Exhibit 99.5
TXO PARTNERS, L.P.
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
Introduction
TXO Partners, L.P. (“TXO Partners”) engages in oil and natural gas exploration and production. The unaudited pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X, using assumptions set forth in the notes to the unaudited pro forma financial statements. The following unaudited pro forma financial statements of TXO Partners reflect the historical results of TXO Partners, on a pro forma basis to give effect to the following transactions, which are described in further detail below, as if they had occurred on June 30, 2024, for pro forma balance sheet purposes, and on January 1, 2023, for pro forma statement of operations purposes:
| • | in the case of the unaudited pro forma statements of operations, the acquisition of producing properties in the Williston Basin of Montana and North Dakota from Eagle Mountain Energy Partners and Vendera V4-ELM, LP, (collectively, the “EMEP Entities”) (“EMEP Acquisition”) in August 2024, including the 2.5 million units issued as part of the consideration paid; and |
| • | an underwritten public offering of 6.5 million common units on June 28, 2024 at a price of $20.00 per common unit resulting in proceeds of $122.5 million net of underwriting discounts, commissions and other costs (“the Offering”) and the underwritten public offering of an additional 975,000 common units at a price of $20.00 per common unit pursuant to the underwriter’s exercise in full of its option to purchase additional common units in the Offering on July 2, 2024, resulting in additional proceeds of $18.7 million net of underwriting discounts, commissions and other costs. We used the net proceeds from the Offering to fund a portion of the cash consideration for the EMEP Acquisition. |
The unaudited pro forma balance sheet of TXO Partners is based on the historical balance sheet of TXO Partners as of June 30, 2024 and includes pro forma adjustments to give effect to the described transactions as if they had occurred on June 30, 2024. The unaudited pro forma statements of operations of the TXO Partners are based on the audited historical statement of operations of TXO Partners for the year ended December 31, 2023, and the unaudited historical statement of operations of TXO Partners for the six months ended June 30, 2024, both having been adjusted to give effect to the described transactions as if they occurred on January 1, 2023.
The pro forma data presented reflect events directly attributable to the described transactions and certain assumptions TXO Partners believes are reasonable. The pro forma data are not necessarily indicative of financial results that would have been attained had the described transactions occurred on the date indicated or which could be achieved in the future because they necessarily exclude various operating expenses, such as incremental general and administrative expenses associated with being a larger company. The adjustments are based on currently available information and certain estimates and assumptions. Therefore, the actual adjustments may differ from the pro forma adjustments. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the transactions and the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited financial statements.
The unaudited pro forma financial statements and related notes are presented for illustrative purposes only. If the EMEP Acquisition and Offering described herein had occurred in the past, TXO Partners’ operating results might have been materially different from those presented in the unaudited pro forma financial statements. The unaudited pro forma financial statements should not be relied upon as an indication of operating results that TXO Partners would have achieved if the EMEP Acquisition and Offering described herein had taken place on the specified date. In addition, future results may vary significantly from the results reflected in the unaudited pro forma financial statements of operations and should not be relied upon as an indication of the future results TXO Partners will have after the EMEP Acquisition and Offering described herein by these unaudited pro forma financial statements.
TXO PARTNERS, L.P.
