UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934
For the month of May 2018
Commission File Number 000-55246
Sundance Energy Australia Limited
(Translation of registrants name into English)
633 17th Street, Suite 1950
Denver, CO 80202
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a
EXPLANATORY NOTE
On April 23, 2018, Sundance Energy Inc., a wholly owned subsidiary of Sundance Energy Australia Limited (Sundance or the Company), acquired producing and non-producing crude oil, natural gas and natural gas liquids properties targeting the Eagle Ford formation and located in McMullen, Live Oak, Atascosa and La Salle Counties, Texas (collectively, the Eagle Ford Properties) for a total purchase price of $220.1 million, subject to customary post-closing adjustments (the Eagle Ford Acquisition). The effective date of the Eagle Ford Acquisition was October 1, 2017. A detailed description of the Eagle Ford Acquisition appears in our Annual Report on Form 20-F for the fiscal year ended December 31, 2017, which was filed with the Securities and Exchange Commission on May 1, 2018.
This Report on Form 6-K is being filed in connection with the Eagle Ford Acquisition to provide the following financial statements: (i) the audited statements of revenue and direct operating expenses of the Eagle Ford Properties for the years ended December 31, 2017 and 2016; (ii) the unaudited pro forma condensed consolidated statement of profit or loss of Sundance for the year ended December 31, 2017, which gives effect to the Eagle Ford Acquisition as if it had occurred on January 1, 2017; and (iii) the unaudited pro forma condensed statement of financial position of Sundance as of December 31, 2017, which gives effect to the Eagle Ford Acquisition, as if it had occurred on December 31, 2017.
The unaudited pro forma condensed consolidated financial statements of Sundance are provided for illustrative purposes only, and are not intended to represent or be indicative of the profit or loss of the Company that would have been recorded had the Eagle Ford Properties been acquired as of the dates presented and should not be taken as representative of the future profit or loss of the Company. The pro forma adjustments give effect to pro forma events that are (i) directly attributable to the Eagle Ford Acquisition, (ii) factually supportable and (iii) with respect to the consolidated statements of income, expected to have a continuing impact on the combined results. The unaudited condensed consolidated financial statements do not reflect the impact of any potential operational efficiencies, cost savings or economies of scale that the Company may achieve with respect to the consolidated operations. Additionally, the pro forma statement of profit or loss does not include non-recurring charges or credits and the related tax effects which result directly from this transaction.
This Report on Form 6-K and Exhibits 99.1, 99.2 and 99.3 thereto, are incorporated by reference into the Registration Statement on Form S-8 (Registration Number 333-204490) and each of the Registration Statements on Form F-3 (Registration Number 333-216220 and 333-224583) of Sundance Energy Australia Limited.
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Exhibit |
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Description |
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99.1 |
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Audited Statements of Revenue and Direct Operating Expenses of the Eagle Ford Properties for the years ended December 31, 2017 and 2016 |
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99.2 |
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Unaudited Pro Forma Condensed Consolidated Statement of Profit or Loss of Sundance for the year ended December 31, 2017 and Unaudited Pro Forma Condensed Statement of Financial Position of Sundance as of December 31, 2017 |
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99.3 |
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Consent of Ernst and Young |
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, thereunto duly authorized.
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Sundance Energy Australia Limited | |
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By: |
/s/ Cathy L. Anderson |
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Name: |
Cathy L. Anderson |
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Date: May 2, 2018 |
Title: |
Chief Financial Officer |
Contents
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Page |
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Report of Independent Auditors |
2 |
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Financial Statements |
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Statements of Revenues and Direct Operating Expenses |
3 |
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Notes to the Statements of Revenues and Direct Operating Expenses |
4 - 5 |
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Supplemental Oil and Natural Gas Information (Unaudited) |
5 - 7 |
Report of Independent Auditors
The Board of Directors
Sundance Energy, Inc.
We have audited the accompanying statements of revenues and direct operating expenses (the financial statements) of the properties to be acquired from Pioneer Natural Resources Company, Reliance EagleFord Upstream Holdings, LP, and Newpek, LLC (the Eagle Ford Properties) for the years ended December 31, 2017 and 2016, and the related notes to the financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the revenues and direct operating expenses of the Eagle Ford Properties for the years ended December 31, 2017 and 2016 in conformity with U.S. generally accepted accounting principles.
Basis of Presentation
The accompanying financial statements were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 1. The presentation is not intended to be a complete financial statement presentation of the properties described above.
