NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts
in this Report on
Form 10-K
are expressed in thousands of U.S. dollars (except per share data), unless otherwise noted).
DESCRIPTION OF THE BUSINESS:
Ultra Petroleum Corp. (the
Company) is an independent oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and natural gas properties. The Company is incorporated under the laws of Yukon, Canada. The
Companys principal business activities are developing its long-life natural gas reserves in the Green River Basin of Wyoming the Pinedale and Jonah fields, its oil reserves in the Uinta Basin in Utah and its natural gas reserves in the
Appalachian Basin of Pennsylvania.
Chapter 11 Proceedings, Ability to Continue as a Going Concern
Chapter 11 Proceedings
On April 29, 2016 (the Petition Date), to restructure their respective obligations and capital structures, the Company and each of its direct and indirect wholly owned subsidiaries
(collectively, the Ultra Entities or Debtors) filed voluntary petitions under chapter 11 of title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District
of Texas (the Bankruptcy Court). The Debtors chapter 11 cases are being jointly administered for procedural purposes under the caption In re Ultra Petroleum Corp., et al, Case
No. 16-32202
(MI) (Bankr. S.D. Tex.). Information about our chapter 11 cases is available at our website (www.ultrapetroleum.com) and also at a website maintained by our claims agent, Epiq Systems
(http://dm.epiq11.com/UPT/Docket).
We are currently operating our business as a
debtor-in-possession
in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. After we filed our chapter 11 petitions, the
Bankruptcy Court granted certain relief we requested enabling us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to pay employee wages
and benefits, pay taxes and certain governmental fees and charges, continue to operate our cash management system in the ordinary course, remit funds we hold from time to time for the benefit of third parties (such as royalty owners), and pay the
prepetition claims of certain of our vendors that hold liens under applicable
non-bankruptcy
law. For goods and services provided following the Petition Date, we intend to pay vendors in full under normal
terms.
Subject to certain exceptions provided for in section 362 of the Bankruptcy Code, all judicial and
administrative proceedings against us or our property were automatically enjoined, or stayed, as of the Petition Date. In addition, the filing of new judicial or administrative actions against us or our property for claims arising prior to the date
on which our chapter 11 cases were filed were automatically enjoined. This prohibits, for example, our lenders or noteholders from pursuing claims for defaults under our debt agreements and our contract counterparties from pursuing claims for
defaults under our contracts. Accordingly, unless the Bankruptcy Court agrees to lift the automatic stay, all of our prepetition liabilities and obligations should be settled or compromised under the Bankruptcy Code as part of our chapter 11
proceedings.
Our operations and ability to execute our business remain subject to the risks and uncertainties
described in Item 1A, Risk Factors. In addition, our assets, liabilities, including our capital structure, shareholders, officers and/or directors could change materially because of our chapter 11 cases. In addition, the description of
our operations, properties and capital plans included in this Annual Report on Form
10-K
may not accurately reflect our operations, properties and capital plans after we emerge from chapter 11.
82
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Creditors Committees Appointment & Formation
On May 5, 2016, the United States Trustee for the Southern District of Texas appointed an official
committee for unsecured creditors of all of the Debtors (the UCC). On September 26, 2016, the United States Trustee for the Southern District of Texas filed a Notice of Reconstitution of the UCC. In addition, certain other stakeholders
have organized for purposes of participating in the Debtors chapter 11 cases: (i) on June 8, 2016, an informal ad hoc committee of unsecured creditors of our subsidiary, Ultra Resources, Inc. (Ultra Resources), notified the
Bankruptcy Court it had formed and identified its members, most of which are distressed debt investors and/or hedge funds; (ii) on June 13, 2016, an informal ad hoc committee of the holders of senior notes issued by the Company notified the
Bankruptcy Court it had formed and identified its members; (iii) on July 20, 2016, an informal ad hoc committee of shareholders of the Company notified the Bankruptcy Court it had formed and identified its members; and (iv) on January 6, 2017, an
informal ad hoc committee of unsecured creditors of our subsidiary, Ultra Resources, notified the Bankruptcy Court it had formed and identified its members, most of which are insurance companies. We expect each of the committees to be involved in
our chapter 11 cases, and any disagreements with any of the committees may extend our chapter 11 cases, increase the cost of our chapter 11 cases, and/or delay our emergence from chapter 11.
Exclusivity
The Bankruptcy Code provides chapter 11
debtors-in-possession
with the exclusive right to file a plan of reorganization
under chapter 11 through a period of time specified in the Bankruptcy Code, which period may be extended by the Bankruptcy Court. On July 27, 2016, we filed a motion seeking an extension of the exclusive chapter 11 plan filing period. At a
hearing conducted on August 25, 2016, the Bankruptcy Court extended our exclusive right to file a plan of reorganization under chapter 11 through and including March 1, 2017, and to solicit acceptances of such plan through and including
May 1, 2017, subject to our producing and delivering a long-term business plan prior to December 1, 2016. The long-term business plan was provided prior to December 1, 2016, and, pursuant to a Stipulation Regarding Order Extending
Exclusivity signed by the Bankruptcy Court, we satisfied the condition (with the effect that our exclusive right to file a reorganization plan now continues until and including March 1, 2017, and our exclusive right to solicit acceptances of
such a plan continues until and including May 1, 2017). On February 1, 2017, we filed a motion seeking an extension of the exclusive chapter 11 plan filing period through June 29, 2017 and the exclusive right to solicit acceptances of
a chapter 11 plan through August 29, 2017. On February 17, 2017, we filed a revised proposed form of order to the motion seeking an extension of the exclusive chapter 11 plan filing period through April 15, 2017 and the exclusive
right to solicit acceptances of a chapter 11 plan through June 15, 2017.
Plan Support Agreement, Rights Offering,
Backstop Commitment Agreement and Exit Financing Commitment Letter
On November 21, 2016, each of
the Ultra Entities entered into a Plan Support Agreement (PSA) with (i) holders of at least 66.67% of the principal amount of the Companys outstanding 5.750% Senior Notes due 2018 and 6.125% Senior Notes due 2024 and
(ii) shareholders who own at least a majority of the Companys outstanding common stock or the economic interests therein (collectively, the Plan Support Parties) and a Backstop Commitment Agreement (BCA) with a
subset thereof (collectively, the Commitment Parties).
Plan Support
Agreement
: The PSA sets forth the terms and conditions pursuant to which the Ultra Entities and the Commitment Parties have agreed to seek and support a joint plan of reorganization at an aggregate plan value of
$6.25 billion, $6.0 billion, or $5.5 billion, depending on commodity prices, for the Ultra Entities which will successfully complete the Reorganization Proceedings (collectively, the Plan). Under the
83
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Plan, the total enterprise value of the Ultra Entities will be $6.0 billion (the Plan Value); provided, that if the average closing price of the
12-month
forward Henry Hub natural gas strip price during the seven (7) trading days preceding the commencement of the Rights Offering solicitation is: (i) greater than $3.65/MMBtu, the Plan Value
will be $6.25 billion; or (ii) less than $3.25/MMBtu, the Plan Value will be $5.5 billion.
Among other matters, the Plan provides for a comprehensive restructuring of all allowable claims against and interests in
the Ultra Entities, including the conversion of the outstanding unsecured senior notes issued by the Company (HoldCo Notes and, the holders thereof, HoldCo Noteholders) to newly-issued shares of common stock in the Company,
the exchange of the outstanding unsecured senior notes issued by UPLs subsidiary Ultra Resources for a combination of new unsecured notes issued by Ultra Resources and cash, the payment in full of all other allowed claims against the Ultra
Debtors in cash, and the distribution to each owner of common stock in the Company as of the Plans record date (HoldCo Equityholders) of such owners pro rata share of the new UPL common stock and the right to participate in
the Rights Offering (as described below).
The PSA provides certain milestones for the restructuring, which
the Company is required to use commercially reasonable efforts to satisfy. Failure of the Company to satisfy certain milestones, including (i) entry of an order approving the Debtors entry into the BCA by January 20, 2017 and
(ii) consummation of the Plan by April 15, 2017 would provide the Plan Support Parties a termination right under the PSA.
On February 9, 2017, the Company entered into the First Amendment to the Plan Support Agreement (the PSA Amendment) with the Plan Support Parties party thereto. Pursuant to the PSA
Amendment, the Required Consenting Parties agreed that the Plan Term Sheet, as modified to accord with the treatment of OpCo Funded Debt Claims and General Unsecured Claims under the Second Amended Plan, is reasonably satisfactory to such parties
(as such terms are defined in the Plan Support Agreement).
On February 13, 2017, the Court signed an
order approving our Disclosure Statement. On February 21, 2017, the Court signed an amended order approving our Disclosure Statement. The amended order: (1) approves the adequacy of our Disclosure Statement, (2) approves the
solicitation and notice procedures related to confirmation of our plan of reorganization, (3) approves the forms of ballots and notices related thereto, (4) approves the rights offering procedures and matters related thereto,
(5) schedules certain dates related to our plan confirmation process and Rights Offering, and (6) grants related relief. With respect to the Rights Offering, the amended order defines the Subscription Commencement Date as
February 21, 2017. Accordingly, as will be reflected in the materials to be distributed in connection with the Rights Offering, the Plan Value under the PSA is $6.0 billion.
Rights Offering
: In accordance with the Plan, the BCA and the Rights Offering
procedures submitted by the Company in connection with the Plan, the Company will offer eligible debt and equity holders, including the Commitment Parties, the right to purchase shares of new common stock in the Company upon effectiveness of the
Plan for an aggregate purchase price of $580.0 million. The Rights Offering will consist of the following offerings:
|
|
|
HoldCo Noteholders shall be granted rights (the HoldCo Noteholder Rights Offering) entitling each such holder to subscribe for the
Rights Offering in an amount up to its pro rata share of new common stock (the HoldCo Noteholder Rights Offering Shares), which HoldCo Noteholder Rights Offering Shares, collectively, will reflect an aggregate purchase price of
$435.0 million.
|
|
|
|
HoldCo Equityholders shall be granted rights (the HoldCo Equityholder Rights Offering) entitling each such holder to subscribe for the
Rights Offering in an amount up to its pro rata share of new common stock (the HoldCo Equityholder Rights Offering Shares and, together with the HoldCo
|
84
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
Noteholder Rights Offering Shares, the Rights Offering Shares), which HoldCo Equityholder Rights Offering Shares, collectively, will reflect an aggregate purchase price of
$145.0 million.
|
Backstop Commitment
Agreement
: Under the BCA, the Commitment Parties have agreed to purchase the HoldCo Noteholder Rights Offering Shares and the HoldCo Equityholder Rights Offering Shares, as applicable, that are not duly subscribed for
pursuant to the HoldCo Noteholder Rights Offering or the HoldCo Equityholder Rights Offering, as applicable, by parties other than Commitment Parties (the Backstop Commitment) at an implied 20% discount to the Plan Value, which is the
price for the rights offering set forth in the PSA (the Rights Offering Price).
The Company will
pay the Commitment Parties upon the closing of the Rights Offering a Commitment Premium equal to 6.0% of the $580.0 million committed amount (the Commitment Premium). The Commitment Premium was fully earned as of January 19,
2017, the date the Backstop Approval Order was entered by the Bankruptcy Court. The Commitment Premium will be paid either in the form of new common stock at the Rights Offering Price, if the Plan is consummated as contemplated in the Plan Support
Agreement, or in cash in the amount of 4.0% of the $580.0 million committed amount, if the Backstop Agreement is terminated other than as a result of a material breach by the Commitment Parties.
Exit Financing Commitment Letter
: On February 8, 2017, the Debtors obtained a
commitment letter (the Commitment Letter) from Barclays Bank PLC (including any affiliates that may perform its responsibilities thereunder, Barclays), pursuant to which, in connection with the consummation of the Plan,
Barclays has agreed to provide secured and unsecured financing in an aggregate amount of up to $2.4 billion, consisting of:
|
|
|
A seven-year senior secured first lien term loan credit facility (the Term Loan Facility) in an aggregate amount of $600.0 million;
|
|
|
|
A five-year senior secured first lien revolving credit facility (the Revolving Facility) in an aggregate amount of $400.0 million
with an initial borrowing base (the Borrowing Base) (which limits the aggregate amount of first lien debt under the Revolving Facility and the Term Loan Facility) of $1.0 billion with scheduled semi-annual redeterminations starting
on October 1, 2017; and
|
|
|
|
Senior unsecured bridge loans under senior unsecured bridge facilities (together with the Revolving Facility and the Term Loan Facility, the
Credit Facilities) in an aggregate amount of $1.4 billion, consisting of (i) a five-year bridge facility in an aggregate principal amount of $700.0 million, less the aggregate principal amount of privately placed five-year senior
unsecured notes of the Company, if any, issued on or prior to the closing date of the Credit Facilities (the Closing Date) and (ii) an eight-year bridge facility in an aggregate principal amount of $700.0 million, less the aggregate
principal amount of privately placed eight-year senior unsecured notes of the Company, if any, issued on or prior to the Closing Date.
|
The Revolving Facility is anticipated to, among other things:
|
|
|
have capacity for the Debtors to increase the commitments subject to certain conditions;
|
|
|
|
have $100.0 million of the commitments available for the issuance of letters of credit; and
|
|
|
|
require the Company to maintain (A) a maximum total net debt to EBITDAX ratio of (i) 4.25 to 1.0 as of the end of the first full fiscal quarter
after the closing date and each subsequent fiscal quarter of 2017 and (ii) 4.0 to 1.0 as of the end of each fiscal quarter thereafter, (B) a minimum current ratio of 1.0 to 1.0 and (C) a minimum interest coverage ratio of 2.5 to 1.0.
|
85
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Term Loan Facility is anticipated to, among other things, have
capacity for the Debtors to increase the commitments, with such increase in commitments subject to certain conditions.
The Revolving Facility and Term Loan Facility will include customary affirmative and negative covenants, including, among other things, as to compliance with laws, delivery of quarterly and annual
financial statements and oil and gas engineering reports, maintenance and operation of properties (including oil and gas properties), maintenance of a lien on, and delivery of title information with respect to, 85% of the Debtors proved oil
and gas reserves, restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other customary covenants.
The Revolving Facility and Term Loan Facility will include events of default relating to customary matters, including,
among other things, nonpayment of principal, interest or other amounts; violation of covenants; incorrectness of representations and warranties in any material respect; cross-payment default and cross acceleration with respect to material
indebtedness; bankruptcy; material judgments; and certain ERISA events. Many events of default are subject to customary notice and cure periods.
The commitments of Barclays to provide the Credit Facilities are subject to certain conditions set forth in the Commitment Letter, including but not limited to the Plan Support Parties reasonable
satisfaction with the approval by the Bankruptcy Court of all actions to be taken, undertakings to be made and obligations to be incurred by the Debtors in connection with the Credit Facilities.
The Commitment Letter will terminate upon the occurrence of certain events described therein and the outside termination
date for the Commitment Letter is May 9, 2017.