PRO FORMA BALANCE SHEET
June 30, 2024
| (in thousands) | TXO, Partners Historical |
Offering | EMEP Acquisition |
Pro Forma | ||||||||||||
| ASSETS |
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| Current Assets: |
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| Cash and cash equivalents |
$ | 75,999 | (a) | $ | 18,745 | (a) | $ | (66,160 | ) | $ | 28,584 | |||||
| Accounts receivable, net |
28,509 | — | — | 28,509 | ||||||||||||
| Other |
12,515 | — | 278 | 12,793 | ||||||||||||
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| Total Current Assets |
117,023 | 18,745 | (65,882 | ) | 69,886 | |||||||||||
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| Property and Equipment, at cost – successful efforts method: |
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| Proved properties |
1,578,274 | — | 284,551 | 1,862,825 | ||||||||||||
| Unproved properties |
18,648 | — | — | 18,648 | ||||||||||||
| Other |
84,574 | — | 569 | 85,143 | ||||||||||||
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| Total Property and Equipment |
1,681,496 | — | 285,120 | 1,966,616 | ||||||||||||
| Accumulated depreciation, depletion and amortization |
(1,033,940 | ) | — | — | (1,033,940 | ) | ||||||||||
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| Net Property and Equipment |
647,556 | — | 285,120 | 932,676 | ||||||||||||
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| Other Assets: |
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| Note receivable from related party |
7,131 | — | — | 7,131 | ||||||||||||
| Other |
2,809 | — | 967 | 3,776 | ||||||||||||
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| Total Other Assets |
9,940 | — | 967 | 10,907 | ||||||||||||
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| TOTAL ASSETS |
$ | 774,519 | $ | 18,745 | $ | 220,205 | 1,013,469 | |||||||||
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| LIABILITIES AND PARTNERS’ CAPITAL |
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| Current Liabilities: |
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| Accounts payable |
$ | 8,829 | $ | — | $ | 5,395 | 14,224 | |||||||||
| Accrued liabilities |
22,926 | — | — | 22,926 | ||||||||||||
| Derivative fair value |
991 | — | — | 991 | ||||||||||||
| Asset retirement obligation, current portion |
1,750 | — | — | 1,750 | ||||||||||||
| Other current liabilities |
1,346 | — | — | 1,346 | ||||||||||||
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| Total Current Liabilities |
35,842 | — | 5,395 | 41,237 | ||||||||||||
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| Long-term Debt |
7,100 | 148,000 | 155,100 | |||||||||||||
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| Other Liabilities: |
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| Asset retirement obligation |
157,294 | — | 16,810 | 174,104 | ||||||||||||
| Other liabilities |
1,495 | — | — | 1,495 | ||||||||||||
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| Total Other Liabilities |
158,789 | — | 16,810 | 175,599 | ||||||||||||
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| Commitments and Contingencies |
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| Partners’ Capital: |
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| Partners’ capital |
572,788 | 18,745 | (a) | 50,000 | 641,533 | |||||||||||
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| Total Partners’ Capital |
572,788 | 18,745 | 50,000 | 641,533 | ||||||||||||
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| TOTAL LIABILITIES AND PARTNERS’ CAPITAL |
$ | 774,519 | $ | 18,745 | $ | 220,205 | 1,013,469 | |||||||||
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The accompanying notes are an integral part of these unaudited pro forma financial statements.
TXO PARTNERS, L.P.
Pro Forma Statements of Operations for the Year Ended December 31, 2023
(Unaudited)
| (in thousands, except for per unit information) | TXO Partners Historical |
EMEP Acquisition |
Offering | Pro Forma | ||||||||||||
| REVENUES |
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| Oil and condensate |
$ | 182,733 | $ | 81,629 | (b) | $ | — | $ | 264,362 | |||||||
| Natural gas liquids |
29,193 | 4,310 | — | 33,503 | ||||||||||||
| Gas |
168,792 | 1,308 | — | 170,100 | ||||||||||||
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| Total Revenues |
380,718 | 87,247 | — | 467,965 | ||||||||||||
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| EXPENSES |
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| Production |
144,730 | 20,103 | — | 164,833 | ||||||||||||
| Exploration |
151 | — | — | 151 | ||||||||||||
| Taxes, transportation and other |
75,415 | 7,299 | — | 82,714 | ||||||||||||
| Depreciation, depletion, and amortization |