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/s/ Ernst & Young LLP |
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Dallas, Texas |
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May 2, 2018 |
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THE EAGLE FORD PROPERTIES
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(in thousands)
|
Year Ended December 31, |
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2017 |
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2016 |
| ||
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Revenues: |
|
|
|
|
| ||
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Oil, natural gas and natural gas liquids sales |
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$ |
24,467 |
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$ |
27,791 |
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Direct operating expenses: |
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|
|
|
| ||
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Lease operating expenses |
|
12,418 |
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15,168 |
| ||
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Production taxes |
|
1,438 |
|
1,659 |
| ||
|
|
|
|
|
|
| ||
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Total direct operating expenses |
|
13,856 |
|
16,827 |
| ||
|
|
|
|
|
|
| ||
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Revenues in excess of direct operating expenses |
|
$ |
10,611 |
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$ |
10,964 |
|
See accompanying Notes to the Statements of Revenues and Direct Operating Expenses.
THE EAGLE FORD PROPERTIES
NOTES TO THE STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
1. Background and Basis of Presentation
On April 23, 2018, Sundance Energy Inc., a wholly owned subsidiary of Sundance Energy Australia Limited (Sundance or the Company), acquired oil, natural gas and natural gas liquids properties in the Eagle Ford located in McMullen, Live Oak, Atascosa and La Salle Counties, Texas (collectively, the Eagle Ford Properties) from Pioneer Natural Resources USA, Inc., Reliance EagleFord Upstream Holding LP, and Newpek, LLC (the Sellers) for a total purchase price of $220.1 million, subject to customary post-closing adjustments (the Acquisition). The effective date of the Acquisition was October 1, 2017.
The Eagle Ford Properties were not accounted for as a separate subsidiary or division during the periods presented. Accordingly, complete financial statements under U.S. generally accepted accounting principles (GAAP) are not available or practicable to obtain for the Eagle Ford Properties. The Statement of Revenues and Direct Operating Expenses is not intended to be a complete presentation of the results of operations of the Eagle Ford Properties and may not be representative of future operations as they do not include general and administrative expenses, effects of derivative transactions, interest income or expense, depreciation, depletion and amortization, provision for income taxes and other income and expense items not directly associated with revenues from natural gas, natural gas liquids (NGLs) and crude oil. The accompanying Statements of Revenues and Direct Operating Expenses are presented in lieu of the full financial statements required under Rule 3-05 of the Securities and Exchange Commissions Regulation S-X.
2. Summary of Significant Accounting Policies
Revenue Recognition
Natural gas sales, NGLs, and Crude Oil Sales. Revenue is recognized when it is realized or realizable and earned. Revenues are considered realized or realizable and earned when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sellers price to the buyer is fixed or determinable and (iv) collectability is reasonably assured. The Eagle Ford Properties oil, natural gas and natural gas liquids production is sold, title is passed and revenue is recognized at or near the Eagle Ford Properties wells under short-term purchase contracts at prevailing prices in accordance with arrangements which are customary in the oil, natural gas and natural gas liquids industry.
Direct Operating Expenses
Direct operating expenses are recognized when incurred and consist of direct expenses of the Eagle Ford Properties. The direct operating expenses include lease operating and production taxes. Lease operating expenses include lifting costs, well repair expenses, facility maintenance expenses, well workover costs, and other field related expenses. Lease operating expenses also include expenses directly associated with support personnel, support services, equipment, and facilities directly related to oil and gas production activities.
Concentration of Credit Risk
Arrangements for oil, natural gas and natural gas liquids sales are evidenced by signed contracts with determinable market prices, and revenues are recorded when production is delivered. The Eagle Ford Properties had revenues from one purchaser, which accounted for 85% of total oil, natural gas and natural gas liquids revenues for each of the years ended December 31, 2017 and 2016. This concentration of customer may impact the Eagle Ford Properties overall business risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. The Sellers believe this risk is mitigated by the size, reputation and nature of its purchasers. All of the Eagle Ford Properties revenues are from oil and natural gas production in Texas.
3. Subsequent Events
Contemporaneous with closing the Acquisition, the Company entered into marketing and transportation contracts with the oil purchaser of the Eagle Ford Properties that include minimum revenue commitments (MRCs) of $81.7 million for the years 2018 to 2022 for the Eagle Ford Properties. As a condition of the Purchase and Sale Agreement, the Company was required by the Sellers and oil purchaser to post bonds and letters of credit in the amount of $40.9 million at closing of the Acquisition for the five year MRC period covering a portion of the MRCs.
THE EAGLE FORD PROPERTIES
NOTES TO THE STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
4. Contingencies
Pursuant to the terms of the Purchase and Sale Agreement between the Company and the Seller of the Eagle Ford Properties, any obligations relating to claims, litigation or disputes pending as of the effective date (October 1, 2017) or any matters arising in connection with ownership of the Eagle Ford Properties prior to the effective date are retained by the Seller.
The activities of the Eagle Ford Properties working interest may become subject to potential claims and litigation in the normal course of operations. The Company is not aware of any legal, environmental or other contingencies that would have a material effect on the Statements of Revenues and Direct Operating Expenses.