Based on the indicative pricing levels provided to the
Company, the blended interest rate of the Credit Facilities on the effective date of the Plan (the Blended Rate) is expected to be approximately 5.10% per annum. The actual Blended Rate on the effective date of the Plan will depend on
factors including, without limitation, the size of each tranche of the Credit Facilities and the results of the syndication process of such Credit Facilities, and may therefore be higher or lower than 5.10% per annum.
As previously disclosed on a Current Report on Form
8-K
filed with the SEC on
February 9, 2017, on February 8, 2017, the Debtors filed a motion with the Bankruptcy Court seeking authorization to enter into and perform under the Commitment Letter and the other commitment papers. The motion was heard and approved
during the Companys disclosure statement hearing on February 13, 2017.
Plan of Reorganization (Disclosure
Statement)
We plan to emerge from our chapter 11 cases after we obtain approval from the Bankruptcy
Court for a chapter 11 plan of reorganization. Among other things, a chapter 11 plan of reorganization will determine the rights and satisfy the claims of our prepetition creditors and security holders. The terms and conditions of a chapter 11 plan
of reorganization will be determined through negotiations with our stakeholders and, possibly, decisions by the Bankruptcy Court.
On December 6, 2016, we filed an initial plan of reorganization and disclosure statement therefore. On January 17, 2017, we filed a revised plan of reorganization and disclosure statement
therefore. On February 8, 2017, we filed a further revised plan of reorganization and disclosure statement therefore. On February 13, 2017, we filed amendments and further revisions to the plan of reorganization we filed on
February 8, 2017 (the
86
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Plan) and to the disclosure statement therefore (the Disclosure Statement). The Court approved our Disclosure Statement on February 13, 2017 and scheduled a hearing
to consider confirmation of the Plan for March 14, 2017.
Under the absolute priority scheme established
by the Bankruptcy Code, unless our creditors agree otherwise, all of our prepetition liabilities and postpetition liabilities must be satisfied in full before the holders of our existing common stock can receive any distribution or retain any
property under a chapter 11 plan of reorganization. The ultimate recovery to creditors and/or shareholders, if any, will not be determined until confirmation and implementation of a plan or plans of reorganization. We can give no assurance that any
recovery or distribution of any amount will be made to any of our creditors or shareholders. Our plan of reorganization could result in any of the holders of our liabilities and/or securities, including our common stock, receiving no distribution on
account of their interests and cancellation of their holdings. Moreover, a plan of reorganization can be confirmed, under the Bankruptcy Code, even if the holders of our common stock vote against the plan and even if the plan provides that the
holders of our common stock receive no distribution on account of their equity interests.
Liabilities Subject to
Compromise
We have applied Accounting Standards Codification (ASC) 852, Reorganizations,
in preparing the Consolidated Financial Statements included in this Annual Report on Form
10-K.
In addition, the consolidated financial statements presented here include amounts classified as liabilities
subject to compromise. This amount represents estimates of known or potential prepetition claims expected to be resolved in connection with our chapter 11 proceedings. Additional amounts may be included in liabilities subject to compromise in
future periods if we elect to reject executory contracts and unexpired leases as part of our chapter 11 cases. Due to the uncertain nature of many of the potential claims, the magnitude of potential claims is not reasonably estimable at this time.
Potential claims not currently included with liabilities subject to compromise in our Consolidated Balance Sheets may be material. In addition, differences between amounts we are reporting as liabilities subject to compromise in this Annual Report
on Form
10-K
and the amounts attributable to such matters claimed by our creditors or approved by the Bankruptcy Court may be material. We will continue to evaluate our liabilities throughout the chapter 11
process, and we plan to make adjustments in future periods as necessary and appropriate. Such adjustments may be material.
Under the Bankruptcy Code, we may assume, assign, or reject certain executory contracts and unexpired leases, subject to the approval of the Bankruptcy Court and certain other conditions. If we reject a
contract or lease, such rejection generally (1) is treated as a prepetition breach of the contract or lease, (2) subject to certain exceptions, relieves the Debtors of performing their future obligations under such contract or lease, and
(3) entitles the counterparty thereto to a prepetition general unsecured claim for damages caused by such deemed breach. If we assume an executory contract or unexpired lease, we are generally required to cure any existing monetary defaults
under such contract or lease and provide adequate assurance of future performance to the counterparty. Accordingly, any description of an executory contract or unexpired lease in this Annual Report on Form
10-K,
including any quantification of our obligations under any such contract or lease, is wholly qualified by the rejection rights we have under the Bankruptcy Code. Further, nothing herein is or shall be
deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and we expressly preserve all of our rights with respect thereto.
87
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the components of liabilities subject to
compromise included in our Consolidated Balance Sheets as of December 31, 2016:
|
|
|
|
|
|
|
December 31,
2016
|
|
Accounts payable
|
|
$
|
1,322
|
|
Accrued liabilities
|
|
|
6,303
|
|
Accrued interest payable
|
|
|
99,774
|
|
Debt
|
|
|
3,759,000
|
|
Accrued contract settlements
|
|
|
171,642
|
|
|
|
|
|
|
Liabilities subject to compromise
|
|
$
|
4,038,041
|
|
|
|
|
|
|
Schedules and Statements Magnitude of Potential Claims & Claims Resolution Process
On June 8, 2016, each of the Debtors filed a Schedule of Assets and Liabilities and Statement of
Financial Affairs (collectively, the Schedules and Statements) with the Bankruptcy Court setting forth, among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. On October
14, 2016, Ultra Wyoming LGS, LLC (UWLGS), one of the Debtors and our indirect, wholly owned subsidiary, filed an amendment to its Schedules and Statements. The Schedules and Statements are subject to further amendment or modification.
Certain holders of prepetition claims were required to file proofs of claim by the deadline for filing certain proofs of claims in the Debtors chapter 11 cases, which deadline was September 1, 2016, for prepetition general unsecured claims and
October 26, 2016, for governmental claims. Differences between amounts scheduled by the Debtors and claims by creditors will be investigated and resolved in connection with the claims resolution process. In light of the expected number of creditors,
the claims resolution process may take considerable time to complete and will likely continue after our emergence from bankruptcy. Accordingly, the ultimate number and amount of allowed claims is not presently known, nor can the ultimate recovery
with respect to allowed claims be presently ascertained.
To the best of our knowledge, we have notified all
of our known current or potential creditors that the Debtors have filed chapter 11 cases. The Schedules and Statements set forth, among other things, the assets and liabilities of each of the Debtors, including executory contracts to which each of
the Debtors is a party, and are subject to the qualifications and assumptions included therein and amendment or modification as our chapter 11 cases proceed.
Through the claims resolution process, differences in amounts scheduled by the Debtors and claims filed by creditors will be investigated and resolved, including through the filing of objections with the
Bankruptcy Court where appropriate.
Many of the claims identified in the Schedules and Statements are listed
as disputed, contingent or unliquidated. In addition, there are differences between the amounts for certain claims listed in the Schedules and Statements and the amounts claimed by our creditors. Such differences, as well as other disputes and
contingencies will be investigated and resolved as part of our claims resolution process in our chapter 11 cases. Please refer to Note 11 for additional information about contingent matters and commitments related to certain claims filed in our
chapter 11 cases.
Pursuant to the Federal Rules of Bankruptcy Procedure, some creditors who wished to assert
prepetition claims against us and whose claims (i) were not listed in the Schedules and Statements or (ii) were listed in the
88
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Schedules and Statements as disputed, contingent, or unliquidated, were required to file a proof of claim with the Bankruptcy Court prior to the bar date set by the court. The bar date for
non-governmental
creditors was September 1, 2016, and the bar date for governmental creditors was October 26, 2016.
The claims filed against the Debtors to date are voluminous. Further, it is possible that claimants will file amended or modified claims in the future, including modifications or amendments to assign
values to claims originally filed with no designated value. The amended or modified claims may be material.
We plan to investigate and evaluate all filed claims in connection with our plan of reorganization. As a part of the
claims resolution process, we anticipate working to resolve differences in amounts we listed in our Schedules and Statements and amounts of claims filed by our creditors. We have already identified, for example, claims that we believe should be
disallowed by the Bankruptcy Court because they are duplicative, have been later amended or superseded, are without merit, are overstated or for other reasons. We have previously filed, and we will continue to file and prosecute objections with the
Bankruptcy Court as necessary for claims we believe should be disallowed.
Tax Attributes; Net Operating Loss
Carryforwards
We have substantial tax net operating loss carryforwards and other tax attributes. Under
the U.S. Internal Revenue Code, our ability to use these net operating losses and other tax attributes may be limited if we experience a change of control, as determined under U.S. Internal Revenue Code. Accordingly, we obtained an order from the
Bankruptcy Court that is intended to protect our ability to use our tax attributes by imposing certain notice procedures and transfer restrictions on the trading of the Companys common stock.
In general, the order applies to any person or entity that, directly or indirectly, beneficially owns (or would
beneficially own as a result of a proposed transfer) at least 4.5% of the Companys common stock. Such persons are required to notify us and the Bankruptcy Court before effecting a transaction that might result in us losing the ability to use
our tax attributes, and we have the right to seek an injunction to prevent the transaction if it might adversely affect our ability to use our tax attributes.
Any purchase, sale or other transfer of our equity securities in violation of the restrictions of the order is null and would be treated as invalid from the outset as an act in violation of a Bankruptcy
Court order and would therefore confer no rights on a proposed transferee.
Costs of Reorganization
We have incurred and will continue to incur significant costs associated with our reorganization and the chapter 11
proceedings. We expect these costs, which are being expensed as incurred, will significantly affect our results of operations. In addition, a
non-cash
charge to
write-off
the unamortized debt issuance costs related to our funded indebtedness is included in Reorganization items, net as these debt instruments are expected to be impacted by the pendency of
the Companys chapter 11 cases. For additional information about the costs of our reorganization and chapter 11 proceedings, see Reorganization items, net below.
89
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the components included in Reorganization
items, net in our Consolidated Statements of Operations for the three and year months ended December 31, 2016:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Professional fees(1)
|
|
$
|
11,781
|
|
|
$
|
|
|
|
$
|
|
|
Deferred financing costs(2)
|
|
|
18,742
|
|
|
|
|
|
|
|
|
|
Contract settlements(3)
|
|
|
17,350
|
|
|
|
|
|
|
|
|
|
Other(4)
|
|
|
(370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Reorganization items, net
|
|
$
|
47,503
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The year ended
December 31, 2016 includes $6.4 million directly related to accrued, unpaid professional fees associated with the chapter 11 filings.
|
(2)
|
A
non-cash
charge to
write-off
all of the unamortized debt issuance
costs related to the unsecured Credit Agreement, unsecured Senior Notes issued by Ultra Resources, the unsecured 2018 Senior Notes issued by the Company and the unsecured 2024 Senior Notes issued by the Company is included in Reorganization items,
net as these debt instruments are expected to be impacted by the pendency of the Companys chapter 11 cases.
|
(3)
|
Includes accrued, unpaid amounts subject to Bankruptcy Court approval related to a settlement reached with Big West Oil, LLC in the amount of
$17.35 million.
|
(4)
|
Cash interest income earned for the period after the Petition Date on excess cash over normal invested capital.
|
Ability to Continue as a Going Concern
The Consolidated Financial Statements included in this Annual Report on Form
10-K
have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The Consolidated Financial Statements do
not reflect any adjustments that might result from the outcome of our chapter 11 proceedings. We have significant indebtedness, all of which we have reclassified to liabilities subject to compromise at December 31, 2016. Our level of
indebtedness has adversely impacted and is continuing to adversely impact our financial condition. As a result of our financial condition, the defaults under our debt agreements, and the risks and uncertainties surrounding our chapter 11
proceedings, substantial doubt exists that we will be able to continue as a going concern.
1.
|
SIGNIFICANT ACCOUNTING POLICIES:
|
Our accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the
normal course of business for the twelve-month period following the date of these consolidated financial statements.
(a) Basis of presentation and principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company presents its financial
statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). All inter-company transactions and balances have been eliminated upon consolidation.
(b)
Cash and Cash Equivalents:
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
90
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(c)
Restricted Cash:
Restricted cash
primarily represents cash received by the Company from production sold where the final division of ownership of the production is unknown or in dispute.
(d)
Accounts Receivable:
Accounts receivable are stated at the historical carrying amount net of write-offs and an allowance for uncollectible accounts. The carrying amount
of the Companys accounts receivable approximates fair value because of the short-term nature of the instruments. The Company routinely assesses the collectability of all material trade and other receivables.
(e)
Property, Plant and Equipment:
Capital assets are recorded at cost and depreciated
using the declining-balance method based on their respective useful life.
(f)
Oil and Natural Gas
Properties:
The Company uses the full cost method of accounting for exploration and development activities as defined by the Securities and Exchange Commission (SEC) Release
No. 33-8995,
Modernization of Oil and Gas Reporting Requirements (SEC Release
No. 33-8995)
and Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 932, Extractive Activities Oil and Gas (FASB ASC 932). Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and
development activities are capitalized as oil and gas properties. This includes any internal costs that are directly related to exploration and development activities but does not include any costs related to production, general corporate overhead
or similar activities. The carrying amount of oil and natural gas properties also includes estimated asset retirement costs recorded based on the fair value of the asset retirement obligation when incurred. Gain or loss on the sale or other
disposition of oil and natural gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas attributable to a country.
The sum of net capitalized costs and estimated future development costs of oil and natural gas properties are amortized
using the
units-of-production
method based on the Companys proved reserves. Oil and natural gas reserves and production are converted into equivalent units based
on relative energy content. Asset retirement costs are included in the base costs for calculating depletion.
Under the full cost method, costs of unevaluated properties and major development projects expected to require
significant future costs may be excluded from capitalized costs being amortized. The Company excludes significant costs until proved reserves are found or until it is determined that the costs are impaired. The Company reviews its unproved leasehold
costs quarterly or when management determines that events or circumstances indicate that the recorded carrying value of the unevaluated properties may not be recoverable. The fair values of unproved properties are evaluated utilizing a discounted
net cash flows model based on managements assumptions of future oil and gas production, commodity prices, operating and development costs; as well as appropriate discount rates. The estimated prices used in the cash flow analysis are
determined by management based on forward price curves for the related commodities, adjusted for average historical location and quality differentials. Estimates of cash flows related to probable and possible reserves are reduced by additional
risk-weighting factors. The amount of any impairment is transferred to the capitalized costs being amortized.
Companies that use the full cost method of accounting for oil and natural gas exploration and development activities are
required to perform a ceiling test calculation each quarter. The full cost ceiling test is an impairment test prescribed by SEC
Regulation S-X
Rule 4-10.
The
ceiling test is performed quarterly, on a
country-by-country
basis, utilizing the average of prices in effect on the first day of the month for the preceding twelve
month period in accordance with SEC Release
No. 33-8995.
The ceiling limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas
reserves discounted at 10%, plus the lower of cost or market value of unproved properties, less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as
91
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a
non-cash
charge to earnings. Any such write-down will reduce earnings in the period of occurrence and results in a lower depletion, depreciation and
amortization (DD&A) rate in future periods. A write-down may not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling.