44,288 | 26,493 | (c) | — | 70,781 | |||||||||||
| Impairment of long-lived assets |
223,384 | — | — | 223,384 | ||||||||||||
| Accretion of discount in asset retirement obligation |
8,644 | 1,209 | (d) | — | 9,853 | |||||||||||
| General and administrative |
7,887 | (2,016 | ) | — | 5,871 | |||||||||||
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| Total Expenses |
504,499 | 53,088 | — | 557,587 | ||||||||||||
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| OPERATING (LOSS) INCOME |
(123,781 | ) | 34,159 | — | (89,622 | ) | ||||||||||
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| OTHER INCOME (EXPENSE) |
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| Other income (expense) |
23,756 | (288 | ) | — | 23,468 | |||||||||||
| Interest income |
461 | — | — | 461 | ||||||||||||
| Interest expense |
(4,423 | ) | (12,439 | )(e) | — | (16,862 | ) | |||||||||
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| Other Income |
19,794 | (12,727 | ) | — | 7,067 | |||||||||||
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| NET (LOSS) INCOME |
$ | (103,987 | ) | $ | 21,432 | $ | — | $ | (82,555 | ) | ||||||
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| NET INCOME PER COMMON UNIT (f) |
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| Basic |
$ | (3.47 | ) | $ | 8.57 | $ | — | $ | (2.07 | ) | ||||||
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| Diluted |
$ | (3.47 | ) | $ | 8.57 | $ | — | $ | (2.07 | ) | ||||||
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| WEIGHTED AVERAGE COMMON UNITS OUTSTANDING (f) |
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| Basic |
30,000 | 2,500 | 7,475 | 39,975 | ||||||||||||
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| Diluted |
30,000 | 2,500 | 7,475 | 39,975 | ||||||||||||
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The accompanying notes are an integral part of these unaudited pro forma financial statements.
TXO PARTNERS, L.P.
Pro Forma Statements of Operations for the Six Months Ended June 30, 2024
(Unaudited)
| (in thousands, except for per unit information) | TXO Partners Historical |
EMEP Acquisition |
Offering | Pro Forma | ||||||||||||
| REVENUES |
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| Oil and condensate |
$ | 80,833 | $ | 31,029 | (b) | $ | — | $ | 111,862 | |||||||
| Natural gas liquids |
13,172 | 2,099 | — | 15,271 | ||||||||||||
| Gas |
30,742 | 152 | — | 30,894 | ||||||||||||
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| Total Revenues |
124,747 | 33,280 | — | 158,027 | ||||||||||||
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| EXPENSES |
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| Production |
69,522 | 10,187 | — | 79,709 | ||||||||||||
| Exploration |
194 | — | — | 194 | ||||||||||||
| Taxes, transportation and other |
28,774 | 3,365 | — | 32,139 | ||||||||||||
| Depreciation, depletion, and amortization |
20,849 | 13,851 | (c) | — | 34,700 | |||||||||||
| Accretion of discount in asset retirement obligation |
5,565 | 688 | (d) | — | 6,253 | |||||||||||
| General and administrative |
7,245 | (901 | ) | — | 6,344 | |||||||||||
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| Total Expenses |
132,149 | 27,190 | — | 159,339 | ||||||||||||
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| OPERATING (LOSS) INCOME |
(7,402 | ) | 6,090 | — | (1,312 | ) | ||||||||||
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| OTHER INCOME (EXPENSE) |
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| Other income |
22,255 | 58 | — | 22,313 | ||||||||||||
| Interest income |
247 | — | — | 247 | ||||||||||||
| Interest expense |
(2,025 | ) | (6,324 | )(e) | — | (8,349 | ) | |||||||||
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| Other Income |
20,477 | (6,266 | ) | — | 14,211 | |||||||||||
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| NET (LOSS) INCOME |
$ | 13,075 | $ | (176 | ) | $ | — | $ | 12,899 | |||||||
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| NET INCOME PER COMMON UNIT (f) |
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| Basic |
$ | 0.42 | $ | (0.07 | ) | $ | — | $ | 0.32 | |||||||
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| Diluted |
$ | 0.42 | $ | (0.07 | ) | $ | — | $ | 0.31 | |||||||
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| WEIGHTED AVERAGE COMMON UNITS OUTSTANDING (f) |
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| Basic |
30,869 | 2,500 | 7,475 | 40,844 | ||||||||||||
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| Diluted |
31,459 | 2,500 | 7,475 | 41,434 | ||||||||||||
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The accompanying notes are an integral part of these unaudited pro forma financial statements.
