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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Chord Energy Corporation | NASDAQ:CHRD | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 154.40 | 147.50 | 167.99 | 0 | 09:05:12 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
|
||||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
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)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading |
Name of each exchange | ||
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) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
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. ☐
Introductory Note.
As reported in a Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission by Chord Energy Corporation (“Chord” or the “Company”) on June 6, 2024 (the “Original Form 8-K”), on May 31, 2024, the Company and Spark Acquisition ULC, an unlimited liability company organized and existing under the laws of the Province of Alberta, Canada and a wholly owned subsidiary of Chord (“Canadian Sub”), completed the previously announced strategic business combination transaction with Enerplus Corporation, a corporation existing under the laws of the Province of Alberta, Canada (“Enerplus”), whereby Canadian Sub acquired all of the issued and outstanding Enerplus common shares pursuant to the arrangement agreement entered into by and among Chord, Canadian Sub and Enerplus on February 21, 2024, and effected by way of a plan of arrangement under the Business Corporations Act (Alberta) (the “Arrangement”).
This Current Report on Form 8-K/A (this “Amendment”) amends and supplements the Original Form 8-K to provide the pro forma financial statements described in Item 9.01 below and to file certain exhibits to the Original Form 8-K. No other modifications to the Original Form 8-K are being made by this Amendment. This Amendment should be read in connection with the Original Form 8-K, which provides a more complete description of the Arrangement.
Item 9.01 | Financial Statements and Exhibits. |
(b) | Pro Forma Financial Information. |
The following unaudited pro forma condensed combined financial information of the Company, attached as Exhibit 99.1 hereto:
• | Unaudited Pro Forma Condensed Combined Financial Statements as of and for the three months ended March 31, 2024 and for the year ended December 31, 2023; and |
• | Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. |
(d) | Exhibits. |
Exhibit |
Description | |
23.1 | Consent of KPMG LLP relating to Enerplus Corporation. | |
23.2 | Consent of Netherland, Sewell & Associates, Inc. relating to Enerplus Corporation. | |
23.3 | Consent of McDaniel & Associates Consultants Ltd. relating to Enerplus Corporation. | |
99.1 | Unaudited Pro Forma Condensed Combined Financial Statements as of and for the three months ended March 31, 2024 and for the year ended December 31, 2023. | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
2
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.
CHORD ENERGY CORPORATION | ||||||
Date: August 7, 2024 | ||||||
By: | /s/ Shannon B. Kinney | |||||
Shannon B. Kinney | ||||||
Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary |
3
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors of Chord Energy Corporation
We consent to the use of our report dated February 21, 2024, which appears in the Annual Report on Form 40-F of Enerplus Corporation and subsidiaries (the Entity) for the fiscal year ended December 31, 2023, on the consolidated financial statements of the Entity, which comprise the consolidated balance sheets as of December 31, 2023 and 2022, the related consolidated statements of income/(loss) and comprehensive income/(loss), changes in shareholders equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes, which is incorporated by reference in the Registration Statements (No. 333- 262192 and 333- 266127) on Form S-8, and No. 333- 271727 on Form S-3 of Chord Energy Corporation.
/s/ KPMG LLP
Chartered Professional Accountants
August 7, 2024
Calgary, Canada
Exhibit 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the references to our firm, in the context in which they appear, and to the references to and the incorporation by reference to the Registration Statement No. 333-262192 and No. 333-266127 on Form S-8 and to the Registration Statement No. 333-271727 on Form S-3 of Chord Energy Corporation (the Company) of our reserves report dated February 20, 2024, included in the Annual Report on Form 40-F of Enerplus Corporation for the fiscal year ended December 31, 2023, as well as in the notes to the financial statements included therein, incorporated by reference in this Current Report on Form 8-K/A dated August 7, 2024, in accordance with the requirements of the Securities Act of 1933, as amended.
NETHERLAND, SEWELL & ASSOCIATES, INC. | ||
By: | /s/ Richard B. Talley, Jr. | |
Richard B. Talley, Jr., P.E. | ||
Chairman and Chief Executive Officer |
Houston, Texas
August 7, 2024
Exhibit 23.3
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the references to our firm, in the context in which they appear, and to the references to and the incorporation by reference to the Registration Statement No. 333-262192 and No. 333-266127 on Form S-8 and to the Registration Statement No. 333-271727 on Form S-3 of Chord Energy Corporation (the Company) of our reserves report dated February 21, 2024, included in the Annual Report on Form 40-F of Enerplus Corporation for the fiscal year ended December 31, 2023, as well as in the notes to the financial statements included therein, incorporated by reference in this Current Report on Form 8-K/A dated August 7, 2024, in accordance with the requirements of the Securities Act of 1933, as amended.
McDANIEL & ASSOCIATES CONSULTANTS LTD. | ||
By: | /s/ Jared W. B. Wynveen | |
Jared W. B. Wynveen, P. Eng | ||
Executive Vice President |
Calgary, Alberta
August 7, 2024
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On May 31, 2024, Chord Energy Corporation (Chord or the Company) completed the arrangement contemplated by the Arrangement Agreement, dated as of February 21, 2024 (the Arrangement Agreement), by and among Chord, Enerplus Corporation (Enerplus) and Spark Acquisition ULC, a wholly-owned subsidiary of Chord (such transaction, the Arrangement). Pursuant to the Arrangement Agreement, each Enerplus shareholder received 0.10125 shares of common stock of Chord, par value of $0.01 per share (the Chord Common Stock) and $1.84 in cash, in exchange for each Enerplus common share held as of the Effective Time (as defined in the Arrangement Agreement).
Chord and Enerplus prepared their respective historical financial statements in accordance with U.S. GAAP. In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805), Chord was treated as the acquirer for accounting purposes and accounted for the Arrangement as an acquisition of a business.
The unaudited pro forma condensed combined balance sheet at March 31, 2024 was prepared as if the Arrangement had occurred on March 31, 2024. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2024 and for the year ended December 31, 2023 were prepared as if the Arrangement had occurred on January 1, 2023. The unaudited pro forma condensed combined financial statements have been derived from the historical consolidated financial statements of the Company and Enerplus.
The unaudited pro forma condensed combined financial statements and underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by the Companys management; accordingly, actual results could differ materially from the pro forma information. Significant estimates and assumptions include the preliminary purchase price allocation, based on estimates of, and assumptions related to, the fair value of the assets acquired and liabilities assumed as of the Effective Time that were applied as if the transaction occurred on March 31, 2024. Management believes that the assumptions used to prepare the unaudited pro forma condensed combined financial statements and accompanying notes provide a reasonable and supportable basis for presenting the significant estimated effects of the Arrangement. The following unaudited pro forma condensed combined statements of operations do not purport to represent what the Companys results of operations would have been if the Arrangement had occurred on January 1, 2023. The unaudited pro forma condensed combined balance sheet does not purport to represent what the Companys financial position would have been if the Arrangement had occurred on March 31, 2024. The unaudited pro forma condensed combined financial statements should be read together with the following:
(i) | Companys audited historical consolidated financial statements and related notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 26, 2024; |
(ii) | Enerplus audited historical consolidated financial statements and related notes filed with SEDAR+ on February 21, 2024 and included in its Annual Report on Form 40-F for the fiscal year ended December 31, 2023, filed with the SEC on February 21, 2024; |
(iii) | Companys unaudited historical condensed consolidated financial statements and related notes included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2024, filed with the SEC on May 9, 2024; and |
(iv) | Enerplus unaudited historical condensed consolidated financial statements and related notes for the three months ended March 31, 2024 filed with SEDAR+ on May 8, 2024 and included on Form 6-K filed with the SEC on May 8, 2024. |
The unaudited pro forma condensed combined financial statements have been prepared in accordance with Article 11 of SEC Regulation S-X as amended by the final rule, Release No. 33-10786 Amendments to Financial Disclosures about Acquired and Disposed Businesses, using assumptions set forth in the notes herein. Article 11 permits presentation of reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (Managements Adjustments). The Company has elected not to present Managements Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements.