5. Supplemental Information for Oil Producing Activities (Unaudited)
The following tables summarize the net ownership interest in the proved oil and gas reserves and the standardized measure of discounted future net cash flows related to the proved oil, natural gas and natural gas liquids for the Eagle Ford Properties.
Proved reserves were estimated by qualified petroleum engineers of the Company using historical data and other information from the records of the Seller.
Numerous uncertainties are inherent in establishing quantities of proved reserves. The following reserve data represents estimates only, and should not be deemed exact. In addition, the standardized measure of discounted future net cash flows should not be construed as the current market value of the Eagle Ford Properties or the cost that would be incurred to obtain equivalent reserves.
All information set forth herein relating to the proved reserves, including the estimated future net cash flows and present values, from those dates, is taken or derived from the records of the Sellers of the Eagle Ford Properties. The estimates of reserves attributable to the Eagle Ford Properties assumes no development plans for those properties. As of December 31, 2016 and 2017, the Sellers of the Eagle Ford Properties did expect to develop the properties. The Companys development plan may differ from the Sellers, including the development of certain of the Eagle Ford Properties. These estimates were based upon review of historical production data and other geological, economic, ownership, and engineering data provided related to the reserves. No reports on these reserves have been filed with any federal agency. In accordance with the SECs guidelines, estimates of proved reserves and the future net revenues from which present values are derived were based on an unweighted 12-month average of the first-day-of-the-month price for the period, and held constant throughout the life of the Eagle Ford Properties. Operating costs, development costs, and certain production-related taxes, which are based on current information and held constant, were deducted in arriving at estimated future net revenues.
The proved reserves of the Eagle Ford Properties, all held within the United States, together with the changes therein are as follows:
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Oil (MBbl) |
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Natural Gas |
|
NGL (MBbl) |
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Total (Mboe) |
|
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Balance as of January 1, 2016 |
|
4,254 |
|
6,536 |
|
1,238 |
|
6,581 |
|
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Production |
|
(678 |
) |
(2,003 |
) |
(283 |
) |
(1,295 |
) |
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Revisions to previous estimates |
|
419 |
|
1,644 |
|
214 |
|
908 |
|
|
|
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|
|
|
|
|
|
|
|
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Balance as of December 31, 2016 |
|
3,955 |
|
6,178 |
|
1,169 |
|
6,194 |
|
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Production |
|
(457 |
) |
(1,291 |
) |
(185 |
) |
(857 |
) |
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Revisions to previous estimates |
|
863 |
|
1,866 |
|
295 |
|
1,469 |
|
|
|
|
|
|
|
|
|
|
|
|
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Balance as of December 31, 2017 |
|
4,401 |
|
6,752 |
|
1,279 |
|
6,806 |
|
THE EAGLE FORD PROPERTIES
NOTES TO THE STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
Supplemental Information for Oil and Natural Gas Producing Activities (Unaudited) - CONTINUED
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|
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Oil (MBbl) |
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Natural Gas |
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NGL |
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Total (Mboe) |
|
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Proved Developed |
|
|
|
|
|
|
|
|
|
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Balance as of January 1, 2016 |
|
4,254 |
|
6,536 |
|
1,238 |
|
6,581 |
|
|
Balance as of December 31, 2016 |
|
3,995 |
|
6,178 |
|
1,169 |
|
6,194 |
|
|
Balance as of December 31, 2017 |
|
4,401 |
|
6,752 |
|
1,279 |
|
6,806 |
|
|
|
|
|
|
|
|
|
|
|
|
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Proved Undeveloped |
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|
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|
|
|
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Balance as of January 1, 2016 |
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Balance as of December 31, 2016 |
|
|
|
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|
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Balance as of December 31, 2017 |
|
|
|
|
|
|
|
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Future cash inflows are computed by applying a 12-month average of the first day of the month commodity price adjusted for location and quality differentials to year-end quantities of proved reserves. Future development costs include future asset retirement costs. Future production costs do not include any general and administrative expenses. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair value of the Eagle Ford Properties.