TXO PARTNERS, L.P.
1. BASIS OF PRESENTATION, CORPORATE REORGANIZATION AND THE OFFERING
The historical financial information is derived from the financial statements of TXO Partners included elsewhere in this prospectus. For purposes of the unaudited pro forma balance sheet, it is assumed that the EMEP Acquisition and Offering had taken place on June 30, 2024. For purposes of the unaudited pro forma statements of operations, it is assumed all transactions had taken place on January 1, 2023.
2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
TXO Partners made the following adjustments and assumptions in the preparation of the unaudited pro forma financial statements:
(a) Reflects estimated gross proceeds of $18.7 million from the issuance and sale of 975,000 shares of common units at an underwritten public offering price of $20.00 per unit, net of underwriting discounts and commissions of $0.8 million, in the aggregate, and the use of the net proceeds therefrom as partial payment of the cash portion of the EMEP Acquisition.
(b) Unless otherwise noted, adjustments below in items (c) – (e) reflect the historical financial statements Eagle Mountain Energy Partners and the historical statements of revenues and direct operating expenses of Vendera V4-ELM. LP., from the assets acquired and liabilities assumed in the EMEP Acquisition, as included elsewhere in this prospectus.
(c) Adjustment reflects additional depreciation, depletion, and amortization expense that would have been incurred with respect to the EMEP Acquisition, had such acquisitions occurred on January 1, 2023.
(d) Adjustment reflects additional accretion of discount in asset retirement obligation expense that would have been recorded with respect to the asset retirement obligation assumed in the EMEP Acquisition, had such acquisition occurred on January 1, 2023.
(e) Adjustment reflects increase in interest expense from the additional borrowings used to pay for the cash portion of the EMEP Acquisition had the acquisition closed on January 1, 2023. The average interest rate was 8.4% for the year ended December 31, 2023 and 8.6% for the six months ended June 30, 2024.
(f) Reflects basic and diluted income (loss) per common share for the issuance of 7,475,000 common units in the Offering and 2,500,000 common units in the EMEP Acquisition as shown below:
| Six months ended June 30, 2024 |
Year ended December 31, 2023 |
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| Basic |
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| Net income (loss) |
$ | 12,899 | $ | (82,555 | ) | |||
| Weighted average common units outstanding |
40,844 | 39,975 | ||||||
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| Basic earnings (loss) per share |
$ | 0.32 | $ | (2.07 | ) | |||
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| Diluted |
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| Numerator: |
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| Net income (loss) |
$ | 12,899 | $ | (82,555 | ) | |||
| Effect of dilutive securities |
— | — | ||||||
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| Diluted net income (loss) attributable to stockholders |
$ | 12,899 | $ | (82,555 | ) | |||
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| Denominator: |
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| Basic weighted average shares outstanding |
40,844 | 39,975 | ||||||
| Effect of dilutive securities |
590 | — | (a) | |||||
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| Diluted weighted average shares outstanding |
41,434 | 39,975 | ||||||
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| Diluted earnings (loss) per share |
$ | 0.31 | $ | (2.07 | ) | |||
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| (a) | – As there was a net loss for the period, any incremental shares would be anti-dilutive. As such, the potentially diluted shares totaling 545,000 were excluded from the calculation. |
3. SUPPLEMENTARY DISCLOSURE OF OIL AND NATURAL GAS OPERATIONS
The following pro forma standardized measure of the discounted net future cash flows and changes applicable to TXO Partners’ proved reserves reflect the effect of Texas state franchise taxes which TXO Partners is subject to. The future cash flows are discounted at 10% per year and assume continuation of existing economic conditions.
The standardized measure of discounted future net cash flows, in management’s opinion, should be examined with caution. The basis for this table is the reserve studies prepared by independent petroleum engineering consultants, which contain imprecise estimates of quantities and rates of production of reserves. Revisions of previous year estimates can have a significant impact on these results. Also, exploration costs in one year may lead to significant discoveries in later years and may significantly change previous estimates of proved reserves and their valuation. Therefore, the standardized measure of discounted future net cash flow is not necessarily indicative of the fair value of TXO Partners’ proved oil and natural gas properties.