Chord Energy Corporation
Pro Forma Condensed Combined Balance Sheet (Unaudited)
As of March 31, 2024
(In thousands)
As Reported | Enerplus As Adjusted Note 2 |
Transaction Accounting Adjustments Note 3 |
Pro Forma Combined Chord |
|||||||||||||||
ASSETS | ||||||||||||||||||
Current assets |
||||||||||||||||||
Cash and cash equivalents |
$ | 296,354 | $ | 33,412 | $ | (537,559 | ) | (a) | $ | | ||||||||
207,793 | (b) | |||||||||||||||||
Accounts receivable, net |
982,062 | 252,571 | 1,432 | (c) | 1,236,065 | |||||||||||||
Inventory |
78,118 | 2,350 | | 80,468 | ||||||||||||||
Prepaid expenses |
30,135 | 13,394 | (10,145 | ) | (c) | 33,384 | ||||||||||||
Derivative instruments |
26,540 | | | 26,540 | ||||||||||||||
Other current assets |
2,033 | 13,004 | | 15,037 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
1,415,242 | 314,731 | (338,479 | ) | 1,391,494 | |||||||||||||
Property, plant and equipment |
||||||||||||||||||
Oil and gas properties (successful efforts method) |
6,575,306 | 7,887,965 | (2,634,182 | ) | (a) | 11,829,089 | ||||||||||||
| (c) | |||||||||||||||||
Other property and equipment |
49,087 | 103,957 | (92,963 | ) | (a) | 60,081 | ||||||||||||
Less: accumulated depreciation, depletion and amortization |
(1,218,284 | ) | (6,429,847 | ) | 6,429,847 | (a) | (1,218,284 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total property, plant and equipment, net |
5,406,109 | 1,562,075 | 3,702,702 | 10,670,886 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Derivative instruments |
22,231 | | | 22,231 | ||||||||||||||
Investment in unconsolidated affiliate |
114,181 | | | 114,181 | ||||||||||||||
Long-term inventory |
28,360 | 5,257 | | 33,617 | ||||||||||||||
Operating right-of-use assets |
19,218 | 23,851 | | 43,069 | ||||||||||||||
Deferred tax assets |
| 131,527 | (131,527 | ) | (d) | | ||||||||||||
Goodwill |
| | 466,016 | (a) | 466,016 | |||||||||||||
Other assets |
20,173 | 884 | 3,076 | (e) | 24,133 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 7,025,514 | $ | 2,038,325 | $ | 3,701,788 | $ | 12,765,627 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||||||||
Current liabilities |
||||||||||||||||||
Accounts payable |
$ | 39,511 | $ | 9,440 | $ | | $ | 48,951 | ||||||||||
Revenues and production taxes payable |
592,888 | 185,581 | | 778,469 | ||||||||||||||
Accrued liabilities |
545,820 | 162,152 | 12,896 | (a) | 779,577 | |||||||||||||
3,076 | (e) | |||||||||||||||||
37,252 | (f) | |||||||||||||||||
11,994 | (g) | |||||||||||||||||
6,387 | (h) | |||||||||||||||||
Current portion of long-term debt |
| 80,600 | (1,722 | ) | (a) | 78,878 | ||||||||||||
Accrued interest payable |
8,532 | | | 8,532 | ||||||||||||||
Derivative instruments |
19,523 | 368 | | 19,891 | ||||||||||||||
Advances from joint interest partners |
2,484 | | | 2,484 | ||||||||||||||
Current operating lease liabilities |
13,691 | 11,460 | | 25,151 | ||||||||||||||
Other current liabilities |
22,671 | | | 22,671 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
1,245,120 | 449,601 | 69,883 | 1,764,604 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Long-term debt |
396,324 | 93,504 | (56,425 | ) | (a) | 641,196 | ||||||||||||
207,793 | (b) | |||||||||||||||||
Deferred tax liabilities |
122,288 | 118,648 | 1,056,284 | (d) | 1,297,220 | |||||||||||||
Asset retirement obligations |
155,696 | 117,631 | (6,377 | ) | (a) | 266,950 | ||||||||||||
Derivative instruments |
3,022 | | | 3,022 | ||||||||||||||
Operating lease liabilities |
15,993 | 13,067 | | 29,060 | ||||||||||||||
Other liabilities |
11,893 | | | 11,893 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
1,950,336 | 792,451 | 1,271,158 | 4,013,945 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Commitments and contingencies |
||||||||||||||||||
Stockholders equity |
||||||||||||||||||
Common stock |
459 | 2,694,403 | (2,694,196 | ) | (a) | 666 | ||||||||||||
Treasury stock |
(523,288 | ) | | | (523,288 | ) | ||||||||||||
Additional paid-in capital |
3,575,557 | 13,531 | 3,718,399 | (a) | 7,307,487 | |||||||||||||
Retained earnings |
2,022,450 | (1,160,719 | ) | 1,160,719 | (a) | 1,966,817 | ||||||||||||
(37,252 | ) | (f) | ||||||||||||||||
(11,994 | ) | (g) | ||||||||||||||||
(6,387 | ) | (h) | ||||||||||||||||
Accumulated other comprehensive loss |
| (301,341 | ) | 301,341 | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
5,075,178 | 1,245,874 | 2,430,630 | 8,751,682 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and stockholders equity |
$ | 7,025,514 | $ | 2,038,325 | $ | 3,701,788 | $ | 12,765,627 | ||||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
Chord Energy Corporation
Pro Forma Condensed Combined Statement of Operations (Unaudited)
Three Months Ended March 31, 2024
(In thousands, except per share data)
As Reported | Enerplus As Adjusted Note 2 |
Transaction Accounting Adjustments Note 3 |
Pro Forma Combined Chord |
|||||||||||||||||
Revenues |
||||||||||||||||||||
Oil, NGL and gas revenues |
$ | 748,162 | $ | 332,835 | $ | | $ | 1,080,997 | ||||||||||||
Purchased oil and gas sales |
337,098 | | | 337,098 | ||||||||||||||||
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|
|
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|
|||||||||||||
Total revenues |
1,085,260 | 332,835 | | 1,418,095 | ||||||||||||||||
Operating expenses |
||||||||||||||||||||
Lease operating expenses |
159,206 | 72,799 | | 232,005 | ||||||||||||||||
Gathering, processing and transportation expenses |
53,984 | 32,464 | | 86,448 | ||||||||||||||||
Purchased oil and gas expenses |
335,762 | | | 335,762 | ||||||||||||||||
Production taxes |
63,911 | 29,436 | | 93,347 | ||||||||||||||||
Depreciation, depletion and amortization |
168,894 | 92,510 | 8,537 | (a) | 269,941 | |||||||||||||||
General and administrative expenses |
25,712 | 32,026 | 4,417 | (b) | 62,155 | |||||||||||||||
Exploration and impairment |
6,154 | | | 6,154 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
813,623 | 259,235 | 12,954 | 1,085,812 | ||||||||||||||||
Gain on sale of assets, net |
1,302 | | | 1,302 | ||||||||||||||||
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|
|
|
|
|
|||||||||||||
Operating income |
272,939 | 73,600 | (12,954 | ) | 333,585 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Net gain (loss) on derivative instruments |
(27,577 | ) | (2,775 | ) | | (30,352 | ) | |||||||||||||
Net gain (loss) from investment in unconsolidated affiliate |
16,296 | | | 16,296 | ||||||||||||||||
Interest expense, net of capitalized interest |
(7,592 | ) | (3,098 | ) | (1,725 | ) | (c) | (12,415 | ) | |||||||||||
Other income |
2,826 | 3,441 | | 6,267 | ||||||||||||||||
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|
|
|
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|
|||||||||||||
Total other income (expense), net |
(16,047 | ) | (2,432 | ) | (1,725 | ) | (20,204 | ) | ||||||||||||
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|
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|
|||||||||||||
Income from continuing operations |
256,892 | 71,168 | (14,679 | ) | 313,381 | |||||||||||||||
Income tax expense |
(57,539 | ) | (5,032 | ) | 3,523 | (d) | (59,048 | ) | ||||||||||||
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|