The Company did not have any write-downs related to the full cost ceiling limitation in 2016 or 2014. During 2015, the
Company recorded a $3.1 billion
non-cash
write-down of the carrying value of the Companys proved oil and gas properties as a result of ceiling test limitations, which is reflected within
ceiling test and other impairments in the accompanying Consolidated Statements of Operations. The ceiling test was calculated based upon the average of quoted market prices in effect on the first day of the month for the preceding twelve month
period at December 31, 2015 for Henry Hub natural gas and West Texas Intermediate oil, adjusted for market differentials.
(g)
Inventories:
At December 31, 2016 and 2015, inventory of $4.9 million and $4.3 million, respectively, primarily includes the cost of pipe and production
equipment that will be utilized during the 2017 drilling program and crude oil inventory. Materials and supplies inventories are carried at lower of cost or market and include expenditures and other charges directly and indirectly incurred in
bringing the inventory to its existing condition and location. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory cost. The Company uses the weighted average method of recording its
materials and supplies inventory. Crude oil inventory is valued at lower of cost or market.
(h)
Derivative
Instruments and Hedging Activities:
The Company follows FASB ASC Topic 815, Derivatives and Hedging (FASB ASC 815). The Company records the fair value of its commodity derivatives as an asset or liability in
the Consolidated Balance Sheets, and records the changes in the fair value of its commodity derivatives in the Consolidated Statements of Operations. The Company does not offset the value of its derivative arrangements with the same counterparty.
(See Note 7).
(i)
Deferred Financing Costs:
During the year ended
December 31, 2016, a
non-cash
charge to
write-off
all of the unamortized debt issuance costs related to the unsecured Credit Agreement, unsecured Senior Notes (as
defined below) issued by Ultra Resources, Inc., the unsecured 2018 Senior Notes (as defined below) issued by the Company and the unsecured 2024 Senior Notes (as defined below) issued by the Company is included in Reorganization items, net in the
accompanying Consolidated Statements of Operations as these debt instruments are expected to be impacted by the pendency of the Companys chapter 11 cases. At December 31, 2015, other current assets includes costs associated with the
issuance of our revolving credit facility while costs associated with the issuance of our Senior Notes, 2018 Notes and 2024 Notes are presented as a direct deduction from the carrying amount of the related debt liability.
(j)
Income Taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded related to deferred tax assets based on the more likely than not criteria
described in FASB ASC Topic 740, Income Taxes. In addition, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an
audit.
92
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(k)
Earnings (loss) Per Share:
Basic
earnings (loss) per share is computed by dividing net earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share is computed by adjusting the
average number of common shares outstanding for the dilutive effect, if any, of common stock equivalents. The Company uses the treasury stock method to determine the dilutive effect. The weighted average shares in the table below do not consider any
potential dilutive effects of the proposed plan of reorganization discussed in Note 1.
The following table
provides a reconciliation of components of basic and diluted net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net income
|
|
$
|
56,151
|
|
|
$
|
(3,207,220
|
)
|
|
$
|
542,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding during the period
|
|
|
153,378
|
|
|
|
153,192
|
|
|
|
153,136
|
|
Effect of dilutive instruments
|
|
|
703
|
|
|
|
|
(1)
|
|
|
1,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding during the period including the effects of dilutive instruments
|
|
|
154,081
|
|
|
|
153,192
|
|
|
|
154,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic
|
|
$
|
0.37
|
|
|
$
|
(20.94
|
)
|
|
$
|
3.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share fully diluted
|
|
$
|
0.36
|
|
|
$
|
(20.94
|
)
|
|
$
|
3.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares not included in dilutive earnings per share that would have been anti-dilutive because the exercise price was
greater than the average market price of the common shares
|
|
|
1,437
|
|
|
|
|
(1)
|
|
|
1,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Due to the net loss for the year ended December 31, 2015, 1.7 million shares for options and restricted stock units were anti-dilutive and
excluded from the computation of net loss per share.
|
(l)
Use of
Estimates:
Preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(m)
Accounting for Share-Based Compensation:
The Company measures and recognizes
compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values in accordance with FASB ASC Topic 718, Compensation Stock Compensation.
(n)
Fair Value Accounting:
The Company follows FASB ASC Topic 820, Fair Value Measurements
and Disclosures (FASB ASC 820), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. This statement applies under other accounting topics that
require or permit fair value measurements. See Note 8 for additional information.
(o)
Asset Retirement
Obligation:
The initial estimated retirement obligation of properties is recognized as a liability with an associated increase in oil and gas properties for the asset retirement cost. Accretion expense is recognized over
the estimated productive life of the related assets. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded to both the asset retirement obligation and the asset retirement cost. Revisions in estimated
liabilities can result from revisions of estimated inflation rates, changes in
93
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
service and equipment costs and changes in the estimated timing of settling asset retirement obligations. As a full cost company, settlements for asset retirement obligations for abandonment are
adjusted to the full cost pool. The asset retirement obligation is included within other long-term obligations in the accompanying Consolidated Balance Sheets.
(p)
Revenue Recognition:
The Company generally sells oil and natural gas under both long-term and short-term agreements at prevailing market prices. The Company recognizes
revenues when the oil and natural gas is delivered, which occurs when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. The Company accounts
for oil and natural gas sales using the entitlements method. Under the entitlements method, revenue is recorded based upon the Companys ownership share of volumes sold, regardless of whether it has taken its ownership share of such
volumes. Any amount received in excess of the Companys share is treated as a liability. If the Company receives less than its entitled share, the underproduction is recorded as a receivable.
Make-up
provisions and ultimate settlements of volume imbalances are generally
governed by agreements between the Company and its partners with respect to specific properties or, in the absence of such agreements, through negotiation. The value of volumes over- or under-produced can change based on changes in commodity prices.
The Company prefers the entitlements method of accounting for oil and natural gas sales because it allows for recognition of revenue based on its actual share of jointly owned production, results in better matching of revenue with related operating
expenses, and provides balance sheet recognition of the estimated value of product imbalances. The Companys imbalance obligations as of December 31, 2016 and December 31, 2015 were immaterial.
(q)
Capitalized Interest:
Interest is capitalized on the cost of unevaluated gas and
oil properties that are excluded from amortization and actively being evaluated, if any.
(r)
Capital Cost
Accrual:
The Company accrues for exploration and development costs in the period incurred, while payment may occur in a subsequent period.
(s)
Reclassifications:
Certain amounts in the financial statements of prior periods
have been reclassified to conform to the current period financial statement presentation.
(t)
Deposits and
Retainers:
Deposits and retainers primarily consists of payments related to surety bonds.
(u)
Recent Accounting Pronouncements:
In November 2016, the FASB issued ASU
2016-18,
Statement of Cash Flows (Topic 230):
Restricted Cash
(ASU
No. 2016-18).
The guidance requires that an explanation is included in the cash flow statement of the change in the total of (1) cash, (2) cash equivalents, and
(3) restricted cash or restricted cash equivalents. The ASU also clarifies that transfers between cash, cash equivalents and restricted cash or restricted cash equivalents should not be reported as cash flow activities and requires the nature
of the restrictions on cash, cash equivalents, and restricted cash or restricted cash equivalents to be disclosed. For public companies, the standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2017 with earlier application permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In August 2016, the FASB issued ASU
2016-15,
Statement of Cash Flows
(Topic 230)
(ASU
No. 2016-15).
The guidance requires that debt prepayment or debt extinguishment costs, including third-party costs, premiums paid, and other fees paid to lenders, be
classified as cash outflows for financing activities. For public companies, the standard will take effect for fiscal years, and interim periods within those fiscal years,
94
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
beginning after December 15, 2017 with earlier application permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update (ASU)
2016-09,
Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
(ASU
No. 2016-09)
to simplify some
of the provisions in stock compensation accounting. The update simplifies the accounting for a stock payments tax consequences and amends how excess tax benefits and a businesss payments to cover the tax bills for the shares
recipients should be classified. The amendments allow companies to estimate the number of stock awards expected to vest and revises the withholding requirements for classifying stock awards as equity. For public companies, the standard will take
effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 with earlier application permitted. The Company is still evaluating the impact of ASU
No. 2016-09
on its financial position and results of operations.
In February 2016, the FASB issued ASU
2016-02,
Leases
(ASU
No. 2016-02).
The guidance requires that lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12
months. The ASU will also require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. For
public companies, the standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with earlier application permitted. The Company is still evaluating the impact of ASU
No. 2016-02
on its financial position and results of operations.
In
July 2015, the FASB issued ASU
2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory
(ASU
No. 2015-11).
Public companies will
have to apply the amendments for reporting periods that start after December 15, 2016, including interim periods within those fiscal years. This ASU requires an entity to measure inventory at the lower of cost and net realizable value. Net
realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The company does not expect the adoption of ASU
No. 2015-11
to have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU
2015-03,
Interest Imputation of Interest (Subtopic
835-30)
Simplifying
the Presentation of Debt Issuance Costs.
In August 2015, the FASB issued ASU
2015-15,
Interest Imputation of Interest (Subtopic
835-30)
Presentation
and Subsequent Measurement of Debt Issuance Costs Associated with
Line-of-Credit
Arrangements
. These ASUs require capitalized debt issuance costs, except for those
related to revolving credit facilities, to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than as an asset. The Company adopted these ASUs on January 1, 2016, using a
retrospective approach. The adoption resulted in a reclassification that reduced current assets and current maturities of long-term debt by $19.4 million on the Companys Consolidated Balance Sheet at December 31, 2015. A
non-cash
charge to
write-off
all of the unamortized debt issuance costs is included in Reorganization items, net at December 31, 2016 as the related debt instruments are
expected to be impacted by the pendency of the Companys chapter 11 cases.
In May 2014, the FASB issued
ASU
2014-09,
Revenue from Contracts with Customers (Topic 606) and in 2016, the FASB issued ASU
2016-08,
Revenue from Contracts with Customers (Topic 606): Principal
versus Agent Considerations (Reporting Revenue Gross versus Net), and ASU
2016-10,
Revenues from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which supersede the
revenue recognition requirements in Topic 605, Revenue Recognition, and industry-specific guidance in Subtopic
95
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
932-605,
Extractive
Activities-Oil
and
Gas-Revenue
Recognition. The new
standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
We are currently evaluating the provisions of ASU
2014-09
and assessing the
impact, if any, it may have on our financial position and results of operations. As part of our assessment work to date, we have dedicated resources to the implementation, completed training of the new ASUs revenue recognition model, and begun
contract review and documentation. The primary impacts to the Company of adopting ASU
2014-09
relate to principal versus agent considerations and the use of the entitlements method for oil and natural gas
sales, both of which are continuing to be evaluated by the Company.
The Company is required to adopt the new
standards in the first quarter of 2018 using one of two application methods: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance
recognized at the date of initial application (the cumulative
catch-up
transition method). The Company is currently evaluating the available adoption methods.
In August 2014, the FASB issued ASU
No. 2014-15,
Disclosure of
Uncertainties about an Entitys Ability to Continue as a Going Concern
(ASU
No. 2014-15)
that requires management to evaluate whether there are conditions and events that raise
substantial doubt about the Companys ability to continue as a going concern within one year after the financial statements are issued on both an interim and annual basis. Management is required to provide certain footnote disclosures if it
concludes that substantial doubt exists or when its plans alleviate substantial doubt about the Companys ability to continue as a going concern. ASU
No. 2014-15
becomes effective for annual periods
ending after December 15, 2016 and for interim reporting periods thereafter. The adoption of this ASU did not have a material impact on the Companys Consolidated Financial Statements.
2.
|
ASSET RETIREMENT OBLIGATIONS:
|
The Company is required to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived
assets that result from the acquisition, construction, development and/or normal use of the assets. The following table summarizes the activities for the Companys asset retirement obligations for the years ended:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Asset retirement obligations at beginning of period
|
|
$
|
146,210
|
|
|
$
|
127,240
|
|
Accretion expense
|
|
|
10,252
|
|
|
|
9,122
|
|
Liabilities incurred
|
|
|
1,317
|
|
|
|
7,352
|
|
Liabilities settled
|
|
|
(170
|
)
|
|
|
(1,861
|
)
|
Revisions of estimated liabilities
|
|
|
(436
|
)
|
|
|
4,357
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations at end of period
|
|
|
157,173
|
|
|
|
146,210
|
|
Less: current asset retirement obligations
|
|
|
(239
|
)
|
|
|
(305
|
)
|
|
|
|
|
|
|
|
|
|
Long-term asset retirement obligations
|
|
$
|
156,934
|
|
|
$
|
145,905
|
|
|
|
|
|
|
|
|
|
|
96
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.
|
OIL AND GAS PROPERTIES:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
Proven Properties:
|
|
|
|
|
|
|
|
|
Acquisition, equipment, exploration, drilling and environmental costs
|
|
$
|
10,752,642
|
|
|
$
|
10,480,165
|
|
Less: Accumulated depletion, depreciation and amortization(1)
|
|
|
(9,742,176
|
)
|
|
|
(9,629,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,010,466
|
|
|
|
851,145
|
|
|
|
|
|
|
|
|
|
|
On a unit basis, DD&A was $0.44, $1.38 and $1.18 per Mcfe for the years ended
December 31, 2016, 2015 and 2014, respectively.