The discounted future cash flow estimates do not include the effects of derivative instruments. The average commodity price follows:
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Year Ended December 31, |
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2017 |
|
2016 |
| ||
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Average 12-month price, net of differentials, per barrel of oil |
|
$ |
48.81 |
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$ |
38.55 |
|
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Average 12-month price, net of differentials, per Mcf of natural gas |
|
$ |
2.88 |
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$ |
2.39 |
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Average 12-month price, net of differentials, per barrel of NGL |
|
$ |
18.86 |
|
$ |
15.74 |
|
Standardized measure of discounted future net cash flows relating to proved reserves was as follows (in thousands):
|
Year Ended December 31, |
|
2017 |
|
2016 |
| ||
|
|
|
|
|
|
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Future cash inflows |
|
$ |
258,381 |
|
$ |
187,181 |
|
|
Future costs: |
|
|
|
|
| ||
|
Production |
|
(192,962 |
) |
(142,736 |
) | ||
|
Development |
|
(2,499 |
) |
(2,499 |
) | ||
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Future net inflows before income taxes |
|
62,920 |
|
41,946 |
| ||
|
Future income taxes |
|
|
|
|
| ||
|
Future net cash flows |
|
62,920 |
|
41,946 |
| ||
|
10% discount factor |
|
(14,040 |
) |
(7,733 |
) | ||
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Standardized measure of discounted future net cash flows |
|
$ |
48,880 |
|
$ |
34,213 |
|
THE EAGLE FORD PROPERTIES
NOTES TO THE STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
Supplemental Information for Oil and Natural Gas Producing Activities (Unaudited) - CONTINUED
(in thousands)
The principal changes in standardized measure of discounted future net cash flows were as follows:
|
Year Ended December 31, |
|
2017 |
|
2016 |
| ||
|
|
|
|
|
|
| ||
|
Standardized measure at the beginning of the year |
|
$ |
34,213 |
|
$ |
38,057 |
|
|
Sales, net of production costs |
|
(10,611 |
) |
(10,964 |
) | ||
|
Net change in prices, net of production costs |
|
13,876 |
|
2,908 |
| ||
|
Revision of quantity estimates |
|
11,516 |
|
5,775 |
| ||
|
Accretion of discount |
|
3,421 |
|
3,806 |
| ||
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Changes in production rates and timing |
|
(3,535 |
) |
(5,369 |
) | ||
|
Standardized measure at the end of the year |
|
$ |
48,880 |
|
$ |
34,213 |
|
SUNDANCE ENERGY AUSTRALIA LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Acquisition
On April 23, 2018, Sundance Energy Inc., a wholly owned subsidiary of Sundance Energy Australia Limited (Sundance or the Company), acquired producing and non-producing crude oil, natural gas and natural gas liquids (NGL) properties targeting the Eagle Ford formation and located in McMullen, Live Oak, Atascosa and La Salle Counties, Texas (collectively, the Eagle Ford Properties) from Pioneer Natural Resources USA, Inc., Reliance EagleFord Upstream Holding LP, and Newpek, LLC (the Sellers) for a total purchase price of $220.1 million, subject to customary post-closing adjustments (the Eagle Ford Acquisition). The effective date of the Eagle Ford Acquisition was October 1, 2017.
The Company closed the Eagle Ford Acquisition with proceeds from a capital raise of $260.0 million. We used $220.1 million of the net proceeds from this offering to fund the purchase price, net of adjustments, with the remainder of the funds to be used for capital expenditures necessary to develop certain of the crude oil, natural gas and NGL properties. Had the Eagle Ford Acquisition closed on December 31, 2017, the adjusted purchase price would have been approximately $219.6 million. The difference between the actual adjusted purchase price paid at Closing and the $219.6 million used in the statements below relates to 2018 purchase price adjustments that were not included in the unaudited pro forma condensed consolidated financial statements.
The following provides the preliminary purchase price allocation for the Eagle Ford Acquisition (in thousands of US dollars):
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Estimated fair value of assets acquired: |
|
|
| |
|
|
|
|
| |
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Development and production assets |
|
$ |
183,420 |
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|
|
|
|
| |
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Exploration and evaluation assets |
|
45,200 |
| |
|
|
|
|
| |
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Total assets acquired |
|
|
228,620 |
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|
|
|
|
| |
|
Estimated fair value of liabilities assumed: |
|
|
| |
|
|
|
|
| |
|
Restoration provision |
|
(9,015 |
) | |
|
|
|
|
| |
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Net assets acquired |
|
$ |
219,605 |
|
|
|
|
|
| |
|
Purchase price: |
|
|
| |
|
|
|
|
| |
|
Cash and cash equivalents |
|
$ |
219,605 |
|
The following unaudited pro forma condensed consolidated financial statements are presented to give effect to the Eagle Ford Acquisition as if this transaction had occurred on January 1, 2017. The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only, and are not intended to represent or be indicative of the profit or loss of the Company that would have been recorded had the Eagle Ford Properties been acquired as of the dates presented and should not be taken as representative of the future profit or loss of the Company. The pro forma adjustments give effect to pro forma events that are (1) directly attributable to the Eagle Ford Acquisition, (2) factually supportable and (3) with respect to the consolidated statements of income, expected to have a continuing impact on the combined results. The unaudited condensed consolidated financial statements do not reflect the impact of any potential operational efficiencies, cost savings or economies of scale that the Company may achieve with respect to the consolidated operations. Additionally, the pro forma statement of profit or loss does not include non-recurring charges or credits and the related tax effects which result directly from this transaction.