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|
|||||||||||||
Net income |
$ | 199,353 | $ | 66,136 | $ | (11,156 | ) | $ | 254,333 | |||||||||||
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|||||||||||||
Earnings per share: |
||||||||||||||||||||
Basic |
$ | 4.79 | $ | 4.08 | (e) | |||||||||||||||
Diluted |
$ | 4.65 | $ | 4.00 | (e) | |||||||||||||||
Weighted average shares outstanding: |
||||||||||||||||||||
Basic |
41,648 | | | 62,328 | (e) | |||||||||||||||
Diluted |
42,747 | | | 63,607 | (e) |
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
Chord Energy Corporation
Pro Forma Condensed Combined Statement of Operations (Unaudited)
Year Ended December 31, 2023
(In thousands, except per share data)
As Reported | Enerplus As Adjusted Note 2 |
Transaction Accounting Adjustments Note 3 |
Pro Forma Combined Chord |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||
Oil, NGL and gas revenues |
$ | 3,132,411 | $ | 1,546,086 | $ | | $ | 4,678,497 | ||||||||||||||
Purchased oil and gas sales |
764,230 | | | 764,230 | ||||||||||||||||||
Other services revenues |
| | | | ||||||||||||||||||
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|
|
|
|
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|
|||||||||||||||
Total revenues |
3,896,641 | 1,546,086 | | 5,442,727 | ||||||||||||||||||
Operating expenses |
||||||||||||||||||||||
Lease operating expenses |
658,938 | 272,747 | | 931,685 | ||||||||||||||||||
Gathering, processing and transportation expenses |
180,219 | 145,576 | | 325,795 | ||||||||||||||||||
Purchased oil and gas expenses |
761,325 | | | 761,325 | ||||||||||||||||||
Production taxes |
260,002 | 135,131 | | 395,133 | ||||||||||||||||||
Depreciation, depletion and amortization |
598,562 | 377,495 | 77,960 | (a) | 1,054,017 | |||||||||||||||||
General and administrative expenses |
126,319 | 65,664 | 23,342 | (b) | 270,958 | |||||||||||||||||
37,252 | (c) | |||||||||||||||||||||
11,994 | (d) | |||||||||||||||||||||
6,387 | (e) | |||||||||||||||||||||
Exploration and impairment |
35,330 | | | 35,330 | ||||||||||||||||||
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|||||||||||||||
Total operating expenses |
2,620,695 | 996,613 | 156,935 | 3,774,243 | ||||||||||||||||||
Gain (loss) on sale of assets, net |
(2,764 | ) | | | (2,764 | ) | ||||||||||||||||
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|
|||||||||||||||
Operating income |
1,273,182 | 549,473 | (156,935 | ) | 1,665,720 | |||||||||||||||||
Other income (expense) |
||||||||||||||||||||||
Net gain on derivative instruments |
63,182 | 31,317 | | 94,499 | ||||||||||||||||||
Net gain from investment in unconsolidated affiliate |
21,330 | | | 21,330 | ||||||||||||||||||
Interest expense, net of capitalized interest |
(28,630 | ) | (15,120 | ) | (6,781 | ) | (f) | (50,531 | ) | |||||||||||||
Other income |
9,964 | 1,760 | | 11,724 | ||||||||||||||||||
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|
|||||||||||||||
Total other income (expense), net |
65,846 | 17,957 | (6,781 | ) | 77,022 | |||||||||||||||||
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|
|||||||||||||||
Income from continuing operations |
1,339,028 | 567,430 | (163,716 | ) | 1,742,742 | |||||||||||||||||
Income tax (expense) |
(315,249 | ) | (111,354 | ) | 39,292 | (g) | (387,311 | ) | ||||||||||||||
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|||||||||||||||
Net income from continuing operations |
$ | 1,023,779 | $ | 456,076 | $ | (124,424 | ) | $ | 1,355,431 | |||||||||||||
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Earnings from continuing operations per share: |
||||||||||||||||||||||
Basic |
$ | 24.59 | $ | 21.80 | (h) | |||||||||||||||||
Diluted |
$ | 23.51 | $ | 21.15 | (h) | |||||||||||||||||
Weighted average shares outstanding: |
||||||||||||||||||||||
Basic |
41,490 | | | 62,170 | (h) | |||||||||||||||||
Diluted |
43,398 | | | 64,078 | (h) |
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. | Basis of Presentation |
The unaudited pro forma condensed combined financial statements have been prepared in accordance with Article 11 using assumptions set forth in the notes herein. Article 11 permits presentation of reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur, otherwise known as Managements Adjustments. The Company has elected not to present Managements Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements.
On May 31, 2024, the Arrangement was completed, and the Company issued 20,680,097 shares of Chord Common Stock and paid $375.8 million in cash to Enerplus shareholders. Pursuant to the Arrangement Agreement, each Enerplus shareholder received 0.10125 shares of Chord Common Stock and $1.84 in cash, in exchange for each Enerplus common share held as of the Effective Time. The Arrangement was accounted for using the acquisition method of accounting in accordance with ASC 805, with Chord treated as the accounting acquirer. The Companys allocation of the preliminary purchase price with respect to the Arrangement is based on estimates of, and assumptions related to, the fair value of the assets acquired and liabilities assumed as of the Effective Time that were applied as if the transaction occurred on March 31, 2024. The Company intends to finalize the valuations and purchase price allocation as soon as practicable within the measurement period, but in no event later than one year following the closing date of the Arrangement. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma financial information and are subject to revision based on a final determination of fair value as of the closing date of the Arrangement. Differences between preliminary estimates and the final allocation of the consideration paid may have a material impact on the accompanying unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined balance sheet at March 31, 2024 was prepared as if the Arrangement had occurred on March 31, 2024. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2024 and for the year ended December 31, 2023 were prepared as if the Arrangement had occurred on January 1, 2023. The unaudited pro forma condensed combined financial statements have been derived from the historical consolidated financial statements of the Company and Enerplus.
For purposes of preparing the unaudited pro forma condensed combined financial statements, certain pro forma adjustments were translated from Canadian dollars to United States dollars using historical exchange rates.
The unaudited pro forma condensed combined financial statements and underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by management; accordingly, actual results could differ materially from the pro forma information. Management believes the assumptions provide a reasonable and supportable basis for presenting the estimated significant effects of the transactions described above. These unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and may or may not provide an indication of results in the future.
2. | Arrangement Reclassification Adjustments |
Certain reclassifications have been made in the historical presentation of Enerplus financial statements to conform to the Companys historical presentation.