(1)
|
During 2015, the Company recorded a $3.1 billion
non-cash
write-down of the carrying value of the
Companys proved oil and gas properties as a result of ceiling test limitations, which is reflected within ceiling test and other impairments in the accompanying Consolidated Statements of Operations. The ceiling test was calculated based upon
the average of quoted market prices in effect on the first day of the month for the preceding twelve month period at December 31, 2015 for Henry Hub natural gas and West Texas Intermediate oil, adjusted for market differentials.
|
4.
|
PROPERTY, PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book
Value
|
|
|
Net Book
Value
|
|
Computer equipment
|
|
|
2,840
|
|
|
|
(2,237
|
)
|
|
|
603
|
|
|
|
794
|
|
Office equipment
|
|
|
309
|
|
|
|
(171
|
)
|
|
|
138
|
|
|
|
196
|
|
Leasehold improvements
|
|
|
486
|
|
|
|
(301
|
)
|
|
|
185
|
|
|
|
267
|
|
Land
|
|
|
4,637
|
|
|
|
|
|
|
|
4,637
|
|
|
|
4,637
|
|
Other
|
|
|
12,460
|
|
|
|
(10,328
|
)
|
|
|
2,132
|
|
|
|
2,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
20,732
|
|
|
$
|
(13,037
|
)
|
|
$
|
7,695
|
|
|
$
|
8,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
DEBT AND OTHER LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
Total Debt:
|
|
|
|
|
|
|
|
|
6.125% Senior Notes due 2024
|
|
$
|
850,000
|
|
|
$
|
850,000
|
|
5.75% Senior Notes due 2018
|
|
|
450,000
|
|
|
|
450,000
|
|
Senior Notes issued by Ultra Resources, Inc.
|
|
|
1,460,000
|
|
|
|
1,460,000
|
|
Credit Agreement
|
|
|
999,000
|
|
|
|
630,000
|
|
|
|
|
|
|
|
|
|
|
Total current portion of long-term debt
|
|
|
3,759,000
|
|
|
|
3,390,000
|
|
Less: Deferred financing costs(1)
|
|
|
|
|
|
|
(19,447
|
)
|
Less: Liabilities subject to compromise(2) (See Note 1)
|
|
|
(3,759,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current portion of long-term debt not subject to compromise
|
|
|
|
|
|
$
|
3,370,553
|
|
|
|
|
|
|
|
|
|
|
97
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
$
|
|
|
|
|
|
|
Other long-term obligations:
|
|
|
|
|
|
|
|
|
Other long-term obligations
|
|
|
177,088
|
|
|
$
|
165,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate maturities of debt at December 31, 2016:(2)
|
|
2017
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
Beyond
5 years
|
|
|
Total
|
|
$3,759,000
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,759,000
|
|
(1)
|
A
non-cash
charge to
write-off
all of the unamortized debt issuance
costs related to the unsecured Credit Agreement, the unsecured Senior Notes issued by Ultra Resources, the unsecured 2018 Senior Notes issued by the Company and the unsecured 2024 Senior Notes issued by the Company is included in Reorganization
items, net in the Consolidated Statements of Operations as these debt instruments are expected to be impacted by the pendency of the Companys chapter 11 cases.
|
(2)
|
We have significant indebtedness, all of which is included with liabilities subject to compromise at December 31, 2016 in the Consolidated
Balance Sheets. Our level of indebtedness has adversely impacted and is continuing to adversely impact our financial condition. As a result of our financial condition, the defaults under our debt agreements and the risks and uncertainties
surrounding our chapter 11 proceedings, substantial doubt exists that we will be able to continue as a going concern. As a result, we have classified all of our total outstanding debt as short-term.
|
Ultra Resources, Inc.
Bank indebtedness.
Ultra Resources, Inc. (Ultra Resources), a wholly owned subsidiary of the Company, is a party to the Credit Agreement. Ultra
Resources obligations under the Credit Agreement are guaranteed by the Company and UP Energy Corporation, a wholly owned subsidiary of the Company.
Ultra Resources filing of the chapter 11 petitions described in Note 1 constituted an event of default that accelerated its obligations under the Credit Agreement. Other events of default are also
present with respect to the Credit Agreement, including a failure to make interest payments and, as described below, a failure to deliver annual audited consolidated financial statements without a going concern qualification, a failure to meet the
minimum
PV-9
ratio covenant and a failure to comply with the consolidated leverage covenant in the Credit Agreement at the end of the first quarter of 2016. The Credit Agreement provides that upon the
acceleration of Ultra Resources obligations under the Credit Agreement, the outstanding balance of loans extended under the Credit Agreement comes due, unpaid interest accrued as of the time of the acceleration comes due, and any fees or other
obligations of the borrower come due. Under the Bankruptcy Code, the creditors under the Credit Agreement are stayed from taking any action against Ultra Resources or any of the other Debtors as a result of the default.
Prior to April 29, 2016, loans under the Credit Agreement bore interest, at the borrowers option, based on
(A) a rate per annum equal to the prime rate or the weighted average fed funds rate on overnight transactions during the preceding business day plus a margin based on a grid of the borrowers consolidated leverage ratio, or (B) a base
Eurodollar rate, substantially equal to the LIBOR rate, plus a margin based on a grid of the borrowers consolidated leverage ratio.
98
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Credit Agreement requires us to deliver annual audited, consolidated
financial statements for the Company without a going concern or like qualification or explanation. On March 15, 2016, we delivered an audit report with respect to the financial statements in our 2015 Annual Report on Form
10-K
that included an explanatory paragraph expressing uncertainty as to our ability to continue as a going concern.
The Credit Agreement contains a consolidated leverage covenant, pursuant to which Ultra Resources is required to maintain
a maximum ratio of its total funded consolidated debt to its trailing four fiscal quarters EBITDAX of 3.5 to 1.0. Based on Ultra Resources EBITDAX for the trailing four fiscal quarters ended March 31, 2016, we were not in compliance
with this consolidated leverage covenant at March 31, 2016 (the ratio was 4.6 times at March 31, 2016).
The Credit Agreement contains a
PV-9
covenant, pursuant to which Ultra Resources is required to maintain a minimum ratio of the discounted net present value of its
oil and gas properties to its total funded consolidated debt of 1.5 times. We were required to report whether we were in compliance with this covenant on April 1, 2016. Based on the
PV-9
of its oil and
gas properties at December 31, 2015, Ultra Resources failed to comply with the
PV-9
ratio covenant under the Credit Agreement (the ratio was 0.9 times at December 31, 2015).
Senior Notes
. Ultra Resources has outstanding $1.46 billion of senior notes
(Senior Notes) which were issued pursuant to a certain Master Note Purchase Agreement dated as of March 6, 2008 (as amended, supplemented or otherwise modified, the MNPA). The Senior Notes rank pari passu with the Credit
Agreement. Payment of the Senior Notes is guaranteed by the Company and by UP Energy Corporation. The Senior Notes are subject to representations, warranties, covenants and events of default similar to those in the Credit Agreement.
Ultra Resources filing of the chapter 11 petitions described in Note 1 constituted an event of default that
accelerated its obligations under the MNPA and the Senior Notes. Other events of default are also present with respect to the MNPA, including a failure to comply with the consolidated leverage covenant at the end of the first quarter of 2016 and a
failure to make principal and interest payments due under the Ultra Resources Senior Notes. The MNPA provides that upon the acceleration of Ultra Resources obligations under the MNPA and the Senior Notes, among other matters, the Senior
Notes are deemed to have matured, the unpaid principal balance of the Senior Notes comes due, unpaid interest accrued as of the time of the acceleration comes due, and any applicable make-whole amount (as determined pursuant to the MNPA) comes due.
Under the Bankruptcy Code, the creditors under the Senior Notes are stayed from taking any action against Ultra Resources or any of the other the Debtors as a result of the default.
The MNPA contains a consolidated leverage covenant, pursuant to which Ultra Resources is required to maintain a maximum
ratio of its total funded consolidated debt to its trailing four fiscal quarters EBITDAX of 3.5 to 1.0. Based on Ultra Resources EBITDAX for the trailing four fiscal quarters ended March 31, 2016, we were not in compliance with this
consolidated leverage covenant at March 31, 2016 (the ratio was 4.6 times at March 31, 2016).
On
March 1, 2016, we failed to make an interest payment of approximately $40.0 million and a principal payment of $62.0 million, each of which was due March 1, 2016 under the terms of the Senior Notes. We entered into a forbearance
agreement related to the failure to make these payments with the holders of the Senior Notes, and we filed the chapter 11 petitions without making the payments before the forbearance period expired.
Interest Expense
. No interest expense has been recognized with respect to the Credit
Agreement or the Senior Notes subsequent to the Petition Date.
99
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Ultra Petroleum Corp. Senior Notes
The Companys filing of the chapter 11 petitions described in Note 1 constituted an event of default that accelerated
the Companys obligations under the 2024 Notes and the 2018 Notes. Additionally, other events of default, including cross-defaults, are present due to the failure to make interest payments and other matters. Under the indentures pursuant to
which the 2024 Notes and the 2018 Notes, respectively, were issued, upon the acceleration of the Companys obligations under the 2024 Notes and the 2018 Notes, among other matters, the 2024 Notes and the 2018 Notes, respectively, are deemed to
have matured, the unpaid principal balance of the 2024 Notes and the 2018 Notes, respectively, comes due, unpaid interest accrued as of the time of the acceleration comes due, and any applicable premiums (as determined pursuant to the indentures)
comes due. Under the Bankruptcy Code, the creditors under the 2024 Notes and the 2018 Notes are stayed from taking any action against the Debtors as a result of the default.
Senior Notes due 2024
: On September 18, 2014, the Company issued
$850.0 million of 6.125% Senior Notes due 2024 (2024 Notes). The 2024 Notes are general, unsecured senior obligations of the Company and mature on October 1, 2024. The 2024 Notes rank equally in right of payment to all existing
and future senior indebtedness of the Company and effectively rank junior to all future secured indebtedness of the Company (to the extent of the value of the collateral securing such indebtedness). The 2024 Notes are not guaranteed by the
Companys subsidiaries and, as a result, are structurally subordinated to the indebtedness and other obligations of the Companys subsidiaries. The 2024 Notes are subject to covenants that restrict the Companys ability to incur
indebtedness, make distributions and other restricted payments, grant liens, use the proceeds of asset sales, make investments and engage in affiliate transactions.
Interest due under the 2024 Notes is payable each April 1 and October 1. On April 1, 2016, we elected to defer
making an interest payment on the 2024 Notes of approximately $26.0 million due April 1, 2016. The indenture governing the 2024 Notes provides a 30-day grace period for us to make this interest payment. We did not make this interest
payment before the end of the grace period, which resulted in an event of default under the indenture governing the 2024 Notes.
Senior Notes due 2018
: On December 12, 2013, the Company issued $450.0 million of 5.75% Senior Notes due 2018 (2018 Notes). The 2018 Notes are
general, unsecured senior obligations of the Company and mature on December 15, 2018. The 2018 Notes rank equally in right of payment to all existing and future senior indebtedness of the Company and effectively rank junior to all future
secured indebtedness of the Company (to the extent of the value of the collateral securing such indebtedness). The 2018 Notes are not guaranteed by the Companys subsidiaries and, as a result, are structurally subordinated to the indebtedness
and other obligations of the Companys subsidiaries. The 2018 Notes are subject to covenants that restrict the Companys ability to incur indebtedness, make distributions and other restricted payments, grant liens, use the proceeds of
asset sales, make investments and engage in affiliate transactions. Interest due under the 2018 Notes is payable each June 15 and December 15.
The Companys filing of the chapter 11 petitions described in Note 1 constituted an event of default that accelerated the Companys obligations under the 2024 Notes and the 2018 Notes.
Additionally, other events of default, including cross-defaults resulting from the acceleration of indebtedness outstanding under the Credit Agreement and the Ultra Resources Senior Notes, are present due to the failure to make interest
payments and other matters. Under the Bankruptcy Code, the creditors under the 2024 Notes and the 2018 Notes are stayed from taking any action against the Debtors as a result of the Companys bankruptcy filings.
Interest Expense
. No interest expense has been recognized with respect to the 2024
Notes or the 2018 Notes subsequent to the Petition Date.
100
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other long-term obligations:
These
costs primarily relate to the long-term portion of production taxes payable and asset retirement obligations.
6.
|
SHARE BASED COMPENSATION:
|
The Company sponsors a share based compensation plan: the 2015 Stock Incentive Plan (2015 Plan). The Plan is administered by the Compensation Committee of the Board of Directors (the
Committee). The share based compensation plan is an important component of the total compensation package offered to the Companys key service providers, and reflects the importance that the Company places on motivating and
rewarding superior results.
The purpose of the 2015 Plan is to foster and promote the long-term financial
success of the Company and to increase shareholder value by attracting, motivating and retaining key employees, consultants, and outside directors, and providing such participants with a program for obtaining an ownership interest in the Company
that links and aligns their personal interests with those of the Companys shareholders, and thus, enabling such participants to share in the long-term growth and success of the Company. To accomplish these goals, the Plan permits the granting
of incentive stock options,
non-statutory
stock options, stock appreciation rights, restricted stock, and other stock-based awards, some of which may require the satisfaction of performance-based criteria in
order to be payable to participants. The Committee determines the terms and conditions of the awards, including, any vesting requirements and vesting restrictions and estimates forfeitures that may occur. The Committee may grant awards under the
2015 Plan until December 31, 2024.
Valuation and Expense Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Total cost of share-based payment plans
|
|
$
|
8,013
|
|
|
$
|
6,137
|
|
|
$
|
8,640
|
|
Amounts capitalized in oil and gas properties and equipment
|
|
$
|
2,451
|
|
|
$
|
2,009
|
|
|
$
|
3,173
|
|
Amounts charged against income, before income tax benefit
|
|
$
|
5,562
|
|
|
$
|
4,128
|
|
|
$
|
5,467
|
|
Amount of related income tax benefit recognized in income before valuation allowances
|
|
$
|
2,216
|
|
|
$
|
1,645
|
|
|
$
|
2,285
|
|
Securities Authorized for Issuance Under Equity Compensation Plans
As of December 31, 2016, the Company had the following securities issuable pursuant to outstanding award agreements
or reserved for issuance under the Companys previously approved stock incentive plans. Upon exercise, shares issued will be newly issued shares or shares issued from treasury.
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of
Securities to
be
Issued
Upon Exercise of
Outstanding
Options
|
|
|
Weighted
Average
Exercise Price of
Outstanding
Options
|
|
|
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation
Plans
(Excluding Securities
Reflected in the
First Column)
|
|
|
|
(000s)
|
|
|
|
|
|
(000s)
|
|
Equity compensation plans approved by security holders
|
|
|
346
|
|
|
$
|
60.64
|
|
|
|
4,339
|
|
Equity compensation plans not approved by security holders
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
346
|
|
|
$
|
60.64
|
|
|
|
4,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in Stock Options and Stock Options Outstanding
The following table summarizes the changes in stock options for the three year period ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
(US$)
|
|
|
|
(000s)
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
1,246
|
|
|
$
|
16.97
|
|
|
|
to
|
|
|
$
|
98.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(513
|
)
|
|
$
|
33.57
|
|
|
|
to
|
|
|
$
|
75.18
|
|
Exercised
|
|
|
(43
|
)
|
|
$
|
16.97
|
|
|
|
to
|
|
|
$
|
25.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
690
|
|
|
$
|
25.68
|
|
|
|
to
|
|
|
$
|
98.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(171
|
)
|
|
$
|
25.68
|
|
|
|
to
|
|
|
$
|
75.18
|
|
Balance, December 31, 2015
|
|
|
519
|
|
|
$
|
49.05
|
|
|
|
to
|
|
|
$
|
98.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(173
|
)
|
|
$
|
50.15
|
|
|
|
to
|
|
|
$
|
75.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
346
|
|
|
$
|
49.05
|
|
|
|
to
|
|
|
$
|
98.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about the stock options outstanding and
exercisable at December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding and Exercisable
|
|
Range of Exercise Price
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
(000s)
|
|
|
(Years)
|
|
|
|
|
|
|
|
$49.05 $62.23
|
|
|
210
|
|
|
|
0.31
|
|
|
$
|
54.12
|
|
|
$
|
|
|
$51.60 $98.87
|
|
|
136
|
|
|
|
1.45
|
|
|
$
|
70.64
|
|
|
$
|
|
|
The aggregate intrinsic value in the preceding tables represents the total
pre-tax
intrinsic value, based on the Companys closing stock price of $7.23 per share on December 31, 2016, which would have been received by the option holders had all option holders exercised their
options as of that date. There were no
in-the-money
options exercisable as of December 31, 2016.