The unaudited pro forma condensed statement of profit or loss for the year ended December 31, 2017, which presents our operations as if the acquisition of the Eagle Ford Properties had occurred on January 1, 2017, has been derived from the following:
· Our statement of profit or loss for the year ended December 31, 2017;
· The Eagle Ford Properties statement of revenues and direct expenses for the year ended December 31, 2017; and
· Pro forma adjustments.
The unaudited pro forma condensed statement of financial position as at December 31, 2017, which presents our financial position as if the acquisition of the Eagle Ford Properties had occurred on December 31, 2017, has been derived from the following:
· Our statement of financial position as at December 31, 2017; and
· Pro forma adjustments.
The assets and liabilities of the Eagle Ford Acquisition have been recorded at their estimated fair values, with no resulting bargain purchase gain or goodwill. The final purchase price allocation has not been performed and may vary materially upon completion of the Companies acquisition date fair valuation. The amounts recorded have taken into consideration the cash paid and the estimated fair value of the acquired crude oil, natural gas and NGL properties.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in the referenced financial statements.
SUNDANCE ENERGY AUSTRALIA LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
|
FOR THE YEAR ENDED |
|
Sundance |
|
Eagle Ford |
|
Pro Forma |
|
|
|
Sundance |
| ||||
|
|
|
US$000 |
|
US$000 |
|
US$000 |
|
|
|
US$000 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Oil and natural gas revenue |
|
$ |
104,399 |
|
$ |
24,467 |
|
$ |
|
|
|
|
$ |
128,866 |
|
|
Lease operating expenses |
|
(22,416 |
) |
(12,418 |
) |
(577 |
) |
(a) |
|
(35,411 |
) | ||||
|
Production taxes |
|
(6,613 |
) |
(1,438 |
) |
|
|
|
|
(8,051 |
) | ||||
|
General and administrative expense |
|
(18,345 |
) |
|
|
1,704 |
|
(b) |
|
(16,641 |
) | ||||
|
Depreciation and amortisation expense |
|
(58,361 |
) |
|
|
(2,394 |
) |
(c) |
|
(60,755 |
) | ||||
|
Impairment expense |
|
(5,583 |
) |
|
|
|
|
|
|
(5,583 |
) | ||||
|
Finance costs, net of amounts capitalized |
|
(13,491 |
) |
|
|
(15,091 |
) |
(d) |
|
(28,582 |
) | ||||
|
Loss on sale of non-current assets |
|
(1,461 |
) |
|
|
|
|
|
|
(1,461 |
) | ||||
|
Loss on derivative instruments |
|
(2,894 |
) |
|
|
|
|
|
|
(2,894 |
) | ||||
|
Other income, net |
|
457 |
|
|
|
|
|
|
|
457 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Gain (loss) before income tax |
|
(24,308 |
) |
10,611 |
|
(16,358 |
) |
|
|
(30,055 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income tax expense |
|
1,873 |
|
|
|
|
|
|
|
1,873 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Gain (loss) attributable to owners of the Company |
|
$ |
(22,435 |
) |
$ |
10,611 |
|
$ |
(16,358 |
) |
|
|
$ |
(28,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Loss per share |
|
(cents |
) |
|
|
|
|
|
|
(cents |
) | ||||
|
Basic |
|
(1.8 |
) |
|
|
|
|
|
|
(0.4 |
) | ||||
|
Diluted |
|
(1.8 |
) |
|
|
|
|
|
|
(0.4 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average common shares outstanding (000) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic |
|
1,251,339 |
|
5,614,447 |
|
|
|
|
|
6,865,786 |
| ||||
|
Diluted |
|
1,251,339 |
|
5,614,447 |
|
|
|
|
|
6,865,786 |
| ||||
SUNDANCE ENERGY AUSTRALIA LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
AS AT DECEMBER 31, 2017 |
|
Sundance |
|
Pro Forma |
|
|
|
Sundance |
|
|
|
|
US$000 |
|
US$000 |
|
|
|
US$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$5,761 |
|
$45,592 |
|
(e) |
|
$51,353 |
|
|
Trade and other receivables |
|
3,966 |
|
|
|
|
|
3,966 |
|
|
Derivative financial instruments |
|
383 |
|
|
|
|
|
383 |
|
|
Income tax receivables |
|
40 |
|
|
|
|
|
40 |
|
|
Other current assets |
|
3,472 |
|
577 |
|
(f) |
|
4,049 |
|
|
Assets held for sale |
|
61,064 |
|
|
|
|
|
61,064 |
|
|