Balance Sheet as of March 31, 2024
Balance Sheet As of March 31, 2024 (In thousands) |
||||||||||||||||||
Enerplus Caption |
Chord Caption |
Enerplus Historical |
Reclassification Adjustments |
Ref. | Enerplus As Adjusted |
|||||||||||||
Current Assets |
||||||||||||||||||
Cash and cash equivalents |
Cash and cash equivalents | $ | 33,412 | $ | | $ | 33,412 | |||||||||||
Accounts receivable, net of allowance for doubtful accounts |
Accounts receivable, net | 252,571 | | 252,571 | ||||||||||||||
Inventory | | 2,350 | (i) | 2,350 | ||||||||||||||
Prepaid expenses | | 13,394 | (i) | 13,394 | ||||||||||||||
Derivative financial assets |
Derivative instruments (current asset) | | | | ||||||||||||||
Other current assets |
Other current assets | 28,748 | (15,744 | ) | (i) | 13,004 | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Total current assets |
314,731 | | 314,731 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Property and equipment: |
||||||||||||||||||
Crude oil and natural gas properties (full cost method) |
Oil and gas properties (successful efforts method) | 1,551,081 | 6,336,884 | (ii) | 7,887,965 | |||||||||||||
Other capital assets |
Other property and equipment | 10,994 | 92,963 | (iii) | 103,957 | |||||||||||||
|
|
|
|
|
|
|||||||||||||
Total property and equipment |
1,562,075 | 6,429,847 | 7,991,922 | |||||||||||||||
Less: accumulated depreciation, depletion and amortization | | (6,429,847 | ) | (ii) (iii) | (6,429,847 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Total property and equipment, net |
1,562,075 | | 1,562,075 | |||||||||||||||
Derivative instruments | | | | |||||||||||||||
Investment in unconsolidated affiliate | | | | |||||||||||||||
Long-term inventory | | 5,257 | (iv) | 5,257 | ||||||||||||||
Right-of-use assets |
Operating right-of-use assets | 23,851 | | 23,851 | ||||||||||||||
Deferred income tax asset |
Deferred tax assets | 131,527 | | 131,527 | ||||||||||||||
Other long-term assets |
Other assets | 6,141 | (5,257 | ) | (iv) | 884 | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 2,038,325 | $ | | $ | 2,038,325 | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Current liabilities |
||||||||||||||||||
Accounts payable and other current liabilities |
Accounts payable | $ | 357,541 | $ | (348,101 | ) | (v) | $ | 9,440 | |||||||||
Revenues and production taxes payable | | 185,581 | (v) | 185,581 | ||||||||||||||
Accrued liabilities | | 162,152 | (v) | 162,152 | ||||||||||||||
Accrued interest payable | | | | |||||||||||||||
Derivative financial liabilities |
Derivative instruments (current liability) | | 368 | (v) | 368 | |||||||||||||
Advances from joint interest partners | | | | |||||||||||||||
Current portion of lease liabilities |
Current operating lease liabilities | 11,460 | | 11,460 | ||||||||||||||
Current portion of long-term debt |
Other current liabilities | 80,600 | | 80,600 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
449,601 | | 449,601 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Long-term debt |
Long-term debt | 93,504 | | 93,504 | ||||||||||||||
Deferred income tax liability |
Deferred tax liabilities | 118,648 | | 118,648 | ||||||||||||||
Asset retirement obligation |
Asset retirement obligations | 117,631 | | 117,631 | ||||||||||||||
Derivative instruments (long-term liability) | | | | |||||||||||||||
Lease liabilities |
Operating lease liabilities | 13,067 | | 13,067 | ||||||||||||||
Other liabilities | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Total liabilities |
792,451 | | 792,451 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Equity |
||||||||||||||||||
Share capital |
Common stock | 2,694,403 | | 2,694,403 | ||||||||||||||
Treasury stock | | | | |||||||||||||||
Paid-in capital |
Additional paid-in capital | 13,531 | | 13,531 | ||||||||||||||
Accumulated deficit |
Retained earnings | (1,160,719 | ) | | (1,160,719 | ) | ||||||||||||
Accumulated other comprehensive loss |
Accumulated other comprehensive loss | (301,341 | ) | | (301,341 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Total equity |
1,245,874 | | 1,245,874 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Total liabilities and equity |
$ | 2,038,325 | $ | | $ | 2,038,325 | ||||||||||||
|
|
|
|
|
|
(i) | Represents the reclassification of balances contained in Other current assets on Enerplus historical balance sheet into Inventory and Prepaid expenses to conform to the Companys balance sheet presentation. |
(ii) | Represents the reclassification of balances contained in Crude oil and natural gas properties (full cost method) on Enerplus historical balance sheet into Less: accumulated depreciation, depletion and amortization to conform to the Companys balance sheet presentation. |
(iii) | Represents the reclassification of balances contained in Other capital assets on Enerplus historical balance sheet into Less: accumulated depreciation, depletion and amortization to conform to the Companys balance sheet presentation. |
(iv) | Represents the reclassification of balances contained in Other long-term assets on Enerplus historical balance sheet into Long-term inventory to conform to the Companys balance sheet presentation. |
(v) | Represents the reclassification of balances contained in Accounts payable and other current liabilities on Enerplus historical balance sheet into Revenues and production taxes payable, Accrued liabilities and Derivative instruments (current liability) to conform to the Companys balance sheet presentation. |
Statement of Operations for the three months ended March 31, 2024
Statement of Operations Three Months Ended March 31, 2024 (In thousands) |
||||||||||||||||||
Enerplus Caption |
Chord Caption |
Enerplus Historical |
Reclassification Adjustments |
Ref. | Enerplus As Adjusted |
|||||||||||||
Revenues |
||||||||||||||||||
Crude oil and natural gas sales |
Oil, NGL and gas revenues | $ | 362,037 | $ | (29,202 | ) | (i) | $ | 332,835 | |||||||||
Purchased oil and gas sales | | | | |||||||||||||||
Commodity derivative instruments gain/(loss) |
Other services revenues | (2,775 | ) | 2,775 | (ii) | | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Total operating revenues |
359,262 | (26,427 | ) | 332,835 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Expenses |
||||||||||||||||||
Operating |
Lease operating expenses | 102,001 | (29,202 | ) | (i) | 72,799 | ||||||||||||
Transportation |
Gathering, processing and transportation expenses | 32,464 | | 32,464 | ||||||||||||||
Purchased oil and gas expenses | | | | |||||||||||||||
Production taxes |
Production taxes | 29,436 | | 29,436 | ||||||||||||||
General and administrative |
General and administrative expenses | 24,257 | 7,769 | (iii) | 32,026 | |||||||||||||
Depletion, depreciation and accretion |
Depreciation, depletion and amortization | 92,510 | | 92,510 | ||||||||||||||
Interest |
3,530 | (3,530 | ) | (iv) | | |||||||||||||
Other expense/(income) |
(3,873 | ) | 3,873 | (v) | | |||||||||||||
Transaction costs |
7,769 | (7,769 | ) | (iii) | | |||||||||||||
Exploration and impairment | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
288,094 | (28,859 | ) | 259,235 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Gain on sale of assets, net | | | | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Operating income | 71,168 | 2,432 | 73,600 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Net gain (loss) on derivative instruments | | (2,775 | ) | (ii) | (2,775 | ) | ||||||||||||
Net gain from investment in unconsolidated affiliate | | | | |||||||||||||||
Interest expense, net of capitalized interest | | (3,098 | ) | (iv) (v) | (3,098 | ) | ||||||||||||
Other income (expense) | | 3,441 | (v) | 3,441 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Total other income (expense), net | | (2,432 | ) | (2,432 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||
Income/(Loss) Before Taxes |
Income from continuing operations | 71,168 | | 71,168 | ||||||||||||||
Income tax expense (benefit) |
||||||||||||||||||
Current income tax expense/(recovery) |
Income tax (expense) benefit | 2,445 | 2,587 | (vi) (vii) | (5,032 | ) | ||||||||||||
Deferred income tax expense/(recovery) |
2,587 | (2,587 | ) | (vi) | | |||||||||||||
|
|
|
|
|
|
|||||||||||||
Total income tax expense (benefit) | 5,032 | | (5,032 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Net Income/(Loss) |
Net income attributable to Chord | $ | 66,136 | $ | | $ | 66,136 | |||||||||||
|
|
|
|
|
|
(i) | Represents the reclassification of balances contained in Operating on Enerplus historical income statement into Oil, NGL and gas revenues to conform to the Companys accounting policy. |
(ii) | Represents the reclassification of balances contained in Commodity derivative instruments gain/(loss) on Enerplus historical income statement into Net gain (loss) on derivative instruments to conform to the Companys income statement presentation. |
(iii) | Represents the reclassification of balances contained in Transaction costs on Enerplus historical income statement into General and administrative expenses to conform to the Companys income statement presentation. |
(iv) | Represents the reclassification of balances contained in Interest on Enerplus historical income statement into Interest expense, net of capitalized interest to conform to the Companys income statement presentation. |
(v) | Represents the reclassification of balances contained in Other expense/(income) on Enerplus historical income statement into Interest expense, net of capitalized interest and Other income (expense) to conform to the Companys income statement presentation. |
(vi) | Represents the reclassification of balances contained in Deferred income tax expense/(recovery) on Enerplus historical income statement into Income tax (expense) benefit to conform to the Companys income statement presentation. |
(vii) | Represents the presentation of balances contained in Current income tax expense/(recovery) and Deferred income tax expense/(recovery) on Enerplus historical income statement as a negative value within Income tax (expense) benefit to conform to the Companys income statement presentation. |
Statement of Operations for the year ended December 31, 2023