The following table summarizes information about the weighted-average grant-date fair value of share options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Options forfeited during the year
|
|
$
|
25.17
|
|
|
$
|
28.00
|
|
|
$
|
24.40
|
|
As of December 31, 2011, all options were fully vested; therefore, no options vested
during the years ended December 31, 2016, 2015 or 2014. There were no stock options exercised during the years ended December 31, 2016, 2015 and 2014.
At December 31, 2016, there was no unrecognized compensation cost related to
non-vested,
employee stock options as all options fully vested as of December 31, 2011.
102
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
PERFORMANCE SHARE PLANS:
Long Term Incentive Plans.
During 2015 and 2014, the Company offered a Long Term Incentive
Plan (LTIP) in order to further align the interests of key employees with shareholders and to give key employees the opportunity to share in the long-term performance of the Company when specific corporate financial and operational goals
are achieved. Each LTIP covers a performance period of three years.
Under each LTIP, the Committee
establishes a percentage of base salary for each participant that is multiplied by the participants base salary at the beginning of the performance period and individual performance level to derive a Long Term Incentive Value as a
target value. This target value corresponds to the number of shares of the Companys common stock the participant is eligible to receive if the participant is employed by the Company through the date the award vests and
if the target level for all performance measures is met. In addition, each participant is assigned threshold and maximum award levels in the event the Companys actual performance is below or above target levels.
Time-Based Measure and Performance-Based Measures:
For each LTIP, the Compensation Committee established time-based and performance-based measures at the beginning of each
three-year performance period. For the LTIP awards in 2015 and 2014, the Compensation Committee established the following performance-based measures: return on capital employed, debt level, and reserve replacement ratio. At the time the LTIP awards
are awarded, the fair value of the time-based and performance-based component of the LTIP award is based on the average high and low market price of the Companys common stock on the date of the award.
Market-Based Measure (Total Shareholder Return):
LTIP awards granted to officers during 2016 and 2015, included an additional performance metric, Total Shareholder Return.
The grant-date fair value related to the market-based condition was calculated using a Monte Carlo simulation.
Valuation
Assumptions
The Company estimates the fair value of the market condition related to the LTIP awards on the
date of grant using a Monte Carlo simulation with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2015 LTIP
|
|
|
2014 LTIP
|
|
Volatility of common stock
|
|
|
40.1
|
%
|
|
|
39.0
|
%
|
Average volatility of peer companies
|
|
|
46.5
|
%
|
|
|
n/a
|
|
Average correlation coefficient of peer companies
|
|
|
0.454
|
|
|
|
n/a
|
|
Risk-free interest rate
|
|
|
1.02
|
%
|
|
|
0.66
|
%
|
Stock-Based Compensation Cost:
For the year ended December 31, 2016, the Company recognized $4.7 million in
pre-tax
compensation expense related to the 2015 and 2014 LTIP awards. For the year ended December 31, 2015, the Company recognized $2.9 million in
pre-tax
compensation expense related to the 2015, 2014 and 2013 LTIP awards. For the year ended December 31, 2014, the Company recognized $6.3 million in
pre-tax
compensation expense related to the 2014,
2013 and 2012 LTIP awards. The amounts recognized during the year ended December 31,
103
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2016 assumes that performance objectives between less than threshold and up to maximum are attained for the 2015 LTIP and 2014 LTIP plans. If the Company ultimately attains these performance
objectives, the associated total compensation, estimated at December 31, 2016, for each of the three-year performance periods is expected to be approximately $10.3 million and $9.5 million related to the 2015 and 2014 LTIP awards of
restricted stock units, respectively.
Based on the Companys achievement relative to the 2013
LTIPs performance-based measures, and based on the continued employment with the Company by those participants who received a payment in connection with the 2013 LTIP relative to the 2013 LTIPs time-based measures, during the first
quarter of 2016, the Compensation Committee approved payment of the 2013 LTIP. This was the first payment of an LTIP since our LTIPs were modified in 2013 to include time-based and performance-based measures. As such, the Compensation Committee
elected to pay the time-based portion of the LTIP awards in cash at the award value and the performance-based portion of the LTIP awards in shares of our common stock. The payout of the 2013 LTIP was during the first quarter of 2016 and totaled
$3.8 million (resulting in delivery of 132,843 net shares of our common stock to eligible participants in the 2013 LTIP).
7.
|
DERIVATIVE FINANCIAL INSTRUMENTS:
|
Objectives and Strategy:
The Companys major market risk exposure is in the pricing applicable to its natural gas and oil production. Realized pricing is currently
driven primarily by the prevailing price for the Companys Wyoming natural gas production. Historically, prices received for natural gas production have been volatile and unpredictable. Pricing volatility is expected to continue. As a result of
its hedging activities, the Company may realize prices that are less than or greater than the spot prices that it would have received otherwise.
The Company relies on various types of derivative instruments to manage its exposure to commodity price risk and to provide a level of certainty in the Companys forward cash flows supporting the
Companys capital investment program.
The Companys hedging policy limits the amounts of resources
hedged to not more than 50% of its forecast production without Board approval.
Fair Value of Commodity
Derivatives:
FASB ASC 815 requires that all derivatives be recognized on the balance sheet as either an asset or liability and be measured at fair value. Changes in the derivatives fair value are recognized currently
in earnings unless specific hedge accounting criteria are met. The Company does not apply hedge accounting to any of its derivative instruments.
Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at fair value on the Consolidated Balance Sheets and the associated unrealized
gains and losses are recorded as current expense or income in the Consolidated Statements of Operations. Unrealized gains or losses on commodity derivatives represent the
non-cash
change in the fair value of
these derivative instruments and do not impact operating cash flows on the Consolidated Statements of Cash Flows.
Commodity Derivative Contracts:
At December 31, 2016, the Company had no open commodity derivative contracts to manage price risk on a portion of its production.
104
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the
pre-tax
realized and unrealized gains and losses the Company recognized related to its natural gas derivative instruments in the Consolidated Statements of Operations for the years ended December 31,
2016, 2015 and 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
Commodity Derivatives:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Realized gain (loss) on commodity derivatives-natural gas(1)
|
|
$
|
|
|
|
$
|
146,801
|
|
|
$
|
(48,170
|
)
|
Realized gain on commodity derivatives-crude oil(1)
|
|
|
|
|
|
|
|
|
|
|
506
|
|
Unrealized (loss) gain on commodity derivatives(1)
|
|
|
|
|
|
|
(104,190
|
)
|
|
|
130,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain on commodity derivatives
|
|
$
|
|
|
|
$
|
42,611
|
|
|
$
|
82,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in gain on commodity derivatives in the Consolidated Statements of Operations.
|
8.
|
FAIR VALUE MEASUREMENTS:
|
As required by FASB ASC Topic 820, Fair Value Measurements and Disclosures (FASB ASC 820), the Company defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three level hierarchy for measuring fair value. Fair value measurements are classified and disclosed in one of the following
categories:
Level 1
: Quoted prices (unadjusted) in active markets for
identical assets and liabilities that we have the ability to access at the measurement date.
Level 2
: Inputs other than quoted prices included within Level 1 that are either
directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted
prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include
non-exchange
traded
derivatives such as
over-the-counter
forwards and swaps.
Level 3
: Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.
The valuation assumptions the Company has used to measure the fair value of its commodity derivatives were observable
inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs).
Assets and Liabilities Measured on a
Non-recurring
Basis
The Company uses fair value to determine the value of its asset retirement obligations. The inputs used to determine such
fair value under the expected present value technique are primarily based upon internal estimates prepared by reservoir engineers for costs of dismantlement, removal, site reclamation and similar activities associated with the Companys oil and
gas properties and would be classified Level 3 inputs.
Fair Value of Financial Instruments
The estimated fair value of financial instruments is the amount at which the instrument could be exchanged currently
between willing parties. The carrying amounts reported in the Consolidated Balance Sheets for cash
105
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments. The carrying amount of
floating-rate debt approximates fair value because the interest rates are variable and reflective of market rates. We use available market data and valuation methodologies to estimate the fair value of our fixed rate debt and the fair values
presented in the tables below reflect original maturity dates for each of the debt instruments. The inputs utilized to estimate the fair value of the Companys fixed rate debt are considered Level 2 fair value inputs. This disclosure is
presented in accordance with FASB ASC Topic 825, Financial Instruments, and does not impact our financial position, results of operations or cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016(1)
|
|
|
December 31, 2015
|
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Carrying
|
|
|
Estimated
|
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
7.31% Notes due March 2016, issued 2009
|
|
|
62,000
|
|
|
|
64,266
|
|
|
|
62,000
|
|
|
|
63,604
|
|
4.98% Notes due January 2017, issued 2010
|
|
|
116,000
|
|
|
|
123,967
|
|
|
|
116,000
|
|
|
|
113,420
|
|
5.92% Notes due March 2018, issued 2008
|
|
|
200,000
|
|
|
|
224,025
|
|
|
|
200,000
|
|
|
|
191,985
|
|
5.75% Notes due December 2018, issued 2013
|
|
|
450,000
|
|
|
|
465,630
|
|
|
|
450,000
|
|
|
|
111,451
|
|
7.77% Notes due March 2019, issued 2009
|
|
|
173,000
|
|
|
|
204,854
|
|
|
|
173,000
|
|
|
|
174,488
|
|
5.50% Notes due January 2020, issued 2010
|
|
|
207,000
|
|
|
|
233,932
|
|
|
|
207,000
|
|
|
|
185,052
|
|
4.51% Notes due October 2020, issued 2010
|
|
|
315,000
|
|
|
|
337,528
|
|
|
|
315,000
|
|
|
|
258,520
|
|
5.60% Notes due January 2022, issued 2010
|
|
|
87,000
|
|
|
|
99,983
|
|
|
|
87,000
|
|
|
|
73,034
|
|
4.66% Notes due October 2022, issued 2010
|
|
|
35,000
|
|
|
|
38,225
|
|
|
|
35,000
|
|
|
|
25,558
|
|
6.125% Notes due October 2024, issued 2014
|
|
|
850,000
|
|
|
|
893,325
|
|
|
|
850,000
|
|
|
|
206,321
|
|
5.85% Notes due January 2025, issued 2010
|
|
|
90,000
|
|
|
|
106,299
|
|
|
|
90,000
|
|
|
|
70,756
|
|
4.91% Notes due October 2025, issued 2010
|
|
|
175,000
|
|
|
|
193,665
|
|
|
|
175,000
|
|
|
|
115,911
|
|
Credit Facility due October 2016
|
|
|
999,000
|
|
|
|
999,000
|
|
|
|
630,000
|
|
|
|
630,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,759,000
|
|
|
$
|
3,984,699
|
|
|
$
|
3,390,000
|
|
|
$
|
2,220,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At December 31, 2016, the debt included in the table above is a component of liabilities subject to compromise in our Consolidated Balance
Sheets. See Note 1.
|
Income (loss) before income tax benefit is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
United States
|
|
$
|
134,959
|
|
|
$
|
(3,249,590
|
)
|
|
$
|
505,689
|
|
Foreign
|
|
|
(79,462
|
)
|
|
|
37,966
|
|
|
|
31,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
55,497
|
|
|
$
|
(3,211,624
|
)
|
|
$
|
537,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The consolidated income tax (benefit) provision is comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal, state and local
|
|
$
|
(72
|
)
|
|
$
|
|
|
|
$
|
(110
|
)
|
Foreign
|
|
|
(583
|
)
|
|
|
(3,414
|
)
|
|
|
(6,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax (benefit)
|
|
|
(655
|
)
|
|
|
(3,414
|
)
|
|
|
(6,819
|
)
|
Deferred tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
1
|
|
|
|
(990
|
)
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax (benefit) expense
|
|
|
1
|
|
|
|
(990
|
)
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax (benefit)
|
|
$
|
(654
|
)
|
|
$
|
(4,404
|
)
|
|
$
|
(5,824
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision (benefit) from continuing operations differs from the amount
that would be computed by applying the U.S. federal income tax rate of 35% to pretax income as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Income tax provision (benefit) computed at the U.S. statutory rate
|
|
$
|
19,424
|
|
|
$
|
(1,124,069
|
)
|
|
$
|
187,959
|
|
State income tax (benefit) provision net of federal effect
|
|
|
(2,335
|
)
|
|
|
(12,998
|
)
|
|
|
8,023
|
|
Valuation allowance
|
|
|
(31,083
|
)
|
|
|
1,147,619
|
|
|
|
(199,038
|
)
|
Tax effect of rate change
|
|
|
|
|
|
|
12,898
|
|
|
|
15,457
|
|
Foreign rate differential
|
|
|
17,388
|
|
|
|
(26,740
|
)
|
|
|
(16,314
|
)
|
Other, net
|
|
|
(4,048
|
)
|
|
|
(1,114
|
)
|
|
|
(1,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax (benefit)
|
|
$
|
(654
|
)
|
|
$
|
(4,404
|
)
|
|
$
|
(5,824
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The tax effects of temporary differences that give rise to significant
components of the Companys deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets
:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
603,045
|
|
|
|
776,504
|
|
Deferred gain
|
|
|
40,867
|
|
|
|
44,593
|
|
U.S. federal tax credit carryforwards
|
|
|
15,967
|
|
|
|
16,144
|
|
U.S. net operating loss carryforwards
|
|
|
428,212
|
|
|
|
319,673
|
|
U.S. state net operating loss carryforwards
|
|
|
71,323
|
|
|
|
61,919
|
|
Non-U.S.
net operating loss carryforwards
|
|
|
30,211
|
|
|
|
9,142
|
|
Asset retirement obligations
|
|
|
55,700
|
|
|
|
51,815
|
|
Liabilities subject to compromise-contract settlement
|
|
|
59,166
|
|
|
|
|
|
Incentive compensation/other, net
|
|
|
16,088
|
|
|
|
28,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,320,579
|
|
|
|
1,308,501
|
|
Valuation allowance
|
|
|
(1,270,935
|
)
|
|
|
(1,307,076
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
49,644
|
|
|
$
|
1,425
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
:
|
|
|
|
|
|
|
|
|
Liabilities subject to compromise-interest
|
|
|
35,498
|
|
|
|
|
|
Liabilities subject to compromise-interest
(non-U.S.)
|
|
|
14,146
|
|
|
|
|
|
Other
non-US
|
|
|
|
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
Net tax liabilities
|
|
$
|
49,644
|
|
|
$
|
1,424
|
|
|
|
|
|
|
|
|
|
|
Net tax asset
|
|
$
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
In assessing the realizability of the deferred tax assets, management considers whether
it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary
differences become deductible or before the attributes expire unused. Among other items, management considers the scheduled reversal of deferred tax liabilities, historical taxable income, projected future taxable income, and available tax planning
strategies.