TOTAL CURRENT ASSETS |
|
74,686 |
|
46,169 |
|
|
|
120,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
Development and production assets |
|
338,796 |
|
183,420 |
|
(g) |
|
522,216 |
|
|
Exploration and evaluation assets |
|
34,979 |
|
45,200 |
|
(g) |
|
80,179 |
|
|
Property and equipment |
|
1,246 |
|
|
|
|
|
1,246 |
|
|
Income tax receivable, non-current |
|
4,688 |
|
|
|
|
|
4,688 |
|
|
Derivative financial instruments |
|
223 |
|
|
|
|
|
223 |
|
|
TOTAL NON-CURRENT ASSETS |
|
379,932 |
|
228,620 |
|
|
|
608,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$454,618 |
|
$274,789 |
|
|
|
$729,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
$9,051 |
|
$ |
|
|
|
$9,051 |
|
|
Accrued expenses |
|
39,051 |
|
|
|
|
|
39,051 |
|
|
Production prepayment |
|
18,194 |
|
(18,194 |
) |
(h) |
|
|
|
|
Derivative financial instruments |
|
5,618 |
|
|
|
|
|
5,618 |
|
|
Provisions, current |
|
1,158 |
|
|
|
|
|
1,158 |
|
|
Liabilities related to assets held for sale |
|
1,064 |
|
|
|
|
|
1,064 |
|
|
TOTAL CURRENT LIABILITIES |
|
74,136 |
|
(18,194 |
) |
|
|
55,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Credit facilities, net of deferred financing fees |
|
189,310 |
|
44,433 |
|
(i) |
|
233,743 |
|
|
Restoration provision |
|
7,567 |
|
9,015 |
|
(j) |
|
16,582 |
|
|
Other provisions, non-current |
|
2,158 |
|
|
|
|
|
2,158 |
|
|
Derivative financial instruments |
|
3,728 |
|
|
|
|
|
3,728 |
|
|
Other non-current liabilities |
|
368 |
|
|
|
|
|
368 |
|
|
TOTAL NON-CURRENT LIABILITIES |
|
203,131 |
|
53,448 |
|
|
|
256,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
$277,267 |
|
$35,254 |
|
|
|
$312,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
$177,351 |
|
$239,535 |
|
|
|
$416,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
Issued capital |
|
$372,764 |
|
$250,925 |
|
(k) |
|
$623,689 |
|
|
Share based payments reserve |
|
16,250 |
|
|
|
|
|
16,250 |
|
|
Foreign currency translation reserve |
|
(1,134 |
) |
|
|
|
|
(1,134 |
) |
|
Accumulated deficit |
|
(210,529 |
) |
(11,390 |
) |
(l) |
|
(221,919 |
) |
|
TOTAL EQUITY |
|
$177,351 |
|
$239,535 |
|
|
|
$416,886 |
|
SUNDANCE ENERGY AUSTRALIA LIMITED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
1. Supplemental Pro Forma Oil and Gas Disclosures
Estimated Net Quantities of Proved Oil and Gas Reserves
The following pro forma estimated reserve quantities reflect the impact of the Eagle Ford Acquisition. These reserve estimates have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission regarding oil and natural gas reserve reporting:
|
|
|
Sundance |
|
Eagle Ford |
|
Sundance |
|
|
|
|
|
|
|
|
|
|
|
Total proved reserves: |
|
|
|
|
|
|
|
|
January 1, 2017 |
|
29,490 |
|
6,194 |
|
35,684 |
|
|
Revisions of previous estimates |
|
(1,972 |
) |
1,469 |
|
(503 |
) |
|
Extensions and discoveries |
|
12,386 |
|
|
|
12,386 |
|
|
Purchases of reserves in-place |
|
11,278 |
|
|
|
11,278 |
|
|
Production |
|
(2,727 |
) |
(857 |
) |
(3,584 |
) |
|
Sales of reserves in-place |
|
(1,376 |
) |
|
|
(1,376 |
) |
|
December 31, 2017 |
|
47,079 |
|
6,806 |
|
53,885 |
|
|
Proved developed reserves |
|
15,744 |
|
6,806 |
|
22,550 |
|
|
Proved undeveloped reserves (1) |
|
31,335 |
|
|
|
31,335 |
|
(1) Although the Company expects Proved undeveloped reserves to be recorded related to the Eagle Ford Properties, the amounts shown in the table above (nil) reflect the Sellers Proved undeveloped reserves based upon their final investment decision as of December 31, 2017. Pursuant to Rule 3-05 of the Securities and Exchange Commissions Regulation S-X, the Acquisitions reserves shown in these statements are based on the Sellers development plan of those assets as of December 31, 2017.
The following reflects the pro forma standardized measure of the discounted future net cash flows and changes applicable to the Companys proved reserves. The future net cash flows are discounted at 10% per year and assume continuation of existing economic conditions.