The data presented should not be viewed as representing the expected cash flow from or current value of, existing proved reserves since the computations are based on a large number of estimates and assumptions. Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions. Actual future prices and costs are likely to be substantially different from the prices and costs utilized in the computation of reported amounts.
The following table provides a pro forma rollforward of the total proved reserves for the year ended December 31, 2023, as well as pro forma proved developed and proved undeveloped reserves at the beginning and end of the year, as if the acquisition reflected occurred on January 1, 2023.
| Oil (MBbls) | TXO Partners Historical |
EMEP Acquisition |
Pro Forma | |||||||||
| January 1, 2023 |
53,509.2 | 10,750.4 | 64,259.6 | |||||||||
| Extensions, additions and discoveries |
71.7 | 1.7 | 73.4 | |||||||||
| Revisions |
(11,628.5 | ) | 332.8 | (11,295.7 | ) | |||||||
| Production |
(2,375.6 | ) | (1,006.9 | ) | (3,382.5 | ) | ||||||
| Purchase in place |
876.3 | — | 876.3 | |||||||||
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| December 31, 2023 |
40,453.1 | 10,078.0 | 50,531.1 | |||||||||
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| Proved Developed Reserves |
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| January 1, 2023 |
34,672.0 | 10,750.4 | 45,422.4 | |||||||||
| December 31, 2023 |
30,959.4 | 10,078.0 | 41,037.4 | |||||||||
| Proved Undeveloped Reserves |
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| January 1, 2023 |
18,837.2 | — | 18,837.2 | |||||||||
| December 31, 2023 |
9,493.7 | — | 9,493.7 | |||||||||
| Natural Gas Liquids (MBbls) | TXO Partners Historical |
EMEP Acquisition |
Pro Forma |
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| January 1, 2023 |
21,932.4 | 2,290.1 | 24,222.5 | |||||||||
| Extensions, additions and discoveries |
— | 0.1 | 0.1 | |||||||||
| Revisions |
(5,245.0 | ) | (5.8 | ) | (5,250.8 | ) | ||||||
| Production |
(1,231.8 | ) | (192.4 | ) | (1,424.2 | ) | ||||||
| Purchase in place |
27.4 | — | 27.4 | |||||||||
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| December 31, 2023 |
15,483.0 | 2,092.0 | 17,575.0 | |||||||||
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| Proved Developed Reserves |
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| January 1, 2023 |
20,723.6 | 2,290.1 | 23,013.7 | |||||||||
| December 31, 2023 |
15,110.9 | 2,092.0 | 17,202.9 | |||||||||
| Proved Undeveloped Reserves |
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| January 1, 2023 |
1,208.8 | — | 1,208.8 | |||||||||
| December 31, 2023 |
372.1 | — | 372.1 | |||||||||
| Natural Gas (MMcf) | TXO Partners Historical |
EMEP Acquisition |
Pro Forma | |||||||||
| January 1, 2023 |
407,877.2 | 12,454.4 | 420,331.6 | |||||||||
| Extensions, additions and discoveries |
7,050.2 | 0.6 | 7,050.8 | |||||||||
| Revisions |
(121,848.5 | ) | (242.2 | ) | (122,090.7 | ) | ||||||
| Production |
(28,738.7 | ) | (1,028.9 | ) | (29,767.6 | ) | ||||||
| Purchase in place |
1,487.4 | — | 1,487.4 | |||||||||
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| December 31, 2023 |
265,827.6 | 11,183.9 | 277,011.5 | |||||||||
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| Proved Developed Reserves |
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| January 1, 2023 |