At December 31, 2016 and 2015, the Company recorded a valuation allowance against certain
deferred tax assets of $1.3 billion and $1.3 billion, respectively. Some or all of this valuation allowance may be reversed in future periods if future taxable income of the appropriate character is available to recognize certain deferred
tax assets. The Companys valuation allowance decreased by $36.1 million from December 31, 2015 to December 31, 2016. Of this amount, $31.1 million reduced the Companys current year deferred tax benefit, and
$5.1 million was reflected through shareholders equity.
As of December 31, 2016, the Company
had approximately $13.7 million of U.S. federal alternative minimum tax (AMT) credits available to offset regular U.S. Federal income taxes. These AMT credits do not expire and can be carried forward indefinitely. The Company has
$0.5 million of general business credits available to offset U.S. federal income taxes. These general business credits expire in 2032. In addition, the Company has $1.6 million of foreign tax credit carryforwards, which will expire in
2017.
108
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company has a U.S. federal tax net operating loss carryforward of
$1.2 billion which will be carried forward to offset taxable income generated in future years, and if unutilized, will expire between 2033 and 2036. The Company has Pennsylvania state tax net operating loss carry forwards of $1.1 billion
which will expire between 2031 and 2036. The Company has Utah state tax net operating loss carry forwards of $80.8 million which will expire between 2033 and 2036. The Company has immaterial state tax net operating loss carry forwards in other
jurisdictions, none of which expire prior to 2020. Without regard to the recorded valuation allowance, if the Company experiences an ownership change as determined under Section 382 of the Internal Revenue Code, our ability to utilize our
substantial net operating loss carryforwards and other tax attributes may be limited, if we can use them at all.
The Company has a Canada Federal and Provincial tax loss carryforward remaining after carryback of $111.9 million that will be carried forward to offset taxable income generated in future years and
will expire in 2036.
The Company did not have any unrecognized tax benefits and there was no effect on our
financial condition or results of operations related to accounting for uncertain tax positions. The amount of unrecognized tax benefits did not change as of December 31, 2016.
Estimated interest and penalties related to potential underpayment on any unrecognized tax benefits are classified as a
component of tax expense in the Consolidated Statements of Operations. The Company has not incurred any interest or penalties associated with unrecognized tax benefits.
The Company files a consolidated federal income tax return in the United States federal jurisdiction and various
combined, consolidated, unitary, and separate filings in several states, and international jurisdictions. With certain exceptions, the income tax years 2013 through 2016 remain open to examination by the major taxing jurisdictions in which the
Company has business activity.
The undistributed earnings of the Companys U.S. subsidiaries are
considered to be indefinitely invested outside of Canada. Accordingly, no provision for Canadian income taxes and/or withholding taxes has been provided thereon.
10. EMPLOYEE BENEFITS:
The Company
sponsors a qualified,
tax-deferred
savings plan in accordance with provisions of Section 401(k) of the Internal Revenue Code for its employees. Employees may defer 100% of their compensation, subject to
limitations. The Company matches all of the employees contribution up to 5% of compensation, as defined by the plan, along with an employer discretionary contribution of 8%. The expense associated with the Companys contribution was
$2.3 million, $2.3 million and $2.0 million for the years ended December 31, 2016, 2015 and 2014, respectively.
11. COMMITMENTS AND CONTINGENCIES:
The commencement of the chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect prepetition liabilities or to exercise control over the property of
the Companys bankruptcy estates, and the Company has obtained from the Bankruptcy Court authority to pay certain prepetition claims in the ordinary course of business notwithstanding the commencement of the chapter 11 proceedings. A future
plan of reorganization in the chapter 11 proceedings, when confirmed, will provide for the treatment of claims against the Companys bankruptcy estates, including prepetition liabilities that have not otherwise been satisfied or addressed
during the chapter 11 proceedings.
109
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Indebtedness Claims
The chapter 11 filings by the Company and its various subsidiaries, including Ultra Resources, constituted events of
default under the Companys debt agreements. See Note 5 of this Annual Report on Form
10-K
for more information about the debt agreements. On or around September 1, 2016, many of the holders of this
indebtedness filed proofs of claim with the Bankruptcy Court, asserting claims for the outstanding balance of the indebtedness, unpaid interest that had accrued by the petition dates, interest that has accrued since the petition dates (including
interest at the default rates under the debt agreements), make-whole amounts, and other fees and obligations under the debt agreements. On December 29, 2016, holders of certain Senior Notes (as defined below) filed a complaint initiating an
adversary proceeding against us in our chapter 11 cases. In the complaint, among other matters, the noteholders allege that there is a make-whole amount due under the Senior Notes as a result of our filing the chapter 11 cases, which they assert is
no less than $200,725,869, exclusive of any interest thereon. On January 13, 2017, holders of certain other Senior Notes intervened to join the adversary proceeding as plaintiffs. On January 30, 2017, we filed a motion to dismiss the
complaint. On February 10, 2017, both noteholder groups objected to our motion to dismiss. On February 13, 2017, the Court set a briefing schedule and a hearing date for April 20, 2017 for resolution of the make-whole and interest claims. At this
time, we are not able to determine the likelihood or range of amounts attributable to claims for postpetition interest, make-whole amounts, or other fees and obligations under the debt agreements. We anticipate these claims will be resolved during
our chapter 11 proceedings, although it is possible resolution of some of these matters could occur after we emerge from chapter 11.
Rockies Express Pipeline
On February 26, 2016,
we received a letter from Sempra Rockies Marketing, LLC (Sempra) alleging that we were in breach of our Capacity Release Agreement, dated March 5, 2009 (the Capacity Agreement), resulting from nonpayment of fees for
transportation service and notifying us that Sempra was authorized to recall the capacity released to us under the Capacity Agreement and to pursue any claims for damages or other remedies to which Sempra was entitled. On March 8, 2016, we
received a letter from Sempra notifying us that Sempra was exercising its alleged right to permanently recall the 50,000 MMBtu/day of capacity on the Rockies Express Pipeline pursuant to the Capacity Agreement and that the recall would be effective
as of March 9, 2016. On August 25, 2016, Sempra filed a proof of claim with the Bankruptcy Court for approximately $63.8 million. On October 28, 2016, we filed an objection to Sempras proof of claim. On December 20, 2016,
Sempra filed a response to the Companys objection. On November 28, 2016, the Bankruptcy Court entered a scheduling order establishing March 2, 2017 as the trial date for the claim objection. On January 23, 2017, the Bankruptcy Court
entered an updated scheduling order establishing April 18, 2017 as the trial date for the claim objection. Our estimate of the potential exposure in connection with the Capacity Agreement and Sempras claim filed in our chapter 11 proceedings
ranges from $4.2 million, which represents amounts Sempra paid to Rockies Express attributable to the capacity released to us under the Capacity Agreement prior to Sempras recalling such capacity, to $63.8 million. We anticipate
Sempras claims will be resolved through our chapter 11 proceedings.
On April 4, 2016, we received
a demand for payment and notice of enforcement from Rockies Express Pipeline LLC (REX) in connection with the transportation agreement related to the Rockies Express Pipeline, pursuant to which Rockies Express demanded payment from us of
$303.2 million by April 20, 2016. On April 14, 2016, REX filed a lawsuit against us in Harris County, Texas alleging breach of contract and seeking damages related to the alleged breach. On August 26, 2016, REX filed a proof of
claim with the Bankruptcy Court for $303.3 million. The Company objected to REXs proof of claim. On January 12, 2017, REX and the Company entered into a settlement agreement resolving REXs proof of claim. Pursuant to the
settlement, we agreed to make a cash payment to REX of $150.0 million six months after the Company emerges from chapter 11, but no later than October 30, 2017, and to provide REX an allowed general unsecured claim under
110
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
our Plan in that amount. Additionally, in connection with the settlement, we agreed to enter into, with REX, a new seven-year agreement, commencing December 1, 2019, for firm transportation
service on the Rockies Express Pipeline,
west-to-east,
of 200,000 dekatherms per day at a rate of approximately $0.37 per dekatherm, or approximately $26.8 million
annually. The settlement with REX has been submitted to the Bankruptcy Court for approval and will be implemented in connection with the plan of reorganization.
Royalties
On April 19, 2016, the Company
received a preliminary determination notice from the Office of Natural Resources Revenue (ONRR) asserting that the Companys allocation of certain processing costs and plant fuel use at certain processing plants were impermissibly
charged as deductions in the determination of royalties owed under Federal oil and gas leases. During the second quarter of 2016, the Company responded to the preliminary determination asserting the reasonableness of its allocation methodology
of such costs, noting several matters we believed should have been considered in the preliminary determination notice. The ONRR unbundling review could ultimately result in an order for payment of additional royalties under the Companys
Federal oil and gas leases for current and prior periods. On October 27, 2016, ONRR filed a proof of claim with the Bankruptcy Court asserting approximately $35.1 million in claims attributable to the Companys royalty
calculations. The Company is not able to determine the likelihood or range of any additional royalties or, if and when assessed, whether such amounts would be material.
Oil Sales Contract
On April 29, 2016, the
Company received a letter from counsel to Sunoco Partners Marketing & Terminals L.P. (SPMT) asserting that (1) the Company had breached, by anticipatory repudiation, a contract for the purchase and sale of crude oil between
Ultra Resources and SPMT and (2) the contract was terminated. In the letter, SPMT demanded payment for damages resulting from the breach in the amount of $38.6 million. On August 31, 2016, SPMT filed a proof of claim with the
Bankruptcy Court for $16.9 million. We dispute SPMTs positions in the letter and its proof of claim. On December 13, 2016, we filed an objection to SPMTs proof of claim, and on December 14, 2016, we filed an adversary
proceeding against SPMT related to its breach of the contract during the prepetition period. On January 18, 2017, SPMT filed a reply to our objection SPMTs proof of claim and an answer to our complaint in the adversary proceeding. At this
time, we are not able to determine the likelihood or range of damages owed to SPMT, if any, related to this matter, or, if and when such amounts are assessed, whether such amounts would be material. SPMT is a member of our official committee of
unsecured creditors. We anticipate SPMTs claims will be resolved through our chapter 11 proceedings.
The Company is a party, with Big West Oil, LLC (Big West), to several prepetition contracts (the Crude
Contracts) for the purchase and sale of crude oil. On April 26, 2016, Big West Oil LLC (Big West) and the Company entered into a Temporary Suspension of Contracts and Interim Crude Oil Purchase and Sale Agreement
(Suspension Agreement), pursuant to which the parties suspended performance under the prepetition contracts. On August 30, 2016, Big West filed a proof of claim with the Bankruptcy Court for $32.6 million. The Company objected
to Big Wests proof of claim. On January 20, 2017, Big West and the Company reached an agreement settling and resolving Big Wests proof of claim. Pursuant to the settlement, we agreed to make a cash payment to Big West, within six
months of our emergence from chapter 11, of $17.35 million to provide Big West with an allowed general unsecured claim against all of the Ultra Entities in that amount and that all of our prepetition contracts with Big West, including the
Suspension Agreement, would be rejected (with no additional damages other than the $17.35 million payment) in connection with our plan of reorganization. Additionally, in connection with the settlement, we and Big West agreed to enter into two
new,
111
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
two-year,
contracts for the purchase and sale of crude oil we produce in Wyoming and Utah. The settlement with Big West has been submitted to the
Bankruptcy Court for approval and will be implemented in connection with the plan of reorganization.
Operating Lease
During December 2012, the Company sold its system of pipelines and central gathering facilities (the
Pinedale LGS) and certain associated real property rights in the Pinedale Anticline in Wyoming and entered into a long-term, triple net lease agreement (the Pinedale Lease Agreement) relating to the use of the Pinedale LGS.
The Pinedale Lease Agreement provides for an initial term of 15 years and potential successive renewal terms of 5 years or 75% of the then remaining useful life of the Pinedale LGS at the sole discretion of the Company. Annual rent for the initial
term under the Pinedale Lease Agreement is $20.0 million (as adjusted annually for changes based on the consumer price index) and may increase if certain volume thresholds are exceeded. The lease is classified as an operating lease. The Company
currently projects that lease payments related to the Pinedale Lease Agreement will total approximately $229.9 million.
All of the Companys lease obligations are related to leases that are classified as operating leases. These leases contain certain provisions that could result in accelerated lease
payments. The Company has considered the effect of these provisions on minimum lease payments in its lease classification analysis and has determined that the default provisions do not impact classification of any the Companys operating
leases.
Office space lease
The Company maintains office space in Colorado, Texas, Wyoming and Utah with total remaining commitments for office leases
of $6.6 million at December 31, 2016; ($1.3 million in 2017; $1.2 million in 2018; $1.2 million in 2019; $1.2 million in 2020; and $1.1 million in 2021 with the remainder due beyond five years).
During the years ended December 31, 2016, 2015 and 2014, the Company recognized expense associated with its office
leases in the amount of $1.5 million, $1.3 million, and $1.0 million, respectively.
Delivery Commitments
With respect to the Companys natural gas production, from time to time the Company enters into
transactions to deliver specified quantities of gas to its customers. As of February 9, 2017, the Company has long-term natural gas delivery commitments of 2.8 MMMBtu in 2018 under existing agreements. As of February 9, 2017, the Company
has long-term crude oil delivery commitments of 1.6 MMBbls in 2017, 1.7 MMBbls in 2018 and 0.3 MMBbls in 2019 under existing agreements. None of these commitments require the Company to deliver gas or oil produced specifically from any of the
Companys properties, and all of these commitments are priced on a floating basis with reference to an index price. In addition, none of the Companys reserves are subject to any priorities or curtailments that may affect quantities
delivered to its customers, any priority allocations or price limitations imposed by federal or state regulatory agencies or any other factors beyond the Companys control that may affect its ability to meet its contractual obligations other
than those discussed in Item 1A. Risk Factors. If for some reason our production is not sufficient to satisfy these commitments, subject to the availability of capital, we could purchase volumes in the market or make other arrangements
to satisfy the commitments.
Other Claims
The Company is party to a lawsuit related to disputes with respect to overriding royalty interests in certain of our
operated leases in Pinedale, Wyoming. At this time, no determination of the outcome of these claims can
112
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
be made, and as no damage claim amount has been asserted by the claimants, we cannot reasonably estimate the potential impact of these claims. We intend to defend this case vigorously, and expect
these claims to be resolved in our chapter 11 proceedings. The Company is currently involved in various routine disputes and allegations incidental to its business operations. While it is not possible to determine the ultimate disposition of these
matters, the Company believes that the resolution of all such pending or threatened litigation is not likely to have a material adverse effect on the Companys financial position or results of operations.
12. CONCENTRATION OF CREDIT RISK:
The Companys financial instruments that are exposed to concentrations of credit risk consist primarily of trade receivables. The Companys revenues related to natural gas and oil sales are
derived principally from a diverse group of companies, including major energy companies, natural gas utilities, oil refiners, pipeline companies, local distribution companies, financial institutions and
end-users
in various industries.
Concentrations of credit risk with
respect to receivables is limited due to the large number of customers and their dispersion across geographic areas. Commodity-based contracts may expose the Company to the credit risk of nonperformance by the counterparty to these contracts. This
credit exposure to the Company is diversified primarily among as many as ten major investment grade institutions and will only be present if the reference price of natural gas established in those contracts is less than the prevailing market price
of natural gas, from time to time.
