Item 2.02. Results of Operations and Financial Condition.
As reported in a Current Report on Form 8-K filed with the
This Current Report on Form 8-K provides certain historical and pro forma
financial statements, as described in Item 9.01 below, each of which are
incorporated into this Item 2.02 by reference. The historical financial
statements of Contango are consistent with the historical financial statements
of Contango filed on the Original Crescent Form 8-K and the pro forma financial
statements are consistent with the pro forma financial statements furnished by
the Company on
Item 7.01. Regulation FD Disclosure.
The information contained in Item 8.01 of this Current Report on Form 8-K is incorporated into this Item 7.01 by reference.
The information contained in this Item 7.01 shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing under the Securities Act of 1933, as amended , or the Exchange Act.
Item 8.01 Other Events.
Historical and Pro Forma Financial Statements
This Current Report on Form 8-K provides certain historical and pro forma
financial statements, as described in Item 9.01 below, each of which are
incorporated into this Item 8.01 by reference. The historical financial
statements of Contango are consistent with the historical financial statements
of Contango filed on the Original Crescent Form 8-K and the pro forma financial
statements are consistent with the pro forma financial statements furnished by
the Company on
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Registration Statement Disclosures
On or about the date of this Current Report on Form 8-K, the Company intends to
file a Registration Statement on Form S-1 (the "Registration Statement")
relating to the proposed offering by the Company of
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Summary Reserve Data based on SEC Pricing
The following table provides historical reserves, PV-0, and PV-10 as of
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Uinta Acquisition(1) As of December 31, 2021 Net Proved Reserves: Oil (MBbls) 42,924 Natural gas (MMcf) 139,329 NGLs (MBbls) (2) - Total Proved Reserves (MBoe) 66,146 Standardized Measure (millions) (3) $ 1,027 PV-0 (millions) (3) $ 1,524 PV-10 (millions) (3) $ 1,054 Net Proved Developed Reserves: Oil (MBbls) 24,871 Natural gas (MMcf) 92,094 NGLs (MBbls) (2) - Total Proved Developed Reserves (MBoe) 40,220 PV-0 (millions) (3) $ 954 PV-10 (millions) (3) $ 733 Net Proved Undeveloped Reserves: Oil (MBbls) 18,054 Natural gas (MMcf) 47,235 NGLs (MBbls) (2) - Total Proved Undeveloped Reserves (MBoe) 25,926 PV-0 (millions) (3) $ 571 PV-10 (millions) (3) $ 321
(1) The Uinta Acquisition's reserves and present value (discounted at ten
percent, or PV-10) were determined using average first-day-of-the-month prices for the prior 12 months in accordance withSEC guidance. The baseSEC oil and gas prices calculated forDecember 31, 2021 were$66.56 per Bbl and$3.598 per MMBtu, respectively. As specified by theSEC , a company must use a 12-month average price, calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period. The base oil price is based upon WTI-Cushing spot prices (EIA) during 2021 and the base gas price is based uponHenry Hub spot prices (Gas Daily ) during 2021. Adjustments to oil and gas prices were calculated by the Company and applied as received by CG&A. For all properties, oil price differentials were forecast at -$10.26 per Bbl and gas price differentials were forecast at -$1.51 per Mcf. Adjustments may include treating costs, transportation charges, plant processing, and/or crude quality and gravity corrections. After these adjustments, the net realized prices over the life of the proved properties was estimated to be$56.30 per Bbl for oil and$2.088 per Mcf for gas. All economic factors were held constant in accordance withSEC guidelines.
(2) Natural gas reserves acquired in the Uinta Acquisition are shown in "wet"
MMcf, which includes NGLs. The Company uses three-stream reserve information, with NGL reserves reported separately. As a result, reserve estimates of the Company are not comparable to reserve estimates for the Uinta Acquisition.
(3) Present value (discounted at PV-0 and PV-10) is not a financial measure
calculated in accordance withU.S. generally accepted accounting principles ("GAAP") because it does not include the effects of income taxes on future net revenues. None of PV-0 and PV-10 represent an estimate of the fair market value of our oil and natural gas properties. Our PV-0 measurement does not provide a discount rate to estimated future cash flows. PV-0 therefore does not reflect the risk associated with future cash flow projections like PV-10 does. PV-0 should therefore only be evaluated in connection with an evaluation of our PV-10 of discounted future net cash flows. We believe that the presentation of PV-0 and PV-10 is relevant and useful to its investors as supplemental disclosure to the standardized measure of future net cash flows, or after tax amount, because it presents the discounted future net cash flows attributable to our reserves prior to taking into account future income taxes and our specific tax characteristics. Standardized measure for the Uinta Acquisition is shown pro forma as if the assets acquired in the Uinta Acquisition had been owned byCrescent Energy Company as ofDecember 31, 2021 . The PV-0 and PV-10 income tax amounts included in the net proved standardized measure but not included in PV-0 and PV-10 were$39.8 million and$27.1 million , respectively. We and others in our industry use PV-0 and PV-10 as a measure to compare the relative size and value of proved reserves without regard to specific tax characteristics. Investors should be cautioned that none of PV-0 and PV-10 represent an estimate of the fair market value of our proved reserves. ******
Summary Reserve Data based on NYMEX Pricing
The following table provides historical reserves, PV-0, and PV-10 as of
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forward-looking expectations of oil and natural gas prices as of a certain date.