Statement of Operations | ||||||||||||||||||||||
Year Ended December 31, 2023 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
Enerplus Caption |
Chord Caption |
Enerplus Historical |
Reclassification Adjustments |
Ref. | Enerplus As Adjusted |
|||||||||||||||||
Revenues |
||||||||||||||||||||||
Crude oil and natural gas sales |
Oil, NGL and gas revenues | $ | 1,663,016 | $ | (116,930 | ) | (i) | $ | 1,546,086 | |||||||||||||
Purchased oil and gas sales | | | | |||||||||||||||||||
Commodity derivative instruments gain/(loss) |
Other services revenues | 31,317 | (31,317 | ) | (ii) | | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total operating revenues |
1,694,333 | (148,247 | ) | 1,546,086 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Expenses |
||||||||||||||||||||||
Operating |
Lease operating expenses | 389,677 | (116,930 | ) | (i) | 272,747 | ||||||||||||||||
Transportation |
Gathering, processing and transportation expenses | 145,576 | | 145,576 | ||||||||||||||||||
Purchased oil and gas expenses | | | | |||||||||||||||||||
Production taxes |
Production taxes | 135,131 | | 135,131 | ||||||||||||||||||
General and administrative |
General and administrative expenses | 65,664 | | 65,664 | ||||||||||||||||||
Depletion, depreciation, accretion, and impairment |
Depreciation, depletion and amortization | 377,495 | | 377,495 | ||||||||||||||||||
Interest |
17,597 | (17,597 | ) | (iii) | | |||||||||||||||||
Foreign exchange (gain)/loss |
60 | (60 | ) | (iv) | | |||||||||||||||||
Transaction costs and other expense/(income) |
(4,297 | ) | 4,297 | (v) | | |||||||||||||||||
Exploration and impairment | | | | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total operating expenses |
1,126,903 | (130,290 | ) | 996,613 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Gain on sale of assets, net | | | | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Operating income | 567,430 | (17,957 | ) | 549,473 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Net gain (loss) on derivative instruments | | 31,317 | (ii) | 31,317 | ||||||||||||||||||
Net gain from investment in unconsolidated affiliate | | | | |||||||||||||||||||
Interest expense, net of capitalized interest | | (15,120 | ) | (iii) | (v) | (15,120 | ) | |||||||||||||||
Other income (expense) | | 1,760 | (iv) | (v) | 1,760 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total other income (expense), net |
| 17,957 | 17,957 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Income/(Loss) Before Taxes |
Income from continuing operations | 567,430 | | 567,430 | ||||||||||||||||||
Income tax expense (benefit) |
||||||||||||||||||||||
Current income tax expense/(recovery) |
Income tax (expense) benefit | 27,183 | 84,171 | (vi) | (vii) | (111,354 | ) | |||||||||||||||
Deferred income tax expense/(recovery) |
84,171 | (84,171 | ) | (vi) | | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total income tax expense (benefit) | 111,354 | | (111,354 | ) | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Net Income/(Loss) |
Net income attributable to Chord | $ | 456,076 | $ | | $ | 456,076 | |||||||||||||||
|
|
|
|
|
|
(i) | Represents the reclassification of balances contained in Operating on Enerplus historical income statement into Oil, NGL and gas revenues to conform to the Companys accounting policy. |
(ii) | Represents the reclassification of balances contained in Commodity derivative instruments gain/(loss) on Enerplus historical income statement into Net gain (loss) on derivative instruments to conform to the Companys income statement presentation. |
(iii) | Represents the reclassification of balances contained in Interest on Enerplus historical income statement into Interest expense, net of capitalized interest to conform to the Companys income statement presentation. |
(iv) | Represents the reclassification of balances contained in Foreign exchange (gain)/loss on Enerplus historical income statement into Other income (expense) to conform to the Companys income statement presentation. |
(v) | Represents the reclassification of balances contained in Transaction costs and other expense/(income) on Enerplus historical income statement into Interest expense, net of capitalized interest and Other income (expense) to conform to the Companys income statement presentation. |
(vi) | Represents the reclassification of balances contained in Deferred income tax expense/(recovery) on Enerplus historical income statement into Income tax (expense) benefit to conform to the Companys income statement presentation. |
(vii) | Represents the presentation of balances contained in Current income tax expense/(recovery) and Deferred income tax expense/(recovery) on Enerplus historical income statement as a negative value within Income tax (expense) benefit to conform to the Companys income statement presentation. |
3. | Arrangement Preliminary Acquisition Accounting and Pro Forma Adjustments and Assumptions |
Balance Sheet
The unaudited pro forma condensed combined balance sheet at March 31, 2024 reflects the following adjustments:
(a) | As the accounting acquirer, Chord accounted for the Arrangement using the acquisition method of accounting for business combinations in accordance with ASC 805. Chords allocation of the preliminary purchase price with respect to the Arrangement is based on estimates of, and assumptions related to, the fair value of the assets acquired and liabilities assumed as of the Effective Time that were applied as if the transaction occurred on March 31, 2024. Because the unaudited pro forma condensed combined financial statements have been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on the financial position and results of operations of the combined company may be materially different from the pro forma amounts included herein. Chord expects to finalize the purchase price allocation as soon as reasonably practicable, which will not extend beyond the one-year measurement period provided under ASC 805. |
The preliminary purchase price allocation is subject to change due to several factors, including, but not limiting to, the following:
| Changes in the estimated fair value of Enerplus identifiable assets acquired and liabilities assumed as of the closing date of the Arrangement, which could result from changes in oil and gas properties estimates, discount rates and other factors; and |
| The tax basis of Enerplus assets and liabilities as of the closing date of the Arrangement. |
The tables below represent the preliminary value of the total consideration and its allocation to the net assets acquired (in thousands, except per share amounts).
Enerplus Shares Outstanding(1) | Chord Shares Issued (2) |
Per Share Price(3) | Purchase Price Consideration (4) |
|||||||||||||
Chord shares issued to legacy Enerplus shareholders |
20,680 | $ | 180.47 | $ | 3,732,137 | |||||||||||
Plus: Cash consideration per eligible share of legacy Enerplus common shares issued and outstanding |
204,246 | 1.84 | 375,813 | |||||||||||||
Plus: Cash consideration to settle legacy Enerplus awards |
102,393 | |||||||||||||||
Plus: Cash consideration to payoff legacy Enerplus debt contemporaneously with close |
53,433 | |||||||||||||||
Plus: Cash consideration to pay a retention bonus to legacy Enerplus employees |
5,920 | |||||||||||||||
|
|
|||||||||||||||
Preliminary arrangement consideration |
$ | 4,269,696 |
(1) | The Enerplus shares outstanding consist of Enerplus common shares issued and outstanding as of May 31, 2024. |
(2) | The Chord shares issued consists of Chord Common Stock issued to legacy Enerplus shareholders on May 31, 2024. |
(3) | The per share price applied to Enerplus common shares issued and outstanding reflects the opening price per share of Chord Common Stock as of May 31, 2024. The per share price attributable to the cash consideration is the cash consideration per share amount as stipulated in the Arrangement Agreement. |
(4) | The Enerplus bank credit facilities balance reflects the principal outstanding (inclusive of unamortized debt issuance costs) as of March 31, 2024. The final purchase price will be based upon the Enerplus bank credit facilities as of the closing date and, therefore, will be different from the amount shown above. |
Preliminary Purchase Price Allocation |
||||
Assets Acquired |
||||
Cash and cash equivalents |
$ | 33,412 | ||
Accounts receivable, net |
254,003 | |||
Inventory |
2,350 | |||
Prepaid expenses |
3,249 | |||
Other current assets |
13,004 | |||
Oil and gas properties (successful efforts method) |
5,253,783 | |||
Other property and equipment |
10,994 | |||
Long-term inventory |
5,257 | |||
Operating right-of-use assets |
23,851 | |||
Other assets |
884 | |||
|
|
|||
Total assets acquired |
5,600,787 | |||
|
|
|||
Liabilities Assumed |
||||
Accounts payable |
9,440 | |||
Revenues and production taxes payable |
185,581 | |||
Accrued liabilities |
175,048 | |||
Current portion of long-term debt |
78,878 | |||
Derivative instruments (current liability) |
368 | |||
Current operating lease liabilities |
11,460 | |||
Long-term debt |
37,079 | |||
Deferred tax liabilities |
1,174,932 | |||
Asset retirement obligations |
111,254 | |||
Operating lease liabilities |
13,067 | |||
|
|
|||
Total liabilities assumed |
1,797,107 | |||
|
|
|||
Net Assets Acquired |
$ | 3,803,680 | ||
Goodwill Acquired |
466,016 | |||
|
|
|||
Purchase price consideration |
$ | 4,269,696 | ||
|
|
(b) | Represents the incremental borrowings of $207.8 million used to finance the closing of the Arrangement using Chords existing revolving credit facility. |
The amount of incremental borrowings reflected in the unaudited pro forma condensed combined financial statements represents the total cash necessary to effectuate the Arrangement less the sum of (i) the historical cash balance at Chord as of March 31, 2024 and (ii) the historical cash balance at Enerplus as of March 31, 2024. The actual amount of incremental borrowings will be informed by cash balances as of the closing date and, therefore, will be different from the amount presented in the unaudited pro forma condensed combined financial statements as of March 31, 2024.