The Company maintains credit policies intended to monitor and mitigate the
risk of uncollectible accounts receivable related to the sale of natural gas, condensate as well as its commodity derivative positions. The Company performs a credit analysis of each of its customers and counterparties prior to making any sales to
new customers or extending additional credit to existing customers. Based upon this credit analysis, the Company may require a standby letter of credit or a financial guarantee. The Company did not have any outstanding, uncollectible accounts for
its natural gas or oil sales, nor derivative settlements at December 31, 2016.
A significant
counterparty is defined as one that individually accounts for 10% or more of the Companys total revenues during the year. In 2016, the Company had one single customer that represented approximately 10% of its total revenues.
13. SUBSEQUENT EVENTS:
The Company has evaluated the period subsequent to December 31, 2016 for events that did not exist at the balance sheet date but arose after that date and determined that no subsequent events arose
that should be disclosed in order to keep the financial statements from being misleading, except as set forth below:
|
|
|
On January 17, 2017, we filed a revised plan of reorganization and disclosure statement therefore. On February 8, 2017, we filed a further
revised plan of reorganization and disclosure statement therefore. On February 13, 2017, we filed amendments and further revisions to the plan of reorganization we filed on February 8, 2017 and to the disclosure statement therefore. The
Court approved our Disclosure Statement on February 13, 2017 and scheduled a hearing to consider confirmation of the Plan for March 14, 2017. On February 21, 2017, the Court signed an amended order approving our Disclosure Statement.
The amended order: (1) approves the adequacy of our Disclosure Statement, (2) approves the solicitation and notice procedures related to confirmation of our plan of reorganization, (3) approves the forms of ballots and notices related thereto, (4)
approves the rights offering procedures and matters related thereto, (5) schedules certain dates related to our plan confirmation process and Rights Offering, and (6) grants related relief. With respect to the Rights Offering, the amended order
|
113
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
defines the Subscription Commencement Date as February 21, 2017. Accordingly, as will be reflected in the materials to be distributed in connection with the Rights Offering, the
Plan Value under the PSA is $6.0 billion.
|
|
|
|
On February 8, 2017, the Debtors obtained a commitment letter from Barclays, pursuant to which, in connection with the consummation of the
Plan, Barclays has agreed to provide secured and unsecured financing in an aggregate amount of up to $2.4 billion, consisting of (i) a seven-year senior secured first lien term loan credit facility in an aggregate amount of
$600.0 million, (ii) a five-year senior secured first lien revolving credit facility in an aggregate amount of $400.0 million and (iii) senior unsecured bridge loans under senior unsecured bridge facilities in an aggregate amount
of up to $1.4 billion.
|
|
|
|
As of January 19, 2017, the Backstop Approval Order was entered by the Bankruptcy Court and the Commitment Premium was fully earned by the
Commitment Parties; the order being entered on January 19, 2017 satisfied one of the milestones in the Backstop Agreement. The Commitment Premium will be paid either in the form of new common stock at the Rights Offering Price, if the Plan is
consummated as contemplated in the Plan Support Agreement, or in cash if the Backstop Agreement is terminated other than as a result of a material breach by the Commitment Parties. See Note 1 for further details.
|
|
|
|
On April 4, 2016, we received a demand for payment and notice of enforcement from REX in connection with the transportation agreement related
to the Rockies Express Pipeline, pursuant to which Rockies Express demanded payment from us of $303.2 million by April 20, 2016. On April 14, 2016, REX filed a lawsuit against us in Harris County, Texas alleging breach of contract and
seeking damages related to the alleged breach. On August 26, 2016, REX filed a proof of claim with the Bankruptcy Court for $303.3 million. The Company objected to REXs proof of claim. On January 12, 2017, REX and the Company
entered into a settlement agreement resolving REXs proof of claim. Pursuant to the settlement, we agreed to make a cash payment to REX of $150.0 million six months after the Company emerges from chapter 11, but no later than
October 30, 2017, and to provide REX an allowed general unsecured claim under our Plan in that amount. Additionally, in connection with the settlement, we agreed to enter into, with REX, a new seven-year agreement, commencing December 1,
2019, for firm transportation service on the Rockies Express Pipeline,
west-to-east,
of 200,000 dekatherms per day at a rate of approximately $0.37 per dekatherm, or
approximately $26.8 million annually. The settlement with REX has been submitted to the Bankruptcy Court for approval and will be implemented in connection with the plan of reorganization.
|
|
|
|
The Company is a party, with Big West Oil, LLC (Big West), to several prepetition contracts (the Crude Contracts) for the
purchase and sale of crude oil. On April 26, 2016, Big West Oil LLC (Big West) and the Company entered into a Temporary Suspension of Contracts and Interim Crude Oil Purchase and Sale Agreement (Suspension Agreement),
pursuant to which the parties suspended performance under the prepetition contracts. On August 30, 2016, Big West filed a proof of claim with the Bankruptcy Court for $32.6 million. The Company objected to Big Wests proof of claim.
On January 20, 2017, Big West and the Company reached an agreement settling and resolving Big Wests proof of claim. Pursuant to the settlement, we agreed to make a cash payment to Big West, within six months of our emergence from chapter
11, of $17.35 million, to provide Big West with an allowed general unsecured claim against all of the Ultra Entities in that amount and that all of our prepetition contracts with Big West, including the Suspension Agreement, would be rejected
(with no additional damages other than the $17.35 million payment) in connection with our plan of reorganization. Additionally, in connection with the settlement, we and Big West agreed to enter into two new,
|
114
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
two-year,
contracts for the purchase and sale of crude oil we produce in Wyoming and Utah. The settlement with Big West has been submitted to the
Bankruptcy Court for approval and will be implemented in connection with the plan of reorganization.
|
14. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
|
Total
|
|
Operating revenues
|
|
$
|
159,386
|
|
|
$
|
146,591
|
|
|
$
|
199,253
|
|
|
$
|
215,861
|
|
|
$
|
721,091
|
|
Operating expenses
|
|
|
126,868
|
|
|
|
94,746
|
|
|
|
99,788
|
|
|
|
99,313
|
|
|
|
420,715
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (excludes contractual interest expense of $141.5 million for the year ended December 31, 2016)
|
|
|
(49,903
|
)
|
|
|
(16,662
|
)
|
|
|
|
|
|
|
|
|
|
|
(66,565
|
)
|
Restructuring expenses
|
|
|
(5,579
|
)
|
|
|
(1,569
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
(7,176
|
)
|
Contract settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(131,106
|
)
|
|
|
(131,106
|
)
|
Other income (expense), net
|
|
|
943
|
|
|
|
2,411
|
|
|
|
2,124
|
|
|
|
1,993
|
|
|
|
7,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income, net
|
|
|
(54,539
|
)
|
|
|
(15,820
|
)
|
|
|
2,096
|
|
|
|
(129,113
|
)
|
|
|
(197,376
|
)
|
Reorganization items, net
|
|
|
|
|
|
|
(22,183
|
)
|
|
|
(3,109
|
)
|
|
|
(22,211
|
)
|
|
|
(47,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax (benefit) provision
|
|
|
(22,021
|
)
|
|
|
13,842
|
|
|
|
98,452
|
|
|
|
(34,776
|
)
|
|
|
55,497
|
|
Income tax (benefit) provision
|
|
|
(190
|
)
|
|
|
(160
|
)
|
|
|
45
|
|
|
|
(349
|
)
|
|
|
(654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(21,831
|
)
|
|
$
|
14,002
|
|
|
$
|
98,407
|
|
|
$
|
(34,427
|
)
|
|
$
|
56,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share basic
|
|
$
|
(0.14
|
)
|
|
$
|
0.09
|
|
|
$
|
0.64
|
|
|
$
|
(0.22
|
)
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share fully diluted
|
|
$
|
(0.14
|
)
|
|
$
|
0.09
|
|
|
$
|
0.64
|
|
|
$
|
(0.22
|
)
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
|
Total
|
|
Operating revenues
|
|
$
|
219,309
|
|
|
$
|
207,998
|
|
|
$
|
222,503
|
|
|
$
|
189,301
|
|
|
$
|
839,111
|
|
Gain (loss) on commodity derivatives
|
|
|
36,865
|
|
|
|
(3,646
|
)
|
|
|
9,390
|
|
|
|
2
|
|
|
|
42,611
|
|
Operating expenses
|
|
|
189,347
|
|
|
|
188,483
|
|
|
|
195,339
|
|
|
|
207,452
|
|
|
|
780,621
|
|
Ceiling test and other impairments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,144,899
|
|
|
|
3,144,899
|
|
Interest expense
|
|
|
42,668
|
|
|
|
42,619
|
|
|
|
43,137
|
|
|
|
43,494
|
|
|
|
171,918
|
|
Other income (expense), net
|
|
|
(992
|
)
|
|
|
1,827
|
|
|
|
2,354
|
|
|
|
903
|
|
|
|
4,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax provision
|
|
|
23,167
|
|
|
|
(24,923
|
)
|
|
|
(4,229
|
)
|
|
|
(3,205,639
|
)
|
|
|
(3,211,624
|
)
|
Income tax provision
|
|
|
(2,022
|
)
|
|
|
(250
|
)
|
|
|
(1,133
|
)
|
|
|
(999
|
)
|
|
|
(4,404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
25,189
|
|
|
$
|
(24,673
|
)
|
|
$
|
(3,096
|
)
|
|
$
|
(3,204,640
|
)
|
|
$
|
(3,207,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic
|
|
$
|
0.16
|
|
|
$
|
(0.16
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(20.91
|
)
|
|
$
|
(20.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share fully diluted
|
|
$
|
0.16
|
|
|
$
|
(0.16
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(20.91
|
)
|
|
$
|
(20.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. DISCLOSURE ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED):
The following information about the Companys oil and natural gas producing activities is presented
in accordance with FASB ASC Topic 932, Oil and Gas Reserve Estimation and Disclosures:
A. OIL
AND GAS RESERVES:
Our policies and practices regarding internal controls over the recording of
reserves is structured to objectively and accurately estimate our oil and gas reserves quantities and present values in compliance with the SECs regulations and GAAP. The Vice President Development is primarily responsible for
overseeing the preparation of the Companys reserve estimates. He has a Bachelor of Science degree in Petroleum Engineering, a Masters of Business Administration and is a licensed Professional Engineer with over 15 years of experience. The
Companys internal controls over reserve estimates include reconciliation and review controls, including an independent internal review of assumptions used in the estimation.
The estimates of proved reserves and future net revenue as of December 31, 2016, are based upon the use of technical
and economic data including, but not limited to, well logs, geologic maps, seismic data, well test data, production data, historical price and cost information and property ownership interests. The reserves were estimated using deterministic
methods; these estimates were prepared in accordance with generally accepted petroleum engineering and evaluation principles. Standard engineering and geoscience methods, such as reservoir modeling, performance analysis, volumetric analysis and
analogy, that were considered to be appropriate and necessary to establish reserve quantities and reserve categorization that conform to SEC definitions and rules and regulations, were also used. As in all aspects of oil and natural gas evaluation,
there are uncertainties inherent in the interpretation of engineering and geoscience data; therefore, these estimates necessarily represent only informed professional judgment.
The determination of oil and natural gas reserves is complex and highly interpretive. Assumptions used to estimate
reserve information may significantly increase or decrease such reserves in future periods. The estimates of reserves are subject to continuing changes and, therefore, an accurate determination of reserves may not be possible for many years because
of the time needed for development, drilling, testing, and studies of reservoirs. From time to time, the Company may adjust the inventory and schedule of its proved undeveloped locations in response to changes in capital budget, economics, new
opportunities in the portfolio or resource availability. The Company has not scheduled any proved undeveloped reserves beyond five years nor does it have any proved undeveloped locations that have been part of its inventory of proved undeveloped
locations for over five years.
The Company engaged Netherland, Sewell & Associates, Inc.
(NSAI), a third-party, independent engineering firm, to prepare the reserve estimates for all of the Companys assets for the year ended December 31, 2016, 2015 and 2014 in this annual report. For the year ended
December 31, 2013, the Company engaged NSAI to prepare the reserve estimates for all of the Companys assets in Wyoming and Pennsylvania in this annual report. Due to the timing of the closing of the acquisition in Utah in December 2013
relative to the timing of preparing annual corporate reserves, the Companys Reservoir Engineering Department prepared the proved reserve estimates for its Utah assets for the year ended December 31, 2013, which were prepared in accordance
with the Companys internal controls and SEC regulations and represented less than 2% of estimated proved reserves as of December 31, 2013.
Our internal professional staff works closely with our independent engineers, NSAI, to ensure the integrity, accuracy and timeliness of data that is furnished to them for their reserve estimation process.
In addition, other pertinent data is provided such as seismic information, geologic maps, well logs, production tests, well
116
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
performance data, operating procedures and relevant economic criteria. We make available all information requested, including our pertinent personnel, to the external engineers as part of their
evaluation of our reserves. The report of NSAI is included as an Exhibit to this annual report.
The reserves
estimates shown herein have been independently evaluated by Netherland, Sewell & Associates, Inc. (NSAI), a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies. NSAI was founded
in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No.
F-2699.
Within NSAI, the technical persons primarily responsible for preparing the
estimates set forth in the NSAI reserves report incorporated herein are Mr. Sean A. Martin and Mr. Philip R. Hodgson. Mr. Martin, a Licensed Professional Engineer in the State of Texas (No. 125354), has been practicing
consulting petroleum engineering at NSAI since 2014 and has over 7 years of prior industry experience. He graduated from
graduated from University of Florida in 2007 with a Bachelor of Science Degree in Chemical Engineering.
Mr. Hodgson, a Licensed Professional Geoscientist in the State of Texas (No. 1314), has been practicing consulting petroleum geoscience at NSAI since 1998 and has over 14 years of prior industry experience. He graduated from University of
Illinois in 1982 with a Bachelor of Science Degree in Geology and from Purdue University in 1984 with a Master of Science Degree in Geophysics. Both technical principals meet or exceed the education, training, and experience requirements set
forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; both are proficient in judiciously applying industry standard practices to engineering and
geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.
Since
January 1, 2016, no crude oil, natural gas or NGL reserve information has been filed with, or included in any report to, any federal authority or agency other than the SEC and the Energy Information Administration (EIA) of the U.S.
Department of Energy. We file Form 23, including reserve and other information, with the EIA.
117
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following unaudited tables as of December 31, 2016, 2015 and
2014 reflect estimated quantities of proved oil and natural gas reserves for the Company and the changes in total proved reserves as of December 31, 2016, 2015 and 2014. All such reserves are located in the Green River Basin in Wyoming, the
Uinta Basin in Utah and the Appalachian Basin of Pennsylvania.