In addition, we believe strip pricing provides relevant and useful information
because it is widely used by investors in our industry as a basis for comparing
the relative size and value of our proved reserves to our peers and in
particular addresses the impact of differentials compared with our peers. Our
estimated historical reserves, PV-0, and PV-10 based on NYMEX futures were
otherwise prepared on the same basis as our
Crescent Energy Company Uinta Acquisition As of December 31, 2021(1) Net Proved Reserves: Oil (MBbls) 211,497 43,252 Natural gas (MMcf) 1,533,009 141,439 NGLs (MBbls) (3) 78,790 - Total Proved Reserves (MBoe) 545,788 66,825 PV-0 (millions) (2) $ 11,931 $ 2,025 PV-10 (millions) (2) $ 6,781 $ 1,466 Net Proved Developed Reserves: Oil (MBbls) 159,332 25,162 Natural gas (MMcf) (3) 1,467,322 94,028 NGLs (MBbls) (3) 68,653 - Total Proved Developed Reserves (MBoe) 472,539 40,833 PV-0 (millions) (2) $ 9,681 $ 1,300 PV-10 (millions) (2) $ 5,658 $ 1,029 Net Proved Undeveloped Reserves: Oil (MBbls) 52,164 18,090 Natural gas (MMcf) 65,687 47,411 NGLs (MBbls) (3) 10,137 - Total Proved Undeveloped Reserves (MBoe) 73,429 25,992 PV-0 (millions) (2) $ 2,249 $ 725 PV-10 (millions) (2) $ 1,123 $ 437
(1) The NYMEX reserves, PV-0, and PV-10 of the Company and the Uinta Acquisition
were determined using index prices for oil and natural gas, respectively, without giving effect to derivative transactions and were calculated based on settlement prices to better reflect the market expectations as of that date, as adjusted for our estimates of quality, transportation fees, and market differentials. The five-year average strip pricing for the reserve calculations based on NYMEX futures pricing at closing onMarch 31, 2022 were$79.71 per Bbl of oil and$4.267 per MMBtu of natural gas. We believe that the use of forward prices provides investors with additional useful information about our reserves, as the forward prices are based on the market's forward-looking expectations of oil and natural gas prices as of a certain date. NYMEX futures prices are not necessarily a projection of future oil and gas prices. Investors should be careful to consider forward prices in addition to, and not as a substitute for,SEC prices, when considering our oil, natural gas and NGL reserves. While we believe the NYMEX forward-month contract pricing is the most accurate indicator of commodity prices as of the applicable date, commodity prices are volatile. As a result, actual future prices may vary significantly from the NYMEX prices used herein. The future value of the reserves eventually recovered and the amounts of reserves actually recovered may be more or less than the estimated amounts.
(2) Present value (discounted at PV-0 and PV-10) is not a financial measure
calculated in accordance with GAAP because it does not include the effects of
income taxes on future net revenues. Neither PV-0 nor PV-10 represent an . . .
Item 9.01 Financial Statements and Exhibits.
(b) Financial Statements of Businesses Acquired
• Audited consolidated financial statements of Contango as of and for the years endedDecember 31, 2020 and 2019, and the related notes to the consolidated financial statements, included in Contango's Annual Report on Form 10-K for the year endedDecember 31, 2020 , attached as Exhibit 99.1 hereto; • Unaudited consolidated financial statements of Contango as ofSeptember 30, 2021 andDecember 31, 2020 and for the three and nine months endedSeptember 30, 2021 and 2020, and the related notes to the condensed consolidated financial statements, included in Contango's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2021 , attached as Exhibit 99.2 hereto;
(b) Pro Forma Financial Information
The following unaudited pro forma condensed combined financial information of the Company, giving effect to the Transactions, attached as Exhibit 99.3 hereto:
• Unaudited Pro Forma Condensed Combined Statement of Operations for the year endedDecember 31, 2021 ; and • Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. (d) Exhibits. Exhibit Description 23.1 Consent ofGrant Thornton LLP , relating to the financial statements ofContango Oil & Gas Company . 23.2 Consent ofCawley, Gillespie & Associates, Inc. 23.3 Consent ofWilliam M. Cobb & Associates, Inc. 23.4 Consent ofW.D. Von Gonten and Company . 99.1 Historical audited consolidated financial statements ofContango Oil & Gas Company as ofDecember 31, 2020 and 2019 and for the years endedDecember 31, 2020 and 2019. 99.2 Historical unaudited consolidated financial statements ofContango Oil & Gas Company as ofSeptember 30, 2021 andDecember 31, 2020 and for the three and nine months endedSeptember 30, 2021 and 2020. 99.3 Unaudited pro forma condensed combined financial information for the year endedDecember 31, 2021 . 99.4 Report ofCawley, Gillespie & Associates, Inc. - Uinta, as ofDecember 31, 2021 . 99.5 Report ofWilliam M. Cobb & Associates, Inc. 99.6 Report ofW.D. Von Gonten and Company . 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). 6
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