in (e) above occurred on January 1, 2015 using the Partnership’s revolving credit facility weighted average interest rate of 2.12% and 2.43% for the twelve months ended December 31, 2015 and three months ended March 31, 2016, respectively.