(c) | Represents the adjustment to align Enerplus historical treatment of capital project prepayments with Chords accounting policy. The impact to Oil and gas properties (successful efforts method) is recorded through the preliminary fair value measurement of Enerplus oil and gas properties acquired by Chord as described in 3(a) above. |
(d) | Represents the adjustment to deferred income taxes to record the acquisition of a net deferred tax liability. This is primarily the result of the purchase price allocated to the acquired oil and gas properties in excess of their acquired tax basis. Additionally, represents the elimination of Enerplus Canadian entities historical deferred tax asset. The deferred tax adjustment assumes a forecasted blended statutory rate of 24.0%. Because the tax rates used for these unaudited pro forma condensed combined financial statements are an estimate, the blended rate will likely vary from the actual effective rate in periods subsequent to the completion of the Arrangement. |
(e) | Represents the adjustment of $3.1 million for deferred financing costs incurred by Chord related to the amendment entered into by Chord on the closing date of the Arrangement to increase the borrowing base and commitment amounts on its existing revolving credit facility. |
(f) | Represents the accrual of $37.3 million of estimated transaction costs expected to be incurred by Chord subsequent to March 31, 2024. These transaction costs are preliminary estimates; the final amounts and the resulting effect on Chords financial position may differ significantly. |
(g) | Represents the accrual of $12.0 million of severance costs incurred by Chord subsequent to March 31, 2024 payable to certain Enerplus officers and Chord directors whom were terminated pursuant to the Arrangement. |
(h) | Represents the accrual of $6.4 million of estimated employee bonuses payable to Chord employees in connection with the Arrangement. These bonuses are preliminary estimates; the final amounts and the resulting effect on Chords financial position may differ significantly. |
Statement of Operations
The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2024 reflects the following adjustments:
(a) | Represents the incremental depreciation, depletion and amortization expense related to the assets acquired in the Arrangement, which is based on the preliminary purchase price allocation. Depletion was calculated using the unit-of-production method under the successful efforts method of accounting. The depletion expense was adjusted for (i) the revision to the depletion rate reflecting the acquisition costs and the reserves volumes attributable to the acquired oil and gas properties and (ii) the difference in depletion methodology under the successful efforts method of accounting applied by Chord compared to the full cost method of accounting applied by Enerplus. The pro forma depletion rate attributable to the Arrangement was $12.47 per barrel of oil equivalent. This adjustment also includes an increase in accretion expense attributable to asset retirement obligations of $0.3 million for the three months ended March 31, 2024 due to Chords higher credit-adjusted risk-free rate as compared to Enerplus. |
(b) | Represents the adjustment to expense certain historical costs originally capitalized by Enerplus under the full cost method of accounting to align with Chords accounting policy under the successful efforts method of accounting. |
(c) | Represents the net increase to interest expense resulting from the (i) elimination of interest expense on Enerplus bank credit facilities, (ii) incremental interest expense for the amortization of the fair value adjustment to Enerplus senior notes assumed by Chord, (iii) reduction of interest expense to align with Chords capitalized interest accounting policy, (iv) incremental interest expense for borrowings on Chords existing credit facility to finance the closing of the Arrangement and (v) incremental interest expense for the amortization of deferred financing costs related to the amendment entered into by Chord on the closing date of the Arrangement to increase the borrowing base capacity and commitment amounts on Chords revolving credit facility as follows: |
Three Months Ended March 31, 2024 | ||||
(In thousands) | ||||
Elimination of interest expense on Enerplus bank credit facilities |
$ | 2,472 | ||
Incremental interest expense for amortization of remeasurement of legacy Enerplus senior notes |
(647 | ) | ||
Reduction of interest expense related to capitalized interest to align with Chords accounting policy |
558 | |||
Incremental interest expense for borrowings on Chords revolving credit facility |
(3,859 | ) | ||
Incremental interest expense for amortization of deferred financing costs |
(249 | ) | ||
|
|
|||
Net transaction accounting adjustments to interest expense |
$ | (1,725 | ) | |
|
|
A 0.125% change in the variable interest rate of Chords revolving credit facility or a $10 million change in the amount financed would increase or decrease interest expense presented in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2024 by $0.1 million and $0.2 million, respectively.
(d) | Represents the estimated income tax impact of the pro forma adjustments from the Arrangement at the estimated blended federal and state statutory rate of approximately 24% for the three months ended March 31, 2024. Because the tax rates used for these unaudited pro forma condensed combined financial statements are an estimate, the blended rate will likely vary from the actual effective rate in periods subsequent to the completion of the Arrangement. |
(e) | The table below represents the calculation of the weighted average shares outstanding and earnings per share included in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2024. As the Arrangement is being reflected in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2024 as if it had occurred on January 1, 2023, the calculation of weighted average shares outstanding for basic and diluted earnings per share assumes that the shares issuable related to the Arrangement have been outstanding for the entire period. |
Three Months Ended March 31, 2024 | ||||
(In thousands, except per share data) | ||||
Pro forma net income |
$ | 254,333 | ||
Basic shares: |
||||
Chord shares outstanding (weighted average per statement of operations) |
41,648 | |||
Chord shares issued in exchange for legacy Enerplus shares as part of consideration transferred |
20,680 | |||
|
|
|||
Pro forma weighted average common shares outstanding, basic |
62,328 | |||
|
|
|||
Diluted shares: |
||||
Pro forma weighted average shares outstanding, basic |
62,328 | |||
Dilutive effect of shares convertible from Chord share based awards |
500 | |||
Dilutive effect of shares convertible from Chord in-the-money warrants |
779 | |||
|
|
|||
Pro forma weighted average common shares outstanding, diluted |
63,607 | |||
|
|
|||
Earnings attributable to Chord per share, basic |
$ | 4.08 | ||
Earnings attributable to Chord per share, diluted |
$ | 4.00 | ||
Anti-dilutive weighted average common shares: |
||||
Potential common shares |
2,238 |
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 reflects the following adjustments:
(a) | Represents the incremental depreciation, depletion and amortization expense related to the assets acquired in the Arrangement, which is based on the preliminary purchase price allocation. Depletion was calculated using the unit-of-production method under the successful efforts method of accounting. The depletion expense was adjusted for (i) the revision to the depletion rate reflecting the acquisition costs and the reserves volumes attributable to the acquired oil and gas properties and (ii) the difference in depletion methodology under the successful efforts method of accounting applied by Chord compared to the full cost method of accounting applied by Enerplus. The pro forma depletion rate attributable to the Arrangement was $12.19 per barrel of oil equivalent. This adjustment also includes an increase in accretion expense attributable to asset retirement obligations of $1.3 million for the year ended December 31, 2023 due to Chords higher credit-adjusted risk-free rate as compared to Enerplus. |
(b) | Represents the adjustment to expense certain historical costs originally capitalized by Enerplus under the full cost method of accounting to align with Chords accounting policy under the successful efforts method of accounting. |
(c) | Represents $37.3 million of estimated transaction costs expected to be incurred by Chord subsequent to March 31, 2024. These transaction costs are preliminary estimates; the final amounts and the resulting effect on Chords results of operations may differ significantly. These costs are nonrecurring and will not affect Chords statement of operations beyond 12 months after the closing of the Arrangement. |
(d) | Represents $12.0 million of severance costs incurred by Chord subsequent to March 31, 2024 payable to certain Enerplus officers and Chord directors whom were terminated pursuant to the Arrangement. These costs are nonrecurring and will not affect Chords statement of operations beyond 12 months after the closing of the Arrangement. |
(e) | Represents $6.4 million of estimated employee bonuses payable to Chord employees in connection with the Arrangement. These bonuses are preliminary estimates; the final amounts and the remaining effect on Chords results of operations may differ significantly. These costs are nonrecurring and will not affect Chords statement of operations beyond 12 months after the closing of the Arrangement. |
(f) | Represents the net increase to interest expense resulting from the (i) elimination of interest expense on Enerplus bank credit facilities, (ii) incremental interest expense for the amortization of the fair value adjustment to Enerplus senior notes assumed by Chord, (iii) reduction of interest expense to align with Chords capitalized interest accounting policy, (iv) incremental interest expense for borrowings on Chords existing credit facility to finance the closing of the Arrangement and (v) incremental interest expense for the amortization of deferred financing costs related to the amendment entered into by Chord on the closing date of the Arrangement to increase the borrowing base capacity and commitment amounts on Chords revolving credit facility as follows: |
Year Ended December 31, 2023 | ||||
(In thousands) | ||||
Elimination of interest expense on Enerplus bank credit facilities |
$ | 10,078 | ||
Incremental interest expense for amortization of remeasurement of legacy Enerplus senior notes |
(2,593 | ) | ||
Reduction of interest expense related to capitalized interest to align with Chords accounting policy |
2,168 | |||
Incremental interest expense for borrowings on Chords revolving credit facility |
(15,436 | ) | ||
Incremental interest expense for amortization of deferred financing costs |
(998 | ) | ||
|
|
|||
Net transaction accounting adjustments to interest expense |
$ | (6,781 | ) | |
|
|
A 0.125% change in the variable interest rate of Chords revolving credit facility or a $10 million change in the amount financed would increase or decrease interest expense presented in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 by $0.3 million and $0.7 million, respectively.
