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 registrant’s 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.

 

Exhibit
Number

 

Description

99.1

 

Audited Statements of Revenue and Direct Operating Expenses of the Eagle Ford Properties for the years ended December 31, 2017 and 2016

99.2

 

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

99.3

 

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.

 

 

Sundance Energy Australia Limited

 

 

 

 

 

 

 

By:

/s/ Cathy L. Anderson

 

Name:

Cathy L. Anderson

Date: May 2, 2018

Title:

Chief Financial Officer

 


Exhibit 99.1

 

Contents

 

 

Page

 

 

Report of Independent Auditors

2

 

 

Financial Statements

 

 

 

Statements of Revenues and Direct Operating Expenses

3

 

 

Notes to the Statements of Revenues and Direct Operating Expenses

4 - 5

 

 

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.

 

Management’s 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.

 

Auditor’s 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 auditor’s 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 entity’s 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 entity’s 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.

 

 

/s/ Ernst & Young LLP

 

 

Dallas, Texas

 

May 2, 2018

 

 

2



 

THE EAGLE FORD PROPERTIES

 

STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

 

(in thousands)

 

Year Ended December 31,

 

2017

 

2016

 

Revenues:

 

 

 

 

 

Oil, natural gas and natural gas liquids sales

 

$

24,467

 

$

27,791

 

 

 

 

 

 

 

Direct operating expenses:

 

 

 

 

 

Lease operating expenses

 

12,418

 

15,168

 

Production taxes

 

1,438

 

1,659

 

 

 

 

 

 

 

Total direct operating expenses

 

13,856

 

16,827

 

 

 

 

 

 

 

Revenues in excess of direct operating expenses

 

$

10,611

 

$

10,964

 

 

See accompanying Notes to the Statements of Revenues and Direct Operating Expenses.

 

3



 

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 Commission’s 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 seller’s 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.

 

4



 

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 Company’s 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 SEC’s 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:

 

 

 

Oil (MBbl)

 

Natural Gas
(MMcf)

 

NGL (MBbl)

 

Total (Mboe)

 

Balance as of January 1, 2016

 

4,254

 

6,536

 

1,238

 

6,581

 

Production

 

(678

)

(2,003

)

(283

)

(1,295

)

Revisions to previous estimates

 

419

 

1,644

 

214

 

908

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2016

 

3,955

 

6,178

 

1,169

 

6,194

 

Production

 

(457

)

(1,291

)

(185

)

(857

)

Revisions to previous estimates

 

863

 

1,866

 

295

 

1,469

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2017

 

4,401

 

6,752

 

1,279

 

6,806

 

 

5



 

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

 

 

 

Oil (MBbl)

 

Natural Gas
(MMcf)

 

NGL
(MBbl)

 

Total (Mboe)

 

Proved Developed

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Proved Undeveloped

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2016

 

 

 

 

 

Balance as of December 31, 2016

 

 

 

 

 

Balance as of December 31, 2017

 

 

 

 

 

 

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:

 

Year Ended December 31,

 

2017

 

2016

 

Average 12-month price, net of differentials, per barrel of oil

 

$

48.81

 

$

38.55

 

Average 12-month price, net of differentials, per Mcf of natural gas

 

$

2.88

 

$

2.39

 

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

 

 

 

 

 

 

 

Future cash inflows

 

$

258,381

 

$

187,181

 

Future costs:

 

 

 

 

 

Production

 

(192,962

)

(142,736

)

Development

 

(2,499

)

(2,499

)

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

)

Standardized measure of discounted future net cash flows

 

$

48,880

 

$

34,213

 

 

6



 

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

 

Changes in production rates and timing

 

(3,535

)

(5,369

)

Standardized measure at the end of the year

 

$

48,880

 

$

34,213

 

 

7


Exhibit 99.2

 

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):

 

Estimated fair value of assets acquired:

 

 

 

 

 

 

 

Development and production assets

 

$

183,420

 

 

 

 

 

Exploration and evaluation assets

 

45,200

 

 

 

 

 

Total assets acquired

 

 

228,620

 

 

 

 

 

Estimated fair value of liabilities assumed:

 

 

 

 

 

 

 

Restoration provision

 

(9,015

)

 

 

 

 

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
DECEMBER 31, 2017

 

Sundance
Historical

 

Eagle Ford
Acquisition
Historical

 

Pro Forma
Adjustments

 

 

 

Sundance
Pro Forma

 

 

 

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
Historical

 

Pro Forma
Adjustments

 

 

 

Sundance
Pro Forma

 

 

 

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
Historical

(Mboe)

 

Eagle Ford
Acquisition
(Mboe)

 

Sundance
Pro Forma
(Mboe)

 

 

 

 

 

 

 

 

 

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 Commission’s Regulation S-X, the Acquisition’s 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 Company’s 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 management’s 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 Company’s 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
Historical

 

Eagle Ford
Acquisition

 

Pro Forma
Adjustments

 

Sundance
Pro Forma

 

 

 

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
Historical

 

Eagle Ford
Acquisition

 

Pro Forma
Adjustments

 

Sundance
Pro Forma

 

 

 

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 Company’s portion of the minimum revenue commitments to Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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.

 


Exhibit 99.3

 

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