The standardized measure of discounted future net cash flows, in managements opinion, should be examined with caution. The basis for this table is the reserve studies prepared by petroleum engineers, which may contain imprecise estimates of quantities and rates of production of reserves. Revisions of previous year estimates can have a significant impact on these results. Also, exploration costs in one year may lead to significant discoveries in later years and may significantly change previous estimates of proved reserves and their valuation. Therefore, the standardized measure of discounted future net cash flows is not necessarily indicative of the fair value of the Companys proved oil and natural gas properties. The data presented should not be viewed as representing the expected net cash flows from, or current value of, existing proved reserves because the computations are based on estimates and assumptions. Reserve quantities may not be measured with precision and their estimation requires many judgmental determinations and frequent revisions. Actual future prices and costs may be different from the prices and costs utilized in the computation of reported amounts.
The following pro forma standardized measure of discounted estimate future net cash flows (in thousands) reflect the impact of the Eagle Ford Acquisition.
|
As at December 31, 2017 |
|
Sundance |
|
Eagle Ford |
|
Pro Forma |
|
Sundance |
| ||||
|
|
|
US$000 |
|
US$000 |
|
US$000 |
|
US$000 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Cash inflows |
|
$ |
1,866,923 |
|
$ |
258,381 |
|
$ |
|
|
$ |
2,125,304 |
|
|
Production costs |
|
(667,438 |
) |
(192,961 |
) |
|
|
(860,399 |
) | ||||
|
Development costs |
|
(516,243 |
) |
(2,499 |
) |
|
|
(518,742 |
) | ||||
|
Income tax expense |
|
(35,933 |
) |
|
|
35,933 |
|
|
| ||||
|
Net cash flows |
|
647,309 |
|
62,921 |
|
35,933 |
|
746,163 |
| ||||
|
10% annual discount rate |
|
(280,562 |
) |
(14,041 |
) |
(21,441 |
) |
(316,044 |
) | ||||
|
Standardized measure of discounted future net cash flows |
|
$ |
366,747 |
|
$ |
48,880 |
|
$ |
14,492 |
|
$ |
430,119 |
|
The changes in the pro forma standardized measure of discounted estimate future net cash flows (in thousands) reflect the impact of the Eagle Ford Acquisition, and the elimination of future income taxes resulting from the combination of Sundance Historical and the Eagle Ford Properties.
|
|
|
Sundance |
|
Eagle Ford |
|
Pro Forma |
|
Sundance |
| ||||
|
|
|
US$000 |
|
US$000 |
|
US$000 |
|
US$000 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Standardized measure, January 1, 2017 |
|
$ |
159,139 |
|
$ |
34,213 |
|
$ |
|
|
$ |
193,352 |
|
|
Sales, net of production costs |
|
(75,370 |
) |
(10,611 |
) |
|
|
(85,981 |
) | ||||
|
Net change in sales prices, net of production costs |
|
7,899 |
|
13,876 |
|
|
|
21,775 |
| ||||
|
Extensions and discoveries, net of future production and development costs |
|
94,151 |
|
|
|
|
|
94,151 |
| ||||
|
Changes in future development costs |
|
17,128 |
|
|
|
|
|
17,128 |
| ||||
|
Previously estimated development costs incurred |
|
51,414 |
|
|
|
|
|
51,414 |
| ||||
|
Revision of quantity estimates |
|
(20,598 |
) |
11,516 |
|
|
|
(9,082 |
) | ||||
|
Accretion of discount |
|
15,914 |
|
3,421 |
|
|
|
19,335 |
| ||||
|
Change in income taxes |
|
(14,492 |
) |
|
|
14,492 |
|
|
| ||||
|
Purchases of reserves in-place |
|
88,280 |
|
|
|
|
|
88,280 |
| ||||
|
Sales of reserves in-place |
|
(7,544 |
) |
|
|
|
|
(7,544 |
) | ||||
|
Change in production rates and other |
|
50,826 |
|
(3,535 |
) |
|
|
47,291 |
| ||||
|
Standardized Measure, December 31, 2017 |
|
$ |
366,747 |
|
$ |
48,880 |
|
$ |
14,492 |
|
$ |
430,119 |
|
2. Pro Forma Assumptions
Unaudited Pro Forma Condensed Consolidated Statement of Profit or Loss for the Year Ended December 31, 2017
(a) The adjustment to lease operating expenses includes the amortization of the portion of the bond premium secured to guarantee the payment of the Companys portion of the minimum revenue commitments to Companys transporting crude oil, natural gas and NGLs, with the remaining portion of the obligation
retained by the Sellers. The Company will continue to pay a portion of the bond premium through the end of the minimum revenue commitment period ending in 2023.