B. ANALYSES OF CHANGES IN PROVEN
RESERVES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
Oil
(MBbls)
|
|
|
Natural Gas
(MMcf)
|
|
|
NGLs
(MBbls)
|
|
Reserves, December 31, 2013
|
|
|
34,119
|
|
|
|
3,409,742
|
|
|
|
|
|
Extensions, discoveries and additions
|
|
|
34,275
|
|
|
|
866,513
|
|
|
|
210
|
|
Sales
|
|
|
|
|
|
|
(239,290
|
)
|
|
|
|
|
Acquisitions
|
|
|
9,381
|
|
|
|
1,345,964
|
|
|
|
21,740
|
|
Production
|
|
|
(3,409
|
)
|
|
|
(228,517
|
)
|
|
|
|
|
Revisions
|
|
|
(6,600
|
)
|
|
|
(323,218
|
)
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves, December 31, 2014
|
|
|
67,766
|
|
|
|
4,831,194
|
|
|
|
21,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extensions, discoveries and additions
|
|
|
166
|
|
|
|
17,415
|
|
|
|
3
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
(3,533
|
)
|
|
|
(268,954
|
)
|
|
|
|
|
Revisions
|
|
|
(42,224
|
)
|
|
|
(2,243,375
|
)
|
|
|
(12,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves, December 31, 2015
|
|
|
22,175
|
|
|
|
2,336,280
|
|
|
|
9,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extensions, discoveries and additions
|
|
|
3,519
|
|
|
|
251,634
|
|
|
|
530
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
(2,912
|
)
|
|
|
(264,278
|
)
|
|
|
|
|
Revisions
|
|
|
(1,307
|
)
|
|
|
(2,023
|
)
|
|
|
(467
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves, December 31, 2016
|
|
|
21,475
|
|
|
|
2,321,613
|
|
|
|
9,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
Oil
(MBbls)
|
|
|
Natural Gas
(MMcf)
|
|
|
NGLs
(MBbls)
|
|
Proved:
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
|
|
|
20,566
|
|
|
|
1,777,267
|
|
|
|
|
|
Undeveloped
|
|
|
13,553
|
|
|
|
1,632,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Proved 2013
|
|
|
34,119
|
|
|
|
3,409,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
|
|
|
28,481
|
|
|
|
2,245,004
|
|
|
|
9,118
|
|
Undeveloped
|
|
|
39,285
|
|
|
|
2,586,190
|
|
|
|
12,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Proved 2014
|
|
|
67,766
|
|
|
|
4,831,194
|
|
|
|
21,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
|
|
|
22,175
|
|
|
|
2,336,280
|
|
|
|
9,840
|
|
Undeveloped
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Proved 2015
|
|
|
22,175
|
|
|
|
2,336,280
|
|
|
|
9,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed
|
|
|
21,475
|
|
|
|
2,321,613
|
|
|
|
9,903
|
|
Undeveloped
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Proved 2016
|
|
|
21,475
|
|
|
|
2,321,613
|
|
|
|
9,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in proved developed
reserves
: During 2016, substantially all of our extensions and discoveries in the proved developed category were attributable to wells drilled in 2016.
Changes in proved undeveloped reserves
: As of December 31, 2016 and 2015, the
Company did not include PUD reserves in its total proved reserve estimates due to uncertainty regarding its ability to continue as a going concern and the availability of capital that would be required to develop the PUD reserves.
NGLs
: During 2014, the Company acquired contracts related to NGLs providing the
opportunity to realize the benefit of the NGLs from the gas it produces beginning in 2017. These contracts provide for an annual election to process NGLs, and the Company elected not to process NGLs in 2017.
Development plan
: The development plan underlying the Companys proved
undeveloped reserves, if any, adopted each year by senior management, is based on the best information available at the time of adoption. As factors such as commodity price, service costs, performance data, and asset mix are subject to change, the
Company occasionally revises its development plan. Development plan revisions include deferrals, removals, and substitutions of previously scheduled PUD reserve locations. These occasional changes achieve the purpose of maximizing profitability and
are in the best interest of the Companys shareholders.
In addition, as a part of our internal controls
for determining a plan to develop our proved reserves each year, we consider whether we have the financial capability to develop proved undeveloped reserves. This year, because substantial doubt exists about our ability to continue as a going
concern, we lack the required degree of certainty that we have the ability to fund a development plan. Therefore, as of December 31, 2016, we did not book any PUD reserves. As of February 22, 2017, the Company has 5 rigs running in the
Pinedale field (4 operated, 1
non-operated)
and, subject to available capital, intends to continue drilling and completing wells. We expect to report PUD reserves in future filings if we determine that we have
the financial capability to execute a development plan.
C. STANDARDIZED MEASURE:
The following table sets forth a standardized measure of the estimated discounted future net cash
flows attributable to the Companys proved reserves. Natural gas prices have fluctuated widely in recent years. The calculated weighted average sales prices utilized for the purposes of estimating the Companys proved reserves and future
net revenues at December 31, 2016, 2015 and 2014 was $2.07, $2.21 and $4.32 per Mcf, respectively, for natural gas, and $37.90, $42.36 and $80.62 per barrel, respectively, for oil and condensate. During 2014, the Company acquired contracts
related to NGLs providing the opportunity to realize the benefit of the NGLs from the gas it produces beginning in 2017. These contracts provide for an annual election to process NGLs, and the Company elected not to process NGLs in 2017. For 2016
and 2015, the average sales price utilized for purposes of estimating the Companys proved reserves and future net revenues associated with NGLs was $19.17 and $20.61 per barrel, respectively. The prices utilized in the reserve report are based
upon the average of prices in effect on the first day of the month for the preceding twelve month period.
119
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The future production and development costs represent the estimated
future expenditures to be incurred in developing and producing the proved reserves, assuming continuation of existing economic conditions. Future income tax expense was computed by applying statutory income tax rates to the difference between pretax
net cash flows relating to the Companys proved reserves and the tax basis of proved properties and available operating loss carryovers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Future cash inflows
|
|
$
|
5,812,234
|
|
|
$
|
6,312,095
|
|
|
$
|
27,331,391
|
|
Future production costs
|
|
|
(2,665,082
|
)
|
|
|
(3,006,265
|
)
|
|
|
(8,627,657
|
)
|
Future development costs
|
|
|
(355,923
|
)
|
|
|
(358,848
|
)
|
|
|
(3,859,385
|
)
|
Future income taxes
|
|
|
|
|
|
|
|
|
|
|
(3,898,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future net cash flows
|
|
|
2,791,229
|
|
|
|
2,946,982
|
|
|
|
10,945,994
|
|
Discount at 10%
|
|
|
(1,100,283
|
)
|
|
|
(1,081,333
|
)
|
|
|
(5,712,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardized measure of discounted future net cash flows
|
|
$
|
1,690,946
|
|
|
$
|
1,865,649
|
|
|
$
|
5,233,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimate of future income taxes is based on the future net cash flows from proved
reserves adjusted for the tax basis of the oil and gas properties but without consideration of general and administrative and interest expenses.
D. SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Standardized measure, beginning
|
|
$
|
1,865,649
|
|
|
$
|
5,233,483
|
|
|
$
|
3,187,969
|
|
Net revisions of previous quantity estimates
|
|
|
(9,623
|
)
|
|
|
(2,126,998
|
)
|
|
|
(603,795
|
)
|
Extensions, discoveries and other changes
|
|
|
209,603
|
|
|
|
15,254
|
|
|
|
1,787,643
|
|
Sales of reserves in place
|
|
|
|
|
|
|
|
|
|
|
(398,506
|
)
|
Acquisition of reserves
|
|
|
|
|
|
|
|
|
|
|
2,552,491
|
|
Changes in future development costs
|
|
|
11,556
|
|
|
|
1,618,068
|
|
|
|
(1,013,652
|
)
|
Sales of oil and gas, net of production costs
|
|
|
(454,725
|
)
|
|
|
(550,879
|
)
|
|
|
(949,389
|
)
|
Net change in prices and production costs
|
|
|
(72,939
|
)
|
|
|
(6,996,416
|
)
|
|
|
1,010,052
|
|
Development costs incurred during the period that reduce future development costs
|
|
|
22,523
|
|
|
|
548,112
|
|
|
|
342,987
|
|
Accretion of discount
|
|
|
186,565
|
|
|
|
709,736
|
|
|
|
413,177
|
|
Net changes in production rates and other
|
|
|
(67,663
|
)
|
|
|
1,551,413
|
|
|
|
(175,419
|
)
|
Net change in income taxes
|
|
|
|
|
|
|
1,863,876
|
|
|
|
(920,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate changes
|
|
|
(174,703
|
)
|
|
|
(3,367,834
|
)
|
|
|
2,045,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardized measure, ending
|
|
$
|
1,690,946
|
|
|
$
|
1,865,649
|
|
|
$
|
5,233,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There are numerous uncertainties inherent in estimating quantities of proved reserves and
projected future rates of production and timing of development expenditures, including many factors beyond the control of the Company. The reserve data and standardized measures set forth herein represent only estimates. Reserve
120
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way and the accuracy of any reserve estimate is a function
of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers often vary. In addition, results of drilling, testing and production subsequent to the date of an estimate
may justify revision of such estimates. Accordingly, reserve estimates are often different from the quantities of oil and natural gas that are ultimately recovered. Further, the estimated future net revenues from proved reserves and the present
value thereof are based upon certain assumptions, including geologic success, prices, future production levels and costs that may not prove correct over time. Predictions of future production levels are subject to great uncertainty, and the
meaningfulness of such estimates is highly dependent upon the accuracy of the assumptions upon which they are based. Historically, oil and natural gas prices have fluctuated widely.
E. COSTS INCURRED IN OIL AND GAS EXPLORATION AND DEVELOPMENT ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unproved
|
|
$
|
983
|
|
|
$
|
13,845
|
|
|
$
|
26,106
|
|
Proved
|
|
|
|
|
|
|
|
|
|
|
895,179
|
|
Exploration*
|
|
|
224,277
|
|
|
|
18,164
|
|
|
|
197,664
|
|
Development
|
|
|
44,300
|
|
|
|
461,458
|
|
|
|
382,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
269,560
|
|
|
$
|
493,467
|
|
|
$
|
1,501,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Exploration costs (as defined in Regulation
S-X)
includes costs spent on development of unproved reserves in
the Pinedale Field.
|
F. RESULTS OF OPERATIONS FOR OIL AND GAS
PRODUCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas revenue
|
|
$
|
721,091
|
|
|
$
|
839,111
|
|
|
$
|
1,230,020
|
|
Production expenses
|
|
|
(266,366
|
)
|
|
|
(288,231
|
)
|
|
|
(280,631
|
)
|
Depletion and depreciation
|
|
|
(125,121
|
)
|
|
|
(401,200
|
)
|
|
|
(292,951
|
)
|
Ceiling test and other impairments
|
|
|
|
|
|
|
(3,144,899
|
)
|
|
|
|
|
Income tax benefit (expense)
|
|
|
83,112
|
|
|
|
(9,841
|
)
|
|
|
3,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
412,716
|
|
|
$
|
(3,005,060
|
)
|
|
$
|
660,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
G. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Proven Properties:
|
|
|
|
|
|
|
|
|
Acquisition, equipment, exploration, drilling and environmental costs
|
|
$
|
10,752,642
|
|
|
$
|
10,480,165
|
|
Less: accumulated depletion, depreciation and amortization
|
|
|
(9,742,176
|
)
|
|
|
(9,629,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,010,466
|
|
|
|
851,145
|
|
Unproven Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,010,466
|
|
|
$
|
851,145
|
|
|
|
|
|
|
|
|
|
|
16. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION:
Following are the financial statements of Ultra Petroleum Corp. (the Parent Company), which are included to
provide additional information with respect to the Parent Companys results of operations, financial position and cash flows on a stand-alone basis:
CONDENSED STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
General and administrative expense
|
|
$
|
650
|
|
|
$
|
308
|
|
|
$
|
261
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (excludes contractual interest expense of $52.4 million for the year ended December 31,
2016)
|
|
|
(26,590
|
)
|
|
|
(81,069
|
)
|
|
|
(42,996
|
)
|
Income (loss) from unconsolidated affiliates
|
|
|
157,450
|
|
|
|
(3,152,078
|
)
|
|
|
558,634
|
|
Guarantee fee income
|
|
|
6,073
|
|
|
|
23,029
|
|
|
|
23,045
|
|
Other expense
|
|
|
(64,888
|
)
|
|
|
(1,684
|
)
|
|
|
(1,324
|
)
|
Reorganization items, net
|
|
|
(15,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
55,568
|
|
|
|
(3,212,110
|
)
|
|
|
537,098
|
|
Income tax benefit
|
|
|
(583
|
)
|
|
|
(4,890
|
)
|
|
|
(5,753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
56,151
|
|
|
$
|
(3,207,220
|
)
|
|
$
|
542,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122
ULTRA PETROLEUM CORP. AND SUBSIDIARIES
(Debtor-in-Possession)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,009
|
|
|
$
|
523
|
|
Accounts receivable from related companies
|
|
|
29,939
|
|
|
|
64,542
|
|
Other current assets
|
|
|
2,100
|
|
|
|
5,150
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
35,048
|
|
|
|
70,215
|
|
Other
non-current
assets
|
|
|
|
|
|
|
24,197
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
35,048
|
|
|
$
|
94,412
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
|
|
|
$
|
1,283,232
|
|
Interest payable
|
|
|
|
|
|
|
14,166
|
|
Accrued and other current liabilities
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
47
|
|
|
|
1,297,398
|
|
Advances from unconsolidated affiliates
|
|
|
1,623,414
|
|
|
|
1,788,951
|
|
Total liabilities not subject to compromise
|
|
|
1,623,461
|
|
|
|
3,086,349
|
|
Liabilities subject to compromise
|
|
|
1,339,739
|
|
|
|
|
|
Total shareholders deficit
|
|
|
(2,928,152
|
)
|
|
|
(2,991,937
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
35,048
|
|
|
$
|
94,412
|
|
|
|
|
|
|
|
|
|
|
CONDENSED STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Net cash (used in) operating activities
|
|
$
|
(21,309
|
)
|
|
$
|
(101,277
|
)
|
|
$
|
(35,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
(850,000
|
)
|
Dividends received
|
|
|
24,089
|
|
|
|
96,297
|
|
|
|
52,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
24,089
|
|
|
|
96,297
|
|
|
|
(797,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Senior Notes
|
|
|
|
|
|
|
|
|
|
|
850,000
|
|
Deferred financing costs
|
|
|
|
|
|
|
6
|
|
|
|
(13,245
|
)
|
Repurchased shares/net share settlements
|
|
|
43
|
|
|
|
|
|
|
|
(6,471
|
)
|
Shares
re-issued
from treasury
|
|
|
(337
|
)
|
|
|
4,725
|
|
|
|
2,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(294
|
)
|
|
|
4,731
|
|
|
|
833,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash during the period
|
|
|
2,486
|
|
|
|
(249
|
)
|
|
|
143
|
|
Cash and cash equivalents, beginning of period
|
|
|
523
|
|
|
|
772
|
|
|
|
629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
3,009
|
|
|
$
|
523
|
|
|
$
|
772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123