(g) | Represents the estimated income tax impact of the pro forma adjustments from the Arrangement at the estimated blended federal and state statutory rate of approximately 24% for the year ended December 31, 2023. Because the tax rates used for these unaudited pro forma condensed combined financial statements are an estimate, the blended rate will likely vary from the actual effective rate in periods subsequent to the completion of the Arrangement. |
(h) | The table below represents the calculation of the weighted average shares outstanding and earnings per share included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023. As the Arrangement is being reflected in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 as if it had occurred on January 1, 2023, the calculation of weighted average shares outstanding for basic and diluted earnings per share assumes that the shares issuable related to the Arrangement have been outstanding for the entire year. |
Year Ended December 31, 2023 | ||||
(In thousands, except per share data) | ||||
Pro forma net income |
$ | 1,355,431 | ||
Basic shares: |
||||
Chord shares outstanding (weighted average per statement of operations) |
41,490 | |||
Chord shares issued in exchange for legacy Enerplus shares as part of consideration transferred |
20,680 | |||
|
|
|||
Pro forma weighted average common shares outstanding, basic |
62,170 | |||
|
|
|||
Diluted shares: |
||||
Pro forma weighted average shares outstanding, basic |
62,170 | |||
Dilutive effect of shares convertible from Chord share based awards |
944 | |||
Dilutive effect of shares convertible from Chord in-the-money warrants |
964 | |||
|
|
|||
Pro forma weighted average common shares outstanding, diluted |
64,078 | |||
|
|
|||
Earnings attributable to Chord per share, basic |
$ | 21.80 | ||
Earnings attributable to Chord per share, diluted |
$ | 21.15 | ||
Anti-dilutive weighted average common shares: |
||||
Potential common shares |
3,709 |
4. | Supplemental Pro Forma Crude Oil, Natural Gas and Natural Gas Liquids Reserves Information |
The following tables present the estimated pro forma combined net proved developed and undeveloped crude oil, natural gas and natural gas liquids (NGL) reserves prepared as of December 31, 2023, along with a summary of changes in the quantities of net remaining proved reserves during the year ended December 31, 2023. The pro forma combined standardized measure of discounted future net cash flows relating to proved reserves as of December 31, 2023, as well as changes to the standardized measure for the year ended December 31, 2023, are also presented.
The pro forma combined reserves, production and standardized measure have been prepared in accordance with FASB ASC Topic 932 Extractive Activities Oil and Gas. Further, this pro forma combined reserves, production and standardized measure information gives effect to the Arrangement as if it had been completed on January 1, 2023; however, the proved reserves and standardized measures presented below represent the respective estimates made as of December 31, 2023, by the Company and Enerplus while they were separate companies. These estimates have not been updated for changes in development plans or other factors, which have occurred or may occur subsequent to December 31, 2023, or subsequent to the completion of the Arrangement. This pro forma information has been prepared for illustrative purposes and is not intended to be a projection of future results of the combined company. With respect to the disclosures below, the amounts were determined by referencing the Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Natural Gas Reserves reported in the Companys Annual Report on Form 10-K for the year ended December 31, 2023 and the Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Crude Oil and Natural Gas Reserves Quantities reported in Enerplus Annual Report on Form 40-F for the year ended December 31, 2023; an explanation of the underlying methodology applied, as required by SEC regulations, can be found within the Annual Report on Form 10-K for the Company and the Annual Report on Form 40-F for Enerplus.
Crude Oil (MBbl) | ||||||||||||
Chord Historical | Enerplus Historical | Pro Forma Combined | ||||||||||
Proved reserves |
||||||||||||
Net proved reserves at December 31, 2022 |
381,288 | 148,953 | 530,241 | |||||||||
Revision of previous estimates |
(38,073 | ) | (14,905 | ) | (52,978 | ) | ||||||
Extensions, discoveries and other additions |
53,207 | 28,551 | 81,758 | |||||||||
Sales of reserves in place |
(3,999 | ) | (952 | ) | (4,951 | ) | ||||||
Purchase of reserves in place |
12,375 | | 12,375 | |||||||||
Production |
(36,427 | ) | (18,532 | ) | (54,959 | ) | ||||||
|
|
|
|
|
|
|||||||
Net proved reserves at December 31, 2023 |
368,371 | 143,115 | 511,486 | |||||||||
|
|
|
|
|
|
|||||||
Proved developed reserves: |
||||||||||||
December 31, 2022 |
272,529 | 80,809 | 353,338 | |||||||||
December 31, 2023 |
241,362 | 69,755 | 311,117 | |||||||||
Proved undeveloped reserves: |
||||||||||||
December 31, 2022 |
108,759 | 68,144 | 176,903 | |||||||||
December 31, 2023 |
127,009 | 73,360 | 200,369 |
Natural Gas (MMcf) | ||||||||||||
Chord Historical | Enerplus Historical | Pro Forma Combined | ||||||||||
Proved reserves |
||||||||||||
Net proved reserves at December 31, 2022 |
814,926 | 877,468 | 1,692,394 | |||||||||
Revision of previous estimates |
(33,308 | ) | (168,462 | ) | (201,770 | ) | ||||||
Extensions, discoveries and other additions |
62,273 | 40,173 | 102,446 | |||||||||
Sales of reserves in place |
(3,067 | ) | (1,079 | ) | (4,146 | ) | ||||||
Purchase of reserves in place |
20,060 | | 20,060 | |||||||||
Production |
(82,953 | ) | (82,775 | ) | (165,728 | ) | ||||||
|
|
|
|
|
|
|||||||
Net proved reserves at December 31, 2023 |
777,931 | 665,325 | 1,443,256 | |||||||||
|
|
|
|
|
|
|||||||
Proved developed reserves: |
||||||||||||
December 31, 2022 |
689,651 | 624,988 | 1,314,639 | |||||||||
December 31, 2023 |
640,180 | 519,714 | 1,159,894 | |||||||||
Proved undeveloped reserves: |
||||||||||||
December 31, 2022 |
125,275 | 252,480 | 377,755 | |||||||||
December 31, 2023 |
137,751 | 145,611 | 283,362 |
NGL (MBbl) | ||||||||||||
Chord Historical | Enerplus Historical | Pro Forma Combined | ||||||||||
Proved reserves |
||||||||||||
Net proved reserves at December 31, 2022 |
138,451 | 27,100 | 165,551 | |||||||||
Revision of previous estimates |
(5,270 | ) | 675 | (4,595 | ) | |||||||
Extensions, discoveries and other additions |