(b) The adjustment to general and administrative expense includes the elimination of certain transaction costs related to the acquisition of the Eagle Ford Properties incurred in the Companys historical statement of profit or loss.
(c) The adjustment to depreciation and amortization includes the estimated provision of $2.2 million computed on the additional depreciable and amortizable basis of $57.2 million related to the developed assets reflected in development and production assets under the units-of-production method based on historical production volumes and reserve volumes estimated by the Companys reservoir engineers. The adjustment also includes $0.2 million of accretion on the additional restoration provision of $9.0 million as if the acquisition was consummated on January 1, 2017, resulting in a total adjustment to depreciation and amortization of $2.4 million.
(d) The adjustment to finance costs, net of amounts capitalized, includes the incremental interest expense of $11.8 million on the refinanced credit facilities as if it had been consummated on January 1, 2017. In addition, the adjustment includes amortization of $3.3 million on additional financing fees of $16.3 million over the life of the refinanced credit facilities.
Unaudited Pro Forma Condensed Consolidated Statement of Financial Position as at December 31, 2017
(e) The adjustment to cash includes an increase of $250.9 million resulting from issued capital of $260.0 million, net of offering costs of $9.1 million, reduced by $219.6 million for the costs to acquire the Eagle Ford Properties, associated transaction costs of $8.7 million, and a $0.6 million bond premium necessary to guarantee the payment of the minimum volume commitments to the Companys transporting crude oil, natural gas and NGLs. The adjustment to cash also includes an increase of $58.0 million for proceeds of $250.0 million from the refinanced term loan, reduced by a payoff of the existing term loan of $125.0 million and the revolving facility of $67.0 million, and reduced by financing fees of $16.3 million to secure the refinanced credit facilities.
(f) To guarantee the payment of the minimum volume commitments to the Companys transporting crude oil, natural gas and NGLs required the payment of a $0.6 million bond premium.
(g) The Company acquired certain Eagle Ford Properties for $221.5 million, net of estimated effective date to closing date adjustments of $1.9 million through December 31, 2017, consisting primarily of crude oil and natural gas revenue, net of lease operating expense and production taxes. The Company assumed a restoration provision of $9.0 million, which was recorded with a corresponding increase to development and production assets, as if the acquisition was consummated on December 31, 2017. The Company allocated approximately $183.4 million and $45.2 million of the purchase price to development and production assets and exploration and evaluation assets, respectively.
(h) Contemporaneous with the refinancing, the Company paid off its production prepayment of $11.8 million with its oil purchaser. The balance of the production prepayment as of December 31, 2017 was $18.2 million.
(i) Commensurate with entry into the acquisition of the Eagle Ford Properties, the Company refinanced its existing credit facilities. The refinancing included the receipt of $250.0 million of proceeds from a refinanced term loan, the payoff of the existing term loan of $125.0 million and the revolving facility of $67.0 million, the write off of existing deferred financing fees of $2.7 million, and deferred financing fees of $16.3 million related to the refinanced credit facilities.
(j) The Company assumed a restoration provision of $9.0 million as if the acquisition was consummated on December 31, 2017.
(k) The Company issued additional capital of $260.0 million, reduced by issuance costs of $9.1 million, or net proceeds of $250.9 million.
(l) The Company estimated remaining transaction costs of $8.7 million related to the Eagle Ford Acquisition, which are reflected as an increase to the December 31, 2017 accumulated deficit as if the acquisition was consummated on that date. The Company incurred $1.7 million of third-party transaction costs during 2017. The accumulated deficit was also increased by $2.7 million for the write off of deferred financing fees associated with the existing credit facilities that were paid off.
3. Subsequent Events
The Company has evaluated subsequent events through May 2, 2018, the date the accompanying Unaudited Pro Forma Condensed Consolidated Financial Statements were available to be issued. There were no material subsequent events that required recognition or additional disclosure in the accompanying Unaudited Pro Forma Condensed Consolidated Financial Statements.
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-204490) of Sundance Energy Australia Limited pertaining to the Sundance Energy Employee Option Plan and Sundance Energy Australia Limited Long Term Incentive Plan,
(2) Registration Statement (Form F-3 No. 333-216220) of Sundance Energy Australia Limited pertaining to the Registration Statement of a Foreign Private Issuer, and
(3) Registration Statement (Form F-3 No. 333-224583) of Sundance Energy Australia Limited pertaining to the Registration Statement of a Foreign Private Issuer;
of our report dated May 2, 2018, with respect to the statements of revenues and direct operating expenses of the Eagle Ford Properties included in this Report of Foreign Private Issuer (Form 6-K) of Sundance Energy Australia Limited for the years ended December 31, 2017 and 2016.
|
|
/s/ Ernst & Young LLP |
|
|
|
|
Dallas, Texas |
|
|
May 2, 2018 |
|