385,188.6 | 12,454.4 | 397,643.0 | |||||||||
| December 31, 2023 |
264,934.4 | 11,183.9 | 276,118.3 | |||||||||
| Proved Undeveloped Reserves |
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| January 1, 2023 |
22,688.6 | — | 22,688.6 | |||||||||
| December 31, 2023 |
893.2 | — | 893.2 | |||||||||
| Total (MBoe) | TXO Partners Historical |
EMEP Acquisition |
Pro Forma | |||||||||
| January 1, 2023 |
143,421.1 | 15,116.3 | 158,537.4 | |||||||||
| Extensions, additions and discoveries |
1,246.7 | 1.9 | 1,248.6 | |||||||||
| Revisions |
(37,181.5 | ) | 286.6 | (36,894.9 | ) | |||||||
| Production |
(8,397.2 | ) | (1,370.8 | ) | (9,768.0 | ) | ||||||
| Purchase in place |
1,151.6 | — | 1,151.6 | |||||||||
|
|
|
|
|
|
|
|||||||
| December 31, 2023 |
100,240.7 | 14,034.0 | 114,274.7 | |||||||||
|
|
|
|
|
|
|
|||||||
| Proved Developed Reserves |
| |||||||||||
| January 1, 2023 |
119,593.7 | 15,116.3 | 134,710.0 | |||||||||
| December 31, 2023 |
90,226.0 | 14,034.0 | 104,260.0 | |||||||||
| Proved Undeveloped Reserves |
| |||||||||||
| January 1, 2023 |
23,827.4 | — | 23,827.4 | |||||||||
| December 31, 2023 |
10,014.7 | — | 10,014.7 | |||||||||
The pro forma standardized measure of discounted estimated future net cash flows was as follows as of December 31, 2023 (in thousands):
| December 31, 2023 | TXO Partners Historical |
EMEP Acquisition |
Pro Forma | |||||||||
| (in thousands) | ||||||||||||
| Future cash inflows |
$ | 4,101,171 | $ | 829,645 | $ | 4,930,816 | ||||||
| Future costs: |
||||||||||||
| Production |
(2,091,880 | ) | (349,382 | ) | (2,441,262 | ) | ||||||
| Development |
(353,191 | ) | (66,659 | ) | (419,850 | ) | ||||||
| Income taxes |
(2,143 | ) | — | (2,143 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Future net cash flows |
1,653,957 | 413,604 | 2,067,561 | |||||||||
| 10% annual discount |
(763,365 | ) | (147,393 | ) | (910,758 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Standardized measure |
$ | 890,592 | $ | 266,211 | $ | 1,156,803 | ||||||
|
|
|
|
|
|
|
|||||||
The change in the pro forma standardized measure of discounted estimated future net cash flows were as follows for 2023 (in thousands):
| December 31, 2023 | TXO Partners Historical |
EMEP Acquisition |
Pro Forma | |||||||||
| Standardized measure, beginning of period |
$ | 1,969,818 | $ | 366,356 | $ | 2,336,174 | ||||||
| Revisions: |
||||||||||||
| Prices and costs |
(1,053,775 | ) | (21,900 | ) | (1,075,675 | ) | ||||||
| Quantity estimates |
(147,398 | ) | (18,328 | ) | (165,726 | ) | ||||||
| Income tax |
2,250 | — | 2,250 | |||||||||
| Future development costs |
(106 | ) | — | (106 | ) | |||||||
| Accretion of discount |
196,982 | 36,636 | 233,618 | |||||||||
| Production rates and other |
22,868 | (41,184 | ) | (18,316 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net revisions |
(979,179 | ) | (44,776 | ) | (1,023,955 | ) | ||||||
| Additions and discoveries |
(8,047 | ) | (138 | ) | (8,185 | ) | ||||||
| Production |
(137,393 | ) | (55,231 | ) | (192,624 | ) | ||||||
| Development costs |
29,820 | — | 29,820 | |||||||||
| Purchases in place |
15,573 | — | 15,573 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net change |
(1,079,226 | ) | (100,145 | ) | (1,179,371 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Standardized measure, end of period |
$ | 890,592 | $ | 266,211 | $ | 1,156,803 | ||||||
|
|
|
|
|
|
|
|||||||