15,046 | 4,303 | 19,349 | |||||||||
Sales of reserves in place |
(53 | ) | (119 | ) | (172 | ) | ||||||
Purchase of reserves in place |
3,052 | | 3,052 | |||||||||
Production |
(13,047 | ) | (4,170 | ) | (17,217 | ) | ||||||
|
|
|
|
|
|
|||||||
Net proved reserves at December 31, 2023 |
138,179 | 27,789 | 165,968 | |||||||||
|
|
|
|
|
|
|||||||
Proved developed reserves: |
||||||||||||
December 31, 2022 |
115,227 | 16,342 | 131,569 | |||||||||
December 31, 2023 |
105,702 | 15,038 | 120,740 | |||||||||
Proved undeveloped reserves: |
||||||||||||
December 31, 2022 |
23,224 | 10,758 | 33,982 | |||||||||
December 31, 2023 |
32,477 | 12,751 | 45,228 |
Total (MBoe) | ||||||||||||
Chord Historical | Enerplus Historical | Pro Forma Combined | ||||||||||
Proved reserves |
||||||||||||
Net proved reserves at December 31, 2022 |
655,560 | 322,298 | 977,858 | |||||||||
Revision of previous estimates |
(48,894 | ) | (42,307 | ) | (91,201 | ) | ||||||
Extensions, discoveries and other additions |
78,632 | 39,550 | 118,182 | |||||||||
Sales of reserves in place |
(4,563 | ) | (1,251 | ) | (5,814 | ) | ||||||
Purchase of reserves in place |
18,770 | | 18,770 | |||||||||
Production |
(63,300 | ) | (36,498 | ) | (99,798 | ) | ||||||
|
|
|
|
|
|
|||||||
Net proved reserves at December 31, 2023 |
636,205 | 281,792 | 917,997 | |||||||||
|
|
|
|
|
|
|||||||
Proved developed reserves: |
||||||||||||
December 31, 2022 |
502,698 | 201,316 | 704,014 | |||||||||
December 31, 2023 |
453,760 | 171,412 | 625,172 | |||||||||
Proved undeveloped reserves: |
||||||||||||
December 31, 2022 |
152,862 | 120,982 | 273,844 | |||||||||
December 31, 2023 |
182,445 | 110,380 | 292,825 |
The pro forma combined standardized measure of discounted future net cash flows relating to proved crude oil, natural gas and NGL reserves as of December 31, 2023 are as follows:
Year Ended December 31, 2023 | ||||||||||||
(In thousands) | ||||||||||||
Chord Historical | Enerplus Historical | Pro Forma Combined | ||||||||||
Future cash inflows |
$ | 31,882,940 | $ | 10,888,013 | $ | 42,770,953 | ||||||
Future production costs |
(13,815,882 | ) | (3,824,062 | ) | (17,639,944 | ) | ||||||
Future development costs |
(3,055,823 | ) | (1,803,944 | ) | (4,859,767 | ) | ||||||
Future income tax expense |
(2,573,017 | ) | (1,078,714 | ) | (3,651,731 | ) | ||||||
|
|
|
|
|
|
|||||||
Future net cash flows |
12,438,218 | 4,181,293 | 16,619,511 | |||||||||
10% annual discount for estimating timing of cash flows |
(5,447,578 | ) | (1,308,753 | ) | (6,756,331 | ) | ||||||
|
|
|
|
|
|
|||||||
Standardized measure of discounted future net cash flows |
$ | 6,990,640 | $ | 2,872,540 | $ | 9,863,180 | ||||||
|
|
|
|
|
|
The changes in the pro forma combined standardized measure of discounted future net cash flows relating to proved crude oil, natural gas and NGL reserves as of December 31, 2023 are as follows:
Year Ended December 31, 2023 | ||||||||||||
(In thousands) | ||||||||||||
Chord Historical | Enerplus Historical | Pro Forma Combined | ||||||||||
January 1, 2023 |
$ | 11,494,475 | $ | 5,529,264 | $ | 17,023,739 | ||||||
Net changes in prices and production costs |
(6,138,846 | ) | (4,590,215 | ) | (10,729,061 | ) | ||||||
Net changes in future development costs |
(92,072 | ) | (505,114 | ) | (597,186 | ) | ||||||
Sales of crude oil and natural gas, net |
(2,033,251 | ) | (992,632 | ) | (3,025,883 | ) | ||||||
Extensions |
864,249 | 879,358 | 1,743,607 | |||||||||
Purchases of reserves in place |
373,913 | | 373,913 | |||||||||
Sales of reserves in place |
(75,097 | ) | (24,617 | ) | (99,714 | ) | ||||||
Revisions of previous quantity estimates |
(1,142,960 | ) | 648,098 | (494,862 | ) | |||||||
Previously estimated development costs incurred |
574,607 | 531,061 | 1,105,668 | |||||||||
Accretion of discount |
1,445,215 | 588,421 | 2,033,636 | |||||||||
Net change in income taxes |
1,419,851 | 808,916 | 2,228,767 | |||||||||
Changes in timing and other |
300,556 | | 300,556 | |||||||||
|
|
|
|
|
|
|||||||
December 31, 2023 |
$ | 6,990,640 | $ | 2,872,540 | $ | 9,863,180 | ||||||
|
|
|
|
|
|
Document and Entity Information |
May 31, 2024 |
---|---|
Cover [Abstract] | |
Entity Registrant Name | Chord Energy Corp |
Amendment Flag | true |
Entity Central Index Key | 0001486159 |
Document Type | 8-K/A |
Document Period End Date | May 31, 2024 |
Entity Incorporation State Country Code | DE |
Entity File Number | 001-34776 |
Entity Tax Identification Number | 80-0554627 |
Entity Address, Address Line One | 1001 Fannin Street |
Entity Address, Address Line Two | Suite 1500 |
Entity Address, City or Town | Houston |
Entity Address, State or Province | TX |
Entity Address, Postal Zip Code | 77002 |
City Area Code | (281) |
Local Phone Number | 404-9500 |
Written Communications | false |
Soliciting Material | false |
Pre Commencement Tender Offer | false |
Pre Commencement Issuer Tender Offer | false |
Security 12b Title | Common Stock |
Trading Symbol | CHRD |
Security Exchange Name | NASDAQ |
Entity Emerging Growth Company | false |
Amendment Description | As reported in a Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission by Chord Energy Corporation (“Chord” or the “Company”) on June 6, 2024 (the “Original Form 8-K”), on May 31, 2024, the Company and Spark Acquisition ULC, an unlimited liability company organized and existing under the laws of the Province of Alberta, Canada and a wholly owned subsidiary of Chord (“Canadian Sub”), completed the previously announced strategic business combination transaction with Enerplus Corporation, a corporation existing under the laws of the Province of Alberta, Canada (“Enerplus”), whereby Canadian Sub acquired all of the issued and outstanding Enerplus common shares pursuant to the arrangement agreement entered into by and among Chord, Canadian Sub and Enerplus on February 21, 2024, and effected by way of a plan of arrangement under the Business Corporations Act (Alberta) (the “Arrangement”). This Current Report on Form 8-K/A (this “Amendment”) amends and supplements the Original Form 8-K to provide the pro forma financial statements described in Item 9.01 below and to file certain exhibits to the Original Form 8-K. No other modifications to the Original Form 8-K are being made by this Amendment. This Amendment should be read in connection with the Original Form 8-K, which provides a more complete description of the Arrangement. |
1 Year Chord Energy Chart |
1 Month Chord Energy Chart |
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